(dollars in millions, except per share data)
Business Overview
We manufacture alloy steel, as well as carbon and micro-alloy steel, with an
annual melt capacity of approximately 2 million tons and shipment capacity of
1.5 million tons. Our portfolio includes special bar quality (SBQ) bars,
seamless mechanical tubing (tubes), value-added solutions such as precision
steel components, and billets. In addition, we supply machining and thermal
treatment services and manage raw material recycling programs, which are used as
a feeder system for our melt operations. Our products and services are used in a
diverse range of demanding applications in the following market sectors:
automotive; oil and gas; industrial equipment; mining; construction; rail;
defense; heavy truck; agriculture; power generation; and oil country tubular
goods (OCTG).
SBQ steel is made to restrictive chemical compositions and high internal purity
levels and is used in critical mechanical applications. We make these products
from nearly 100% recycled steel, using our expertise in raw materials to create
custom steel products. We focus on creating tailored products and services for
our customers' most demanding applications. Our engineers are experts in both
materials and applications, so we can work closely with each customer to deliver
flexible solutions related to our products as well as to their applications and
supply chains.
The SBQ bar, tube, and billet production processes take place at our Canton,
Ohio manufacturing location. This location accounts for all of the SBQ bars,
seamless mechanical tubes and billets we produce and includes three
manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. Our
value-added solutions production processes take place at two downstream
manufacturing facilities: Tryon Peak (Columbus, North Carolina), and St. Clair
(Eaton, Ohio). Many of the production processes are integrated, and the
manufacturing facilities produce products that are sold in all of our market
sectors. As a result, investments in our facilities and resource allocation
decisions affecting our operations are designed to benefit the overall business,
not any specific aspect of the business.
In the first quarter of 2020, we closed our TimkenSteel Material Services (TMS)
facility in Houston, Texas. See "Note 5 - Disposition of Non-Core Assets" in the
Notes to the unaudited Consolidated Financial Statements for additional
information.
We conduct our business activities and report financial results as one business
segment. The presentation of financial results as one reportable segment is
consistent with the way we operate our business and is consistent with the
manner in which the Chief Operating Decision Maker (CODM) evaluates performance
and makes resource and operating decisions for the business as described above.
Furthermore, the Company notes that monitoring financial results as one
reportable segment helps the CODM manage costs on a consolidated basis,
consistent with the integrated nature of our operations.
Impact of COVID-19 Pandemic
We continue to closely monitor the impact of the COVID-19 pandemic on our
Company, employees, customers and supply chain. The full extent to which the
COVID-19 pandemic will impact our operations and financial results is uncertain
and ultimately will depend on, among many other factors, the duration of the
pandemic, further Federal and State government actions and the speed of economic
recovery. We estimate the primary impact of COVID-19 on the Company was lost
sales of approximately $70 million for the third quarter of 2020 and
approximately $200 million for the nine months ended September 30, 2020, as
compared to expectations established prior to the onset of the pandemic. The
negative impact on the remainder of the year and beyond remains unknown but at a
minimum, we expect customer demand in the COVID-19 environment to continue to be
lower in the fourth quarter of 2020 in comparison to the prior year fourth
quarter, resulting in periodic production outages as the Company continues to
balance production schedules with demand.
In response to the significant reduction in customer demand resulting from the
COVID-19 crisis, the Company has taken additional actions to further reduce
operating expenses, conserve cash and maximize liquidity. The following actions
began in the second quarter of 2020 and unless otherwise noted, continued for
the duration of the third quarter:
• Reduced interim CEO and senior executives' base salaries by 20 percent and
other executives' base salaries by 10 percent, effective May 1;
• Reduced cash retainer for its board of directors by 20 percent beginning
with the second-quarter 2020, and reduced the value of the board's annual
equity grant by 20 percent;
• Suspended the Company's 401(k) plan matching contributions for salaried
employees, effective June 1;
• Implemented unpaid rolling furloughs for approximately 90 percent of
salaried employees, with an average 5 weeks of unpaid furloughs per
employee, beginning in early April and ending in late July; and
• Deferred Social Security payroll tax remittance as permitted by the CARES
Act.
In the third quarter of 2020, the Company's COVID-19 related actions saved
approximately $5 million in cash and reduced administrative expenses by
approximately $2 million. Since implementation in the second quarter of 2020,
the Company's COVID-19 related actions saved approximately $12 million in cash
and reduced administrative expenses by approximately $7 million in total.
