AK Steel Holding (AKS)

Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the cautionary information set forth under the heading “Forward-Looking Statements.”

The Company expects shipments for the fourth quarter to be approximately 1,600,000 tons, subject to the potential impact of the Ashland Works blast furnace outage discussed below. The average selling price is expected to decline approximately 1% as the result of lower raw material surcharges, primarily related to nickel. The Company also anticipates higher costs in the fourth quarter 2007 compared to the third quarter 2007, including approximately $20.0 in higher planned maintenance outage costs and an increase of approximately $30.0 for LIFO expense. Overall, the Company is currently forecasting an operating profit for the fourth quarter of 2007 of approximately $70 per ton.

Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the cautionary information set forth under the heading “Forward-Looking Statements.”

The Company expects the normal seasonal decline in its business in the third quarter primarily associated with its automotive business. In anticipation of that seasonal reduction in demand, the Company has scheduled an outage at its Middletown Works hot strip mill in the third quarter that is expected to result in a reduction in shipments of approximately 100,000 tons. As a result, shipments are expected to total approximately 1,600,000 tons in the third quarter of 2007. The Company’s value-added product mix is expected to increase to approximately 81%, reflecting an anticipated decline in the shipment of hot-rolled carbon products.

In the third quarter, the Company expects its average selling price to be slightly lower by about 2% compared to the price during the second quarter of 2007. The expected negative impact on average selling price is the result of an anticipated decline in nickel surcharges due to the recent decline in the price of nickel, largely offset by the expected positive impact of an anticipated higher value-added product mix during the third quarter.

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The Company anticipates higher maintenance outage costs in the third quarter versus the second quarter, due principally to the scheduled third-quarter outage at the Company’s Middletown Works hot strip mill. Overall, planned outage costs in the third quarter are expected to be approximately $11.0 versus approximately $6.0 in the second quarter.

The Company anticipates lower labor costs at its Middletown Works as a result of the completion early in the third quarter of the transition from the replacement workforce to the hourly represented employees. In addition, the Company will not incur a pension curtailment charge in the third quarter, as it did in the first and second quarters.

Overall, the Company is currently forecasting an operating profit for the third quarter of 2007 of approximately $100 per ton.

The Company also expects to record a one-time tax benefit of approximately $11.0 associated with recognition of a deferred tax asset resulting from new tax legislation enacted in Michigan in July 2007. The legislation will eliminate the single business tax and implement a new income tax and a modified gross receipts tax, effective for 2008.

Outlook

AK Steel said it expects shipments for the third quarter of 2007 to be approximately 1,600,000 tons, lower than second quarter 2007 levels, primarily due to a planned maintenance outage at the Middletown hot strip mill. The company expects its average per-ton selling price to be about 2% lower than in the second quarter of 2007. However, the company expects its operating costs to improve from second quarter levels, in part, as a result of lower return-to-work costs at Middletown Works and lower LIFO costs. The company expects to generate operating profit of about $100 per ton in the third quarter of 2007.

In addition, the company expects a one-time, non-cash tax gain in the third quarter as a result of recently enacted tax law changes in the state of Michigan.

Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the cautionary information set forth under the heading “Forward-Looking Statements.”

The Company expects earnings to continue to improve during the second quarter. The principal reasons for this expected continued improvement are anticipated higher shipments and higher selling prices. These improvements are expected to be partially offset by higher raw material input costs and one-time transition costs in the second quarter associated with training the returning workers at the Company’s Middletown Works. Additional details with respect to expectations for the second quarter are set forth below, but overall, the Company is currently forecasting an operating profit for the second quarter of 2007 of approximately $80 to $85 per ton, including the effects of a pension curtailment charge associated with the Middletown Works labor agreement as discussed below.

Shipments for the second quarter of 2007 are expected to increase by 3% compared to the first quarter of 2007 to an estimated 1,650,000 tons. In addition, the Company anticipates its second quarter average selling price for its products to increase by approximately 2-3% compared to the first quarter of 2007. The increase in average selling price is primarily being driven by increased carbon spot market prices and an increase in raw material surcharges associated with the continued rise in raw material input costs. As a result of the higher shipments and the higher average selling prices, the Company expects record quarterly revenues for the second quarter of 2007.

In the second quarter of 2007, the Company will recognize a non-cash pension curtailment charge of $24.7 related to the new labor agreement negotiated in 2007 with the represented employees at the Company’s Middletown Works. Under this agreement, the existing defined benefit pension plan was “locked and frozen” in 2007 with subsequent Company contributions being made to the International Association of Machinists multi-employer pension fund based upon a fixed-amount-per-hour contribution. As a result, the Company is required to recognize in the second quarter of 2007 the past service pension expense that previously would have been amortized.

The Company also will incur increased costs in the second quarter related to the return of its union-represented workforce to Middletown Works. As the employees return, the Company has been implementing the workforce flexibility achieved in the new labor agreement and many of the returning employees need retraining to perform new or different jobs than they performed prior to the start of the lockout. During this process, which is expected to be concluded during the second quarter, the Company expects to incur higher-than-normal labor costs, principally due to increased staffing needs associated with the retraining.

As a result of the recent decision in the West litigation and the changes in pension benefits described above as part of the new labor contract at Middletown Works, the Company has determined that it would be appropriate to perform a re-measurement of the associated pension plans during the second quarter. The potential liability arising from the West case and the impact of the new Middletown Works labor contract will be two of the factors considered in that re-measurement. Other factors which will be considered as part of that revaluation exercise include investment returns and retirement and mortality experience. The net effect of all of these factors will be amortized over time into the

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Company’s results of operations beginning in the second quarter of 2007 in accordance with FAS 87. The Company does not believe that the results of this re-measurement will materially change the estimated ranges of the Company’s required pension funding for the next few years. See pension funding discussion in Liquidity and Capital Resources below.

