- Net sales of $316.8
million
- Net loss of $13.3 million with
adjusted EBITDA(1) of $10.8 million
- Operating cash flow of $46.8
million with record ending cash and cash equivalents of
$262.5 million
CANTON,
Ohio, Nov. 3, 2022 /PRNewswire/ -- TimkenSteel
(NYSE: TMST), a leader in high-quality specialty steel,
manufactured components, and supply chain solutions, today
confirmed its previously reported third-quarter 2022 net sales of
$316.8 million and reported a net
loss of $13.3 million, or a loss of
$0.29 per diluted share. On an
adjusted basis(1), the third-quarter 2022 net
loss was $4.1 million, or a loss
of $0.09 per diluted share, and
adjusted EBITDA was $10.8
million.
This compares with the company's sequential second-quarter 2022
net sales of $415.7 million and net
income of $74.5 million, or
$1.42 per diluted share. On an
adjusted basis(1), second-quarter 2022 net income was
$67.4 million, or $1.29 per diluted share, and adjusted EBITDA was
a record $84.2 million.
In the same quarter last year, net sales were $343.7 million with net income of $50.1 million, or $0.94 per diluted share. On an adjusted
basis(1), third-quarter 2021 net income was $55.2 million, or $1.04 per diluted share, and adjusted EBITDA was
$72.0 million.
"As we guided in our mid-October announcement, our third-quarter
financial performance was significantly impacted by the July
incident at our melt shop. While we anticipate that fourth-quarter
profitability will remain challenged as we continue to ramp up melt
production, I am encouraged that demand remains solid across our
end markets, we see a positive trend in base sales pricing and our
balance sheet is strong. These factors give me confidence that we
will enter 2023 with positive momentum and are well positioned for
long-term success," said Mike
Williams, president and chief executive officer. "We remain
focused on enhancing our safety culture with important initiatives
and advanced training that will continue into 2023. Lastly, I thank
our customers for their continued trust in TimkenSteel."
THIRD-QUARTER 2022 FINANCIAL SUMMARY
- Net sales of $316.8
million decreased 24 percent compared with $415.7 million in the second quarter 2022. The
decrease in net sales was primarily driven by lower shipments and a
market-driven 13 percent reduction in surcharge revenue per ton,
partially offset by 9 percent higher base sales(1)
prices. Compared with the prior-year third quarter, net sales
decreased 8 percent primarily driven by lower shipments, partially
offset by 30 percent higher base sales(1) prices.
- Ship tons of 158,500 decreased 50,400 tons sequentially,
or 24 percent, driven by lower shipments across all end markets.
Compared with the prior-year third quarter, ship tons decreased 25
percent as a result of lower industrial and mobile shipments.
Customer demand remained solid throughout the third quarter 2022;
however, shipments were negatively impacted by the availability of
inventory for shipment as a result of the July melt shop
incident.
(1)
Please see discussion of non-GAAP financial measures in this
news release.
|
- Manufacturing costs increased sequentially by
$32.8 million with melt utilization
of 40 percent compared with 84 percent in the second quarter. As a
result of the melt shop incident and ongoing production ramp up,
the third quarter experienced a significant sequential decline in
manufacturing cost absorption. Additionally, costs associated with
the incident totaled approximately $8
million in the quarter as repairs were completed. Annual
maintenance shutdown costs in the third quarter were also
approximately $8 million, as the
company pulled forward certain annual maintenance activities into
the third quarter to minimize fourth quarter downtime. Compared
with the prior-year third quarter, manufacturing costs increased
$54.3 million in the quarter. The
increase was primarily driven by lower cost absorption given the 40
percent melt utilization rate compared with 85 percent in the same
quarter last year. Manufacturing costs were also higher due to
overall inflation, as well as higher maintenance and repair
costs.
- SG&A expense was $16.2
million, a $5.5 million
sequential decrease and a $3.7
million decrease when compared to the prior-year third
quarter, primarily driven by lower variable compensation
expense.
CASH AND LIQUIDITY
As of September 30, 2022, the company's cash and cash
equivalents balance was a record $262.5 million. In the third quarter 2022,
operating cash flow was $46.8
million, primarily driven by a reduction in working
capital. Total liquidity(2) was $487.2 million as of September 30, 2022.
On September 30, 2022, the company
refinanced its asset-based revolving credit facility ("Credit
Facility") and extended the maturity date to September 2027. Following the amendment, Credit
Facility capacity remained at $400.0
million with improvement in a variety of financial terms and
covenants. The Credit Facility remains undrawn at this time.
COMMON SHARE REPURCHASE ACTIVITY
In the third quarter,
the company repurchased 1.3 million common shares in the open
market at an aggregate cost of $19.7
million. In October, the company repurchased 0.7 million
additional common shares in the open market at an aggregate cost of
$12.1 million. As of October 31, 2022, the company has repurchased
approximately 2.6 million total common shares at an aggregate cost
of $44.5 million, leaving just
$5.5 million remaining on its
$50.0 million program established in
December 2021.
On November 2, 2022, the Board of
Directors authorized an additional $75.0
million share repurchase program. This authorization
reflects the continued confidence of the Board and senior
leadership in the company's ability to generate sustainable
through‐cycle profitability while maintaining a strong balance
sheet and cash flow. In aggregate as of November 2, 2022, the company has $79.1 million remaining under its authorized
share repurchase programs.
OUTLOOK
From a commercial perspective:
- Demand remains strong across the company's end markets with a
customer order backlog in excess of 300,000 ship tons and the
majority of production capacity allocated to customers in 2023.
However, fourth-quarter shipments continue to be negatively
impacted by available inventory following the July melt shop
incident. As a result, fourth-quarter shipments are expected to be
slightly lower than the third quarter.
- Surcharge revenue per ton is expected to be sequentially lower
in the fourth quarter as a result of a market decline in scrap
prices.
- Annual customer pricing agreements are currently being
negotiated for 2023. Following a favorable outcome for 2022
customer pricing agreements, negotiations are progressing
positively with an expected increase in 2023 base prices.
(2)
|
The company defines
total liquidity as available borrowing capacity plus cash and cash
equivalents.
|
From an operational perspective:
- Melt utilization is expected to average approximately 50 to 60
percent during the fourth quarter, reflective of a continued
monthly ramp-up of production through the end of this year
following the July incident, as well as planned annual shutdown
maintenance. In 2023, melt utilization rates are expected to be
much improved compared with the second half of 2022.
- The remainder of this year's planned annual shutdown
maintenance will be completed in the fourth quarter at a cost of
approximately $3 million.
- Capital expenditures are expected to be approximately
$10 million to $15 million in the fourth quarter, resulting in a
total of approximately $25 million to
$30 million for the full-year
2022.
As a result of the above drivers, the company expects
fourth-quarter adjusted EBITDA to continue to be challenged,
excluding any potential business interruption insurance recovery
related to the July melt shop incident. The company
anticipates a significant insurance recovery related to the
incident, although the timing and amount of potential recovery are
uncertain at this time.
TIMKENSTEEL EARNINGS WEBCAST INFORMATION
TimkenSteel
will provide live Internet listening access to its conference call
with the financial community scheduled for Friday, November 4, 2022, at 9:00 a.m. ET. The live conference call will be
broadcast at investors.timkensteel.com. A replay of the conference
call will also be available at investors.timkensteel.com.
