Company Announcements

(1)

Please see discussion of non-GAAP financial measures in this news release.

(2)

The company defines total liquidity as available borrowing capacity plus cash and cash equivalents.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
September 30,

Nine Months Ended
September 30,

(in millions, except per share data) (Unaudited)

2024

2023

2024

2023

Net sales

$

227.2

$

354.2

$

843.5

$

1,034.3

Cost of products sold

215.1

303.2

756.7

889.2

Gross Profit

12.1

51.0

86.8

145.1

Selling, general & administrative expenses (SG&A)

22.5

20.5

67.3

61.9

Loss (gain) on sale or disposal of assets, net

0.1

(0.3)

0.4

(2.8)

Loss on extinguishment of debt

—

—

—

11.4

Other (income) expense, net

(1.0)

(2.0)

(2.3)

(13.1)

Earnings (Loss) Before Interest and Taxes (EBIT)⁽¹⁾

(9.5)

32.8

21.4

87.7

Interest (income) expense, net

(2.4)

(1.8)

(7.6)

(5.0)

Income (Loss) Before Income Taxes

(7.1)

34.6

29.0

92.7

Provision (benefit) for income taxes

(1.2)

9.8

6.3

24.6

Net Income (Loss)

$

(5.9)

$

24.8

$

22.7

$

68.1

Net Income (Loss) per Common Share:

Basic earnings (loss) per share

$

(0.13)

$

0.56

$

0.52

$

1.55

Diluted earnings (loss) per share^{(2, 3)}

$

(0.13)

$

0.51

$

0.49

$

1.43

Weighted average shares outstanding - basic

43.1

44.1

43.4

44.0

Weighted average shares outstanding - diluted^{(2, 3)}

43.1

47.9

46.2

48.0

⁽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, 2024, because the effect of their inclusion would have been anti-dilutive. For the nine months ended September 30, 2024, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (1.7 million shares) and common share equivalents for shares issuable for equity-based awards (1.1 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, 2024, net income was adjusted to add back $0.6 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

⁽³⁾

For the three and nine months ended September 30, 2023, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (1.7 million shares and 2.0 million shares, respectively) and common share equivalents for shares issuable for equity-based awards (2.1 million shares and 2.0 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 $0.2 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, of convertible notes interest expense (including amortization of convertible notes issuance costs).

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions) (Unaudited)

September 30,
2024

December 31,
2023

ASSETS

Cash and cash equivalents

$

254.6

$

280.6

Accounts receivable, net of allowances

105.1

113.2

Inventories, net

218.0

228.0

Deferred charges and prepaid expenses

17.8

10.3

Other current assets

6.5

24.7

Total Current Assets

602.0

656.8

Property, plant and equipment, net

496.3

492.5

Operating lease right-of-use assets

11.6

11.4

Pension assets

6.9

9.9

Intangible assets, net

4.0

2.7

Other non-current assets

12.6

2.0

Total Assets

$

1,133.4

$

1,175.3

LIABILITIES

Accounts payable

$

113.3

$

133.3

Salaries, wages and benefits

19.9

26.8

Accrued pension and postretirement costs

17.7

43.5

Current operating lease liabilities

5.1

5.0

Current convertible notes, net

13.2

13.2

Government funding liabilities

45.5

—

Other current liabilities

13.5

26.6

Total Current Liabilities

228.2

248.4

Credit agreement

—

—

Non-current operating lease liabilities

6.5

6.4

Accrued pension and postretirement costs

157.2

160.5

Deferred income taxes

15.1

15.0

Other non-current liabilities

13.7

13.4

Total Liabilities

420.7

443.7

SHAREHOLDERS' EQUITY

Additional paid-in capital

840.4

844.2

Retained deficit

(31.0)

(53.7)

Treasury shares

(105.1)

(71.3)

Accumulated other comprehensive income (loss)

8.4

12.4

Total Shareholders' Equity

712.7

731.6

Total Liabilities and Shareholders' Equity

$

1,133.4

$

1,175.3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Dollars in millions) (Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

CASH PROVIDED (USED)

Operating Activities

Net income (loss)

$

(5.9)

