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USX Corporation Reports Fourth Quarter And Full Year 2000 Marathon Group ResultsPRNewswire USX-Marathon Group (NYSE: MRO) today issued the following: Earnings Highlights
(Dollars in millions except per diluted share data)
4Q 4Q 2000 1999
2000 1999
Net income adjusted
for special items $386 $148 $1,308 $434
- per diluted share $1.25 $0.47 $4.20 $1.40
Net income (loss) $(310) $171 $432 $654
Net income (loss)
per diluted share $(1.00) $0.55 $1.39 $2.11
Revenues and Other Income $8,046 $7,295 $33,846 $23,707
USX-Marathon Group's (NYSE: MRO) net income adjusted for special items was $386 million, or $1.25 per diluted share, in fourth quarter 2000, compared with adjusted net income of $148 million, or 47 cents per diluted share, in fourth quarter 1999. The Marathon Group recorded a fourth quarter 2000 net loss of $310 million, or $1.00 per diluted share compared to net income of $171 million or 55 cents per diluted share in the fourth quarter of 1999. Included in fourth quarter 2000 results were after-tax net charges totaling $696 million, including a $586 million non-cash adjustment related to the formation of a joint venture with Kinder Morgan, oil and gas non-cash property impairments amounting to $115 million, and restructuring charges of $44 million including a pension settlement loss and benefit accrual, partially offset by a non-cash deferred tax benefit of $30 million and by net gains on asset dispositions of $19 million. The 1999 results included a $23 million favorable adjustment to deferred federal income taxes related to the outcome of a United States Tax Court case. The Marathon Group reported 2000 net income adjusted for special items of $1.3 billion, or $4.20 per diluted share. For the year 2000, the Marathon Group recorded net income of $432 million, or $1.39 per diluted share. Special items for the year reduced net income by $876 million, including the fourth quarter special items discussed above, an unfavorable $235 million one-time, non-cash deferred tax charge, and a partial offset from a $55 million after-tax gain on sale of assets. Net income for the year 1999 was $654 million, or $2.11 per diluted share and included a favorable inventory market valuation reserve adjustment and an adjustment related to the outcome of a United States Tax Court case, partially offset by net losses from the sale of Scurlock Permian LLC, Carnegie Natural Gas Company and certain oil and gas producing properties. The net favorable after-tax effect of 1999 special items was $220 million. Marathon Group revenues were $8.0 billion in fourth quarter 2000 and $33.8 billion for the year, compared with $7.3 billion and $23.7 billion in the same periods of 1999. Commenting on 2000 performance, USX Corporation Board Chairman Thomas J. Usher said, "Consistently strong worldwide liquid hydrocarbon and natural gas prices combined with solid Midwest refined product margins paved the way for significantly improved operating results. During 2000, Marathon initiated a restructuring program for its upstream business which contributes to an overall workforce reduction of 24%, compared to the previous year. Marathon also disposed of non-core operating assets and increased its ownership interests in key strategic areas. In the fourth quarter, Marathon recognized a $58 million pre-tax gain upon completion of the Sakhalin property exchange with Shell and received interests in the Foinaven and Ursa fields located respectively in the U.K. Atlantic Margin area and Gulf of Mexico." Income for Marathon's reportable segments was $723 million in fourth quarter 2000 and $2.8 billion for the year 2000, compared with $373 million and $1.3 billion in the same periods of 1999. Worldwide exploration and production (upstream) segment income totaled $405 million in fourth quarter 2000 and $1.5 billion for the year, compared with $257 million and $618 million in the same periods of 1999. Domestic upstream income was $332 million in fourth quarter 2000 and $1.1 billion for the year, compared with $195 million and $494 million in the same periods of 1999. International upstream income was $73 million in fourth quarter 2000 and $420 million for the year, compared with income of $62 million and $124 million in the same periods of 1999. The worldwide increases in both the fourth quarter and the year were primarily the result of significantly improved liquid hydrocarbon and natural gas prices. Refining, marketing and transportation (downstream) segment income was $305 million in fourth quarter 2000 and $1.3 billion for the year, versus $102 million and $611 million in the comparable periods of 1999. Usher noted, "Marathon Ashland Petroleum's (MAP) third year of operations was its best. Refining margins remained strong in the fourth quarter and overshadowed lower retail margins. In the fourth quarter, MAP disposed of 134 non-core Speedway SuperAmerica units, recognizing a fourth quarter pre-tax gain of $18 million." Other energy related businesses segment income was $13 million in fourth quarter 2000 and $38 million for the year, compared with $14 million and $61 million in the same periods of 1999. The 1999 results included the second quarter reversal of pipeline abandonment accruals of $10 million. In November 2000, the