<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, 2000 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 Identification No.)
incorporation or organization)
703 Curtis Street, Middletown, Ohio 45043
(Address of principal executive offices) (Zip Code)
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.
109,652,441 shares of common stock
----------------------------------
(as of July 25, 2000)
<PAGE>
AK STEEL HOLDING CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income -
Three- and Six-Month Periods Ended June 30, 1999 and 2000 2
Condensed Consolidated Balance Sheets -
December 31, 1999 and June 30, 2000 3
Condensed Consolidated Statements of Cash Flows -
Six-Month Periods Ended June 30, 1999 and 2000 4
Notes to Condensed Consolidated Financial Statements 5
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 Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
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<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,
------------------ ------------------
<S> <C> <C> <C> <C>
1999 2000 1999 2000
-------- -------- -------- --------
Net sales $1,113.5 $1,226.1 $2,137.8 $2,365.9
Cost of products sold 896.0 982.4 1,718.0 1,918.9
Selling and administrative expenses 77.9 67.9 151.5 132.8
Depreciation 50.3 60.2 100.4 120.4
-------- -------- -------- --------
Total operating costs 1,024.2 1,110.5 1,969.9 2,172.1
Operating profit 89.3 115.6 167.9 193.8
Interest expense 29.5 34.3 60.0 68.2
Other income 4.9 1.1 9.6 1.5
-------- -------- -------- --------
Income before income taxes 64.7 82.4 117.5 127.1
Income tax provision (Note 4) 28.8 33.3 38.3 51.5
Minority interest 2.0 -- 4.0 --
-------- -------- -------- --------
Income from continuing operations 33.9 49.1 75.2 75.6
Discontinued operations (Note 5) 7.5 -- 7.5 --
-------- -------- -------- --------
Income before extraordinary loss 41.4 49.1 82.7 75.6
Extraordinary loss on retirement of debt, net of tax (Note 6) 11.7 -- 13.4 --
-------- -------- -------- --------
Net income $ 29.7 $ 49.1 $ 69.3 $ 75.6
======== ======== ======== ========
Earnings per share: (Note 2)
Basic earnings per share:
Income from continuing operations $ 0.31 $ 0.44 $ 0.70 $ 0.68
Discontinued operations 0.07 -- 0.07 --
Extraordinary loss on retirement of debt 0.11 -- 0.13 --
-------- -------- -------- --------
Net income $ 0.27 $ 0.44 $ 0.64 $ 0.68
======== ======== ======== ========
Diluted earnings per share:
Income from continuing operations $ 0.31 $ 0.44 $ 0.69 $ 0.68
Discontinued operations 0.07 -- 0.07 --
Extraordinary loss on retirement of debt 0.11 -- 0.13 --
-------- -------- -------- --------
Net income $ 0.27 $ 0.44 $ 0.63 $ 0.68
======== ======== ======== ========
Cash dividends per common share $ 0 .125 $ 0.125 $ 0 . 25 $ 0.25
Common shares and common share equivalents
outstanding (weighted average in millions):
For basic earnings per share 101.1 110.7 100.9 110.9
For diluted earnings per share 101.8 111.5 108.5 111.7
</TABLE>
___________
See notes to condensed consolidated financial statements
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<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1999 2000
------------ --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 54.4 $ 141.5
Accounts receivable 507.2 591.8
Inventories (Note 3) 797.6 776.0
Deferred tax asset 64.5 56.9
Other current assets 8.8 18.8
-------- --------
Total Current Assets 1,432.5 1,585.0
-------- --------
Property, Plant and Equipment 4,573.5 4,633.3
Less accumulated depreciation 1,585.7 1,701.9
-------- --------
Property, plant and equipment, net 2,987.8 2,931.4
-------- --------
Other Assets
AFSG Holdings, Inc. (Note 7) 85.6 85.6
Other investments 51.7 50.9
Goodwill 121.3 118.1
Prepaid pension 122.4 148.1
Deferred tax asset 328.0 289.2
