AK Steel Reports Financial Results For Second Quarter Of 2014

        AK Steel Reports Financial Results For Second Quarter Of 2014

PR Newswire

WEST CHESTER, Ohio, July 29, 2014

WEST CHESTER, Ohio, July 29, 2014 /PRNewswire/ --AK Steel (NYSE: AKS) today
reported its financial results for the second quarter of 2014.

2nd Quarter 2014 Performance Summary

  oShipments of 1,397,500 tons
  oSales of $1.53 billion with an average selling price of $1,095 per ton
  oNet after-tax loss of $17.1 million, or $0.13 per diluted share
  oAdjusted net income of $2.9 million, or $0.02 per diluted share
  oAdjusted EBITDA of $64.5 million
  oEnded 2nd quarter with solid liquidity of $539 million

AK Steel reported a net loss of $17.1 million, or $0.13 per diluted share of
common stock, for the second quarter of 2014, compared to a net loss of $40.4
million, or $0.30 per diluted share, for the second quarter of 2013 and net
loss of $86.1 million, or $0.63 per diluted share, for the first quarter of
2014. Excluding the unrealized mark-to-market loss on commodity derivatives
discussed below, the company reported adjusted net income of $2.9 million, or
$0.02 per diluted share. The company reported adjusted EBITDA (as defined in
the "Non-GAAP Financial Measures" section below) of $64.5 million, or $46 per
ton, for the second quarter of 2014 compared to adjusted EBITDA of $47.5
million, or $36 per ton, for the year-ago second quarter and an adjusted
EBITDA loss of $2.8 million, or $2 per ton, for the first quarter of 2014.

"We experienced meaningful improvements in virtually every aspect of our
business in the second quarter as compared to the first quarter of 2014," said
James L. Wainscott, Chairman, President and CEO of AK Steel. "Despite facing
some significant challenges in the second quarter, on an adjusted basis, we
earned net income and we are well-positioned for a much better third quarter
and second-half of 2014."

Net sales for the second quarter of 2014 were $1.53 billion on shipments of
1,397,500 tons, compared to net sales of $1.40 billion on shipments of
1,323,700 tons for the year-ago second quarter and net sales of $1.38 billion
on shipments of 1,262,100 tons for the first quarter of 2014. The increase in
shipments in the second quarter of 2014 compared to the first quarter of 2014
was primarily a result of the recovery from the planned and unplanned outages
at the Ashland Works blast furnace in the first quarter, partially offset by
the effects of the extreme winter weather conditions which reduced the
availability of iron ore pellets.

The company said its average selling price for the second quarter of 2014 was
$1,095 per ton, essentially flat with the first quarter of 2014. Improved
selling prices in the second quarter for many of the company's products were
offset by a change in mix, as more shipments of lower value-added products
were made to the carbon spot market. The company also said its average selling
price for the second quarter of 2014 increased 3% from the second quarter of
2013, primarily as a result of higher spot market prices for carbon steel
products.

Costs of products sold increased in the second quarter of 2014 due to the
continued adverse effects of the extreme cold weather conditions the company
experienced in the first quarter. Those conditions resulted in an
extraordinarily high level of ice coverage on the Great Lakes, which delayed
the start of the 2014 shipping season on the Great Lakes and slowed the
movement of iron ore. As a result, the available supply of iron ore to the
steel industry in the second quarter was less than had been anticipated, and
the company was forced to reduce the production rate at its blast furnaces to
match production levels to the available supply of iron ore. The company also
experienced higher transportation costs for the iron ore pellets it received
in the second quarter. The company incurred additional costs for these issues
in the second quarter of 2014 of approximately $15.0 million, or $0.11 per
diluted share.

The company incurred $2.5 million of costs for planned outages during the
second quarter of 2014, compared to $21.6 million in the year-ago second
quarter and $29.4 million in the first quarter of 2014.

The 2014 second quarter results included a LIFO credit of $3.3 million,
compared to a LIFO credit of $12.4 million for the second quarter of 2013 and
a LIFO credit of $1.5 million for the first quarter of 2014.

