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Common shares		TMST		New York Stock Exchange

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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at July 31, 2020

	~~Class~~		~~Outstanding at October 13, 2017~~
	Common Shares, without par value		~~44,441,647~~	45,036,324

~~TimkenSteel Corporation~~

Table of Contents

TimkenSteel Corporation

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM I.1. FINANCIAL STATEMENTS

TimkenSteel Corporation

Consolidated Statements of Operations (Unaudited)

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in millions, except per share data)
Net sales
$339.1

$213.8

$987.8

$654.8
Cost of products sold 320.6
206.3
928.5
629.6
Gross Profit 18.5
7.5
59.3
25.2

Selling, general and administrative expenses 22.5
21.8
67.7
66.8
Restructuring charges —
—
—
0.3
Operating Loss (4.0 ) (14.3 ) (8.4 ) (41.9 )

Interest expense 3.7
3.9
11.0
8.0
Other income (expense), net 1.9
(17.3 ) 10.7
(12.1 )
Loss Before Income Taxes (5.8 ) (35.5 ) (8.7 ) (62.0 )
Provision (benefit) for income taxes 0.1
(13.3 ) 1.2
(23.5 )
Net Loss
($5.9 )
($22.2 )
($9.9 )
($38.5 )

Per Share Data:
Basic loss per share
($0.13 )
($0.50 )
($0.22 )
($0.87 )
Diluted loss per share
($0.13 )
($0.50 )
($0.22 )
($0.87 )

Dividends per share
$—

$—

$—

$—

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

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TimkenSteel Corporation

Consolidated ~~Statements~~Statement of Comprehensive ~~Loss~~Income (Loss) (Unaudited)

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

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in millions)
Net Loss
($5.9 )
($22.2 )
($9.9 )
($38.5 )
Other comprehensive income, net of tax:
Foreign currency translation adjustments 0.3
(0.5 ) 1.1
(2.8 )
Pension and postretirement liability adjustments 0.1
—
0.4
0.8
Other comprehensive income, net of tax 0.4
(0.5 ) 1.5
(2.0 )
Comprehensive Loss, net of tax
($5.5 )
($22.7 )
($8.4 )
($40.5 )

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

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TimkenSteel Corporation

Consolidated Balance Sheets (Unaudited)

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

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

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

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

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

September 30,
2017 December 31,
2016
(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents
$25.8

$25.6
Accounts receivable, net of allowances (2017 - $2.6 million; 2016 - $2.1 million) 160.6
91.6
Inventories, net 219.5
164.2
Deferred charges and prepaid expenses 4.2
2.8
Other current assets 7.4
6.2
Total Current Assets 417.5
290.4

Property, Plant and Equipment, Net 701.6
741.9

Other Assets
Pension assets 9.8
6.2
Intangible assets, net 20.9
25.0
Other non-current assets 6.0
6.4
Total Other Assets 36.7
37.6
Total Assets
$1,155.8

$1,069.9

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable, trade
$133.8

$87.0
Salaries, wages and benefits 30.4
20.3
Accrued pension and postretirement costs 3.0
3.0
Other current liabilities 21.4
20.4
Total Current Liabilities 188.6
130.7

Non-Current Liabilities
Convertible notes, net 69.2
66.4
Other long-term debt 95.2
70.2
Accrued pension and postretirement costs 196.2
192.1
Deferred income taxes 0.7
—
Other non-current liabilities 13.2
13.1
Total Non-Current Liabilities 374.5
341.8

Shareholders’ Equity
Preferred shares, without par value; authorized 10.0 million shares, none issued —
—
Common shares, without par value; authorized 200.0 million shares;
issued 2017 and 2016 - 45.7 million shares
—
—
Additional paid-in capital 842.3
845.6
Retained deficit (204.1 ) (193.9 )
Treasury shares - 2017 - 1.3 million; 2016 - 1.5 million (37.6 ) (44.9 )
Accumulated other comprehensive loss (7.9 ) (9.4 )
Total Shareholders’ Equity 592.7
597.4
Total Liabilities and Shareholders’ Equity
$1,155.8

$1,069.9

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

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TimkenSteel Corporation

Consolidated Statements of Shareholders’ Equity (Unaudited)

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

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

See accompanying Notes to the unaudited Consolidated Financial Statements.

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TimkenSteel Corporation

Consolidated Statements of Cash Flows (Unaudited)

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

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

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

Nine Months Ended September 30,
2017 2016
(Dollars in millions)
CASH PROVIDED (USED)
Operating Activities
Net loss
($9.9 )
($38.5 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 56.4
56.2
Amortization of deferred financing fees and debt discount 3.1
1.9
Impairment charges and loss on sale or disposal of assets 0.4
1.0
Deferred income taxes 0.7
(24.9 )
Stock-based compensation expense 4.9
4.6
Pension and postretirement expense 4.6
23.4
Pension and postretirement contributions and payments (2.5 ) (3.1 )
Reimbursement from postretirement plan assets —
13.3
Changes in operating assets and liabilities:
Accounts receivable, net (69.0 ) (23.0 )
Inventories, net (55.3 ) 18.5
Accounts payable, trade 46.8
23.6
Other accrued expenses 10.7
(8.4 )
Deferred charges and prepaid expenses (1.4 ) 7.6
Other, net (1.2 ) 3.3
Net Cash (Used) Provided by Operating Activities (11.7 ) 55.5

Investing Activities
Capital expenditures (11.9 ) (26.1 )
Net Cash Used by Investing Activities (11.9 ) (26.1 )

Financing Activities
Proceeds from exercise of stock options 0.2
—
Shares surrendered for employee taxes on stock compensation (1.4 ) —
Credit agreement repayments (5.0 ) (130.0 )
Credit agreement borrowings 30.0
—
Debt issuance costs —
(4.8 )
Proceeds from issuance of convertible notes —
86.3
Net Cash Provided (Used) by Financing Activities 23.8
(48.5 )
Effect of exchange rate changes on cash —
—
Increase (Decrease) In Cash and Cash Equivalents 0.2
(19.1 )
Cash and cash equivalents at beginning of period 25.6
42.4
Cash and Cash Equivalents at End of Period
$25.8

$23.3

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

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TimkenSteel Corporation

Notes to Unaudited Consolidated Financial Statements

(dollars in millions, except per share data)

Note1- ~~Company and~~ Basis of Presentation

The accompanying ~~Unaudited~~unaudited Consolidated Financial Statements have been prepared by TimkenSteel Corporation (the Company or TimkenSteel) in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures considered necessary for a fair presentation have been included. For further information, refer to TimkenSteel’s ~~Audited~~audited Consolidated Financial Statements and Notes included in its Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~TimkenSteel Corporation (the Company~~2019.

Customer Receivables

The Company’s accounts receivables arise from sales to customers across all end markets. Historically, TimkenSteel’s allowance for doubtful accounts write-offs have been immaterial. The allowance for doubtful account reserve has been established using qualitative and quantitative methods. In general, account balances greater than one year of age or ~~TimkenSteel) manufactures alloy steel,~~sent to third party collection are fully reserved. Account balances for customers that are viewed as higher risk are also analyzed for a reserve. In addition to these methods, the allowance for doubtful accounts in 2020 was adjusted for forward looking uncollectible balances, primarily in the energy and automotive end markets. The amount recorded was based on the Company’s assessment of the risk presented to customers in these end markets as a result of the COVID-19 pandemic as well as ~~carbon and micro-alloy steel, with an annual melt capacity~~geo-political factors facing the energy end market. At this time, the full impact 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) 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 forCOVID-19 is difficult to predict due to uncertainty surrounding 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 and tubes production processes take place at 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 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,pandemic 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 designedtimeline for economic activities to ~~benefit the overall business of the Company, not any specific aspect of the business.~~

fully recover.

Change in Accounting Principle

~~On December 31, 2016,~~

During the fourth quarter of 2019, TimkenSteel ~~changed~~elected to change its ~~accounting principle~~method for ~~recognizing actuarial gains and losses and expected returns on plan assets for~~valuing its ~~defined benefit pension and other postretirement benefit plans. Prior~~inventories that previously used the last-in, first-out (LIFO) method to ~~2016,~~ the Company amortized, as a component of pension and other postretirement expense, unrecognized actuarial gains and losses (included within accumulated other comprehensive income (loss)) over the average remaining service period of active employees expected to receive benefits under the plan, or average remaining life expectancy of inactive participants when all or almost all of plan participants are inactive. The Company historically has calculated the market-related value of plan assets based on a 5-year market adjustment. The value was determined by adjusting the fair value of plan assets to reflect the investment gains and losses during each of the last 5 years. The difference between the expected return on assets and actual return on assets was recognized at the rate of 20% per year (e.g., recognized over five years). Under the new principle, actuarial gains and losses are immediately recognized through net periodic benefit cost in the Statement of Operations upon the annual remeasurement at December 31, or on an interim basis as triggering events warrant remeasurement. In addition, the Company changed its accounting for measuring the market-related value of plan assets from a calculated amount (based on a five-year smoothing of asset returns) to fair value.first-in, first-out (FIFO) method. The Company believes ~~these changes are~~that the FIFO method is preferable as ~~they result in an accelerated recognition~~it improves comparability with its peers, more closely resembles the physical flow of ~~changes in assumptions~~its inventory and ~~market return on plan assets, as compared to the minimum amortization approach and market-related value of plan assets (i.e. delayed approach). Additionally,~~aligns with how the Company ~~believes~~internally manages the new accounting principles provide a better representation of the operating results of the Company and the impact of its benefit obligations (through the income statement) in the period when changes occur.

~~These changes have been applied retrospectively to prior periods beginning with the formation of the TimkenSteel pension and postretirement benefit plans during the second quarter of 2014.~~business. The ~~cumulative effect~~effects of the change in accounting ~~principles resulted~~principle from LIFO to FIFO were retrospectively applied. As a result of the retrospective application of the change in ~~a reduction of additional paid~~accounting principle, certain financial statement line items in ~~capital of $229.4 million per year~~the Company’s consolidated balance sheets as of June 30, 2019 and the ~~date~~consolidated statements of ~~establishment of~~operations, comprehensive income (loss), shareholders’ equity and cash flows for the ~~TimkenSteel pension~~three and ~~other postretirement plans.~~six months ended June 30, 2019 were adjusted as necessary. For further information, refer to ~~our~~TimkenSteel’s audited Consolidated Financial Statements and Notes included in its Annual Report on Form 10-K for the year ended December 31, ~~2016 filed with~~2019.

