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United States Steel Corporation Reports 2009 Second Quarter ResultsPRNewswire PITTSBURGH, July 28 /PRNewswire-FirstCall/ --
United States Steel Corporation (NYSE: X) reported a second quarter 2009 net loss of $392 million, or $2.92 per diluted share, compared to a net loss of $439 million, or $3.78 per diluted share, in the first quarter of 2009 and net income of $668 million, or $5.65 per diluted share, in the second quarter of 2008. ------------------------------------------------------------------------
Earnings Highlights
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(Dollars in millions except per share data) 2Q 2009 1Q 2009 2Q 2008
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Net sales $2,127 $2,750 $6,744
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Segment (loss) income from operations
Flat-rolled $(362) $(422) $468
U. S. Steel Europe (53) (159) 298
Tubular (88) 127 177
Other Businesses (7) (3) 16
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Total segment (loss) income from operations $(510) $(457) $959
Retiree benefit (expenses) income (34) (32) 1
Other items not allocated to segments 79 11 (6)
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(Loss) income from operations $(465) $(478) $954
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Net interest and other financial costs 9 71 25
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Income tax (benefit) provision (82) (110) 255
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Net (loss) income attributable to
United States Steel Corporation $(392) $(439) $668
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- Per basic share $(2.92) $(3.78) $5.69
- Per diluted share $(2.92) $(3.78) $5.65
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Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "Our second quarter operating loss was in line with the first quarter as our order book and operating rates remained at very low levels, spot market prices declined and we continued to incur carrying costs for our idled facilities." The company reported a second quarter loss from operations of $465 million, compared to a loss of $478 million in the first quarter of 2009 and income from operations of $954 million in the second quarter last year. Other items not allocated to segments in the second quarter of 2009 consisted of pre-tax income of $45 million from the reversal of a litigation reserve as a result of a favorable court ruling and $34 million associated with the recovery of federal excise taxes that were paid on coal export sales during 1990 to 1992. These items increased net income by $49 million, or 36 cents per diluted share. Other items not allocated to segments in the first quarter of 2009 increased net income by $7 million, or 6 cents per diluted share. Other items not allocated to segments in the second quarter of 2008 reduced net income by $4 million, or 3 cents per diluted share. Net interest and other financial costs in the second quarter of 2009 included a foreign currency gain that increased net income by $41 million, or 31 cents per diluted share, due to the remeasurement of an $824 million U.S. dollar-denominated intercompany loan to a European affiliate and related euro-U.S. dollar derivatives activity. This compares to a foreign currency loss that decreased net income by $28 million, or 24 cents per diluted share, in the first quarter of 2009 and an immaterial amount for these items in the second quarter of 2008. The effective tax benefit rate of 19 percent for the first six months of 2009 is lower than the statutory rate because losses in Canada and Serbia, which are jurisdictions where we have recorded a full valuation allowance on deferred tax assets, do not generate a tax benefit for accounting purposes. During the second quarter of 2009, U. S. Steel raised $1.5 billion through common stock and senior convertible notes offerings, repaid $655 million of term loans due in 2010 and 2012 and amended our revolving credit facility to eliminate certain financial covenants and provide lenders a security interest in domestic inventory. We ended the second quarter with total liquidity of $3.1 billion. Reportable Segments and Other Businesses Management believes segment income from operations is a key measure in evaluating company performance. U. S. Steel's reportable segments and Other Businesses reported a segment loss from operations of $510 million, or $173 per ton, in the second quarter of 2009, compared with a loss of $457 million, or $142 per ton, in the first quarter of 2009 and income of $959 million, or $136 per ton, in the second quarter of 2008. The lower overall results as compared to first quarter 2009 reflect significantly lower Tubular results which more than offset the changes in Flat-rolled and U. S. Steel Europe (USSE). The results