Worthington Steel(WS) - 2025 Q3 - Quarterly Report

Financial Performance - Net sales for the three months ended February 28, 2025, were $687.4 million, a decrease of 14.7% compared to $805.8 million for the same period in 2024[20] - Gross margin for the nine months ended February 28, 2025, was $261.6 million, down from $308.8 million in the same period of 2024, reflecting a decrease of 15.3%[20] - Operating income for the three months ended February 28, 2025, was $18.3 million, a decline of 72.3% from $66.3 million in the prior year[20] - Net earnings attributable to controlling interest for the nine months ended February 28, 2025, were $55.0 million, compared to $101.5 million for the same period in 2024, representing a decrease of 45.8%[20] - Comprehensive income attributable to controlling interest for the nine months ended February 28, 2025, was $45.7 million, down from $97.3 million in the same period of 2024, a decrease of 53.0%[23] - Basic earnings per common share attributable to controlling interest for the three months ended February 28, 2025, was $0.28, down from $0.99 for the same period in 2024[100] - For the nine months ended February 28, 2025, net earnings attributable to controlling interest was $55.0 million, compared to $101.5 million for the same period in 2024[102] - Adjusted EBIT for Q3 fiscal 2025 was $25.3 million, down $41.6 million (61.9%) from $66.9 million in Q3 fiscal 2024[184] - Year-to-date net sales totaled $2,260.4 million, a decrease of $259.2 million (10.3%) from the prior year period[186] - Year-to-date operating income was $80.6 million, down $46.6 million (36.6%) from $127.2 million in the prior year[187] Assets and Liabilities - Total current assets decreased to $912.6 million as of February 28, 2025, from $1,001.8 million as of May 31, 2024, a decline of 8.9%[14] - Total liabilities decreased to $656.6 million as of February 28, 2025, from $748.9 million as of May 31, 2024, a reduction of 12.3%[17] - Cash and cash equivalents increased to $63.3 million as of February 28, 2025, compared to $40.2 million as of May 31, 2024, an increase of 57.7%[14] - The balance of accumulated other comprehensive income (loss) as of February 28, 2025, was $(15.4) million, compared to $(6.1) million at May 31, 2024[96] - The carrying value of the Credit Facility was $110.0 million as of February 28, 2025, down from $148.0 million at May 31, 2024[127] Cash Flow and Dividends - The company reported a net cash provided by operating activities of $176.4 million for the nine months ended February 28, 2025, compared to $163.9 million for the same period in 2024, an increase of 7.6%[26] - The company declared cash dividends of $0.16 per common share for the three months ended February 28, 2025, consistent with the same period in 2024[20] - The company declared a quarterly cash dividend of $0.16 per common share, payable on June 27, 2025, to shareholders of record as of June 13, 2025[159] - Net cash used in financing activities increased to $69.5 million from $57.0 million, driven by $23.9 million in dividends paid to shareholders[212] Operational Highlights - The automotive industry accounted for 52% of net sales for the three months ended February 28, 2025, with the Detroit Three Automakers representing 32% of total sales[52] - Total volume decreased by 11% compared to the prior quarter, with toll shipments down 15% and automotive shipments down 3% year-over-year[160] - North American vehicle production decreased by 9% in Q3 fiscal 2025 compared to Q3 fiscal 2024, while production from the Detroit Three Automakers fell by 15% in the same period[157] - The average price of hot-rolled steel was $702 per ton in Q3 fiscal 2025, down from $1,030 per ton in Q3 fiscal 2024, reflecting a significant price decline[168] Restructuring and Separation - The company plans to consolidate its Cleveland, Ohio toll processing manufacturing facility into its existing facility in Twinsburg, Ohio, with operations expected to be completed by the end of fiscal 2025[65] - Separation costs totaled $1.0 million for Q3 fiscal 2024 and $19.5 million for the nine months ended February 29, 2024[34] - No additional separation costs are expected following the finalization of the Separation on December 1, 2023[193] Investments and Acquisitions - Tempel entered into a Purchase Agreement to acquire approximately 52% of S.I.T.E.M. S.p.A. for approximately €51 million ($52.9 million) plus the contribution of its electrical steel facility in Germany[105][106] - The acquisition of Voestalpine Automotive Components Nagold was completed for net cash consideration of $21.0 million and the assumption of a $0.9 million pension liability[107] - The final purchase accounting for Voestalpine Nagold resulted in $12.6 million of property, plant and equipment and $8.2 million of net working capital, with $1.1 million recognized as goodwill[108] Debt and Financing - The company incurred $110.0 million in short-term borrowings under its revolving credit facility as of February 28, 2025, down from $148.0 million as of May 31, 2024[77] - The weighted average interest rate on outstanding interest-bearing debt under the credit facility was 5.91% as of February 28, 2025, compared to 6.92% as of May 31, 2024[84] - The company may seek additional capital through new debt or equity securities, but market conditions could impact the ability to obtain favorable terms[206] Tax and Regulatory - The Company's effective income tax rate was 26.7% for the third quarter of fiscal 2025, compared to 22.2% for the same period in fiscal 2024[98] - Income tax expense decreased to $12.6 million with an effective tax rate of 18.7%, down from 21.9% in the prior year, due to lower pre-tax earnings[199] Miscellaneous - The company recognized a pre-tax impairment charge of $1.3 million for an in-process research and development intangible asset deemed fully impaired during the third quarter of fiscal 2025[64] - The company has outstanding cash flow hedges with a notional amount of $13.3 million in commodity contracts and $6.1 million in foreign currency exchange contracts as of February 28, 2025[118]