TimkenSteel Corporation

Thank you for standing by, and welcome to the Temp Constill Third Quarter 2021 Earnings 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 this 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 your speaker today, Jennifer Beeman. Thank you. Please go ahead.

Thanks and good morning. Welcome to Timken Steel's third 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, Chris Westbrooks, Executive Vice President and Chief Financial Officer, and Kevin Rakitic, Executive Vice President of Sales, Marketing, and Business Development. 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 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. During the third quarter, our end market demand remained robust, and I'm pleased the first half of our 2022 order book is filling up in a strong pricing environment. While our sales to the mobile market continue to be impacted by the semiconductor supply chain disruption during the quarter, we had steady industrial sales thanks to the hard work of the team, and continued focus on our customer needs. In addition to our top priorities of employee safety and customer service, we remain committed to cost control and working capital discipline, and therefore, we were able to achieve record adjusted EBITDA in the third quarter and significant operating cash flow. Turning to our efforts around environmental safety and governance, In the third and fourth quarters, we successfully completed all of our annual maintenance outages. I'd like to thank the teams for careful planning, execution, and adhering to our high safety standards. Nothing is more important than returning our employees and contractors home safely at the end of each shift. In October, we published our 2030 environmental goals. These goals included a 40% absolute reduction in combined Scope 1 and Scope 2 greenhouse gas emissions, a 30% absolute reduction in total energy consumption, a 35% absolute reduction in fresh water withdrawn, and a 10% reduction in waste to landfill intensity. We believe these environmental targets are aligned with regional, national, and international environmental priorities and are firmly supported by efforts throughout our manufacturing supply chain and corporate operations. Initiatives around energy conservation and renewables, recycled metal sourcing and handling, and water management and reuse positions the company as an environmental leader. We have confidence that steel will continue to be a critical component of a reduced carbon future, and we remain committed to making progress toward and achieving our long-term goals and building on our long-lasting reputation as a sustainable steel supplier. Before I comment on our end market demand environment, a word on pricing in general. We are currently in the process of negotiating customer pricing agreements for roughly 70% of our business. To date, we've completed about half of our 2022 pricing negotiations. Thus far, we have been pleased with the positive outcomes and expect our average base sales price will be higher than 2021. Turning to market demand, in mobile, the semiconductor supply chain disruption continued to negatively impact the quarter. Our mobile shipments decreased by 5% sequentially due in part to supply chain issues. We expect fourth quarter mobile shipments to continue to be negatively impacted by customer production schedule changes. I know many of you have asked what Tempkin Steel's role will be in an EV world, and I am pleased to say that we are currently working with our automotive customers as they roll out new EV or hybrid models. In fact, we have been awarded over 20 applications on different EV programs or base sales well in excess of $50 million and expect that to increase even further. For example, today we provide our manufactured components products in the form of ring gears and pinion shafts to major OEMs. In future years, we expect that we will continue to earn additional applications on EV platforms. As I mentioned earlier, our industrial market demand remained steady in the third quarter. Customer inventory levels, although up slightly compared with the second quarter, remain relatively low. Therefore, we have a positive view for 2022 market demand. Moving to energy, while the short-term demand remains historically low, we continue to see more and more activity as larger players begin to replenish inventories and the rate counts are increasing. With these improving industry statistics, our shipments into this market increase sequentially by 50% as we experience some demand recovery. From an operational and strategic standpoint, we are currently working on initiatives centered around people, profitability, cash management, and business development. As such, we are focused on projects such as simplifying our administrative functions and improving our manufacturing processes More to come on these projects in the future. In our efforts to achieve sustainable, profitable growth, we are continuing to evaluate and refine our organizational structure to ensure we have the agility to best serve our customers and the cost structure to remain competitive during all business cycles. In October, we offered a voluntary exit incentive to certain U.S.-based salaried non-operative employees Not only will this action result in savings for the company, but we expect that this move will provide opportunities for some employees eager to take on new challenges. Chris will cover the financial impact of this action in a moment. Finally, I am pleased that we reached an agreement with United Steelworkers Local 1123, and they have voted in favor of a new four-year contract. We believe this contract provides some of the area's best wages and benefits, while also addressing some of our long-term competitive challenges. The contract, which is in effect until September 27th of 2025, offers our Canton-based bargaining workforce increases to base wages every year, competitive health care, and retirement benefits for all members, and a continued focus on employee safety, productivity, and quality. With that, I'd like to turn the call over to Chris. Chris?