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01/31/2004 -
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AK Steel Reports 4th Quarter Results
Jan. 31, 2004 — AK Steel reported a net loss of $163.9 million on net sales of $1,054.0 million for the fourth quarter 2003, and a net loss of $560.4 million on net sales of $4,041.7 million for the full year.
Fourth Quarter Results—Net loss of $163.9 million ($1.51 per share of common stock) compares to a net loss of $489.7 million ($4.54 per share) in the fourth quarter of 2002. Included in the fourth quarter 2003 net loss were combined non-cash benefit plan corridor charges of $240.1 million ($145.3 million after tax, or $1.34 per share) to recognize actuarial net losses associated with the company's pension and other postretirement benefit plans that are outside a defined corridor. In 2002, the company incurred combined fourth quarter non-cash corridor charges of $816.8 million ($483.8 million after tax, or $4.49 per share). These non-cash corridor charges are required because of the company's unique method of accounting for its benefit plans, and in 2003 were primarily due to the impact of declining interest rates.
AK Steel continues to make progress in reducing costs to improve its profitability and its competitiveness in the industry. The company said that more than 400 of the 475 positions earmarked for reduction were eliminated in the fourth quarter, with the remaining positions scheduled to be eliminated in the first quarter of 2004. The company also announced that it had made significant progress towards its goal of pre-tax earnings improvements of $200 million in 2004, having realized a portion of those savings in the fourth quarter of 2003. In addition, the company is continuing its confidential discussions with union representatives in an effort to achieve competitive employment costs. |
Excluding the per-share effects of these charges, the fourth quarter 2003 net loss would have been $18.6 million ($0.17 per share). The fourth quarter 2003 net loss was also net of $15.5 million ($0.14 per share) of after-tax income from discontinued operations. Excluding the per-share effect of the non-cash corridor charges and the income from discontinued operations, AK Steel would have recorded a $34.1 million ($0.31 per share) loss from continuing operations for the fourth quarter of 2003.
Net sales of $1,054.0 million on shipments of 1,563,700 tons compare to net sales of $1,025.8 million on shipments of 1,428,100 tons in the fourth quarter of 2002. The reported sales for both periods reflect steel operations only and exclude the results of operations of Douglas Dynamics, LLC and Greens Port Industrial Park, both of which the company previously announced are for sale and, accordingly, have been reported as discontinued operations.
Full-Year Results—Net loss of $560.4 million ($5.17 per share) compares to a 2002 net loss of $502.4 million ($4.67 per share). In addition to the fourth quarter non-cash corridor charges, the 2003 net loss included non-cash impairments of $101.2 million ($0.93 per share) for goodwill and $87.3 million ($0.80 per share) for deferred taxes. Also included was after-tax income from the discontinued operations totaling $34.0 million ($0.31 per share), and pre-tax costs of $5 million related to the announced 20% reduction in salaried workforce. Higher natural gas, scrap and purchased slab costs and an increase in pension and other postretirement benefit expenses also contributed to the loss.
Net sales of $4,041.7 million on 5,830,800 tons shipped compare to $4,158.8 million on 5,803,700 tons shipped in 2002. Average steel selling prices for 2003 decreased to $677 per ton from $703 per ton for 2002. The decrease was attributable to the combined effects of lower automotive and appliance market shipments, higher shipments to the distributor and converter markets, a poorer product mix and lower spot market pricing.
On January 27, 2004, Eurofer, an association of European steel producers, formally withdrew an anti-dumping trade complaint that it had filed with the European Commission in 2002. The complaint related to imports into the European Union of certain stainless steel sheet products originating from the United States. As a result of the complaint, the European Commission had, in September of 2003, imposed a provisional duty of 20.6% against certain stainless steel sheet products manufactured by AK Steel for export to Europe. Although the European Commission has not yet terminated the investigation initiated by the complaint, AK Steel said that it anticipates the commission will do so, and will remove the provisional duty, in light of the withdrawal of the complaint. AK Steel said it disagrees with, and has contested vigorously, the original complaint. |
Management Comments—"AK Steel employees responded to the challenges we faced in the fourth quarter with the best quarterly operating results of the year. We regained shipment volumes and lowered operating costs despite significantly higher energy and raw material costs," said James L. Wainscott, President and CEO. "This organization is keenly focused on meeting the challenges we face as we strive to return the company to a sustainable level of profitability."
Liquidity, Pending Asset Sales and Other Matters—AK Steel ended 2003 with $54.7 million of cash and $455 million of availability under its two credit facilities, for total liquidity of approximately $510 million. During the fourth quarter, the company generated $61.6 million of cash from continuing operations, made a scheduled $62.5 million payment as the third of four annual principal payments on its senior secured notes, and repaid the $50 million outstanding balance on its inventory-based credit facility.
Also in the fourth quarter, the company announced plans to sell Douglas Dynamics, LLC and Greens Port Industrial Park and to use a substantial portion of the proceeds to reduce outstanding debt. The company has targeted completion of those sales for the first quarter of 2004.
AK Steel, headquartered in Middletown, Ohio, produces
flat-rolled carbon, stainless and electrical steels, as well as tubular
steel products for the automotive, appliance, construction and manufacturing
markets.
