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Stock-Based Compensation | 12 Months Ended
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May 31, 2025
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Note K – Stock-Based Compensation Under our stock-based compensation plans, we may grant incentive or non-qualified stock options, restricted common shares, market-based restricted common shares, and performance shares to employees and non-qualified stock options and restricted common shares to non-employee directors. We classify share-based compensation expense within SG&A to correspond with the same financial statement caption as the majority of the cash compensation paid to employees who have been awarded common shares. A total of 7,780,633 common shares were authorized and available for issuance in connection with our stock-based compensation plans in place at May 31, 2025. We recognized pre-tax stock-based compensation expense of $16,186 ($12,107 a fter-tax), $16,688 ($14,999 after-tax) and $19,178 ($14,786 after-tax) under our stock-based compensation plans during fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Pre-tax stock-based compensation attributable to continuing operations was $13,155 and $14,566 during fiscal 2024 and fiscal 2023, respectively. At May 31, 2025, the total unrecognized compensation cost related to non-vested awards was $29,857, which will be expensed over the next three fiscal years. The Separation In connection with the Separation, we adjusted our outstanding share-based awards in accordance with the terms of the Employee Matters Agreement. Adjustments to the underlying shares and terms of outstanding non-qualified stock options, services-based restricted common shares, market-based restricted common shares, and performance share awards were made to preserve the intrinsic value of the awards immediately before the Separation. The adjustment of the underlying shares and exercise prices, as applicable, was determined using a ratio based on the relative values of our pre-Distribution common share price and our post-Distribution common share price. Non-Qualified Stock Options Stock options may be granted to purchase common shares at not less than 100% of the fair market value of the underlying common shares on the grant date. All outstanding stock options are non-qualified stock options. The exercise price of all stock options granted has been set at 100% of the fair market value of the underlying common shares on the grant date. Generally, stock options granted to employees vest and become exercisable at the rate of 33% per year beginning one year from the grant date, and expire ten years after the grant date. Non-qualified stock options granted to non-employee directors vest and become exercisable on the earlier of (a) the first anniversary of the grant date or (b) the date on which the next annual meeting of shareholders of Worthington Enterprises is held following the grant date for any stock option granted as of the date of an annual meeting of shareholders of Worthington Enterprises. Stock options can be exercised through net-settlement, at the election of the option holder. GAAP requires that all share-based awards be recorded as expense in the statement of earnings based on their grant date fair value. We calculate the fair value of our non-qualified stock options using the Black-Scholes option pricing model and certain assumptions. The computation of fair values for all stock options granted in fiscal 2024 and fiscal 2023 incorporates the following assumptions: expected volatility (based on the historical volatility of the common shares); risk-free interest rate (based on the U.S. Treasury strip rate for the expected term of the stock options); expected term (based on historical exercise experience); and dividend yield (based on annualized current dividends and an average quoted price of the common shares over the preceding annual period). Due to the impact of the Separation on the comparability to the historical prices of the common shares, we used a comparable peer group to determine the expected volatility of the common shares granted in fiscal 2025. The risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the non-qualified stock options. The expected term was developed using historical exercise experience. The table below sets forth the non-qualified stock options granted during each of the last three fiscal years. For each grant, the exercise price was equal to the closing market price of the underlying common shares at the respective grant date. The calculated pre-tax stock-based compensation expense for these stock options will be recognized on a straight-line basis over the three-year vesting period of the stock options.
