FORM 8-K |
Date of Report (Date of Earliest Event Reported): | April 26, 2018 |
TIMKENSTEEL CORPORATION (Exact name of registrant as specified in its charter) |
Ohio | 1-36313 | 46-4024951 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1835 Dueber Avenue, SW, Canton, OH 44706 |
(Address of Principal Executive Offices) (Zip Code) |
(330) 471-7000 |
(Registrant's Telephone Number, Including Area Code) |
Not Applicable |
(Former name or former address, if changed since last report) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |
99.1 |
TIMKENSTEEL CORPORATION | |||
Date: | April 26, 2018 | By: | /s/ Christopher J. Holding |
Christopher J. Holding | |||
Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 |
• | Ship tons were approximately 300,000, an increase of 7.1 percent over the first quarter of 2017 and an increase of 4.9 percent sequentially, due to strong end-market demand. |
• | Prior-year and sequential gains were from increased volume, higher prices, and improved product mix. |
• | Surcharge revenue of $90.7 million increased 55.6 percent from the prior-year quarter as a result of a 21 percent increase in the No. 1 Busheling Index and higher volumes. Compared with the fourth-quarter 2017, surcharge revenue increased 16.9 percent. |
TimkenSteel Corporation | ||||
1835 Dueber Ave. S.W., GNE-14, Canton, OH 44706 | ||||
Media Contact: Carla Wooley, APR | Investor Contact: Tina Beskid | |||
P 330.471.7760 | P 330.471.7000 | |||
news@timkensteel.com | ir@timkensteel.com |
• | EBIT(1) improved both year over year and sequentially due to raw material spread as a result of the rising No. 1 Busheling Index, and better price/mix. |
• | Included in first-quarter EBIT(1) is $3.7 million of non-recurring legal costs and employee benefit claims. |
• | Melt utilization was 77 percent for the quarter driven by improved demand across all end markets, compared with 71 percent in first-quarter 2017 and 68 percent in fourth-quarter 2017. |
▪ | Shipments are expected to be between 5 percent and 10 percent higher than first-quarter 2018 from improving end markets. |
▪ | Net income is projected to be between $8 million and $18 million. |
▪ | EBITDA is projected to be between $30 million and $40 million. |
▪ | Raw material spread is expected to be a headwind of about $6 million. |
▪ | 2018 capital spending is projected to be $40 million. |
Conference Call | Friday, April 27, 2018 9 a.m. ET Toll-free dial-in: 866-393-4306 International dial-in: 734-385-2616 Conference ID: 5047779 |
Conference Call Replay | Replay dial-in available through May 4, 2018 855-859-2056 or 404-537-3406 Replay passcode: 5047779 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
Three Months Ended, | ||||||||||
March 31, | December 31, | |||||||||
(Dollars in millions, except per share data) (Unaudited) | 2018 | 2017 | 2017 | |||||||
Net sales | $380.8 | $309.4 | $341.4 | |||||||
Cost of products sold | 359.7 | 292.4 | 332.9 | |||||||
Gross Profit | 21.1 | 17.0 | 8.5 | |||||||
Selling, general & administrative expenses (SG&A) | 24.7 | 22.9 | 22.8 | |||||||
Impairment and restructuring charges | — | — | 0.7 | |||||||
Other income (expense), net | 6.4 | 4.5 | (14.8 | ) | ||||||
Earnings (Loss) Before Interest and Taxes (EBIT) (1) | 2.8 | (1.4 | ) | (29.8 | ) | |||||
Interest expense | 4.6 | 3.6 | 3.8 | |||||||
Loss Before Income Taxes | (1.8 | ) | (5.0 | ) | (33.6 | ) | ||||
