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AK Steel Provides Third Quarter 2013 Guidance
09/19/2013 - AK Steel provided guidance for its third quarter of 2013 financial results, expecting to incur a net loss due in part to a previously disclosed unplanned blast furnace outage at its Middletown Works.
AK Steel expects to incur a net loss ofUS$0.22 to US$0.27 per diluted share of common stock, which includes a loss of approximately US$0.09 per diluted share related to the Middletown Works blast furnace outage described below. The principal assumptions and other factors driving this estimate are set forth below.
Shipments
AK Steel expects shipments of approximately 1,240,000 to 1,260,000 tons in the third quarter of 2013 compared to shipments of 1,323,700 tons in the second quarter of 2013, a decrease of approximately 5% to 6%. The reduction in shipments from the second quarter is attributable principally to the effects of the unplanned outage at the company's Middletown Works blast furnace and to a seasonal reduction in shipments to the automotive market. As a result of the outage, the company's melt production during the quarter has been reduced, resulting in a delay of shipments to some carbon spot market customers and an overall reduction in shipments during the quarter.
Pricing
The company expects its average selling price for the third quarter of 2013 to increase slightly to about US$1,065 per ton from its average selling price of US$1,061 per ton for the second quarter of 2013. The expected increase in average selling price is primarily due to a more favorable mix of value-added products compared to the previous quarter, largely offset by lower raw material surcharges and the effect of the delayed shipments to customers resulting from the unplanned blast furnace outage. The company has continued to honor its commitments to customers for lower-priced orders placed prior to the outage for carbon spot market shipments and, as a result of the limitations on its capacity for shipments caused by the outage, the company has not been able to realize the full benefit of price increases in the carbon spot market which occurred during the third quarter.
Planned Maintenance
Total planned maintenance outage costs are expected to be about US$5 million in the third quarter compared to US$21.6 million in the second quarter, representing a decrease of approximately US$17 million in costs from the prior quarter.
Unplanned Blast Furnace Outage Effect and Insurance Recovery
The company's projected loss for the third quarter includes approximately US$12 million, or US$0.09 per diluted share, related to the unplanned blast furnace outage after an expected partial insurance recovery. 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 expects to recognize approximately US$14 million in insurance recoveries during the third quarter related to the unplanned blast furnace outage. The company anticipates there will be some additional losses incurred and insurance recoveries recorded in the fourth quarter.
Income Taxes
AK Steel said that it expects to record a non-cash income tax expense of approximately US$7 million, orUS$0.05 per diluted share of common stock, for the third quarter of 2013 using the discrete tax method. In the second quarter of 2013, the company recorded a tax provision of US$9.7 million, or US$0.07 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, and could affect this estimate.
Shipments
AK Steel expects shipments of approximately 1,240,000 to 1,260,000 tons in the third quarter of 2013 compared to shipments of 1,323,700 tons in the second quarter of 2013, a decrease of approximately 5% to 6%. The reduction in shipments from the second quarter is attributable principally to the effects of the unplanned outage at the company's Middletown Works blast furnace and to a seasonal reduction in shipments to the automotive market. As a result of the outage, the company's melt production during the quarter has been reduced, resulting in a delay of shipments to some carbon spot market customers and an overall reduction in shipments during the quarter.
Pricing
The company expects its average selling price for the third quarter of 2013 to increase slightly to about US$1,065 per ton from its average selling price of US$1,061 per ton for the second quarter of 2013. The expected increase in average selling price is primarily due to a more favorable mix of value-added products compared to the previous quarter, largely offset by lower raw material surcharges and the effect of the delayed shipments to customers resulting from the unplanned blast furnace outage. The company has continued to honor its commitments to customers for lower-priced orders placed prior to the outage for carbon spot market shipments and, as a result of the limitations on its capacity for shipments caused by the outage, the company has not been able to realize the full benefit of price increases in the carbon spot market which occurred during the third quarter.
Planned Maintenance
Total planned maintenance outage costs are expected to be about US$5 million in the third quarter compared to US$21.6 million in the second quarter, representing a decrease of approximately US$17 million in costs from the prior quarter.
Unplanned Blast Furnace Outage Effect and Insurance Recovery
The company's projected loss for the third quarter includes approximately US$12 million, or US$0.09 per diluted share, related to the unplanned blast furnace outage after an expected partial insurance recovery. 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 expects to recognize approximately US$14 million in insurance recoveries during the third quarter related to the unplanned blast furnace outage. The company anticipates there will be some additional losses incurred and insurance recoveries recorded in the fourth quarter.
Income Taxes
AK Steel said that it expects to record a non-cash income tax expense of approximately US$7 million, orUS$0.05 per diluted share of common stock, for the third quarter of 2013 using the discrete tax method. In the second quarter of 2013, the company recorded a tax provision of US$9.7 million, or US$0.07 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, and could affect this estimate.
