U. S. Steel Posts US$18 Million Net Loss in Second Quarter
07/30/2014 - U. S. Steel said the impacts of the extraordinary weather conditions and operational issues that began in the first quarter resulted in continuing operating inefficiencies; higher repairs and maintenance costs; and logistical issues that temporarily limited its production capabilities during the second quarter.
United States Steel Corporation reported second quarter 2014 net loss of US$18 million, or US$0.12 per diluted share, compared to a second quarter 2013 net loss of US$78 million, or US$0.54 per diluted share, and first quarter 2014 net income of US$52 million, or US$0.34 per diluted share. Adjusted net income for the second quarter of 2014 was US$25 million, or US$0.17 per diluted share, excluding a charge of US$46 million, or US$0.31 per diluted share, for litigation reserves; a loss on assets held for sale of US$9 million, or US$0.06 per diluted share; and a curtailment gain of US$12 million, or US$0.08 per diluted share. See the Non-GAAP Financial Measures section for a description of the non-GAAP measures and a reconciliation to net income (loss) attributable to U. S. Steel.
Commenting on results, U. S. Steel President and CEO Mario Longhi said, "The Carnegie Way journey continues to drive improvements as we reported operating income for each of our reportable segments and Other Businesses despite significant operating inefficiencies and logistical issues in our Flat-rolled segment."
The US$132 million, or US$26 per ton, of reportable segment and Other Businesses income from operations for the second quarter of 2014 compares to income from operations of US$154 million, or US$30 per ton, in the first quarter of 2014 and income from operations of US$47 million, or US$9 per ton, in the second quarter of 2013.
Other items not allocated to segments in the second quarter of 2014 consisted of a pre-tax charge of US$70 million for litigation reserves, a pre-tax loss of US$14 million on assets held for sale and a pre-tax curtailment gain of US$19 million.
As of June 30, 2014, U. S. Steel had US$1.5 billion of cash and US$3.2 billion of total liquidity. Cash provided by operating activities was US$1.4 billion in the first half of 2014 primarily due to improved working capital management. During the second quarter, we repaid the remaining US$322 million of our 2014 Senior Convertible Notes.
Reportable Segments and Other Businesses
Results for our Flat-rolled segment remained positive but decreased significantly from the first quarter. The impacts of the extraordinary weather conditions and operational issues that began in the first quarter resulted in continuing operating inefficiencies; higher repairs and maintenance costs; and logistical issues that temporarily limited our production capabilities during the second quarter. These events resulted in both higher operating costs and lower shipments as compared to the first quarter. Market conditions in North America did improve versus the first quarter, resulting in higher average realized proceeds in the second quarter. The benefits generated by our Carnegie Way efforts partially offset the impact of these events and allowed us to report positive results. As we exited the second quarter, we returned to normal operations.
We reported comparable results for our European segment in the second quarter despite the absence of the sale and swap of carbon emission allowances recognized in the first quarter. Iron ore costs declined while shipments and average realized prices were comparable to the first quarter.
Tubular results increased compared to the first quarter. Shipments were higher due to increased drilling activity while average realized prices were in line with the first quarter. Raw materials costs improved as compared to the first quarter.
Outlook
Commenting on U. S. Steel's outlook for the third quarter, Longhi said, "We expect operating income for our reportable segments and Other Businesses to increase significantly over the second quarter, as we return to normal operating levels. We continue to earn the right to grow as the Carnegie Way transformation allows us to better meet our customers' needs and improves our earnings power."
Results for our Flat-rolled segment are expected to improve significantly from the second quarter. Shipments are projected to increase as we return to normal operations while average realized prices are expected to remain consistent with the second quarter. The absence of weather related and operational challenges experienced during the second quarter is expected to generate a favorable impact of approximately US$150 million from reduced repairs and maintenance costs and increased operating efficiencies along with the increased shipments described above. Inventory levels are expected to increase during the balance of the year as we work to replenish our supply chain.
We expect results for our European segment to decrease as compared to the second quarter. Scheduled caster and blast furnace maintenance along with the normal impact of the European holiday season is expected to result in lower shipments and higher repairs and maintenance costs related to the planned outages. These negative impacts are expected to be partially offset by a decrease in raw materials costs, primarily for iron ore. Average realized prices are projected to be in line with the second quarter.
Tubular results are expected to improve slightly as compared to the second quarter. Shipments are expected to decrease, due to the indefinite idling of the McKeesport and Bellville facilities, while average realized prices are projected to increase due to improved pricing and mix. Because the International Trade Commission (ITC) ruling on the OCTG trade case is expected in mid-August, we do not anticipate any benefit for the third quarter.
