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): December 20, 2023
WORTHINGTON ENTERPRISES, INC.
(Exact name of Registrant as Specified in Its Charter)
Ohio | 001-08399 | 31-1189815 |
(State or Other Jurisdiction | (Commission File Number) | (IRS Employer |
of Incorporation) | 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:
- Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
- Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
- Pre-commencementcommunications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
- Pre-commencementcommunications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Trading | ||||
Title of each class | 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. ☐
Item 2.02. Results of Operations and Financial Condition.
Worthington Enterprises, Inc. (the "Registrant") conducted a conference call on December 20, 2023, beginning at approximately 9:00 a.m., Eastern Time, to discuss the Registrant's unaudited financial results for the second quarter of fiscal 2024 ended November 30, 2023. Additionally, the Registrant addressed certain issues related to the outlook for the Registrant and its subsidiaries and their respective markets for the coming months. 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 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") and adjusted EBITDA, each on a consolidated basis, for the Registrant's trailing twelve months ("TTM") ended November 30, 2023 and August 31, 2023. EBITDA and adjusted EBITDA are non-GAAP financial measures and are used by management as measures of operating performance. EBITDA is calculated by adding or subtracting, as appropriate, interest expense, net, income tax expense and depreciation and amortization to/from net earnings attributable to controlling interest. Adjusted EBITDA is calculated by adding or subtracting, as appropriate, to/from EBITDA certain items that the Registrant believes are not necessarily indicative of the Registrant's operating performance, such those listed in the Non-GAAP Footnotes section below. The table below provides a reconciliation from net earnings attributable to controlling interest (the most comparable GAAP financial measure) to the non-GAAP financial measures, EBITDA and adjusted EBITDA, for the TTM ended November 30, 2023 and August 31, 2023.
Additionally, adjusted EBITDA for the TTM ended November 30, 2023 and August 31, 2023 is adjusted further to reflect the results of the Registrant, on a pro forma basis, to illustrate the estimated effects of the separation of Worthington Steel, Inc. from the combined company prior to December 1, 2023 ("the Separation"). This non-GAAP financial information, which the Registrant refers to as pro forma adjusted EBITDA, assumes the Separation occurred on June 1, 2022, the first day of the Registrant's fiscal 2023. Beginning in the third quarter of fiscal 2024, historical results will be restated to reflect the operations of Worthington Steel as a discontinued operation in periods prior the December 1, 2023 Separation. For further information on this pro forma presentation, refer to the Use of Non-GAAP Measures and Definitions schedules included in Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed on December 19, 2023.
TTM | TTM | ||||||
November 30, | August 31, | ||||||
(In thousands) | 2023 | 2023 | |||||
Net earnings attributable to controlling interest (1) | $ | 296,638 | $ | 288,552 | |||
Interest expense, net | 15,801 | 21,244 | |||||
Income tax expense | 88,544 | 85,477 | |||||
Depreciation and amortization | 112,777 | 113,124 | |||||
EBITDA | 513,760 | 508,397 | |||||
Incremental expense related to (true-up of) Level5 earnout accrual (2) | (1,050 ) | (525 ) | |||||
Impairment of long-lived assets (1)(3) | 3,168 | 3,168 | |||||
Restructuring and other expense (income), net (1)(4) | 816 | (1,621 ) | |||||
Separation costs (5) | 42,789 | 30,083 | |||||
Loss on extinguishment of debt (6) | 1,534 | 1,534 | |||||
Loss on sale of investment in ArtiFlex (7) | 300 | 300 | |||||
Gain on sale of assets in equity income (9) | (2,780 ) | - | |||||
Sale-leaseback gain in equity income (8) | (2,063 ) | (2,063 ) | |||||
Adjusted EBITDA | $ | 556,474 | $ | 539,273 | |||
Pro forma information (giving effect to the Separation) | |||||||
Adjusted EBITDA | $ | 556,474 | $ | 539,273 | |||
Removal of Worthington Steel, Inc. | (253,163 ) | (230,452 ) | |||||
Shared overhead reallocation (10) | (31,733 ) | (30,266 ) | |||||
Operational adjustments (11) | (3,368 ) | (3,468 ) | |||||
Stock-based compensation (12) | 12,092 | 11,684 | |||||
Pro forma adjusted EBITDA | $ | 280,302 | $ | 286,771 | |||
Consolidated net sales | $ | 4,612,360 | 4,700,983 | ||||
Removal of Worthington Steel, Inc. | (3,287,063 ) | (3,340,355 ) | |||||
Pro forma net sales | $ | 1,325,297 | $ | 1,360,628 | |||
Pro forma adjusted EBITDA margin | 21 % | 21 % |
Non-GAAP Footnotes:
- Excludes the impact of noncontrolling interests.
