Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Consolidated Statements of Operations (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(Dollars in millions, except per share data)
Net sales	$	154.0		$	336.7		$	413.6		$	707.7
Cost of products sold		158.0			321.9			409.8			664.5
Gross Profit		(4.0	)		14.8			3.8			43.2

Selling, general and administrative expenses		16.8			20.2			40.2			43.5
Restructuring charges		0.3			3.6			0.9			3.6
Impairment charges and loss (gain) on sale or asset disposals		(0.9	)		1.8			(3.2	)		1.8
Interest expense		3.0			4.2			6.2			8.4
Other expense (income), net		(8.1	)		(0.2	)		(5.4	)		(2.9	)
Income (Loss) Before Income Taxes		(15.1	)		(14.8	)		(34.9	)		(11.2	)
Provision (benefit) for income taxes		0.2			(2.9	)		0.3			(2.8	)
Net Income (Loss)	$	(15.3	)	$	(11.9	)	$	(35.2	)	$	(8.4	)

Per Share Data:
Basic earnings (loss) per share	$	(0.34	)	$	(0.27	)	$	(0.78	)	$	(0.19	)
Diluted earnings (loss) per share	$	(0.34	)	$	(0.27	)	$	(0.78	)	$	(0.19	)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(Dollars in millions, except per share data)
Net sales
$274.2

$409.9

$981.9

$1,204.2
Cost of products sold 261.0
385.3
914.2
1,126.4
Gross Profit 13.2
24.6
67.7
77.8

Selling, general and administrative expenses 21.4
24.0
64.9
73.6
Restructuring charges —
—
3.6
—
Impairment charges and loss on asset disposals 0.1
—
1.9
0.9
Interest expense 3.6
4.4
12.0
12.9
Other income, net 5.2
6.1
8.1
18.7
Income (Loss) Before Income Taxes (6.7 )
2.3

(6.6 )
9.1
Provision (benefit) for income taxes (2.1 ) 0.9
(1.8 ) 1.2
Net Income (Loss)
($4.6 )

$1.4

($4.8 )
$7.9

Per Share Data:
Basic earnings (loss) per share
($0.10 )
$0.03

($0.11 )
$0.18
Diluted earnings (loss) per share
($0.10 )
$0.03

($0.11 )
$0.17

See accompanying Notes to the unaudited Consolidated Financial Statements.

Table of Contents

TimkenSteel Corporation

Consolidated Statement of Comprehensive Income (Loss) (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(Dollars in millions)
Net income (loss)	$	(15.3	)	$	(11.9	)	$	(35.2	)	$	(8.4	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		0.1			(0.6	)		(1.7	)		(0.2	)
Pension and postretirement liability adjustments		(1.4	)		66.3			(2.5	)		66.4
Other comprehensive income (loss), net of tax		(1.3	)		65.7			(4.2	)		66.2
Comprehensive Income (Loss), net of tax	$	(16.6	)	$	53.8		$	(39.4	)	$	57.8

Three Months Ended September 30, Nine Months Ended September 30,
2019
2018 2019 2018
(Dollars in millions)
Net income (loss)
($4.6 )
$1.4

($4.8 )
$7.9

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (1.0 ) (0.5 ) (1.2 ) (0.9 )
Pension and postretirement liability adjustments, net of tax of $2.2
million for the three and nine months ended September 30, 2019
(net of tax of $0 for the three and nine months ended September
30, 2018)
(3.4 ) 0.2
66.1
0.5

Other comprehensive income (loss), net of tax (4.4 ) (0.3 ) 64.9
(0.4 )
Comprehensive Income (Loss), net of tax
($9.0 )
$1.1

$60.1

$7.5

See accompanying Notes to the unaudited Consolidated Financial Statements.

Table of Contents

TimkenSteel Corporation

Consolidated Balance Sheets (Unaudited)

	June 30, 2020			December 31, 2019
(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents	$	75.5		$	27.1
Accounts receivable, net of allowances (2020 - $1.7 million; 2019 - $1.5 million)		63.6			77.5
Inventories, net		206.4			281.9
Deferred charges and prepaid expenses		1.9			3.3
Assets held for sale		2.1			4.1
Other current assets		5.6			7.8
Total Current Assets		355.1			401.7

Property, plant and equipment, net		595.4			626.4
Operating lease right-of-use assets		18.5			14.3
Pension assets		20.4			25.2
Intangible assets, net		11.2			14.3
Other non-current assets		3.1			3.3
Total Assets	$	1,003.7		$	1,085.2

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	48.1		$	69.3
Salaries, wages and benefits		19.4			13.9
Accrued pension and postretirement costs		3.0			3.0
Current operating lease liabilities		7.0			6.2
Convertible notes, net		81.0			—
Other current liabilities		11.4			19.9
Total Current Liabilities		169.9			112.3

Convertible notes, net		—			78.6
Credit Agreement		60.0			90.0
Non-current operating lease liabilities		11.5			8.2
Accrued pension and postretirement costs		223.0			222.1
Deferred income taxes		0.9			0.9
Other non-current liabilities		11.4			10.0
Total Liabilities		476.7			522.1

Shareholders’ Equity
Preferred shares, without par value; authorized 10.0 million shares, NaN issued		—			—
Common shares, without par value; authorized 200.0 million shares; issued 2020 and 2019 - 45.7 million shares		—			—
Additional paid-in capital		840.7			844.8
Retained deficit		(336.7	)		(301.5	)
Treasury shares - 2020 - 0.7 million; 2019 - 0.9 million		(17.5	)		(24.9	)
Accumulated other comprehensive income (loss)		40.5			44.7
Total Shareholders’ Equity		527.0			563.1
Total Liabilities and Shareholders’ Equity	$	1,003.7		$	1,085.2

September 30,
2019 December 31,
2018
(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents
$18.4

$21.6
Accounts receivable, net of allowances (2019 - $1.2 million; 2018 - $1.7 million) 107.4
163.4
Inventories, net 279.4
296.8
Deferred charges and prepaid expenses 4.9
3.5
Other current assets 7.9
6.1
Total Current Assets 418.0
491.4

Property, plant and equipment, net 643.0
674.4
Operating lease right-of-use assets 14.2
—
Pension assets 13.2
10.5
Intangible assets, net 16.2
17.8
Other non-current assets 2.7
3.5
Total Assets
$1,107.3

$1,197.6

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable
$79.0

$160.6
Salaries, wages and benefits 17.0
36.8
Accrued pension and postretirement costs 3.0
3.0
Current operating lease liabilities 6.1
—
Other current liabilities 17.4
20.4
Total Current Liabilities 122.5
220.8

Convertible notes, net 77.4
74.1
Credit Agreement 110.0
115.0
Non-current operating lease liabilities 8.2
—
Accrued pension and postretirement costs 178.5
240.0
Deferred income taxes 0.6
0.8
Other non-current liabilities 10.4
11.7
Total Liabilities 507.6
662.4

Shareholders’ Equity
Preferred shares, without par value; authorized 10.0 million shares, none issued —
—
Common shares, without par value; authorized 200.0 million shares;
issued 2019 and 2018 - 45.7 million shares
—
—
Additional paid-in capital 842.8
846.3
Retained deficit (274.0 ) (269.2 )
Treasury shares - 2019 - 0.9 million; 2018 - 1.1 million (25.1 ) (33.0 )
Accumulated other comprehensive income (loss) 56.0
(8.9 )
Total Shareholders’ Equity 599.7
535.2
Total Liabilities and Shareholders’ Equity
$1,107.3

$1,197.6

See accompanying Notes to the unaudited Consolidated Financial Statements.

Table of Contents

TimkenSteel Corporation

Consolidated Statements of Shareholders’ Equity (Unaudited)

(Dollars in millions)	Common Shares Outstanding			Additional Paid-in Capital			Retained Deficit			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2019		44,820,153		$	844.8		$	(301.5	)	$	(24.9	)	$	44.7		$	563.1
Net income (loss)		—			—			(19.9	)		—			—			(19.9	)
Other comprehensive income (loss)		—			—			—			—			(2.9	)		(2.9	)
Stock-based compensation expense		—			2.0			—			—			—			2.0
Issuance of treasury shares		215,708			(5.7	)		—			5.7			—			—
Shares surrendered for taxes		(70,033	)		—			—			(0.2	)		—			(0.2	)
Balance at March 31, 2020		44,965,828		$	841.1		$	(321.4	)	$	(19.4	)	$	41.8		$	542.1
Net income (loss)		—			—			(15.3	)		—			—			(15.3	)
Other comprehensive income (loss)		—			—			—			—			(1.3	)		(1.3	)
Stock-based compensation expense		—			1.6			—			—			—			1.6
Issuance of treasury shares		75,689			(2.0	)		—			2.0			—			—
Shares surrendered for taxes		(5,341	)		—			—			(0.1	)		—			(0.1	)
Balance at June 30, 2020		45,036,176		$	840.7		$	(336.7	)	$	(17.5	)	$	40.5		$	527.0

	Common Shares Outstanding			Additional Paid-in Capital			Retained Deficit			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2018		44,584,668		$	846.3		$	(191.5	)	$	(33.0	)	$	(8.9	)	$	612.9
Net income (loss)		—			—			3.5			—			—			3.5
Other comprehensive income (loss)		—			—			—			—			0.5			0.5
Stock-based compensation expense		—			2.2			—			—			—			2.2
Stock option activity		—			0.2			—			—			—			0.2
Issuance of treasury shares		261,130			(7.5	)		—			7.5			—			—
Shares surrendered for taxes		(79,889	)		—			—			(1.0	)		—			(1.0	)
Balance at March 31, 2019		44,765,909		$	841.2		$	(188.0	)	$	(26.5	)	$	(8.4	)	$	618.3
Net income (loss)		—			—			(11.9	)		—			—		$	(11.9	)
Other comprehensive income (loss)		—			—			—			—			65.7			65.7
Stock-based compensation expense		—			1.6			—			—			—			1.6
Stock option activity		—			—			—			—			—			—
Issuance of treasury shares		50,185			(1.4	)		—			1.4			—			—
Balance at June 30, 2019		44,816,094		$	841.4		$	(199.9	)	$	(25.1	)	$	57.3		$	673.7

(Dollars in millions) Common Shares Outstanding Additional Paid-in Capital Retained Deficit Treasury Shares Accumulated Other Comprehensive Income (Loss) Total
Balance as of December 31, 2018 44,584,668

$846.3

($269.2 )
($33.0 )
($8.9 )
$535.2
Net income (loss) —
—
4.2
—
—
4.2
Other comprehensive income (loss) —
—
—
—
0.5
0.5
Stock-based compensation expense —
2.2
—
—
—
2.2
Stock option activity —
0.2
—
—
—
0.2
Issuance of treasury shares 261,130
(7.5 ) —
7.5
—
—
Shares surrendered for taxes (79,889 ) —
—
(1.0 ) —
(1.0 )
Balance at March 31, 2019 44,765,909

$841.2

($265.0 )

($26.5 )

($8.4 )
$541.3
Net income (loss) —
—
(4.4 ) —
—
(4.4 )
Other comprehensive income (loss) —
—
—
—
68.8
68.8
Stock-based compensation expense —
1.6
—
—
—
1.6
Issuance of treasury shares 50,185
(1.4 ) —
1.4
—
—
Balance at June 30, 2019 44,816,094

$841.4

($269.4 )

($25.1 )

$60.4

$607.3
Net income (loss) —
—
(4.6 ) —
—
(4.6 )
Other comprehensive income (loss) —
—
—
—
(4.4 ) (4.4 )
Stock-based compensation expense —
1.4
—
—
—
1.4
Issuance of treasury shares 1,704
—
—
—
—
—
Shares surrendered for taxes (720 ) —
—
—
—
—
Balance at September 30, 2019 44,817,078

$842.8

($274.0 )
($25.1 )
$56.0

$599.7

See accompanying Notes to the unaudited Consolidated Financial Statements.

Table of Contents

TimkenSteel Corporation

Consolidated Statements of ~~Shareholders’ Equity~~Cash Flows (Unaudited)

	Six Months Ended June 30,
	2020			2019
(Dollars in millions)
CASH PROVIDED (USED)
Operating Activities
Net income (loss)	$	(35.2	)	$	(8.4	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization		35.4			35.7
Amortization of deferred financing fees and debt discount		2.7			2.5
Impairment charges and loss (gain) on sale or disposal of assets		(3.2	)		1.8
Deferred income taxes		0.3			(0.2	)
Stock-based compensation expense		3.6			3.8
Pension and postretirement expense, net		4.9			3.3
Pension and postretirement contributions and payments		(3.2	)		(3.5	)
Changes in operating assets and liabilities:
Accounts receivable, net		13.9			17.0
Inventories, net		75.5			3.3
Accounts payable		(17.2	)		(50.3	)
Other accrued expenses		(2.0	)		(22.3	)
Deferred charges and prepaid expenses		1.4			0.9
Other, net		3.0			(1.2	)
Net Cash Provided (Used) by Operating Activities		79.9			(17.6	)

Investing Activities
Capital expenditures		(9.6	)		(12.3	)
Proceeds from disposals of property, plant and equipment		8.4			—
Net Cash Provided (Used) by Investing Activities		(1.2	)		(12.3	)

Financing Activities
Proceeds from exercise of stock options		—			0.2
Shares surrendered for employee taxes on stock compensation		(0.3	)		(1.0	)
Repayments on credit agreements		(30.0	)		(10.0	)
Borrowings on credit agreements		—			40.0
Net Cash Provided (Used) by Financing Activities		(30.3	)		29.2
Increase (Decrease) in Cash and Cash Equivalents		48.4			(0.7	)
Cash and cash equivalents at beginning of period		27.1			21.6
Cash and Cash Equivalents at End of Period	$	75.5		$	20.9

Common Shares Outstanding Additional Paid-in Capital Retained Deficit Treasury Shares Accumulated Other Comprehensive Income (Loss) Total
Balance at December 31, 2017 44,445,747

$843.7

($238.0 )
($37.4 )
($7.6 )
$560.7
Net income (loss) —
—
(1.9 ) —
—
(1.9 )
Other comprehensive income (loss) —
—
—
—
0.9
0.9
Revenue recognition accounting standard adoption —
—
0.7
—
—
0.7
Stock-based compensation expense —
2.2
—
—
—
2.2
Stock option activity —
0.1
—
—
—
0.1
Issuance of treasury shares 121,012
(3.4 ) (0.1 ) 3.5
—
—
Shares surrendered for taxes (37,533 ) —
—
(0.7 ) —
(0.7 )
Balance at March 31, 2018 44,529,226

$842.6

($239.3 )

($34.6 )

($6.7 )

$562.0
Net income (loss) —
—
8.4
—
—

$8.4
Other comprehensive income (loss) —
—
—
—
(1.0 )
($1.0 )
Stock-based compensation expense —
1.5
—
—
—

$1.5
Stock option activity —
0.1
—
—
—

$0.1
Issuance of treasury shares 55,442
(1.5 ) (0.1 ) 1.6
—

$—
Balance at June 30, 2018 44,584,668

$842.7

($231.0 )

($33.0 )

($7.7 )

$571.0
Net income (loss) —
—
1.4
—
—

$1.4
Other comprehensive income (loss) —
—
—
—
(0.3 )
($0.3 )
Stock-based compensation expense —
2.2
—
—
—

$2.2
Balance at September 30, 2018 44,584,668

$844.9

($229.6 )
($33.0 )
($8.0 )
$574.3

See accompanying Notes to the unaudited Consolidated Financial Statements.

