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What changed in Metallus Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Metallus Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+267 added−267 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-24)

Top changes in Metallus Inc.'s 2023 10-K

267 paragraphs added · 267 removed · 196 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

57 edited+26 added−18 removed12 unchanged
Biggest changeRaw materials comprise a significant portion of the steelmaking cost structure and are subject to price and availability changes due to global demand fluctuations and local supply limitations. Proper selection and management of raw materials can have a significant impact on procurement cost, flexibility to supply changes, steelmaking energy costs and mill productivity.
Biggest changeRaw Materials The principal raw materials that we use to manufacture steel are recycled scrap metal, chrome, nickel, molybdenum oxide, vanadium and other alloy materials. Raw materials comprise a significant portion of the steelmaking cost structure and are subject to price and availability changes due to global demand fluctuations and local supply limitations.
All 2030 targets are based on the Company’s operating assets as of 2018 and do not account for any future inorganic growth or other expansion of its facilities or operating assets, for which an adjustment to the absolute reduction may be required.
All 2030 targets are based on the Company’s operating assets as of 2018 and do not account for any future inorganic growth or other expansion of the Company's facilities or operating assets, for which an adjustment to the absolute reduction may be required.
We also offer an educational reimbursement program to assist employees with the cost of obtaining certain undergraduate or graduate degrees. TimkenSteel encourages our employees to constantly learn and grow and has aligned our performance management system to support this focus on continuous learning and development.
We also offer an educational reimbursement program to assist employees with the cost of obtaining certain undergraduate or graduate degrees. Metallus encourages our employees to constantly learn and grow and has aligned our performance management system to support this focus on continuous learning and development.
In October 2021, TimkenSteel announced the following 2030 environmental goals, compared with a 2018 baseline: • 40% absolute reduction in combined Scope 1 and Scope 2 greenhouse gas emissions • 30% absolute reduction in total energy consumption (direct and indirect) • 35% absolute reduction in fresh water withdrawn • 10% reduction in waste-to-landfill intensity The Company’s 2030 targets for greenhouse gas emissions, energy consumption and fresh water withdrawn are based on an absolute or total reduction in the amount of greenhouse gas emissions, energy consumption and fresh water withdrawn as compared to a 2018 baseline.
In October 2021, the Company announced the following 2030 environmental goals, compared with a 2018 baseline: • 40% absolute reduction in combined Scope 1 and Scope 2 greenhouse gas emissions • 30% absolute reduction in total energy consumption (direct and indirect) • 35% absolute reduction in fresh water withdrawn • 10% reduction in waste-to-landfill intensity The Company’s 2030 targets for GHG emissions, energy consumption and fresh water withdrawn are based on an absolute or total reduction in the amount of GHG emissions, energy consumption and fresh water withdrawn as compared to a 2018 baseline.
That is why it is a core component of our strategy to invest in talent and leadership development at all levels of TimkenSteel. We invest significant resources to develop talent with the right capabilities to deliver the growth and innovation needed to support our business strategy.
That is why it is a core component of our strategy to invest in talent and leadership development at all levels of the Company. We invest significant resources to develop talent with the right capabilities to deliver the growth and innovation needed to support our business strategy.
This sense of responsibility drives engagement through increased awareness of the vital role each team member plays in promoting a safe work environment while maintaining our commitment to best-in-class quality in our processes and products. We recognize the need and are committed to improving the Company's safety culture.
This sense of responsibility drives engagement through increased 7 Table of Contents awareness of the vital role each team member plays in promoting a safe work environment while maintaining our commitment to best-in-class quality in our processes and products. We recognize the need and are committed to improving the Company's safety culture.
Commitment to Human Rights At TimkenSteel, we are committed to the protection and advancement of human rights. We recognize our responsibility for the company's culture and the impact our practices have on society as a whole.
Commitment to Human Rights At Metallus, we are committed to the protection and advancement of human rights. We recognize our responsibility for the Company's culture and the impact our practices have on society as a whole.
During 2022, we introduced new safety training focused on the core elements of improving the safety culture and performance while helping to understand the direct impact human factors have on all of us. In 2023, we intend to build on this foundation with additional training regarding human factors which positively influence safety, performance, and reliability outcomes.
During 2022, we introduced new safety training focused on the core elements of improving the safety culture and performance while helping to understand the direct impact human factors have on all of us. In 2023, we built on this foundation with additional training regarding human factors which positively influence safety, performance and reliability outcomes.
Our focus is on alloy steel, although in total we manufacture more than 400 grades of high-performance carbon, micro-alloy and alloy steel, sold as ingots, bars, tubes and billets. These products are custom-made in a variety of chemistries, lengths and finishes.
Our focus is on alloy steel, although in total we manufacture more than 500 grades of high-performance alloy, carbon, and micro-alloy steel, sold as bars, tubes and billets. These products are custom-made in a variety of chemistries, lengths and finishes.
Products We believe we produce some of the cleanest, highest performing alloy air-melted steels in the world for our customers’ most demanding applications. We leverage our technical knowledge, development expertise and production and engineering capabilities across all of our products and market sectors to deliver high-performance products to our customers. SBQ Steel Bar, Seamless Mechanical Steel Tubes, and Billets.
Products We believe we produce some of the cleanest, highest performing alloy air-melted steels in the world for our customers’ most demanding applications. We leverage our technical knowledge, development expertise and production and engineering capabilities across all of our products and end-markets to deliver high-performance products to our customers. SBQ Steel Bar, Seamless Mechanical Steel Tubes, and Billets.
To reinforce the importance of operating safely and responsibly, a safety metric (comprised of both leading and lagging indicators beginning in 2023) is included in our annual incentive compensation plan for all salaried employees. Diversity and inclusion At TimkenSteel, we believe our people are our strongest assets.
To reinforce the importance of operating safely and responsibly, a safety metric (comprised of both leading and lagging indicators beginning in 2023) is included in our annual incentive compensation plan for all salaried employees. Belonging and inclusion At Metallus, we believe our people are our strongest assets.
Item 1. B usiness Overview TimkenSteel Corporation ("we", "us", "our", the "Company" or "TimkenSteel") was incorporated in Ohio on October 24, 2013, and became an independent, publicly traded company as the result of a spinoff from The Timken Company ("Timken") on June 30, 2014.
Item 1. B usiness Overview Metallus Inc., formerly known as TimkenSteel Corporation, ("we", "us", "our", the "Company" or "Metallus") was incorporated in Ohio on October 24, 2013, and became an independent, publicly traded company as the result of a spinoff from The Timken Company ("Timken") on June 30, 2014.
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.
Many of the production processes are integrated, and the manufacturing facilities produce products that are sold in all of our end-markets. 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.
We recognize that a diverse workforce and inclusive, engaging culture has enabled us to deliver innovative solutions throughout the life of our business and is key to our continued business success. Within our organization, we maintain employee resource groups which further promote diversity, equity and inclusion.
We recognize that a diverse workforce and an inclusive, engaging culture has enabled us to deliver innovative solutions throughout the life of our business and is key to our continued business success. Within our organization, we maintain employee resource groups (ERGs) which further promote belonging and inclusion.
Our specialty steels are featured in a wide variety of end products including: gears; hubs; axles; crankshafts and motor shafts; oil country drill pipe; bits and collars; bearing races and rolling elements; bushings; fuel injectors; wind energy shafts; anti-friction bearings; and other demanding applications where mechanical power transmission is critical to the end customer. Manufactured Components .
Our specialty metals are featured in a wide variety of end products including: gears; hubs; axles; crankshafts and motor shafts; oil country drill pipe; bits and collars; bearing races and rolling elements; bushings; fuel injectors; wind energy shafts; anti-friction bearings; artillery and mortar bodies; and other demanding applications where mechanical power transmission is critical to the end customer.
Health and safety At TimkenSteel, our core value of Safety First expresses our belief that the health and well-being of our fellow employees is essential to our ability to achieve our mission to be an industry-leading provider of high-quality steel and to deliver exceptional value for our customers, employees, and investors.
Health and safety At Metallus, our core value of Safety First expresses our belief that the health and well-being of our fellow employees is essential to our ability to achieve our mission to be an industry-leading provider of high-quality specialty metals and to deliver exceptional value for our customers, employees and investors.
The Contract, which is in effect until September 27, 2025, offers TimkenSteel's Canton-based bargaining employees an increase to base wages every year, competitive healthcare and retirement benefits for all members, and has a continued focus on employee wellbeing as well as safe and sustainable operations. The Contract covers approximately 1,060 bargaining employees at the Company’s Canton, Ohio operations.
The Contract, which is in effect until September 27, 2025, provides Metallus' Canton-based bargaining employees an increase to base wages every year, competitive healthcare and retirement benefits for all members, as well as a continued focus on employee wellbeing as well as safe and sustainable operations. The Contract covers approximately 1,170 bargaining employees at the Company’s Canton, Ohio operations.
After indefinitely idling these assets, our annual melt capacity is approximately 1.2 million tons and our shipment capacity is approximately 0.9 million tons. Operating Segments We conduct our business activities and report financial results as one business segment.
Our annual melt capacity is approximately 1.2 million tons and our shipment capacity is approximately 0.9 million tons. Operating Segments We conduct our business activities and report financial results as one business segment.
Our metallurgical expertise and what we believe to be unique operational capabilities drive high-value solutions for industrial, energy and mobile customers.
Our metallurgical expertise and what we believe to be unique operational capabilities drive high-value solutions for industrial, automotive, aerospace & defense and energy customers.
The TimkenSteel Code of Conduct sets forth policies covering a broad range of subjects, including antitrust and competition, corruption and bribery, conflicts of interest, inside information, accurate financial records, among other matters, and requires strict adherence to laws and regulations applicable to the Company’s business.
The Metallus Code of Conduct sets forth policies covering a broad range of subjects, including antitrust and competition, corruption and bribery, conflicts of interest, inside information, accurate financial records, harassment, environment, health and safety and intellectual property, among other matters, and requires strict adherence to laws and regulations applicable to the Company’s business.
We expect to invest approximately $7 million in 2023 in company-wide training, equipment and improved safety processes in an effort to ensure we are creating a lasting culture of safety.
We invested approximately $10 million in 2023 in Company-wide safety training, equipment and improved safety processes in an effort to ensure we are creating a lasting culture of safety. We expect to invest approximately $7 million in 2024 to further expand these efforts.
For 2022, we ended the year with an overall voluntary turnover rate of approximately 16 percent, comprised of approximately 10 percent for salaried and approximately 18 percent for hourly employees. This compares to an overall voluntary turnover rate of approximately 10 percent in 2021.
For 2023, we ended the year with an overall voluntary turnover rate of approximately 8.9 percent, comprised of approximately 7.5 percent for 8 Table of Contents salaried and approximately 9.5 percent for hourly employees. This compares to an overall voluntary turnover rate of approximately 16 percent in 2022 and 10 percent in 2021.
We do not tolerate harassment or disrespect of an individual for any reason, and we strictly forbid any form of child labor, forced labor or slavery, or human trafficking at any of our facilities or within our supply chain.
As further detailed in our applicable policies, Metallus does not tolerate harassment or disrespect of an individual for any reason, and we strictly forbid any form of child labor, forced labor or slavery, or human trafficking at any of our facilities or within our supply chain.
TimkenSteel maintains policies on human rights, child and forced labor and human trafficking, as well as a supplier code of conduct, each of which can be found on the Sustainability page of our website at www.timkensteel.com. These policies, together with our Code of Conduct, include additional details regarding our commitment to human rights.
Our supplier code of conduct, along with standalone policies on human rights, child and forced labor, conflict minerals and human trafficking, can be found on the Sustainability page of our website at www.metallus.com . These policies, together with our Code of Conduct, include additional details regarding our commitment to human rights.
We believe a continuous focus on employee engagement will help us provide high quality products to our customers. In 2022, we launched a new employee engagement survey tool to gather insight into the level of employee engagement at TimkenSteel and other factors that contribute to a successful workplace.
We believe a continuous focus on Company culture and employee engagement will help us provide high quality products to our customers. In 2023, we conducted quarterly surveys to gather insight into the level of employee engagement at Metallus and other factors that contribute to a successful workplace.
The initial survey was followed by quarterly pulse surveys to ensure we are continuously listening to our 7 Table of Contents employees and measuring our progress. We regularly communicate with our employees regarding survey results and actions being taken in response. We diligently track our employee retention and management regularly evaluates our employees’ retention risk.
These surveys help to ensure we are continuously listening to our employees and measuring our progress. We regularly communicate with our employees regarding survey results and actions being taken in response. We diligently track our employee retention and management regularly evaluates our employees’ retention risk.
In 2022, we introduced several new training initiatives aimed at developing leadership and other professional skills and capabilities, including Perpetual's High-Performing Teams, Thayer Leadership Principles, negotiation skills and supervisor training, as well as a new apprentice program for mechanical and electric maintainers.
In 2023, we continued and expanded upon many of the programs first introduced in 2022 and aimed at developing leadership and other professional skills and capabilities, including Perpetual's High-Performing Teams, Thayer Leadership Principles, negotiation skills and supervisor training, as well as an apprentice program for mechanical and electric maintainers.
From time to time, we may be a party to lawsuits, claims or other proceedings related to environmental matters and/or receive notices of potential violations of environmental laws and regulations from the EPA and similar state or local authorities.
