TIMKENSTEEL CORP, 10-Q filed on 4/26/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
Apr. 15, 2018
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Entity Registrant Name TimkenSteel Corporation  
Entity Central Index Key 0001598428  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   44,529,226
v3.8.0.1
Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Net sales $ 380.8 $ 309.4
Cost of products sold 359.7 292.4
Gross Profit 21.1 17.0
Selling, general and administrative expenses 24.7 22.9
Operating Loss (3.6) (5.9)
Interest expense 4.6 3.6
Other income, net 6.4 4.5
Loss Before Income Taxes (1.8) (5.0)
Provision for income taxes 0.1 0.3
Net Loss $ (1.9) $ (5.3)
Per Share Data:    
Basic loss per share (in dollars per share) $ (0.04) $ (0.12)
Diluted loss per share (in dollars per share) (0.04) (0.12)
Dividends per share (in dollars per share) $ 0.00 $ 0.00
v3.8.0.1
Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]    
Net Loss $ (1.9) $ (5.3)
Other comprehensive income, net of tax:    
Foreign currency translation adjustments 0.8 0.2
Pension and postretirement liability adjustments 0.1 0.3
Other comprehensive income, net of tax 0.9 0.5
Comprehensive Loss, net of tax $ (1.0) $ (4.8)
v3.8.0.1
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Mar. 31, 2018
Dec. 31, 2017
Current Assets    
Cash and cash equivalents $ 35.4 $ 24.5
Accounts receivable, net of allowances (2018 - $1.5 million; 2017 - $1.4 million) 181.1 149.8
Inventories, net 252.8 224.0
Deferred charges and prepaid expenses 3.5 3.9
Other current assets 7.6 8.0
Total Current Assets 480.4 410.2
Property, Plant and Equipment, Net 691.9 706.7
Other Assets    
Pension assets 17.4 14.6
Intangible assets, net 18.8 19.9
Other non-current assets 5.9 5.2
Total Other Assets 42.1 39.7
Total Assets 1,214.4 1,156.6
Current Liabilities    
Accounts payable, trade 171.0 135.3
Salaries, wages and benefits 29.1 32.4
Accrued pension and postretirement costs 11.5 11.5
Other current liabilities 19.4 27.6
Total Current Liabilities 231.0 206.8
Non-Current Liabilities    
Convertible notes, net 71.1 70.1
Other long-term debt 130.0 95.2
Accrued pension and postretirement costs 209.2 210.8
Deferred income taxes 0.0 0.3
Other non-current liabilities 11.1 12.7
Total Non-Current Liabilities 421.4 389.1
Shareholders’ Equity    
Preferred shares, without par value; authorized 10.0 million shares; none issued 0.0 0.0
Common shares, without par value; authorized 200.0 million shares; issued 2018 and 2017- 45.7 million shares 0.0 0.0
Additional paid-in capital 842.6 843.7
Retained deficit (239.3) (238.0)
Treasury shares - 2018 - 1.2 million; 2017 - 1.3 million (34.6) (37.4)
Accumulated other comprehensive loss (6.7) (7.6)
Total Shareholders’ Equity 562.0 560.7
Total Liabilities and Shareholders’ Equity $ 1,214.4 $ 1,156.6
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Allowances for accounts receivable $ 1.5 $ 1.4
Company preferred stock, no par value, authorized (in shares) 10,000,000 10,000,000
Preferred shares, issued (in shares) 0 0
Common shares, authorized (in shares) 200,000,000 200,000,000
Common shares, issued (in shares) 45,700,000 45,700,000
Treasury shares (in shares) 1,200,000 1,300,000
v3.8.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operating Activities    
Net Loss $ (1.9) $ (5.3)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 18.5 18.9
Amortization of deferred financing fees and debt discount 1.8 1.2
Deferred income taxes (0.3) 0.3
Stock-based compensation expense 2.2 1.6
Pension and postretirement expense (benefit), net (1.4) 0.8
Pension and postretirement contributions and payments (2.5) (1.6)
Changes in operating assets and liabilities:    
Accounts receivable, net (31.3) (56.3)
Inventories, net (28.8) (26.7)
Accounts payable, trade 35.7 39.4
Other accrued expenses (13.2) 2.9
Deferred charges and prepaid expenses 0.4 (0.3)
Other, net 1.4 (1.2)
Net Cash Used by Operating Activities (19.4) (26.3)
Investing Activities    
Capital expenditures (2.2) (2.7)
Net Cash Used by Investing Activities (2.2) (2.7)
Financing Activities    
Proceeds from exercise of stock options 0.1 0.2
Shares surrendered for employee taxes on stock compensation (0.7) (1.2)
Revenue Refunding Bonds repayments (30.2) 0.0
Credit Agreement repayments 65.0  
Amended Credit Agreement borrowings 130.0 25.0
Debt issuance costs related to Amended Credit Agreement (1.7) 0.0
Net Cash Provided by Financing Activities 32.5 24.0
Increase (Decrease) In Cash and Cash Equivalents 10.9 (5.0)
Cash and cash equivalents at beginning of period 24.5 25.6
Cash and Cash Equivalents at End of Period $ 35.4 $ 20.6
v3.8.0.1
Company and Basis of Presentation
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Company and Basis of Presentation
Company and Basis of Presentation
The accompanying Unaudited Consolidated Financial Statements have been prepared 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. 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, 2017.
TimkenSteel Corporation (the Company or TimkenSteel) manufactures alloy steel, as well as carbon and micro-alloy steel, with an annual melt capacity of approximately 2 million tons and shipment capacity of 1.5 million tons. TimkenSteel’s portfolio includes special bar quality (SBQ) bars, seamless mechanical tubing (tubes), value-add solutions such as precision steel components, and billets. In addition, TimkenSteel manages machining, thermal treatment, and raw material recycling programs that are used as a feeder system for the Company’s melt operations. The Company’s products and services are used in a diverse range of demanding applications in the following market sectors: oil and gas; oil country tubular goods (OCTG); automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation.
The SBQ bars, tubes, and billets production processes take place at the Company’s Canton, Ohio manufacturing location. This location accounts for all of the SBQ bars, seamless mechanical tubes and billets the Company produces and includes three manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. TimkenSteel’s value-add solutions production processes take place at three downstream manufacturing facilities: TimkenSteel Material Services (Houston, TX), Tryon Peak (Columbus, NC), and St. Clair (Eaton, OH). Many of the production processes are integrated, and the manufacturing facilities produce products that are sold in all of the Company’s market sectors. As a result, investments in the Company’s facilities and resource allocation decisions affecting the Company’s operations are designed to benefit the overall business of the Company, not any specific aspect of the business.
v3.8.0.1
Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Adoption of New Accounting Standards
The Company adopted the following Accounting Standard Updates (ASU) during the period ended March 31, 2018, all of which were effective as of date January 1, 2018. With the exception of ASU 2014-09 “Revenue from Contracts with Customers” and the related amendments (collectively, the new revenue standard), which is discussed below, the adoption of these standards 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
2014-09, Revenue from Contracts with Customers
The standard defines that a company will recognize revenue when it transfers control of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers.
2017-01, Clarifying the Definition of a Business
The standard clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions, or disposals of assets or businesses.
2017-09, Stock Compensation, Scope of Modification Accounting
The standard provides guidance intended to reduce diversity in practice when accounting for a modification to the terms and conditions of a share-based payment award.



