<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 1996 Commission File No. 1-13696
AK STEEL HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-1401455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
703 Curtis Street
Middletown, Ohio 45043
(Address of principal executive offices) (Zip Code)
(Registrants telephone number including area code) (513)425-5000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
26,324,950 shares of common stock
---------------------------------
(as of October 17, 1996)
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AK STEEL HOLDING CORPORATION
INDEX
PART I Page
Item 1 Financial Information
Condensed Consolidated Statements of
Operations -
Three and Nine-Month Periods Ended 2
September 30, 1996 and 1995
Condensed Consolidated Balance Sheets - 3
September 30, 1996 and December 31, 1995
Condensed Consolidated Statements of
Cash Flows -
Nine-Month Periods Ended September 30, 1996 4
and 1995
Notes to Condensed Consolidated Financial
Statements 5,6
Item 2 Management's Discussion and Analysis of the
Condensed Consolidated Financial Statements 7
PART II
OTHER INFORMATION
Item 1 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of 9
Security Holders
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 10
-1- <PAGE>
<PAGE>
Item 1.
<TABLE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $524.3 $559.3 $1,730.6 $1,693.6
Cost of products sold 403.9 440.3 1,349.5 1,341.3
Selling and admin.
expenses 28.3 28.5 86.2 84.7
Depreciation 19.3 18.7 57.8 58.7
------ ------ ------- ------
Total operating costs 451.5 487.5 1,493.5 1,484.7
Operating profit 72.8 71.8 237.1 208.9
Interest expense 8.3 9.5 26.6 28.4
Other income 6.0 2.8 14.0 8.4
------ ------ ------- ------
Income before income
taxes 70.5 65.1 224.5 188.9
Current income tax
provision (benefit)
(Note 5) (7.3) (1.6) 6.1 10.4
Deferred income tax
provision (Note 5) 10.6 27.0 4.5 63.3
----- ------ ------- ------
Net income 67.2 39.7 213.9 115.2
Preferred stock dividends 4.0 2.6 12.1 8.5
------ ------- ------- ------
Net income applicable to
common shareholders $ 63.2 $ 37.1 $ 201.8 $ 106.7
------ ------- -------- ------
------ ------- -------- ------
Earnings per common
share: (Note 2)
Primary $ 2.37 $ 1.40 $ 7.62 $ 4.03
Fully diluted $ 2.02 $ 1.28 $ 6.49 $ 3.71
Cash dividends per
common share $ - $ .15 $ - $ .45
Common shares and
common share
equivalents outstanding
(weighted average in
millions):
For primary earnings
per share 26.7 26.6 26.5 26.5
For fully diluted
earnings per share 33.1 30.9 33.0 31.1
<FN>
- ---------------------
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<CAPTION>
ASSETS
December 31, September 30,
1995 1996
----------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 137.0 $ 158.0
Short-term investments 175.8 65.2
Accounts receivable - net
(Note 4) 217.0 261.0
Inventories: (Note 3)
Finished and semi-finished 183.5 213.4
Raw materials 157.2 149.5
-------- --------
Total inventories - net 340.7 362.9
Deferred taxes 14.8 -
Other current assets 1.9 8.0
--------- --------
Total Current Assets 887.2 855.1
--------- --------
Property, plant and equipment 1,451.6 1,505.6
Less accumulated depreciation (478.0) (535.4)
--------- --------
Property, plant and equipment -
net 973.6 970.2
--------- --------
Prepaid Pension 138.8 156.1
Other 115.9 107.7
--------- --------
TOTAL ASSETS $2,115.5 $2,089.1
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 255.9 $ 191.1
Other accruals 141.4 144.5
Current portion of long-term
debt (Note 4) - -
Current portion of pension
obligation 0.1 0.1
Current portion of postretirement
benefit obligation - -
------- --------
Total Current Liabilities 397.4 335.7
------- --------
Noncurrent Liabilities:
Long-term debt (Note 4) 325.0 325.0
Pension obligation - -
Postretirement benefit obligation 655.7 621.0
Other liabilities 63.2 63.4
-------- ---------
Total Noncurrent Liabilities 1,043.9 1,009.4
-------- ---------
TOTAL LIABILITIES 1,441.3 1,345.1
-------- ---------
Stockholders' Equity:
Preferred stock - Authorized 25,000,000
shares of $.01 par value each;
7,479,674 shares issued;
outstanding 1995 - 5,915,974 shares,
1996 - 4,845,774 shares 0.1 0.1
Common stock - Authorized 75,000,000
shares of $.01 par value each;
issued 1995 - 26,476,297 shares,
1996 - 26,958,834 shares; outstanding
1995 - 25,838,862 shares,
1996 - 26,319,950 shares 0.3 0.3