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

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

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

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

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

Note2-Recent Accounting Pronouncements

Adoption of New Accounting Standards

The Company adopted the following Accounting Standard Updates (ASU) ~~during~~in the ~~nine months ended September 30, 2017. With the exception~~first quarter of 2020, all of which were effective as of January 1, 2020, except ASU ~~2017-07,~~2020-04, which ~~is discussed below, the~~became effective upon issuance on March 12, 2020. The adoption of these standards did not have a material impact on the ~~Unaudited~~unaudited Consolidated Financial Statements or the related Notes to the ~~Unaudited~~unaudited Consolidated Financial Statements.



~~Standard~~ Standards Adopted	Description
ASU 2020-04, Reference Rate Reform (Topic 848)	The standard provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.
~~2015-11~~ ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)	~~Inventory: Simplifying~~ The standard aligns the requirements for capitalizing implementation costs in cloud computing software arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
ASU 2018-13, Fair Value Measurement (Topic 820)	The standard eliminates, modifies and adds disclosure requirements for fair value measurements.
ASU 2016-13, Measurement of ~~Inventory~~Credit Losses on Financial Instruments (Topic ~~330)~~
~~2016-15~~326)	~~Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts~~ The standard changes how entities will measure credit losses for most financial assets, including trade and ~~Cash Payments (a Consensus of~~other receivables, and replaces the ~~Emerging Issues Task Force)~~
~~2016-16~~	~~Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740)~~
~~2017-07~~	~~Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715)~~current incurred loss approach with an expected loss model.

In the first quarter of 2017, the FASB issued and the Company early adopted ASU 2017-07, “Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715).” This ASU requires entities to present non-service cost components of net periodic benefit cost in a caption below operating loss and provides that only service cost is eligible to be capitalized in inventory or construction of an asset. This ASU requires retrospective application of the change in the statement of operations and prospective application for the capitalization of service cost in assets. This ASU permits previously disclosed components of net periodic benefit costs as an estimation basis for applying the retrospective presentation as a practical expedient. Utilizing the practical expedient approach, based on amounts previously disclosed, the Company reclassified non-service components of net periodic benefit cost from cost of products sold and selling, general and administrative expenses, respectively, into other income (expense), net on the Unaudited Consolidated Statements of Operations. See Note 9 - Retirement and Postretirement Plans for additional information.

Accounting Standards Issued But Not Yet Adopted

~~In July 2017,~~

The Company has considered the ~~FASB~~recent ASUs issued ~~ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives~~by the Financial Accounting Standards Board summarized below:


Standard Pending Adoption	Description	Effective Date	Anticipated Impact
ASU 2019-12, Income Taxes (Topic 740)	The standard simplifies the accounting for income taxes by removing various exceptions.	January 1, 2021	The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)	The standard eliminates, modifies and adds disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.	January 1, 2021	The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.
ASU 2020-03, Codification Improvements to Financial Instruments	The standard clarifies or improves the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications.	January 1, 2021	The Company is currently evaluating the impact of the adoption of this ASU on its results of operations and financial condition.

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Note3-Revenue Recognition

The following table provides the major sources of revenue by end-market sector for the three and ~~Hedging (Topic 815): (Part I) Accounting~~six months ended June 30, 2020 and 2019:

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

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

The following table provides the major sources of revenue by product type for ~~Certain Financial Instruments with Down Round Features, (Part II) Replacement~~the three and six months ended June 30, 2020 and 2019:

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

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

Note4-Restructuring Charges

During 2019 and the first half of 2020, TimkenSteel made organizational changes to enhance profitable and sustainable growth. These company-wide actions included the restructuring of its business support functions, the reduction of management layers throughout the organization, the closure of the ~~Indefinite Deferral~~TimkenSteel Material Services (TMS) facility in Houston, Texas and other actions to further improve the Company’s overall cost structure. Through these restructuring efforts, to date the Company has eliminated approximately 180 salaried positions and recognized restructuring charges of $9.5 million, primarily consisting of severance and employee-related benefits. Approximately 20 of these positions were eliminated in the first half of 2020. TimkenSteel recorded reserves for ~~Mandatorily Redeemable Financial Instruments~~such restructuring charges as other current liabilities on the Consolidated Balance Sheets. The reserve balance at June 30, 2020 is expected to be substantially used in the next twelve months.

The following is a summary of ~~Certain Nonpublic Entities~~the restructuring reserve for the six months ended June 30, 2020 and ~~Certain Mandatorily Redeemable Noncontrolling Interests~~2019:

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

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

Note 5 - Disposition of Non-Core Assets

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

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Note6–Other Expense (Income), net

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

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

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

The TimkenSteel Corporation Retirement Plan (Salaried Plan) has a provision that permits employees to elect to receive their pension benefits in a lump sum. In the first quarter of 2020, the cumulative cost of all lump sum payments was projected to exceed the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. As a result, the Company completed a full remeasurement of its pension obligations and plan assets associated with the Salaried Plan as of June 30, 2020 and March 31, 2020, which resulted in a non-cash (gain) loss from remeasurement of ($1.9) million and $7.6 million for the three and six months ended June 30, 2020, respectively. For more details on the remeasurement, refer to “Note 11 - Retirement and Postretirement Plans.”

Note7-Income Tax Provision

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

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

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

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, an ~~entity’s own stock. It is effective for annual periods beginning after~~economic stimulus package intended to provide support, principally in the form of tax benefits, to companies and individuals negatively impacted by the COVID-19 pandemic. Although the majority of the provisions included in the CARES Act will not immediately benefit the Company from a cash tax perspective due to its significant net operating losses, the Company has taken advantage of the deferral of the employer share (6.2% of employee wages) of Social Security payroll taxes that would otherwise have been owed from the date of enactment of the legislation through December 31, ~~2018. Early adoption is permitted. TimkenSteel~~2020, as afforded by the Act. Through June 30, 2020, the Company has deferred $2.0 million in cash payments, and expects additional deferred cash payments of approximately $4 million to $5 million for the remainder of 2020, with total deferred amounts to be paid in 2 equal installments at December 31, 2021 and December 31, 2022. The Company is currently evaluating its eligibility and potential benefit related to the ~~impact~~Employee Retention Credit.

Note 8 - Earnings (Loss) Per Share

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

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

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The following table sets forth the reconciliation of the ~~adoption of this ASU on its results of operations and financial condition.~~

In May 2017, the FASB issued ASU 2017-09, Compensation — Stock Compensation (Topic 718), Scope of Modification Accounting. This ASU clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. This ASU shall be applied prospectively to awards modified on or after the adoption date. It is effective for annual periods beginning after December 31, 2017. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. TimkenSteel will apply this ASU for awards modified on or after January 1, 2018, as applicable. TimkenSteel does not expect this ASU to have a material impact on its results of operations or financial condition.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations - Clarifying the Definition of a Business.” This guidance clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. It is effective for annual periods beginning after December 31, 2017. TimkenSteel will apply this ASU to business combinations effective after January 1, 2018, as applicable.

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 the current 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

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~~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 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 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. Under ASU 2014-09numerator and the ~~subsequently issued amendments,~~denominator of basic and diluted earnings (loss) per share for the 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, timingthree and ~~uncertainty of revenues~~six months ended June 30, 2020 and cash flows from contracts with customers. This standard is effective for reporting periods after December 15, 2017. TimkenSteel has substantially completed a review of its customer contracts and has preliminarily determined that its revenue transactions will continue to be recognized at a point in time. Based on the analysis completed to date, the Company’s expectation is that this standard will not materially impact the amount or timing of revenue recognized. The Company is finalizing its review of accounting policies, systems and related internal controls in anticipation of adopting ASU 2014-09 as of January 1, 2018, using the modified retrospective approach.2019:

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

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

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

Note 3 9-Inventories

The components of inventories, net of reserves as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows:

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

September 30,
2017 December 31,
2016
Inventories, net:
Manufacturing supplies
$36.6

$37.9
Raw materials 31.7
16.2
Work in process 96.3
58.6
Finished products 63.5
59.6
Subtotal 228.1
172.3
Allowance for surplus and obsolete inventory (8.6 ) (8.1 )
Total Inventories, net
$219.5

$164.2

~~Inventories are valued at~~

In the ~~lower~~second quarter of ~~cost or~~2020, the Company recorded an additional allowance for inventory reserve of approximately $3.1 million. The additional reserve is associated with the Energy end market ~~with approximately 64% 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~~closure of the ~~inventory under~~TMS facility in Houston. For more details, refer to “Note 5 – Disposition of Non-Core Assets.”

Note10-Financing Arrangements

For a detailed discussion of the ~~LIFO method can be made only at~~Company's long-term debt and credit arrangements, refer to “Note 14 - Financing Arrangements” in the ~~end of each year based~~Company’s Annual Report 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, 2017 and December 31, 2016 was $53.5 million and $44.6 million, respectively. TimkenSteel projects that its LIFO reserve will increase~~Form 10-K for the year ~~ending~~ended December 31, ~~2017 due primarily to higher anticipated raw material costs and inventory quantities.~~

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~~Note 4 - Property, Plant and Equipment~~

~~The components of property, plant and equipment, net as of September 30, 2017 and December 31, 2016, were as follows:~~

September 30,
2017 December 31,
2016
Property, Plant and Equipment, net:
Land
$13.4

$13.3
Buildings and improvements 418.9
420.6
Machinery and equipment 1,354.1
1,352.0
Construction in progress 51.6
63.9
Subtotal 1,838.0
1,849.8
Less allowances for depreciation (1,136.4 ) (1,107.9 )
Property, Plant and Equipment, net
$701.6

$741.9

Total depreciation expense was $51.3 million and $51.0 million for the nine months ended September 30, 2017 and 2016, respectively. TimkenSteel recorded capitalized interest related to construction projects of $0.5 million in both the nine months ended September 30, 2017 and 2016. During the nine months ended September 30, 2017, TimkenSteel recorded impairment charges of $0.4 million in the caption cost of products sold on the Unaudited Consolidated Statements of Operations, related to the discontinued use of certain assets. There were no impairment charges recorded during the nine months ended September 30, 2016.