On January 1, 2018, TimkenSteel adopted the new revenue standard using the modified retrospective approach as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning on or after January 1, 2018, are presented in accordance with the new revenue standard. Comparative financial information for reporting periods beginning prior to January 1, 2018, has not been adjusted and continues to be reported in accordance with the Company's revenue recognition policies prior to the adoption of the new revenue standard. The cumulative effect was an adjustment to the opening balance of retained earnings. Under the new revenue standard, the Company will continue to recognize revenue at a point in time when it transfers promised goods or services to customers. Refer to Note 10 - Revenue Recognition in the Notes to Unaudited Consolidated Financial Statements for further discussion.
The following table outlines the cumulative effect of adopting the new revenue standard as of January 1, 2018.
Consolidated Balance Sheet caption
 
As of
December 31, 2017
 
ASU 2014-09 Adjustment
 
As of
January 1, 2018
Inventories, net
 

$224.0

 

($3.3
)
 

$220.7

Other current liabilities
 

$27.6

 

($4.0
)
 

$23.6

Retained deficit
 

($238.0
)
 

$0.7

 

($237.3
)

The ASU 2014-09 adoption adjustment is due to transactions in which the Company bills a customer for product but retains physical possession of the product until it is transferred to the customer at a point in time in the future. Prior to the adoption of the new revenue standard, TimkenSteel would recognize revenue when the product was physically transferred to the customer. Under the new revenue standard, the Company has satisfied its performance obligation and the customer obtains control when the goods are ready to be transferred to the customer and revenue is recorded at that time.

For the three months ended March 31, 2018, the adoption of the new revenue standard did not have a material impact on the Unaudited Consolidated Financial Statements.
Accounting Standards Issued But Not Yet Adopted
The Company has considered the recent ASUs issued by the FASB summarized below.
Standard Pending Adoption
Description
Effective Date
Anticipated Impact
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.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2018-01, Leases - Land Easement Practical Expedient for Transition to Topic 842
The standard provides an optional transition practical expedient for land easements that allows an entity to continue applying its current accounting policy for certain land easements that exist or expire before the standard’s effective date.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
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.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments
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.

January 1, 2020
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2016-02, Leases
The standard requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for operating leases, and requires additional quantitative and qualitative disclosures and must be adopted using a modified retrospective approach.
January 1, 2019
The Company is currently reviewing its lease contracts, related systems and internal controls as it continues to evaluate the impact of the adoption of this ASU on its results of operations and financial condition.
v3.8.0.1
Inventories
3 Months Ended
Mar. 31, 2018
Inventory Disclosure [Abstract]  
Inventories
Inventories
The components of inventories, net as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31,
2018
 
December 31,
2017
Inventories:
 
 
 
Manufacturing supplies

$38.7

 

$36.3

Raw materials
34.4

 
31.9

Work in process
165.6

 
137.8

Finished products
79.9

 
82.9

Gross inventory
318.6

 
288.9

Allowance for surplus and obsolete inventory
(7.4
)
 
(7.8
)
LIFO reserve
(58.4
)
 
(57.1
)
Total Inventories, net

$252.8

 

