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What changed in Worthington Steel, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Worthington Steel, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+376 added−311 removedSource: 10-K (2025-07-29) vs 10-K (2024-08-02)

Top changes in Worthington Steel, Inc.'s 2025 10-K

376 paragraphs added · 311 removed · 240 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAt the corporate level, we maintain a fully dedicated department responsible for best-in-class environmental, health and safety initiatives and best practices across the Company. Twenty-three of our facilities hold ISO 14001 certifications, a highly recognized global standard for an effective Environmental Management System and our remaining facilities are managed to similar standards.
Biggest changeTwenty-two of our facilities hold the ISO 14001 certifications, a highly recognized global standard for an effective environmental management system and our remaining facilities are managed to similar standards. Intellectual Property and Licenses We own several patents, trademarks, copyrights and trade secrets, and hold licenses to intellectual property owned by others.
In connection with the Separation, Worthington Steel entered into several agreements with Worthington Enterprises that govern the relationship between the parties following the Distribution, including a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Steel Supply Agreement, and Transition Services Agreement.
In connection with the Separation, Worthington Steel entered into several agreements with Worthington Enterprises that govern the relationship between the parties following the Distribution, including a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Steel Supply and Services Agreement, and Transition Services Agreement.
For us, safety is about engagement, and our employees have adopted a culture where safety is everyone’s responsibility, not just the safety of our employees, but the safety of everyone who enters our facilities.
For us, safety is about engagement, and our employees have adopted a culture where safety is everyone’s responsibility, not just the safety of our employees, but for the safety of everyone who enters our facilities.
Worthington Steel’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as Worthington Steel’s definitive proxy materials for annual meetings of shareholders filed pursuant to Section 14 of the Exchange Act, are available free of charge, on or through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
Worthington Steel’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as Worthington Steel’s definitive proxy materials for annual meetings of shareholders filed pursuant to Section 14 of the Exchange Act, are available free of charge, on or through our website, as soon as reasonably practical after such material is electronically filed with, or furnished to, the SEC.
Spartan is managed by a board of governors consisting of six members, of which we are entitled to appoint three. • TWB, is a 55%-owned joint venture that supplies light-weight tailor welded solutions, including laser welded blanks, tailor welded aluminum blanks, laser welded coils and other laser welded products across North America for use primarily in the automotive industry for products such as inner-door panels, rails and pillars.
Spartan is managed by a board of governors consisting of six members, of which we are entitled to appoint three. • TWB is a 55%-owned joint venture that supplies light-weight tailor welded solutions, including laser welded blanks, tailor welded aluminum blanks, hot formed tailored welded blanks, laser welded coils and other laser welded products across North America for use primarily in the automotive industry for products such as inner-door panels, rails and pillars.
WSCP’s operations are overseen by a 3 Table of Contents supervisory board of five members, of which we are entitled to appoint three and the other member of WSCP is entitled to appoint two. • Spartan, is a 52%-owned joint venture that operates a cold-rolled, hot-dipped coating line for toll processing steel coils into galvanized, galvannealed and aluminized products intended primarily for the automotive industry.
WSCP’s operations are overseen by a supervisory board of five members, of which we are entitled to appoint three and the other member of WSCP is entitled to appoint two. • Spartan is a 52%-owned joint venture that operates a cold-rolled, hot-dipped coating line for toll processing steel coils into galvanized, galvannealed and aluminized products intended primarily for the automotive industry.
The following three joint ventures are consolidated due to our ability to control operating and capital decisions made in the ordinary course of business: • WSCP, is a 63%-owned joint venture that operates two pickling facilities in Ohio. WSCP has no fixed duration and will operate in perpetuity until dissolved or otherwise terminated by its managers.
The following three joint ventures are consolidated due to our ability to control operating and capital decisions made in the ordinary course of business: • WSCP is a 63%-owned joint venture that operates a pickling facility in Ohio. WSCP has no fixed duration and will operate in perpetuity until dissolved or otherwise terminated by its managers.
Serviacero Worthington is managed by a board of managers consisting of six managers, of which we are entitled to appoint three. See “Note C – Investment in Unconsolidated Affiliate” for additional information about our unconsolidated joint ventures.
Serviacero Worthington is managed by a board of managers consisting of six managers, of which we are entitled to appoint three. See “Note 3 – Investment in Unconsolidated Affiliate” for additional information about our unconsolidated joint ventures.
Friction stir offers the widest range of formable welded properties for all automotive aluminum alloys. 1 Table of Contents We also toll process steel for steel mills, large end-users and service centers. Toll processing is different from direct sale steel processing in that the customer retains title to the steel and has the responsibility for selling the end product.
Friction stir offers the widest range of formable welded properties for all automotive aluminum alloys. We also toll process steel for steel mills, large end-users and service centers. Toll processing is different from direct sale steel processing in that the customer retains title to the steel and has the responsibility for selling the end product.
We have a broad array of other employee centered-benefits and wellness programs, including fitness centers, free health screenings, health fairs, and other company-wide and location-specific wellness events and challenges. We believe our investments in safety, health and wellness are key to supporting and protecting our most important asset, our people.
We have a broad array of other employee centered-benefits and wellness programs, including fitness centers, free health screenings, health fairs, and other company-wide and location-specific 4 Table of Contents wellness events and challenges. We believe our investments in safety, health and wellness are key to supporting and protecting our most important asset, our people.
TWB is managed by a board of managers consisting of seven managers, of which we are entitled to appoint four. Our remaining operating joint venture, Serviacero Worthington, in which we own a 50% noncontrolling interest, is unconsolidated and operates three steel processing facilities located in Mexico.
TWB is managed by a board of managers consisting of seven managers, of which we are entitled to appoint four. 3 Table of Contents Our remaining operating joint venture, Serviacero Worthington, in which we own a 50% noncontrolling interest, is unconsolidated and operates three steel processing facilities located in Mexico.
Built on the successful foundation of the Worthington Business System, designed to drive continuous improvement through the use of enabling tools and technology that help drive results and inform our business decisions, we apply a disciplined approach to capital deployment and seek to grow earnings by optimizing our operations and supply chain, developing and commercializing new products and applications, and pursuing strategic investments and acquisitions.
Built on the successful foundation of the Worthington Business System, a strategic framework designed to drive continuous improvement through the use of enabling tools and technology that help drive results and inform our business decisions, we apply a disciplined approach to capital 1 Table of Contents deployment and seek to grow earnings by optimizing our operations and supply chain, developing and commercializing new products and applications, and pursuing strategic investments and acquisitions.
Of the aggregate of those groups, approximately 19% of those individuals are represented by collective bargaining units, all of which are located outside of the United States and in jurisdictions where collective bargaining arrangements are customary.
Of the aggregate of those groups, approximately 22% of those individuals are represented by collective bargaining units, all of which are located outside of the United States and in jurisdictions where collective bargaining arrangements are customary.
General Overview We are a value-added processor of carbon flat-rolled steel, a producer of laser welded solutions, and a provider of electrical steel laminations. We are one of the largest independent intermediate processors of carbon flat-rolled steel in the U.S. We occupy a niche in the steel industry by focusing on products requiring exact specifications.
We are a value-added processor of carbon flat-rolled steel and a producer of laser welded solutions and electrical steel laminations. We are one of the largest independent intermediate processors of carbon flat-rolled steel in the U.S. We occupy a niche in the steel industry by focusing on products requiring exact specifications.
Our people-first philosophy is rooted in the belief that people are our most important asset, which serves as the basis for our unwavering commitment to our employees, customers, suppliers, and shareholders. Our primary goal is to create value for our shareholders.
Our philosophy is rooted in the belief that people are our most important asset and is the basis for our unwavering commitment to our employees, customers, suppliers, and shareholders. Our primary goal is to create value for our shareholders.
Our commitment to environmental and social governance and sustainability includes putting people first by providing a supportive and inclusive environment built on a culture of engagement, and by working together to ensure the health and safety of our employees.
Corporate Responsibility Human Capital Management Our commitment to social governance and sustainability includes putting people first by providing a supportive and inclusive environment built on a culture of engagement, and by working together to ensure the health and safety of our employees.
We comply with and work to exceed all applicable worker safety regulations in the U.S. as governed by OSHA. Our U.S. facilities also hold certifications with various industry groups that require regular inspections including the International Organization for Standardization (ISO).
We comply with and work to exceed all applicable worker safety regulations in the U.S. as governed by OSHA. Our U.S. facilities also hold certifications with various industry groups that require regular inspections including ISO. Our global sites meet or exceed all local regulations for worker safety and hold various accreditations, certifications, and registrations that require regular inspections.
This uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate our website into this Form 10-K.
We maintain a website at www.worthingtonsteel.com . This uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate our website into this Form 10-K.
The Council implemented a strategy where diversity, equity and inclusion efforts are focused on strengthening our workforce, workplace, and community pillars. These pillars serve as a foundation for continually building and fostering an inclusive culture. 5 Table of Contents
The Council implemented a strategy where diversity, equity and inclusion efforts are focused on strengthening our workforce, workplace, and community pillars. These pillars serve as a foundation for continually building and fostering an inclusive culture. A vital part of that inclusive culture at Worthington Steel is our support for Employee Resource Groups (ERGs).
Laboratory facilities are equipped with a wide range of physical and chemical testing capabilities to support production, development needs, and high-level failure analyses. Tests are performed in accordance with specified industry standards.
Our metallurgical engineers work in conjunction with internal quality teams to engage customers in problem solving, new product development and education. Laboratory facilities are equipped with a wide range of physical and chemical testing capabilities to support production, development needs, and high-level failure analyses. Tests are performed in accordance with specified industry standards.
We are headquartered at 100 West Old Wilson Bridge Road, Columbus, Ohio 43085, telephone (614) 840-3462. The common shares of Worthington Steel (the “common shares”) are traded on the New York Stock Exchange (“NYSE”) under the symbol WS. We maintain a website at www.worthingtonsteel.com .
Our other quarterly periods end on the final day of August (first quarter), November (second quarter) and February (third quarter). We are headquartered at 100 West Old Wilson Bridge Road, Columbus, Ohio 43085, telephone (614) 840-3462. The common shares of Worthington Steel (the “common shares”) are traded on the New York Stock Exchange (“NYSE”) under the symbol WS.
Although our patents, copyrights, trademarks, trade secrets, and other intellectual property rights are important to our success, we do not consider any single, or in the aggregate, patent, trademark, copyright, trade secret or license to be of material importance to our business. 4 Table of Contents Corporate Responsibility Human Capital Management As of May 31, 2024, we had approximately 4,600 employees and our unconsolidated joint venture employed approximately 500 additional individuals.
Although our patents, copyrights, trademarks, trade secrets, and other intellectual property rights are important to our success, we do not consider any single, or in the aggregate, patent, trademark, copyright, trade secret or license to be of material importance to our business.
In nearly all market conditions, steel is available from a few suppliers and generally any supplier relationship or contract can and has been replaced with little or no significant interruption to our business. During fiscal 2024, we purchased approximately 2.66 million tons of steel (66% hot-rolled, 20% cold-rolled and 14% galvanized).
In nearly all market conditions, steel is available from multiple suppliers and generally any supplier relationship or contract can and has been replaced with little or no significant interruption to our business.
We employ a staff of 20+ metallurgical engineers throughout the business and leverage their expertise to offer practical solutions on topics ranging from steelmaking and steel processing through downstream manufacturing. Our metallurgical engineers work in conjunction with internal quality teams to engage customers in problem solving, new product development and education.
We believe we are a leader in the flat rolled steel market for providing metallurgical and steel processing solutions to meet our customers’ customized material needs. We employ a staff of 20+ metallurgical engineers throughout the business and leverage their expertise to offer practical solutions on topics ranging from steelmaking and steel processing through downstream manufacturing.
During our fiscal year ended on May 31, 2024 (“fiscal 2024“), our top three customers represented approximately 32.0% of total net sales. We buy coils of steel from primary steel producers and process them to precise type, thickness, length, width, shape and surface quality required by customer specifications.
We buy coils of steel from primary steel producers and process them to the precise type, thickness, length, width, shape and surface quality required by customer specifications.
Item 1. — Business The Separation On December 1, 2023 (the “Separation Date”) at 12:01 a.m. Eastern Time, Worthington Enterprises, Inc., an Ohio corporation formerly known as Worthington Industries, Inc.
Our CODM is Worthington Steel’s Chief Executive Officer (“CEO”). The Separation On December 1, 2023 (the “Separation Date”) at 12:01 a.m. Eastern Time, Worthington Enterprises, Inc., an Ohio corporation formerly known as Worthington Industries, Inc. (“Worthington Enterprises” or “Former Parent”), completed the Separation into Worthington Steel as a stand-alone publicly traded company.
Toll processing allows us to earn a fee for services without incurring inventory costs. Our manufacturing facilities further benefit from the flexibility to scale between direct versus tolling services based on demand throughout the year. The steel processing industry is fragmented and highly competitive. There are many competitors, including other independent intermediate processors.
Toll processing allows us to earn a fee for services without incurring inventory costs. Our manufacturing facilities further benefit from the flexibility to move between direct versus tolling services based on demand throughout the year. We operate 28 manufacturing facilities located in the U.S. (19), Canada (2), China, India, Germany, and Mexico (4).
During fiscal 2024, we purchased steel from the following major suppliers, in alphabetical order: Cleveland-Cliffs Steel Inc.; NLMK Indiana LLC; North Star BlueScope Steel, LLC; Nucor Corporation; Steel Dynamics, Inc; and United States Steel Corporation. For certain raw materials, for example, zinc, there are limited suppliers and our purchases are generally at market prices.
Supply contracts are also entered into, some of which have fixed pricing and some of which are indexed (monthly or quarterly). During fiscal 2025, we purchased steel from the following major suppliers, in alphabetical order: Cleveland-Cliffs Steel Inc.; NLMK Indiana LLC; North Star BlueScope Steel, LLC; Nucor Corporation; Steel Dynamics, Inc; and United States Steel Corporation.
However, historically, we have been able to replace our supplier relationships or contracts with little or no significant interruption to our business. Major suppliers of zinc in fiscal 2024 were, in alphabetical order: Concord Resources Limited; Glencore Ltd; Nexa Resources US Inc.; Teck Resources Limited; and Trafigura Trading LLC. We believe our supplier relationships are generally favorable.
Major suppliers of zinc in fiscal 2025 were, in alphabetical order: Glencore Ltd; Nexa Resources US Inc.; Ritchey Metals Company Inc.; Teck Resources Limited; and Trafigura Trading LLC. We believe our supplier relationships are generally favorable. Technical Services We recognize the importance of the metallurgical and technical aspects of our value-added steel products.
Laboratory facilities also perform metallurgical and chemical testing as dictated by International Organization for Standardization (ISO), ASTM International, and other customer and industry specific requirements. Seasonality Our operations have historically been subject to seasonal fluctuations that may impact our cash flows for a particular period.
Seasonality Our operations have historically been subject to seasonal fluctuations that may impact our cash flows for a particular period.
We evaluate and implement ways to improve safety, reduce emissions and waste, and decrease costs related to compliance with environmental and other government regulations.
