Attached files
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| 8-K - FORM 8-K - TMS International Corp. | d488543d8k.htm |
 Investing in TMS: An Overview
Exhibit 99.1 |
 Safe
harbor provision 1
This presentation includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, (the “Exchange Act”), as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to
our financial condition, results of operations and business and our expectations or beliefs concerning
future events. Such forward-looking statements include the discussions of our business
strategies, estimates of future global steel production, trends toward outsourcing and other
market metrics and our expectations concerning future operations, margins, profitability,
liquidity and capital resources, among others. Although we believe that such forward-looking statements are
reasonable, there can be no assurance that any forward-looking statements will prove to be
correct. Such forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by such
forward-looking statements. Certain areas of this presentation depict Revenue After Raw
Materials Costs, EBITDA and Discretionary Cash Flow, which are non-GAAP
financial measures. Revenue After Raw Materials Costs, EBITDA and Discretionary Cash Flow
are not and should not be considered alternatives to revenues or net income or any other financial
measure under U.S. GAAP. We reconcile these measurements to GAAP in our quarterly and annual
reports on forms 10-Q and 10-K, filed with the S.E.C. pursuant to the Exchange Act. Our
calculation of Revenue After Raw Materials Costs, EBITDA and Discretionary Cash Flow may differ
from methods used by other companies. When we use the term “North America” in
this presentation, we are referring to the United States and Canada; when we use the term
“International,” we are referring to countries other than the United States and Canada; when we use the
term “Latin America,” we are referring to Mexico, Central America, South America and
the Caribbean, including Trinidad & Tobago. |
 Why
invest in TMS? Market-leading global industrial services provider
Significant growth profile
Long-term contracted revenue and variable cost structure
Experienced and proven management team
Superior financial strength and liquidity
Strong cash flow generation drives earnings growth
2 |
 TMS
enables steel producers to lower costs and generate operational
efficiencies STEEL PRODUCERS
Integrated/EAF mills
MSG
(Mill Services Group)
RMOG
(Raw Material & Optimization Group)
3
TMS POST-STEEL MAKING SERVICES
Metal
recovery, slag
handling, and
sales
Material
handling
Surface
conditioning
TMS PRE-STEEL MAKING SERVICES
Raw materials
procurement
and logistics
Lowest cost
liquid steel
optimization
Scrap
management
and
preparation |
 Countries of operation
2007
6
2012
19
TMS’
global footprint and established platform for growth
Strong North American base and growing international operations demonstrates
the strength and diversity of TMS’
global growth platform.
Revenue after raw materials costs ($MM)
2007
$410
2012
$607
International revenue (% of total)
2007
6%
2012
26%
TMS’
Operations / Offices
Countries of operation: Belgium, Brazil, Canada, China, France, Indonesia,
Malaysia, Mexico, Poland, Singapore, Slovakia, South Africa, South Korea,
Taiwan, Trinidad, U.A.E., United Kingdom, United States, Vietnam 4
|
 TMS
– A global growth story
Three factors
and
trends
driving
TMS’
growth:
1)
Global steel production growing
2)
Increased demand for outsourcing globally
3)
Increased global market share
REVENUE AFTER RAW MATERIALS COSTS ($MM)
ADJUSTED EBITDA ($MM)
5
$410
$467
$358
$466
$549
$607
0
$200
$400
$600
$800
2007
2008
2009
2010
2011
2012
$92
$103
$84
$120
$134
$145
0
$40
$80
$120
$160
2007
2008
2009
2010
2011
2012 |
 TMS
– A global growth story
1) Global steel production is growing
RMOG
•
The need for raw materials
increase as volumes
increase
•
Opportunities to do more
transactions increase as
volumes increase
•
Opportunities to expand
our product offering
increase as volumes
increase
MSG
•
Revenues increase as
volumes increase
•
Cross-selling opportunities
increase as volumes
increase
•
The need for cost-efficient
solutions increase as
volumes increase
6
Source: CRU
1,339
1,856
STEEL PRODUCTION BY REGION (MM TONS)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2007
2008
2009
2010
2011
2012
2013P
2014P
2015P
2016P
2017P
China
Asia X
-
China
Latin America
Middle East/Africa
Europe
North America |
 Maturity of outsourcing by market
TMS –
A global growth story
2) Outsourcing services is gaining acceptance worldwide
Why is the outsource services
market growing?
