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AK Steel Holding Corp. Reports Operating Results (10-Q)

November 01, 2010 | About:
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10qk

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AK Steel Holding Corp. (AKS) filed Quarterly Report for the period ended 2010-09-30.

Ak Steel Holding Corp. has a market cap of $1.38 billion; its shares were traded at around $12.59 with a P/E ratio of 12 and P/S ratio of 0.3. The dividend yield of Ak Steel Holding Corp. stocks is 1.7%.AKS is in the portfolios of Paul Tudor Jones of The Tudor Group, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

In the ordinary course of business, the Company s primary areas of market risk include changes in (a) interest rates, (b) the prices of raw materials and energy sources, and (c) foreign currency exchange rates. The Company manages interest rate risk by issuing variable- and fixed-rate debt, and currently has $400.0 in principal amount of fixed-rate debt and $102.5 of variable-rate debt outstanding, totaling $502.5. The fair value of this debt as of September 30, 2010, was $512.5. A reduction in prevailing interest rates or improvement in the Company s credit rating could increase the fair value of this debt. A 1% reduction in the rate used to discount total future principal and interest payments would result in an increase in the total fair value of the Company s long-term debt of approximately $49.1. An unfavorable effect on the Company s financial results and cash flows from exposure to interest rate declines and a corresponding increase in the fair value of its debt would result only if the Company elected to repurchase its outstanding debt securities at prevailing market prices.

For derivatives designated in cash flow hedge relationships, the effective portion of the gains and losses from the use of these instruments for natural gas and electricity are deferred in accumulated other comprehensive income on the Condensed Consolidated Balance Sheets and recognized into cost of products sold in the same period as the earnings recognition of the associated underlying transaction. At September 30, 2010, accumulated other comprehensive income included $11.6 in unrealized net-of-tax losses for the fair value of these derivative instruments. All other commodity price swaps and options are marked to market and recognized into cost of products sold with the offset recognized as other current assets or other accrued liabilities. At September 30, 2010, other current assets of $1.5, accrued liabilities of $15.4 and other non-current liabilities of $0.2 were included on the Condensed Consolidated Balance Sheets for the fair value of these commodity hedges. The following table presents the negative effect on pre-tax income of a hypothetical change in the fair value of derivative instruments outstanding at September 30, 2010, due to an assumed 10% and 25% decrease in the market price of each of the indicated commodities.

The Company is also subject to risks of exchange rate fluctuations on a small portion of intercompany receivables that are denominated in foreign currencies. The Company occasionally uses forward currency contracts to manage exposures to certain of these currency price fluctuations. At September 30, 2010, the Company had outstanding forward currency contracts with a total notional value of $30.0 for the sale of euros. The Company marks to market the value of these contracts. At September 30, 2010, accrued liabilities of $2.1 were included on the Condensed Consolidated Balance Sheets for the fair value of these contracts. Based on the contracts outstanding at September 30, 2010, a 10% change in the dollar to euro exchange rate would result in an approximate $3.0 pretax impact on the value of these contracts on a mark to market basis, which would offset the income benefit of a more favorable exchange rate.

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10qk
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