Worthington Industries(WOR_V) - 2026 Q1 - Quarterly Report

Commonly Used or Defined Terms This section defines key terms used throughout the financial report to ensure clarity and consistent understanding Cautionary Note Regarding Forward-Looking Statements This note advises readers that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from projections - Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected[11] - Key risk factors include future cash positions, liquidity, strategy, anticipated benefits of the Separation, financial and operational performance, pricing trends for raw materials, demand trends, and effects of judicial rulings and regulations[11][12] - Readers are cautioned not to place undue reliance on forward-looking statements and the Company disclaims any obligation to update them, except as required by law[13] Use of Non-GAAP Financial Measures and Definitions This section defines and reconciles non-GAAP financial measures used by management to assess performance, excluding non-recurring or non-operational items - Non-GAAP financial measures (Adjusted operating income, Adjusted net earnings, Adjusted EPS - diluted, Adjusted EBITDA) are used by management to evaluate ongoing performance, financial planning, and incentive compensation, excluding items not reflective of ongoing operations[15][16][17][18] - Exclusions from non-GAAP measures include impairment charges and restructuring activities, as they are non-recurring or not part of ordinary business operations[19][20] Consolidated Results – Selected Non-GAAP Adjusted Results (Three Months Ended August 31) | Metric | 2025 (GAAP) | 2025 (Non-GAAP) | 2024 (GAAP) | 2024 (Non-GAAP) | | :------------------------------ | :------------ | :-------------- | :------------ | :-------------- | | Operating Income (Loss) ($) | 9,243 | 11,719 | (4,699) | (3,541) | | Earnings Before Income Taxes ($) | 45,681 | 48,157 | 30,790 | 31,948 | | Net Earnings ($) | 35,148 | 37,247 | 24,253 | 25,121 | | Diluted EPS ($) | 0.70 | 0.74 | 0.48 | 0.50 | Consolidated Results – Adjusted EBITDA (Three Months Ended August 31) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :-------------------------------- | :----------------- | :----------------- | | Net earnings (GAAP) | 34,821 | 24,008 | | Net earnings attributable to controlling interest | 35,148 | 24,253 | | Interest expense, net | 63 | 489 | | Income tax expense | 10,860 | 6,782 | | EBIT | 46,071 | 31,524 | | Restructuring and other expense, net | 2,476 | 1,158 | | Adjusted EBIT | 48,547 | 32,682 | | Depreciation and amortization | 13,086 | 11,830 | | Stock-based compensation | 3,427 | 3,925 | | Adjusted EBITDA (non-GAAP) | 65,060 | 48,437 | Part I. Financial Information This part presents the company's comprehensive financial information, including statements, notes, and management's discussion and analysis of operations and liquidity Item 1. Financial Statements This section presents the company's unaudited consolidated financial statements, including balance sheets, statements of earnings, comprehensive income, and cash flows, along with detailed notes explaining accounting policies, segment operations, acquisitions, and financial instruments for the three months ended August 31, 2025, and comparable periods Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity as of August 31, 2025, and May 31, 2025 Consolidated Balance Sheet Highlights (In thousands) | Metric | August 31, 2025 | May 31, 2025 | | :------------------------------------------ | :-------------- | :----------- | | Total Assets | $1,738,137 | $1,695,152 | | Total Current Assets | $626,040 | $685,370 | | Cash and cash equivalents | $167,122 | $250,075 | | Total Inventories | $201,560 | $169,393 | | Total Liabilities | $778,306 | $756,915 | | Total Equity | $959,831 | $938,237 | Consolidated Statements of Earnings This section presents the company's financial performance, detailing revenues, expenses, and net earnings for the three months ended August 31, 2025, and 2024 Consolidated Statements of Earnings Highlights (Three Months Ended August 31, in thousands, except per common share amounts) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net sales | $303,707 | $257,308 | | Gross profit | $82,284 | $62,495 | | Operating income (loss) | $9,243 | $(4,699) | | Earnings before income taxes | $45,681 | $30,790 | | Net earnings | $34,821 | $24,008 | | Net earnings attributable to controlling interest | $35,148 | $24,253 | | Diluted EPS | $0.70 | $0.48 | | Cash dividends declared per common share | $0.19 | $0.17 | Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net earnings and other comprehensive income components, for the three months ended August 31, 2025, and 2024 Consolidated Statements of Comprehensive Income Highlights (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net earnings | $34,821 | $24,008 | | Other comprehensive income, net of tax | $1,083 | $484 | | Comprehensive income attributable to controlling interest | $36,231 | $24,737 | Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended August 31, 2025, and 2024 Consolidated Statements of Cash Flows Highlights (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | | :------------------------------------------ | :------- | :------- | | Net cash provided by