Financial Performance - Net sales for Q3 2024 were $227.2 million, a decrease of 23% from $294.7 million in Q2 2024 and a 36% decrease from $354.2 million in Q3 2023[1][2][3]. - The company reported a net loss of $5.9 million for Q3 2024, compared to a net income of $4.6 million in Q2 2024 and $24.8 million in Q3 2023[1][2][3]. - Adjusted EBITDA for Q3 2024 was $6.1 million, down from $19.9 million in Q2 2024 and $46.8 million in Q3 2023[1][2][3]. - Net sales for the three months ended September 30, 2024, were $227.2 million, a decrease of 35.8% compared to $354.2 million for the same period in 2023[19]. - Gross profit for the nine months ended September 30, 2024, was $86.8 million, down 40.2% from $145.1 million for the same period in 2023[19]. - Net income for the three months ended September 30, 2024, was a loss of $5.9 million, compared to a profit of $24.8 million for the same period in 2023[19]. - Basic earnings per share for the three months ended September 30, 2024, were $(0.13), compared to $0.56 for the same period in 2023[19]. - The net income for the three months ended September 30, 2024, was a loss of $5.9 million, resulting in a net income margin of -2.6%, compared to a profit of $24.8 million and a margin of 7.0% in the same quarter of 2023[33]. - The adjusted EBITDA for the nine months ended September 30, 2024, was $69.4 million, with an adjusted EBITDA margin of 8.2%, compared to $133.3 million and 12.9% in 2023[33]. Liquidity and Capital Expenditures - Total liquidity as of September 30, 2024, was $496.8 million, with cash and cash equivalents at $254.6 million[1][8]. - The company invested $17.6 million in capital expenditures and repurchased $20.1 million worth of shares in Q3 2024[1][10]. - Capital expenditures for 2024 are expected to be approximately $65 million, including $15 million funded by the U.S. government[12]. - Cash and cash equivalents were $254.6 million as of September 30, 2024, down from $280.6 million as of December 31, 2023[20]. - The company had cash and cash equivalents of $254.6 million as of September 30, 2024, compared to $280.6 million at the end of 2023[46]. Shipments and Sales Segments - Ship tons decreased by 30,200 tons sequentially to 119,900 tons, a 20% decline, primarily due to lower aerospace & defense and automotive shipments[6][7]. - The company shipped a total of 175.8 thousand tons in Q3 2024, compared to 205.9 thousand tons in Q3 2023, indicating a decline in shipment volume[38]. - Base sales for the Industrial segment were $104.7 million, while Automotive segment base sales were $106.0 million for the same period[39]. - Base sales for the Aerospace & Defense segment were $25.6 million, while Energy segment base sales were $26.5 million for Q3 2024[39]. - The company reported surcharges of $86.6 million included in net sales for the three months ended September 30, 2024[39]. - The average net sales per ton for the total was $2,015, with the Industrial segment at $2,028 per ton and the Automotive segment at $1,771 per ton[40]. Expenses and Adjustments - The company incurred selling, general, and administrative expenses of $22.5 million for the three months ended September 30, 2024, an increase from $20.5 million for the same period in 2023[19]. - Free cash flow for the three months ended September 30, 2024, was $(27.1) million, a decrease from $10.6 million in the same period of 2023[23]. - The company incurred $5.8 million in capital spending related to the project funded by the United States Army, which is excluded from free cash flow calculations[22]. - Stock-based compensation expense increased to $3.5 million for the three months ended September 30, 2024, compared to $3.0 million in the same period of 2023[21]. - Business transformation costs for the nine months ended September 30, 2024, amounted to $1.5 million, while IT transformation costs were $3.4 million[29]. Funding and Agreements - The company received $35.5 million from the U.S. Army as part of a $99.75 million funding agreement to support munitions production[9]. - The company generated $35.5 million in funding proceeds from the United States Army during the third quarter of 2024, contributing to a total of $99.75 million in obligated funding[22].

Financial Performance - Second-quarter 2024 net sales were $294.7 million, a decrease of 8% from $321.6 million in the first quarter 2024 and a 17% decline from $356.6 million in the second quarter 2023[5][2] - Net income for the second quarter 2024 was $4.6 million, or $0.10 per diluted share, compared to $24.0 million, or $0.52 per diluted share in the first quarter 2024 and $28.9 million, or $0.62 per diluted share in the second quarter 2023[1][2] - Net sales for the three months ended June 30, 2024, were $294.7 million, a decrease of 17.4% compared to $356.6 million for the same period in 2023[20] - Gross profit for the six months ended June 30, 2024, was $74.7 million, down 20.5% from $94.1 million in the prior year[20] - Net income for the three months ended June 30, 2024, was $4.6 million, a decline of 84.1% compared to $28.9 million for the same period in 2023[20] - Basic earnings per share for the three months ended June 30, 2024, were $0.10, down 84.8% from $0.66 in the same period last year[20] - For the six months ended June 30, 2024, the company reported a net income of $28.6 million, with diluted earnings per share of $0.71, compared to a net income of $43.3 million and diluted earnings per share of $1.03 for the same period in 2023[34] - Adjusted net income for the three months ended June 30, 2024, was $6.7 million, compared to $27.6 million for the same period in 2023[28] - Adjusted net income for the six months ended June 30, 2024, was $32.8 million, while adjusted diluted earnings per share was $0.71, compared to adjusted net income of $48.4 million and adjusted diluted earnings per share of $1.03 for the same period in 2023[34] Operational Metrics - Ship tons for the second quarter 2024 totaled 150,100, down 3% sequentially and 15% year-over-year, primarily due to lower shipments in industrial and energy markets[5] - Average melt utilization rate is expected to increase in the third quarter while balancing production with demand[10] - Metallus experienced a decrease in ship tons for the industrial segment, reporting 56.4 thousand tons in Q2 2024 compared to 70.2 thousand tons in Q2 2023[40][41] - The aerospace defense segment reported net sales of $43.7 million for Q2 2024, with a base sales per ton of $2,342[40] Cash Flow and Liquidity - Operating cash flow for the second quarter was $8.3 million, with cash and cash equivalents at $272.8 million as of June 30, 2024[7] - Total current assets decreased to $606.8 million as of June 30, 2024, from $656.8 million at the end of 2023, reflecting a decline of 7.6%[20] - Total liabilities decreased to $384.1 million as of June 30, 2024, down 13.4% from $443.7 million at the end of 2023[20] - Cash and cash equivalents were $272.8 million as of June 30, 2024, a slight decrease from $280.6 million at the end of 2023[20] - The total liquidity as of June 30, 2024, was $512.1 million, down from $539.4 million as of December 31, 2023[47] Costs and Expenditures - Manufacturing costs increased by $13.1 million sequentially and $19.3 