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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, ~~2018~~2019

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission File No. 1-13696

AK STEEL HOLDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		31-1401455
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
9227 Centre Pointe Drive, West Chester, Ohio		45069
(Address of principal executive offices)		(Zip Code)

9227 Centre Pointe Drive, West Chester, Ohio 45069

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (513) 425-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock $0.01 Par Value	AKS	The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ~~Yes~~ ☐ ~~No ☐~~

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes ☐ No ☒

Aggregate market value of the registrant’s voting stock held by non-affiliates at June 30, ~~2018~~2019: $1743,~~359~~645,~~812,849~~887

There were 316,~~308~~909,~~531~~268 shares of common stock outstanding as of February 1318, ~~2019~~2020.

DOCUMENTS INCORPORATED BY REFERENCE

The information required to be furnished pursuant to Part III of this Form 10-K will be set forth in, and incorporated by reference from, the registrant’s definitive proxy statement for the annual meeting of stockholders (the “2020 Proxy Statement”), which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year ended December 31, 2019.

AK Steel Holding Corporation

Table of Contents

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	1618
Item 2.	Properties	1618
Item 3.	Legal Proceedings	1719
Item 4.	Mine Safety Disclosures	1719
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1819
Item 6.	Selected Financial Data	2022
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 8.	Financial Statements and Supplementary Data	4139
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	9490
Item 9A.	Controls and Procedures	9490
Item 9B.	Other Information	9793
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	9793
Item 11.	Executive Compensation	9793
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9793
Item 13.	Certain Relationships and Related Transactions, and Director Independence	9793
Item 14.	Principal Accounting Fees and Services	9793
PART IV
Item 15.	Exhibits, Financial Statement Schedules	9894
Item 16.	Form 10-K Summary	98
	Signatures	~~103~~99

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Table of Contents

(Dollars in millions, except per share and per ton amounts or as otherwise specifically noted)

PART I


Item 1.	Business.

Overview

AK Steel Holding Corporation (“AK Holding”) was formed under the laws of Delaware in 1993. Through its wholly owned subsidiary, AK Steel Corporation (“AK Steel”), it is a leading producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing, and distributors and converters markets. Other subsidiaries also provide customer solutions with carbon and stainless steel tubing products, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components, and complex assemblies. AK Steel is the successor to Armco Inc. and has built upon Armco’s rich history of creating leading-edge steel innovations since its formation in 1899. Unless the context indicates otherwise, references to “we,” “us” and “our” refer to AK Holding and its subsidiaries.

Our mission is to create innovative, high-quality steel solutions for our customers and our key values of safety, quality, productivity and innovation, along with environmental responsibility and sustainability, are its foundation. We have approximately 9,~~500~~300 employees in North America and Europe, as well as manufacturing operations across seven states in the eastern U.S., Canada and Mexico.

Our corporate strategy is comprised of three pillars:


•	commercializing our innovative new products and services;


•	transforming our operations to significantly improve our competitive position; and


•	driving future growth into new markets and downstream businesses.

On December 2, 2019, we entered into an Agreement of Plan of Merger (as it may be amended from time to time, the “Merger Agreement”) among us, Cleveland-Cliffs Inc. (“Cliffs”) and Pepper Merger Sub Inc., a direct, wholly owned subsidiary of Cliffs (“Merger Sub”), pursuant to which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Cliffs will acquire AK Holding by way of the merger of Merger Sub with and into AK Holding (the “Merger”), with AK Holding surviving such Merger as a wholly owned subsidiary of Cliffs. Under the terms of the Merger Agreement, at the effective time of the Merger, AK Holding stockholders will be entitled to receive 0.40 Cliffs common shares for each outstanding share of AK Holding common stock they own at the effective time. Upon completion of the proposed Merger, it is expected that AK Holding stockholders will own approximately 32% and Cliffs shareholders will own approximately 68% of the combined company on a fully diluted basis. We expect to complete the Merger in the first quarter of 2020, subject to the receipt of customary regulatory and stockholder approvals and the satisfaction or (to the extent permissible) waiver of the other closing conditions under the Merger Agreement. See the discussion under Cleveland-Cliffs Acquisition in Item 7 for additional information.

Customers and Markets

We target customers who require comprehensive steel solutions that involve the most technically demanding, highest-quality steel products, “just-in-time” delivery, technical support and product development ~~assistance~~leadership. Our research and engineering expertise, robust product quality and delivery capabilities, as well as our emphasis on collaborative customer technical support and product planning, are critical factors in our ability to serve our customer markets. Our strategy is to focus on markets for our steel solutions that deliver higher margins, where possible, and reduce amounts sold into the typically lower-margin ~~steel~~commodity spot markets, which have experienced substantial volatility in pricing over the past several years primarily as a result of shifting international trade environments and related effects on the domestic markets we serve.

We sell our products to customers in three broad market categories: (i) automotive; (ii) infrastructure and manufacturing, which includes electrical power; and (iii) distributors and converters. The following table presents the percentage of our net sales to each of these markets:

Market	~~2018~~2019		~~2017~~2018		~~2016~~2017
Automotive	6366	%	6563	%	6665	%
Infrastructure and Manufacturing	1516	%	1615	%	16	%
Distributors and Converters	2218	%	1922	%	1819	%

We sold approximately 70% of our flat-rolled steel shipments in ~~2018~~2019 under fixed base price contracts. These contracts are typically one year in duration and expire at various times throughout the year. Some of these contracts have a surcharge mechanism that passes through certain changes in input costs. We sold the remainder of our flat-rolled steel shipments in 2018 into the spot market at prevailing market prices or under annual contracts that have pricing provisions that are typically linked to a steel index with price adjustments based on a prior monthly or quarterly reference point. The increase in the percent of net sales to the Distributors and Converters market in 2018 is reflective of the substantial increase in spot market pricing from 2017 to 2018 and an increase in tons opportunistically sold into that market in 2018 as a result of the favorable conditions.

Automotive Market

The automotive industry is our core market, and we aim to address the principal needs of major automotive manufacturers and their suppliers. We specialize in manufacturing difficult-to-produce, high-quality steel products combined with demanding delivery performance, customer technical support and collaborative relationships to develop breakthrough steel solutions that help our customers meet their product requirements. In addition, many of our competitors do not have the capability to supply all of the

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~~products~~through ~~that~~certain wechanges ~~make~~in ~~for~~input ~~our~~costs. ~~automotive~~We ~~customers,~~sold ~~such as steel for exposed automotive applications,~~ the ~~most~~remainder ~~sophisticated grades~~ of ~~advanced~~our ~~high~~flat-~~strength~~rolled ~~steels~~steel ~~(“AHSS”)~~shipments ~~and~~in ~~value-added~~2019 ~~stainless~~into ~~chrome products. The exacting requirements for servicing~~ the ~~automotive~~spot market ~~generally~~at ~~enable~~prevailing usmarket ~~to justify higher selling~~ prices ~~for~~or ~~products~~under ~~sold~~contracts to that ~~market~~involve ~~than~~variable ~~for~~pricing ~~the~~that ~~commodity~~is ~~types~~tied ofto ~~carbon~~an ~~and~~independently ~~stainless~~published ~~steels~~steel ~~sold to other markets~~index.

InAutomotive light of the automotive market’s importance to us, North American light vehicle production has a significant impact on our total sales and shipments. North American light vehicle production for 2018 declined slightly to approximately 17.0 million units from the prior year. Demand for SUVs, trucks, crossovers and larger vehicles continued to increase while demand for smaller sedans and compact cars declined, and we benefited from intentionally targeting larger vehicle platforms to take advantage of the trend. Over the past several years, we have focused on and have been successful in getting sourced on numerous SUV, truck, crossover and larger vehicle platforms. As a result, about three-quarters of the carbon automotive steel that we sell is used to produce these popular larger vehicles. In addition to benefiting from our exposure to consumers’ strong demand for larger vehicles, these vehicles also typically contain a higher volume of steel than smaller sedans and compact cars, providing us the opportunity to sell a greater proportion of our steel products to our automotive customers. Ford Motor Company accounted for 11% and 12% of our net sales in 2018 and 2017, and FCA (an affiliate of Fiat Chrysler Automobiles N.V.) accounted for 10% of our net sales in 2018. No other customer represented more than 10% of our net sales in either year.Market

~~Automotive~~The ~~manufacturers~~automotive ~~are~~industry ~~under~~is ~~pressure~~our tocore ~~achieve~~market, ~~heightened~~and ~~federally~~we ~~mandated~~aim ~~fuel~~to ~~economy~~address ~~standards through 2025 (~~the ~~Corporate~~principal ~~Average~~needs ~~Fuel~~of ~~Economy,~~major orautomotive ~~“CAFE,” standards). The CAFE standards generally require automobile~~ manufacturers toand ~~meet~~their ~~an average fuel economy goal of 54~~suppliers.5 ~~miles~~We ~~per~~specialize ~~gallon~~in ~~across~~manufacturing ~~the fleet of vehicles they~~ difficult-to-produce, byhigh-quality ~~the~~steel ~~year 2025~~products, combined with ~~certain~~demanding ~~milestones~~delivery toperformance, becustomer ~~met~~technical insupport ~~interim periods. The United States Environmental Protection Agency (“EPA”)~~ and ~~the~~collaborative ~~National~~relationships, ~~Highway~~to ~~Traffic~~develop ~~Safety~~breakthrough ~~Administration~~steel ~~have~~solutions ~~proposed~~that ~~lowering~~help ~~the~~our ~~fuel~~customers ~~economy~~meet ~~goal~~their ~~under~~product ~~the CAFE standards~~requirements. ~~However~~In addition, ~~California~~many ~~and~~of ~~other~~our ~~states~~competitors ~~continue~~do tonot ~~maintain~~have the ~~more~~capability ~~stringent~~to ~~emissions~~supply ~~standards,~~the ~~and~~full ~~certain~~portfolio ~~auto~~of ~~makers~~products ~~have~~that ~~expressed~~we ~~differing~~make ~~preferences~~ for ~~approaches to regulation aimed at improving fuel efficiencies. As a result,~~ our automotive customers ~~continue to explore various avenues for achieving the standards~~, ~~including lightweighting of components and developing more efficient engines. Lightweighting efforts include testing alternatives to traditional carbon steels,~~ such as ~~AHSS and other materials. While this could reduce the aggregate volume of~~ steel ~~consumed~~for byexposed ~~the~~ automotive ~~industry~~applications, wethe ~~expect~~most ~~that~~sophisticated ~~demand~~grades ~~will~~of ~~increase~~advanced ~~for current and next~~high-~~generation~~strength ~~AHSS~~steels ~~and that our~~ (“AHSS”) and ~~other~~value-added ~~innovative~~stainless ~~steels~~steel ~~will command higher margins~~products. WeThe ~~are~~exacting ~~collaborating~~requirements ~~with~~for ~~our~~servicing the automotive ~~customers~~market ~~and~~generally ~~their~~enable ~~suppliers~~us to ~~develop~~justify ~~innovative~~higher ~~solutions~~selling ~~using~~prices ~~our~~for ~~developments~~products insold ~~lightweighting,~~to ~~efficiency,~~that ~~strength~~market ~~and~~than ~~formability~~for ~~across~~the ~~our~~commodity ~~extensive~~types ~~product~~of ~~portfolio,~~carbon ~~in combination with our automotive stamping~~ and ~~tube-making~~stainless ~~capabilities.~~steels Wesold ~~are also working with our customers~~ to ~~develop~~other ~~steels with greater heat resistance for exhaust systems that support new, fuel-efficient engines that run at higher temperatures~~markets.

~~Automotive~~In ~~manufacturers~~light ~~have~~of ~~also~~the ~~been~~automotive ~~increasing~~market’s ~~their~~importance ~~development~~to ofus, ~~hybrid/electric~~North ~~vehicles~~American light vehicle production has a significant impact on our total sales and shipments. North American light vehicle production for 2019 declined 4% to approximately 16.3 million units from the prior year, due in part to a strike at General Motors (“~~H/EVs~~GM”) that halted its vehicle production for over one month. We currently expect a slight increase in ~~order~~North American light vehicle production in 2020. Furthermore, consumer demand for SUVs, trucks, crossovers and larger vehicles continued to ~~meet~~increase ~~the~~while ~~CAFE~~demand ~~standards~~for smaller sedans and ~~growing~~compact ~~customer~~cars ~~adoption~~declined. We benefit from intentionally targeting larger vehicle platforms to take advantage of ~~H/EVs.~~consumer ~~Many~~preferences, ~~motors~~and ~~used~~we inhave ~~H/EVs~~focused ~~being~~on ~~sold~~and have been successful in getting sourced on numerous SUV, truck, crossover and larger vehicle platforms. As a result, more than three-quarters of the Ucarbon automotive steel that we sell is used to produce these popular larger vehicles.S. ~~today~~In ~~are~~addition ~~imported~~to benefiting from ~~foreign~~our ~~suppliers~~exposure to consumers’ strong demand for larger vehicles, ~~but~~these ~~more~~vehicles ~~local~~also ~~sourcing~~typically ~~and~~contain ~~manufacturing~~a higher volume of ~~motors~~steel ~~may~~than ~~occur~~smaller insedans and compact cars, providing us the ~~future~~opportunity to sell a greater proportion of our steel products to our automotive customers. WeFord ~~believe~~Motor Company (“Ford”) accounted for 11% of our ~~strong~~net ~~foundation~~sales in ~~electrical~~both ~~steels~~2019 and ~~long-standing~~2018, ~~relationships~~and ~~with~~FCA ~~automotive~~(an ~~manufacturers~~affiliate ~~and~~of ~~their~~Fiat ~~other~~Chrysler ~~suppliers~~Automobiles ~~will~~N.V.) ~~provide~~accounted usfor ~~with~~11% anand ~~advantage~~10% inof ~~this~~our ~~market~~net assales itin ~~grows~~2019 and ~~matures~~2018. No other customer represented more than 10% of our net sales in ~~the~~either ~~future~~year.

~~Infrastructure~~Automotive manufacturers are under pressure to achieve heightened federally mandated fuel economy standards through 2025 (the Corporate Average Fuel Economy, or “CAFE,” standards). The CAFE standards generally require automobile manufacturers to meet an average fuel economy goal, which is approximately 50 miles per gallon across the fleet of vehicles they produce by the year 2025, with certain milestones to be met in interim periods. The United States Environmental Protection Agency (“EPA”) and ~~Manufacturing~~the ~~Market~~National Highway Traffic Safety Administration have proposed rolling back the fuel economy goal under the CAFE standards to average fuel economy requirements that would be closer to 37 miles per gallon across the fleet of vehicles they produce by the year 2025. However, California and other states continue to maintain the more stringent emissions standards, and the EPA’s Science Advisory Board and certain auto makers have expressed differing preferences for approaches to regulation aimed at improving fuel efficiencies. As a result, our automotive customers continue to explore various avenues for achieving the standards, including lightweighting components and developing more fuel-efficient engines. Lightweighting efforts include the use of alternatives to traditional carbon steels, such as AHSS and other materials. While this could reduce the aggregate volume of steel consumed by the automotive industry, we expect that demand will increase for current and next-generation AHSS and that our AHSS and other innovative steels will command higher margins. We are collaborating with our automotive customers and their suppliers to develop innovative solutions using our developments in lightweighting, efficiency, and material strength and formability across our extensive product portfolio, in combination with our automotive stamping and tube-making capabilities. We are also working with our customers to develop steels with greater heat resistance for exhaust systems that support new, fuel-efficient engines that run at higher temperatures.

~~The~~Among ~~infrastructure~~our ~~and~~innovative ~~manufacturing~~solutions ~~market~~for ~~primarily~~automotive ~~represents~~customers ~~sales~~are toour ~~manufacturers~~press-hardenable ofsteel ~~heating,~~(“PHS”) ~~ventilation~~products ~~and~~for ~~air~~hot-stamping ~~conditioning~~applications. ~~equipment,~~Our ~~appliances,~~ULTRALUME® ~~and~~PHS ~~power~~is ~~transmission~~an ~~and~~aluminized ~~distribution~~Type ~~transformers,~~1 ~~who~~heat-treatable ~~produce~~boron ~~equipment~~steel. ~~for~~Our ~~the~~customers ~~electrical~~depend ~~grid. Domestic~~on ~~construction~~ULTRALUME ~~activity~~PHS ~~and~~when ~~the~~they ~~replacement~~require ofhigh-strength ~~aging~~parts ~~infrastructure~~with ~~directly~~complex ~~affects~~geometries. ~~sales~~These ofsteels ~~our~~enable ~~carbon,~~automotive ~~stainless~~manufacturers ~~and~~to ~~electrical~~reduce ~~steel~~vehicle ~~products,~~weight ~~particularly~~while ~~for~~continuing ~~grain-oriented~~to ~~electrical~~keep ~~steel~~pace ~~(“GOES”)~~with critical safety requirements. ~~Housing~~In ~~starts~~October in2019, ~~the~~we ~~U.S.~~entered ~~improved~~a ~~approximately~~licensing 5%agreement ~~over~~with ArcelorMittal that provides us, as the ~~prior~~sole ~~year~~North American licensee, ~~and~~the weright ~~expect~~to ahave ~~general~~ULTRALUME ~~lift~~PHS inhot-stamped ~~demand~~parts ~~for~~manufactured aby ~~variety~~both ofus and our ~~steel~~customers ~~products~~in ifthe ~~construction~~U.S., ~~accelerates~~Canada and Mexico. WeThis ~~also~~licensing ~~believe~~agreement ~~that~~resolves ~~the~~a ~~market~~long-standing ~~growth~~dispute ofregarding ~~H/EVs~~alleged ~~may~~patent ~~require~~infringement, ~~upgrades~~and towe ~~the~~believe ~~U.S.~~that ~~electrical~~it ~~grid~~will ~~infrastructure~~result toin ~~support~~expanded ~~increased~~adoption ~~demand~~of ~~for~~this ~~electricity,~~product ~~and~~going ~~thus~~forward ~~increased~~and ~~demand~~growth ~~for~~in our ~~GOES~~sales ~~products~~over the next several years.

~~Over~~Automotive ~~the~~manufacturers ~~past~~have ~~couple~~also ofbeen ~~years,~~increasing ~~electrical~~their ~~steel~~development ~~pricing~~of ~~declined~~hybrid/electric vehicles (“H/EVs”) in ~~many~~order ~~international~~to ~~markets,~~meet ~~which~~the ~~contributed~~CAFE tostandards ~~GOES~~and ~~imports~~growing ~~into~~customer adoption of H/EVs. Many motors used in H/EVs being sold in the U.S. ~~doubling~~today inare ~~the~~imported ~~first~~from ~~quarter~~foreign ofsuppliers, ~~2018~~but ~~from~~more ~~2017~~local sourcing and ~~suppressing~~manufacturing ~~domestic~~of ~~electrical~~motors ~~steel~~is ~~pricing~~expected to occur in ~~2018~~the future. WeAs ~~continue~~the toonly ~~assess~~North ~~various~~American ~~alternatives~~producer toof ~~ensure~~high-efficiency ~~that~~non-oriented ~~foreign~~electrical ~~producers~~steel (“NOES”), which is a critical component of ~~GOES~~H/EV motors, we are ~~required~~positioned to ~~comply~~potentially ~~with~~benefit Ufrom the growth of H/EVs going forward.S. ~~trade~~We ~~laws,~~believe ~~including~~our ~~encouraging~~strong ~~the~~foundation ~~vigorous~~in ~~enforcement~~electrical ofsteels ~~existing~~and ~~laws~~long-standing relationships with automotive manufacturers and ~~regulations.~~their suppliers will provide us with an advantage in this market as it

Distributors and Converters Market

Steel distributors and converters typically source from the commodity carbon, stainless and electrical spot markets. Demand and pricing can be highly dependent on a variety of factors outside our control, including global and domestic commodity steel production capacity, the relative health of countries’ economies and whether they are consuming or exporting excess steel capacity, the provisions of international trade agreements and fluctuations in international currencies and, therefore, are subject to a high degree of volatility.

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~~Because~~continues ofto ~~this~~grow ~~volatility~~ and ~~our~~mature. ~~strategy~~Likewise, tothe ~~focus~~growing oncustomer ~~value-added~~adoption ~~products,~~of weH/EVs ~~have~~may ~~taken~~also ~~deliberate~~increase ~~actions~~demand for improvements in the electric grid to ~~reduce~~support higher demand for more extensive battery charging, which our ~~exposure~~grain-oriented toelectrical ~~these~~steels ~~commodity~~(“GOES”) ~~markets~~could support.

Infrastructure and Manufacturing Market

The infrastructure and manufacturing market primarily represents sales to manufacturers of heating, ventilation and air conditioning equipment, appliances, and power transmission and distribution transformers, who produce equipment for the electrical grid. Domestic construction activity and the replacement of aging infrastructure directly affects sales of our carbon, stainless and electrical steel products, particularly for GOES. In 2019, housing starts in the U.S. increased slightly from the prior year, and our domestic GOES customers continue to experience steady demand consistent with the construction and electrical transformer replacement markets. We also believe that the market growth of H/EVs may require upgrades to the U.S. electrical grid infrastructure to support increased demand for electricity, and thus increased demand for our GOES products in the coming years.

Over the past couple of years, electrical steel pricing declined substantially in many international markets, which contributed to GOES imports into the U.S. doubling in the first quarter of 2018 from 2017 before declining since that point. We believe that foreign competitors are continuing to circumvent existing trade laws, primarily by increasing imports of downstream electrical products not currently covered by the Section 232 steel tariff, which include electrical transformer cores and core assemblies, electrical transformers, and even laminations, which are simply cut pieces of electrical steel. To avoid the Section 232 steel tariff, producers have either increased their imports of foreign-made downstream electrical goods or moved some of their domestic production outside the United States, which adversely affects our electrical steel business. These actions have suppressed domestic electrical steel pricing through 2018 and 2019. In the absence of a remedy against these actions to circumvent the Section 232 steel tariff on electrical steel, these actions are likely to continue and increase over time, significantly pressuring our electrical steel business. We continue to work proactively to mitigate or eliminate this potential avenue for avoiding and circumventing the steel tariff, including by communicating our concerns to the U.S. government and requesting appropriate action to address this issue.

Distributors and Converters Market

Geographic Presence

We sell our carbon steel products principally to customers in North America, and we sell our electrical and stainless steel products primarily in North America and Europe. Our customer base is geographically diverse and there is no single country outside the U.S. where our sales are material compared to our total net sales. For the vast majority of international sales, we are not the importer of record and do not bear the responsibility for paying any applicable tariffs.

Research, Innovation and Operations

Rapidly evolving and highly competitive markets require our customers to seek new, comprehensive steel solutions, and we believe we are well positioned to deliver the most ~~responsive~~robust solutions through our broad portfolio of offerings. ~~We are the only steelmaker in North America that can produce all three major categories of flat-rolled steels: carbon, stainless and electrical.~~ In addition to our flat-rolled steels, ~~our~~this ~~broad product portfolio~~ includes carbon and stainless tubular products, sophisticated tool and die designs, and lightweight, complex, hard-to-manufacture components and ~~sub-~~assemblies for the automotive market. ~~The~~Collaboration ~~collaboration~~ across our steel, tube-making, stamping and materials research groups ~~results~~generates ~~in the generation of more~~ innovative and comprehensive solutions for our customers, which we believe ~~improves~~enhances our competitive advantage.

Creating innovative products and breakthrough solutions is a strategic priority, as we believe differentiation through producing higher value steels to meet challenging requirements enables us to maintain and enhance our margins. We conduct a broad range of research and development activities aimed at improving existing products and processes and developing new ones. Our tradition of ~~leading~~ steel innovation has produced a highly diversified flat-rolled steel product portfolio. InAs ~~recent~~part ~~years,~~of weour ~~have~~underlying ~~increased~~strategy ~~our~~to ~~commitment~~focus toon ~~research~~higher-value materials and ~~development~~minimize ~~with~~exposure ~~greater~~to ~~investment~~commodity products, ~~both~~we have invested in ~~personnel~~research and ~~capabilities~~innovation totaling $30.7, ~~One~~$29.4 ofand ~~these~~$28.1 ~~investments~~in 2019, 2018 and 2017. Our on-going efforts at our state-of-the-art Research and Innovation Center in Middletown, Ohio, ~~has~~to ~~resulted~~enhance ~~in enhanced~~ technical collaboration ~~and~~have increased the introduction of new steel solutions to the marketplace.

Awards and Recognition

We are unwavering in our quality expectations, and we take a planned approach to continuously improve our products, processes and services. This approach is key to our strategic partnerships with our customers, and we received several noteworthy awards from them in 2018. In April, we were the only North American steelmaker recognized as a “GM Supplier of the Year” for 2017 for superior performance in quality, execution, innovation and total enterprise cost. In May, both the American Iron and Steel Institute (“AISI”) and the Auto/Steel Partnership recognized AK Steel Research and Innovation employees for distinguished research in steel forming behavior and pre-competitive steel solutions in future vehicle designs.

In October, the U.S. Department of Energy (“DOE”) selected us to receive an award of up to $1.2 under the Office of Energy Efficiency and Renewable Energy’s Advanced Manufacturing Office program to investigate novel low-density steels, which may ultimately be used in automotive structural applications. The three-year project will be conducted in collaboration with the DOE, Oak Ridge National Laboratory Materials Science and Technology Division, and the Advanced Steel Processing and Products Research Center at the Colorado School of Mines. The objective of the project is to conduct alloy design, laboratory validation, and testing of low-density steels that are alternatives to currently available advanced high strength steels and other lightweight metals. These low-density steels are expected to generate energy savings by bringing efficiencies in manufacturing and lifetime savings in automotive structural applications. This was the second award that we have received from the DOE in the past two years. We are currently in the second year of a three-year project awarded to us in May 2017 by the DOE to develop the next generation of advanced non-oriented electrical steel (“NOES”) for motors used in a wide variety of industrial and automotive applications. Laboratory proof of concept for this project has been successfully completed and industrial scale trials are currently underway.

Carbon Steel

We sell flat-rolled carbon steel products, consisting of premium-quality coated, cold-rolled, and hot-rolled carbon steel products, primarily to automotive manufacturers and their suppliers, as well as to customers in the infrastructure and manufacturing market. We also sell carbon steel products to distributors, service centers and converters, who may further process these products before reselling them. We are particularly focused on AHSS for the automotive market, and we produce virtually every AHSS grade currently used by our customers. Our AHSS grades, such as Dual Phase 590, 780 and 980, have been adopted by our customers for both stamped and roll-formed parts. Looking forward, our NEXMET 1000 and 1200 grades provide even greater enhancements in strength and formability, and represent the next generation of automotive lightweighting steels for cold-stamping operations.

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~~Press-Hardenable~~Research ~~Steel~~and Innovation Awards

WeThe ~~also~~Office ~~provide~~of ~~press-hardenable~~Energy ~~steel~~Efficiency and Renewable Energy under the U.S. Department of Energy (“~~PHS~~DOE”) ~~products~~continues to grant AK Steel awards for ~~hot-stamping~~innovative ~~applications~~steel research. ~~Our~~In ~~ULTRALUME®~~March ~~PHS~~2019, iswe received an ~~aluminized~~award ~~Type~~to 1leverage ~~heat-treatable~~high ~~boron~~performance ~~steel.~~computing ~~Our~~from ~~customers~~the ~~depend~~Lawrence onLivermore ~~ULTRALUME~~National ~~PHS~~Laboratory ~~when~~to ~~they~~conduct ~~require~~hot ~~high-strength~~rolling ~~parts~~research. Researchers from AK Steel are working in collaboration with ~~complex~~scientists ~~geometries.~~from ~~These~~the ~~steels~~Computational ~~enable~~Engineering ~~automotive~~Division ~~manufacturers~~to build a “Fast Acting Reduced Ordered Model” to ~~reduce~~predict ~~vehicle~~the ~~weight~~properties ~~while~~of ~~continuing~~a finished steel coil after hot rolling in order to ~~keep~~improve ~~pace~~product ~~with~~consistency, ~~critical~~provide ~~safety~~immediate ~~requirements~~feedback on product quality, and to save time, money and energy by reducing the need for expensive industrial trials. This research also will complement current artificial intelligence models used in the manufacture of AK Steel’s portfolio of innovative steel products.

We are currently in the second year of a three-year project that was announced in October 2018, when the DOE selected us to receive an award of up to $1.2 under the Office of Energy Efficiency and Renewable Energy’s Advanced Manufacturing Office program to investigate novel low-density steels. The project is being conducted in collaboration with the DOE, Oak Ridge National Laboratory Materials Science and Technology Division, and the Advanced Steel Processing and Products Research Center at the Colorado School of Mines. The objective of the project is to conduct alloy design, laboratory validation, and testing of low-density steels that are alternatives to currently available advanced high strength steels and other lightweight metals. These low-density steels are expected to generate energy savings by bringing efficiencies in manufacturing and lifetime savings in automotive structural applications. We have begun mathematical modeling and laboratory scale investigations for the program.

We are also in the third year of a project that the DOE awarded to us in May 2017 to develop the next generation of advanced NOES for motors used in a wide variety of industrial and automotive applications. Laboratory proof of concept for this project has been successfully completed and industrial scale trials have been conducted.

These three awards underscore our track record of innovation and our commitment to being a leader in next generation steel product and process development.

In November 2019, the Auto/Steel Partnership recognized members of AK Steel’s Advanced Engineering team as part of the partnership’s 2019 Excellence Awards. The partnership is an automotive material consortium comprised of North American automotive original equipment manufacturing (“OEM”) companies and steel producers from the American Iron and Steel Institute’s Automotive Applications Council who leverage shared research in a pre-competitive environment. Project teams within the partnership conduct studies in vehicle design applications using steel. Along with other award recipients, we were recognized for collaboration and technical expertise in finding solutions to industry problems. This included the use of new stamping technologies to facilitate potential applications of Next-Generation AHSS in future automotive body structures. AK Steel received an award in the Individual Category for providing exceptional leadership to the partnership. In addition, AK Steel’s Advanced Engineering group and other members of the partnership Stamping Team were recognized for excellence in the Project Team category.

Carbon Steel

We direct most of our research and innovation efforts on carbon steel towards applications for automotive manufacturers and their suppliers. We are particularly focused on AHSS for the automotive market, and we produce virtually every AHSS grade currently used by our customers. Our AHSS grades, such as Dual Phase 590, 780 and 980, have been adopted by our customers for both stamped and roll-formed parts, and our NEXMET® 1000 and 1200 products have demonstrated enhanced strength, formability and opportunities for automotive lightweighting in cold-stamped applications. We are also pursuing application of NEXMET 440EX and NEXMET 490EX in surface-critical, exposed auto body panels as an alternative to aluminum.

Third-Generation Advanced High-Strength Steel

WeOur ~~continue to expand our portfolio of~~ third- generation ~~AHSS. Our~~ NEXMET® ~~440EX product was developed for use in surface-critical, exposed auto body panels. Our NEXMET~~ 1000 and NEXMET 1200 AHSS products enable our customers to achieve significant lightweighting in the unexposed structural components of their vehicles. NEXMET 1200, for example, offers ~~better~~superior formability ~~than~~similar to conventional Dual Phase 600 steel, but at twice the strength level. ~~These~~We ~~AHSS~~have ~~products~~expanded ~~allow~~the ~~automotive~~application ~~engineers~~of tothe ~~design~~NEXMET ~~lightweight~~technology ~~parts~~to ~~that~~our ~~meet~~tubular ~~rigorous~~products ~~service~~from ~~and~~AK ~~safety~~Tube ~~requirements.~~LLC ~~Product~~(“AK ~~qualification~~Tube”) isand ~~presently~~stamped ~~underway~~components ~~with~~from ~~several~~PPHC ~~automotive~~Holdings, ~~original~~LLC ~~equipment manufacturers~~ (“~~OEMs~~Precision Partners”). ~~for~~These ~~both~~AHSS ~~galvanized~~products ~~and~~allow ~~cold-rolled~~automotive ~~NEXMET~~engineers ~~1000~~to ~~and~~design ~~NEXMET~~lightweight ~~1200~~parts ~~AHSS.~~that ~~Also,~~meet arigorous ~~number~~service ofand ~~stamping~~safety ~~trials have been completed successfully~~requirements. The NEXMET family of steels helps our customers achieve vehicle weight savings for ambitious fuel efficiency standards while avoiding significant capital costs required to re-design production facilities to use alternative materials.

~~Specialty~~Both ~~Stainless~~galvanized and ~~Electrical~~cold-rolled ~~Steel~~NEXMET 1000 and NEXMET 1200 AHSS are progressing through product qualification with several OEM customers, and the first automotive production parts manufactured from NEXMET material will appear on a new vehicle platform that is planned to launch in late 2020. A number of stamping and component assembly trials have been completed successfully, with more planned and underway. Because the timing of automotive design and production cycles spans several years, widespread automotive customer adoption of revolutionary new material such as NEXMET AHSS may also extend over several years.

We continue to develop new and improved specialty stainless and electrical steels for a variety of applications in the automotive, infrastructure and manufacturing, and other markets. For example, we are working with our automotive customers and their exhaust system suppliers to develop new stainless steels for exhaust systems that can withstand higher exhaust gas temperatures associated with future engine designs to achieve increased fuel economy. These steels exhibit improved thermal fatigue and corrosion resistance over currently available materials. We are also developing stainless steels with unique cosmetic appearances (specialized finishes and colors) for use in architectural and appliance applications.

We are a global leader in producing the highest-quality electrical steel products, and our electrical steels are among the most energy efficient in the world. We sell our electrical steel products, which are iron-silicon alloys with unique magnetic properties, primarily to manufacturers of power transmission and distribution transformers and electrical motors and generators, in the infrastructure and manufacturing markets. These customers require high-quality steels with low core losses and high magnetic permeability for the production of efficient electrical transformers, which help to lower costs of electricity generation, transmission and distribution.

We focus on the high-end of the electrical steel market, as GOES is technically challenging to produce and typically commands a higher selling price than grades of NOES. In the second quarter of 2018, we launched our TRAN-COR® X product, which is a high-permeability GOES that will help transformer manufacturers design to higher levels of efficiency while reducing greenhouse gas emissions due to energy loss in electricity transmission and distribution. High-permeability GOES products represent the most technologically advanced and highest-efficiency electrical steels in the world. We believe the superior efficiency of our GOES products is attractive to customers in markets with increasing efficiency standards, such as Europe and the United States. We also continue to work with automotive OEMs and their suppliers to qualify DI-MAX® HF-10X, both as a semi-processed and fully processed NOES designed to meet specific OEM requirements for use in high-speed motors, traction motors, aircraft generators and certain other rotating equipment.

Downstream Steel Applications

In 2017, we expanded our portfolio of steel solutions by acquiring PPHC Holdings, LLC (“Precision Partners”), which provides advanced-engineered solutions, tool design and build, hot- and cold-stamped components and complex assemblies for the automotive market. In addition to Precision Partners, our downstream operations include Combined Metals of Chicago, LLC and AK Tube LLC (“AK Tube”), which manufactures advanced tubular products for automotive and other applications using carbon and stainless steels. We believe that collaboration among Precision Partners, AK Tube and our steelmaking operations can accelerate the adoption of our innovative steel products by automotive manufacturers and their Tier 1 suppliers by enabling us to provide them with steel solutions, rather than simply offering steel.

Our research and technical experts, along with engineers from Precision Partners and AK Tube, have undertaken numerous collaborative projects that are generating robust solutions for our customers. Precision Partners’ expertise in tool design and stamping capabilities has allowed us to create prototype components using AK Steel’s innovative new materials and present customers with new potential steel solutions. This approach has and will continue to demonstrate to customers that they can significantly lightweight automotive parts on an accelerated timeline and in a cost-effective manner by using our highly formable grades of AHSS in place of traditional lower-strength grades.

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We expect that other automotive vehicle platforms will incorporate NEXMET AHSS in their designs and that NEXMET AHSS will become a strong differentiator for AK Steel going forward.

Specialty Stainless and Electrical Steel

We continue to develop new and improved specialty stainless and electrical steels for a variety of applications in the automotive, infrastructure and manufacturing, and other markets. For example, we are working with our automotive customers and their exhaust system suppliers to develop new stainless steels for exhaust systems that can withstand higher exhaust gas temperatures associated with future engine designs to achieve increased fuel economy. These steels exhibit improved resistance to thermal fatigue and corrosion over currently available materials. We are also developing stainless steels with unique cosmetic appearances (specialized finishes and colors) for use in architectural and appliance applications.

We are a global leader in producing the highest-quality electrical steel products, which are iron-silicon alloys with unique magnetic properties, and our electrical steels are among the most energy efficient in the world. We sell GOES primarily to manufacturers of power transmission and distribution transformers and NOES to manufacturers of electric motors and generators in both the infrastructure and manufacturing and automotive market. Our GOES customers require high-quality steels with low core losses and high magnetic permeability for the production of efficient electrical transformers, which help to lower costs of electricity generation, transmission and distribution. Although we produce both GOES and NOES products, our primary focus remains on the higher-efficiency GOES products, as these are more challenging to produce and typically command higher selling prices and margins than NOES products.

Downstream Steel Applications

Our portfolio of steel solutions includes the operations of Precision Partners, which provides advanced-engineered solutions, tool design and build, hot- and cold-stamped components and complex assemblies for the automotive market. In addition to Precision Partners, our downstream operations include AK Tube, which manufactures advanced tubular products for automotive and other applications using carbon and stainless steels, and Combined Metals of Chicago, LLC, a premier processor and distributor of flat-rolled stainless steel products. We believe that collaboration among our steelmaking operations and our downstream businesses can accelerate the adoption of our innovative steel products by automotive manufacturers and their Tier 1 suppliers.

In addition, our collaborative projects are enhancing our collective knowledge and experience in the stamping of new, advanced grades of steel, advanced-engineered solutions, and tool design and build. For example, Precision Partners specializes in hot-stamping PHS for automotive applications. AK Steel’s experience as a leader in PHS and Precision Partners’ expertise in hot-stamping has enabled these teams to have greater insight into these high-growth areas and has accelerated product development and customer adoption of these automotive lightweighting solutions. Likewise, collaboration with AK Tube strategically advances our mission to innovate in AHSS for the automotive industry, as AK Tube has been at the forefront of producing tubular products from third-generation AHSS. We believe the combination of Precision Partners’ stamping and advanced die-making capabilities, AK Tube’s leading tubemaking capabilities and AK Steel’s breakthrough material introductions will enhance our ability to deliver innovative, steel solutions to our customers.

Precision Partners ~~was~~has recently been awarded acontracts ~~contract~~from ~~with~~two a major automotive ~~manufacturer~~manufacturers to supply ~~a body-side outer subassembly, consisting of a~~ single-piece hot-stamped door ~~ring.~~rings ~~They~~and ~~were~~complex ~~also awarded a second single-piece hot-stamped door ring on another vehicle platform by a key Tier 1 supplier~~assemblies. Taken together, the ~~two~~ awards are expected to represent approximately $50.0 of projected annual stamping and assembly revenue beginning in ~~mid-~~late 2020 or early 2021, in addition to revenue from a large, one-time tooling award. In winning these contracts, Precision Partners has been able to leverage its hot-stamping tooling leadership, in addition to ~~their~~its innovative hot-stamping process, to capture new strategic opportunities and demonstrate that ~~they~~it ~~are~~is one of the few companies in North America that has the technical capabilities to produce a major ~~subassembly~~complex assembly and stamping ~~job~~work of this nature.

