Rouge Industries Posts a First Quarter Loss of $59.8 Million

Apr 26, 2001, 01:00 ET from Rouge Industries, Inc.

    DEARBORN, Mich., April 26 /PRNewswire/ -- Rouge Industries, Inc.
 (NYSE:   ROU) reported a net loss of $59.8 million, or $2.69 per share, for the
 first quarter of 2001, compared to a net loss of $12.9 million or $0.58 per
 share in the first quarter of 2000.  The loss in 2001 included a $7.4 million
 benefit for indemnification by the Company's former parent for environmental
 liabilities related to the cleanup of the Rouge Complex.  Steel product
 shipments in the first quarter of 2001 totaled 581,000 tons, 163,000 tons or
 21.9% lower than the first quarter of 2000.  Raw steel production in the
 quarter totaled 556,000 tons, 115,000 tons or 17.1% lower than last year's
 first quarter production level.
     During the first quarter of 2001, the Company closed on a new $250 million
 revolving loan facility with Congress Financial Corporation.  Borrowings under
 the new loan facility are limited to specified percentages of inventories and
 receivables.  At March 31, 2001, the Company had $102.8 million of debt
 outstanding.
     The Company's production and shipments in the quarter were adversely
 impacted by the continuing weakness in the automotive market and by
 excessively high inventories resulting from the continuing onslaught of steel
 imports into the Company's markets.  As a result, the Company idled the
 smaller of its two blast furnaces for 60 days during the quarter to help
 balance production with sales.  The idled blast furnace resumed full
 production in early March to coincide with an increased order rate going into
 April.
     "The first quarter was another difficult quarter marked by substantially
 reduced automotive production schedules, steel selling prices in the spot
 market that reached a twenty-year low and a continuing glut of foreign steel
 imports into the U.S.," said Carl L. Valdiserri, chairman and chief executive
 officer.  "For the past three years, unfairly traded steel imports have
 created a domestic steel crisis of major proportions.  This is evidenced by 16
 steel companies in bankruptcy and the many thousands of steel related jobs
 that have been lost during this period.  To exacerbate the problem, natural
 gas costs in the first quarter increased 125% over the first quarter of 2000.
 The natural gas increase alone accounted for a $12 million cost increase from
 a year ago," said Mr. Valdiserri.
     The Company's operating income was also adversely impacted by $17.7
 million of direct and indirect costs attributable to the Rouge Complex
 Powerhouse explosion and fire that occurred in 1999.  These costs include
 $13.3 million for business interruption, $3.5 million for property damage
 costs and $900,000 for professional services and other costs.  These costs
 were partially offset by $6.4 million of income for anticipated insurance
 recovery.  The insurance recovery amount reflects a reduction in a previously
 recorded reserve for potential insurance recovery shortfalls.
     "The Company's insurance carrier suspended its business interruption
 coverage effective December 31, 2000," said Gary P. Latendresse, vice chairman
 and chief financial officer.  "This cessation of coverage caused the Company
 to absorb more than $13 million of excess utility costs and blast furnace gas
 flaring penalties during the quarter.  Excess utility costs and blast furnace
 gas flaring penalties were fully covered in the first quarter of 2000.  The
 new co-generation power plant, under construction by an affiliate of CMS
 Energy, did not commence operations in the first quarter and caused us to
 continue to rely upon the higher cost, natural gas-fueled, temporary steam
 boilers.  At this point, the new power plant's blast furnace gas burning
 boilers are being tested and we expect steam supply to commence by the end of
 May," concluded Mr. Latendresse.
     Through March 31, 2001, the Company has recorded costs of $319.3 million
 directly and indirectly attributable to the explosion.  Insurance recoveries
 of $268.0 million have been recorded through March for property damage and
 business interruption losses.  To date, Rouge Industries has been advanced
 $298.1 million.  The Company will continue to record Powerhouse explosion-
 related costs and insurance recovery amounts until the new power plant is
 operational and the disposition of the idled Powerhouse is resolved.
     "Our order book continues to improve, and we expect shipments to increase
 in the second quarter by 15% to 20% over the first quarter level.  Natural gas
 usage will abate as the heating season ends and the new power plant commences
 commercial steam production.  All of these factors should contribute to the
 Company's improved financial results in the second quarter.  The outlook for
 the second half of 2001 is still quite cloudy due to the unstable economy and
 questions surrounding the ongoing strength of the automotive market.  We hope
 that the U.S. government will support the domestic steel industry's efforts
 to survive, and we continue all out efforts to improve our yield and
 productivity, with the goal of returning to profitability by the end of the
 year," concluded Mr. Valdiserri.
 
     Safe Harbor Statement
     This press release contains forward-looking information about the Company.
 A number of factors could cause the Company's actual results to differ
 materially from those anticipated, including changes in the general economic
 climate, the supply of or demand for and the pricing of steel products in the
 Company's markets, potential environmental liabilities and higher than
 expected costs.  For further information on these and other factors that could
 impact the Company and the statements contained herein, reference should be
 made to the Company's filings with the Securities and Exchange Commission.
 
