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United States Steel Corporation Reports 2015 Second Quarter Results

- Net loss of $261 million, or $1.79 per diluted share; Adjusted net loss of $115 million, or $0.79 per diluted share

- Adjusted EBITDA of $20 million

- Second quarter operating cash flow of $79 million; first half operating cash flow of $215 million

- Total liquidity of $2.7 billion, including $1.2 billion of cash

- Full-year 2015 adjusted EBITDA guidance of $700 - $900 million

07.28.2015

PITTSBURGH, July 28, 2015 /PRNewswire/ -- United States Steel Corporation (NYSE: X) reported a second quarter 2015 net loss of $261 million, or $1.79 per diluted share, which included a $136 million, or $0.93 per diluted share, non-cash write-down of our retained interest in U. S. Steel Canada (USSC) and a net loss of $10 million, or $0.07 per diluted share, related to non-cash restructuring and other charges.  This compared to a second quarter 2014 net loss of $18 million, or $0.12 per diluted share, and a first quarter 2015 net loss of $75 million, or $0.52 per diluted share. 

For a description of the non-generally accepted accounting principles (non-GAAP) measures and a reconciliation to net earnings (loss) attributable to U. S. Steel and earnings (loss) before interest and income taxes (EBIT) see the Non-GAAP Financial Measures section.

 

Earnings Highlights


(Dollars in millions, except per share amounts)

2Q 2015

1Q 2015

2Q 2014

Net Sales

$

2,900


$

3,272


$

4,400


Segment (loss) earnings before interest and income taxes (EBIT)




     Flat-Rolled

$

(64)


$

(67)


$

30


     U. S. Steel Europe

20


37


38


     Tubular

(66)


1


47


     Other Businesses

6


8


17


Total Segment EBIT

$

(104)


$

(21)


$

132


Postretirement benefit expense

(14)


(13)


(32)


Other items not allocated to segments

(274)


(153)


(65)


EBIT

$

(392)


$

(187)


$

35


Net interest and other financial costs

55


62


64


Income tax benefit

(186)


(174)


(11)


Less: Net earnings attributable to the noncontrolling interests




Net loss attributable to United States Steel Corporation

$

(261)


$

(75)


$

(18)


-Loss per basic share

$

(1.79)


$

(0.52)


$

(0.12)


-Loss per diluted share

$

(1.79)


$

(0.52)


$

(0.12)


 

Commenting on results, U. S. Steel President and Chief Executive Officer Mario Longhi said, "We've taken aggressive and decisive actions to address the extremely challenging conditions we continue to face in North America.  Our Carnegie Way efforts, combined with short-term cost improvements, have helped to partially offset the continued depressed volumes and low prices in both the tubular and flat-rolled markets as well as the negative impact of tremendously high levels of imports. U.S. trade laws have been strengthened by the signing of the Trade Adjustment Assistance bill, which will improve the means by which domestic companies may seek relief from unfairly traded imports.  We are also maintaining our customer focus and our flexibility to respond as market conditions change."

Segment loss before interest and income taxes was $104 million, or $27 per ton, for the second quarter of 2015 compared to segment loss before interest and income taxes of $21 million, or $5 per ton, in the first quarter of 2015 and segment earnings before interest and income taxes of $132 million, or $26 per ton, in the second quarter of 2014.

During the second quarter of 2015, management continued to assess the recoverability of our retained interest in USSC and as a result of this assessment, we recorded a $255 million non-cash, pre-tax charge to write-down our retained interest in USSC.  Further information will be provided in our Form 10-Q.

For the second quarter 2015, we recorded a tax benefit of $186 million on our pre-tax loss of $447 million. The tax provision reflects a benefit for percentage depletion in excess of cost depletion for iron ore that we produce and consume or sell.

Despite the significantly challenging market conditions, we maintained positive operating cash flow of $215 million for the six months ended June 30, 2015. As of June 30, U. S. Steel had $1.2 billion of cash and $2.7 billion of total liquidity compared to cash and total liquidity of $1.4 billion and $3.1 billion, respectively, at December 31, 2014.

Segment Analysis

Second quarter results for our Flat-Rolled segment were comparable to the first quarter despite the adverse impact of significant and increasing volumes of unfairly traded sheet imports in addition to elevated import activity caused by the continued strength of the U.S. dollar, which have served to drastically depress both spot and contract prices in the second quarter.  The earnings power of our Carnegie Way efforts, combined with our aggressive actions to reduce operating costs in alignment with our low utilization levels enabled us to offset the effect of lower average realized prices, which declined by more than $70 per ton in the second quarter.

