United States Steel Corporation Reports 2012 Third Quarter Results
PITTSBURGH, Oct. 30, 2012 /PRNewswire-FirstCall/ — United States Steel Corporation (NYSE: X) reported third quarter 2012 net income of $44 million, or $0.28 per diluted share, compared to second quarter 2012 net income of $101 million, or $0.62 per diluted share, and third quarter 2011 net income of $22 million, or $0.15 per diluted share. Net income for the third quarter 2012 included a $22 million, or $0.13 per diluted share, after-tax charge for employee lump sum payments as provided in the new labor agreement. Net income for the second quarter 2012 included an $11 million after-tax early redemption premium on our $300 million 5.65% Senior Notes due 2013. Net income for the third quarter 2011 included $96 million of net foreign currency losses, primarily related to the accounting remeasurement of a U.S. dollar denominated intercompany loan to a European entity.
Earnings Highlights
-------------------
(Dollars in
millions, except
per share amounts) 3Q 2012 2Q 2012 3Q 2011
------------------- ------- ------- -------
Net Sales $4,652 $5,017 $5,081
--------- ------ ------ ------
Segment income
(loss) from
operations
Flat-rolled $29 $177 $203
U. S. Steel Europe 27 34 (50)
Tubular 102 103 134
Other Businesses 13 16 8
---------------- --- --- ---
Total reportable
segment and Other
Businesses income
from operations $171 $330 $295
Postretirement
benefit expense (74) (77) (96)
Other items not
allocated to
segments (35) - -
---
Income from
operations $62 $253 $199
----------- --- ---- ----
Net interest and
other financial
costs 45 82 144
---------------- --- --- ---
Income tax (benefit)
provision (27) 70 33
-------------------- --- --- ---
Net income
attributable to
United States Steel
Corporation $44 $101 $22
-------------------- --- ---- ---
-Per basic share $0.30 $0.70 $0.15
---------------- ----- ----- -----
-Per diluted share $0.28 $0.62 $0.15
------------------ ----- ----- -----
Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, “Third quarter operating results were positive for all three reportable segments in an economic environment that was more challenging than the second quarter. Our Tubular segment once again had solid results despite declining rig activity and pricing pressure caused by rising oil country tubular goods inventory and continued high levels of imports. Our Flat-rolled and European segments were profitable but continue to be challenged by difficult global economic conditions. In addition, our Flat-rolled segment continued to be adversely affected by increased import levels.”
The company reported third quarter 2012 reportable segment and Other Businesses income from operations of $171 million, or $32 per ton, compared with income of $330 million, or $61 per ton, in the second quarter of 2012 and income of $295 million, or $54 per ton, in the third quarter of 2011.
Other items not allocated to segments in the third quarter of 2012 consisted of a $35 million pre-tax charge for employee lump sum payments as provided in the new labor agreement.
For the third quarter 2012, we recorded a tax benefit of $27 million on our pre-tax income of $17 million. The third quarter 2012 tax benefit includes $20 million, or $0.12 per diluted share, of favorable effects associated with the settlement of prior years’ income tax audits and $26 million, or $0.15 per diluted share, of a tax benefit to adjust our estimated 2011 federal income tax liability to our actual tax liability reflected in our tax return as filed in the third quarter. The tax benefit does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where we have recorded a full valuation allowance on deferred tax assets.
As of September 30, 2012, U. S. Steel had $536 million of cash and $2.4 billion of total liquidity.
Reportable Segments and Other Businesses
Flat-rolled third quarter results decreased from the second quarter primarily due to a $31 per ton decrease in average realized prices, as significant price decreases for domestic scrap and globally traded steelmaking raw materials placed downward pressure on spot and index-based pricing mechanisms in North America in the third quarter. The spot market continues to be pressured by high import volumes, which for sheet products have increased 13 percent year over year through the first nine months of 2012. Proceeds from steel substrate sales to our Tubular segment have also decreased. Shipments and operating costs for our Flat-rolled segment were comparable to the second quarter.
Despite the continued economic challenges, third quarter results remained positive for our European segment. Results were lower than the second quarter as average realized prices decreased compared to the second quarter due to weaker spot market prices. Shipments were also lower in the third quarter as a result of the continued conservative buying pattern by service centers and distributors, reduced automotive production schedules and the normal summer holiday outages. Operating costs decreased compared to the second quarter due to lower raw materials prices and good operating cost performance.
Third quarter results for our Tubular segment were in line with the second quarter. Shipments decreased as end users adjusted their drilling plans and curtailed spending due to economic uncertainty and concern over energy prices. Average realized prices declined slightly as import levels remained high resulting in pricing pressure from increased supply. Operating costs decreased compared to the second quarter due to lower substrate costs.
Outlook
Commenting on U. S. Steel’s outlook for the fourth quarter, Surma said, “Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America. We expect total reportable segment and Other Businesses operating results to be around breakeven for the fourth quarter with decreased results in all reportable segments.”
