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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 June 30, 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, including zip code)
Registrant’s telephone number, including area code: (513) 425-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class 
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock $0.01 Par Value
AKS
The New York Stock Exchange

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 316,384,868 shares of common stock outstanding as of July 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 June 30,
 
Six Months Ended June 30,
(unaudited)
 
2019
 
2018
 
2019
 
2018
Net sales
 
$
1,680.5

 
$
1,746.6

 
$
3,378.2

 
$
3,405.5

 
 
 
 
 
 
 
 
 
Cost of products sold (exclusive of items shown separately below)
 
1,449.0

 
1,512.7

 
2,914.4

 
2,976.4

Selling and administrative expenses
 
75.3

 
79.5

 
151.9

 
156.2

Depreciation
 
49.6

 
54.9

 
100.0

 
109.8

Ashland Works closure
 

 

 
64.1

 

Total operating costs
 
1,573.9

 
1,647.1

 
3,230.4

 
3,242.4

Operating profit
 
106.6

 
99.5

 
147.8

 
163.1

Interest expense
 
37.1

 
37.9

 
75.0

 
75.5

Pension and OPEB (income) expense
 
(6.9
)
 
(10.0
)
 
(0.4
)
 
(20.0
)
Other (income) expense
 
(4.5
)
 
(0.2
)
 
(17.2
)
 
(4.1
)
Income before income taxes
 
80.9

 
71.8

 
90.4

 
111.7

Income tax expense (benefit)
 
1.0

 
(0.5
)
 
2.4

 
(5.4
)
Net income
 
79.9

 
72.3

 
88.0

 
117.1

Less: Net income attributable to noncontrolling interests
 
13.1

 
15.7

 
25.7

 
31.8

Net income attributable to AK Steel Holding Corporation
 
$
66.8

 
$
56.6

 
$
62.3

 
$
85.3

Net income per share attributable to AK Steel Holding Corporation common stockholders:
 
 
 
 
 
 
 
 
Basic
 
$
0.21

 
$
0.18

 
$
0.20

 
$
0.27

Diluted
 
$
0.21

 
$
0.18

 
$
0.20

 
$
0.27


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 June 30,
 
Six Months Ended June 30,
(unaudited)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
79.9

 
$
72.3

 
$
88.0

 
$
117.1

Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
 
Foreign currency translation gain (loss)
 
0.4

 
(2.2
)
 
(0.3
)
 
(1.1
)
Cash flow hedges:
 
 
 
 
 
 
 
 
Gains (losses) arising in period
 
(24.3
)
 
(4.1
)
 
(16.9
)
 
(5.5
)
Reclassification of losses (gains) to net income
 
2.1

 
(5.5
)
 
(4.3
)
 
(13.1
)
Pension and OPEB plans:
 
 
 
 
 
 
 
 
Reclassification of prior service cost (credits) to net income
 
(2.5
)
 
(2.5
)
 
(5.1
)
 
(4.9
)
Reclassification of losses (gains) to net income
 
(2.7
)
 
3.6

 
(5.3
)
 
7.2

Other comprehensive income (loss), before tax
 
(27.0
)
 
(10.7
)
 
(31.9
)
 
(17.4
)
Income tax benefit related to items of comprehensive income (loss)
 

 

 

 

Other comprehensive income (loss)
 
(27.0
)
 
(10.7
)
 
(31.9
)
 
(17.4
)
Comprehensive income
 
52.9

 
61.6

 
56.1

 
99.7

Less: Comprehensive income attributable to noncontrolling interests
 
13.1

 
15.7

 
25.7

 
31.8

Comprehensive income attributable to AK Steel Holding Corporation
 
$
39.8

 
$
45.9

 
$
30.4

 
$
67.9


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)
 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
42.2

 
$
48.6

Accounts receivable, net
 
675.2

 
635.8

Inventory
 
1,353.9

 
1,419.9

Other current assets
 
88.9

 
97.0

Total current assets
 
2,160.2

 
2,201.3

Property, plant and equipment
 
7,034.5

 
6,969.2

Accumulated depreciation
 
(5,155.3
)
 
(5,057.6
)
Property, plant and equipment, net
 
1,879.2

 
1,911.6

Operating lease assets
 
245.7

 

Other non-current assets
 
401.9

 
402.8

TOTAL ASSETS
 
$
4,687.0

 
$
4,515.7

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
732.3

 
$
801.0

Accrued liabilities
 
242.9

 
288.9

Current portion of operating lease liabilities
 
53.9

 