In addition to the requirements of the state and local governments of the communities in which we operate, we must comply with federal environmental regulations, the most significant of which are enforced by the EPA. We evaluate and implement ways to reduce emissions and waste and decrease costs related to compliance with environmental and other government regulations.
(“Worthington Enterprises ” or “Former Parent”), completed the separation of its steel processing business (the “Separation”) into Worthington Steel, Inc., an Ohio corporation (“Worthington Steel” and, together with its consolidated subsidiaries and joint ventures, referred to herein as the “Company,” “we,” “us” or “our”), as a stand-alone publicly traded company.
Item 1. — Business General Overview Worthington Steel, Inc., an Ohio corporation (“Worthington Steel” and, together with its consolidated subsidiaries and joint ventures, referred to herein as the “Company,” “we,” “us” or “our”) is one of North America’s premier value-added metals processors with the ability to provide a diversified range of products and services that span a variety of end markets.
Steel is primarily purchased and processed based on specific customer orders. Raw materials are generally purchased in the open market on a negotiated basis. Supply contracts are also entered into, some of which have fixed pricing and some of which are indexed (monthly or quarterly).
During fiscal 2025, we purchased approximately 2.44 million tons of steel (70% hot-rolled, 20% cold-rolled and 10% galvanized). 2 Table of Contents Steel is primarily purchased and processed based on specific customer orders. Raw materials are generally purchased in the open market on a negotiated basis.
We also own a controlling interest in Worthington Specialty Processing (“WSP”), which became a non-operating joint venture on October 31, 2022. We operate 29 manufacturing facilities located in the United States (20), Canada (2), China (1), India (1) Germany (1), and Mexico (4).
We also own a controlling interest in Worthington Specialty Processing (“WSP”), which became a non-operating joint venture on October 31, 2022. Our fiscal year and fourth quarter ends on May 31, with “fiscal 2025” ending on May 31, 2025, “fiscal 2024” ending on May 31, 2024, and “fiscal 2023” ending on May 31, 2023.
We serviced approximately 1,400 customers during fiscal 2024 in many end markets including automotive, construction, machinery and equipment, agriculture, and heavy trucks, among others. The automotive industry is one of the largest consumers of flat-rolled steel, and thus the largest end market for us.
The automotive industry is one of the largest consumers of flat-rolled steel, and the largest end market for us. During fiscal 2025, our top three customers represented approximately 33.0% of total net sales. The steel processing industry is fragmented and highly competitive. There are many competitors, including other independent intermediate processors.
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Our fiscal year and fourth quarter ends on May 31, with “fiscal 2024” ending on May 31, 2024, “fiscal 2023” ending on May 31, 2023, and “fiscal 2022” ending on May 31, 2022. Our other quarterly periods end on the final day of August (first quarter), November (second quarter) and February (third quarter).
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On June 3, 2025, subsequent to the end of fiscal year ended on May 31, 2025 (“fiscal 2025”), through our subsidiary Tempel Steel Company, LLC (“Tempel”), we acquired a 52% controlling equity stake in Italy-based Sitem S.p.A.
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Recent Business Developments • On November 16, 2023, we acquired Voestalpine Automotive Components Nagold GmbH & Co. KG (“Voestalpine Nagold”), including its facility in Nagold, Germany and related assets, for net cash consideration of $21.0 million and the assumption of a $0.9 million pension liability. Voestalpine Nagold produces automotive and electrical steel lamination stampings in Europe.
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(“Sitem” and, together with its subsidiaries, Stanzwerk AG, Decoup S.A.S. and Sitem Slovakia spol. s r.o., collectively referred to herein as the “Sitem Group”), which has additional locations in Italy (3), France, Slovakia, and Switzerland. We serviced approximately 1,200 customers during fiscal 2025 in many end markets including automotive, construction, machinery and equipment, agriculture, and heavy trucks, among others.
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The acquisition establishes a manufacturing presence in Europe for Worthington Steel and allows us to capitalize on the growing EV and industrial motor markets in that region. • On November 30, 2023, we entered into a multi-year senior secured revolving credit facility (the “Credit Facility”) scheduled to mature on November 30, 2028, with a group of lenders.
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Recent Business Developments • Finalized the definitive agreement to acquire a controlling equity stake in Italy-based Sitem Group.
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The Credit Facility allows for borrowings of up to $550.0 million, to the extent secured by eligible accounts receivable and inventory balances at period end, which consist primarily of U.S. dollar denominated account balances.
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The transaction closed on June 3, 2025, subsequent to the end of fiscal 2025. • On June 25, 2025, the Worthington Steel Board of Directors (the “Board”) declared a quarterly dividend of $0.16 per common share payable on September 26, 2025, to shareholders of record at the close of business on September 12, 2025.
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Individual amounts drawn under the Credit Facility accrue interest at rates equal to an applicable margin over the one-, three-, or six-month term SOFR Rate, plus a SOFR adjustment.
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Segment Our operations are managed principally on a products and services basis under a single group organizational structure.
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The Company incurred approximately $2.7 million of issuance costs, of which $2.5 million will be amortized to interest expense over the expected five-year Credit Facility term and are reflected in other assets. • On December 1, 2023, the Separation was completed through the Distribution, Worthington Steel paid a $150.0 million distribution to Worthington Enterprises, and the Worthington Steel common shares began trading on the New York Stock Exchange under the ticker symbol “WS.” • On March 13, 2024, TWB signed a licensing agreement with ArcelorMittal Tailored Blanks for a patented ablation technology that will expand the organization’s capabilities in North America. • On June 26, 2024, the Board of Directors of Worthington Steel (the “Board”) declared a quarterly dividend of $0.16 per common share payable on September 27, 2024, to shareholders of record at the close of business on September 13, 2024. 2 Table of Contents Segment Our operations are managed principally on a products and services basis under a single group organizational structure.
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We determined that there is only one operating segment and therefore one reportable segment after considering several sources of information, including our internal organizational structure, the basis on which budgets and forecasts are prepared, the financial information that the our Chief Operating Decision Maker (“CODM”) reviews in evaluating company performance and determining how resources should be allocated, and how we release information to the public and analysts.
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Following the Separation, the financial information reviewed by our Chief Operating Decision Maker (“CODM”) for the purpose of assessing performance and allocating resources has been presented as a single component, or operating segment, and comprises all of our operations. Our CODM is Worthington Steel’s Chief Executive Officer (“CEO”).
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For certain raw materials, such as, zinc, there are limited suppliers and our purchases are generally at market prices. However, historically, we have been able to replace our supplier relationships or contracts with little or no significant interruption to our business.
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Technical Services We recognize the importance of the metallurgical and technical aspects of our value-added steel products. We believe we are a leader in the flat rolled steel market for providing metallurgical and steel processing solutions to meet our customers’ customized material needs.
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Laboratory facilities also perform metallurgical and chemical testing as dictated by International Organization for Standardization (“ISO”), ASTM International, and other customer and industry specific requirements. This comprehensive approach to technical services and support enhances our competitive position by ensuring high-quality products, strong customer relationships and continuous improvement.
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In addition to providing incremental coating capacity, Spartan has served to expand our coating capabilities to include aluminized steel to serve new markets.
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At the corporate level, we maintain a fully dedicated department responsible for best-in-class environmental, health and safety initiatives and best practices across the Company. As of May 31, 2025, we had approximately 4,800 employees and our unconsolidated joint venture employed approximately 500 additional individuals.
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Our global sites meet or exceed all local regulations for worker safety and hold various accreditations, certifications, and registrations that require regular inspections. Intellectual Property and Licenses We own several patents, trademarks, copyrights and trade secrets, and hold licenses to intellectual property owned by others.
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Fifteen of our facilities hold ISO 45001 certifications, a highly recognized global standard for an effective Health and Safety Management System and our remaining facilities are managed to similar standards. Diversity, Equity and Inclusion We believe that fostering an inclusive environment is essential to our success. We are committed to ensuring that every employee feels respected, heard, and valued.
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Diversity, Equity and Inclusion We believe that diversity, of all types, contributes to our success. We are committed to increasing the diversity of our employee base at all levels of our organization because we believe our differences make us better and that diverse thoughts and experiences drive innovation and produce better results.
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Grounded in our Philosophy, we are building a culture where everyone belongs, unique perspectives are welcomed, and collaboration fuels innovation and delivers stronger results. To further such efforts, we established a Diversity, Equity, and Inclusion Council (the “Council”) chaired by out CEO.
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With our Philosophy as our foundation, we are working to build an environment where diversity is valued, and where all employees feel they belong and are empowered to do their best work. To further such efforts, we established a Diversity, Equity, and Inclusion Council (the “Council”) chaired by a senior officer.
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These voluntary, employee-led groups work to foster a more welcoming workplace by uniting people with common interests, identities, or backgrounds. ERGs play a key role in shaping our culture, offering insight to leadership, building cross-functional relationships, and ensuring that all voices are recognized and empowered across the organization. 5 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA default under any of the documents governing our indebtedness could prevent us from borrowing additional funds, limit our ability to pay interest or principal and allow our lenders to declare the amounts outstanding to be immediately due and payable and to exercise certain other remedies. 17 Table of Contents Risks Related to the Separation and Our Relationship with Worthington Enterprises We have limited history of operating as a separate, publicly traded company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results .
Biggest changeA default under any of the documents governing our indebtedness could prevent us from borrowing additional funds, limit our ability to pay interest or principal and allow our lenders to declare the amounts outstanding to be immediately due and payable and to exercise certain other remedies.
Many of our key end markets, such as automotive and construction, are cyclical in nature. Many of our key end markets, such as automotive and construction, are cyclical and can be impacted by both market demand and raw material supply, particularly with respect to steel.
Many of our key end markets, such as automotive and construction, are cyclical in nature. Cyclical markets can be impacted by both market demand and raw material supply, particularly with respect to steel.
The historical information about us in this Form 10-K, for periods prior to the Separation, refers to our business as operated by and integrated with the Former Parent. Our historical financial information included in this Form 10-K is derived from the consolidated financial statements and accounting records of the Former Parent.
The historical information about us in this Form 10-K, for periods prior to the Separation, refers to our business as operated by and integrated with the Former Parent. Our historical financial information, prior to the Separation, included in this Form 10-K is derived from the consolidated financial statements and accounting records of the Former Parent.
Accordingly, the historical financial information included in this Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below. • Prior to the Separation, our business was operated by the Former Parent as part of its broader corporate organization, rather than as a separate, publicly traded company.
Accordingly, the historical financial information, prior to the Separation, included in this Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below. • Prior to the Separation, our business was operated by the Former Parent as part of its broader corporate organization, rather than as a separate, publicly traded company.
Even if the Distribution otherwise qualifies for tax-free treatment to the Former Parent’s shareholders under Section 355 of the Code, it may result in corporate-level taxable gain to the Former Parent if there is a 50% or greater change in ownership, by vote or value, of shares of Worthington Steel stock, the Former Parent stock or the stock of a successor of either occurring as part of a plan or series of related transactions that includes the Distribution.
Even if the Distribution otherwise qualifies for tax-free treatment to the Former Parent’s shareholders under Section 355 of the Code, it may result in corporate-level taxable gain to the Former Parent if there is a 50% or greater change in ownership, by vote or value, of the common shares of Worthington Steel, the common shares of the Former Parent or the stock of a successor of either occurring as part of a plan or series of related transactions that includes the Distribution.
We also self-insure a significant portion of our potential liability for workers’ compensation, product liability, general liability, property liability, automobile liability and employee medical claims, and in order to reduce risk for these liabilities, we purchase insurance from highly-rated, licensed insurance carriers that cover most claims in excess of the applicable deductible or retained amounts.
We also self-insure a significant portion of our potential liability for workers’ compensation, product liability, general liability, property liability, cyber liability, automobile liability and employee medical claims, and in order to reduce risk for these liabilities, we purchase insurance from highly rated, licensed insurance carriers that cover most claims in excess of the applicable deductible or retained amounts.
If increased government fuel efficiency and/or emissions standards for automobiles result in the substitution of other materials for steel, or the substitution of electric motors for internal combustion engines, demand for our products could be negatively impacted, which could have an adverse effect on our financial results.
If government fuel efficiency and/or emissions standards for automobiles result in the substitution of other materials for steel, or the substitution of electric motors for internal combustion engines, demand for our products could be negatively impacted, which could have an adverse effect on our financial results.
Acquisitions and Equity Investments We may be unable to successfully consummate, manage or integrate our acquisitions or other equity investments or our acquisitions and investments may not meet our expectations. We may from time to time continue to seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to our existing strengths.
Acquisitions and Equity Investments We may be unable to successfully consummate, manage or integrate our acquisitions or other equity investments or our acquisitions and investments may not meet our expectations. We may from time to time seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to our existing strengths.
Although we currently have cash reserves, as well as adequate borrowing availability under our existing Revolving Credit Facility and should be able to access other capital if needed, should those facilities become unavailable due to covenant or other defaults, or should financial markets tighten so that we otherwise cannot raise capital outside our existing facilities, or the terms under which we do so change, we may be negatively impacted.
Although we currently have cash reserves, as well as adequate borrowing availability for our existing business under our existing Revolving Credit Facility and should be able to access other capital if needed, should those facilities become unavailable due to covenant or other defaults, or should financial markets tighten so that we otherwise cannot raise capital outside our existing facilities, or the terms under which we do so change, we may be negatively impacted.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control 20 Table of Contents over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are then listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are then listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
Impacts of future public health emergencies may include, without limitation, potential significant volatility or continued decreases in the demand for our products, changes in customer and consumer behavior and preferences, disruptions in or additional closures of our manufacturing operations or those of our customers and suppliers, disruptions within our supply chain, limitations on our employees’ ability to work and travel, potential financial difficulties of customers and suppliers, slower payment of accounts receivable and potential increases in uncollectible accounts receivable, significant changes in economic or political conditions, and related volatility in the financial and commodity markets, including volatility in raw material and other input costs.
Impacts of future public health emergencies may include, without limitation, potential significant volatility or continued decreases in the demand for our products, 10 Table of Contents changes in customer and consumer behavior and preferences, disruptions in or additional closures of our manufacturing operations or those of our customers and suppliers, disruptions within our supply chain, limitations on our employees’ ability to work and travel, potential financial difficulties of customers and suppliers, slower payment of accounts receivable and potential increases in uncollectible accounts receivable, significant changes in economic or political conditions, and related volatility in the financial and commodity markets, including volatility in raw material and other input costs.
If these or other tariffs or duties expire or if others are relaxed or repealed, or if relatively higher U.S. steel prices make it attractive for foreign steel producers to export their products to the U.S., despite the presence of duties or tariffs, the resurgence of substantial imports of foreign steel could create downward pressure on U.S. steel prices.
If these or other tariffs or duties expire or if others are relaxed or repealed, or if relatively higher U.S. metal prices make it attractive for foreign metal producers to export their products to the U.S., despite the presence of duties or tariffs, the resurgence of substantial imports of foreign metal could create downward pressure on U.S. metal prices.
