Worthington Steel Inc

Worthington Steel was formed as an Ohio corporation on February 28, 2023 for the purpose of receiving, pursuant to a reorganization, all of the outstanding equity interests of the Steel Processing business of Worthington Industries. On December 1, 2023, the Separation was completed through the Distribution, which is intended to be tax-free to Worthington Industries shareholders for U.S. federal income tax purposes. Following the Distribution, Worthington Steel became an independent, publicly traded company. For additional information, see “Note A – Worthington Steel Separation, Description of Business, and Basis of Presentation” and “Note Q – Subsequent Events.”

The accompanying combined financial statements have been prepared on a stand-alone, carve-out basis using the consolidated financial statements and accounting records of Parent. The combined financial statements reflect the operations of Worthington Steel, as historically managed, in accordance with U.S. GAAP. Our combined financial statements include allocations of certain general and administrative expense related to shared corporate functions. The allocations have been determined on a reasonable basis: however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had we been an entity that operating independently of the Parent. Further, our combined financial statements may not be reflective of what our results of operations, comprehensive income, historical financial position, equity or cash flows might be in the future as a separate public company. Certain factors could impact the nature and amount of these public company costs, including finalization of our staffing and infrastructure needs. Following the Separation, pursuant to agreements with Parent, Worthington will continue to provide us some of the services related to these previously shared corporate functions on a transitional basis in exchange for agreed-upon fees, and we will incur other costs to replace the services and resources that are not provided by Worthington. As a separate public company, our total costs related to such support functions may differ from the costs that were historically allocated to us.

Anticipated additional costs are primarily for the following:

•

additional personnel costs, including salaries, benefits and potential bonuses and stock-based compensation awards for staff additions to establish certain corporate functions historically supported by Parent and not covered by the transition services agreement; and

•

corporate governance costs, including board of director compensation and expenses, audit and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, consulting and legal fees and stock exchange listing fees.

We expect the additional separate public company costs in excess of the costs that have been historically allocated to us could range between $10 million and $15 million per year. In addition to these separate public company costs, we expect to incur certain non-recurring costs as a result of the Separation.

We have historically been dependent on Parent for all of our working capital and financing requirements and, with the exception of cash held outside of the United States, we have participated in Parent’s centralized cash management and financing arrangements. Our financing transactions are reflected within equity as Net Worthington Enterprises, Inc. investment. Accordingly, none of Parent’s cash, cash equivalents or debt has been assigned to us. Prior to its June 2023 termination, borrowings outstanding under the AR Facility and related interest expense are included in our combined financial statements as one of our subsidiaries is the legal party to the arrangement.

In contemplation of our anticipated post-separation capital structure, the AR Facility was terminated in June 2023. No early termination or other similar fees or penalties were paid in connection with the termination. As part of the Separation, we replaced the terminated AR Facility with the new Credit Facility. See “Recent Business Developments” and “Note H – Debt” for additional information.

Net Worthington Enterprises, Inc. investment, which includes retained earnings, represents Worthington’s interest in the recorded net assets of us. All significant transactions between Parent and us have been properly accounted for in the accompanying combined financial statements as related party transactions. To the extent not expected to be settled in cash, these transactions are reflected in the accompanying combined statements of equity as transfers (to) from Parent, net and in the accompanying combined balance sheets within Net Worthington Enterprises, Inc. investment.

The effects of transactions with Parent are discussed further in “Note P – Related Party Transactions.”