Provision (benefit) for income taxes | 0.1 | 0.3 | 0.3 | |||||||
Net Loss | ($1.9 | ) | ($5.3 | ) | ($33.9 | ) | ||||
Net Loss per Common Share: | ||||||||||
Basic loss per share | ($0.04 | ) | ($0.12 | ) | ($0.76 | ) | ||||
Diluted loss per share (2) | ($0.04 | ) | ($0.12 | ) | ($0.76 | ) | ||||
Dividends per share | $— | $— | $— | |||||||
Weighted average shares outstanding | 44.5 | 44.3 | 44.4 | |||||||
Weighted average shares outstanding - assuming dilution | 44.5 | 44.3 | 44.4 | |||||||
(1) EBIT is defined as net 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, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Cash and cash equivalents | $35.4 | $24.5 | |||||
Accounts receivable, net of allowances | 181.1 | 149.8 | |||||
Inventories, net | 252.8 | 224.0 | |||||
Deferred charges and prepaid expenses | 3.5 | 3.9 | |||||
Other current assets | 7.6 | 8.0 | |||||
Total Current Assets | 480.4 | 410.2 | |||||
Property, Plant and Equipment, net | 691.9 | 706.7 | |||||
Other Assets | |||||||
Pension assets | 17.4 | 14.6 | |||||
Intangible assets, net | 18.8 | 19.9 | |||||
Other non-current assets | 5.9 | 5.2 | |||||
Total Other Assets | 42.1 | 39.7 | |||||
Total Assets | $1,214.4 | $1,156.6 | |||||
LIABILITIES | |||||||
Accounts payable, trade | $171.0 | $135.3 | |||||
Salaries, wages and benefits | 29.1 | 32.4 | |||||
Accrued pension and postretirement costs | 11.5 | 11.5 | |||||
Other current liabilities | 19.4 | 27.6 | |||||
Total Current Liabilities | 231.0 | 206.8 | |||||
Convertible notes, net | 71.1 | 70.1 | |||||
Other long-term debt | 130.0 | 95.2 | |||||
Accrued pension and postretirement costs | 209.2 | 210.8 | |||||
Deferred income taxes | — | 0.3 | |||||
Other non-current liabilities | 11.1 | 12.7 | |||||
Total Non-Current Liabilities | 421.4 | 389.1 | |||||
SHAREHOLDERS' EQUITY | |||||||
Additional paid-in capital | 842.6 | 843.7 | |||||
Retained deficit | (239.3 | ) | (238.0 | ) | |||
Treasury shares | (34.6 | ) | (37.4 | ) | |||
Accumulated other comprehensive loss | (6.7 | ) | (7.6 | ) | |||
Total Shareholders' Equity | 562.0 | 560.7 | |||||
Total Liabilities and Shareholders' Equity | $1,214.4 | $1,156.6 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Dollars in millions) (Unaudited) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
CASH PROVIDED (USED) | ||||||||
Operating Activities | ||||||||
Net Loss | ($1.9 | ) | ($5.3 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 18.5 | 18.9 | ||||||
Amortization of deferred financing fees and debt discount | 1.8 | 1.2 | ||||||
Deferred income taxes | (0.3 | ) | 0.3 | |||||
Stock-based compensation expense | 2.2 | 1.6 | ||||||
Pension and postretirement expense | (1.4 | ) | 0.8 | |||||
Pension and postretirement contributions and payments | (2.5 | ) | (1.6 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (31.3 | ) | (56.3 | ) | ||||
Inventories, net | (28.8 | ) | (26.7 | ) | ||||
Accounts payable, trade | 35.7 | 39.4 | ||||||
Other accrued expenses | (13.2 | ) | 2.9 | |||||
Deferred charges and prepaid expenses | 0.4 | (0.3 | ) | |||||
Other, net | 1.4 | (1.2 | ) | |||||
Net Cash Provided by Operating Activities | (19.4 | ) | (26.3 | ) | ||||
Investing Activities | ||||||||
Capital expenditures | (2.2 | ) | (2.7 | ) | ||||
Net Cash Used by Investing Activities | (2.2 | ) | (2.7 | ) | ||||
Financing Activities | ||||||||
Proceeds from exercise of stock options | 0.1 | 0.2 | ||||||