million year-over-year, attributed to lower fixed cost leverage on decreased production volume[6] - Planned capital expenditures for 2024 are approximately $55 million, a reduction of $5 million from previous guidance[10] - Required pension contributions are estimated at $3 million in the third quarter and an additional $5 million in the fourth quarter 2024[10] - The company incurred IT transformation costs of $2.5 million for the six months ended June 30, 2024, compared to $2.1 million for the same period in 2023[34] - The company’s business transformation costs for the six months ended June 30, 2024 were $0.6 million, compared to $0.1 million for the same period in 2023[37] Other Financial Highlights - The company received a $10 million initial payment from the U.S. Army as part of a funding agreement for up to $99 million to support munitions production[7] - The company reported a loss on extinguishment of debt of $11.4 million in the six months ended June 30, 2023[20] - The company recognized an insurance recovery of $11.3 million related to unplanned operational downtime, with $9.8 million recorded in Q1 2023 and $1.5 million in Q2 2023[35] - The company recognized an insurance recovery of $11.3 million in the first half of 2023, with $9.8 million recorded in Q1 and $1.5 million in Q2[39] - The company reported a loss on the sale or disposal of assets of $0.2 million for the three months ended June 30, 2024[23] - Stock-based compensation expense for the three months ended June 30, 2024, was $3.5 million, compared to $2.9 million for the same period in 2023[23] - The company recognized pension and postretirement expense of $2.1 million for the three months ended June 30, 2024, slightly up from $2.0 million for the same period in 2023[23] Market Outlook - The company expects adjusted EBITDA to decline sequentially in the third quarter 2024 due to weaker market demand[8] - The company’s adjusted EBITDA for Q2 2024 remained stable at $20 million, consistent with Q1 2024[50] - Surcharges for the automotive segment were $364 per ton in Q2 2024, compared to $472 per ton in Q2 2023[41] - The company aims to enhance clarity of core pricing and results by presenting net sales adjusted to exclude surcharges, which can introduce volatility[39]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-36313 METALLUS INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 18 ...

Financial Performance - First-quarter 2024 net sales were $321.6 million, a decrease of 2% from $328.1 million in the fourth quarter of 2023[9]. - Net income for the first quarter of 2024 was $24.0 million, or $0.52 per diluted share, compared to $1.3 million, or $0.03 per diluted share in the fourth quarter of 2023[2][3]. - Adjusted EBITDA for the first quarter of 2024 was $43.4 million, up from $35.7 million in the fourth quarter of 2023[2][3]. - Net sales for the three months ended March 31, 2024, were $321.6 million, a slight decrease of 0.6% from $323.5 million in the same period of 2023[27]. - Gross profit increased to $50.6 million, representing a 25.0% increase compared to $40.4 million in the prior year[27]. - Net income for Q1 2024 was $24.0 million, up 66.7% from $14.4 million in Q1 2023, resulting in basic earnings per share of $0.55, compared to $0.33 in the previous year[27]. - Free cash flow for the three months ended March 31, 2024, was $16.0 million, a significant improvement from a negative $0.8 million in the same period of 2023[33]. - The adjusted net income for the same period was $26.1 million, with adjusted diluted earnings per share of $0.56, up from $20.8 million and $0.44 in the prior year, indicating a 25.5% increase in adjusted net income[35]. - The company's EBIT for Q1 2024 was $27.2 million, with an EBIT margin of 8.5%, compared to $16.7 million and 5.2% in Q1 2023, reflecting a significant improvement in operational efficiency[43]. - EBITDA for the three months ended March 31, 2024, was reported at $40.6 million, with an EBITDA margin of 12.6%, compared to $31.2 million and 9.6% in the same quarter of the previous year, showing a strong growth in earnings before interest, taxes, depreciation, and amortization[43]. - The net income margin for Q1 2024 was 7.5%, an increase from 4.5% in Q1 2023, indicating improved profitability relative to sales[43]. - Adjusted EBITDA for Q1 2024 was $43.4 million, with an adjusted EBITDA margin of 13.5%, compared to $36.0 million and 11.1% in Q1 2023, reflecting enhanced operational performance[43]. Operational Metrics - Ship tons for the first quarter were 155,200, a decrease of 2,400 tons or 2% sequentially, and a 10% decrease compared to the prior-year first quarter[9][10]. - The average melt utilization rate improved to 72% in the first quarter, compared to 58% in the fourth quarter of 2023[10]. - For the second quarter of 2024, adjusted EBITDA is expected to be lower than in the first quarter, with shipments anticipated to be similar[16][17]. - Total assets decreased to $1,165.8 million as of March 31, 2024, down from $1,175.3 million at the end of 2023[30]. - Total liabilities decreased to $426.5 million from $443.7 million at the end of 2023, indicating improved financial stability[30]. - Accounts receivable increased to $120.0 million, up from $113.2 million in the previous quarter, indicating a potential increase in sales activity[30]. - The company reported a loss on extinguishment of debt of $0.0 million in Q1 2024, compared to a loss of $11.4 million in Q1 2023, reflecting improved debt management[27]. - Selling, general & administrative expenses (SG&A) rose to $24.1 million, an increase of 14.8% from $21.0 million in the same period last year[27]. - The company incurred business transformation costs of $0.3 million in Q1 2024, up from $0.1 million in Q1 2023, indicating ongoing investments in strategic initiatives[43]. - IT transformation costs amounted to $1.3 million in Q1 2024, compared to $0.8 million in the same period last year, highlighting the company's focus on technology modernization[43]. - The company recognized insurance recoveries of $9.8 million in Q1 2023 related to prior year claims, which were closed as of Q1 2024, impacting the financial results positively[47]. Shareholder Returns and Capital Management - The company authorized an additional $100 million share repurchase program on May 6, 2024, reflecting confidence in its ability to generate profitability[13]. - Planned capital expenditures for 2024 are approximately $60 million, consistent with previous guidance[20]. - Required pension contributions are estimated at $6 million for the second quarter, with an additional $12 million expected in the second half of 2024[20]. - Total liquidity as of March 31, 2024, was $549.0 million, up from $539.4 million as of December 31, 2023[54]. - Cash and cash equivalents at the end of the period were $278.6 million, slightly down from $281.3 million at the beginning of the period[31]. - Cash and cash equivalents as of March 31, 2024, were $278.1 million, slightly down from $280.6 million as of December 31, 2023[54]. Company Rebranding - The company announced a name change to Metallus Inc. during Q1 2024, incurring rebranding costs of $0.3 million, which is part of its strategic repositioning efforts[46].

