Worthington Steel, Inc. (“Worthington Steel,” together with its consolidated subsidiaries, the “Company”) is a value-added metals processor and service center company with a diversified range of products and services serving customers across a variety of end markets. On June 3, 2026, the Company completed the acquisition of a controlling equity interest in German-based Kloeckner (the “Kloeckner Acquisition”), significantly expanding the Company’s scale, product and service offerings, end-market exposure and geographic footprint. For additional information, see “Note 2 – Acquisitions.”

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.

Worthington Steel became an independent, publicly traded company on December 1, 2023, following its separation from Worthington Enterprises, Inc., formerly known as Worthington Industries, Inc.

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

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 2027 are not necessarily indicative of the results that may be expected for the entirety of fiscal 2027 or any other quarter. These interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2026 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.

On June 3, 2026, the Company completed its acquisition of a controlling interest in Kloeckner, a Germany-based metals processor with operations primarily in the United States, Mexico, and Europe. Following the acquisition, the Company held approximately 60.86% of Kloeckner’s outstanding share capital and began consolidating Kloeckner’s results of operations and financial position. On June 15, 2026, the Company acquired additional Kloeckner shares, increasing its ownership to approximately 61.87% of Kloeckner’s outstanding share capital. For additional information, see “Note 2 – Acquisitions.”

The Company owns controlling interests in the following additional 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 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”) (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, or in the case of Sitem Group, Redeemable NCI, in the Company’s consolidated balance sheets, and their portions of net earnings and other comprehensive income (loss) (“OCI”) are shown as net earnings or comprehensive income attributable to noncontrolling interests in the Company’s consolidated statements of earnings and comprehensive income, respectively.

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. The Company did not identify any material events during the most recent lag period that would require adjustment to the consolidated financial statements. For additional information, see “Note 2 – Acquisitions.”

The Company owns a noncontrolling interest (50%) in one unconsolidated joint venture: Serviacero Planos, S. de R.L. de C.V. (“Serviacero Worthington”). The investment in the Company’s unconsolidated affiliate is accounted for using the equity method based upon financial information reported on a one-month lag with the Company’s proportionate share of income or loss recognized within equity in net income (loss) of unconsolidated affiliate (“equity income”) in its consolidated statements of earnings. Distributions received are recognized as a reduction in the carrying amount of the investment. The Company evaluates events occurring during the reporting lag to determine whether the effects of any material events should be reflected in its consolidated financial statements. The Company received a $22.0 million dividend from Serviacero Worthington during the current one-month lag reporting period that was reflected as a reduction in the carrying amount of the investment in the consolidated balance sheet. See further discussion of the Company’s unconsolidated affiliate in “Note 4 – Investments.”

In connection with the Kloeckner Acquisition, the Company acquired certain Kloeckner business units that met the held-for-sale criteria under Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment (“ASC 360”) as of the acquisition date, including Becker Stahl-Service GmbH and its related steel service center operations (the “Kloeckner Disposal Group”). In accordance with ASC Topic 805, Business Combinations (“ASC 805”), the Kloeckner Disposal Group was classified and measured at fair value less costs to sell as of the acquisition date. Management has committed to a plan to sell the Kloeckner Disposal Group, and expects the sale to be completed before the end of fiscal 2027.

Unless otherwise indicated, amounts and disclosures included in the interim condensed consolidated financial statements relate to the Company’s continuing operations and exclude amounts attributable to discontinued operations. For additional information, see “Note 18 – Discontinued Operations and Assets and Liabilities Held for Sale.”

New Accounting Policies

The Company has updated the following significant accounting policies in the first quarter of fiscal 2027 following the acquisition of Kloeckner. There have not been any other material changes to the significant accounting policies included in the 2026 Form 10-K.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost for inventories of Worthington Steel is determined using the first-in, first-out method. Cost for inventories of Kloeckner is determined primarily using the monthly moving-average method, with specific identification used for certain inventories. The assessment of net realizable value requires the use of estimates to determine cost to complete, normal profit margin and the ultimate selling price of inventory.

Investments Measured at Net Asset Value

In connection with the Kloeckner Acquisition, the Company acquired investments in venture capital and growth equity funds. These are measured using net asset value (“NAV”) per share (or its equivalent) as a practical expedient under ASC Topic 820, Fair Value Measurement (“ASC 820”), where the investee's NAV is calculated consistent with ASC Topic 946, Financial Services—Investment Companies (“ASC 946”). Changes in NAV are recognized in net earnings within miscellaneous income (expense), net, consistent with the Company's policy for equity securities. Investments are classified as current or non-current based on management's intent and expected timing of sale. Prior-period financial statements were not recast, as the Company held no investments measured using the NAV practical expedient in prior periods. For additional information, see “Note 15 – Fair Value.”