Table of Contents

TimkenSteel Corporation

~~Consolidated Statements of Cash Flows (Unaudited)~~

Nine Months Ended September 30,
2019 2018
(Dollars in millions)
CASH PROVIDED (USED)
Operating Activities
Net income (loss)
($4.8 )
$7.9
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization 53.2
55.0
Amortization of deferred financing fees and debt discount 3.7
4.3
Impairment charges and loss on sale or disposal of assets 1.9
0.9
Deferred income taxes (2.3 ) 0.3
Stock-based compensation expense 5.2
5.9
Pension and postretirement expense (benefit), net 6.0
(4.3 )
Pension and postretirement contributions and payments (2.3 ) (12.4 )
Changes in operating assets and liabilities:
Accounts receivable, net 56.0
(22.3 )
Inventories, net 17.4
(61.3 )
Accounts payable (81.6 ) 3.5
Other accrued expenses (24.7 ) (5.9 )
Deferred charges and prepaid expenses (1.4 ) (0.8 )
Other, net (2.0 ) 0.8
Net Cash Provided (Used) by Operating Activities 24.3
(28.4 )

Investing Activities
Capital expenditures (21.7 ) (17.7 )
Proceeds from disposals of property, plant and equipment —
1.0
Net Cash Used by Investing Activities (21.7 ) (16.7 )

Financing Activities
Proceeds from exercise of stock options 0.2
0.2
Shares surrendered for employee taxes on stock compensation (1.0 ) (0.7 )
Refunding Bonds repayments —
(30.2 )
Repayments on credit agreements (45.0 ) (75.0 )
Borrowings on credit agreements 40.0
155.0
Debt issuance costs —
(1.7 )
Net Cash Provided (Used) by Financing Activities (5.8 ) 47.6
Increase (Decrease) in Cash and Cash Equivalents (3.2 ) 2.5
Cash and cash equivalents at beginning of period 21.6
24.5
Cash and Cash Equivalents at End of Period
$18.4

$27.0

~~See accompanying Notes to the unaudited Consolidated Financial Statements.~~

~~Table of Contents~~

~~TimkenSteel Corporation~~

Notes to Unaudited Consolidated Financial Statements

(dollars in millions, except per share data)

Note1-Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared by TimkenSteel Corporation (the Company or TimkenSteel) in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. ~~Certain items previously reported in specific financial statement captions have been reclassified to conform with the current year presentation.~~ For further information, refer to TimkenSteel’s audited Consolidated Financial Statements and Notes included in its Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Customer Receivables

The Company’s accounts receivables arise from sales to customers across all end markets. Historically, TimkenSteel’s allowance for doubtful accounts write-offs have been immaterial. The allowance for doubtful account reserve has been established using qualitative and quantitative methods. In general, account balances greater than one year of age or sent to third party collection are fully reserved. Account balances for customers that are viewed as higher risk are also analyzed for a reserve. In addition to these methods, the allowance for doubtful accounts in 2020 was adjusted for forward looking uncollectible balances, primarily in the energy and automotive end markets. The amount recorded was based on the Company’s assessment of the risk presented to customers in these end markets as a result of the COVID-19 pandemic as well as geo-political factors facing the energy end market. At this time, the full impact of COVID-19 is difficult to predict due to uncertainty surrounding the pandemic and the timeline for economic activities to fully recover.

Change in Accounting Principle

During the fourth quarter of 2019, TimkenSteel elected to change its method for valuing its inventories that previously used the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. The Company believes that the FIFO method is preferable as it improves comparability with its peers, more closely resembles the physical flow of its inventory and aligns with how the Company internally manages the business. The effects of the change in accounting principle from LIFO to FIFO were retrospectively applied. As a result of the retrospective application of the change in accounting principle, certain financial statement line items in the Company’s consolidated balance sheets as of June 30, 2019 and the consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the three and six months ended June 30, 2019 were adjusted as necessary. For further information, refer to TimkenSteel’s audited Consolidated Financial Statements and Notes included in its Annual Report on Form 10-K for the year ended December 31, 2019.

The following tables reflect the impact to the financial statement line items as a result of the change in accounting principle for the prior periods presented in the accompanying financial statements (dollars in millions, except per share data):

Consolidated Statement of Operations	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	As Reported			Adjustments			As Adjusted			As Reported			Adjustments			As Adjusted
Cost of products sold	$	311.3		$	10.6		$	321.9		$	653.2		$	11.3		$	664.5
Gross profit		25.4			(10.6	)		14.8			54.5			(11.3	)		43.2
Income (loss) before income taxes		(4.2	)		(10.6	)		(14.8	)		0.1			(11.3	)		(11.2	)
Provision (benefit) for income taxes		0.2			(3.1	)		(2.9	)		0.3			(3.1	)		(2.8	)
Net income (loss)		(4.4	)		(7.5	)		(11.9	)		(0.2	)		(8.2	)		(8.4	)

Per Share Data:
Basic earnings (loss) per share		(0.10	)		(0.17	)		(0.27	)		—			(0.19	)		(0.19	)
Diluted earnings (loss) per share		(0.10	)		(0.17	)		(0.27	)		—			(0.19	)		(0.19	)

Consolidated Statement of Comprehensive Income (Loss)	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	As Reported			Adjustments			As Adjusted			As Reported			Adjustments			As Adjusted
Net income (loss)	$	(4.4	)	$	(7.5	)	$	(11.9	)	$	(0.2	)	$	(8.2	)	$	(8.4	)
Pension and postretirement liability adjustments		69.4			(3.1	)		66.3			69.5			(3.1	)		66.4
Comprehensive income (loss), net of tax		64.4			(10.6	)		53.8			69.1			(11.3	)		57.8

Table of Contents

Consolidated Statement of Cash Flows	Six Months Ended June 30, 2019
	As Reported			Adjustments			As Adjusted
Net income (loss)	$	(0.2	)	$	(8.2	)	$	(8.4	)
Pension and postretirement expense (benefit), net		6.4			(3.1	)		3.3
Changes in operating assets and liabilities:
Inventories, net		(8.0	)		11.3			3.3

Note2-Recent Accounting Pronouncements

Adoption of New Accounting Standards

The Company adopted the following Accounting Standard Updates (ASU) in the first quarter of ~~2019,~~2020, all of which were effective as of January 1, ~~2019.~~2020, except ASU 2020-04, which became effective upon issuance on March 12, 2020. The adoption of these standards ~~had no~~did not have a material impact on the unaudited Consolidated Financial Statements or the related Notes to the unaudited Consolidated Financial Statements.



~~Standards Adopted~~	~~Description~~
~~ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting~~	~~The standard provides an expanded scope of Topic 718, to include share-based payment transactions for acquiring goods and services from nonemployees.~~
~~ASU 2018-02, Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~	~~The standard permits entities to reclassify tax effects stranded in accumulated other comprehensive income as a result of tax reform to retained earnings.~~
~~ASU 2017-11, Distinguishing Liabilities from Equity; Derivatives and Hedging~~	The standard eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock.

On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topics 842),” which requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for not only finance (previously capital) leases but also operating leases. The standard also requires additional quantitative and qualitative disclosures. The Company adopted the standard using the modified retrospective transition approach without adjusting comparative periods.

~~The Company elected certain of the practical expedients permitted under the transition guidance within the new standard as follows:~~

~~A package of practical expedients to not reassess:~~


◦ Standards Adopted	~~Whether a contract is or contains a lease~~

	Description
◦ ASU 2020-04, Reference Rate Reform (Topic 848)	~~Lease classification~~

	The standard provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.
◦	~~Initial direct costs~~

~~A practical expedient to not reassess certain land easements~~

The Company has implemented internal controls and lease accounting software to enable the quantification of the expected impact on the unaudited Consolidated Balance Sheets and to facilitate the calculations of the related accounting entries and disclosures. Adoption of the lease standard resulted in recognition of right-to-use assets and lease liabilities of $16.0 million as of January 1, 2019. Adoption of the lease standard had no impact on the Company’s debt-covenant compliance under its current agreements. Also, the standard did not materially affect the Company’s results of operations or its cash flows. Refer to “Note 11 - Leases” for additional information.

~~Table of Contents~~

~~Accounting Standards Issued But Not Yet Adopted~~

~~The Company has considered the recent ASUs issued by the Financial Accounting Standards Board summarized below:~~



~~Standard Pending Adoption~~	~~Description~~	~~Effective Date~~	~~Anticipated Impact~~
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)	The standard aligns the requirements for capitalizing implementation costs in cloud computing software arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.	~~January 1, 2020~~	~~The Company plans on adopting this ASU using the prospective method. The Company does not expect the ASU to have a material impact on its results of operations or financial condition.~~
~~ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)~~	~~The standard eliminates, modifies and adds disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.~~	~~January 1, 2021~~	~~The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.~~
ASU 2018-13, Fair Value Measurement (Topic 820)	The standard eliminates, modifies and adds disclosure requirements for fair value measurements.	~~January 1, 2020~~	~~The Company does not expect the ASU to have a material impact on its results of operations or financial condition.~~
ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326)	The standard changes how entities will measure credit losses for most financial assets, including trade and other receivables, and replaces the current incurred loss approach with an expected loss model.

Accounting Standards Issued But Not Yet Adopted

The Company has considered the recent ASUs issued by the Financial Accounting Standards Board summarized below:


Standard Pending Adoption	Description	Effective Date	Anticipated Impact
ASU 2019-12, Income Taxes (Topic 740)	The standard simplifies the accounting for income taxes by removing various exceptions.	January 1, ~~2020~~2021	The Company ~~does not expect~~is currently evaluating the impact of the adoption of this ASU ~~to have a material impact~~ on its results of operations orand financial condition.
ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)	The standard eliminates, modifies and adds disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.	January 1, 2021	The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2020-03, Codification Improvements to Financial Instruments	The standard clarifies or improves the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications.	January 1, 2021	The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.

Table of Contents

Note3-Revenue Recognition

TimkenSteel recognizes revenue from contracts at a point in time when it has satisfied its performance obligation and the customer obtains control of the goods, at the amount that reflects the consideration the Company expects to receive for those goods. The Company receives and acknowledges purchase orders from its customers which define the quantity, pricing, payment and other applicable terms and conditions. In some cases, the Company receives a blanket purchase order from its customer, which includes pricing, payment and other terms and conditions. Quantities are defined at the time the customer issues periodic releases against the blanket purchase order. Certain contracts contain variable consideration, which primarily consists of rebates that are accounted for in net sales and accrued based on the estimated probability of the requirements being met. Amounts billed to customers related to shipping and handling costs are included in net sales and related costs are included in costs of products sold in the unaudited Consolidated Financial Statements.

The following table provides the major sources of revenue by end-market sector for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Mobile	$	36.1	$	135.3	$	133.8	$	279.5
Industrial		98.0		124.3		211.3		271.3
Energy		14.6		54.1		39.8		114.9
Other(1)		5.3		23.0		28.7		42.0
Total Net Sales	$	154.0	$	336.7	$	413.6	$	707.7

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Mobile
$110.2

$136.4

$389.7

$420.5
Industrial 116.9
169.7
388.2
484.3
Energy 32.6
70.1
147.5
188.0
Other⁽¹⁾
14.5
33.7
56.5
111.4
Total Net Sales
$274.2

$409.9

$981.9

$1,204.2

⁽¹⁾“Other” ~~for~~ sales by end-market sector includes the Company’s scrap and oil country tubular goods (OCTG) billet sales.

~~Table of Contents~~

The following table provides the major sources of revenue by product type for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Bar	$	92.7	$	225.4	$	260.8	$	465.3
Tube		25.6		40.8		56.0		90.4
Value-add		32.9		63.1		88.4		136.8
Other(2)		2.8		7.4		8.4		15.2
Total Net Sales	$	154.0	$	336.7	$	413.6	$	707.7

Three Months Ended September 30, Nine Months Ended September 30,
2019
2018 2019 2018
Bar
$179.7

$262.2

$645.0

$759.0
Tube 32.2
66.7
122.6
201.0
Value-add 55.9
70.6
192.7
212.5
Other⁽²⁾
6.4
10.4
21.6
31.7
Total Net Sales
$274.2

$409.9

$981.9

$1,204.2

⁽²⁾“Other” ~~for~~ sales by product type includes the Company’s scrap sales.

Note4-Restructuring Charges

During 2019 and the ~~second quarter~~first half of ~~2019,~~2020, TimkenSteel made organizational changes to enhance profitable and sustainable growth. These company-wide actions included the restructuring of its ~~commercial~~business support functions, the reduction of management layers throughout the organization, the closure of the TimkenSteel Material Services (TMS) facility in Houston, Texas and ~~technology organizations~~other actions to ~~drive innovation and focus on~~further improve the ~~key growth areas identified by~~Company’s overall cost structure. Through these restructuring efforts, to date the Company ~~such as value-added components, energy products and government business. Given these and other restructuring efforts, the Company implemented~~has eliminated approximately 55180 salaried ~~position eliminations~~positions and recognized restructuring charges of ~~$3.6~~$9.5 million, primarily consisting of severance and employee-related benefits. Approximately 20 of these positions were eliminated in the first half of 2020. TimkenSteel recorded reserves for such restructuring charges as other current liabilities on the ~~unaudited~~ Consolidated Balance Sheets. The reserve balance at ~~September~~June 30, ~~2019~~2020 is expected to be substantially used in the next ~~six~~twelve months.