The company ended the second quarter of 2014 with total liquidity of $538.9
million consisting of cash and cash equivalents and $502.5 million of
availability under the company's revolving credit facility. Consistent with
prior seasonal patterns, working capital was a use of $149.0 million of cash
in the second quarter of 2014, primarily as a result of an increase in
accounts receivable from strong June sales and interest payments. The company
anticipates that working capital will continue to be a use of cash in the
third quarter and a significant source of cash in the fourth quarter of 2014.

Six-Month Results
For the first six months of 2014, the company reported a net loss of $103.2
million, or $0.76 per diluted share. For the corresponding six months of 2013,
the company reported a net loss of $50.3 million, or $0.37 per diluted share.
Sales for the first six months of 2014 were $2.91 billion compared to sales of
$2.77 billion in the first half of 2013. Shipments for the first half of 2014
were 2,659,600 tons compared to 2,613,500 tons in the first half of 2013.

Extreme winter weather conditions in early 2014 resulted in extra costs of
approximately $45.0 million for the first six months of 2014. Energy costs
were higher in the first quarter of 2014, primarily for electricity and
natural gas. The extreme winter weather conditions also affected the delivery
of iron ore pellets in the second quarter of 2014 with the company incurring
additional costs for transportation and operations. The first six months of
2014 also included $23.4 million in mark-to-market losses on derivatives
(discussed below) and a $5.8 million charge relating to a tentative settlement
of certain class action antitrust claims.

An incident at the company's Ashland (KY) Works blast furnace in February 2014
resulted in unplanned outage costs of approximately $18.0 million in the first
six months of 2014. In June 2013, an incident at the company's Middletown (OH)
Works blast furnace resulted in unplanned outage costs of approximately $6.2
million in the first six months of 2013.

The company recorded expenses of $31.9 million during the first six months of
2014 for planned outages, compared to expenses of $22.6 million during the
first six months of 2013.

Hedging
AK Steel uses various derivatives to hedge the price of certain commodities,
primarily iron ore and energy. For some of these derivatives, the company is
unable to or does not use hedge accounting treatment under U.S. generally
accepted accounting principles, but instead records changes in the values of
the derivatives in the statement of operations using mark-to-market
accounting. As a result, unrealized gains and losses are recognized prior to
the periods that the underlying exposures being hedged are recognized. The
results for the first six months of 2014 include $23.4 million, or $0.18 per
diluted share, for unrealized mark-to-market losses on derivatives, primarily
in costs of products sold, with $20.0 million, or $0.15 per diluted share, of
that amount coming in the second quarter of the year. However, the company
expects that either its cost for purchasing iron ore and other commodities
associated with the hedging strategies will be reduced by a similar amount in
future periods, or an offsetting unrealized gain will be recognized if the
mark-to-market loss on the derivative reverses before settlement. Therefore,
the company anticipates that the mark-to-market losses included in its results
for the first six months of 2014 are primarily a matter of timing and will be
substantially offset in the remainder of 2014.

Third Quarter 2014 Outlook
Consistent with its current practice, the company expects to provide detailed
guidance for its third quarter results in September.

