Worthington Steel, Inc.

Note 1 – Description of Business and Basis of Presentation

Description of Business

The Company is one of North America’s premier value-added steel processors with the ability to provide a diversified range of products and services that span a variety of end markets. The Company maintains market-leading positions in the North American carbon flat-rolled steel and tailor welded blank industries and is one of the largest global producers of electrical steel laminations. For over 70 years, the Company has been delivering high quality steel processing capabilities across a variety of end-markets including automotive, heavy truck, agriculture, construction, and energy. The Company serves its customers primarily by processing flat-rolled steel coils, which are sourced primarily from various North American steel mills, into the precise type, thickness, length, width, shape, and surface quality required by customer specifications. The Company sells steel on a direct basis, whereby it is exposed to the risks and rewards of ownership of the material while in its possession. Additionally, the Company toll processes steel under a fee for service arrangement whereby it processes customer-owned material. The Company’s manufacturing facilities further benefit from the flexibility to scale between direct and tolling services based on demand dynamics throughout the year.

On December 1, 2023 at 12:01 a.m., Eastern Time, Worthington Enterprises, Inc., then known as Worthington Industries, Inc. (the “Former Parent”), completed the spin-off of its steel processing business, Worthington Steel, into a stand-alone publicly traded company. On November 30, 2023, in connection with the Separation, the Company entered into several agreements with the Former Parent that govern the relationship between the Former Parent and the Company following the Separation, including the Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Steel Supply and Services Agreement, and Transition Services Agreement.

Basis of Presentation

The consolidated financial statements include the accounts of Worthington Steel and its consolidated subsidiaries. Material intercompany accounts and transactions are eliminated.

On June 3, 2025, the Company, through its wholly owned subsidiary Tempel Steel Company, LLC (“Tempel”), completed its acquisition of 52% of the issued and outstanding capital stock of S.I.T.E.M. S.p.A., a joint stock company incorporated under the laws of Italy (“Sitem” and, together with its subsidiaries, Stanzwerk AG, Decoup S.A.S. and Sitem Slovakia spol. s r.o., the “Sitem Group”). The results of Sitem Group are included in the Company’s consolidated financial statements on a one-month reporting lag to allow for the timely completion of its financial reporting process. For additional information, see “Note 12 – Acquisitions.”

The Company owns controlling interests in the following four operating joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”) (52% interest); TWB Company, L.L.C. (“TWB”) (55% interest); Worthington Samuel Coil Processing, L.L.C. (“WSCP”) (63% interest); and the Sitem Group (52% interest). The Company also owns a controlling interest (51% interest) in Worthington Specialty Processing (“WSP”), which became a nonoperating joint venture on October 31, 2022, when its remaining net assets were sold. These joint ventures are consolidated with the equity owned by the other joint venture members shown as noncontrolling interests on the Company’s consolidated balance sheets, and their portions of net earnings and other comprehensive income (loss) (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in the Company’sconsolidated statements of earnings and comprehensive income, respectively.

The Company owns a noncontrolling interest (50% interest) inone unconsolidated joint venture: Serviacero Planos, S. de R.L. de C.V. (“Serviacero Worthington”). The Company’s investment in its unconsolidated affiliate is accounted for using the equity method with the Company’s proportionate share of income or loss recognized within equity in net income (loss) of unconsolidated affiliate (“equity income”) in itsconsolidated statements of earnings. See further discussion of the Company’s unconsolidated affiliate in “Note 3 – Investment in Unconsolidated Affiliate.”

Organizational Structure and Operating Segment

The Company’s operations are managed principally on a products and services basis under a single group organizational structure. The Company has determined that it has onlyone operating segment and thereforeone reportable segment after considering several sources of information, including the Company’s internal organizational structure, the basis on which budgets and forecasts are prepared, the financial information that the Company’s chief operating decision maker (“CODM”) reviews in evaluating company performance and determininghow resources should be allocated, and how the Company releases information to the public and analysts. The Company’s CODM is Worthington Steel’s chief executive officer (“CEO”).

New Accounting Policy - Redeemable Noncontrolling Interest

During the first quarter of fiscal 2026, the Company entered into an agreement with certain minority interest holders of the Sitem Group that provides them with redemption rights (i.e., put options) that could require the Company to purchase the minority interest holders’ remaining 48% noncontrolling interests in the Sitem Group upon the occurrence of specified events. These redemption rights represent a new type of transaction for the Company, and accordingly the following accounting policy is being disclosed for the first time. As these redemption rights are not solely within the control of the Company such interests are classified as redeemable noncontrolling interest outside of permanent equity, in mezzanine equity, on the Company’s consolidated balance sheet.

At initial recognition, redeemable noncontrolling interests are recorded at their issuance-date, or acquisition date, fair value. Subsequently, redeemable noncontrolling interests that are currently redeemable, or probable of becoming redeemable, are adjusted to the greater of (i) current redemption value or (ii) initial carrying amount. Adjustments to redemption value are recorded through retained earnings or, in the absence of retained earnings, through additional paid-in capital. Upward adjustments are considered a deemed dividend, and would result in a reduction to earnings available to common shareholders for the calculation of earnings per common share. For additional information, see “Note 9 – Mezzanine Equity.”

Prior-period financial statements were not recast, as these redemption rights were not applicable in prior periods.

Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows as of the beginning and end of the periods presented:

Concentration of Net Sales

The Company sells its products and services to a diverse customer base and a broad range of end markets. The automotive industry is the largest end market for the Company, which is largely driven by the production schedules of Ford, General Motors and Stellantis North America (the “Detroit Three Automakers”).

