AK Steel Reports $83.1 Million Net Income For Third Quarter of 2004

 

Middletown, OH, October 26, 2004—AK Steel (NYSE: AKS) today reported net income of $83.1 million, or $0.76 per share of common stock, for the third quarter of 2004, compared to a net loss of $277.5 million, or $2.56 per share in the third quarter of 2003.  The 2004 third quarter reported results include both a tax benefit of $50.2 million, or $0.46 per share, related to continuing operations, and a tax provision of $35.5 million, or $0.33 per share, associated with the sale of discontinued operations during the first half of 2004, which together resulted in a net tax benefit of $14.7 million, or $0.13 per share. Excluding the net tax benefit, the company’s earnings were equivalent to $68.4 million, or $0.63 per share. 

AK Steel said its operating profit during the 2004 third quarter was $94.5 million, or $61 per ton, compared to an adjusted operating loss of $123.8 million, or $82 per ton in the third quarter of 2003, which excluded an impairment of goodwill charge of $101.2 million.  Including the impairment of goodwill charge, the third quarter 2003 operating loss was $225 million.

Net sales in the third quarter of 2004 were a record $1,337.3 million on shipments of 1,541,800 tons, compared to net sales of $1,021.1 million on shipments of 1,502,700 tons in the year-ago quarter. 

“The turnaround of AK Steel continues, propelled by a strong steel market and our constant focus on the second phase elements of our recovery,” said James L. Wainscott, president and CEO of AK Steel.  “In that regard, we have made measurable progress in establishing more favorable contract sales agreements and more competitive labor agreements, and we are developing our long-term raw materials strategy, all toward the goal of increasing and sustaining AK Steel’s profitability for the long-run,” he said. 

The company said its average steel selling price was a record $866 per ton in the third quarter of 2004, up 32% from the third quarter of 2003 and about 4% higher than the $835 per ton average in the second quarter of 2004.  AK Steel said continued strong global demand for steel lifted shipment volumes and spot market selling prices.  The company said its selling prices were also higher as a result of surcharges implemented to partially offset unprecedented high prices for raw materials and energy.

Results For The First Nine Months of 2004

For the first nine months of 2004, the company reported net sales of $3,783.5 million on shipments of   4,621,200 tons, compared to net sales of $2,987.7 million on shipments of 4,267,100 tons for the first nine months of 2003.  Operating profit for the first nine months of 2004 was $152.4 million, or $33 per ton, compared to an adjusted operating loss of $282.1 million, or $66 per ton, for the first nine months of 2003, exclusive of the previously mentioned impairment of goodwill charge.  Including the impairment of goodwill charge, the operating loss for the first nine months of 2003 was $383.3 million. 

Net income of $341.2 million, or $3.13 per share, for the first nine months of 2004 includes $211.9 million, or $1.95 per share, for the combined gain on the sale of Douglas Dynamics and Greens Port Industrial Park in Houston.  For the same period in 2003, AK Steel reported a net loss of $396.5 million, or $3.66 per share.

AK Steel said its liquidity at the end of the third quarter of 2004 totaled $775 million, including cash of $314 million, and availability of $461 million under its two credit facilities.  The company said it had no cash borrowings under its credit facilities at any time during the third quarter.

Company to Make Advanced Pension Fund Contribution and Reduce Debt

The company said that, based on its improved financial performance and cash position, its board of directors has authorized it to contribute $150 million to its pension trust fund.  The contribution will be made in January 2005, well ahead of the next anticipated required pension funding of approximately $300 million due in 2006.  The 2005 payment will reduce the company’s 2006 projected pension funding obligation by approximately 50%, as well as lower annual pension expense by approximately $13 million.

The company also said that it will redeem in December its outstanding 9% Senior Notes Due September 2007, as well as its outstanding 8 7/8% Senior Notes Due December 2008.  The company said the redemption of these notes would reduce its outstanding debt by approximately $150 million, and reduce its annual interest expense by approximately $14 million. 

“We are pleased to again demonstrate our commitment to honor our pension obligations, improve our balance sheet and enhance our future earnings with these actions,” said Mr. Wainscott.

Outlook

AK Steel said that despite rising prices for steelmaking inputs, especially scrap and purchased slabs, the company expects to generate higher operating income in the fourth quarter than the third quarter level. The company said the higher input costs are expected to be offset by increased shipments and higher selling prices.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. The statements in this release with respect to future earnings 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.  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.  Except as required by law, the company disclaims any obligation to update any forward-looking statements to reflect future developments or events.

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