AK Steel (NYSE: AKS) today reported its financial results for the
third quarter of 2018.
Third Quarter 2018 Highlights
- Net income of $67.2 million, or $0.21 per diluted
share, versus $22.3 million, or $0.07 per diluted share, a year
ago
- Adjusted EBITDA of $160.8 million, or 9.3% of sales;
highest third quarter since 2008
- Sales of $1,735.6 million, a 16% increase from third
quarter 2017
“Our results represented our best third quarter performance in
10 years and reflected strong market conditions and our focus on
value-added products,” said Roger K. Newport, Chief Executive
Officer of AK Steel. “We expect market conditions to remain
positive, which should be reflected in selling prices and support
continued strong performance in the fourth quarter and 2019 fiscal
year.”
AK Steel reported net income of $67.2 million, or $0.21 per
diluted share of common stock, for the third quarter of 2018.
For the third quarter of 2017, net income was $22.3 million, or
$0.07 per diluted share.
The company’s adjusted EBITDA (as defined in the “Non-GAAP
Financial Measures” section below) was $160.8 million, or 9.3% of
net sales, for the third quarter of 2018. Adjusted EBITDA
increased 39% from $115.8 million, or 7.7% of net sales, in the
third quarter a year ago. Higher steel selling prices and
shipments during the recent third quarter, particularly to the
distributors and converters market, more than offset higher costs
for certain raw materials, transportation and supplies, including
graphite electrodes, compared to the third quarter a year ago.
Net sales for the recent third quarter of $1.74 billion
increased 16% compared to the third quarter of 2017 due to higher
selling prices and higher shipments.
The company reported liquidity of $953.5 million at the end of
the third quarter, consisting of cash and cash equivalents and
$911.8 million of availability under the company’s revolving credit
facility. The company reported outstanding borrowings under
the credit facility of $365.0 million at September 30, 2018.
|
|
|
|
|
(Dollars in millions, except per share and per ton data) |
|
Three Months
EndedSeptember 30, |
|
Nine Months EndedSeptember
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Flat-rolled steel shipments (000 tons) |
|
1,424.0 |
|
|
1,368.6 |
|
|
4,294.7 |
|
|
4,259.1 |
|
Selling price per flat-rolled steel ton |
|
$ |
1,114 |
|
|
$ |
1,021 |
|
|
$ |
1,087 |
|
|
$ |
1,022 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,735.6 |
|
|
$ |
1,494.3 |
|
|
$ |
5,141.1 |
|
|
$ |
4,584.9 |
|
Operating profit |
|
114.8 |
|
|
66.3 |
|
|
277.9 |
|
|
312.5 |
|
Net income attributable to AK Steel Holding Corporation |
|
67.2 |
|
|
22.3 |
|
|
152.5 |
|
|
183.9 |
|
Adjusted EBITDA |
|
160.8 |
|
|
115.8 |
|
|
427.9 |
|
|
461.1 |
|
|
|
|
|
|
|
|
|
|
Net income per diluted share attributable to AK Steel Holding
Corporation |
|
$ |
0.21 |
|
|
$ |
0.07 |
|
|
$ |
0.48 |
|
|
$ |
0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OutlookThe company anticipates that market
conditions will remain strong in the fourth quarter.
Accordingly, the company expects:
- Fourth quarter flat rolled steel shipments to be essentially
flat compared to the third quarter, as the seasonal slowdown in
automotive shipments is offset by strong demand from the
distributors and converters market, which includes spot market
opportunities.
- Due to the shift in mix from seasonally lower automotive
shipments and increased sales into the distributors and converters
market, including spot market sales, our average selling price will
decline by about 2 to 3 percent. Increased shipments into the
distributors and converters market will reduce our average selling
price, as products sold into those markets typically have lower
selling prices than most of our other products.
- We expect planned outage costs to be approximately $15 million
in the fourth quarter compared to $4.7 million in the previous
quarter.
- Adjusted EBITDA margin is expected to decline by around 150
basis points in the seasonally weaker fourth quarter compared to
the third quarter, which was the highest quarterly adjusted EBITDA
margin in 2018. Even with the expected margin decline, the
company expects that fourth quarter adjusted EBITDA will be
significantly stronger than a year ago and among our best fourth
quarter adjusted EBITDA performances in the last 10 years.