While the Company’s business is not dependent on any one customer, net sales to certain customers were at least 10% of the Company’s consolidated net sales for the periods presented. A significant loss of, or decrease in, business from any of these customers could have a material adverse effect on the Company’s consolidated net sales and financial results if the Company was not able to obtain replacement business. Also, the Company’s sales may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments with respect to, one or more of the Company’s largest customers.

The following table summarizes the concentration percentage of consolidated net sales for the periods presented:

Preparation of Financial Statements Including the Use of Estimates

These interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments that are of a normal and recurring nature necessary for a fair presentation of the consolidated financial statements for these interim periods have been included. Operating results for the first quarter of fiscal 2026 are not necessarily indicative of the results that may be expected for the entirety of fiscal 2026 or any other quarter. For further information, refer to the consolidated and combined financial statements and notes thereto included in the 2025 Form 10-K.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Reclassifications: Certain amounts disclosed within the Company’s consolidated statement of cash flow for the first quarter of fiscal 2026 earnings release have been reclassified to conform to the current presentation of the net (gain) loss on sale of assets and proceeds from sale of assets, net of selling costs. These reclassifications had no impact on total cash, cash equivalents, and restricted cash.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

There have been no new accounting standards adopted since the filing of the 2025 Form 10-K that have significance, or potential significance, to the interim condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

Disaggregation of Income Statement Expenses – In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards (“ASU”) Update 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). This guidance requires the disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements to provide enhanced transparency into the expense captions presented on the statement of earnings. It is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. Adoption may be applied either prospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of this guidance on the Company’s related disclosures.

Improvements to Income Tax Disclosures – In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which expands disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the effect the adoption of the ASU may have on its disclosures.

Note 2 – Revenue Recognition

The Company recognizes revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration it expects to receive for those goods or services, including any variable consideration.

The Company generates revenue by processing steel to the precise type, thickness, length, width, shape, and surface quality required by customer specification. The Company can also toll process steel for steel mills, large end-users and service centers. Toll processing revenue is recognized over time. All other revenue is recognized at a point in time, generally upon shipment to the customer.

The following table summarizes net sales by product class for the periods presented:

The following table summarizes the unbilled receivables and contract assets at the dates indicated:

The following table summarizes the changes in contract liabilities for the periods presented:

Note 3 – Investment in Unconsolidated Affiliate

Investments in affiliated companies that the Company does not control, either through majority ownership or otherwise, are accounted for using the equity method. The Company owns a noncontrolling interest (50% interest) inone unconsolidated joint venture, Serviacero Worthington. Serviacero Worthington provides steel processing services, such as pickling, blanking, slitting, multi-blanking andcutting-to-length, to customers in a variety of industries including automotive, appliance and heavy equipment.

The Company didnot receive any distributions from Serviacero Worthington during thethree months ended August 31, 2025 or August 31, 2024.

The following tables summarize certain financial information of Serviacero Worthington as of the dates, and for the periods, presented:

The following table presents the net earnings of Serviacero Worthington attributable to the Company for the periods presented:

Note 4 – Restructuring and Other (Income), Net

The Company considers restructuring activities to be programs whereby it fundamentally changes its operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions).

A progression of the liabilities associated with the restructuring activities, combined with a reconciliation to the restructuring and other (income), net financial statement caption in the Company’s consolidated statement of earnings as of the dates presented, is summarized below:

During the three months ended August 31, 2025, the following actions were taken related to our restructuring activities:

•

The Company made early retirement and severance payments of $0.4 million associated with a TWB voluntary retirement program (“VRP”). Under the terms of the VRP, eligible TWB employees in the U.S. who chose to participate in the program were offered severance based on their years of service. The VRP was closed to employee acceptance during the fourth quarter of fiscal 2025. The Company doesnot expect to incur additional material severance expenses in fiscal 2026 or beyond due to these announced plans.

•

The Company made severance payments of $0.4 million associated with its announced plans to consolidate WSCP’s remaining Cleveland, Ohio toll processing manufacturing facility into WSCP’s existing manufacturing facility in Twinsburg, Ohio. The Company doesnot expect to incur additional material severance expenses in fiscal 2026 or beyond due to these announced plans. During the first quarter of fiscal 2026, the Company sold machinery and equipment with a net book value of $0.3 million that was reported within assets held for sale for net cash proceeds of $1.3 million, resulting in a pre-tax gain of $1.0 million.

The total liability as of August 31, 2025, is expected to extend past the 12 months from August 31, 2025, due to the severance period.

Note 5 – Contingent Liabilities and Commitments

Legal Proceedings

The Company is a defendant in certain legal proceedings that are incidental to its business. In the opinion of management, the outcome of these legal proceedings, which is not clearly determinable at the present time, individually and in the aggregate, would not have a material adverse effect on the Company, its consolidated financial position, future results of operations or cash flows. The Company has recorded a liability, as necessary, to provide for the anticipated costs, including legal defense costs, associated with the resolution of these legal proceedings. However, the possibility exists that the costs to resolve these legal proceedings could differ materially from the recorded estimates and, therefore, have a material effect on the Company, its consolidated financial position, future results of operations or cash flows for the periods in which they are resolved.

Note 6 – Guarantees

The Company does not have guarantees that it believes are reasonably likely to have a material current or future effect on its consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

At August 31, 2025, the Company had in place outstanding stand-by letters of credit in the aggregate amount of $2.4 million issued to third-party service providers. The fair value of the guarantee instruments, based on premiums paid, was not material andno amounts were drawn against it at August 31, 2025. These guarantee instruments are subject to annual renewal.

