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Press release from PR Newswire

AK Steel Reports Financial Results for Third Quarter of 2012

Tuesday, October 23, 2012

AK Steel Reports Financial Results for Third Quarter of 201208:30 EDT Tuesday, October 23, 2012WEST CHESTER, Ohio, Oct. 23, 2012 /PRNewswire/ -- AK Steel (NYSE: AKS) today reported a net loss of $60.9 million, or $0.55 per diluted share of common stock, for the third quarter of 2012, compared to a net loss of $3.5 million, or $0.03 per diluted share, for the third quarter of 2011. The 2012 third quarter results include a non-cash income tax expense of $33.1 million, or $0.30 per diluted share, as a result of the change in a tax valuation allowance. The company reported a loss before income taxes of $28.7 million for the third quarter of 2012, compared to a loss before income taxes of $6.8 million for the third quarter of 2011.Net sales for the third quarter of 2012 were $1,463.5 million on shipments of 1,363,500 tons, compared to net sales of $1,585.8 million on shipments of 1,368,800 tons for the year-ago third quarter and net sales of $1,538.4 million on shipments of 1,335,800 tons for the second quarter of 2012. The company said its average selling price for the third quarter of 2012 was $1,073 per ton, a 7% decrease from both the second quarter of 2012 and the third quarter of 2011. The lower average selling price for the third quarter 2012 compared to the second quarter of 2012 was primarily due to lower spot market prices for carbon steel products, reduced raw material surcharges and a lower value-added product mix.The company reported adjusted EBITDA (as defined in the table below) of $27.2 million, or $20 per ton, for the third quarter of 2012 compared to adjusted EBITDA of $59.3 million, or $43 per ton, for the third quarter of 2011. The adjusted EBITDA excludes EBITDA of noncontrolling interests as shown in the financial table included with this news release. Included in the results for the third quarter of 2012 were planned major maintenance outage costs of $28.5 million, primarily for outages at the company's Ashland Works blast furnace and Middletown Works hot strip mill, compared to outage costs of $1.7 million for the third quarter of 2011. The 2012 third quarter results include a LIFO credit of $27.5 million, compared to a LIFO credit of $9.5 million in the third quarter of 2011 and a LIFO credit of $18.3 million for the second quarter of 2012."Challenging domestic and global economic conditions continue to weigh on shipping volumes and prices," said James L. Wainscott, Chairman, President and CEO of AK Steel. "Additionally, while we expect to enjoy lower raw material costs in the future, we are still working through some higher cost raw material inventories."The company ended the third quarter of 2012 with $47.1 million of cash and cash equivalents and $557.8 million of availability under the company's revolving credit facility, for total liquidity of $604.9 million.Nine-Month Results For the first nine months of 2012, the company reported a net loss of $796.9 million, or $7.21 per diluted share, which includes income tax expense of $767.3 million, almost entirely due to a non-cash change in a tax valuation allowance. For the corresponding 2011 period, the company reported net income of $38.3 million, or $0.35 per diluted share.The company reported a loss before income taxes of $9.7 million for the first nine months of 2012, compared to income before income taxes of $64.4 million for the first nine months of 2011.Net sales for the first nine months of 2012 were $4,510.6 million compared to $4,958.8 million for the first nine months of 2011. Shipments for the first nine months of 2012 were 4,025,200 tons compared to 4,288,900 tons for the first nine months of 2011.The company reported adjusted EBITDA of $164.4 million, or $41 per ton, for the first nine months of 2012, compared to adjusted EBITDA of $253.6 million, or $59 per ton, for the same period of 2011. Earnings for the first nine months of 2012 were negatively impacted by the decrease in sales along with higher coke costs, which were partially offset by decreases in costs for carbon scrap and energy.Fourth Quarter 2012 Outlook Consistent with its current practice, the company said that it will not provide detailed guidance for its fourth quarter results at this time. The company said that it intends to provide such detailed fourth quarter guidance later during the quarter. However, in advance of that guidance, the company noted that, based on current conditions, it expects to incur a net loss for the fourth quarter of 2012. The company notes that this anticipated net loss includes a non-cash tax expense for the fourth quarter as a result of an anticipated change in its tax valuation allowance, which the company expects to incur regardless