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Press release from PR Newswire

United States Steel Corporation Reports 2010 Fourth Quarter and Full-Year Results

Tuesday, January 25, 2011

United States Steel Corporation Reports 2010 Fourth Quarter and Full-Year Results07:34 EST Tuesday, January 25, 2011PITTSBURGH, Jan. 25, 2011 /PRNewswire-FirstCall/ -- Fourth quarter net loss of $249 million, or $1.74 per shareFourth quarter shipments of 5.5 million tons, a decrease of 1 percent from third quarter 2010Fourth quarter net sales of $4.3 billion, a decrease of 4 percent from third quarter 2010Full-year net loss was $919 million less than 2009 and reportable segment and Other Businesses income from operations was $56 million, an improvement of $1.6 billion from full-year 2009Operating results, net sales and shipments reflect a significant improvement compared to the 2009 fourth quarter and full yearMaintained strong liquidity position with $578 million of cash and $2.1 billion of total liquidityUnited States Steel Corporation (NYSE: X) reported a fourth quarter 2010 net loss of $249 million, or $1.74 per diluted share, compared to a third quarter 2010 net loss of $51 million, or $0.35 per diluted share, and fourth quarter 2009 net loss of $267 million, or $1.86 per diluted share.  For full-year 2010, U. S. Steel reported a net loss of $482 million, or $3.36 per diluted share, compared with a full-year 2009 net loss of $1,401 million, or $10.42 per diluted share.Earnings Highlights(Dollars in millions except per share data)4Q 20103Q 20104Q 200920102009Net sales$4,300$4,497$3,354$17,374$11,048Segment (loss) income from operationsFlat-rolled$ (156)$ (174)$(284)$ (312)$(1,438)U. S. Steel Europe(39)(25)(3)(33)(208)Tubular961123934957Other Businesses77352(2)Total reportable segment and Other Businesses (loss) income from operations$ (92)$  (80)$(245)$  56$(1,591)Retiree benefit expenses(43)(43)(35)(173)(134)Other items not allocated to segments21(15)(49)641(Loss) Income from operations$(114)$ (138)$(329)$ (111)$(1,684)Net interest and other financial costs (income)94(78)56274161Income tax provision (benefit)41(9)(117)97(439)Net income (loss) attributable to noncontrolling interests--(1)-(5)Net loss attributable to United States Steel Corporation$ (249)$   (51)$(267)$ (482)$(1,401) - Per basic share$(1.74)$ (0.35)$(1.86)$(3.36)$(10.42) - Per diluted share$(1.74)$ (0.35)$(1.86)$(3.36)$(10.42)Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "We reported a modest improvement in our fourth quarter operating results in comparison to the third quarter mainly due to reduced spending for facility repair and maintenance, including structural repairs and inspections, and a net gain related to asset sales.  The improvements were partially offset by decreases in realized prices and a reduction in total shipments, reflecting soft steel market conditions during most of the quarter and the traditional seasonal downtime taken by some of our customers during the latter part of the quarter."  The company reported a fourth quarter 2010 loss from operations of $114 million, compared with a loss from operations of $138 million in the third quarter of 2010 and a loss from operations of $329 million in the fourth quarter of 2009.  For the year 2010, loss from operations was $111 million versus a loss from operations of $1,684 million for the year 2009.Other items not allocated to segments in the fourth quarter of 2010 included a pre-tax net gain of $21 million related to the sale of transportation assets in Alabama as well as the sale of the bar mill and bloom and billet mill assets located at Hamilton Works.  These items increased net income by $11 million, or seven cents per diluted share.  Other items not allocated to segments in the third quarter of 2010 decreased net income by $15 million, or 11 cents per diluted share.  Other items not allocated to segments in the fourth quarter of 2009 reduced net income by $31 million, or 21 cents per diluted share.  Net interest and other financial costs in the fourth quarter of 2010 included a foreign currency loss that decreased net income by $33 million, or 23 cents per share.  The net loss primarily resulted from the accounting remeasurement of a $1.6 billion U.S. dollar-denominated intercompany loan to a European subsidiary, partially offset by gains on euro-U.S. dollar derivatives activity.  This compares to a foreign currency gain that increased net income by $139 million, or 96 cents per diluted share, in the third quarter of 2010 and a foreign currency loss that decreased net income by $11 million, or seven cents per share, in the fourth quarter of 2009.For the full year 2010, we recorded a tax provision of $97 million on our pre-tax loss of $385 million.  In accordance with accounting guidance, the tax provision does not reflect any tax benefit for pre-tax losses in Canada and Serbia, which are jurisdictions where we have recorded a full valuation allowance on deferred tax assets and for foreign currency losses that are not recognized in any tax jurisdiction.  