From time to time, we may be a party to lawsuits, claims or other proceedings related to environmental matters and/or receive notices of potential violations of environmental laws and regulations from the EPA and similar state or local authorities. We recorded reserves for such environmental matters of $0.6 million and $0.1 million as of December 31, 2023 and 2022, respectively.
In the spinoff, Timken transferred to us all of the assets and generally all of the liabilities related to Timken’s steel business. We manufacture alloy steel, as well as carbon and micro-alloy steel using electric arc furnace ("EAF") technology. Our portfolio includes special bar quality (“SBQ”) bars, seamless mechanical tubing (“tubes”), manufactured components such as precision steel components, and billets.
We manufacture alloy steel, as well as carbon and micro-alloy steel, using electric arc furnace ("EAF") technology. Our portfolio includes special bar quality (“SBQ”) bars, seamless mechanical tubing (“tubes”), manufactured components such as precision steel components, and billets.
During the second half of 2022, the Faircrest melt shop experienced unplanned operational downtime. During the fourth quarter of 2022, TimkenSteel recognized an insurance recovery of $33.0 million related to the unplanned downtime. Of the total recovery, $13.0 million was received in the fourth quarter of 2022 and $20.0 million was collected in the first quarter of 2023.
During the fourth quarter of 2022, the Company recognized an insurance recovery of $33.0 million related to the 2022 unplanned downtime, of which $13.0 million was received in the fourth quarter of 2022 and $20.0 million was received in the first quarter of 2023.
Competition The steel industry, both domestically and globally, is highly competitive and is expected to remain so. Maintaining high standards of product quality and reliability, while keeping production costs competitive, is essential to our ability to compete with domestic and foreign manufacturers of alloy steel and mechanical components.
Maintaining high standards of asset reliability, product quality and customer service, while keeping production costs competitive, is essential to our ability to compete with domestic and foreign manufacturers of alloy steel and mechanical components.
Available Information We use our Investor Relations website at http://investors.timkensteel.com, as a channel for routine distribution of important information, including news releases, analyst presentations and financial information.
More information on Metallus' corporate responsibility can be found on the Sustainability page of our website at www.metallus.com . Available Information We use our Investor Relations website at http://investors.metallus.com, as a channel for routine distribution of important information, including news releases, analyst presentations and financial information.
Additionally, we manage raw material recycling programs, which are used internally as a feeder system for our melt operations and allow us to sell scrap not used in our operations to third parties.
Additionally, we manage raw material recycling programs, which are used internally as a feeder system for our melt operations and allow us to sell scrap not used in our operations to third parties. Our products and solutions are used in a diverse range of demanding applications in the following end-markets: industrial; automotive; aerospace & defense; and energy.
Employee retention We seek to retain the best people by providing them with opportunities to grow, build skills and be appreciated for their contributions as they work to serve our customers. Our employees are critical to our success and are the reason we are able to execute at a high level.
Our Company also provides employer-sponsored health and wellness benefits to our employees. Employee retention We seek to retain the best people by providing them with opportunities to grow, build skills and be appreciated for their contributions as they work to serve our customers.
We employ proactive environmental practices that focus on maintaining clean air, water and land, and comply with environmental rules and regulations. Innovation, collaboration and stakeholder engagement are embedded within our environmental programs.
We employ proactive environmental practices that focus on maintaining clean air, water and land, and comply with environmental rules and regulations. Innovation, collaboration and stakeholder engagement are embedded within our environmental programs. Our Board of Directors oversees our sustainability strategy, including receiving regular updates from senior leadership and reviewing sustainability-related risks and opportunities annually.
Compensation and total rewards We provide competitive compensation programs to help meet the needs of our employees. Our programs are designed to support the profitable growth of our business; attract, reward, and retain the talent we need to succeed; support the health and overall well-being of our employees; and reinforce a performance-based culture.
Our programs are designed to support the profitable growth of our business; attract, reward, and retain the talent we need to succeed; support the health and overall well-being of our employees; and reinforce a performance-based culture. In addition to base compensation, we offer quarterly and annual incentive compensation, stock awards, and participation in various retirement plans.
Diversity, equity and inclusion (DEI) are fundamental to our strategic imperative to attracting and retaining a diverse workforce. We foster a culture that lends a variety of perspectives and expertise to our operations and reflects the communities in which we operate.
Creating an atmosphere that provides a sense of belonging and inclusion are fundamental to our strategic imperative to attract and retain top talent. We foster a culture that lends a variety of perspectives and expertise to our operations and reflects the communities in which we operate.
For seamless mechanical tubing, offshore 4 Table of Contents producers such as Tenaris, S.A., Vallourec, S.A. and TMK Group are our primary competitors as well as the foreign-owned domestic producer ArcelorMittal Tubular Products (a unit of Luxembourg-based ArcelorMittal, S.A.).
For seamless mechanical tubing, offshore producers such as Tenaris, S.A., Vallourec, S.A. and TMK Group are our primary competitors, as well as the foreign-owned domestic producer ArcelorMittal Tubular Products (a unit of Luxembourg-based ArcelorMittal, S.A.). We also provide unique manufactured steel products and supply chain solutions to our customers in the industrial, automotive, aerospace & defense and energy end-markets.
The higher voluntary turnover rate in 2022 was driven primarily by a competitive labor market as well as a higher rate of retirements attributable to rising discount rates and the impact on lump-sum pension benefits. Employee training and development At TimkenSteel, we believe that our vision moves us forward and our people drive our success.
The voluntary turnover rate in 2023 was driven primarily by normal retirements and a continuing competitive labor market. Employee training and development At Metallus, we believe that our vision moves us forward and our people drive our success.
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.
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. Industry Segments and Geographical Financial Information Information required by this Item is incorporated herein by reference to “Note 3 - Segment Information” in the Notes to the Consolidated Financial Statements.
For bar products less than 6-inch in diameter, principal competitors include foreign-owned domestic producers Gerdau Special Steel North America (a unit of Brazilian steelmaker Gerdau, S.A) and Republic Steel (a unit of Mexican steel producer ICH).
For bar products less than 6-inch in diameter, the primary competitor is foreign-owned domestic producer Gerdau Special Steel North America (a unit of Brazilian steelmaker Gerdau, S.A). For bar products up to 9-inch in diameter, domestic producers Steel Dynamics, Inc. and Nucor Corporation (in some cases up to 10-inch) are our principal competitors.
For bar products up to 9-inch in diameter, domestic producers Steel Dynamics, Inc. and Nucor Corporation (in some cases up to 10-inch) are our principal competitors. For very large bars from 10 to 16 inches in diameter, offshore producers as well as specialty forging companies in North America such as Scot Forge are the primary competitors.
For very large bars from 10 to 16 inches in diameter, 4 Table of Contents offshore producers as well as specialty forging companies in North America such as Scot Forge and Frisa are the primary competitors.
We make these products from nearly 100% recycled steel, using our expertise in raw materials to create high-quality steel products. We focus on creating tailored products for our respective end-market sectors.
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 high-quality specialty metal products. We focus on creating tailored products for our respective end-markets.
Although it is not 5 Table of Contents possible to predict with certainty the outcome of such matters, management believes the ultimate disposition of these matters should not have a material adverse effect on our consolidated financial position, results of operations or cash flows. Legal Proceedings Information required by this section is incorporated herein by reference to “Item 3.
Accruals related to such environmental matters represent management’s best estimate of the fees and costs associated with these matters. Although it is not possible to predict with certainty the outcome of such matters, management believes the ultimate disposition of these matters should not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
In addition to our customized steels, we also custom-make precision components that provide us with the opportunity to further expand our market for bar and tube products and capture additional sales. These products provide customers, especially those in the mobile end-market sector, with ready-to-finish components that simplify vendor management, streamline supply chains and often cost less than other alternatives.
Manufactured Components . In addition to our customized steels, we also custom-make precision components that provide us with the opportunity to further expand our market for bar and tube products and capture additional sales.
We are committed to operating in accordance with the highest standards of ethics and integrity, and maintaining robust programs focused on compliance. To ensure effective and responsive governance, we regularly review and update policies and procedures, the charters for our Board committees, director skills, qualifications, and experience.
To ensure effective and responsive governance, we regularly review and update our policies and procedures and the charters for our Board committees, and regularly evaluate director skills, qualifications, and experience.
While most of our products are sold directly to original equipment ("OE") manufacturers, a portion of our sales are made through authorized distributors and steel service centers, representing approximately 25% of net sales during 2022. The majority of our customers are served through individually negotiated price agreements.
Sales and Distribution Our sales force is made up largely of engineers that are backed by a team of metallurgists and other technical experts. While most of our products are sold directly to original equipment ("OE") manufacturers, a portion of our sales are made through authorized distributors and steel service centers, representing approximately 25% of net sales during 2023.
In addition to accessing scrap and alloys through the open market, we have established a scrap return supply chain with many of our customers. This part of our business leverages our knowledge of the raw material supply industry and an extensive network of relationships that result in steady, reliable supply from our raw material sources.
This part of our business leverages our knowledge of the raw material supply industry and an extensive network of relationships that result in steady, reliable supply from our raw material sources. In the ordinary course of business, we are exposed to the volatility of the costs of our raw materials.
Major Customers We sell products and services that are used in a range of demanding applications around the world. We have approximately 350 diverse customers in the following market sectors: automotive; oil and gas; industrial equipment; mining; construction; rail; defense; heavy truck; agriculture; and power generation.
Major Customers We sell products and services that are used in a range of demanding applications around the world. We have approximately 350 diverse customers in the following end-markets: industrial; automotive; aerospace & defense; and energy. No one customer accounted for 10% or more of net sales in 2023.
Legal Proceedings.” Patents, Trademarks and Licenses While we own a number of U.S. and foreign patents, trademarks, licenses and copyrights, none are material to our products and production processes. Governance and Environmental Stewardship TimkenSteel is committed to promoting the long-term interests of shareholders and building public trust through good governance practices.
Legal Proceedings Information required by this section is incorporated herein by reference to “Item 3. Legal Proceedings.” Patents, Trademarks and Licenses While we own a number of U.S. and foreign patents, trademarks, licenses and copyrights, none are material to our products and production processes.
The Company selected 2018 as the baseline year as it aligns with the baseline used in the Company’s Sustainability Accounting Standards Board (SASB) disclosure. Following the anticipated publication of Science Based Targets initiative’s (SBTi) steel sector guidance in 2023, the company intends to submit a science-based target to SBTi for validation, which may result in refreshed environmental goals.
The Company selected 2018 as the baseline year as it aligns with the baseline used in the Company’s Sustainability Accounting Standards Board (SASB) disclosure. Following the publication of steel sector guidance and standards in 2023 by the Global Steel Climate Council (GSCC), the Company has evaluated its existing goals and performance.
The SEC also maintains a website, www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report unless expressly noted. 8 Table of Contents
The information contained on or accessible through, including any reports available on, our website, or on any other website referred to in this Annual Report on Form 10-K is not incorporated by reference i nto this Annual Report unless expressly noted. 9 Table of Contents
On October 29, 2021, the United Steelworkers ("USW") Local 1123 voted to ratify a new four-year contract (the “Contract”).
Human Capital Employment At December 31, 2023, we had approximately 1,840 employees, with approximately 64% of our employees covered under a collective bargaining agreement. On October 29, 2021, the United Steelworkers ("USW") Local 1123 voted to ratify a new four-year contract (the “Contract”).
In accordance with our Supplier Code of Conduct, we seek to work with suppliers that share our core values. Our commitment to environmental stewardship encompasses how we continuously seek to improve the efficiency and cleanliness of our EAF operations while delivering quality projects and services that help our customers succeed.
We are also committed to the protection and advancement of human rights, as further described below under “Human Capital – Commitment to Human Rights.” 6 Table of Contents As part of our commitment to environmental stewardship, we continuously seek to improve the efficiency and cleanliness of our EAF operations while delivering quality projects and services that help our customers succeed.
Our research and development expense for the years ended December 31, 2022, 2021 and 2020 were $0.8 million, $1.7 million and $1.8 million, respectively. Environmental Matters and Governmental Regulations We consider compliance with environmental regulations and environmental sustainability a key strategic focus area and integral to our responsibility as a good corporate citizen.
For further information related to previous insurance recoveries, refer to "Note 7 - Other (Income) Expense, net" in the Notes to the Consolidated Financial Statements for additional information. 5 Table of Contents Environmental Matters and Governmental Regulations We consider compliance with environmental regulations and environmental sustainability a key strategic focus area and integral to our responsibility as a good corporate citizen.
We also provide unique manufactured steel products and supply chain solutions to our customers in the mobile, industrial and energy end-market sectors. Manufactured component competitors include both integrated and non-integrated component producers. Lead Time The lead time for our products varies based on product type and specifications.
Manufactured component competitors include both integrated and non-integrated component producers. Lead Time The lead time for our products varies based on product type and specifications. As of the date of this filing, our lead times for bar products currently extend to April and tube product lead times extend into May 2024.
In 2022, we established a DEI Advisory Council comprised of senior leaders in the company and the executive sponsors of our employee resource groups to help establish priorities to advance the company's DEI objectives. TimkenSteel is also proudly involved in several organizations that promote and foster diversity, equity and inclusion in our community and industry.