Current portion of pension and other postretirement benefit obligations
 
37.8

 
38.7

Total current liabilities
 
1,066.9

 
1,128.6

Non-current liabilities:
 
 
 
 
Long-term debt
 
1,946.2

 
1,993.7

Long-term operating lease liabilities
 
212.9

 

Pension and other postretirement benefit obligations
 
808.0

 
829.9

Other non-current liabilities
 
177.4

 
134.0

TOTAL LIABILITIES
 
4,211.4

 
4,086.2

Equity:
 
 
 
 
Common stock, authorized 450,000,000 shares of $0.01 par value each; issued 317,705,839 and 316,595,613 shares in 2019 and 2018; outstanding 316,342,354 and 315,535,765 shares in 2019 and 2018
 
3.2

 
3.2

Additional paid-in capital
 
2,901.0

 
2,894.9

Treasury stock, common shares at cost, 1,363,485 and 1,059,848 shares in 2019 and 2018
 
(7.2
)
 
(6.4
)
Accumulated deficit
 
(2,629.5
)
 
(2,691.8
)
Accumulated other comprehensive loss
 
(131.9
)
 
(100.0
)
Total stockholders’ equity
 
135.6

 
99.9

Noncontrolling interests
 
340.0

 
329.6

TOTAL EQUITY
 
475.6

 
429.5

TOTAL LIABILITIES AND EQUITY
 
$
4,687.0

 
$
4,515.7


- 3-

Table of Contents

The condensed consolidated balance sheets as of June 30, 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)
 
June 30,
2019
 
December 31,
2018
Middletown Coke Company, LLC (“SunCoke Middletown”)
 
 
 
 
Cash and cash equivalents
 
$
0.1

 
$
1.1

Accounts receivable, net
 
20.0

 
0.5

Inventory
 
25.6

 
21.1

Property, plant and equipment
 
428.7

 
427.8

Accumulated depreciation
 
(118.6
)
 
(106.9
)
Accounts payable
 
16.8

 
13.7

Other assets (liabilities), net
 

 
(1.7
)
Noncontrolling interests
 
339.0

 
328.2

 
 
 
 
 
Other variable interest entities
 
 
 
 
Cash and cash equivalents
 
$
0.1

 
$
0.5

Property, plant and equipment
 
11.7

 
11.7

Accumulated depreciation
 
(9.9
)
 
(9.8
)
Other assets (liabilities), net
 
0.1

 
0.5

Noncontrolling interests
 
1.0

 
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)
 
 
Six Months Ended June 30,
(unaudited)
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
88.0

 
$
117.1

Depreciation
 
86.4

 
102.1

Depreciation—SunCoke Middletown
 
13.6

 
7.7

Amortization
 
17.5

 
17.3

Ashland Works closure
 
64.1

 

Deferred income taxes
 
0.6

 
(7.2
)
Pension and OPEB expense (income)
 
2.5

 
(16.2
)
Contributions to pension trust
 
(19.5
)
 
(15.2
)
Other postretirement benefit payments
 
(15.6
)
 
(19.3
)
Mark-to-market (gains) losses on derivative contracts
 
(61.1
)
 
(7.4
)
Changes in working capital
 
(33.4
)
 
28.8

Other operating items, net
 
(6.9
)
 
(20.3
)
Net cash flows from operating activities
 
136.2

 
187.4

Cash flows from investing activities:
 
 
 
 
Capital investments
 
(82.4
)
 
(64.0
)
Other investing items, net
 
10.3

 
0.3

Net cash flows from investing activities
 
(72.1
)
 
(63.7
)
Cash flows from financing activities:
 
 
 
 
Net borrowings (payments) under credit facility
 
(50.0
)
 
(80.0
)
Redemption of long-term debt
 
(4.2
)
 

SunCoke Middletown distributions to noncontrolling interest owners
 
(15.3
)
 
(34.8
)
Other financing items, net
 
(1.0
)
 
(0.9
)
Net cash flows from financing activities
 
(70.5
)
 
(115.7
)
Net increase (decrease) in cash and cash equivalents
 
(6.4
)
 
8.0

Cash and cash equivalents, beginning of period
 
48.6

 
38.0

Cash and cash equivalents, end of period
 
$
42.2

 
$
46.0


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 June 30,
 
Six Months Ended June 30,
(unaudited)
 
2019
 
2018
 
2019
 
2018
Common stock
 
 
 
 
 
 
 
 
Balance at beginning and end of period
 
$
3.2

 
$
3.2

 
$
3.2

 
$
3.2

Additional paid-in capital
 
 
 
 
 
 
 
