1
EXHIBIT 99.3
Contact: William E. Keslar
Don H. Herring
(412) 433-6870
FOR IMMEDIATE RELEASE
USX ANNOUNCES FOURTH QUARTER AND FULL YEAR
DELHI GROUP FINANCIAL RESULTS
PITTSBURGH, January 21, 1994 -- USX Corporation announced
that in 1993 many of Delhi Group's (NYSE:DGP) key performance
indicators, including systems throughput, NGL sales volumes,
capital expenditures, and dedicated reserve additions were at
their highest level since 1985. This translated into total year
1993 net income of $12.2 million, or $.86 per share, which
included an estimated net charge of $2.2 million for the
aftertax effect of remeasuring prior period tax liabilities
associated with the increase in the federal income tax rate,
certain asset sales, certain accrual reversals, and a tax refund.
This compares with 1992 pro forma income before the cumulative
effect of the change in accounting principle of $13.8 million or
$.98 per share, which included a net favorable aftertax effect of
$0.9 million related to the settlement of certain lawsuits and
third party disputes. Sales totaled $534.8 million in 1993, up
17% from $457.8 million in 1992.
For the fourth quarter 1993 net income was $2.1
million, or $.15 per share. Net income in the fourth quarter of
1992 was $3.1 million, or $.22 per share. Fourth quarter 1993
sales totaled $143.5 million, up 5% from the prior year.
2
Fourth quarter operating income for the Delhi Group
totaled $5.9 million, down 20% from the same quarter of 1992. The
benefits of lower operating and other expenses were more than
offset by lower average prices and volumes for natural gas
liquids (NGLs) and a decline in natural gas transportation
margins and throughput volumes. Due to the lower NGL prices in
the fourth quarter of 1993, Delhi chose not to fully process some
gas and this contributed to the decline in NGL sales volumes.
The fourth quarter 1993 gas sales margin was $27.7 million,
essentially unchanged from last year's fourth quarter, as the
benefit of increased gas sales throughput volumes was offset by
volatile gas prices in the spot market which caused a decline in
gas sales unit margins.
For the year 1993, Delhi Group operating income totaled
$35.6 million, up 9% from 1992. Operating income for 1993
included favorable effects of $1.8 million for the reversal of a
prior-period accrual related to a natural gas contract
settlement, $0.8 million related to gas imbalance settlements and
a net $0.6 million refund of prior years' taxes other than
income. Operating income in 1992 included favorable effects
totaling $1.5 million relating to the settlement of various
lawsuits and third-party disputes. Excluding the effects of
these items, 1993 operating income improved by $1.3 million
mainly due to increased gas sales margins and lower operating and
other expenses. NGL margins declined in 1993 from the prior year
as higher average natural gas prices, primarily in the first nine
months, led to increased feedstock costs for gas processing. In
addition, NGL prices trended downward with crude oil prices in
the last half of 1993, further depressing NGL margins.
3
USX Chairman Charles A. Corry stated, "Despite the lower
fourth quarter earnings, Delhi continues to benefit from an
aggressive expenditure program to connect dedicated reserves.
This is reflected in Delhi's increased 1993 throughput volumes
for both the quarter and the year. In 1993, Delhi increased its
capital expenditures by 60% to $42.6 million and added 382
billion cubic feet of new dedicated natural gas reserves, a 40%
increase in new additions over those added in 1992. Entering
1994, Delhi is well positioned to take advantage of favorable
economic, environmental and regulatory conditions currently
existing and developing in the natural gas industry."
During the fourth quarter, Delhi completed a
multi-pipeline interconnection and compression project in East
Texas. This project will increase marketing flexibility and
expand Delhi's access to interstate and intrastate pipelines. It
will also facilitate Delhi's ability to aggregate gas for
delivery to premium off-system markets now developing in the
Midwest and Northeast as a result of FERC Order 636. Also in the
fourth quarter, Delhi purchased a cryogenic gas processing plant
near their existing systems in South Texas. This acquisition
will enable Delhi to process surplus gas volumes now leaving the
system unprocessed and to increase pipeline capacity in the area.
