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 - April 29, 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):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Solicitation material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
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 o
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. o






Item 2.02
Results of Operations and Financial Condition.
 
 
On April 29, 2019, AK Steel Holding Corporation 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 first quarter of 2019.

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 first quarter 2019 financial results, to be held at 8:30 a.m. Eastern Time on April 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 April 29, 2019
 
 
Investor Presentation April 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
 
 
Corporate Secretary
 
 
 
 
Dated:
April 29, 2019



Exhibit
 
 
EXHIBIT 99.1
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12861902&doc=4
        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 First Quarter 2019 Financial Results

WEST CHESTER, OH, April 29, 2019 – AK Steel (NYSE: AKS) today reported its financial results for the first quarter of 2019.

First Quarter 2019 Highlights
Sales of $1,697.7 million, a 2% increase from first quarter 2018
Net loss of $4.5 million, or $0.01 per diluted share, including the Ashland Works closure charge of $77.4 million
Adjusted net income of $72.9 million, or $0.23 per diluted share
Adjusted EBITDA of $160.9 million, or 9.5% of sales; up 36% from a year ago

“Our solid first quarter operating performance benefitted from our annual customer contract renewals. A higher proportion of contractual sales helps to reduce the volatility in our business and this was reflected in our first quarter results,” said Roger K. Newport, Chief Executive Officer. “We also continued to strengthen our position with automotive manufacturers by commercializing new steel solutions, including through our downstream tubing and stamping operations.”
AK Steel reported a net loss of $4.5 million, or $0.01 per diluted share of common stock, for the first quarter of 2019, which included a $77.4 million charge for the Ashland Works closure discussed below. Excluding this item, adjusted net income was $72.9 million, or $0.23 per diluted share, for the period. For the first quarter of 2018, net income was $28.7 million, or $0.09 per diluted share.
The company’s adjusted EBITDA (as defined in the “Non-GAAP Financial Measures” section below) was $160.9 million, or 9.5% of net sales, for the first quarter of 2019. Adjusted EBITDA increased 36% from $118.7 million, or 7.2% of net sales, in the first quarter a year ago. Adjusted EBITDA in the recent first quarter included mark-to-market gains of $21.8 million from iron ore derivatives. For the same period in 2018, the company recorded a mark-to-market loss of $7.7 million. Also included in adjusted EBITDA for the recent first quarter was an $11.6 million gain from the sale of electrical transmission assets at the company’s Dearborn Works. The sale of the assets will transfer the maintenance requirements of those assets to the buyer.
Net sales for the recent first quarter were $1.7 billion, a 2% increase, compared to the first quarter of 2018. The increase was due to higher selling prices for most products and increased shipments to the distributors and converters market, partly offset by lower shipments to the automotive market, as expected.
The company reported liquidity of $937.5 million at the end of the first quarter, consisting of cash and cash equivalents and $896.8 million of availability under the company’s revolving credit facility. The company reported outstanding borrowings under the credit facility of $380.0 million at March 31, 2019.




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(Dollars in millions, except per share and per ton data)
 
Three Months Ended March 31,
 
 
2019
 
2018
 
 
 
 
 
Flat-rolled steel shipments (000 tons)
 
1,388.4

 
1,430.9

Selling price per flat-rolled steel ton
 
$
1,112

 
$
1,045

 
 
 
 
 
Net sales
 
$
1,697.7

 
$
1,658.9

Operating profit
 
41.2

 
63.6

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

Adjusted net income attributable to AK Steel Holding Corporation
 
72.9

 
28.7

Adjusted EBITDA
 
160.9

 
118.7

 
 
 
 
 
Net income (loss) per diluted share attributable to AK Steel Holding Corporation
 
$
(0.01
)
 
$
0.09

Adjusted net income per diluted share attributable to AK Steel Holding Corporation
 
