S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N Deutsche Bank Global Industrials & Materials Summit June 9, 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N We have made forward-looking statements in this presentation that are based on our management’s beliefs and assumptions and on information available to our management at the time such statements were made and hereby are identified as “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “should” or the negative of these terms or similar expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in our forward-looking statements. You should not rely on any forward-looking statements. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include: reduced selling prices, shipments and profits associated with a highly competitive and cyclical industry; increased global steel production and imports; changes in the cost of raw materials and energy; our significant amount of debt and other obligations; severe financial hardship or bankruptcy of one or more of our major customers or key suppliers; reduced demand in key product markets due to competition from aluminum or other alternatives to steel; excess inventory of raw materials; supply chain disruptions or poor quality of raw materials; production disruption or reduced production levels; our healthcare obligations; our pension obligations; not reaching new labor agreements on a timely basis; major litigation, arbitrations, environmental issues and other contingencies; regulatory compliance and changes; climate change and greenhouse gas emission limitations; conditions in the financial, credit, capital and banking markets; our use of derivative contracts to hedge commodity pricing volatility; potential permanent idling of facilities; inability to fully realize benefits of margin enhancement initiatives; and information technology security threats and cybercrime. The risk factors discussed under “Item 1A.—Risk Factors” in AK Holding’s Annual Report on Form 10-K for the year ended December 31, 2015 and under similar headings in AK Holding’s subsequently filed quarterly reports on Form 10-Q could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. We expressly disclaim any obligation to update our forward-looking statements other than as required by law. Non-GAAP financial measures Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors. Because our calculations of these measures may differ from similar measures used by other companies, you should be careful when comparing our non-GAAP financial measures to those of other companies. A reconciliation of non-GAAP financial measures to GAAP financial measures is included in an Appendix to this presentation. Forward-Looking Statements June 2016 2
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 3 Diversified Products Strategic Focus Financial Update Background June 2016 AK Steel: We Can . . . We Will!
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 4 Safety First, First in Safety Note: Based upon most current AISI data available, as of 3Q 2015 Industry Leading Safety Performance June 2016 AK Steel’s safety performance is three times better than AISI composite Last two years, AK Steel had three facilities with no OSHA recordables Dearborn Works had lowest ever annual OSHA recordables in 2015 2.33 2.01 2.45 1.87 1.37 1.70 1.68 1.33 0.29 0.25 0.33 0.32 0.26 0.24 0.25 0.45 0.00 1.00 2.00 3.00 2008 2009 2010 2011 2012 2013 2014 2015 2015 includes Dearborn Works AISI AK Steel
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 5 117 years of steel making expertise and a history of innovation − Shipped first order of electrical steel to Westinghouse in 1903 − Pioneered the world’s first continuous hot rolling sheet mill in the 1920s − Introduced aluminized stainless steels for auto exhaust in 1990s − Introduced advanced high strength steels in 2004 Background Leading position in coated materials for automotive market Growing niche specialty stainless and electrical steel businesses Excellent operational flexibility to drive margin improvement Focusing on higher value, differentiated products Heritage of Success and Innovation June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N Diversified Products Growing Supplier to Major Auto Manufacturers in North America 6 Note: The trademark and logo of each automotive manufacturer is the property of the respective manufacturer Higher value carbon and stainless steels Leading capabilities in more difficult to produce materials for exposed body parts Provide materials for most demanding applications Meeting stringent quality and just-in-time requirements complemented by technical support services June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 7 Diversified Products Four facilities located in Ohio, Indiana and Mexico (3Q 2016) Electric Resistance Welded (ERW) stainless and carbon tubing for automotive / truck and other applications Innovators in the production of tubing made from Advanced High Strength Steels Diameters: 19mm – 168mm Wall thickness: 0.8mm – 4.6mm Annual shipments of ~140 million feet AK Tube Delivering Value to Customers June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 8 Global leader in production of high permeability electrical steels used to manufacture energy-efficient power generation and distribution transformers Focused on innovation and product mix enhancement: − Highest quality product line − Developing even more advanced products − Enhanced operational capabilities Well positioned for increasing demand due to more stringent energy efficiency standards Diversified Products Electrical Steels – Helping to Energize the World June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 9 Strategically Repositioning AK Steel New Direction Has Been Defined Investing resources in higher value products − Minimizing exposure to commoditized products and markets where quality is less valued − Growing market share of carbon coated, automotive stainless and electrical steels Implementing margin enhancement actions − Relentless focus on cost and process improvements − Dedicating capacity to more profitable products Enhancing product portfolio through collaborations Increasing investment in research and innovation June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 10 Strategic focus Strategically Repositioning AK Steel Actions taken to date Temporarily idled Ashland hot end Operating Dearborn, Middletown and Butler at higher rates Reduced commodity grade steel shipments Growing automotive share Process improvements and cost reductions $29 million investment in coating line at Dearborn to provide Next Generation AHSS Expanding capacity for high value-added electrical steels $36 million Research & Innovation Center Increased staffing by ~30% Numerous innovative products in pipeline Optimize footprint Margin enhancement Focus on higher margin products Investment in Research and Innovation Transformation Underway June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N Stainless / Electrical, 14% Coated, 50% Cold-rolled, 18% Hot-rolled, 13% Secondary, 3% Tubular, 2% Stainless / Electrical, 12% Coated, 46% Cold-rolled, 18% Hot-rolled, 20% Secondary, 2% Tubular, 2% 11 High Value Products Transformation Q2 2015 Q1 2016 Upgrading Product Mix to Enhance Margins Note: Based on shipped tons. June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 12 Enhancing Product and Technological Capabilities New Research & Innovation Center New 135,000 square foot Research & Innovation Center Broke ground in June 2015 and on track to open later this year Expected to house ~90 researchers, scientists and engineers Predominantly financed through a long-term capital lease June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 13 June 2016 Product Innovation Recent Product Innovation Advanced High Strength Steel Provides high strength, design flexibility and collision protection Key material for light-weighting vehicles Stainless steel with excellent high temperature strength and superior oxidation resistance Hot-end automotive exhaust applications Formed into tubular product by AK Tube LLC Excellent press-formability High surface quality Homogenous coated surfaces after press forming for light weighting of exposed automotive panels ULTRALUME® Press Hardened Steel THERMAK® 17 Coated Bake Hard 440
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 14 Product Innovation Developing Next Generation Steel Products Next Generation Advanced High Strength Steels Introducing one of the first commercially available Next Generation AHSS Provides greater opportunities for automotive light-weighting Improved formability with higher tensile strength Enhanced Electrical Steel Enhancement to electrical steel product technology Expected to provide lowest core loss for conventional GOES Meets more stringent DOE and European energy and efficiency standards Next Generation Hybrid/EV Motor Provides superior performance compared to conventional non- oriented electrical steels Well positioned for future market growth Multiple material solution provider for auto makers June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 15 Balance Sheet Strategies Top Financial Priority – Target $700 Million Debt Reduction Refinance Senior Secured Notes − Strong collateral package Utilize portion of additional liquidity from recent equity raise to repurchase Senior Unsecured Notes − Open market or privately negotiated transactions − Other capital market transactions Address Convertible Notes − Equitize or issue new convertible debt to extend maturity Position company to opportunistically issue additional equity June 2016 Note: Deleveraging strategy is contingent upon favorable capital market conditions
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N FUTURE2022 2021 2020 2019 2018 2017 2016 16 Note: As of March 31, 2016. Maturities exclude balances drawn under the revolving credit facility that expires in 2019. Excludes $9.6 million capital lease associated with the Research & Innovation Center. ($ Millions) Senior Secured Notes with 4x asset value coverage Exchangeable notes (Convertible) No Near-Term Maturities Manageable Debt Profile June 2016
S A F E T Y | Q U A L I T Y | P R O D U C T I V I T Y | I N N O V A T I O N 17 Focused on Margin Enhancement and Operating Efficiency Significant Progress, More to be Done Multi-material solutions serving critical applications in carbon, stainless and electrical steels Positioned to deliver more value-added, higher-margin products and services Continued focus on growing automotive business Reducing exposure to low-margin commodity grade steel markets Investment in industry-leading product innovation to meet customer needs Improving liquidity and deleveraging balance sheet June 2016
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