EX-99.2 11 d652347dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

WORTHINGTON ENTERPRISES, INC

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Overview

On December 1, 2023, Worthington Enterprises, Inc. (“we,” “our,” “us,” the “Company” or “Worthington Enterprises”), formerly known as Worthington Industries, Inc., completed the separation of its Steel Processing business into a separate, independent publicly traded company, Worthington Steel, Inc (“Worthington Steel”). The Separation (as defined below) was achieved through a pro rata distribution of 100% of the outstanding shares of Worthington Steel to our shareholders of record as of the close of business on November 21, 2023 (the “Record Date”). Each holder of record of Worthington Enterprises common shares received one Worthington Steel common share for every one Worthington Enterprises common share held on the Record Date. Worthington Steel is now an independent public company that trades under the symbol “WS” on the New York Stock Exchange. After the Distribution, Worthington Enterprises no longer consolidates Worthington Steel into its financial results (the entire transaction referred to herein as the “Separation”).

Basis of Presentation

The following unaudited pro forma consolidated financial statements of Worthington Enterprises are intended to illustrate the estimated effects of the separation of Worthington Steel from the historical combined company and have been derived from the historical consolidated financial statements of the Company, prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The following unaudited pro forma consolidated statements of earnings for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, assume the Separation occurred on June 1, 2022, the first day of fiscal 2023, in that they reflect the reclassification of Worthington Steel as discontinued operations for all periods presented. The unaudited pro forma consolidated balance sheet gives effect to the transactions described below as if they had occurred on August 31, 2023, our latest balance sheet date. Beginning in the third quarter of fiscal 2024, Worthington Steel’s historical financial results for periods prior to the Separation will be reflected in Worthington Enterprises’ consolidated financial statements as discontinued operations in accordance with the applicable accounting guidance.

In addition to capturing the effects of the Separation in accordance with the discontinued operations guidance prescribed under U.S. GAAP, this unaudited pro forma financial information also includes certain transaction adjustments that we believe are necessary to present fairly our unaudited consolidated pro forma consolidated statements of earnings and our consolidated balance sheet as of and for the periods presented, including.

 

  •  

the contribution by the Company to Worthington Steel, pursuant to the Separation, all the assets and liabilities that comprised the operations of the Steel Processing business of the historical combined company;

 

  •  

the cash payment to Worthington Enterprises by Worthington Steel of $150.0 million funded out of net cash proceeds generated from Worthington Steel’s indebtedness; and

 

  •  

the impact of the separation and distribution, tax matters, transition services, employee matters, and other agreements entered into by and between Worthington Enterprises and Worthington Steel as a result of the Separation, and the provisions contained therein.

The unaudited pro forma consolidated financial statements should be read in conjunction with the Company’s historical consolidated financial statements and accompanying notes and the Company’s historical Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2023.

The unaudited pro forma consolidated financial statements have been prepared based upon the best available information and management estimates and is subject to assumptions and adjustments described below and in the accompanying notes. They are not intended to be a complete presentation of the Company’s financial position or results of operations had the Separation occurred as of and for the periods indicated. In addition, the unaudited pro forma consolidated financial statements are provided for illustrative and informational purposes only, and are not necessarily indicative of the Company’s future results of operations or financial condition had the Separation and related transactions been completed on the dates assumed. Management believes these assumptions and estimates are reasonable, given the information available at the filing date.

The As Reported columns in the unaudited pro forma consolidated financial statements reflect the Company’s historical consolidated financial statements for the periods presented and do not reflect any adjustments related to the Separation and related events. The Separation of Worthington Steel columns in the unaudited pro forma consolidated financial statements reflect the removal of the Steel Processing business as presented in the Company’s historical consolidated financial statements, along with GAAP adjustments to meet requirements of discontinued operations. The amounts were derived from the carve-out financial statements of the Steel Processing business of Worthington Industries, Inc. The Pro Forma Adjustments columns in the unaudited pro forma consolidated financial statements reflect adjustments related to the Separation and related events, and GAAP adjustments to meet the requirements of discontinued operations. The Company’s current estimates of amounts included in discontinued operations are preliminary and could change as the Company finalizes discontinued operations accounting to be reported in future filings.