0.23

 
0.09


Ashland Works Closure
In January 2019, the company announced its intention to close its Ashland Works facility. The Ashland Works facility includes a blast furnace and steelmaking operations which were idled in December 2015, and a hot dip galvanizing coating line, which has remained operational. The company is transitioning its products to its other U.S. coating lines, and will close the Ashland Works line before the end of 2019. The company recorded a charge of $77.4 million during the first quarter of 2019 for termination of certain take-or-pay supply agreements, supplemental unemployment and other employee benefit costs, pension and OPEB termination benefits (including $13.3 million recorded in pension and OPEB (income) expense), estimated multiemployer plan withdrawal liability, and other costs.

Outlook
Based on the change in hot-rolled carbon spot market pricing from approximately $720 per ton in January to about $690 per ton currently, the company is updating its annual guidance. The company’s annual guidance had indicated that for every $10 change in the carbon hot-rolled coil spot market price, annual earnings would be impacted by $5 to $7 million. Accordingly, the company now expects net income to be in the range of $76 to $96 million, or $0.24 to $0.30 per diluted share. Excluding the impact of the Ashland Works closure, adjusted net income is expected to be in the range of $153 to $173 million, or $0.48 to $0.54 per diluted share, and adjusted EBITDA to be in the range of $505 to $525 million. This updated guidance aligns with the company’s previous guidance.
Other outlook items include:
The company’s adjusted net income and adjusted EBITDA guidance exclude the effects of the Ashland Works charge of $77.4 million recorded in the first quarter of 2019, as discussed above.
Planned maintenance outage expenditures in 2019 are still expected to be $70 to $80 million and substantially heavier in the second and fourth quarters. As a result, the company expects to have a similar level of adjusted EBITDA between the first half and the second half of the year.
The company expects working capital to be a small source of cash for the year. In January, the company had indicated that working capital would be a small use of cash.
The other annual guidance items remain unchanged from the company’s January guidance.
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.

First Quarter 2019 Earnings Conference Call
AK Steel will provide live listening access on its website for the company’s earnings conference call on April 30, 2019 at 8:30 a.m. Eastern Time. A link to the webcast is on the company’s home page at www.aksteel.com.

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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 (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 and uncertainties and contingencies that are beyond the company’s control. They are also based 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 trade agreements and treaties, laws, regulations or policies affecting trade; 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 changes in tax laws and regulations; 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, 2018, 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 March 31,
 
 
2019
 
2018
Flat-rolled steel shipments (000 tons)
 
1,388.4

 
1,430.9

Selling price per flat-rolled steel ton
 
$
1,112

 
$
1,045

 
 
 
 
 
Net sales
 
$
1,697.7

 
$
1,658.9

 
 
 
 
 
Cost of products sold
 
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:
 
 
 
 
Basic
 
$
(0.01
)
 
$
0.09

Diluted
 
$
(0.01
)
 
$
0.09

Weighted-average shares outstanding:
 
 
 
 
Basic
 
315.6

 
314.7

Diluted
 
315.6

 
316.0



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AK STEEL HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions, except per share amounts)
 
 
 
 
 
 
 
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


Note: The company adopted a new accounting standards update for leases effective January 1, 2019. The adoption of this standard update had no effect on net income or on prior periods.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
 
 
 
 
 
Three Months Ended March 31,
 
 
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




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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 attributable to AK Steel Holding that exclude the effects of noncontrolling interests and costs associated with the closure of Ashland Works. The company believes that reporting adjusted net income (as a total and on a per share basis) with these items excluded more clearly reflects its current operating results and provides investors with a better understanding of its overall financial performance. Adjustments to net income 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 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 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.

