ISG Reports 4th Quarter and Full Year Results
02/27/2004 -
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ISG Reports 4th Quarter
and Full Year Results
Feb. 27, 2004 — International Steel Group Inc. reported net income of $24.9 million on sales of $1.4 billion for the fourth quarter of 2003, and a net loss of $23.5 million on sales of $4.1 billion for the full year 2003.
ISG recently announced its intention to acquire most of the assets of Weirton Steel Corp. for $255 million, subject to purchase price adjustments. Closing of the transaction is subject to U.S. Bankruptcy Court approval, expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and satisfaction of other conditions. The Weirton Steel acquisition is consistent with ISG's strategy to continue to consolidate domestic steel assets on a basis that will add value for the company's stockholders. ISG has the ability to finance the cash portion of the acquisition through existing cash and credit arrangements. However, ISG may consider financing alternatives that could permit the company to extend debt maturities, reduce financing costs, improve liquidity and increase financial flexibility. |
Fourth Quarter Results—Net income of $24.9 million corresponds to earnings of $0.28 per diluted share. Sales were $1.4 billion on shipments of 3.5 million tons, a 600,000 ton increase over the third quarter. Average realized price per ton shipped was $405. Comparisons of these results to the prior year are not meaningful since ISG was not in existence for a full year in 2002, and 2003 included the results of the acquisition of the Bethlehem Steel Corp. assets.
Full Year Results—The 2003 net loss of $23.5 million corresponds to a loss of $0.31 per diluted share. The loss included charges of $70.3 million due to the Bethlehem acquisition. These charges related to inventory revaluation, assumed contract revaluation and initial investment in the United Steelworkers of America pension plan for Bethlehem employees.
Sales for 2003 were $4.1 billion on shipments of 10.4 million tons. Average realized price per ton shipped was $391, reflecting continued improvements over the course of the year and relative to 2002. Most of this improvement was the result of the richer product mix due to the Bethlehem acquisition. The product mix improved as shipments of cold-rolled steel and other value-added products increased to 54% of total shipments in 2003 from 29% in 2002.
Comments—ISG's CEO Rodney B. Mott said, "Our accomplishments were significant in 2003. We purchased Bethlehem's assets, resulting in the largest acquisition in the domestic steel industry, and thus far we have been successful in integrating the assets and the employees of Bethlehem. In addition, we completed a very successful initial public offering. The proceeds of the IPO were used to reduce our debt and make significant progress toward our goal of achieving investment grade credit metrics. During the fourth quarter, our results improved as compared with our third quarter as production and shipments increased significantly. This led to a 20% rise in revenues from the third quarter to the fourth quarter while operating income improved to $53.2 million in the fourth quarter from a $15.7 million loss in the third quarter. We are pleased to have ended the fourth quarter and year with profitable results."
Liquidity and Leverage—ISG's initial public offering provided net proceeds of $493 million, which were used to reduce bank borrowings related to the Bethlehem acquisition. As of December 31, 2003, ISG had liquidity of $423 million, consisting of $194 million in cash, with available borrowing capacity of $229 million. Liquidity at December 31, 2002 totaled about $103 million. At year-end 2003, long-term debt to total capitalization was approximately 32%.
Outlook—The improving domestic economy should allow the company to further increase prices and improve its operating profit margins during 2004. Raw material costs, principally for coke and steel scrap, increased significantly in the fourth quarter of 2003 and have continued to increase in early 2004. Those cost increases and the strength of the steel markets have prompted ISG, like other steel producers, to announce significant price increases and implement surcharges to recover some or all of the increased raw material costs. Most recently, on February 16, 2004, ISG announced a price increase on hot-band steel from $370 to $420 per ton, and increased its surcharge from $30 to $90 per ton.
ISG expects to ship between 14 and 15 million tons in 2004, an increase of nearly 5 million tons as compared with 2003. ISG's order book is full for the first half of the year.
International Steel Group Inc. (ISG) is the second-largest integrated steel producer in North America, based on steelmaking capacity. With the capacity to cast more than 18 million tons of steel products annually, ISG ships a variety of steel products from 11 major steel producing and finishing facilities in six states. Products include hot-rolled, cold-rolled and coated sheets, tin mill products, carbon and alloy plates, rail products and semi-finished shapes serving the automotive, construction, pipe and tube, appliance, container and machinery markets.
