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United States Steel Corporation Reports Highest Segment Operating Results Since The Third Quarter Of 2008

- Total reportable segment and Other Businesses income from operations of $479 million

- Adjusted net income of $325 million, or $2.16 per diluted share; reported net loss of $207 million, or $1.42 per diluted share

- Adjusted EBITDA of $611 million

- Total liquidity of $3.0 billion, including $1.3 billion of cash

10.28.2014

PITTSBURGH, Oct. 28, 2014 /PRNewswire/ -- United States Steel Corporation (NYSE: X) reported a third quarter 2014 net loss of $207 million, or $1.42 per diluted share, compared to a third quarter 2013 net loss of $1,791 million, or $12.38 per diluted share, and a second quarter 2014 net loss of $18 million, or $0.12 per diluted share.  Adjusted net income for the third quarter of 2014 was $325 million, or $2.16 per diluted share.  This excludes non-cash charges for strategic actions of $577 million, or $3.88 per diluted share, as well as a $45 million, or $0.30 per diluted share, gain on the sale of real estate assets.  See the Non-GAAP Financial Measures section for a description of the non-GAAP measures and a reconciliation to net loss attributable to U. S. Steel and income (loss) from operations.

 

Earnings Highlights


(Dollars in millions, except per share amounts)

3Q 2014

2Q 2014

3Q 2013

Net Sales

$

4,587


$

4,400


$

4,131


Segment income (loss) from operations







     Flat-rolled

$

347


$

30


$

82


     U. S. Steel Europe

29


38


(32)


     Tubular

69


47


49


     Other Businesses

34


17


14


Total reportable segment and Other Businesses income from operations

$

479


$

132


$

113


Postretirement benefit expense

(26)


(32)


(55)


Other items not allocated to segments

(594)


(65)


(1,760)


(Loss) income from operations

$

(141)


$

35


$

(1,702)


Net interest and other financial costs

60


64


85


Income tax provision (benefit)

6


(11)


4


Less: Net loss attributable to the noncontrolling interests




Net loss attributable to United States Steel Corporation

$

(207)


$

(18)


$

(1,791)


-Per basic share

$

(1.42)


$

(0.12)


$

(12.38)


-Per diluted share

$

(1.42)


$

(0.12)


$

(12.38)


               

Commenting on results, U. S. Steel President and Chief Executive Officer Mario Longhi said, "We experienced a significant improvement in Total reportable segments and Other Businesses income from operations in the third quarter, the highest level since the market peak in 2008. Steel market conditions in the U.S. have remained stable and our operations have performed well, particularly our Flat-rolled segment, where we returned to more normal operating levels and income from operations increased by over $300 million from the second quarter.  Our results reflect the significant improvement in our earnings power from our Carnegie Way transformation efforts."

The $479 million, or $94 per ton, of Total reportable segment and Other Businesses income from operations for the third quarter of 2014 compares to income from operations of $132 million, or $26 per ton, in the second quarter of 2014 and income from operations of $113 million, or $24 per ton, in the third quarter of 2013.

Other items not allocated to segments in the third quarter of 2014 consisted of pre-tax non-cash charges for strategic actions totaling $649 million and a $55 million gain on the sale of real estate assets.

As of September 30, 2014, U. S. Steel had $1.3 billion of cash and $3.0 billion of total liquidity.  Cash provided by operating activities was $1.2 billion in the first nine months of 2014 primarily due to improved results and working capital management.

Reportable Segments and Other Businesses
We continue to realize increasing benefits and improving earnings power from our Carnegie Way transformation across all of our segments.

Results for our Flat-rolled segment improved significantly from the second quarter.  Shipments increased as we returned to normal operations in the third quarter, while the relatively flat market conditions during the quarter resulted in average realized prices that were consistent with the second quarter. There was a favorable impact of approximately $150 million in the third quarter from reduced repairs and maintenance costs and increased operating efficiencies along with the increased shipments.  Operating costs also reflected a decrease in energy costs.  Additionally, third quarter results included a $20 million operating loss for U. S. Steel Canada for the period prior to its CCAA filing on September 16, 2014.

We reported decreased results for our European segment as compared to the second quarter.  Scheduled caster and blast furnace maintenance along with the normal impact of the European holiday season resulted in lower shipments and higher repairs and maintenance costs related to the planned outages.   These negative impacts were partially offset by a decrease in raw materials costs, primarily for iron ore.  Average realized euro-based prices were in line with the second quarter.

