CANTON, Ohio, Oct. 25, 2018 /PRNewswire/ -- TimkenSteel (NYSE:
TMST, timkensteel.com), a leader in customized alloy steel products
and services, today reported third-quarter 2018 net sales of
$409.9 million and net income of
$1.4 million or $0.03 per diluted share. In the same quarter last
year, net sales were $339.1 million
with a net loss of $5.9 million or
minus $0.13 per diluted share.
Adjusted EBITDA(1) for the third quarter was
$26.5 million, an increase of
$7.7 million over the same quarter
last year.
"We continue to build on our position as a leader in special bar
quality steel to deliver a richer mix of products, and the third
quarter demonstrated good results in that regard. Operational
performance remains focused on safety and improved delivery," said
Tim Timken, chairman, CEO and
president. "We plan to run production aggressively in the fourth
quarter in anticipation of a strong start to 2019."
THIRD-QUARTER 2018 FINANCIAL SUMMARY
Third-quarter net sales increased $70.8 million or 21 percent year over
year.
- Ship tons were approximately 295,500, an increase of 2 percent
over the third quarter of 2017, due to continued end-market
strength.
- Net sales benefited from improved product mix, higher prices
and surcharges, as well as increased volume.
- Surcharge revenue of $107.1
million represents a 37.5 percent increase from the
prior-year quarter as a result of higher volumes and a rise in the
No. 1 Busheling Index.
EBIT(1) increased to $6.7 million from a loss of $2.1 million for the same period a year ago.
Adjusted EBIT(1) increased to $8.4 million from $0.2
million in the third quarter of 2017.
- Improved profitability was primarily due to more favorable
product mix resulting from more energy and industrial volume and
reduced billet sales, as well as higher prices and increased
volume.
- Manufacturing costs were higher year over year due to the
timing of scheduled maintenance, with prior-year scheduled
maintenance occurring in the fourth quarter.
- Inflation of consumables not subject to surcharge resulted in
higher costs compared to third-quarter 2017.
- Melt utilization was 62 percent for the third quarter of 2018,
compared with 74 percent in third-quarter 2017. The decrease in
third-quarter melt utilization was driven primarily by the
scheduled maintenance shutdown.
FOURTH-QUARTER 2018 OUTLOOK
- Normal seasonality will impact fourth-quarter outlook as
customers balance inventories.
- Shipments are expected to be similar to fourth-quarter 2017
with continued improvement in mix.
- Raw material spread is expected to be similar to third-quarter
2018.
- Higher manufacturing costs and consumables inflation will be a
headwind.
- Adjusted EBITDA(1) is projected to be
between $15 million and $25 million. At this time, the company is unable
to reconcile its fourth-quarter outlook for Adjusted
EBITDA(1) to a comparable GAAP range due to
an expected full re-measurement of its pension and OPEB plan assets
and obligations at December 31, 2018.
The amount of the gain or loss from the re-measurement cannot
currently be estimated.
Other Guidance
- 2018 capital spending is projected to be approximately
$40 million.
(1) Please see discussion of non-GAAP
financial measures in this news release. Adjusted EBITDA for the
third quarter of 2018 excludes $1.7
million of executive severance costs, and for the
third-quarter 2017 excludes a $2.3
million loss from the remeasurement of benefit
plans.
The company will host a conference call at 9 a.m. ET on Friday, October 26, to discuss its
financial performance with investors and securities analysts. The
financial results and conference call materials will be available
online at investors.timkensteel.com.
TimkenSteel Earnings Call Information:
Conference
Call
|
Friday, October 26,
2018 9 a.m.
ET Toll-free dial-in:
833-238-7951 International
dial-in: 647-689-4199 Conference ID: 7083359
|
Conference Call
Replay
|
Replay dial-in
available through Nov. 2, 2018 800-585-8367 or 416-621-4642 Replay passcode: 7083359
|
About TimkenSteel Corporation
TimkenSteel (NYSE:TMST, timkensteel.com) creates tailored steel
products and services for demanding applications, helping customers
push the bounds of what's possible within their industries. The
company reaches around the world in its customers' products and
leads North America in large alloy
steel bars (up to 16 inches in diameter) and seamless mechanical
tubing made of its special bar quality (SBQ) steel, as well as
supply chain and steel services. TimkenSteel operates warehouses
and sales offices in five countries and has made its steel in
America for more than 100 years. The company posted
sales of $1.3 billion in 2017.
