<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 June 30, 1999 Commission File No. 1-13696
AK STEEL HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 31-1401455
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
703 Curtis Street, Middletown, Ohio 45043
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's 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.
59,592,404 shares of common stock
---------------------------------
(as of August 10, 1999)
<PAGE>
AK STEEL HOLDING CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income -
Three-Month and Six-Month Periods Ended June 30, 1998 and 1999 2
Condensed Consolidated Balance Sheets -
December 31, 1998 and June 30, 1999 3
Condensed Consolidated Statements of Cash Flows -
Six-Month Periods Ended June 30, 1998 and 1999 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of the
Condensed Consolidated Financial Statements 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ --------------------
1998 1999 1998 1999
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Net Sales $612.0 $682.6 $1,200.2 $1,314.8
Cost of products sold 503.0 562.5 986.6 1,084.0
Selling and administrative expenses 29.5 32.6 58.7 62.8
Depreciation 21.2 33.9 42.4 67.1
------ ------ -------- --------
Total operating costs 553.7 629.0 1,087.7 1,213.9
Operating profit 58.3 53.6 112.5 100.9
Interest expense 11.6 24.0 27.3 48.7
Other income 6.0 2.4 12.9 5.6
------ ------ -------- --------
Income before income taxes and extraordinary item 52.7 32.0 98.1 57.8
Current income tax provision (Note 5) 12.7 5.4 22.6 9.5
Deferred income tax provision (Note 5) 6.6 6.7 13.7 0.8
------ ------ -------- --------
Income before extraordinary item 33.4 19.9 61.8 47.5
Extraordinary item - (12.0) - (12.0)
------ ------ -------- --------
Net income 33.4 7.9 61.8 35.5
Other comprehensive income, net of tax:
Unrealized gains/(losses) on securities:
Unrealized holding gains/(losses) arising
during period (0.1) 0.1 0.6 (0.1)
Less: reclassification adjustment for gains
included in net income 0.1 0.1 0.1 0.4
------ ------ -------- --------
Comprehensive income $ 33.2 $ 7.9 $ 62.3 $ 35.0
====== ====== ======== ========
Earnings per share: (Note 2)
Basic earnings per share:
Income before extraordinary item $ .56 $ .33 $ 1.04 $ .80
Extraordinary item - (.20) - (.20)
Net income .56 .13 1.04 .60
Diluted earnings per share:
Income before extraordinary item $ .56 $ .33 $ 1.03 $ .79
Extraordinary item - (.20) - (.20)
Net income .56 .13 1.03 .59
Cash dividends per common share $ .125 $ .125 $ .25 $ .25
Common shares and common share
equivalents outstanding (weighted
average in millions):
For basic earnings per share 59.2 59.5 59.6 59.3
For diluted earnings per share 59.6 60.2 59.9 59.9
</TABLE>
- ------------------------------
See notes to condensed consolidated financial statements.
-2-
<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1998 1999
------------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 83.0 $ 141.3
Accounts receivable, net (Note 4) 286.8 321.0
Inventories: (Note 3)
Finished and semi-finished 259.9 271.0
Raw materials 172.0 137.6
-------- --------
Total Inventories, net 431.9 408.6
Other current assets 5.8 11.6
-------- --------
Total Current Assets 807.5 882.5
-------- --------
Property, Plant and Equipment 2,932.5 3,078.5
Less accumulated depreciation (681.6) (748.8)
-------- --------
Property, plant and equipment, net 2,250.9 2,329.7
-------- --------
Prepaid Pension 170.3 172.4
Other 77.6 64.4
-------- --------
TOTAL ASSETS $3,306.3 $3,449.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 322.9 $ 289.2
Other accruals 184.5 188.3
Current portion of deferred taxes 23.9 18.7
Current portion of long-term debt (Note 4) - -
Current portion of pension obligation 0.1 -
Current portion of postretirement benefit obligation - -
-------- --------
Total Current Liabilities 531.4 496.2
-------- --------
Noncurrent Liabilities:
Long-term debt (Note 4) 1,145.0 1,280.0
Pension obligation - -
Postretirement benefit obligation 572.6 584.3
Deferred taxes (Note 5) 68.0 69.2
Other liabilities 59.8 61.9
-------- --------
Total Noncurrent Liabilities 1,845.4 1,995.4
-------- --------
TOTAL LIABILITIES 2,376.8 2,491.6
-------- --------
Stockholders' Equity:
Common stock, authorized 200,000,000 shares of
$.01 par value each; issued 1998, 63,868,087
shares, 1999, 64,502,320 shares; outstanding
1998, 59,022,588 shares, 1999, 59,605,163 shares 0.6 0.6
Additional paid-in capital 722.0 730.5
Treasury stock, common shares at cost,
1998, 4,845,499, 1999, 4,897,157 shares (87.8) (89.0)
Retained earnings 293.1 313.8
Accumulated other comprehensive income 1.6 1.5
-------- --------
TOTAL STOCKHOLDERS' EQUITY 929.5 957.4
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,306.3 $3,449.0
======== ========
</TABLE>
- ----------------------------
See notes to condensed consolidated financial statements.