Marathon Group indicated that it would be revising downward its estimate of proved developed and undeveloped oil and gas reserves by approximately 100 million barrels of oil equivalent (BOE). As a result of recently completed more detailed reserve analysis, at year end 2000 Marathon revised downward its estimate of proved developed and undeveloped oil and gas reserves by 167 million BOE. These revisions are principally in Canada, the North Sea and United States and are the result of production performance and disappointing drilling results. Year 2001 production is expected to average 430,000 BOE per day. In the first quarter 2001, production is expected to average 425,000 BOE per day split evenly between liquid hydrocarbons and natural gas, excluding the planned acquisition of Pennaco Energy, Inc., announced on December 22, 2000. On December 28, 2000, Marathon signed a Definitive Agreement to form a joint venture with Kinder Morgan Energy Partners. In forming the joint venture, Marathon contributed portions of its Yates production operations while Kinder Morgan contributed the interest in Yates that it purchased from Marathon before year-end, portions of its Sacroc assets and carbon dioxide reserves. Marathon holds an 85% interest in the combined entity which offers synergies involving carbon dioxide enhanced recovery techniques. The joint venture commenced operations in January 2001. This release contains forward-looking statements with respect to timing and levels of Marathon's worldwide liquid hydrocarbon and natural gas production, and the proposed acquisition of Pennaco Energy, Inc. Some factors that could potentially affect the drilling program and worldwide liquid hydrocarbon and natural gas production include pricing, supply and demand for petroleum products, amount of capital available for exploration and development, regulatory constraints, timing of commencing production from new wells, drilling rig availability, the proposed acquisition of Pennaco Energy, Inc., future acquisitions of producing properties, and other geological, operating and economic considerations. Some factors that would affect the Pennaco acquisition are resolution of lawsuits involving the Pennaco tender offer, completion of tender offer for Pennaco, and successful completion of customary closing conditions. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, USX has included in Form 10-K for the year ended December 31, 1999, and subsequent Form 10-Q's and Form 8-K's, 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. A Statement of Operations and Preliminary Supplemental Statistics for the Marathon Group and a consolidated Statement of Operations for USX Corporation are attached. The company will conduct a conference call on fourth quarter earnings on Wednesday, January 24 at 10 a.m. EST. To listen to the webcast of the conference call, visit the USX website, http://www.usx.com/ and click on the "Marathon Group" button, then the "Investor Services" button. Replays of the webcast will be available through February 1. For more information on USX Corporation and Marathon Group, visit our websites at http://www.usx.com/ or http://www.marathon.com/ . Visit USX Corporation's web site at http://www.usx.com/. USX Corporation press releases are available through Company News On-Call by fax, 800-758-5804, ext. 929150, or at http://www.prnewswire.com/comp/929150.html; or by fax, 800-758-5804, ext. 133204, or at http://www.prnewswire.com/comp/133204.html. MARATHON GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
-----------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions,
except per share
amounts) 2000 1999* 2000 1999*
-----------------------------------------------------------------------
REVENUES AND OTHER INCOME:
Revenues $8,879 $7,250 $34,474 $23,590
Dividend and investee
income 39 11 107 69
Net gains (losses)
on disposal of assets (880) 17 (785) -
Gain on ownership
change in Marathon
Ashland
Petroleum LLC 3 6 12 17
Other income 5 11 38 31
------ ------ ------ ------
Total revenues and
other income 8,046 7,295 33,846 23,707
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues
(excludes items
shown below) 6,530 5,368 25,464 16,653
Selling, general
and administrative
expenses 216 111 625 486
Depreciation,
depletion and
amortization 518 272 1,245 950
Taxes other than
income taxes 1,152 1,118 4,626 4,218
Exploration expenses 96 76 238 238
Inventory market
valuation credits - - - (551)
------ ------ ------ ------
Total costs and
expenses 8,512 6,945 32,198 21,994
------ ------ ------ ------
INCOME (LOSS) FROM
OPERATIONS (466) 350 1,648 1,713
Net interest and
other financial costs 44 70 236 288
Minority interest in
income of Marathon
Ashland Petroleum LLC 125 42 498 447
------ ------ ------ ------
INCOME (LOSS) BEFORE
INCOME TAXES (635) 238 914 978
Provision (credit)
for estimated income
taxes (325) 67 482 324
------ ------ ------ ------
NET INCOME (LOSS) $(310) $171 $432 $654
====== ====== ====== ======
MARATHON STOCK DATA:
Net income (loss)
per share -- basic
and diluted $(1.00) $.55 $1.39 $2.11
Dividends paid per share .23 .21 .88 .84
Weighted average shares, in thousands
- Basic 309,930 311,289 311,531 309,696
- Diluted 309,930 311,553 311,761 310,010
* Certain amounts have been reclassified to conform to 2000
classifications.
