# Worthington Enterprises, Inc.: Form 10-Q for the period ended Aug 31, 2024

- Company: [Worthington Enterprises, Inc.](/companies/wor.md) (CIK 108516)
- Form: 10-Q
- Filed: 2024-10-07
- Accepted by EDGAR: Oct 7, 2024, 16:14 ET
- Period: 2024-08-31
- Accession: 0000950170-24-113225
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/108516/000095017024113225/wor-20240831.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/108516/000095017024113225/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-08-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-06-01 to 2024-08-31 | $257.3m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-06-01 to 2024-08-31 | $194.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-06-01 to 2024-08-31 | $62.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-06-01 to 2024-08-31 | $66.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-06-01 to 2024-08-31 | −$4.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-06-01 to 2024-08-31 | $489.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-06-01 to 2024-08-31 | $6.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-06-01 to 2024-08-31 | $24.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-06-01 to 2024-08-31 | $0.48 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-06-01 to 2024-08-31 | $0.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-06-01 to 2024-08-31 | 50,365,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-06-01 to 2024-08-31 | $41.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-06-01 to 2024-08-31 | $9.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-06-01 to 2024-08-31 | $8.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-06-01 to 2024-08-31 | $6.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-08-31 | $178.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-08-31 | $576.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-08-31 | $1.65bn | us-gaap:Assets |
| Current liabilities | at 2024-08-31 | $166.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-08-31 | $742.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-08-31 | $300.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-08-31 | $901.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,048 characters.

*Selected statements contained in this MD&A constitute “forward-looking statements” as that term is used in the PSLRA. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-Q and “Part I – Item 1A. – Risk Factors” of the 2024 Form 10-K.*

*Unless otherwise indicated, all Note references contained in this MD&A refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. All amounts are presented in millions except common share and per common share amounts.*

### 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 2024 Form 10-K includes additional information about our business, operations and consolidated financial position and should be read in conjunction with this Form 10-Q. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management. The results of operations contained in this MD&A include all of our operations, including our former steel processing business. Our historical results have been restated to reflect the operations of Worthington Steel as a discontinued operation in periods prior to the December 1, 2023 Separation as discussed in “Note A – Basis of Presentation.” This MD&A is divided into five main sections:

- Recent Business Developments;
- Trends and Factors Impacting our Performance;
- Results of Operations;
- Liquidity and Capital Resources; and
- Critical Accounting Estimates.

### Recent Business Developments

- On June 3, 2024, we acquired Ragasco, a leading global manufacturer of composite propane cylinders based in Norway. The purchase price included cash consideration of approximately $102.2 million, with a future earnout opportunity of up to $14.0 million. The results of Ragasco are included within the Building Products operating segment for periods subsequent to the acquisition date. See “Note N – Acquisitions” for additional information.
- During the first quarter of fiscal 2025, we repurchased 150,000 common shares under existing repurchase authorizations for $6.8 million, at an average purchase price of $45.35.
- On September 24, 2024, the Board declared a quarterly dividend of $0.17 per common share payable on December 27, 2024, to shareholders of record at the close of business on December 13, 2024.

### Trends and Factors Impacting our Performance

The following trends and factors have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results.

### End Markets and Competition

We offer a wide range of products and services to a diverse customer base across various end markets. These markets include residential construction, non-residential construction, and repair and remodeling, which drive demand in our Building Products operating segment, including our unconsolidated joint ventures, WAVE and ClarkDietrich. Additionally, tools, outdoor living, and celebrations drive demand in our Consumer Products operating segment, including our consolidated joint venture, Halo. Given the extensive range of products and services we provide, our competitors vary by industry, product type, service type, program size, and geography. Competition is primarily based on price, product quality, brand recognition, product innovation, and customer service. Sales to one customer in the Consumer Products operating segment accounted for 13% of our consolidated net sales in the first quarter of fiscal 2025. Trends and factors impacting each of our end markets are described in additional detail below.

