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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019

or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission File No. 1-13696

AK STEEL HOLDING CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
31-1401455
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
9227 Centre Pointe Drive, West Chester, Ohio
 
45069
(Address of principal executive offices)
 
(Zip Code)

(513) 425-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
 
Emerging growth company
 
 
 

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 Section13(a) of the Exchange Act. Yes No

Indicate by check mark whether the registrant is a shell company. Yes No

There were 316,344,103 shares of common stock outstanding as of April 25, 2019.
 
 
 
 
 


                

AK STEEL HOLDING CORPORATION
TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

-i-

Table of Contents         

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
 
 
 
 
 
 
 
Three Months Ended March 31,
(unaudited)
 
2019
 
2018
Net sales
 
$
1,697.7

 
$
1,658.9

 
 
 
 
 
Cost of products sold (exclusive of items shown separately below)
 
1,465.4

 
1,463.7

Selling and administrative expenses
 
76.6

 
76.7

Depreciation
 
50.4

 
54.9

Ashland Works closure
 
64.1

 

Total operating costs
 
1,656.5

 
1,595.3

Operating profit
 
41.2

 
63.6

Interest expense
 
37.9

 
37.6

Pension and OPEB (income) expense
 
6.5

 
(10.0
)
Other (income) expense
 
(12.7
)
 
(3.9
)
Income before income taxes
 
9.5

 
39.9

Income tax expense (benefit)
 
1.4

 
(4.9
)
Net income
 
8.1

 
44.8

Less: Net income attributable to noncontrolling interests
 
12.6

 
16.1

Net income (loss) attributable to AK Steel Holding Corporation
 
$
(4.5
)
 
$
28.7

Net income (loss) per share attributable to AK Steel Holding Corporation common stockholders:
 
 
 
 
Basic
 
$
(0.01
)
 
$
0.09

Diluted
 
$
(0.01
)
 
$
0.09


See notes to condensed consolidated financial statements.

- 1-

Table of Contents         

AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in millions)
 
 
 
 
 
 
 
Three Months Ended March 31,
(unaudited)
 
2019
 
2018
Net income
 
$
8.1

 
$
44.8

Other comprehensive income (loss), before tax:
 
 
 
 
Foreign currency translation gain (loss)
 
(0.7
)
 
1.1

Cash flow hedges:
 
 
 
 
Gains (losses) arising in period
 
7.4

 
(1.4
)
Reclassification of losses (gains) to net income
 
(6.4
)
 
(7.6
)
Pension and OPEB plans:
 
 
 
 
Reclassification of prior service cost (credits) to net income
 
(2.6
)
 
(2.4
)
Reclassification of losses (gains) to net income
 
(2.6
)
 
3.6

Other comprehensive income (loss), before tax
 
(4.9
)
 
(6.7
)
Income tax benefit related to items of comprehensive income (loss)
 

 

Other comprehensive income (loss)
 
(4.9
)
 
(6.7
)
Comprehensive income
 
3.2

 
38.1

Less: Comprehensive income attributable to noncontrolling interests
 
12.6

 
16.1

Comprehensive income (loss) attributable to AK Steel Holding Corporation
 
$
(9.4
)
 
$
22.0


See notes to condensed consolidated financial statements.

- 2-

Table of Contents         

AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except per share data)
 
 
 
 
 
(unaudited)
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
41.2

 
$
48.6

Accounts receivable, net
 
720.6

 
635.8

Inventory
 
1,378.8

 
1,419.9

Other current assets
 
88.8

 
97.0

Total current assets
 
2,229.4

 
2,201.3

Property, plant and equipment
 
6,996.4

 
6,969.2

Accumulated depreciation
 
(5,106.7
)
 
(5,057.6
)
Property, plant and equipment, net
 
1,889.7

 
1,911.6

Operating lease assets
 
254.0

 

Other non-current assets
 
397.0

 
402.8

TOTAL ASSETS
 
$
4,770.1

 
$
4,515.7

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
768.2

 
$
801.0

Accrued liabilities
 
225.2

 
288.9

Current portion of operating lease liabilities
 
56.1

 

Current portion of pension and other postretirement benefit obligations
 
38.2

 
38.7

Total current liabilities
 
1,087.7

 
1,128.6

Non-current liabilities:
 
 
 
 
Long-term debt
 
2,037.7

 
1,993.7

Long-term operating lease liabilities
 
220.3

 

Pension and other postretirement benefit obligations
 
824.2

 
829.9

Other non-current liabilities
 
170.4

 
134.0

TOTAL LIABILITIES
 
4,340.3

 
4,086.2

Equity:
 
 
 
 
Common stock, authorized 450,000,000 shares of $0.01 par value each; issued 317,669,397 and 316,595,613 shares in 2019 and 2018; outstanding 316,306,678 and 315,535,765 shares in 2019 and 2018
 
3.2

 
3.2

Additional paid-in capital
 
2,899.2

 
2,894.9

Treasury stock, common shares at cost, 1,362,719 and 1,059,848 shares in 2019 and 2018
 
(7.2
)
 
(6.4
)
Accumulated deficit
 
(2,696.3
)
 
(2,691.8
)
Accumulated other comprehensive loss
 
(104.9
)
 
(100.0
)
Total stockholders’ equity
 
94.0

 
99.9

Noncontrolling interests
 
335.8

 
329.6

TOTAL EQUITY
 
429.8

 
429.5

TOTAL LIABILITIES AND EQUITY
 
$
4,770.1

 
$
4,515.7


- 3-

Table of Contents         

The condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018, include the following amounts related to consolidated variable interest entities, prior to intercompany eliminations. See Note 11 for more information concerning variable interest entities.
(unaudited)
 
March 31,
2019
 
December 31,
2018
Middletown Coke Company, LLC (“SunCoke Middletown”)
 
 
 
 
Cash and cash equivalents
 
$
0.3

 
$
1.1

Accounts receivable, net
 
11.6

 
0.5

Inventory
 
25.2

 
21.1

Property, plant and equipment
 
427.7

 
427.8

Accumulated depreciation
 
(112.5
)
 
(106.9
)
Accounts payable
 
16.8

 
13.7

Other assets (liabilities), net
 
(1.0
)
 
(1.7
)
Noncontrolling interests
 
334.5

 
328.2

 
 
 
 
 
Other variable interest entities
 
 
 
 
Cash and cash equivalents
 
$
0.2

 
$
0.5

Property, plant and equipment
 
11.7

 
11.7

Accumulated depreciation
 
(9.9
)
 
(9.8
)
Other assets (liabilities), net
 
0.5

 
0.5

Noncontrolling interests
 
1.3

 
1.4



See notes to condensed consolidated financial statements.