The following notes are an integral part of this financial statement.
MARATHON GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT
-------------------------------------
1. The statement of operations of the Marathon Group includes the results
of operations for the businesses of Marathon Oil Company (Marathon) and
certain other subsidiaries of USX and a portion of USX's net financial
costs, general and administrative costs and income taxes attributed to
the groups in accordance with USX's accounting and tax allocation
policies. This statement should be read in connection with the
consolidated statement of operations of USX.
2. When USX acquired Marathon in March 1982, crude oil and refined product
prices were at historically high levels. USX established a new LIFO
cost basis for Marathon's inventories by reference to these prices.
Generally accepted accounting principles require that inventories be
reported at the lower of recorded cost or current market value.
Marathon has established an inventory market valuation (IMV) reserve to
reduce the cost basis of its inventories to current market value.
Quarterly adjustments to the IMV reserve result in noncash charges or
credits to income from operations. Decreases in market prices below
the cost basis result in charges to income from operations. Once a
reserve has been established, subsequent increases in prices (up to the
cost basis) result in credits to income from operations.
The charges or credits to income resulting from IMV reserve adjustments
affect the comparability of financial results from period to period.
They also affect comparisons with other energy companies, many of which
do not have such adjustments. Therefore, USX reports separately the
effects of IMV reserve adjustments on financial results. In
management's opinion, the effects of such adjustments should be
considered separately when evaluating operating performance.
3. In the fourth quarter 2000, Marathon exchanged its 37.5 percent
interest in Sakhalin Energy Investment Company Ltd. (Sakhalin Energy)
for certain interests in the UK Atlantic Margin area and the U.S. Gulf
of Mexico as well as reimbursement for all Sakhalin project capital
expenditures made in 2000. As a result of the absence of future
foreign source income from Sakhalin Energy, an additional valuation
allowance of $235 million to reduce deferred federal tax benefits was
recognized in the third quarter 2000.
4. In the fourth quarter 2000, the Marathon Group adopted the following
accounting pronouncements primarily related to the classification of
items in the statement of operations. In December 1999, the Securities
and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101
(SAB 101) "Revenue Recognition in Financial Statements," which
summarizes the SEC staff's interpretations of generally accepted
accounting principles related to revenue recognition and
classification. During the third quarter 2000, the Emerging Issues
Task Force of the Financial Accounting Standards Board (EITF) issued
EITF Consensus No. 99-19 "Reporting Revenue Gross as a Principal versus
Net as an Agent," which addresses whether certain cost items should be
reported as a reduction of revenue or as a component of cost of sales,
and EITF Consensus No. 00-10 "Accounting for Shipping and Handling Fees
and Costs," which addresses the classification of costs incurred for
shipping goods to customers. The adoption of these new pronouncements
had no net effect on the financial position or results of operations of
the Marathon Group, although they required reclassifications of certain
amounts in the statement of operations.
5. In December 2000, Marathon and Kinder Morgan Energy Partners, L.P.
signed a definitive agreement to form a joint venture combining certain
of their oil and gas producing activities in the U.S. Permian Basin,
including Marathon's interest in the Yates Field. This transaction
will allow Marathon to expand its interests in the Permian Basin and
will improve access to materials for use in enhanced recovery
techniques in the Yates Field. The joint venture named MKM Partners
L.P., commenced operations in January 2001 and will be accounted for
under the equity method of accounting. Marathon recognized a pretax
charge of $931 million in the fourth quarter 2000, related to the joint
venture formation.
