Contact: William E. Keslar
Don H. Herring
(412) 433-6870
FOR IMMEDIATE RELEASE
USX CORPORATION REPORTS LOWER THIRD QUARTER
FINANCIAL RESULTS FOR THE U. S. STEEL GROUP DUE TO IMPORT
SURGE
Earnings Highlights
(Dollars in millions except per diluted share data)
3Q 1998 3Q 1997
Net income adjusted for special items $58 $100
- per diluted share $0.63 $1.08
Net income $65 $ 116
Net income - per diluted share $0.71 $1.25
Revenues $1,497 $1,735
PITTSBURGH, October 22, 1998 -- Impacted by an
unprecedented surge in imports, weak tubular markets and
effects of the General Motors strike, USX-U. S. Steel Group
(NYSE: X) reported third quarter 1998 adjusted net income of
$58 million, or 63 cents per diluted share, on revenues of
$1.5 billion. Third quarter 1997 adjusted net income was
$100 million, or $1.08 per diluted share on revenues of $1.7
billion.
U. S. Steel Group recorded third quarter 1998 net
income of $65 million, or 71 cents per diluted share,
including a $7 million aftertax reduction to interest expense
as a result of adjusting the carrying value of indexed debt
(see note 2 to the attached U. S. Steel Group Statement of
Operations). Third quarter 1997 net income was $116 million,
or $1.25 per diluted share, which included $16 million
(aftertax) in insurance proceeds related to the 1996 hearth
breakout at the Gary (Ind.) Works No. 13 blast furnace.
Income from operations in the third quarter was $105
million, or $41 per ton, on shipments of 2.6 million net
tons. Income from operations in the third quarter 1997 was
$197 million, or $69 per ton, which included $25 million in
insurance proceeds related to the Gary Works No. 13 blast
furnace. Shipments were 2.9 million net tons in third
quarter 1997.
Commenting on the latest quarter's results, USX Board
Chairman Thomas J. Usher said, "After achieving our best year
ever in 1997 and a solid first half this year, the positive
momentum we had built has been interrupted by record volumes
of foreign steel imports at predatory prices, in clear
violation of our trade laws. This has resulted in lower
shipment levels, lower average steel product prices and less
efficient operating levels." The surge in imports
contributed to third quarter 1998 raw steel capability
utilization falling to 84.6 percent from 90.4 percent in
third quarter 1997.
In response to the difficult market conditions,
U. S. Steel Group has curtailed its production operations by
about 15 percent. "Actions taken to date have included
keeping Gary Works No. 6 blast furnace out of service even
though a scheduled reline was completed in mid-August," added
Usher. "We also have cut back raw steel production at our
Mon Valley Works and Fairfield Works, suspended one of
Minntac's five taconite pellet production lines in Minnesota,
and taken the Fairfield pipe mill down for several multiple-
week periods."
In an attempt to stem the tide of imports, U. S. Steel
joined with 11 other producers and the United Steelworkers of
America on September 30, 1998 to file trade cases against
Japan, Russia and Brazil. These filings document that
millions of tons of unfairly traded hot-rolled carbon sheet
products have caused serious injury to the domestic steel
industry through rapidly falling prices and lost business.
Information is continuing to be evaluated and the filing of
additional trade cases is anticipated.
During the quarter, U. S. Steel Clairton Works became
the first plant in the domestic steel or coking industries to
achieve ISO 14001 certification -- the global benchmark for
environmental management systems. "The hard work and
dedication of our people to sound environmental performance,
coupled with substantial capital investments by the company,
have made Clairton the industry leader in productivity,
efficiency and environmental excellence," said Usher.
******
Statements of Operation and Supplemental Statistics for
the U. S. Steel Group and a Consolidated Statement of Operations
for USX Corporation are attached.
For more information on USX Corporation and U. S. Steel
Group, visit our websites at www.usx.com or www.ussteel.com.
-o0o-
U. S. STEEL GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
Third Quarter Nine Months
Ended Ended
September 30 September 30
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- -------------------------------------------------------------------------------
REVENUES $1,497 $1,735 $4,926 $5,103
COSTS AND EXPENSES:
Cost of sales (excludes items shown below) 1,312 1,433 4,203 4,275
Selling, general and administrative
expenses (credits) (51) (30) (150) (100)
Depreciation, depletion and amortization 71 72 220 225
Taxes other than income taxes 60 63 169 182
------ ------ ------ ------
Total costs and expenses 1,392 1,538 4,442 4,582
------ ------ ------ ------
INCOME FROM OPERATIONS 105 197 484 521
Net interest and other financial costs 10 22 60 70
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 95 175 424 451
Provision for estimated income taxes 30 59 136 151
------ ------ ------ ------
NET INCOME 65 116 288 300
Noncash credit from exchange of preferred stock - - - 10
Dividends on preferred stock (2) (2) (7) (10)
------ ------ ------ ------
NET INCOME APPLICABLE TO STEEL STOCK $63 $114 $281 $300
====== ====== ====== ======
STEEL STOCK DATA:
Net income per share
- Basic $.72 $1.32 $3.22 $3.50
- Diluted .71 1.25 3.11 3.24
Dividends paid per share .25 .25 .75 .75
Weighted average shares, in thousands
- Basic 88,099 85,770 87,223 85,463
- Diluted 92,359 93,952 94,717 94,176
<FN>
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 December 1996, USX issued $117 million of debt (notes) indexed
to the common stock price of RTI International Metals, Inc. (RTI)
(formerly RMI Titanium Company). At maturity in February 2000, USX
must exchange these notes for shares of RTI common stock, or redeem
the notes for the equivalent amount of cash. Since USX's
investment in RTI is attributed to the U. S. Steel Group, the
indexed debt is also attributed to the U. S. Steel Group.
