United States Steel Corporation Reports 2012 First Quarter Results

PITTSBURGH, April 24, 2012 /PRNewswire/ --

  • Significantly improved operating results  
  • Reportable segment and Other Businesses income from operations of $295 million compared to fourth quarter 2011 loss of $26 million  
  • Net loss was $219 million, or $1.52 per diluted share, including $399 million loss on sale of U. S. Steel Serbia
  • First quarter shipments of 5.7 million tons and net sales of $5.2 billion 
  • Raised net proceeds of $392 million from the March issuance of $400 million of 7.50% Senior Notes due 2022 primarily used in April to redeem $300 million of 5.65% Senior Notes due 2013

United States Steel Corporation (NYSE:  X) reported a first quarter 2012 net loss of $219 million, or $1.52 per diluted share, compared to a fourth quarter 2011 net loss of $211 million, or $1.46 per diluted share, and a first quarter 2011 net loss of $86 million, or $0.60 per diluted share.  Adjusted first quarter 2012 net income was $110 million, or $0.67 per diluted share, and included adjustments for a $399 million after-tax loss on the sale of U. S. Steel Serbia (USSS), which was completed on January 31, 2012; a $58 million after-tax gain on the sale of transportation assets; and a $12 million after-tax gain on property tax settlements.









Earnings Highlights










(Dollars in millions, except per share amounts)

1Q 2012

4Q 2011

1Q 2011



Net Sales

$   5,172

$   4,819

$     4,864



Segment (loss) income from operations







Flat-rolled*

$     183

$      (72)

$        (36)




U. S. Steel Europe

(34)

(89)

(5)




Tubular*

129

119

32




Other Businesses*

17

16

13



Total reportable segment and Other Businesses income (loss) from operations*

$     295

$      (26)

$           4



Postretirement benefit expense*

(77)

(99)

(95)



Other items not allocated to segments

(291)

(18)

-



Loss from operations

$      (73)

$    (143)

$        (91)



Net interest and other financial costs (income)

50

102

(21)



Income tax provision (benefit)

96

(34)

16



Net loss attributable to United States Steel Corporation

$    (219)

$    (211)

$        (86)



-Per basic share

$   (1.52)

$   (1.46)

$     (0.60)



-Per diluted share

$   (1.52)

$   (1.46)

$     (0.60)



*First quarter 2011 amounts have been revised to reflect the change in our segment allocation methodology for 



postretirement benefit expenses as disclosed in our second quarter 2011 results.












Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "We reported a significant improvement in our operating results in the first quarter as compared to the fourth quarter, mainly driven by improved average realized prices and shipments for our Flat-rolled segment.  Our Tubular segment had another strong performance reflecting the continued strength of oil-directed drilling.  U. S. Steel Europe results, excluding the loss on the sale of U. S. Steel Serbia, improved but continue to reflect the challenging economic situation in the region."

The company reported first quarter 2012 reportable segment and Other Businesses income from operations of $295 million, compared with a loss of $26 million in the fourth quarter of 2011 and income of $4 million in the first quarter of 2011.  

Other items not allocated to segments in the first quarter of 2012 included the pre-tax loss on the sale of USSS of $399 million, the pre-tax gain of $89 million on the sale of transportation assets and the pre-tax gain of $19 million related to property tax settlements.  Other items not allocated to segments in the fourth quarter of 2011 included a pre-tax environmental remediation charge of $18 million

Historically, we have disclosed certain foreign currency gains or losses included in net income.  These foreign currency gains or losses primarily resulted from the accounting remeasurement of a U.S. dollar-denominated intercompany loan to a European entity.  Effective January 1, 2012, the functional currency of this European entity was changed from the euro to the U.S. dollar because of significant changes in economic facts and circumstances, including the sale of U. S. Steel Serbia. This change in functional currency has been applied on a prospective basis since January 1, 2012.  As a result of the change, the first quarter 2012 foreign currency remeasurement effect was minimal and is expected to be minimal going forward.  

Net interest and other financial costs in the fourth quarter of 2011 included a foreign currency loss that decreased net income by $51 million, or 35 cents per diluted share. Net interest and other financial costs in the first quarter of 2011 included a foreign currency gain that increased net income by $81 million, or 56 cents per share.    

For the first quarter 2012, we recorded a tax provision of $96 million on our pre-tax loss of $123 million.  No material tax benefit was recorded for the loss on the sale of USSS.  Additionally, the tax provision does not reflect any tax benefit for pre-tax losses in Canada and Serbia, which are jurisdictions where we have recorded a full valuation allowance on deferred tax assets.  The Serbian deferred tax assets and offsetting valuation allowance were removed in the first quarter 2012 in connection with the sale.  

