U. S. Steel Posts Third Quarter 2013 Net Loss of US$1.8 Billion
10/29/2013 - United States Steel Corporation reported a third quarter 2013 net loss of US$1,791 million primarily due to a US$1.8 Billion pre-tax non-cash goodwill impairment charge.
United States Steel Corporation reported a third quarter 2013 net loss of US$1,791 million, or US$12.38 per diluted share, compared to a second quarter 2013 net loss of US$78 million, or US$0.54 per diluted share, and third quarter 2012 net income of US$44 million, or US$0.28 per diluted share. Adjusted net loss for the third quarter of 2013 was US$20 million, or US$0.14 per diluted share, excluding an after-tax non-cash goodwill impairment charge of US$1.8 billion, or US$12.24 per diluted share. Adjusted net income for the third quarter of 2012 was US$66 million, or US$0.41 per diluted share, excluding an after-tax charge of US$22 million, or US$0.13 per diluted share, for employee lump sum payments as provided in the 2012 labor agreement.
Commenting on results, U. S. Steel CEO Mario Longhi said, "Total reportable segment and Other Businesses operating results of US$113 million reflect a meaningful improvement in our Flat-rolled segment operating results partially offset by an outage in our European segment."
The US$113 million, or US$24 per ton, of reportable segment and Other Businesses income from operations for the third quarter of 2013 compares to income from operations of US$47 million, or US$9 per ton, in the second quarter of 2013 and income from operations of US$171 million, or US$32 per ton, in the third quarter of 2012.
Other items not allocated to segments in the third quarter of 2013 consisted primarily of a US$1.8 billion pre-tax non-cash goodwill impairment charge, which was announced in a press release and Form 8-K filed earlier this month and will be detailed further in our Form 10-Q.
Net interest and other financial costs in the third quarter of 2013 includes a US$22 million pre-tax charge related to a guarantee of an unconsolidated equity method investment for which payment by U. S. Steel is probable.
For the third quarter 2013, the company recorded a tax provision of US$4 million on its pre-tax loss of US$1,787 million. The tax provision does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where it has recorded a full valuation allowance on deferred tax assets. In addition, essentially no tax benefit was recorded on the US$1.8 billion goodwill impairment charge.
As of 30 September 2013, U. S. Steel had US$697 million of cash and US$2.4 billion of total liquidity.
Reportable Segments and Other Businesses
The Flat-rolled segment results from operations improved versus the second quarter due to an increase in average realized prices and lower repairs and maintenance costs partially offset by reduced shipments. Average realized prices increased compared to the second quarter due to higher spot market prices. Shipments decreased significantly due to a planned blast furnace outage at the Great Lakes Works and the Lake Erie Works labor dispute. A successor agreement was reached in August with blast furnace production at Lake Erie Works resuming in October.
Third quarter results for the European segment decreased compared to the second quarter. A scheduled blast furnace outage resulted in significantly lower shipments and increased facility repairs and maintenance costs. Average realized euro-based prices were comparable to the second quarter as decreases in spot and contract market prices were offset by the positive effect of a higher percentage of value-added shipments.
Third quarter results for the Tubular segment were comparable to the second quarter. Shipments and average realized prices increased slightly primarily due to a higher percentage of alloy and seamless shipments. Operating costs increased due to higher repairs and maintenance costs.
Third quarter results for Other Businesses decreased primarily due to a gain of approximately US$30 million from a real estate sale that occurred in the second quarter.
Outlook
Commenting on U. S. Steel's outlook for the fourth quarter, Longhi said, "We expect total reportable segment and Other Businesses income from operations to decrease compared to the third quarter due primarily to planned maintenance outages in our Flat-rolled segment. Results for our European segment are projected to improve compared to the third quarter and Tubular results are expected to be comparable to the third quarter."
Fourth quarter results for the Flat-rolled segment are expected to be near breakeven. Overall, repairs and maintenance costs are expected to increase by approximately US$60 million as compared to the third quarter due primarily to a reline of a blast furnace at Gary Works and a planned blast furnace maintenance project at Fairfield Works. Despite higher average spot and market-based contract prices in the fourth quarter, it expects average realized prices to be comparable to the third quarter due to a higher percentage of hot rolled shipments in the fourth quarter. Shipments are expected to increase slightly quarter over quarter.
The company expects results for the European segment to improve in the fourth quarter and return to profitability due to higher shipments and lower facility repairs and maintenance costs as a blast furnace outage was completed in the third quarter. It expects average realized prices for the majority of its products to increase compared to the third quarter; however, overall average realized prices in the fourth quarter are expected to decline compared to the third quarter due to a return to a more normal level of hot rolled shipments.