 
                              ROUGE INDUSTRIES, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (amounts in thousands except per share amounts)
 
 
                                                          Unaudited
                                                    For the Quarter Ended
                                                           March 31
                                                     2001              2000
 
     Total Sales                                   $230,195          $321,606
 
     Costs and Expenses
       Costs of Goods Sold                          281,747           334,838
       Depreciation and Amortization                  6,541            15,151
       Selling and Administrative Expenses            5,625             7,467
 
       Total Costs and Expenses                     293,913           357,456
 
       Operating Loss                               (63,718)          (35,850)
 
     Net Interest Expense                            (2,711)           (1,865)
 
     Insurance Recovery                               6,393            15,595
 
     Other - Net                                        989               900
 
       Loss Before Income Taxes and Equity
       In Unconsolidated Subsidiaries               (59,047)          (21,220)
 
     Income Tax Benefit                                   -             7,811
 
     Equity in Unconsolidated Subsidiaries             (709)              512
 
       Net Loss                                    $(59,756)         $(12,897)
 
     Earnings Per Share - Basic and Diluted        $  (2.69)         $  (0.58)
     Weighted Average Shares Outstanding (000)       22,236            22,134
     Shipments (000) NT                                 581               744
     Raw Steel Production (000) NT                      556               671
 
 
 
                               ROUGE INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                              (amounts in thousands)
 
                                                    Unaudited
                                                    March 31        December 31
                                                      2001              2000
 
     Assets
 
     Current Assets
       Cash and Cash Equivalents                   $  7,548          $  5,433
       Accounts Receivable                          135,239           130,537
       Inventories                                  206,780           269,245
       Other Current Assets                           5,335             8,499
         Total Current Assets                       354,902           413,714
 
     Net Property, Plant and Equipment              246,700           244,368
 
     Investment in Unconsolidated Subsidiaries       66,792            66,918
 
     Deferred Charges and Other                      29,886            16,018
 
         Total Assets                              $698,280          $741,018
 
 
     Liabilities and Stockholders' Equity
 
     Current Liabilities
       Accounts Payable                            $179,452          $199,775
       Deferred Insurance Recovery                   42,224            44,000
       Accrued Liabilities                           46,780            52,179
         Total Current Liabilities                  268,456           295,954
 
     Long-Term Debt                                 102,810            66,500
 
     Other Postretirement Benefits                   75,813            73,288
 
     Other Liabilities                               18,544            12,430
 
     Stockholders' Equity                           232,657           292,846
 
         Total Liabilities and Stockholders'
         Equity                                    $698,280          $741,018
 
 
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SOURCE Rouge Industries, Inc.
    DEARBORN, Mich., April 26 /PRNewswire/ -- Rouge Industries, Inc.
 (NYSE:   ROU) reported a net loss of $59.8 million, or $2.69 per share, for the
 first quarter of 2001, compared to a net loss of $12.9 million or $0.58 per
 share in the first quarter of 2000.  The loss in 2001 included a $7.4 million
 benefit for indemnification by the Company's former parent for environmental
 liabilities related to the cleanup of the Rouge Complex.  Steel product
 shipments in the first quarter of 2001 totaled 581,000 tons, 163,000 tons or
 21.9% lower than the first quarter of 2000.  Raw steel production in the
 quarter totaled 556,000 tons, 115,000 tons or 17.1% lower than last year's
 first quarter production level.
     During the first quarter of 2001, the Company closed on a new $250 million
 revolving loan facility with Congress Financial Corporation.  Borrowings under
 the new loan facility are limited to specified percentages of inventories and
 receivables.  At March 31, 2001, the Company had $102.8 million of debt
 outstanding.
     The Company's production and shipments in the quarter were adversely
 impacted by the continuing weakness in the automotive market and by
 excessively high inventories resulting from the continuing onslaught of steel
 imports into the Company's markets.  As a result, the Company idled the
 smaller of its two blast furnaces for 60 days during the quarter to help
 balance production with sales.  The idled blast furnace resumed full
 production in early March to coincide with an increased order rate going into
 April.
     "The first quarter was another difficult quarter marked by substantially
 reduced automotive production schedules, steel selling prices in the spot
 market that reached a twenty-year low and a continuing glut of foreign steel
 imports into the U.S.," said Carl L. Valdiserri, chairman and chief executive
 officer.  "For the past three years, unfairly traded steel imports have
 created a domestic steel crisis of major proportions.  This is evidenced by 16
 steel companies in bankruptcy and the many thousands of steel related jobs
 that have been lost during this period.  To exacerbate the problem, natural
 gas costs in the first quarter increased 125% over the first quarter of 2000.
 The natural gas increase alone accounted for a $12 million cost increase from
 a year ago," said Mr. Valdiserri.
     The Company's operating income was also adversely impacted by $17.7
 million of direct and indirect costs attributable to the Rouge Complex
 Powerhouse explosion and fire that occurred in 1999.  These costs include
 $13.3 million for business interruption, $3.5 million for property damage
 costs and $900,000 for professional services and other costs.  These costs
 were partially offset by $6.4 million of income for anticipated insurance
 recovery.  The insurance recovery amount reflects a reduction in a previously
 recorded reserve for potential insurance recovery shortfalls.
     "The Company's insurance carrier suspended its business interruption
 coverage effective December 31, 2000," said Gary P. Latendresse, vice chairman
 and chief financial officer.  "This cessation of coverage caused the Company
 to absorb more than $13 million of excess utility costs and blast furnace gas
 flaring penalties during the quarter.  Excess utility costs and blast furnace
 gas flaring penalties were fully covered in the first quarter of 2000.  The
 new co-generation power plant, under construction by an affiliate of CMS
 Energy, did not commence operations in the first quarter and caused us to
 continue to rely upon the higher cost, natural gas-fueled, temporary steam
 boilers.  At this point, the new power plant's blast furnace gas burning
 boilers are being tested and we expect steam supply to commence by the end of
 May," concluded Mr. Latendresse.
     Through March 31, 2001, the Company has recorded costs of $319.3 million
 directly and indirectly attributable to the explosion.  Insurance recoveries
 of $268.0 million have been recorded through March for property damage and
 business interruption losses.  To date, Rouge Industries has been advanced
 $298.1 million.  The Company will continue to record Powerhouse explosion-
 related costs and insurance recovery amounts until the new power plant is
 operational and the disposition of the idled Powerhouse is resolved.
     "Our order book continues to improve, and we expect shipments to increase
 in the second quarter by 15% to 20% over the first quarter level.  Natural gas
 usage will abate as the heating season ends and the new power plant commences
 commercial steam production.  All of these factors should contribute to the
 Company's improved financial results in the second quarter.  The outlook for
 the second half of 2001 is still quite cloudy due to the unstable economy and
 questions surrounding the ongoing strength of the automotive market.  We hope
 that the U.S. government will support the domestic steel industry's efforts
 to survive, and we continue all out efforts to improve our yield and
 productivity, with the goal of returning to profitability by the end of the
 year," concluded Mr. Valdiserri.
 
