SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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 incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 703 Curtis Street, Middletown, Ohio | 45043 | |
| (Address of principal executive offices) | (Zip Code) | |
(513) 425-5000
(Registrant’s telephone number, including area code)
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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.
108,704,401 shares of common stock
(as of April 30, 2004)
AK STEEL HOLDING CORPORATION
| Page | ||||
| PART I. |
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| Item 1. | ||||
| Consolidated Statements of Operations - Three-Month Periods Ended March 31, 2003 and 2004 |
1 | |||
| Consolidated Balance Sheets - As of December 31, 2003 and March 31, 2004 |
2 | |||
| Condensed Consolidated Statements of Cash Flows - Three-Month Periods Ended March 31, 2003 and 2004 |
3 | |||
| 4 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 4. | 14 | |||
| PART II. |
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| Item 1. | 14 | |||
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
15 | ||
| Item 5. | 15 | |||
| Item 6. | 16 | |||
| 17 | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
| (unaudited) |
Three Months Ended March 31, |
|||||||
| 2003 |
2004 |
|||||||
| Net sales |
$ | 985.3 | $ | 1,134.4 | ||||
| Cost of products sold |
912.0 | 1,026.4 | ||||||
| Selling and administrative expenses |
59.5 | 52.5 | ||||||
| Depreciation |
56.9 | 54.0 | ||||||
| Total operating costs |
1,028.4 | 1,132.9 | ||||||
| Operating profit (loss) |
(43.1 | ) | 1.5 | |||||
| Interest expense |
28.6 | 29.7 | ||||||
| Other income |
1.2 | 1.6 | ||||||
| Loss before income taxes |
(70.5 | ) | (26.6 | ) | ||||
| Income tax benefit |
28.1 | 10.2 | ||||||
| Loss from continuing operations |
(42.4 | ) | (16.4 | ) | ||||
| Discontinued operations: (Note 6) |
||||||||
| Income from discontinued operations, net of tax |
1.6 | 6.9 | ||||||
| Gain on sale of discontinued operations, net of tax |
— | 174.9 | ||||||
| Net income (loss) |
$ | (40.8 | ) | $ | 165.4 | |||
| Basic and diluted income (loss) per share: (Note 2) |
||||||||
| Loss from continuing operations |
$ | (0.39 | ) | $ | (0.15 | ) | ||
| Income from discontinued operations |
0.01 | 0.06 | ||||||
| Gain on sale of discontinued operations |
— | 1.61 | ||||||
| Net income (loss) per share |
$ | (0.38 | ) | $ | 1.52 | |||
| Common shares and common share equivalents outstanding (weighted average in millions): |
108.4 | 108.7 | ||||||
See notes to consolidated financial statements.
-1-
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
| (unaudited) | ||||||||
| December 31, 2003 |
March 31, 2004 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 54.7 | $ | 299.9 | ||||
| Accounts receivable |
399.3 | 478.2 | ||||||
| Inventories (Note 3) |
730.9 | 782.0 | ||||||
| Deferred tax asset |
99.0 | 108.7 | ||||||
| Current assets held for sale |
46.5 | 1.7 | ||||||
| Other current assets |
27.6 | 28.9 | ||||||
| Total Current Assets |
1,358.0 | 1,699.4 | ||||||
| Property, Plant and Equipment |
4,793.9 | 4,804.8 | ||||||
| Less accumulated depreciation |
(2,360.0 | ) | (2,414.1 | ) | ||||
| Property, plant and equipment, net |
2,433.9 | 2,390.7 | ||||||
| Other Assets: |
||||||||
| Investment in AFSG Holdings, Inc. |
55.6 | 55.6 | ||||||
| Other investments |
110.0 | 92.8 | ||||||
| Goodwill |
37.1 | 37.1 | ||||||
| Other intangible assets |
80.3 | 80.2 | ||||||
| Deferred tax asset |
827.5 | 793.9 | ||||||
| Non-current assets held for sale |
65.5 | 28.6 | ||||||
| Other assets |
57.7 | 53.8 | ||||||
| TOTAL ASSETS |
$ | 5,025.6 | $ | 5,232.1 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes payable |
$ | — | $ | 80.0 | ||||
| Accounts payable |
376.3 | 327.5 | ||||||
| Accrued liabilities |
181.9 | 203.5 | ||||||
| Current liabilities of discontinued operations |
16.8 | 0.6 | ||||||
| Current portion of long-term debt |
62.5 | 62.5 | ||||||
| Current portion of pension and other postretirement benefit obligations |
141.4 | 141.4 | ||||||
| Total Current Liabilities |