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Additionally, in the third quarter of 2020, the Company took the following
operational actions:
• Continued to maintain flexible production schedules at all plants to align
operations with customer demand, resulting in the temporary layoff of
manufacturing employees;
• Maintained its forecasted 2020 capital expenditures at a lower level range
of $15 million to $20 million, as previously communicated in the second
quarter.
These actions resulted in the Company having total liquidity of $280 million as
of September 30, 2020, despite the negative impact of COVID-19 on our business.
We believe this level of liquidity is sufficient to meet the Company's needs for
at least the next 12 months. The Company will continue to take actions such as
those described above in order to preserve liquidity for the duration of this
pandemic.
Impact of Raw Material Prices
In the ordinary course of business, we are exposed to the volatility of the
costs of our raw materials. Whenever possible, we manage our exposure to
commodity risks primarily through the use of supplier pricing agreements that
enable us to establish the purchase prices for certain inputs that are used in
our manufacturing process. We utilize a raw material surcharge mechanism when
pricing products to our customers, which is designed to mitigate the impact of
increases or decreases in raw material costs, although generally with a lag
effect. This timing effect can result in raw material spread whereby costs can
be over- or under-recovered in certain periods. While the surcharge generally
protects gross profit, it has the effect of diluting gross margin as a percent
of sales.
Results of Operations
Net Sales
The charts below present net sales and shipments for the three months ended
September 30, 2020 and 2019.
[[Image Removed]] [[Image Removed]]
Net sales for the three months ended September 30, 2020 were $205.9 million, a
decrease of $68.3 million, or 24.9%, compared with the three months ended
September 30, 2019. The decrease was due to a reduction in volume of
approximately 55 thousand ship tons, resulting in a decrease of $61.7 million of
net sales and lower surcharges of $20.2 million. These decreases in net sales
were slightly offset by a positive mix across all end markets resulting in an
increase in net sales of $18.6 million. The primary driver in the decrease in
volume was lower customer demand across all end markets. The decrease in
surcharges was primarily due to a 18.0% decline in the average surcharge per ton
due to lower market prices for scrap and alloys. We estimate the impact of the
COVID-19 pandemic on our net sales was a reduction of approximately $70 million,
as compared to our forecast prior to the onset of the pandemic. Excluding
surcharges, net sales decreased $48.1 million, or 21.6%.
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The charts below present net sales and shipments for the nine months ended
September 30, 2020 and 2019.
[[Image Removed]] [[Image Removed]]
Net sales for the nine months ended September 30, 2020 were $619.5 million, a
decrease of $362.4 million, or 36.9%, compared with the nine months ended
September 30, 2019. The decrease was due to a reduction in volume of
approximately 242 thousand ship tons, resulting in a decrease of $264.2 million
of net sales and lower surcharges of $117.6 million. These decreases in net
sales were slightly offset by a positive mix across all end markets resulting in
an increase in net sales of $30.3 million. The primary driver in the decrease in
volume was lower customer demand across all end markets primarily as a result of
the COVID-19 pandemic and weak energy market. The decrease in surcharges was
primarily due to an approximate 30% decline in the average surcharge per ton due
to lower market prices for scrap and alloys. We estimate the impact of the
COVID-19 pandemic on our net sales during 2020 was a reduction of approximately
$200 million, as compared to our forecast prior to the onset of the pandemic.
Over half of this decrease was related to lower than forecasted volume in our
mobile end-market sector, as production was halted by all major automotive
manufacturers for various lengths of time during the second quarter. Excluding
surcharges, net sales decreased $244.8 million, or 32.1%.
Gross Profit
The chart below presents the drivers of the gross profit variance from the three
months ended September 30, 2019 to September 30, 2020.
[[Image Removed]]
Gross profit for the three months ended September 30, 2020 increased $0.2
million, or 7.7%, compared with the three months ended September 30, 2019. The
increase was driven primarily by favorable raw material spread, manufacturing
costs, and price/mix, partially offset by lower volumes. Raw material spread was
favorable due to higher scrap spread in the third quarter of 2020. Favorable
manufacturing costs were
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primarily due to the Company's significant cost reduction actions, slightly
offset by the unfavorable impact of lower production levels on fixed cost
leverage. Favorable price/mix was driven by favorable mix across all end markets
and improved pricing. The primary driver in the decrease in volume was lower
customer demand across all end markets as a result of the COVID-19 pandemic and
a weak energy market.
