TimkenSteel Corporation

Good day, and thank you for standing by. Welcome to the Timpkins Steel first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Jennifer Beeman. Ma'am, please go ahead.

Thanks, and good morning, and welcome to Timken Steel's first quarter 2021 conference call. I'm Jennifer Beeman, Senior Manager of Communications and Investor Relations for Timken Steel. Joining me today is Mike Williams, President and Chief Executive Officer, and Chris Westbrooks, Executive Vice President and Chief Financial Officer. You all should have received a copy of our press release, which was issued last night. During today's conference call, we may make forward-looking statements as defined by the SEC. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in yesterday's release. Please refer to our SEC filings, including our most recent Form 10-K and Form 10-Q and and the list of factors included in our earnings release, all of which are available on the Timken Steel website. Where non-GAAP financial information is referenced, additional details and reconciliations to its GAAP equivalent are also included in the earnings release. With that, I'd like to turn the call over to Mike. Mike?

Thank you, Jennifer, and thanks to everyone on the call for joining us this morning. We have enjoyed a strong start to our year thanks to the recovery in the automotive and industrial markets and our improving cost structure. As a result, in the first quarter, our adjusted EBITDA nearly doubled from the prior quarter, and we continue to generate positive operating cash flow. The systemic changes we've put in place over the past 18 months have allowed us to leverage recovery markets and improve profitability. Before I continue with my remarks regarding the quarter, I'd like to cover a few changes at Timken Steel. As announced in our earnings release, our Board of Directors has named Ron Rice as our new chairman, following the retirement of Jack Riley. Ron has been an independent member of the Timken Steel's Board of Directors since 2015 and brings a wealth of knowledge to the role. I speak for the team when I say we look forward to working with Ron more closely in the future. Furthermore, we sincerely thank Jack for his dedication and leadership as chairman over the years. He was a founding member of our board of directors, and under Jack's guidance, Timken Steel has built a strong foundation for future growth. We are grateful for his contributions, and we wish Jack well in his retirement. We also announced that Tom Moline, Executive Vice President of Commercial Operation, and Bill Bryan, Executive Vice President of Manufacturing and Supply Chain, will both be leaving the company. Kevin Rakitic, currently serving as Executive Vice President of Strategy and Development at Tempkin Steel, will assume a new role as Executive Vice President of Sales, Marketing, and Business Development. We expect smooth transitions in light of these changes, I'd like to thank Tom and Bill for their many years of service, and we wish them all the best. Turning to safety, this year we're focusing on special initiatives to ensure we keep our employees safe. In 2021, we will implement extensive confined space training, refocus on machinery safety, continue with our COVID-19 safety protocols, and host our annual Iron Shield Awards. As a reminder, this is a program where we gather safety recommendations from our employees and reward teams for innovative ideas. As always, we will continue to leverage our relationships with our union safety reps to ensure that we provide the right level of training in the right areas. The wellbeing of our people is a core belief and nothing we do is more important than returning employees home safely at the end of their workday. Moving to markets, we continue to see steady automotive demand, particularly in the light truck and SUV categories, and inventories remain at a historic 10-year low. We have all read about the commodity shortages, such as semiconductors, rubber, and resin, which are disrupting automotive OEM production. We are staying close to customers as they plan for recovery in the second half of the year and beyond. Regarding the global semiconductor shortage, in the fourth quarter of 2020, we had not yet experienced a meaningful impact to our order book. For the first quarter, we estimate this shortage has impacted our orders by approximately 2,000 tons. We expect this will have a larger impact in the second quarter, and thus far, we have been successful filling any open capacity with short lead time opportunities elsewhere in our customer base. In our industrial markets, we continue to see positive momentum as evidenced by a 33% sequential increase in our shipments into that end market. We are encouraged that the majority of the industrial categories we serve, such as industrial machinery, agriculture, power generation, and defense, continue to improve with the overall economy. Distributor inventories are at historic lows, which is presenting us with restocking opportunities. Overall, short-term energy demand still remains weak. We remain cautious regarding the energy market, but there has been some signs of life with modestly improving industry statistics and a slight improvement in demand to fill inventory requirements. Regarding scrap pricing, the number one bushling index rose by $170 in the first quarter, reaching $567 per gross ton. We're optimistic that scrap prices will hold for the remainder of the second quarter due to higher steel mill utilization. To highlight other events in the quarter, we announced that we signed an agreement with Dido Steel to sell our Timpkins Steel Shanghai subsidiary for approximately $7 million in cash. This deal aligns Dido Steel's strategy to strengthen its sales, technical, and business management team in the Chinese market with our desire to provide our customers a sustainable and high-quality supply chain in the region. Together, we have enjoyed a long relationship with Dido Steel, and this will continue as we support key customers in both Asia and the United States. The deal is contingent upon completion of usual and customary due diligence and is expected to close sometime in the third quarter of 2021. As previously discussed, we indefinitely idled our Harrison melt and casting assets in the quarter. We work collaboratively with our employees, suppliers, and a number of customers to ensure a well organized and efficient transition. Going forward, all of our melting and casting activities will take place at the Faircrest location. And to date, we're fully manned at Faircrest Melt with increased staffing in mid-April to support improving customer demand. By operating one melt shop, we will be using our manufacturing assets more efficiently while producing the best possible mix of products to meet our customers' needs. We expect our melt utilization to reach at least 80% or higher in the second quarter of 2021. Before I turn the call over to Chris, I wanted to highlight some of our current corporate sustainability efforts. At Tenton Steel, operating responsibly and sustainably is as important to us as making clean steel. For years, the company has been focused on sustainability and our safety and environmental practices, And we're proud of what we've accomplished. Currently, we are working on enhancing our ESG reporting, and we recently posted our first ever SASB disclosure on our website. We believe this is an important step in becoming more transparent in terms of how we manage critical natural resources. For example, this year alone, we expect to reduce our greenhouse gas emissions over 10%. We look forward to sharing our long-term goals including GHG reduction targets later this year. Our culture is rooted in continuous improvement and being a good corporate citizen where we work and live. With that, I'd like to turn the call over to Chris.