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 that the acquisition of
Severstal Dearborn may not be consummated, or may not be consummated in a
timely manner; that regulatory approval not be obtained or may only be
obtained subject to conditions that are not anticipated; that Severstal
Dearborn will not be integrated successfully into AK Steel following the
consummation of the acquisition; and that cost savings, synergies, accretion
to earnings, increased shipments and other anticipated benefits and
opportunities from the acquisition may not be fully realized or may take
longer to realize than expected. In addition, our results and financial
condition and any benefits from the acquisition, if consummated, could be
adversely affected by reduced selling prices, shipments and profits associated
with a highly competitive industry with excess capacity; changes in the cost
of raw materials and energy; the company's significant amount of debt and
other obligations; severe financial hardship or bankruptcy of one or more of
the company's major customers; reduced demand in key product markets due to
competition from alternatives to steel or other factors; increased global
steel production and imports; excess inventory of raw materials; supply chain
disruptions or poor quality of raw materials; production disruption or reduced
production levels; the company's healthcare and pension obligations; not
timely reaching new labor agreements; major litigation, arbitrations,
environmental issues and other contingencies; regulatory compliance and
changes; climate change and greenhouse gas emission limitations; conditions in
the financial, credit, capital and banking markets; the company's use of
derivative contracts to hedge commodity pricing volatility; the value of the
company's net deferred tax assets; inability to fully realize benefits of
long-term cost savings and margin enhancement initiatives; lower quantities,
quality or yield of estimated coal reserves of AK Coal; increased governmental
regulation of mining activities; inability to hire or retain skilled labor and
experienced manufacturing and mining managers; and IT security threats and
sophisticated cybercrime; as well as those risks and uncertainties discussed
in the company's Annual Report on Form 10-K for the year ended December 31,
2013, 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 is a world leader in the production of flat-rolled carbon, stainless
and electrical steel products, primarily for automotive, infrastructure and
manufacturing, construction and electrical power generation and distribution
markets. The company's AK Tube subsidiary produces carbon and stainless
electric resistance welded tubular steel products for truck, automotive and
other markets. Headquartered in West Chester, Ohio (Greater Cincinnati), the
company employs approximately 6,500 men and women at seven steel plants and
two tube manufacturing plants across four states: Indiana, Kentucky, Ohio and
Pennsylvania. The company also has interests in iron ore through its
Magnetation LLC joint venture and in metallurgical coal through its AK Coal
subsidiary. Additional information about AK Steel is available at
www.aksteel.com. 



AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars and shares in millions, except per share and per ton data)
                                Three Months Ended      Six Months Ended
                                June 30,                June 30,
                                2014        2013        2014        2013
Shipments (000 tons)            1,397.5     1,323.7     2,659.6     2,613.5
Selling price per ton           $ 1,095     $ 1,061     $ 1,096     $ 1,061
Net sales                       $ 1,530.8   $ 1,404.5   $ 2,914.3   $ 2,774.3
Cost of products sold           1,416.9     1,309.2     2,752.5     2,561.5
Selling and administrative      53.9        50.2        114.1       101.8
expenses
Depreciation                    48.5        47.9        97.2        96.5
Pension and OPEB expense        (25.0)      (16.5)      (50.7)      (32.4)
(income)
Total operating costs           1,494.3     1,390.8     2,913.1     2,727.4
Operating profit                36.5        13.7        1.2         46.9
Interest expense                33.2        32.0        65.4        63.0
Other income (expense)          (3.0)       2.5         (4.9)       4.3
Income (loss) before income     0.3         (15.8)      (69.1)      (11.8)
taxes
Income tax expense              1.8         9.7         3.6         6.9
Net income (loss)               (1.5)       (25.5)      (72.7)      (18.7)
Less: Net income attributable   15.6        14.9        30.5        31.6
to noncontrolling interests
Net income (loss) attributable
to AK Steel Holding             $ (17.1)    $ (40.4)    $ (103.2)   $ (50.3)
Corporation
Basic and diluted earnings per
share:
Net income (loss) attributable
to AK Steel Holding             $ (0.13)    $ (0.30)    $ (0.76)    $ (0.37)
Corporation
Weighted-average shares
outstanding:
Basic                           136.2       135.8       136.2       135.8
Diluted                         136.2       135.8       136.2       135.8





AK STEEL HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)
                                                 June 30,    December 31, 2013
                                                 2014
ASSETS
Current assets:
Cash and cash equivalents                        $ 54.8      $    45.3
Accounts receivable, net                         596.2       525.2
Inventory, net                                   738.3       586.6
Other current assets                             116.7       116.1
Total current assets                             1,506.0     1,273.2
Property, plant and equipment                    5,893.6     5,871.9
Accumulated depreciation                         (4,088.3)   (3,991.8)
Property, plant and equipment, net               1,805.3     1,880.1
Investment in Magnetation LLC                    229.0       187.8
Other non-current assets                         266.3       264.6
TOTAL ASSETS                                     $ 3,806.6   $    3,605.7
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                 $ 642.4     $    601.8
Accrued liabilities                              170.2       142.9
Current portion of long-term debt                0.4         0.8
Current portion of pension and other             69.5        85.9
postretirement benefit obligations
Total current liabilities                        882.5       831.4
Long-term debt                                   1,948.2     1,506.2
Pension and other postretirement benefit         816.3       965.4
obligations
Other non-current liabilities                    115.3       110.0
TOTAL LIABILITIES                                3,762.3     3,413.0
Equity:
Common stock, authorized 300,000,000 shares of
$0.01 par value each; issued 136,936,413 and
149,691,388 shares in 2014 and 2013;             1.4         1.5
outstanding 136,793,421 and 136,380,078 shares
in 2014 and 2013
Additional paid-in capital                       1,910.9     2,079.2
Treasury stock, common shares at cost, 142,992   (1.0)       (174.0)
and 13,311,310 shares in 2014 and 2013
Accumulated deficit                              (2,554.3)   (2,451.1)
Accumulated other comprehensive income           272.0       323.4
Total stockholders' equity (deficit)             (371.0)     (221.0)
Noncontrolling interests                         415.3       413.7
TOTAL EQUITY                                     44.3        192.7
TOTAL LIABILITIES AND EQUITY                     $ 3,806.6   $    3,605.7



