Acquisition of Dearborn (Notes)

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Acquisition of Dearborn

Acquisition of Dearborn

On September 16, 2014, the Company acquired Severstal Dearborn, LLC (“Dearborn”) from Severstal Columbus Holdings, LLC (“Severstal”). The assets acquired from Severstal included the integrated steelmaking assets located in Dearborn, Michigan (“Dearborn Works”), the Mountain State Carbon, LLC (“Mountain State Carbon”) cokemaking facility located in Follansbee, West Virginia, and interests in joint ventures that process flat-rolled steel products. The Company acquired Dearborn to increase scale and enhance its ability to serve customers, further its automotive strategy, strengthen its carbon steelmaking footprint and achieve additional operational flexibility. In addition, the Company acquired highly modernized and upgraded steelmaking equipment and facilities and the opportunity to achieve significant cost-based synergies. Immediately after the acquisition, Dearborn was merged with and into AK Steel. The final cash purchase price was $690.3, net of cash acquired.

During the second quarter of 2015, the Company sold its 50.0% equity interest in Double Eagle Steel Coating Company (“Double Eagle”) for $25.0 in cash. The sale resolved a dispute with the other equity interest holder over the fair market value of the Company’s interest in Double Eagle, which the Company acquired through its purchase of Dearborn. In July 2015, the Company received $25.0 from DTE Electric Company (“DTE”) to resolve a favorable administrative decision that concluded Dearborn Works had been overcharged for electricity for several years prior to the Company’s acquisition of that facility. Both of these matters resolved disputes that existed at the time of the Company’s acquisition of Dearborn. The purchase price allocation shown below reflects the updated estimates in value of these matters.  Neither the proceeds from AK Steel’s sale of its equity interest in Double Eagle nor the proceeds from DTE had a material impact, individually or in the aggregate, on the Company’s results of operations for 2015 or the consolidated balance sheet at December 31, 2014.

A summary of the final purchase price allocation for the fair value of the assets acquired and the obligations assumed at the date of the acquisition is presented below.

Accounts receivable	$	180.6
Inventory	362.6
Other current assets	3.6
Property, plant and equipment	445.5
Investment in affiliates	72.5
Total assets acquired	1,064.8
Accounts payable	(201.4		)
Accrued liabilities	(32.8		)
Other postretirement benefit obligations	(128.2		)
Other non-current liabilities	(12.1		)
Total liabilities assumed	(374.5		)
Purchase price, net of cash acquired	$	690.3

Assuming the acquisition had been completed at the beginning of 2014, unaudited pro forma net sales and operating profit (loss) for the nine months endedSeptember 30, 2014 were $5,945.0 and $(890.3), respectively, including charges for fixed asset impairments of $1,005.1 recorded by Severstal prior to the acquisition. This selected unaudited pro forma consolidated financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the acquisition had been completed at the beginning of 2014. Moreover, this information does not indicate what the Company’s future operating results will be.

For the three and nine months ended September 30, 2014, the Company incurred acquisition costs of $6.3 and $7.3, respectively. Acquisition costs are primarily comprised of transaction fees and direct costs, including legal, finance, consulting and other professional fees. These costs are included in selling and administrative expenses in the Condensed Consolidated Statements of Operations. In addition, the Company incurred $12.6 of costs in the three and nine months ended September 30, 2014 for committed bridge financing that the Company arranged in connection with the acquisition of Dearborn, but which was unused because of the Company’s successful financing of the acquisition through debt and common stock offerings. As a result, these costs were expensed in the third quarter of 2014 and are included in other income (expense) in the Condensed Consolidated Statements of Operations. Subsequent to the acquisition, the Company incurred severance costs of $2.6 for certain employees of Dearborn, which are included in selling and administrative expenses in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014, and an income tax charge of $2.1 related to changes in the value of deferred tax assets resulting from the acquisition.