CANTON, Ohio, April 27, 2017 /PRNewswire/ -- TimkenSteel
(NYSE: TMST) (timkensteel.com), a leader in customized alloy steel
products and services, today reported first-quarter net sales of
$309.4 million and a net loss of
$5.3 million or minus 12 cents per share. This compares with net
sales of $217.9 million and a net
loss of $9.7 million or minus 22
cents per share in the same quarter last year, and net sales
of $214.7 million and a net loss of
$67.0 million or minus $1.52 per share in the fourth quarter of 2016. As
noted previously, fourth-quarter 2016 results included $59.3 million in expense from mark-to-market
accounting for pension and other post-employment benefit plans.
EBITDA(1) for the first quarter was
$17.5 million, compared with
EBITDA(1) of $4.6
million in the same quarter last year and adjusted
EBITDA(1) of $1.4 million
in the fourth quarter 2016. The improvement was driven
primarily by the favorable timing impact from raw material spread,
focused execution of cost reduction tactics and additional
volume.
"The strategy we are deploying is working. We won new business
and, now that our markets have begun to turn, we are focused on
effectively ramping up to meet our customers' needs," said
Tim Timken, chairman, CEO and
president. "We are adding manufacturing crews and are excited to
begin to more fully utilize some of our newer assets, which enabled
us to expand our portfolio and compete in new areas. We're
confident they will begin to deliver returns when they're more
fully loaded."
FIRST-QUARTER 2017 FINANCIAL SUMMARY
First-quarter net sales increased $91.5 million or 42.0 percent year over year and
increased $94.7 million or 44.1
percent sequentially.
- Ship tons were approximately 280,000, an increase of 50.4
percent over the first quarter of 2016 and 45.0 percent
sequentially.
- Gains were related primarily to increased market penetration
and sales initiatives, including winning new business supplying
billets to tube makers.
- Surcharge revenue of $58.3
million increased 276.1 percent from the prior-year quarter
and 123.4 percent from the fourth quarter 2016 as a result of a
rise in the No. 1 Busheling Index and higher volumes.
EBIT(1) was a loss of
$1.4 million, compared with
EBIT(1) loss of $14.1 million for the same period a year ago
and an adjusted EBIT(1) loss of $17.3 million for fourth-quarter
2016.
- First-quarter EBIT(1) improved primarily due to
increased volume across all market sectors and from new business,
production efficiencies from higher melt utilization and favorable
timing impact related to raw material spread, partially offset by
negative mix and price.
- Melt utilization was 71 percent for the quarter, compared with
47 percent in first-quarter 2016 and 50 percent in fourth-quarter
2016. Higher volumes, primarily from new business, improved both
melt utilization and operating cost leverage.
SECOND-QUARTER OUTLOOK
- Shipments are expected to be approximately 10,000 to 20,000
tons (or about 5 percent) higher than first-quarter 2017 based upon
positive sentiment across all markets.
- Shipments of billets to tube makers projected to be about
60,000 tons; 10,000 tons higher than first-quarter.
- Net income/loss is projected to be between a loss of
$8 million and income of $2 million.
- EBITDA(1) is projected to be between $15 million and $25 million.
- Melt utilization is expected to increase from 71 percent to 74
percent from higher volumes.
- Raw material spread is expected to be similar to first-quarter
2017 (i.e., minimal sequential impact).
Other Guidance
- 2017 capital spending is projected to be $40 million.
- Anticipate commissioning of the advanced quench-and-temper
facility in the fourth quarter.
The company will host a conference call at 9 a.m. EDT on Friday,
April 28, 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, April 28,
2017
9 a.m. EDT
Toll-free dial-in:
877-201-0168
International
dial-in: 647-788-4901
Conference ID: 3228265
|
|
|
|
Conference Call
Replay
|
Replay dial-in
available through May 12, 2017
800-585-8367 or
416-621-4642
Replay passcode:
3228265
|
|
|
|
Live
Audiocast
|
investors.timkensteel.com
|
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 all of its steel
in America for 100 years. The company posted sales of
$870 million in 2016. 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, as well as
supplemental financial data. Non-GAAP financial measures should be
viewed in addition to, and not as an alternative 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.
