AK Steel Reports First Quarter Results

 

Middletown, OH, April 20, 2004—AK Steel (NYSE: AKS) today reported net income of $165.4 million, or $1.52 per share of common stock, for the first quarter of 2004.   In the first quarter of 2003 the company reported a net loss of $40.8 million, or $0.38 per share of common stock. 

The latest quarterly results include the benefit of an after-tax gain of $174.9 million, or $1.61 per share of common stock, from the sale of Douglas Dynamics, L.L.C. on March 31, 2004 for $264 million.  During the first quarter of 2004, AK Steel reported a loss from continuing operations of $16.4 million, or $0.15 per share of common stock, a substantial improvement compared to a loss of $42.4 million, or $0.39 per share, from continuing operations in the first quarter of 2003.  Douglas Dynamics was treated as a discontinued operation for this quarter-to-quarter comparison.

Net sales in the first quarter of 2004 totaled $1,134.4 million on shipments of 1,514,300 tons, compared to sales of  $985.3 million on shipments of 1,365,400 tons in the year-ago quarter.  The company said that sharply increased steel demand resulted in higher shipment volumes as well as higher realized prices.  AK Steel said prices also rose as a result of the surcharges it has implemented for spot market sales to offset a portion of the unprecedented escalation in the cost of certain raw materials and energy, especially scrap, purchased slabs and natural gas.  The company said its average flat-rolled selling price was $747 per ton for the first quarter of 2004, up from $702 per ton in the first quarter of 2003 and $671 per ton in the fourth quarter of 2003.

For the first quarter of 2004 the company recorded an operating profit of $1.5 million, compared to an operating loss of $43.1 million for the corresponding quarter of 2003.  The company said that improved operating levels, continuing rigorous cost controls and salaried workforce reductions implemented during the preceding two quarters served to partially offset increased costs for steel scrap, purchased slabs and natural gas.

AK Steel said that its cash balance at March 31, 2004 was $299.9 million and that it had an additional $436 million of availability under its two existing credit facilities.  The company said its cash balance increased more than $245 million during the quarter, primarily due to the sale of Douglas Dynamics.  In addition, on April 9, 2004, the company completed the sale of its Greens Port Industrial Park for approximately $75 million.  Net proceeds from these sales have been used to repay $80 million of outstanding borrowings under the company’s accounts receivable credit facility and also will be used to fund the redemption on May 21, 2004 of the remaining $62.5 million of outstanding senior secured notes due December 2004.

“Our improved results reflect the efforts and renewed focus of the men and women of AK Steel to return this great company to profitability,” said James L. Wainscott, president and CEO.  “While we have made significant progress in reducing costs over the last six months, we continue to suffer from non-competitive labor costs at most of our steel operations.”

Mr. Wainscott commended employees of the company’s Coshocton, Ohio stainless finishing facility who ratified a progressive labor agreement between the company and the United Auto Workers earlier this month.

“The new labor agreement at Coshocton is patterned after the most recently negotiated contracts elsewhere in the industry,” he said.  “I commend our Coshocton employees for recognizing the necessity and urgency of bringing our costs in line with those of our competitors.”

Outlook

AK Steel said that it expects second quarter shipments to approximate first quarter levels, while selling prices are expected to rise due to previously announced increases in base prices and surcharges for sales in the spot market.  The company said costs for purchased slabs are expected to be significantly higher in the second quarter compared to the first quarter of 2004.  The company said it will undertake a planned blast furnace outage during the second quarter that is expected to negatively impact its second quarter results by approximately $16 million.  Overall, the company expects modestly improved operating results in the second quarter in comparison to the first quarter of 2004.

AK Steel is headquartered in Middletown, Ohio and employs about 8,800 men and women.  The company has steel operations in Ohio, Kentucky, Indiana and Pennsylvania, as well as tube operations in Ohio and Indiana.  The company serves primarily automotive, appliance, construction and manufacturing markets.

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