Second-Quarter 2007 Outlook

AK Steel said it expects shipments in the second quarter of 2007 to be approximately 1,650,000 tons, reflecting an increase over first-quarter levels of approximately 3%. The company anticipates that its second-quarter 2007 average per-ton selling prices will be 2% to 3% higher compared to the first quarter of 2007. The company will also incur a non-cash, pre-tax pension curtailment charge of $24.7 million in the second quarter related to the new labor agreement covering union employees at the company’s Middletown Works.

Overall, the higher sequential shipments, coupled with higher average selling prices, are likely to result again in record quarterly revenues, and an operating profit between $80 and $85 per ton.

First-Quarter 2007 Outlook

AK Steel said it expects shipments in the first quarter of 2007 to be comparable to the 2006 fourth-quarter level. The company anticipates that its first-quarter 2007 average per-ton selling prices will be 4% to 5% higher than in the fourth quarter of 2006. The higher per-ton selling prices are expected to be partially offset by higher raw material costs, compared to fourth-quarter 2006 levels. The company said it expects to generate an operating profit in the first quarter of 2007 of between $60 and $65 per ton.

Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the cautionary information set forth under the heading “Forward-Looking Statements.”

Fourth quarter shipments are expected to be approximately 1,500,000 tons, slightly lower than third quarter shipments. This projection assumes continued normal levels of production at the Company’s Middletown Works, excluding the impact of planned outages, and a slight decline in automotive, appliance, construction and service center demand. The Company’s value-added product mix is projected to rise to approximately 83% reflecting an anticipated decrease of hot-rolled shipments in the fourth quarter compared to the third quarter.

In the fourth quarter, the Company anticipates that the average selling price for its products will decrease by approximately 1% compared to the third quarter 2006. This expected decrease in average selling price is principally due to an anticipated decrease in automotive shipments and lower carbon spot market pricing, mostly offset by higher surcharges. With this decrease in average selling price, the Company anticipates a slight decrease in net sales during the fourth quarter.

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During the second and third quarter of 2006, the Company concluded the negotiations for a substantial majority of its contract business, which will result in a significant increase in the contract prices for its carbon, stainless and electrical steel business under those contracts. With respect to carbon and some stainless steel products, these increases will be effective in the second half of 2006 and already are reflected in the Company’s fourth quarter guidance. With respect to electrical steel products, most of the increases will not be effective until 2007.

The Company’s 2006 financial results could be negatively impacted by potential charges associated with the labor agreements currently being negotiated in 2006 with its Middletown (OH) Works and Mansfield (OH) Works. The Company has negotiated a “lock and freeze” of the defined benefit pension plans to which hourly employees at its Ashland (KY) Works, Zanesville Works and Butler Works currently are entitled and will replace them prospectively with defined contribution plans. The Company continues to seek such a “lock and freeze” of the defined benefit pension plans to which hourly employees at its Middletown Works and Mansfield Works are currently entitled. Such a “lock and freeze” typically results in the Company recognizing a non-cash curtailment charge. The total amount of all such curtailment charges or any other potential charges for the Company’s defined benefit pension plans related to these current labor negotiations cannot be reliably estimated at this time.

As a result of the recent labor contract negotiations which have resulted in reducing the Company’s other postretirement benefit obligations, the Company’s future other postretirement benefit expense is expected to decline further in 2007 since these liability reductions are amortized through the Company’s financial statements over time.

Under its method of accounting for pension and other postretirement benefit plans, the Company recognizes into income (loss), as a fourth quarter adjustment, any unrecognized actuarial gains and losses that exceed 10% of the larger of projected benefit obligations or plan assets (the “corridor”). Based on current assumptions for prevailing interest rates and on other relevant assumptions made by the Company, the pre-tax effect of a 2006 fourth quarter non-cash pension and other postretirement benefits charge is currently estimated to be between $125.0 and $175.0. However, because factors influencing the determination of plan liabilities and expenses may change, the Company cannot yet determine with certainty the actual amount of these fourth quarter charges

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 that planned contribution into account, 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, the reliability of estimated future pension contributions decreases as the length of time until the contributions must be made increases.

In October 2006, the FASB issued SFAS No. 158 entitled, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This Statement requires companies to fully recognize an asset or liability for the overfunded or underfunded status of their benefit plans in financial statements for years ending after December 15, 2006. The pension asset or liability equals the difference between the fair value of the plan’s assets and its benefit obligation. The Company has performed a preliminary analysis of the impact of the adoption of SFAS No. 158 on its financial position and results of operations and believes that, because the Company has previously recognized fourth quarter “corridor” charges (as described above for 2006), the impact of the adoption of SFAS No. 158 as of December 31, 2006, based on current assumptions, is expected to result in a reduction of the Company’s pension and other postretirement benefit obligations in the range of $200.0 – $250.0.

Fourth-Quarter Outlook

AK Steel said that it expects fourth-quarter 2006 shipments of approximately 1,500,000 tons. Despite increased value-added shipments and higher stainless steel surcharge revenues, the company expects its average per-ton selling price to decrease slightly from third quarter 2006 levels. The company also expects higher costs for planned maintenance outages during the fourth quarter compared to the third quarter, as it balances its supply with demand from its served markets. Also the company expects higher raw material and energy costs and a lower LIFO charge compared to the third quarter. The net effect of these items is expected to result in an operating profit of approximately $30 to $35 per shipped ton for the fourth quarter of 2006.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

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Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the cautionary information set forth under the heading “Forward-Looking Statements.”