~~Note 5 - Intangible Assets~~

~~The components of intangible assets, net as of September 30, 2017 and December 31, 2016 were as follows:~~

September 30, 2017 December 31, 2016
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

$4.0

$2.3

$6.3

$3.7

$2.6
Technology use 9.0
5.8
3.2
9.0
5.2
3.8
Capitalized software 58.5
43.1
15.4
58.9
40.3
18.6
Total Intangible Assets
$73.8

$52.9

$20.9

$74.2

$49.2

$25.0

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, 2017 and 2016 was $5.1 million and $5.2 million, respectively.

~~Note 6 - Financing Arrangements~~

2019.

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~~ c~~ommon shares per $1,000 principal amount of Notes~~

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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 Amended Credit Agreement.

The components of the Convertible Notes as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows:

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

September 30,
2017 December 31,
2016
Principal
$86.3

$86.3
Less: Debt issuance costs, net of amortization (1.8 ) (2.1 )
Less: Debt discount, net of amortization (15.3 ) (17.8 )
Convertible notes, net
$69.2

$66.4

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

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

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Contractual interest expense
$1.3

$1.3

$3.9

$1.7
Amortization of debt issuance costs 0.1
0.1
0.1
0.3
0.2
Amortization of debt discount 0.9
0.7
2.5
0.9
Total
$2.3

$2.1

$6.7

$2.8

Amended Credit Agreement

On October 15, 2019, the Company, as borrower, and certain domestic subsidiaries of the Company, as subsidiary guarantors, entered into a Third Amended and Restated Credit Agreement (the Amended Credit Agreement), with JP Morgan Chase Bank, N.A., as administrative agent (the Administrative Agent), Bank of America, N.A., as syndication agent, and the other lenders party thereto (collectively, the Lenders), which further amended and restated the Company’s Second Amended and Restated Credit Agreement dated as of January 26, 2018. The interest rate under the Amended Credit Agreement was 1.7% as of June 30, 2020. The amount available for borrowings under the credit agreement as of June 30, 2020 was $176.4 million. As of June 30, 2020, the Company was in compliance with all covenants.

Fair Value Measurement

The fair value of the Convertible Notes was approximately ~~$162.8~~$72.6 million as of ~~September~~June 30, ~~2017.~~2020. The fair value of the Convertible Notes, which falls within Level 1 of the fair value hierarchy as defined by Accounting Standards Codification (ASC) 820, Fair Value Measurements, is based on the last price traded in ~~September 2017 .~~

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.

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~~Other Long-Term Debt~~

~~The components of other long-term debt as of September 30, 2017 and December 31, 2016 were as follows:~~

September 30,
2017 December 31,
2016
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.862% as of September 30, 2017)
$12.2

$12.2
Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.862% as of September 30, 2017) 9.5
9.5
Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (0.862% as of September 30, 2017) 8.5
8.5
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread) 65.0
40.0
Total Other Long-Term Debt
$95.2

$70.2

~~Amended~~June 2020.

TimkenSteel’s 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 $45.0 million in fiscal year 2016 and $50.0 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. As of September 30, 2017, we are in compliance with all covenants.

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 5.2% as of September 30, 2017. The amount available under the Amended Credit Agreement as of September 30, 2017 was $164.3 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

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Bonds to the weekly rate and the delivery of the replacement letters of credit, as applicable. The replacement letters of credit had an initial stated term of one year that, upon request by the Company, and with approval by the issuing bank, can be renewed annually thereafter for subsequent one year terms.

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.

As of September 30, 2017, the Company has requested and the issuing banks have approved renewal of the Air Quality Bonds and Pollution Control Bonds through June 2018 and the Water Bonds through August 2018. ~~TimkenSteel is responsible for payment of the interest and principal associated with the Bonds subsequent to the Remarketing Date.~~

~~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~~rates. This valuation falls within Level 2 of the fair value ~~input as defined by Accounting Standard Codification (ASC) 820, Fair Value Measurements. The valuation of Level 2~~hierarchy and 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 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.

Interest Paid

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 relatedtotal cash interest income and expense, are eliminated in the Unaudited Consolidated Financial Statements. As of September 30, 2017, $39.6 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, $11.8 million has been financed through the lease arrangement described above.

~~Note 7 - Accumulated Other Comprehensive Loss~~

~~Changes in accumulated other comprehensive loss~~paid for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016 by component are as follows:~~

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 1.1
—
1.1
Amounts reclassified from accumulated other comprehensive loss, before income tax —
1.1
1.1
Income tax benefit —
(0.7 ) (0.7 )
Net current period other comprehensive income, net of income taxes 1.1
0.4
1.5
Balance at September 30, 2017
($5.9 )
($2.0 )
($7.9 )

Foreign Currency Translation Adjustments Pension and Postretirement Liability Adjustments Total
Balance at December 31, 2015
($5.0 )
($2.9 )
($7.9 )
Other comprehensive loss before reclassifications, before income tax (2.8 ) —
(2.8 )
Amounts reclassified from accumulated other comprehensive loss, before income tax —
1.2
1.2
Income tax benefit —
(0.4 ) (0.4 )
Net current period other comprehensive (loss) income, net of income taxes (2.8 ) 0.8
(2.0 )
Balance as of September 30, 2016
($7.8 )
($2.1 )
($9.9 )

~~The amount reclassified from accumulated other comprehensive loss for the pension~~2019 was $4.1 million and postretirement liability adjustment was included in other income (expense), net in the Unaudited Consolidated Statements of Operations. These accumulated other comprehensive loss components are components of net periodic benefit cost. See $6.1 million, respectively.

Note 9 11-Retirement and Postretirement Plans ~~for additional information.~~

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~~Note 8 - Changes in Shareholders' Equity~~

~~Changes in the components of shareholders’ equity for the nine months ended September 30, 2017 were as follows:~~

Total Additional Paid-in Capital Retained Deficit Treasury Shares Accumulated Other Comprehensive Loss
Balance at December 31, 2016
$597.4

$845.6

($193.9 )
($44.9 )
($9.4 )
Net loss (9.9 ) —
(9.9 ) —
—
Pension and postretirement adjustment, net of tax 0.4
—
—
—
0.4
Foreign currency translation adjustments 1.1
—
—
—
1.1
Stock-based compensation expense 4.9
4.9
—
—
—
Stock option activity 0.2
0.2
—
—
—
Issuance of treasury shares —
(8.4 ) (0.3 ) 8.7
—
Shares surrendered for taxes (1.4 ) —
—
(1.4 ) —
Balance at September 30, 2017
$592.7

$842.3

($204.1 )
($37.6 )
($7.9 )

~~Note 9 - Retirement and Postretirement Plans~~

The components of net periodic benefit cost (income) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 were as follows:

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

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

Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016
Components of net periodic benefit cost: Pension Postretirement Pension Postretirement
Service cost
$4.6

$0.4

$3.9

$0.4
Interest cost 12.3
2.1
13.2
2.4
Expected return on plan assets (17.7 ) (1.3 ) (18.1 ) (1.5 )
Amortization of prior service cost 0.1
0.2
0.1
0.2
Net remeasurement loss 2.3
—
20.4
—
Net Periodic Benefit Cost
$1.6

$1.4

$19.5

$1.5

Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016
Components of net periodic benefit cost: Pension Postretirement Pension Postretirement
Service cost
$13.8

$1.2

$11.7

$1.2
Interest cost 36.8
6.3
39.8
7.1
Expected return on plan assets (52.9 ) (4.0 ) (53.6 ) (4.4 )
Amortization of prior service cost 0.3
0.8
0.4
0.8
Net remeasurement loss 2.3
—
20.4
—
Net Periodic Benefit Cost
$0.3

$4.3

$18.7

$4.7

The service cost component is included in cost of products sold and selling, general and administrative expenses. The non-service cost components of net periodic benefit costs are included in other income (expense), net in the Unaudited Consolidated Statements of Operations. The Company utilized the practical expedient approach, based on amounts previously disclosed, to reclassify non-service components of net periodic benefit cost from cost of products sold and selling, general and administrative expenses, into other income (expense), net on the Unaudited Consolidated Statements of Operations.

~~The following table sets forth the amounts reclassified into other income (expense), net for the three and nine months ended September 30, 2016.~~

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Three Nine

Months ended
September 30, 2016
Cost of products sold
($13.3 )
($7.7 )
Selling, general and administrative expenses (3.4 ) (2.8 )

($16.7 )
($10.5 )

~~The TimkenSteel Corporation Retirement~~Salaried Plan ~~(Salaried Plan)~~ has a provision that permits employees to elect to receive their pension benefits in a lump sum. In the ~~third~~first quarter of ~~2017 and 2016,~~2020, the cumulative cost of all ~~settlements exceeded~~lump sum payments was projected to exceed the sum of the service cost and interest cost components of net periodic pension cost for the Salaried Plan. ~~The~~As a result, the Company completed a full remeasurement of its pension obligations and plan assets associated with the Salaried Plan as of ~~September~~June 30, ~~2017~~2020 and ~~2016,~~March 31, 2020, which resulted in a non-cash ~~pre-tax~~(gain) loss from remeasurement of ~~$2.3~~($1.9) million and ~~$20.4~~$7.6 million ~~respectively, included in other income (expense), net on the Unaudited Consolidated Statements of Operations.~~

~~Note 10 - 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 (loss) 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~~six months ended ~~September~~June 30, ~~2017 and 2016:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Numerator:
Net loss for basic and diluted earnings per share
($5.9 )
($22.2 )
($9.9 )
($38.5 )

Denominator:
Weighted average shares outstanding, basic 44,433,094
44,221,310
44,373,264
44,215,373
Dilutive effect of stock-based awards —
—
—
—
Weighted average shares outstanding, diluted 44,433,094
44,221,310
44,373,264
44,215,373

Basic loss per share
($0.13 )
($0.50 )
($0.22 )
($0.87 )
Diluted loss per share
($0.13 )
($0.50 )
($0.22 )
($0.87 )

2020, respectively.

