AK Steel Holding (AKS)

2007 Financial Results Overview

The Company experienced record financial performance in 2007. For the first time in the Company’s history, it achieved an operating profit in excess of $100 per ton not only for a quarter but for the entire year. The Company achieved a quarterly record of $124 operating profit per ton (excluding $24.7 of curtailment charges) in the second quarter of 2007 and an annual record of $103 operating profit per ton (excluding $39.8 of curtailment charges) for all of 2007. At the bottom line, the Company also achieved record earnings of $3.46 per diluted share on record net income of $387.7. Net sales increased by more than 15% over 2006, and the Company established a new annual net sales record of $7 billion in 2007. The average annual selling price for the Company’s products rose to $1,081 per ton, also a Company record. The continued strong operating results enabled the Company to continue to improve its cash position. The Company’s cash at 2007 year-end was $713.6 versus $519.4 at 2006 year-end, even after making $700.0 in combined debt redemptions and contributions to the

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Company’s pension trust fund and $104.4 in capital expenditures during 2007. The Company also ended 2007 with $683.7 of availability under its credit facility, representing a record-high total liquidity of $1,397.3.

Although the Company’s overall financial performance in 2007 was the best in its history, there were many challenges which the Company had to overcome to achieve that record. The Company again had to contend with large increases in the costs for raw materials which caused the cost of products sold to increase by approximately 9% from the prior year. While the Company was able to recoup a portion of those increased costs through price increases, it was not able to recover all of them. Until a labor dispute ended late in the first quarter of 2007, the Company operated its largest facility, Middletown Works, with a replacement workforce. For several months after that, the Company incurred increased costs while it brought back and re-trained its represented workforce at Middletown Works. The Company’s results also were impacted by curtailment charges associated with the successful completion of the new labor agreement at Middletown Works, as well as a new labor agreement at Mansfield Works. In addition, the Company experienced an unplanned outage at its Ashland Works blast furnace late in the third quarter that affected operations there for the remainder of the third quarter and a portion of the fourth quarter. Despite all of these challenges, the Company not only improved its financial performance over 2006, but also had a record-breaking year in all of the key metrics its uses to measure its financial performance.

The Company was able to partially overcome its increased costs in 2007 by increasing selling prices, improving productivity, lowering operating costs and reducing discretionary spending wherever prudent.

2006 Financial Results Overview

With an environment of improved customer relations, improved customer and labor contracts, and the realization of cost savings from initiatives that management began in the fourth quarter of 2003, the Company experienced significant improvements in 2006 in its sales and operating results, excluding the effect of certain non-cash charges discussed in more detail below. Net sales increased by more than 7% over 2005 and established a new record for the Company in 2006. The average annual selling price for the Company’s products rose to $984 per ton, also a Company record. The continued strong operating results enabled the Company to continue to maintain its cash position, despite making $209.0 in early, voluntary contributions to the Company’s pension trust fund and $76.2 in capital expenditures during the year. The Company ended the year with $519.4 of cash and $544.3 of availability under its two credit facilities, representing total liquidity of $1,063.7.

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Although operating results continue to be strong, there also were continued financial challenges. The Company had to contend with large, unprecedented increases in the costs for raw materials and energy in 2006. As a result, the cost of products sold increased by approximately 9% from the prior year. Due to competitive forces, the Company was not able to recoup a portion of those increased costs through price increases. The Company also incurred additional costs associated with the lockout of hourly employees at the Company’s Middletown Works that began on March 1, 2006. However, as the year progressed, the Company was able to significantly reduce those lockout-related costs. Also, because of the nature of its business, the Company continues to incur significant costs to comply with stringent, and in some instances newly-imposed environmental regulations. For example, starting in 2005 and continuing into 2006 the Company invested approximately $65.0 to install new environmental equipment at its Middletown Works to comply with newly-imposed regulations governing particulate emissions. The first phase of that project was completed in May 2005 and the second phase was completed in April 2006. Also, in 2006 the Company began work pursuant to a Consent Decree to address PCBs in the sediments and soils relating to Dicks Creek and certain other specified surface waters, adjacent floodplain areas, and other geographic areas. Additional information concerning these remediation activities is contained in the “Legal Proceedings” section above.

The Company was able to partially overcome these increased costs in 2006 by increasing selling prices, improving productivity, lowering operating and overhead costs, reducing discretionary spending wherever prudent, and where possible, adding various raw material and energy surcharges to the price of carbon, stainless and electrical steel product sales. Overall, management is very pleased with the progress made in 2006 and the ongoing efforts of its employees to help the Company move toward its goal of returning to sustained profitability.

2005 Financial Results Overview

With an environment of improved customer relations, an improving economy and the realization of cost savings from initiatives that management began in the fourth quarter of 2003, the Company experienced significant improvements in 2005 in its shipments, sales and operating results, excluding the effect of certain non-cash charges discussed in more detail below. Both net sales and shipments increased over 2004 and established new records for the Company in 2005. The average selling price for the Company’s products rose to $879 per ton. The improvement in operating results enabled the Company to continue to improve its cash position, ending the year with $519.6 of cash and $509.8 of availability under its two credit facilities, representing total liquidity of $1,029.4.

Although operating results improved in 2005, there also were continued financial challenges. The Company had to contend with large, unprecedented increases in the costs for raw materials and energy in 2005. As a result, the cost of products sold increased by 9.7% from the prior year. Due to competitive forces, the Company was not able to recoup a portion of those increased costs through price increases. Also, because of the nature of its business, the Company continues to incur significant costs to comply with stringent, and in some instances new, environmental regulations. For example, the Company is investing approximately $65.0 to install new environmental equipment at its Middletown Works to comply with newly-enacted regulations governing particulate emissions. The first phase of that project was completed in 2005.

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The Company was able to partially overcome these increased costs in 2005 by improving productivity and quality, lowering operating and overhead costs, reducing discretionary spending wherever prudent, and where possible, adding surcharges to the price of carbon, stainless and electrical steel product sales. Overall, management of the Company is very pleased with the progress made in 2005 and the ongoing efforts of its employees throughout the Company to help the Company make progress toward its goal of returning to sustained profitability.