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," "plan,"
"possible," "potential," "predict," "project," "seek," "target,"
"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: the impact of mark-to-market accounting; the company's ability
to realize the expected benefits of its spinoff from The Timken
Company; 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; the company's
ability to maintain appropriate relations with unions that
represent its employees in certain locations in order to avoid
disruptions of business; and 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.
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
|
|
March
31,
|
|
December
31,
|
|
(Dollars in
millions, except per share data) (Unaudited)
|
2017
|
|
2016
|
|
2016
|
|
Net sales
|
$309.4
|
|
|
$217.9
|
|
|
$214.7
|
|
|
Cost of products
sold
|
292.4
|
|
|
212.5
|
|
|
212.0
|
|
|
Gross
Profit
|
17.0
|
|
|
5.4
|
|
|
2.7
|
|
|
Selling, general
& administrative expenses (SG&A)
|
22.9
|
|
|
22.1
|
|
|
23.4
|
|
|
Impairment and
restructuring charges
|
—
|
|
|
—
|
|
|
—
|
|
|
Other (income)
expense, net
|
(4.5)
|
|
|
(2.6)
|
|
|
55.9
|
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (1)
|
(1.4)
|
|
|
(14.1)
|
|
|
(76.6)
|
|
|
Interest
expense
|
3.6
|
|
|
2.0
|
|
|
3.4
|
|
|
Loss Before Income
Taxes
|
(5.0)
|
|
|
(16.1)
|
|
|
(80.0)
|
|
|
Provision (benefit)
for income taxes
|
0.3
|
|
|
(6.4)
|
|
|
(13.0)
|
|
|
Net
Loss
|
($5.3)
|
|
|
($9.7)
|
|
|
($67.0)
|
|
|
|
|
|
|
|
|
Net Loss per
Common Share:
|
|
|
|
|
|
|
Basic loss per
share
|
($0.12)
|
|
|
($0.22)
|
|
|
($1.52)
|
|
|
Diluted loss per
share (2)
|
($0.12)
|
|
|
($0.22)
|
|
|
($1.52)
|
|
|
|
|
|
|
|
|
Dividends per
share
|
$—
|
|
|
$—
|
|
|
$—
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
44,300,396
|
|
|
44,206,837
|
|
|
44,224,039
|
|
|
Weighted average
shares outstanding - assuming dilution
|
44,300,396
|
|
|
44,206,837
|
|
|
44,224,039
|
|
|
|
|
|
|
|
|
(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, which include shares issuable for equity-based
awards and upon the conversion of outstanding convertible notes,
were excluded from the computation of diluted loss per share
because the effect of their inclusion would have been
anti-dilutive.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
(Dollars in
millions) (Unaudited)
|
March 31,
2017
|
|
December 31,
2016
|
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
$20.6
|
|
|
$25.6
|
|
|
Accounts receivable,
net of allowances
|
147.9
|
|
|
91.6
|
|
|
Inventories,
net
|
190.9
|
|
|
164.2
|
|
|
Deferred charges and
prepaid expenses
|
3.1
|
|
|
2.8
|
|
|
Other current
assets
|
7.6
|
|
|
6.2
|
|
|
Total Current
Assets
|
370.1
|
|
|
290.4
|
|
|
Property, Plant and
Equipment, net
|
727.3
|
|
|
741.9
|
|
|
Other
Assets
|
|
|
|
|
Pension
assets
|
8.4
|
|
|
6.2
|
|
|
Intangible assets,
net
|
23.6
|
|
|
25.0
|
|
|
Other non-current
assets
|
6.1
|
|
|
6.4
|
|
|
Total Other
Assets
|
38.1
|
|
|
37.6
|
|
|
Total
Assets
|
$1,135.5
|
|
|
$1,069.9
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Accounts payable,
trade
|
$126.4
|
|
|
$87.0
|
|
|