|  | 2025 |  |  | 2024 |  |  | 2023 |
Granted |  |  | 54,200 |  |  |  | 58,000 |  |  |  | 84,400 |
Weighted average exercise price, per common share |  | $ | 44.38 |  |  | $ | 68.68 |  |  | $ | 46.39 |
Weighted average grant date fair value, per common share |  | $ | 16.38 |  |  | $ | 25.61 |  |  | $ | 16.36 |
Pre-tax stock-based compensation expense |  | $ | 888 |  |  | $ | 1,485 |  |  | $ | 1,381 |
The weighted average fair value of stock options granted in fiscal 2025, fiscal 2024 and fiscal 2023 was based on the following weighted average assumptions:
|  | 2025 |  |  | 2024 |  |  | 2023 |
Dividend yield |  |  | 1.34 | % |  |  | 2.34 | % |  |  | 2.33 | %
Expected volatility |  |  | 36.90 | % |  |  | 42.62 | % |  |  | 41.63 | %
Risk-free interest rate |  |  | 3.97 | % |  |  | 4.04 | % |  |  | 3.19 | %
Expected life (years) |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |
The following tables summarize our stock option activity for the prior three fiscal years:
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | Number of Stock Options |  |  | Weighted Average Exercise Price |  |  | Number of Stock Options |  |  | Weighted Average Exercise Price |  |  | Number of Stock Options |  |  | Weighted Average Exercise Price |
Outstanding, beginning of year |  |  | 520,480 |  |  | $ | 29.67 |  |  |  | 573,330 |  |  | $ | 42.61 |  |  |  | 602,001 |  |  | $ | 39.66 |
Converted to Worthington Steel common shares (1) |  |  | - |  |  |  | - |  |  |  | (61,032 | ) |  |  | 51.44 |  |  |  | - |  |  |  | - |
Separation related adjustment |  |  | - |  |  |  | - |  |  |  | 254,361 |  |  |  | - |  |  |  | - |  |  |  | - |
Granted |  |  | 54,200 |  |  |  | 44.38 |  |  |  | 58,000 |  |  |  | 68.68 |  |  |  | 84,400 |  |  |  | 46.39 |
Exercised |  |  | (151,646 | ) |  |  | 25.29 |  |  |  | (296,664 | ) |  |  | 31.98 |  |  |  | (113,071 | ) |  |  | 29.71 |
Forfeited |  |  | (1,416 | ) |  |  | 37.08 |  |  |  | (7,515 | ) |  |  | 45.91 |  |  |  | - |  |  |  | - |
Outstanding, end of year |  |  | 421,618 |  |  | $ | 33.11 |  |  |  | 520,480 |  |  | $ | 29.67 |  |  |  | 573,330 |  |  | $ | 42.61 |
Exercisable at end of year |  |  | 360,948 |  |  | $ | 31.34 |  |  |  | 400,879 |  |  | $ | 27.23 |  |  |  | 418,475 |  |  | $ | 40.84 |
(1) Effective as of the Distribution, each outstanding stock option held by a then-current or former employee or service provider of Worthington Steel was converted into a stock option denominated in the common shares of Worthington Steel.
|  |  |  |  | Weighted |  |  |  |
|  |  |  |  | Average |  |  |  |
|  |  |  |  | Remaining |  |  | Aggregate |
|  | Number of |  |  | Contractual |  |  | Intrinsic |
|  | Stock |  |  | Life |  |  | Value |
|  | Options |  |  | (In years) |  |  | (In thousands) |
May 31, 2025 |  |  |  |  |  |  |  |  |
Outstanding |  |  | 421,618 |  |  |  | 3.24 |  |  | $ | 10,877 |
Exercisable |  |  | 360,948 |  |  |  | 2.37 |  |  | $ | 9,952 |
May 31, 2024 |  |  |  |  |  |  |  |  |
Outstanding |  |  | 520,480 |  |  |  | 4.11 |  |  | $ | 14,245 |
Exercisable |  |  | 400,879 |  |  |  | 2.82 |  |  | $ | 11,945 |
May 31, 2023 |  |  |  |  |  |  |  |  |
Outstanding |  |  | 573,330 |  |  |  | 5.47 |  |  | $ | 7,970 |
Exercisable |  |  | 418,475 |  |  |  | 4.38 |  |  | $ | 6,472 |
The total intrinsic value of stock options exercised during fiscal 2025 was $4,589. The total amount of cash received from the exercise of stock options during fiscal 2025 was $3,834, and the related excess tax benefit realized from share-based payment awards was $960. The following table summarizes information about non-vested stock option awards for fiscal 2025:
|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  |  |  |  | Grant Date |
|  |  |  |  | Fair Value |
|  | Number of |  |  | Per |
|  | Stock Options |  |  | Common Share |
Non-vested, beginning of year |  |  | 119,601 |  |  | $ | 13.78 |
Granted |  |  | 54,200 |  |  |  | 16.38 |
Vested |  |  | (113,131 | ) |  |  | 13.29 |
Forfeited |  |  | - |  |  |  | - |
Non-vested, end of year |  |  | 60,670 |  |  | $ | 16.23 |
(1) Effective as of the Distribution, each outstanding stock option held by a then-current or former employee or service provider of Worthington Steel was converted into a stock option denominated in the common shares of Worthington Steel. Service-Based Restricted Common Shares Restricted common shares that contain service-based vesting conditions may be awarded to certain employees and non-employee directors. Service-based restricted common shares granted to employees cliff vest three years from the date of grant. Service-based restricted common shares granted to non-employee directors vest under the same parameters as discussed above with respect to non-qualified stock option grants. All service-based restricted common shares are valued at the closing market price of the common shares on the date of the grant. The table below sets forth the service-based restricted common shares granted under the Plans during each of the past three fiscal years. The calculated pre-tax stock-based compensation expense for these restricted common shares will be recognized on a straight-line basis over their respective three-year service periods.
