WOR Worthington Enterprises Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 24, 2024

 

 

WORTHINGTON ENTERPRISES, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Ohio			001-08399	31-1189815
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
200 West Old Wilson Bridge Road
Columbus, Ohio				43085
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (614) 438-3210

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, Without Par Value		WOR		The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02. Results of Operations and Financial Condition.

 

Worthington Enterprises, Inc. (the “Registrant”) conducted a conference call on September 25, 2024, beginning at approximately 8:30 a.m., Eastern Daylight Time, to discuss the Registrant’s unaudited financial results for the first quarter ended August 31, 2024. Additionally, the Registrant addressed certain issues related to the outlook for the Registrant and its subsidiaries and their respective markets. A copy of the transcript of the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”).

The information contained in this Item 2.02 and in Exhibit 99.1 is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, unless the Registrant specifically states that the information is to be considered “filed” under the Exchange Act or incorporates the information by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended.

 

In the conference call, the Registrant discussed financial measures prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”) as well as non-GAAP financial measures to provide investors with additional information that the Registrant believes allows for increased comparability of the performance of the Registrant’s ongoing operations from period to period. Specifically, the Registrant referred to earnings before interest, taxes, depreciation and amortization (“EBITDA”) from continuing operations and adjusted EBITDA from continuing operations, each on a consolidated basis, for the Registrant's trailing twelve months (“TTM”) ended August 31, 2024. In the table below, the Registrant also presents TTM adjusted EBITDA from continuing operations margin. These measures are non-GAAP financial measures and are used by management as measures of operating performance. EBITDA from continuing operations is calculated by adding or subtracting, as appropriate, interest expense, net, income tax expense and depreciation and amortization to/from net earnings from continuing operations attributable to controlling interest. Adjusted EBITDA from continuing operations is calculated by adding or subtracting, as appropriate, to/from EBITDA from continuing operations certain items that the Registrant believes are not necessarily indicative of the Registrant's operating performance, such as those listed in the table below and previously described in Exhibit 99.1 of the Registrant's Current Report on Form 8-K filed on September 24, 2024. TTM adjusted EBITDA from continuing operations margin is calculated by dividing TTM adjusted EBITDA from continuing operations by net sales. The table below provides a reconciliation from net earnings (loss) before income taxes (the most comparable GAAP financial measure) to adjusted EBITDA from continuing operations, for the TTM ended August 31, 2024.

 

		First				Fourth				Third				Second
		Quarter				Quarter				Quarter				Quarter
(In thousands)		2025				2024				2024				2024
Earnings (loss) before income taxes (GAAP)		$	30,790			$	(26,798	)		$	40,471			$	24,542
Less: net loss attributable to noncontrolling interest			(245	)			(263	)			-				-
Net earnings (loss) before income taxes attributable to controlling interest			31,035				(26,535	)			40,471				24,542
Interest expense, net			489				(9	)			50				472
EBIT (1)			31,524				(26,544	)			40,521				25,014
Corporate costs eliminated at Separation			-				-				-				9,671
Impairment of goodwill and long-lived assets			-				32,975				-				-
Restructuring and other expense (income), net			1,158				28,624				698				6
Separation costs			-				240				2,999				7,056
Non-cash settlement charges in miscellaneous expense			-				11,077				8,103				-
Gain on sale of assets in equity income			-				-				-				(2,780	)
Pension settlement charge in equity income			-				1,040				-				-
Adjusted EBIT (1)			32,682				47,412				52,321				38,967
Depreciation and amortization			11,830				12,424				11,949				12,215
Stock-based compensation			3,925				3,332				2,602				3,861
Adjusted EBITDA from continuing operations (non-GAAP)		$	48,437			$	63,168			$	66,872			$	55,043
TTM adjusted EBITDA from continuing operations (non-GAAP)		$	233,520
TTM earnings before income taxes margin (GAAP)			5.8	%
TTM Adjusted EBITDA from continuing operations margin (non-GAAP)			19.6	%

 

 

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During the conference call, the Registrant referred to free cash flow for the three months ended August 31, 2024. Free cash flow is a non-GAAP financial measure that management believes measures the Registrant's ability to generate cash beyond what is required for its business operations and capital expenditures. The following provides a reconciliation of net cash provided by operating activities (the most comparable GAAP financial measure) to free cash flow for the three months ended August 31, 2024.

 

		First
		Quarter
(In thousands)		2025
Net cash provided by operating activities (GAAP)		$	41,146
Investment in property, plant and equipment			(9,629	)
Free cash flow (non-GAAP)		$	31,517

 

During the conference call, the Registrant referred to the ratio of net debt to TTM adjusted EBITDA from continuing operations, which is a non-GAAP financial measure that is used by the Registrant as a measure of leverage. Net debt to TTM adjusted EBITDA from continuing operations is calculated by subtracting cash and cash equivalents from net debt (defined as the aggregate of short-term borrowings, current maturities of long-term debt and long-term debt) and dividing the sum by TTM adjusted EBITDA from continuing operations. The calculation of net debt to adjusted EBITDA from continuing operations for the TTM ended August 31, 2024 is outlined below.

 

		August 31,
(In thousands)		2024
Long-term debt		$	300,009
Less: cash and cash equivalents			178,547
Net debt		$	121,462
TTM adjusted EBITDA from continuing operations (non-GAAP)		$	233,520
Net debt to TTM adjusted EBITDA from continuing operations (non-GAAP)			0.52

 

Additional non-GAAP financial measures referred to by the Registrant on the conference call, including reconciliations to the most comparable GAAP financial measures, are included in Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on September 24, 2024. Such Exhibit 99.1 includes a copy of the Registrant’s news release issued on September 24, 2024 (the “Financial News Release”) reporting results for the first quarter ended August 31, 2024. The Financial News Release was made available on the Registrant’s website throughout the conference call and will remain available on the Registrant’s website for at least one year.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

At the Annual Meeting of Shareholders of the Registrant held on September 24, 2024 (the "Annual Meeting"), the shareholders of the Registrant approved the Worthington Enterprises, Inc. 2024 Long-Term Incentive Plan (“2024 LTIP”). The 2024 LTIP will be administered by the Compensation Committee (the “Committee”) of the Registrant’s Board of Directors (the “Board”). Eligibility to participate in the 2024 LTIP is limited to employees of the Registrant and its subsidiaries.

Subject to adjustment as described in the 2024 LTIP, the 2024 LTIP currently provides that the maximum number of common shares available for settlement of awards over the life of the 2024 LTIP is the sum of 8,000,000, and the aggregate number of common shares subject to awards outstanding under the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan, and the Worthington Industries, Inc. 2010 Stock Option Plan as of September 24, 2024, that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable common shares).

 

If any common shares subject to any award under the 2024 LTIP are forfeited or withheld for taxes, any award terminates or expires unexercised or any award is settled for cash or other property or exchanged for other awards, the common shares subject to such award will again be available for grant pursuant to the 2024 LTIP.

 

Under the 2024 LTIP, the Committee may grant the following types of awards: (a) non-qualified stock options; (b) stock appreciation rights, in tandem with non-qualified stock options or free-standing; (c) restricted common shares; (d) restricted stock units; (e) performance awards in the form of performance shares or performance units subject to the achievement of performance goals during a specified performance period; and (f) other awards of common shares or awards valued in whole or in part by reference to, or otherwise based upon, common shares or other property.