As of March 31, 2012, U. S. Steel had $652 million of cash and $2.5 billion of total liquidity as compared to $408 million of cash and $1.8 billion of total liquidity at December 31, 2011.  These amounts reflect net proceeds from the March 2012 issuance of $400 million of 7.50% Senior Notes due 2022.  In April, the company used the majority of these proceeds to redeem all of its $300 million of 5.65% Senior Notes due 2013, for a total payment of $324 million, of which $18 million represents a make-whole redemption premium that will be recorded as interest expense in the second quarter 2012. 

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 income from operations of $295 million, or $52 per ton, in the first quarter of 2012, compared with a loss of $26 million, or $5 per ton, in the fourth quarter of 2011 and income of $4 million, or $1 per ton, in the first quarter of 2011.

Flat-rolled income from operations improved significantly from fourth quarter 2011 primarily due to higher average realized prices and shipments resulting from improved end user demand and some inventory replenishment by spot customers. First quarter prices increased by $23 per ton to $764 per ton due to higher average realized prices on both spot and contract business.  Shipments increased by eight percent to 4.1 million net tons, the highest shipping level since third quarter 2008.  Additionally, operating costs decreased in the first quarter as a result of operating efficiencies and reduced energy and facility maintenance costs.  First quarter results also reflected the absence of the approximately $75 million loss on the pellet sales transactions recorded in the fourth quarter 2011.  The raw steel capability utilization rate was 83 percent for the Flat-rolled segment, an increase from the fourth quarter rate of 75 percent.

Excluding the loss on the sale of USSS, U. S. Steel Europe (USSE) results improved significantly from the fourth quarter reflecting $17 million of operating losses at our former Serbian operations prior to the sale as compared to $67 million of losses in the fourth quarter of 2011.  U. S. Steel Kosice (USSK) had an operating loss of $17 million in the first quarter of 2012 compared to a loss of $22 million in the fourth quarter of 2011.  Although average realized prices for USSK declined slightly from the fourth quarter 2011, spot market prices improved progressively throughout the quarter largely as a result of a mini-restocking cycle, reversing the declining trend experienced in the fourth quarter. Maintenance work was completed on a blast furnace in Slovakia and the furnace was restarted in late January resulting in a raw steel capability utilization rate for USSK of 92 percent for the first quarter, an increase from the fourth quarter rate of 75 percent.

Tubular first quarter results improved from fourth quarter 2011 as the demand for oil country tubular goods and line pipe remained strong. Shipments of 529 thousand tons represented a record quarterly shipping level and an increase of 10 percent from fourth quarter 2011.  Average realized prices increased slightly to $1,727 per ton.  These increases were partially offset by higher substrate costs.   

Outlook

Commenting on U. S. Steel's outlook for the second quarter, Surma said, "We expect all three of our operating segments to reflect positive results from operations with total segment results consistent with the first quarter. Our European segment is expected to return to positive income from operations reflecting improved average realized prices. Our Tubular segment is expected to perform well with results similar to the first quarter. Our Flat-rolled segment results are expected to decrease due primarily to higher maintenance costs."

Shipments and average realized prices for our Flat-rolled segment are expected to remain comparable to the first quarter as end user demand remains stable and spot market inventories appear to be aligned with end user demand. Maintenance costs are expected to increase by approximately $50 million over the first quarter, primarily for spending related to scheduled blast furnace and other maintenance projects.  All other operating costs are expected to be comparable with the first quarter.

While the economic conditions in Europe remain challenging, second quarter results for our European segment should improve compared to the first quarter. Average realized prices are expected to improve as higher spot market prices carry over into the second quarter and quarterly contract prices increase. USSK shipments and utilization rates are expected to be in line with the first quarter as modest seasonal improvements offset a slowdown in the restocking cycle. Operating costs are expected to be comparable to the first quarter.

Second quarter 2012 results for our Tubular segment should remain consistent with the solid performance achieved in each of the past three quarters.  Average realized prices are expected to remain near first quarter levels.  Shipments are expected to remain strong, but slightly below the record levels of the first quarter.  End users continue to rebalance their inventory positions as oil-directed drilling continues to drive the rig count, while natural gas drilling is being negatively affected by high storage levels and low prices.  Operating costs are expected to be lower due to reduced spending levels. 

