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Timkensteel Announces First-Quarter 2016 Results

The following excerpt is from the company's SEC filing.

Net sales of $217.9 million increased 5.5 percent sequentially.

Net loss of $13.6 million or minus 31 cents per share was driven by weak commodity markets.

EBITDA loss of $1.6 million marks improved performance, driven by company actions and industrial markets.

$11.6 million of free cash flow generated for the period.

CANTON, Ohio: April 28, 2016 -TimkenSteel (NYSE: TMST,

timkensteel.com

), a leader in customized alloy steel products and services, today reported first-quarter net sales of $217.9 million and a net loss of $13.6 million or minus 31 cents per share. This co mpares with net income

of $6.9 million or 15 cents per share in the same quarter last year.

EBITDA for the quarter was a loss of $1.6 million, a sequential improvement of $16 million and better than original first-quarter expectations.

“Our employees helped us achieve better-than-expected results in the quarter. They continue to reduce costs and capture new sales,” said Tim Timken, chairman, CEO and president. “Our performance also benefited from conditions in several of our markets, with industrial showing positive movement and automotive demand remaining strong. We continue to face a challenging year, though, with energy markets still weak and imports pressuring price in spot markets. Everyone at TimkenSteel remains focused on the priorities that enable us to compete in this environment and emerge a stronger company.”

FIRST-QUARTER 2016 FINANCIAL SUMMARY

First-quarter net sales decreased $170.8 million or 43.9 percent year over year and increased $11.3 million or 5.5 percent sequentially.

Ship tons were approximately 186,000, a decrease of 31.3 percent over the first quarter of 2015, but an increase of 6.2 percent sequentially.

U.S. rig count is more than 50 percent lower compared with the first quarter of 2015, resulting in decreased demand for energy and related industrial products.

Please see discussion of non-GAAP financial measures at the end of this press release.

NEWS RELEASE / Page

Improved industrial markets through the distribution channel primarily drove the sequential increase in net sales.

Surcharge revenue of $15.5 million decreased 79.4 percent from the prior-year quarter as a result of lower volumes and a drop in the No.

1 Busheling Index.

Surcharge revenue decreased 19.3 percent compared with the fourth-quarter 2015, primarily due to the drop in the No. 1 Busheling Index.

EBIT was a loss of $20.3 million, compared with EBIT

of $11.2 million for the same period a year ago and an EBIT loss of $36.0 million for the fourth-quarter 2015.

Year over year, first-quarter EBIT was lower primarily due to reduced volume and the associated impact on manufacturing costs from low melt utilization, partially offset by the favorable timing impact related to raw material spread and realization of cost reduction actions.

Sequentially, EBIT was favorable due to increased melt utilization, the positive impact of cost reduction actions and the timing of raw material spread from stabilizing scrap prices.

Melt utilization was 47 percent for the quarter, compared with 66 percent in first-quarter 2015, and 41 percent in fourth-quarter 2015.

OUTLOOK

Second-Quarter 2016 Revenue

Shipments are expected to be similar to first-quarter 2016 with an improved mix.

Automotive demand should remain strong.

Continued pressure on oil and gas shipments is expected due to low levels of energy exploration and production spend.

Demand in industrial supply chains should be higher due to tapering of inventory destocking.

Second-Quarter 2016 EBITDA

EBITDA projected to be between a loss of $5 million and income of $5 million.

Raw material spread expected to be favorable versus first-quarter 2016 due to stabilizing scrap markets.

Manufacturing expected to continue to be positively impacted by cost reduction efforts.

Melt utilization expected to remain slightly below 50 percent.

Imports and weak market dynamics to continue to pressure pricing.

Other Guidance

2016 capital spending planned to be $45 million.

The company will host a conference call at 9 a.m. EDT on Friday, April 29, 2016, to discuss its financial performance with investors and analysts. The financial results and first-quarter 2016 earnings supporting information are available on our website at

investors.timkensteel.com.

Conference Call

Toll-free dial-in: 877-201-0168

International dial-in: 647-788-4901

Conference ID: 84880918

Conference Call Replay

Available through May 13, 2016

Dial-in: 855-859-2056 or 404-537-3406

Replay passcode: 84880918

Live Webcast

About TimkenSteel Corporation

TimkenSteel (NYSE:TMST,

) 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 makes all of its steel in the United States and operate warehouses and sales offices in four other countries. The company posted sales of $1.1 billion in 2015 and was named Steel Producer of the Year by

American Metal Market

. Follow us on Twitter

@TimkenSteel

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. EBIT is defined as net income before interest expense and income taxes and EBITDA is defined as net (loss) income before interest expense, income taxes, depreciation and amortization. EBIT and EBITDA 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 EBIT and EBITDA is useful to investors as this measure is representative of the company's performance. It also is a useful reflection of the underlying growth from the ongoing activities of the business and provides improved comparability of results.