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The 2024 LTIP became effective upon approval of the 2024 LTIP by the Registrant’s shareholders on September 24, 2024 and will remain in effect until terminated by the Board. The Board or the Committee may amend, terminate or suspend the 2024 LTIP at any time except to the extent that approval of the Registrant’s shareholders is required to satisfy applicable requirements imposed by: (a) Rule 16b-3 under the Securities Exchange Act of 1934, as amended; (b) applicable sections of the Internal Revenue Code; or (c) NYSE rules.

The foregoing description of the 2024 LTIP is qualified in its entirety by reference to the complete terms of the 2024 LTIP, which is included with this Form 8-K as Exhibit 10.1 and incorporated herein by this reference. A description of the material terms of the 2024 LTIP was included in the Registrant’s definitive Proxy Statement for the Annual Meeting as filed with the Securities and Exchange Commission on August 14, 2024.

 

Item 5.07. Submission of Matters to a Vote of Security Holders.

The Registrant held the Annual Meeting on September 24, 2024. At the close of business on July 29, 2024, the record date for the Annual Meeting, there were a total of 50,127,974 common shares of the Registrant outstanding and entitled to vote. At the Annual Meeting, the holders of 45,369,425 (in excess of 90%) of the Registrant’s common shares outstanding on the record date were represented by proxy, constituting a quorum.

The results of the voting on the proposals presented to the shareholders at the Annual Meeting were as follows:

Proposal 1 — Election of Directors

		Votes For		Votes Against		Abstentions	Broker Non-Votes
John B. Blystone		39,858,729		2,273,229		124,342	3,113,125
Mark C. Davis		40,276,683		1,940,585		39,032	3,113,125
John H. McConnell II		40,775,674		1,443,228		37,398	3,113,125
B. Andrew Rose		41,786,072		315,162		155,066	3,113,125

At the Annual Meeting, the shareholders of the Registrant elected each of Mr. Blystone, Mr. Davis, Mr. McConnell and Mr. Rose as a director of the Registrant for a three-year term, expiring at the Annual Meeting of Shareholders occurring in 2027.

Proposal 2 — Advisory Vote to Approve the Compensation of the NEOs

Votes For		Votes Against		Abstentions		Broker Non-Votes
35,785,258		6,372,695		98,347		3,113,125

At the Annual Meeting, the shareholders of the Registrant approved the advisory resolution to approve the compensation of the Registrant’s named executive officers, as described in the Registrant’s proxy statement for the Annual Meeting.

Proposal 3 — Approve the 2024 LTIP

Votes For		Votes Against		Abstentions		Broker Non-Votes
32,964,494		9,154,022		137,784		3,113,125

At the Annual Meeting, the shareholders of the Registrant approved the proposal to approve the 2024 LTIP.

Proposal 4 — Ratification of the Selection of Independent Registered Public Accounting Firm

Votes For		Votes Against		Abstentions
45,047,320		261,375		60,730

At the Annual Meeting, the shareholders of the Registrant ratified the selection of KPMG LLP as the Registrant’s independent registered public accounting firm for the fiscal year ending May 31, 2025.

 

 

Item 9.01 Financial Statements and Exhibits.

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(d) Exhibits: The following exhibits are included with this Form 8‑K:

Exhibit No.		Description
10.1		Worthington Enterprises, Inc. 2024 Long-Term Incentive Plan†
99.1		Transcript of Worthington Enterprises, Inc. Earnings Conference Call for First Quarter of Fiscal 2025 (Fiscal Quarter ended August 31, 2024), held on September 25, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

† Indicates a management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			WORTHINGTON ENTERPRISES, INC.
Date:	September 30, 2024	By:	/s/Patrick J. Kennedy
			Patrick J. Kennedy, Vice President - General Counsel and Secretary

 

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Worthington Enterprises, Inc.
2024 Long-Term Incentive Plan

 

1. Purpose. The purposes of the Worthington Enterprises, Inc. 2024 Long-Term Incentive Plan (this “Plan”) are to enable selected key Employees to align the interests of the Employees with those of Worthington’s shareholders, to provide Employees with incentives to contribute to the Company’s future success, thus enhancing the value of the Company for the benefit of Worthington’s shareholders, and to enhance the ability of the Company to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. This Plan is effective on the Effective Date. Capitalized terms used and not otherwise defined in this Plan have the meanings ascribed to them in Section 15 hereof.

 

2. Administration. This Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of this Plan as may from time to time be adopted by the Board, to: (a) select the Employees to whom Awards may from time to time be granted hereunder; (b) determine the type or types of Award to be granted to each Participant hereunder; (c) determine the number of Shares to be covered by each Award granted hereunder; (d) determine the terms and conditions, not inconsistent with the provisions of this Plan, of any Award granted hereunder; (e) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property or canceled or suspended; (f) interpret and administer this Plan and any instrument or agreement entered into under this Plan; (g) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of this Plan; and (h) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan. Decisions of the Committee shall be final, conclusive and binding upon all Persons, including the Company, any Participant, any shareholder, and any Employee of the Company. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. The Committee, in its sole discretion, may delegate any duties associated with this Plan to any person that it deems appropriate, except that the Committee may not delegate any duties that the Committee is required to discharge to comply with applicable laws and regulations.

 

3. Duration and Shares.

 

a. Term. This Plan shall remain in effect until terminated by the Board.

 

b. Shares Subject to this Plan. The maximum number of Shares in respect of which Awards may be granted under this Plan, subject to adjustment as provided in Section 3(c) of this Plan, shall be equal to the sum of (i) 8,000,000, and (ii) the number of Shares subject to the awards outstanding under the Prior Plan that cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable Shares). Notwithstanding the foregoing, no Participant may be granted Awards in any one calendar year with respect to more than 500,000 Shares.

 

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For the purpose of computing the total number of Shares available for Awards under this Plan, there shall be counted against the foregoing limitations the number of Shares subject to issuance upon exercise or settlement of Awards. For purposes of clarity, the Committee may make reasonable estimates of the numbers of Shares that are expected to be issued in connection with a Performance Award, provided that the total number of Shares actually issued in connection with the Plan may not exceed the maximum. Shares which were previously subject to Awards shall again be available for Awards under this Plan if any such Awards are forfeited, terminated, expire unexercised, settled in cash or property other than Shares or exchanged for other Awards including any withholding or surrender of Shares to pay taxes (to the extent of such forfeiture, termination, withholding, surrender or expiration of such Awards), or if the Shares subject thereto can otherwise no longer be issued. Any Shares which are used as full or partial payment to Worthington by a Participant of the option price of Shares upon exercise of an Option shall again be available for Awards under this Plan.

 

Shares which may be issued under this Plan may be either authorized and unissued Shares or issued Shares which have been reacquired by Worthington. No fractional Shares shall be issued under this Plan.

 

 

d. Prohibition on Repricing. Except for adjustments made pursuant to Section 3(c) of this Plan, in no event may the Committee, without obtaining the approval of Worthington’s shareholders: (a) amend the terms of an outstanding Award to reduce the option price of an outstanding Option or the grant price of an outstanding Stock Appreciation Right; (b) cancel an outstanding Option or Stock Appreciation Right in exchange for Options or Stock Appreciation Rights with an option price or grant price, as applicable, that is less than the option price or grant price of the original Option or Stock Appreciation Right; (c) cancel an outstanding

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Option or Stock Appreciation Right with an option price or grant price, as applicable, which is above the current Fair Market Value of the Shares underlying the Option or Stock Appreciation Right in exchange for another Award, cash or other securities; (d) take any other action that is treated as a “repricing” under generally accepted accounting principles; or (e) take any other action that has the effect of “repricing” an Award, as defined under the rules of the securities exchange or other recognized market or quotation system on which the Shares are then listed or traded.

