Market Overview

United States Steel Corporation Reports 2012 Third Quarter Results

Share:

- Reportable segment and Other Businesses income from operations of $171 million

- Net income of $44 million, or $0.28 per diluted share, including a $0.13 per diluted share charge for employee lump sum payments provided in the new labor agreement

- Third quarter shipments of 5.3 million tons and net sales of $4.7 billion

- Strong liquidity position with $536 million of cash and $2.4 billion of total liquidity

PITTSBURGH, Oct. 30, 2012 /PRNewswire-FirstCall/ -- United States Steel Corporation (NYSE: X) reported third quarter 2012 net income of $44 million, or $0.28 per diluted share, compared to second quarter 2012 net income of $101 million, or $0.62 per diluted share, and third quarter 2011 net income of $22 million, or $0.15 per diluted share.  Net income for the third quarter 2012 included a $22 million, or $0.13 per diluted share, after-tax charge for employee lump sum payments as provided in the new labor agreement.  Net income for the second quarter 2012 included an $11 million after-tax early redemption premium on our $300 million 5.65% Senior Notes due 2013.  Net income for the third quarter 2011 included $96 million of net foreign currency losses, primarily related to the accounting remeasurement of a U.S. dollar denominated intercompany loan to a European entity.











Earnings Highlights











(Dollars in millions, except per share amounts)

3Q 2012

2Q 2012

3Q 2011

Net Sales

$   4,652

$   5,017

$     5,081

Segment income (loss) from operations









Flat-rolled

$       29

$     177

$       203



U. S. Steel Europe

27

34

(50)



Tubular

102

103

134



Other Businesses

13

16

8

Total reportable segment and Other Businesses income from operations

$     171

$     330

$       295

Postretirement benefit expense

(74)

(77)

(96)

Other items not allocated to segments

(35)

-

-

Income from operations

$       62

$     253

$       199

Net interest and other financial costs

45

82

144

Income tax (benefit) provision

(27)

70

33

Net income attributable to United States Steel Corporation

$       44

$     101

$         22

-Per basic share

$    0.30

$    0.70

$      0.15

-Per diluted share

$    0.28

$    0.62

$      0.15











          

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "Third quarter operating results were positive for all three reportable segments in an economic environment that was more challenging than the second quarter.  Our Tubular segment once again had solid results despite declining rig activity and pricing pressure caused by rising oil country tubular goods inventory and continued high levels of imports.  Our Flat-rolled and European segments were profitable but continue to be challenged by difficult global economic conditions.  In addition, our Flat-rolled segment continued to be adversely affected by increased import levels."

The company reported third quarter 2012 reportable segment and Other Businesses income from operations of $171 million, or $32 per ton, compared with income of $330 million, or $61 per ton, in the second quarter of 2012 and income of $295 million, or $54 per ton, in the third quarter of 2011. 

Other items not allocated to segments in the third quarter of 2012 consisted of a $35 million pre-tax charge for employee lump sum payments as provided in the new labor agreement.

For the third quarter 2012, we recorded a tax benefit of $27 million on our pre-tax income of $17 million.  The third quarter 2012 tax benefit includes $20 million, or $0.12 per diluted share, of favorable effects associated with the settlement of prior years' income tax audits and $26 million, or $0.15 per diluted share, of a tax benefit to adjust our estimated 2011 federal income tax liability to our actual tax liability reflected in our tax return as filed in the third quarter.  The tax benefit 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.    

As of September 30, 2012, U. S. Steel had $536 million of cash and $2.4 billion of total liquidity.  

Reportable Segments and Other Businesses                            

Flat-rolled third quarter results decreased from the second quarter primarily due to a $31 per ton decrease in average realized prices, as significant price decreases for domestic scrap and globally traded steelmaking raw materials placed downward pressure on spot and index-based pricing mechanisms in North America in the third quarter.  The spot market continues to be pressured by high import volumes, which for sheet products have increased 13 percent year over year through the first nine months of 2012.  Proceeds from steel substrate sales to our Tubular segment have also decreased.  Shipments and operating costs for our Flat-rolled segment were comparable to the second quarter. 

Despite the continued economic challenges, third quarter results remained positive for our European segment. Results were lower than the second quarter as average realized prices decreased compared to the second quarter due to weaker spot market prices. Shipments were also lower in the third quarter as a result of the continued conservative buying pattern by service centers and distributors, reduced automotive production schedules and the normal summer holiday outages.  Operating costs decreased compared to the second quarter due to lower raw materials prices and good operating cost performance.

Third quarter results for our Tubular segment were in line with the second quarter. Shipments decreased as end users adjusted their drilling plans and curtailed spending due to economic uncertainty and concern over energy prices. Average realized prices declined slightly as import levels remained high resulting in pricing pressure from increased supply.  Operating costs decreased compared to the second quarter due to lower substrate costs.

