CANTON,
Ohio, Oct. 12, 2022 /PRNewswire/ -- TimkenSteel
Corp. (NYSE: TMST), a leader in high-quality specialty steel,
manufactured components, and supply chain solutions, today
announced preliminary third-quarter 2022 financial results.
"The end of July incident at our melt shop, which resulted in
approximately one month of melt shop downtime and a subsequent
slower than expected ramp up, significantly impacted our
profitability for the third quarter. As a result, we expect third
quarter adjusted EBITDA(1) to be in the range of
approximately $9 million to
$12 million. The company anticipates
a significant recovery on its business interruption insurance
related to the incident. The
insurance recovery process is ongoing and nothing has been recorded
at this time," said Mike Williams,
president and chief executive officer.
"We are encouraged that demand remains strong across our end
markets with a customer order backlog in excess of 300,000 ship
tons, the majority of our production capacity allocated to
customers in 2023, and positive momentum in base pricing. As we
continue to conservatively ramp up
melt production in the fourth quarter, we remain focused on safety
and the execution of our strategic imperatives to drive sustainable
through-cycle profitability. I am confident that we remain
well-positioned for the long term, and I thank our customers for
their patience and continued trust in TimkenSteel," said
Williams.
THIRD QUARTER 2022
UPDATE
- Overall, the company expects adjusted EBITDA(1)
to be in the range of approximately $9
million to $12 million.
Due to the full remeasurement of certain company pension plans as
of September 30, 2022, which is
ongoing and cannot be estimated at this time, the company is unable
to provide the most directly comparable GAAP range or reconcile its
third-quarter outlook for adjusted EBITDA to the most directly
comparable GAAP range without unreasonable effort.
- Commercial:
-
- Net sales of $316.8 million
decreased 24 percent from the sequential second quarter driven by
lower shipments and surcharge revenue per ton, partially offset by
higher base sales(1) prices.
- Shipments were 158,500 tons, a 24 percent sequential decline.
The decline in shipments was driven by availability of inventory
for shipment as a result of the melt shop incident.
- The purchase of third-party melt helped support customer demand
late in the third quarter but was not enough to offset the
short-term loss in production. Third-party melt purchases are
expected to increase in the fourth quarter.
- Operations:
-
- Melt utilization was 40 percent compared with 84 percent in the
second quarter. The sequential decline in melt utilization was due
to the melt shop incident and resulted in significantly lower
manufacturing cost absorption in the third quarter.
- Approximately $8 million of
repair costs and other expenses associated with the melt shop
incident were recognized in the quarter to
complete the required repairs.
- Annual maintenance shutdown costs in the quarter were
approximately $8 million, as the
company pulled forward certain maintenance activities into the
third quarter to minimize fourth quarter downtime.
(1) Please see discussion of non-GAAP financial measures in this
news release.
- Cash:
-
- Cash and cash equivalents were a record $262.5 million at the end of September, an
increase of $24.0 million from the
end of June.
- Capital expenditures were $5.7
million in the quarter, an increase of $2.2 million from the second quarter.
- The company repurchased 1.3 million common shares in the open
market at an aggregate cost of $19.7
million in the quarter. As of September 30, 2022, the company had $17.6 million remaining under its previously
approved $50.0 million share
repurchase program.
- The company recently completed a refinancing of its
$400.0 million asset-based revolving
credit facility, resulting in an extension of the facility to
September 30, 2027. The credit
facility remains undrawn at this time.
The preliminary information provided above is based on the
company's current estimates of its financial results for the
quarter ended September 30, 2022 and
remains subject to change based on management's final review of the
company's third-quarter financial results.
THIRD-QUARTER EARNINGS WEBCAST
DETAILS
TimkenSteel will release its third-quarter 2022 financial
results, including fourth-quarter
outlook, on Thursday, November 3,
2022, after the market closes on the New York Stock
Exchange.
The company 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. EDT. 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 EBITDA 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. Due to the full remeasurement of certain
company pension plans as of September 30,
2022, which is ongoing and cannot be estimated at this time,
the company is unable to provide the most directly comparable GAAP
range or reconcile its third-quarter outlook for adjusted EBITDA to
the most directly comparable GAAP range without unreasonable
effort. For details on base sales, refer to the Reconciliation of
Base Sales to GAAP Net Sales table at the end of this release.
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 amount, if any, that the company is
able to obtain from its business interruption insurance claim in
connection with the 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.
Reconciliation of Base Sales to
GAAP Net Sales:
The tables below present net sales, adjusted to exclude
surcharges, which represents a financial measure that has not been
determined in accordance with GAAP. We believe presenting net
sales, 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. 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, adjusted to exclude
surcharges including on a per ton basis, allows management and
investors to better analyze key market indicators and trends.
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.
Sales
Data
|
|
|
|
|
|
(dollars in
millions, tons in thousands)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30, 2022
|
|
|
Three Months
Ended
June 30, 2022
|
|
Tons
|
|
158.5
|
|
|
|
208.9
|
|
|
|
|
|
|
|
Net Sales
|
$
|
316.8
|
|
|
$
|
415.7
|
|
Less:
Surcharges
|
|
100.0
|
|
|
|
152.2
|
|
Base Sales
|
$
|
216.8
|
|
|
$
|
263.5
|
|
|
|
|
|
|
|
Net Sales /
Ton
|
$
|
1,999
|
|
|
$
|
1,990
|
|
Surcharges /
Ton
|
$
|
631
|
|
|
$
|
729
|
|
Base Sales /
Ton
|
$
|
1,368
|
|
|
$
|
1,261
|
|
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SOURCE TimkenSteel Corp.