Sustainability

We are committed to operating in a sustainable manner. Beyond ensuring that we are acting responsibly to serve our communities and the environment, sustainably operating our company also ~~provides~~opens us opportunities to grow our business, increase customer collaboration and loyalty, ~~attract, retain and motivate employees, and~~ differentiate us from our competition~~. Steel is the most recycled material on the planet—more than aluminum~~, ~~plastic, paper~~ and ~~glass combined each year—which provides a strong foundation for our sustainability efforts. In May 2018~~attract, weretain ~~issued our 2017 Sustainability Report, which provides significantly increased disclosure~~ and ~~transparency~~motivate ~~regarding our corporate-wide sustainability efforts and highlights our efforts to support our~~ employees~~, encourage diversity and inclusion, contribute to our communities, and demonstrate our commitment to the environment, among other items~~. WeSteel also disclose our steelmaking operations’ energy and water usage, emissions, waste generation and targets for reducing our environmental footprint. In addition, our Sustainability Report includes our scope 1 greenhouse gas emissions, which are generally direct emissions from owned or controlled sources, and reduction targets for those emissions. Our Sustainability Report (which is ~~not incorporated into this Annual Report) can be found in~~ the ~~“Corporate~~most ~~Citizenship”~~recycled ~~section~~material ofon ~~our website at www.aksteel.com.~~

Employee Safety

Our employees and their safety are of paramount importance to us. Our occupational health and safety policies and programs are the cornerstone of our operating philosophy and are integrated into all of our daily operations and activities. We rigorously manage, control and focus on eliminating or minimizing potential exposure to the hazards associated with making and working around steel. Our low recordable injury rate, based on U.S. Occupational Safety and Health Administration (“OSHA”) criteria, reflects our effectiveness in protecting our employees. In 2018, three of our facilities operated with zero OSHA recordable injuries for the entire year, and seven of our facilities operated with zero OSHA recordable injuries during the fourth quarter. Our 2018 performance at our steelmaking facilities (year-to-date through the third quarter, which is the latest industry information currently available), measured as the number of OSHA recordable injuries per 200,000 labor hours, was 0.64, which was more than two times better than the industry average.

We consistently lead the U.S. steel industry in safety, outperforming the steel industry average injury frequencies for each of the last ten years, and we have received numerous awards recognizing our safety performance. In May, the American Coke and Coal Chemicals Institute, a leading industry trade organization, granted both our Middletown Works and our Mountain State Carbon coke plants the Max Eward Safety Award for 2017 for operating the safest cokemaking facilities in America. In July, our Coshocton Works and Zanesville Works both received the “Special Award for Safety” from the Ohio Bureau of Workers’ Compensation, division of Safety and Hygiene (“Ohio BWC”), recognizing more than 500,000 hours and at least six months without an injury resulting in a day or more away from work. In 2018, Zanesville Works also received the Ohio BWC’s “100% Award,” recognizing zero injuries or illnesses resulting in a day or more away from work during the previous year.

Environmental Responsibility

We maintain an unwavering commitment to responsible environmental performance throughout our operations. In 2018, we experienced another year of outstanding overall environmental performance. In addition, to emphasize and reinforce the importance of sustainability and environmental responsibility at the company and to continue to drive improved performance in these areas, in January 2018 our Board of Directors incorporated an environmental performance component into our annual management incentive

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~~plan.~~the ~~After~~planet—more ~~assessing~~than ~~a variety of potential performance categories to incorporate~~aluminum, ~~including an evaluation of areas most ripe for improvement~~plastic, ~~the~~paper ~~Board~~and ~~chose~~glass tocombined ~~include~~each ~~air~~year—which ~~permit~~establishes ~~deviation events as~~ a ~~category~~strong ~~for~~foundation ~~measuring performance under our annual management incentive plan~~ for ~~2018. An air permit deviation event occurs when an event at~~ our ~~steelmaking~~sustainability ~~operations results in noncompliance under the Title V air permits that govern those facilities~~initiatives. ~~In 2018, we had our best performance in the past five years in terms of air permit deviation events, recording our lowest annual total during that period.~~

In December 2019, AK Steel was named to Newsweek’s “America’s Most Responsible Companies 2020” list. Newsweek published its first ranking of 300 companies from more than 2,000 of the largest U.S. public companies by revenue to determine “which firms were tops when it comes to doing good.” This list focused on performance in the environmental, social and corporate governance areas. AK Steel was the only integrated steel mill included in the Newsweek 2020 list.

In April 2019, we issued our Sustainability Report for 2018 that highlights our corporate-wide sustainability efforts and our efforts to support our employees, encourage diversity and inclusion, contribute to our communities, and demonstrate our commitment to the environment, among other initiatives. We also disclose our steelmaking operations’ energy and water usage, air emissions, waste generation and targets for reducing our environmental footprint. In addition, our Sustainability Report includes our scope 1 greenhouse gas emissions, which are generally direct emissions from owned or controlled sources, and reduction targets for those emissions. Our Sustainability Report (which is not incorporated into this Annual Report) can be found in the “Corporate Citizenship” section of our website at www.aksteel.com.

Employee Safety

Our employees and their safety are of paramount importance to us. Our occupational health and safety policies and programs are the cornerstone of our operating philosophy and are integrated into all of our daily operations and activities. We rigorously manage, control and focus on eliminating or minimizing potential exposure to the hazards associated with making and working around steel. Our low recordable injury rate, based on U.S. Occupational Safety and Health Administration (“OSHA”) criteria, reflects our effectiveness in protecting our employees. In 2019, one of our facilities operated with zero OSHA DART (days away, restricted, or job transfer) injuries for the entire year. During the fourth quarter of 2019, three of our facilities operated with zero OSHA recordable injuries, while six facilities operated with zero OSHA DART injuries. Our full-year 2019 performance at our steelmaking facilities, measured as the number of OSHA recordable injuries per 200,000 labor hours, was 0.46, which was nearly three times better than the industry average (year-to-date through the third quarter, which is the latest industry information currently available).

We consistently lead the U.S. steel industry in safety, outperforming the steel industry average injury frequencies for each of the last ten years, and we have received numerous awards recognizing our safety performance. In May 2019, AK Steel’s Middletown Works received the Max Eward Safety Award for 2018 from the American Coke and Coal Chemicals Institute (“ACCCI”), a leading industry trade organization. The award recognizes Middletown Works for operating one of the safest cokemaking facilities in America and operating all of 2018 without a single OSHA recordable injury. This ACCCI recognition marks the 18th time in the last 22 years that one or more AK Steel coke plants have received the Max Eward Safety Award. In May 2019, our Coshocton Works and Zanesville Works were recognized for outstanding safety performance by the Ohio Bureau of Workers’ Compensation, Division of Safety and Hygiene. We continue to focus on safety in all we do, driving safety results that lead our industry.

Environmental Responsibility

We maintain an unwavering commitment to responsible environmental performance throughout our operations. In 2019, we experienced another year of outstanding overall environmental performance. In addition, to emphasize and reinforce the importance of sustainability and environmental responsibility at the company and to continue to drive improved performance in these areas, since January 2018 our Board of Directors has incorporated an environmental performance component into our annual management incentive plan. After assessing a variety of potential performance categories to incorporate, including an evaluation of areas most ripe for improvement, the Board chose to include air permit deviation events as a category for measuring performance under our annual management incentive plan for 2018 and again in 2019. An air permit deviation event occurs when an event at our steelmaking operations results in noncompliance under the Title V air permits that govern those facilities. In 2019, we had our best performance in the past six years in terms of air permit deviation events, recording our lowest annual total during that period.

We believe that our strong environmental performance is a direct result of the proactive approach we take to environmental management and the close collaborative efforts that we employ across the company. We target sustainable performance in all aspects of our operations, including continuous improvement in operations that include air, water and waste management. Our comprehensive environmental policy provides that we will:


•	commit the necessary resources to comply with all applicable environmental laws, regulations, permits and agreements applicable to us;


•	reduce environmental risks through operating practices and emergency preparedness programs;


•	encourage recycling, recovery and reuse of residual materials, as well as the reduction and prevention of emissions and releases when feasible;


•	participate in efforts to develop and implement environmental laws and regulations;

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•	continually evaluate compliance with applicable environmental laws and regulations; and

• strive ~~for~~to continually ~~improving~~improve the effectiveness of our environmental management efforts.

Certain production units in our operations are inherently water-intensive. However, we continuously seek opportunities to reduce water usage and increase water reuse at our steelmaking plants. In addition, our steelmaking facilities are located near abundant sources of water and we do not believe that any of those operations are located in regions that experience high water stress.

The International Organization for Standardization (“ISO”) has certified all of our steelmaking plants with ISO 14001 environmental management certification, and our environmental affairs professionals oversee environmental compliance throughout our organization. We also invest heavily in equipment to help meet our environmental objectives. For example, in ~~2018~~2019, we spent $~~126~~141.3 to operate and maintain our environmental controls and invested $723.10 in environmental projects. InDuring 2019, we ~~plan~~completed toa ~~invest approximately~~ $6.0 project at our Rockport Works to ~~begin~~install ~~installation of~~ a more modern, environmentally friendly and lower-cost pickling process.

Strategic Opportunities Related to Climate Change

Our strategy of creating new innovative steel solutions and improving existing products enables us to contribute to carbon reduction efforts and the achievement of sustainability goals throughout the product supply chain. Innovative products in each of the carbon, stainless, electrical, tubular, and ~~tubular~~stamped steel component families further the sustainability goals of many of our customers. For example, in the automotive market our customers are benefiting from our carbon lightweighting solutions to meet their heightened fuel economy targets under the CAFE standards. We are also providing customers with stainless steel and tubular solutions that allow for greater heat resistance in vehicle exhaust systems, enabling exhaust systems to handle the higher engine exhaust temperatures needed for increased fuel economy. In addition, we continue to develop higher-efficiency NOES products for use in future H/EVs and GOES products for their required infrastructure, a market that we anticipate will grow over time. Our steels also contribute to sustainability goals beyond the automotive market. For instance, our GOES products are among the highest-efficiency electrical steels in the world. These GOES products provide low core loss and high magnetic permeability to ~~move~~transmit electricity across electrical grids in the U.S. and around the world more efficiently through better-performing electrical transformers.

While greenhouse gas emissions are a natural byproduct of steel manufacturing today, we continue to take steps to increase energy efficiency while remaining competitive in the global steel marketplace. For example, through the American Iron and Steel Institute (“AISI”), we participate in the DOE’s Climate VISION agreement. This program assists domestic steelmakers in their continued efforts to lead the global steel sector in voluntary emissions reductions. We are also a member of the federal ENERGY STAR program, which identifies and promotes energy-efficient products to help reduce greenhouse gas emissions. ENERGY STAR is a joint program of the EPA and the DOE, helping businesses and consumers save money and protect the environment through energy-efficient products and practices. As with other companies engaged in the production of steel, certain aspects of our production process are carbon-intensive and current technology does not currently afford us the ability to dramatically lower our direct greenhouse gas emissions without significantly reducing the scope of our operations. However, we and other steel producers in the United States are actively participating in research and development to develop technology, processes and approaches to reduce emissions during the steelmaking processes, but these developments are likely to occur over the longer term.

In addition, the production phase of steelmaking is less carbon-intensive than the processes for producing certain other competing materials, such as aluminum. Thus, while the CAFE standards have motivated the use of alternative materials in some vehicles to help achieve lightweighting goals, we intend to continue to educate governments, the automotive industry and other key stakeholders that steel is the most sustainable metal to reduce greenhouse gas emissions across the entire life cycle of a vehicle. These benefits are made even greater when utilizing our advanced steel products for vehicle lightweighting.

-Our 6Sustainability Report issued in April 2019 includes targeted emissions reductions and an inventory of our scope 1 greenhouse gas emissions at our steelmaking plants, along with time-bound, quantitative targets for reducing scope 1 greenhouse gas emissions at those plants. Over time, we also plan to expand our efforts to scope 2 greenhouse gas emissions, which generally are indirect emissions from purchased energy sources, as we develop our internal systems for tracking and targeting scope 1 greenhouse gas reductions.

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steel is the most sustainable metal to reduce greenhouse gas emissions across the entire life cycle of a vehicle. These benefits are made even greater when utilizing our advanced steel products for vehicle lightweighting.

As discussed above, we began to share more information publicly during 2018 on greenhouse gas emissions from our steelmaking operations and our targeted emissions reductions. Our Sustainability Report issued in May 2018 included an inventory of our scope 1 greenhouse gas emissions at our steelmaking plants, along with time-bound, quantitative targets for reducing scope 1 greenhouse gas emissions at those plants. Over time, we also plan to expand our efforts to scope 2 greenhouse gas emissions, which generally are indirect emissions from purchased energy sources, as we develop our internal systems for tracking and targeting scope 1 greenhouse gas reductions.

Production Resources

Employees

Approximately 5,~~700~~600 of our 9,~~500~~300 employees are represented by labor unions. The labor contracts covering these represented employees expire between ~~2019~~2020 and ~~2021~~2023. See the discussion under Labor Agreements in Item 7 for additional information on these agreements.

In- October, we partnered with the International Association of Machinists, Local Lodge 1943, to launch an apprenticeship program at our Middletown Works. The Ohio Department of Job and Family Services approved the apprenticeship standards, and the program gives union production employees the opportunity to train to become fully accredited journeymen through classroom work and job training. We have similar programs at other locations.7-

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Raw Materials and Other Inputs

Our steel manufacturing operations require carbon and stainless steel scrap, coal, coke, chrome, iron ore, nickel and zinc as primary raw materials. We also ~~use~~consume natural gas, electricity, graphite electrodes and industrial gases. We typically purchase carbon and stainless steel scrap, natural gas, a substantial portion of our electricity and most other raw materials at prevailing market prices, which may fluctuate with market supply and demand. However, we make most of our purchases of iron ore, coke, industrial gases and a portion of our electricity at negotiated prices under annual or multi-year agreements with periodic price adjustments. We purchase substantially all of our iron ore from ~~one~~Cliffs ~~supplier~~ under multi-year contracts. We typically purchase most of our metallurgical coal under annual fixed-price agreements, but we also obtain approximately 15% of our metallurgical coal needs from our own mine at AK Coal Resources, Inc. (“AK Coal”). We typically purchase carbon and stainless steel scrap, natural gas, a substantial portion of our electricity and most other raw materials at prevailing market prices, which may fluctuate with market supply and demand. Additionally, we may hedge portions of our energy and raw materials purchases to reduce volatility and risk, which is discussed in more detail in Quantitative and Qualitative Disclosures about Market Risk in Item 7A.

We also attempt to reduce the risk of future supply shortages and price volatility in other ways. If multi-year contracts are available in the marketplace, we may use these contracts to secure sufficient supply to satisfy our key raw material needs. When multi-year contracts are not available, or are not available on acceptable terms, we purchase the remainder of our raw materials needs under annual contracts or ~~make~~conduct spot purchases. We also regularly evaluate alternative sources and substitute materials. We believe that we have secured, or will be able to secure, adequate supply sources for our raw materials and energy requirements for ~~2019~~2020.

Competition

We principally compete with domestic and foreign producers of flat-rolled carbon, stainless and electrical steel, carbon and stainless tubular products, aluminum, carbon fiber, concrete and other materials that may be used as a substitute for flat-rolled steels in manufactured products. Precision Partners ~~competes~~and ~~against~~AK ~~other~~Tube ~~tooling~~both ~~and~~compete ~~stamping~~against other niche companies in a highly fragmented ~~market~~markets.

Price, quality, on-time delivery, customer service and product innovation are the primary competitive factors in the steel industry and vary in importance according to the product category and customer requirements. Steel producers that sell to the automotive market face competition from aluminum manufacturers (and, to a lesser extent, other materials) as automotive manufacturers attempt to develop vehicles that will enable them to satisfy more stringent, government-imposed fuel efficiency standards. To address automotive manufacturers’ lightweighting needs that the aluminum industry is targeting, we and others in the steel industry are developing AHSS grades that we believe provide weight savings similar to aluminum, while being stronger, less costly, more sustainable, easier to repair and more environmentally friendly. Aluminum penetration has been primarily limited to specific automotive applications, such as outer panels and closures, rather than entire body designs. In addition, our automotive customers who continue to use steel, as opposed to aluminum and other alternative materials, are able to avoid the significant capital expenditures required to re-tool their manufacturing ~~process~~processes to accommodate the use of non-steel materials.

Mini-mills (producers using electric arc furnaces) typically have competitive cost advantages as a result of their different production processes and lower labor costs associated with what are often non-union workforces. Their primary raw materials are scrap metal and increasingly pig iron, which blast furnaces produce. Mini-mills generally offer a narrower range of products than integrated steel mills, but the increasing use of pig iron, direct reduced iron and compacted hot briquetted iron have ~~been~~enabled ~~expanding~~them to expand their product capabilities in recent years. ~~In addition~~However, mini-mills do not have ~~some~~the ~~competitive~~equipment ~~cost~~capabilities ~~advantages~~to asproduce athe ~~result~~product range that we offer, nor do they possess our depth of ~~their~~customer ~~different~~service, ~~production~~technical ~~processes~~support and research and innovation. Recent new or restarted steelmaking capacity in mini-mills has been primarily intended to service markets other than automotive, thus capping negative impacts to our revenues.

-Domestic 7steel producers, including us, face significant competition from foreign producers. For many reasons, these foreign producers often are able to sell products in the U.S. at prices substantially lower than domestic producers. Depending on the country of origin, these reasons may include government subsidies; lower labor, raw material, energy and regulatory costs; less stringent environmental regulations; less stringent safety requirements; the maintenance of artificially low exchange rates against the U.S. dollar; and preferential trade practices in their home countries. Since late 2017, import levels of carbon and stainless flat-rolled products into the United States have shown a gradual and steady decline and have recently been more reflective of historical levels before the unprecedented surges that began in 2014. However, import levels for GOES products are much higher than their historical levels. These may not be in the form of master coils or slit coils, but rather in the form of cut laminations or assembled transformer cores—which are imported under different tariff codes not subject to the current Section 232 tariffs. Import levels are affected to varying degrees by the relative level of steel production in China and other countries, the strength of demand for steel outside the U.S. and the relative strength or weakness of the U.S. dollar against various foreign currencies. Imports of finished steel into the United States accounted for approximately 19%, 23% and 27% of domestic steel market consumption in 2019, 2018 and 2017.

We continue to provide pension and healthcare benefits to a great number of our retirees, resulting in a competitive disadvantage compared to certain other domestic and foreign steel producers that do not provide such benefits to any or most of their retirees. However, we have taken a number of actions to reduce pension and healthcare benefits costs, including negotiating

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~~lower~~progressive labor ~~costs~~agreements ~~associated~~that ~~with~~have ~~what~~significantly ~~are~~reduced ~~often~~total ~~non-~~employment costs at all of our union-represented ~~workforces. However~~facilities, ~~mini~~transferring all responsibility for healthcare benefits for various groups of retirees to Voluntary Employee Benefits Association trusts, offering voluntary lump-~~mills~~sum dosettlements ~~not~~to ~~have~~pension ~~the~~plan ~~equipment~~participants, ~~capabilities~~lowering retiree benefit costs for salaried employees, and transferring pension obligations to ~~produce~~highly rated insurance companies. These actions have not only reduced some of the ~~product~~risks ~~range~~associated ~~that~~with weour ~~offer~~pension fund obligations, ~~nor~~but domore ~~they~~importantly ~~possess~~have reduced our ~~depth~~risk exposure to performance of ~~research~~the financial markets, which are a principal driver of pension funding requirements. We continue to actively seek opportunities to reduce pension and ~~development~~healthcare benefits costs.

~~Domestic~~Information ~~steel~~about ~~producers,~~our ~~including~~Executive us, face significant competition from foreign producers. For many reasons, these foreign producers often are able to sell products in the U.S. at prices substantially lower than domestic producers. Depending on the country of origin, these reasons may include generous government subsidies; lower labor, raw material, energy and regulatory costs; less stringent environmental regulations; less stringent safety requirements; the maintenance of artificially low exchange rates against the U.S. dollar; and preferential trade practices in their home countries. In recent years, the annual level of imports of foreign steel into the United States has increased over historical levels and is affected to varying degrees by the relative level of steel production in China and other countries, the strength of demand for steel outside the U.S. and the relative strength or weakness of the U.S. dollar against various foreign currencies. Imports of finished steel into the United States accounted for approximately 23%, 27% and 26% of domestic steel market consumption in 2018, 2017 and 2016, levels that are higher than the historic norm.Officers

WeThe ~~continue~~following totable ~~provide~~provides ~~pension~~the ~~and healthcare benefits to a great number of our retirees~~name, ~~resulting~~age ~~in a competitive disadvantage compared to certain other domestic~~ and ~~foreign~~principal ~~steel~~position ~~producers that do not provide such benefits to any or most~~ of ~~their~~each ~~retirees. However, we have taken a number~~ of ~~actions to reduce pension and healthcare benefits costs, including negotiating progressive labor agreements that have significantly reduced total employment costs at all of~~ our ~~union-represented~~executive ~~facilities,~~officers ~~transferring~~as ~~all responsibility for healthcare benefits for various groups~~ of ~~retirees to Voluntary Employee Benefits Association trusts~~February 18, offering voluntary lump-sum settlements to pension plan participants, lowering retiree benefit costs for salaried employees, and transferring pension obligations to highly rated insurance companies. These actions have not only reduced some of the risks associated with our pension fund obligations, but more importantly have reduced our risk exposure to the financial markets that drive pension funding requirements. We continue to actively seek opportunities to reduce pension and healthcare benefits costs.2020:

Executive Officers of the Registrant



Name	Age	Position
Roger K. Newport	55	Chief Executive Officer
Kirk W. Reich	51	President and Chief Operating Officer
Joseph C. Alter	42	Vice President, General Counsel and Corporate Secretary
Brian K. Bishop	48	Vice President, Carbon Steel Operations
Stephanie S. Bisselberg	49	Vice President, Human Resources
Renee S. Filiatraut	56	Vice President, Litigation, Labor and External Affairs
Gregory A. Hoffbauer	53	Vice President, Controller and Chief Accounting Officer
Michael A. Kercsmar	48	Vice President, Specialty Steel Operations
Scott M. Lauschke	50	Vice President, Sales and Customer Service
Maurice A. Reed	57	Vice President, Strategic Planning and Business Development
Christopher J. Ross	52	Vice President, Treasurer and Interim Chief Financial Officer

The following table provides the name, age and principal position of each of our executive officers as of February 13, 2019:

Name	Age	Position
Roger K. Newport	54	Chief Executive Officer
Kirk W. Reich	50	President and Chief Operating Officer
Joseph C. Alter	41	Vice President, General Counsel and Corporate Secretary
Brian K. Bishop	47	Vice President, Carbon Steel Operations
Stephanie S. Bisselberg	48	Vice President, Human Resources
Renee S. Filiatraut	55	Vice President, Litigation, Labor and External Affairs
Gregory A. Hoffbauer	52	Vice President, Controller and Chief Accounting Officer
Michael A. Kercsmar	47	Vice President, Specialty Steel Operations
Scott M. Lauschke	49	Vice President, Sales and Customer Service
Maurice A. Reed	56	Vice President, Strategic Planning and Business Development
Christopher J. Ross	51	Vice President and Treasurer
Jaime Vasquez	56	Vice President, Finance and Chief Financial Officer

Roger K. Newport has served as Chief Executive Officer since January 2016. Prior to that, Mr. Newport served as Executive Vice President, Finance and Chief Financial Officer since May 2015. Prior to that, Mr. Newport served as Senior Vice President, Finance and Chief Financial Officer since May 2014, and as Vice President, Finance and Chief Financial Officer since May 2012. Prior to that, Mr. Newport served in a variety of other capacities since joining us in 1985, including Vice President—Business Planning and Development, Controller and Chief Accounting Officer, Assistant Treasurer, Investor Relations, Manager—Financial Planning and Analysis, Product Manager, Senior Product Specialist and Senior Auditor.

Kirk W. Reich has served as President and Chief Operating Officer since January 2016. Prior to that, Mr. Reich served as Executive Vice President, Manufacturing since May 2015. Before assuming that role, Mr. Reich served as Senior Vice President, Manufacturing since May 2014, and as Vice President, Procurement and Supply Chain Management since May 2012. Prior to that, Mr. Reich served in a variety of other capacities since joining us in 1989, including Vice President—Specialty Steel Operations, General Manager—Middletown Works, Manager—Mobile Maintenance/Maintenance Technology, General Manager—Mansfield Works, Manager—Processing and Shipping, Technical Manager, Process Manager and Civil Engineer.

Joseph C. Alter has served as Vice President, General Counsel and Corporate Secretary since May 2015. Prior to that, Mr. Alter served as Vice President, General Counsel and Chief Compliance Officer since May 2014 and Assistant General Counsel, Corporate and Chief Compliance Officer since December 2012. Since joining us in 2009, Mr. Alter served as Corporate Counsel and Chief Compliance Officer and as Corporate Counsel. Prior to joining us, Mr. Alter was Corporate Counsel at Convergys Corporation and an attorney with the law firm of Keating Muething & Klekamp PLL.

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Chief Compliance Officer since December 2012. Since joining us in 2009, Mr. Alter served as Corporate Counsel and Chief Compliance Officer and as Corporate Counsel. Prior to joining us, Mr. Alter was Corporate Counsel at Convergys Corporation and an attorney with the law firm of Keating Muething & Klekamp PLL.

Brian K. Bishop has served as Vice President, Carbon Steel Operations since March 2016. Prior to that, Mr. Bishop served as Director, Carbon Steel Operations since July 2015 and General Manager, Dearborn Works since September 2014. Prior to that, Mr. Bishop was General Manager—Maintenance, Repair and Operations Purchasing since May 2013. Since joining us in 1995, Mr. Bishop progressed through a number of positions, including General Manager—Middletown Works, General Manager—Mansfield Works, Manager—Occupational Safety and Health and Shift Manager at Middletown Works.

Stephanie S. Bisselberg has served as Vice President, Human Resources since April 2013. She also served as Assistant General Counsel—Labor, Labor Counsel and Assistant Labor Counsel since joining us in 2004. Prior to joining us, Ms. Bisselberg was an attorney with the law firm of Taft, Stettinius and Hollister LLP.

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Renee S. Filiatraut has served as Vice President, Litigation, Labor and External Affairs since May 2014. Prior to that, Ms. Filiatraut served as Assistant General Counsel, Litigation since December 2012. Before joining us as Litigation Counsel in 2011, Ms. Filiatraut was a Partner with Thompson Hine LLP.

Gregory A. Hoffbauer has served as Vice President, Controller and Chief Accounting Officer since January 2016. Prior to that, Mr. Hoffbauer served as Controller and Chief Accounting Officer since February 2013. Before joining us as Assistant Controller in 2011, Mr. Hoffbauer was Director of Accounting with NewPage Corporation. Mr. Hoffbauer also was Controller for Day International, Inc. and served in a number of increasingly responsible accounting and auditing positions for Deloitte & Touche LLP, including Audit Senior Manager.

Michael A. Kercsmar has served as Vice President, Specialty Steel Operations since March 2016. Prior to that, Mr. Kercsmar served as Director, Specialty Steel Operations since July 2015 and General Manager, Coshocton Works and Zanesville Works since June 2013. Mr. Kercsmar served in a number of roles since joining us in 1997, including General Manager—Mansfield Works, Manager—Occupational Safety and Health at Middletown Works, Department Manager—South Coating, and Shift Manager in the cold strip mill at Middletown Works.

Scott M. Lauschke has served as Vice President, Sales and Customer Service since joining us in February 2015. Before joining us, Mr. Lauschke was Vice President and General Manager of AFGlobal Corporation from July 2013 through November 2014. Before that, Mr. Lauschke served in various roles of increasing responsibility at The Timken Company, including General Sales Manager.

Maurice A. Reed has served as Vice President, Strategic Planning and Business Development since August 2018. Prior to that, he served as Vice President, Engineering, Raw Materials and Energy since May 2012. Prior to that, Mr. Reed served in a variety of other capacities since joining us in 1996, including Director—Engineering and Raw Materials, Director—Engineering and Energy, General Manager—Engineering, Operations Support and Primary Process Research and General Manager—Engineering. Before joining us, Mr. Reed held a number of increasingly responsible engineering technology positions for National Steel Corporation.

Christopher J. Ross has served as Vice President, Treasurer and ~~Treasurer~~Interim Chief Financial Officer since ~~January~~November ~~2018~~2019. Prior to that, Mr. Ross was Vice President and Treasurer since January 2018, Treasurer since February 2016 and General Manager, Cash Management and Finance since August 2012. Mr. Ross served in a number of roles since joining us in 1997, including General Manager—Strategic Planning and Financial Analysis, General Manager—Investor Relations and Diversified Business Group, Assistant Treasurer, Manager—Investor Relations, Product Manager—Hot Dip Galvanized and Electrogalvanized, Senior Accountant—Financial Planning and Analysis and Cost Accountant at Middletown Works.

Jaime Vasquez has served as Vice President, Finance and Chief Financial Officer since January 2016. Before joining us in September 2014 as Director, Finance, Mr. Vasquez held several positions with Carpenter Technology Corporation, including Vice President, Chief Financial Officer for the Performance Engineered Products Group from October 2013; Vice President, Corporate Development; President, Asia Pacific; and Vice President, Treasurer and Investor Relations.

Available Information

We maintain a website at www.aksteel.com. Information about us is available on the website free of charge, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Such information is posted to the website as soon as reasonably practicable after submission to the Securities and Exchange Commission. Information on our website is not incorporated by reference into this report.

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Item 1A.	Risk Factors.

We caution readers that our business activities involve risks and uncertainties that could cause actual results to differ materially from those we currently expect. While the items listed below represent the most significant risks to us, we regularly monitor and report risks to the Board of Directors through a formal Total Enterprise Risk Management program.

Risk of reduced selling prices, shipments and profits associated with a highly competitive and cyclical industry. The competitive landscape in the steel industry reflects shifting domestic and international political priorities, an uncertain global trade landscape, and intense competition from domestic and foreign competitors producing steel and substitute products. These conditions directly impact our pricing. It is impossible to predict whether the domestic and/or global economies or industry sectors of those economies that are key to our sales will continue to improve and generate enough demand to absorb some of the existing excess capacity in the steel industry, as well as new or expanded capacity. Also, we cannot know how customers or competitors will react to these and other factors and how their actions could affect market dynamics and sales of, and prices for, our products. Market price and demand for steel are very hard to predict and decreases in either or both could adversely impact our sales, financial results and cash flows. In addition, our direct sales to the automotive industry generate approximately 6366% of our revenue and we make additional sales to distributors and converters whom, we believe, ultimately resell some of that volume to the automotive market. If automotive demand should decline substantially or we lose market share to competitors, our sales, financial results and cash flows could be severely impacted.

Risk of domestic and global steel overcapacity. Significant global steel capacity and new or expanded production capacity in the United States in recent years has caused and continues to cause capacity to exceed demand globally, as well as in our primary markets in North America. In fact, significant increases in production capacity and a restart of previously idled capacity in the U.S. by our competitors has occurred in recent periods, as new carbon and stainless steelmaking and finishing facilities have begun or may soon begin production. In addition, foreign competitors have substantially increased their production capacity in the last few years and, in some instances appear to have targeted the U.S. market for imports. Also, some foreign economies, such as China, seem to be slowing relative to recent historical norms, resulting in an increased volume of steel products that cannot be consumed by industries in those foreign steel producers’ own countries. These and other factors have contributed to a high level of imports of foreign steel into the U.S. in recent years compared to historical levels and create a risk of even greater levels of imports, depending upon foreign market and economic conditions, the value of the U.S. dollar relative to other currencies, and other variables beyond our control. A significant further increase in domestic capacity or foreign imports could adversely affect our sales, financial results and cash flows.

Risks related to U.S. government actions on trade agreements and treaties, laws, regulations or policies affecting trade. The U.S. government has altered its approach to international trade policy, both generally and with respect to the matters directly and indirectly affecting the steel industry. In 2018, the U.S. government undertook certain unilateral actions affecting trade and also renegotiated existing bilateral or multi-lateral trade agreements or entered into new agreements or treaties with foreign countries. In March 2018, President Trump signed a proclamation pursuant to Section 232 imposing a 25 percent tariff on imported steel. In retaliation against the Section 232 tariffs, the European Union, Mexico and Canada subsequently imposed their own tariffs against certain steel products and other goods imported from the U.S. The Section 232 tariffs have generally resulted in higher steel prices in the U.S. generally and for us specifically, particularly for our steel sales to the distributors and converters and infrastructure and manufacturing markets. In the event the Section 232 tariffs are removed or substantially lessened, whether through legal challenge, legislation or otherwise, imports of foreign steel would likely increase and steel prices in the U.S. would likely fall, which would materially adversely affect our sales, financial results and cash flows. In addition, in October 2018, the Trump administration announced that the U.S. had reached an agreement with Canada and Mexico on the United States-Mexico-Canada Trade Agreement (“USMCA”), which is being proposed to replace the existing North American Free Trade Agreement (“NAFTA”) among those countries. Because all of our manufacturing facilities are located in North America and our principal market is automotive manufacturing in North America, we believe that the USMCA has the potential to positively impact our business by incentivizing automakers and other manufacturers to increase manufacturing production in North America and to use North American steel. However, it is difficult to predict the short- and long-term implications of changes in trade policy and, therefore whether USMCA or other new or renegotiated trade agreements, treaties, laws, regulations of policies will have a beneficial or detrimental impact on our business and our customers’ and suppliers’ business. Adverse effects could occur directly from a disruption to trade and commercial transactions and/or indirectly by adversely affecting the U.S. economy or certain sectors thereof, thereby impacting demand for our customers’ products, and in turn negatively affecting demand for our products. Key links of the supply chain for some of our key customers, including automotive manufacturers, could be negatively impacted by USMCA or other new or renegotiated trade agreements, treaties, laws, regulations of policies. Any of these actions and their direct and indirect impacts could materially adversely affect our sales, financial results and cash flows.

Risk of changes in the cost of raw materials, supplies and energy. The price that we pay for energy and key supplies and raw materials, such as electricity, natural gas, industrial gases, graphite electrodes, iron ore, chrome, zinc and coal, can fluctuate significantly based on market factors. In some cases the prices at which we sell steel will not change in tandem with changes in our raw materials, supplies and energy costs. Global demand and supply, particularly Chinese demand and supply, for certain raw

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~~materials~~Risk ~~can~~of ~~have~~domestic aand ~~significant~~global ~~influence~~steel onovercapacity. Significant ~~our~~global ~~costs~~steel ~~for~~capacity ~~those raw materials, especially iron ore~~ and ~~coal,~~new asor ~~well~~expanded ~~as supplies for~~ production ~~whose~~capacity ~~prices~~in ~~are~~North ~~impacted~~America byin ~~raw~~recent ~~material~~years ~~prices,~~has ~~such~~caused ~~as graphite electrodes~~ and ~~refractory~~continues ~~materials.~~to ~~However,~~cause ~~our~~capacity ~~sales~~to ~~prices~~exceed ~~are generally driven by North American~~ demand globally, ~~which~~as ~~can~~well ~~result~~as in ~~a compression in~~ our ~~margins~~primary markets in ~~cases~~North ~~where raw material costs increase and our sales prices do not move enough to cover those increases~~America. ~~The~~In ~~majority~~fact, ofsignificant ~~our shipments are sold under contracts that do not allow us to pass through all~~ increases in ~~raw~~new ~~materials,~~production ~~supplies~~capacity and ~~energy~~a ~~costs.~~restart ~~Some~~ of ~~our~~previously ~~shipments~~idled tocapacity ~~contract~~in ~~customers include variable-pricing mechanisms allowing us to adjust~~ the ~~total~~U.S. ~~sales~~by ~~price~~our ~~based~~competitors ~~upon~~has ~~changes~~occurred in ~~specified~~recent ~~raw materials~~periods, ~~supplies~~as ~~and~~new ~~energy~~carbon ~~costs.~~and ~~Those~~stainless ~~adjustments,~~steelmaking ~~however, rarely reflect all of our underlying raw materials, supplies~~ and ~~energy~~finishing ~~cost~~facilities ~~changes.~~have ~~The~~begun ~~scope~~or ~~of the adjustment~~ may ~~also~~soon bebegin ~~limited~~production. byIn ~~the~~addition, ~~terms~~foreign ofcompetitors ~~the~~have ~~negotiated~~substantially ~~language,~~increased ~~including~~their ~~limitations~~production oncapacity ~~when~~in the ~~adjustment~~last ~~occurs.~~few ~~For~~years ~~shipments we make to the spot market~~and, ~~market~~in ~~conditions~~some orinstances ~~timing~~appear ~~of sales may not allow us~~ to ~~recover~~have targeted the ~~full~~U.S. ~~amount~~market offor animports. ~~increase~~Also, insome ~~raw~~foreign ~~material~~economies, ~~supplies or energy costs. In~~ such ~~circumstances,~~as ~~a significant increase in raw material~~China, ~~supplies~~have orslowed ~~energy~~relative ~~costs~~to ~~likely~~recent ~~would~~historical ~~adversely impact our financial results and cash flows. Conversely~~norms, resulting in ~~certain~~an ~~circumstances,~~increased wevolume ~~may~~of ~~not~~steel ~~realize~~products ~~all~~that ofcannot ~~the~~be ~~benefits~~consumed ~~when~~by ~~the~~industries ~~price~~in ~~for~~those ~~certain~~foreign ~~raw~~steel ~~materials,~~producers’ ~~supplies~~own ~~or energy declines~~countries. ~~For~~Although ~~example,~~import ~~this~~levels ~~can occur when we lock in the price~~ of acarbon ~~raw material over a set period~~ and ~~the~~stainless ~~spot~~flat-rolled ~~market~~products ~~price~~into ~~for~~ the ~~material~~United ~~declines~~States ~~during~~have ~~that~~shown ~~period.~~a ~~Our~~gradual ~~need~~and tosteady ~~consume~~decline ~~existing~~over ~~inventories may also delay~~ the ~~impact~~past oftwo ayears, ~~change~~imports ~~in prices~~ of ~~raw~~other ~~materials~~steel orproducts ~~supplies.~~remain ~~New~~at ~~inventory~~historic ~~may~~highs ~~not~~and bethe ~~purchased~~risk ~~until~~remains ~~some portion~~ of ~~the~~even ~~existing~~greater ~~inventory~~levels ~~is consumed. The impact~~ of ~~this~~imports, ~~risk~~depending isupon ~~particularly~~foreign ~~significant~~market ~~for iron ore~~ and ~~coke~~economic ~~because~~conditions, ofchanges ~~the volumes held~~ in ~~inventory.~~trade Weagreements ~~manage~~and ~~our~~treaties, ~~exposure~~laws, toregulations ~~the~~or ~~risk~~government ofpolicies ~~iron~~affecting ~~ore~~trade, ~~price~~the ~~increases~~value ~~by hedging a portion~~ of ~~our annual iron ore supply and by entering supply agreements where~~ the ~~IODEX,~~U.S. ~~the~~dollar ~~global~~relative ~~iron~~to ~~ore~~other ~~price index~~currencies, isand ~~only~~other ~~one~~variables ~~factor~~beyond ~~affecting~~ our ~~price of iron ore pellets~~control. ~~Significant~~A ~~changes~~significant infurther ~~raw material costs may also~~ increase ~~the potential for inventory value write-downs~~ in ~~the~~domestic ~~event~~capacity ofor aforeign ~~reduction~~imports incould ~~selling~~adversely ~~prices~~affect ~~and~~ our ~~inability~~sales, tofinancial ~~realize~~results ~~the~~and ~~cost~~cash ~~of the inventory~~flows.