European segment results remained positive but decreased compared to the first quarter.  Planned maintenance outages in the second quarter resulted in reduced shipments and higher repairs and maintenance costs.  These negative effects were partially offset by a slight increase in averaged realized euro-based prices and a reduction in raw materials costs.

Second quarter results for our Tubular segment decreased significantly as compared to the first quarter primarily due to considerably lower shipments.  Shipments continue to be adversely impacted by reduced drilling activity caused by low crude oil prices and the near record levels of tubular imports, much of which we believe are unfairly traded.  The decrease in results is also attributable to operating inefficiencies as a result of reduced production levels.

2015 Outlook   

We currently expect commercial conditions to improve in the second half of 2015 from the conditions we experienced in the first half, as supply chain inventories continue to rebalance, primarily in our flat-rolled markets.  Based on increasing benefits from our Carnegie Way transformation and our aggressive efforts to reduce operating costs to align them with our utilization levels, we currently expect to be within our full-year adjusted EBIT of $115 million to $315 million, or full-year adjusted earnings before interest, income taxes, depreciation and amortization (EBITDA) of $700 million to $900 million, guidance range for 2015.  While we continue to find additional short term cost reductions and generate additional Carnegie Way benefits, if the current pace of commercial improvement in our markets does not increase, we would expect to be near the low end of the range. Consistent with our Carnegie Way transformation process, we are focused on converting as much of the short term cost reductions as possible into permanent improvements in our cost structure.

*****

We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share, EBITDA and Adjusted EBITDA, which are non-GAAP measures, as additional measurements to enhance the understanding of our operating performance and facilitate a comparison with that of our competitors.

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 second quarter earnings on Wednesday, July 29, at 8:30 a.m. Eastern Daylight.  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.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains information that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Generally, we have identified such forward-looking statements by using the words "believe," "expect," "intend," "estimate," "anticipate," "project," "target", "forecast", "aim," "will" and similar expressions or by using future dates in connection with any discussion of, among other things, operating performance, trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described in "Item 1A. Risk Factors" and "Supplementary Data - Disclosures About Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2014, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

 


UNITED STATES STEEL CORPORATION

STATEMENT OF OPERATIONS (Unaudited)
















Quarter Ended


Six Months Ended




June 30


March 31


June 30


June 30,

(Dollars in millions, except per share amounts)

2015


2015


2014


2015


2014

NET SALES


$

2,900



$

3,272



$

4,400



$

6,172



$

8,848














OPERATING EXPENSES (INCOME):











Cost of sales (excludes items shown below)

2,792



3,066



4,097



5,858



8,135



Selling, general and administrative expenses

107



102



143



209



281



Depreciation, depletion and amortization

138



144



165



282



331



Earnings from investees

(17)



(6)



(57)



(23)



(53)



Loss on write-down of retained interest in USSC

255







255





Restructuring and other charges

19



153



18



172



18



Net gain on disposal of assets

(1)





(1)



(1)



(21)



Other income, net

(1)







(1)

















         Total operating expenses

3,292



3,459



4,365



6,751



8,691














(LOSS) EARNINGS BEFORE INTEREST AND INCOME TAXES (EBIT)

(392)



(187)



35



(579)



157


Net interest and other financial costs

55



62



64



117



133















(LOSS) EARNINGS BEFORE INCOME TAXES

(447)



(249)



(29)



(696)



24


Income tax benefit

(186)



(174)



(11)



(360)



(10)














Net (loss) earnings

(261)



(75)



(18)



(336)



34



Less: Net earnings attributable to the











   noncontrolling interests










NET (LOSS) EARNINGS ATTRIBUTABLE TO











UNITED STATES STEEL CORPORATION

$

(261)



$

(75)



$

(18)



$

(336)



$

34














COMMON STOCK DATA:






















Net (loss) earnings per share attributable to










   United States Steel Corporation stockholders:











Basic


$

(1.79)



$

(0.52)



$

(0.12)



$

(2.31)



$

0.23



Diluted


$

(1.79)



$

(0.52)



$

(0.12)



$

(2.31)



