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United States Steel Corporation Reports 2004 Third Quarter ResultsPRNewswire-FirstCall Earnings Highlights
(dollars in millions except per share data)
3Q 2004 2Q 2004 3Q 2003
Revenues and other income $3,729 $3,466 $2,508
Segment income (loss) from operations
Flat-rolled Products $362 $335 $(21)
U. S. Steel Europe 146 76 35
Tubular Products 55 25 (10)
Real Estate 5 3 11
Straightline (16)
Other Businesses 2 15 (8)
Total segment income (loss) from operations $570 $454 $(9)
Retiree benefit expenses (72) (65) (19)
Other items not allocated to segments (4) (1) (666)
Income (loss) from operations $494 $388 $(694)
Net income (loss) $354 $211 $(354)
- Per basic share $3.08 $1.82 $(3.47)
- Per diluted share $2.72 $1.62 $(3.47)
United States Steel Corporation (NYSE: X) reported record net income for third quarter 2004 of $354 million, or $2.72 per diluted share, compared to net income of $211 million, or $1.62 per diluted share in 2004's second quarter, and a net loss of $354 million, or $3.47 per diluted share (after preferred stock dividends), in the third quarter of 2003. Diluted earnings per share for both 2004 quarters reflect the assumed conversion of the company's convertible preferred shares into approximately 16 million common shares. Income from operations in the third quarter of 2004 was $494 million, $106 million higher than in the second quarter of 2004, and dramatically improved from the large loss in the third quarter of 2003, which included workforce reduction charges of $618 million. Commenting on the quarter's results, U. S. Steel President and CEO John P. Surma said, "These excellent results reflect robust steel markets and continuing benefits from ongoing cost reduction efforts." Net income in third quarter 2004 included a $24 million net favorable effect related to the settlements of prior years' income tax audits. This amount consisted of a favorable interest adjustment of $31 million, net of additional tax expense of $7 million. These settlements and other items not allocated to segments increased net income by $21 million, or 16 cents per diluted share. Net interest and other financial costs in second quarter 2004 included a $33 million charge resulting from the early redemption of senior debt. This charge and a small other item not allocated to segments reduced second quarter 2004 net income by $22 million, or 17 cents per diluted share. Other items not allocated to segments decreased net income by $433 million, or $4.19 per diluted share in third quarter 2003. Reportable Segments and Other Businesses Management uses segment income from operations to evaluate company performance because it believes this to be a key measure of ongoing operating results. U. S. Steel's reportable segments and Other Businesses generated segment income from operations of $570 million, or $108 per ton, in the third quarter of 2004, compared with $454 million, or $82 per ton, in the second quarter of 2004 and a loss of $9 million, or $2 per ton, in the third quarter of 2003. Results for Flat-rolled, Tubular and European operations in the third quarter of 2004 continued to benefit from improving prices and expanding margins. Compared to 2004's second quarter, domestic results reflected higher raw materials costs, principally for scrap; higher costs for profit-based payments under the labor agreement with the United Steelworkers of America; and higher costs for repair outages, as blast furnace repairs at Gary Works and Granite City Works were both completed during the third quarter. Cash and Liquidity U. S. Steel contributed $70 million to its main defined benefit pension plan during the third quarter, and ended the quarter with over $1 billion in cash and cash equivalents and about $2 billion of total liquidity. Outlook Looking ahead to the fourth quarter, Surma stated, "We expect continued strong results for each of our major business units." In the Flat-rolled segment, total shipments should increase slightly compared to the third quarter, and margins should remain at high levels. Some markets are being affected by seasonal softness and efforts to control inventory. Seasonal patterns suggest that these markets will rebound in the first quarter of 2005. Average realized prices are expected to be comparable to or slightly below the third quarter, reflecting some differences in product mix as well as flattening in spot prices. Scrap and energy costs remain volatile and planned outage costs will remain comparable to third quarter levels. U. S. Steel currently expects coke costs to decline. For full-year 2004, Flat-rolled segment shipments are expected to be 15.8 