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AK Steel Holding Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 27, 2010 01:34PM
AK Steel Holding Corp. (AKS) filed Quarterly Report for the period ended 2010-03-31.
Highlight of Business Operations:
For the three months ended March 31, 2010, net sales were $1,405.7, reflecting an approximate 52% increase from first quarter 2009 net sales of $922.2. Net sales to customers outside the United States totaled $197.8 and $180.2 during the first three months of 2010 and 2009, respectively. A substantial majority of the revenue outside of the United States is associated with electrical and, to a lesser extent, stainless steel products. The Company s average selling price for the first quarter of 2010 was $1,014 per ton, an approximate 14% reduction from the Company s first quarter 2009 average selling price of $1,184 per ton. The increase in net sales reflected increased demand for virtually all steel products, particularly in the spot and automotive markets, following the worst global economic conditions in decades. The decrease in average selling prices was primarily the result of a change in product and market mix, including higher hot-rolled shipments and somewhat lower electrical steel shipments.
As a result of the various factors and conditions described above, the Company reported net income in the three months ended March 31, 2010, of $1.9, or $0.02 per diluted share, compared to a net loss of $73.4, or $0.67 per diluted share, in the first quarter of 2009.
The Company continued its strong and stable liquidity position in the first quarter, with a total liquidity of over one billion dollars. At March 31, 2010, the Company had total liquidity of $1,027.7, consisting of $330.2 of cash and cash equivalents and $697.5 of availability under the Company s $850.0 five-year revolving credit facility (the “Credit Facility”). At March 31, 2010, there were no outstanding borrowings under the Credit Facility; however, availability was reduced by $152.5 due to outstanding letters of credit. The Company s Credit Facility is secured by its inventory and accounts receivable. Availability under the Credit Facility can fluctuate monthly based on the varying levels of eligible collateral. The Company s eligible collateral, after application of applicable advance rates, exceeded $850.0 as of March 31, 2010.
Cash used by operations totaled $107.2 for the three months ended March 31, 2010. Primary uses of cash were a $75.0 pension contribution, a $65.0 contribution to a VEBA Trust established for Middletown Works retirees and an increase in working capital of $47.1. The increase in working capital resulted primarily from higher accounts receivable attributable to the increased level of sales revenue. Also contributing to the increase in working capital was an increase in inventories, as a result of both higher raw material costs and a higher level of inventories. An increase in accounts payable partially offset the use of cash due to a higher level of business activity.
As previously noted, the Company made a pension contribution of $75.0 during the first quarter of 2010. The Company also has announced plans to make an additional pension contribution of $35.0 by the end of the second quarter of 2010. Total pension contributions of $110.0 will satisfy the Company s required annual pension contributions for 2010 and will increase the Company s total pension fund contributions since 2005 to over $1.1 billion. Currently, the Company estimates required annual pension contributions for 2011 and 2012 to be approximately $275.0 each year. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants, and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.
During the three months ended March 31, 2010, cash used by financing activities netted $7.4. This includes the purchase of $7.5 of the Company s common stock primarily to satisfy federal, state and local taxes due upon the vesting of restricted stock, and the payment of common stock dividends in the amount of $5.5, and an offset of $2.3 in advances from noncontrolling interest owner SunCoke to Middletown Coke.
Stocks Discussed: AKS,