- 4-

Table of Contents         

AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
 
 
Three Months Ended March 31,
(unaudited)
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
8.1

 
$
44.8

Depreciation
 
42.9

 
51.1

Depreciation—SunCoke Middletown
 
7.5

 
3.8

Amortization
 
10.1

 
10.0

Ashland Works closure
 
64.1

 

Deferred income taxes
 
0.3

 
(6.8
)
Pension and OPEB expense (income)
 
7.9

 
(8.1
)
Contributions to pension trust
 
(9.2
)
 
(6.0
)
Other postretirement benefit payments
 
(9.6
)
 
(10.1
)
Changes in working capital
 
(95.8
)
 
0.2

Other operating items, net
 
(34.2
)
 
(13.3
)
Net cash flows from operating activities
 
(7.9
)
 
65.6

Cash flows from investing activities:
 
 
 
 
Capital investments
 
(44.8
)
 
(37.9
)
Other investing items, net
 
11.6

 

Net cash flows from investing activities
 
(33.2
)
 
(37.9
)
Cash flows from financing activities:
 
 
 
 
Net borrowings (payments) under credit facility
 
45.0

 
(10.0
)
Redemption of long-term debt
 
(4.0
)
 

SunCoke Middletown distributions to noncontrolling interest owners
 
(6.4
)
 
(10.3
)
Other financing items, net
 
(0.9
)
 
(0.9
)
Net cash flows from financing activities
 
33.7

 
(21.2
)
Net increase (decrease) in cash and cash equivalents
 
(7.4
)
 
6.5

Cash and cash equivalents, beginning of period
 
48.6

 
38.0

Cash and cash equivalents, end of period
 
$
41.2

 
$
44.5


See notes to condensed consolidated financial statements.

- 5-

Table of Contents         


AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(dollars in millions)
 
 
 
 
 
 
 
Three Months Ended March 31,
(unaudited)
 
2019
 
2018
Common stock
 
 
 
 
Balance at beginning and end of period
 
$
3.2

 
$
3.2

Additional paid-in capital
 
 
 
 
Balance at beginning of period
 
2,894.9

 
2,884.8

Share-based compensation
 
4.3

 
4.5

Balance at end of period
 
2,899.2

 
2,889.3

Treasury stock
 
 
 
 
Balance at beginning of period
 
(6.4
)
 
(5.4
)
Purchase of treasury stock
 
(0.8
)
 
(1.0
)
Balance at end of period
 
(7.2
)
 
(6.4
)
Accumulated deficit
 
 
 
 
Balance at beginning of period
 
(2,691.8
)
 
(2,877.0
)
Cumulative effect of adopting new hedging standard
 

 
(0.8
)
Net income (loss)
 
(4.5
)
 
28.7

Balance at end of period
 
(2,696.3
)
 
(2,849.1
)
Accumulated other comprehensive loss
 
 
 
 
Balance at beginning of period
 
(100.0
)
 
(50.2
)
Cumulative effect of adopting new hedging standard
 

 
0.8

Change in accumulated other comprehensive loss
 
(4.9
)
 
(6.7
)
Balance at end of period
 
(104.9
)
 
(56.1
)
Noncontrolling interests
 
 
 
 
Balance at beginning of period
 
329.6

 
345.2

Net income
 
12.6

 
16.1

Net distributions to noncontrolling interests
 
(6.4
)
 
(10.3
)
Balance at end of period
 
335.8

 
351.0

Total equity
 
$
429.8

 
$
331.9



See notes to condensed consolidated financial statements.

- 6-

Table of Contents         

AK STEEL HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(dollars in millions, except per share data, unless otherwise indicated)

NOTE 1Summary of Significant Accounting Policies
 

Basis of Presentation—These financial statements consolidate the operations and accounts of AK Steel Holding Corporation (“AK Holding”), its wholly owned subsidiary AK Steel Corporation (“AK Steel”), all subsidiaries in which AK Holding has a controlling interest, and two variable interest entities for which AK Steel is the primary beneficiary. Unless the context provides otherwise, references to “we,” “us” and “our” refer to AK Holding and its subsidiaries. In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2019 and December 31, 2018, our results of operations for the three months ended March 31, 2019 and 2018, and our cash flows for the three months ended March 31, 2019 and 2018. Our results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results we expect for the full year ending December 31, 2019. These condensed consolidated financial statements should be read along with our audited consolidated financial statements for the year ended December 31, 2018, included in our Annual Report on Form 10-K for the year ended December 31, 2018.

Leases—We determine if an arrangement contains a lease at inception. We recognize right-of-use assets and liabilities associated with leases based on the present value of the future minimum lease payments over the lease term at the later of the commencement date of the lease or January 1, 2019 (the implementation date of Accounting Standards Update No. 2016-02, Leases (Topic 842)). We use our incremental borrowing rate at the recognition date in determining the present value of future payments for leases that do not have a readily determinable implicit rate. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that the option will be exercised. For leases that include residual value guarantees or payments for terminating the lease, we include these costs in the lease liability when it is probable that we will incur them. Right-of-use assets and obligations for short-term leases (leases with an initial term of 12 months or less) are not recognized in the condensed consolidated balance sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. We have agreements that contain lease and non-lease components. In assessing whether an agreement includes a lease component, we consider the nature of the assets included under the agreement and our right to direct their use. We allocate the costs of the agreement to the separate components based on the relative standalone prices of the components. Where observable standalone prices are not readily available, we estimate the standalone price based on the most observable information available. For leases of real estate and certain light equipment, such as vehicles and mobile equipment, and for certain contracts that contain assets, such as production support, natural gas, electricity and industrial gas agreements, we account for the lease and non-lease components in the contracts as a single lease component. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting treatment.


