Slides
Page 1
ibdroot\projects\IBD-NY\trillium2020\664375_1\16. Investor Day Presentations\03. WOR Enterprises\2023.09.29 - Investor Day - WOR Enterprises Shell_v78.pptx Q 2 F Y 2 0 2 5 E A R N I N G S S U M M A R Y D E C E M B E R 1 7 , 2 0 2 4
Page 2
Notes to Investors FORWARD-LOOKING STATEMENTS. Selected statements in this presentation constitute “forward-looking statements,” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “Act”). Worthington Enterprises, Inc. (the “Company” or “Worthington”) wishes to take advantage of the safe harbor provisions included in the Act. Forward-looking statements reflect the Company’s current expectations, estimates or projections concerning future results or events. These statements are often identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “estimate,” “project,” “position,” “strategy,” “target,” “aim,” “seek,” “foresee” and similar words or phrases. These forward-looking statements include, without limitation, statements relating to: expected cash positions, liquidity and ability to access financial markets and capital; outlooks, strategies or business plans; anticipated benefits of the separation of the Company’s steel processing business (the “Separation); expected financial and operational performance of, and future opportunities for, the Company following the Separation; the Company’s performance on a pro forma basis to illustrate the estimated effects of the Separation on historical periods; the tax treatment of the Separation transaction; expected performance, growth, demand, financial condition or other financial measures; pricing trends for raw materials and finished goods; additions to product lines and opportunities to participate in new markets; anticipated working capital needs, capital expenditures and asset sales; anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain; the ability to make acquisitions, form joint ventures and consolidate operations and the projected timing, benefits and costs related thereto; expectations for the economy and markets; expectations for shareholder value; effects of the novel coronavirus (“COVID-19”) pandemic; and other non-historical matters. Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, those that follow: the uncertainty of obtaining regulatory approvals in connection with the Separation, including rulings from the Internal Revenue Service; the ability to successfully realize the anticipated benefits of the Separation; the impacts of the COVID-19 pandemic; the effect of conditions in national and worldwide financial markets, including inflation, increases in interest rates and economic recession, and with respect to the ability of financial institutions to provide capital; the impact of tariffs, the adoption of trade restrictions affecting the Company’s products or suppliers, a U.S. withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships; changing oil prices and/or supply; product demand and pricing; changes in product mix, product substitution and market acceptance of the Company’s products; volatility or fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities, labor and other items required by operations (especially in light of the COVID-19 pandemic and Russia’s invasion of Ukraine); effects of sourcing and supply chain constraints; the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates; failure to maintain appropriate levels of inventories; financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business; the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts; the ability to realize cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis; the overall success of, and the ability to integrate, newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom; capacity levels and efficiencies, within facilities, within major product markets and within the industries in which the Company participates as a whole; the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor shortages, interruption in utility services, civil unrest, international conflicts (especially in light of Russia’s invasion of Ukraine), terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability (especially in light of Russia’s invasion of Ukraine), foreign currency exchange