-3-
<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------
1998 1999
---- ----
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $138.5 $101.8
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments (414.1) (145.9)
Change in short-term investments 163.0 -
Other 5.6 1.8
------- -------
NET CASH FLOWS FROM INVESTING ACTIVITIES (245.5) (144.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0.6 5.0
Proceeds from issuance of long-term debt 147.5 460.0
Principal payments on long-term debt - (325.0)
Common stock dividends paid (14.9) (14.8)
Purchase of common stock, held in treasury (35.5) (1.2)
Underwriting discount and fees (0.3) (10.3)
Debt prepayment fees - (13.1)
------- -------
NET CASH FLOWS FROM FINANCING ACTIVITIES 97.4 100.6
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9.6) 58.3
Cash and cash equivalents, beginning of period 348.2 83.0
------- -------
Cash and cash equivalents, end of period $ 338.6 $ 141.3
======= =======
Supplemental disclosure of cash flow information:
- ------------------------------------------------
Cash paid during the period for:
Interest $ 54.4 $ 55.6
Interest capitalized (30.3) (15.1)
Income taxes 9.8 1.9
</TABLE>
- ----------------------------
See notes to condensed consolidated financial statements.
-4-
<PAGE>
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
June 30, 1999, and the results of its operations for the three-month and
six-month periods ended June 30, 1998 and 1999. The results of operations
for the six-month period ended June 30, 1999 are not necessarily indicative
of the results to be expected for the year ending December 31, 1999. These
condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements for the years ended
December 31, 1997 and 1998.
There is no summarized financial information included for AK Steel because
there is no substantial difference in the operations of AK Steel and AK
Holding and because the debt of AK Steel is fully and unconditionally
guaranteed by AK Holding. AK Holding has no independent operations.
2. Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic earnings per share income:
Income before extraordinary item $33.4 $ 19.9 $61.8 $ 47.5
Extraordinary item - (12.0) - (12.0)
----- ------ ----- ------
Net income $33.4 $ 7.9 $61.8 $ 35.5
===== ====== ===== ======
Common shares outstanding
(weighted average in millions) 59.2 59.5 59.6 59.3
===== ====== ===== ======
Basic earnings per share:
Income before extraordinary item $ .56 $ .33 $1.04 $ .80
Extraordinary item - (.20) - (.20)
----- ------ ----- ------
Net income $ .56 $ .13 $1.04 $ .60
===== ====== ===== ======
Diluted earnings per share income:
Income before extraordinary item $33.4 $ 19.9 $61.8 $ 47.5
Extraordinary item - (12.0) - (12.0)
----- ------ ----- ------
Net income $33.4 $ 7.9 $61.8 $ 35.5
===== ====== ===== ======
Shares (weighted average in millions):
Common shares outstanding 59.2 59.5 59.6 59.3
Common stock options outstanding 0.4 0.7 0.3 0.6
----- ------ ----- ------
Common shares outstanding as adjusted 59.6 60.2 59.9 59.9
===== ====== ===== ======
Diluted earnings per share:
Income before extraordinary item $ .56 $ .33 $1.03 $ .79
Extraordinary item - (.20) - (.20)
----- ------ ----- ------
Net income $ .56 $ .13 $1.03 $ .59
===== ====== ===== ======
</TABLE>
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. On January 7, 1999, the city of Rockport, Indiana issued $10.0 in Variable
Rate Demand Revenue Bonds with a 30-year term maturing on June 1, 2029
priced at an initial rate of 3.0%, which are secured by the Company's
letter of credit. Interest is at a variable rate which is reset weekly and
paid monthly.