The foregoing outlook is based on AK Steel’s current estimates
and may change based on business conditions and other
factors. There are many other items that could affect the
company’s 2018 results, as outlined in the Forward-Looking
Statements below, including developments in the domestic and global
economies, in the company’s business, in trade actions and the
imposition of tariffs, and in the businesses of the company’s
customers, suppliers and competitors.
Third Quarter 2018 Earnings Conference CallAK
Steel will provide live listening access on its website for the
company’s earnings conference call on October 26, 2018 at 8:30 a.m.
Eastern Time. A link to the webcast is on the company’s home
page at www.aksteel.com. Presentation slides will also be
available on the webcast link and under the Investor Presentations
section on the website. The webcast will be archived on the
company’s website for three months and will be accessible from the
Investor News and Events section.
AK SteelAK Steel is a leading producer of
flat-rolled carbon, stainless and electrical steel products,
primarily for the automotive, infrastructure and manufacturing,
including electrical power, and distributors and converters
markets. Through its subsidiaries, the company also provides
customer solutions with carbon and stainless steel tubing products,
die design and tooling, and hot- and cold-stamped components.
Headquartered in West Chester, Ohio (Greater Cincinnati), the
company has approximately 9,200 employees at manufacturing
operations in the United States, Canada and Mexico, and facilities
in Western Europe. Additional information about AK Steel is
available at www.aksteel.com.
Forward-Looking StatementsCertain statements
made or incorporated by reference in this earnings release reflect
management’s estimates and beliefs and are intended to be
“forward-looking statements” identified in the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Words such as “expects,” “anticipates,” “believes,”
“intends,” “plans,” “estimates” and other similar references to
future periods typically identify forward-looking statements.
The company cautions readers that forward-looking statements
reflect the company’s current beliefs and judgments, but are not
guarantees of future performance or outcomes. They are based
on a number of assumptions and estimates that are inherently
affected by economic, competitive, regulatory, and operational
risks, uncertainties and contingencies that are beyond the
company’s control, and upon assumptions about future business
decisions and conditions that may change.
Forward-looking statements are only predictions and involve
risks and uncertainties, resulting in the possibility that actual
events or performance will differ materially from such predictions
as a result of certain risk factors. Such factors that could
cause the company’s actual results and financial condition to
differ materially from the results contemplated by such
forward-looking statements include reduced selling prices,
shipments and profits associated with a highly competitive and
cyclical industry; domestic and global steel overcapacity; risks
related to U.S. government actions on Section 232 and 301, NAFTA
and/or other trade agreements, treaties or policies; changes in the
cost of raw materials, supplies and energy; the company’s
significant amount of debt and other obligations; severe financial
hardship or bankruptcy of one or more of the company’s major
customers or key suppliers; the company’s significant proportion of
sales to the automotive market; reduced demand in key product
markets due to competition from aluminum or other alternatives to
steel; excess inventory of raw materials; supply chain disruptions
or poor quality of raw materials or supplies; production disruption
or reduced production levels; the company’s healthcare and pension
obligations; not reaching new labor agreements on a timely basis;
major litigation, arbitrations, environmental issues and other
contingencies; regulatory compliance and changes; climate change
and greenhouse gas emissions; conditions in the financial, credit,
capital and banking markets; the company’s use of derivative
contracts to hedge commodity pricing volatility; potential
permanent idling of facilities; inability to fully realize benefits
of margin enhancement initiatives; information technology security
threats, cybercrime and exposure of private information; the
company’s failure to achieve expected benefits of the Precision
Partners acquisition and/or to integrate Precision Partners
successfully; and changes in tax laws and regulations; as well as
those risks and uncertainties discussed in more detail in the
company’s Annual Report on Form 10-K for the year ended
December 31, 2017, and its subsequent Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K filed with or furnished
to the Securities and Exchange Commission. As such, the
company cautions readers not to place undue reliance on
forward-looking statements, which speak only to the company’s
plans, assumptions and expectations as of the date hereof.
