Good morning, and welcome to Worthington Steel, Inc.'s third quarter fiscal year 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. I will now hand the call over to Melissa Dykstra, vice president of corporate communications and investor relations. Please go ahead.

Thank you, Operator. Good morning, and welcome to Worthington Steel, Inc.'s third quarter fiscal year 2026 earnings call. On our call today, we have Jeff Gilmore, Worthington Steel, Inc.'s president and chief executive officer, and Timothy Adams, vice president and chief financial officer. Before we begin, I would like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested. We issued our earnings release yesterday after the market closed. Please refer to it for more detail on factors that could cause actual results to differ materially. Unless noted as reported, today's discussion will reference non-GAAP financial measures which adjust for certain items included in our GAAP results and are presented on a standalone basis. You can find definitions of each non-GAAP measure and GAAP-to-non-GAAP reconciliations within our earnings release. Today's call is being recorded, and a replay will be made available later today on worthingtonsteel.com. I will now turn the call over to Jeff Gilmore.

Good morning, and thanks for being with us today. It has been a memorable few months for us to say the least. As most of you know, in January, we announced our proposed acquisition of Kloeckner, which will be the largest in our history and a meaningful strategic step for the company. I appreciate that even with an announcement of this size, and the work that goes with it, our team stayed anchored in what matters: safety, serving customers, and improving the business every day. Thank you to the entire Worthington Steel, Inc. team. This quarter, I will start with an update on the Kloeckner acquisition. The combination of our two organizations will create a larger, more diversified metals processing platform with meaningful opportunities to generate value and capture synergies through Worthington Steel, Inc.’s proprietary base business improvement program that we call the transformation. This transaction is being executed through a voluntary public tender offer in Germany and remains subject to the tender process and required regulatory approvals. Since our investor call in January, the voluntary tender offer has been launched. We have submitted requests for regulatory approval in the required jurisdictions, and we are beginning to see approvals come through. Overall, the process is progressing well. Today is the final day of the initial acceptance period of the tender offer process, and we are confident we will secure enough shares to meet the 57.5% minimum threshold. We continue to expect the transaction to close in the second half of the calendar year. In preparation for closing, we have begun and focused on integration, governance, and day-one readiness. We are doing that responsibly and deliberately with an eye toward maintaining our high-performing cultures, unlocking value, and accelerating growth. Most importantly, this deal is about combining two great companies that share…

Thank you, Jeff. Good morning, everyone. Our third quarter was a disciplined quarter in a more challenging environment. While we saw softer demand in certain markets and continued pressure in Europe, we executed well, generating strong free cash flow, gaining share in key markets, and maintaining a strong balance sheet. That consistency and execution, particularly in more challenging environments, is a hallmark of how we run the business. We also took an important strategic step forward with the proposed Kloeckner transaction, which we believe will strengthen our long-term positioning. For the third quarter, we reported earnings of $10.4 million, or $0.20 per share, as compared with earnings of $13.8 million, or $0.27 per share, in the prior-year quarter. There were several nonrecurring items that impacted comparability in the quarter, including a number of Kloeckner-related items which are primarily transactional and timing-related, and not indicative of our ongoing operating performance. First, the current-quarter results include $15.4 million of pretax SG&A expense, or $0.24 per share, for advisory, legal, and regulatory fees incurred in connection with the previously announced acquisition of Kloeckner. Additionally, we recognized $9.1 million of pretax miscellaneous income, or $0.14 per share, related to a foreign currency forward contract designed to hedge a portion of the Kloeckner purchase price. Unrelated to the Kloeckner transaction, we recognized a $6.0 million pretax restructuring gain, or $0.06 per share, on the sale of real estate and equipment associated with our previously announced Worthington Samuel coil processing plant closure in Cleveland, Ohio. Finally, in the quarter, we recognized a $1.5 million pretax impairment of certain internal-use software, or $0.03 per share. The prior-year quarterly results included several nonrecurring items, including a $7.4 million pretax impairment of assets, or $0.07 per share, primarily related to the operational consolidation of our Worthington Samuel coil processing…

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Samuel McKinney with KeyBanc Capital Markets. Your line is open. Please go ahead.

Good morning. With direct volumes for the third quarter only up 3% year over year, surprised to hear you say the direct auto shipments increased by 10%. Assuming much of this was owed to the market share wins you have outlined, can you talk through some of those wins and the impact they are having? Okay. Thanks. That is helpful. And then on to Kloeckner, how should we think about the over $100 million of short-term debt you used to purchase their securities? Just any other color you could give on that equity investment in the context of meeting the threshold would be helpful. Like Tim said, that is about 8% of Kloeckner shares. Okay. Thanks. And then last one for me. Steel pricing has remained hot in recent weeks. Can you give us a sense of the net working capital expectation for the fourth quarter in the context of the $15 million to $20 million of inventory holding gains?

