United States Steel Corporation Reports 2007 Third Quarter Results
PITTSBURGH, Oct. 30 /PRNewswire-FirstCall/ --
Earnings Highlights
3Q 2007 2Q 2007 3Q 2006
(Dollars in millions except per share data)
Net sales $4,354 $4,228 $4,106
Segment income from operations
Flat-rolled $170 $92 $230
U. S. Steel Europe 152 244 219
Tubular 74 97 164
Other Businesses 37 1 39
Total segment income from operations $433 $434 $652
Retiree benefit expenses (46) (43) (70)
Other items not allocated to segments (27) - (21)
Income from operations $360 $391 $561
Net interest and other financial costs 22 34 7
Income tax provision 68 53 136
Net income $269 $302 $417
-- Per basic share $2.28 $2.55 $3.44
-- Per diluted share $2.27 $2.54 $3.42
United States Steel Corporation (NYSE: X) reported third quarter 2007 net
income of $269 million, or $2.27 per diluted share, compared to second quarter
2007 net income of $302 million, or $2.54 per diluted share, and third quarter
2006 net income of $417 million, or $3.42 per diluted share.
Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "We
had a good quarter as each of our segments effectively responded to diverse
challenges, including general economic concerns that affected our major markets.
We made good progress in implementing a unified business model for our Tubular
segment and are realizing synergies from the Lone Star acquisition."
The company reported third quarter 2007 income from operations of $360
million, compared with income from operations of $391 million in the second
quarter of 2007 and $561 million in the third quarter of 2006.
Other items not allocated to segments in the third quarter of 2007 consisted
of a $27 million pre-tax charge related to inventory acquired in the Lone Star
acquisition. The tax provision included several discrete charges totaling $11
million. These charges and the item not allocated to segments reduced third
quarter 2007 net income by $28 million, or 23 cents per diluted share. In the
second quarter of 2007, net interest and other financial costs included a $23
million pre-tax charge related to the early redemption of our 9.75% Senior Notes
due 2010. This charge reduced net income by $14 million or 12 cents per diluted
share. Other items not allocated to segments in the third quarter of 2006
reduced net income by $21 million, or 17 cents per diluted share, and consisted
of employee severance and benefit charges for a workforce reduction of over 20
percent at our Serbian operations.
We repurchased 285,000 shares of common stock for $28 million during the
third quarter.
Reportable Segments and Other Businesses
Management believes segment income from operations is a key measure in
evaluating company performance. U. S. Steel's reportable segments and Other
Businesses reported segment income from operations of $433 million, or $78 per
ton, in the third quarter of 2007, compared with $434 million, or $79 per ton,
in the second quarter of 2007 and $652 million, or $117 per ton, in the third
quarter of 2006.
Flat-rolled income from operations improved for the third consecutive
quarter, despite a $9 per ton decrease in average realized prices and higher raw
material costs compared to the second quarter. The improved results primarily
reflected higher operating rates including hot rolled band shipments to support
Tubular, and lower outage and energy costs.
The decrease in European operating results was due primarily to lower
shipments related to outages, increased raw material costs and higher unit costs
resulting from lower raw steel capability utilization.
Tubular operating results declined due mainly to lower prices and the
effects of integrating Lone Star into the U. S. Steel supply chain and
establishing our unified business model. Distributor inventories and imports
remained high.
Results for Other Businesses improved from the second quarter largely as a
result of lower outage costs at iron ore operations.
Outlook
Commenting on U. S. Steel's outlook, Surma said, "We expect a decline in
overall results for the fourth quarter mainly due to normal seasonal effects and
several scheduled blast furnace outages. North American flat-rolled inventories
and imports are at relatively low levels and over time the weaker U.S. currency
should favor many of our steel-consuming customers. In Europe, steel consumption
remains healthy; however, high imports, particularly from China, and high
service center inventories are resulting in some pressure on spot prices and
order rates."
For Flat-rolled, fourth quarter results are expected to decrease from the
third quarter due primarily to lower shipments and higher raw material, outage
and modernization-related costs. Prices are expected to remain in line with the
third quarter.
Fourth quarter results are expected to decrease for U. S. Steel Europe
(USSE). Prices and shipments are expected to remain comparable to the third
quarter levels and costs are expected to increase slightly. Two planned blast
furnace outages will continue to limit raw steel production.
In conjunction with efforts to increase productivity, we are commencing a
voluntary early retirement program at U. S. Steel Kosice (USSK), which we
anticipate will generate substantial future cost savings. We will not know the
employee response to this program and the amount of the resulting fourth quarter
charge until later this year.
Fourth quarter results for Tubular are expected to be consistent with third
quarter results as average realized prices and costs are expected to improve and
shipments should decrease, due primarily to continued high inventory levels and
year-end seasonal effects.