MARATHON GROUP OF USX CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 2000 1999 2000 1999
-------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Exploration & Production ("E&P")
Domestic $332 $195 $1,115 $494
International 73 62 420 124
----- ----- ----- -----
Income For E&P
Reportable Segment 405 257 1,535 618
Refining, Marketing
& Transportation (a) 305 102 1,273 611
Other Energy Related
Businesses (b) 13 14 38 61
----- ----- ----- -----
Income For
Reportable Segments $723 $373 $2,846 $1,290
Items Not Allocated To Segments:
Administrative Expenses $(31) $(25) $(136) $(108)
Inventory Market
Valuation Reserve
Adjustment - - - 551
Gain on Ownership
Change in MAP 3 6 12 17
Impairment of Oil and
Gas Properties and
Assets Held for Sale (197) (16) (197) (16)
Charge on formation
of MKM Partners LP JV (931) - (931) -
Gain/(Loss) on Disposal
of Assets:
Gain on disposition
of Angus/Stellaria - - 87 -
Gain on Sakhalin
exchange 58 - 58 -
Loss on sale of
Howard Glasscock Field (39) - (39) -
Gain on sale of
SSA non-core stores 18 - 18 -
Other, net - (3) - (36)
----- ----- ------ ------
Gain/(Loss) on
Disposal of Assets 37 (3) 124 (36)
Restructuring Charges
including Pension
Settlement (Loss)/
Gain & Benefit Accruals (70) 15 (70) 15
----- ----- ------ ------
Marathon Group Income
From Operations $(466) $350 $1,648 $1,713
CAPITAL EXPENDITURES
Exploration &
Production $189 $150 $742 $744
Refining, Marketing
& Transportation (a) 341 386 656 612
Other (c) 17 15 27 22
----- ----- ----- -----
Total $547 $551 $1,425 $1,378
EXPLORATION EXPENSE
Domestic $36 $42 $120 $134
International 60 34 118 104
----- ----- ----- -----
Total $96 $76 $238 $238
INVESTMENTS IN EQUITY
METHOD INVESTEES - NET $3 $23 $61 $128
OPERATING STATISTICS
Net Liquid Hydrocarbon
Production (d):
United States 130.2 148.0 131.3 144.6
Europe 32.6 29.4 29.3 31.6
Other International 30.4 38.0 35.6 30.8
------ ------ ------ ------
Total Consolidated 193.2 215.4 196.2 207.0
Equity Investees 15.9 1.9 10.8 1.1
------ ------ ------ ------
Worldwide 209.1 217.3 207.0 208.1
Net Natural Gas Production (e):
United States 744.4 776.7 730.7 754.7
Europe (f) 353.4 331.5 338.2 341.9
Other International 140.5 142.3 143.7 162.8
------ ------ ------- -------
Total Consolidated 1238.3 1250.5 1212.6 1259.4
Equity Investee 31.1 49.1 28.8 36.3
------- ------- ------- ------
Worldwide 1269.4 1299.6 1241.4 1295.7
MARATHON GROUP OF USX CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
2000 1999 2000 1999
------------------------------------------------
OPERATING STATISTICS
(continued)
Average Equity Sales
Prices (g) (h):
Liquid Hydrocarbons
(per Bbl)
Domestic $25.89 $21.06 $25.11 $15.44
International 25.54 22.52 26.55 16.90
Natural Gas (per Mcf)
Domestic $4.44 $2.08 $3.30 $1.90
International 3.58 2.17 2.76 1.90
Crude Oil Refined
(a) (d) 857.0 824.4 900.4 888.1
Refined Products
Sold (a) (d) 1308.2 1320.0 1305.5 1251.1
Matching buy/sell
volumes included in
refined products
sold (a) (d) 43.1 30.2 52.2 45.0
MAP Merchandise
Sales (a) $552 $543 $2,338 $2,088
------------------------------------------------------
(a) Includes MAP at 100%. RM&T income for reportable segments includes
Ashland's 38% interest in MAP of $117 million, $41 million, $489
million and $242 million in the fourth quarters and years of 2000 and
1999, respectively.
(b) Includes domestic natural gas and crude oil marketing and
transportation, and power generation.
(c) Includes other energy related businesses and corporate capital
expenditures.
(d) Thousands of barrels per day
(e) Millions of cubic feet per day
(f) Includes gas acquired for injection and subsequent resale of 10.0,
13.8, 11.3 and 19.6 mmcfd in the fourth quarters and years of 2000 and
1999, respectively.
(g) Prices exclude gains and losses from hedging activities.
(h) Prices exclude equity investees and purchase/resale gas.
