[Technical difficulty] generated nearly $12 million in free cash flow. Melt utilization climbed to 47%, [technical difficulty] breakeven point of about 50% in normalized scrap markets. While the quarter came in better than expected, we continue to face a challenging year, and still have a lot of work to do. Let's take a minute to look at what happened in the quarter. First, our employees remained focused on a clear set of priorities, drive operational excellence, especially in the areas of safety, quality, and service, to create value for our customers, and to maintain discipline in spending. Employees across the company are working within their functions to deliver cost savings. We've been working closely with suppliers in a variety of areas to develop a creative and more efficient way of working. For example, we simplified our natural gas transmission agreement, we reduced fuel consumption in our plant vehicles through more efficient movement and less idling, and we changed the type of refractory brick we use in our ladles. Employees across the country are focused on continuous improvement and implementing ideas both large and small. And that's brining us in on the positive side of spending projections. Our sales engineers and the teams who support them are also capitalizing, both on our newest capabilities, and on changes in the market to win new business. One example is our reentry into the polyethylene tubing market with a supply agreement with A&A Machine and Fabrication. Together, we recently announced our first order of this high-pressure tubing to a major petrochemical producer. With the assets we have today we are able to streamline the process, creating cost efficiencies even in small order size and short lead times. And that paved the way for a profitable reentry to the market. This is just one example…

Thank you, Tim. Good morning. Last quarter, we announced that we will no longer report out as two segments given the organizational changes made to reduce cost across the company. We have provided supplemental sales information in our presentation materials that reside under the Investor section on our Web site at www.timkensteel.com. We believe the sales information will provide additional insight into our revenues. Shipments in the quarter of 186,000 tons represent a 6% increase over the fourth quarter of 2015. We continue to see strength in the mobile side of our business. The North American light vehicle production rate is forecast to be 18.2 million vehicles for the year, an unprecedented seven consecutive years of growth. Mobile shipments were sequentially flat from a high fourth quarter, while industrial shipments increased 23%. Global commodity markets have begun to stabilize, positively impacting the industrial end markets along with more balanced inventories in the industrial supply chain. Shipments to the energy end market however declined more than 30% versus the fourth quarter 2015, as U.S. rig count also dropped over 30%, and customer inventory levels remain inflated. We expect the same market dynamics to continue into the second quarter of this year. Net sales for the quarter were $218 million, with base sales of 202 million, and surcharges of $16 million. Base sales per ton were about 2% higher than fourth quarter 2015 from better product mix. EBIT for the quarter was a loss of $200 million, a sequential improvement of $16 million. The improvement was primarily due to a 6% higher volume and cost reduction actions taken across the enterprise. Additionally, raw material spread was $6 million better than the fourth quarter, which was in line with our expectations. The three-city average scrap index dropped over 10% in the first quarter,…

[Operator Instructions] And your first question comes from Novid Rassouli with Cowen and Company. Your line is now open.

Good morning, Tim, Chris, and Tina. Thanks for taking my question. Just wanted to see, regarding the tapering of de-stocking in the industrial supply chain, so are your customers re-stocking at all or simply buying hand-to-mouth? I'm just curious how I guess the thought process has changed from the buyers' side, and how much of an uptick we could see from the distribution channel in the coming months and quarters.

Let me comment on what we've seen so far, and then I probably won't speculate as to what we're going to see forward, but we have seen inventory in the distribution channel beginning to balance. We've seen some nice spot orders coming in here and there, people filling shelves, that kind of thing. I don't think it's a pronounced improvement in the demand signal, but I think so far, at least the distributors that we deal with have done a nice job of managing their inventory through the last, call it 12 months or so. [Technical difficulty] It's positive improvement. It feels good. We're holding our breath right now to see whether it continues along at that pace.

Okay. And then on the import side that you mentioned, Tim, so it sounds like it's still an issue now. I'm just wondering, what products and from what countries [indiscernible] are you seeing unbeaten imports [ph] kind of still flowing into the U.S.?

Well, in the broader steel industry you're seeing a little bit of everything. In our products we continue to see tubing coming in, mostly out of Romania. We've seen bar product coming out of China, Korea, a little bit out of Western Europe. We're the strongest market in the world right now, and so people are taking advantage of the currency to come in pretty aggressively into the marketplace. So we're keeping a pretty close eye on it, collecting all the data that we need to collect. And we'll take action if appropriate at the right time.

