UPDATE: AK Steel (AKS) Trades Lower with Q1 Conference Call Ongoing

(Updated - April 25, 2017 11:30 AM EDT)

AK Steel (NYSE: AKS) Trades Lower with Q1 Conference Call Ongoing.

Below were the CEO's opening remarks:

Thank you, Doug. Good morning, and thanks for joining us on the first quarter investor conference call. I am pleased to report that we are off to a great start in 2017 with solid first quarter results in terms of safety, quality, environmental, operations and our financial performance. We reported net income of $62.5 million or $0.19 per diluted share, and we achieved adjusted EBITDA of $143 million. Our first quarter performance is a result of the margin enhancement strategy we initiated over a year ago. Key components include: Realigning our sales with those customers and markets where we can generate reasonable returns over the market cycles; further optimizing our assets; leaving no stone unturned in seeking to lower our operating costs; and derisking our business, where possible, all with the goal of improving our margins. We continue to pursue these strategic actions while never lose inside of our #1 priority, safety. I am pleased to report that 6 of our facilities had 0 OHSA recordable cases in the first quarter. Also during the quarter, employees at our Zanseville Works were recognized for outstanding safety performance by both the Ohio Bureau of Workers' Comp and the Zanseville [ph] County Safety Council. These safety awards were given in recognition of working the entire year of 2016 without any lost time injuries, having the lowest incident rate and for the longer-term achievements of working over 5.4 million man-hours without a lost time injury. So I would like to take time to recognize and thank our employees who make health and safety a priority, with special recognition to our team at Zanesville Works for their extraordinary safety performance. And speaking of employees, I would also like to recognize the leadership of the United Steel Workers Union at our Mansfield Works for ratifying a new 4-year labor agreement last month that addresses both the needs of our employees and our company. At the beginning of 2016, we stated that one of our objectives was to deleverage and derisk our balance sheet. Since that time, we have made great progress in this objective, and we continue to do so in the first quarter this year. During the first quarter, we were opportunistic and took actions that will strengthen our financial position as we further reduced our long-term debt levels, lowered our cash interest cost and extended our debt maturity profile. These actions complemented several other balance sheet enhancing activities taken throughout 2016. Collectively, these actions have and will improve our financial flexibility and demonstrate that we are executing our strategy to significantly enhance our balance sheet. So I'd like to recognize our finance team, HR and legal teams for their successful execution of all these transactions over the past year or so. As we enter 2017, we continued our fight for fair trade in the steel industry in the United States. We must have a level playing field and our trade laws must be enforced. We want to thank the Trump administration for making a major move towards leveling the playing field for the steel industry in the United States by initiating a Section 232 investigation last week to determine the national security implications of imports of foreign-produced steel. While we recognize this is a trade tool not frequently used in the past by our government, we believe it is appropriate. The current global oversupply of steel and resulting flood of cheap imports have not and cannot be addressed by traditional trade cases alone. While those cases have had positive effects, they are limited in scope to only certain products and certain countries. This creates opportunities for offending countries to work around the trade case orders by making only slight modifications to products or shipping through non-named countries. The result is that despite the hundreds of successful steel trade cases on the books, the foreign steel import market shares continues to hove around 26%. From our perspective, the national security implications of unchecked imports are very real. Especially in the electrical steel market where we are the sole U.S. supplier. Our grain-oriented electrical steels are critical to our national electric grid system. In recent months, we have seen an increase in the level of grain-oriented electrical steel or ghost imports entering into the United States, especially from China, Korea and Japan, in particular. We believe the situation involving grain-oriented electrical steel is a matter of national security. We believe it is important that the United States not be put into a position in the long term where a country becomes heavily or solely dependent on obtaining steel and/or other components of electrical transformers from China, Japan or other foreign countries. Because virtually, every household and business in this country relies on electricity, we believe the security and long-term liability of our electrical infrastructure is a national imperative. The electrical steel we produced are among the most energy-efficient, and we continue to be well-positioned to serve our domestic and global customers as they drive to meet the increasingly stringent energy efficiency regulations, both in the United States and in Europe. Our researchers continue to work on identifying new, more energy efficient electrical steel products, both for the power distribution and the electric vehicle markets. But we are making technical advancements with our electrical steel products, we must also address the import pressures caused by the prior failed ghost trade case and we look forward to working with the Department of Commerce to establish a case for strong remedy under the Section 232 investigation. This will help us address unfair trade not only in the electrical steel market but also with our carbon and stainless steel products. Speaking of stainless steel, we were pleased with the progress made on the stainless front as the U.S. International Trade Commission determined that the steel industry in the United States has been materially injured by unfairly traded stainless steel imports from China. As a result, the Department of Commerce imposed antidumping duties on stainless steel imports from China, ranging from 63% to 76% and countervailing duties ranging from 75% to 190%. On the carbon steel front, the anticircumvention cases against China for cold-rolled and coated carbon steels routed through Vietnam continue to move forward, and we expect final determination in the next several months. We are also encouraged by the administration's drive to invest in our nation's infrastructure, reform our tax code to incentivize investment in the U.S., take actions to address burdensome regulations at manufacturing growth in the United States and the NAFTA trade enforcement of policies that will grow our economy. We believe these actions are critical to achieving economic growth that will truly spur increased investments and job creation, including in the