AK Steel Holding (AKS)

Liquidity and Capital Resources

At September 30, 2007, the Company had total liquidity of $1,109.3, consisting of $425.6 of cash and cash equivalents and $683.7 of availability under the Company’s $850.0 five-year revolving credit facility. At September 30, 2007, there were no outstanding borrowings under the credit facility; however, availability was reduced by $166.3 due to outstanding letters of credit. Availability under the credit facility fluctuates monthly based on the varying levels of eligible collateral. The Company entered into the new credit facility in February 2007. It is secured by the Company’s inventory and accounts receivable and replaced separate inventory and accounts receivable facilities totaling $700.0.

Cash generated by operations totaled $400.3 for the nine months ended September 30, 2007. Net cash generated by the Company’s operations benefited from $131.9 of cash generated by a decrease of net working capital. The decrease in net working capital was from reduced inventory levels and higher accounts payable, partially offset by higher accounts receivable, as a result of strong quarterly sales.

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The Company made early pension contributions in 2007 of $75.0 in the first quarter, $105.0 in the second quarter and $70.0 in the third quarter. These total pension trust contributions of $250.0 for 2007 increase the Company’s total contributions since 2005 to $609.0. Currently, the Company estimates required pension contributions for the years 2008 to 2010 to average approximately $150.0 to $160.0 each year. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants, and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of changes to pension legislation in the future, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases. The Company also anticipates making a $468.0 contribution to the Middletown Works Retiree’s VEBA trust in the first quarter of 2008 as part of the settlement reached with the class members in October 2007.

During the nine months ended September 30, 2007, cash used by investing activities totaled $55.8. Cash used included $63.5 for capital investments and $8.0 in contributions to a nonqualified pension plan, partially offset by a draw in the amount of $2.5 from the restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnace. Also in the first nine months of 2007, $12.6 in proceeds was generated when the Company transferred support of a letter of credit from restricted cash to the Company’s credit facility. Capital spending for the year 2007 is expected to total approximately $135.0. In October 2007, the Company announced two major capital projects totaling $180.0 that will lower production costs and increase electrical steel capacity at the Company’s specialty steel operations at its Butler Works and Zanesville Works. The projects are expected to be completed by the end of 2009.

Liquidity and Capital Resources

At June 30, 2007, the Company had total liquidity of $1,138.2 consisting of $455.9 of cash and cash equivalents and $682.3 of availability under the Company’s $850.0 five-year revolving credit facility. At June 30, 2007, there were no outstanding borrowings under the credit facility; however, availability was reduced by $167.7 due to outstanding letters of credit. Availability under the credit facility fluctuates monthly based on the varying levels of eligible collateral. The Company entered into the new credit facility in February 2007. It is secured by the Company’s inventory and accounts receivable and replaced separate inventory and accounts receivable facilities totaling $700.0. The new facility provides the Company with enhanced liquidity, lower costs and greater flexibility for borrowings and is being used for general corporate purposes.

Cash generated by operations totaled $250.1 for the six months ended June 30, 2007. Net cash generated by the Company’s operations was primarily impacted by $89.1 of cash generated from the decrease of net working capital. Sources of cash were from lower inventory levels and higher accounts payable, partially offset by higher accounts receivable, as a result of record quarterly sales resulting principally from higher selling prices and higher shipments.

The Company made early pension contributions of $75.0 in the first quarter of 2007 and $105.0 in the second quarter of 2007. With the completion of these early contributions, no additional pension payments will be required for 2007. In July 2007, however, the Company announced it will make another early contribution of $70.0 to its pension trust in the third quarter of 2007, bringing total contributions to $250.0 for 2007, thereby increasing the total contributions since 2005 to $679.0. Currently, including credit for the announced third quarter contribution, the Company estimates required pension contributions for the years 2008 to 2010 to be approximately $120.0 to $150.0 each year. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of changes to pension legislation in the future, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.

During the six months ended June 30, 2007, cash used by investing activities totaled $23.3. This included $35.1 for capital investments, which was partially offset by a draw in the amount of $2.5 from the restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnace. Also in the first half of 2007, $12.6 in proceeds was generated when the Company transferred support of a letter of credit from restricted cash to the Company’s credit facility. Capital spending for the year 2007 is expected to total approximately $150.0.