Has the recent uptick from global steel prices helped to reduce the levels of imports coming into the U.S. or has that not really impacted you guys at all?

The import data is kind of mixed in the first quarter. You're seeing it slow a little bit, but I don't think anybody's lost interest in the U.S. market. And I think, given the openness of our market, that we'll continue to see import activity going forward.

Okay. And my last question. So you guys have done a great job, in my opinion, of controlling costs. It's very encouraging to see the ability to generate EBITDA next quarter, while melt utilization remains below 50%. I'm guessing these are both contributing factors. But what do you think is the more significant contributor to being able to generate EBITDA with melt under 50%, the continued cost reductions or the improving raw material spreads as scrap stabilizes?

Yes, Novid, this is Chris. I'd say, without trying to be too funny, I'd say both right there. The cost reduction has been really important. If you go back and compare Q3 of last year, and adjust for scrap spread and maintenance, and add $10 million to Q3, and compared to Q1, you can see the impact of cost reduction, and it's really significant. So that's big. I would say, going forward, the cost reduction will not be nearly as pronounced, obviously as it has been, because almost all the cost reduction programs were in place for the full first quarter 2016. And I think after that what's going to be required to boost our earnings up to prior levels will be more from the market than cost.

Got it, great. Thanks for taking my questions.

Thanks Novid.

Your next question comes from Justin Bergner with Gabelli & Co. Your line is now open.

Good morning everyone.

Good morning.

Good morning.

Nice work on the cost side. Hopefully the market will become friendly as well. My first question just related to flat sequential shipment guidance for the second quarter. I guess, would you normally see an uptick seasonally in shipments in the second quarter versus the first quarter or would that normally be flat seasonally?

Yes, typically you would see a little seasonality favorable in Q1, but I think what's impacted us is that our Q4 mobile sales were so strong, that our mobile sales were kind of flat. And that's unusual, but again it's attributable to the incredible strength in the U.S. mobile market.

Yes, I guess the only thing I would add is that you're seeing puts and takes across all the markets. We'll continue to see some softness in oil and gas in the first half of the year. We're seeing some signs out of industrial that there are parts of it that are getting better. We're also doing a nice job at picking up some market share. And then as Chris pointed out, the automotive continues to chug along at a pretty high rate.

Okay, that's helpful. But in terms of looking at Q2, would the normal seasonality be for a sequentially flat Q2 versus Q1 or would it be for a slight improvement? And how does weather in the extra leap year day play into that?

Yes, in a flat market, all things being equal, you'd say that Q2 would be a little bit higher normally. But when you're coming in and out of a cycle all bets are off, and so that's why our guidance is to pretty similar revenues quarter-on-quarter.

Okay, that's helpful. And then the raw material, I guess, tailwind looking sequentially into the second quarter. Will that also be offset by a LIFO charge similar to what you experienced in the first quarter versus the fourth quarter?

No. We would expect that our LIFO will be pretty flat through the year. So whatever you saw in LIFO in Q1 we would anticipate in Q2 also.

Okay, so we'd see a similar sort of negative 9 million or some figure…

No, that's sequential. I mean sequentially, if you look, our LIFO number was $2 million. So we'd expect a $2 million number in the subsequent quarter too. Outside of all the other great things can affect LIFO, but that's what we'd expect.

Okay. So I'm just trying to make sure I understand how the 2 million compares to the negative 9 million the sequential?

For the sequential there will be no change. Q1 to Q2, we wouldn't anticipate any change.

Okay, great. And then, when you think about your shipment guidance being flat in the second quarter versus the first quarter, is there any, I guess, incremental headwind from increased import pressure that you're sort of baking into that flat guidance?

Yes, I think two issues. One, as I said, we've seen the volumes come off a little bit, but the pricing pressure hasn't really let up all that much, especially on the more commodity side of our product range. So we'll see a little bit of a drop in volume, but the price pressure is still there.

Okay, great. I'll hop back into the queue.

All right, thanks Justin.

[Operator Instructions] And your next question comes from Tyler Kenyon with KeyBanc Capital Markets. Your line is now open.

Hi, good morning.

Good morning.

Good morning, Tyler.

