# Worthington Enterprises, Inc.: Form 10-Q for the period ended Nov 30, 2024

- Company: [Worthington Enterprises, Inc.](/companies/wor.md) (CIK 108516)
- Form: 10-Q
- Filed: 2025-01-10
- Accepted by EDGAR: Jan 10, 2025, 12:46 ET
- Period: 2024-11-30
- Accession: 0000950170-25-004028
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/108516/000095017025004028/wor-20241130.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/108516/000095017025004028/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-11-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-09-01 to 2024-11-30 | $274.0m | us-gaap:Revenues |
| Revenue | 6 months, 2024-06-01 to 2024-11-30 | $531.4m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-09-01 to 2024-11-30 | $200.0m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-06-01 to 2024-11-30 | $394.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-09-01 to 2024-11-30 | $74.1m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-06-01 to 2024-11-30 | $136.6m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-09-01 to 2024-11-30 | $67.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-06-01 to 2024-11-30 | $134.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-09-01 to 2024-11-30 | $3.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-06-01 to 2024-11-30 | −$1.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-09-01 to 2024-11-30 | $1.0m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-06-01 to 2024-11-30 | $1.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-09-01 to 2024-11-30 | $9.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-06-01 to 2024-11-30 | $15.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-09-01 to 2024-11-30 | $28.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-06-01 to 2024-11-30 | $52.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-09-01 to 2024-11-30 | $0.56 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-06-01 to 2024-11-30 | $1.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-09-01 to 2024-11-30 | $0.57 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-06-01 to 2024-11-30 | $1.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-09-01 to 2024-11-30 | 50,138,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-06-01 to 2024-11-30 | 50,264,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-09-01 to 2024-11-30 | $49.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 6 months, 2024-06-01 to 2024-11-30 | $90.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-09-01 to 2024-11-30 | $15.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 6 months, 2024-06-01 to 2024-11-30 | $24.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-09-01 to 2024-11-30 | $9.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 6 months, 2024-06-01 to 2024-11-30 | $17.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-09-01 to 2024-11-30 | $8.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 6 months, 2024-06-01 to 2024-11-30 | $14.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-11-30 | $193.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-11-30 | $603.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-11-30 | $1.66bn | us-gaap:Assets |
| Current liabilities | at 2024-11-30 | $169.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-11-30 | $744.1m | us-gaap:Liabilities |
| Long-term debt | at 2024-11-30 | $295.7m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-11-30 | $911.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,649 characters.

*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 December 17, 2024, the Board declared a quarterly dividend of $0.17 per common share payable on March 28, 2025, to shareholders of record at the close of business on March 14, 2025.
- Due to the retirement of our former CEO, effective November 1, 2024, we accelerated the vesting of certain outstanding equity awards, resulting in a charge of $2.7 million reported in restructuring and other expense, net in our consolidated statement of earnings for the three and six months ended November 30, 2024. Refer to “Note D – Restructuring and Other Expense, Net” for additional information.
- 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 $101.4 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 six months ended November 30, 2024, we repurchased a total of 350,000 of our common shares for $14.9 million, at an average purchase price of $42.52.

### 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.

### Key Indicators

We actively monitor publicly available macroeconomic trends that provide insight into the activity in our end markets and raw material pricing trends that provide insight into our cost of goods sold. These trends include, but are not limited to, the ABI, the Dodge Momentum Index, the HMI, hot-rolled and cold-rolled steel prices, retail sales, state and local government spending, interest rate environment and inflation metrics. Selected key indicators are presented below.