Note: In January 2014, the Board of Directors authorized the formal retirement
of 13,311,310 shares of common stock held by the Company as treasury stock.
The retirement had no effect on the number of shares authorized or outstanding
or on total stockholders' equity.



AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
                                                          Six Months Ended
                                                          June 30,
                                                          2014       2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                         $ (72.7)   $ (18.7)
Depreciation                                              90.1       89.6
Depreciation—SunCoke Middletown                           7.1        6.9
Amortization                                              10.8       10.7
Deferred income taxes                                     2.5        5.5
Pension and OPEB expense (income)                         (50.7)     (32.4)
Contributions to pension trust                            (112.4)    (71.3)
Other postretirement benefit payments                     (34.7)     (32.5)
Changes in working capital                                (162.4)    (62.7)
Changes in working capital—SunCoke Middletown             (5.2)      1.1
Other operating items, net                                (3.5)      (0.7)
 Net cash flows from operating activities           (331.1)    (104.5)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments                                       (27.3)     (31.0)
Capital investments—SunCoke Middletown                    (0.3)      (1.4)
Investments in acquired businesses                        (45.0)     (50.0)
Other investing items, net                                6.9        4.8
 Net cash flows from investing activities           (65.7)     (77.6)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under credit facility                      440.0      40.0
Proceeds from issuance of long-term debt                  —          31.9
Redemption of long-term debt                              (0.4)      (27.0)
Debt issuance costs                                       (3.3)      (2.4)
 SunCoke Middletown distributions to noncontrolling  (28.9)     (27.6)
interest owners
Other financing items, net                                (1.1)      (1.4)
 Net cash flows from financing activities            406.3      13.5
Net increase (decrease) in cash and cash equivalents      9.5        (168.6)
Cash and cash equivalents, beginning of period            45.3       227.0
Cash and cash equivalents, end of period                  $ 54.8     $ 58.4



AK STEEL HOLDING CORPORATION
NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Dollars in millions)

In certain of its disclosures in this news release, the company has reported
adjusted EBITDA and has reported adjusted net income that excludes the effects
of unrealized mark-to-market gains (losses) on derivative contracts used to
hedge commodity risks. Management believes that reporting adjusted net income
attributable to AK Holding (as a total and on a per share basis) with this
item excluded more clearly reflects the Company's current operating results
and provides investors with a better understanding of the Company's overall
financial performance.

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. The adjusted results, although not
financial measures under generally accepted accounting principles in the
United States ("GAAP") and not identically applied by other companies,
facilitate the ability to analyze the company's financial results in relation
to those of its competitors and to the company's prior financial performance
by excluding items that otherwise would distort the comparison. Adjusted
EBITDA and adjusted net income are not, however, intended as alternative
measures of operating results or cash flow from operations as determined in
accordance with GAAP and are 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 or adjusted net income as a
substitute for any GAAP financial measure and the company encourages current
and potential investors to review the following reconciliations of net income
(loss) attributable to AK Holding to adjusted EBITDA and adjusted net income.