$

0.23














Weighted average shares, in thousands











Basic


145,962



145,733



144,884



145,848



144,821



Diluted


145,962



145,733



144,884



145,848



146,144














Dividends paid per common share

$

0.05



$

0.05



$

0.05



$

0.10



$

0.10


 

UNITED STATES STEEL CORPORATION

CASH FLOW STATEMENT (Unaudited)












Six Months Ended





June 30,

(Dollars in millions)


2015


2014

Cash provided by (used in) operating activities:





Net (loss) earnings


$

(336)



$

34



Depreciation, depletion and amortization

282



331



Loss on write-down of retained interest in USSC

255





Restructuring and other charges

172



18



Pensions and other postretirement benefits

(24)



(59)



Deferred income taxes

(345)



16



Net gain on disposal of assets

(1)



(21)



Working capital changes

226



833



Income taxes receivable/payable

18



153



Other operating activities

(32)



48




Total


215



1,353









Cash (used in) provided by investing activities:





Capital expenditures


(276)



(186)



Acquisitions


(25)





Disposal of assets


1



26



Other investing activities


5



13




Total


(295)



(147)









Cash (used in) provided by financing activities:





Repayment of long-term debt


(18)



(322)



Receipts from exercise of stock options

1



1



Dividends paid


(15)



(15)




Total


(32)



(336)









Effect of exchange rate changes on cash

(32)



(3)









Net (decrease) increase in cash and cash equivalents

(144)



867


Cash and cash equivalents at beginning of the year

1,354



604









Cash and cash equivalents at end of the period

$

1,210



$

1,471


 

UNITED STATES STEEL CORPORATION

CONDENSED BALANCE SHEET (Unaudited)










June 30


Dec. 31

(Dollars in millions)


2015


2014

Cash and cash equivalents

$

1,210



$

1,354


Receivables, net

1,497



1,942


Inventories

2,330



2,496


Other current assets

399



639



Total current assets

5,436



6,431


Property, plant and equipment, net

4,431



4,574


Investments and long-term receivables, net

672



939


Intangible assets, net

200



204


Other assets

474



166









Total assets


$

11,213



$

12,314








Accounts payable

$

1,811



$

2,001


Payroll and benefits payable

879



1,003


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

362



378


Other current liabilities

190



187



Total current liabilities

3,242



3,569


Long-term debt, less unamortized discount

3,124



3,120


Employee benefits

952



1,117


Other long-term liabilities

414



708


United States Steel Corporation stockholders' equity

3,480



3,799


Noncontrolling interests

1



1









Total liabilities and stockholders' equity

$

11,213



$

12,314


 

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

We present EBITDA, adjusted EBITDA, adjusted net earnings (loss) and adjusted net earnings (loss) per diluted share, 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 (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA and adjusted net earnings (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.

 

RECONCILIATION OF ADJUSTED EBITDA










Quarter Ended



June 30


March 31


June 30

(Dollars in millions)

2015


2015


2014

Reconciliation to (loss) earnings before interest and income taxes (EBIT)







Adjusted EBITDA

$

20



$

110



$

265



Loss on write-down of retained interest in USSC

(255)







Loss on shutdown of coke production facilities



(153)





Restructuring and other charges (a)

(19)







Impairment of carbon alloy facilities







Write-off of pre-engineering costs







Gain on sale of real estate assets







Litigation reserves





(70)



Loss on assets held for sale





(14)



Curtailment gain





19



EBITDA

(254)



(43)



200



Depreciation, depletion and amortization expense

(138)



(144)



(165)



EBIT, as reported

$

(392)



$

(187)



$

35















(a) Consists primarily of employee related costs, including costs for severance, supplemental unemployment benefits and continuation of health care benefits.

 

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES (Unaudited)


RECONCILIATION OF ADJUSTED NET LOSS










Quarter Ended



June 30


March 31


June 30

(Dollars in millions, except per share amounts)

2015


2015


2014

Reconciliation to net loss attributable to United States Steel Corporation







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

$

(115)



$

(10)



$

25



Loss on write-down of retained interest in USSC

(136)







Loss on shutdown of coke production facilities



(65)





Restructuring and other charges (a)

(10)







Litigation reserves





(46)



Loss on assets held for sale





(9)



Curtailment gain





12



     Total Adjustments

(146)



(65)



(43)



Net loss attributable to United States Steel Corporation, as reported

$

(261)