Fourth quarter 2010 results included a $52 million, or 36 cents per diluted share, unfavorable catch-up adjustment as a result of an increase in the actual annual effective tax rate due to changes in the composition of domestic and foreign earnings.  This compares to a $29 million, or 20 cents per diluted share, favorable catch-up adjustment in the third quarter 2010.Capital expenditures for 2010 of $676 million largely consisted of strategic projects primarily related to coke and coke substitute production, including blast furnace coal injection in Europe, implementation of an enterprise resource planning system, and non-discretionary environmental and other infrastructure projects.  This compares with capital expenditures of $472 million for 2009.As of December 31, 2010, U. S. Steel had $578 million of cash and $2.1 billion of total liquidity as compared to $1.2 billion of cash and $2.5 billion of total liquidity at December 31, 2009.  Reportable Segments and Other Businesses Management believes segment income from operations is a key measure in evaluating company performance.  U. S. Steel's reportable segments and Other Businesses reported a loss from operations of $92 million, or $17 per ton, in the fourth quarter of 2010, compared with a loss of $80 million, or $14 per ton, in the third quarter of 2010 and a loss of $245 million, or $53 per ton, in the fourth quarter of 2009.Fourth quarter results for the Flat-rolled segment improved compared to the third quarter primarily due to reduced spending for facility repair and maintenance, including structural inspections and repairs, partially offset by decreased average realized prices, as publicly reported spot prices bottomed in November.  The reduction in spending is partially due to the substantial completion of repairs in the third quarter related to the structural failure at our Gary Works facility.  Our Hamilton Works iron and steelmaking facilities were idled in October, and we incurred approximately $40 million in idle facility carrying costs during the fourth quarter.  Average realized prices in the fourth quarter were $657 per net ton, a decrease of $31 from the third quarter of 2010 due to lower spot market and index-based contract prices.  Shipments increased by one percent to 3.9 million net tons as customer order rates progressively improved during the quarter.  The raw steel capability utilization rate was 72 percent for the Flat-rolled segment, five percent lower than the third quarter.Fourth quarter results for U. S. Steel Europe (USSE) were lower than the third quarter as lower euro-based spot market transaction prices and shipments were partially offset by lower raw materials costs.  The reported average realized price increased by $45 per ton in the fourth quarter to $793 per ton reflecting a significant favorable foreign currency translation effect.  Euro-based transaction prices, which were lower than the third quarter, were more than offset by a favorable mix of value-added contract shipments.  The favorable mix reflects progress in our long-term strategy to increase our value-added product sales.  Shipments decreased by seven percent to 1.2 million tons due to reduced order rates from our spot market customers and normal seasonal patterns.  USSE operated at 77 percent of raw steel capability for the fourth quarter.Tubular results were lower than the third quarter as the impact of lower shipments and average realized prices was partially offset by lower costs for purchased rounds and hot-rolled bands, which are priced on a monthly basis.  Shipments decreased by nine percent to 386 thousand tons, and the reported average realized price decreased by $55 to $1,504 per ton.   Outlook Commenting on U. S. Steel's outlook for the first quarter, Surma said, "We expect to report a modest improvement in reportable segment results in comparison to the fourth quarter 2010. Order rates for most customer groups and publicly reported spot market prices began to increase later in the fourth quarter and we remain cautiously optimistic that global economic conditions will continue to improve in the first quarter."   Flat-rolled results for first quarter 2011 are expected to improve compared to the fourth quarter 2010 as the benefits of increased average realized prices, shipments and production volumes are expected to be partially offset by higher raw materials costs, primarily for scrap and coal. Average realized prices are expected to increase from fourth quarter 2010 as we expect to begin realizing the benefits of increasing spot and some market-based contract prices throughout the first quarter. Increases in some of our index-based contract prices should be realized in the second quarter as higher published market price assessments enter the index calculations.  