 

4. Eligibility. Any Employee (excluding any member of the Committee) shall be eligible to be selected as a Participant.

 

5. Options. Options may be granted hereunder to Participants, either alone or in addition to other Awards granted under this Plan. Any Option granted under this Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of this Plan, as the Committee shall deem desirable. The provisions of Options need not be the same with respect to each Participant.

 

a. Option Price. The option price per Share purchasable upon exercise of an Option shall be determined by the Committee in its sole discretion; provided that such option price shall not be less than the Fair Market Value of the Share on the date of the grant of the Option.

 

 

c. Exercisability. Options shall be exercisable at such time or times as determined by the Committee.

 

d. Method of Exercise. Subject to the other provisions of this Plan and any applicable Award Agreement, any Option may be exercised by the Participant in whole or in part at such time or times, and the Participant may make payment of the option price in such form or forms, including, without limitation, payment by delivery of cash, Shares already owned by the Participant or other consideration (including, where permitted by law, by delivery or surrender of outstanding vested and exercisable Awards, including through the withholding of Shares which would otherwise be issued in connection with the exercise of a vested and exercisable Option), having a Fair Market Value on the exercise date equal to the total option price, or by any combination of cash, Shares and other consideration unless the Committee may otherwise specify in the applicable Award Agreement.

 

6. Stock Appreciation Rights. Stock Appreciation Rights may be granted hereunder to Participants, either alone or in addition to other Awards granted under this Plan, and may, but need not, relate to a specific Option granted under Section 5. Any Stock Appreciation Right granted under this Plan shall be evidenced by an Award Agreement in such form as

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the Committee may from time to time approve. Any such Stock Appreciation Right shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of this Plan, as the Committee shall deem desirable. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant.

 

a. Term. Subject to Section 12(b), the term of each Stock Appreciation Right shall be fixed by the Committee in its sole discretion.

 

 

c. Method of Exercise. Subject to the other provisions of this Plan and any applicable Award Agreement, any Stock Appreciation Right may be exercised by the Participant in whole or in part at such time or times.

 

7. Restricted Stock and Restricted Stock Units.

 

a. Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the Grant Date.

 

b. Restricted Stock or Restricted Stock Unit Award Agreement. Each Award of Restricted Stock and/or Restricted Stock Unit shall be evidenced by an Award Agreement that shall specify the restriction period, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

 

c. Other Conditions and Restrictions. The Committee may impose such other conditions and/or restrictions on any Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable or desirable. Such conditions and restrictions may include, but shall not be limited to, a requirement that the Participant pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, acceleration of a restriction period based on the achievement of performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which the Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Committee upon vesting of such Restricted Stock or Restricted Stock Units.

 

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An Award of Restricted Stock or Restricted Stock Units shall have a minimum vesting period of one year from the date of its grant with no vesting prior to the first anniversary of the grant date, except that this minimum vesting condition need not apply (i) in the case of the death or disability of the Participant or termination of employment of a Participant in connection with a Change of Control, and (ii) with respect to up to an aggregate of 5% of the Shares authorized under this Plan, which may be granted (or regranted upon forfeiture) in any form permitted under this Plan without regard to such minimum vesting requirements.

 

Restricted Stock Units shall be settled in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.

 

d. Registration. Any Restricted Stock issued hereunder may be evidenced in such manner as the Committee in its sole discretion shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Restricted Stock awarded under this Plan, such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award.

 

To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Restricted Stock have been satisfied or lapse. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Restricted Stock Award have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations).

 

e. Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, a Participant receiving a Restricted Stock Award will have, with respect to the Restricted Stock, all of the rights of a shareholder of the Company holding the class of Shares that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any dividends paid on Restricted Stock. Any dividends paid on the Restricted Stock will be subject to the same restrictions that apply to the Restricted Stock with respect to which the dividend was paid.

 

A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. A Participant shall have no dividend rights with respect to any Restricted Stock Units granted hereunder unless the Participant is also granted Dividend-Equivalent Rights. Any Participant selected by the Committee may be granted Dividend-Equivalent Rights in connection with any Award other than an Option or SAR based on the dividends declared on Shares that are subject to the Award to which they relate, to be accrued as of dividend payment dates, during the period between the date the Award is granted and the date the Award vests or expires, as determined by the Committee. Such Dividend-Equivalent Rights shall

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be converted to cash or Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing or any provision of this Plan to the contrary, if any Award for which Dividend-Equivalent Rights have been granted has its vesting or grant dependent upon the satisfaction of (i) a service condition, (ii) one or more performance conditions, or (iii) both a service condition and one or more performance conditions, then such Dividend-Equivalent Rights shall be subject to the same performance conditions and service conditions, as applicable, as the underlying Award. For purposes of clarity, no amount shall be paid or settled in connection with a Dividend-Equivalent Right until the underlying Award is paid or settled.

 

f. Section 83(b) Election. The Committee may provide in an Award Agreement that any Restricted Stock Award is conditioned upon the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to promptly file a copy of such election with the Company.

 

8. Performance Awards. Performance Awards may be issued hereunder to Participants, either alone or in addition to other Awards granted under this Plan, for such consideration as determined by the Committee, in its sole discretion. The performance criteria to be achieved during any Performance Period, the length of the Performance Period and the other terms and conditions with respect to the Performance Award shall be determined by the Committee upon the grant of each Performance Award. Performance Awards may be paid in cash, Shares or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance levels to be achieved for each Performance Period and the amount of the Award to be distributed shall be determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period and achievement of the applicable performance levels. The maximum grant date value of the property, including cash, that may be paid or distributed to any Participant pursuant to a grant of any Performance Award made in any one calendar year shall be $10,000,000. The provisions of Performance Awards need not be the same with respect to each Participant.

 

9. Unrestricted Stock and Other Awards.

 

a. Other Stock Awards Administration. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares (collectively, “Other Stock Unit Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards granted under this Plan. Other Stock Unit Awards may be paid in Shares, cash or any other form of property as the Committee shall determine.

 

b. Cash-Based Award. The Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine in its sole discretion.

 

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c. Terms and Conditions. Other Stock Unit Awards granted under this Section 9 may be issued for such consideration as determined by the Committee in its sole discretion. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Section 9 shall be purchased for such consideration as the Committee shall in its sole discretion determine, which shall not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is awarded. The terms and conditions and other provisions with respect to Other Stock Unit Awards shall be determined by the Committee. The provisions of Other Stock Unit Awards need not be the same with respect to each Participant.

 

10. Change in Control Provisions.

 

a. Impact of Event. Notwithstanding any other provision of this Plan to the contrary, but subject to the provisions of Section 10(c), in the event of a Change in Control:

 

i. Any Options and Stock Appreciation Rights outstanding as of the date such Change in Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Participant holding a Stock Appreciation Right who is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable unless it shall have been outstanding for at least six months at the date such Change in Control is determined to have occurred. Any Option and Stock Appreciation Right outstanding on the date of such Change in Control shall either (A) be adjusted to maintain the intrinsic value of the Award on the date of the Change in Control as described in Section 3(c), or (B) cash out the intrinsic value of the Option and Stock Appreciation Right by treating the Award as if it had been exercised on the date of the Change in Control.

 

ii. The restrictions applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant.

 

iii. All Performance Awards shall be considered to be earned and payable in full, and any other restriction shall lapse and such Performance Awards shall be immediately settled or distributed. For purposes of clarity, any performance conditions shall be treated as satisfied at the greater of (A) actual performance during the Performance Period through the date of such Change in Control, and (B) target performance.