ABOUT TIMKENSTEEL CORPORATION
TimkenSteel (NYSE: TMST)
manufactures high-performance carbon and alloy steel products from
recycled scrap metal in Canton,
OH, serving demanding applications in mobile, energy and a
variety of industrial end markets. The company is a premier U.S.
producer of alloy steel bars (up to 16 inches in diameter),
seamless mechanical tubing and manufactured components. In the
business of making high-quality steel for more than 100 years,
TimkenSteel's proven expertise contributes to the performance of
our customers' products. The company employs approximately 1,725
people and had sales of $1.3 billion
in 2021. For more information, please visit us at
www.timkensteel.com.
NON-GAAP FINANCIAL MEASURES
TimkenSteel reports its
financial results in accordance with accounting principles
generally accepted in the United
States ("GAAP") and corresponding metrics as non-GAAP
financial measures. This earnings release includes references to
the following non-GAAP financial measures: adjusted earnings (loss)
per share, adjusted net income (loss), EBIT, adjusted EBIT, EBITDA,
adjusted EBITDA, free cash flow and base sales. These are important
financial measures used in the management of the business,
including decisions concerning the allocation of resources and
assessment of performance. Management believes that reporting these
non-GAAP financial measures is useful to investors as these
measures are representative of the company's performance and
provide improved comparability of results. See the attached
schedules for definitions of the non-GAAP financial measures
referred to above and corresponding reconciliations of these
non-GAAP financial measures to the most comparable GAAP financial
measures. Non-GAAP financial measures should be viewed as additions
to, and not as alternatives for, TimkenSteel's results prepared in
accordance with GAAP. In addition, the non-GAAP measures
TimkenSteel uses may differ from non-GAAP measures used by other
companies, and other companies may not define the non-GAAP measures
TimkenSteel uses in the same way.
FORWARD-LOOKING STATEMENTS
This news release
includes "forward-looking" statements within the meaning of the
federal securities laws. You can generally identify the company's
forward-looking statements by words such as "will," "anticipate,"
"aspire," "believe," "could," "estimate," "expect," "forecast,"
"outlook," "intend," "may," "plan," "possible," "potential,"
"predict," "project," "seek," "target," "should," "would,"
"strategy," or "strategic direction" or other similar words,
phrases or expressions that convey the uncertainty of future events
or outcomes. The company cautions readers that actual results may
differ materially from those expressed or implied in
forward-looking statements made by or on behalf of the company due
to a variety of factors, such as: the potential impact of the
COVID-19 pandemic on the company's operations and financial
results, including cash flows and liquidity; whether the company is
able to successfully implement actions designed to improve
profitability on anticipated terms and timetables and whether the
company is able to fully realize the expected benefits of such
actions; deterioration in world economic conditions, or in economic
conditions in any of the geographic regions in which the company
conducts business, including additional adverse effects from global
economic slowdown, terrorism or hostilities, including political
risks associated with the potential instability of governments and
legal systems in countries in which the company or its customers
conduct business, and changes in currency valuations; the impact of
the Russia-Ukraine conflict on the global economy,
sourcing of raw materials, and commodity prices; climate-related
risks, including environmental and severe weather caused by climate
changes, and legislative and regulatory initiatives addressing
global climate change or other environmental concerns; the effects
of fluctuations in customer demand on sales, product mix and prices
in the industries in which the company operates, including the
ability of the company to respond to rapid changes in customer
demand including but not limited to changes in customer operating
schedules due to supply chain constraints, the effects of customer
bankruptcies or liquidations, the impact of changes in industrial
business cycles, and whether conditions of fair trade exist in U.S.
markets; competitive factors, including changes in market
penetration, increasing price competition by existing or new
foreign and domestic competitors, the introduction of new products
by existing and new competitors, and new technology that may impact
the way the company's products are sold or distributed; changes in
operating costs, including the effect of changes in the company's
manufacturing processes, changes in costs associated with varying
levels of operations and manufacturing capacity, availability of
raw materials and energy, the company's ability to mitigate the
impact of fluctuations in raw materials and energy costs and the
effectiveness of its surcharge mechanism, changes in the expected
costs associated with product warranty claims, changes resulting
from inventory management, cost reduction initiatives and different
levels of customer demands, the effects of unplanned work
stoppages, and changes in the cost of labor and benefits; the
success of the company's operating plans, announced programs,
initiatives and capital investments, and the company's ability to
maintain appropriate relations with the union that represents its
associates in certain locations in order to avoid disruptions of
business; unanticipated litigation, claims or assessments,
including claims or problems related to intellectual property,
product liability or warranty, employment matters, and
environmental issues and taxes, among other matters; cyber-related
risks, including information technology system failures,
interruptions and security breaches; the company's ability to
achieve its environmental, social, and governance ("ESG") goals,
including its 2030 ESG goals; the availability of financing and
interest rates, which affect the company's cost of funds and/or
ability to raise capital, including the ability of the company to
refinance or repay at maturity the convertible notes due
December 1, 2025; the company's
pension obligations and investment performance, and/or customer
demand and the ability of customers to obtain financing to purchase
the company's products or equipment that contain its products; the
overall impact of pension and other postretirement benefit
mark-to-market accounting; the effects of the conditional
conversion feature of the convertible notes due December 1, 2025, which, if triggered, entitles
holders to convert the notes at any time during specified periods
at their option and therefore could result in potential dilution if
the holder elects to convert and the company elects to satisfy a
portion or all of the conversion obligation by delivering common
shares instead of cash; the timing required to ramp up melt
production to forecasted demand levels, as the company recovers
from the July 2022 melt shop
incident; the amount, if any, that the company is able to obtain
from its business interruption insurance claim in connection with
the related incident at the company's melt shop; and the impacts
from any repurchases of our common shares, including the timing and
amount of any repurchases. Further, this news release represents
our current policy and intent and is not intended to create legal
rights or obligations. Certain standards of measurement and
performance contained in this news release are developing and based
on assumptions, and no assurance can be given that any plan,
objective, initiative, projection, goal, mission, commitment,
expectation, or prospect set forth in this news release can or will
be achieved. Inclusion of information in this news release is not
an indication that the subject or information is material to our
business or operating results.
