Exhibit 99.2.
Contact: William E. Keslar
Don H. Herring
(412) 433-6870
FOR IMMEDIATE RELEASE
USX CORPORATION REPORTS 2000 FOURTH QUARTER
AND FULL-YEAR U. S. STEEL GROUP RESULTS
Earnings Highlights
(Dollars in millions except per share data)
4Q 4Q
2000 1999 2000 1999
Net income adjusted for special items $(57) $39 $77 $83
- per diluted share $(.67) $.42 $.78 $.84
Net income $(139) $34 $(21) $44
Net income per diluted share $(1.59) $.35 $(.33) $.40
Revenues and Other Income $1,413 $1,500 $6,132 $5,470
PITTSBURGH, January 24, 2001 -- USX-U. S. Steel Group (NYSE: X) reported a
fourth quarter 2000 adjusted net loss of $57 million, or 67 cents per diluted
share, compared with net income of $39 million, or 42 cents per diluted share in
fourth quarter 1999. Revenues were $1.4 billion in fourth quarter 2000,
compared with $1.5 billion in the same period of 1999.
U. S. Steel Group recorded a fourth quarter 2000 net loss of $139 million,
or $1.59 per diluted share, which included an after-tax total of $82 million for
unfavorable special items. These items included $46 million for asset
impairments at two coal mines, $22 million to establish a reserve against notes
and receivables from financially distressed steel companies, and $14 million for
environmental accruals. The fourth quarter 2000 net loss reflects an unusually
high state tax provision because it was determined that certain previously
recorded state tax
-2-
benefits can no longer be utilized.
Fourth quarter 1999 net income of $34 million, or 35 cents per diluted
share, included special items which had a net unfavorable after-tax effect of $5
million.
In the fourth quarter 2000, U. S. Steel Group's Domestic Steel segment
recorded a loss from operations of $122 million, including pre-tax charges of
$55 million for reserves against notes and receivables, and environmental
accruals, resulting in an adjusted loss of $29 per ton. U. S. Steel
Kosice s.r.o. (USSK), the Slovak Republic steel operation, reported fourth
quarter 2000 segment income of $2 million, or $6 per ton, following its
acquisition by USX on November 24, 2000.
Fourth quarter 1999 segment income for Domestic Steel was $48 million, or
$17 per ton, which included unfavorable special items totaling $7 million pre-
tax.
Fourth quarter 2000 results were negatively impacted by significantly
reduced shipment levels and prices, inefficient operating rates due to lower
volumes, higher energy costs and severely limited coal mining operations due to
adverse geological conditions at two mines. Tubular shipments and prices
continued to benefit from strong energy markets.
Total shipments for Domestic Steel in fourth quarter 2000 were 2.3 million
net tons, down 19 percent from fourth quarter 1999 shipments of 2.9 million net
tons and the lowest level since the first quarter 1993. Total shipments for
USSK in the 38 days of operation under USX ownership in the fourth quarter 2000
were 317 thousand net tons.
Domestic raw steel capability utilization in the fourth quarter of 2000
was 75 percent, down from 97 percent in fourth quarter 1999. USSK raw steel
capability utilization in the period following the November 24,
-3-
2000 acquisition was 80 percent.
For the year 2000, U. S. Steel Group net income adjusted for special items
was $77 million, or 78 cents per diluted share, compared with $83 million, or 84
cents per diluted share in 1999. Revenues in 2000 were $6.1 billion, compared
with $5.5 billion in 1999.
For the year 2000, the U. S. Steel Group recorded a net loss of $21
million, or 33 cents per diluted share, which included special items with a net
unfavorable after-tax effect of $98 million or $1.11 per diluted share. In
addition to those items mentioned for the fourth quarter 2000, special items
also included other environmental and legal accruals and USX's share of
restructuring and impairment charges at Republic Technologies International, LLC
(Republic).
For the year 1999, U. S. Steel Group recorded net income of $44 million,
or 40 cents per diluted share, which included special items having a net
unfavorable after-tax effect of $39 million, or 44 cents per share.
Segment income in 2000 for Domestic Steel was $23 million, or $2 per ton,
on shipments of 10.8 million net tons, which included unfavorable pre-tax
special items totaling $151 million, or $14 per ton. Segment income in 1999 for
Domestic Steel was $91 million, or $9 per ton, on shipments of 10.6 million net
tons. These 1999 results included $24 million, or $2 per ton, of unfavorable
pre-tax special items. Domestic raw steel capability utilization in 2000 was 89
percent, down from 94 percent in 1999.