Steel industry consolidation
drives global best practices and
increases outsourcing
Global awareness and cultural
change increases outsourcing
Demand for cost efficiencies
increases outsourcing
Global volume increases
China
North
America
Western
Europe
Eastern
Europe
Middle East /
Africa
Asia
X-China
Latin
America
< More Mature
Less Mature >
TMS’
ESTIMATES OF OUTSOURCED SERVICES MARKET BY REGION
7
2017
$1.0 Billion
$700MM
$200MM
$400MM
$200MM
$70MM
$30MM
2012
North America
European Union
Non-EU Europe/CIS
Latin America
Middle East/Africa
Asia/Oceania (x-China)
China
$500MM
$500MM
$300MM
$100MM
$200MM
$1.3 Billion
$900MM
$2.6 Billion
$3.8 Billion |
 TMS
– a global growth story
3) Gaining market share
Why is TMS gaining market share?
Broadest portfolio of services
Modular approach to customer
penetration
Cross-selling opportunities
Corporate culture focused on safety and
customer service
Industry-leading safety record
Average length of relationship for top 15
customers –
35 years
Decades of experience
Started in 1926
Unmatched record of quality & service
Only company with both MSG
and RMOG
Unique and deep market knowledge
Allows us to partner with our customers to
provide unique solutions
Global infrastructure
Global platform already well-established
Can deploy anywhere in the world we
choose
TMS REVENUE AFTER RAW MATERIALS COSTS BY REGION ($MM)
8
$410
$467
$358
$466
$549
$607
0
$200
$400
$600
$800
2007
2008
2009
2010
2011
2012
North America
Europe
Latin America
Middle East/Africa
Asia/Other |
 TMS
has the broadest portfolio of services in the industry Harsco
Corporation
(Metals
& Minerals Segment)
Global
Phoenix Services
Global
Edward C. Levy
(Steel Mill Services
Segment)
Global
Stein
U.S. /
Regional
David J. Joseph
(owned by Nucor)
Global
Schnitzer Steel
Global
Sims Metal
Management
Global
Omnisource
(owned by SDI)
U.S. /
Regional
TMS
Global
Coverage
Raw
materials
procurement
and logistics
Lowest cost
liquid steel
optimization
Scrap
management
and preparation
Metal recovery,
slag handling,
and sales
Material
handling
Surface
conditioning
9 |
 RK
2011
2012
2013 YTD
EBITDA (MSG segment only)
$118MM
$130MM
—
Maintenance capital spend
$42MM
$43MM
—
Growth capital spend*
$41MM
$68MM
—
# of MSG contract wins
9
17
3
Cross-sells
2
15
2
International
8
7
2
Growth capital commitment**
$60 -
$65MM
$35 -
$40MM
$50 -
$55MM
Added revenue backlog
$433MM
$307MM
$266MM
New countries penetrated
UAE
South Africa
Poland
Malaysia
MSG operational highlights (2011-2013 YTD)
Notes:
2013:
Announced largest single
contract win in the history
of the company providing
mill services in Poland
Entered JV agreement to
provide mill services to
one of Malaysia’s largest
steel mills***
Pipeline of opportunities
remains strong
2012:
Start-ups are performing
as expected
Record number of
contract wins
Strong year for cross-sells
*Capital incurred in the period.
**Growth capital commitment is the total capital expected to be spent on the
contract wins in the period. ***Represents a minority interest
investment. 10 |
 RMOG
operational highlights #
of
Offices
–
Asia
2007
1
2012
8
#
of
Offices
–
Europe
2007
3
2012
2
#
of
Offices
–
North
America
2007
11
2012
23
#
of
Offices
–
Latin
America
2007
0
2012
1
#
of
Offices
–
Middle
East
/
Africa
2007
0
2012
1
11
Expanded our web of traders worldwide with 35 offices across 5 continents
13.4 million tons of raw materials brokered and managed in 2012
2.4 million tons of raw materials internationally brokered and managed in
2012 Continued to increase our diversity in new commodities traded
Unique risk-minimizing profile
•
Primarily back-to-back transactions
•
Limited inventory risk |
 Unique business model reduces cyclicality and risk
-
Average term of contracts: 7 years
-
Average length of relationship: 35 years
Tiered pricing structure
Minimum monthly fees regardless of volume
Price adjustments based on published
price indices
Approximately 80% of operating costs variable
Variable maintenance capital expenditures
Long-term contracts with long-term customers
BUSINESS MODEL ATTRIBUTES
BUSINESS MODEL STRENGTHS
Revenue grows as steel production grows –
not linked to steel prices
Built-in protection from:
1) steel production declines and
2) increases in key operating costs
