Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(dollars in millions, except per share data)
Business Overview
We manufacture alloy steel, as well as carbon and micro-alloy steel, with an annual melt capacity of approximately 1.2 million tons and shipment capacity of approximately 0.9 million tons. Our portfolio includes special bar quality (“SBQ”) bars, seamless mechanical tubing (“tubes”), manufactured components (formerly known as the "value-add" product type) such as precision steel components, and billets. In addition, we supply machining and thermal treatment services and manage raw material recycling programs, which are also used as a feeder system for our melt operations. Our products and services are used in a diverse range of demanding applications in the following market sectors: automotive; oil and gas; industrial equipment; mining; construction; rail; defense; heavy truck; agriculture; power generation; and oil country tubular goods (“OCTG”).
SBQ steel is made to restrictive chemical compositions and high internal purity levels and is used in critical mechanical applications. We make these products from nearly 100% recycled steel, using our expertise in raw materials to create custom steel products. We focus on creating tailored products and services for our customers’ most demanding applications. Our engineers are experts in both materials and applications, so we can work closely with each customer to deliver flexible solutions related to our products as well as to their applications and supply chains.
The SBQ bar, tube, and billet production processes take place at our Canton, Ohio manufacturing location. This location accounts for all of the SBQ bars, seamless mechanical tubes and billets we produce and includes three manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. Our production of manufactured components takes place at two downstream manufacturing facilities: Tryon Peak (Columbus, North Carolina) and St. Clair (Eaton, Ohio). Many of the production processes are integrated, and the manufacturing facilities produce products that are sold in all of our market sectors. As a result, investments in our facilities and resource allocation decisions affecting our operations are designed to benefit the overall business, not any specific aspect of the business.
The lead time for our products varies based on product type and specifications. As of the date of this filing, lead times for SBQ bars and tubes are through the end of the third quarter of 2022.
We conduct our business activities and report financial results as one business segment. The presentation of financial results as one reportable segment is consistent with the way we operate our business and is consistent with the manner in which the CODM evaluates performance and makes resource and operating decisions for the business as described above. Furthermore, the Company notes that monitoring financial results as one reportable segment helps the CODM manage costs on a consolidated basis, consistent with the integrated nature of our operations.
Impact of Raw Material Prices
In the ordinary course of business, we are exposed to the volatility of the costs of our raw materials. For example, the current Russia-Ukraine conflict could exacerbate inflationary pressures throughout the global economy and lead to potential market disruptions, such as significant volatility in commodity prices and supply chain disruptions. Although our business has not been materially impacted by this conflict to date, it is difficult to predict the extent to which our operations, or those of our suppliers, will be impacted in the future.
Whenever possible, we manage our exposure to commodity risks primarily through the use of supplier pricing agreements that enable us to establish the purchase prices for certain inputs that are used in our manufacturing process. We utilize a raw material surcharge mechanism when pricing products to our customers, which is designed to mitigate the impact of increases or decreases in raw material costs, although generally with a lag effect. This timing effect can result in raw material spread whereby costs can be over- or under-recovered in certain periods. While the surcharge generally protects gross profit, it has the effect of diluting gross margin as a percent of sales.
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Table of Contents
Results of Operations
Net Sales
The charts below present net sales and shipments for the three months ended March 31, 2022 and 2021.
Net sales for the three months ended March 31, 2022 were $352.0 million, an increase of $78.4 million, or 28.7% compared with the three months ended March 31, 2021. The increase in net sales was driven by an increase in surcharges, favorable price/mix, and higher volumes. The increase in surcharges of $41.0 million was due to higher market prices for scrap and alloys. Favorable price/mix of $32.2 million was primarily due to higher base prices across all end-market sectors, as well as an improvement of mix within all end-market sectors. Higher volumes of three thousand ship tons resulted in a net sales increase of $5.2 million, primarily due to increased customer demand in the industrial and energy end-market sectors. The overall increase in volume was partially offset by decreased ship tons in the mobile end-market sector, primarily driven by the semiconductor chip shortage, which caused an approximate six thousand ton decrease in expected ship tons for the three months ended March 31, 2022. Excluding surcharges, net sales increased $37.4 million or 18.2%.