The unaudited pro forma combined financial statements have been prepared in accordance with Article 11 of the Securities and Exchange Commission’s (the “SEC”) Regulation S-X. In May 2020, the SEC adopted Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” or the Final Rule. The Final Rule was effective on January 1, 2021 and the unaudited pro forma combined financial information herein is presented in accordance therewith.

WORTHINGTON ENTERPRISES, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF AUGUST 31, 2023

(in thousands)

 

     As Reported      Separation of
Worthington Steel (a)		     Pro Forma
Adjustments		           Pro Forma  

Assets

            

Current assets:

            

Cash and cash equivalents

    $ 201,009      $ (27,401 )    $ —         (b )    $ 173,608  

Receivables, less allowances

      698,287        (497,693 )      —           200,594  

Inventories:

            

Raw materials

      302,626        (202,822 )      —           99,804  

Work in process

      192,344        (174,408 )      —           17,936  

Finished products

      177,326        (79,411 )      —           97,915  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total inventories

      672,296        (456,641 )      —           215,655  

Income taxes receivable

      2,593        (2,593 )      —           —    

Assets held for sale

      1,979        (1,979 )      —           —    

Prepaid expenses and other current assets

      115,692        (71,186 )      —           44,506  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total current assets

    $ 1,691,856      $ (1,057,493 )    $ —         $ 634,363  

Investments in unconsolidated affiliates

      241,564        (123,507 )      —           118,057  

Operating lease assets

      97,316        (73,737 )      —           23,579  

Goodwill

      415,813        (78,591 )      —           337,222  

Other intangible assets, net of accumulated amortization

      310,030        (81,789 )      —           228,241  

Other assets

      38,245        (10,459 )      —           27,786  

Property, plant and equipment:

            

Land

      49,739        (37,534 )      —           12,205  

Buildings and improvements

      309,752        (169,917 )      —           139,835  

Machinery and equipment

      1,266,341        (861,366 )      —           404,975  

Construction in progress

      64,414        (40,188 )      —           24,226  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total property, plant and equipment

      1,690,246        (1,109,005 )      —           581,241  

Less: accumulated depreciation

      1,008,378        (682,397 )      —           325,981  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total property, plant and equipment, net

      681,868        (426,608 )      —           255,260  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total assets

    $ 3,476,692      $ (1,852,184 )    $ —         $ 1,624,508  
  

 

 

     

 

 

    

 

 

      

 

 

  

Liabilities and equity

            

Current liabilities:

            

Accounts payable

    $ 526,686      $ (409,396 )    $ —         $ 117,290  

Accrued compensation, contributions to employee benefit plans and related taxes

      76,960        (39,313 )      —           37,647  

Dividends payable

      18,603        —         —           18,603  

Other accrued items

      47,899        (17,986 )      —           29,913  

Current operating lease liabilities

      12,610        (5,860 )      —           6,750  

Income taxes payable

      35,913        2,238       —           38,151  

Current maturities of long-term debt

      150,268        —         (150,000 )      (b )      268  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total current liabilities

      868,939        (470,317 )      (150,000 )        248,622  

Other liabilities

      109,840        (38,687 )      —           71,153  

Distributions in excess of investment in unconsolidated affiliate

      116,377        —         —           116,377  

Long-term debt

      298,083        —         —           298,083  

Noncurrent operating lease liabilities

      87,626        (70,450 )      —           17,176  

Deferred income taxes, net

      93,911        (15,648 )      —           78,263  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total liabilities

      1,574,776        (595,102 )      (150,000 )        829,674  

Shareholders’ equity—controlling interest

      1,774,623        (1,129,789 )      150,000       (b )      794,834  

Noncontrolling interests

      127,293        (127,293 )      —           —    
  

 

 

     

 

 

    

 

 

      

 

 

  

Total equity

      1,901,916        (1,257,082 )      150,000         794,834  
  

 

 

     

 

 

    

 

 

      

 

 

  

Total liabilities and equity

    $ 3,476,692      $ (1,852,184 )    $ —         $ 1,624,508  
  

 

 

     

 

 

    

 

 

      

 

 

  

WORTHINGTON ENTERPRISES, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS

For the three months ended August 31, 2023

(In thousands, except per share amounts)

 

     As Reported     Separation of
Worthington Steel (a)		     Pro Forma
Adjustments		           Pro Forma  

Net Sales

    $ 1,193,256     $ (881,338 )    $ —         $ 311,918  

Cost of goods sold

      995,767       (753,592 )      900       (c )      243,075  
  

 