We have an advisory council comprised of senior leaders in the Company and the executive sponsors of our ERGs to help establish priorities to advance the Company's objectives. In 2023, our ERGs expanded their programming and employee engagement with the support of the advisory council.
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Our products and solutions 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; and power generation. SBQ steel is made to restrictive chemical compositions and high internal purity levels and is used in critical mechanical applications.
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In the spinoff, Timken transferred to us all of the assets and generally all of the liabilities related to Timken’s steel business. On January 10, 2024, the Company announced its intent to change the name to Metallus, which became effective on February 26, 2024.
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The Company anticipates an additional insurance recovery, although the timing and amount of potential recovery are uncertain at this time. Refer to “Note 7 - Other (Income) Expense, net” in the Notes to the Consolidated Financial Statements for additional information.
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Strengths and Strategy Our customers are at the core of everything we do, from how we make our strong, sustainable steel to the markets we serve. We bring to every project a greater understanding of metallurgy and the critical elements required for a quality product.
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On February 16, 2021, management announced a plan to indefinitely idle our Harrison melt and casting assets, which was completed in the first quarter of 2021. All of our melt and casting activities now take place at the Faircrest location. We worked collaboratively with employees, suppliers and a number of customers to ensure a well-organized and efficient transition.
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We prioritize collaboration with our customers to ensure that the solutions we deliver meet their specifications and expectations.
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Our rolling and finishing operations at Harrison were not impacted by this action. For additional details regarding this matter please refer to “Note 6 – Disposition of Non-Core Assets.” Prior to indefinitely idling these assets, we had an annual melt capacity of approximately 2 million tons and shipment capacity of 1.5 million tons.
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From design to delivery, and beyond, our knowledgeable customer service team supports the entire project lifecycle to keep our customers informed and preserve lasting partnerships. 3 Table of Contents Special bar quality (SBQ) steel is our niche, and our capabilities extend into tubing and manufactured components.
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Industry Segments and Geographical Financial Information Information required by this Item is incorporated herein by reference to “Note 3 - Segment Information” in the Notes to the Consolidated Financial Statements. 3 Table of Contents Strengths and Strategy Our customers depend on us to be the leader in solving their industries’ constantly evolving challenges.
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Our customers benefit from our expertise; over 70% of our sales representatives, account managers, and technical service team members have engineering backgrounds. We apply this knowledge through product design and investments in our manufacturing capabilities.
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Our team, including engineers and experienced manufacturing professionals in both materials and applications, works closely with customers to deliver flexible solutions related to our products as well as our customers’ applications and supply chains.
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We also care about our customers, and provide tailored solutions built on a technical foundation through our: • Knowledgeable, experienced, and attentive management and technical teams. • Trusted, lasting partnerships with customers across diverse end markets. • Leadership position in differentiated markets with a legacy of providing critical applications.
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The TimkenSteel business model delivers these tailored solutions based on the following foundation: • Experienced management and technical team. • Close and trusted working relationship with customers across diverse market sectors. • Leadership position in niche markets with differentiated products. • Track record of innovation rooted in a deep technical knowledge of steel materials, manufacturing processes and a focus on end-user applications.
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These products provide customers, especially those in the automotive end-market, with ready-to-finish components that simplify vendor management, streamline supply chains and often cost less than other alternatives. We also customize products and services for the industrial, aerospace & defense and energy end-markets.
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We also customize products and services for the industrial and energy end-market sectors. Sales and Distribution Our sales force is made up largely of engineers that are backed by a team of metallurgists and other technical experts.
Added
The majority of our customers are served through individually negotiated price agreements. Competition The steel industry, both domestically and globally, is highly competitive and is expected to remain so.
Removed
As of the date of this filing, our order book is expected to remain full in the first half of 2023. Raw Materials The principal raw materials that we use to manufacture steel are recycled scrap metal, chrome, nickel, molybdenum oxide, vanadium and other alloy materials.
Added
Proper selection and management of raw materials can have a significant impact on procurement cost, steelmaking energy costs, mill productivity and ability to adapt to supply chain constraints. In addition to accessing scrap and alloys through the open market, we have established a scrap return supply chain with many of our customers.
Removed
Research and Development Our engineers analyze customer application challenges and develop solutions to address the customers’ needs. With a century of experience in materials science and steelmaking, we leverage our technical know-how to improve the performance of our customers’ products and supply chains.
Added
For example, the impact of global conflicts 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.
Removed
This expertise extends to advanced process technology in which material conversion, finishing, gaging and assembly enables high quality production of our products. We are able to support our customers’ requirements with resources dedicated to studying, developing, and implementing new manufacturing processes and technologies.
Added
Although our business has not been materially impacted by current conflicts to date, it is difficult to predict the extent to which our operations, or those of our suppliers, will be impacted in the future.
Removed
We recorded reserves for such environmental matters of $0.1 million and $0.2 million as of both December 31, 2022 and 2021, respectively. Accruals related to such environmental matters represent management’s best estimate of the fees and costs associated with these matters.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe acquiring person may complete the proposed acquisition only if the acquisition is approved by the affirmative vote of the holders of at least a majority of the voting power of all shares entitled to vote in the election of directors represented at the meeting, excluding the voting power of all “interested shares.” Interested shares include any shares held by the acquiring person and those held by officers and directors of the corporation. 14 Table of Contents We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal, and are not intended to make our Company immune from takeovers.
Biggest changeThe acquiring person may complete the proposed acquisition only if the acquisition is approved by the affirmative vote of the holders of at least a majority of the voting power of all shares entitled to vote in the election of directors represented at the meeting, excluding the voting power of all “interested shares.” Interested shares include any shares held by the acquiring person and those held by officers and directors of the corporation.
Additionally, fluctuation in the cost of certain alloys not covered by a raw material surcharge could materially affect out revenues, earnings, and cash flow. We rely on third parties to supply certain raw materials that are critical to the manufacture of our products. Purchase prices and availability of these critical raw materials are subject to volatility.
Additionally, fluctuation in the cost of certain alloys not covered by a raw material surcharge could materially affect our revenues, earnings, and cash flow. We rely on third parties to supply certain raw materials that are critical to the manufacture of our products. Purchase prices and availability of these critical raw materials are subject to volatility.
Refer to “Note 14 - Financing Arrangements” in the Notes to the Consolidated Financial Statements for more detail on the Amended Credit Agreement. 12 Table of Contents The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
Refer to “Note 14 - Financing Arrangements” in the Notes to the Consolidated Financial Statements for more detail on the Amended Credit Agreement. 14 Table of Contents The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
The market price of our common shares may fluctuate significantly in response to many factors, including: • actual or anticipated changes in operating results or business prospects; • changes in financial estimates by securities analysts; • an inability to meet or exceed securities analysts’ estimates or expectations; • conditions or trends in our industry or sector; • the performance of other companies in our industry or sector and related market valuations; • announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives; • general financial, economic or political instability; • hedging or arbitrage trading activity in our common shares; • changes in interest rates; • capital commitments; • additions or departures of key personnel; and • future sales of our common shares or securities convertible into, or exchangeable or exercisable for, our common shares.
The market price of our common shares may fluctuate significantly in response to many factors, including: • actual or anticipated changes in operating results or business prospects; • changes in financial estimates by securities analysts; • an inability to meet or exceed securities analysts’ estimates or expectations; • conditions or trends in our industry or end-markets; • the performance of other companies in our industry and related market valuations; • announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives; • general financial, economic or political instability; • hedging or arbitrage trading activity in our common shares; • changes in interest rates; • capital commitments; • additions or departures of key personnel; and • future sales of our common shares or securities convertible into, or exchangeable or exercisable for, our common shares.
Our strategic imperatives are centered around people, profitability, process improvement, business development, and ESG. These focus areas are intended to drive sustainable through-cycle profitability while maintaining a strong balance sheet and cash flow. If we are unsuccessful in executing on our strategic imperatives, it could negatively impact profitability and liquidity, requiring us to alter our strategy.
Our strategic imperatives are centered around people, profitability, process improvement, business development, and sustainability. These focus areas are intended to drive sustainable through-cycle profitability while maintaining a strong balance sheet and cash flow. If we are unsuccessful in executing on our strategic imperatives, it could negatively impact profitability and liquidity, requiring us to alter our strategy.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected. Our most recent evaluation resulted in our conclusion that, as of December 31, 2022, our internal control over financial reporting was effective. We believe that we currently have adequate internal control procedures in place for future periods.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected. Our most recent evaluation resulted in our conclusion that, as of December 31, 2023, our internal control over financial reporting was effective. We believe that we currently have adequate internal control procedures in place for future periods.
These factors may cause the market price of our common shares to decline, regardless of our financial condition, results of operations, business or prospects. 13 Table of Contents Conversion of the Convertible Notes may dilute ownership interest of our shareholders or may otherwise depress the market price of our common shares.
These factors may cause the market price of our common shares to decline, regardless of our financial condition, results of operations, business or prospects. 15 Table of Contents Conversion of the Convertible Notes may dilute ownership interest of our shareholders or may otherwise depress the market price of our common shares.
We are also subject to Section 1701.831 of the Ohio Revised Code, which requires the prior authorization of the shareholders of certain corporations in order for any person to acquire, either directly or indirectly, shares of that corporation that would entitle the acquiring person to exercise or direct the exercise of 20% or more of the voting power of that corporation in the election of directors or to exceed specified other percentages of voting power.
We are also subject to Section 1701.831 of the Ohio Revised Code, which requires the prior authorization of the shareholders of certain corporations in order for any person to acquire, either directly or indirectly, shares of that corporation that would entitle the 16 Table of Contents acquiring person to exercise or direct the exercise of 20% or more of the voting power of that corporation in the election of directors or to exceed specified other percentages of voting power.
We require substantial amounts of raw materials, including scrap metal and alloys, to operate our business. The majority of our customer agreements contain surcharge pricing provisions that are designed to enable us to recover raw material cost increases. The surcharges are 9 Table of Contents generally tied to a market index for that specific raw material.
We require substantial amounts of raw materials, including scrap metal and alloys, to operate our business. The majority of our customer agreements contain surcharge pricing provisions that are designed to enable us to recover raw material cost increases. The surcharges are generally tied to a market index for that specific raw material.
As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment deadlines or address other significant issues, any of which could have a material adverse effect on our business, financial condition or results of operations.
As a result, we may be unable to shift manufacturing capabilities to 12 Table of Contents alternate locations, accept materials from suppliers, meet customer shipment deadlines or address other significant issues, any of which could have a material adverse effect on our business, financial condition or results of operations.
If we do not succeed in retaining our current employees and attracting new high-quality employees, our business could be materially adversely affected. 15 Table of Contents We are subject to a wide variety of domestic and foreign laws and regulations that could adversely affect our results of operations, cash flow or financial condition.
If we do not succeed in retaining our current employees and attracting new high-quality employees, our business could be materially adversely affected. We are subject to a wide variety of domestic and foreign laws and regulations that could adversely affect our results of operations, cash flow or financial condition.
Weakness in global economic conditions or in any of the industries or geographic regions in which we or our customers operate, as well as the cyclical nature of our customers’ businesses generally or sustained uncertainty in financial markets, could adversely impact our revenues and profitability by reducing demand and margins.
General Risk Factors Weakness in global economic conditions or in any of the industries or geographic regions in which we or our customers operate, as well as the cyclical nature of our customers’ businesses generally or sustained uncertainty in financial markets, could adversely impact our revenues and profitability by reducing demand and margins.
There can be no assurance that our insurance coverage will be adequate or continue to be available on terms acceptable to us. Our operating results depend in part on continued successful research, development and marketing of products and services. The success of products and services depends on their initial and continued acceptance by our customers.
There can be no assurance that our insurance coverage for these types of events will be adequate or continue to be available on terms acceptable to us. Our operating results depend in part on continued successful research, development and marketing of products and services. The success of products and services depends on their initial and continued acceptance by our customers.
As these tariffs, duties and quotas continue to change, or are repealed, it could result in substantial imports of foreign steel and create pressure on United States steel prices and the overall industry. This could have a material adverse effect on our operations.
As these tariffs, duties and quotas continue to change, or are repealed, it could result in substantial imports of foreign steel and create pressure on United States steel prices and the overall industry. This could have a material adverse effect on our operations. We are dependent on our key customers.
Although it is not possible to predict the ongoing impact of COVID-19, including on our business, results of operations, financial position or cash flows, such impacts that may be material include, but are not limited to: (i) reduced sales and profit levels; (ii) slower collection of accounts receivable and potential increases in uncollectible accounts receivable; (iii) increased operational risks as a result of manufacturing facility disruptions; (iv) delays and disruptions in the availability of and timely delivery of materials and components used in our operations, as well as increased costs for such material and components, and (v) increased cybersecurity risks including vulnerability to security breaches, information technology disruptions and other similar events as a result of a substantial number of employees utilizing remote work arrangements.