$

24.8

$

22.7

$

68.1

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization

13.6

14.0

40.4

42.8

Amortization of deferred financing fees

0.2

0.1

0.4

0.4

Loss on extinguishment of debt

—

—

—

11.4

Loss (gain) on sale or disposal of assets, net

0.1

(0.3)

0.4

(2.8)

Deferred income taxes

—

—

—

0.7

Stock-based compensation expense

3.5

3.0

10.5

8.5

Pension and postretirement expense (benefit), net

1.0

0.6

5.1

6.4

Changes in operating assets and liabilities:

Accounts receivable, net

1.6

(2.6)

7.5

(56.1)

Inventories, net

(14.5)

10.3

9.2

(62.7)

Accounts payable

(2.2)

(14.9)

(16.4)

34.1

Other accrued expenses

1.6

3.3

(19.9)

(9.7)

Pension and postretirement contributions and payments

(3.4)

(0.5)

(38.0)

(2.4)

Deferred charges and prepaid expenses

(2.9)

(8.2)

(7.5)

(5.0)

Other, net

(8.0)

(1.5)

12.0

17.5

Net Cash Provided (Used) by Operating Activities

(15.3)

28.1

26.4

51.2

Investing Activities

Capital expenditures

(17.6)

(17.5)

(49.1)

(36.2)

Proceeds from government funding

35.5

—

45.5

—

Proceeds from disposals of property, plant and equipment

—

—

—

1.7

Net Cash Provided (Used) by Investing Activities

17.9

(17.5)

(3.6)

(34.5)

Financing Activities

Purchase of treasury shares

(20.1)

(7.7)

(34.1)

(28.5)

Proceeds from exercise of stock options

0.1

0.6

1.4

2.4

Shares surrendered for employee taxes on stock compensation

(0.1)

—

(15.5)

(3.4)

Repayments on convertible notes

—

—

—

(18.7)

Net Cash Provided (Used) by Financing Activities

(20.1)

(7.1)

(48.2)

(48.2)

Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash

(17.5)

3.5

(25.4)

(31.5)

Cash, cash equivalents, and restricted cash at beginning of period

273.4

222.8

281.3

257.8

Cash, Cash Equivalents, and Restricted Cash at End of Period

$

255.9

$

226.3

$

255.9

$

226.3

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

$

254.6

$

225.4

$

254.6

$

225.4

Restricted cash reported in other current assets

1.3

0.9

1.3

0.9

Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows

$

255.9

$

226.3

$

255.9

$

226.3

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Dollars in millions) (Unaudited)

2024

2023

2024

2023

Net Cash Provided (Used) by Operating Activities

$

(15.3)

$

28.1

$

26.4

$

51.2

Less: Capital expenditures⁽¹⁾

(11.8)

(17.5)

(43.3)

(36.2)

Free Cash Flow⁽²⁾

$

(27.1)

$

10.6

$

(16.9)

$

15.0

⁽¹⁾

On February 27, 2024, the Company entered into an agreement for up to $99.75 million in funding from the United States Army. Initially, $49.5 million was obligated (i.e., committed), but during the third quarter of 2024, the remainder was obligated resulting in a total of $99.75 million of obligated funding. In the three and nine months ended September 30, 2024, funding proceeds of $35.5 million and $45.5 million were received, respectively, and the related capital spending for the project of $5.8 million are excluded from Free Cash Flow.

⁽²⁾

Free Cash Flow is defined as net cash provided (used) by operating activities less capital expenditures.

Three months ended
September 30, 2024

Three months ended
September 30, 2023

Three months ended
June 30, 2024

(Dollars in millions) (Unaudited)

Net
income
(loss)

Diluted
earnings
(loss) per
share⁽¹⁾

Net
income
(loss)

Diluted
earnings
(loss) per
share⁽⁷⁾

Net
income
(loss)

Diluted
earnings
(loss) per
share⁽⁸⁾

As reported

$

(5.9)

$

(0.13)

$

24.8

$

0.51

$

4.6

$

0.10

Adjustments:⁽²⁾

Loss (gain) on sale or disposal of assets, net

0.1

—

(0.3)

(0.01)

0.2

—

Loss (gain) from remeasurement of benefit plans, net

—

—

(1.0)