operating activities | $41,061 | $41,146 | | Net cash used by investing activities | $(105,430) | $(88,747) | | Net cash used by financing activities | $(18,584) | $(18,077) | | Decrease in cash and cash equivalents | $(82,953) | $(65,678) | | Cash and cash equivalents at end of period | $167,122 | $178,547 | Condensed Notes to Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering accounting policies, segment data, and financial instruments Note A – Basis of Presentation This note outlines the basis for preparing the interim unaudited consolidated financial statements, including consolidation principles for subsidiaries like Halo, equity method accounting for unconsolidated affiliates, and details related party transactions with Worthington Steel. It also mentions the impact of recently issued accounting pronouncements on future disclosures - Worthington Enterprises consolidates its 80% controlling interest in Halo, with noncontrolling interests reported separately[35] - Investments in unconsolidated affiliates are accounted for using the equity method[36] Purchases from Worthington Steel (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Purchases under Steel Supply and Services Agreement | $37,036 | $28,431 | - ASU 2023-09 (Income Taxes) will require enhanced income tax disclosures starting fiscal 2025, and ASU 2024-03 (Expense Disaggregation Disclosures) will expand cost and expense disclosures starting fiscal 2027[41][42] Note B – Investments in Unconsolidated Affiliates This note details the company's equity method investments in unconsolidated joint ventures, including ClarkDietrich, Sustainable Energy Solutions, WAVE, and Workhorse, and provides summarized financial information for these affiliates, highlighting distributions received and the accounting treatment for excess distributions - The company holds investments in unconsolidated joint ventures: ClarkDietrich (25%), Sustainable Energy Solutions (49%), WAVE (50%), and Workhorse (20%)[43] - Distributions from unconsolidated affiliates totaled $36,476,000 during the three months ended August 31, 2025[44] Summarized Financial Information for Unconsolidated Affiliates (Three Months Ended August 31, in thousands) | Affiliate | Metric | 2025 | 2024 | | :---------------- | :---------------- | :----- | :----- | | WAVE | Net sales | $134,717 | $125,905 | | | Net earnings | $63,597 | $56,209 | | ClarkDietrich | Net sales | $289,991 | $301,855 | | | Net earnings | $23,735 | $34,976 | | Other | Net sales | $72,485 | $87,913 | | | Net earnings (loss) | $(3,623) | $(503) | Note C – Restructuring and Other Expense, Net This note describes the company's restructuring activities, which aim to fundamentally change operations through facility closures, consolidations, or headcount rationalization. It also provides a summary of the associated liabilities and expenses for the three months ended August 31, 2025 - Restructuring activities include employee-related costs (severance) and facility-related costs (exit costs, asset disposals)[48] Restructuring Activities Liabilities and Expense (Three Months Ended August 31, 2025, in thousands) | Category | Balance at May 31, 2025 | Expense | Payments | Balance at August 31, 2025 | | :-------------------------- | :---------------------- | :------ | :------- | :----------------------- | | Early retirement and severance | $585 | $775 | $(365) | $995 | | Other restructuring charges | $100 | $1,701 | $(1,801) | $- | | Total | $685 | $2,476 | $(2,166) | $995 | - The total liability of $995,000 associated with restructuring activities as of August 31, 2025, is expected to be paid within the next 12 months[49] Note D – Contingent Liabilities and Commitments Management believes that the outcome of current legal actions and environmental issues will not significantly affect the company's consolidated financial position or future results of operations - Management does not expect current legal actions or environmental issues to significantly affect financial position or future results[50] Note E – Guarantees The company reports that it does not have guarantees that are reasonably likely to have a material current or future effect on its financial condition. It also discloses outstanding stand-by letters of credit - The company does not have guarantees with a material current or future effect on its financial condition[51] - Outstanding stand-by letters of credit totaled $9,204,000 as of August 31, 2025, with no amounts drawn[52] Note F – Debt This note provides information on the company's $500 million unsecured revolving Credit Facility, which matures on September 27, 2028. It states that there were no outstanding borrowings under the facility at August 31, 2025, or May 31, 2025 - The company has a $500,000,000 unsecured revolving Credit Facility maturing on September 27, 2028[53] - There were no borrowings outstanding under the Credit Facility at August 31, 2025, or May 31, 2025, leaving the full $500,000,000 available[53] Note G – Other Comprehensive Income (Loss) This note summarizes the tax effects on each component of Other Comprehensive Income (OCI) for the three months ended August 31, 2025, and 2024, including foreign currency translation, pension liability adjustments, and cash flow hedges Other Comprehensive