Additional risks relating to the company's business, the
industries in which the company operates, or the company's common
shares may be described from time to time in the company's filings
with the SEC. All of these risk factors are difficult to predict,
are subject to material uncertainties that may affect actual
results and may be beyond the company's control. Readers are
cautioned that it is not possible to predict or identify all of the
risks, uncertainties and other factors that may affect future
results and that the above list should not be considered to be a
complete list. Except as required by the federal securities laws,
the company undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new
information, future events or otherwise.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
(in millions,
except per share data) (Unaudited)
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
Net sales
|
|
$
|
316.8
|
|
|
$
|
343.7
|
|
|
$
|
1,084.5
|
|
|
$
|
944.6
|
|
Cost of products
sold
|
|
|
311.2
|
|
|
|
277.0
|
|
|
|
937.5
|
|
|
|
780.0
|
|
Gross
Profit
|
|
|
5.6
|
|
|
|
66.7
|
|
|
|
147.0
|
|
|
|
164.6
|
|
Selling, general &
administrative expenses (SG&A)
|
|
|
16.2
|
|
|
|
19.9
|
|
|
|
56.4
|
|
|
|
60.4
|
|
Restructuring
charges
|
|
|
—
|
|
|
|
0.4
|
|
|
|
0.8
|
|
|
|
2.0
|
|
Loss on sale of
consolidated subsidiary
|
|
|
—
|
|
|
|
1.1
|
|
|
|
—
|
|
|
|
1.1
|
|
Loss (gain) on sale or
disposal of assets, net
|
|
|
1.9
|
|
|
|
0.1
|
|
|
|
2.5
|
|
|
|
0.5
|
|
Impairment
charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8.2
|
|
Loss on extinguishment
of debt
|
|
|
0.1
|
|
|
|
—
|
|
|
|
43.1
|
|
|
|
—
|
|
Other (income) expense,
net
|
|
|
0.2
|
|
|
|
(6.6)
|
|
|
|
(58.8)
|
|
|
|
(28.3)
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT)(1)
|
|
|
(12.8)
|
|
|
|
51.8
|
|
|
|
103.0
|
|
|
|
120.7
|
|
Interest (income)
expense, net
|
|
|
(0.2)
|
|
|
|
1.2
|
|
|
|
1.6
|
|
|
|
4.7
|
|
Income (Loss)
Before Income Taxes
|
|
|
(12.6)
|
|
|
|
50.6
|
|
|
|
101.4
|
|
|
|
116.0
|
|
Provision (benefit) for
income taxes
|
|
|
0.7
|
|
|
|
0.5
|
|
|
|
3.1
|
|
|
|
2.1
|
|
Net Income
(Loss)
|
|
$
|
(13.3)
|
|
|
$
|
50.1
|
|
|
$
|
98.3
|
|
|
$
|
113.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
$
|
(0.29)
|
|
|
$
|
1.08
|
|
|
$
|
2.12
|
|
|
$
|
2.49
|
|
Diluted earnings (loss)
per share(2, 3)
|
|
$
|
(0.29)
|
|
|
$
|
0.94
|
|
|
$
|
1.91
|
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic
|
|
|
46.0
|
|
|
|
46.2
|
|
|
|
46.3
|
|
|
|
45.8
|
|
Weighted average shares
outstanding - diluted(2, 3)
|
|
|
46.0
|
|
|
|
53.9
|
|
|
|
52.3
|
|
|
|
55.2
|
|
|
(1) EBIT is defined as net income
(loss) before interest (income) expense, net and income taxes. EBIT
is an important financial measure used in the management of the
business, including decisions concerning the allocation of
resources and assessment of performance. Management believes that
reporting EBIT is useful to investors as this measure is
representative of the company's performance.
|
|
(2) Common share equivalents for
shares issuable upon the conversion of outstanding convertible
notes and common share equivalents for shares issuable for
equity-based awards, were excluded from the computation of diluted
earnings (loss) per share for the three months ended September 30,
2022, because the effect of their inclusion would have been
anti-dilutive. For the nine months ended September 30, 2022,
common share equivalents for shares issuable upon the conversion of
outstanding convertible notes (3.9 million shares) and common share
equivalents for shares issuable for equity-based awards (2.1
million shares) were included in the computation of diluted
earnings (loss) per share, as they were considered dilutive. For
the convertible notes, the company utilizes the if-converted method
to calculate diluted earnings (loss) per share. As such, for the
nine months ended September 30, 2022, net income was adjusted to
add back $1.5 million of convertible notes interest expense
(including amortization of convertible notes issuance
costs).
|
|
(3) For
the three and nine months ended September 30, 2021, common share
equivalents for shares issuable upon the conversion of outstanding
convertible notes (5.9 million shares and 7.8 million shares,
respectively) and common share equivalents for shares issuable for
equity-based awards (1.8 million shares and 1.6 million shares,
respectively) were included in the computation of diluted earnings
(loss) per share, as they were considered dilutive. For the
convertible notes, the Company utilizes the if-converted method to
calculate diluted earnings (loss) per share. As such, net income
was adjusted to add back $0.8 million and $3.3 million for the
three and nine months ended September 30, 2021, respectively, of
convertible notes interest expense (including amortization of
convertible notes issuance costs).
|
CONSOLIDATED BALANCE
SHEETS
|
(Dollars in
millions) (Unaudited)
|
|
September 30,
2022
|
|
|
December 31,
2021
|
|
ASSETS
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
262.5
|
|
|
$
|
259.6
|
|
Accounts receivable,
net of allowances
|
|
|
100.1
|
|
|
|
100.5
|
|
Inventories,
net
|
|
|
205.6
|
|
|
|
210.9
|
|
Deferred charges and
prepaid expenses
|
|
|
6.9
|
|
|
|
3.9
|
|
Assets held for
sale
|
|
|
—
|
|
|
|
4.3
|
|
Other current
assets
|
|
|
7.4
|
|
|
|
3.1
|
|
Total Current
Assets
|
|
|
582.5
|
|
|
|
582.3
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
485.1
|
|
|
|
510.2
|
|
Operating lease
right-of-use assets
|
|
|
14.0
|
|
|
|
14.5
|
|
Pension
assets
|
|
|
32.8
|
|
|
|
43.1
|
|
Intangible assets,
net
|
|
|
5.4
|
|
|
|
6.7
|
|
Other non-current
assets
|
|
|
2.5
|
|
|
|
2.1
|
|
Total Assets
|
|
$
|
1,122.3
|
|
|
$
|
1,158.9
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
123.8
|
|
|
$
|
141.9
|
|
Salaries, wages and
benefits
|
|
|
22.6
|
|
|
|
37.9
|
|
Accrued pension and
postretirement costs
|
|
|
2.6
|
|
|
|
4.3
|
|
Current operating
lease liabilities
|
|
|
6.2
|
|
|
|
5.7
|
|
Current convertible
notes, net
|
|
|
20.4
|
|
|
|
44.9
|
|
Other current
liabilities
|
|
|
16.3
|
|
|
|
16.1
|
|
Total Current
Liabilities
|
|
|
191.9
|
|
|
|
250.8
|
|
|
|
|
|
|
|
|
Credit
agreement
|
|
|
—
|
|
|
|
—
|
|
Non-current operating
lease liabilities
|
|
|
7.8
|
|
|
|
8.8
|
|
Accrued pension and
postretirement costs
|
|
|
172.9
|
|
|
|
223.0
|
|
Deferred income