million tons. For U. S. Steel Europe (USSE), fourth quarter 2004 average realized prices are expected to increase from the third quarter reflecting the announced October 1 price increase for flat-rolled products, more than offsetting higher raw materials costs. Shipments for the quarter are expected to increase by about 150,000 tons compared to the third quarter and estimated full-year 2004 shipments remain at 5.1 million net tons. For the Tubular segment, margins are expected to continue to increase, reflecting full-quarter realization of a series of third quarter price increases and additional fourth quarter price increases. Margins will reflect stable costs for the significant portion of tube rounds supplied by the Flat- rolled segment, which are transferred at a cost-based annual price. Tubular segment shipments for the total year are expected to be about 1.1 million tons. U. S. Steel Kosice has given irrevocable notice to repay its $272 million of long-term debt at face amount on November 24, 2004. Only $20 million of this debt was due in 2004. Annualized interest expense on this debt is approximately $23 million. Capital expenditures for 2004 are currently expected to be about $570 million, reflecting domestic spending of approximately $360 million and European spending of approximately $210 million, which will fluctuate based upon exchange rates. These amounts include advanced spending for a major reline to the No. 13 Blast Furnace at Gary Works, scheduled for 2005, and spending in Serbia to return a second blast furnace to production, also in 2005. 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; availability and prices of raw materials; plant operating performance; the timing and completion of outages and other projects; natural gas prices and usage; 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. 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, 2003, and in subsequent filings by 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 26, at 2 p.m. EDT. To listen to the webcast of the conference call, visit the U. S. Steel web site, http://www.ussteel.com/ , and click on the "Investors" button. For more information about U. S. Steel, visit its web site at http://www.ussteel.com/ . UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
Third Quarter Nine Months
Ended Ended
September 30, September 30,
(Dollars in millions) 2004 2003 2004 2003
------------------------------------------------------------------------
REVENUES AND OTHER INCOME:
Revenues $3,707 $2,506 $10,079 $6,715
Income (loss) from investees 18 (2) 37 (10)
Net gains on disposal of assets 2 4 46 27
Other income 2 -- 14 45
----- ----- ----- -----
Total revenues and other income 3,729 2,508 10,176 6,777
----- ----- ----- -----
COSTS AND EXPENSES:
Cost of revenues (excludes items
shown below) 2,967 2,294 8,335 6,117
Selling, general and
administrative expenses 172 150 521 421
Depreciation, depletion and
amortization 96 94 287 271
Restructuring charges -- 664 -- 664
----- ----- ----- -----
Total costs and expenses 3,235 3,202 9,143 7,473
----- ----- ----- -----
INCOME (LOSS) FROM OPERATIONS 494 (694) 1,033 (696)
Net interest and other financial
costs 4 26 142 106
----- ----- ----- -----
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTERESTS, EXTRAORDINARY
LOSS AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 490 (720) 891 (802)
Income tax provision (benefit) 126 (366) 263 (418)
Minority interests 10 -- 19 --
----- ----- ----- -----
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 354 (354) 609 (384)
Extraordinary loss, net of tax -- -- -- (52)
Cumulative effects of changes in
accounting principles, net of tax -- -- 14 (5)
----- ----- ----- -----
NET INCOME (LOSS) 354 (354) 623 (441)
Dividends on preferred stock (4) (4) (13) (11)
----- ----- ----- -----
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $350 $(358) $610 $(452)
===== ===== ===== =====
UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
(Continued)
------------------------------------
Third Quarter Nine Months
Ended Ended
September 30, September 30,
COMMON STOCK DATA: 2004 2003 2004 2003
-------------------------------------------------------------------------
Per share:
Income (loss) before extraordinary
loss and cumulative effects of
changes in accounting principles:
-Basic $3.08 $(3.47) $5.36 $(3.84)
-Diluted $2.72 $(3.47) $4.76 $(3.84)
Extraordinary loss, net of tax:
-Basic $-- $-- $-- $(.50)
-Diluted $-- $-- $-- $(.50)
Cumulative effects of changes in
accounting principles, net of tax:
-Basic $-- $-- $.13 $(.05)
-Diluted $-- $-- $.11 $(.05)
Net income (loss):
-Basic $3.08 $(3.47) $5.49 $(4.39)
-Diluted $2.72 $(3.47) $4.87 $(4.39)
