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United States Steel Corporation Reports 2005 Third Quarter ResultsPRNewswire-FirstCall United States Steel Corporation Earnings Highlights
(Dollars in millions
except per share data) 3Q 2005 2Q 2005 3Q 2004
Net sales $3,200 $3,582 $3,707
Segment income from operations
Flat-rolled Products $41 $190 $362
U. S. Steel Europe 32 141 146
Tubular Products 124 133 55
Other Businesses 21 23 7
Total segment income from
operations $218 $487 $570
Retiree benefit expenses (55) (70) (72)
Other items not allocated to
segments (4) (4) (4)
Income from operations $159 $413 $494
Interest and other financial
costs 17 20 8
Foreign currency losses (gains) (1) 43 (4)
Net interest and other financial
costs 16 63 4
Income tax provision 28 93 126
Net income $107 $245 $354
- Per basic share $0.89 $2.11 $3.08
- Per diluted share $0.82 $1.88 $2.72
United States Steel Corporation (NYSE: X) reported third quarter 2005 net income of $107 million, or $0.82 per diluted share, compared to second quarter 2005 net income of $245 million, or $1.88 per diluted share, and third quarter 2004 net income of $354 million, or $2.72 per diluted share. Commenting on third quarter results, U. S. Steel President and CEO John P. Surma said, "Our Flat-rolled and European segments remained profitable despite lower spot market prices and reduced operating rates. Our largest domestic blast furnace and our largest European blast furnace were both down for the entire quarter for major rebuilds. In addition, after standing idle for eighteen years, our No. 1 blast furnace in Serbia took time to ramp up to full production following a rebuild completed in June. In contrast, our Tubular segment had another outstanding quarter as demand and prices remained strong." The company reported third quarter 2005 income from operations of $159 million, compared with income from operations of $413 million in the second quarter of 2005 and $494 million in the third quarter of 2004. Other items not allocated to segments reduced third quarter 2005 net income by $4 million, or 3 cents per diluted share and second quarter 2005 net income by $3 million, or 2 cents per diluted share. Third quarter 2004 net income was increased by $21 million, or 16 cents per diluted share, primarily resulting from a $24 million favorable effect related to the settlements of prior years' income tax audits. Foreign currency gains in the third quarter of 2005 were $1 million, compared to losses of $43 million in the second quarter of 2005 and gains of $4 million in the third quarter of 2004. The year-to-date losses in 2005 primarily reflect accounting remeasurement losses from the appreciation of the U.S. dollar functional currency versus the euro and other local currencies. Reportable Segments and Other Businesses Management uses segment income from operations to evaluate company performance because we believe it to be a key measure of ongoing operating results. U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $218 million, or $47 per ton, in the third quarter of 2005, compared with $487 million, or $100 per ton, in the second quarter of 2005 and $570 million, or $108 per ton, in the third quarter of 2004. The decrease in third quarter 2005 Flat-rolled income from operations compared to the second quarter primarily reflected lower spot prices and higher natural gas costs. The decline in European results was mainly due to lower spot market prices and shipments compared to the second quarter, partly resulting from a longer than anticipated outage at the No. 2 blast furnace in Slovakia. Outlook Commenting on U. S. Steel's outlook, Surma said, "With continuing reductions in service center inventory levels and firming spot prices, we expect fourth quarter market conditions to show improvement over the third, but results will remain well below those of the first two quarters of the year. Our order book remains strong across all industries, but we will continue to be affected by high natural gas prices and by reduced domestic raw steel capability for the duration of the Gary blast furnace rebuild." For Flat-rolled, fourth quarter 2005 shipments and average realized prices are expected to improve compared to the third quarter; however, these effects may be more than offset by higher costs for natural gas. We expect the Gary No. 14 blast furnace to start up in December and to reach full production early next year. For U. S. Steel Europe (USSE), fourth quarter shipments are expected to improve compared to the third quarter with all five blast furnaces operational after the October 12 restart of No. 2 blast furnace in Slovakia. Average realized prices should also improve, reflecting the recent increase in spot prices. Raw material costs are expected to decline compared to the third quarter. Shipments for the Tubular segment in the fourth quarter of 2005 are expected to return to second quarter levels while average realized prices should increase due to continued strong energy markets. The transfer price of tube rounds supplied by Flat-rolled was increased by $46 