- 7-

Table of Contents         

NOTE 2Supplementary Financial Statement Information
 

Revenue

Net sales by market are presented below:
 
Three Months Ended March 31,
 
2019
 
2018
Automotive
$
1,090.9

 
$
1,119.1

Infrastructure and Manufacturing
278.1

 
241.3

Distributors and Converters
328.7

 
298.5

Total
$
1,697.7

 
$
1,658.9


Net sales by product line are presented below:
 
Three Months Ended March 31,
 
2019
 
2018
Carbon steel
$
1,099.2

 
$
1,068.6

Stainless and electrical steel
444.5

 
426.1

Tubular products, components and other
154.0

 
164.2

Total
$
1,697.7

 
$
1,658.9



We sell domestically to customers located primarily in the Midwestern, Southern and Eastern United States and to foreign customers, primarily in Canada, Mexico and Western Europe. Net sales to customers located outside the United States were $143.2 for the three months ended March 31, 2019, compared to $167.8 for the corresponding period in 2018.

Inventory

Inventories as of March 31, 2019 and December 31, 2018, are presented below:
 
March 31,
2019
 
December 31,
2018
Finished and semi-finished
$
1,021.9

 
$
1,054.4

Raw materials
356.9

 
365.5

Inventory
$
1,378.8

 
$
1,419.9



Other Non-Current Assets

Intangible assets at March 31, 2019 and December 31, 2018, consist of:
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
As of March 31, 2019
 
 
 
 
 
Customer relationships
$
36.6

 
$
(8.7
)
 
$
27.9

Technology
19.3

 
(5.3
)
 
14.0

Intangible assets
$
55.9

 
$
(14.0
)
 
$
41.9

 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
Customer relationships
$
36.6

 
$
(7.4
)
 
$
29.2

Technology
19.3

 
(4.6
)
 
14.7

Intangible assets
$
55.9

 
$
(12.0
)
 
$
43.9



- 8-

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Amortization expense related to intangible assets was $2.0 for the three months ended March 31, 2019 and $2.4 for the three months ended March 31, 2018.

Investments in Affiliates

We have investments in several businesses that are accounted for using the equity method of accounting. Summarized financial statement data for all investees is presented below.
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Revenue
 
$
77.8

 
$
74.8

Gross profit
 
21.5

 
21.1

Net income
 
2.7

 
4.2

 
 
 
 
 
Our share of income of equity investees (included in cost of products sold)
 
0.7

 
1.3



Ashland Works Closure

In January 2019, our Board of Directors approved and we announced the planned closure of our Ashland Works, including the previously idled blast furnace and steelmaking operations (“Ashland Works Hot End”) and the hot dip galvanizing coating line that has remained operational, subject to negotiations with the labor union at that facility. Factors that influenced our decision to close Ashland Works included an uncertain global trade landscape influenced by shifting domestic and international political priorities, Ashland Works’ high cost of production, and continued intense competition from domestic and foreign steel competitors. These conditions directly impact our pricing, which in turn directly impacts our assessment of the demand forecasts for the markets we serve. Despite several successful trade actions, we continue to see a high level of carbon steel imports driven by global overcapacity, particularly in China. The global overcapacity is expected to be exacerbated by several domestic steel companies that have restarted or plan new capacity additions in the United States. In addition, we have recently concluded that we have sufficient coating capacity to meet our customers’ needs without using our coating operations at Ashland Works. We are transitioning products to our other U.S. coating lines, and plan to close the Ashland Works line before the end of 2019.

We recorded a charge of $77.4 during the first quarter of 2019, which includes $18.5 for termination of take-or-pay supply agreements, $15.2 for supplemental unemployment and other employee benefit costs, pension and OPEB termination benefits of $13.3 (recorded in pension and OPEB (income) expense), an estimated multiemployer plan withdrawal liability of $23.0, and $7.4 for other costs. The supplemental unemployment and other employee benefit costs are expected to be paid primarily in 2020 and 2021. For the $77.4 charge, we expect to make cash payments of approximately $15.0 in 2019, $30.0 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 $77.4 charge recorded in the first quarter of 2019, we expect to record expenses of approximately $14.0 over the full-year 2019, consisting of cash costs of approximately $10.0 related to closing the facility and $4.0 of accelerated depreciation related to the coating line fixed assets. These cash costs related to closing the facility will decline in future years and no depreciation expense will be incurred beyond 2019. On-going costs for maintenance of the equipment, utilities and supplier obligations related to the idled Ashland Works Hot End were $2.5 and $5.4 for the three months ended March 31, 2019 and 2018.

NOTE 3Income Taxes
 

Income taxes recorded for the periods ended March 31, 2019 and 2018, were estimated using the discrete method. Income taxes are based on our financial results through the end of the period, as well as the related change in the valuation allowance on deferred tax assets. We are unable to estimate the annual effective tax rate with sufficient precision for purposes of the effective tax rate method, which requires us to consider a projection of full-year income and the expected change in the valuation allowance. The estimated annual effective tax rate method was not reliable due to its sensitivity to small changes to forecasted annual pre-tax earnings and the effect of our valuation allowance, which create results with significant variations in the customary relationship between income tax expense and pre-tax income for the interim periods. As a result, we determined that using the discrete method is more appropriate than using the annual effective tax rate method.


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During the first three months of 2018, we reduced our valuation allowance and recorded an income tax benefit of $5.3 as a result of changes to the tax net operating loss carryover rules included in the Tax Cuts and Jobs Act of 2017 that allow us to use certain indefinite-lived deferred tax liabilities as a source of future income to realize deferred tax assets.