(0.02)

1.0

0.02

Business transformation costs⁽³⁾

0.9

0.02

0.1

—

0.3

0.01

IT transformation costs⁽⁴⁾

0.9

0.03

1.0

0.02

1.2

0.03

Rebranding costs⁽⁵⁾

0.1

—

0.2

0.01

0.1

—

Accelerated depreciation and amortization

—

—

0.1

—

—

—

Tax effect on above adjustments⁽⁶⁾

(0.5)

(0.01)

—

—

(0.7)

(0.01)

As adjusted

$

(4.4)

$

(0.09)

$

24.9

$

0.52

$

6.7

$

0.15

⁽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, 2024, because the effect of their inclusion would have been anti-dilutive.

⁽²⁾

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.

⁽³⁾

Business transformation costs consist primarily of professional service fees associated with strategic initiatives and organizational changes.

⁽⁴⁾

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.

⁽⁵⁾

Rebranding costs consist primarily of professional service fees associated with the company's name change to Metallus Inc., announced during the first quarter of 2024.

⁽⁶⁾

Tax effect on above adjustments includes the tax impact related to the adjustments shown above.

⁽⁷⁾

For the three months ended September 30, 2023, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (1.7 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 three months ended September 30, 2023 was 47.9 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 $0.2 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

⁽⁸⁾

For the three months ended June 30, 2024 convertible notes (1.7 million shares) and common share equivalents for shares issuable for equity-based awards (1.1 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 three and six months ended June 30, 2024 was 46.6 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 $0.2 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

Nine Months Ended
September 30, 2024

Nine Months Ended
September 30, 2023

(Dollars in millions) (Unaudited)

Net
income
(loss)

Diluted
earnings
(loss) per
share⁽¹⁾

Net
income
(loss)

Diluted
earnings
(loss) per
share⁽⁸⁾

As reported

$

22.7

$

0.49

$

68.1

$

1.43

Adjustments:⁽²⁾

Loss (gain) on sale or disposal of assets, net

0.4

—

(2.8)

(0.06)

Loss on extinguishment of debt

—

—

11.4

0.24

Loss (gain) from remeasurement of benefit plans, net

1.8

0.04

1.7

0.04

Sales and use tax refund

—

—

—

—

Business transformation costs⁽³⁾

1.5

0.03

0.4

0.01

IT transformation costs⁽⁴⁾

3.4

0.09

3.1

0.07

Insurance recoveries⁽⁵⁾

—

—

(11.3)

(0.24)

Rebranding costs⁽⁶⁾

0.5

—

0.3

0.01

Accelerated depreciation and amortization

—

—

0.7

0.01

Tax effect on above adjustments⁽⁷⁾

(1.9)

(0.03)

1.7

0.04

As adjusted

$

28.4

$

0.62

$

73.3

$

1.55

⁽¹⁾

For the nine months ended September 30, 2024, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (1.7 million shares) and common share equivalents for shares issuable for equity-based awards (1.1 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, 2024, net income was adjusted to add back $0.6 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

⁽²⁾

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.

⁽³⁾

Business transformation costs consist primarily of professional service fees associated with strategic initiatives and organizational changes.

⁽⁴⁾

For the nine months ended September 30, 2024 and 2023, 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.

⁽⁵⁾

During the second half of 2022, the Faircrest melt shop experienced unplanned operational downtime. Metallus recognized an insurance recovery of $11.3 million in the first half of 2023 related to the unplanned downtime, of which $9.8 million was recorded during the first quarter and $1.5 million was recorded in the second quarter. The 2022 insurance claims were closed as of the first quarter 2024.

⁽⁶⁾

Rebranding costs consist primarily of professional service fees associated with the company's name change to Metallus Inc., announced during the first quarter of 2024.

⁽⁷⁾ 

Tax effect on above adjustments includes the tax impact related to the adjustments shown above.