~~Risk~~Risks ~~from~~related ~~our~~to ~~significant~~U.S. ~~amount~~government ofactions ~~debt~~on ~~and~~trade ~~other~~agreements ~~obligations. On~~and ~~December 31~~treaties, ~~2018~~laws, weregulations ~~had~~or ~~$2,035~~policies affecting trade.4 Under ofthe ~~indebtedness~~Trump ~~outstanding~~Administration, the U.S. Wegovernment ~~also~~has ~~had~~altered ~~pension~~its approach to international trade policy, both generally and ~~other~~with ~~postretirement~~respect ~~benefit~~to ~~obligations~~the ~~totaling~~matters ~~$868.6.~~directly Weand ~~anticipate~~indirectly ~~making~~affecting ~~approximately~~the ~~$45~~steel industry.0 ofIn ~~required~~recent ~~annual~~years, ~~pension~~the ~~contributions~~U.S. ~~for~~government ~~2019.~~undertook ~~Based~~certain onunilateral ~~current~~actions ~~funding~~affecting ~~projections,~~trade weand ~~expect~~also torenegotiated ~~make~~existing ~~contributions~~bilateral toor ~~the~~multi-lateral ~~master~~trade ~~pension~~agreements ~~trust~~or ofentered ~~approximately~~into ~~$50.0~~new ~~for~~agreements ~~2020~~or ~~and~~treaties ~~$50~~with foreign countries.0 ~~for~~For ~~2021~~example, ~~though~~in ~~funding~~March ~~projections~~2018, ~~for~~President ~~2020~~Trump ~~and~~signed ~~beyond~~a ~~could~~proclamation bepursuant ~~materially~~to ~~affected~~Section by232 ~~differences~~imposing ~~between~~a ~~expected~~25 ~~and~~percent ~~actual~~tariff ~~returns~~ on ~~plan~~imported ~~assets,~~steel. ~~actuarial~~In ~~data~~retaliation ~~and~~against ~~assumptions~~the ~~relating~~Section to232 ~~plan participants~~tariffs, the ~~discount~~European ~~rate~~Union ~~used~~subsequently toimposed ~~measure~~its ~~the~~own ~~pension~~tariffs ~~obligations~~against certain steel products and ~~changes~~other togoods ~~regulatory~~imported ~~funding~~from ~~requirements~~the U.S. WeIf ~~also~~the ~~have~~Section ~~the~~232 ~~ability~~tariffs toare ~~borrow~~removed ~~additional~~or ~~amounts~~substantially ~~under~~lessened, ~~our~~whether $1through legal challenge,~~350.0~~ ~~revolving~~legislation ~~credit~~or ~~facility~~otherwise, ~~(the~~imports ~~“Credit~~of ~~Facility”).~~foreign Atsteel ~~December~~would ~~31,~~likely ~~2018,~~increase weand ~~had~~steel ~~$335~~prices in the U.0S. ofwould ~~outstanding~~likely ~~borrowings~~fall, ~~under~~which ~~the~~would ~~Credit~~materially ~~Facility~~adversely ~~with~~affect ~~outstanding~~our ~~letters~~sales, offinancial ~~credit~~results ofand ~~$73~~cash flows.2 In addition, ~~resulting~~on inDecember ~~maximum~~10, ~~remaining~~2019, ~~availability~~representatives of ~~$941~~the U.8S., ~~under~~Mexico and Canada signed a revision to the ~~Credit~~United ~~Facility~~States-Mexico-Canada Trade Agreement (~~subject~~“USMCA”), which was proposed to ~~customary~~replace ~~borrowing~~the ~~conditions,~~existing ~~including~~North aAmerican ~~borrowing~~Free ~~base~~Trade Agreement (“NAFTA”) among those countries. ~~Borrowing~~On ~~capacity~~January ~~under~~29, 2020, President Trump signed the ~~Credit~~USMCA ~~Facility~~Implementation isAct ~~determined~~on bybehalf of the ~~value~~U.S. Because all of ~~eligible~~our ~~collateral~~manufacturing ~~less~~facilities ~~outstanding~~are ~~borrowings~~located in North America and ~~letters~~our ofprincipal ~~credit.~~market Atis ~~December~~automotive ~~31,~~manufacturing ~~2018~~in North America, ~~borrowing~~we ~~availability~~believe ~~under~~that the ~~Credit~~USMCA ~~Facility~~has ~~was~~the ~~$941.8~~potential ~~based~~to onpositively ~~eligible~~impact ~~collateral~~our atbusiness ~~that~~by ~~time.~~incentivizing Onautomakers ~~November~~and ~~15,~~other ~~2019,~~manufacturers ~~our~~to ~~$148.5~~increase ~~million~~manufacturing production in ~~principal~~North ~~amount~~America ofand ~~Exchangeable~~to ~~Notes~~use ~~due~~North ~~2019~~American ~~will become due~~steel. AtHowever, orit ~~prior~~is difficult to predict the ~~maturity~~short- ofand ~~those~~long-term ~~Exchangeable~~implications ~~Notes,~~of wechanges ~~intend~~in totrade ~~repay~~policy orand, ~~refinance them~~therefore, ~~subject~~whether toUSMCA ~~market~~or ~~conditions.~~other ~~Our~~new ~~debt~~or ~~and~~renegotiated ~~pension~~trade ~~obligations~~agreements, ~~along~~treaties, ~~with~~laws, ~~other~~regulations ~~financial~~or ~~obligations,~~policies ~~could~~will have ~~important~~a ~~consequences.~~beneficial ~~For~~or ~~example,~~detrimental ~~they~~impact ~~could~~on ~~increase~~ our ~~vulnerability~~business toand ~~general~~our ~~adverse~~customers’ ~~economic~~ and ~~industry~~suppliers’ ~~conditions;~~business. ~~require~~Adverse aeffects ~~substantial~~could ~~portion~~occur ofdirectly ~~our~~from ~~cash~~a ~~flows~~disruption to betrade ~~dedicated~~and tocommercial ~~interest~~transactions ~~payments~~ and/or ~~debt~~indirectly ~~service,~~by ~~reducing~~adversely affecting the ~~amount~~U.S. ofeconomy ~~cash~~or ~~flows~~certain ~~available~~sectors ~~for other purposes~~thereof, ~~such~~thereby asimpacting ~~working~~demand ~~capital,~~for ~~capital~~our ~~expenditures,~~customers’ ~~acquisitions~~products, ~~joint~~and ~~ventures~~in orturn ~~general~~negatively ~~corporate~~affecting ~~purposes;~~demand ~~limit~~for our ~~ability~~products. toKey ~~obtain~~links ~~future~~of ~~additional~~the ~~financing;~~supply ~~reduce~~chain ~~our~~for ~~planning~~some ~~flexibility~~of ~~for,~~our orkey ~~ability~~customers, toincluding ~~react~~automotive tomanufacturers, ~~changes~~could inbe ~~our~~negatively ~~business~~impacted ~~and~~by ~~the~~USMCA ~~industry;~~or ~~and~~other ~~place~~new usor atrenegotiated atrade ~~competitive~~agreements, ~~disadvantage~~treaties, ~~with~~laws, ~~competitors~~regulations ~~who~~of ~~may~~policies. ~~have~~Any ~~less~~of ~~indebtedness~~these actions and ~~other~~their ~~obligations~~direct orand ~~greater~~indirect ~~access~~impacts tocould ~~financing.~~materially adversely affect our sales, financial results and cash flows.

Risk of ~~severe~~changes ~~financial~~in ~~hardship~~the orcost ~~bankruptcy~~ of ~~one~~raw ormaterials, ~~more~~supplies ofand ~~our~~energy. The ~~major~~price ~~customers~~that orwe pay for energy, key ~~suppliers. Sales~~supplies and ~~operations~~raw ofmaterials, asuch ~~majority~~as ofelectricity, ~~our~~natural ~~customers~~gas, ~~are~~industrial ~~sensitive~~gases, tographite ~~general~~electrodes, ~~economic~~iron ~~conditions~~ore, ~~especially~~chrome, aszinc ~~they~~and ~~affect~~coal, can fluctuate significantly based on market factors. In some cases, the ~~North~~prices ~~American~~at ~~automotive~~which we sell steel will not change in tandem with changes in our raw materials, supplies and ~~housing~~energy ~~industries~~costs. If ~~there~~Global isdemand and supply, particularly Chinese demand and supply, for certain raw materials can have a significant ~~weakening~~influence ofon ~~current~~our ~~economic~~costs ~~conditions,~~for ~~whether~~those ~~because~~raw ofmaterials, ~~secular~~especially oriron ~~cyclical~~ore ~~issues~~and coal, itas ~~could~~well ~~lead~~as tosupplies ~~financial~~for ~~difficulties~~production orwhose ~~even~~prices ~~bankruptcy~~are ~~filings~~impacted by ~~our~~raw ~~customers~~material prices, such as graphite electrodes and refractory materials. ~~The~~However, ~~concentration~~our ofsales ~~customers~~prices are generally driven by North American demand, which can result in a ~~specific~~compression ~~industry,~~in ~~such~~our asmargins ~~the~~in ~~automotive~~cases ~~industry,~~where ~~may~~raw material costs increase and our ~~risk~~sales ~~because~~prices do not move enough to cover those increases. The majority of ~~the~~our ~~likelihood~~shipments are sold under contracts that ~~circumstances~~do ~~may~~not ~~affect~~allow ~~multiple~~us ~~customers~~to atpass ~~the~~through ~~same~~all ~~time.~~increases ~~The~~in ~~nature~~raw materials, supplies and energy costs. Some of ~~that~~our ~~impact~~shipments ~~would~~to ~~likely~~contract customers include ~~lost~~variable-pricing ~~sales~~mechanisms orallowing ~~losses~~us ~~associated~~to ~~with~~adjust the ~~potential~~total ~~inability~~sales toprice ~~collect~~based ~~all~~upon ~~outstanding~~changes ~~accounts~~in ~~receivable~~specified raw materials, supplies and energy costs. ~~Such~~Those anadjustments, ~~event~~however, ~~could~~rarely ~~also~~reflect ~~negatively~~all ~~impact~~of our ~~financial~~underlying ~~results~~raw materials, supplies and ~~cash~~energy ~~flows~~cost changes. InThe ~~addition,~~scope ~~many~~of the adjustment may also be limited by the terms of ~~our~~the ~~key~~negotiated ~~suppliers~~language, ~~particularly~~including ~~those~~limitations ~~who~~on ~~supply~~when usthe ~~with~~adjustment ~~critical~~occurs. ~~raw~~For ~~materials~~shipments ~~for~~we make to the ~~steelmaking~~spot ~~process~~market, ~~have~~market ~~recently~~conditions ~~faced~~or ~~severe~~timing ~~financial~~of ~~challenges~~sales ormay ~~bankruptcy~~not ~~and~~allow ~~other~~us ~~suppliers~~to ~~may~~recover ~~face~~the full amount of an increase in raw material, supplies or energy costs. In such circumstances, a significant increase in ~~the~~raw ~~future~~material, supplies or energy costs likely would adversely impact our financial results and cash flows. ~~Also~~Conversely, in certain circumstances, we ~~purchase~~may ~~substantially~~not realize all of ~~our~~the ~~iron~~benefits ~~ore~~when ~~from~~the ~~one~~price ~~supplier~~for ~~under~~certain ~~two~~raw ~~multi-year~~materials, ~~contracts~~supplies or energy declines. ~~This~~For ~~reliance~~example, onthis can occur when we lock in the price of a ~~single~~raw ~~supplier~~material ~~for~~over a ~~primary~~set ~~raw~~period and the spot market price for the material declines during that period. Our need to consume existing inventories may ~~increase~~also ~~our~~delay ~~risk~~the impact of ~~increased~~a ~~costs~~change ~~from~~in ~~substitute~~prices ~~suppliers~~of raw materials or ~~supply~~supplies. ~~chain~~New ~~disruptions~~inventory inmay ~~the~~not ~~event~~be purchased until some portion of ~~its~~the ~~financial~~existing ~~hardship~~inventory oris ~~bankruptcy~~consumed. ~~Key~~The ~~suppliers~~impact ~~facing~~of ~~financial~~this ~~hardship~~risk oris ~~operating~~particularly insignificant ~~bankruptcy~~for ~~could~~iron ~~experience~~ore ~~operational~~and ~~disruption~~coke orbecause ~~even~~of ~~face~~the ~~liquidation,~~volumes ~~which~~held ~~could~~in ~~result~~inventory. inWe manage our ~~inability~~exposure to ~~secure~~the ~~replacement~~risk ~~raw~~of ~~materials~~iron onore aprice ~~timely~~increases ~~basis,~~by orhedging ata ~~all,~~portion orof ~~cause~~our usannual toiron ~~incur~~ore ~~increased~~supply ~~costs~~and toby domaintaining ~~so.~~supply ~~Such~~agreements ~~events~~where ~~could~~the ~~adversely~~IODEX, ~~impact~~the ~~our~~global ~~operations~~iron ore price index, ~~financial~~is ~~results~~only ~~and~~one ~~cash~~factor ~~flows~~affecting our price of iron ore pellets. Significant changes in raw material costs may also

Risk related to our significant proportion of sales to the automotive market. In 2018, approximately 63% of our sales were to the automotive market. In addition to the size of our exposure to the automotive industry, we face risks related to our relative concentration of sales to certain specific automotive manufacturers. In 2018, two customers accounted for 11% and 10% of our net sales. Automotive production and sales are cyclical and sensitive to general economic conditions and other factors, including interest

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~~rates,~~increase ~~consumer credit, and consumer spending and preferences. If automotive production and sales decline, our sales and shipments to~~ the ~~automotive~~potential ~~market~~for ~~are~~inventory ~~likely~~value towrite-downs ~~decline~~ in ~~a corresponding manner. Adverse impacts that we may sustain as a result include, without limitation, lower margins because of~~ the ~~need~~event ~~to sell our steel to less profitable customers and markets, higher fixed costs from lower steel production if we are unable to sell the same amount~~ of steel to other customers and markets, and/or lower sales, shipments and margins generally as our competitors face similar challenges and compete vigorously in other markets. These adverse impacts would negatively affect our sales, financial results and cash flows. Additionally, the trend toward lightweighting in the automotive industry, which requires lighter gauges of steel at higher strengths, could result in a ~~lower~~reduction ~~volume of steel required by that industry over time. Moreover, competition for automotive business has intensified~~ in ~~recent~~selling ~~years,~~prices ~~as steel producers~~ and ~~companies~~our ~~producing~~inability ~~alternative~~to ~~materials~~realize have focused their efforts on capturing and/or expanding their market share of automotive business because of less favorable conditions in other markets for steel and other metals, including commodity products and steel for use in the ~~oil~~cost ~~and gas markets. As a result, the potential exists that we may lose market share to existing or new entrants or that automotive manufacturers will take advantage~~ of the intense competition among potential suppliers to pressure our pricing and margins in order to maintain or expand our market share with them, which could negatively affect our sales, financial results and cash flowsinventory.

Risk from our significant amount of ~~reduced~~debt ~~demand~~and inother ~~key~~obligations. On ~~product~~December ~~markets~~31, ~~due~~2019, towe ~~competition~~had ~~from~~$1,997.3 ~~aluminum~~of indebtedness outstanding. We also had pension and other ~~alternatives~~postretirement tobenefit ~~steel~~obligations totaling $758. ~~The~~8. ~~automotive~~We ~~market~~anticipate ismaking ~~important~~approximately to$45.0 ~~our~~of ~~business,~~required ~~both~~annual pension contributions in ~~terms~~2020. Based on current funding projections, we expect to make contributions to the master pension trust of ~~volume~~approximately $45.0 for 2021 and ~~margins~~$35.0 ~~Automotive~~for ~~manufacturers~~2022, ~~are~~though ~~under~~funding ~~pressure~~projections for 2021 and beyond could be materially affected by differences between expected and actual returns on plan assets, actuarial data and assumptions relating to ~~meet~~plan participants, the ~~government-mandated~~discount ~~CAFE~~rate ~~standards~~used to measure the pension obligations and changes to regulatory funding requirements. Furthermore, ~~which~~actions ~~require~~to ~~increasing~~reduce ~~fuel~~our ~~economy~~pension ~~for~~obligations, ~~automobiles~~such inas transferring retiree obligations to insurance companies through purchased annuity contracts could accelerate the ~~future.~~timing ~~Automotive~~or ~~manufacturers~~increase ~~have~~the ~~begun~~amount of contributions that we are required to ~~incorporate~~make ~~aluminum~~to ~~and~~the ~~other~~master ~~alternative~~pension ~~materials~~trust. ~~into~~We ~~their~~also ~~vehicles~~have ~~and~~the ~~continue~~ability to ~~investigate~~borrow additional amounts under our $1,500.0 revolving credit facility (the ~~potential~~“Credit ~~risks~~Facility”). ~~and~~At ~~benefits~~December 31, 2019, we had $450.0 of ~~expanding~~outstanding borrowings under the ~~use~~Credit Facility with outstanding letters of ~~non-steel~~credit ~~materials~~of $72.5, ~~For~~resulting ~~example,~~in ~~one~~maximum ~~major~~remaining ~~automotive~~availability ~~company~~of ~~previously~~$977.5 ~~elected~~under the Credit Facility, subject to ~~substitute~~customary ~~aluminum~~borrowing ~~for~~conditions, ~~carbon~~including ~~steel~~a inborrowing base, which is determined by the ~~body~~value of ~~some~~eligible collateral less outstanding borrowings and letters of ~~its~~credit. ~~vehicles~~At December 31, 2019, borrowing availability under the Credit Facility was $804.6 ~~Although~~based ~~automotive~~on ~~manufacturers~~eligible ~~have~~collateral ~~incorporated~~at ~~aluminum~~that time. Our debt and ~~other~~pension ~~competing~~obligations, ~~materials~~along atwith aother ~~much~~financial ~~slower~~obligations, ~~rate~~could ~~than~~have ~~some~~important ~~experts~~consequences. ~~previously~~For ~~expected~~example, ifthey ~~demand~~could ~~for~~increase ~~steel~~our ~~from~~vulnerability ~~one~~to orgeneral ~~more~~adverse economic and industry conditions; require a substantial portion of our ~~major~~cash ~~automotive~~flows ~~customers~~to ~~was~~be dedicated to ~~significantly~~interest ~~decline~~payments ~~because~~and ofdebt ~~increased~~service, ~~use~~reducing the amount of ~~aluminum~~cash orflows available for other ~~competing~~purposes, ~~materials~~such inas ~~substitution~~working ~~for~~capital, ~~steel~~capital expenditures, itacquisitions, ~~likely~~joint ~~would~~ventures ~~negatively~~(“JVs”) ~~affect~~or general corporate purposes; limit our ~~sales~~ability to obtain future additional financing; reduce our planning flexibility for, ~~financial~~or ~~results~~ability to react to, changes in our business and ~~cash~~the ~~flows~~industry; and place us at a competitive disadvantage with competitors who may have less indebtedness and other obligations or greater access to financing.

~~Risks~~Risk of ~~excess~~severe ~~inventory~~financial hardship or bankruptcy of ~~raw~~one ~~materials~~or more of our major customers or key suppliers or JVs. WeSales ~~have~~and ~~certain~~operations ~~raw~~of ~~material~~a ~~supply~~majority ~~contracts~~of ~~that~~our ~~include~~customers ~~minimum~~are ~~annual~~sensitive ~~purchases~~to general economic conditions, ~~subject~~especially toas ~~exceptions~~they ~~for~~affect ~~force~~the ~~majeure~~North American automotive and ~~other~~housing ~~circumstances~~industries. If ~~our~~there ~~need~~is ~~for~~ a ~~particular~~significant ~~raw~~weakening ~~material~~of iscurrent ~~reduced~~economic ~~for~~conditions, anwhether ~~extended~~because ~~period~~of ~~significantly~~secular ~~below~~or ~~what~~cyclical weissues, ~~projected~~it atcould lead to financial difficulties or even bankruptcy filings by our customers. The concentration of customers in a specific industry, such as the ~~contract’s~~automotive ~~inception~~industry, ormay ~~what~~increase weour ~~projected~~risk because of the likelihood that circumstances may affect multiple customers at the same time. anThe ~~annual~~nature ~~nomination~~of ~~was~~that ~~made~~impact ~~under~~would ~~certain~~likely ~~contracts,~~include welost ~~could~~sales beor ~~required~~losses associated with the potential inability to ~~purchase~~collect ~~quantities~~all ofoutstanding ~~raw~~accounts ~~materials~~receivable. ~~that~~Such ~~exceed~~an event could also negatively impact our ~~anticipated~~financial ~~annual~~results ~~needs~~and cash flows. IfIn addition, some of our ~~existing~~key ~~supply~~suppliers, ~~contracts~~particularly ~~require~~those who supply us towith ~~purchase~~critical raw materials infor ~~quantities~~the ~~beyond~~steelmaking ~~our needs~~process, ~~and~~have ifrecently wefaced dosevere ~~not~~financial ~~succeed~~challenges inor ~~reaching~~bankruptcy anand ~~agreement~~other ~~with~~suppliers aor ~~particular~~JVs ~~raw~~may ~~material~~face ~~supplier~~such tocircumstances ~~reduce~~in the ~~quantity~~future. ofAlso, ~~raw materials~~ we purchase all of our iron ore from ~~that~~Cliffs ~~supplier,~~under ~~then~~two wemulti-year ~~would~~contracts. ~~likely~~This bereliance ~~required~~on toa ~~purchase~~single ~~more~~supplier offor a ~~particular~~primary raw material may increase our risk of increased costs from substitute suppliers or supply chain disruptions. Key suppliers facing financial hardship or operating in bankruptcy could experience operational disruption or even face liquidation, which could result in our inability to secure replacement raw materials on a ~~given~~timely ~~year~~basis, ~~than~~or weat ~~need~~all, ~~negatively~~or ~~affecting~~cause us to incur increased costs to do so. Such events could adversely impact our operations, financial results, ~~liquidity~~ and cash flows.

Risk related to our significant proportion of ~~supply~~sales ~~chain~~to ~~disruptions~~the orautomotive ~~poor~~market. In ~~quality~~2019, approximately 66% of ~~raw~~our ~~materials~~sales orwere ~~supplies~~to the automotive market. ~~Our~~ ~~sales,~~In ~~financial~~addition ~~results~~to ~~and~~the ~~cash~~size ~~flows~~of ~~could~~our beexposure ~~adversely~~to ~~affected~~the byautomotive ~~transportation~~industry, ~~raw~~we ~~material,~~face ~~energy~~risks orrelated ~~other~~to ~~key~~our ~~supply~~relative ~~disruptions~~concentration of sales to certain specific automotive manufacturers. In 2019, ortwo ~~poor~~customers ~~quality~~each accounted for 11% of ~~raw~~our ~~materials,~~net ~~particularly~~sales. ~~scrap~~Automotive production and sales are cyclical and sensitive to general economic conditions and other factors, ~~coal~~including interest rates, ~~coke~~consumer credit, ~~iron~~and ~~ore~~consumer spending and ~~alloys~~preferences. InIf ~~addition~~automotive production and sales decline, our sales and shipments to the automotive market are likely to decline in a corresponding manner. Adverse impacts that we may ~~experience~~sustain ~~supply~~as ~~chain~~a ~~disruptions~~result orinclude, ~~increased~~without limitation, lower margins because of the need to sell our steel to less profitable customers and markets, higher fixed costs from ~~transportation-related~~lower ~~challenges~~steel ~~due~~production if we are unable to ~~new~~sell orthe ~~enhanced~~same ~~regulation,~~amount ~~changes~~of steel to ~~providers’~~other ~~operations,~~customers ~~labor~~and ~~shortages~~markets, and/or lower sales, shipments and margins generally as our competitors face similar challenges and compete vigorously in other ~~factors~~markets. ~~Disruptions~~These oradverse ~~quality~~impacts ~~issues~~would negatively affect our sales, ~~whether~~financial results and cash flows. Additionally, the ~~result~~trend oftoward ~~severe~~lightweighting ~~financial~~in ~~hardships~~the orautomotive ~~bankruptcies~~industry, which requires lighter gauges of ~~suppliers~~steel at higher strengths, ~~natural~~could orresult ~~man-made~~in ~~disasters,~~a ~~other~~lower ~~adverse~~volume ~~weather~~of ~~events~~steel required by that industry over time. Moreover, orcompetition ~~other~~for ~~unforeseen~~automotive ~~events~~business has intensified in recent years, ~~could~~as ~~reduce~~steel ~~production~~producers orand ~~increase~~companies ~~costs~~producing atalternative ~~one~~materials have focused their efforts on capturing and/or ~~more~~expanding their market share of ~~our~~automotive ~~plants~~business ~~and~~because ~~potentially~~of ~~adversely~~less ~~affect~~favorable ~~customers~~conditions orin other markets tofor ~~which~~steel weand ~~sell~~other ~~our~~metals, including commodity products and steel for use in the oil and gas markets. ~~Any~~As ~~significant~~a ~~disruption~~result, the potential exists that we may lose market share to existing or ~~quality~~new ~~issue~~entrants inor ~~any~~that automotive manufacturers will take advantage of the ~~areas~~intense ~~addressed~~competition ~~above~~among ~~would~~potential ~~adversely~~suppliers to pressure our pricing and margins in order to maintain or expand our market share with them, which could negatively affect our sales, financial results and cash flows.

Risk of ~~production disruption or~~ reduced ~~production~~demand ~~levels. When~~in ~~business~~key ~~conditions~~product ~~permit,~~markets wedue ~~attempt~~ to ~~operate~~competition ~~our~~from ~~facilities~~aluminum atand ~~production~~other ~~levels~~alternatives ~~that~~to ~~are at or near capacity~~steel. The ~~High~~automotive ~~production~~market ~~levels~~is ~~are~~ important to our ~~financial~~business, ~~results~~both ~~because~~in ~~they~~terms ~~enable us to spread fixed costs over a greater number~~ of ~~production~~volume ~~tons~~and margins. WeAutomotive ~~have~~manufacturers ~~implemented~~are aunder ~~strategy~~pressure to ~~target~~meet ~~markets for our products that deliver higher margins, where possible, and reduce amounts sold into~~ the ~~typically lower~~government-~~margin~~mandated ~~spot~~CAFE ~~markets.~~standards, ~~This~~which ~~ongoing~~require ~~strategy~~increasing ~~relies~~fuel oneconomy ~~our~~for ~~ability~~automobiles toin ~~sell higher-margin products that overcome~~ the ~~effects of lower production volumes on our fixed costs~~future. IfAutomotive wemanufacturers ~~are~~have ~~unable~~begun to ~~sustain~~incorporate ~~this~~aluminum ~~strategy successfully, it would adversely affect our sales, financial results~~ and ~~cash~~other ~~flows.~~alternative ~~Production disruptions could be caused by unanticipated plant outages or equipment failures, a lack of redundancy for key production assets, or lack of adequate raw~~ materials, ~~energy~~into ortheir ~~other~~vehicles ~~supplies, particularly under circumstances where we lack adequate redundant facilities. Production disruptions could result in significant costs~~ and ~~potential~~continue ~~liability~~ to ~~us,~~investigate ~~as well as negative publicity and damage to our reputation with current or potential customers. In addition,~~ the occurrence of natural or man-made disasters, adverse weather conditions or similar events could significantly disrupt our operations, negatively impact the operations of other companies or contractors we depend upon, or adversely affect customers or markets who buy our products. Any significant disruption or reduced level of production would adversely affect our sales, financial results and cash flows.

Risks associated with our healthcare obligations. We provide healthcare coverage to our active employees and to a significant portion of our retirees, as well as certain members of their families. We are self-insured for substantially all of our healthcare coverage. While we have reduced our exposure to rising healthcare costs to a significant degree through cost sharing, cost caps and VEBA trusts, the cost of providing such healthcare coverage may be greater on a relative basis for us than for our competitors because they either

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~~provide~~potential arisks ~~lesser~~and ~~level~~benefits of ~~benefits~~expanding the use of non-steel materials. For example, ~~require~~one ~~that~~major ~~their~~automotive ~~participants~~company ~~pay~~has ~~more~~begun substituting aluminum for ~~their~~carbon ~~benefits,~~steel orin dothe ~~not~~body ~~provide~~of ~~coverage~~some toof asits ~~broad~~vehicles. Although automotive manufacturers have incorporated aluminum and other competing materials at a ~~group~~much ofslower ~~participants~~rate ~~(e.g.~~than some experts previously expected, ~~they~~if dodemand ~~not~~for ~~provide~~steel ~~retiree~~from ~~healthcare~~one ~~benefits).~~or Inmore ~~addition,~~of our ~~costs~~major ~~for~~automotive ~~retiree~~customers ~~healthcare~~was ~~obligations~~to ~~could~~significantly bedecline ~~affected~~because byof ~~fluctuations~~increased inuse ~~interest~~of ~~rates~~aluminum or byother ~~federal~~competing ~~healthcare~~materials ~~legislation~~in substitution for steel, it likely would negatively affect our sales, financial results and cash flows.

Risks ~~associated~~of ~~with~~excess ~~our~~inventory ~~pension~~of ~~obligations~~raw materials. We have acertain ~~substantial~~raw ~~pension~~material ~~obligation~~supply contracts that, ~~along~~include ~~with~~minimum ~~the~~annual ~~related pension expense (income) and funding requirements~~purchases, issubject ~~directly~~to ~~affected~~exceptions byfor ~~various~~force ~~changes~~majeure ~~in assumptions, including the selection of appropriate mortality assumptions~~ and ~~discount~~other ~~rates~~circumstances. ~~These~~If ~~items also are affected by the rate and timing of employee retirements, actual experience compared to actuarial projections and asset returns in the securities markets. Such changes could increase~~ our ~~cost~~need for ~~those~~a ~~obligations,~~particular ~~which~~raw ~~could have a~~ material ~~adverse~~is ~~effect~~reduced onfor ~~our~~an ~~results~~extended ~~and~~period ~~ability~~significantly tobelow ~~meet~~what ~~those~~we ~~obligations.~~projected Inat ~~addition, changes in~~ the ~~laws~~contract’s ~~governing~~inception, ~~pensions~~or ~~could~~what ~~also~~we ~~materially~~projected ~~adversely~~at ~~affect~~the ~~our~~time ~~costs~~an ~~and~~annual ~~ability~~nomination towas ~~meet~~made ~~our~~under ~~pension~~certain ~~obligations. Also~~contracts, ~~under the method of accounting~~ we ~~use~~could ~~for~~be ~~pension~~required ~~obligation~~to ~~reporting,~~purchase wequantities ~~recognize into our results~~ of ~~operations,~~raw asmaterials ~~a “corridor” adjustment, any unrecognized actuarial net gains or losses~~ that exceed ~~10%~~our ofanticipated ~~the~~annual ~~larger~~needs. ofIf ~~projected~~our ~~benefit~~existing ~~obligations~~supply orcontracts ~~plan~~require ~~assets.~~us ~~These~~to ~~corridor~~purchase ~~adjustments~~raw ~~are~~materials ~~driven mainly by changes~~ in ~~assumptions~~quantities ~~and by events and circumstances~~ beyond our ~~control~~needs, ~~primarily changes in interest rates, performance of the financial markets,~~ and ~~mortality and retirement projections. A corridor adjustment,~~ if ~~required~~we ~~after~~do anot ~~re-measurement~~succeed ~~of our pension obligations, historically has been recorded~~ in ~~the~~reaching ~~fourth quarter of the year, though one may be recorded at any time if~~ an ~~interim~~agreement ~~remeasurement~~with ~~occurs. A corridor adjustment can have~~ a ~~significant~~particular ~~impact~~raw onmaterial ~~our~~supplier ~~financial~~to ~~statements~~reduce ~~when it occurs, although its immediate recognition reduces~~ the ~~impact~~quantity of ~~unrealized~~raw ~~gains~~materials orwe ~~losses~~purchase onfrom ~~future~~that ~~periods.~~supplier, Athen ~~corridor~~we ~~charge~~would ~~does~~likely ~~not~~be ~~have~~required ~~any immediate impact on our cash flows. We also contribute~~ to ~~multiemployer~~purchase ~~pension~~more ~~plans~~of ~~according~~a toparticular ~~collective~~raw ~~bargaining~~material ~~agreements that cover certain union-represented employees. Participating~~ in ~~these~~a ~~multiemployer~~given ~~plans~~year ~~exposes~~than uswe toneed, ~~potential~~negatively ~~liabilities~~affecting ifour ~~the~~financial ~~multiemployer~~results, ~~plan~~liquidity isand ~~unable~~cash ~~to pay its unfunded obligations or we choose to stop participating in the plan~~flows.

Risk of ~~not~~supply ~~reaching~~chain ~~new~~disruptions ~~labor~~or ~~agreements~~poor onquality ~~a timely basis. Most~~ of ~~our~~raw ~~hourly~~materials ~~employees~~or ~~are represented by various labor unions and are covered by collective bargaining agreements with expiration dates between March 2019 and September 2021~~supplies. Our ~~Five of those contracts are scheduled to expire in 2019. With our January 28~~sales, ~~2019,~~financial ~~announcement~~results ofand ~~plans~~cash toflows ~~permanently~~could ~~close~~be ~~the~~adversely ~~Ashland~~affected ~~Works facility~~ by ~~the~~transportation, ~~end~~raw ~~of 2019~~material, weenergy ~~expect~~or toother ~~engage~~key insupply ~~negotiations with the United Steelworkers~~disruptions, ~~Local~~or ~~1865,~~poor ~~over~~quality ~~the coming months regarding the plant closure in accordance with applicable law and the terms and conditions~~ of ~~the~~raw ~~labor agreement. The labor agreement~~materials, ~~with~~particularly ~~an original expiration date of September 1~~scrap, ~~2018~~coal, ~~is by mutual agreement being extended on a rolling 60-day basis~~coke, ~~subject~~iron toore ~~further~~and ~~notification of termination by either party~~alloys. ~~The~~In ~~labor contract with the United Steelworkers~~addition, ~~Local~~we ~~1190,~~may ~~which~~experience ~~governs~~supply ~~approximately~~chain ~~230~~disruptions ~~production~~or ~~employees~~increased atcosts ~~Mountain~~from ~~State~~transportation-related ~~Carbon~~challenges ~~LLC,~~due ~~expires~~to onnew ~~March 1,~~or ~~2019.~~enhanced ~~The labor contract with the United Auto Workers~~regulation, ~~Local~~changes ~~3303,~~to ~~which~~providers’ ~~governs approximately 1~~operations,~~170~~ ~~production~~labor ~~employees~~shortages ator ~~Butler~~other ~~Works, expires on April 16, 2019~~factors. ~~The~~Disruptions ~~labor~~or ~~contract~~quality ~~with the United Auto Workers~~issues, ~~Local~~whether ~~4104, which represents approximately 100 production employees at Zanesville Works, expires on May 31, 2019. The labor contract with~~ the ~~United~~result ~~Auto~~of ~~Workers,~~severe ~~Local~~financial ~~3462,~~hardships ~~which~~or ~~governs~~bankruptcies ~~approximately~~of ~~300 production employees at Coshocton Works~~suppliers, ~~expires~~natural onor ~~September 30,~~man-made ~~2019. Other than the agreement at Ashland Works~~disasters, weother ~~intend~~adverse toweather ~~negotiate with these unions to reach new~~events, ~~competitive~~or ~~labor~~other ~~agreements~~unforeseen ~~in advance of the current expiration dates. We cannot predict~~events, ~~however,~~could ~~when~~reduce ~~new,~~production ~~competitive~~or ~~labor~~increase ~~agreements~~costs ~~with~~at ~~the~~one ~~unions will be reached~~ or ~~what~~more ~~the impact~~ of ~~such agreements will be on~~ our ~~operating~~plants ~~costs, operating income~~ and ~~cash~~potentially ~~flows.~~adversely ~~There~~affect iscustomers ~~the~~or ~~potential~~markets ofto ~~work~~which ~~stoppages~~we atsell ~~these~~our ~~locations~~products. inAny ~~2019~~significant ~~and~~disruption ~~beyond~~or ifquality weissue ~~cannot reach timely agreements~~ in ~~contract~~any ~~negotiations~~of ~~before~~ the ~~contract~~areas ~~expirations. If~~addressed ~~work~~above ~~stoppages~~would ~~occur,~~adversely ~~they~~affect ~~could have a material impact on~~ our ~~operations~~sales, financial results and cash flows. ~~For labor contracts at other locations that expire after 2019, a similar risk applies.~~

~~Risks~~Risk ~~associated~~of ~~with~~production ~~major~~disruption ~~litigation,~~or ~~arbitrations,~~reduced ~~environmental~~production ~~issues and other contingencies~~levels. WeWhen ~~have~~business ~~described~~conditions ~~several~~permit, ~~significant~~we ~~legal~~attempt ~~and~~to ~~environmental~~operate ~~proceedings~~our infacilities ~~Note~~at 10production tolevels ~~the~~that ~~consolidated~~are ~~financial~~at ~~statements~~or innear ~~Item 8~~capacity. ~~For~~ ~~environmental~~High ~~issues,~~production ~~changes~~levels inare ~~application~~important orto ~~scope~~our offinancial ~~laws~~results orbecause ~~regulations~~they ~~applicable~~enable us to ~~us,~~spread orfixed ~~negative~~costs ~~outcomes~~over ina ~~pending~~greater ornumber ~~future~~of ~~litigation,~~production ~~could~~tons. We have ~~significant~~implemented ~~adverse~~a ~~impacts,~~strategy ~~including~~to ~~requiring~~target ~~capital~~markets ~~expenditures~~for toour ~~ensure~~products ~~compliance~~that ~~with~~deliver ~~the~~higher ~~laws~~margins, ~~regulations~~where possible, orand ~~court~~reduce ~~decisions,~~amounts ~~increased~~sold ~~difficulty~~into inthe ~~obtaining~~typically ~~future~~lower-margin ~~permits~~spot ormarkets. ~~meeting~~This ~~future~~ongoing ~~permit~~strategy ~~requirements,~~relies ~~incurring~~on ~~costs~~our ~~for~~ability ~~emission~~to ~~allowances,~~sell ~~restriction~~higher-margin products that overcome the effects of lower production, ~~and~~volumes ~~higher~~on ~~prices~~our ~~for~~fixed ~~certain~~costs. ~~raw~~If ~~materials.~~we ~~One~~are orunable ~~more~~to ofsustain ~~these~~this ~~adverse~~strategy ~~developments~~successfully, ~~could~~it ~~negatively~~would ~~impact~~adversely affect our ~~operations~~sales, financial results and cash flows. ~~For~~Production ~~litigation,~~disruptions ~~arbitrations~~at ~~and~~facilities ~~other~~we ~~legal~~own ~~proceedings,~~or itat isour ~~not~~joint ~~possible~~ventures ~~to predict with certainty the outcome of such matters and we~~ could ~~incur~~be ~~future~~caused ~~judgments,~~by ~~fines~~unanticipated orplant ~~penalties~~outages or ~~enter~~equipment ~~into settlements of lawsuits~~failures, ~~arbitrations~~a ~~and~~lack ~~claims~~of ~~that~~redundancy ~~could~~for ~~have~~key anproduction ~~adverse effect on our business~~assets, ~~results~~or lack of ~~operations~~adequate ~~and~~raw ~~financial condition. In addition~~materials, ~~while~~energy weor ~~maintain~~other ~~insurance~~supplies, ~~coverage~~particularly ~~for~~under ~~certain~~circumstances ~~claims,~~where we ~~may~~lack ~~not~~adequate beredundant ~~able~~facilities. toProduction ~~obtain~~disruptions ~~insurance~~could onresult ~~acceptable terms~~ in ~~the~~significant ~~future~~costs and, ifpotential weliability ~~obtain~~to ~~such insurance~~us, itas ~~may~~well ~~not~~as ~~provide~~negative ~~adequate~~publicity ~~coverage~~and ~~against~~damage ~~all~~to ~~claims.~~our Wereputation ~~establish~~with ~~reserves~~current ~~based~~or onpotential ~~our~~customers. ~~assessment~~In ~~of contingencies~~addition, ~~including~~the ~~contingencies~~occurrence ~~for~~of ~~claims~~natural ~~asserted~~or ~~against~~man-made usdisasters, inadverse ~~connection~~weather ~~with~~conditions ~~litigation,~~or ~~arbitrations~~similar ~~and~~events ~~environmental~~could ~~issues. Adverse~~significantly ~~developments~~disrupt inour ~~litigation~~operations, ~~arbitrations,~~negatively ~~environmental~~impact ~~issues~~the oroperations of other ~~legal~~companies ~~proceedings~~or ~~may~~contractors ~~affect~~we ~~our~~depend ~~assessment~~upon, ~~and~~or ~~estimates~~adversely ofaffect ~~the~~customers ~~loss~~or ~~contingency~~markets ~~recorded~~who asbuy aour ~~reserve~~products. ~~and~~Any ~~require~~significant usdisruption toor ~~make~~reduced ~~payments~~level ~~in excess~~ of ~~our~~production ~~reserves,~~would ~~which~~adversely ~~could negatively~~ affect our ~~operations~~sales, financial results and cash flows.

