Document


 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8‑K
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - January 24, 2019
(Date of Earliest Event Reported)
AK STEEL HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
 
Commission File No. 1-13696

Delaware
 
31-1401455
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
9227 Centre Pointe Drive
West Chester, OH
 
45069
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (513) 425-5000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
q
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
q
Solicitation material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
q
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
q
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company q
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. q





Item 2.02
Results of Operations and Financial Condition.
 
 
On January 28, 2019, AK Steel Holding Corporation (the “Company” or “AK Steel”) issued a press release, a copy of which is attached hereto as Exhibit No. 99.1 and incorporated by reference herein, regarding its financial results for the fourth quarter and full year 2018.

Item 2.05
Costs Associated With Exit or Disposal Activities.

 
 
On January 28, 2019, AK Steel announced its intention to permanently close its Ashland Works plant in Ashland, Kentucky (the “Ashland Works”). Given the Company’s strategy of focusing on value-added, more innovative products, AK Steel plans to close the largely-idled Ashland Works facility by the end of 2019. The decision, which is subject to closure negotiations with the United Steelworkers, Local 1865, was made on January 24, 2019. More than three years ago, AK Steel idled most of the Ashland Works operations, including the blast furnace, but continued to operate a single hot dip galvanizing coating line with 230 employees. The Company plans to increase its operating efficiency and lower its costs by completing the shutdown of the blast furnace and steelmaking operations within the next several months and by working with its customers to transition products coated at Ashland Works to other AK Steel operations in the United States with available capacity before the end of this year.
 
Associated with the closure of Ashland Works, the Company expects to record a charge of approximately $80.0 million during the first quarter of 2019. The charge includes approximately $20.0 million for termination of certain take-or-pay supply agreements, approximately $30.0 million for supplemental unemployment and other employee benefit costs, an estimated multiemployer plan withdrawal liability of $25.0 million and approximately $5.0 million for other costs. With respect to the $80.0 million charge, the Company expects to make cash payments of approximately $15.0 million in 2019, $30.0 million in 2020 and the remaining amount over several years thereafter. The actual multiemployer plan withdrawal liability will not be known until 2020 and is expected to be paid over a number of years. In addition to the $80.0 million charge recorded in the first quarter of 2019, the Company expects to record expenses of approximately $14.0 million over the full-year 2019, consisting of cash costs of approximately $10.0 million related to closing the facility and $4.0 million of accelerated depreciation related to the coating line fixed assets. These 2019 cash costs related to closing the facility will decline in future years and the accelerated depreciation expense will not be incurred beyond 2019.

Additional information relating to this action is set forth under the “Ashland Works” section of the Company’s news release issued on January 28, 2019, which is provided as Exhibit 99.1 hereto (though only the information set forth in the “Ashland Works” section is incorporated into this Item 2.05 by reference).

Item 7.01
Regulation of FD Disclosures.
 
 
AK Steel has prepared presentation materials (the “Investor Presentation”) that management intends to use with its earnings conference call for its fourth quarter and full year 2018 financial results, to be held at 8:30 a.m. Eastern Time on January 29, 2019, and from time to time thereafter in presentations regarding AK Steel. AK Steel may use the Investor Presentation, possibly with modifications, in presentations to current and potential investors, as well as others with an interest in AK Steel and its business.

The information contained in the Investor Presentation is summary information that should be considered in the context of materials filed with, or furnished to, the Securities and Exchange Commission





and other public announcements that AK Steel may make by news release or otherwise from time to time.  The Investor Presentation speaks only as of the date of this Current Report on Form 8-K.  While AK Steel may elect to update the Investor Presentation in the future to reflect events and circumstances occurring or existing after the date of this Current Report, AK Steel specifically disclaims any obligation to do so.

By filing this Current Report on Form 8-K and furnishing the Investor Presentation, AK Steel makes no admission or representation as to the materiality of any information in this Current Report or the Investor Presentation.  The Investor Presentation may contain forward-looking statements.  See Page 3 of the Investor Presentation for a discussion of certain forward-looking statements that may be included therein and the risks and uncertainties related thereto.

The Investor Presentation is furnished as Exhibit 99.2 hereto and is incorporated herein by reference.


Item 9.01
Financial Statements and Exhibits.
 
 
 
 
(d)
Exhibit:
 
 
 
 
 
 
Press Release issued on January 28, 2019
 
 
 
 
 
 
Investor Presentation - January 2019











SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
AK STEEL HOLDING CORPORATION
 
 
 
 
 
 
 
 
 
By:
/s/ Joseph C. Alter
 
 
Joseph C. Alter
 
 
Secretary
Dated: January 28, 2019


Exhibit
 
 
EXHIBIT 99.1
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12657949&doc=40
News Release
 
 
 
 
Contacts:
 
 
Media – Lisa H. Jester, Corporate Manager, Communications and Public Relations (513) 425-2510
 
Investors – Douglas O. Mitterholzer, General Manager, Investor Relations (513) 425-5215


AK Steel Announces Fourth Quarter and Full-Year 2018 Financial Results;
Provides 2019 Outlook

WEST CHESTER, OH, January 28, 2019 – AK Steel (NYSE: AKS) today reported its financial results for the fourth quarter and full-year 2018.

Fourth Quarter 2018 Highlights
Fourth quarter 2018 net income of $33.5 million, or $0.11 per diluted share; adjusted net income of $48.0 million, or $0.16 per diluted share, compared to a loss in prior year fourth quarter
Fourth quarter 2018 adjusted EBITDA of $135.5 million, a 101% increase from the fourth quarter of 2017
Fourth quarter 2018 sales of $1,677.1 million, a 12% increase from the fourth quarter of 2017
Plans to close the largely-idled Ashland Works, where 230 people currently work, by the end of 2019 to increase utilization at its other U.S. operations; will offer employees open jobs at other facilities; expects more than $40 million in annual cost savings when complete
Full-Year 2018 Highlights
Full-year 2018 net income of $186.0 million, or $0.59 per diluted share; adjusted net income of $200.5 million, or $0.64 per diluted share, up 25% from 2017
Full-year 2018 adjusted EBITDA of $563.4 million, highest since 2008
Full-year 2018 sales of $6,818.2 million, a 12% increase from 2017

