Investor Presentation September 2012 SLIDES ONLY FINAL 10 ...tmsinternational.investorroom.com/download/2012+TMS+Internation… · Investor Presentation September 2012. 1 Safe Harbor

Investor Presentation

September 2012

1

Safe Harbor Provision

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.

1

2

Management Team

� Joe Curtin: Chairman, President and CEO

� Ray Kalouche: Chief Operating Officer, and President and COO

of the Mill Services Group

� David Aronson: COO, Raw Materials and Optimization Group

� Tom Lippard: Executive Vice President & General Counsel

� Dan Rosati: Executive Vice President & CFO

� Kelly Boyer: VP, Investor Relations & Treasurer

2

3

Company Overview

Current Operating Environment

Global Growth Strategy

Financial Overview

Outlook

3

Agenda

4

Company Overview

4

5

A Leading Provider of Mission Critical Services Throughout the Steel Production Process

TMS enables steel producers to generate substantial operational efficiencies and cost savings

Raw Materials Procurement and Logistics

Proprietary, Software-Based Raw Materials

Cost Optimization

Scrap Management

and Preparation

Semi-Finished and Finished

Material Handling

Metal Recovery and Slag Handling,

Processing and Sales

Surface Conditioning

Pre-Steel Making Post-Steel MakingSteel Making

Raw Material and Optimization Group (RMOG)

Mill Services Group (MSG)

5

6

Outsourcing to TMS Allows Steel Producers to Focus on Their Core Business – Making Steel

Iron Ore

Coke

Limestone

Blast FurnaceProduces molten pig iron

from iron ore

Scrap Steel

Electric Arc FurnaceProduces molten steel

Pig Iron

Basic Oxygen FurnaceProduces molten steel

TMS is embedded in all phases of our customers’’’’ operations –providing mission critical services throughout the steel-making process

80-85%

As

Ne

ed

ed

fo

r q

ua

lity

Rolling/FinishingFacilities

Slag

70-75%

80-85%15-20%

SurfaceConditioning

Liquid Steel ===��to Casting85-87%

Aggregate

On-SiteTransport

Finished Goods

Loading Dock/Rail/Truck

On-SiteTransport

On-SiteTransport

Liquid Steel ===��to Casting

Semi-Finished Material

Raw Materials Sourcing & Logistics

6

7

� Contracts typically have minimums/tiered pricing

� Approximately 80% of cash operating costs

variable

� Capital not spent until contract is signed

� Long-term contracts with price indexing provides

good visibility

Leading Global Provider of Outsourced Services to Steel Mills

Raw Materials Procurement and Logistics

Proprietary, Software-Based Raw Materials Cost

Optimization

Scrap Management and Preparation

Semi-Finished and Finished Material Handling

Metal Recovery and Slag Handling, Processing

and Sales

Surface Conditioning

Mill Services Group

� 34 offices supporting global operations� 82 customer sites in 11 countries

UniqueBusiness

ModelReduces

CyclicalityAnd Risk

Operations

Services / North

America Market Share

#1

#1

#1

#1

#2

#1

TTM at 06/30/12

Revenue After Raw Materials Costs: $587MM

Adjusted EBITDA: $141MM

Raw Material and Optimization Group

� Minimal inventory and commodity price risk

� No capital required for growth

7

88

Broadest Portfolio of Services in the Industry

Coverage

Scrap

Management

and

Preparation

Semi-Finished

and Finished

Material Handling

Metal Recovery

and Slag Handling

Processing and

Sales

Surface

Conditioning

Raw Materials

Procurement and

Logistics

Proprietary,

Software-Based

Raw Materials

Cost Optimization

Global �� 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

ManagementGlobal ��

Omnisource

(owned by SDI)U.S Regional ��

TSR Recycling Europe/Asia ��

9

9

2005 2006 2007 2008 2009 2010 2011 1Q12 2Q12

EAF Mills (SMA) 4.01 4.32 4.33 3.97 3.19 4.15 4.91 2.98

Integrated Mills (AISI) 5.42 3.63 2.64 2.33 1.97 2.45 1.87

Slag (NSA) 6.47 6.46 4.7 4.47 2.72 3.25

TMS 4.17 4.7 3.06 2.6 0.93 1.44 1.51 1.48 1.57

0

1

2

3

4

5

6

7

Note: Rates are calculated using the OSHA formula which is multiplying the number of recordable injuries by 200,000 and dividing by the total number of hours worked.