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Table of Contents
Gross Profit
The chart below presents the drivers of the gross profit variance from the three months ended March 31, 2021 to March 31, 2022.
Gross profit for the three months ended March 31, 2022 increased $29.3 million, or 95.4% compared with the three months ended March 31, 2021. The increase was driven by favorable price/mix and increased volume, partially offset by unfavorable raw material spread. Favorable price/mix was due to higher base prices across all end-market sectors, as well as an improvement of mix within all end-market sectors. The increase in volume was due to higher customer demand in the industrial and energy end-market sectors, partially offset by lower mobile end-market shipments, primarily driven by the semiconductor chip shortage. These increases were partially offset by unfavorable raw material spread due to lower scrap and alloy spreads.
20
Table of Contents
Selling, General and Administrative Expenses
The charts below present selling, general and administrative (“SG&A”) expense for the three months ended March 31, 2022 and 2021.
SG&A expense for the three months ended March 31, 2022 decreased by $1.0 million, or 5.1% compared with the March 31, 2021. This decrease was primarily due to lower employee expense as a result of prior restructuring actions.
Restructuring Charges
Over the past several years, TimkenSteel has made numerous organizational changes to enhance profitable and sustainable growth. These company-wide actions included the restructuring of its business support functions, the reduction of management layers throughout the organization and other domestic and international actions to further improve the Company’s overall cost structure. Restructuring charges totaled $0.4 million for the three months ended March 31, 2022 compared with restructuring charges of $0.5 million for the three months ended March 31, 2021. Refer to “Note 4 - Restructuring Charges” in the Notes to the unaudited Consolidated Financial Statements for additional information.
Impairment Charges
TimkenSteel recorded no impairment charges for the three months ended March 31, 2022. For the three months ended March 31, 2021, the Company recorded $8.2 million of impairment charges driven by $7.9 million related to the indefinite idling of our Harrison melt and casting assets. Other impairment charges in the prior year included $0.3 million related to the disposition of assets at our former TMS facility.
Refer to “Note 5 - Disposition of Non-Core Assets” in the Notes to the unaudited Consolidated Financial Statements for additional information.
Interest Expense
Interest expense for the three months ended March 31, 2022 was $1.2 million, a decrease of $0.7 million, compared with the three months ended March 31, 2021. The decrease was due to a reduction in average outstanding borrowings. Refer to “Note 10 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.
Other (Income) Expense, net
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Three Months Ended March 31, |
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2022 |
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2021 |
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|
$ Change |
|
Pension and postretirement non-service benefit (income) loss |
|
$ |
(8.7 |
) |
|
$ |
(9.6 |
) |
|
$ |
0.9 |
|
Loss (gain) from remeasurement benefit plan |
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|
(6.5 |
) |
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|
0.2 |
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|
(6.7 |
) |
Total other (income) expense, net |
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$ |
(15.2 |
) |
|
$ |
(9.4 |
) |
|
$ |
(5.8 |
) |
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Table of Contents
Non-service related pension and other postretirement benefit income, for all years, consists of the interest cost, expected return on plan assets and amortization components of net periodic cost.
The Supplemental Pension Plan of TimkenSteel Corporation ("Supplemental Plan") and the TimkenSteel Corporation Retirement Plan (“Salaried Plan”) have a provision that permits employees to elect to receive their pension benefits in a lump sum upon retirement. In the first quarter of 2022, the cumulative cost of all lump sum payments exceeded the sum of the service cost and interest cost components of net periodic pension cost for the Supplemental Plan. Additionally, the cumulative costs of all lump sum payments were projected to exceed the sum of the service costs and interest cost components of net periodic pension cost in 2022 for the Salaried Plan. As a result, the Company completed a full remeasurement of its pension obligations and plan assets associated with the Supplemental Plan and Salaried Plan during the first quarter of 2022, and is required to complete a full remeasurement of both plans each quarter for the remainder of 2022. A full remeasurement of the pension obligations and plan assets associated with the Salaried Plan was also required during each quarter of 2021. For more details on the remeasurement refer to "Note 6 - Other (Income) Expense, net" and “Note 11 - Retirement and Postretirement Plans” in the Notes to the unaudited Consolidated Financial Statements.