Liquidity and Capital Resources

At March 31, 2007, the Company had total liquidity of $973.9 consisting of $290.1 of cash and cash equivalents and $683.8 of availability under the Company’s new $850.0 five-year revolving credit facility. At March 31, 2007, there were no outstanding borrowings under the credit facility; however, availability was reduced by $166.2 due to outstanding letters of credit. Availability under the credit facility fluctuates monthly based on the varying levels of eligible collateral. The Company entered into the new credit facility in February 2007. It is secured by the Company’s inventory and accounts receivable and replaced separate inventory and accounts receivable facilities which together provided $700.0 of availability. The new facility provides the Company with enhanced liquidity, lower costs and greater flexibility for borrowings and will be used for general corporate purposes.

In April 2007, the Company announced that it would redeem $75.0 of the remaining $225.0 of its outstanding 7-7/8% senior notes due February 15, 2009. The redemption of these notes follows the redemption of $225.0 of the original $450.0 of these notes on March 2, 2007 and will be funded from the Company’s existing cash reserves. This second redemption is expected to be completed in the second quarter of 2007. The Company also reaffirmed its prior intent, subject to market conditions, to consider early redemption of the remaining $150.0 of outstanding 7-7/8% senior notes no later than the first quarter of 2008. The Company also has senior notes of $550.0 due in 2012.

Cash used by operations totaled $4.6 for the three months ended March 31, 2007. The primary source of cash was net income from the Company’s operating activities. This was offset by the Company’s uses of cash in the first quarter of 2007 related to the Company’s $75.0 early pension contribution, as described in more detail below, along with a $70.8 increase in the Company’s working capital as a result of higher accounts receivable associated with the record quarterly revenues, lower accounts payable related to lower raw materials purchases, and an overall reduction in inventories.

During the first quarter of 2007, the Company made an early pension contribution of $75.0, increasing its total of early and/or voluntary pension fund contributions in the last two years to $434.0. In the second quarter of 2007, the Company announced and subsequently made an early pension contribution of $105.0, thereby increasing the total contributions over the last two years to $539.0. Based upon current assumptions, no additional pension payments will be required for 2007, but the Company may elect to make additional early contributions. Currently, the Company estimates required pension contributions for 2008 and 2009 to be in the ranges of $200.0 to $225.0 and $100.0 to $150.0, respectively. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.

During the three months ended March 31, 2007, net cash used by investing activities totaled $1.9, including $15.4 for capital investments. Such capital investments were offset by $0.3 in proceeds received from the draw on restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnaces. Also in the first quarter of 2007, a net $12.6 in proceeds was generated when the Company transferred support of a letter of credit from restricted cash to the Company’s credit facility. Capital spending for the year 2007 is expected to total approximately $150.0.

During the first quarter of 2007, cash used by financing activities totaled $222.8, primarily the result of the Company’s early redemption of $225.0 of its $450.0 outstanding 7-7/8% senior notes due February 15, 2009 and fees related to the new credit facility, offset by excess tax benefits from stock-based compensation of $2.9.

Liquidity and Capital Resources

At September 30, 2006, the Company had total liquidity of $1,004.1, consisting of $466.8 of cash and cash equivalents, $167.7 of availability under a $300.0 accounts receivable purchase credit facility and $369.6 of availability under a $400.0 five-year senior revolving credit facility secured by certain of the Company’s inventories. The accounts receivable purchase credit facility’s three-year term is scheduled to expire in May 2007 with the option of a two-year extension. At September 30, 2006, there were no outstanding borrowings under either credit facility; provided, however, that availability under the facilities was reduced by $147.7 due to outstanding letters of credit. Availability under both facilities fluctuates monthly based on the varying levels of eligible collateral. The Company has no significant scheduled debt payments due until 2009. In 2009 and 2012, the Company has Senior Notes due of $450.0 and $550.0, respectively.

Cash used by operations totaled $4.5 for the nine months ended September 30, 2006. Net cash used by the Company’s operations was negatively impacted by $142.0 of cash used to increase net working capital and the $134.0 in pension contributions detailed below. Accounts receivable rose as a result of record quarterly sales resulting principally from higher selling prices. The value of inventories and accounts payable also grew, primarily due to higher levels of inventories along with the impact of rising raw material and energy costs.