~~Risk~~Risks associated with ~~regulatory~~our ~~compliance~~healthcare ~~and changes~~obligations. ~~Our~~ We ~~business~~provide healthcare coverage to our active employees and ~~the~~to ~~businesses~~a significant portion of our ~~customers~~retirees, ~~and~~as ~~suppliers~~well as certain members of their families. We are ~~subject~~self-insured for substantially all of our healthcare coverage. While we have reduced our exposure to rising healthcare costs to a ~~wide~~significant ~~variety~~degree through cost sharing, cost caps and VEBA trusts, the cost of ~~government~~providing ~~regulations~~such healthcare coverage may be greater on a relative basis for us than for our competitors because they either provide a lower level of benefits, ~~including~~require ~~those~~that ~~relating~~their participants pay more for their benefits, or do not provide coverage to ~~environmental~~as ~~permitting~~broad ~~requirements~~a group of participants (e.g., ~~The~~they ~~regulations~~do ~~promulgated~~not orprovide ~~adopted~~retiree byhealthcare ~~various~~benefits). ~~government~~In ~~agencies~~addition, ~~and~~our ~~the~~costs ~~interpretations~~for ~~and~~retiree ~~application~~healthcare ofobligations ~~such~~could ~~regulations,~~be ~~are~~affected by fluctuations in interest rates or by federal healthcare legislation.

Risks associated with our pension obligations. We have a substantial pension obligation that, along with the related pension expense (income) and funding requirements, is directly affected by various changes in assumptions, including the selection of appropriate mortality assumptions and discount rates. These items also are affected by the rate and timing of employee retirements, actual experience compared to actuarial projections and asset returns in the securities markets. Such changes could increase our cost for those obligations, which could have a material adverse effect on our results and ability to meet those obligations. In addition, changes in the laws governing pensions could also materially adversely affect our costs and ability to meet our pension obligations. Also, under the method of accounting we use for pension obligation reporting, we recognize into our results of operations, as a “corridor” adjustment, any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets. These corridor adjustments are driven mainly by changes in assumptions and by events and circumstances beyond our control, primarily changes in interest rates, performance of the financial markets, and mortality and retirement projections. A corridor adjustment, if required after a re-measurement of our pension obligations, historically has been recorded in the fourth quarter of the year, though one may be recorded at any time if an interim remeasurement occurs. A corridor adjustment can have a significant impact on our financial statements when it occurs, although its immediate recognition reduces the impact of unrealized gains or losses on future periods. A corridor charge does not have any immediate impact on our cash flows. We also contribute to multiemployer pension

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~~dynamic~~plans ~~and~~according ~~constantly~~to ~~evolving.~~collective Ifbargaining ~~new~~agreements ~~regulations~~that ~~arise,~~cover ~~the~~certain ~~application~~union-represented ~~of existing regulations expands, or the interpretation of applicable regulations changes, we may incur additional costs for compliance, including capital expenditures~~employees. ~~For~~Participating ~~example,~~in ~~the~~these ~~EPA~~multiemployer isplans ~~required~~exposes tous routinely reassess the National Ambient Air Quality Standards (“NAAQS”) for criteria pollutants like nitrogen dioxide, sulfur dioxide, lead, ozone and particulate matter. These standards are frequently subject to ~~litigation~~potential ~~and~~liabilities ~~revision.~~if ~~Revisions to~~ the ~~NAAQS~~multiemployer ~~could~~plan ~~require~~is usunable to ~~make~~pay ~~significant~~its ~~capital~~underfunded ~~expenditures~~obligations toor ~~ensure~~we ~~compliance~~choose ~~and could make it more difficult for us~~ to ~~obtain~~stop ~~required~~participating ~~permits~~ in the ~~future~~plan. ~~These~~For ~~risks~~example, ~~are higher for our facilities that are located~~ in ~~non-attainment~~2019 ~~areas.~~the ~~Complex~~trustees ~~foreign~~for ~~and~~the ~~U.S.~~IAM ~~laws~~National ~~and~~Pension ~~regulations~~Fund ~~apply to our domestic and international operations, including but not limited to~~ (the ~~Foreign~~“Fund”) ~~Corrupt~~voluntarily ~~Practices~~elected ~~Act and other anti-bribery laws, regulations related~~ to ~~import/export~~place ~~controls,~~ the ~~Office~~Fund ofin ~~Foreign Assets Control sanctions program, anti-boycott provisions,~~ the ~~European~~Red ~~Union’s~~Zone ~~General~~for ~~Data~~2019 ~~Protection Regulation (GDPR)~~ and ~~other~~implement ~~U.S.~~a ~~and~~rehabilitation ~~foreign privacy regulations~~plan, ~~and~~which ~~transportation~~requires ~~and~~both ~~logistics~~an ~~regulations.~~increase ~~These laws and regulations and changes~~ in ~~these~~employer ~~laws~~contributions and ~~regulations~~reduction ~~may increase our cost~~ of ~~doing~~certain ~~business~~employee inpension ~~international jurisdictions and expose our operations and our employees to elevated risk~~benefits. WeDepending ~~have~~on ~~implemented~~negotiations ~~policies and processes designed to comply~~ with ~~these~~one ~~laws~~of ~~and regulations, but failure by~~ our ~~employees,~~affected ~~contractors or agents to comply with these laws and regulations could result in possible administrative~~unions, ~~civil or criminal liability and reputational harm to us and~~ our ~~employees.~~contributions We may also be indirectly affected through regulatory changes that impact our customers or suppliers. Regulatory changes that impact our customers could reduce the quantity of our products they demand or the price of our products that they are willing to ~~pay. Regulatory changes that impact our suppliers could decrease~~ the ~~supply~~Fund ~~of products or availability of services they sell to us or~~ could increase ~~the~~approximately ~~price~~$2.0 ~~they~~in ~~demand~~2020, ~~for~~with ~~products~~gradually orincreasing ~~services~~requirements ~~they~~through ~~sell to us~~2031.

~~Risks~~Risk ~~associated~~of ~~with~~not ~~climate~~reaching ~~change~~new ~~and~~labor ~~greenhouse~~agreements ~~gas~~on ~~emissions. Our~~a ~~business~~timely ~~and~~basis. Most ~~operations, as well as the business and operations~~ of our ~~key~~hourly ~~suppliers~~employees ~~and~~are ~~customers,~~represented ~~may~~by ~~become~~various ~~subject~~labor tounions legislation or regulation intended to limit climate change or greenhouse gas emissions. It is possible that limitations on greenhouse gas emissions may be imposed in the United States through legislation or regulation. For example, the EPA has issued and~~/or~~ ~~proposed~~are ~~regulations~~covered ~~addressing~~by ~~greenhouse~~collective ~~gas~~bargaining ~~emissions,~~agreements ~~including~~with ~~regulations~~expiration ~~that~~dates ~~will~~between ~~require~~March ~~large~~2020 ~~sources~~ and ~~suppliers~~July ~~in the United States to report greenhouse gas emissions~~2023. InOne ~~addition,~~of ~~the~~those ~~U.S.~~contracts ~~Congress~~is ~~has~~scheduled ~~introduced from time~~ to ~~time~~expire ~~legislation~~in ~~aimed at limiting carbon emissions from carbon-intensive business operations~~2020. The ~~CAFE~~labor ~~standards~~contract ~~and~~with ~~other~~the ~~existing~~International ~~and~~Association ~~future~~of ~~climate~~Machinists ~~change-related legislation~~ and ~~regulation~~Aerospace ~~could~~Workers, ~~also~~Local ~~affect our customers~~1943, ~~and~~which ingoverns ~~particular~~approximately ~~our automotive customers~~1,750 asproduction ~~they~~employees ~~may~~at ~~elect~~Middletown toWorks, ~~use~~expires ~~lower~~on ~~volumes~~March 15, ~~of steel to achieve mandates related to emissions~~2020. ~~Similarly,~~We ~~our~~intend ~~suppliers may incur cost increases in order~~ to ~~comply~~negotiate with ~~climate~~the ~~control~~union ~~legislation~~to ~~and~~reach ~~regulation~~a new, ~~which~~competitive ~~they~~labor ~~could~~agreement in ~~turn~~advance ~~attempt~~of ~~to pass through to us in~~ the ~~form~~current ofexpiration ~~higher prices for critical goods and/or services~~date. We Itcannot ~~is impossible~~predict, however, towhen ~~forecast~~a ~~the terms of the final regulations and legislation~~new, ifcompetitive ~~any,~~labor ~~and~~agreement with the ~~resulting~~union ~~effects~~will onbe ~~us.~~reached ~~Depending~~or ~~upon~~what the ~~terms~~impact of ~~any~~ such ~~legislation~~agreement orwill ~~regulation,~~be ~~however,~~on weour ~~could~~operating ~~suffer negative financial impacts because of increased energy~~costs, ~~operational,~~operating ~~environmental~~income and ~~other~~cash ~~costs~~flows. toThere ~~comply~~is ~~with~~ the ~~limitations~~potential ~~that~~of ~~would~~a bework ~~imposed~~stoppage onat ~~greenhouse~~this ~~gas~~location ~~emissions.~~in In2020 ~~addition, depending upon whether similar limitations are imposed globally, the regulations~~ and~~/or~~ ~~legislation~~beyond ~~could~~if ~~negatively~~we ~~impact~~cannot ~~our~~reach ~~ability~~timely toagreement ~~compete with foreign steel companies situated~~ in ~~areas~~contract ~~not~~negotiations ~~subject~~before tothe ~~such~~contract ~~limitations~~expiration. If ~~Unless~~a ~~and~~work ~~until~~stoppage ~~all~~occurs, ofit ~~the~~could ~~terms~~have ofa ~~such~~material ~~regulation~~impact ~~and~~on ~~legislation~~our ~~are known~~operations, ~~however,~~financial weresults ~~cannot~~and ~~reasonably~~cash orflows. ~~reliably~~For ~~estimate~~labor ~~their~~contracts ~~impact~~at onother ~~our~~locations ~~financial~~that ~~condition,~~expire ~~operating~~after ~~performance~~2020, ora ~~ability~~similar torisk ~~compete~~applies.

Risks associated with ~~financial~~major litigation, ~~credit~~arbitrations, ~~capital~~environmental issues and ~~banking~~other ~~markets~~contingencies. InWe have described several significant legal and environmental proceedings in Note 11 to the ~~ordinary~~consolidated ~~course~~financial ofstatements ~~business~~in Item 8. For environmental issues, wechanges ~~seek~~in application or scope of laws or regulations applicable to ~~access~~us, ~~financial~~or negative outcomes in pending or future litigation, ~~credit~~could have significant adverse impacts, including requiring capital ~~and/~~expenditures to ensure compliance with the laws, regulations, or ~~banking~~court ~~markets~~decisions, atincreased ~~competitive~~difficulty ~~rates.~~in ~~Currently~~obtaining future permits or meeting future permit requirements, weincurring ~~believe~~costs wefor ~~have~~emission ~~adequate~~allowances, ~~access~~restriction toof production, and higher prices for certain raw materials. One or more of these ~~markets~~adverse todevelopments ~~meet~~could negatively impact our ~~reasonably~~operations, ~~anticipated~~financial ~~business~~results ~~needs~~and cash flows. WeFor ~~provide~~litigation, arbitrations and ~~receive~~other ~~normal~~legal ~~trade~~proceedings, ~~financing~~it is not possible to ~~our~~predict ~~customers~~with certainty the outcome of such matters and ~~from~~we could incur future judgments, fines or penalties or enter into settlements of lawsuits, arbitrations and claims that could have an adverse effect on our ~~suppliers.~~business, Ifresults ~~access~~of tooperations ~~competitive~~and financial condition. In addition, ~~credit~~while we maintain insurance coverage for certain claims, ~~capital~~we may not be able to obtain insurance on acceptable terms in the future and~~/or~~, ~~banking~~if ~~markets~~we byobtain such insurance, it may not provide adequate coverage against all claims. We establish reserves based on our assessment of contingencies, including contingencies for claims asserted against us in connection with litigation, arbitrations and environmental issues. Adverse developments in litigation, arbitrations, environmental issues or other legal proceedings may affect our ~~customers~~assessment orand ~~suppliers,~~estimates isof ~~impaired~~the loss contingency recorded as a reserve and require us to make payments in excess of our reserves, which could negatively affect our operations, financial results and cash flows ~~could be adversely impacted~~.

Risk associated with ~~derivative~~regulatory ~~contracts~~compliance toand ~~hedge commodity pricing volatility~~changes. WeOur ~~use~~business ~~cash-settled~~and ~~commodity~~the ~~price~~businesses ~~swaps~~of ~~and~~our ~~options~~customers toand ~~reduce~~suppliers ~~pricing~~are ~~volatility~~subject ~~for~~to a ~~portion~~wide variety of ~~our~~government ~~raw material~~regulations, ~~energy~~including ~~and~~those ~~other~~relating ~~commodity~~to ~~purchases.~~environmental Wepermitting ~~employ~~requirements. aThe ~~systematic~~regulations ~~approach~~promulgated inor ~~order~~adopted toby ~~mitigate~~various ~~the~~government ~~risk~~agencies, ofand ~~potential~~the ~~volatile~~interpretations ~~price~~and ~~movements~~application of ~~certain~~such ~~commodities.~~regulations, ~~This~~are ~~approach~~dynamic isand ~~intended~~constantly toevolving. ~~protect~~If usnew ~~against~~regulations aarise, ~~sharp rise in~~ the ~~price~~application of ~~commodities.~~existing ~~However~~regulations expands, ~~engaging~~or in the ~~use~~interpretation of ~~swaps,~~applicable ~~options~~regulations ~~and~~changes, ~~similar~~we ~~agreements~~may ~~for~~incur ~~hedging~~additional ~~entails~~costs afor ~~variety~~compliance, ofincluding ~~risks~~capital expenditures. For example, if the ~~price~~EPA ofis anrequired ~~underlying~~to ~~commodity~~routinely ~~falls~~reassess ~~below~~ the ~~price~~National atAmbient ~~which~~Air weQuality ~~hedged~~Standards ~~the~~(“NAAQS”) ~~commodity,~~for wecriteria ~~will~~pollutants ~~benefit~~like ~~from~~nitrogen ~~the~~dioxide, ~~lower~~sulfur ~~market~~dioxide, ~~price~~lead, ~~for~~ozone ~~the~~and ~~commodity~~particulate ~~purchased,~~matter. ~~but~~These ~~may~~standards ~~not~~are ~~realize~~frequently ~~the~~subject ~~full~~to ~~benefit~~litigation ofand revision. Revisions to the ~~lower~~NAAQS ~~commodity~~could ~~price~~require ~~because~~us ofto ~~the~~make ~~hedged~~significant ~~transaction.~~capital Inexpenditures ~~certain~~to ~~circumstances~~ensure wecompliance ~~also~~and could bemake ~~required~~it tomore ~~provide~~difficult ~~collateral~~ for aus ~~potential~~to ~~derivative~~obtain ~~liability~~required orpermits ~~close~~in ~~our~~the ~~hedging~~future. ~~transaction~~These ~~for~~risks ~~the~~are ~~commodity.~~higher ~~Additionally,~~for ~~there~~our ~~may~~facilities bethat aare ~~timing~~located ~~lag~~in ~~(particularly~~non-attainment ~~for~~areas. ~~iron~~Complex ~~ore)~~foreign ~~between~~and aU.S. ~~decline~~laws inand ~~the~~regulations ~~price~~apply ofto aour ~~commodity~~domestic ~~underlying~~and ainternational ~~derivative contract~~operations, ~~which~~including ~~could~~but ~~require~~not uslimited to ~~make~~the ~~payments~~Foreign inCorrupt ~~the~~Practices ~~short-term~~Act toand ~~provide~~other ~~collateral~~anti-bribery orlaws, ~~settle~~regulations ~~the~~related ~~relevant~~to ~~hedging~~import/export ~~transaction~~controls, ~~and~~ the ~~period~~Office ~~when~~of weForeign ~~experience~~Assets ~~the~~Control ~~benefits~~sanctions ofprogram, ~~the~~anti-boycott ~~lower~~provisions, ~~cost~~the ~~input~~European ~~through~~Union’s ~~physical~~General ~~purchases~~Data ofProtection ~~the~~Regulation ~~commodity~~(“GDPR”) ~~the~~and ~~hedge~~other ~~covers~~U.S. ~~Further,~~and ~~for~~foreign ~~derivatives~~privacy ~~designated~~regulations, asand ~~cash~~transportation ~~flow~~and ~~hedges,~~logistics weregulations. ~~initially~~These ~~record~~laws ~~the~~and ~~effective~~regulations ~~gains~~ and ~~losses~~changes in ~~accumulated~~these ~~other~~laws ~~comprehensive~~and ~~income~~regulations ~~(loss)~~may ~~and~~increase ~~reclassify~~our ~~them~~cost toof ~~earnings~~doing business in ~~the~~international ~~same~~jurisdictions ~~period~~and weexpose ~~recognize~~our ~~the~~operations ~~effect~~and ofour ~~the~~employees ~~associated~~to ~~hedged~~elevated ~~transaction~~risk. We ~~record~~have ~~all~~implemented ~~derivative~~policies ~~gains~~and orprocesses ~~losses~~designed ~~for~~to ~~which~~comply ~~hedge~~with ~~accounting~~these ~~treatment~~laws ~~has~~and ~~not~~regulations, ~~been~~but ~~elected~~failure orby ~~from~~our ~~hedge~~employees, ~~ineffectiveness~~contractors or agents to ~~earnings~~comply inwith ~~the~~these ~~period~~laws ~~the~~and ~~gain~~regulations could result in possible administrative, civil or ~~loss~~criminal ~~occurs.~~liability ~~Changes~~and inreputational ~~the~~harm ~~fair~~to ~~value~~us ofand ~~derivatives~~our ~~for~~employees. ~~which~~We ~~hedge~~may ~~accounting~~also ~~treatment~~be ~~has~~indirectly ~~not~~affected ~~been~~through ~~elected~~regulatory changes that impact our customers or ~~greater~~suppliers. ~~hedge~~Regulatory ~~ineffectiveness~~changes ~~than~~that weimpact ~~anticipated~~our oncustomers ~~cash~~could ~~flow~~reduce ~~hedges~~the ~~may~~quantity ~~result~~of inour ~~increased~~products ~~volatility~~they indemand or the price of our ~~reported~~products ~~earnings.~~that ~~For~~they ~~example,~~are wewilling ~~immediately~~to ~~recognize~~pay. Regulatory changes inthat impact our suppliers could decrease the ~~fair~~supply ~~value~~of products or availability of ~~our~~services ~~iron~~they ~~ore~~sell ~~derivative~~to ~~contracts~~us inor ~~earnings~~could ~~when~~increase the ~~fair~~price ~~value~~they ~~changes,~~demand ~~instead~~for ofproducts ~~when~~or weservices they sell to us.

Risks associated with climate change and greenhouse gas emissions. Our business and operations, as well as the business and operations of our key suppliers and customers, may become subject to legislation or regulation intended to limit climate change or greenhouse gas emissions. It is possible that limitations on, or taxes or other assessments related to, greenhouse gas emissions may be imposed in the United States through legislation or regulation. For example, the EPA has issued and/or proposed regulations addressing greenhouse gas emissions, including regulations that will require large sources and suppliers in the United States to report

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~~recognize~~greenhouse gas emissions. In addition, the ~~underlying~~U.S. ~~cost~~Congress has introduced from time to time legislation aimed at limiting carbon emissions from carbon-intensive business operations. The CAFE standards and other existing and future climate change-related legislation and regulation could also affect our customers, and in particular our automotive customers, as they may elect to use lower volumes of ~~iron~~steel ~~ore~~to achieve mandates related to emissions. Similarly, ~~thus~~our ~~potentially~~suppliers ~~increasing~~may incur cost increases in order to comply with climate control legislation and regulation, which they could in turn attempt to pass through to us in the ~~volatility~~form of ~~our~~higher ~~results~~prices for critical goods and services. It is impossible to forecast the terms of ~~operations~~the final regulations and legislation, if any, and the resulting effects on us. ~~Each~~Depending upon the terms of ~~these~~any ~~risks~~such ~~related~~legislation or regulation, we could suffer negative financial impacts because of increased energy, operational, environmental and other costs to ~~our~~comply ~~hedging~~with ~~transactions~~the limitations that would be imposed on greenhouse gas emissions. In addition, depending upon whether similar limitations are imposed globally, the regulations and/or legislation could ~~adversely~~negatively ~~affect~~impact our ~~financial~~ability ~~results~~to compete with foreign steel companies situated in areas not subject to such limitations. Until all of the terms of such regulation and ~~cash~~legislation ~~flows~~are known, we cannot reasonably or reliably estimate their impact on our financial condition, operating performance or ability to compete.

Risks ~~related~~associated towith ~~the~~financial, ~~potential~~credit, ~~permanent~~capital ~~idling~~and ofbanking ~~facilities~~markets. We In ~~perform~~the ~~strategic~~ordinary ~~reviews~~course of ~~our~~ business ~~on an ongoing basis~~, ~~which~~we ~~includes~~seek ~~evaluating each of our plants and operating units~~ to ~~assess~~access ~~their~~financial, ~~strategic benefits~~credit, ~~competitiveness~~capital and ~~viability.~~banking Asmarkets ~~part~~at ofcompetitive ~~these~~rates. ~~reviews~~Currently, we ~~may~~believe ~~idle—whether~~we ~~temporarily~~have oradequate ~~permanently—certain~~access ~~of our existing facilities in order~~ to ~~reduce~~these ~~or eliminate participation in~~ markets ~~where~~to wemeet ~~determine that~~ our ~~returns~~reasonably ~~are~~anticipated ~~not~~business ~~acceptable~~needs. ~~For~~We ~~example,~~provide inand ~~January~~receive ~~2019~~normal wetrade ~~announced~~financing ~~our intention~~ to ~~close~~ our ~~largely~~customers ~~idled Ashland Works plant, including the blast furnace~~ and ~~steelmaking~~from ~~operations (“Ashland Works Hot End”), which had been temporarily idled since December 2015 as part of~~ our ~~strategy to limit our exposure to the carbon steel spot market~~suppliers. ~~Our~~If ~~closure~~access ~~of Ashland Works will result in the incurrence and acceleration of cash expenses, including those relating~~ to ~~labor~~competitive ~~benefit obligations~~financial, ~~a multiemployer plan withdrawal liability~~credit, ~~take-or-pay~~capital ~~supply agreements~~ and ~~accelerated~~banking ~~environmental~~markets ~~remediation~~by costs, as well as charges for impairment of those assets and the effects on pension and OPEB liabilities. In addition, we will endeavor to transition products produced at the Ashland Works coating line to our other facilities in the United States. Customers could respond negatively to this requested transition and take current or future business from us~~. Alternatively~~, ~~we could fail to meet customer specifications at the facilities to which these products will be transitioned, resulting in customer dissatisfaction~~ or ~~claims, or face other unanticipated operational issues. Other risks associated with the closure of Ashland Works include, without limitation,~~ our ~~failure~~customers ~~to achieve the projected savings, costs~~ or ~~actions resulting from closure negotiations with the labor union at Ashland Works~~suppliers, ~~and~~is ~~higher than expected closure costs. For operations other than Ashland Works~~impaired, ~~we could incur similar types of cash and non-cash costs if we elect to temporarily or permanently idle any of~~ our ~~other currently operating assets or facilities as part of our ongoing strategic reviews. If we elect to permanently idle other material facilities or assets, it could adversely affect our~~ operations, financial results and cash flows could be adversely impacted.

Risk ofassociated ~~inability~~with toderivative ~~fully~~contracts ~~realize~~to ~~benefits~~hedge ofcommodity ~~margin~~pricing ~~enhancement initiatives~~volatility. InWe ~~recent~~use ~~years~~cash-settled wecommodity ~~have~~price ~~undertaken~~swaps ~~several~~and ~~significant~~options ~~projects~~to inreduce anpricing ~~effort~~volatility tofor ~~lower~~a ~~costs~~portion of our raw material, energy and ~~enhance~~other ~~margins~~commodity purchases. ~~These~~We ~~projects~~employ ~~and~~a ~~initiatives~~systematic ~~include~~approach ~~efforts~~in order to ~~focus~~mitigate ~~production~~the ~~and~~risk ~~sales~~of onpotential ~~higher~~volatile ~~margin~~price ~~products,~~movements ~~increase~~of ~~our~~certain ~~operating~~commodities. ~~rates~~This ~~and~~approach ~~lower~~is ~~our~~intended ~~costs.~~to Weprotect ~~identified~~us against a ~~number~~sharp ofrise ~~areas~~in ~~for~~the ~~enhancing~~price ~~profitability~~of commodities. However, ~~including~~engaging ~~increasing~~in ~~our~~the ~~percentage~~use of ~~contract sales~~swaps, ~~producing~~options and ~~selling~~similar aagreements ~~greater~~for ~~value-added~~hedging ~~mix~~entails a variety of ~~products~~risks. ~~and~~For ~~developing~~example, ~~new~~if ~~products~~the ~~that~~price ~~can~~of ~~command~~an ~~higher~~underlying ~~prices~~commodity ~~from~~falls ~~customers.~~below ~~For~~the ~~example~~price at which we hedged the commodity, we ~~have~~will ~~recently~~benefit ~~undertaken~~from ~~several~~the ~~significant~~lower ~~information~~market ~~technology~~price ~~(“IT”)~~for ~~projects~~the commodity purchased, ~~including~~but ~~new~~may ~~and~~not ~~upgraded~~realize ~~enterprise~~the ~~systems~~full ~~that~~benefit ~~affect~~of ~~key~~the ~~areas~~lower ofcommodity ~~our~~price ~~business~~because ~~and~~of ~~operations~~the hedged transaction. ~~Although~~In certain circumstances we ~~anticipate~~also ~~that~~could ~~these~~be ITrequired ~~projects~~to ~~will~~provide ~~increase~~collateral for a potential derivative liability or close our ~~efficiency~~hedging transaction for the commodity. Additionally, ~~should~~there ~~these~~may ~~projects~~be ~~face~~a ~~unexpected~~timing ~~challenges,~~lag ~~whether~~(particularly ~~during~~for ~~implementation,~~iron ~~adoption~~ore) orbetween ~~other~~a ~~stages~~decline in the price of a commodity underlying a derivative contract, itwhich could ~~have~~require ~~adverse~~us ~~impacts~~to onmake ~~our~~payments ~~business~~in the short-term to provide collateral or ~~operations.~~settle ~~Generally~~the relevant hedging transaction, ifand ~~one~~the orperiod ~~more~~when we experience the benefits of ~~these~~the ~~key~~lower cost~~-savings~~ orinput ~~margin~~through ~~enhancement~~physical ~~projects~~purchases ~~are~~of ~~unsuccessful~~the commodity the hedge covers. Further, orfor ~~are~~derivatives ~~significantly~~designated ~~less~~as cash flow hedges, we initially record the effective gains and losses in ~~achieving~~accumulated ~~the~~other ~~level~~comprehensive income (loss) and ~~timing~~reclassify them to earnings in the same period we recognize the effect of ~~combined~~the ~~cost~~associated ~~savings~~hedged transaction. We record all derivative gains or ~~margin~~losses ~~enhancement~~for ~~than~~which wehedge ~~anticipated,~~accounting treatment has not been elected to earnings in the period the gain or ifloss weoccurs. doChanges in the fair value of derivatives for which hedge accounting treatment has not ~~achieve~~been ~~results~~elected asmay ~~quickly~~result asin ~~anticipated~~increased volatility in our reported earnings. For example, we immediately recognize changes in the fair value of our ~~financial~~iron ore derivative contracts in earnings when the fair value changes, instead of when we recognize the underlying cost of iron ore, thus potentially increasing the volatility of our results ~~and~~of ~~cash~~operations. ~~flows~~Each ~~could~~of bethese risks related to our hedging transactions could adversely ~~impacted~~affect our financial results and cash flows.

~~Risk~~Risks ofrelated ITto ~~security~~the ~~threats,~~potential ~~cybercrime~~permanent ~~and~~idling ~~exposure~~ of ~~private information~~facilities. We ~~rely~~perform onstrategic ITreviews ~~systems~~of ~~and~~our ~~networks~~business inon ~~almost~~an ~~every~~ongoing ~~aspect~~basis, which includes evaluating each of our ~~business~~plants ~~activities~~and operating units to assess their strategic benefits, competitiveness and viability. InAs ~~addition~~part of these reviews, we ~~and~~may idle—whether temporarily or permanently—certain of our ~~third-party~~existing ~~data~~facilities ~~processing~~in ~~providers~~order ~~collect~~to ~~and~~reduce ~~store~~or ~~sensitive~~eliminate ~~data,~~participation ~~and~~in ~~our~~markets ~~vendors~~where orwe ~~suppliers~~determine ~~may~~that ~~collect~~our ~~and~~returns ~~store~~are ~~sensitive~~not ~~data~~acceptable. ~~about~~For usexample, in ~~their~~2019 ~~information~~we ~~system~~permanently ~~environments~~closed our Ashland Works plant. WeOur ~~have~~closure ~~taken,~~of Ashland Works resulted in the incurrence and ~~intend~~acceleration toof ~~continue~~cash expenses, including those relating to ~~take~~labor benefit obligations, ~~what~~a wemultiemployer ~~believe~~plan ~~are~~withdrawal ~~appropriate~~liability, take-or-pay supply agreements and ~~reasonable~~accelerated ~~steps~~environmental toremediation ~~prevent~~costs, ~~security~~as ~~breaches~~well inas ~~our~~charges ~~systems~~for impairment of those assets and ~~networks~~the effects on pension and OPEB liabilities. InOther ~~recent~~risks ~~years~~associated with the closure of Ashland Works include, ~~however~~without limitation, ~~both~~our failure to achieve the ~~number~~projected savings and ~~sophistication~~higher ofthan ITexpected ~~security~~closure ~~threats~~costs. ~~and~~For ~~cybercrimes~~operations ~~have~~other ~~increased.~~than ~~Additionally~~Ashland Works, ~~regulation~~we ~~has~~could ~~increased~~incur ~~for~~similar ~~companies~~types of cash and non-cash costs if we elect to ~~prevent~~temporarily ~~security~~or ~~breaches~~permanently ~~and~~idle ~~notify~~any ~~stakeholders~~of ifour ~~data~~other iscurrently ~~exposed.~~operating ~~These~~assets ITor ~~security~~facilities ~~threats~~as ~~and~~part ~~increasingly~~of ~~sophisticated~~our ~~cybercrimes~~ongoing ~~pose~~strategic areviews. ~~risk~~We towill ~~system~~generally ~~security~~endeavor ~~and~~to ~~the~~transition ~~confidentiality,~~products ~~availability~~produced ~~and~~at ~~integrity~~an ofaffected operation to our ~~data. A~~other ~~breach~~facilities, inincluding ~~security~~joint ventures. Customers could ~~expose~~respond negatively to this requested transition and take current or future business from us. Alternatively, we could fail to ~~risks~~meet ofcustomer ~~production~~specifications ~~downtimes~~at ~~and~~the ~~operations~~facilities ~~disruptions~~to which these products will be transitioned, ~~misuse~~resulting ofin ~~information~~customer dissatisfaction or ~~systems~~claims, or ~~the~~face ~~compromise~~other ofunanticipated ~~confidential~~operational ~~information,~~issues. ~~which~~If inwe ~~turn~~elect to permanently idle other material facilities or assets, it could adversely affect our ~~reputation~~operations, ~~competitive~~financial ~~position,~~results ~~business~~ and ~~financial~~cash ~~results~~flows.

Risk of ~~failure~~inability to ~~achieve~~fully ~~expected~~realize benefits of ~~the~~margin ~~Precision~~enhancement ~~Partners acquisition~~initiatives. WeIn ~~may~~recent beyears ~~unable~~we tohave ~~achieve~~undertaken ~~the~~several ~~strategic,~~significant ~~operational,~~projects ~~financial~~in ~~and~~an ~~other~~effort ~~benefits~~to ~~contemplated~~lower ascosts ~~part~~and ofenhance ~~the~~margins. ~~acquisition~~These ofprojects ~~Precision~~and ~~Partners~~initiatives toinclude ~~the~~efforts ~~full~~to ~~extent~~focus ~~expected~~production orand insales aon ~~timely~~higher ~~manner.~~margin Ifproducts, weincrease ~~are~~our ~~not~~operating asrates ~~successful~~and orlower ~~timely~~our ascosts. weWe ~~expect~~identified ina ~~integrating~~number ~~Precision~~of ~~Partners,~~areas wefor ~~may~~enhancing ~~not fully realize the potential growth opportunities~~profitability, ~~ability~~including toincreasing ~~provide~~our ~~enhanced~~percentage ~~solutions~~of tocontract ~~our customers~~sales, ~~leveraging~~producing and ~~acceleration~~selling ofa ~~combined~~greater ~~research~~value-added ~~and~~mix ~~innovation~~of ~~efforts,~~products and ~~anticipated~~developing ~~financial~~new ~~and~~products ~~non-financial~~that ~~benefits~~can ~~and~~command ~~opportunities~~higher prices from ~~the acquisition~~customers. ~~Goodwill~~For isexample, awe ~~significant~~expect ~~part of~~ Precision Partners’ ~~assets~~to ~~and~~continue ~~our inability~~ to ~~realize~~grow ~~the~~as ~~benefits~~it ofexpands ~~the~~its ~~acquisition~~operations ~~could~~and ~~result~~capabilities inwith anrevenues ~~impairment~~that ofcan ~~goodwill.~~realize ~~These~~higher ~~circumstances,~~margins ~~either~~than ~~alone or in combination, could have other adverse effects on~~ our average business,. ~~financial~~Goodwill ~~results~~is ~~and~~a ~~cash~~significant ~~flows.~~part

Risks associated with changes in tax laws and regulations. We are a large corporation with operations in the U.S. and other jurisdictions. As such, we are subject to tax laws and regulations of the U.S. federal, state and local governments, as well as various foreign jurisdictions. We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Significant judgment is required in determining our tax provision for income taxes. Changes in tax laws or regulations may be enacted that could adversely affect our overall tax assets and liabilities. For example, on December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The changes included in the Tax Act are broad and complex. The final transition impacts of the

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~~Tax~~of ~~Act~~Precision ~~may~~Partners’ ~~differ~~assets ~~from~~and our inability to realize the ~~estimates~~benefits ~~provided~~of ~~elsewhere~~the growth in ~~this~~its ~~Annual~~business ~~Report,~~model ~~possibly~~could ~~materially,~~result ~~due~~in ~~to,~~an ~~among~~impairment ~~other~~of ~~things~~goodwill. As another example, ~~changes~~we inhave ~~interpretations~~recently ofundertaken ~~the~~several ~~Tax~~significant ~~Act~~information technology (“IT”) projects, ~~any~~including ~~legislative~~new ~~action~~and toupgraded ~~address~~enterprise ~~questions~~systems that ~~arise~~affect ~~because~~key areas of ~~the~~our ~~Tax~~business ~~Act,~~and ~~any~~operations. ~~changes~~Although inwe ~~accounting~~anticipate ~~standards~~that ~~for~~these ~~income~~IT ~~taxes~~projects orwill ~~related~~increase ~~interpretations~~our inefficiency, ~~response~~should tothese ~~the~~projects ~~Tax~~face ~~Act~~unexpected challenges, orwhether ~~any~~during ~~updates~~implementation, adoption or ~~changes~~other tostages, ~~estimates~~it wecould have ~~used~~adverse ~~to calculate the transition~~ impacts. ~~Any~~on ~~changes~~our inbusiness ~~enacted~~or ~~tax~~operations. ~~laws~~Generally, ~~(such~~if asone ~~the~~or ~~recent~~more ~~U.S.~~of ~~tax~~these ~~legislation),~~key ~~rules~~cost-savings or ~~regulatory~~margin orenhancement ~~judicial~~projects ~~interpretations~~are unsuccessful, ~~any~~are ~~adverse~~significantly ~~outcome~~less effective in ~~connection~~achieving ~~with~~the ~~tax~~level ~~audits~~and intiming ~~any~~of ~~jurisdiction,~~combined orcost ~~any~~savings ~~change~~or inmargin ~~the~~enhancement ~~pronouncements~~than ~~relating~~we toanticipated, ~~accounting~~or ~~for~~do ~~income~~not ~~taxes~~achieve ~~could~~results ~~materially~~as ~~and~~quickly ~~adversely~~as ~~impact~~anticipated, our financial ~~condition~~results and ~~results~~cash offlows ~~operations~~could be adversely impacted.

Risk of IT security threats, cybercrime and exposure of private information. We rely on IT systems and networks in almost every aspect of our business activities. In addition, we and certain of our third-party data processing providers collect and store sensitive data, and our vendors or suppliers may collect and store sensitive data about us in their information system environments. We have taken, and intend to continue to take, what we believe are appropriate and reasonable steps to prevent security breaches in our systems and networks. In recent years, however, both the number and sophistication of IT security threats and cybercrimes have increased. Additionally, regulatory pressure has increased for companies to prevent security breaches and notify stakeholders if data is exposed. These IT security threats and increasingly sophisticated cybercrimes pose a risk to system security and the confidentiality, availability and integrity of our data. A breach in security could expose us to risks of production downtimes and operations disruptions, misuse of information or systems, or the compromise of confidential information, which in turn could adversely affect our reputation, competitive position, business and financial results.

Risks associated with changes in tax laws and regulations. We are a large corporation with operations in the U.S. and other jurisdictions. As such, we are subject to tax laws and regulations of the U.S. federal, state and local governments, as well as various foreign jurisdictions. We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Significant judgment is required in determining our tax provision for income taxes. Changes in tax laws or regulations may be enacted that could adversely affect our overall tax assets and liabilities. Any changes in enacted tax laws, rules or regulatory or judicial interpretations, any adverse outcome in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our financial condition and results of operations.

Risks related to the uncertain consideration our stockholders will receive in the Merger because the market price of Cliffs common shares will fluctuate. Subject to the terms and conditions set forth in the Merger Agreement, upon consummation of the Merger, each share of our common stock issued and outstanding immediately prior to the effective time of the Merger (other than restricted shares and shares of our common stock owned by us, Cliffs or Merger Sub) will be converted into the right to receive 0.40 Cliffs common shares (as well as cash in lieu of any fractional Cliffs common shares and any dividends or distributions on the Cliffs common shares with a record date at or after the effective time of the Merger). The exchange ratio in the Merger is fixed, and there will be no adjustment to the consideration to be received by our stockholders in the Merger for changes in the market price of Cliffs common shares or our common stock prior to the completion of the Merger. The market value of Cliffs common shares may fluctuate prior to the closing of the transaction as a result of a variety of factors, including general market and economic conditions, changes in Cliffs’ business, operations and prospects and regulatory considerations. Such factors are difficult to predict and in many cases may be beyond our control or Cliff’s control. The actual value of the consideration to be received by our stockholders at the completion of the Merger will depend on the market value of the Cliffs common shares at that time. This market value may differ, possibly materially, from the market value of Cliffs common shares at the time the Merger Agreement was entered into or at any other time.

Risk that the Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed. The Merger Agreement contains a number of conditions that must be satisfied or waived in order to complete the Merger. Those conditions include, among others:


•	the adoption of the Merger Agreement by our stockholders;


•	the approval by Cliffs shareholders of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the issuance of Cliffs common shares in connection with the Merger;


•	the approval to list the Cliffs common shares issuable in connection with the Merger on the NYSE;


•	the expiration or termination of the antitrust waiting period applicable to the Merger and receipt of required regulatory approvals in Mexico;


•	the absence of any governmental order or law prohibiting the consummation of the Merger;


•	the accuracy of Cliffs’ and our respective representations and warranties under the Merger Agreement (subject to the materiality standards set forth in the Merger Agreement);


•	Cliffs’ and our performance of their respective obligations under the Merger Agreement in all material respects;


•	the absence of a material adverse effect on Cliffs (as described in the Merger Agreement); and


•	our receipt of a written opinion of our tax counsel (or, if our tax counsel is unwilling or unable to deliver such tax opinion, Cliffs’ tax counsel, or, if Cliffs’ tax counsel does not deliver such an opinion, subject to our using reasonable best efforts to

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obtain the tax opinion from another nationally recognized tax counsel reasonably acceptable to us) regarding the U.S. federal income tax treatment of the transaction.

These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed. In addition, if the Merger is not completed by June 30, 2020 (subject to our and Cliffs’ ability to extend the date to September 30, 2020 and then December 31, 2020 if required antitrust approvals have not yet been obtained or there is an impediment under any antitrust law), either Cliffs or we may choose not to proceed with the Merger. The parties can mutually decide to terminate the Merger Agreement at any time, before or after the receipt of our stockholder approval or Cliffs shareholder approval.

