United States Steel Corporation : Reports 2013 Third Quarter Results

-- Net loss of $20 million, or $0.14 per diluted share, excluding a $1.8 billion, or $12.24 per diluted share, non-cash goodwill impairment charge

PITTSBURGH, Oct. 28, 2013 /PRNewswire/ -- United States Steel Corporation (NYSE: X) reported a third quarter 2013 net loss of $1,791 million, or $12.38per diluted share, compared to a second quarter 2013 net loss of $78 million, or $0.54per diluted share, and third quarter 2012 net income of $44 million, or $0.28per diluted share.  Adjusted net loss for the third quarter of 2013 was $20 million, or $0.14per diluted share, excluding an after-tax non-cash goodwill impairment charge of $1.8 billion, or $12.24per diluted share.  Adjusted net income for the third quarter of 2012 was $66 million, or $0.41per diluted share, excluding an after-tax charge of $22 million, or $0.13per diluted share, for employee lump sum payments as provided in the 2012 labor agreement. 

Earnings Highlights
(Dollars in millions, except per share amounts)		3Q 2013		2Q 2013		3Q 2012
Net Sales		$	4,131	$	4,429	$	4,652
Segment income (loss) from operations
Flat-rolled		$	82	$	(51)	$	29
U. S. Steel Europe		(32)		10		27
Tubular		49		45		102
Other Businesses		14		43		13
Total reportable segment and Other Businesses income from operations		$	113	$	47	$	171
Postretirement benefit expense		(55)		(54)		(74)
Other items not allocated to segments		(1,760)		-		(35)
Income (loss) from operations		$	(1,702)	$	(7)	$	62
Net interest and other financial costs		85		68		45
Income tax provision (benefit)		4		3		(27)
Less: Net loss attributable to the noncontrolling interests		-		-		-
Net (loss) income attributable to United States Steel Corporation		$	(1,791)	$	(78)	$	44
-Per basic share		$	(12.38)	$	(0.54)	$	0.30
-Per diluted share		$	(12.38)	$	(0.54)	$	0.28

Commenting on results, U. S. Steel CEO Mario Longhisaid, "Total reportable segment and Other Businesses operating results of $113 millionreflect a meaningful improvement in our Flat-rolled segment operating results partially offset by an outage in our European segment."

The $113 million, or $24per ton, of reportable segment and Other Businesses income from operations for the third quarter of 2013 compares to income from operations of $47 million, or $9per ton, in the second quarter of 2013 and income from operations of $171 million, or $32per ton, in the third quarter of 2012.

Other items not allocated to segments in the third quarter of 2013 consisted primarily of a $1.8 billionpre-tax non-cash goodwill impairment charge, which was announced in a press release and Form 8-K filed earlier this month and will be detailed further in our Form 10-Q.

Net interest and other financial costs in the third quarter of 2013 includes a $22 millionpre-tax charge related to a guarantee of an unconsolidated equity method investment for which payment by U. S. Steel is probable.

For the third quarter 2013, we recorded a tax provision of $4 millionon our pre-tax loss of $1,787 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.  In addition, essentially no tax benefit was recorded on the $1.8 billiongoodwill impairment charge.

As of September 30, 2013, U. S. Steel had $697 millionof cash and $2.4 billionof total liquidity. 

Reportable Segments and Other Businesses

Our Flat-rolled segment results from operations improved versus the second quarter due to an increase in average realized prices and lower repairs and maintenance costs partially offset by reduced shipments.  Average realized prices increased compared to the second quarter due to higher spot market prices.  Shipments decreased significantly due to a planned blast furnace outage at our Great Lakes Works and the Lake Erie Works labor dispute.  A successor agreement was reached in August with blast furnace production at Lake Erie Works resuming in October.

Third quarter results for our European segment decreased compared to the second quarter.  A scheduled blast furnace outage resulted in significantly lower shipments and increased facility repairs and maintenance costs. Average realized euro-based prices were comparable to the second quarter as decreases in spot and contract market prices were offset by the positive effect of a higher percentage of value-added shipments.