Raw steel capability utilization is expected to increase from the fourth quarter of 2010 as all of our blast furnaces are expected to operate for the majority of the period except for Hamilton Works, which is subject to a labor dispute.First quarter 2011 results for USSE are expected to improve compared to the fourth quarter 2010 as the benefits of increased shipments and production volumes are expected to be partially offset by higher raw materials costs.  Euro-based transaction prices are expected to improve during the first quarter.  Increases in some of our index-based contract prices should be realized in the second quarter as higher published market price assessments enter the index calculations.  Our raw steel capability utilization rate is expected to increase in the first quarter 2011 as we have restarted a blast furnace at U. S. Steel Serbia that was idled during the fourth quarter.  We expect all five blast furnaces to operate during the first quarter.We expect our Tubular operations to remain profitable in the first quarter.  We anticipate that shipments will improve slightly as customer inventory levels appear balanced and end users pursue their 2011 drilling programs.  Average realized transaction prices are expected to be in line with fourth quarter levels as announced price increases begin to take effect throughout the quarter.  Overall, compared to the fourth quarter, we expect lower results due to monthly increases for purchased rounds and hot-rolled bands that will not be fully realized in Tubular product prices in the quarter. Total costs for pension and other benefits plans are expected to be approximately $590 million in 2011 compared to $428 million in 2010.  Company payments for these plans in 2010 were $534 million, which included a voluntary contribution of $140 million to our main defined benefit pension plan.This release contains forward-looking statements with respect to market conditions, operating costs, shipments, prices, capital spending, and employee benefit costs and payments.  Although we believe that we are in the early stages of a gradual economic recovery, U. S. Steel cannot control or predict the extent and timing of economic recovery.  As the recovery occurs, U. S. Steel has incurred and may continue to incur costs to rebuild working capital, but we cannot accurately forecast the amount of such costs.  Other more normal 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 transportations prices, usage and availability; (f) international trade developments, including 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, including any successor to the labor agreement covering our Hamilton Works operations; (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 and climate change.  Economic conditions and political factors in Europe and Canada that may affect USSE's and U. S. Steel Canada's results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) government instability; (p) political unrest; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures.  Factors that may affect our decisions on strategic initiatives include, among other things: (s) the cost and availability of capital; (t) the anticipated cost of additional facilities (whether built or acquired); and (u) current and anticipated product demand in the automotive and shale natural gas markets and availability of alternative products for such applications.  Factors that may affect our ability to construct new facilities include: (v) levels of cash flow from operations; (w) general economic conditions; (x) business conditions; (y) cost and availability of capital; (z) receipt of necessary permits; and (aa) unforeseen hazards such as contractor performance, material shortages, weather conditions, explosions or fires.  Factors that may affect the amount of net periodic benefit costs and payments include, among other things: (bb) changes to laws affecting benefits; (cc) investment performance; (dd) liability changes; and (ee) interest rates.  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, 2009, and in subsequent filings for U. S. Steel.A Statement of Operations (Unaudited), Cash Flow Statement (Unaudited), Condensed Balance Sheet (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached.The company will conduct a conference call on fourth quarter earnings on Tuesday, January 25, at 3 p.m. EST.  To listen to the webcast of the conference call, visit the U. S. Steel website, www.ussteel.com, and click on "Overview" then "Current Information" under the "Investors" section.For more information on U. S. Steel, visit our website at www.ussteel.com.UNITED STATES STEEL CORPORATIONSTATEMENT OF OPERATIONS (Unaudited)Year EndedQuarter EndedDecember 31Dec. 31Sept. 30Dec. 31(Dollars in millions)20102010200920102009NET SALES$    4,300$   4,497$   3,354$   17,374$   11,048OPERATING EXPENSES (INCOME):Cost of sales (excludes items shown    below)4,1154,3213,34816,25911,597Selling, general and administrative expenses162148158610618Depreciation, depletion and amortization168163177658661(Income)loss from investees(7)(9)(3)(20)29Net (gain) loss on disposal of assets(16)1410(7)(124)Other income, net(8)(2)(7)(15)(49)        