Note 7 – Debt

The following table summarizes the Company’s debt outstanding at the dates presented:

(a)

Sitem Group shall maintain a ratio of bank debt plus financial lease obligations less cash and cash equivalents (“Net Financial Position” or “NFP”) to netearnings before interest, tax, depreciation and amortization (“EBITDA”) less than or equal to 3, and a ratio of NFP to Equity less than or equal to 1.

(b)

Sitem Group shall maintain a ratio of NFP to EBITDA less than or equal to 3, a ratio of NFP to Equity less than or equal to 1, a ratio of EBITDA to financial expenses less than or equal to 10, and a NFP less than or equal to €40.0 million(approximately USD $45.7 million asof August 31, 2025).

(c)

Sitem Group shall maintain a ratio of NFP to EBITDA less than or equal to 3.60, a ratio of NFP to Equity less than or equal to 1.20, a ratio of EBITDA to financial expenses less than or equal to 8, and a NFP less than or equal to €48.0 million(approximately USD $54.8 million asof August 31, 2025).

The following table provides the maturities of long-term debt in the next five years and the remaining years thereafter as of August 31, 2025:

As of August 31, 2025, there are $160.0 million of short-term borrowings under the Credit Facility due in fiscal 2026.

Short-Term borrowings

Revolving Credit Facility

On November 30, 2023, the Company entered into a senior secured revolving credit facility scheduled to mature on November 30, 2028, with a group of lenders (the “Credit Facility”). The Credit Facility provides capacity of up to$550.0 million, to the extent secured by eligible accounts receivable and inventory balances at period end, which consist primarily of U.S. dollar denominated account balances. At August 31, 2025 and May 31, 2025, there were$160.0 million and$149.2 million, respectively, of outstanding borrowings drawn against the Credit Facility. After accounting for the eligible borrowing base, at August 31, 2025 and May 31, 2025, availability under the Credit Facility was $279.6 million and $260.9 million, respectively. Individual amounts drawn under the Credit Facility accrue interest at rates equal to an applicable margin over the one-, three-, or six-month term Secured Overnight Financing Rate (“SOFR Rate”), plus a SOFR adjustment. The Company incurred approximately $2.7 million of issuance costs, of which $2.5 million will be amortized to interest expense over the expected five-year term of the Credit Facility and are reflected in other assets.

The Credit Facility permits borrowings under two types of borrowing mechanisms: (i) Term SOFR Rate Loans (as defined in the Credit Facility) and (ii) a swing loan. The Term SOFR Rate Loans permit the Company to draw a specific principal amount for a defined maturity of up tosix months with the interest rate determined at the time of the draw, which equals an applicable margin over the applicable term SOFR Rate, plus a SOFR adjustment. Each Term SOFR Rate Loan has an individual, unique identifier and is distinguishable from the other Term SOFR Rate Loans drawn by the Company. At the end of each relevant interest period, the Company has the option to continue the same interest period for such Term SOFR Rate Loan or the Company can request a conversion to a new interest period for such Term SOFR Rate Loan. If no notice is given by the Company, the Term SOFR Rate Loan is deemed to continue with the same interest period.

The swing loan permits the Company to draw on the Credit Facility at any time up to a maximum of the greater of (i) $55 million and (ii)10% of the then-maximum amount of the Credit Facility. The swing loan interest rate is variable based upon the interest rate market. As of August 31, 2025 and May 31, 2025, the swing loan rate was equal to 8.00%. Any amounts drawn on the swing loan mature on the same date as the maturity of the Credit Facility; however, it has been the practice of the Company to repay the outstanding draws on the swing loan within a short-term period.

The Credit Facility is secured by a first priority lien (subject to permitted liens and certain other exceptions) on certain working capital assets of the Company and the guarantors, including accounts and inventory, but excluding intellectual property, real property and equity interests, and subject to customary exceptions.

The Company currently has no material contractual or regulatory restrictions on the payment of dividends provided that no event of default exists under the Credit Facility and it meets the minimum availability threshold thereunder.

As of August 31, 2025 and May 31, 2025, the weighted average interest rate on the outstanding interest-bearing debt under the Credit Facility was 5.94% and 5.98%, respectively.

Long-Term Debt

Canadian Government Regional Economic Growth Loan

Tempel, a wholly owned subsidiary of Worthington Steel, owns a subsidiary in Canada (“Tempel Canada”). On December 17, 2024, Tempel Canada entered into an agreement with the Federal Economic Development Agency for Southern Ontario, Canada, through the Canadian Government’s Regional Economic Growth Innovation program, which provided a 0% interest loan of up to CAD $3.5 million (approximately USD $2.5 million as of August 31, 2025) (“FED DEV Loan”)to be used for the purchase and installation of advanced manufacturing equipment at Tempel Canada’s Burlington, Ontario location. The first distribution to Tempel Canada was received in the third quarter of fiscal 2025 in the amount of CAD $3.2 million (approximately USD $2.2 million at the time of distribution), or 90% of the total available through the program. The remaining 10% is expected to be received upon project completion. The FED DEV loan is scheduled to be paid off in 60 equal installments beginning April 1, 2027 with the final payment due March 1, 2032. There wereno debt issuance costs associated with the loan.

As of August 31, 2025 and May 31, 2025, the amount outstanding under the FED DEV Loan was$2.3 million.