In May and July 2006, the Company made voluntary early contributions to its pension trust in the amounts of $84.0 and $50.0, respectively, as part of an effort to reduce overall liabilities and improve the funding level of its pension plans. In addition, the Company has announced another earlier-than-required contribution to its pension trust in the fourth quarter of 2006 in the amount of $75.0. After taking into account these already-made or planned 2006 contributions, the Company currently estimates additional required contributions to its pension trust for 2007 and 2008 to be in the ranges of $175.0 – $200.0 and $200.0 – $250.0, respectively. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.

During the nine months ended September 30, 2006, cash used by investing activities totaled $52.3, including $52.2 for capital investments offset by $8.0 proceeds received from the draw on restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnaces. Capital spending for the year 2006 is expected to total approximately $90.0. Also in the first quarter of 2006, in order to reduce overall banking fees, the Company utilized $12.3 in cash to collateralize its letter of credit supporting an industrial revenue bond. This amount is classified in the Company’s condensed consolidated balance sheets as restricted cash in Other Investments.

Liquidity and Capital Resources

At June 30, 2006, the Company had total liquidity of $1,013.6, consisting of $485.4 of cash and cash equivalents, $158.6 of availability under a $300.0 accounts receivable purchase credit facility and $369.6 of availability under a $400.0 five-year senior revolving credit facility secured by certain of the Company’s inventories. The accounts receivable purchase credit facility’s three year term is scheduled to expire in May 2007 with the option of a two-year extension. At June 30, 2006, there were no outstanding borrowings under either credit facility; provided, however, that availability under the facilities was reduced by $156.8 due to outstanding letters of credit. Availability under both facilities fluctuates monthly based on the varying levels of eligible collateral. The Company has no significant scheduled debt payments due until 2009. In 2009 and 2012, the Company has Senior Notes due of $450.0 and $550.0, respectively.

Cash generated by operations totaled $5.6 for the six months ended June 30, 2006. Net cash generated by the Company’s operations was primarily impacted by $85.2 of cash used to increase net working capital. Accounts receivable rose as a result of record quarterly sales resulting principally from higher selling prices. The value of inventories and accounts payable also grew, primarily due to higher levels of inventories along with the impact of rising raw material and energy costs.

In May 2006, the Company made an early contribution of $84.0 to its pension plans. In July 2006, the Company’s Board of Directors authorized the Company to make, and the Company did make, a voluntary $50.0 contribution to its pension trust as part of an effort to reduce overall liabilities. After making these early contributions, the Company currently estimates additional required contributions for 2007 and 2008 to be in the ranges of $250.0 – $300.0 and

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$200.0 – $250.0, respectively. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.

During the six months ended June 30, 2006, cash used by investing activities totaled $41.5, including $37.6 for capital investments offset by $7.2 proceeds received from the draw on restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnace. Capital spending for the year 2006 is expected to total approximately $130.0. Also in the first quarter of 2006, in order to reduce overall banking fees, the Company utilized $12.3 in cash to collateralize its letter of credit supporting an industrial revenue bond. This amount is classified in the Company’s condensed consolidated balance sheets as restricted cash in Other Investments.

Liquidity and Capital Resources

At March 31, 2006, the Company had total liquidity of $1,006.7 consisting of $475.2 of cash and cash equivalents, $161.9 of availability under a $300.0 accounts receivable purchase credit facility and $369.6 of availability under a $400.0 five-year senior revolving credit facility secured by certain of the Company’s inventories. At March 31, 2006, there were no outstanding borrowings under either credit facility; however, availability under the facilities was reduced by $153.5 due to outstanding letters of credit. Availability under both facilities fluctuates monthly based on the varying levels of eligible collateral. The Company has no significant scheduled debt payments due until 2009. In 2009 and 2012, the Company has Senior Notes due of $450.0 and $550.0, respectively.