rate exposure and the acceptance of the Company’s products in global markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the effect of inflation, interest rate increases and economic recession, which may negatively impact the Company’s operations and financial results; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; the level of imports and import prices in the Company’s markets; the impact of environmental laws and regulations or the actions of the U.S. Environmental Protection Agency or similar regulators which increase costs or limit the Company’s ability to use or sell certain products; the impact of increasing environmental, greenhouse gas emission and sustainability regulations or considerations; the impact of judicial rulings and governmental regulations, both in the U.S. and abroad, including those adopted by the U.S. Securities and Exchange Commission (“SEC”) and other governmental agencies as contemplated by the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; the effect of healthcare laws in the U.S. and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase the Company’s healthcare and other costs and negatively impact the Company’s operations and financial results; the effect of tax laws in the U.S. and potential changes for such laws, which may increase the Company’s costs and negatively impact its operations and financial results; cyber security risks; the effects of privacy and information security laws and standards; and other risks described from time to time in the Company’s filings with the SEC, including those described in “Part I — Item 1A. — Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024, and its subsequent filings with the SEC. Forward-looking statements should be construed in the light of such risks. It is impossible to predict or identify all potential risk factors. Consequently, readers should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made, which was December 17, 2024. The Company does not undertake, and hereby disclaims, any obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law. 2
Page 3
3 Q2 FY2025 / Recent Highlights 1 Free cash flow is a non-GAAP measure calculated as net cash provided by operating activities ($49.1M) less investment in property, plant and equipment ($15.2M) Consumer Products Adj. EBITDA of $15 million and Adj. EBITDA margin of 13.3% in Q2 improving from $13 million and 10.7% in the prior year quarter Building Products Adj. EBITDA of $47 million and Adj. EBITDA margin of 30.0% in Q2 maintaining a solid performance compared to $46 million and 30.3% in the prior year quarter Consolidated net sales declined 8.1% year over year driven by the SES deconsolidation, but profitability improved with gross margin increasing to 27.0% from 21.2% and Adj. EBITDA margin rising to 20.5% from 18.5% in the prior year quarter Free cash flow1 for Q2 was $34 million with capex spend in Q2 of $15 million, which included $5 million related to our facility modernization projects Repurchased 200 thousand shares of common stock during Q2 for $8 million, at an average purchase price of $40.40 leaving 5.7 million shares remaining on the Company’s share repurchase authorization at 11/30/24 Declared $0.17 per share dividend payable in March 2025
Page 4
Q2 FY2025 Highlights – Financial Summary 4 Refer to appendix for reconciliation of Adjusted EBITDA from continuing operations to the comparable GAAP measure. $ Millions except EPS Q2 Q2 Worthington Enterprises Consolidated FY 2025 FY 2024 Net Sales $274 $298 Adj. EBITDA $56 $55 % Margin 20.5% 18.5% Adj. EPS $0.60 $0.57 Building Products Segment Net Sales $157 $151 Adj. EBITDA $47 $46 % Margin 30.0% 30.3% Consumer Products Segment Net Sales $117 $119 Adj. EBITDA $15 $13 % Margin 13.3% 10.7% Other Net Sales $0 $28 Adj. EBITDA ($6) ($4)
Page 5
Q2 FY2025 – Reconciliation of Adjusted Net Earnings 5 Q2 FY2025 Q2 FY2024 Worthington Enterprises Consolidated $ Millions after tax Diluted EPS $ Millions after tax Diluted EPS Net Earnings (Loss) – Continuing Operations (GAAP) $28 $0.56 $18 $0.36 Corporate costs eliminated at Separation (1) - - $7 $0.14 Restructuring and other charges $2 $0.04 - - Separation costs - - $5 $0.11 Gain on sale of assets in equity income - - $(2) $(0.04) Adj. Net Earning – Continuing Operations (Non-GAAP)(2) $30 $0.60 $28 $0.57 (1) References to the “Separation” are to the Company’s separation of its former steel processing business into Worthington Steel , Inc. on December 1, 2023 (2) Figures may not sum exactly due to rounding