The following table summarizes supplemental cash flow information for the periods presented:


	Three Months Ended
	August 31,		August 31,
(In millions)	2026		2025
Interest paid, net of amount capitalized	$	30.1	$	3.0
Income taxes paid, net of refunds	$	3.0	$	2.1

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 influenced 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, the Company has significant concentrations of net sales within the automotive end market and with the Detroit Three Automakers. A significant loss of, or decrease in, business from these customers could have an adverse effect on the Company’s consolidated net sales and financial results if the Company were not able to obtain replacement business.

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


	Three Months Ended
	August 31,			August 31,
(Percentage of Net Sales)	2026			2025
End Market – Automotive		25	%		56	%
End Market – Construction		19	%		11	%
Detroit Three Automakers		15	%		35	%

No individual customer accounted for 10% or more of consolidated net sales during the three months ended August 31, 2026. During the three months ended August 31, 2025, net sales to two customers represented approximately 13% and 15% of consolidated net sales, respectively.

As of May 31, 2026, the Company’s equity securities were comprised exclusively of Kloeckner shares. As a result of the Kloeckner Acquisition, the Company began consolidating Kloeckner’s results of operations and financial position. As of August 31, 2026, the Company is no longer subject to the fluctuation in the fair value of these securities based on market conditions and issuer-specific developments. Refer to “Note 2 – Acquisitions” for additional information.

Reclassifications: The Company has reclassified the presentation of certain prior-year information to conform to the current presentation.

Recent Accounting Pronouncements

There have been no new accounting standards adopted since the filing of the 2026 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 FASB issued ASU No. 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 adoption, and it expects the adoption of this ASU will result in additional disclosures, but that it will not result in a material impact on its consolidated financial statements.

Targeted Improvements to the Accounting for Internal-Use Software – In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). This guidance modernizes the accounting for internal-use software. ASU 2025-06 removes all references to prescriptive and sequential software development stages and clarifies the threshold for beginning capitalization of eligible internal-use software costs. Under the amended guidance, capitalization begins when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. It is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2027, with early adoption permitted. ASU 2025-06 can be applied prospectively to new software costs incurred as of the beginning of the adoption

period for all projects, prospectively to new software costs incurred only for projects that meet the new capitalization requirements, or retrospectively by recasting comparative periods and recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the first period presented. The Company is currently evaluating the timing and method of its adoption of ASU 2025-06 and has not selected a transition method, and the impact of adoption is not yet reasonably estimable.

Hedge Accounting Improvements – In September 2025, the FASB issued ASU No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements (“ASU 2025-09”). This guidance amends existing guidance to simplify the application of hedge accounting, enhance alignment between risk management activities and financial reporting, and provide additional flexibility in the designation and measurement of certain hedging relationships. The amendments included in the five matters addressed in this ASU are intended to better reflect those strategies in financial reporting by enabling entities to achieve and maintain hedge accounting for highly effective economic hedges of forecasted transactions. It is effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact that adoption of ASU 2025-09 will have on its consolidated financial statements and related disclosures. The impact of adoption is not yet reasonably estimable.

Accounting for Government Grants Received by Business Entities – In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (“ASU 2025-10”). This guidance establishes authoritative guidance for the recognition, measurement, presentation, and disclosure of government grants received by business entities. It is effective for annual periods beginning after December 15, 2028, including interim periods within those annual periods. ASU 2025-10 allows for modified prospective, modified retrospective, or full retrospective application. Early adoption in interim or annual periods is permitted, with adoption in an interim period to be applied as of the beginning of the annual period that includes that interim. The Company has begun evaluating the guidance, including its application to government financing arrangements containing potential forgiveness provisions, and has not selected a transition method. The impact of adoption is not yet reasonably estimable.

Interim Reporting: Narrow-Scope Improvements – In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). This guidance enhances consistency in interim reporting for all entities by clarifying interim disclosure requirements and the form and content of interim financial statements in accordance with GAAP. It is effective for interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and must be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of ASU 2025-11 on its consolidated financial statements and disclosures.

Environmental Credits and Environmental Credit Obligations – In May 2026, the FASB issued ASU No. 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). This guidance establishes recognition, measurement, presentation and disclosure guidance for environmental credits and related regulatory compliance obligations. It is effective for interim periods within annual reporting periods beginning after December 15, 2027. The guidance will be applied through a cumulative-effect adjustment to opening retained earnings at the beginning of the annual period of adoption, without recasting prior periods. Given the recent issuance of the guidance, the Company has initiated a preliminary assessment of its applicability to the Company’s operations. The impact of adoption is not yet reasonably estimable.

The significant accounting policies discussed herein are not intended to represent a comprehensive list of all of the Company’s accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with a lesser need for the Company’s judgment in its application. There are also areas in which the Company’s judgment in selecting an available alternative would not produce a materially different result.