*(Dollars and units in millions)*

|  | November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| U.S. Residential Construction spend (1)(3) | $918,113 | $889,691 | $28,422 |
| U.S. Non-residential Construction Spend (1)(3) | $1,234,468 | $1,200,999 | $33,469 |
| Hot-Rolled Steel ($ per ton) (2) | $690 | $747 | $(57) |
| Cold-Rolled Steel ($ per ton) (2) | $938 | $978 | $(40) |
| Existing Home Sales (units) (1)(3) | 4.2 | 3.9 | 0.3 |
| Authorized Housing Permits (units) (1)(3) | 1.5 | 1.5 | - |
| U.S. Private Housing Starts (units) (1)(3) | 1.3 | 1.5 | (0.2) |
| U.S. Core CPI (4) | 3.30% | 4.02% | (0.72%) |
| HMI | 46.0 | 34.0 | 12.0 |
| ABI | 49.6 | 45.3 | 4.3 |
| Dodge Momentum Index | 191.5 | 179.2 | 12.3 |
| 30-Year Fixed mortgage rates (1) | 6.81% | 7.22% | (0.41%) |

(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

(4) U.S. Bureau of Labor Statistics

### End Markets and Competition

We offer a wide range of products and services to a diverse customer base across various end markets, primarily in the U.S., including the residential and non-residential construction markets, repair and remodeling, which drive demand for our building products offerings, as well as the tools, outdoor living, and celebrations end markets, which drive demand for our consumer products offerings. Given the 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 12.9% of our consolidated net sales in the second quarter of fiscal 2025.

*Residential Construction:* The near-term outlook for U.S. residential construction spend remains cautiously optimistic, growing a modest 3.0% year-over-year in November 2024. The year-over-year growth, however, continues to follow the trend of the overall inflationary rate rather than organic growth, as housing starts and authorized permits remain flat indicating that both builders and potential buyers remain cautious in their spending approach. The HMI was up 12 points year-over-year in November 2024 to 46.0, highlighting resilience in this end market, despite persistent macro-economic challenges, including high mortgage rates, elevated home prices, and increasing material and labor costs. Although there are short-term challenges posed by higher interest rates and inflation that have impacted demand and affordability for consumers, we are optimistic that the underlying fundamentals of the U.S. residential housing market remains sound due to favorable demographics and a chronic undersupply of homes and we remain well-positioned to take advantage of these positive long-term trends.

*Non-residential Construction*: The near-term outlook for U.S. non-residential construction remains mixed. The November 2024 ABI was 49.6, indicating that the share of firms that reported declining billings was essentially equal to the share of firms that reported increasing billings. Despite declining interest rates and softening inflation, firms remain hesitant to start new projects, especially as some developers wait until the full scope of President-elect Trump's legislative agenda comes into better focus. While up year-over-year, the Dodge Momentum Index decreased 2.3% from October 2024 representing a moderate pullback in the number of projects planned. Some of this pullback is attributed to a decline in planned data center projects as well as weaker activity in healthcare, recreational, and religious projects. Despite the recent pullback in activity, there is optimism in market conditions as the planning queue remains strong and potential further rate cuts in calendar year 2025 have the potential to spur additional activity.

*Repair and Remodel / Tools*: Spending on home improvement has declined year-over-year through November 2024 due to multi-decade lows in existing home sales, driven by elevated interest rates, rising prices and supply constraints. Despite the recent pullback in repair and remodel spend, the October 2024 LIRA Report by the Joint Center for Housing Studies at Harvard University forecasts 1.2 percent of annual growth in home renovation and maintenance expenditures, rising to $477.1 billion through the third quarter of 2025. This projected growth comes as the average 30-year fixed mortgage rate decreased to 6.81% at November 30, 2024, from 7.22% at November 30, 2023, with further rate reductions expected over the medium to long-term as the U.S. Federal Reserve works to balance growth while keeping prices stable. However, it remains uncertain how far rates need to fall to entice home buyers to enter the market or leave their existing, lower fixed-rate mortgages.