Salaries, wages and
benefits
|
26.4
|
|
|
20.3
|
|
|
Accrued pension and
postretirement costs
|
3.0
|
|
|
3.0
|
|
|
Other current
liabilities
|
17.9
|
|
|
20.4
|
|
|
Total Current
Liabilities
|
173.7
|
|
|
130.7
|
|
|
Convertible notes,
net
|
67.3
|
|
|
66.4
|
|
|
Other long-term
debt
|
95.2
|
|
|
70.2
|
|
|
Accrued pension and
postretirement costs
|
193.2
|
|
|
192.1
|
|
|
Deferred income
taxes
|
0.3
|
|
|
—
|
|
|
Other non-current
liabilities
|
12.6
|
|
|
13.1
|
|
|
Total Non-Current
Liabilities
|
368.6
|
|
|
341.8
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Additional paid-in
capital
|
841.4
|
|
|
845.6
|
|
|
Retained
deficit
|
(199.5)
|
|
|
(193.9)
|
|
|
Treasury
shares
|
(39.8)
|
|
|
(44.9)
|
|
|
Accumulated other
comprehensive loss
|
(8.9)
|
|
|
(9.4)
|
|
|
Total Shareholders'
Equity
|
593.2
|
|
|
597.4
|
|
|
Total Liabilities and
Shareholders' Equity
|
$1,135.5
|
|
|
$1,069.9
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(Dollars in
millions) (Unaudited)
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
|
CASH PROVIDED
(USED)
|
|
|
|
|
Operating
Activities
|
|
|
|
|
Net loss
|
($5.3)
|
|
|
($9.7)
|
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
18.9
|
|
|
18.7
|
|
|
Amortization related
to other long-term debt
|
1.2
|
|
|
0.2
|
|
|
Loss on sale or
disposal of assets
|
—
|
|
|
0.8
|
|
|
Deferred income
taxes
|
0.3
|
|
|
(8.7)
|
|
|
Stock-based
compensation expense
|
1.6
|
|
|
1.5
|
|
|
Pension and
postretirement expense
|
0.8
|
|
|
0.6
|
|
|
Pension and
postretirement contributions and payments
|
(1.6)
|
|
|
(1.9)
|
|
|
Reimbursement from
postretirement plan assets
|
—
|
|
|
13.3
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts receivable,
net
|
(56.3)
|
|
|
(14.1)
|
|
|
Inventories,
net
|
(26.7)
|
|
|
13.0
|
|
|
Accounts payable,
trade
|
39.4
|
|
|
6.6
|
|
|
Other accrued
expenses
|
2.9
|
|
|
(10.7)
|
|
|
Deferred charges and
prepaid expenses
|
(0.3)
|
|
|
7.0
|
|
|
Other, net
|
(1.2)
|
|
|
3.5
|
|
|
Net Cash (Used)
Provided by Operating Activities
|
(26.3)
|
|
|
20.1
|
|
|
Investing
Activities
|
|
|
|
|
Capital
expenditures
|
(2.7)
|
|
|
(8.5)
|
|
|
Proceeds from
disposals of property, plant and equipment
|
—
|
|
|
—
|
|
|
Net Cash Used by
Investing Activities
|
(2.7)
|
|
|
(8.5)
|
|
|
Financing
Activities
|
|
|
|
|
Proceeds from
exercise of stock options
|
0.2
|
|
|
—
|
|
|
Shares surrendered
for employee taxes on stock compensation
|
(1.2)
|
|
|
—
|
|
|
Credit agreement
repayments
|
—
|
|
|
(15.0)
|
|
|
Credit agreement
borrowings
|
25.0
|
|
|
—
|
|
|
Issuance costs
related to credit agreement
|
—
|
|
|
(1.5)
|
|
|
Net Cash Provided
(Used) by Financing Activities
|
24.0
|
|
|
(16.5)
|
|
|
Effect of exchange
rate changes on cash
|
—
|
|
|
—
|
|
|
Decrease In Cash
and Cash Equivalents
|
(5.0)
|
|
|
(4.9)
|
|
|
Cash and cash
equivalents at beginning of period
|
25.6
|
|
|
42.4
|
|
|
Cash and Cash
Equivalents at End of Period
|
$20.6
|
|
|
$37.5
|
|
|
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 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 loss to EBIT, Adjusted EBIT, EBITDA
and Adjusted EBITDA.