Where we do not hold a majority interest in a joint venture (i.e., the unconsolidated joint venture Serviacero Worthington in which we own a 50% noncontrolling interest), our ability to control the direction and operations of that joint venture is generally very limited and our investment in that joint venture is significantly dependent on the other member of the joint venture.
Where we do not hold a majority interest in a joint venture (i.e., the unconsolidated joint venture Serviacero Worthington in which we own a 50% noncontrolling interest), our ability to control the direction and operations of that joint venture is limited and our investment in that joint venture is significantly dependent on the other member of the joint venture.
The financial difficulties of certain customers and/or their failure to obtain credit or otherwise improve their overall financial condition could result in changes within the markets we serve, including plant closings, decreased production, reduced demand, changes in product mix, unfavorable changes in the prices, terms or conditions we are able to obtain and other changes that may result in decreased purchases from us and otherwise 7 Table of Contents negatively impact our business.
The financial difficulties of certain customers and/or their failure to obtain credit or otherwise improve their overall financial condition could result in changes within the markets we serve, including plant closings, decreased production, reduced demand, changes in product mix, unfavorable changes in the prices, terms or conditions we are able to obtain and other changes that may result in decreased purchases from us and otherwise negatively impact our business.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common shares may be negatively affected.
If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common shares may be negatively affected.
Such risks include, but are not limited to, adverse effects on global macroeconomic conditions; increased volatility in the price and demand of iron, steel, 12 Table of Contents oil, natural gas, and other commodities; disruptions in global supply chains; and exposure to foreign currency fluctuations and potential constraints or disruption in the capital markets and our sources of liquidity.
Such risks include, but are not limited to, adverse effects on global macroeconomic conditions; increased volatility in the price and demand of iron, steel, oil, natural gas, and other commodities; disruptions in global supply chains; and exposure to foreign currency fluctuations and potential constraints or disruption in the capital markets and our sources of liquidity.
Competition Our business is highly competitive, and increased competition may cause decreased demand, decreased market share and/or reduced prices for our products and services and could negatively impact our financial results. Generally, the markets in which we conduct business are highly competitive. Our competitors include a variety of domestic and foreign companies in all major markets.
Competition Our business is highly competitive, and increased competition may cause decreased demand, decreased market share and/or reduced prices for our products and services and could negatively impact our financial results. Generally, the markets in which we conduct 9 Table of Contents business are highly competitive. Our competitors include a variety of domestic and foreign companies in all major markets.
Likewise, to the extent new legislation or regulations would have an adverse effect on the economy, our markets or the ability of domestic businesses to compete against foreign operations, we could also be adversely impacted. Changes to global data privacy laws and cross-border transfer requirements could adversely affect our business and operations.
Likewise, to the extent new legislation or regulations would have an adverse effect 19 Table of Contents on the economy, our markets or the ability of domestic businesses to compete against foreign operations, we could also be adversely impacted. Changes to global data privacy laws and cross-border transfer requirements could adversely affect our business and operations.
Risk Factors Our future results and the market price for the common shares are subject to numerous risks, many of which are driven by factors that we cannot control or predict.
Item 1A. — Risk Factors Our future results and the market price for the common shares are subject to numerous risks, many of which are driven by factors that we cannot control or predict.
However, should our suppliers increase the prices of our critical raw materials, we may not have alternative sources of supply. In addition, in an environment of increasing prices for steel and other raw materials, competitive conditions or contractual obligations may impact how much of the price increases we can pass on to our customers.
However, should our suppliers increase the prices of our critical raw materials, we may not have alternative sources of supply. In addition, in an environment of increasing prices for steel and other raw materials, competitive conditions or contractual obligations may 6 Table of Contents impact how much of the price increases we can pass on to our customers.
Over the past three years, we have experienced volatility in steel prices due to supplier consolidation, tight mill orders due to a pandemic, the war in Ukraine and tariffs on foreign steel.
Over the past few years, we have experienced volatility in steel prices due to supplier consolidation, tight mill orders due to a pandemic, the war in Ukraine and tariffs on foreign steel.
We self-insure most of our risks for product recall, cyber liability and pollution liability.
We self-insure most of our risks for product recall and pollution liability.
The automotive and construction industries account for approximately 52.0% and 13.0%, respectfully, of our net sales, and reduced demand from these industries could adversely affect our business.
The automotive and construction industries account for approximately 52.0% and 11.0%, respectfully, of our net sales, and reduced demand from these industries could adversely affect our business.
Adverse developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded as a reserve and require us to make payments in excess of our reserves, which could negatively affect our operations, financial results and cash flows.
Adverse 14 Table of Contents developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded as a reserve and require us to make payments in excess of our reserves, which could negatively affect our operations, financial results and cash flows.
If there is a change in ownership, a change of control, a change in management or management philosophy, a change in business strategy or another event with respect to a member of a joint venture that adversely impacts the relationship between the joint venture members, it could adversely impact that joint venture.
If there is a change in ownership, a change of control, a change in management or management philosophy, a change in business strategy or another event with respect to a 12 Table of Contents member of a joint venture that adversely impacts the relationship between the joint venture members, it could adversely impact that joint venture.
Following the completion of the Separation, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. • As a result of the Separation, the cost of capital for our business may be higher than the Former Parent’s cost of capital prior to the Separation. • Our historical financial information does not reflect the debt or the associated interest expense that we expected to incur after the Separation.
As a result of the Separation, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. 16 Table of Contents • As a result of the Separation, the cost of capital for our business may be higher than the Former Parent’s cost of capital prior to the Separation. • Our historical financial information prior to the Separation does not reflect the debt or the associated interest expense that we expected to incur after the Separation.
Approximately 34% of the outstanding common shares are beneficially owned, directly or indirectly, by John P. McConnell, our former Executive Chairman. As a result of his beneficial ownership of these common shares, Mr. McConnell may have the ability to exert significant influence in these matters and other proposals upon which shareholders may vote.
Approximately 34% of the outstanding common shares are beneficially owned, directly or indirectly, by John P. McConnell. As a result of his beneficial ownership of these common shares, Mr. McConnell may have the ability to exert significant influence in these matters and other proposals upon which shareholders may vote.
Any acquisitions or issuances of Worthington Steel’s stock or the Former Parent’s stock within two years of the distribution are generally presumed to be part of such a plan, although the Former Parent may be able to rebut that presumption.
Any acquisitions or issuances of Worthington Steel’s common shares or the Former Parent’s common shares within two years of the Distribution are generally presumed to be part of such a plan, although the Former Parent may be able to rebut that presumption.
In addition, some automakers have begun using greater amounts of aluminum and smaller proportions of steel in some new models, thereby reducing the demand for certain of our products. Any future UAW strikes against the Detroit Three automakers could have material adverse effects on our business, financial position, results of operations and cash flows.
In addition, some automakers have begun using greater amounts of aluminum and smaller proportions of steel in some new models, thereby reducing the demand for certain of our products. Any future United Auto Workers (“UAW”) strikes against the Detroit Three automakers could have material adverse effects on our business, financial position, results of operations and cash flows.
Such conflicts may strain our relationships with the parties involved, which could adversely affect our future business with them. 10 Table of Contents The closing or idling of our suppliers’ manufacturing facilities could have a negative impact on us.
Such conflicts may strain our relationships with the parties involved, which could adversely affect our future business with them. The closing, idling or relocation of our suppliers’ manufacturing facilities could have a negative impact on us.
Our ability to engage in equity transactions could be limited or restricted in order to preserve, for U.S. federal income tax purposes, the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code.
We might not be able to engage in certain transactions and equity issuances following the distribution. Our ability to engage in equity transactions could be limited or restricted in order to preserve, for U.S. federal income tax purposes, the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code.
An overall downturn in the general economy, a disruption in capital and credit markets, high inflation, high unemployment, reduced consumer confidence or other factors could cause reductions in demand from our end markets in general and, in particular, the automotive and construction end markets.
An overall downturn in the general economy and/or in the countries in which we conduct business, a disruption in capital and credit markets, high inflation, high unemployment, reduced consumer confidence or other factors could cause reductions in demand from our end markets in general and, in particular, the automotive and construction end markets.
If certain aspects of our operations are adversely affected by challenging economic and financial conditions, we may be required to record future impairments, which would negatively impact our results of operations. Item 1B. — Unresol ved Staff Comments None.
If certain aspects of our operations are adversely affected by challenging economic and financial conditions, we may be required to record future impairments, which would negatively impact our results of operations. 20 Table of Contents Item 1B. — Unresolved Staff Comments None.
If the Section 232 measures are further removed or substantially lessened, whether through legal challenge, legislation, executive action or otherwise, imports of foreign steel would likely increase and steel prices in the U.S. would likely fall, which could materially adversely affect our revenues, financial results and cash flows.
If the Section 232 measures are removed or substantially lessened, whether through legal challenge, legislation, executive action or otherwise, imports of foreign metals would likely increase and metal prices in the U.S. would likely fall, which could materially adversely affect our financial results.
These provisions include, among others: • the inability of our shareholders to call a special meeting unless they hold 50% or more of our outstanding shares; • the inability of our shareholders to act by written consent; • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • the right of the Board to issue preferred shares without shareholder approval; • the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provision that shareholders may only remove directors with cause; • the ability of our directors, and not shareholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board (except in the case of removal of a director by the shareholders, in which case the shareholders may fill such vacancy at the same meeting); and • the requirement that the affirmative vote of shareholders holding at least two-thirds of our voting stock is required to amend our amended and restated code of regulations and certain provisions in our amended and restated articles of incorporation.
These provisions include, among others: • the inability of our shareholders to call a special meeting unless they hold 50% or more of our outstanding shares; • the inability of our shareholders to act by written consent; • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • the right of the Board to issue preferred shares without shareholder approval; • the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • provision that shareholders may only remove directors with cause; • the ability of our directors, and not shareholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board (except in the case of removal of a director by the shareholders, in which case the shareholders may fill such vacancy at the same meeting); and • the requirement that the affirmative vote of shareholders holding at least two-thirds of our voting shares is required to amend our amended and restated code of regulations and certain provisions in our amended and restated articles of incorporation. 18 Table of Contents We believe these provisions will protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess any acquisition proposal.
However, there can be no assurance that such indemnity will be sufficient to insure us against the full amount of such liabilities, or that Worthington Enterprises, Inc.’s ability to satisfy its indemnification obligations will not be impaired in the future.
However, there can be no assurance that such indemnity will be sufficient to insure us against the full amount of such liabilities, or that the Former Parent’s ability to satisfy its indemnification obligations will not be impaired in the future.
The market price of our common shares may fluctuate significantly due to a number of factors, some of which may be beyond our control, including: • our quarterly or annual earnings, or those of other companies in our industry; • the failure of securities analysts to cover our common shares; • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • changes to the regulatory and legal environment in which we operate; • changes in interest or inflation rates; • overall market fluctuations and domestic and worldwide economic conditions; and • other factors described in Item 1A.
The market price of our common shares has fluctuated significantly since the Separation, and may continue to fluctuate significantly due to a number of factors, many of which are beyond our control, including: 17 Table of Contents • our quarterly or annual earnings, or those of other companies in our industry; • the failure of securities analysts to cover our common shares; • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • changes to the regulatory and legal environment in which we operate; • changes in interest or inflation rates; • overall market fluctuations and domestic and worldwide economic conditions; and • other factors described in this Item 1A.
While we maintain insurance coverage that may offset some losses relating to certain types of these events, losses from business disruptions could have an adverse effect on our operations and financial results and we could be adversely impacted to the extent any such losses are not covered by insurance or cause some other adverse impact to us. 13 Table of Contents Foreign Operations Economic, political and other risks associated with foreign operations could adversely affect our financial results.
While we maintain insurance coverage that may offset some losses relating to certain types of these events, losses from business disruptions could have an adverse effect on our operations and financial results, and we could be adversely impacted to the extent any such losses are not covered by insurance or cause some other adverse impact to us.
Although we do sell to the domestic operations of foreign automakers and their suppliers, a significant portion of our automotive sales are to the Detroit Three automakers and their suppliers.
Approximately 52% of our net sales are to automotive-related customers. Although we do sell to the domestic operations of foreign automakers and their suppliers, a significant portion of our automotive sales are to the Detroit Three automakers and their suppliers.
If our social and environmental sustainability-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of social and environmental sustainability on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected. 9 Table of Contents Inventories Our business could be harmed if we fail to maintain proper inventory levels.
If our social and environmental sustainability-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of social and environmental sustainability on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
If we are required to indemnify the Former Parent under the circumstances set forth in the Separation and Distribution Agreement, we may be subject to substantial liabilities. 18 Table of Contents In connection with the Separation, Worthington Enterprises, Inc. will indemnify us for certain liabilities.
If we are required to indemnify the Former Parent under the circumstances set forth in the Separation and Distribution Agreement, we may be subject to substantial liabilities. In connection with the Separation, the Former Parent will indemnify us for certain liabilities.
The Federal Reserve has continued to increase interest rates in 2023, increasing our interest expense on the Revolving Credit Facility. If interest rates continue to rise in the future, we could be unable to service our debt, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
An increase in interest rates would increase our interest expense on the Revolving Credit Facility. If interest rates rise in the future, we could be unable to service our debt, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Our results of operations or liquidity could be affected by an adverse ruling in any legal proceedings or investigations which may be pending against us or filed against us in the future.
Legal Proceedings We may be subject to legal proceedings or investigations, the resolution of which could negatively affect our results of operations and liquidity. Our results of operations or liquidity could be affected by an adverse ruling in any legal proceedings or investigations which may be pending against us or filed against us in the future.
In addition, acquisitions and investments involve risks that the businesses acquired or in which we invest will not perform in accordance with our expectations, that business judgments concerning the value, strengths and weaknesses of businesses will prove incorrect, that we may assume unknown liabilities from the seller, that the businesses may not be integrated successfully and that the acquisitions and investments may strain our management resources or divert management’s attention from other business concerns. 14 Table of Contents International acquisitions and investments may present unique challenges and increase our exposure to the risks associated with foreign operations and countries.
In addition, acquisitions and investments involve risks that the businesses acquired or in which we invest will not perform in accordance with our expectations, that business judgments concerning the value, strengths and weaknesses of businesses will prove incorrect, that we may assume unknown liabilities from the seller, that the businesses may not be integrated successfully and that the acquisitions and investments may strain our management resources or divert management’s attention from other business concerns.
Continuing ownership of common shares of the Former Parent and equity awards could create, or appear to create, potential conflicts of interest if we and the Former Parent face decisions that could have implications for both the Former Parent and us after the separation. Worthington Enterprises, Inc. may compete with us.
Continuing ownership of common shares of the Former Parent and equity awards could create, or appear to create, potential conflicts of interest if we and the Former Parent face decisions that could have implications for both the Former Parent and us. The Former Parent may compete with us. The Former Parent is not restricted from competing with us.
In addition, beginning with our fiscal 2025 annual report on Form 10-K, we expect we will be required to furnish annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these assessments pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
In addition, we are required to furnish annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these assessments pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).