NOTE 4Long-term Debt and Other Financing
 

Debt balances at March 31, 2019 and December 31, 2018, are presented below:
 
March 31,
2019
 
December 31,
2018
Credit Facility
$
380.0

 
$
335.0

7.50% Senior Secured Notes due July 2023 (effective rate of 8.3%)
380.0

 
380.0

5.00% Exchangeable Senior Notes due November 2019 (effective rate of 10.8%)
148.5

 
148.5

7.625% Senior Notes due October 2021
406.2

 
406.2

6.375% Senior Notes due October 2025 (effective rate of 7.1%)
270.2

 
274.8

7.00% Senior Notes due March 2027
391.6

 
391.6

Industrial Revenue Bonds due 2020 through 2028
99.3

 
99.3

Unamortized debt discount and issuance costs
(38.1
)
 
(41.7
)
Total long-term debt
$
2,037.7

 
$
1,993.7



During the three months ended March 31, 2019, we were in compliance with all the terms and conditions of our debt agreements. The Exchangeable Notes maturing in 2019 are classified as long-term based on our ability and intent to refinance that debt on a long-term basis. During the three months ended March 31, 2019, we repurchased an aggregate principal amount of $4.6 of our 6.375% Senior Notes due October 2025 in private, open market transactions and recognized a net gain on the repurchases totaling $0.6, which is included in other (income) expense.

Credit Facility

As of March 31, 2019 we had a $1,350.0 revolving credit facility (the “Credit Facility”), which expires in September 2022. As of March 31, 2019, we had outstanding borrowings of $380.0 under the Credit Facility. At March 31, 2019, our eligible collateral under the Credit Facility, after application of applicable advance rates, was in excess of $1,350.0. Availability as of March 31, 2019, was $896.8 after reductions of $73.2 for outstanding letters of credit. In April 2019, we increased the Credit Facility by $150.0 to $1,500.0.

NOTE 5Leases
 

We have leases primarily for offices, production buildings and equipment. Our leases have remaining contractual lease terms ranging from less than one year to 19 years. Certain of those leases include options to extend the leases, and those options are for periods from 1 to 32 years depending on the particular lease. Certain of the leases may also include options to terminate the leases within 1 year. Certain leases include variable lease payments based on production, usage or independent factors such as changes in published producer price indexes.

Lease costs are presented below:
 
Three Months Ended March 31,
 
2019
Operating leases
$
16.7

Short-term leases
11.1

Variable lease costs
17.3

Total
$
45.1




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Other information related to leases was as follows:
 
Three Months Ended March 31,
 
2019
Cash paid for operating cash flows from operating leases
$
18.1

Right-of-use assets obtained in exchange for operating lease liabilities
3.7

Weighted-average remaining lease term of operating leases (in years)
7.8

Weighted-average discount rate for operating leases
8.4
%


Future minimum lease payments under noncancelable operating leases as of March 31, 2019, were as follows:
Year ending December 31:
 
2019 (remaining period of year)
$
53.3

2020 
63.4

2021 
50.8

2022 
40.9

2023
34.8

Thereafter
148.2

Total future minimum operating lease payments
391.4

Less imputed interest
115.0

Total operating lease liabilities
276.4

Less current portion of operating lease liabilities
56.1

Long-term operating lease liabilities
$
220.3



NOTE 6Pension and Other Postretirement Benefits
 

Net periodic benefit (income) expense for pension and other postretirement benefits was as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Pension Benefits
 
 
 
Service cost
$
0.5

 
$
0.8

Interest cost
22.3

 
23.7

Expected return on assets
(28.0
)
 
(38.8
)
Amortization of prior service cost
0.7

 
1.0

Amortization of (gain) loss
(1.7
)
 
3.9

Termination benefits—Ashland Works
9.7

 

Net periodic benefit (income) expense
$
3.5

 
$
(9.4
)
 
 
 
 
Other Postretirement Benefits
 
 
 
Service cost
$
0.9

 
$
1.1

Interest cost
4.1

 
3.9

Amortization of prior service cost (credit)
(3.3
)
 
(3.4
)
Amortization of (gain) loss
(0.9
)
 
(0.3
)
Termination benefits—Ashland Works
3.6

 

Net periodic benefit (income) expense
$
4.4

 
$
1.3



We are required to contribute $45.9 to the master pension trust during 2019, of which $9.2 was contributed through March 31, 2019 and another $10.3 was contributed in April 2019. Based on current actuarial assumptions, we estimate that

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our required pension contributions will be approximately $50.0 in 2020 and $50.0 in 2021. Factors that affect our estimates of future funding projections include return on plan assets, actuarial data and assumptions relating to plan participants, the discount rate used to measure the pension obligations and changes to regulatory funding requirements.

NOTE 7Environmental and Legal Contingencies
 

Environmental Contingencies

We and our predecessors have been involved in steel manufacturing and related operations since 1900. Although we believe our operating practices have been consistent with prevailing industry standards, hazardous materials may have been released at operating sites or third-party sites in the past, including operating sites that we no longer own. If we reasonably can, we have estimated potential remediation expenditures for those sites where future remediation efforts are probable based on identified conditions, regulatory requirements or contractual obligations arising from the sale of a business or facility. For sites involving government-required investigations, we typically make an estimate of potential remediation expenditures only after the investigation is complete and when we better understand the nature and scope of the remediation. In general, the material factors in these estimates include the costs associated with investigations, delineations, risk assessments, remedial work, governmental response and oversight, site monitoring, and preparation of reports to the appropriate environmental agencies. We have recorded the following liabilities for environmental matters on our condensed consolidated balance sheets:
 
March 31,
2019
 
December 31,
2018
Accrued liabilities
$
7.3

 
$
8.0

Other non-current liabilities
32.6

 
31.2



We cannot predict the ultimate costs for each site with certainty because of the evolving nature of the investigation and remediation process. Rather, to estimate the probable costs, we must make certain assumptions. The most significant of these assumptions is for the nature and scope of the work that will be necessary to investigate and remediate a particular site and the cost of that work. Other significant assumptions include the cleanup technology that will be used, whether and to what extent any other parties will participate in paying the investigation and remediation costs, reimbursement of past response and future oversight costs by governmental agencies, and the reaction of the governing environmental agencies to the proposed work plans. Costs for future investigation and remediation are not discounted to their present value. To the extent that we have been able to reasonably estimate future liabilities, we do not believe that there is a reasonable possibility that we will incur a loss or losses that exceed the amounts we accrued for the environmental matters discussed below that would, either individually or in the aggregate, have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, since we recognize amounts in the consolidated financial statements in accordance with accounting principles generally accepted in the United States that exclude potential losses that are not probable or that may not be currently estimable, the ultimate costs of these environmental proceedings may be higher than the liabilities we currently have recorded in our consolidated financial statements.