The Company expects an improved third quarter as compared to the second quarter of 2006. The principal factors driving the improvement are expected to be higher revenues and selling prices, higher production levels and lower operating costs. These improvements are expected to be partially offset by the negative impact associated with continued rising raw material and energy costs. Additional details with respect to the third quarter are set forth below, but the Company is currently forecasting an operating profit for the third quarter of 2006 of approximately $45 to $50 per ton.

Third quarter shipments are expected to be similar to the second quarter at approximately 1,600,000 tons. This projection assumes continued normal levels of production at the Company’s Middletown Works and continued strong demand for the Company’s products. The Company’s value-added product mix is projected to rise to approximately 82% reflecting an anticipated decrease of hot-rolled shipments in the third quarter compared to the second quarter.

In the third quarter, the Company anticipates that the average selling price for its products will rise by approximately 4% compared to the second quarter 2006. This expected increase in average selling price is principally due to increased contract customer pricing and higher surcharges. With this increase in average selling price, the Company anticipates an increase in net sales during the third quarter.

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The Company expects operating costs in the third quarter to decline from second quarter levels, primarily as a result of improved operations at its Middletown Works. At the start of the second quarter, operating levels at the Middletown Works were below pre-lockout levels. By the end of the quarter, the Company had returned to normal operating levels at nearly every operating unit at Middletown Works. Accordingly, the Company expects higher production levels during the third quarter at Middletown Works, resulting in lower operating costs.

In addition, the Company’s 2006 financial results could be negatively impacted by potential charges associated with the labor agreements reached and currently being negotiated in 2006. For example, the Company has negotiated a “lock and freeze” of the defined benefit pension plans to which hourly employees at its Ashland (KY) Works, Zanesville (OH) Works and Butler (PA) Works currently are entitled and will replace them prospectively with defined contribution plans. The Company continues to seek such a “lock and freeze” of the defined benefit pension plan to which hourly employees at its Middletown Works are currently entitled. Such a “lock and freeze” typically results in the Company recognizing a non-cash curtailment charge. The total amount of all such curtailment charges or any other potential charges for all of the Company’s defined benefit pension plans cannot be reliably estimated at this time.

During the second quarter and early part of the third quarter of 2006, the Company concluded a substantial portion of its sales contract negotiations, which will result in a significant increase in the contract prices for its carbon, stainless and electrical steel business under those contracts. These contract price increases reflect the recent increases in the spot market and in the Company’s raw material costs. With respect to carbon and some stainless steel products, these increases will be effective in the second half of 2006 and already are reflected in the Company’s third quarter guidance. With respect to electrical steel products, most of the increases will not be effective until 2007.

Outlook

AK Steel said that, for the third quarter of 2006, it expects improved results compared to second quarter. Third quarter shipments are expected to be approximately 1,600,000 tons. The company expects contract and spot prices to increase, and operating costs to decline from second quarter levels as a result of higher production levels at Middletown Works.

The lower operating costs and higher selling prices are expected to be partially offset by higher raw material and energy costs. As a result, the company expects to report an operating profit for the third quarter of 2006 in the range of $45 to $50 per shipped ton.

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Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the cautionary information set forth under the heading “Forward-Looking Statements.”

The Company expects an improved second quarter as compared to the first quarter of 2006. The principal factors driving the improvement are expected to be higher shipments, higher production levels and lower operating costs at the Company’s Middletown Works, and lower natural gas and outage costs. These improvements are expected to be partially offset by higher raw material input costs. Additional details with respect to the second quarter are set forth below, but netting the anticipated improvements against the anticipated higher input costs, the Company is currently forecasting an operating profit for the second quarter of 2006 of approximately $30 to $35 per ton.

Shipments are expected to increase in the second quarter to between 1,575,000 and 1,600,000 tons as the result of increased production at the Company’s Middletown Works and continued strong demand for the Company’s products in virtually all of the markets it serves. The Company’s value-added product mix is projected to decline to approximately 82% reflecting an anticipated increase of hot-rolled shipments in the second quarter compared to the first quarter.

In the second quarter, the Company anticipates that the average selling price for its products will decline by approximately 2% compared to the first quarter 2006. This expected decline is the result of a slightly lower value-added product mix of 82% compared to the value-added product mix of 88.5% in the first quarter of 2006. Notwithstanding this decline in average selling price, the Company anticipates an increase in net sales due to increased shipments and continued strong pricing in the spot market. In addition, the Company has announced increases in pricing extras for zinc to recover the record high costs for zinc used to coat galvanized carbon steel products and will start to benefit from this higher pricing in the second quarter.

In addition, the Company expects higher production levels and lower operating costs at its Middletown Works in the second quarter. The labor agreement with hourly represented employees at the Middletown Works expired on February 28, 2006 and the parties were unable to reach a new agreement prior to its expiration. Effective March 1, 2006, the Company elected to exercise its right to prevent the represented employees at the Middletown Works from continuing to work without a labor agreement and implemented a contingency plan to operate that facility with salaried employees and temporary replacement workers. As those employees and replacement workers have gained experience, production at the various operating lines has increased and is expected to be at normal operating levels by the end of the second quarter. The Company expects operating costs in the second quarter to decline by approximately $17.0 from the first quarter level as a result of improved operations at its Middletown Works and reduced maintenance outage costs. In the first quarter of 2006, the Company elected to take an eight-day outage to perform maintenance repair work on its Middletown Works blast furnace; no blast furnace outage is planned for the second quarter. The Company continues to bargain in good faith to reach a competitive labor agreement as soon as possible at its Middletown Works, but cannot predict when such an agreement will be reached.