Follow us on Twitter @TimkenSteel and on Instagram.
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: EBIT, Adjusted EBIT,
EBITDA and Adjusted EBITDA. 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. At this
time, the company is unable to reconcile its fourth quarter outlook
for Adjusted EBITDA to a comparable GAAP range due to an expected
full re-measurement of its pension and OPEB plan assets and
obligations at December 31,
2018. The amount of the gain or loss from the re-measurement
cannot currently be estimated. 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 "anticipate," "believe," \"could," "estimate,"
"expect," "forecast," "outlook," "intend," "may," "possible,"
"potential," "predict," "project," "seek," "target," "could,"
"may," "should" or "would" 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: 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 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, 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 (including the jumbo bloom
vertical caster and advanced quench-and-temper facility), the
ability to integrate acquired companies, the ability of acquired
companies to achieve satisfactory operating results, including
results being accretive to earnings, and the company's ability to
maintain appropriate relations with unions that represent 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, and environmental issues and taxes,
among other matters; the availability of financing and interest
rates, which affect the company's cost of funds and/or ability to
raise capital, 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 amount of any dividend declared by
the company's Board of Directors on the company's common shares;
and the overall impact of mark-to-market accounting. 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.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
(Dollars in
millions, except per share data) (Unaudited)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net sales
|
$409.9
|
|
|
$339.1
|
|
|
$1,204.2
|
|
|
$987.8
|
|
|
Cost of products
sold
|
385.3
|
|
|
320.6
|
|
|
1,126.4
|
|
|
928.5
|
|
|
Gross
Profit
|
24.6
|
|
|
18.5
|
|
|
77.8
|
|
|
59.3
|
|
|
Selling, general
& administrative expenses (SG&A)
|
24.0
|
|
|
22.5
|
|
|
73.6
|
|
|
67.7
|
|
|
Impairment charges
and loss on sale or disposal of assets
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
Other income,
net
|
6.1
|
|
|
1.9
|
|
|
18.7
|
|
|
10.7
|
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (1)
|
6.7
|
|
|
(2.1)
|
|
|
22.0
|
|
|
2.3
|
|
|
Interest
expense
|
4.4
|
|
|
3.7
|
|
|
12.9
|
|
|
11.0
|
|
|
Earnings (Loss)
Before Income Taxes
|
2.3
|
|
|
(5.8)
|
|
|
9.1
|
|
|
(8.7)
|
|
|
Provision for income
taxes
|
0.9
|
|
|
0.1
|
|
|
1.2
|
|
|
1.2
|
|
|
Net Income
(Loss)
|
$1.4
|
|
|
($5.9)
|
|
|
$7.9
|
|
|
($9.9)
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
per Common Share:
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
$0.03
|
|
|
($0.13)
|
|
|
$0.18
|
|
|
($0.22)
|
|
|
Diluted earnings
(loss) per share (2)
|
$0.03
|
|
|
($0.13)
|
|
|
$0.17
|
|
|
($0.22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic
|
44.6
|
|
|
44.4
|
|
|
44.5
|
|
|
44.4
|
|
|
Weighted average
shares outstanding - diluted
|
45.2
|
|
|
44.4
|
|
|
45.2
|
|
|
44.4
|
|
|
|
|
|
|
|
|
|
|
|
(1) EBIT
is defined as net income (loss) before interest expense 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 for equity-based awards for the three and nine