### General Economic and Market Conditions

U.S. GDP growth rate trends typically reflect the strength of demand and, in many cases, pricing for our products. A year-over-year increase in U.S. GDP growth rates generally signals a stronger economy and higher demand and pricing for our products. Conversely, declining U.S. GDP growth rates usually indicate a weaker economy and reduced demand and pricing our products. Fluctuations in U.S. GDP growth rates can affect conversion costs related to production and SG&A.

The macroeconomic and geopolitical outlook has been complex and evolving. Although the U.S. economy continues to grow at a modest pace, prolonged inflationary pressures continue to negatively impact the discretionary spending of many of our customers. The recent 0.50% rate cut by the Federal Reserve is expected to alleviate some of this pressure in the near-term as borrowing becomes cheaper, stimulating spending in our residential construction, non-residential construction, and repair and remodel end markets. Besides inflation, consumer spending habits for our products are influenced by prevailing global economic conditions, the costs of basic necessities and other goods, employment levels, salaries and wage rates, and prevailing interest rates. Additionally, consumer purchasing patterns are generally affected by consumers’ disposable income, credit availability, and debt levels.

We also actively monitor other publicly available macroeconomic trends that provide insight into the activity in our end markets. These trends include, but are not limited to, the ABI, the Dodge Momentum Index, the HMI, steel prices, retail sales, state and local government spending, interest rate environment and inflation metrics. Current macro-economic trends within our end markets are described in additional detail below, as well as selected key indicators for the periods presented.

*($ and units in millions)*

|  | August 31, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| U.S. Residential Construction spend (1)(3) | $911,429 | $887,564 | $23,865 |
| U.S. Non-residential Construction Spend (1)(3) | $1,220,507 | $1,159,850 | $60,657 |
| Hot-Rolled Steel ($ per ton) (2) | $690 | $879 | $(189) |
| Existing Home Sales (units) (1)(3) | 3.9 | 4.0 | (0.1) |
| Authorized Housing Permits (units) (1)(3) | 1.5 | 1.6 | (0.1) |
| U.S Private Housing Starts (units) (1)(3) | 1.4 | 1.3 | 0.1 |
| HMI | 39.0 | 50.0 | (11.0) |
| ABI | 45.7 | 48.1 | (2.4) |
| Dodge Momentum Index | 220.4 | 178.0 | 42.4 |
| 30 Year Fixed mortgage rates (1) | 6.35% | 7.18% | (0.8%) |

(1) Federal Reserve Bank of St. Louis; figures based on seasonally adjusted annual rates

(2) Period average of CRU Hot-Rolled Index

(3) 2023 figures based on revised actuals

*Residential Construction:* The near-term outlook for U.S. residential construction spending remains cautiously optimistic, with spending increasing by approximately 7.4% between August 2024 and August 2023. While construction data continues to show positive year-over-year growth, housing starts and authorized permits remain flat, reflecting a cautious approach by both builders and potential home buyers. The HMI also fell to 39.0 in August 2024, indicating persistent challenges such as high mortgage rates and elevated home prices. Builders continue to grapple with high interest rates for construction loans and ongoing labor shortages, which are impacting their ability to meet demand. Additionally, rising material costs add further pressure on the end market. However, we are optimistic that recent interest rate cuts could spur new construction activity in the near term and we remain well-positioned to meet the anticipated demand. More broadly, the solid underlying fundamentals of the housing market, including favorable demographics and a chronic undersupply of homes, provide strong support for this end market in the long-term.

*Non-residential Construction*: The near-term outlook for U.S. non-residential construction is mixed. The ABI fell to 45.7 in August 2024 from 48.1 in August 2023, indicating a continued decline in demand for architectural services. This marks the nineteenth consecutive month of declining billings, reflecting ongoing challenges in converting project inquiries into actual contracts. However, the Dodge Momentum Index offers a more optimistic view, rising to 220.4 in August 2024 from 178.0 in August 2023, driven by gains in both commercial and institutional planning. This suggests that while current billings are down, there is a pipeline of projects that could bolster future construction activity. Overall, the sector faces headwinds but also holds potential for growth as economic conditions stabilize and interest rates are expected to decrease.

