TIMKENSTEEL CORP, 10-Q filed on 10/27/2016
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2016
Oct. 15, 2016
Document and Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q3 
 
Entity Registrant Name
TimkenSteel Corporation 
 
Entity Central Index Key
0001598428 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
44,221,682 
Consolidated Statements of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Income Statement [Abstract]
 
 
 
 
Net sales
$ 213.8 
$ 232.7 
$ 654.8 
$ 899.6 
Cost of products sold
211.3 
253.2 
638.7 
884.6 
Gross Profit (Loss)
2.5 
(20.5)
16.1 
15.0 
Selling, general and administrative expenses
25.0 
26.6 
71.6 
85.4 
Impairment and restructuring charges
0 
0.8 
0.3 
2.8 
Operating Loss
(22.5)
(47.9)
(55.8)
(73.2)
Interest expense
3.9 
0.9 
8.0 
2.0 
Other expense, net
0.2 
1.0 
1.7 
2.4 
Loss Before Income Taxes
(26.6)
(49.8)
(65.5)
(77.6)
Benefit for income taxes
(10.0)
(19.0)
(24.8)
(29.4)
Net Loss
$ (16.6)
$ (30.8)
$ (40.7)
$ (48.2)
Per Share Data:
 
 
 
 
Basic loss earnings per share (in dollars per share)
$ (0.38)
$ (0.69)
$ (0.92)
$ (1.08)
Diluted loss per share (in dollars per share)
$ (0.38)
$ (0.69)
$ (0.92)
$ (1.08)
Dividends per share (in dollars per share)
$ 0.00 
$ 0.14 
$ 0.00 
$ 0.42 
Consolidated Statements of Comprehensive Loss (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net loss
$ (16.6)
$ (30.8)
$ (40.7)
$ (48.2)
Other comprehensive (loss) income, net of tax:
 
 
 
 
Foreign currency translation adjustments
(0.5)
(1.1)
(2.8)
(1.1)
Pension and postretirement liability adjustments
(8.5)
6.1 
0.8 
17.2 
Other comprehensive (loss) income, net of tax
(9.0)
5.0 
(2.0)
16.1 
Comprehensive Loss, net of tax
$ (25.6)
$ (25.8)
$ (42.7)
$ (32.1)
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Current Assets
 
 
Cash and cash equivalents
$ 23.3 
$ 42.4 
Accounts receivable, net of allowances
103.8 
80.9 
Inventories, net
155.4 
173.9 
Deferred charges and prepaid expenses
3.8 
11.4 
Other current assets
6.7 
9.2 
Total Current Assets
293.0 
317.8 
Property, Plant and Equipment, Net
743.5 
769.3 
Pension assets
11.0 
20.0 
Intangible assets, net
25.7 
30.6 
Other non-current assets
4.9 
4.1 
Total Other Assets
41.6 
54.7 
Total Assets
1,078.1 
1,141.8 
Current Liabilities
 
 
Accounts payable, trade
73.1 
49.5 
Salaries, wages and benefits
18.2 
21.4 
Accrued pension and postretirement costs
3.2 
3.2 
Other current liabilities
21.4 
30.1 
Total Current Liabilities
115.9 
104.2 
Non-Current Liabilities
 
 
Convertible notes, net
65.6 
0 
Other long-term debt
70.2 
200.2 
Accrued pension and postretirement costs
143.8 
114.1 
Deferred income taxes
10.1 
26.9 
Other non-current liabilities
12.7 
10.0 
Total Non-Current Liabilities
302.4 
351.2 
Commitments and contingencies
0 
0 
Shareholders’ Equity
 
 
Preferred shares, without par value; authorized 10.0 million shares, none issued
0 
0 
Common shares, without par value; authorized 200.0 million shares; issued 2016 and 2015 - 45.7 million shares
0 
0 
Additional paid-in capital
1,073.1 
1,058.2 
Retained deficit
(102.4)
(61.7)
Treasury shares - 2016 and 2015 - 1.5 million, respectively
(45.1)
(46.3)
Accumulated other comprehensive loss
(265.8)
(263.8)
Total Shareholders’ Equity
659.8 
686.4 
Total Liabilities and Shareholders’ Equity
$ 1,078.1 
$ 1,141.8 
Consolidated Balance Sheets Parenthetical (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 1.8 
$ 1.5 
Company preferred stock, no par value, authorized
10,000,000 
10,000,000 
Company Preferred stock, no par value, issued
0 
0 
Company common stock, no par value, authorized
200,000,000 
200,000,000 
Common Stock, Shares, Issued
45,700,000 
45,700,000 
Treasury Stock, Shares
1,500,000 
1,500,000 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Net Cash Provided by (Used in) Operating Activities [Abstract]
 
 
Net loss
$ (40.7)
$ (48.2)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
56.2 
54.6 
Impairment charges
0 
0.9 
Loss on sale or disposal of assets
1.0 
1.0 
Deferred income taxes
(24.9)
(30.2)
Stock-based compensation expense
4.6 
6.0 
Pension and postretirement expense
21.2 
22.9 
Loss on pension settlement
5.4 
0 
Pension and postretirement contributions and payments
(3.1)
(12.2)
Reimbursement from postretirement plan assets
13.3 
0 
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
(23.0)
60.4 
Inventories, net
18.5 
97.8 
Accounts payable, trade
23.6 
(71.3)
Other accrued expenses
(8.4)
(33.8)
Deferred charges and prepaid expenses
7.6 
17.7 
Other, net
2.3 
(2.1)
Net Cash Provided by Operating Activities
55.5 
63.8 
Investing Activities
 
 
Capital expenditures
(26.1)
(52.9)
Proceeds from disposals of property, plant and equipment
0 
0.4 
Net Cash Used by Investing Activities
(26.1)
(52.5)
Financing Activities
 
 
Cash dividends paid to shareholders
0 
(18.7)
Purchase of treasury shares
0 
(17.3)
Proceeds from exercise of stock options
0 
1.5 
Credit agreement repayments
(130.0)
(45.0)
Credit agreement borrowings
0 
65.0 
Issuance costs related to credit agreement
(1.7)
0 
Proceeds from issuance of convertible notes
86.3 
0 
Issuance costs related to convertible notes
(3.1)
0 
Net transfers to Timken and affiliates
0 
(0.5)
Net Cash Used by Financing Activities
(48.5)
(15.0)
Effect of exchange rate changes on cash
0 
0 
Decrease In Cash and Cash Equivalents
(19.1)
(3.7)
Cash and cash equivalents at beginning of period
42.4 
34.5 
Cash and Cash Equivalents at End of Period
23.3 
30.8 
Convertible Notes
 
 
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Amortization related to other long-term debt
1.1 
0 
Other Long-Term Debt
 