The following is a summary of the restructuring reserve for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019:

Balance at December 31, 2019	$	6.0
Expenses		0.9
Payments		(5.9	)
Balance at June 30, 2020	$	1.0

Balance at December 31, 2018	$	—
Expenses		3.6
Payments		(0.2	)
Balance at June 30, 2019	$	3.4



~~Balance at December 31, 2018~~		$—
~~Expenses~~	~~3.6~~
~~Payments~~	~~(1.5~~		)
~~Balance at September 30, 2019~~		~~$2.1~~

Note 5 - Disposition of Non-Core Assets

During the first quarter of 2020, management completed its previously announced plan to close the Company’s TMS facility in Houston, and initiated a plan to market and sell the assets at the facility. Accelerated depreciation and amortization of $1.6 million was recorded in the first quarter to reduce the net book value of the machinery and equipment to its expected fair value. Subsequent to the closure, certain assets were sold and a gain on sale of $1.0 million and $4.2 million was recognized for the three and six months ended June 30, 2020, respectively. At June 30, 2020, the remaining associated machinery and equipment, with a net book value of $2.1 million, was classified as held for sale on the Consolidated Balance Sheet. The land and buildings associated with TMS were not classified as held for sale, as they were not considered available for immediate sale in their present condition. While the Company began selling the inventory associated with TMS in the first quarter of 2020 at prices that were in line with the net realizable value of the inventory established in the fourth quarter of 2019, excess inventory related to our Energy end-market sector resulted in an additional reserve of approximately $3.1 million being recorded in the second quarter of 2020. The excess inventory is the result of continued weakness in this end-market sector, as well as recent closures of several distributors that were holding considerable amounts of similar inventory.

Table of Contents

Note6–Other ~~Income,~~Expense (Income), net

The following table provides the components of other ~~income,~~expense (income), net for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~:2019:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Pension and postretirement non-service benefit loss (income)	$	(6.5	)	$	(4.5	)	$	(13.0	)	$	(7.3	)
Loss (gain) from remeasurement of benefit plans		(1.9	)		4.4			7.6			4.4
Foreign currency exchange loss (gain)		0.3			(0.2	)		0.4			(0.1	)
Miscellaneous expense (income)		—			0.1			(0.4	)		0.1
Total other expense (income), net	$	(8.1	)	$	(0.2	)	$	(5.4	)	$	(2.9	)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Pension and postretirement non-service benefit income
$5.1

$6.2

$12.4

$18.7
Loss from remeasurement of benefit plans —
—
(4.4 ) —
Foreign currency exchange gain (loss) (0.1 ) —
—
—
Miscellaneous income (expense) 0.2
(0.1 ) 0.1
—
Total other income, net
$5.2

$6.1

$8.1

$18.7

Non-service benefit income is derived from the Company’s pension and other postretirement plans. The Company’s expected return on assets has exceeded the interest cost component, resulting in income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

The TimkenSteel Corporation Retirement Plan (Salaried Plan) has a provision that permits employees to elect to receive their pension benefits in a lump sum. In the ~~second~~first quarter of ~~2019,~~2020, the cumulative cost of all lump sum payments was projected to exceed the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. As a result, the Company ~~amended its postretirement benefit plan. This amendment reduced the postretirement liability and therefore required the Company to perform~~completed a full remeasurement of its ~~postretirement~~pension obligations and plan assets associated with the Salaried Plan as of ~~April~~June 30, ~~2019. The reduction~~2020 and March 31, 2020, which resulted in a non-cash (gain) loss from remeasurement of ($1.9) million and $7.6 million for the ~~Accumulated Postretirement Benefit Obligation (APBO) was recognized in Other Comprehensive Income~~three and ~~subsequently amortized as an offset to postretirement benefit cost.~~six months ended June 30, 2020, respectively. For more details on the remeasurement, refer to “Note 1311 - Retirement and Postretirement Plans.”

~~Table of Contents~~

Note 6 7-Income Tax Provision

TimkenSteel’s provision for income taxes in interim periods is computed by applying the appropriate estimated annual effective tax rates to income or loss before income taxes for the period. In addition, non-recurring or discrete items, including interest on prior-year tax liabilities, are recorded during the periods in which they occur.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Provision (benefit) for incomes taxes	$	0.2		$	(2.9	)	$	0.3		$	(2.8	)
Effective tax rate		(1.1	)%		19.6	%		(0.8	)%		25.0	%

Three Months Ended September 30, Nine Months Ended September 30,
2019
2018 2019 2018
Provision (benefit) for incomes taxes
($2.1 )
$0.9

($1.8 )
$1.2
Effective tax rate 31.4 % 41.0 % 27.1 % 13.4 %

Intraperiod tax allocation rules require the allocation of income taxes between continuing operations and other categories of comprehensive income. In periods in which the Company has a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of comprehensive income, the Company must consider that income in determining the amount of tax benefit that results from a loss in continuing operations and that will be allocated to continuing operations. As a result of the intraperiod tax allocation rules, the Company recorded an income tax benefit of $2.2 million within other comprehensive income for the three and nine months ended September 30, 2019.

In light of TimkenSteel’s ~~recent~~ operating performance in the U.S. and current industry conditions, the Company assessed its U.S. deferred tax assets and concluded, based upon all available evidence, that it was more likely than not that it would not realize the assets. As a result, the Company maintains a full valuation allowance against its deferred tax assets in the U.S. and applicable foreign countries until sufficient positive evidence exists to conclude that a valuation allowance is not necessary. Going forward, the need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in the Company’s effective tax rate. The majority of TimkenSteel’s income taxes are derived from foreign operations.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, an economic stimulus package intended to provide support, principally in the form of tax benefits, to companies and individuals negatively impacted by the COVID-19 pandemic. Although the majority of the provisions included in the CARES Act will not immediately benefit the Company from a cash tax perspective due to its significant net operating losses, the Company has taken advantage of the deferral of the employer share (6.2% of employee wages) of Social Security payroll taxes that would otherwise have been owed from the date of enactment of the legislation through December 31, 2020, as afforded by the Act. Through June 30, 2020, the Company has deferred $2.0 million in cash payments, and expects additional deferred cash payments of approximately $4 million to $5 million for the remainder of 2020, with total deferred amounts to be paid in 2 equal installments at December 31, 2021 and December 31, 2022. The Company is currently evaluating its eligibility and potential benefit related to the Employee Retention Credit.

Note 78 - Earnings (Loss) Per Share

Basic earnings (loss) per share is computed based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based upon the weighted average number of common shares outstanding plus the dilutive effect of common share equivalents calculated using the treasury stock method or if-converted method. For the Convertible Notes, the Company utilizes the if-converted method to calculate diluted earnings (loss) per share. Under the if-converted method, the Company adjusts net earnings to add back interest expense (including amortization of debt discount) recognized on the Convertible Notes and includes the number of shares potentially issuable related to the Convertible Notes in the weighted average shares outstanding. Treasury stock is excluded from the denominator in calculating both basic and diluted earnings (loss) per share.

Common share equivalents for shares issuable for equity-based awards were excluded from the computation of diluted earnings (loss) per share for the three and ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 because the effect of their inclusion would have been anti-dilutive. Common share equivalents for shares issuable upon the conversion of outstanding convertible notes were excluded from the computation of diluted earnings (loss) per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 because the effect of their inclusion would have been anti-dilutive.

Table of Contents

The following table sets forth the reconciliation of the numerator and the denominator of basic and diluted earnings (loss) per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Numerator:
Net income (loss)	$	(15.3	)	$	(11.9	)	$	(35.2	)	$	(8.4	)

Denominator:
Weighted average shares outstanding, basic		45.0			44.8			44.9			44.7
Dilutive effect of stock-based awards		—			—			—			—
Weighted average shares outstanding, diluted		45.0			44.8			44.9			44.7

Basic earnings (loss) per share	$	(0.34	)	$	(0.27	)	$	(0.78	)	$	(0.19	)
Diluted earnings (loss) per share	$	(0.34	)	$	(0.27	)	$	(0.78	)	$	(0.19	)

~~Table of Contents~~

Three Months Ended September 30, Nine Months Ended September 30,
2019
2018 2019 2018
Numerator:
Net income (loss)
($4.6 )
$1.4

($4.8 )
$7.9

Denominator:
Weighted average shares outstanding, basic 44.8
44.6
44.8
44.5
Dilutive effect of stock-based awards —
0.6
—
0.7
Weighted average shares outstanding, diluted 44.8
45.2
44.8
45.2

Basic earnings (loss) per share
($0.10 )
$0.03

($0.11 )
$0.18
Diluted earnings (loss) per share
($0.10 )
$0.03

($0.11 )
$0.17

Note 8 9-Inventories

The components of inventories, net of reserves as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018 were as follows:~~

September 30,
2019 December 31,
2018
Manufacturing supplies
$52.2

$46.9
Raw materials 38.5
35.2
Work in process 112.6
155.7
Finished products 133.0
142.8
Gross inventory 336.3
380.6
Allowance for surplus and obsolete inventory (5.5 ) (5.1 )
LIFO reserve (51.4 ) (78.7 )
Total Inventories, net
$279.4

$296.8

Inventories are valued at the lower of cost or market, with approximately 74% valued by the last in, first out (LIFO) method, and the remaining inventories, including manufacturing supplies inventory as well as international (outside the United States) inventories, valued by the first-in, first-out, average cost or specific identification methods.

An actual valuation of the inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because these calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to the final year-end LIFO inventory valuation.

~~TimkenSteel projects its LIFO reserve will decrease for the year ending December 31, 2019 due to lower anticipated raw material costs, manufacturing costs and quantities.~~

~~Table of Contents~~

~~Note 9 - Property, Plant and Equipment~~

~~The components of property, plant and equipment, net as of September 30, 2019 and December 31, 2018 were as follows:~~

September 30,
2019 December 31,
2018
Land
$14.1

$14.1
Buildings and improvements 426.4
424.4
Machinery and equipment 1,409.0
1,404.2
Construction in progress 25.8
28.5
Subtotal 1,875.3
1,871.2
Less allowances for depreciation (1,232.3 ) (1,196.8 )
Property, Plant and Equipment, net
$643.0

$674.4

Total depreciation expense was $16.3 million and $16.8 million for the three months ended September 30, 2019 and 2018, respectively. Total depreciation expense was $49.2 million and $50.8 million for the nine months ended September 30, 2019 and 2018, respectively. There was a loss on disposal of $0.1 million during the three months ended September 30, 2019 and no losses on disposal during the three months ended September 30, 2018. For the nine months ended September 30, 2019 TimkenSteel recorded a loss on disposal of assets of $1.8 million primarily related to the abandonment of certain equipment. For the nine months ended September 30, 2018, TimkenSteel recorded approximately $0.5 million of impairment charges and loss on sale or disposals related to the discontinued use of certain assets.

~~Note 10 - Intangible Assets~~

~~The components of intangible assets, net as of September 30, 2019 and December 31, 2018 were as follows:~~

September 30, 2019 December 31, 2018
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Customer relationships
$6.3

$4.9

$1.4

$6.3

$4.6

$1.7
Technology use 9.0
6.9
2.1
9.0
6.5
2.5
Capitalized software 61.2
48.5
12.7
61.6
48.0
13.6
Total Intangible Assets
$76.5

$60.3

$16.2

$76.9

$59.1

$17.8

Intangible assets subject to amortization are amortized on a straight-line method over their legal or estimated useful lives. Amortization expense for intangible assets for the three months ended September 30, 2019 and 2018 was $1.2 million and $1.3 million, respectively. Amortization expense for intangible assets for the nine months ended September 30, 2019 and 2018 was $4.0 million and $4.2 million, respectively. During the nine months ended September 30, 2019, TimkenSteel recorded a loss on disposal of $0.1 million. For the nine months ended September 30, 2018, TimkenSteel recorded approximately $0.4 million of impairment charges due to the discontinued use of certain capitalized software.

~~Table of Contents~~

~~Note 11 - Leases~~

The Company has operating leases for office space, warehouses, land, machinery and equipment, vehicles and certain information technology equipment. These leases have remaining lease terms of less than one year to six years, some of which may include options to extend the leases for one or more years. Certain leases also include options to purchase the leased property. As of September 30, 2019, the Company has no financing leases. The weighted average remaining lease term for our operating leases as of September 30, 2019 was 2.8 years.

Leases with an initial term of 12 months or less (short-term leases) are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into after the adoption of ASC 842, the Company combines lease and non-lease components. The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

~~The Company recorded lease cost for the three and nine months ended September 30, 2019 as follows:~~

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating lease cost
$1.9

$5.5
Short-term lease cost 0.5
1.5
Total lease cost
$2.4

$7.0

When available, the rate implicit in the lease is used to discount lease payments to present value; however, the Company’s leases generally do not provide a readily determinable implicit rate. Therefore, the incremental borrowing rate to discount the lease payments is estimated using market-based information available at lease commencement. The weighted average discount rate used to measure our operating lease liabilities as of September 30, 2019 was 4.7%.