Tubular segment results improved as compared to the second quarter.  Shipments decreased, due to the indefinite idling of the McKeesport and Bellville facilities during the third quarter, while average realized prices increased due to improved pricing and mix.

Outlook         
Commenting on U. S. Steel's outlook for the fourth quarter, Longhi said, "Our Carnegie Way progress so far has exceeded our expectations in this multi-year journey.  We expect to continue to see increasing benefits from our Carnegie Way transformation which focuses on building stockholder value.  We expect fourth quarter segment income from operations to decrease compared to the third quarter primarily due to significantly lower results for our Flat-rolled segment.  Results for our European and Tubular segments are expected to improve slightly compared to the third quarter."

Fourth quarter results for our Flat-rolled segment are expected to decrease significantly compared to the third quarter but are expected to exceed $100 million.  Overall, repairs and maintenance costs are expected to increase by approximately $150 million as compared to the third quarter due primarily to a reline of a blast furnace at Mon Valley Works and planned blast furnace maintenance projects at Granite City and Great Lakes, which will result in lower operating levels.  Shipments, which no longer include U. S. Steel Canada, are expected to decline by as much as 10% from the 3.2 million net tons shipped by our U.S. plants in the third quarter and average realized prices are also expected to decrease from the third quarter as a result of weaker spot market conditions and lower shipments to end users around the holiday season.

We expect fourth quarter results for our European segment to increase slightly compared to the third quarter primarily due to higher shipments and lower facility repairs and maintenance costs as scheduled maintenance was completed in the third quarter.  A shift in product mix is expected to result in lower average realized euro-based prices.

Fourth quarter results for our Tubular segment are expected to increase slightly compared to the third quarter.  We expect average realized prices to increase compared to the third quarter due to continued improved pricing, including the positive impact of the OCTG case decision, and an improved mix as a result of a reduction in our exposure to welded line pipe.  Shipments are projected to decrease slightly due to the indefinite idling of the McKeesport and Bellville facilities.

*****

This release contains forward-looking statements with respect to market conditions, operating costs, shipments and prices.  Factors that could affect market conditions, costs, shipments and prices for both North American and European operations include: (a) foreign currency fluctuations and related activities; (b) global product demand, prices and mix; (c) global and company steel production levels; (d) plant operating performance; (e) natural gas, electricity, raw materials and transportation prices, usage and availability; (f) international trade developments, including court decisions, legislation and agency decisions on petitions and sunset reviews; (g) 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; (h) changes in environmental, tax, pension and other laws; (i) the terms of collective bargaining agreements; (j) employee strikes or other labor issues; and (k) 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, climate change and shale gas development.  Economic conditions and political factors in Europe that may affect U. S. Steel Europe's results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) fiscal instability; (p) political issues; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures.  We present adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and Adjusted EBITDA, which are non-GAAP measures, as an additional measurement to enhance the understanding of our operating performance and facilitate a comparison with that of our competitors.  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, 2013, and in subsequent filings for U. S. Steel.

A Consolidated Statement of Operations (Unaudited), Consolidated Cash Flow Statement (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 third quarter earnings on Wednesday, October 29, at 8:30 a.m. Eastern Daylight Time.  To listen to the webcast of the conference call, visit the U. S. Steel website, www.ussteel.com, and click on "Current Information" under the "Investors" section.

For more information on U. S. Steel, visit our website 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, except per share amounts)

2014



2014



2013



2014



2013


NET SALES


$

4,587



$

4,400



$

4,131



$

13,435



$

13,155



















OPERATING EXPENSES (INCOME):
















Cost of sales (excludes items shown below)

3,848



4,097



3,749



11,983



12,105



Selling, general and administrative expenses

125



143



153



406



449



Depreciation, depletion and amortization

158



165



173



489



514



Income from investees

(50)



(57)



(26)



(103)



(31)



Impairment of goodwill





1,783





1,783



Restructuring and other charges

236



18





254





Loss on deconsolidation of U. S. Steel Canada and other charges

413







413





Net gain on disposal of assets

(2)



(1)





(23)





Other (income) expense, net





1





6





















Total operating expenses

4,728



4,365



5,833



13,419



14,826



















(LOSS) INCOME FROM OPERATIONS

(141)



35



(1,702)



16



(1,671)


Net interest and other financial costs

60



64



85



193



257



















LOSS BEFORE INCOME TAXES
















AND NONCONTROLLING INTERESTS

(201)



(29)



(1,787)



(177)



(1,928)


Income tax provision (benefit)

6



(11)



4



(4)



14



















Net loss

(207)



(18)