Provision for Income Taxes
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Three Months Ended March 31, |
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2022 |
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2021 |
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|
$ Change |
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Provision (benefit) for income taxes |
|
$ |
0.9 |
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|
$ |
0.2 |
|
|
$ |
0.7 |
|
Effective tax rate |
|
|
2.4 |
% |
|
|
2.0 |
% |
|
|
0.4 |
% |
The majority of the Company’s income tax expense is derived from domestic state and local taxes. The Company remains in a full valuation for the U.S. jurisdiction for the three months ended March 31, 2022 and March 31, 2021.
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Table of Contents
Non-GAAP Financial Measures
Net Sales, Excluding Surcharges
The table below presents net sales by end-market sector, adjusted to exclude surcharges, which represents a financial measure that has not been determined in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). We believe presenting net sales by end-market sector adjusted to exclude raw material and natural gas surcharges provides additional insight into key drivers of net sales such as base price and product mix.
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(dollars in millions, tons in thousands) |
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Three Months Ended March 31, 2022 |
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|
Mobile |
|
|
Industrial |
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|
Energy |
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|
Other |
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Total |
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Tons |
|
|
88.9 |
|
|
|
94.9 |
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|
|
12.6 |
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|
|
— |
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|
196.4 |
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|
|
|
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|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
144.1 |
|
|
$ |
175.0 |
|
|
$ |
25.0 |
|
|
$ |
7.9 |
|
|
$ |
352.0 |
|
Less: Surcharges |
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|
45.7 |
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|
54.9 |
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|
|
8.0 |
|
|
|
— |
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|
|
108.6 |
|
Base Sales |
|
$ |
98.4 |
|
|
$ |
120.1 |
|
|
$ |
17.0 |
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|
$ |
7.9 |
|
|
$ |
243.4 |
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|
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|
|
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Net Sales / Ton |
|
$ |
1,621 |
|
|
$ |
1,844 |
|
|
$ |
1,984 |
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|
$ |
— |
|
|
$ |
1,792 |
|
Surcharges / Ton |
|
$ |
514 |
|
|
$ |
578 |
|
|
$ |
635 |
|
|
$ |
— |
|
|
$ |
553 |
|
Base Sales / Ton |
|
$ |
1,107 |
|
|
$ |
1,266 |
|
|
$ |
1,349 |
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|
$ |
— |
|
|
$ |
1,239 |
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|
Three Months Ended March 31, 2021 |
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|
Mobile |
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|
Industrial |
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Energy |
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Other |
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Total |
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Tons |
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|
103.5 |
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|
84.4 |
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|
5.5 |
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|
|
— |
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|
193.4 |
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|
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|
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|
|
|
Net Sales |
|
$ |
133.6 |
|
|
$ |
124.7 |
|
|
$ |
7.7 |
|
|
$ |
7.6 |
|
|
$ |
273.6 |
|
Less: Surcharges |
|
|
32.8 |
|
|
|
32.7 |
|
|
|
2.1 |
|
|
|
— |
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|
|
67.6 |
|
Base Sales |
|
$ |
100.8 |
|
|
$ |
92.0 |
|
|
$ |
5.6 |
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|
$ |
7.6 |
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$ |
206.0 |
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Net Sales / Ton |
|
$ |
1,291 |
|
|
$ |
1,477 |
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|
$ |
1,400 |
|
|
$ |
— |
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|
$ |
1,415 |
|
Surcharges / Ton |
|
$ |
317 |
|
|
$ |
387 |
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|
$ |
382 |
|
|
$ |
— |
|
|
$ |
350 |
|
Base Sales / Ton |
|
$ |
974 |
|
|
$ |
1,090 |
|
|
$ |
1,018 |
|
|
$ |
— |
|
|
$ |
1,065 |
|
23
Table of Contents
Liquidity and Capital Resources
Amended Credit Agreement
On October 15, 2019, the Company entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and the other lenders party thereto, which further amended and restated the Company’s Second Amended and Restated Credit Agreement dated as of January 26, 2018.
For additional details regarding the Amended Credit Agreement please refer to “Note 14 - Financing Arrangements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Convertible Notes
In May 2016, the Company issued $75.0 million aggregate principal amount of Convertible Senior Notes due 2021, plus an additional $11.3 million principal amount to cover over-allotments.