“We made good progress in 2018, generating our highest net income and adjusted EBITDA in a decade and further strengthening our balance sheet. Additionally, during the course of the year we expanded our portfolio of steel solutions, as our advanced steel operations accelerated collaboration with our downstream stamping, tooling and tubing businesses at Precision Partners and AK Tube,” said Roger K. Newport, Chief Executive Officer of AK Steel. “As we enter 2019, we are well positioned after the successful renegotiation of our annual customer contracts and expect another solid year.”
AK Steel reported net income of $33.5 million, or $0.11 per diluted share of common stock, for the fourth quarter of 2018. This compared to a net loss of $80.4 million, or $0.26 per diluted share, for the fourth quarter of 2017. As another step to strengthen its balance sheet, the company entered into a de-risking pension annuity transaction in the fourth quarter of 2018. As a result, the company incurred a pension settlement charge of $14.5 million. Excluding this charge, adjusted net income was $48.0 million, or $0.16 per diluted share. This compares to an adjusted net loss of $24.1 million, or $0.08 per diluted share, for the fourth quarter a year ago. Included in reported results in the year ago fourth quarter were non-cash charges for asset impairments and a credit for the benefit of a transportation agreement reached in the fourth quarter of 2017.
The company’s adjusted EBITDA (as defined in the “Non-GAAP Financial Measures” section below) was $135.5 million, or 8.1% of net sales, for the fourth quarter of 2018, more than double the adjusted EBITDA of $67.4 million, or 4.5% of net sales, for the fourth quarter a year ago. Higher steel selling prices and shipments during the fourth quarter, particularly to the distributors and converters market, more than offset higher costs for certain raw materials and supplies, including graphite electrodes, compared to the fourth quarter a year ago.

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The company ended the fourth quarter of 2018 with total liquidity of $988.8 million, consisting of cash and cash equivalents and $941.8 million of availability under the company’s revolving credit facility. During 2018, the company reduced outstanding long-term debt by $116.4 million and its pension and other postretirement benefit obligations by $65.7 million.

Full-Year 2018 Results
AK Steel reported net income of $186.0 million, or $0.59 per diluted share of common stock, for 2018. This compared to net income of $103.5 million, or $0.32 per diluted share, for 2017. After adjusting for the aforementioned pension settlement charge of $14.5 million, adjusted net income for 2018 was $200.5 million, or $0.64 per diluted share. This compares to adjusted net income of $159.8 million, or $0.50 per diluted share, for 2017. Included in the reported results for 2017 were non-cash charges for asset impairments and a credit for the benefit of a transportation agreement.
The company’s adjusted EBITDA for 2018 was $563.4 million, or 8.3% of net sales, compared to adjusted EBITDA of $528.5 million, or 8.7% of net sales, for a year ago. Higher steel selling prices and shipments during 2018, particularly to the distributors and converters market, more than offset higher costs for certain raw materials and supplies, including graphite electrodes, compared to a year ago.

(Dollars in millions, except per share and per ton data)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Flat-rolled steel shipments (000 tons)
 
1,388.7

 
1,337.1

 
5,683.4

 
5,596.2

Selling price per flat-rolled steel ton
 
$
1,106

 
$
1,024

 
$
1,091

 
$
1,022

 
 
 
 
 
 
 
 
 
Net sales
 
$
1,677.1

 
$
1,495.6

 
$
6,818.2

 
$
6,080.5

Operating profit (loss)
 
86.5

 
(52.3
)
 
364.4

 
260.2

Net income (loss) attributable to AK Steel Holding Corporation
 
33.5

 
(80.4
)
 
186.0

 
103.5

Adjusted net income (loss) attributable to AK Steel Holding Corporation
 
48.0

 
(24.1
)
 
200.5

 
159.8

Adjusted EBITDA
 
135.5

 
67.4

 
563.4

 
528.5

 
 
 
 
 
 
 
 
 
Net income (loss) per diluted share attributable to AK Steel Holding Corporation
 
$
0.11

 
$
(0.26
)
 
$
0.59

 
$
0.32


Ashland Works
Given the company’s strategy of focusing on value-added, more innovative and differentiated products, AK Steel plans to close the largely-idled Ashland Works facility by the end of 2019. More than three years ago, AK Steel idled most of the Ashland Works operations, including the blast furnace, but continued to operate a single hot dip galvanizing coating line with 230 employees. The company plans to increase its operating efficiency and lower its costs by completing the shutdown of the blast furnace and steelmaking operations within the next several months, and by working with its customers to transition products coated at Ashland Works to other AK Steel operations in the United States with available capacity before the end of this year. This will increase those operations’ utilization rates. Production volumes and customer shipments are not expected to be impacted by the closure. The company will offer employees at the Ashland Works site open jobs at its other facilities.
Once fully implemented, these actions are expected to result in annual savings of over $40 million. These savings, combined with the positive impact of the Administration’s policies to address unfair trade practices, will help facilitate the company’s longer term growth plans. It will also help maintain and enhance the company’s more cost effective steelmaking facilities and further drive growth and innovation. The company expects to invest approximately $650 million in maintenance at its facilities in 2019 and make another $170 million to $190 million in capital investments. Over the last five years, the company has invested over $5 billion in its steelmaking assets

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and downstream businesses, including over $4 billion in maintenance and capital investments and $1.1 billion in acquisitions.
Associated with the closure of Ashland Works, the company expects to record a charge of approximately $80 million during the first quarter of 2019. The charge includes approximately $20 million for termination of certain take-or-pay supply agreements, approximately $30 million for supplemental unemployment and other employee benefit costs, an estimated multiemployer plan withdrawal liability of $25 million and approximately $5 million for other costs. With respect to the approximately $80 million charge, the company expects to make cash payments of approximately $15 million in 2019, $30 million in 2020 and the remaining amount over several years thereafter. The actual multiemployer plan withdrawal liability will not be known until 2020 and is expected to be paid over a number of years. In addition to the approximately $80 million charge recorded in the first quarter of 2019, the company expects to record expenses of approximately $14 million over full-year 2019, consisting of cash costs of approximately $10 million related to closing the facility, and $4 million of accelerated depreciation related to the coating line fixed assets. These cash costs related to closing the facility will decline in future years and the accelerated depreciation expense will not be incurred beyond 2019.