(1,791)



(173)



(1,942)



Less: Net loss attributable to the
















   noncontrolling interests










NET LOSS ATTRIBUTABLE TO
















UNITED STATES STEEL CORPORATION

$

(207)



$

(18)



$

(1,791)



$

(173)



$

(1,942)



















COMMON STOCK DATA:
































Net loss per share attributable to















   United States Steel Corporation shareholders:
















-Basic


$

(1.42)



$

(0.12)



$

(12.38)



$

(1.19)



$

(13.44)



-Diluted


$

(1.42)



$

(0.12)



$

(12.38)



$

(1.19)



$

(13.44)



















Weighted average shares, in thousands
















-Basic


145,348



144,884



144,727



144,999



144,523



-Diluted


145,348



144,884



144,727



144,999



144,523



















Dividends paid per common share

$

0.05



$

0.05



$

0.05



$

0.15



$

0.15


 

 

UNITED STATES STEEL CORPORATION

CASH FLOW STATEMENT (Unaudited)














Nine Months Ended





September 30,

(Dollars in millions)


2014



2013


Cash provided by (used in) operating activities:







Net loss


$

(173)



$

(1,942)



Depreciation, depletion and amortization

489



514



Impairment of goodwill




1,783



Restructuring and other charges

254





Loss on deconsolidation of U. S. Steel Canada and other charges

413





Pensions and other postretirement benefits

(266)



(143)



Deferred income taxes

6



3



Net gain on disposal of assets

(23)





Working capital changes

337



158



Income taxes receivable/payable

167



1



Currency remeasurement loss

32



8



Other operating activities

11



39




Total


1,247



421











Cash (used in) provided by investing activities:







Capital expenditures


(282)



(328)



Acquisition of intangible assets




(12)



Disposal of assets


28





Other investing activities


20



31




Total


(234)



(309)











Cash (used in) provided by financing activities:







Issuance of long-term debt, net of financing costs



575



Repayment of long-term debt


(323)



(542)



Receipts from exercise of stock options

10





Dividends paid


(22)



(22)




Total


(335)



11











Effect of exchange rate changes on cash

(25)



4











Net increase in cash and cash equivalents

653



127


Cash and cash equivalents at beginning of the year

604



570











Cash and cash equivalents at end of the period

$

1,257



$

697


 

 

UNITED STATES STEEL CORPORATION

CONDENSED BALANCE SHEET (Unaudited)












Sept. 30


Dec. 31

(Dollars in millions)


2014



2013


Cash and cash equivalents

$

1,257



$

604


Receivables, net

2,072



2,160


Inventories

2,199



2,688


Other current assets

573



626



Total current assets

6,101



6,078


Property, plant and equipment, net

4,570



5,922


Investments and long-term receivables, net

986



621


Intangible assets, net

205



271


Other assets

146



251











Total assets


$

12,008



$

13,143










Accounts payable

$

2,072



$

1,754


Payroll and benefits payable

925



974


Short-term debt and current maturities of long-term debt

336



323


Other current liabilities

217



194



Total current liabilities

3,550



3,245


Long-term debt, less unamortized discount

3,162



3,616


Employee benefits

554



2,064


Other long-term liabilities (a)

799



842


United States Steel Corporation stockholders' equity (a)

3,942



3,375


Noncontrolling interests

1



1











Total liabilities and stockholders' equity

$

12,008



$

13,143


(a)  2013 amounts for other long-term liabilities and stockholders' equity (retained earnings) have been revised to correct an error that resulted in additional tax benefit of $27 million.

 

UNITED STATES STEEL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)

We present adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA, which are non-GAAP measures, as an additional measurement to enhance the understanding of our operating performance and facilitate a comparison with that of our competitors.  EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA and adjusted net income (loss) are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with GAAP and are not necessarily comparable to similarly titled measures used by other companies.

The following schedule reflects the reconciliation of adjusted net income (loss):

 

RECONCILIATION OF ADJUSTED NET INCOME (LOSS)













Quarter Ended



Sept. 30



June 30



Sept. 30


(Dollars in millions, except per share amounts)

2014



2014



2013


Reconciliation to net loss attributable to United States Steel Corporation










Adjusted net income (loss) attributable to United States Steel Corporation

$

325



$

25



$

(20)



Loss on deconsolidation of U. S. Steel Canada and other charges

(384)







Impairment of carbon alloy facilities at Gary Works

(163)







Write-off of pre-engineering costs at Keetac

(30)







Gain on sale of real estate assets

45







Litigation reserves



(46)





