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United States Steel Reports 1st Quarter Results
04/25/2007 - United States Steel reported net income of $273 million on net sales of $3756 million for the first quarter of 2007.
United States Steel Corp. reported net income of $273 million on net sales of $3756 million for the first quarter of 2007.
First Quarter Results—The $273-million net income ($2.30 per diluted share) compares to fourth-quarter 2006 net income of $297 million ($2.50 per diluted share), and first-quarter 2006 net income of $256 million ($2.04 per diluted share).
Income from operations was $346 million, which compares with income from operations of $341 million in the fourth quarter of 2006, and $369 million in the first quarter of 2006.
Results included a $3-million pre-tax charge related for 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). In the fourth quarter of 2006, results included a $32-million pre-tax charge for early redemption of most of the company’s 10-3/4% Senior Notes. This item and other items not allocated to segments decreased net income by $33 million (28 cents per diluted share). Other items not allocated to segments in the first quarter of 2006 consisted of an asset impairment charge, which reduced net income by $5 million (4 cents per diluted Share).
U. S. Steel also repurchased 305,000 shares of common stock for $25 million during the first quarter of 2007.
Management Comments—"Considering market conditions, we had a good quarter with solid results from Flat-rolled and Tubular and a particularly strong performance by our European segment,” commented U. S. Steel Chairman and CEO John P. Surma. “We continued to generate substantial cash, redeemed $49-million of debt and made a voluntary contribution of $35 million to our main defined benefit pension plan."
Reportable Segments and Other Businesses—Segment income from operations was $385 million ($76 per ton) in the first quarter of 2007, which compares with segment income of $414 million ($85 per ton) in the fourth quarter of 2006, and $429 million ($80 per ton) in the first quarter of 2006.
Segment results decreased from fourth quarter 2006. Flat-rolled income more than doubled from the fourth quarter due primarily to higher contract prices and improved operating efficiencies, partially offset by lower spot prices and higher raw material costs. U. S. Steel Europe (USSE) income increased mainly due to higher shipment volumes. Tubular results were lower than the fourth quarter on lower shipments and prices, reflecting continued high imports and customer inventory levels. The decline in results for Other Businesses was related to normal seasonal effects at the company’s iron ore operations in Minnesota and the non-recurrence of fourth-quarter land sales.
Outlook—Looking ahead to the second quarter, Surma said, "We expect continued solid operating results for our three reportable segments with overall results in line with the first quarter."
The company expects second-quarter Flat-rolled results to improve from the first quarter on higher shipment volumes and utilization rates, partially offset by increased raw material, outage and energy costs. Average realized prices are expected to be comparable to first quarter levels as spot shipments and prices are expected to increase.
For USSE, the company expects second-quarter results to be somewhat lower than the first quarter, as increased prices are offset by higher raw material and outage costs. Shipment levels should be in line with the first quarter. Prices and shipments for Tubular in second-quarter 2007 are expected to be lower than first quarter levels as imports and customer inventories remain high.
Normal seasonal improvements at Minnesota iron ore operations are expected to be lower due to production levels that will remain near first quarter, repair outages and costs for longer-term mine development.
Lone Star Acquisition—Concerning the March 28, 2007 definitive agreement between U. S. Steel and Lone Star Technologies, Inc., regulatory filings have been made under the Hart-Scott-Rodino Act in the United States and in several other nations. U. S. Steel expects that the transaction, which is subject to the approval of Lone Star's shareholders and regulatory approvals, will be completed late in the second quarter or early in the third quarter of 2007.