The decrease in the Domestic Steel segment income was the result of lower
sheet product shipment volumes, higher costs due to lower throughput, higher
energy prices and problems in coal operations.
Commenting on these results, Thomas J. Usher, USX Corporation
-4-
Board Chairman, said, "The U. S. Steel Group's results for the fourth quarter
were disappointing. The devastating combination of continued high steel import
levels and a slowing domestic economy resulted in significantly reduced order
levels, operating rates and shipments and sheet prices that were among the
lowest in the past twenty years. The increasing list of steel bankruptcy
filings and reports of tight liquidity among other steel competitors demonstrate
the severity of the steel crisis in this country."
Usher added, "Import levels in 2000 approached the record levels of 1998.
Due to the latest surge in imports, fourth quarter 2000 domestic raw steel
production declined 23 percent from the prior year's fourth quarter,
necessitating layoffs and idling of production facilities at a number of
locations."
Responding to the latest import crisis, U. S. Steel participated in
November with an industry group in filing trade cases against dumped and
subsidized imports of hot-rolled carbon steel from ll countries. In late
December, the U.S. International Trade Commission (ITC) issued a unanimous
preliminary determination that there is a reasonable indication that these
imports were materially injuring the domestic industry. This preliminary
determination is subject to further investigation and review by the ITC and the
U.S. Department of Commerce.
Regarding the coal mining problems, adverse geological conditions were
encountered during the fourth quarter at U. S. Steel Mining's coal mines in
Alabama and West Virginia. As a result, "force majeure" provisions in coal
supply contracts were exercised and, following a reassessment of long-term
prospects, asset impairments for both mines were recorded.
U. S. Steel's purchase of LTV Corporation's tin mill products
-5-
business has been delayed as a result of LTV's filing for Chapter ll
bankruptcy protection in late December. Assuming the bankruptcy court
approves this non-cash transaction, an orderly transition in ownership is
expected.
Looking ahead, Usher noted, "The USSK acquisition is a major step in our
globalization strategy. Many of our American customers are moving abroad, and a
number of them have already located facilities in Central Europe where demand
for consumer goods is increasing. Through USSK, we are now strategically
positioned to service the growing needs of these and other customers in this
region."
In addition, Usher said, "Entering 2001, the outlook is far from
promising, especially for the first quarter. Although we anticipate that first
quarter domestic shipments will be somewhat better than fourth quarter levels,
we expect that sheet and plate pricing, which declined markedly in the fourth
quarter, will continue to be depressed. Steel imports are continuing at high
levels across all product lines. Domestically, our order book continues to be
weak, the economy continues to soften and natural gas prices remain
extraordinarily high. We are optimistic, however, that USSK should have a
favorable impact on our 2001 results. Our tubular business is strong and, as
excess inventory levels for other products are drawn down, we expect to see
improvements in both shipments and prices as the year progresses."
For the full year 2001, domestic shipments are expected to be
approximately 11 million net tons, excluding any shipments from the potential
acquisition of LTV Tin. USSK shipments for the full year 2001 are expected to
be approximately 3.3 million to 3.6 million net tons.
*****
This release contains forward-looking statements with respect to
-6-
shipments, prices, the impact of USSK and the acquisition of LTV Corporation's
tin operations. Some factors, among others, that could affect first quarter and
full year 2001 shipments and prices include import levels, customer inventory
levels and U.S. economic performance. Some factors, among others, that could
affect full year 2001 shipments and the overall impact from USSK may be
unfavorable European economic conditions and currency exchange rate
fluctuations. One factor which could affect the acquisition of LTV
Corporation's tin operations is bankruptcy court approval. 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, 1999, and
subsequent Form 10-Q's and 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.
