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United States Steel Corporation Reports Second Quarter 2002 ResultsPRNewswire-FirstCall United States Steel Corporation (NYSE: X) today issued the following: Earnings Highlights
(Dollars in millions except per share data)
2Q 2002 1Q 2002 2Q 2001
Revenues and
other income $1,807 $1,434 $1,737
Net income (loss)
per share $0.28 $(0.93) $(0.34)
Net income (loss) $27 $(83) $(30)
Adjustments to remove
special items (Pre-tax):
Federal excise tax
refund (33)
Insurance recoveries
related to USS-POSCO fire (6) (12) (2)
Pension settlement loss 10
Asset impairments
- receivables 14
Costs related to
Fairless shutdown 1
Reversal of
litigation accrual (9)
Costs related to
Separation 8
Adjustment to gain on
Transtar reorganization 2
Tax effect of
special items (at
35% statutory rate) 5 7 1
Net income (loss) adjusted
for special items $17 $(96) $(21)
Net income (loss)
- adjusted, per share $0.18 $(1.07) $(0.24)
NOTE: Special items are discussed in Selected Notes to Financial Statement
United States Steel Corporation (NYSE: X) reported second quarter 2002 adjusted net income of $17 million, or 18 cents per share, significantly improved from the adjusted net loss of $96 million, or $1.07 per share, reported in the first quarter 2002 and the adjusted net loss of $21 million, or 24 cents per share, reported in second quarter 2001. In second quarter 2002, U. S. Steel reported net income of $27 million, or 28 cents per share, including the net favorable effects of special items, which on an after tax basis increased net income by $10 million, or 10 cents per share. The first quarter 2002 net loss of $83 million, or $0.93 per share, included special items, which in total decreased the net loss by $13 million, or 14 cents per share. The second quarter 2001 net loss of $30 million, or 34 cents per share, included special items, which in total increased the net loss by $9 million, or 10 cents per share. Second quarter 2002 income from operations before special items improved to $32 million, compared with losses from operations before special items of $81 million in first quarter 2002 and $19 million in second quarter 2001. U. S. Steel Chairman, CEO and President Thomas J. Usher said, "We capitalized on improved shipments, operating efficiencies and prices for both our domestic and Slovakian operations during the second quarter. Steel production facilities operated at high levels with domestic operations at 94 percent of capability and U. S. Steel Kosice (USSK) at 96 percent. Flat- rolled segment shipments increased 10 percent and USSK shipments increased 46 percent versus the first quarter. We also benefited from recovering sheet spot market prices in the United States and in Europe." U. S. Steel's Flat-rolled segment recorded a second quarter 2002 loss from operations of $26 million, or $10 per ton. Second quarter results improved from the losses from operations of $74 million, or $32 per ton, and $143 million, or $62 per ton, recorded in the 2002 first and 2001 second quarters, respectively. Average realized prices in second quarter 2002 were $402 per ton, up $25 from the 2002 first quarter as realized prices on most products increased and the company shipped more value-added products. Flat- rolled shipments rose to 2.6 million net tons compared with 2.3 million net tons in both the 2002 first and 2001 second quarters. The Tubular segment recorded income from operations of $6 million, or $28 per ton. This reflects an increase from income from operations of $3 million, or $16 per ton, recorded in the first quarter, but was down from second quarter 2001 income from operations of $35 million, or $111 per ton. Shipments of 217,000 net tons were up from 188,000 net tons in the 2002 first quarter, but well below the 315,000 net tons shipped in the second quarter of 2001. Average realized prices decreased to $636 per ton from $640 in the 2002 first quarter primarily due to product mix effects. Depressed North American oil and gas drilling activity and high levels of imports of these products, which are not covered by the Section 201 action, continued to adversely impact this segment in the second quarter. The USSK segment recorded income from operations of $26 million, or $24 per ton, for the quarter, compared with a loss from operations of $1 million, or $1 per ton, in the 2002 first quarter and income from operations of $41 million, or $38 per ton, in second quarter 2001. USSK's average realized steel price increased by $12 per ton versus the 2002 first quarter. Units comprising U. S. Steel's Other Businesses recorded income from operations of $26 million, compared with a loss from operations of $9 million in the 2002 first quarter and second quarter 2001 income from operations of $48 million. For