U.
| Earnings Highlights | |||||||||
| (Dollars in millions, except per share amounts) | 2Q 2014 | 1Q 2014 | 2Q 2013 | ||||||
| Net Sales | US$ | 4,400 | US$ | 4,448 | US$ | 4,429 | |||
| Segment income (loss) from operations | |||||||||
| Flat-rolled | US$ | 30 | US$ | 85 | US$ | (51) | |||
| U. S. Steel Europe | 38 | 32 | 10 | ||||||
| Tubular | 47 | 24 | 45 | ||||||
| Other Businesses | 17 | 13 | 43 | ||||||
|
Total reportable segment and Other Businesses income from operations |
US$ | 132 | US$ | 154 | US$ | 47 | |||
| Postretirement benefit expense | (32) | (32) | (54) | ||||||
| Other items not allocated to segments | (65) | — | — | ||||||
| Income (loss) from operations | US$ | 35 | US$ | 122 | US$ | (7) | |||
| Net interest and other financial costs | 64 | 69 | 68 | ||||||
| Income tax (benefit) provision | (11) | 1 | 3 | ||||||
| Less: Net loss attributable to the noncontrolling interests | — | — | — | ||||||
| Net (loss) income attributable to United States Steel Corporation | US$ | (18) | US$ | 52 | US$ | (78) | |||
| -Per basic share | US$ | (0.12) | US$ | 0.36 | US$ | (0.54) | |||
| -Per diluted share | US$ | (0.12) | US$ | 0.34 | US$ | (0.54) | |||
Commenting on results, U. S. Steel President and CEO Mario Longhi said, "The Carnegie Way journey continues to drive improvements as we reported operating income for each of our reportable segments and Other Businesses despite significant operating inefficiencies and logistical issues in our Flat-rolled segment."
The US$132 million, or US$26 per ton, of reportable segment and Other Businesses income from operations for the second quarter of 2014 compares to income from operations of US$154 million, or US$30 per ton, in the first quarter of 2014 and income from operations of US$47 million, or US$9 per ton, in the second quarter of 2013.
Other items not allocated to segments in the second quarter of 2014 consisted of a pre-tax charge of US$70 million for litigation reserves, a pre-tax loss of US$14 million on assets held for sale and a pre-tax curtailment gain of US$19 million.
As of June 30, 2014, U. S. Steel had US$1.5 billion of cash and US$3.2 billion of total liquidity. Cash provided by operating activities was US$1.4 billion in the first half of 2014 primarily due to improved working capital management. During the second quarter, we repaid the remaining US$322 million of our 2014 Senior Convertible Notes.
Reportable Segments and Other Businesses
Results for our Flat-rolled segment remained positive but decreased significantly from the first quarter. The impacts of the extraordinary weather conditions and operational issues that began in the first quarter resulted in continuing operating inefficiencies; higher repairs and maintenance costs; and logistical issues that temporarily limited our production capabilities during the second quarter. These events resulted in both higher operating costs and lower shipments as compared to the first quarter. Market conditions in North America did improve versus the first quarter, resulting in higher average realized proceeds in the second quarter. The benefits generated by our Carnegie Way efforts partially offset the impact of these events and allowed us to report positive results. As we exited the second quarter, we returned to normal operations.
We reported comparable results for our European segment in the second quarter despite the absence of the sale and swap of carbon emission allowances recognized in the first quarter. Iron ore costs declined while shipments and average realized prices were comparable to the first quarter.
Tubular results increased compared to the first quarter. Shipments were higher due to increased drilling activity while average realized prices were in line with the first quarter. Raw materials costs improved as compared to the first quarter.
Outlook
Commenting on U. S. Steel's outlook for the third quarter, Longhi said, "We expect operating income for our reportable segments and Other Businesses to increase significantly over the second quarter, as we return to normal operating levels. We continue to earn the right to grow as the Carnegie Way transformation allows us to better meet our customers' needs and improves our earnings power."
Results for our Flat-rolled segment are expected to improve significantly from the second quarter. Shipments are projected to increase as we return to normal operations while average realized prices are expected to remain consistent with the second quarter. The absence of weather related and operational challenges experienced during the second quarter is expected to generate a favorable impact of approximately US$150 million from reduced repairs and maintenance costs and increased operating efficiencies along with the increased shipments described above. Inventory levels are expected to increase during the balance of the year as we work to replenish our supply chain.
We expect results for our European segment to decrease as compared to the second quarter. Scheduled caster and blast furnace maintenance along with the normal impact of the European holiday season is expected to result in lower shipments and higher repairs and maintenance costs related to the planned outages. These negative impacts are expected to be partially offset by a decrease in raw materials costs, primarily for iron ore. Average realized prices are projected to be in line with the second quarter.
Tubular results are expected to improve slightly as compared to the second quarter. Shipments are expected to decrease, due to the indefinite idling of the McKeesport and Bellville facilities, while average realized prices are projected to increase due to improved pricing and mix. Because the International Trade Commission (ITC) ruling on the OCTG trade case is expected in mid-August, we do not anticipate any benefit for the third quarter.
U.