|  | 2025 |  |  | 2024 |  |  | 2023 |
Granted |  |  | 307,745 |  |  |  | 217,915 |  |  |  | 358,500 |
Weighted average grant date fair value, per common share |  | $ | 45.17 |  |  | $ | 64.45 |  |  | $ | 49.89 |
Pre-tax stock-based compensation |  | $ | 13,901 |  |  | $ | 14,046 |  |  | $ | 17,884 |
The following table summarizes the activity for service-based restricted common shares for the past three fiscal years:
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | Restricted Common Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Restricted Common Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Restricted Common Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding, beginning of year |  |  | 574,832 |  |  | $ | 36.43 |  |  |  | 800,400 |  |  | $ | 47.39 |  |  |  | 649,300 |  |  | $ | 44.12 |
Converted to Worthington Steel common shares (1) |  |  | - |  |  |  | - |  |  |  | (296,100 | ) |  |  | 51.46 |  |  |  | - |  |  |  | - |
Separation related adjustment |  |  | - |  |  |  | - |  |  |  | 219,460 |  |  |  | - |  |  |  | - |  |  |  | - |
Granted |  |  | 307,745 |  |  |  | 45.17 |  |  |  | 217,915 |  |  |  | 64.45 |  |  |  | 358,500 |  |  |  | 49.89 |
Vested |  |  | (289,772 | ) |  |  | 36.16 |  |  |  | (344,870 | ) |  |  | 39.22 |  |  |  | (184,241 | ) |  |  | 40.52 |
Forfeited |  |  | (14,102 | ) |  |  | 38.64 |  |  |  | (21,973 | ) |  |  | 45.65 |  |  |  | (23,159 | ) |  |  | 48.94 |
Outstanding, end of year |  |  | 578,703 |  |  | $ | 41.15 |  |  |  | 574,832 |  |  | $ | 36.43 |  |  |  | 800,400 |  |  | $ | 47.39 |
Weighted average remaining contractual life of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
outstanding restricted common shares (in years) |  |  | 1.19 |  |  |  |  |  |  | 1.13 |  |  |  |  |  |  | 1.28 |  |  |  |
Aggregate intrinsic value of outstanding restricted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
common shares |  | $ | 34,091 |  |  |  |  |  | $ | 32,783 |  |  |  |  |  | $ | 44,926 |  |  |  |
Aggregate intrinsic value of restricted common |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
shares vested during the year |  | $ | 12,744 |  |  |  |  |  | $ | 21,708 |  |  |  |  |  | $ | 8,897 |  |  |  |
(1) Effective as of the Distribution, each restricted stock award held by an employee or director of Worthington Steel was converted into a restricted stock award covering Worthington Steel common shares. Market-Based Restricted Common Shares Market-based restricted common shares consist of grants of performance-based restricted common shares to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions. The fair value of our market-based restricted common shares is estimated using a Monte-Carlo simulation model that incorporates key assumptions such as the risk-free interest rate, expected volatility and expected dividends. Compensation expense is recognized on a straight-line basis over the vesting period, regardless of whether the market condition is satisfied. Vesting is subject to continued service requirements through the vesting date. The following weighted average assumptions were used to determine the grant date fair value for our market-based restricted common shares granted in fiscal 2025, fiscal 2024, and fiscal 2023.
|  | 2025 |  | 2024 |  |  | 2023 |
Dividend yield |  | n/a |  |  | 1.05 | % |  |  | 2.67 | %
Expected volatility |  | n/a |  |  | 33.9 | % |  |  | 43.0 | %
Risk-free interest rate |  | n/a |  |  | 4.52 | % |  |  | 3.18 | %
The following table summarizes our market-based restricted common shares for the past three fiscal years.