Restrictions on trade with foreign countries, imposition of customs duties or further modifications to U.S. international trade policy have the potential to disrupt our supply chain or the supply chains of our customers and to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof, potentially leading to negative effects on our business and financial condition. 22 Table of Contents We have certain operations which are located outside of the U.S. that expose us to certain anti-corruption laws.
Restrictions on trade with foreign countries, imposition of customs duties or further modifications to U.S. international trade policy have the potential to disrupt our supply chain or the supply chains of our customers and to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof, potentially leading to negative effects on our business and financial condition.
Lack of, or limited access to, capital would adversely affect our suppliers to produce the materials we need for our operations and our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis. 21 Table of Contents Tax Laws and Regulations Tax increases or changes in tax laws or regulations could adversely affect our financial results.
Lack of, or limited access to, capital would adversely affect our suppliers to produce the materials we need for our operations and our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis.
Environmental, Health and Safety We may incur additional costs related to environmental and health and safety matters. Our operations and facilities are subject to a variety of federal, state, local and foreign laws and regulations relating to the protection of the environment and human health and safety.
Our operations and facilities are subject to a variety of federal, state, local and foreign laws and regulations relating to the protection of the environment and human health and safety.
If the Former Parent in the future decides to engage in the type of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of operations to be materially adversely affected. 19 Table of Contents We may not achieve some or all of the expected benefits of the Separation, and the Separation may adversely affect our business.
If the Former Parent in the future decides to engage in the type of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of operations to be materially adversely affected.
However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Board determines is not in the best interests of us and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Board determines is not in the best interests of us and our shareholders.
Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, which is expected to increase with our investment in foreign locations. As a result, we are subject to risks associated with doing business internationally.
Foreign Operations Economic, political and other risks associated with foreign operations could adversely affect our financial results. Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, which is expected to increase with our investment in foreign locations.
Insurance coverage for cyberattacks may become unavailable, may not cover the types of losses we may incur, and may be inadequate in amount to cover liabilities resulting from a cyberattack. Refer to Item 1C: "Cybersecurity" for further information on our Cybersecurity processes, policies, and programs.
Insurance coverage for cyberattacks may become unavailable, may not cover the types of losses we may incur, and may be inadequate in amount to cover liabilities resulting from a cyberattack.
Given the potential for challenges, uncertainty and volatility in the domestic and global economies and financial markets, there can be no assurance that our capital resources will be adequate to provide for all of our cash requirements.
Additionally, anticipated growth in the electrical steel market will require a significant amount of strategic capital expenditures to meet those market growth expectations. Given the potential for challenges, uncertainty and volatility in the domestic and global economies and financial markets, there can be no assurance that our capital resources will be adequate to provide for all of our cash requirements.
General Risk Factors Economic or Industry Downturns and Weakness Our business is cyclical and weakness or downturns in the economy or certain industries could have an adverse effect on our business.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. General Risk Factors Economic or Industry Downturns and Weakness Our business is cyclical and weakness or downturns in the economy or certain industries could have an adverse effect on our business.
If new indebtedness is added to our current debt levels, the related risks that we now face could intensify. Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. Accordingly, we will have to generate significant cash flows from operations to meet our debt service requirements.
Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. Accordingly, we will have to generate significant cash flows from operations to meet our debt service requirements.
Capital Structure Although we expect to finance our growth initiatives through borrowings under our Revolving Credit Facility, we may have to find additional sources of funding, which could be difficult. We expect to finance our growth initiatives through borrowings under our ABL Credit Facility, which matures on November 30, 2028.
We expect to finance our growth initiatives through borrowings under our ABL Credit Facility, which matures on November 30, 2028. However, our ABL Credit Facility may not be sufficient or available to finance our growth initiatives, and we may have to find additional sources of financing.
These benefits may not be achieved within the anticipated timeframe, or at all. Failing to realize the benefits anticipated from an acquisition or investment could have a material adverse effect on our financial condition and results of operations.
Failing to realize the benefits anticipated from an acquisition or investment could have a material adverse effect on our financial condition and results of operations. Capital Expenditures and Capital Resources Our business requires capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements.
We are subject to tax and related obligations in the jurisdictions in which we operate or do business, including state, local, federal and non-U.S. taxes. The tax laws of the various jurisdictions in which we operate or do business often are complex and subject to varying interpretations.
Tax Laws and Regulations Tax increases or changes in tax laws or regulations could adversely affect our financial results. We are subject to tax and related obligations in the jurisdictions in which we operate or do business, including state, local, federal and non-U.S. taxes.
In addition, governments could change their existing tax laws, impose new taxes on us or increase the rates at which we are taxed in the future. The payment of substantial additional taxes, penalties or interest resulting from tax assessments, or the imposition of any new taxes, could materially and adversely impact our results of operations and financial condition.
Some of these assessments may be substantial, and also may involve the imposition of penalties and interest. In addition, governments could change their existing tax laws, impose new taxes on us or increase the rates at which we are taxed in the future.
While we take steps to comply with applicable legal requirements, the volatility and changes to such laws may impact our ability to effectively transfer data in support of our business operations.
A number of U.S. states have introduced and passed legislation to expand data breach notification rules and to mirror some of the protections provided by GDPR. While we take steps to comply with applicable legal requirements, the volatility and changes to such laws may impact our ability to effectively transfer data in support of our business operations.
In addition, violations of such laws, or other privacy regulations, may result in significant fines, penalties and damage to our brands and businesses which could, individually or in the aggregate, materially harm our business and reputation. Additionally, the U.S. federal government has imposed tariffs on certain foreign goods, including on certain steel products imported into the U.S.
In addition, violations of such laws, or other privacy regulations, may result in significant fines, penalties and damage to our brands and businesses which could, individually or in the aggregate, materially harm our business and reputation. We have certain operations which are located outside of the U.S. that expose us to certain anti-corruption laws.
Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows. Potential indemnification obligations to Worthington Enterprises, Inc. pursuant to the Separation and Distribution Agreement could materially and adversely affect our business, financial condition, results of operations and cash flows.
Potential indemnification obligations to the Former Parent pursuant to the Separation and Distribution Agreement could materially and adversely affect our business, financial condition, results of operations and cash flows.
We may modify our management structure from time to time or reduce our overall workforce, which may create marketing, operational and other business risks. If we lose members of our management team or other key employees and fail to implement effective succession plans, our business and results of operations may be negatively impacted.
We may modify our management structure from time to time or reduce our overall workforce, which may create marketing, operational and other business risks.
Our actual results may differ materially from the estimates, assumptions and judgments that we use, which could have a material adverse effect on our financial condition and results of operations. 16 Table of Contents Principal Shareholder The principal shareholder of Worthington Steel may have the ability to exert significant influence in matters requiring a shareholder vote and could delay, deter or prevent a change in control of Worthington Steel.
Our actual results may differ materially from the estimates, assumptions and judgments that we use, which could have a material adverse effect on our financial condition and results of operations.
Any adverse change in our access to capital or the terms of our borrowings, including increased costs, could have a negative impact on our financial condition. 15 Table of Contents Legal Proceedings We may be subject to legal proceedings or investigations, the resolution of which could negatively affect our results of operations and liquidity.
Any adverse change in our access to capital or the terms of our borrowings, including increased costs, could have a negative impact on our financial condition. Guidance Regarding Future Performance We may release guidance regarding our anticipated future performance and such guidance may prove to be inaccurate.
There is also increased focus by governmental and non-governmental entities on sustainability matters. Any perception that we have failed to act responsibly regarding climate change could result in negative publicity and adversely affect our business and reputation.
Any perception that we have failed to act responsibly regarding climate change could result in negative publicity and adversely affect our business and reputation. 7 Table of Contents There also has been stakeholder focus, including by governmental authorities, investors, customers, media and nongovernmental organizations, on environmental sustainability matters, such as climate change, the reduction of greenhouse gases and water consumption.
We are required to maintain sufficient inventories to accommodate the needs of our customers including, in many cases, short lead times and just-in-time delivery requirements. Although we typically have customer orders in hand prior to placement of our raw material orders, we anticipate and forecast customer demand.
Inventories Our business could be harmed if we fail to maintain proper inventory levels. We are required to maintain sufficient inventories to accommodate the needs of our customers including, in many cases, short lead times and just-in-time delivery requirements.
Also, failure to successfully integrate any of our acquisitions may cause significant operating inefficiencies and could adversely affect our operations and financial condition. Even if the operations of an acquisition are integrated successfully, we may fail to realize the anticipated benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect.
Even if the operations of an acquisition are integrated successfully, we may fail to realize the anticipated benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated timeframe, or at all.
However, our ABL Credit Facility may not be sufficient or available to finance our growth initiatives, and we may have to find additional sources of financing. It may be difficult for us in the future to obtain the necessary funds and liquidity on terms acceptable to us, or at all, to run and expand our business.
It may be difficult for us in the future to obtain the necessary funds and liquidity on terms acceptable to us, or at all, to run and expand our business. Increased leverage and borrowing rates could adversely impact our business and results of operations. We may also incur additional indebtedness in the future.
Although our product offerings include certain light weighting solutions and electric motor components, the substitution of lighter weight material for steel and/or electric motors for internal combustion engines in automobiles could adversely affect prices of and demand for certain of our steel products. 11 Table of Contents Freight and Energy Increasing freight and energy costs could increase our operating costs or the costs of our suppliers, who may seek to pass those increased costs on to us, all of which could have an adverse effect on our financial results.
Although our product offerings include certain lightweighting solutions and electric motor components, the substitution of lighter weight material for steel and/or electric motors for internal combustion engines in automobiles could adversely affect prices of and demand for certain of our steel products.
Increased leverage and borrowing rates could adversely impact our business and results of operations. We may also incur additional indebtedness in the future. The terms of the Revolving Credit Facility restrict but do not prohibit us from doing so, and the indebtedness incurred in compliance with these restrictions could be substantial.
The terms of the Revolving Credit Facility restrict but do not prohibit us from doing so, and the indebtedness incurred in compliance with these restrictions could be substantial. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.
Additionally, as of May 31, 2024, we were obligated under lease agreements to make aggregate operating lease payments of $94.6 million. Our business also requires expenditures for maintenance of our facilities. Additionally, anticipated growth in the electrical steel market will require a significant amount of strategic capital expenditures to meet those market growth expectations.
Many of our operations are capital intensive. For the fiscal year ended May 31, 2025, our total capital expenditures, were approximately $130.4 million. Additionally, as of May 31, 2025, we were obligated under lease agreements to make aggregate operating lease payments of $94.1 million. Our business also requires expenditures for maintenance of our facilities.
Tax authorities may challenge tax positions that we take or historically have taken and may assess taxes where we have not made tax filings or may audit the tax filings we have made and assess additional taxes. Some of these assessments may be substantial, and also may involve the imposition of penalties and interest.
The tax laws of the various jurisdictions in which we operate or do business often are complex and subject to varying interpretations. Tax authorities may challenge tax positions that we take or historically have taken and may assess taxes where we have not made tax filings or may audit the tax filings we have made and assess additional taxes.
Significant reductions in sales to any of Ford, General Motors, and Stellantis North America (the “Detroit Three automakers”), or to our automotive-related customers in general, could have a negative impact on our business. Approximately 50% of our net sales are to automotive-related customers.
While we monitor market developments, the pace, timing, and extent of economic improvement remains uncertain and is outside of our control. 8 Table of Contents Significant reductions in sales to any of the Detroit Three automakers, or to our automotive-related customers in general, could have a negative impact on our business.
For example, a number of U.S. states have introduced and passed legislation to expand data breach notification rules and which contain numerous requirements that must be complied with in connection with how we handle personal data.
For example, the European Union has implemented the General Data Protection Regulation (GDPR), which contains numerous requirements that must be complied with in connection with how we handle personal data related to our European-based operations and individuals.
Business Disruptions Disruptions to our business or the business of our customers or suppliers could adversely impact our operations and financial results.
We are actively building enterprise governance structures, such as a Technology Governance Committee and a Data Asset and Information Management program, to help ensure responsible, secure, and ethical use of AI and data assets across the business. Business Disruptions Disruptions to our business or the business of our customers or suppliers could adversely impact our operations and financial results.
Risks Related to Our Common Shares We cannot be certain that an active trading market for our common shares will be sustained, and the price of our common shares may fluctuate significantly. Prior to the Separation, there was no public market for our common shares. We cannot guarantee that an active trading market will be sustainable for our common shares.
Risks Related to Owning Our Common Shares The price of our common shares has fluctuated significantly and may continue to fluctuate significantly.
Removed
Item 1A. — Risk Factors Summary of Risk Factors We and our stockholders are subject to a number of risks, including risks related to our business operations, risks related to the Separation and related transactions, risks related to owning our common shares and other general risks.
Added
Excessive imports of steel into the U.S. have exerted, and may continue to exert, downward pressure on U.S. steel prices. On February 1, 2025, President Trump issued executive orders imposing additional tariffs on imports from Canada, Mexico, and China (a 10% duty on Chinese imports and deferred action on Canada/Mexico) followed by retaliatory tariffs from China.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity programs are under the direction of our Vice President of Transformation and Chief Information Officer (“CIO”) who receives reports from our Senior Cybersecurity manager who monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents. The dedicated personnel of information system security professionals are overseen by an information security manager with 15 years of experience in cybersecurity.
Biggest changeOur cybersecurity programs are under the direction of our Vice President and Chief Information Officer (“CIO”) who receives regular reports from our Director of Cybersecurity.
Our processes include steps for assessing the severity of a cybersecurity threat, identifying the source of a cybersecurity threat including whether the cybersecurity threat is associated with a third-party service provider, implementing cybersecurity countermeasures and mitigation strategies and informing management and the Board of material cybersecurity threats and incidents.
Our processes include steps for assessing the severity of a cybersecurity threat, identifying the source of a cybersecurity threat including whether the cybersecurity threat is associated with a third-party service provider, implementing cybersecurity countermeasures and mitigation strategies and informing management and the Board of material cybersecurity threats and incidents. We engage third-party security experts for risk assessment and system enhancements.
Management, including the CIO and our cybersecurity manager, regularly update the Audit Committee on our cybersecurity programs, which includes cybersecurity risks and mitigation strategies, a third-party risk program, vulnerability management, and on-going cybersecurity projects.
Management, including the CIO and our Director of Cybersecurity, regularly updates the Audit Committee on our cybersecurity programs, which includes cybersecurity risks and mitigation strategies, a third-party risk assessment program, vulnerability management, and on-going cybersecurity projects.
It is possible that we may not implement appropriate controls if we do not detect a particular risk. In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate the risks. Even when a risk is detected, disruptive events may not always be immediately and thoroughly interpreted and acted upon.
In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate the risks. Even when a risk is detected, disruptive events may not always be immediately and thoroughly interpreted and acted upon.
For more information about these risks, please see "Risk Factors – Risks Related to our Business" in Item 1A of this Form10-K. 23 Table of Contents
For more information about these risks, see “Risk Factors – Risks Related to our Business” in Item 1A. of this Form 10-K. 21 Table of Contents
In fiscal 2024, we did not identify any cybersecurity incidents that materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident.