 
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Amortization related to other long-term debt
$ 0.8 
$ 0.3 
Basis of Presentation
Basis of Presentation
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, 2015.
TimkenSteel (the “Company”) manufactures alloy steel, as well as carbon and micro-alloy steel, with an annual melt capacity of approximately two million tons. TimkenSteel’s portfolio includes special bar quality steel (SBQ), seamless mechanical tubes (tubes) and value-add solutions, such as precision steel components. In addition, TimkenSteel supplies machining and thermal treatment services, as well as manages raw material recycling programs, which 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 & gas; automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation.
The SBQ bars and tubes production processes occur out of the Company’s Canton, Ohio manufacturing location. This location accounts for all of the SBQ bars and seamless mechanical tubes the Company produces and includes three manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. TimkenSteel’s value-add solutions production processes occur out of three downstream manufacturing facilities: the TimkenSteel Material Services, Tryon Peak, and St. Clair facilities. 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.
Effective January 1, 2016, TimkenSteel eliminated its segment reporting as a result of organizational changes made in the second half of 2015, in addition to the integrated nature of the Company’s business as described above. These organizational changes were made to better align resources to support the business strategy of operating in a leaner, more efficient environment. Specifically, the Company has centralized its customer-facing activities under one leadership role and eliminated the former two segment operating structure. The Company is now organized in a centralized manner based on functionality. As a result, TimkenSteel is conducting its business activities and reporting financial results as one business segment.
The presentation of financial results as one reportable segment is consistent with the way the Company operates its business under the realigned organization 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 will help the CODM manage costs on a consolidated basis, consistent with the integrated nature of the operations.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-05, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. It is effective for annual and interim reporting periods beginning after December 15, 2015, with early adoption permitted. TimkenSteel adopted ASU 2015-05 effective January 1, 2016 on a prospective basis. The adoption did not have a material effect on the Consolidated Financial Statements.
In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU requires the presentation of debt issuance costs as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. TimkenSteel adopted ASU 2015-03 as of March 31, 2016. The adoption did not have a material effect on the Consolidated Balance Sheets.
Recently Issued Accounting Standards
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)”. The guidance is intended to reduce diversity in practice in how certain items are classified in the cash flow statement. It is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted, provided that all the issues addressed in the standard are adopted in the same period. Retrospective transition is required. TimkenSteel plans to adopt ASU 2016-15 effective January 1, 2017, and the adoption is not expected to have a material effect on its Statements of Cash Flows.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU changes how entities will measure credit losses for most financial assets, including trade and other receivables. This guidance will replace today’s incurred loss approach with an expected loss model. It is effective for annual periods beginning after December 31, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018 and interim periods therein. TimkenSteel is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which provides guidance for revenue recognition and will supersede Topic 605, “Revenue Recognition,” and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised 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. Additional disclosures will be required about the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date" which defers the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date of annual reporting periods beginning after December 15, 2016. The FASB issued additional amendments to ASU 2014-09. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the principal versus agent evaluation and how to apply the control principle to certain arrangements. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. This ASU amends the guidance on transition, collectibility, noncash consideration and the presentation of sales and other similar taxes. The effective date and transition requirements for ASU 2016-08 and ASU 2016-12 are the same as those for ASU 2014-09. TimkenSteel is currently evaluating the impact of the adoption of ASU 2014-09 and the additional amendments on its results of operations and financial condition.
In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This ASU will affect several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification on the statement of cash flows and accounting for forfeitures. It is effective for fiscal years beginning after December 15, 2016, including interim periods, with early adoption permitted. TimkenSteel will adopt ASU 2016-09 effective January 1, 2017, and the adoption is not expected to have a material effect on its results of operations, financial condition, and cash flows.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which 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. It is effective for annual reporting periods beginning after December 15, 2018. The Company regularly enters into operating leases. TimkenSteel is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
In July 2015, the FASB issued ASU 2015-11, “Inventory: Simplifying the Measurement of Inventory (Topic 330),” which requires that certain inventory be measured at the lower of cost or net realizable value. The guidance applies only to inventories for which cost is determined by methods other than last-in, first-out (LIFO). It is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company values certain portions of its inventory using the FIFO, average cost, or specific identification methods. TimkenSteel is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
Inventories
Inventories
Inventories
The components of inventories, net as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31,
2015
Inventories, net:
 
 
 
Manufacturing supplies

$38.5

 

$43.3

Raw materials
13.5

 
14.6

Work in process
60.5

 
59.5

Finished products
51.7

 
64.9

Subtotal
164.2

 
182.3

Allowance for surplus and obsolete inventory
(8.8
)
 
(8.4
)
Total Inventories, net

$155.4

 

$173.9


Inventories are valued at the lower of cost or market, with approximately 63% 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.
The LIFO reserve as of September 30, 2016 and December 31, 2015 was $43.1 million and $51.4 million, respectively. TimkenSteel projects that its LIFO reserve will decrease for the year ending December 31, 2016 due primarily to lower anticipated manufacturing costs and inventory quantities.
Property, Plant and Equipment
Property, Plant and Equipment
Property, Plant and Equipment
The components of property, plant and equipment, net as of September 30, 2016 and December 31, 2015, were as follows:
 
September 30,
2016
 
December 31,
2015
Property, Plant and Equipment, net:
 
 
 
Land

$13.4

 

$13.4

Buildings and improvements
418.2

 
418.2

Machinery and equipment
1,332.3

 
1,298.2

Construction in progress
63.0

 
74.9

Subtotal
1,826.9

 
1,804.7

Less allowances for depreciation
(1,083.4
)
 
(1,035.4
)
Property, Plant and Equipment, net

$743.5

 

$769.3


Total depreciation expense was $51.0 million and $49.7 million for the nine months ended September 30, 2016 and 2015, respectively. TimkenSteel recorded capitalized interest related to construction projects of $0.5 million and $1.2 million for the nine months ended September 30, 2016 and 2015, respectively. TimkenSteel recorded impairment charges of $0.9 million related to the discontinued use of certain assets during the nine months ended September 30, 2015.
On February 26, 2016, TimkenSteel entered into an agreement for the sale and leaseback of the Company’s Canton, Ohio office facilities for a purchase price of $20 million. During the second quarter, the Company terminated the agreement and no further obligations exist between the parties.
Intangible Assets
Intangible Assets
Intangible Assets
The components of intangible assets, net as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30, 2016
 
December 31, 2015
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
Intangible Assets Subject to Amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$6.8

 
$4.0

 

$2.8

 

$6.8

 

$3.7

 

$3.1

Technology use
9.0

 
5.2

 
3.8

 
9.0

 
4.7

 
4.3

Capitalized software
58.2

 
39.1

 
19.1

 
57.9

 
34.7

 
23.2

Total Intangible Assets

$74.0

 

$48.3

 

$25.7

 

$73.7

 

$43.1

 

$30.6


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 nine months ended September 30, 2016 and 2015 was $5.2 million and $4.9 million, respectively.
Financing Arrangements
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 (the “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 $83.7 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 Amended Credit Agreement.
The components of the Convertible Notes are as follows:
 
September 30,
2016
 
December 31,
2015
Principal

$86.3

 

$—

Less: Debt issuance costs, net of amortization
(2.2
)
 
—

Less: Debt discount, net of amortization
(18.5
)
 
—

Convertible notes, net

$65.6

 

$—


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:
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2016
 
2015
2016
 
2015
Contractual interest expense

$1.3

 

$—


$1.7

 

$—

Amortization of debt issuance costs
0.1

 
—

0.2

 
—

Amortization of debt discount
0.7

 
—

0.9

 
—

Total

$2.1

 

$—


$2.8

 

$—


The fair value of the Convertible Notes was approximately $80.9 million as of September 30, 2016. The fair value of the Convertible Notes, which falls within Level 3 of the fair value hierarchy, is determined based on similar debt instruments that do not contain a conversion feature.
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 cash or deliver common shares, or a combination thereof, at its election. The amount of cash and number of common shares 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 September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31,
2015
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.84% as of September 30, 2016)

$12.2

 

$12.2

Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.83% as of September 30, 2016)
9.5

 
9.5

Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (0.84% as of September 30, 2016)
8.5

