Worthington Enterprises Reports Third Quarter Fiscal 2024 Results

Worthington Enterprises, Inc. (“Company”) reported net sales of $316.8 million and net earnings from continuing operations of $22.0 million, or $0.44 per diluted share, for its fiscal 2024 third quarter ended February 29, 2024. This compares to net sales of $346.3 million and net earnings from continuing operations of $29.8 million, or $0.60 per diluted share, in the third quarter of fiscal 2023. On an adjusted basis, the Company reported net earnings from continuing operations of $40.2 million, or $0.80 per diluted share, for the current year quarter compared to adjusted net earnings from continuing operations of $39.9 million, or $0.81 per share, in the prior year quarter.

As previously disclosed, the separation of the Company’s former Steel Processing business into an independent publicly traded company, Worthington Steel, Inc. (“Worthington Steel”), was completed on December 1, 2023 (the “Separation”). Accordingly, the results of Worthington Steel are presented as discontinued operations separate from the Company’s continuing operations in periods prior to the Separation. Earnings from discontinued operations include operating expenses only to the extent directly attributable to Worthington Steel. Indirect corporate overhead costs are included in continuing operations, and, to the extent eliminated post-Separation, have been included as an adjustment to earnings from continuing operations in periods prior to the Separation in the table below. The third quarter of fiscal 2024 was negatively impacted by the final Separation costs, as well as a one-time charge to income tax expense primarily related to non-deductible transaction costs. In addition, the current year quarter was negatively impacted by a non-cash charge to settle, in full, the unfunded benefit obligation of our last remaining pension plan.

“We are off to a good start with our first full quarter as Worthington Enterprises reporting adjusted earnings of $0.80 per share,” said Worthington Enterprises President and CEO Andy Rose. “Higher volume and margins in our Consumer Products business combined with healthy contributions from our Building Products segment drove results, offset by continued softness in Europe from our Sustainable Energy Solutions business. We appreciate our employees’ continued dedication to delivering value-added products for our customers every day.”

Consolidated Quarterly Results

Net sales for the third quarter of fiscal 2024 were $316.8 million, a decrease of $29.6 million, or 8.5%, from the prior year quarter, as unfavorable mix combined with slightly lower volumes led to a $35.6 million decrease in net sales within Building Products.

Operating income of $4.3 million was up slightly from $4.0 million in the prior year quarter. On an adjusted basis, operating income of $8.0 million was down $8.9 million from the prior year quarter, on the combined impact of lower gross profit, which was down $5.9 million due to lower contributions from Building Products and Sustainable Energy Solutions, partially offset by improvements within Consumer Products, and higher overall SG&A expense, up $3 million, excluding the impact of corporate costs in the prior year quarter that were eliminated post-Separation.

Miscellaneous expense increased $7.2 million from the prior year quarter primarily due to a pension lift-out transaction to transfer, in full, the remaining projected benefit obligation of the inactive Gerstenslager pension plan to a third-party insurance company, which resulted in an $8.1 million pre-tax non-cash charge.

Net interest expense was nominal in the current year quarter compared to $4.2 million in the prior year quarter due to higher interest income and, to a lesser extent, lower average debt levels driven by the July 28, 2023, redemption of the Company’s senior unsecured notes that were set to mature in April 2026 (“2026 Notes”).

Equity income increased $6.1 million over the prior year quarter to $43.2 million, primarily due to higher contributions from WAVE.

Income tax expense was $18.5 million in the current year quarter compared to $7.4 million in the prior year quarter. The increase was driven by discrete tax adjustments primarily related to the Separation. Current quarter income tax expense reflects an estimated annual effective rate of 30.8%, up from 22.6% in the prior year quarter, due to the impact of discrete tax items, including one-time charges triggered by the Separation consisting primarily of non-deductible transaction costs. On an adjusted basis, the effective tax rate was 23.1% in the current year quarter compared to 20.9% in the prior year quarter.

Balance Sheet

Total debt was $298.0 million at the end of the third quarter of fiscal 2024, down approximately $390 million from May 31, 2023, due to the early redemption of senior unsecured notes of an equal amount in fiscal 2024, including $150.0 million in December 2023 that was funded by a cash distribution received from Worthington Steel immediately prior to the Separation.  The Company ended the third quarter of fiscal 2024 with cash of $227.3 million.

