U.S. Steel Reports 2nd Quarter Income
07/25/2007 - United States Steel reports net income of $302 million on net sales of $4.2 billion for the second quarter, and net income of $575 million on net sales of $8.0 billion for the first six months of 2007.
United States Steel Corp. reported net income of $302 million on net sales of $4.2 billion for the second quarter, and net income of $575 million on net sales of $8.0 billion for the first six months of 2007.
Second Quarter Results—The $302-million net income ($2.54 per diluted share) compares to net income of $273 million ($2.30 per diluted share) in the previous quarter, and net income of $404 million ($3.22 per diluted share) for the year-ago second quarter.
Management Comments—“We had another good quarter with record results for U. S. Steel Europe (USSE),” said U. S. Steel Chairman and CEO John P. Surma. “During the quarter, we completed the $2-billion acquisition of Lone Star Technologies, and we're pleased with the progress we've made to date in integrating our new facilities and employees into U. S. Steel. Also during the quarter, we issued $1.1 billion of senior notes, expanded our credit facilities, and retired $378 million of 9.75% senior notes that were due in 2010."
Second Quarter Operating Results—Income from operations was $391 million, which compares with income from operations of $346 million in the first quarter of 2007, and $514 million in the second quarter of 2006.
Current net interest and other financial costs included a $23-million pre-tax charge for early redemption of the company’s 9.75% Senior Notes due 2010. This charge reduced net income by $14 million (12 cents per diluted share). In the first quarter of 2007, net interest and other financial costs included a $3-million pre-tax charge related to the early redemption of the company’s 10% Senior Quarterly Income Debt Securities. This charge reduced net income by $2 million (2 cents per diluted share). The income tax provision in the second quarter of 2006 included a favorable adjustment of $15 million (12 cents per diluted share) related to estimated 2005 tax accruals.
The company also repurchased 304,900 shares of common stock for $33 million during the second quarter.
Reportable Segments and Other Businesses—U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $434 million ($79 per ton) in the second quarter of 2007, compared with $385 million ($76 per ton) in the first quarter of 2007 and $579 million ($99 per ton) in the second quarter of 2006.
The company attributes the increase in Flat-rolled income from operations (as compared to the first quarter) to higher shipments and an increased utilization rate, with partial offsets from higher outage and raw material costs. The company says that higher prices helped to boost European operating results, while Tubular operating results, although strong, declined from the first quarter due mainly to lower prices. Tubular results included Lone Star’s operating results effective June 14th, including increased depreciation and amortization as a result of purchase-accounting asset valuations. Lone Star added 47,000 tons to the company’s second-quarter Tubular shipments.
Outlook—Commenting on U. S. Steel's outlook, Surma said, "We expect continued strong performance by our three reportable segments in the third quarter of 2007, with overall operating results improving from the second quarter, excluding any charges resulting from Lone Star integration activities."
For Flat-rolled, third quarter results are expected to improve from the second quarter due primarily to reduced outage and related costs and higher shipments, partially offset by slightly lower average realized prices, reflecting current spot market conditions and higher semi-finished product shipments.
The company expects third-quarter results to decrease for U. S. Steel Europe mainly as a result of higher costs resulting from outage spending and related effects, including a blast furnace reline in Serbia, which will begin in September. Shipments are expected to decrease while average realized prices should increase slightly from second quarter levels.
The company says it expects third-quarter average realized prices for Tubular to decrease from second-quarter levels, including the effects of product mix. Results will reflect the inclusion of Lone Star for the entire quarter; results may be negatively impacted by inventory issues related to the integration.
