U. S. Steel Reports Results, Continues "Multi-Year Journey" to Profitability
01/28/2014 - United States Steel Corporation reported a fourth quarter 2013 net loss of US$122 million compared to a third quarter 2013 net loss of US$1,791 million and fourth quarter 2012 net loss of US$50 million.
Adjusted net income for the fourth quarter of 2013 was US$38 million, or US$0.27 per diluted share, excluding after-tax non-cash restructuring and other charges primarily related to the shutdown of the iron and steelmaking facilities at Hamilton Works of US$302 million, or US$2.09 per diluted share, and a favorable tax-related item of US$142 million, or US$0.98 per diluted share. Adjusted net loss for the third quarter of 2013 was US$20 million, orUS$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 loss for the fourth quarter of 2012 was US$59 million, or US$0.41 per diluted share, excluding a favorable settlement of US$9 million, or US$0.06 per diluted share, related to a supplier contract dispute.
For the full-year 2013, U. S. Steel reported a net loss of US$2,064 million, or US$14.27 per diluted share, which included a net loss ofUS$2.1 billion primarily due to a non-cash goodwill impairment charge and non-cash restructuring and other charges. For full-year 2012, U. S. Steel reported a net loss of US$124 million, or US$0.86 per diluted share, which included a net loss of US$353 million primarily due to the sale of U. S. Steel Serbia.
Commenting on results, U. S. Steel CEO Mario Longhi said, "We are on a multi-year journey to earn the right to grow by improving our balance sheet and achieving sustainable profitability. Our fourth quarter results reflect our early efforts on this journey as all segments were profitable and in total, we had an overall improvement in operating results compared to the third quarter."
The US$146 million, or US$30 per ton, of reportable segment and Other Businesses income from operations for the fourth quarter of 2013 compares to income from operations of US$113 million, or US$24 per ton, in the third quarter of 2013 and income from operations of US$59 million, or US$11 per ton, in the fourth quarter of 2012.
Other items not allocated to segments in the fourth quarter of 2013 consisted of non-cash restructuring and other charges ofUS$248 million, or US$1.71 per diluted share; an adjustment to our preliminary non-cash goodwill impairment charge of US$23 million, orUS$0.16 per diluted share; a US$32 million, or US$0.22 per diluted share, environmental remediation charge and a non-cash charge to write-off an equity investment of US$16 million, or US$0.11 per diluted share.
For the full-year 2013, we recorded a tax benefit of US$168 million on our pre-tax loss of US$2,232 million. The tax provision does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where we have recorded a full valuation allowance on deferred tax assets; however, it does include a tax benefit of US$142 million associated with the tax provision recorded in other comprehensive income related to the year-end pension revaluation. In addition, essentially no tax benefit was recorded on theUS$1.8 billion goodwill impairment charge.
As of 31 December 2013, U. S. Steel had US$604 million of cash and US$2.3 billion of total liquidity.
Reportable Segments and Other Businesses
Fourth quarter results for our Flat-rolled segment were comparable to the third quarter. Average spot and market-based contract prices were higher in the fourth quarter; however, a higher percentage of hot rolled shipments resulted in average realized prices that were comparable to the third quarter. A decrease in raw materials and other costs were offset by an increase of approximately US$45 million for facility repairs and maintenance costs due primarily to a blast furnace reline at Gary Works and a planned blast furnace maintenance project at Fairfield Works.
Results for our European segment improved in the fourth quarter and returned to profitability due to higher shipments and lower facility repairs and maintenance costs as a blast furnace outage was completed in the third quarter. Average realized euro-based prices for the majority of our products remained relatively unchanged in the fourth quarter; however, overall average realized prices in the fourth quarter declined compared to the third quarter due to a higher level of hot-rolled shipments.
Fourth quarter results for our Tubular segment decreased compared to the third quarter due primarily to lower shipments and average realized prices as end users decreased drilling activity in order to operate within their 2013 capital budgets and imports persisted at high levels for which a trade case is pending. Inventory management by our customers was also a factor as we approached year-end.