Weighted average shares, in
thousands
-Basic 113,523 103,321 111,170 103,096
-Diluted 130,021 103,321 127,940 103,096
Dividends paid per common share $.05 $.05 $.15 $.15
UNITED STATES STEEL CORPORATION
OTHER FINANCIAL DATA (Unaudited)
------------------------------------
Nine Months Ended
September 30,
Cash Flow Data (In millions) 2004 2003
------------------------------------------------------------------------
Cash provided from (used in) operating
activities:
Net income (loss) $623 $(441)
Depreciation, depletion and amortization 287 271
Restructuring charges -- 633
Working capital changes (88) 195
Other operating activities 193 (326)
------ ------
Total 1,015 332
------ ------
Cash used in investing activities:
Capital expenditures (367) (205)
Acquisitions -- (916)
Other investing activities 92 56
------ ------
Total (275) (1,065)
------ ------
Cash provided from financing activities:
Issuance of long-term debt -- 427
Repayment of long-term debt (297) (3)
Preferred stock issued -- 242
Common stock issued 348 11
Dividends paid (29) (26)
Other financing activities (16) (1)
------ ------
Total 6 650
------ ------
Total net cash flow 746 (83)
Cash at beginning of the year 316 243
------ ------
Cash at end of the period $1,062 $160
====== ======
Sept. 30, Dec. 31,
Balance Sheet Data (In millions) 2004 2003
------------------------------------------------------------------------
Cash and cash equivalents $1,062 $316
Other current assets 3,113 2,790
Property, plant and equipment - net 3,514 3,414
Other assets 1,093 1,317
------ ------
Total assets $8,782 $7,837
====== ======
Current liabilities $2,442 $2,127
Long-term debt 1,569 1,890
Employee benefits 2,384 2,382
Other long-term liabilities 328 343
Minority interests 25 2
Stockholders' equity 2,034 1,093
------ ------
Total liabilities and stockholders' equity $8,782 $7,837
====== ======
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Quarter Ended
September June 30, September
(Dollars in millions) 30, 2004 2004 30, 2003
-----------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Flat-rolled Products(a) $362 $335 $(21)
U. S. Steel Europe(b) 146 76 35
Tubular Products 55 25 (10)
Real Estate 5 3 11
Straightline(a) (16)
Other Businesses 2 15 (8)
----- ----- -----
Segment Income (Loss) from Operations 570 454 (9)
Retiree benefit expenses(c) (72) (65) (19)
Other items not allocated to segments:
Workforce reduction charges -- -- (618)
Stock appreciation rights (4) (1) (2)
Asset impairments -- -- (46)
----- ----- -----
Total Income (Loss) from Operations $494 $388 $(694)
CAPITAL EXPENDITURES
Flat-rolled Products(a) $109 $37 $23
U. S. Steel Europe(b) 57 40 30
Tubular Products 3 2 6
Real Estate -- -- 1
Straightline 1
Other Businesses 33 16 12
----- ----- -----
Total $202 $95 $73
OPERATING STATISTICS
Average realized steel price: ($/net ton)(d)
Flat-rolled Products(a) $627 $583 $424
Tubular Products 907 779 625
U. S. Steel Europe(b) 573 491 351
Steel Shipments:(d) (e)
Flat-rolled Products(a) 3,745 3,982 3,909
Tubular Products 266 269 231
U. S. Steel Europe(b) 1,257 1,263 1,170
Raw Steel-Production:(e)
Domestic Facilities 4,293 4,230 4,396
U. S. Steel Europe(b) 1,400 1,467 1,158
Raw Steel-Capability Utilization:(f)
Domestic Facilities 87.8% 87.5% 89.9%
U. S. Steel Europe(b) 75.0% 79.5% 83.5%
Domestic iron ore production(e) 5,546 6,011 4,567
Domestic iron ore shipments(e)(g) 6,930 6,722 5,786
Domestic coke production(e)(i) 1,659 1,666 1,780
Domestic coke shipments(e)(h)(i) 686 642 762
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(a) The Flat-rolled segment includes the residual effects of Straightline
from January 1, 2004 and the consolidated results of the Clairton
1314B Partnership that was accounted for under the equity method
prior to January 1, 2004.
(b) Includes U. S. Steel's Serbian operations from September 12, 2003.
Prior to September 12, 2003, included effects of activities under
certain agreements with the former owner of the Serbian operations.
(c) Includes certain profit-based expenses for U. S. Steel retirees and
National retirees pursuant to provisions of the 2003 labor agreement
with the USWA.
(d) Excludes intersegment transfers.
(e) Thousands of net tons.
(f) Based on annual raw steel production capability for domestic
facilities of 19.4 million net tons and annual raw steel production
capability for U. S. Steel Europe of 5.0 million net tons prior to
September 12, 2003, and 7.4 million net tons thereafter.
(g) Includes trade shipments and intersegment transfers.
(h) Includes trade shipments only.
(i) Includes Clairton 1314B Partnership.
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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