See the attached schedules for supplemental financial data and corresponding reconciliations of the non-GAAP financial measures referred to above to the most comparable GAAP financial measures for the three months ended March 31, 2016 and 2015. Non-GAAP financial measures should be viewed in addition to, and not as an alternative 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.

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 company’s ability to realize the expected benefits of its spinoff from The Timken Company; the costs associated with being an independent public company, which may be higher than anticipated; 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 of fluctuations 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, and 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, and the amount of any dividend declared by the company’s board of directors on its common shares.

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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions, except per share data) (Unaudited)

Three Months Ended

$388.7

Cost of products sold

Gross Profit

Selling, general & administrative expenses (SG&A)

Impairment charges

Other expense, net

(Loss) Earnings Before Interest and Taxes (EBIT)

Interest expense

(Loss) Income Before Income Taxes

(Benefit) provision for income taxes

Net (Loss) Income

($13.6

Net (Loss) Income per Common Share:

Basic (loss) earnings per share

($0.31

Diluted (loss) earnings per share

Weighted average shares outstanding

44,206,837

44,769,679

Weighted average shares outstanding - assuming dilution

45,020,023

EBIT is defined as net (loss) income before interest expense and income taxes. EBIT is an important financial measure used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT is useful to investors as this measure is representative of the Company's performance.

Table Page

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions) (Unaudited)

ASSETS

Cash and cash equivalents

Accounts receivable, net of allowances

Inventories, net

Prepaid expenses

Other current assets

Total Current Assets

Property, Plant and Equipment, net

Pension assets

Intangible assets, net

Other non-current assets

Total Other Assets

Total Assets

$1,124.1

$1,141.8

LIABILITIES

Accounts payable, trade

Salaries, wages and benefits

Accrued pension and postretirement cost

Other current liabilities

Total Current Liabilities

Long-term debt

Deferred income taxes

Other non-current liabilities

Total Non-Current Liabilities

SHAREHOLDERS' EQUITY

Additional paid-in capital

1,058.5

1,058.2

Retained (deficit) earnings

Treasury shares

Accumulated other comprehensive loss

(260.1

(263.8

Total Shareholders' Equity

Total Liabilities and Shareholders' Equity

Table Page

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions) (Unaudited)

CASH PROVIDED (USED)

Operating Activities

Net (loss) income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Loss on sale or disposal of assets

Stock-based compensation expense

Pension and postretirement expense

Pension and postretirement contributions and payments

Reimbursement from postretirement plan assets

Changes in operating assets and liabilities:

Other accrued expenses

Other, net

Net Cash Provided by Operating Activities

Investing Activities

Capital expenditures

Proceeds from sale of assets

Net Cash Used by Investing Activities

Financing Activities

Cash dividends paid to shareholders

Purchase of treasury shares

Proceeds from exercise of stock options

Payment on long-term debt

Proceeds from issuance of debt

Deferred financing costs

Net transfers from/(to) Parent and affiliates

Net Cash (Used) Provided by Financing Activities

Effect of exchange rate changes on cash

(Decrease) Increase In Cash and Cash Equivalents

Cash and cash equivalents at beginning of period

Cash and Cash Equivalents at End of Period

Reconciliation of EBIT to GAAP Net (Loss) Income:

This reconciliation is provided as additional relevant information about the Company's performance. Management believes EBIT is representative of the Company's performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net (loss) income to EBIT.

($20.3

EBIT Margin

EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT Margin 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 EBIT and EBIT Margin is useful to investors as these measures are representative of the Company's performance.

Reconciliation of (Loss) Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)

This reconciliation is provided as additional relevant information about the Company's performance. Management believes EBITDA is representative of the Company's performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net (loss) income to EBITDA.

% of net sales

EBITDA is defined as net (loss) income before interest expense, income taxes, depreciation and amortization. EBITDA Margin is EBITDA as a percentage of net sales. EBITDA and EBITDA Margin 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 EBITDA and EBITDA Margin is useful to investors as these measures are representative of the Company's performance.

Reconciliation of Total Debt to Net Debt and the Ratio of Total Debt and Net Debt to Capital:

This reconciliation is provided as additional relevant information about the Company's financial position. Capital, used for the ratio of total debt to capital and net debt to capital, is defined as total debt plus total equity. Management believes net debt is an important measure of the Company's financial position due to the amount of cash and cash equivalents.

March 31,

December 31,

$185.2

$200.2

Less: Cash and cash equivalents

$147.7

$157.8

Total Equity

$678.0

$686.4

Ratio of Total Debt to Capital

Ratio of Net Debt to Capital

Reconciliation of Free Cash Flow to GAAP Net Cash Provided by Operating Activities:

Management believes that free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.

Less: Capital expenditures

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

TimkenSteel Corporation director was just granted 2,404 restricted shares - April 4, 2016
TimkenSteel Corporation just filed a prospectus, suggesting it plans to soon issue some securities - March 30, 2016