Worthington Steel, Inc.

Our primary ongoing requirements for cash are expected to be for working capital, including the working capital requirements of our expanded operations following the Kloeckner Acquisition, which closed subsequent to May 31, 2026, capital expenditures, integration and transaction-related costs, interest and principal payments on indebtedness, dividend payments, potential future acquisitions and other strategic initiatives.

As of May 31, 2026, our sources of liquidity included cash and cash equivalents, cash generated from operating activities and availability under our then-existing revolving credit facility.

As of May 31, 2026, our cash, cash equivalents, and restricted cash balance was $84.6 million. As of May 31, 2026, the Credit Facility had availability of $219.5 million, after accounting for the eligible borrowing base.

During fiscal 2026, we generated $201.2 million of cash from operating activities, and we used $213.4 million of cash in investing activities, which primarily related to $121.2 million invested in property, plant and equipment and $106.2 million in purchases of equity securities. Additionally, we had net debt proceeds of $51.9 million, and we paid dividends of $32.6 million. The following table summarizes our consolidated and combined cash flows for the periods presented:

Kloeckner Acquisition and Other Capital Subsequent Events

Subsequent to fiscal year-end, we completed certain financing transactions in connection with the Kloeckner Acquisition and refinanced and replaced the Credit Facility. These transactions included, on June 1, 2026, (1) the issuance of the 2033 Notes ($700.0 million aggregate principal amount 7.750% Senior Secured Notes due June 1, 2033) and (2) the incurrence of the Term Loans ($700.0 million aggregate principal amount seven-year Term Loan Facility, due June 1, 2033), bearing interest, at our option, at a per annum rate equal to Term SOFR plus 4.00%, Daily Simple SOFR plus 4.00%, or the base rate plus 3.00% under the Term Loan Facility. On June 3, 2026, we completed the Kloeckner Acquisition and held a total of 60,710,791 Kloeckner shares. Additionally, on June 25, 2026, we entered into the 2031 Revolving Credit Facility, an asset-based revolving credit agreement providing for an aggregate principal amount of up to $550.0 million, subject to borrowing base availability and other conditions. The 2031 Revolving Credit Facility, maturing on June 25, 2031, replaced the prior Credit Facility.

The net proceeds of the 2033 Notes and the Term Loan Facility described above, together with cash on hand, were used to fund the Kloeckner Acquisition, repay certain of our and Kloeckner’s existing indebtedness, pay transaction fees and expenses, and for general working capital purposes. Specifically, the net proceeds and cash on hand were used to purchase the 52,389,508 Tendered Shares on the Settlement Date as well as the additional purchase of one million Kloeckner shares on June 15, 2026. Additional uses of the net proceeds included repayment of a portion of Kloeckner’s pre-acquisition indebtedness. We were required by the public delisting tender offer rules to guarantee the availability of certain funds sufficient to satisfy the potential acceptance of all outstanding Kloeckner shares not already held by us. We fulfilled this requirement using funds available from the financing transactions outlined above. Once the public delisting tender offer settles, the unallocated funds, if any, become unrestricted and available for use.

These financing and acquisition transactions occurred after May 31, 2026, and are thus not reflected in net cash provided by financing activities for fiscal 2026. However, these transactions meaningfully increased our indebtedness and debt service obligations, changed the mix and relative cost of our capital resources and will affect financing cash flows beginning in fiscal 2027. Kloeckner debt that was not repaid in connection with the acquisition will be reflected in our consolidated debt profile once Kloeckner is consolidated in our financial statements.

Subsequent to May 31, 2026, Stanzwerk AG entered into an Amended and Restated Standstill Agreement with UBS Switzerland AG maintaining the credit facility through August 31, 2028.

After giving effect to these subsequent financing and acquisition transactions, our sources of liquidity consist primarily of cash and cash equivalents, cash generated from operating activities and availability under our asset-based revolving credit facility. We believe that these sources of liquidity will be adequate to fund our operations, working capital requirements, capital expenditures, integration and transaction-related costs, debt service obligations, dividend payments and other current and long-term obligations and strategic initiatives for the next 12 months following May 31, 2026, and the foreseeable future.

Our ability to borrow under the asset-based revolving credit facility is subject to a borrowing base and satisfaction of customary borrowing conditions. In addition, the asset-based revolving credit facility requires us to maintain a minimum consolidated fixed charge coverage ratio only during a trigger period based on excess availability. Our senior secured notes, term loan facility and asset-based revolving credit facility also contain covenants and restrictions that, subject to customary exceptions and baskets, may limit our ability to incur additional indebtedness, pay dividends, make investments, dispose of assets or engage in other transactions, with certain restrictions becoming more limiting during periods of reduced availability or covenant trigger events. There can be no assurance that our sources of liquidity and capital resources will continue to be sufficient for our needs or that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

We routinely monitor our current and expected operational requirements, financial market conditions, credit relationships, capital structure and liquidity needs.