     Safe Harbor Statement
     This press release contains forward-looking information about the Company.
 A number of factors could cause the Company's actual results to differ
 materially from those anticipated, including changes in the general economic
 climate, the supply of or demand for and the pricing of steel products in the
 Company's markets, potential environmental liabilities and higher than
 expected costs.  For further information on these and other factors that could
 impact the Company and the statements contained herein, reference should be
 made to the Company's filings with the Securities and Exchange Commission.
 
 
                              ROUGE INDUSTRIES, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (amounts in thousands except per share amounts)
 
 
                                                          Unaudited
                                                    For the Quarter Ended
                                                           March 31
                                                     2001              2000
 
     Total Sales                                   $230,195          $321,606
 
     Costs and Expenses
       Costs of Goods Sold                          281,747           334,838
       Depreciation and Amortization                  6,541            15,151
       Selling and Administrative Expenses            5,625             7,467
 
       Total Costs and Expenses                     293,913           357,456
 
       Operating Loss                               (63,718)          (35,850)
 
     Net Interest Expense                            (2,711)           (1,865)
 
     Insurance Recovery                               6,393            15,595
 
     Other - Net                                        989               900
 
       Loss Before Income Taxes and Equity
       In Unconsolidated Subsidiaries               (59,047)          (21,220)
 
     Income Tax Benefit                                   -             7,811
 
     Equity in Unconsolidated Subsidiaries             (709)              512
 
       Net Loss                                    $(59,756)         $(12,897)
 
     Earnings Per Share - Basic and Diluted        $  (2.69)         $  (0.58)
     Weighted Average Shares Outstanding (000)       22,236            22,134
     Shipments (000) NT                                 581               744
     Raw Steel Production (000) NT                      556               671
 
 
 
                               ROUGE INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                              (amounts in thousands)
 
                                                    Unaudited
                                                    March 31        December 31
                                                      2001              2000
 
     Assets
 
     Current Assets
       Cash and Cash Equivalents                   $  7,548          $  5,433
       Accounts Receivable                          135,239           130,537
       Inventories                                  206,780           269,245
       Other Current Assets                           5,335             8,499
         Total Current Assets                       354,902           413,714
 
     Net Property, Plant and Equipment              246,700           244,368
 
     Investment in Unconsolidated Subsidiaries       66,792            66,918
 
     Deferred Charges and Other                      29,886            16,018
 
         Total Assets                              $698,280          $741,018
 
 
     Liabilities and Stockholders' Equity
 
     Current Liabilities
       Accounts Payable                            $179,452          $199,775
       Deferred Insurance Recovery                   42,224            44,000
       Accrued Liabilities                           46,780            52,179
         Total Current Liabilities                  268,456           295,954
 
     Long-Term Debt                                 102,810            66,500
 
     Other Postretirement Benefits                   75,813            73,288
 
     Other Liabilities                               18,544            12,430
 
     Stockholders' Equity                           232,657           292,846
 
         Total Liabilities and Stockholders'
         Equity                                    $698,280          $741,018
 
 
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 SOURCE  Rouge Industries, Inc.