Although it is not possible to predict the impact of pandemics, epidemics, widespread illness or other health issues, on our business, results of operations, financial position or cash flows, such impacts that may be material include, but are not limited to: (i) reduced sales and profit levels; (ii) slower collection of accounts receivable and potential increases in uncollectible accounts receivable; (iii) increased operational risks as a result of manufacturing facility disruptions; (iv) delays and disruptions in the availability of and timely delivery of materials and components used in our operations, as well as increased costs for such material and components, and (v) increased cybersecurity risks including vulnerability to security breaches, information technology disruptions and other similar events as a result of a substantial number of employees utilizing remote work arrangements.
On September 30, 2022, TimkenSteel Corporation (the “Company”), as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors (the “Subsidiary Guarantors”), entered into a Fourth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders party thereto (collectively, the “Lenders”), which further amends and restates the Company’s existing secured Third Amended and Restated Credit Agreement, dated as of October 15, 2019.
On September 30, 2022, the Company, as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors (the “Subsidiary Guarantors”), entered into a Fourth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders party thereto (collectively, the “Lenders”), which further amended and restated the Company’s secured Third Amended and Restated Credit Agreement, dated as of October 15, 2019.
For the year ended December 31, 2022, sales to our 10 largest customers accounted for approximately 44% of our net sales. Additionally, customers continue to demand stronger and lighter products, among other adaptations to traditional products.
For the year ended December 31, 2023, sales to our 10 largest customers accounted for approximately 46% of our net sales. Additionally, customers continue to demand stronger and lighter products, among other adaptations to traditional products.
Our results of operations may be materially affected by conditions in the global economy generally and in global capital markets. There has been volatility in the capital markets and in the market sectors and geographic regions in which we or our customers operate, which has negatively affected our revenues.
Our results of operations may be materially affected by conditions in the global economy generally and in global capital markets. There has been volatility in the capital markets and in the end-markets and geographic regions in which we or our customers operate, which has negatively affected our revenues at times.
We are subject to the risk of substantial liability and limitations on our operations due to such laws and regulations.
We are subject to the risk of 11 Table of Contents substantial liability and limitations on our operations due to such laws and regulations.
Risks Related to Our Debt Deterioration in our asset borrowing base could adversely affect our financial health and restrict our ability to borrow necessary cash to support the needs of our business and fulfill our pension obligations. As of December 31, 2022, we had outstanding debt of $20.8 million and our total liquidity was $490.7 million.
Risks Related to Our Debt Deterioration in our asset borrowing base could adversely affect our financial health and restrict our ability to borrow necessary cash to support the needs of our business and fulfill our pension obligations. As of December 31, 2023, we had outstanding debt of $13.2 million and our total liquidity was $539.4 million.
In addition, to the extent we have quoted prices to customers and accepted customer orders or entered into agreements for products prior to purchasing necessary raw materials, we may be unable to raise the price of products to cover all or part of the increased cost of the raw materials.
In addition, to the extent we have quoted prices to customers and accepted customer orders or entered into agreements for products prior to purchasing necessary raw materials, we may be unable to raise the price of products to cover all or part of the increased cost of the raw materials. 10 Table of Contents The cost and availability of electricity and natural gas are also subject to volatile market conditions.
Competition for these employees is intense, and we could experience difficulty from time to time in hiring and retaining the personnel necessary to support our business. Additionally, costs to attract and retain employees may be increased given the competitive labor market.
Our future success will depend on our ability to attract and retain highly skilled personnel and senior management professionals. Competition for employees is intense, and we could experience difficulty from time to time in hiring and retaining the personnel necessary to support our business. Additionally, costs to attract and retain employees may be increased given the competitive labor market.
Work stoppages or similar difficulties could significantly disrupt our operations, reduce our revenues and materially affect our earnings. A work stoppage at one or more of our facilities could have a material adverse effect on our business, financial condition and results of operations.
A successful warranty or product liability claim against us could have a material adverse effect on our business ,financial condition and results of operations. Work stoppages or similar difficulties could significantly disrupt our operations, reduce our revenues and materially affect our earnings.
See “Note 15 - Retirement and Postretirement Plans” in the Notes to the Consolidated Financial Statements for a discussion of assumptions and further information associated with these benefit plans. We may incur restructuring and impairment charges that could materially affect our profitability.
See “Note 15 - Retirement and Postretirement Plans” in the Notes to the Consolidated Financial Statements for a discussion of assumptions and further information associated with these benefit plans.
For additional information on current restructuring and impairment charges, refer to “Note 5 - Restructuring Charges” and “Note 6 - Disposition of Non-Core Assets” in the Notes to Consolidated Financial Statements.
For additional information on current restructuring and impairment charges, refer to “Note 5 - Restructuring Charges” and “Note 6 - Disposition of Non-Core Assets” in the Notes to Consolidated Financial Statements. We may not be able to execute successfully on our strategic imperatives or achieve the intended results.
To date, we have committed significant expenditures in our efforts to achieve and maintain compliance with these requirements, 10 Table of Contents and we expect that we will continue to make these expenditures related to such compliance in the future.
Compliance with environmental, health and safety legislation and regulatory requirements may prove to be more limiting and costly than we anticipate. To date, we have committed significant expenditures in our efforts to achieve and maintain compliance with these requirements, and we expect that we will continue to make these expenditures related to such compliance in the future.
As of December 31, 2022, approximately 62% of our employees were covered under a collective bargaining agreement that expires in September 2025. Any failure to negotiate and conclude a new collective bargaining agreement with the union when the existing agreement expires could cause work interruptions or stoppages.
Any failure to negotiate and conclude a new collective bargaining agreement with the union when the existing agreement expires could cause work interruptions or stoppages.
Although we rely on commonly used security and processing systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from all potential compromises or breaches of security. We may not be able to execute successfully on our strategic imperatives or achieve the intended results.
Although we rely on commonly used security and processing systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from all potential compromises or breaches of security. 17 Table of Contents If we are unable to attract and retain key personnel, our business could be materially adversely affected.
Also, if one or more of our customers were to experience a work stoppage, that customer may halt or limit purchases of our products, which could have a material adverse effect on our business, financial condition and results of operations. 11 Table of Contents A significant portion of our manufacturing facilities are located in Stark County, Ohio, which increases the risk of a significant disruption to our business as a result of unforeseeable developments in this geographic area.
Also, if one or more of our customers were to experience a work stoppage, that customer may halt or limit purchases of our products, which could have a material adverse effect on our business, financial condition and results of operations.
We produce high-performance carbon and alloy steel, sold as ingots, bars, tubes and billets in a variety of chemistries, lengths and finishes designed for our customers’ demanding applications. Failure of the materials that are included in our customers’ applications could give rise to product liability or warranty claims.
Additionally, any costs related to the reduction of greenhouse gas emissions may be higher than we anticipated. Product liability, warranty and product quality claims could adversely affect our operating results. We produce high-performance carbon and alloy steel, sold as bars, tubes and billets in a variety of chemistries, lengths and finishes designed for our customers’ demanding applications.
We may also encounter control or production restrictions, or not realize the cost benefit from such capital-intensive technology adaptations or capital improvements to our current production processes. Product liability, warranty and product quality claims could adversely affect our operating results.
We may also encounter control or production restrictions, or not realize the cost benefit from such capital-intensive technology adaptations or capital improvements to our current production processes. We are subject to extensive environmental, health and safety laws and regulations, which impose substantial costs and limitations on our operations.
Any of these events could adversely affect our results of operations and profitability. The cost and availability of electricity and natural gas are also subject to volatile market conditions. Steel producers like us consume large amounts of energy. We rely on third parties for the supply of energy resources we consume in our steelmaking activities.
Steel producers like us consume large amounts of energy. We rely on third parties for the supply of energy resources we consume in our steelmaking activities.
We will continue to monitor the impact of the COVID-19 pandemic on our Company. General Risk Factors We may be subject to risks relating to our information technology systems and cybersecurity. We rely on information technology systems to process, transmit and store electronic information and manage and operate our business.
Any of these events could adversely affect our profitability, cash flow and financial condition. We may be subject to risks relating to our information technology systems and cybersecurity. We rely on information technology systems to process, transmit and store electronic information and manage and operate our business.
If we are unable to attract and retain key personnel, our business could be materially adversely affected. Our business substantially depends on the continued service of key members of our management. The loss of the services of a significant number of members of our management could have a material adverse effect on our business.
Our business substantially depends on the continued service of key members of our management. The loss of the services of a significant number of members of our management could have a material adverse effect on our business. Modern steel-making uses specialized techniques and advanced equipment that requires experienced engineers and skilled laborers.
If we fail to meet a customer’s specifications for its products, we may be subject to product quality costs and claims. A successful warranty or product liability claim against us could have a material adverse effect on our earnings. We are subject to extensive environmental, health and safety laws and regulations, which impose substantial costs and limitations on our operations.
Failure of the materials that are included in our customers’ applications could give rise to product liability or warranty claims. If we fail to meet a customer’s specifications for its products, we may be subject to product quality costs and claims.
Any of these events could adversely affect our profitability, cash flow and financial condition. We are dependent on our key customers.
Any of these events could adversely affect our results of operations and profitability. We may incur restructuring and impairment charges that could materially affect our profitability.
Removed
Compliance with environmental, health and safety legislation and regulatory requirements may prove to be more limiting and costly than we anticipate.
Added
A work stoppage at one or more of our facilities could have a material adverse effect on our business, financial condition and results of operations. As of December 31, 2023, approximately 64% of our employees were covered under a collective bargaining agreement that expires in September 2025.
Removed
Additionally, any costs related to the reduction of greenhouse gas emissions may be higher than we anticipated.
Added
A significant portion of our manufacturing facilities are located in Stark County, Ohio, which increases the risk of a significant disruption to our business as a result of unforeseeable developments in this geographic area.
Removed
In addition, under certain circumstances, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Added
Expectations relating to environmental, social and governance (“ESG”) matters and/or our reporting of such matters could expose us to potential liabilities, increased costs, reputational harm and other negative impacts on our business.
Removed
Risks Related to COVID-19 The COVID-19 pandemic could have a material, adverse impact on our operations and financial results including cash flows and liquidity.
Added
There is an increasing focus from investors, customers, employees, and other stakeholders concerning sustainability and ESG matters, and an increasing number of investors and customers are requiring companies to disclose sustainability and ESG policies, practices and metrics. Our customers may require us to implement sustainability and ESG responsibility procedures or standards before they continue to do business with us.
Removed
Modern steel-making uses specialized techniques and advanced equipment that requires experienced engineers and skilled laborers. Our future success will depend on our ability to attract and retain such highly skilled personnel, as well as finance, marketing and senior management professionals.
Added
In addition, some investors use ESG criteria to guide their investment strategies, and may not invest in us, or divest their holdings of us, if they believe our policies relating to ESG matters are inadequate or, on the other hand, have a negative response to such policies as a result of anti-ESG sentiment.
Added
Additionally, we may face reputational challenges in the event that our sustainability and ESG policies, practices and metrics do not meet the standards set by certain constituencies, which are often inconsistent in approach. Furthermore, standards for tracking and reporting on sustainability and ESG matters have not been harmonized and continue to evolve.
Added
Our processes and controls for reporting of sustainability and ESG matters may not always comply with evolving and disparate standards for identifying, 13 Table of Contents measuring, and reporting such metrics, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, goals or reported progress in achieving such goals.
Added
There can be no assurance of the extent to which any of our ESG targets and goals will be achieved, if at all; we could fail, or be perceived to fail, in our achievement of any such initiatives, targets or goals, or we could fail in fully and accurately reporting our progress on any such initiatives, targets and goals.
Added
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.
Added
We may not be able to complete or successfully integrate future acquisitions into our business, which could adversely affect our business and results of operations We intend to consider growth opportunities through the acquisition of assets or companies and routinely review acquisition opportunities.
Added
We cannot predict whether we will be successful in identifying suitable acquisition candidates or pursuing acquisition opportunities or whether we will be able to achieve the strategic and other objectives related to such acquisitions.
Added
Acquisitions involve numerous risks, including difficulty determining appropriate valuation, integrating operations, information systems, technologies, services and products of the acquired product lines or business, personnel turnover, and the diversion of management’s attention from other business matters. Depending upon the nature, size, and timing of future acquisitions, we may be required to raise additional financing.
Added
Further, we may not be able to successfully integrate any acquired business with our existing businesses or recognize the expected benefits from a completed acquisition in the timeframe that we anticipate, or at all, which could adversely affect our business and results of operations.
Added
We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal, and are not intended to make our Company immune from takeovers.
Added
Pandemics, epidemics, widespread illness or other health issues could adversely affect the Company's operations and financial results, including cash flows and liquidity.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−1 removed0 unchanged
Biggest changeOur facilities vary in age and condition, and each of them has an active maintenance program to ensure a safe operating environment and to keep the facilities in good condition. We believe our facilities are in satisfactory operating condition and are suitable and adequate to conduct our business and support future growth.
Biggest changeThe buildings occupied by us are principally made of brick, steel, reinforced concrete and concrete block construction. 19 Table of Contents Our facilities vary in age and condition, and each of them has an active maintenance program to ensure a safe operating environment and to keep the facilities in good condition.
In addition to these manufacturing facilities, we lease a distribution facility in Mexico. The aggregate floor area of these facilities is 3.6 million square feet, of which approximately twelve thousand square feet is leased and the rest is owned in fee. The buildings occupied by us are principally made of brick, steel, reinforced concrete and concrete block construction.
