WORTHINGTON ENTERPRISES INC
For the period ended Aug 31, 2024. Filed Oct 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 31, 2024 · Filed Oct 7, 2024
WOR$60.50-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-02-29; filed 2024-04-09.
0000950170-24-042963
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-08-31; filed 2024-10-07.
0000950170-24-113225
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 124 previous paragraphs and 87 current paragraphs.
33 unchanged; 25 reworded; 28 added; 61 removed; 5 previous and 1 current paragraphs rearranged.
Tables are not compared: 26 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
On June 3, 2024, we acquired Ragasco, a leading global manufacturer of composite propane cylinders based in Norway. The purchase price included cash consideration of approximately $102.2 million, with a future earnout opportunity of up to $14.0 million. The results of Ragasco are included within the Building Products operating segment for periods subsequent to the acquisition date. See “Note N – Acquisitions” for additional information.
Current report
During the first quarter of fiscal 2025, we repurchased 150,000 common shares under existing repurchase authorizations for $6.8 million, at an average purchase price of $45.35.
Current report
The following trends and factors have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results.
Current report
The macroeconomic and geopolitical outlook has been complex and evolving. Although the U.S. economy continues to grow at a modest pace, prolonged inflationary pressures continue to negatively impact the discretionary spending of many of our customers. The recent 0.50% rate cut by the Federal Reserve is expected to alleviate some of this pressure in the near-term as borrowing becomes cheaper, stimulating spending in our residential construction, non-residential construction, and repair and remodel end markets. Besides inflation, consumer spending habits for our products are influenced by prevailing global economic conditions, the costs of basic necessities and other goods, employment levels, salaries and wage rates, and prevailing interest rates. Additionally, consumer purchasing patterns are generally affected by consumers’ disposable income, credit availability, and debt levels.
Current report
Federal Reserve Bank of St. Louis; figures based on seasonally adjusted annual rates
Current report
Period average of CRU Hot-Rolled Index
Current report
2023 figures based on revised actuals
Current report
Residential Construction: The near-term outlook for U.S. residential construction spending remains cautiously optimistic, with spending increasing by approximately 7.4% between August 2024 and August 2023. While construction data continues to show positive year-over-year growth, housing starts and authorized permits remain flat, reflecting a cautious approach by both builders and potential home buyers. The HMI also fell to 39.0 in August 2024, indicating persistent challenges such as high mortgage rates and elevated home prices. Builders continue to grapple with high interest rates for construction loans and ongoing labor shortages, which are impacting their ability to meet demand. Additionally, rising material costs add further pressure on the end market. However, we are optimistic that recent interest rate cuts could spur new construction activity in the near term and we remain well-positioned to meet the anticipated demand. More broadly, the solid underlying fundamentals of the housing market, including favorable demographics and a chronic undersupply of homes, provide strong support for this end market in the long-term.
Current report
Non-residential Construction: The near-term outlook for U.S. non-residential construction is mixed. The ABI fell to 45.7 in August 2024 from 48.1 in August 2023, indicating a continued decline in demand for architectural services. This marks the nineteenth consecutive month of declining billings, reflecting ongoing challenges in converting project inquiries into actual contracts. However, the Dodge Momentum Index offers a more optimistic view, rising to 220.4 in August 2024 from 178.0 in August 2023, driven by gains in both commercial and institutional planning. This suggests that while current billings are down, there is a pipeline of projects that could bolster future construction activity. Overall, the sector faces headwinds but also holds potential for growth as economic conditions stabilize and interest rates are expected to decrease.
Current report
Tools: Spending in the tools end market is predominantly influenced by macroeconomic conditions. Recently, the market has experienced positive tailwinds as inflation has eased, with the annual inflation rate dropping to 2.5% in August 2024, a significant decrease from its peak in 2022. Despite moderating inflation, overall demand in this sector continued to be adversely affected by a general moderation in consumer spending on non-essential items, resulting in lower overall demand from both DIY and professional customers. Notwithstanding these short-term headwinds, we believe that the outlook remains positive as we continue to grow market share with our well-known brands and innovation of new products.