In December 2020, the Company entered into separate, privately negotiated exchange agreements with a limited number of holders of the Company’s then outstanding Convertible Senior Notes due 2021. Pursuant to the exchange agreements, the Company exchanged $46.0 million aggregate principal amount of Convertible Senior Notes due 2021 for $46.0 million aggregate principal amount of its new Convertible Senior Notes due 2025. The Company did not receive any cash proceeds from the issuance of the Convertible Senior Notes due 2025.
The remaining Convertible Senior Notes due 2021 matured on June 1, 2021 and were settled with a combination of cash of $38.9 million and 0.1 million shares, as most noteholders exercised their conversion option prior to maturity. The final cash payment for interest was also made to noteholders on June 1, 2021 in the amount of $1.2 million.
The Convertible Senior Notes due 2025 bear cash interest at a rate of 6.0% per year, payable semiannually on June 1 and December 1, beginning on June 1, 2021. The Convertible Senior Notes due 2025 will mature on December 1, 2025, unless earlier repurchased or converted. The net amount of this exchange was $44.5 million, after deducting the initial underwriters’ fees and paying other transaction costs.
The Convertible Senior Notes due 2025 are convertible at the option of holders in certain circumstances and during certain periods into the Company’s common shares, cash, or a combination thereof, at the Company’s election. The Indenture for the Convertible Senior Notes due 2025 provides that notes will become convertible during a quarter when the share price for 20 trading days during the final 30 trading days of the immediately preceding quarter was greater than 130% of the conversion price. This criterion was met during the first quarter of 2022 and as such the notes can be converted at the option of the holders beginning April 1 through June 30, 2022. Whether the notes will be convertible following such period will depend on if this criterion, or another conversion condition, is met in the future. To date, no holders have elected to convert their notes during any optional conversion periods.
In the first quarter of 2022, TimkenSteel repurchased a total of $10.0 million aggregate principal amount of its Convertible Senior Notes Due 2025. Total cash paid to noteholders was $26.8 million. A loss on extinguishment of debt was recognized in the first quarter of 2022 in the amount of $17.0 million, which includes a charge of $0.2 million for unamortized debt issuance costs related to the portion of debt extinguished, as well as the related transaction costs.
For additional details regarding the Convertible Notes please refer to “Note 14 - Financing Arrangements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
24
Table of Contents
Additional Liquidity Considerations
The following represents a summary of key liquidity measures under the Amended Credit Agreement as of March 31, 2022 and December 31, 2021:
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|
March 31, 2022 |
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|
December 31, 2021 |
|
Cash and cash equivalents |
|
$ |
239.9 |
|
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$ |
259.6 |
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|
Credit Agreement: |
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Maximum availability |
|
$ |
400.0 |
|
|
$ |
400.0 |
|
Suppressed availability(1) |
|
|
(111.7 |
) |
|
|
(143.5 |
) |
Availability |
|
|
288.3 |
|
|
|
256.5 |
|
Amount borrowed |
|
|
— |
|
|
|
— |
|
Letter of credit obligations |
|
|
(5.4 |
) |
|
|
(5.4 |
) |
Availability not borrowed |
|
$ |
282.9 |
|
|
$ |
251.1 |
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|
Total liquidity |
|
$ |
522.8 |
|
|
$ |
510.7 |
|
(1) As of March 31, 2022, and December 31, 2021, TimkenSteel had less than $400 million in collateral assets to borrow against.
Our principal sources of liquidity are cash and cash equivalents, cash flows from operations and available borrowing capacity under our Amended Credit Agreement. As of March 31, 2022, taking into account our view of mobile, industrial, and energy market demand for our products, and our 2022 operating and long-range plan, we believe that our cash balance as of March 31, 2022, projected cash generated from operations, and borrowings available under the Amended Credit Agreement, will be sufficient to satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations, including servicing our debt and pension and postretirement benefit obligations, for at least the next twelve months.
To the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, and cash on hand or credit availability is insufficient, we would seek additional financing to provide additional liquidity. We regularly evaluate our potential access to the equity and debt capital markets as sources of liquidity and we believe additional financing would likely be available if necessary, although we can make no assurance as to the form or terms of any such financing.
