AK Steel Reports 4th-Quarter, Full-Year 2008 Results
01/28/2009 - AK Steel reports a net loss of $430.6 million on net sales of $1,458.7 million for the fourth quarter, and net income of $4.0 million on record net sales of $7,644.3 million for the full year 2008.
AK Steel reported a net loss of $430.6 million on net sales of $1,458.7 million for the fourth quarter, and net income of $4.0 million on record net sales of $7,644.3 million for the full year 2008.
Fourth Quarter Results—The $430.6 million net loss ($3.88 per diluted share of common stock) compares to net income of $106.7 million ($0.95 per diluted share) in the year-ago fourth quarter.
Results reflect a $699.5-million non-cash charge related to the company's pension plans, the bulk of which ($660.1 million) resulted from the company's unique "corridor" pension accounting requirement. The remaining $39.4 million resulted from the company's decision in December to lower future costs by locking and freezing the defined benefit pension plans for salaried employees.
Adjusted income before taxes, which exclude the $699.5-million non-cash charge, amounted to $0.6 million, which compare to $164.1 million income before taxes in the year-ago fourth quarter. There were no corridor or curtailment charges in the fourth quarter of 2007.
Net sales of $1,458.7 million were approximately 14% lower than in the year-ago fourth quarter, while shipments of 1,073,500 tons were approximately 32% lower than in the year-ago period. The company's average selling price was $1,359 per ton, approximately 26% higher than the $1,079 per-ton average price in the year-ago period.
Adjusted operating profit was $10.3 million ($10 per ton), excluding the pre-tax corridor and curtailment charges. Including the charges, the company's operating loss was $689.2 million ($642 per ton), which compares to an operating profit of $153.5 million ($98 per ton) for the year-ago fourth quarter.
Full-Year Results—The $4.0 million net income ($0.04 per share) compares to net income of $387.7 million ($3.46 per share) for 2007. The 2007 full-year net income includes a total of $39.8 million in one-time curtailment charges related to new labor agreements at the company's Mansfield and Middletown, Ohio plants.
Record net sales of $7,644.3 million compare to revenues of $7,003.0 million for 2007, and shipments of 5,866,000 tons compare to shipments of 6,478,700 tons in 2007. AK Steel's average selling price for 2008 rose to a record $1,303 per ton, approximately 21% above its 2007 average of $1,081 per ton.
Excluding the fourth-quarter pre-tax corridor and curtailment charges, the company posted record adjusted operating profit for 2008 of $727.5 million (a record $124 per ton), which compares to adjusted operating profit of $664.2 million ($103 per ton) for 2007. Including the fourth-quarter charges, 2008 operating profit was $28.0 million ($5 per ton), which compares to 2007 operating profit of $624.4 million ($96 per ton).
AK Steel ended 2008 with a cash balance of $562.7 million, in addition to $682.3 million of availability under its line of credit, for total liquidity of $1,245.0 million.
AK Steel ended 2008 with a cash balance of $562.7 million, in addition to $682.3 million of availability under its line of credit, for total liquidity of $1,245.0 million.
Management Comments—"While the sudden economic downturn late in the year made for a very challenging fourth quarter, 2008 was an exceptionally good year for AK Steel," said James L. Wainscott, Chairman, President and CEO. "AK Steel is uniquely prepared to weather this economic storm, and we will continue to make the necessary adjustments, not only to meet today's challenges, but to quickly take advantage of any improving market conditions."
First-Half 2009 Outlook—The company said it expects shipments in the first quarter of 2009 to be in a range between 850,000 and 900,000 tons, although it cautioned that the economic situation remains uncertain.
The company said it will take advantage of the economic downturn to temporarily idle its Middletown blast furnace, beginning early in March, to perform extensive maintenance, which is expected to take about 45 days. Considering these factors, the company said it expects to experience a significant operating loss for the first quarter of 2009.
The company also said it expects shipments to improve in the second quarter of 2009, and, coupled with lower raw material costs compared to the first quarter of 2009, the company expects to generate a modest operating profit for the second quarter of 2009.
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 6,500 men and women in Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pa.; Ashland, Ky.; Rockport, Ind.; and its corporate headquarters in West Chester, Ohio.