In addition to these owned manufacturing facilities, we lease a distribution facility in Mexico. The aggregate floor area of these facilities is 3.6 million square feet, of which approximately twelve thousand square feet is leased and the rest is owned.
Item 2. P roperties We are headquartered in Canton, Ohio, at a facility we own in fee. We have facilities in two countries: U.S. and Mexico. We have manufacturing facilities at multiple locations in the U.S. These manufacturing facilities are located in Canton and Eaton, Ohio and Columbus, North Carolina.
Item 2. P roperties We are headquartered in Canton, Ohio, on a campus of owned facilities that are adjacent to our steelmaking operations. We have manufacturing facilities at multiple locations in the United States. These manufacturing facilities are located in Canton and Eaton, Ohio and Columbus, North Carolina.
Removed
Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of our melt capacity utilization.
Added
We believe our facilities are in satisfactory operating condition and are suitable and adequate to conduct our business and support future growth. Our melt capacity utilization was 70%, 63% and 73% for the years ended December 31, 2023, 2022 and 2021, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

9 edited+0 added−0 removed6 unchanged
Biggest changeHe earned his bachelor’s of science degree in business and master’s degree in accountancy from Miami University of Ohio and is a certified public accountant. Kristine C. Syrvalin is Executive Vice President, General Counsel and Chief Human Resources Officer of TimkenSteel Corporation, a position she has held since May 2022.
Biggest changeHe earned his bachelor of science degree in business and master’s degree in accountancy from Miami University of Ohio and is a certified public accountant. Kristine C. Syrvalin is Executive Vice President, General Counsel and Chief Human Resources Officer, a position she has held since May 2022.
Williams earned his bachelor’s of science degree in information science from the University of Pittsburgh. Kristopher R. Westbrooks is Executive Vice President and Chief Financial Officer, a position he has held since September 2018. Previously, Mr. Westbrooks served from April 2015 until August 2018 as Vice President, Corporate Controller and Chief Accounting Officer at A.
Williams earned his bachelor of science degree in information science from the University of Pittsburgh. Kristopher R. Westbrooks is Executive Vice President and Chief Financial Officer, a position he has held since September 2018. Previously, Mr. Westbrooks served from April 2015 until August 2018 as Vice President, Corporate Controller and Chief Accounting Officer at A.
Raketich is Executive Vice President and Chief Commercial Officer, a position he has held since May 2022. Prior to assuming his current role, Mr. Raketich served as Executive Vice President, Sales, Marketing, and Business Development since May 2021 and as Executive Vice President, Strategy and Corporate Development from January 2017 until May 2021, in each case for TimkenSteel.
Raketich is Executive Vice President and Chief Commercial Officer, a position he has held since May 2022. Prior to assuming his current role, Mr. Raketich served as Executive Vice President, Sales, Marketing, and Business Development since May 2021 and as Executive Vice President, Strategy and Corporate Development from January 2017 until May 2021, in each case for Metallus.
Previously, he held a number of leadership roles at TimkenSteel since the spinoff from The Timken Company in 2014, including Vice President, Industrial and Energy, Vice President, Business Development, and Director-International. Prior to the spinoff, Mr. Raketich held various roles of increasing responsibility at The Timken Company.
Previously, he held a number of leadership roles at Metallus since the spinoff from The Timken Company in 2014, including Vice President, Industrial and Energy, Vice President, Business Development, and Director-International. Prior to the spinoff, Mr. Raketich held various roles of increasing responsibility at The Timken Company.
Prior to assuming her current role, she had served as Executive Vice President, General Counsel and Secretary since January 2021, and as Assistant General Counsel and Vice President - Ethics and Compliance since October 2014, in each case for TimkenSteel. Previously, Ms.
Prior to assuming her current role, she had served as Executive Vice President, General Counsel and Secretary since January 2021, and as Assistant General Counsel and Vice President - Ethics and Compliance since October 2014, in each case for Metallus. Previously, Ms.
He earned his bachelor's degree in material science engineering from Michigan State University and his master's degree in business administration from Duke University's Fuqua School of Business. 17 Table of Contents P art II.
He earned his bachelor's degree in material science engineering from Michigan State University and his master's degree in business administration from Duke University's Fuqua School of Business. 21 Table of Contents P art II.
In the opinion of our management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. 16 Table of Contents I nformation about our Executive Officers The executive officers of our Company as of February 24, 2023, are as follows: Name Age Current Position Michael S.
In the opinion of our management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. 20 Table of Contents I nformation about our Executive Officers The executive officers of our Company as of February 28, 2024, are as follows: Name Age Current Position Michael S.
Williams is the President and Chief Executive Officer of TimkenSteel Corporation, a position he has held since January 2021. Previously, Mr.
Williams is the President and Chief Executive Officer, a position he has held since January 2021. Previously, Mr.
Williams 62 President and Chief Executive Officer Kristopher R. Westbrooks 44 Executive Vice President and Chief Financial Officer Kristine C. Syrvalin 54 Executive Vice President, General Counsel and Chief Human Resources Officer Kevin A. Raketich 56 Executive Vice President and Chief Commercial Officer 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 Michael S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

91 edited+29 added−47 removed46 unchanged
Biggest changeThis 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; • 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; 34 Table of Contents • 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 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 timing required to ramp up melt production to forecasted demand levels, as the Company recovers from unplanned operational downtime in the second half of 2022, as well as the amount that the Company is able to recover from its insurance policies in connection with the related unplanned downtime; • the impacts from any repurchases of our common shares and convertible notes, including the timing and amount of any repurchases; and • those items identified under the caption Risk Factors in this Annual Report on Form 10-K.
Biggest changeThis 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 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 the U.S. markets; • 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; availability of skilled labor; and changes in the cost of labor and benefits; • the success of our operating plans, announced programs, initiatives and capital investments; the consistency to meet demand levels following unplanned downtime; and our ability to maintain appropriate relations with the union that represents our associates in certain locations in order to avoid disruptions of business; • 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; • the Company's pension obligations and investment performance; • 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; • availability of property insurance coverage at commercially reasonable rates or insufficient insurance coverage to cover claims or damages; • the availability of financing and interest rates, which affect the Company's cost of funds and/or ability to raise capital; • 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 and convertible notes, including the timing and amount of any repurchases; • 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; • deterioration in global 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.
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. The share repurchase program was intended to return capital to shareholders while also offsetting dilution from annual equity compensation awards.
On December 20, 2021, the Company 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. The share repurchase program was intended to return capital to shareholders while also offsetting dilution from annual equity compensation awards.
These purchase commitments do not represent our entire anticipated purchases in the future but represent only those items for which we are contractually obligated as of December 31, 2022. The majority of our products and services are purchased as needed, with no advance commitment. We do not have any off-balance sheet arrangements with unconsolidated entities or other persons.
These purchase commitments do not represent our entire anticipated purchases in the future but represent only those items for which we are contractually obligated as of December 31, 2023. The majority of our products and services are purchased as needed, with no advance commitment. We do not have any off-balance sheet arrangements with unconsolidated entities or other persons.
In periods of stable demand for our products, the surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand and cost of raw materials are lower, however, the surcharge impacts sales prices to a lesser extent. 36 Table of Contents
In periods of stable demand for our products, the surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand and cost of raw materials are lower, however, the surcharge impacts sales prices to a lesser extent. 42 Table of Contents
Inclusion of information in this report is not an indication that the subject or information is material to our business or operating results. 35 Table of Contents I tem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our borrowings include both fixed and variable-rate debt. The variable debt consists principally of borrowings under our Credit Agreement.
Inclusion of information in this report is not an indication that the subject or information is material to our business or operating results. 41 Table of Contents I tem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our borrowings include both fixed and variable-rate debt. The variable debt consists principally of borrowings under our Credit Agreement.
The table does not include separate information about this plan because it merely provides for the deferral, rather than the issuance, of common shares. (5) These securities were granted to Michael S. Williams on January 5, 2021 and were approved by the Compensation Committee of TimkenSteel's Board of Directors.
The table does not include separate information about this plan because it merely provides for the deferral, rather than the issuance, of common shares. (5) These securities were granted to Michael S. Williams on January 5, 2021 and were approved by the Compensation Committee of the Company's Board of Directors.
None of our outstanding debt as of December 31, 2022 has variable interest rates, thus a rise in interest rates would not impact our interest expense at this point in time. Foreign Currency Exchange Rate Risk Fluctuations in the value of the U.S. dollar compared to foreign currencies may impact our earnings.
None of our outstanding debt as of December 31, 2023 has variable interest rates, thus a rise in interest rates would not impact our interest expense at this point in time. Foreign Currency Exchange Rate Risk Fluctuations in the value of the U.S. dollar compared to foreign currencies may impact our earnings.
Cash Flows The following table reflects the major categories of cash flows for the years ended December 31, 2022, 2021, and 2020. For additional details, please refer to the Consolidated Statements of Cash Flows included in Item 8, "Financial Statements and Supplemental Data" of this Annual Report on Form 10-K.
Cash Flows The following table reflects the major categories of cash flows for the years ended December 31, 2023, 2022, and 2021. For additional details, please refer to the Consolidated Statements of Cash Flows included in Item 8, "Financial Statements and Supplemental Data" of this Annual Report on Form 10-K.
Awards may be credited with dividend equivalents payable in the form of common shares. (4) The Company also maintains the Director Deferred Compensation Plan pursuant to which non-employee Directors may defer receipt of common shares authorized for issuance under the Equity Plan.
Awards may be credited with dividend equivalents payable in the form of common shares. (4) The Company also maintains the Director Deferred Compensation Plan pursuant to which non-employee Directors may defer receipt of common shares authorized for issuance under the Company's equity plans.
Benefit Plans TimkenSteel recognizes an overfunded status or underfunded status (e.g., the difference between the fair value of plan assets and the benefit obligations) as either an asset or a liability for its defined benefit pension and other postretirement benefit plans on the Consolidated Balance Sheets.
Benefit Plans Metallus recognizes an overfunded status or underfunded status (e.g., the difference between the fair value of plan assets and the benefit obligations) as either an asset or a liability for its defined benefit pension and other postretirement benefit plans on the Consolidated Balance Sheets.
Revenue Recognition TimkenSteel recognizes revenue from contracts at a point in time when it has satisfied its performance obligation and the customer obtains control of the goods, at the amount that reflects the consideration the Company expects to receive for those goods. Substantially all performance obligations arise from the sale of manufactured steel products.
Revenue Recognition Metallus recognizes revenue from contracts at a point in time when it has satisfied its performance obligations and the customer obtains control of the goods, at the amount that reflects the consideration the Company expects to receive for those goods. Substantially all performance obligations arise from the sale of manufactured steel products.
Refer to “Note 14 - Financing Arrangements” in the Notes to the Consolidated Financial Statements for more information regarding scheduled maturities of our long-term debt. Interest payments include interest on the Convertible Notes, as well as the unused commitment 30 Table of Contents fee of 25 basis points related to the Amended Credit Agreement.
Refer to “Note 14 - Financing Arrangements” in the Notes to the Consolidated Financial Statements for more information regarding scheduled maturities of our long-term debt. Interest payments include interest on the Convertible Notes, as well as the unused commitment fee of 25 basis points related to the Amended Credit Agreement.
GAAP”). We believe presenting net sales by end-market sector, both on a gross basis and on a per ton basis, 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.
GAAP”). We believe presenting net sales by end-markets, both on a gross basis and on a per ton basis, 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.
As of December 31, 2022, taking into account our view of mobile, industrial, and energy market demand for our products, and our 2023 operating and long-range plan, we believe that our cash balance as of December 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.
As of December 31, 2023, taking into account our view of industrial, automotive, aerospace & defense and energy market demand for our products, and our 2024 operating and long-range plan, we believe that our cash balance as of December 31, 2023, 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.
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.
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 Chief Operating Decision Maker ("CODM") evaluates performance and makes resource and operating decisions for the business as described above.
Presenting net sales by end-market sector, 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-market sectors.
Presenting net sales by end-markets, 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.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K.
You 39 Table of Contents are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K.
The securities awarded consist of time-based restricted share units covering 423,400 of TimkenSteel's common shares and performance-based restricted share units covering a target number of 423,400 of TimkenSteel's common shares (with a maximum payout opportunity of 635,100 common shares). 19 Table of Contents Performance Graph: The following graph compares the cumulative total return of our common shares with the cumulative total return of the Standard & Poor’s ("S&P") MidCap 400 Index ("S&P MidCap 400"), S&P 500 Steel Sub-Industry Index ("S&P 500 Steel"), and S&P 1500 Steel Sub-Industry Index ("S&P 1500 Steel"), assuming $100 was invested and that cash dividends were reinvested for the period December 31, 2017 through December 31, 2022.