for the second quarter of 2009 included lower of cost or market related adjustments totaling approximately $100 million primarily at U. S. Steel Canada (USSC), USSE and Texas Operations, compared to $65 million in the first quarter of 2009. These adjustments reflect the significant decrease in flat-rolled and tubular selling prices in recent quarters. The second quarter 2009 Flat-rolled loss from operations was less than the first quarter despite the extremely low capability utilization rate of 32 percent. The change was primarily due to the non-recurrence of accruals recorded in the first quarter for estimated future layoff benefits and for losses on excess natural gas forward purchase contracts, as well as reductions in spending and labor, partially offset by lower average realized prices, additional lower of cost or market inventory charges and reduced shipments. Second quarter results reflected continuing employee and other costs for idled facilities totaling approximately $285 million, compared to $230 million in the first quarter of 2009 as our Lake Erie Works was idled for the entire quarter and we idled additional iron ore capacity. Second quarter 2009 results for USSE improved significantly compared to the first quarter primarily due to lower raw material costs, sales of emissions allowances and lower inventory write-downs. These items were partially offset by lower average realized prices. Tubular results continue to reflect the impacts of lower oil and gas exploration and production activity, high inventory levels and the surge of unfairly traded and subsidized product from China. Tubular reported an operating loss in the second quarter of 2009 compared to income in the first quarter mainly due to a decrease in shipments, lower average realized prices and second quarter lower of cost or market related write-downs. These items were partially offset by the non-recurrence of accruals recorded in the first quarter for estimated future layoff benefits. Second quarter results reflected continuing employee and other costs for idled facilities totaling approximately $25 million, compared to $20 million in the first quarter of 2009. Outlook Commenting on U. S. Steel's outlook for the third quarter, Surma said, "While we anticipate an increase in our third quarter operating rates from the extremely low levels of last quarter, we expect each of our segments to report an operating loss in the third quarter due to continued low operating rates, idled facility carrying costs and lower average realized prices. There are some signs that the destocking cycle has ended in the North American and Central European steel markets as increased customer orders across almost all industry segments have resulted in an extension of lead times. We have begun to bring up idled facilities in line with customer demand and we have implemented price increases in our Flat-rolled and USSE segments in the third quarter. Despite these signs of improvement, the outlook for overall demand remains uncertain and the timing and magnitude of sustained economic recovery remain difficult to forecast." For Flat-rolled, third quarter results are expected to decrease from the second quarter, reflecting lower index-based contract prices, which tend to lag the spot market, and increased shipments of lower margin semi-finished and hot-rolled product. Raw steel capability utilization and shipments are expected to improve in line with increased customer orders as we restart raw materials and steelmaking operations. However, the favorable effects of these items are expected to be offset by higher raw material and energy costs, as well as costs to restart idled facilities at our Granite City Works and several raw materials operations. Consideration will be given to restarting other facilities if sustained customer demand supports higher production levels. Also, we are currently negotiating with the United Steelworkers for a successor to the labor agreement covering our Lake Erie Works operations, which expires on July 31, 2009. Third quarter results for USSE are expected to be in line with the second quarter. Lower raw material and energy costs and higher spot market prices later in the quarter are expected to be offset by the non-recurrence of the gain on sales of emissions allowances and lower contract prices. We have experienced a delay in the intended start up of our third blast furnace at U. S. Steel Kosice, but it is expected to be operating in late September. In the meantime, we are meeting our customers' requirements with increased production at U. S. Steel Serbia. Third quarter results for Tubular are expected to show some improvement compared to the second quarter mainly due to a slight increase in shipments as customers fill limited inventory needs for certain specialized products. However, we expect an operating loss as we continue to incur idled