Page 6
ibdroot\projects\IBD-NY\trillium2020\664375_1\16. Investor Day Presentations\03. WOR Enterprises\2023.09.29 - Investor Day - WOR Enterprises Shell_v78.pptx W O R T H I N G T O N E N T E R P R I S E S A m a r k e t- l e a d i n g d e s i g n e r a n d m a n u f a c t u r e r o f i n n o v a t i v e B u i l d i n g P r o d u c t s a n d C o n s u m e r P r o d u c t s t h a t h e l p e n a b l e p e o p l e t o l i v e s a f e r , h e a l t h i e r a n d m o r e e x p r e s s i v e l i v e s 6
Page 7
7Note: TTM figures as of Q2 FY2025. Net Sales reflects wholly-owned businesses only, exclude JV’s. KEY FIGURES (TTM AS OF Q2 FY25) ($ MILLIONS) FINANCIAL METRICS NET SALES ADJ. EBITDA 32% ADJ. EBI TDA MARGI N $192M ADJ. EBI TDA $599M NET SALES Building Products At-a-Glance Heating and Cooking Cooling Facilitating the transition away from fuel oil, as well as providing back-up power solutions. Integral in storing and transporting refrigerants while facilitating the transition to lower global-warming potential and ozone-depleting gases. Construction Provides safe storage and transport of spray polyurethane foam insulation and roofing adhesive. 7 Water Key component in providing safe and clean drinking water in homes and buildings. Ceiling Solutions Solutions for ceilings, walls and partitions, suspended systems, and trim and transitions in numerous commercial, education, healthcare, retail and specialty environments, among others. Metal Framing Cold-formed steel framing and drywall/plastering finishing systems for interior and exterior applications, as well as clips, connectors, metal lath, welded wire, barrier mesh and accessories. $673 $717 $619 FY22 FY23 FY24 $239 $222 $210 FY22 FY23 FY24 $151 $157 FY24 Q2 FY25 Q2 $46 $47 FY24 Q2 FY25 Q2
Page 8
Consumer Products At-a-Glance 8 $493M NET SALES 15% ADJ. EBITDA MARGIN $76M ADJ. EBITDA NET SALES ADJ. EBITDA KEY FIGURES (TTM AS OF Q2 FY25) ($ MILLIONS) FINANCIAL METRICS Hand-held torches, micro torches, lighters, accessories and fuel for constructing, fixing, making and creating. Precision and specialty hand, digital and safety tools for tradesmen, craftsmen and DIYers. Drywall tools and accessories used for finishing and taping, skimming and masonry projects by professionals and DIYers. Hand-held torches and micro torches used on the job and at home. Cutting, siding and roofing tools utilized by tradespeople and DIYers for construction, remodeling and renovation projects. Torches, fuel and accessories, including the first in-market digital fuel gauge, for outdoor adventures, backyard entertaining and yardwork. Portable propane fuel cylinders for outdoor adventures. Ergonomic multi-use garden tools including cultivators, weeders, edgers, pick-up and hand tools. Pizza ovens, pellet grills, griddles and accessories for backyard cooking or outdoor experiences away from home. Portable helium tanks and accessories for celebrations anytime and anywhere. Tools Outdoor Living Celebrations $505 $555 $495 FY22 FY23 FY24 $109 $97 $70 FY22 FY23 FY24 Note: TTM figures as of Q2 FY2025. $119 $117 FY24 Q2 FY25 Q2 $13 $15 FY24 Q2 FY25 Q2
Page 9
Worthington Enterprises - A Compelling Financial Profile Net Sales Adj. EBITDA1 Adj. EBITDA Margin $1,167M 20%$235M 9 Note: TTM figures as of Q2 FY2025. 1 Refer to appendix for reconciliation of Adjusted EBITDA from continuing operations to the comparable GAAP measure. 2 Net Working Capital is defined as Accounts Receivable ($185M) + Inventory ($179M) – Accounts Payable ($83M) as of 11/30/24. Net Working Capital2 Fixed Assets Net Debt $281M $102M$260M
Page 10
Established Portfolio of Market-Leading Brands… 80%+ of Adjusted EBITDA comes from brands and products with leading market positions Camping Fuel Metal Framing Ceiling Suspension Systems Vertical Residential Heating Tanks Portable Helium Tanks Hand Torch And Fuels Well Water Tanks 10 Note: FY2024 period. North America only. Based on management estimates.