778.9 | 815.5 | ||||||
| Non-current Liabilities: |
||||||||
| Long-term debt |
1,197.8 | 1,197.9 | ||||||
| Pension and other postretirement benefit obligations |
2,940.6 | 2,956.7 | ||||||
| Non-current liabilities of discontinued operations |
9.1 | — | ||||||
| Other liabilities |
152.0 | 145.6 | ||||||
| Total Non-current Liabilities |
4,299.5 | 4,300.2 | ||||||
| TOTAL LIABILITIES |
5,078.4 | 5,115.7 | ||||||
| Stockholders’ Equity: |
||||||||
| Common stock, authorized 200,000,000 shares of $.01 par value each; issued 2003, 117,082,911 shares, 2004, 117,247,012 shares; outstanding 2003, 108,577,655 shares, 2004, 108,706,511 shares |
1.2 | 1.2 | ||||||
| Additional paid-in capital |
1,815.9 | 1,817.1 | ||||||
| Treasury stock, common shares at cost, 2003, 8,505,256 shares; 2004, 8,540,501 shares |
(122.7 | ) | (122.8 | ) | ||||
| Accumulated deficit |
(1,544.2 | ) | (1,378.8 | ) | ||||
| Accumulated other comprehensive loss (Note 7) |
(203.0 | ) | (200.3 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY |
(52.8 | ) | 116.4 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 5,025.6 | $ | 5,232.1 | ||||
See notes to consolidated financial statements.
-2-
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
| (unaudited) |
Three Months Ended March 31, |
|||||||
| 2003 |
2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | (40.8 | ) | $ | 165.4 | |||
| Depreciation and amortization |
59.3 | 57.8 | ||||||
| Deferred income taxes |
(28.1 | ) | (10.7 | ) | ||||
| Pension and other postretirement benefit expense in excess of payments |
41.0 | 16.2 | ||||||
| Exclusion of income from and gain on sale of discontinued operations |
(1.6 | ) | (181.8 | ) | ||||
| Working capital |
(53.0 | ) | (162.3 | ) | ||||
| Other |
1.4 | (3.7 | ) | |||||
| Net cash flows from operating activities of continuing operations |
(21.8 | ) | (119.1 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Capital investments |
(15.0 | ) | (10.8 | ) | ||||
| Purchase of investments |
(0.9 | ) | — | |||||
| Proceeds from sale of business |
— | 263.9 | ||||||
| Proceeds from sale of investments |
1.3 | 18.8 | ||||||
| Other |
(0.3 | ) | (0.1 | ) | ||||
| Net cash flows from investing activities of continuing operations |
(14.9 | ) | 271.8 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from issuing notes payable |
— | 80.0 | ||||||
| Purchase of treasury stock |
(0.5 | ) | (0.2 | ) | ||||
| Other |
0.9 | (0.1 | ) | |||||
| Net cash flows from financing activities of continuing operations |
0.4 | 79.7 | ||||||
| Cash flows from discontinued operations |
3.0 | 12.8 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(33.3 | ) | 245.2 | |||||
| Cash and cash equivalents, beginning of period |
282.5 | 54.7 | ||||||
| Cash and cash equivalents, end of period |
$ | 249.2 | $ | 299.9 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Net cash paid (received) during the period for: |
||||||||
| Interest, net of capitalized interest |
$ | 24.9 | $ | 26.4 | ||||
| Income taxes |
(0.1 | ) | 0.1 | |||||
| Supplemental disclosure of non-cash investing and financing activities — Issuance of restricted stock |
$ | 5.3 | $ | 0.8 | ||||
See notes to consolidated financial statements.
-3-
NOTES TO 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 consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2004 and the results of its operations and cash flows for the three-month periods ended March 31, 2003 and 2004. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2003.
| 2. | Earnings Per Share |
| Three Months Ended March 31, |
||||||||
| 2003 |
2004 |
|||||||
| Income (loss) for calculation of basic and diluted earnings per share: |
||||||||
| Loss from continuing operations |
$ | (42.4 | ) | $ | (16.4 | ) | ||
| Income from discontinued operations |
1.6 | 6.9 | ||||||
| Gain on sale of discontinued operations |
— | 174.9 | ||||||
| Net income (loss) |
$ | (40.8 | ) | $ | 165.4 | |||
| Weighted average common shares (in millions) |
108.4 | 108.7 | ||||||
| Basic and diluted income (loss) per share: |
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