*Repair and Remodel*: Spending on home improvement is expected to continue declining in the near term as existing home sales remain at multi-decade lows. Although the average 30-year fixed mortgage rate decreased to 6.35% at August 31, 2024, from 7.18% at August 31, 2023, this decline isn’t significant enough to entice most buyers to enter the market or leave their existing lower fixed rate mortgages. Despite these challenges, the long-term outlook remains strong as interest rates are expected to decline further and the aging housing stock will drive the need for renovations. As economic conditions stabilize, we expect homeowners to access their record levels of equity and drive spending in the long-term.

*Tools:* Spending in the tools end market is predominantly influenced by macroeconomic conditions. Recently, the market has experienced positive tailwinds as inflation has eased, with the annual inflation rate dropping to 2.5% in August 2024, a significant decrease from its peak in 2022. Despite moderating inflation, overall demand in this sector continued to be adversely affected by a general moderation in consumer spending on non-essential items, resulting in lower overall demand from both DIY and professional customers. Notwithstanding these short-term headwinds, we believe that the outlook remains positive as we continue to grow market share with our well-known brands and innovation of new products.

*Outdoor Living:* Participation in outdoor recreation is beginning to normalize to pre-pandemic levels. This trend is evident in the number of new U.S. camping households, a key metric that measures the influx of first-time campers. After peaking in 2020, driven by the desire for safe, socially-distanced activities during the height of the pandemic, the number has steadily declined. However, the long-term fundamentals in the outdoor living category remain positive, driven by diverse participation across different age groups, socio-economic classes, and geographic regions.

*Celebrations*: The celebrations end market has shown a gradual recovery, propelled by the increasing demand for personalized and unique event experiences. Consumer income and the debt-to-income ratio have gradually recovered, approaching levels observed prior to COVID-19, alongside moderating inflation. Despite these positive indicators, inflation and interest rates continue to influence disposable income and spending power. It is anticipated that consumer spending on non-essential items will remain constrained, primarily due to a larger share of income being allocated towards essential purchases and mortgage payments.

### Seasonality

Historically, sales tend to be stronger in the third and fourth quarters of our fiscal year for our Consumer Products operating segment when our facilities perform at seasonal peaks, matching consumer demand. Sales in our Building Products operating segment are generally stronger in the first and fourth quarters of our fiscal year due to weather conditions, customer business cycles, and the timing of renovation and new construction projects. Demand in our Building Products operating segment during the first quarter of fiscal 2025 was not reflective of the cyclical strength we typically see in in the first quarter of our fiscal year due to continued destocking at certain distributors as well as unfavorable weather patterns.

### Results of Operations

### First Quarter – Fiscal 2025 Compared to Fiscal 2024

The following discussion provides a review of results for the three months ended August 31, 2024 and August 31, 2023:

*(In millions, except per common share amounts)*

|  | Three Months Ended August 31, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Net sales | $257.3 | $311.9 | $(54.6) |
| Operating loss | (4.7) | (7.3) | 2.6 |
| Adjusted operating income (loss) (1) | (3.5) | 4.8 | (8.3) |
| Net earnings from continuing operations | 24.3 | 26.8 | (2.5) |
| Adjusted EBITDA from continuing operations (1) | 48.4 | 65.9 | (17.5) |
| Equity income | 35.5 | 45.4 | (9.9) |
| EPS from continuing operations - diluted | 0.48 | 0.54 | (0.06) |
| Adjusted EPS from continuing operations - diluted (1) | $0.50 | $0.75 | $(0.25) |

(1) A reconciliation of each of these non-GAAP financial measures to their most comparable GAAP financial measure is provided in the “Use of Non-GAAP Measures and Definitions” section.