We continue to evaluate the best use of our liquidity which would allow us to invest in profitable growth, maintain a strong balance sheet, and return capital to shareholders. We continue to anticipate capital expenditures to be approximately $40 million in 2022, with over half of this budget allocated to profitability improvement projects.
During the first quarter of 2022, we privately negotiated the early repurchase of $10.0 million aggregate principal amount of our Convertible Senior Notes Due 2025. In addition to reducing outstanding debt and generating $0.6 million of annual interest savings, the convertible notes repurchase will have the effect of reducing diluted shares outstanding by a total of approximately 1.3 million shares beginning in the second quarter of 2022.
On December 20, 2021, TimkenSteel announced that its Board of Directors authorized a share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding common shares. Our share repurchase program is intended to return capital to shareholders while also offsetting dilution from annual equity compensation awards. The Company may utilize various methods to repurchase shares, which could include open market repurchases, including repurchases through Rule 10b5-1 plans, privately-negotiated transactions or by other means. The actual timing, number and value of shares repurchased under the program will depend on a number of factors, including the price of the Company's shares, general market and economic conditions, capital needs and other factors. The share repurchase program does not require the Company to acquire any dollar amount or number of shares and may be modified, suspended, extended or terminated by the Company at any time without prior notice. For the three months ended March 31, 2022, the Company repurchased approximately 0.2 million common shares at an aggregate cost of $3.4 million in the open market, which equates to an average repurchase price of $20.27 per share. As of March 31, 2022, the Company had a balance of $46.6 million remaining on its previously approved $50.0 million share repurchase program.
25
Table of Contents
In April 2022, the Company repurchased approximately 0.1 million common shares at an aggregate cost of $3.0 million, which equates to an average repurchase price of $21.88 per share. As of April 30, 2022, the Company had $43.6 million remaining under its previously approved $50.0 million share repurchase program.
Coronavirus Aid, Relief, and Economic Security Act
Due to a provision in the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, the Company was able to defer the employer share of Social Security payroll taxes for a specified time during 2020. During the year ended December 31, 2020, the Company deferred $6.4 million in cash payments and recorded reserves for such deferred payroll taxes in salaries, wages and benefits on the Consolidated Balance Sheets, to be paid in two equal installments. The first installment in the amount of $3.2 million was paid during the fourth quarter of 2021. The second installment is due on December 31, 2022.
The CARES Act also provided for an employee retention credit (“Employee Retention Credit”), which is a refundable tax credit against certain employment taxes. The Company qualified for the tax credit in the second and third quarters of 2020 and accrued a benefit of $2.3 million in the fourth quarter of 2020 related to the Employee Retention Credit in other (income) expense, net on the Consolidated Statements of Operations. The Company filed for this credit in the second quarter of 2021 and received a portion of the proceeds from the Internal Revenue Service ("IRS") in the amount of $0.5 million during the fourth quarter of 2021. The Company received the remaining $1.8 million of cash proceeds in the first quarter of 2022.
Cash Flows
The following table reflects the major categories of cash flows for the three months ended March 31, 2022 and 2021. For additional details, please refer to the unaudited Consolidated Statements of Cash Flows included in this quarterly report.
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|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Net cash provided (used) by operating activities |
|
$ |
13.3 |
|
|
$ |
13.2 |
|
Net cash provided (used) by investing activities |
|
|
(6.5 |
) |
|
|
(2.3 |
) |
Net cash provided (used) by financing activities |
|
|
(25.5 |
) |
|
|
2.0 |
|
Increase (Decrease) in Cash and Cash Equivalents |
|
$ |
(18.7 |
) |
|
$ |
12.9 |
|
Operating activities
Net cash provided by operating activities for the three months ended March 31, 2022 was $13.3 million compared to net cash provided of $13.2 million for the three months ended March 31, 2021. The increase in net cash provided by operating activities is due to an increase in profitability during the first quarter of 2022 compared to the first quarter of 2021. This is partially offset by an increased use of cash for working capital purposes and an increase in the cash payment related to variable compensation earned in 2021 compared to 2020, which is paid out in the first quarter of the subsequent year.
Investing activities
Net cash used by investing activities for the three months ended March 31, 2022 was $6.5 million compared to net cash used of $2.3 million for the three months ended March 31, 2021. The change was due to higher capital expenditures in the first quarter of 2022 compared to the first quarter of 2021.
