We See the Future in STEEL

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We See the Future in STEEL We see the future in STEEL ANNUAL REPORT AND FORM 10-K 2015 2015 AK STEEL ANNUAL REPORT AND FORM 10-K To combat these challenges, our efforts are focused on “margin enhancement.” This starts with the top line – sales – Roger K. Newport what we sell and who we sell to. It Chief Executive Officer also includes lowering costs; both the costs to produce our products and all of our other costs. Max Eward Sharpening our Focus Safety Award Winner A Message from Roger K. Newport We are sharpening our focus on our I am honored to serve as Chief core business – and those products and Executive Officer of AK Steel markets that provide a reasonable return AK Steel’s Middletown Works coke plant and look forward to leading our to our company and our investors. received recognition for its 2015 safety performance. management team as we implement In 2015, we took some difficult yet the future strategy of the company. important actions to better position our Despite the significant headwinds business for long-term success. We wrote our business, and to give back to the we faced in 2015, we improved our off our investment in Magnetation LLC in communities where we work and live. financial performance throughout the the first quarter as a result of the collapse Safety remains our top priority, and year and made progress in safety, in iron ore prices. In December, we idled we continue to lead the industry with quality and lowering our costs. the hot end of our Ashland Works facility. a safety record that is four times better In the fourth quarter of 2015, we And we re-evaluated our investment in a than the steel industry average. achieved our highest adjusted quarterly discontinued insurance operation, took Both Dearborn Works and Mountain EBITDA (earnings before interest, tax, a cash distribution of $14 million and State Carbon greatly improved their safety depreciation and amortization) level are nearing completion of its sale. performance in 2015. A number of other since the third quarter of 2008. These were not easy decisions – plants set new safety records during the For the full-year 2015, our revenues especially the temporary idling of year, while others are continuing record reached approximately $6.7 billion on our Ashland Works hot-end – as we breaking periods with no injuries. Our shipments of about 7 million tons, resulting have about 600 of our hard working Coshocton Works and Zanesville Works in an average selling price of $942 per employees on layoff at this time. We each received awards for safety from the ton. And we ended the year with solid continue to operate our hot dipped Ohio Bureau of Workers’ Compensation liquidity of approximately $700 million. galvanizing line at Ashland Works that Division of Safety and Hygiene in 2015. This was achieved as a result of the primarily serves the automotive market. We are committed to environmental actions and focus of our employees to While these were the necessary stewardship at all of our locations. lower our costs, improve our productivity, actions to take, we continue to make For example, during Dearborn and further enrich our mix toward more improvements in all areas of our business. Works’ first full year under AK Steel’s profitable products and markets. The U.S. remains an attractive Environmental Management System, I want to take this opportunity to thank place to do business; the dollar has our environmental practices were each and every one of our employees for remained strong, with solid market implemented at Dearborn Works. This their outstanding efforts – particularly in demand, especially in the automotive paved the way for a heightened level of the face of adverse market conditions. market. Our operations continue to accountability throughout the operation, Our most significant headwind in perform well as our employees find new and resulted in a dramatic improvement 2015 was caused by the massive global ways to lower costs. It is their daily in Dearborn Works’ environmental oversupply of steel, primarily from China, commitment to continuously improve that performance. In addition, some of our and the direct and indirect impacts differentiates us from our competition. new innovative products continue to of this oversupply in all regions of the I am also very pleased with the provide benefits to the environment. world. And, although AK Steel is not progress of integrating Dearborn Works We were also honored with a supplier a major player in the oil country tubular – including improvements in the areas award for environmental achievement goods business, the significant downturn of safety, environmental, quality and from Honda North America. The in that market contributed to the excess productivity. In 2015, we achieved award recognized an environmental capacity in those markets in which we do $59 million of cost-based synergies from project at our Rockport Works that compete and in the overall steel market. the Dearborn Works acquisition. This is resulted in a substantial reduction in The steel market in the United States more than double our original estimate water and energy consumption. has been flooded with what we believe of $25 million in year one, and above AK Steel and its employees continue to are unfairly traded imports. While import our year two estimate of $50 million. support our local communities. Through levels have indeed begun to decline from the AK Steel Foundation, our employees many of those countries where preliminary Safety, Environment and Communities and our matching gift program, we are duties are being levied, we still face At AK Steel, we strive to operate safely able to make a positive difference in the significant on-going import pressures. and responsibly across all aspects of lives of others through numerous programs, scholarships and grants to nonprofit organizations, including the United Way. In addition, our employees collectively volunteer hundreds of hours of their Rendering of AK Steel’s new world-class Research and Innovation Center. personal time to support non-profit agencies in each of our communities. extent than the spot market decline. Strategic Direction Enhancing Value for our Customers Regardless of these market pressures, Our strategy is to provide the best value AK Steel is the only domestic steel we continue to work with our customers of products and services to our customers, maker to produce carbon, stainless to provide them with our best solutions, while creating a sustainable level of and electrical steel products. We are and best value, to meet their needs. profitability as we continue to innovate uniquely positioned to provide multi- and transform our product portfolio material solutions to serve the critical needs Research and Innovation to best meet our customers’ needs. of our customers around the world. At AK Steel, we see the future in We will continue to look for the best We have taken strategic actions in steel, and we are driving innovation ways to make those changes, focusing order to grow the more differentiated, in every part of our business. For on creating value for our investors, value-added portions of our business each of the markets we serve, we our customers, and our employees. while minimizing exposure to commodity are focused on developing innovative And because the world around us is products. Quite simply, our goal solutions through improved products and changing at a rapid pace, we must is to become the most valued steel processes. In 2015, we continued to remain flexible to meet those needs. supplier in the eyes of our customers. make terrific progress on the research That means we will focus on: The demand in our largest market – and innovation front, and this will be a • Controlling things within our control automotive – remains very strong. In key focus area for us going forward. • Proactively addressing items outside 2015, North American light vehicle We remain committed to the automotive of our control production totaled a record 17.5 market and we work closely with our • Improving our product and market million vehicles and sales to this market customers to provide leading edge mix to optimize our financial returns • Investing in our higher-end represented roughly 60% of our total sales. technology to assist in their ongoing growth products Demand for our high efficiency electrical efforts to reduce vehicle weight. Next • Reviewing every asset, every product steels also remains strong. In the first generation Advanced High Strength and every market quarter of 2016, we will be completing Steels for automotive structures is just one • Developing new, innovative products the final phase of our capital investment to example of innovation in this area. and processes expand our production capabilities for high In 2015, we announced an investment • And above all else, maintaining value-added, grain-oriented electrical steels in our Dearborn Works galvanizing line safety as our number one priority for both the U.S. and the global markets. to produce next generation coated and In closing, I would like to thank Jim This includes installing new equipment cold rolled Advanced High Strength Wainscott for 12 years of leading at Butler Works to upgrade an existing Steel. We expect to begin production the company as President and processing line. The new equipment of these products in late 2016. CEO and his more than 20 years will increase our capacity for producing In our stainless business, we continue of contributions to AK Steel. TRAN-COR® DR® and CARLITE® families to grow sales of CHROMESHIELD® 22. of high permeability grades of steel. Developed by AK Steel researchers for We Can…And We Will! On the stainless side of our business, use in many applications, including food I’d like to thank our employees and our AK Steel remains the market leader in service, automotive and appliances, this shareholders for their support.
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