We expect a loss for our Flat-rolled segment due to slightly lower average realized prices, as well as lower shipments and higher operating costs. Average realized prices and shipments are expected to be lower compared to the third quarter as a result of cautious purchasing patterns early in the quarter created by the uncertain global economic outlook; however, market conditions have recently begun improving in North America, and we believe that we are already beyond the spot price trough of the fourth quarter. New spot orders are being transacted at higher prices for delivery later this quarter. Operating costs are expected to increase due to scheduled blast furnace and other maintenance projects.
We expect our European segment results to be around breakeven. Average realized prices are expected to decrease reflecting lower spot market and quarterly contract pricing. Shipments are projected to decrease compared to the third quarter due to lower consumption in automotive and other end user industries. Operating costs are expected to decrease compared to the third quarter primarily due to lower raw materials costs.
We expect fourth quarter results for our Tubular segment to remain profitable but well below third quarter results. Average realized prices are expected to be lower and shipments are projected to be significantly lower than the third quarter as imports continue at high levels despite end users decreasing drilling activity in order to operate within their 2012 capital budgets. Inventory management by our customers may also be a considerable factor as we approach year-end. Operating costs are expected to increase due to operating inefficiencies caused by lower production volumes.
We expect a minimal tax provision/benefit in the fourth quarter primarily due to the full valuation allowance on deferred tax assets in Canada.
*****
This release contains forward-looking statements with respect to market conditions, operating costs, shipments, prices, capital spending, and employee benefit costs and payments. Although we believe that we are experiencing a gradual economic recovery, there are signs of continued economic issues in Europe and U. S. Steel cannot control or predict the impact. Other more normal 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 sunsets; (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 CO(2) emissions, climate change and shale gas development. Economic conditions and political factors in Europe and Canada that may affect U. S. Steel Europe’s and U. S. Steel Canada’s results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) government instability; (p) political unrest; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures. To the extent that actual 2012 results for U.S. and foreign income or loss vary from estimates applied at the end of the most recent interim period, the actual tax provision or benefit recognized in 2012 could be materially different from the forecasted amount. 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, 2011, 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 Tuesday, October 30, at 2 p.m. EDT. 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
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Quarter Ended Nine Months Ended
------------- -----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2012 2012 2011 2012 2011
-------------------- ---- ---- ---- ---- ----
NET SALES $4,652 $5,017 $5,081 $14,841 $15,065
OPERATING EXPENSES (INCOME):
Cost of sales (excludes items shown
below) 4,311 4,477 4,560 13,414 13,679
Selling, general and administrative
expenses 166 173 181 512 550
Depreciation, depletion and
amortization 163 164 172 490 512
Income from investees (48) (44) (27) (116) (66)
Net (gain) loss on disposal of
assets (1) - - 308 (10)
Other income, net (1) (6) (4) (9) (8)
---
Total operating expenses 4,590 4,764 4,882 14,599 14,657
----- ----- ----- ------ ------
INCOME FROM OPERATIONS 62 253 199 242 408
Net interest and other financial costs 45 82 144 177 136
--- --- --- --- ---
INCOME BEFORE INCOME TAXES
AND NONCONTROLLING INTERESTS 17 171 55 65 272
Income tax (benefit) provision (27) 70 33 139 114
--- --- --- --- ---
Net income (loss) 44 101 22 (74) 158
Less: Net income attributable to
the
noncontrolling interests - - - - -
---
NET INCOME (LOSS) ATTRIBUTABLE TO
UNITED STATES STEEL CORPORATION $44 $101 $22 $(74) $158
===
COMMON STOCK DATA:
------------------
Net income (loss) per share attributable to
United States Steel Corporation shareholders:
-Basic $0.30 $0.70 $0.15 $(0.51) $1.10
-Diluted $0.28 $0.62 $0.15 $(0.51) $1.02
Weighted average shares, in thousands
-Basic 144,350 144,176 144,067 144,199 143,932
-Diluted 171,673 171,416 144,452 144,199 171,534
Dividends paid per common share $0.05 $0.05 $0.05 $0.15 $0.15
UNITED STATES STEEL CORPORATION
CONSOLIDATED CASH FLOW STATEMENT (Unaudited)
-------------------------------------------
Nine Months Ended
September 30
------------
(Dollars in millions) 2012 2011
-------------------- ---- ----
Cash (used in) provided by operating activities:
Net (loss) income $(74) $158
Depreciation,
depletion and
amortization 490 512
Pensions and other
postretirement benefits (112) (74)
Deferred income
taxes 86 10
Net loss on
disposal of
assets 308 (10)
Working capital
changes 215 (623)
Income taxes
receivable/
payable 27 148
Currency
remeasurement
loss (gain) (13) (26)
Other operating
activities 31 13
Total 958 108
--- ---
Cash (used in) provided by investing activities:
Capital
expenditures(a) (536) (626)
Disposal of assets 141 16
Other investing
activities (71) (1)
Total (466) (611)
---- ----
Cash provided by (used in) financing activities:
Revolving credit
facilities - borrowings 523 3,316
- repayments (653) (3,163)
Receivables Purchase Agreement
(payments) proceeds (380) 75
Issuance of long-term debt,
net of financing costs 485 -
Repayment of long-
term debt (319) (18)
Common stock
issued - 4
Dividends paid (22) (22)
Other financing
activities - 1
Total (366) 193
---- ---
Effect of exchange rate changes on cash 2 2
--- ---
Net increase (decrease) in cash and cash equivalents 128 (308)
Cash and cash equivalents at beginning of the year 408 578
Cash and cash equivalents at end of the period $536 $270
==== ====
(a)Excludes the change in accrued capital expenditures of $50 million for the nine months ended September 30, 2012. The change in
accrued capital expenditures was immaterial for the nine months ended September 30, 2011.
