AK Steel Reports Second Quarter Net Income
07/25/2007 - AK Steel reported net income of $109.9 million on record net sales of $1,869.5 million for the second quarter, and net income of $172.6 million on net sales of $3.6 billion for the first six months of 2007.
AK Steel reported net income of $109.9 million on record net sales of $1,869.5 million for the second quarter, and net income of $172.6 million on net sales of $3.6 billion for the first six months of 2007.
Second Quarter Results—The $109.9 million net income ($0.98 per diluted share of common stock) compares to net income of $29.1 million ($0.26 per diluted share) for the second quarter of 2006. Record net sales of $1,869.5 million compare to sales of $1,497.3 million for the year-ago quarter. Record shipments of 1,711,400 tons compare to shipments of 1,599,100 tons for the year-ago quarter.
The company said its average selling price for the second quarter was a record of $1,092 per ton, a 17% increase over the $936 per-ton mark set in the second quarter of 2006, and about 1% higher than the $1,078 per-ton level in the first quarter of 2007.
Operating profit was $187.4 million (a record $109 per ton) compared to $63.0 million ($39 per ton) in the second quarter of 2006. The company says the year-over-year operating profit improvement was primarily the result of higher shipments, higher spot market and contract
selling prices, lower total employment costs corporate-wide, and lower operating and maintenance costs at the company's Middletown Works.
Operating profit was impacted by a $24.7-million pre-tax, non-cash pension-curtailment charge for a new labor agreement at the company's Middletown Works, along with higher raw material costs and associated higher LIFO charges. Excluding the pension curtailment charge, operating profit would have been $212.1 million ($124 per ton).
Management Comments—"AK Steel's excellent second quarter results reflect strong shipment levels and prices for our products, an outstanding operating performance, and our unrelenting efforts to reduce costs," said James L. Wainscott, Chairman, President and CEO of AK Steel. Consistent with our approach for 2007, we continue to 'put the pedal to the metal' as we accelerate toward realizing AK Steel's potential for our shareholders."
Six-Month Results—The $172.6-million net income ($1.55 per diluted share) compares to net income of $35.3 million ($0.32 per diluted share) for the corresponding 2006 period. Results for the first six months of 2006 included non-cash charges of $2.7 million ($0.02 per diluted share), reflecting the reduction in value of the company's deferred-tax assets as a result of state tax law changes. Record sales of $3,589.4 million compared to sales of $2,933.2 million in the first half of 2006.
Operating profit was $307.4 million ($93 per ton), which compares to operating profit of $92.4 million ($30 per ton) for the first half of 2006. Operating profit was impacted by pre-tax, non-cash pension-curtailment charges totaling $39.8 million for new labor agreements at the company's Mansfield and Middletown plants, along with higher raw material costs and associated higher LIFO charges. Excluding the pension curtailment charges, operating profit in the first half of 2007 would have been a record $347.2 million ($105 per ton), also a record performance.
During the first half of 2007, the company redeemed $300 million of senior notes, made $180 million in early pension-fund contributions, and ended the second quarter with $455.9 million of cash on hand, and $682.3 million of availability under its credit facility.
Outlook—AK Steel said it expects shipments for the third quarter of 2007 to be approximately 1,600,000 tons, lower than second quarter 2007 levels, primarily due to a planned maintenance outage at the Middletown hot strip mill. The company expects its average per-ton selling price to be about 2% lower than in the second quarter of 2007. However, the company says it expects its operating costs to improve from second-quarter levels, in part, as a result of lower return-to-work costs at Middletown Works and lower LIFO costs. The company says it also expects to generate operating profit of about $100 per ton in the third quarter of 2007.
In addition, the company expects a one-time, non-cash tax gain in the third quarter as a result of recently enacted tax law changes in the state of Michigan.
AK Steel produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for customers in the automotive, appliance, construction and manufacturing markets.