Outlook
Commenting on U. S. Steel's outlook for the first quarter, Longhi said, "We are encouraged by our early progress on the Carnegie Way. We expect total reportable segment and Other Businesses income from operations to increase moderately compared to the fourth quarter."
We expect first quarter results for our Flat-rolled segment to increase primarily due to higher average realized prices and shipments as well as reduced repairs and maintenance costs. Average realized prices and shipments are expected to increase as a result of higher contract and spot market prices and improving end user demand after the fourth quarter holiday down time. Repairs and maintenance costs are projected to decrease as compared to the fourth quarter due to the completion of the projects at Gary Works and Fairfield Works. We will also have reduced idled facility costs after the shutdown of the iron and steelmaking facilities at Hamilton Works. Raw materials costs, primarily for purchased scrap, and energy costs are expected to increase.
We expect first quarter results for our European segment to be comparable to the fourth quarter as the benefits of increased average realized prices are offset by an increase in raw materials costs, primarily for iron ore, and other operating costs. Average realized prices are expected to increase compared to the fourth quarter due to a more favorable product mix and an anticipated gradual recovery in the spot market while shipments are expected to remain comparable.
First quarter results for our Tubular segment are expected to decrease as the benefits of reduced operating costs and increased shipments are more than offset by a decrease in average realized prices and an increase in substrate costs. Average realized prices are projected to decrease primarily due to pricing pressures from continuing high import levels and increased domestic supply. Shipments are expected to increase as drilling activity begins to improve.
(a) Excludes intersegment shipments.
(b) Thousands of net tons.
(c) Based on annual raw steel production capability of 24.3 million net tons for Flat-rolled and 5.0 million net tons for U. S. Steel Europe (USSE). Prior to the sale of USSS on 31 January 2012, annual raw steel production capability for USSE was 7.4 million net tons. On 31 December 2013, U. S. Steel permanently shut down its iron and steelmaking facilities at Hamilton Works reducing Flat-rolled's annual steel capacity to 22.0 million tons.
(d) AISI capability utilization rates include our U.S. facilities (Gary Works, Great Lakes Works, Mon Valley Works, Granite City Works and Fairfield Works).
For the full-year 2013, U. S. Steel reported a net loss of US$2,064 million, or US$14.27 per diluted share, which included a net loss ofUS$2.1 billion primarily due to a non-cash goodwill impairment charge and non-cash restructuring and other charges. For full-year 2012, U. S. Steel reported a net loss of US$124 million, or US$0.86 per diluted share, which included a net loss of US$353 million primarily due to the sale of U. S. Steel Serbia.
| Earnings Highlights | |||||||||||||||
| (Dollars in millions, except per share amounts) | 4Q 2013 | 3Q 2013 | 4Q 2012 | 2013 | 2012 | ||||||||||
| Net Sales | US$ | 4,269 | US$ | 4,131 | US$ | 4,487 | US$ | 17,424 | US$ | 19,328 | |||||
| Segment income (loss) from operations | |||||||||||||||
| Flat-rolled | US$ | 87 | US$ | 82 | US$ | 11 | US$ | 105 | US$ | 400 | |||||
| U. S. Steel Europe | 12 | (32) | 7 | 28 | 34 | ||||||||||
| Tubular | 32 | 49 | 32 | 190 | 366 | ||||||||||
| Other Businesses | 15 | 14 | 9 | 77 | 55 | ||||||||||
|
Total reportable segment and Other Businesses income from operations |
US$ | 146 | US$ | 113 | US$ | 59 | US$ | 400 | US$ | 855 | |||||
| Postretirement benefit expense | (56) | (55) | (69) | (221) | (297) | ||||||||||
| Other items not allocated to segments | (319) | (1,760) | 15 | (2,079) | (311) | ||||||||||
| Income (loss) from operations | US$ | (229) | US$ | (1,702) | US$ | 5 | US$ | (1,900) | US$ | 247 | |||||
| Net interest and other financial costs | 75 | 85 | 64 | 332 | 241 | ||||||||||
| Income tax (benefit) provision | (182) | 4 | (8) | (168) | 131 | ||||||||||
| Less: Net loss attributable to the noncontrolling interests | — | — | (1) | — | (1) | ||||||||||
| Net loss attributable to United States Steel Corporation | US$ | (122) | US$ | (1,791) | US$ | (50) | US$ | (2,064) | US$ | (124) | |||||
| -Per basic share | US$ | (0.84) | US$ | (12.38) | US$ | (0.35) | US$ | (14.27) | US$ | (0.86) | |||||
| -Per diluted share | US$ | (0.84) | US$ | (12.38) | US$ | (0.35) | US$ | (14.27) | US$ | (0.86) | |||||
Commenting on results, U. S. Steel CEO Mario Longhi said, "We are on a multi-year journey to earn the right to grow by improving our balance sheet and achieving sustainable profitability. Our fourth quarter results reflect our early efforts on this journey as all segments were profitable and in total, we had an overall improvement in operating results compared to the third quarter."