Income (Loss), Net of Tax (Three Months Ended August 31, in thousands) | Component | 2025 (Net-of-Tax) | 2024 (Net-of-Tax) | | :-------------------------- | :---------------- | :---------------- | | Foreign currency translation | $1,407 | $541 | | Pension liability adjustment | $(11) | $(7) | | Cash flow hedges | $(313) | $(50) | | Total OCI (loss) | $1,083 | $484 | Note H – Changes in Equity This note summarizes the changes in equity by component for the three months ended August 31, 2025, and 2024, detailing net earnings, other comprehensive income, common shares issued and repurchased, and cash dividends declared. It also provides an update on the common share repurchase authorization Changes in Equity Highlights (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | | :------------------------------------------ | :------- | :------- | | Net earnings attributable to controlling interest | $35,148 | $24,253 | | Other comprehensive income | $1,083 | $484 | | Repurchases and retirement of common shares | $(6,259) | $(6,803) | | Cash dividends declared | $(9,433) | $(8,550) | | Balance at August 31 | $959,831 | $903,241 | - During the three months ended August 31, 2025, the company repurchased 100,000 common shares, leaving 5,265,000 common shares available for repurchase under the existing authorization[57] Note I – Stock-Based Compensation This note describes the company's stock-based compensation plans, including service-based restricted common shares, market-based restricted common shares, and performance shares. It details the grants, fair values, vesting conditions, and key assumptions used for valuation during the three months ended August 31, 2025 - Granted 63,330 service-based restricted common shares with a weighted average fair value of $63.05 per share, vesting over three years[59] - Granted 92,500 market-based restricted common shares (at target) on June 30, 2025, with an estimated grant date fair value of $45.39 per share, contingent on ATSR achievement over a three-year service period[60] Assumptions for Market-Based Restricted Common Shares (Three Months Ended August 31, 2025) | Assumption | Value | | :------------------ | :---- | | Dividend yield | 1.19% | | Expected volatility | 38.00% | | Risk-free interest rate | 3.68% | - Granted performance share awards covering 53,130 common shares (at target) with an aggregate grant-date fair value of $3,395,000, earned based on corporate and business unit targets over three-year performance periods[65] Note J – Income Taxes This note reports the income tax expense and estimated annual effective tax rates (ETRs) for the three months ended August 31, 2025, and 2024. It highlights that the increase in tax expense is primarily due to higher pre-tax earnings and notes that the actual ETR for fiscal 2026 could differ from the forecasted rate Income Tax Expense and Estimated Annual ETR (Three Months Ended August 31) | Metric | 2025 | 2024 | | :------------------ | :----- | :----- | | Income tax expense ($ thousands) | $10,860 | $6,782 | | Estimated Annual ETR | 23.8% | 24.5% | - The increase in income tax expense was primarily driven by higher pre-tax earnings[127] Note K – Earnings per Share This note provides the computation of basic and diluted Earnings Per Share (EPS) attributable to controlling interest for the three months ended August 31, 2025, and 2024, along with the weighted average common shares outstanding for each period Earnings per Share Attributable to Controlling Interest (Three Months Ended August 31) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net earnings attributable to controlling interest ($ thousands) | $35,148 | $24,253 | | Basic EPS – weighted average common shares (thousands) | 49,264 | 49,487 | | Diluted EPS – weighted average common shares (thousands) | 50,026 | 50,365 | | Basic EPS ($) | $0.71 | $0.49 | | Diluted EPS ($) | $0.70 | $0.48 | - Stock options and restricted common shares totaling 13,610 (2025) and 77,837 (2024) were excluded from diluted EPS computation due to their antidilutive effect[67] Note L – Segment Operations This note describes the company's two operating segments, Consumer Products and Building Products, and provides summarized financial information, including net sales, adjusted EBITDA, total assets, and capital expenditures for each segment, along with Unallocated Corporate and Other categories - The company operates under two reportable segments: Consumer Products and Building Products, with performance evaluated based on adjusted EBITDA[68] Net Sales by Segment (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :------------------ | :------- | :------- | | Consumer Products | $118,938 | $117,596 | | Building Products | $184,769 | $139,712 | | Consolidated | $303,707 | $257,308 | Adjusted EBITDA by Segment (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :-------------------------- | :------- | :------- | | Consumer Products | $16,148 | $17,775 | | Building Products | $57,793 | $39,729 | | Other | $(1,663) | $(1,153) | | Unallocated Corporate | $(7,218) | $(7,914) | | Consolidated | $65,060 | $48,437 | Total Assets by Segment (in thousands) | Segment | August 31, 2025 | May 31, 2025 | | :-------------------------- | :-------------- | :----------- | | Consumer Products | $534,316 | $531,187 | | Building Products | $928,012 | $795,837 | | Unallocated Corporate and Other | $275,809 | $368,128 | | Total Assets | $1,738,137 | $1,695,152 | Capital Expenditures by Segment (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Consumer Products | $9,041 | $4,943 | | Building Products | $3,509 | $3,709 | | Unallocated Corporate | $645 | $977 | | Total | $13,195 | $9,629 | Note M – Acquisitions This note details the acquisition of Elgen on June 18, 2025, for approximately $91.2 million, net of cash acquired. Elgen, a provider of HVAC parts, was integrated into the Building Products segment. The note also provides a preliminary allocation of the purchase price, including identified intangible assets and goodwill - Acquired Elgen, a provider of HVAC parts and components, on June 18, 2025, for $91,185,000, net of cash acquired[74] - Elgen's results have been included in consolidated statements of earnings since the acquisition date as part of the Building Products segment[74] Acquired Identifiable Intangible Assets from Elgen Acquisition (in thousands) | Category | Amount | Useful Life (Years) | | :-------------------------- | :----- | :------------------ | | Customer relationships | $17,800 | 15 | | Trade name | $7,900 | 10 | | Technological know-how | $7,000 | 10 | | Non-compete agreement | $1,700 | 5 | | Total | $34,400 | | - Goodwill of $33,617,000 was recognized from the Elgen acquisition, representing the excess of purchase price over fair value of net identifiable assets[79] Note N – Derivative Financial Instruments and Hedging Activities This note explains the company's use of derivative financial instruments to manage exposure to interest rate, foreign currency exchange, and commodity price risks. It details cash flow hedges, net investment hedges, and economic (non-designated) hedges, including their notional positions and recognized gains/losses - The company uses derivative financial instruments to manage interest rate risk, foreign currency exchange rate risk, and commodity price risk (steel, natural gas, copper, zinc, aluminum)[80][81][82][83] Fair Value of Derivative Financial Instruments (in thousands) | Category | August 31, 2025 (Assets) | May 31, 2025 (Assets) | August 31, 2025 (Liabilities) | May 31, 2025 (Liabilities) | | :------------------------------------------ | :----------------------- | :-------------------- | :-------------------------- | :----------------------- | | Derivatives designated as hedging instruments | $594 | $961 | $378 | $86 | | Derivatives not designated as hedging instruments | $36 | $81 | $7,642 | $7,375 | | Total | $630 | $1,042 | $8,020 | $7,461 | Net Notional Positions of Cash Flow Hedges (August 31, 2025, in thousands) | Contract Type | Notional Amount | Maturity Date(s) | | :-------------------------- | :-------------- | :-------------------------------- | | Commodity contracts | $9,423 | September 2025 - December 2027 | | Foreign currency exchange contracts | $6,895 | September 2025 - April 2026 | - Euro-denominated debt of €91,700,000 ($99,479,000) is designated as a non-derivative net investment hedge of foreign operations in Portugal[90] Gain (Loss) Recognized in Earnings for Economic (Non-designated) Derivative Financial Instruments (Three Months Ended August 31, in thousands) | Location of Gain (Loss) | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Cost of goods sold (Commodity contracts) | $(47) | $87 | | Miscellaneous income (expense), net (Foreign currency exchange contracts) | $674 | $1,047 | | Total | $627 | $1,134 | Note O – Fair Value Measurements This note defines fair value and outlines the three-tier fair value hierarchy (Level 1, 2, 3) used for recurring and non-recurring measurements. It provides tables for derivative financial instruments measured at fair value and discloses the fair value of long-term debt - Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants[93] Recurring Fair Value Measurements of Derivative Financial Instruments (Level 2, in thousands) | Metric | August 31, 2025 | May 31, 2025 | | :------------------------------------------ | :-------------- | :----------- | | Assets | $630 | $1,042 | | Liabilities | $8,020 | $7,461 | Fair Value and Carrying Amount of Long-Term Debt (in thousands) | Metric | August 31, 2025 | May 31, 2025 | | :------------------------------------------ | :-------------- | :----------- | | Fair value of long-term debt | $276,990 | $263,547 | | Carrying amount of long-term debt | $306,010 | $302,868 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, covering business overview, recent acquisitions, demand trends, factors affecting operating costs, detailed results of operations, and liquidity and capital resources for the three months ended August 31, 2025 Introduction This introduction sets the context for the Management's Discussion and Analysis (MD&A), emphasizing its role in providing material information on market trends, business developments, and financial performance, and advises reading it in conjunction with the consolidated financial statements and the 2025 Form 10-K - The MD&A provides material information relevant to an assessment of the company's financial condition and results of operations[99] - It should be read in conjunction with the consolidated