Total operating expenses4,4144,6353,68317,48512,732LOSS FROM OPERATIONS(114)(138)(329)(111)(1,684)Net interest and other financial costs    (income)94(78)56274161LOSS BEFORE INCOME TAXES AND    NONCONTROLLING INTERESTS(208)(60)(385)(385)(1,845)Income tax provision (benefit)41(9)(117)97(439)Net loss(249)(51)(268)(482)(1,406)Less: Net loss attributable to the    noncontrolling interests--(1)-(5)NET LOSS ATTRIBUTABLE TO    UNITED STATES STEEL CORPORATION$     (249)$     (51)$     (267)$     (482)$   (1,401)COMMON STOCK DATA:Net loss per share:- Basic$(1.74)$(0.35)$(1.86)$(3.36)$(10.42)- Diluted$(1.74)$(0.35)$(1.86)$(3.36)$(10.42)Weighted average shares, in thousands:- Basic143,712143,660143,380143,571134,469- Diluted143,712143,660143,380143,571134,469Dividends paid per common share$.05$.05$.05$.20$.45UNITED STATES STEEL CORPORATIONCASH FLOW STATEMENT (Unaudited)Year EndedDecember 31(Dollars in millions)20102009Cash (used in) provided by operating activities:Net loss$(482)$(1,406)Depreciation, depletion and amortization       658661Pensions and other postretirement benefits(111)(203)Deferred income taxes235(156)Net gain on disposal of assets       (7)(124)Working capital changes(757)1,538Income taxes receivable/payable56(271)Other operating activities29(100)     Total(379)(61)Cash (used in) provided by investing activities:Capital expenditures(676)(472)Capital expenditures ? variable interest entities-(147)Disposal of assets169366Other investing activities(76)(121)     Total(583)(374)Cash (used in) provided by financing activities:Revolving credit facilities ? borrowings39-                                         ?  repayments(310)-Issuance of long-term debt737966Repayments of long-term debt       (107)(800)Common stock issued5667Dividends paid(29)(56)Other financing activities-161     Total335938Effect of exchange rate changes on cash(13)(9)Total net cash flow(640)494Cash at beginning of the year1,218724Cash at end of the year$578$1,218UNITED STATES STEEL CORPORATIONCONDENSED BALANCE SHEET (Unaudited)Dec. 31Dec. 31(Dollars in millions)20102009Cash and cash equivalents$578$1,218Receivables, net2,0231,567Inventories2,3521,679Other current assets422551    Total current assets5,3755,015Property, plant and equipment, net6,4866,820Investments and long-term receivables, net670695Goodwill and intangible assets, net2,0352,006Other assets784886    Total assets$15,350$15,422Accounts payable$1,804$1,457Payroll and benefits payable938854Short-term debt and current maturities of long-term debt21619Other current liabilities189144    Total current liabilities3,1472,474Long-term debt, less unamortized discount3,5173,345Employee benefits4,3654,143Other long-term liabilities 469481United States Steel Corporation stockholders' equity3,8514,676Noncontrolling interests1303    Total liabilities and stockholders' equity$15,350$15,422UNITED STATES STEEL CORPORATIONPRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)Quarter EndedYear EndedDec. 31Sept. 30Dec. 31December 31(Dollars in millions)20102010200920102009(LOSS) INCOME FROM OPERATIONSFlat-rolled       $(156)$(174)$(284)$(312)$(1,438)U. S. Steel Europe(39)(25)(3)(33)(208)Tubular961123934957Other Businesses77352(2)Reportable Segment and Other Business (Loss) Income from Operations(92)(80)(245)56(1,591)Retiree benefit expenses(43)(43)(35)(173)(134)Other items not allocated to segments:       Federal excise tax refund----34       Litigation reserve----45       Net gain (loss) on sale of assets21(15)-697       Environmental remediation charge--(49)-(49)       Workforce reduction charges----(86)          Total (Loss) Income from Operations$(114)$(138)$(329)$(111)$(1,684)CAPITAL EXPENDITURES Flat-rolled       $194$151$107$499$338U. S. Steel Europe272139120113Tubular221034512Other Businesses72-129       Total$250$184$149$676$472UNITED STATES STEEL CORPORATIONPRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)Quarter EndedYear EndedDec. 31Sept. 30Dec. 31December 31(Dollars in millions)20102010200920102009OPERATING STATISTICS       Average realized price: ($/net ton) (a)           Flat-rolled657688633675651           U. S. Steel Europe793748664705637           Tubular1,5041,5591,4621,4941,755       Steel Shipments:(a)(b)           Flat-rolled3,8563,8123,20115,3019,861           U. S. Steel Europe1,2331,3231,2465,4644,463           Tubular3864222071,551657               Total Steel Shipments5,4755,5574,65422,31614,981       Intersegment Shipments:(b)           Flat-rolled to Tubular3864132531,601498       Raw Steel-Production:(b)           Flat-rolled4,3874,6943,93218,44311,724           U. S. Steel Europe1,4271,4411,4906,0895,077       Raw Steel-Capability Utilization:(c)           Flat-rolled72%77%64%76%48%           U. S. Steel Europe77%77%80%82%69%(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 7.4 million net tons for U. S. Steel Europe.SOURCE United States Steel CorporationFor further information: Media: Erin DiPietro, +1-412-433-6845, Investors/Analysts: Dan Lesnak, +1-412-433-1184