Risk that an adverse ruling in one or more lawsuits filed against AK Steel, its directors, Cliffs, its directors and Merger Sub in connection with the Merger may delay the completion of the Merger or prevent the Merger from being completed. Six actions, including one putative class action lawsuit, have been filed in federal court in Delaware, Michigan and New York by purported stockholders of ours in connection with the Merger: the Stein Action, Spuhler Action, Franchi Action, Raul Action, Ruiz Action and Rubin Action (collectively, the “AK Steel Stockholder Federal Actions”, each as defined and described in Note 11 to the consolidated financial statements in Item 8). A seventh action, the Pate Action (as defined and described in Note 11 to the consolidated financial statements), has been filed by a purported AK Steel stockholder as a putative class action in state court in Ohio (the Pate Action and the AK Steel Stockholder Federal Actions are collectively referred to as the “AK Steel Stockholder Actions.”). Each of the AK Steel Stockholder Actions names AK Steel and its directors as defendants, and the Franchi Action and Pate Action each name Cliffs and Merger Sub as additional defendants. An eighth action, the Nessim Action (as defined and described in Note 11 to the consolidated financial statements), has been filed in federal court in New York against Cliffs and its directors by a purported shareholder of Cliffs (the Nessim Action and the AK Steel Stockholder Federal Actions are collectively referred to as the “Federal Stockholder Actions,” and all eight actions are collectively referred to as the “Stockholder Actions.”). Each of the Federal Stockholder Actions alleges, among other things, that the registration statement on Form S-4 filed by Cliffs in connection with the Merger is false and misleading and/or omits material information concerning the transactions contemplated by the Merger Agreement in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated under the Exchange Act. The Pate Action alleges breach of fiduciary duty claims against the AK Steel directors and aiding and abetting claims against AK Steel, Cliffs and Merger Sub in connection with the transactions contemplated by the Merger Agreement, including that the registration statement on Form S-4 filed by Cliffs in connection with the Merger is false and misleading and/or omits material information concerning the transactions contemplated by the Merger Agreement. The plaintiffs in the Stockholder Actions, among other things, seek to enjoin the transactions contemplated by the Merger Agreement and an award of attorneys’ fees and expenses.

Additional lawsuits related to the transactions contemplated by the Merger Agreement may be filed in the future. Even if the lawsuits are without merit, these claims can result in substantial costs and divert management time and resources. There can be no assurance that any of the defendants will be successful in defending the pending or any potential future lawsuits. A preliminary injunction could delay or jeopardize the completion of the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin the completion of the Merger. An adverse judgment in any Stockholder Action could result in monetary damages, which could have a negative impact on Cliffs’ and AK Steel’s respective liquidity and financial condition.

Risk of negative impacts on the price of shares of our common stock and our debt securities, our future business and financial results as a result of failing to complete the Merger. If the Merger is not completed for any reason, including the failure of either company’s stockholders to approve the requisite transactions, our business and financial results may be adversely affected, including as follows:


•	we may experience negative reactions from the financial markets, including negative impacts on the market price of our common stock and debt securities;


•	the manner in which customers, vendors, business partners and other third parties perceive us may be negatively impacted, which in turn could affect our ability to compete for new business or obtain renewals in the marketplace more broadly;


•	we may experience negative reactions from employees, which may adversely affect, among other things, productivity, employee turnover and occupational safety; and


•	we have and will continue to expend significant time and resources that could otherwise have been spent on our existing businesses and the pursuit of other opportunities that could have been beneficial to us, and our ongoing business and financial results may be adversely affected.

In addition to the above risks, if the Merger Agreement is terminated and our board seeks an alternative transaction, our stockholders cannot be certain that we will be able to find a party willing to engage in a transaction on more attractive terms than the Merger. If the Merger Agreement is terminated under specified circumstances, we also may be required to pay Cliffs a termination fee.

Risks associated with the Merger Agreement limiting our ability to pursue alternatives to the Merger. The Merger Agreement contains provisions that may discourage a third party from submitting an acquisition proposal to us that might result in greater value to

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our stockholders than the Merger, or may result in a potential competing acquirer proposing to pay a lower per share price to acquire us than it might otherwise have proposed to pay. These provisions include a general prohibition on our soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by our board, entering into discussions with any third party regarding any acquisition proposal or offer for a competing transaction, and a termination fee that is payable to Cliffs if we terminate the Merger Agreement to accept a superior acquisition proposal.

Risk of business uncertainties while the Merger is pending and related adverse effects on our business. Uncertainty about the effect of the Merger on employees, suppliers and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed, and could cause suppliers, customers and others that deal with us to seek to change our existing business relationships. In addition, the Merger Agreement restricts us from entering into certain corporate transactions and taking other specified actions without the consent of Cliffs, and generally requires us to continue our operations in the ordinary course, until completion of the Merger. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Merger.

Risk of the significant transaction and Merger-related costs exceeding our expectations. We have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, including, among others, fees paid to financial, legal and accounting advisors, employee retention costs, severance and benefit costs and filing fees. Many of these costs will be borne by us even if the Merger is not completed and could have an adverse effect on our financial condition and operating results.

Risk that uncertainties associated with the Merger cause a loss of management personnel and other employees, which could adversely affect our future business and operations. We are dependent on the experience and industry knowledge of our officers and other employees to execute our business plans. Our success depends in part upon our ability to retain management personnel and other employees. Our current and prospective employees may experience uncertainty about their roles within the combined company following the Merger, which may have an adverse effect on our ability to attract or retain management and other personnel while the transaction is pending.


Item 1B.	Unresolved Staff Comments.

None.


Item 2.	Properties.

We lease our corporate headquarters in West Chester, Ohio, through 2029, with two five-year options to extend the lease. We own our Research and Innovation Center located in Middletown, Ohio. ~~We also lease an administration building located in Dearborn, Michigan.~~

Our operations consist primarily of ~~eight~~seven steelmaking and finishing plants in the United States. We own all of our steelmaking and finishing facilities. In addition, we operate two coke plants, a metallurgical coal production facility, three tube manufacturing plants and ~~eight~~ten tooling and stamping operations in the United States, Canada and Mexico.

~~Ashland~~Butler Works is located in ~~Ashland~~Butler, ~~Kentucky~~Pennsylvania, and ~~its~~produces ~~coating~~stainless, ~~line~~electrical ~~helps~~and tocarbon ~~complete~~steel. Melting ~~finishing~~takes ofplace ~~material~~in ~~processed~~an atelectric ~~Middletown~~arc ~~Works.~~furnace Inthat ~~January~~feeds ~~2019,~~an weargon-oxygen ~~announced~~decarburization ~~that~~unit wefor ~~plan~~the tospecialty ~~close~~steels. ~~the~~A ~~Ashland~~ladle metallurgy furnace feeds two double-strand continuous casters. Butler Works ~~facility~~also includes a hot rolling mill, annealing and pickling units and two tandem cold rolling mills. ~~See~~It ~~Note~~also 2has tovarious ~~our~~intermediate ~~consolidated~~and ~~financial~~finishing ~~statements~~operations for ~~more~~both ~~information~~stainless and electrical steels.

Butler Works is located in Butler, Pennsylvania, and produces stainless, electrical and carbon steel. Melting takes place in a highly-efficient electric arc furnace that feeds an argon-oxygen decarburization unit for the specialty steels. A ladle metallurgy furnace feeds two double-strand continuous casters. Butler Works also includes a hot rolling mill, annealing and pickling units and two tandem cold rolling mills. It also has various intermediate and finishing operations for both stainless and electrical steels.

Coshocton Works is located in Coshocton, Ohio, and consists of a stainless steel finishing plant containing two Sendzimer mills and two Z-high mills for cold reduction, four annealing and pickling lines, nine bell annealing furnaces, four hydrogen annealing furnaces, two bright annealing lines and other processing equipment, including temper rolling, slitting and packaging facilities.

Dearborn Works is located in Dearborn, Michigan, and its operations include carbon steel melting, casting, hot and cold rolling and finishing operations for carbon steel. It consists of a blast furnace, basic oxygen furnaces, two ladle metallurgy furnaces, a vacuum degasser and two slab casters. Dearborn Works also has a hot rolling mill, a pickle line/tandem cold mill, batch anneal shops, a temper mill and a hot-dip galvanizing line for finishing products.

Mansfield Works is located in Mansfield, Ohio, and produces stainless steel. Operations include a melt shop with two electric arc furnaces, an argon-oxygen decarburization unit, a ladle metallurgy furnace, a thin-slab continuous caster and a hot rolling mill.

Middletown Works is located in Middletown, Ohio, and melts carbon steel and processes carbon and stainless steel. It consists of a coke facility, a blast furnace, basic oxygen furnaces, a CAS-OB, a vacuum degasser and a continuous caster for the production of ~~carbon steel. Middletown Works also has a hot rolling mill, cold rolling mill, two pickling lines, four annealing facilities, two temper mills and three coating lines for finishing products.~~

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carbon steel. Middletown Works also has a hot rolling mill, cold rolling mill, two pickling lines, four annealing facilities, two temper mills and three coating lines for finishing products.

Rockport Works is located near Rockport, Indiana, and consists of a carbon and stainless steel finishing plant containing a continuous cold rolling mill, a continuous hot-dip galvanizing and galvannealing line, a continuous carbon and stainless steel pickling line, a continuous stainless steel annealing and pickling line, hydrogen annealing facilities and a temper mill.

Zanesville Works is located in Zanesville, Ohio, and consists of a finishing plant for some of the stainless and electrical steel produced at Butler Works and Mansfield Works and has a Sendzimer cold rolling mill, annealing and pickling lines, high-temperature box anneal and other decarburization and coating units.

AK Tube, a subsidiary, owns a plant in Walbridge, Ohio, which operates six electric resistance welded tube mills ~~and a slitter~~. It also has a plant on leased ~~property~~land in Columbus, Indiana, which operates seven electric resistance welded tube mills, ~~two~~three high-speed cold saws ~~and one nick-and-shear cutting machine~~. AK Tube’s leased plant in Queretaro, Mexico, operates one electric resistance welded tube mill and one high-speed cold saw.

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AK Coal, a subsidiary, produces metallurgical coal from reserves in Somerset County, Pennsylvania.

Mountain State Carbon, LLC, a subsidiary, produces furnace and foundry coke from its cokemaking facility in Follansbee, West Virginia, which consists of four batteries.

Precision Partners, a subsidiary, provides advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components and complex assemblies for the automotive market across ~~eight~~ten plants in Ontario, Alabama and Kentucky. Its facilities feature ~~five~~seven large-bed, hot-stamping presses providing ~~nine~~thirteen lines of production; 8081 cold-stamping presses ranging from 200 tons to 3,000 tons of pressing capacity; 17 large-bed, high-tonnage tryout presses with prove-out capabilities for new tool builds; and ~~125~~144 multi-axis welding assembly cells. Precision Partners owns one facility in Ontario and the remainder are leased.


Item 3.	Legal Proceedings.

Information for this item may be found in Note 1011 to the consolidated financial statements in Item 8, which is incorporated herein by reference.


Item 4.	Mine Safety Disclosures.

The ~~operation~~operations of AK Coal’s North Fork ~~Mine~~mine and ~~Coal Innovations, LLC~~ coal wash plant (collectively, the “AK Coal Operations”) are subject to regulation by the Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977, as amended (“Mine Act”). MSHA inspects mining and processing operations, such as the AK Coal Operations, on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Exhibit 95.1 to this Annual Report presents citations and orders from MSHA and other regulatory matters required to be disclosed by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act or otherwise under this Item 4.

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PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

AK Holding’s common stock is listed on the New York Stock Exchange (symbol: AKS). As of February 1318, ~~2019~~2020, there were 316,~~308~~909,~~531~~268 shares of common stock outstanding and held of record by 3,~~564~~470 stockholders. Because depositories, brokers and other nominees ~~held~~hold many of these shares, the number of record holders is not representative of the number of beneficial holders. There were no unregistered sales of equity securities in the year ended December 31, ~~2018~~2019.

Period	TotalNumber ofSharesPurchased (a)	Average Price Paid PerShare (a)		Total Number ofShares (or Units)Purchased as Part of PubliclyAnnounced Plansor Programs (b)	ApproximateDollar Value ofShares that MayYet be PurchasedUnder the Plans orPrograms (b)
October 2018	760	$	4.68	—
November 2018	—	—		—
December 2018	—	—		—
Total	760	4.68		—	$	125.6

(a) Employees may have us withhold shares to pay federal, state and local taxes due upon the vesting of restricted stock or performance shares under the terms of the AK Steel Holding Corporation Stock Incentive Plan. In this event, the withheld shares have a fair market value equal to the minimum statutory withholding rate that tax authorities could impose on the transaction. We repurchase the withheld shares at the quoted average of the reported high and low sales prices on the day we withhold the shares.

(b) On October 21, 2008, the Board of Directors authorized us to repurchase, from time to time, up to $150.0 of our outstanding equity securities. The Board of Directors’ authorization specified no expiration date. We did not repurchase any of our equity securities under this authorization in 2018.

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The following graph compares cumulative total stockholder return on AK Holding’s common stock for the five-year period from January 1, 2014 through December 31, 2018, with the cumulative total return for the same period of (i) the Standard & Poor’s Small Cap 600 Stock Index, and (ii) the New York Stock Exchange Arca Steel Index. These comparisons assume an investment of $100 at the beginning of the period and reinvestment of dividends.

	January 1,		December 31,
	2014		2014		2015		2016		2017		2018
AK Holding	$	100	$	72	$	27	$	125	$	69	$	27
NYSE Arca Steel	100		72		40		77		93		73
S&P 600 Small Cap	100		104		101		126		141		127

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ISSUER PURCHASES OF EQUITY SECURITIES



Period	Total Number of Shares Purchased (a)	Average Price Paid Per Share (a)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (b)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (b)
October 2019	414	$	2.43	—
November 2019	—	—		—
December 2019	—	—		—
Total	414	2.43		—	$	125.6

(a)

Employees may have us withhold shares to pay federal, state and local taxes due upon the vesting of restricted stock or performance shares under the terms of the AK Steel Holding Corporation 2019 Omnibus Supplemental Incentive Plan. In this event, the withheld shares have a fair market value equal to the minimum statutory withholding rate that tax authorities could impose on the transaction. We repurchase the withheld shares at the quoted closing price on the day we withhold the shares.


(b)	On October 21, 2008, the Board of Directors authorized us to repurchase, from time to time, up to $150.0 of our outstanding equity securities. The Board of Directors’ authorization specified no expiration date. We did not repurchase any of our equity securities under this authorization in 2019.

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The following graph compares cumulative total stockholder return on AK Holding’s common stock for the five-year period from January 1, 2015 through December 31, 2019, with the cumulative total return for the same period of (i) the Standard & Poor’s Small Cap 600 Stock Index, and (ii) the New York Stock Exchange Arca Steel Index. These comparisons assume an investment of $100 at the beginning of the period and reinvestment of dividends.



	January 1,		December 31,
	2015		2015		2016		2017		2018		2019
AK Holding	$	100	$	38	$	172	$	95	$	38	$	55
NYSE Arca Steel	100		56		107		130		102		111
S&P 600 Small Cap	100		97		121		135		122		147

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Item 6.	Selected Financial Data.

The following selected historical consolidated financial data should be read along with the consolidated financial statements presented in Item 8 and Management’s Discussion and Analysis of Financial Condition and Results of Operations presented in Item 7.

	2018		2017		2016			2015			2014
	2019		2018		2017			2016			2015
	(dollars in millions, except per share and per ton data)
Statement of Operations Data:
Net sales	$	6,~~818~~359.24	$	6,~~080~~818.52	$	56,~~882~~080.5		$	65,~~692~~882.95		$	6,~~505~~692.79
Operating profit (loss)	~~364~~209.43		~~260~~364.24		~~217~~260.62			~~(67~~217.46		)	17(67.64		)
Net income (loss) attributable to AK Steel Holding Corporation (a)	~~186~~11.02		~~103~~186.50		~~(16~~103.85		)	(~~652~~16.38		)	(~~114~~652.23		)
Basic earnings (loss) per share	0.5904		0.3359		(0.0733		)	(30.6707		)	(03.7767		)
Diluted earnings (loss) per share (a)	0.5904		0.3259		(0.0732		)	(30.6707		)	(03.7767		)
Other Data:
Total flat-rolled shipments (in thousands of tons)	5,~~683~~342.42		5,~~596~~683.24		5,~~936~~596.42			65,~~974~~936.04			6,~~007~~974.20
Selling price per flat-rolled ton	$	1,~~091~~078	$	1,~~022~~091	$	~~955~~1,022		$	~~929~~955		$	~~1,042~~929
Balance Sheet Data:
Cash and cash equivalents	$	4831.60	$	3848.06	$	~~173~~38.20		$	56173.62		$	7056.26
Working capital	~~1,072~~959.78		1,~~070~~072.17		1,~~077~~070.1			~~899~~1,077.51			~~1,195~~899.45
Total assets	4,515.7		4,474.8		4,101.7			4,157.8			5,052.8
Total assets (b)	4,590.6		4,515.7		4,474.8			4,101.7			4,157.8
Long-term debt	1,~~993~~968.78		21,~~110~~993.17		12,~~816~~110.61			21,~~354~~816.16			2,~~422~~354.01
Current portion of pension and other postretirement benefit obligations	3841.70		4038.17		4140.31			7741.73			5577.67
Pension and other postretirement benefit obligations (excluding current portion)	~~829~~717.98		~~894~~829.29		~~1,093~~894.72			1,~~146~~093.97			1,~~225~~146.39
Total equity (deficit)	~~429~~477.53		~~300~~429.65		~~149~~300.86			~~(528~~149.48		)	~~142~~(528.04		)

(a) ~~Under~~In ~~our method of accounting for pensions and other postretirement benefits~~2019, we recorded ~~pension~~a ~~corridor~~charge ~~charges~~ of $7869.43 ($0.3422 per diluted share), ~~$144.3~~to ~~($0.81~~permanently ~~per~~close ~~diluted~~Ashland ~~share) and $2~~Works.0 ~~($0.01~~In ~~per diluted share) in 2016~~2019, ~~2015~~2018 and ~~2014~~2016, ~~and~~we ~~OPEB~~recorded ~~corridor~~pension ~~credits~~settlement charges of $3526.39 ($0.1508 per diluted share), ~~and~~ $1314.15 ($0.0705 per diluted share) ~~in 2016~~ and ~~2015. In 2018, we also recorded pension settlement charges of~~ $1425.50 ($0.0511 per diluted share). In 2017, we recorded an asset impairment charge of $75.6 ($0.24 per diluted share) related to the ~~temporarily~~Ashland ~~idled~~Works blast furnace and steelmaking operations (“Ashland Works Hot End”) and a credit of $19.3 ($0.06 per diluted share) for the reversal of a liability for transportation costs. In 2016, we also recorded costs of $69.5 ($0.30 per diluted share) to terminate a pellet offtake agreement and for related transportation costs. Under our method of accounting for pensions and other postretirement benefits, we recorded pension ~~settlement~~corridor charges of $2578.4 ($0.34 per diluted share) and $144.3 ($0.1181 per diluted share) in 2016 and ~~costs~~2015, and OPEB corridor credits of $6935.53 ($0.3015 per diluted share) toand ~~terminate~~$13.1 a($0.07 ~~pellet~~per ~~offtake~~diluted ~~agreement~~share) ~~and~~in ~~for~~2016 ~~related~~and ~~transportation costs~~2015. In 2015, we also recorded a charge for a temporary facility idling of $28.1 ($0.16 per diluted share) for the Ashland Works Hot End and impairments of our investments in our former Magnetation LLC joint venture ~~(“Magnetation”)~~ of $256.3 ($1.44 per diluted share) and AFSG Holdings, Inc. ~~(“AFSG”)~~ of $41.6 ($0.23 per diluted share).


(b)	We adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), as of January 1, 2019 through the modified retrospective method and recorded additional lease assets and liabilities of $291.1 as of January 1, 2019. Prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting treatment.


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Executive Overview

We are a leading producer of flat-rolled carbon, stainless and electrical steel products, primarily for the automotive, infrastructure and manufacturing, ~~including electrical power,~~ and distributors and converters markets. Our downstream businesses also provide customer solutions with carbon and stainless steel tubing products, high-end stainless steel finishing, advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components and complex assemblies.

Our mission is to create innovative, high-quality steel solutions for our customers and our key values of safety, quality, productivity and innovation, along with environmental responsibility and sustainability, are its foundation. We target customers who require the most technically demanding, highest-quality steel products, “just-in-time” delivery, technical support and product development assistance. Our robust product quality and delivery capabilities, as well as our emphasis on collaborative customer technical support and product planning, are critical factors in our ability to serve our customer markets. We focus on value-added steel solutions rather than sales into commodity steel markets.

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~~2018~~2019 Financial Overview

In 2019, we made significant capital investments to strengthen the company for the long-run, including a major planned outage that will lower our steelmaking costs at Dearborn Works and the construction of a new Precision Partners facility to grow our market position and capabilities in automotive stamping and complex assembly. While those investments will benefit the company in future years, we faced market headwinds in 2019 that impacted our financial results. Those headwinds included lower shipments resulting from challenging steel market conditions with softening spot market steel prices and a slight decline in automotive demand, including reduced shipments to General Motors as a result of the 40-day strike that halted its vehicle production. Our ~~2018~~2019 net income ofwas $~~186~~11.02, or $0.5904 per diluted share of common stock, ~~marked~~which reflected a ~~significant~~charge ~~improvement~~for ~~from~~the ~~our~~Ashland ~~2017~~Works closure of $69.3 (or $0.22 per diluted share), compared to 2018 net income of $~~103~~186.50, or $0.3259 per diluted share. AsOur ~~another~~2019 ~~step~~results toalso ~~strengthen~~reflected ~~our~~a ~~balance~~pension ~~sheet~~settlement charge of $26.9, weor ~~entered~~$0.08 ~~into~~per adiluted ~~de-risking~~share, from a pension annuity transaction that we entered into in the fourth quarter of ~~2018.~~2019 Asas apart ~~result~~ of ~~its~~our ~~successful~~efforts ~~completion,~~to de-risk our balance sheet. Our 2018 results reflected a pension settlement charge of $14.5, or $0.05 per diluted share, ~~was~~for ~~recorded~~a inseparate ~~the~~pension ~~fourth~~annuity ~~quarter~~transaction ofthat we entered into in 2018. Excluding ~~this~~the ~~item~~Ashland closure and pension settlement charges, ~~2018~~2019 adjusted net income was $~~200~~107.54, or $0.6434 per diluted share, compared to ~~2017~~2018 adjusted net income of $~~159~~200.85, or $0.5064 per diluted share. Our adjusted EBITDA (as defined in Non-GAAP Financial Measures) was $~~563~~446.45, or 87.30% of net sales, for ~~2018~~2019, compared to adjusted EBITDA of $~~528~~563.54, or 8.73% of net sales, for ~~2017~~2018. ~~Our 2017 reported results reflected net charges totaling $56.3, or $0.18 per diluted share.~~

Our 2019 results reflected lower shipments of flat-rolled steel from a year ago, primarily due to a softening of sales to the distributors and converters market and reduced shipments to the automotive market. The average selling price per flat-rolled steel ton ~~increased~~decreased by 71% in ~~2018~~2019 from ~~2017~~2018, primarily due to ~~higher~~lower selling prices for carbon spot market sales. ~~and~~These ~~automotive~~impacts ~~sales,~~were partially offset by ~~the~~higher ~~effect~~selling onprices ~~product mix of lower shipments~~ to the automotive market. ~~The~~and ~~impact~~lower ofcosts ~~the~~for ~~higher~~scrap, ~~prices~~alloys ~~was~~and ~~also~~energy. ~~partially~~Maintenance ~~offset by~~ outage costs in ~~2018~~2019 ~~totaling~~were $9181.10, upcompared ~~from~~to $8491.91 in ~~2017, and higher costs for transportation, raw materials and supplies~~2018. We recorded mark-to-market unrealized gains on iron ore derivatives of $049.26 in ~~2018~~2019, as compared to unrealized gains of $310.62 in ~~2017~~2018.

~~During~~In ~~2018~~January 2019, we ~~continued~~announced our intent to ~~reduce~~close ~~our~~Ashland ~~leverage~~Works, including the previously idled blast furnace and ~~long-term~~steelmaking ~~liabilities.~~operations ~~During~~(“Ashland ~~the~~Works ~~course~~Hot ofEnd”), and the ~~year~~hot dip galvanizing coating line that had remained operational. During 2019, we ~~reduced~~transitioned ~~our~~products ~~outstanding~~to ~~long-term~~our ~~debt~~other, bylower ~~$116~~cost U.4S. coating lines and ~~our~~in ~~total~~November ~~pension~~2019 ~~and~~ceased ~~other~~operations ~~postretirement~~at ~~benefit~~the ~~obligations~~Ashland byWorks coating line. We recorded a charge of $6569.73, or $0.22 Weper ~~also~~diluted ~~continued~~share, toduring ~~take~~2019 ~~proactive~~for ~~steps~~termination toof ~~further~~certain detake-~~risk~~or-pay ~~exposure~~agreements, tosupplemental ~~our~~unemployment ~~pension~~and ~~plan~~other byemployee ~~transferring~~benefit ~~$278.8~~costs, ofestimated ~~pension~~multiemployer ~~obligations~~plan ~~for~~withdrawal ~~approximately 5~~liability,~~400~~ ~~retirees~~and orother ~~their~~costs. ~~beneficiaries~~See todiscussion abelow ~~highly~~and ~~rated~~in ~~insurance~~Note ~~company~~3 to the consolidated financial statements.

OnDuring ~~January 1~~2019, ~~2018,~~ we ~~changed~~transferred ~~our~~$615.6 ~~accounting~~of ~~method~~pension ~~for~~obligations ~~valuing inventories~~ to ~~the~~a ~~average~~highly-rated ~~cost~~insurance ~~method~~company for ~~inventories~~approximately ~~previously valued using the last-in~~4,250 ~~first-out~~retirees ~~(“LIFO”)~~or ~~method~~their beneficiaries. WeSince ~~believe that the average cost method is preferable since it improves comparability with our peers~~mid-2016, ~~more~~we ~~closely~~have ~~tracks~~transferred ~~the~~a ~~physical~~total ~~flow~~ of ~~our~~$1.1 ~~inventory,~~billion ~~better~~in ~~matches~~pension ~~revenue~~trust ~~with~~assets ~~expenses,~~to ~~and~~purchase ~~aligns~~four ~~with~~non-participating ~~how~~annuity wecontracts ~~internally~~that ~~manage~~require ~~our~~highly-rated ~~business.~~insurance ~~The~~companies ~~effects~~to ofpay the ~~change~~transferred inpension ~~accounting~~obligations ~~method~~to ~~from~~approximately ~~LIFO~~20,000 topension ~~average~~participants. ~~cost~~The ~~have~~settlement ~~been~~charges ~~retrospectively~~related ~~applied~~ to ~~all~~these ~~periods~~transactions ~~presented~~represent inthe ~~all~~recognition ~~sections~~ of ~~this~~unrealized ~~Annual~~actuarial ~~Report,~~losses ~~including~~that ~~Management’s~~were ~~Discussion~~being ~~and~~recognized ~~Analysis.~~over ~~See~~the ~~Note~~future 2estimated toremaining ~~our~~lives ~~consolidated~~of ~~financial statements for more information related to~~ the ~~change~~affected inpension ~~accounting principle~~participants.

On2019 ~~August 4,~~Compared ~~2017,~~to we acquired Precision Partners, which provides advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components and complex assemblies for the automotive market. Our financial results include the effects of the acquisition and Precision Partners’ operations for periods after the acquisition, affecting comparability between periods. See Precision Partners for more information.2018

2018 Compared to 2017

Steel Shipments

Flat-rolled steel shipments in ~~2018~~2019 were 5,~~683~~342,~~400~~200 tons, a 26% ~~increase~~decrease compared to ~~2017~~2018 shipments of 5,~~596~~683,~~200~~400 tons. The ~~increase~~decrease was a result of ~~higher~~lower ~~demand~~shipments ~~from~~to the distributors and converters market, ~~which~~and ~~was partially offset by~~ a 36% decline in shipments to the automotive market, due in part to the 40-day strike at General Motors. Shipments of flat-rolled steel by product category for ~~2018~~2019 and ~~2017~~2018, as a percent of total flat-rolled steel shipments, were as follows:

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Flat-Rolled Steel Shipments by Product Category

Net Sales

The following table presents information on net sales:

	2018			2017			Increase
	2019			2018			Increase (Decrease)
Net sales	$	6,~~818~~359.24		$	6,~~080~~818.52		12(7	)%
Average net selling price per ton	1,~~091~~078			1,~~022~~091			7(1	)%
Net sales outside the United States	~~634~~569.84			~~627~~634.18
Net sales outside the United States as a percent of net sales	9		%	109		%

The ~~increase~~decrease in net sales was driven primarily by ~~higher~~lower shipments and ~~better~~lower spot market steel pricing, which includes the effect of surcharges, partly offset by higher selling prices for automotive shipments. The ~~increase~~decrease in average net selling price per ton was primarily driven by ~~higher~~reduced selling prices in the carbon spot market ~~and for automotive sales~~.

The following table presents the percentage of net sales to each of our markets:

Market	~~2018~~2019		~~2017~~2018
Automotive	6366	%	6563	%
Infrastructure and Manufacturing	1516	%	1615	%
Distributors and Converters	2218	%	1922	%

Cost of Products Sold

Cost of products sold in ~~2018~~2019 ~~was~~of $5,~~911~~606.03, or 8688.72% of net sales, ~~and~~decreased ~~increased~~ from ~~2017~~2018 cost of products sold of $5,~~253~~911.10, or 86.47% of net sales,. The decrease was largely due to ~~higher~~a lower volume of shipments and lower costs for ~~raw materials~~scrap, ~~transportation~~alloys and ~~supplies~~energy, ~~including~~which ~~graphite~~were ~~electrodes~~partially offset by higher costs for iron ore, coal and coke. Cost of products sold ~~included~~in ~~planned~~2019 ~~maintenance~~included total outage costs of $4081.~~2 in 2018~~0, compared to ~~$84.9~~total ~~in 2017. The higher planned maintenance~~ outage costs in ~~2017~~2018 ~~were~~of ~~primarily~~$91.1, awhich ~~result~~included ofunplanned ~~larger~~outage ~~planned~~costs ~~maintenance projects~~ at our Middletown Works ~~blast~~totaling ~~furnace and steelmaking shops and our Mansfield Works melt shop~~$50.9. We ~~also~~ had ~~unplanned~~$18.9 ~~outage~~of ~~costs~~insurance atrecoveries ~~our Middletown Works~~ in ~~2018 totaling $50.9~~2019, ~~partially~~compared ~~offset~~to by insurance recoveries totaling $15.1 in 2018. We recorded mark-to-market gains of $049.26 and $310.62 for ~~2018~~2019 and ~~2017~~2018 from iron ore derivatives that do not qualify as cash flow hedges for accounting purposes.

Selling and Administrative Expense

Selling and administrative expense ~~increased~~decreased to $~~322~~295.62 in ~~2018~~2019 from $~~284~~322.96 in ~~2017~~2018. The ~~increase~~decrease was primarily ~~related~~a toresult ~~the inclusion~~ of ~~Precision~~lower ~~Partners,~~variable ~~which~~compensation weexpense ~~acquired~~compared into ~~August~~the ~~2017,~~prior ~~and higher variable compensation expense~~year.

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Depreciation Expense

Depreciation expense decreased to $~~220~~192.26 in ~~2018~~2019 from $~~226~~220.02 in ~~2017~~2018. ~~Depreciation~~The ~~expense~~decline ~~for~~was ~~the~~primarily ~~acquired~~a ~~Precision~~result ~~Partners~~of ~~property,~~a ~~plant~~significant ~~and~~amount ~~equipment~~of ~~was~~fixed ~~offset~~assets byrelated ~~lower~~to ~~depreciation~~the ~~expense~~initial asconstruction aof ~~result~~our ofRockport ~~the~~Works ~~fourth~~facility ~~quarter~~becoming ~~2017~~fully ~~impairment~~depreciated as of ~~the~~December ~~Ashland~~31, ~~Works~~2018, ~~Hot~~partly ~~End~~offset ~~long-lived~~by ~~assets~~higher depreciation at SunCoke Middletown.

~~Charges~~Ashland ~~(Credit)~~Works ~~for Termination of Pellet Agreement and Related Transportation Costs~~Closure

InAs ~~2017,~~a weresult ~~reached~~of anthe ~~agreement~~decision ~~for~~to ~~transportation~~permanently ~~services~~close ~~that~~Ashland ~~provides~~Works adiscussed ~~timeframe~~in toNote ~~begin~~3 ~~using~~to the ~~rail~~consolidated ~~cars~~financial ~~that~~statements, ~~were~~we ~~idled~~recorded ~~after~~a ~~the~~charge in 2019 of $69.3, which included $18.5 for termination of acertain ~~pellet~~take-or-pay supply ~~agreement~~agreements, $20.1 Asfor asupplemental ~~result~~unemployment and other employee benefit costs, wepension ~~recorded~~and aother ~~credit~~postretirement employee benefit (“OPEB”) termination benefits of $1913.3 to(recorded ~~reduce~~in ~~the~~pension ~~unpaid~~and ~~liability.~~OPEB ~~See~~(income) ~~Note~~expense), 4an toestimated ~~the~~multiemployer ~~consolidated~~plan ~~financial~~withdrawal ~~statements~~liability of $10.0, and $7.4 for ~~further~~other ~~information~~costs.

Asset Impairment Charge

In 2017, we recognized a non-cash asset impairment charge of $75.6, primarily related to the long-lived assets associated with the temporarily idled Ashland Works Hot End. See Note 2 to the consolidated financial statements for further information.

Operating Profit

Operating profit for ~~2018~~2019 of $~~364~~209.43 was ~~higher~~lower than ~~2017~~2018 operating profit of $~~260~~364.24. Included in ~~the 2017~~ operating profit was the credit of $19.3 to reduce the transportation liability related to our terminated iron ore pellet offtake agreement and a non-cash asset impairment charge of $75.6, primarily for the Ashland Works Hot End fixed assets. Also included in operating profit was SunCoke Middletown’s operating profit of $5852.42 and $6158.74 for ~~2018~~2019 and ~~2017~~2018.

Interest Expense

Interest expense for ~~2018~~2019 decreased to $~~151~~146.6 from $~~152~~151.36 in ~~2017. The~~2018, ~~decrease from 2017~~ primarily ~~reflected~~as ~~our~~a ~~successful~~result ~~2017 actions to reduce our principal amount~~ of ~~senior unsecured notes and to refinance debt with~~ lower ~~interest rates, partially offset by higher~~ average borrowings ~~outstanding~~under onthe ~~our~~ Credit Facility in ~~2018~~2019.

Pension and ~~Other Postretirement Employee Benefit (“~~OPEB”) ~~Expense~~ (Income) Expense

Pension and OPEB ~~income~~expense ofwas $1912.20 in ~~2018~~2019, ~~decreased~~compared ~~from~~to income of $7119.92 in ~~2017~~2018. The ~~decrease~~change infrom income to expense in 2019 was primarily due to ~~lower~~pension ~~amortization~~and OPEB termination benefits of ~~prior~~$13.3 ~~service~~recognized ~~credits~~in 2019 associated with the Ashland Works closure and a lower expected return on plan assets, partially offset by ~~lower~~a ~~interest~~greater ~~costs~~amount of amortization of unrealized gains. We also recorded settlement losses of $26.9 and $14.5 in 2019 and 2018 as a result of ~~the~~purchases ~~purchase~~ of a non-participating annuity ~~contract~~contracts for certain retirees and lump sum payouts to new retirees.

Other (Income) Expense

Other (income) expense was income of $(518.9)5 in ~~2018~~2019 and ~~expense~~income of $175.19 in ~~2017~~2018. ~~The~~Included ~~expense~~ in ~~2017~~2019 was ~~primarily~~ a ~~result~~gain of ~~expenses of~~ $2111.56 ~~that~~related weto ~~incurred~~the insale ~~connection~~of ~~with~~electrical ~~the~~transmission ~~refinancing~~assets ofat ~~debt~~our inDearborn ~~2017~~Works.

Income Tax Expense (Benefit)

~~The~~We ~~Tax~~recorded ~~Act, signed into law on December 22, 2017, reduced corporate~~ income tax ~~rates~~expense ~~and the corresponding value~~ of ~~our deferred tax assets~~$6.2 Asin ~~a result~~2019, ~~the~~compared ~~company’s~~to an income tax ~~expense~~benefit ~~for~~of ~~2017 includes a~~ $46.32 ~~non-cash~~in ~~credit related to this change~~2018. ~~During~~Included in 2018, weis ~~reduced our valuation allowance and recorded~~ an income tax benefit of $5.3 as a result of a reduction in our valuation allowance caused by changes to the tax net operating loss carryover rules included in the Tax Cuts and Jobs Act of 2017 that allow us to use certain indefinite-lived deferred tax liabilities as a source of future income to realize deferred tax assets. ~~As a result, we recorded an income tax benefit of $6.2 in 2018, compared to an income tax benefit of $2.2 in 2017.~~

Net Income ~~(Loss)~~ and Adjusted Net Income ~~(Loss)~~ Attributable to AK Steel Holding Corporation

Net income attributable to AK Holding in ~~2018~~2019 was $~~186~~11.02, or $0.5904 per diluted share. Net income in ~~2018~~2019 included a charge for the Ashland Works closure of $69.3, or $0.22 per diluted share, and a pension settlement loss of $1426.59, or $0.0508 per diluted share. Excluding ~~this~~these ~~item~~items, we reported adjusted net income attributable to AK Holding of $~~200~~107.54, or $0.6434 per diluted share, for ~~2018~~2019.

Net income attributable to AK Holding in ~~2017~~2018 was $~~103~~186.50, or $0.3259 per diluted share. ~~The~~Net ~~net~~ income in ~~2017~~2018 ~~included~~reflected a ~~credit~~pension ofsettlement ~~$19.3, or $0.06 per diluted share, to adjust the transportation liability associated with a terminated pellet offtake agreement and an asset impairment~~ charge of $7514.65, or $0.2405 per diluted share. Excluding ~~these~~this ~~items~~item, we reported adjusted net income attributable to AK Holding of $~~159~~200.85, or $0.5064 per diluted share, for ~~2017~~2018.

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Adjusted EBITDA

Adjusted EBITDA was $~~563~~446.45, or 87.30% of net sales, for ~~2018~~2019, as compared to $~~528~~563.54, or 8.73% of net sales, for ~~2017~~2018.

2017 Compared to 2016

Steel Shipments

Flat-rolled steel shipments in 2017 were 5,596,200 tons, a 6% decrease from 2016 flat-rolled steel shipments of 5,936,400 tons. The decrease in flat-rolled steel shipments was principally driven by a 10% decline in shipments to the automotive market compared to 2016, primarily as a result of reduced North American light vehicle production. Shipments of flat-rolled steel by product category for 2017 and 2016 as a percent of total flat-rolled steel shipments, were as follows:

Shipments by Product Category

Net Sales

The following table presents information on net sales:

	2017			2016			Increase
Net sales	$	6,080.5		$	5,882.5		3	%
Average net selling price per ton	1,022			955			7	%
Net sales outside the United States	627.1			655.6
Net sales outside the United States as a percent of net sales	10		%	11		%

The increases in net sales and average net selling price per ton reflect our strategy of producing and selling higher-value carbon, stainless and electrical steels, higher prices on both automotive and spot market sales, and higher surcharges on specialty steel products. Revenues for 2017 also included net sales of Precision Partners following the August 4, 2017 acquisition. The decrease in net sales to customers outside the United States was primarily due to lower international sales of carbon and electrical steel.

