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USX Corporation Reports Second Quarter 2001 U. S. Steel Group ResultsPRNewswire USX-U. S. Steel Group (NYSE: X) today issued the following: Earnings Highlights
(Dollars in millions except per diluted share data)
2Q 2001 2Q 2000
Net income (loss) adjusted for special items $(30) $66
- per diluted share $(0.36) $0.72
Net income (loss) $(30) $56
Net income (loss) per diluted share $(0.36) $0.62
Revenues $1,737 $1,656
USX-U. S. Steel Group (NYSE: X) reported a second quarter 2001 net loss of $30 million, or 36 cents per diluted share, compared with adjusted net income of $66 million, or 72 cents per diluted share, in second quarter 2000. Net income in second quarter 2000 was $56 million, or 62 cents per diluted share, including after-tax charges of $10 million for certain environmental and legal contingencies. In second quarter 2001, U. S. Steel Group recorded a loss from reportable segments of $28 million, or $8 per ton, on shipments of 3.7 million tons. U. S. Steel Group's Domestic Steel segment recorded a loss from operations of $69 million, or $26 per ton. Second quarter 2000 Domestic Steel segment income was $68 million, or $23 per ton. U. S. Steel Kosice, s.r.o. (USSK), the Slovak Republic steel operation acquired during the 2000 fourth quarter, reported second quarter 2001 segment income of $41 million, or $38 per ton. Total Domestic Steel shipments in second quarter 2001 were 2.6 million net tons, down 10 percent from 2.9 million tons in second quarter 2000. Total USSK shipments in second quarter 2001 were 1.1 million net tons, up 43 percent from 749,000 tons in first quarter 2001. Average domestic steel prices were $429 per ton in second quarter 2001 compared with $451 per ton in the same quarter last year. Average USSK steel prices in the second quarter were $249 per ton, down from $293 per ton in first quarter 2001. Domestic raw steel capability utilization during second quarter 2001 was 82.1 percent, down from 95.4 percent in second quarter 2000. USSK raw steel capability utilization in the 2001 second quarter was 100.8 percent, compared with 85.8 percent in this year's first quarter. Impacting domestic utilization was refurbishment of the Mon Valley Works No. 3 blast furnace, which began May 30. This facility could resume production in September if business conditions warrant. On May 31, a major fire damaged the cold rolling mill at the joint venture USS-POSCO plant in Pittsburg, California. USS-POSCO maintains insurance coverage against such losses, including coverage for business interruption. Currently, it is expected that the cold mill will resume production sometime in the first quarter of 2002. Until such time, the plant will continue customer shipments using cold rolled coils from U. S. Steel Group and POSCO as a substitute feedstock. Commenting on results for Domestic Steel, USX Corporation Board Chairman Thomas J. Usher said, "While domestic commercial conditions remain difficult, demand and pricing appear to have bottomed out in the 2001 second quarter. Since that time, our order book has strengthened and prices have stabilized. A major positive on the cost side is that we are seeing a declining trend in natural gas prices and we have reduced our natural gas usage by approximately 25 percent in this quarter compared to last year. USSK recorded another strong performance in the 2001 second quarter despite a difficult European commercial environment and recorded a significant increase in volume over the first quarter." Usher added, "The Bush Administration took long-needed actions in June against the unprecedented flood of unfairly traded steel imports. Initiating a Section 201 investigation was a bold, responsive move, which demonstrates the President understands the state of our industry. The President has sent a strong message to our trading partners that the U.S. will no longer be the dumping ground for the world's excess steel capacity. We are optimistic that the Section 201 process could eventually lead to a sustained period of import stability in the U.S." In looking to the third quarter, Usher said, "We believe conditions for our Domestic Steel operations have found the bottom of this steel cycle and that we have turned the corner. We have seen two sequential quarters of improving volumes and, building on that trend, we anticipate somewhat higher third quarter volumes. We expect our realized prices to be flat or modestly higher in the third quarter. Additionally, domestic natural gas prices have shown downward movement over the last few months. Continuation of this trend could provide a significant positive impact on our costs over the balance of the year." Usher added, "For USSK, we expect third quarter 2001 shipments to be slightly lower and realized prices to be flat compared to the 2001 second quarter. "For the full year 200l, we expect total