 

iv. The restrictions and other conditions applicable to Restricted Stock Units, any Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall become free of all restrictions or conditions and become fully vested and transferable to the full extent of the original grant.

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b. Successors. All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business, equity and/or assets of the Company. All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon each Participant’s heirs, legal representatives, and successors.

 

11. Amendments and Termination. The Board may amend, alter or discontinue this Plan or any outstanding Award, but no amendment, alteration, or discontinuation shall be made (a) that would impair the rights of a Participant under an Award theretofore granted, without the Participant’s consent, or (b) without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.

 

12. General Provisions.

 

a. No Assignment. Unless the Committee determines otherwise at the time the Award is granted, no Award, and no Shares subject to Awards which have not been issued or as to which any applicable restriction, performance period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, except by will or by the laws of descent and distribution; provided that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant. In the absence of any such beneficiary designation, any Awards that remain outstanding at the Participant’s death shall be paid to or exercised by the Participant’s surviving spouse, if any, or the Participant’s executor, administrator, or legal representative. Each Award shall be exercisable, during the Participant’s lifetime, only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative.

 

b. Term of Awards. The term of each Award shall be for such period of months or years from the date of its grant as may be determined by the Committee; provided that in no event shall the term of any Option or Stock Appreciation Right exceed a period of 10 years from the date of its grant.

 

c. No Right to Award. No Employee or Participant shall have any claim to be granted any Award under this Plan and there is no obligation for uniformity of treatment of Employees or Participants under this Plan.

 

d. Written Agreement Required. The prospective recipient of any Award under this Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an agreement or other instrument evidencing the Award and delivered a fully executed copy thereof to Worthington, and otherwise complied with the then applicable terms and conditions.

 

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e. Adjustments. The Committee shall be authorized to make adjustments in Performance Award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. In the event Worthington shall assume outstanding employee benefit awards or the right or obligation to make future awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under this Plan as it shall deem appropriate.

 

f. Cancellations and Forfeitures. The Committee shall have full power and authority to determine whether, to what extent, and under what circumstances, any Award shall be canceled or suspended. In particular, but without limitation, all outstanding Awards to any Participant shall be canceled if the Participant, without the consent of the Committee, while employed by the Company or after termination of such employment, becomes associated with, employed by, renders services to, or owns any interest in (other than any non-substantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest as determined by the Committee.

 

To the maximum extent permitted by applicable law, in the event a Participant terminates his or her employment with the Company for any reason whatsoever, and within 18 months after the date thereof becomes associated with, employed by, renders services to, or owns any interest in (other than any non-substantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest as determined by the Committee, the Committee, in its sole discretion, may require such Participant to return to the Company the economic value of any Award which is realized or obtained (measured at the date of exercise) by such Participant at any time during the period beginning on that date which is six months prior to the date of such Participant’s termination of employment with the Company.

 

g. Securities Laws Restrictions. No Shares shall be issued under this Plan unless counsel for Worthington shall be satisfied that such issuance will be in compliance with applicable federal and state securities laws. All certificates for Shares delivered under this Plan pursuant to any Award shall be subject to such share transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

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h. Payment Requirements. Except as otherwise required in any applicable Award Agreement or by the terms of this Plan, recipients of Awards under this Plan shall not be required to make any payment or provide consideration other than the rendering of services.

 

i. Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount, or such higher withholding elected by the Participant provided that such higher withholding would not have a negative accounting impact for the Company, to satisfy federal, state, provincial, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. As soon as practicable after the date as of which the amount first becomes includible in the gross income of the Participant, the Participant shall pay to the Company, or make arrangements satisfactory to the Company or other entity identified by the Committee regarding the payment of any federal, state, provincial, or local taxes of any kind (including any employment taxes) required by law to be withheld with respect to such income. The obligations of the Company under this Plan shall be conditional on such payment or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant.

 

Unless the Participant has elected, with the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by paying the taxes in cash or transferring to the Company Shares owned by the Participant that would satisfy no less than minimum statutory total tax but no more than the maximum statutory total tax with respect to the Company’s withholding obligation, the Participant shall be deemed to have elected to have the Company withhold a number of Shares that would satisfy no less than the minimum statutory total tax and, in the Committee’s discretion, up to the maximum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made by the Participant in a manner approved by the Committee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

j. Other Arrangements. Nothing contained in this Plan shall prevent the Board or the Committee from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is otherwise required, and such arrangements may be either generally applicable or applicable only in specific cases.

 

k. Applicable Law. The validity, construction, and effect of this Plan and any rules and regulations relating to this Plan shall be determined in accordance with the laws of the State of Ohio and applicable Federal law.

 

l. Invalid Provisions. If any provision of this Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot

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be construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Plan, it shall be stricken and the remainder of this Plan shall remain in full force and effect.

 

m. Foreign Nationals. Awards may be granted to Employees who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those specified in this Plan as may, in the judgment of the Committee, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country.

 

n. No Right to Employment. Neither the adoption of this Plan nor the granting of any Award shall confer upon any employee of the Company any right to continued employment with the Company, nor shall it interfere in any way with the right of the Company to terminate the employment of any of its employees at any time, with or without cause.

 

o. Treatment as Compensation for Other Purposes. Payments and other benefits received by a Participant under an Award made pursuant to this Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of the termination indemnity or severance pay law of any country and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company unless expressly so provided by such other plan or arrangements, or except where the Committee expressly determines that an Award or portion of an Award should be included to accurately reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive annual cash compensation. Awards under this Plan may be made in combination with or in tandem with, or as alternatives to, grants, awards or payments under any other Company plans. This Plan notwithstanding, the Company may adopt such other compensation programs and additional compensation arrangements as it deems necessary to attract, retain and reward employees for their service with the Company.

 

p. Clawback. Any Award issued under this Plan will be subject to any clawback policy developed by the Board or the Committee, whether such Award was granted before or after the effective date of any such clawback policy.

 

14. Effective Date of this Plan. This Plan became effective on the Effective Date.

 

15. Definitions. As used in this Plan, the following terms shall have the meanings set forth below:

 

a. “Acquiring Person” shall mean any Person (any individual, firm, corporation or other entity) who or which, together with all Affiliates and Associates, has acquired

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or obtained the right to acquire the beneficial ownership of 25% or more of the Shares then outstanding.

 

b. “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act

 

c. “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share, Performance Unit, Other Stock Unit Award, Cash-Based Award or any other right, interest, or option relating to Shares granted pursuant to the provisions of this Plan.

 

d. “Award Agreement” shall mean any written agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder.

 

e. “Board” shall mean the Board of Directors of Worthington.

 

f. “Cash-Based Award” shall mean an Award, denominated in cash, granted to a Participant as described in Section 9(b).

 

g. A “Change in Control” shall have occurred when any Person (other than (i) the Company, (ii) any employee benefit plan of the Company or any trustee of or fiduciary with respect to any such plan when acting in such capacity, or (iii) any Person who, on the Effective Date of this Plan, was an Affiliate of the Company owning in excess of 10% of the outstanding shares of Worthington and the respective successors, executors, legal representatives, heirs and legal assigns of such Person), alone or together with its Affiliates and Associates, has acquired or obtained the right to acquire the beneficial ownership of 25% or more of the Shares then outstanding; provided, however, that with respect to any Award subject to Section 409A of the Code that is settled or distributed upon the occurrence of a Change in Control, no settlement or distribution of such Award shall be made unless the Change in Control also constitutes a “change in control event” within the meaning of Section 409A of the Code.