taxes
|
|
|
1.7
|
|
|
|
2.2
|
|
Other non-current
liabilities
|
|
|
12.9
|
|
|
|
9.5
|
|
Total
Liabilities
|
|
|
387.2
|
|
|
|
494.3
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
Additional paid-in
capital
|
|
|
846.0
|
|
|
|
832.1
|
|
Retained
deficit
|
|
|
(89.9)
|
|
|
|
(188.2)
|
|
Treasury
shares
|
|
|
(33.6)
|
|
|
|
—
|
|
Accumulated other
comprehensive income (loss)
|
|
|
12.6
|
|
|
|
20.7
|
|
Total Shareholders'
Equity
|
|
|
735.1
|
|
|
|
664.6
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
1,122.3
|
|
|
$
|
1,158.9
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Dollars in
millions) (Unaudited)
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
CASH PROVIDED
(USED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(13.3)
|
|
|
$
|
50.1
|
|
|
$
|
98.3
|
|
|
$
|
113.9
|
|
Adjustments to
reconcile net income (loss) to net cash provided (used) by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
14.4
|
|
|
|
15.1
|
|
|
|
43.7
|
|
|
|
48.1
|
|
Amortization of
deferred financing fees
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
0.6
|
|
|
|
0.7
|
|
Loss on extinguishment
of debt
|
|
|
0.1
|
|
|
|
—
|
|
|
|
43.1
|
|
|
|
—
|
|
Loss on sale of
consolidated subsidiary
|
|
|
—
|
|
|
|
1.1
|
|
|
|
—
|
|
|
|
1.1
|
|
Loss (gain) on sale or
disposal of assets, net
|
|
|
1.9
|
|
|
|
0.1
|
|
|
|
2.5
|
|
|
|
0.5
|
|
Impairment
charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8.2
|
|
Deferred income
taxes
|
|
|
(0.3)
|
|
|
|
—
|
|
|
|
(0.5)
|
|
|
|
(0.1)
|
|
Stock-based
compensation expense
|
|
|
2.2
|
|
|
|
1.9
|
|
|
|
6.5
|
|
|
|
5.5
|
|
Pension and
postretirement expense (benefit), net
|
|
|
5.1
|
|
|
|
(1.8)
|
|
|
|
(44.7)
|
|
|
|
(11.7)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
|
59.9
|
|
|
|
(8.9)
|
|
|
|
0.5
|
|
|
|
(66.9)
|
|
Inventories,
net
|
|
|
56.2
|
|
|
|
(9.4)
|
|
|
|
5.4
|
|
|
|
(45.1)
|
|
Accounts
payable
|
|
|
(66.9)
|
|
|
|
4.3
|
|
|
|
(19.9)
|
|
|
|
44.3
|
|
Other accrued
expenses
|
|
|
(2.0)
|
|
|
|
5.0
|
|
|
|
(12.5)
|
|
|
|
10.3
|
|
Pension and
postretirement contributions and payments
|
|
|
(0.9)
|
|
|
|
(0.9)
|
|
|
|
(4.9)
|
|
|
|
(2.9)
|
|
Deferred charges and
prepaid expenses
|
|
|
(3.6)
|
|
|
|
(3.0)
|
|
|
|
(3.1)
|
|
|
|
(1.1)
|
|
Other, net
|
|
|
(6.2)
|
|
|
|
—
|
|
|
|
(4.2)
|
|
|
|
1.4
|
|
Net Cash Provided
(Used) by Operating Activities
|
|
|
46.8
|
|
|
|
53.8
|
|
|
|
110.8
|
|
|
|
106.2
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(5.7)
|
|
|
|
(3.5)
|
|
|
|
(15.7)
|
|
|
|
(7.3)
|
|
Proceeds from sale of
consolidated subsidiary
|
|
|
—
|
|
|
|
6.2
|
|
|
|
—
|
|
|
|
6.2
|
|
Proceeds from disposals
of property, plant and equipment
|
|
|
2.9
|
|
|
|
0.2
|
|
|
|
3.0
|
|
|
|
0.2
|
|
Net Cash Provided
(Used) by Investing Activities
|
|
|
(2.8)
|
|
|
|
2.9
|
|
|
|
(12.7)
|
|
|
|
(0.9)
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury
shares
|
|
|
(19.7)
|
|
|
|
—
|
|
|
|
(32.4)
|
|
|
|
—
|
|
Proceeds from exercise
of stock options
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
7.9
|
|
|
|
3.3
|
|
Shares surrendered for
employee taxes on stock compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.7)
|
|
|
|
(0.5)
|
|
Repayments on
convertible notes
|
|
|
—
|
|
|
|
—
|
|
|
|
(67.6)
|
|
|
|
(38.9)
|
|
Debt issuance
costs
|
|
|
(0.7)
|
|
|
|
—
|
|
|
|
(0.7)
|
|
|
|
—
|
|
Net Cash Provided
(Used) by Financing Activities
|
|
|
(20.3)
|
|
|
|
0.1
|
|
|
|
(94.5)
|
|
|
|
(36.1)
|
|
Increase (Decrease)
in Cash, Cash Equivalents, and Restricted Cash
|
|
|
23.7
|
|
|
|
56.8
|
|
|
|
3.6
|
|
|
|
69.2
|
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
|
|
239.5
|
|
|
|
115.2
|
|
|
|
259.6
|
|
|
|
102.8
|
|
Cash, Cash
Equivalents, and Restricted Cash at End of Period
|
|
$
|
263.2
|
|
|
$
|
172.0
|
|
|
$
|
263.2
|
|
|
$
|
172.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
provides a reconciliation of cash, cash equivalents, and restricted
cash reported within the Consolidated Balance Sheets that sum to
the total of the same such amounts shown in the Consolidated
Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
262.5
|
|
|
$
|
172.0
|
|
|
$
|
262.5
|
|
|
$
|
172.0
|
|
Restricted cash
reported in other current assets
|
|
|
0.7
|
|
|
|
—
|
|
|
|
0.7
|
|
|
|
—
|
|
Total cash, cash
equivalents, and restricted cash shown in the Consolidated
Statements of Cash Flows
|
|
$
|
263.2
|
|
|
$
|
172.0
|
|
|
$
|
263.2
|
|
|
$
|
172.0
|
|
Reconciliation of Free Cash Flow(1) to GAAP Net
Cash Provided (Used) by Operating Activities:
This reconciliation is provided as additional relevant
information about the company's financial position. Free cash flow
is an important financial measure used in the management of the
business. Management believes that free cash flow is useful to
investors because it is a meaningful indicator of cash generated
from operating activities available for the execution of its
business strategy.
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
(Dollars in
millions) (Unaudited)
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
Net Cash Provided
(Used) by Operating Activities
|
|
$
|
46.8
|
|
|
$
|
53.8
|
|
|
$
|
110.8
|
|
|
$
|
106.2
|
|
Less: Capital
expenditures
|
|
|
(5.7)
|
|
|
|
(3.5)
|
|
|
|
(15.7)
|
|
|
|
(7.3)
|
|
Free Cash
Flow(1)
|
|
$
|
41.1
|
|
|
$
|
50.3
|
|
|
$
|
95.1
|
|
|
$
|
98.9
|
|
|
(1) Free Cash Flow is defined as net
cash provided (used) by operating activities less capital
expenditures.
|
Reconciliation of adjusted net income (loss)(3) to
GAAP net income (loss) and adjusted diluted earnings (loss) per
share(3) to GAAP diluted earnings (loss) per share for
the three months ended September 30,
2022, September 30, 2021, and
June 30, 2022:
Adjusted net income (loss), adjusted diluted earnings (loss) per
share and other adjusted items referred to below are financial
measures not required by, or presented in accordance with GAAP.
These Non-GAAP financial measures should be considered as a
supplement to, and not as a substitute for, the financial measures
prepared in accordance with GAAP, and a reconciliation of these
financial measures to the most comparable GAAP financial measures
is presented. Management believes this data provides investors with
additional useful information on the underlying operations and
trends of the business and enables period-to-period comparability
of the company's financial performance.
