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Supplementary Financial Statement Information (Notes)
 12 Months Ended
Dec. 31, 2018
Supplementary Financial Statement Information [Abstract]  
Supplementary Financial Statement Information Supplementary Financial Statement Information
 

Revenue

Net sales by market are presented below:
 
2018
 
2017
 
2016
Automotive
$
4,284.7

 
$
3,951.5

 
$
3,906.8

Infrastructure and Manufacturing
1,049.1

 
948.0

 
936.7

Distributors and Converters
1,484.4

 
1,181.0

 
1,039.0

Total
$
6,818.2

 
$
6,080.5

 
$
5,882.5


Net sales by product line are presented below:
 
2018
 
2017
 
2016
Carbon steel
$
4,409.1

 
$
4,034.5

 
$
4,014.5

Stainless and electrical steel
1,793.8

 
1,687.6

 
1,654.1

Tubular products, components and other
615.3

 
358.4

 
213.9

Total
$
6,818.2

 
$
6,080.5

 
$
5,882.5



We sell domestically to customers located primarily in the Midwestern and Eastern United States and to foreign customers, primarily in Canada, Mexico and Western Europe. Net sales to customers located outside the United States totaled $634.8, $627.1 and $655.6 for 2018, 2017 and 2016.

Research and Development Costs

We conduct a broad range of research and development activities aimed at improving existing products and manufacturing processes and developing new products and processes. Research and development costs, which are recorded as cost of products sold when incurred, totaled $29.4, $28.1 and $28.3 in 2018, 2017 and 2016.

Allowance for Doubtful Accounts

Changes in the allowance for doubtful accounts for the years ended December 31, 2018, 2017 and 2016, are presented below:
 
2018
 
2017
 
2016
Balance at beginning of year
$
6.8

 
$
7.8

 
$
6.0

Increase (decrease) in allowance
0.3

 
(1.0
)
 
2.4

Receivables written off
(0.5
)
 
—

 
(0.6
)
Balance at end of year
$
6.6

 
$
6.8

 
$
7.8



Inventory

Inventories as of December 31, 2018 and 2017, consist of:
 
2018
 
2017
Finished and semi-finished
$
1,054.4

 
$
996.8

Raw materials
365.5

 
388.2

Inventory
$
1,419.9

 
$
1,385.0



Adoption of New Accounting Principle

In the first quarter of 2018, we changed our accounting method for valuing certain inventories from the LIFO method to the average cost method. This method values inventory using average costs for materials and most recent production costs for labor and overhead. We believe that using the average cost method is preferable since it improves comparability with our peers, more closely tracks the physical flow of our inventory, better matches revenue with expenses and aligns with how we internally manage our business.

The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to all periods presented. As a result of the retrospective application of the change in accounting principle, certain financial statement line items in our consolidated balance sheet as of December 31, 2017 and our consolidated statements of operations, comprehensive income and cash flows for years ended December 31, 2017 and 2016 were adjusted as follows:
 
As Originally Reported
 
Effect of Change
 
As Adjusted
Consolidated statement of operations for the year ended December 31, 2017:
 
 
 
 
 
Cost of products sold (a)
$
5,365.2

 
$
(112.1
)
 
$
5,253.1

Income tax expense (benefit)
(17.0
)
 
14.8

 
(2.2
)
Net income
67.6

 
97.3

 
164.9

Net income attributable to AK Steel Holding Corporation
6.2

 
97.3

 
103.5

Net income per share attributable to AK Steel Holding Corporation common stockholders:
 
 
 
 
 
Basic
$
0.02

 
$
0.31

 
$
0.33

Diluted
0.02

 
0.30

 
0.32

 
 
 
 
 
 
Consolidated statement of comprehensive income for the year ended December 31, 2017:
 
 
 
 
 
Cash flow hedges—Reclassification of losses (gains) to net income
$
(12.5
)
 
$
6.4

 
$
(6.1
)
Comprehensive income
91.1

 
112.3

 
203.4

Comprehensive income attributable to AK Steel Holding Corporation
29.7

 
112.3

 
142.0

 
 
 
 
 
 
Consolidated balance sheet as of December 31, 2017:
 
 
 
 
 
Inventory
$
1,147.8

 
$
237.2

 
$
1,385.0

Other non-current assets
169.3

 
(58.5
)
 
110.8

Other non-current liabilities
161.6

 
7.3

 
168.9

Accumulated deficit
(3,058.6
)
 
181.6

 
(2,877.0
)
Accumulated other comprehensive loss
(40.0
)
 
(10.2
)
 
(50.2
)
 
 
 
 
 
 
Consolidated statement of cash flows for the year ended December 31, 2017:
 
 
 
 
 
Net income
$
67.6

 
$
97.3

 
$
164.9

Deferred income taxes
(15.2
)
 
6.2

 
(9.0
)
Changes in working capital
1.8

 
(118.5
)
 
