Market Overview

United States Steel Corporation Reports Second Quarter 2020 Results

Share:
  • Net loss of $589 million, or $3.36 per diluted share
  • Adjusted net loss of $469 million, or $2.67 per diluted share
  • Adjusted EBITDA loss of $264 million
  • Liquidity of $2.652 billion, including cash of $2.300 billion

United States Steel Corporation (NYSE:X) reported second quarter 2020 net loss of $589 million, or $3.36 per diluted share. Adjusted net loss was $469 million, or $2.67 per diluted share. This compares to second quarter 2019 net earnings of $68 million, or $0.39 per diluted share. Adjusted net earnings for second quarter 2019 were $78 million, or $0.45 per diluted share.

Earnings Highlights

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(Dollars in millions, except per share amounts)

2020

2019

 

2020

2019

Net Sales

$

2,091

 

$

3,545

 

 

$

4,839

 

$

7,044

 

Segment (loss) earnings before interest and income taxes

 

 

 

 

 

Flat-Rolled

$

(329)

 

$

134

 

 

$

(364)

 

$

229

 

U. S. Steel Europe

(26)

 

(10)

 

 

(40)

 

19

 

Tubular

(47)

 

(6)

 

 

(95)

 

4

 

Other Businesses

(21)

 

10

 

 

(20)

 

18

 

Total segment (loss) earnings before interest and income taxes

$

(423)

 

$

128

 

 

$

(519)

 

$

270

 

Other items not allocated to segments

(109)

 

(13)

 

 

(388)

 

(44)

 

(Loss) earnings before interest and income taxes

$

(532)

 

$

115

 

 

$

(907)

 

$

226

 

Net interest and other financial costs

62

 

54

 

 

97

 

103

 

Income tax (benefit) provision

(5)

 

(7)

 

 

(24)

 

1

 

Net (loss) earnings

$

(589)

 

$

68

 

 

$

(980)

 

$

122

 

(Loss) earnings per diluted share

$

(3.36)

 

$

0.39

 

 

$

(5.67)

 

$

0.70

 

 

 

 

 

 

 

Adjusted net (loss) earnings (a)

$

(469)

 

78

 

 

$

(592)

 

159

 

Adjusted net (loss) earnings per diluted share (a)

$

(2.67)

 

$

0.45

 

 

$

(3.43)

 

$

0.92

 

Adjusted (loss) earnings before interest, income taxes, depreciation and amortization (EBITDA) (a)

$

(264)

 

278

 

 

$

(200)

 

563

 

(a) Please refer to the non-GAAP Financial Measures section of this document for the reconciliation of these amounts.

"Protecting lives and livelihoods remains our top priority," said U. S. Steel President and Chief Executive Officer David B. Burritt. "We remain vigilant and continue to actively enforce our COVID-19 protocols, including working from home, where applicable, promoting physical distancing, limiting visitors to our sites, and continuing our enhanced cleaning activities. As a result of this intense focus, COVID-19 cases among our workforce remains significantly better than the general U.S. population."

Burritt continued, "We are encouraged by the recovery in market conditions as automotive original equipment manufacturers (OEMs) are nearing normalized production levels and healthy order activity has continued into the third quarter. Construction demand is exceeding our expectations and is expected to remain robust, particularly for value-add construction products. To ensure we continue to serve our customers, we restarted two blast furnaces to quickly respond to increasing activity and plan to restart an additional furnace at Gary Works on August 1. In Europe, demand is beginning to recover, in-line with the re-opening of the European continent."

Commenting on the quarter, Burritt said, "We exceeded our second quarter guidance as North American Flat-rolled segment shipments meaningfully accelerated in the second half of June, resulting in better than expected production efficiencies and cost benefits across our mines and steel plants. Still, second quarter performance was impacted by COVID-19 and the nonrecurring costs associated with a significant portion of our steelmaking operations being idled in the quarter. We are encouraged by the accelerating pace of incoming orders across our steelmaking and sheet finishing facilities. While a portion of operating inefficiencies will continue to impact third quarter performance, we are confident that the second quarter was the trough for the year."

*****

The Company will conduct a conference call on second quarter 2020 earnings on Friday, July 31, at 8:30 a.m. Eastern Daylight. To listen to the webcast of the conference call, and to access the company's slide presentation, visit the U. S. Steel website, www.ussteel.com, and click on the "Investors" section. Replays of the conference call will be available on the website after 10:30 a.m. on July 31.

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2020

 

2019

 

2020

 

2019

OPERATING STATISTICS

 

 

 

 

 

 

 

Average realized price: ($/net ton unless otherwise noted)(a)

 

 

 

 

 

 

 

Flat-Rolled

 

721

 

 

 

779

 

 

 

715

 

 

 

789

 

U. S. Steel Europe

 

632

 

 

 

652

 

 

 

620

 

 

 

661

 

U. S. Steel Europe (€/net ton)

 

575

 

 

 

580

 

 

 

563

 

 

 

585

 

Tubular

 

1,288

 

 

 

1,524

 

 

 

1,285

 

 

 

1,537

 

Steel shipments (thousands of net tons):(a)

 

 

 

 

 

 

 

Flat-Rolled

 

1,790

 

 

 

2,804

 

 

 

4,299

 

 

 

5,529

 

U. S. Steel Europe

 

610

 

 

 

1,004

 

 

 

1,411

 

 

 

2,068

 

Tubular

 

132

 

 

 

195

 

 

 

319

 

 

 

402

 

Total Steel Shipments

 

2,532

 

 

 

4,003

 

 

 

6,029

 

 

 

7,999

 

 

 

 

 

 

 

 

 

Intersegment steel (unless otherwise noted) shipments (thousands of net tons):