Current report
Outdoor Living: Participation in outdoor recreation is beginning to normalize to pre-pandemic levels. This trend is evident in the number of new U.S. camping households, a key metric that measures the influx of first-time campers. After peaking in 2020, driven by the desire for safe, socially-distanced activities during the height of the pandemic, the number has steadily declined. However, the long-term fundamentals in the outdoor living category remain positive, driven by diverse participation across different age groups, socio-economic classes, and geographic regions.
Current report
Celebrations: The celebrations end market has shown a gradual recovery, propelled by the increasing demand for personalized and unique event experiences. Consumer income and the debt-to-income ratio have gradually recovered, approaching levels observed prior to COVID-19, alongside moderating inflation. Despite these positive indicators, inflation and interest rates continue to influence disposable income and spending power. It is anticipated that consumer spending on non-essential items will remain constrained, primarily due to a larger share of income being allocated towards essential purchases and mortgage payments.
Current report
Other - Net sales in the first quarter of fiscal 2024 are related to our former Sustainable Energy Solutions operating segment, which was deconsolidated in May 2024 when we sold a 51% interest in the business. In periods subsequent to the sales transaction, our 49% interest is accounted for under the equity method.
Current report
Gross profit was $62.5 million for the first quarter of fiscal 2025, a decrease of $7.1 million, or 10.2% from the first quarter of fiscal 2024, driven by the reduction in net sales at Building Products.
Current report
Selling, General and Administrative Expense
Current report
SG&A decreased $8.5 million, or 11.4%, from the first quarter of fiscal 2024, primarily driven by the elimination of certain corporate overhead costs that no longer exist post-Separation, but have been presented within net earnings from continuing operations in our consolidated statements of earnings.
Current report
Restructuring expense in the first quarter of fiscal 2025 was driven by a $0.7 million true-up of our accrual for final transaction costs associated with the deconsolidation of our former Sustainable Energy Solutions operating segment, as well as severance costs.
Current report
Equity income contributed by WAVE and ClarkDietrich is reported within our Building Products segment.
Current report
Includes our share of equity earnings of the Workhorse and the Sustainable Energy Solutions joint ventures.
Current report
Equity income decreased $9.9 million from the first quarter of fiscal 2024, driven by lower contributions from ClarkDietrich, which was down $8.0 million, as declining steel prices compressed margins, and equity losses at the Sustainable Energy Solutions joint venture in the first quarter of fiscal 2025.
Current report
Adjusted EBITDA from Continuing Operations
Current report
Building Products –Adjusted EBITDA from continuing operations decreased $20.0 million from the first quarter of fiscal 2024, on lower volume, particularly in our heating and cooking products, and unfavorable mix combined with lower equity earnings at ClarkDietrich. Adjusted EBITDA from continuing operations in the first quarter of fiscal 2025 included $1.9 million of incremental expense related to the Ragasco acquisition resulting primarily from the step up of inventory to fair value.
Current report
Unallocated Corporate and Other –Adjusted EBITDA from continuing operations was down $1.0 million from the first quarter of fiscal 2024, driven by higher SG&A partially offset by lower losses due to the deconsolidation of our former Sustainable Energy Solutions operating segment in May 2024.
Current report
During the three months ended August 31, 2024, we generated $41.1 million of cash from operating activities, invested $9.6 million in property, plant and equipment, spent $88.9 million to acquire Ragasco, and received $11.8 million for the sale of 51% of our former Sustainable Energy Solutions operating segment. Additionally, we paid $6.8 million to repurchase 150,000 common shares and paid dividends of $8.1 million on the common shares in the first quarter of fiscal 2025.
Current report
Activity related to our discontinued operations has not been segregated in our consolidated statements of cash flows. See “Note B – Discontinued Operations” for a summarization of significant non-cash items related to discontinued operations.
Current report
Net cash provided by operating activities was $41.1 million during the first quarter of fiscal 2025, down from $59.7 million in the first quarter of fiscal 2024. The decrease was primarily due to lower net earnings from core operations and a $25.7 million decrease in dividends from unconsolidated joint ventures.
Current report
Net cash used by investing activities was $88.7 million during the first quarter of fiscal 2025, compared to $44.3 million during the first quarter of fiscal 2024. Net cash used by investing activities in the first quarter of fiscal 2025 was driven primarily by the acquisition of Ragasco and capital expenditures partially offset by proceeds from the sale of 51% of the nominal share capital of our former Sustainable Energy Solutions operating segment on May 29, 2024.