 
8.5

Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
40.0

 
170.0

Total Other Long-Term Debt

$70.2

 

$200.2


Amended Credit Agreement
On February 26, 2016, the Company, as borrower, and certain domestic subsidiaries, as subsidiary guarantors, entered into Amendment No. 1 to the Amended and Restated Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto.
The Amended Credit Agreement provides for a $265.0 million asset-based revolving credit facility, including a $13.3 million sublimit for the issuance of commercial and standby letters of credit, and a $26.5 million sublimit for swingline loans. The availability of borrowings is subject to a borrowing base calculation based upon a valuation of the eligible accounts receivable, inventory and machinery and equipment of TimkenSteel and the subsidiary guarantors, each multiplied by an applicable advance rate. The Amended Credit Agreement includes a block on availability equal to the greater of $28.9 million or 12.5% of the aggregate commitments (except that in the event of a mandatory reduction in the commitments, the block on availability will be equal to the greater of $20.0 million or 12.5% of the aggregate commitments), effectively reducing the Company’s borrowing base by the availability block.
The Amended Credit Agreement contains certain customary covenants, including covenants that limit TimkenSteel’s and its subsidiaries’ ability 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 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. Further, the Amended Credit Agreement contains financial covenants that (i) limit the amount of capital expenditures TimkenSteel may make to $45 million in fiscal year 2016 and $50 million in fiscal years thereafter and (ii) require the Company to maintain a minimum specified fixed charge coverage ratio for the year-to-date periods beginning January 1, 2017 and ending June 30, 2017, July 31, 2017 and August 31, 2017.
Borrowings under the Amended Credit Agreement bear interest based on the daily balance outstanding at LIBOR (with no rate floor), plus an applicable margin (varying from 3.00% to 3.50%) and an additional 0.75% on the machinery and equipment component or, in certain cases, an alternate base rate (based on certain lending institutions’ Prime Rate or as otherwise specified in the Amended and Restated Credit Agreement, with no rate floor), plus an applicable margin (varying from 2.00% to 2.50%). The Amended Credit Agreement also carries a commitment fee equal to the unused borrowings multiplied by an applicable margin of 0.50%. The applicable margins are calculated quarterly and vary based on TimkenSteel’s average quarterly availability as set forth in the Amended Credit Agreement. The interest rate under the Amended Credit Agreement was 4.6% as of September 30, 2016. The amount available under the Amended Credit Agreement as of September 30, 2016 was $129.4 million net, after reducing for the block on availability of $33.1 million.
Revenue Refunding Bonds
On June 1, 2014, The Timken Company (“Timken”) purchased, in lieu of redemption, the State of Ohio Water Development Revenue Refunding Bonds (Water Bonds), State of Ohio Air Quality Development Revenue Refunding Bonds (Air Quality Bonds) and State of Ohio Pollution Control Revenue Refunding Bonds (Pollution Control Bonds) (collectively, Bonds). Pursuant to an Assignment and Assumption Agreement dated June 24, 2014 between Timken and TimkenSteel, Timken assigned all of its right, title and interest in and to the loan agreements and the notes associated with the Bonds to, and these obligations were assumed by, TimkenSteel. Additionally, replacement letters of credit were issued for the Water Bonds and the Pollution Control Bonds. The Bonds were remarketed on June 24, 2014 (Remarketing Date) in connection with the conversion of the interest rate mode for the Bonds to the weekly rate and the delivery of the replacement letters of credit, as applicable. TimkenSteel is responsible for payment of the interest and principal associated with the Bonds subsequent to the Remarketing Date.
On September 1, 2016, the Water Bonds were remarketed in connection with the delivery of a replacement letter of credit issued by JP Morgan Chase Bank, N.A. The key terms of the Water Bonds did not change as a result of the remarketing.
All of TimkenSteel’s other long-term debt is variable-rate debt. As such, the carrying value of this debt is a reasonable estimate of fair value as interest rates on these borrowings approximate current market rates, which is considered a Level 2 fair value input as defined by Accounting Standard Codification (ASC) 820, “Fair Value Measurements.” The valuation of Level 2 is based on quoted prices for similar assets and liabilities in active markets that are observable either directly or indirectly.
Advanced Quench-and-Temper Facility
In the second quarter of 2015, TimkenSteel entered into a capital lease arrangement with the Stark County Port Authority in connection with the construction of a new advanced quench-and-temper facility in Perry Township, Ohio and the issuance of an Industrial Revenue Bond. The bond is held 100% by TimkenSteel Material Services, LLC (a wholly-owned subsidiary of TimkenSteel) and, accordingly, the obligation under the lease agreement and investment in the Industrial Revenue Bond, as well as the related interest income and expense, are eliminated in the Unaudited Consolidated Financial Statements. As of September 30, 2016, $36.4 million has been spent on the new advanced quench-and-temper facility and is reported in property, plant and equipment, net in the Unaudited Consolidated Balance Sheets. Of this amount, $10.8 million has been financed through the capital lease arrangement described above.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss for the nine months ended September 30, 2016 and 2015 by component are as follows:
 
Foreign Currency Translation Adjustments
 
Pension and Postretirement Liability Adjustments
 
Total
Balance at December 31, 2015

($6.3
)
 

($257.5
)
 

($263.8
)
Other comprehensive (loss) income before reclassifications, before income tax
(2.8
)
 
(19.5
)
 
(22.3
)
Amounts reclassified from accumulated other comprehensive loss, before income tax
—

 
20.2

 
20.2

Income tax benefit
—

 
0.1

 
0.1

Net current period other comprehensive (loss) income, net of income taxes
(2.8
)
 
0.8

 
(2.0
)
Balance at September 30, 2016

($9.1
)
 

($256.7
)
 

($265.8
)
 
Foreign Currency Translation Adjustments
 
Pension and Postretirement Liability Adjustments
 
Total
Balance at December 31, 2014

($4.8
)
 

($292.5
)
 

($297.3
)
Other comprehensive (loss) income before reclassifications, before income tax
(1.1
)
 
0.5

 
(0.6
)
Amounts reclassified from accumulated other comprehensive loss, before income tax
—

 
26.7

 
26.7

Income tax expense
—

 
(10.0
)
 
(10.0
)
Net current period other comprehensive (loss) income, net of income tax
(1.1
)
 
17.2

 
16.1

Balance at September 30, 2015

($5.9
)
 

($275.3
)
 

($281.2
)

The amount reclassified from accumulated other comprehensive loss for the pension and postretirement liability adjustment was included in cost of products sold and selling, general and administrative expenses in the Unaudited Consolidated Statements of Operations. These components are included in the computation of net periodic benefit cost.
In the third quarter of 2016, the Company remeasured its pension obligations and plan assets associated with the TimkenSteel Corporation Retirement Plan.  See Note 9 for additional information.
Changes in Shareholders' Equity
Changes in Shareholders' Equity
Changes in Shareholders' Equity
Changes in the components of shareholders’ equity for the nine months ended September 30, 2016 were as follows:
 
Total
 
Additional Paid-in Capital
 
Retained Deficit
 
Treasury Shares
 
Accumulated Other Comprehensive Loss
Balance at December 31, 2015

$686.4

 

$1,058.2

 

($61.7
)
 

($46.3
)
 

($263.8
)
Net loss
(40.7
)
 
—

 
(40.7
)
 
—

 
—

Pension and postretirement adjustment, net of tax
0.8

 
—

 
—

 
—

 
0.8

Foreign currency translation adjustments
(2.8
)
 