Loss on assets held for sale



(9)





Curtailment gain



12





Impairment of goodwill





(1,771)



     Total Adjustments

(532)



(43)



(1,771)



Net loss attributable to United States Steel Corporation, as reported

$

(207)



$

(18)



(1,791)












Reconciliation to diluted net loss per share










Adjusted diluted net income (loss) per share

$

2.16



$

0.17



$

(0.14)



Loss on deconsolidation of U. S. Steel Canada and other charges

(2.54)







Impairment of carbon alloy facilities at Gary Works

(1.08)







Write-off of pre-engineering costs at Keetac

(0.21)







Gain on sale of real estate assets

0.30







Litigation reserves



(0.31)





Loss on assets held for sale



(0.06)





Curtailment gain



0.08





Impairment of goodwill





(12.24)



Additional dilutive effects of securities

(0.05)







     Total adjustments

(3.58)



(0.29)



(12.24)



Diluted net loss per share, as reported

$

(1.42)



$

(0.12)



$

(12.38)


 

 

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES (Unaudited)


The following schedule reflects the reconciliation of adjusted EBITDA:


RECONCILIATION OF ADJUSTED EBITDA













Quarter Ended



Sept. 30



June 30



Sept. 30


(Dollars in millions)

2014



2014



2013


Reconciliation to (loss) income from operations










Adjusted EBITDA

$

611



$

265



$

231



Restructuring and other charges

(236)







Loss on deconsolidation of U. S. Steel Canada and other charges

(413)







Gain on sale of real estate assets

55







Litigation reserves



(70)





Loss on assets held for sale



(14)





Curtailment gain



19





Impairment of goodwill





(1,783)



Supplier contract dispute settlement





23



EBITDA

17



200



(1,529)



Depreciation expense

(158)



(165)



(173)



(Loss) income from operations, as reported

(141)



35



(1,702)















 

 

UNITED STATES STEEL CORPORATION


PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)





















Quarter Ended


Nine Months Ended




Sept. 30



June 30



Sept. 30



September 30,


(Dollars in millions)

2014



2014



2013



2014



2013



INCOME (LOSS) FROM OPERATIONS

















Flat-rolled

$

347



$

30



$

82



$

462



$

18




U. S. Steel Europe

29



38



(32)



99



16




Tubular

69



47



49



140



158




Other Businesses

34



17



14



64



62




















Reportable Segment and Other Businesses Income from Operations

479



132



113



765



254




Postretirement benefit expense

(26)



(32)



(55)



(90)



(165)




Other items not allocated to segments:

















     Loss on deconsolidation of U. S. Steel
     Canada and other charges

(413)







(413)






     Impairment of carbon alloy facilities

(199)







(199)






     Write-off of pre-engineering costs

(37)







(37)






     Gain on sale of real estate assets

55







55






     Litigation reserves



(70)





(70)






     Loss on assets held for sale



(14)





(14)






     Curtailment gain



19





19






     Impairment of goodwill





(1,783)





(1,783)




     Supplier contract dispute settlement





23





23




















Total (Loss) Income from Operations

$

(141)



$

35



$

(1,702)



$

16



$

(1,671)




















CAPITAL EXPENDITURES

















Flat-rolled

$

56



$

47



$

72



$

158



$

248




U. S. Steel Europe

23



17



14



58



32




Tubular

13



31



19



60



42




Other Businesses

4



1



2



6



6





















          Total

$

96



$

96



$

107



$

282


(a)

$

328


(a)

(a) Excludes the increase in accrued capital expenditures of $46 million and $28 million for the nine months ended September 30, 2014 and 2013, respectively.

 

 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)























Quarter Ended


Nine Months Ended





Sept. 30


June 30


Sept. 30


September 30,





2014



2014



2013



2014



2013


OPERATING STATISTICS
















Average realized price: ($/net ton) (a)

















Flat-rolled

777



774



752



771



731




    Flat-rolled U.S. Facilities (b)

786



788



750



783



735




U. S. Steel Europe

671



691



714



691



711




Tubular

1,567



1,479



1,543



1,508



1,536



Steel Shipments: (a) (c)

















Flat-rolled

3,692



3,527



3,428



10,893



11,174




U. S. Steel Europe

987



1,053



861



3,071



2,971




Tubular

428



449



459



1,296



1,343





Total Steel Shipments

5,107



5,029



4,748



15,260



15,488






















    Flat-rolled U.S. Facilities   















    Steel Shipments(b)

3,213



3,006



3,281



9,334



10,282





















Intersegment Shipments: (c)

