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The outlook for the Company in 2006 may also be affected by the expiration of the collective bargaining agreements at its Zanesville Works in Ohio and Butler Works in Pennsylvania. The Zanesville Works and Butler Works agreements expire on May 20, 2006 and on September 30, 2006, respectively. On May 2, 2006, the Company and the union representing hourly employees at its Zanesville Works reached a tentative agreement for a new collective bargaining agreement covering those employees. The tentative agreement is subject to ratification by the represented workers at the Zanesville Works. While management is seeking to reach new agreements at these facilities without a work stoppage, the Company cannot predict the outcome of the contract negotiations. The Company is developing contingency plans to operate its facilities in the event of a work stoppage, but there is a risk that such a work stoppage nonetheless could have a material impact on the Company’s operations and financial results.

In addition, the Company’s 2006 financial results could be negatively impacted by potential charges associated with the labor contracts currently being, and to be, negotiated in 2006. For example, the Company is seeking to “lock and freeze” the defined benefit pension plans to which hourly employees currently are entitled and to replace them prospectively with defined contribution plans. The successful negotiation of such a “lock and freeze” would likely result in the Company recognizing a non-cash curtailment charge. The likelihood and amount of such a curtailment charge or any other potential charges cannot reasonably be estimated at this time.

Outlook

AK Steel said that it expects to report improved second quarter of 2006 results as compared to the first quarter of 2006. Second quarter shipments are expected to be between 1,575,000 and 1,600,000 tons. Compared to the first quarter, the company expects steelmaking input costs to be relatively flat in the second quarter, with lower natural gas costs offset by increased costs for raw materials.

In addition, the company expects operating costs in the second quarter to decline by approximately $17 million from the first quarter level as a result of improved operations at its Middletown Works and reduced maintenance outage costs. As a result, the company expects to report an operating profit for the second quarter of 2006 in a range between $30 and $35 per shipped ton.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

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Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the information set forth beginning on page 36 under the heading “Forward Looking Statements”.

For the first quarter of 2006, the Company expects to ship between 1,575,000 and 1,600,000 tons, with the average selling price increasing by approximately 4-5% from the fourth quarter of 2005. The projected increase in average selling price is primarily the result of increases in pricing from contract customers. The Company also expects first-quarter 2006 raw material costs to rise from fourth-quarter 2005 levels and expects its natural gas costs to remain essentially flat. In addition, the Company anticipates a LIFO charge in 2006 due to expected increases in raw material and energy costs, a portion of which will be taken in the first quarter. Taking all of these factors into account, the Company expects to generate operating profit in the first quarter of between $33 and $37 per shipped ton.

While it is not possible yet to reliably forecast the Company’s financial performance for all of 2006, management believes that steps taken or announced in 2005 have laid a foundation for strong financial performance by the Company in 2006. These steps include:

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Offsetting some of the benefits of these positive factors, however, are anticipated significant increases in the cost of energy, principally natural gas, and certain raw materials in 2006. Although the Company has made progress in its strategy to secure contracts for long-term supplies of raw materials at competitive prices, many of those contracts include forms of variable pricing. Thus, while the Company will have the raw materials its needs, it continues to be exposed to the risk of increases in the global price for many of those raw materials. The Company so far has had only limited success in recouping those cost increases directly through surcharges. The Company currently is anticipating another significant annual increase in the cost of energy and certain raw materials in 2006.

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The benefits of the Company’s cost saving efforts addressed above also may be mitigated by changes in the selling price of the Company’s steel products in 2006. Currently, the outlook for the sale of the Company’s high- end, grain-oriented electrical steel products appears likely to be very strong throughout 2006. Current demand for the Company’s other value-added products also remains strong, but is more difficult to forecast for the duration of 2006.

The outlook for the Company in 2006 also may be affected by the expiration of the collective bargaining agreements at its largest two facilities, Middletown Works in Ohio and Butler Works in Pennsylvania. In addition, the collective bargaining agreement at its Zanesville Works also expires in 2006. Collectively, the unions at these three facilities represent approximately 4,300 of the Company’s total of 6,300 represented employees. The Company believes it is imperative that it secure competitive “new era” labor agreements with the represented workers at these facilities, as it has done with the represented workers at six other of its facilities over the course of the past two years. The inability of the Company and the union to timely reach a new collective bargaining agreement at any of these facilities could result in a work stoppage. While the Company has contingency plans to operate its facilities in the event of a work stoppage, there remains a risk that a work stoppage nonetheless could have a material impact on the Company’s operations and financial results. The Middletown Works labor agreement expired on February 28, 2006 and the parties were unable prior to its expiration to reach a new agreement. Effective March 1, 2006, the Company elected to exercise its right to prevent the represented employees at the Middletown Works from continuing to work without a labor agreement. The Company has implemented its contingency plan to operate the Middletown Works with temporary replacement workers and salaried employees.

The potential exists that the Company may also face a corridor charge which would not be recognized until the fourth quarter of 2006. Under the Company’s pension and other postretirement benefit plan accounting method, the annual determination of a fourth quarter corridor adjustment, if any, is made as of the plans’ October 31 measurement date. Since the balance of deferred actuarial losses for all major pension and other postretirement benefit plans was at or near the edge of the 10% corridor at the end of 2005, the development of any additional net actuarial losses (which could result from a decline in interest rates, poor investment returns or adverse changes in assumptions) would likely result in another corridor charge in the fourth quarter of 2006. Whether or not such a charge will be recognized and, if so, the amount of such a charge cannot be reliably predicted or estimated at this time.