—

 
—

 
—

 
(2.8
)
Stock-based compensation expense
4.6

 
4.6

 
—

 
—

 
—

Issuance of treasury shares
—

 
(1.2
)
 
—

 
1.2

 
—

 Equity component of convertible notes, net
18.7

 
18.7

 
—

 
—

 
—

 Deferred tax liability on convertible notes
(7.2
)
 
(7.2
)
 
—

 
—

 
—

Balance at September 30, 2016

$659.8

 

$1,073.1

 

($102.4
)
 

($45.1
)
 

($265.8
)
Retirement and Postretirement Benefits
Retirement and Postretirement Plans
Retirement and Postretirement Plans
The components of net periodic benefit cost for the three and nine months ended September 30, 2016 and 2015 were as follows:
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2015
Components of net periodic benefit cost:
Pension
 
Postretirement
 
Pension
 
Postretirement
Service cost

$3.9

 

$0.4

 

$4.3

 

$0.4

Interest cost
13.2

 
2.4

 
12.8

 
2.3

Expected return on plan assets
(18.1
)
 
(1.5
)
 
(19.4
)
 
(1.7
)
Amortization of prior service cost
0.1

 
0.2

 
0.1

 
0.3

Amortization of net actuarial loss
6.3

 
—

 
8.7

 
—

Settlement loss
5.4

 
—

 
—

 
—

Net Periodic Benefit Cost

$10.8

 

$1.5

 

$6.5

 

$1.3

 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
Components of net periodic benefit cost:
Pension

 
Postretirement

 
Pension
 
Postretirement
Service cost
11.7

 
1.2

 

$12.6

 

$1.3

Interest cost
39.8

 
7.1

 
38.5

 
7.0

Expected return on plan assets
(54.3
)
 
(4.5
)
 
(58.1
)
 
(5.1
)
Amortization of prior service cost
0.4

 
0.8

 
0.4

 
0.8

Amortization of net actuarial loss
19.0

 
—

 
25.5

 
—

Settlement loss
5.4

 
—

 
—

 
—

Net Periodic Benefit Cost

$22.0

 

$4.6

 

$18.9

 

$4.0


Net periodic benefit costs are included in the Unaudited Consolidated Statements of Operations as a component of cost of products sold and selling, general and administrative expenses.
In the third quarter of 2016, the Company amended its postretirement benefit plans relating to its non-bargaining retirees, effective January 1, 2017, to provide for the transition of certain Medicare-eligible retirees and their eligible dependents from company-sponsored group retiree medical coverage to individual health insurance purchased through an insurance company private exchange. The change was deemed to be insignificant and therefore, interim remeasurement was not necessary.

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 third quarter of 2016, the cumulative cost of all settlements exceeded the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. The Company completed a full remeasurement of its pension obligations and plan assets associated with the Salaried Plan as of September 30, 2016, which resulted in a non-cash pre-tax loss from the settlement of $5.4 million.  The Company anticipates additional settlement losses will be recorded in the fourth quarter.
Earnings Per Share
Earnings Per Share
Earnings 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 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, 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 and diluted loss per share for the three and nine months ended September 30, 2016 and 2015:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Numerator:
 
 
 
 
 
 
 
Net loss for basic and diluted earnings per share

($16.6
)
 

($30.8
)
 

($40.7
)
 

($48.2
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding, basic
44,221,310

 
44,431,092

 
44,215,373

 
44,636,149

Dilutive effect of stock-based awards
—

 
—

 
—

 
—

Weighted average shares outstanding, diluted
44,221,310

 
44,431,092

 
44,215,373

 
44,636,149

 
 
 
 
 
 
 
 
Basic loss per share

($0.38
)
 

($0.69
)
 

($0.92
)
 

($1.08
)
Diluted loss per share

($0.38
)
 

($0.69
)
 

($0.92
)
 

($1.08
)
Income Tax Benefit
Income Tax Benefit
Income Tax Benefit
TimkenSteel’s 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
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Benefit for income taxes

($10.0
)
 

($19.0
)
 

($24.8
)
 

($29.4
)
Effective tax rate
37.6
%
 
38.2
%
 
37.9
%
 
37.9
%

The effective tax rate for the three months ended September 30, 2016 was higher than the U.S. federal statutory rate of 35% primarily due to U.S. state and local tax differences and foreign and domestic mix of pretax book income.
The effective tax rate for the three months ended September 30, 2015 was higher than the U.S. federal statutory rate of 35% primarily due to U.S. state and local taxes, and certain discrete tax items.
The effective tax rate for the nine months ended September 30, 2016 was higher than the U.S. federal statutory rate of 35% primarily due to U.S. state and local tax differences, certain discrete tax items, foreign and domestic mix of pretax book income, and other permanent differences.
The effective tax rate for the nine months ended September 30, 2015 was higher than the U.S. federal statutory rate of 35% primarily due to U.S. state and local taxes, certain discrete tax items and the tax benefit associated with non-U.S. earnings taxed at a rate less than the U.S. statutory rate. These were partially offset by the effect of other permanent differences.
Contingencies
Contingencies
Contingencies
TimkenSteel has a number of loss exposures that are 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.
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 and similar state or local authorities. TimkenSteel recorded reserves for such environmental matters as other current and non-current liabilities on the Unaudited 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.
 
2016
2015
Beginning Balance, January 1

$1.3


$1.3

Expenses, net
—

—

Payments
(0.4
)
(0.3
)
Ending Balance, September 30

$0.9


$1.0

Restructuring Charges
Restructuring Charges
Restructuring Charges
During the second quarter of 2015, TimkenSteel approved and began implementing a cost reduction plan that resulted in the reduction of TimkenSteel’s salaried and hourly headcount. As of September 30, 2016 and December 31, 2015, TimkenSteel had a $0.2 million and $2.3 million reserve for such restructuring charges, respectively, classified as other current liabilities on the Unaudited Consolidated Balance Sheets. The following is a rollforward of the consolidated restructuring accrual for the nine months ended September 30, 2016:
Balance at December 31, 2015