$224.0


Inventories are valued at the lower of cost or market, with approximately 65% valued by the LIFO method, and the remaining inventories, including manufacturing supplies inventory as well as international (outside the United States) inventories, valued by FIFO, 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 that its LIFO reserve will increase for the year ending December 31, 2018 due primarily to higher anticipated manufacturing costs and inventory quantities.
v3.8.0.1
Property, Plant and Equipment
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
Property, Plant and Equipment
The components of property, plant and equipment, net as of March 31, 2018 and December 31, 2017, were as follows:
 
March 31,
2018
 
December 31,
2017
Property, Plant and Equipment, net:
 
 
 
Land

$13.4

 

$13.4

Buildings and improvements
422.8

 
420.6

Machinery and equipment
1,399.2

 
1,387.4

Construction in progress
17.1

 
30.4

Subtotal
1,852.5

 
1,851.8

Less allowances for depreciation
(1,160.6
)
 
(1,145.1
)
Property, Plant and Equipment, net

$691.9

 

$706.7


Total depreciation expense was $17.0 million and $17.1 million for the three months ended March 31, 2018 and 2017, respectively. TimkenSteel recorded capitalized interest related to construction projects of $0.1 and $0.2 million for the three months ended March 31, 2018 and 2017, respectively. There were no impairment charges recorded during the three months ended March 31, 2018 and 2017.
v3.8.0.1
Intangible Assets
3 Months Ended
Mar. 31, 2018
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Intangible Assets
Intangible Assets
The components of intangible assets, net as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31, 2018
 
December 31, 2017
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
Intangible Assets Subject to Amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships

$6.3

 

$4.3

 

$2.0

 

$6.3

 

$4.1

 

$2.2

Technology use
9.0

 
6.0

 
3.0

 
9.0

 
5.9

 
3.1

Capitalized software
59.2

 
45.4

 
13.8

 
59.1

 
44.5

 
14.6

Total Intangible Assets

$74.5

 

$55.7

 

$18.8

 

$74.4

 

$54.5

 

$19.9


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 March 31, 2018 and 2017 was $1.5 million and $1.8 million, respectively.
v3.8.0.1
Financing Arrangements
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Financing Arrangements
Financing Arrangements
Convertible Notes
In May 2016, the Company issued $75.0 million aggregate principal amount of Convertible Senior Notes, and an additional $11.3 million principal amount to cover over-allotments (Convertible Notes). The Indenture for the Convertible Notes dated May 31, 2016, which was filed with the Securities and Exchange Commission as an exhibit to a Form 8-K filed on May 31, 2016, contains a complete description of the terms of the Convertible Notes. The key terms are as follows:
Maturity Date:         June 1, 2021 unless repurchased or converted earlier
Interest Rate:         6.0% cash interest per year
Interest Payments Dates:     June 1 and December 1 of each year, beginning on December 1, 2016
Initial Conversion Price:    Approximately $12.58 per common share of the Company
Initial Conversion Rate:    79.5165 common shares per $1,000 principal amount of Notes
The net proceeds to the Company from the offering were $83.2 million, after deducting the initial underwriters’ discount and fees and the offering expenses payable by the Company. The Company used the net proceeds to repay a portion of the amounts outstanding under the Credit Agreement.
The components of the Convertible Notes as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31, 2018
 
December 31, 2017
 
Principal

$86.3

 

$86.3

Less: Debt issuance costs, net of amortization
(1.5
)
 
(1.6
)
Less: Debt discount, net of amortization
(13.7
)
 
(14.6
)
Convertible notes, net

$71.1

 

$70.1


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 following table sets forth total interest expense recognized related to the Convertible Notes for the three months ended March 31, 2018 and 2017:
 
Three Months Ended March 31,
 
2018
2017
Contractual interest expense

$1.3


$1.3

Amortization of debt issuance costs
0.1

0.1

Amortization of debt discount
0.9

0.8

Total

$2.3


$2.2


The fair value of the Convertible Notes was approximately $146.6 million as of March 31, 2018. The fair value of the Convertible Notes, which falls within Level 1 of the fair value hierarchy, is based on the last price traded in March 2018.
Holders may convert all or any portion of their Convertible Notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding March 1, 2021 only under certain circumstances described in the Convertible Notes Indenture, based on the reported sale price of the Company’s common shares for specified trading days as a percentage of the conversion price of the Convertible Notes, and upon the occurrence of specified corporate events. On or after March 1, 2021 until the business day preceding the maturity date, holders may convert all or any portion of their Convertible Notes, in multiples of $1,000 principal amount, at their option.
Upon conversion, the Company will pay or deliver, as the case may be, cash, common shares or a combination of cash and common shares, at its election. If the Company satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and common shares, the amount of cash and number of common shares, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 40-trading day period.
If the Company undergoes a fundamental change, subject to certain conditions, holders may require the Company to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to the repurchase date.
Upon certain events of default occurring and continuing (including failure to pay principal or interest on the Convertible Notes when due and payable), the Trustee or the holders of at least 25% in principal amount may declare 100% of the principal and accrued and unpaid interest, if any, on all the Convertible Notes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization, involving the Company or a significant subsidiary, 100% of the principal and accrued and unpaid interest on the Convertible Notes will become due and payable immediately.
Other Long-Term Debt
The components of other long-term debt as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31,
2018
 
December 31,
2017
 
 
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (1.58% as of December 31, 2017)

$—

 

$12.2

Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (1.60% as of December 31, 2017)

 
9.5

Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (1.60% as of December 31, 2017)