IncidentRates

Our industry leading safety record, which is our #1 priority, and strong operational expertise set us apart from other companies in our industry.

This, in turn, helps us maintain our high contract renewal rate - which is 97% since 2005.

TMS Target: 0

Industry Leading Safety Performance

10

Long-Standing Relationships with World’’’’s Leading Steel Producers

CustomerNumber of TMS Sites

Years of Service (1)

AK Steel 4 24

ArcelorMittal 12 72

CMC 3 18

Evraz 2 23

Gerdau 11 35

Nucor 9 33

SSAB 1 23

Tata Steel 2 51

Ternium 2 5

United States Steel 9 69

Average length of service >34

(1) Includes service to predecessor entities.

� Customer base includes 12 of top 15 largest global steel producers by volume

� Average length of top 10 customer relationships –over 34 years

� Offer broadest portfolio of services

� Deep operational integration

� Contracts written on a site-level and service-level basis, mitigating potential customer concentration

� Mission-critical, cost-effective service offerings

Contracts are written on a site-by-site basis which reduces the risk associated with customer concentration

10

11

Strong North American Base with Significant Global Scale and Growing Geographic Diversification

Revenue by Geography

International Revenue after Raw Material Costs has increased from 6% in 2007 to 26% YTD 6/30/12

2007 6/30/12

YTD

North America 94% 74%

International 6% 26%Raw Material Procurement Offices

Mill Services Locations

Point Lisas

Monclova

Monterrey

Puebla

Saltillo

Ho Chi Minh City

Singapore

Jakarta

Kaohsiung Taichung

Beijing

Dubai Abu Dhabi

Vanderbijlpark S.A Saldanha, S.A.

Kosice

Smederevo

GentImmingham

Florange

Le Creusot

Teeside

Sheffield

DunkerqueCommentry

Marseilles

Genk

ScunthorpeMN

SaskatchewanIPSCO

(Regina)

UTNucor Steel

(Plymouth)

IANorth Star Steel

(Wilton)

ARMacSteel

(Ft. Smith) GAGerdau

AmeriSteel

WICharter Steel(Saukville)

L'Orignal

NYNucor Steel

(Auburn)

WVISGWeirton Steel

(Weirton)

IL

MN

OR

MS

DE

Saskatchewan

Regina

UT

AR

GA

WI

Ontario

NY

TN

TX

NE

IN

SC

CA

VA

MI

PA

OH NJ

AZ

KY

FL

AL

CT

Belo Horizonte

Seoul

WA

11

12

Current Operating Environment

12

13

Steel Production and Outsourcing Expanding Globally

Notes: Figures represent CAGR over stated period. Regional GDP and Industrial Production represents a weighted average of selected countries in region.

Source: CRU International as of August 2012 and Economist Intelligence Unit as of July 2012.

Middle East ’’’’12-’’’’16

Steel Production: 6.4%

GDP: 3.8%

Industrial Production: 4.2%

China ’’’’12-’’’’16


GDP: 8.1%


South Africa’’’’12-’’’’16


GDP: 3.7%


Eastern Europe / Russia’12-’16


GDP: 3.5%


Turkey ’12-’16


GDP: 5.0%


Brazil ’12-’16


GDP: 4.1%


Latin America ’12-’16


GDP: 4.2%


Mexico ’12-’16


GDP: 3.7%


India ’’’’12-’’’’16


GDP: 7.8%


United States / Canada’12-’16


GDP: 2.2%


Steel production is a global growth industry and outsourcing services is growing in every region

13

14

680 696 667

508621 654 669 687 706 726

569649 662

724

795859

894926

955982

0

500

1,000

1,500

2,000

2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F

14

Robust Steel Production Growth Expected

Global Steel Production

Continued Growth Expected Through 2015

(in millions of metric tons)

Rest of WorldBRIC

1,249 1,231

1,345 1,3301,416

1,5131,563

1,6131,660

1,708

Source: AME, June 2012

130 131

123

82

110

117120

123126

130

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F

North American Steel Production(in millions of metric tons)