*Outdoor Living / Celebrations:* Spending in the outdoor living and celebrations end markets is predominantly influenced by macroeconomic conditions affecting the general consumer (i.e., consumer spending), which have been adversely impacted by continued economic uncertainty, elevated interest rates, and lower than average housing turnover. However, the recent headwinds created by the combination of higher prices and higher interest rates should abate as prices stabilize and rates fall from their recent peak levels. While inflation has consistently dropped from its peak of 9.1% in June 2022, overall consumer demand continues to be adversely affected by a general moderation in consumer spending on non-essential items, driven by the combination of tighter monetary policy and persistently higher prices – the November 2024 Core CPI increased 3.30% relative to November 2023. We expect our consumers, who are price sensitive, to maintain a cautious posture in the near term as a result.

### General Economic and Market Conditions

GDP growth rate trends are generally indicative of the underlying demand trends and, in many cases, pricing for our products. Increasing. GDP growth rates, which are an indication of a strengthening economy, typically drive higher demand for our products. Conversely, declining GDP growth rates usually indicate a weaker economy potentially reducing demand for many of our products. Fluctuations in GDP growth rates can affect conversion costs related to production and SG&A.

The macroeconomic and geopolitical outlook remains complex and evolving. Although the U.S. economy continues to grow at a modest pace, prolonged inflationary pressures have negatively impacted discretionary spending, reducing demand for certain of our products and services. Recent rate cuts by the U.S. Federal Reserve, including 0.50% in September 2024 and an additional 0.25% in November 2024, are expected to alleviate some of this pressure in the near-term by reducing borrowing costs and stimulating spending, particularly in the U.S. residential and non-residential construction end markets. However, the extent and magnitude of future rate cuts will be predicated on price stability and the Federal Reserve’s ability to lower the core CPI, currently at 3.30%, down to its target of 2%. In addition to inflation, consumer spending habits and demand for our products and services 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.

### Seasonality

Historically, sales tend to be stronger in the third and fourth quarters of our fiscal year for our Consumer Products businesses when our facilities perform at seasonal peaks, matching consumer demand. Sales in our Building Products businesses 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.

### Results of Operations

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

The following discussion provides a review of results for the three months ended November 30, 2024 and November 30, 2023:

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

*GAAP Financial Measures*

|  | Three Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Net sales | $274.0 | $298.2 | $(24.2) |
| Operating income (loss) | 3.5 | (14.4) | 17.9 |
| Earnings before income taxes | 37.1 | 24.5 | 12.6 |
| Net earnings from continuing operations | 28.3 | 17.9 | 10.4 |
| Equity income | 34.6 | 38.7 | (4.1) |
| EPS from continuing operations - diluted | 0.56 | 0.36 | 0.20 |
| **Non-GAAP Financial Measures (1)** |  |  |  |
| Adjusted operating income | $6.1 | $2.4 | $3.7 |
| Adjusted EBITDA from continuing operations | 56.2 | 55.0 | 1.2 |
| Adjusted EPS from continuing operations - diluted | 0.60 | 0.57 | 0.03 |

(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 Financial 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% November 30, 2024 | 2023 | Increase/ (Decrease) | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Consumer Products | $116.7 | $119.4 | $(2.7) | (2.3%) |
| Building Products | 157.3 | 151.3 | 6.0 | 4.0% |
| Total reportable segments | 274.0 | 270.7 | 3.3 | 1.2% |
| Other | - | 27.5 | (27.5) | N.M. |
| Consolidated | $274.0 | $298.2 | $(24.2) | (8.1%) |

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

| (Volume in units) | Three Months Ended% November 30, 2024 | 2023 | Increase/ (Decrease) | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Consumer Products | 16,419,957 | 15,931,049 | 488,908 | 3.1% |
| Building Products | 3,328,513 | 3,346,983 | (18,470) | (0.6%) |
| Total reportable segments | 19,748,470 | 19,278,032 | 470,438 | 2.4% |
| Other | - | 114,063 | (114,063) | N.M. |
| Consolidated | 19,748,470 | 19,392,095 | 356,375 | 1.8% |

