Related Party Transactions

6 Months Ended

Nov. 30, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Note P – Related Party Transactions

Historically, we were been managed and operated in the normal course of business by Parent. Transactions through November 30, 2023 between Parent and us have been accounted for as related party transactions in the accompanying combined financial statements, as described below:

Allocation of General Corporate Costs

Certain support functions have been provided to us on a centralized basis from Parent, including information technology, human resources, finance, and corporate operations, amongst others, profit sharing and bonuses, and respective surpluses and shortfalls of

various planned insurance expenses. For purposes of these combined financial statements, these corporate and other shared costs have been attributed to us on the basis of direct usage when identifiable, with the remainder allocated on the basis of headcount or profitability, considering the characteristics of each respective cost. Management believes the assumptions regarding the allocation of Parent’s general corporate expenses are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect combined results of operations, financial position and cash flows had we been a stand-alone public company during the periods presented. Substantially all of the allocated corporate costs are included in SG&A expense in the combined statements of earnings.

Our allocated expenses from Parent, which are substantially recorded in SG&A expense in the combined statements of earnings, were $19.5 million and $17.8 million for the three months ended November 30, 2023 and November 30, 2022, respectively, and $38.5 million and $32.1 million for the six months ended November 30, 2023 and November 30, 2022, respectively.

Attribution of Separation Costs

Parent incurred Separation Costs that have been directly attributed to us to the extent incurred to our direct benefit and are presented separately in our combined statements of earnings.

Sales to Parent

Net sales to Parent totaled $19.3 million and $26.4 million for the three months ended November 30, 2023 and November 30, 2022, respectively, and $43.8 million and $62.1 million for the six months ended November 30, 2023 and November 30, 2022, respectively.

Due to/from Parent

Given that cash was managed centrally, long-term intercompany financing arrangements were used to fund expansion or certain working capital needs. Excluding the TWB Term Loan disclosed in “Note H – Debt”, debt resulting from these long-term intercompany financing arrangements has been reflected in Net Worthington Enterprises, Inc. Investment within equity.

Amounts due to Parent under the TWB Term Loan totaled $20.0 million at November 30, 2023 and May 31, 2023, all of which is presented in current maturities of long-term debt due to Worthington Enterprises, Inc. in the corresponding combined balance sheet. The corresponding interest expense, which accrues at a rate of 5.0% per annum, was $0.2 million and $0.4 million in three months ended November 30, 2023 and November 30, 2022, respectively, and $0.5 million and $0.9 million in the six months ended November 30, 2023 and November 30, 2022, respectively. Refer to “Note H – Debt” for additional information.

Net Worthington Enterprises, Inc. Investment

Related party transactions between Parent and us have been included within Net Worthington Enterprises, Inc. investment in the combined balance sheets in the historical periods presented as these related party transactions were part of the centralized cash management program and were not settled in cash. Net Worthington Enterprises, Inc. investment in the combined balance sheet and combined statement of equity represents Parent’s historical investment in us, the net effect of transactions with and allocations from Parent, and our retained earnings.

Net transfers from Parent are included within Net Worthington Enterprises, Inc. investment. The reconciliation of total net transfers to and from Parent to the corresponding amount presented in the Combined Statement of Cash Flows are as follows:

	Three Months Ended						Six Months Ended
	November 30,						November 30,
(In millions)	2023			2022			2023			2022
Total net transfers from Worthington Enterprises, Inc. per combined statements of equity	$	(84.9	)	$	(72.2	)	$	(44.1	)	$	(33.3	)
Less: depreciation expense allocated from Parent		0.6			0.7			1.2			1.3
Less: stock-based compensation		3.3			2.4			6.1			4.6
Total net transfers to Worthington Enterprises, Inc. per combined statement of cash flows	$	(88.8	)	$	(75.3	)	$	(51.4	)	$	(39.2	)