Except as we expressly note below, we do not currently anticipate any material effect on our consolidated financial position, results of operations or cash flows as a result of compliance with current environmental regulations. Moreover, because all domestic steel producers operate under the same federal environmental regulations, we do not believe that we are more disadvantaged than our domestic competitors by our need to comply with these regulations. Some foreign competitors may benefit from less stringent environmental requirements in the countries where they produce, resulting in lower compliance costs for them and providing those foreign competitors with a cost advantage on their products.

According to the Resource Conservation and Recovery Act (“RCRA”), which governs the treatment, handling and disposal of hazardous waste, the United States Environmental Protection Agency (“EPA”) and authorized state environmental agencies may conduct inspections of RCRA-regulated facilities to identify areas where there have been releases of hazardous waste or hazardous constituents into the environment and may order the facilities to take corrective action to remediate such releases. Environmental regulators may inspect our major steelmaking facilities. While we cannot predict the future actions of these regulators, it is possible that they may identify conditions in future inspections of these facilities which they believe require corrective action.

Under authority from the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the EPA and state environmental authorities have conducted site investigations at certain of our facilities and other third-party facilities, portions of which previously may have been used for disposal of materials that are currently regulated. The results

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of these investigations are still pending, and we could be directed to spend funds for remedial activities at the former disposal areas. Because of the uncertain status of these investigations, however, we cannot reliably predict whether or when such spending might be required or its magnitude.

As previously reported, on April 29, 2002, we entered a mutually agreed-upon administrative order on consent with the EPA pursuant to Section 122 of CERCLA to perform a Remedial Investigation/Feasibility Study (“RI/FS”) of the Hamilton Plant site located in New Miami, Ohio. The plant ceased operations in 1990 and all of its former structures have been demolished. We submitted the investigation portion of the RI/FS, and we completed a supplemental study in 2014. We currently have accrued $0.7 for the remaining cost of the RI/FS. Until the RI/FS is complete, we cannot reliably estimate the additional costs, if any, we may incur for potentially required remediation of the site or when we may incur them.

As previously reported, on September 30, 1998, our predecessor, Armco Inc., received an order from the EPA under Section 3013 of RCRA requiring it to develop a plan for investigation of eight areas of our Mansfield Works that allegedly could be sources of contamination. A site investigation began in November 2000 and is continuing. We cannot reliably estimate how long it will take to complete this site investigation. We currently have accrued $0.6 for the projected cost of the study. Until the site investigation is complete, we cannot reliably estimate the additional costs, if any, we may incur for potentially required remediation of the site or when we may incur them.

As previously reported, on September 26, 2012, the EPA issued an order under Section 3013 of RCRA requiring us to develop a plan for investigation of four areas at our Ashland Works coke plant. The Ashland Works coke plant ceased operations in 2011 and all of its former structures have been demolished and removed. In 1981, we acquired the plant from Honeywell International Corporation (as successor to Allied Corporation), who had managed the coking operations there for approximately 60 years. In connection with the sale of the coke plant, Honeywell agreed to indemnify us from certain claims and obligations that could arise from the investigation and we intend to pursue such indemnification from Honeywell, if necessary. We cannot reliably estimate how long it will take to complete the site investigation. On March 10, 2016, the EPA invited us to participate in settlement discussions regarding an enforcement action. Settlement discussions between the parties are ongoing, though whether the parties will reach agreement and any such agreement’s terms are uncertain. We currently have accrued $1.4 for the projected cost of the investigation and known remediation. Until the site investigation is complete, we cannot reliably estimate the costs, if any, we may incur for potential additional required remediation of the site or when we may incur them.

As previously reported, on July 15, 2009, we and the Pennsylvania Department of Environmental Protection (“PADEP”) entered a Consent Order and Agreement (the “Consent Order”) to resolve an alleged unpermitted discharge of wastewater from the closed Hillside Landfill at our former Ambridge Works. Under the terms of the Consent Order, we paid a penalty and also agreed to implement various corrective actions, including an investigation of the area where landfill activities occurred, submission of a plan to collect and treat surface waters and seep discharges, and upon approval from PADEP, implementation of that plan. We have accrued $5.6 for the remedial work required under the approved plan and Consent Order. We submitted a National Pollution Discharge Elimination System (“NPDES”) permit application to move to the next work phase. We currently estimate that the remaining work will be completed in 2020, though it may be delayed.

As previously reported, on June 29, 2000, the United States filed a complaint on behalf of the EPA against us in the U.S. District Court for the Southern District of Ohio, Case No. C-1-00530, alleging violations of the Clean Air Act, the Clean Water Act and RCRA at our Middletown Works. Subsequently, the State of Ohio, the Sierra Club and the National Resources Defense Council intervened. On May 15, 2006, the court entered a Consent Decree in Partial Resolution of Pending Claims (the “Consent Decree”). Under the Consent Decree, we agreed to undertake a comprehensive RCRA facility investigation at Middletown Works and, as appropriate, complete a corrective measures study. The Consent Decree also required us to implement certain RCRA corrective action interim measures. We have completed the remedial activity at Dicks Creek, but continue to work on the RCRA facility investigation and certain interim measures. We have accrued $12.3 for the cost of known work required under the Consent Decree for the RCRA facility investigation and remaining interim measures.

As previously reported, on May 12, 2014, the Michigan Department of Environmental Quality (“MDEQ”) issued to our Dearborn Works an Air Permit to Install No. 182-05C (the “PTI”) to increase the emission limits for the blast furnace and other emission sources. The PTI was issued as a correction to a prior permit to install that did not include certain information during the prior permitting process. On July 10, 2014, the South Dearborn Environmental Improvement Association (“SDEIA”), Detroiters Working for Environmental Justice, Original United Citizens of Southwest Detroit and the Sierra Club filed a Claim of Appeal of the PTI in the State of Michigan, Wayne County Circuit, Case No. 14-008887-AA. Appellants and the MDEQ required the intervention of Severstal Dearborn, LLC (“Dearborn”) (now owned by us) in this action as an additional appellee. The appellants allege multiple deficiencies with the PTI and the permitting process. Until the appeal is

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resolved, we cannot determine what the ultimate permit limits will be. Until the permit limits are determined and final, we cannot reliably estimate the costs we may incur, if any, or when we may incur them.

