Good morning. My name is Kenzie and I will be your conference operator today. At this time, I would like to welcome everyone to the TimkenSteel First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session [Operator Instructions] Thank you. Mitch Byrnes, Senior Manager of Investor Relations, you may begin your conference.

Great, thank you. Good morning, everyone. And welcome to the TimkenSteel’s first quarter 2019 earnings call. I'm pleased to have here in the room, Tim Timken, Chairman, CEO and President, as well as Kris Westbrooks, Executive Vice President and Chief Financial Officer. 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 described in greater detail in today’s release. Please refer to our most recent SEC filing and forward-looking statements included in the earnings release, all of which are available on the TimkenSteel website. Where non-GAAP financial information is referenced, additional details and reconciliations to its GAAP equivalent are also included in the earnings release and supporting information as appropriate. Keep in mind, today's call is copyrighted by TimkenSteel Corporation. Any use of any portion of the call without our written approval is prohibited. With that, I'd like to turn the call over to Tim.

Thanks Mitch, and thank you all for joining us today. We performed well in the first quarter, in line with expectation. We sold a richer mix of product and improved price. We also continued to improve safety, quality and on-time delivery. Kris will discuss the financial details in a few moments. I’d like to take a moment to talk about the broader areas of focus that will drive the success of our company over the long term. As we entered our fifth year of operation as a public company, our leadership team has taken time to reflect on and validate the strategy we’ve been pursuing to create customized and innovative solutions, deliver quality products, provide integrated supply chain services and of course, to operate with integrity. We hold a unique position in the market with both technological leadership and operational flexibility to serve specialized needs. We leveraged that advantage to deliver results in the quarter, and that’s the basis on which we’ll grow. We also recognized that with the competitive pressures we face, we must redouble our efforts to operate in a lean way across the company. As a result, we began 2019 with a drive to accelerate improvement in every corner of our company. Employees have been asking themselves how can we be more effective in what we do. The answer to that question has taken many forms just in the last few months. Here are few examples. We expanded the size range of our bar pillar, which improves the surface finish of our steel bars and provides very precise outside diameter. That’s helping us win new business and keep the processing in-house improving earnings. We evaluated our benefits offering for employees and retirees, and are now offering more flexible plans at improved costs. And we launched a long…

Thanks Tim and good morning everyone. Our first quarter 2019 financial results were in line with guidance and exceeded the same period in the prior year. Remaining focused and disciplined, our team delivered net income of $4.2 million or $0.09 per diluted share, an improvement of $6 million over the first quarter last year. EBITDA was $26.3 million in the first quarter, representing $5 million increase over the same period last year, and above the midpoint of our previously communicated guidance range. EBITDA margin expansion of 150 basis points over the first quarter 2018 reflects $22 million of improved price and product mix, partially offset by lower volume, as well as lower raw material spread. First quarter 2019 shipments of approximately 261,000 tons or 34,000 tons below fourth quarter 2018, resulting from the expected decline in lower margin OCTG billet volume. Overall, we expect second quarter 2019 shipments across our end markets to be similar to first quarter results. Looking now at each of our end markets, our mobile shipments in the first quarter were 10% above fourth quarter and 2% above first quarter last year. We expect second quarter mobile shipments to be in line with first quarter 2019 levels. Mobile demand remain strong and we’re focused on continued share gains above the market build rate. For 2019, the projected North American light vehicle production forecast of 16.8 million units is slightly lower than last year, however, remains stable at a solid level with an improving mix of heavier SUVs and trucks that are more favorable to our business. Shipments to the energy end market increased 8% over the same quarter a year ago, while declining sequentially from the fourth quarter 2018 as expected. The number of drilled but uncompleted wells remained high and distribution service center inventory levels…

I wanted to start by delving into the cost savings program. I guess help me understand. Will the $30 million in 2019 savings and $50 million in annualize savings, all have a cash component or are there certain things like the post retirement savings that will not have cash component associated with them?

When you say cash component, the cost to achieve or cash benefits?

I was talking about the cash benefit, I wasn’t sure if the post retirement benefit change corresponds to a cash benefit, or if it’s more accounting?

So specifically on the post retirement benefit, the payments for those currently are funded by a VEBA, and it appears we’re still working through the details of that -- the lower subsidy payments that we'll making in the future will come out of that VIBA, which will allow that to support the future cash cost more efficiently, but it’s not coming out of our direct cash balance or operating cash flow. The remaining items, a lot of those fits the professional service fee decline or a medical decline, those are true cash savings for the company. Some of the other items it just improved margin from more efficient processes. But there is definitely a cash savings benefit or improved cash flow that will come from the majority of these items.

And then on the savings, clearly, you’re not just coming up with initiatives to save money, because the demand environment is getting weaker. So I mean how should I think about the $50 million in savings versus what you would normally accomplish through ongoing productivity improvements in the business on a year-to-year basis?