U. S. STEEL GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 2000 1999* 2000 1999*
- ------------------------------------------------------------------------------
REVENUES AND OTHER INCOME:
Revenues $1,417 $1,492 $6,090 $5,536
Loss from investees (21) (3) (8) (89)
Net gains on disposal of assets 12 12 46 21
Other income (loss) 5 (1) 4 2
------ ------ ------ ------
Total revenues and other income 1,413 1,500 6,132 5,470
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues (excludes items shown below) 1,422 1,360 5,656 5,084
Selling, general and administrative
expenses (credits) (47) (57) (223) (283)
Depreciation, depletion and amortization 138 76 360 304
Taxes other than income taxes 59 46 235 215
------ ------ ------ -----
Total costs and expenses 1,572 1,425 6,028 5,320
------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (159) 75 104 150
Net interest and other financial costs 30 26 105 74
------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSSES (189) 49 (1) 76
Provision (credit) for estimated income taxes (50) 15 20 25
------ ------ ------ ------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSSES (139) 34 (21) 51
Extraordinary losses on extinguishment of debt,
net of income tax - - - 7
------ ------ ------ ------
NET INCOME (LOSS) (139) 34 (21) 44
Dividends on preferred stock 2 2 8 9
------ ------ ------ ------
NET INCOME (LOSS) APPLICABLE TO STEEL STOCK $(141) $32 $(29) $35
====== ====== ====== ======
STEEL STOCK DATA:
Income (loss) before extraordinary losses $(141) $32 $(29) $42
- Per share - basic and diluted (1.59) .35 (.33) .48
Extraordinary losses, net of income tax - - - 7
- Per share - basic and diluted - - - .08
Net income (loss) $(141) $32 $(29) $35
- Per share - basic and diluted (1.59) .35 (.33) .40
Dividends paid per share .25 .25 1.00 1.00
Weighted average shares, in thousands
- Basic 88,788 88,419 88,613 88,392
- Diluted 88,788 88,428 88,613 88,396
*Certain amounts have been reclassified to conform to 2000
classifications.
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. In 1999, USX irrevocably deposited with a trustee the entire 5.5
million common shares it owned in RTI International Metals (RTI). The
deposit of the shares resulted in the satisfaction of USX's obligation
under its 6-3/4% Exchangeable Notes (indexed debt) due February 1,
2000. Under the terms of the indenture, the trustee exchanged one RTI
share for each note at maturity; therefore, none reverted back to USX.
As a result of the above transaction, USX recorded in the first
quarter of 1999 an extraordinary loss of $5 million, net of a $3
million income tax benefit, representing prepaid interest expense
and the write-off of unamortized debt issue costs, and a pretax
charge of $22 million, representing the difference between the
carrying value of the investment in RTI and the carrying value of
the indexed debt, which is included in net gains on disposal of
assets.
Additionally, a $13 million credit to adjust the indexed debt to
settlement value at March 31, 1999, is included in net interest
and other financial costs.
In December 1996, USX had issued the $117 million of notes indexed
to the common share price of RTI. At maturity, USX would have
been required to exchange the notes for shares of RTI common
stock, or redeem the notes for the equivalent amount of cash.
Since USX's investment in RTI was attributed to the U. S. Steel
Group, the indexed debt was also attributed to the U. S. Steel
Group. USX had a 26% investment in RTI and accounted for its
investment using the equity method of accounting.
Republic Technologies International, LLC, an equity method
affiliate of USX, recorded in the third quarter of 1999 an
extraordinary loss related to the early extinguishment of debt.
As a result, the U. S. Steel Group recorded an extraordinary loss
of $2 million, net of a $1 million income tax benefit,
representing its share of the extraordinary loss.
3. In August 1999, USX and Kobe Steel, Ltd. (Kobe Steel) completed a
transaction that combined the steelmaking and bar producing assets
of USS/Kobe Steel Company (USS/Kobe) with companies controlled by
Blackstone Capital Partners II. The combined entity was named
Republic Technologies International, LLC (Republic). As a result
of this transaction, the U. S. Steel Group recorded $47 million in
charges related to the impairment of the carrying value of its
investment in USS/Kobe and costs related to the formation of
Republic. These charges were included in loss from investees in
1999. In addition, USX made a $15 million equity investment in
Republic. USX owned 50% of USS/Kobe and now owns 16% of Republic.
USX accounts for its investment in Republic under the equity
method of accounting. The seamless pipe business of USS/Kobe was
excluded from this transaction. That business, now known as
Lorain Tubular Company LLC, is a wholly owned subsidiary of USX.
U. S. STEEL GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
4. In the fourth quarter 2000, the U. S. Steel Group adopted the
following accounting pronouncements primarily related to the
classification of items in the statement of operations. In
December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 (SAB 101) "Revenue Recognition
in Financial Statements," which summarizes the SEC staff's
interpretations of generally accepted accounting principles
related to revenue recognition and classification. During the
third quarter 2000, the Emerging Issues Task Force of the
Financial Accounting Standards Board (EITF) issued EITF Consensus
No. 99-19 "Reporting Revenue Gross as a Principal versus Net as an
Agent", which addresses whether certain cost items should be
reported as a reduction of revenue or as a component of cost of
sales, and EITF Consensus No. 00-10 "Accounting for Shipping and
Handling Fees and Costs," which addresses the classification of
costs incurred for shipping goods to customers. The adoption of
these new pronouncements had no net effect on the financial
position or results of operations of the U. S. Steel Group,
although they required reclassifications of certain amounts in the
statement of operations.