 

h. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

 

i. “Committee” shall mean the Compensation Committee of the Board, composed of no fewer than three directors, each of whom is a Non-Employee Director and an “outside director” within the meaning of Section 162(m) of the Code.

 

j. “Company” shall mean Worthington and its subsidiaries, direct and indirect. Subsidiaries of Worthington shall include (i) any entity of which Worthington owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock, if the entity is a corporation, or of the capital or profits interests, if the entity is a partnership or another form of entity and (ii) any other entity in which Worthington has a 20% or greater direct or indirect equity interest and which is

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designated as a “Subsidiary” by the Committee for purposes of this Plan; provided, however, that with respect to any Award that is subject to Section 409A of the Code, “Company” shall mean Worthington and its subsidiaries with whom Worthington would be considered a single employer under Sections 414(b) and (c) of the Code, but modified as permitted by Treasury Regulation §1.409A-1(b)(5)(iii)(E)(1).

 

k. “Effective Date” shall mean September 24, 2024.

 

l. “Employee” shall mean any common law employee of the Company. Unless otherwise determined by the Committee in its sole discretion, for purposes of this Plan, an Employee shall be considered to have terminated employment and to have ceased to be an Employee if his or her employer ceases to be a subsidiary of Worthington, even if he or she continues to be employed by such employer.

 

m. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

 

n. “Fair Market Value” means the value of one Share on any relevant date, determined under the following rules:

 

i. If the Shares are traded on an exchange or recognized market or quotation system on which “closing prices” are reported, the reported “closing price” on the relevant date, if it is a trading day, otherwise on the next trading day;

 

ii. If the Shares are traded over-the-counter with no reported closing price, the mean between the highest bid and the lowest asked prices on the relevant date, if it is a trading day, otherwise on the next trading day; or

 

iii. If neither subsections (i) or (ii) of this definition apply, the fair market value as determined by the Board in good faith and consistent with any applicable provisions under the Code, except with respect to Options and SARs, in which event the fair market value as determined by the reasonable application of a reasonable valuation method taking into account all information material to the value of the Company satisfying the requirements of Section 409A of the Code.

 

o. “Non-Employee Director” shall have the meaning set forth in Rule 16b-3(b)(3) promulgated by the Securities and Exchange Commission under the Exchange Act or any successor definition adopted by the Securities and Exchange Commission.

 

p. “Option” shall mean any right granted to a Participant under this Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.

 

q. “Other Stock Unit Award” shall mean any right granted to a Participant by the Committee pursuant to Section 9 hereof.

 

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r. “Participant” shall mean an Employee who is selected by the Committee to receive an Award under this Plan.

 

s. “Performance Award” shall mean any Award subject to performance criteria pursuant to Section 8 hereof.

 

t. “Performance Period” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goal(s) specified by the Committee with respect to such Performance Award are to be measured.

 

u. “Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, limited liability company, other entity or government or political subdivision thereof.

 

v. “Prior Plan” shall mean the Worthington Industries Inc. 1997 Long-Term Incentive Plan, as amended, and the Worthington Industries, Inc. Stock Option Plan, as amended.

 

w. “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge, or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

x. “Restricted Stock Award” shall mean an award of Restricted Stock under Section 7 hereof.

 

y. “Shares” shall mean the common shares, without par value, of Worthington and such other securities of Worthington as the Committee may from time to time determine.

 

z. “Stock Appreciation Right” shall mean any right granted to a Participant pursuant to Section 6 hereof to receive, upon exercise by the Participant, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant, or if granted in connection with an outstanding Option on the date of grant of the related Option, as specified by the Committee in its sole discretion, which, other than in the case of substitute Awards, shall not be less than the Fair Market Value of one Share on such date of grant of the right or the related Option, as the case may be. Any payment by the Company in respect of such right may be made in cash, Shares, other property, or any combination thereof, as the Committee, in its sole discretion, shall determine.

 

aa. “Treasury Regulations” means any regulations promulgated by the Department of Treasury and/or Internal Revenue Service under the Code.

 

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bb. “Worthington” shall mean Worthington Enterprises, Inc., an Ohio corporation.

 

16. Section 409A of the Code. This Plan is intended to comply with or be exempt from the requirements of Section 409A of the Code and the Treasury Regulations promulgated thereunder, as applicable, and shall be interpreted, administered and operated accordingly. Nothing in this Plan should be construed as a guarantee or entitlement of any particular tax treatment to a Participant. None of the Company, the Board, the Committee or any other Person shall any liability with respect to any Participant in the event this Plan fails to comply with the requirements of Section 409A of the Code.

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09 - 25 - 2024

Worthington Enterprises

FY2025 Q1 Earnings Call

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PAGES: 16

 

CORPORATE SPEAKERS:

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Marcus Rogier

Worthington Enterprises; Treasurer and Investor Relations Officer

Andy Rose

Worthington Enterprises; President and Chief Executive Officer

Joseph Hayek

Worthington Enterprises; Chief Financial and Operations Officer

 

 

PARTICIPANTS:

Kathryn Thompson

Thompson Research Group; Analyst

Susan Maklari

Goldman Sachs; Analyst

Brian McNamara

Canaccord Genuity; Analyst

Unidentified Participant

CJS Securities; Analyst

John Tumazos

John Tumazos Very Independent Research; Analyst

 

 

 

 

PRESENTATION:

Operator^ Good afternoon. And welcome to the Worthington Enterprises First Quarter Fiscal 2025 Earnings Conference Call. (Operator Instructions)

 

This conference is being recorded at the request of Worthington Enterprises. (Operator Instructions)

 

I'd now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer.

 

Mr. Rogier, you may begin.

 

Marcus Rogier^ Thank you, [Rob]. Good morning, everyone. And thank you for joining us for Worthington Enterprises’ first quarter fiscal 2025 earnings call.

 

On our call today, we have Andy Rose, Worthington's President and Chief Executive Officer; and Joe Hayek, Worthington's Chief Financial and Operations Officer.

 

Before we get started, I'd like to note that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act.

 

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These statements are subject to risks and uncertainties that could cause actual results to differ than those suggested.

 

We issued our earnings release yesterday after the market closed. Please refer to it for more detail on those factors that could cause actual results to differ materially.

 

In addition, our discussion today will include non-GAAP financial measures. A reconciliation of these measures to the most appropriate comparable GAAP measure is included in the earnings press release, which is available on our Investor Relations website.

 

Today's call is being recorded. And a replay will made available later on our Worthingtonenterprises.com website.

 

At this point, I will turn the call over to Andy for opening remarks.

 

Andy Rose^ Thank you, Marcus. And good morning.

 

I want to welcome you to Worthington Enterprises 2025 Fiscal First Quarter Earnings Call. Despite a tough environment of high interest rates and macroeconomic uncertainty, our team delivered another respectable quarter with adjusted EBITDA of $48 million and adjusted earnings per share of $0.50 versus $0.75 in the prior year.

 

The two big drivers of the decline are ClarkDietrich down $8 million and the heating and cooking business in Building Products, which we see clear evidence that it is at the bottom of its post-COVID destocking cycle. Despite these challenges, we have a positive long-term outlook as the balance of our businesses remained steady with some markets improving year-over-year. The integration of our acquisition of Hexagon Ragasco and the launch of our Sustainable Energy Solutions joint venture with Hexagon Composites have both gone well.