In fiscal 2025, we did not identify any cybersecurity threats, including as a result of any previous cybersecurity incidents, that materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Our cybersecurity team also engages third-party security experts for risk assessment and system enhancements. In addition, our cybersecurity team provides training to all appropriate employees. The Board has overall oversight responsibility for our risk management, and delegates cybersecurity risk management oversight to the Audit Committee of the Board.
The Company delivers annual security awareness training to employees, augmented by periodic role-specific modules and recurring phishing simulation exercises to measure user susceptibility and inform further training. The Board has overall oversight responsibility for our risk management, and delegates cybersecurity risk management oversight to the Audit Committee of the Board.
Added
The Director of Cybersecurity, oversees our dedicated cybersecurity team comprised of 2 Senior Security Engineers and 2 Security Analysts and is augmented by a 24x7 managed security services who actively manage and execute our efforts to prevent, detect, mitigate and remediate cybersecurity incidents.
Added
The Director of Cybersecurity has over 15 years of experience in cybersecurity, with demonstrated expertise in incident response, threat detection, vulnerability management, and third-party risk assessments. He holds advanced degrees in IT Project Management and Network Security and maintains industry certifications including CISSP (Certified Information Systems Security Professional) and GCIH (GIAC Certified Incident Handler).
Added
The two Senior Security Engineers have 16 and 10 years of experience, respectively. Their areas of specialization include network security architecture, endpoint protection technologies, and operational technology (OT) security integration. Both hold advanced certifications such as CISSP, GRID (GIAC Response and Industrial Defense), and GCIP (GIAC Critical Infrastructure Protection).
Added
The two Security Analysts bring 3 and 4 years of experience, respectively. Each holds a bachelor’s degree in Computer Science and maintain industry certifications including CompTIA Security+ (SEC+). Their responsibilities include real-time security monitoring, phishing simulation campaigns, and user awareness support.
Added
Collectively, the cybersecurity team brings 48 years of combined experience and is actively engaged in ongoing professional development to remain current with emerging cyber threats, technologies, and regulatory requirements.
Added
However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. It is possible that we may not implement appropriate controls if we do not detect a particular risk.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWholly-owned and Consolidated Joint Ventures Entity Type Location Number of facilities Leased Owned Worthington Steel Manufacturing OH (5), IL, IN, KY, MI, NY Canada, China, Germany, India, Mexico 15 2 13 TWB Manufacturing OH (2), MI (2), TN (2), KY Mexico (3), Canada 11 10 1 WSCP Manufacturing OH (2) 2 1 1 Spartan Manufacturing MI 1 – 1 Total 29 13 16 Unconsolidated Joint Venture Joint Venture Type Location Number of facilities Leased Owned Serviacero Worthington Manufacturing Mexico (3) 3 – 3 Total 3 – 3
Biggest changeWholly-owned and Consolidated Joint Ventures Entity Type Location Number of facilities Leased Owned Worthington Steel (1) Manufacturing OH (5), IL, IN, KY, MI, NY Canada, China, Germany, India, Mexico 15 2 13 TWB Manufacturing OH (2), MI (2), TN (2), KY Mexico (3), Canada 11 10 1 WSCP (2) Manufacturing OH 1 – 1 Spartan Manufacturing MI 1 – 1 Total 28 12 16 (1) Facility information is as of May 31, 2025, and does not include the acquisition activity subsequent to year end.
At May 31, 2024, including our consolidated and unconsolidated joint ventures, we owned or leased more than 6.7 million square feet of space for our manufacturing facilities. More details on these facilities are contained in the table below. We believe these facilities are well maintained and in good operating condition and are sufficient to meet our current needs.
At May 31, 2025, including our consolidated and unconsolidated joint ventures, we owned or leased more than 6.4 million square feet of space for our manufacturing facilities. More details on these facilities are contained in the table below. We believe these facilities are well maintained and in good operating condition and are sufficient to meet our current needs.
Item 2. — P roperties. Our principal corporate offices are located in two adjacent leased buildings in Columbus, Ohio. We lease space from the Former Parent in Columbus, Ohio used for administrative, metallurgical services and warehousing purposes. Additionally, we own warehouse space in Pennsylvania and South Carolina, and lease warehouse space in California and Pennsylvania.
We lease space from the Former Parent in Columbus, Ohio used for administrative, metallurgical services and warehousing purposes. Additionally, we own warehouse space in Pennsylvania and South Carolina, and lease warehouse space in California and Pennsylvania.
Added
Item 2. — P roperties. Our principal corporate offices are located in two adjacent leased buildings in Columbus, Ohio. During fiscal 2025, we purchased a building in Columbus, Ohio, which will serve as a new corporate headquarters. We will move into the building when renovations are completed, which is expected during fiscal 2027.
Added
The table below excludes our strategic investment in Canada given the construction is still in progress at this location.
Added
(2) One facility in Cleveland, Ohio is excluded from the table because it is idled with manufacturing operations ceased. Unconsolidated Joint Venture Joint Venture Type Location Number of facilities Leased Owned Serviacero Worthington Manufacturing Mexico (3) 3 – 3 Total 3 – 3

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

12 edited+3 added−0 removed1 unchanged
Biggest changeBlystone 71 Executive Chairman and Director 2023 Geoffrey G. Gilmore 52 President and Chief Executive Officer 2023 Jeffrey R. Klingler 52 Executive Vice President and Chief Operating Officer 2023 Timothy A. Adams 60 Vice President and Chief Financial Officer 2023 Joseph Y. Heuer 48 Vice President – General Counsel and Secretary 2024 John B.
Biggest changeName Age Position(s) with the Registrant Present Office Held Since John B. Blystone 72 Executive Chairman and Director 2023 Geoffrey G. Gilmore 53 President and CEO 2023 Jeffrey R. Klingler 53 Executive Vice President and Chief Operating Officer 2023 Clifford J. Larivey 52 President, Flat-Roll Steel Processing 2024 Timothy A.
In addition, Mr. Adams serves on the boards of two Worthington Steel joint ventures, TWB and Serviacero Worthington. Joseph Y. Heuer has served as our Vice President, General Counsel and Secretary since February 2024. Prior to that, he served as Assistant General Counsel since joining us in August 2023.
In addition, Mr. Adams serves on the board of Serviacero Worthington. Joseph Y. Heuer has served as our Vice President, General Counsel and Secretary since February 2024. Prior to that, he served as Assistant General Counsel since joining us in August 2023.
There are no family relationships among any of Worthington Steel’s executive officers or directors. No arrangements or understandings exist pursuant to which any individual has been, or is to be, selected as an executive officer of Worthington Steel. 25 Table of Contents PAR T II
Executive officers serve at the pleasure of the Board. There are no family relationships among any of Worthington Steel’s executive officers or directors. No arrangements or understandings exist pursuant to which any individual has been, or is to be, selected as an executive officer of Worthington Steel. 23 Table of Contents PAR T II
Blystone previously served as Chairman of the Board, President and Chief Executive Officer of SPX Corporation, a global provider of technical products and systems, industrial products and services, flow technology, cooling technologies and services and service solutions, from December 1995 to December 2004, when he retired. 24 Table of Contents Geoffrey G.
Blystone previously served as Chairman of the Board, President and CEO of SPX Corporation, a global provider of technical products and systems, industrial products and services, flow technology, cooling technologies and services and service solutions, from December 1995 to December 2004, when he retired. Geoffrey G. Gilmore has served as our President and CEO since December 2023.
Klingler served as vice president of sales, marketing and procurement for Banner Services Corporation, a supplier and processor of metal bar products, from 2008 until 2014, after serving in numerous capacities with The Worthington Steel Company from 1992 to 2008. Timothy A. Adams has served as our Vice President and Chief Financial Officer since December 2023.
Klingler served as vice president of sales, marketing and procurement for Banner Services Corporation, a supplier and processor of metal bar products, from 2008 until 2014, after serving in numerous capacities with The Worthington Steel Company from 1992 to 2008. Clifford J. Larivey has served as President of Flat-Roll Steel Processing since December 2024.
Gilmore has served as our President and Chief Executive Officer since December 2023. Prior to that, he served as Executive Vice President and Chief Operating Officer of Worthington Industries from August 2018 through the separation. Mr. Gilmore served as President of Worthington Cylinder Corporation from June 2016 to August 2018. Mr.
Prior to that, he served as Executive Vice President and Chief Operating Officer of Worthington Industries from August 2018 through the Separation. Mr. Gilmore served as President of Worthington Cylinder Corporation from June 2016 to August 2018. Mr. Gilmore served as President of The Worthington Steel Company from August 2012 through May 2016. From July 2011 to July 2012, Mr.
Gilmore served as General Manager of The Worthington Steel Company’s Delta, Ohio facility; and from June 2006 to February 2010, he served as Director of Automotive Sales for The Worthington Steel Company. Mr. Gilmore served in various other positions with Worthington Industries from 1998 to June 2006. Jeffrey R.
Gilmore served as Vice President-Purchasing for Worthington Industries. From April 2010 to July 2011, Mr. Gilmore served as General Manager of The Worthington Steel Company’s Delta, Ohio facility; and from June 2006 to February 2010, he served as Director of Automotive Sales for The Worthington Steel Company. Mr.
Prior to joining us, he was Senior Counsel for PubMatic, Inc., and also previously served as Assistant General Counsel at InMarket Media, LLC and as Vice President, Assistant General Counsel and Assistant Corporate Secretary for Big Lots, Inc. Executive officers serve at the pleasure of the Board.
Prior to joining us, he was Senior Counsel for PubMatic, Inc., a developer of online advertising software and strategies, and also previously served as Assistant General Counsel at InMarket Media, LLC, a digital advertising agency, and as Vice President, Assistant General Counsel and Assistant Corporate Secretary for Big Lots, Inc., a retailer.
Item 4. — Mine S afety Disclosures Not Applicable. Supplemental Item — E xecutive Officers of Worthington Steel The following table lists the names, positions held and ages of the individuals serving as executive officers of Worthington Steel, Inc. as of August 2, 2024. Name Age Position(s) with the Registrant Present Office Held Since John B.
Item 4. — Mine S afety Disclosures Not applicable. 22 Table of Contents Supplemental Item — E xecutive Officers of Worthington Steel The following table lists the names, ages, positions held and term of present office of the individuals serving as executive officers of Worthington Steel, Inc. as of July 29, 2025.
Klingler has served as Executive Vice President and Chief Operating Officer since December 2023. Prior to that, he served as President of The Worthington Steel Company since from May 2019 through the separation. Mr. Klingler served as General Manager of various business units within The Worthington Steel Company from May 2014 until April 2019. Mr.
Gilmore served in various other positions with Worthington Industries from 1998 to June 2006. Jeffrey R. Klingler has served as Executive Vice President and Chief Operating Officer since December 2023. Prior to that, he served as President of The Worthington Steel Company since from May 2019 through the Separation. Mr.
Blystone has served as our Executive Chairman since December 2023. He currently serves as Chairmen of the Board of Worthington Enterprises, where he has been a director since 1997. Mr.
Adams 61 Vice President and Chief Financial Officer 2023 Joseph Y. Heuer 49 Vice President – General Counsel and Secretary 2024 John B. Blystone has served as our Executive Chairman since December 2023. He currently serves as Chairman of the Board of Worthington Enterprises, where he has been a director since 1997. Mr.
Gilmore served as President of The Worthington Steel Company from August 2012 through May 2016. From July 2011 to July 2012, Mr. Gilmore served as Vice President-Purchasing for Worthington Industries. From April 2010 to July 2011, Mr.
Larivey served as Vice President of Purchasing at Worthington Industries from June 2012 until the Separation, and Director of Purchasing from February 2010 to June 2012. Before joining Worthington Industries, Mr.
Added
Klingler served as General Manager of various business units within The Worthington Steel Company from May 2014 until April 2019. Mr.
Added
This role was separated from the position of Chief Operating Officer in the second quarter of fiscal 2025. From December 2023 to December 2024, he served as Senior Vice President of Commercial and Purchasing. Prior to the Separation, Mr.
Added
Larivey served in various roles at Gibraltar Strip Steel, including Vice President of Purchasing and Marketing from January 2008 until Worthington Industries acquisition of Gibraltar Strip Steel in February 2010. Timothy A. Adams has served as our Vice President and Chief Financial Officer since December 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of Common Shares Purchased as Maximum Number of Total Number Average Price Part of Publicly Common Shares that of Common Paid per Announced May Yet Be Shares Common Plans or Purchased Under the Period Purchased Share Programs (1) Plans or Programs (2) March 1-31, 2024 10,311 $ 32.39 - - April 1-30, 2024 2,131 31.84 - - May 1-31, 2024 - - - - Total 12,442 $ 32.30 - (1) There were no common shares purchased during the period presented as part of publicly announced plans or programs.
Biggest changeTotal Number of Common Shares Purchased as Maximum Number of Total Number Average Price Part of Publicly Common Shares that of Common Paid per Announced May Yet Be Shares Common Plans or Purchased Under the Period Purchased Share Programs Plans or Programs March 1-31, 2025 1,271 $ 26.16 - - April 1-30, 2025 7,172 24.79 - - May 1-31, 2025 477 25.64 - - Total 8,920 $ 25.03 - It em 6. – [Reserved] 25 Table of Contents
The Board reviews the declaration and payment of a dividend on a quarterly basis and establishes the dividend rate based upon Worthington Steel’s consolidated and combined financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors.
The Board reviews the declaration and payment of a dividend on a quarterly basis and establishes the dividend rate based upon Worthington Steel’s consolidated financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors.
Unregistered Sales of Equity Securities There were no equity securities of Worthington Steel sold by Worthington Steel during fiscal 2024 that were not registered under the Securities Act of 1933, as amended. Issuer Purchases of Equity Securities Common shares withheld to cover tax withholding obligations in connection with the vesting of restricted common shares are treated as common share repurchases.
Unregistered Sales of Equity Securities There were no equity securities of Worthington Steel sold by Worthington Steel during fiscal 2025 that were not registered under the Securities Act of 1933, as amended. Issuer Purchases of Equity Securities Common shares withheld to cover tax withholding obligations in connection with the vesting of restricted common shares are treated as common share repurchases.
The graph tracks the performance of a $100 investment, assuming reinvestment of dividends, in our common shares and in each index from December 1, 2023, the date Worthington Steel shares commenced regular-way trading on the NYSE, to May 31, 2024.
The graph tracks the performance of a $100 investment, assuming reinvestment of dividends, in our common shares and in each index from December 1, 2023, the date Worthington Steel shares commenced regular-way trading on the NYSE, to May 31, 2025.
Copyright© 2024, Standard & Poor’s, Inc. All rights reserved. Used with permission . Worthington Steel is a component of the S&P Small Cap 600 Index. The S&P 1500 Composite Steel Sub-Index, of which Worthington Steel is also a component, is the most specific index relative to our business.
Copyright© 2025 and Standard & Poor’s, Inc. All rights reserved. Used with permission . Worthington Steel is a component of the S&P Small Cap 600 Index. The S&P 1500 Composite Steel Sub-Index, of which Worthington Steel is also a component, is the most specific index relative to our business.