Outlook

Commenting on U. S. Steel's outlook for the fourth quarter, Surma said, "Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America.  We expect total reportable segment and Other Businesses operating results to be around breakeven for the fourth quarter with decreased results in all reportable segments."

We expect a loss for our Flat-rolled segment due to slightly lower average realized prices, as well as lower shipments and higher operating costs.  Average realized prices and shipments are expected to be lower compared to the third quarter as a result of cautious purchasing patterns early in the quarter created by the uncertain global economic outlook; however, market conditions have recently begun improving in North America, and we believe that we are already beyond the spot price trough of the fourth quarter.  New spot orders are being transacted at higher prices for delivery later this quarter.  Operating costs are expected to increase due to scheduled blast furnace and other maintenance projects.

We expect our European segment results to be around breakeven.  Average realized prices are expected to decrease reflecting lower spot market and quarterly contract pricing.  Shipments are projected to decrease compared to the third quarter due to lower consumption in automotive and other end user industries.  Operating costs are expected to decrease compared to the third quarter primarily due to lower raw materials costs.

We expect fourth quarter results for our Tubular segment to remain profitable but well below third quarter results.  Average realized prices are expected to be lower and shipments are projected to be significantly lower than the third quarter as imports continue at high levels despite end users decreasing drilling activity in order to operate within their 2012 capital budgets.  Inventory management by our customers may also be a considerable factor as we approach year-end.  Operating costs are expected to increase due to operating inefficiencies caused by lower production volumes.

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, prices, capital spending, and employee benefit costs and payments.  Although we believe that we are experiencing a gradual economic recovery, there are signs of continued economic issues in Europe and U. S. Steel cannot control or predict the impact.  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 transportation prices, usage and availability; (f) international trade developments, including court decisions, legislation and agency decisions on petitions and sunsets; (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) government instability; (p) political unrest; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures.  To the extent that actual 2012 results for U.S. and foreign income or loss vary from estimates applied at the end of the most recent interim period, the actual tax provision or benefit recognized in 2012 could be materially different from the forecasted amount.  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, 2011, 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 30, at 2 p.m. EDT.  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

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)































Quarter Ended



Nine Months Ended







Sept. 30



June 30



Sept. 30



September 30

(Dollars in millions)

2012



2012



2011



2012



2011

























NET SALES

$       4,652



$       5,017



$       5,081



$     14,841



$     15,065

























OPERATING EXPENSES (INCOME):





















Cost of sales (excludes items shown below)

4,311



4,477



4,560



13,414



13,679



Selling, general and administrative expenses

166



173



181



512



550



Depreciation, depletion and amortization

163



164



172



490



512



Income from investees

(48)



(44)



(27)



(116)



(66)



Net (gain) loss on disposal of assets

(1)



-



-



308



(10)



Other income, net

(1)



(6)



(4)



(9)



(8)





























Total operating expenses

4,590



4,764



4,882



14,599



14,657

























INCOME FROM OPERATIONS

62



253



199



242



408

Net interest and other financial costs

45



82



144



177



136

























INCOME BEFORE INCOME TAXES 





















AND NONCONTROLLING INTERESTS

17



171



55



65



272

Income tax (benefit) provision

(27)



70



33



139



114

























Net income (loss)

44



101



22



(74)



158



Less: Net income attributable to the 





















noncontrolling interests

-



-



-



-



-

NET INCOME (LOSS) ATTRIBUTABLE TO 





















UNITED STATES STEEL CORPORATION

$           44



$         101



$           22



$          (74)



$         158

















































COMMON STOCK DATA:











































Net income (loss) per share attributable to 



















United States Steel Corporation shareholders:





















-Basic



$        0.30



$        0.70



$        0.15



$       (0.51)



$        1.10



-Diluted



$        0.28



$        0.62



$        0.15



$       (0.51)



$        1.02

























Weighted average shares, in thousands





















-Basic



144,350



144,176



144,067



144,199



143,932



-Diluted



171,673



171,416



144,452



144,199



171,534

























Dividends paid per common share

$        0.05



$        0.05



$        0.05



$        0.15



$        0.15

 

UNITED STATES STEEL CORPORATION

CONSOLIDATED CASH FLOW STATEMENT (Unaudited)



























Nine Months Ended











September 30

(Dollars in millions)



2012



2011

















Cash (used in) provided by operating activities:









Net (loss) income



$          (74)



$         158



Depreciation, depletion and amortization



490



512



Pensions and other postretirement benefits

(112)



(74)



Deferred income taxes



86



10



Net loss on disposal of assets



308



(10)



Working capital changes



215



(623)



Income taxes receivable/payable



27



148



Currency remeasurement loss (gain)



(13)



(26)



Other operating activities



31



13





Total





958



108

















Cash (used in) provided by investing activities:











Capital expenditures(a)