Outlook
Beginning with calendar year 2019, the company is providing annual guidance and is no longer providing quarterly guidance. The annual guidance better aligns with how the company manages its business, as more than 70% of its business is now based on fixed base price contracts. For 2019, the company currently expects net income to be in a range of $160 to $180 million, or $0.51 to $0.57 per diluted share, and adjusted EBITDA to be in the range of $515 to $535 million. Below are key assumptions used in developing these ranges:
About 50% of adjusted EBITDA for 2019 is expected to be generated in the first half of the year. The timing of planned outages is expected to mostly offset the seasonal nature of our business.
The guidance is based on the average carbon hot rolled coil spot market price for the month of January of about $720 per ton. The company estimates that for every $10 change in the carbon hot rolled coil spot market price, adjusted EBITDA and net income would be impacted by approximately $5 to $7 million, on an annualized basis, taking into consideration the related effects on carbon scrap, but holding everything else constant. Historically, changes in carbon scrap costs have been strongly correlated to carbon hot rolled coil spot market price movements.
The company’s guidance excludes the effects of the Ashland Works charge expected to be recorded in the first quarter of 2019, as discussed above.
The company expects to make capital investments of between $170 and $190 million in 2019, which includes about $25 to $30 million of growth related investments for Precision Partners and AK Tube.
Assumptions on additional factors are included with the investor presentation slides on the company’s website. See information below for accessing the presentation slides.
The foregoing outlook is based on AK Steel’s current estimates and may change based on business conditions and other factors. There are many other items that could affect the company’s 2019 results, as outlined in the Forward-Looking Statements below, including developments in the domestic and global economies, in the company’s business, in trade actions and the imposition of tariffs, and in the businesses of the company’s customers, suppliers and competitors.

Fourth Quarter and Full-Year 2018 Earnings Conference Call
AK Steel will provide live listening access on its website for the company’s earnings conference call on January 29, 2019 at 8:30 a.m. Eastern Time. A link to the webcast is on the company’s home page at www.aksteel.com. Presentation slides will also be available on the webcast link and under the Investor Presentations section on the website. The webcast will be archived on the company’s website for three months and will be accessible from the Investor News and Events section.

AK Steel
AK Steel is a leading producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing, including electrical power, and distributors and converters markets. Through its subsidiaries, the company also provides customer solutions with carbon and stainless steel tubing products, die design and tooling, and hot- and cold-stamped components. Headquartered in West Chester, Ohio

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(Greater Cincinnati), the company has approximately 9,500 employees at manufacturing operations in the United States, Canada and Mexico, and facilities in Western Europe. Additional information about AK Steel is available at www.aksteel.com.

Forward-Looking Statements
Certain statements made or incorporated by reference in this earnings release reflect management’s estimates and beliefs and are intended to be “forward-looking statements” identified in 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 forward-looking statements.
The company cautions readers that forward-looking statements reflect the company’s current beliefs and judgments, but are not guarantees of future performance or outcomes. They are based on a number of assumptions and estimates that are inherently affected by economic, competitive, regulatory, and operational risks, uncertainties and contingencies that are beyond the company’s control, and upon assumptions about future business decisions and conditions that may change.
Forward-looking statements are only predictions and involve risks and uncertainties, resulting in the possibility that actual events or performance will differ materially from such predictions as a result of certain risk factors. Such factors that could cause the company’s actual results and financial condition to differ materially from the results contemplated by such forward-looking statements include reduced selling prices, shipments and profits associated with a highly competitive and cyclical industry; domestic and global steel overcapacity; risks related to U.S. government actions on Section 232 and 301, NAFTA and/or other trade agreements, treaties or policies; changes in the cost of raw materials, supplies and energy; the company’s significant amount of debt and other obligations; severe financial hardship or bankruptcy of one or more of the company’s major customers or key suppliers; the company’s significant proportion of sales to the automotive market; reduced demand in key product markets due to competition from aluminum or other alternatives to steel; excess inventory of raw materials; supply chain disruptions or poor quality of raw materials or supplies; production disruption or reduced production levels; the company’s healthcare and pension obligations; not reaching new labor agreements on a timely basis; major litigation, arbitrations, environmental issues and other contingencies; regulatory compliance and changes; climate change and greenhouse gas emissions; conditions in the financial, credit, capital and banking markets; the company’s use of derivative contracts to hedge commodity pricing volatility; potential permanent idling of facilities; inability to fully realize benefits of margin enhancement initiatives; information technology security threats, cybercrime and exposure of private information; the company’s failure to achieve expected benefits of the Precision Partners acquisition and/or to integrate Precision Partners successfully; changes in tax laws and regulations; and risks associated with the closure of Ashland Works, including without limitation risks related to a failure to achieve the estimated savings, loss of existing or future business as a result of transitioning (or seeking to transition) products to other coating lines, costs or actions resulting from closure negotiations with the labor union at Ashland Works, higher than expected closure costs, and unanticipated operational issues as a result of producing products at other coating lines; as well as those risks and uncertainties discussed in more detail in the company’s Annual Report on Form 10-K for the year ended December 31, 2017, and its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with or furnished to the Securities and Exchange Commission. As such, the company cautions readers not to place undue reliance on forward-looking statements, which speak only to the company’s plans, assumptions and expectations as of the date hereof. The company undertakes no obligation to publicly update any forward-looking statement, except as required by law.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars and shares in millions, except per share and per ton data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
Flat-rolled steel shipments (000 tons)
 
1,388.7

 
1,337.1

 
5,683.4

 
5,596.2

Selling price per flat-rolled steel ton
 
$
1,106

 
$
1,024

 
$
1,091

 
$
1,022

 
 
 
 
 
 
 
 
 
Net sales
 
$
1,677.1

 
$
1,495.6

 
$
6,818.2

 
$
6,080.5

 
 
 
 
 
 
 
 
 
Cost of products sold
 
1,448.4

 
1,354.4

 
5,911.0

 
5,253.1

Selling and administrative expenses
 
86.8

 
79.4

 
322.6

 
284.9

Depreciation
 
55.4

 
57.8

 
220.2

 
226.0

Credit for adjustment of liability for transportation costs
 

 
(19.3
)
 

 
(19.3
)
Asset impairment charge
 

 
75.6

 

 
75.6

Total operating costs
 
1,590.6

 
1,547.9

 
6,453.8

 
5,820.3

 
 
 
 
 
 
 
 
 
Operating profit (loss)
 
86.5

 
(52.3
)
 
364.4

 
260.2

 
 
 
 
 
 
 
 
 
Interest expense
 
38.3

 
37.2

 
151.6

 
152.3

Pension and OPEB (income) expense
 
10.8

 
(17.6
)
 
(19.2
)
 
(71.9
)
Other (income) expense
 
(2.5
)
 
(2.1
)
 
(5.9
)
 
17.1

 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
39.9

 
(69.8
)
 
237.9

 
162.7

 
 
 
 
 
 
 
 
 
Income tax expense (benefit)
 
(2.2
)
 
(2.3
)
 
(6.2
)
 
(2.2
)
 
 
 
 
 
 
 
 
 
Net income (loss)
 
42.1

 
(67.5
)
 
244.1

 
164.9

Less: Net income attributable to noncontrolling interests
 
8.6

 
12.9

 
58.1

 
61.4

 
 
 
 
 
 
 
 
 
Net income (loss) attributable to AK Steel Holding Corporation
 
$
33.5

 
$
(80.4
)
 
