Supplementary Financial Statement Information (Notes)

9 Months Ended

Sep. 30, 2019

Supplementary Financial Statement Information

Revenue

Net sales by market are presented below:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Automotive	$	1,040.0	$	1,036.7	$	3,212.6	$	3,264.5
Infrastructure and Manufacturing	239.8		277.1		785.6		782.2
Distributors and Converters	255.7		421.8		915.5		1,094.4
Total	$	1,535.5	$	1,735.6	$	4,913.7	$	5,141.1

Net sales by product line are presented below:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Carbon steel	$	1,000.9	$	1,132.6	$	3,202.3	$	3,303.6
Stainless and electrical steel	389.3		454.3		1,264.8		1,363.5
Tubular products, components and other	145.3		148.7		446.6		474.0
Total	$	1,535.5	$	1,735.6	$	4,913.7	$	5,141.1

We sell domestically to customers located primarily in the Midwestern, Southern and Eastern United States and to foreign customers, primarily in Canada, Mexico and Western Europe. Net sales to customers located outside the United States were $144.3 and $439.6 for the three and nine months ended September 30, 2019, compared to $149.6 and $490.3 for the corresponding periods in 2018.

Inventory

Inventories as of September 30, 2019 and December 31, 2018, are presented below:



	September 30, 2019		December 31, 2018
Finished and semi-finished	$	1,017.5	$	1,054.4
Raw materials	345.2		365.5
Inventory	$	1,362.7	$	1,419.9

Other Non-Current Assets

Intangible assets at September 30, 2019 and December 31, 2018, consist of:



	Gross Amount		Accumulated Amortization			Net Amount
As of September 30, 2019
Customer relationships	$	36.6	$	(11.3	)	$	25.3
Technology	23.0		(7.8		)	15.2
Intangible assets	$	59.6	$	(19.1	)	$	40.5

As of December 31, 2018
Customer relationships	$	36.6	$	(7.4	)	$	29.2
Technology	19.3		(4.6		)	14.7
Intangible assets	$	55.9	$	(12.0	)	$	43.9

Amortization expense related to intangible assets was $2.9 and $7.1 for the three and nine months ended September 30, 2019, compared to $2.2 and $6.9 for the three and nine months ended September 30, 2018.

Investments in Affiliates

We have investments in several businesses that are accounted for using the equity method of accounting. Summarized financial statement data for all investees is presented below.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenue	$	81.4	$	88.9	$	242.2	$	247.2
Gross profit	21.2		24.5		66.7		69.2
Net income	1.8		6.4		8.8		15.7

Our share of income of equity investees (included in cost of products sold)	0.3		2.5		2.4		5.5

Ashland Works Closure

In January 2019, our Board of Directors approved and we announced the planned closure of our Ashland Works, including the previously idled blast furnace and steelmaking operations (“Ashland Works Hot End”) and the hot dip galvanizing coating line that has continued to operate. Factors that influenced our decision to close Ashland Works included an uncertain global trade landscape influenced by shifting domestic and international political priorities, Ashland Works’ high cost of production, and continued intense competition from domestic and foreign steel competitors. These conditions directly impacted our pricing, which in turn directly impacted our assessment of the demand forecasts for the markets we serve. Despite several favorable trade actions, carbon steel imports remained at a high level, driven by global overcapacity, particularly in China. We expected global overcapacity to be exacerbated by several domestic steel companies that had restarted or planned new capacity additions in the United States. In addition, we concluded that we had sufficient coating capacity to meet our customers’ needs without using our coating operations at Ashland Works. We are presently transitioning products to our other U.S. coating lines, and plan to close the Ashland Works coating line before the end of 2019.

We recorded a charge during the first quarter of 2019 as a result of this announcement. For the nine months ended September 30, 2019, the charge of $77.4 included $18.5 for termination of take-or-pay supply agreements, $20.2 for supplemental unemployment and other employee benefit costs, pension and OPEB termination benefits of $13.3 (recorded in pension and OPEB (income) expense), an estimated multiemployer plan withdrawal liability of $18.0, and $7.4 for other costs. The supplemental unemployment and other employee benefit costs are expected to be paid primarily in 2020 and 2021. For the $77.4 charge, we expect to make cash payments of approximately $15.0 in 2019, $30.0 in 2020 and the remaining amount over several years thereafter. The actual multiemployer plan withdrawal liability will not be known until a future date and is expected to be paid over a number of years. In addition to the $77.4 charge, we expect to record expenses of approximately $14.0 over the full-year 2019, consisting of cash costs of approximately $10.0 related to closing the facility and $4.0 of accelerated depreciation related to the coating line fixed assets. These cash costs related to closing the facility will decline in future years and no depreciation expense will be incurred beyond 2019. Ongoing costs to maintain the equipment and utilities and meet supplier obligations related to the idled Ashland Works Hot End were $2.1 and $7.0 for the three and nine months ended September 30, 2019, and $4.7 and $15.1 for the corresponding periods in 2018.