AK STEEL REPORTS FOURTH QUARTER AND FULL YEAR 2002 RESULTS

 

Middletown, OH, January 31, 2003—AK Steel (NYSE: AKS) today reported a net loss of $489.7 million, or $4.54 per diluted share of common stock, for the fourth quarter of 2002. Revenues for the quarter were $1,062.2 million on shipments of 1,428,100 tons. The company’s average selling price rose to $718 per ton from $651 per ton in the year-ago quarter. Excluding unusual items, operating profit for the quarter was $36.9 million, or $26 per ton shipped.

The quarterly net loss included two unusual items. The most significant was a non-cash, after-tax charge of $483.8 million, or $4.49 per diluted share, related to recognition of actuarial net losses associated with the company’s pension and retiree benefit plans, resulting from the combined effects of continued negative performance in equity markets, lower interest rates and increasing health care costs. The company said the non-cash pension and health care charge was expected and in line with previously announced estimates.

The second unusual item was an after-tax write-down of $6.5 million, or $0.06 per diluted share, related to the company’s equity investment in EVTAC, a taconite iron ore mining and processing facility in Minnesota. The write-down was a result of the company’s decision to purchase most of its iron ore requirements from suppliers other than EVTAC, as well as EVTAC’s loss of other major customers.

For the full year 2002, AK Steel reported a net loss of $502.4 million or $4.67 per diluted share of common stock. Annual revenues were $4,289.0 million on steel shipments of 5,803,700 tons. AK Steel’s average selling price for the year was $703 per ton, up from $655 per ton in 2001. Including the benefit of a second quarter insurance settlement of $23.9 million, operating profit was $129.3 million, or $22 per shipped ton. Excluding all unusual items for the year, operating profit was $105.4 million, or $18 per shipped ton. The company ended the year with $282.5 million in cash, up from $101.0 million at the end of 2001.

“The employees of AK Steel put forth another outstanding operating performance in 2002,” said Richard M. Wardrop, Jr., chairman and CEO of AK Steel. “Unfortunately, their efforts were overshadowed by the unusual non-cash accounting charges which pushed our net results significantly into the red,” he said.

Safety, Quality and Productivity Records Continue

AK Steel said it continued to improve on its industry-leading safety, quality and productivity measures during 2002. Of note in safety performance, AK Steel’s total recordable injury rate improved by nearly 35% to 0.77, or about 8 times better than the steel industry average, according to the most recent data available. In 2002, AK Steel’s Rockport (IN) Works, became the second steel plant to earn the Occupational Safety and Health Administration’s Star designation for Voluntary Protection Programs. AK Steel’s Butler (PA) Works became the first steel plant to earn the VPP Star designation in 2001. Virtually every AK Steel operation turned in significantly improved safety performances.

AK Steel continued to earn prestigious quality awards from customers in 2002, including Ford, Toyota, and Subaru-Isuzu. During 2002, AK Steel employees also continued to establish new world records in productivity, including continuous casting in both stainless and carbon grades.

AK Steel produces flat-rolled carbon, stainless and electrical steel products for automotive, appliance, construction and manufacturing markets, as well as tubular steel products. AK Steel is headquartered in Middletown, Ohio. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

AK Steel Statement of Operations

(Dollars and Shares in Millions, Except Per Share Data)

Three Months Ended December 31,

Twelve Months Ended December 31,

2002 2001 2002 2001
Shipment (000 tons) 1,428.1 1,353.8 5,803.7 5,618.3
Net Sales $1,062.2 $ 932.7 $4,289.0 $3,833.4
Cost of products sold 901.2 755.5 3,689.4 3,225.5
Selling and administrative expenses 69.1 71.5 268.8 257.6
Depreciation 55.0 53.0 225.4 225.8
Unusual expenses (benefits):
Pension and other postretirement benefit corridor charge 816.8 192.2 816.8 192.2

Stock received in insurance demutualization

- (49.9) - (49.9)

Insurance settlement

- - (23.9) -

Impairment of equity investment

10.9 --- 10.9 ---
Total operating costs 1,853.0 1,022.3 4,987.4 3,851.2
Operating loss (790.8) (89.6) (698.4) (17.8)
Interest expense 30.1 32.6 128.3 133.1
Gain on sale of Anthem stock - - 24.1 -
Other income (expense) (4.4) 0.9 (0.3) 6.1
Loss before income taxes (825.3) (121.3) (802.9) (144.8)
Income tax benefit (335.6) (44.9) (327.3) (53.6)
Loss from continuing operations (489.7) (76.4) (475.6) (91.2)
Loss from discontinued operations, net of tax - - 0.5 1.2
Loss on sale of Sawhill Tubular, net of tax --- --- 6.4 ---
Loss before extraordinairy item (489.7) (76.4) (482.5) (92.4)
Loss on early retirement of debt, net of tax --- --- 19.9 ---
Net loss (489.7) (76.4) (502.4) (92.4)
Less preferred stock dividends --- --- 1.5 0.7
Net loss applicable to common stock $(489.7) $(76.4) $(503.9) $(93.1)
Basic losses per share
Loss from continuing operations $ (4.54) $ (0.71) $ (4.42) $ (0.86)
Loss from discontinued operations - - - 0.01
Loss on sale of Sawhill Tubular - - 0.06 -
Loss on early retirement of debt --- --- 0.19 ---
Net loss $ (4.54) $ (0.71) $ (4.67) $ (0.87)
Weighted average shares outstanding 107.9 107.7 107.9 107.7
Diluted losses per share
Loss from continuing operations $ (4.54) $ (0.71) $ (4.42) $ (0.86)
Loss from discontinued operations - - - 0.01
Loss on sale of Sawhill Tubular - - 0.06 -
Loss on early retirement of debt --- --- 0.19 ---
Net loss $ (4.54) $ (0.71) $ (4.67) $ (0.87)
Weighted average shares outstanding 107.9 107.7 107.9 107.7