$2.3

Expenses
0.3

Payments
(2.4
)
Balance at September 30, 2016

$0.2

Segment Information
Segment Information
Segment Information
TimkenSteel manufactures alloy steel, as well as carbon and micro-alloy steel, with an annual melt capacity of approximately two million tons. TimkenSteel’s portfolio includes special bar quality steel (SBQ), seamless mechanical tubes (tubes) and value-add solutions, such as precision steel components. In addition, TimkenSteel supplies machining and thermal treatment services, as well as manages raw material recycling programs, which 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 & gas; automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation.
The SBQ bars and tubes production processes occur out of the Company’s Canton, Ohio manufacturing location. This location accounts for all of the SBQ bars and seamless mechanical tubes the Company produces and includes three manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. TimkenSteel’s value-add solutions production processes occur out of three downstream manufacturing facilities: the TimkenSteel Material Services, Tryon Peak, and St. Clair facilities. 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.
Effective January 1, 2016, TimkenSteel eliminated its segment reporting as a result of organizational changes made in the second half of 2015, in addition to the integrated nature of the Company’s business as described above. These organizational changes were made to better align resources to support the business strategy of operating in a leaner, more efficient environment. Specifically, the Company has centralized its customer-facing activities under one leadership role and eliminated the former two segment operating structure. The Company is now organized in a centralized manner based on functionality. As a result, TimkenSteel is conducting its business activities and reporting financial results as one business segment.
The presentation of financial results as one reportable segment is consistent with the way the Company operates its business under the realigned organization 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 will help the CODM manage costs on a consolidated basis, consistent with the integrated nature of the operations. The Company’s Unaudited Consolidated Financial Statements reflect the realignment of the reportable segments for periods beginning after January 1, 2016 and for all comparable periods presented.
Basis of Presentation (Policies)
Basis of Presentation
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, 2015.
TimkenSteel (the “Company”) manufactures alloy steel, as well as carbon and micro-alloy steel, with an annual melt capacity of approximately two million tons. TimkenSteel’s portfolio includes special bar quality steel (SBQ), seamless mechanical tubes (tubes) and value-add solutions, such as precision steel components. In addition, TimkenSteel supplies machining and thermal treatment services, as well as manages raw material recycling programs, which 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 & gas; automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation.
The SBQ bars and tubes production processes occur out of the Company’s Canton, Ohio manufacturing location. This location accounts for all of the SBQ bars and seamless mechanical tubes the Company produces and includes three manufacturing facilities: the Faircrest, Harrison, and Gambrinus facilities. TimkenSteel’s value-add solutions production processes occur out of three downstream manufacturing facilities: the TimkenSteel Material Services, Tryon Peak, and St. Clair facilities. 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.
Effective January 1, 2016, TimkenSteel eliminated its segment reporting as a result of organizational changes made in the second half of 2015, in addition to the integrated nature of the Company’s business as described above. These organizational changes were made to better align resources to support the business strategy of operating in a leaner, more efficient environment. Specifically, the Company has centralized its customer-facing activities under one leadership role and eliminated the former two segment operating structure. The Company is now organized in a centralized manner based on functionality. As a result, TimkenSteel is conducting its business activities and reporting financial results as one business segment.
The presentation of financial results as one reportable segment is consistent with the way the Company operates its business under the realigned organization 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 will help the CODM manage costs on a consolidated basis, consistent with the integrated nature of the operations.
Recent Accounting Pronouncements (Policies)
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-05, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. It is effective for annual and interim reporting periods beginning after December 15, 2015, with early adoption permitted. TimkenSteel adopted ASU 2015-05 effective January 1, 2016 on a prospective basis. The adoption did not have a material effect on the Consolidated Financial Statements.
In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This ASU requires the presentation of debt issuance costs as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. TimkenSteel adopted ASU 2015-03 as of March 31, 2016. The adoption did not have a material effect on the Consolidated Balance Sheets.
Recently Issued Accounting Standards
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)”. The guidance is intended to reduce diversity in practice in how certain items are classified in the cash flow statement. It is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted, provided that all the issues addressed in the standard are adopted in the same period. Retrospective transition is required. TimkenSteel plans to adopt ASU 2016-15 effective January 1, 2017, and the adoption is not expected to have a material effect on its Statements of Cash Flows.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU changes how entities will measure credit losses for most financial assets, including trade and other receivables. This guidance will replace today’s incurred loss approach with an expected loss model. It is effective for annual periods beginning after December 31, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018 and interim periods therein. TimkenSteel is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which provides guidance for revenue recognition and will supersede Topic 605, “Revenue Recognition,” and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised 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. Additional disclosures will be required about the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date" which defers the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date of annual reporting periods beginning after December 15, 2016. The FASB issued additional amendments to ASU 2014-09. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the principal versus agent evaluation and how to apply the control principle to certain arrangements. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. This ASU amends the guidance on transition, collectibility, noncash consideration and the presentation of sales and other similar taxes. The effective date and transition requirements for ASU 2016-08 and ASU 2016-12 are the same as those for ASU 2014-09. TimkenSteel is currently evaluating the impact of the adoption of ASU 2014-09 and the additional amendments on its results of operations and financial condition.
In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This ASU will affect several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification on the statement of cash flows and accounting for forfeitures. It is effective for fiscal years beginning after December 15, 2016, including interim periods, with early adoption permitted. TimkenSteel will adopt ASU 2016-09 effective January 1, 2017, and the adoption is not expected to have a material effect on its results of operations, financial condition, and cash flows.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which 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. It is effective for annual reporting periods beginning after December 15, 2018. The Company regularly enters into operating leases. TimkenSteel is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
In July 2015, the FASB issued ASU 2015-11, “Inventory: Simplifying the Measurement of Inventory (Topic 330),” which requires that certain inventory be measured at the lower of cost or net realizable value. The guidance applies only to inventories for which cost is determined by methods other than last-in, first-out (LIFO). It is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company values certain portions of its inventory using the FIFO, average cost, or specific identification methods. TimkenSteel is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
Inventories (Tables)
Schedule of Components of Inventory
The components of inventories, net as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31,
2015
Inventories, net:
 
 
 
Manufacturing supplies

$38.5

 

$43.3

Raw materials
13.5

 
14.6

Work in process
60.5

 
59.5

Finished products
51.7

 
64.9

Subtotal
164.2

 
182.3

Allowance for surplus and obsolete inventory
(8.8
)
 
(8.4
)
Total Inventories, net

$155.4

 

$173.9

Property, Plant and Equipment (Tables)
Property, Plant and Equipment
The components of property, plant and equipment, net as of September 30, 2016 and December 31, 2015, were as follows:
 
September 30,
2016
 
December 31,
2015
Property, Plant and Equipment, net:
 
 
 
Land

$13.4

 

$13.4

Buildings and improvements
418.2

 
418.2

Machinery and equipment
1,332.3

 
1,298.2

Construction in progress
63.0

 
74.9

Subtotal
1,826.9

 
1,804.7

Less allowances for depreciation
(1,083.4
)
 
(1,035.4
)
Property, Plant and Equipment, net

$743.5

 

$769.3

Intangible Assets (Tables)
Schedule of Finite-Lived Intangible Assets
The components of intangible assets, net as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30, 2016
 
December 31, 2015
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
 Accumulated Amortization
 
Net Carrying Amount
Intangible Assets Subject to Amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$6.8

 
$4.0

 

$2.8

 

$6.8

 

$3.7

 

$3.1

Technology use
9.0

 
5.2

 
3.8

 
9.0

 
4.7

 
4.3

Capitalized software
58.2

 
39.1

 
19.1

 
57.9

 
34.7

 
23.2

Total Intangible Assets

$74.0

 

$48.3

 

$25.7

 

$73.7

 

$43.1

 

$30.6

Financing Arrangements (Tables)
Schedule of Components of Convertible Notes 
The components of the Convertible Notes are as follows:
 
September 30,
2016
 
December 31,
2015
Principal

$86.3

 

$—

Less: Debt issuance costs, net of amortization
(2.2
)
 
—

Less: Debt discount, net of amortization
(18.5
)
 
—

Convertible notes, net

$65.6

 

$—

Schedule of Long-term Debt Instruments 
The following table sets forth total interest expense recognized related to the Convertible Notes:
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2016
 
2015
2016
 
2015
Contractual interest expense

$1.3

 

$—


$1.7

 

$—

Amortization of debt issuance costs
0.1

 
—

0.2

 
—

Amortization of debt discount
0.7

 
—

0.9

 
—

Total

$2.1

 

$—


$2.8

 

$—

The components of other long-term debt as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30,
2016
 
December 31,
2015
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.84% as of September 30, 2016)

$12.2

 

$12.2

Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.83% as of September 30, 2016)
9.5

 
9.5

Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (0.84% as of September 30, 2016)
8.5

