TimkenSteel Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Temp Can Steal fourth quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your Speaker today, Jennifer Beeman, Senior Manager of Communications and Investor Relations of Timken Steel. Thank you. Please go ahead.

Thanks and good morning. Welcome to Timken Steel's fourth quarter and full year 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 Tim Kinseal 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 I appreciate everyone joining us on the call today. 2021 was without a question a transformative year for Timken Steel. The accelerating momentum in our markets throughout the year resulted in great opportunities and some challenges, namely the supply chain disruptions related to semiconductors and the COVID resurgence. However, our teams worked together to effectively serve our customers and remain committed to cost control and working capital discipline to drive year-over-year improvements in profitability. I am proud of how far our team has come in a short period of time. And I thank the employees of Tempkin Steel for their unwavering focus to transform our business. Now turning to safety, our lost time incident rate improved in 2021 to 0.32, but our OSHA recordable rate of 1.85 was slightly higher than last year. With the full engagement of our employees and the United Steelworkers, we will continue to focus on safety for 2022. and are implementing a number of new initiatives, including special attention to hazard awareness and training, safety leadership training, housekeeping, and continued safety protocols related to COVID-19. Overall, we will continue to drive better safety performance through sustainable process and cultural improvements. As we close 2021 and start 2022, our end market demand has remained healthy, and our order book now extends into the third quarter. However, we experienced a sequential decline in fourth quarter shipment given the planned annual maintenance outage at our Faircrest Melt Shop and unplanned downtime at the Faircrest Melt Shop, which created some disruption to our supply chain that our team has effectively managed. Consequently, we are staying close to customers to fulfill their needs and with lessons learned, technology improvements, and the continued implementation of best practices centered around manufacturing excellence, I expect we'll be better positioned in the future. Before I move on, a quick update on our customer pricing agreement. We are now almost complete in our negotiations and are pleased with the positive outcomes. That said, we expect our average base sales price in 2022 to be meaningfully higher than 2021. As expected, we felt ongoing effects of the global semiconductor shortage on our mobile customer shipments. Nonetheless, customer demand is high and vehicle inventories remain at historic lows. Production continues to be choppy. While most indicators point to a recovery of this market in late 2022, and into early 2023, we continue to serve our customers and remain flexible. Representing 50% of our total ship times in 2021, industrial demand remains strong. In 2022, we expect the demand momentum to continue and are focused on enhancing our product and customer mix while growing our share within targeted markets such as defense, construction, mining, and distribution, as those sectors are experiencing solid growth. Lastly, the energy sector continues to recover, and customers are ordering material to support drilling and completion activities. Re-counts continue to climb as a result of higher oil and natural gas prices. We are optimistic that demand will continue to improve in the coming year. As I have consistently stated, our objective is to deliver sustainable through-cycle profitability and cash flow while maintaining a strong balance sheet and creating value for shareholders. To support these goals, we have unveiled a set of strategic imperatives which are centered around people, profitability, process improvement, business development, and our environmental, social, and governance aspirations. Let me take a few minutes to outline these five imperatives, and then Chris will speak to the financial impact of these actions in a moment. First, we aim to attract, retain, and empower top talent. We will invest in talent and leadership development at all levels of the organization. We are bolstering development initiatives from the leadership level down to the shop floor employees. To drive accountability, our compensation is aligned with goals associated with the strategic imperatives and with living our core values. It is key that we be held accountable for our decision making and our execution while learning from our mistakes. Every employee fully understands that our goal is to achieve sustainable, profitable growth. Through consistent and cross-functional communication, Employees will understand how they can contribute to profit and sustainability. Data, knowledge, and efficient, proactive problem solving will override hierarchy and bureaucracy. Part of profitable growth is to improve our cost competitiveness through manufacturing excellence. By addressing the interrelated functions of manufacturing, maintenance, and supply chains, We will streamline and standardize processes, increase agility, and create a sustainable approach that will allow us to weather down cycles and take full advantage of up cycles. Manufacturing excellence involves implementing industry best practices, investing in technology, and engaging in open dialogue with our equipment manufacturers. I'm confident this work will improve our manufacturing efficiency by increasing productivity, lowering our cost of non-conformance, increasing first-time quality, and improving yield to support customer demand. Another strategic imperative is the thoughtful pursuit of new opportunities to enhance our portfolio of products and services. Over the coming year, we will leverage commercial excellence processes to deepen our relationships with our core customers and standardize our approach, our product offerings, and customer service to provide a more efficient and effective customer experience. We know the ease of doing business is always a priority for our customers, which is why as an imperative, we will standardize, leverage, and fully adopt modern information technology. By reducing technology complexity, we will become more responsive and flexible to support our customers' needs while introducing automation into our business processes to enhance performance. Lastly, we aim to advance our commitment to environmental, social, and governance. In 2021, we developed and communicated our long-term ESG targets. We will invest in reducing our greenhouse gas emissions and energy intensity to progress towards the achievement of our targets. We will improve safety processes and behaviors to achieve industry-leading performance and remain committed to diversity, equity, and inclusion in our workplace. You can learn more about all of these efforts in our first ESG report, which is expected to be released in the second quarter of 2022. This is a pivotal point in our history. We are energized by our recent success, our path forward, and our business outlook. With that, I'd like to turn the call over to Chris. Chris.