financial statements and notes in Part I, Item 1 of this Form 10-Q, and the 2025 Form 10-K[99] Business Overview Worthington Enterprises is a market-leading designer and manufacturer of innovative metal products, operating through two reportable segments: Consumer Products and Building Products. The company aims to create shareholder value by optimizing operations, developing new products, and pursuing strategic investments and acquisitions - The company operates two market-leading segments: Consumer Products and Building Products[100] - Consumer Products offers tools, outdoor living, and celebrations products, including propane cylinders, torches, and helium kits[101] - Building Products provides pressurized containment solutions (e.g., refrigerant and LPG cylinders, well water tanks) and, through joint ventures, ceiling suspension systems and light gauge metal framing products[102] - The acquisition of Elgen expanded the Building Products portfolio to include HVAC parts and components[102] Acquisitions and Divestitures This section highlights the company's recent acquisition activities, including the purchase of Elgen in fiscal 2026, which expanded the Building Products segment into HVAC parts, and the acquisition of Ragasco in fiscal 2025, a global manufacturer of composite propane cylinders - On June 18, 2025, the company acquired Elgen, a leading provider of HVAC parts and components, for approximately $91,200,000, net of cash acquired, integrating it into the Building Products segment[105] - On June 3, 2024, the company acquired Ragasco, a global manufacturer of composite propane cylinders, for $108,600,000, also integrated into Building Products[106] Demand Trends This section analyzes the macroeconomic environment, inventory management strategies of customers, and specific end market trends impacting product demand. It notes a mixed macroeconomic environment with easing inflation but elevated borrowing costs, cautious customer inventory management, and uneven conditions in construction and repair/remodel markets General Economic Conditions The macroeconomic environment during the first quarter of fiscal 2026 was mixed, with easing inflation offset by elevated borrowing costs and policy uncertainty. This led to cautious consumer and business sentiment, impacting discretionary purchases and new construction demand, with uneven demand expected in the near term - The macroeconomic environment in Q1 fiscal 2026 was mixed, with easing inflation but elevated borrowing costs and policy uncertainty[108] - U.S. GDP increased at a 3.3% annualized rate in June 2025, while CPI rose 3.1% year-over-year in August 2025[108] - Elevated mortgage costs (6.56% average 30-year fixed rate at August 31, 2025) constrained new construction demand[108] - Demand is expected to remain uneven in the near term due to tight credit conditions, softening industrial activity, and global uncertainty[109] Inventory Demand Cycles Demand for the company's products is significantly influenced by the inventory management strategies of its retail and distribution partners. In the first quarter of fiscal 2026, customer inventory levels were generally aligned with end-user demand, with replenishment activity mirroring point-of-sale trends and cautious buying due to tariff-related cost pressures - Customer destocking and restocking cycles can significantly impact the company's reported revenue and margin performance, particularly in Consumer Products[110] - During Q1 fiscal 2026, inventory levels at key retailer and distributor customers remained aligned with end-user demand, with no material build-up[111] - Customers maintained a cautious approach, selectively trimming orders for lower-volume items due to tariff-related cost pressures[111] End Market Trends Conditions across key end markets remained uneven in Q1 fiscal 2026. U.S. residential and non-residential construction spending trended lower, with a subdued new home pipeline (HMI at 32). However, non-residential project planning activity showed improvement (DMI rose 7.5% to 301.4), and homeowner improvement spending is projected for modest growth - U.S. residential and non-residential construction spending trended lower in Q1 fiscal 2026[113] - The HMI weakened to 32 in August 2025, indicating a notably subdued new home pipeline[113] - The DMI rose 7.5% in August 2025 to a record 301.4, signaling stronger non-residential project planning activity despite current spending softness[113] - The LIRA projects approximately 1.2% growth in homeowner improvement spending through Q2 calendar year 2026[113] Factors Affecting Operating Costs This section examines the impact of raw material price fluctuations and seasonality on the company's operating costs. It notes moderation in steel prices, increased aluminum costs due to tariffs, stable or declining propane/propylene/helium costs, and outlines the seasonal sales patterns for Consumer and Building Products Raw Materials Raw material expenditures, primarily steel, propane, propylene, and aluminum, significantly impact operating costs. In Q1 fiscal 2026, steel prices moderated, aluminum costs increased due to higher global prices and U.S. tariffs, while propane, propylene, and other industrial gas costs were stable or declined - Steel is the