 
8.5

Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
40.0

 
170.0

Total Other Long-Term Debt

$70.2

 

$200.2

Accumulated Other Comprehensive Loss (Tables)
Schedule of Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive loss for the nine months ended September 30, 2016 and 2015 by component are as follows:
 
Foreign Currency Translation Adjustments
 
Pension and Postretirement Liability Adjustments
 
Total
Balance at December 31, 2015

($6.3
)
 

($257.5
)
 

($263.8
)
Other comprehensive (loss) income before reclassifications, before income tax
(2.8
)
 
(19.5
)
 
(22.3
)
Amounts reclassified from accumulated other comprehensive loss, before income tax
—

 
20.2

 
20.2

Income tax benefit
—

 
0.1

 
0.1

Net current period other comprehensive (loss) income, net of income taxes
(2.8
)
 
0.8

 
(2.0
)
Balance at September 30, 2016

($9.1
)
 

($256.7
)
 

($265.8
)
 
Foreign Currency Translation Adjustments
 
Pension and Postretirement Liability Adjustments
 
Total
Balance at December 31, 2014

($4.8
)
 

($292.5
)
 

($297.3
)
Other comprehensive (loss) income before reclassifications, before income tax
(1.1
)
 
0.5

 
(0.6
)
Amounts reclassified from accumulated other comprehensive loss, before income tax
—

 
26.7

 
26.7

Income tax expense
—

 
(10.0
)
 
(10.0
)
Net current period other comprehensive (loss) income, net of income tax
(1.1
)
 
17.2

 
16.1

Balance at September 30, 2015

($5.9
)
 

($275.3
)
 

($281.2
)
Changes in Shareholders' Equity (Tables)
Schedule of Stockholders Equity
Changes in the components of shareholders’ equity for the nine months ended September 30, 2016 were as follows:
 
Total
 
Additional Paid-in Capital
 
Retained Deficit
 
Treasury Shares
 
Accumulated Other Comprehensive Loss
Balance at December 31, 2015

$686.4

 

$1,058.2

 

($61.7
)
 

($46.3
)
 

($263.8
)
Net loss
(40.7
)
 
—

 
(40.7
)
 
—

 
—

Pension and postretirement adjustment, net of tax
0.8

 
—

 
—

 
—

 
0.8

Foreign currency translation adjustments
(2.8
)
 
—

 
—

 
—

 
(2.8
)
Stock-based compensation expense
4.6

 
4.6

 
—

 
—

 
—

Issuance of treasury shares
—

 
(1.2
)
 
—

 
1.2

 
—

 Equity component of convertible notes, net
18.7

 
18.7

 
—

 
—

 
—

 Deferred tax liability on convertible notes
(7.2
)
 
(7.2
)
 
—

 
—

 
—

Balance at September 30, 2016

$659.8

 

$1,073.1

 

($102.4
)
 

($45.1
)
 

($265.8
)
Retirement and Postretirement Benefits (Tables)
Schedule of Defined Benefit Plans Disclosures
The components of net periodic benefit cost for the three and nine months ended September 30, 2016 and 2015 were as follows:
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2015
Components of net periodic benefit cost:
Pension
 
Postretirement
 
Pension
 
Postretirement
Service cost

$3.9

 

$0.4

 

$4.3

 

$0.4

Interest cost
13.2

 
2.4

 
12.8

 
2.3

Expected return on plan assets
(18.1
)
 
(1.5
)
 
(19.4
)
 
(1.7
)
Amortization of prior service cost
0.1

 
0.2

 
0.1

 
0.3

Amortization of net actuarial loss
6.3

 
—

 
8.7

 
—

Settlement loss
5.4

 
—

 
—

 
—

Net Periodic Benefit Cost

$10.8

 

$1.5

 

$6.5

 

$1.3

 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
Components of net periodic benefit cost:
Pension

 
Postretirement

 
Pension
 
Postretirement
Service cost
11.7

 
1.2

 

$12.6

 

$1.3

Interest cost
39.8

 
7.1

 
38.5

 
7.0

Expected return on plan assets
(54.3
)
 
(4.5
)
 
(58.1
)
 
(5.1
)
Amortization of prior service cost
0.4

 
0.8

 
0.4

 
0.8

Amortization of net actuarial loss
19.0

 
—

 
25.5

 
—

Settlement loss
5.4

 
—

 
—

 
—

Net Periodic Benefit Cost

$22.0

 

$4.6

 

$18.9

 

$4.0

Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following table sets forth the reconciliation of the numerator and the denominator of basic and diluted loss per share for the three and nine months ended September 30, 2016 and 2015:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Numerator:
 
 
 
 
 
 
 
Net loss for basic and diluted earnings per share

($16.6
)
 

($30.8
)
 

($40.7
)
 

($48.2
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding, basic
44,221,310

 
44,431,092

 
44,215,373

 
44,636,149

Dilutive effect of stock-based awards
—

 
—

 
—

 
—

Weighted average shares outstanding, diluted
44,221,310

 
44,431,092

 
44,215,373

 
44,636,149

 
 
 
 
 
 
 
 
Basic loss per share

($0.38
)
 

($0.69
)
 

($0.92
)
 

($1.08
)
Diluted loss per share

($0.38
)
 

($0.69
)
 

($0.92
)
 

($1.08
)
Income Tax (Benefit) Provision (Tables)
Schedule of Components of Income Tax Expense (Benefit)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Benefit for income taxes

($10.0
)
 

($19.0
)
 

($24.8
)
 

($29.4
)
Effective tax rate
37.6
%
 
38.2
%
 
37.9
%
 
37.9
%
Contingencies (Tables)
Schedule of Loss Contingencies by Contingency
 
2016
2015
Beginning Balance, January 1

$1.3


$1.3

Expenses, net
—

—

Payments
(0.4
)
(0.3
)
Ending Balance, September 30

$0.9


$1.0

Restructuring Charges (Tables)
Schedule of Restructuring Reserve by Type of Cost
The following is a rollforward of the consolidated restructuring accrual for the nine months ended September 30, 2016:
Balance at December 31, 2015

$2.3

Expenses
0.3

Payments
(2.4
)
Balance at September 30, 2016

$0.2

Basis of Presentation (Details)
9 Months Ended 12 Months Ended
Sep. 30, 2016
segment
T
manufacturing_facility
Dec. 31, 2015
segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Annual melt capacity
2,000,000 
 
Number of manufacturing facilities
3 
 
Number of operating segments
1 
2 
Number of reportable segments
1 
 
Inventories (Details 1) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Inventory Disclosure [Abstract]
 
 
Manufacturing supplies
$ 38.5 
$ 43.3 
Raw materials
13.5 
14.6 
Work in process
60.5 
59.5 
Finished products
51.7 
64.9 
Subtotal
164.2 
182.3 
Allowance for surplus and obsolete inventory
(8.8)
(8.4)
Total Inventories, net
$ 155.4 
$ 173.9 
Inventories (Details 2) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Inventory Disclosure [Abstract]
 
 
Percentage of LIFO inventory
63.00% 
 
LIFO reserve
$ 43.1 
$ 51.4 
Property, Plant and Equipment (Details 1) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Property, Plant and Equipment [Abstract]
 
 
Land
$ 13.4 
$ 13.4 
Buildings and improvements
418.2 
418.2 
Machinery and equipment
1,332.3 
1,298.2 
Construction in progress
63.0 
74.9 
Subtotal
1,826.9 
1,804.7 
Less allowances for depreciation
(1,083.4)
(1,035.4)
Property, Plant and Equipment, net
$ 743.5 
$ 769.3 
Property, Plant and Equipment (Details 2) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Feb. 26, 2016
Property, Plant and Equipment [Abstract]
 