FOURTH QUARTER 2002
(Unaudited)
SUPPLEMENTAL INFORMATION

Three Months Ended December 31,

Twelve Months Ended December 31,

2002 2001 2002 2001
Other data:
Shipments (thousands of ton) 1,428.1 1,353.8 5,803.7 5,618.3
Steel operations selling price per ton $ 718 $ 651 $ 703 $ 655
Operating profit per ton (1) $ 26 $ 39 $ 22 $ 22
(1) Excludes 4th quarter unusual items.

STEEL SHIPMENTS

Three Months Ended December 31,

Twelve Months Ended December 31,

2002 2001 2002 2001
Tons Shipped by Product (000's)
Stainless/Electrical 231.1 227.0 989.8 946.2
Coated 742.9 668.0 2,973.8 2,780.1
Cold Rolled 319.1 352.0 1,297.0 1,448.4
Tubular 21.8 18.3 91.3 31.8
Hot Rolled 43.2 18.3 168.4 117.6
Secondary 70.0 70.2 283.4 294.2
Total Shipments 1,428.1 1,353.8 5,803.7 5,618.3


Shipments by Product (%)
Stainless/Electrical 16.2% 16.8% 17.1% 16.8%
Coated 52.0% 49.3% 51.2% 49.5%
Cold Rolled 22.3% 26.0% 22.3% 25.8%
Tubular 1.5% 1.4% 1.6% 0.6%
Hot Rolled 3.0% 1.4% 2.9% 2.1%
Secondary 5.0% 5.1% 4.9% 5.2%
Total Shipments 100.0% 100.0% 100.0% 100.0%

CONSOLIDATED BALANCE SHEETS
FOURTH QUARTER 2002

(Dollars in millions, except per share amounts)
December 31,December 31,
20022001
Current Assets
Cash and cash equivalents$ 282.5 $ 101.0
Accounts and notes receivables - net 403.2 388.0
Inventories - net 870.3 904.6
Current assets held for sale - 60.6
Other current assets 143.7 93.6
Total Current Assets 1,699.7 1,547.8
Property, plant and equipment 4,811.6 4,742.9
Accumulated depreciation (2,179.8) (1,974.6)
Property, plant and equipment - net 2,631.8 2,768.3
Noncurrent assets held for sale - 24.4
Other 1,068.2 885.3
Total Assets $5,399.7 $5,225.8
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable$ 456.8$ 537.6
Other accruals 238.8 270.5
Current portion of long-term debt 62.5 78.0
Current portion of pension & postretirement benefit obligation 102.2 68.3
Total Current Liabilities 860.3 954.4
Long-term debt 1,259.9 1,324.5
Pension & postretirement benefit obligation 2,584.8 1,740.1
Other liabilities 165.4 173.5
Total Liabilities 4,870.4 4,192.5
Shareholders' Equity
Preferred stock - 259,481 shares redeemed 9/30/02 - 12.5
Common stock - 2002; authorized 200,000,000 shares of $.01 par value each; 116,292,876 shares issued; 107,895,707 shares outstanding 1.2 1.2
Additional paid-in capital 1,812.1 1,807.2
Treasury stock - 2002; 8,397,172 shares at cost (122.0) (120.4)
Retained earnings (1,162.0) (667.2)
Total Shareholders' Equity 529.3 1,033.3
Total Liabilities and Shareholders' Equity$5,399.7$5,225.8


CONSOLIDATED STATEMENTS OF CASH FLOWS
FOURTH QUARTER 2002

(Dollars in millions)
Twelve Months
Ended December 31
20022001
Cash Flow From Operating Activities:
Net loss$(502.4)$(92.4)
Depreciation225.4 225.8
Amortization9.814.7
Deferred taxes(276.0)(52.8)
Non-cash unusual items827.7142.3
Extraordinary item19.9-
Working capital(57.0)3.0
Other63.1(91.6)
Net Cash Flow From Operating Activities310.5149.0
Cash Flow From Investing Activities:
Capital investments(93.8)(108.0)
Other94.832.8
Net Cash Flow From Investing Activities1.0(75.2)
Cash Flow From Financing Activities:
Principal payments on long-term debt(628.0)(63.2)
Premium payment on retirement of long-term debt(25.1)-
Proceeds on issuance of debt538.1 -
Common and preferred stock transactions(14.7)(1.1)
Preferred stock dividends(0.9)(0.7)
Common stock dividends-(13.5)
Other(2.5)0.5
Net Cash Flow From Financing Activities(133.1)(78.0)
Cash Flow From Discontinued Operations3.118.4
Net Increase (Decrease) in Cash181.514.2
Cash and Cash Equivalents - Beginning101.086.8
Cash and Cash Equivalents - Ending$282.5 $101.0