facility carrying costs and shipments and average realized prices continue to be depressed by the inventory glut created by the surge of unfairly traded and subsidized product from China. This release contains forward-looking statements with respect to market conditions, operating costs, shipments and prices. U. S. Steel has been, and we expect will continue to be, negatively impacted by the current global credit and economic problems. U. S. Steel cannot control or predict the extent and timing of economic recovery. When a recovery occurs, U. S. Steel will incur costs to restart idled facilities and to rebuild working capital, but we cannot accurately forecast the amount of such costs. Other more normal factors that could affect market conditions, costs, shipments and prices for both North American operations and USSE include global product demand, prices and mix; global and company steel production levels; plant operating performance; the timing and completion of facility projects; natural gas and electricity prices, usage and availability; raw materials and transportation prices and availability; international trade developments; 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, pension and other laws; the terms of collective bargaining agreements including any successor to the labor agreement covering our Lake Erie Works operations; employee strikes or other labor issues; 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, including those related to CO2 emissions and climate change. Economic conditions and political factors in Europe and Canada that may affect USSE's and USSC's results include, but are not limited to, taxation, nationalization, inflation, currency fluctuations, government instability, political unrest, regulatory changes, 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 U. S. Steel's Annual Report on Form 10-K for the year ended December 31, 2008, and in subsequent filings for U. S. Steel. A Consolidated Statement of Operations (Unaudited), Consolidated Statement of Cash Flows (Unaudited), Condensed Consolidated Balance Sheet (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached. The company will conduct a conference call on second quarter earnings on Tuesday, July 28, at 3 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 "Overview" under the "Investors" section. For more information on U. S. Steel, visit its web site at www.ussteel.com. UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
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Quarter Ended Six Months Ended
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June 30 Mar. 31 June 30 June 30
(Dollars in millions) 2009 2009 2008 2009 2008
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NET SALES $2,127 $2,750 $6,744 $4,877 $11,940
OPERATING EXPENSES (INCOME):
Cost of sales (excludes
items shown below) 2,340 3,007 5,497 5,347 10,140
Selling, general and
administrative expenses 154 143 171 297 313
Depreciation, depletion
and amortization 159 158 159 317 315
Income from investees 10 21 (34) 31 (41)
Net gains on disposal of
assets (36) (97) (1) (133) (2)
Other income, net (35) (4) (2) (39) (5)
--- -- -- --- --
Total operating expenses 2,592 3,228 5,790 5,820 10,720
----- ----- ----- ----- ------
(LOSS) INCOME FROM OPERATIONS (465) (478) 954 (943) 1,220
Net interest and other
financial costs 9 71 25 80 (7)
--- --- --- --- ---
(LOSS) INCOME BEFORE INCOME
TAXES (474) (549) 929 (1,023) 1,227
Income tax (benefit) provision (82) (110) 255 (192) 313
--- ----- --- ----- ---
Net (loss) income (392) (439) 674 (831) 914
Less: Net income
attributable to the
noncontrolling interests - - 6 - 11
--- --- --- --- ---
NET (LOSS) INCOME ATTRIBUTABLE
TO UNITED STATES STEEL
CORPORATION $(392) $(439) $668 $(831) $903
===== ===== ===== ===== =====
COMMON STOCK DATA:
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Net income per share:
- Basic $(2.92) $(3.78) $5.69 $(6.63) $7.68
- Diluted $(2.92) $(3.78) $5.65 $(6.63) $7.64
Weighted average shares, in
thousands
- Basic 134,634 116,103 117,507 125,420 117,551
- Diluted 134,634 116,103 118,217 125,420 118,190
Dividends paid per common
share $.05 $.30 $.25 $.35 $.50
UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
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Six Months Ended
June 30
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(Dollars in millions) 2009 2008
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Cash provided from operating activities:
Net (loss) income $(831) $914
Depreciation, depletion and amortization 317 315
Pensions and other postretirement benefits 1 (216)
Deferred income taxes (248) 97
Net gains on disposal of assets (133) (2)
Changes in: Current receivables 1,028 (1,053)
Inventories 718 (292)
Current accounts payable and accrued
expenses (532) 798
Bank checks outstanding (1) (5)
Other operating activities 42 (93)
-- ---
Total 361 463