Additional paid-in capital 715.0 698.7
Treasury Stock - common shares
at cost - 1995 - 637,435 shares;
1996 - 638,884 shares (21.5) (21.5)
Retained earnings (19.7) 66.4
-------- --------
TOTAL STOCKHOLDERS' EQUITY 674.2 744.0
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,115.5 $2,089.1
--------- ----------
--------- ----------
<FN>
- -----------
See notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1995 1996
---- ----
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $199.2 $ 13.8
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments (103.6) (55.3)
Change in short-term investments (181.2) 110.6
Other 3.5 2.5
------- -------
NET CASH FLOWS FROM INVESTING ACTIVITIES (281.3) 57.8
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3.0 9.4
Principal payments on long-term debt (5.0) -
Preferred stock dividends paid (12.1) (9.1)
Common stock dividends paid - (11.7)
Purchase of treasury stock - (0.1)
Purchase of preferred stock - (39.1)
------- -------
NET CASH FLOWS FROM FINANCING ACTIVITIES (14.1) (50.6)
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (96.2) 21.0
Cash and cash equivalents, beginning
of period 261.8 137.0
-------- --------
Cash and cash equivalents, end of period $165.6 $158.0
-------- --------
-------- --------
Supplemental disclosure of cash flow information:
- -------------------------------------------------
Cash paid during the period for:
Interest (net of amount capitalized) $ 16.2 $ 18.7
Income taxes 2.2 1.9
<FN>
- ----------------
See notes to condensed consolidated financial statements.
</TABLE>
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AK STEEL HOLDING CORPORATION
- ----------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions, except per share data)
- ----------------------------------------------------
1. Basis of Presentation
In the opinion of the management of AK Steel Holding Corporation
("AK Holding") and AK Steel Corporation ( AK Steel"), collectively
the ( Company ), the accompanying condensed consolidated financial
statements contain all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial position of
the Company as of September 30, 1996, and the results of its
operations for the three-month and nine-month periods ended
September 30, 1995 and 1996, and cash flows for the nine-month
periods ended September 30, 1995 and 1996. The results of
operations and financial position of AK Steel approximate the
results and financial position of AK Holding. The results of
operations for the nine-month period ended September 30, 1996 are
not necessarily indicative of the results to be expected for the
year ending December 31, 1996. These condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements for the years ended December 31,
1994 and 1995.
2. Earnings Per Share
<TABLE>
(CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Net income $67.2 $39.7 $213.9 $115.2
Less dividends on preferred
stock 4.0 2.6 12.1 8.5
----- ----- ------ ------
Income applicable to common
shareholders $63.2 $37.1 $201.8 $106.7
----- ----- ------ ------
----- ----- ------ ------
Shares (weighted average):
Number of common shares
outstanding 26.4 26.2 26.3 26.1
Number of common equivalent
shares outstanding .3 .4 .2 .4
----- ------ ------ ------
Number of common shares
outstanding as adjusted 26.7 26.6 26.5 26.5
----- ------ ------ ------
----- ------ ------ ------
Primary earnings per
common share $ 2.37 $ 1.40 $ 7.62 $ 4.03
------ ------ ------ ------
------ ------ ------ ------
Assuming full dilution:
Net income $67.2 $39.7 $213.9 $115.2
------ ------ ------ ------
------ ------ ------ ------
Shares (weighted average):
Number of common shares
outstanding 26.4 26.2 26.3 26.1
Number of common equivalent
shares outstanding .3 .4 .3 .4
Assuming conversion of
preferred stock 6.4 4.3 6.4 4.6
------ ------ ------ ------
Number of common shares
outstanding as adjusted 33.1 30.9 33.0 31.1
------ ------ ------ ------
------ ------ ------ ------
Earnings per share assuming
full dilution $ 2.02 $ 1.28 $ 6.49 $ 3.71
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
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3. Inventories are valued at the lower of cost or market. The
cost of the majority of inventories is measured on the last in,
first out (LIFO) method. Other inventories are measured principally
at average cost.