Reconciliation of Adjusted EBITDA
(dollars in millions, except per ton)
 
Three Months Ended March 31,
 
 
2019
 
2018
Net income (loss) attributable to AK Steel Holding
 
$
(4.5
)
 
$
28.7

Net income attributable to noncontrolling interests
 
12.6

 
16.1

Income tax expense (benefit)
 
1.4

 
(4.9
)
Interest expense, net
 
37.7

 
37.4

Depreciation and amortization
 
56.3

 
61.3

EBITDA
 
103.5

 
138.6

Less: EBITDA of noncontrolling interests (a)
 
20.0

 
19.9

Ashland Works closure
 
77.4

 

Adjusted EBITDA
 
$
160.9

 
$
118.7

Adjusted EBITDA margin
 
9.5
%
 
7.2
%

(a)
The reconciliation of net income attributable to noncontrolling interests to EBITDA of noncontrolling interests is as follows:
(dollars in millions)
 
Three Months Ended March 31,
 
 
2019
 
2018
Net income attributable to noncontrolling interests
 
$
12.6

 
$
16.1

Depreciation
 
7.4

 
3.8

EBITDA of noncontrolling interests
 
$
20.0

 
$
19.9



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Reconciliation of Adjusted Net Income
 
 
 
 
 
 
 
Three Months Ended March 31,
(dollars in millions, except per share)
 
2019
 
2018
Reconciliation to Net Income Attributable to AK Steel Holding
 
 
 
 
Net income (loss) attributable to AK Steel Holding
 
$
(4.5
)
 
$
28.7

Ashland Works closure
 
77.4

 

Adjusted net income attributable to AK Steel Holding
 
$
72.9

 
$
28.7

 
 
 
 
 
Reconciliation to Diluted Earnings per Share
 
 
 
 
Diluted earnings (loss) per share
 
$
(0.01
)
 
$
0.09

Ashland Works closure
 
0.24

 

Adjusted diluted earnings per share
 
$
0.23

 
$
0.09


Reconciliation of Adjusted EBITDA Guidance for 2019
 
 
Year Ending December 31, 2019
(dollars in millions)
 
Low
 
High
Net income attributable to AK Holding
 
$
76

 
$
96

Net income attributable to noncontrolling interests
 
55

 
55

Income tax expense
 
7

 
7

Interest expense, net
 
155

 
155

Depreciation and amortization
 
210

 
210

EBITDA
 
503

 
523

Less: EBITDA of noncontrolling interests (a)
 
75

 
75

Ashland Works closure
 
77

 
77

Adjusted EBITDA
 
$
505

 
$
525


(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

 
$
55

Depreciation
 
20

 
20

EBITDA of noncontrolling interests
 
$
75

 
$
75



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Reconciliation of Adjusted Net Income Guidance for 2019
 
 
Year Ending December 31, 2019
(dollars in millions, except per share)
 
Low
 
High
Reconciliation to Net Income Attributable to AK Steel Holding
 
 
 
 
Net income attributable to AK Steel Holding
 
$
76

 
$
96

Ashland Works closure
 
77

 
77

Adjusted net income attributable to AK Steel Holding
 
$
153

 
$
173

 
 
 
 
 
Reconciliation to Diluted Earnings per Share
 
 
 
 
Diluted earnings per share
 
$
0.24

 
$
0.30

Ashland Works closure
 
0.24

 
0.24

Adjusted diluted earnings per share
 
$
0.48

 
$
0.54



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AK STEEL HOLDING CORPORATION
FLAT-ROLLED STEEL SHIPMENTS
(Unaudited)
(Tons in thousands)
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Tons Shipped by Product
 
 
 
 
Stainless/electrical
 
206.6

 
200.7

Coated
 
713.7

 
734.5

Cold-rolled
 
256.8

 
282.5

Hot-rolled
 
169.1

 
174.3

Other
 
42.2

 
38.9

Total shipments
 
1,388.4

 
1,430.9

 
 
 
 
 
Shipments by Product (%)
 
 
 
 
Stainless/electrical
 
15
%
 
14
%
Coated
 
52
%
 
51
%
Cold-rolled
 
18
%
 
20
%
Hot-rolled
 
12
%
 
12
%
Other
 
3
%
 
3
%
Total shipments
 
100
%
 
100
%

###

exhibit992investorpresen
First Quarter 2019 Financial Results April 29, 2019 Creating Innovative Steel Solutions © 2019 AK Steel. All rights reserved.


