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AK Steel Holding Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 27, 2012 04:44PM
AK Steel Holding Corp. (AKS) filed Quarterly Report for the period ended 2012-03-31. Ak Steel Hldg has a market cap of $833.7 million; its shares were traded at around $7.27 with a P/E ratio of 44.3 and P/S ratio of 0.1. The dividend yield of Ak Steel Hldg stocks is 2.7%.
Highlight of Business Operations:During the first quarter of 2012, the Company took several actions to increase liquidity. In February 2012, AK Steel refinanced (the “IRB Refinancing”) $73.3 aggregate principal amount of variable-rate tax-exempt industrial revenue bonds (“IRBs”) by issuing fixed-rate tax-exempt IRBs in the same respective aggregate principal amounts as the prior IRBs. The prior IRBs were backed by letters of credit, which had the effect of lowering availability under the Credit Facility and, accordingly, the Company s liquidity. The new IRBs are not backed by letters of credit and thus the Company s available credit under the Credit Facility increased as a result of the IRB Refinancing. In March 2012, AK Steel issued $300.0 of 8.375% Senior Notes due 2022 (the “2022 Notes”). The issuance generated net proceeds of $293.0 after underwriting discounts and commissions and other fees. The Company used the proceeds from the 2022 Notes to repay outstanding borrowings under the Credit Facility. As a result of these actions, the Company's total liquidity increased from $558.7 as of December 31, 2011 to $882.9 as of March 31, 2012, consisting of $42.3 of cash and cash equivalents and $840.6 of availability under the Company's Credit Facility.
With respect to a year-over-year comparison of the financial results, in the first quarter of 2012, the Company experienced a decline in revenue of approximately 5% from the first quarter of 2011. This was principally attributable to a decline in shipments compared to the first quarter of 2011, partly offset by an increase of approximately 3% in the average selling price for the Company's products from the first quarter of 2011. In addition, cost performance remained a challenge, principally because certain of the Company's steelmaking raw material costs were higher in the first quarter of 2012 compared to the same period in 2011.
Total shipments were 1,325,900 tons and 1,423,100 tons for the three months ended March 31, 2012 and 2011, respectively. The decline in total shipments in the first quarter of 2012 compared to the prior year was attributable principally to the effects on certain products of lower demand, unfavorable spot market pricing and inventory constraints. For the three months ended March 31, 2012, value-added products comprised 84.5% of total shipments compared to 86.1% for the three months ended March 31, 2011. The Company continued to focus on maximizing profitability through product mix adjustments based on current and projected market demands—both domestically and internationally. The following table presents net shipments by product line:
For the three months ended March 31, 2012, net sales were $1,508.7, a 5% decrease from net sales of $1,581.1 for the three months ended March 31, 2011. The Company s average selling price for the three months ended March 31, 2012 was $1,138 per ton, an increase of approximately 3% from the Company s average selling price of $1,109 per ton for the three months ended March 31, 2011. The higher average selling price for first quarter 2012 over first quarter 2011 was driven principally by a richer product mix, increased contract sales and higher prices for certain products. Net sales to customers outside the United States for the three months ended March 31, 2012 and 2011, totaled $225.2 and $218.0, respectively.
The Company reported an operating profit of $4.1, or $3 per ton, in the three months ended March 31, 2012. This result compares to an operating profit of $19.5, or $14 per ton, in the three months ended March 31, 2011. For the three months ended March 31, 2012, the Company benefited from year-over-year increases in its average selling price. However, during that same period, the Company also experienced lower sales volumes and higher iron ore and other raw material costs that could not be fully recovered through price increases or surcharges.
Stocks Discussed: AKS,