4. As of September 30, 1996, AK Steel Receivables, Inc. ( AKR ) had
not sold accounts receivable to any participating banks under its
Receivables Purchase and Servicing Agreement although $5.8 letters
of credit had been issued. AKR had a sufficient pool of eligible
receivables that could be sold to utilize the available capacity of
the participating banks commitments.
At September 30, 1996, the Company had $325.0 of long-term debt
outstanding.
5. The book tax rate for 1996 will approximate 39% compared to
nearly 5% in 1995. The significantly lower rate for 1995 resulted
from the reduction of valuation reserves set up against deferred tax
assets.
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Item 2. Management's Discussion and Analysis of the
Condensed Consolidated Financial Statements
Certain statements contained herein are forward-looking statements
that are based upon numerous assumptions about future conditions
that could prove to be inaccurate. Actual results may materially
differ. The Company s ability to achieve such results is subject to
certain risks and uncertainties. Such risks and uncertainties
include, but are not limited to, the existence of demand for and
acceptance of the Company s products and services, economic
conditions, the impact of competition and pricing, and other factors
affecting the Company s business that are beyond the Company s
control.
The Company concentrates on the production of premium quality
coated, cold rolled and hot rolled carbon steel. Consistent with
management s operating strategy, sales of coated products for the
third quarter and nine months ended September 30, 1996 exceed those
of the comparable prior periods by approximately 17% and 12%,
respectively. Increased levels of coated shipments are attributable
to recent capital investments in the Company s coated facilities and
increased cold mill productivity. Operating rates of each of the
Company s major production units continue to show improvement.
The Company s net sales revenue for the third quarter of 1996 exceeds
the comparable 1995 level by nearly 7%. This increase reflects a
14% improvement in shipments, primarily coated and hot rolled
products. Net sales in the third quarter of 1995 included $16.1
million of merchant coke sales. In December 1995, the Company shut
down two coke oven batteries at the Middletown Works thus
eliminating merchant coke sales beginning in 1996.
For the first nine months of the year, sales of flat rolled products
exceed prior year levels by 1%. Contract sales prices, which
account for approximately 70% of the Company s annual sales volumes,
decreased from prior year levels. The Company has generated
additional revenue through a series of price increases on non-
contract shipments during 1996.
The Company s principal customers are in the automotive, appliance,
construction and manufacturing markets. The Company also sells its
products to distributors and steel service centers. Demand in the
third quarter for flat rolled products, especially coated and cold
rolled products, continued at strong levels with shipments of
1,048,000 tons compared to 921,000 tons in the third quarter of
1995. The Company s marketing efforts have been increasingly
directed toward those customers with exacting requirements for
quality, on-time delivery, technical support and specialized product
applications.
The following table sets forth the percentage of the Company s net
sales to various markets for the nine months ended September 30,
1996 and 1995.
<TABLE>
<CAPTION>
Nine Months
-----------
1996 1995
---- ----
<S> <C> <C>
Automotive 55% 49%
Appliance, Construction and Manufacturing 16% 16%
Distributors and Service Centers 29% 35%
---- ----
Total 100% 100%
</TABLE>
AK Steel s book tax rate for 1996 will approximate 39% compared to
nearly 5% in 1995. The significantly lower rate for 1995 resulted
from the reduction of valuation reserves set up against deferred tax
assets. Fully diluted earnings per share for the third quarter and
nine months of 1996 were $1.28 and $3.71, compared to a reported
$2.02 and $6.49 ($1.30 and $4.16 on a comparably taxed basis) for
the prior year period.