 

    

 

 

    

 

 

      

 

 

  

Gross margin

      197,489       (127,746 )      (900 )        68,843  

Selling, general and administrative expense

      112,348       (37,535 )      (83 )      (d )      74,730  

Impairment of long-lived assets

      1,401       (1,401 )      —           —    

Separation costs

      6,035       (3,626 )      —           2,409  
  

 

 

    

 

 

    

 

 

      

 

 

  

Operating income

      77,705       (85,184 )      (817 )        (8,296 ) 

Other income (expense):

           

Miscellaneous expense

      1,011       (712 )      —           299  

Loss on extinguishment of debt

      (1,534 )      —         —           (1,534 ) 

Interest expense, net

      (3,083 )      2,009       —           (1,074 ) 

Equity in net income of unconsolidated affiliates

      54,381       (8,957 )      —           45,424  
  

 

 

    

 

 

    

 

 

      

 

 

  

Earnings before income taxes

      128,480       (92,844 )      (817 )        34,819  

Income tax expense

      28,777       (19,912 )      (188 )      (e )      8,677  
  

 

 

    

 

 

    

 

 

      

 

 

  

Net earnings

      99,703       (72,932 )      (629 )        26,142  

Net earnings attributable to noncontrolling interests

      3,597       (3,597 )      —           —    
  

 

 

    

 

 

    

 

 

      

 

 

  

Net earnings attributable to controlling interest

    $ 96,106     $ (69,335 )    $ (629 )      $ 26,142  
  

 

 

    

 

 

    

 

 

      

 

 

  

Basic

           

Average common shares outstanding

      48,842             48,842  
  

 

 

          

 

 

  

Earnings per common share attributable to controlling interest

    $ 1.97           $ 0.54  
  

 

 

          

 

 

  

Diluted

           

Average common shares outstanding

      49,886             49,564  
  

 

 

          

 

 

  

Earnings per common share attributable to controlling interest

    $ 1.93           $ 0.53  
  

 

 

          

 

 

  

WORTHINGTON ENTERPRISES, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS

For the fiscal year ended May 31, 2023

(In thousands, except per share amounts)

 

     As Reported     Separation of
Worthington Steel (a)		     Pro Forma
Adjustments		           Pro Forma  

Net Sales

    $ 4,916,392     $ (3,497,896 )    $ —         $ 1,418,496  

Cost of goods sold

      4,253,080       (3,162,464 )      3,900       (c )      1,094,516  
  

 

 

    

 

 

    

 

 

      

 

 

  

Gross margin

      663,312       (335,432 )      (3,900 )        323,980  

Selling, general and administrative expense

      428,872       (140,392 )      (331 )      (d )      288,149  

Impairment of long-lived assets

      2,596       (2,112 )      —           484  

Restructuring and other income, net

      (4,571 )      4,204       —           (367 ) 

Separation costs

      24,048       (17,515 )      3,931       (e )      10,464  
  

 

 

    

 

 

    

 

 

      

 

 

  

Operating income

      212,367       (179,617 )      (7,500 )        25,250  

Other income (expense):

          —        

Miscellaneous expense

      (1,227 )      (3,270 )      —           (4,497 ) 

Interest expense, net

      (26,759 )      8,462       —           (18,297 ) 

Equity in net income of unconsolidated affiliates

      160,987       (7,725 )      —           153,262  
  

 

 

    

 

 

    

 

 

      

 

 

  

Earnings before income taxes

      345,368       (182,150 )      (7,500 )        155,718  

Income tax expense

      76,198       (37,929 )      (1,725 )      (f )      36,544  
  

 

 

    

 

 

    

 

 

      

 

 

  

Net earnings

      269,170       (144,221 )      (5,775 )        119,174  

Net earnings attributable to noncontrolling interests

      12,642       (12,642 )      —           —    
  

 

 

    

 

 

    

 

 

      

 

 

  

Net earnings attributable to controlling interest

    $ 256,528     $ (131,579 )    $ (5,775 )      $ 119,174  
  

 

 

    

 

 

    

 

 

      

 

 

  

Basic

           

Average common shares outstanding

      48,566             48,566  
  

 

 

          

 

 

  

Earnings per common share attributable to controlling interest

    $ 5.28           $ 2.45  
  

 

 

          

 

 

  

Diluted

           

