Interest Rate Stabilization Provision to Benefit AK Steel and Its Retirees
West Chester, OH, August 08, 2014—AK Steel (NYSE: AKS) said today that it applauds the enactment of the Highway and Transportation Funding Act, legislation that is vital to maintaining and improving America’s infrastructure – much of which is made with steel. In addition to bolstering the Highway Trust Fund, the legislation contains an interest rate stabilization provision for companies that sponsor defined benefit employee pension plans, such as AK Steel.
The pension stabilization provision is meaningful to AK Steel and its retirees in several ways. For the company, the provision ensures that its pension funding obligations will not dramatically increase when interest rates are low, which can free up capital for the good of the business. For its retirees, the provision offers a sense of security, as it continues to require companies to meet certain funding requirements even when interest rates rise.
“We appreciate the important work done by Congress and the President to pass the Highway and Transportation Funding Act, legislation that is good for our country and for AK Steel” said James L. Wainscott, Chairman, President and CEO of AK Steel. “The legislation will allow AK Steel to direct capital into the business without sacrificing our ability to continue to meet our pension funding obligations.”
Steelmaking is a capital-intensive business, and low interest rates have significantly increased AK Steel’s pension obligation in recent years. As a result of the stabilization provision, and based on current actuarial assumptions, the company expects its pension contributions to decrease by approximately $65 million in 2015, thus reducing its required pension contributions for 2015 from a previously estimated $100 million to a current estimate of approximately $35 million. For 2016, AK Steel currently estimates its pension contributions to be about $15 million, down from a previous estimate of approximately $50 million, for a decrease of $35 million.
AK Steel, including its predecessor company, Armco, has sponsored defined benefit employee pension plans for more than 60 years. In that time, the company has never missed a contribution to its pension trust fund nor a pension payment to generations of retirees and their survivors. From 2005 to date, AK Steel has contributed approximately $1.9 billion in cash contributions to its pension trust fund. As of June 30, 2014, the company estimated that its pension plan is approximately 87 percent funded based on current actuarial assumptions.
AK Steel is a world leader in the production of flat-rolled carbon, stainless and electrical steel products, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets. The company’s AK Tube subsidiary produces carbon and stainless electric resistance welded tubular steel products for truck, automotive and other markets. Headquartered in West Chester, Ohio (Greater Cincinnati), the company employs approximately 6,500 men and women at seven steel plants and two tube manufacturing plants across four states: Indiana, Kentucky, Ohio and Pennsylvania. The company also has interests in iron ore through its Magnetation LLC joint venture and in metallurgical coal through its AK Coal subsidiary. Additional information about AK Steel is available at www.aksteel.com.