Third quarter results for our Tubular segment were comparable to the second quarter.  Shipments and average realized prices increased slightly primarily due to a higher percentage of alloy and seamless shipments. Operating costs increased due to higher repairs and maintenance costs.

Third quarter results for Other Businesses decreased primarily due to a gain of approximately $30 millionfrom a real estate sale that occurred in the second quarter.

Outlook

Commenting on U. S. Steel's outlook for the fourth quarter, Longhi said, "We expect total reportable segment and Other Businesses income from operations to decrease compared to the third quarter due primarily to planned maintenance outages in our Flat-rolled segment.  Results for our European segment are projected to improve compared to the third quarter and Tubular results are expected to be comparable to the third quarter."

Fourth quarter results for our Flat-rolled segment are expected to be near breakeven.  Overall, repairs and maintenance costs are expected to increase by approximately $60 millionas compared to the third quarter due primarily to a reline of a blast furnace at Gary Works and a planned blast furnace maintenance project at Fairfield Works. Despite higher average spot and market-based contract prices in the fourth quarter, we expect average realized prices to be comparable to the third quarter due to a higher percentage of hot rolled shipments in the fourth quarter.  Shipments are expected to increase slightly quarter over quarter.

We expect results for our European segment to improve in the fourth quarter and return to profitability due to higher shipments and lower facility repairs and maintenance costs as a blast furnace outage was completed in the third quarter.  We expect average realized prices for the majority of our products to increase compared to the third quarter; however, overall average realized prices in the fourth quarter are expected to decline compared to the third quarter due to a return to a more normal level of hot rolled shipments.

Fourth quarter results for our Tubular segment are expected to be comparable to the third quarter as the benefits of reduced operating costs are offset by slightly lower average realized prices and shipments as end users are expected to decrease drilling activity in order to operate within their 2013 capital budgets. Inventory management by our customers may also be a factor as we approach year-end.

We expect a minimal tax provision/benefit in the fourth quarter primarily due to the full valuation allowance on deferred tax assets in Canada.

*****

This release contains forward-looking statements with respect to market conditions, operating costs, shipments and prices.  Factors that could affect market conditions, costs, shipments and prices for both North American and European operations include: (a) foreign currency fluctuations and related activities; (b) global product demand, prices and mix; (c) global and company steel production levels; (d) plant operating performance; (e) natural gas, electricity, raw materials and transportation prices, usage and availability; (f) international trade developments, including court decisions, legislation and agency decisions on petitions and sunset reviews; (g) the impact of fixed prices in energy and raw materials contracts (many of which have terms of one year or longer) as compared to short-term contract and spot prices of steel products; (h) changes in environmental, tax, pension and other laws; (i) the terms of collective bargaining agreements; (j) employee strikes or other labor issues; and (k) U.S. and global economic performance and political developments.  Domestic steel shipments and prices could be affected by import levels and actions taken by the U.S. Government and its agencies, including those related to CO2 emissions, climate change and shale gas development.  Economic conditions and political factors in Europe and Canada that may affect U. S. Steel Europe's and U. S. Steel Canada's results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) fiscal instability; (p) political issues; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures.  We present adjusted net income and adjusted net income per diluted share, which are non-GAAP measures, to better enable investors and others to assess our results and compare them with our competitors.  In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward-looking statements have been included in U. S. Steel's Annual Report on Form 10-K for the year ended December 31, 2012, and in subsequent filings for U. S. Steel.

A Consolidated Statement of Operations (Unaudited), Consolidated Cash Flow Statement (Unaudited), Condensed Consolidated Balance Sheet (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached.

The company will conduct a conference call on third quarter earnings on Tuesday, October 29, at 3:00 p.m.Eastern.  To listen to the webcast of the conference call, visit the U. S. Steel website, www.ussteel.com, and click on "Current Information" under the "Investors" section.

For more information on U. S. Steel, visit our website at www.ussteel.com.

UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
			Quarter Ended									Nine Months Ended
			Sept. 30			June 30			Sept. 30			September 30,
(Dollars in millions, except per share amounts)			2013			2013			2012			2013			2012
NET SALES			$	4,131		$	4,429		$	4,652		$	13,155		$	14,841
OPERATING EXPENSES (INCOME):
	Cost of sales (excludes items shown below)		3,749			4,114			4,318			12,105			13,436
	Selling, general and administrative expenses		153			151			159			449			490
	Depreciation, depletion and amortization		173			170			163			514			490
	(Income) loss from investees		(26)			3			(48)			(31)			(116)
	Impairment of goodwill		1,783			-			-			1,783			-
	Net (gain) loss on disposal of assets		-			(1)			(1)			-			308
	Other expense (income), net		1			(1)			(1)			6			(9)
		Total operating expenses	5,833			4,436			4,590			14,826			14,599
(LOSS) INCOME FROM OPERATIONS			(1,702)			(7)			62			(1,671)			242
Net interest and other financial costs			85			68			45			257			177
(LOSS) INCOME BEFORE INCOME TAXES
	AND NONCONTROLLING INTERESTS		(1,787)			(75)			17			(1,928)			65
Income tax provision (benefit)			4			3			(27)			14			139
Net (loss) income			(1,791)			(78)			44			(1,942)			(74)
	Less: Net loss attributable to the
	noncontrolling interests		-			-			-			-			-
NET (LOSS) INCOME ATTRIBUTABLE TO
	UNITED STATES STEEL CORPORATION		$	(1,791)		$	(78)		$	44		$	(1,942)		$	(74)
COMMON STOCK DATA:
Net (loss) income per share attributable to
United States Steel Corporation shareholders:
	-Basic		$	(12.38)		$	(0.54)		$	0.30		$	(13.44)		$	(0.51)
	-Diluted		$	(12.38)		$	(0.54)		$	0.28		$	(13.44)		$	(0.51)
Weighted average shares, in thousands
	-Basic		144,727			144,485			144,350			144,523			144,199
	-Diluted		144,727			144,485			171,673			144,523			144,199
Dividends paid per common share			$	0.05		$	0.05		$	0.05		$	0.15		$	0.15

UNITED STATES STEEL CORPORATION
CASH FLOW STATEMENT (Unaudited)
				Nine Months Ended
				September 30,
(Dollars in millions)				2013			2012
Cash (used in) provided by operating activities:
	Net loss			$	(1,942)		$	(74)
	Depreciation, depletion and amortization			514			490
	Impairment of goodwill			1,783			-
	Pensions and other postretirement benefits			(143)			(112)
	Deferred income taxes			3			86
	Net loss on disposal of assets			-			308
	Working capital changes			158			215
	Income taxes receivable/payable			1			27
	Currency remeasurement loss (gain)			8			(13)
	Other operating activities			39			31
		Total		421			958
Cash (used in) provided by investing activities:
	Capital expenditures			(328)			(536)
	Acquisition of intangible assets			(12)			-
	Disposal of assets			-			141
	Other investing activities			31			(71)
		Total		(309)			(466)
Cash provided by (used in) financing activities:
	Revolving credit facilities		- borrowings	-			523
			- repayments	-			(653)
	Receivables Purchase Agreement payments			-			(380)
	Issuance of long-term debt, net of financing costs			575			485
	Repayment of long-term debt			(542)			(319)
	Dividends paid			(22)			(22)
		Total		11			(366)
Effect of exchange rate changes on cash				4			2
Net increase in cash and cash equivalents				127			128
Cash and cash equivalents at beginning of the year				570			408
Cash and cash equivalents at end of the period				$	697		$	536