 
Balance at beginning of period
 
2,899.2

 
2,889.3

 
2,894.9

 
2,884.8

Share-based compensation
 
1.8

 
1.8

 
6.1

 
6.3

Balance at end of period
 
2,901.0

 
2,891.1

 
2,901.0

 
2,891.1

Treasury stock
 
 
 
 
 
 
 
 
Balance at beginning of period
 
(7.2
)
 
(6.4
)
 
(6.4
)
 
(5.4
)
Purchase of treasury stock
 

 

 
(0.8
)
 
(1.0
)
Balance at end of period
 
(7.2
)
 
(6.4
)
 
(7.2
)
 
(6.4
)
Accumulated deficit
 
 
 
 
 
 
 
 
Balance at beginning of period
 
(2,696.3
)
 
(2,849.1
)
 
(2,691.8
)
 
(2,877.0
)
Cumulative effect of adopting new hedging standard
 

 

 

 
(0.8
)
Net income
 
66.8

 
56.6

 
62.3

 
85.3

Balance at end of period
 
(2,629.5
)
 
(2,792.5
)
 
(2,629.5
)
 
(2,792.5
)
Accumulated other comprehensive loss
 
 
 
 
 
 
 
 
Balance at beginning of period
 
(104.9
)
 
(56.1
)
 
(100.0
)
 
(50.2
)
Cumulative effect of adopting new hedging standard
 

 

 

 
0.8

Change in accumulated other comprehensive loss
 
(27.0
)
 
(10.7
)
 
(31.9
)
 
(17.4
)
Balance at end of period
 
(131.9
)
 
(66.8
)
 
(131.9
)
 
(66.8
)
Noncontrolling interests
 
 
 
 
 
 
 
 
Balance at beginning of period
 
335.8

 
351.0

 
329.6

 
345.2

Net income
 
13.1

 
15.7

 
25.7

 
31.8

Net distributions to noncontrolling interests
 
(8.9
)
 
(24.5
)
 
(15.3
)
 
(34.8
)
Balance at end of period
 
340.0

 
342.2

 
340.0

 
342.2

Total equity
 
$
475.6

 
$
370.8

 
$
475.6

 
$
370.8



See notes to condensed consolidated financial statements.

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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 June 30, 2019 and December 31, 2018, our results of operations for the three and six months ended June 30, 2019 and 2018, and our cash flows for the six months ended June 30, 2019 and 2018. Our results of operations for the three and six months ended June 30, 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.


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NOTE 2Supplementary Financial Statement Information
 

Revenue

Net sales by market are presented below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Automotive
$
1,081.7

 
$
1,108.7

 
$
2,172.6

 
$
2,227.8

Infrastructure and Manufacturing
267.7

 
263.8

 
545.8

 
505.1

Distributors and Converters
331.1

 
374.1

 
659.8

 
672.6

Total
$
1,680.5

 
$
1,746.6

 
$
3,378.2

 
$
3,405.5


Net sales by product line are presented below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Carbon steel
$
1,102.2

 
$
1,102.4

 
$
2,201.4

 
$
2,171.0

Stainless and electrical steel
431.0

 
483.1

 
875.5

 
909.2

Tubular products, components and other
147.3

 
161.1

 
301.3

 
325.3

Total
$
1,680.5

 
$
1,746.6

 
$
3,378.2

 
$
3,405.5



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 $152.1 and $295.3 for the three and six months ended June 30, 2019, compared to $172.9 and $340.7 for the corresponding periods in 2018.

Inventory

Inventories as of June 30, 2019 and December 31, 2018, are presented below:
 
June 30,
2019
 
December 31,
2018
Finished and semi-finished
$
1,003.8

 
$
1,054.4

Raw materials
350.1

 
365.5

Inventory
$
1,353.9

 
$
1,419.9



Other Non-Current Assets

Intangible assets at June 30, 2019 and December 31, 2018, consist of:
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
As of June 30, 2019
 
 
 
 
 
Customer relationships
$
36.6

 
$
(10.0
)
 
$
26.6

Technology
23.0

 
(6.2
)
 
16.8

Intangible assets
$
59.6

 
$
(16.2
)
 
$
43.4

 
 
 
 
 
 
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


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Amortization expense related to intangible assets was $2.2 and $4.2 for the three and six months ended June 30, 2019, compared to $2.3 and $4.7 for the three and six months ended June 30, 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 June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenue
 
$
83.0

 
$
83.5

 
$
160.8

 
$
158.3

Gross profit
 
24.0

 
23.6

 
45.5

 
44.7

Net income
 
4.3

 
5.1

 
7.0

 
9.3

 
 
 
 
 
 
 
 
 
Our share of income of equity investees (included in cost of products sold)
 
1.4

 
1.7

 
2.1

 
3.0



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 continued to operate. 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 concluded that we have sufficient coating capacity to meet our customers’ needs without using our coating operations at Ashland Works. We are presently transitioning products to our other U.S. coating lines, and plan to close the Ashland Works coating line before the end of 2019.