$

(75)



$

(18)









Reconciliation to diluted net loss per share







Adjusted diluted net (loss) earnings per share

$

(0.79)



$

(0.07)



$

0.17



Loss on write-down of retained interest in USSC

(0.93)







Loss on shutdown of coke production facilities



(0.45)





Restructuring and other charges (a)

(0.07)







Litigation reserves





(0.31)



Loss on assets held for sale





(0.06)



Curtailment gain





0.08



     Total adjustments

(1.00)



(0.45)



(0.29)



Diluted net loss per share, as reported

$

(1.79)



$

(0.52)



$

(0.12)















(a) Consists primarily of employee related costs, including costs for severance, supplemental unemployment benefits and continuation of health care benefits.

 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)















Quarter Ended


Six Months Ended




June 30


March 31


June 30


June 30,


(Dollars in millions)

2015


2015


2014


2015


2014


SEGMENT EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES (EBIT)












Flat-Rolled

$

(64)



$

(67)



$

30



$

(131)



$

115




U. S. Steel Europe

20



37



38



57



70




Tubular

(66)



1



47



(65)



71




Other Businesses

6



8



17



14



30















Total Segment EBIT

(104)



(21)



132



(125)



286




Postretirement benefit expense

(14)



(13)



(32)



(27)



(64)




Other items not allocated to segments:












     Loss on write-down of retained interest in USSC

(255)







(255)






     Loss on shutdown of coke production facilities



(153)





(153)






     Restructuring and other charges

(19)







(19)






     Litigation reserves





(70)





(70)




     Loss on assets held for sale





(14)





(14)




     Curtailment gain





19





19
















        EBIT

$

(392)



$

(187)



$

35



$

(579)



$

157















CAPITAL EXPENDITURES












Flat-Rolled

$

56



$

132



$

47



$

188



$

102




U. S. Steel Europe

24



21



17



45



35




Tubular

24



16



31



40



47




Other Businesses



3



1



3



2
















          Total

$

104



$

172



$

96



$

276


(a)

$

186


(a)























(a) Excludes the (decrease) increase in accrued capital expenditures of $(18) million and $4 million for the six months ended June 30, 2015, and 2014, respectively.

 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)


















Quarter Ended


Six Months Ended





June 30


March 31


June 30


June 30,





2015


2015


2014


2015


2014

OPERATING STATISTICS











Average realized price: (a)












Flat-Rolled ($/net ton)

695


768


774


731


767



    Flat-Rolled U.S. Facilities ($/net ton) (b)

695


768


788


731


781



U. S. Steel Europe ($/net ton)

533


530


691


532


700



    U. S. Steel Europe (euro/net ton)

483


471


504


476


511



Tubular ($/net ton)

1,651


1,637


1,479


1,641


1,479


Steel Shipments: (a) (c)












Flat-Rolled

2,712


2,617


3,527


5,329


7,201



   Flat-Rolled U.S. Facilities (b)

2,712


2,617


3,006


5,329


6,121



U. S. Steel Europe

1,091


1,264


1,053


2,355


2,084



Tubular

92


220


449


312


868




Total Steel Shipments

3,895


4,101


5,029


7,996


10,153















Intersegment Shipments: (c)












Flat-Rolled to Tubular

96


149


457


245


892



U. S. Steel Europe to Flat-Rolled



75



75


Raw Steel Production: (c)












Flat-Rolled

2,808


2,868


4,132


5,676


8,623



    Flat-Rolled U.S. Facilities (b)

2,808


2,868


3,528


5,676


7,421



U. S. Steel Europe

1,200


1,283


1,223


2,483


2,364


Raw Steel Capability Utilization: (d)












Flat-Rolled

58%


60%


75%


59%


79%



    Flat-Rolled U.S. Facilities (e)

58%


60%


73%


59%


77%



U. S. Steel Europe

96%


104%


98%


100%


95%


















 (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 19.4 million net tons for Flat-Rolled and 5.0 million net tons for U. S. Steel Europe. Prior to the CCAA filing and deconsolidation of U. S. Steel Canada, on September 16, 2014 annual raw steel production capability for Flat-Rolled was 22.0 million net tons.

(e) AISI capability utilization rates include our U.S. facilities (Gary Works, Great Lakes Works, Mon Valley Works, Granite City Works and Fairfield Works).

            

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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