On February 10, 1999, the Company issued $450.0 principal amount of 7 7/8%
Senior Notes Due 2009 ("Notes") with interest payable semiannually
commencing on August 15, 1999. The Notes were sold at
-5-
<PAGE>
99.623% of their principal amount. The Notes have not been registered under
the Securities Act of 1933 pursuant to an exemption from the registration
requirements of the Act.
On April 1, 1999, the Company used the proceeds from the sale of the Notes
(after the discount to the initial purchasers and other expenses of the
offering) to finance the $338.1 cost of redeeming the 10 3/4% Senior Notes
Due 2004 and the remaining $104.0 for general corporate purposes. Until
utilized, the proceeds of the Notes had been invested in short-term
interest-bearing U.S. Government obligations. Early extinguishment of the
debt resulted in an extraordinary loss of $19.3 ($12.0 after taxes) or
approximately $.20 per share on a diluted basis.
As of June 30, 1999, AK Steel Receivables, Ltd. ("AKR") had not sold
accounts receivable to any participating banks under its Receivables
Purchase and Servicing Agreement although $35.2 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. On January 15, 1999, AKR's Purchase and Servicing Agreement
was increased from $125.0 to $200.0 and the expiration extended to December
31, 2003.
5. The book tax rate for 1999 is estimated at 38%. The deferred income tax
provision includes a credit of $11.6 related to prior years for a recycling
tax credit from the Commonwealth of Kentucky recognized in the first
quarter of 1999.
6. On May 20, 1999, AK Holding, the parent Company of AK Steel, and Armco Inc.
entered into a definitive agreement to merge Armco Inc. with and into AK
Steel. As a result of the proposed merger, Armco Inc. common stock will be
exchanged for AK Holding common stock at an exchange rate to be determined
at the time of closing.
Item 2. Management's Discussion and Analysis of the
Condensed Consolidated Financial Statements
Results of Operations
- ---------------------
The Company's principal customers are in the automotive, appliance, construction
and manufacturing markets. The Company also sells its products to distributors
and converters. Shipments for the second quarter of 1999 totalled a record
1,345,000 tons surpassing first quarter of 1999 and second quarter of 1998
shipments by 70,000 and 173,000 tons, respectively.
Net sales for the second quarter of 1999 totalled $682.6 million, an increase of
7.9% from the first quarter and an 11.5% increase over the second quarter of
1998. Year to date net sales for 1999 exceeded those for the comparable 1998
period by 9.5%.
The Company recorded an operating profit of $53.6 million, or $40 per ton for
the second quarter of 1999, up $3 from the first quarter and down $10 from the
1998 second quarter. The decrease in operating profit year over year is due to
lower realized selling prices (approximately 5%) as well as increased
depreciation, primarily related to the Company's Rockport Works, of $10 per ton.
Interest expense totalled $24.0 million for the second quarter of 1999, a
decrease of $.7 million from the first quarter and up $12.4 million from the
comparable prior year period. The increase in year-to-date interest expense
over the prior period is due in part to lower capitalized interest of $15.1
million. Secondly, due to the fact that the Company could not call its 10 3/4%
Senior Notes until April 1, 1999, it carried both the 7 7/8% and 10 3/4% Senior
Notes for a period of 50 days which increased expense by approximately $5.0
million.
In the first quarter of 1999, the Company recorded a deferred income tax credit
of $11.6 million related to prior years for the Commonwealth of Kentucky
recycling credit. The Company's normal tax rate is 38%.
Income before extraordinary item totalled $19.9 million and $33.4 million for
the second quarter of 1999 and 1998, respectively, and is $47.5 million for the
year, compared to $61.8 million for the comparable prior year period. Diluted
earnings per share before extraordinary item were $.33 and $.56 for the second
quarter of 1999 and 1998, respectively, and $.79 for the year compared to $1.03
for the prior year period.
The Company recorded an extraordinary loss of $19.3 million ($12.0 million after
taxes) in the second quarter, or $.20 per share on a diluted basis, due to the
early extinguishment of its 10 3/4% Senior Notes.
-6-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity needs are primarily for capital investments, working
capital requirements, employee benefit obligations and interest on its
indebtedness. At June 30, 1999 the Company had $141.3 million of cash and cash
equivalents, and also had $164.8 million available under its $200.0 million
Accounts Receivable Purchase Credit Facility.