 
8.5

Credit Agreement, due 2019 (LIBOR plus applicable spread)

 
65.0

Amended Credit Agreement, due 2023 (LIBOR plus applicable spread)
130.0

 

Total Other Long-Term Debt

$130.0

 

$95.2




Credit Agreement
On February 26, 2016, the Company entered into a $265 million asset based Revolving Credit Facility (Credit Agreement).
Amended 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 (Amended Credit Agreement), with JPMorgan 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 Amended Credit Agreement provides for a $300.0 million asset-based revolving credit facility, including a $15.0 million sublimit for the issuance of commercial and standby letters of credit and a $30.0 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 commitments under the Amended Credit Agreement in the aggregate principal amount of up to $50.0 million, to the extent that existing or new lenders agree to provide such additional commitments.
The availability of borrowings under the Amended Credit Agreement is subject to a borrowing base calculation based upon a valuation of the eligible accounts receivable, inventory and machinery and equipment of 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 agent in its permitted discretion.
The interest rate per annum applicable to loans under the Amended Credit Agreement 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 of the administrative agent, (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 commitment fee on the average daily unused amount of the credit facility in a percentage determined by the Company’s average daily availability for the most recently completed calendar month. The interest rate under the Amended Credit Agreement was 3.9% as of March 31, 2018. The amount available under the Amended Credit Agreement as of March 31, 2018 was $167.4 million.
The proceeds of the Amended Credit Agreement will be used to finance working capital, capital expenditures, certain permitted acquisitions and other general corporate purposes. In addition, $30.2 million of the proceeds were used to redeem the revenue refunding bonds (discussed below). All of the indebtedness under the Amended Credit Agreement is guaranteed by the Company’s material domestic subsidiaries, as well as any other domestic subsidiary the Company elects to make a party to the Amended Credit Agreement, and is secured by substantially all of the personal property of the Company and the subsidiary guarantors.
The Amended 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.
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 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.
Revenue Refunding Bonds
In connection to the Amended Credit Agreement, 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).
v3.8.0.1
Accumulated Other Comprehensive Loss
3 Months Ended
Mar. 31, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss for the three months ended March 31, 2018 and 2017 by component are as follows:

 
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
0.8

 

 
0.8

Amounts reclassified from accumulated other comprehensive loss, before income tax

 
0.1

 
0.1

Income tax benefit

 

 

Net current period other comprehensive (loss) income, net of income taxes
0.8

 
0.1

 
0.9

Balance as of March 31, 2018

($5.1
)
 

($1.6
)
 

($6.7
)
 
Foreign Currency Translation Adjustments
 
Pension and Postretirement Liability Adjustments
 
Total
Balance at December 31, 2016

($7.0
)
 

($2.4
)
 

($9.4
)
     Other comprehensive income before reclassifications, before income tax
0.2

 

 
0.2

      Amounts reclassified from accumulated other comprehensive loss, before income tax

 
0.3

 
0.3

              Income tax expense

 

 

Net current period other comprehensive income, net of income taxes
0.2

 
0.3

 
0.5

Balance at March 31, 2017

($6.8
)
 

($2.1
)
 

($8.9
)

The amount reclassified from accumulated other comprehensive loss for the pension and postretirement liability adjustment was included in other income, net in the Unaudited Consolidated Statements of Operations. These accumulated other comprehensive loss components are components of net periodic benefit cost. See Note 9 - Retirement and Postretirement Plans for additional information.
v3.8.0.1
Changes in Shareholders' Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Changes in Shareholders' Equity
Note 8 - Changes in Shareholders' Equity
Changes in the components of shareholders’ equity for the three months ended March 31, 2018 were as follows:
 
Total
 
Additional Paid-in Capital
 
Retained Deficit
 
Treasury Shares
 
Accumulated Other Comprehensive Loss
Balance at December 31, 2017

$560.7

 

$843.7

 

($238.0
)
 

($37.4
)
 

($7.6
)
Net loss
(1.9
)
 

 
(1.9
)
 

 

Pension and postretirement adjustment, net of tax
0.1

 

 

 

 
0.1

Foreign currency translation adjustments
0.8

 

 

 

 
0.8

ASU 2014-09 adjustment
0.7

 

 
0.7

 

 

Stock-based compensation expense
2.2

 
2.2

 

 

 

Stock option activity
0.1

 
0.1

 

 

 

Issuance of treasury shares

 
(3.4
)
 
(0.1
)
 
3.5

 

Shares surrendered for taxes
(0.7
)
 

 

 
(0.7
)
 

Balance at March 31, 2018

$562.0



$842.6



($239.3
)


($34.6
)


($6.7
)
v3.8.0.1
Retirement and Postretirement Benefits
3 Months Ended
Mar. 31, 2018
Defined Benefit Plan [Abstract]  
Retirement and Postretirement Plans
Retirement and Postretirement Plans
The components of net periodic benefit cost for the three months ended March 31, 2018 and 2017 were as follows:
 
Three Months Ended
March 31, 2018
 
Three Months Ended
March 31, 2017
 
Components of net periodic benefit cost:
Pension
 
Postretirement
 
Pension
 
Postretirement
Service cost

$4.3

 

$0.4

 

$4.6

 

$0.4

Interest cost
11.4

 
1.9

 
12.2

 
2.1

Expected return on plan assets
(18.4
)
 
(1.2
)
 
(17.5
)
 
(1.4
)
Amortization of prior service cost
0.1

 
0.1

 
0.1

 
0.3

Net Periodic Benefit Cost

($2.6
)
 

$1.2

 

($0.6
)
 

$1.4

v3.8.0.1
Revenue Recognition
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
Note 10 - Revenue Recognition
As discussed in Note 2 - Recent Accounting Pronouncements, on January 1, 2018 TimkenSteel adopted the new revenue recognition standard. Under this new standard, 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, with quantities defined at the time the customer issues periodic releases from 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.
 