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Note ~~11 - Income Taxes~~

~~TimkenSteel’s provision (benefit)~~12 – Stock-Based Compensation

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

Time-vested restricted stock units are issued with the fair value equal to the closing market price of TimkenSteel common shares on the date of grant. These restricted stock units do not have any performance conditions for ~~income taxes in interim periods~~vesting. Expense is ~~computed by applying~~recognized over the ~~appropriate estimated annual effective tax rates to income or loss before income taxes~~service period, adjusted for ~~the period. In addition, non-recurring or discrete items, including interest on prior-year tax liabilities, are recorded~~any forfeitures that should occur during the ~~periods in which they occur.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Provision (benefit) for income taxes
$0.1

($13.3 )
$1.2

($23.5 )
Effective tax rate (1.5 )% 37.5 % (14.0 )% 37.9 %

~~For the nine months ended September 30, 2017 and the year ended December 31, 2016, operating losses generated in the U.S. resulted in a decrease in the carrying~~vesting period. The weighted average fair value of the ~~Company’s U.S. net deferred tax liability~~restricted stock units granted during the six months ended June 30, 2020 was $4.24 per share.The Board of Directors were granted their annual time-vested restricted stock units during the second quarter totalling 332,325 shares.

Performance-vested restricted stock units issued in 2020 vest based on achievement of a total shareholder return (TSR) metric. The TSR metric is considered a market condition, which requires TimkenSteel to ~~the point that would result in a net U.S. deferred tax asset at September 30, 2017 and December 31, 2016. In light of TimkenSteel’s recent operating performance~~reflect it in the ~~U.S.~~fair value on grant date using an advanced option-pricing model. The fair value of each performance share was therefore determined using a Monte Carlo valuation model, a generally accepted lattice pricing model under ASC 718 – Stock-based Compensation. The Monte Carlo valuation model, among other factors, uses commonly-accepted economic theory underlying all valuation models, estimates fair value using simulations of future share prices based on stock price behavior and ~~current industry conditions,~~considers 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,~~correlation of peer company returns in determining fair value. The weighted average fair value of the ~~fourth quarter of 2016,~~performance-vested restricted stock units granted during the Company recorded full valuation allowance on its net U.S. deferred tax asset of $15.6 million. Going forward, the need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in the Company’s effective tax rate. The 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. The increase in the effective tax rate for the ninesix months ended ~~September~~June 30, ~~2017 is primarily due to a discrete charge of approximately $1.0 million recorded~~2020 was $5.23 per share. There were 0 performance-vested restricted stock units granted in the second quarter of ~~2017.~~2020.

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

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

Note13-Accumulated Other Comprehensive Income (Loss)

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

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

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

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The amount reclassified from accumulated other comprehensive income (loss) in the six months ended June 30, 2020 for the pension and postretirement liability adjustment was included in other income, net in the unaudited Consolidated Statements of Operations.

Note ~~12 -~~ 14–Contingencies

TimkenSteel has a number of loss exposures incurred in the ordinary course of business, such as environmental claims, product warranty claims, and litigation. Establishing loss reserves for these matters requires management’s estimate and judgment regarding risk exposure and ultimate liability or realization. These loss reserves are reviewed periodically and adjustments are made to reflect the most recent facts and circumstances. Accruals related to environmental claims represent management’s best estimate of the fees and costs associated with these claims. Although it is not possible to predict with certainty the outcome of such claims, management believes that their ultimate dispositions should not have a material adverse effect on our financial position, cash flows or results of operations. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, TimkenSteel had a ~~$0.7~~$1.3 million and ~~$0.2~~a $1.5 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. 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 September 30, 2017 and December 31, 2016, TimkenSteel had a $0.5 million and a $0.6 million reserve for such environmental matters, respectively, classified as other current and non-current liabilities on the Unaudited Consolidated Balance Sheets.

~~The following is a rollforward of the accrual related to environmental matters for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended September 30,
2017 2016
Beginning Balance, January 1
$0.6

$0.8
Expenses 0.1
—
Payments (0.2 ) (0.2 )
Ending Balance, September 30
$0.5

$0.6

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollars in millions, except per share data)

Business Overview

TimkenSteel Corporation (we, us, our, the Company or TimkenSteel) was incorporated in Ohio on October 24, 2013, and became an independent, publicly traded company as the result of a spinoff from The Timken Company (Timken) on June 30, 2014.

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

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

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

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

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

We conduct our business activities and report financial results as one business segment. The ~~collective bargaining agreement between~~presentation of financial results as one reportable segment is consistent with the way we operate our business and is consistent with the manner in which the Chief Operating Decision Maker (CODM) evaluates performance and makes resource and operating decisions for the business as described above. Furthermore, the Company ~~and~~notes that monitoring financial results as one reportable segment helps the ~~United Steelworkers (USW) Local 1123, which had an expiration date~~CODM manage costs on a consolidated basis, consistent with the integrated nature of ~~September 25, 2017 has been extended, and we remain in discussions with USW representatives regarding a new collective bargaining agreement.~~ our operations.

Impact of COVID-19 Pandemic

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

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

•

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

~~Capital Investments~~

•

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

~~Our recent capital investments are expected~~

•

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

•

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

•

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

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

•

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

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•

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

Despite the negative impact on our business, these actions resulted in the Company having total liquidity of $251.9 million as of June 30, 2020. We believe this level of liquidity is sufficient to ~~significantly strengthen our position~~meet the Company’s needs for at least the next 12 months. The Company will continue to take actions such as ~~a leader~~those taken during the second quarter in ~~providing differentiated solutions~~order to preserve liquidity for the ~~energy, industrial and automotive market sectors, while enhancing our operational performance and customer service capabilities.~~

On July 17, 2014, we began investing in additional advanced quench-and-temper heat-treat capacity. The approximately $40 million facility will perform quench-and-temper heat-treat operations and, we believe, will have capacity for up to 50,000 process-tons annuallyduration of 4-inch to 13-inch bars and tubes. This facility will be located in Perry Township, Ohio on the site of our Gambrinus Steel Plant near three existing thermal treatment facilities. This facility will be larger than each of our three existing thermal treatment facilities in Canton, Ohio. The Company anticipates beginning operations in the fourth quarter of 2017.

this pandemic.

Impact of Raw Material Prices ~~and LIFO~~

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

Results of Operations

Net Sales

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

Net sales for the three months ended June 30, 2020 were $154.0 million, a decrease of $182.7 million, or 54.3%, compared with the three months ended June 30, 2019. The decrease was due to a reduction in volume of approximately 139 thousand ship tons, resulting in a decrease of $148.4 million of net sales and lower surcharges of $53.6 million. These decreases in net sales were slightly offset by a positive mix across all end markets resulting in an increase in net sales of $21.1 million. The primary driver in the decrease in volume was lower customer demand across all end markets primarily as a result of the COVID-19 pandemic and weak energy market. The decrease in surcharges was primarily due to a 28.9% decline in the average surcharge per ton due to lower market prices for scrap and alloys. We estimate the impact of the COVID-19 pandemic on our net sales was a reduction of approximately $120 million, as compared to our forecast prior to the onset of the pandemic. The majority of this decrease was related to our mobile end-market sector, as production was halted by all major automotive manufacturers for various lengths of time during the second quarter of 2020. Excluding surcharges, net sales decreased $129.1 million, or 49.9%.

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

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~~We value~~

Net sales for the six months ended June 30, 2020 were $413.6 million, a decrease of $294.1 million, or 41.6%, compared with the six months ended June 30, 2019. The decrease was due to a reduction in volume of approximately ~~64%~~187 thousand ship tons, resulting in a decrease of ~~our inventory utilizing the LIFO inventory valuation method. Changes~~$202.5 million of net sales and lower surcharges of $97.4 million. These decreases in net sales were slightly offset by a positive mix across all end markets resulting in an increase in net sales of $11.8 million. The primary driver in the ~~cost of raw materials and production activities are recognized~~decrease in ~~cost of products sold~~volume was lower customer demand across all end markets. The decrease in surcharges was primarily due to a 33.8% decline in the ~~current period even though these materials~~average surcharge per ton due to lower market prices for scrap and ~~other~~alloys. We estimate the impact of the COVID-19 pandemic on our net sales during the first half of 2020 was a reduction of approximately $130 million. The majority of this decrease was related to our mobile end-market sector, as production was halted by all major automotive manufacturers for various lengths of time from March through June 2020. Excluding surcharges, net sales decreased $196.7 million, or 36.4%.

Gross Profit

The chart below presents the drivers of the gross profit variance from the three months ended June 30, 2019 to June 30, 2020.

Gross profit for the three months ended June 30, 2020 decreased $18.8 million, or 127.0% compared with the three months ended June 30, 2019. The decrease was driven primarily by lower volumes and unfavorable inventory adjustments, partially offset by favorable manufacturing costs ~~may have been incurred~~and improvements in ~~different periods~~price/mix. The primary driver in the decrease in volume was lower customer demand across all end markets primarily as a result of the COVID-19 pandemic and a weak energy market. Unfavorable inventory reserve adjustments relate primarily to a lower of cost or net realizable adjustment for inventory at ~~significantly different values~~our exited TMS facility. Favorable manufacturing costs in 2020 were primarily due to the ~~length~~Company’s significant cost reduction actions, slightly offset by the unfavorable impact of ~~time~~lower production levels in fixed cost leverage. Improvements in price/mix were driven by favorable mix with a lower proportion of mobile and OCTG billet shipments in 2020 in comparison to the prior year, slightly offset by unfavorable pricing across all end markets.

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The chart below presents the drivers of the gross profit variance from the six months ended June 30, 2019 to June 30, 2020.