The chart below presents the drivers of the gross profit variance from the nine
months ended September 30, 2019 to September 30, 2020.
[[Image Removed]]
Gross profit for the nine months ended September 30, 2020 decreased $39.2
million, or 96.6%, compared with the nine months ended September 30, 2019. The
decrease was driven primarily by lower volumes and additional inventory
adjustments, partially offset by favorable manufacturing costs and raw material
spread. The primary driver in the decrease in volume was lower customer demand
across all end markets primarily as a result of the COVID-19 pandemic and a weak
energy market. Additional inventory reserve adjustments relate primarily to a
lower of cost or net realizable adjustment for inventory at our closed TMS
facility. Favorable manufacturing costs in 2020 were primarily due to the
Company's significant cost reduction actions, including cost control efforts
related to planned annual maintenance, slightly offset by the unfavorable impact
of lower production levels on fixed cost leverage. Raw material spread was
favorable due to higher scrap spread specifically during the third quarter of
2020.
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Selling, General and Administrative Expenses
The charts below present selling, general and administrative (SG&A) expense for
the three and nine months ended September 30, 2020 and 2019.
[[Image Removed]] [[Image Removed]]
Selling, general and administrative (SG&A) expense for the three and nine months
ended September 30, 2020 decreased by $3.5 million, or 16.4%, and $6.8 million,
or 10.5%, respectively, compared with the same periods in 2019. The decreases
are primarily due to lower wages and benefits expense which are a result of a
reduction in employee headcount following the Company's recent restructuring
actions, as well as unpaid furloughs for salaried employees which began in the
second quarter and ended in July 2020. Other COVID-19 related cost reduction
actions and lower controllable spend also contributed to the decreases. These
decreases are partially offset by increases in variable compensation.
Restructuring Charges
During 2019 and throughout 2020, TimkenSteel made organizational changes to
enhance profitable and sustainable growth. These company-wide actions included
the restructuring of its business support functions, the reduction of management
layers throughout the organization, the closure of the TMS facility in Houston,
Texas and other domestic and international actions to further improve the
Company's overall cost structure. Through these restructuring efforts, to date
the Company has eliminated approximately 210 salaried positions and recognized
restructuring charges of $10.2 million ($8.6 million in 2019 and $1.6 million in
2020), consisting of severance and employee-related benefits. Approximately 50
of these positions were eliminated in 2020. The Company expects to realize
annual savings of approximately $25 million as a result of these actions. Refer
to "Note 4 - Restructuring Charges" in the Notes to the unaudited Consolidated
Financial Statements for additional information.
Interest Expense
Interest expense for the three months ended September 30, 2020 was $3.0 million,
a decrease of $0.6 million, compared with the three months ended September 30,
2019. Interest expense for the nine months ended September 30, 2020 was $9.2
million, a decrease of $2.8 million, compared with the nine months ended
September 30, 2019. The decrease in interest expense in both periods was
primarily due to a reduction in outstanding borrowings as well as a lower
interest rate environment. Refer to "Note 10 - Financing Arrangements" in the
Notes to the unaudited Consolidated Financial Statements for additional
information.
Other Expense (Income), net
Three Months Ended September 30,
2020 2019 $ Change
Pension and postretirement non-service
benefit loss (income) $ (6.7 )$ (5.1 )$ (1.6 )
(Gain) loss from remeasurement benefit plan (4.1 ) - (4.1 )
Foreign currency exchange (gain) loss (0.1 ) 0.1 (0.2 )
Miscellaneous expense (income) 0.3 (0.2 ) 0.5
Total other expense (income), net $ (10.6 )$ (5.2 )$ (5.4 )
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Nine Months Ended September 30,
2020 2019 $ Change
Pension and postretirement non-service
benefit loss (income) $ (19.7 )$ (12.4 )$ (7.3 )
Loss from remeasurement of benefit plans 3.5 4.4 (0.9 )
Foreign currency exchange (gain) loss 0.3 - 0.3
Miscellaneous income (expense) (0.1 ) (0.1 ) -
Total other expense (income), net $ (16.0 )$ (8.1 )$ (7.9 )
Non-service benefit income is derived from the Company's pension and other
postretirement plans. The Company's expected return on assets has exceeded the
interest cost component, resulting in income for the three and nine months ended
September 30, 2020 and 2019.
