Segment Operations

9 Months Ended

Feb. 29, 2024

Segment Reporting [Abstract]

Segment Operations

Note O – Segment Operations

Our operations are managed principally on a products and services basis. Factors used to identify reportable segments include the nature of the products and services provided by each business, the management reporting structure, similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance. Our operations are organized under three operating segments: Consumer Products, Building Products, and Sustainable Energy Solutions, none of which are aggregated for segment reporting purposes. In prior quarters, we also presented an additional operating segment, Steel Processing, which is no longer a reportable segment as a result of the Separation. The related segment disclosures herein have been updated accordingly, including recasting prior period information to reflect the Steel Processing business as discontinued operations.

Segment information is prepared on the same basis that our CODM reviews financial information for operational decision-making purposes. We have identified our Chief Executive Officer as our CODM. Factors used to identify operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.

In connection with the Separation, our CODM began evaluating segment operating performance on the basis of adjusted EBITDA, as previously described in the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-Q. At the operating segment level, adjusted EBITDA excludes public company and other governance-related costs. Effective December 1, 2023, we also realigned management responsibilities and the internal reporting of our liquified petroleum gas propane tank manufacturing facility in Westerville, Ohio, to fall under our Building Products segment (from Consumer Products). Previously reported results have been recast to reflect these changes.

The following tables presents summarized financial information for our reportable segments for the periods indicated.

	Three Months Ended February 29, 2024
(In thousands)	Consumer Products		Building Products		Sustainable Energy Solutions			Unallocated Corporate and Other			Consolidated (5)
Net sales	$	133,181	$	148,190	$	35,384		$	-		$	316,755
Restructuring and other expense, net		-		84		-			614			698
Separation costs		-		-		-			2,999			2,999
Miscellaneous income (expense), net		12		154		328			(7,489	)		(6,995	)
Equity Income		-		43,813		-			(578	)		43,235
Adjusted EBITDA (1)		25,649		53,059		(2,667	)		(9,170	)		66,871

	Three Months Ended February 28, 2023
(In thousands)	Consumer Products			Building Products		Sustainable Energy Solutions			Unallocated Corporate and Other			Consolidated (5)
Net sales	$	130,684		$	183,839	$	31,792		$	-		$	346,315
Impairment of long-lived assets		-			484		-			-			484
Restructuring and other expense, net		206			617		-			-			823
Separation costs		-			-		-			2,305			2,305
Miscellaneous income (expense), net		(12	)		122		(37	)		144			217
Equity Income		-			37,836		-			(725	)		37,111
Adjusted EBITDA (2)(4)		21,100			58,097		212			(9,193	)		70,216

	Nine Months Ended February 29, 2024
(In thousands)	Consumer Products		Building Products		Sustainable Energy Solutions			Unallocated Corporate and Other			Consolidated (5)
Net sales	$	369,923	$	465,421	$	91,558		$	-		$	926,902
Restructuring and other expense, net		-		84		-			620			704
Separation costs		-		-		-			12,465			12,465
Miscellaneous income (expense), net		49		452		1,165			(7,649	)		(5,983	)
Loss on extinguishment of debt		-		-		-			(1,534	)		(1,534	)
Equity Income		-		124,032		-			3,296			127,328
Adjusted EBITDA (1)(2)(3)(4)		52,537		158,501		(6,434	)		(16,775	)		187,829

	Nine Months Ended February 29, 2023
(In thousands)	Consumer Products			Building Products		Sustainable Energy Solutions		Unallocated Corporate and Other			Consolidated (5)
Net sales	$	406,479		$	542,536	$	100,679	$	-		$	1,049,694
Impairment of long-lived assets		-			484		-		-			484
Restructuring and other expense (income), net		206			617		-		(1,177	)		(354	)
Separation costs		-			-		-		3,572			3,572
Miscellaneous income (expense), net		(78	)		405		19		(4,845	)		(4,499	)
Equity Income		-			116,809		-		(14,805	)		102,004
Adjusted EBITDA (1)(2)(4)		67,846			157,458		2,932		(15,948	)		212,288

(1)Excludes pre-tax charges of $8,103 and $4,774 from separate pension lift-out transactions completed in February 2024 and August 2022, respectively, to transfer the pension benefit obligation under The Gerstenslager Company Bargaining Unit Employees’ Pension Plan to third-party insurance companies.

(2)Excludes the following items reflected in Equity Income in our consolidated statements of earnings:

•For the nine months ended February 29, 2024, our share of the gain realized by our engineered cabs joint venture, Workhorse, in connection with the sale of the joint venture’s operations in Brazil, which totaled $2,780 on a pre-tax basis.

•For the nine months ended February 28, 2023, the loss realized in connection with the August 3, 2022, sale of our then 50% noncontrolling equity investment in ArtiFlex, or $16,059 on a pre-tax basis, including $300 of transaction costs during the three months ended February 28, 2023.

(3)Excludes a pre-tax loss of $1,534 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.

(4)Reflects reductions in certain corporate overhead costs that no longer exist post-Separation. These costs were included in continuing operations as they represent general corporate overhead that was historically allocated to Worthington Steel but did not meet the requirements to be presented as discontinued operations.

(5)A reconciliation of net earnings from continuing operations (the most comparable GAAP financial measure) to consolidated adjusted EBITDA is included in the MD&A “Results of Operations” section of this Form 10-Q for the respective three and nine months ended February 29, 2024 and February 28, 2023.

Total assets for each of our reportable segments at the dates indicated were as follows:

	February 29,		May 31,
(In thousands)	2024		2023
Consumer Products	$	566,715	$	544,911
Building Products		678,699		706,169
Sustainable Energy Solutions		144,543		129,872
Unallocated Corporate and Other		314,732		509,170
Total assets of continuing operations	$	1,704,689	$	1,890,122