Investor Presentation
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
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
Company Overview
Current Operating Environment
Global Growth Strategy
Financial Overview
Outlook
Company Overview
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 Making
Steel Making
Raw Material and Optimization Group (RMOG)
Mill Services Group (MSG)
Outsourcing to TMS Allows Steel Producers to Focus
on Their Core Business – Making Steel
Iron Ore
Coke
Limestone
Blast Furnace
Produces molten pig iron from iron ore
Scrap Steel
Electric Arc Furnace
Produces molten steel
Pig Iron
Basic Oxygen Furnace
Produces molten steel
TMS is embedded in all phases of our customers
’
’
’
’
operations –
providing mission critical services throughout the steel-making process
80-85% A s N e e d e d fo r q u a li ty Rolling/Finishing Facilities Slag 70-75% 80-85% 15-20% Surface Conditioning
Liquid Steel ===to Casting 85-87% Aggregate On-Site Transport Finished Goods Loading Dock/Rail/Truck On-Site Transport On-Site Transport
Liquid Steel ===to Casting
Semi-Finished Material Raw Materials Sourcing & Logistics 6
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
Unique Business Model Reduces Cyclicality And 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
8
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 & MineralsSegment)
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 TSR Recycling Europe/Asia2005 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.
Incident
Rates
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
Long-Standing Relationships with World
’
’
’
’
s
Leading Steel Producers
Customer Number 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
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 Gent Immingham Florange Le Creusot Teeside Sheffield Dunkerque Commentry Marseilles Genk Scunthorpe MN Saskatchewan IPSCO (Regina) UT Nucor Steel (Plymouth) IA
North Star Steel (Wilton) AR MacSteel (Ft. Smith) GA Gerdau AmeriSteel WI Charter Steel (Saukville) L'Orignal NY Nucor Steel (Auburn) WV ISGWeirton 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
Current Operating Environment
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.
Middle East ’’’’12-’’’’16 Steel Production: 6.4% GDP: 3.8% Industrial Production: 4.2% China ’’’’12-’’’’16 Steel Production: 4.9% GDP: 8.1% Industrial Production: 11.5% South Africa ’’’’12-’’’’16 Steel Production: 5.2% GDP: 3.7% Industrial Production: 4.6%
Eastern Europe / Russia
’12-’16 Steel Production: 3.0% GDP: 3.5% Industrial Production: 4.2% Turkey ’12-’16 Steel Production: 4.1% GDP: 5.0% Industrial Production: 5.5% Brazil ’12-’16 Steel Production: 5.2% GDP: 4.1% Industrial Production: 4.0% Latin America ’12-’16 Steel Production: 5.5% GDP: 4.2% Industrial Production: 4.1% Mexico ’12-’16 Steel Production: 3.6% GDP: 3.7% Industrial Production: 4.8% India ’’’’12-’’’’16 Steel Production: 7.4% GDP: 7.8% Industrial Production: 8.2%
United States / Canada
’12-’16 Steel Production: 2.9% GDP: 2.2% Industrial Production: 3.1%
680 696 667 508 621 654 669 687 706 726 569 649 662 724 795 859 894 926 955 982 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 World BRIC 1,249 1,231 1,345 1,330 1,416 1,513 1,5631,613 1,6601,708
Source: AME, June 2012
130 131 123 82 110 117 120 123 126 130 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)
0 500 1,000 1,500 2,000 1990 1995 2000 2005 2010 2015 15.1 12.6 8.6 11.9 13.1 14.9 15.3 16.0 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 Low
Cap Utilization Recovering From Lows
Total 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)
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
M a tu ri ty o f S te e l S e rv ic e s O u ts o u rc in g M a rk e t Low High L o w H ig h China APAC ex-China Middle East Eastern Europe / Russia Latin America Western Europe North America 16 Increasing Acceptance of Outsourcing as a Best Practice
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
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
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:
MSG Operational Highlights
August 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
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
RMOG Operational Highlights
August YTD 2012
Financial Overview
Unique Business Model Reduces Cyclicality and Risk
- 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
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
Two complementary business segments
Complementary segments produce cross-selling opportunities and more complete
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 Base
88%
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
$27MM Cash
24
Attractive Financial Profile
~17% to 19% of
Revenue After Raw
Historical Financial Performance
Revenue After Raw Materials Costs ($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 $100 2006 2007 2008 2009 2010 2011DCP % of Revenue After Raw Materials Costs
Discretionary Cash Production
4($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 2011Total 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 Costs U.S. Steel Industry Capacity Utilization
2 2012P EBITDA based off midpoint of 2012 guidance ($142-$148 million) 1 #1 Heavy Melt, American Metal Market
3
2012 Financial Highlights
Quarter Ended June 30
($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
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
6/30/2012