the quarter, the coal, coke and iron ore units reported income from operations of $11 million, up from the loss from operations of $14 million reported in the first quarter 2002 and slightly less than the income from operations of $14 million in second quarter 2001. During the second quarter, the iron ore unit experienced a seasonal improvement and the coal unit benefited from improved mining operations. The transportation and real estate units also contributed to the improved earnings compared with first quarter 2002. Net interest and other financial costs include foreign currency translation adjustments, primarily the effect of remeasuring USSK balances into the U.S. dollar, the functional currency. Net gains of approximately $13 million were recorded in the second quarter and first six months of 2002 versus net losses of $3 million and $7 million for the second quarter and first six months of 2001, respectively. In April, U. S. Steel announced that it had signed a letter of intent to sell coal and related assets associated with U. S. Steel Mining Company's West Virginia and Alabama mines. A definitive agreement on the sale is expected in the third quarter. Available sources of liquidity at the end of the quarter increased to $715 million consisting of cash and amounts available under the Receivables Purchase Agreement, the Inventory Facility and the USSK credit facilities. This increase of $219 million from the prior quarter was primarily the result of increased availability under the Receivables Purchase Agreement due to higher receivables balances, and the repurchase of receivables previously sold with the $192 million of net proceeds from the company's May equity offering of 10,925,000 shares of common stock. Looking ahead, shipments for Flat-rolled products are expected to increase slightly in the third quarter. Further improvement in average realized prices is also anticipated. For full-year 2002, Flat-rolled shipments are now expected to approximate 10.1 million net tons. For Tubular, some improvement is expected in the second half with third quarter shipments up from the depressed levels in the first half of 2002 and average realized prices up slightly versus the second quarter. Shipments for full-year 2002 are expected to be approximately 900,000 net tons. USSK's average realized prices in third quarter 2002 are expected to increase, with shipments in line with the second quarter. Shipments in 2002 are now projected to be approximately 4.0 million net tons. Commenting on U. S. Steel's outlook, Usher said, "For full-year 2002, we remain optimistic that U. S. Steel will be profitable. Our Flat-rolled business should continue to benefit from our domestic spot market exposure and the recent price restorations in the market. Internationally, our USSK operations are benefiting from improved steel market conditions in Europe and should continue to produce at the high, efficient levels experienced in the second quarter." Because of a higher than expected number of normal salaried retirements, together with last year's Voluntary Early Retirement Program that was completed in June, an unfavorable pension settlement effect is expected to be recognized later this year for the qualified non-union plan. The amount of this recognition of deferred actuarial losses will depend on pension fund investment performance and liability changes up to the measurement date, but is broadly estimated to be approximately $100 million (pretax). *** This release contains forward-looking statements with respect to market conditions, costs, shipments and prices, the potential coal mining asset sale and customer matters. Some factors, among others, that could affect full-year 2002 market conditions, costs, shipments and prices include import levels, future product demand, prices and mix, global and company steel production, plant operating performance, domestic natural gas prices and usage, the resumption of operation of steel facilities sold under the bankruptcy laws, and U.S. and European economic performance and political developments. Steel shipments and prices can be affected by imports and actions of the U.S. Government and its agencies. Factors that may affect USSK results are similar to domestic factors, including excess world supply, plus foreign currency fluctuations, matters peculiar to international marketing such as tariffs, and completion of facility projects at USSK. Factors that may impact the occurrence and timing of the coal mining asset sale include the availability of financing to the buyer and completion of definitive documentation. Factors that may affect the amount of the expected unfavorable pension settlement in the qualified non-union plan later this year include, among others, pension fund investment performance, liability changes and interest rates. 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, 2001, and in subsequent filings for U. S. Steel. A Statement of Operations and Preliminary Supplemental Statistics for U. S. Steel are attached. The company will conduct a conference call on second quarter earnings on Tuesday, July 23, at 11 a.m. EDT. To listen to the web cast of the conference call, visit the U. S. Steel web site, http://www.ussteel.com/, and click on the "Investors" button. Replays of the web cast will be available through July 30. For more information on U. S. Steel, visit our web site at http://www.ussteel.com/. UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
