Metallus Announces First-Quarter 2024 Results

• Net sales of $321.6 million with net income of $24.0 million and adjusted EBITDA⁽¹⁾ of $43.4 million
• Operating cash flow of $33.4 million with ending cash and cash equivalents of $278.1 million
• Invested $17.4 million in capital expenditures and deployed $4.4 million to repurchase common shares
• On May 6, 2024, the company's Board of Directors authorized an additional $100 million common share repurchase program

CANTON, Ohio, May 9, 2024 /PRNewswire/ -- Metallus (NYSE: MTUS), a leader in high-quality specialty metals, manufactured components and supply chain solutions, today reported first-quarter 2024 net sales of $321.6 million and net income of $24.0 million, or $0.52 per diluted share. On an adjusted basis⁽¹⁾, the first-quarter 2024 net income was $26.1 million, or $0.56 per diluted share, and adjusted EBITDA was $43.4 million.

This compares with the sequential fourth-quarter 2023 net sales of $328.1 million and net income of $1.3 million, or $0.03 per diluted share. On an adjusted basis⁽¹⁾, the fourth-quarter 2023 net income was $16.5 million, or $0.36 per diluted share, and adjusted EBITDA was $35.7 million.

In the same quarter last year, net sales were $323.5 million and net income was $14.4 million, or $0.30 per diluted share. On an adjusted basis⁽¹⁾, the first-quarter 2023 net income was $20.8 million, or $0.44 per diluted share, and adjusted EBITDA was $36.0 million.

"Over the past several years, our business has undergone significant transformation with a focus on through-cycle profitability and positive operating cash flow in all business cycles. I'm pleased that our efforts have proven effective, and we are seeing solid profitability and cash generation, despite the current softer demand environment, primarily from our industrial distribution and energy customers," stated Mike Williams, president and chief executive officer. 

"We currently participate in over 20 different defense-related programs and continue to identify new opportunities for growth in the aerospace & defense end market. We are pursuing new programs requiring specialty metal solutions tailored to critical defense applications. Additionally, we are conducting trials with a range of metals, including titanium, to expand our conversion opportunities and enrich our portfolio, in line with the evolving needs of our customers," said Williams.

FIRST-QUARTER 2024 FINANCIAL SUMMARY

• Net sales of $321.6 million decreased 2 percent compared with $328.1 million in the fourth quarter 2023. The decrease in net sales was primarily driven by lower shipments and base sales⁽¹⁾ prices, partially offset by higher raw material surcharge revenue per ton. Compared with the prior-year first quarter, net sales were relatively flat with lower shipments and a reduction in raw material surcharge revenue per ton being offset by favorable price/mix.
• Ship tons of 155,200 decreased 2,400 tons sequentially, or 2 percent, driven by lower shipments in the aerospace & defense, energy and automotive end markets, partially offset by higher industrial shipments. Compared with the prior-year first quarter, ship tons decreased 10 percent as a result of lower automotive, energy and industrial shipments, partially offset by higher aerospace & defense shipments.
• Manufacturing costs decreased by $10.0 million on a sequential basis, primarily driven by higher fixed cost leverage on increased production volume and lower planned annual maintenance shutdown costs. Melt utilization improved to 72 percent from 58 percent in the fourth quarter while the company continued to balance production with demand. Compared with the prior-year first quarter, manufacturing costs increased $13.0 million, primarily driven by the year-over-year impact of plant costs capitalized into inventory and released as inventory was sold. Melt utilization was 72 percent compared with 73 percent in the same quarter last year.

CASH, LIQUIDITY AND REPURCHASE ACTIVITY

As of March 31, 2024, the company's cash and cash equivalents balance was $278.1 million. In the first quarter, operating cash flow was $33.4 million, primarily driven by profitability and insurance recoveries, partially offset by required pension contributions. Total liquidity⁽²⁾ was $549.0 million as of March 31, 2024.

In the first quarter, the company contributed a total of $28.4 million in required pension contributions, most of which related to the Bargaining Plan. Additionally, during the first quarter, the company repurchased approximately 212,000 common shares in the open market at an aggregate cost of $4.4 million.

On May 6, 2024, the Board of Directors authorized an additional $100 million share repurchase program. This additional authorization reflects the continued confidence of the Board and executive leadership in the company's ability to generate through-cycle profitability, maintain a strong balance sheet and generate positive cash flow.

