Note 17 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:


Level 1	–	Quoted prices (unadjusted) in active markets for identical assets and liabilities that the reporting entity can assess at the measurement date.

Level 2	–	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3	–	Unobservable inputs for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability and that are significant to the fair value of the assets and liabilities (i.e., allowing for situations in which there is little or no market activity for the asset or liability at the measurement date).

Recurring Fair Value Measurements

At May 31, 2025, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:


	Quoted		Significant
	Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative financial instruments (1)	$	-	$	5.6	$	-	$	5.6
Total assets	$	-	$	5.6	$	-	$	5.6

Liabilities
Derivative financial instruments (1)	$	-	$	3.7	$	-	$	3.7
Total liabilities	$	-	$	3.7	$	-	$	3.7

(1)

The fair value of the Company’s derivative financial instruments was based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “Note 16 – Derivative Financial Instruments and Hedging Activities” for additional information regarding the use of derivative financial instruments.

At May 31, 2024, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:


	Quoted		Significant
	Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative financial instruments (1)	$	-	$	3.6	$	-	$	3.6
Total assets	$	-	$	3.6	$	-	$	3.6

Liabilities
Derivative financial instruments (1)	$	-	$	4.4	$	-	$	4.4
Total liabilities	$	-	$	4.4	$	-	$	4.4

(1)

Non-Recurring Fair Value Measurements

At May 31, 2025, the Company’s assets measured at fair value on a non-recurring basis were as follows:


	Quoted		Significant
	Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Long-lived assets held for sale (1)	$	-	$	-	$	10.4	$	10.4
Total assets	$	-	$	-	$	10.4	$	10.4

(1)

During the third quarter of fiscal 2025, the Company’s announced plans to combine WSCP’s Cleveland, Ohio toll processing manufacturing facility into its existing manufacturing facility in Twinsburg, Ohio. At that time, the Company determined there was no impairment related to finance lease assets along with certain other fixed assets encumbered to the land and building of the finance lease assets. Certain machinery and equipment fixed assets and other long-lived assets were written down to their estimated fair value of $1.3 million based on estimated replacement costs and/or prices for similar assets. During the fourth quarter of fiscal 2025, the Company transferred the remaining $10.4 million to asset held for sale, which represented the remaining net assets prior to the held for sale criteria being met. The assets held for sale are expected to be disposed of primarily by sales within the next twelve months.

At May 31, 2024, there were no assets measured at fair value on a non-recurring basis on the consolidated balance sheet, except as noted below.

The non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, income taxes receivable, other assets, accounts payable, short-term borrowings, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate fair value due to their short-term nature.

The remaining carrying value of the Credit Facility debt was $149.2 million and $148.0 million at May 31, 2025 and May 31, 2024, respectively. Due to its short-term nature, the carrying value approximates fair value. The remaining fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $2.8 million at May 31, 2025. The carry amount of long-term debt, including current maturities, was $2.3 million at May 31, 2025. There were no long-term debt outstanding at May 31, 2024.

Historical Timeline

Fiscal Year	Filed
2025	Jul 29, 2025	Showing above
2024	Aug 2, 2024

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Worthington Steel, Inc. Fair Value Disclosure

Historical Timeline

About Fair Value Disclosures

Other Available Disclosures