Fourth quarter results for the Tubular segment are expected to be comparable to the third quarter as the benefits of reduced operating costs are offset by slightly lower average realized prices and shipments as end users are expected to decrease drilling activity in order to operate within their 2013 capital budgets. Inventory management by customers may also be a factor as it approaches year-end.
The company expects a minimal tax provision/benefit in the fourth quarter primarily due to the full valuation allowance on deferred tax assets in Canada.
Commenting on results, U. S. Steel CEO Mario Longhi said, "Total reportable segment and Other Businesses operating results of US$113 million reflect a meaningful improvement in our Flat-rolled segment operating results partially offset by an outage in our European segment."
The US$113 million, or US$24 per ton, of reportable segment and Other Businesses income from operations for the third quarter of 2013 compares to income from operations of US$47 million, or US$9 per ton, in the second quarter of 2013 and income from operations of US$171 million, or US$32 per ton, in the third quarter of 2012.
Other items not allocated to segments in the third quarter of 2013 consisted primarily of a US$1.8 billion pre-tax non-cash goodwill impairment charge, which was announced in a press release and Form 8-K filed earlier this month and will be detailed further in our Form 10-Q.
Net interest and other financial costs in the third quarter of 2013 includes a US$22 million pre-tax charge related to a guarantee of an unconsolidated equity method investment for which payment by U. S. Steel is probable.
For the third quarter 2013, the company recorded a tax provision of US$4 million on its pre-tax loss of US$1,787 million. The tax provision does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where it has recorded a full valuation allowance on deferred tax assets. In addition, essentially no tax benefit was recorded on the US$1.8 billion goodwill impairment charge.
As of 30 September 2013, U. S. Steel had US$697 million of cash and US$2.4 billion of total liquidity.
Reportable Segments and Other Businesses
The Flat-rolled segment results from operations improved versus the second quarter due to an increase in average realized prices and lower repairs and maintenance costs partially offset by reduced shipments. Average realized prices increased compared to the second quarter due to higher spot market prices. Shipments decreased significantly due to a planned blast furnace outage at the Great Lakes Works and the Lake Erie Works labor dispute. A successor agreement was reached in August with blast furnace production at Lake Erie Works resuming in October.
Third quarter results for the European segment decreased compared to the second quarter. A scheduled blast furnace outage resulted in significantly lower shipments and increased facility repairs and maintenance costs. Average realized euro-based prices were comparable to the second quarter as decreases in spot and contract market prices were offset by the positive effect of a higher percentage of value-added shipments.
Third quarter results for the Tubular segment were comparable to the second quarter. Shipments and average realized prices increased slightly primarily due to a higher percentage of alloy and seamless shipments. Operating costs increased due to higher repairs and maintenance costs.
Third quarter results for Other Businesses decreased primarily due to a gain of approximately US$30 million from a real estate sale that occurred in the second quarter.
Outlook
Commenting on U. S. Steel's outlook for the fourth quarter, Longhi said, "We expect total reportable segment and Other Businesses income from operations to decrease compared to the third quarter due primarily to planned maintenance outages in our Flat-rolled segment. Results for our European segment are projected to improve compared to the third quarter and Tubular results are expected to be comparable to the third quarter."
Fourth quarter results for the Flat-rolled segment are expected to be near breakeven. Overall, repairs and maintenance costs are expected to increase by approximately US$60 million as compared to the third quarter due primarily to a reline of a blast furnace at Gary Works and a planned blast furnace maintenance project at Fairfield Works. Despite higher average spot and market-based contract prices in the fourth quarter, it expects average realized prices to be comparable to the third quarter due to a higher percentage of hot rolled shipments in the fourth quarter. Shipments are expected to increase slightly quarter over quarter.
The company expects results for the European segment to improve in the fourth quarter and return to profitability due to higher shipments and lower facility repairs and maintenance costs as a blast furnace outage was completed in the third quarter. It expects average realized prices for the majority of its products to increase compared to the third quarter; however, overall average realized prices in the fourth quarter are expected to decline compared to the third quarter due to a return to a more normal level of hot rolled shipments.
Fourth quarter results for the Tubular segment are expected to be comparable to the third quarter as the benefits of reduced operating costs are offset by slightly lower average realized prices and shipments as end users are expected to decrease drilling activity in order to operate within their 2013 capital budgets. Inventory management by customers may also be a factor as it approaches year-end.
The company expects a minimal tax provision/benefit in the fourth quarter primarily due to the full valuation allowance on deferred tax assets in Canada.