Quarterly Segment Results

Effective December 1, 2023, management responsibilities at the propane tank manufacturing facility in Westerville, Ohio, were realigned under Building Products from Consumer Products. Additionally, during the third quarter, management began evaluating segment results on the basis of adjusted EBITDA, as defined and further described in the Use of Non-GAAP Measures and Definitions section below. Financial results below, including historical data, reflect these changes.

Consumer Products generated net sales of $133.2 million during the current year quarter, up $2.5 million, or 1.9%, over the prior year quarter on higher volume, partially offset by lower average selling prices. Adjusted EBITDA was up $4.5 million in the quarter to $25.6 million, driven by the impact of higher volume.

Building Products generated net sales of $148.2 million during the current year quarter, down 19%, or $35.6 million, from the prior year quarter primarily due to an unfavorable shift in product mix. Adjusted EBITDA decreased $5.0 million from the prior year quarter to $53.1 million, as unfavorable mix compressed gross profit. Higher contributions of equity income, driven by a $7.1 million increase at WAVE, partially offset the impact of lower gross profit.   

Sustainable Energy Solutions generated net sales of $35.4 million during the current year quarter, up $3.6 million, or 11.3%, over the prior year quarter, on higher volume. Adjusted EBITDA was a loss of $2.7 million, unfavorable by $2.9 million from the prior year quarter, as volumes remained too low to absorb the fixed costs in the business.

Recent Developments

• In connection with the Separation, the Company received a cash distribution of $150.0 million from Worthington Steel, which was used to redeem, in full, the unsecured senior notes that were set to mature in August 2024.
• On February 1, 2024, the Company acquired an 80 percent ownership stake in an affiliate of HALO Products Group, LLC. Halo is an asset-light business with technology-enabled solutions in the outdoor cooking space with products that include HALO™ branded pizza ovens, pellet grills, griddles and other accessories. The total purchase price was approximately $9.4 million.
• On March 20, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.16 per common share payable on June 28, 2024, to shareholders of record at the close of business on June 14, 2024.

Outlook

“Worthington Enterprises is operating well as we head into our fourth quarter,” Rose said. “We have well vetted strategies and strong teams with high expectations for delivering on our promise of increasing shareholder value. We are not without our challenges, but our strategic positioning is solid, and we have a strong balance sheet and significant capital available to take advantage of opportunities as they arise. Our Worthington Business System of transformation, innovation and acquisitions is well entrenched and will enable our success.”

For the full third quarter results, click here.

About Worthington Enterprises

Worthington Enterprises (NYSE: WOR) is a designer and manufacturer of market-leading brands that help enable people to live safer, healthier and more expressive lives. The Company operates with three segments: Building Products, Consumer Products and Sustainable Energy Solutions. Worthington’s emphasis on innovation and transformation extends to building products including heating and cooling solutions, water systems, architectural and acoustical grid ceilings and metal framing and accessories, and consumer products in tools, outdoor living and celebrations categories sold under brand names Coleman®, Bernzomatic®, Balloon Time®, Level5 Tools®, Mag Torch®, Well-X-Trol®, General®, Garden-Weasel®, Pactool International®, HALO™ and Hawkeye™. The Company serves the growing global hydrogen ecosystem through on-board fueling systems and gas containment solutions. Headquartered in Columbus, Ohio, Worthington Enterprises employs approximately 5,000 people throughout North America and Europe. Founded in 1955 as Worthington Industries, Worthington Enterprises follows a people-first Philosophy with earning money for its shareholders as its first corporate goal. Worthington Enterprises achieves this outcome by empowering its employees to innovate, thrive and grow with leading brands in attractive markets that improve everyday life. The Company engages deeply with local communities where it has operations through volunteer efforts and The Worthington Companies Foundation, participates actively in workforce development programs and reports annually on its corporate citizenship and sustainability efforts. For more information, visit worthingtonenterprises.com.

Contact:

Sonya L. Higginbotham – Senior Vice President, Chief of Corporate Affairs, Communications and Sustainability – sonya.higginbotham@wthg.com – (614) 438-7391

Source: Worthington Enterprises, Inc.