5. In November 2000, USX acquired U. S. Steel Kosice s.r.o. (USSK),
which is located in the Slovak Republic. USSK was formed to hold
the steel operations and related assets of VSZ a.s (VSZ), a
diversified Slovak corporation. The cash purchase price was $69
million. Additional payments to VSZ of not less than $25 million
and up to $75 million are contingent upon the future performance
of USSK. Additionally, $325 million of debt was included with the
acquisition. The acquisition was accounted for under the purchase
method of accounting. The 2000 results of operations include the
operations of USSK commencing November 24, 2000.
Prior to this transaction, USX and VSZ were equal partners in VSZ
U. S. Steel s.r.o. (VSZUSS), a tin mill products manufacturer.
The assets of USSK included VSZ's interest in VSZUSS. The
acquisition of the remaining interest in VSZUSS was accounted for
under the purchase method of accounting. Previously, USX had
accounted for its investment in VSZUSS under the equity method of
accounting.
U. S. STEEL GROUP OF USX CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 2000 1999 2000 1999
- --------------------------------------------------------------------------------
REVENUES AND OTHER INCOME $1,413 $1,500 $6,132 $5,470
INCOME (LOSS) FROM OPERATIONS
Domestic Steel(a) (b) (122) $48 $23 $91
U. S. Steel Kosice (c) 2 - 2 -
---- ---- ---- ----
Income from Reportable Segments (120) 48 25 91
Items not allocated to segments:
Net Pension Credits 67 42 266 228
Administrative Expenses (7) - (25) (17)
Cost related to former business activities (d) (28) (18) (91) (83)
Asset Impairments - Coal (71) - (71) -
Impairment of USX's investment in USS/Kobe
and costs related to the formation of
Republic (e) - 3 - (47)
Loss on settlement of indexed debt with
RTI International Metals, Inc. Stock - - - (22)
---- ---- ---- ----
Total U. S. Steel Group (159) 75 104 150
CAPITAL EXPENDITURES
Domestic Steel $106 $66 $239 $287
U. S. Steel Kosice 5 - 5 -
---- ---- ---- ----
Total $111 $66 $244 $287
OPERATING STATISTICS
Average steel price per ton: ($/net ton)
Domestic Steel $459 $418 $450 $420
U. S. Steel Kosice 269 - 269 -
Steel Shipments: (f)
Domestic Steel 2,315 2,865 10,756 10,629
U. S. Steel Kosice 317 - 317 -
---- ---- ---- ----
Total 2,632 2,865 11,073 10,629
Raw Steel-Production: (f)
Domestic Steel 2,424 3,131 11,362 12,032
U. S. Steel Kosice 382 - 382 -
---- ---- ---- ----
Total 2,806 3,131 11,744 12,032
Raw Steel-Capability Utilization: (g)
Domestic Steel 75.3% 97.1% 88.8% 94.0%
U. S. Steel Kosice 79.9% - 79.9% -
Iron ore shipments - Domestic Steel (f) 4,215 4,133 15,020 15,025
- ----------
(a) Results in the fourth quarter and year 2000 included $34
million to establish reserves against notes and receivables
from financially distressed steel companies and $21 million for
environmental accruals. Results for 2000 also included $10
million for USX's share of Republic's special charges and $15
million for certain other environmental and legal accruals.
Results in fourth quarter 1999 included equity investee
charges, which totaled $7 million unfavorable. In addition,
results in 1999 included $17 million unfavorable charges for
environmental and legal accruals.
(b) Includes the sale and domestic production of steel
products, coke and taconite pellets; domestic coal mining; the
management of mineral resources; engineering and consulting
services; and equity income from joint ventures and partially
owned companies. Also includes results of real estate
development and management.
(c) Includes the production and sale of steel products 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) For additional information on the impairment, see Note 3
to the U. S. Steel Group Financial Statements.