We recorded a charge of $77.4 during the first quarter of 2019, which included $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. During the second quarter of 2019, we recorded adjustments to these amounts, consisting of $5.0 of additional employee benefit costs agreed to with the United Steelworkers for concluding the collective bargaining agreement, offset by a $5.0 reduction in the estimated multiemployer plan withdrawal liability. Ongoing costs to maintain the equipment and utilities and meet supplier obligations related to the idled Ashland Works Hot End were $2.4 and $4.9 for the three and six months ended June 30, 2019, and $5.0 and $10.4 for the corresponding periods in 2018.

NOTE 3Income Taxes
 

Income taxes recorded for the periods ended June 30, 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

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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.

During the first six 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 June 30, 2019 and December 31, 2018, are presented below:
 
June 30,
2019
 
December 31,
2018
Credit Facility
$
285.0

 
$
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
(34.6
)
 
(41.7
)
Total long-term debt
$
1,946.2

 
$
1,993.7



During the six months ended June 30, 2019, we were in compliance with all the terms and conditions of our debt agreements. The Exchangeable Notes maturing in 2019 and $7.3 of Industrial Revenue Bonds due in 2020 are classified as long term based on our ability and intent to refinance that debt on a long-term basis. During the six months ended June 30, 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

In April 2019, we increased the capacity of our revolving credit facility (the “Credit Facility”), which expires in September 2022, by $150.0 to $1,500.0. As of June 30, 2019, we had outstanding borrowings of $285.0 under the Credit Facility, and our eligible collateral under the Credit Facility, after application of applicable advance rates, was $1,395.2. Availability as of June 30, 2019, was $1,037.1 after reductions of $73.1 for outstanding letters of credit.

NOTE 5Leases
 

We have leases primarily for offices, production buildings and equipment. Our leases have remaining contractual lease terms up 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. Some leases may also include options to terminate the leases. 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 June 30,
 
Six Months Ended June 30,
 
2019
 
2019
Operating leases
$
17.2

 
33.9

Short-term leases
10.5

 
21.6

Variable lease costs
18.5

 
35.8

Total
$
46.2

 
$
91.3




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Other information related to leases was as follows:
 
Six Months Ended June 30,
 
2019
Cash paid for operating leases within cash flows from operating activities
$
36.6

Right-of-use assets obtained in exchange for operating lease liabilities
6.5

Weighted-average remaining lease term of operating leases (in years)
7.7

Weighted-average discount rate for operating leases
8.4
%


Future minimum lease payments under noncancelable operating leases as of June 30, 2019, were as follows:
Year ending December 31:
 
2019 (remaining period of year)
$
36.1

2020 
63.5

2021 
51.4

2022 
41.4

2023
35.1

Thereafter
148.5

Total future minimum operating lease payments
376.0

Less imputed interest
109.2

Total operating lease liabilities
266.8

Less current portion of operating lease liabilities
53.9

Long-term operating lease liabilities
$
212.9



NOTE 6Pension and Other Postretirement Benefits
 

Net periodic benefit (income) expense for pension and other postretirement benefits was as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Pension Benefits
 
 
 
 
 
 
 
Service cost
$
0.7

 
$
0.7

 
$
1.2

 
$
1.5

Interest cost
22.2

 
23.8

 
44.5

 
47.5

Expected return on assets
(28.0
)
 
(38.8
)
 
(56.0
)
 
(77.6
)
Amortization of prior service cost
0.8

 
0.9

 
1.5

 
1.9

Amortization of (gain) loss
(1.8
)
 
4.0

 
(3.5
)
 
7.9

Termination benefits—Ashland Works

 

 
9.7

 

Net periodic benefit (income) expense
$
(6.1
)
 
$
(9.4
)
 
$
(2.6
)
 
$
(18.8
)
 
 
 
 
 
 
 
 
Other Postretirement Benefits
 
 
 
 
 
 
 
Service cost
$
0.8

 
$
1.2

 
$
1.7

 
$
2.3

Interest cost
4.1

 
3.9

 
8.2

 
7.8

Amortization of prior service cost (credit)
(3.3
)
 
(3.4
)
 
(6.6
)
 
(