~~Supplemental cash flow information related to leases was as follows:~~



	~~Nine Months Ended September 30, 2019~~
~~Cash paid for amounts included in the measurement of operating lease liabilities~~		~~$5.7~~
~~Right-of-use assets obtained in exchange for operating lease obligations~~		~~$2.8~~

~~Future minimum lease payments under non-cancellable leases as of September 30,~~ 2019 were as follows:

	June 30, 2020			December 31, 2019
Manufacturing supplies	$	43.3		$	49.8
Raw materials		12.2			26.0
Work in process		89.6			123.7
Finished products		75.4			93.1
Gross inventory		220.5			292.6
Allowance for inventory reserves		(14.1	)		(10.7	)
Total Inventories, net	$	206.4		$	281.9

2019 (excluding the nine months ended September 30, 2019)
$1.8
2020 6.2
2021 4.2
2022 1.8
2023 0.9
After 2023 0.2
Total future minimum lease payments 15.1
Less amount of lease payment representing interest (0.9 )
Total present value of lease payments
$14.2

~~Table of Contents~~

~~Future minimum lease payments under non-cancellable leases as of December 31, 2018 were as follows:~~

2019
$6.3
2020 5.2
2021 3.3
2022 1.0
2023 0.6
After 2023 —
Total future minimum lease payments
$16.4

~~As of September 30, 2019, we have additional operating leases that have not yet commenced for which~~

In the present value of lease payments over the respective lease terms totals approximately $6.0 million. These leases are primarily manufacturing equipment to support the Company’s mobile value-added powertrain component product sales. These operating leases will commence between the fourthsecond quarter of ~~2019~~2020, the Company recorded an additional allowance for inventory reserve of approximately $3.1 million. The additional reserve is associated with the Energy end market and closure of the ~~first half~~TMS facility in Houston. For more details, refer to “Note 5 – Disposition of ~~2020 with lease terms of three to four years. Accordingly, these leases are not recorded on the unaudited Consolidated Balance Sheet at September 30, 2019.~~

Non-Core Assets.”

Note 12 10-Financing Arrangements

For a detailed discussion of the Company's long-term debt and credit arrangements, refer to “Note 614 - Financing Arrangements” in the Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2018.~~

2019.

Convertible Notes

The components of the Convertible Notes as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:

	June 30, 2020			December 31, 2019
Principal	$	86.3		$	86.3
Less: Debt issuance costs, net of amortization		(0.5	)		(0.7	)
Less: Debt discount, net of amortization		(4.8	)		(7.0	)
Convertible notes, net	$	81.0		$	78.6

September 30,
2019 December 31,
2018
Principal
$86.3

$86.3
Less: Debt issuance costs, net of amortization (0.8 ) (1.2 )
Less: Debt discount, net of amortization (8.1 ) (11.0 )
Convertible notes, net
$77.4

$74.1

The initial value of the principal amount recorded as a liability at the date of issuance was $66.9 million, using an effective interest rate of 12.0%. The remaining $19.4 million of principal amount was allocated to the conversion feature and recorded as a component of shareholders’ equity at the date of issuance. This amount represents a discount to the debt to be amortized through interest expense using the effective interest method through the maturity of the Convertible Notes.

Transaction costs were allocated to the liability and equity components based on their relative values. Transaction costs attributable to the liability component of $2.4 million are amortized to interest expense over the term of the Convertible Notes, and transaction costs attributable to the equity component of $0.7 million are included in shareholders’ equity.

The Convertible Notes mature on June 1, 2021, and accordingly are classified as a current liability in the Consolidated Balance Sheet as of June 30, 2020.

Table of Contents

The following table sets forth total interest expense recognized related to the Convertible Notes:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Contractual interest expense	$	1.3	$	1.3	$	2.6	$	2.6
Amortization of debt issuance costs		0.1		0.1		0.2		0.2
Amortization of debt discount		1.1		1.0		2.2		2.0
Total	$	2.5	$	2.4	$	5.0	$	4.8

Three Months Ended September 30, Nine Months Ended September 30,
2019
2018 2019 2018
Contractual interest expense
$1.3

$1.3

$3.9

$3.9
Amortization of debt issuance costs 0.1
0.1
0.3
0.3
Amortization of debt discount 1.0
0.9
3.0
2.6
Total
$2.4

$2.3

$7.2

$6.8

~~Table of Contents~~

~~Credit Agreement~~

On January 26, 2018, the Company, as borrower, and certain domestic subsidiaries, as subsidiary guarantors, entered into the Second Amended and Restated Credit Agreement (Credit Agreement), with JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and the other lenders party thereto, which amended and restated the Company’s credit agreement. The interest rate under the credit agreement was 4.1% as of September 30, 2019. The amount available under the credit agreement as of September 30, 2019 was $187.0 million. As of September 30, 2019, the Company was in compliance with all covenants.

~~Refunding Bonds~~

On January 23, 2018, the Company redeemed in full $12.2 million of Ohio Water Development Revenue Refunding Bonds (originally due on November 1, 2025), $9.5 million of Ohio Air Quality Development Revenue Refunding Bonds (originally due on November 1, 2025) and $8.5 million of Ohio Pollution Control Revenue Refunding Bonds (originally due on June 1, 2033).

Amended Credit Agreement

On October 15, 2019, the Company, as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors, entered into a Third Amended and Restated Credit Agreement (the Amended Credit Agreement), with JP Morgan Chase Bank, N.A., as administrative agent (the Administrative Agent), Bank of America, N.A., as syndication agent, and the other lenders party thereto (collectively, the Lenders), which further amended and restated the Company’s ~~existing~~Second Amended and Restated Credit Agreement dated as of January 26, 2018.

The Amended Credit Agreement provides for a $400.0 million asset-based revolving credit facility (the Credit Facility), including a $15.0 million sublimit for the issuance of commercial and standby letters of credit and a $40.0 million sublimit for swingline loans. Pursuant to the terms of the Amended Credit Agreement, the Company is entitled, on up to two occasions and subject to the satisfaction of certain conditions, to request increases in the commitmentsinterest rate under the Amended Credit Agreement ~~in the aggregate principal~~was 1.7% as of June 30, 2020. The amount of up to $100.0 million, to the extent that existing or new lenders agree to provide such additional commitments. In addition to and independent of any increase described in the preceding sentence, the Company is entitled, subject to the satisfaction of certain conditions, to request a separate first-in, last-out (FILO) tranche in an aggregate principal amount of up to $30.0 million with a separate borrowing base and interest rate margins, in each case, to be agreed upon among the Company, the Administrative Agent and the Lenders providing the incremental FILO tranche.

~~The availability of~~available for borrowings under the ~~Credit Facility is subject to a borrowing base calculation based upon a valuation~~credit agreement as of ~~the eligible accounts receivable, inventory and machinery and equipment~~June 30, 2020 was $176.4 million. As of June 30, 2020, the Company and the subsidiary guarantors, each multiplied by an applicable advance rate. The availability of borrowings may be further modified by reserves established from time to time by the Administrative Agentwas in ~~its permitted discretion.~~

The interest rate per annum applicable to loans under the Credit Facility will be, at the Company’s option, equal to either (i) the alternate base rate plus the applicable margin or (ii) the relevant adjusted LIBO rate for an interest period of one, two, three or six months (as selected by the Company) plus the applicable margin. The base rate will be a fluctuating rate per annum equal to the greatest of (i) the prime rate as quoted in The Wall Street Journal, (ii) the effective Federal Reserve Bank of New York rate plus 0.50% and (iii) the adjusted LIBO rate for a one-month interest period on the applicable date, plus 1.00%. The adjusted LIBO rate will be equal to the applicable London interbank offered rate for the selected interest period, as adjusted for statutory reserve requirements for eurocurrency liabilities. The applicable margin will be determined by a pricing grid based on the Company’s average quarterly availability. In addition, the Company will pay a 0.25% per annum commitment fee on the average daily unused amount of the Credit Facility.

All of the indebtedness under the Credit Facility is guaranteed by the Company’s material domestic subsidiaries, as well as any other domestic subsidiary that the Company elects to make a party to the Amended Credit Agreement, and is secured by substantiallycompliance with all ~~of the personal property of the Company and the subsidiary guarantors.~~

The Credit Facility matures on October 15, 2024. Prior to the maturity date, amounts outstanding are required to be repaid (without reduction of the commitments thereunder) from mandatory prepayment events from the proceeds of certain asset sales, equity or debt issuances or casualty events.

The Amended Credit Agreement contains certain customary covenants, including covenants that limit the ability of the Company and its subsidiaries to, among other things, (i) incur or suffer to exist certain liens, (ii) make investments, (iii) incur or guaranty additional indebtedness, (iv) enter into consolidations, mergers, acquisitions, sale-leaseback transactions and sales of assets, (v) make distributions and other restricted payments, (vi) change the nature of its business, (vii) engage in transactions

~~Table of Contents~~

~~with affiliates and (viii) enter into restrictive agreements, including agreements that restrict the ability to incur liens or make distributions.~~

In addition, the Amended Credit Agreement requires the Company to (i) unless certain conditions are met, maintain certain minimum liquidity as specified in the Amended Credit Agreement during the period commencing on March 1, 2021 and ending on June 1, 2021 and (ii) maintain a minimum specified fixed charge coverage ratio on a springing basis if minimum availability requirements as specified in the Amended Credit Agreement are not maintained.

The Amended Credit Agreement contains certain customary events of default. If any event of default occurs and is continuing, the Lenders would be entitled to take various actions, including the acceleration of amounts due under the Amended Credit Agreement, and exercise other rights and remedies.

covenants.

Fair Value Measurement

The fair value of the Convertible Notes was approximately ~~$81.1~~$72.6 million as of ~~September~~June 30, ~~2019.~~2020. The fair value of the Convertible Notes, which falls within Level 1 of the fair value hierarchy as defined by Accounting Standards Codification (ASC) 820, Fair Value Measurements, is based on the last price traded in ~~September 2019.~~

June 2020.

TimkenSteel’s Credit Agreement is variable-rate debt. As such, the carrying value is a reasonable estimate of fair value as interest rates on these borrowings approximate current market rates. This valuation falls within Level 2 of the fair value hierarchy and is based on quoted prices for similar assets and liabilities in active markets that are observable either directly or indirectly.

Interest Paid

The total cash interest paid for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 ~~and 2018~~ was ~~$7.6~~$4.1 million and ~~$6.4~~$6.1 million, respectively.

~~Table of Contents~~

Note 13 11-Retirement and Postretirement Plans

The components of net periodic benefit cost (income) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were as follows:

	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
	Pension			Postretirement			Pension			Postretirement
Service cost	$	4.8		$	0.3		$	4.4		$	0.3
Interest cost		10.7			1.0			12.3			1.5
Expected return on plan assets		(16.0	)		(0.9	)		(16.4	)		(1.0	)
Amortization of prior service cost		0.1			(1.5	)		0.1			(1.0	)
Net remeasurement losses (gains)		(1.9	)		—			—			4.4
Net Periodic Benefit Cost (Income)	$	(2.3	)	$	(1.1	)	$	0.4		$	4.2

	Six Months Ended June 30, 2020						Six Months Ended June 30, 2019
	Pension			Postretirement			Pension			Postretirement
Service cost	$	9.7		$	0.6		$	8.7		$	0.6
Interest cost		21.7			2.1			24.5			3.5
Expected return on plan assets		(32.2	)		(1.8	)		(32.6	)		(1.9	)
Amortization of prior service cost		0.2			(3.0	)		0.2			(1.0	)
Net remeasurement losses (gains)		7.6			—			—			4.4
Net Periodic Benefit Cost (Income)	$	7.0		$	(2.1	)	$	0.8		$	5.6

Three Months Ended
September 30, 2019
Three Months Ended
September 30, 2018

Pension
Postretirement
Pension
Postretirement
Service cost
$4.4

$0.3

$4.3

$0.4
Interest cost 12.2

1.3

11.4

1.9
Expected return on plan assets (16.3 )
(1.0 )
(18.4 )
(1.2 )
Amortization of prior service cost 0.1

(1.4 )
0.1

0.1
Net Periodic Benefit Cost (Income)
$0.4

($0.8 )

($2.6 )

$1.2

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018

Pension Postretirement Pension Postretirement
Service cost
$13.1

$0.9

$12.9

$1.3
Interest cost 36.7
4.8
34.2
5.7
Expected return on plan assets (48.9 ) (2.9 ) (55.3 ) (3.6 )
Amortization of prior service cost 0.3
(2.4 ) 0.3
0.2
Net remeasurement losses (gains) —
4.4
—
—
Net Periodic Benefit Cost (Income)
$1.2

$4.8

($7.9 )
$3.6

The Salaried Plan has a provision that permits employees to elect to receive their pension benefits in a lump sum. In the ~~second~~first quarter of ~~2019,~~2020, the cumulative cost of all lump sum payments was projected to exceed the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. As a result, the Company amended its postretirement benefit plan relating to moving Medicare-eligible union retirees to an individual plan on a Medicare healthcare exchange. This amendment reduced the postretirement liability by $70.2 million. This amendment required the Company to performcompleted a full remeasurement of its ~~postretirement~~pension obligations and plan assets associated with the Salaried Plan as of ~~April~~June 30, ~~2019.~~2020 and March 31, 2020, which resulted in a non-cash (gain) loss from remeasurement of ($1.9) million and $7.6 million for the three and six months ended June 30, 2020, respectively.

Table of Contents

Note 12 – Stock-Based Compensation

During the six months ended June 30, 2020 the Board of Directors granted 931,244 time-vested restricted stock units, 143,280 performance-vested restricted stock units, and 511,020 stock options.

Time-vested restricted stock units are issued with the fair value equal to the closing market price of TimkenSteel common shares on the date of grant. These restricted stock units do not have any performance conditions for vesting. Expense is recognized over the service period, adjusted for any forfeitures that should occur during the vesting period. The ~~$70.2 million reduction~~weighted average fair value of the restricted stock units granted during the six months ended June 30, 2020 was $4.24 per share.The Board of Directors were granted their annual time-vested restricted stock units during the second quarter totalling 332,325 shares.

Performance-vested restricted stock units issued in 2020 vest based on achievement of a total shareholder return (TSR) metric. The TSR metric is considered a market condition, which requires TimkenSteel to reflect it in the ~~APBO is recognized~~fair value on grant date using an advanced option-pricing model. The fair value of each performance share was therefore determined using a Monte Carlo valuation model, a generally accepted lattice pricing model under ASC 718 – Stock-based Compensation. The Monte Carlo valuation model, among other factors, uses commonly-accepted economic theory underlying all valuation models, estimates fair value using simulations of future share prices based on stock price behavior and considers the correlation of peer company returns in ~~Other Comprehensive Income (Loss) and subsequently amortized as an offset to postretirement benefit cost over a period of 12 years (average remaining service period). In addition to the reduction~~determining fair value. The weighted average fair value of the ~~APBO,~~performance-vested restricted stock units granted during the ~~Company recognized a net remeasurement loss of $4.4 million~~six months ended June 30, 2020 was $5.23 per share. There were 0 performance-vested restricted stock units granted in the second quarter of ~~2019 related~~2020.