steel industry. With the expected actions by the administration to stimulate economic growth and with our continued progress in product and process innovation, we remain very optimistic for increased demand in the steel industry in the future. Meanwhile, we continue to enhance our product portfolio with every new and innovative product offerings. As I discussed during the fourth quarter investor call, we recently opened our new research and innovation center and completed a major capital investment in our Dearborn Works active galvanizing line. This has positioned us to launch our innovative NEXMET advanced high-strength steel products for use in the automotive lightweighting applications, specifically designed to help our customers meet future CAFE requirements. Over the past few weeks, we delivered on our commitment to provide initial samples of NEXMET 1000 and NEXMET 1200 advanced high-strength steel products to automotive customers in the early part of 2017. This is an important step in the customer qualifications process. Now I'd like to provide you some perspective on the various markets that we serve. In our biggest market, the automotive market, most industry sources are presently predicting a modest decline year-over-year of 1% to 3%, in light of light vehicle build rates in North America. If this modest decline should indeed materialize, this will still represent another solid year for the automotive industry. It is anticipated that most of the forecasted reduction in automotive build rates will take place on small- and medium-sized vehicle platforms. However, the majority of our automotive shipments are used in the production of larger vehicles, such as pickup trucks and SUVs, which continue to experience very high sale levels in the U.S. So we would expect the predicted automotive downturn to have less of an impact on our business than it might have on others. On the housing front, in 2016, housing starts were 1.17 million units and 2017 is expected to exhibit modest year-on-year growth. Forecasters currently project housing starts of about 1.28 million units in 2017 and the March rate achieved this annualized level. Now while housing starts are up, they're still below the historical levels of about 1.5 million units. This continued growth should help support demand for a variety of our carbon stainless electrical steel products. With regard to the carbon spot market, pricing has been very volatile, especially with rising raw material costs, primarily as a result of the increasing cost for raw materials, we announced 3 carbon steel price increases in the first quarter totaling $100 per ton and also announced a stainless steel price increase in March. The price increases are also being supported by relatively low levels of seasonally adjusted service center inventories, which in March were reported to be about 2 months of inventory for carbon products. Our limited exposure to the spot market in our announced price increases are consistent with our objective to enhance margins over the long-term and through the market cycles. Switching to the electrical steel market, demand in the United States remains fairly robust as housing starts continued their steady growth. However, we continue to see weakness in international markets as global overcapacity has led to depressed electrical steel pricing. While conditions in the global electrical steel market remains volatile, we continued to be well-positioned to serve this market and provide our customers with high-efficiency products. On the stainless steel front, demand is expected to increase slightly in 2017 after 2 fairly stable years. This improvement will likely be driven by the expected increase in demand in the housing and construction markets and by overall consumer demand. And the seasonally adjusted service center inventories at the end of March remained at relatively low levels about 2.9 months of inventory. Although we believe that the favorable stainless steel trade case ruling against China has had a positive impact on domestic market conditions, we continued to see evidence of other countries now filling the China void. We will continue to monitor this closely and will work with the new administration to ensure that duties and trade laws are actively enforced. I would (inaudible) 1 important distinction in our stainless steel business, the demand for our chrome stainless products mostly 400 series products, is driven in large part by the automotive industry. We continue to limit our exposure to the other more commoditized portions of the stainless steel market. In summary, our first quarter performance continues to build on the accomplishments we achieved in 2016, and we are further strengthening our foundation for the future. Our focus remains on enhancing long-term shareholder value, and we will continue to identify ways to expand downstream to add more value to our flat-rolled and tubular steel products. In addition, our progress of innovation brand, including next-generation and third-generation of steel products, along with new breakthroughs will continue to create value for our company as we drive our strategy in developing transformational products to surpass our customers current and their future needs. We made great progress in the execution of our strategy and the benefits continue to be reflected in our operating results. While we have made significant progress, the AK Steel team is committed to implementing additional actions to enhance our margins over the long-term and ultimately, to add value to our company. Before turning the call over to Jaime for his comments on our financial performance, I'd like to leave you with these thoughts. We communicated our strategy at the beginning of 2016 that we made great progress in executing that strategy. We continue to focus on enhancing our margins and while this tactically includes reducing our operating costs, we are also making sure, we maintain our equipment to ensure stable operations to serve our customers. With our new Research and Innovation Center and our expanded innovation team, we will continue to accelerate our research and innovation activities, including the launch of new products and further development of advanced high-strength steel products with a new equipment on our Dearborn Works galvanizing line. We have substantially deleveraged our balance sheet and we will be opportunistic in the future to implement actions to further enhance our balance sheet and overall financial flexibility. We will seek downstream opportunities to further enhance the value of our carbon, stainless and electrical steel products and all of our actions and the execution of this strategy are focused on creating additional value for our shareholders. As we have demonstrated over the last 5 quarters, we will go to the control those items that are within our control and we will continue to implement our strategy. As we move forward, I'm excited about the future of AK Steel and I believe that the efforts and actions of our entire AK Steel team will continue to enhance the value for our company. Now I'd like to turn it over to Jaime.

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