The US$146 million, or US$30 per ton, of reportable segment and Other Businesses income from operations for the fourth quarter of 2013 compares to income from operations of US$113 million, or US$24 per ton, in the third quarter of 2013 and income from operations of US$59 million, or US$11 per ton, in the fourth quarter of 2012.
Other items not allocated to segments in the fourth quarter of 2013 consisted of non-cash restructuring and other charges ofUS$248 million, or US$1.71 per diluted share; an adjustment to our preliminary non-cash goodwill impairment charge of US$23 million, orUS$0.16 per diluted share; a US$32 million, or US$0.22 per diluted share, environmental remediation charge and a non-cash charge to write-off an equity investment of US$16 million, or US$0.11 per diluted share.
For the full-year 2013, we recorded a tax benefit of US$168 million on our pre-tax loss of US$2,232 million. The tax provision does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where we have recorded a full valuation allowance on deferred tax assets; however, it does include a tax benefit of US$142 million associated with the tax provision recorded in other comprehensive income related to the year-end pension revaluation. In addition, essentially no tax benefit was recorded on theUS$1.8 billion goodwill impairment charge.
As of 31 December 2013, U. S. Steel had US$604 million of cash and US$2.3 billion of total liquidity.
Reportable Segments and Other Businesses
Fourth quarter results for our Flat-rolled segment were comparable to the third quarter. Average spot and market-based contract prices were higher in the fourth quarter; however, a higher percentage of hot rolled shipments resulted in average realized prices that were comparable to the third quarter. A decrease in raw materials and other costs were offset by an increase of approximately US$45 million for facility repairs and maintenance costs due primarily to a blast furnace reline at Gary Works and a planned blast furnace maintenance project at Fairfield Works.
Results for our European segment improved in the fourth quarter and returned to profitability due to higher shipments and lower facility repairs and maintenance costs as a blast furnace outage was completed in the third quarter. Average realized euro-based prices for the majority of our products remained relatively unchanged in the fourth quarter; however, overall average realized prices in the fourth quarter declined compared to the third quarter due to a higher level of hot-rolled shipments.
Fourth quarter results for our Tubular segment decreased compared to the third quarter due primarily to lower shipments and average realized prices as end users decreased drilling activity in order to operate within their 2013 capital budgets and imports persisted at high levels for which a trade case is pending. Inventory management by our customers was also a factor as we approached year-end.
Outlook
Commenting on U. S. Steel's outlook for the first quarter, Longhi said, "We are encouraged by our early progress on the Carnegie Way. We expect total reportable segment and Other Businesses income from operations to increase moderately compared to the fourth quarter."
We expect first quarter results for our Flat-rolled segment to increase primarily due to higher average realized prices and shipments as well as reduced repairs and maintenance costs. Average realized prices and shipments are expected to increase as a result of higher contract and spot market prices and improving end user demand after the fourth quarter holiday down time. Repairs and maintenance costs are projected to decrease as compared to the fourth quarter due to the completion of the projects at Gary Works and Fairfield Works. We will also have reduced idled facility costs after the shutdown of the iron and steelmaking facilities at Hamilton Works. Raw materials costs, primarily for purchased scrap, and energy costs are expected to increase.
