AK Steel finished the year 2009 in strong fashion, and that is a credit to all of our employees who responded to the challenges of one of the most severe economic downturns in our country’s history. Despite the “Great Recession” of 2009, we continued to move in the right direction and sequentially improved our results each quarter throughout the year.

Thanks to the hard work and dedication of the men and women at AK Steel, the company got back in the black during the third quarter of 2009 and recorded an operating profit of $64 per ton in the fourth quarter of 2009. Our full-year 2009 revenues reached approximately $4.1 billion on shipments of 3.9 million tons at an average selling price of $1,036 per ton.

The “Three C's”

From the onset of the recession, when it was impossible to see any improvement on the horizon, our vision remained clear. We acted quickly and prudently in 2009, re-emphasizing our “Three C’s” program that continues to serve the company extremely well—a program that is entirely focused on serving Customers better than anyone else, reducing Costs and conserving Cash.

In addition to the “Three C’s,” we were able to weather the economic storm of 2009 by remaining focused on our key values of safety, quality and productivity. Simply put, our objective is to be the best in the world in those three categories.

While the recession took its toll on operating levels across the industry in 2009, we took steps at AK Steel to prepare for an eventual increase in productivity. And, at the same time, we remained at the top of our game in terms of employee safety and product quality.

Safety First, First In Safety

Safety is our highest priority at AK Steel, and our 2009 safety performance was about eight times better than the steel industry average. As a result of our unwavering commitment to safety, the company earned significant recognition from industry trade associations and government agencies in 2009.

For the fifth consecutive year, AK Steel’s Ashland coke plant received the Max Eward Safety Award from the American Coke and Coal Chemicals Institute. The award recognized the men and women at the plant for operating the safest cokemaking facility in America in 2009. In fact, our employees at the plant worked the entire year of 2009 without any OSHA recordable injuries. That is an outstanding accomplishment, and the recognition marks the 12th time in the past 13 years that an AK Steel coke plant has received this award.

In addition, our employees at Middletown Works, Zanesville Works and AK Tube in Walbridge, Ohio received several safety awards from the Ohio Bureau of Workers’ Compensation Division of Safety and Hygiene in 2009. And, both of our AK Tube plants were recognized in 2009 by the Fabricators & Manufacturers Association, International for their outstanding safety performance.

Of special note, AK Tube in Columbus, Indiana became re-certified as a Star site in the Department of Labor’s Voluntary Protection Program in 2009. The Star designation signifies that the plant’s safety programs go above and beyond OSHA requirements.

All told, we set a new company safety record of only 15 OSHA recordable injuries in 2009. While that is the best we have ever done, the goal must always be zero. And, I am proud to say that employees at three of our operations actually delivered zeros in 2009. In addition to the men and women at our Ashland coke plant, employees at our Rockport and Zanesville Works also worked the entire year of 2009 without a single OSHA recordable injury. That is a terrific job by everyone at each of those locations.

Quality Performance

The year 2009 was also one of the company’s best years ever in quality. According to independent customer surveys conducted by Jacobson and Associates, our carbon and specialty steel customers rated AK Steel number one in overall customer satisfaction, quality and delivery for the year 2009.

In addition, AREVA, one of the world’s leading producers of electricity transmission and distribution products, named AK Steel to its prestigious list of certified suppliers in 2009. We also received high praise from Toyota in 2009 for quality performance and supplier diversity achievement, and we were named a “Supplier of the Year” by two of our valued customers—Berg Steel and Kenwal Steel.

Our research group also earned some well-deserved recognition in 2009 when they received the 42nd Annual Outstanding Author Award from the Galvanizers Association. The award was presented in connection with a technical paper on the subject of “Furnace Atmosphere Monitoring at AK Steel’s Coating Lines.” This marked the 10th time that AK Steel has received this outstanding recognition.

Productivity and Competitiveness

On the productivity front, we turned a negative into a positive in 2009. As our operating levels began to sharply decline due to the recession, we took advantage of the situation by replacing the blast furnace hearth at Middletown Works. The old hearth had been in service since 1984, holding 52 million tons of hot metal during its lifetime. The new hearth will help the blast furnace remain among the most productive in the world, for its size, as market conditions return to normal.

We also took advantage of another opportunity in 2009 to enhance AK Steel’s competitiveness in the future. By forging a long-term agreement to purchase metallurgical-grade coke and electricity from SunCoke Energy’s Haverhill, Ohio plant, we were able to help insulate AK Steel from volatile, world-market prices for raw materials and energy.

Enhanced Shareholder Value

At AK Steel, we strive to enhance shareholder value in all that we do. Although challenged by the global economic downturn in 2009, we did not dilute our shareholders’ interests by issuing additional stock. In fact, investors saw the value of their AK Steel shares increase by approximately 129 percent in 2009. From 2003 through the end of 2009, the company’s stock value grew by about 1,000 percent. And, thanks to our strong balance sheet, we continued to reward our shareholders in 2009 by maintaining a quarterly dividend throughout the year.

We also repurchased more than 1.6 million shares of AK Steel’s common stock in 2009 at an average price of $6.13 per share. In addition, we further deleveraged our balance sheet in 2009 by repurchasing $26.4 million of our 7 ¾ percent senior notes. We also contributed $210 million to our pension trust fund in 2009. From 2005 to the end of 2009, we contributed more than $1 billion to the pension fund. And, we made a $65 million contribution to the Middletown Retirees’ Voluntary Employees Beneficiary Association (VEBA) trust in 2009. At the end of 2009, our net debt, which reflects our total debt minus our cash balance, was less than $150 million.

Cut Costs, Conserved Cash

With the difficult market conditions in 2009, we intensified our efforts to reduce costs and conserve cash throughout the year. We temporarily idled certain operations and, for most of 2009, reduced pay for all salaried employees, including myself, our Executive Officers, as well as for the members of our Board of Directors. We also modified our salaried benefit plans and offered an early retirement program to qualified salaried employees throughout the company. These initiatives helped us end the year 2009 with a solid cash balance of $462 million.

Ready For Recovery

Thanks to all of the progress that we have made since the fall of 2003, AK Steel was well-positioned to survive the “Great Recession” of 2009, capitalize on the chaos and emerge as a stronger company. Our management team has an excellent track record of overcoming adversity, and that experience will continue to serve the company exceptionally well as we head into the new decade.

In addition, AK Steel is well-served by its outstanding Board of Directors, including Robert H. Jenkins (Lead Director), Richard A. Abdoo, John S. Brinzo, Dennis C. Cuneo, William K. Gerber, Dr. Bonnie G. Hill, Ralph S. (“Mike”) Michael III, Shirley D. Peterson and Dr. James A. Thomson. Their experience is a tremendous asset to AK Steel, and I would like to take this opportunity to thank each of them for their strong support and leadership in 2009.

AK Steel continued to “ROLL On” in 2009, and we are “READY for Recovery” in 2010. Our goal is to:
Remain focused on our key values,
Execute with world-class precision,
Aggressively control our costs,
Deliver shareholder value and produce
Year-long continuous improvement.