I think a lot of my questions have already been answered here, but just one on the cash flow statement here. And, Chris, it looks like the reimbursement just from the VEBA plan assets maybe hit in full in the first quarter. How should we expect that to progress throughout the course of the year? And also, any changes with respect to your pension obligations here, moving forward through the year as well?

Yes, I'll start with the pension. The pension obligation at year-end was pretty much fully funded. If you look at our funded pension plans, they were fully funded. So we don't anticipate any cash contributions to our pension plan. In the first quarter, we reimbursed for our 2015 OPEB costs. So that's what the $13 million are. And then going forward for all of 2016, we will pay the claims right from the VEBA trust rather than from operating cash flow. So the next cash-out relative to OPEB will be about $2 million for the whole year.

Okay, great. And then just as far as how you're thinking about working capital here, moving forward, we've clearly seen a lift in scrap prices. Anything we should be thinking of in terms of inventory, you know, as a user source of cash here into the second quarter, and kind of maybe how you see it progressing through the year from here?

Yes. First of all, our guys have done a good job on working capital, taking a lot of working capital out of the business. Last year, we reduced our working capital by about $150 million. And then for the first quarter, let's call it, breakeven-ish, even though our revenue was up. So that's a good job. The story for working capital for the year will depend what sales will be for the year and what revenues are, but so specific to Q2, we've called revenue flat, and so we wouldn't anticipate much change in working capital one way or another.

Okay, great. And then just one more on the cost cutting initiatives, you've done a great job of finding opportunities quarter-to-quarter, any sense for kind of what the mix is between variable and fixed costs there? And is there anything incremental that you think you can gleam in terms of cost cutting moving forward here?

Yes. I would say most of the cost cutting programs are fully in force as of Q1. So, well, I think there could be some smaller additional reductions. I wouldn't anticipate them to be very large. I think what's really help us is that enterprise-wide we've had all engagement from our employees, so I don't want to sell them short, because as you can tell in the first quarter the cost reduction was a little bit better than we thought it would be. So hats off to everybody who is involved with that at TimkenSteel, but I would not anticipate a significant increase in cost cutting run rate after Q1.

Great, thank you.

Thanks.

And your next question comes from Justin Bergner with Gabelli & Co. Your line is now open.

Thanks for taking my follow-up question. On the revolver, I guess you have 55 million of availability, maybe is there a sort of simply way to think about how does one gets about 55 million from the 265 million versus the total amount that you have drawn today?

No. There really isn't -- the revolver has a borrowing base, and that borrowing base is based in accounts receivable, inventory, and fixed assets. And so, as our working capital changes, the borrowing base changes. So, one of the things that we did as we now have a lot better feel for our borrowing base, it's one of the reasons we reduced the size of the revolver from 300 million to 265 million, because we were never going to have a borrowing base close to 300 million. And so, we thought 265 would be the maximum that we need to borrow.

Okay. That's helpful. And then in terms of sort of go-forward, capital raising possibilities, does that remain very much on the table, or could you just sort of remind us where TimkenSteel stands in terms of potentially approaching capital markets?

Yes, sure, Justin. Probably the first thing I'd point out is, making, having free cash flow in the first quarter was helpful. And so, we're just evaluating our needs. We don't want to borrow money that we may not need, but we keep our eyes open into the capital markets about what we might want to do to lose liquidity going forward.

Great, thank you.

Thanks.

And your next question comes from Tyler Kenyon with KeyBanc Capital Markets. Your line is now open.

Hey, thanks for the opportunity to follow-up here. Just on the sale leaseback transaction, is that still expected to close here in the second quarter? And any sense as to how that will be treated, whether it's an operating lease or a capital lease at this particular point?

Yes. We would anticipate that the sale leaseback will close in the second quarter, and that would be considered an operating lease. But we will provide more guidance on that once we're done.

Okay, thank you.

And there are no further questions at this time. I'll turn the conference back to Tim Timken for closing remarks.

Well, thanks for your question, and thank you for your interest in TimkenSteel. We've got some bright spots this quarter, but 2016 will continue to be a challenging year. So, we're not taking our foot off the gas. Our performance in the quarter demonstrates that our employees remain diligent in taking the right actions to perform in a difficult environment. And I want to thank all of them for their efforts. If you have any follow-up questions, as usual, please don't hesitate to call Tina. Thanks again, and have a great day.

And this concludes today's conference. You may now disconnect.