 
AK Steel Executive Presenters . Roger Newport Chief Executive Officer . Kirk Reich President and Chief Operating Officer . Jaime Vasquez Vice President – Finance and Chief Financial Officer SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 2 © 2019 AK Steel. All rights reserved.


 
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 and uncertainties and contingencies that are beyond the company’s control. They are also based 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 trade agreements, trade related laws and regulations and trade related 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; changes in tax laws and regulations; 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, 2018, 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. SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 3 © 2019 AK Steel. All rights reserved.


 
Roger Newport Chief Executive Officer SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 © 2019 AK Steel. All rights reserved.


 
Protecting Our Most Important Asset – Our People . Safety performance continues to lead the industry by a wide margin . Four facilities achieved zero OSHA DART cases for 1Q 2019 . Four facilities achieved zero OSHA Recordable cases for 1Q 2019 . Two facilities achieved zero occupational injuries for 1Q 2019 SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 5 © 2019 AK Steel. All rights reserved.


 
Strategic Progress • New Research and Innovation Center • Introduced NEXMET® 2016 1000 and 1200 2018 2019 + • Raw Material Supplier of the Year by FCA USA • Capital investment to support growth at • DOE award to improve • Acquired Dearborn • Dearborn coating line motor efficiency for • Best financial Precision Partners assets upgraded to produce hybrid/electric vehicles performance since 2008 • Announced closure of next generation steels • Idled Ashland hot-end • Acquisition of Precision • Named a General Motors Ashland Works steelmaking operations • Introduced NEXMET® Partners Supplier of the Year 440EX • • Began product portfolio • Major investment at • Mansfield melt shop DOE award to leverage optimization • Strengthened balance Middletown hot-end upgrade high performance sheet • Launched TRAN-COR® X computing for hot rolling • Reduced interest cost electrical steel steel research and extended maturity • DOE Award for • ~$210 million pension development of • Ongoing steel, tubing, 2014-15 de-risking annuitizations 2017 lightweight steels and stamping new • Record AK Tube results product trials • ~$280 million pension de-risking annuitization • Reduced debt by $116 million SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 6 © 2019 AK Steel. All rights reserved.


 
Ashland Works Update . Plan to close the Ashland Works facility by the end of 2019 − Blast furnace and ‘hot-end’ were idled more than three years ago . Transitioning of production to increase utilization at other AK Steel coating lines in the U.S. is on track . These actions are expected to result in annual savings of over $40 million beginning in 2020 SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 7 © 2019 AK Steel. All rights reserved.


 
Delivering On Our Strategy  Improving competitive cost position  Enhancing financial position  De-risking the business  Developing innovative steel solutions SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 8 © 2019 AK Steel. All rights reserved.


 
Steel Market Update North America Light Vehicle Production . Overall demand for steel remains solid (Millions) . Automotive production remains strong, although 17.1 17.0 16.9 16.8 17.0 expected to be slightly lower than 2018 . Spot market pricing for carbon steels remains at healthy levels . Service center inventories are balanced with demand 2017 2018 2019E 2020E 2021E U.S. Housing Starts U.S. Non-Residential Construction Fixed Investment (Millions) ($ Billions) 1.34 $2,996 1.29 $2,917 1.26 1.26 $2,825 $2,712 1.21 $2,539 2017 2018 2019E 2020E 2021E 2017 2018 2019E 2020E 2021E Source: AK Steel estimates SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 9 © 2019 AK Steel. All rights reserved.


 
Kirk Reich President and Chief Operating Officer SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 © 2019 AK Steel. All rights reserved.


