AK Steel Reports Fourth-Quarter and Full-Year 2008 Results

 

West Chester, OH, January 27, 2009—AK Steel (NYSE: AKS) today reported 2008 fourth-quarter adjusted income before taxes of $0.6 million, compared to income before taxes of $164.1 million in the 2007 fourth-quarter. The adjusted 2008 number excludes a $699.5 million non-cash charge related to the company’s pension plans. Most of the non-cash charge, $660.1 million, resulted from the company’s unique “corridor” pension accounting requirement, while $39.4 million resulted from the company’s decision in December to lower future costs by locking and freezing the defined benefit pension plans for salaried employees.

Including the non-cash charge, the company recorded a net loss of $430.6 million, or $3.88 per diluted share of common stock in the 2008 fourth-quarter, compared to net income of $106.7 million, or $0.95 per diluted share, in the 2007 fourth-quarter. There were no corridor or curtailment charges in the fourth quarter of 2007.

Net sales for the fourth quarter of 2008 were $1,458.7 million on shipments of 1,073,500 tons. Fourth-quarter 2008 sales and shipments were approximately 14% and 32% lower, respectively, than in the year-ago period. However, the company’s average selling price was $1,359 per ton for the fourth quarter of 2008, approximately 26% higher than the $1,079 per-ton average price in the year-ago period.

Adjusted fourth-quarter 2008 operating profit was $10.3 million, or $10 per ton, excluding the pre-tax corridor and curtailment charges. Including the charges, the company’s operating loss for the 2008 fourth-quarter was $689.2 million, or $642 per ton, compared to an operating profit of $153.5 million, or $98 per ton, for the 2007 fourth-quarter.

The following schedule reflects the reconciliation of the Non-GAAP quarterly financial measures discussed in the preceding section of this news release:

(Dollars in millions except per ton amounts) Three Months Ended
December 31,
  2008    2007
Reconciliation to net income (loss)  
 Adjusted income before income taxes (excluding items below) $ 0.6   $ 164.1
 Pension corridor charge (660.1)   -
 Curtailment charge (39.4)   -
 Income (loss) before income taxes $ (698.9)   $ 164.1
 Income tax provision (benefit) (268.3)   57.4
 Net income (loss) $ (430.6)   $ 106.7
 
       
 
Reconciliation to operating profit (loss)  
 Adjusted operating profit (excluding items below) $ 10.3   $ 153.5
 Pension corridor charge (660.1)   -
 Curtailment charge (39.4)   -
 Operating profit (loss) $ (689.2)   $ 153.5
 
       
Reconciliation to operating profit (loss) per ton  
 Adjusted operating profit per ton (excluding items below) $ 10   $ 98
 Pension corridor charge (615)   -
 Curtailment charge (37)   -
 Operating profit (loss) per ton $ (642)   $ 98
 
       

Full-Year Results
For the full 2008 year, excluding the fourth-quarter charges, AK Steel reported adjusted, pre-tax income of $692.6 million. Including the fourth quarter charges, the company posted net income of $4.0 million, or $0.04 per share for 2008, compared to net income of $387.7 million, or $3.46 per share, for 2007. The 2007 full-year net income includes a total of $39.8 million in one-time curtailment charges related to the implementation of new labor agreements at the company’s Mansfield and Middletown, Ohio plants.

Net sales for 2008 were a record $7,644.3 million on shipments of 5,866,000 tons, compared to revenues of $7,003.0 million on shipments of 6,478,700 tons for 2007. AK Steel’s average selling price for 2008 rose to a record $1,303 per ton, approximately 21% above its 2007 average of $1,081 per ton.

Excluding the fourth-quarter pre-tax corridor and curtailment charges, the company posted record adjusted operating profit for 2008 of $727.5 million, equal to a record $124 per ton, compared to adjusted operating profit of $664.2 million, or $103 per ton for 2007. Including the fourth-quarter charges, 2008 operating profit was $28.0 million, or $5 per ton, compared to 2007 operating profit of $624.4 million, or $96 per ton. AK Steel ended 2008 with a cash balance of $562.7 million, in addition to $682.3 million of availability under its line of credit, for total liquidity of $1,245.0 million.

The following schedule reflects the reconciliation of the Non-GAAP financial measures discussed in the preceding section of this news release:

(Dollars in millions except per ton amounts) Twelve Months Ended
December 31,
  2008    2007
Reconciliation to net income (loss)  
 Adjusted income before income taxes (excluding items below) $ 692.6   $ 631.1
 Pension corridor charge (660.1)   -
 Curtailment charges (39.4)   (39.8)
 Income (loss) before income taxes $ (6.9)   $ 591.3
 Income tax provision (benefit) (10.9)   203.6
 Net income (loss) $ 4.0   $ 387.7
 
       
 
Reconciliation to operating profit  
 Adjusted operating profit (excluding items below) $ 727.5   $ 664.2
 Pension corridor charge (660.1)   -
 Curtailment charges (39.4)   (39.8)
 Operating profit $ 28.0   $ 624.4
 
       
Reconciliation to operating profit per ton  
 Adjusted operating profit per ton (excluding items below) $ 124   $ 103
 Pension corridor charge (112)   -
 Curtailment charges (7)   (7)
 Operating profit per ton $ 5   $ 96
 
       

2008 Was An Exceptional Year
“While the sudden economic downturn late in the year made for a very challenging fourth quarter, 2008 was an exceptionally good year for AK Steel,” said James L. Wainscott, chairman, president and CEO. “AK Steel is uniquely prepared to weather this economic storm, and we will continue to make the necessary adjustments, not only to meet today’s challenges, but to quickly take advantage of any improving market conditions.”

First-Quarter and First-Half 2009 Outlook
While noting that the economic situation remains uncertain, AK Steel said it expects shipments in the first quarter of 2009 to be in a range between 850,000 and 900,000 tons. The company said it will take advantage of the economic downturn to temporarily idle its Middletown blast furnace, beginning early in March, to perform extensive maintenance, which is expected to take about 45 days. Considering these factors, the company said it expects to experience a significant operating loss for the first quarter of 2009.

However, the company said it expects shipments in the second quarter of 2009 to improve, and, coupled with lower raw material costs compared to the first quarter of 2009, the company expects to generate a modest operating profit for the second quarter of 2009.

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. 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 AK Steel’s Annual Report on Form 10K for the year ended December 31, 2007, and in subsequent Quarterly Reports on Form 10-Q. 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, appliance, construction and electrical power generation and distribution markets. The company employs about 6,500 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.

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