per ton effective October 1, 2005. Common Stock Repurchase Program On July 26, 2005, U. S. Steel announced that its Board of Directors had approved the repurchase of up to eight million shares of its common stock. During the third quarter, 1,210,000 shares were repurchased under this program for a total cost of $52 million. ***** This release contains forward-looking statements with respect to market conditions, operating costs, shipments and prices. Some factors, among others, that could affect market conditions, costs, shipments and prices for both domestic operations and USSE include global product demand, prices and mix; global and company steel production levels; plant operating performance; the timing and completion of the startup of the No. 14 blast furnace project at Gary Works and other facility projects; natural gas and electricity prices and usage; scrap and other raw materials availability and prices; the impact of fixed prices in energy and raw materials contracts (many of which have terms of one year or longer) as compared to short-term contract and spot prices of steel products; changes in environmental, tax and other laws; employee strikes; power outages; and U.S. and global economic performance and political developments. Domestic steel shipments and prices could be affected by import levels and actions taken by the U.S. Government and its agencies. Economic conditions and political factors in Europe that may affect USSE's results include, but are not limited to, taxation, nationalization, inflation, currency fluctuations, increased regulation, export quotas, tariffs, and other protectionist measures. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward- looking statements have been included in the Form 10-K of U. S. Steel for the year ended December 31, 2004, and in subsequent filings for U. S. Steel. A Statement of Operations (Unaudited), Other Financial Data (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached. The company will conduct a conference call on third quarter earnings on Tuesday, October 25, at 2 p.m. EDT. To listen to the webcast of the conference call, visit the U. S. Steel web site, www.ussteel.com, and click on the "Investors" button. For more information on U. S. Steel, visit its web site at www.ussteel.com. UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
Quarter Ended Nine Months Ended
------------------------------- -----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2005 2005 2004 2005 2004
-------------------------------------------------------------------------
NET SALES $3,200 $3,582 $3,707 $10,569 $10,085
OPERATING EXPENSES (INCOME):
Cost of sales (excludes
items shown below) 2,808 2,925 2,967 8,632 8,341
Selling, general and
administrative expenses 161 176 172 506 521
Depreciation, depletion and
amortization 88 88 96 274 287
Income from investees (2) (13) (18) (28) (37)
Net gains on disposal
of assets (7) (6) (2) (17) (46)
Other income, net (7) (1) (2) (10) (14)
----- ----- ----- ----- -----
Total operating expenses 3,041 3,169 3,213 9,357 9,052
----- ----- ----- ----- -----
INCOME FROM OPERATIONS 159 413 494 1,212 1,033
Net interest and other
financial costs 16 63 4 101 142
----- ----- ----- ----- -----
INCOME BEFORE INCOME TAXES,
MINORITY INTERESTS AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 143 350 490 1,111 891
Income tax provision 28 93 126 276 263
Minority interests 8 12 10 28 19
----- ----- ----- ----- -----
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 107 245 354 807 609
Cumulative effect of change
in accounting principle,
net of tax -- -- -- -- 14
----- ----- ----- ----- -----
NET INCOME 107 245 354 807 623
Dividends on preferred
stock (4) (5) (4) (13) (13)
----- ----- ----- ----- -----
NET INCOME APPLICABLE TO
COMMON STOCK $103 $240 $350 $794 $610
===== ===== ===== ===== =====
UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
(Continued)
------------------------------------
Quarter Ended Nine Months Ended
------------------------------- -----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2005 2005 2004 2005 2004
-------------------------------------------------------------------------
Per share:
Income before cumulative
effect of change in
accounting principle:
- Basic $.89 $2.11 $3.08 $6.96 $5.36
- Diluted $.82 $1.88 $2.72 $6.18 $4.76
Cumulative effect of
change in accounting
principle, net of tax:
- Basic $-- $-- $-- $-- $.13
- Diluted $-- $-- $-- $-- $.11
Net income:
- Basic $.89 $2.11 $3.08 $6.96 $5.49
- Diluted $.82 $1.88 $2.72 $6.18 $4.87
Weighted average shares,
in thousands:
- Basic 113,980 114,222 113,523 114,054 111,170
- Diluted 130,339 130,646 130,021 130,583 127,940
Dividends paid per
common share $.10 $.10 $.05 $.28 $.15
UNITED STATES STEEL CORPORATION
OTHER FINANCIAL DATA (Unaudited)
------------------------------------
Nine Months Ended
-----------------
September 30
Cash Flow Data (In millions) 2005 2004
-----------------------------------------------------------------------
Cash provided from operating activities:
Net income $807 $623
Depreciation, depletion and amortization 274 287