The following table presents the percentage of net sales to each of our markets:

Market	2017		2016
Automotive	65	%	66	%
Infrastructure and Manufacturing	16	%	16	%
Distributors and Converters	19	%	18	%

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Cost of Products Sold

Cost of products sold in 2017 was $5,253.1, or 86.4% of net sales, and increased from 2016 cost of products sold of $5,099.7, or 86.7% of net sales, largely due to higher costs for raw materials, primarily scrap, chrome and other alloys. Cost of products sold included planned maintenance outage costs of $84.9 in 2017, compared to $62.1 in 2016. The higher planned maintenance outage costs in 2017 were primarily a result of larger planned maintenance projects at our Middletown Works blast furnace and steelmaking shops and our Mansfield Works melt shop.

Beginning in the third quarter of 2016, our iron ore derivatives no longer qualified for hedge accounting treatment. Therefore, we recorded adjustments to mark these derivatives to fair value each period and recognized the resulting unrealized gains or losses immediately in cost of products sold, versus recognizing them in the period that iron ore purchases affect earnings. In 2017, we recognized $31.6 of unrealized gains since the market price of iron ore and the fair value of the derivative contracts increased. Cost of products sold for the fourth quarter of 2016 included $33.8 of unrealized gains on iron ore derivatives contracts that were scheduled to settle in 2017 and 2018. As a result, cost of products sold for 2017 did not reflect $36.0 of realized gains from the contracts that settled during the year, but that were recognized in prior periods.

Selling and Administrative Expense

Selling and administrative expense increased to $284.9 in 2017 from $279.1 in 2016. The increase included acquisition costs of $6.2 in 2017 related to the Precision Partners acquisition and on-going expenses after its acquisition, partially offset by lower costs for employee incentive compensation in 2017 than in 2016.

Depreciation Expense

Depreciation expense increased slightly to $226.0 in 2017 from $216.6 in 2016. We recognized $5.8 of depreciation expense for Precision Partners’ property, plant, and equipment since the August 4, 2017 acquisition.

Charges (Credit) for Termination of Pellet Agreement and Related Transportation Costs

In the fourth quarter of 2016, the United States Bankruptcy Court for the District of Minnesota approved a settlement agreement with certain third parties to terminate our long-term iron ore pellet offtake agreement with Magnetation LLC and to wind down Magnetation’s business. In connection with that approval, we recognized charges of $69.5 in the fourth quarter of 2016 that covered both a $36.6 payment we made to the bankruptcy estate in the quarter and additional charges of $32.9 for remaining obligations under contracts with other third parties to transport pellets to our facilities. In the fourth quarter of 2017, we reached an agreement for transportation services that provides a timeframe to begin using the rail cars that were idled after the termination of the pellet supply agreement. As a result, we recorded a credit of $19.3 to reduce the unpaid liability during the fourth quarter of 2017. See Note 4 to the consolidated financial statements for further information.

Asset Impairment Charge

Operating Profit

Operating profit for 2017 of $260.2 was higher than 2016 operating profit of $217.6. The 2017 operating profit included the credit of $19.3 to reduce the transportation liability related to our terminated iron ore pellet offtake agreement and a non-cash asset impairment charge of $75.6, primarily for the Ashland Works Hot End fixed assets. The 2016 operating profit included charges for the termination of the Magnetation pellet offtake agreement and related transportation costs of $69.5. Also included was operating profit from SunCoke Middletown of $61.7 and $66.0 for 2017 and 2016.

Interest Expense

Interest expense for 2017 decreased to $152.3 from $163.9 in 2016. The decrease from 2016 primarily reflected our successful actions to reduce our principal amount of senior unsecured notes and to refinance debt with lower interest rates in 2017.

Pension and OPEB Expense (Income)

Pension and OPEB income was $71.9 in 2017, compared to expense of $16.5 in 2016. The change in income was principally a result of lower amortization of unrealized actuarial losses in 2017, as well as a net corridor charge and a pension settlement charge in 2016.

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InFor ~~2017, we incurred no pension or OPEB corridor adjustments. In 2016, we incurred~~ a ~~pension~~comparison ~~corridor charge~~ of ~~$78.4~~the ~~and~~year anended ~~OPEB~~December ~~corridor~~31, ~~credit~~2018 ofto ~~$35.3. Although~~ the ~~corridor~~year ~~adjustments~~ended ~~reduce~~December ~~reported operating and net income~~31, ~~they do not affect our cash flows in the current period. However~~2017, werefer ~~expect~~ to ~~ultimately~~2018 ~~settle~~Compared ~~the~~to ~~pension~~2017, ~~and~~which ~~OPEB~~is ~~obligations~~incorporated inherein ~~cash.~~by ~~See~~reference, ~~Critical~~of ~~Accounting~~Management’s ~~Estimates~~Discussion ~~for information on our policy for measurement~~ and ~~recognition~~Analysis of ~~corridor~~Financial ~~adjustments.~~Condition Weand ~~also~~Results ~~recorded settlement losses~~ of ~~$25.0~~Operations in ~~2016~~Item as7 aof ~~result~~our ofAnnual ~~the~~Report ~~purchase~~on ofForm ~~non~~10-~~participating~~K ~~annuity contracts~~ for ~~certain~~the ~~retirees~~year ~~and~~ended ~~lump~~December ~~sum~~31, ~~payouts to new retirees~~2018.

Other (Income) Expense

Other (income) expense was expense of $17.1 and $4.9 for 2017 and 2016, primarily as a result of expenses of $21.5 and $9.4 that we incurred in connection with the refinancing of debt in 2017 and 2016. See Note 6 to the consolidated financial statements for further information on long-term debt financing.

Income Tax Expense (Benefit)

The Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017, reduced corporate income tax rates and the corresponding value of our deferred tax liabilities. As a result, the company’s income tax expense for the fourth quarter of 2017 includes a $4.3 non-cash credit related to this change. We do not expect to incur cash tax liabilities in the near term, including any transition tax on undistributed earnings of our foreign subsidiaries, associated with the U.S. tax legislation due to the availability of existing net operating loss carryforwards.

Other than the effects of the new tax law, our income tax provision is primarily related to the allocation of income tax expense to other comprehensive income. The 2016 results included non-cash income tax benefits of $15.5 from allocating income tax expense to other comprehensive income. As a result, we recorded an income tax benefit of $2.2 in 2017, compared to an income tax benefit of $16.9 in 2016.

Net Income (Loss) and Adjusted Net Income (Loss) Attributable to AK Steel Holding Corporation

Net income attributable to AK Holding in 2017 was $103.5, or $0.32 per diluted share. The net income in 2017 included a credit of $19.3, or $0.06 per diluted share, to adjust the transportation liability associated with a terminated pellet offtake agreement and an asset impairment charge of $75.6, or $0.24 per diluted share. Excluding the above items, we reported adjusted net income of $159.8, or $0.50 per diluted share, for 2017.

Net loss attributable to AK Holding in 2016 was $16.8, or $0.07 per diluted share. The net loss in 2016 included a pension corridor charge of $78.4, an OPEB corridor credit of $35.3, and pension settlement charges of $25.0, netting to $68.1, or $0.30 per diluted share. Additionally, the net loss in 2016 included charges to terminate a pellet offtake agreement and related transportation costs of $69.5, or $0.06 per diluted share. Excluding these charges, our adjusted net income was $120.8, or $0.53 per diluted share, for 2016.

Adjusted EBITDA

Adjusted EBITDA was $528.5, or 8.7% of net sales, for 2017, and $472.8, or 8.0% of net sales, for 2016.

Non-GAAP Financial Measures

In certain of our disclosures, we have reported adjusted EBITDA, adjusted EBITDA margin and adjusted net income ~~(loss)~~ attributable to AK Holding that exclude the effects of noncontrolling interests, ~~pension~~costs ~~and~~associated ~~OPEB~~with ~~net corridor and settlement charges, charges (credit) for~~ the ~~termination~~closure of anAshland ~~iron~~Works, ~~ore~~pension ~~pellet~~settlement ~~offtake~~charges ~~agreement~~ and ~~related~~a ~~transportation~~credit ~~costs, impairment charges~~ for ~~our~~adjustment ~~investments~~to ina ~~Magnetation~~liability ~~and AFSG, charges~~ for ~~temporarily~~transportation ~~idling facilities and an asset impairment charge~~costs. We believe that reporting adjusted net income ~~(loss)~~ attributable to AK Holding (as a total and on a per share basis) with these items excluded more clearly reflects our current operating results and provides investors with a better understanding of our overall financial performance. Adjustments to net income ~~(loss)~~ attributable to AK Holding do not result in an income tax effect as any gross income tax effects are offset by a corresponding change in the deferred income tax valuation allowance.

EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. It is a metric that is sometimes used to compare the results of different companies by removing the effects of different factors that might otherwise make comparisons inaccurate or inappropriate. For purposes of this report, we have made the adjustments to EBITDA noted in the preceding paragraph. The adjusted results, although not financial measures under generally accepted accounting principles in the United States (“GAAP”) and not identically applied by other companies, facilitate the ability to analyze our financial results in relation to those of our competitors and to our prior financial performance by excluding items that otherwise would distort the comparison. Adjusted EBITDA, adjusted EBITDA margin and adjusted net income ~~(loss)~~ are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with GAAP and are not necessarily comparable to similarly titled measures used by other companies.

-Neither ~~26-~~current stockholders nor potential investors in our securities should rely on adjusted EBITDA, adjusted EBITDA margin or adjusted net income as a substitute for any GAAP financial measure and we encourage investors and potential investors to review the following reconciliations of adjusted EBITDA and adjusted net income.

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results or cash flow from operations as determined in accordance with GAAP and are not necessarily comparable to similarly titled measures used by other companies.

We recognize in our results of operations, as a corridor adjustment, any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets. Amounts inside this 10% corridor are amortized over the plan participants’ life expectancy. The need for a corridor charge is considered at any remeasurement date, but has generally only been recorded in the fourth quarter at the time of the annual remeasurement. After excluding the corridor charge, the remaining pension and OPEB expenses included in the non-GAAP measure are comparable to the accounting for pension and OPEB expenses on a GAAP basis in the first three quarters of the year and we believe this is useful to investors in analyzing our results on a quarter-to-quarter basis, as well as analyzing our results on a year-to-year basis. As a result of the corridor method of accounting, our subsequent financial results on both a GAAP and a non-GAAP basis do not contain any amortization of prior period actuarial gains or losses that exceeded the corridor threshold because those amounts were immediately recognized as a corridor adjustment in the period incurred. Actuarial net gains and losses occur when actual experience differs from any of the many assumptions used to value the benefit plans, or when the assumptions change, as they may each year when we perform a valuation. The two most significant of those assumptions are the discount rate we use to value projected plan obligations and the rate of return on plan assets. In addition, changes in other actuarial assumptions and the degree by which the unrealized gains or losses are within the corridor threshold before remeasurement will affect the corridor adjustment calculation. The effect of prevailing interest rates on the discount rate as of a measurement date and actual return on plan assets compared to the expected return will have a significant impact on our liability, corridor adjustment and following year’s expense for these benefit plans. For example, actuarial assumptions we made to remeasure the funded status of our pension and OPEB obligations in the fourth quarter of 2016 affected actuarial losses and the related pension/OPEB net corridor charge. The net corridor charge reflected (i) a decrease in the discount rate assumption used to determine pension liabilities from 4.15% at December 31, 2015 to 3.35% at the October 2016 remeasurement (an actuarial loss of approximately $221.1), partially offset by (ii) gains from changes in pension and OPEB mortality assumptions, lower claims costs and other demographic factors (netting to a gain of approximately $76.4) and (iii) the net effect of the difference between the expected annualized return on assets of 7.25% ($129.4) and the actual annualized return on assets of 12.7% as of the October 2016 remeasurement ($228.8) (netting to a gain of $99.4). We believe that the corridor method of accounting for pension and OPEB obligations is rarely used by other publicly traded companies. However, because other companies use different approaches to recognize actuarial gains and losses, our resulting pension and OPEB expense on a GAAP basis or a non-GAAP basis may not be comparable to other companies’ pension and OPEB expense on a GAAP basis. Although the net corridor charge reduces reported operating and net income, it does not affect our cash flows in the current period. However, we expect to ultimately settle the pension and OPEB obligations in cash.

Neither current shareholders nor potential investors in our securities should rely on adjusted EBITDA, adjusted EBITDA margin or adjusted net income (loss) as a substitute for any GAAP financial measure and we encourage investors and potential investors to review the following reconciliations of adjusted EBITDA and adjusted net income (loss).

Reconciliation of Adjusted EBITDA

	2018			2017			2016
	2019			2018			2017
Net income (loss) attributable to AK Holding	$	186.0		$	103.5		$	(16.8	)
Net income attributable to AK Holding	$	11.2		$	186.0		$	103.5
Net income attributable to noncontrolling interests	5851.18			6158.41			6661.04
Income tax expense (benefit)	(6.2		)	(26.2		)	(162.92		)
Interest expense, net	~~150~~145.7			150.97			~~162~~150.39
Depreciation and amortization	~~237~~209.08			~~236~~237.30			~~221~~236.43
EBITDA	~~625~~424.67			~~549~~625.96			~~416~~549.09
Less: EBITDA of noncontrolling interests (a)	7674.74			7776.7			8077.87
Pension and OPEB net corridor and settlement charges	14.5			—			68.1
Ashland Works closure	69.3			—			—
Charges (credit) for termination of pellet agreement and related transportation costs	—			(19.3		)	69.5
Pension settlement charges	26.9			14.5			—
Asset impairment charge	—			75.6			—
Credit for adjustment of liability for transportation costs	—			—			(19.3		)
Adjusted EBITDA	$	563.4		$	528.5		$	472.8
Asset impairment charge	—			—			75.6
Adjusted EBITDA margin	8.3		%	8.7		%	8.0		%
Adjusted EBITDA	$	446.5		$	563.4		$	528.5
Adjusted EBITDA margin	7.0		%	8.3		%	8.7		%

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(a)	The reconciliation of net income attributable to noncontrolling interests to EBITDA of noncontrolling interests is as follows:

	2018		2017		2016
	2019		2018		2017
Net income attributable to noncontrolling interests	$	5851.18	$	6158.41	$	6661.04
Depreciation	1822.6		1618.36		1416.83
EBITDA of noncontrolling interests	$	7674.74	$	7776.7	$	8077.87

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Reconciliation of Adjusted Net Income

	2018		2017			2016
	2019		2018			2017
Reconciliation to Net Income (Loss) Attributable to AK Holding
Reconciliation to Net Income Attributable to AK Holding
Net income (loss) attributable to AK Holding, as reported	$	186.0	$	103.5		$	(16.8	)
Net income attributable to AK Holding, as reported	$	11.2	$	186.0		$	103.5
Pension and OPEB net corridor and settlement charges	14.5		—			68.1
Ashland Works closure	69.3		—			—
Charges (credit) for termination of pellet agreement and related transportation costs	—		(19.3		)	69.5
Pension settlement charges	26.9		14.5			—
Asset impairment charge	—		75.6			—
Credit for adjustment of liability for transportation costs	—		—			(19.3		)
Adjusted net income attributable to AK Holding	$	200.5	$	159.8		$	120.8
Asset impairment charge	—		—			75.6
Reconciliation to Diluted Earnings (Loss) per Share
Adjusted net income attributable to AK Holding	$	107.4	$	200.5		$	159.8
Diluted earnings (loss) per share, as reported	$	0.59	$	0.32		$	(0.07	)
Reconciliation to Diluted Earnings per Share
Pension and OPEB net corridor and settlement charges	0.05		—			0.30
Diluted earnings per share, as reported	$	0.04	$	0.59		$	0.32
Charges (credit) for termination of pellet agreement and related transportation costs	—		(0.06		)	0.30
Ashland Works closure	0.22		—			—
Asset impairment charge	—		0.24			—
Pension settlement charges	0.08		0.05			—
Adjusted diluted earnings per share	$	0.64	$	0.50		$	0.53
Credit for adjustment of liability for transportation costs	—		—			(0.06		)
Asset impairment charge	—		—			0.24
Adjusted diluted earnings per share	$	0.34	$	0.64		$	0.50

Liquidity and Capital Resources

We have a revolving credit facility (the “Credit Facility”) that expires in September 2022 with a $1,500.0 commitment. At December 31, ~~2018~~2019, we had total liquidity of $~~988~~835.84, consisting of $4730.08 of cash and cash equivalents and $~~941~~804.86 of availability under the Credit Facility. Our obligations under the Credit Facility are secured by inventory and accounts receivable. Availability under the Credit Facility fluctuates monthly based on our varying levels of eligible collateral. Our eligible collateral was ~~in excess of~~ $1,~~350~~327.01 at December 31, ~~2018~~2019, after application of applicable advance rates. At December 31, ~~2018~~2019, we had $~~335~~450.0 of outstanding borrowings under the Credit Facility, and $7372.25 of outstanding letters of credit that further reduced availability. During the year ended December 31, ~~2018~~2019, our borrowings from the Credit Facility ranged from $~~315~~285.0 to $~~570~~475.0, with outstanding borrowings averaging $~~429~~356.0 per day.

We believe that our current sources of liquidity will be adequate to meet our obligations for the foreseeable future. We expect to fund future liquidity requirements for items such as capital investments, employee and retiree benefit obligations, scheduled debt maturities and debt redemptions with internally generated cash and other financing sources. As part of our efforts to improve our capital structure, we regularly evaluate accessing the capital markets as a source of liquidity if we view conditions as favorable. ~~Consolidated cash and cash equivalents of $48.6 at December 31, 2018, includes $1.6 of cash and cash equivalents of consolidated variable interest entities, which are not available for our use.~~ We may use the Credit Facility as necessary to fund requirements for working capital, capital investments and other general corporate purposes. We are focused on reducing debt through free cash flow generation. In 2019, our only scheduled debt maturity is our $148.5 of 5.0% Exchangeable Senior Notes (the “Exchangeable Notes”) due November 2019. We intend to refinance the Exchangeable Notes prior to maturity or use availability under our Credit facility to repay them. We believe that we would continue to have sufficient liquidity if we were to borrow under the Credit Facility to retire the Exchangeable Notes. Our Credit Facility is scheduled to expire in September 2022 and any amounts outstanding under it at the time of expiration would need to be repaid or refinanced.

From time to time, we may repurchase, as we have done previously, outstanding notes in the open market on an unsolicited basis, by tender offer, through privately negotiated transactions or otherwise. Our forward-looking statements on liquidity are based on currently available information and expectations and, if the information or expectations are inaccurate or conditions deteriorate, there could be a material adverse effect on our liquidity.

We have significant debt maturities and other obligations that will be due in future periods, including possible required cash contributions to our qualified pension plan. For further information, see the Contractual Obligations section.

-Cash ~~28-~~from operating activities totaled $265.9 for 2019, which includes $68.6 that was generated by and can only be used by SunCoke Middletown for its operations or for distribution to its equity owners. Cash generated from a $60.2 decrease in accounts receivable, a $73.7 decrease in inventory and a $75.0 decrease in other assets was partially offset by cash used for a $172.8 decrease in accounts payable and other current liabilities. During the year, we made required annual pension contributions of $43.5 and payments for other pension and OPEB benefits of $27.7. The remaining cash from operations was generated from normal business activities for the year.

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Cash from operating activities totaled $364.7 for 2018, which includes $76.6 that was generated by and can only be used by SunCoke Middletown for its operations or for distribution to its equity owners. Cash generated from a $119.6 increase in accounts payable was partially offset by a $125.0 increase in accounts receivable. During the year, we made required annual pension contributions of $49.9 and payments for other pension and OPEB benefits of $36.6. The remaining cash from operations was generated from normal business activities for the year.

Investing and Financing Activities

During ~~2018~~2019, net cash used for investing activities totaled $~~151~~188.92, primarily for capital investments, including $14.0 of capital investments made by SunCoke Middletown. Cash used for capital investments, excluding SunCoke Middletown, totaled $180.8 in 2019. Our increase in 2019 from 2018 was primarily due to significant capital investments to strengthen the company for the long-run,

~~Net~~- cash from financing activities in 2018 was $202.2, primarily from payments on the Credit Facility. During 2018, we also repurchased aggregate principal amount of $15.0 of our senior unsecured notes at a discount, resulting in gains of $2.0. The total cash used for financing activities also includes $73.7 of payments from SunCoke Middletown to SunCoke.27-

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including a major planned outage that will lower our steelmaking costs at Dearborn Works and the construction of a new Precision Partners facility to grow our market position and capabilities in automotive stamping and complex assembly.

Net cash used for financing activities in 2019 was $95.3, primarily for payments to retire the aggregate principal amount of $148.5 of our Exchangeable Notes, partly offset by from borrowings on the Credit Facility. The total cash used for financing activities also includes $55.6 of payments from SunCoke Middletown to SunCoke.

Restrictions Under Debt Agreements

The indentures governing our senior indebtedness and tax-exempt fixed-rate industrial revenue bonds (“IRBs”) (collectively, the “Notes”) and Credit Facility contain restrictions and covenants that may limit our operating flexibility. The Credit Facility contains customary restrictions, including limitations on, among other things, distributions and dividends, acquisitions and investments, dispositions, indebtedness, liens and affiliate transactions. Availability is calculated as the lesser of the total commitments under the Credit Facility or eligible collateral after advance rates, less outstanding revolver borrowings and letters of credit. The Credit Facility requires us to maintain a minimum fixed charge coverage ratio of one to one if availability under the Credit Facility is less than $~~135~~150.0. We are in compliance with restrictions and covenants under our Credit Facility and Notes and, in the absence of any significant and sustained material adverse events, expect that we will remain in compliance for the foreseeable future.

The indentures governing the Notes ~~(other than the Exchangeable Notes)~~ include customary restrictions on (a) the incurrence of additional debt by certain of our subsidiaries, (b) the incurrence of certain liens, (c) the amount of sale/leaseback transactions, and (d) our ability to merge or consolidate with other entities or to sell, lease or transfer all or substantially all of our assets to another entity. ~~They~~The Notes also contain customary events of default. In addition, the indenture governing the 7.50% Senior Secured Notes due July 2023 includes covenants with customary restrictions on the use of proceeds from the sale of collateral. The indenture governing the Exchangeable Notes does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us.

We do not expect any of these restrictions to affect or limit our ability to conduct our business in the ordinary course. During ~~2018~~2019, we were in compliance with all the terms and conditions of our debt agreements.

Capital Investments

Cash used for capital investments in 2018 totaled $152.0. For 2019, we expect to make capital investments of $170.0 to $190.0, including about $25.0 to $30.0 of growth-related investments for our downstream businesses. These amounts could be adjusted based on changes in market conditions or operational needs. In the near-term, we expect to fund these investments from cash generated from operations or from borrowings under our Credit Facility.

Employee Benefit Obligations

In ~~addition~~recent toyears, ~~actions~~we have taken inmultiple ~~prior~~steps ~~years~~in toreducing ~~reduce~~and ~~the~~de-risking ~~growth~~our ofpension ~~employee benefit~~ obligations, weincluding ~~continue~~freezing toall ~~actively~~benefits ~~seek~~under ~~options~~our tomajor ~~de-risk~~pension plan, closing our pension plans to new participants, and ~~OPEB~~providing ~~obligations.~~lump ~~Actions~~sum ~~taken~~distributions into ~~prior~~eligible ~~years~~participants. ~~include~~During ~~closing~~2019, ~~our~~we ~~major~~transferred $615.6 of pension ~~plan~~obligations to ~~new~~an ~~participants~~insurance company for approximately 4,250 ~~freezing~~retirees ~~all~~or ~~benefits~~their ~~under~~beneficiaries. ~~the~~Since ~~plan~~mid-2016, ~~and~~we ~~transferring~~have transferred a ~~portion~~total of $1.1 billion in pension trust assets to purchase four non-participating annuity contracts that require highly-rated insurance companies to pay the transferred pension obligations to approximately 20,000 pension participants. These actions greatly reduce our exposure to financial market volatility and ~~related~~the ~~assets~~risk of significant increases in future required pension contributions as a result of this volatility. We intend to anactively ~~insurance~~seek ~~company~~options to further de-risk our pension and OPEB obligations.

~~Pension~~Our pension and OPEB obligations recorded on our consolidated balance sheets declined by ~~approximately~~ $65109.78 in ~~2018~~2019, primarily due to contributing $4943.95 to the pension trust and ~~making~~achieving ~~benefit~~favorable ~~payments~~investment ~~during~~returns ~~the~~from ~~year~~pension plan assets. We will be required to make contributions to our plan’s pension trust of varying amounts until it is fully funded, and some of these contributions could be substantial. We are required to make approximately $45.0 of pension contributions in ~~2019~~2020. Based on current actuarial assumptions, we expect to make required annual pension contributions of approximately $5045.0 for ~~2020~~2021 and $5035.0 for ~~2021~~2022. The amount and timing of future required contributions to the pension trust depend on assumptions about future events. The most significant of these assumptions are the future investment performance of the pension funds, actuarial data about plan participants and the interest rate we use to discount benefits to their present value. In addition, the amount and timing of future contributions may be affected by future activities we may take to reduce and de-risk our pension obligations. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation or increased pension insurance premiums, the reliability of estimated future pension contributions decreases as the length of time until we must make the contribution increases. Effective January 1, 2020, we changed our assumption for future expected returns on plan assets to 7.50% from 6.75% in response to a change in asset allocation.

-We ~~29-~~provide healthcare benefits to a significant portion of our employees and retirees. OPEB benefits have been either eliminated for new employees or are subject to caps on the share of benefits we pay. Based on the assumptions used to value other postretirement benefits, primarily retiree healthcare and life insurance benefits, annual cash payments for these benefits are expected to be in a range that trends down from $35.6 in 2020 to $7.6 over the next 30 years.

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we must make the contribution increases. We changed our assumption for future expected returns on plan assets to 6.75% from 7.00%, effective January 1, 2019. This change will reduce our pension income in 2019 from 2018 by approximately $4.0.

We provide healthcare benefits to a significant portion of our employees and retirees. OPEB benefits have been either eliminated for new employees or are subject to caps on the share of benefits we pay. Based on the assumptions used to value other postretirement benefits, primarily retiree healthcare and life insurance benefits, annual cash payments for these benefits are expected to be in a range that trends down from $37.5 in 2019 to $8.8 over the next 30 years.

In recent years, we have made multiple advances in reducing and de-risking our pension obligations. During 2018, we transferred $278.8 of pension obligations to an insurance company for approximately 5,400 retirees or their beneficiaries. Since mid-2016, we have transferred a total of $494.0 in pension trust assets to purchase three non-participating annuity contracts that require the insurance companies to pay the transferred pension obligations to over 15,400 pension participants.

Ashland Works Closure

In January 2019, ~~we announced that we intend to permanently close~~ our ~~largely~~Board ~~idled~~of ~~Ashland~~Directors ~~Works,~~approved ~~subject~~and towe ~~negotiations~~announced ~~with~~ the ~~labor~~planned ~~union~~closure ~~at that facility. More than three years ago, we idled most~~ of ~~the~~our Ashland Works ~~operations~~, including the ~~blast~~previously ~~furnace,~~idled ~~but~~Ashland ~~continued~~Works toHot ~~operate~~End aand ~~single~~the hot dip galvanizing coating line ~~with~~that ~~approximately~~continued ~~230~~to ~~employees~~operate. WeFactors ~~plan~~that toinfluenced ~~increase~~ our ~~operating~~decision ~~efficiency~~to ~~and~~close ~~lower~~Ashland ~~our~~Works ~~costs~~included byan ~~completing~~uncertain ~~the~~global ~~shutdown~~trade oflandscape ~~the~~influenced ~~blast~~by ~~furnace~~shifting domestic and ~~steelmaking~~international ~~operations~~political ~~within the next several months~~priorities, ~~and~~Ashland byWorks’ ~~working~~high ~~with~~cost ~~our~~of ~~customers~~production, toand ~~transition,~~continued ~~before~~intense ~~the~~competition ~~end~~from ofdomestic ~~this~~and ~~year,~~foreign ~~products~~steel ~~coated~~competitors. atThese ~~Ashland~~conditions ~~Works~~directly toimpacted our ~~other~~pricing, ~~operations~~which in ~~the~~turn ~~United~~directly ~~States~~impacted ~~that~~our ~~have~~assessment ~~available~~of ~~capacity.~~the ~~This~~demand ~~will~~forecasts ~~increase~~for ~~those~~the ~~operations’~~markets ~~utilization~~we ~~rates~~serve. ~~Production~~Despite ~~volumes~~several ~~and~~favorable ~~customer~~trade ~~shipments~~actions, ~~are~~carbon ~~not~~steel ~~expected~~imports toremained beat ~~impacted~~a byhigh ~~the~~level, ~~closure.~~driven ~~Once~~by ~~fully~~global ~~implemented~~overcapacity, ~~these~~particularly ~~actions are projected to result~~ in ~~annual savings of over $40~~China.0, ~~primarily~~We ~~from~~expected ~~switching~~global ~~production~~overcapacity to ~~lower-cost~~be ~~operations,~~exacerbated ~~reducing~~by ~~the~~several ~~costs~~domestic ~~for~~steel ~~on-going~~companies ~~maintenance,~~that ~~utilities~~had ~~and~~restarted ~~supplier~~or ~~obligations~~planned atnew ~~Ashland~~capacity ~~Works,~~additions ~~and~~in ~~lowering~~the ~~costs~~United ~~for~~States. ~~transportation~~In byaddition, ~~being~~we ~~able~~concluded tothat ~~process~~we ~~steel~~had ~~closer~~sufficient tocoating ~~the~~capacity ~~end~~to ~~customer~~meet ~~and~~our ~~eliminate~~customers’ ~~additional~~needs ~~product~~without ~~movement~~using ~~between~~ our ~~facilities.~~coating ~~These~~operations ~~savings,~~at ~~combined~~Ashland ~~with~~Works. ~~the~~We ~~positive~~have ~~impact~~transitioned ofproducts ~~the Administration’s policies~~ to ~~address~~our ~~unfair trade practices~~other, ~~will~~lower ~~help~~cost ~~facilitate our longer-term growth plans~~U.S. Itcoating ~~will~~lines ~~also help maintain~~ and ~~enhance~~closed ~~our~~the ~~more~~Ashland ~~cost-effective~~Works ~~steelmaking~~coating ~~facilities~~line ~~and~~in ~~further~~November ~~drive growth and innovation~~2019.

~~Factors~~By ~~that~~transitioning ~~influenced~~production to our ~~decision~~other, tolower ~~close~~cost ~~Ashland~~operations ~~Works~~in ~~included~~the anUnited ~~uncertain~~States ~~global~~that ~~trade~~have ~~landscape~~available ~~influenced~~capacity, bywe ~~shifting~~have ~~domestic~~increased ~~and~~those ~~international~~operations’ ~~political~~utilization ~~priorities~~rates. Once fully implemented, ~~Ashland~~these ~~Works’~~actions ~~high~~are ~~cost~~projected to result in annual savings of over $40.0, primarily from switching production ~~and~~to ~~continued~~lower-cost ~~intense~~operations, ~~competition~~reducing ~~from~~the ~~domestic~~costs ~~and~~for ~~foreign~~ongoing ~~steel~~maintenance, ~~competitors.~~utilities ~~These~~and ~~conditions~~supplier ~~directly~~obligations ~~impact~~at ~~our~~Ashland ~~pricing~~Works, ~~which~~and inlowering ~~turn~~transportation ~~directly~~costs ~~impacts~~by ~~our~~being ~~assessment~~able ofto ~~the~~process ~~demand~~steel ~~forecasts~~closer ~~for~~to the ~~markets~~end wecustomer ~~serve.~~and ~~Despite~~eliminate ~~several~~additional ~~successful~~product ~~trade~~movement ~~actions~~between our facilities. These savings, wewhich ~~continue~~began toin ~~see~~2019, aand ~~high~~the ~~level~~positive impact of ~~carbon~~the ~~steel~~Administration’s ~~imports~~policies ~~driven~~to byaddress ~~global~~unfair ~~overcapacity,~~trade ~~particularly~~practices inwill ~~China.~~help Wefacilitate ~~also~~our ~~have~~longer-term ~~seen~~growth ~~significant~~plans ~~capacity~~by ~~restarted~~helping orus ~~new~~maintain ~~capacity~~and ~~additions~~enhance ~~announced~~our inmore ~~the~~cost-effective ~~United~~steelmaking ~~States~~facilities and further driving growth and innovation.

WeFor ~~expect~~the toyear ~~record~~ended aDecember ~~charge~~31, of2019, ~~approximately~~we ~~$80.0~~have ~~during~~recorded ~~the~~a ~~first~~charge ~~quarter~~ of ~~2019~~$69.3, which ~~includes~~included ~~approximately~~ $2018.05 for termination of ~~certain~~ take-or-pay supply agreements, ~~approximately~~ $3020.01 for supplemental unemployment and other employee benefit costs, pension and OPEB termination benefits of $13.3 (recorded in pension and OPEB (income) expense), an estimated multiemployer plan withdrawal liability of $2510.0 ~~and~~(after ~~approximately~~a fourth quarter 2019 credit of $58.0 ~~for~~to ~~other~~adjust ~~costs.~~the ~~The~~estimate), ~~supplemental~~and ~~unemployment~~$7.4 ~~and~~for other ~~employee benefit~~ costs. ~~are~~We ~~expected~~made tocash bepayments ~~paid~~of ~~primarily~~$8.8 in ~~2020~~2019 ~~and~~related ~~2021. With respect~~ to the ~~$80.0~~2019 charge, weand expect to make cash payments of approximately $1525.0 in ~~2019, $30.0 in~~ 2020 and the remaining amount over several years thereafter. The supplemental unemployment and other employee benefit costs are expected to be paid primarily in 2020 and 2021. The actual multiemployer plan withdrawal liability will not be known until ~~2020~~a future date and is expected to be paid over a number of years. InOngoing ~~addition~~costs to maintain the ~~$80.0~~equipment ~~charge~~and ~~recorded~~utilities inand ~~the~~meet ~~first~~supplier ~~quarter~~obligations ofrelated ~~2019,~~to wethe ~~expect~~idled toAshland ~~record~~Works ~~expenses~~Hot ofEnd ~~approximately~~were $1412.~~0 during the full-year 2019~~6, ~~consisting of cash costs of approximately~~ $1020.0 ~~related to closing the facility~~ and $421.02 offor ~~accelerated~~the ~~depreciation~~years ~~related~~ended toDecember 31, ~~the~~2019, ~~coating~~2018 ~~line~~and ~~fixed assets~~2017. These cash costs related to closing the facility will decline in future years. ~~and~~We ~~the~~recorded ~~accelerated depreciation expense will only be incurred in 2019~~$4.0 ~~On-going costs for maintenance~~ of ~~the~~accelerated ~~equipment,~~depreciation ~~utilities and supplier obligations~~ related to the ~~idled~~coating ~~Ashland~~line ~~Works~~fixed ~~Hot~~assets ~~End were $20.4, $21.2, and $22.1~~ for the ~~years~~year ended December 31, ~~2018,~~2019 ~~2017~~to ~~and~~fully ~~2016~~depreciate them.

Off-Balance Sheet Arrangements

There were no material off-balance sheet arrangements as of December 31, ~~2018~~2019.

Selected Factors that Affect Our Operating Results

Automotive Market

We sell a significant portion of our carbon and stainless steel flat-rolled and tubular products directly to automotive manufacturers and their Tier 1 suppliers, as well as to distributors, service centers and converters who in some cases resell the products to the automotive industry. Because the automotive market is an important element of our business and growth strategy, North American light vehicle production has a significant impact on our total sales and shipments. In ~~2018~~2019, North American light vehicle production declined to approximately 16.3 million units from the prior year, due in part to the 40-day strike at GM that halted its vehicle production. As a result of these factors, our flat-rolled steel shipments to the automotive industry declined 6%. Substantially all of Precision Partners’ revenue is from the automotive market and new vehicle platforms in its hot-stamping and cold-stamping business drove a higher level of revenue in 2019 than in 2018.

In May 2019, GM and Ford each presented us with prestigious supplier awards. At the GM 27th Annual Supplier of the Year Awards, GM recognized its best suppliers that have consistently exceeded GM’s expectations, created outstanding value or introduced innovations to GM. AK Steel was awarded as a Supplier of the Year for Non-Fabricated 30Steel, the second consecutive year that we received the award. In addition, at Ford’s 21st Annual Ford World Excellence Awards, Ford recognized AK Steel as a top-performing global supplier and presented us with its Smart Brand Pillar award in recognition of demonstrated leadership in Ford’s primary brand pillars. Further, AK Tube was one of just three suppliers to receive a Supplier of the Year award from Kirchhoff Automotive in 2019.

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slightly to approximately 17.0 million units from the prior year. As a result, our flat-rolled steel shipments to the automotive industry declined 3%. Substantially all of Precision Partners’ revenue is from the automotive market and growth in its hot-stamping and cold-stamping business drove a higher level of revenue in 2018 than in 2017.

Carbon Steel Spot Market

Since 2016, we have intentionally and substantially reduced our sales and shipments to the commodity carbon steel spot market and implemented a strategy to focus our product mix on value-added steel products. Generally, sales into the carbon steel spot market are at prevailing market prices, which are highly volatile, and are subject to intense competition from both low-cost domestic producers and cheap, unfairly traded foreign imports. Fluctuations in spot market prices have a direct effect on our results and are driven by factors mostly outside our control. In addition, the spot market price fluctuations do not always directly correlate with our raw material and energy costs and, consequently, we have limited ability to pass through increases in costs to customers absent increases in the market price. We reduced shipments of our commodity carbon steels in 2019 compared to 2018, primarily due to declining carbon spot market prices.

Specialty ~~Electrical~~Stainless and ~~Stainless~~Electrical Steel Markets

We are a leading manufacturer of ~~GOES~~value-added ~~and~~stainless ~~other~~steel, ~~electrical~~primarily ~~steels,~~for ~~which~~the weautomotive ~~sell~~market. Stainless steel is typically priced with a fixed base price and surcharges to ~~customers~~reflect ~~primarily~~changes in ~~North~~the ~~America~~cost ~~and~~of ~~Europe~~certain raw materials. WeThus, ~~have~~while ~~experienced~~we aexpect ~~substantial~~changes ~~decline~~in revenues will generally offset changes in ~~shipments~~costs, tothere ~~international~~may ~~markets~~be ~~due~~a totiming ~~global~~lag ~~overcapacity~~from ~~and~~the ~~both~~change ~~direct~~in ~~and~~costs ~~indirect~~in ~~effects~~one ofperiod ~~European~~to ~~and~~the ~~Chinese~~change ~~trade~~in ~~actions~~revenue in a different period.

We are also a leading manufacturer of ~~value-added~~GOES ~~stainless~~and ~~steel~~other electrical steels, which we sell to customers primarily ~~for~~in ~~the~~North ~~automotive~~America ~~market~~and Europe. ~~Stainless~~We ~~steel~~have isexperienced ~~typically~~a ~~priced~~notable ~~with~~decline ain ~~fixed~~shipments ~~base~~to ~~price~~international ~~and~~markets ~~surcharges~~due to ~~reflect~~global ~~changes~~overcapacity inand ~~the~~both ~~cost~~direct ofand ~~certain~~indirect ~~raw~~effects ~~materials.~~of ~~Thus,~~European ~~while~~and weChinese ~~expect~~trade ~~revenues~~actions. ~~will~~Our ~~generally~~domestic ~~offset~~electrical ~~changes~~steel insales ~~costs,~~have ~~there~~also ~~may~~declined bedue ato ~~timing~~increased ~~lag~~imports ~~from~~of ~~the~~laminations ~~change~~(cut insheets ~~costs~~of insteel) ~~one~~and ~~period~~transformer tocores ~~the~~(which ~~change~~includes inboth ~~revenue~~stacked inand awound ~~different period~~laminations).

Trade Matters

Section 232 Investigation of Imported Foreign Steel

On April 19, 2017, the Commerce Department initiated an investigation pursuant to Section 232 of the Trade Expansion Act, as amended by the Trade Act of 1974 (“Section 232”), into whether imports of foreign steel into the U.S. ~~pose~~posed a threat to U.S. national security. On March 8, 2018, President Trump signed a proclamation pursuant to Section 232 imposing a 25 percent tariff on imported steel. Following the proclamation, the U.S. government announced various agreements for exemptions from the Section 232 steel tariff for certain countries, including Argentina, Australia, Brazil and South Korea. Some of these countries, such as South Korea and Brazil, have agreed to a quota system that limits their annual imports of steel into the U.S. In addition, although steel products from the European Union, Canada and Mexico were initially exempted from the tariff, on June 1, 2018, those exemptions expired and the Section 232 tariff was applied to steel imports from these countries as well. In retaliation against the Section 232 tariffs, the European Union, Mexico and Canada subsequently imposed their own tariffs against certain steel products and other goods imported from the U.S. The Mexican retaliatory tariffs went into effect on June 5, 2018, the European Union’s tariffs began to apply on June 22, 2018, and Canadian tariffs became effective on July 1, 2018.