Business Development Bank of Canada Canadian Loan

On March 25, 2025, Tempel Canada entered into a letter of offer (“BDC Letter”) with Business Development Bank of Canada (“BDC”). Pursuant to the terms of the BDC Letter, BDC committed to lend Tempel Canada up to CAD $57.5 million (approximately USD $41.8 million as of August 31, 2025) (“BDC Loan”), subject to the satisfaction of customary closing conditions and deliverables. The purpose of the BDC Loan is to fund the construction of a new manufacturing facility to be located in Burlington, Ontario, Canada (“Burlington Property”).

The BDC Loan is structured as a construction draw loan. The draw period for the BDC Loan will lapse on March 21, 2026, unless extended by BDC. Monthly interest only payments will be due until July 1, 2026, at which point the BDC Loan will also be subject to monthly amortization payments until maturity. The BDC Loan will accrue interest (a) during the construction period, at a per annum rate equal to BDC’s Floating Base Rate minus 1.75%, and (b) at all times thereafter, at a per annum rate equal to BDC’s Floating Base Rate minus 1.75% or BDC’s Base Rate minus 1.75%, at Tempel Canada’s election. The BDC Loan matures on June 1, 2051.

Worthington Steel guarantees the payment obligations of Tempel Canada in respect of the BDC Loan. As amended during the first quarter of fiscal 2026, the guarantee is for the full amount of the BDC Loan amount on the date of any demand. Provided that there has never been a breach of certain default conditions, the guarantee is reduced to 50% of the outstanding BDC Loan balance once the principal amount outstanding is less than CAD $40.0 million (approximately USD $29.1 million asof August 31, 2025), subject to the satisfaction of certain conditions. The Company will also provide customary cost overrun and completion guarantees in respect of the construction of the Burlington Property. The obligations of Tempel Canada under the BDC Letter are secured by a mortgage on the Burlington Property, an assignment of rents relating to the Burlington Property, and a lien on certain equipment and other personal property located on or used in connection with the Burlington Property.

The BDC Loan contains representations, covenants and events of default customary for transactions of this nature, including that Tempel Canada will maintain a total debt to tangible equity ratio of 1.0 to 1.0 and a fixed charge coverage ratio of 1.15 to 1.0, each tested annually.

As of August 31, 2025, the amount outstanding under the BDC Loan was$21.6 million, while there were no amounts drawn and outstanding as of May 31, 2025.

Canadian Advanced Manufacturing and Innovation Competitiveness (“AMIC”) Loan

On May 12, 2025, Tempel Canada entered into an agreement with the Province of Ontario’s Minister of Economic Development, Job Creation and Trade, which provided a loan for up to CAD $5.0 million (approximately USD $3.6 million as of August 31, 2025) (“AMIC Loan”) to support building and equipment expansion at the Burlington Property. The first distribution to Tempel Canada was received in the first quarter of fiscal 2026 in the amount of CAD $1.0 million (approximately USD $0.7 million in quarter received), or 20% of the total available through the loan. The remaining 80% is expected to be received in steps as project spending progresses. The AMIC Loan is interest free until June 1, 2028, at which point it will bear interest at a fixed rate of 5.97% per annum with interest due annually. The AMIC Loan is scheduled to be paid off infour equal annual installments beginning June 30, 2029 with the final payment due June 30, 2032. The AMIC Loan is structured with an incentive component that states up to CAD $0.5 million (approximately USD $0.4 million as of August 31, 2025) of the principal may be forgiven if certain performance targets are met. There wereno debt issuance costs associated with the AMIC Loan.

As of August 31, 2025, the amount outstanding under the AMIC Loan was $0.7 million.

Sitem Group

The Company assumed the liabilities of the Sitem Group as part of the acquisition and recorded the Sitem Group liabilities within the Company’s consolidated balance sheet. The Sitem Group’s obligations included various Euro-denominated term loans, which have varying maturities, varying interest rates, interest rate mechanisms, and have periodic payments due until maturity. The obligations, along with the relevant loan terms, are included in the summary table within this footnote. Sitem Group was in compliance with its financial covenants as of August 31, 2025.

Standstill Agreement – Sitem Group

Sitem Group, through its subsidiary Stanzwerk AG, entered into a standstill agreement (the “standstill agreement”) with UBS Switzerland AG, as agent and a syndicate of lenders in April 2025. The agreement relates to bilateral credit facilities originally provided to Stanzwerk AG in the aggregate principal amount of CHF 17.1 million (approximately USD $21.0 million as of August 31, 2025). Under the terms of the standstill agreement, the lenders agreed to maintain availability under the credit lines through June 30, 2026, and to forbear from exercising termination, enforcement, or acceleration rights with respect to scheduled repayments or collateral during the standstill period, subject to customary extraordinary termination rights upon events of default.

The standstill agreement provides for continued use of the facilities solely for loan advances and requires pro rata utilization of the credit lines across participating lenders. Borrowings bear interest at the applicable reference rate (which is based on the Swiss Average Rate Overnight and has a floor of zero) plus a 500 basis point margin, with an additional 0.25% quarterly commission on overdraft balances.

The standstill agreement contains financial covenants requiring Stanzwerk AG to maintain (i) a minimum equity ratio of 15%, tested quarterly beginning June 30, 2025, and (ii) minimum liquidity of CHF 4.0 million (approximately USD $4.9 million as of August 31, 2025), tested monthly beginning April 30, 2025. Stanzwerk AG was in compliance with these covenants as of August 31, 2025.

Other Debt

Other– Tempel China

Tempel owns a subsidiary in China (“Tempel China”), and Tempel China utilizes multiple short-term loan facilities, which are used to finance raw material purchases, and are collateralized by Tempel China property and equipment. There wereno borrowings outstanding under the facilities at August 31, 2025 and May 31, 2025.

