TimkenSteel Announces Third-Quarter 2017 Earnings; Shows Significant Year-Over-Year Improvement

CANTON, Ohio, Oct. 26, 2017 /PRNewswire/ -- TimkenSteel (NYSE: TMST) (timkensteel.com), a leader in customized alloy steel products and services, today reported third-quarter net sales of $339.1 million, compared with net sales of $213.8 million in the same quarter last year and $339.3 million in the second quarter of 2017. The company reported a net loss of $5.9 million or minus $0.13 per share for the third quarter of 2017, compared with a net loss of $22.2 million or minus $0.50 per share in the same quarter last year, and net income of $1.3 million or $0.03 per diluted share in the second quarter of 2017.

Adjusted EBITDA⁽¹⁾ for the third quarter was $18.8 million, compared with adjusted EBITDA⁽¹⁾ of $7.8 million in the same quarter last year and EBITDA of $24.7 million in the second quarter of 2017, which included a favorable $4.9 million supplier refund. The improvement over the prior year was driven primarily from recovering energy and industrial end-market demand, new business and favorable raw material spread.

"With one of the fastest production ramps in company history complete and a new quench-and-temper facility running successful trials, the third quarter provides a solid foundation to capitalize on improving market conditions," said Tim Timken, chairman, CEO and president. "The 60 percent increase in sales puts us in a very different place than we were 12 months ago. More importantly, we're driving operational efficiencies and sales strategies that have potential to deliver even greater value for customers and shareholders."

THIRD-QUARTER 2017 FINANCIAL SUMMARY

Third-quarter net sales increased $125.3 million or 58.6 percent year over year and were similar to the prior quarter.

• Ship tons were approximately 290,000, an increase of 63 percent over the third quarter of 2016 and a decrease of 1.6 percent sequentially.
• Year-over-year gains were related to improving industrial and energy end markets, as well as increased market penetration, including winning new business.
• Surcharge revenue of $77.9 million increased 169.6 percent from the prior-year quarter as a result of a rise in the No. 1 Busheling Index and higher volumes. Sequentially, surcharge revenue was similar to the prior quarter.

Adjusted EBIT⁽¹⁾ was $0.2 million, compared with an Adjusted EBIT⁽¹⁾ loss of $11.2 million for the same period a year ago and EBIT⁽¹⁾ of $5.8 million for the second quarter of 2017.

• Adjusted EBIT⁽¹⁾ improved over the prior year due to higher volumes and favorable raw material spread, partially offset by negative mix and price.
• Sequentially, adjusted EBIT⁽¹⁾ was lower primarily because second-quarter results included a favorable $4.9 million supplier refund.
• Melt utilization was 74 percent for the quarter, compared with 44 percent in the third quarter of 2016 and 76 percent in the second quarter of 2017. Higher volumes, primarily from new business and increased end-market demand and improved operating cost leverage.

FOURTH-QUARTER OUTLOOK            

• Shipments are expected to be between 3 percent and 5 percent higher than third-quarter 2017 as markets continue to recover.
• Adjusted EBITDA⁽¹⁾ is projected to be between breakeven and $10 million.
  At this time, the company is unable to reconcile its fourth quarter outlook for Adjusted EBITDA to a comparable GAAP range due to an expected full re-measurement of its pension and OPEB plan assets and obligations at December 31, 2017. The amount of the gain or loss from the re-measurement cannot currently be estimated.
• Expenses associated with annual maintenance activities are anticipated to be between $8 million and $12 million.
• Raw material spread is expected to be lower in the fourth quarter primarily due to a decrease in the average No. 1 Busheling Index.

Other Guidance

• 2017 capital spending is projected to be $40 million.

The company will host a conference call at 9 a.m. ET on Friday, Oct. 27, to discuss its financial performance with investors and securities analysts. The financial results and conference call materials will be available online at investors.timkensteel.com.