Other factors which are relevant to the Company’s 2006 outlook include the following: The Company estimates that depreciation expense will be approximately $200.0 in 2006 compared to $196.4 in 2005 as the result of the major capital investments made in 2005. Capital investments in 2006 are estimated to be approximately $160.0, of which the two largest projects include the completion of the Middletown Works MACT project and the installation of a new large diameter stainless tube mill at AK Tube LLC. In 2005, the Company had planned major outages at both its Ashland and Middletown blast furnaces. The Company currently does not anticipate future planned outages on these furnaces until 2007.

First Quarter 2006 Outlook

AK Steel said it expects shipments between 1,575,000 and 1,600,000 tons in the first quarter of 2006, with an average selling price per ton 4% to 5% higher than in the fourth quarter of 2005, with raw material costs higher and natural gas costs similar to fourth quarter 2005 levels. The company said it expects to generate operating profit in the first quarter of 2006 between $33 and $37 per shipped ton.

Outlook

The Company expects an improved fourth quarter as compared to the third quarter of 2005. The principal factor driving the improvement is expected to be higher average selling prices, offset by a net increase in total input costs. Additional details with respect to the factors affecting the fourth quarter outlook are set forth below, but netting them all together, the Company currently is forecasting an operating profit for the fourth quarter of 2005 of approximately $18 to $20 per ton on a continuing operations basis, excluding the effects of a $12.9 pre-tax curtailment charge for the implementation of the Ashland labor contract and a potential non-cash pension and postretirement benefit obligation corridor charge which currently is estimated to be between $100.0 and $150.0. Both of these non-cash charges are discussed below and could result in the Company reporting an operating loss for the fourth quarter.

Despite continued strong demand, shipments are expected to decrease slightly during the fourth quarter. Total production is expected to be comparable to the third quarter, but a portion of that production will go to a slight increase in finished goods inventory to support new contract customer business beginning in 2006. Total fourth quarter shipments currently are projected to be approximately 1,625,000 tons.

The Company expects spot market pricing to continue to recover through the end of 2005. This increase in pricing, coupled with an improved product mix for the fourth quarter is expected to result in an increase in the average selling price for the Company’s products during the fourth quarter of between 3% and 4% as compared to the third quarter. Demand for the Company’s higher-priced electrical steel products, in particular, is robust. The Company also expects that an improved value-added product mix will contribute to the anticipated increase in average selling price. Overall, the percentage of total shipments consisting of value-added products is expected to be approximately 85% in the fourth quarter, compared to 81.9% in the third quarter primarily as a result of lower hot rolled shipments.

Principally as a result of the effects of Hurricanes Katrina and Rita in the Gulf of Mexico, the country is presently faced with record-high natural gas prices. The integrated steel industry uses large volumes of natural gas as part of the steelmaking process and thus has been hit hard by the recent extraordinary increase in the cost of natural gas. The Company does not anticipate that natural gas prices will decline significantly during the fourth quarter. This price increase was partially mitigated by the hedging of a majority of the Company’s fourth quarter natural gas requirements at prices lower than current spot market prices for natural gas. Scrap prices have also risen as a result of Hurricanes Katrina and Rita, principally due to disruptions in transportation. Although scrap prices have moderated somewhat in recent weeks, the Company still anticipates an overall increase in scrap prices in the fourth quarter of 2005. Thus, the Company expects the net impact of these costs for the fourth quarter of 2005 to be approximately $25.0 higher than the third quarter of 2005 due to these higher input costs.

The Company also will experience an increase in labor costs at its Middletown Works due to the impact of an arbitration decision during the third quarter. As a result of that decision, the Company was required to recall 71 laid-off hourly employees during the latter part of the third quarter. During the fourth quarter, the Company will experience the full employment cost of the recalled employees, resulting in an increase in labor costs, quarter over quarter.

In addition, although it will be a non-cash charge, the fourth quarter will be negatively impacted by an approximate $12.9 curtailment pre-tax charge related to the new labor contract negotiated recently with the United Steelworkers’ represented employees at the Company’s Ashland Works. Under that agreement, the existing defined benefit pension will be “locked and frozen” beginning January 1, 2006, with subsequent company pension contributions to the Steelworkers Pension Trust (“SPT”). As a result, the Company is required to recognize the past service pension expense that previously would have been amortized. On balance, the future benefits associated with the new labor contract, including the locking and freezing of the defined benefit plans and increased active and retiree healthcare cost-sharing, will outweigh the one-time fourth quarter curtailment charge and the ongoing contributions to the SPT.

The Company will also experience cost improvements during the fourth quarter. The principal improvement will be with respect to lower planned maintenance outage costs. In the third quarter, the Company had two major planned maintenance outages, including a 10-day outage at its Ashland Works and a 5-day outage at its Middletown Works. No major outages are planned for the fourth quarter. As a result, the Company anticipates that its maintenance outage costs will decrease by approximately $25.0 in the fourth quarter compared to the third quarter and will be approximately the same as the fourth quarter of 2004.

As a result of the installation of a new degasser and the modification of the existing caster equipment during the above-referenced outage at the Ashland Works, that facility began producing degassed slabs in the third quarter. The Company previously was unable to produce all of the degassed slabs necessary to satisfy its customer needs

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and therefore purchased the balance of its requirements from third parties. Degassed slabs typically sell at a premium compared to non-degassed slabs and are commercially available from fewer suppliers. The recent capital investments at the Ashland Works should eliminate the Company’s need to purchase degassed slabs. The Company anticipates that this will generate significant cost savings in the future, a small part of which will be experienced in the fourth quarter.

There are a number of risks which could impact the Company’s outlook for the fourth quarter and beyond. Those risks are articulated under the Forward-Looking Statements section in this Form 10-Q on page 21. There are several areas of uncertainty, however, which bear special mention in relation to the Company’s outlook.