(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)
------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 2000 1999* 2000 1999*
- -----------------------------------------------------------------------------
REVENUES AND OTHER INCOME:
Revenues $10,274 $8,725 $40,487 $29,068
Dividend and investee income (loss) 18 8 99 (20)
Net gains (losses) on disposal of assets (868) 29 (739) 21
Gain on ownership change in Marathon Ashland
Petroleum LLC 3 6 12 17
Other income 10 10 42 33
------ ------ ------ ------
Total revenues and other income 9,437 8,778 39,901 29,119
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues (excludes items shown below) 7,930 6,711 31,043 21,679
Selling, general and administrative expenses 169 54 402 203
Depreciation, depletion and amortization 656 348 1,605 1,254
Taxes other than income taxes 1,211 1,164 4,861 4,433
Exploration expenses 96 76 238 238
Inventory market valuation credits - - - (551)
------ ------ ------ ------
Total costs and expenses 10,062 8,353 38,149 27,256
------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (625) 425 1,752 1,863
Net interest and other financial costs 74 96 341 362
Minority interest in income of Marathon Ashland
Petroleum LLC 125 42 498 447
------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSSES (824) 287 913 1,054
Provision (credit) for estimated income taxes (375) 82 502 349
------ ------ ------ ------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSSES (449) 205 411 705
Extraordinary losses on extinguishment of debt,
net of income tax - - - 7
------ ------ ------ ------
NET INCOME (LOSS) (449) 205 411 698
Dividends on preferred stock 2 2 8 9
------ ------ ------ ------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKS $(451) $203 $403 $689
====== ====== ====== ======
*Certain amounts have been reclassified to conform to 2000
classifications.
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
------------------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 2000 1999 2000 1999
- -----------------------------------------------------------------------------
APPLICABLE TO MARATHON STOCK:
Net income (loss) $(310) $171 $432 $654
- Per share - basic and diluted (1.00) .55 1.39 2.11
Dividends paid per share .23 .21 .88 .84
Weighted average shares, in thousands
- Basic 309,930 311,289 311,531 309,696
- Diluted 309,930 311,553 311,761 310,010
APPLICABLE TO STEEL STOCK:
Income (loss) before extraordinary losses $(141) $32 $(29) $42
- Per share - basic and diluted (1.59) .35 (.33) .48
Extraordinary losses, net of income tax - - - 7
- Per share - basic and diluted - - - .08
Net income (loss) $(141) $32 $(29) $35
- Per share - basic and diluted (1.59) .35 (.33) .40
Dividends paid per share .25 .25 1.00 1.00
Weighted average shares, in thousands
- Basic 88,788 88,419 88,613 88,392
- Diluted 88,788 88,428 88,613 88,396
The following notes are an integral part of this financial statement.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. When USX acquired Marathon in March 1982, crude oil and refined
product prices were at historically high levels. USX established
a new LIFO cost basis for Marathon's inventories by reference to
these prices.
Generally accepted accounting principles require that inventories
be reported at the lower of recorded cost or current market value.
Marathon has established an inventory market valuation (IMV)
reserve to reduce the cost basis of its inventories to current
market value. Quarterly adjustments to the IMV reserve result in
noncash charges or credits to income from operations. Decreases
in market prices below the cost basis result in charges to income
from operations. Once a reserve has been established, subsequent
increases in prices (up to the cost basis) result in credits to
income from operations.
The charges or credits to income resulting from IMV reserve
adjustments affect the comparability of financial results from
period to period. They also affect comparisons with other energy
companies, many of which do not have such adjustments. Therefore,
USX reports separately the effects of IMV reserve adjustments on
financial results. In management's opinion, the effects of such
adjustments should be considered separately when evaluating
operating performance.
2. In 1999, USX irrevocably deposited with a trustee the entire 5.5
million common shares it owned in RTI International Metals (RTI).
The deposit of the shares resulted in the satisfaction of USX's
obligation under its 6-3/4% Exchangeable Notes (indexed debt) due
February 1, 2000. Under the terms of the indenture, the trustee
exchanged one RTI share for each note at maturity; therefore, none
reverted back to USX.
As a result of the above transaction, USX recorded in the first
quarter of 1999 an extraordinary loss of $5 million, net of a $3
million income tax benefit, representing prepaid interest expense
and the write-off of unamortized debt issue costs, and a pretax
charge of $22 million, representing the difference between the
carrying value of the investment in RTI and the carrying value of
the indexed debt, which is included in net gains (losses) on
disposal of assets.
Additionally, a $13 million credit to adjust the indexed debt to
settlement value at March 31, 1999, is included in net interest
and other financial costs.
In December 1996, USX had issued the $117 million of notes indexed
to the common share price of RTI. At maturity, USX would have
been required to exchange the notes for shares of RTI common
stock, or redeem the notes for the equivalent amount of cash.