As of August 31, 2025, Tempel China had two active short term facilities, for an aggregate amount of CNY 90.0 million (approximately USD$12.6 million and USD$12.5 million, as of August 31, 2025 and May 31, 2025). The first facility is for CNY 40.0 million (approximately USD$5.6 million as of August 31, 2025) and matures on September 10, 2026. The second facility is for CNY 50.0 million (approximately USD$7.0 million as of August 31, 2025) and matures on December 31, 2025.

Other– Tempel India

Tempel owns a subsidiary in India (“Tempel India”) which hastwo individual credit facilities with separate financial institutions, each of which contain a line of credit and standby letters of credit/letters of guarantee secured by applicable Tempel India current assets and fixed assets. The facilities are subject to annual renewals, which are effective as of the date of the annual renewal letter.

The aggregate size of the Tempel India credit facilities is INR 1,200.0 million (approximately USD$13.6 million and USD$14.0 million, as of August 31, 2025 and May 31, 2025, respectively), subject to adjustment pursuant to the security noted above. One credit facility is for INR 550.0 million (approximately USD $6.2 million as of August 31, 2025) and matures on December 18, 2025. The other credit facility is for INR 650.0 million (approximately USD $7.4 million as of August 31, 2025) and matures on November 14, 2025. Both the credit facilities allow for borrowing on the lines of credit up to a sublimit of the total facility size, which was equal to an aggregate of INR 600.0 million (approximately USD$6.8 million and USD$7.0 million, as of August 31, 2025 and May 31, 2025, respectively). Interest is payable monthly and will accrue on the outstanding balance according to the lender’s base lending rate plus an applicable margin as determined by the lender. As of August 31, 2025 and May 31, 2025, there wereno borrowings outstanding under Tempel India line of credit facilities.

Letters of credit may be drawn against the aggregate limit of these credit facilities, excluding any amounts drawn by the lines of credit. As of August 31, 2025 and May 31, 2025, no amounts under the Tempel India credit facilities were due to the financial institutions. The purchases, made in the normal course of business that are supported by the letters of credit, are recorded in accounts payable in the consolidated balance sheets as of August 31, 2025 and May 31, 2025.

Other– Sitem Slovakia

Tempel owns a majority interest in a subsidiary in Slovakia (“Sitem Slovakia”), and Sitem Slovakia has an overdraft line of credit in the amountof €0.3 million (approximately USD $0.3 million), which is secured by Sitem Slovakia’s trade receivables. The overdraft line of credit matures in February 2026, and is reviewed annually for renewal. Outstanding borrowings carry an interest rate of 1-month Euribor plus 1.75%. There wereno borrowings outstanding under the facilities as of August 31, 2025.

Note 8 – Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss): The following table summarizes the tax effects on each component of other comprehensive income (loss) (“OCI”) for the periods presented:

Accumulated Other Comprehensive Income (Loss): The following table summarizes the changes in accumulated other comprehensive income (loss) (“AOCI”) for the periods presented:

(1)

Theconsolidated statement of earnings classification of amounts reclassified to net income include:

a.

Cash flow hedges – See the disclosure in “Note 13 – Derivative Financial Instruments and Hedging Activities”.

Note 9–Mezzanine Equity

Mezzanine Equity: The Sitem Group purchase agreement includes a series of put options and call options. The put options are held by the minority investors of the Sitem Group, which provide the right to sell up to 100% of their remaining interest (i.e., a 48% interest) in the Sitem Group to the Company. The call options are held by the Company and provide it the right to acquire from the minority investors of the Sitem Group up to 100% of their remaining interest (i.e., a 48% interest) in the Sitem Group. The call options require the achievement of certain EBITDA based milestones. There aretwo put options held by the minority investors andtwo call options held by the Company, with the first and second put option period occurring in fiscal 2030 and fiscal 2032, respectively, and the first and second call option period occurring in fiscal 2031 and 2033, respectively.

The put and call options are considered redeemable noncontrolling interests as: 1) the minority shareholders can put the Sitem Group shares to the Company; 2) the put is outside of the Company’s control; and 3) redemption is possible as it is based upon specified financial metrics. As a result, the redeemable noncontrolling interest is presented as mezzanine equity.

The put and call options cannot be separated from the noncontrolling interest. Due to the redemption features, the minority interest is classified as a redeemable noncontrolling interest within mezzanine equity on the Company’s consolidated balance sheets. For additional information, see “Note 12 – Acquisitions.”

Redeemable noncontrolling interests are initially recorded at the issuance date fair value, which is the acquisition date for the Sitem Group transaction. When redeemable noncontrolling interest is currently redeemable, or probable of becoming redeemable, it is subsequently adjusted to the greater of current redemption value or initial carrying value. The redemption value is updated at least annually in connection with a third-party valuation. Interim periods rely on a roll forward approach, unless circumstances materially change (e.g., significant deviation from forecast, changes in key metrics, or material foreign currency movements).

The redeemable noncontrolling interest remeasurement was adjusted to the current redemption value as of August 31, 2025. For the first quarter of fiscal 2026, this was accounted for as a deemed dividend of redeemable noncontrolling interest equal to $0.5 million and recorded as an adjustment to retained earnings as well as a reduction to earnings available to common shareholders for the calculation of earnings per common share.

For the roll forward of mezzanine equity, see the Company’s consolidated statement of equity and mezzanine equity.