This release contains forward-looking statements with respect to market conditions, operating costs, shipments, prices, capital spending, and employee benefit costs and payments.  Although we believe that we are experiencing a gradual economic recovery, there are signs of continued economic issues in Europe and U. S. Steel cannot control or predict the impact.  Other more normal factors that could affect market conditions, costs, shipments and prices for both North American and European operations include: (a) foreign currency fluctuations and related activities; (b) global product demand, prices and mix; (c) global and company steel production levels; (d) plant operating performance; (e) natural gas, electricity, raw materials and transportation prices, usage and availability; (f) international trade developments, including court decisions, legislation and agency decisions on petitions and sunsets; (g) the impact of fixed prices in energy and raw materials contracts (many of which have terms of one year or longer) as compared to short-term contract and spot prices of steel products; (h) changes in environmental, tax, pension and other laws; (i) the terms of collective bargaining agreements; (j) employee strikes or other labor issues; and (k) U.S. and global economic performance and political developments.  Domestic steel shipments and prices could be affected by import levels and actions taken by the U.S. Government and its agencies, including those related to CO2 emissions, climate change and shale gas development.  Economic conditions and political factors in Europe and Canada that may affect USSE's and U. S. Steel Canada's results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) government instability; (p) political unrest; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures.  We present adjusted net income and adjusted net income per diluted share, which are non-GAAP measures, to better enable investors and others to assess our results and compare them with our competitors without the distorting impact of items not allocated to segments.  Additionally, the effect of the items not allocated to segments is not considered in the management of our business. We also present the non-GAAP operating income for USSK and USSS to allow investors to understand the results of our remaining European operation.  In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward-looking statements have been included in U. S. Steel's Annual Report on Form 10-K for the year ended December 31, 2011, and in subsequent filings for U. S. Steel. 

A Consolidated Statement of Operations (Unaudited), Consolidated Cash Flow Statement (Unaudited), Condensed Consolidated Balance Sheet (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached.  

The company will conduct a conference call on first quarter earnings on Tuesday, April 24, at 2 p.m. EDT.  To listen to the webcast of the conference call, visit the U. S. Steel website, www.ussteel.com, and click on "Overview" then "Current Information" under the "Investors" section. 

For more information on U. S. Steel, visit our website at www.ussteel.com.

 

UNITED STATES STEEL CORPORATION

STATEMENT OF OPERATIONS (Unaudited)












Quarter Ended




March 31


Dec. 31


March 31

(Dollars in millions)


2012


2011


2011









NET SALES


$       5,172


$       4,819


$       4,864









OPERATING EXPENSES (INCOME):







Cost of sales (excludes items shown below)

4,626


4,647


4,621


Selling, general and administrative expenses

173


183


180


Depreciation, depletion and amortization

163


169


169


Income from investees

(24)


(19)


(8)


Net loss (gain) on disposal of assets

309


(15)


(6)


Other income, net

(2)


(3)


(1)











Total operating expenses

5,245


4,962


4,955









LOSS FROM OPERATIONS

(73)


(143)


(91)

Net interest and other financial costs (income)

50


102


(21)









LOSS BEFORE INCOME TAXES 







AND NONCONTROLLING INTERESTS

(123)


(245)


(70)

Income tax provision (benefit)

96


(34)


16









Net loss



(219)


(211)


(86)


Less: Net loss attributable to the 







noncontrolling interests

-


-


-

NET LOSS ATTRIBUTABLE TO UNITED STATES 







STEEL CORPORATION

$        (219)


$        (211)


$          (86)

















COMMON STOCK DATA:














Net loss per share attributable to United






States Steel Corporation shareholders:







-Basic


$       (1.52)


$       (1.46)


$       (0.60)


-Diluted


$       (1.52)


$       (1.46)


$       (0.60)









Weighted average shares, in thousands







-Basic


144,075


144,071


143,801


-Diluted


144,075


144,071


143,801









Dividends paid per common share

$        0.05


$        0.05


$        0.05

 

 

UNITED STATES STEEL CORPORATION

CASH FLOW STATEMENT (Unaudited)














Quarter Ended






March 31

(Dollars in millions)


2012


2011









Cash (used in) provided by operating activities:





Net loss

$        (219)


$          (86)


Depreciation, depletion and amortization

163


169


Pensions and other postretirement benefits

(131)


33


Deferred income taxes


44


8


Net loss (gain) on disposal of assets


309


(6)


Working capital changes


209


(45)


Income taxes receivable/payable


54


79


Currency remeasurement gain


(13)


(101)


Other operating activities


10


(34)



Total



426


17









Cash (used in) provided by investing activities:






Capital expenditures


(189)


(180)


Disposal of assets


131


12


Other investing activities


2


(4)