Current report
Net cash used by financing activities was $18.1 million during the first quarter of fiscal 2025, compared to $269.3 million in the first quarter of fiscal 2024. During the first quarter of fiscal 2025, we paid $6.8 million to repurchase 150,000 common shares and paid dividends of $8.1 million on the common shares. During the first quarter of fiscal 2024, we paid dividends of $15.7 million on the common shares and repaid $243.8 million of long-term debt associated with the redemption of the 2026 Notes.
Removed paragraphs (61)
Previous report
Separation of the Steel Processing Business;
Previous report
Separation of the Steel Processing Business
Previous report
On December 1, 2023, we completed the previously announced Separation of our Steel Processing business segment into a separate public company in a transaction intended to qualify as tax free to our shareholders, which was accomplished via the distribution of 100% of the outstanding common shares of Worthington Steel to holders of record of the Company’s common shares as of the Record Date. Worthington Steel is an independent public company trading under the symbol “WS” on the NYSE. Following the Separation, Worthington Industries, Inc. changed its name to Worthington Enterprises, Inc. and its common shares continue trading on the NYSE under the ticker symbol “WOR.” Worthington Enterprises is comprised of the Building Products, Consumer Products and Sustainable Energy Solutions businesses. In connection with the Separation, we received a one-time cash dividend of $150.0 million from Worthington Steel to finalize each company’s respective capital structure. The dividend was funded by cash drawn on Worthington Steel Credit Facility of $175.0 million immediately prior to the Distribution.
Previous report
On July 28, 2023, we redeemed the 2026 Notes, which resulted in a non-cash loss of approximately $1.5 million related primarily to unamortized issuance costs and the remaining loss associated with an interest rate swap deferred in AOCI at redemption. See “Note I – Debt and Receivables Securitization” for additional information.
Previous report
On December 6, 2023, we used the proceeds received from Worthington Steel in connection with the Separation to pay off in full the 2024 Notes. The payoff amount consisted of $150.0 million in principal plus accrued interest of $0.5 million. See “Note I – Debt and Receivables Securitization” for additional information.
Previous report
On February 1, 2024, we acquired an 80% ownership stake in Halo, an asset-light business with technology-enabled solutions in the outdoor cooking space. The total purchase price was approximately $9.4 million. Refer to “Note P – Acquisitions” for additional information.
Previous report
Residential Construction: The residential construction sector has demonstrated positive year-over-year growth, with an overall increase in spending since its relative low in the spring of 2023. New housing starts and housing permits issued have also increased during the current year period. The HMI for February 2024 was up for the fourth consecutive month and was at its highest level since August 2023, suggesting improving builder sentiment. Fixed mortgage rates remain too high for many buyers to enter the market; however, data gathered from the Federal Reserve Economic Database, shows a recent decline in the 30-year fixed rate mortgage from 7.22% at November 30, 2023 to 6.94% at February 29, 2024, which may allow more buyers to enter the market.
Previous report
Non-residential Construction: Non-residential construction spending has shown consistent year-over-year growth. However, the near-term outlook appears to be mixed due to a rise in on-hold projects and delayed bids. Commercial real estate remains generally weak, with notable softness for office buildings, partially offset by strong demand for data centers and manufacturing facilities. The ABI continued to decline in February 2024. However, the decline was the most modest easing in billings since July 2023, suggesting that the recent slowdown may be receding.
Previous report
General Consumer: Consumer income and debt-to-income ratios are gradually returning to pre-pandemic levels and inflation has moderated recently. However, consumer spending on discretionary items is expected to continue to be under pressure as a higher proportion of income is spent on essential purchases and mortgage payments.
Previous report
Outdoor: Participation in outdoor recreation is beginning to normalize to pre-pandemic levels as new U.S. camping households, a measure of first time campers, has steadily declined from a high in 2020. The long-term fundamentals in the outdoor category remain strong as outdoor recreation and camping participation continue to grow despite broader economic headwinds.