Corry also noted, "Delhi remains committed to optimizing
profitability from existing assets. In the first quarter of
1994, we expect to complete a project in western Oklahoma which
includes installing compression, making new pipeline
interconnections with third parties and redesigning and moving an
idle processing plant. This project will expand
4
system and processing capacity and improve Delhi's access to
interstate markets."
The cumulative effect of adopting Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" in
1992 was reported as a favorable $17.9 million change in
accounting principle.
Delhi is an established natural gas merchant engaged in
the purchasing, processing, transporting and marketing of natural
gas. It operates an extensive pipeline systems of over 8,000
miles and has 22 gas processing plants, primarily in Texas and
Oklahoma.
* * * * * * * *
Supplemental statistics and condensed financial
statements for the Delhi Group and condensed consolidated
financial statements for USX Corporation are attached.
5
DELHI GROUP OF USX CORPORATION
CONDENSED STATEMENT OF OPERATIONS (Unaudited)
Fourth Quarter Year
Ended Ended
December 31 December 31
(In Millions Except Per Share Data) 1993 1992 1993 1992
- --------------------------------------------------------------------------------------
SALES................................................. $143.5 $136.9 $534.8 $457.8
Total operating costs................................. (137.6) (129.5) (499.2) (425.2)
------ ------ ------ ------
Operating income...................................... 5.9 7.4 35.6 32.6
Other income.......................................... .3 .4 5.2 1.7
Net interest and other financial costs................ (2.8) (2.6) (10.5) (4.6)
------ ------ ------ ------
TOTAL INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.......................... 3.4 5.2 30.3 29.7
Less provision for estimated U.S. income
taxes......................................... 1.3 2.1 18.1 11.1
------ ------ ------ ------
TOTAL INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE..................................... 2.1 3.1 12.2 18.6
Cumulative effect of change in
accounting principle.......................... - - - 17.9
------ ------ ------ ------
NET INCOME............................................ 2.1 3.1 12.2 $36.5
====== ====== ====== ======
Dividends on preferred stock.......................... - - (.1)
Net income applicable to Retained Interest............ (.7) (1.1) (4.3)
------ ------ ------
NET INCOME APPLICABLE TO DELHI
STOCK......................................... $ 1.4 $ 2.0 $ 7.8
====== ====== ======
Per common share data:
Weighted average shares, in thousands:
- Primary and fully diluted................... 9,155 9,001 9,067
Net income - primary and fully diluted........ $ .15 $ .22 $ .86
Dividends paid................................ .05 .05 .20
Pro forma income data:
Pro Forma
Total income before cumulative effect of ----------
change in accounting principle........ $ 13.8
Total income before cumulative effect of
change in accounting principle
applicable to outstanding Delhi Stock. 8.8
--Per share........................... .98
Average shares, in thousands.................. 9,000
<FN>
The following notes are an integral part of these financial statements.
6
DELHI GROUP OF USX CORPORATION
CONDENSED BALANCE SHEET (Unaudited)
December 31 December 31
(In Millions) 1993 1992 1993 1992
- ---------------------------------------------------------------------------------
ASSETS LIABILITIES AND
Cash and cash STOCKHOLDERS' EQUITY
equivalents........... $ 3.8 $ .1 Current liabilities... $102.4 $109.7
Receivables - net....... 24.2 12.2 Long-term debt........ 109.0 92.5
Inventories............. 9.6 8.4 Other liabilities..... 163.5 166.2
Other current assets.... 4.6 4.8
----- ----- ------ ------
Total current assets.. 42.2 25.5 Total liabilities 374.9 368.4
Property, plant and Preferred stock........ 2.5 2.5
equipment - net....... 521.8 516.6 Common stockholders'
Other assets............ 16.4 22.4 equity............... 203.0 193.6
----- ----- ------ ------
Total................ $580.4 $564.5 Total.............. $580.4 $564.5
===== ===== ====== ======
<FN>
Revised January 25, 1994 to reflect minor reclassifications.