$
186.0

 
$
103.5

 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to AK Steel Holding Corporation common stockholders:
 
 
 
 
 
 
 
 
Basic
 
$
0.11

 
$
(0.26
)
 
$
0.59

 
$
0.33

Diluted
 
$
0.11

 
$
(0.26
)
 
$
0.59

 
$
0.32

 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
315.0

 
314.4

 
314.8

 
314.3

Diluted
 
315.9

 
314.4

 
315.6

 
319.7




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AK STEEL HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)
 
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
48.6

 
$
38.0

Accounts receivable, net
 
635.8

 
517.8

Inventory, net
 
1,419.9

 
1,385.0

Other current assets
 
97.0

 
130.3

Total current assets
 
2,201.3

 
2,071.1

Property, plant and equipment
 
6,969.2

 
6,831.8

Accumulated depreciation
 
(5,057.6
)
 
(4,845.6
)
Property, plant and equipment, net
 
1,911.6

 
1,986.2

Other non-current assets:
 
 
 
 
Goodwill and intangible assets
 
298.9

 
306.7

Other non-current assets
 
103.9

 
110.8

TOTAL ASSETS
 
$
4,515.7

 
$
4,474.8

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
801.0

 
$
690.4

Accrued liabilities
 
288.9

 
270.5

Current portion of pension and other postretirement benefit obligations
 
38.7

 
40.1

Total current liabilities
 
1,128.6

 
1,001.0

Non-current liabilities:
 
 
 
 
Long-term debt
 
1,993.7

 
2,110.1

Pension and other postretirement benefit obligations
 
829.9

 
894.2

Other non-current liabilities
 
134.0

 
168.9

TOTAL LIABILITIES
 
4,086.2

 
4,174.2

Equity:
 
 
 
 
Common stock, authorized 450,000,000 shares of $.01 par value each; issued 316,595,613 and 315,782,764 shares in 2018 and 2017; outstanding 315,535,765 and 314,884,569 shares in 2018 and 2017
 
3.2

 
3.2

Additional paid-in capital
 
2,894.9

 
2,884.8

Treasury stock, common shares at cost, 1,059,848 and 898,195 shares in 2018 and 2017
 
(6.4
)
 
(5.4
)
Accumulated deficit
 
(2,691.8
)
 
(2,877.0
)
Accumulated other comprehensive income (loss)
 
(100.0
)
 
(50.2
)
Total stockholders’ equity (deficit)
 
99.9

 
(44.6
)
Noncontrolling interests
 
329.6

 
345.2

TOTAL EQUITY
 
429.5

 
300.6

TOTAL LIABILITIES AND EQUITY
 
$
4,515.7

 
$
4,474.8




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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
 
 
Twelve Months Ended December 31,
 
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
244.1

 
$
164.9

Depreciation
 
201.6

 
209.8

Depreciation—SunCoke Middletown
 
18.6

 
16.2

Amortization
 
32.0

 
24.1

Asset impairment charge
 

 
75.6

Credit for adjustment of liability for transportation costs
 

 
(19.3
)
Deferred income taxes
 
(8.0
)
 
(9.0
)
Contributions to pension trust
 
(49.9
)
 
(44.1
)
Pension and OPEB (income) expense
 
(11.6
)
 
(64.4
)
Other pension payments
 
(1.0
)
 
(1.1
)
OPEB payments
 
(35.6
)
 
(39.6
)
Changes in working capital, net of effect of acquired business
 
13.8

 
(112.4
)
Other operating items, net
 
(39.3
)
 
(1.9
)
Net cash flows from operating activities
 
364.7

 
198.8

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital investments
 
(152.0
)
 
(152.5
)
Investment in acquired business, net of cash acquired
 

 
(360.4
)
Other investing items, net
 
0.1

 
4.2

Net cash flows from investing activities
 
(151.9
)
 
(508.7
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Net borrowings (repayments) under credit facility
 
(115.0
)
 
450.0

Proceeds from issuance of long-term debt
 

 
680.0

Redemption of long-term debt
 
(12.6
)
 
(848.4
)
Debt issuance costs
 

 
(25.3
)
SunCoke Middletown distributions to noncontrolling interest owners
 
(73.7
)
 
(79.1
)
Other financing items, net
 
(0.9
)
 
(2.5
)
Net cash flows from financing activities
 
(202.2
)
 
174.7

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
10.6

 
(135.2
)
Cash and cash equivalents, beginning of year
 
38.0

 
173.2

Cash and cash equivalents, end of year
 
$
48.6

 
$
38.0


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AK STEEL HOLDING CORPORATION
NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Dollars in millions)

In certain of its disclosures in this news release, the company has reported adjusted EBITDA, adjusted EBITDA margin and adjusted net income (loss) that exclude the effects of noncontrolling interests, pension settlement charges, a credit for adjustment of liability for transportation costs and an asset impairment charge. The company believes that reporting adjusted net income (loss) (as a total and on a per share basis) with these items excluded more clearly reflects our current operating results and provides investors with a better understanding of our overall financial performance. Adjustments to net income (loss) do not result in an income tax effect as any gross income tax effects are offset by a corresponding change in the deferred income tax valuation allowance.

EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. It is a metric that is sometimes used to compare the results of different companies by removing the effects of different factors that might otherwise make comparisons inaccurate or inappropriate. The adjusted results, although not financial measures under generally accepted accounting principles (“GAAP”) and not identically applied by other companies, facilitate the ability to analyze the company’s financial results in relation to those of its competitors and to the company’s prior financial performance by excluding items that otherwise would distort the comparison. Adjusted EBITDA, adjusted EBITDA margin and adjusted net income (loss) are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with GAAP and are not necessarily comparable to similarly titled measures used by other companies.

Neither current nor potential investors in the company’s securities should rely on adjusted EBITDA, adjusted EBITDA margin or adjusted net income (loss) as a substitute for any GAAP financial measure and the company encourages current and potential investors to review the following reconciliations of adjusted EBITDA and adjusted net income (loss).