First, the Company continues to focus on running its existing operations in order to lower overall operating costs. As a result of market conditions and cost reduction strategies, the Company has temporarily idled a cold mill and pickler at its Zanesville Works. The Company also has cold mills and picklers idled at its Mansfield and Butler Works. In addition, the Company holds an equity interest in AK-ISG Steel Coating Company (“AK-ISG”), a facility that operates an electrogalvanizing line. Based on current market conditions, the Company is presently not coating any of its material at this facility, although AK-ISG continues to operate the line for other customers. The Company continues to monitor the strategic utilization of these various assets and the potential exists, at a future date, that the Company could be required to take an impairment charge if conditions worsen. At this time, because factors influencing the determination of the utilization/disposition of these assets are likely to change, the Company cannot reasonably estimate the amount of an impairment charge, if any. The total book value of these assets is approximately $69.4, including the investment in AK-ISG.

Second, as of September 30, 2005, AK Steel’s operations included approximately 5,600 employees that are represented by labor unions under various contracts that expire in the years 2006 through 2008. The Middletown Works hourly employees are represented by the Armco Employees Independent Federation. This union currently represents approximately 2,700 employees and the contract is scheduled to expire on February 28, 2006. In addition, AK Steel’s labor agreements at its Butler Works, Zanesville Works and AK Tube facility are scheduled to expire at various other dates in 2006. Collectively, these three unions represent approximately 1,750 employees. While the Company hopes to avoid any disruptions in operations associated with upcoming labor negotiations, it cannot predict the outcome of those negotiations. There is a potential of a work stoppage, which could have a material impact on the Company’s financial condition, operations and cash flow, if AK Steel and its unions cannot reach agreement in contract negotiations.

Finally, under its method of accounting for pension and other postretirement benefit plans, the Company recognizes into income (loss), as a fourth quarter adjustment, any unrecognized actuarial gains and losses that exceed 10% of the larger of projected benefit obligations or plan assets (the “corridor”). Based on current assumptions for prevailing interest rates and on other relevant assumptions made by the Company, the pre-tax effect of a 2005 fourth quarter non-cash pension and other postretirement benefit obligations charge is estimated to be between $100.0 and $150.0. However, at this time, because factors influencing the determination of plan liabilities and expenses may change, the Company cannot reasonably determine with certainty the actual amount of these fourth quarter charges. Under current assumptions, the Company is not required to make any pension contributions until 2006, when it estimates approximately $100.0 would need to be contributed during the year. The amount of the 2006 contribution, if one is necessary, will depend on, among other things, the investment performance of the pension funds and any potential legislative changes to existing funding requirements.

Fourth Quarter Outlook

AK Steel said it expects to record an operating profit in the fourth quarter of 2005 between $18 and $20 per ton shipped, excluding certain non-cash charges which will likely result in the company reporting an operating loss for the fourth quarter of 2005.

Specifically, the company expects to incur a non-cash, pre-tax curtailment charge of $12.9 million related to the new labor agreement previously mentioned. The charge results from the recognition, in the fourth quarter, of past service pension benefits, which would have been amortized over future periods, as the parties agreed to “lock and freeze” the existing defined benefit pension plan, commencing January 1, 2006.

Additionally, as a result of AK Steel’s unique “corridor” accounting method for pensions and other postretirement benefit plans, it is required to recognize, as a fourth quarter adjustment, any unrecognized actuarial net gains or losses that exceed 10% of the larger of the projected benefit obligations or the plan assets. Collectively, the company estimates these non-cash, pre-tax corridor charges will range between $100 million and $150 million.

The company said it expects to realize higher steel prices on lower shipments of approximately 1,625,000 tons in the fourth quarter, with continued spot market pricing improvements during the fourth quarter. The company said that it expects its product mix will reflect a somewhat higher percentage of value-added products in the fourth quarter compared to the third quarter. AK Steel said it expects costs for planned maintenance outages to be approximately $25 million lower for the fourth quarter compared to the third quarter of 2005, the result of fewer planned outages. AK Steel said it expects to continue to be impacted by higher energy and raw material costs, as the natural gas production-related effects of Hurricanes Katrina and Rita linger.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

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Outlook

The Company expects third quarter 2005 shipments to be approximately 1,625,000 tons, about one percent higher than second quarter 2005 levels. Continued strong demand for stainless and electrical steels and increased sales to the spot market will be partially offset by a decrease to automotive customers as a result of seasonal operations. The percentage of value-added products to total shipments is expected to be approximately 85% compared to the 87.9% experienced in the second quarter. The Company expects average selling prices to decline approximately four percent due primarily to lower spot market prices, which had declined recently, but are expected to begin rising in the third quarter.

The Company expects maintenance outage costs to increase by approximately $24.0 in the third quarter compared to the second quarter primarily as a result of a 10-day maintenance outage of the Ashland blast furnace to gunnite the furnace walls and install the equipment for the new degasser and modification to the caster and a five-day maintenance outage at its Middletown hot strip mill. Both of these outages were successfully completed in July 2005. The Ashland degasser and straight mold caster capital investment will allow the Company to produce degassed slabs at Ashland to meet customer needs without having to purchase such slabs at a premium from third parties. It is anticipated that this will generate significant cost savings to the Company. The Company also expects to experience lower raw material costs compared to the second quarter of approximately $28.0 due primarily to lower scrap prices, which on average are expected to be lower than in the second quarter, but are expected to begin rising in the third quarter. The Company will incur higher costs in the third quarter for purchased slabs associated with the planned Ashland Works blast furnace outage. In addition, as required by an arbitrator’s ruling, the Company is in the process

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of recalling up to 108 laid-off employees at Middletown Works during the third quarter of 2005. As a result of the State of Ohio legislation on tax reform, the Company should experience a benefit in operating income of approximately $1.0 per quarter in the third and fourth quarters. Additional benefits will be realized beyond the current levels as various components of the tax change are phased in through 2010. Netting all of these impacts, the Company currently expects to report an operating profit for the third quarter 2005 of approximately $10 per ton.