 
 
Depreciation
$ 51.0 
$ 49.7 
 
Interest costs capitalized
0.5 
1.2 
 
Impairment charges
0 
0.9 
 
Sale leaseback transaction, purchase price
 
 
$ 20 
Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
$ 74.0 
$ 73.7 
Accumulated Amortization
48.3 
43.1 
Net Carrying Amount
25.7 
30.6 
Customer relationships
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
6.8 
6.8 
Accumulated Amortization
4.0 
3.7 
Net Carrying Amount
2.8 
3.1 
Technology use
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
9.0 
9.0 
Accumulated Amortization
5.2 
4.7 
Net Carrying Amount
3.8 
4.3 
Capitalized software
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
58.2 
57.9 
Accumulated Amortization
39.1 
34.7 
Net Carrying Amount
$ 19.1 
$ 23.2 
Intangible Assets (Details 2) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Intangible Assets, Net (Excluding Goodwill) [Abstract]
 
 
Amortization expense for intangible assets
$ 5.2 
$ 4.9 
Financing Arrangements (Details 1) (USD $)
9 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Dec. 31, 2015
Sep. 30, 2016
Advanced Quench-and-Temper Facility
Sep. 30, 2016
TimkenSteel Material Services, LLC
Advanced Quench-and-Temper Facility
Sep. 30, 2016
Amended Credit Agreement
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
Sep. 30, 2016
Amended Credit Agreement
Letters of Credit
Sep. 30, 2016
Amended Credit Agreement
Swingline Loans
Sep. 30, 2016
Amended Credit Agreement
Machinery and Equipment
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
LIBOR
Sep. 30, 2016
Amended Credit Agreement
Minimum
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
Sep. 30, 2016
Amended Credit Agreement
Minimum
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
LIBOR
Sep. 30, 2016
Amended Credit Agreement
Minimum
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
Prime Rate
Sep. 30, 2016
Amended Credit Agreement
Maximum
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
Sep. 30, 2016
Amended Credit Agreement
Maximum
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
LIBOR
Sep. 30, 2016
Amended Credit Agreement
Maximum
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
Prime Rate
May 31, 2016
Convertible Senior Notes
Convertible Senior Notes due 2021 (6.00% fixed rate) Issuance One
May 31, 2016
Convertible Senior Notes
Convertible Senior Notes due 2021 (6.00% fixed rate) Issuance Two
May 31, 2016
Convertible Senior Notes
Convertible Senior Notes, due 2021 (6.00% fixed rate)
Sep. 30, 2016
Convertible Senior Notes
Convertible Senior Notes, due 2021 (6.00% fixed rate)
Dec. 31, 2015
Convertible Senior Notes
Convertible Senior Notes, due 2021 (6.00% fixed rate)
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 75,000,000 
$ 11,300,000 
 
 
 
Interest rate
 
 
 
 
 
4.60% 
 
 
 
 
 
 
 
 
 
 
 
6.00% 
 
 
Conversion price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 12.58 
 
 
Conversion ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.0795165 
 
Net proceeds
86,300,000 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
83,700,000 
 
 
Initial value of principal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66,900,000 
65,600,000 
0 
Effective interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12.00% 
 
 
Principal amount allocated to conversion feature
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,400,000 
 
 
Transaction costs, debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,400,000 
2,200,000 
0 
Transaction costs, equity component of convertible debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
700,000 
 
 
Fair value of convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
80,900,000 
 
Conversion price observation period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40 days 
 
Percentage of holders of notes required to be notified of debt default
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
 
Percentage of principal that can be called in the event of debt default
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
Maximum borrowing capacity for amended credit agreement
 
 
 
 
 
265,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capacity available for letters of credit and swingline loans
 
 
 
 
 
 
13,300,000 
26,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
Block on availability of borrowings
 
 
 
 
 
28,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Block on availability of borrowings as a percent of aggregate commitments
 
 
 
 
 
12.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Block on availability of borrowing following a mandatory reduction in commitments
 
 
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Block on availability of borrowing following a mandatory reduction in commitments as a percent of aggregate commitments
 
 
 
 
 
12.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Limit on capital expenditures during 2016
 
 
 
 
 
 
 
 
 
 
 
 
45,000,000 
 
 
 
 
 
 
 
Limit on capital expenses thereafter
 
 
 
 
 
 
 
 
 
 
 
 
50,000,000 
 
 
 
 
 
 
 
Variable rate margin
 
 
 
 
 
 
 
 
0.75% 
 
3.00% 
2.00% 
 
3.50% 
2.50% 
 
 
 
 
 
Commitment fee margin
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
Amount available under amended credit agreement
 
 
 
 
 
129,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount available under amended credit agreement, including block on availability
 
 
 
 
 
33,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bond ownership percentage
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount spent on facilities
63,000,000 
 
74,900,000 
36,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount financed through capital lease arrangement
 
 
 
$ 10,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financing Arrangements (Details 2) (Convertible Senior Notes, Convertible Senior Notes, due 2021 (6.00% fixed rate), USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
May 31, 2016
Dec. 31, 2015
Convertible Senior Notes |
Convertible Senior Notes, due 2021 (6.00% fixed rate)
 
 
 
Debt Instrument [Line Items]
 
 
 
Principal
$ 86.3 
 
$ 0 
Less: Debt issuance costs, net of amortization
(2.2)
(2.4)
0 
Less: Debt discount, net of amortization
(18.5)
 
0 
Net carrying amount
$ 65.6 
$ 66.9 
$ 0 
Financing Arrangements (Details 3) (Convertible Senior Notes, USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Convertible Senior Notes
 
 
 
 
Debt Instrument [Line Items]
 
 
 
 
Contractual interest expense
$ 1.3 
$ 0 
$ 1.7 
$ 0 
Amortization of debt issuance costs
0.1 
0 
0.2 
0 
Amortization of debt discount
0.7 
0 
0.9 
0 
Total
$ 2.1 
$ 0 
$ 2.8 
$ 0 
Financing Arrangements (Details 4) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2016
Dec. 31, 2015
Debt Instrument [Line Items]
 
 
Other long-term debt
$ 70.2 
$ 200.2 
Revenue Refunding Bonds |
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.84% as of September 30, 2016)
 
 
Debt Instrument [Line Items]
 
 
Other long-term debt
12.2 
12.2 
Interest rate
0.84% 
 
Revenue Refunding Bonds |
Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.83% as of September 30, 2016)
 
 
Debt Instrument [Line Items]
 
 
Other long-term debt
9.5 
9.5 
Interest rate
0.83% 
 
Revenue Refunding Bonds |
Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (0.84% as of September 30, 2016)
 
 
Debt Instrument [Line Items]
 
 
Other long-term debt
8.5 
8.5 
Interest rate
0.84% 
 
Credit Agreement |
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)
 
 
Debt Instrument [Line Items]
 
 
Other long-term debt
$ 40.0 
$ 170.0 
Accumulated Other Comprehensive Loss (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Foreign Currency Translation Adjustments
Sep. 30, 2015
Foreign Currency Translation Adjustments
Sep. 30, 2016
Pension and Postretirement Liability Adjustments
Sep. 30, 2015
Pension and Postretirement Liability Adjustments
Sep. 30, 2016
Total
Dec. 31, 2015
Total
Sep. 30, 2015
Total
Dec. 31, 2014
Total
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Beginning Balance
 