Previous report
Renewable Energy: The impact of unprecedented investment in renewable infrastructure will likely become more apparent over the next several years as many jurisdictions around the world have mandated clean energy standards and policies. While regulation could lay the foundation for strong long-term fundamentals, the near-term outlook is mixed, especially in Europe as economies continue to be challenged by the conflict in Ukraine.
Previous report
Furthermore, post-pandemic market dynamics, including the impact of pent-up demand as COVID restrictions were eased, resulted in higher-than-normal inventory levels at some of our larger retail and wholesale customers, which has temporarily impacted demand for some of our products in the form of destocking.
Previous report
The following table provides volume (in units) by operating segment for the periods presented:
Previous report
Sustainable Energy Solutions – Net sales totaled $35.4 million in the third quarter of fiscal 2024, up $3.6 million, or 11.3%, over the third quarter of fiscal 2023, due to higher volume.
Previous report
Gross profit was $73.1 million for the third quarter of fiscal 2024, a decrease of $5.9 million compared to the third quarter of fiscal 2023, due to lower contributions at Building Products, down $10.2 million on the combined impact of unfavorable mix and slightly lower volume, and Sustainable Energy Solutions, down $3.3 million on higher fixed cost absorption, partially offset by improvements within Consumer Products, up $5.4 million on higher volume.
Previous report
SG&A
Previous report
SG&A was $65.1 million for the third quarter of fiscal 2024, down $6.3 million, or 8.8%, from the third quarter of fiscal 2023, driven primarily by the impact of $10.4 million of corporate costs in the prior year quarter that were eliminated at Separation, partially offset by higher healthcare and other benefit-related costs on a per employee basis.
Previous report
Impairment of long-lived assets in the third quarter of fiscal 2023 was due to changes in the intended use of certain fixed assets at our Building Products facility in Jefferson, Ohio. Refer to “Note E – Impairment of Long-Lived Assets” for additional information.
Previous report
Restructuring activity during the third quarter of fiscal 2024 was the result of severance costs within Unallocated Corporate and Other. Restructuring activity during the third quarter of fiscal 2023 related primarily to a reduction in workforce at our Columbus, Ohio manufacturing facility and organizational realignment within Building Products.
Previous report
Miscellaneous expense (income), net
Previous report
Miscellaneous expense, net was $7.0 million in the third quarter of fiscal 2024, unfavorable $7.2 million to the third quarter of fiscal 2023, primarily due to an $8.1 million pension settlement charge to annuitize, in full, the remaining projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees’ Pension Plan to third-party insurance companies.
Previous report
Interest expense, net was nominal in the third quarter of fiscal 2024 compared to $4.2 million in the third quarter of fiscal 2023 due to lower average debt levels driven by the July 28, 2023, redemption of the 2026 Notes and higher interest income, up $1.3 million. Refer to “Note I – Debt and Receivables Securitization” for additional information.
Previous report
Equity Income increased $6.1 million over the third quarter of fiscal 2023, primarily due to higher profitability at WAVE on higher volume and gross margin improvement.
Previous report
Reflects a pre-tax benefit of $1.0 million within SG&A expense to reverse the compensation expense accrued during the first six months of fiscal 2023 for anticipated payout under the first annual earnout opportunity associated with the Level5 acquisition.
Previous report
Reflects a pre-tax charge of $8.1 million from a pension lift-out transaction to transfer, in full, the remaining projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees’ Pension Plan to third-party insurance companies.
Previous report
On August 3, 2022, we sold our 50% noncontrolling equity investment in ArtiFlex, resulting in a pre-tax loss of $16.1 million in Equity Income related to the sale, including a loss of $0.3 million for the settlement of final transaction costs related to the sale during the three months ended February 28, 2023.
Previous report
Reflects reductions in certain indirect and/or shared corporate overhead costs that were eliminated at 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.
Previous report
Building Products –Adjusted EBITDA decreased $5.0 million from the third quarter of fiscal 2023 from $58.1 million 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.
Previous report
Sustainable Energy Solutions –Adjusted EBITDA was a loss of $2.7 million in the third quarter of fiscal 2024, unfavorable $2.9 million to the third quarter of fiscal 2023, as volumes remained too low to absorb the fixed costs in the business.