 

Overall, our strong balance sheet and market-leading products and brands have us well positioned to take advantage of positive long-term secular trends and a more favorable interest rate backdrop as rates fall.

 

Three notable events during the quarter are worth highlighting. Earlier this month, we broke ground on a modernization project at our Chilton, Wisconsin campus where we manufacture Bernzomatic and Mag-Torch hand torches and fuel cylinders. A new 58,000 square foot building and automated equipment will increase production efficiencies, building on our competitive advantage and helping ensure continued product quality and safety performance, while allowing for future expansion.

 

Second, Newsweek recognized Worthington Enterprises for two awards, America's Greatest Workplaces and the World's Most Trustworthy Companies. Worthington is one of 38 industrial products companies to earn the America's Greatest Workplaces distinction that recognizes compensation and benefits, training and career progression, work-life balance and company

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culture. And we were one of a thousand companies across 20 countries to earn recognition as the world's most trustworthy companies.

 

Once again, our people first performance-based culture is a true differentiator. Congratulations to our people who earn these honors every day with their hard work and dedication to our philosophy and the golden rule.

 

Finally, yesterday, we published our Annual Corporate Citizenship and Sustainability Report detailing the company's commitment, management approach and achievements focused on four categories: People first, process and planet, sustainable products and responsible governance.

 

We have taken significant strides in our first year as Worthington Enterprises to use sustainability as an enabler for success and are committed to achieving meaningful outcomes in collaboration with our customers, suppliers and communities.

 

Our culture guided by our philosophy in the golden rule and our focus on doing the right thing, make this effort a natural extension of who we already are as a company. The Worthington Business System of Transformation, Innovation and M&A will enable us to achieve accelerated growth in earnings.

 

Today, we are particularly focused on building a meaningful M&A pipeline and further enhancing our innovation capabilities, so we can bring more and better products to market faster and incorporate sustainable technologies that will deliver significant value to our customers and make us a more valuable partner.

 

We are working hard to reignite our growth as Worthington Enterprises, and Joe will now walk you through the numbers.

 

Joseph Hayek^ Thank you, Andy. And good morning, everyone.

 

In Q1, we reported GAAP earnings from continuing operations of $0.48 per share versus $0.54 in the prior year. There were a few unique items that impacted our quarterly results including the following.

 

The current quarter was negatively impacted by restructuring charges of $1 million or $0.02 per share. Results in the prior year quarter were negatively impacted by $0.21 a share due to several items, the largest being corporate costs that were eliminated at the time of separation, along with transaction costs related to the separation of our steel processing business, and a onetime charge related to the early extinguishment of our 2026 public bonds.

 

Excluding these items, we generated adjusted earnings from continuing operations of $0.50 per share in the current quarter compared to $0.75 per share in Q1 last year.

 

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In addition, our Q1 results were negatively impacted by $2 million or $0.03 a share related to purchase accounting adjustments and costs associated with our acquisition of Hexagon Ragasco.

 

Consolidated net sales in the quarter of $257 million decreased 17.5% from $312 million in the prior year. The decrease was driven by the deconsolidation of our former Sustainable Energy Solutions segment, which contributed $29 million in sales in the prior year quarter combined with loan volumes and an unfavorable mix in Building Products. Excluding the impact of the SES deconsolidation, sales were down 9%.

 

Our gross profit for the quarter decreased to $62 million compared to $70 million in the prior year quarter, driven by lower sales, while gross margin actually increased approximately 200 basis points to 24.3% in the current quarter.

 

Adjusted EBITDA in Q1 was $48 million, down from $66 million in Q1 of last year. Trailing 12-month adjusted EBITDA is now $234 million, and our trailing 12 months adjusted EBITDA margin is 19.6%.

 

With respect to cash flows and our balance sheet, cash flow from operations was $41 million in the quarter and free cash flow was $32 million. During the quarter, we invested $10 million of capital projects, which included $5 million related to our previously mentioned facility modernization projects.

 

We spent $89 million to close the Hexagon Ragasco acquisition on June 3, we paid $8 million in dividends and spent $7 million to repurchase 150,000 shares of our common stock.

 

We also received $12 million of proceeds associated with selling 51% of the former SES segment as part of the formation of our JV with Hexagon, and we received $39 million in dividends from our unconsolidated JVs during the quarter, which represents a 110% cash conversion rate on that equity income.

 

Looking at our balance sheet and liquidity position, we ended the quarter with $300 million of long-term funded debt carrying an average interest rate of 3.6% and $179 million of cash, yielding around 5%. Continue to operate with extremely low leverage, ending the quarter with a net debt to trailing EBITDA leverage ratio of approximately 0.5 turn, we're well positioned with ample liquidity including a $500 million undrawn bank credit facility.

 

Yesterday, the Worthington Enterprises Board declared a dividend of $0.17 per share for the quarter, which is payable in December of 2024.

 

We'll now spend a few minutes on each of the businesses.

 

In Consumer Products, net sales in Q1 of $118 million were essentially flat from a year ago, with volumes up slightly compared to the prior year. Adjusted EBITDA for the Consumer business

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was $18 million and adjusted EBITDA margin was 15.1% in Q1 compared to $14 million and 12.2% in Q1 of last year.

 

Our consumer team has continued to face headwinds caused by general economic uncertainty impacting consumer spending across multiple product categories, along with the decrease in existing and new home sales, which continues to depress repair/remodel activity, that impacts our tools businesses. Despite concerns about the economy, we are encouraged by the year-over-year improvement in adjusted EBITDA as well as sequential improvements in volume and EBITDA margin, which was up 3.3% and 150 basis points, respectively, from Q4.

 

We believe current volumes are reflective of a point-of-sale activities and there is no material destocking.

 

Consumer business is well positioned for growth as market conditions improve as we continue to partner with our retail customers and deliver market-leading products that are essential to outdoor living activities, celebrations and home improvement projects.

 

Building Products generated net sales of $140 million in Q1, down 16% from $166 million a year ago. The decrease was driven by lower volumes, particularly in the heating and cooking space and a less favorable product mix.

 

It was a challenging quarter for Building Products as the business generated adjusted EBITDA of $40 million and adjusted EBITDA margin was 28.4% compared to $60 million and 36% in Q1 of last year.

 

The year-over-year decrease in adjusted EBITDA was largely driven by lower volumes and mix in the heating and cooking business combined with lower equity earnings at ClarkDietrich. We believe that destocking in the large heating tank business has largely run its course, which should help the mix in the heating business going into their seasonally stronger winter quarters.

 

ClarkDietrich contributed $9 million in the quarter compared to a very strong $17 million in the prior year. The ClarkDietrich team has done a great job navigating a choppy demand environment and margin compression caused by the sustained decline in steel prices but we are starting to see some indications that contractors' backlogs are improving.

 

WAVE continued to deliver strong results with lower volumes in commercial being offset by relative strength in multiple other end markets.

 

WAVE contributed equity earnings of $28 million in the current quarter, down slightly from record equity earnings in the prior year.

 

Initially, at the start of the quarter, we completed the acquisition of Hexagon Ragasco, which contributed Q1 sales of $16 million and adjusted EBITDA of $2 million, which included $1.5 million of purchase accounting and deal cost adjustments that we do not expect to repeat in

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future quarters. We're very happy to have Hexagon Ragasco team as part of the Worthington team.

 

Despite some continuing headwinds, the Building Products team continues to build on its excellent reputation with customers, delivering value-added solutions and innovation across multiple value streams .

 

At this point, we're happy to take any questions people might have.