Page 11
…With High Barriers-to-Entry Innovative Products and Services – Driving Innovation Into Mature Markets Robust Industry Knowledge – 69-Year History Providing Specialized, Technical Industry Expertise Reliability, Speed & Product Quality – Exceptional Quality, Service, and Supply Chain Solutions Manufacturing at Scale – Automation Enabling Enhanced Efficiency in Production Across Niche Markets Highly Engineered Solutions – Meeting Rigorous Specifications in Highly Regulated Markets 11 High Margin, Asset-Light Business Model, Generating Strong Cash Flow and Returns
Page 12
Our Products Serve Markets that are Well Positioned to Capitalize on Strong Secular Trends RE-SHORING AND NEAR SHORING 12 Propane Systems GOVERNMENT STIMULUS AND SUPPORT Ceiling Solutions Tools HVAC Products Metal Framing Multiple Federal funding bills support long-term construction and supply chain investment ENVIRONMENTAL INVESTMENT Sustainable Cylinders Refillable Solutions Increasing investments in environmental projects at the corporate and government level Manufacturing investment in the U.S. in early stages of multi-year resurgence Population trends support increased need for new and re-modeled homes POPULATION SHIFT Lawn & Garden BBQ / Grill Products Propane Systems Foam & Adhesive Metal Framing Industrial Products HVAC Products
Page 13
Worthington Business System Accelerates Our Growth and Profitability Our deeply-held Philosophy is rooted in the Golden Rule – we treat our customers, employees, investors, and suppliers as we would like to be treated • Through continuous transformation we drive higher margins within Manufacturing, Commercial, Sourcing, and Supply Chain Excellence • We innovate in partnership with our customers and suppliers • We acquire strategic capabilities and invest in accretive opportunities • We invest in technology and sustainability to create value for customers • We are disciplined stewards of capital, focused on earning exceptional returns for our shareholders 13
Page 14
Innovation for Highly Engineered Products Drives Incremental Sales and Margin BUILDING THE CORE Improving existing products with a leading brand portfolio 01 02 EXPANDING THE CORE Strength in channel management to drive margin expansion 03 DISRUPTING THE CORE Transformational innovations driving sustainable value creation 14 Higher margin, diversified portfolio mix enabling long-term growth
Page 15
Acquisition Strategy Focused on Driving Profitable Growth 15 ($ MILLIONS) HISTORICAL FINANCIAL METRICS NET SALES 1 ADJ. EBITDA 1 $54 $66 $64 CY21 CY22 CY23 $9 $12 $13 CY21 CY22 CY23 1 Financials adjusted to reflect carve out from Hexagon Composites and converted from NOK to USD assuming exchange rate of 10.97 NOK/USD • A global market leader in lightweight, customizable LPG composite cylinders used for leisure, household (cooking) and industrial applications • Highly automated manufacturing facility in Raufoss, Norway with approximately 130 employees which is now part of the Building Products segment • Complementary to Worthington’s Amtrol-Alfa facility in Portugal • Furthers Worthington’s interests in advancing the use of clean fuels as part of the global energy transition • Calendar year 2023 Net sales of approximately $64M and adjusted EBITDA of $13M • Purchase price of approximately $100M subject to closing adjustments and a potential earn out Broad array customized composite LPG cylinders used for leisure, household and industrial applications Acquired Hexagon Ragasco on June 3, 2024
Page 16
Guided by Our Philosophy A People-First, Performance-Based Culture Health & Safety Putting our people first and ensuring the health and safety of our employees Profit-Sharing Incentives Committed to best- in-industry practices in recruiting, promotion, and retention Diversity & Inclusion Valuing diversity of all types and committed to building an inclusive culture Positive Impact Partnering with organizations and school districts to support our communities Culture of Engagement Strong sense of belonging and accountability, driving ownership of results 16 16
Page 17
Low Leverage and Ample Liquidity Provides Financial Flexibility Strong Balance Sheet 17 Financial Flexibility Disciplined Capital Allocation Note: TTM figures as of Q2 FY2025. 1 $296M of total debt and TTM Adjusted EBITDA from continuing operations of $235M. 2 Includes $194M of cash and cash equivalents and $500M of capacity from undrawn revolver as of 11/30/24. Commitment to Maintaining Investment Grade Rating Ample Liquidity2: $694M Focused on growth and rewarding shareholders Leverage1: 1.3x Total Debt / TTM Adj. EBITDA 17
Page 18