Gross profit for the six months ended June 30, 2020 decreased $39.4 million, or 91.2%, compared with the six months ended June 30, 2019. The decrease was driven primarily by lower volumes, additional inventory adjustments, and unfavorable price/mix, offset by favorable manufacturing costs. The primary driver in the decrease in volume was lower customer demand across all end markets primarily as a result of the COVID-19 pandemic and a weak energy market. Additional inventory reserve adjustments relate primarily to a lower of cost or net realizable adjustment for inventory at our exited TMS facility. Unfavorable price/mix was driven by lower pricing and favorable mix across all end markets. Favorable manufacturing costs in 2020 were primarily due to the Company’s significant cost reduction actions, slightly offset by the unfavorable impact of lower production ~~cycle.~~levels on fixed cost leverage.

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Selling, General and Administrative Expenses

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

Selling, general and administrative (SG&A) expense for the three and six months ended June 30, 2020 decreased by $3.4 million, or 16.8%, and $3.3 million, or 7.6%, respectively, compared with the same periods in 2019. The decreases are primarily due to unpaid furloughs for salaried employees and other COVID-19 related cost reduction actions, as well as lower in wages and benefits which are a result of a reduction in employees following the Company’s recent restructuring actions. These decreases are slightly offset by increases in variable compensation.

Restructuring Charges

During 2019 and the first half of 2020, TimkenSteel made organizational changes to enhance profitable and sustainable growth. These company-wide actions included the restructuring of its business support functions, the reduction of management layers throughout the organization, the closure of the TMS facility in Houston, Texas and other actions to further improve the Company’s overall cost structure. Through these restructuring efforts, to date the Company has eliminated approximately 180 salaried positions and recognized restructuring charges of $9.5 million, consisting of severance and employee-related benefits. Approximately 20 of these positions were eliminated in the first half of 2020. The Company expects to realize annual savings of approximately $21 million as a result of these actions. Refer to “Note 4 - Restructuring Charges” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Interest Expense

Interest expense for the three months ended June 30, 2020 was $3.0 million, a decrease of $1.2 million, compared with the three months ended June 30, 2019. Interest expense for the six months ended June 30, 2020 was $6.2 million, a decrease of $2.2 million, compared with the six months ended June 30, 2019.The decrease in interest expense in both periods was primarily due to a reduction in outstanding borrowings as well as a lower interest rate environment. Refer to “Note 10 - Financing Arrangements” in the Notes to the unaudited Consolidated Financial Statements for additional information.

Other Expense (Income), net

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

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

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 ~~a period~~the first quarter of ~~rising raw material prices,~~2020, the cumulative cost of ~~products sold recognized under LIFO is generally higher than~~all lump sum payments was projected to exceed the ~~cash costs incurred to acquire~~sum of the ~~inventory sold. Conversely,~~service cost and interest cost components of net periodic pension cost for the Salaried Plan. As a result, the Company completed a full remeasurement of its pension obligations and plan assets associated with the Salaried Plan as of June 30, 2020 and March 31, 2020, which resulted in a ~~period~~non-cash loss (gain) from remeasurement of ~~declining raw material prices, cost~~($1.9) million and $7.6 million for the three and six months ended June 30, 2020, respectively. For more details on the remeasurement, refer to “Note 11 - Retirement and Postretirement Plans.”

Provision for Income Taxes

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

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

The majority of ~~products sold recognized under LIFO~~the Company’s income tax expense is ~~generally lower than cash costs incurred to acquire~~derived from foreign operations. The Company remains in a full valuation for the ~~inventory sold. In periods~~U.S. jurisdiction for the three and six months ended June 30, 2020 and 2019.

Table of rising inventories and deflating raw material prices, the likely result will be a positive impact to net income. Conversely, in periods of rising inventories and increasing raw materials prices, the likely result will be a negative impact to net income.

~~Results of Operations~~

Three Months Ended September 30,
2017 2016 Increase (Decrease) % Change
Net sales
$339.1

$213.8

$125.3
58.6 %
Net sales, excluding surcharges 261.2
184.9
76.3
41.3 %
Gross profit 18.5
7.5
11.0
146.7 %
Gross margin 5.5 % 3.5 % NM
200 bps
Selling, general and administrative expenses 22.5
21.8
0.7
3.2 %
Net income (5.9 ) (22.2 ) 16.3
(73.4 )%
Average scrap index per ton (30 day lag) 374
272
102
37.5 %
Average selling price per ton, including surcharges
$1,170

$1,202

($32 ) (2.7 )%
Shipments (in tons) 289,942
177,823
112,119
63.1 %
Melt utilization 74 % 44 % NM
30 pp

Nine Months Ended September 30,
2017 2016 Increase (Decrease) % Change
Net sales
$987.8

$654.8

$333.0
50.9 %
Net sales, excluding surcharges 773.8
587.2
186.6
31.8 %
Gross profit 59.3
25.2
34.1
135.3 %
Gross margin 6.0 % 3.8 % NM
220 bps
Selling, general and administrative expenses 67.7
66.8
0.9
1.3 %
Net loss (9.9 ) (38.5 ) 28.6
74.3 %
Average scrap index per ton (30 day lag) 353
229
124
54.1 %
Average selling price per ton, including surcharges
$1,143

$1,183

($40 ) (3.4 )%
Shipments (in tons) 864,446
553,646
310,800
56.1 %
Melt utilization 74 % 45 % NM
29 pp

Contents

NON-GAAP FINANCIAL MEASURES

Net Sales, Excluding Surcharges

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

~~Net Sales~~

Net sales for the third quarter of 2017 were $339 million, an increase of $125 million compared to the third quarter of 2016. Excluding surcharges, net sales increased $76 million, or 41%. The increase was due to higher volumes of $124 million, offset by price/mix of approximately $48 million. For the three months ended September 30, 2017, ship tons increased by 112 thousand tons, or 63% compared to the same period in 2016, due primarily to market penetration and sales initiatives, including 56 thousand tons of new billet business to the tube manufacturers supplying the OCTG market.

~~Table of Contents~~

Net sales for the nine months ended 2017 were $988 million, an increase of 51% compared to the same period in 2016. Excluding surcharges, net sales increased $187 million, or 32%. The increase was due to higher volumes of $346 million, offset by price/mix of approximately $159 million. For the nine months ended September 30, 2017, ship tons increased 311 thousand tons, or 56% compared to the same period in 2016, due primarily to market penetration and sales initiatives, including 162 thousand tons of new billet business to the tube manufacturers supplying the OCTG market.

~~Gross Profit~~

Gross profit for the third quarter of 2017 was $19 million, an increase of $11 million, or 147%, compared to gross profit of $8 million for the third quarter of 2016. The increase was driven primarily by higher volumes of approximately $21 million, favorable raw material spread of approximately $10 million and production efficiencies of approximately $26 million as a result of increased melt utilization to 74% for the third quarter of 2017 compared to 44% for the third quarter of 2016, partially offset by price/mix of approximately $39 million and higher LIFO expense of approximately $7 million.

Gross profit for the nine months ended September 30, 2017 was $59 million, an increase of $34 million, or 135%, compared to gross profit of $25 million for the same period in 2016. The increase was driven primarily by higher volumes of approximately $58 million, favorable raw material spread of approximately $32 million, a supplier refund of approximately $5 million and production efficiencies of approximately $53 million as a result of increased melt utilization to 74% for the nine months ended September 30, 2017 compared to 45% for the same period in 2016, partially offset by price/mix of approximately $99 million and higher LIFO expense of approximately $15 million.

~~Our surcharge mechanism is designed to mitigate the impact of increases or decreases in raw material costs, although~~accounting principles generally with a lag effect. This timing effect can result in raw material costs being over- or under-recovered in certain periods. For the nine months ended September 30, 2017, the surcharge favorably impacted gross margin as a percent of sales.

~~Selling, General and Administrative Expenses~~

~~Selling, general and administrative (SG&A) expenses increased approximately $1 million in both the third quarter of 2017 and~~accepted in the ~~nine months ended September 30, 2017 compared to the same periods in 2016 due primarily to variable compensation costs.~~

~~Interest Expense~~

Three Months Ended September 30,
2017 2016 $ Change
Cash interest paid
$0.8

$0.9

($0.1 )
Accrued interest 1.9
1.9
—
Amortization of convertible notes discount and deferred financing 1.0
1.1
(0.1 )
Total Interest Expense
$3.7

$3.9

($0.2 )

Nine Months Ended September 30,
2017 2016 $ Change
Cash interest paid
$6.0

$4.2

$1.8
Accrued interest 1.9
1.9
—
Amortization of convertible notes discount and deferred financing 3.1
1.9
1.2
Total Interest Expense
$11.0

$8.0

$3.0

Interest expense decreased $0.2 million in the third quarter of 2017 compared to the same period in 2016. Interest expense for the nine months ended September 30, 2017 increased approximately $3 million, compared to the same period in 2016, due primarily to the issuance in May 2016 of the 6.00% Convertible Senior Notes due in 2021 (Convertible Notes)United States (U.S. GAAP).

~~Table of Contents~~

~~Other Income (Expense), Net~~

Three Months Ended September 30,
2017 2016 $ Change % Change
Non-service components of benefit cost
$4.3

$3.7

($0.6 ) 16.2 %
Loss from remeasurement of benefit plans (2.3 ) (20.4 )
($18.1 ) (88.7 )%
Other (0.1 ) (0.6 )
($0.5 ) (83.3 )%
Other income (expense), net
$1.9

($17.3 )
($19.2 ) (111.0 )%

Nine Months Ended September 30,
2017 2016 $ Change % Change
Non-service components of benefit cost
$12.7

$9.9

($2.8 ) 28.3 %
Loss from remeasurement of benefit plans (2.3 ) (20.4 )
($18.1 ) (88.7 )%
Other 0.3
(1.6 )
($1.9 ) (118.8 )%
Other income (expense), net
$10.7

($12.1 )
($22.8 ) (188.4 )%

Other income (expense), net was income of $1.9 million and $10.7 million for the three and nine months ended September 30, 2017, respectively compared to expense of $17.3 million and $12.1 million in the three and nine months ended September 30, 2016, respectively. The change in the three and nine months ended September 30, 2017 is primarily due to the change in the loss from remeasurement of benefit plans. See Note 9 - Retirement and Postretirement Plans in the Notes to Unaudited Consolidated Financial Statements for a discussion regarding the loss from remeasurement of benefit plans.