The securities awarded consist of time-based restricted share units covering 423,400 of Metallus' common shares and performance-based restricted share units covering a target number of 423,400 of Metallus' common shares (with a maximum payout opportunity of 635,100 common shares). 23 Table of Contents Performance Graph: The following graph compares the cumulative total return of our common shares with the cumulative total return of the Standard & Poor’s ("S&P") MidCap 400 Index ("S&P MidCap 400"), S&P 500 Steel Sub-Industry Index ("S&P 500 Steel"), and S&P 1500 Steel Sub-Industry Index ("S&P 1500 Steel"), assuming $100 was invested and that cash dividends were reinvested for the period December 31, 2018 through December 31, 2023.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Quarterly Common Stock Prices and Cash Dividends Per Share: Our common shares are traded on the New York Stock Exchange ("NYSE") under the symbol “TMST.” The estimated number of record holders of our common shares at December 31, 2022 was 3,185.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Quarterly Common Stock Prices and Cash Dividends Per Share: Our common shares are traded on the New York Stock Exchange ("NYSE") under the symbol “MTUS.” The estimated number of record holders of our common shares at December 31, 2023 was 3,040.
During the second quarter of 2021, TimkenSteel received a refund from the State of Ohio related to an overpayment of sales and use taxes for the period of October 1, 2016 through September 30, 2019. This resulted in a gain recognized of $2.5 million, net of related professional fees, for the year ended December 31, 2021.
This resulted in a gain recognized of $1.4 million, net of related professional fees, for the year ended December 31, 2023. During the second quarter of 2021, the Company received a refund from the State of Ohio related to an overpayment of sales and use taxes for the period of October 1, 2016 through September 30, 2019.
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.
Although our business has not been materially impacted by current conflicts to date, it is difficult to predict the extent to which our operations, or those of our suppliers, will be impacted in the future.
A sensitivity analysis of the projected incremental effect of a 0.25% increase (decrease), holding all other assumptions constant, is as follows: Hypothetical rate increase (decrease) 0.25% (0.25)% Discount rate Net periodic benefit income, prior to annual remeasurement gains or losses $ 0.7 $ (0.7 ) Benefit obligation $ (16.0 ) $ 16.6 Return on plan assets Net periodic benefit income, prior to annual remeasurement gains or losses $ (1.4 ) $ 1.4 In 2023, the aggregate net periodic pension is forecasted to be expense of $10.3 million, while other postretirement is forecasted to be income of $4.0 million.
A sensitivity analysis of the projected incremental effect of a 0.25% increase (decrease), holding all other assumptions constant, is as follows: Hypothetical rate increase (decrease) 0.25% (0.25)% Discount rate Net periodic benefit income, prior to annual remeasurement gains or losses $ 0.8 $ (0.8 ) Benefit obligation $ (15.8 ) $ 16.4 Return on plan assets Net periodic benefit income, prior to annual remeasurement gains or losses $ (1.4 ) $ 1.4 In 2024, net periodic pension expense is forecasted to be $8.4 million, while postretirement benefit income is forecasted to be $3.9 million.
Total cash paid to noteholders was $67.6 million. A loss on extinguishment of debt was recognized of $43.0 million, including a charge of $0.6 million for unamortized debt issuance costs related to the portion of debt extinguished, as well as the related transaction costs.
A loss on extinguishment of debt was recognized of $43.0 million, including a charge of $0.6 million for unamortized debt issuance costs related to the portion of debt extinguished, as well as the related transaction costs.
Additionally, the current Russia-Ukraine conflict could also exacerbate inflationary pressures throughout the global economy and lead to potential market disruptions, such as significant volatility in commodity prices and supply chain disruptions.
Additionally, the current and potential future global conflicts could also exacerbate inflationary pressures throughout the global economy and lead to potential market disruptions, such as significant volatility in commodity prices and supply chain disruptions.
These securities were granted outside of the Amended 2020 Plan as inducements material to Mr. Williams acceptance of employment with TimkenSteel.
These securities were granted outside of the Original 2020 Plan as inducements material to Mr. Williams acceptance of employment with Metallus.
We are exposed to the risk of rising interest rates to the extent we fund our operations with these variable-rate borrowings. As of December 31, 2022, we have $20.8 million of aggregate debt outstanding.
We are exposed to the risk of rising interest rates to the extent we fund our operations with these variable-rate borrowings. As of December 31, 2023, we have $13.3 million of aggregate debt outstanding.
Year Ended December 31, 2022 2021 2020 Net cash provided (used) by operating activities $ 134.5 $ 196.9 $ 173.5 Net cash provided (used) by investing activities (21.7 ) (4.8 ) (6.0 ) Net cash provided (used) by financing activities (114.6 ) (35.3 ) (91.8 ) Increase (Decrease) in Cash and Cash Equivalents $ (1.8 ) $ 156.8 $ 75.7 Operating activities Net cash provided by operating activities for the year ended December 31, 2022 was $134.5 million compared to net cash provided of $196.9 million for the year ended December 31, 2021.
Year Ended December 31, 2023 2022 2021 Net cash provided (used) by operating activities $ 125.3 $ 134.5 $ 196.9 Net cash provided (used) by investing activities (49.9 ) (21.7 ) (4.8 ) Net cash provided (used) by financing activities (51.9 ) (114.6 ) (35.3 ) Increase (Decrease) in Cash and Cash Equivalents $ 23.5 $ (1.8 ) $ 156.8 Operating activities Net cash provided by operating activities for the year ended December 31, 2023 was $125.3 million compared to net cash provided of $134.5 million for the year ended December 31, 2022.
Interest payable associated with our debt will be approximately $2.3 million due in the next twelve months and $6.2 million thereafter. Purchase commitments are defined as agreements to purchase goods or services that are enforceable and legally binding.
Interest payable associated with our debt will be approximately $1.8 million due in the next twelve months and $3.5 million through maturity. Purchase commitments are defined as agreements to purchase goods or services that are enforceable and legally binding.
Payment terms are generally 30 days from the invoice date. Invoiced amounts are usually inclusive of shipping and handling activities incurred. Shipping and handling activities billed are included in net sales in the Consolidated Statements of Operations.
The Company invoices its customers at the time of title transfer. Payment terms are generally 30 days from the invoice date. Invoiced amounts are usually inclusive of shipping and handling activities incurred. Shipping and handling activities billed are included in net sales in the Consolidated Statements of Operations.
Changes in the selected discount rate could have a material impact on our projected benefit obligations and the unfunded status of our pension and other postretirement benefit plans. For the year ended December 31, 2022, net periodic pension and postretirement benefit income was $23.3 million and $16.7 million, respectively.
Changes in the selected discount rate could have a material impact on our projected benefit obligations and the unfunded status of our pension and other postretirement benefit plans. For the year ended December 31, 2023, net periodic pension expense was $49.1 million and postretirement benefit income was $2.1 million, respectively.
As of December 31, 2022, our undiscounted purchase commitments will be approximately $83.1 million due in the next twelve months and $77.3 million due thereafter. Included in purchase commitments are certain obligations related to capital asset commitments, service agreements and energy consumed in our production processes.
As of December 31, 2023, our undiscounted purchase commitments are approximately $49.1 million due in the next twelve months and $67.4 million due thereafter. Included in purchase commitments are certain obligations related to capital asset commitments, service agreements and energy consumed in our production processes.
Subsequent to December 31, 2022, the Company repurchased 0.2 million additional common shares in the open market at an aggregate cost of $4.5 million, which equates to an average repurchase price of $19.19 per share. As of February 24, 2023, the Company has $68.5 million remaining under its authorized share repurchase program.
Subsequent to December 31, 2023, the Company repurchased 0.1 million additional common shares in the open market at an aggregate cost of $1.2 million, which equates to an average repurchase price of $21.07 per share. As of February 15, 2024, the Company has $39.2 million remaining under its authorized share repurchase program.
These items are partially offset by the release of the Company’s income tax valuation allowance on domestic deferred tax assets due to consecutive years of positive net income and the utilization of the majority of loss carryforwards generated in prior years. 26 Table of Contents Non-GAAP Financial Measures Net Sales Adjusted to Exclude Surcharges The tables below present 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.
The provision for income taxes for the year ended December 31, 2022 was also impacted by the release of the Company’s income tax valuation allowance on domestic deferred tax assets due to consecutive years of positive net income and the utilization of the majority of loss carryforwards generated in prior years. 31 Table of Contents Non-GAAP Financial Measures Net Sales Adjusted to Exclude Surcharges The tables below present net sales by end-markets, 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.
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 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. (2) The average price paid per share excludes any broker commissions.
This estimate is based on a weighted average discount rate of 5.61% for the pension benefit plans and 5.70% for other postretirement benefit plans, as well as a weighted average expected return on assets of 7.13% for the pension benefit plans and 6.25% for the other postretirement benefit plans.
This estimate is based on a weighted average discount rate of 5.33% for the pension benefit plans and 5.43% for other postretirement benefit plans, as well as a weighted average expected return on assets of 7.15% for the pension benefit plans and 5.80% for the other postretirement benefit plans.
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. Currently, we are anticipating capital expenditures to be approximately $45 million in 2023, with $10 million allocated to profitability improvement projects.
We continually 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 are currently anticipating capital expenditures to be approximately $60 million in 2024.
The Company’s accounting policy is to recognize settlements during the quarter in which it is projected that the costs of all settlements during the year will be greater than the sum of the service cost and interest cost components of net periodic benefit cost. In addition, the Company uses fair value to account for the value of plan assets.
The Company’s accounting policy is to recognize settlements during the quarter in which it is projected that the costs of all settlements during the 38 Table of Contents year will be greater than the sum of the service cost and interest cost components of net periodic benefit cost.
Other (Income) Expense, net Year Ended December 31, 2022 2021 $ Change Pension and postretirement non-service benefit (income) loss $ (20.3 ) $ (37.2 ) $ 16.9 Loss (gain) from remeasurement of benefit plans (35.4 ) (20.1 ) (15.3 ) Foreign currency exchange loss (gain) (0.2 ) 0.1 (0.3 ) Insurance recoveries (34.5 ) — (34.5 ) Sales and use tax refund — (2.5 ) 2.5 Miscellaneous (income) expense (0.2 ) 0.2 (0.4 ) Total other (income) expense, net $ (90.6 ) $ (59.5 ) $ (31.1 ) Year Ended December 31, 2021 2020 $ Change Pension and postretirement non-service benefit (income) loss $ (37.2 ) $ (26.6 ) $ (10.6 ) Loss (gain) from remeasurement of benefit plans (20.1 ) 14.7 (34.8 ) Foreign currency exchange loss (gain) 0.1 0.2 (0.1 ) Sales and use tax refund (2.5 ) — (2.5 ) Employee retention credit — (2.3 ) 2.3 Miscellaneous (income) expense 0.2 (0.2 ) 0.4 Total other (income) expense, net $ (59.5 ) $ (14.2 ) $ (45.3 ) Non-service related pension and other postretirement benefit income, for all years, consists primarily of the interest cost, expected return on plan assets and amortization components of net periodic cost.
Refer to “Note 14 - Financing Arrangements” in the Notes to the Consolidated Financial Statements for additional information. 29 Table of Contents Other (Income) Expense, net Year Ended December 31, 2023 2022 $ Change Pension and postretirement non-service benefit (income) loss $ (4.6 ) $ (20.3 ) $ 15.7 Loss (gain) from remeasurement of benefit plans 40.6 (35.4 ) 76.0 Foreign currency exchange loss (gain) — (0.2 ) 0.2 Insurance recoveries (31.3 ) (34.5 ) 3.2 Sales and use tax refund (1.4 ) — (1.4 ) Miscellaneous (income) expense 0.4 (0.2 ) 0.6 Total other (income) expense, net $ 3.7 $ (90.6 ) $ 94.3 Year Ended December 31, 2022 2021 $ Change Pension and postretirement non-service benefit (income) loss $ (20.3 ) $ (37.2 ) $ 16.9 Loss (gain) from remeasurement of benefit plans (35.4 ) (20.1 ) (15.3 ) Foreign currency exchange loss (gain) (0.2 ) 0.1 (0.3 ) Sales and use tax refund — (2.5 ) 2.5 Insurance recoveries (34.5 ) — (34.5 ) Miscellaneous (income) expense (0.2 ) 0.2 (0.4 ) Total other (income) expense, net $ (90.6 ) $ (59.5 ) $ (31.1 ) Non-service related pension and other postretirement benefit income, for all years, consists primarily of the interest cost, expected return on plan assets and amortization components of net periodic cost.
During the year ended December 31, 2021, TimkenSteel recorded approximately $10.6 million of impairment charges. This was driven by $7.9 million of impairment charges related to the indefinite idling of our Harrison melt and casting assets. Other impairment charges included $2.4 million related to the impairment of certain assets at our St.
This was driven by $7.9 million of impairment charges related to the indefinite idling of our Harrison melt and casting assets. Other impairment charges included $2.4 million related to the impairment of certain assets at our St.
In 2022, net periodic pension and other postretirement benefit income was calculated using a variety of assumptions, including a weighted average discount rate of 2.96% and 3.00%, respectively, and a weighted average expected return on plan assets of 5.96% and 4.75%, respectively. The expected return on plan assets is determined based on forward-looking current market pricing.
In 2023, net periodic pension expense and other postretirement benefit income was calculated using a variety of assumptions, including a weighted average discount rate of 5.61% and 5.70%, respectively, and a weighted average expected return on plan assets of 7.13% and 6.25%, respectively. The expected return on plan assets is determined based on forward-looking current market pricing.
The principal amount of the Convertible Senior Notes due 2025 as of December 31, 2022 is $20.8 million, while the Convertible Senior Notes due 2025, net is $20.4 million.