As previously reported, on August 21, 2014, the SDEIA filed a Complaint under the Michigan Environmental Protection Act (“MEPA”) in the State of Michigan, Wayne County Circuit Case No. 14-010875-CE. The plaintiffs allege that the air emissions from our Dearborn Works are impacting the air, water and other natural resources, as well as the public trust in such resources. The plaintiffs are requesting, among other requested relief, that the court assess and determine the sufficiency of the PTI’s limitations. On October 15, 2014, the court ordered a stay of the proceedings until a final order is issued in Wayne County Circuit Court Case No. 14-008887-AA (discussed above). When the proceedings resume, we will vigorously contest these claims. Until the claims in this Complaint are resolved, we cannot reliably estimate the costs we may incur, if any, or when we may incur them.

As previously reported, on April 27, 2000, MDEQ issued RCRA Corrective Action Order No. 111-04-00-07E to Rouge Steel Company and Ford Motor Company for the property that includes our Dearborn Works. The Corrective Action Order has been amended five times. We are a party to the Corrective Action Order as the successor-in-interest to Dearborn, which was the successor-in-interest to Rouge Steel Company. The Corrective Action Order requires the site-wide investigation, and where appropriate, remediation of the facility. The site investigation and remediation are ongoing. We cannot reliably estimate how long it will take to complete this site investigation and remediation. To date, Ford Motor Company has incurred most of the costs of the investigation and remediation due to its prior ownership of the steelmaking operations at Dearborn Works. Until the site investigation is complete, we cannot reliably estimate the additional costs we may incur, if any, for any potentially required remediation of the site or when we may incur them.

As previously reported, we received an order in October 2002 from the EPA under Section 3013 of RCRA requiring us to investigate several areas of Zanesville Works that allegedly could be sources of contamination. A site investigation began in 2003 and was approved by EPA in November 2012. On October 28, 2016, the EPA requested that we conduct a corrective measures study and implement these measures as necessary. We subsequently agreed to proceed with a voluntary corrective measures study and have accrued $0.1 for the study. Until the study is complete, we cannot reliably estimate the costs, if any, we may incur for potential required remediation of the site or when we may incur them.

In addition to the foregoing matters, we are or may be involved in proceedings with various regulatory authorities that may require us to pay fines, comply with more rigorous standards or other requirements or incur capital and operating expenses for environmental compliance. We believe that the ultimate disposition of the proceedings will not have, individually or in the aggregate, a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Legal Contingencies

As previously reported, since 1990 we have been named as a defendant in numerous lawsuits alleging personal injury as a result of exposure to asbestos. The great majority of these lawsuits have been filed on behalf of people who claim to have been exposed to asbestos while visiting the premises of one of our current or former facilities. The majority of asbestos cases pending in which we are a defendant do not include a specific dollar claim for damages. In the cases that do include specific dollar claims for damages, the complaint typically includes a monetary claim for compensatory damages and a separate monetary claim in an equal amount for punitive damages, but does not attempt to allocate the total monetary claim among the various defendants.


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The number of asbestos cases pending at March 31, 2019, is presented below:
 
 
Asbestos Cases Pending at
 
 
March 31, 2019
Cases with specific dollar claims for damages:
 
 
Claims up to $0.2
 
164

Claims above $0.2 to $5.0
 
4

Claims above $5.0 to $20.0
 
3

Total claims with a specific dollar claim for damages (a)
 
171

Cases without a specific dollar claim for damages
 
176

Total asbestos cases pending
 
347

(a)
Involve a total of 2,246 plaintiffs and 19,559 defendants

In each case, the amount described is per plaintiff against all of the defendants, collectively. Thus, it usually is not possible at the outset of a case to determine the specific dollar amount of a claim against us. In fact, it usually is not even possible at the outset to determine which of the plaintiffs actually will pursue a claim against us. Typically, that can only be determined through written interrogatories or other discovery after a case has been filed. Therefore, in a case involving multiple plaintiffs and multiple defendants, we initially only account for the lawsuit as one claim. After we have determined through discovery whether a particular plaintiff will pursue a claim, we make an appropriate adjustment to statistically account for that specific claim. It has been our experience that only a small percentage of asbestos plaintiffs ultimately identify us as a target defendant from whom they actually seek damages and most of these claims ultimately are either dismissed or settled for a small fraction of the damages initially claimed. Asbestos-related claims information for the three months ended March 31, 2019 and 2018 is presented below:
 
Three Months Ended March 31,
 
2019
 
2018
New Claims Filed
11

 
12

Pending Claims Disposed Of
7

 
11

Total Amount Paid in Settlements
$
0.2

 
$
0.3



Since the onset of asbestos claims against us in 1990, five asbestos claims against us have proceeded to trial in four separate cases. All five concluded with a verdict in our favor. We continue to vigorously defend the asbestos claims. Based upon present knowledge, and the factors above, we believe it is unlikely that the resolution in the aggregate of the asbestos claims against us will have a materially adverse effect on our consolidated results of operations, cash flows or financial condition. However, predictions about the outcome of pending litigation, particularly claims alleging asbestos exposure, are subject to substantial uncertainties. These uncertainties include (1) the significantly variable rate at which new claims may be filed, (2) the effect of bankruptcies of other companies currently or historically defending asbestos claims, (3) the litigation process from jurisdiction to jurisdiction and from case to case, (4) the type and severity of the disease each claimant is alleged to suffer, and (5) the potential for enactment of legislation affecting asbestos litigation.

