UNITED STATES STEEL CORPORATION - Adjusting capital allocation strategy to move faster towards world-competitive, “best of both” strategy
- Updating stakeholders on accelerating progress towards achieving goal of as much as
$1 billion of capital and operational cash improvements by 2022
Fourth quarter 2019 adjusted EBITDA is expected to be approximately
“While the current realities of the markets we serve are having a significant impact on our short-term results, we are taking swift action to align our operational footprint and financial strategy with our customers’ future to ensure we continue executing our ‘best of both’ integrated and mini-mill technology strategy,” commented President and Chief Executive Officer
We understand the impact today’s announcement to indefinitely idle Great Lakes Works has on many of our stakeholders, and we are acting now to reposition U. S. Steel around a footprint differentiated based on cost or capability.”
Burritt continued, “2020 will be an important year for strategy execution and we are taking decisive action to make changes to our capital deployment strategy that help us get to where we are going faster. With the reduced capital spending forecast and quarterly dividend adjustment announced today, we are preserving
Updates to 2020 Capital Spending Forecast:
- Capital Spending Flexibility – The Company is adjusting its 2020 capital spending forecast from
$950 million to$875 million , a$75 million adjustment to the previously disclosed 2020 capital spending forecast, and reprioritizing spending across the enterprise to enable focus on previously announced strategic priorities.
Updates on
- 2022 Capital and Operational Cash Improvement Target – As disclosed on the
October 1, 2019 call regarding the investment in BigRiver Steel , the Company has set a goal of achieving as much as$1 billion in capital and operational cash improvements by 2022 through activities such as rescoping asset revitalization investments, reducing fixed costs and enhancing its ability to pursue opportunities to extract incremental value from excess iron ore pellets. The Company has reduced the Asset Revitalization program by$200 - 250 million to focus the remaining program around enhancements to the Gary hot strip mill capability advantages.
Additionally, the Company has already completed actions (primarily labor reductions) to date that will generate annualized cost benefits of approximately$75 million in 2020 of the stated$200 million run rate fixed cost reduction by the end of 2021. The Company continues to assess options to create incremental value, primarily through its excess iron ore pellets and has expanded the scope to include real estate opportunities.
Updates to Capital Allocation Strategy:
- Dividend Policy and Stock Repurchase Program Change – The Board of Directors has approved an adjustment of the quarterly dividend to
$0.01 /share, from$0.05 /share, to support successful execution of the Company’s world-competitive, “best of both” strategy. This change in the dividend becomes effective as dividends are declared in 2020 and is expected to deliver approximately$25 million of annual cash savings beginning in 2020. In addition, as communicated on the third quarter earnings call, the Company has stopped repurchases under its stock repurchase program and now has decided to formally terminate the program. Currently, the Company believes that executing its world-competitive, “best of both” strategy is a better use of capital than maintaining the current dividend policy or continuing with stock repurchases. These components of the capital allocation strategy remain important to the Company’s capital allocation framework and will continue to be assessed regularly by the Board of Directors.
“Market dynamics reinforce the need to accelerate the world-competitive, ‘best of both’ company, ultimately centering our North American Flat-rolled footprint around three world-class assets (Big
Full Year Guidance Details
The Company expects full year 2019 adjusted EBITDA to be approximately
Fourth Quarter Adjusted EBITDA Commentary
While flat-rolled steel market conditions are improving, the Company’s expected fourth quarter Flat-rolled segment results are negatively impacted by the approximately 60% of shipments impacted by lower steel selling prices in the third quarter and October. Lower fourth quarter shipments to third party customers, suggested in the previously disclosed annual shipment guidance of 10.7 million tons, are also expected to negatively impact earnings. The Company also expects the
In
Commercial headwinds in the Tubular segment are expected to drive lower-than-expected fourth quarter earnings. Selling prices continue to decline, while substrate costs improved less than expected, primarily due to higher scrap costs. This is expected to narrow margins and reduce earnings compared to the third quarter. In addition, seasonal weakness is negatively impacting quarter-over-quarter results and import levels remain high, but the electric arc furnace installation remains on-budget and on-time for 2020.