Item 5. – Market for Registrant's Common Equity, Related St ockholder Matters and Issuer Purchases of Equity Securities Common Shares Information The common shares trade on the NYSE under the symbol WS. As of July 30, 2024, Worthington Steel had 5,860 registered shareholders.
Item 5. – Market for Registrant's Common Equity, Related St ockholder Matters and Issuer Purchases of Equity Securities Common Shares Information The common shares trade on the NYSE under the symbol WS. As of July 25, 2025, Worthington Steel had 5,797 registered shareholders.
Those withheld common shares are not considered common share repurchases under an authorized common share repurchase plan or program. The table below provides information regarding common shares withheld from our employees to satisfy minimum statutory tax withholding obligations arising from the vesting of restricted common shares. The presentation of the table below and related footnote represents full common share amounts.
However, those withheld common shares are not considered common share repurchases under an authorized common share repurchase plan or program. The table below provides information regarding common shares withheld from our employees to satisfy minimum statutory tax withholding obligations arising from the vesting of restricted common shares.
The comparisons in the graph and table below are based upon historical data and are not indicative of, nor intended to forecast, the future performance of the common shares. 12/1/23 12/31/23 1/31/24 2/29/24 3/31/24 4/30/24 5/31/24 Worthington Steel, Inc. $ 100.00 $ 126.58 $ 134.91 $ 142.61 $ 162.34 $ 139.42 $ 149.39 S&P Small Cap 600 Index $ 100.00 $ 109.62 $ 105.30 $ 108.80 $ 112.32 $ 106.02 $ 111.36 S&P 1500 Composite Steel Sub-Index $ 100.00 $ 105.61 $ 108.47 $ 114.29 $ 118.49 $ 105.55 $ 109.11 26 Table of Contents Data and graph provided by Zacks Investment Research, Inc.
The comparisons in the graph and table below are based upon historical data and are not indicative of, nor intended to forecast, the future performance of the common shares. 12/1/23 2/29/24 5/31/24 8/31/24 11/30/24 2/28/25 5/31/25 Worthington Steel $ 100.00 $ 142.61 $ 149.39 $ 161.16 $ 205.13 $ 122.47 $ 115.03 S&P Small Cap 600 Index $ 100.00 $ 108.80 $ 111.36 $ 118.84 $ 129.45 $ 115.62 $ 109.41 S&P 1500 Composite Steel Sub-Index $ 100.00 $ 114.29 $ 109.11 $ 101.04 $ 111.14 $ 100.21 $ 93.53 24 Table of Contents Data and graph provided by Zacks Investment Research, Inc.
Removed
(2) No publicly announced plans or programs existed for the periods presented. It em 6. – [Reserved] 27 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+69 added−22 removed54 unchanged
Biggest changeAmerica Auto Build (000's vehicles) (3) 15,900 14,910 13,225 990 1,685 Zinc ($ per pound) (4) $ 1.15 $ 1.40 $ 1.56 $ (0.25 ) $ (0.16 ) Natural Gas ($ per mcf) (5) $ 2.47 $ 5.22 $ 4.92 $ (2.75 ) $ 0.30 On-Highway Diesel Fuel Prices ($ per gallon) (6) $ 4.09 $ 4.80 $ 3.99 $ (0.71 ) $ 0.81 (1) 2023 figures based on revised actuals (2) CRU Hot-Rolled Index; period average (3) S&P Global (4) LME Zinc; period average (5) NYMEX Henry Hub Natural Gas; period average (6) Energy Information Administration; period average Sales to one automotive customer represented 14.6% and 16.2% of our consolidated and combined net sales in fiscal 2024 and 2023, respectively.
Biggest changeAmerica Auto Build (000's vehicles) (3) 14,987 15,889 14,910 (902 ) 979 Zinc ($ per pound) (4) $ 1.29 $ 1.15 $ 1.40 $ 0.14 $ (0.25 ) Natural Gas ($ per mcf) (5) $ 3.08 $ 2.47 $ 5.22 $ 0.61 $ (2.75 ) On-Highway Diesel Fuel Prices ($ per gallon) (6) $ 3.61 $ 4.09 $ 4.80 $ (0.48 ) $ (0.71 ) (1) Fiscal 2024 and 2023 figures based on revised actuals (2) CRU Hot-Rolled Coil (“HRC”) Index; period average (3) S&P Global (4) LME Zinc; period average (5) NYMEX Henry Hub Natural Gas; period average (6) Energy Information Administration; period average The following table summarizes the concentration percentage of consolidated or combined net sales for the periods presented: (Percentage of Net Sales) 2025 2024 End Market – Automotive 52 % 52 % Detroit Three Automakers 33 % 32 % Largest Automotive Customers: Customer 1 14 % 11 % Customer 2 12 % 15 % While our automotive business is largely driven by the production schedules of the Detroit Three automakers, our customer base is much broader and includes other domestic manufacturers and many of their suppliers.
Declining steel prices could also require us to write down the value of our inventories to reflect current market pricing. Further, the number of suppliers has decreased in recent years due to industry consolidation and the financial difficulties of certain suppliers, and consolidation may continue.
Declining steel prices could also require us to write down the value of our inventories to reflect current market pricing. Further, the number of steel suppliers has decreased in recent years due to industry consolidation and the financial difficulties of certain suppliers, and consolidation may continue.
We maintain market leading positions in the North American carbon flat-rolled steel and tailor welded blank industries and are one of the largest global producers of electrical steel laminations. For nearly 70 years, we have been delivering high quality steel processing capabilities across a variety of end-markets including automotive, heavy truck, agriculture, construction, and energy.
We maintain market leading positions in the North American carbon flat-rolled steel and tailor welded blank industries and are one of the largest global producers of electrical steel laminations. For 70 years, we have been delivering high quality steel processing capabilities across a variety of end-markets including automotive, heavy truck, agriculture, construction, and energy.
We believe that our sources of liquidity, including our cash balances, the funds generated by our operating activities and the funds accessible to us through the Credit Facility, are adequate to fund our operations for the next 12 months and for the foreseeable future and will allow us to meet our current and long-term obligations and strategic initiatives.
We believe that our sources of liquidity, including our cash balances, the funds generated by our operating activities and the funds accessible to us, primarily through the Credit Facility, are adequate to fund our operations for the next 12 months and for the foreseeable future and will allow us to meet our current and long-term obligations and strategic initiatives.
Adjusted EBIT, a non-GAAP financial measure, excludes impairment and restructuring expense (income), but may also exclude other items, as described below, that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing operations.
Adjusted EBIT, a non-GAAP financial measure, excludes impairment and restructuring expense (income), net, but may also exclude other items, as described below, that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing operations.
However, the continuation of uncertain economic conditions and heightened 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 will continue to monitor the economic environment and its impact on our operations and liquidity needs.
However, the continuation of uncertain economic conditions and a heightened 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 will continue to monitor the economic environment and its impact on our operations and liquidity needs.
Impairment of Indefinite-Lived Long-Lived Assets Critical estimate : Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that impairment may be present.
Impairment of Goodwill and Other Indefinite-Lived Long-Lived Assets Critical estimate : Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that impairment may be present.
The Board reviews the dividend quarterly and establishes the dividend rate based upon our consolidated and combined financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors.
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.
With the ability to produce customized steel solutions, we aim to be the preferred value-added steel processor in the markets we serve by delivering highly technical, customer-specific solutions, while also providing advanced materials support. Our scale and operating footprint allow us to achieve an advantaged cost structure and service platform supported by a strategic operating footprint.
With the ability to produce customized steel solutions, we aim to be the preferred value-added steel processor in the markets we serve by delivering highly technical, customer-specific solutions, while also providing advanced materials support. Our scale allows us to achieve an advantaged cost structure and service platform supported by a strategic operating footprint.
We incurred approximately $2.7 million of issuance costs, of which $2.5 million will be amortized to interest expense over the five-year Credit Facility term and are reflected in other assets. As of May 31, 2024, we were in compliance with the financial covenants of the Credit Facility. The Credit Facility does not include credit rating triggers.
We incurred approximately $2.7 million of issuance costs, of which $2.5 million will be amortized to interest expense over the five-year Credit Facility term and are reflected in other assets. As of May 31, 2025, we were in compliance with the financial covenants of the Credit Facility. The Credit Facility does not include credit rating triggers.
To the extent we are unable to pass on to our customers future price increases in raw materials, our financial results could be adversely affected.
To the extent we are unable to pass future price increases in raw materials to our customers, our financial results could be adversely affected.
In an environment of increasing prices for steel and other raw materials, competitive conditions may impact how much of the price increases we can pass on to our customers. To the extent we are able to pass on to our customers future price increases in raw materials, this could positively affect our financial results resulting in inventory holding gains.
In an environment of increasing prices for steel and other raw materials, competitive conditions may impact how much of the price increases we can pass on to our customers. To the extent we are able to pass future price increases in raw materials to our customers, this could positively affect our financial results leading to inventory holding gains.
Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimation of the fair value of each reporting unit. A reporting unit is defined as an operating segment or one level below an operating segment. Our operations are organized as a single component, or operating segment.
Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimation of the fair value of each reporting unit. A reporting unit is defined as an operating segment or one level below an operating segment. Our operations are organized as a single component, or operating segment, and therefore one reportable segment.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. See “Note O – Acquisitions” for further information. Corporate Allocations: Critical estimate : Prior to the Separation, we operated as part of the Former Parent and not as a stand-alone company.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. See “Note 15 – Acquisitions” for further information. Corporate Allocations Critical estimate : Prior to the Separation, we operated as part of the Former Parent and not as a stand-alone company.
For additional information, see “Note A – Description of Business, The Separation, Agreements with the Former Parent and Separation Costs, and Basis of Presentation.” Business Overview We are one of North America’s premier value-added steel processors with the ability to provide a diversified range of products and services that span a variety of end markets.
For additional information, see “Note 1 – Description of Business, The Separation, Agreements with the Former Parent and Separation Costs, and Basis of Presentation.” Business Overview We are one of North America’s premier value-added metals processors with the ability to provide a diversified range of products and services that span a variety of end markets.
Such differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. See “Note M – Income Taxes” for further information.
Such differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. See “Note 13 – Income Taxes” for further information.
These contracts covered periods commensurate with known or expected exposures throughout the periods presented. The derivative financial instruments were executed with highly rated financial institutions. The following table presents the average quarterly market price per ton of hot-rolled steel during each of the past three fiscal years.
These contracts covered periods commensurate with known or expected exposures throughout the periods presented. The derivative financial instruments were executed with highly rated financial institutions. The following table presents the average quarterly market price per ton of HRC steel during each of the past three fiscal years.
Our primary ongoing requirements for cash are expected to be for working capital, funding of acquisitions, dividend payments, debt redemptions and capital expenditures.
Liquidity and Capital Resources Our primary ongoing requirements for cash are expected to be for working capital, funding of acquisitions, dividend payments, debt redemptions and capital expenditures.
The net assets and operating results of these joint ventures are consolidated with the equity owned by the minority joint venture member shown as “Noncontrolling interests” in our consolidated and combined balance sheets, and the noncontrolling interest in net earnings and Other Comprehensive Income (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated and combined statements of earnings and consolidated and combined statements of comprehensive income (loss), respectively.
The net assets and operating results of these joint ventures are consolidated with the equity owned by the minority joint venture member shown as “Noncontrolling interests” in our consolidated balance sheets, and the noncontrolling interest in net earnings and Other Comprehensive Income (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our 26 Table of Contents consolidated and combined statements of earnings and consolidated and combined statements of comprehensive income, respectively.
We own controlling interests in the Spartan, TWB, and WSCP operating joint ventures. We also own a controlling interest in WSP, which became a non-operating joint venture in October 2022, when we completed the divestiture of its remaining net assets.
We own controlling interests in the following operating joint ventures: Spartan, TWB, and WSCP. We also own a controlling interest in WSP, which became a nonoperating joint venture in October 2022, when we completed the divestiture of its remaining net assets.
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.
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 additional financing will be available on satisfactory terms.
Although actual results historically have not deviated significantly from those determined using our estimates, as discussed below, our 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.
Although actual results historically have not deviated significantly from those determined using our estimates, our 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 estimates.
The mix of direct versus toll volumes was 56% to 44% in fiscal 2024, compared to 57% to 43% in fiscal 2023.
The mix of direct versus toll volumes was 57% to 43% in fiscal 2025, compared to 56% to 44% in fiscal 2024.
We use the following information from the past three fiscal years to monitor our costs and demand in our major end markets: 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 U.S.
We use the following information from the past three fiscal years to monitor our costs and demand in our major end markets: 2025 2024 (1) 2023 (1) 2025 vs. 2024 2024 vs. 2023 U.S.
Capital expenditures reflect cash used for investment in property, plant and equipment and are presented below (this information excludes cash flows related to acquisition and divestiture activity) for each of the prior three fiscal years: (In millions) 2024 2023 2022 Capital Expenditures $ 103.4 $ 45.5 $ 36.4 35 Table of Contents Investment activities are largely discretionary and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant.
Capital expenditures reflect cash used for investment in property, plant and equipment and are presented below (this information excludes cash flows related to acquisition and divestiture activity) for each of the prior three fiscal years: (In millions) 2025 2024 2023 Capital Expenditures $ 130.4 $ 103.4 $ 45.5 Investment activities are largely discretionary and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant.
The expected price of scrap compared to the price of the steel raw material is factored into pricing. Generally, as the price of steel increases, the price of scrap increases by a similar amount.
The expected price of scrap compared to the price of the steel raw material is factored into pricing. Generally, as the price of steel increases, the price of scrap increases by a similar amount and vice versa.
The indemnification agreement, which was entered into with the former Tempel owners at the time we acquired Tempel, provides protection to us from unfavorable rulings by tax authorities through the acquisition date.
The indemnification agreement, which was entered into with the former Tempel owners at the time the Company acquired Tempel, provides protection to the Company from rulings by tax authorities through the acquisition date.
Accordingly, if delivery from a major steel supplier is disrupted, it may be more difficult to obtain an alternative supply than in the past or the alternative supply may only be available at a premium. 30 Table of Contents The market price of our products is closely related to the price of Hot Rolled Coil (HRC).
Accordingly, if delivery from a major steel supplier is disrupted, it may be more difficult to obtain an alternative supply than in the past or the alternative supply may only be available at a premium. The market price of our products is closely related to the price of HRC.
Item 7. – Management’s Discussion and Analysis o f Financial Condition and Results of Operations ITEM PAGE Introduction 28 Basis of Presentation 28 Business Overview 28 Recent Business Developments 29 Trends and Factors Impacting our Performance 29 Results of Operations 31 Liquidity and Capital Resources 34 Critical Accounting Estimates 37 Introduction This MD&A should be read in conjunction with our consolidated and combined financial statements and the related Notes in this Form 10-K.