As previously reported, on January 20, 2010, ArcelorMittal France and ArcelorMittal Atlantique et Lorraine (collectively “ArcelorMittal”) filed an action in the United States District Court for the District of Delaware, Case No. 10-050-SLR against us, Dearborn, and Wheeling-Nisshin Inc., whom Dearborn indemnified in this action. By virtue of our responsibility as a successor-in-interest to Dearborn and an indemnitor of Wheeling-Nisshin Inc., we now have complete responsibility for the defense of this action. The three named defendants are collectively referred to hereafter as “we” or “us”, though the precise claims against each separate defendant may vary. The complaint alleges that we are infringing the claims of U.S. Patent No. 6,296,805 (the “Patent”) in making pre-coated cold-rolled boron steel sheet and seeks injunctive relief and unspecified compensatory damages. We filed an answer denying ArcelorMittal’s claims and raised various affirmative defenses. We also filed counterclaims against ArcelorMittal for a declaratory judgment that we are not infringing the Patent and that the Patent is invalid. Subsequently, the trial court separated the issues of liability and damages. The case proceeded with a trial to a jury on the issue of liability during the week of January 15, 2011. The jury returned a verdict that we did not infringe the Patent and that the Patent was invalid. Judgment then was entered in our favor. ArcelorMittal filed an appeal with the United States Court of Appeals for the Federal Circuit. On November 30, 2012, the court of appeals issued a decision reversing certain findings related to claim construction and the validity of the Patent and remanded the case to the trial court for further

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proceedings. On January 30, 2013, ArcelorMittal filed a motion for rehearing with the court of appeals. On March 20, 2013, the court of appeals denied ArcelorMittal’s motion for rehearing. The case then was remanded to the trial court for further proceedings. On April 16, 2013, according to a petition previously filed by ArcelorMittal and ArcelorMittal USA LLC, the U.S. Patent and Trademark Office (“PTO”) reissued the Patent as U.S. Reissue Patent RE44,153 (the “Reissued Patent”). Also on April 16, 2013, ArcelorMittal filed a second action against us in the United States District Court for the District of Delaware, Case Nos. 1:13-cv-00685 and 1:13-cv-00686 (collectively the “Second Action”). The complaint filed in the Second Action alleges that we are infringing the claims of the Reissued Patent and seeks injunctive relief and unspecified compensatory damages. On April 23, 2013, we filed a motion to dismiss key elements of the complaint filed in the Second Action. In addition, the parties briefed related non-infringement and claims construction issues in the original action. On October 25, 2013, the district court granted summary judgment in our favor, confirming that our product does not infringe the original Patent or the Reissued Patent. The court further ruled that ArcelorMittal’s Reissued Patent was invalid due to ArcelorMittal’s deliberate violation of a statutory prohibition on broadening a patent through reissue more than two years after the original Patent was granted and that the original Patent had been surrendered when the Reissued Patent was issued and thus is no longer in effect. Final Judgment was entered on October 31, 2013. On November 6, 2013, ArcelorMittal filed a motion to clarify or, in the alternative, to alter or amend the October 31, 2013 judgment. We opposed the motion. On December 5, 2013, the court issued a memorandum and order denying the motion and entered final judgment in our favor, and against ArcelorMittal, specifically ruling that all claims of ArcelorMittal’s Reissued Patent are invalid as violative of 35 U.S.C. §251(d). On December 30, 2013, ArcelorMittal filed notices of appeal to the Federal Circuit Court of Appeals. On May 12, 2015, the Federal Circuit issued its decision affirming in part and reversing in part the trial court’s decision and remanding the case for further proceedings. The Federal Circuit ruled that 23 of the 25 claims of the Reissued Patent were improperly broadened and therefore invalid. However, the Federal Court found that the district court erred in invalidating the remaining two claims and remanded the case for further proceedings before the district court. Following the remand, ArcelorMittal filed a motion in the trial court for leave to amend the Second Action to assert additional patent infringement claims based on another, related patent that the PTO issued on June 10, 2014, No. RE44,940 (Second Reissue Patent). It also filed a motion to dismiss the original action on the grounds that it is now moot in light of the Court of Appeals’ last ruling. We opposed both of those motions. In addition, we filed separate motions for summary judgment in the original action on the grounds of non-infringement and invalidity. A hearing on all motions was held on October 27, 2015. On December 4, 2015, the district court issued an order granting our motion for summary judgment that neither of the remaining claims of the Reissued Patent are infringed and both are invalid as obvious. The court therefore entered final judgment in favor of the defendants in the original case. In the court’s order, the judge also granted ArcelorMittal’s motion to file a first amended complaint and ArcelorMittal did file an amended complaint in Case No. 1:13-cv-00685 (“685 Action”) alleging we are infringing the claims of the Second Reissue Patent, which we deny. On December 21, 2015, ArcelorMittal filed a notice of appeal from the district court’s December 4, 2015 final judgment. On May 16, 2017, the Federal Circuit Court of Appeals affirmed the district court’s judgment of invalidity and non-infringement of the reissued Patent. On June 14, 2017, ArcelorMittal filed a petition to the Federal Circuit for rehearing en banc of the May 16, 2017 decision. On August 14, 2017, the Federal Court of Appeals denied ArcelorMittal’s petition for rehearing en banc. On January 20, 2016, we filed a motion to dismiss the amended complaint in the 685 Action, or in the alternative, a motion to stay pending a resolution of the appeal in the original case. On April 19, 2016, the district court issued an order denying our motion and ordering limited discovery. Following discovery, on August 17, 2016, we filed a motion for summary judgment on the basis that the claims in the 685 Action are precluded by the judgment in the original case. On January 19, 2017, the district court issued an opinion granting summary judgment in our favor in the 685 Action on the grounds of non-infringement and also entered a final judgment on that basis. On February 14, 2017, ArcelorMittal filed a notice of appeal of the district court’s order in the Federal Circuit Court of Appeals. On November 5, 2018, the Federal Court of Appeals issued a decision vacating the judgment of non-infringement entered by the district court. The decision remands the case back to the district court for further proceedings. We intend to continue to contest this matter vigorously. We have not made a determination that a loss is probable and we do not have adequate information to reliably or accurately estimate a potential loss if ArcelorMittal prevails on remand. Because we have been unable to determine that the potential loss in this case is probable or estimable, we have not recorded an accrual for this matter. If our assumptions used to evaluate whether a loss in this matter is either probable or estimable prove to be incorrect or change, we may be required to record a liability for an adverse outcome.