most significant direct cost across both Consumer Products and Building Products segments[115] - Prices for hot-rolled and cold-rolled steel moderated from April 2025 peaks in Q1 fiscal 2026, contributing to improved spread[115] - Aluminum costs increased year-over-year in Q1 fiscal 2026 due to higher global benchmark prices and a June 2025 increase in U.S. Section 232 tariffs to 50%[116] - Propane, propylene, and other industrial gases (helium) costs were stable or declined in Q1 fiscal 2026[117] Seasonality The company's net sales exhibit seasonal patterns. Consumer Products typically experience stronger sales in the fiscal third and fourth quarters, while Building Products generally sees stronger sales in the first and fourth quarters, influenced by weather, customer business cycles, and construction project timing - Net sales for Consumer Products tend to be stronger in fiscal third and fourth quarters[119] - Sales in Building Products are generally stronger in the first and fourth quarters of the fiscal year[119] Results of Operations This section provides a detailed analysis of the company's financial performance for the three months ended August 31, 2025, compared to the prior year. It highlights significant increases in consolidated net sales, gross profit, operating income, net earnings, and adjusted EBITDA, primarily driven by strong performance in the Building Products segment Net Sales Consolidated net sales increased by 18.0% to $303.7 million, primarily driven by a 32.2% increase in Building Products sales, which included a $20.9 million contribution from the Elgen acquisition. Consumer Products sales saw a modest 1.1% increase due to favorable product mix Consolidated Net Sales by Operating Segment (Three Months Ended August 31, in millions) | Segment | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :----- | :----- | :--------- | :--------- | | Consumer Products | $118.9 | $117.6 | $1.3 | 1.1% | | Building Products | $184.8 | $139.7 | $45.1 | 32.3% | | Consolidated | $303.7 | $257.3 | $46.4 | 18.0% | - Building Products' net sales increase included $20,900,000 in contributions from the Elgen acquisition[121] Gross Profit Gross profit for the current year quarter increased by $19.8 million, or 31.7%, to $82.3 million, with the gross margin improving to 27.1%. This increase was primarily driven by higher overall volumes in the wholly-owned businesses of the Building Products segment Gross Profit (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----------- | :----- | :----- | :--------- | :--------- | | Gross profit | $82.3 | $62.5 | $19.8 | 31.7% | | Gross margin | 27.1% | 24.3% | | | - The increase in gross profit was primarily driven by higher overall volumes in the wholly owned businesses of Building Products[122] SG&A Selling, General and Administrative (SG&A) expenses increased by $4.6 million, or 7.0%, primarily due to the addition of Elgen. However, as a percentage of net sales, SG&A decreased from 25.7% in the prior year quarter to 23.2% due to slightly lower overall corporate overhead expenses SG&A (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----------- | :----- | :----- | :--------- | :--------- | | SG&A | $70.6 | $66.0 | $4.6 | 7.0% | | Net Sales % | 23.2% | 25.7% | | | - The increase in SG&A was primarily due to the addition of Elgen[123] Restructuring and Other Expense, Net Restructuring and other expense, net, increased to $2.5 million in the current year quarter from $1.2 million in the prior year. These expenses primarily consisted of employee severance and transaction costs related to acquisitions and divestitures Restructuring and Other Expense, Net (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | Change ($) | | :------------------------------------------ | :----- | :----- | :--------- | | Restructuring and other expense, net | $2.5 | $1.2 | $1.3 | - Expenses primarily consisted of employee severance and transaction costs related to acquisitions and divestitures[124] Equity Income Equity income increased by $1.2 million, or 3.4%, to $36.7 million. This growth was driven by higher contributions from WAVE, which increased by $4.5 million, partially offset by a $2.8 million decline at ClarkDietrich due to pricing pressure Equity Income (Three Months Ended August 31, in millions) | Affiliate | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :----- | :----- | :--------- | :--------- | | WAVE | $32.4 | $27.9 | $4.5 | 16.1% | | ClarkDietrich | $5.9 | $8.7 | $(2.8) | (32.2%) | | Other | $(1.6) | $(1.1) | $(0.5) | (45.5%) | | Equity income | $36.7 | $35.5 | $1.2 | 3.4% | - The decline at ClarkDietrich was due to pricing pressure leading to lower gross profit[126] Income Tax Expense Income tax expense increased to $10.9 million in the current year quarter from $6.8 million in the prior year, primarily due to higher pre-tax earnings. The estimated annual effective tax rate (ETR) decreased slightly from 24.5% to 23.8% Income Tax Expense (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | Change ($) | | :------------------ | :----- | :----- | :--------- | | Income tax expense | $10.9 | $6.8 | $4.1 | | Estimated Annual ETR | 23.8% | 24.5% | | - The increase in income tax expense was primarily driven by higher pre-tax earnings[127] Adjusted EBITDA