Note 10– Income Taxes

The Company’s effective income tax rate was 26.6% and 12.3% for the first quarter of fiscal 2026 and fiscal 2025, respectively. The effective tax rate for the first quarter of fiscal 2026 differed from the statutory rate primarily due to non-deductible executive compensation, revaluation of a German net operating loss carryforward due to the Sitem Group transaction, and income from unconsolidated joint ventures outside the U.S. recognized net of tax. The effective tax rate for the first quarter of fiscal 2025 differed from the statutory rate primarily due to recognizing a discrete tax item for a pre-acquisition tax matter at Tempel.

The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items and excludes any impact from the inclusion of net earnings attributable to noncontrolling interests in the consolidated statements of earnings. Net earnings attributable to noncontrolling interests are a result of the Company’s consolidated joint ventures. The net earnings attributable to the noncontrolling interests in the U.S. operations of the Company’s consolidated joint ventures do not generate tax expense to the Company since the investors are taxed directly based on the earnings attributable to the investors. The tax expense of TWB’s wholly owned foreign subsidiaries is reported in the consolidated income tax expense. Management is required to estimate the annual effective income tax rate based upon its forecast of annual pre-tax income for domestic and foreign operations. The Company’s actual effective income tax rate for fiscal 2026 could be materially different from the forecasted rate as of August 31, 2025.

Note 11– Earnings per Common Share

The following table sets forth the computation of basic and diluted earnings per common share attributable to controlling interest for the periods presented:

(1)

These non-qualified stock options and restricted common share awards were excluded from the calculation of diluted earnings per common share because their inclusion would have been anti-dilutive.

Earnings per common share was calculated based on the weighted-average number of common shares outstanding. Earnings per diluted common share included the weighted-average effect of dilutive restricted common shares and non-qualified stock options on the weighted-average shares outstanding.

The remeasurement of the redeemable noncontrolling interest was accounted for as a deemed dividend of redeemable noncontrolling interest and recorded as an adjustment to retained earnings as well as a reduction to earnings available to common shareholders for the calculation of earnings per common share. Refer to “Note 9 – Mezzanine Equity” for additional information.

Note 12 – Acquisitions

Sitem Group (Fiscal 2026)

On June 3, 2025, Tempel completed its acquisition of 52% of the Sitem Group. The Sitem Group produces electric motor laminations and accessory products primarily for automotive and industrial applications in Europe.

The total purchase price to be paid by Tempel in the Sitem Group acquisition consisted of the following:

(1)

Stock acquired from shareholders of €43.1 million ($48.9 million)

(2)

Cash capital contribution of €10.0 million ($11.3 million) related to the purchase for newly issued shares, of which €4.8 million ($5.4 million) is attributable to minority interest, and

(3)

Contribution of Tempel’s electrical steel subsidiary in Nagold, Germany (“Tempel Nagold”), which was valued at €22.0 million ($25.0 million) at the time of acquisition, of which €10.6 million ($12.0 million) is attributable to minority interest.

The cash consideration included cash that is contingent on certain customary conditions, of which €4.2 million ($4.7 million) relates to the purchase of existing shares and €0.6 million ($0.7 million) relates to the purchase of newly issued shares. The acquisition was funded primarily with restricted cash held in escrow at May 31, 2025. The difference between the contributed fair value of Tempel Nagold at the time of the acquisition and the noncontrolling interest in Tempel Nagold, which was at the Company’s historical cost, was $0.7 million and was recorded as an adjustment to APIC.

As of the first quarter of fiscal 2026, total acquisition-related expenses, consisting primarily of legal, advisory, and valuation services were $5.0 million, of which $0.4 million was incurred in the first quarter of fiscal 2026. These costs are included in SG&A expense in the consolidated statement of earnings. There was a one-time bonus of €4.0 million ($4.6 million) that was paid to key individuals at the Sitem Group as a result of the successful closing, which was recorded in SG&A expense in the consolidated statement of earnings. There was a deferred tax asset adjustment of €0.7 million ($0.8 million) related to thedisallowance of deferred tax assets located within Germany as a result of the contribution of Tempel Nagold. This adjustment was recorded in income tax expense in the consolidated statement of earnings.

The Sitem Group transaction includes a series of put options and call options. The net put/call was valued at €9.4 million ($10.7 million) using a Monte Carlo simulation in a risk-neutral framework and is recorded within Mezzanine Equity. The fair value of the remaining noncontrolling interest of 48% after the acquisition was determined using the implied enterprise value based on the purchase price. For additional information, see “Note 9 – Mezzanine Equity.”

The following table summarizes the consideration transferred and the estimated fair value assigned to the assets acquired and liabilities assumed at the acquisition date. These amounts reflect various preliminary fair value estimates and assumptions, including preliminary work performed by a third-party valuation specialist, and are subject to change within the measurement period as the valuation is finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of acquired tangible assets and liabilities, identification and valuation of residual goodwill and tax effects of acquired assets and assumed liabilities.

In addition to the redeemable noncontrolling interest above of $81.8 million, the Company recorded $17.4 million of redeemable noncontrolling interest related to the cash capital contribution and the contribution of Tempel Nagold.

The Company recognized goodwill related to this acquisition of $22.0 million, which is not expected to be deductible for income tax purposes. The goodwill recognized in this acquisition was attributable to the acquired assembled workforce, expected synergies, expanded market opportunities, and economies of scale, none of which qualify for recognition as a separate intangible asset.

Acquired intangible assets are being amortized over the estimated useful lives on a straight-line basis. The following table summarizes the purchase price allocation and weighted average remaining useful lives for identifiable intangible assets acquired as of the acquisition date:

Operating results of the Sitem Group have been included in our consolidated statement of earnings since June 3, 2025, the date of acquisition. The Sitem Group is reported on a one-month lag. During the first quarter of fiscal 2026, the Sitem Group contributed net sales of$39.4 million and net loss attributable to Worthington Steel of$3.0 million.