Three months ended
September 30, 2022
|
|
(Dollars in
millions) (Unaudited)
|
|
Net
income
(loss)
|
|
|
SG&A
|
|
|
Loss (gain) on
sale or
disposal of
assets, net
|
|
|
Loss on
extinguishment
of debt
|
|
|
Other
expense
(income),
net
|
|
|
Diluted
earnings
(loss) per
share(1)
|
|
As
reported
|
|
$
|
(13.3)
|
|
|
$
|
16.2
|
|
|
$
|
1.9
|
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
$
|
(0.29)
|
|
Adjustments:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale or
disposal of assets, net(6)
|
|
|
1.9
|
|
|
|
—
|
|
|
|
(1.9)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.04
|
|
Loss on
extinguishment of debt
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1)
|
|
|
|
—
|
|
|
|
0.01
|
|
Loss from
remeasurement of benefit plans, net
|
|
|
4.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4.8)
|
|
|
|
0.10
|
|
Business
transformation costs(2)
|
|
|
0.8
|
|
|
|
(0.8)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.02
|
|
IT transformation
costs(7)
|
|
|
1.6
|
|
|
|
(1.6)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.03
|
|
As
adjusted
|
|
$
|
(4.1)
|
|
|
$
|
13.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4.6)
|
|
|
$
|
(0.09)
|
|
|
Three months ended
September 30, 2021
|
(Dollars in
millions) (Unaudited)
|
|
Net
income
(loss)
|
|
|
SG&A
|
|
|
Restructuring
charges
|
|
|
Loss on sale
of
consolidated
subsidiary
|
|
|
Other
expense
(income),
net
|
|
|
Diluted
earnings
(loss) per
share(4)
|
|
As
reported
|
|
$
|
50.1
|
|
|
$
|
19.9
|
|
|
$
|
0.4
|
|
|
$
|
1.1
|
|
|
$
|
(6.6)
|
|
|
$
|
0.94
|
|
Adjustments:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
charges
|
|
|
0.4
|
|
|
|
—
|
|
|
|
(0.4)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
Loss from
remeasurement of benefit plans, net
|
|
|
2.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.7)
|
|
|
|
0.05
|
|
Business
transformation costs(2)
|
|
|
0.9
|
|
|
|
(0.9)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.02
|
|
Loss on sale of
consolidated subsidiary
|
|
|
1.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.1)
|
|
|
|
—
|
|
|
|
0.02
|
|
As
adjusted
|
|
$
|
55.2
|
|
|
$
|
19.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(9.3)
|
|
|
$
|
1.04
|
|
|
Three months ended
June 30, 2022
|
|
(Dollars in
millions) (Unaudited)
|
|
Net
income
(loss)
|
|
|
SG&A
|
|
|
Restructuring
charges
|
|
|
Loss (gain) on
sale or disposal
of assets, net
|
|
|
Loss on
extinguishment
of debt
|
|
|
Other
expense
(income),
net
|
|
|
Diluted
earnings
(loss) per
share(5)
|
|
As
reported
|
|
$
|
74.5
|
|
|
$
|
21.7
|
|
|
$
|
0.4
|
|
|
$
|
0.5
|
|
|
$
|
26.0
|
|
|
$
|
(43.8)
|
|
|
$
|
1.42
|
|
Adjustments:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
charges
|
|
|
0.4
|
|
|
|
—
|
|
|
|
(0.4)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
Loss on sale or
disposal of assets, net(6)
|
|
|
0.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
Loss on
extinguishment of debt
|
|
|
26.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26.0)
|
|
|
|
—
|
|
|
|
0.49
|
|
Gain from
remeasurement of benefit plans, net
|
|
|
(35.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35.5
|
|
|
|
(0.67)
|
|
Business
transformation costs(2)
|
|
|
0.2
|
|
|
|
(0.2)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.00
|
|
IT transformation
costs(7)
|
|
|
1.3
|
|
|
|
(1.3)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.03
|
|
As
adjusted
|
|
$
|
67.4
|
|
|
$
|
20.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(8.3)
|
|
|
$
|
1.29
|
|
|
(1) Common
share equivalents for shares issuable upon the conversion of
outstanding convertible notes and common share equivalents for
shares issuable for equity-based awards, were excluded from the
computation of diluted earnings (loss) per share for the three
months ended September 30, 2022, because the effect of their
inclusion would have been anti-dilutive.
|
|
(2) Business
transformation costs consist of items that are non-routine in
nature. These costs are primarily related to professional service
fees associated with strategic initiatives and organizational
changes.
|
|
(3) Adjusted
net income (loss) and adjusted diluted earnings (loss) per share
are defined as net income (loss) and diluted earnings (loss) per
share, respectively, excluding, as applicable, adjustments listed
in the foregoing table. Other adjusted items referred to in the
foregoing tables are also defined as the applicable item excluding
any adjustments listed in the foregoing tables with respect to such
item.
|
|
(4) For the
three months ended September 30, 2021, common share equivalents for
shares issuable upon the conversion of outstanding convertible
notes (5.9 million shares) and common share equivalents for shares
issuable for equity-based awards (1.8 million shares) were included
in the computation of adjusted diluted earnings (loss) per share,
as they were considered dilutive. The total diluted weighted
average shares outstanding for the three months ended September 30,
2021 was 53.9 million shares. For the convertible notes, the
Company utilizes the if-converted method to calculated diluted
earnings (loss) per share. As such, net income was adjusted to add
back $0.8 million of convertible notes interest expense (including
amortization of convertible notes issuance costs).
|
|
(5) For the
three months ended June 30, 2022, common share equivalents for
shares issuable upon the conversion of outstanding convertible
notes (4.0 million shares) and common share equivalents for shares
issuable for equity-based awards (2.2 million shares) were included
in the computation of as reported and as adjusted diluted earnings
(loss) per share, as they were considered dilutive. The total
diluted weighted average shares outstanding for the three months
ended June 30, 2022 was 52.8 million shares. For the convertible
notes, the company utilizes the if-converted method to calculate
diluted earnings (loss) per share. As such, net income was adjusted
to add back $0.5 million of convertible notes interest expense
(including amortization of convertible notes issuance
costs).
|
|
(6) For the
three months ended September 30, 2022, the loss on sale or disposal
of assets, net, primarily related to the loss recognized on the
sale of the remaining land and buildings at the company's
TimkenSteel Material Services ("TMS") facility, as well as
write-offs of aged assets removed from service. For the three
months ended June 30, 2022, the loss on sale or disposal of assets,
net, primarily consisted of write-offs of aged assets removed from
service.
|
|
(7) For the
three months ended September 30, 2022 and June 30, 2022, IT
transformation costs were primarily related to professional service
fees not eligible for capitalization that are associated
specifically with an information technology application
simplification and modernization project.
|
Reconciliation of adjusted net income (loss)(3) to
GAAP net income (loss) and adjusted diluted earnings (loss) per
share(3) to GAAP diluted earnings (loss) per share for
the nine months ended September 30,
2022 and September 30,
2021:
Adjusted net income (loss), adjusted diluted earnings (loss) per
share and other adjusted items referred to below are financial
measures not required by, or presented in accordance with GAAP.
These Non-GAAP financial measures should be considered as a
supplement to, and not as a substitute for, the financial measures
prepared in accordance with GAAP, and a reconciliation of these
financial measures to the most comparable GAAP financial measures
is presented. Management believes this data provides investors with
additional useful information on the underlying operations and
trends of the business and enables period-to-period comparability
of the company's financial performance.