Since the beginning of 2022 through May 6, 2024, the company has repurchased $92.9 million of its common stock, exhausting 74 percent of its previous Board authorizations. In aggregate as of May 6, 2024 following the additional share repurchase authorization, the company has $132.1 million remaining under its authorized share repurchase program.

The company expects share repurchases will be made from time to time in the open market at prevailing market prices or through private transactions or block trades. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements and other factors. The company's share repurchase authorization is discretionary and has no expiration date.

2024 OUTLOOK

Given the elements outlined in the outlook below, the company expects second-quarter of 2024 adjusted EBITDA to be lower than the first quarter of 2024.

Commercial:

• Second-quarter shipments are expected to be similar to the first quarter.
• Lead times for bar products currently extend to June and tube product lead times extend to July.
• Base price per ton is anticipated to remain solid in the second quarter while product mix is expected to be less favorable in comparison to the first quarter.
• Surcharge revenue per ton is expected to decline in the second quarter given a lower average No. 1 busheling scrap index in the second quarter compared with the first quarter.

Operations:

• The company expects the average melt utilization rate to be less than the first quarter, as the company continues to balance production with demand.

Other matters:

• Planned capital expenditures are approximately $60 million in 2024, consistent with previous guidance.
• An effective income tax rate of approximately 25 percent is expected for the full-year 2024.
• Required pension contributions are approximately $6 million in the second quarter with an estimated additional $12 million of required pension contributions in the second half of 2024.

 

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

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

METALLUS EARNINGS WEBCAST INFORMATION
Metallus will provide live Internet listening access to its conference call with the financial community scheduled for Friday, May 10, 2024 at 9:00 a.m. ET. The live conference call will be broadcast at investors.metallus.com. A replay of the conference call will also be available at investors.metallus.com.

ABOUT METALLUS INC.
Metallus (NYSE: MTUS) manufactures high-performance specialty metals from recycled scrap metal in Canton, OH, serving demanding applications in industrial, automotive, aerospace & defense and energy end-markets. The company is a premier U.S. producer of alloy steel bars (up to 16 inches in diameter), seamless mechanical tubing and manufactured components. In the business of making high-quality steel for more than 100 years, Metallus' proven expertise contributes to the performance of our customers' products. The company employs approximately 1,860 people and had sales of $1.4 billion in 2023. For more information, please visit us at www.metallus.com.

NON-GAAP FINANCIAL MEASURES
Metallus reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP") and corresponding metrics as non-GAAP financial measures. This earnings release includes references to the following non-GAAP financial measures: adjusted earnings (loss) per share, adjusted net income (loss), EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, free cash flow, base sales, and other adjusted items. These are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting these non-GAAP financial measures is useful to investors as these measures are representative of the company's performance and provide improved comparability of results. See the attached schedules for definitions of the non-GAAP financial measures referred to above and corresponding reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures. Non-GAAP financial measures should be viewed as additions to, and not as alternatives for, Metallus' results prepared in accordance with GAAP. In addition, the non-GAAP measures Metallus uses may differ from non-GAAP measures used by other companies, and other companies may not define the non-GAAP measures Metallus uses in the same way.