Source: AME, June 2012

15

0

500

1,000

1,500

2,000

1990 1995 2000 2005 2010 2015

15.1

12.6

8.6

11.913.1

14.9 15.316.0

0.0

4.0

8.0

12.0

16.0

20.0

2007 2008 2009 2010 2011 2012F 2013F 2014F

30

40

50

60

70

80

90

100

2002 2004 2006 2008 2010 2012

North American Demand Continues to Rebound

Service Center Inventories Still LowCap Utilization Recovering From LowsTotal Steel Inventories (mm tons)

Source: MSCI, July 2012

Capacity Utilization %

Source: AISI, September 2012

85.4

75.4

U.S. Steel Industry Capacity Utilization 2002-2008 Average Utilization

0

4,000

8,000

12,000

16,000

2005 2007 2009 2011

NA Vehicles Production Rebounding

(in millions)

Source: IHS AutoInsight, July 2012

U.S. steel industry recovery being driven by auto, energy, industrial and agricultural end-markets

Delayed Rebound in Non-Res Construction

(in million sq. feet)

Source: McGraw Hill, July 2012

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16

Increased Adoption of Outsourcing as a Best Practice

Notes: Size of bubble represents current market size based on current Crude Steel Production Source: Management, CRU.Expected Market Growth is based on 2011E – 2015E Crude Steel Production CAGR. Source: CRU.

Expected Market Growth

Ma

turi

ty o

f S

tee

l S

erv

ice

s

Ou

tso

urc

ing

Ma

rke

t

Low High

Lo

wH

igh

China

APACex-China

MiddleEast

EasternEurope / Russia Latin

America

WesternEurope

North America

16

Increasing

Acceptance

of Outsourcing

as a

Best Practice

17

Global Growth Strategy

17

18

Our Growth Strategy

18

� Continue to expand our global raw materials procurement network

� Win new service contracts globally

- Expand to new locations

- Cross sell services at existing locations

- Take advantage of new outsourcing opportunities

� Selectively expand service and product offerings

� Selectively pursue acquisitions and partnerships

19

Current Operational Highlights

� The North American market, where we are the market leader, continues to

be healthy and strong

� TMS European sites continue to operate at above average levels for Europe

� Company will continue to deploy capital where it makes sense and based on

strict ROIC hurdle rates

� Continued focus on strong cash flow generation

19

20

August YTD 2012:

� 13 new contracts wins

- Seven international contracts

- 11 of the 13 were the result of cross-selling efforts

� Startups are performing as expected

� Pipeline of opportunities remains strong

2011:

� Nine new contract wins

- Eight international contracts

- Three contract wins in new geographies (Middle East and South Africa)

- Two contract wins were cross-sells at existing sites

Summary of New Contracts:

RK

MSG Operational HighlightsAugust YTD 2012 and 2011

2011 August YTD 2012

# of contract wins 9 13

Additional revenue backlog $433MM $270MM

Growth capital commitment $60 - $65MM $30 - $35MM

Average new contract term 5 - 10 years 7 - 15 years

20

21

� Risk-minimizing business model validated in 2Q results

� Continued to strengthen and diversify global procurement network

- 34 offices covering 5 continents

- Traders hired and offices opened in Mexico, Brazil, Texas and Dubai

- Opened Miami office to cover Latin America

- Opened new office in Indiana to serve as a central support location for International activities

- Continuing to expand commodity menu

� Continued success with large vessel transactions contributed positively to

per ton margins

RK

RMOG Operational HighlightsAugust YTD 2012

21

22

Financial Overview

22

23

Unique Business Model Reduces Cyclicality and Risk

DR

- Average term of contracts: 7 years- Average length of relationship: 34 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

Procurement contracts matched with customer orders

Long-term contracts with long-term customers

BUSINESS MODEL ATTRIBUTESBUSINESS 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

23

Two complementary business segmentsComplementary segments produce cross-selling opportunities and more complete

knowledge of customer needs

24

Strong Adjusted EBITDA Margins 24% to 26%

High Discretionary Cash Margins (1)

Variable Operating Cost Structure~80%

Superior Contract Renewal Rate (2) >97%

Long-Term Contracted Revenue Base88%

Highly Visible Contracted Backlog (3) (4)

(1) Discretionary Cash is defined as Adjusted EBITDA – Maintenance Capital Expenditures.

(2) Since 2005.