UNITED STATES STEEL CORPORATION
CONDENSED BALANCE SHEET (Unaudited)
			Sept. 30			Dec. 31
(Dollars in millions)			2013			2012
Cash and cash equivalents			$	697		$	570
Receivables, net			1,957			2,090
Inventories			2,480			2,503
Other current assets			220			211
	Total current assets		5,354			5,374
Property, plant and equipment, net			6,167			6,408
Investments and long-term receivables, net			607			609
Goodwill and intangible assets, net			280			2,075
Other assets			598			751
	Total assets		$	13,006		$	15,217
Accounts payable			$	1,723		$	1,800
Payroll and benefits payable			965			977
Short-term debt and current maturities of long-term debt			322			2
Other current liabilities			276			211
	Total current liabilities		3,286			2,990
Long-term debt, less unamortized discount			3,618			3,936
Employee benefits			3,919			4,416
Other long-term liabilities			408			397
United States Steel Corporation stockholders' equity			1,774			3,477
Noncontrolling interests			1			1
	Total liabilities and stockholders' equity		$	13,006		$	15,217

UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
			Quarter Ended									Nine Months Ended
			Sept. 30			June 30			Sept. 30			September 30,
(Dollars in millions)			2013			2013			2012			2013			2012
INCOME (LOSS) FROM OPERATIONS
Flat-rolled			$	82		$	(51)		$	29		$	18		$		389
U. S. Steel Europe			(32)			10			27			16			27			(a)
Tubular			49			45			102			158			334
Other Businesses			14			43			13			62			46
Reportable Segment and Other Businesses Income from Operations				113			47			171	254				796
Postretirement benefit expense			(55)			(54)			(74)			(165)			(228)
Other items not allocated to segments:
Impairment of goodwill			(1,783)			-			-			(1,783)			-
Supplier contract dispute settlement			23			-			-			23			-
Loss on sale of U. S. Steel Serbia			-			-			-			-			(399)
Gain on sale of transportation assets			-			-			-			-			89
Property tax settlements			-			-			-			-			19
Labor agreement lump sum payments			-			-			(35)			-			(35)
Total (Loss) Income from Operations			$	(1,702)		$	(7)		$	62		$	(1,671)		$		242
CAPITAL EXPENDITURES
Flat-rolled			$	72		$	80		$	117		$	248		$		484
U. S. Steel Europe			14			8			12			32			21
Tubular			19			15			7			42			25
Other Businesses			2			2			3			6			6
Total			$	107		$	105		$	139		$	328		$		536

(a) Nine months ended September 30, 2012, includes income from operations for USSK of $44 million.

UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
				Quarter Ended									Nine Months Ended
				Sept. 30			June 30			Sept. 30			September 30,
				2013			2013			2012			2013			2012
OPERATING STATISTICS
	Average realized price: ($/net ton) (a)
		Flat-rolled		752			725			741			731			759
		U. S. Steel Europe		714			702			731			711			749
			USSK	714			702			731			711			751
		Tubular		1,543			1,510			1,676			1,536			1,704
	Steel Shipments: (a) (b)
		Flat-rolled		3,428			3,728			3,972			11,174			12,050
		U. S. Steel Europe		861			1,062			911			2,971			2,911
		Tubular		459			456			457			1,343			1,479
			Total Steel Shipments	4,748			5,246			5,340			15,488			16,440
		USSK Steel Shipments		861			1,062			911			2,971			2,838
	Intersegment Shipments: (b)
		Flat-rolled to Tubular		450			445			456			1,336			1,415
		U. S. Steel Europe to Flat-rolled		-			-			128			-			249
	Raw Steel Production: (b)
		Flat-rolled		4,261			4,212			4,699			13,393			14,430
		U. S. Steel Europe		1,032			1,158			1,140			3,393			3,553
			USSK	1,032			1,158			1,140			3,393			3,465
	Raw Steel Capability Utilization: (c)
		Flat-rolled		70%			70%			77%			74%			79%
		Flat-rolled U.S. Facilities (d)		87%			87%			83%			88%			86%
		U. S. Steel Europe		82%			93%			90%			91%			90%
			USSK	82%			93%			90%			91%			92%

(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 January 31, 2012, annual raw steel production capability for USSE was 7.4 million net 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).

SOURCE United States Steel Corporation

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