Total



(56)


(172)









Cash provided by (used in) financing activities:





Revolving credit facilities

- borrowings

522


240





- repayments

(652)


(240)


Receivables Purchase Agreement payments

(380)


-


Issuance of long-term debt, net of financing costs

392


-


Repayment of long-term debt


(4)


(4)


Common stock issued


-


4


Dividends paid


(7)


(7)



Total



(129)


(7)









Effect of exchange rate changes on cash


3


5









Net (decrease) increase in cash and cash equivalents

244


(157)

Cash and cash equivalents at beginning of the year

408


578









Cash and cash equivalents at end of the period

$         652


$         421









 

UNITED STATES STEEL CORPORATION

CONDENSED BALANCE SHEET (Unaudited)










March 31


Dec. 31

(Dollars in millions)


2012


2011







Cash and cash equivalents

$         652


$         408

Receivables, net


2,518


2,053

Receivables sold to third party conduits

-


380

Inventories


2,437


2,775

Other current assets


184


158


Total current assets

5,791


5,774

Property, plant and equipment, net

6,401


6,579

Investment and long-term receivables, net

668


683

Goodwill and intangible assets, net

2,060


2,045

Other assets


884


992








Total assets


$     15,804


$     16,073







Accounts payable


$       2,013


$       2,063

Payroll and benefits payable

994


1,003

Short-term debt and current maturities of long-term debt

315


20

Borrowings under Receivables Purchase Agreement

-


380

Other current liabilities


330


183


Total current liabilities

3,652


3,649

Long-term debt, less unamortized discount

3,802


3,828

Employee benefits


4,403


4,600

Other long-term liabilities

486


495

United States Steel Corporation stockholders' equity

3,460


3,500

Noncontrolling interests

1


1








Total liabilities and stockholders' equity

$     15,804


$     16,073







 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
















Quarter Ended






March 31


Dec. 31


March 31

(Dollars in millions)


2012


2011


2011











INCOME (LOSS) FROM OPERATIONS








Flat-rolled (a)


$       183


$        (72)


$             (36)


U. S. Steel Europe


(34)


(89)


(5)


Tubular (a)


129


119


32


Other Businesses (a)


17


16


13











Reportable Segment and Other Businesses Income (Loss) from Operations (a)

295


(26)


4


Postretirement benefit expense (a)


(77)


(99)


(95)


Other items not allocated to segments:









Environmental remediation charge


-


(18)


-



Loss on sale of U. S. Steel Serbia


(399)


-


-



Gain on sale of transportation assets


89


-


-



Property tax settlements 


19


-


-














Total Loss from Operations


$       (73)


$      (143)


$             (91)











CAPITAL EXPENDITURES








Flat-rolled


$       181


$       189


$            125


U. S. Steel Europe


2


16


23


Tubular



4


10


31


Other Businesses


2


7


1














Total


$       189


$       222


$            180












(a) First quarter 2011 amounts have been revised to reflect a change in our segment allocation methodology for  


postretirement benefit expenses.  Under the revised allocation methodology, only service cost and amortization of prior 


service costs for active employees are allocated to segments.  Interest cost, expected return on plan assets, and 


actuarial gains and losses, a portion of which was historically allocated to segments, are no longer allocated to segments. 











 

 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)














Quarter Ended





March 31


Dec. 31


March 31





2012


2011


2011










OPERATING STATISTICS







Average realized price: ($/net ton) (a)








Flat-rolled

764


741


720



U. S. Steel Europe

749


770


823



Tubular

1,727


1,711


1,447


Steel Shipments: (a) (b)








Flat-rolled

4,092


3,784


3,954



U. S. Steel Europe

1,045


1,153


1,445



Tubular

529


482


425













Total Steel Shipments

5,666


5,419


5,824


Intersegment Shipments: (b)








Flat-rolled to Tubular

477


431


389


Raw Steel Production : (b)








Flat-rolled  

5,043


4,593


4,598



U. S. Steel Europe

1,240


1,211


1,681


Raw Steel Capability Utilization: (c)








Flat-rolled

83%


75%


77%



U. S. Steel Europe

85%


65%


92%



    USSK

92%


75%


96%











(a)

Excludes intersegment shipments.


(b)

Thousands of net tons.


(c)

Based on annual raw steel production capability of 24.3 million net tons for Flat-rolled and



7.4 million net tons for U. S. Steel Europe (USSE).  Subsequent to the sale of USSS 



on January 31, 2012, annual raw steel production capability for USSE is 5.0 million net tons.










SOURCE United States Steel Corporation



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