~~Provision (Benefit) for Income Taxes~~

Three Months Ended September 30,
2017 2016 $ Change % Change
Provision (benefit) for income taxes
$0.1

($13.3 )
($13.4 ) (100.8 )%
Effective tax rate (1.5 )% 37.5 % NM
(3900) bps

Nine Months Ended September 30,
2017 2016 $ Change % Change
Provision (benefit) for income taxes
$1.2

($23.5 )
($24.7 ) (105.1 )%
Effective tax rate (14.0 )% 37.9 % NM
(5,190 ) bps

For the year ended December 31, 2016, operating losses generated in the U.S. resulted in a decrease in the carrying value of our U.S. deferred tax liability to the point that would result in a net U.S. deferred tax asset at December 31, 2016. In light of our recent operating performance in the U.S. and current industry conditions, we assessed, based upon all available evidence, and concluded that it was more likely than not that we would not realize our U.S. deferred tax assets. As a result, in the nine months ended September 30, 2017 and in the fourth quarter of 2016, we recorded full valuation allowance on our net U.S. deferred tax asset. Going forward, the need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries will cause variability in our effective tax rate. We will maintain a full valuation allowance against our deferred tax assets in the U.S. and applicable foreign countries until sufficient positive evidence exists to eliminate them. The increase in the effective tax rate for the nine months ended September 30, 2017 is primarily due to a discrete charge of approximately $1.0 million recorded in the second quarter of 2017.

~~Net Sales, Excluding Surcharges~~

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

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

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

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

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

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

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

	Six Months Ended June 30, 2020
	Mobile		Industrial		Energy		Other		Total
Tons		121.5		144.4		27.5		28.7		322.1

Net Sales	$	133.8	$	211.3	$	39.8	$	28.7	$	413.6
Less: Surcharges		23.3		33.4		6.4		7.1		70.2
Base Sales	$	110.5	$	177.9	$	33.4	$	21.6	$	343.4

Net Sales / Ton	$	1,101	$	1,463	$	1,447	$	1,000	$	1,284
Surcharges / Ton	$	192	$	231	$	232	$	247	$	218
Base Sales / Ton	$	909	$	1,232	$	1,215	$	753	$	1,066

	Six Months Ended June 30, 2019
	Mobile		Industrial		Energy		Other		Total
Tons		223.1		188.9		62.4		34.6		509.0

Net Sales	$	279.5	$	271.3	$	114.9	$	42.0	$	707.7
Less: Surcharges		69.6		62.5		24.5		11.0		167.6
Base Sales	$	209.9	$	208.8	$	90.4	$	31.0	$	540.1

Net Sales / Ton	$	1,253	$	1,436	$	1,841	$	1,214	$	1,390
Surcharges / Ton	$	312	$	331	$	392	$	318	$	329
Base Sales / Ton	$	941	$	1,105	$	1,449	$	896	$	1,061

Table of Contents

Net Sales adjusted to exclude surcharges
(dollars in millions, tons in thousands)
Three Months Ended September 30,
2017 2016
Mobile Industrial Energy Other Total Mobile Industrial Energy Other Total
Tons 100.8
106.2
26.7
56.2
289.9
100.5
70.2
7.1
—
177.8

Net Sales
$127.5

$126.3

$37.7

$47.6

$339.1

$120.4

$79.7

$8.7

$5.0

$213.8
Less: Surcharges 27.1
28.8
6.4
15.6
77.9
16.3
11.3
1.3
—
28.9
Base Sales
$100.4

$97.5

$31.3

$32.0

$261.2

$104.1

$68.4

$7.4

$5.0

$184.9

Net Sales / Ton
$1,265

$1,189

$1,412

$847

$1,170

$1,198

$1,135

$1,225
N/A

$1,202
Base Sales / Ton
$996

$918

$1,172

$569

$901

$1,036

$974

$1,042
N/A

$1,040

Nine Months Ended September 30,
2017 2016
Mobile Industrial Energy Other Total Mobile Industrial Energy Other Total
Tons 324.4
308.4
69.3
162.3
864.4
317.4
216.8
19.4
—
553.6

Net Sales
$399.7

$357.1

$99.0

$132.0

$987.8

$365.8

$246.2

$27.7

$15.1

$654.8
Less: Surcharges 78.2
76.9
15.3
43.4
213.8
38.0
26.9
2.7
—
67.6
Base Sales
$321.5

$280.2

$83.7

$88.6

$774.0

$327.8

$219.3

$25.0

$15.1

$587.2

Net Sales / Ton
$1,232

$1,158

$1,429

$813

$1,143

$1,152

$1,136

$1,428
N/A

$1,183
Base Sales / Ton
$991

$909

$1,208

$546

$895

$1,033

$1,012

$1,289
N/A

$1,061

~~Balance Sheet~~

~~The following discussion is a comparison of the Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016:~~

Current Assets September 30,
2017 December 31,
2016
Cash and cash equivalents
$25.8

$25.6
Accounts receivable, net 160.6
91.6
Inventories, net
$219.5

$164.2
Deferred charges and prepaid expenses 4.2
2.8
Other current assets 7.4
6.2
Total Current Assets
$417.5

$290.4

Refer to the Liquidity and Capital Resources section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the change in cash and cash equivalents. Accounts receivable, net increased $69 million as of September 30, 2017 compared to December 31, 2016, due to an increase in net sales of $124 million in the third quarter of 2017 compared to the fourth quarter of 2016. Inventories, net increased approximately $55 million as of September 30, 2017 compared to December 31, 2016 primarily due to efforts to align inventories with anticipated sales volumes as well as increased costs.

Property, Plant and Equipment September 30,
2017 December 31,
2016
Property, plant and equipment, net
$701.6

$741.9

Property, plant and equipment, net decreased approximately $40 million as of September 30, 2017 compared to December 31, 2016. The decrease was primarily due to depreciation expense of approximately $51 million, partially offset by capital expenditures of approximately $12 million, during the nine months ended September 30, 2017.

~~Table of Contents~~

Other Assets September 30,
2017 December 31,
2016
Pension assets
$9.8

$6.2
Intangible assets, net 20.9
25.0
Other non-current assets 6.0
6.4
Total Other Assets
$36.7

$37.6

Pension assets increased approximately $4 million as of September 30, 2017 compared to December 31, 2016, primarily driven by an annual pension contribution made in the first quarter of 2017 to the Company’s U.K. pension plan. Intangible assets, net decreased approximately $4 million as of September 30, 2017 compared to December 31, 2016, primarily due to amortization expense of $5 million recognized in the nine months ended September 30, 2017.

Liabilities and Shareholders’ Equity September 30,
2017 December 31,
2016
Current liabilities
$188.6

$130.7
Convertible notes, net 69.2
66.4
Other long-term debt 95.2
70.2
Accrued pension and postretirement costs - long-term 196.2
192.1
Deferred income taxes 0.7
—
Other non-current liabilities 13.2
13.1
Total shareholders’ equity 592.7
597.4
Total Liabilities and Shareholders’ Equity
$1,155.8

$1,069.9

Current liabilities increased approximately $58 million as of September 30, 2017 compared to December 31, 2016, primarily due to an increase in accounts payable of approximately $47 million from increased inventory levels, and higher compensation related accruals.

~~See Note 6 - Financing Arrangements in the Notes to Unaudited Consolidated Financial Statements for a discussion of the change in the Convertible Notes.~~

~~Other long-term debt increased due to borrowings of $25 million on the Amended Credit Agreement primarily to fund working capital.~~

~~Refer to Note 8 - Changes in Shareholders' Equity in the Notes to Unaudited Consolidated Financial Statements for details of the decrease in Shareholders’ Equity.~~

~~Liquidity and Capital Resources~~

LIQUIDITY AND CAPITAL RESOURCES

Convertible Notes

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

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

Amended Credit Agreement

~~During~~

On October 15, 2019, the third quarter of 2015, we projected that at December 31, 2015, we would not be in compliance with the interest coverage ratio covenant contained in our then-existing revolving credit facility, due to a steeper-than-expected drop in industrial demand driven by depressed commodity prices. Accordingly, on December 21, 2015, we amended and restated our existing revolving credit facility, effectively converting it from a cash flow-based facility to an asset-based facility in order to eliminate various financial covenants that are customary in cash flow-based facilities, including the interest coverage ratio covenant.

~~Table of Contents~~

~~On February 26, 2016, we~~Company, entered into ~~Amendment No. 1~~a Third Amended and Restated Credit Agreement (the ~~Amendment) to~~Amended Credit Agreement), with JP Morgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and the other lenders party thereto, which further amends and restates the Company’s Second Amended and Restated Credit Agreement dated as of December 21, 2015 (as amended by the Amendment, the Amended Credit Agreement) in order to provide more flexibility with respect to the amount and form of financing we could obtain to enhance our liquidity.

Pursuant to the Amendment, we also reduced the size of the revolving credit facility from $300 million to $265 million given that, in the near-term, it was unlikely we would have a borrowing base sufficient to support such availability. January 26, 2018.

The Amended Credit Agreement ~~also includes a block on availability equal~~increases capacity to ~~the greater of $28.9~~$400 million ~~or 12.5% of the aggregate commitments (except that~~compared to $300 million in the ~~event of a mandatory reduction in~~previous facility and extends the ~~commitments, the block on availability will be equal~~maturity date to the greater of $20.0 million or 12.5% of the aggregate commitments), effectively reducing our borrowing base by the availability block. Refer to Note 6 - Financing Arrangements in the Notes to the Unaudited Consolidated Financial Statements and the Covenant Compliance section within Management’s Discussion and Analysis for details onOctober 15, 2024. Furthermore, the Amended Credit Agreement ~~covenants.~~

~~The Amended Credit Agreement has~~provides for an enhanced asset base with reappraised fixed assets and investment grade foreign accounts receivable collateral in the borrowing base, improves interest rate spread pricing by 50 basis points, and reduces the unused commitment fee to a ~~term~~fixed 25 basis points from the previous 37.5 to 50 basis point range.