The following notes are an integral part of these financial statements.
7
DELHI GROUP OF USX CORPORATION
SELECTED NOTES TO CONDENSED FINANCIAL STATEMENTS
On October 2, 1992, USX publicly sold 9,000,000 shares of a new class of common
stock, USX-Delhi Group Common Stock (Delhi Stock), which is intended to reflect
the performance of the Delhi Group. Beginning October 2, 1992, the condensed
financial statements of the Delhi Group include the results of operations and
financial position for the businesses of Delhi Gas Pipeline Corporation and
certain subsidiaries of USX, and a portion of the corporate assets, liabilities
and related transactions that are not se parately identified with ongoing
operating units of USX. Prior to October 2, 1992, the businesses of the Delhi
Group were included in the Marathon Group. These condensed financial
statements should be read in connection with the condensed consolidated
financial statements of USX.
The USX Board of Directors initially designated 14,000,000 shares of Delhi
Stock as the total number of shares of Delhi Stock which it deemed to represent
100% of the common stockholders' equity value of USX attributable to the Delhi
Group. The Delhi Fraction is the percentage interest in the Delhi Group
represented by the shares of Delhi Stock that are outstanding at any particular
time and, based on 9,282,870 outstanding shares as of December 31, 1993, is
approximately 66%. The Marathon Group financial statements reflect a Retained
Interest of approximately 34% in the Delhi Group at December 31, 1993.
Other income in 1993 included a pretax gain of $2.9 million from disposal of
assets. The disposal of assets included a pretax gain of $1.6 million from the
first quarter 1993 sale of a 25% interest in a natural gas transmission
partnership. The provision for estimated U.S. income taxes for the first
quarter of 1993 included an unfavorable tax effect associated with the sale of
the partnership interest, which resulted in a $1.3 million net loss on the
transaction.
The provision for estimated U.S. income taxes for interim periods is based on
tax rates and amounts which recognize management's best estimate of current and
deferred tax assets and liabilities in accordance with USX's tax allocation
policy. The 1993 U.S. income tax provision included a $4.1 million charge
associated with an increase in the federal income tax rate from 34% to 35%,
reflecting remeasurement of deferred income tax liabilities as of January 1,
1993.
In 1992, USX adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The cumulative effect of this change in
accounting principle increased first quarter 1992 net income of the Delhi Group
by $17.9 million.
The pro forma income data is based on the assumption that the capital structure
of the Delhi Group, determined as of June 30, 1992, was in effect as of January
1, 1992. The historical income before the cumulative effect of the change in
accounting principle has been adjusted to reflect the weighted average effects
of all USX financial activities assumed to be attributed to the Delhi Group and
the change in income taxes due to recognition of these adjustments. Pro forma
income before the cumulative effect of the change in accounting principle
applicable to outstanding Delhi Stock represents pro forma income before the
cumulative effect of the change in accounting principle less dividends on
attributed preferred stock and income applicable to the Retained Interest. The
pro forma income per share before the cumulative effect of the change in
accounting principle applicable to outstanding Delhi Stock is based on the
weighted average number of shares outstanding, which assumes the 9,000,000
shares initially sold were outstanding for the period.