 
Growth at Precision Partners . Increase in profitability expected in 2019 . Joint commercial activity with AK Steel and AK Tube progressing . Investing in new 200,000 square foot facility to support new business awarded SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 11 © 2019 AK Steel. All rights reserved.


 
Record Performance and Growth at AK Tube . Expect 2019 to exceed record 2018 results . Proficient in both carbon and stainless tube across the entire spectrum of steel grades . Production capabilities provide a competitive advantage . Solid and growing automotive and powersports OEM partnerships . Significant additional opportunities in development SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 12 © 2019 AK Steel. All rights reserved.


 
Automotive Technical “Road Shows” . Developing even stronger customer relationships . Hands-on displays . Highlights AK Steel high-strength steel advancements and downstream solutions SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 13 © 2019 AK Steel. All rights reserved.


 
Optimizing Raw Materials Costs . Additional coal seam operational by 3Q 2019 . Capitalizing on foundry coke market opportunity . Modest capital investment . Optimizing current equipment ‒ Accessing new mine through current portal . Increased production benefits the cost of furnace coke . Maintain existing production levels ‒ Lower cost ‒ Improve blended coal quality . Creates opportunity to increase production, depending upon market conditions SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 14 © 2019 AK Steel. All rights reserved.


 
Automotive Model Changeovers Provide Opportunity 20 Higher UHSS utilization on new models . New vehicle launches occurring at a faster rate 18 16 . OEMs are focused on lightweighting and powertrain innovation to meet CAFE standards 14 12 . Steel provides the best solution for overall value 10 and performance 8 6 . Ultra high-strength steel (UHSS) utilization 4 Annaul Vehicle Production (millions) greater at model changeover/launch 2 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Models Launched Pre-2017 Models Launched Post-2016 Opportunities for ultra high-strength steels are increasing Note: UHSS represents steels with tensile strengths greater than 980 MPa such as ULTRALUME® and NEXMET® SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 15 © 2019 AK Steel. All rights reserved.


 
Growing Demand for Ultra High-Strength Steels 600 570 . 533 Automotive OEMs are seeking cost 507 effective lightweighting solutions 500 474 453 431 320 395 282 . Innovating steel products in 400 254 218 329 170 collaboration with future OEM 314 123 195 296 vehicle body designs 300 279 71 258 66 239 63 59 209 55 51 Net Pounds per Vehicle per Pounds Net 200 . Fewer competitors capable of 45 producing UHSS 272 248 258 261 258 256 253 251 250 220 233 100 188 203 164 . Growth is expected to accelerate between 2020 and 2025 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 AHSS UHSS AK Steel is well-positioned to provide the future lightweighting solutions sought by automakers Source: DuckerFrontier 2018, SMDI NA Automotive Steel Content Market Study SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 16 © 2019 AK Steel. All rights reserved.


 
Jaime Vasquez Vice President – Finance and Chief Financial Officer SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 © 2019 AK Steel. All rights reserved.


 
Ashland Works Financial Impact . First quarter 2019 charge of $77.4 million − 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 − $15 million in 2021 − Balance is 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 . Annual savings of more than $40 million expected beginning in 2020 Note: Ashland Works closure charge in 1Q 2019 excluded from the company's 2019 annual guidance SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 18 © 2019 AK Steel. All rights reserved.


 
First Quarter 2019 Financial Highlights ($ Millions, except per share and per ton) Y-o-Y 1Q 2018 4Q 2018 1Q 2019 Improvement Flat-Rolled Shipments (in 000s of tons) 1,431 1,389 1,388 -3% Flat-Rolled Average Selling Price Per Ton $1,045 $1,106 $1,112 6% Net Sales $1,658.9 $1,677.1 $1,697.7 2% Net Income (Loss) $28.7 $33.5 ($4.5) NM Adjusted Net Income $28.7 $48.0 $72.9 154% Adjusted EBITDA $118.7 $135.5 $160.9 36% Adjusted EBITDA Margin 7.2% 8.1% 9.5% 32% Earnings (Loss) Per Share – Diluted $0.09 $0.11 ($0.01) NM Adjusted Earnings Per Share – Diluted $0.09 $0.16 $0.23 156% Note: See Appendix for reconciliations of non-GAAP financial measures SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 19 © 2019 AK Steel. All rights reserved.