Cash used by operations totaled $16.0 for the three months ended March 31, 2006. Net cash generated by the Company’s operations was more than offset by $89.1 of cash used to increase net working capital. Accounts receivable rose slightly as a result of increased sales resulting principally from higher selling prices. The value of inventories also grew, primarily due to higher levels of inventories along with rising raw material and energy costs. Accounts payable declined due principally to decreased raw materials purchases.

Based upon current assumptions, the Company will be required to make approximately $84.0 in pension contributions during 2006. Currently, the Company estimates required payments for 2007 and 2008 to be in the ranges of $250.0-$300.0 and $200.0-$250.0, respectively. The calculation of estimated future pension contributions requires the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount future benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.

During the three months ended March 31, 2006, cash used by investing activities totaled $28.5, including $19.7 for capital investments offset by $3.6 proceeds received from the draw on restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnaces. Capital spending for the year 2006 is expected to total approximately $160.0. Also in the first quarter of 2006, in order to reduce overall banking fees, the Company utilized $12.3 in cash to collateralize its letter of credit supporting an industrial revenue bond. This amount is classified in the Company’s condensed consolidated balance sheets as restricted cash in Other Investments.

Liquidity and Capital Resources

At September 30, 2005, the Company had $348.7 of cash and cash equivalents, $172.9 of availability under a $300.0 trade receivable revolving credit facility and $299.1 of availability under a $400.0 inventory credit facility. At September 30, 2005, there were no outstanding borrowings under either credit facility. Total availability under these facilities was reduced by $154.8 of outstanding letters of credit and reduced pools of eligible collateral. Availability under each facility fluctuates monthly with changes in the levels of eligible receivables and inventories. The Company believes that its current liquidity will be adequate to meet its obligations for the foreseeable future. Future liquidity requirements for employee benefit plan contributions, scheduled debt maturities and capital investments are expected to be funded by internally generated cash and/or the other financing sources referred to above and/or in the notes to the financial statements. However, there is no assurance that the Company will be able to generate or obtain all of the necessary liquidity if there is a material deterioration in the steel industry or the overall economy. The Company’s forward-looking statement on liquidity is based on currently available information and to the extent the information is inaccurate, there could be a material adverse impact to the Company’s liquidity.

Net cash generated by operations totaled $73.8 for the nine months ended September 30, 2005. The net cash generated was the result of positive operating results partially offset by a utilization of cash of $84.8 for working capital and $150.0 voluntary early contribution to the pension trust in January 2005. The $84.8 increase in working capital was a result of an increase in accounts receivable associated with increased sales resulting from higher selling prices, higher shipments and the increase in the level of inventories due to higher input costs and an overall higher

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level of business. In addition, accounts payable increased due principally to the increased purchases necessary to support the Company’s higher level of business.

During the nine months ended September 30, 2005, cash used by investing activities totaled $103.3 including $133.9 for capital investments offset by $29.1 in industrial revenue bond and State of Ohio loan proceeds to finance construction of emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnaces. Capital spending for the year 2005 is expected to total approximately $175.0 and will be partially offset by approximately $35.0 for reimbursement from the restricted funds.

During the nine months ended September 30, 2005, cash flow from financing activities generated $1.1, due primarily to the exercise of stock options.

The Company has no material scheduled debt maturities due before 2009. In addition, as a result of the Pension Funding Equity Act (“Act”) of 2004, which was signed into law in early April 2004, the Company made a special election in the first quarter of 2005 that had the effect of reducing the amount of the Company’s required contributions to its pension plan trust in 2006. The contribution which otherwise would have been due in 2006 was not eliminated. Rather, it was simply deferred to a later date. This deferral provides the Company with more flexibility to use the cash which otherwise would have been contributed to the pension plan trust in 2006 to enhance the sustainable profitability of the Company. To the extent, however, that the financial performance of the Company improves sufficiently to allow such contributions while still moving toward the Company’s goal of sustained profitability, the Company may voluntarily make contributions to the pension plan trust in 2006 over and above the required contributions. The contribution in the amount of $150 million during the first quarter of 2005 was such a voluntary contribution. Based upon current assumptions, no cash payments to the Company’s pension plans are required in 2005. The amount and timing of future required contributions to the pension trust depend on the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contribution must be made increases.

