As a testament to the hard work and perseverance of the men and women of AK Steel, the company finished the year 2010 firmly on the road to recovery. While America’s economic turnaround was slower and weaker than expected in 2010, our commitment to customers was stronger than ever. That is a credit to all of our employees who remained focused on our “Three C’s” approach to serving Customers better than anyone else, reducing Costs and conserving Cash.
Thanks to a great team effort, AK Steel’s revenues reached approximately $6 billion for the full-year 2010, an increase of 46 percent over 2009. In addition, shipments for the year 2010 totaled 5.7 million tons, an increase of more than 1.7 million tons, or 44 percent, compared to 2009. And, our average selling price for the year 2010 was $1,054 per ton, a modest improvement over 2009. Despite the lingering effects of the Great Recession and record-high raw material costs, AK Steel remains well-positioned to compete in the global steel marketplace.
Safety First, First In Safety
Workplace safety is our top priority at AK Steel, and our 2010 safety performance continued to lead the steel industry average. As a result of our commitment to safety, the company earned significant recognition from industry trade associations and government agencies in 2010.
The employees at our Ashland and Middletown coke plants operated two of the safest cokemaking facilities in America in 2010. By working the entire year without any OSHA recordable injuries, each plant earned the coveted Max Eward Safety Award from the American Coke and Coal Chemicals Institute. The recognition marks the second time that both coke plants have received the award in the same year—an unprecedented accomplishment. It also marks the 13th time in the past 14 years that an AK Steel coke plant has received the award.
In addition to our coke plants, the employees at our Ashland Works main plant and AK Tube facility in Columbus, Indiana also worked the entire year of 2010 without any OSHA recordable injuries—a terrific job by everyone at those locations.
Our Coshocton Works and Zanesville Works earned several awards for safety from the Ohio Bureau of Workers’ Compensation Division of Safety and Hygiene in 2010, and both of our AK Tube plants were recognized by the Fabricators & Manufacturers Association, International, for their exceptional safety performance.
Quality Performance
AK Steel also received several awards in 2010 that reflect the overall quality of the company and our products. According to independent 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 full-year 2010. We also recorded our best-ever results for quality across several internal key performance indicators.
In June of 2010, AK Steel was named “Steel Producer of the Year” by American Metal Market (AMM), a leading metal industry publication. The company also received AMM’s award for “Best Turnaround of the Decade,” and was named a finalist in the category of “Best Operational Improvements.” In addition, AK Steel was recognized by Toyota for Supplier Diversity and Quality Performance Achievement.
Productivity Achievements
On the productivity front, employees at Middletown Works set a new world record in 2010 when they cast 2,156 consecutive heats of steel through the plant’s double-strand continuous caster in just 59 days. The employees worked injury-free during the record-setting run while producing more than 474,000 tons of carbon steel slabs—an outstanding performance by everyone involved.
Our #5 electric arc furnace project at Butler Works also progressed throughout 2010. The new furnace, which became operational in March of 2011, replaces three 1960’s-vintage furnaces, increases the plant’s steelmaking capacity and gives us greater flexibility to produce carbon, stainless and electrical steels for our customers.
We also prudently advanced a maintenance outage at our Ashland Works blast furnace in 2010. The job went extremely well and, following its successful completion, the furnace is again stable and productive.
Historic Milestone
The company also reached a historic milestone in 2010, marking 100 years of innovation at its research facility in Middletown, Ohio. AK Steel’s predecessor, Armco, announced the creation of the industry’s first dedicated research department on September 22, 1910. Since that time, the company has been an industry leader in new product development, customer technical services and steelmaking process improvements.
Advanced Energy
Construction advanced on SunCoke Energy’s state-of-the-art cokemaking and electric co-generation plant in Middletown, Ohio during 2010-—a project that will enhance AK Steel’s energy independence. When operational in the fourth quarter of 2011, the new SunCoke plant will produce electricity from heat recovery generators and provide our Middletown steel plant with a long-term supply of blast furnace fuel.
In addition, we continued to study another advanced energy project in 2010 that would use waste gas from our Middletown blast furnace to produce steam and electrical power. Combined with the SunCoke facility, these projects could produce more than 145 megawatts of electricity. That is equivalent to more than half of the power needed to operate the company’s Middletown Works.
The bottom-line is that becoming more energy efficient puts AK Steel in a better position to help our customers compete globally—and that is good for our business and the environment. To help us increase our efficiency, AK Steel joined the EPA’s Energy Star program in 2010 with a pledge to protect the environment through the continuous improvement of our energy performance.
Cost Competitiveness
In December of 2010, AK Steel announced its decision to permanently close the company’s Ashland coke plant in 2011. The decision was made because the coke plant was no longer cost competitive, and the change would help support the future viability of the company’s Ashland steelmaking operation. AK Steel has secured alternate sources of coke to meet the near-term needs of its Ashland blast furnace, and will do its best to offer jobs to the affected employees at other locations within the company.
Corporate Responsibility
As a responsible company, AK Steel continues to take action to conserve natural resources and support our communities. In recognition of the company’s ongoing environmental restoration efforts at Coshocton Works, AK Steel was proud to receive Honda’s “Green Factory Environmental Achievement Award” in 2010. And, in recognition of the many ways that AK Steel continues to help make a positive difference in the lives of others, the company received the “Good Scout Award” in 2010 from the Dan Beard Council, Boy Scouts of America.
Sound Financial Management
AK Steel successfully completed two senior notes offerings in 2010, which enabled the company to lower interest on its outstanding debt and extend its debt maturity. These offerings also included a new covenant package that improved the company’s financial flexibility.
In addition, AK Steel contributed $110 million to its pension trust fund in 2010. From 2005 through the end of 2010, we contributed approximately $1.2 billion to the fund. We also made a $65 million contribution to the Middletown Retirees’ Voluntary Employees Beneficiary Association trust in 2010. The company’s final $65 million contribution was retirees is now complete.
Of special note to shareholders, AK Steel was honored for corporate governance in 2010, topping Directorship magazine’s list of “Best Governed Companies.” The recognition speaks volumes about AK Steel and the leadership provided by the company’s Board of Directors.
ROAD to Recovery
As the economy continues to recover from the Great Recession, AK Steel remains well-positioned to compete, and to win, on the global steel stage. I am fortunate to lead an excellent management team with a track record of success, and that experience will continue to serve the company well as we take advantage of opportunities in 2011 and beyond.
In addition, AK Steel is well-served by its 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. I would like to take this opportunity to thank each of them for their strong support and leadership in 2010.
AK Steel was “READY for Recovery” in 2010, and we will continue to stay on the “ROAD to Recovery” in 2011 by striving to:
Remain focused on our key values,
Outperform expectations,
Aggressively control costs and
Deliver shareholder value.