Consolidated Adjusted EBITDA increased by 34.3% to $65.0 million. This was primarily driven by a 45.6% increase in Building Products' Adjusted EBITDA due to volume growth, despite a 9.6% decrease in Consumer Products' Adjusted EBITDA. Unallocated Corporate's Adjusted EBITDA improved due to lower accruals and increased cost recovery Adjusted EBITDA by Segment (Three Months Ended August 31, in millions) | Segment | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Consumer Products | $16.1 | $17.8 | $(1.7) | (9.6%) | | Building Products | $57.8 | $39.7 | $18.1 | 45.6% | | Other | $(1.7) | $(1.2) | $(0.5) | 41.7% | | Unallocated Corporate | $(7.2) | $(7.9) | $0.7 | 8.9% | | Consolidated | $65.0 | $48.4 | $16.6 | 34.3% | - Building Products' Adjusted EBITDA was negatively impacted by $2,200,000 of nonrecurring items related to the Elgen acquisition[128] - Unallocated Corporate's Adjusted EBITDA improved due to lower profit sharing and bonus accruals, and increased costs recovered through the Transition Services Agreement with Worthington Steel[128] Liquidity and Capital Resources This section discusses the company's cash flow generation, investments, and financing activities, affirming adequate resources for current operations and future needs. It highlights stable operating cash flow, increased cash used in investing activities due to acquisitions, and details financing activities including share repurchases and dividends, while maintaining a $500 million available credit facility Operating Activities Net cash provided by operating activities remained flat at $41.1 million for the three months ended August 31, 2025. Higher net earnings in the current quarter were offset by an increase in operating working capital requirements and a $2.5 million decrease in dividends received from unconsolidated affiliates Net Cash Provided by Operating Activities (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $41.1 | $41.1 | - Higher net earnings were offset by increased operating working capital requirements and a $2,500,000 decrease in dividends from unconsolidated affiliates[134] Investing Activities Net cash used by investing activities increased to $105.4 million for the three months ended August 31, 2025, compared to $88.7 million in the prior year. This was primarily driven by the cash paid to acquire Elgen and capital expenditures, including $8.6 million related to ongoing facility modernization projects Net Cash Used by Investing Activities (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | | :------------------------------------------ | :------- | :------- | | Net cash used by investing activities | $(105.4) | $(88.7) | - Primary drivers were the acquisition of Elgen (approximately $92,000,000) and capital expenditures ($13,200,000, including $8,600,000 for facility modernization)[129][135] Financing Activities Net cash used by financing activities was $18.6 million for the three months ended August 31, 2025. This included $6.3 million for the repurchase of 100,000 common shares and $8.6 million in dividend payments. The company has 5,265,000 common shares remaining available for repurchase and no outstanding borrowings on its $500 million Credit Facility Net Cash Used by Financing Activities (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | | :------------------------------------------ | :------- | :------- | | Net cash used by financing activities | $(18.6) | $(18.1) | - Paid $6,300,000 to repurchase 100,000 common shares and $8,600,000 in dividends[129][137] - As of August 31, 2025, 5,265,000 common shares remained available for repurchase under the Board's authorization[138] - No outstanding borrowings were drawn against the $500,000,000 Credit Facility at August 31, 2025[140] Dividend Policy The Board of Directors reviews the dividend quarterly, establishing the rate based on the company's consolidated financial condition, results of operations, capital requirements, cash flows, business prospects, and other relevant factors. There are no material contractual or regulatory restrictions on dividend payments - A quarterly dividend of $0.19 per common share was declared on September 23, 2025, payable on December 29, 2025[138] - The Board reviews dividends quarterly based on financial condition, results, capital requirements, cash flows, and business prospects[141] - There are no material contractual or regulatory restrictions on dividend payments, though future payments are not guaranteed[141] Critical Accounting Estimates The company's critical accounting estimates, which involve significant judgments and assumptions affecting reported financial amounts, have not materially changed from those discussed in the 2025 Form 10-K. These estimates are based on historical experience, current trends, and other relevant factors - Critical accounting estimates, involving significant judgments and assumptions, have not significantly changed from those discussed in the 2025 Form 10-K[142] - Estimates are based on historical experience, current trends, and other relevant factors, but actual results could differ materially from those implied by assumptions[142] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that the company's market risks have not materially changed from those disclosed in "Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk" of the 2025 Form 10-K - Market risks have not materially changed from those disclosed in the 2025 Form 10-K[143] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting. Management concluded that disclosure controls were effective at a reasonable assurance level, and no material changes occurred in internal control during the period Evaluation of Disclosure Controls and Procedures Management, under the supervision of the principal executive officer and principal financial officer, evaluated the effectiveness of the company's disclosure controls and procedures. They concluded that these controls were designed and effective at a reasonable assurance level as of the end of the quarterly period - Disclosure controls and procedures were designed and effective at a reasonable assurance level as of August 31, 2025[145] Changes in Internal Control Over Financial Reporting This section reports that no changes occurred during the period covered by this Form 10-Q in the company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting - No changes occurred during the period that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[146] Part II. Other Information This part provides additional disclosures on legal proceedings, risk factors, equity security sales, and other relevant corporate information Item 1. Legal Proceedings The company is involved in various judicial and administrative proceedings arising in the ordinary course of business. Management does not believe that any such proceedings, individually or in aggregate, will have a material adverse effect on its business, financial position, results of operations, or cash flows - The company is involved in various legal proceedings in the ordinary course of business[149] - Management does not believe these proceedings will have a material adverse effect on the business, financial position, results of operations, or cash flows[149] Item 1A. Risk Factors This section states that the company's risk factors have not significantly changed from those detailed in "PART I – Item 1A. – Risk Factors" of the 2025 Form 10-K. It advises readers to carefully review those factors in connection with evaluating the business and investments - Risk factors have not significantly changed from those disclosed in the 2025 Form 10-K[150] - Readers should carefully review the risk factors from the 2025 Form 10-K when evaluating the business and forward-looking statements[150] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that Worthington Enterprises had no unregistered sales of equity securities during the three months ended August 31, 2025. It also details issuer purchases of equity securities, including common shares withheld for tax obligations and repurchases under publicly announced plans Unregistered Sales of Equity Securities There were no equity securities of Worthington Enterprises sold by the company during the three months ended August 31, 2025, that were not registered under the Securities Act of 1933, as amended - No unregistered sales of equity securities by Worthington Enterprises during the three months ended August 31, 2025[151] Issuer Purchases of Equity Securities The company purchased a total of 165,909 common shares at an average price of $62.33 during the three months ended August 31, 2025. This included 100,000 common shares repurchased under publicly announced plans, leaving 5,265,000 common shares available for repurchase under the existing authorization Issuer Purchases of Equity Securities (Three Months Ended August 31, 2025) | Period | Total Number of Common Shares Purchased | Average Price Paid per Common Share | Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs | | :---------------- | :-------------------------------------- | :---------------------------------- | :---------------------------------------------------------------------------------- | | June 1-30, 2025 | 40,862 | $60.46 | - | | July 1-31, 2025 | 124,730 | $62.93 | 100,000 | | August 1-31, 2025 | 317 | $67.05 | - | | Total | 165,909 | $62.33 | 100,000 | - As of August 31, 2025, 5,265,000 common shares remained available for repurchase under the authorization[153] Item 3. Defaults Upon Senior Securities This item is not applicable to Worthington Enterprises for the reporting period - Not applicable[155] Item 4. Mine Safety Disclosures This item is not applicable to Worthington Enterprises for the reporting period - Not applicable[156] Item 5. Other Information During the quarter ended August 31, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangements or any non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[157] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, equity plans, certifications from executive officers, and interactive data files in XBRL format - Exhibits include Amended Articles of Incorporation, Code of Regulations, 2025 Equity Plan for Non-Employee Directors, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Interactive Data Files (XBRL)[158] Signatures This section contains the official certification and signatures for the Form 10-Q, confirming its submission by an authorized officer - The report was signed on October 8, 2025, by Colin J. Souza, Vice President and Chief Financial Officer[164]