Shares surrendered for employee taxes on stock compensation | (0.7 | ) | (1.2 | ) | ||||
Revenue Refunding Bonds repayment | (30.2 | ) | — | |||||
Credit Agreement repayments | (65.0 | ) | ||||||
Amended Credit Agreement borrowings | 130.0 | 25.0 | ||||||
Debt issuance costs related to the amended credit agreement | (1.7 | ) | — | |||||
Net Cash Provided (Used) by Financing Activities | 32.5 | 24.0 | ||||||
Increase (decrease) In Cash and Cash Equivalents | 10.9 | (5.0 | ) | |||||
Cash and cash equivalents at beginning of period | 24.5 | 25.6 | ||||||
Cash and Cash Equivalents at End of Period | $35.4 | $20.6 |
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 income (loss) to EBIT, Adjusted EBIT, EBITDA and Adjusted EBITDA. | |||||||||||
(Dollars in millions) (Unaudited) | Three Months Ended | ||||||||||
March 31, | December 31, | ||||||||||
2018 | 2017 | 2017 | |||||||||
Net Loss | ($1.9 | ) | ($5.3 | ) | ($33.9 | ) | |||||
Provision (benefit) for income taxes | 0.1 | 0.3 | 0.3 | ||||||||
Interest expense | 4.6 | 3.6 | 3.8 | ||||||||
Earnings (Loss) Before Interest and Taxes (EBIT) (1) | $2.8 | ($1.4 | ) | ($29.8 | ) | ||||||
EBIT Margin (1) | 0.7 | % | (0.5 | )% | (8.7 | )% | |||||
Depreciation and amortization | 18.5 | 18.9 | 18.5 | ||||||||
Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization (EBITDA) (2) | $21.3 | $17.5 | ($11.3 | ) | |||||||
EBITDA Margin (2) | 5.6 | % | 5.7 | % | (3.3 | )% | |||||
Loss from remeasurement of benefit plans | — | — | (19.5 | ) | |||||||
Adjusted EBIT (3) | $2.8 | ($1.4 | ) | ($10.3 | ) | ||||||
Adjusted EBITDA (4) | $21.3 | $17.5 | $8.2 | ||||||||
(1) EBIT is defined as net loss before interest expense and income taxes. EBIT Margin is EBIT as a percentage of net sales. | |||||||||||
(2) EBITDA is defined as net 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 loss from remeasurement of benefit plans. | |||||||||||
(4) Adjusted EBITDA is defined as EBITDA excluding the loss from remeasurement of benefit plans. |
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, 2018 | December 31, 2017 | ||||
Convertible notes, net | $71.1 | $70.1 | ||||
Other long-term debt | 130.0 | 95.2 | ||||
Total long-term financing | 201.1 | 165.3 | ||||
Less: Cash and cash equivalents | 35.4 | 24.5 | ||||
Net Debt | $165.7 | $140.8 | ||||
Total Equity | $562.0 | $560.7 | ||||
Ratio of Total Debt to Capital | 26.4 | % | 22.8 | % | ||
Ratio of Net Debt to Capital | 21.7 | % | 19.4 | % |
Reconciliation of Free Cash Flow to GAAP Net Cash Provided 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. | |||||||
(Dollars in millions) (Unaudited) | Three Months Ended March 31, | ||||||
2018 | 2017 | ||||||
Net Cash Provided by Operating Activities | ($19.4 | ) | ($26.3 | ) | |||
Less: Capital expenditures | (2.2 | ) | (2.7 | ) | |||
Free Cash Flow | ($21.6 | ) | ($29.0 | ) |
Reconciliation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (1) to GAAP Net Income: | |||||||
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) | 2018 | 2018 | |||||
Low | High | ||||||
Net income | $8.0 | $18.0 | |||||
Provision (benefit) for income taxes | 0.3 | 0.3 | |||||
Interest expense | 3.5 | 3.5 | |||||
Depreciation and amortization | 18.2 | 18.2 | |||||
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (1) | $30.0 | $40.0 | |||||
(1) EBITDA is defined as net income (loss) before interest expense, income taxes, depreciation and amortization. |
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