TimkenSteel(TMST) - 2022 Q2 - Quarterly Report

Part I. Financial Information Financial Statements Unaudited statements for H1 2022 show significant growth in net sales and net income, with strong operating cash flow Consolidated Statements of Operations (Unaudited) H1 2022 net sales reached $767.7 million and net income hit $111.6 million, driven by strong Q2 performance Consolidated Statements of Operations Highlights (Unaudited) | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $415.7 | $327.3 | $767.7 | $600.9 | | Gross Profit | $81.4 | $67.2 | $141.4 | $97.9 | | Income Before Taxes | $76.0 | $55.4 | $114.0 | $65.4 | | Net Income | $74.5 | $54.0 | $111.6 | $63.8 | | Diluted EPS | $1.42 | $0.98 | $2.12 | $1.19 | Consolidated Balance Sheets (Unaudited) Total assets grew to $1.22 billion while liabilities decreased, boosting shareholders' equity to $768.9 million Consolidated Balance Sheet Summary (Unaudited) | Metric (in millions) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $669.6 | $582.3 | | Total Assets | $1,217.3 | $1,158.9 | | Total Current Liabilities | $260.0 | $250.8 | | Total Liabilities | $448.4 | $494.3 | | Total Shareholders' Equity | $768.9 | $664.6 | Consolidated Statements of Cash Flows (Unaudited) Operating cash flow for H1 2022 increased to $64.0 million, while financing activities used $74.2 million Consolidated Cash Flow Summary (Unaudited) | Metric (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $64.0 | $52.4 | | Net Cash Used by Investing Activities | $(9.9) | $(3.8) | | Net Cash Used by Financing Activities | $(74.2) | $(36.2) | | Increase (Decrease) in Cash | $(20.1) | $12.4 | Notes to Unaudited Consolidated Financial Statements Notes detail strong revenue growth, capital management via debt and stock repurchases, and pension plan changes Net Sales by End-Market Sector (Six Months Ended June 30) | End-Market (in millions) | 2022 | 2021 | | :--- | :--- | :--- | | Mobile | $297.0 | $266.5 | | Industrial | $383.2 | $298.3 | | Energy | $71.3 | $21.0 | | Other | $16.2 | $15.1 | | Total Net Sales | $767.7 | $600.9 | - In the first half of 2022, the company repurchased $25.2 million in principal of its Convertible Senior Notes Due 2025 for a total cash payment of $67.6 million, resulting in a loss on extinguishment of debt of $43.0 million[70] - The company entered an agreement with Prudential to transfer approximately $256.2 million of its Bargaining Plan pension obligations via a group annuity contract, funded by plan assets[81] Management's Discussion and Analysis of Financial Condition and Results of Operations H1 2022 net sales rose 27.8% due to higher surcharges and favorable price/mix, maintaining strong liquidity - Net sales for H1 2022 increased by $166.8 million (27.8%) compared to H1 2021, driven by a $89.3 million increase in surcharges and a $74.6 million improvement in price/mix[110] - Gross profit for H1 2022 increased by $43.5 million (44.4%) compared to H1 2021, primarily due to favorable price/mix, partially offset by higher manufacturing costs[115] - Total liquidity as of June 30, 2022, was $558.7 million, consisting of $238.5 million in cash and $320.2 million in available borrowing capacity[146] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is commodity price volatility, managed via surcharges, with no variable-rate debt - As of June 30, 2022, the company had no variable-rate debt outstanding, thus a rise in interest rates would not impact current interest expense[181] - The company's primary market risk is commodity price fluctuation for raw materials and energy, which is managed through supplier agreements and a surcharge mechanism[183][184] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - 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[185] - 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[186] Part II. Other Information Legal Proceedings Ongoing legal matters are not expected to have a material adverse effect on the company's financial condition - Management does not expect ongoing legal proceedings to have a material adverse effect on the company's financial condition or results[188] Risk Factors No material changes have occurred to the risk factors disclosed in the 2021 Annual Report on Form 10-K - 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, 2021[189] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 437,638 common shares for $9.3 million in Q2 2022 under its authorized program Share Repurchase Activity (Q2 2022) | Metric | Value | | :--- | :--- | | Total shares purchased | 437,638 | | Average price paid per share | $21.20 | | Total cost (in millions) | ~$9.3 | | Max value remaining under program (in millions) | $37.3 | Exhibits This section lists all exhibits filed with the Form 10-Q, including required certifications and XBRL data