Concerning Stelco, the Stelco shareholders have approved the transaction,
required regulatory approvals have been obtained, and we expect to complete this
transaction and commence the integration later this week. Results for Stelco
will be included in our Flat-rolled segment as of the date of the acquisition,
and the above fourth quarter outlook does not include the Stelco operations.
This release contains forward-looking statements with respect to the
acquisition of Stelco, market conditions, operating costs, shipments, prices and
a voluntary early retirement program at USSK. Risks and uncertainties regarding
the closing of the Stelco transaction include the approval of the Plan of
Arrangement by the Ontario Superior Court of Justice. Some factors, among
others, that could affect market conditions, costs, shipments and prices for
both domestic operations and USSE include global product demand, prices and mix;
global and company steel production levels; plant operating performance; the
timing and completion of facility projects; natural gas and electricity prices
and usage; raw materials and transportation availability and prices; the impact
of fixed prices in energy and raw materials contracts (many of which have terms
of one year or longer) as compared to shorter-term contracts and spot prices of
steel products; changes in environmental, tax and other laws; employee strikes;
energy outages or curtailments; and 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.
Economic conditions and political factors in Europe that may affect USSE's
results include, but are not limited to, taxation, nationalization, inflation,
currency fluctuations, increased regulation, export quotas, tariffs, and other
protectionist measures. Factors that may affect the cost savings expected to
result from the early retirement program at USSK include employee response to
the program. 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 the Form 10-K of U. S. Steel for the year ended
December 31, 2006, and in subsequent filings for U. S. Steel.
A Statement of Operations (Unaudited), Cash Flow Statement (Unaudited),
Condensed 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 web site, http://www.ussteel.com, and click on the
"Investors" button.
For more information on U. S. Steel, visit its web site at
http://www.ussteel.com.
UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
Quarter Ended Nine Months Ended
------------------------------ --------------------
Sept. 30 June 30 Sept. 30 Sept. 30
(Dollars in millions) 2007 2007 2006 2007 2006
--------------------------------------------------------------------------
NET SALES $4,354 $4,228 $4,106 $12,338 $11,941
OPERATING EXPENSES
(INCOME):
Cost of sales
(excludes items
shown below) 3,749 3,595 3,308 10,523 9,745
Selling, general and
administrative
expenses 134 138 144 411 458
Depreciation, depletion
and amortization 124 118 113 353 339
Income from investees (7) (10) (19) (19) (39)
Net gains on disposal
of assets (7) (3) - (20) (2)
Other income, net 1 (1) (1) (7) (4)
----- ----- ----- ------ ------
Total operating
expenses 3,994 3,837 3,545 11,241 10,497
----- ----- ----- ------ ------
INCOME FROM
OPERATIONS 360 391 561 1,097 1,444
Net interest and
other financial
costs 22 34 7 61 37
----- ----- ----- ------ ------
INCOME BEFORE INCOME
TAXES AND MINORITY
INTERESTS 338 357 554 1,036 1,407
Income tax provision 68 53 136 187 317
Minority interests 1 2 1 5 13
----- ----- ----- ------ ------
NET INCOME 269 302 417 844 1,077
Dividends on
preferred stock - - - - (8)
----- ----- ----- ------ ------
NET INCOME
APPLICABLE TO
COMMON STOCK $269 $302 $417 $844 $1,069
===== ===== ===== ====== ======
COMMON STOCK DATA:
--------------------------------------------------------------------------
Net income per share:
-- Basic $2.28 $2.55 $3.44 $7.15 $9.39
-- Diluted $2.27 $2.54 $3.42 $7.10 $8.67
Weighted average
shares, in
thousands
-- Basic 118,086 118,221 121,270 118,183 113,764
-- Diluted 118,755 118,891 121,964 118,896 124,226
Dividends paid
per common share $.20 $.20 $.15 $.60 $.40
UNITED STATES STEEL CORPORATION
CASH FLOW STATEMENT (Unaudited)
------------------------------------
Nine Months Ended
September 30
----------------------
(Dollars in millions) 2007 2006
--------------------------------------------------------------------------
Cash provided from operating activities:
Net income $844 $1,077
Depreciation, depletion and amortization 353 339
Pensions and other postretirement benefits (182) (199)
Deferred income taxes 113 124
Net gains on disposal of assets (20) (2)
Changes in: Current receivables (300) (335)
Inventories 243 (180)
Current accounts payable and
accrued expenses 216 211
Other operating activities 87 -
------ ------
Total 1,354 1,035
------ ------
Cash used in investing activities:
Capital expenditures (460) (397)