Yes, Sam, this is Jeff. I will take that. Clearly, positive impact. If you look at automotive as a whole, it was down maybe 1% or 2% year over year. If you look specifically at the Detroit Three, their production was up 3%, and ours were up 13%. If you look at the difference in the gap, that really is that market share gain that we have been speaking about the last several quarters. Fortunately for us, we have continued to win market share with those customers mentioned as well as several others, so that is something that you will continue to see layered in. The beginning of your question was being up 13% there, but only 3% as a whole. As you are aware, weather in the Midwest was quite challenging in late January, specifically for a week, and that disrupted the entire supply chain, whether it was the mills trying to ship out to us, receiving in, and then us trying to ship to our customers. The impact there was probably 10,000 to 15,000 tons. The mills are extremely busy right now. They have extended lead times. Their on-time delivery performance has been challenging. We just were not able to make up for that backlog during the month of February. We did some, but probably could have shipped closer to 15,000 additional tons. Fortunately, those are not orders lost. We will make up that backlog and are starting to do so already this month.

Yes, Sam, this is Tim. We had the ability through antitrust—right, we had to look at the regulations of antitrust as far as how much we could buy. We could buy in the open market 10%, and we used that opportunity when the tender offer was announced to buy in the open market. So we increased our ABL by $126.0 million, and we used $101.0 million of it to buy shares in the open market. As long as the price stays below the tender offer of $11, we can buy shares. You have seen the price of Kloeckner rise a little bit. That shut us out of the market. We bought shares early in the quarter, and we have not bought much since. On working capital, we are definitely going to see some upward pressure. You can look at the percentage price increase and translate that into how much working capital should go up, but you will see some upward pressure on working capital in Q4 for sure.

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Your line is open. Please go ahead.

Thank you. The German stock market is down 8% year to date, and their economy is more vulnerable to the energy escalation, as they are almost entirely an energy importer. Is your view of the amount of debt level that you want to hold post-acquisition or the degree of exposure to Europe changed given our incursion into Iran and the subsequent events in the last four weeks? Following up on what you just said, would you then want to have more equity in your financial structure and less debt?

John, good question. Thanks for calling in. We went into this acquisition with eyes wide open and a clear understanding on Europe and the current challenges. A few things: first, their economy—I think they are doing their own things to increase, I will call it, protectionism, which certainly will help their economy. Specifically, I think aimed at China. I think they have increased spend on defense pretty significantly over the last six to twelve months, which should benefit the business environment, specifically manufacturing. What we did not predict was a war with Iran and the impact on oil prices. Right now, it is not having a major impact on the business here or in Europe. But if this is prolonged, then we certainly are concerned about their economy, and we are equally concerned about the economy here. Obviously, higher energy prices, higher gas prices are not going to be good for either economy. So that is really our position on it right now. No, we are comfortable with the capital structure where we are moving forward right now. We are quite comfortable with the debt level that we will be carrying forward. To be more transparent, it is because we are very confident in our plan and how we will go about paying that debt down over time. We have not had any serious discussions about reducing the debt and increasing equity as part of capital structure, and I think we are going to be in very good shape.

There are no further questions at this time. I will now turn the call back to Jeff Gilmore, president and CEO, for closing remarks.

From a macroeconomic standpoint, there were some challenges with the business. During last call, I addressed the overall market as well as some of the challenges in spreads, specifically hot rolled and coated, and hot rolled and cold rolled, but at that time, I mentioned I felt like the quarter would be the trough, and I feel strongly that is the case, and that is what we have seen. I think the tightness in the market in the U.S. and where we are seeing prices headed, along with being cautiously optimistic now on all markets, that we are starting to see recovery, and that is the sentiment across the market. We are no different. We can start to see signs of growth, not just with market share gains in automotive, but other key markets as well. Certainly, those markets will increase demand for galvanized as well as cold rolled, and we start to see some of that spread pressure alleviate gradually over time. More importantly, we could not be more well positioned to continue to grow as a company. We have a great deal of confidence in us achieving the threshold goal for Kloeckner, and that puts us in a position to accelerate growth moving forward. The business is in great shape. I look forward to what is to come. Thank you again for listening in today.

This concludes today’s call. Thank you for attending. You may now disconnect.