AK Steel Provides Fourth Quarter 2013 Guidance
12/19/2013 - AK Steel provided guidance for its fourth quarter of 2013 financial results, noting that it has seen stronger demand in the fourth quarter compared to the third quarter, particularly in carbon sales to the spot market.
AK expects to realize net income of US$0.02 to US$0.06 per diluted share of common stock, excluding the effects of a potential non-cash income tax benefit related to pension and other postretirement benefit gains, as described below.
Shipments
AK Steel expects shipments of approximately 1,400,000 tons in the fourth quarter of 2013 compared to shipments of 1,242,400 tons in the third quarter of 2013, an increase of approximately 13%. AK Steel said that the company has seen stronger demand in the fourth quarter compared to the third quarter, particularly in carbon sales to the spot market. Additionally, the expected increase in shipments from the third quarter reflects the company's recovery from the previously disclosed unplanned Middletown Works blast furnace outage.
Pricing
The company expects its average selling price for the fourth quarter of 2013 to decrease approximately 4% from its average selling price of US$1,071 per ton for the third quarter of 2013. The expected decrease in average selling price from the third quarter is primarily due to a lower proportion of value-added shipments to the spot market in the fourth quarter.
Production Costs
The company said that it expects to incur lower production costs in the fourth quarter, primarily as a result of lower costs for iron ore pellets. Additionally, the company expects total planned maintenance outage costs to be about US$2 million in the fourth quarter, compared to US$4.2 million incurred in the third quarter.
Unplanned Blast Furnace Outage Effect and Insurance Recovery
The company projects expense for the fourth quarter of approximately US$5 million related to the Middletown Works unplanned blast furnace outage, net of insurance recoveries. As previously disclosed, the company's losses attributable to the unplanned blast furnace outage are partially covered by property damage and business interruption insurance. The company continues to work with its insurance underwriters on the claim.
Income Taxes
AK Steel said that it expects to record a non-cash income tax expense of approximately US$2 million, orUS$0.01 per diluted share, for the fourth quarter of 2013, excluding any potential income tax benefit associated with the normal year-end measurement of pension and other postretirement benefit plan liabilities. In the third quarter of 2013, the company recorded income tax expense of US$6.7 million, orUS$0.05 per diluted share. The company's income tax provision is primarily related to changes in the company's LIFO reserve, which results in a tax valuation allowance adjustment related to the company's deferred tax assets. Changes at year-end in the company's LIFO reserve could affect the current tax estimate. In certain circumstances, the company may be required to record an income tax benefit if a significant reduction of the pension and other postretirement benefit plan liabilities occurs at year-end. The amount of this income tax benefit is subject to changes in these liabilities caused by changes in assumptions and events and circumstances beyond the company's control, primarily changes in interest rates, performance of the financial markets, healthcare cost trends and mortality and retirement experiences, and thus is impossible to reliably forecast or predict at this time.
Shipments
AK Steel expects shipments of approximately 1,400,000 tons in the fourth quarter of 2013 compared to shipments of 1,242,400 tons in the third quarter of 2013, an increase of approximately 13%. AK Steel said that the company has seen stronger demand in the fourth quarter compared to the third quarter, particularly in carbon sales to the spot market. Additionally, the expected increase in shipments from the third quarter reflects the company's recovery from the previously disclosed unplanned Middletown Works blast furnace outage.
Pricing
The company expects its average selling price for the fourth quarter of 2013 to decrease approximately 4% from its average selling price of US$1,071 per ton for the third quarter of 2013. The expected decrease in average selling price from the third quarter is primarily due to a lower proportion of value-added shipments to the spot market in the fourth quarter.
Production Costs
The company said that it expects to incur lower production costs in the fourth quarter, primarily as a result of lower costs for iron ore pellets. Additionally, the company expects total planned maintenance outage costs to be about US$2 million in the fourth quarter, compared to US$4.2 million incurred in the third quarter.
Unplanned Blast Furnace Outage Effect and Insurance Recovery
The company projects expense for the fourth quarter of approximately US$5 million related to the Middletown Works unplanned blast furnace outage, net of insurance recoveries. As previously disclosed, the company's losses attributable to the unplanned blast furnace outage are partially covered by property damage and business interruption insurance. The company continues to work with its insurance underwriters on the claim.
Income Taxes
AK Steel said that it expects to record a non-cash income tax expense of approximately US$2 million, orUS$0.01 per diluted share, for the fourth quarter of 2013, excluding any potential income tax benefit associated with the normal year-end measurement of pension and other postretirement benefit plan liabilities. In the third quarter of 2013, the company recorded income tax expense of US$6.7 million, orUS$0.05 per diluted share. The company's income tax provision is primarily related to changes in the company's LIFO reserve, which results in a tax valuation allowance adjustment related to the company's deferred tax assets. Changes at year-end in the company's LIFO reserve could affect the current tax estimate. In certain circumstances, the company may be required to record an income tax benefit if a significant reduction of the pension and other postretirement benefit plan liabilities occurs at year-end. The amount of this income tax benefit is subject to changes in these liabilities caused by changes in assumptions and events and circumstances beyond the company's control, primarily changes in interest rates, performance of the financial markets, healthcare cost trends and mortality and retirement experiences, and thus is impossible to reliably forecast or predict at this time.