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 2000 1999* 2000 1999*
------------------------------------------------------------------------
REVENUES AND OTHER INCOME:
Revenues $10,274 $8,725 $40,487 $29,068
Dividend and investee income
(loss) 18 8 99 (20)
Net gains (losses) on disposal
of assets (868) 29 (739) 21
Gain on ownership change in Marathon
Ashland Petroleum LLC 3 6 12 17
Other income 10 10 42 33
------ ------ ------ ------
Total revenues and other
income 9,437 8,778 39,901 29,119
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues (excludes items
shown below) 7,930 6,711 31,043 21,679
Selling, general and administrative
expenses 169 54 402 203
Depreciation, depletion and
amortization 656 348 1,605 1,254
Taxes other than income taxes 1,211 1,164 4,861 4,433
Exploration expenses 96 76 238 238
Inventory market valuation credits -- -- -- (551)
------ ------ ------ ------
Total costs and expenses 10,062 8,353 38,149 27,256
------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (625) 425 1,752 1,863
Net interest and other financial
costs 74 96 341 362
Minority interest in income of
Marathon Ashland Petroleum LLC 125 42 498 447
------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY LOSSES (824) 287 913 1,054
Provision (credit) for estimated
income taxes (375) 82 502 349
------ ------ ------ ------
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSSES (449) 205 411 705
Extraordinary losses on extinguishment
of debt, net of income tax -- -- -- 7
------ ------ ------ ------
NET INCOME (LOSS) (449) 205 411 698
Dividends on preferred stock 2 2 8 9
------ ------ ------ ------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKS $(451) $203 $403 $689
====== ====== ====== ======
*Certain amounts have been reclassified to conform to 2000
classifications.
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
--------------------------------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per
share amounts) 2000 1999 2000 1999
--------------------------------------------------------------------------
APPLICABLE TO MARATHON STOCK:
Net income (loss) $(310) $171 $432 $654
- Per share - basic and
diluted (1.00) .55 1.39 2.11
Dividends paid per share .23 .21 .88 .84
Weighted average shares, in
thousands
- Basic 309,930 311,289 311,531 309,696
- Diluted 309,930 311,553 311,761 310,010
APPLICABLE TO STEEL STOCK:
Income (loss) before
extraordinary losses $(141) $32 $(29) $42
- Per share - basic and diluted (1.59) .35 (.33) .48
Extraordinary losses, net of
income tax -- -- -- 7
- Per share - basic and
diluted -- -- -- .08
Net income (loss) $(141) $32 $(29) $35
- Per share - basic and
diluted (1.59) .35 (.33) .40
Dividends paid per share .25 .25 1.00 1.00
Weighted average shares, in thousands
- Basic 88,788 88,419 88,613 88,392
- Diluted 88,788 88,428 88,613 88,396
The following notes are an integral part of this financial statement.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. When USX acquired Marathon in March 1982, crude oil and refined product
prices were at historically high levels. USX established a new LIFO
cost basis for Marathon's inventories by reference to these prices.
Generally accepted accounting principles require that inventories be
reported at the lower of recorded cost or current market value.
Marathon has established an inventory market valuation (IMV) reserve to
reduce the cost basis of its inventories to current market value.
Quarterly adjustments to the IMV reserve result in noncash charges or
credits to income from operations. Decreases in market prices below
the cost basis result in charges to income from operations. Once a
reserve has been established, subsequent increases in prices (up to the
cost basis) result in credits to income from operations.
The charges or credits to income resulting from IMV reserve adjustments
affect the comparability of financial results from period to period.
They also affect comparisons with other energy companies, many of which
do not have such adjustments. Therefore, USX reports separately the
effects of IMV reserve adjustments on financial results. In
management's opinion, the effects of such adjustments should be
considered separately when evaluating operating performance.
2. In 1999, USX irrevocably deposited with a trustee the entire
5.5 million common shares it owned in RTI International Metals (RTI).
The deposit of the shares resulted in the satisfaction of USX's
obligation under its 6-3/4% Exchangeable Notes (indexed debt) due
February 1, 2000. Under the terms of the indenture, the trustee
exchanged one RTI share for each note at maturity; therefore, none
reverted back to USX.
As a result of the above transaction, USX recorded in the first quarter
of 1999 an extraordinary loss of $5 million, net of a $3 million income
tax benefit, representing prepaid interest expense and the write-off of
unamortized debt issue costs, and a pretax charge of $22 million,
representing the difference between the carrying value of the
investment in RTI and the carrying value of the indexed debt, which is
included in net gains (losses) on disposal of assets.
Additionally, a $13 million credit to adjust the indexed debt to
settlement value at March 31, 1999, is included in net interest and
other financial costs.
In December 1996, USX had issued the $117 million of notes indexed to
the common share price of RTI. At maturity, USX would have been
required to exchange the notes for shares of RTI common stock, or
redeem the notes for the equivalent amount of cash. Since USX's
investment in RTI was attributed to the U. S. Steel Group, the indexed
debt was also attributed to the U. S. Steel Group. USX had a 26%
investment in RTI and accounted for its investment using the equity
method of accounting.