Flat-rolled to Tubular

439



457



450



1,331



1,336




U. S. Steel Europe to Flat-rolled



75





75





Raw Steel Production: (c)

















Flat-rolled

4,675



4,132



4,261



13,298



13,393




    Flat-rolled U.S. Facilities (b)

4,166



3,528



4,261



11,587



12,788




U. S. Steel Europe

1,111



1,223



1,032



3,475



3,393



Raw Steel Capability Utilization: (d)

















Flat-rolled

86

%


75

%


70

%


81

%


74

%



    Flat-rolled U.S. Facilities (e)

85

%


73

%


87

%


80

%


88

%



U. S. Steel Europe

88

%


98

%


82

%


93

%


91

%

(a) Excludes intersegment shipments.
(b) Excludes U. S. Steel Canada for all periods presented.
(c) Thousands of net tons.
(d) Based on annual raw steel production capability of 22.0 million net tons for Flat-rolled and 5.0 million net tons for U. S. Steel Europe.  Prior to the permanent shut down of the iron and steelmaking facilities at Hamilton Works on December 31, 2013, annual raw steel production capability for Flat-rolled was 24.3 million net tons.  Subsequent to the CCAA filing and deconsolidation of U. S. Steel Canada, annual raw steel production capability for Flat-rolled is 19.4 million net tons. The quarter and nine months ended September 30, 2014 shipments and raw steel production amounts for Flat-rolled do not include U. S. Steel Canada after September 15, 2014.
(e) 
AISI capability utilization rates include our U.S. facilities (Gary Works, Great Lakes Works, Mon Valley Works, Granite City Works and Fairfield Works).

 

UNITED STATES STEEL CORPORATION
U. S. STEEL CANADA FINANCIAL STATEMENTS (Unaudited)

As a result of the CCAA proceedings, the financial position of U. S. Steel Canada has been deconsolidated from U. S. Steel's September 30, 2014 balance sheet.  The following table represents U. S. Steel Canada's assets, liabilities and accumulated other comprehensive loss which have been deconsolidated from U. S. Steel's September 30, 2014 consolidated balance sheet.  The amounts presented are before the elimination of balances with U. S. Steel, presenting U. S. Steel Canada as if on a stand-alone basis.

 

U. S. STEEL CANADA CONDENSED BALANCE SHEET (Unaudited)




(Dollars in millions)

Deconsolidated as of

September 30, 2014

Assets



Current assets:



Cash and cash equivalents

$

80


Receivables

291


Inventories

373


Other current assets

6


Total current assets

750


Property, plant and equipment, net

840


Other noncurrent assets

126


Total assets

$

1,716


Liabilities



Current liabilities:



Accounts payable

$

435


Other current liabilities

149


Total current liabilities

584


Long-term debt

126


Long-term notes payable

1,733


Employee benefits

948


Other noncurrent liabilities

29


Total liabilities

3,420


Stockholders' Equity



Additional paid-in capital

2,268


Retained earnings

(3,504)


Accumulated other comprehensive loss

(468)


Total stockholders' equity

(1,704)


Noncontrolling interests


Total liabilities and stockholders' equity

$

1,716


 

UNITED STATES STEEL CORPORATION
U. S. STEEL CANADA FINANCIAL STATEMENTS (Unaudited)

U. S. Steel Canada's results of operations have been removed from U. S. Steel's consolidated statement of operations beginning September 16, 2014. The table below shows U. S. Steel Canada's results of operations for the periods presented which are included in our consolidated statements of operations.  The amounts presented are before the elimination of transactions with U. S. Steel, presenting U. S. Steel Canada as if on a stand-alone basis.

 

U. S. STEEL CANADA STATEMENT OF OPERATIONS (Unaudited)





















Quarter Ended


Nine Months Ended




Sept. 30


June 30


Sept. 30


September 30,

(Dollars in millions)

2014



2014



2013



2014



2013



















Net Sales

447



542



282



1,508



960


Total Operating Expenses

467



572



1,026



1,587



1,941


     Loss from Continuing Operations

(20)



(30)



(744)



(79)



(981)


Net interest and other financial costs

37



40



39



121



142


     Loss before income taxes

(57)



(70)



(783)



(200)



(1,123)


Income tax benefit










Net loss

(57)



(70)



(783)



(200)



(1,123)


 

SOURCE United States Steel Corporation

For further information: Media, Courtney Boone, (412) 433-6791, Investors/Analysts, Dan Lesnak, (412) 433-1184

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