Financing activities
Net cash used by financing activities for the three months ended March 31, 2022 was $25.5 million compared to net cash provided of $2.0 million for the three months ended March 31, 2021. The change was due to the early repurchase of a portion of the Convertible Senior Notes due 2025 and the repurchase of common shares in the first quarter of 2022 under the share repurchase program, which is discussed in more detail in “Note 10 - Financing Arrangements”. This is partially offset by increased proceeds from the exercise of stock options in the first quarter of 2022 compared to the first quarter of 2021.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We review our critical accounting policies throughout the year.
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Table of Contents
New Accounting Guidance
See “Note 2 - Recent Accounting Pronouncements” in the Notes to the unaudited Consolidated Financial Statements.
Forward-Looking Statements
Certain statements set forth in this Quarterly Report on Form 10-Q (including our forecasts, beliefs and expectations) that are not historical in nature are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as “anticipate,” ,“aspire,” “believe,” “could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “strategic direction,” “strategy,” “target,” “will,” “would,” or other similar words, phrases or expressions that convey the uncertainty of future events or outcomes. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. We caution readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of us due to a variety of factors, such as:
•deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which we conduct business, including additional adverse effects from global economic slowdown, terrorism or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which we or our customers conduct business, and changes in currency valuations;
•climate-related risks, including environmental and severe weather caused by climate changes, and legislative and regulatory initiatives addressing global climate change or other environmental concerns;
•the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which we operate. This includes: our ability to respond to rapid changes in customer demand including but not limited to changes in customer operating schedules due to supply chain constraints; the effects of customer bankruptcies or liquidations; the impact of changes in industrial business cycles; and whether conditions of fair trade exist in the U.S. markets;
•the potential impact of the COVID-19 pandemic on our operations and financial results, including cash flows and liquidity;
•whether we are able to successfully implement actions designed to improve profitability on anticipated terms and timetables and whether we are able to fully realize the expected benefits of such actions;
•competitive factors, including changes in market penetration; increasing price competition by existing or new foreign and domestic competitors; the introduction of new products by existing and new competitors; and new technology that may impact the way our products are sold or distributed;
•changes in operating costs, including the effect of changes in our manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability of raw materials and energy; our ability to mitigate the impact of fluctuations in raw materials and energy costs and the effectiveness of our surcharge mechanism; changes in the expected costs associated with product warranty claims; changes resulting from inventory management, cost reduction initiatives and different levels of customer demands; the effects of unplanned work stoppages; and changes in the cost of labor and benefits;
•the success of our operating plans, announced programs, initiatives and capital investments; and our ability to maintain appropriate relations with the union that represents our associates in certain locations in order to avoid disruptions of business;
•unanticipated litigation, claims or assessments, including claims or problems related to intellectual property, product liability or warranty, employment matters, and environmental issues and taxes, among other matters;
•cyber-related risks, including information technology system failures, interruptions and security breaches;
•the Company's ability to achieve its environmental, social, and governance ("ESG") goals, including its 2030 ESG goals;
•the availability of financing and interest rates, which affect our cost of funds and/or ability to raise capital, including our ability to refinance and/or repay prior to or at maturity the Convertible Notes due December 1, 2025; our pension obligations and investment
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performance; and/or customer demand and the ability of customers to obtain financing to purchase our products or equipment that contain our products;
•the overall impact of the pension and postretirement mark-to-market accounting;
•the effects of the conditional conversion feature of the Convertible Senior Notes due 2025, which, if triggered, entitles holders to convert the notes at any time during specified periods at their option and therefore could result in potential dilution if the holder elects to convert and the Company elects to satisfy a portion or all of the conversion obligation by delivering common shares instead of cash;
•the impacts from any repurchases of our common shares, including the timing and amount of any repurchases; and
•those items identified under the caption Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021.
You are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, and that the above list should not be considered to be a complete list. Except as required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Further, this report includes our current policy and intent and is not intended to create legal rights or obligations. Certain standards of measurement and performance contained in this report are developing and based on assumptions, and no assurance can be given that any plan, objective, initiative, projection, goal, mission, commitment, expectation, or prospect set forth in this report can or will be achieved. Inclusion of information in this report is not an indication that the subject or information is material to our business or operating results.