The principal amount of the Convertible Senior Notes due 2025 as of December 31, 2022 was $20.8 million, while the Convertible Senior Notes due 2025, net was $20.4 million after consideration of unamortized debt issuance costs.
For the year ended December 31, 2022, the Company repurchased approximately 3.0 million common shares in the open market at an aggregate cost of $52.0 million, which equates to an average repurchase price of $17.18 per share. As of December 31, 2022, the Company had a balance of $73.0 million remaining under its share repurchase program.
For the year ended December 31, 2023, the Company repurchased approximately 1.7 million common shares in the open market at an aggregate cost of $32.6 million, which equates to an average repurchase price of $19.03 per share. As of December 31, 2023, the Company had a balance of $40.4 million remaining under its share repurchase program.
A net gain of $20.1 million from the remeasurement of these benefit plans was recognized for the year ended December 31, 2021. This gain was driven by a $55.7 million decrease in the pension liability primarily due to an increase in discount rates, partially offset by a loss of $35.6 million driven primarily by investment losses on plan assets.
This gain was driven by a $55.7 million decrease in the pension liability primarily due to an increase in discount rates, partially offset by a loss of $35.6 million driven primarily by investment losses on plan assets.
For more details on this credit refer to "Note 2 - Significant Accounting Policies." Provision for Income Taxes Year Ended December 31, 2022 2021 $ Change Provision (benefit) for income taxes $ 32.0 $ 5.7 $ 26.3 Effective tax rate 32.9 % 3.2 % NM (1) Year Ended December 31, 2021 2020 $ Change Provision (benefit) for income taxes $ 5.7 $ 1.2 $ 4.5 Effective tax rate 3.2 % (2.0 )% NM (1) (1) “NM” is data that is not meaningful.
Provision for Income Taxes Year Ended December 31, 2023 2022 $ Change Provision (benefit) for income taxes $ 27.0 $ 32.0 $ (5.0 ) Effective tax rate 28.0 % 32.9 % -4.9 % Year Ended December 31, 2022 2021 $ Change Provision (benefit) for income taxes $ 32.0 $ 5.7 $ 26.3 Effective tax rate 32.9 % 3.2 % NM (1) (1) “NM” is data that is not meaningful.
During the second half of 2022, the Faircrest melt shop experienced unplanned operational downtime. During the fourth quarter of 2022, TimkenSteel recognized an insurance recovery of $33.0 million related to the unplanned downtime. Of the total recovery, $13.0 million was received in the fourth quarter of 2022 and $20.0 million was collected in the first quarter of 2023.
During the fourth quarter of 2022, the Company recognized an insurance recovery of $33.0 million related to the 2022 unplanned downtime, of which $13.0 million was received in the fourth quarter of 2022 and $20.0 million was received in the first quarter of 2023.
(2) 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.
As of February 15, 2024, the Company has $39.2 million remaining under its authorized share repurchase program. (1) 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.
For the year ended December 31, 2022, TimkenSteel recorded a loss on sale and disposal of assets of $1.9 million primarily related to the loss recognized on the sale of the remaining land and buildings at the Company's former TMS facility.
For the year ended December 31, 2022, the loss on sale or disposal of assets, net, of $1.9 million primarily related to the loss recognized on the sale of the remaining land and buildings at the Company's TMS facility, as well as write-offs of aged assets removed from service.
For more details on the aforementioned remeasurements, refer to “Note 15 - Retirement and Postretirement Plans.” 25 Table of Contents During the second half of 2022, the Faircrest melt shop experienced unplanned operational downtime. During the fourth quarter of 2022, TimkenSteel recognized an insurance recovery of $33.0 million related to the unplanned downtime.
For more details on the aforementioned remeasurements, refer to “Note 15 - Retirement and Postretirement Plans.” During the second half of 2022, the Faircrest melt shop experienced unplanned operational downtime.
Net deferred tax assets relate primarily to net operating losses and pension and other postretirement benefit obligations in the U.S., which we believe are more likely than not to result in future tax benefits.
Net deferred tax assets relate primarily to net operating losses and pension and other postretirement benefit obligations in the U.S., which we believe are more likely than not to result in future tax benefits. In the ordinary course of our business, there are many transactions and calculations regarding which the ultimate income tax determination is uncertain.
Issuer Purchases of Common Shares: On December 20, 2021, TimkenSteel announced that its Board of Directors had authorized a share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding common shares. Any repurchase would be in accordance with our Amended Credit Agreement, which places certain limitations on our ability to purchase our common shares.
Issuer Purchases of Common Shares: On December 20, 2021, the Company announced that its Board of Directors had authorized a share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding common shares.
The change in net interest expense was due to a reduction in average outstanding borrowings for the year ended December 31, 2022 compared to the same period in 2021, as well as interest earned on cash invested in a money market fund and deposits with financial institutions.
The change was due to interest earned on cash invested in a money market fund and deposits with financial institutions at a rate similar to the money market fund during 2023, as well as a reduction in average outstanding convertible notes compared to the same period in 2022.
The change was primarily due to the purchase of treasury shares and the repurchase of our Convertible Senior Notes due in 2025, partially offset by increased proceeds from the exercise of stock options during the year ended December 31, 2022 compared to the same period of 2021.
The change was primarily due to lower repurchases of common shares and 36 Table of Contents Convertible Notes in 2023, partially offset by decreased proceeds from the exercise of stock options during the year ended December 31, 2023 compared to the same period of 2022.
These other loss reserves have an immaterial impact on the Consolidated Financial Statements. 33 Table of Contents Forward-Looking Statements Certain statements set forth in this Annual Report on Form 10-K (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.
Forward-Looking Statements Certain statements set forth in this Annual Report on Form 10-K (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.
Investing activities Net cash used by investing activities for the year ended December 31, 2022 was $21.7 million compared to net cash used of $4.8 million for the year ended December 31, 2021. The change was primarily due to higher capital expenditures.
The change was primarily due to higher capital expenditures in 2023. Financing activities Net cash used by financing activities for the year ended December 31, 2023 was $51.9 million compared to net cash used of $114.6 million for the year ended December 31, 2022.
(a) (b) (c) Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans reflected in column (a) (3) Equity compensation plans approved by security holders (4) 3,148,210 $ 18.85 4,103,524 Equity compensation plans not approved by security holders (5) 1,058,500 — — Total 4,206,710 $ 18.85 4,103,524 (1) The amount shown in column (a) and covered under an equity compensation plan approved by security holders includes the following: nonqualified stock options - 1,119,523; deferred shares – 108,670; performance-based restricted stock units – 906,085; and time-based restricted stock units – 1,013,932 (which includes 923,628 cliff-vested restricted stock units).
(a) (b) (c) Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans reflected in column (a) (3) Equity compensation plans approved by security holders (4) 3,583,065 $ 17.95 3,253,585 Equity compensation plans not approved by security holders (5) 1,058,500 — — Total 4,641,565 $ 17.95 3,253,585 (1) The amount shown in column (a) and covered under an equity compensation plan approved by security holders includes the following: nonqualified stock options - 621,350; deferred shares – 219,080; performance-based restricted stock units – 1,773,226 (based on potential maximum performance); and time-based restricted stock units – 969,409 (which includes 935,109 cliff-vested restricted stock units).
The determination of the discount rate is generally based on an index created from a hypothetical bond portfolio consisting of high-quality fixed income securities with durations that match the timing of expected benefit 32 Table of Contents payments.
These benefit obligations were valued using a weighted average discount rate of 5.33% for pension benefit plans and 5.43% for other postretirement benefit plans. The determination of the discount rate is generally based on an index created from a hypothetical bond portfolio consisting of high-quality fixed income securities with durations that match the timing of expected benefit payments.
To date, no holders have elected to convert their notes during any optional conversion periods. In the first half of 2022, TimkenSteel repurchased a total of $25.2 million aggregate principal amount of its Convertible Senior Notes Due 2025. There were no repurchases related to the Convertible Notes during the second half of 2022.
In the first half of 2022, the Company repurchased a total of $25.2 million aggregate principal amount of its Convertible Senior Notes Due 2025. There were no repurchases related to the Convertible Notes during the second half of 2022. Total cash paid to noteholders was $67.6 million.
Transfer of control and revenue recognition for substantially all the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership, and risk of loss pass to the customer and is based on the applicable customer shipping terms. The Company invoices its customers at the time of title transfer.
In some cases, the Company receives a blanket purchase order from its customer, which includes pricing, payment and other terms and conditions, with quantities defined at the time the customer issues periodic releases from the blanket purchase order. 37 Table of Contents Transfer of control and revenue recognition for substantially all the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership, and risk of loss pass to the customer and is based on the applicable customer shipping terms.
Sales returns and allowances are treated as a reduction to net sales and are provided for primarily based on historical experience. These reserves also capture any potential warranty claims, which normally result in returned or replaced product. Inventory Inventories are stated at lower of cost or net realizable value.
Sales returns and allowances are treated as a reduction to net sales and are provided for primarily based on historical experience. These reserves also capture any potential warranty claims, which normally result in returned or replaced product. The Company’s contracts with certain Manufactured Components customers extend multiple years and generally average five years.
(2) The weighted average exercise price in column (b) includes nonqualified stock options only.
As a result, this amount may overstate eventual actual dilution. (2) The weighted average exercise price in column (b) includes nonqualified stock options only.
This criterion was met during the fourth quarter of 2022 and as such the notes can be converted at the option of the holders beginning January 1 through March 31, 2023. Whether the notes will be convertible following such period will depend on if this criterion, or another conversion condition, is met in the future.
This criterion was met during the fourth quarter of 2023 (and each preceding quarter of 2023) and as such the notes can be converted at the option of the holders beginning January 1 through March 31, 2024.
This resulted in lower volumes of 126.5 thousand ship tons, or a net sales decrease of $134.4 million. Excluding surcharges, net sales increased $39.8 million or 4.5%. 22 Table of Contents Gross Profit The chart below presents the drivers of the gross profit variance from the year ended December 31, 2021 to December 31, 2022.
Excluding surcharges, net sales increased $107.5 million or 11.8%. 27 Table of Contents Gross Profit The chart below presents the drivers of the gross profit variance from the year ended December 31, 2022 to the year ended December 31, 2023.
This compares with a net loss on sale of assets of $1.3 million related to the disposition of excess assets for the year ended December 31, 2021. 24 Table of Contents Refer to “Note 6 - Disposition of Non-Core Assets” and “Note 11 - Property, Plant and Equipment” in the Notes to the Consolidated Financial Statements for additional information.
Refer to “Note 6 - Disposition of Non-Core Assets” and “Note 11 - Property, Plant and Equipment” in the Notes to the Consolidated Financial Statements for additional information. Interest (Income) Expense, net Net interest income for the year ended December 31, 2023 was $7.1 million, compared with net interest expense of $0.6 million for the year ended December 31, 2022.
The provision for incomes taxes for the year ended December 31, 2022 was $32.0 million compared to a provision for income taxes of $5.7 million in 2021.
The provision for incomes taxes for the year ended December 31, 2023 was $27.0 million compared to a provision for income taxes of $32.0 million in 2022. The change from the prior year is primarily related to higher permanent items for the year ended December 31, 2022 compared with December 31, 2023.
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.
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: • the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which we operate.
This gain was driven by a $359.9 million decrease in the pension liability primarily due to an increase in discount rates and a $2.7 million non-cash settlement related to the partial annuitization of the Bargaining Plan. This was partially offset by a loss of $327.2 million driven primarily by investment losses on plan assets and lump sum basis losses.
A net gain of $35.4 million from the remeasurement of these benefit plans was recognized for the year ended December 31, 2022. This gain was driven by a $359.9 million decrease in the pension liability primarily due to an increase in discount rates and a $2.7 million non-cash settlement related to the partial annuitization of the Bargaining Plan.
For additional details regarding the Amended Credit Agreement and the Convertible Notes, please refer to “Note 14 - Financing Arrangements” in the Notes to the Consolidated Financial Statements, and for our discussion regarding risk factors related to our business and our debt, see Risk Factors in this Annual Report on Form 10-K. 28 Table of Contents Additional Liquidity Considerations The following represents a summary of total liquidity available under the Amended Credit Agreement in effect as of December 31, 2022 and December 31, 2021: December 31, 2022 2021 Cash and cash equivalents $ 257.2 $ 259.6 Credit Agreement: Maximum availability $ 400.0 $ 400.0 Suppressed availability (1) (161.2 ) (143.5 ) Availability 238.8 256.5 Credit facility amount borrowed — — Letter of credit obligations (5.3 ) (5.4 ) Availability not borrowed 233.5 251.1 Total liquidity $ 490.7 $ 510.7 (1) As of December 31, 2022 and 2021, TimkenSteel had less than $400.0 million in collateral assets to borrow against.
Additional Liquidity Considerations The following represents a summary of total liquidity available under the Amended Credit Agreement in effect as of December 31, 2023 and 2022: December 31, 2023 2022 Cash and cash equivalents $ 280.6 $ 257.2 Credit Agreement: Maximum availability $ 400.0 $ 400.0 Suppressed availability (1) (135.8 ) (161.2 ) Availability 264.2 238.8 Credit facility amount borrowed — — Letter of credit obligations (5.4 ) (5.3 ) Availability not borrowed 258.8 233.5 Total liquidity $ 539.4 $ 490.7 (1) As of December 31, 2023 and 2022, the Company had less than $400.0 million in collateral assets to borrow against.
