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AK Steel Reports Large Net Losses for 4Q12 and Full Year 2012
01/29/2013 - AK Steel says sluggish economic conditions impacted global demand and selling prices for steel products during the fourth quarter and the full-year of 2012.
AK Steel reported a net loss of US$230.4 million for the fourth quarter of 2012, compared to a net loss of $193.9 million for the fourth quarter of 2011. The fourth quarter 2012 results include a pre-tax pension corridor charge of $157.3 million compared to a pre-tax pension corridor charge of $268.1 million for the fourth quarter of 2011. Neither charge had any current cash flow impact. The fourth quarter 2012 results also include a non-cash income tax charge of $96.4 million as a result of a change in a deferred tax asset valuation allowance, which includes income taxes associated with the pension corridor charge. Excluding these pension corridor and income tax charges, and as reconciled below, AK Steel had an adjusted net loss of $36.6 million for the fourth quarter of 2012.
Net sales for the fourth quarter of 2012 were $1.42 billion on shipments of 1,406,100 tons, compared to sales of $1.51 billion on shipments of 1,409,900 tons for the year-ago fourth quarter. The company said its average selling price for the fourth quarter of 2012 was $1,011 per ton, approximately 6% lower than the $1,070 per ton reported for the fourth quarter of 2011 and the $1,073 per ton reported for the third quarter of 2012. The lower average selling price for the fourth quarter of 2012 compared to the fourth quarter of 2011 was primarily due to lower spot market prices for carbon steel products and reduced raw material surcharges. The lower average selling price for the fourth quarter of 2012 compared to the third quarter of 2012 was primarily due to lower spot market prices for carbon steel products, reduced raw material surcharges and a less rich value-added product mix.
The company reported adjusted EBITDA of $16.8 million, or $12 per ton, for the fourth quarter of 2012 compared to $12.1 million, or $9 per ton, for the fourth quarter of 2011. The 2012 fourth quarter results include a LIFO credit of $30.8 million, compared to a LIFO credit of $44.1 million for the fourth quarter of 2011.
"Sluggish economic conditions impacted global demand and selling prices for steel products during the fourth quarter and the full-year of 2012," said James L. Wainscott, chairman, president and CEO of AK Steel. "That said, AK Steel remains well-positioned to take advantage of market opportunities with its high quality, valued-added steels as the economy continues to slowly recover. Taking everything into account, we expect a significantly better first quarter and full-year 2013."
The company ended 2012 with total liquidity of $1,098.9 million, consisting of $227.0 million of cash and cash equivalents and $871.9 million of availability under the company's revolving credit facility. There were no outstanding borrowings under the company's revolving credit facility as of the end of 2012. Liquidity nearly doubled from the end of the third quarter of 2012 as a result of the successful completion of several capital market transactions during the fourth quarter of 2012.
Full-Year 2012 Results
For the full year, AK Steel reported a net loss of $1,027.3 million compared to a net loss of $155.6 million for 2011. These results include the pre-tax pension corridor charges described above of $157.3 million for 2012, and $268.1 million for 2011. The 2012 results also include non-cash income tax charges of $865.5 million as a result of deferred tax asset valuation allowance changes. Neither charge had any current cash flow impact. Excluding these pension corridor and income tax charges, and as reconciled below, AK Steel had an adjusted net loss of $64.4 million for the full year 2012.
For the full year, AK Steel reported a net loss of $1,027.3 million compared to a net loss of $155.6 million for 2011. These results include the pre-tax pension corridor charges described above of $157.3 million for 2012, and $268.1 million for 2011. The 2012 results also include non-cash income tax charges of $865.5 million as a result of deferred tax asset valuation allowance changes. Neither charge had any current cash flow impact. Excluding these pension corridor and income tax charges, and as reconciled below, AK Steel had an adjusted net loss of $64.4 million for the full year 2012.
Sales for 2012 were $5.93 billion, a decrease of 8% compared to $6.47 billion for 2011. Shipments for 2012 were 5,431,300 tons, a decrease of 5% compared to 5,698,800 tons in 2011 as a result of a weaker carbon spot market. The company said its average selling price for full-year 2012 was $1,092 per ton, approximately 3% lower than the $1,131 per ton reported for 2011. The lower average selling price for full-year 2012 was primarily due to lower spot market selling prices and reduced raw material surcharges. The company reported adjusted EBITDA of $181.2 million, or $33 per ton, for 2012 compared to adjusted EBITDA of $265.7 million, or $47 per ton, for 2011.
Earnings for 2012 were negatively affected compared to 2011 by the decrease in shipments and spot market selling prices along with higher coke costs. This negative impact was partially offset by decreases in costs for carbon scrap, iron ore and energy.
First Quarter 2013 Outlook
Consistent with its current practice, the company said that it will provide detailed guidance for its first quarter in March.
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 6,100 men and women in Middletown, Mansfield, Coshoctonand Zanesville, Ohio; Butler, Pa.; Ashland, Ky.; Rockport, Ind.; and its corporate headquarters in West Chester, Ohio.
