AK Steel Reports Financial Results For Third Quarter of 2015
“I am pleased that AK Steel delivered solid third quarter 2015 financial results. Despite facing the continued onslaught of what we believe are unfairly traded carbon steel imports, we experienced our best quarterly financial performance in nearly six years,” said James L. Wainscott, Chairman, President and CEO. “The company achieved more than double its adjusted EBITDA quarter-over-quarter and we ended the third quarter with solid liquidity of $821 million.”
Mr. Wainscott continued, “Our results benefited from a combination of record quarterly automotive shipments, stable operations, and lower raw material costs. We also achieved cost savings from the continued integration of Dearborn Works and from all of our other cost reduction initiatives throughout the company. All in all, it was a great team effort from all of our employees that allowed us to generate a quarterly profit on behalf of our shareholders.”
Net sales for the third quarter of 2015 were $1.71 billion on shipments of 1,871,200 tons, compared to net sales of $1.59 billion on shipments of 1,462,900 tons for the year-ago third quarter and net sales of $1.69 billion on shipments of 1,811,700 tons for the second quarter of 2015. The company’s shipments in the third quarter of 2015 rose from the second quarter of 2015, primarily as a result of increased shipments to the automotive market. The increase in shipments and sales for the third quarter of 2015 compared to the year-ago period was due principally to the addition of shipments from the acquisition of Dearborn Works in September 2014 and continued strong shipments of carbon and stainless steel products to the automotive market.
The company said that its average selling price for the third quarter of 2015 was $912 per ton, down 2% from the second quarter of 2015. The decrease in average selling price was primarily attributable to carbon steel pricing that remained weak in the third quarter, partly offset by higher selling prices for electrical steel. AK Steel believes the substantial decline in carbon steel selling prices is primarily the result of continued high levels of what the company believes are unfairly traded, lower priced foreign steel imports. The lower carbon spot market selling prices, combined with the higher proportion of hot-rolled shipments following the Dearborn Works acquisition, were the primary factors that resulted in a 16% decline in the company’s average selling price for the third quarter of 2015 compared to the third quarter of 2014.
Cost of products sold decreased from the second quarter to the third quarter of 2015 due to better operating costs, higher operating rates and lower costs for carbon scrap, iron ore pellets and coke. Cost of products sold was higher in the third quarter of 2015 as compared to the prior year quarter due to the higher overall sales volume in 2015 reflecting the acquisition of Dearborn Works. The company incurred $11.8 million of costs for planned outages during the third quarter of 2015, compared to $1.1 million in the year-ago third quarter and $18.2 million in the second quarter of 2015.
The Company also continued to make strides in lowering its operating costs during the third quarter. In addition to realizing further cost-based synergies at Dearborn Works, the Company implemented cost reduction efforts and efficiency gains to reduce its production costs across its facilities.
The 2015 third quarter results include a LIFO credit of $44.8 million, compared to a LIFO credit of $10.9 million for the third quarter of 2014 and a LIFO credit of $34.8 million for the second quarter of 2015. Also included in the third quarter of 2014 were acquisition-related expenses of $23.6 million, or $0.17 per diluted share, related to the purchase of Dearborn Works.
During the third quarter, the company repurchased $12.5 million of outstanding senior unsecured notes in private, unsolicited open market transactions and made repayments of $45.0 million on the company’s revolving credit facility. The company ended the third quarter of 2015 with total liquidity of $821.0 million, consisting of cash and cash equivalents and $747.8 million of availability under the company’s revolving credit facility.
Nine-Month Results
For the first nine months of 2015, the company reported a net loss of $363.6 million, or $2.05 per diluted share. Included in the net loss for the first nine months of 2015 was an impairment charge to fully impair the company’s investment in Magnetation LLC, as discussed below. Excluding the one-time impairment charge in the first nine months of 2015, the company reported an adjusted net loss of $107.3 million, or $0.61 per diluted share. For the corresponding nine months of 2014, the company reported a net loss of $110.4 million, or $0.79 per diluted share, and an adjusted net loss of $85.8 million, or $0.61 per diluted share, which excludes acquisition-related expenses of $24.6 million, or $0.18 per diluted share, related to the purchase of Dearborn Works.