Other Contingencies

In addition to the matters discussed above, there are various pending and potential claims against us and our subsidiaries involving product liability, commercial, employee benefits and other matters arising in the ordinary course of business. Because of the considerable uncertainties which exist for any claim, it is difficult to reliably or accurately estimate what would be the amount of a loss if a claimant prevails. If material assumptions or factual understandings we rely on to evaluate exposure for these contingencies prove to be inaccurate or otherwise change, we may be required to record a liability for an adverse outcome. If, however, we have reasonably evaluated potential future liabilities for all of these contingencies,

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including those described more specifically above, it is our opinion, unless we otherwise noted, that the ultimate liability from these contingencies, individually and in the aggregate, should not have a material effect on our consolidated financial position, results of operations or cash flows.

NOTE 8Share-based Compensation
 

AK Holding’s Stock Incentive Plan (“SIP”) permits the granting of nonqualified stock option, restricted stock, performance share and restricted stock unit awards to our Directors, officers and other employees. We have estimated share-based compensation expense to be $9.5 for 2019. Information on share-based compensation expense is presented below:
 
Three Months Ended March 31,
Share-based Compensation Expense
2019
 
2018
Stock options
$
1.7

 
$
1.7

Restricted stock
1.5

 
1.9

Restricted stock units issued to Directors
0.3

 
0.3

Performance shares
0.6

 
0.5

Equity-based long-term performance plan
0.2

 
0.1

Total share-based compensation expense
$
4.3

 
$
4.5



We granted stock options on 1,199,415 shares during the three months ended March 31, 2019, with a weighted-average fair value of $1.52 per share of stock option. No options were exercised during the three months ended March 31, 2019.

We granted restricted stock awards of 768,304 shares during the three months ended March 31, 2019, at a weighted-average fair value of $2.66 per share. The total intrinsic value of restricted stock awards that vested (i.e., restrictions lapsed) during the three months ended March 31, 2019 was $1.9.

We granted performance share awards of 595,733 shares during the three months ended March 31, 2019, with a weighted-average fair value of $3.09 per share. The total intrinsic value of performance share awards that vested during the three months ended March 31, 2019 was $0.7.

During the first quarter of 2019, in order to further align our management and stockholder interests, the Board of Directors changed the structure of long-term incentive compensation for executive officers. For performance periods beginning in 2019, 50% of the long-term incentive plan compensation earned by executive officers will now be denominated in stock instead of the 30% denominated in stock for performance periods beginning in 2018. In addition, beginning in 2019, 30% of the compensation earned by other participants under the long-term incentive plan will now be paid in stock. The remaining portion of the long-term incentive plan for all participants will be settled in cash. As a result, the equity-based portion of the long-term incentive plan is treated as share-based compensation with a performance condition.


- 17-

Table of Contents         

NOTE 9Comprehensive Income (Loss)
 

Other comprehensive income (loss), net of tax, information is presented below:
 
Three Months Ended March 31,
 
2019
 
2018
Foreign currency translation
 
 
 
Balance at beginning of period
$
(0.6
)
 
$
1.1

Other comprehensive income (loss)—foreign currency translation gain (loss)
(0.7
)
 
1.1

Balance at end of period
$
(1.3
)
 
$
2.2

Cash flow hedges
 
 
 
Balance at beginning of period
$
7.2

 
$
22.3

Cumulative effect of adopting new hedging standard

 
0.8

Other comprehensive income (loss):
 
 
 
Gains (losses) arising in period
7.4

 
(1.4
)
Income tax expense (benefit) (b)

 

Gains (losses) arising in period, net of tax
7.4

 
(1.4
)
Reclassification of losses (gains) to net income:
 
 
 
Recorded in cost of products sold
(6.4
)
 
(7.6
)
Income tax (expense) benefit (b)

 

Net amount of reclassification of losses (gains) to net income, net of tax
(6.4
)
 
(7.6
)
Total other comprehensive income (loss), net of tax
1.0

 
(9.0
)
Balance at end of period
$
8.2

 
$
14.1

Pension and OPEB plans
 
 
 
Balance at beginning of period
$
(106.6
)
 
$
(73.6
)
Reclassification to net income:
 
 
 
Prior service costs (credits) (a)
(2.6
)
 
(2.4
)
Actuarial (gains) losses (a)
(2.6
)
 
3.6

Subtotal
(5.2
)
 
1.2

Income tax (expense) benefit (b)

 

Amount of reclassification to net income, net of tax
(5.2
)
 
1.2

Total other comprehensive income (loss), net of tax
(5.2
)
 
1.2

Balance at end of period
$
(111.8
)
 
$
(72.4
)

(a)
Included in pension and OPEB (income) expense
(b)
Included in income tax expense (benefit)


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Table of Contents         

NOTE 10Earnings per Share
 

Earnings per share are calculated using the “two-class” method. Under the “two-class” method, undistributed earnings are allocated to both common shares and participating securities. We divide the sum of distributed earnings to common stockholders and undistributed earnings to common stockholders by the weighted-average number of common shares outstanding during the period. The restricted stock granted by AK Holding is entitled to dividends before vesting and meets the criteria of a participating security.
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Net income (loss) attributable to AK Steel Holding Corporation
 
$
(4.5
)
 
$
28.7

Less: distributed earnings to common stockholders and holders of certain stock compensation awards
 

 

Undistributed earnings
 
$
(4.5
)
 
$
28.7

 
 
 
 
 
Common stockholders earnings—basic and diluted:
 
 
 
 
Distributed earnings to common stockholders
 
$

 
$

Undistributed earnings to common stockholders
 
(4.5
)
 
28.6

Common stockholders earnings—basic and diluted
 
$
(4.5
)
 
$
28.6

 
 
 
 
 
Common shares outstanding (weighted-average shares in millions):
 
 
 
 
Common shares outstanding for basic earnings per share
 
315.6

 
314.7

Effect of exchangeable debt
 

 
0.5

Effect of dilutive stock-based compensation
 

 
0.8

Common shares outstanding for diluted earnings per share
 
315.6

 
316.0

 
 
 
 
 
Basic earnings per share:
 
 
 
 
Distributed earnings
 
$

 
$

Undistributed earnings
 
(0.01
)
 
0.09

Basic earnings per share
 
$
(0.01
)
 
$
0.09

 
 
 
 
 
Diluted earnings per share:
 
 
 
 
Distributed earnings
 
$

 
$

Undistributed earnings
 
(0.01
)
 
0.09

Diluted earnings per share
 
$
(0.01
)
 
$
0.09