FORWARD-LOOKING STATEMENTS
This news release includes "forward-looking" statements within the meaning of the federal securities laws. You can generally identify the company's forward-looking statements by words such as "will," "anticipate," "aspire," "believe," "could," "estimate," "expect," "forecast," "outlook," "intend," "may," "plan," "possible," "potential," "predict," "project," "seek," "target," "should," "would," "strategy," or "strategic direction" or other similar words, phrases or expressions that convey the uncertainty of future events or outcomes. The company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the company due to a variety of factors, such as: (1) the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which the company operates, including the ability of the company to respond to rapid changes in customer demand including but not limited to changes in customer operating schedules due to supply chain constraints or unplanned work stoppages, the ability of customers to obtain financing to purchase the company's products or equipment that contains its products, the effects of customer bankruptcies or liquidations, the impact of changes in industrial business cycles, and whether conditions of fair trade exist in U.S. markets; (2) changes in operating costs, including the effect of changes in the company's manufacturing processes, changes in costs associated with varying levels of operations and manufacturing capacity, availability of raw materials and energy, the company's ability to mitigate the impact of fluctuations in raw materials and energy costs and the effectiveness of its 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, availability of skilled labor and changes in the cost of labor and benefits; (3) the success of the company's operating plans, announced programs, initiatives and capital investments, the consistency to meet demand levels following unplanned downtime, and the company's ability to maintain appropriate relations with the union that represents its associates in certain locations in order to avoid disruptions of business; (4) whether the company is able to successfully implement actions designed to improve profitability on anticipated terms and timetables and whether the company is able to fully realize the expected benefits of such actions; (5) the company's pension obligations and investment performance; (6) with respect to the company's ability to achieve its sustainability goals, including its 2030 environmental goals, the ability to meet such goals within the expected timeframe, changes in laws, regulations, prevailing standards or public policy, the alignment of the scientific community on measurement and reporting approaches, the complexity of commodity supply chains and the evolution of and adoption of new technology, including traceability practices, tools and processes; (7) availability of property insurance coverage at commercially reasonable rates or insufficient insurance coverage to cover claims or damages; (8) the availability of financing and interest rates, which affect the company's cost of funds and/or ability to raise capital; (9) the effects of the conditional conversion feature of the convertible notes due December 1, 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; (10) the impacts from any repurchases of our common shares, including the timing and amount of any repurchases; (11) 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 the company's products are sold or distributed; (12) deterioration in global economic conditions, or in economic conditions in any of the geographic regions in which the company conducts business, including additional adverse effects from global economic slowdown, terrorism or hostilities, including political risks associated with the potential instability of governments and legal systems in countries in which the company or its customers conduct business, and changes in currency valuations; (13) the impact of global conflicts on the economy, sourcing of raw materials, and commodity prices; (14) 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; (15) unanticipated litigation, claims or assessments, including claims or problems related to intellectual property, product liability or warranty, employment matters, regulatory compliance and environmental issues and taxes, among other matters; (16) cyber-related risks, including information technology system failures, interruptions and security breaches; (17) the potential impact of pandemics, epidemics, widespread illness or other health issues; and (18) with respect to the continuous bloom reheat furnace investment, whether the funding awarded to support this investment is received on the anticipated timetable, whether the company is able to successfully complete the installation and commissioning of the new assets on the targeted budget and timetable, and whether the anticipated increase in throughput is achieved. Further, this news release represents our current policy and intent and is not intended to create legal rights or obligations. Certain standards of measurement and performance contained in this news release 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 news release can or will be achieved. Inclusion of information in this news release is not an indication that the subject or information is material to our business or operating results.

Additional risks relating to the company's business, the industries in which the company operates, or the company's common shares may be described from time to time in the company's filings with the SEC. All of these risk factors are difficult to predict, are subject to material uncertainties that may affect actual results and may be beyond the company's control. Readers 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, the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

CONSOLIDATED STATEMENTS OF OPERATIONS
		Three Months Ended March 31,
(in millions, except per share data) (Unaudited)		2024				2023
Net sales		$	321.6			$	323.5
Cost of products sold			271.0				283.1
Gross Profit			50.6				40.4
Selling, general & administrative expenses (SG&A)			24.1				21.0
Loss (gain) on sale or disposal of assets, net			0.1				0.1
Loss on extinguishment of debt			—				11.4
Other (income) expense, net			(0.8)				(8.8)
Earnings (Loss) Before Interest and Taxes (EBIT) (1)			27.2				16.7
Interest (income) expense, net			(2.8)				(1.5)
Income (Loss) Before Income Taxes			30.0				18.2
Provision (benefit) for income taxes			6.0				3.8
Net Income (Loss)		$	24.0			$	14.4
Net Income (Loss) per Common Share:
Basic earnings (loss) per share		$	0.55			$	0.33
Diluted earnings (loss) per share (2,3)		$	0.52			$	0.30
Weighted average shares outstanding - basic			43.6				44.0
Weighted average shares outstanding - diluted (2,3)			46.8				48.7

(1) EBIT is defined as net income (loss) before interest (income) expense, net and income taxes. EBIT is an important financial measure used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT is useful to investors as this measure is representative of the company's performance.