months ended September 30, 2017 and common share equivalents
for shares issuable upon the
conversion of outstanding convertible notes for all periods
presented were excluded from the computation of diluted earnings
(loss) per share because the
effect of their inclusion would have been anti-dilutive.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
(Dollars in
millions) (Unaudited)
|
September 30,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$27.0
|
|
|
$24.5
|
|
Accounts receivable,
net of allowances
|
172.1
|
|
|
149.8
|
|
Inventories,
net
|
285.3
|
|
|
224.0
|
|
Deferred charges and
prepaid expenses
|
4.7
|
|
|
3.9
|
|
Other current
assets
|
8.3
|
|
|
8.0
|
|
Total Current
Assets
|
497.4
|
|
|
410.2
|
|
Property, Plant and
Equipment, net
|
670.2
|
|
|
706.7
|
|
Pension
assets
|
18.0
|
|
|
14.6
|
|
Intangible assets,
net
|
16.8
|
|
|
19.9
|
|
Other non-current
assets
|
4.9
|
|
|
5.2
|
|
Total Other
Assets
|
39.7
|
|
|
39.7
|
|
Total
Assets
|
$1,207.3
|
|
|
$1,156.6
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Accounts
payable
|
$138.8
|
|
|
$135.3
|
|
Salaries, wages and
benefits
|
32.2
|
|
|
32.4
|
|
Accrued pension and
postretirement costs
|
2.9
|
|
|
11.5
|
|
Other current
liabilities
|
22.7
|
|
|
27.6
|
|
Total Current
Liabilities
|
196.6
|
|
|
206.8
|
|
Convertible notes,
net
|
73.0
|
|
|
70.1
|
|
Other long-term
debt
|
145.0
|
|
|
95.2
|
|
Accrued pension and
postretirement costs
|
205.9
|
|
|
210.8
|
|
Deferred income
taxes
|
0.6
|
|
|
0.3
|
|
Other non-current
liabilities
|
11.9
|
|
|
12.7
|
|
Total Non-Current
Liabilities
|
436.4
|
|
|
389.1
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
Additional paid-in
capital
|
844.9
|
|
|
843.7
|
|
Retained
deficit
|
(229.6)
|
|
|
(238.0)
|
|
Treasury
shares
|
(33.0)
|
|
|
(37.4)
|
|
Accumulated other
comprehensive loss
|
(8.0)
|
|
|
(7.6)
|
|
Total Shareholders'
Equity
|
574.3
|
|
|
560.7
|
|
Total Liabilities and
Shareholders' Equity
|
$1,207.3
|
|
|
$1,156.6
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
Activities
|
|
|
|
|
|
|
|
Net income
(loss)
|
$1.4
|
|
|
($5.9)
|
|
|
$7.9
|
|
|
($9.9)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
18.1
|
|
|
18.6
|
|
|
55.0
|
|
|
56.4
|
|
Amortization of
deferred financing fees and debt discount
|
1.3
|
|
|
1.0
|
|
|
4.3
|
|
|
3.1
|
|
Impairment charges
and loss on sale or disposal of assets
|
—
|
|
|
—
|
|
|
0.9
|
|
|
0.4
|
|
Deferred income
taxes
|
0.6
|
|
|
0.5
|
|
|
0.3
|
|
|
0.7
|
|
Stock-based
compensation expense
|
2.2
|
|
|
1.5
|
|
|
5.9
|
|
|
4.9
|
|
Pension and
postretirement expense (benefit), net
|
(1.4)
|
|
|
3.0
|
|
|
(4.3)
|
|
|
4.6
|
|
Pension and
postretirement contributions and payments
|
0.5
|
|
|
0.2
|
|
|
(12.4)
|
|
|
(2.5)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
1.5
|
|
|
(7.1)
|
|
|
(22.3)
|
|
|
(69.0)
|
|
Inventories,
net
|
9.2
|
|
|
(20.2)
|
|
|
(61.3)
|
|
|
(55.3)
|
|
Accounts
payable
|
(39.0)
|
|
|
3.0
|
|
|
3.5
|
|
|
46.8
|
|
Other accrued
expenses
|
7.0
|
|
|
9.2
|
|
|
(5.9)
|
|
|
10.7
|
|
Deferred charges and
prepaid expenses
|
(2.4)
|
|
|
(2.4)
|
|
|
(0.8)
|
|
|
(1.4)
|
|
Other, net
|
2.7
|
|
|
(1.5)
|
|
|
0.8
|
|
|
(1.2)
|
|
Net Cash Provided
(Used) by Operating Activities
|
1.7
|
|
|
(0.1)
|
|
|
(28.4)
|
|
|
(11.7)
|
|
Investing
Activities
|
|
|
|
|
|
|
|
Capital
expenditures
|
(8.7)
|
|
|
(5.1)
|
|
|
(17.7)
|
|
|
(11.9)
|
|