Part I [Business Overview](index=3&type=section&id=Item%201.%20Business) Metallus Inc. manufactures and sells special bar quality alloy steel products, including bars, seamless mechanical tubes, and components, for diverse industrial, automotive, aerospace, and energy markets - Metallus Inc. officially changed its name from TimkenSteel Corporation on **February 26, 2024**[9](index=9&type=chunk) - Metallus operates as a **single reportable business segment** due to integrated manufacturing and centralized decision-making[14](index=14&type=chunk)[155](index=155&type=chunk) - The company's annual melt capacity is approximately **1.2 million tons**, with a shipment capacity of about **0.9 million tons**[13](index=13&type=chunk)[289](index=289&type=chunk) [Products and Markets](index=4&type=section&id=Products%20and%20Markets) Metallus specializes in over 500 grades of high-performance steel, including SBQ bars, seamless tubes, and manufactured components, serving diverse customers directly and through distributors - Specialty metals are used in critical end products such as gears, axles, crankshafts, drill pipes, and artillery bodies[20](index=20&type=chunk) - Manufactured components offer customers, especially in the automotive sector, ready-to-finish parts that streamline supply chains[21](index=21&type=chunk) - In 2023, no single customer accounted for **10% or more of net sales**, with approximately **25% of net sales** through distributors and service centers[18](index=18&type=chunk)[22](index=22&type=chunk) [Competition and Raw Materials](index=4&type=section&id=Competition%20and%20Raw%20Materials) The company faces intense competition in the steel industry and manages volatile raw material costs through a surcharge mechanism, which can lead to timing-related cost recovery issues - Key competitors include Gerdau, Steel Dynamics, and Nucor for bar products, and Tenaris, Vallourec, and ArcelorMittal for seamless mechanical tubing[23](index=23&type=chunk)[25](index=25&type=chunk) - Principal raw materials are recycled scrap metal, chrome, nickel, and molybdenum, with price volatility managed via supplier agreements and a customer surcharge mechanism[27](index=27&type=chunk)[29](index=29&type=chunk) - The surcharge mechanism mitigates raw material cost fluctuations but can cause a timing lag, resulting in over- or under-recovery of costs[31](index=31&type=chunk) [Governance and Human Capital](index=6&type=section&id=Governance%20and%20Human%20Capital) Metallus focuses on environmental stewardship with 2030 reduction goals and manages human capital through safety, inclusion, and development initiatives, noting a significant decrease in voluntary turnover 2030 Environmental Goals (vs. 2018 Baseline) | Goal | Target Reduction | | :--- | :--- | | Scope 1 & 2 GHG Emissions | 40% absolute reduction | | Total Energy Consumption | 30% absolute reduction | | Fresh Water Withdrawn | 35% absolute reduction | | Waste-to-Landfill Intensity | 10% reduction | - As of December 31, 2023, the company had approximately **1,840 employees**, with about **64%** covered by a collective bargaining agreement expiring **September 27, 2025**[45](index=45&type=chunk)[46](index=46&type=chunk) - The voluntary employee turnover rate significantly decreased to approximately **8.9% in 2023** from **16% in 2022**[56](index=56&type=chunk)[57](index=57&type=chunk) - The company invested approximately **$10 million** in safety initiatives in 2023 and plans to invest around **$7 million** in 2024[50](index=50&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including intense competition, customer concentration, volatile raw material costs, potential operational disruptions, substantial pension liabilities, and challenges related to ESG and cybersecurity - The steel industry is highly competitive, with risks from global overcapacity and high imports potentially pressing domestic prices[64](index=64&type=chunk) - The company is dependent on key customers, with its **10 largest customers** accounting for approximately **46% of net sales in 2023**[66](index=66&type=chunk) - A work stoppage could significantly disrupt operations, as approximately **64% of employees** are unionized with an agreement expiring in **September 2025**[81](index=81&type=chunk) - The company has significant unfunded pension and retiree healthcare liabilities requiring future cash contributions[84](index=84&type=chunk) [Cybersecurity](index=18&type=section&id=Item%201C.%20Cyber%20Security) Metallus maintains a cybersecurity program aligned with the NIST framework, overseen by the Board, and has not identified any material threats to date - The cybersecurity program is integrated into the company's ERM and aligns with the **NIST Cybersecurity framework**[119](index=119&type=chunk) - The Board of Directors oversees the cybersecurity program, receiving regular updates and consulting with a board-level cybersecurity expert[121](index=121&type=chunk) - As of the report date, no material cybersecurity threats have been identified that have or are reasonably likely to materially affect the business[122](index=122&type=chunk) [Properties](index=19&type=section&id=Item%202.%20Properties) Metallus's primary manufacturing facilities are in Ohio and North Carolina, totaling 3.6 million square feet, with 2023 melt capacity utilization at 70% - The company's manufacturing facilities in Ohio and North Carolina comprise **3.6 million square feet**, mostly owned[124](index=124&type=chunk) Melt Capacity Utilization | Year | Utilization Rate | | :--- | :--- | | 2023 | 70% | | 2022 | 63% | | 2021 | 73% | [Executive Officers](index=21&type=section&id=Information%20about%20our%20Executive%20Officers) The report lists the company's executive officers as of February 28, 2024, including the President and CEO, CFO, General Counsel and CHRO, and Chief Commercial Officer Executive Officers (as of Feb 28, 2024) | Name | Age | Position | | :--- | :--- | :--- | | Michael S. Williams | 63 | President and Chief Executive Officer | | Kristopher R. Westbrooks | 45 | Executive Vice President and Chief Financial Officer | | Kristine C. Syrvalin | 55 | Executive Vice President, General Counsel and Chief Human Resources Officer | | Kevin A. Raketich | 57 | Executive Vice President and Chief Commercial Officer | Part II [Stock Market and Shareholder Matters](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Metallus common shares trade on the NYSE under "MTUS", and the company actively repurchases shares, with **$40.4 million** remaining under its **$75.0 million** authorization as of December 31, 2023 - On November 2, 2022, the Board authorized an additional **$75.0 million** share repurchase program[137](index=137&type=chunk) Q4 2023 Share Repurchases | Month (2023) | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | October | 94,408 | $20.53 | | November | 56,251 | $20.25 | | December | 45,867 | $21.76 | | **Q4 Total** | **196,526** | **$20.74** | - As of December 31, 2023, **$40.4 million** remained available for