- *Consumer Products –* Net sales totaled $116.7 million in the second quarter of fiscal 2025, down $2.7 million, or 2.3% from the second quarter of fiscal 2024 primarily due to an unfavorable shift in product mix, partially offset by an increase in volume.
- *Building Products –* Net sales totaled $157.3 million in the second quarter of fiscal 2025, up $6.0 million, or 4.0%, over the second quarter of fiscal 2024, primarily driven by contributions from Ragasco, partially offset by lower overall volumes, excluding Ragasco, primarily in our heating and cooking business where our production of gas grill tanks was limited due to ongoing facility modernization efforts.
- *Other* - Net sales in the second quarter of fiscal 2024 are related to our former Sustainable Energy Solutions operating segment, which was deconsolidated on May 29, 2024, when we sold a 51% interest in the business. In periods subsequent to the sale transaction, our retained 49% interest is accounted for under the equity method as discussed in “Note C – Investments in Unconsolidated Affiliates.”

### Gross Profit

*(Dollars in millions)*

|  | Three Months Ended November 30, 2024 | Gross Margin | November 30, 2023 | Gross Margin | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $74.1 | 27.0% | $63.3 | 21.2% | $10.8 |

- Gross profit for the second quarter of fiscal 2025 was $74.1 million, an increase of $10.8 million, or 17.1% from the second quarter of fiscal 2024, largely driven by improved spread and higher volume in Consumer Products and contributions from Ragasco in Building Products. Gross profit for the second quarter of fiscal 2024 was negatively impacted by a $3.1 million reserve related to the voluntary recall of Consumer Products’ Balloon Time® Mini helium tank.

### SG&A

*(Dollars in millions)*

|  | Three Months Ended November 30, 2024 | % of Net Sales | November 30, 2023 | % of Net Sales | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| SG&A | $67.9 | 24.8% | $70.6 | 23.7% | $(2.7) |

- SG&A decreased $2.7 million, or 3.8%, from the second 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, partially offset by a $2.8 million increase due to the acquisition of Ragasco on June 3, 2024.

### Other Operating Items

*(Dollars in millions)*

|  | Three Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Restructuring and other expense, net | 2.6 | - | 2.6 |
| Separation costs | - | 7.1 | (7.1) |

- Restructuring and other expense, net in the second quarter of fiscal 2025 was driven primarily by the accelerated vesting of certain outstanding equity awards upon retirement of our former CEO.
- 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 November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Interest expense, net | $1.0 | $0.5 | $0.5 |

- Interest expense, net was up $0.5 million over the second quarter of fiscal 2024, driven primarily by lower interest income.

### Equity Income

*(Dollars in millions)*

|  | Three Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| WAVE (1) | $24.6 | $21.4 | $3.2 |
| ClarkDietrich (1) | 9.7 | 13.7 | (4.0) |
| Other (2) | 0.3 | 3.5 | (3.2) |
| **Equity income** | $34.6 | $38.6 | $(4.0) |

(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 $4.0 million from the second quarter of fiscal 2024 to $34.6 million, on lower contributions from ClarkDietrich and a $2.8 million gain in the second quarter of fiscal 2024 related to the divestiture of the Brazilian operations of Workhorse, partially offset by a $3.2 million increase in equity earnings from WAVE.

### Income Taxes

*(Dollars in millions)*

|  | Three Months Ended November 30, 2024 | Annual Estimated ETR | November 30, 2023 | Annual Estimated ETR | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income tax expense | $9.1 | 24.1% | $6.6 | 25.7% | $2.5 |