Generally accepted accounting principles require that indexed debt
be reported at the settlement value. Quarterly adjustments to the
carrying value of this indexed debt result in noncash charges or
credits to interest and other financial costs.
Net interest and other financial costs included a credit of $11
million and $7 million in the third quarter and nine months of
1998, respectively, and a credit of $6 million in the 1997 nine
months, as a result of the quarterly adjustments in the carrying
value of indexed debt. There was no adjustment in the third
quarter of 1997.
USX holds a 27% interest in RTI and accounts for this investment
under the equity method of accounting. Changes in the market value
of USX's investment in RTI generally offset changes in the
settlement value of the indexed debt. However, under the equity
method of accounting, USX cannot recognize in income these
corresponding changes in the market value of its investment in RTI.
Such changes will be realized upon disposition of this investment.
The charges or credits to income resulting from indexed debt
adjustments affect the comparability of financial results from
period to period. Therefore, USX discusses separately the effects
of indexed debt adjustments on financial results. In management's
opinion, the effects of such adjustments should be considered
separately when evaluating financial performance.
U.S. STEEL GROUP OF USX CORPORATION
SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------
(Dollars in millions)
Third Quarter Nine Months
Ended Ended
September 30 September 30
1998 1997(e) 1998 1997(e)
------ ------ ------ ------
REVENUES $1,497 $1,735 $4,926 $5,103
INCOME FROM OPERATIONS
Steel and Related Businesses (a) $32 $140 $235 $354
Steel and Related-Equity Affiliates - 8 29 29
---- ---- ---- ----
Subtotal - Steel & Related $32 $148 $264 $383
Administrative and Other (b) 73 49 220 138
---- ---- ---- ----
Total U. S. Steel Group $105 $197 $484 $521
CAPITAL EXPENDITURES $92 $59 $228 $176
OPERATING STATISTICS (Steel & Related Businesses)
Steel Shipments (c) 2,554 2,861 8,344 8,670
Raw Steel-Production (c) 2,729 2,915 8,774 9,157
Raw Steel-Capability Utilization (d) 84.6% 90.4% 91.6% 95.6%
- ------------
<FN>
(a) Includes the production and sale of steel products, coke
and taconite pellets; domestic coal mining; the management of
mineral resources; and engineering and consulting services.
(b) Includes pension credits, other postretirement benefit
costs and certain other expenses principally attributable to
former business units of the U. S. Steel Group. Also includes
results of real estate development and management, and leasing
and financing activities and equity income from RTI
International Metals, Inc.
(c) Thousands of net tons.
(d) Based on annual raw steel production capability of 12.8
million tons.
(e) Certain 1997 amounts have been reclassified to conform to
1998 classifications.