We believe that our cash balances, cash generated from operating activities and availability under our asset-based revolving credit facility provide adequate capital for our current operational needs, working capital requirements, capital expenditures, integration and transaction-related costs, debt service obligations and other current and long-term obligations and strategic initiatives. We may from time to time seek additional capital through the issuance of debt and/or equity securities or other financing arrangements to strengthen our liquidity, fund strategic initiatives, refinance existing obligations or otherwise support our capital structure.

Although we successfully accessed the debt capital markets in connection with the Kloeckner Acquisition, our future ability to access the financial markets and the terms under which we may do so will depend on a number of factors, including our financial performance, credit profile, prevailing interest rates, financial market conditions, economic conditions and other factors, many of which are outside our control. There can be no assurance that additional debt or equity financing will be available on terms acceptable to us, if at all. Any additional debt financing could increase our interest expense, leverage and covenant obligations, and any additional equity financing could dilute the interests of our existing shareholders.

Operating Activities

Our business is cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic and industry conditions. We rely on cash and short-term borrowings to meet cyclical increases in working capital needs. These needs generally rise during periods of economic expansion or higher raw material prices, requiring increased levels of inventory and accounts receivable. During economic slowdowns, or periods of declining raw material costs, working capital needs generally decrease as inventories and accounts receivable are reduced.

Net cash provided by operating activities was $201.2 million during fiscal 2026 compared to $230.3 million in fiscal 2025, a decrease of $29.1 million. This change was primarily due to incremental professional and other fees paid in connection with the Kloeckner Acquisition in the amount of $21.4 million and a $19.7 million reduction in the releases of cash from net operating working capital (accounts receivable, inventories, and accounts payable), partially offset by a $10.7 million increase in dividends from Serviacero Worthington. The reduction in the release of net operating working capital is driven by higher average steel prices in fiscal 2026 over fiscal 2025, partially offset by lower-than-normal inventory levels at the end of fiscal 2026 due to tightness in the steel market supply.

Investing Activities

Net cash used in investing activities was $213.4 million during fiscal 2026 compared to $129.1 million in fiscal 2025. In the current year period, the driver of net cash used in investing activities was primarily related to capital expenditures of $121.2 million, which were substantially related to the previously announced strategic expansions of our electrical steel operations in Canada and Mexico to service the transformer and automotive markets, respectively, as well as certain other assets. Additionally, in fiscal 2026, we purchased $106.2 million of Kloeckner equity securities, and paid $2.9 million for Acquisitions, net of cash acquired, in fiscal 2026, due to the acquisition of Sitem Group. See “Note 2 – Acquisitions” for further information.

Capital expenditures reflect cash used for investment in property, plant and equipment and are presented below (this information excludes cash flows related to acquisition and divestiture activity) for each of the prior three fiscal years:

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 additional financing will be available on satisfactory terms. We estimate our annual maintenance capital needs to be between approximately $40.0 million and $45.0 million, which excludes capital expenditures related to strategic initiatives, including, but not limited to, manufacturing capacity expansions, corporate headquarters, and other technology upgrades. This amount is reflective of our estimated needs prior to the Kloeckner Acquisition. We expect that our annual maintenance capital needs will be approximately 1% of net sales subsequent to the Kloeckner Acquisition.

Financing Activities

Net cash provided by financing activities was $3.0 million in fiscal 2026 compared to net cash used in financing activities of $48.5 million in fiscal 2025. The increase in net cash provided by financing activities in fiscal 2026 was primarily due to $36.2 million in incremental revolver debt drawn to purchase Kloeckner shares and $38.1 million in new debt associated with the Tempel Canada facility. In fiscal 2026, we paid $32.6 million of dividends to our shareholders compared to $31.9 million in fiscal 2025.

Revolving credit facility – On November 30, 2023, we entered into a senior secured Credit Facility. The Credit Facility allows for borrowings of up to $550.0 million, to the extent secured by eligible accounts receivable and inventory balances at period end. The Credit Facility does not include credit rating triggers. As of May 31, 2026, there were $185.4 million of outstanding borrowings drawn against the Credit Facility with $219.5 million available under the Credit Facility after accounting for the eligible borrowing base. As of May 31, 2026, we were in compliance with the financial covenants of the Credit Facility.

On January 15, 2026, we amended the Credit Facility to, among other things, permit us to consummate the Offer. We incurred immaterial costs associated with the amendment. For additional information, see “Note 2 – Acquisitions”.