Other 72.2 51.4
-------- --------
TOTAL ASSETS $5,201.5 $5,259.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 496.0 $ 502.4
Accrued liabilities 297.3 311.0
Current portion of long-term debt 5.9 3.3
Current portion of pension and other postretirement benefit obligations 68.8 66.5
-------- --------
Total Current Liabilities 868.0 883.2
-------- --------
Noncurrent Liabilities:
Long-term debt 1,451.0 1,450.6
Postretirement benefit obligation 1,390.7 1,394.7
Other liabilities 214.0 220.4
-------- --------
Total Noncurrent Liabilities 3,055.7 3,065.7
-------- --------
TOTAL LIABILITIES 3,923.7 3,948.9
-------- --------
Stockholders' Equity:
Preferred stock 14.9 12.5
Common stock, authorized 200,000,000 shares of
$.01 par value each; issued 1999, 115,048,490
shares, 2000, 115,828,086 shares; outstanding
1999, 110,640,088 shares, 2000, 109,656,473 shares 1.2 1.2
Additional paid-in capital 1,793.6 1,800.3
Treasury stock, common shares at cost,
1999, 4,408,402 shares; 2000, 6,171,613 shares (80.2) (98.2)
Accumulated deficit (450.0) (402.5)
Accumulated other comprehensive income (loss) (Note 8) (1.7) (2.5)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 1,277.8 1,310.8
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,201.5 $5,259.7
======== ========
</TABLE>
___________
See notes to condensed consolidated financial statements.
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<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1999 2000
------- ------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 148.6 $200.6
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments (170.1) (65.3)
Purchase of long-term investments (0.1) (1.4)
Proceeds from the sale of assets and investments 5.8 4.1
Change in short-term investments (18.0) --
Other 0.7 0.1
------- ------
NET CASH FLOWS FROM INVESTING ACTIVITIES (181.7) (62.5)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5.2 1.6
Proceeds from issuance of long-term debt 460.0 --
Principal payments on long-term debt (440.9) (2.9)
Common stock dividends paid (14.8) (27.8)
Preferred stock dividends paid (4.8) (0.5)
Purchase of common stock, held in treasury (1.2) (18.0)
Purchase of preferred stock -- (2.2)
Underwriting discount and fees (10.3) --
Debt prepayment fees (13.1) --
Other (1.2) (1.2)
------- ------
NET CASH FLOWS FROM FINANCING ACTIVITIES (21.1) (51.0)
------- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (54.2) 87.1
Cash and cash equivalents, beginning of period 346.7 54.4
------- ------
Cash and cash equivalents, end of period $292.5 $141.5
======= ======
Supplemental disclosure of cash flow information:
------------------------------------------------
Cash paid during the period for:
Interest, net of capitalized interest $ 52.9 $ 63.7
Income taxes 5.0 0.7
Supplemental schedule of non-cash investing and financing activities
Issuance of restricted stock $ 11.0 $ 6.0
</TABLE>
___________
See notes to condensed consolidated financial statements.
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<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", and together with AK
Holding, 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, 2000, and the results of its operations for the
three and six-month periods ended June 30, 1999 and 2000, and cash flows
for the six-month periods ended June 30, 1999 and 2000. The results of
operations for the six-month period ended June 30, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31,
2000. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of AK
Holding for the year ended December 31, 1999.
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. Interim
financial information for 1999 has been restated to reflect the merger of
Armco Inc. with and into AK Steel, which was accounted for as a pooling of
interests.
2. Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
<S> <C> <C> <C> <C>
1999 2000 1999 2000
------ ------ ------ ------
Income for calculation of basic earnings per share:
Income from continuing operations $ 33.9 $ 49.1 $ 75.2 $ 75.6
Less: Preferred stock dividends 2.4 0.2 4.9 0.5
------ ------ ------ ------
Income from continuing operations
available to common stockholders 31.5 48.9 70.3 75.1
Discontinued operations 7.5 -- 7.5 --
Extraordinary loss on retirement of debt 11.7 -- 13.4 --
------ ------ ------ ------
Net income available to common stockholders $ 27.3 $ 48.9 $ 64.4 $ 75.1
====== ====== ====== ======
Weighted average common shares (in millions) 101.1 110.7 100.9 110.9
====== ====== ====== ======
Basic earnings per share:
Income from continuing operations $ 0.31 $ 0.44 $ 0.70 $ 0.68
Discontinued operations 0.07 -- 0.07 --
Extraordinary loss on retirement of debt 0.11 -- 0.13 --
------ ------ ------ ------
Net income $ 0.27 $ 0.44 $ 0.64 $ 0.68
====== ====== ====== ======
Income for calculation of diluted earnings per share:
Income from continuing operations $ 33.9 $ 49.1 $ 75.2 $ 75.6
Less: Preferred stock dividends 2.4 -- -- --
------ ------ ------ ------
Income from continuing operations
available to common stockholders 31.5 49.1 75.2 75.6
Discontinued operations 7.5 -- 7.5 --
Extraordinary loss on retirement of debt 11.7 -- 13.4 --
------ ------ ------ ------
Net income available to common stockholders $ 27.3 $ 49.1 $ 69.3 $ 75.6
====== ====== ====== ======
Weighted average common shares (in millions) 101.1 110.7 100.9 110.9
Assumed conversion of preferred stock -- 0.7 7.0 0.7
Common stock options outstanding 0.7 0.1 0.6 0.1
------ ------ ------ ------
Common shares outstanding as adjusted 101.8 111.5 108.5 111.7
====== ====== ====== ======
Diluted earnings per share:
Income from continuing operations $ 0.31 $ 0.44 $ 0.69 $ 0.68
Discontinued operations 0.07 -- 0.07 --
Extraordinary loss on retirement of debt 0.11 -- 0.13 --
------ ------ ------ ------
Net income $ 0.27 $ 0.44 $ 0.63 $ 0.68
====== ====== ====== ======
</TABLE>
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<PAGE>
3. Inventories
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.
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
------------ --------
<S> <C> <C>
Finished and semi-finished $630.4 $656.2
Raw materials 190.0 153.3
------ ------
Total cost 820.4 809.5
Adjustment to state inventories at LIFO value (22.8) (33.5)
------ ------
Net inventories $797.6 $776.0
====== ======
</TABLE>
4. Taxes
The income tax provision for the six-month period ended June 30, 1999
includes an $11.6 recycling tax credit received from the Commonwealth of
Kentucky in the first quarter of that year, but which related to prior
years.
5. Discontinued Operations
Certain of Armco's former businesses included operations in foreign
countries. At the time of their sale or closure, some of these operations
had unresolved tax issues in those countries. Following consultation with
local country advisors in 1999, Armco determined that it had resolved most
of these issues and reversed a majority of the related reserves,
recognizing income in discontinued operations of $7.5, or $0.07 per share
in the three and six months ended June 30, 1999.
6. Extraordinary Loss on Early Retirement of Debt
In the three and six months ended June 30, 1999, the Company recorded
extraordinary losses of $11.7, or $0.11 per share, and $13.4, or $0.13 per
share, respectively, related to the early redemption of AK Steel's 10-3/4%
Senior Notes Due 2004 and Armco's 9-3/8% Senior Notes Due 2000.
7. AFSG Holdings, Inc.
In March 1997, North Atlantic Insurance Company, a group of international
insurance companies previously affiliated with Armco's Financial Services
Group but sold in 1991, filed an application for provisional liquidation in
the United Kingdom. As a result, claims related to certain insurance
policies assumed by North Atlantic were asserted by policyholders against
Northwestern National Insurance Company ("NNIC"). NNIC, which is currently
in runoff, is a subsidiary of AFSG Holdings, Inc. and an indirect
subsidiary of the Company. On April 21, 2000, the U.S. Bankruptcy Court
issued a permanent injunction prohibiting policyholders from asserting
claims related to these policies against NNIC and directing that any such
claims be made against the North Atlantic estate.
