AK Steel Holding Corp. (AKS) filed Quarterly Report for the period ended 2009-09-30.
AK Steel produces flat-rolled carbon stainless and electrical steel products as well as carbon and stainless tubular steel products for automotive appliance construction and manufacturing markets. AK Steel maintains a relentless pursuit of improvement in every critical performance measure. The result is a track record without equal. Ak Steel Holding Corp. has a market cap of $1.7 billion; its shares were traded at around $15.51 with and P/S ratio of 0.2. The dividend yield of Ak Steel Holding Corp. stocks is 1.3%. Ak Steel Holding Corp. had an annual average earning growth of 14.9% over the past 5 years.
Highlight of Business Operations:
For the three months ended September 30, 2009, net sales were $1,041.1, reflecting an approximate 52% decrease from third quarter 2008 net sales of $2,157.6. On a positive note, such sales represented an approximate 31% increase from second quarter 2009 net sales of $793.6. Net sales during the first nine months of 2009 and 2008 were $2,756.9 and $6,185.6, respectively. The 2009 decrease in net sales compared to the same periods in 2008 was caused by weak demand for all steel products, particularly in the automotive market, resulting from the worst global economic conditions in decades. The increase in net sales for the third quarter of 2009 compared to the second quarter of 2009 was the result of increased carbon shipments, principally to the automotive and distributors and converters markets. Net sales to customers outside the United States for the three- and nine-month periods ended September 30, 2009 totaled $194.0 and $564.9, respectively, compared to the three- and nine-month periods ended September 30, 2008 totaling $349.3 and $1,004.6, 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 third quarter of 2009 was $994 per ton, a reduction of approximately 32% from the Company s third quarter 2008 average selling price of $1,462 per ton and a 7% decrease from the second quarter 2009 average selling price of $1,072 per ton. The decrease in average selling price in the third quarter of 2009 versus the third quarter of 2008 was primarily due to lower prices in the spot market and lower surcharges on many of the Company s products. The lower average selling price in the third quarter of 2009 versus the second quarter of 2009 was primarily the result of an increase in carbon shipments.
The Company expects shipments in the fourth quarter of 2009 to be approximately 1,300,000 tons, reflecting an increase of nearly 24% over third quarter 2009 shipments. This increase is the result of anticipated increased shipments in carbon steel products, principally due to improved automotive demand as the domestic automotive companies rebuild depleted inventories during the fourth quarter. The Company anticipates its average per-ton selling price to decline approximately 2% compared to the third quarter of 2009 level. The expected decline in the average selling price is due to an anticipated higher percentage of carbon steel shipments relative to stainless and electrical shipments in the fourth quarter as compared to the third quarter. The Company also anticipates that maintenance costs will be approximately $10.0 higher compared to the third quarter as a result of maintenance work at the Company s Middletown Works blast furnace and Ashland Works basic oxygen furnace. The Company expects to benefit from lower operating costs and lower raw material costs, primarily related to iron ore, in the fourth quarter compared to the third quarter. Based on these factors, the Company currently expects to earn an operating profit of between $30 and $35 per ton for the fourth quarter of 2009. The Company expects to incur a non-cash charge of approximately $5.0, or $0.05 per share of common stock, primarily as the result of a decrease in the value of the Company s deferred tax assets as the result of state tax law changes.
The Company continued its strong and stable liquidity position in the third quarter, with a total liquidity of over one billion dollars. At September 30, 2009, the Company had total liquidity of $1,052.0, consisting of $339.5 of cash and cash equivalents and $712.5 of availability under the Company s $850.0 five-year revolving credit facility. At September 30, 2009, there were no outstanding borrowings under the credit facility; however, availability was reduced by $137.5 due to outstanding letters of credit. The Company s obligation under its credit facility is secured by its inventory and accounts receivable. Thus, availability also may be reduced by a decline in the level of eligible collateral, which can fluctuate monthly under the terms of the credit facility. The Company s eligible collateral, after application of applicable advance rates, exceeded $850.0 as of September 30, 2009.
During the first nine months of 2009, the Company made pension contributions totaling $210.0. The third-quarter pension contribution of $110.0 was approximately double the $55.0 that was required for the balance of 2009 and is expected to reduce the Company s 2010 contribution obligation. The additional contribution brought the total 2009 pension contributions to $210.0 and increased the Company s total pension fund contributions since 2005 to over $1.0 billion. Currently, the Company estimates required annual pension contributions for 2010 to be approximately $105.0 and for 2011 to be approximately $280.0. 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 nine months ended September 30, 2009, cash used by financing activities totaled $24.4. This includes $23.3 relating principally to the repurchase of a portion of the Company s debt obligations, the purchase of $11.4 of the Company s common stock primarily related to the Company s share repurchase program, and the payment of common stock dividends in the amount of $16.5. Cash used was offset by $25.3 in advances from minority interest owner SunCoke to Middletown Coke.
The payment of cash dividends is subject to a restrictive covenant contained in the instruments governing most of the Company s outstanding senior debt. The covenant allows the payment of dividends, if declared by the Board of Directors, and the redemption or purchase of shares of its outstanding capital stock, subject to a formula that reflects cumulative net earnings. As of September 30, 2009, the limitation on these restricted payments is $58.6. Restrictive covenants also are contained in the instruments governing the Company s $850.0 asset-based revolving credit facility. Under the credit facility covenants, dividends and share repurchases are not restricted unless availability falls below $150.0, at which point dividends would be limited to $12.0 annually and share repurchases would be prohibited. As of September 30, 2009, the availability under the asset-based revolving credit facility of $712.5 significantly exceeds $150.0. Accordingly, none of the covenants currently prevent the Company from declaring and paying a dividend to its stockholders.
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