- Reflects the compensation expense, and related true-ups, accrued in connection with the first annual payout under the Level5 earnout agreement.
- Impairment of long-lived assets are excluded because they do not occur in the ordinary course of the Registrant's ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical and current financial results.
- Restructuring activities consist of established programs that are not part of the Registrant's 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).
- Reflects direct and incremental costs incurred in connection with the anticipated separation of the Registrant's Steel Processing business, including audit, legal, and other fees paid to third-party advisors as well as direct and incremental costs associated with the separation of shared corporate functions.
- Reflects the loss realized in connection with the July 28, 2023, early redemption of the 2026 Notes. The loss resulted primarily from unamortized issuance costs and discount included in the carrying amount of the 2026 Notes and the acceleration of the remaining unamortized loss in equity related to a treasury lock derivative instrument executed in connection with the issuance of the 2026 Notes.
- Reflects the loss realized in connection with the August 3, 2022 sale of the Registrant's 50% noncontrolling equity investment in ArtiFlex.
- Reflects our share of the gain realized by our engineered cabs joint venture, Taxi Workhorse, in connection with the sale of joint venture operations in Brazil, which totaled $2,780 on a pre-tax basis.
- During the three months ended May 31, 2023, Workhorse recognized a pre-tax gain of $10,315 related to a sale-leaseback transaction. The Registrant's portion of this gain, which is recorded in equity income, was $2,063.
Pro Forma Footnotes:
- Reflects the excess of the Registrant's estimated post-separation corporate expenses over the amounts historically absorbed by our segments, including the re-allocation of costs historically attributed to Steel Processing that will continue post-separation as well as incremental corporate expenses resulting from lost economies of scale. Pro forma amounts within Corporate & Other reflect certain general overhead expenses that will not be allocated to the Registrant's segments post-separation but are included in the Registrant's historical segment reporting.
- Includes the estimated incremental material cost associated with intercompany purchases from Steel Processing post-separation that will be subject to arms-length commercial pricing arrangements specified in the Steel Supply Agreement between us and Worthington Steel entered into
in connection with the separation, net of anticipated costs to be recovered by us post-separation under the Transition Services Agreement between the Registrant and Worthington Steel entered into in connection with the Separation.
- For purposes of this pro forma presentation, adjusted EBITDA excludes stock-based compensation. Post-separation, management intends to change the profitability measure it uses to assess segment performance from adjusted EBIT to adjusted EBITDA. In connection with the change, management revised its definition of adjusted EBITDA to exclude non-cashstock-based compensation, in addition to the other excluded items as historically defined and measured by management.
In the conference call, the Registrant referred to free cash flow for the three months ended November 30, 2023. 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-month period ended November 30, 2023.
Second | ||||
Quarter | ||||
(In thousands) | 2024 | |||
Net cash provided by operating activities | $ | 134,990 | ||
Investment in property, plant and equipment | (32,876 ) | |||
Free cash flow | $ | 102,114 | ||
In the conference call, the Registrant referred to the ratio of net debt to TTM adjusted EBITDA, which is a non-GAAP financial measure that is used by the Registrant as a measure of leverage. Net debt to adjusted EBITDA 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 adjusted EBITDA. The calculation of net debt to adjusted EBITDA for the twelve months ended November 30, 2023, along with a reconciliation of net cash provided by operating activities (the most comparable GAAP financial measure) to adjusted EBITDA for the same period, as mentioned in the conference call, is outlined below.