Item 7. – Management’s Discussion and Analysis o f Financial Condition and Results of Operations ITEM PAGE Introduction 26 Basis of Presentation 26 Business Overview 26 Recent Business Developments 27 Trends and Factors Impacting our Performance 27 Results of Operations 30 Liquidity and Capital Resources 33 Critical Accounting Estimates 36 Introduction This MD&A should be read in conjunction with our consolidated and combined financial statements and the related Notes in this Form 10-K.
The breakdown of our net sales by end market for fiscal 2024 and fiscal 2023 is illustrated below: 2024 2023 Automotive 52 % 50 % Construction 13 % 13 % Machinery & Equipment 8 % 10 % Agriculture 5 % 6 % Heavy Trucks 5 % 5 % Other 17 % 16 % Total 100 % 100 % The automotive industry is one of the largest consumers of flat-rolled steel in North America, and the largest end market for us and our unconsolidated joint venture, Serviacero Worthington.
The breakdown of net sales by end market for fiscal 2025 and fiscal 2024 is illustrated below: 2025 2024 Automotive 52 % 52 % Construction 11 % 13 % Machinery & Equipment 9 % 8 % Agriculture 3 % 5 % Heavy Trucks 5 % 5 % Other 20 % 17 % Total 100 % 100 % The automotive industry is one of the largest consumers of flat-rolled steel in North America, and the largest end market for us and our unconsolidated joint venture, Serviacero Worthington.
To manage our exposure to market risk, we attempt to negotiate the best prices for steel and to competitively price products and services to reflect the fluctuations in market prices. Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the cost of certain steel.
To manage our exposure to market risk, we attempt to negotiate the best prices for commodities and to competitively price products and services to reflect fluctuations in market prices. Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the cost of our raw materials; steel is the most significant.
The following table summarizes our consolidated and combined cash flows for the periods presented: 34 Table of Contents (In millions) 2024 2023 2022 Net cash provided by operating activities $ 199.5 $ 315.0 $ 39.5 Net cash used in investing activities (123.2 ) (22.2 ) (395.3 ) Net cash provided by (used in) financing activities (68.8 ) (280.2 ) 358.4 Increase in cash and cash equivalents 7.5 12.6 2.6 Cash and cash equivalents at beginning of period 32.7 20.1 17.5 Cash and cash equivalents at end of period $ 40.2 $ 32.7 $ 20.1 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.
The following table summarizes our consolidated and combined cash flows for the periods presented: (In millions) 2025 2024 2023 Net cash provided by operating activities $ 230.3 $ 199.5 $ 315.0 Net cash used in investing activities (129.1 ) (123.2 ) (22.2 ) Net cash used in financing activities (48.5 ) (68.8 ) (280.2 ) Increase in cash, cash equivalents and restricted cash 52.7 7.5 12.6 Cash, cash equivalents, and restricted cash at beginning of year 40.2 32.7 20.1 Cash, cash equivalents, and restricted cash at end of year $ 92.9 $ 40.2 $ 32.7 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 33 Table of Contents activities, for at least 12 months and for the foreseeable future thereafter.
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.
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 MD&A included in this report discusses our fiscal 2025 and fiscal 2024 financial condition and results of operations.
(Dollars per ton) (1) 2024 2023 2022 1st Quarter $ 879 $ 978 $ 1,762 2nd Quarter $ 747 $ 742 $ 1,888 3rd Quarter $ 1,030 $ 720 $ 1,421 4th Quarter $ 809 $ 1,116 $ 1,280 Annual Avg. $ 866 $ 889 $ 1,588 (1) CRU Hot-Rolled Index No matter how efficient, our operations, which use steel as a raw material, create some amount of scrap.
(Dollars per ton) (1) 2025 2024 2023 1st Quarter $ 690 $ 879 $ 978 2nd Quarter $ 690 $ 747 $ 742 3rd Quarter $ 702 $ 1,030 $ 720 4th Quarter $ 933 $ 809 $ 1,116 Annual Avg. $ 754 $ 866 $ 889 (1) CRU Hot-Rolled Index No matter how efficient, our operations, which use steel as a raw material, create some amount of scrap.
Fiscal 2024 included net short-term borrowings of $145.2 million, primarily from our Credit Facility to fund the $150.0 million distribution to the Former Parent. Revolving credit facility – We entered into the Credit Facility on November 30, 2023, immediately prior to the Separation.
In the prior year period, there were net short-term borrowings of $145.2 million from our Credit Facility, which were primarily to fund the $150.0 million distribution to the Former Parent. Revolving credit facility – We entered into the Credit Facility on November 30, 2023, immediately prior to the Separation.
Refer to “Note H – Debt” for additional information.
Refer to “Note 8 – Debt” for additional information.
Fiscal 2024 income tax expense reflected an estimated annual effective income tax rate of 23.0% versus 25.0% in fiscal 2023. For additional information regarding our income taxes, refer to “Note M – Income Taxes.” Adjusted EBIT We evaluate operating performance on the basis of adjusted earnings before interest and taxes (“adjusted EBIT”).
Fiscal 2025 income tax expense reflected an estimated annual effective income tax rate of 20.6% versus 23.0% in fiscal 2024. Refer to “Note 13 – Income Taxes” for additional information. Adjusted EBIT We evaluate operating performance on the basis of adjusted earnings before interest and taxes (“adjusted EBIT”).
The following table provides a reconciliation of net earnings attributable to controlling interest (the most comparable GAAP financial measure) to adjusted EBIT for the periods presented: (In millions) 2024 2023 Net earnings attributable to controlling interest $ 154.7 $ 87.1 Interest expense, net 6.0 3.0 Income tax expense 46.1 29.0 EBIT 206.8 119.1 Impairment of long-lived assets (1) 0.9 1.9 Restructuring and other income, net (2) - (2.4 ) Separation costs (3) 19.5 17.5 Tax indemnification adjustment (4) (2.8 ) - Adjusted EBIT $ 224.4 $ 136.1 (1) Impairment charges are excluded because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical, current and 33 Table of Contents forecasted financial results.
The following table provides a reconciliation of net earnings attributable to controlling interest (the most comparable GAAP financial measure) to adjusted EBIT for the periods presented: (In millions) 2025 2024 Net earnings attributable to controlling interest $ 110.7 $ 154.7 Interest expense, net 7.1 6.0 Income tax expense 28.8 46.1 EBIT 146.6 206.8 Impairment of assets (1) 4.6 0.9 Restructuring and other expense, net (2) 1.5 - Separation costs (3) - 19.5 Tax indemnification adjustment (4) 4.6 (2.8 ) Pension settlement gain (5) (2.7 ) - Gain on land sale (6) (1.5 ) - Gain on Sitem Group purchase derivative (7) (4.0 ) - Adjusted EBIT $ 149.1 $ 224.4 (1) Impairment charges are excluded because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical, current and forecasted financial results.
Business Combinations Critical estimate : We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition.
See “Note 12 – Employee Retirement Plans” for further information. 38 Table of Contents Business Combinations Critical estimate : We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition.
Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements. Our processed steel products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, shipping costs, and overall economic conditions in the U.S. and abroad.
Our processed steel products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, transportation and shipping costs, and overall economic conditions in the U.S. and abroad.
We evaluate the deferred tax assets to determine whether it is more likely than not that some, or a portion, of the deferred tax assets will not be realized, and provide a valuation allowance as appropriate. Changes in existing tax laws or rates could significantly impact the estimate of our tax liabilities.
We evaluate the deferred tax assets to determine whether it is more likely than not that some, or a portion, of the deferred tax assets will not be realized, and provide a valuation allowance as appropriate.
We consider the basis on which expenses have been allocated to be a reasonable reflection of the services provided to or the benefit derived from the use of such support functions. See “Note S – Related Party Transactions” for further information.
We consider the basis on which expenses have been allocated to be a reasonable reflection of the services provided to or the benefit derived from the use of such support functions. There are no such allocations for fiscal 2025 given the Separation occurred in fiscal 2024. See “Note 19 – Related Party Transactions” for further information.
A more detailed discussion of our impairment activity can be found elsewhere in this MD&A as well as in “Note D – Goodwill and Other Long-Lived Assets.” (2) Restructuring activities consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions).
Refer to “Note 4 – Goodwill and Other Assets.” (2) Restructuring activities consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions).
On December 1, 2023, the common shares began trading on the NYSE under the ticker symbol “WS.” During fiscal 2024 and following the Separation, we declared cash dividends totaling $0.32 per common share at a quarterly rate of $0.16 per common share. Prior to the Separation, the Former Parent was the sole owner of Worthington Steel.
During fiscal 2024 and following the Separation, we declared cash dividends totaling $0.32 per common share at a quarterly rate of $0.16 per common share. Prior to the Separation, the Former Parent was the sole owner of Worthington Steel.
We received cash distributions of $2.0 million from Serviacero Worthington during fiscal 2024.
We received cash distributions of $12.8 million from Serviacero Worthington during fiscal 2025 as compared to $2.0 million during fiscal 2024.
Non-cash impairment charges in both periods were driven by idled equipment at the manufacturing facility in Taylor, Michigan and changes in the estimated fair market value less cost to sell related to ongoing efforts to divest certain production equipment at WSCP’s former toll processing facility in Cleveland, Ohio, and excludes the noncontrolling interest portion of impairment of long-lived assets of $0.5 million and $0.2 million in the fiscal 2024 and fiscal 2023, respectively.
Non-cash impairment charge in the fiscal 2024 was driven by changes in the estimated fair market value less cost to sell related to ongoing efforts to divest certain production equipment at another WSCP former toll processing facility in Cleveland, Ohio, and excludes the noncontrolling interest portion of impairment of assets of $0.5 million.
These costs have been directly attributed to us to the extent incurred to our direct benefit, and include third-party advisory fees, certain employee-related costs and non-recurring costs associated with the separation of shared corporate functions.
These costs have been directly attributed to us to the extent incurred to our direct benefit, and include third-party advisory fees, certain employee-related costs and non-recurring costs associated with the separation of shared corporate functions. (4) Tax indemnification adjustments reported in miscellaneous income, net, related to an indemnification agreement with the former owners of Tempel.
Common shares – Prior to the Separation, our common shares were owned by the Former Parent. After the Separation was completed as described in “Note J – Equity”, there were 49.3 million shares issued and outstanding.
As of May 31, 2025, there were no amounts drawn and outstanding on the BDC loan. Common shares – Prior to the Separation, our common shares were owned by the Former Parent. After the Separation was completed as described in “Note 10 – Equity”, there were 49.3 million shares issued and outstanding.
Assumptions and judgments : Certain key actuarial assumptions critical to the pension and post-retirement accounting estimates include expected long-term rate of return on plan assets, discount rates, projected health care cost trend rates, cost of living adjustments, and mortality rates. In developing future long-term return expectations for our benefit plans’ assets, we formulate views on the future economic environment.
Assumptions and judgments : Certain actuarial assumptions used in developing the pension and post-retirement accounting estimates include expected long-term rate of return on plan assets, discount rates, projected health care cost trend rates, cost of living adjustments, and mortality rates. We believe discount rates and expected return on assets are the most critical assumptions.
Refer to “Note T – Subsequent Events” for additional information. Trends and Factors Impacting our Performance The steel processing industry is fragmented and highly competitive. Given the broad base of products and services offered, specific competitors vary based on the target industry, product type, service type, size of program and geography.
Trends and Factors Impacting our Performance The steel processing industry is fragmented and highly competitive. Given the broad base of products and services offered, specific competitors vary based on the target industry, product type, service type, size of program and geography. Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements.
Our capital structure, long-term commitments, and liquidity sources have thus changed from our prior practices. Our ability to fund our operating needs is dependent upon our ability to continue to generate positive cash flow from operations, and on our ability to maintain our debt financing on acceptable terms.
Our ability to fund our operating needs is dependent upon our ability to continue to generate positive cash flow from operations, and on our ability to maintain our debt financing on acceptable terms.
(In millions, except volume and per common share amounts) 2024 2023 Increase/ (Decrease) Volume (tons) 4,007,373 3,954,575 52,798 Net sales $ 3,430.6 $ 3,607.7 $ (177.1 ) Operating income 194.5 120.3 74.2 Equity income 22.4 7.7 14.7 Net earnings attributable to controlling interest 154.7 87.1 67.6 Earnings per diluted common share attributable to controlling interest (1) $ 3.11 $ 1.77 $ 1.34 (1) On December 1, 2023, there were approximately 49.3 million common shares outstanding following the Distribution.
(In millions, except volume and per common share amounts) 2025 2024 Increase/ (Decrease) Volume (tons) 3,793,752 4,007,373 (213,621 ) Net sales $ 3,093.3 $ 3,430.6 $ (337.3 ) Operating income 147.0 194.5 (47.5 ) Equity income 4.4 22.4 (18.0 ) Net earnings attributable to controlling interest 110.7 154.7 (44.0 ) Earnings per diluted common share attributable to controlling interest (1) $ 2.19 $ 3.11 $ (0.92 ) (1) On December 1, 2023, there were approximately 49.3 million common shares outstanding following the Distribution.
Given the many different products that make up our net sales and the wide variety of end markets we service, it is difficult to isolate the key market indicators that drive this portion of our business.
Our remaining net sales are to other markets such as agricultural, appliance, construction, container, energy, heavy truck, HVAC, industrial electric motor, generator, and transformer. Given the many different products that make up our net sales and the wide variety of end markets we service, it is difficult to isolate the key market indicators that drive this portion of our business.
We follow the authoritative guidance included in ASC 740, Income Taxes, which contains a two-step approach to recognize and measure uncertain tax positions.
Changes in existing tax laws or rates could significantly impact the estimate of our tax liabilities. 37 Table of Contents We follow the authoritative guidance included in ASC 740, Income Taxes, which contains a two-step approach to recognize and measure uncertain tax positions.
Significant assumptions that form the basis of fair value can include discount rates, underlying forecast assumptions, and royalty rates. These assumptions are forward looking and can be affected by future economic and market conditions.
Significant assumptions that form the basis of fair value can include discount rates, underlying forecast assumptions and royalty rates. These assumptions are forward looking and can be affected by future economic and market conditions. During the third quarter of fiscal 2025, the Company identified an impairment indicator for the in-process research and development intangible asset of TWB.
Also, holding all other factors constant, a decrease in the expected long-term rate of return on plan assets by 0.25% would have increased fiscal 2024 pension expense by approximately $0.2 million. See “Note L – Employee Retirement Plans” for further information.
Holding all other factors constant, a decrease in the discount rate by 0.25% would have increased the projected benefit obligation at May 31, 2025 by approximately $1.3 million. Also, holding all other factors constant, a decrease in the expected long-term rate of return on plan assets by 0.25% would have increased fiscal 2025 pension expense by approximately $0.2 million.
The quantitative analysis compares the fair value of each reporting unit or indefinite-lived intangible asset to the respective carrying amount, and an impairment loss is recognized in our consolidated and combined statements of earnings equivalent to the excess of the carrying amount over the fair value.
The quantitative analysis compares the fair value of each reporting unit or indefinite-lived intangible asset to the respective carrying amount, and an impairment loss is recognized in our consolidated and combined statements of earnings equivalent to the excess of the carrying amount over the fair value. 36 Table of Contents Assumptions and judgments : When performing a qualitative assessment, judgment is required when considering relevant events and circumstances that could affect the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is assigned.