(116.7
)
Other operating items, net
5.1

 
15.0

 
20.1

 
 
 
 
 
 
Consolidated statement of operations for the year ended December 31, 2016:
 
 
 
 
 
Cost of products sold (a)
$
5,070.6

 
$
29.1

 
$
5,099.7

Income tax expense (benefit)
3.2

 
(20.1
)
 
(16.9
)
Net income
58.2

 
(9.0
)
 
49.2

Net income attributable to AK Steel Holding Corporation
(7.8
)
 
(9.0
)
 
(16.8
)
Net income per share attributable to AK Steel Holding Corporation common stockholders:
 
 
 
 
 
Basic
$
(0.03
)
 
$
(0.04
)
 
$
(0.07
)
Diluted
(0.03
)
 
(0.04
)
 
(0.07
)
 
 
 
 
 
 
Consolidated statement of comprehensive income for the year ended December 31, 2016:
 
 
 
 
 
Cash flow hedges—Reclassification of losses (gains) to net income
$
27.2

 
$
11.9

 
$
39.1

Comprehensive income
181.9

 
(8.1
)
 
173.8

 
As Originally Reported
 
Effect of Change
 
As Adjusted
Comprehensive income attributable to AK Steel Holding Corporation
115.9

 
(8.1
)
 
107.8

 
 
 
 
 
 
Consolidated statement of cash flows for the year ended December 31, 2016:
 
 
 
 
 
Net income
$
58.2

 
$
(9.0
)
 
$
49.2

Deferred income taxes
5.0

 
(9.1
)
 
(4.1
)
Changes in working capital
112.4

 
17.2

 
129.6

Other operating items, net
2.1

 
0.9

 
3.0

(a)
Cost of products sold as originally reported reflects the change in presentation of pension and OPEB (income) expense further described in Note 1.

The following table shows the effects of the change in accounting principle from LIFO to average cost as of December 31, 2018 and for the year ended December 31, 2018:
 
As Computed under LIFO
 
As Reported under Average Cost
 
Effect of Change
Consolidated statement of operations for the year ended December 31, 2018:
 
 
 
 
 
Cost of products sold
$
5,966.7

 
$
5,911.0

 
$
(55.7
)
Income tax expense (benefit)
(19.4
)
 
(6.2
)
 
13.2

Net income
201.6

 
244.1

 
42.5

Net income attributable to AK Steel Holding Corporation
143.5

 
186.0

 
42.5

Net income per share attributable to AK Steel Holding Corporation common stockholders:
 
 
 
 
 
Basic
$
0.46

 
$
0.59

 
$
0.13

Diluted
0.45

 
0.59

 
0.14

 
 
 
 
 
 
Consolidated statement of comprehensive income for the year ended December 31, 2018:
 
 
 
 
 
Comprehensive income
$
151.0

 
$
193.5

 
$
42.5

Comprehensive income attributable to AK Steel Holding Corporation
92.9

 
135.4

 
42.5

 
 
 
 
 
 
Consolidated balance sheet as of December 31, 2018:
 
 
 
 
 
Inventory
$
1,128.7

 
$
1,419.9

 
$
291.2

Other non-current assets
180.9

 
103.9

 
(77.0
)
Other non-current liabilities
132.0

 
134.0

 
2.0

Accumulated deficit
(2,915.9
)
 
(2,691.8
)
 
224.1

 
 
 
 
 
 
Consolidated statement of cash flows for the year ended December 31, 2018:
 
 
 
 
 
Net income
$
201.6

 
$
244.1

 
$
42.5

Deferred income taxes
(21.2
)
 
(8.0
)
 
13.2

Changes in working capital
66.7

 
12.7

 
(54.0
)
Other operating items, net
4.1

 
2.4

 
(1.7
)


Property, Plant and Equipment

Property, plant and equipment as of December 31, 2018 and 2017, consist of:
 
2018
 
2017
Land, land improvements and leaseholds
$
272.1

 
$
275.3

Buildings
509.7

 
509.0

Machinery and equipment
6,061.6

 
5,958.2

Construction in progress
125.8

 
89.3

Total
6,969.2

 
6,831.8

Less accumulated depreciation
(5,057.6
)
 
(4,845.6
)
Property, plant and equipment, net
$
1,911.6

 
$
1,986.2



Interest on capital projects capitalized in 2018, 2017 and 2016 was $1.6, $1.9 and $3.1. Asset retirement obligations were $8.5 and $7.8 at December 31, 2018 and 2017.