Stock options are issued with an exercise price equal to the ~~plan amendment.~~

~~Table~~closing market price of ~~Contents~~

TimkenSteel common shares on the date of grant. The fair value of stock options is determined using a Black-Scholes option pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate and the expected dividend yield. The weighted average exercise price and weighted average fair value of the stock option grants during the six months ended June 30, 2020 were $5.26 per share and $2.23 per share, respectively. There were 0 stock option grants in the second quarter of 2020.

TimkenSteel recognized stock-based compensation expense of $1.6 million and $3.6 million for the three and six months ended June 30, 2020, compared to $1.5 million and $3.1 for the same periods in 2019, respectively. Future stock-based compensation expense regarding the unvested portion of all awards is approximately $6.7 million. The future expense is expected to be recognized over the remaining vesting periods through 2024.

Note 14 13-Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 by component were as follows:

	Foreign Currency Translation Adjustments			Pension and Postretirement Liability Adjustments			Total
Balance as of December 31, 2019	$	(6.8	)	$	51.5		$	44.7
Other comprehensive income before reclassifications, before income tax		(1.7	)		—			(1.7	)
Amounts reclassified from accumulated other comprehensive income (loss), before income tax		—			(2.8	)		(2.8	)
Amounts deferred to accumulated other comprehensive income (loss), before income tax		—			—			—
Tax effect		—			0.3			0.3
Net current period other comprehensive income, net of income taxes		(1.7	)		(2.5	)		(4.2	)
Balance as of June 30, 2020	$	(8.5	)	$	49.0		$	40.5

	Foreign Currency Translation Adjustments			Pension and Postretirement Liability Adjustments			Total
Balance at December 31, 2018	$	(7.3	)	$	(1.6	)	$	(8.9	)
Other comprehensive income before reclassifications, before income tax		(0.2	)		—			(0.2	)
Amounts reclassified from accumulated other comprehensive loss, before income tax		—			(0.7	)		(0.7	)
Amounts deferred to accumulated other comprehensive income (loss), before income tax		—			67.1			67.1
Tax effect		—			—			—
Net current period other comprehensive income, net of income taxes		(0.2	)		66.4			66.2
Balance as of June 30, 2019	$	(7.5	)	$	64.8		$	57.3

Foreign Currency Translation Adjustments Pension and Postretirement Liability Adjustments Total
Balance as of December 31, 2018
($7.3 )
($1.6 )
($8.9 )
Other comprehensive income before reclassifications, before income tax (1.2 ) —
(1.2 )
Amounts reclassified from accumulated other comprehensive income (loss), before income tax —
(2.0 ) (2.0 )
Amounts deferred to accumulated other comprehensive income (loss), before income tax —
70.2
70.2
Tax effect —
(2.1 ) (2.1 )
Net current period other comprehensive income, net of income taxes (1.2 ) 66.1
64.9
Balance as of September 30, 2019
($8.5 )
$64.5

$56.0

Foreign Currency Translation Adjustments Pension and Postretirement Liability Adjustments Total
Balance at December 31, 2017
($5.9 )
($1.7 )
($7.6 )
Other comprehensive income before reclassifications, before income tax (0.9 ) —
(0.9 )
Amounts reclassified from accumulated other comprehensive loss, before income tax —
0.5
0.5
Tax effect —
—
—
Net current period other comprehensive income, net of income taxes (0.9 ) 0.5
(0.4 )
Balance as of September 30, 2018
($6.8 )
($1.2 )
($8.0 )

Table of Contents

The amount reclassified from accumulated other comprehensive income (loss) in the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 for the pension and postretirement liability adjustment was included in other income, net in the unaudited Consolidated Statements of Operations. The amount deferred to accumulated other comprehensive income in the nine months ended September 30, 2019, was a result of a plan amendment to the Company’s postretirement benefit plan. These accumulated other comprehensive income (loss) components are components of net periodic benefit cost. See “Note 13 - Retirement and Postretirement Plans” for additional information.

Note ~~15 -~~ 14–Contingencies

TimkenSteel has a number of loss exposures incurred in the ordinary course of business, such as environmental claims, product warranty claims, and litigation. Establishing loss reserves for these matters requires management’s estimate and judgment regarding risk exposure and ultimate liability or realization. These loss reserves are reviewed periodically and adjustments are made to reflect the most recent facts and circumstances. Accruals related to environmental claims represent management’s best estimate of the fees and costs associated with these claims. Although it is not possible to predict with certainty the outcome of such claims, management believes that their ultimate dispositions should not have a material adverse effect on our financial position, cash flows or results of operations. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, TimkenSteel had a ~~$1.4~~$1.3 million and a $1.5 million contingency reserve, respectively, related to loss exposures incurred in the ordinary course of business.

Table of Contents

~~Note 16 - Subsequent Events~~

~~Chief Executive Officer Transition~~

On October 8, 2019, Ward J. Timken, Jr. stepped down as Chief Executive Officer and President of TimkenSteel Corporation and as Chairman of the Company’s Board of Directors. Per the terms of Mr. Timken’s severance agreement, the Company will recognize a charge of approximately $4.0 million in the fourth quarter. Additionally, a charge of approximately $1.5 million to $2.0 million will be recognized in the fourth quarter as a result of the accelerated vesting of stock-based compensation per the terms of the applicable award agreements.

~~Restructuring~~

During October 2019, TimkenSteel continued to make organizational changes to enhance profitable and sustainable growth. These company-wide actions included the restructuring and reduction of management layers throughout the organization. The Company will recognize restructuring charges in the fourth quarter of approximately $1.7 million consisting of severance, employee-related benefits, and accelerated stock-based compensation.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollars in millions, except per share data)

Business Overview

~~TimkenSteel Corporation (we, us, our, the Company or Timkensteel) manufactures~~

We manufacture alloy steel, as well as carbon and micro-alloy steel, with an annual melt capacity of approximately 2 million tons and shipment capacity of ~~approximately~~ 1.5 million tons. Our portfolio includes special bar quality (SBQ) bars, seamless mechanical tubing (tubes), ~~value-add~~value-added solutions such as precision steel components, and billets. In addition, we supply machining and thermal treatment services and manage raw material recycling programs, which are used as a feeder system for our melt operations. Our products and services are used in a diverse range of demanding applications in the following market ~~categories:~~sectors: automotive; oil and gas; industrial equipment; mining; construction; rail; defense; heavy truck; agriculture; power generation; and oil country tubular goods (OCTG)~~; automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation.~~

Based on our knowledge of the steel industry, we believe we are the only focused SBQ steel producer in North America and have the largest SBQ steel large bar (6-inch diameter and greater) production capacity among North American steel producers. In addition, we are the only steel manufacturer able to produce rolled SBQ steel large bars up to 16-inches in diameter. .

SBQ steel is made to restrictive chemical compositions and high internal purity levels and is used in critical mechanical applications. We make these products from nearly ~~all~~100% recycled steel, using our expertise in raw materials to create custom steel products. We focus on creating tailored products and services for our customers’ most demanding applications. Our engineers are experts in both materials and applications, so we can work closely with each customer to deliver flexible solutions related to our products as well as to their applications and supply chains. ~~We believe our unique operating model and production assets give us a competitive advantage in our industry.~~

The SBQ bar, tube, and billet production processes take place at our Canton, Ohio manufacturing location. This location accounts for all of the SBQ bars, seamless mechanical tubes and billets we produce and includes three manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. Our ~~value-add~~value-added solutions production processes take place at ~~three~~two downstream manufacturing facilities: ~~TimkenSteel Material Services (Houston, Texas),~~ Tryon Peak (Columbus, North Carolina), and St. Clair (Eaton, Ohio). Many of the production processes are integrated, and the manufacturing facilities produce products that are sold in all of our market sectors. As a result, investments in our facilities and resource allocation decisions affecting our operations are designed to benefit the overall business, not any specific aspect of the business.

In the first quarter of 2020, we closed our TimkenSteel Material Services (TMS) facility in Houston, Texas. See “Note 5 - Disposition of Non-Core Assets” in the Notes to the unaudited Consolidated Financial Statements for additional information.

We conduct our business activities and report financial results as one business segment. The presentation of financial results as one reportable segment is consistent with the way we operate our business and is consistent with the manner in which the Chief Operating Decision Maker (CODM) evaluates performance and makes resource and operating decisions for the business as described above. Furthermore, the Company notes that monitoring financial results as one reportable segment helps the CODM manage costs on a consolidated basis, consistent with the integrated nature of our operations.

Impact of COVID-19 Pandemic

We continue to closely monitor the impact of the COVID-19 pandemic on our Company, employees, customers and supply chain. The full extent to which the COVID-19 pandemic will impact our operations and financial results is uncertain and ultimately will depend on, among many other factors, the duration of the pandemic, further Federal and State government actions and the speed of economic recovery. We estimate the primary impact on our second quarter of 2020 results was lost sales of approximately $120 million, as compared to expectations established prior to the onset of the pandemic. The negative impact on the remainder of the year and beyond remains unknown but at a minimum, we expect customer demand in the COVID-19 environment to continue to be lower in the third quarter of 2020 in comparison to the prior year third quarter, resulting in periodic production outages as the Company continues to balance production schedules with demand.

In response to the significant reduction in customer demand resulting from the COVID-19 crisis, the Company has taken additional actions to further reduce operating expenses, conserve cash and maximize liquidity, such as:

•

Reduced interim CEO and senior executives’ base salaries by 20 percent and other executives’ base salaries by 10 percent, effective May 1;

•

Reduced cash retainer for its board of directors by 20 percent beginning with the second-quarter 2020, and reduced the value of the board’s annual equity grant by 20 percent;

•

Suspended company’s 401(k) plan matching contributions for salaried employees, effective June 1;

•

Implemented unpaid rolling furloughs for approximately 90 percent of salaried employees, with an average 5 weeks of unpaid furloughs per employee, beginning in early April and continuing through July; and

•

Deferred Social Security payroll tax remittance as permitted by the CARES Act.

In total, the Company’s COVID-19 related actions preserved approximately $7 million in cash and reduced administrative expenses by approximately $5 million during the second quarter of 2020. Additionally, the Company took the following operational actions:

•

Aggressively reduced production schedules at all plants to align operations with customer demand, resulting in the temporary layoff of manufacturing employees;

Table of Contents

•

Reduced planned 2020 capital expenditures to $15 million to $20 million, a $10 million to $15 million reduction from the original guidance.

Despite the negative impact on our business, these actions resulted in the Company having total liquidity of $251.9 million as of June 30, 2020. We believe this level of liquidity is sufficient to meet the Company’s needs for at least the next 12 months. The Company will continue to take actions such as those taken during the second quarter in order to preserve liquidity for the duration of this pandemic.

Impact of Raw Material Prices ~~and LIFO~~

In the ordinary course of business, we are exposed to the volatility of the costs of our raw materials. Whenever possible, we manage our exposure to commodity risks primarily through the use of supplier pricing agreements that enable us to establish the purchase prices for certain inputs that are used in our manufacturing process. We utilize a raw material surcharge mechanism when pricing products to our customers, which is designed to mitigate the impact of increases or decreases in raw material costs, although generally with a lag effect. This timing effect can result in raw material spread whereby costs can be over- or under-recovered in certain periods. While the surcharge generally protects gross profit, it has the effect of diluting gross margin as a percent of ~~sales in a rising cost environment.~~

We value a majority of our inventory utilizing the LIFO inventory valuation method. Changes in the cost of raw materials and production activities are recognized in cost of products sold in the current period even though these materials and other costs may have been incurred in different periods at significantly different values due to the length of time of our production cycle. In periods of rising inventories and deflating raw material prices, the likely result will be a positive impact to net income. Conversely, in periods of rising inventories and increasing raw materials prices, the likely result will be a negative impact to net income.

~~Table of Contents~~

sales.

Results of Operations

Net Sales

The charts below present net sales and shipments for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

Net sales for the three months ended ~~September~~June 30, ~~2019~~2020 were ~~$274.2~~$154.0 million, a decrease of ~~$135.7~~$182.7 million, or ~~33.1%~~54.3%, compared with the three months ended ~~September~~June 30, ~~2018.~~2019. The decrease was due to a reduction in volume of approximately 86139 thousand ship tons, resulting in a decrease of ~~$92.4~~$148.4 million of net sales and lower surcharges of ~~$55.8~~$53.6 million. These decreases in net sales were slightly offset by a positive mix across all end markets resulting in an increase in net sales of $21.1 million. The primary driver in the decrease in volume was lower customer demand ~~in the industrial and energy~~across all end markets primarily as a result of the COVID-19 pandemic and ~~the reduction of OCTG billet shipments.~~weak energy market. The decrease in surcharges was primarily due to a 28.9% decline in the average surcharge per ton due to lower ~~volumes~~market prices for scrap and ~~decreasing scrap prices. These decreases were partially offset by favorable price/mix~~alloys. We estimate the impact of ~~$12.6~~the COVID-19 pandemic on our net sales was a reduction of approximately $120 million, as compared to our forecast prior to the ~~Company realized~~onset of the ~~benefit~~pandemic. The majority of ~~previous price increases and continued focused efforts~~this decrease was related to ~~sell~~ our ~~higher value products.~~mobile end-market sector, as production was halted by all major automotive manufacturers for various lengths of time during the second quarter of 2020. Excluding surcharges, net sales decreased ~~$79.9~~$129.1 million, or ~~26.4%~~49.9%.