Ability to respond quickly to changing business
conditions
Maintenance capital expenditures tied to
equipment utilization
Minimal inventory and commodity price risk
Procurement orders matched with customer
orders
12 |
 TOTAL REVENUE
ADJUSTED EBITDA
DISCRETIONARY CASH PRODUCTION
4
Historical financial performance
Revenue growth and disciplined cost management driving strong and consistent cash
flow 13
REVENUE AFTER RAW MATERIALS COSTS
1
2
$1,670
$2,983
$1,298
$2,031
$2,661
$2,526
$257
$384
$209
$332
$411
$368
0
100
200
300
400
500
600
$0
$1,000
$2,000
$3,000
$4,000
2007
2008
2009
2010
2011
2012
Total Revenue ($MM)
Average Scrap Price / Ton
$410
$467
$358
$466
$549
$607
86.4%
81.2%
51.0%
70.1%
74.8%
75.1%
0%
25%
50%
75%
100%
$0
$200
$400
$600
$800
2007
2008
2009
2010
2011
2012
Revenue After Raw Materials Costs ($MM)
U.S. Steel Industry Capacity Utilization
$92
$103
$84
$120
$134
$145
$152-$160
22.8%
22.1%
23.4%
25.7%
24.4%
24.0%
0%
10%
20%
30%
40%
50%
$0
$50
$100
$150
$200
2007
2008
2009
2010
2011
2012
2013
Adjusted EBITDA ($MM)
% Margin³
$54
$67
$68
$89
$92
$102
13.1%
14.4%
19.0%
19.0%
16.8%
16.8%
0%
5%
10%
15%
20%
25%
30%
$0
$20
$40
$60
$80
$100
$120
2007
2008
2009
2010
2011
2012
DCP ($MM)
% of Revenue After Raw Materials Costs
1
#1 Heavy Melt, American Metal Market
2
2013 Guidance
3
% of Revenue After Raw Materials Costs
4
Adjusted EBITDA –
Maintenance Capex |
 Fourth Quarter
($MM)
Full Year
($MM)
2012
2011
% Change
2012
2011
%
Change
Revenue after raw
materials costs
$148.3
$137.9
+7.5%
$606.7
$549.5
+10.4%
Adjusted EBITDA
$35.0
$31.7
+10.4%
$145.3
$134.0
+8.4%
Discretionary
cash
flow
1
$20.6
$18.4
+12.0%
$102.6
$92.1
+11.3%
Growth capital
$11.6
$18.1
$68.1
$41.4
Leverage ratio
2.0x
2.1x
2.0x
2.1x
1
Adjusted EBITDA less Maintenance Capital Expenditures.
Fourth quarter and full year financial highlights
14
Continued global expansion drives year-over-year growth
|
 Concluding remarks
Investment highlights
Market-leading global industrial services provider
Significant growth profile
Long-term contracted revenue and variable cost structure
Experienced and proven management team
Superior financial strength and liquidity
Strong cash flow generation drives earnings growth
Factors driving growth
Global steel production growing
Increased demand for outsourcing globally
Increased global market share
2013 Adjusted EBITDA guidance of $152 -
$160 MM
15 |
 Appendix |
 Case
study: Growing with our customers internationally Customer A is one of the
world’s largest and most global steel producers We proved our
international capabilities with this customer in 2006 offering one service at one mill site
We have grown this relationship by providing cost-efficient and outstanding
service We are now on their short list for most new contracts globally
Today, we
offer
a
variety
of
services
with
an
on-site
presence
at
13
locations
in
6
countries.
Customer A
has 65 sites globally.
Customer A
2006
2007
2008
2009
2010
2011
2012
2013
Number of sites
5
6
7
8
9
10
12
13
Number of countries
2
3
4
4
4
4
5
6
16 |
 CUSTOMERS
Case study: Entering the Mexican market
Entered the market in 2008 at 1 site providing metal recovery services
Today, we have on-site presence at 4 locations in Mexico
Opened a procurement office in Monterrey from which we broker and manage
a diverse group of raw materials
Mexico is
the
13th
largest
steel
producer
in
the
world
with
18.2
million
tons
produced in 2012 at 10 mills
TMS growth from:
1.
Continued steel production growth
2.
Increased outsourcing by steel producers
3.
Increasing market share
2008
2009
2010
2011
2012
Number of sites
2
2
2
3
4
17 |
 TMS
enables steel producers to lower costs and generate operational
efficiencies Blast Furnace
Produces molten pig iron
from iron ore
Electric Arc Furnace
Produces molten steel
Pig Iron
Basic Oxygen Furnace
Produces molten steel
Rolling/Finishing
Facilities
Slag
80-85%
15-20%
Surface
Conditioning
Liquid Steel ===
to Casting
Aggregate
On-Site
Transport
Finished
Goods
Loading
Dock/Rail/Truck
On-Site
Transport
Liquid Steel ===
to Casting
Semi-Finished
Material
TMS is embedded in all phases of our customers’
operations –
providing mission critical services
throughout the steel-making process
18 |
 |