-7-
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<PAGE>
Liquidity
- ---------
The Company s liquidity needs are primarily for capital investments,
working capital requirements, employee benefit obligations and
interest payments on its indebtedness. At September 30, 1996 the
Company had $223.2 million of cash, cash equivalents and short-term
investments and also had $119.2 million of financing available under
its $125.0 accounts receivable purchase credit facility. During the
nine months ended September 30, 1996, cash flow from operations
generated $13.8 million. The Company contributed $25.0 million to
its pension fund, $50.0 million to prefund healthcare benefits for
all active and retired employees and paid profit sharing bonuses of
approximately $34.0 million. In addition, the Company made capital
investments of $55.3 million, paid cash dividends of $20.8 million
and applied $39.1 million to open market purchases of its equity
securities.
The Company anticipates ongoing capital investments to maintain the
competitiveness and efficiency of its existing facilities and to
assure its compliance with applicable safety and environmental
standards. Capital expenditures for 1996 are expected to aggregate
approximately $90.0 million, inclusive of $55.3 million expended
during the first nine months of the year. At September 30, 1996,
commitments for future capital expenditures, including expenditures
for environmental compliance, totalled approximately $42.7 million,
of which approximately $6.8 million will be expended in 1997 and
$1.7 million in 1998.
The Company s pension plans are fully funded on an accrued benefits
obligation basis as of September 30, 1996. Funding levels in the
near term are expected to be minimal. The Company also has
available a pension funding credit balance of $337.0 million that
could be used to meet future funding requirements, if any, although
there are no present plans to do so.
At September 30, 1996 the Company s obligations for postretirement
benefits other than pensions totalled approximately $621.0 million.
The Company established a healthcare trust as of June 30, 1995 as a
means of prefunding these obligations. The Company currently is
paying benefits from this trust, however, it has reimbursed the
trust for current benefit payments. The balance in the trust at
September 30, 1996 is $137.8 million, which is equivalent to
approximately two years of active and retiree benefit payments.
Although no funding obligation to the trust exists, the Company may
make periodic contributions to the trust at its discretion.
On October 8, 1996, the Company s board of directors declared a
quarterly common stock dividend of $0.20 per share, payable on
November 15, 1996, to stockholders of record on October 21, 1996.
The dividend represents a 33% increase in the common stock dividend
and indicates an annual dividend rate of $.80 per share of common
stock.
The Company currently is considering various alternatives for growth
of its capacity to produce value added products. Although the
Company has not made a determination to implement any of these
alternatives, action taken, if any, could have a material effect on
the Company s future liquidity, capital expenditures and cash flow.
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<PAGE>
PART II OTHER INFORMATION
- -------------------------------
Item 1. Legal Proceedings
There were no significant legal matters in the three-month period
ended September 30, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - None
B. Form 8-K
Earnings Release July 11, 1996
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<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on behalf of the registrant by the
following duly authorized persons.
AK Steel Holding Corporation
----------------------------
(Registrant)
Date: October 17, 1996 /s/ Richard E. Newsted
---------------- -------------------------------
Richard E. Newsted
Senior Vice President and
Chief Financial Officer
Date: October 17, 1996 /s/ Donald B. Korade
---------------- ------------------------------
Donald B. Korade
Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM AK STEEL HOLDING CORPORATION'S QUARTERLY
REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 158
<SECURITIES> 65
<RECEIVABLES> 261
<ALLOWANCES> 0
<INVENTORY> 363
<CURRENT-ASSETS> 855
<PP&E> 1,505
<DEPRECIATION> 535
<TOTAL-ASSETS> 2,089
<CURRENT-LIABILITIES> 336
<BONDS> 325
<COMMON> 0
0
0
<OTHER-SE> 744
<TOTAL-LIABILITY-AND-EQUITY> 2,089
<SALES> 1,694
<TOTAL-REVENUES> 1,694
<CGS> 1,341
<TOTAL-COSTS> 1,485
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 189
<INCOME-TAX> 74
<INCOME-CONTINUING> 115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115
<EPS-PRIMARY> 4.03
<EPS-DILUTED> 3.71
</TABLE>