Reconciliation of Adjusted EBITDA

                     Three Months Ended    Six Months Ended       Three Months
                                                                  Ended
                     June 30,              June 30,               Mar 31,
(dollars in
millions, except     2014       2013       2014        2013       2014
per ton)
Net income (loss)
attributable to AK   $ (17.1)   $ (40.4)   $ (103.2)   $ (50.3)   $  (86.1)
Holding
Net income
attributable to      15.6       14.9       30.5        31.6       14.9
noncontrolling
interests
Income tax expense   1.8        9.7        3.6         6.9        1.8
Interest expense     33.2       32.0       65.4        63.0       32.2
Interest income      —          (0.2)      —           (0.9)      —
Depreciation         48.5       47.9       97.2        96.5       48.7
Amortization         1.6        2.0        5.8         6.1        4.2
EBITDA               83.6       65.9       99.3        152.9      15.7
Less: EBITDA of
noncontrolling       19.1       18.4       37.6        38.6       18.5
interests (a)
Adjusted EBITDA      $ 64.5     $ 47.5     $ 61.7      $ 114.3    $  (2.8)
Adjusted EBITDA per  $ 46       $ 36       $ 23        $ 44       $  (2)
ton





(a) The reconciliation of EBITDA of noncontrolling interests to net income
    attributable to noncontrolling interests is as follows:



                            Three Months Ended  Six Months Ended  Three Months
                                                                  Ended
                            June 30,            June 30,          Mar 31,
(dollars in millions)       2014       2013     2014     2013     2014
Net income attributable to  $  15.6    $ 14.9   $ 30.5   $ 31.6   $   14.9
noncontrolling interests
Depreciation                3.5        3.5      7.1      7.0      3.6
EBITDA of noncontrolling    $  19.1    $ 18.4   $ 37.6   $ 38.6   $   18.5
interests





Reconciliation of Adjusted Net Income

                                                            Three Months Ended
                                                            June 30,
(dollars in millions, except per share)                     2014
Reconciliation to Net Income (Loss) Attributable to AK
Steel Holding
Adjusted net income attributable to AK Steel Holding        $    2.9
Corporation
Unrealized mark-to-market loss on derivatives               (20.0)
Net income (loss) attributable to AK Steel Holding          $    (17.1)
Corporation, as reported
Reconciliation to Basic and Diluted Earnings (Losses) per
Share
Adjusted basic and diluted earnings per share               $    0.02
Unrealized mark-to-market loss on derivatives               (0.15)
Basic and diluted earnings (losses) per share, as reported  $    (0.13)





AK STEEL HOLDING CORPORATION
STEEL SHIPMENTS
(Unaudited)
(Tons in thousands)
                                    Three Months Ended    Six Months Ended
                                    June 30,              June 30,
                                    2014       2013       2014       2013
Tons Shipped by Product
Stainless/electrical                223.8      215.1      430.0      419.5
Coated                              637.5      639.1      1,238.3    1,216.2
Cold-rolled                         298.0      262.1      584.5      539.5
Tubular                             33.5       31.5       64.4       63.0
Subtotal value-added shipments      1,192.8    1,147.8    2,317.2    2,238.2
Hot-rolled                          177.1      151.8      285.6      324.1
Secondary                           27.6       24.1       56.8       51.2
Subtotal non value-added shipments  204.7      175.9      342.4      375.3
Total shipments                     1,397.5    1,323.7    2,659.6    2,613.5
Shipments by Product (%)
Stainless/electrical                16.0    %  16.2    %  16.2    %  16.1    %
Coated                              45.6    %  48.3    %  46.6    %  46.5    %
Cold-rolled                         21.3    %  19.8    %  22.0    %  20.6    %
Tubular                             2.4     %  2.4     %  2.4     %  2.4     %
Subtotal value-added shipments      85.3    %  86.7    %  87.2    %  85.6    %
Hot-rolled                          12.7    %  11.5    %  10.7    %  12.4    %
Secondary                           2.0     %  1.8     %  2.1     %  2.0     %
Subtotal non value-added shipments  14.7    %  13.3    %  12.8    %  14.4    %
Total shipments                     100.0   %  100.0   %  100.0   %  100.0   %



SOURCE AK Steel

Website: http://www.aksteel.com
Contact: Media - Michael P. Wallner, General Manager, Communications and PR
(513) 425-2688, Investors - Roger K. Newport, Senior Vice President, Finance
and Chief Financial Officer (513) 425-5270
 
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