The company undertakes no obligation to publicly update any
forward-looking statement, except as required by law.
|
AK STEEL HOLDING
CORPORATION |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
(Unaudited) |
(Dollars and shares in millions,
except per share and per ton data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Flat-rolled steel shipments (000 tons) |
|
1,424.0 |
|
|
1,368.6 |
|
|
4,294.7 |
|
|
4,259.1 |
|
Selling price per flat-rolled steel ton |
|
$ |
1,114 |
|
|
$ |
1,021 |
|
|
$ |
1,087 |
|
|
$ |
1,022 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,735.6 |
|
|
$ |
1,494.3 |
|
|
$ |
5,141.1 |
|
|
$ |
4,584.9 |
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
1,486.2 |
|
|
1,301.8 |
|
|
4,462.6 |
|
|
3,898.7 |
|
Selling and administrative expenses |
|
79.6 |
|
|
68.2 |
|
|
235.8 |
|
|
205.5 |
|
Depreciation |
|
55.0 |
|
|
58.0 |
|
|
164.8 |
|
|
168.2 |
|
Total operating costs |
|
1,620.8 |
|
|
1,428.0 |
|
|
4,863.2 |
|
|
4,272.4 |
|
Operating profit |
|
114.8 |
|
|
66.3 |
|
|
277.9 |
|
|
312.5 |
|
Interest expense |
|
37.8 |
|
|
37.5 |
|
|
113.3 |
|
|
115.1 |
|
Pension and OPEB (income) expense |
|
(10.0 |
) |
|
(18.1 |
) |
|
(30.0 |
) |
|
(54.3 |
) |
Other (income) expense |
|
0.7 |
|
|
7.8 |
|
|
(3.4 |
) |
|
19.2 |
|
Income before income taxes |
|
86.3 |
|
|
39.1 |
|
|
198.0 |
|
|
232.5 |
|
Income tax expense (benefit) |
|
1.4 |
|
|
(0.3 |
) |
|
(4.0 |
) |
|
0.1 |
|
Net income |
|
84.9 |
|
|
39.4 |
|
|
202.0 |
|
|
232.4 |
|
Less: Net income attributable to noncontrolling interests |
|
17.7 |
|
|
17.1 |
|
|
49.5 |
|
|
48.5 |
|
Net income attributable to AK Steel Holding
Corporation |
|
$ |
67.2 |
|
|
$ |
22.3 |
|
|
$ |
152.5 |
|
|
$ |
183.9 |
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to AK Steel Holding
Corporation: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.21 |
|
|
$ |
0.07 |
|
|
$ |
0.48 |
|
|
$ |
0.58 |
|
Diluted |
|
$ |
0.21 |
|
|
$ |
0.07 |
|
|
$ |
0.48 |
|
|
$ |
0.57 |
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
314.9 |
|
|
314.3 |
|
|
314.8 |
|
|
314.2 |
|
Diluted |
|
316.0 |
|
|
316.7 |
|
|
315.8 |
|
|
321.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AK STEEL HOLDING
CORPORATION |
CONSOLIDATED BALANCE
SHEETS |
(Unaudited) |
(Dollars in millions, except per
share amounts) |
|
|
|
|
|
|
|
September 30,
2018 |
|
December 31,
2017 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
47.3 |
|
|
$ |
38.0 |
|
Accounts receivable, net |
|
700.7 |
|
|
517.8 |
|
Inventory |
|
1,345.5 |
|
|
1,385.0 |
|
Other current assets |
|
78.9 |
|
|
130.3 |
|
Total current assets |
|
2,172.4 |
|
|
2,071.1 |
|
Property, plant and equipment |
|
6,916.1 |
|
|
6,831.8 |
|
Accumulated depreciation |
|
(5,007.0 |
) |
|
(4,845.6 |
) |
Property, plant and equipment, net |
|
1,909.1 |
|
|
1,986.2 |
|
Other non-current assets |
|
406.4 |
|
|
417.5 |
|
TOTAL ASSETS |
|
$ |
4,487.9 |
|
|
$ |
4,474.8 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
773.6 |
|
|
$ |
690.4 |
|
Accrued liabilities |
|
257.3 |
|
|
270.5 |
|
Current portion of pension and other postretirement
benefit obligations |
|
38.8 |
|
|
40.1 |
|
Total current liabilities |
|
1,069.7 |
|
|
1,001.0 |
|
Non-current liabilities: |
|
|
|
|
Long-term debt |
|
2,034.9 |
|
|
2,110.1 |
|
Pension and other postretirement benefit
obligations |
|
797.5 |
|
|
894.2 |
|
Other non-current liabilities |
|
148.0 |
|
|
168.9 |
|
TOTAL LIABILITIES |
|
4,050.1 |
|
|
4,174.2 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Common stock, authorized 450,000,000 shares of $0.01
par value each; issued 316,569,578 and 315,782,764 shares in 2018
and 2017; outstanding 315,510,490 and 314,884,569 shares in 2018
and 2017 |
|
3.2 |
|
|
3.2 |
|