 
Adjusted EBITDA – 4Q 2018 to 1Q 2019 $200 $175 $21 $7 $161 $150 $5 $136 $8 $125 ($ Millions)($ $100 $75 $50 4Q 2018 Pricing/Volume/Mix Raw Materials & Operations Other 1Q 2019 Energy SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 20 © 2019 AK Steel. All rights reserved.


 
Balance Sheet and Cash Flow Highlights Robust Liquidity ($ Millions) . Maintain focus on strengthening balance sheet $1,500 $1,354 $989 $938 . Increased revolving credit facility to $1.5 billion in April $1,000 $845* $700 . Working capital was a seasonal use of $96 million in $500 1Q; expected to be a modest source of cash for full $0 year 2019 12/31/15 12/31/16 12/31/17 12/31/18 03/31/19 * Acquisition of Precision Partners Consistent Capital Investments Manageable Pension Contributions ($ Millions) ($ Millions) $200 ~$170 - $190 $75 $153 $152 $150 $128 $50 $50 $50 $44 $46 $99 $50 $100 $24 $25 $50 $0 $0 $0 2015 2016 2017 2018 2019E 2015 2016 2017 2018 2019E 2020E 2021E SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 21 © 2019 AK Steel. All rights reserved.


 
2019 Full Year Guidance Estimates . Net income attributable to AK Steel of ~$76 to $96 million Flat-Rolled Shipments . Adjusted net income of ~$153 to $173 million (000s tons) . Adjusted EBITDA in the range of $505 to $525 million 8,000 6,974 5,936 5,596 5,683 ‒ Based on current average carbon hot-rolled coil spot market price of 6,000 ~$690 per ton 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 annually 2,000 . Adjusted results exclude the effect of the Ashland Works closure 0 charge of $77.4 million recorded in 1Q 2015 2016 2017 2018 Flat-Rolled Average Selling Price Per Ton Adjusted EBITDA ($ 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. SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 22 © 2019 AK Steel. All rights reserved.


 
2019 Other Guidance Items . Earnings per share of ~$0.24 to $0.30 . Adjusted earnings per share of ~$0.48 to $0.54 . Flat-rolled shipments ~5.9 million tons . Average flat-rolled selling price roughly the same as 2018 . Adjusted EBITDA expected to be similar in the first and second half . Planned maintenance outages ~$70 to $80 million and expected to be substantially heavier in the second and fourth quarters . Depreciation and amortization ~$210 million* . Cash/total interest expense of ~$135/$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 modest source of cash * Includes $20 million for SunCoke ** Includes ~$6 million expense reported in Cost of Products Sold/Selling and Administrative expenses; excludes $13 million charge in 1Q for Ashland Works closure 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. SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 23 © 2019 AK Steel. All rights reserved.


 
THANK YOU! SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 © 2019 AK Steel. All rights reserved.


 
Appendix SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 © 2019 AK Steel. All rights reserved.


 
Investor Contact SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 26 © 2019 AK Steel. All rights reserved.


 
Longer Term Target Metrics Average EBITDA Margin Debt-to-EBITDA through a business cycle >8% <3.0x Economic Profit: EBITDA Contributions from Return on Invested Capital Downstream Business >10.5% >30% SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 27 © 2019 AK Steel. All rights reserved.


 
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% SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 28 © 2019 AK Steel. All rights reserved.