⁽⁸⁾

For the nine months ended September 30, 2023, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (2.0 million shares) and common share equivalents for shares issuable for equity-based awards (2.0 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, 2023 was 48.0 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 $0.8 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
June 30,

(Dollars in millions) (Unaudited)

2024

2023

2024

2023

2024

Net income (loss)

$

(5.9)

$

24.8

$

22.7

$

68.1

$

4.6

Net Income Margin ⁽¹⁾

(2.6)

%

7.0

%

2.7

%

6.6

%

1.6

%

Provision (benefit) for income taxes

(1.2)

9.8

6.3

24.6

1.5

Interest (income) expense, net

(2.4)

(1.8)

(7.6)

(5.0)

(2.4)

Earnings Before Interest and Taxes (EBIT) ⁽²⁾

$

(9.5)

$

32.8

$

21.4

$

87.7

$

3.7

EBIT Margin ⁽²⁾

(4.2)

%

9.3

%

2.5

%

8.5

%

1.3

%

Depreciation and amortization

13.6

14.0

40.4

42.8

13.4

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) ⁽³⁾

$

4.1

$

46.8

$

61.8

$

130.5

$

17.1

EBITDA Margin ⁽³⁾

1.8

%

13.2

%

7.3

%

12.6

%

5.8

%

Adjustments:

Accelerated depreciation and amortization (EBIT only)

—

0.1

—

0.7

—

(Gain) loss from remeasurement of benefit plans

—

(1.0)

1.8

1.7

1.0

Loss on extinguishment of debt

—

—

—

11.4

—

Sales and use tax refund

—

—

—

—

—

Business transformation costs ⁽⁶⁾

0.9

0.1

1.5

0.4

0.3

IT transformation costs ⁽⁷⁾

0.9

1.0

3.4

3.1

1.2

Rebranding costs ⁽⁸⁾

0.1

0.2

0.5

0.3

0.1

(Gain) loss on sale or disposal of assets, net

0.1

(0.3)

0.4

(2.8)

0.2

Insurance recoveries ⁽⁹⁾

—

—

—

(11.3)

—

Adjusted EBIT ⁽⁴⁾

$

(7.5)

$

32.9

$

29.0

$

91.2

$

6.5

Adjusted EBIT Margin ⁽⁴⁾

(3.3)

%

9.3

%

3.4

%

8.8

%

2.2

%

Adjusted EBITDA ⁽⁵⁾

$

6.1

$

46.8

$

69.4

$

133.3

$

19.9

Adjusted EBITDA Margin ⁽⁵⁾

2.7

%

13.2

%

8.2

%

12.9

%

6.8

%

⁽¹⁾

Net Income Margin is defined as net income (loss) as a percentage of net sales.

⁽²⁾

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.

⁽³⁾

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.

⁽⁴⁾

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.

⁽⁵⁾

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.

⁽⁶⁾

Business transformation costs consist primarily of professional service fees associated with strategic initiatives and organizational changes.

⁽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.

⁽⁸⁾

Rebranding costs consist primarily of professional service fees associated with the company's name change to Metallus Inc., announced during the first quarter of 2024.

⁽⁹⁾

During the second half of 2022, the Faircrest melt shop experienced unplanned operational downtime. Metallus recognized an insurance recovery of $11.3 million in the first half of 2023 related to the unplanned downtime, of which $9.8 million was recorded during the first quarter and $1.5 million was recorded in the second quarter. The 2022 insurance claims were closed as of the first quarter of 2024.

(Dollars in millions, ship tons in thousands)

Three Months Ended September 30, 2024

Industrial

Automotive

Aerospace &
Defense

Energy

Other

Total

Ship Tons

53.1

57.1

3.4

6.3

—

119.9

Net Sales

$

91.4

$

104.9

$

12.3

$

14.5

$

4.1

$

227.2

Less: Surcharges

21.3

19.3

1.2

3.4

—

45.2

Base Sales

$

70.1

$

85.6

$

11.1

$

11.1

$

4.1

$

182.0

Net Sales / Ton

$

1,721

$

1,837

$

3,618

$

2,302

$

—

$

1,895

Surcharges / Ton

$

401

$

338

$

353

$

540

$

—

$

377

Base Sales / Ton

$

1,320

$

1,499

$

3,265

$

1,762

$

—

$

1,518

Three Months Ended September 30, 2023

Industrial

Automotive

Aerospace &
Defense

Energy

Other

Total

Ship Tons

70.5

79.1

11.9

14.3

—

175.8