AK Steel Reports Financial Results for Third Quarter of 2010

WEST CHESTER, Ohio, Oct. 26 /PRNewswire-FirstCall/ -- AK Steel (NYSE: AKS) today reported a net loss of $59.2 million, or $0.54 per diluted share of common stock, for the third quarter of 2010, compared to net income of $6.2 million, or $0.06 per diluted share, for the third quarter of 2009.  

Net sales for the third quarter of 2010 were $1,575.9 million on shipments of 1,465,800 tons compared to sales of $1,041.1 million on shipments of 1,047,800 tons for the year-ago third quarter.  The company said its average selling price for the third quarter of 2010 was $1,075 per ton, a 2% decrease from the $1,101 per-ton price in the second quarter of 2010, and approximately 8% higher than the $994 per-ton average price realized in the third quarter of 2009.  The company reported an operating loss for the third quarter of 2010 of $102.5 million, or $70 per ton, compared to an operating profit of $15.3 million, or $15 per ton, for the third quarter of 2009.  

2010 Iron Ore Price Increase Impacts Third Quarter

AK Steel said that it has agreed with two of its three primary iron ore suppliers that the requirements for the establishment of the annual benchmark price of iron ore for 2010 have been met.  That 2010 benchmark is an increase of 98.65 % over the 2009 benchmark, and is higher than the 65% increase the company had previously estimated for the first half and for its third quarter guidance. The third primary supplier of iron ore to the company has not acknowledged yet that an annual benchmark price has been established.  Instead, that supplier continues to seek a price increase in excess of the 98.65% annual benchmark price.  The company does not agree that this supplier has a right under the parties' contract to charge based on other than an annual benchmark price and, for purposes of the iron ore purchased from this supplier, the company has used an estimated benchmark price increase of 98.65% in its third quarter financial results.

The company's third quarter 2010 financial results reflect the year-to-date impact of the higher iron ore price, which increased the company's third quarter operating loss by approximately $76.0 million, or $52 per ton.  Excluding the effect of the change in the price of iron ore, the company's operating loss in the third quarter was approximately $26.5 million, or $18 per ton, which includes the costs associated with an 11-day blast furnace maintenance outage that had been planned for the first half of 2011.  That outage on the company's Ashland (KY) blast furnace was advanced to the third quarter due to furnace conditions.  

"The combined impact of significantly higher iron ore costs and the accelerated blast furnace maintenance obscured the solid year-over-year performance turned in by AK Steel employees," said James L. Wainscott, Chairman, President and CEO of AK Steel.  "Nonetheless, a stubbornly reluctant economic recovery and soaring raw material costs will continue to challenge us in the near term."  

The following schedule reflects the reconciliation of the Non-GAAP quarterly financial measures discussed in the preceding section of this news release:

Nine-Month Results

For the first nine months of 2010, the company reported a net loss of $30.6 million, or $0.28 per diluted share of common stock, compared to a net loss of $114.4 million, or $1.05 per diluted share for the corresponding 2009 period.  Results for the first nine months of 2010 include a non-cash charge in the first quarter of $25.3 million, or $0.23 per diluted share of common stock, related to federal healthcare legislation signed into law in March of this year.  Excluding the special charge, the net loss for the first nine months of 2010 was $5.3 million, or $0.05 per diluted share.  

Sales for the first nine months of 2010 were $4,577.7 million compared to $2,756.9 million in the first nine months of 2009.  Shipments for the first nine months of 2010 were 4,301,000 tons compared to 2,567,200 tons for the first nine months of 2009.  The company reported an operating profit of $20.7 million, or $5 per ton, for the first nine months of 2010 compared to an operating loss of $157.1 million, or $61 per ton, for the first nine months of 2009.  

During the first nine months of 2010, the company made $110.0 million in pension fund contributions and a $65.0 million contribution associated with the Middletown Works VEBA settlement.

The following schedule reflects the reconciliation of the Non-GAAP nine-month financial measures discussed in the preceding section of this news release:  

Fourth-Quarter 2010 Outlook

AK Steel said it expects shipments of approximately 1,300,000 to 1,350,000 tons for the fourth quarter, with an average selling price per ton decrease of approximately 4% from the third quarter.  While the company expects fourth-quarter maintenance costs to decrease by about $20 million from the third quarter, it nonetheless expects to incur an operating loss of approximately $80 per ton for the fourth quarter of 2010, largely due to the lower shipments and selling prices combined with continued high iron ore and other raw material costs.

Use of Non-GAAP Financial Measures

AK Steel has included in this news release certain Non-GAAP financial measures that management believes are useful to investors in understanding and evaluating the operating performance of the company across comparable periods.  The presentation of these additional financial measures is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP.

Safe Harbor Statement

The statements in this release with respect to future results reflect management's estimates and beliefs and are intended to be, and hereby are identified as "forward-looking statements" for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Words such as "expects," "anticipates," "believes," "intends," "plans," "estimates" and other similar references to future periods typically identify such forward-looking statements.  The company cautions readers that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently expected by management, including those risks and uncertainties discussed in AK Steel's Annual Report on Form 10-K for the year ended December 31, 2009, as updated in our most recent Quarterly Report on Form 10-Q.  Except as required by law, the company disclaims any obligation to update any forward-looking statements to reflect future developments or events.

AK Steel

AK Steel produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, appliance, construction and electrical power generation and distribution markets.  The company employs about 6,200 men and women in Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pennsylvania; Ashland, Kentucky; Rockport, Indiana; and its corporate headquarters in West Chester, Ohio.  Additional information about AK Steel is available on the company's web site at www.aksteel.com.

AK Tube LLC, a wholly owned subsidiary of AK Steel, employs about 300 men and women in plants in Walbridge, Ohio and Columbus, Indiana.  AK Tube produces carbon and stainless electric resistance welded (ERW) tubular steel products for truck, automotive and other markets.  Additional information about AK Tube LLC is available on its web site at www.aktube.com.

SOURCE AK Steel