(2) For the three months ended March 31, 2024, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (1.7 million shares) and common share equivalents for shares issuable for equity-based awards (1.5 million shares) were included in the computation of diluted earnings (loss) per share, as they were considered dilutive. For the convertible notes, the company utilizes the if-converted method to calculate diluted earnings (loss) per share. As such, for the three months ended March 31, 2024, net income was adjusted to add back $0.2 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

(3) For the three months ended March 31, 2023, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (2.6 million shares) and common share equivalents for shares issuable for equity-based awards (2.1 million shares) were included in the computation of diluted earnings (loss) per share, as they were considered dilutive. For the convertible notes, the company utilizes the if-converted method to calculate diluted earnings (loss) per share. As such, for the three months ended March 31, 2023, net income was adjusted to add back $0.3 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

 

CONSOLIDATED BALANCE SHEETS
(Dollars in millions) (Unaudited)		March 31, 2024				December 31, 2023
ASSETS
Cash and cash equivalents		$	278.1			$	280.6
Accounts receivable, net of allowances			120.0				113.2
Inventories, net			237.5				228.0
Deferred charges and prepaid expenses			9.0				10.3
Other current assets			3.1				24.7
Total Current Assets			647.7				656.8
Property, plant and equipment, net			492.4				492.5
Operating lease right-of-use assets			10.1				11.4
Pension assets			11.0				9.9
Intangible assets, net			2.6				2.7
Other non-current assets			2.0				2.0
Total Assets		$	1,165.8			$	1,175.3
LIABILITIES
Accounts payable		$	145.4			$	133.3
Salaries, wages and benefits			19.2				26.8
Accrued pension and postretirement costs			26.8				43.5
Current operating lease liabilities			4.4				5.0
Current convertible notes, net			13.2				13.2
Other current liabilities			30.1				26.6
Total Current Liabilities			239.1				248.4
Credit agreement			—				—
Non-current operating lease liabilities			5.7				6.4
Accrued pension and postretirement costs			153.1				160.5
Deferred income taxes			15.1				15.0
Other non-current liabilities			13.5				13.4
Total Liabilities			426.5				443.7
SHAREHOLDERS' EQUITY
Additional paid-in capital			835.0				844.2
Retained deficit			(29.7)				(53.7)
Treasury shares			(77.3)				(71.3)
Accumulated other comprehensive income (loss)			11.3				12.4
Total Shareholders' Equity			739.3				731.6
Total Liabilities and Shareholders' Equity		$	1,165.8			$	1,175.3

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions) (Unaudited)		Three Months Ended March 31,
		2024				2023
CASH PROVIDED (USED)
Operating Activities
Net income (loss)		$	24.0			$	14.4
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization			13.4				14.5
Amortization of deferred financing fees			0.1				0.1
Loss on extinguishment of debt			—				11.4
Loss (gain) on sale or disposal of assets, net			0.1				0.1
Deferred income taxes			—				0.7
Stock-based compensation expense			3.5				2.6
Pension and postretirement expense (benefit), net			2.0				3.8
Changes in operating assets and liabilities:
Accounts receivable, net			(6.7)				(47.5)
Inventories, net			(9.3)				(52.0)
Accounts payable			16.5				63.7
Other accrued expenses			(4.2)				(12.8)
Pension and postretirement contributions and payments			(28.4)				(1.5)
Deferred charges and prepaid expenses			1.3				1.8
Other, net			21.1				10.5
Net Cash Provided (Used) by Operating Activities			33.4				9.8
Investing Activities
Capital expenditures			(17.4)				(10.6)
Proceeds from disposals of property, plant and equipment			—				1.5
Net Cash Provided (Used) by Investing Activities			(17.4)				(9.1)
Financing Activities
Purchase of treasury shares			(4.4)				(9.4)
Proceeds from exercise of stock options			1.1				1.3
Shares surrendered for employee taxes on stock compensation			(15.4)				(3.4)
Repayments on convertible notes			—				(18.7)
Net Cash Provided (Used) by Financing Activities			(18.7)				(30.2)
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash			(2.7)				(29.5)
Cash, cash equivalents, and restricted cash at beginning of period			281.3				257.8
Cash, Cash Equivalents, and Restricted Cash at End of Period		$	278.6			$	228.3
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within  the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated  Statements of Cash Flows:
Cash and cash equivalents		$	278.1			$	227.4
Restricted cash reported in other current assets			0.5				0.9
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows		$	278.6			$	228.3

Reconciliation of Free Cash Flow⁽¹⁾ to GAAP Net Cash Provided (Used) by Operating Activities:

This reconciliation is provided as additional relevant information about the company's financial position. Free cash flow is an important financial measure used in the management of the business. Management believes that free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.