Currently, the Company’s major pension plans are significantly underfunded. As a result, absent major increases in long-term interest rates, above average returns on pension plan assets, and/or changes in legislated funding requirements, the Company will be required to make contributions to its pension trusts in varying amounts for at least the next several years. Some of these contributions could be substantial. Based upon updated actuarial assumptions and demographics since the Company reported on this subject in its Annual Report on Form 10-K for the calendar year 2004, the Company now estimates required pension contributions approximately $100.0 for 2006 and $300.0 for 2007. As noted above, however, these estimates could be significantly impacted by numerous factors, including changes in the law with respect to pension funding requirements. In fact, new federal pension legislation has been proposed which, if enacted into law, would significantly change the amount and timing of the Company’s required pension funding contributions, starting as early as 2006. At this time, it is not possible to predict whether such legislation will be enacted into law in either its present or an alternative form and it thus is impossible to reliably quantify future pension funding requirements even for 2006 and 2007.

Liquidity and Capital Resources

At June 30, 2005, the Company had $264.6 of cash and cash equivalents, $172.5 of availability under a $300.0 trade receivable revolving credit facility and $357.3 of availability under a $400.0 inventory credit facility. At June 30, 2005, there were no outstanding borrowings under either credit facility. Total availability under these facilities was also reduced by $155.2 of outstanding letters of credit and reduced pools of eligible collateral. Availability under each facility fluctuates monthly with changes in the levels of eligible receivables and inventories. During the second quarter of 2005, the Company renegotiated fees on its existing inventory-based credit facility, which will have an estimated $1.0 annual cost benefit going forward. All other terms of the agreement remained unchanged. The Company believes that its current liquidity will be adequate to meet its obligations for the foreseeable future. Future liquidity requirements for employee benefit plan contributions, scheduled debt maturities and capital investments are expected to be funded by internally generated cash and/or the other financing sources referred to above and in the notes to the

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financial statements. However, there is no assurance that the Company will be able to generate or obtain all of the necessary liquidity if there is a material deterioration in the steel industry or the overall economy. The Company’s forward-looking statement on liquidity is based on currently available information and to the extent the information is inaccurate, there could be a material adverse impact to the Company’s liquidity.

Cash used by operations totaled $54.0 for the six months ended June 30, 2005. Net cash generated by the Company’s operations was more than offset by $185.1 of cash used to increase net working capital. Cash was also negatively impacted by the $150.0 voluntary cash contribution to the pension trust in January 2005. Accounts receivable rose slightly as a result of increased sales resulting from higher sales prices, while the value of inventories grew due to both higher levels of inventories in preparation for the third quarter maintenance outages and rising raw material and energy costs. Accounts payable increased due principally to the increased purchases necessary to support the Company’s higher level of business.

During the six months ended June 30, 2005, cash used by investing activities totaled $60.1, including $80.9 for capital investments offset by $20.3 in industrial revenue bond and loan from the state of Ohio proceeds to finance construction of emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnaces. Capital spending for the year 2005 is expected to total approximately $185.0 and will be offset by approximately $35.0 for reimbursement from the restricted funds.

During the six months ended June 30, 2005, cash flow from financing activities generated $1.6, due primarily to the exercise of stock options.