A more detailed description regarding our capital structure changes can be found elsewhere in this MD&A as well as in the “Financing Activities” section below.
A more detailed description regarding our capital structure changes can be found elsewhere in this MD&A as well as in the “Financing Activities” section below. We believe we could access the financial markets to be in a position to sell long-term debt or equity securities.
During fiscal 2024 we noted no events or changes in circumstances that indicated the carrying value of an asset or asset group may not be recoverable. 37 Table of Contents Income Taxes Critical estimate : Prior to the Separation, the income tax provision in the statement of earnings had been calculated as if we were operating on a stand-alone basis and filed separate tax returns in the jurisdictions in which we operate.
Income Taxes Critical estimate : Prior to the Separation, the income tax provision in the statement of earnings had been calculated as if we were operating on a stand-alone basis and filed separate tax returns in the jurisdictions in which we operate.
GDP (% growth year-over-year) (1) 2.7 % 1.5 % 5.4 % 1.2 % (3.9 %) Hot-Rolled Steel ($ per ton) (2) $ 866 $ 889 $ 1,588 $ (23 ) $ (699 ) Detroit Three Auto Build (000's vehicles) (3) 6,781 6,906 6,164 (125 ) 742 No.
GDP (% growth year-over-year) 2.8 % 3.0 % 1.5 % (0.2 %) 1.5 % Hot-Rolled Steel ($ per ton) (2) $ 754 $ 866 $ 889 $ (112 ) $ (23 ) Detroit Three Auto Build (000's vehicles) (3) 6,299 6,799 6,906 (500 ) (107 ) No.
Separation costs increased by $2.0 million to $19.5 million in fiscal 2024 as the Separation was finalized on December 1, 2023. No additional Separation costs are expected after fiscal 2024. Refer to “Note A – Description of Business, The Separation, Agreements with the Former Parent and Separation Costs, and Basis of Presentation” for additional information.
No additional Separation costs are expected after fiscal 2025. Refer to “Note 1 – Description of Business, The Separation, Agreements with the Former Parent and Separation Costs, and Basis of Presentation” for additional information.
Fiscal 2023 Compared to Fiscal 2022 For a comparison and discussion of our results of operations and financial condition for fiscal 2023 and fiscal 2022, see “Item 2.
For a comparison and discussion of our results of operations and financial condition for fiscal 2024 and fiscal 2023, see “Part II – Item 7.
Gross Margin % of % of Increase/ (In millions) 2024 Net sales 2023 Net sales (Decrease) Gross margin $ 439.8 12.8 % $ 336.5 9.3 % $ 103.3 31 Table of Contents Gross margin increased $103.3 million over the prior year to $439.8 million, primarily due to favorable direct spreads between sales price and material costs, and, to a lesser extent a more favorable mix within toll processing.
Gross Margin % of % of Increase/ (In millions) 2025 Net sales 2024 Net sales (Decrease) Gross margin $ 388.6 12.6 % $ 439.8 12.8 % $ (51.2 ) Gross margin decreased $51.2 million over the prior year to $388.6 million, primarily due to lower volume (direct and toll) and, to a lesser extent, unfavorable direct spreads between sales price and material costs.
Net cash provided by operating activities was $199.5 million during fiscal 2024 compared to $315.0 million in fiscal 2023, a decrease of $115.5 million.
Net cash provided by operating activities was $230.3 million during fiscal 2025 compared to $199.5 million in fiscal 2024, an increase of $30.8 million.
Liquidity and Capital Resources Historically, we financed our working capital requirements through cash flows from operating activities and arrangements with the Former Parent. Upon completion of the Separation, we ceased such arrangements with the Former Parent and secured independent debt financing in the form of the Credit Facility.
Upon completion of the Separation, we ceased such arrangements with the Former Parent and secured independent debt financing in the form of the Credit Facility. Our capital structure, long-term commitments, and liquidity sources have thus changed from our prior practices.
On June 26, 2024, during the first quarter of fiscal 2025, the Board declared a quarterly cash dividend of $0.16 per common share payable on September 27, 2024, to the shareholders of record at the close of business on September 13, 2024.
The transaction closed on June 3, 2025, subsequent to the end of fiscal 2025. • On June 25, 2025, the Board declared a quarterly dividend of $0.16 per common share payable on September 26, 2025, to shareholders of record at the close of business on September 12, 2025. Refer to “Note 21 – Subsequent Events” for additional information.
There were $148.0 million outstanding borrowings drawn against the Credit Facility on May 31, 2024, leaving a borrowing capacity of $402.0 million, subject to the eligible borrowing base, available for use. Under the Credit Facility, we may extend borrowings up to the maturity date subject to the eligible borrowing base.
There were $149.2 million outstanding borrowings drawn against the Credit Facility on May 31, 2025, leaving a borrowing capacity of $400.8 million, subject to the eligible borrowing base, available for use. At May 31, 2025 and May 31, 2024, the available borrowing capacity was $260.9 million and $307.6 million, respectively.
Environmental We do not believe that compliance with environmental laws has or will have a material effect on our capital expenditures, future results of operations or financial position or competitive position. 36 Table of Contents Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated and combined financial statements, which have been prepared in accordance with GAAP.
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated and combined financial statements, which have been prepared in accordance with GAAP.
Investing Activities Net cash used in investing activities was $123.2 million during fiscal 2024 compared to $22.2 million in fiscal 2023. Net cash used in investing activities in fiscal 2024 included capital expenditures of $103.4 million. Additionally, we paid $21.0 million, net of cash acquired, for the acquisition of Voestalpine Nagold in fiscal 2024.
Investing Activities Net cash used in investing activities was $129.1 million during fiscal 2025 compared to $123.2 million in fiscal 2024. Net cash used in investing activities in fiscal 2025 included capital expenditures of $130.4 million.
However, we believe that the trend in U.S. gross domestic product growth is a reasonable macroeconomic indicator for analyzing the demand of our end markets.
However, we believe that the trend in U.S. gross domestic product growth (“U.S. GDP”) is a reasonable macroeconomic indicator for analyzing the demand of our end markets other than the automotive industry. U.S. GDP has shown resilient growth during much of fiscal 2025. Recent economic data has suggested that there has been a slight pull back in U.S.
When increases in scrap prices do not keep pace with the increases in the price of the steel raw material, it can have a negative impact on our margins due to the additional unrecovered costs in our scrap.
When increases in scrap prices do not keep pace with the increases in the price of the steel raw material, it can have a negative impact on our margins. 29 Table of Contents Results of Operations Fiscal 2025 Compared to Fiscal 2024 The tables throughout this section present, on a comparative basis, our results of operations for the past two fiscal years.
Selling, General and Administrative Expense % of % of Increase/ (In millions) 2024 Net sales 2023 Net sales (Decrease) Selling, general and administrative expense $ 224.4 6.5 % $ 200.8 5.6 % $ 23.6 SG&A increased $23.6 million over the prior year primarily due to increased wage and benefit costs as a result of being a stand-alone company, and, to a lesser extent, increased incentive compensation.
Selling, General and Administrative Expense % of % of Increase/ (In millions) 2025 Net sales 2024 Net sales (Decrease) Selling, general and administrative expense $ 231.6 7.5 % $ 224.4 6.5 % $ 7.2 Selling, general and administrative expense (“SG&A”) increased $7.2 million over the prior year primarily due to increased wage and benefit costs and $4.6 million of professional fees associated with the Sitem Group Transaction.
Equity Income Increase/ (In millions) 2024 2023 (Decrease) Serviacero Worthington $ 22.4 $ 7.7 $ 14.7 Equity earnings at Serviacero Worthington increased $14.7 million over the prior year period driven by improved direct spreads, primarily related to the impact of favorable inventory holding gains, and, to a lesser extent, higher direct volume.
Equity Income Increase/ (In millions) 2025 2024 (Decrease) Serviacero Worthington $ 4.4 $ 22.4 $ (18.0 ) Equity earnings at Serviacero Worthington decreased $18.0 million over fiscal 2024 due to lower direct spreads, primarily related to the impact of reduced inventory holding gains, lower direct volume, and unfavorable exchange rate movements during fiscal 2025.
This change was primarily due to a $154.9 million reduction in cash from net operating working capital (accounts receivable, inventories, and accounts payable) and a $25.2 million increase in undistributed earnings from an unconsolidated affiliate, partially offset by a $70.4 million increase in overall net earnings.
This change was primarily due to a $44.9 million increase in cash provided from net operating working capital (accounts receivable, inventories, and accounts payable), driven by the reduction in average steel prices in fiscal 2025 over fiscal 2024.
Significant assumptions that form the basis of fair value can include discount rates, underlying forecast assumptions and royalty rates. These assumptions are forward looking and can be affected by future economic and market conditions. Our qualitative review for fiscal 2024 did not indicate any impairment.
Significant assumptions that form the basis of fair value can include discount rates, underlying forecast assumptions, and royalty rates. These assumptions are forward looking and can be affected by future economic and market conditions. During fiscal 2025, the Company announced plans to combine WSCP’s Cleveland, Ohio toll processing manufacturing facility into its existing manufacturing facility in Twinsburg, Ohio.
Net sales totaled $3,430.6 million in fiscal 2024, down $177.1 million compared to fiscal 2023. While volume increased 52,798 tons, or 1.3% from fiscal 2023 to fiscal 2024, net sales decreased primarily due to lower direct selling prices, which were down approximately 6%. This was partially offset by a more favorable mix within toll processing.
Net sales totaled $3,093.3 million in fiscal 2025, down $337.3 million compared to fiscal 2024, primarily due to lower direct selling prices and unfavorable volumes. Direct selling prices were down approximately 6%. Overall volume decreased 213,621 tons, or 5% from fiscal 2024 to fiscal 2025. Direct tons sold decreased 4%, while toll tons sold decreased 7% compared to fiscal 2024.
Adjusted EBIT was up $88.3 million over the prior year, primarily due to favorable direct spreads, up $93.9 million, including an estimated $45.2 million favorable change in estimated inventory holding losses and, to a lesser extent, a $14.7 million increase in equity earnings at Serviacero Worthington, partially offset by a $23.6 million increase in SG&A compared to fiscal 2023.
Adjusted EBIT was down $75.3 million over the prior year, primarily due to a $51.2 million decrease in gross margin, an $18.0 million decrease in equity earnings at Serviacero Worthington, and a $7.2 million increase in SG&A compared to fiscal 2024.
We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields, and spreads. We also consider expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and target allocations.
In developing future long-term return expectations for our benefit plans’ assets, we formulate views on the future economic environment. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields, and spreads.
North American vehicle production, including the Detroit Three automakers, is a leading indicator of automotive demand. North American vehicle production was up in fiscal 2024 compared to fiscal 2023. Our remaining net sales are to other markets such as agricultural, appliance, construction, container, energy, heavy truck, HVAC, industrial electric motor, generator, and transformer.
North American vehicle production, including the Detroit Three automakers, is a leading indicator of automotive demand. North American vehicle production was down 6% in fiscal 2025 compared to fiscal 2024, and the Detroit Three automakers vehicle production was down 7% in fiscal 2025 compared to fiscal 2024.
The increase in capital expenditures from fiscal 2023 to fiscal 2024 was primarily related to strategic expansions in our electrical steel operations in Mexico and Canada to service the automotive and transformer markets.
In the current year period, the driver of net cash used in investing activities was primarily related to capital expenditures, which were substantially related to the previously announced strategic expansions of our electrical steel operations in Mexico and Canada to service the automotive and transformer markets, respectively, as well as certain other assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA sensitivity analysis of changes in the price of hedged commodities indicates that a 10% decline in the market prices of steel, zinc, scrap, natural gas or any combination of these would not have a material impact to the value of our hedges or our reported results. 39 Table of Contents The fair values of our outstanding derivative positions as of May 31, 2024 and 2023 are summarized below.
Biggest change(In millions) 2025 2024 Commodity contracts $ (2.0 ) $ (0.8 ) Foreign currency exchange contracts $ 3.9 $ - A sensitivity analysis of changes in the price of hedged commodities and foreign currency exchange contracts indicates that a 10% decline in the market prices of steel, zinc, scrap, natural gas or any combination of these, or a 10% decrease in the hedge currencies would not have a material impact to the value of our hedges or our reported results.
These instruments are used primarily to mitigate market exposure. Refer to “Note P – Derivative Financial Instruments and Hedging Activities” for additional information. Commodity Price Risk We are exposed to market risk for price fluctuations on purchases of raw materials as well as our utility requirements.
These instruments are used primarily to mitigate market exposure. Refer to “Note 16 – Derivative Financial Instruments and Hedging Activities” for additional information. Commodity Price Risk We are exposed to market risk for price fluctuations on purchases of raw materials as well as our utility requirements.
These contracts covered periods commensurate with known or expected exposures throughout fiscal 2024. The derivative financial instruments were executed with highly rated financial institutions. No credit loss is anticipated.
Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the certain foreign currencies. These contracts covered periods commensurate with known or expected exposures throughout fiscal 2025. The derivative financial instruments were executed with highly rated financial institutions. No credit loss is anticipated.
Fair values of these derivative financial instruments do not consider the offsetting impact of the underlying hedged item. (In millions) 2024 2023 Commodity contracts $ (0.8 ) $ (7.5 ) Safe Harbor Quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management’s opinion about risks associated with the use of derivative financial instruments.
Consequently, any future borrowings on our Credit Facility will increase market risk resulting from potential interest rate volatility. Safe Harbor Quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management’s opinion about risks associated with the use of derivative financial instruments.
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These contracts covered periods commensurate with known or expected exposures throughout fiscal 2025. The derivative financial instruments were executed with highly rated financial institutions. No credit loss is anticipated. Foreign Exchange Rate Risk Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries.
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Our foreign currency exposure primarily consists of the Canadian dollar, Mexican peso, Chinese yuan, Indian rupee, and Euro through our operations in Canada, Mexico, China, India, and Germany, respectively. We have exposure to exchange rate fluctuations, both due to translation and transaction exposures.
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Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances 39 Table of Contents denominated in currencies other than the functional currency.
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In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions may lead to a decline in our net earnings and cash flows.
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Total foreign currency transaction gains and losses included in our net earnings were gains of $2.4 million in 2025, which included a $4.0 million gain on Sitem Group purchase derivative, $0.9 million in 2024, and $2.6 million in 2023, respectively. The fair values of our outstanding derivative positions as of May 31, 2025 and 2024 are summarized below.
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Fair values of these derivative financial instruments do not consider the offsetting impact of the underlying hedged item.
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Interest Rate Risk We are exposed to market risk related to our variable-rate debt via our Credit Facility. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. Changes in interest rates may decrease pretax net earnings resulting from an increase in interest rates.
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As of May 31, 2025, we had $149.2 million outstanding under the Credit Facility. A sensitivity analysis of changes in the interest rate on the Credit Facility indicates that a 10% increase in the interest rate would not have a material impact to the value of pretax net earnings.

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