Long-Term Capital Allocation Priorities ORGANIC GROWTH • Brand, Innovation, and Channel investments • Investments in automation and R&D initiatives • High-returning Capex investments 18 TARGETED M&A CAPITAL RETURN • Build out core businesses and selectively grow into new markets • Create value via channel and supply chain synergies • Enhance capabilities allowing for faster integration and synergies • Modest quarterly dividend payments - $0.17 sh. quarterly • Opportunistic share buybacks
Page 19
Worthington Enterprises KEY INVESTMENT HIGHLIGHTS 1 TTM Figures as of Q2 FY2025 ended 11/30/24. Sales exclude pro-rata share of unconsolidated JV sales. 2 Refer to appendix for reconciliation of Adjusted EBITDA from continuing operations to the comparable GAAP measure. NET SALES OF $1.2 BILLION1 Adj. EBITDA of $235 million2 Building Products Other Consumer Products 19 FOUNDED IN 1955 42% 51% 7% • Established Portfolio of Market-Leading Brands with High Barriers to Entry • Strong Underlying Secular Trends Enabling Steady Long-Term Growth • Business Model Drives High Free Cash Flow and Returns • Worthington Business System Accelerates Growth and Profitability • Innovation For Highly Engineered Products Drives Incremental Sales and Margin • Guided by Our Philosophy – a People-First, Performance-Based Culture • Low Leverage and Ample Liquidity Provides Financial Flexibility Net Sales by Segment1
Page 20
ibdroot\projects\IBD-NY\trillium2020\664375_1\16. Investor Day Presentations\03. WOR Enterprises\2023.09.29 - Investor Day - WOR Enterprises Shell_v78.pptx A p p e n d i x
Page 21
21 Worthington Enterprises Reconciliation of Non-GAAP Measures (in millions) See next slide for detailed footnotes related to reconciliation of Non-GAAP measures 05/31/24 TTM FY24 FY25 FY24 FY25 Q2 Q2 Q2 Earnings before income taxes (GAAP) 74.0$ 81.6$ 24.5$ 37.1$ Plus: Net loss attributable to noncontrolling interest 0.3 0.8 - 0.3 Net earnings before income taxes attributrable to controlling interest 74.3 82.4 24.5 37.4 Interest expense, net 1.6 1.6 0.5 1.0 EBIT (subtotal) 75.9 84.0 25.0 38.4 Corporate costs eliminated at Separation (1) 19.3 - 9.7 - Impairment of goodwill and long-lived assets 33.0 33.0 - - Restructuring and other expense (income), net 29.3 33.1 - 2.6 Separation costs 12.7 3.2 7.1 - Non-cash charges in miscellaneous income (2) 19.2 19.2 - - Loss on extinguishment of debt (3) 1.5 - - Gain on sale of assets in equity income (4) (2.8) - (2.8) - Pension settlement charge in equity income (5) 1.0 1.0 - - Adjusted EBIT (subtotal) 189.1 173.5 39.0 41.0 Depreciation and amortization 48.7 48.1 12.2 11.9 Stock-based compensation 13.2 13.1 3.9 3.3 Adjusted EBITDA - Continuing operations (non-GAAP) 251.0$ 234.7$ 55.1$ 56.2$ Adjusted EBITDA - continuing operations margin (non-GAAP) 20.1% 20.1% 18.5% 20.5%
Page 22
Non-GAAP Footnotes (1) Reflects reductions in certain corporate overhead costs that no longer exist post-Separation. These costs were included in continuing operations as they represent general corporate overhead that was historically allocated to our former steel processing business but did not meet the requirements to be presented as discontinued operations. (2) Reflects the following non-cash charges in miscellaneous expense: • Pre-tax charge of $8.0 million from pension lift-out transaction completed in February 2024, to transfer the pension benefit obligation under The Gerstenslager Company Bargaining Unit Employees’ Pension Plan to third-party insurance companies. • A pre-tax charge of $11.2 million during the three months ended May 2024 due to the write-down of an investment in notes receivable that was determined to be other than temporarily impaired. (3) Reflects a pre-tax loss of $1.5 million realized in connection with the July 28, 2023, early redemption of the 2026 Notes.The loss resulted primarily from unamortized issuance costs and discount included in the carrying amount of the 2026 Notes and the acceleration of the remaining unamortized loss in equity related to a treasury lock derivative instrument executed in connection with the issuance of the 2026 Notes. (4) Reflects the following activity within equity income associated with the sale or divestiture of assets at Workhorse: • A net gain of $2.8 million associated with the divestiture of the Brazilian operations during the three months ended November 30, 2023. (5) Reflects the settlement of certain participant balances within the pension plan maintained by WAVE. 22 Worthington Enterprises Reconciliation of Non-GAAP Measures (in millions)
Page 23