The TimkenSteel Corporation Retirement Plan (Salaried Plan) has a provision that
permits employees to elect to receive their pension benefits in a lump sum. In
the first quarter of 2020, the cumulative cost of all lump sum payments was
projected to exceed the sum of the service cost and interest cost components of
net periodic pension cost for the Salaried Plan. As a result, the Company
completed a full remeasurement of its pension obligations and plan assets
associated with the Salaried Plan during each quarter of 2020, which resulted in
a non-cash (gain) loss from remeasurement of ($4.1) million and $3.5 million for
the three and nine months ended September 30, 2020, respectively. For more
details on the remeasurement, refer to "Note 11 - Retirement and Postretirement
Plans."
Provision for Income Taxes
Three Months Ended September 30,
2020 2019 $ Change
Provision (benefit) for income taxes $ 0.3$ (5.5 )$ 5.8
Effective tax rate (2.2 )% 24.4 % NM
Nine Months Ended September 30,
2020 2019 $ Change
Provision (benefit) for income taxes $ 0.6$ (8.3 )$ 8.9
Effective tax rate
(1.2 )% 24.6 % NM
The majority of the Company's income tax expense is derived from foreign
operations. The Company remains in a full valuation for the U.S. jurisdiction
for the three and nine months ended September 30, 2020 and 2019.
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NON-GAAP FINANCIAL MEASURES
Net Sales, Excluding Surcharges
The table below presents net sales by end market sector, adjusted to exclude
surcharges, which represents a financial measure that has not been determined in
accordance with accounting principles generally accepted in the United States
(U.S. GAAP). We believe presenting net sales by end market sector adjusted to
exclude raw material surcharges provides additional insight into key drivers of
net sales such as base price and product mix.
(dollars in millions, tons in thousands)
Three Months Ended September 30, 2020
Mobile Industrial Energy Other Total
Tons 90.3 59.3 4.7 - 154.3
Net Sales $ 103.1$ 90.7$ 7.0$ 5.1$ 205.9
Less: Surcharges 17.0 13.0 1.1 - 31.1
Base Sales $ 86.1$ 77.7$ 5.9$ 5.1$ 174.8
Net Sales / Ton $ 1,142$ 1,530$ 1,489 $ - $ 1,334
Surcharges / Ton $ 189$ 220$ 234 $ - $ 201
Base Sales / Ton $ 953$ 1,310$ 1,255 $ - $ 1,133
Three Months Ended September 30, 2019
Mobile Industrial Energy Other Total
Tons 93.0 87.1 17.7 11.8 209.6
Net Sales $ 110.2$ 116.9$ 32.6$ 14.5$ 274.2
Less: Surcharges 20.5 22.3 5.7 2.8 51.3
Base Sales $ 89.7$ 94.6$ 26.9$ 11.7$ 222.9
Net Sales / Ton $ 1,185$ 1,342$ 1,842$ 1,229$ 1,308
Surcharges / Ton $ 220$ 256$ 322$ 237$ 245
Base Sales / Ton $ 965$ 1,086$ 1,520$ 992$ 1,063
Nine Months Ended September 30, 2020
Mobile Industrial Energy Other Total
Tons 211.8 203.7 32.2 28.7 476.4
Net Sales $ 236.9$ 302.0$ 46.8$ 33.8$ 619.5
Less: Surcharges 40.3 46.4 7.5 7.1 101.3
Base Sales $ 196.6$ 255.6$ 39.3$ 26.7$ 518.2
Net Sales / Ton $ 1,119$ 1,483$ 1,453$ 1,178$ 1,300
Surcharges / Ton $ 191$ 228$ 233$ 248$ 212
Base Sales / Ton $ 928$ 1,255$ 1,220$ 930$ 1,088
Nine Months Ended September 30, 2019
Mobile Industrial Energy Other Total
Tons 316.1 276.0 80.1 46.4 718.6
Net Sales $ 389.7$ 388.2$ 147.5$ 56.5$ 981.9
Less: Surcharges 90.1 84.8 30.2 13.8 218.9
Base Sales $ 299.6$ 303.4$ 117.3$ 42.7$ 763.0
Net Sales / Ton $ 1,233$ 1,407$ 1,841$ 1,218$ 1,366
Surcharges / Ton $ 285$ 308$ 377$ 298$ 304
Base Sales / Ton $ 948$ 1,099$ 1,464$ 920$ 1,062
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LIQUIDITY AND CAPITAL RESOURCES
Convertible Notes
In May 2016, the Company issued $75.0 million aggregate principal amount of
Convertible Notes, plus an additional $11.3 million principal amount to cover
over-allotments. The Convertible Notes bear cash interest at a rate of 6.0% per
year, payable semi-annually on June 1 and December 1, beginning on December 1,
2016. The net proceeds received from the offering were $83.2 million, after
deducting the initial underwriters' discount and fees and paying the offering
expenses. The Convertible Notes will mature on June 1, 2021, unless earlier
repurchased or converted, and accordingly are classified as a current liability
in the Consolidated Balance Sheet as of September 30, 2020. We expect to have
adequate liquidity to retire the Convertible Notes using a combination of cash
and borrowing capacity on the Amended Credit Agreement, and/or the ability to
refinance prior to or at maturity.