- Income tax expense was $9.1 million in the second quarter of fiscal 2025 compared to $6.6 million in the second quarter of fiscal 2024. The increase was driven by higher pre-tax earnings. Income tax expense in the second quarter of fiscal 2025 reflected an estimated annual ETR of 24.1% compared to 25.7% in the second 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 and Definitions” 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 November 30, 2024 | % of Net Sales | November 30, 2023 | % of Net Sales | Increase/ (Decrease) | % Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Consumer Products | $15.5 | 13.3% | $12.7 | 10.6% | $2.8 | 22.0% |
| Building Products | 47.2 | 30.0% | 45.8 | 30.3% | 1.4 | 3.1% |
| Total reportable segments | $62.7 | 22.9% | $58.5 | 21.6% | 4.2 | 7.2% |
| Unallocated Corporate and Other | (6.5) | N.M. | (3.4) | N.M. | (3.1) | 8.8% |
| **Consolidated** | $56.2 | 20.5% | $55.1 | 18.5% | 1.1 | 2.0% |

- *Consumer Products –* Adjusted EBITDA from continuing operations was $15.5 million in the second quarter of fiscal 2025, an increase of $2.8 million over the second quarter of fiscal 2024, primarily driven by higher gross profit and margin improvement. Adjusted EBITDA in the current quarter includes incremental bad debt expense of $1.9 million related to a customer bankruptcy whereas the second quarter of fiscal 2024 included a $3.1 million reserve related to the recall of our Balloon Time® Mini helium tank initiated in November 2023.
- *Building Products –* Adjusted EBITDA from continuing operations increased $1.4 million from the second quarter of fiscal 2024 as contributions from Ragasco and a favorable product mix, particularly in our heating and cooking business, where volume in our higher margin large format propane tank offering increased, was partially offset by lower volumes, excluding Ragasco. Equity income was down less than $1.0 million as lower earnings from ClarkDietrich more than offset the strong performance at WAVE.
- *Unallocated Corporate and Other –* Adjusted EBITDA from continuing operations was down $3.1 million from the second quarter of fiscal 2024, primarily due to lower contributions of equity income driven by a $2.8 million gain in the second quarter of fiscal 2024 related to the divestiture of the Brazilian operations of Workhorse.

### Six Months Year-to-Date - Fiscal 2025 Compared to Fiscal 2024

The following discussion provides a review of results for the six months ended November 30, 2024 and November 30, 2023:

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

| GAAP Financial Measures | Six Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Net sales | $531.4 | $610.1 | $(78.7) |
| Operating loss | (1.2) | (21.7) | 20.5 |
| Earnings before income taxes | 67.9 | 60.3 | 7.6 |
| Net earnings from continuing operations | 52.5 | 44.8 | 7.7 |
| Equity income | 70.0 | 84.1 | (14.1) |
| EPS from continuing operations - diluted | 1.04 | 0.89 | 0.15 |
| **Non-GAAP Financial Measures (1)** |  |  |  |
| Adjusted operating income | $2.6 | $7.1 | $(4.5) |
| Adjusted EBITDA from continuing operations | 104.6 | 121.0 | (16.4) |
| Adjusted EPS from continuing operations - diluted | 1.10 | 1.31 | (0.21) |

(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 Financial 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)*

|  | Six Months Ended% November 30, 2024 | 2023 | Increase/ (Decrease) | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Consumer Products | $234.3 | $236.7 | $(2.4) | (1.0%) |
| Building Products | 297.0 | 317.2 | (20.2) | (6.4%) |
| Total reportable segments | 531.3 | 553.9 | (22.6) | (4.1%) |
| Other | - | 56.2 | (56.2) | N.M. |
| Consolidated | $531.3 | $610.1 | $(78.8) | (12.9%) |

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

| (Volume in units) | Six Months Ended% November 30, 2024 | 2023 | Increase/ (Decrease) | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Consumer Products | 32,590,513 | 31,962,632 | 627,881 | 2.0% |
| Building Products | 6,422,630 | 7,155,803 | (733,173) | (10.2%) |
| Total reportable segments | 39,013,143 | 39,118,435 | (105,292) | (0.3%) |
| Other | - | 220,369 | (220,369) | N.M. |
| Consolidated | 39,013,143 | 39,338,804 | (325,661) | (0.8%) |