8
DELHI GROUP OF USX CORPORATION
SELECTED NOTES TO CONDENSED FINANCIAL STATEMENTS
(continued)
Sales to one of Delhi's largest customers, SWEPCO, pursuant to one contract
expiring in April 1995 are at prices substantially above spot prices and, as a
result, this contract has accounted for more than 10% of Delhi's total gross
margin in each year subsequent to 1990. This contract is currently the subject
of litigation between SWEPCO and Delhi. SWEPCO's alleged damages, including
interest, could approximate $76.8 million through December 31, 1993, and could
increase by approximately $6.1million per quarter through April 1995. On
November 1, 1993, SWEPCO advised Delhi that, effective with payments due on or
after such date, SWEPCO would deposit to the custody of the Court cash amounts
it alleges to be overcharges for gas sold and delivered to SWEPCO under the
contract. The deposit of such amounts, which adversely affect cash flows, was
$3.6 million in the fourth quarter of 1993 and could approximate $4.9 million
per quarter thereafter. SWEPCO continues to pay Delhi for gas taken under the
contract at prices which reflect its interpretation of the contract. Delhi
continues to record the sales revenue associated with both the amounts
currently being paid and the amounts being deposited with the Court. An
adverse decision in this litigation could have a material adverse effect on
Delhi. Delhi continues to believe that it will prevail in this matter,
accordingly, no provision for loss has been established in this case. The
trial is scheduled to commence on March 14, 1994, and mediation efforts between
the parties are ongoing.
January 21, 1994
9
DELHI GROUP OF USX CORPORATION
SUPPLEMENTAL STATISTICS
($'s in Millions)
Fourth Quarter Year
Ended Ended
December 31 December 31
-------------- --------------
1993 1992 1993 1992
SALES $143.5 $136.9 $534.8 $457.8
- -----------------------------
GROSS MARGIN
- -----------------------------
Gas Sales Margin $ 27.7 $ 27.8 $104.5 $ 96.1
Transportation Margin 2.9 4.2 14.2 14.8
------ ------ ------ ------
Systems Margin 30.6 32.0 118.7 110.9
Gas Processing Margin .9 4.6 17.3 26.1
------ ------ ------ ------
Total Gross Margin $ 31.5 $ 36.6 $136.0 $137.0
OPERATING INCOME $ 5.9 $ 7.4 $ 35.6 $ 32.6
- -----------------------------
CAPITAL EXPENDITURES $ 21.6 $ 13.3 $ 42.6 $ 26.6
- -----------------------------
OPERATING STATISTICS
- -----------------------------
Natural Gas Throughput (A):
Natural Gas Sales 598.2 511.0 556.7 546.4
Transportation 288.2 316.7 322.1 282.6
------ ------ ------ ------
Systems Throughput 886.4 827.7 878.8 829.0
Partnerships - equity share 18.5 29.2 17.9 27.8
------ ------ ------ ------
Total Throughput 904.9 856.9 896.7 856.8
====== ====== ====== ======
Natural Gas Liquids Sales (B) 672.2 815.0 772.5 714.2
<FN>
(A) Millions of cubic feet per day
(B) Thousands of gallons per day
10
USX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Fourth Quarter Year
Ended Ended
December 31 December 31
(In Millions Except Per Share Data) 1993 1992* 1993 1992*
- ----------------------------------------------------------------------------------------
SALES................................................. $4,604 $4,575 $18,064 $17,813
Total operating costs................................. (4,576) (4,960) (18,008) (17,743)
------ ------ ------- -------
Operating income (loss)............................... 28 (385) 56 70
Other income (loss)................................... 102 (2) 257 (2)
Net interest and other financial costs................ (40) (116) (552) (257)
------ ------ ------- -------
TOTAL INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES......................... 90 (503) 239 (189)
Less provision (credit) for estimated
income taxes..................................
- United States............................... (12) (171) (156) (64)
- Foreign..................................... 65 11 84 35
------ ------ ------- -------
TOTAL INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLES.................................... 37 (343) (167) (170)
Cumulative effect of changes in
accounting principles......................... - - (92) (1,666)
------ ------ ------- -------
NET INCOME (LOSS)..................................... 37 (343) (259) (1,826)
Dividends on preferred stock.......................... (7) (2) (27) (9)
------ ------ ------- -------
NET INCOME (LOSS) APPLICABLE TO COMMON
STOCKS........................................ $ 30 $ (345) $ (286) $(1,835)
====== ====== ======= =======
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
December 31 December 31
(In Millions) 1993 1992 1993 1992
- ---------------------------------------------------------------------------------
ASSETS LIABILITIES AND
Cash and cash STOCKHOLDERS' EQUITY
equivalents.......... $ 268 $ 57 Current liabilities.. $ 3,334 $ 3,470
Receivables - net....... 932 924 Long-term debt........ 5,888 5,968
Inventories............. 1,626 1,930 Other liabilities..... 4,234 4,105
Other current assets.... 354 189
------ ------ ------ ------
Total current assets.. 3,180 3,100 Total liabilities 13,456 13,543
Property, plant and Preferred stock........ 112 105
equipment - net....... 11,603 11,759 Common stockholders'
Other assets............ 2,537 2,393 equity............... 3,752 3,604
------ ------ ------ ------
Total................ $17,320 $17,252 Total............. $17,320 $17,252
====== ====== ====== ======
<FN>
* Certain reclassifications of data have been made to conform to 1993
classifications.