Amended Credit Agreement
On October 15, 2019, the Company, entered into a Third Amended and Restated
Credit Agreement (the Amended Credit Agreement), with JP Morgan Chase Bank,
N.A., as administrative agent, Bank of America, N.A., as syndication agent, and
the other lenders party thereto, which further amended and restated the
Company's Second Amended and Restated Credit Agreement dated as of January 26,
2018.
The Amended Credit Agreement increased capacity to $400 million compared to $300
million in the previous facility and extended the maturity date to October 15,
2024. Furthermore, the Amended Credit Agreement provided for an enhanced asset
base with reappraised fixed assets and investment grade foreign accounts
receivable collateral in the borrowing base, improved interest rate spread
pricing by 50 basis points, and reduced the unused commitment fee to a fixed 25
basis points from the previous 37.5 to 50 basis point range.
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Additional Liquidity Considerations
The following represents a summary of key liquidity measures under the Amended
Credit Agreement as of September 30, 2020 and December 31, 2019:
September 30, December 31,
2020 2019
Cash and cash equivalents $ 74.8 $ 27.1
Credit Agreement:
Maximum availability $ 400.0 $ 400.0
Suppressed availability(1) (171.0 ) (103.0 )
Availability 229.0 297.0
Amount borrowed (20.0 ) (90.0 )
Letter of credit obligations (3.8 ) (3.8 )
Availability not borrowed $ 205.2 $ 203.2
Total liquidity $ 280.0 $ 230.3
(1) As of September 30, 2020, and December 31, 2019, TimkenSteel had less than
$400 million in collateral assets to borrow against.
Our principal sources of liquidity are cash and cash equivalents, cash flows
from operations and available borrowing capacity under our credit agreement. As
of September 30, 2020, taking into account our view of automotive, industrial,
and energy market demands for our products, and our 2020 operating and
long-range plan, we believe that our cash balance as of September 30, 2020,
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 obligations, for at least the next
twelve months.
The full extent to which the COVID-19 pandemic will impact our operations and
financial results is uncertain and ultimately will depend on, among many other
factors, the duration of the pandemic, further Federal and State government
actions and the speed of economic recovery. While the negative impact on the
remainder of the year and beyond remains unknown, at a minimum, we expect
customer demand in the COVID-19 environment will continue to be lower in the
fourth quarter of 2020 in comparison to the prior year fourth quarter. To the
extent our liquidity needs prove to be greater than expected or cash generated
from operations is less than anticipated, and cash on hand or credit
availability is insufficient, we would seek additional financing to provide
additional liquidity. We regularly evaluate our potential access to the equity
and debt capital markets as sources of liquidity and we believe additional
financing would likely be available if necessary, although we can make no
assurance as to the form or terms of any such financing. We would also consider
additional cost reductions and restructuring, changes in working capital
management and further reductions of capital expenditures. Regardless, we will
continue to evaluate additional financing or may seek to refinance outstanding
borrowings under the Amended Credit Agreement to provide us with additional
flexibility and liquidity. Any additional financing beyond that incurred to
refinance existing debt would increase our overall debt and could increase
interest expense.
On March 27, 2020, the President of the United States signed the Coronavirus
Aid, Relief, and Economic Security ("CARES") Act, an economic stimulus package
intended to provide support, principally in the form of tax benefits and
additional liquidity, to companies and individuals negatively impacted by the
COVID-19 pandemic. Although the majority of the provisions included in the CARES
Act did not immediately benefit the Company from a cash tax perspective due to
its significant net operating losses, the Company has taken advantage of the
deferral of the employer share (6.2% of employee wages) of Social Security
payroll taxes that would otherwise have been owed from the date of enactment of
the legislation through December 31, 2020, as afforded by the Act. Through
September 30, 2020, the Company deferred approximately $4.3 million of payroll
taxes as permitted by the CARES Act. Payroll tax deferrals in the fourth quarter
of 2020 are expected to total $2 million to $3 million, all of which will be
paid in two equal installments at December 31, 2021 and December 31, 2022. The
Company is currently evaluating the potential benefit related to the Employee
Retention Credit and intends to file for this credit in the fourth quarter of
2020.