| 2025 |  |  | 2024 |  |  | 2023 |
| Market- |  |  | Weighted |  |  | Market- |  |  | Weighted |  |  | Market- |  |  | Weighted |
| based |  |  | Average |  |  | based |  |  | Average |  |  | based |  |  | Average |
| Restricted |  |  | Grant |  |  | Restricted |  |  | Grant |  |  | Restricted |  |  | Grant |
| Common |  |  | Date Fair |  |  | Common |  |  | Date Fair |  |  | Common |  |  | Date Fair |
| Shares |  |  | Value |  |  | Shares |  |  | Value |  |  | Shares |  |  | Value |
Outstanding, beginning of year |  | 260,384 |  |  | $ | 31.40 |  |  |  | 330,000 |  |  | $ | 22.03 |  |  |  | 320,000 |  |  | $ | 21.61 |
Separation related adjustment |  | - |  |  |  | - |  |  |  | 34,424 |  |  |  | - |  |  |  | - |  |  |  | - |
Granted |  | - |  |  |  | - |  |  |  | 165,960 |  |  |  | 42.82 |  |  |  | 10,000 |  |  |  | 35.49 |
Vested |  | (78,687 | ) |  |  | 9.09 |  |  |  | (270,000 | ) |  |  | 22.96 |  |  |  | - |  |  |  | - |
Forfeited |  | (40,000 | ) |  |  | 42.82 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Outstanding, end of year |  | 141,697 |  |  | $ | 40.57 |  |  |  | 260,384 |  |  | $ | 31.40 |  |  |  | 330,000 |  |  | $ | 22.03 |
Weighted average remaining contractual life of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
outstanding market-based common shares |  | 1.66 |  |  |  |  |  |  | 2.11 |  |  |  |  |  |  | 0.49 |  |  |  |
(in years) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Aggregate intrinsic value of outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
market-based common shares | $ | 8,347 |  |  |  |  |  | $ | 14,850 |  |  |  |  |  | $ | 18,523 |  |  |  |
Aggregate intrinsic value of market-based common |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
shares vested during the year | $ | 3,363 |  |  |  |  |  | $ | 18,152 |  |  |  |  |  | n/a |  |  |  |
Performance Shares We have awarded performance shares to certain key employees under our stock-based compensation plans. These performance shares are earned based on the level of achievement with respect to corporate targets for cumulative corporate economic value added, EPS growth and, in the case of business unit executives, a business unit adjusted EBITDA from continuing operations target, in each case for the three-year periods ending May 31, 2025, 2026 and 2027. These performance share awards will be paid, to the extent earned, in common shares in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period on all tranches will vary based on our periodic assessment of the probability of the targets being achieved. The table below sets forth the performance shares we granted (at target levels) during fiscal 2025, fiscal 2024 and fiscal 2023:
|  | 2025 |  |  | 2024 |  |  | 2023 |
Granted |  |  | 42,100 |  |  |  | 116,353 |  |  |  | 117,545 |
Weighted average grant date fair value, per common share |  | $ | 44.36 |  |  | $ | 52.36 |  |  | $ | 43.40 |
Pre-tax stock-based compensation expense |  | $ | 1,868 |  |  | $ | 6,093 |  |  | $ | 5,101 |
The following table summarizes our performance share award activity for the past three fiscal years:
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | Performance Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Performance Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Performance Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding, beginning of year |  |  | 140,526 |  |  | $ | 37.55 |  |  |  | 171,474 |  |  | $ | 46.37 |  |  |  | 159,417 |  |  | $ | 42.93 |
Converted to Worthington Steel common shares (1) |  |  | - |  |  |  | - |  |  |  | (38,900 | ) |  |  | 56.99 |  |  |  | - |  |  |  | - |
Separation related adjustment |  |  | - |  |  |  | - |  |  |  | 59,232 |  |  |  | - |  |  |  | - |  |  |  | - |
Granted (2) |  |  | 75,854 |  |  |  | 41.34 |  |  |  | 116,353 |  |  |  | 52.36 |  |  |  | 117,545 |  |  |  | 43.40 |
Vested |  |  | (71,173 | ) |  |  | 37.74 |  |  |  | (145,464 | ) |  |  | 38.91 |  |  |  | (88,731 | ) |  |  | 38.91 |
Forfeited |  |  | (71,427 | ) |  |  | 37.66 |  |  |  | (22,169 | ) |  |  | 40.18 |  |  |  | (16,757 | ) |  |  | 39.36 |
Outstanding, end of year |  |  | 73,780 |  |  | $ | 41.16 |  |  |  | 140,526 |  |  | $ | 37.55 |  |  |  | 171,474 |  |  | $ | 46.37 |
Weighted average remaining contractual life of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
outstanding performance shares (in years) |  |  | 1.51 |  |  |  |  |  |  | 1.43 |  |  |  |  |  |  | 1.59 |  |  |  |
Aggregate intrinsic value of outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
performance shares |  | $ | 4,346 |  |  |  |  |  | $ | 8,014 |  |  |  |  |  | $ | 9,636 |  |  |  |
Aggregate intrinsic value of performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
shares vested during the year |  | $ | 3,395 |  |  |  |  |  | $ | 10,165 |  |  |  |  |  | $ | 4,056 |  |  |  |
(1) Effective as of the Distribution, each performance share award held by an employee or director of Worthington Steel was converted into a restricted stock award covering Worthington Steel shares. (2) Includes common shares related to previously granted awards that paid out at percentages above target levels.

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