Reconciliation of Adjusted EBITDA
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
(dollars in millions, except per ton)
 
2018
 
2017
 
2018
 
2017
Net income (loss) attributable to AK Steel Holding
 
$
33.5

 
$
(80.4
)
 
$
186.0

 
$
103.5

Net income attributable to noncontrolling interests
 
8.6

 
12.9

 
58.1

 
61.4

Income tax expense (benefit)
 
(2.2
)
 
(2.3
)
 
(6.2
)
 
(2.2
)
Interest expense, net
 
38.0

 
37.1

 
150.7

 
150.9

Depreciation and amortization
 
58.7

 
60.5

 
237.0

 
236.3

EBITDA
 
136.6

 
27.8

 
625.6

 
549.9

Less: EBITDA of noncontrolling interests (a)
 
15.6

 
16.7

 
76.7

 
77.7

Pension settlement charges
 
14.5

 

 
14.5

 

Credit for adjustment of liability for transportation costs
 

 
(19.3
)
 

 
(19.3
)
Asset impairment charge
 

 
75.6

 

 
75.6

Adjusted EBITDA
 
$
135.5


$
67.4

 
$
563.4

 
$
528.5

Adjusted EBITDA margin
 
8.1
%
 
4.5
%
 
8.3
%
 
8.7
%

(a)
The reconciliation of net income attributable to noncontrolling interests to EBITDA of noncontrolling interests is as follows:
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
(dollars in millions)
 
2018
 
2017
 
2018
 
2017
 
Net income attributable to noncontrolling interests
 
$
8.6

 
$
12.9

 
$
58.1

 
$
61.4

 
Depreciation
 
7.0

 
3.8

 
18.6

 
16.3

 
EBITDA of noncontrolling interests
 
$
15.6

 
$
16.7

 
$
76.7

 
$
77.7

 

- more -


9


Reconciliation of Adjusted Net Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
(dollars in millions, except per share)
 
2018
 
2017
 
2018
 
2017
Reconciliation to Net Income (Loss) Attributable to AK Steel Holding
 
 
 
 
 
 
 
 
Net income (loss) attributable to AK Steel Holding Corporation, as reported
 
$
33.5

 
$
(80.4
)
 
$
186.0

 
$
103.5

Pension settlement charges
 
14.5

 

 
14.5

 

Credit for adjustment of liability for transportation costs
 

 
(19.3
)
 

 
(19.3
)
Asset impairment charge
 

 
75.6

 

 
75.6

Adjusted net income (loss) attributable to AK Steel Holding
 
$
48.0

 
$
(24.1
)
 
$
200.5

 
$
159.8

 
 
 
 
 
 
 
 
 
Reconciliation to Diluted Earnings (Losses) per Share
 
 
 
 
 
 
 
 
Diluted earnings (losses) per share, as reported
 
$
0.11

 
$
(0.26
)
 
$
0.59

 
$
0.32

Pension settlement charges
 
0.05

 

 
0.05

 

Credit for adjustment of liability for transportation costs
 

 
(0.06
)
 

 
(0.06
)
Asset impairment charge
 

 
0.24

 

 
0.24

Adjusted diluted earnings (losses) per share
 
$
0.16

 
$
(0.08
)
 
$
0.64

 
$
0.50




Reconciliation of Adjusted EBITDA Guidance for 2019
 
 
Year Ending December 31, 2019
(dollars in millions)
 
Low
 
High
Net income attributable to AK Holding
 
$
160.0

 
$
180.0

Net income attributable to noncontrolling interests
 
55.0

 
55.0

Income tax expense
 
10.0

 
10.0

Interest expense, net
 
155.0

 
155.0

Depreciation and amortization
 
210.0

 
210.0

EBITDA
 
590.0

 
610.0

Less: EBITDA of noncontrolling interests (a)
 
75.0

 
75.0

Adjusted EBITDA
 
$
515.0

 
$
535.0


(a)
The reconciliation of net income attributable to noncontrolling interests to EBITDA of noncontrolling interests is as follows:
 
 
Year Ending December 31, 2019
(dollars in millions)
 
Low
 
High
Net income attributable to noncontrolling interests
 
$
55.0

 
$
55.0

Depreciation
 
20.0

 
20.0

EBITDA of noncontrolling interests
 
$
75.0

 
$
75.0



- more -


10


    
AK STEEL HOLDING CORPORATION
FLAT-ROLLED STEEL SHIPMENTS
(Unaudited)
(Tons in thousands)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
Tons Shipped by Product
 
 
 
 
 
 
 
 
Stainless/electrical
 
201.4

 
195.6

 
830.2

 
813.1

Coated
 
720.0

 
672.2

 
2,895.8

 
2,942.1

Cold-rolled
 
261.5

 
256.6

 
1,077.9

 
988.6

Hot-rolled
 
165.3

 
179.1

 
720.1

 
706.4

Secondary
 
40.5

 
33.6

 
159.4

 
146.0

Total shipments
 
1,388.7

 
1,337.1

 
5,683.4

 
5,596.2

 
 
 
 
 
 
 
 
 
Shipments by Product (%)
 
 
 
 
 
 
 