Previous report
Nine Months Year-to-Date - Fiscal 2024 compared to Fiscal 2023
Previous report
Net Sales and Volume
Previous report
Consumer Products –Net sales totaled $369.9 million in the current year period, down $36.6 million, or 9.0%, from the prior year period, due primarily to lower volumes driven largely by destocking at some of our retail customers that continued into the first quarter of fiscal 2024.
Previous report
Building Products –Net sales totaled $465.4 million in the current year period, down $77.1 million, or 14.2%, from the prior year period, due to an unfavorable shift in product mix, and to a lesser extent, lower volumes.
Previous report
Sustainable Energy Solutions –Net sales totaled $91.6 million in the current year period, down $9.1 million, or 9.0%, from the prior year period on an unfavorable shift in product mix and lower volumes.
Previous report
Gross Profit
Previous report
Gross profit was $206.0 million in the current year period, a decrease of $23.4 million compared to the prior year period, driven primarily by the impact of lower overall volume and an unfavorable shift in product mix.
Previous report
SG&A
Previous report
SG&A was $210.3 million in the current year period, down $0.9 million, or 0.4%, from the prior year period. Excluding the impact of corporate costs in the prior year period that were eliminated post-Separation, SG&A was up $10.9 million, primarily due to higher healthcare and other benefit-related costs, and to a lesser extent, higher wages.
Previous report
Impairment of long-lived assets in the prior year period was driven by changes in the intended use of certain fixed assets at our Building Products facility in Jefferson, Ohio. Refer to “Note E – Impairment of Long-Lived Assets” for additional information.
Previous report
Restructuring activity during the current year period related primarily to severance costs within Unallocated Corporate and Other. Restructuring activity in the prior year period was related primarily to a reduction in workforce at our Columbus, Ohio facility, organizational realignment within Building Products and a pretax gain of $1.2 million from the sale of real property in Tulsa Oklahoma.
Showing the first 40 of 61 passages. Open the source sections for the rest.
Reworded paragraphs (25)
Previous wording
Selected statements contained in this MD&A constitute “forward-looking statements” as that term is used in the PSLRA. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” in the beginning of this Form 10-Q and “Part I – Item 1A. – Risk Factors” of the 2023 Form 10-K.
Current wording
Selected statements contained in this MD&A constitute “forward-looking statements” as that term is used in the PSLRA. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-Q and “Part I – Item 1A. – Risk Factors” of the 2024 Form 10-K.
Previous wording
Unless otherwise indicated, all Note references contained in this MD&A refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q.
Current wording
Unless otherwise indicated, all Note references contained in this MD&A refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. All amounts are presented in millions except common share and per common share amounts.
Previous wording
The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position, should be read in conjunction with our consolidated financial statements and notes thereto included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. The 2023 Form 10-K includes additional information about our business, operations and consolidated financial position and should be read in conjunction with this Form 10-Q. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management. The results of operations contained in this MD&A include all of our operations, including our former Steel Processing business. Beginning in the third quarter of fiscal 2024, our historical results have been restated to reflect the operations of Worthington Steel as a discontinued operation in periods prior to the December 1, 2023 Separation. This MD&A is divided into six main sections:
Current wording
The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position, should be read in conjunction with our consolidated financial statements and notes thereto included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. The 2024 Form 10-K includes additional information about our business, operations and consolidated financial position and should be read in conjunction with this Form 10-Q. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management. The results of operations contained in this MD&A include all of our operations, including our former steel processing business. Our historical results have been restated to reflect the operations of Worthington Steel as a discontinued operation in periods prior to the December 1, 2023 Separation as discussed in “Note A – Basis of Presentation.” This MD&A is divided into five main sections:
Previous wording
Common shares – On March 20, 2024, the Board 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.
Current wording
On September 24, 2024, the Board declared a quarterly dividend of $0.17 per common share payable on December 27, 2024, to shareholders of record at the close of business on December 13, 2024.
