AK Steel reported a net loss of $724.2 million, or $6.55 per diluted share of common stock, for the second quarter of 2012. The 2012 second quarter results include the effects of a non-cash charge of $736.0 million, or $6.65 per diluted share, for a valuation allowance for the company’s deferred tax assets. A tax valuation allowance is required under accounting principles to record the effect on income tax expense of a change in the potential future realization of the company’s deferred tax assets. This accounting treatment is subject to reversal upon a return by the company to sustained profitability.

Excluding the effects of this charge, the company’s adjusted net income for the second quarter of 2012 was $11.4 million, or $0.10 per diluted share. These results reflect an improvement over the net loss of $11.8 million, or $0.11 per diluted share, incurred in the first quarter of 2012. They compare to net income of $33.1 million, or $0.30 per diluted share, for the second quarter of 2011.

Net sales for the second quarter of 2012 were $1,538.4 million on shipments of 1,335,800 tons, compared to sales of $1,791.9 million on shipments of 1,497,000 tons for the year-ago second quarter and sales of $1,508.7 million on shipments of 1,325,900 tons for the first quarter of 2012.

The company said its average selling price for the second quarter of 2012 was $1,152 per ton, a 1% increase over the first quarter of 2012, and about 3% lower than the second quarter of 2011. The higher average selling price for the second quarter 2012 over the first quarter of 2012 was primarily due to a richer product mix and increased contract sales, partially offset by lower selling prices for spot market sales.

The company reported an operating profit for the second quarter of 2012 of $56.7 million, or $42 per ton, compared to $68.5 million, or $46 per ton, for the second quarter of 2011 and $4.1 million, or $3 per ton, for the first quarter of 2012. The 2012 second quarter operating results reflect an improvement of $52.6 million compared to the first quarter of 2012. The 2012 second quarter results include a LIFO credit of $18.3 million, compared to a LIFO charge of $38.8 million in the second quarter of 2011 and a LIFO credit of $12.4 million for the first quarter of 2012.

"During the second quarter, sluggish domestic and global economic conditions impacted shipment volumes and selling prices for our steel products," said James L. Wainscott, Chairman, President and CEO of AK Steel. "Despite these market challenges, AK Steel recorded an improved operating profit and adjusted net income performance compared to the previous quarter."

The company ended the second quarter of 2012 with $37.4 million of cash and cash equivalents and $671.7 million of availability under the company’s revolving credit facility, for total liquidity of approximately $709 million.

Six-Month Results
For the first six months of 2012, the company reported a net loss of $736.0 million, or $6.66 per diluted share. The company reported net income for the corresponding 2011 period of $41.8 million, or $0.38 per diluted share. Excluding the effects of the tax valuation allowance charge recorded in 2012, the company would have reported an adjusted net loss of $0.4 million, or less than $0.01 per diluted share, for the first six months of 2012.

Sales for the first six months of 2012 were $3,047.1 million compared to $3,373.0 million in the first half of 2011. Shipments for the first half of 2012 were 2,661,700 tons compared to 2,920,100 tons in the first half of 2011. The company reported operating profit of $60.8 million, or $23 per ton, for the first six months of 2012 compared to $88.0 million, or $30 per ton, for the same period in 2011. The negative effect on earnings caused by the decrease in sales and higher coal costs was partially offset by decreases in energy costs.

During the first half of 2012, the company contributed $170.2 million to its pension trust fund, which satisfies the company’s requirements for the full year.

Third Quarter 2012 Outlook
Due to continued uncertainty and volatility with respect to near-term economic conditions in the U.S. and in other markets served by the company, AK Steel is not providing detailed guidance for the company’s third quarter results at this time. The company said that it intends to provide such detailed third quarter guidance later during the quarter.

However, in advance of that guidance, the company noted that it expects to incur approximately $28 million related to planned maintenance outage costs during the third quarter, compared to approximately $1 million in maintenance outage costs for the second quarter of 2012. The vast majority of this increased cost is associated with a planned blast furnace outage at the company’s Ashland Works. The company further noted that it expects to incur a net loss for the third quarter of 2012.

In addition, the company announced that it has elected to suspend its dividend, which will save the company about $22 million annually. This action will help enhance the company’s financial flexibility and further support capital needs for the business.

As a result of the tax valuation allowance recorded in the second quarter of 2012, the company expects that its normal current year income tax provision will be mostly offset by a related change in the valuation allowance. However, LIFO income or expense for the year will result in changes in the value of the LIFO-related tax-planning strategy used to support the value of a portion of the deferred tax assets. Thus, the company’s current projection of LIFO income for 2012 is expected to result in income tax expense for the third quarter of 2012, as well as for the full year, regardless of pre-tax financial results.