In the past, we’ve always said that we work to offset inflation through continuous improvement efforts. And typically that’s in the $25 million to $30 million range. As we were looking at the uncertainty of this year during business planning, we said we really have to put that on steroids. And so the lien enterprise effort that we launched at the beginning of the year really was meant to jump start that and take it to a new level, as well as look at some structural issues that have become apparent through the down cycle. So it was a redoubling of the effort, probably a broader scope, and ultimately has generated bigger numbers.

As you look towards the second half of the year, I mean given the maintenance work that you’ll be doing 2Q. Is there a lot of maintenance work left to be done in the second half of the year? Or can you pretty much operate close to full capacity?

Well, our current plan right now for Q2 is to take Harrison and Gambrinus -- our Harrison Avenue melt shop and our tubing operations and do the bulk of the maintenance in Q2. That would leave Faircrest to be done in Q3. So there is still a pretty substantial maintenance program that will need to be accomplished, but we’re confident given the schedules that we’re looking at that we’ll be able to manage both.

[Operator Instructions] Our next question comes from the line of Michael Leshock with KeyBanc Capital. Your line is open.

So first question just looking at your CapEx spend, you had a slower start to the year in the first quarter in terms of spend. Is that more a back half loaded then, or is there any one quarter that you would expect to have a larger spend?

Well, as I said, we’ll spread our normal maintenance spread out from typically what is concentrated in the third into the second and the third. And then we have a number of automotive programs rolling on later in the year. And so that money is beginning to get spent now for equipment and for infrastructure.

Just quickly, Michael, to add on to that. We typically see as the year continues a higher level of spend as well. If you could go back and look at our trends in the past, we always try to balance that out, but a lot of it does start to come in towards the second half.

And then looking at auto pricing, what drove the weakness quarter-over-quarter in pricing there?

So if you look the mix of our products that were sold in our first quarter, we sold less tubes than we have in the past and more bars those tubes come with a higher price per ton than the bars do. So that mix, if you’re able to dig down deeper into the individual products and see the components there, you would see improved price on a product level but that mix has a big impact on what you see externally.

And then just looking at the oil and gas business a little bit. If you could talk about your exposure there in terms of what it is to drilling activity versus the uncompleted wells and any opportunity that exists there, because I know the pricing in energy was strong there sequentially. Maybe if you expect that to continue throughout 2019? Thanks.

Well, as we’ve said repeatedly in the past. We have broad exposure across pretty much all oil and gas activity. So drilling and completion, onshore, offshore, traditional wells, frac wells. So as long as they’re poking a hole in the ground, we’re happy. What we saw in the last couple of quarters is a heavy focus on the drilling side less on the completion side. We think that most is mostly tied to takeaway capacity down in the Permian basis. Our belief is that those capacity restrictions are going to be resolved in the second half of the year. I think you’re seeing some of that pipeline capacity coming up, which should allow better activity on the completion side. So we think as we roll through the year, we’ll see a better balance than we saw over the last couple of quarters.

Your next question comes from the line of Justin Bergner with G Research. Your line is open.

You mentioned the raw material spread also being a headwind in the second quarter. Can you frame how big of a headwind it will be, will be similar to the first quarter and without maybe as much of a corresponding offsetting LIFO benefit?

Yes. So we’re seeing that busheling index has trended down on a monthly basis over the last three months towards finishing maybe even in the 3.30, 3.40 level at the end of Q2. And that has continued the headwinds that we saw there in the first quarter. We can’t give you the exact specific numbers, but it’s a sizeable headwind but we do feel as the markets recover in the second half that that would lessen.

And then lastly, could you maybe provide an update on the prevailing trade issues that are important to you as you look forward in the business?

Well, obviously, 2.32 is still the big issue. We've seen an impact obviously on imports from certain countries, although, I will say that we continue to see bar product out of China to product out of places like Romania, priced pretty aggressively. On the whole, it’s been a positive thing for us. It’s allowed us to roll into our contract negotiations last year in a better position, but the work is done. And as you know, they’ve got negotiations going on with China and negotiations going on with the U.S. MCA and also probably the EU is probably third in the queue there. We believe that the way the negotiations are playing out that we’re likely to see flip from a tariff to a quota, which we actually think in a lot of ways might be more effective in slowing down the surge of imports that we’ve seen out of certain countries. So we’re watching those negotiations pretty carefully, staying close to the administration and have a lot of confidence that Bob Lighthizer is going to be able to come out of all three of those negotiations with a good deal for the industry.

There are no further questions, at this time. I turn the call back to Tim Timken for closing remarks.

Well, thanks for the questions today. If you have any additional ones, please don’t hesitate to give Mitch Byrnes a call. We posted continuing improvement in the company’s performance and we’re accelerating the performance culture at TimkenSteel to drive even quicker progress. I want to thank all of our employees for their relentless effort on driving shareholder value by winning new business, improving customer service and continuing to generate ideas that will improve our earnings. I also want to thank all of you for joining us today and for your interest in the company. Have a good day.

This concludes today’s conference call. You may now disconnect.