8. Comprehensive Income
For the three and six months ended June 30, 1999 and 2000, comprehensive
income is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
<S> <C> <C> <C> <C>
1999 2000 1999 2000
----- ----- ----- -----
Net income $29.7 $49.1 $69.3 $75.6
Other comprehensive income, net of tax:
Foreign currency translation adjustment (0.7) (0.7) (1.1) (1.2)
Unrealized gains/losses on securities:
Unrealized holding gains (losses) arising in period 0.1 -- (0.1) 0.4
Reclass (gains) losses included in net income (0.1) -- (0.4) 0.1
----- ----- ----- -----
Comprehensive income $29.0 $48.4 $67.7 $74.9
===== ===== ===== =====
</TABLE>
9. Segment Information
The Company's Steel Operations consist of the production, finishing and
sale of flat-rolled carbon, stainless and electrical steels. The Company's
Other Operations include an industrial park, the production and sale of
snowplow and ice control products, and the production and sale of steel
pipe and tubular products. The following presents the results of the
Company's Steel Operations and Other Operations.
-6-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales: 1999 2000 1999 2000
-------- -------- -------- --------
Steel Operations $1,039.1 $1,141.5 $2,003.4 $2,213.9
Other Operations 74.4 84.6 134.4 152.0
-------- -------- -------- --------
Total net sales $1,113.5 $1,226.1 $2,137.8 $2,365.9
======== ======== ======== ========
Operating profit: 1999 2000 1999 2000
-------- -------- -------- --------
Steel Operations $ 79.1 $ 105.7 $ 155.1 $ 181.4
Other Operations 10.2 9.9 12.8 12.4
-------- -------- -------- --------
Total operating profit $ 89.3 $ 115.6 $ 167.9 $ 193.8
======== ======== ======== ========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(dollars in millions, except per share and per ton data)
Results of Operations
---------------------
The Company's principal business focus is its Steel Operations, which currently
consist of seven steelmaking and finishing facilities that produce flat-rolled
carbon, stainless and electrical steel products that are sold primarily to the
automotive, appliance, industrial machinery and equipment, and construction
markets, as well as to distributors, service centers and converters. The Company
also produces standard steel pipe and tubular products, as well as snowplows and
ice control products for four-wheel drive light trucks, and operates an
industrial park on the Houston, Texas, ship channel.
For the three months ended June 30, 2000, net sales were $1,226.1, an increase
of 10.1% from the $1,113.5 reported for the corresponding period in 1999. Steel
Operations contributed $1,141.5 to total net sales in the second quarter of
2000, compared to $1,039.1 for the 1999 period, an increase of 9.9%. These
increases were due primarily to continued growth in the percentage of total
shipments attributable to value-added products, consisting primarily of
stainless and electrical steels and coated and cold-rolled carbon steels. For
the three months ended June 30, 2000, value-added products comprised
approximately 89% of total shipments, compared to 81% for the corresponding
period of 1999. This improved product mix, which continued from the first
quarter of 2000, was the primary cause of a nearly 11% increase in net sales for
the six months ended June 30, 2000 to $2,365.9 from the $2,137.8 reported for
the first six months of 1999.
Total steel shipments during the three months ended June 30, 2000, inclusive of
tubular products, declined slightly to 1,710,000 tons from the 1,736,000 tons
shipped in the second quarter of 1999, reflecting the Company's closure in
January 2000 of a redundant galvanizing facility in Dover, Ohio, which had
previously been operated by Armco and accounted for shipments of approximately
58,000 tons in the 1999 period. Total shipments for the first half of 2000 were
3,314,000 tons, compared to 3,374,000 tons for the corresponding 1999 period,
with the decline also being attributable to the effects of the closure of the
Dover facility.