(536)



(626)



Disposal of assets



141



16



Other investing activities



(71)



(1)





Total





(466)



(611)

















Cash provided by (used in) financing activities:









Revolving credit facilities

- borrowings

523



3,316









- repayments

(653)



(3,163)



Receivables Purchase Agreement (payments) proceeds

(380)



75



Issuance of long-term debt, net of financing costs

485



-



Repayment of long-term debt



(319)



(18)



Common stock issued



-



4



Dividends paid



(22)



(22)



Other financing activities



-



1





Total





(366)



193

















Effect of exchange rate changes on cash



2



2

















Net increase (decrease) in cash and cash equivalents

128



(308)

Cash and cash equivalents at beginning of the year

408



578

















Cash and cash equivalents at end of the period

$         536



$         270

















(a)Excludes the change in accrued capital expenditures of $50 million for the nine months ended September 30, 2012.  The change in accrued capital expenditures was immaterial for the nine months ended September 30, 2011.  

















 

UNITED STATES STEEL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)



















Sept. 30



Dec. 31

(Dollars in millions)



2012



2011













Cash and cash equivalents

$         536



$         408

Receivables, net



2,412



2,053

Receivables sold to third party conduits

-



380

Inventories



2,525



2,775

Other current assets



173



158



Total current assets

5,646



5,774

Property, plant and equipment, net

6,390



6,579

Investment and long-term receivables, net

645



683

Goodwill and intangible assets, net

2,071



2,045

Other assets



744



992















Total assets



$     15,496



$     16,073













Accounts payable



$       1,948



$       2,063

Payroll and benefits payable

1,048



1,003

Short-term debt and current maturities of long-term debt

1



20

Borrowings under Receivables Purchase Agreement

-



380

Other current liabilities



270



183



Total current liabilities

3,267



3,649

Long-term debt, less unamortized discount

3,939



3,828

Employee benefits



3,989



4,600

Other long-term liabilities

438



495

United States Steel Corporation stockholders' equity

3,861



3,500

Noncontrolling interests

2



1















Total liabilities and stockholders' equity

$     15,496



$     16,073













 

 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)







































Quarter Ended



Nine Months Ended











Sept. 30



June 30



Sept. 30



September 30

(Dollars in millions)



2012



2012



2011



2012



2011





























INCOME (LOSS) FROM OPERATIONS























Flat-rolled



$       29



$      177



$      203



$     389



$     541



U. S. Steel Europe



27



34



(50)



27



(73)



Tubular





102



103



134



334



197



Other Businesses



13



16



8



46



30





























Reportable Segment and Other Businesses Income from Operations

171



330



295



796



695



Postretirement benefit expense



(74)



(77)



(96)



(228)



(287)



Other items not allocated to segments:

























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 Income from Operations



$       62



$      253



$      199



$     242



$     408





























CAPITAL EXPENDITURES























Flat-rolled



$       89



$      151



$      160



$     421



$     427



U. S. Steel Europe



15



12



26



29



93



Tubular





17



4



30



25



94



Other Businesses



8



1



9



11



12



































Total



$     129



$      168



$      225



$     486

 (a) 

$     626





























(a) Capital expenditures include $50 million of changes in accrued but unpaid capital expenditures for the nine months ended September 30, 2012.  Changes in the accrued but unpaid capital expenditures for the nine months ended September 30, 2011 were not material. 

 

 

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)



































Quarter Ended



Nine Months Ended









Sept. 30



June 30



Sept. 30



September 30









2012



2012



2011



2012



2011



























OPERATING STATISTICS





















Average realized price: ($/net ton) (a)























Flat-rolled

741



772



773



759



765





U. S. Steel Europe

731



767



862



749



868





Tubular

1,676



1,706



1,699



1,704



1,576



Steel Shipments: (a) (b)























Flat-rolled

3,972



3,986



3,835



12,050



11,725





U. S. Steel Europe

911



955



1,196



2,911



3,779





Tubular

457



493



481



1,479



1,330

































Total Steel Shipments

5,340



5,434



5,512



16,440



16,834



Intersegment Shipments: (b)























Flat-rolled to Tubular

456



460



492



1,415



1,339





U. S. Steel Europe to Flat-rolled

128



44



-



249



71



Raw Steel Production: (b)























Flat-rolled  

4,699



4,688



4,516



14,430



14,008





U. S. Steel Europe

1,140



1,173



1,317



3,553



4,429



Raw Steel Capability Utilization: (c)























Flat-rolled

77%



77%



74%



79%



77%





U. S. Steel Europe

90%



94%



71%



90%



80%





   USSK

90%



94%



82%



92%



87%





























(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.  Subsequent to the sale of USSS









on January 31, 2012, annual raw steel production capability for USSE is 5.0 million net tons.



























 

 

SOURCE United States Steel Corporation

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