 
Stainless/electrical
 
15
%
 
15
%
 
15
%
 
15
%
Coated
 
52
%
 
50
%
 
50
%
 
53
%
Cold-rolled
 
18
%
 
19
%
 
19
%
 
17
%
Hot-rolled
 
12
%
 
13
%
 
13
%
 
13
%
Secondary
 
3
%
 
3
%
 
3
%
 
2
%
Total shipments
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 

###        

exhibit992toform8kinvest
Fourth Quarter 2018 Financial Results January 28, 2019 C r e a t i n g I n n o v a t i v e S t e e l S o l u t i o n s © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
AK Steel Executive Management Team . Roger Newport Chief Executive Officer . Kirk Reich President and Chief Operating Officer . Jaime Vasquez Vice President – Finance and Chief Financial Officer S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 2 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Forward-Looking Statements Certain statements made or incorporated by reference in this earnings release reflect management’s estimates and beliefs and are intended to be “forward-looking statements” identified in 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 forward-looking statements. The company cautions readers that forward-looking statements reflect the company’s current beliefs and judgments, but are not guarantees of future performance or outcomes. They are based on a number of assumptions and estimates that are inherently affected by economic, competitive, regulatory, and operational risks, uncertainties and contingencies that are beyond the company’s control, and upon assumptions about future business decisions and conditions that may change. Forward-looking statements are only predictions and involve risks and uncertainties, resulting in the possibility that actual events or performance will differ materially from such predictions as a result of certain risk factors. Such factors that could cause the company’s actual results and financial condition to differ materially from the results contemplated by such forward-looking statements include reduced selling prices, shipments and profits associated with a highly competitive and cyclical industry; domestic and global steel overcapacity; risks related to U.S. government actions on Section 232 and 301, NAFTA and/or other trade agreements, treaties or policies; changes in the cost of raw materials, supplies and energy; the company’s significant amount of debt and other obligations; severe financial hardship or bankruptcy of one or more of the company’s major customers or key suppliers; the company’s significant proportion of sales to the automotive market; reduced demand in key product markets due to competition from aluminum or other alternatives to steel; excess inventory of raw materials; supply chain disruptions or poor quality of raw materials or supplies; production disruption or reduced production levels; the company’s healthcare and pension obligations; not reaching new labor agreements on a timely basis; major litigation, arbitrations, environmental issues and other contingencies; regulatory compliance and changes; climate change and greenhouse gas emissions; conditions in the financial, credit, capital and banking markets; the company’s use of derivative contracts to hedge commodity pricing volatility; potential permanent idling of facilities; inability to fully realize benefits of margin enhancement initiatives; information technology security threats, cybercrime and exposure of private information; the company’s failure to achieve expected benefits of the Precision Partners acquisition and/or to integrate Precision Partners successfully; changes in tax laws and regulations; and risks associated with the closure of Ashland Works, including without limitation risks related to a failure to achieve the estimated savings, loss of existing or future business as a result of transitioning (or seeking to transition) products to other coating lines, costs or actions resulting from closure negotiations with the labor union at Ashland Works, higher than expected closure costs, and unanticipated operational issues as a result of producing products at other coating lines; as well as those risks and uncertainties discussed in more detail in the company’s Annual Report on Form 10-K for the year ended December 31, 2017, and its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with or furnished to the Securities and Exchange Commission. As such, the company cautions readers not to place undue reliance on forward-looking statements, which speak only to the company’s plans, assumptions and expectations as of the date hereof. The company undertakes no obligation to publicly update any forward-looking statement, except as required by law. S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 3 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Roger Newport Chief Executive Officer S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Strong Performance in 2018 . Net Income $186 million . Adjusted Net Income $201 million . Adjusted EBITDA $563 million Best Performance Since 2008 Note: See Appendix for reconciliations of non-GAAP financial measures S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 5 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Protecting Our Most Important Asset – Our People . Three facilities achieved zero OSHA recordables for OSHA Recordable Frequency 4Q 2018 . One facility achieved zero OSHA recordables for the 3.00 year 2018 . 2.33 2.37 One facility achieved zero occupational injuries for 2.01 2.00 1.87 the year 2018 1.69 1.67 1.38 1.55 1.55 1.45 1.36 1.00 0.64 0.45 0.41 0.36 0.29 0.25 0.33 0.32 0.26 0.25 0.26 0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 AISI AK Steel OSHA Recordable Frequency is number of injuries per 200,000 employee hours Notes: Based upon most current American Iron and Steel Institute (AISI) data available through 3Q 2018. AK Steel data represents steelmaking operations; 2015 and forward includes Dearborn Works. S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 6 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Strategic Path . $680 million of debt refinanced and maturities extended since 2016 Strengthened . Capital Reduced debt and legacy liabilities by a total of nearly $200 million in 2018 Structure . Pension annuitizations to-date of ~$500 million . Major investment completed at Middletown Works hot-end Enhanced . Mansfield melt shop upgrade and installed new technology at caster Core Business . New state-of-the-art stainless coil build up line planned at Coshocton Works . Launched new products, including NEXMET® AHSS coated products for automotive Expanded and TRAN-COR® X for electrical transformers; various customer trials are underway Growth . Acquired Precision Partners – tool design and build/hot stamping/cold stamping Platform . Investing to increase downstream revenues and profits S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 7 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Enhancing Asset Utilization . Plan to close the Ashland Works facility by the end of 2019 − Blast furnace and ‘hot-end’ were idled more than three years ago − Transition of hot dip galvanizing coating line production to other AK Steel operations in U.S. . Employees will be offered open positions at other facilities . Increase utilization of other AK Steel coating lines in the U.S. . Once fully implemented, these actions are expected to result in annual savings of over $40 million S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 8 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Investing in the Future Maintenance and Capital Investment Strategic $1,600 $1,500 $1,400 $1,200 $1,200 $1,000 $800 $800 $800 $800 ($ Millions) ($ $600 $400 $200 $0 2014 2015 2016 2017 2018 Note: 2014 includes Dearborn for full year S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 9 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Steel Market Update . Overall economic conditions remain solid North America Light Vehicle Production . (Vehicles in Millions) Automotive market remains healthy 17.8 17.1 17.0 17.1 17.1 17.4 . Spot market pricing for carbon steels remain at healthy levels . Service center inventories are balanced with demand 2016 2017 2018 2019E 2020E 2021E U.S. Housing Starts U.S. Non-Residential Construction Fixed Investment (Millions) ($ Billions) 1.40 $2,981 $2,713 $2,824 $2,908 1.33 $2,411 $2,539 1.26 1.29 1.18 1.21 2016 2017 2018 2019E 2020E 2021E 2016 2017 2018 2019E 2020E 2021E Source: AK Steel estimates S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 10 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Kirk Reich President and Chief Operating Officer S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Strategic Capital Investments Cost Benefit Sustainability Growth . Dearborn Works Melt Shop . Rockport Works Pickling . Mansfield Works Caster . Coshocton Works Coil Build Up Line . AK Tube . Precision Partners About one-third of 2019 capital investments for growth and improvements S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 12 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Downstream Operations – Platform for Growth . Downstream Revenues* Continued development of Advanced High-Strength ($ Millions) Steel tubing and stamping applications $800 $615 . Improved downstream performance in 2018 $600 $400 $358 ‒ AK Tube achieved record results $214 $200 ‒ Precision Partners awarded record level of future $0 business 2016 2017 2018 * Includes tubular products, components and other revenues . Proactive moves improved stamping operations in 4Q and set foundation for strong 2019 . Capital investments in tooling and stamping operations to support growth in 2019 and beyond . Downstream operations expected to continue growth in 2019 S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 13 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Precision Partners Significant Growth Opportunity Body side/door ring assembly . Strategically used our tooling leadership in the hot stamp arena to open the door to new opportunities with North American OEMs . Complemented by its innovative production process, Precision Partners was able to secure significant new business . The award of the hot stamped, one-piece, body side outer (a/k/a door ring) assembly puts Precision Partners in an elite category of capabilities with only two other players in North America . Continued demonstration of expertise in this area provides significant upside market potential S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 14 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Successful Customer Contract Renegotiations . Carbon automotive contracts − Improved pricing and expanded margins − Positioned on the right platforms − Improving mix of High-Strength Steel products − Continued progress on adoption of new, Advanced High-Strength Steel grades . Carbon non-automotive contracts and spot business subject to direction of spot market pricing . Specialty steel contracts complete and expected to cover cost pressures and increase margins overall S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 15 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Jaime Vasquez Vice President – Finance and Chief Financial Officer S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Fourth Quarter 2018 Financial Highlights ($ Millions, except per share and per ton) Y-o-Y Y-o-Y 4Q 2017 3Q 2018 4Q 2018 Improvement Improvement Flat-Rolled Shipments (in 000s of tons) 1,337 1,424 1,389 52 4% Flat-Rolled Average Selling Price Per Ton $1,024 $1,114 $1,106 $82 8% Net Sales $1,495.6 $1,735.6 $1,677.1 $181.5 12% Net Income (Loss) ($80.4) $67.2 $33.5 $113.9 NM Adjusted Net Income (Loss) ($24.1) $67.2 $48.0 $72.1 NM Adjusted EBITDA $67.4 $160.8 $135.5 $68.1 101% Adjusted EBITDA Margin 4.5% 9.3% 8.1% 3.6 points 80% Earnings (Loss) Per Share – Diluted ($0.26) $0.21 $0.11 $0.37 NM Adjusted Earnings (Loss) Per Share – Diluted ($0.08) $0.21 $0.16 $0.24 NM Notes: . 2017 and prior recast to reflect retrospective adjustments from certain accounting changes, including switch from LIFO . See Appendix for reconciliations of non-GAAP financial measures S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 17 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Consolidated Adjusted EBITDA Bridge – 3Q 2018 to 4Q 2018 $200 $175 $161 $150 $5 $1 $16 $136 $125 $12 $3 ($ ($ Millions) $100 $75 $50 3Q 2018 Actual Sales Rate & Raw Materials & Operations Downstream Other 4Q 2018 Actual Volume/Mix Energy S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 18 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Balance Sheet and Cash Flow Highlights . Solid free cash flow generation resulted in a $116 million Pension/OPEB Liabilities Reduced By 29% reduction in debt in 2018 ($ Millions) . $1,500 Maintain focus on strengthening balance sheet $1,225 . $1,135 Completed ~$280 million pension asset and liability transfer $934 $1,000 $868 in October 2018 . Pension/OPEB liability reduction of $66 million in 2018 $500 . Working capital was a source of $25 million cash in 4Q and $0 $14 million for full year 2015 2016 2017 2018 Consistent Capital Investments Manageable Pension Contributions ($ Millions) ($ Millions) $200 ~$170 - $190 $75 $153 $152 $150 $128 $50 $50 $50 $44 $45 $99 $50 $100 $24 $25 $50 $0 $0 $0 2015 2016 2017 2018 2019E 2015 2016 2017 2018 2019E 2020E 2021E S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 19 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
2019 Full Year Guidance Estimates . Net income attributable to AK Steel of ~$160 to $180 million Flat-Rolled Shipments . Adjusted EBITDA in the range of $515 to $535 million, ~50% (000s tons) expected to be generated in the first half of the year 8,000 6,974 . 5,936 5,683 Based on January 2019 average carbon hot rolled coil spot 6,000 5,596 market price of ~$720 4,000 . Every $10 change in the carbon hot roll coil spot market price, adjusted EBITDA and net income impacted by ~$5 to $7 million 2,000 . Excludes effect of the charge for Ashland Works closure costs 0 expected to be recorded in 1Q 2015 2016 2017 2018 Flat-Rolled Average Selling Price Per Ton Adjusted EBITDA ($ Millions) $1,200 $1,091 $600 $563.4 $1,022 $528.5 $955 $929 $500 $472.8 $900 $400 $600 $300 $180.4 $200 $300 $100 $0 $0 2015 2016 2017 2018 2015 2016 2017 2018 Note: 2017 and prior recast to reflect retrospective adjustments from certain accounting changes, including switch from LIFO The company's guidance is based on AK Steel’s current estimates and may change based on business conditions and other factors. There are many other items that could affect the company’s 2019 results, as outlined in the Forward-Looking Statements slide of this presentation, including developments in the domestic and global economies, in the company’s business, in trade actions and the imposition of tariffs, and in the businesses of the company’s customers, suppliers and competitors. S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 20 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
2019 Other Guidance Items . Earnings per share of ~$0.51 to $0.57 . Flat-rolled shipments ~5.9 million tons . Average flat-rolled selling price roughly the same as 2018 . Major maintenance outages ~$70 to $80 million . Depreciation and amortization ~$210 million* . Cash interest expense of ~$135 million . Total interest expense of ~$155 million . Pension and OPEB income ~$20 to $25 million** . OPEB payments of ~$40 million . Minimal cash and book taxes . Working capital expected to be slight use of cash * Includes $20 million for SunCoke ** Includes ~$6 million expense reported in Cost of Products Sold/Selling and Administrative expenses The company's guidance is based on AK Steel’s current estimates and may change based on business conditions and other factors. There are many other items that could affect the company’s 2019 results, as outlined in the Forward-Looking Statements slide of this presentation, including developments in the domestic and global economies, in the company’s business, in trade actions and the imposition of tariffs, and in the businesses of the company’s customers, suppliers and competitors. S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 21 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Ashland Works Financial Impact . Expect to incur a charge of ~$80 million in 1Q 2019 − Primarily termination of take-or-pay agreements and employee unemployment and benefit costs . Estimated cash impact and timing − $15 million in 2019 − $30 million in 2020 − $35 million spread over several years thereafter . Expect to incur additional cash