The Company has no material scheduled debt maturities due before 2009. In addition, as a result of the Pension Funding Equity Act (“Act”) of 2004, which was signed into law in early April 2004, the Company made a special election in the first quarter of 2005 that had the effect of reducing the amount of the Company’s required contributions to its pension plan trust in 2006. The contribution which otherwise would have been due in 2006 was not eliminated. Rather, it was simply deferred to a later date. This deferral provides the Company with more flexibility to use the cash which otherwise would have been contributed to the pension plan trust in 2006 to enhance the sustainable profitability of the Company. To the extent, however, that the financial performance of the Company improves sufficiently to allow such contributions while still moving toward the Company’s goal of sustained profitability, the Company may voluntarily make contributions to the pension plan trust in 2006 over and above the required contributions. In fact, the Company did make such a voluntary contribution in the amount of $150 million during the first quarter of 2005. Based upon current assumptions, no cash payments to the Company’s pension plans are required in 2005. The amount and timing of future required contributions to the pension trust depend on the use of assumptions concerning future events. The most significant of these assumptions relate to future investment performance of the pension funds, actuarial data relating to plan participants and the benchmark interest rate used to discount benefits to their present value. Because of the variability of factors underlying these assumptions, including the possibility of future pension legislation, the reliability of estimated future pension contributions decreases as the length of time until the contribution must be made increases. Currently, the Company’s major pension plans are significantly underfunded. As a result, absent major increases in long-term interest rates, above average returns on pension plan assets, and/or changes in legislated funding requirements, the Company will be required to make contributions to its pension trusts in varying amounts for at least the next several years. Some of these contributions could be substantial. Based upon updated actuarial assumptions and demographics since the Company reported on this subject in its Annual Report on Form 10-K for the calendar year 2004, the Company now estimates required pension contributions of less than $100.0 for 2006 and approximately $300.0 for 2007. As noted above, however, these estimates could be significantly impacted by changes in the law with respect to pension funding requirements. In fact, new federal pension legislation has been proposed which, if enacted into law, would significantly change the amount and timing of the Company’s required pension funding contributions, starting as early as 2006. At this time, it is not possible to predict whether such legislation will be enacted into law in either its present or an alternative form and it thus is impossible to reliably quantify future pension funding requirements even for 2006 and 2007.

Liquidity and Capital Resources

At March 31, 2005, the Company had $259.0 of cash and cash equivalents, $172.2 of availability under a $300.0 trade receivable revolving credit facility and $357.3 of availability under a $400.0 inventory credit facility. At March 31, 2005, there were no outstanding borrowings under either credit facility. Total availability under these facilities was also reduced by $155.5 of outstanding letters of credit and reduced pools of eligible collateral. Availability under each facility fluctuates monthly with changes in the levels of eligible receivables and inventories. The Company believes that its current liquidity will be adequate to meet its obligations for the foreseeable future. Future liquidity requirements for employee benefit plan contributions, scheduled debt maturities and capital investments are expected to be funded by internally generated cash and/or other financing sources. However, there is no assurance that the Company will be able to generate or obtain all of the necessary liquidity if there is a material deterioration in the steel industry or the overall economy. The Company’s forward looking statement on liquidity is based on currently available information and to the extent the information is inaccurate, there could be a material adverse impact to the Company’s liquidity.

Cash used by operations totaled $97.1 for the three months ended March 31, 2005. Net cash generated by the Company’s operations was more than offset by $105.9 of cash used to increase net working capital. Cash was also negatively impacted by the $150.0 voluntary cash contribution to the pension trust in January 2005. Accounts receivable rose slightly as a result of increased sales resulting from higher selling prices, while the value of inventories grew due to both higher levels of inventories and rising raw material and energy costs. Accounts payable increased due principally to the increased purchases necessary to support the Company’s higher level of business and continued improvement in vendor payment terms as a result of the Company’s improved financial condition.

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During the three months ended March 31, 2005, cash used by investing activities totaled $23.9, including $32.7 for capital investments offset by $8.8 proceeds received from the draw on restricted funds for spending related to emission control equipment for the Middletown Works’ blast furnace and basic oxygen furnaces. Capital spending for the year 2005 is expected to total approximately $185.0.

During the three months ended March 31, 2005, cash flow from financing activities generated $2.9, due primarily to the exercise of stock options.

The Company has no material scheduled debt maturities due before 2009. In addition, as a result of the Pension Funding Equity Act (“Act”) of 2004, which was signed into law in early April 2004, the Company made a special election in the first quarter of 2005 that had the effect of reducing the amount of the Company’s required contributions to its pension plan trust in 2006 to approximately $126.0. The contributions which otherwise would have been due in 2005 and 2006 were not eliminated. Rather, they were simply deferred to a later date. This deferral provides the Company with more flexibility to use the cash which otherwise would have been contributed to the pension plan trust in 2005 and 2006 to enhance the sustainable profitability of the Company. To the extent, however, that the financial performance of the Company improves sufficiently to allow such contributions while still moving toward the Company’s goal of sustained profitability, the Company may voluntarily make contributions to the pension plan trust in 2006 over and above the required contributions. In fact, the Company did make such a voluntary contribution in the amount of $150 million during the first quarter of 2005.