We expect first quarter results for our European segment to be comparable to the fourth quarter as the benefits of increased average realized prices are offset by an increase in raw materials costs, primarily for iron ore, and other operating costs. Average realized prices are expected to increase compared to the fourth quarter due to a more favorable product mix and an anticipated gradual recovery in the spot market while shipments are expected to remain comparable.
First quarter results for our Tubular segment are expected to decrease as the benefits of reduced operating costs and increased shipments are more than offset by a decrease in average realized prices and an increase in substrate costs. Average realized prices are projected to decrease primarily due to pricing pressures from continuing high import levels and increased domestic supply. Shipments are expected to increase as drilling activity begins to improve.
| UNITED STATES STEEL CORPORATION | |||||||||||||||||
| PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited) | |||||||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||
| 31 Dec. | 30 Sept. | 31 Dec. | 31 December | ||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | |||||||||||||
| OPERATING STATISTICS | |||||||||||||||||
| Average realized price: ($/net ton) (a) | |||||||||||||||||
| Flat-rolled | 750 | 752 | 721 | 735 | 750 | ||||||||||||
| U. S. Steel Europe | 692 | 714 | 718 | 706 | 742 | ||||||||||||
| USSK | 692 | 714 | 718 | 706 | 743 | ||||||||||||
| Tubular | 1,509 | 1,543 | 1,624 | 1,530 | 1,687 | ||||||||||||
| Steel Shipments: (a) (b) | |||||||||||||||||
| Flat-rolled | 3,470 | 3,428 | 3,924 | 14,644 | 15,974 | ||||||||||||
| U. S. Steel Europe | 1,029 | 861 | 905 | 4,000 | 3,816 | ||||||||||||
| Tubular | 414 | 459 | 407 | 1,757 | 1,886 | ||||||||||||
| Total Steel Shipments | 4,913 | 4,748 | 5,236 | 20,401 | 21,676 | ||||||||||||
| USSK Steel Shipments | 1,029 | 861 | 905 | 4,000 | 3,743 | ||||||||||||
| Intersegment Shipments: (b) | |||||||||||||||||
| Flat-rolled to Tubular | 363 | 450 | 393 | 1,699 | 1,803 | ||||||||||||
| U. S. Steel Europe to Flat-rolled | — | — | — | — | 249 | ||||||||||||
| Raw Steel Production: (b) | |||||||||||||||||
| Flat-rolled | 4,474 | 4,261 | 4,686 | 17,867 | 19,116 | ||||||||||||
| U. S. Steel Europe | 1,205 | 1,032 | 969 | 4,598 | 4,522 | ||||||||||||
| USSK | 1,205 | 1,032 | 969 | 4,598 | 4,434 | ||||||||||||
| Raw Steel Capability Utilization: (c) | |||||||||||||||||
| Flat-rolled | 73 | % | 70 | % | 77 | % | 74 | % | 78 | % | |||||||
| Flat-rolled U.S. Facilities (d) | 80 | % | 87 | % | 84 | % | 86 | % | 86 | % | |||||||
| U. S. Steel Europe | 96 | % | 82 | % | 77 | % | 92 | % | 87 | % | |||||||
| USSK | 96 | % | 82 | % | 77 | % | 92 | % | 88 | % | |||||||
(b) Thousands of net tons.
(c) Based on annual raw steel production capability of 24.3 million net tons for Flat-rolled and 5.0 million net tons for U. S. Steel Europe (USSE). Prior to the sale of USSS on 31 January 2012, annual raw steel production capability for USSE was 7.4 million net tons. On 31 December 2013, U. S. Steel permanently shut down its iron and steelmaking facilities at Hamilton Works reducing Flat-rolled's annual steel capacity to 22.0 million tons.
(d) AISI capability utilization rates include our U.S. facilities (Gary Works, Great Lakes Works, Mon Valley Works, Granite City Works and Fairfield Works).