### Net Sales and Volume

The following table provides a breakdown of our consolidated net sales by operating segment for the periods indicated:

*(Dollars in millions)*

|  | Three Months Ended% August 31, 2024 | 2023 | Increase/ (Decrease) | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Consumer Products | $117.6 | $117.4 | $0.2 | 0.2% |
| Building Products | 139.7 | 165.9 | (26.2) | (15.8%) |
| Total reportable segments | 257.3 | 283.3 | (26.0) | (9.2%) |
| Other | - | 28.6 | (28.6) | (100.0%) |
| Consolidated | $257.3 | $311.9 | $(54.6) | (17.5%) |

The following table provides volume by operating segment for the periods presented (in units):

|  | Three Months Ended% August 31, 2024 | 2023 | Increase/ (Decrease) | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Consumer Products | 16,170,556 | 16,031,583 | 138,973 | 0.9% |
| Building Products | 3,094,117 | 3,808,820 | (714,703) | (18.8%) |
| Total reportable segments | 19,264,673 | 19,840,403 | (575,730) | (2.9%) |
| Other | - | 106,306 | (106,306) | (100.0%) |
| Consolidated | 19,264,673 | 19,946,709 | (682,036) | (3.4%) |

- *Consumer Products –* Net sales totaled $117.6 million in the first quarter of fiscal 2025, up slightly from the first quarter of fiscal 2024 on marginally higher volume.
- *Building Products –* Net sales totaled $139.7 million in the first quarter of fiscal 2025, down $26.2 million, or 15.8%, from the first quarter of fiscal 2024, primarily due to lower volume and an unfavorable shift in product mix, which more than offset contributions from the acquisition of Ragasco in June 2024.
- *Other* - Net sales in the first quarter of fiscal 2024 are related to our former Sustainable Energy Solutions operating segment, which was deconsolidated in May 2024 when we sold a 51% interest in the business. In periods subsequent to the sales transaction, our 49% interest is accounted for under the equity method.

### Gross Profit

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | Gross Margin | August 31, 2023 | Gross Margin | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $62.5 | 24.3% | $69.6 | 22.3% | $(7.1) |

- Gross profit was $62.5 million for the first quarter of fiscal 2025, a decrease of $7.1 million, or 10.2% from the first quarter of fiscal 2024, driven by the reduction in net sales at Building Products.

### Selling, General and Administrative Expense

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | % of Net Sales | August 31, 2023 | % of Net Sales | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Selling, general and administrative expense | $66.0 | 25.7% | $74.5 | 23.9% | $(8.5) |

- SG&A decreased $8.5 million, or 11.4%, from the first quarter of fiscal 2024, primarily driven by the elimination of certain corporate overhead costs that no longer exist post-Separation, but have been presented within net earnings from continuing operations in our consolidated statements of earnings.

### Other Operating Items

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Restructuring and other expense, net | $1.2 | $- | $1.2 |
| Separation costs | $- | $2.4 | $(2.4) |

- Restructuring expense in the first quarter of fiscal 2025 was driven by a $0.7 million true-up of our accrual for final transaction costs associated with the deconsolidation of our former Sustainable Energy Solutions operating segment, as well as severance costs.
- Separation costs in the prior year quarter reflect direct and incremental costs incurred in connection with the Separation.

### Interest Expense, Net

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Interest expense, net | $0.5 | $1.1 | $(0.6) |

- Interest expense, net was down $0.6 million from the prior year quarter, driven primarily by lower average debt levels as a result of the redemption of the 2024 Notes and 2026 Notes in December 2024.

### Equity Income

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| WAVE (1) | $27.9 | $28.3 | $(0.4) |
| ClarkDietrich (1) | 8.7 | 16.7 | (8.0) |
| Other (2) | (1.1) | 0.4 | (1.5) |
| **Equity income** | $35.5 | $45.4 | $(9.9) |

(1) Equity income contributed by WAVE and ClarkDietrich is reported within our Building Products segment.

(2) Includes our share of equity earnings of the Workhorse and the Sustainable Energy Solutions joint ventures.