 

Operator^ (Operator Instructions) Your first question comes from the line of Kathryn Thompson from Thompson Research Group.

 

Kathryn Thompson^ Focus on getting more color on the ClarkDietrich relative weakness in the quarter. How much is due to more timing versus cancellation of projects? And is there any -- just any additional color if there are regions or end markets that have been more sluggish versus others?

 

Andy Rose^ Yes. Kathryn, this is Andy. I think overall, their market is holding up pretty well. I mean it has been a little bit choppy, as Joe mentioned. But generally speaking, the other thing that goes on in that space is when steel prices decline, you have an issue with contractors sort of holding off for lower prices. And the business has to actually wait for sort of steel prices to catch up. So there's a little bit of that margin compression going on right now.

 

Joseph Hayek^ Yes. That's [a miss], it is a function of steel prices. ClarkDietrich being a big national company oftentimes buys ahead, right? And so in a market like we've been in the last year or so, with prices declining pretty steadily, smaller regional competitors that are buying spot can ultimately buy better two months after ClarkDietrich buys. And so you do see margin compression there.

 

But yes, Andy is right on. I think the demand market isn't great, but it's relatively steady. And you see steel prices stabilize or actually rise and that dynamic either abates or actually reverses itself.

 

Andy Rose^ And Kathryn, your firm actually put out a note [to me] that talked about the commercial outlook. And I think it was rather positive saying that there's a number of large mega projects and government stimulus and some other areas, data centers where the short to medium term, maybe even longer-term two- to three-year outlook is quite positive. And because ClarkDietrich is a national player, the largest player in the metal framing space, they will stand to benefit very well from that trend.

 

Kathryn Thompson^ Yes. And that was kind of a tag on to the follow-up. Given the steel pricing is kind of two part with that, at least to what's going with inventory in the field. So is it -- what insight do you have in terms of inventories right now because there may need to be a little bit of catch-up. But then also, how does ClarkDietrich win with these mega projects.

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Andy Rose^ Well maybe I'll take the second question first, and then we can talk about inventories. But the way that ClarkDietrich wins is with the breadth of their product line, they're a national player and their ability to do things that a number of their competitors can't.

 

And just as one example, they can deliver full truckloads of steel to a job site in 24 hours. So capabilities that they have, especially on these very large projects, they are very well positioned to win and not only win the project, but also potentially even garner a little bit of a premium because of what they can do.

 

And then inventory, I don't have a ton of insight in terms of what the inventory levels that their customers are off the top of my head. I don't know Joe, if you do.

 

Joseph Hayek^ It's actually typically relatively low because so much of what they're doing is specific to a job that their distributor customers often aren't holding a lot of inventory. And it plays to, as Andy mentioned, some of the strengths, which is being able to get things where they need to go ClarkDietrich has, right, some level of inventory, but we're not overly concerned that it's gotten too heavy.

 

Operator^ Our next question comes from the line of Susan Maklari from Goldman Sachs.

 

Susan Maklari^ My first question is just talking more broadly about the health of the consumer. You mentioned that the volumes came in a little lighter relative to perhaps some expectations. Can you just talk across the business and especially in the consumer segment, what your’re hearing from your retail partners? And how you would characterize the state of demand in the consumer as we head into the fall and the winter?

 

Andy Rose^ Yes. I think we saw some improvement in the Consumer Products business this quarter. And when you talk about the consumer, you have to kind of segment a little bit between our products. We have sort of three categories: outdoor living, celebrations and tools. Tools is probably the one where it's the weakest, I would say, right now because of the well-known and well publicized repair and remodel recession.

 

But outside of that, I think the rest of our businesses are essentially selling at POS levels. So whatever our business level is sort of matches what's happening at POS. And it's obviously down from the COVID levels where we saw a significant increase but it's back to more normalized levels.

 

So I think for the most part, we're not seeing a ton of impact there. But I don't know Joe, if you have anything different?

 

Joseph Hayek^ Yes. No. I think that's right. When we -- you hear consumer confidence and you think about that, that's definitely real, a 50 basis point decline in interest rates. That's, I think, a

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step in the right direction. And so as interest rates decline, worst case, that's neutral for our consumer business, more likely case, it ultimately starts to influence people's mobility, right?

 

People do repair and remodel projects most frequently when they're getting ready to sell their house or when they first move into their house. And so lower interest rates will be a good guy.

 

I think for a lot of reasons, and certainly we’ll benefit there. But the rest, ultimately, I think, as Andy said, is really around we're operating kind of at levels that are lower than we were two or three years ago. But we've also kind of taken the opportunity to really work on some cost controls, which is why you see some of the margin expansion that we had in Q1 on essentially flat volumes.

 

Susan Maklari^ Okay. That's helpful color. And then can you also talk a bit about the price cost dynamics across both the consumer segment and the Building Products segment as the steel prices have come down any thoughts on how that's trending and where that could go over the next couple of quarters?

 

Andy Rose^ Yes. I mean steel prices, obviously as you well know are very difficult to predict. And as a result, the way that we run a good portion of our business is that we try and fix prices for an extended period of time, so call it 9 to 12 months out so that we don't have that uncertainty. Year-over-year, prices have come down. And so you see some of that benefit flowing through our numbers.

 

Right now steel prices, I think, are relatively flat, but things can change very quickly. Obviously, we got an election cycle coming up, and there's a lot of press around the large acquisition in the steel space with Nippon Steel, trying to buy U.S. steel. So things can change quickly.

 

But I will tell you, we have a partnership with our former steel processing business, and we believe they're the best in the world at securing steel. And so I think we're -- we'll do well in any environment.

 

Susan Maklari^ Okay. And then can I sneak one more in, which is the WAVE JV was a really nice bright spot in the quarter. Can you just talk about what the dynamics you're seeing there? And how you're thinking about the performance as we go into your -- or the calendar year-end?

 

Joseph Hayek^ Yes. WAVE, you're right, had another terrific quarter. I mean volumes flat to slightly down. I mean the commercial obviously is still soft and that’s kind of across the board, but relative strength in several other end markets that the data center space is a small but growing part of WAVE’s portfolio there, acquisition of DCR was small, but gets them a toehold into the data center space and to the containment space, they will ultimately be able to get DCR more looks at opportunities and the same will be true because of the revenue and projects that DCR is on WAVE will get more looks there.

 

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But health care and education, some of those infrastructure projects continue to bode really well for WAVE. Their mix of pretty significantly weighted on repair and remodel versus new has also boded well for them, and they continue to really drive home their value proposition around having great products and having the availability but saving contractors' money on labor, right? As labor costs have continued to rise and labor has gotten more scarce. The fact that these contractors can use WAVE’s products and ultimately have that be less labor intensive is proving to be a real winning value proposition for them.

 

Operator^ Your next question comes from the line of Brian McNamara from Canaccord Genuity.

 

Brian McNamara^ So I'm curious, I mean obviously numbers came in well below, I guess, our expectations. What was the biggest surprise or delta in the quarter relative to your expectations like 90 days ago?

 

Andy Rose^ Yes. I'm not sure it's necessarily a huge surprise, Brian, but we've been expecting ClarkDietrich’s margin to come down. And so we obviously saw that was probably the biggest driver of the decline year-over-year. And second was our heating business in Building Products. And I think that one maybe just surprised us a little bit in terms of the -- they've been in a destocking period for a while, and it's just lasted a little bit longer than we expected, although I think you heard me and Joe both mentioned, we feel like we're kind of through that now. And so we're seeing evidence that, that market is definitely picking up. And so hopefully, we're through it and on the greener pastures.