Nine months ended
September 30, 2022
|
|
(Dollars in
millions) (Unaudited)
|
|
Net
income
(loss)
|
|
|
SG&A
|
|
|
Restructuring
charges
|
|
|
Loss (gain) on
sale or
disposal of
assets, net
|
|
|
Loss on
extinguishment
of debt
|
|
|
Other
expense
(income),
net
|
|
|
Diluted
earnings
(loss) per
share(1)
|
|
As
reported
|
|
$
|
98.3
|
|
|
$
|
56.4
|
|
|
$
|
0.8
|
|
|
$
|
2.5
|
|
|
$
|
43.1
|
|
|
$
|
(58.8)
|
|
|
$
|
1.91
|
|
Adjustments:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
charges
|
|
|
0.8
|
|
|
|
—
|
|
|
|
(0.8)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.02
|
|
Loss on sale or
disposal of assets, net(5)
|
|
|
2.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.05
|
|
Loss on
extinguishment of debt
|
|
|
43.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(43.1)
|
|
|
|
—
|
|
|
|
0.82
|
|
Gain from
remeasurement of benefit plans, net
|
|
|
(37.2)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37.2
|
|
|
|
(0.71)
|
|
Business
transformation costs(2)
|
|
|
1.5
|
|
|
|
(1.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.03
|
|
IT transformation
costs(6)
|
|
|
2.9
|
|
|
|
(2.9)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.05
|
|
As
adjusted
|
|
$
|
111.9
|
|
|
$
|
52.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(21.6)
|
|
|
$
|
2.17
|
|
Nine months ended September 30,
2021
|
|
(Dollars in millions)
(Unaudited)
|
|
Net
income
(loss)
|
|
|
Cost of
products
sold
|
|
|
SG&A
|
|
|
Restructuring
charges
|
|
|
Loss on sale
of
consolidated
subsidiary
|
|
|
Impairment
charges
|
|
|
Other
expense
(income),
net
|
|
|
Diluted
earnings
(loss)
per
share(4)
|
|
As reported
|
|
$
|
113.9
|
|
|
$
|
780.0
|
|
|
$
|
60.4
|
|
|
$
|
2.0
|
|
|
$
|
1.1
|
|
|
$
|
8.2
|
|
|
$
|
(28.3)
|
|
|
$
|
2.12
|
|
Adjustments:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
2.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.0)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.04
|
|
Accelerated depreciation and
amortization
|
|
|
1.5
|
|
|
|
(1.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.03
|
|
Loss from remeasurement of benefit plans,
net
|
|
|
2.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.2)
|
|
|
|
0.04
|
|
Write-down of supplies
inventory
|
|
|
2.1
|
|
|
|
(2.1)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.04
|
|
Business transformation
costs(2)
|
|
|
1.4
|
|
|
|
—
|
|
|
|
(1.4)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.02
|
|
TMS impairment charges
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.3)
|
|
|
|
—
|
|
|
|
0.01
|
|
Sales and use tax refund
|
|
|
(2.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.5
|
|
|
|
(0.05)
|
|
Executive severance and transition
costs
|
|
|
0.5
|
|
|
|
—
|
|
|
|
(0.5)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
Harrison melt impairment
charges
|
|
|
7.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7.9)
|
|
|
|
—
|
|
|
|
0.14
|
|
Loss on sale of consolidated
subsidiary
|
|
|
1.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.1)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.02
|
|
As adjusted
|
|
$
|
130.4
|
|
|
$
|
776.4
|
|
|
$
|
58.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(28.0)
|
|
|
$
|
2.42
|
|
|
(1) For
the nine months ended September 30, 2022, common share equivalents
for shares issuable upon the conversion of outstanding convertible
notes (3.9 million shares) and common share equivalents for shares
issuable for equity-based awards (2.1 million shares) were included
in the computation of as reported and as adjusted diluted earnings
(loss) per share, as they were considered dilutive. The total
diluted weighted average shares outstanding for the nine months
ended September 30, 2022 was 52.3 million shares. For the
convertible notes, the company utilizes the if-converted method to
calculate diluted earnings (loss) per share. As such, net income
was adjusted to add back $1.5 million of convertible notes interest
expense (including amortization of convertible notes issuance
costs).
|
|
(2) Business transformation costs
consist of items that are non-routine in nature. These costs are
primarily related to professional service fees associated with
strategic initiatives and organizational changes.
|
|
(3) Adjusted net income (loss) and
adjusted diluted earnings (loss) per share are defined as net
income (loss) and diluted earnings (loss) per share, respectively,
excluding, as applicable, adjustments listed in the foregoing
table. Other adjusted items referred to in the foregoing tables are
also defined as the applicable item excluding any adjustments
listed in the foregoing tables with respect to such
item.
|
|
(4) For
the nine months ended September 30, 2021, common share equivalents
for shares issuable upon the conversion of outstanding convertible
notes (7.8 million shares) and common share equivalents for shares
issuable for equity-based awards (1.6 million shares) were included
in the computation of adjusted diluted earnings (loss) per share,
as they were considered dilutive. The total diluted weighted
average shares outstanding for the nine months ended September 30,
2021 was 55.2 million shares. For the convertible notes, the
Company utilizes the if-converted method to calculate diluted
earnings (loss) per share. As such, net income was adjusted to add
back $3.3 million of convertible notes interest expense (including
amortization of convertible notes issuance costs).
|
|
(5) For
the nine months ended September 30, 2022, the loss on sale or
disposal of assets, net, primarily related to the loss recognized
on the sale of the remaining land and buildings at the company's
TimkenSteel Material Services ("TMS") facility, as well as
write-offs of aged assets removed from service.
|
|
(6) For
the nine months ended September 30, 2022, IT transformation costs
were primarily related to professional service fees not eligible
for capitalization that are associated specifically with an
information technology application simplification and modernization
project.
|
Reconciliation of Earnings (Loss) Before Interest and Taxes
(EBIT)(1), Adjusted EBIT(3), Earnings (Loss)
Before Interest, Taxes, Depreciation and Amortization
(EBITDA)(2) and Adjusted EBITDA(4) to GAAP
Net Income (Loss):
This reconciliation is provided as additional relevant
information about the company's performance. EBIT, Adjusted EBIT,
EBITDA and Adjusted EBITDA are important financial measures used in
the management of the business, including decisions concerning the
allocation of resources and assessment of performance. Management
believes that reporting EBIT, Adjusted EBIT, EBITDA and Adjusted
EBITDA is useful to investors as these measures are representative
of the company's performance. Management also believes that it is
appropriate to compare GAAP net income (loss) to EBIT, Adjusted
EBIT, EBITDA and Adjusted EBITDA.