Additional paid-in capital |
|
2,893.3 |
|
|
2,884.8 |
|
Treasury stock, common shares at cost, 1,059,088 and
898,195 shares in 2018 and 2017 |
|
(6.4 |
) |
|
(5.4 |
) |
Accumulated deficit |
|
(2,725.3 |
) |
|
(2,877.0 |
) |
Accumulated other comprehensive loss |
|
(67.7 |
) |
|
(50.2 |
) |
Total stockholders’ equity (deficit) |
|
97.1 |
|
|
(44.6 |
) |
Noncontrolling interests |
|
340.7 |
|
|
345.2 |
|
TOTAL EQUITY |
|
437.8 |
|
|
300.6 |
|
TOTAL LIABILITIES AND EQUITY |
|
$ |
4,487.9 |
|
|
$ |
4,474.8 |
|
|
|
|
|
|
|
|
|
|
|
AK STEEL HOLDING
CORPORATION |
CONSOLIDATED STATEMENTS OF
CASH FLOWS |
(Unaudited) |
(Dollars in millions) |
|
|
|
|
|
Nine Months EndedSeptember
30, |
|
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
|
Net income |
|
$ |
202.0 |
|
|
$ |
232.4 |
|
Depreciation |
|
153.3 |
|
|
155.8 |
|
Depreciation—SunCoke Middletown |
|
11.5 |
|
|
12.4 |
|
Amortization |
|
24.5 |
|
|
17.9 |
|
Deferred income taxes |
|
(6.3 |
) |
|
4.9 |
|
Pension and OPEB expense (income) |
|
(24.2 |
) |
|
(48.6 |
) |
Contributions to pension trust |
|
(40.7 |
) |
|
(38.1 |
) |
Other postretirement benefit payments |
|
(28.5 |
) |
|
(30.0 |
) |
Changes in working capital |
|
(11.1 |
) |
|
(156.2 |
) |
Other operating items, net |
|
(30.6 |
) |
|
3.5 |
|
Net cash flows from operating activities |
|
249.9 |
|
|
154.0 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Capital investments |
|
(101.1 |
) |
|
(88.7 |
) |
Investment in acquired business, net of cash
acquired |
|
— |
|
|
(360.9 |
) |
Other investing items, net |
|
0.2 |
|
|
4.2 |
|
Net cash flows from investing activities |
|
(100.9 |
) |
|
(445.4 |
) |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Net borrowings (payments) under credit facility |
|
(85.0 |
) |
|
415.0 |
|
Proceeds from issuance of long-term debt |
|
— |
|
|
680.0 |
|
Redemption of long-term debt |
|
— |
|
|
(821.8 |
) |
Debt issuance costs |
|
— |
|
|
(25.0 |
) |
SunCoke Middletown distributions to noncontrolling
interest owners |
|
(54.0 |
) |
|
(58.2 |
) |
Other financing items, net |
|
(0.7 |
) |
|
(2.5 |
) |
Net cash flows from financing activities |
|
(139.7 |
) |
|
187.5 |
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
9.3 |
|
|
(103.9 |
) |
Cash and cash equivalents, beginning of period |
|
38.0 |
|
|
173.2 |
|
Cash and cash equivalents, end of period |
|
$ |
47.3 |
|
|
$ |
69.3 |
|
|
|
|
|
|
|
|
|
|
AK STEEL HOLDING
CORPORATIONNON-GAAP FINANCIAL
MEASURES(Unaudited)(Dollars in millions)
In certain of its disclosures in this news release, the company
has reported adjusted EBITDA and EBITDA margin that exclude the
effects of noncontrolling interests. EBITDA is an acronym for
earnings before interest, taxes, depreciation and
amortization. It is a metric that is sometimes used to
compare the results of different companies by removing the effects
of different factors that might otherwise make comparisons
inaccurate or inappropriate. For purposes of this news
release, the company has made adjustments to EBITDA to exclude the
effect of noncontrolling interests. The adjusted results,
although not financial measures under generally accepted accounting
principles (“GAAP”) and not identically applied by other companies,
facilitate the ability to analyze the company’s financial results
in relation to those of its competitors and to the company’s prior
financial performance by excluding items that otherwise would
distort the comparison. Adjusted EBITDA and adjusted
EBITDA margin are not, however, intended as alternative measures of
operating results or cash flow from operations as determined in
accordance with GAAP and are not necessarily comparable to
similarly titled measures used by other companies.