- Equity income decreased $9.9 million from the first quarter of fiscal 2024, driven by lower contributions from ClarkDietrich, which was down $8.0 million, as declining steel prices compressed margins, and equity losses at the Sustainable Energy Solutions joint venture in the first quarter of fiscal 2025.

### Income Taxes

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | Estimated Effective Tax Rate | August 31, 2023 | Estimated Effective Tax Rate | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income tax expense | $6.8 | 24.5% | $9.0 | 25.1% | $(2.2) |

- Income tax expense was $6.8 million in the first quarter of fiscal 2025 compared to income tax expense of $9.0 million in the first quarter of fiscal 2024. The decrease was primarily driven by lower pre-tax earnings. Income tax expense in the first quarter of fiscal 2025 reflected an estimated annual effective rate of 24.5% compared to 25.1% in the first quarter of fiscal 2024.

### Adjusted EBITDA from Continuing Operations

The following table provides a summary of adjusted EBITDA from continuing operations by reportable segment, a non-GAAP financial measure, along with the respective percentage of the total of each reportable segment. See the “Use of Non-GAAP Financial Measures” section preceding Part I, Item 1 of this Form 10-Q for additional information regarding our use of non-GAAP financial measures. A reconciliation from earnings before income taxes to adjusted EBITDA from continuing operations is provided in “Note M – Segment Operations.”

*(Dollars in millions)*

|  | Three Months Ended August 31, 2024 | % of Net Sales | August 31, 2023 | % of Net Sales | Increase/ (Decrease) | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Consumer Products | $17.8 | 15.1% | $14.3 | 12.2% | $3.5 | 24.5% |
| Building Products | 39.7 | 28.4% | 59.7 | 36.0% | (20.0) | (33.5%) |
| Total reportable segments | $57.5 | 22.3% | $74.0 | 26.1% | (16.5) | (22.3%) |
| Unallocated Corporate and Other | (9.1) | n/a | (8.1) | n/a | (1.0) | 12.3% |
| **Consolidated** | $48.4 | 18.8% | $65.9 | 21.1% | (17.5) | (26.6%) |

- *Consumer Products –* Adjusted EBITDA from continuing operations was $17.8 million in the first quarter of fiscal 2025, an increase of $3.5 million over the first quarter of fiscal 2024, on improved gross margin driven by lower material costs.
- *Building Products –* Adjusted EBITDA from continuing operations decreased $20.0 million from the first quarter of fiscal 2024, on lower volume, particularly in our heating and cooking products, and unfavorable mix combined with lower equity earnings at ClarkDietrich. Adjusted EBITDA from continuing operations in the first quarter of fiscal 2025 included $1.9 million of incremental expense related to the Ragasco acquisition resulting primarily from the step up of inventory to fair value.
- *Unallocated Corporate and Other –* Adjusted EBITDA from continuing operations was down $1.0 million from the first quarter of fiscal 2024, driven by higher SG&A partially offset by lower losses due to the deconsolidation of our former Sustainable Energy Solutions operating segment in May 2024.

### Liquidity and Capital Resources

During the three months ended August 31, 2024, we generated $41.1 million of cash from operating activities, invested $9.6 million in property, plant and equipment, spent $88.9 million to acquire Ragasco, and received $11.8 million for the sale of 51% of our former Sustainable Energy Solutions operating segment. Additionally, we paid $6.8 million to repurchase 150,000 common shares and paid dividends of $8.1 million on the common shares in the first quarter of fiscal 2025.

The following table summarizes our consolidated cash flows for the periods presented:

*(In millions)*

|  | Three Months Ended August 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $41.1 | $59.7 |
| Net cash used by investing activities | (88.7) | (44.3) |
| Net cash used by financing activities | (18.1) | (269.3) |
| Decrease in cash and cash equivalents | (65.7) | (253.9) |
| Cash and cash equivalents at beginning of period | 244.2 | 454.9 |
| **Cash and cash equivalents at end of period** | $178.5 | $201.0 |

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

We believe we have access to adequate resources to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments, and working capital, to the extent not funded by cash provided by operating activities, for at least 12 months and for the foreseeable future thereafter. These resources include cash and cash equivalents and unused committed lines of credit under our Credit Facility, which had a total of $500.0 million of borrowing capacity available to be drawn as of August 31, 2024.