Three Months Ended March 31,
 
2018

2017
Mobile

$142.5

 

$136.6

Industrial
147.7

 
110.6

Energy
49.1

 
23.7

Other
41.5

 
38.5

Total Net Sales

$380.8

 

$309.4

The following table provides the major sources of revenue by product type.
 
Three Months Ended March 31,
 
2018
 
2017
Bar

$234.4

 

$198.1

Tube
63.7

 
34.6

Value-add
72.7

 
67.9

Other
10.0

 
8.8

Total Net Sales

$380.8

 

$309.4

v3.8.0.1
Earnings Per Share
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Earnings Per Share
Earnings Per Share
Basic loss per share is computed based upon the weighted average number of common shares outstanding. Diluted loss per share are 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 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 loss per share.
Common Share equivalents, which include shares issuable for equity-based awards and upon the conversion of outstanding convertible notes, were excluded from the computation of diluted earnings (loss) per share because the effect of their inclusion would have been anti-dilutive.
The following table sets forth the reconciliation of the numerator and the denominator of basic loss per share and diluted loss per share for the three months ended March 31, 2018 and 2017:
 
Three Months Ended March 31,
 
2018
 
2017
Numerator:
 
 
 
Net loss for basic and diluted earnings per share

($1.9
)
 

($5.3
)
 
 
 
 
Denominator:
 
 
 
Weighted average shares outstanding, basic
44.5

 
44.3

Weighted average shares outstanding, diluted
44.5

 
44.3

 
 
 
 
Basic loss per share

($0.04
)
 

($0.12
)
Diluted loss per share

($0.04
)
 

($0.12
)
v3.8.0.1
Income Tax Provision
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax Provision
Income Tax Provision
TimkenSteel’s provision (benefit) 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 March 31,
 
2018
2017
Provision for incomes taxes

$0.1


$0.3

Effective tax rate
(5.6
)%
(6.0
)%

For the three months ended March 31, 2018 and the years ended December 31, 2017 and 2016, operating losses generated in the U.S. resulted in a decrease in the carrying value of the Company’s U.S. net deferred tax liability to the point that would result in a net U.S. deferred tax asset at March 31, 2018, December 31, 2017 and December 31, 2016. In light of TimkenSteel’s recent operating performance in the U.S. and current industry conditions, the Company assessed, based upon all available evidence, and concluded that it was more likely than not that it would not realize its U.S. deferred tax assets. As a result, the Company will maintain 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.
Tax Cuts and Jobs Act Bill

On December 22, 2017, the Tax Cut and Jobs Act (the Act) was signed into law, which resulted in significant changes to U.S. tax and related laws. Some of the provisions of the Act affecting corporations include, but are not limited to reducing the federal corporate income tax rate from 35% to 21%, limiting the interest expense deduction, expensing of cost of acquired qualified property and eliminating the domestic production activities deduction. We are currently evaluating the impact of the Act, however we do not anticipate that the Act will have a material impact on our financial condition and results of operations. At this time, we do not anticipate a significant reduction in our effective income tax rate or our net deferred federal income tax assets as a result of the income tax rate reduction, as we expect to be in a valuation allowance in 2018.
Other provisions of the Act include a new minimum tax on certain foreign earnings, the Global Intangibles Low-taxed Income, a new tax on certain payments to foreign related parties, the Base Erosion Anti-avoidance Tax, a new incentive for Foreign-derived Intangibles Income, changes to the limitation on the deductibility of certain executive compensation, and new limitations on the deductibility of interest expense. Generally, these other provisions take effect for the Company in the year ending December 31, 2018. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118). This guidance allows registrants a “measurement period,” not to exceed one year from the date of enactment, to complete their accounting for the tax effects of the Act. SAB 118 further directs that, during the measurement period, registrants that are able to make reasonable estimates of the tax effects of the Act should include those amounts in their financial statements as “provisional” amounts. Registrants should reflect adjustments over subsequent periods as they are able to refine their estimates and complete their accounting for the tax effects of the Act. The tax effects related to the Act described in the paragraph above represent the Company’s reasonable estimates within the meaning of SAB 118. Also, it is expected that the U.S. Treasury will issue regulations and other guidance on the application of certain provisions of the Act. In subsequent periods, but within the measurement period, the Company will analyze that guidance and other necessary information.
v3.8.0.1
Contingencies
3 Months Ended
Mar. 31, 2018
Loss Contingency Accrual, Disclosures [Abstract]  
Contingencies
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. As of March 31, 2018 and December 31, 2017, TimkenSteel had a $0.8 million and a $0.9 million contingency reserve, respectively, related to loss exposures incurred in the ordinary course of business.
Environmental Matters
From time to time, TimkenSteel may be a party to lawsuits, claims or other proceedings related to environmental matters and/or may receive notices of potential violations of environmental laws and regulations from the U.S. Environmental Protection Agency (EPA) and similar state or local authorities. TimkenSteel recorded reserves for such environmental matters as other current and non-current liabilities on the Consolidated Balance Sheets. Accruals related to such environmental matters represent management’s best estimate of the fees and costs associated with these matters. Although it is not possible to predict with certainty the outcome of such matters, management believes that their ultimate dispositions should not have a material adverse effect on TimkenSteel’s financial position, cash flows, or results of operations. As of March 31, 2018 and December 31, 2017, TimkenSteel had a $0.9 million and $0.5 million reserve for such environmental matters as other current and non-current liabilities on the Unaudited Consolidated Balance Sheets, respectively.
The following rollforward of the accrual related to environmental matters for the three months ended March 31, 2018 and 2017:
 