repurchase, decreasing to **$39.2 million** by February 15, 2024[138](index=138&type=chunk) [Management's Discussion and Analysis (MD&A)](index=25&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion analyzes the company's financial performance, highlighting increased net sales and gross profit in 2023, strong liquidity, and capital returns, with a focus on product mix optimization and cost management [Results of Operations](index=27&type=section&id=Results%20of%20Operations) In 2023, net sales increased to **$1,362.4 million** driven by favorable price/mix, gross profit rose to **$186.5 million**, and net income reached **$69.4 million**, despite a **$40.6 million** loss from benefit plan remeasurement - Net sales for 2023 increased by **$32.5 million (2.4%)** to **$1,362.4 million**, driven by favorable price/mix despite lower surcharges and slightly decreased volume[162](index=162&type=chunk) - Gross profit for 2023 increased by **$59.8 million (47.2%)** to **$186.5 million**, primarily due to higher base prices across all end-markets[165](index=165&type=chunk) - A net loss of **$40.6 million** from benefit plan remeasurement was recognized in 2023, contrasting with a **$35.4 million** gain in 2022, significantly impacting 'Other (income) expense, net'[175](index=175&type=chunk)[176](index=176&type=chunk) - The company recognized insurance recoveries of **$31.3 million** in 2023 and **$34.5 million** in 2022 for unplanned downtime at the Faircrest melt shop[173](index=173&type=chunk)[179](index=179&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) The company uses "Base Sales" as a non-GAAP measure to track core pricing, with Base Sales per ton increasing to **$1,494** in 2023 from **$1,322** in 2022, reflecting improved pricing and product mix Base Sales per Ton Comparison (2021-2023) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Ship Tons (thousands) | 683.8 | 692.1 | 818.6 | | Net Sales / Ton | $1,992 | $1,922 | $1,567 | | Surcharges / Ton | $498 | $600 | $498 | | **Base Sales / Ton** | **$1,494** | **$1,322** | **$1,069** | [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, Metallus maintained strong total liquidity of **$539.4 million**, generated **$125.3 million** in operating cash flow, and used cash for capital expenditures, share repurchases, and convertible note repayments Total Liquidity (in millions) | Component | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $280.6 | $257.2 | | Availability not borrowed | $258.8 | $233.5 | | **Total liquidity** | **$539.4** | **$490.7** | - In 2023, the company repurchased **$7.5 million** principal of Convertible Senior Notes for **$18.7 million** cash, incurring an **$11.4 million** loss on extinguishment[197](index=197&type=chunk) - The company repurchased approximately **1.7 million common shares** for **$32.6 million** in 2023[209](index=209&type=chunk) - Net cash from operating activities was **$125.3 million** in 2023, a decrease from **$134.5 million** in 2022, primarily due to higher working capital usage[213](index=213&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant judgment, particularly in revenue recognition, inventory valuation, income tax accounting, and actuarial assumptions for pension and postretirement benefit plans - Revenue recognition for multi-year contracts involves estimating variable consideration, with **$16.0 million** in adjustments recognized in 2023[229](index=229&type=chunk) - Benefit plan accounting is highly sensitive to assumptions; a **0.25%** discount rate change would impact benefit obligation by approximately **$16 million** and net periodic benefit income by **$0.8 million**[238](index=238&type=chunk) - Pension and postretirement benefit obligations were valued using weighted average discount rates of **5.33%** and **5.43%**, respectively, as of December 31, 2023[236](index=236&type=chunk) [Financial Statements and Supplementary Data](index=43&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2021-2023, including statements of operations, balance sheets, and cash flows, with detailed notes [Consolidated Statements of Operations](index=47&type=section&id=Consolidated%20Statements%20of%20Operations) For 2023, Metallus reported net sales of **$1,362.4 million**, gross profit of **$186.5 million**, income before taxes of **$96.4 million**, and net income of **$69.4 million**, with diluted EPS of **$1.47** Key Financial Performance (in millions, except per share data) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net sales | $1,362.4 | $1,329.9 | $1,282.9 | | Gross Profit | $186.5 | $126.7 | $220.0 | | Income Before Taxes | $96.4 | $97.1 | $176.7 | | **Net Income** | **$69.4** | **$65.1** | **$171.0** | | Diluted EPS | $1.47 | $1.30 | $3.18 | [Consolidated Balance Sheets](index=49&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2023, total assets increased to **$1,175.3 million**, total liabilities rose to **$443.7 million**, and total shareholders' equity grew to **$731.6 million** Key Balance Sheet Items (in millions) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $280.6 | $257.2 | | Inventories, net | $228.0 | $192.4 | | Total Assets | $1,175.3 | $1,082.0 | | Total Current Liabilities | $248.4 | $186.7 | | Total Liabilities | $443.7 | $395.5 | | Total Shareholders' Equity | $731.6 | $686.5 | [Consolidated Statements of Cash Flows](index=51&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In 2023, the company generated **$125.3 million** from operations, used **$49.9 million** in investing activities, and **$51.9 million** in financing activities, resulting in a **$23.5 million** increase in cash Summary of Cash Flows (in millions) | Cash Flow Category | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $125.3 | $134.5 | $196.9 | | Net Cash used in Investing Activities | ($49.9) | ($21.7) | ($4.8) | | Net Cash used in Financing Activities | ($51.9) | ($114.6) | ($35.3) | | **Increase (Decrease) in Cash** | **$23.5** | **($1.8)** | **$156.8** | [Note 15 - Retirement and Postretirement Plans](index=70&type=section&id=Note%2015%20-%20Retirement%20and%20Postretirement%20Plans) As of December 31, 2023, the company's pension plans were underfunded by **$163.0 million**, with the Salaried Plan termination expected to settle in 2024 and **$40 million** in contributions anticipated for the Bargaining Plan Funded Status of Benefit Plans (Dec 31, 2023, in millions) | Plan Type | Benefit Obligation | Plan Assets | Funded Status | | :--- | :--- | :--- | :--- | | Pension | $688.6 | $525.6 | ($163.0) | | Postretirement | $84.9 | $53.8 | ($31.1) | - The Salaried Plan, terminated effective **March 31, 2022**, is expected to be fully settled via an annuity purchase in **2024**[413](index=413&type=chunk) - The company estimates required contributions of approximately **$40 million** to the Bargaining Unit Pension Plan in 2024[412](index=412&type=chunk) [Note 19 – Subsequent Event](index=84&type=section&id=Note%2019%20%E2%80%93%20Subsequent%20Event) On February 27, 2024, Metallus secured an agreement with the U.S. Army