WEST CHESTER, Ohio,
Dec. 17, 2014 /PRNewswire/ -- AK
Steel (NYSE: AKS) today provided guidance for its fourth quarter
2014 financial results. AK Steel said that, despite incurring
approximately $31 million in costs
associated with a planned Ashland Works blast furnace outage, it
expects to report higher EBITDA (earnings before interest, taxes,
depreciation and amortization) compared to the third quarter of
2014 and net income of $0.05 to $0.10
per diluted share of common stock, excluding the effects of
acquisition-related expenses pertaining to its recent purchase of
Severstal Dearborn.
Shipments
For the fourth quarter of 2014, the company expects shipments of
approximately 2,000,000 tons, an increase of about 37% from the
1,462,900 tons shipped in the third quarter of 2014. The
anticipated higher level of shipments in the fourth quarter is
mostly due to the acquisition of Dearborn Works and continued
strong demand from the automotive market.
Pricing
The company expects its average selling price for the fourth
quarter of 2014 to be approximately $980 per ton, about 10% less than the third
quarter of 2014 average selling price of $1,089 per ton. The anticipated decrease in
the company's overall average selling price is primarily due to a
higher percentage of product shipments to the carbon spot market in
the fourth quarter compared to the third quarter, principally due
to the higher mix of hot-rolled coil shipments from Dearborn Works,
as well as a general reduction in spot market pricing.
Ashland Works Blast Furnace Planned Outage
As previously disclosed, the company took a planned outage at
its Ashland Works blast furnace beginning in October 2014. The planned outage, which
included a reline of the blast furnace hearth, was originally
scheduled for 28 days but was completed in 27 days. The
outage included capital investments of approximately $19 million and approximately $31 million of costs associated with the planned
outage itself and reduced production levels at Ashland Works in the
period prior to the outage. The company took steps in advance
of the outage to minimize the potential impact on its customers,
including purchasing additional carbon slabs and building inventory
through increased production at other AK Steel manufacturing
locations.
The company believes that the reline of the blast furnace hearth
will position it well to provide stable blast furnace operations in
the future by allowing the company to avoid the unplanned
disruptions that have occurred throughout 2014. In addition,
the company expects this investment to reduce the company's future
production costs by returning the Ashland Works blast furnace to
normal operating levels and allow the company to better serve its
customers in the future.
Lower Raw Material and Energy Costs
The company expects to benefit from substantially lower iron
ore, carbon scrap and energy costs in the fourth quarter compared
to the prior quarter.
Pension and Other Postemployment Benefit Obligations
The company recognizes into its net income, as a "corridor"
adjustment, any unrecognized actuarial net gains and losses that
exceed 10% of the larger of projected benefit obligations or plan
assets. The effect of prevailing interest rates on the
discount rate used to value projected plan obligations as of the
end of the year and the actual return on plan assets compared to
the expected return are important factors in determining if the
company may be required to record a corridor adjustment in the
fourth quarter. In addition, the Society of Actuaries issued
new mortality tables in October 2014
that the company anticipates will significantly increase the
estimate of its pension and postemployment benefit obligations.
The new mortality tables increase the assumed life expectancy
of participants in the company's benefit plans, thereby increasing
the total expected benefit payments over a longer time horizon.
The adoption of the new mortality tables, as well as the
effects of interest rates and asset returns, may result in a net
increase in unrecognized losses that exceed the corridor as
described above. At this time, the company is unable to
determine whether it will need to record a corridor adjustment gain
or loss in the fourth quarter.
Income Taxes
The company said that it expects to record income tax expense of
approximately $4 million for the
fourth quarter of 2014 using the discrete method of accounting for
income taxes. This includes an expected income tax expense of
approximately $6 million of
acquisition-related changes in the value of deferred tax
assets. The acquisition-related income tax expense is
excluded from the earnings per share guidance above.
Forward-Looking Statements
The statements in this release with respect to future results
reflect management's estimates and beliefs and are intended to be,
and hereby are identified as "forward-looking statements" for
purposes of 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 such
forward-looking statements.
The company cautions readers that such forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those currently expected by
management, including that Dearborn will not be integrated
successfully into AK Steel following the consummation of the
acquisition; and that cost savings, synergies, accretion to
earnings, increased shipments and other anticipated benefits and
opportunities from the acquisition may not be fully realized or may
take longer to realize than expected. In addition, our
results and financial condition and any benefits from the
acquisition could be adversely affected by reduced selling prices,
shipments and profits associated with a highly competitive industry
with excess capacity; changes in the cost of raw materials 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; reduced demand in key product
markets due to competition from alternatives to steel or other
factors; increased global steel production and imports; excess
inventory of raw materials; supply chain disruptions or poor
quality of raw materials; production disruption or reduced
production levels; the company's healthcare and pension
obligations; not timely reaching new labor agreements; major
litigation, arbitrations, environmental issues and other
contingencies; regulatory compliance and changes; climate change
and greenhouse gas emission limitations; conditions in the
financial, credit, capital and banking markets; the company's use
of derivative contracts to hedge commodity pricing volatility; the
value of the company's net deferred tax assets; inability to fully
realize benefits of long-term cost savings and margin enhancement
initiatives; lower quantities, quality or yield of estimated coal
reserves of AK Coal Resources, Inc.; increased governmental
regulation of mining activities; inability to hire or retain
skilled labor and experienced manufacturing and mining managers;
and IT security threats and sophisticated cybercrime; as well as
those risks and uncertainties discussed in the company's Annual
Report on Form 10-K for the year ended December 31, 2013, as updated in subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed with or furnished to the Securities and Exchange Commission.
Except as required by law, the company disclaims any
obligation to update any forward-looking statements to reflect
future developments or events.
AK Steel
AK Steel is a world leader in the production of flat-rolled carbon,
stainless and electrical steel products, primarily for automotive,
infrastructure and manufacturing, construction and electrical power
generation and distribution markets. Headquartered in
West Chester, Ohio (Greater Cincinnati), the company employs
approximately 8,000 men and women at eight steel plants, two coke
plants and two tube manufacturing plants across six states:
Indiana, Kentucky,
Michigan, Ohio, Pennsylvania and West Virginia. The company also has
interests in iron ore through its Magnetation LLC joint venture and
in metallurgical coal through its AK Coal Resources, Inc.
subsidiary. Additional information about AK Steel is
available at www.aksteel.com.
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SOURCE AK Steel