Pensions and other postretirement benefits (77) (19)
Property tax settlement gain (95) --
Deferred income taxes 86 264
Net gains on disposal of assets (17) (46)
Changes in: Current receivables 153 (431)
Inventories (144) 32
Current accounts payable and accrued expenses (104) 235
Other operating activities 1 (23)
------ ------
Total 884 922
------ ------
Cash used in investing activities:
Capital expenditures (473) (367)
Disposal of assets 25 87
Other investing activities 11 5
------ ------
Total (437) (275)
------ ------
Cash (used in) provided from financing activities:
Repayment of long-term debt (7) (297)
Common stock issued 27 348
Common stock repurchased (52) --
Dividends paid (45) (29)
Change in bank checks outstanding 20 93
Other financing activities (26) (16)
------ ------
Total (83) 99
------ ------
Effect of exchange rate changes on cash (7) --
------ ------
Total net cash flow 357 746
Cash at beginning of the year 1,037 316
------ ------
Cash at end of the period $1,394 $1,062
====== ======
Sept. 30 Dec. 31
Balance Sheet Data (In millions) 2005 2004
--------------------------------------------------------------------------
Cash and cash equivalents $1,394 $1,037
Other current assets 3,233 3,206
Property, plant and equipment - net 3,840 3,627
Pension Asset 2,377 2,538
Other assets 521 548
------ ------
Total assets $11,365 $10,956
====== ======
Current liabilities $2,207 $2,531
Long-term debt 1,366 1,363
Employee benefits 2,024 2,125
Other long-term liabilities 1,038 939
Minority interests 29 28
Stockholders' equity 4,701 3,970
------ ------
Total liabilities and stockholders' equity $11,365 $10,956
====== ======
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Quarter Ended Nine Months Ended
-------------------------- -----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2005 2005 2004 2005 2004
--------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Flat-rolled Products $41 $190 $362 $566 $810
U. S. Steel Europe 32 141 146 385 262
Tubular Products 124 133 55 379 83
Other Businesses(a) 21 23 7 27 31
----- ----- ----- ----- -----
Segment Income from Operations 218 487 570 1,357 1,186
Retiree benefit expenses(b) (55) (70) (72) (208) (181)
Other items not allocated to
segments:
Property tax settlement
gain(c) -- -- -- 70 --
Stock appreciation rights (1) 2 (4) 2 (15)
Workforce reduction
charges(d) (3) (6) -- (9) --
Income from sale of real
estate interests -- -- -- -- 43
----- ----- ----- ----- -----
Total Income from
Operations $159 $413 $494 $1,212 $1,033
CAPITAL EXPENDITURES
Flat-rolled Products $83 $78 $109 $220 $167
U. S. Steel Europe 67 59 57 175 136
Tubular Products 1 - 3 4 8
Other Businesses 43 20 33 74 56
----- ----- ----- ----- -----
Total $194 $157 $202 $473 $367
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(a) Includes the results of the former Real Estate segment.
(b) Includes certain profit-based expenses for U. S. Steel retirees and
National retirees pursuant to provisions of the 2003 labor agreement
with the United Steelworkers of America.
(c) Reflects the portion of the Gary property tax settlement gain that is
included in cost of sales, and excludes $25 million that is included
in net interest and other financial costs.
(d) Reflects special termination benefits for a USSK voluntary early
retirement program.
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Quarter Ended Nine Months Ended
----------------------------- ----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2005 2005 2004 2005 2004
--------------------------------------------------------------------------
OPERATING STATISTICS
Average realized price:
($/net ton)
Flat-rolled
Products(a) $586 $633 $627 $624 $561
U. S. Steel
Europe 562 643 573 631 496
Tubular Products 1,393 1,302 907 1,281 785
Steel Shipments:(a)(b)
Flat-rolled
Products 3,191 3,224 3,745 9,950 11,888
U. S. Steel
Europe 1,230 1,332 1,257 3,852 3,693
Tubular Products 264 297 266 864 807
Raw Steel-Production:(b)
Domestic
Facilities 3,514 3,597 4,293 11,414 13,002
U. S. Steel
Europe 1,200 1,486 1,400 4,234 4,211
Raw Steel-Capability
Utilization:(c)
Domestic
Facilities 71.9% 74.4% 87.8% 78.7% 89.3%
U. S. Steel
Europe 64.1% 80.2% 75.0% 76.2% 75.8%
Domestic iron ore
production(b) 5,878 5,670 5,546 16,930 17,169
Domestic iron ore
shipments(b)(d) 6,066 6,232 6,930 15,687 17,688
Domestic coke
production(b)(e) 1,602 1,585 1,659 4,607 4,974
Domestic coke
shipments (b)(e)(f) 192 241 686 678 1,999
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(a) Excludes intersegment transfers.
(b) Thousands of net tons.
(c) Based on annual raw steel production capability of 19.4 million net
tons for domestic facilities and 7.4 million net tons for U. S. Steel
Europe.
(d) Includes trade shipments and intersegment transfers.
(e) Includes the Clairton 1314B Partnership.
(f) Includes trade shipments only.
SOURCE: United States Steel Corporation CONTACT: Media, John Armstrong, +1-412-433-6792, or Investors-Analysts, Web site: http://www.ussteel.com/ Company News On-Call: http://www.prnewswire.com/comp/929150.html |
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