Introducing Investor presentation KeyBanc Capital Markets Basic Materials & Packaging Conference September 10, 2014 Boston
Today’s presenters Tim Timken Chairman, CEO & President Chris Holding Executive Vice President & Chief Financial Officer Tina Beskid Director, Investor Relations & Forecast, Planning & Analysis 2
Forward-looking statements and non-GAAP financial information The information provided today will include forward-looking statements relating to our goals and estimates for future years, including statements about expected sales, operating earnings per share, cash flow, segment margins, our worldwide markets, our anticipated effective income tax rate, and others. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to diffe r, perhaps materially, from those anticipated in the forward-looking statements: unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; increases in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; new laws and governmental regulations; interest rate changes; changes in currency exchange rates; stock market fluctuations; unanticipated deterioration of economic and financial conditions in the United States and around the world; the amount and timing of any dividends and share repurchases; and the risks identified in the company’s registration statement on Form 10 filed with the SEC. We do not assume any obligation to update these forward-looking statements. The unaudited pro forma consolidated financial data in this presentation is subject to assumptions and adjustments described in the company’s registration statement on Form 10. TimkenSteel Corporation’s (“TimkenSteel”) management believes these assumptions and adjustments are reasonable under the circumstances and given the information available at this time. However, these adjustments are subject to change as The Timken Company and TimkenSteel finalize the terms of the spinoff, including the separation and distribution agreement and related transaction agreements. The unaudited pro forma consolidated financial data does not purport to represent what TimkenSteel’s financial position and results of operations actually would have been had th e spinoff occurred on the dates indicated, or to project TimkenSteel’s financial performance for any future period following th e spinoff. This presentation includes certain non-GAAP financial measures as defined by SEC rules. A reconciliation of those measures to the most directly comparable GAAP equivalent is contained in the appendix. Please see discussion of non-GAAP financial measures in the appendix. 3
Business overview
TimkenSteel: At a glance Key facts 2013 sales split by product • $1,381 million in 2013 sales Value added solutions (precision machining, supply chain management, • $159 million in 2013 Adjusted EBITDA 1 cutting and drilling) 21% • 2013 shipments: 919k tons Alloy steel bars (SBQ) • Annual melt capacity of ~2 million tons Seamless 59% mechanical tubing • Headquartered in Canton, Ohio 20% • ~3,000 employees 2013 sales split by business segment 2013 sales split by end market 2 Other 3 12% Mining 3% Passenger car 26% Industrial 5% Energy & distribution Industrial & Machinery 4 mobile 37% 12% 63% Light truck 22% Oil & gas 20% Source: TimkenSteel 1 See Appendix for Adjusted EBITDA reconciliation 2 Distribution sales were 20% of 2013 sales 3 Other: ≤ 2% each of construction, rail, military/defense, heavy and medium truck, agriculture, metals recycling, power genera tion, marine and aerospace 4 Machinery includes historic intercompany sales to Timken 5
A leading manufacturer of engineered steel products and value-added services 59% 20% Alloy steel bars (SBQ) Seamless mechanical tubing 21% Value-added solutions Machining, honing & drilling Supply chain Components 6
Broad size range strengthens our competitive position Market sector size 3.5mm tons 1.8mm tons 0.8mm tons 0.4mm tons TimkenSteel Nucor - Memphis Steel Dynamics - Pittsboro Republic Steel Gerdau MacSteel 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Bar Diameter (Inches) 6:1 Reduction – Machining Source: TimkenSteel internal estimates as of 12/31/2013 7
A leading producer of seamless mechanical tubing 19.4mm annual tons - welded and seamless Differentiation Line pipe • 23% Largest domestic capacity • Broadest size range OCTG 1.875” to 13.0” Seamless 36% mechanical • Consistency in our application 3% • Higher value – added niche volume and alloy grade categories Welded mechanical • 12% Leading producer of quench and tempered capability Structural 14% Stainless Standard 1% 10% Pressure 1% Source: 2013 Preston Pipe and Tube Report Source: TimkenSteel 8
Focused in niche market sectors where we have competitive strength Global finished steel products USA finished steel products Our core product lines Other Asia 15% Special Bar Seamless China 47% Quality Mechanical Other Long EU-28 9% 5% Tubing Products² 1% 26% NAFTA 9% Our home market Flat-Rolled 69% Others¹ 9% Japan 4% Other Europe CIS 4% 3% World: 1,633 mm tons USA: 107 mm tons Source: World Steel Association; American Iron and Steel Institute ¹ Others: Middle East 3.2%, Central & South America 3.3%, Africa 2.0%, Australia & New Zealand 0.4% 2 Other Long Products: Light Shapes, Reinforcing Bars, Merchant Bars, Wire, Pipe & Tubing 9
Highly competitive cost structure Competitive cost structure Labor Productivity • Lower cost Electric Arc Furnaces (EAF) mills 18 • Sophisticated raw material model 16 Scrap return supply chain established with 14 many customers 12 • Labor hrs/ton Raw material, alloy and natural gas price 10 volatility largely passed on to customers through 8 surcharge mechanisms 6 • Team driven by continuous improvement in processes and technology 4 • Breakeven operating structure at ~50% 2 • 0 $45mm - $55mm spent annually on 1981 1985 1989 1993 1997 2001 2005 2009 2013 maintenance and continuous improvement Source: TimkenSteel internal estimates as of 12/31/2013 capital expenditures 10
Investing for growth and competitive strength Jumbo Caster Ladle refining station • ~$200m investment to be • $25m investment commissioned 3Q 2014 commissioned April 2013 • 125k tons added capacity • Expands capacity for tight • 10% yield improvement chemistry • Operating efficiency • Flexible capacity in all markets • Superior cleanness for stand • Steelmaking capacity for 40k cast products additional finish tons • Broader capability to support • Market opportunities higher value SBQ and seamless mechanical tube markets In-Line Forge Press Intermediate Finishing Line (IFL) • $35m investment • $50m investment commissioned April 2013 commissioned April 2013 • 2% yield improvement • 65% cycle time reduction • 40k ton increase in rolling • 40% labor productivity capacity • Advanced Inspection • Achieves required Technology improves quality soundness up to 16” bar assurance • Entrance to new markets • Enhanced safety and environmental controls 11
Providing enhanced capabilities that customers value Advanced Heat Treat Value Add Advanced Heat Treat Small Quantity Advanced Heat Treat Single Thermal Large Quantity Customer value level Treat Value Add Single Thermal Treat Single Small Thermal Treat Quantity Large Hot Roll Quantity Small Quantity Hot Roll Large Quantity Material and service level Source: TimkenSteel 12
Energy & Distribution segment overview 2013A figures Overview Key takeaways Shipments • 331k tons Work closely with selected distribution channel partners Sales $516mm to best reach targeted share participation levels EBIT $67mm • 13.0% Serve global Energy OEM and service companies for their EBIT margin most critical applications operating in harsh • High-performance on- and off- shore drilling and environments completion applications • Combine high-performance alloy steel manufacturing, • Proven history and extension of capabilities Key unique heat treat and custom boring /finishing capabilities highlights Energy offerings are valued and trusted by industry • Authorized service centers are valued for delivering leaders differentiated solutions to end users • Grow globally our unique and integrated supply chain • Oil & gas solution set which combines: • Distribution service centers End High performance materials markets Unmatched thermal treatment Proprietary machining processes Energy Sales Distribution 45% 55% Responsive delivery capabilities mix AM Castle Metals Ellwood Texas Forge Energy Alloys National Oilwell Varco-Grant Prideco Customers Reliance Steel & Aluminum Marmon Keystone 13
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