AK Steel Reports Second Quarter 2005 Results

Middletown, OH, July 26, 2005—AK Steel (NYSE: AKS) today reported second quarter 2005 net income of $9.0 million, or $0.08 per share of common stock.  The results include the effect of a non-cash charge of $29.5 million, or $0.27 per share, associated with recent state tax law changes.  Excluding this charge, the company’s second quarter net income would have been $38.5 million or $0.35 per share.  Although the tax law changes will lower AK Steel’s state tax liability for the second half of 2005 and beyond, the changes required the company to reduce the value of its deferred tax asset in the second quarter of 2005, which gave rise to the charge.

In the year-ago period, AK Steel reported net income of $92.7 million, or $0.85 per share.  The 2004 second quarter net income included an after-tax gain on the sale of assets and income related to discontinued operations.  Without the asset sale gain and income from discontinued operations, second quarter 2004 net income would have been $20.2 million, or $0.18 per share.

Net sales in the second quarter of 2005 were a record $1,454.6 million on shipments of 1,610,500 tons, or approximately 11% and 3% higher, respectively, than sales of $1,311.8 million and shipments of 1,565,100 tons in the year-ago period.  The company’s average selling price was $903 per ton in the second quarter of 2005, up 8% from $835 per ton in the second quarter of 2004.

AK Steel reported an operating profit of $74.2 million, or $46 per ton, in the second quarter of 2005, compared to $56.4 million, or $36 per ton, in the second quarter of 2004. 

“AK Steel responded well to changing market conditions with a first-half performance that included record total and per-ton sales revenue, good cost performance and record safety and quality marks,” said James L. Wainscott, president and CEO.  “We are preparing our operations for what we believe will be strengthening markets for our steel products during the second half of 2005.”

For the first six months of 2005, the company reported income from continuing operations of $68.2 million, or $0.62 per share, which includes total non-cash charges of $32.6 million, or $0.29 per share, resulting from the reduction in the value of the company’s deferred tax assets, most of which was recorded in the second quarter.  Excluding these non-cash charges, income from continuing operations would have been $100.8 million, or $0.91 per share, compared to $3.8 million, or $0.03 per share, for the same period in 2004.

First-half 2005 sales were a record $2,877.1 million, compared to $2,446.2 million in the first half of 2004.  The company reported operating profit for the first six months of 2005 of $187.8 million, or $60 per ton, compared to $57.9 million, or $19 per ton in the first half of 2004.  AK Steel reported that it ended the second quarter of 2005 with $264.6 million of cash and $529.8 million of availability under its two credit facilities.

Third Quarter and Second-Half 2005 Outlook

AK Steel expects costs for planned maintenance outages to be approximately $24 million higher for the third quarter over the second quarter of 2005. The planned maintenance activities include a 10-day outage at the company’s Ashland, Kentucky blast furnace, and a five-day outage at its Middletown, Ohio hot strip mill, both of which have been completed.  The company said that it expects spot market prices to begin rising in the third quarter, although its average selling price will be lower in the third quarter compared to the second quarter of 2005, due to lower prices at the beginning of the quarter.  The company expects lower scrap prices for the third quarter compared to the second quarter of 2005. 

AK Steel said that it expects second-half shipments to be slightly higher than in the first half, with spot market prices continuing to rise in the fourth quarter of 2005.  The company said that a vacuum degasser and a straight-mold caster conversion currently being commissioned at its Ashland Works are expected to eliminate, in the future, the company’s need to purchase degassed slabs.  Degassed slabs are used to serve the company’s high value-added customers, and are typically priced at a premium to commodity-grade slabs.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

Click here for Financial Tables. (PDF)