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AK Steel Provides Fourth-Quarter Guidance
12/16/2011 - AK Steel opted to provide guidance later in the fourth quarter when it had more information upon which to base its estimates. The company now expects shipments of approximately 1.4 million tons in the 2011 fourth quarter, or about 2% higher than the third quarter of 2011, and about 3% higher than in the year-ago fourth quarter.
AK Steel says it did not provide guidance for the fourth quarter concurrent with the release of its third quarter 2011 financial results on October 22, 2011, because of continued uncertainty and volatility with respect to economic conditions in the U.S. and other markets served by the company. The company opted to provide guidance later in the fourth quarter when it had more information upon which to base its estimates.
AK Steel now expects shipments of approximately 1.4 million tons in the 2011 fourth quarter, or about 2% higher than the third quarter of 2011, and about 3% higher than in the year-ago fourth quarter. The company said it expects that its average per-ton selling price for the fourth quarter will be about 8% lower than for the third quarter of 2011, but about 5% higher than in the year-ago fourth quarter. The expected quarter-over-quarter selling price decrease is primarily due to lower spot market pricing and a lower value-added product mix for the fourth quarter of 2011.
The company expects its operating costs to be lower for the fourth quarter of 2011 compared to the third quarter of 2011 due to the lower value-added product mix and the impact of LIFO, partially offset by lower operating rates. AK Steel now expects to record a LIFO credit for the fourth quarter of 2011. Previously, AK Steel said it believed the company would incur a LIFO charge in the fourth quarter of 2011. As a result of all these factors, an operating loss in a range between $40 and $45 per ton for the fourth quarter of 2011 is expected.
AK Steel also said it may incur a significant non-cash charge in the fourth quarter related to its method of pension accounting. The company estimates that it will incur a non-cash, pre-tax corridor charge of approximately $250 million in the fourth quarter of 2011, which is not reflected in the above guidance.
AK Steel noted that the actual measurement date for the corridor determination is December 31, 2011, and the final amount is subject to fluctuations in market performance and interest rate assumptions from now until that date.
The company expects to end the fourth quarter with approximately $600 million in liquidity, approximately the same level as at the end of the third quarter of 2011.
AK Steel produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets. The company employs about 6200 men and women in Middletown, Mansfield, Coshocton, and Zanesville, Ohio; Butler, Pa.; Ashland, Ky.; Rockport, Ind.; and its corporate headquarters in West Chester, Ohio.
AK Tube LLC, a wholly owned subsidiary of AK Steel, employs about 300 men and women in plants in Walbridge, Ohio, and Columbus, Ind. AK Tube produces carbon and stainless electric resistance welded (ERW) tubular steel products for truck, automotive and other markets.
AK Coal Resources, Inc., another wholly owned subsidiary of AK Steel, owns or leases metallurgical coal reserves in Somerset County, Pa. AK Steel also owns 49.9% of Magnetation LLC, a joint venture headquartered in Nashwauk, Minn., which produces iron ore concentrate from previously mined ore reserves.