for up to **$99 million** in funding to increase artillery shell production, targeting late 2025 for operational readiness - On **February 27, 2024**, the company secured an agreement with the U.S. Army for up to **$99 million** in funding[461](index=461&type=chunk) - The funding will support new assets for artillery shell production, targeting an operational date of **late 2025**[461](index=461&type=chunk) Part III [Directors, Executive Compensation, and Corporate Governance](index=87&type=section&id=Item%2010-14) Information for Items 10-14, covering directors, executive compensation, and corporate governance, is incorporated by reference from the forthcoming 2024 proxy statement - Information for Items 10-14, including Directors, Executive Compensation, and Corporate Governance, is incorporated by reference from the forthcoming proxy statement[474](index=474&type=chunk)[477](index=477&type=chunk)[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=89&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists exhibits filed with the Form 10-K, including governance documents and material contracts, and presents Schedule II detailing valuation and qualifying accounts Schedule II - Valuation and Qualifying Accounts (in millions) | Account | Balance at Dec 31, 2022 | Additions (Charged to Costs) | Deductions (Write-offs/Releases) | Balance at Dec 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Allowance for uncollectible accounts | $1.0 | $1.2 | ($0.2) | $2.0 | | Allowance for inventory reserves | $0.5 | $1.1 | ($0.9) | $0.7 | | Valuation allowance on deferred tax assets | $13.0 | $2.5 | $0.0 | $15.5 |

Financial Performance - Fourth-quarter 2023 net sales were $328.1 million, a decrease of 7% from $354.2 million in the third quarter 2023, but an increase of 34% compared to $245.4 million in the fourth quarter 2022[11][4]. - Full-year 2023 net income was $69.4 million, or $1.47 per diluted share, compared to $65.1 million, or $1.30 per diluted share, for full-year 2022[10]. - Adjusted EBITDA for the fourth quarter 2023 was $35.7 million, while full-year adjusted EBITDA was $169.0 million, compared to $172.2 million in 2022[7][10]. - Net sales for Q4 2023 reached $328.1 million, a 33.6% increase from $245.4 million in Q4 2022[26]. - Gross profit for Q4 2023 was $41.4 million, compared to a loss of $20.3 million in Q4 2022, indicating a significant turnaround[26]. - Net income for the year ended December 31, 2023, was $69.4 million, up from $65.1 million in 2022, reflecting a stable performance[26]. - Basic earnings per share for Q4 2023 were $0.03, recovering from a loss of $0.75 per share in Q4 2022[26]. - Adjusted net income for Q4 2023 was $16.5 million, translating to adjusted diluted earnings per share of $0.36, compared to an adjusted net loss of $4.6 million in Q4 2022[35]. - For the year ended December 31, 2023, the company reported an adjusted net income of $89.8 million, with adjusted diluted earnings per share of $1.91, compared to $94.2 million and $1.87 per share for 2022, respectively[44]. - The net income margin for the year ended December 31, 2023, was 5.1%, an increase from 4.9% in 2022[53]. Cash Flow and Liquidity - Operating cash flow for the fourth quarter 2023 was $74.1 million, with total liquidity of $539.4 million at year-end[13][7]. - Cash and cash equivalents rose to $280.6 million in 2023, up from $257.2 million in 2022, indicating improved liquidity[29]. - Free cash flow for Q4 2023 was $58.7 million, compared to $12.3 million in Q4 2022, indicating a strong increase in cash generation[32]. - Cash provided by operating activities for the year ended December 31, 2023, was $125.3 million, slightly down from $134.5 million in 2022[30]. - Total liquidity as of December 31, 2023, was $539.4 million, up from $490.7 million as of December 31, 2022, reflecting an increase of approximately 9.0%[70]. - The company reported a total cash, cash equivalents, and restricted cash balance of $281.3 million at the end of Q4 2023, compared to $257.8 million at the end of Q4 2022[30]. Operational Metrics - Ship tons in the fourth quarter 2023 were 157,600, a decrease of 10% sequentially but an increase of 23% compared to the fourth quarter 2022[11]. - The company reported a total of 157.6 thousand ship tons in Q4 2023, an increase from 128.3 thousand ship tons in Q4 2022, which is a growth of 22.8%[63]. - Ship tons for the year ended December 31, 2023, totaled 683.8 thousand, a slight decrease from 692.1 thousand in 2022, representing a decline of about 1.9%[67]. - The aerospace & defense segment generated net sales of $44.1 million in Q4 2023, up from $24.9 million in Q4 2022, reflecting a growth of 77.3%[63]. - The aerospace & defense segment's ship tons increased to 18.5 thousand in Q4 2023 from 7.0 thousand in Q4 2022, representing a significant growth of 164.3%[63]. Investments and Expenditures - The company repurchased 1.7 million common shares for $32.6 million during 2023, with $40.4 million remaining on its share repurchase program[14]. - Planned capital expenditures for 2024 are approximately $60 million, with an effective income tax rate expected to be between 25% and 28%[20]. - Capital expenditures for Q4 2023 were $15.4 million, up from $11.4 million in Q4 2022, reflecting increased investment in growth[32]. Strategic Focus and Future Outlook - The company plans to continue focusing on business transformation and IT transformation initiatives to enhance operational efficiency[36]. - The company plans to continue focusing on the aerospace & defense market for future growth opportunities, as indicated by the strategic split of this segment from the industrial end-market[61]. - Future guidance indicates a continued upward trend in net sales and ship tons, driven by strategic investments and market expansion efforts[61]. - The average melt utilization rate is expected to be approximately 70% in the first quarter 2024, following a completion of annual maintenance[20]. Balance Sheet and Equity - Total assets increased to $1,175.3 million in 2023 from $1,082.0 million in 2022, showing growth in the company's financial position[29]. - Accounts receivable increased to $113.2 million in 2023, compared to $79.4 million in 2022, suggesting higher sales activity[29]. - Total current liabilities increased to $248.4 million in 2023 from $186.7 million in 2022, reflecting changes in operational financing[29]. - Shareholders' equity rose to $731.6 million in 2023, up from $686.5 million in 2022, indicating a stronger equity base[29]. - The company reported a significant reduction in retained deficit from $(123.1) million in 2022 to $(53.7) million in 2023, reflecting improved profitability[29].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-36313 TIMKENSTEEL CORPORATION (Exact name of registrant as specified in its charter) Ohio 46-4024951 (State or other jurisdiction of incorporation or organization) 1835 Dueber Avenue SW, Canton, OH 44706 (Address of principal executive offices) (Zip Code) ☒ QUARTERLY REPORT P ...