shipments to be approximately 14 to 14.5 million net tons with Domestic Steel shipments of approximately 10.5 to 11 million net tons and USSK shipments of about 3.5 million net tons." This release contains forward-looking statements with respect to the expected restart of the USS-POSCO cold rolling mill, market conditions, costs, shipments and prices. One factor, among others, that may affect the restart of the cold rolling mill at the USS-POSCO joint venture is completion of repairs. Some factors, among others, that could affect third quarter and full year 2001 market conditions, costs, shipments and prices include import levels, customer inventory levels, plant operating performance, domestic natural gas prices and usage, and U.S. and European economic performance. In accordance with "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, 2000, in Form 10-Q for the quarter ended March 31, 2001, and in subsequent 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 U. S. Steel Group and a Consolidated Statement of Operations for USX Corporation are attached. The company will conduct a conference call on second quarter earnings on Monday, July 23 at 11 a.m. EDST. To listen to the webcast of the conference call, visit the USX website, http://www.usx.com/ and click on the "U. S. Steel Group" button, then the "Investor Services" button. Replays of the conference call will be available until July 30. For more information on USX Corporation and U. S. Steel Group, visit their websites at http://www.usx.com/ or http://www.ussteel.com/. USX Corporation press releases are available through Company News On-Call at http://www.prnewswire.com/gh/cnoc/comp/929150.html. U. S. STEEL GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
Second Quarter Six Months
Ended Ended
(Dollars in millions, June 30 June 30
except per share amounts) 2001 2000 2001 2000
REVENUES AND OTHER INCOME:
Revenues $1,733 $1,629 $3,243 $3,211
Income (loss)
from investees (7) 14 40 7
Net gains on
disposal of assets 10 13 16 28
Other income (loss) 1 - 2 (2)
------ ------ ------ ------
Total revenues
and other income 1,737 1,656 3,301 3,244
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues
(excludes items
shown below) 1,599 1,462 3,148 2,890
Selling, general and
administrative
expenses (credits) 11 (57) (6) (120)
Depreciation, depletion
and amortization 79 78 152 153
Taxes other than
income taxes 67 61 126 118
Costs related to
Proposed Separation 8 - 9 -
------ ------ ------ ------
Total costs
and expenses 1,764 1,544 3,429 3,041
------ ------ ------ ------
INCOME (LOSS)
FROM OPERATIONS (27) 112 (128) 203
Net interest and
other financial costs 48 24 36 48
------ ------ ------ ------
INCOME (LOSS)
BEFORE INCOME TAXES (75) 88 (164) 155
Provision (credit)
for income taxes (45) 32 (143) 56
------ ------ ------ ------
NET INCOME (LOSS) (30) 56 (21) 99
Dividends on
preferred stock 2 2 4 4
------ ------ ------ ------
NET INCOME (LOSS)
APPLICABLE TO
STEEL STOCK $(32) $54 $(25) $95
====== ====== ====== ======
STEEL STOCK DATA:
Net income (loss) $(32) $54 $(25) $95
- Per share - basic (.36) .62 (.28) 1.08
- diluted (.36) .62 (.28) 1.07
Dividends paid
per share .10 .25 .35 .50
Weighted average
shares, in thousands
- Basic 89,005 88,499 88,906 88,461
- Diluted 89,005 92,755 88,906 92,721
The following notes are an integral part of this financial statement.
U. S. STEEL GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT
--------------------------------------
1. The statement of operations of the U. S. Steel Group includes the
results of operations for the businesses of USX other than
businesses included in the Marathon Group 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. On March 1, 2001, USX completed the purchase of East Chicago Tin,
the tin mill products business of LTV Corporation. In this noncash
transaction, USX assumed certain employee related obligations of
East Chicago Tin. The acquisition was accounted for using the
purchase method of accounting. Results of operations for the six
months of 2001 include the operations of East Chicago Tin from the
date of acquisition.
On March 23, 2001, Transtar, Inc. (Transtar) completed its
previously announced reorganization with its two voting
shareholders, USX and Transtar Holdings, L.P. (Holdings), an
affiliate of Blackstone Capital Partners L.P. As a result of this
transaction, USX became sole owner of Transtar and certain of its
subsidiaries. Holdings became owner of the other subsidiaries of
Transtar. USX accounted for the change in its ownership interest in
Transtar using the purchase method of accounting. The U. S. Steel
Group recognized in the six months of 2001, a pretax gain of
$68 million (included in income (loss) from investees) and a
favorable deferred tax adjustment of $33 million related to this
transaction. USX previously accounted for its investment in
Transtar under the equity method of accounting.