Table of ~~five years through June 30, 2019.~~ Contents

Additional Liquidity Considerations

The following represents a summary of key liquidity measures under the Amended Credit Agreement as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

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

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

Total liquidity	$	251.9		$	230.3

September 30,
2017 December 31, 2016
Cash and cash equivalents $25.8 $25.6

Amended Credit Agreement:
Maximum availability $265.0 $194.4
Amount borrowed 65.0 40.0
Letter of credit obligations 2.6 1.6
Availability not borrowed 197.4 152.8
Availability block 33.1 33.1
Net availability $164.3 $119.7

Total liquidity $190.1 $145.3

(1) As of June 30, 2020 and December 31, 2019, TimkenSteel had less than $400 million in collateral assets to borrow against.

Our principal sources of liquidity are cash and cash equivalents, cash flows from operations and available borrowing capacity under our Amended Credit Agreement. We currently expect that our cash and cash equivalents on hand, expected cash flows from operations and borrowings available under the Amended Credit Agreement will be sufficient to meet liquidity needs; however, these plans rely on certain underlying assumptions and estimates that may differ from actual results. Such assumptions include growing market demand and maintaining the benefits to our operating results and cash flows driven by the restructuring and cost reduction activities taken during 2015 that streamlined our organizational structure, lowered operating costs and increased liquidity.

credit agreement. As of ~~September~~June 30, ~~2017,~~2020, taking into account ~~the foregoing, as well as~~ our view of automotive, industrial, ~~energy,~~ and ~~automotive~~energy market demands for our products, ~~our 2017 operating plan~~ and our 2020 operating and long-range plan, we believe that our cash balance as of ~~September~~June 30, ~~2017 of $25.8 million,~~2020, projected cash generated from operations, and borrowings available under the Amended Credit Agreement, will be sufficient to satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations, including servicing our debt obligations, for at least the next twelve ~~months~~months.

The full extent to which the COVID-19 pandemic will impact our operations and ~~through June 30, 2019,~~financial results is uncertain and ultimately will depend on, among many other factors, the ~~maturity date~~duration of the pandemic, further Federal and State government actions and the speed of economic recovery. While the negative impact on our ~~Amended Credit Agreement.~~

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

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

For additional ~~discussion~~details regarding ~~risk factors related~~the Amended Credit Agreement and the Convertible Notes, please refer to ~~our business and our debt, see Risk Factors~~“Note 14 - Financing Arrangements” in ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~For additional details on the Amended Credit Agreement and the Convertible Notes, please refer to Note 6 - Financing Arrangements in the Notes to Unaudited Consolidated Financial Statements.~~

2019.

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Cash Flows

The following table reflects the major categories of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019. For additional details, please ~~see~~refer to the ~~Unaudited~~unaudited Consolidated Statements of Cash Flows ~~contained elsewhere~~included in this quarterly report.

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

Cash Flows Nine Months Ended September 30,
2017 2016
Net cash (used) provided by operating activities
($11.7 )
$55.5
Net cash used by investing activities (11.9 ) (26.1 )
Net cash provided (used) by financing activities 23.8
(48.5 )
Increase (Decrease) in Cash and Cash Equivalents
$0.2

($19.1 )

Operating activities

Net cash ~~used~~provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~approximately $12~~$79.9 million compared to net cash used of $17.6 million for the six months ended June 30, 2019. The increase in cash provided by operating activities of ~~approximately $56~~$97.5 million ~~for the nine months ended September 30, 2016. The $68 million decrease~~ was primarily due to ~~cash used by~~management actions to improve working capital as well as the impact of ~~$68 million for~~lower customer demand and production levels in the ~~nine months ended September 30, 2017~~first half of 2020 as compared to ~~cash provided by working capital of $18 million during~~ the same period in ~~2016.~~the prior year. Refer to the ~~Unaudited~~unaudited Consolidated Statements of Cash Flows for additional information.

Investing activities

Net cash used by investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016~~2020 was ~~approximately $12~~$1.2 million, ~~and $26~~as compared to net cash used of $12.3 million ~~respectively.~~for the six months ended June 30, 2019. Cash used ~~for~~by investing activities in the first half of 2020 primarily relates to ~~capital investments in our production processes. Capital spending decreased approximately $14 million due to lower spending compared to~~ the ~~nine months ended September 30, 2016, as a result~~maintenance of ~~targeted strategic capital allocations.~~

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

The Company expects its capital expenditures to ~~remain competitive~~be between $15 million and ~~ensure we can implement strategic initiatives. Our $52~~$20 million ~~construction~~ in ~~progress balance as~~2020, a reduction from the previous outlook of ~~September 30, 2017 includes: (a) $42~~a maximum of $25 million (made up of approximately $6 million relating to growth initiatives ~~(i.e., new product offerings, additional capacity~~ and ~~new capabilities) and~~the remainder related to continuous ~~improvement projects; and (b) $10 million relating primarily to routine~~improvement). The Company has no material capital costs to maintain the reliability, integrity and safety of our manufacturing equipment and facilities. We expect to incur approximately $31 million of additional costs including approximately $23 million relating to additional growth initiatives and continuous improvement and approximately $8 million of additional costs to complete other remaining projects. These additional costs are expected to be incurred during the next one to three years.

expenditure plans or commitments beyond 2020 at this time.

Financing activities

Net cash used by financing activities for the six months ended June 30, 2020 was $30.3 million compared to net cash provided by financing activities of $29.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 was approximately $24 million compared to net cash used by financing activities of approximately~~ ~~$49 million~~ ~~for the nine months ended September 30, 2016. The change was mainly~~2019, primarily due to changes in borrowings ~~of $30 million~~ on the Amended Credit Agreement during the nine months ended September 30, 2017 compared to repayments of $130 million on the Amended Credit Agreement, partially offset by the proceeds of $86.3 million from the issuance of the Convertible Notes during the nine months ended September 30, 2016.

~~Covenant Compliance~~

Under the Amended Credit Agreement, we are required to comply with certain customary covenants, including covenants that limit our 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 our 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 we 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. The fixed charge coverage ratio is the ratio of EBITDA to fixed charges. Fixed charges include, among other things, cash interest, scheduled principal payments, cash taxes, dividends, capital expenditures, and capital lease obligation payments. As of September 30, 2017, we were in compliance with this covenant throughout the term of the Amended Credit Agreement.

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We expect to remain in compliance with our debt covenants for at least the next twelve months. If at any time we expect that we will be unable to meet the covenants under the Amended Credit Agreement, we would seek to further amend the Amended Credit Agreement to be in compliance and avoid a default or pursue other alternatives, such as additional financing. If, contrary to our expectations, we were unable to amend the terms of our Amended Credit Agreement to remain in compliance or refinance the debt under the Amended Credit Agreement, we would experience an event of default and all outstanding debt under the revolving credit ~~facility would be subject to acceleration and may become immediately due and payable.~~

~~For additional discussion regarding risk factors related to our business and our debt, see Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~Dividends and Share Repurchases~~

On November 13, 2015, our Board of Directors decided to suspend the cash dividend as we continued to manage through a challenging market environment. Our Board of Directors will review the dividend as business conditions improve.

~~Critical Accounting Policies and Estimates~~

agreements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

There have been no material changes to these policies during the nine months ended September 30, 2017. For a summary of the critical accounting policies and estimates that we used in the preparation of our Unaudited Consolidated Financial Statements, see our Annual Report on Form 10-K for the year ended December 31, 2016.

New Accounting Guidance

See ~~Note~~“Note 2 - Recent Accounting ~~Pronouncements~~Pronouncements” in the Notes to ~~our Unaudited~~the unaudited Consolidated Financial ~~Statements for a discussion of recently issued accounting pronouncements.~~

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~~Forward-Looking Statements~~

Statements.

FORWARD-LOOKING STATEMENTS

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

•

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

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

•

the effects of fluctuations in customer demand on sales, product mix and prices in the industries in which we operate. This includes: our ability to respond to rapid changes in customer demand; the effects of customer bankruptcies or liquidations; the impact of changes in industrial business cycles; and whether conditions of fair trade exist in the U.S. markets;

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

•

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

•

competitive factors, including changes in market penetration; increasing price competition by existing or new foreign and domestic competitors; the introduction of new products by existing and new competitors; and new technology that may impact the way our products are sold or distributed;

•

changes in operating costs, including the effect of changes in our manufacturing processes; changes in costs associated with varying levels of operations and manufacturing capacity; availability of raw materials and energy; our ability to mitigate the impact of fluctuations in raw materials and energy costs and the effectiveness of our surcharge mechanism; changes in the expected costs associated with product warranty claims; changes resulting from inventory management, cost reduction initiatives and different levels of customer demands; the effects of unplanned work stoppages; and changes in the cost of labor and benefits;

•

the success of our operating plans, announced programs, initiatives and capital investments; and our ability to maintain appropriate relations with unions that represent our associates in certain locations in order to avoid disruptions of business;

the success of our operating plans, announced programs, initiatives and capital investments (including the jumbo bloom vertical caster and advanced quench-and-temper facility); the ability to integrate acquired companies; the ability of acquired companies to achieve satisfactory operating results, including results being accretive to earnings; and our ability to maintain appropriate relations with unions that represent our associates in certain locations in order to avoid disruptions of business;

•

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

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

•

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

•

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

~~those items identified under Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016.~~

•

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

You are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, and that the above list should not be considered to be a complete list. Except as required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our borrowings include both fixed and variable-rate debt. The variable debt consists principally of borrowings under our ~~Amended~~ Credit Agreement. We are exposed to the risk of rising interest rates to the extent we fund our operations with these variable-rate borrowings. As of ~~September~~June 30, ~~2017,~~2020, we have ~~$164.4~~$141.0 million of aggregate debt outstanding, of which ~~$95.2~~$60.0 million consists of debt with variable interest rates. Based on the amount of debt with variable-rate interest outstanding, a 1% rise in interest rates would result in an increase in interest expense of ~~approximately $1~~$0.6 million ~~annually, with a corresponding increase in loss before income taxes of the same amount.~~

annually.