Part I. Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) TimkenSteel Corporation's unaudited consolidated financial statements for Q2 and H1 2023 reveal a year-over-year decline in key financial metrics [Consolidated Statements of Operations (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) Unaudited consolidated operations show significant year-over-year declines in net sales and net income for Q2 and H1 2023 Consolidated Statements of Operations Highlights (Unaudited) | (Dollars in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $356.6 | $415.7 | $680.1 | $767.7 | | **Gross Profit** | $53.7 | $81.4 | $94.1 | $141.4 | | **Net Income (Loss)** | $28.9 | $74.5 | $43.3 | $111.6 | | **Diluted earnings (loss) per share** | $0.62 | $1.42 | $0.92 | $2.12 | [Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Total assets increased to **$1,148.5 million** as of June 30, 2023, primarily due to higher inventories and receivables Balance Sheet Highlights (Unaudited) | (Dollars in millions) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $221.9 | $257.2 | | Inventories, net | $266.0 | $192.4 | | **Total Current Assets** | **$626.7** | **$556.6** | | **Total Assets** | **$1,148.5** | **$1,082.0** | | **Total Current Liabilities** | **$219.8** | **$186.7** | | **Total Liabilities** | **$436.7** | **$395.5** | | **Total Shareholders' Equity** | **$711.8** | **$686.5** | [Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Net cash from operations significantly decreased to **$23.1 million** in H1 2023, leading to an overall **$35.0 million** decrease in cash Cash Flow Summary (Unaudited) | (Dollars in millions) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net Cash Provided (Used) by Operating Activities | $23.1 | $64.0 | | Net Cash Provided (Used) by Investing Activities | ($17.0) | ($9.9) | | Net Cash Provided (Used) by Financing Activities | ($41.1) | ($74.2) | | **Increase (Decrease) in Cash** | **($35.0)** | **($20.1)** | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue, debt, and compensation, highlighting **$11.3 million** in insurance recoveries and ongoing share repurchases Revenue by End-Market Sector | (Dollars in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Industrial | $168.8 | $208.2 | $312.5 | $383.2 | | Mobile | $136.9 | $152.9 | $264.7 | $297.0 | | Energy | $45.9 | $46.3 | $92.1 | $71.3 | - In the first half of 2023, the company repurchased **$7.5 million** of its Convertible Senior Notes due 2025 for **$18.7 million** in cash, recognizing a loss on extinguishment of debt of **$11.4 million**[58](index=58&type=chunk) - The company recognized insurance recoveries of **$11.3 million** in the first half of 2023 related to unplanned operational downtime at the Faircrest melt shop in late 2022[38](index=38&type=chunk) - The company estimates required contributions of approximately **$40 million** to its Bargaining Unit Pension Plan in 2024[69](index=69&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses decreased net sales and gross profit for Q2 and H1 2023, while maintaining strong liquidity and continuing capital returns [Business Overview](index=20&type=section&id=Business%20Overview) TimkenSteel manufactures alloy, carbon, and micro-alloy steel products for diverse markets, with its order book full through Q3 2023 - The company's order book is full through the third quarter and is currently booking into the fourth quarter[87](index=87&type=chunk) - TimkenSteel recognized **$11.3 million** in insurance recoveries in the first half of 2023 related to unplanned operational downtime at its Faircrest melt shop in the second half of 2022[86](index=86&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q2 2023 net sales decreased **14.2%** to **$356.6 million** and gross profit fell **34.0%** year-over-year, primarily due to lower volumes and unfavorable surcharges - Q2 2023 net sales decreased by **$59.1 million** (**14.2%**) YoY, driven by unfavorable surcharges (**$48.1 million**) and lower volumes (**$43.6 million**), partially offset by favorable price/mix (**$32.6 million**)[95](index=95&type=chunk) - Q2 2023 gross profit decreased by **$27.7 million** (**34.0%**) YoY, primarily due to higher manufacturing costs, unfavorable raw material spread, and lower volume[100](index=100&type=chunk) Effective Tax Rate Comparison | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | 27.4% | 2.0% | | Six Months Ended June 30 | 25.4% | 2.1% | [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles GAAP Net Sales to non-GAAP Base Sales, excluding surcharges, to highlight core pricing and product mix drivers Base Sales per Ton by End-Market (Q2 2023 vs Q2 2022) | End-Market | Base Sales / Ton (Q2 2023) | Base Sales / Ton (Q2 2022) | | :--- | :--- | :--- | | Industrial | $1,502 | $1,256 | | Mobile | $1,250 | $1,144 | | Energy | $1,550 | $1,369 | | **Total** | **$1,423** | **$1,261** | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was **$529.9 million** as of June 30, 2023, deemed sufficient for the next twelve months, with ongoing capital return through repurchases Liquidity Summary | (Dollars in millions) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $221.9 | $257.2 | | Availability not borrowed | $308.0 | $233.5 | | **Total liquidity** | **$529.9** | **$490.7** | - Anticipated capital expenditures for 2023 are approximately **$50 million**[138](index=138&type=chunk) - In H1 2023, the company repurchased **$20.8 million** of its common shares and **$7.5 million** principal amount of its Convertible Senior Notes[132](index=132&type=chunk)[141](index=141&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, primarily managing commodity price volatility through surcharges - The company's primary market risk is commodity price fluctuation, particularly for scrap steel, alloys, and natural gas[160](index=160&type=chunk) - A raw material surcharge mechanism is used in pricing to pass through cost changes for scrap, alloys, and natural gas, though its effectiveness can vary with demand[161](index=161&type=chunk) - As of June 30, 2023, the company had no variable-rate debt outstanding, minimizing exposure to rising interest rates[158](index=158&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[162](index=162&type=chunk) - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[163](index=163&type=chunk) Part II. Other Information [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal claims, but management believes their resolution will not materially affect its financial position or results - Management does not expect the outcome of current legal proceedings to have a material adverse effect on the company's financial condition or results[165](index=165&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the detailed discussion of risks and uncertainties in the company's Annual Report on Form 10-K for FY2022 - For a discussion of risks and uncertainties, the report refers to the Risk Factors section in the Annual Report on Form 10-K for the year ended December 31, 2022[166](index=166&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2023, the company repurchased **650,271** common shares for approximately **$11.4 million**, with **$52.2 million** remaining under repurchase programs Share Repurchases for Q2 2023 | Month (2023) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April | 167,287 | $17.80 | | May | 307,980 | $16.95 | | June | 175,004 | $18.79 | | **Quarter-to-date** | **650,271** | **$17.66** | - As of June 30, 2023, the maximum dollar value of shares that may yet be purchased under the company's repurchase programs was **$52.2 million**[168](index=168&type=chunk) [Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and XBRL data files