		Three Months Ended March 31,
(Dollars in millions) (Unaudited)		2024				2023
Net Cash Provided (Used) by Operating Activities		$	33.4			$	9.8
Less: Capital expenditures			(17.4)				(10.6)
Free Cash Flow		$	16.0			$	(0.8)

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

Reconciliation of adjusted net income (loss)⁽²⁾ to GAAP net income (loss) and adjusted diluted earnings (loss) per share⁽²⁾ to GAAP diluted earnings (loss) per share for the three months ended March 31, 2024, March 31, 2023, and December 31, 2023:

Adjusted net income (loss) and adjusted diluted earnings (loss) per share are financial measures not required by, or presented in accordance with GAAP. These Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with GAAP, and a reconciliation of these financial measures to the most comparable GAAP financial measures is presented. Management believes this data provides investors with additional useful information on the underlying operations and trends of the business and enables period-to-period comparability of the company's financial performance.

		Three months ended March 31, 2024								Three months ended March 31, 2023								Three months ended December 31, 2023
(Dollars in millions) (Unaudited)		Net income (loss)				Diluted earnings (loss) per share(1)				Net income (loss)				Diluted earnings (loss) per share(8)				Net income (loss)				Diluted earnings (loss) per share(9)
As reported		$	24.0			$	0.52			$	14.4			$	0.30			$	1.3			$	0.03
Adjustments:(2)
Loss (gain) on sale or disposal of assets, net			0.1				—				0.1				—				0.3				0.01
Loss on extinguishment of debt			—				—				11.4				0.23				—				—
Loss (gain) from remeasurement of benefit plans, net			0.8				0.02				2.2				0.05				38.8				0.82
Sales and use tax refund			—				—				—				—				(1.4)				(0.03)
Business transformation costs(3)			0.3				—				0.1				—				0.6				0.01
IT transformation costs(4)			1.3				0.03				0.8				0.02				1.2				0.03
Insurance recoveries(5)			—				—				(9.8)				(0.20)				(20.0)				(0.42)
Rebranding costs(6)			0.3				—				—				—				0.5				0.01
Accelerated depreciation and amortization			—				—				0.3				0.01				—				—
Tax effect on above adjustments(7)			(0.7)				(0.01)				1.3				0.03				(4.8)				(0.10)
As adjusted		$	26.1			$	0.56			$	20.8			$	0.44			$	16.5			$	0.36

(1) For the three months ended March 31, 2024 convertible notes (1.7 million shares) and common share equivalents for shares issuable for equity-based awards (1.5 million shares) were included in the computation of as reported and as adjusted diluted earnings (loss) per share, as they were considered dilutive. The total diluted weighted average shares outstanding for the three months ended March 31, 2024 was 46.8 million shares. For the convertible notes, the company utilizes the if-converted method to calculate diluted earnings (loss) per share. As such, net income was adjusted to add back $0.2 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

(2) Adjusted net income (loss) and adjusted diluted earnings (loss) per share are defined as net income (loss) and diluted earnings (loss) per share, respectively, excluding, as applicable, adjustments listed in the foregoing table.

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

(4) IT transformation costs were primarily related to professional service fees not eligible for capitalization that are associated specifically with an information technology application simplification and modernization project.

(5) During 2023, the company recognized insurance recoveries of $9.8 million in the first quarter and $20.0 million in the fourth quarter related to the 2022 Faircrest melt shop unplanned downtime. The 2022 insurance claims were closed as of the first quarter of 2024.

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

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

(8) For the three months ended March 31, 2023, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (2.6 million shares) and common share equivalents for shares issuable for equity-based awards (2.1 million shares) were included in the computation of as reported and as adjusted diluted earnings (loss) per share, as they were considered dilutive. The total diluted weighted average shares outstanding for the three months ended March 31, 2023 was 48.7 million shares. For the convertible notes, the company utilizes the if-converted method to calculate diluted earnings (loss) per share. As such, net income was adjusted to add back $0.3 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

(9) For the three months ended December 31, 2023, common share equivalents for shares issuable upon the conversion of outstanding convertible notes (1.7 million shares) and common share equivalents for shares issuable for equity-based awards (2.2 million shares) were included in the computation of as reported and as adjusted diluted earnings (loss) per share, as they were considered dilutive. The total diluted weighted average shares outstanding for the three months ended December 31, 2023 was 47.1 million shares. For the convertible notes, the company utilizes the if-converted method to calculate diluted earnings (loss) per share. As such, net income was adjusted to add back $0.2 million of convertible notes interest expense (including amortization of convertible notes issuance costs).