The following unaudited pro forma information presents consolidated financial information as if the Sitem Group had been acquired at the beginning of fiscal 2025. Depreciation and amortization expense included in the pro forma results reflect the preliminary acquisition-date fair values assigned to the definite-lived intangible assets and fixed assets of the Sitem Group assuming a June 1, 2024 acquisition date. Adjustments have been made to remove acquisition-related costs and the acquisition date fair value adjustment to acquired inventories. The pro forma adjustments noted below have been adjusted for the applicable income tax impact. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on June 1, 2024.

Note 13– Derivative Financial Instruments and Hedging Activities

The Company utilizes derivative financial instruments to primarily manage exposure to certain risks related to its ongoing operations. The primary risks managed through the use of derivative financial instruments are commodity price risk, foreign currency exchange risk, and interest rate risk. While certain of the Company’s derivative financial instruments are designated as hedging instruments, the Company also enters into derivative financial instruments that are designed to hedge a risk, but are not designated as hedging instruments and, therefore, do not qualify for hedge accounting. These derivative financial instruments are adjusted to current fair value through earnings at the end of each period.

Commodity Price Risk Management – The Company is exposed to changes in the price of certain commodities, including steel, zinc and other raw materials, and the Company’s utility requirements. The objective is to reduce earnings and cash flow volatility associated with forecasted purchases and sales of these commodities to allow management to focus its attention on business operations. Accordingly, the Company enters into derivative financial instruments to manage the associated price risk.

Foreign Currency Exchange Risk Management – The Company conducts business in several major international currencies and is, therefore, subject to risks associated with changing foreign currency exchange rates. The Company uses foreign currency forward contracts to protect against exchange rate movements for forecasted cash flows, primarily operating expenses denominated in currencies other than the functional currency. Such contracts limit exposure to both favorable and unfavorable foreign currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects the Company to exposure related to fluctuating foreign currency exchange rates; however, derivative financial instruments are not used to manage this risk.

Interest Rate Risk Management – The Company is exposed to the impact of interest rate changes. The Company’s objective is to manage the impact of interest rate changes on cash flows and the market value of borrowings. The Company utilizes a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, the Company enters into interest rate swaps to further manage exposure to interest rate variations related to borrowings and to lower overall borrowing costs.

The Company is exposed to counterparty credit risk on all of its derivative financial instruments. Accordingly, the Company has established and maintains strict counterparty credit guidelines. The Company has credit support agreements in place with certain counterparties to limit the Company’s credit exposure. These agreements require either party to post cash collateral if its cumulative market position exceeds a predefined liability threshold. Amounts posted to the margin accounts accrue interest at market rates and are required to be refunded in the period in which the cumulative market position falls below the required threshold. The Company does not have significant exposure to any one counterparty, and management believes the overall risk of loss is remote and, in any event, would not be material.

Refer to “Note 14 – Fair Value” for additional information regarding the accounting treatment for the Company’s derivative financial instruments, as well as how fair value is determined.

The following table summarizes the fair value of the derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at the dates presented:

GAAP permits an entity to present derivative financial instruments assets and liabilities on a net basis on the balance sheet, provided a right of offset exists and/or when they are subject to a master netting arrangement. The Company’s policy is to record derivative financial instruments on a net basis where the Company has an executed master netting arrangement with counterparties as well as where the right of offset exists. The amounts in the table above reflect the fair value of the derivative financial instruments on a net basis, where allowable under master netting arrangements and/or where the right of offset exists. Had these amounts been recognized on a gross basis, the impact would have been an increase in receivables with a corresponding increase in accounts payable of $0.6 million and $0.6 million at August 31, 2025 and May 31, 2025, respectively.

Cash Flow Hedges

The Company enters into derivative financial instruments to hedge its exposure to changes in cash flows attributable to interest rate and commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on each of these derivative financial instruments is reported as a component of OCI and reclassified into earnings in the same line associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative financial instrument is recognized in earnings immediately.

The following table summarizes the Company’s cash flow hedges outstanding at August 31, 2025:

The following table summarizes the Company’s cash flow hedges outstanding at May 31, 2025:

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into net earnings for derivative financial instruments designated as cash flow hedges for the periods presented:

The estimated net amount of the losses recognized in AOCI at August 31, 2025, expected to be reclassified into net earnings within the succeeding twelve months is $0.8 million (net of tax of $0.3 million). This amount was computed using the fair value of the cash flow hedges at August 31, 2025, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, 2026 and May 31, 2027.

Economic (Non-designated) Hedges

The Company enters into foreign currency exchange contracts to manage its foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. The Company also enters into certain commodity contracts that do not qualify for hedge accounting treatment. Accordingly, these derivative financial instruments are adjusted to current market value at the end of each period through earnings.

The following table summarizes the Company’s economic (non-designated) derivative financial instruments outstanding at August 31, 2025:

The following table summarizes the Company’s economic (non-designated) derivative financial instruments outstanding at May 31, 2025:

The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments for the periods presented:

Note 14 – Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities that the reporting entity can assess at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability and that are significant to the fair value of the assets and liabilities (i.e., allowing for situations in which there is little or no market activity for the asset or liability at the measurement date).

Recurring Fair Value Measurements

At August 31, 2025, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

(1)

The fair value of the Company’s derivative financial instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “Note 13 – Derivative Financial Instruments and Hedging Activities” for additional information regarding the use of derivative financial instruments.