Part I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q1 2023 financial statements indicate reduced profitability and cash flow, with increased assets and ongoing capital returns to shareholders [Consolidated Statements of Operations (Unaudited)](index=3&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) Q1 2023 operations show significant declines in net sales, net income, and diluted EPS compared to Q1 2022 Q1 2023 vs Q1 2022 Statement of Operations Highlights | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $323.5 | $352.0 | -8.1% | | Gross Profit | $40.4 | $60.0 | -32.7% | | Loss on extinguishment of debt | $11.4 | $17.0 | -32.9% | | Net Income | $14.4 | $37.1 | -61.2% | | Diluted EPS | $0.30 | $0.70 | -57.1% | [Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) As of March 31, 2023, total assets and liabilities increased, primarily due to higher inventories and accounts receivable, while cash decreased Balance Sheet Summary | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $227.4 | $257.2 | | Inventories, net | $244.7 | $192.4 | | Total Current Assets | $614.7 | $556.6 | | Total Assets | $1,135.3 | $1,082.0 | | Total Current Liabilities | $231.0 | $186.7 | | Total Liabilities | $443.9 | $395.5 | | Total Shareholders' Equity | $691.4 | $686.5 | [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Q1 2023 cash flow shows decreased operating cash, increased investing outflows, and higher financing usage, leading to a net cash decrease Cash Flow Summary (Q1 2023 vs Q1 2022) | Cash Flow Activity (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $9.8 | $13.3 | | Net Cash from Investing Activities | $(9.1) | $(6.5) | | Net Cash from Financing Activities | $(30.2) | $(25.5) | | Net Decrease in Cash | $(29.5) | $(18.7) | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail revenue sources, financing activities including debt and share repurchases, pension plan changes, and an insurance recovery Net Sales by End-Market Sector (in millions) | End-Market | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Industrial | $143.7 | $175.0 | | Mobile | $127.8 | $144.1 | | Energy | $46.2 | $25.0 | | Other | $5.8 | $7.9 | | **Total** | **$323.5** | **$352.0** | - In Q1 2023, the company repurchased **$7.5 million** of its Convertible Senior Notes, paying **$18.7 million** in cash and recognizing an **$11.4 million** loss on extinguishment of debt[55](index=55&type=chunk) - The company recognized a **$9.8 million** insurance recovery in Q1 2023 related to unplanned operational downtime at the Faircrest melt shop in 2022[37](index=37&type=chunk) - The effective tax rate for Q1 2023 was **21.0%**, significantly higher than **2.4%** in Q1 2022, primarily due to the reversal of the company's valuation allowance at the end of 2022[40](index=40&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A discusses Q1 2023 sales and gross profit declines, strong liquidity, and capital allocation priorities including growth investments and shareholder returns - The decrease in Q1 2023 net sales was driven by lower volumes (**23.5 thousand ship tons**) and unfavorable surcharges (**$25.8 million**), partially offset by favorable price/mix (**$28.4 million**)[93](index=93&type=chunk) - Gross profit decreased by **$19.6 million** (**32.7%**) YoY, driven by higher manufacturing costs, lower volume, and unfavorable raw material spread[96](index=96&type=chunk) - Total liquidity as of March 31, 2023, was **$530.7 million**, comprising **$227.4 million** in cash and **$303.3 million** in available credit[122](index=122&type=chunk) - The company expects capital expenditures to be approximately **$45 million** in 2023[125](index=125&type=chunk) [Business Overview](index=18&type=section&id=Business%20Overview) TimkenSteel manufactures alloy and carbon steel products for diverse markets, managing costs via surcharges, with a full Q2 order book and Q3 bookings underway - The company manufactures alloy steel, carbon, and micro-alloy steel products (SBQ bars, tubes, components) using EAF technology and **nearly 100%** recycled steel[81](index=81&type=chunk)[82](index=82&type=chunk) - As of the filing date, the company's order book is full for the second quarter of 2023, and it is currently booking orders for the third quarter[85](index=85&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity of **$530.7 million**, with Q1 2023 capital allocation focused on convertible note and common share repurchases Liquidity Summary | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $227.4 | $257.2 | | Availability not borrowed | $303.3 | $233.5 | | **Total liquidity** | **$530.7** | **$490.7** | - In Q1 2023, the company repurchased **$7.5 million** principal amount of its Convertible Senior Notes for **$18.7 million** in cash[119](index=119&type=chunk) - During Q1 2023, the company repurchased approximately **0.5 million** common shares for **$9.4 million** As of March 31, 2023, **$63.7 million** remained under the share repurchase authorization[128](index=128&type=chunk) [Cash Flows](index=26&type=section&id=Cash%20Flows) Q1 2023 cash flows show decreased operating cash, increased investing outflows, and higher financing usage from share and note repurchases - Net cash from operating activities decreased to **$9.8 million** in Q1 2023 from **$13.3 million** in Q1 2022, primarily due to lower profitability and increased use of cash for working capital[134](index=134&type=chunk) - Net cash used in financing activities increased to **$30.2 million** in Q1 2023 from **$25.5 million** in Q1 2022, due to more share repurchases and lower proceeds from stock option exercises[136](index=136&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, managing the latter through a raw material surcharge mechanism - As of March 31, 2023, the company's **$13.1 million** of debt is fixed-rate, so a rise in interest rates would not impact current interest expense[144](index=144&type=chunk) - The company is exposed to commodity price risk for raw materials and energy It manages this risk through supplier agreements and a raw material surcharge mechanism in its pricing[146](index=146&type=chunk)[148](index=148&type=chunk) - The Russia-Ukraine conflict is noted as a potential factor that could exacerbate commodity price volatility and supply chain disruptions, though it has not had a material impact to date[146](index=146&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[150](index=150&type=chunk) - No changes