Use of Non-GAAP Measures and Definitions 23 Effective December 1, 2023, the Company shifted management responsibilities for a propane tank manufacturing facility that was previously reported within the Consumer Products segment to the Building Products segment. Segment financial data included in these materials reflects this change for all periods presented. NON-GAAP MEASURES. These materials include certain financial measures that are not calculated and precented in accordance with accounting principles generally accepted in the United States (“GAAP”). The non- GAAP financial measures typically exclude items that management believes are not reflective of, and thus should not be included when evaluating the performance of the Company’s ongoing operations. Management uses the non-GAAP financial measures to evaluate the Company’s performance, engage in financial and operational planning, and determine incentive compensation. Management believes these non- GAAP measures provide useful supplemental information and additional perspective on the performance of the Company’s ongoing operations and should not be considered as an alternative to the comparable GAAP measure. Additionally, management believes these non-GAAP measures allow for meaningful comparisons and analysis of trends in the Company’s businesses and enables investors to evaluate operations and future prospects in the same manner as management. The following provides an explanation of each non-GAAP measure presented in these materials: Adjusted earnings (loss) per diluted share from continuing operations attributable to controlling interest is defined as adjusted net earnings (loss) from continuing operations attributable to controlling interest divided by diluted weighted-average shares outstanding. Adjusted EBITDA – Adjusted EBITDA is defined as Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”). EBITDA is calculated by adding or subtracting, as appropriate, interest expense, net, income tax expense, depreciation, and amortization to/from net earnings from continuing operations attributable to controlling interest, which is further adjusted to exclude items that management believes are not reflective of, and thus should not be included when evaluating the performance of its ongoing operations, as outlined below. Adjusted EBITDA also excludes stock-based compensation due to its non- cash nature, which is consistent with how management assesses operating performance. At the segment level, adjusted EBITDA includes expense allocations for centralized corporate back-office functions that exist to support the day-to-day business operations. Public company and other governance costs are held at the corporate-level. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net sales. Exclusions from Non-GAAP Financial Measures Management believes it is useful to exclude the following items from the non-GAAP measures presented in this report for its own and investors’ assessment of the business for the reasons identified below: Impairment charges are excluded because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, which we believe facilitates the comparison of historical, current and forecasted financial results. Restructuring activities, which can result in both discrete gains and/or losses, consist of established programs that are not part of our ongoing 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). These items are excluded because they are not part of the ongoing operations of our underlying business. Separation costs, which consist of direct and incremental costs incurred in connection with the completed Separation are excluded as they are one-time in nature and are not expected to occur in period following the Separation. These costs include fees paid to third-party advisors, such as investment banking, audit and other advisory services as well as direct and incremental costs associated with the Separation of shared corporate functions. Results in the current fiscal year also include incremental compensation expense associated with the modification of unvested short and long-term incentive compensation awards, as required under the employee matters agreement executed in conjunction with the Separation. Loss on extinguishment of debt is excluded because it does not occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions. Pension settlement charges are excluded because due to their non-cash nature and the fact that they do not occur in the normal course of business and may obscure analysis of trends and financial performance. These transactions typically result from the transfer of all or a portion of the total projected benefit obligation to third-party insurance companies. Corporate costs eliminated at Separation reflect certain corporate overhead costs that no longer exist post-Separation. These costs were included in continuing operations as they represent general corporate overhead that was historically allocated to the Company’s former steel processing business but did not meet the requirements to be presented as discontinued operations.