|
|
(Dollars in
millions) (Unaudited)
|
Three Months
Ended
|
|
March
31,
|
|
December
31,
|
|
2017
|
|
2016
|
|
2016
|
|
Net loss
|
($5.3)
|
|
($9.7)
|
|
($67.0)
|
|
|
|
|
|
|
|
Provision (Benefit)
for income taxes
|
0.3
|
|
(6.4)
|
|
(13.0)
|
|
Interest
expense
|
3.6
|
|
2.0
|
|
3.4
|
|
Earnings (Loss)
Before Interest and Taxes (EBIT) (1)
|
($1.4)
|
|
($14.1)
|
|
($76.6)
|
|
EBIT Margin
(1)
|
(0.5)%
|
|
(6.5)%
|
|
(35.7)%
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
18.9
|
|
18.7
|
|
18.7
|
|
Earnings (Loss)
Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(2)
|
$17.5
|
|
$4.6
|
|
($57.9)
|
|
EBITDA Margin
(2)
|
5.7%
|
|
2.1%
|
|
(27.0)%
|
|
|
|
|
|
|
|
|
|
Actuarial
gains/(losses) from remeasurement of mark-to-market
accounting
|
—
|
|
—
|
|
(59.3)
|
|
Adjusted EBIT
(3)
|
($1.4)
|
|
($14.1)
|
|
($17.3)
|
|
Adjusted EBITDA
(4)
|
$17.5
|
|
$4.6
|
|
$1.4
|
|
|
|
|
|
|
|
(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 the remeasurement impact
of mark-to-market accounting.
|
|
(4)
Adjusted EBITDA is defined as EBITDA excluding the remeasurement
impact of mark-to-market accounting.
|
|
Reconciliation of
Total Debt to Net Debt and the Ratio of Total Debt and Net Debt to
Capital:
|
|
This reconciliation
is provided as additional relevant information about the Company's
financial position. Capital, used for the ratio of total debt
to capital and net debt to capital, is defined as total debt plus
total equity. Management believes net debt is useful to
investors as it is an important measure of the Company's financial
position due to the amount of cash and cash equivalents.
|
|
(Dollars in
millions) (Unaudited)
|
March
31,
2017
|
|
December 31,
2016
|
|
Convertible notes,
net
|
$67.3
|
|
$66.4
|
|
Other long-term
debt
|
95.2
|
|
70.2
|
|
Total long-term
financing
|
162.5
|
|
136.6
|
|
Less: Cash and cash
equivalents
|
20.6
|
|
25.6
|
|
Net
Debt
|
$141.9
|
|
$111.0
|
|
|
|
|
|
Total
Equity
|
$593.2
|
|
$597.4
|
|
|
|
|
|
Ratio of Total
Debt to Capital
|
21.5%
|
|
18.6%
|
|
Ratio of Net Debt
to Capital
|
18.8%
|
|
15.1%
|
|
|
|
Reconciliation of
Free Cash Flow to GAAP Net Cash (Used) Provided by Operating
Activities:
|
|
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.
|
|
(Dollars in
millions) (Unaudited)
|
Three Months
Ended
March 31,
|
|
2017
|
|
2016
|
|
Net Cash (Used)
Provided by Operating Activities
|
($26.3)
|
|
$20.1
|
|
Less: Capital
expenditures
|
(2.7)
|
|
(8.5)
|
|
Free Cash
Flow
|
($29.0)
|
|
$11.6
|
|
Reconciliation of
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) (1) to GAAP Net Income (Loss):
|
|
This reconciliation
is provided as additional relevant information about the Company's
second quarter guidance. EBITDA 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 EBITDA is
useful to investors as this measure is representative of the
Company's performance. Management also believes that it is
appropriate to compare GAAP net income (loss) to EBITDA.
|
|
Three Months
Ended
June 30,
|
|
(Dollars in
millions) (Unaudited)
|
2017
|
|
2017
|
|
Low
|
|
High
|
|
Net income
(loss)
|
($8.0)
|
|
$2.0
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
—
|
|
—
|
|
Interest
expense
|
4.0
|
|
4.0
|
|
Depreciation and
amortization
|
19.0
|
|
19.0
|
|
Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA)
(1)
|
$15.0
|
|
$25.0
|
|
|
|
|
|
(1) EBITDA
is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/timkensteel-announces-first-quarter-2017-results-shipments-increase-with-growing-demand-300447618.html
SOURCE TimkenSteel