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
Three Months Ended
June 30,
|
|
(Dollars in
millions) (Unaudited)
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
Net income
(loss)
|
|
$
|
(13.3)
|
|
|
$
|
50.1
|
|
|
$
|
98.3
|
|
|
$
|
113.9
|
|
|
$
|
74.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for
income taxes
|
|
|
0.7
|
|
|
|
0.5
|
|
|
|
3.1
|
|
|
|
2.1
|
|
|
|
1.5
|
|
Interest (income)
expense, net
|
|
|
(0.2)
|
|
|
|
1.2
|
|
|
|
1.6
|
|
|
|
4.7
|
|
|
|
0.6
|
|
Earnings Before
Interest and Taxes (EBIT) (1)
|
|
$
|
(12.8)
|
|
|
$
|
51.8
|
|
|
$
|
103.0
|
|
|
$
|
120.7
|
|
|
$
|
76.6
|
|
EBIT Margin
(1)
|
|
|
(4.0)
|
%
|
|
|
15.1
|
%
|
|
|
9.5
|
%
|
|
|
12.8
|
%
|
|
|
18.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
14.4
|
|
|
|
15.1
|
|
|
|
43.7
|
|
|
|
48.1
|
|
|
|
14.7
|
|
Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA)
(2)
|
|
$
|
1.6
|
|
|
$
|
66.9
|
|
|
$
|
146.7
|
|
|
$
|
168.8
|
|
|
$
|
91.3
|
|
EBITDA Margin
(2)
|
|
|
0.5
|
%
|
|
|
19.5
|
%
|
|
|
13.5
|
%
|
|
|
17.9
|
%
|
|
|
22.0
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
charges
|
|
|
—
|
|
|
|
(0.4)
|
|
|
|
(0.8)
|
|
|
|
(2.0)
|
|
|
|
(0.4)
|
|
Accelerated
depreciation and amortization (EBIT only)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.5)
|
|
|
|
—
|
|
(Loss) gain from
remeasurement of benefit plans, net
|
|
|
(4.8)
|
|
|
|
(2.7)
|
|
|
|
37.2
|
|
|
|
(2.2)
|
|
|
|
35.5
|
|
Loss on extinguishment
of debt
|
|
|
(0.1)
|
|
|
|
—
|
|
|
|
(43.1)
|
|
|
|
—
|
|
|
|
(26.0)
|
|
Write-down of supplies
inventory
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.1)
|
|
|
|
—
|
|
Business transformation
costs (5)
|
|
|
(0.8)
|
|
|
|
(0.9)
|
|
|
|
(1.5)
|
|
|
|
(1.4)
|
|
|
|
(0.2)
|
|
IT transformation costs
(7)
|
|
|
(1.6)
|
|
|
|
—
|
|
|
|
(2.9)
|
|
|
|
—
|
|
|
|
(1.3)
|
|
Sales and use tax
refund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.5
|
|
|
|
—
|
|
Executive severance and
transition costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.5)
|
|
|
|
—
|
|
Loss on sale or
disposal of assets, net (6)
|
|
|
(1.9)
|
|
|
|
—
|
|
|
|
(2.5)
|
|
|
|
—
|
|
|
|
(0.5)
|
|
Harrison melt
impairment charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7.9)
|
|
|
|
—
|
|
TMS impairment
charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.3)
|
|
|
|
—
|
|
Loss on sale of
consolidated subsidiary
|
|
|
—
|
|
|
|
(1.1)
|
|
|
|
—
|
|
|
|
(1.1)
|
|
|
|
—
|
|
Adjusted EBIT
(3)
|
|
$
|
(3.6)
|
|
|
$
|
56.9
|
|
|
$
|
116.6
|
|
|
$
|
137.2
|
|
|
$
|
69.5
|
|
Adjusted EBIT Margin
(3)
|
|
|
(1.1)
|
%
|
|
|
16.6
|
%
|
|
|
10.8
|
%
|
|
|
14.5
|
%
|
|
|
16.7
|
%
|
Adjusted EBITDA
(4)
|
|
$
|
10.8
|
|
|
$
|
72.0
|
|
|
$
|
160.3
|
|
|
$
|
183.8
|
|
|
$
|
84.2
|
|
Adjusted EBITDA Margin
(4)
|
|
|
3.4
|
%
|
|
|
20.9
|
%
|
|
|
14.8
|
%
|
|
|
19.5
|
%
|
|
|
20.3
|
%
|
|
(1) EBIT is defined as net income
(loss) before interest (income) expense, net and income taxes. EBIT
Margin is EBIT as a percentage of net sales.
|
|
(2) EBITDA is defined as net income
(loss) before interest (income) expense, net, income taxes,
depreciation and amortization. EBITDA Margin is EBITDA as a
percentage of net sales.
|
|
(3) Adjusted EBIT is defined as EBIT
excluding, as applicable, adjustments listed in the table above.
Adjusted EBIT Margin is Adjusted EBIT as a percentage of net
sales.
|
|
(4) Adjusted EBITDA is defined as
EBITDA excluding, as applicable, adjustments listed in the table
above. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of
net sales.
|
|
(5) Business transformation costs
consist of items that are non-routine in nature. These costs were
primarily related to professional service fees associated with
strategic initiatives and organizational changes.
|
|
(6) For the
three and nine months ended September 30, 2022, the loss on sale or
disposal of assets, net, primarily related to the loss recognized
on the sale of the remaining land and buildings at the company's
TimkenSteel Material Services ("TMS") facility, as well as
write-offs of aged assets removed from service. For the three
months ended June 30, 2022, the loss on sale or disposal of assets,
net, primarily consisted of write-offs of aged assets removed from
service.
|
|
(7) IT
transformation costs are primarily related to professional service
fees not eligible for capitalization that are associated
specifically with an information technology application
simplification and modernization project.
|
Reconciliation of Base Sales by end market sector to GAAP Net
Sales by end-market sector:
The tables below present net sales by end-market sector,
adjusted to exclude surcharges, which represents a financial
measure that has not been determined in accordance with GAAP. We
believe presenting net sales by end-market sector, both on a gross
basis and on a per ton basis, adjusted to exclude raw material and
natural gas surcharges, provides additional insight into key
drivers of net sales such as base price and product mix. Due to the
fact that the surcharge mechanism can introduce volatility to our
net sales, net sales adjusted to exclude surcharges provides
management and investors clarity of our core pricing and results.
Presenting net sales by end-market sector, adjusted to exclude
surcharges including on a per ton basis, allows management and
investors to better analyze key market indicators and trends and
allows for enhanced comparison between our end-market sectors.
When surcharges are included in a customer agreement and are
applicable (i.e., reach the threshold amount), based on the terms
outlined in the respective agreement, surcharges are then included
as separate line items on a customer's invoice. These additional
surcharge line items adjust base prices to match cost fluctuations
due to market conditions. Each month, the company will post on the
surcharges page of its external website, as well as our customer
portal, the scrap, alloy, and natural gas surcharges that will be
applied (as a separate line item) to invoices dated in the
following month (based upon shipment volumes in the following
month). All surcharges invoiced are included in GAAP net sales.