Reconciliation of Earnings (Loss) Before Interest and Taxes (EBIT)⁽²⁾, Adjusted EBIT⁽⁴⁾, Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization (EBITDA)⁽³⁾ and Adjusted EBITDA⁽⁵⁾ to GAAP Net Income (Loss):

This reconciliation is provided as additional relevant information about the company's performance. EBIT, Adjusted EBIT, EBITDA and Adjusted EBITDA are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT, Adjusted EBIT, EBITDA and Adjusted EBITDA is useful to investors as these measures are representative of the company's performance. Management also believes that it is appropriate to compare GAAP net income (loss) to EBIT, Adjusted EBIT, EBITDA and Adjusted EBITDA.

		Three Months Ended March 31,								Three Months Ended December 31,
(Dollars in millions) (Unaudited)		2024				2023				2023
Net income (loss)		$	24.0			$	14.4			$	1.3
Net Income Margin (1)			7.5	%			4.5	%			0.4	%
Provision (benefit) for income taxes			6.0				3.8				2.4
Interest (income) expense, net			(2.8)				(1.5)				(2.1)
Earnings Before Interest and Taxes (EBIT) (2)		$	27.2			$	16.7			$	1.6
EBIT Margin (2)			8.5	%			5.2	%			0.5	%
Depreciation and amortization			13.4				14.5				14.1
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (3)		$	40.6			$	31.2			$	15.7
EBITDA Margin (3)			12.6	%			9.6	%			4.8	%
Adjustments:
Accelerated depreciation and amortization (EBIT only)			—				0.3				—
(Gain) loss from remeasurement of benefit plans			0.8				2.2				38.8
Loss on extinguishment of debt			—				11.4				—
Sales and use tax refund			—				—				(1.4)
Business transformation costs (6)			0.3				0.1				0.6
IT transformation costs (7)			1.3				0.8				1.2
Rebranding costs (8)			0.3				—				0.5
(Gain) loss on sale or disposal of assets, net			0.1				0.1				0.3
Insurance recoveries (9)			—				(9.8)				(20.0)
Adjusted EBIT (4)		$	30.0			$	21.8			$	21.6
Adjusted EBIT Margin (4)			9.3	%			6.7	%			6.6	%
Adjusted EBITDA (5)		$	43.4			$	36.0			$	35.7
Adjusted EBITDA Margin (5)			13.5	%			11.1	%			10.9	%

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

(2) EBIT is defined as net income (loss) before interest (income) expense, net and income taxes. EBIT Margin is EBIT as a percentage of net sales.

(3) EBITDA is defined as net income (loss) before interest (income) expense, net, income taxes, depreciation and amortization. EBITDA Margin is EBITDA as a percentage of net sales.

(4) Adjusted EBIT is defined as EBIT excluding, as applicable, adjustments listed in the table above. Adjusted EBIT Margin is Adjusted EBIT as a percentage of net sales.

(5) Adjusted EBITDA is defined as EBITDA excluding, as applicable, adjustments listed in the table above. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of net sales.

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

(7) IT transformation costs are primarily related to professional service fees not eligible for capitalization that are associated specifically with an information technology application simplification and modernization project.

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

(9) During 2023, the company recognized insurance recoveries of $9.8 million in the first quarter and $20.0 million in the fourth quarter related to the 2022 Faircrest melt shop unplanned downtime. The 2022 insurance claims were closed as of the first quarter of 2024.

Reconciliation of Base Sales by end-market to GAAP Net Sales by end-market:

The tables below present net sales by end-market, adjusted to exclude surcharges, which represents a financial measure that has not been determined in accordance with GAAP. We believe presenting net sales by end-market, both on a gross basis and on a per ton basis, adjusted to exclude raw material and energy surcharges, provides additional insight into key drivers of net sales such as base price and product mix. Due to the fact that the surcharge mechanism can introduce volatility to our net sales, net sales adjusted to exclude surcharges provides management and investors clarity of our core pricing and results. Presenting net sales by end-market, adjusted to exclude surcharges including on a per ton basis, allows management and investors to better analyze key market indicators and trends and allows for enhanced comparison between our end-markets.

