2003 Annual Stockholders Meeting

Middletown, OH, May 13, 2003—Prepared remarks by AK Steel Chairman and Chief Executive Officer Richard M. Wardrop, Jr. at the 2003 Annual Meeting of Stockholders:

During 2002, AK Steel experienced declines in contract pricing, additional costs of operation, and dramatically increased pension and health care costs.  As a result, we recorded a net loss of $502.4 million. 

Two unusual, non-cash accounting charges were largely responsible for the net loss.  The largest was related to recognition of actuarial losses associated with our pension and other retiree benefit plans.  The other charge was a write-down of our investment in taconite producer EVTAC, which has declared bankruptcy.

Despite the net loss, there were many positive accomplishments in 2002 that were overshadowed by the accounting charges.  For example, in safety, our OSHA Recordable injury rate dropped to 0.77 — that’s nearly 8 times better than the steel industry average.  Our Lost Workday Case rate also decreased, and was about 13 times better than the industry average.  Rockport Works became the second steel plant in the nation to earn the prestigious Star designation under OSHA’s Voluntary Protection Program.  Our Butler Works was the first steel plant to earn the Star award in 2001.

As another sign of our leadership in safety, U.S. Labor Secretary Elaine Chao has appointed Jim Stanley, AK Steel’s vice president of safety and health, to the National Advisory Committee on Occupational Safety and Health.

On the environmental front, each of our steel operations have earned certificates of registration under ISO 14001 for environmental management systems.  The ISO 14001 certification underscores AK Steel’s commitment to compliance with environmental laws and regulations. 

During the year, customers with some of the most prestigious names in manufacturing awarded AK Steel their highest honors.  We received the Gold World Excellence Award from Ford Motor Company for the second consecutive year.  AK Steel was the only U. S. company to receive the Gold award last year.

In March, Toyota again gave us their highest level of customer recognition—Superior—in both quality and delivery.  This marks an incredible ninth year in a row that we have earned dual honors from Toyota.

And earlier this month we were presented with the Presidential Award from Subaru for the 6th time.  AK Steel plants established numerous productivity records last year — including some world records.

Ashland Caster crews broke their own world record for consecutive heats of carbon steel.  The crews cast 1,851 consecutive heats during August and September, while working accident-free.  In November, Mansfield broke its own world record for consecutive heats of 409 stainless steel with 32 consecutive heats, also without a single injury.  Our Rockport Works won the North American Maintenance Excellence award.  It is the second time an AK Steel plant received the NAME award; Middletown Works won it in 1998.

Overall, AK Steel had the best product mix in the industry with 92% of our shipments being value-added product, that includes stainless, electrical, coated, cold rolled and tubular steels.

Excluding the unusual charges, AK Steel essentially had a break-even year in 2002.  Our shipments increased by 3%, thanks to increased demand from automotive customers.  Our 2002 revenues increased by 12% because of our richer product mix and higher spot market selling prices.

And, our average selling price per ton increased by 7%.  We finished the year in a strong cash position with $283 million, and that balance stood at $249 at the end of the first quarter.

Looking to the future, I have said that AK Steel is not content with mere survival, we want to grow.  Since the Armco merger in 1999, most of our growth has been from within.  We have made impressive productivity gains and moved to more value-added products.  Most recently, we bid on the assets of National Steel Corporation, which was in bankruptcy. But ultimately, National accepted a lower offer.

We bid on National with the belief that the assets, operated within the appropriate cost structure, would have strengthened AK Steel.  The keystone would have been a new contract with the United Steelworkers of America, which represents most of the hourly employees of National.  In the end, however, we did not reach an agreement with the USWA that would have provided us with the necessary cost structure.  

Acquiring National, under the right conditions, could have added value to AK Steel.  We have been, and will remain, thoughtful and discerning about our strategic direction.  The conditions that would have made the National acquisition good for AK Steel simply did not materialize.

Nonetheless, we continue to scrutinize opportunities to grow and strengthen AK Steel financially while continuing to improve upon the fundamentals of our business.  Thank you.