The Company is constantly focused on adjusting its operations in response to fluctuating market conditions, including selectively investing capital into various operating units and temporarily idling equipment. With the recent completion of the Ashland degasser and caster modification investment along with optimization of and adjustments to its various steel operations, the Company continues to focus on running its existing operations in order to lower overall operating costs. As a result of market conditions and cost reduction strategies, the Company has temporarily idled a cold mill and pickler at its Zanesville Works. The Company also has cold mills and picklers idled at its Mansfield and Butler Works. In addition, the Company holds an equity interest in AK-ISG Steel Coating Company (“AK-ISG”), a facility that operates an electrogalvanizing line, and based on current market conditions, the Company is presently not coating any of its material at this facility. AK-ISG continues to operate the line for other customers. The Company continues to monitor the strategic utilization of these various assets and the potential exists, at a future date, that the Company could be required to take an impairment charge if conditions worsen. At this time, because factors influencing the determination of the utilization/disposition of these assets are likely to change, the Company cannot reasonably estimate the amount of an impairment charge, if any. The total book value of these assets is approximately $70.6, including the investment in AK-ISG.

As of June 30, 2005, AK Steel’s operations included approximately 6,400 employees that are represented by international and independent labor unions under various contracts that expire in the years 2005 through 2008. The labor contract representing approximately 750 hourly employees at its Ashland facility is currently in negotiations, and is scheduled to expire on September 1, 2005. The Middletown Works hourly employees are represented by the Armco Employees Independent Federation. The union represents approximately 2,761 active and laid-off employees and the contract is scheduled to expire on February 28, 2006. In addition, AK Steel’s labor agreements at its Butler Works, Zanesville Works and AK Tube facility are scheduled to expire at various other dates in 2006. These unions represent approximately 1,800 employees. While management does not expect any disruptions in operations associated with upcoming labor negotiations, the Company cannot predict the outcome of the contract negotiations. However, there is a potential of a work stoppage, which could have a material impact on the Company’s financial condition, operations and cash flow, if AK Steel and its unions cannot reach agreement in contract negotiations.

The Company purchases approximately 40% of the iron ore consumed by its blast furnaces from Quebec Cartier Mining Company (“QCM”). On April 8, 2005, the hourly employees in one of five union locals at QCM’s Mont-Wright mine did not ratify a proposed new labor agreement and went on strike, effectively shutting down the mine. Shortly thereafter, QCM notified the Company that as a result of the strike it was declaring force majeure under the iron ore sales agreement between QCM and the Company. In an effort to minimize the impact of the strike on its customers, QCM also continued to ship iron ore to its customers, including the Company, from its existing inventories using management personnel until those inventories were depleted. On June 3, 2005 QCM’s Mont-Wright mine employees ratified a multi-year agreement and QCM resumed its mining operations. QCM was fully operational in early June and shipment of pellets resumed later in June after depleted inventories were rebuilt. The Company anticipates a negative impact of approximately $4.0 to its operating profit in the third quarter of 2005 attributable to the effects of the strike.

Under its method of accounting for pension and other postretirement benefit plans, the Company recognizes into income, as a fourth quarter adjustment, any unrecognized actuarial gains and losses that exceed 10% of the larger of projected benefit obligations or plan assets. Prevailing interest rates on the fourth quarter measurement date are one of the factors used to determine the Company’s year-end liability, fourth quarter corridor charge and subsequent year’s expense for these benefit plans. At this time, because factors influencing the determination of plan liabilities and expenses are likely to change, the Company cannot reasonably estimate the amount of a fourth quarter charge, if one is necessary.

Outlook

The Company expects second quarter 2005 shipments to be approximately 1,600,000 tons, up slightly from first quarter 2005 levels. While shipments to automotive customers are expected to decrease somewhat, the decrease will be offset by increased sales to the spot market and improving demand for stainless and electrical steels. The percentage of value-added products to total shipments is expected to be slightly higher than the 88.0% experienced in the first quarter. The Company expects average selling prices to decline slightly as the result of reduced automotive shipments, higher shipments to the spot market and declining spot market prices.

The Company expects maintenance outage costs to decline by approximately $12.0 in the second quarter compared to the first quarter. The Company also expects to experience significantly higher raw material and energy costs, primarily iron ore, purchased carbon slabs and alloys. As a result, the Company currently expects to report operating profit for the second quarter 2005 to be between $55 and $60 per ton.

The Company purchases approximately 40% of the iron ore consumed by its blast furnaces from Quebec Cartier Mining Company (“QCM”). On April 8, 2005, the hourly employees in one of five union locals at QCM’s Mont-Wright mine did not ratify a proposed new labor agreement and went on strike, effectively shutting down the mine. Shortly thereafter, QCM notified the Company that as a result of the strike it was declaring force majeure under the iron ore sales agreement between QCM and the Company. In an effort to minimize the impact of the strike on its customers, QCM also has stated that it will continue to ship iron ore to its customers, including the Company, from its existing inventories using management personnel until those inventories are depleted. The Company currently estimates that it has an adequate supply of iron ore in inventory or to be shipped to it from existing suppliers to meet the Company’s needs through at least the second quarter of 2005. The Company continues to seek additional iron ore from other suppliers. The Company cannot predict the likely duration of the QCM strike. Nor can it yet determine the availability, or reliably estimate the cost of iron ore from other sources, particularly if the strike continues for an extended period. In addition to seeking additional iron ore from other suppliers, the Company has implemented some measures already, and is considering other measures, to mitigate the impact of an extended interruption in the supply of iron ore from QCM. These measures include increasing the purchase of carbon slabs, adjusting steel operating levels, increasing the volume of steel scrap consumed by the Company’s basic oxygen furnaces, and other changes in its melt operations. Notwithstanding these measures, if the QCM strike continues for an extended period of time and the Company is unable to procure adequate alternative sources of iron ore, the Company’s operating results could be materially affected.