Canadian Government Regional Economic Growth Loan – Tempel owns a subsidiary in Canada (“Tempel Canada”) that 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 May 31, 2026) (“FED DEV Loan”). The FED DEV Loan is to be used for the purchase and installation of advanced manufacturing equipment at Tempel Canada’s Burlington, Ontario location. As of May 31, 2026, $2.3 million was outstanding under the FED DEV Loan.

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 has committed to lend Tempel Canada up to CAD $57.5 million (approximately USD $41.7 million as of May 31, 2026) (“BDC Loan”) to fund the construction of a new manufacturing facility to be located in Burlington, Ontario, Canada (“Burlington Property”). As extended in the third quarter of fiscal 2026, the draw period for the BDC Loan was set to lapse on June 30, 2026, unless further extended by BDC. Subsequent to May 31, 2026, the draw period was extended until August 31, 2026.

Worthington Steel guarantees the payment obligations of Tempel Canada in respect of the BDC Loan. As amended, the guarantee is for the full amount of the BDC Loan on the date of any demand. 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 beginning May 31, 2026. As of May 31, 2026, we were in compliance with the financial covenants of the BDC Loan. As of May 31, 2026, $36.4 million was outstanding under the BDC Loan.

Canadian Advanced Manufacturing and Innovation Competitiveness 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 May 31, 2026) (“AMIC Loan”) to support building and equipment expansion at the Burlington Property. During fiscal 2026, we received total distributions of CAD $2.5 million (approximately USD $1.8 million as of May 31, 2026). The AMIC Loan is structured with an incentive component that states up to CAD $0.5 million (approximately USD $0.4 million as of May 31, 2026) of the principal may be forgiven if certain performance targets are met. As of May 31, 2026, $1.8 million was outstanding under the AMIC Loan.

Sitem Group Term Loans– We assumed liabilities of Sitem Group as part of the acquisition and recorded the liabilities within the consolidated balance sheet as part of the opening balance sheet. Sitem Group’s obligations included various term loans (“Sitem Group Term Loans”), which spanned maturities and had varying interest rates and interest rate mechanisms. As of May 31, 2026, the aggregate amount outstanding of the Sitem Group Term Loans was $30.9 million, which includes the Sitem Group Standstill Agreement described below. The obligations, along with the relevant loan terms, are included in the summary table within “Note 9 – Debt”.

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 $21.7 million as of May 31, 2026). Under the terms of the standstill, the lenders agreed to maintain availability under the credit lines through June 30, 2026. 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 $5.1 million as of May 31, 2026), tested monthly beginning April 30, 2025. Stanzwerk AG was in compliance with these covenants as of May 31, 2026. A detailed discussion of all debt obligations and their associated terms is provided in “Note 9 – Debt”.

As of May 31, 2026, prior to the subsequent financing transactions described below, we had total debt outstanding of $256.8 million, consisting of $185.4 million of short-term borrowings, $27.0 million of current maturities of long-term debt and $44.4 million of long-term debt. Our debt as of May 31, 2026, included amounts outstanding under our then-existing revolving credit facility, Canadian expansion-related loan arrangements, Sitem Group Term Loans and other debt arrangements. We were in compliance with the applicable covenants under our debt arrangements as of May 31, 2026.

Common shares –Prior to the Separation, our common shares were owned by the Former Parent. After the Separation was completed, as described in “Note 11 – Equity and Mezzanine Equity”, there were 49.3 million shares issued and outstanding. On December 1, 2023, the common shares began trading on the NYSE under the ticker symbol WS.

During fiscal 2026, we declared cash dividends totaling $0.64 per common share at a quarterly rate of $0.16 per common share. During fiscal 2025, we declared cash dividends totaling $0.64 per common share at a quarterly rate of $0.16 per common share.

On June 24, 2026, during the first quarter of fiscal 2027, the Board declared a quarterly cash dividend of $0.16 per common share payable on September 29, 2026, to the shareholders of record at the close of business on September 15, 2026.

There were no common shares purchased by Worthington Steel during the period presented as part of publicly announced plans or programs.

Dividend Policy

We currently have no material contractual or regulatory restrictions on the payment of dividends provided that no event of default exists under the 2031 Revolving Credit Facility and the applicable payment conditions, including the minimum availability threshold, are satisfied. Dividends are declared at the discretion of the Board. The Board reviews the dividend quarterly and establishes the dividend rate based upon our consolidated financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors. There is no guarantee that we will continue the payments of dividends in the future or that any dividends declared by the Board in the future will be similar in amount or timing to any dividends previously declared by the Board.

Recent Accounting Pronouncements

Refer to “Note 1 – Description of Business, The Separation, and Basis of Presentation” for further information.

Environmental

We do not believe that compliance with environmental laws has or will have a material effect on our capital expenditures, future results of operations, or financial position or competitive position.