The Company receives and acknowledges purchase orders from its customers, which define the quantity, pricing, payment and other applicable terms and conditions. In some cases, the Company receives a blanket purchase order from its customer, which includes pricing, payment and other terms and conditions, with quantities defined at the time the customer issues periodic releases from the blanket purchase order.
The Company receives and acknowledges purchase orders from its customers, which define the quantity, pricing, payment and other applicable terms and conditions.
In the ordinary course of our business, there are many transactions and calculations regarding which the ultimate income tax determination is uncertain. We are regularly under audit by tax authorities. Accruals for uncertain tax positions are provided for in accordance with the requirements of applicable accounting guidance.
We are regularly under audit by tax authorities. Accruals for uncertain tax positions are provided for in accordance with the requirements of applicable accounting guidance. We record interest and penalties related to uncertain tax positions as a component of income tax expense.
(dollars in millions, tons in thousands) 2022 Mobile Industrial Energy Other Total Tons 313.2 315.8 63.1 — 692.1 Net Sales $ 539.1 $ 628.7 $ 136.6 $ 25.5 $ 1,329.9 Less: Surcharges 171.6 200.6 43.1 — 415.3 Base Sales $ 367.5 $ 428.1 $ 93.5 $ 25.5 $ 914.6 Net Sales / Ton $ 1,721 $ 1,991 $ 2,165 $ — $ 1,922 Surcharges / Ton $ 548 $ 635 $ 683 $ — $ 600 Base Sales / Ton $ 1,173 $ 1,356 $ 1,482 $ — $ 1,322 2021 Mobile Industrial Energy Other Total Tons 370.4 408.9 39.3 — 818.6 Net Sales $ 527.9 $ 661.2 $ 62.9 $ 30.9 $ 1,282.9 Less: Surcharges 167.7 218.3 22.1 — 408.1 Base Sales $ 360.2 $ 442.9 $ 40.8 $ 30.9 $ 874.8 Net Sales / Ton $ 1,425 $ 1,617 $ 1,601 $ — $ 1,567 Surcharges / Ton $ 453 $ 534 $ 563 $ — $ 498 Base Sales / Ton $ 972 $ 1,083 $ 1,038 $ — $ 1,069 2020 Mobile Industrial Energy Other Total Tons 308.1 267.0 36.3 29.0 640.4 Net Sales $ 346.0 $ 391.7 $ 53.2 $ 39.8 $ 830.7 Less: Surcharges 59.3 61.1 8.4 7.2 136.0 Base Sales $ 286.7 $ 330.6 $ 44.8 $ 32.6 $ 694.7 Net Sales / Ton $ 1,123 $ 1,467 $ 1,466 $ 1,372 $ 1,297 Surcharges / Ton $ 192 $ 229 $ 232 $ 248 $ 212 Base Sales / Ton $ 931 $ 1,238 $ 1,234 $ 1,124 $ 1,085 27 Table of Contents Liquidity and Capital Resources Amended Credit Agreement On September 30, 2022, TimkenSteel Corporation (the “Company”), as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors (the “Subsidiary Guarantors”), entered into a Fourth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders party thereto (collectively, the “Lenders”), which further amends and restates the Company’s existing secured Third Amended and Restated Credit Agreement, dated as of October 15, 2019.
These changes have been retrospectively applied in the following tables. 32 Table of Contents (dollars in millions, tons in thousands) 2023 Industrial Automotive Aerospace & Defense Energy Other Total Ship Tons 264.6 306.4 45.6 67.2 — 683.8 Net Sales $ 533.3 $ 531.9 $ 115.0 $ 160.4 $ 21.8 $ 1,362.4 Less: Surcharges 147.2 129.4 18.8 44.9 — 340.3 Base Sales $ 386.1 $ 402.5 $ 96.2 $ 115.5 $ 21.8 $ 1,022.1 Net Sales / Ton $ 2,015 $ 1,736 $ 2,522 $ 2,386 $ — $ 1,992 Surcharges / Ton $ 556 $ 422 $ 412 $ 668 $ — $ 498 Base Sales / Ton $ 1,459 $ 1,314 $ 2,110 $ 1,718 $ — $ 1,494 2022 Industrial Automotive Aerospace & Defense Energy Other Total Ship Tons 289.1 313.2 26.7 63.1 — 692.1 Net Sales $ 549.0 $ 539.1 $ 79.7 $ 136.6 $ 25.5 $ 1,329.9 Less: Surcharges 185.4 171.6 15.2 43.1 — 415.3 Base Sales $ 363.6 $ 367.5 $ 64.5 $ 93.5 $ 25.5 $ 914.6 Net Sales / Ton $ 1,899 $ 1,721 $ 2,985 $ 2,165 $ — $ 1,922 Surcharges / Ton $ 641 $ 548 $ 569 $ 683 $ — $ 600 Base Sales / Ton $ 1,258 $ 1,173 $ 2,416 $ 1,482 $ — $ 1,322 2021 Industrial Automotive Aerospace & Defense Energy Other Total Ship Tons 388.8 370.4 20.1 39.3 — 818.6 Net Sales $ 601.0 $ 527.9 $ 60.2 $ 62.9 $ 30.9 $ 1,282.9 Less: Surcharges 208.0 167.7 10.3 22.1 — 408.1 Base Sales $ 393.0 $ 360.2 $ 49.9 $ 40.8 $ 30.9 $ 874.8 Net Sales / Ton $ 1,546 $ 1,425 $ 2,995 $ 1,601 $ — $ 1,567 Surcharges / Ton $ 534 $ 453 $ 512 $ 563 $ — $ 498 Base Sales / Ton $ 1,012 $ 972 $ 2,483 $ 1,038 $ — $ 1,069 33 Table of Contents Liquidity and Capital Resources Amended Credit Agreement On September 30, 2022, the Company, as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors (the “Subsidiary Guarantors”), entered into a Fourth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders party thereto (collectively, the “Lenders”), which further amended and restated the Company’s secured Third Amended and Restated Credit Agreement, dated as of October 15, 2019.
As of December 31, 2022, this authorization has been exhausted. On November 2, 2022, the Board of Directors authorized an additional $75.0 million share repurchase program. This authorization reflects the continued confidence of the Board and senior leadership in the Company’s ability to generate sustainable through-cycle profitability while maintaining a strong balance sheet and cash flow.
This authorization reflects the continued confidence of the Board and senior leadership in the Company’s ability to generate sustainable through-cycle profitability while maintaining a strong balance sheet and cash flow. The table below provides information concerning our repurchase of common shares for the three months ended December 31, 2023.
The change was primarily due to lower profitability, partially offset by a reduction in working capital, during the year ended December 31, 2022. Refer to the Consolidated Statements of Cash Flows for additional information.
The change was primarily due to a higher use of cash for working capital in 2023, partially offset by improved 2023 profitability. Investing activities Net cash used by investing activities for the year ended December 31, 2023 was $49.9 million compared to net cash used of $21.7 million for the year ended December 31, 2022.
(Dollars in millions, except per share data) Total number of shares purchased (1) Average price paid per share (3) Total number of shares purchased as part of publicly announced plans or programs (1) Maximum dollar value of shares that may yet be purchased under the plans or programs (2) Beginning shares available $ 17.6 October, 2022 752,842 $ 16.07 752,842 $ 5.5 November, 2022 240,975 $ 18.02 240,975 $ 76.2 December, 2022 173,108 $ 18.15 173,108 $ 73.0 Quarter ended December 31, 2022 1,166,925 $ 16.78 1,166,925 $ 73.0 (1) 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.
(Dollars in millions, except per share data) Total number of shares purchased (1) Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs (1) Maximum dollar value of shares that may yet be purchased under the plans or programs (3) Beginning shares available $ 44.5 October, 2023 94,408 $ 20.53 94,408 $ 42.5 November, 2023 56,251 $ 20.25 56,251 $ 41.4 December, 2023 45,867 $ 21.76 45,867 $ 40.4 Quarter ended December 31, 2023 196,526 $ 20.74 196,526 $ 40.4 Subsequent to December 31, 2023, the Company repurchased 0.1 million additional common shares in the open market at an aggregate cost of $1.2 million, which equates to an average repurchase price of $21.07 per share.
As of December 31, 2022, our projected benefit obligations related to our pension and other postretirement benefit plans were $666.6 million and $87.4 million, respectively, and the underfunded status of our pension and other postretirement benefit obligations were $117.2 million and $28.2 million, respectively.
In addition, the Company uses fair value to account for the value of plan assets. As of December 31, 2023, our projected benefit obligations related to our pension and other postretirement benefit plans were $688.6 million and $84.9 million, respectively, and the underfunded status of our pension and other postretirement benefit obligations were $163.0 million and $31.1 million, respectively.
Date TimkenSteel Corporation S&P MidCap 400 S&P 500 Steel S&P 1500 Steel December 31, 2017 $ 100.00 $ 100.00 $ 100.00 $ 100.00 December 31, 2018 $ 57.47 $ 86.63 $ 81.63 $ 74.10 December 31, 2019 $ 48.98 $ 108.54 $ 89.15 $ 85.48 December 31, 2020 $ 30.74 $ 120.17 $ 81.91 $ 85.71 December 31, 2021 $ 109.55 $ 149.84 $ 180.70 $ 145.40 December 31, 2022 $ 119.29 $ 128.44 $ 207.71 $ 175.68 This performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
S&P MidCap 400 S&P 500 Steel S&P 1500 Steel December 31, 2018 $ 100.00 $ 100.00 $ 100.00 $ 100.00 December 31, 2019 $ 85.22 $ 109.21 $ 125.29 $ 115.36 December 31, 2020 $ 53.26 $ 100.40 $ 140.27 $ 115.68 December 31, 2021 $ 190.38 $ 220.52 $ 172.02 $ 195.82 December 31, 2022 $ 202.18 $ 256.51 $ 145.44 $ 236.70 December 31, 2023 $ 273.31 $ 325.28 $ 170.48 $ 323.96 This performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
Gross profit for the year ended December 31, 2022 decreased $93.3 million, or 42.4%, compared with the year ended December 31, 2021. The decrease was driven by higher manufacturing costs, unfavorable raw material spread, and decreased volume, partially offset by favorable price/mix.
Gross profit for the year ended December 31, 2023 increased $59.8 million, or 47.2%, compared with the year ended December 31, 2022. The increase was driven by favorable price/mix, partially offset by higher manufacturing costs. Favorable price/mix was due to higher base prices across all end-markets.
All inventories, including raw materials, manufacturing supplies inventory as well as international (outside the U.S.) inventories, have been valued using the FIFO or average cost method. 31 Table of Contents Long-lived Assets Long-lived assets (including tangible assets and intangible assets subject to amortization) are reviewed for impairment when events or changes in circumstances have occurred indicating the carrying value of the assets may not be recoverable.
All inventories, including raw materials, manufacturing supplies inventory as well as international (outside the U.S.) inventories, have been valued using the FIFO or average cost method. Income Taxes We are subject to income taxes in the U.S. and non-U.S. jurisdictions, and we account for income taxes in accordance with applicable accounting guidance.
Favorable price/mix was due to higher base prices across all end-market sectors, as well as an improvement of product mix within all end-market sectors. 23 Table of Contents Selling, General and Administrative Expenses The charts below present selling, general and administrative ("SG&A") expense for the years ended December 31, 2022, 2021 and 2020.
Higher manufacturing costs were primarily due to higher plant spend and inflationary cost increases. 28 Table of Contents Selling, General and Administrative Expenses The charts below present selling, general and administrative ("SG&A") expense for the years ended December 31, 2023, 2022 and 2021.
Additionally, during the third quarter of 2022, TimkenSteel recognized an insurance recovery of $1.5 million related to an unplanned outage at our Faircrest facility in November 2021. TimkenSteel recognizes an insurance recovery when it is realized or considered realizable, in accordance with the accounting guidance, and records this activity within other (income) expense, net on the Consolidated Statements of Operations.
Additionally, during 30 Table of Contents the third quarter of 2022, the Company recognized an insurance recovery of $1.5 million related to an unplanned outage at our Faircrest facility in November 2021.
(3) The average price paid per share excludes any broker commissions. 18 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans: The following table sets forth certain information as of December 31, 2022, regarding the equity compensation plan maintained by us on that date, the TimkenSteel Corporation Amended and Restated 2020 Equity and Incentive Compensation Plan (the "Amended 2020 Plan"), which amended the previous TimkenSteel Corporation 2020 Equity and Incentive Compensation Plan (the "TimkenSteel 2020 Plan").
The share repurchase program does not require the Company to acquire any dollar amount or number of shares and does not have an expiration date. 22 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans: The following table sets forth certain information as of December 31, 2023, regarding the equity compensation plan maintained by us on that date, the Amended and Restated 2020 Equity and Incentive Compensation Plan (the "Amended 2020 Plan"), which amended the previous 2020 Equity and Incentive Compensation Plan (the "Original 2020 Plan") plus certain awards still outstanding under all plans preceding the Original 2020 Plan (as well as certain inducement awards granted to our CEO in 2021 that remained outstanding.

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