Goodwill and Intangible Assets

Changes in goodwill for the years ended December 31, 2018, 2017 and 2016 are presented below:
 
2018
 
2017
 
2016
Balance at beginning of year
$
253.8

 
$
32.8

 
$
32.8

Acquisition
1.2

 
221.0

 
—

Balance at end of year
$
255.0

 
$
253.8

 
$
32.8



Intangible assets at December 31, 2018 and 2017, consist of:
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
As of December 31, 2018
 
 
 
 
 
Customer relationships
$
36.6

 
$
(7.4
)
 
$
29.2

Technology
19.3

 
(4.6
)
 
14.7

Other
1.0

 
(1.0
)
 
—

Intangible assets
$
56.9

 
$
(13.0
)
 
$
43.9

 
 
 
 
 
 
As of December 31, 2017
 
 
 
 
 
Customer relationships
$
36.6

 
$
(2.2
)
 
$
34.4

Technology
19.3

 
(1.4
)
 
17.9

Other
1.0

 
(0.4
)
 
0.6

Intangible assets
$
56.9

 
$
(4.0
)
 
$
52.9



Amortization expense related to intangible assets was $9.0 and $4.0 in 2018 and 2017. Amortization expense is included in costs of products sold. The remaining average life of our intangible assets is 5.6 years for customer relationships and 4.6 years for technology. Estimated annual amortization expense for intangible assets over the next five years is $8.4 each year from 2019 through 2022 and $7.1 in 2023.

Other Non-current Assets

Other non-current assets as of December 31, 2018 and 2017, consist of:
 
2018
 
2017
Investments in affiliates
$
80.5

 
$
77.5

Other
23.4

 
33.3

Other non-current assets
$
103.9

 
$
110.8



Accrued Liabilities

Accrued liabilities as of December 31, 2018 and 2017, consist of:
 
2018
 
2017
Salaries, wages and benefits
$
127.8

 
$
101.3

Interest
34.8

 
35.0

Other
126.3

 
134.2

Accrued liabilities
$
288.9

 
$
270.5



Ashland Works Closure

In January 2019, our Board of Directors approved and we announced that we intend to close our Ashland Works, including the previously idled blast furnace and steelmaking operations (“Ashland Works Hot End”) and a single hot dip galvanizing coating line that had remained operational, subject to negotiations with the labor union at that facility. Factors that influenced our decision to close Ashland Works included an uncertain global trade landscape influenced by shifting domestic and international political priorities, Ashland Works’ high cost of production, and continued intense competition from domestic and foreign steel competitors. These conditions directly impact our pricing, which in turn directly impacts our assessment of the demand forecasts for the markets we serve. Despite several successful trade actions, we continue to see a high level of carbon steel imports driven by global overcapacity, particularly in China. We also have seen significant capacity restarted or new capacity additions announced in the United States. In addition, we have recently concluded that we have sufficient coating capacity to meet our customers’ needs without using our coating operations at Ashland Works. We will continue to operate the Ashland Works coating line until the end of 2019 to allow us time to complete the transition of products to our other coating lines in the U.S.

We expect to record a charge of approximately $80.0 during the first quarter of 2019, which includes approximately $20.0 for termination of certain take-or-pay supply agreements, approximately $30.0 for supplemental unemployment and other employee benefit costs, an estimated multiemployer plan withdrawal liability of $25.0, and approximately $5.0 for other costs. The supplemental unemployment and other employee benefit costs are expected to be paid primarily in 2020 and 2021. With respect to the $80.0 charge, we expect to make cash payments of approximately $15.0 in 2019, $30.0 in 2020 and the remaining amount over several years thereafter. The actual multiemployer plan withdrawal liability will not be known until 2020 and is expected to be paid over a number of years. In addition to the $80.0 charge recorded in the first quarter of 2019, we expect to record expenses of approximately $14.0 over the full-year 2019, consisting of cash costs of approximately $10.0 related to closing the facility and $4.0 of accelerated depreciation related to the coating line fixed assets. These cash costs related to closing the facility will decline in future years and the accelerated depreciation expense will not be incurred beyond 2019. On-going costs for maintenance of the equipment, utilities and supplier obligations related to the idled Ashland Works Hot End were $20.0, $21.2, and $22.1 for the years ended December 31, 2018, 2017, and 2016.

In the fourth quarter of 2015, we temporarily idled the Ashland Works Hot End. We incurred charges of $28.1 in the fourth quarter of 2015, which included $22.2 for supplemental unemployment and other employee benefit costs and $5.9 for equipment idling, asset preservation and other costs. The supplemental unemployment and other employee benefit costs were recorded as accrued liabilities, and the activity for the years ended December 31, 2018, 2017, and 2016 was as follows:
 
 
2018
 
2017
 
2016
Balance at beginning of year
 
$
1.5

 
$
6.2

 
$
22.2

Payments
 
(1.5
)
 
(5.3
)
 
(20.1
)
Additions to the reserve
 
—

 
0.6

 
4.1

Balance at end of year
 
$
—

 
$
1.5

 
$
6.2



During 2017, we recognized a non-cash asset impairment charge of $75.6, primarily related to the long-lived assets associated with the Ashland Works Hot End.