The following notes are an integral part of these financial statements.
11
USX CORPORATION AND SUBSIDIARY COMPANIES
COMMON SHARE DATA (Unaudited)
Fourth Quarter Year
Ended Ended
December 31 December 31
(In Millions Except Per Share Data) 1993 1992 1993 1992
- -------------------------------------------------------------------------------------
Common share data - Marathon Stock
Total income (loss) before cumulative effect
of changes in accounting principles
applicable to Marathon Stock.................. $(90) $(121) $(12) $ 103
--Per share - primary and fully diluted....... (.31) (.42) (.04) .37
Cumulative effect of changes in accounting
principles.................................... - - (23) (331)
--Per share - primary and fully diluted....... - - (.08) (1.17)
Net income (loss) applicable to Marathon
Stock......................................... (90) (121) (35) (228)
--Per share - primary and fully diluted....... (.31) (.42) (.12) (.80)
Dividends paid per share...................... .17 .17 .68 1.22
Common share data - Steel Stock
Total income (loss) before cumulative effect
of changes in accounting principles
applicable to Steel Stock..................... $119 $(226) $(190) $ (274)
--Per share - primary......................... 1.67 (3.80) (2.96) (4.92)
- fully diluted............................... 1.53 (3.80) (2.96) (4.92)
Cumulative effect of changes in accounting
principles.................................... - - (69) (1,335)
--Per share - primary......................... - - (1.08) (23.93)
- fully diluted............................... - - (1.08) (23.93)
Net income (loss) applicable to Steel
Stock......................................... 119 (226) (259) (1,609)
--Per share - primary................. 1.67 (3.80) (4.04) (28.85)
- fully diluted............................... 1.53 (3.80) (4.04) (28.85)
Dividends paid per share...................... .25 .25 1.00 1.00
Common share data - Delhi Stock
Net income applicable to outstanding Delhi
Stock...................................... $1.4 $2.0 $7.8
--Per share - primary and fully diluted ... .15 .22 .86
Dividends paid per share................... .05 .05 .20
<FN>
The following notes are an integral part of these financial statements.
12
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial information for the Marathon Group, the U. S. Steel Group and the
Delhi Group, taken together, includes all accounts which comprise the
corresponding consolidated financial information for USX.
USX adopted two new accounting standards in the fourth quarter of 1993 which
resulted in restatement of the first nine months of 1993. Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," requires employers to recognize the obligation to
provide postemployment benefits on an accrual basis if certain conditions are
met. The cumulative effect of adopting this standard is reported as a change
in accounting principle effective January 1, 1993, and decreased net income by
$86 million, net of $50 million income tax effect. The increase to 1993
operating costs as a result of adopting this standard was $23 million.
The second accounting standard, Emerging Issues Task Force (EITF) Consensus
No.93-14, "Accounting for Multiple-Year Retrospectively Rated Insurance
Contracts," requires accrual of retrospective premium adjustments when the
insured has an obligation to pay cash to the insurer that would not have been
required absent experience under the contract. The cumulative effect of this
change in accounting principle determined as of January 1, 1993, decreased net
income by $6 million, net of $3 million income tax effect.