-----------------------------------
Second Quarter Six Months
(Dollars in millions, Ended Ended
except per share June 30 June 30
amounts) 2002 2001 2002 2001
-----------------------------------------------------------------------
REVENUES AND OTHER INCOME:
Revenues $1,761 $1,733 $3,192 $3,243
Income (loss)
from investees 7 (7) 9 40
Net gains on disposal
of assets 4 10 5 16
Other income 35 1 35 2
------ ------ ------ ------
Total revenues
and other income 1,807 1,737 3,241 3,301
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues 1,571 1,617 2,907 3,174
Selling, general and
administrative
expenses 100 68 171 103
Depreciation, depletion
and amortization 89 79 177 152
------ ------ ------ ------
Total costs
and expenses 1,760 1,764 3,255 3,429
------ ------ ------ ------
INCOME (LOSS) FROM
OPERATIONS 47 (27) (14) (128)
Net interest and
other financial costs 19 48 53 36
------ ------ ------ ------
INCOME (LOSS)
BEFORE INCOME TAXES 28 (75) (67) (164)
Provision (credit)
for income taxes 1 (45) (11) (143)
------ ------ ------ ------
NET INCOME (LOSS) $27 $(30) $(56) $(21)
====== ====== ====== ======
COMMON STOCK DATA:
Net income (loss),
per share
- Basic and diluted $.28 $ (.34) $(.60) $ (.24)
Weighted average
shares, in thousands
- Basic 95,670 89,223 92,636 89,223
- Diluted 95,675 89,223 92,636 89,223
Dividends paid per share:
United States Steel
Corporation Common
Stock $.05 - $.10 -
USX - U. S. Steel
Common Stock - $.10 - $.35
Note: Net income (loss) per common share for the periods of 2002 are
based on the weighted average number of common shares outstanding
during the periods. Net loss per common share for the periods of
2001 are based on outstanding common shares at December 31, 2001,
the date of the Separation.
The following notes are an integral part of this financial statement.
UNITED STATES STEEL CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT
-------------------------------------
1. United States Steel Corporation (U. S. Steel) is engaged
domestically in the production, sale and transportation of steel
mill products, coke, taconite pellets and coal; the management and
development of mineral resources and real estate; and engineering
and consulting services and, through U. S. Steel Kosice in the
Slovak Republic, in the production and sale of steel mill products
and coke primarily for the Central European market. Prior to
December 31, 2001, the businesses of U. S. Steel comprised an
operating unit of USX Corporation, now named Marathon Oil
Corporation (Marathon). Marathon had two outstanding classes of
common stock: USX-Marathon Group common stock, which was intended to
reflect the performance of Marathon's energy business, and USX-U. S.
Steel Group common stock (Steel Stock), which was intended to
reflect the performance of Marathon's steel business. On
December 31, 2001, U. S. Steel was capitalized through the issuance
of 89.2 million shares of common stock to the holders of Steel Stock
in exchange for all outstanding shares of Steel Stock on a one-for-
one basis (the Separation).
The accompanying Statement of Operations includes the second quarter
and six months of 2002 results of operations of U. S. Steel on a
stand-alone basis, while the second quarter and six months of 2001
results of operations represent a carve-out presentation of the
businesses comprising U. S. Steel and are not intended to be a
complete presentation of the results of operations of U. S. Steel on
a stand-alone basis. The results of operations for the 2001 periods
contain certain transactions related to interest and other financial
costs that were attributed to U. S. Steel by Marathon based on U. S.
Steel's cash flows and its capital structure. Corporate general and
administrative costs were allocated to U. S. Steel during the
periods of 2001 based upon utilization or other methods that
management believed to be reasonable and which considered certain
measures of business activities, such as employment, investments and
revenues. Income taxes were allocated to U. S. Steel during the
periods of 2001 in accordance with Marathon's tax allocation policy.