3. USX has a 16% investment in Republic Technologies International LLC
(Republic) which was accounted for under the equity method of
accounting. During the first quarter of 2001, USX discontinued
applying the equity method since investments in and advances to
Republic had been reduced to zero. Also, USX has recognized certain
debt obligations of $14 million previously assumed by Republic. On
April 2, 2001, Republic filed a voluntary petition with the U.S.
Bankruptcy Court to reorganize its operations under Chapter 11 of
the U.S. Bankruptcy Code. In the first quarter of 2001, as a result
of Republic's action, the U. S. Steel Group recorded a pretax
provision of $74 million for potentially uncollectible receivables
from Republic.
4. Interest and other financial costs in the six months of 2001
includes a favorable adjustment of $67 million and provision for
income taxes includes an unfavorable adjustment of $15 million
related to prior years' taxes.
5. On April 24, 2001, USX announced that its board of directors
authorized management to proceed with the necessary steps to
implement a plan of reorganization to separate the energy and steel
businesses of USX (Proposed Separation). The Proposed Separation
envisions a tax-free spin-off of the steel and steel-related
businesses of USX into a freestanding, publicly traded company to be
known as United States Steel Corporation. Holders of current
USX-U. S. Steel Group Common Stock will become holders of United
States Steel Corporation Common Stock. Holders of current
USX-Marathon Group Common Stock will become holders of Marathon Oil
Corporation Common Stock. Costs related to the Proposed Separation
include professional fees and certain other expenses.
6. On July 2, 2001, a corporate reorganization was implemented to
create a new holding company structure. USX became a holding
company that owns all of the outstanding equity of Marathon Oil
Company, an Ohio Corporation which, directly and indirectly, owns
and operates the businesses of the USX-Marathon Group, and United
States Steel LLC, a Delaware limited liability company which owns
and operates the businesses of the USX-U. S. Steel Group. The
reorganization will not have any impact on the results of operations
or financial position of USX Corporation, the Marathon Group or the
U. S. Steel Group.
This reorganization in corporate form is independent of the Proposed
Separation of the energy and steel businesses of USX Corporation
that was announced on April 24, 2001.
U. S. STEEL GROUP OF USX CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
(Dollars in millions) 2001 2000 2001 2000
INCOME (LOSS)
FROM OPERATIONS
Domestic Steel(a)(b) $(69) $68 $(220) $122
U. S. Steel Kosice(c) 41 - 82 -
----- ----- ----- -----
Income (loss) from
reportable segments $(28) $68 $(138) $122
Items not allocated
to segment:
Net pension credits 31 67 72 132
Administrative Expenses (8) (5) (15) (11)
Costs related to former
business activities(d) (14) (18) (38) (40)
Costs related to
proposed separation(e) (8) - (9) -
----- ----- ----- -----
Total U. S.
Steel Group $(27) $112 $(128) $203
CAPITAL EXPENDITURES
Domestic Steel $95 $52 $127 $97
U. S. Steel Kosice 9 - 14 -
----- ----- ----- -----
Total U. S.
Steel Group $104 $52 $141 $97
OPERATING STATISTICS
Average steel price
per ton: ($/net ton)
Domestic Steel $429 $451 $434 $445
U. S. Steel Kosice 249 - 267 -
Steel Shipments:(f)
Domestic Steel 2,616 2,904 5,048 5,884
U. S. Steel Kosice 1,069 - 1,818 -
----- ----- ----- -----
Total Steel
Shipments 3,685 2,904 6,866 5,884
Raw Steel-Production:(f)
Domestic Steel 2,621 3,034 5,244 6,186
U. S. Steel Kosice 1,131 - 2,083 -
----- ----- ----- -----
Total Raw Steel-
Production 3,752 3,034 7,327 6,186
Raw Steel-Capability
Utilization:(g)
Domestic Steel 82.1% 95.4% 82.6% 97.2%
U. S. Steel Kosice 100.8% - 93.4% -
Iron ore shipments
- Domestic Steel(f) 5,189 4,656 7,100 6,685
(a) The first six months of 2001 include a favorable $68 million for
USX's share of gain on the Transtar reorganization and a $74 million
charge for a substantial portion of accounts receivable from
Republic. Results in the second quarter and first six months of
2000 include charges totaling $15 million for certain environmental
and legal accruals.