Three Months Ended March 31,
 
2018
2017
Beginning balance, January 1

$0.5


$0.6

Expenses
0.4


Payments


Ending balance, March 31

$0.9


$0.6

v3.8.0.1
Recent Accounting Pronouncements (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Adoption of New Accounting Standards
Adoption of New Accounting Standards
The Company adopted the following Accounting Standard Updates (ASU) during the period ended March 31, 2018, all of which were effective as of date January 1, 2018. With the exception of ASU 2014-09 “Revenue from Contracts with Customers” and the related amendments (collectively, the new revenue standard), which is discussed below, the adoption of these standards 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
2014-09, Revenue from Contracts with Customers
The standard defines that a company will recognize revenue when it transfers control of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers.
2017-01, Clarifying the Definition of a Business
The standard clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions, or disposals of assets or businesses.
2017-09, Stock Compensation, Scope of Modification Accounting
The standard provides guidance intended to reduce diversity in practice when accounting for a modification to the terms and conditions of a share-based payment award.



On January 1, 2018, TimkenSteel adopted the new revenue standard using the modified retrospective approach as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning on or after January 1, 2018, are presented in accordance with the new revenue standard. Comparative financial information for reporting periods beginning prior to January 1, 2018, has not been adjusted and continues to be reported in accordance with the Company's revenue recognition policies prior to the adoption of the new revenue standard. The cumulative effect was an adjustment to the opening balance of retained earnings. Under the new revenue standard, the Company will continue to recognize revenue at a point in time when it transfers promised goods or services to customers. Refer to Note 10 - Revenue Recognition in the Notes to Unaudited Consolidated Financial Statements for further discussion.
The following table outlines the cumulative effect of adopting the new revenue standard as of January 1, 2018.
Consolidated Balance Sheet caption
 
As of
December 31, 2017
 
ASU 2014-09 Adjustment
 
As of
January 1, 2018
Inventories, net
 

$224.0

 

($3.3
)
 

$220.7

Other current liabilities
 

$27.6

 

($4.0
)
 

$23.6

Retained deficit
 

($238.0
)
 

$0.7

 

($237.3
)

The ASU 2014-09 adoption adjustment is due to transactions in which the Company bills a customer for product but retains physical possession of the product until it is transferred to the customer at a point in time in the future. Prior to the adoption of the new revenue standard, TimkenSteel would recognize revenue when the product was physically transferred to the customer. Under the new revenue standard, the Company has satisfied its performance obligation and the customer obtains control when the goods are ready to be transferred to the customer and revenue is recorded at that time.

For the three months ended March 31, 2018, the adoption of the new revenue standard did not have a material impact on the Unaudited Consolidated Financial Statements.
Accounting Standards Issued But Not Yet Adopted
The Company has considered the recent ASUs issued by the FASB summarized below.
Standard Pending Adoption
Description
Effective Date
Anticipated Impact
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.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2018-01, Leases - Land Easement Practical Expedient for Transition to Topic 842
The standard provides an optional transition practical expedient for land easements that allows an entity to continue applying its current accounting policy for certain land easements that exist or expire before the standard’s effective date.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
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.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments
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.

January 1, 2020
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2016-02, Leases
The standard requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for operating leases, and requires additional quantitative and qualitative disclosures and must be adopted using a modified retrospective approach.
January 1, 2019
The Company is currently reviewing its lease contracts, related systems and internal controls as it continues to evaluate the impact of the adoption of this ASU on its results of operations and financial condition.


v3.8.0.1
Recent Accounting Pronouncements (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Schedule of Accounting Changes
The Company adopted the following Accounting Standard Updates (ASU) during the period ended March 31, 2018, all of which were effective as of date January 1, 2018. With the exception of ASU 2014-09 “Revenue from Contracts with Customers” and the related amendments (collectively, the new revenue standard), which is discussed below, the adoption of these standards 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
2014-09, Revenue from Contracts with Customers
The standard defines that a company will recognize revenue when it transfers control of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers.
2017-01, Clarifying the Definition of a Business
The standard clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions, or disposals of assets or businesses.
2017-09, Stock Compensation, Scope of Modification Accounting
The standard provides guidance intended to reduce diversity in practice when accounting for a modification to the terms and conditions of a share-based payment award.