(3) Estimated future Revenue After Raw Materials Costs over existing contracts’ remaining terms.

(4) As of June 30, 2012

1

2

3

4

5

6$1.8 billion

7 Strong Balance Sheet with Significant Liquidity (4) $350MM Revolver

$27MM Cash

24

Attractive Financial Profile

~17% to 19% of

Revenue After Raw

Materials Costs

25

Historical Financial Performance

Revenue After Raw Materials Costs ($MM)Total Revenue ($MM)

Adjusted EBITDA ($MM)

$54 $54

$67 $68

$89$92

14.2% 13.1%

14.4%

19.0% 19.0% 16.8%

0%

5%

10%

15%

20%

25%

30%

$0

$20

$40

$60

$80

$100

2006 2007 2008 2009 2010 2011

DCP % of Revenue After Raw Materials Costs

Discretionary Cash Production4 ($MM)

4 Adjusted EBITDA – Maintenance Capex

Revenue Growth and Disciplined Cost Management Driving Leading Margins

$1,376

$1,670

$2,983

$1,298

$2,031

$2,661

$224$257

$384

$209

$332$411

$0

$100

$200

$300

$400

$500

$600

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2006 2007 2008 2009 2010 2011

Total Revenue Average Scrap Price / Ton1

3 % of Revenue After Raw Materials Costs

$378$410

$467

$358

$466

$549

85.3%

86.4%

81.2%

51.0%

70.1% 74.8%

0%

25%

50%

75%

100%

$0

$100

$200

$300

$400

$500

$600

2006 2007 2008 2009 2010 2011

Rev enue Af ter Raw Materials CostsU.S. Steel Industry Capacity Utilization

2 2012P EBITDA based off midpoint of 2012 guidance ($142-$148 million)

1 #1 Heavy Melt, American Metal Market

3

2

25

26

2012 Financial Highlights

Quarter Ended June 30($MM)

YTD June 30($MM)

2012 2011%

Change 2012 2011%

Change

Avg. U.S. Steel Industry Capacity Utilization

78.6% 74.0% +5% 78.2% 74.2% +5%

Revenue After Raw Materials Costs

$153.6 $137.0 +12% $309.5 $272.3 +14%

Adjusted EBITDA $37.8 $33.5 +13% $74.6 $68.1 +10%

Discretionary Cashflow (1)

$28.2 $22.9 +23% $57.2 $50.2 +14%

Growth Capital (2) $12.6 $3.6 $38.1 $8.1

(1) Defined as Adjusted EBITDA less Maintenance Capital Expenditures.

(2) Capital expenditures includes 2011 carry-forward.

New contract wins in MSG and new business wins in RMOG driving significant year-over-year growth

26

27

� Significant liquidity available and no debt maturities until December 2016

� Cash interest savings from new term debt structure: $8.5MM before taxes

� New $300MM Senior Secured Term Loan completed on March 20, 2012

� ABL Revolver facility increased from $165MM to $350MM on Dec 15, 2011

� Corporate ratings: BB- (S&P, 4Q 2011) and Ba3 (Moody’s, 1Q 2012)

Capital Structure Summary

($MM) Rate Maturity

ABL Revolver ($350MM facility) $0 L + 150/225 Dec 2016

Senior Secured Term Loan $297 L + 450 (1) Mar 2019

Capital Leases and Other $13

Total Debt $310

Less: Cash $27

Net Debt $283

Adjusted EBITDA (TTM 2Q 2012) $141

Net Debt / EBITDA 2.0x

27

6/30/2012

(1) LIBOR floor of 1.25%.

28

Outlook

28

29

2012 Focus

� Continue global expansion of Mill Service contracts by selectively

penetrating new locations and cross-selling services

� Expand Outsourced Purchasing presence in Asia, Middle East/Africa, Latin

America and Europe

� Carefully manage start-ups to ensure smooth operational transitions and

achievement of profitability forecasts

� Continue to monitor customer production volumes and implement cost-

actions, if necessary

- Continued stringent cost discipline

� 2012 Adjusted EBITDA guidance of $142 - $148 million

29

Investor Presentation September 2012 SLIDES ONLY FINAL 10 ...tmsinternational.investorroom.com/download/2012+TMS+Internation… · Investor Presentation September 2012. 1 Safe Harbor

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