Posted on 24 Feb 2020
AK Steel (NYSE: AKS) today reported its financial results for the fourth quarter and full-year 2019.
Fourth Quarter 2019 Highlights
• Fourth quarter 2019 net loss of $53.9 million, or $0.17 per diluted share; adjusted net loss of $35.1 million, or $0.11 per diluted share
• Fourth quarter 2019 adjusted EBITDA of $47.2 million
• Fourth quarter 2019 sales of $1.4 billion
Full-Year 2019 Highlights
• Full-year 2019 net income of $11.2 million, or $0.04 per diluted share; adjusted net income of $107.4 million, or $0.34 per diluted share
• Full-year 2019 adjusted EBITDA of $446.5 million
• Full-year 2019 sales of $6.4 billion
“We operated well in the face of very challenging market conditions during the fourth quarter,” said Roger K. Newport, Chief Executive Officer of AK Steel. “We successfully completed a major planned maintenance outage at our Dearborn Works in October and made significant investments in the blast furnace and steelmaking operations, which will generate substantial recurring cost savings. Also, during the fourth quarter we entered into a merger agreement with Cleveland-Cliffs Inc. We continue to be excited about the value-creation potential of the transaction, which we anticipate will close on March 13, subject to regulatory review and shareholder approval.”
AK Steel reported a net loss of $53.9 million, or $0.17 per diluted share of common stock, for the fourth quarter of 2019. This compared to net income of $33.5 million, or $0.11 per diluted share, for the fourth quarter of 2018. During the fourth quarter of 2019, the company took another major step to de-risk its balance sheet and entered into a $615.6 million pension annuity transaction, bringing total pension obligations transferred through annuity transactions to approximately $1.1 billion since 2016. As a result, the company incurred a non-cash pension settlement charge of $26.9 million, or 0.08 per diluted share, in the fourth quarter. Also during the fourth quarter, the company completed the transition of all products from its Ashland Works coating line and closed that facility, as planned. In addition, the company recorded a credit of $8.1 million, or $0.02 per diluted share, to reflect adjustments to the Ashland Works closure costs recorded previously. Excluding these items, adjusted net loss for the fourth quarter of 2019 was $35.1 million, or $0.11 per diluted share. This compares to adjusted net income of $48.0 million, or $0.16 per diluted share, for the fourth quarter a year ago. Included in reported results in the year ago fourth quarter were non-cash pension settlement charges of $14.5 million, or $0.05 per diluted share.
The company’s adjusted EBITDA (as defined in the “Non-GAAP Financial Measures” section below) was $47.2 million, or 3.3% of net sales, for the fourth quarter of 2019, compared to adjusted EBITDA of $135.5 million, or 8.1% of net sales, for the fourth quarter a year ago. Contributing to this decline compared to the fourth quarter a year ago were significantly lower spot market selling prices, lower shipments to the automotive market due primarily to the General Motors strike, and higher costs for iron ore, coal and coke during the current year fourth quarter. Those challenges more than offset lower costs for scrap and energy. The company also had higher planned outage costs of $34.4 million in the fourth quarter of 2019, compared to $14.9 million in the fourth quarter of 2018.
The company ended 2019 with total liquidity of $835.4 million, consisting of cash and cash equivalents and $804.6 million of availability under the company’s revolving credit facility. During 2019, the company reduced outstanding long-term debt by $24.9 million and its pension and other postretirement benefit obligations by $109.8 million. In November 2019, the company redeemed its $148.5 million aggregate principal amount of Exchangeable Senior Notes at their maturity date by using its revolving credit facility.
Full-Year 2019 Results
AK Steel reported net income of $11.2 million, or $0.04 per diluted share of common stock, for 2019. This compared to net income of $186.0 million, or $0.59 per diluted share, for 2018. After adjusting for the aforementioned pension settlement charge of $26.9 million and charges of $69.3 million for the Ashland Works closure costs, adjusted net income for 2019 was $107.4 million, or $0.34 per diluted share. This compares to adjusted net income of $200.5 million, or $0.64 per diluted share, for 2018. Included in the reported results for 2018 was a pension settlement charge of $14.5 million. We made cash payments of $8.8 million in 2019 related to the Ashland Works charges, and expect to make cash payments of approximately $25.0 million in 2020 and the remaining amount over several years thereafter.
The company’s adjusted EBITDA for 2019 was $446.5 million, or 7.0% of net sales, compared to adjusted EBITDA of $563.4 million, or 8.3% of net sales, for a year ago. The decline was primarily driven by significantly lower steel spot market selling prices, lower shipments to the automotive and distributor and converter markets, and higher costs for iron ore, coal and coke during 2019. These factors more than offset higher automotive market selling prices, lower costs for outages, energy and certain raw materials, including scrap and alloys, and higher unrealized gains on iron ore derivatives compared to a year ago. The company had major maintenance outage costs of $81.0 million in 2019, compared to $91.1 million in 2018. Included in the results for 2019 were mark-to-market gains of $49.6 million from iron ore derivatives, of which approximately two-thirds are associated with iron ore purchases in future years. Not included in the financial results for 2019 were realized gains of $35.9 million for iron ore derivatives contracts that settled during the period for which the company had recognized mark-to-market gains in its financial results in prior periods, compared to $21.9 million for the same period in 2018. For 2018, the company recorded mark-to-market gains of $0.2 million.
Source: AK Steel
Source:AK Steel