Operating profit for the three months ended June 30, 2000, totaled $115.6, or
$68 per ton shipped, an increase of 29% from the $89.3, or $51 per ton, reported
for the same period in 1999, due primarily to the benefits of the increased
shipments of value-added products, which carry higher margins. Substantially
higher costs in comparison to 1999 for steel scrap, purchased carbon steel slabs
and, most particularly, natural gas in the second quarter of 2000 were partly
offset by higher than expected merger synergies, which totaled nearly $21.0, and
other cost savings through more efficient utilization of production facilities.
For the first half of 2000, operating profit was $193.8, or $58 per ton,
compared to $167.9, or $50 per ton, for the first six months of 1999, reflecting
the benefits of approximately $39.0 of merger synergies and the enhanced product
mix. These benefits were partially offset by higher costs for scrap, purchased
slabs and natural gas, an $11.0 scheduled maintenance outage at the Company's
Middletown Works blast furnace during the first quarter of 2000 and $7.0 of
excess costs during that quarter as a result of the labor dispute at the
Company's Mansfield Works. Although that dispute is continuing, no such excess
costs were incurred in the second quarter.
Interest expense for the three months ended June 30, 2000 increased by $4.8, or
approximately 16.3%, over the corresponding 1999 period, due primarily to a $5.1
reduction in the amount of interest that the Company was permitted to capitalize
in the 2000 period as a result of the completion of construction of its Rockport
Works in the second half of 1999. For the six months ended June 30, 2000, a
$14.0 reduction in capitalized interest was the principal reason for an $8.2
increase in interest expense compared to the first half of 1999. Other income,
consisting
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<PAGE>
primarily of interest earned on cash balances, declined in both the second
quarter and first half of 2000, due to lower average cash balances during those
periods compared to the corresponding periods in 1999.
The book tax rate for 2000 is estimated to be 40%, while the projected cash tax
rate is only 4%. The difference primarily represents changes in the deferred tax
asset for use of the net operating losses, payments on previously accrued
retirement benefits and accelerated tax depreciation over book. The income tax
provision for the six-month period ended June 30, 1999 includes an $11.6
recycling tax credit received from the Commonwealth of Kentucky in the first
quarter of that year, but which related to prior years.
Income from continuing operations for the three months ended June 30, 2000
increased 44.8% to $49.1 from the $33.9 reported for the corresponding period of
1999, reflecting the substantial increase in operating profit during the 2000
period, offset in part by higher interest expense, the decline in other income
and an increased provision for income taxes. However, because operating profit
for the first quarter of 2000 was slightly below that for the corresponding
quarter of 1999, the increased net interest expense and provision for income
taxes during the six months ended June 30, 2000 resulted in income from
continuing operations for that period of $75.6 only slightly higher than the
$75.2 reported for the corresponding period of 1999.
Net income for the three months ended June 30, 2000, which increased by 65.3% to
$49.1, compared to the $29.7 reported for the corresponding period of 1999,
reflected the benefits of the substantial increase in income from continuing
operations during the 2000 period as well as the fact that net income for the
1999 period was adversely affected by a $11.7 extraordinary loss on early
retirement of debt (as described in Note 6), which was offset in part, however,
by $7.5 of income from discontinued operations (as described in Note 5). The
same factors contributed, although to a lesser degree, to the increase in net
income for the first six months of 2000 to $75.6, compared to $69.3 for the
first half of 1999.
Outlook
-------
Due to the normal automotive industry maintenance shutdowns and some softening
in spot market demand, the Company expects third quarter shipments to be
slightly lower than those in the second quarter, although the percentage of
total shipments attributable to value-added products is expected to remain
relatively constant. Although scrap and slab prices appear to have stabilized,
natural gas prices have been rising sharply and, unless offset by other cost
savings, will adversely affect future financial results. The Company has no
maintenance outages planned for the third quarter, but has scheduled a seven-day
outage in the fourth quarter for maintenance and upgrading of melt facilities at
its Butler Works.