 
Significantly Improved Debt Profile ($ Millions) December 31, 2015 March 31, 2019 Total Debt: $2.4 billion $700 $150 $150 $537 Total Debt: $2.1 billion $7 $406 $406 $380 $380 $380 $392 $290 $270 $550 $530 $149 $62 $62 $30 $30 $7 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Credit Facility Senior Notes Senior Secured Notes Industrial Revenue Bonds . Liquidity is sufficient to pay down the $149 million exchangeable notes due in November 2019 Note: Excludes unamortized debt discount and issuance costs SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 29 © 2019 AK Steel. All rights reserved.


 
Non-GAAP Financial Measures Reconciliation of Adjusted Net Income Qtr ended Qtr ended 2019 Guidance ($ Millions) 2016 2017 2018 03/31/2018 03/31/2019 Low High Reconciliation to Net Income (Loss) Attributable to AK Steel Holding Corporation Net income (loss) attributable to AK Steel Holding Corporation, as reported ($16.8) $103.5 $186.0 $28.7 ($4.5) $76 $96 Pension and OPEB net corridor and settlement charges 68.1 14.5 Charges (credit) for termination of pellet agreement and related transportation costs 69.5 (19.3) Ashland Works closure 77.4 77 77 Asset impairment charge 75.6 Adjusted net income (loss) attributable to AK Steel Holding $120.8 $159.8 $200.5 $28.7 $72.9 $153 $173 Reconciliation to Diluted Earnings (Losses) per Share Diluted earnings (loss) per share, as reported ($0.07) $0.32 $0.59 $0.09 ($0.01) $0.24 $0.30 Pension and OPEB net corridor charge/settlement loss 0.30 0.05 Charges (credit) for termination of pellet agreement and related transportation costs 0.30 (0.06) Ashland Works closure 0.24 0.24 0.24 Asset impairment charge 0.24 Adjusted diluted earnings (loss) per share $0.53 $0.50 $0.64 $0.09 $0.23 $0.48 $0.54 Flat-rolled Shipments 5,936.4 5,596.2 5,683.4 1,430.9 1,388.4 Flat-rolled Average Selling Price $955 $1,022 $1,091 $1,045 $1,112 SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 30 © 2019 AK Steel. All rights reserved.


 
Non-GAAP Financial Measures Reconciliation of Adjusted EBITDA Qtr ended Qtr ended 2019 Guidance ($ Millions) 2016 2017 2018 03/31/2018 03/31/2019 Low High Net income (loss) attributable to AK Steel Holding ($16.8) $103.5 $186.0 $28.7 ($4.5) $76 $96 Net income (loss) attributable to NCI 66.0 61.4 58.1 16.1 12.6 55 55 Income tax expense (benefit) (16.9) (2.2) (6.2) (4.9) 1.4 7 7 Interest expense, net 162.3 150.9 150.7 37.4 37.7 155 155 Depreciation and amortization 221.4 236.3 237.0 61.3 56.3 210 210 EBITDA $416.0 $549.9 $625.6 $138.6 $103.5 $503 $523 Less: EBITDA of NCI (a) 80.8 77.7 76.7 19.9 20.0 75 75 Pension and OPEB net corridor charges / settlement loss 68.1 14.5 Charges (credit) for termination of pellet agreement and related transportation costs 69.5 (19.3) Ashland Works closure 77.4 77 77 Asset impairment charge 75.6 Adjusted EBITDA $472.8 $528.5 $563.4 $118.7 $160.9 $505 $525 Adjusted EBITDA margin 8.0% 8.7% 8.3% 7.2% 9.5% (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 $66.0 $61.4 $58.1 $16.1 $12.6 $55 $55 Depreciation 14.8 16.3 18.6 3.8 7.4 20 20 EBITDA of noncontrolling interests $80.8 $77.7 $76.7 $19.9 $20.0 $75 $75 SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 31 © 2019 AK Steel. All rights reserved.


 
SAFETY | QUALITY | PRODUCTIVITY | INNOVATION April 2019 © 2019 AK Steel. All rights reserved.