In 1992, USX adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
(SFAS No.106), and Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109). The cumulative effect of these
changes in accounting principles decreased first quarter 1992 net income by
$1.306 billion, net of $764 million income tax effect, for SFAS No. 106 and
$360 million for SFAS No.109.
Pretax income (loss) in 1993 included a $506 million charge ($127 million
credit in the fourth quarter) related to an adverse decision in the Lower Lake
Erie Iron Ore Antitrust Litigation against a former USX subsidiary, the
Bessemer & Lake Erie Railroad. Charges of $342 million were included in
operating costs ($96 million credit in the fourth quarter) and $164 million
included in net interest and other financial costs ($31 million credit in the
fourth quarter). The effect on 1993 net income (loss) was $325 million
unfavorable ($5.04 per share of Steel Stock) for 1993.
Changes in the inventory market valuation reserve resulted in a $241 million
charge against operating income in 1993 ($187 million charge in the fourth
quarter) and a $62 million credit to operating income in 1992 ($98 million
charge in the fourth quarter).
Operating income in the fourth quarter of 1993 included a restructuring charge
of $42 million for the planned permanent closure of a Pennsylvania coal mine.
In 1992, operating income included restructuring charges of $125 million ($10
million in the fourth quarter).
Pretax income (loss) in 1992 included the settlement of a production tax refund
claim for the years 1982 through 1985. The refund resulted in credits to
operating income of $119 million and interest income of $177 million in the
second quarter of 1992.
13
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Other income in 1993 included pretax gains of $253 million from disposal of
assets ($102 million in the fourth quarter), primarily related to the sale of
the Cumberland Coal Mine, an investment in an insurance company and the fourth
quarter gain from the realization of proceeds from a subordinated note related
to the 1988 sale of Transtar, Inc. The collection of the Transtar note also
resulted in $37 million of interest income. Other income in 1992 included a
$19 million charge for impairment of a 25% interest in a natural gas
transmission partnership.
The provision for estimated U.S. and foreign income taxes for interim periods
is based on tax rates and amounts which recognize management's best estimate of
current and deferred tax assets and liabilities. The 1993 U.S. income tax
provision included a credit of $64 million related to recognition of additional
future U.S. income tax benefits for deferred foreign income taxes. This
favorable adjustment results from USX's ability to elect to credit, rather than
deduct, foreign income taxes for U.S. federal income tax purposes in future
periods. The U.S. income tax provision for 1993 also included a $24 million
charge associated with an increase in the federal income tax rate from 34% to
35%, reflecting remeasurement of deferred income tax liabilities as of January
1, 1993. Adjustments to the fourth quarter 1993 tax provision relate primarily
to prior years' Internal Revenue Service examinations and the establishment of
valuation allowances for certain tax credits which USX is not expected to be
able to fully utilize.
In 1993, USX sold 10,000,000 shares of Steel Stock to the public for net
proceeds of $350 million.
In 1993, USX also sold 6,900,000 shares of 6.50% Cumulative Convertible
Preferred Stock (stated value of $1.00 per share; initial liquidation
preference of $50 per share) to the public for net proceeds of $336 million.
The Convertible Preferred Stock is convertible at any time into shares of Steel
Stock at a conversion price of $46.125 per share of Steel Stock.
On October 2, 1992, USX sold the initial 9,000,000 shares of Delhi Stock to the
public. Net income and dividends per share applicable to outstanding Delhi
Stock are presented for the periods subsequent to October 2, 1992.
The numbers of shares used in the computation of earnings per share were as
follows:
(In Thousands)
--------------------------------------
Fourth Quarter Ended Year Ended
December 31 December 31
-------------------- ----------------
1993 1992 1993 1992
---- ---- ---- ----
Marathon Stock - primary.......... 286,582 286,276 286,594 283,494
- fully diluted.... 286,582 286,276 286,594 283,495
Steel Stock - primary............. 70,311 59,551 64,370 55,764
- fully diluted... 81,233 59,551 64,370 55,764
Delhi Stock - primary and fully
- diluted........... 9,155 9,001 9,067
January 21, 1994