Proceeds from
disposals of property, plant and equipment
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
Net Cash Used by
Investing Activities
|
(8.7)
|
|
|
(5.1)
|
|
|
(16.7)
|
|
|
(11.9)
|
|
Financing
Activities
|
|
|
|
|
|
|
|
Proceeds from
exercise of stock options
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Shares surrendered
for employee taxes on stock compensation
|
—
|
|
|
(0.2)
|
|
|
(0.7)
|
|
|
(1.4)
|
|
Revenue Refunding
Bonds repayment
|
—
|
|
|
—
|
|
|
(30.2)
|
|
|
—
|
|
Credit Agreement
repayments
|
—
|
|
|
(5.0)
|
|
|
(65.0)
|
|
|
(5.0)
|
|
Amended Credit
Agreement borrowings
|
—
|
|
|
—
|
|
|
155.0
|
|
|
30.0
|
|
Amended Credit
Agreement repayments
|
(5.0)
|
|
|
—
|
|
|
(10.0)
|
|
|
—
|
|
Debt issuance costs
related to the Amended Credit Agreement
|
—
|
|
|
—
|
|
|
(1.7)
|
|
|
—
|
|
Net Cash Provided
(Used) by Financing Activities
|
(5.0)
|
|
|
(5.2)
|
|
|
47.6
|
|
|
23.8
|
|
Increase (Decrease)
In Cash and Cash Equivalents
|
(12.0)
|
|
|
(10.4)
|
|
|
2.5
|
|
|
0.2
|
|
Cash and cash
equivalents at beginning of period
|
39.0
|
|
|
36.2
|
|
|
24.5
|
|
|
25.6
|
|
Cash and Cash
Equivalents at End of Period
|
$27.0
|
|
|
$25.8
|
|
|
$27.0
|
|
|
$25.8
|
|
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,
|
|
(Dollars in
millions) (Unaudited)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income
(loss)
|
$1.4
|
|
|
($5.9)
|
|
|
$7.9
|
|
|
($9.9)
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
0.9
|
|
|
0.1
|
|
|
1.2
|
|
|
1.2
|
|
Interest
expense
|
4.4
|
|
|
3.7
|
|
|
12.9
|
|
|
11.0
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (1)
|
$6.7
|
|
|
($2.1)
|
|
|
$22.0
|
|
|
$2.3
|
|
EBIT Margin
(1)
|
1.6
|
%
|
|
(0.6)
|
%
|
|
1.8
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
18.1
|
|
|
18.6
|
|
|
55.0
|
|
|
56.4
|
|
Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA)
(2)
|
$24.8
|
|
|
$16.5
|
|
|
$77.0
|
|
|
$58.7
|
|
EBITDA Margin
(2)
|
6.1
|
%
|
|
4.9
|
%
|
|
6.4
|
%
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
Executive
severance costs
|
(1.7)
|
|
|
—
|
|
|
(1.7)
|
|
|
—
|
|
Loss from
remeasurement of benefit plans
|
—
|
|
|
(2.3)
|
|
|
—
|
|
|
(2.3)
|
|
Adjusted EBIT
(3)
|
$8.4
|
|
|
$0.2
|
|
|
$23.7
|
|
|
$4.6
|
|
Adjusted EBIT Margin
(3)
|
2.0
|
%
|
|
0.1
|
%
|
|
2.0
|
%
|
|
0.5
|
%
|
Adjusted EBITDA
(4)
|
$26.5
|
|
|
$18.8
|
|
|
$78.7
|
|
|
$61.0
|
|
Adjusted EBITDA
Margin (4)
|
6.5
|
%
|
|
5.5
|
%
|
|
6.5
|
%
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
(1) EBIT
is defined as net income (loss) before interest expense and income
taxes. EBIT Margin is EBIT as a percentage of net sales.
|
(2) EBITDA
is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization. EBITDA Margin is EBITDA
as a percentage of net sales.
|
(3)
Adjusted EBIT is defined as EBIT excluding executive severance
costs for the three and nine months ended September 30, 2018 and
loss from remeasurement of benefit plans for the three and nine
months ended September 30, 2017. Adjusted EBIT Margin is
Adjusted EBIT as a percentage of net sales.
|
(4)
Adjusted EBITDA is defined as EBITDA excluding executive severance
costs for the three and nine months ended September 30, 2018 and
loss from remeasurement of benefit plans for the three and nine
months ended September 30, 2017. Adjusted EBITDA Margin is
Adjusted EBITDA as a percentage of net sales.
|
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SOURCE TimkenSteel Corporation