In retaliation against the Section 232 tariffs, the European Union, Mexico and Canada subsequently imposed their own tariffs against certain steel products and other goods imported from the U.S. The Mexican retaliatory tariffs went into effect on June 5, 2018, the European Union’s tariffs began to apply on June 22, 2018, and Canadian tariffs became effective on July 1, 2018. We ship steel products into Canada, Mexico and the European Union and ~~are~~have been required to pay tariffs on certain of our shipments. WeOn ~~may~~May at17, ~~some~~2019, ~~point in~~ the ~~future~~United ~~recover~~States aannounced ~~portion~~an ofagreement ~~the~~with ~~tariffs~~Canada weand ~~have~~Mexico ~~paid~~ to ~~Canada~~remove ~~under~~ the ~~country’s~~Section ~~duty~~232 ~~drawback~~tariffs ~~rules.~~for ~~These~~steel ~~rules~~and ~~provide~~aluminum ~~for~~imports ~~the~~from ~~reimbursement~~those ~~for~~countries ~~tariffs~~and ~~paid~~for on the ~~portion~~removal of ~~products~~all ~~imported~~retaliatory ~~into~~tariffs ~~that~~imposed ~~country~~on ~~that~~American ~~are~~goods ~~exported~~by ~~from~~those ~~Canada~~countries. The asagreement ~~part~~provides offor aaggressive ~~final~~monitoring ~~product.~~and ~~Our~~a ~~understanding~~mechanism isto ~~that~~prevent ~~the~~surges ~~U.S.~~in ~~government~~imports ~~has~~of ~~been~~steel and ~~will~~aluminum. If ~~continue~~surges toin ~~negotiate~~imports ~~with~~of ~~the~~specific ~~European~~steel ~~Union~~products occur, ~~Mexico~~the ~~and~~United ~~Canada~~States ~~for~~may are-impose ~~resolution~~Section to232 ~~the~~tariffs ~~trade~~on ~~issues~~those ~~between~~products. Any ~~the~~retaliation ~~U.S.~~by Canada and ~~these~~Mexico, ~~countries.~~however, Wewould dothen ~~not~~be ~~know~~limited ~~how~~to ~~long~~steel ~~these~~products. ~~tariffs~~The ~~will~~Section ~~remain~~232 insteel ~~effect,~~and ifrelated ~~these~~retaliatory ~~trade~~tariffs ~~issues~~still ~~will~~remain bein ~~resolved,~~place orwith ~~whether~~ the ~~terms~~European ofUnion, ~~any~~and ~~such~~negotiations ~~resolutions~~between ~~will~~the beU.S. ~~beneficial~~and orEuropean ~~detrimental~~Union toare ~~our business~~ongoing. In addition to the ongoing country-by-country negotiations in which the U.S. government is engaged, the Commerce Department has also implemented a system for petitioning the U.S. government to exempt specific products (for instance, a certain grade of steel) from the tariff and a process for challenging these exemption requests. The possibility exists that, despite our objections, the Commerce Department may grant exemption requests for imported steel products that would have a significant adverse impact on our business.

The Section 232 steel ~~tariff~~tariffs ~~currently~~originally only ~~applies~~applied to certain steel products, including flat-rolled carbon, stainless and electrical steel products, but ~~it does~~ not ~~apply~~ to certain downstream goods that may contain these steels. On January 24, 2020, President Trump signed a proclamation expanding the scope of the duties to a limited number of steel and aluminum derivative products including nails, staples, electrical wires and body stampings for motor vehicles and tractors. Those countries that are currently exempt or subject to a quota are excluded from this action. Downstream electrical steel products were not included. As a result, some third parties or customers may attempt to substitute purchases of our flat-rolled steel with imports of downstream goods containing foreign steel product inputs that are not subject to the tariff or trade cases. These actions would circumvent the purpose and intent of the Section 232 steel tariffs. The effects of the limited scope of the steel tariff are particularly salient to our electrical steel business. Imports of downstream electrical goods not currently covered by the tariff include electrical transformer cores and core assemblies, electrical transformers, and even laminations, which are simply cut pieces of electrical steel. To avoid the Section 232 steel tariff, producers have increased their imports of foreign-made downstream electrical goods or moved some of their domestic production outside the United States, which adversely affects our electrical steel business. In the absence of a remedy against these actions to circumvent the Section 232

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laminations, which are simply cut pieces of electrical steel. To avoid the Section 232 steel tariff, producers have continued to increase their imports of foreign-made downstream electrical goods or moved some of their domestic production outside the United States, which adversely affects our electrical steel business. In the absence of a remedy against these actions to circumvent the Section 232 steel tariff on electrical steel, these actions are likely to increase over time, pressuring our electrical steel business. We continue to proactively work to mitigate or eliminate this potential avenue for avoiding and circumventing the steel tariff, including by communicating our concerns to the U.S. government and requesting appropriate action to address this issue. In the absence of decisive action by the U.S. government or a meaningful change in business or market conditions, we expect our electrical steel business to continue to face material downward pressure. We believe the United States’ electrical infrastructure is critical to national security and that additional actions are necessary and should be undertaken by the U.S. government to preserve its short- and long-term integrity.

Members of the U.S. Congress have introduced legislation to restrict the President’s power to implement tariffs on national security grounds. Some of the proposed legislation has included provisions that would require Congressional approval of the current Section 232 proclamations or they would terminate. If such legislation is passed by both the House of Representatives and Senate, President Trump would have the ability to veto it, which would then require a two-thirds majority vote in each of the branches of Congress to override the presidential veto. In addition, there are pending challenges to the President’s authority and actions under Section 232 in the U.S. court system and before international bodies.

United States-Mexico-Canada Trade Agreement (“USMCA”)

On ~~October~~December 110, ~~2018~~2019, ~~the~~representatives ~~Trump~~of ~~administration announced that~~ the U.S., ~~had~~Mexico ~~reached~~and ~~an agreement with~~ Canada ~~and~~signed ~~Mexico~~a onrevision to the USMCA, which iswas ~~being~~ proposed to replace the existing North American Free Trade Agreement (“NAFTA”) among those countries. Among other ~~things~~requirements, the USMCA, as proposed, includes revised “rules of origin” that encourage automobiles and other products manufactured in North America to contain ~~certain~~higher levels of North American-made content and that require aan ~~certain~~increased percentage of work on North American-made automobiles be performed by workers earning at least $16 per hour in order to be exempt from tariffs. The proposed terms of the USMCA also include provisions that incentivize the use of North American steel. Because all of our manufacturing facilities are located in North America and our principal market is automotive, we believe that the USMCA has the potential to positively impact our business by incentivizing automakers and other manufacturers to increase manufacturing production in North America and to use North American steel. For the proposed USMCA to take effect, ~~both~~legislative ~~houses~~bodies offor ~~Congress~~all the countries must approve ~~implementing~~and ~~legislation,~~ratify the agreement. The U.S. and itMexico ishave ~~not~~ratified ~~currently~~the ~~possible~~revised agreement. Canada still has to ~~predict~~ratify ~~when,~~it ifand ~~ever,~~that ~~this~~is ~~may~~expected to occur in 2020. At this time, the USMCA does not alter or affect the terms of Section 232 tariffs on imported steel or related retaliatory tariffs, which continue to remain in effect.

Research, Innovation and Operations

We continued to pursue our investments in research and innovation, particularly through increased collaboration between our downstream businesses and legacy steelmaking operations. Our intended plan to increase capacity utilization and operating efficiencies in our more cost-effective steelmaking facilities in 2019 will help generate the resources for us to continue our expanded investments in downstream businesses and research and innovation. As part of our underlying strategy to focus on higher-value materials and minimize exposure to commodity products, our investment in research and innovation during the past three years has been $29.4, $28.1 and $28.3 in 2018, 2017 and 2016. In addition, we acquired the Research and Innovation Center capital lease for $26.6 in October 2017.

Raw Materials

Iron ore is one of the principal raw materials required for our steel manufacturing operations. We purchased approximately 6.5.8 million tons of iron ore pellets in ~~2018~~2019 and expect to purchase approximately 6.45 million tons in ~~2019~~2020. We make most of our purchases of iron ore at negotiated prices under multi-year agreements. For ~~2019~~2020, we expect to purchase ~~most~~all of our iron ore from ~~one supplier~~Cliffs. The price we pay for iron ore is affected by a variety of factors under the terms of our contracts, including measures of general industrial inflation and steel prices and a variable-price mechanism that adjusts the annual average price we pay for iron ore based on reference to an iron ore index referred to as the IODEX. A change in one of more of the factors upon which our iron ore price is determined (whether that may be the IODEX, inflation, steel prices or other indices) typically affects to varying degrees the price we pay for iron ore. Accordingly, the actual impact on us from a change in these factors will vary depending on the percentage of the total iron ore we purchase and how much each factor is weighted for pricing under related contracts. In addition, the total net cost we pay for iron ore is affected by our hedging activities, which are described below. Thus, for example, although ~~the~~a ~~tragic~~significant ~~dam~~event ~~breach in January 2019 at Vale’s iron ore operation in Brumadinho, Brazil~~ could directly or indirectly result in an increase in the IODEX ~~in 2019~~, ~~we do not anticipate~~ a material impact on our iron ore costs inwould ~~2019~~be tempered because (i) the IODEX is only one component of our price for iron ore, (ii) our iron ore contracts contain a fixed pellet premium, and (iii) we ~~have~~hedge ~~hedged~~ a substantial portion of our ~~2019~~2020 IODEX exposure.

In addition to integrated risk strategies, we ~~use~~employ derivative financial instruments to manage iron ore price risk that we cannot mitigate through our customer contracts. WeAlthough we use derivative instruments to reduce our exposure if iron ore costs increase, ~~but~~ these instruments ~~can~~may also reduce potential benefits ifshould iron ore costs decline. We employ a systematic approach in our hedging strategy to mitigate iron ore exposure. We hedge a higher proportion of our near-term iron ore exposure and a lower proportion for our longer-term exposure through a combination of swaps and options. As of December 31, ~~2018~~2019, we have hedged the IODEX component for a portion of our iron ore purchases for ~~2019~~2020 and ~~2020~~2021 through the use of iron ore derivatives with notional amounts of 1,~~385~~215,000 tons and ~~740~~280,000 tons, which represents a substantial portion of our ~~2019~~2020 IODEX exposure. Our hedging activities further reduce our exposure to changes in the IODEX on the total cost we pay for iron ore. Our iron ore derivatives do not meet the accounting criteria for hedge accounting treatment. As a result, the changes in fair value for those derivatives are immediately recognized in earnings, instead of when we recognize the underlying cost of iron ore, thus potentially increasing the volatility of our results of operations. This volatility does not affect the ultimate gains or losses on the derivative contracts we will recognize in the financial statements, but only the timing of recognition.

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accounting treatment. As a result, the changes in fair value for those derivatives are immediately recognized in earnings, instead of when we recognize the underlying cost of iron ore, thus potentially increasing the volatility of our results of operations. This volatility does not affect the ultimate gains or losses on the derivative contracts we will recognize in the financial statements, but only the timing of recognition.

Precision Partners

On August 4, 2017, we acquired 100% of the equity of Precision Partners, which provides advanced-engineered solutions, tool design and build, hot- and cold-stamped steel components and complex assemblies for the automotive market. Founded in 1955, Precision Partners is headquartered in Ontario, Canada, and has more than 1,000 employees, including approximately 300 engineers and skilled tool makers, across ~~eight~~ten plants in Ontario, Alabama and Kentucky. Precision Partners specializes in manufacturing lightweight, complex components and assemblies, and it offers a broad portfolio of highly-engineered solutions. Among other benefits, we believe ~~this~~Precision ~~strategic acquisition~~Partners:


•	complements our core focus on product innovation, accelerating the development and introduction of existing and new AHSS and PHS to the high-growth automotive lightweighting space;


•	provides a fully integrated downstream platform that further strengthens our close collaboration with our automotive customers and their Tier 1 suppliers; and


•	leverages our expertise in metals forming with Precision Partners’ expertise in tool design and advanced product design-engineering capabilities in hot and cold stamping.

~~With our acquisition of~~ Precision Partners, wecomplements ~~added~~our reputation as a well-respected supplier to our core automotive portfolio. Importantly, we believe that ~~our addition of~~ Precision Partners has ~~begun~~accelerated ~~to accelerate~~ our efforts to drive adoption of our innovative steel products by automotive manufacturers and their Tier 1 suppliers. Our steelmaking experts and Precision Partners’ engineers have undertaken numerous collaboration projects aimed at achieving this goal. Precision Partners’ expertise in tool design and stamping capabilities has allowed us to deliver to customers fully formed prototypes of automotive components utilizing our innovative steel products. As such, we are now able to provide solutions through prototype automotive components. This approach has and will continue to demonstrate to customers that they can significantly lightweight automotive parts on an accelerated timeline by using our high-strength, highly formable grades of steel in place of traditional lower-strength grades or alternative materials. In addition, these collaborative projects are enhancing Precision Partners’ knowledge and experience in tool design and build, and stamping of new, advanced grades of steel, enabling it to provide expert solutions to automotive customers now and in the future.

Labor Agreements

At December 31, ~~2018~~2019, we employed approximately 9,~~500~~300 people, of which approximately 5,~~700~~600 are represented by labor unions under various contracts that expire between ~~2019~~2020 and ~~2021~~2023.

In ~~March~~April ~~2018~~2019, ~~members~~we ofand the ~~International~~United ~~Association~~Steelworkers, ofLocal ~~Machinists~~1865, ~~and~~which ~~Aerospace~~represents ~~Workers,~~production ~~Local~~employees ~~1943,~~at ~~ratified~~Ashland aWorks, ~~labor~~reached an agreement ~~covering~~to ~~approximately~~revise ~~1,760~~and ~~production~~extend ~~employees~~the atcollective ~~Middletown~~bargaining ~~Works~~agreement. The new agreement ~~expires~~includes ~~March 15~~terms governing the permanent closure of the facility, ~~2020~~including benefits to employees who are terminated or transition to other AK Steel plants.

~~With~~In ~~our~~May ~~January 28,~~ 2019, ~~announcement~~members of ~~plans to permanently close~~ the ~~Ashland Works facility by the end of 2019, over the coming months we expect to engage in negotiations with the~~ United Steelworkers, Local ~~1865~~1190, ~~regarding~~ratified ~~the~~a ~~plant~~three-year ~~closure~~labor inagreement ~~accordance~~covering ~~with~~approximately ~~applicable~~220 ~~law~~production ~~and~~employees ~~the~~at ~~terms~~Mountain ~~and~~State ~~conditions~~Carbon, ~~of the labor agreement~~LLC. The ~~labor~~new agreement, ~~with~~will anbe ~~original~~in ~~expiration~~effect ~~date~~through ~~of September~~April 130, ~~2018, is by mutual agreement being extended on a rolling 60-day basis, subject to further notification of termination by either party~~2022.

~~The~~In ~~following~~May 2019, members of the United Auto Workers, Local 4104, which governs approximately 100 production employees at Zanesville Works, ratified a new three-year labor ~~agreements~~agreement. ~~expire~~The ~~within~~new ~~the~~agreement ~~next~~will ~~twelve~~be ~~months:~~in effect through May 31, 2022.

•In July 2019, members of the United ~~Steelworkers~~Auto Workers, Local ~~1190~~3303, which governs approximately ~~230~~1,100 production and maintenance employees at ~~Mountain~~Butler ~~State~~Works, ~~Carbon~~ratified ~~LLC,~~a isnew ~~scheduled~~three-year toagreement. ~~expire~~The onnew ~~March~~agreement 1will be in effect through June 15, ~~2019~~2022.

•In September 2019, members of the United Auto Workers, Local ~~3303~~3462, which governs approximately ~~1,170~~310 production employees at ~~Butler~~Coshocton Works, ~~was~~ratified ~~originally~~a ~~scheduled~~new ~~to expire on April 1, 2019~~agreement. ByThe ~~mutual~~new agreement, ~~the~~will ~~labor~~be ~~agreement~~in ~~has~~effect ~~been~~through ~~extended and is now scheduled to expire on April 16~~July 31, ~~2019~~2023.

•Agreements ~~United~~that ~~Auto~~expire within the next twelve months include an agreement with the International Association of Machinists and Aerospace Workers, Local ~~4104~~1943, which governs approximately ~~100~~1,750 production employees at ~~Zanesville~~Middletown Works, is scheduled to expire onMarch 15, ~~May~~2020, 31and an agreement with United Steelworkers, ~~2019~~Local 1915, which governs approximately 100 production employees at AK Tube’s Walbridge plant, scheduled to expire January 22, 2021.

• United Auto Workers, Local 3462, which governs approximately 300 production employees at Coshocton Works, is scheduled to expire on September 30, 2019.

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Potential Impact of Climate Change Legislation

On an ongoing basis we assess the potential impacts and implications of climate change and associated legislation and regulation on our business, operations, customers, suppliers, markets and other relevant areas. In 2010, the EPA issued a final “tailoring rule” providing new regulations governing major stationary sources of greenhouse gas emissions under the Clean Air Act. Generally, the tailoring rule requires that new or modified sources of high volumes of greenhouse gases must follow heightened permit standards and lower emissions thresholds. The EPA continues to work on further greenhouse gas emissions rules that would apply more broadly and to lower levels of emission sources. In 2014, the U.S. Supreme Court partially upheld and partially invalidated the tailoring rule. The decision’s impact will often require us to conduct a best available control technology analysis for greenhouse gases for new major projects. The tailoring rule will not materially adversely affect us in the near term and we cannot reliably estimate the regulation’s long-term impact. However, there are a number of factors that may affect us, including the EPA’s tailoring rule and other similar regulations, such as the EPA’s Clean Power Plant Rule established on August 3, 2015, implications from the Paris Climate Agreement arising from the 2015 United Nations Climate Change Conference or similar accords relating to climate change. These and other factors could cause us to suffer negative financial impacts over time from increased energy, environmental and other costs needed to comply with the limitations that our suppliers would impose on us directly or indirectly.

In 2017, the EPA announced its intention to repeal the Clean Power Plant Rule and the U.S. State Department gave formal notice of its intent to withdraw from the Paris Climate Agreement. The earliest date for the United States to completely withdraw from the Paris Agreement is November 4, 2020. Given these recent developments, we expect the near-~~term~~ negative impacts to our business directly arising from climate change legislation to be low. However, we do not expect the potential challenges to our business arising from climate change to decline in the long term, and we do not expect our key customers in our principal markets to substantially reduce their focus on climate change32-related issues. This is particularly true for our automotive manufacturer customers, who remain subject to CAFE standards and other regulations aimed at reducing vehicle emissions. In addition, automotive manufacturers typically design light vehicle platforms for multiple international markets, so other countries’ climate change legislation and regulations that govern the automotive manufacturers likely will continue to affect their approach for the U.S. market.

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lower emissions thresholds. The EPA continues to work on further greenhouse gas emissions rules that would apply more broadly and to lower levels of emission sources. In 2014, the U.S. Supreme Court partially upheld and partially invalidated the tailoring rule. The decision’s impact will often require us to conduct a best available control technology analysis for greenhouse gases for new major projects. The tailoring rule will not materially adversely affect us in the near term and we cannot reliably estimate the regulation’s long-term impact. However, there are a number of factors that may affect us, including the EPA’s tailoring rule and other similar regulations, such as the EPA’s Clean Power Plant Rule established on August 3, 2015, implications from the Paris Climate Agreement arising from the 2015 United Nations Climate Change Conference or similar accords relating to climate change. These and other factors could cause us to suffer negative financial impacts over time from increased energy, environmental and other costs needed to comply with the limitations that our suppliers would impose on us directly or indirectly.

In 2017, the EPA announced its intention to repeal the Clean Power Plant Rule and the U.S. State Department gave formal notice of its intent to withdraw from the Paris Climate Agreement. The earliest date for the United States to completely withdraw from the Paris Agreement is November 4, 2020. Given these recent developments, we expect the near-term negative impacts to our business directly arising from climate change legislation to be low. However, we do not expect the potential challenges to our business arising from climate change to decline in the long term, and we do not expect our key customers in our principal markets to substantially reduce their focus on climate change-related issues. This is particularly true for our automotive manufacturer customers, who remain subject to CAFE standards and other regulations aimed at reducing vehicle emissions, as well as potential changes in global consumer demands for vehicles with lower impacts on the environment. In addition, automotive manufacturers typically design light vehicle platforms for multiple international markets, so other countries’ climate change legislation and regulations that govern the automotive manufacturers likely will continue to affect their approach for the U.S. market.

In addition, the possibility exists that some form of federally-enacted legislation or additional regulations in the U.S. may further impose limitations on greenhouse gas emissions. In the past, bills have been introduced in the United States Congress that aim to limit carbon emissions over long periods from facilities that emit significant amounts of greenhouse gases. Such bills, if enacted, would apply to the steel industry, in general, and to us, in particular, because producing steel from elemental iron creates carbon dioxide, one of the targeted greenhouse gases. Although we and other steel producers in the United States are actively participating in research and development to develop technology, processes and approaches for reducing greenhouse gas emissions, these developments will take time and it is impossible to predict when or to what degree these efforts will be successful. To address this need for developing new technologies, approaches and processes, not just in the steel industry but elsewhere, proposed legislation has been introduced in the past that included a system of carbon emission credits. Such credits would be available to certain companies for a period, similar to the European Union’s existing “cap and trade” system. However, it is virtually impossible to forecast the provisions of any such final legislation and its effects on us.

If regulation or legislation to address climate change or regulate carbon emissions is enacted, it is reasonable to assume that the net financial impact on us will be negative, despite some potential benefits discussed below. On balance, such regulation or legislation likely would cause us to incur increased energy, environmental and other costs to comply with the limitations that would be imposed on greenhouse gas emissions. For example, additional costs could take the form of new or retrofitted equipment or the development of new technologies (e.g., sequestration) to try to control or reduce greenhouse gas emissions.

The future enactment of climate control or greenhouse gas emissions legislation or regulation could produce benefits for us that would offset somewhat the adverse effects noted above. For example, if climate control legislation or regulation continues to drive automotive manufacturers to meet higher fuel efficiency targets, we could benefit from increased sales of our broad portfolio of products: NOES for H/EV motors, GOES for upgrading electrical grid infrastructure required to support more H/EVs, stainless steels needed for exhaust systems and other components for more efficient engines, and AHSS products to lightweight automobiles. Moreover, if climate change legislation provides further incentives for energy efficiency, up to certain levels, we could benefit from increased sales of our GOES products, which are already among the most energy-efficient electrical steels in the world. We sell our electrical steels primarily to manufacturers of power transmission and distribution transformers and electrical motors and generators, the demand for which could grow if energy efficiency standards increase. In addition, climate control legislation may enhance sales of our products in different ways. For instance, if the legislation promotes the use of renewable energy technology, such as wind or solar technology, it could increase demand for our high-efficiency electrical steel products used in power transformers, which are needed to connect these new sources to the electricity grid.

The ultimate impacts on us from any additional climate change or emissions reduction legislation or regulation would depend on the final terms of any such legislation or regulation. Presently, we are unable to predict with any reasonable degree of accuracy when or even if climate control legislation or regulation will be enacted, or if it is, what its terms and applicability to us will be. As a result, we currently have no reasonable basis to reliably predict or estimate the specific effects any eventually enacted laws may have on us or how we may be able to reduce any negative impacts on our business and operations. In the meantime, the items described above provide some indication of the potential mixed impact on us from climate control legislation or regulation generally.

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~~how~~Cleveland-Cliffs we may be able to reduce any negative impacts on our business and operations. In the meantime, the items described above provide some indication of the potential mixed impact on us from climate control legislation or regulation generally.Acquisition

On December 2, 2019, we entered the Merger Agreement pursuant to which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Cliffs will acquire AK Holding by way of the Merger. Under the terms of the Merger Agreement, at the effective time of the Merger, AK Holding stockholders will become entitled to receive 0.40 Cliffs common shares for each outstanding share of AK Holding common stock they own at the effective time. Upon completion of the proposed Merger, AK Holding stockholders are expected to own approximately 32% and Cliffs shareholders to own approximately 68% of the combined company on a fully diluted basis.

The completion of the Merger is subject to the receipt of antitrust clearance in the United States. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), and the rules promulgated thereunder, the Merger may not be completed until we and Cliffs have each filed notification and report forms with the United States Federal Trade Commission (“FTC”), and the Antitrust Division of the United States Department of Justice (“DOJ”), and the applicable waiting period (or any extension thereof) has expired or been terminated. On January 22, 2020, we and Cliffs each received notification from the FTC of the early termination of the waiting period applicable to the Merger under the HSR Act. Each of our and Cliffs’ obligation to effect the Merger is also subject to obtaining regulatory approval from the antitrust authorities in Canada and Mexico. On February 12, 2020, we and Cliffs each received a “no-action” letter from the Canadian Competition Bureau, clearing the Merger under Canadian competition law. On January 6, 2020, we and Cliffs each submitted notifications and an application for Mexican Competition Commission (Comisión Federal de Competencia Económica) clearance of the Merger and that process is ongoing.

On February 4, 2020, the SEC declared effective the registration statement on Form S-4 that Cliffs had filed with the SEC in connection with the Merger and Cliffs filed a final prospectus with respect to the Cliffs common shares that will be issued to our stockholders in the Merger. We also filed our definitive joint proxy statement with the SEC on February 4, 2020, and we and Cliffs each commenced mailing the definitive joint proxy statement to our respective stockholders on February 5, 2020. The definitive joint proxy statement contains information relating to the Merger and also announced that each company will hold a special meeting of its respective stockholders on March 10, 2020, where the stockholders of each company will be asked to vote on matters related to the transaction, including for our stockholders to approve the adoption of the Merger Agreement and Cliffs shareholders to approve the Merger Agreement and related transactions, including the issuance of the Cliffs common shares to our stockholders in the Merger.

We expect to complete the Merger in the first quarter of 2020, subject to the receipt of customary regulatory and stockholder approvals and the satisfaction or (to the extent permissible) waiver of the other closing conditions under the Merger Agreement.

Critical Accounting Estimates

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. These principles permit choices among alternatives and require numerous estimates of financial matters. Accounting estimates are based on historical experience and information that is available to us about current events and actions we may take in the future. We believe the accounting principles chosen are appropriate under the circumstances, and that the estimates, judgments and assumptions involved in financial reporting are reasonable. There can be no assurance that actual results will not differ from these estimates. We believe the accounting estimates discussed below represent those accounting estimates requiring the exercise of judgment where a different set of judgments could result in the greatest changes to reported results.

Inventory Costing

We value inventories at the lower of cost or net realizable value, and we measure the cost of inventories using the average cost method. We record any amount required to reduce the carrying value of inventory to net realizable value as a charge to cost of products sold. If selling prices were to decline in future quarters, write-downs of inventory could result, specifically raw material inventory such as iron ore, coke and certain alloys purchased during periods of peak market pricing.

On January 1, 2018, we changed our accounting method for valuing inventories to the average cost method for inventories previously valued using the LIFO method. The effects of the change in accounting principle have been retrospectively applied to all periods presented, including Management’s Discussion and Analysis. See Note 2 to our consolidated financial statements for more information related to the change in accounting principle.

Asset Impairment

We have various assets that are subject to impairment testing, including property, plant and equipment, goodwill and equity method investments. If circumstances indicate that an asset has lost value below its carrying amount, we review the asset for impairment. We evaluate the effect of changes in operations and estimate future cash flows to measure fair value. We use assumptions, such as ~~forecasted~~revenue growth rates, terminal growth rates, EBITDA margins and cost of capital, as part of these analyses and our selections of the assumptions to use can result in different conclusions. We believe the data and assumptions used are appropriate in the circumstances and consistent with internal projections. The most recent annual goodwill impairment tests indicated that the fair values of the relevant reporting units were in excess of their carrying value. However, while an improvement from the prior year, the estimated fair value of the Precision Partners reporting unit was still relatively close to its carrying amount. We believe that this result is reasonable as this reporting unit was acquired in August 2017. Changes in certain assumptions in the impairment tests could have resulted in various scenarios, including an increase in fair value or a decrease in fair value below the carrying amount of Precision Partners. We believe certain key assumptions, such as cost of capital and terminal growth rates, used in our assessment have an appropriate degree of conservatism. For the tubular reporting unit, ~~its~~AK Tube’s estimated fair value was substantially higher than its carrying amount. Our businesses operate in highly cyclical industries and the valuation of these businesses can fluctuate, which may lead to impairment charges in future periods. Fair value is determined using quoted market prices, estimates based on prices of similar assets, or anticipated cash flows discounted at a rate commensurate with risk.

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We consider the need to evaluate long-lived assets for indicators of impairment at least quarterly to determine if events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. We evaluate long-lived assets associated with our steelmaking operations for impairment based on a collective asset grouping that includes the operations of all facilities. We manage these operations as part of an “integrated process” that allows us to route production to various facilities so that we can maximize financial results and cash flows. If the carrying value of a long-lived asset group exceeds its fair value, we determine that an impairment has occurred and we recognize a loss based on the amount that the carrying value exceeds the fair value, less cost to dispose, for assets we plan to sell or abandon.

As a result of the temporary idling of the Ashland Works blast furnace and steelmaking operation in 2015, we considered the need for an impairment of the long-lived assets and determined that no impairment was indicated based on the expected temporary nature of the idling. At the end of 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. At that time, we believed it was unlikely that the Ashland Works Hot End would restart in the near term based on forecasted supply and demand characteristics of the markets that we serve.

Income Taxes

We recognize deferred tax assets and liabilities based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the enacted tax laws. We regularly evaluate the need for a valuation allowance against our deferred tax assets by assessing whether it is more likely than not that we will realize the deferred tax assets in the future. We assess the need for a valuation allowance each reporting period, with any additions or adjustments reflected in earnings in the period of assessment. We have maintained a full valuation allowance against our net U.S. deferred tax assets since 2012, with appropriate consideration for the future reversal of our taxable temporary differences. At December 31, 2019, our deferred tax asset valuation allowance was $659.4.

-In ~~35-~~assessing the need for a valuation allowance, we have considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets for each jurisdiction. At December 31, 2019, we considered the existence of recent cumulative income from U.S. operations as a source of positive evidence. We generated losses from U.S. operations for several periods through 2016 and in 2019 and accordingly generated significant cumulative losses in those periods, which is a significant source of objective negative evidence. Despite income reported in 2017 and 2018 from U.S. operations, the following forms of negative evidence concerning our ability to realize our domestic deferred tax assets were considered:

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deferred tax assets by assessing whether it is more likely than not that we will realize the deferred tax assets in the future. We assess the need for a valuation allowance each reporting period, with any additions or adjustments reflected in earnings in the period of assessment. We have maintained a full valuation allowance against our net U.S. deferred tax assets since 2012, with appropriate consideration for the future reversal of our taxable temporary differences. At December 31, 2018, our deferred tax asset valuation allowance was $693.5.

In assessing the need for a valuation allowance, we have considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets for each jurisdiction. At December 31, 2018, we considered the existence of recent cumulative income from U.S. operations as a source of positive evidence. We have generated losses from U.S. operations for several of our recent periods through 2016 and accordingly have generated significant cumulative losses in those periods, which is a significant source of objective negative evidence. Despite the recent income reported in 2017 and 2018 from U.S. operations, the following forms of negative evidence concerning our ability to realize our domestic deferred tax assets were considered:


•	we have historical evidence that the steel industry we operate within has business cycles of longer than a few years and therefore attribute significant weight to our cumulative losses over longer business cycles in evaluating our ability to generate future taxable income;


•	the global steel industry has been experiencing global overcapacity and periods of increased foreign steel imports into the U.S., which has created volatile economic conditions and uncertainty relative to predictions of future taxable income;


•	while we have changed our business model to de-emphasize sales of commodity business and believe that this model will generate improved financial results throughout an industry cycle, we have not experienced all parts of the cycle and therefore we do not know what results our business model will produce in those circumstances;

• our U.S. operations have generated losses in 2019 and cumulatively significant losses in prior years and the competitive landscape in the steel industry reflects shifting domestic and international political priorities, an uncertain global trade landscape, and continued intense competition from domestic and foreign steel competitors, all of which present significant uncertainty regarding our ability to routinely generate U.S. income in the near term;


•	significant volatility in spot market selling prices for carbon steel; and


•	a substantial portion of our U.S. deferred tax assets are tax carryforwards with expiration dates that may prevent us from using them prior to expiration.

At December 31, ~~2018~~2019, we concluded that objective and subjective negative evidence outweighed positive evidence, and therefore it was not more likely than not that we would be able to realize our net deferred tax assets. As a result of the cyclical nature of our industry and to the extent that the improvement in our financial results is sustainable, there is the potential for different weighting of positive and negative factors in the future as facts and circumstances change. Accordingly, material changes in the valuation allowance may be recognized in future periods.

We evaluate uncertainty in our tax positions and only recognize benefits when the tax position is believed to be more likely than not to be sustained upon audit. We have tax filing requirements in many states and are subject to audit in these states, as well as at the federal level. Tax audits by their nature are often complex and can require several years to resolve. In the preparation of the consolidated financial statements, we exercise judgment in estimating the potential exposure of unresolved tax matters. While actual results could vary, we believe that we have adequately accrued the ultimate outcome of these unresolved tax matters.

Pension and OPEB Plans

Accounting for retiree pension and healthcare benefits requires the use of actuarial methods and assumptions, including assumptions about current employees’ future retirement dates, anticipated mortality rates, the benchmark interest rate used to discount benefits to their present value, anticipated future increases in healthcare costs and our obligations under collective bargaining agreements with respect to pension and healthcare benefits for retirees. Changing any of these assumptions could have a material effect on the calculation of our total obligation for future pension and healthcare benefits.

~~Actuarial~~- net gains and losses occur when actual experience differs from any of the many assumptions used to value the benefit plans or when the assumptions change, as they may each year when a valuation or remeasurement is performed. The major factors contributing to our actuarial gains and losses are changes in the discount rate used to value plan liabilities as of the measurement date and changes in the expected lives of plan participants. We believe the mortality assumptions selected for determining the expected lives of plan participants are most closely associated with the expected lives of our plan participants. However, selecting other available assumptions would likely increase the plan obligations. In addition, a major factor contributing to actuarial gains and losses for our pension plan is the difference between expected and actual returns on plan assets. For OPEB plans, differences in estimated versus actual healthcare costs and changes in assumed healthcare cost trend rates are additional factors generally contributing to actuarial gains and losses. However, we do not expect changes in these OPEB assumptions to have a material effect on us since most of the plans have caps on the share of benefits we pay. In addition to their effect on the funded status of the plans and their potential for corridor adjustments, these factors affect future net periodic benefit expenses. Changes in key assumptions can have a material 35-

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Actuarial net gains and losses occur when actual experience differs from any of the many assumptions used to value the benefit plans or when the assumptions change, as they may each year when a valuation or remeasurement is performed. The major factors contributing to our actuarial gains and losses are changes in the discount rate used to value plan liabilities as of the measurement date and changes in the expected lives of plan participants. We believe the mortality assumptions selected for determining the expected lives of plan participants are most closely associated with the expected lives of our plan participants. However, selecting other available assumptions would likely increase the plan obligations. In addition, a major factor contributing to actuarial gains and losses for our pension plan is the difference between expected and actual returns on plan assets. For OPEB plans, differences in estimated versus actual healthcare costs and changes in assumed healthcare cost trend rates are additional factors generally contributing to actuarial gains and losses. However, we do not expect changes in these OPEB assumptions to have a material effect on us since most of our plans have caps on the share of benefits we pay. In addition to their effect on the funded status of the plans and their potential for corridor adjustments, these factors affect future net periodic benefit expenses. Changes in key assumptions can have a material effect on the amount of benefit obligation and annual expense we record. For example, a 25 basis point decrease in the discount rate would decrease the interest cost component of pension income in ~~2019~~2020 by $3.70. A 25 basis point decrease in the discount rate would have increased the pension obligation at December 31, ~~2018~~2019, by approximately $4136.0 and the OPEB obligation by approximately $910.0. A 25 basis point decrease in the expected rate of return on pension plan assets would decrease the projected ~~2019~~2020 pension income by approximately $43.0.

Under our method of accounting for pension and OPEB plans, we recognize into income any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets as of the measurement date, defined as the corridor. Amounts inside the corridor are amortized over the plan participants’ life expectancy. Our method results in faster recognition of actuarial net gains and losses than the minimum amortization method permitted by prevailing accounting standards and used by the vast majority of companies in the United States. Faster recognition under this method also results in the potential for highly volatile and difficult to forecast corridor adjustments.

Environmental and Legal Contingencies

We are involved in a number of environmental and other legal proceedings. We record a liability when we determine that litigation has commenced or a claim or assessment has been asserted and, based on available information, it is probable that the outcome of the litigation, claim or assessment, whether by decision or settlement, will be unfavorable and the amount of the liability is reasonably estimable. We measure the liability using available information, including the extent of damage, similar historical situations, our allocable share of the liability and, in the case of environmental liabilities, the need to provide site investigation, remediation and future monitoring and maintenance. We record accruals for probable costs based on a combination of litigation and settlement strategies on a case-by-case basis and, where appropriate, supplement those with incurred-but-not-reported development reserves. However, amounts we record in the financial statements in accordance with accounting principles generally accepted in the United States exclude costs that are not probable or that may not be currently estimable. The ultimate costs of these environmental and legal proceedings may, therefore, be higher than those we have recorded on our financial statements. In addition, changes in assumptions or the effectiveness of our strategies can materially affect results of operations in future periods.

Contractual Obligations

In the ordinary course of business, we enter into agreements that obligate us to make legally enforceable future payments. These agreements include those for borrowing money, leasing equipment and purchasing goods and services. The following table summarizes by category expected future cash outflows associated with contractual obligations we have as of December 31, ~~2018~~2019.

	Payment due by period
Contractual Obligations	Lessthan 1year		1-3 years		3-5 years		Morethan 5years		Total
Long-term debt	$	~~148~~7.53	$	~~413~~856.52	$	~~715~~442.0	$	~~758~~691.48	$	21,~~035~~997.43
Interest on debt (a)	~~130~~124.2		~~239~~205.16		~~154~~113.40		~~130~~81.04		~~653~~524.72
Lease obligations	23.3		41.4		36.0		83.6		184.3
Operating lease obligations	67.8		97.9		67.0		144.5		377.2
Purchase obligations and commitments	2,~~239~~006.2		2,~~796~~334.07		1,~~601~~070.96		21,~~592~~512.27		96,~~229~~924.32
Pension and OPEB obligations (b)	3841.70		7578.52		7074.72		~~683~~565.74		~~868~~758.68
Other non-current liabilities	—		36.8		16.1		81.1		134.0
Other non-current liabilities (c)	—		51.8		23.5		78.8		154.1
Total	$	2,~~579~~246.95	$	3,~~602~~624.34	$	21,~~594~~790.13	$	43,~~329~~074.06	$	1310,~~105~~735.38

(a) Amounts include contractual interest payments using the interest rates as of December 31, ~~2018~~2019 applicable to our variable-rate debt and stated fixed interest rates for fixed-rate debt.