~~Table of Contents~~

The charts below present net sales and shipments for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

Table of Contents

Net sales for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 were ~~$981.9~~$413.6 million, a decrease of ~~$222.3~~$294.1 million, or ~~18.5%~~41.6%, compared with the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The decrease was due to ~~lower volumes~~a reduction in volume of approximately ~~186~~187 thousand ship tons, resulting in a decrease of ~~$196.5~~$202.5 million of net sales and lower surcharges of ~~$82.7~~$97.4 million. These decreases in net sales were slightly offset by a positive mix across all end markets resulting in an increase in net sales of $11.8 million. The primary driver in the decrease in volume was lower customer demand ~~in the industrial and energy~~across all end ~~markets and the reduction of OCTG billet shipments.~~markets. The decrease in surcharges was primarily due to a 33.8% decline in the average surcharge per ton due to lower ~~volumes~~market prices for scrap and ~~decreasing scrap prices. These decreases were partially offset by favorable price/mix~~alloys. We estimate the impact of ~~$55.8 million, driven by increased pricing in early 2019 compared with~~ the ~~same period in 2018, and continued focused efforts to sell~~COVID-19 pandemic on our ~~higher value products. This resulted in~~ net sales ~~per ton increasing 2.7%~~during the first half of 2020 was a reduction of approximately $130 million. The majority of this decrease was related to our mobile end-market sector, as production was halted by all major automotive manufacturers for various lengths of time from ~~2018.~~March through June 2020. Excluding surcharges, net sales decreased ~~$139.6~~$196.7 million, or ~~15.5%~~

~~Table of Contents~~

36.4%.

Gross Profit

The chart below presents the drivers of the gross profit variance from the three months ended ~~September~~June 30, ~~2018~~2019 to ~~September~~June 30, ~~2019.~~

2020.

Gross profit for the three months ended ~~September~~June 30, ~~2019~~2020 decreased ~~$11.4~~$18.8 million, or ~~46.3%,~~127.0% compared with the three months ended ~~September~~June 30, ~~2018.~~2019. The decrease was driven primarily by lower volumes and unfavorable inventory adjustments, partially offset by favorable manufacturing costs ~~raw material spread,~~ and improvements in price/mix. The primary driver in the decrease in volume was lower ~~volumes. Higher~~customer demand across all end markets primarily as a result of the COVID-19 pandemic and a weak energy market. Unfavorable inventory reserve adjustments relate primarily to a lower of cost or net realizable adjustment for inventory at our exited TMS facility. Favorable manufacturing costs in ~~2019~~2020 were primarily due to the Company’s significant cost reduction actions, slightly offset by the unfavorable impact of lower production levels in fixed cost leverage. Improvements in price/mix were driven by favorable mix with a ~~decline~~lower proportion of mobile and OCTG billet shipments in ~~melt utilization, resulting~~2020 in ~~lower fixed-cost leverage. Raw material spread was a headwind due~~comparison to ~~a decline in~~ the ~~No.1 Busheling scrap index and lower volumes during the three months ended September 30, 2019. These decreases were partially~~prior year, slightly offset by ~~a favorable LIFO inventory valuation and improved price/mix. LIFO benefited in 2019 from declining scrap prices and inventory quantities. Price/mix was favorable due to increased~~unfavorable pricing ~~in early 2019 compared with the same period in 2018, and continued focused efforts to sell our higher value products.~~

across all end markets.

Table of Contents

The chart below presents the drivers of the gross profit variance from the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 to ~~September~~June 30, ~~2019.~~

2020.

Gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased ~~$10.1~~$39.4 million, or ~~13.0%~~91.2%, compared with the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The decrease was driven primarily by lower volumes, additional inventory adjustments, and unfavorable price/mix, offset by favorable manufacturing costs. The primary driver in the decrease in volume was lower customer demand across all end markets primarily as a result of the COVID-19 pandemic and a weak energy market. Additional inventory reserve adjustments relate primarily to a lower of cost or net realizable adjustment for inventory at our exited TMS facility. Unfavorable price/mix was driven by lower pricing and favorable mix across all end markets. Favorable manufacturing costs ~~raw material spread, and lower volumes. Manufacturing costs~~in 2020 were ~~unfavorable~~ primarily due to ~~a decline in melt utilization, resulting in~~the Company’s significant cost reduction actions, slightly offset by the unfavorable impact of lower fixed-cost leverage during 2019. Raw material spread was a headwind due to a decline in the No.1 Busheling scrap index and lower volumes during the nine moths ended September 30, 2019. These decreases were partially offset with a favorable LIFO inventory valuation and favorable price/mix. LIFO benefited from declining scrap prices and a reduction in inventory quantities in 2019 compared with amounts in inventory at December 31, 2018. Price/mix was favorable due to increased pricing in early 2019 compared with the same period in 2018, and continued focused efforts to sell higher value products.

production levels on fixed cost leverage.

Table of Contents

Selling, General and Administrative Expenses

The charts below present selling, general and administrative (SG&A) expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

Selling, general and administrative (SG&A) expense for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$2.6~~$3.4 million, or ~~10.8%~~16.8%, and ~~$8.7~~$3.3 million, or ~~11.8%~~7.6%, respectively, compared with the same periods in ~~2018.~~2019. The ~~decline~~decreases are primarily due to unpaid furloughs for salaried employees and other COVID-19 related cost reduction actions, as well as lower in ~~both periods is primarily the~~wages and benefits which are a result of ~~the Company’s profitability improvement plans that targeted, among other areas,~~ a reduction in ~~salaried~~ employees ~~lower professional services fees, and benefit costs. Additionally,~~following the Company’s recent restructuring actions. These decreases are slightly offset by increases in variable ~~compensation decreased year over year.~~

compensation.

Restructuring Charges

During 2019 and the ~~second quarter~~first half of ~~2019,~~2020, TimkenSteel made organizational changes to enhance profitable and sustainable growth. These company-wide actions included the restructuring of its ~~commercial~~business support functions, the reduction of management layers throughout the organization, the closure of the TMS facility in Houston, Texas and ~~technology organizations~~other actions to ~~drive innovation and focus on~~further improve the ~~key growth areas identified by~~Company’s overall cost structure. Through these restructuring efforts, to date the Company ~~such as value-added components, energy products~~has eliminated approximately 180 salaried positions and ~~government business. Given these and other restructuring efforts, the Company implemented approximately 55 salaried position eliminations. As a result of the headcount reduction, TimkenSteel~~ recognized restructuring charges of ~~$3.6~~$9.5 million, consisting of severance and employee-related benefits. ~~During~~Approximately 20 of these positions were eliminated in the ~~three months ended September 30, 2019, there were no additional restructuring charges.~~first half of 2020. The Company expects to realize ~~savings of approximately $2 million in fiscal 2019 with~~ annual savings of approximately $7$21 million ~~beginning in fiscal 2020.~~as a result of these actions. Refer to “Note 4 - Restructuring Charges” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Interest Expense

Interest expense for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$3.6~~$3.0 million, a decrease of ~~$0.8~~$1.2 million, compared with the three months ended ~~September~~June 30, ~~2018.~~2019. Interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$12.0~~$6.2 million, a decrease of ~~$0.9~~$2.2 million, compared with the ~~same period in 2018. The~~six months ended June 30, 2019.The decrease in interest expense in both periods was primarily due to a reduction in outstanding ~~revolver debt and no deferred financing fee write-offs in 2019.~~borrowings as well as a lower interest rate environment. Refer to “Note 1210 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Other Expense (Income), net

	Three Months Ended June 30,
	2020			2019			$ Change
Pension and postretirement non-service benefit loss (income)	$	(6.5	)	$	(4.5	)	$	(2.0	)
(Gain) loss from remeasurement benefit plan		(1.9	)		4.4			(6.3	)
Foreign currency exchange loss (gain)		0.3			(0.2	)		0.5
Miscellaneous expense (income)		—			0.1			(0.1	)
Total other expense (income), net	$	(8.1	)	$	(0.2	)	$	(7.9	)

Table of Contents

	Six Months Ended June 30,
	2020			2019			$ Change
Pension and postretirement non-service benefit income	$	(13.0	)	$	(7.3	)	$	(5.7	)
Loss from remeasurement of benefit plans		7.6			4.4			3.2
Foreign currency exchange loss (gain)		0.4			(0.1	)		0.5
Miscellaneous income (expense)		(0.4	)		0.1			(0.5	)
Total other expense (income), net	$	(5.4	)	$	(2.9	)	$	(2.5	)

~~Other Income, net~~

Three Months Ended September 30,
2019
2018 $ Change
Pension and postretirement non-service benefit income
$5.1

$6.2

($1.1 )
Foreign currency exchange gain (loss) (0.1 ) —
(0.1 )
Miscellaneous income (expense) 0.2
(0.1 ) 0.3
Total other income, net
$5.2

$6.1

($0.9 )

Nine Months Ended September 30,
2019 2018 $ Change
Pension and postretirement non-service benefit income
$12.4

$18.7

($6.3 )
Loss from remeasurement of benefit plans (4.4 ) —
(4.4 )
Miscellaneous income (expense) 0.1
—
0.1
Total other income, net
$8.1

$18.7

($10.6 )

Non-service benefit income is derived from ~~our~~the Company’s pension and other postretirement plans. ~~Expected~~The Company’s expected return on assets has exceeded the interest cost component, resulting in income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.

The TimkenSteel Corporation Retirement Plan (Salaried Plan) has a provision that permits employees to elect to receive their pension benefits in a lump sum. In the ~~second~~first quarter of ~~2019,~~2020, the cumulative cost of all lump sum payments was projected to exceed the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. As a result, the Company ~~amended its postretirement benefit plan. This amendment reduced the postretirement liability and therefore required~~completed a full remeasurement of ~~the postretirement~~its pension obligations and plan assets associated with the Salaried Plan as of ~~April~~June 30, ~~2019. The reduction~~2020 and March 31, 2020, which resulted in a non-cash loss (gain) from remeasurement of ($1.9) million and $7.6 million for the ~~Accumulated Postretirement Benefit Obligation (APBO) is recognized in Other Comprehensive Income (Loss)~~three and ~~subsequently amortized as an offset to postretirement benefit cost.~~six months ended June 30, 2020, respectively. For more details on the remeasurement, refer to “Note 1311 - Retirement and Postretirement ~~Plans” in the Notes to unaudited Consolidated Financial Statements.~~

Plans.”

Provision for Income Taxes

	Three Months Ended June 30,
	2020			2019			$ Change
Provision (benefit) for income taxes	$	0.2		$	(2.9	)	$	3.1
Effective tax rate		(2.2	)%		19.6	%	NM

	Six Months Ended June 30,
	2020			2019			$ Change
Provision (benefit) for income taxes	$	0.3		$	(2.8	)	$	3.1
Effective tax rate		(0.1	)%		25.0	%	NM

Three Months Ended September 30,
2019
2018 $ Change
Provision (benefit) for income taxes
($2.1 )
$0.9

($3.0 )
Effective tax rate 31.4 % 41.0 % NM

Nine Months Ended September 30,
2019 2018 $ Change
Provision (benefit) for income taxes
($1.8 )
$1.2

($3.0 )
Effective tax rate 27.1 % 13.4 % NM

The majority of the Company’s income tax expense is derived from foreign operations. The Company remains in a full valuation for the U.S. jurisdiction for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019. Intraperiod tax allocation rules require the Company to allocate our provision for income taxes between continuing operations~~2020 and other categories of comprehensive income. In periods in which the Company has a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of comprehensive income, the Company must consider that income in determining the amount of tax benefit that results from a loss in continuing operations and that will be allocated to continuing operations. As a result of the intraperiod tax allocation rules, for the three and nine months ended September 30, 2019, the Company recorded income tax expense of $2.2 million within other comprehensive income.

2019.

Table of Contents

NON-GAAP FINANCIAL MEASURES

Net Sales, Excluding Surcharges

The table below presents net sales by end market sector, adjusted to exclude ~~raw material~~ surcharges, which represents a financial measure that has not been determined in accordance with accounting principles generally accepted in the United States (U.S. GAAP). We believe presenting net sales by end market sector adjusted to exclude raw material surcharges provides additional insight into key drivers of net sales such as base price and product mix.

(dollars in millions, tons in thousands)
	Three Months Ended June 30, 2020
	Mobile		Industrial		Energy		Other		Total
Tons		32.7		63.2		9.1		3.7		108.7

Net Sales	$	36.1	$	98.0	$	14.6	$	5.3	$	154.0
Less: Surcharges		6.7		14.6		2.2		0.8		24.3
Base Sales	$	29.4	$	83.4	$	12.4	$	4.5	$	129.7

Net Sales / Ton	$	1,104	$	1,551	$	1,604	$	1,432	$	1,417
Surcharges / Ton	$	205	$	231	$	241	$	216	$	224
Base Sales / Ton	$	899	$	1,320	$	1,363	$	1,216	$	1,193

	Three Months Ended June 30, 2019
	Mobile		Industrial		Energy		Other		Total
Tons		110.3		86.4		31.0		20.4		248.1

Net Sales	$	135.3	$	124.3	$	54.1	$	23.0	$	336.7
Less: Surcharges		32.1		27.4		12.0		6.4		77.9
Base Sales	$	103.2	$	96.9	$	42.1	$	16.6	$	258.8

Net Sales / Ton	$	1,227	$	1,439	$	1,745	$	1,127	$	1,357
Surcharges / Ton	$	291	$	317	$	387	$	313	$	314
Base Sales / Ton	$	936	$	1,122	$	1,358	$	814	$	1,043


Net Sales adjusted to exclude surcharges
(dollars in millions, tons in thousands)
	Three Months Ended September 30, 2019										Six Months Ended June 30, 2020
	Mobile		Industrial		Energy		Other		Total		Mobile		Industrial		Energy		Other		Total
Tons	93.0		87.1		17.7		11.8		209.6			121.5		144.4		27.5		28.7		322.1

Net Sales	$110.2		$116.9		$32.6		$14.5			$274.2	$	133.8	$	211.3	$	39.8	$	28.7	$	413.6
Less: Surcharges	20.5		22.3		5.7		2.8		51.3			23.3		33.4		6.4		7.1		70.2
Base Sales		$89.7		$94.6		$26.9		$11.7		$222.9	$	110.5	$	177.9	$	33.4	$	21.6	$	343.4

Net Sales / Ton	$1,185		$1,342		$1,842		$1,229		$1,308		$	1,101	$	1,463	$	1,447	$	1,000	$	1,284
Surcharges / Ton											$	192	$	231	$	232	$	247	$	218
Base Sales / Ton	$965		$1,086		$1,520		$992		$1,063		$	909	$	1,232	$	1,215	$	753	$	1,066

	Three Months Ended September 30, 2018										Six Months Ended June 30, 2019
	Mobile		Industrial		Energy		Other		Total		Mobile		Industrial		Energy		Other		Total
Tons	103.6		119.9		40.4		31.6		295.5			223.1		188.9		62.4		34.6		509.0