End-Market Sector
Sales Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions, tons in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2022
|
|
|
|
Mobile
|
|
|
Industrial
|
|
|
Energy
|
|
|
Other
|
|
|
Total
|
|
Tons
|
|
|
71.2
|
|
|
|
71.3
|
|
|
|
16.0
|
|
|
|
—
|
|
|
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
130.0
|
|
|
$
|
146.0
|
|
|
$
|
36.0
|
|
|
$
|
4.8
|
|
|
$
|
316.8
|
|
Less:
Surcharges
|
|
|
42.9
|
|
|
|
45.8
|
|
|
|
11.3
|
|
|
|
—
|
|
|
|
100.0
|
|
Base Sales
|
|
$
|
87.1
|
|
|
$
|
100.2
|
|
|
$
|
24.7
|
|
|
$
|
4.8
|
|
|
$
|
216.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales /
Ton
|
|
$
|
1,826
|
|
|
$
|
2,048
|
|
|
$
|
2,250
|
|
|
$
|
—
|
|
|
$
|
1,999
|
|
Surcharges /
Ton
|
|
$
|
603
|
|
|
$
|
643
|
|
|
$
|
706
|
|
|
$
|
—
|
|
|
$
|
631
|
|
Base Sales /
Ton
|
|
$
|
1,223
|
|
|
$
|
1,405
|
|
|
$
|
1,544
|
|
|
$
|
—
|
|
|
$
|
1,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2021
|
|
|
|
Mobile
|
|
|
Industrial
|
|
|
Energy
|
|
|
Other
|
|
|
Total
|
|
Tons
|
|
|
88.8
|
|
|
|
111.0
|
|
|
|
12.9
|
|
|
|
—
|
|
|
|
212.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
133.5
|
|
|
$
|
182.0
|
|
|
$
|
20.4
|
|
|
$
|
7.8
|
|
|
$
|
343.7
|
|
Less:
Surcharges
|
|
|
47.0
|
|
|
|
66.6
|
|
|
|
7.4
|
|
|
|
—
|
|
|
|
121.0
|
|
Base Sales
|
|
$
|
86.5
|
|
|
$
|
115.4
|
|
|
$
|
13.0
|
|
|
$
|
7.8
|
|
|
$
|
222.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales /
Ton
|
|
$
|
1,503
|
|
|
$
|
1,640
|
|
|
$
|
1,581
|
|
|
$
|
—
|
|
|
$
|
1,616
|
|
Surcharges /
Ton
|
|
$
|
529
|
|
|
$
|
600
|
|
|
$
|
573
|
|
|
$
|
—
|
|
|
$
|
569
|
|
Base Sales /
Ton
|
|
$
|
974
|
|
|
$
|
1,040
|
|
|
$
|
1,008
|
|
|
$
|
—
|
|
|
$
|
1,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2022
|
|
|
|
Mobile
|
|
|
Industrial
|
|
|
Energy
|
|
|
Other
|
|
|
Total
|
|
Tons
|
|
|
85.4
|
|
|
|
102.1
|
|
|
|
21.4
|
|
|
|
—
|
|
|
|
208.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
152.9
|
|
|
$
|
208.2
|
|
|
$
|
46.3
|
|
|
$
|
8.3
|
|
|
$
|
415.7
|
|
Less:
Surcharges
|
|
|
55.2
|
|
|
|
80.0
|
|
|
|
17.0
|
|
|
|
—
|
|
|
|
152.2
|
|
Base Sales
|
|
$
|
97.7
|
|
|
$
|
128.2
|
|
|
$
|
29.3
|
|
|
$
|
8.3
|
|
|
$
|
263.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales /
Ton
|
|
$
|
1,790
|
|
|
$
|
2,039
|
|
|
$
|
2,164
|
|
|
$
|
—
|
|
|
$
|
1,990
|
|
Surcharges /
Ton
|
|
$
|
646
|
|
|
$
|
783
|
|
|
$
|
795
|
|
|
$
|
—
|
|
|
$
|
729
|
|
Base Sales /
Ton
|
|
$
|
1,144
|
|
|
$
|
1,256
|
|
|
$
|
1,369
|
|
|
$
|
—
|
|
|
$
|
1,261
|
|
(Dollars in
millions, tons in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2022
|
|
|
|
Mobile
|
|
|
Industrial
|
|
|
Energy
|
|
|
Other
|
|
|
Total
|
|
Tons
|
|
|
245.5
|
|
|
|
268.3
|
|
|
|
50.0
|
|
|
|
—
|
|
|
|
563.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
427.0
|
|
|
$
|
529.2
|
|
|
$
|
107.3
|
|
|
$
|
21.0
|
|
|
$
|
1,084.5
|
|
Less:
Surcharges
|
|
|
143.8
|
|
|
|
180.7
|
|
|
|
36.3
|
|
|
|
—
|
|
|
|
360.8
|
|
Base Sales
|
|
$
|
283.2
|
|
|
$
|
348.5
|
|
|
$
|
71.0
|
|
|
$
|
21.0
|
|
|
$
|
723.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales /
Ton
|
|
$
|
1,739
|
|
|
$
|
1,972
|
|
|
$
|
2,146
|
|
|
$
|
—
|
|
|
$
|
1,924
|
|
Surcharges
/Ton
|
|
$
|
585
|
|
|
$
|
673
|
|
|
$
|
726
|
|
|
$
|
—
|
|
|
$
|
640
|
|
Base Sales /
Ton
|
|
$
|
1,154
|
|
|
$
|
1,299
|
|
|
$
|
1,420
|
|
|
$
|
—
|
|
|
$
|
1,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2021
|
|
|
|
Mobile
|
|
|
Industrial
|
|
|
Energy
|
|
|
Other
|
|
|
Total
|
|
Tons
|
|
|
285.9
|
|
|
|
307.3
|
|
|
|
27.1
|
|
|
|
—
|
|
|
|
620.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
400.0
|
|
|
$
|
480.3
|
|
|
$
|
41.4
|
|
|
$
|
22.9
|
|
|
$
|
944.6
|
|
Less:
Surcharges
|
|
|
121.5
|
|
|
|
156.9
|
|
|
|
14.1
|
|
|
|
—
|
|
|
|
292.5
|
|
Base Sales
|
|
$
|
278.5
|
|
|
$
|
323.4
|
|
|
$
|
27.3
|
|
|
$
|
22.9
|
|
|
$
|
652.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales /
Ton
|
|
$
|
1,399
|
|
|
$
|
1,563
|
|
|
$
|
1,528
|
|
|
$
|
—
|
|
|
$
|
1,523
|
|
Surcharges /
Ton
|
|
$
|
425
|
|
|
$
|
511
|
|
|
$
|
521
|
|
|
$
|
—
|
|
|
$
|
472
|
|
Base Sales /
Ton
|
|
$
|
974
|
|
|
$
|
1,052
|
|
|
$
|
1,007
|
|
|
$
|
—
|
|
|
$
|
1,051
|
|
Calculation of Total Liquidity(1):
This calculation is provided as additional relevant information
about the company's financial position.
(Dollars in
millions) (Unaudited)
|
|
September 30,
2022
|
|
|
June 30,
2022
|
|
|
December 31,
2021
|
|
Cash and cash
equivalents
|
|
$
|
262.5
|
|
|
$
|
238.5
|
|
|
$
|
259.6
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Agreement:
|
|
|
|
|
|
|
|
|
|
Maximum
availability
|
|
$
|
400.0
|
|
|
$
|
400.0
|
|
|
$
|
400.0
|
|
Suppressed
availability(2)
|
|
|
(169.9)
|
|
|
|
(74.3)
|
|
|
|
(143.5)
|
|
Availability
|
|
|
230.1
|
|
|
|
325.7
|
|
|
|
256.5
|
|
Credit facility amount
borrowed
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Letter of credit
obligations
|
|
|
(5.4)
|
|
|
|
(5.5)
|
|
|
|
(5.4)
|
|
Availability not
borrowed
|
|
$
|
224.7
|
|
|
$
|
320.2
|
|
|
$
|
251.1
|
|
|
|
|
|
|
|
|
|
|
|
Total
liquidity(1)
|
|
$
|
487.2
|
|
|
$
|
558.7
|
|
|
$
|
510.7
|
|
|
(1) Total Liquidity is defined as
available borrowing capacity plus cash and cash
equivalents.
|
(2) As
of September 30, 2022, June 30, 2022 and December 31, 2021,
TimkenSteel had less than $400 million in collateral assets to
borrow against.
|
ADJUSTED
EBITDA(1) WALKS
|
|
(Dollars in
millions) (Unaudited)
|
|
2021 3Q
vs. 2022 3Q
|
|
|
2022 2Q
vs. 2022 3Q
|
|
Beginning Adjusted
EBITDA(1)
|
|
$
|
72
|
|
|
$
|
84
|
|
Volume
|
|
|
(9)
|
|
|
|
(19)
|
|
Price/Mix
|
|
|
35
|
|
|
|
6
|
|
Raw Material
Spread
|
|
|
(33)
|
|
|
|
(31)
|
|
Manufacturing
|
|
|
(54)
|
|
|
|
(33)
|
|
Inventory
Reserve
|
|
|
(3)
|
|
|
|
—
|
|
SG&A
|
|
|
5
|
|
|
|
6
|
|
Other
|
|
|
(2)
|
|
|
|
(2)
|
|
Ending Adjusted
EBITDA(1)
|
|
$
|
11
|
|
|
$
|
11
|
|
|
(1) Please refer to the
Reconciliation of Earnings (Loss) Before Interest and Taxes (EBIT),
Adjusted EBIT, Earnings (Loss) Before Interest, Taxes, Depreciation
and Amortization (EBITDA) and Adjusted EBITDA to GAAP Net Income
(Loss).
|
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SOURCE TimkenSteel Corp.