UNITED STATES STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
Sept. 30 Dec. 31
(Dollars in
millions) 2012 2011
----------- ---- ----
Cash and cash
equivalents $536 $408
Receivables, net 2,412 2,053
Receivables sold to
third party
conduits - 380
Inventories 2,525 2,775
Other current
assets 173 158
--- ---
Total current
assets 5,646 5,774
Property, plant and
equipment, net 6,390 6,579
Investment and
long-term
receivables, net 645 683
Goodwill and
intangible assets,
net 2,071 2,045
Other assets 744 992
--- ---
Total assets $15,496 $16,073
Accounts payable $1,948 $2,063
Payroll and
benefits payable 1,048 1,003
Short-term debt
and current
maturities of
long-term debt 1 20
Borrowings under
Receivables
Purchase Agreement - 380
Other current
liabilities 270 183
--- ---
Total current
liabilities 3,267 3,649
Long-term debt,
less unamortized
discount 3,939 3,828
Employee benefits 3,989 4,600
Other long-term
liabilities 438 495
United States Steel
Corporation
stockholders'
equity 3,861 3,500
Noncontrolling
interests 2 1
--- ---
Total
liabilities
and
stockholders'
equity $15,496 $16,073
=============
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
Quarter Ended Nine Months Ended
------------- -----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2012 2012 2011 2012 2011
-------------------- ---- ---- ---- ---- ----
INCOME (LOSS) FROM OPERATIONS
Flat-rolled $29 $177 $203 $389 $541
U. S. Steel Europe 27 34 (50) 27 (73)
Tubular 102 103 134 334 197
Other Businesses 13 16 8 46 30
Reportable Segment and Other Businesses Income from Operations 171 330 295 796 695
Postretirement benefit expense (74) (77) (96) (228) (287)
Other items not allocated to
segments:
Loss on sale of U. S. Steel
Serbia - - - (399) -
Gain on sale of transportation
assets - - - 89 -
Property tax settlements - - - 19 -
Labor agreement lump sum
payments (35) - - (35) -
--- --- --- --- ---
Total Income from Operations $62 $253 $199 $242 $408
CAPITAL EXPENDITURES
Flat-rolled $89 $151 $160 $421 $427
U. S. Steel Europe 15 12 26 29 93
Tubular 17 4 30 25 94
Other Businesses 8 1 9 11 12
Total $129 $168 $225 $486 (a) $626
(a) Capital expenditures include $50 million of changes in accrued but unpaid capital expenditures for the nine months ended September 30, 2012. Changes in the accrued but unpaid capital expenditures for the nine months ended September 30, 2011 were not material.
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
Quarter Ended Nine Months Ended
------------- -----------------
Sept. 30 June 30 Sept. 30 September 30
2012 2012 2011 2012 2011
---- ---- ---- ---- ----
OPERATING STATISTICS
Average realized price: ($/net
ton) (a)
Flat-rolled 741 772 773 759 765
U. S. Steel Europe 731 767 862 749 868
Tubular 1,676 1,706 1,699 1,704 1,576
Steel Shipments: (a) (b)
Flat-rolled 3,972 3,986 3,835 12,050 11,725
U. S. Steel Europe 911 955 1,196 2,911 3,779
Tubular 457 493 481 1,479 1,330
--- --- --- ----- -----
Total Steel Shipments 5,340 5,434 5,512 16,440 16,834
Intersegment Shipments: (b)
Flat-rolled to Tubular 456 460 492 1,415 1,339
U. S. Steel Europe to Flat-
rolled 128 44 - 249 71
Raw Steel Production: (b)
Flat-rolled 4,699 4,688 4,516 14,430 14,008
U. S. Steel Europe 1,140 1,173 1,317 3,553 4,429
Raw Steel Capability Utilization:
(c)
Flat-rolled 77% 77% 74% 79% 77%
U. S. Steel Europe 90% 94% 71% 90% 80%
USSK 90% 94% 82% 92% 87%
(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. Subsequent to the sale of USSS
on January 31, 2012, annual raw steel production capability for USSE is 5.0 million net tons.
SOURCE United States Steel Corporation