costs in 2019 related to closure of the facility of ~$10 million, which will decline in future years, plus $4 million of accelerated depreciation . Once fully implemented, annual savings of more than $40 million are expected S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 22 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Roger Newport Chief Executive Officer S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Path for Creating Shareholder Value Transformational Growth - Precision Partners Organic/Geographic acquisition Growth - Targeted investments - Acquired Dearborn Innovation to improve and grow - AK Tube Mexico the business - People - Downstream products Optimize Assets - Carbon AHSS Lower Debt - Electrical - Stainless S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 24 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Strategy Create Shareholder Value By: Driving further Transforming our growth – Commercializing operations to organically and innovative significantly through products and improve our acquisitions – into services competitive cost new markets and position downstream business S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 25 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
THANK YOU! S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Appendix S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Investor Contact S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 28 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Strengthening Our Foundation Best Financial Performance in a Decade Mansfield Works Acquired Melt Shop Precision Partners Improvements Launched New Opened New Record Downstream NEXMET™ AHSS Research and Earnings Innovation Center Products Began Portfolio Strengthened Lowered Debt Reduction Optimization Capital Interest Costs Structure Idled Ashland Completed Major Acquired Completed Dearborn Hot-end Hot-end Operations Pension De-risking Dearborn AHSS Investment Operations Investments 2014 2015 2016 2017 2018 S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 29 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Longer Term Target Metrics Average EBITDA Margin Debt-to-EBITDA through a business cycle >8% <4.0x Economic Profit: EBITDA Contributions from Return on Invested Capital Downstream Business >10.5% >30% S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 30 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
High-Value Product Mix with More Predictable Pricing Flat-Rolled Product Mix Customer Contract Structure 2015 2015 Other 3% Spot Market Hot-rolled ~19% 18% Coated Fixed Base 48% Price Contracts Stainless/ Steel Index ~62% Electrical Based Contracts 13% ~19% Cold-rolled 2018 2018 18% Other 3% Spot Market Hot-rolled ~13% 13% Coated Fixed Base 50% Price Contracts Stainless/ Steel Index ~70% Electrical Based Contracts 15% ~17% Cold-rolled 19% S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 31 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Full Year 2018 Financial Highlights ($ Millions, except per share and per ton) Y-o-Y Y-o-Y 2017 2018 Improvement Improvement Flat-Rolled Shipments (in 000s of tons) 5,596 5,683 87 2% Flat-Rolled Average Selling Price Per Ton $1,022 $1,091 $69 7% Net Sales $6,080.5 $6,818.2 $737.7 12% Net Income $103.5 $186.0 $82.5 80% Adjusted Net Income $159.8 $200.5 $40.7 25% Adjusted EBITDA $528.5 $563.4 $34.9 7% Adjusted EBITDA Margin 8.7% 8.3% (40 bps) -5% Earnings Per Share – Diluted $0.32 $0.59 $0.27 84% Adjusted Earnings Per Share – Diluted $0.50 $0.64 $0.14 28% Notes: . 2017 and prior recast to reflect retrospective adjustments from certain accounting changes, including switch from LIFO . See Appendix for reconciliations of non-GAAP financial measures S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 32 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Significantly Improved Debt Profile ($ Millions) December 31, 2015 December 31, 2018 Total Debt: $2.4 billion $700 $150 $150 $537 Total Debt: $2.0 billion $7 $406 $406 $380 $380 $392 $335 $290 $275 $550 $530 $149 $62 $62 $30 $7 $30 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Credit Facility Senior Notes Senior Secured Notes Industrial Revenue Bonds . Free cash flow generation allowed for a $116 million reduction of debt in 2018 Note: Excludes unamortized debt discount and issuance costs S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 33 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Non-GAAP Financial Measures Reconciliation of Adjusted Net Income Qtr ended Qtr ended Qtr ended Qtr ended ($ Millions) 2015 2016 2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 2018 Reconciliation to Net Income (Loss) Attributable to AK Steel Holding Corporation Net income (loss) attributable to AK Steel Holding Corporation, as reported ($652.3) ($16.8) $103.5 $28.7 $56.6 $67.2 $33.5 $186.0 Pension and OPEB net corridor and settlement charges 131.2 68.1 14.5 14.5 Charges (credit) for termination of pellet agreement and related transportation costs 69.5 (19.3) Impairment of Magnetation investment 256.3 Impairment of AFSG investment 41.6 Charge for facility idling 28.1 Asset impairment charge 75.6 Adjusted net income (loss) attributable to AK Steel Holding ($195.1) $120.8 $159.8 $28.7 $56.6 $67.2 $48.0 $200.5 Reconciliation to Diluted Earnings (Losses) per Share Diluted earnings (loss) per share, as reported ($3.67) ($0.07) $0.32 $0.09 $0.18 $0.21 $0.11 $0.59 Pension and OPEB net corridor charge/settlement loss 0.74 0.29 0.05 0.05 Charges (credit) for termination of pellet agreement and related transportation costs 0.30 (0.06) Impairment of Magnetation investment 1.44 Impairment of AFSG investment 0.23 Charge for facility idling 0.16 Asset impairment charge 0.24 Adjusted diluted earnings (loss) per share ($1.10) $0.52 $0.50 $0.09 $0.18 $0.21 $0.16 $0.64 Flat-rolled Shipments 6,974.0 5,936.4 5,596.2 1,430.9 1,439.8 1,424.0 1,388.7 5,683.4 Flat-rolled Average Selling Price $929 $955 $1,022 $1,045 $1,101 $1,114 $1,106 $1,091 Note: 2017 and prior recast to reflect retrospective adjustments from certain accounting changes, including switch from LIFO S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 34 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
Non-GAAP Financial Measures Reconciliation of Adjusted EBITDA Qtr ended Qtr ended Qtr ended Qtr ended 2019 Guidance ($ Millions) 2015 2016 2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 2018 Low High Net income (loss) attributable to AK Steel Holding ($652.3) ($16.8) $103.5 $28.7 $56.6 $67.2 $33.5 $186.0 $160.0 $180.0 Net income (loss) attributable to NCI 62.8 66.0 61.4 16.1 15.7 17.7 8.6 58.1 55.0 55.0 Income tax expense (benefit) (6.3) (16.9) (2.2) (4.9) (0.5) 1.4 (2.2) (6.2) 10.0 10.0 Interest expense, net 171.7 162.6 150.9 37.4 37.7 37.6 38.0 150.7 155.0 155.0 Depreciation and amortization 224.4 221.4 236.3 61.3 58.6 58.4 58.7 237.0 210.0 210.0 EBITDA ($199.7) $416.0 $549.9 $138.6 $168.1 $182.3 $136.6 $625.6 $590.0 $610.0 Less: EBITDA of NCI (a) 77.1 80.8 77.7 19.9 19.7 21.5 15.6 76.7 75.0 75.0 Pension and OPEB net corridor charges / settlement loss 131.2 68.1 14.5 14.5 Charges (credit) for termination of pellet agreement and related transportation costs 69.5 (19.3) Impairment of Magnetation investment 256.3 Impairment of AFSG investment 41.6 Charge for facility idling 28.1 Asset impairment charge 75.6 Adjusted EBITDA $180.4 $472.8 $528.5 $118.7 $148.4 $160.8 $135.5 $563.4 $515.0 $535.0 Adjusted EBITDA margin 2.7% 8.0% 8.7% 7.2% 8.5% 9.3% 8.1% 8.3% (a) The reconciliation of EBITDA of noncontrolling interest to net income attributable to noncontrolling interests is as follows: Net income (loss) attributable to noncontrolling interests $62.8 $66.0 $61.4 $16.1 $15.7 $17.7 $8.6 $58.1 $55.0 $55.0 Depreciation 14.3 14.8 16.3 3.8 4.0 3.8 7.0 18.6 20.0 20.0 EBITDA of noncontrolling interests $77.1 $80.8 $77.7 $19.9 $19.7 $21.5 $15.6 $76.7 $75.0 $75.0 Note: 2017 and prior recast to reflect retrospective adjustments from certain accounting changes, including switch from LIFO S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 35 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .


 
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N January 2019 © 2 0 1 9 A K S t e e l . A l l r i g h t s r e s e r v e d .