TimkenSteel Earnings Call Information:

About TimkenSteel Corporation
TimkenSteel (NYSE:TMST, timkensteel.com) creates tailored steel products and services for demanding applications, helping customers push the bounds of what's possible within their industries. The company reaches around the world in its customers' products and leads North America in large alloy steel bars (up to 16 inches in diameter) and seamless mechanical tubing made of its special bar quality (SBQ) steel, as well as supply chain and steel services. TimkenSteel operates warehouses and sales offices in five countries and has made its steel in America for 100 years. The company posted sales of $870 million in 2016. Follow us on Twitter @TimkenSteel and on Instagram.

NON-GAAP FINANCIAL MEASURES
TimkenSteel reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP") and corresponding metrics as non-GAAP financial measures. This earnings release includes references to the following non-GAAP financial measures: EBIT, EBITDA, Adjusted EBIT and Adjusted EBITDA. These are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting these non-GAAP financial measures is useful to investors as these measures are representative of the Company's performance and provide improved comparability of results.  See the attached schedules for definitions of the non-GAAP financial measures referred to above and corresponding reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures, as well as supplemental financial data. At this time, the company is unable to reconcile its fourth quarter outlook for Adjusted EBITDA to a comparable GAAP range due to an expected full re-measurement of its pension and OPEB plan assets and obligations at December 31, 2017.  The amount of the gain or loss from the re-measurement cannot currently be estimated. Non-GAAP financial measures should be viewed as additions to, and not as alternatives for, TimkenSteel's results prepared in accordance with GAAP. In addition, the non-GAAP measures TimkenSteel uses may differ from non- GAAP measures used by other companies, and other companies may not define the non-GAAP measures TimkenSteel uses in the same way.

FORWARD-LOOKING STATEMENTS
This news release includes "forward-looking" statements within the meaning of the federal securities laws. You can generally identify the company's forward-looking statements by words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "outlook," "intend," "may," "plan," "possible," "potential," "predict," "project," "seek," "target," "should" or "would" or other similar words, phrases or expressions that convey the uncertainty of future events or outcomes. The company cautions readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of the company due to a variety of factors, such as: the impact of mark-to-market accounting; the company's ability to realize the expected benefits of its spinoff from The Timken Company; deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which the company conducts business, including additional adverse effects from global economic slowdown, terrorism or hostilities, including political risks associated with the potential instability of governments and legal systems in countries in which the company or its customers conduct business, and changes in currency valuations; the effects offluctuations in customer demand on sales, product mix and prices in the industries in which the company operates, including the ability of the company to respond to rapid changes in customer demand, the effects of customer bankruptcies or liquidations, the impact of changes in industrial business cycles, and whether conditions of fair trade exist in U.S. markets; competitive factors, including changes in market penetration, increasing price competition by existing or new foreign and domestic competitors, the introduction of new products by existing and new competitors, and new technology that may impact the way the company's products are sold or distributed; changes in operating costs, including the effect of changes in the company's manufacturing processes, changes in costs associated with varying levels of operations and manufacturing capacity, availability of raw materials and energy, the company's ability to mitigate the impact of fluctuations in raw materials and energy costs and the effectiveness of its surcharge mechanism, changes in the expected costs associated with product warranty claims, changes resulting from inventory management, cost reduction initiatives and different levels of customer demands, the effects of unplanned work stoppages, and changes in the cost of labor and benefits; the success of the company's operating plans, announced programs, initiatives and capital investments (including the jumbo bloom vertical caster and advanced quench-and-temper facility); the ability to integrate acquired companies, the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings; the company's ability to maintain appropriate relations with unions that represent its employees in certain locations in order to avoid disruptions of business; and the availability of financing and interest rates, which affect the company's cost of funds and/or ability to raise capital, the company's pension obligations and investment performance, and/or customer demand and the ability of customers to obtain financing to purchase the company's products or equipment that contain its products.

Additional risks relating to the company's business, the industries in which the company operates or the company's common shares may be described from time to time in the company's filings with the SEC. All of these risk factors are difficult to predict, are subject to material uncertainties that may affect actual results and may be beyond the company's control. Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Except as required by the federal securities laws, the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

(1) Please see discussion of non-GAAP financial measures in this news release.

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SOURCE TimkenSteel