~~(b)~~- Future cash contributions to our qualified pension trust are not included in the table above. We have approximately $45.0 of required contributions for 2019. Based on current actuarial assumptions, the estimates for our contributions are approximately $50.0 for 2020 and $50.0 for 2021. Estimates of cash contributions to the pension trust to be made after 2019 are uncertain since several variable factors impact defined benefit pension plan contributions and required contributions are significantly affected by asset returns. Because we expect the pension trust to make pension benefit payments beyond the next five years, the net pension liability is included in the More than 5 years column. We estimate benefit payments, after receipt of Medicare subsidy reimbursements, will be $37.5 for 2019 and we expect them to trend down to $8.8 over the next 30 years. For a more detailed description of these obligations, see Note 7 to the consolidated financial statements.36-

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~~prices~~(b) Future cash contributions to our qualified pension trust are not included in the ~~contract~~table ~~and~~above. ~~(5)~~We ~~the~~have ~~effect~~approximately $45.0 of required contributions for 2020. Based on current actuarial assumptions, the ~~Ashland~~estimates ~~Works~~for ~~closure~~our contributions are approximately $45. ~~Because~~0 for 2021 and $35.0 for 2022. Estimates of ~~changes~~cash incontributions to the ~~markets~~pension wetrust ~~serve,~~to ~~changes~~be inmade ~~business~~after ~~decisions~~2020 ~~regarding~~are ~~production~~uncertain ~~levels~~since orseveral ~~unforeseen~~variable ~~events,~~factors ~~the~~impact ~~actual~~defined ~~amounts~~benefit ~~paid~~pension ~~under~~plan ~~these~~contributions ~~contracts~~and ~~could~~required ~~differ~~contributions are significantly ~~from~~affected by asset returns. Because we expect the ~~amounts~~pension ~~presented~~trust ~~above. For~~to ~~example,~~make ~~circumstances~~pension ~~could~~benefit ~~arise~~payments ~~which~~beyond ~~create~~the ~~exceptions~~next tofive ~~minimum~~years, ~~purchase~~the ~~obligations~~net pension liability is included in the ~~contracts~~More than 5 years column. We ~~calculated~~estimate other postretirement benefit payments, after receipt of Medicare subsidy reimbursements, will be $35.6 for 2020 and we expect them to trend down to $7.6 over the ~~purchase~~next 30 years. For a more detailed description of these obligations, insee ~~the~~Note ~~table~~8 ~~above~~to ~~without~~the ~~considering~~consolidated ~~such~~financial ~~exceptions~~statements.


(c)	Excludes the long-term portion of operating lease obligations.

In calculating the amounts for purchase obligations, we identified contracts where we have a legally enforceable obligation to purchase products or services from the vendor or make payments to the vendor for an identifiable period. For each identified contract, we determined our best estimate of payments to be made under the contract assuming (1) the continued operation of existing production facilities, (2) normal business levels, (3) both parties would adhere to the contract in good faith throughout its term, and (4) prices in the contract. Because of changes in the markets we serve, changes in business decisions regarding production levels or unforeseen events, the actual amounts paid under these contracts could differ significantly from the amounts presented above. For example, circumstances could arise which create exceptions to minimum purchase obligations in the contracts. We calculated the purchase obligations in the table above without considering such exceptions.

A number of our purchase contracts specify a minimum volume or price for the products or services covered by the contract. If we were to purchase only the minimums specified, the payments in the table would be reduced. Under “requirements contracts” the quantities of goods or services we are required to purchase may vary depending on our needs, which are dependent on production levels and market conditions at the time. If our business deteriorates or increases, the amount we are required to purchase under such a contract would likely change. Many of our agreements for the purchase of goods and services allow us to terminate the contract without penalty if we give 30 to 90 days’ notice. Any such termination could reduce the projected payments.

Our consolidated balance sheets contain liabilities for pension and OPEB and other long-term obligations. We calculate the benefit plan liabilities using actuarial assumptions that we believe are reasonable under the circumstances. However, because changes in circumstances can have a significant effect on the liabilities and expenses associated with these plans including, in the case of pensions, pending or future legislation, we cannot reasonably and accurately project payments into the future. While we do include information about these plans in the above table, we also discuss these benefits elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the notes to the consolidated financial statements.

The other long-term liabilities on our consolidated balance sheets include accruals for environmental and legal issues, employment-related benefits and insurance, liabilities established for uncertain tax positions, and other obligations. These amounts generally do not arise from contractual negotiations with the parties receiving payment in exchange for goods and services. The ultimate amount and timing of payments are uncertain and, in many cases, depend on future events occurring, such as the filing of a claim or completion of due diligence investigations, settlement negotiations, audit and examinations by taxing authorities, documentation or legal proceedings.

New Accounting Pronouncements

The information called for by this section is incorporated herein by reference to the Adoption of New Accounting Principles section of Note 1 of the consolidated financial statements.

Forward-Looking Statements

Certain statements we make or incorporate by reference in this Form 10-K, or make in other documents we furnish to or file with the Securities Exchange Commission, as well as in press releases or in presentations made by our employees, reflect our estimates and beliefs and are intended to be, and are hereby identified as “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “believes,” “intends,” “plans,” “estimates” and other similar references to future periods typically identify such forward-looking statements. We caution readers that forward-looking statements reflect our current beliefs and judgments, but are not guarantees of future performance or outcomes. They are based on a number of assumptions and estimates that are inherently subject to economic, competitive, regulatory, and operational risks, uncertainties and contingencies that are beyond our control, and upon assumptions about future business decisions and conditions that may change. In particular, these include, but are not limited to, statements in the Liquidity and Capital Resources section and Item 7A, Quantitative and Qualitative Disclosures about Market Risk.

We caution readers that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently expected. See Item 1A, Risk Factors for more information on certain of these risks and uncertainties.

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Any forward-looking statement made in this document speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.


Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.

Our primary areas of market risk include changes in (a) interest rates, (b) commodity prices and (c) foreign currency exchange rates.

Interest Rate Risk

We manage interest rate risk in our capital structure by issuing variable- and fixed-rate debt. Our outstanding long-term indebtedness (excluding unamortized debt discount and issuance costs) was $21,~~035~~997.43 and $2,~~165~~035.54 at December 31, ~~2018~~2019 and ~~2017~~2018. The amount outstanding at December 31, ~~2018~~2019, consisted of $1,~~674~~521.43 of fixed-rate debt, $26.0 of variable-rate IRBs and $~~335~~450.0 of variable-rate borrowings from our Credit Facility. An increase in prevailing interest rates would increase interest expense and interest paid for the variable-rate debt, including any outstanding borrowings from the Credit Facility. For example, a 100 basis point increase in interest rates would increase annual interest expense by approximately $4.8 on our outstanding debt at December 31, 2019.

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variable-rate debt, including any outstanding borrowings from the Credit Facility. For example, a 100 basis point increase in interest rates would increase annual interest expense by approximately $3.6 on our outstanding debt at December 31, 2018.

Commodity Price Risk

Commodity prices for certain carbon, stainless and electrical steels and raw material and energy inputs represent a source of market risk. Prices for certain raw materials and energy have been volatile over the last several years, with chrome, iron ore, natural gas, zinc, and scrap being especially volatile. We attempt to mitigate commodity price risk by aligning fixed and variable components in the following commitments:


•	customer pricing contracts;


•	supplier purchasing agreements; and


•	derivative financial instruments.

Some customer contracts have fixed-pricing terms, which increase our exposure to fluctuations in raw material and energy costs. To reduce our exposure, we enter annual, fixed-price agreements for certain raw materials. Some of our existing multi-year raw material supply agreements have required minimum purchase quantities. Under adverse economic conditions, those minimums may exceed our needs. Absent exceptions for force majeure and other circumstances affecting the legal enforceability of the agreements, these minimum purchase requirements may compel us to purchase quantities of raw materials that could significantly exceed our anticipated needs or pay damages to the supplier for shortfalls. In these circumstances, we would attempt to negotiate agreements for new purchase quantities. There is a risk, however, that we would not be successful in reducing purchase quantities, either through negotiation or litigation. If that occurred, we would likely be required to purchase more of a particular raw material in a particular year than we need, negatively affecting our results of operations and cash flows.

In many cases, our customer contracts do not include variable-pricing mechanisms that adjust selling prices in response to changes in the costs of certain raw materials and energy, though some of our customer contracts include such mechanisms. We may enter multi-year purchase agreements for certain raw materials with similar variable-price mechanisms, allowing us to achieve natural hedges between the customer pricing contracts and supplier purchasing agreements. Therefore, in some cases price fluctuations for energy (particularly natural gas and electricity), raw materials (such as scrap, chrome, zinc and nickel) or other commodities may be, in part, passed on to customers rather than absorbed solely by us. There is a risk, however, that the variable-price mechanisms in the sales contracts may not necessarily change in tandem with the variable-price mechanisms in our purchase agreements, negatively affecting our results of operations and cash flows.

If we are unable to align fixed and variable components between customer pricing contracts and supplier purchasing agreements, we use cash-settled commodity price swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. We routinely use these derivative instruments to hedge a portion of our natural gas, iron ore, zinc and electricity requirements. Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure, abnormal price increases in any of these commodity markets might still negatively affect operating costs.

For derivatives designated in cash flow hedging relationships, we record the gains and losses from the use of these instruments in accumulated other comprehensive income (loss) on the consolidated balance sheets and subsequently recognize the accumulated gains and losses into cost of goods sold in the same period when the associated underlying transactions occur. At December 31, ~~2018~~2019, accumulated other comprehensive income (loss) included $225.40 in unrealized pre-tax losses for these derivative instruments. All other commodity price swaps and options are marked-to-market and recognized into cost of products sold with the offset recognized as an asset or accrued liability. See Note 1718 of the consolidated financial statements for further information on our outstanding derivatives.

~~The following table presents the negative effect on pre~~-~~tax~~ income of a hypothetical change in the fair value of derivative instruments outstanding at December 31, 2018, due to an assumed 10% and 25% decrease in the market price of each of the indicated commodities:38-

	Negative Effect on Pre-tax Income
Commodity Derivative	10% Decrease		25% Decrease
Natural gas	$	11.3	$	28.2
Zinc	4.6		11.1
Electricity	5.0		12.5
Iron ore	10.9		22.8

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The following table presents the negative effect on pre-tax income of a hypothetical change in the fair value of derivative instruments outstanding at December 31, 2019, due to an assumed 10% and 25% decrease in the market price of each of the indicated commodities:



	Negative Effect on Pre-tax Income
Commodity Derivative	10% Decrease			25% Decrease
Natural gas	$	8.7		$	21.8
Nickel	(0.1		)	(0.2		)
Zinc	2.7			6.6
Electricity	4.5			11.2
Iron ore	12.5			20.7

Because we structure and use these instruments as hedges, the benefit of lower prices paid for the physical commodity used in the normal production cycle or higher prices received on the sale of product would offset these hypothetical losses. We do not enter into derivative contracts for trading purposes.

Foreign Currency Exchange Rate Risk

Exchange rate fluctuations affect our accounts receivable that are denominated in euros and our operating costs that are denominated in Canadian dollars, and we use forward currency contracts to reduce our exposure to certain of these currency price fluctuations. At December 31, ~~2018~~2019 and ~~2017~~2018, we had outstanding forward currency contracts with a total contract value of $41.67 and $314.26 for the sale of euros. Based on the contracts outstanding at December 31, ~~2018~~2019, a 10% change in the dollar-to-euro exchange rate would result in a pre-tax impact of $0.52 on the fair value of these contracts, which would offset the effect of a change in the exchange rate on the underlying receivable. At December 31, ~~2018~~2019 and ~~2017~~2018, we had outstanding forward currency contracts with a total contract value of $8655.9 and $~~117~~86.89 for the purchase of Canadian dollars. Based on the contracts outstanding at December 31, ~~2018~~2019, a 10% change in the U.S. dollar-to-Canadian dollar exchange rate would result in a pre-tax impact of $85.76 on the fair value of these contracts, which would offset the effect of a change in the exchange rate on the underlying operating costs. See Note 1718 of the consolidated financial statements for further information on our outstanding forward contracts.

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Item 8.	Financial Statements and Supplementary Data.

AK Steel Holding Corporation and Subsidiaries

Index to Consolidated Financial Statements

	Page
Management’s Responsibility for Consolidated Financial Statements	4240
Report of Independent Registered Public Accounting Firm	4341
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016	44
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017	43
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016	45
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017	44
Consolidated Balance Sheets as of December 31, 2018 and 2017	46
Consolidated Balance Sheets as of December 31, 2019 and 2018	45
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016	48
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017	47
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018, 2017 and 2016	49
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019, 2018 and 2017	48
Notes to Consolidated Financial Statements	5049

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MANAGEMENT’S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles permit choices among alternatives and require numerous estimates of financial matters. We believe the accounting principles chosen are appropriate under the circumstances, and that the estimates, judgments and assumptions involved in our financial reporting are reasonable.

We are responsible for the integrity and objectivity of the financial information presented in our consolidated financial statements. We maintain a system of internal accounting controls designed to provide reasonable assurance that employees comply with stated policies and procedures, that assets are safeguarded and that financial reports are fairly presented. On a regular basis, financial management discusses internal accounting controls and financial reporting matters with our independent registered public accounting firm and our Audit Committee, composed solely of independent outside directors. The independent registered public accounting firm and the Audit Committee also meet privately to discuss and assess our accounting controls and financial reporting.

Dated:	February 1520, ~~2019~~2020	/s/ Roger K. Newport
		Roger K. Newport
		Chief Executive Officer and Director
Dated:	February 1520, ~~2019~~2020	/s/ ~~Jaime~~Christopher ~~Vasquez~~J. Ross
		Jaime Vasquez
		Christopher J. Ross
		Vice President, Finance and Chief Financial Officer
		Vice President, Treasurer and Interim Chief Financial Officer

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of AK Steel Holding Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of AK Steel Holding Corporation (the Company) as of December 31, ~~2018~~2019 and ~~2017~~2018, ~~and~~ the related consolidated statements of operations, comprehensive income, stockholders’ equity ~~(deficit)~~, and cash flows for each of the three years in the period ended December 31, ~~2018~~2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2018~~2019 and ~~2017~~2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2018~~2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2018~~2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 ~~framework~~Framework) and our report dated February 1520, ~~2019~~2020 expressed an unqualified opinion thereon.

~~Changes~~Adoption inof ~~Accounting~~ASU ~~Principles~~No. 2016-02

As discussed in the ~~paragraphs~~paragraph under the caption “Adoption of New Accounting Principles” described in ~~Notes~~Note 1 ~~and 2~~ to the consolidated financial statements, effective January 1, ~~2018~~2019, the Company ~~(a)~~ changed its method of accounting for ~~the~~leases ~~presentation and disclosure of periodic pension and other postretirement (income) expense~~ due to the adoption of Accounting Standards Update No. ~~2017~~2016-0702, ~~Compensation—Retirement~~Leases ~~Benefits~~ (Topic ~~715~~842): Improving the Presentation of Net Periodic Benefit Pension Costs and Net Periodic Postretirement Benefit Cost, and (b) elected to change its method of accounting for inventories to the average cost method, while in prior years, these inventories were accounted for using the last-in, first-out (“LIFO”) method.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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	Realizability of Deferred Tax Assets
Description of the Matter	As more fully described in Note 6, at December 31, 2019, the Company had gross deferred tax assets on deductible temporary differences and carryforwards of $833.9 million reduced by a valuation allowance of $659.4 million, both primarily related to the U.S. Deferred tax assets must be reduced by a valuation allowance if, based upon the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Auditing management’s analysis of the realizability of its U.S. deferred tax assets was complex and highly judgmental due to the weighting of positive and negative evidence with respect to future reversals of taxable U.S. temporary differences and future U.S. taxable income exclusive of reversing temporary differences and carryforwards.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls relating to the realizability of deferred tax assets. Our audit procedures included testing controls over management’s projections of future reversals of existing taxable temporary differences and future taxable income (exclusive of reversing temporary differences and carryforwards) and testing the completeness and accuracy of the underlying data used by the Company. To test the realizability of the Company’s deferred tax assets, we performed audit procedures which included, among others, assessing the positive and negative evidence related to the likelihood of realization of the U.S. deferred tax assets. We tested the Company’s scheduling of the reversal of existing temporary taxable differences used as a source of taxable income were of the appropriate character to realize existing deferred tax assets. We assessed the historical accuracy of management’s forecasted U.S. taxable income, exclusive of reversing temporary differences and carryforwards, and compared the forecasts to current industry and economic trends. We involved tax professionals to evaluate the application of jurisdictional tax laws and regulations used in the Company’s assumptions and calculations.



	Precision Partners’ Reporting Unit Goodwill
Description of the Matter	At December 31, 2019, goodwill was $255.5 million, and included $222.7 million related to the Precision Partners’ reporting unit. As discussed in Note 1 to the consolidated financial statements, goodwill is reviewed for potential impairment at the reporting unit level at least annually on October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred. Auditing management’s annual goodwill impairment assessment for the Precision Partners’ reporting unit was complex due to the significant estimation required to determine the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions, such as revenue growth rates, the terminal growth rate, EBITDA margin, and the weighted average cost of capital, which are affected by expectations about future market or economic conditions.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process. For example, we tested controls over management’s review of the significant judgmental assumptions, including revenue growth rates, the terminal growth rate, EBITDA margin, and the weighted average cost of capital. To test the Company’s annual goodwill impairment assessment for the Precision Partners’ reporting unit, we performed audit procedures that included, among others, evaluating the estimated fair value of the Precision Partners’ reporting unit, including evaluating methodologies used. We involved our specialists in the evaluation of the significant assumptions described above and testing the underlying data used by the Company in its analysis for completeness and accuracy. We compared the significant assumptions used by management to current industry and economic trends, recent historical performance and other factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions.

/s/ ERNST & YOUNG LLP

We have served as the Company’s auditor since 2013.

Cincinnati, Ohio

February 1520, ~~2019~~2020

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2019, 2018 and 2017
(dollars in millions, except per share data)
	2019			2018			2017
Net sales	$	6,359.4		$	6,818.2		$	6,080.5

Cost of products sold (exclusive of items shown separately below)	5,606.3			5,911.0			5,253.1
Selling and administrative expenses	295.2			322.6			284.9
Depreciation	192.6			220.2			226.0
Ashland Works closure	56.0			—			—
Credit for adjustment of liability for transportation costs	—			—			(19.3		)
Asset impairment charge	—			—			75.6
Total operating costs	6,150.1			6,453.8			5,820.3
Operating profit	209.3			364.4			260.2
Interest expense	146.6			151.6			152.3
Pension and OPEB (income) expense	12.0			(19.2		)	(71.9		)
Other (income) expense	(18.5		)	(5.9		)	17.1
Income before income taxes	69.2			237.9			162.7
Income tax expense (benefit)	6.2			(6.2		)	(2.2		)
Net income	63.0			244.1			164.9
Less: Net income attributable to noncontrolling interests	51.8			58.1			61.4
Net income attributable to AK Steel Holding Corporation	$	11.2		$	186.0		$	103.5
Net income per share attributable to AK Steel Holding Corporation common stockholders:
Basic	$	0.04		$	0.59		$	0.33
Diluted	$	0.04		$	0.59		$	0.32

See notes to consolidated financial statements.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, 2018, 2017 and 2016
Years Ended December 31, 2019, 2018 and 2017
(dollars in millions, except per share data)
(dollars in millions)
	2018			2017			2016
	2019			2018			2017
Net sales	$	6,818.2		$	6,080.5		$	5,882.5
Net income	$	63.0		$	244.1		$	164.9
Cost of products sold (exclusive of items shown separately below)	5,911.0			5,253.1			5,099.7
Other comprehensive income, before tax:
Selling and administrative expenses	322.6			284.9			279.1
Foreign currency translation gain (loss)	(0.6		)	(1.7		)	4.7
Depreciation	220.2			226.0			216.6
Cash flow hedges:
Charge (credit) for termination of pellet agreement and related transportation costs	—			(19.3		)	69.5
Gains (losses) arising in period	(31.5		)	(5.6		)	(11.5		)
Asset impairment charge	—			75.6			—
Reclassification of losses (gains) to net income	8.9			(10.3		)	(6.1		)
Total operating costs	6,453.8			5,820.3			5,664.9
Pension and OPEB plans:
Operating profit	364.4			260.2			217.6
Prior service credit (cost) arising in period	—			11.1			4.7
Interest expense	151.6			152.3			163.9
Gains (losses) arising in period	50.5			(63.6		)	94.2
Pension and OPEB (income) expense	(19.2		)	(71.9		)	16.5
Reclassification of prior service cost (credits) included in net income	(9.6		)	(9.8		)	(53.8		)
Other (income) expense	(5.9		)	17.1			4.9
Reclassification of losses (gains) included in net income	15.7			29.3			6.3
Income before income taxes	237.9			162.7			32.3
Other comprehensive income (loss), before tax	33.4			(50.6		)	38.5
Income tax expense (benefit)	(6.2		)	(2.2		)	(16.9		)
Income tax expense in other comprehensive income	1.4			—			—
Net income	244.1			164.9			49.2
Other comprehensive income (loss)	32.0			(50.6		)	38.5
Less: Net income attributable to noncontrolling interests	58.1			61.4			66.0
Comprehensive income	95.0			193.5			203.4
Net income (loss) attributable to AK Steel Holding Corporation	$	186.0		$	103.5		$	(16.8	)
Less: Comprehensive income attributable to noncontrolling interests	51.8			58.1			61.4
Net income (loss) per share attributable to AK Steel Holding Corporation common stockholders:
Comprehensive income attributable to AK Steel Holding Corporation	$	43.2		$	135.4		$	142.0
Basic	$	0.59		$	0.33		$	(0.07	)
Diluted	$	0.59		$	0.32		$	(0.07	)

See notes to consolidated financial statements.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED BALANCE SHEETS
Years Ended December 31, 2018, 2017 and 2016
December 31, 2019 and 2018
(dollars in millions)
(dollars in millions, except per share data)
	2018			2017			2016
	2019			2018
Net income	$	244.1		$	164.9		$	49.2
ASSETS
Other comprehensive income, before tax:
Current assets:
Foreign currency translation gain (loss)	(1.7		)	4.7			(1.5		)
Cash and cash equivalents	$	31.0		$	48.6
Cash flow hedges:
Accounts receivable, net	577.9			635.8
Gains (losses) arising in period	(5.6		)	(11.5		)	56.1
Inventory	1,346.2			1,419.9
Reclassification of losses (gains) to net income	(10.3		)	(6.1		)	39.1
Other current assets	65.2			97.0
Pension and OPEB plans:
Total current assets	2,020.3			2,201.3
Prior service credit (cost) arising in period	11.1			4.7			(8.3		)
Property, plant and equipment	7,168.9			6,969.2
Gains (losses) arising in period	(63.6		)	94.2			11.6
Accumulated depreciation	(5,237.0		)	(5,057.6		)
Reclassification of prior service cost (credits) included in net income	(9.8		)	(53.8		)	(54.8		)
Property, plant and equipment, net	1,931.9			1,911.6
Reclassification of losses (gains) included in net income	29.3			6.3			97.9
Other non-current assets:
Other comprehensive income (loss), before tax	(50.6		)	38.5			140.1
Goodwill and intangible assets	293.4			298.9
Income tax expense in other comprehensive income	—			—			15.5
Other non-current assets	345.0			103.9
Other comprehensive income (loss)	(50.6		)	38.5			124.6
TOTAL ASSETS	$	4,590.6		$	4,515.7
Comprehensive income	193.5			203.4			173.8
LIABILITIES AND EQUITY
Less: Comprehensive income attributable to noncontrolling interests	58.1			61.4			66.0
Current liabilities:
Comprehensive income attributable to AK Steel Holding Corporation	$	135.4		$	142.0		$	107.8
Accounts payable	$	705.1		$	801.0
Accrued liabilities	314.4			288.9
Current portion of pension and other postretirement benefit obligations	41.0			38.7
Total current liabilities	1,060.5			1,128.6
Non-current liabilities:
Long-term debt	1,968.8			1,993.7
Pension and other postretirement benefit obligations	717.8			829.9
Other non-current liabilities	366.2			134.0
TOTAL LIABILITIES	4,113.3			4,086.2
Equity:
Common stock, authorized 450,000,000 shares of $.01 par value each; issued 317,768,621 and 316,595,613 shares in 2019 and 2018; outstanding 316,401,478 and 315,535,765 shares in 2019 and 2018	3.2			3.2
Additional paid-in capital	2,904.2			2,894.9
Treasury stock, common shares at cost, 1,367,143 and 1,059,848 shares in 2019 and 2018	(7.3		)	(6.4		)
Accumulated deficit	(2,680.6		)	(2,691.8		)
Accumulated other comprehensive loss	(68.0		)	(100.0		)
Total stockholders’ equity	151.5			99.9
Noncontrolling interests	325.8			329.6
TOTAL EQUITY	477.3			429.5
TOTAL LIABILITIES AND EQUITY	$	4,590.6		$	4,515.7

See notes to consolidated financial statements.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2018 and 2017
(dollars in millions, except per share data)
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	48.6		$	38.0
Accounts receivable, net	635.8			517.8
Inventory	1,419.9			1,385.0
Other current assets	97.0			130.3
Total current assets	2,201.3			2,071.1
Property, plant and equipment	6,969.2			6,831.8
Accumulated depreciation	(5,057.6		)	(4,845.6		)
Property, plant and equipment, net	1,911.6			1,986.2
Other non-current assets:
Goodwill and intangible assets	298.9			306.7
Other non-current assets	103.9			110.8
TOTAL ASSETS	$	4,515.7		$	4,474.8
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	801.0		$	690.4
Accrued liabilities	288.9			270.5
Current portion of pension and other postretirement benefit obligations	38.7			40.1
Total current liabilities	1,128.6			1,001.0
Non-current liabilities:
Long-term debt	1,993.7			2,110.1
Pension and other postretirement benefit obligations	829.9			894.2
Other non-current liabilities	134.0			168.9
TOTAL LIABILITIES	4,086.2			4,174.2
Equity:
Common stock, authorized 450,000,000 shares of $.01 par value each; issued 316,595,613 and 315,782,764 shares in 2018 and 2017; outstanding 315,535,765 and 314,884,569 shares in 2018 and 2017	3.2			3.2
Additional paid-in capital	2,894.9			2,884.8
Treasury stock, common shares at cost, 1,059,848 and 898,195 shares in 2018 and 2017	(6.4		)	(5.4		)
Accumulated deficit	(2,691.8		)	(2,877.0		)
Accumulated other comprehensive loss	(100.0		)	(50.2		)
Total stockholders’ equity (deficit)	99.9			(44.6		)
Noncontrolling interests	329.6			345.2
TOTAL EQUITY	429.5			300.6
TOTAL LIABILITIES AND EQUITY	$	4,515.7		$	4,474.8

The consolidated balance sheets as of December 31, 2019 and 2018, include the following amounts for consolidated variable interest entities, before intercompany eliminations. See Note 16 for more information concerning variable interest entities.



	2019			2018
Middletown Coke Company, LLC (“SunCoke Middletown”)
Cash and cash equivalents	$	0.1		$	1.1
Inventory	24.1			21.1
Property, plant and equipment	446.1			427.8
Accumulated depreciation	(127.7		)	(106.9		)
Accounts payable	19.2			13.7
Other assets (liabilities), net	1.5			(1.2		)
Noncontrolling interests	324.9			328.2

Other variable interest entities
Cash and cash equivalents	$	0.1		$	0.5
Property, plant and equipment	11.7			11.7
Accumulated depreciation	(10.0		)	(9.8		)
Other assets (liabilities), net	0.1			0.5
Noncontrolling interests	0.9			1.4

See notes to consolidated financial statements.

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The consolidated balance sheets as of December 31, 2018 and 2017, include the following amounts for consolidated variable interest entities, before intercompany eliminations. See Note 15 for more information concerning variable interest entities.



AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2019, 2018 and 2017
(dollars in millions)
	2019			2018			2017
Cash flows from operating activities:
Net income	$	63.0		$	244.1		$	164.9
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation	169.9			201.6			209.8
Depreciation—SunCoke Middletown	22.7			18.6			16.2
Amortization	32.7			32.0			24.1
Ashland Works closure	56.0			—			—
Asset impairment charge—Ashland Works Hot End	—			—			75.6
Credit for adjustment of liability for transportation costs	—			—			(19.3		)
Deferred income taxes	(1.0		)	(8.0		)	(9.0		)
Contributions to pension trust	(43.5		)	(49.9		)	(44.1		)
Pension and OPEB (income) expense	17.8			(11.6		)	(64.4		)
(Gains) losses on retirement of debt	(0.8		)	(2.0		)	21.3
Mark-to-market (gains) losses on derivative contracts	(44.0		)	(8.9		)	(45.7		)
Other operating items, net	(7.6		)	2.4			20.1
Changes in assets and liabilities, net of effect of acquired business:
Accounts receivable	60.2			(125.0		)	(34.4		)
Inventory	73.7			(34.8		)	(116.7		)
Accounts payable and other current liabilities	(172.8		)	119.6			46.2
Other assets	75.0			52.9			(6.5		)
Other pension payments	(0.9		)	(1.0		)	(1.1		)
OPEB payments	(26.8		)	(35.6		)	(39.6		)
Other liabilities	(7.7		)	(29.7		)	1.4
Net cash flows from operating activities	265.9			364.7			198.8
Cash flows from investing activities:
Capital investments	(180.8		)	(150.1		)	(149.6		)
Capital investments—SunCoke Middletown	(14.0		)	(1.9		)	(2.9		)
Investment in acquired business, net of cash acquired	—			—			(360.4		)
Other investing items, net	6.6			0.1			4.2
Net cash flows from investing activities	(188.2		)	(151.9		)	(508.7		)
Cash flows from financing activities:
Net borrowings (repayments) under credit facility	115.0			(115.0		)	450.0
Proceeds from issuance of long-term debt	—			—			680.0
Redemption of long-term debt	(152.3		)	(12.6		)	(848.4		)
Debt issuance costs	—			—			(25.3		)
SunCoke Middletown distributions to noncontrolling interest owners	(55.6		)	(73.7		)	(79.1		)
Other financing items, net	(2.4		)	(0.9		)	(2.5		)
Net cash flows from financing activities	(95.3		)	(202.2		)	174.7
Net increase (decrease) in cash and cash equivalents	(17.6		)	10.6			(135.2		)
Cash and cash equivalents, beginning of year	48.6			38.0			173.2
Cash and cash equivalents, end of year	$	31.0		$	48.6		$	38.0

	2018			2017
Middletown Coke Company, LLC (“SunCoke Middletown”)
Cash and cash equivalents	$	1.1		$	0.1
Inventory	21.1			18.4
Property, plant and equipment	427.8			425.9
Accumulated depreciation	(106.9		)	(88.6		)
Accounts payable	13.7			11.3
Other assets (liabilities), net	(1.2		)	(1.0		)
Noncontrolling interests	328.2			343.5
Other variable interest entities
Cash and cash equivalents	$	0.5		$	0.7
Property, plant and equipment	11.7			11.7
Accumulated depreciation	(9.8		)	(9.6		)
Other assets (liabilities), net	0.5			0.8
Noncontrolling interests	1.4			1.7

See notes to consolidated financial statements.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2018, 2017 and 2016
Years Ended December 31, 2019, 2018 and 2017
(dollars in millions)
	2018			2017			2016
	2019			2018			2017
Cash flows from operating activities:
Common stock
Net income	$	244.1		$	164.9		$	49.2
Balance at beginning of period	$	3.2		$	3.2		$	3.1
Adjustments to reconcile net income to cash flows from operating activities:
Share-based compensation	—			—			0.1
Depreciation	201.6			209.8			201.7
Balance at end of period	3.2			3.2			3.2
Depreciation—SunCoke Middletown	18.6			16.2			14.9
Additional paid-in capital
Amortization	32.0			24.1			18.4
Balance at beginning of period	2,894.9			2,884.8			2,855.4
Asset impairment charge—Ashland Works Hot End	—			75.6			—
Share-based compensation	9.2			9.2			7.6
Charge (credit) for transportation costs affected by termination of pellet agreement	—			(19.3		)	32.9
Stock options exercised	0.1			0.9			0.5
Deferred income taxes	(8.0		)	(9.0		)	(4.1		)
Exchangeable notes exchange feature	—			—			21.3
Contributions to pension trust	(49.9		)	(44.1		)	—
Balance at end of period	2,904.2			2,894.9			2,884.8
Pension and OPEB (income) expense	(11.6		)	(64.4		)	24.3
Treasury stock
(Gains) losses on retirement of debt	(2.0		)	21.3			9.2
Balance at beginning of period	(6.4		)	(5.4		)	(2.4		)
Mark-to-market (gains) losses on derivative contracts	(8.9		)	(45.7		)	1.2
Purchase of treasury stock	(0.9		)	(1.0		)	(3.0		)
Other operating items, net	2.4			20.1			3.0
Balance at end of period	(7.3		)	(6.4		)	(5.4		)
Changes in assets and liabilities, net of effect of acquired business:
Accumulated deficit
Accounts receivable	(125.0		)	(34.4		)	0.1
Balance at beginning of period	(2,691.8		)	(2,877.0		)	(2,980.5		)
Inventory	(34.8		)	(116.7		)	129.6
Cumulative effect of adopting new hedging standard	—			(0.8		)	—
Accounts payable and other current liabilities	119.6			46.2			(143.2		)
Net income attributable to AK Steel Holding Corporation	11.2			186.0			103.5
Other assets	52.9			(6.5		)	40.9
Balance at end of period	(2,680.6		)	(2,691.8		)	(2,877.0		)
Other pension payments	(1.0		)	(1.1		)	(33.0		)
Accumulated other comprehensive loss
OPEB payments	(35.6		)	(39.6		)	(34.4		)
Balance at beginning of period	(100.0		)	(50.2		)	(88.7		)
Other liabilities	(29.7		)	1.4			(6.1		)
Cumulative effect of adopting new hedging standard	—			0.8			—
Net cash flows from operating activities	364.7			198.8			304.6
Change in accumulated other comprehensive loss	32.0			(50.6		)	38.5
Cash flows from investing activities:
Balance at end of period	(68.0		)	(100.0		)	(50.2		)
Capital investments	(152.0		)	(152.5		)	(127.6		)
Noncontrolling interests
Investment in acquired business, net of cash acquired	—			(360.4		)	—
Balance at beginning of period	329.6			345.2			362.9
Other investing items, net	0.1			4.2			2.3
Net income attributable to noncontrolling interests	51.8			58.1			61.4
Net cash flows from investing activities	(151.9		)	(508.7		)	(125.3		)
Net distributions to noncontrolling interests	(55.6		)	(73.7		)	(79.1		)
Cash flows from financing activities:
Balance at end of period	325.8			329.6			345.2
Net borrowings (repayments) under credit facility	(115.0		)	450.0			(550.0		)
Total equity	$	477.3		$	429.5		$	300.6
Proceeds from issuance of long-term debt	—			680.0			380.0
Redemption of long-term debt	(12.6		)	(848.4		)	(392.8		)
Proceeds from issuance of common stock	—			—			600.4
Debt issuance costs	—			(25.3		)	(20.4		)
SunCoke Middletown distributions to noncontrolling interest owners	(73.7		)	(79.1		)	(85.1		)
Other financing items, net	(0.9		)	(2.5		)	5.2
Net cash flows from financing activities	(202.2		)	174.7			(62.7		)
Net increase (decrease) in cash and cash equivalents	10.6			(135.2		)	116.6
Cash and cash equivalents, beginning of year	38.0			173.2			56.6
Cash and cash equivalents, end of year	$	48.6		$	38.0		$	173.2

See notes to consolidated financial statements.

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AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
Years Ended December 31, 2018, 2017 and 2016
(dollars in millions)
	2018			2017			2016
Common stock
Balance at beginning of period	$	3.2		$	3.1		$	1.8
Issuance of common stock	—			—			1.3
Share-based compensation	—			0.1			—
Balance at end of period	3.2			3.2			3.1
Additional paid-in capital
Balance at beginning of period	2,884.8			2,855.4			2,266.8
Issuance of common stock	—			—			599.1
Share-based compensation	9.2			7.6			5.4
Stock options exercised	0.9			0.5			5.4
Exchangeable notes exchange feature	—			21.3			(21.3		)
Balance at end of period	2,894.9			2,884.8			2,855.4
Treasury stock
Balance at beginning of period	(5.4		)	(2.4		)	(2.0		)
Purchase of treasury stock	(1.0		)	(3.0		)	(0.4		)
Balance at end of period	(6.4		)	(5.4		)	(2.4		)
Accumulated deficit
Balance at beginning of period	(2,877.0		)	(2,980.5		)	(2,963.7		)
Cumulative effect of adopting new hedging standard	(0.8		)	—			—
Net income attributable to AK Steel Holding Corporation	186.0			103.5			(16.8		)
Balance at end of period	(2,691.8		)	(2,877.0		)	(2,980.5		)
Accumulated other comprehensive loss
Balance at beginning of period	(50.2		)	(88.7		)	(213.3		)
Cumulative effect of adopting new hedging standard	0.8			—			—
Change in accumulated other comprehensive loss	(50.6		)	38.5			124.6
Balance at end of period	(100.0		)	(50.2		)	(88.7		)
Noncontrolling interests
Balance at beginning of period	345.2			362.9			382.0
Net income attributable to noncontrolling interests	58.1			61.4			66.0
Net distributions to noncontrolling interests	(73.7		)	(79.1		)	(85.1		)
Balance at end of period	329.6			345.2			362.9
Total equity	$	429.5		$	300.6		$	149.8

See notes to consolidated financial statements.

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AK STEEL HOLDING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in millions, except per share amounts or as otherwise specifically noted)

NOTE 1 - Summary of Significant Accounting Policies

Basis of Presentation—These financial statements consolidate the operations and accounts of AK Steel Holding Corporation (“AK Holding”), its wholly owned subsidiary AK Steel Corporation (“AK Steel”), all subsidiaries in which AK Holding has a controlling interest, and two variable interest entities for which AK Steel is the primary beneficiary. Unless the context indicates otherwise, references to “we,” “us” and “our” refer to AK Holding and its subsidiaries. We also operate Mexican and European trading companies that buy and sell steel and steel products and other materials. We manage operations on a consolidated, integrated basis so that we can use the most appropriate equipment and facilities for the production of a product, regardless of product line. Therefore, we conclude that we operate in a single business segment. All intercompany transactions and balances have been eliminated.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the amounts reported. We base these estimates on historical experience and information available to us about current events and actions we may take in the future. Estimates and assumptions affect significant items that include the carrying value of long-lived assets, including investments and goodwill; valuation allowances for receivables, inventories and deferred income tax assets; legal and environmental liabilities; workers compensation and asbestos liabilities; share-based compensation; and assets and obligations of employee benefit plans. There can be no assurance that actual results will not differ from these estimates.

Revenue Recognition—We generate our revenue through product sales, and shipping terms generally indicate when we have fulfilled our performance obligations and passed control of products to our customer. Our revenue transactions consist of a single performance obligation to transfer promised goods. We have contracts with a substantial portion of our customers. These contracts usually define the mechanism for determining the sales price, but the contracts do not impose a specific quantity on either party. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders or other written instructions we receive from the customer. Spot market sales are made through purchase orders or other written instructions. We recognize revenue when we have fulfilled a performance obligation, which is typically when we have shipped products at the customer’s instructions. For sales with shipping terms that transfer title and control at the destination point, we recognize revenue when the customer receives the goods and our performance obligation is complete. For sales with shipping terms that transfer title and control at the shipping point with us bearing responsibility for freight costs to the destination, we determine that we have fulfilled a single performance obligation and recognize revenue when we ship the goods. For our tooling solutions, we record progress payments that we receive from a customer as accrued liabilities until we recognize the revenue when the customer provides written acceptance that our performance obligation has been fulfilled.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring product. We reduce the amount of revenue recognized for estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets we serve. We maintain an allowance for doubtful accounts for the loss that would be incurred if a customer is unable to pay amounts due. We initially estimate the allowance required at the time of revenue recognition based on historical experience and make changes to the allowance based on various factors, including changes in the customer’s financial condition or payment patterns. Sales taxes collected from customers are excluded from revenues.

We recognize an allowance for credit loss at the time a receivable is recorded based on our estimate of expected credit losses and adjust this estimate over the life of the receivable as needed. We evaluate the aggregation and risk characteristics of receivable pools and develop loss rates that reflect historical collections, current forecasts of future economic conditions over the time horizon we are exposed to credit risk, and payment terms or conditions that may materially affect future forecasts. We expect credit losses associated with major auto companies to be lower than other customer pools.

Cost of Products Sold—Cost of products

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