 
$ (6.3)
$ (4.8)
$ (257.5)
$ (292.5)
$ (265.8)
$ (263.8)
$ (281.2)
$ (297.3)
Other comprehensive (loss) income before reclassifications, before income tax
(22.3)
(0.6)
(2.8)
(1.1)
(19.5)
0.5 
 
 
 
 
Amounts reclassified from accumulated other comprehensive loss, before income tax
20.2 
(26.7)
0 
0 
20.2 
26.7 
 
 
 
 
Income tax benefit
0.1 
10.0 
0 
0 
0.1 
(10.0)
 
 
 
 
Net current period other comprehensive (loss) income, net of income taxes
(2.0)
16.1 
(2.8)
(1.1)
0.8 
17.2 
 
 
 
 
Ending Balance
 
 
$ (9.1)
$ (5.9)
$ (256.7)
$ (275.3)
$ (265.8)
$ (263.8)
$ (281.2)
$ (297.3)
Changes in Shareholders' Equity (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Balance at December 31, 2015
 
 
$ 686.4 
 
Net loss
(16.6)
(30.8)
(40.7)
(48.2)
Pension and postretirement adjustment, net of tax
(8.5)
6.1 
0.8 
17.2 
Foreign currency translation adjustments
(0.5)
(1.1)
(2.8)
(1.1)
Stock-based compensation expense
 
 
4.6 
 
Issuance of treasury shares
 
 
0 
 
Equity component of convertible notes, net
 
 
18.7 
 
Deferred tax liability on convertible notes
 
 
7.2 
 
Balance at September 30, 2016
659.8 
 
659.8 
 
Additional Paid-in Capital [Member]
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Balance at December 31, 2015
 
 
1,058.2 
 
Net loss
 
 
0 
 
Pension and postretirement adjustment, net of tax
 
 
0 
 
Foreign currency translation adjustments
 
 
0 
 
Stock-based compensation expense
 
 
4.6 
 
Issuance of treasury shares
 
 
(1.2)
 
Equity component of convertible notes, net
 
 
18.7 
 
Deferred tax liability on convertible notes
 
 
7.2 
 
Balance at September 30, 2016
1,073.1 
 
1,073.1 
 
Retained Deficit [Member]
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Balance at December 31, 2015
 
 
(61.7)
 
Pension and postretirement adjustment, net of tax
 
 
0 
 
Foreign currency translation adjustments
 
 
0 
 
Stock-based compensation expense
 
 
0 
 
Issuance of treasury shares
 
 
0 
 
Equity component of convertible notes, net
 
 
0 
 
Deferred tax liability on convertible notes
 
 
0 
 
Balance at September 30, 2016
(102.4)
 
(102.4)
 
Treasury Stock [Member]
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Balance at December 31, 2015
 
 
(46.3)
 
Net loss
 
 
0 
 
Pension and postretirement adjustment, net of tax
 
 
0 
 
Foreign currency translation adjustments
 
 
0 
 
Stock-based compensation expense
 
 
0 
 
Issuance of treasury shares
 
 
1.2 
 
Equity component of convertible notes, net
 
 
0 
 
Deferred tax liability on convertible notes
 
 
0 
 
Balance at September 30, 2016
(45.1)
 
(45.1)
 
Accumulated Other Comprehensive Loss [Member]
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Balance at December 31, 2015
 
 
(263.8)
 
Net loss
 
 
0 
 
Pension and postretirement adjustment, net of tax
 
 
0.8 
 
Stock-based compensation expense
 
 
0 
 
Issuance of treasury shares
 
 
0 
 
Equity component of convertible notes, net
 
 
0 
 
Deferred tax liability on convertible notes
 
 
0 
 
Balance at September 30, 2016
$ (265.8)
 
$ (265.8)
 
Retirement and Postretirement Benefits (Details 1) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
Loss on pension settlement
 
 
$ 5.4 
$ 0 
Pension
 
 
 
 
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
Service cost
3.9 
4.3 
11.7 
12.6 
Interest cost
13.2 
12.8 
39.8 
38.5 
Expected return on plan assets
(18.1)
(19.4)
(54.3)
(58.1)
Amortization of prior service cost
0.1 
0.1 
0.4 
0.4 
Amortization of net actuarial loss
6.3 
8.7 
19.0 
25.5 
Loss on pension settlement
5.4 
0 
5.4 
0 
Net Periodic Benefit Cost
10.8 
6.5 
22.0 
18.9 
Postretirement
 
 
 
 
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
Service cost
0.4 
0.4 
1.2 
1.3 
Interest cost
2.4 
2.3 
7.1 
7.0 
Expected return on plan assets
(1.5)
(1.7)
(4.5)
(5.1)
Amortization of prior service cost
0.2 
0.3 
0.8 
0.8 
Amortization of net actuarial loss
0 
0 
0 
0 
Loss on pension settlement
0 
0 
0 
0 
Net Periodic Benefit Cost
$ 1.5 
$ 1.3 
$ 4.6 
$ 4.0 
Retirement and Postretirement Benefits Retirement and Postretirement Benefits (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Non-cash pre-tax loss from settlement
 
 
$ 5.4 
$ 0 
Pension
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Non-cash pre-tax loss from settlement
$ 5.4 
$ 0 
$ 5.4 
$ 0 
Earnings Per Share (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Numerator:
 
 
 
 
Net loss for basic and diluted earnings per share
$ (16.6)
$ (30.8)
$ (40.7)
$ (48.2)
Denominator:
 
 
 
 
Weighted average shares outstanding, basic (in shares)
44,221,310 
44,431,092 
44,215,373 
44,636,149 
Dilutive effect of stock-based awards (in shares)
0 
0 
0 
0 
Weighted average shares outstanding, diluted (in shares)
44,221,310 
44,431,092 
44,215,373 
44,636,149 
Basic loss earnings per share (in dollars per share)
$ (0.38)
$ (0.69)
$ (0.92)
$ (1.08)
Diluted loss per share (in dollars per share)
$ (0.38)
$ (0.69)
$ (0.92)
$ (1.08)
Income Tax (Benefit) Provision (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Income Tax Disclosure [Abstract]
 
 
 
 
Benefit for income taxes
$ (10.0)
$ (19.0)
$ (24.8)
$ (29.4)
Effective tax rate
37.60% 
38.20% 
37.90% 
37.90% 
Federal statutory rate
35.00% 
35.00% 
35.00% 
35.00% 
Contingencies (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Accrual for Environmental Loss Contingencies [Roll Forward]
 
 
Beginning Balance, January 1
$ 1.3 
$ 1.3 
Expenses, net
0 
0 
Payments
(0.4)
(0.3)
Ending Balance, September 30
$ 0.9 
$ 1.0 
Restructuring Charges (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2016
Restructuring Reserve [Roll Forward]
 
Balance at December 31, 2015
$ 2.3 
Expenses
0.3 
Payments
(2.4)
Balance at September 30, 2016
$ 0.2 
Segment Information (Details)
9 Months Ended 12 Months Ended
Sep. 30, 2016
segment
T
manufacturing_facility
Dec. 31, 2015
segment
Segment Reporting [Abstract]
 
 
Annual melt capacity
2,000,000 
 
Number of manufacturing facilities
3 
 
Number of operating segments
1 
2 
Number of reportable segments
1