AK Steel Reports Financial Results For Second Quarter Of 2013

 

West Chester, OH, July 23, 2013—AK Steel (NYSE: AKS) today reported its financial results for the second quarter of 2013.

2nd Quarter 2013 Performance Summary
- Shipments of 1,323,700 tons
- Sales of $1.4 billion with an average selling price of $1,061 per ton
- Net loss of $40.4 million, or $0.30 per diluted share
- Adjusted EBITDA of $47.5 million
- Strong liquidity in excess of $900 million
- Middletown (OH) Works blast furnace restarted successfully on July 12, 2013 

AK Steel reported a net loss of $40.4 million, or $0.30 per diluted share of common stock, for the second quarter ended June 30, 2013, compared to a net loss of $724.2 million, or $6.55 per diluted share, for the second quarter of 2012.  The results for the second quarter of 2012 included a non-cash income tax charge of $735.6 million, or $6.65 per diluted share, as a result of a change in a deferred tax asset valuation allowance.  The company reported adjusted EBITDA (as defined in the “Non-GAAP Financial Measures” section below) of $47.5 million, or $36 per ton, for the second quarter of 2013 compared to adjusted EBITDA of $88.3 million, or $66 per ton, for the year-ago second quarter and adjusted EBITDA of $66.8 million, or $52 per ton, for the first quarter of 2013.
 
Net sales for the second quarter of 2013 were $1,404.5 million on shipments of 1,323,700 tons, compared to net sales of $1,538.4 million on shipments of 1,335,800 tons for the year-ago second quarter and net sales of $1,369.8 million on shipments of 1,289,800 tons for the first quarter of 2013.  The lower shipments for the second quarter of 2013 compared to the year-ago period were primarily due to lower shipments to the carbon spot market and electrical steel market, partially offset by increased shipments to the automotive market.  The unplanned outage of the Middletown Works blast furnace also contributed to a decline in shipments in the second quarter of 2013.  The higher shipments in the second quarter of 2013 compared to the first quarter of 2013 were primarily due to higher shipments to the automotive market, partially offset by lower shipments to the carbon spot market.
 
The company said its average selling price for the second quarter of 2013 was $1,061 per ton, an 8% decrease from the second quarter of 2012 and flat with the first quarter of 2013.  The average selling price for the second quarter of 2013 improved over the first quarter of the year as a result of the favorable mix of shipments, but was offset by lower spot market prices for carbon steel products.  The lower average selling price for the second quarter of 2013 compared to the second quarter of 2012 was primarily due to lower spot market prices for carbon steel products, reduced raw material surcharges and lower selling prices for electrical steel products globally.
 
The decrease in adjusted EBITDA from the prior quarter was primarily the result of planned major maintenance outages.  As previously announced, the Middletown blast furnace underwent a planned seven-day maintenance outage during the second quarter of 2013.  This was the first major maintenance outage to the blast furnace since the furnace was relined in 2009.  The company recorded expenses of $21.6 million during the second quarter of 2013 for planned outages, compared to $1.0 million in expenses in each of the second quarter of 2012 and the first quarter of 2013.  The 2013 second quarter results also include expenses of approximately $6.2 million, or pre-tax $0.05 per share, for costs related to an unplanned blast furnace outage at the company’s Middletown (OH) Works, as discussed more fully below.  The 2013 second quarter results include a LIFO credit of $12.4 million, compared to a LIFO credit of $18.3 million in the second quarter of 2012 and a LIFO credit of $6.0 million for the first quarter of 2013.
 
“Excluding the blast furnace repair costs, both planned and unplanned, AK Steel’s second quarter performance improved compared to our first quarter,” said James L. Wainscott, Chairman, President and CEO of AK Steel.  “We will continue to drive the company for improved results on every front on behalf of our shareholders and all of our constituents.”
 
The company ended the second quarter of 2013 with total liquidity of $905.3 million, consisting of cash and cash equivalents and $857.7 million of availability under the company’s revolving credit facility.  There were $40.0 million of outstanding borrowings under the company’s revolving credit facility as of June 30, 2013.

Six-Month Results

For the first six months of 2013, the company reported a net loss of $50.3 million, or $0.37 per diluted share.  For the corresponding six months of 2012, the company reported a net loss of $736.0 million, or $6.66 per diluted share.  The results for the first six months of 2012 include a non-cash income tax charge of $735.6 million, or $6.66 per diluted share, as a result of a change in a deferred tax asset valuation allowance in the second quarter.
 
Sales for the first six months of 2013 were $2,774.3 million compared to $3,047.1 million in the first half of 2012.  Shipments for the first half of 2013 were 2,613,500 tons compared to 2,661,700 tons in the first half of 2012.  The company recorded expenses of $22.6 million during the first six months of 2013 for planned outages, compared to expenses of $1.6 million during the first six months of 2012.
 
The company reported adjusted EBITDA of $114.3 million, or $44 per ton, for the first six months of 2013, compared to $137.2 million, or $52 per ton, for the first six months of 2012.  The decrease in earnings in the first six months of 2013 was primarily a result of higher planned maintenance outage costs.

Middletown Works Unplanned Blast Furnace Outage

As previously announced, the company’s blast furnace at its Middletown (OH) Works experienced an unexpected mechanical failure in the charging apparatus internal to the furnace on June 22, 2013.  The company executed its contingency plan and the blast furnace was taken off-line to prevent any damage to the furnace and to position it for start-up once the repairs were completed.  During the period in which the blast furnace was off-line, the company utilized its existing inventory together with its Butler (PA) Works electric arc furnace and its Ashland (KY) Works blast furnace and purchased some merchant carbon slabs to help service its customers.  The company restarted the blast furnace on July 12, 2013.
 
The company’s second quarter results for 2013 included a charge of $6.2 million for the unplanned outage.  The company maintains property damage and business interruption insurance, and it currently expects that its total uninsured portion of losses in the second half of 2013 will be between $12.0 million and $17.0 million.

Third Quarter 2013 Outlook

Consistent with its current practice, the company said that it will provide detailed guidance for its third quarter results in September.  However, the company noted that it expects to incur additional expenses related to the unplanned Middletown blast furnace outage in the third quarter.  Further, the timing and amount of any insurance recovery cannot be accurately predicted at this time and could occur after the third quarter, thus resulting in a mismatch of expenses and insurance recovery.

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, including those estimates with respect to the timing and cost of repairing the blast furnace at the Middletown (OH) Works, 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 the company’s Annual Report on Form 10-K for the year ended December 31, 2012, 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 produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets.  The company employs about 6,100 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.
 
AK Coal Resources, Inc., another wholly-owned subsidiary of AK Steel, controls and is developing metallurgical coal reserves in Somerset County, Pennsylvania.  AK Steel also owns 49.9% of Magnetation LLC, a joint venture headquartered in Grand Rapids, Minnesota, which produces iron ore concentrate from previously mined ore reserves.

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