Acquisition of Lone Star Technologies, Inc. (1,990) -
Disposal of assets 27 6
Other investing activities 2 6
------ ------
Total (2,421) (385)
------ ------
Cash provided from (used in) financing activities:
Issuance of long-term debt 1,583 -
Repayment of long-term debt (458) (277)
Common stock issued 15 16
Common stock repurchased (87) (396)
Dividends paid (71) (54)
Change in bank checks outstanding 61 5
Other financing activities (1) (13)
------ ------
Total 1,042 (719)
------ ------
Effect of exchange rate changes on cash 6 -
------ ------
Net increase (decrease) in cash and cash
equivalents (19) (69)
Cash at beginning of the year 1,422 1,479
------ ------
Cash at end of the period $1,403 $1,410
====== ======
UNITED STATES STEEL CORPORATION
CONDENSED BALANCE SHEET (Unaudited)
------------------------------------
Sept. 30 Dec. 31
(Dollars in millions) 2007 2006
--------------------------------------------------------------------------
Cash and cash equivalents $1,403 $1,422
Receivables, net 2,309 1,799
Inventories 1,826 1,604
Other current assets 347 371
------ ------
Total current assets 5,885 5,196
Property, plant and equipment, net 4,809 4,429
Investments and long-term receivables, net 315 336
Prepaid pensions 531 330
Intangible assets 231 -
Goodwill 1,155 -
Other assets 386 295
------ ------
Total assets $13,312 $10,586
====== ======
Accounts payable $1,656 $1,313
Payroll and benefits payable 1,100 1,028
Short-term debt and current maturities
of long-term debt 68 82
Other current liabilities 340 279
------ ------
Total current liabilities 3,164 2,702
Long-term debt 2,103 943
Employee benefits 2,111 2,174
Other long-term liabilities and minority interests 582 402
Stockholders' equity 5,352 4,365
------ ------
Total liabilities and stockholders' equity $13,312 $10,586
====== ======
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
----------------------------------------------------
Quarter Ended Nine Months Ended
----------------------------- ---------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2007 2007 2006 2007 2006
--------------------------------------------------------------------------
INCOME FROM OPERATIONS
Flat-rolled $170 $92 $230 $337 $569
U. S. Steel Europe 152 244 219 602 532
Tubular(a) 74 97 164 273 487
Other Businesses 37 1 39 40 72
----- ----- ----- ----- -----
Segment Income from
Operations 433 434 652 1,252 1,660
Retiree benefit
expenses(b) (46) (43) (70) (128) (190)
Other items not
allocated to segments:
Tubular inventory
transition effects (27) - - (27) -
Workforce reduction
charges - - (21) - (21)
Asset impairment
charge - - - - (5)
----- ----- ----- ----- -----
Total Income
from Operations $360 $391 $561 $1,097 $1,444
CAPITAL EXPENDITURES
Flat-rolled $121 $69 $46 $240 $147
U. S. Steel Europe 52 47 67 129 162
Tubular(a) 10 1 1 13 2
Other Businesses 27 25 32 78 86
----- ----- ----- ----- -----
Total $210 $142 $146 $460 $397
-----------
(a) Includes the results of the businesses acquired from Lone Star as of
June 14, 2007.
(b) Includes certain profit-based expenses for U. S. Steel retirees and
National retirees pursuant to provisions of the 2003 labor agreement
with the United Steelworkers.
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
------------------------------------------------------
Quarter Ended Nine Months Ended
------------------------------ -----------------
Sept. 30 June 30 Sept. 30 September 30
(Dollars in millions) 2007 2007 2006 2007 2006
--------------------------------------------------------------------------
OPERATING STATISTICS
Average realized price:($/net ton)(a)
Flat-rolled $643 $652 $651 $648 $630
U. S. Steel Europe $738 $726 $640 $710 $589
Tubular(b) $1,282 $1,389 $1,491 $1,350 $1,492
Steel Shipments:(a)(c)
Flat-rolled 3,601 3,599 3,695 10,388 11,102
U. S. Steel Europe 1,486 1,616 1,552 4,754 4,712
Tubular(b) 473 288 303 1,008 920
----- ----- ----- ----- -----
Total Steel
Shipments 5,560 5,503 5,550 16,150 16,734
Raw Steel-Production:(c)
Flat-rolled 4,328 4,116 4,359 12,157 13,085
U. S. Steel Europe 1,661 1,865 1,734 5,325 5,290
Tubular(b)(d) 46 16 - 62 -
Raw Steel-Capability
Utilization:(e)
Flat-rolled 88.5% 85.1% 89.1% 83.8% 90.2%
U. S. Steel Europe 88.7% 100.8% 92.7% 95.9% 95.3%
Domestic iron ore
production(c) 5,323 4,949 5,953 15,167 16,919
Domestic coke
production(c)(f) 1,382 1,299 1,446 4,047 4,421
-----------
(a) Excludes intersegment transfers.
(b) Includes the results of the businesses acquired from Lone Star as of
June 14, 2007.
(c) Thousands of net tons.
(d) The hot end at the Texas Operations was permanently idled in September
2007.
(e) Based on annual raw steel production capability for Flat-rolled of 19.4
million net tons and annual raw steel production capability for U. S.
Steel Europe of 7.4 million net tons.
(f) Includes the Clairton 1314B Partnership.