In general, such policy provided that the consolidated provision and
related tax payments or refunds be allocated based principally upon
the financial income, taxable income, credits, preferences and other
amounts directly related to U. S. Steel.
Effective January 1, 2002, net pension and other postretirement
costs associated with active employees at our operating locations
are reflected in cost of revenues. Net costs and credits associated
with corporate headquarters personnel and all retirees are reflected
in selling, general and administrative expenses. Prior year data
has been reclassified to conform to the current year presentation,
which resulted in a decrease in cost of revenues and an increase in
selling, general and administrative expenses of $38 million and
$80 million for the second quarter and six months of 2001,
respectively.
2. In the second quarter of 2002, U. S. Steel recognized a pretax gain
of $33 million associated with the recovery of black lung excise
taxes that were paid on coal export sales during the period 1993
through 1999. This gain is included in other income in the
Statement of Operations and resulted from a 1998 federal district
court decision that found such taxes to be unconstitutional. Of the
$33 million recognized, $10 million represents the interest
component of the claim.
3. On March 1, 2001, U. S. Steel completed the purchase of the tin mill
products business of LTV Corporation (LTV), which is now operated as
East Chicago Tin. In this noncash transaction, U. S. Steel assumed
approximately $66 million of certain employee-related obligations
from LTV. The acquisition was accounted for using the purchase
method of accounting. Results of operations for 2001 included the
operations of East Chicago Tin from the date of acquisition.
On March 23, 2001, Transtar, Inc. (Transtar) completed a
reorganization with its two voting shareholders, U. S. Steel and
Transtar Holdings, L.P. (Holdings), an affiliate of Blackstone
Capital Partners L.P., which resulted in U. S. Steel becoming the
sole owner of Transtar and certain of its subsidiaries while
Holdings became the owner of the other subsidiaries. U. S. Steel
recorded $70 million and ($2) million in income (loss) from
investees in the first and second quarters of 2001, respectively, to
reflect its share of the gain and subsequent downward adjustment of
the gain recognized by Transtar as a result of the reorganization.
Also, in connection with this transaction, U. S. Steel recognized a
favorable deferred tax adjustment of $33 million in the first
quarter of 2001 related to its investment in the stock of Transtar
which is included in the provision (credit) for income taxes. U. S.
Steel previously accounted for its investment in Transtar under the
equity method of accounting.
4. U. S. Steel has a 16% investment in Republic Technologies
International Holdings, LLC. (Republic) which was accounted for
under the equity method of accounting until the first quarter of
2001 when investments in and advances to Republic were reduced to
zero. On April 2, 2001, Republic filed a voluntary petition with
the U.S. Bankruptcy Court to reorganize its operations under Chapter
11 of the U.S. Bankruptcy Code. In the first quarter of 2001 as a
result of Republic's petition, U. S. Steel recorded a pretax charge
reflected as a reduction in revenues of $74 million for potentially
uncollectible trade receivables and recognized certain debt
obligations of $14 million which had been previously assumed by
Republic. As a result of further deterioration of Republic's
financial condition during the balance of 2001, an additional charge
of $68 million was recorded in the fourth quarter of 2001 to reserve
the remaining balance of pre-petition trade receivables and to
reserve a portion of other receivables established for retiree
medical claim payments made by U.S. Steel that were to be
subsequently reimbursed by Republic. These retiree medical cost
reimbursements are the subject of a pending request for treatment as
administrative expenses in the bankruptcy proceedings. On July 11,
2002, after a protracted auction proceeding, the Bankruptcy Court
issued an order approving the sale of substantially all of
Republic's assets which sale appears to have not produced sufficient
cash proceeds to satisfy all administrative claims. As a result of
this and other recent developments, U. S. Steel has reassessed the
likelihood of collecting the retiree medical cost reimbursements
from Republic, even if U. S. Steel prevails in its claim for
treatment as administrative expenses and has recorded a pretax
charge of $14 million to reserve the remaining balance of these
receivables. This charge is included in selling, general and
administrative expenses.