in the company's internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[151](index=151&type=chunk) Part II [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal claims, with management expecting no material adverse effect on financial position or operations - Management does not expect that the ultimate disposition of various ongoing claims and legal actions will have a material adverse effect on the company's financial condition[152](index=152&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - The report refers to the Risk Factors section in the Annual Report on Form 10-K for the year ended December 31, 2022, for a discussion of risks and uncertainties[153](index=153&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2023, the company repurchased **514,086** common shares for **$9.4 million**, with **$63.7 million** remaining under authorization Share Repurchases for Q1 2023 | Month (2023) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January | 157,986 | $18.93 | | February | 83,140 | $19.60 | | March | 272,960 | $17.36 | | **Q1 Total** | **514,086** | **$18.20** | - As of March 31, 2023, the maximum dollar value of shares that may yet be purchased under the company's repurchase programs was **$63.7 million**[155](index=155&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) The report lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications and Inline XBRL data files[158](index=158&type=chunk)

Financial Performance - Net sales for the year ended December 31, 2022, were $1,329.9 million, an increase from $1,282.9 million in 2021, representing a growth of 3.3%[265] - Gross profit decreased to $126.7 million in 2022 from $220.0 million in 2021, reflecting a decline of 42.4%[265] - Net income for 2022 was $65.1 million, down from $171.0 million in 2021, indicating a decrease of 61.9%[265] - Comprehensive income for 2022 was $59.1 million, down from $151.3 million in 2021, reflecting a significant decline in overall profitability[267] - Cash provided by operating activities was $134.5 million in 2022, down from $196.9 million in 2021, indicating a decline of about 31.6%[274] - Income from operations before income taxes for 2022 was $97.1 million, a decrease from $176.7 million in 2021[344] - The provision for income taxes for the year ended December 31, 2022, was $32.0 million, compared to $5.7 million in 2021[346] - The effective tax rate for 2022 was 32.9%, significantly higher than 3.2% in 2021[346] - For the year ended December 31, 2022, net income was $65.1 million, down from $171.0 million in 2021, resulting in diluted earnings per share of $1.30 compared to $3.18 in 2021[365] Debt and Financial Obligations - As of December 31, 2022, the company had $20.8 million of aggregate debt outstanding, with none having variable interest rates, thus insulating it from immediate interest rate increases[240] - The company reported a loss on extinguishment of debt amounting to $43.1 million in 2022, compared to no such loss in 2021[265] - The company repurchased $25.2 million of outstanding principal related to convertible notes, reducing weighted average diluted shares outstanding by 2.3 million shares for the year ended December 31, 2022[362] - The Company repurchased a total of $25.2 million aggregate principal amount of its Convertible Senior Notes due 2025 in the first half of 2022, recognizing a loss on extinguishment of debt of $43.0 million[402] - As of December 31, 2022, total debt was $20.4 million, a significant decrease from $44.9 million in 2021[377] Assets and Liabilities - Total assets decreased to $1,082.0 million in 2022 from $1,158.9 million in 2021, indicating a reduction of approximately 6.5%[269] - Current liabilities decreased to $186.7 million in 2022 from $250.8 million in 2021, a reduction of about 25.6%[269] - Shareholders' equity increased to $686.5 million in 2022 from $664.6 million in 2021, reflecting a growth of approximately 3.0%[269] - Long-lived assets in the United States decreased to $503.0 million in 2022 from $530.7 million in 2021, reflecting asset management strategies[317] - The total liabilities recognized on the balance sheet for pension and postretirement benefit plans amounted to $(117.3) million as of December 31, 2022[430] Pension and Retirement Plans - The company's aggregate defined benefit pension and other postretirement benefit obligation was $754.0 million as of December 31, 2022, exceeding the fair value of plan assets of $608.6 million, resulting in an unfunded obligation of $145.4 million[252] - A net gain of $35.4 million from the remeasurement of benefit plans was recognized for the year ended December 31, 2022, driven by a $359.9 million decrease in pension liability due to increased discount rates[339] - The benefit obligation for pension and postretirement plans at the end of 2022 was $666.6 million, with significant actuarial gains primarily due to an increase in discount rates[420] - The fair value of plan assets at the end of 2022 was $549.4 million, resulting in a funded status deficit of $117.2 million[423] - The Company expects to purchase an irrevocable annuity contract for the Salaried Plan in 2023, following its termination effective March 31, 2022[415] Operational and Strategic Initiatives - The company has implemented supplier pricing agreements to manage exposure to commodity price risks, particularly for raw materials and energy[243] - The company maintained effective internal control over financial reporting as of December 31, 2022, according to the auditors' opinion[257] - TimkenSteel's annual melt capacity is approximately 1.2 million tons and shipment capacity is approximately 0.9 million tons after idling the Harrison melt and casting assets[277] - The mobile sector generated $539.1 million in revenue for 2022, up from $527.9 million in 2021, while the industrial sector saw a decrease to $628.7 million from $661.2 million[318] - The company recognized revenue from contracts at a point in time when it has satisfied its performance obligation[281] Shareholder Actions - The company repurchased $52.0 million in treasury shares during 2022, reflecting a strategic move to enhance shareholder value[274] - The Company has a share repurchase program authorized for up to $75.0 million, reflecting confidence in sustainable profitability[408] - As of February 24, 2023, the Company has $68.5 million remaining under its authorized share repurchase program after repurchasing an additional 0.2 million shares for $4.5 million at an average price of $19.19 per share[410] Tax and Regulatory Matters - The company recognizes interest and penalties related to unrecognized tax benefits within the provision for income taxes[302] - The company recognized a gain of $2.5 million from a tax refund related to overpayment of sales and use taxes for the period of October 1, 2016, through September 30, 2019[342] - The company accrued a benefit of $2.3 million related to the Employee Retention Credit in the fourth quarter of 2020, with total proceeds received amounting to $2.3 million by the first quarter of 2022[314]