of its fourth quarter pre-tax financial results.Safe Harbor Statement The statements in this release with respect to future results reflect management's estimates and beliefs and are intended to be, and hereby are identified as "forward-looking statements" for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "believes," "intends," "plans," "estimates" and other similar references to future periods typically identify such forward-looking statements.The company cautions readers that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently expected by management, including those risks and uncertainties discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2011, as updated in subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with or furnished to the Securities and Exchange Commission. Except as required by law, the company disclaims any obligation to update any forward-looking statements to reflect future developments or events.AK Steel AK Steel produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets. The company employs about 6,200 men and women in Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pennsylvania; Ashland, Kentucky; Rockport, Indiana; and its corporate headquarters in West Chester, Ohio. Additional information about AK Steel is available on the company's web site at www.aksteel.com.AK Tube LLC, a wholly-owned subsidiary of AK Steel, employs about 300 men and women in plants in Walbridge, Ohio and Columbus, Indiana. AK Tube produces carbon and stainless electric resistance welded (ERW) tubular steel products for truck, automotive and other markets. Additional information about AK Tube LLC is available on its web site at www.aktube.com.AK Coal Resources, Inc., another wholly-owned subsidiary of AK Steel, owns or leases metallurgical coal reserves in Somerset County, Pennsylvania. AK Steel also owns 49.9% of Magnetation LLC, a joint venture headquartered in Grand Rapids, Minnesota, which produces iron ore concentrate from previously mined ore reserves.AK STEEL HOLDING CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(Dollars and shares in millions, except per share and per ton data)Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Shipments (000 tons)1,363.51,368.84,025.24,288.9Selling price per ton$1,073$1,158$1,120$1,151Net sales$1,463.5$1,585.8$4,510.6$4,958.8Cost of products sold1,385.01,482.64,186.44,585.2Selling and administrative expenses51.954.6158.5161.6Depreciation48.246.1144.9139.3Pension and OPEB expense (income)(9.6)(8.9)(28.0)(26.7)Total operating costs1,475.51,574.44,461.84,859.4Operating profit (loss)(12.0)11.448.899.4Interest expense22.413.560.433.7Other income (expense)5.7(4.7)1.9(1.3)Income (loss) before income taxes(28.7)(6.8)(9.7)64.4Income tax provision (benefit)23.8(0.7)767.329.6Net income (loss)(52.5)(6.1)(777.0)34.8Less: Net income (loss) attributable to noncontrolling interests8.4(2.6)19.9(3.5)Net income (loss) attributable to AK Steel Holding Corporation$(60.9)$(3.5)$(796.9)$38.3Basic and diluted earnings per share:     Net income (loss) attributable to AK Steel Holding Corporation$(0.55)$(0.03)$(7.21)$0.35Weighted-average shares outstanding:   Basic110.2109.8110.1109.8   Diluted110.2109.8110.1109.9Dividends declared and paid per share$-$0.05$0.10$0.15 AK STEEL HOLDING CORPORATIONCONSOLIDATED BALANCE SHEETS(Unaudited)(Dollars in millions, except per share amounts)September 30, 2012December 31, 2011ASSETS  Current assets:  Cash and cash equivalents$47.1$42.0  Accounts receivable, net565.6564.2  Inventory, net727.8418.7  Other current assets66.4249.5     Total current assets1,406.91,274.4Property, plant and equipment5,984.55,967.2Accumulated depreciation(3,942.5)(3,797.0)Property, plant and equipment, net2,042.02,170.2Other non-current assets471.81,005.3TOTAL ASSETS$3,920.7$4,449.9LIABILITIES AND EQUITY (DEFICIT)Current liabilities:  Short-term borrowings under credit facility$42.0$250.0  Accounts payable603.2583.6  Accrued liabilities185.6172.8  Current portion of long-term debt0.70.7  Current portion of pension and other postretirement benefit obligations125.4130.0     Total current liabilities956.91,137.1Long-term debt, including $400.0 of credit facility borrowings at Sept. 30, 20121,349.5650.0Pension and other postretirement benefit obligations1,503.41,744.8Other non-current liabilities524.8540.8TOTAL LIABILITIES4,334.64,072.7Equity (deficit):  Common stock, authorized 200,000,000 shares of $.01 par value each;    issued 123,779,646 and 123,229,210 shares in 2012 and 2011; outstanding    110,630,790 and 110,284,228 shares in 2012 and 20111.21.2  Additional paid-in capital1,933.71,922.2  Treasury stock, common shares at cost, 13,148,856 and 12,944,982 shares    in 2012 and 2011(173.3)(171.6)  Accumulated deficit(2,173.9)(1,366.0)  Accumulated other comprehensive income (loss)(22.2)2.7     TOTAL STOCKHOLDERS' EQUITY (DEFICIT)(434.5)388.5  Noncontrolling interests20.6(11.3)  TOTAL EQUITY (DEFICIT)(413.9)377.2TOTAL LIABILITIES AND EQUITY (DEFICIT)$3,920.7$4,449.9  AK STEEL HOLDING CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(Dollars in millions)Nine Months EndedSeptember 30,20122011CASH FLOWS FROM OPERATING ACTIVITIES:  Net income (loss)$(777.0)$34.8  Depreciation134.7139.3  Depreciation-SunCoke Middletown10.2-  Amortization12.811.7  Deferred income taxes753.428.2  Pension and OPEB expense (income)(28.0)(26.7)  Contributions to pension trust(170.2)(170.0)  Contributions to Middletown and Butler retirees VEBAs(31.7)(87.6)  Other postretirement benefit payments(48.3)(56.7)  Working capital(217.1)(202.5)  Working capital-SunCoke Middletown(29.8)(11.1)  Other operating items, net3.1(14.8)     Net cash flows from operating activities(387.9)(355.4)CASH FLOWS FROM INVESTING ACTIVITIES:  Capital investments(31.8)(88.0)  Capital investments-SunCoke Middletown(17.5)(163.2)  Investments in acquired businesses(38.1)-  Other investing items, net4.60.7     Net cash flows from investing activities(82.8)(250.5)CASH FLOWS FROM FINANCING ACTIVITIES:  Net borrowings under credit facility192.0295.0  Proceeds from issuance of long-term debt373.3-  Redemption of long-term debt(73.9)(0.5)  Debt issuance costs(8.6)(9.2)  Proceeds from exercise of stock options-0.2  Purchase of treasury stock(1.7)(1.4)  Common stock dividends paid(11.0)(16.5)  SunCoke Middletown advances from noncontrolling interest owner5.5180.3  Other financing items, net0.2(0.1)     Net cash flows from financing activities475.8447.8Net increase (decrease) in cash and cash equivalents5.1(158.1)Cash and cash equivalents, beginning of period42.0216.8Cash and cash equivalents, end of period$47.1$58.7 AK STEEL HOLDING CORPORATION ADJUSTED EBITDA (Unaudited) (Dollars in millions)   In certain of its disclosures in this news release, the company has reported adjusted EBITDA because management believes that it enhances the understanding of the company's financial results. EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. It is a metric that is sometimes used to compare the results of companies by removing the effects of different factors that might otherwise make comparisons inaccurate or inappropriate. For purposes of this news release, the company has made an adjustment to EBITDA in order to exclude the effect of noncontrolling interests. For purposes of this report, "Adjusted EBITDA" is defined as net income (loss) attributable to AK Holding, plus income tax provision (benefit), net interest expense, depreciation and amortization. Adjusted EBITDA is presented because the company believes it is a useful indicator of its performance and ability to meet debt service and capital expenditure requirements. It is not, however, intended as an alternative measure of operating results or cash flow from operations as determined in accordance with generally accepted accounting principles. Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies.Neither current shareholders nor potential investors in the company's securities should rely on adjusted EBITDA as a substitute for any GAAP financial measure and the company encourages investors and potential investors to review the following reconciliation of net income (loss) attributable to AK Holding to adjusted EBITDA.   Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Net income (loss) attributable to AK Holding$(60.9)$(3.5)$(796.9)$38.3Noncontrolling interests8.4(2.6)19.9(3.5)Income tax provision (benefit)23.8(0.7)767.329.6Interest expense22.413.560.433.7Interest income(0.1)(0.2)(0.3)(0.4)Depreciation48.246.1144.9139.3Amortization2.22.611.411.1EBITDA44.055.2206.7248.1Less: EBITDA of noncontrolling interests16.8(4.1)42.3(5.5)Adjusted EBITDA$27.2$59.3$164.4$253.6 AK STEEL HOLDING CORPORATIONSTEEL SHIPMENTS(Unaudited)(Tons in thousands)Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Tons Shipped by ProductStainless/electrical218.2229.3660.6699.4Coated572.5577.21,753.61,830.3Cold-rolled285.5278.3848.6941.2Tubular31.532.4103.599.4Subtotal value-added shipments1,107.71,117.23,366.33,570.3Hot-rolled211.2222.6553.3622.2Secondary44.629.0105.696.4Subtotal non value-added shipments255.8251.6658.9718.6Total shipments1,363.51,368.84,025.24,288.9Shipments by Product (%)Stainless/electrical16.0%16.7%16.4%16.3%Coated42.0%42.2%43.6%42.7%Cold-rolled20.9%20.3%21.1%22.0%Tubular2.3%2.4%2.6%2.3%Subtotal value-added shipments81.2%81.6%83.7%83.3%Hot-rolled15.5%16.3%13.7%14.5%Secondary3.3%2.1%2.6%2.2%Subtotal non value-added shipments18.8%18.4%16.3%16.7%Total shipments100.0%100.0%100.0%100.0% SOURCE AK SteelFor further information: Media Barry L. Racey, Director, Government and Public Relations, +1-513-425-2749; Investors: Albert E. Ferrara, Jr., Senior Vice President, Corporate Strategy and Investor Relations, +1-513-425-2888