For additional details regarding the Amended Credit Agreement and the
Convertible Notes, please refer to "Note 14 - Financing Arrangements" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2019.
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Cash Flows
The following table reflects the major categories of cash flows for the nine
months ended September 30, 2020 and 2019. For additional details, please refer
to the unaudited Consolidated Statements of Cash Flows included in this
quarterly report.
Nine Months Ended September 30,
2020 2019
Net cash provided (used) by operating activities $ 121.0 $ 24.3
Net cash provided (used) by investing activities (3.0 ) (21.7 )
Net cash provided (used) by financing activities (70.3 ) (5.8 )
Increase (Decrease) in Cash and Cash Equivalents $ 47.7 $ (3.2 )
Operating activities
Net cash provided by operating activities for the nine months ended
September 30, 2020 was $121.0 million compared to net cash provided of $24.3
million for the nine months ended September 30, 2019. The increase in cash
provided by operating activities of $96.7 million was primarily due to
management actions to improve working capital as well as the impact of lower
customer demand and production levels as compared to the same period in the
prior year. Refer to the unaudited Consolidated Statements of Cash Flows for
additional information.
Investing activities
Net cash used by investing activities for the nine months ended September 30,
2020 was $3.0 million, as compared to net cash used of $21.7 million for the
nine months ended September 30, 2019. Cash used by investing activities in the
first nine months of 2020 decreased as compared to the same period in 2019
primarily due to lower capital expenditures and proceeds from sales of property,
plant and equipment.
The Company expects its capital expenditures in 2020 to be within its previously
stated range of $15 million to $20 million (of which approximately $6 million
relates to growth initiatives and continuous improvement). The Company has no
material capital expenditure plans or commitments beyond 2020 at this time.
Financing activities
Net cash used by financing activities for the nine months ended September 30,
2020 was $70.3 million compared to net cash used by financing activities of $5.8
million for the nine months ended September 30, 2019, primarily due to higher
repayments on credit agreements in 2020 as compared to the same period in 2019.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial statements are prepared in accordance with U.S. GAAP. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. We review our critical accounting
policies throughout the year.
New Accounting Guidance
See "Note 2 - Recent Accounting Pronouncements" in the Notes to the unaudited
Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS
Certain statements set forth in this Quarterly Report on Form 10-Q (including
our forecasts, beliefs and expectations) that are not historical in nature are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In particular, Management's Discussion and
Analysis of Financial Condition and Results of Operations contains numerous
forward-looking statements. Forward-looking statements generally will be
accompanied by words such as "anticipate," "believe," "could," "estimate,"
"expect," "forecast," "outlook," "intend," "may," "plan," "possible,"
"potential," "predict," "project," "seek," "should," "target," "will," "would,"
or other similar words, phrases or expressions that convey the uncertainty of
future events or outcomes. You are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date of this Form 10-Q.
We caution readers that actual results may differ materially from those
expressed or implied in forward-looking statements made by or on behalf of us
due to a variety of factors, such as:
• deterioration in world economic conditions, or in economic conditions in any
of the geographic regions in which we conduct business, including additional
adverse effects from global economic slowdown, terrorism or hostilities.
This includes: political risks associated with the potential instability of
governments and legal systems in countries in which we or our customers
conduct business, and changes in currency valuations;
• the effects of fluctuations in customer demand on sales, product mix and
prices in the industries in which we operate. This includes: our ability to
respond to rapid changes in customer demand; 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;
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• the potential impact of the COVID-19 pandemic on our operations and
financial results, including cash flows and liquidity;
• 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
unions that represent 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,
and environmental issues and taxes, among other matters;
• 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; 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; and the amount of any dividend declared
by our Board of Directors on our common shares;
• the overall impact of the pension and postretirement mark-to-market
accounting; and
• those items identified under the caption Risk Factors in our Annual Report
on Form 10-K for the year ended December 31, 2019 and as updated herein.
You are cautioned that it is not possible to predict or identify all of the
risks, uncertainties and other factors that may affect future results, and that
the above list should not be considered to be a complete list. Except as
required by the federal securities laws, we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
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