(b) Includes the sale, domestic production and transportation of steel
products, coke, taconite pellets and coal; the management of mineral
resources; real estate development; engineering and consulting
services; and equity income from joint ventures and partially owned
companies.
(c) Includes the production and sale of steel products and coke from
facilities primarily located in the Slovak Republic.
(d) Includes other postretirement benefit costs and certain other
expenses principally attributable to former business units of the
U. S. Steel Group.
(e) Includes professional fees and expenses, and certain other costs
related to the proposed separation.
(f) Thousands of net tons.
(g) Based on annual raw steel production capability of 12.8 million tons
for Domestic Steel and 4.5 million tons for U. S. Steel Kosice.
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
------------------------------------------------
Second Quarter Six Months
Ended Ended
June 30 June 30
(Dollars in millions) 2001 2000 2001 2000
REVENUES AND OTHER INCOME:
Revenues $10,844 $10,293 $20,960 $19,600
Dividend and
investee income 32 31 112 35
Net gains on
disposal of assets 17 15 38 122
Other income 10 11 78 22
------ ------ ------ ------
Total revenues
and other income 10,903 10,350 21,188 19,779
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues
(excludes items
shown below) 7,791 7,710 15,560 14,923
Selling, general and
administrative expenses 181 67 304 138
Depreciation, depletion
and amortization 385 318 761 639
Taxes other than
income taxes 1,269 1,237 2,450 2,400
Exploration expenses 26 46 49 91
Costs related to
Proposed Separation 23 - 25 -
------ ------ ------ ------
Total costs
and expenses 9,675 9,378 19,149 18,191
------ ------ ------ ------
INCOME FROM OPERATIONS 1,228 972 2,039 1,588
Net interest and
other financial costs 86 92 109 187
Minority interest in
income of Marathon Ashland
Petroleum LLC 320 203 427 258
------ ------ ------ ------
INCOME BEFORE INCOME
TAXES AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 822 677 1,503 1,143
Provision for
income taxes 270 254 434 423
------ ------ ------ ------
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 552 423 1,069 720
Cumulative effect of
change in accounting
principle - - (8) -
------ ------ ------ ------
NET INCOME 552 423 1,061 720
Dividends on
preferred stock 2 2 4 4
------ ------ ------ ------
NET INCOME APPLICABLE
TO COMMON STOCKS $550 $421 $1,057 $716
====== ====== ====== ======
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
------------------------------------------------------------
Second Quarter Six Months
Ended Ended
(Dollars in millions, June 30 June 30
except per share amounts) 2001 2000 2001 2000
APPLICABLE TO
MARATHON STOCK:
Income before
cumulative effect
of change in
accounting principle $582 $367 $1,090 $621
- Per share - basic 1.88 1.18 3.53 1.99
- diluted 1.88 1.18 3.52 1.99
Cumulative effect of
change in accounting
principle - - (8) -
- Per share - basic - - (.03) -
- diluted - - (.02) -
Net income $582 $367 $1,082 $621
- Per share - basic
and diluted 1.88 1.18 3.50 1.99
Dividends paid per share .23 .21 .46 .42
Weighted average
shares, in thousands
- Basic 309,101 312,233 308,928 312,180
- Diluted 309,627 312,431 309,338 312,359
APPLICABLE TO STEEL STOCK:
Net income (loss) $(32) $54 $(25) $95
- Per share - basic (.36) .62 (.28) 1.08
- diluted (.36) .62 (.28) 1.07
Dividends paid
per share .10 .25 .35 .50
Weighted average
shares, in thousands
- Basic 89,005 88,499 88,906 88,461
- Diluted 89,005 92,755 88,906 92,721
The following notes are an integral part of this financial statement.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. Effective January 1, 2001, USX adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133), which was amended by SFAS
Nos. 137 and 138. This Standard requires recognition of all
derivatives as either assets or liabilities at fair value.