The following table outlines the cumulative effect of adopting the new revenue standard as of January 1, 2018.
Consolidated Balance Sheet caption
 
As of
December 31, 2017
 
ASU 2014-09 Adjustment
 
As of
January 1, 2018
Inventories, net
 

$224.0

 

($3.3
)
 

$220.7

Other current liabilities
 

$27.6

 

($4.0
)
 

$23.6

Retained deficit
 

($238.0
)
 

$0.7

 

($237.3
)
The Company has considered the recent ASUs issued by the FASB summarized below.
Standard Pending Adoption
Description
Effective Date
Anticipated Impact
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.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2018-01, Leases - Land Easement Practical Expedient for Transition to Topic 842
The standard provides an optional transition practical expedient for land easements that allows an entity to continue applying its current accounting policy for certain land easements that exist or expire before the standard’s effective date.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
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.
January 1, 2019
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments
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.

January 1, 2020
The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2016-02, Leases
The standard requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for operating leases, and requires additional quantitative and qualitative disclosures and must be adopted using a modified retrospective approach.
January 1, 2019
The Company is currently reviewing its lease contracts, related systems and internal controls as it continues to evaluate the impact of the adoption of this ASU on its results of operations and financial condition.
v3.8.0.1
Inventories (Tables)
3 Months Ended
Mar. 31, 2018
Inventory Disclosure [Abstract]  
Schedule of Components of Inventory
The components of inventories, net as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31,
2018
 
December 31,
2017
Inventories:
 
 
 
Manufacturing supplies

$38.7

 

$36.3

Raw materials
34.4

 
31.9

Work in process
165.6

 
137.8

Finished products
79.9

 
82.9

Gross inventory
318.6

 
288.9

Allowance for surplus and obsolete inventory
(7.4
)
 
(7.8
)
LIFO reserve
(58.4
)
 
(57.1
)
Total Inventories, net

$252.8

 

$224.0

v3.8.0.1
Property, Plant and Equipment (Tables)
3 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
The components of property, plant and equipment, net as of March 31, 2018 and December 31, 2017, were as follows:
 
March 31,
2018
 
December 31,
2017
Property, Plant and Equipment, net:
 
 
 
Land

$13.4

 

$13.4

Buildings and improvements
422.8

 
420.6

Machinery and equipment
1,399.2

 
1,387.4

Construction in progress
17.1

 
30.4

Subtotal
1,852.5

 
1,851.8

Less allowances for depreciation
(1,160.6
)
 
(1,145.1
)
Property, Plant and Equipment, net

$691.9

 

$706.7

v3.8.0.1
Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2018
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Schedule of Finite-Lived Intangible Assets
The components of intangible assets, net as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31, 2018
 
December 31, 2017
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
Intangible Assets Subject to Amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships

$6.3

 

$4.3

 

$2.0

 

$6.3

 

$4.1

 

$2.2

Technology use
9.0

 
6.0

 
3.0

 
9.0

 
5.9

 
3.1

Capitalized software
59.2

 
45.4

 
13.8

 
59.1

 
44.5

 
14.6

Total Intangible Assets

$74.5

 

$55.7

 

$18.8

 

$74.4

 

$54.5

 

$19.9

v3.8.0.1
Financing Arrangements (Tables)
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of Components of Convertible Notes
The components of the Convertible Notes as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31, 2018
 
December 31, 2017
 
Principal

$86.3

 

$86.3

Less: Debt issuance costs, net of amortization
(1.5
)
 
(1.6
)
Less: Debt discount, net of amortization
(13.7
)
 
(14.6
)
Convertible notes, net

$71.1

 

$70.1

Schedule of Long-term Debt Instruments
The components of other long-term debt as of March 31, 2018 and December 31, 2017 were as follows:
 
March 31,
2018
 
December 31,
2017
 
 
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (1.58% as of December 31, 2017)

$—

 

$12.2

Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (1.60% as of December 31, 2017)

 
9.5

Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (1.60% as of December 31, 2017)

 
8.5

Credit Agreement, due 2019 (LIBOR plus applicable spread)

 
65.0

Amended Credit Agreement, due 2023 (LIBOR plus applicable spread)
130.0

 

Total Other Long-Term Debt

$130.0

 

$95.2

The following table sets forth total interest expense recognized related to the Convertible Notes for the three months ended March 31, 2018 and 2017:
 
Three Months Ended March 31,
 
2018
2017
Contractual interest expense

$1.3


$1.3

Amortization of debt issuance costs
0.1

0.1

Amortization of debt discount
0.9

0.8

Total

$2.3


$2.2

v3.8.0.1
Accumulated Other Comprehensive Loss (Tables)
3 Months Ended
Mar. 31, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Schedule of Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive loss for the three months ended March 31, 2018 and 2017 by component are as follows:

 
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
0.8

 

 
0.8

Amounts reclassified from accumulated other comprehensive loss, before income tax

 
0.1

 
0.1

Income tax benefit

 

 

Net current period other comprehensive (loss) income, net of income taxes
0.8

 
0.1

 
0.9

Balance as of March 31, 2018

($5.1
)
 

($1.6
)
 

($6.7
)
 
Foreign Currency Translation Adjustments
 
Pension and Postretirement Liability Adjustments
 
Total
Balance at December 31, 2016

($7.0
)
 

($2.4
)
 

($9.4
)
     Other comprehensive income before reclassifications, before income tax
0.2

 

 
0.2

      Amounts reclassified from accumulated other comprehensive loss, before income tax

 
0.3

 
0.3

              Income tax expense

 

 

Net current period other comprehensive income, net of income taxes
0.2

 
0.3

 
0.5

Balance at March 31, 2017

($6.8
)
 