At May 31, 2025, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

(1)

The fair value of the Company’s derivative financial instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “Note 13 – Derivative Financial Instruments and Hedging Activities” for additional information regarding the use of derivative financial instruments.

Non-Recurring Fair Value Measurements

At August 31, 2025, the Company’s assets measured at fair value on a non-recurring basis were as follows:

(1)

Comprised of the remaining idled assets at WSCP’s Cleveland, Ohio toll processing manufacturing facility. During the first quarter of fiscal 2026, the Company sold machinery and equipment with a net book value of $0.3 million that was reported within assets held for sale for net cash proceeds of $1.3 million, resulting in a pre-tax gain of $1.0 million. Refer to“Note 4– Restructuring and Other (Income), net” for additional information.

At May 31, 2025, the Company’s assets measured at fair value on a non-recurring basis were as follows:

(1)

During the third quarter of fiscal 2025, the Company announced plans to combine WSCP’s Cleveland, Ohio toll processing manufacturing facility into its existing manufacturing facility in Twinsburg, Ohio. At that time, the Company determined there wasno impairment related to finance lease assets along with certain other fixed assets encumbered to the land and building of the finance lease assets. Certain machinery and equipment fixed assets and other long-lived assets were written down to their estimated fair value of $1.3 million based on estimated replacement costs and/or prices for similar assets. During the fourth quarter of fiscal 2025, the Company transferred the remaining $10.4 million to assets held for sale, which represented the remaining net assets prior to the held for sale criteria being met. The assets held for sale are expected to be disposed of primarily by sales within the next twelve months.

The fair value of non-derivative financial instruments, including cash and cash equivalents, receivables, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities, approximate carrying value due to their short-term nature.

The carrying value of the Credit Facility was$160.0 million and$149.2 million at August 31, 2025 and May 31, 2025, respectively, and relates to the Credit Facility, which due to its short-term nature, approximates fair value.

The following table provides a summary of the carrying value and estimated fair value of the Company’s outstanding debt, excluding the Credit Facility, reported on the balance sheets within total liabilities as of the dates presented:

(1)

The estimated fair value of long-term debt, including current maturities, was calculated based upon models utilizing market observable (Level 2) inputs and credit risk. For long-term variable rate debt, the carrying amount approximates fair value as the variable rates reset frequently at market rates. For the current maturities of long-term debt for fixed rate debt, the carrying amount approximates fair value due to its short-term nature.

Note 15 – Related Party Transactions

Subsequent to the Separation, transactions between the Former Parent and the Company are considered related party transactions, including those subject to agreements entered into with the Former Parent. The material related party transactions have been disclosed below.

Transactions with the Former Parent

The majority of the Company’s net sales to the Former Parent are subject to the Steel Supply and Services Agreement and are included within net sales in the consolidated statement of earnings. Net sales to the Former Parent totaled$18.2 million and$15.9 million for the three months ended August 31, 2025 and August 31, 2024, respectively.

As of August 31, 2025 and May 31, 2025, the outstanding accounts receivable balance with the Former Parent equaled$10.6 million and$9.2 million, respectively, as a result of the net sales to the Former Parent described above.

Note 16 – Segment Information

Segment Information

The Company’s CODM is Worthington Steel’s CEO. The Company has determined that it has only one operating segment and therefore one reportable segment after considering several sources of information, including the Company’s internal organizational structure, the basis on which budgets and forecasts are prepared, the financial information that the Company’s CODM reviews in evaluating company performance and determining how resources should be allocated, and how the Company releases information to the public and analysts. The CODM manages all business activities on a consolidated basis, and as a result, the Company has concluded that there is onlyone operating segment and thereforeone reportable segment.

The Company’s one reportable segment serves its customers primarily by processing flat-rolled steel coils, which are sourced primarily from various North American steel mills, into the precise type, thickness, length, width, shape, and surface quality required by customer specifications. The Company generates a substantial percentage of its revenue from selling steel on a direct basis, whereby it is exposed to the risk and rewards of ownership of the material while in its possession. Additionally, the Company toll processes steel under a fee for service arrangement whereby it processes customer-owned material.

As the one reportable segment is managed on a consolidated basis, the measure of segment profit or loss is consolidated net income. The CODM uses consolidated net income to assess the performance of the Company’s one segment and decide how and where to allocate resources and reinvest profits into the business in areas such as capital expenditures, business and/or asset acquisitions, investments in market share expansion with our existing and potential new customers, talent, technology, the repurchase of the Company’s common shares, and/or the payment of dividends. Netearnings and components of net earnings are used to monitor actual performance and are compared to budgeted and forecasted results to assess the performance of the Company’s one reportable segment, settargets, and establish management’s incentive compensation. The measure of consolidated segment assets is reported on the balance sheets as total assets.

The Company regularly provides the CODM a reporting package that is structured similar to the statement of earnings, andthe CODM reviews consolidated net earnings (loss) as a key performance measure of profit (loss) for the Company’s single reportable segment and reviews significant expenses on a consolidated basis consistent with the presentation on the consolidated statements of earnings, with the exception of cost of goods sold, which is further disaggregated. The CODM’s review is focused on the consolidated results for the Company.

The following table presents the significant expenses that are regularly provided to the CODM for theone reportable segment and the required disclosable amounts that are included in consolidated net earnings for the periods presented:

(1)

Includes expenses related to manufacturing profit sharing and bonus.

Note 17 – Subsequent Events

On September 24, 2025, Worthington Steel's Board of Directors (the “Board”) declared a quarterly cash dividend of $0.16 per common share payable on December 26, 2025, to shareholders of record at the close of business on December 12, 2025.