Outlook

AK Steel said that it expects second quarter shipments to be approximately 1,600,000 tons, reflecting continued strong shipments to carbon, stainless and electrical markets and no significant planned maintenance outages. The company also expects second quarter 2005 raw material costs, primarily iron ore, purchased carbon slabs and certain steelmaking alloys, to increase over first quarter 2005 levels. As a result, the company expects to report operating results for the second quarter of 2005 in a range between $55 to $60 per ton.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for the automotive, appliance, construction and manufacturing markets. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

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Outlook

All of the statements in this “Outlook” section are subject to, and qualified by, the information set forth beginning on page 29 under the heading “Forward Looking Statements”.

Building on the solid financial improvement started in 2004, the Company is forecasting further improved financial performance in 2005. For example, the Company expects its shipments in 2005 to be approximately 6.3 million tons, slightly higher than 2004 shipments, and the product mix is expected to be approximately 90% value-added. During 2005 the Company expects higher average selling prices, primarily the result of negotiating double-digit price increases with approximately 90% of its contract customers. The increased revenue from these

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higher prices is expected to more than offset significant projected increases in the cost of raw materials and energy, particularly scrap, purchased slabs, iron ore, coke, coal and natural gas. The Company estimates that depreciation expense will decline by approximately $6.0 from 2004 levels to approximately $200.0 and expects interest expense to decrease by approximately $20.0 in 2005 compared to 2004 levels, principally as the result of debt reduction. Capital expenditures in 2005 are estimated to be approximately $200.0, of which the two largest projects include the Middletown Works MACT project and the Ashland Works caster and degasser project. For tax purposes, the Company expects to have a book tax rate of approximately 36% for 2005, although the cash tax rate is expected to be less than 10%.

The Company expects that pension and other post retirement benefit expenses will decline by approximately $15.0, excluding any potential fourth quarter pension and other postretirement benefits corridor charges. Under the Company’s pension and other postretirement benefit plan accounting method, the annual determination of a fourth quarter adjustment, if any, is made as of the plans’ October 31 measurement date. Since the balance of deferred actuarial losses for all major pension and other postretirement benefit plans was at or near the edge of the 10% corridor at the end of 2004, the development of any additional net actuarial losses, which may result from a further decline in interest rates, poor investment returns or adverse changes in assumptions, would likely result in another corridor charge in the fourth quarter of 2005.

The Company does not anticipate any required cash payments to its pension plan trust in 2005. Due to the Company’s improved financial performance and enhanced liquidity during 2004, however, a voluntary $150.0 million pension contribution to the pension trust was made in the first quarter of 2005. The Company currently projects that this early contribution will reduce its required 2006 pension contribution to approximately $126.2. See Liquidity and Capital Resources below for a further discussion of future funding requirements.

In the first quarter of 2005, the Company expects to ship nearly 1,550,000 tons, somewhat less than the 1,631,400 tons shipped in the fourth quarter of 2004. While the Company anticipates continued strong demand for its products, planned maintenance outages at its Middletown and Mansfield facilities will adversely affect first quarter shipments and negatively impact pre-tax earnings by approximately $16.0. The outage at the Company’s Middletown facility will be to perform maintenance work on its blast furnace. During that outage, the Company also will complete the installation of certain emission control equipment required to bring the furnace into compliance with new environmental regulations. The Mansfield outage was originally planned to occur in the second quarter. The outage has been moved into the first quarter and will have a $6.0 negative impact on operating profit, or approximately $4 per ton. As a result, the Company now estimates first quarter operating profit of approximately $76 per ton. The Company expects a significant increase in revenues during the first quarter as a result of previously negotiated price increases for its contract business, which is expected to account for approximately 70% of sales. The Company also expects, however, a significant increase in its costs for raw materials and energy, particularly scrap, iron ore, coal, purchased slabs and natural gas. After considering all of these factors, the Company expects to report improved operating results for the first quarter of 2005 compared to the fourth quarter of 2004.

Outlook

AK Steel said that it expects to generate substantially higher operating income in 2005 than in 2004, despite facing further price increases for steelmaking raw material inputs. The higher input costs are expected to be more than offset by a combination of higher contract selling prices, higher average spot market selling prices, surcharges, and continued controllable cost reductions and operating efficiencies. The company said it expects to generate an operating profit of approximately $500 million on shipments of approximately 6.3 million tons, equating to earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $700 million.

“During 2004, we successfully concluded what we termed ‘Phase 1’ of our recovery, our return to profitability,” said Mr. Wainscott. “We have also made significant strides toward our ‘Phase 2’ goals, especially in reaching new agreements with nearly 90% of our contract sales customers. We remain focused on achieving competitive total employment costs and developing our raw materials strategy, the remaining elements of Phase 2 of our plan,” he said.

The statements in this release with respect to future results reflect management’s estimates and beliefs and are intended to be, and hereby are identified as “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company cautions readers that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently expected by management. Except as required by law, the company disclaims any obligation to update any forward-looking statements to reflect future developments or events.

AK Steel, headquartered in Middletown, Ohio, produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for customers in the automotive, appliance, construction and manufacturing markets. Additional information about AK Steel is available on the company’s web site at www.aksteel.com.

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