Forward Looking Statements
This release contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. Generally, we have identified such forward-looking statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,” “aim,” “should,” “will” and similar expressions or by using future dates in connection with any discussion of, among other things, operating performance, trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume impacts, share of sales and earnings per share changes, anticipated cost savings, potential capital and operational cash improvements, U. S. Steel’s future ability or plans to take ownership of the Big
NON-GAAP FINANCIAL MEASURES
RECONCILIATION OF ADJUSTED EBITDA GUIDANCE
| (Dollars in millions) | |||||
| Reconciliation to Projected Adjusted EBITDA Included in Guidance | 4Q 2019 | ||||
| Projected net loss attributable to | $ | (366 | ) | ||
| Estimated income tax benefit | (113 | ) | |||
| Estimated net interest and other financial costs | 64 | ||||
| Estimated depreciation, depletion and amortization | 165 | ||||
| Projected EBITDA included in guidance | $ | (250 | ) | ||
| Estimated fourth quarter adjustments | 225 | ||||
| Projected adjusted EBITDA included in guidance | $ | (25 | ) | ||
| (Dollars in millions) | |||||
| Reconciliation to Projected Adjusted EBITDA Included in Guidance | 2019 | ||||
| Projected net loss attributable to | $ | (328 | ) | ||
| Estimated income tax benefit | (156 | ) | |||
| Estimated net interest and other financial costs | 215 | ||||
| Estimated depreciation, depletion and amortization | 619 | ||||
| Projected EBITDA included in guidance | $ | 350 | |||
| Estimated full year adjustments | 332 | ||||
| Projected adjusted EBITDA included in guidance | $ | 682 | |||
NON-GAAP FINANCIAL MEASURES
RECONCILIATION OF ADJUSTED NET LOSS GUIDANCE
| (Dollars in millions, except per share amounts) | |||
| Reconciliation to Projected Adjusted Net Loss Attributable to U. S. Steel Included in Guidance | 4Q 2019 | ||
| Projected net loss attributable to | $ | (366 | ) |
| Estimated fourth quarter adjustments 1 | 171 | ||
| Projected adjusted net loss attributable to | $ | (195 | ) |
| Reconciliation to Projected Adjusted Diluted Net Loss Per Share Included in Guidance | 4Q 2019 | ||
| Projected diluted net loss per share included in guidance | $ | (2.15 | ) |
| Estimated fourth quarter adjustments 1 | 1.00 | ||
| Projected adjusted diluted net loss per share included in guidance | $ | (1.15 | ) |
1 These adjustments have been tax effected.
| (Dollars in millions, except per share amounts) | |||
| Reconciliation to Projected Adjusted Net Loss Attributable to U. S. Steel Included in Guidance | 2019 | ||
| Projected net loss attributable to | $ | (328 | ) |
| Estimated full year adjustments 1 | 257 | ||
| Projected adjusted net loss attributable to | $ | (71 | ) |
| Reconciliation to Projected Adjusted Diluted Net Loss Per Share Included in Guidance | 2019 | ||
| Projected diluted net loss per share included in guidance | $ | (1.92 | ) |
| Estimated full year adjustments 1 | 1.50 | ||
| Projected adjusted diluted net loss per share included in guidance | $ | (0.42 | ) |
1 These adjustments have been tax effected.
Note Regarding Non-GAAP Financial Measures
We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share, earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and adjusted EBITDA, which are non-GAAP measures, as additional measurements to enhance the understanding of our operating performance. We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to our operating performance and provides management and investors with additional information for comparison of our operating results to the operating results of other companies.
Adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA are non-GAAP measures that exclude the financial effects of restructuring charges, the
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CONTACTS:
Public Affairs Rep.
Corporate Communications
T – (412) 433-2512
E – almalkowski@uss.com
General Manager
Investor Relations
T – (412) 433-6935
E – klewis@uss.com
2019 GlobeNewswire, Inc., source