30

- *Consumer Products –* Net sales totaled $234.3 million in the current year period, down slightly from the prior year period as unfavorable mix more than offset the impact of higher overall volume.
- *Building Products –* Net sales totaled $297.0 million in the current year period, down $20.2 million, or 6.4%, from the prior year period, as contributions from Ragasco were more than offset by the combined impact of lower volume and an unfavorable product mix.
- *Other* - Net sales in the prior year period are related to our former Sustainable Energy Solutions operating segment, which was deconsolidated on May 29, 2024, when we sold a 51% interest in the business. In periods subsequent to the sales transaction, our 49% retained interest is accounted for under the equity method as discussed in “Note C – Investments in Unconsolidated Affiliates.”

### Gross Profit

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | Gross Margin | November 30, 2023 | Gross Margin | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $136.6 | 25.7% | $132.9 | 21.8% | $3.7 |

- Gross profit was $136.6 million for the current year period, an increase of $3.7 million, or 2.8%, over the prior year period, primarily due to improvements within Consumer Products, up $10.9 million, on the combined impact of higher volume and improvement in gross margin due, in part, to a $3.1 million reserve related to the voluntary recall of our Balloon Time® Mini helium tank in the prior year quarter, partially offset by lower contributions from Building Products, down $6.5 million on lower volume.

### SG&A

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | % of Net Sales | November 30, 2023 | % of Net Sales | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| SG&A | $134.0 | 25.2% | $145.1 | 23.8% | $(11.1) |

- SG&A decreased $11.1 million, or 7.6%, from the prior year period, largely 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, partially offset by a $5.4 million increase due to the acquisition of Ragasco on June 3, 2024.

### Other Operating Items

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Restructuring and other expense, net | 3.8 | - | 3.8 |
| Separation costs | - | 9.5 | (9.5) |

- Restructuring activity in the current year period was driven by $2.7 million of non-cash stock-based compensation expense related to the accelerated vesting of certain outstanding equity awards upon retirement of our former CEO and a $1.1 million true-up of the loss on deconsolidation of our former Sustainable Energy Solutions operating segment.
- Separation costs in the prior year quarter reflect direct and incremental costs incurred in connection with the Separation.

### Loss on Extinguishment of Debt

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Loss on extinguishment of debt | $- | $1.5 | $(1.5) |

- Loss on extinguishment of debt of $1.5 million resulted from 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, Net

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| Interest expense, net | $1.5 | $1.5 | $- |

- Interest expense, net of $1.5 million was flat compared to the prior year period as lower interest income was largely offset by lower average debt levels.

### Equity Income

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | 2023 | Increase/ (Decrease) |
| --- | ---: | ---: | ---: |
| WAVE (1) | $52.5 | $49.7 | $2.8 |
| ClarkDietrich (1) | 18.5 | 30.5 | (12.0) |
| Other (2) | (0.9) | 3.9 | (4.8) |
| **Equity income** | $70.1 | $84.1 | $(14.0) |

(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 was down $14.0 million from the prior year period, driven by lower contributions from ClarkDietrich, which was down $12.0 million, as declining steel prices compressed margins, and lower contributions from Workhorse, which benefited from a $2.8 million gain in the prior year period related to the divestiture of its Brazilian operations.

### Income Taxes

*(Dollars in millions)*

|  | Six Months Ended November 30, 2024 | Annual Estimated ETR | November 30, 2023 | Annual Estimated ETR | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income tax expense | $15.9 | 24.1% | $15.6 | 25.7% | $0.3 |

- Income tax expense was $15.9 million in the current year period compared to $15.6 million in the prior year period. The increase was primarily driven by higher pre-tax earnings. Income tax expense in the current year period reflected an estimated annual ETR of 24.1% compared to 25.7% in the prior year period.