Previous wording
We sell our products and services to a diverse customer base and a broad range of end markets. These end markets include residential construction, nonresidential construction, and repair and remodel, which drives demand in our Building Products operating segment, including WAVE and ClarkDietrich, our unconsolidated joint ventures; general consumer and outdoor recreation, which drives demand in our Consumer Products operating segment; and renewable energy, which drives demand in our Sustainable Energy Solutions operating segment. Given the broad base of products and services offered, specific competitors vary based on the target industry, product type, service type, size of program and geography. Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements. Our products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, transportation and shipping costs, and overall economic conditions in the U.S. and abroad. Sales to one customer within Consumer Products represented 12.4% of consolidated net sales during the third quarter of fiscal 2024.
Current wording
We offer a wide range of products and services to a diverse customer base across various end markets. These markets include residential construction, non-residential construction, and repair and remodeling, which drive demand in our Building Products operating segment, including our unconsolidated joint ventures, WAVE and ClarkDietrich. Additionally, tools, outdoor living, and celebrations drive demand in our Consumer Products operating segment, including our consolidated joint venture, Halo. Given the extensive range of products and services we provide, our competitors vary by industry, product type, service type, program size, and geography. Competition is primarily based on price, product quality, brand recognition, product innovation, and customer service. Sales to one customer in the Consumer Products operating segment accounted for 13% of our consolidated net sales in the first quarter of fiscal 2025. Trends and factors impacting each of our end markets are described in additional detail below.
Previous wording
U.S. GDP growth rate trends are generally indicative of the strength in demand and, in many cases, pricing for our products. A year-over-year increase in U.S. GDP growth rates is generally indicative of a stronger economy, which generally increases demand and pricing for our products. Conversely, declining U.S. GDP growth rates generally indicate a weaker economy, which decreases demand and pricing for our products. Changes in U.S. GDP growth rates can also signal changes in conversion costs related to production and in SG&A.
Current wording
U.S. GDP growth rate trends typically reflect the strength of demand and, in many cases, pricing for our products. A year-over-year increase in U.S. GDP growth rates generally signals a stronger economy and higher demand and pricing for our products. Conversely, declining U.S. GDP growth rates usually indicate a weaker economy and reduced demand and pricing our products. Fluctuations in U.S. GDP growth rates can affect conversion costs related to production and SG&A.
Previous wording
We also closely monitor other publicly available macroeconomic trends that provide insight into the activity in our end markets, including, but not limited to the ABI, the Dodge Momentum Index, the HMI, steel prices, retail sales, state and local government spending, interest rate environment and inflation metrics. Current macro-economic trends within our end markets are described in additional detail below.
Current wording
We also actively monitor other publicly available macroeconomic trends that provide insight into the activity in our end markets. These trends include, but are not limited to, the ABI, the Dodge Momentum Index, the HMI, steel prices, retail sales, state and local government spending, interest rate environment and inflation metrics. Current macro-economic trends within our end markets are described in additional detail below, as well as selected key indicators for the periods presented.
Previous wording
Repair and Remodel: Spending on home improvement is expected to decline in the near term, as existing home sales are at multi-decade lows; however, the long-term outlook remains strong due to the aging housing stock, higher interest rates, and tightening of lending policies.
Current wording
Repair and Remodel: Spending on home improvement is expected to continue declining in the near term as existing home sales remain at multi-decade lows. Although the average 30-year fixed mortgage rate decreased to 6.35% at August 31, 2024, from 7.18% at August 31, 2023, this decline isn’t significant enough to entice most buyers to enter the market or leave their existing lower fixed rate mortgages. Despite these challenges, the long-term outlook remains strong as interest rates are expected to decline further and the aging housing stock will drive the need for renovations. As economic conditions stabilize, we expect homeowners to access their record levels of equity and drive spending in the long-term.
Previous wording
Historically, sales tend to be stronger in the third and fourth quarters of our fiscal year for our Consumer Products operating segment when our facilities perform at seasonal peaks, matching consumer demand. Sales in our Building Products operating segment are generally stronger in the first and fourth quarters of our fiscal year due to weather conditions, customer business cycles, and the timing of renovation and new construction projects. Sustainable Energy sales are typically at greater levels during our fiscal fourth quarter due to customer business cycles.
Current wording
Historically, sales tend to be stronger in the third and fourth quarters of our fiscal year for our Consumer Products operating segment when our facilities perform at seasonal peaks, matching consumer demand. Sales in our Building Products operating segment are generally stronger in the first and fourth quarters of our fiscal year due to weather conditions, customer business cycles, and the timing of renovation and new construction projects. Demand in our Building Products operating segment during the first quarter of fiscal 2025 was not reflective of the cyclical strength we typically see in in the first quarter of our fiscal year due to continued destocking at certain distributors as well as unfavorable weather patterns.