Foreign Currency Exchange Rate Risk

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

Commodity Price Risk

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

ITEM 4. CONTROLS AND PROCEDURES


~~(a)~~	~~Disclosure Controls and Procedures~~

(a) Disclosure Controls and Procedures

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

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


~~(b)~~	~~Changes in Internal Control Over Financial Reporting~~

(b) Changes in Internal Control Over Financial Reporting

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

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PART II. OTHER INFORMATION

~~Item~~

ITEM 1. ~~Legal Proceedings~~

LEGAL PROCEEDINGS

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

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

The U.S. Environmental Protection Agency (EPA) issued two related Notices of Violation (NOV) to TimkenSteel on August 5, 2014 and November 2, 2015, respectively. The EPA alleges violations under the Clean Air Act based on purported violations of permitted emission limits and engineering requirements at TimkenSteel’s Faircrest and Harrison manufacturing facilities. TimkenSteel disputes many of EPA’s allegations but has worked cooperatively with EPA and the U.S. Department of Justice to resolve the government’s claims. Negotiations to resolve the NOVs are essentially concluded. The settlement of these matters is expected to include a civil penalty of approximately $0.4 million and a commitment by the company to make approximately $1.0 million in clean-air related capital improvements, principally at the Harrison manufacturing facility, within one year after the settlement is finalized.

~~Item~~

ITEM 1A. ~~Risk Factors~~

RISK FACTORS

We are subject to various risks and uncertainties in the course of our business. The discussion of such risks and uncertainties may be found under Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the SEC. ~~There~~

Risks Related to COVID-19

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

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

The effects of the COVID-19 pandemic also may impact other risk ~~factors.~~

factors previously disclosed in Item ~~2. Unregistered Sales~~1A. Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. This impact could be to cause previously disclosed risks to occur or to increase the severity of ~~Equity Securities and Use of Proceeds~~

~~None.~~

the negative affect inherent in those other risk factors.

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~~Item~~

ITEM 6. ~~Exhibits~~

EXHIBITS

Exhibit Number		Exhibit Description

~~Exhibit Number~~ 10.1*		~~Exhibit Description~~ Form Director Restricted Share Unit Agreement
10.1* 31.1*		~~Form of Severance Agreement between TimkenSteel and Certain Executive Officers~~
12.1*		~~Computation of Ratio of Earnings to Fixed Charges.~~
31.1*		Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

*	Filed herewith.


**
*	~~Filed herewith.~~
**	Furnished herewith.

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SIGNATURES

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

		TIMKENSTEEL CORPORATION

		~~TIMKENSTEEL CORPORATION~~
Date:	August 6, 2020	/s/Kristopher R. Westbrooks

~~Date:~~	~~October 26, 2017~~	~~/s/ Christopher J. Holding~~
		~~Christopher J. Holding~~ Kristopher R. Westbrooks Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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~~INDEX TO EXHIBITS~~



~~Exhibit Number~~		~~Exhibit Description~~
~~10.1~~		~~Form of Severance Agreement between TimkenSteel and Certain Executive Officers~~
~~12.1~~		~~Computation of Ratio of Earnings to Fixed Charges.~~
~~31.1~~		~~Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~31.2~~		~~Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~32.1~~		~~Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101.INS~~		~~XBRL Instance Document~~
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~



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

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

		PAGE

		~~PAGE~~
PART I. Financial Information		3
Item 1.	Financial Statements	3
	Consolidated Statements of Operations (Unaudited)	3
	Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) (Unaudited)	4
	Consolidated Balance Sheets (Unaudited)	5
	Consolidated Statements of Shareholders’ Equity (Unaudited)	6
	Consolidated Statements of Cash Flows (Unaudited)	67
	Notes to Unaudited Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2726
Item 4.	Controls and Procedures	2726
PART II. Other Information		2728
Item 1.	Legal Proceedings	2728
Item 1A.	Risk Factors	2728
Item 2.6.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Exhibits	2729
~~Item 6.~~	~~Exhibits~~Signatures	2830
	~~Signatures~~	29



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



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

Ohio		46-4024951


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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
(Dollars in millions, except per share data)
Net sales		$339.1			$213.8			$987.8			$654.8
Cost of products sold	320.6			206.3			928.5			629.6
Gross Profit	18.5			7.5			59.3			25.2

Selling, general and administrative expenses	22.5			21.8			67.7			66.8
Restructuring charges	—			—			—			0.3
Operating Loss	(4.0		)	(14.3		)	(8.4		)	(41.9		)

Interest expense	3.7			3.9			11.0			8.0
Other income (expense), net	1.9			(17.3		)	10.7			(12.1		)
Loss Before Income Taxes	(5.8		)	(35.5		)	(8.7		)	(62.0		)
Provision (benefit) for income taxes	0.1			(13.3		)	1.2			(23.5		)
Net Loss		($5.9	)		($22.2	)		($9.9	)		($38.5	)

Per Share Data:
Basic loss per share		($0.13	)		($0.50	)		($0.22	)		($0.87	)
Diluted loss per share		($0.13	)		($0.50	)		($0.22	)		($0.87	)

Dividends per share		$—			$—			$—			$—



	September 30, 2017			December 31, 2016
(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents		$25.8			$25.6
Accounts receivable, net of allowances (2017 - $2.6 million; 2016 - $2.1 million)	160.6			91.6
Inventories, net	219.5			164.2
Deferred charges and prepaid expenses	4.2			2.8
Other current assets	7.4			6.2
Total Current Assets	417.5			290.4

Property, Plant and Equipment, Net	701.6			741.9

Other Assets
Pension assets	9.8			6.2
Intangible assets, net	20.9			25.0
Other non-current assets	6.0			6.4
Total Other Assets	36.7			37.6
Total Assets		$1,155.8			$1,069.9

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable, trade		$133.8			$87.0
Salaries, wages and benefits	30.4			20.3
Accrued pension and postretirement costs	3.0			3.0
Other current liabilities	21.4			20.4
Total Current Liabilities	188.6			130.7

Non-Current Liabilities
Convertible notes, net	69.2			66.4
Other long-term debt	95.2			70.2
Accrued pension and postretirement costs	196.2			192.1
Deferred income taxes	0.7			—
Other non-current liabilities	13.2			13.1
Total Non-Current Liabilities	374.5			341.8

Shareholders’ Equity
Preferred shares, without par value; authorized 10.0 million shares, none issued	—			—
Common shares, without par value; authorized 200.0 million shares; issued 2017 and 2016 - 45.7 million shares	—			—
Additional paid-in capital	842.3			845.6
Retained deficit	(204.1		)	(193.9		)
Treasury shares - 2017 - 1.3 million; 2016 - 1.5 million	(37.6		)	(44.9		)
Accumulated other comprehensive loss	(7.9		)	(9.4		)
Total Shareholders’ Equity	592.7			597.4
Total Liabilities and Shareholders’ Equity		$1,155.8			$1,069.9



	September 30, 2017			December 31, 2016
Inventories, net:
Manufacturing supplies		$36.6			$37.9
Raw materials	31.7			16.2
Work in process	96.3			58.6
Finished products	63.5			59.6
Subtotal	228.1			172.3
Allowance for surplus and obsolete inventory	(8.6		)	(8.1		)
Total Inventories, net		$219.5			$164.2



	September 30, 2017			December 31, 2016
Property, Plant and Equipment, net:
Land		$13.4			$13.3
Buildings and improvements	418.9			420.6
Machinery and equipment	1,354.1			1,352.0
Construction in progress	51.6			63.9
Subtotal	1,838.0			1,849.8
Less allowances for depreciation	(1,136.4		)	(1,107.9		)
Property, Plant and Equipment, net		$701.6			$741.9



	September 30, 2017						December 31, 2016
	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		$4.0		$2.3		$6.3		$3.7		$2.6
Technology use	9.0		5.8		3.2		9.0		5.2		3.8
Capitalized software	58.5		43.1		15.4		58.9		40.3		18.6
Total Intangible Assets		$73.8		$52.9		$20.9		$74.2		$49.2		$25.0



	September 30, 2017		December 31, 2016
Variable-rate State of Ohio Water Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.862% as of September 30, 2017)		$12.2		$12.2
Variable-rate State of Ohio Air Quality Development Revenue Refunding Bonds, maturing on November 1, 2025 (0.862% as of September 30, 2017)	9.5		9.5
Variable-rate State of Ohio Pollution Control Revenue Refunding Bonds, maturing on June 1, 2033 (0.862% as of September 30, 2017)	8.5		8.5
Amended Credit Agreement, due 2019 (LIBOR plus applicable spread)	65.0		40.0
Total Other Long-Term Debt		$95.2		$70.2



	Three Months Ended September 30, 2017						Three Months Ended September 30, 2016
Components of net periodic benefit cost:	Pension			Postretirement			Pension			Postretirement
Service cost		$4.6			$0.4			$3.9			$0.4
Interest cost	12.3			2.1			13.2			2.4
Expected return on plan assets	(17.7		)	(1.3		)	(18.1		)	(1.5		)
Amortization of prior service cost	0.1			0.2			0.1			0.2
Net remeasurement loss	2.3			—			20.4			—
Net Periodic Benefit Cost		$1.6			$1.4			$19.5			$1.5



	Nine Months Ended September 30, 2017						Nine Months Ended September 30, 2016
Components of net periodic benefit cost:	Pension			Postretirement			Pension			Postretirement
Service cost		$13.8			$1.2			$11.7			$1.2
Interest cost	36.8			6.3			39.8			7.1
Expected return on plan assets	(52.9		)	(4.0		)	(53.6		)	(4.4		)
Amortization of prior service cost	0.3			0.8			0.4			0.8
Net remeasurement loss	2.3			—			20.4			—
Net Periodic Benefit Cost		$0.3			$4.3			$18.7			$4.7



	Three			Nine
	Months ended September 30, 2016
Cost of products sold		($13.3	)		($7.7	)
Selling, general and administrative expenses	(3.4		)	(2.8		)
		($16.7	)		($10.5	)



Property, Plant and Equipment	September 30, 2017		December 31, 2016
Property, plant and equipment, net		$701.6		$741.9