### 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 and Definitions” 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)*

|  | Six Months Ended November 30, 2024 | % of Net Sales | November 30, 2023 | % of Net Sales | Increase/ (Decrease) | % Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Consumer Products | $33.3 | 14.2% | $26.9 | 11.4% | $6.4 | 23.8% |
| Building Products | 86.9 | 29.3% | 105.4 | 33.2% | (18.5) | (17.6%) |
| Total reportable segments | $120.2 | 22.6% | $132.3 | 23.9% | (12.1) | (9.1%) |
| Unallocated Corporate and Other | (15.6) | N.M. | (11.4) | N.M. | (4.2) | (36.8%) |
| **Consolidated** | $104.6 | 19.7% | $120.9 | 19.8% | (16.3) | (13.5%) |

- *Consumer Products –* Adjusted EBITDA from continuing operations was $33.3 million in the current year period, an increase of $6.4 million over the prior year period, primarily due to the impact of higher volume and improved spread in gross margin. Adjusted EBITDA in the prior year period was negatively impacted by a $3.1 million reserve related to the recall of our Balloon Time® Mini helium tank.
- *Building Products –* Adjusted EBITDA from continuing operations decreased $18.5 million from the prior year period, on lower volume, particularly in our gas grill tanks, and lower contributions from ClarkDietrich. Adjusted EBITDA from continuing operations in the current year period 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 $4.2 million from the prior year period, driven by lower equity earnings from Workhorse, which benefited from a $2.8 million gain related to the divestiture of its Brazilian operations in the prior year period, and 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 six months ended November 30, 2024, we generated $90.2 million of cash from operating activities, invested $24.8 million in property, plant and equipment, spent $88.2 million to acquire Ragasco, and received $11.4 million for the sale of 51% of our former Sustainable Energy Solutions operating segment. Additionally, we paid $14.9 million to repurchase 350,000 common shares and paid dividends of $17.1 million on the common shares during the six months ended November 30, 2024.

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

*(In millions)*

|  | Six Months Ended November 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $90.2 | $194.7 |
| Net cash used by investing activities | (101.6) | (97.8) |
| Net cash used by financing activities | (39.0) | (120.9) |
| Decrease in cash and cash equivalents | (50.4) | (24.0) |
| Cash and cash equivalents at beginning of period | 244.2 | 454.9 |
| **Cash and cash equivalents at end of period** | $193.8 | $430.9 |

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 November 30, 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 $90.2 million during the six months ended November 30, 2024, down from $194.7 million from the prior year period. The decrease was primarily due to lower net earnings in the current year period driven by the Separation and a $26.2 million decrease in dividends from unconsolidated joint ventures.

### Investing Activities

Net cash used by investing activities was $101.6 million during the six months ended November 30, 2024 compared to $97.8 million from the prior year period. Net cash used by investing activities during the six months ended November 30, 2024 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 $39.0 million during the six months ended November 30, 2024, compared to $120.9 million in the prior year period. During the six months ended November 30, 2024, we paid $14.9 million to repurchase 350,000 common shares and paid dividends of $17.1 million on the common shares. During the six months ended November 30, 2023, we received $172.2 million in net proceeds of short-term borrowings and repaid $243.8 million of long-term debt associated with the redemption of the 2026 Notes.

*Common shares –* On December 24, 2024, the Board declared a quarterly dividend of $0.17 per common share payable on March 28, 2025, to shareholders of record at the close of business on March 14, 2025. During the second 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 November 30, 2024, 5,715,000 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 November 30, 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 November 30, 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 and related disclosure, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to use judgment and 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, current trends and other factors that we believe to be relevant and reasonable under the circumstances at the time the estimate was made. 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. We believe that our estimates, assumptions, and judgments are reasonable in that they were based on information available when the estimates, assumptions and judgments were made. However, because future events and their effects cannot be determined with certainty, actual results could differ materially from those implied by our assumptions and estimates. 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, 1,739 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. 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 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 Jan 10, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-004028. Last ingested by Listed: Nov 2, 2026, 11:47 ET. No prices; not investment advice.