Average common shares outstanding

      49,386             49,212  
  

 

 

          

 

 

  

Earnings per common share attributable to controlling interest

    $ 5.19           $ 2.42  
  

 

 

          

 

 

  

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Separation of Worthington Steel, Inc.:

 

(a)

Reflects amounts representing the net sales, expenses, assets, liabilities, and equity attributable to Worthington Steel, which were included in the Company’s historical consolidated financial statements. Corporate expenses that were not specifically related to Worthington Steel have been excluded as such general corporate expenses do not meet the requirements to be presented in discontinued operations. Interest expense associated with the $150,000 senior notes discussed in (b) below has been attributed to Worthington Steel in accordance with the discontinued operations guidance prescribed under U.S. GAAP.

Pro Forma Adjustments:

 

(b)

Reflects a cash payment, in the form of a dividend, by Worthington Steel to us in the amount of $150,000, and the subsequent early redemption of our 4.6%, $150,000 senior notes that were due to mature on August 10, 2024. The cash dividend was funded by borrowings under Worthington Steel’s asset-back lending facility.

 

(c)

Reflects the incremental material cost on purchases of flat rolled steel from Worthington Steel that were historically treated as intercompany transactions in our consolidated financial statements. Post-separation these transactions will be governed by the arms-length pricing mechanisms included in the long-term steel supply agreement between us and Worthington Steel executed in connection with the Separation.

 

(d)

Reflects cost recoveries of $83 and $331 for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, respectively, to capture the effects of the transition services agreement between us and Worthington Steel that provides for the performance of certain services by each company for the benefit of the other for a period of time post-separation.

 

(e)

Reflects the incremental expense to true-up accruals associated with unvested long-term incentive compensation awards that were modified under the employee matters agreement executed in connection with the Separation. The pro forma adjustment reflects the amount attributed to our continuing operations and is reflected within Separation costs as it is a non-recurring item that is directly attributable to the Separation. An incremental $1,685 is attributed to Worthington Steel and will be classified within discontinued operations post-separation.

 

(f)

Represents the tax effects of the transaction pro forma adjustments as the applicable statutory tax rate for both the three months ended August 31, 2023 and the fiscal year ended May 31, 2023. The effective tax rate of Worthington Enterprises could be different (either higher or lower) depending on activities subsequent to the Separation. The impacts of pro forma adjustments on deferred tax assets and liabilities were offset against existing deferred tax assets and liabilities reflected in our historical combined balance sheet.

Management Adjustments:

Worthington Enterprises has elected to present management adjustments to the unaudited pro forma combined financial statements and include all adjustments necessary for a fair statement of such information. Worthington Enterprises anticipates a reduction to certain general corporate overhead costs, primarily associated with labor and benefits, for shared resources transferred to Worthington Steel that the Company does not intend to replace after the Separation. These costs were excluded from discontinued operations in note (a) above as they represent general corporate overhead costs that were historically allocated to Worthington Steel and do not meet the requirements to be presented as discontinued operations. Management believes the resource transfers and costs which were used as the basis for the management adjustments below are reasonable and representative of the cost reductions the company will realize after the Separation of Worthington Steel. However, actual cost reductions the Company will realize after the Separation could be different from the estimates and will depend on several factors, including the economic environment and strategic decisions made.

Management believes the presentation of these adjustments are necessary to enhance an understanding of the pro forma effects of the transaction. The pro forma financial information below reflects all adjustments that are, in the opinion of management, necessary to provide a fair statement of the pro forma financial information, aligned with the assessment described above.

The table below includes the management adjustments for the periods presented:

 

     Three Months Ended
August 31, 2023		      Fiscal Year Ended
May 31, 2023		  

Unaudited pro forma net earnings (1)

    $ 26,142      $ 119,174  

Management adjustments

      10,768        43,325  

Income tax effects

      (2,477 )       (9,965 ) 
  

 

 

     

 

 

  

Unaudited pro forma net earnings after management adjustments

    $ 34,433      $ 152,534  
  

 

 

     

 

 

  

Pro forma basic earnings per common share after management adjustments

    $ 0.70      $ 3.14  
  

 

 

     

 

 

  

Pro forma diluted earnings per common share after management adjustments

    $ 0.69      $ 3.10  
  

 

 

     

 

 

  

 

(1)

As shown in the unaudited pro forma consolidated statements of earnings.