Cash flow from operations generated $101.8 million for the six months ended June
30, 1999. Net income of $35.5 million and depreciation of $67.1 million account
for this cash generation.
Cash used in investing activities totalled $144.1 million. Capital investments
amounts to $130.8 million with an additional $15.1 million in capitalized
interest. Remaining capital investments for 1999 are expected to total $100.0
million, which will be paid out of existing cash balances and cash generated
from operations.
Cash flows from financing activities generated $100.6 million. On February 10,
1999, the Company issued $450.0 million of 7 7/8% Senior Notes Due 2009. The
Company used $104.0 million for general corporate purposes and the remaining
(after the discount to the initial purchasers and other expenses of the
offering) was invested in short-term interest bearing U.S. Government
obligations. On April 1, 1999, the Company used these proceeds to finance the
$338.1 million cost of redeeming the 10 3/4% Senior Notes Due 2004.
The Company's pension plans are fully funded on an accumulated benefit
obligation basis in accordance with generally accepted accounting principles as
of June 30, 1999. Funding levels in the near term (three to five years) are
expected to be minimal. The Company also has available a pension funding credit
balance of $298.1 million that can be used to meet future funding requirements.
At June 30, 1999 the Company's liability for postretirement benefits other than
pensions totalled $584.3 million. The Company has established a health care
trust as a means of prefunding this liability. The balance of the trust as of
June 30, 1999 is equivalent to over two years of active and retiree health care
payments.
Proposed Acquisition of Armco Inc.
- ----------------------------------
On May 20, 1999, the Company entered into an agreement for the acquisition of
Armco Inc. The acquisition, which is subject to approval by stockholders of
both companies, is expected to be consummated at or shortly after the end of the
third quarter. Under the terms of the agreement, Armco will be merged with and
into the Company's operating subsidiary, AK Steel Corporation. Armco common
stockholders will receive newly-issued shares of common stock of the Company in
exchange for their Armco shares. Holders of two series of preferred shares of
Armco will receive cash in the aggregate amount of approximately $120.0 million
and holders of a third series of Armco preferred stock will receive a
substantially identical new series of preferred stock of the Company. In
addition, AK Steel will assume approximately $225.0 million principal amount of
outstanding Armco senior notes.
The merger will be accounted for as a pooling-of-interests. Combining AK Steel
and Armco also will result in other one-time charges to the Company's results of
operations, the actual amount of which has not yet been determined but which is
expected to range from $230.0 million to $275.0 million. In addition, the
Company expects to record a charge to operations of approximately $20.0 million
to $25.0 million for transaction fees and expenses. It is anticipated that most
of these charges will be recorded during the fourth quarter of 1999.
Year 2000 Readiness
- -------------------
The year 2000 issue arises from the design of computer operating systems and
computer software programs which recognize only two digits in the date field
and, as a result, may interpret "00" incorrectly as the year 1900 instead of as
the year 2000. Such incorrect recognition has the potential to disrupt both
business systems and process control systems, of which the latter could directly
impact the manufacturing process.
The Company has assessed and essentially completed all necessary modifications
and upgrades to its business systems to be year 2000 compliant. Additionally,
with the assistance of outside consultants, the Company has assessed and
essentially completed all necessary modifications and upgrades to its process
control systems to be year 2000 compliant. The Company plans to complete
testing of its business and process control systems by September 30, 1999.
In addition, the Company has responded to numerous customer inquiries on the
year 2000 issue. Inquiries have also been made of the Company's major suppliers
as to their year 2000 readiness. Electronic data interchange testing with
customers and suppliers is expected to be completed by September 30, 1999.
-7-
<PAGE>
The Company currently estimates its expenditures for year 2000 compliance will
approximate $5.0 million, of which $2.6 million has been incurred to date.
Costs are expensed as incurred and paid from general corporate funds and
approximate 10% of the information technology budget. Additional expenditures,
if any, beyond this amount could be required based on the nature and extent of
required modifications or upgrades identified during testing.