Net Sales		$136.4		$169.7		$70.1		$33.7		$409.9	$	279.5	$	271.3	$	114.9	$	42.0	$	707.7
Less: Surcharges	34.2		45.1		17.7		10.1		107.1			69.6		62.5		24.5		11.0		167.6
Base Sales		$102.2		$124.6		$52.4		$23.6		$302.8	$	209.9	$	208.8	$	90.4	$	31.0	$	540.1

Net Sales / Ton		$1,317		$1,415		$1,735		$1,066		$1,387	$	1,253	$	1,436	$	1,841	$	1,214	$	1,390
Surcharges / Ton											$	312	$	331	$	392	$	318	$	329
Base Sales / Ton		$986		$1,039		$1,297		$747		$1,025	$	941	$	1,105	$	1,449	$	896	$	1,061

Nine Months Ended September 30, 2019
Mobile Industrial Energy Other Total
Tons 316.1
276.0
80.1
46.4
718.6

Net Sales
$389.7

$388.2

$147.5

$56.5

$981.9
Less: Surcharges 90.1
84.8
30.2
13.8
218.9
Base Sales
$299.6

$303.4

$117.3

$42.7

$763.0

Net Sales / Ton
$1,233

$1,407

$1,841

$1,218

$1,366
Base Sales / Ton
$948

$1,099

$1,464

$920

$1,062

Nine Months Ended September 30, 2018
Mobile Industrial Energy Other Total
Tons 325.9
356.6
109.9
112.5
904.9

Net Sales
$420.5

$484.3

$188.0

$111.4

$1,204.2
Less: Surcharges 100.4
123.2
43.8
34.2
301.6
Base Sales
$320.1

$361.1

$144.2

$77.2

$902.6

Net Sales / Ton
$1,290

$1,358

$1,711

$990

$1,331
Base Sales / Ton
$982

$1,013

$1,312

$686

$997

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Convertible Notes

In May 2016, wethe Company issued $75.0 million aggregate principal amount of Convertible Notes, plus an additional $11.3 million principal amount to cover over-allotments. The Convertible Notes bear cash interest at a rate of 6.0% per year, payable semiannually on June 1 and December 1, beginning on December 1, 2016. The ~~Convertible Notes will mature on June 1, 2021, unless earlier repurchased or converted. The~~ net proceeds received from the offering were $83.2 million, after deducting the initial underwriters’ discount and fees and paying the offering expenses. The Convertible Notes will mature on June 1, 2021, unless earlier repurchased or converted, and accordingly are classified as a current liability in the Consolidated Balance Sheet as of June 30, 2020. We ~~used~~expect to have adequate liquidity to retire the ~~net proceeds to repay~~Convertible Notes using a ~~portion~~combination of cash and borrowing capacity on the ~~amounts outstanding under our Credit Agreement.~~

Amended Credit Agreement,

and/or the ability to refinance prior to or at maturity.

Amended Credit Agreement

On ~~January 26, 2018, we as borrower, and certain domestic subsidiaries, as subsidiary guarantors,~~October 15, 2019, the Company, entered into ~~the Second~~a Third Amended and Restated Credit Agreement ~~(Credit~~(the Amended Credit Agreement), with JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and the other lenders party thereto, which amended and restated the Company’s then existing credit agreement. The Credit Agreement matures on January 26, 2023. Prior to the maturity date, amounts outstanding are required to be repaid (without reduction of the commitments thereunder) from mandatory prepayment events from the proceeds of certain asset sales, equity or debt issuances or casualty events.

~~On October 15, 2019, the Company, entered into a Third Amended and Restated Credit Agreement (the Amended Credit Agreement), with JP Morgan Chase Bank, N.A. which~~ further amends and restates the Company’s Second Amended and Restated Credit Agreement dated as of January 26, 2018.

The Amended Credit Agreement ~~increased~~increases capacity to $400 million compared to $300 million in the previous facility and ~~extended~~extends the maturity date to October 15, 2024. Furthermore, the Amended Credit Agreement ~~included~~provides for an enhanced asset base with reappraised fixed assets and investment grade foreign accounts receivable collateral in the borrowing base, ~~improved~~improves interest rate spread pricing by 50 basis points, and ~~reduced~~reduces the unused commitment fee to a fixed 25 basis points from the previous 37.5 to 50 basis point range.

~~Refer to “Note 12 - Financing Arrangements” for additional information.~~

~~Refunding Bonds~~

~~In connection with entering into the credit agreement, on January~~

23 ~~2018, we redeemed in full $12.2 million~~

Table of Ohio Water Development Revenue Refunding Bonds (originally due on November 1, 2025), $9.5 million of Ohio Air Quality Development Revenue Refunding Bonds (originally due on November 1, 2025) and $8.5 million of Ohio Pollution Control Revenue Refunding Bonds (originally due on June 1, 2033).

Contents

Additional Liquidity Considerations

The following represents a summary of key liquidity measures under the Amended Credit Agreement as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

	June 30, 2020			December 31, 2019
Cash and cash equivalents	$	75.5		$	27.1

Credit Agreement:
Maximum availability	$	400.0		$	400.0
Suppressed availability⁽¹⁾		(159.9	)		(103.0	)
Availability		240.1			297.0
Amount borrowed		(60.0	)		(90.0	)
Letter of credit obligations		(3.7	)		(3.8	)
Availability not borrowed	$	176.4		$	203.2

Total liquidity	$	251.9		$	230.3

September 30,
2019 December 31,
2018
Cash and cash equivalents
$18.4

$21.6

Credit Agreement:
Maximum availability
$300.0

$300.0
Suppressed availability⁽¹⁾
(0.4 ) —
Availability 299.6
300.0
Amount borrowed (110.0 ) (115.0 )
Letter of credit obligations (2.6 ) (2.6 )
Availability not borrowed 187.0
182.4

Total liquidity
$205.4

$204.0

⁽¹⁾

(1) As of ~~September~~June 30, 2020 and December 31, 2019, ~~Timkensteel did not have $300~~TimkenSteel had less than $400 million in ~~borrowing base assets.~~

~~Table of Contents~~

collateral assets to borrow against.

Our principal sources of liquidity are cash and cash equivalents, cash flows from operations and available borrowing capacity under our ~~Credit Agreement.~~credit agreement. As of ~~September~~June 30, ~~2019,~~2020, taking into account our view of automotive, industrial, ~~energy,~~ and ~~automotive~~energy market demands for our products, ~~our forecast for the remainder of 2019~~ and our 2020 operating and long-range plan, we believe that our cash balance as of ~~September~~June 30, ~~2019,~~2020, projected cash generated from operations, and borrowings available under the Amended Credit Agreement, will be sufficient to satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations, including servicing our debt obligations, for at least the next twelve ~~months~~months.

The full extent to which the COVID-19 pandemic will impact our operations and ~~through~~financial results is uncertain and ultimately will depend on, among many other factors, the ~~maturity date~~duration of the pandemic, further Federal and State government actions and the speed of economic recovery. While the negative impact on our ~~Amended Credit Agreement.~~

third quarter, remainder of the year and beyond remains unknown, at a minimum, we expect customer demand in the COVID-19 environment continue to be lower in the third quarter of 2020 in comparison to the prior year third quarter. To the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, and cash on hand or credit availability is insufficient, we would seek additional financing to provide additional liquidity. We regularly evaluate our potential access to the equity and debt capital markets as sources of liquidity and we believe additional financing would likely be available if necessary, although we can make no assurance as to the form or terms of any such financing. We would also consider additional cost reductions and restructuring, changes in working capital management and further reductions of capital expenditures. Regardless, we will continue to evaluate additional financing or may seek to refinance outstanding borrowings under the Amended Credit Agreement to provide us with additional flexibility and liquidity. Any additional financing beyond that incurred to refinance existing debt would increase our overall debt and could increase interest expense.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, an economic stimulus package intended to provide support, principally in the form of tax benefits and additional liquidity, to companies and individuals negatively impacted by the COVID-19 pandemic. Although the majority of the provisions included in the CARES Act did not immediately benefit the Company from a cash tax perspective due to its significant net operating losses, the Company has taken advantage of the deferral of the employer share (6.2% of employee wages) of Social Security payroll taxes that would otherwise have been owed from the date of enactment of the legislation through December 31, 2020, as afforded by the Act. Through June 30, 2020, the Company deferred approximately $2 million of payroll taxes as permitted by the CARES Act. Payroll tax deferrals in the second half of 2020 are expected to total $4 million to $5 million, all of which will be paid in two equal installments at December 31, 2021 and December 31, 2022. The Company is currently evaluating its eligibility and potential benefit related to the Employee Retention Credit.

For additional details regarding ~~the Credit Agreement,~~ the Amended Credit Agreement and the Convertible Notes, please refer to “Note 1214 - Financing Arrangements” in the ~~Notes to the unaudited Consolidated Financial Statements, and for our discussion regarding risk factors related to our business and our debt, see Risk Factors in our~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

2019.

Table of Contents

Cash Flows

The following table reflects the major categories of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. For additional details, please refer to the unaudited Consolidated Statements of Cash Flows included in this quarterly report.

	Six Months Ended June 30,
	2020			2019
Net cash provided (used) by operating activities	$	79.9		$	(17.6	)
Net cash provided (used) by investing activities		(1.2	)		(12.3	)
Net cash provided (used) by financing activities		(30.3	)		29.2
Increase (Decrease) in Cash and Cash Equivalents	$	48.4		$	(0.7	)

Nine Months Ended September 30,
2019 2018
Net cash provided (used) by operating activities
$24.3

($28.4 )
Net cash used by investing activities (21.7 ) (16.7 )
Net cash (used) provided by financing activities (5.8 ) 47.6
(Decrease) Increase in Cash and Cash Equivalents
($3.2 )
$2.5

Operating activities

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$24.3~~$79.9 million compared to net cash used of ~~$28.4~~$17.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase in cash provided by operating activities of ~~$52.7~~$97.5 million was primarily due to ~~lower cash used for~~management actions to improve working capital as well as ~~pension and postretirement benefit payments, partially offset by lower accrued liabilities, primarily due to lower variable compensation.~~

The improvement in cash used for working capital between periods was due to inventories and accounts receivable, partially offset by accounts payable. The decrease in cash used for inventory was driven by the impact of ~~declining scrap prices combined with a~~ lower quantity of inventory on hand during the first nine months of 2019 as compared to the opposite trend during the same period in the prior year. The increase in cash provided by accounts receivable was primarily due to declining salescustomer demand and production levels in the first ~~nine months~~half of ~~2019, which resulted in collections exceeding billings,~~2020 as compared to increasing sales in the same period in the prior year. The increase in cash used for accounts payable was driven by lower raw material purchases and declining scrap prices during the first nine months of 2019 as compared to the impact of increasing raw material purchases and scrap prices during the same period in the prior year. Refer to the unaudited Consolidated Statements of Cash Flows for additional information.

~~Table of Contents~~

Investing activities

Net cash used by investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019 and 2018~~2020 was ~~$21.7~~$1.2 million, ~~and $16.7~~as compared to net cash used of $12.3 million ~~respectively.~~for the six months ended June 30, 2019. Cash used ~~for~~by investing activities in the first half of 2020 primarily relates to ~~capital investments in our manufacturing facilities.~~

~~Our business requires capital investments to maintain~~the maintenance of machinery and equipment at our plants, partially offset by proceeds from sales of property, plant and ~~equipment~~equipment.

The Company expects its capital expenditures to ~~remain competitive~~be between $15 million and ~~ensure we can implement strategic initiatives. Our construction~~$20 million in ~~progress balance~~2020, a reduction from the previous outlook of a maximum of $25 million (made up of approximately ~~$26 million as of September 30, 2019 includes: (a) approximately $10~~$6 million relating to growth initiatives ~~(e.g. new product offerings, additional capacity~~ and ~~new capabilities) and continuous improvement projects; and (b) approximately $16 million relating primarily to routine capital costs to maintain~~ the reliability, integrity and safety of our manufacturing equipment and facilities. In the next one to three years, we expect to spend approximately $40 million to complete existing ongoing projects (made up of approximately $34 million relating to additional growth initiatives and approximately $6 millionremainder related to continuous improvement).

The Company has no material capital expenditure plans or commitments beyond 2020 at this time.

Financing activities

Net cash used by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$5.8~~$30.3 million compared to net cash provided by financing activities of ~~$47.6~~$29.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. The change was mainly~~2019, primarily due to ~~net repayments of debt of $5.0 million during the nine months ended September 30, 2019 as compared to net~~changes in borrowings ~~of $49.8 million during the nine months ended September 30, 2018.~~

on credit agreements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We review our critical accounting policies throughout the year.

On January 1, 2019, TimkenSteel adopted ASU 2016-02, “Leases” and ASU 2018-11, “Leases - Targeted Improvements”. Refer to “Note 2 - Recent Accounting Pronouncements” and “Note 11 - Leases” for additional information.

~~Table of Contents~~

On January 1, 2018, TimkenSteel adopted ASU 2014-09, “Revenue from Contracts with Customers.” Refer to “Note 2 - Recent Accounting Pronouncements” and “Note 3 - Revenue Recognition” for additional information.

New Accounting Guidance

See “Note 2 - Recent Accounting Pronouncements” in the Notes to the unaudited Consolidated Financial Statements.