Second | First | Fourth | Third | |||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||
(In thousands) | 2024 | 2024 | 2023 | 2023 | ||||||||||
Net cash provided by operating activities: | $ | 134,990 | $ | 59,696 | $ | 229,234 | $ | 182,152 | ||||||
Adjustments: | ||||||||||||||
Changes in assets and liabilities, net of impact of acquisitions | (74,895 ) | 79,860 | (60,582 ) | (78,197 ) | ||||||||||
Interest expense, net | 2,169 | 3,083 | 4,514 | 6,035 | ||||||||||
Income tax expense | 7,198 | 28,777 | 40,514 | 12,055 | ||||||||||
Impairment of long-lived assets | - | (1,401 ) | (1,800 ) | (484 ) | ||||||||||
Benefit from (provision for) deferred income taxes | (1,968 ) | 5,453 | (4,670 ) | 5,525 | ||||||||||
Loss on extinguishment of debt | - | (1,534 ) | - | - | ||||||||||
Bad debt (expense) benefit | (345 ) | 799 | 1,678 | (2,346 ) | ||||||||||
Equity in net income of unconsolidated affiliates, net of | ||||||||||||||
distributions | 4,129 | (10,225 ) | 4,545 | (23,218 ) | ||||||||||
Net gain (loss) on sale of assets | 439 | (105 ) | (530 ) | (46 ) | ||||||||||
Stock-based compensation | (6,175 ) | (4,516 ) | (5,420 ) | (4,975 ) | ||||||||||
Less: noncontrolling interest | (3,865 ) | (3,596 ) | (4,260 ) | (3,933 ) | ||||||||||
EBITDA (1) | $ | 61,677 | $ | 156,291 | $ | 203,223 | $ | 92,568 | ||||||
Adjustments: | ||||||||||||||
Incremental expense related to (true-up of) Level5 earnout | - | - | - | (1,050 ) | ||||||||||
Impairment of long-lived assets (1) | - | 884 | 1,800 | 484 | ||||||||||
Restructuring and other expense (income), net (1) | 6 | - | (13 ) | 824 | ||||||||||
Separation costs | 21,952 | 6,035 | 8,455 | 6,347 | ||||||||||
Loss on extinguishment of debt | 1,534 | - | - | |||||||||||
Loss on sale of investment in ArtiFlex | - | - | - | 300 | ||||||||||
Gain on sale of assets in equity income | (2,780 ) | - | - | - | ||||||||||
Sale-leaseback gain in equity income | - | - | (2,063 ) | - | ||||||||||
Adjusted EBITDA (1) | $ | 80,855 | $ | 164,744 | $ | 211,402 | $ | 99,473 | ||||||
TTM adjusted EBITDA (1) | $ | 556,474 | ||||||||||||
(1) Excludes the impact of noncontrolling interests. | ||||||||||||||
November 30, | ||||
(In thousands) | 2023 | |||
Short-term borrowings | $ | 175,000 | ||
Current maturities of long-term debt | 150,269 | |||
Long-term debt | 298,549 | |||
Total debt | $ | 623,818 | ||
Less: cash and cash equivalents | (430,906 ) | |||
Net debt | $ | 192,912 | ||
TTM adjusted EBITDA | $ | 556,474 | ||
Net debt to TTM adjusted EBITDA | 0.35 |
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 December 19, 2023. Such Exhibit 99.1 includes a copy of the Registrant's news release issued on December 19, 2023 (the "Financial News Release") reporting results for the three-month period ended November 30, 2023 (the Registrant's fiscal 2024 second quarter). 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 9.01 | Financial Statements and Exhibits. |
- Exhibits: The following exhibits are included with this Form 8-K: Exhibit No. Description
99.1Transcript of Worthington Industries, Inc. Earnings Conference Call for Second Quarter of Fiscal 2024 (Fiscal Quarter ended November 30, 2023), held on December 20, 2023
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: | December 22, 2023 | By: /s/Patrick J. Kennedy | |
Patrick J. Kennedy, Vice President - | |||
General Counsel and Secretary | |||
TRANSCRIPT
12 - 20 - 2023
Worthington Enterprises, Inc.
Second Quarter 2024 Earnings
TOTAL PAGES: 13
Worthington Enterprises, Inc.
Second Quarter 2024 Earnings
CORPORATE SPEAKERS:
Marcus Rogier
Worthington Enterprises; Investor Relations
Andy Rose
Worthington Enterprises; President, Chief Executive Officer
Joe Hayek
Worthington Enterprises; Chief Financial and Operations Officer
PARTICIPANTS:
Phil Gibbs
KeyBanc Capital Markets; Analyst
Daniel Moore
CJS Securities; Analyst
John Tumazos
John Tumazos Very Independent Research; Principal
PRESENTATION:
Operator^ Good afternoon. And welcome to the Worthington Enterprises Second Quarter Fiscal 2024 Earnings Conference Call. (Operator Instructions)
This conference is being recorded at the request of Worthington Enterprises. If anyone objects, you may disconnect at this time.
I'd now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer.
Mr. Rogier, you may begin.
Marcus Rogier^ Thank you, JL. Good morning, everyone. And welcome to Worthington Enterprises second quarter fiscal 2024 earnings call.