Republic Technologies International, LLC, an equity method affiliate of
USX, recorded in the third quarter of 1999 an extraordinary loss
related to the early extinguishment of debt. As a result, USX recorded
an extraordinary loss of $2 million, net of a $1 million income tax
benefit, representing its share of the extraordinary loss.
3. In August 1999, USX and Kobe Steel, Ltd. (Kobe Steel) completed a
transaction that combined the steelmaking and bar producing assets of
USS/Kobe Steel Company (USS/Kobe) with companies controlled by
Blackstone Capital Partners II. The combined entity was named Republic
Technologies International, LLC (Republic). As a result of this
transaction, USX recorded $47 million in charges related to the
impairment of the carrying value of its investment in USS/Kobe and
costs related to the formation of Republic. These charges were
included in dividend and investee income (loss) in 1999. In addition,
USX made a $15 million equity investment in Republic. USX owned 50% of
USS/Kobe and now owns 16% of Republic. USX accounts for its investment
in Republic under the equity method of accounting. The seamless pipe
business of USS/Kobe was excluded from this transaction. That
business, now known as Lorain Tubular Company LLC, is a wholly owned
subsidiary of USX.
4. In the fourth quarter 2000, Marathon exchanged its 37.5 percent
interest in Sakhalin Energy Investment Company Ltd. (Sakhalin Energy)
for certain interests in the UK Atlantic Margin area and the U.S. Gulf
of Mexico as well as reimbursement for all Sakhalin project capital
expenditures made in 2000. As a result of the absence of future
foreign source income from Sakhalin Energy, an additional valuation
allowance of $235 million to reduce deferred federal tax benefits was
recognized in the third quarter 2000.
5. In the fourth quarter 2000, USX adopted the following accounting
pronouncements primarily related to the classification of items in the
statement of operations. In December 1999, the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101)
"Revenue Recognition in Financial Statements," which summarizes the SEC
staff's interpretations of generally accepted accounting principles
related to revenue recognition and classification. During the third
quarter 2000, the Emerging Issues Task Force of the Financial
Accounting Standards Board (EITF) issued EITF Consensus No. 99-19
"Reporting Revenue Gross as a Principal versus Net as an Agent," which
addresses whether certain cost items should be reported as a reduction
of revenue or as a component of cost of sales, and EITF Consensus
No. 00-10 "Accounting for Shipping and Handling Fees and Costs," which
addresses the classification of costs incurred for shipping goods to
customers. The adoption of these new pronouncements had no net effect
on the financial position or results of operations of USX, although
they required reclassifications of certain amounts in the statement of
operations.
6. In November 2000, USX acquired U. S. Steel Kosice s.r.o. (USSK), which
is located in the Slovak Republic. USSK was formed to hold the steel
operations and related assets of VSZ a.s (VSZ), a diversified Slovak
corporation. The cash purchase price was $69 million. Additional
payments to VSZ of not less than $25 million and up to $75 million are
contingent upon the future performance of USSK. Additionally,
$325 million of debt was included with the acquisition. The
acquisition was accounted for under the purchase method of accounting.
The 2000 results of operations include the operations of USSK
commencing November 24, 2000.
Prior to this transaction, USX and VSZ were equal partners in VSZ U. S.
Steel s.r.o. (VSZUSS), a tin mill products manufacturer. The assets of
USSK included VSZ's interest in VSZUSS. The acquisition of the
remaining interest in VSZUSS was accounted for under the purchase
method of accounting. Previously, USX had accounted for its investment
in VSZUSS under the equity method of accounting.
7. In December 2000, Marathon and Kinder Morgan Energy Partners, L.P.
signed a definitive agreement to form a joint venture combining certain
of their oil and gas producing activities in the U.S. Permian Basin,
including Marathon's interest in the Yates Field. This transaction
will allow Marathon to expand its interests in the Permian Basin and
will improve access to materials for use in enhanced recovery
techniques in the Yates Field. The joint venture named MKM Partners
L.P., commenced operations in January 2001 and will be accounted for
under the equity method of accounting. Marathon recognized a pretax
charge of $931 million in the fourth quarter 2000, related to the joint
venture formation.
SOURCE: USX-Marathon Group Contact: William E. Keslar or Don H. Herring, both of USX Corporation, Company News On-Call: http://www.prnewswire.com/comp/133204.html or fax, |
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