Sales for the first nine months of 2015 were $5.2 billion compared to sales of $4.5 billion in the first nine months of 2014. Shipments for the first nine months of 2015 were 5,433,400 tons compared to 4,122,500 tons in the first nine months of 2014. The increases are primarily the result of the acquisition of Dearborn Works, as well as continued strength in the automotive market.
The company said that its average selling price for the first nine months of 2015 was $947 per ton, down from $1,093 per ton for the first nine months of 2014. The decrease in average selling price is primarily attributable to significantly lower carbon steel selling prices in 2015, principally due to a significant increase in what the company believes are unfairly traded foreign steel imports. The effect of the lower selling prices was partially offset by lower costs for carbon scrap, iron ore pellets and energy. The company recorded costs of $43.6 million during the first nine months of 2015 for planned outages, compared to $31.9 million during the first nine months of 2014.
As of March 31, 2015, AK Steel concluded that its 49.9% equity interest in Magnetation, an unconsolidated joint venture that produces iron ore pellets and is accounted for under the equity method, was impaired. The impairment was a result of liquidity issues caused primarily by a significant decline in global iron ore pellet pricing and the negative effect of that decline on Magnetation’s results of operations and cash flows, as well as the longer-term outlook of iron ore pellet pricing and the inability of Magnetation to access additional capital funds. As a result, the company recorded an impairment charge of $256.3 million, or $1.44 per diluted share, in the nine-month period ended September 30, 2015, to fully impair the company’s investment in Magnetation recorded on its consolidated balance sheet. Magnetation’s outstanding indebtedness is non-recourse to AK Steel. The company is not required to make any additional capital contributions or other future investments in Magnetation and has not guaranteed any obligations of Magnetation. AK Steel does not expect to record any further impact in its financial statements from its equity investment in Magnetation.
Results for the first nine months of 2014 were negatively affected by extreme winter weather conditions in early 2014 and incidents at the company’s Ashland (KY) Works blast furnace in the first and third quarters of 2014. Extra costs of approximately $45.0 million were recognized for the first nine months of 2014 for higher energy costs and additional costs for transportation and operations related to weather-delayed deliveries of iron ore pellets. The company incurred unplanned maintenance outage costs of $23.2 million and $41.2 million in the third quarter and first nine months of 2014, respectively, related to incidents at the Ashland Works blast furnace.
Fourth Quarter 2015 Outlook
Consistent with its current practice, the company said that it intends to provide detailed guidance for its fourth quarter 2015 financial results in December. The company anticipates lower carbon steel pricing in the fourth quarter compared to the third quarter, due principally to the high level of low-priced foreign steel that has continued to be imported into the United States during the preliminary stages of the carbon steel trade cases, in addition to recent declines in carbon scrap prices. As a result of these low-priced imports and their impact on the current market environment, the company also expects lower carbon steel spot market shipments in the fourth quarter.
As a result of the continued high levels of imported carbon steel products, on October 16, 2015 the company issued notices under the Worker Adjustment and Retraining Notification (“WARN”) Act to hourly and salaried employees at its Ashland, Kentucky Works that it intends to temporarily idle the blast furnace and related steelmaking operations at that facility. If market conditions do not improve, it is expected that the idling of the affected portions of the facility will begin in mid-December of 2015 and could last more than six months. In this event, the company would record charges for unemployment benefits and other costs to idle the operations in the fourth quarter of 2015 and throughout the idle period.
Under its method of accounting for pension and other postretirement benefit plans, the company recognizes into income, as a fourth quarter adjustment, any unrecognized actuarial gains and losses that exceed 10% of the larger of projected benefit obligations or plan assets (the “corridor”). These corridor charges are driven mainly by changes in assumptions and by events and circumstances beyond the company’s control, primarily changes in interest rates, performance of the financial markets, healthcare cost trends and mortality and retirement experience. It thus is impossible to reliably forecast or predict whether the company will incur corridor charges in any given year or, if it does, what the magnitude of those charges will be. Based upon currently available information and reasonable projections, it is possible that the company could incur a corridor charge in the fourth quarter of 2015, depending on year-end interest rates and pension plan asset values.
Комментарии