Based upon internal assessments, formal communications with suppliers and
customers and work completed to date, the Company believes that year 2000 issues
should not pose significant operational problems or have a material impact on
the Company's consolidated financial position, results of operations or cash
flow. A failure of third party vendors or customers to be year 2000 ready,
however, could adversely affect these beliefs and is not quantifiable. Such
failure could have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flow in a given period, but
probably not over the long-term. The most reasonably likely worst case scenario
of failure by the Company or its suppliers or customers to resolve year 2000
problems would be a temporary slowdown or cessation of manufacturing operations
at one or more of the Company's facilities and a temporary inability on the part
of the Company to timely process orders and to deliver finished products to
customers. Delays in meeting customers' orders would affect the timing of
billings to and payments received from customers with respect to orders and
could result in other liabilities. Customers' year 2000 problems could also
delay the timing of payments to the Company for orders. We are currently
conducting on site year 2000 audits of our key suppliers as a safeguard against
a worse case scenario. We are actively working to complete contingency plans
should unplanned situations arise on January 1, 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In addition to the items discussed below, the Company is also involved in
routine litigation, environmental proceedings, and claims pending with respect
to matters arising out of the normal conduct of the business. In management's
opinion, the ultimate liability resulting from all claims, individually or in
the aggregate, will not materially affect the Company's consolidated financial
position, results of operations or cash flows.
In April, 1996, an action was filed in the United States District Court,
Southern District of Ohio by a number of former employees of the Company seeking
certain pension and post-retirement benefits which they allege were wrongly
denied them when the Company outsourced their positions. On May 7, 1999, the
lawsuit was dismissed following execution of a settlement agreement, the payment
and terms of which were immaterial.
On January 20, 1998, a verdict was issued in the United States District Court,
Southern District of Ohio against the Company in the amount of $6.5 million
following a jury trial in a disability discrimination lawsuit brought by a
former employee. On January 30, 1998, the Company moved for judgment in its
favor as a matter of law, reduction of the damages and a new trial. On August
7, 1998, the court temporarily stayed all post-trial motions pending mediation.
On May 26, 1999, the Court granted the parties' joint motion to reinstate the
case to the active docket.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held on May 20, 1999. In connection with
the meeting, proxies were solicited pursuant to the Securities Exchange Act.
The following are the voting results on proposals considered and voted upon at
the meeting as described in the proxy statement.
All nine nominees for Director listed in the proxy statement were elected.
For Withheld
---------- --------
Allen Born 53,401,977 13,353
John A. Georges 53,402,157 13,173
Dr. Bonnie G. Hill 53,397,208 18,122
Robert H. Jenkins 53,400,682 14,648
Lawrence A. Leser 53,400,277 15,053
Robert E. Northam 53,395,497 19,833
Cyrus Tang 53,401,136 14,194
Dr. James A. Thomson 53,401,526 13,804
Richard M. Wardrop, Jr. 53,401,826 13,504
-8-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - none
B. Form 8-K
Earnings Release April 15, 1999
James M. Banker elected Vice President April 28, 1999
of Sales and Marketing
Announcement of a definitive merger May 24, 1999
agreement with Armco Inc.
Stainless continuous annealing and pickling June 2, 1999
line at Rockport begins operations
-9-
<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 August 12 , 1999 /s/ James L. Wainscott
----------------- -----------------------
James L. Wainscott
Vice President, Treasurer and Chief
Financial Officer
Date August 12 , 1999 /s/ Donald B. Korade
----------------- ---------------------
Donald B. Korade
Controller
-10-
<TABLE> <S> <C>
<PAGE>
<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.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 141
<SECURITIES> 0
<RECEIVABLES> 321
<ALLOWANCES> 0
<INVENTORY> 409
<CURRENT-ASSETS> 883
<PP&E> 3,079
<DEPRECIATION> 749
<TOTAL-ASSETS> 3,449
<CURRENT-LIABILITIES> 496
<BONDS> 1,280
0
0
<COMMON> 1
<OTHER-SE> 956
<TOTAL-LIABILITY-AND-EQUITY> 3,449
<SALES> 1,315
<TOTAL-REVENUES> 1,315
<CGS> 1,084
<TOTAL-COSTS> 1,214
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> 58
<INCOME-TAX> 10
<INCOME-CONTINUING> 48
<DISCONTINUED> 0
<EXTRAORDINARY> (12)
<CHANGES> 0
<NET-INCOME> 36
<EPS-BASIC> .60
<EPS-DILUTED> .25
<FN>
Earnings per share are after extraordinary loss of $.20 per share.
</FN>
</TABLE>