Neither current nor potential investors in the company’s
securities should rely on adjusted EBITDA or adjusted EBITDA margin
as a substitute for any GAAP financial measure and the company
encourages current and potential investors to review the following
reconciliation of adjusted EBITDA.
Reconciliation of Adjusted
EBITDA
|
|
|
|
|
(dollars in millions, except per ton) |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
income attributable to AK Steel Holding |
|
$ |
67.2 |
|
|
$ |
22.3 |
|
|
$ |
152.5 |
|
|
$ |
183.9 |
|
Net
income attributable to noncontrolling interests |
|
17.7 |
|
|
17.1 |
|
|
49.5 |
|
|
48.5 |
|
Income tax expense (benefit) |
|
1.4 |
|
|
(0.3 |
) |
|
(4.0 |
) |
|
0.1 |
|
Interest expense |
|
37.8 |
|
|
37.5 |
|
|
113.3 |
|
|
115.1 |
|
Interest income |
|
(0.2 |
) |
|
(0.5 |
) |
|
(0.6 |
) |
|
(1.3 |
) |
Depreciation |
|
55.0 |
|
|
58.0 |
|
|
164.8 |
|
|
168.2 |
|
Amortization |
|
3.4 |
|
|
2.8 |
|
|
13.5 |
|
|
7.6 |
|
EBITDA |
|
182.3 |
|
|
136.9 |
|
|
489.0 |
|
|
522.1 |
|
Less: EBITDA of noncontrolling interests (a) |
|
21.5 |
|
|
21.1 |
|
|
61.1 |
|
|
61.0 |
|
Adjusted EBITDA |
|
$ |
160.8 |
|
|
$ |
115.8 |
|
|
$ |
427.9 |
|
|
$ |
461.1 |
|
Adjusted EBITDA margin |
|
9.3 |
% |
|
7.7 |
% |
|
8.3 |
% |
|
10.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
The reconciliation of net income attributable to noncontrolling
interests to EBITDA of noncontrolling interests is as follows:
|
|
|
|
|
(dollars in millions) |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income attributable to noncontrolling interests |
|
$ |
17.7 |
|
|
$ |
17.1 |
|
|
$ |
49.5 |
|
|
$ |
48.5 |
|
Depreciation |
|
3.8 |
|
|
4.0 |
|
|
11.6 |
|
|
12.5 |
|
EBITDA of noncontrolling interests |
|
$ |
21.5 |
|
|
$ |
21.1 |
|
|
$ |
61.1 |
|
|
$ |
61.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AK STEEL HOLDING
CORPORATION |
FLAT-ROLLED STEEL
SHIPMENTS |
(Unaudited) |
(Tons in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
EndedSeptember 30, |
|
Nine Months
EndedSeptember 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Tons Shipped by Product |
|
|
|
|
|
|
|
|
Stainless/electrical |
|
206.6 |
|
|
197.1 |
|
|
628.8 |
|
|
617.5 |
|
Coated |
|
720.0 |
|
|
726.8 |
|
|
2,175.8 |
|
|
2,269.9 |
|
Cold-rolled |
|
264.3 |
|
|
244.1 |
|
|
816.4 |
|
|
732.0 |
|
Hot-rolled |
|
192.4 |
|
|
164.9 |
|
|
554.8 |
|
|
527.3 |
|
Other |
|
40.7 |
|
|
35.7 |
|
|
118.9 |
|
|
112.4 |
|
Total shipments |
|
1,424.0 |
|
|
1,368.6 |
|
|
4,294.7 |
|
|
4,259.1 |
|
|
|
|
|
|
|
|
|
|
Shipments by Product (%) |
|
|
|
|
|
|
|
|
Stainless/electrical |
|
15 |
% |
|
14 |
% |
|
15 |
% |
|
14 |
% |
Coated |
|
50 |
% |
|
53 |
% |
|
50 |
% |
|
53 |
% |
Cold-rolled |
|
19 |
% |
|
18 |
% |
|
19 |
% |
|
17 |
% |
Hot-rolled |
|
13 |
% |
|
12 |
% |
|
13 |
% |
|
13 |
% |
Other |
|
3 |
% |
|
3 |
% |
|
3 |
% |
|
3 |
% |
Total shipments |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:Media – Lisa H. Jester,
Corporate Manager, Communications and Public Relations (513)
425-2510Investors – Douglas O. Mitterholzer, General Manager,
Investor Relations (513) 425-5215
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