($2.1
)
 

($8.9
)

v3.8.0.1
Changes in Shareholders' Equity (Tables)
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Schedule of Shareholders' Equity
Changes in the components of shareholders’ equity for the three months ended March 31, 2018 were as follows:
 
Total
 
Additional Paid-in Capital
 
Retained Deficit
 
Treasury Shares
 
Accumulated Other Comprehensive Loss
Balance at December 31, 2017

$560.7

 

$843.7

 

($238.0
)
 

($37.4
)
 

($7.6
)
Net loss
(1.9
)
 

 
(1.9
)
 

 

Pension and postretirement adjustment, net of tax
0.1

 

 

 

 
0.1

Foreign currency translation adjustments
0.8

 

 

 

 
0.8

ASU 2014-09 adjustment
0.7

 

 
0.7

 

 

Stock-based compensation expense
2.2

 
2.2

 

 

 

Stock option activity
0.1

 
0.1

 

 

 

Issuance of treasury shares

 
(3.4
)
 
(0.1
)
 
3.5

 

Shares surrendered for taxes
(0.7
)
 

 

 
(0.7
)
 

Balance at March 31, 2018

$562.0



$842.6



($239.3
)


($34.6
)


($6.7
)
v3.8.0.1
Retirement and Postretirement Benefits (Tables)
3 Months Ended
Mar. 31, 2018
Defined Benefit Plan [Abstract]  
Schedule of Periodic Benefit Cost
The components of net periodic benefit cost for the three months ended March 31, 2018 and 2017 were as follows:
 
Three Months Ended
March 31, 2018
 
Three Months Ended
March 31, 2017
 
Components of net periodic benefit cost:
Pension
 
Postretirement
 
Pension
 
Postretirement
Service cost

$4.3

 

$0.4

 

$4.6

 

$0.4

Interest cost
11.4

 
1.9

 
12.2

 
2.1

Expected return on plan assets
(18.4
)
 
(1.2
)
 
(17.5
)
 
(1.4
)
Amortization of prior service cost
0.1

 
0.1

 
0.1

 
0.3

Net Periodic Benefit Cost

($2.6
)
 

$1.2

 

($0.6
)
 

$1.4

v3.8.0.1
Revenue Recognition (Tables)
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue
As discussed in Note 2 - Recent Accounting Pronouncements, on January 1, 2018 TimkenSteel adopted the new revenue recognition standard. Under this new standard, 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, with quantities defined at the time the customer issues periodic releases from 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.
 
Three Months Ended March 31,
 
2018

2017
Mobile

$142.5

 

$136.6

Industrial
147.7

 
110.6

Energy
49.1

 
23.7

Other
41.5

 
38.5

Total Net Sales

$380.8

 

$309.4

The following table provides the major sources of revenue by product type.
 
Three Months Ended March 31,
 
2018
 
2017
Bar

$234.4

 

$198.1

Tube
63.7

 
34.6

Value-add
72.7

 
67.9

Other
10.0

 
8.8

Total Net Sales

$380.8

 

$309.4

v3.8.0.1
Earnings Per Share (Tables)
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted
The following table sets forth the reconciliation of the numerator and the denominator of basic loss per share and diluted loss per share for the three months ended March 31, 2018 and 2017:
 
Three Months Ended March 31,
 
2018
 
2017
Numerator:
 
 
 
Net loss for basic and diluted earnings per share

($1.9
)
 

($5.3
)
 
 
 
 
Denominator:
 
 
 
Weighted average shares outstanding, basic
44.5

 
44.3

Weighted average shares outstanding, diluted
44.5

 
44.3

 
 
 
 
Basic loss per share

($0.04
)
 

($0.12
)
Diluted loss per share

($0.04
)
 

($0.12
)
v3.8.0.1
Income Tax Provision (Tables)
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Schedule of (Benefit) Provision for Income Taxes
 
Three Months Ended March 31,
 
2018
2017
Provision for incomes taxes

$0.1


$0.3

Effective tax rate
(5.6
)%
(6.0
)%
v3.8.0.1
Contingencies (Tables)
3 Months Ended
Mar. 31, 2018
Loss Contingency Accrual, Disclosures [Abstract]  
Schedule of Loss Contingencies by Contingency
The following rollforward of the accrual related to environmental matters for the three months ended March 31, 2018 and 2017:
 
Three Months Ended March 31,
 
2018
2017
Beginning balance, January 1

$0.5


$0.6

Expenses
0.4


Payments


Ending balance, March 31

$0.9


$0.6

v3.8.0.1
Company and Basis of Presentation - Narrative (Details)
T in Millions
3 Months Ended
Mar. 31, 2018
manufacturing_facility
T
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Annual melt capacity 2.0
Shipment capacity 1.5
Number of manufacturing facilities | manufacturing_facility 3
v3.8.0.1
Recent Accounting Pronouncements - Adoption of New Accounting Standards (Details) - USD ($)
$ in Millions
Mar. 31, 2018
Jan. 01, 2018
Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]      
Inventories, net $ 252.8 $ 220.7 $ 224.0
Other current liabilities 19.4 23.6 27.6
Retained deficit $ (239.3) (237.3) (238.0)
Calculated under Revenue Guidance in Effect before Topic 606      
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]      
Inventories, net     224.0
Other current liabilities     27.6
Retained deficit     $ (238.0)
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09