~~Table of Contents~~

FORWARD-LOOKING STATEMENTS

Certain statements set forth in this Quarterly Report on Form 10-Q (including our forecasts, beliefs and expectations) that are not historical in nature are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “outlook,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or other similar words, phrases or expressions that convey the uncertainty of future events or outcomes. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q. We caution readers that actual results may differ materially from those expressed or implied in forward-looking statements made by or on behalf of us due to a variety of factors, such as:

•

deterioration in world economic conditions, or in economic conditions in any of the geographic regions in which we conduct business, including additional adverse effects from global economic slowdown, terrorism or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which we or our customers conduct business, and changes in currency valuations;

~~deterioration in world economic conditions, or in economic conditions in any~~

•

the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which we operate. This includes: our ability 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 the U.S. markets;

Table of the geographic regions in which we conduct business, including additional adverse effects from global economic slowdown, terrorism or hostilities. This includes: political risks associated with the potential instability of governments and legal systems in countries in which we or our customers conduct business, and changes in currency valuations;Contents

•

the potential impact of the COVID-19 pandemic on our operations, financial results, and liquidity;

•

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 our products are sold or distributed;

•

changes in operating costs, including the effect of changes in our manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability of raw materials and energy; our ability to mitigate the impact of fluctuations in raw materials and energy costs and the effectiveness of our 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 our operating plans, announced programs, initiatives and capital investments; and our ability to maintain appropriate relations with unions that represent our associates in certain locations in order to avoid disruptions of business;

the success of our operating plans, announced programs, initiatives and capital investments; the ability to integrate acquired companies; the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings; and our ability to maintain appropriate relations with unions that represent our associates in certain locations in order to avoid disruptions of business;

•

unanticipated litigation, claims or assessments, including claims or problems related to intellectual property, product liability or warranty, and environmental issues and taxes, among other matters;

~~unanticipated litigation, claims or assessments, including claims or problems related to intellectual property, product liability or warranty, and environmental issues and taxes, among other matters;~~

•

the availability of financing and interest rates, which affect our cost of funds and/or ability to raise capital, including our ability to refinance and/or repay prior to or at maturity the Convertible Notes; our pension obligations and investment performance; and/or customer demand and the ability of customers to obtain financing to purchase our products or equipment that contain our products; and the amount of any dividend declared by our Board of Directors on our common shares;

the availability of financing and interest rates, which affect our cost of funds and/or ability to raise capital; our pension obligations and investment performance; and/or customer demand and the ability of customers to obtain financing to purchase our products or equipment that contain our products; and the amount of any dividend declared by our Board of Directors on our common shares;

•

the overall impact of the pension and postretirement mark-to-market accounting; and

~~the overall impact of the pension and postretirement mark-to-market accounting; and~~

•

those items identified under the caption Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

~~those items identified under the caption Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018.~~

You 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, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

~~Table of Contents~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our borrowings include both fixed and variable-rate debt. The variable debt consists principally of borrowings under our Credit Agreement. We are exposed to the risk of rising interest rates to the extent we fund our operations with these variable-rate borrowings. As of ~~September~~June 30, ~~2019,~~2020, we have ~~$187.4~~$141.0 million of aggregate debt outstanding, of which ~~$110.0~~$60.0 million consists of debt with variable interest rates. Based on the amount of debt with variable-rate interest outstanding, a 1% rise in interest rates would result in an increase in interest expense of ~~$1.1~~$0.6 million annually.

Foreign Currency Exchange Rate Risk

Fluctuations in the value of the U.S. dollar compared to foreign currencies may impact our earnings. Geographically, our sales are primarily made to customers in the United States. Currency fluctuations could impact us to the extent they impact the currency or the price of raw materials in foreign countries in which our competitors operate or have significant sales.

Commodity Price Risk

In the ordinary course of business, we are exposed to market risk with respect to commodity price fluctuations, primarily related to our purchases of raw materials and energy, principally scrap steel, other ferrous and non-ferrous metals, alloys, natural gas and electricity. Whenever possible, we manage our exposure to commodity risks primarily through the use of supplier pricing agreements that enable us to establish the purchase prices for certain inputs that are used in our manufacturing business. We utilize a raw material surcharge as a component of pricing steel to pass through the cost increases of scrap, alloys and other raw materials, as well as natural gas. From time to time, we may use financial instruments to hedge a portion of our exposure to price risk related to natural gas and electricity purchases. In periods of stable demand for our products, the surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand and cost of raw materials are lower, however, the surcharge impacts sales prices to a lesser extent.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based upon that evaluation, the principal executive officer and

Table of Contents

principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

(b) Changes in Internal Control Over Financial Reporting

During the Company’s most recent fiscal quarter, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Canton, Ohio U.S. Environmental Protection Agency Notice of Violation

The U.S. Environmental Protection Agency (EPA) issued two related Notices of Violation (NOV) to TimkenSteel on August 5, 2014 and November 2, ~~2015.~~2015, respectively. The EPA alleges violations under the Clean Air Act based on ~~alleged~~purported violations of permitted emission limits and engineering requirements at TimkenSteel’s Faircrest and Harrison ~~Steel Plants in Canton, Ohio.~~manufacturing facilities. TimkenSteel disputes many of EPA’s allegations but ~~is working~~has worked cooperatively with EPA and the U.S. Department of Justice to resolve the government’s claims. Negotiations to resolve the NOVs are ~~ongoing, but it~~essentially concluded. The settlement of these matters is ~~not anticipated that~~expected to include a civil penalty of approximately $0.4 million and a commitment by the ~~ultimate resolution of~~company to make approximately $1.0 million in clean-air related capital improvements, principally at the ~~NOVs will have a material adverse effect on our consolidated financial position, results of operations or cash flows.~~

Harrison manufacturing facility, within one year after the settlement is finalized.

ITEM 1A. RISK FACTORS

We are subject to various risks and uncertainties in the course of our business. The discussion of such risks and uncertainties may be found under Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC. ~~There~~

Risks Related to COVID-19

The COVID-19 pandemic could have ~~been no~~a material, ~~changes~~adverse impact on our operations and financial results including cash flows and liquidity.

We continue to ~~such~~closely monitor the impact of the COVID-19 pandemic on our Company, customers, employees and supply chain. The full extent to which the COVID-19 pandemic will impact our operations and financial results is uncertain and ultimately will depend on, among many other factors, the duration of the pandemic, further Federal and State government actions and the speed of economic recovery. The negative impact on our third quarter of 2020, remainder of the year and beyond remains unknown.

The effects of the COVID-19 pandemic also may impact other risk factors previously disclosed in Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. This impact could be to cause previously disclosed risks to occur or to increase the severity of the negative affect inherent in those other risk factors.

Table of Contents

ITEM 6. EXHIBITS

Exhibit Number		Exhibit Description

~~Exhibit Number~~ 10.1*		~~Exhibit Description~~ Form Director Restricted Share Unit Agreement
31.1*		Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document.
101.SCH*
101.SCH*		Inline XBRL Taxonomy Extension Schema Document.
101.PRE*
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.CAL*
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.DEF*
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

* Filed

**	Furnished herewith.

** Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TIMKENSTEEL CORPORATION

		~~TIMKENSTEEL CORPORATION~~
Date:	August 6, 2020

~~Date:~~	~~November 6, 2019~~	/s/Kristopher R. Westbrooks
		Kristopher R. Westbrooks Executive Vice President and Chief Financial Officer (Principal Financial Officer)



~~Ohio~~		~~46-4024951~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1835 Dueber Avenue SW, Canton, OH		44706
(Address of principal executive offices)		(Zip Code)



~~Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:~~
Title of each class		Trading symbol	Name of exchange in which registered
Common shares	~~TMST~~	~~NASDAQ~~ TMST	New York Stock Exchange



Large accelerated filer	o ☐	Accelerated filer	ý ☒

Non-accelerated filer	o ☐	Smaller reporting company	o ☐

		Emerging growth company	o ☐

Class		Outstanding at July 31, 2020

	~~Class~~		~~Outstanding at October 31, 2019~~
	Common Shares, without par value		~~44,820,153~~	45,036,324

		PAGE

		~~PAGE~~
PART I. Financial Information		3
Item 1.	Financial Statements	3
	Consolidated Statements of Operations (Unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4
	Consolidated Balance Sheets (Unaudited)	5
	Consolidated Statements of Shareholders’ Equity (Unaudited)	6
	Consolidated Statements of Cash Flows (Unaudited)	87
	Notes to Unaudited Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2216
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3526
Item 4.	Controls and Procedures	3526
PART II. Other Information		3628
Item 1.	Legal Proceedings	3628
Item 1A1A..	Risk Factors	3628
Item 6.	Exhibits	3729
	Signatures	3830



ý	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



o	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

Ohio		46-4024951


~~TIMKENSTEEL CORPORATION~~ ~~(Exact name of registrant as specified in its charter)~~



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
(Dollars in millions, except per share data)
Net sales		$274.2			$409.9		$981.9			$1,204.2
Cost of products sold	261.0			385.3		914.2			1,126.4
Gross Profit	13.2			24.6		67.7			77.8

Selling, general and administrative expenses	21.4			24.0		64.9			73.6
Restructuring charges	—			—		3.6			—
Impairment charges and loss on asset disposals	0.1			—		1.9			0.9
Interest expense	3.6			4.4		12.0			12.9
Other income, net	5.2			6.1		8.1			18.7
Income (Loss) Before Income Taxes	(6.7		)	2.3		(6.6		)	9.1
Provision (benefit) for income taxes	(2.1		)	0.9		(1.8		)	1.2
Net Income (Loss)		($4.6	)		$1.4		($4.8	)		$7.9

Per Share Data:
Basic earnings (loss) per share		($0.10	)		$0.03		($0.11	)		$0.18
Diluted earnings (loss) per share		($0.10	)		$0.03		($0.11	)		$0.17



	September 30, 2019			December 31, 2018
(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents		$18.4			$21.6
Accounts receivable, net of allowances (2019 - $1.2 million; 2018 - $1.7 million)	107.4			163.4
Inventories, net	279.4			296.8
Deferred charges and prepaid expenses	4.9			3.5
Other current assets	7.9			6.1
Total Current Assets	418.0			491.4

Property, plant and equipment, net	643.0			674.4
Operating lease right-of-use assets	14.2			—
Pension assets	13.2			10.5
Intangible assets, net	16.2			17.8
Other non-current assets	2.7			3.5
Total Assets		$1,107.3			$1,197.6

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$79.0			$160.6
Salaries, wages and benefits	17.0			36.8
Accrued pension and postretirement costs	3.0			3.0
Current operating lease liabilities	6.1			—
Other current liabilities	17.4			20.4
Total Current Liabilities	122.5			220.8

Convertible notes, net	77.4			74.1
Credit Agreement	110.0			115.0
Non-current operating lease liabilities	8.2			—
Accrued pension and postretirement costs	178.5			240.0
Deferred income taxes	0.6			0.8
Other non-current liabilities	10.4			11.7
Total Liabilities	507.6			662.4

Shareholders’ Equity
Preferred shares, without par value; authorized 10.0 million shares, none issued	—			—
Common shares, without par value; authorized 200.0 million shares; issued 2019 and 2018 - 45.7 million shares	—			—
Additional paid-in capital	842.8			846.3
Retained deficit	(274.0		)	(269.2		)
Treasury shares - 2019 - 0.9 million; 2018 - 1.1 million	(25.1		)	(33.0		)
Accumulated other comprehensive income (loss)	56.0			(8.9		)
Total Shareholders’ Equity	599.7			535.2
Total Liabilities and Shareholders’ Equity		$1,107.3			$1,197.6



(Dollars in millions)	Common Shares Outstanding		Additional Paid-in Capital			Retained Deficit			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Total
Balance as of December 31, 2018	44,584,668			$846.3			($269.2	)		($33.0	)		($8.9	)		$535.2
Net income (loss)	—		—			4.2			—			—			4.2
Other comprehensive income (loss)	—		—			—			—			0.5			0.5
Stock-based compensation expense	—		2.2			—			—			—			2.2
Stock option activity	—		0.2			—			—			—			0.2
Issuance of treasury shares	261,130		(7.5		)	—			7.5			—			—
Shares surrendered for taxes	(79,889	)	—			—			(1.0		)	—			(1.0		)
Balance at March 31, 2019	44,765,909			$841.2			($265.0	)		($26.5	)		($8.4	)		$541.3
Net income (loss)	—		—			(4.4		)	—			—			(4.4		)
Other comprehensive income (loss)	—		—			—			—			68.8			68.8
Stock-based compensation expense	—		1.6			—			—			—			1.6
Issuance of treasury shares	50,185		(1.4		)	—			1.4			—			—
Balance at June 30, 2019	44,816,094			$841.4			($269.4	)		($25.1	)		$60.4			$607.3
Net income (loss)	—		—			(4.6		)	—			—			(4.6		)
Other comprehensive income (loss)	—		—			—			—			(4.4		)	(4.4		)
Stock-based compensation expense	—		1.4			—			—			—			1.4
Issuance of treasury shares	1,704		—			—			—			—			—
Shares surrendered for taxes	(720	)	—			—			—			—			—
Balance at September 30, 2019	44,817,078			$842.8			($274.0	)		($25.1	)		$56.0			$599.7



	September 30, 2019			December 31, 2018
Land		$14.1			$14.1
Buildings and improvements	426.4			424.4
Machinery and equipment	1,409.0			1,404.2
Construction in progress	25.8			28.5
Subtotal	1,875.3			1,871.2
Less allowances for depreciation	(1,232.3		)	(1,196.8		)
Property, Plant and Equipment, net		$643.0			$674.4



	September 30, 2019						December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships		$6.3		$4.9		$1.4		$6.3		$4.6		$1.7
Technology use	9.0		6.9		2.1		9.0		6.5		2.5
Capitalized software	61.2		48.5		12.7		61.6		48.0		13.6
Total Intangible Assets		$76.5		$60.3		$16.2		$76.9		$59.1		$17.8



2019 (excluding the nine months ended September 30, 2019)		$1.8
2020	6.2
2021	4.2
2022	1.8
2023	0.9
After 2023	0.2
Total future minimum lease payments	15.1
Less amount of lease payment representing interest	(0.9		)
Total present value of lease payments		$14.2



	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
	Pension			Postretirement			Pension			Postretirement
Service cost		$4.4			$0.3			$4.3			$0.4
Interest cost	12.2			1.3			11.4			1.9
Expected return on plan assets	(16.3		)	(1.0		)	(18.4		)	(1.2		)
Amortization of prior service cost	0.1			(1.4		)	0.1			0.1
Net Periodic Benefit Cost (Income)		$0.4			($0.8	)		($2.6	)		$1.2



	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	Pension			Postretirement			Pension			Postretirement
Service cost		$13.1			$0.9			$12.9			$1.3
Interest cost	36.7			4.8			34.2			5.7
Expected return on plan assets	(48.9		)	(2.9		)	(55.3		)	(3.6		)
Amortization of prior service cost	0.3			(2.4		)	0.3			0.2
Net remeasurement losses (gains)	—			4.4			—			—
Net Periodic Benefit Cost (Income)		$1.2			$4.8			($7.9	)		$3.6

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

Operating lease cost

Short-term lease cost

Total lease cost