Previous wording
Third Quarter – Fiscal 2024 Compared to Fiscal 2023
Current wording
First Quarter – Fiscal 2025 Compared to Fiscal 2024
Previous wording
The following table provides a reconciliation of net earnings from continuing operations (the most comparable GAAP financial measure) to the non-GAAP financial measure of adjusted EBITDA for the periods presented. For additional information regarding our use of non-GAAP financial measures, refer to the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-Q.
Current wording
A reconciliation of each of these non-GAAP financial measures to their most comparable GAAP financial measure is provided in the “Use of Non-GAAP Measures and Definitions” section.
Previous wording
The following table provides volume by operating segment for the periods presented:
Current wording
The following table provides volume by operating segment for the periods presented (in units):
Previous wording
Consumer Products – Net sales totaled $133.2 million in the third quarter of fiscal 2024, up $2.5 million, or 1.9% over the third quarter of fiscal 2023 on higher volume, partially offset by lower average selling prices.
Current wording
Consumer Products – Net sales totaled $117.6 million in the first quarter of fiscal 2025, up slightly from the first quarter of fiscal 2024 on marginally higher volume.
Previous wording
Building Products – Net sales totaled $148.2 million in the third quarter of fiscal 2024, down $35.6 million, or 19.4%, from the third quarter of fiscal 2023, primarily due to an unfavorable shift in product mix.
Current wording
Building Products – Net sales totaled $139.7 million in the first quarter of fiscal 2025, down $26.2 million, or 15.8%, from the first quarter of fiscal 2024, primarily due to lower volume and an unfavorable shift in product mix, which more than offset contributions from the acquisition of Ragasco in June 2024.
Previous wording
Separation costs reflect direct and incremental costs incurred in connection with the Separation as discussed in “Note A – Basis of Presentation.”
Current wording
Separation costs in the prior year quarter reflect direct and incremental costs incurred in connection with the Separation.
Previous wording
Interest expense, net of $1.6 million in the current year period was favorable compared to the prior year period by $15.7 million, driven primarily by lower average debt levels as a result of the redemption of the 2024 Notes and 2026 Notes in the current fiscal year and, to a lesser extent, higher interest income. Refer to “Note I – Debt and Receivables Securitization” for additional information.
Current wording
Interest expense, net was down $0.6 million from the prior year quarter, driven primarily by lower average debt levels as a result of the redemption of the 2024 Notes and 2026 Notes in December 2024.
Previous wording
Income tax expense was $18.5 million in the third quarter of fiscal 2024 compared to income tax expense of $7.4 million in the third quarter of fiscal 2023. The increase was primarily driven by $9.2 million of one-time discrete tax charges related to the Separation. Income tax expense in the third quarter of fiscal 2024 reflected an estimated annual effective rate of 30.8% up from 22.6% in the third quarter of fiscal 2023 primarily due to the effect of current quarter discrete tax items.
Current wording
Income tax expense was $6.8 million in the first quarter of fiscal 2025 compared to income tax expense of $9.0 million in the first quarter of fiscal 2024. The decrease was primarily driven by lower pre-tax earnings. Income tax expense in the first quarter of fiscal 2025 reflected an estimated annual effective rate of 24.5% compared to 25.1% in the first quarter of fiscal 2024.
Previous wording
The following table provides a reconciliation of net earnings from continuing operations (the most comparable GAAP financial measure) to adjusted EBITDA for the periods presented. For additional information regarding our use of non-GAAP financial measures refer to the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-Q.
Current wording
The following table provides a summary of adjusted EBITDA from continuing operations by reportable segment, a non-GAAP financial measure, along with the respective percentage of the total of each reportable segment. See the “Use of Non-GAAP Financial Measures” section preceding Part I, Item 1 of this Form 10-Q for additional information regarding our use of non-GAAP financial measures. A reconciliation from earnings before income taxes to adjusted EBITDA from continuing operations is provided in “Note M – Segment Operations.”