Although we do not currently anticipate a need, we believe that we could access the financial markets to sell long-term debt or equity securities. However, the continuation of uncertain economic conditions, including those caused by a high interest rate environment, could create volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so.

We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. Should we seek additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, privately-negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

### Operating Activities

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

Net cash provided by operating activities was $41.1 million during the first quarter of fiscal 2025, down from $59.7 million in the first quarter of fiscal 2024. The decrease was primarily due to lower net earnings from core operations and a $25.7 million decrease in dividends from unconsolidated joint ventures.

### Investing Activities

Net cash used by investing activities was $88.7 million during the first quarter of fiscal 2025, compared to $44.3 million during the first quarter of fiscal 2024. Net cash used by investing activities in the first quarter of fiscal 2025 was driven primarily by the acquisition of Ragasco and capital expenditures partially offset by proceeds from the sale of 51% of the nominal share capital of our former Sustainable Energy Solutions operating segment on May 29, 2024.

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 any such opportunities may require additional financing. However, there can be no assurance 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 $18.1 million during the first quarter of fiscal 2025, compared to $269.3 million in the first quarter of fiscal 2024. During the first quarter of fiscal 2025, we paid $6.8 million to repurchase 150,000 common shares and paid dividends of $8.1 million on the common shares. During the first quarter of fiscal 2024, we paid dividends of $15.7 million on the common shares and repaid $243.8 million of long-term debt associated with the redemption of the 2026 Notes.

*Common shares –* On September 24, 2024, the Board declared a quarterly dividend of $0.17 per common share payable on December 27, 2024, to shareholders of record at the close of business on December 13, 2024. During the first quarter of fiscal 2024, we declared dividends totaling $0.32 per common share under our pre-Separation capital structure.

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

On March 24, 2021, the Board authorized the repurchase of up to an additional 5,618,464 common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000. As of August 31, 2024, 5,915,000 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.

*Long-term debt and short-term borrowings –* As of August 31, 2024, we were in compliance with the financial covenants of our short-term and long-term debt agreements. Our debt agreements do not include credit rating triggers or material adverse change provisions. There were no outstanding borrowings drawn against the Credit Facility at August 31, 2024, leaving the full borrowing capacity of $500.0 million available for future use.

### Dividend Policy

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

### Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates, including those related to our valuation of receivables, inventories, intangible assets, accrued liabilities, income and other tax accruals, contingencies and litigation, and business combinations. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical accounting policies are defined as those that reflect our significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. Although actual results historically have not deviated significantly from those determined using our estimates, our consolidated financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptions in the application of such policies. Our critical accounting policies have not significantly changed from those discussed in “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of the 2024 Form 10-K.

## Market risk

As filed, 169 characters.

Market risks have not materially changed from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of the 2024 Form 10-K.

## Controls and procedures

As filed, 1,829 characters.

### Evaluation of Disclosure Controls and Procedures

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

Management, under the supervision of and with the participation of Worthington Enterprises’ principal executive officer and principal financial officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q (the quarterly period ended August 31, 2024). Based on that evaluation, Worthington Enterprises’ principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were designed at the reasonable assurance level and 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 August 31, 2024) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,090 characters.

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 2024 Form 10-K, we included a detailed discussion of our risk factors. Our risk factors have not changed significantly from those disclosed in the 2024 Form 10-K. Those 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 2024 Form 10-K 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 2024 Form 10-K 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.

Filed Oct 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-113225. Last ingested by Listed: Nov 2, 2026, 11:47 ET. No prices; not investment advice.