--- ---
Cash used in investing activities:
Capital expenditures (206) (299)
Capital expenditures - variable interest entities (93) (41)
Disposal of assets 339 7
Other investing activities (55) (17)
--- ---
Total (15) (350)
--- ----
Cash (used in) provided from financing activities:
Issuance of long-term debt 839 -
Repayment of long-term debt (667) (36)
Common stock issued 666 11
Common stock repurchased - (85)
Dividends paid (42) (59)
Other financing activities 90 34
-- --
Total 886 (135)
--- ----
Effect of exchange rate changes on cash (6) 12
-- --
Net increase (decrease) in cash and cash equivalents 1,226 (10)
Cash at beginning of the year 724 401
--- ---
Cash at end of the period $1,950 $391
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UNITED STATES STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
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June 30 Dec. 31
(Dollars in millions) 2009 2008
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Cash and cash equivalents $1,950 $724
Receivables, Net 1,257 2,288
Inventories 1,781 2,492
Other current assets 470 228
--- ---
Total current assets 5,458 5,732
Property, plant and equipment, net 6,740 6,676
Investments and long-term receivables, net 630 695
Goodwill and intangible assets, net 1,927 1,891
Other assets 982 1,093
--- -----
Total assets $15,737 $16,087
======= =======
Accounts payable $1,073 $1,483
Payroll and benefits payable 787 967
Short-term debt and current maturities of
long-term debt 18 81
Other current liabilities 271 247
--- ---
Total current liabilities 2,149 2,778
Long-term debt, less unamortized discount 3,333 3,064
Employee benefits 4,720 4,767
Other long-term liabilities 406 419
United States Steel Corporation stockholders' equity 4,873 4,895
Noncontrolling interests 256 164
--- ---
Total liabilities and stockholders' equity $15,737 $16,087
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UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
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Quarter Ended Six Months Ended
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June 30 Mar. 31 June 30 June 30
(Dollars in millions) 2009 2009 2008 2009 2008
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(LOSS) INCOME FROM
OPERATIONS
Flat-rolled(a) $(362) $(422) $468 $(784) $565
U. S. Steel Europe (53) (159) 298 (212) 459
Tubular (88) 127 177 39 228
Other Businesses(a) (7) (3) 16 (10) 34
--- --- --- --- ---
Segment (Loss) Income
from Operations (510) (457) 959 (967) 1,286
Retiree benefit
expenses (34) (32) 1 (66) 2
Other items not
allocated to
segments:
Litigation reserve 45 - - 45 (45)
Federal excise tax
refund 34 - - 34 -
Net gain on sale of
assets - 97 - 97 -
Workforce reduction
charges - (86) - (86) -
Flat-rolled inventory
transition effects - - (6) - (23)
--- --- -- --- ---
Total (Loss) Income
from Operations $(465) $(478) $954 $(943) $1,220
CAPITAL EXPENDITURES(b)
Flat-rolled(a) $65 $98 $126 $163 $201
U. S. Steel Europe 18 10 49 28 81
Tubular 3 3 5 6 9
Other Businesses(a) 2 7 5 9 8
--- --- --- --- ---
Total $88 $118 $185 $206 $299
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(a) Effective with the fourth quarter of 2008, the operating results of
our iron ore operations, which were previously included in Other
Businesses, are included in the Flat-rolled segment. Prior periods
have been restated to reflect this change.
(b) Excludes capital spending by variable interest entities, which is not
funded by U. S. Steel.
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
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Quarter Ended Six Months Ended
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June 30 Mar. 31 June 30 June 30
2009 2009 2008 2009 2008
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OPERATING STATISTICS
Average realized price:
($/net ton)(a)
Flat-rolled 677 715 777 697 713
U. S. Steel Europe 602 672 986 634 890
Tubular 1,526 2,353 1,690 2,100 1,508
Steel Shipments:(a)(b)
Flat-rolled 1,815 2,123 4,849 3,938 9,550
U. S. Steel Europe 1,035 897 1,696 1,932 3,334
Tubular 92 207 500 299 933
--- --- --- --- ---
Total Steel Shipments 2,942 3,227 7,045 6,169 13,817
Intersegment Shipments:(b)
Flat-rolled to Tubular 34 88 472 122 917
Raw Steel-Production:(b)
Flat-rolled 1,964 2,279 5,614 4,243 11,172
U. S. Steel Europe 1,059 999 1,925 2,058 3,833
Raw Steel-Capability
Utilization:(c)
Flat-rolled 32.4% 38.0% 92.7% 35.2% 92.2%
U. S. Steel Europe 57.4% 54.8% 104.3% 56.1% 103.9%
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(a) Excludes intersegment shipments.
(b) Thousands of net tons.
(c) Based on annual raw steel production capability of 24.3 million net
tons for Flat-rolled and 7.4 million net tons for U. S. Steel Europe.
SOURCE United States Steel Corporation SOURCE: United States Steel Corporation Web site: http://www.ussteel.com/ |
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