Previous wording
Consumer Products –Adjusted EBITDA was $25.6 million in the third quarter of fiscal 2024, an increase of $4.5 million over the third quarter of fiscal 2023, driven by higher volumes, partially offset by slightly higher SG&A before corporate allocations.
Current wording
Consumer Products –Adjusted EBITDA from continuing operations was $17.8 million in the first quarter of fiscal 2025, an increase of $3.5 million over the first quarter of fiscal 2024, on improved gross margin driven by lower material costs.
Previous wording
We believe that the available borrowing capacity of the Credit Facility is sufficient to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments, working capital, to the extent not funded by cash provided by operating activities, for at least 12 months and for the foreseeable future thereafter. Our resources include cash and cash equivalents and unused committed lines of credit. There were no borrowings outstanding under the Credit Facility at February 29, 2024, leaving up to $500.0 million available for future use.
Current wording
We believe we have access to adequate resources to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments, and working capital, to the extent not funded by cash provided by operating activities, for at least 12 months and for the foreseeable future thereafter. These resources include cash and cash equivalents and unused committed lines of credit under our Credit Facility, which had a total of $500.0 million of borrowing capacity available to be drawn as of August 31, 2024.
Previous wording
Although we do not currently anticipate a need, we believe that we could access the financial markets to be in a position to sell long-term debt or equity securities. However, the continuation of soft economic conditions and an uncertain interest rate environment could create volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so.
Current wording
Although we do not currently anticipate a need, we believe that we could access the financial markets to sell long-term debt or equity securities. However, the continuation of uncertain economic conditions, including those caused by a high interest rate environment, could create volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so.
Previous wording
We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. Should we seek additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, privately-negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transaction may or may not be material. To facilitate our post-Separation capital structure, during the first quarter of fiscal 2024, we redeemed in full our 2026 Notes for $243.8 million followed by the early redemption of the 2024 Notes for $150.0 million on December 6, 2023, as further discussed in “Note I – Debt and Receivables Securitization.”
Current wording
We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. Should we seek additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, privately-negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Previous wording
Investment activities are largely discretionary, and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and such opportunities may require additional financing. There can be no assurance, however, that any such opportunities will arise, that any such acquisition opportunities will be consummated, or that any needed additional financing will be available on satisfactory terms if required.
Current wording
Investment activities are largely discretionary and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and any such opportunities may require additional financing. However, there can be no assurance that any such opportunities will arise, that any such acquisition opportunities will be consummated, or that any needed additional financing will be available on satisfactory terms if required.
Previous wording
On March 20, 2019, the Board authorized the repurchase of up to 6.6 million common shares.
Current wording
On March 20, 2019, the Board authorized the repurchase of up to 6,600,000 common shares.
Previous wording
On March 24, 2021, the Board authorized the repurchase of up to an additional 5.6 million common shares, increasing the total number of common shares then authorized for repurchase to 10.0 million. As of February 29, 2024, 6.1 million common shares remained available for repurchase under these two authorizations.
Current wording
On March 24, 2021, the Board authorized the repurchase of up to an additional 5,618,464 common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000. As of August 31, 2024, 5,915,000 common shares remained available for repurchase under these two authorizations.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Common shares – On September 24, 2024, the Board declared a quarterly dividend of $0.17 per common share payable on December 27, 2024, to shareholders of record at the close of business on December 13, 2024. During the first quarter of fiscal 2024, we declared dividends totaling $0.32 per common share under our pre-Separation capital structure.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
The following table provides a summary of adjusted EBITDA by reportable segment, along with the respective percentage of consolidated net sales of each, for the periods presented.
Previous report — wording carried elsewhere
The following discussion provides a review of results for the nine months ended February 29, 2024 and February 28, 2023.
Previous report — wording carried elsewhere
The following table provides a breakdown of our consolidated net sales by operating segment for the periods indicated:
Previous report — wording carried elsewhere
Separation costs reflect direct and incremental costs incurred in connection with the Separation as discussed in “Note A – Basis of Presentation.”
Previous report — wording carried elsewhere
The following table provides a summary of adjusted EBITDA by reportable segment, along with the respective percentage of consolidated net sales of each, for the periods presented.