Worthington Steel(WS) - 2026 Q1 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements Overview This section identifies forward-looking statements in the Form 10-Q, covering future financial performance, operational strategies, and market conditions - Forward-looking statements are identified by specific words/phrases (e.g., 'believe,' 'expect,' 'anticipate') and cover future financial performance, operational strategies, growth, profitability, and market conditions[8] - Statements also include anticipated benefits from the Separation of Worthington Enterprises, Inc.'s steel processing business into Worthington Steel as a stand-alone company on December 1, 2023[8] Risks and Uncertainties Forward-looking statements are subject to inherent risks and uncertainties, including market conditions, commodity prices, supply chain, and regulatory factors - Actual results may differ materially due to risks such as public health emergencies, regulatory approvals for the Separation, financial market conditions (inflation, interest rates, recession), and the ability of financial institutions to provide capital[9] - Other significant risks include changing commodity prices and supply, product demand and pricing, changes in product mix, volatility in raw material availability and quality, supply chain constraints, critical equipment failures, and financial difficulties of customers or suppliers[9] - The Company also faces risks from international business operations (economic/political instability, currency exchange rates), tariffs and trade restrictions, inflation, interest rate increases, impairment of assets, competitive pressures, environmental regulations, judicial rulings, healthcare/tax law changes, cybersecurity, and the cyclical nature of the steel industry[11] Part I. Financial Information Item 1. Financial Statements This section presents Worthington Steel's unaudited consolidated financial statements for Q1 fiscal 2026, including balance sheets, earnings, comprehensive income, cash flows, and equity Consolidated Balance Sheets Consolidated Balance Sheet Highlights (August 31, 2025 vs. May 31, 2025) | Metric | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :----------------------------------- | :------------------------- | :-------------------- | :---------------- | | Total Assets | $2,243.3 | $1,961.8 | +$281.5 | | Total Current Assets | $1,148.5 | $1,048.5 | +$100.0 | | Cash and cash equivalents | $78.3 | $38.0 | +$40.3 | | Receivables, net | $490.3 | $438.7 | +$51.6 | | Total Inventories | $478.5 | $422.0 | +$56.5 | | Total Liabilities | $912.4 | $763.9 | +$148.5 | | Total Current Liabilities | $693.6 | $631.5 | +$62.1 | | Total Debt (Short-term + Long-term) | $233.4 | $151.5 | +$81.9 | | Total Equity | $1,233.2 | $1,197.9 | +$35.3 | | Redeemable noncontrolling interest | $97.7 | $- | +$97.7 | Consolidated Statements of Earnings Consolidated Statements of Earnings Highlights (Three Months Ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 (Millions) | August 31, 2024 (Millions) | Change (Millions) | YoY Change (%) | | :------------------------------------------ | :------------------------- | :------------------------- | :---------------- | :------------- | | Net sales | $872.9 | $834.0 | +$38.9 | +4.7% | | Gross margin | $115.2 | $100.4 | +$14.8 | +14.7% | | Operating income | $48.3 | $43.4 | +$4.9 | +11.3% | | Earnings before income taxes | $52.0 | $36.2 | +$15.8 | +43.6% | | Net earnings attributable to Worthington Steel | $36.8 | $28.4 | +$8.4 | +29.6% | | Basic EPS attributable to Worthington Steel shareholders | $0.73 | $0.57 | +$0.16 | +28.1% | | Diluted EPS attributable to Worthington Steel shareholders | $0.72 | $0.56 | +$0.16 | +28.6% | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income Highlights (Three Months Ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 (Millions) | August 31, 2024 (Millions) | Change (Millions) | | :------------------------------------------ | :------------------------- | :------------------------- | :---------------- | | Net earnings attributable to Worthington Steel | $36.8 | $28.4 | +$8.4 | | Other comprehensive income | $1.1 | $2.2 | -$1.1 | | Comprehensive income attributable to Worthington Steel | $37.9 | $30.6 | +$7.3 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Three Months Ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 (Millions) | August 31, 2024 (Millions) | Change (Millions) | | :------------------------------------------ | :------------------------- | :------------------------- | :---------------- | | Net cash (used in) provided by operating activities | $(6.3) | $54.6 | -$60.9 | | Net cash used in investing activities | $(29.6) | $(21.5) | -$8.1 | | Net cash provided by (used in) financing activities | $21.0 | $(37.3) | +$58.3 | | Decrease in cash, cash equivalents and restricted cash | $(14.6) | $(4.2) | -$10.4 | | Cash, cash equivalents, and restricted cash at end of period | $78.3 | $36.0 | +$42.3 | Consolidated Statements of Equity and Mezzanine Equity Consolidated Statements of Equity and Mezzanine Equity Highlights (August 31, 2025 vs. May 31, 2025) | Metric | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :------------------------------------------ | :------------------------- | :-------------------- | :---------------- | | Total Shareholders' equity – controlling interest | $1,104.9 | $1,074.1 | +$30.8 | | Retained Earnings | $192.5 | $164.2 | +$28.3 | | Accumulated other comprehensive loss, net | $(2.9) | $(4.0) | +$1.1 | | Redeemable noncontrolling interest | $97.7 | $- | +$97.7 | | Total equity | $1,233.2 | $1,197.9 | +$35.3 | Note 1 – Description of Business and Basis of Presentation - Worthington Steel is a value-added steel processor in North America, holding market-leading positions in carbon flat-rolled steel, tailor welded blanks, and electrical steel laminations[30] - On December 1, 2023, Worthington Steel completed its spin-off from Worthington Enterprises, Inc. to become a stand-alone publicly traded company[31] - On June 3, 2025, the Company acquired a 52% controlling interest in S.I.T.E.M. S.p.A. (Sitem Group), whose results are included in consolidated financial statements with a one-month reporting lag[33] Concentration of Net Sales by End Market (Three Months Ended August 31) | End Market | August 31, 2025 (%) | August 31, 2024 (%) | | :------------------------- | :------------------ | :------------------ | | Automotive | 56% | 51% | | Detroit Three Automakers | 35% | 32% | | Largest Automotive Customers: | | | | Customer A | 13% | 13% | | Customer B | 15% | 13% | Note 2 – Revenue Recognition - Revenue is recognized upon transfer of control of goods or services, reflecting the expected consideration. The Company generates revenue from processing steel to customer specifications (direct sales) and toll processing customer-owned material (fee-for-service)[49][5