Liquidity and Capital Resources
-------------------------------
The Company's liquidity needs are primarily for capital investments, working
capital, employee benefit obligations and interest on outstanding indebtedness.
At June 30, 2000, the Company had $141.5 of cash and cash equivalents, as well
as $218.6 available for borrowings under its $300.0 Accounts Receivable Purchase
Credit Facility. At that date, there were no outstanding borrowings under the
credit facility and availability was affected solely by outstanding letters of
credit.
Cash flow from operations generated $200.6 for the six months ended June 30,
2000. Income, excluding depreciation and amortization and other noncash items,
of $250.5 was partially offset by a net increase in working capital. The working
capital increase reflected higher accounts receivables balances, primarily
related to increased second quarter sales volume, compared to the fourth quarter
of 1999.
During the first six months of 2000, the Company expended $7.0 of cash to fund
expenses related to the Armco merger. Cash expenditures related to the merger
during the remainder of 2000 are not expected to exceed $5.0.
During the six months ended June 30, 2000, cash used in investing activities
totaled $62.5. Capital expenditures were $65.3, including $1.2 in capitalized
interest. Capital investments for the full year of 2000 are expected to total
approximately $165.0 to $175.0 and will be funded by existing cash balances and
cash generated from operations.
During the six months ended June 30, 2000, cash flows from financing activities
used $51.0, including $28.3 for dividends on common and preferred stock and
$19.5 for the purchase of common and preferred stock under the Company's share
repurchase plan.
-8-
<PAGE>
Share Repurchase Plan
---------------------
On April 25, 2000, the Company announced that its Board of Directors had
authorized the Company to repurchase, from time to time, up to $100.0 of its
outstanding equity securities. As of June 30, 2000, the Company had purchased
1,702,500 shares of its common stock and 48,450 shares of its convertible
preferred stock pursuant to this authorization. Those purchases were, and future
purchases will be, funded by existing cash balances and cash generated from
operations.
New Accounting Standards
------------------------
In 1998, The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Company intends to adopt the new standard when required in
2001. At present, the Company does not expect that SFAS No. 133 will have a
material effect on its financial statements.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes some of the staff's interpretations of the
application of generally accepted accounting principles to revenue recognition.
The Company will adopt SAB No. 101 when required in the fourth quarter of 2000.
At present, the Company does not expect that SAB No. 101 will have a material
effect on its financial statements.
Forward-Looking Statements
--------------------------
Certain statements made or incorporated by reference in this Form 10-Q, reflect
management's estimates and beliefs and are intended to be, and are hereby
identified as "forward-looking statements" for purposes of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. As discussed
in its Form 10-K for the year ended December 31, 1999, the Company cautions
readers that such forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from those currently
expected by management. In addition to those noted in the statements themselves,
these factors include, but are not limited to, the following: risks of a
downturn in the general economy or in the highly cyclical steel industry;
volatility in financial markets, which may affect invested pension plan assets
and the calculation of benefit plan liabilities and expenses; changes in demand
for the Company's products; unplanned plant outages, equipment failures or labor
difficulties; actions by the Company's foreign and domestic competitors;
unexpected outcomes of major litigation and contingencies; changes in United
States trade policy and actions with respect to imports; unanticipated increases
in prices for, or disruptions in the supply of, raw materials, supplies or
utilities; actions by reinsurance companies with which AFSG does business, or
foreign or domestic insurance regulators; and changes in application or scope of
environmental regulations applicable to the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On April 19, 2000, a purported class action was filed in the United States
District Court for the Southern District of Ohio by Bernard Fidel against AK
Steel Holding Corporation and certain of its directors and officers, alleging
material misstatements and omissions in the Company's public disclosure about
its business and operations. Since that date, one additional purported class
action has been filed in the same court against the same defendants setting
forth the same allegations as those set forth in the Fidel action. The
defendants intend to vigorously defend these actions.