When surcharges are included in a customer agreement and are applicable (i.e., reach the threshold amount), based on the terms outlined in the respective agreement, surcharges are then included as separate line items on a customer's invoice. These additional surcharge line items adjust base prices to match cost fluctuations due to market conditions. Each month, the company will post on the surcharges page of its external website, as well as our customer portal, the scrap, alloy, and energy surcharges that will be applied (as a separate line item) to invoices dated in the following month (based upon shipment volumes in the following month). All surcharges invoiced are included in GAAP net sales.

(Dollars in millions, ship tons in thousands)
		Three Months Ended March 31, 2024
		Industrial				Automotive				Aerospace & Defense				Energy				Other				Total
Ship Tons			60.8				66.5				16.5				11.4				—				155.2
Net Sales		$	118.9			$	122.9			$	46.3			$	28.0			$	5.5			$	321.6
Less: Surcharges			30.1				26.5				6.5				6.6				—				69.7
Base Sales		$	88.8			$	96.4			$	39.8			$	21.4			$	5.5			$	251.9
Net Sales / Ton		$	1,956			$	1,848			$	2,806			$	2,456			$	—			$	2,072
Surcharges / Ton		$	495			$	398			$	394			$	579			$	—			$	449
Base Sales / Ton		$	1,461			$	1,450			$	2,412			$	1,877			$	—			$	1,623
		Three Months Ended March 31, 2023
		Industrial				Automotive				Aerospace & Defense				Energy				Other				Total
Ship Tons			65.2				80.4				7.0				20.3				—				172.9
Net Sales		$	126.3			$	127.8			$	17.4			$	46.2			$	5.8			$	323.5
Less: Surcharges			34.5				31.7				3.5				13.1				—				82.8
Base Sales		$	91.8			$	96.1			$	13.9			$	33.1			$	5.8			$	240.7
Net Sales / Ton		$	1,937			$	1,590			$	2,486			$	2,276			$	—			$	1,871
Surcharges / Ton		$	529			$	394			$	500			$	645			$	—				479
Base Sales / Ton		$	1,408			$	1,196			$	1,986			$	1,631			$	—			$	1,392
		Three Months Ended December 31, 2023
		Industrial				Automotive				Aerospace & Defense				Energy				Other				Total
Ship Tons			58.7				67.4				18.5				13.0				—				157.6
Net Sales		$	118.0			$	127.1			$	44.1			$	32.7			$	6.2			$	328.1
Less: Surcharges			27.7				26.0				5.9				7.2				—				66.8
Base Sales		$	90.3			$	101.1			$	38.2			$	25.5			$	6.2			$	261.3
Net Sales / Ton		$	2,009			$	1,886			$	2,384			$	2,515			$	—			$	2,082
Surcharges / Ton		$	472			$	386			$	319			$	554			$	—			$	424
Base Sales / Ton		$	1,537			$	1,500			$	2,065			$	1,961			$	—			$	1,658

Calculation of Total Liquidity⁽¹⁾:

This calculation is provided as additional relevant information about the company's financial position.

(Dollars in millions) (Unaudited)		March 31, 2024				December 31, 2023
Cash and cash equivalents		$	278.1			$	280.6
Credit Agreement:
Maximum availability		$	400.0			$	400.0
Suppressed availability(2)			(123.7)				(135.8)
Availability			276.3				264.2
Credit facility amount borrowed			—				—
Letter of credit obligations			(5.4)				(5.4)
Availability not borrowed		$	270.9			$	258.8
Total liquidity		$	549.0			$	539.4

(1) Total Liquidity is defined as available borrowing capacity plus cash and cash equivalents.

(2) As of March 31, 2024 and December 31, 2023, Metallus had less than $400 million in collateral assets to borrow against.

 

ADJUSTED EBITDA(1) WALKS
(Dollars in millions) (Unaudited)		2023 1Q vs. 2024 1Q				2023 4Q vs. 2024 1Q
Beginning Adjusted EBITDA(1)		$	36			$	36
Volume			(6)				(1)
Price/Mix			28				(5)
Raw Material Spread			1				5
Manufacturing			(13)				10
SG&A			(2)				(2)
Other			(1)				—
Ending Adjusted EBITDA(1)		$	43			$	43

(1) Please refer to the Reconciliation of Earnings (Loss) Before Interest and Taxes (EBIT), Adjusted EBIT, Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA to GAAP Net Income (Loss).

 

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SOURCE Metallus Inc.