Results for our second quarter reflect the performance of the pre-separation consolidated Worthington Industries, including the Worthington Steel business, which became a stand-alone publicly traded company on December 1.
Given the recent separation, today's prepared remarks will primarily focus on the consolidated results as well as the performance of the remaining business segments within Worthington Enterprises, including building products, consumer products and sustainable energy solutions.
Worthington Enterprises, Inc.
Second Quarter 2024 Earnings
Worthington Steel will be hosting their second quarter earnings call separately on Friday morning of this week at 8:30 a.m.
So we'd please ask that you hold any questions about the steel processing business until then.
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.
These statements are subject to risks and uncertainties that could cause actual results to differ from those suggested.
We issued our earnings release yesterday after the market close.
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 with the most appropriate comparable GAAP measure is included in the earnings press release, which is available on our Investor Relations website.
Lastly, today's call is being recorded, and a replay will be made available later on our website.
At this point, I will turn the call over to Andy for opening remarks.
Andy Rose^ Thank you, Marcus. And good morning, everyone.
What a year it has been. I want to start the call by thanking our employees who have gone above and beyond to make this separation successful. Our people have stayed positive in the face of change and worked tirelessly to set both companies up for success. I am confident that the work done by our teams to create Worthington Steel and Worthington Enterprises was best-in-class.
I also want to thank our customers for continuing to have confidence in Worthington Steel and Worthington Enterprises throughout this process. Both businesses performed well over the past 15 months, and I know these two companies are better positioned for success today as two separate entities than when we began this journey back in 2022.
And finally, I'd like to thank our Board of Directors for having confidence in our leadership team to not only make the decision to separate the companies, but to dig in and help navigate the journey. This was truly a team effort across many constituencies.
Worthington Enterprises, Inc.
Second Quarter 2024 Earnings
December 1st marks the end of Worthington Industries, but it really represents a new beginning. We've taken one great company and created two great companies, both of which are well capitalized market-leading businesses poised for growth and value creation. We will maintain the best of what has made us great over 68 years, our philosophy, written down over 50 years ago by our founder, will continue to shape our culture, decision-making and performance. The philosophy is based on the golden rule. We treat our customers, employees, investors and suppliers as we would like to be treated.
The philosophy's first corporate goal for Worthington is to earn money for our shareholders and increase the value of their investment. This is underpinned by our performance-based culture. And above all, our belief in our most important asset, our people.
We are excited about our future in Worthington Enterprises and wish our friends at Worthington Steel best of luck in their future endeavors. Joe, you want to take us through the numbers?
Joe Hayek^ Sure. Thank you, Andy. And good morning, everybody. This is a unique quarter for us. And as Marcus mentioned, we'll be reporting the earnings of Worthington Industries as a consolidated entity. I'll go over those results then focus a bit more on the business units that now make up Worthington Enterprises, and we would ask that any questions related to Worthington Steel will be held for that team who have their earnings call scheduled for Friday morning.
In Q2, we reported consolidated earnings of $0.49 a share versus $0.33 per share in the prior year quarter. There were a few unique items that impacted our quarterly results, including the following. We incurred pretax expense of $22 million or $0.33 per share related to the separation of our steel processing business into a new public company, which was completed on December 1. This compares to separation expenses of $0.14 a share incurred in the prior year quarter. We may have some minor expenses related to the separation in Q3, and we believe that the majority of those expenses are behind us.
We recognized a pretax gain of $3 million or $0.04 a share related to the divestiture of the Brazilian business of our Cabs joint venture. In the prior year, the quarter benefited by $0.03 per share, primarily due to a gain on the divestiture of our WSP joint venture, which was partially offset by expenses related to an earnout at Level 5.
Excluding these items, we generated earnings of $0.78 per share in the current quarter compared to $0.44 a share in Q2 of last year. Furthermore, in Q2, estimated inventory holding losses in the steel processing business were $0.52 per share compared to inventory holding losses of $0.81 a share in Q2 of fiscal '23.
Finally, our consumer business recorded a charge of $3 million or $0.05 per share in the quarter related to a voluntary recall on our Balloon Time Mini tank.
Consolidated net sales in the quarter of $1.1 billion decreased 7.5% from the prior year primarily due to lower average selling prices in steel processing, combined with a shift in product mix, which was partially offset by higher volumes across most of our segments. The gross profit for
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Worthington Enterprises Inc. published this content on 22 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 December 2023 16:13:58 UTC.