Since USX's investment in RTI was attributed to the U. S. Steel
Group, the indexed debt was also attributed to the U. S. Steel
Group. USX had a 26% investment in RTI and accounted for its
investment using the equity method of accounting.
Republic Technologies International, LLC, an equity method
affiliate of USX, recorded in the third quarter of 1999 an
extraordinary loss related to the early extinguishment of debt.
As a result, USX recorded an extraordinary loss of $2 million, net
of a $1 million income tax benefit, representing its share of the
extraordinary loss.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
3. In August 1999, USX and Kobe Steel, Ltd. (Kobe Steel) completed a
transaction that combined the steelmaking and bar producing assets
of USS/Kobe Steel Company (USS/Kobe) with companies controlled by
Blackstone Capital Partners II. The combined entity was named
Republic Technologies International, LLC (Republic). As a result
of this transaction, USX recorded $47 million in charges related
to the impairment of the carrying value of its investment in
USS/Kobe and costs related to the formation of Republic. These
charges were included in dividend and investee income (loss) in
1999. In addition, USX made a $15 million equity investment in
Republic. USX owned 50% of USS/Kobe and now owns 16% of Republic.
USX accounts for its investment in Republic under the equity
method of accounting. The seamless pipe business of USS/Kobe was
excluded from this transaction. That business, now known as
Lorain Tubular Company LLC, is a wholly owned subsidiary of USX.
4. In the fourth quarter 2000, Marathon exchanged its 37.5 percent
interest in Sakhalin Energy Investment Company Ltd. (Sakhalin
Energy) for certain interests in the UK Atlantic Margin area and
the U.S. Gulf of Mexico as well as reimbursement for all Sakhalin
project capital expenditures made in 2000. As a result of the
absence of future foreign source income from Sakhalin Energy, an
additional valuation allowance of $235 million to reduce deferred
federal tax benefits was recognized in the third quarter 2000.
5. In the fourth quarter 2000, USX adopted the following accounting
pronouncements primarily related to the classification of items in
the statement of operations. In December 1999, the Securities and
Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101
(SAB 101) "Revenue Recognition in Financial Statements," which
summarizes the SEC staff's interpretations of generally accepted
accounting principles related to revenue recognition and
classification. During the third quarter 2000, the Emerging
Issues Task Force of the Financial Accounting Standards Board
(EITF) issued EITF Consensus No. 99-19 "Reporting Revenue Gross as
a Principal versus Net as an Agent", which addresses whether
certain cost items should be reported as a reduction of revenue or
as a component of cost of sales, and EITF Consensus No. 00-10
"Accounting for Shipping and Handling Fees and Costs," which
addresses the classification of costs incurred for shipping goods
to customers. The adoption of these new pronouncements had no net
effect on the financial position or results of operations of USX,
although they required reclassifications of certain amounts in the
statement of operations.
6. In November 2000, USX acquired U. S. Steel Kosice s.r.o. (USSK),
which is located in the Slovak Republic. USSK was formed to hold
the steel operations and related assets of VSZ a.s (VSZ), a
diversified Slovak corporation. The cash purchase price was $69
million. Additional payments to VSZ of not less than $25 million
and up to $75 million are contingent upon the future performance
of USSK. Additionally, $325 million of debt was included with the
acquisition. The acquisition was accounted for under the purchase
method of accounting. The 2000 results of operations include the
operations of USSK commencing November 24, 2000.
Prior to this transaction, USX and VSZ were equal partners in VSZ
U. S. Steel s.r.o. (VSZUSS), a tin mill products manufacturer.
The assets of USSK included VSZ's interest in VSZUSS. The
acquisition of the remaining interest in VSZUSS was accounted for
under the purchase method of accounting. Previously, USX had
accounted for its investment in VSZUSS under the equity method of
accounting.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
7. In December 2000, Marathon and Kinder Morgan Energy Partners, L.P.
signed a definitive agreement to form a joint venture combining
certain of their oil and gas producing activities in the U.S.
Permian Basin, including Marathon's interest in the Yates Field.
This transaction will allow Marathon to expand its interests in
the Permian Basin and will improve access to materials for use in
enhanced recovery techniques in the Yates Field. The joint
venture named MKM Partners L.P., commenced operations in January
2001 and will be accounted for under the equity method of
accounting. Marathon recognized a pretax charge of $931 million
in the fourth quarter 2000, related to the joint venture
formation.