 

Joseph Hayek^ Yes. And I think, Brian, there's the very large heating tanks and then there are like the gas grill tanks. And in the quarter, there are a handful of things going on in that market including a company that had a few hundred thousand cylinders that kind of came into the market and ultimately, was, I think, priced pretty aggressively. And so that revenues there for us were down, which ultimately colored Building Products’ thatwholly owned businesses performance. And so that's something that we didn't see six months ago but ultimately impacted the quarter.

 

Andy Rose^ Yes. That's the 20-pound gas fuel cylinder thing.

 

Brian McNamara^ Got it. And I guess the evidence you're seeing that gives you confidence that we're at the bottom of this kind of post-pandemic heating and cooking market is kind of that sell-in kind of matching the sell-through kind of thing with your customers?

 

Andy Rose^ Yes. And they're also moving into their seasonally strong period, right? The temperatures have been very warm, which impacts their business as well but we're moving into the colder weather slowly, but surely, it seems like, but we're getting there. And so that, in conjunction with just destocking at our distributor customers, that's largely complete.

 

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Brian McNamara^ Great. And then finally, I mean have you seen any kind of mood change with your customers in Building Products? I think 90 days ago, maybe a 50 bp rate cut was kind of out of the expectation since the Fed announcement last week? Any kind of mood change or more willingness to invest kind of thing?

 

Joseph Hayek^ I think I mean the answer is yes, but, and I think it's -- this makes us feel better and we've entered a new part of the interest rate cycle. But I think they anticipate more cuts that might come, whether it's 25 or 50 more basis points this year and whatever it is.

 

But it certainly seems and feels like to our customers and to us that a year from now you're going to be looking at interest rates that are lower than where we are today. And for a lot of our Building Products customers, sometimes what they're buying from us is, in fact, the CapEx. And so lower interest rates is going to help there quite a bit.

 

I don't think that 50 basis points flip the switch and now everybody's going to catch back up. But people have definitely appreciated the fact that capital will be very likely less expensive going forward than it was in the rearview.

 

Operator^ (Operator Instructions) Your next question comes from the line of Dan Moore from CJS Securities.

 

Unidentified Participant^ This is Will on for Dan. A lot of questions have been answered. So I just thought I would ask your balance sheet remains arguably undercapitalized relative to your cash generation even after the Hexagon acquisition, what are your priorities for capital development? And is M&A still your primary focus, would you consider returning cash to shareholders? Or would you prefer to continue to build liquidity for larger potential deals down the line?

 

Andy Rose^ Yes. I think you've kind of answered the question for us a little bit. Our top priority right now is building the M&A pipeline, and we've done a very good job of doing that. The question now is just finding the right companies at the right price that are a good fit for our strategy.

 

Would we consider pivoting in terms of capital allocation to share buyback? The answer is yes. I mean right now obviously we've got a very aggressive growth strategy, and we're trying to execute on that and M&A is the top priority. But if there were an opportunity, we would consider it.

 

We bought back some stock during the quarter, mostly to offset dilution, and we'll probably continue to do that. But in terms of a massive share buyback, I think that would be an opportunistic situation.

 

Operator^ And your next question comes from the line of John Tumazos from John Tumazos Very Independent Research.

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John Tumazos^ In terms of your Building Products, what fraction of it would you say is tied to housing as opposed to commercial construction?

 

Joseph Hayek^ So a little bit of a mix, John. The wholly owned businesses are probably relatively close to 50-50, though with a bias towards maintenance, repair, remodel versus new, the JVs are almost no residential.

 

John Tumazos^ In terms of your consumer strategy it would appear since the pandemic staples cost more globally, food, et cetera, my insurance premiums, they try to raise them 50% a year, cut back coverage, things like that.

 

I spent a month in Europe every summer. And where I go in Greece, the fishermen catch 3 kilo,three men on a boat and they sell it for EUR 20, EUR 30 a kilo, so they make EUR 20 or EUR 30 a night. And it's hard work lifting the nets.

 

It would seem like there's a strong argument that the consumer is strapped around the world and maybe with global warming, agriculture is tougher and tougher and food stays expensive. So why pay large multiples to acquire consumer businesses, you paid [$88 million or $89 million] for Hexagon and there's $71 million in new goodwill and intangibles. And why not sell one or two underperformers or flat performers and buy back a little stock?

 

Joseph Hayek^ So Hexagon Ragasco, right, is part of our Building Products group, but your point is well taken. But that is a -- it's not a consumer nondurable. It's not an appliance nor is it a trip overseas or to a nice hotel. And so we feel like our products, one, relatively speaking, aren't very expensive. If you find them at Home Depot or Lowe's or Walmart.

 

Two, oftentimes, when people are, in fact, strapped , they might shy away from using some of our products or buying some of our products, but oftentimes, they'll also trade down from taking that trip to a hotel or to somewhere else on an airplane and go camping and they might actually spend more time at home, cooking out and doing things like that.

 

So we like the way that our products are positioned relative to softness in economy. I mean we've talked about COVID, people bought a lot of stuff. And then since then, they've done a lot of experiences, right? And I think you're starting to see that moderate some.

 

But John, rest assured, we're constantly thinking about what makes the most sense for us from a capital allocation perspective. And if we can't find the right types of deals that are high margin, low asset intensity with a good competitive advantage, then we'll absolutely look to think about capital allocation differently.

 

But I think for now we feel like despite some of the headwinds that we've got in our businesses that we're happy with our portfolio.

 

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John Tumazos^ I can ask one more. The old Worthington Industries would buy back stock in 0.5 million or 1 million share chunks. I know we're smaller with the demerger. But was there a reason why you just put your toe in the water for 150,000 shares. Did the program start the last week of the quarter or something like that?

 

Andy Rose^ Yes. I mean historically, we believed we were very much undervalued, John, and that's why we went through the separation of the steel business. And I think that that proved out. We used to trade it.

 

John Tumazos^ Congratulations, well done.

 

Andy Rose^ So now we're trading between 10x and12x EBITDA, which we think is an appropriate multiple for the return on capital and the margin profile that we have today.

 

As I mentioned earlier, our focus right now is building the business into kind of a world-class Consumer and Building Products company. And gaining some scale through M&A. That being said, we may be opportunistic on the share repurchase front. But right now all we're doing is offsetting dilution.

 

Joseph Hayek^ Which John is (multiple speakers)inaudible.

 

Operator^ And that concludes our question and answer session, I will now turn the call back over to Andy Rose for some final closing remarks.

 

Andy Rose^ Yes, thanks, everyone. I just want to finish by saying we’re proud of our people and the effort that they put forth everyday and we look forward to showcasing our ability to achieve world class growth in the coming years. Thanks.

 

Joseph Hayek^ Thanks, everybody.

 

Operator^ This concludes today's conference call. Thank you for your participation. You may now disconnect.

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v3.24.3

Document And Entity Information	Sep. 24, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Sep. 24, 2024
Entity Registrant Name	WORTHINGTON ENTERPRISES, INC.
Entity Central Index Key	0000108516
Entity Emerging Growth Company	false
Entity File Number	001-08399
Entity Incorporation, State or Country Code	OH
Entity Tax Identification Number	31-1189815
Entity Address, Address Line One	200 West Old Wilson Bridge Road
Entity Address, City or Town	Columbus
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43085
City Area Code	(614)
Local Phone Number	438-3210
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Shares, Without Par Value
Trading Symbol	WOR
Security Exchange Name	NYSE

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