5. The credit for income taxes in the six months of 2002 reflected a
tax benefit for pretax losses at the estimated annual effective tax
rate for 2002 of approximately 24%. As a result of Slovak Republic
laws regarding tax credits and certain tax planning strategies to
reinvest earnings in foreign operations, virtually no income tax
provision is recorded for USSK income. The tax credit also included
a $4 million charge related to a newly enacted state tax law.
In the six months of 2001, effective tax rates were applied to U. S.
Steel's domestic and foreign operations separately. As a result,
the credit for income taxes reflected an estimated annual effective
tax rate of approximately 34% for U. S. Steel's domestic operations,
and virtually no tax provision for USSK's income. The tax credit
also included a $33 million benefit related to the Transtar
reorganization. In addition, net interest and other financial costs
in the six months of 2001 included a favorable adjustment of
$67 million and the credit for income taxes included an unfavorable
adjustment of $15 million, both of which were related to prior
years' taxes.
6. Selling, general and administrative expenses for the second quarter
and six months of 2002 included a pretax settlement charge of
$10 million related to retirements of personnel covered under the
non tax-qualified pension plan and the executive management
supplemental pension program.
Selling, general and administrative expenses for the second quarter
and six months of 2001 included $8 million and $9 million,
respectively for costs, primarily professional fees, incurred
related to the Separation.
7. Income (loss) from investees included pretax gains of $6 million and
$2 million for the second quarter of 2002 and 2001, respectively,
and $18 million and $2 million for the six months of 2002 and 2001,
respectively, for U. S. Steel's share of insurance recoveries
related to the May 31, 2001 fire at the USS-POSCO joint venture.
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
------------------------------------------------
Quarter Ended
June 30 March 31 June 30
(Dollars in millions) 2002 2002 2001
-------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Flat-rolled Products $(26) $(74) $(143)
Tubular Products 6 3 35
U. S. Steel Kosice 26 (1) 41
Other Businesses:
Coal, Coke and Iron Ore 11 (14) 14
Straightline (10) (7) -
All Other 25 12 34
----- ----- -----
Income (Loss) from
Operations before
Special Items 32 (81) (19)
Special Items:
Federal excise tax refund 33 - -
Insurance recoveries
related to USS-POSCO fire 6 12 2
Pension settlement loss (10) - -
Asset impairments
- receivables (14) - -
Costs related to
Fairless shutdown - (1) -
Reversal of litigation
accrual - 9 -
Costs related to Separation - - (8)
Adjustment to gain
on Transtar reorganization - - (2)
----- ----- -----
Total Income (Loss)
from Operations $47 $(61) $(27)
CAPITAL EXPENDITURES
Flat-rolled Products $6 $11 $83
Tubular Products 10 5 -
U. S. Steel Kosice 17 17 9
Other Businesses 15 23 12
----- ----- -----
Total $48 $56 $104
OPERATING STATISTICS
Average realized price: ($/net ton)(a)
Flat-rolled Products $402 $377 $395
Tubular Products 636 640 677
U. S. Steel Kosice 257 245 249
Steel Shipments:(a)(b)
Flat-rolled Products 2,571 2,330 2,296
Tubular Products 217 188 315
U. S. Steel Kosice 1,105 756 1,071
Raw Steel-Production:(b)
Domestic Facilities 2,998 2,906 2,621
U. S. Steel Kosice 1,191 917 1,131
Raw Steel-Capability
Utilization:(c)
Domestic Facilities 93.9% 92.1% 82.1%
U. S. Steel Kosice 95.5% 74.4% 90.7%
Domestic Ore
Shipments(b)(d) 5,059 2,289 5,189
Domestic Coke
Shipments(b)(d) 1,356 1,164 1,293
-----------
(a) Excludes intersegment transfers.
(b) Thousands of net tons.
(c) Based on annual raw steel production capability of 12.8 million net
tons for domestic facilities and 5.0 million net tons for U. S. Steel
Kosice.
(d) Includes intersegment transfers.
SOURCE: United States Steel Corporation CONTACT: Media: Mike Dixon, +1-412-433-6870; or Investors/Analysts: John Web site: http://www.ussteel.com/ Company News On-Call: |
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