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
------------------------------------------------
Third Quarter Nine Months
Ended Ended
September 30 September 30
(Dollars in millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
REVENUES $7,156 $5,657 $21,635 $16,854
COSTS AND EXPENSES:
Cost of sales (excludes items shown below) 5,297 3,934 15,765 11,952
Selling, general and administrative expenses 81 66 233 163
Depreciation, depletion and amortization 293 235 921 722
Taxes other than income taxes 1,069 851 2,937 2,392
Exploration expenses 46 55 203 129
Inventory market valuation charges (credits) 50 (41) 22 137
------ ------ ------ ------
Total costs and expenses 6,836 5,100 20,081 15,495
------ ------ ------ ------
INCOME FROM OPERATIONS 320 557 1,554 1,359
Net interest and other financial costs 73 86 226 272
Minority interest in income of Marathon Ashland
Petroleum LLC 70 - 282 -
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 177 471 1,046 1,087
Provision for estimated income taxes 61 163 362 369
------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS 116 308 684 718
LOSS FROM DISCONTINUED OPERATIONS (net of
income tax) - (1) - (1)
------ ------ ------ ------
NET INCOME 116 307 684 717
Noncash credit from exchange of preferred stock - - - 10
Dividends on preferred stock (2) (2) (7) (10)
------ ------ ------ ------
NET INCOME APPLICABLE TO COMMON STOCKS $114 $305 $677 $717
====== ====== ====== ======
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
------------------------------------------------------------
Third Quarter Nine Months
Ended Ended
September 30 September 30
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
APPLICABLE TO MARATHON STOCK:
Net income $51 $192 $396 $418
- Per share - basic .18 .67 1.37 1.45
- diluted .17 .66 1.36 1.44
Dividends paid per share .21 .19 .63 .57
Weighted average shares, in thousands
- Basic 291,320 288,095 289,928 287,853
- Diluted 291,803 291,857 290,528 294,090
APPLICABLE TO STEEL STOCK:
Net income $63 $114 $281 $300
- Per share - basic .72 1.32 3.22 3.50
- diluted .71 1.25 3.11 3.24
Dividends paid per share .25 .25 .75 .75
Weighted average shares, in thousands
- Basic 88,099 85,770 87,223 85,463
- Diluted 92,359 93,952 94,717 94,176
<FN>
The following notes are an integral part of this financial statement.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. In August 1998, Marathon Oil Company (Marathon) acquired Tarragon Oil and
Gas Limited (Tarragon), a Canadian oil and gas exploration and production
company, for $1.1 billion. Securityholders of Tarragon received, at their
election, Cdn$14.25 for each Tarragon share, or the economic equivalent in
Exchangeable Shares of an indirect Canadian subsidiary of Marathon, which
are exchangeable solely on a one-for-one basis into USX-Marathon Group
Common Stock. The purchase price of $1.1 billion included cash payments to
Tarragon securityholders of $670 million, issuance of approximately 878,000
Exchangeable Shares valued at $29 million and the assumption of $345 million
in debt. USX accounted for the acquisition using the purchase method of
accounting. Tarragon operations have been included in USX's results of
operations commencing August 12, 1998.
During 1997, Marathon and Ashland Inc. (Ashland) agreed to combine the major
elements of their refining, marketing and transportation (RM&T) operations.
On January 1, 1998, Marathon transferred certain RM&T net assets to Marathon
Ashland Petroleum LLC (MAP), a new consolidated subsidiary. Also on January
1, 1998, Marathon acquired certain RM&T net assets from Ashland in exchange
for a 38% interest in MAP. The acquisition was accounted for under the
purchase method of accounting. The purchase price was determined to be
$1.9 billion, based upon an external valuation. The change in Marathon's
ownership interest in MAP resulted in a gain of $245 million, which is
included in the first nine months of 1998 revenues.
2. Effective October 31, 1997, USX sold its stock in Delhi Gas Pipeline
Corporation and other subsidiaries of USX that comprised all of the Delhi
Group. The 1997 financial results of the Delhi Group have been reclassified
as discontinued operations in the Consolidated Statement of Operations.
3. 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.
When USX acquired the crude oil and refined product inventories associated
with Ashland's RM&T operations in January 1998, a new cost basis was
established for those inventories. The acquisition cost of these
inventories lowered the overall average cost of the combined RM&T
inventories; as a result, the price threshold at which an IMV reserve will
be recorded has also been lowered. This acquisition resulted in a one-time
reduction in the IMV reserve, yielding a net favorable IMV reserve
adjustment in the first quarter of 1998.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
4. In December 1996, USX issued $117 million of debt (notes) indexed to the
common stock price of RTI International Metals, Inc. (RTI) (formerly RMI
Titanium Company). At maturity in February 2000, USX must exchange these
notes for shares of RTI common stock, or redeem the notes for the equivalent
amount of cash. Since USX's investment in RTI is attributed to the U. S.
Steel Group, the indexed debt is also attributed to the U. S. Steel Group.
Generally accepted accounting principles require that indexed debt be
reported at the settlement value. Quarterly adjustments to the carrying
value of this indexed debt result in noncash charges or credits to interest
and other financial costs.
Net interest and other financial costs included a credit of $11 million and
$7 million in the third quarter and nine months of 1998, respectively, and a
credit of $6 million in the 1997 nine months, as a result of the quarterly
adjustments in the carrying value of indexed debt. There was no adjustment
in the third quarter of 1997.
USX holds a 27% interest in RTI and accounts for this investment under the
equity method of accounting. Changes in the market value of USX's
investment in RTI generally offset changes in the settlement value of the
indexed debt. However, under the equity method of accounting, USX cannot
recognize in income these corresponding changes in the market value of its
investment in RTI. Such changes will be realized upon disposition of this
investment.
The charges or credits to income resulting from indexed debt adjustments
affect the comparability of financial results from period to period.
Therefore, USX discusses separately the effects of indexed debt adjustments
on financial results. In management's opinion, the effects of such
adjustments should be considered separately when evaluating financial
performance.