The Kentucky Natural Resources and Environmental Protection Cabinet instituted
an administrative proceeding against AK Steel in November 1993, alleging certain
regulatory violations. On June 28, 2000, AK Steel and the Kentucky Natural
Resources and Environmental Protection Cabinet reached a settlement concluding
this matter.
Subsequent to a multi-media inspection of AK Steel's Middletown Works during the
fall of 1996, the U. S. Environmental Protection Agency ("USEPA") Region V
notified AK Steel that legal proceedings had been initiated alleging violations
of Clean Air Act and Clean Water Act regulations. On June 29, 2000, USEPA filed
a complaint against AK Steel in the U. S. District Court for the Southern
District of Ohio, for alleged violations of the Clean Air Act, the Clean Water
Act and the Resource Conservation and Recovery Act. On the same date, AK Steel
filed a Verified Complaint for Declaratory and Injunctive Relief in the Court of
Common Pleas for Butler County, Ohio against the State of Ohio and the Ohio
Environmental Protection Agency ("OEPA") seeking a declaration that (a) AK Steel
is in compliance with its operating permits for the blast furnace and basic
oxygen furnaces at its Middletown Works, which would preclude the State of Ohio
and the OEPA from taking any action to order or enforce obligations
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<PAGE>
on AK Steel with respect to those facilities, and (b) that any emissions from
the Middletown Works do not cause, or otherwise contribute to, a public
nuisance. On June 30, 2000, the State of Ohio moved to intervene in the USEPA
action.
On June 7, 2000, USEPA Region III issued to AK Steel's Butler Works an Emergency
Order ("Order") pursuant to the Safe Drinking Water Act, concerning discharge of
nitrate/nitrite compounds to the Connoquenessing Creek, an occasional water
source for the Borough of Zelienople. The Order was issued without any prior
notice to AK Steel. On June 9, 2000, AK Steel filed a Petition for Review and a
Motion for Emergency Stay with the Sixth Circuit Court of Appeals. On June 13,
2000, the Sixth Circuit issued an order denying AK Steel's Motion for Emergency
Stay. AK Steel and USEPA Region III are currently engaged in discussions in an
effort to reach a settlement of this matter.
In January 1996, an action was filed in the Court of Common Pleas of Butler
County, Ohio on behalf of four named plaintiffs who purport to represent a class
of plaintiffs consisting of all hourly employees at AK Steel's Middletown Works
and all hourly employees of independent contractors working at the facility
since June 1992. The plaintiffs alleged negligence and intentional tort, and
sought compensatory and punitive damages in an unspecified amount for alleged
dangerous working conditions at the Middletown Works. In March 1997, the court
granted plaintiffs' motion to certify a class. On May 8, 2000, on motion by AK
Steel, the court vacated the class certification. The plaintiffs did not appeal
the order vacating class certification and the cases will proceed, if at all, as
separate individual actions.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 15, 2000. The sole
item of business at the meeting was the election of directors. All nine nominees
were elected. The following sets forth the voting results:
For Vote Withheld
--- -------------
Allen Born 93,127,505 2,496,489
Donald V. Fites 95,034,237 589,757
John A. Georges 95,044,357 579,637
Dr. Bonnie G. Hill 94,990,849 633,145
Robert H. Jenkins 95,056,195 567,799
Lawrence A. Leser 95,037,763 586,231
Daniel J. Meyer 95,013,755 610,239
Dr. James A. Thomson 95,052,254 571,740
Richard M. Wardrop, Jr. 94,975,738 648,256
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits. None.
---------
B. Reports on Form 8-K.
--------------------
Item Reported Date
------------- ----
Announcement of introduction of a durable
antimicrobial coating for stainless steel May 24, 2000
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<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 July 27, 2000 /s/ James L. Wainscott
---------------------------- ------------------------------------------
James L. Wainscott
Senior Vice President, Treasurer and Chief
Financial Officer
Date July 27, 2000 /s/ Donald B. Korade
---------------------------- ------------------------------------------
Donald B. Korade
Vice President and Controller
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