The transition adjustment related to adopting SFAS No. 133 on
January 1, 2001, was recognized as a cumulative effect of change in
accounting principle. The unfavorable cumulative effect on net
income, net of a tax benefit of $5 million, was $8 million. The
unfavorable cumulative effect on other comprehensive income (OCI),
net of a tax benefit of $4 million, was $8 million. The amounts
reported as OCI will be reflected in net income when the anticipated
physical transactions are consummated.
2. In the first quarter 2001, Marathon Oil Company (Marathon) acquired
Pennaco Energy, Inc. (Pennaco), a natural gas producer. Marathon
acquired 87% of the outstanding stock of Pennaco through a tender
offer completed on February 7, 2001 at $19 a share. On March 26,
2001, Pennaco was merged with a wholly owned subsidiary of Marathon.
Under the terms of the merger, each share not held by Marathon was
converted into the right to receive $19 in cash. The total purchase
price of Pennaco was $506 million. The acquisition was accounted
for under the purchase method of accounting. Results of operations
for the six months of 2001 include the results of Pennaco from
February 7, 2001.
On March 1, 2001, USX completed the purchase of East Chicago Tin,
the tin mill products business of LTV Corporation. In this noncash
transaction, USX assumed certain employee related obligations of
East Chicago Tin. The acquisition was accounted for using the
purchase method of accounting. Results of operations for the six
months of 2001 include the operations of East Chicago Tin from the
date of acquisition.
On March 23, 2001, Transtar, Inc. (Transtar) completed its
previously announced reorganization with its two voting
shareholders, USX and Transtar Holdings, L.P. (Holdings), an
affiliate of Blackstone Capital Partners L.P. As a result of this
transaction, USX became sole owner of Transtar and certain of its
subsidiaries. Holdings became owner of the other subsidiaries of
Transtar. USX accounted for the change in its ownership interest in
Transtar using the purchase method of accounting. USX recognized in
the six months of 2001, a pretax gain of $68 million (included in
dividend and investee income) and a favorable deferred tax
adjustment of $33 million related to this transaction. USX
previously accounted for its investment in Transtar under the equity
method of accounting.
3. USX has a 16% investment in Republic Technologies International LLC
(Republic) which was accounted for under the equity method of
accounting. During the first quarter of 2001, USX discontinued
applying the equity method since investments in and advances to
Republic had been reduced to zero. Also, USX has recognized certain
debt obligations of $14 million previously assumed by Republic. On
April 2, 2001, Republic filed a voluntary petition with the U.S.
Bankruptcy Court to reorganize its operations under Chapter 11 of
the U.S. Bankruptcy Code. In the first quarter of 2001, as a result
of Republic's action, USX recorded a pretax provision of $74 million
for potentially uncollectible receivables from Republic.
4. On April 24, 2001, USX announced that its board of directors
authorized management to proceed with the necessary steps to
implement a plan of reorganization to separate the energy and steel
businesses of USX (Proposed Separation). The Proposed Separation
envisions a tax-free spin-off of the steel and steel-related
businesses of USX into a freestanding, publicly traded company to be
known as United States Steel Corporation. Holders of current
USX-U. S. Steel Group Common Stock will become holders of United
States Steel Corporation Common Stock. Holders of current
USX-Marathon Group Common Stock will become holders of Marathon Oil
Corporation Common Stock. Costs related to the Proposed Separation
include professional fees and certain other expenses.
5. On July 2, 2001, a corporate reorganization was implemented to
create a new holding company structure. USX became a holding
company that owns all of the outstanding equity of Marathon Oil
Company, an Ohio Corporation which, directly and indirectly, owns
and operates the businesses of the USX-Marathon Group, and United
States Steel LLC, a Delaware limited liability company which owns
and operates the businesses of the USX-U. S. Steel Group. The
reorganization will not have any impact on the results of operations
or financial position of USX Corporation, the Marathon Group or the
U. S. Steel Group.
This reorganization in corporate form is independent of the Proposed
Separation of the energy and steel businesses of USX Corporation
that was announced on April 24, 2001.
SOURCE: USX-U. S. Steel Group Contact: William E. Keslar or Don H. Herring of USX-U. S. Steel Group, Website: http://www.usx.com/ Website: http://www.ussteel.com/ Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/929150.html |
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