AK Steel Q2 jumps from net loss to net income of $17.3 million
Staff Writer |
AK Steel reported its financial results for the second quarter of 2016. Net income was $17.3 million, or $0.08 per diluted share of common stock.
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This compares to a net loss of $64 million, or $0.36 per diluted share, for the second quarter of 2015.
The company’s adjusted EBITDA of $99.3 million, or 6.7% of net sales, for the second quarter of 2016 more than doubled from adjusted EBITDA of $47.6 million, or 2.8% of net sales, for the year ago second quarter.
Net sales of $1.49 billion for the second quarter of 2016 decreased from $1.69 billion in the second quarter of 2015, primarily as a result of lower automotive contract pricing compared to a year ago as well as a decrease in shipments.
In the recent second quarter, shipments of 1,555,500 tons represented a decline of 14% compared to 1,811,700 tons from the second quarter a year ago.
The company’s decision to reduce exposure to the commodity carbon steel spot market resulted in a 320,000 ton decline in shipments to the distributors and converters markets, or a 48% reduction from a year ago.
Shipments of higher value coated products, which are sold mostly to the automotive market, increased to 53% of the company’s total shipments in the current second quarter from 45% a year ago.
The company’s adjusted EBITDA more than doubled to $99.3 million in the second quarter of 2016 from the second quarter of 2015, principally due to a better product mix, operational improvements, a continued focus on reducing costs, and lower raw material and energy costs.
The second quarter of 2016 included a LIFO charge of $20.7 million, compared to a LIFO credit of $34.8 million in the second quarter a year ago. Also included in the recent second quarter was approximately $14.1 million of unrealized hedge losses compared to $1.1 million in the same quarter a year ago.
As part of the company’s strategy to enhance its balance sheet, in May 2016 the company issued 59.8 million shares of common stock at $4.40 per share. Net proceeds of $249.4 million were used to reduce debt by repaying outstanding borrowings under the company’s revolving credit facility.
In June 2016, as part of a transaction to refinance its senior secured notes due 2018, the company issued $380.0 million of 7.50% senior secured notes due 2023. Through a concurrent tender offer for the old notes, the company retired $251.7 million in principal amount of old notes, then called the remaining $128.3 million in principal amount, which were subsequently retired in July 2016.
As a result, all of the old notes have been extinguished. Included in other income (expense) in the second quarter of 2016 was $5.6 million of expense related to the tender offer.
The company ended the second quarter of 2016 with total liquidity of $945.0 million.
Cash flows from operating activities for the second quarter of 2016 were $136.3 million and included a $50.6 million contribution from working capital, as the company continued to proactively manage its inventory levels.
The company reduced its debt levels by repaying borrowings under its credit facility by $370.0 million during the second quarter of 2016, largely as a result of the net proceeds from the successful equity offering during the second quarter of 2016 and diligent working capital management. ■