 

 

 

 

 

 

 

Flat-Rolled to Tubular

 

9

 

 

 

52

 

 

 

101

 

 

 

133

 

Flat-Rolled to U. S. Steel Europe (iron ore pellets and fines)

 

225

 

 

 

189

 

 

 

225

 

 

 

189

 

Raw steel production (thousands of net tons):

 

 

 

 

 

 

 

Flat-Rolled

 

1,468

 

 

 

2,984

 

 

 

4,616

 

 

 

6,059

 

U. S. Steel Europe

 

645

 

 

 

1,148

 

 

 

1,527

 

 

 

2,307

 

Raw steel capability utilization:(b)

 

 

 

 

 

 

 

Flat-Rolled

 

35

%

 

 

70

%

 

 

54

%

 

 

72

%

U. S. Steel Europe

 

52

%

 

 

92

%

 

 

61

%

 

 

93

%

 

 

 

 

 

 

 

 

CAPITAL EXPENDITURES (dollars in millions)

 

 

 

 

 

 

 

Flat-Rolled

$

118

 

 

$

254

 

 

$

310

 

 

$

501

 

U. S. Steel Europe

 

14

 

 

 

41

 

 

 

48

 

 

 

75

 

Tubular

 

40

 

 

 

29

 

 

 

94

 

 

 

48

 

Other Businesses

 

1

 

 

 

2

 

 

 

3

 

 

 

4

 

Total

$

173

 

 

$

326

 

 

$

455

 

 

$

628

 

(a) Excludes intersegment shipments.

(b) Based on annual raw steel production capability of 17.0 million net tons for Flat-Rolled and 5.0 million net tons for U. S. Steel Europe.

UNITED STATES STEEL CORPORATION

CONDENSED STATEMENT OF OPERATIONS (Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

(Dollars in millions, except per share amounts)

2020

 

2019

 

2020

 

2019

NET SALES

 

$

2,091

 

 

$

3,545

 

 

$

4,839

 

 

$

7,044

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES (INCOME):

 

 

 

 

 

 

 

 

Cost of sales (excludes items shown below)

 

2,274

 

 

3,227

 

 

4,879

 

 

6,399

 

Selling, general and administrative expenses

 

62

 

 

82

 

 

134

 

 

160

 

Depreciation, depletion and amortization

 

159

 

 

150

 

 

319

 

 

293

 

Loss (earnings) from investees

 

39

 

 

(28

)

 

47

 

 

(37

)

Tubular asset impairment charges

 

 

 

 

 

263

 

 

 

Gain on equity investee transactions

 

 

 

 

 

(31

)

 

 

Restructuring and other charges

 

89

 

 

 

 

130

 

 

 

Net loss on sale of assets

 

 

 

 

 

 

 

4

 

Other losses, net

 

 

 

(1

)

 

5

 

 

(1

)

Total operating expenses

 

2,623

 

 

3,430

 

 

5,746

 

 

6,818

 

 

 

 

 

 

 

 

 

 

EARNINGS BEFORE INTEREST AND INCOME TAXES

 

(532

)

 

115

 

 

(907

)

 

226

 

Net interest and other financial costs

 

62

 

 

54

 

 

97

 

 

103

 

 

 

 

 

 

 

 

 

 

EARNINGS BEFORE INCOME TAXES

 

(594

)

 

61

 

 

(1,004

)

 

123

 

Income tax (benefit) provision

 

(5

)

 

(7

)

 

(24

)

 

1

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings

 

(589

)

 

68

 

 

(980

)

 

122

 

Less: Net earnings (loss) attributable to noncontrolling interests

 

 

 

 

 

 

 

 

NET (LOSS) EARNINGS ATTRIBUTABLE TO UNITED STATES STEEL CORPORATION

 

$

(589

)

 

$

68

 

 

$

(980

)

 

$

122

 

 

 

 

 

 

 

 

 

 

COMMON STOCK DATA:

 

 

 

 

 

 

 

 

Net (loss) earnings per share attributable to

 

 

 

 

 

 

 

 

United States Steel Corporation stockholders:

 

 

 

 

 

 

 

 

Basic

 

$

(3.36

)

 

$

0.39

 

 

$

(5.67

)

 

$

0.71

 

Diluted

 

$

(3.36

)

 

$

0.39

 

 

$

(5.67

)

 

$

0.70

 

Weighted average shares, in thousands

 

 

 

 

 

 

 

 

Basic

 

175,327

 

 

171,992

 

 

172,775

 

 

172,613

 

Diluted

 

175,327

 

 

172,512

 

 

172,775

 

 

173,475

 

Dividends paid per common share

 

$

0.01

 

 

$

0.05

 

 

$

0.02

 

 

$

0.10

 

UNITED STATES STEEL CORPORATION

CONDENSED CASH FLOW STATEMENT (Unaudited)

 

Six Months Ended

 

June 30,

(Dollars in millions)

2020

 

2019

Cash (used in) provided by operating activities:

 

 

 

Net (loss) earnings

$

(980

)

 

$

122

 

Depreciation, depletion and amortization

 

319

 

 

 

293

 

Tubular asset impairment charges

 

263

 

 

 

 

Gain on equity investee transactions

 

(31

)

 

 

 

Restructuring and other charges

 

130

 

 

 

 

Pensions and other postretirement benefits

 

(10

)

 

 

55

 

Deferred income taxes

 

(12

)

 

 

(3

)

Net loss on sale of assets

 

 

 

 

4

 

Working capital changes

 

(42

)

 

 

(133

)

Income taxes receivable/payable

 

10

 

 

 

39

 

Other operating activities

 

(9

)

 

 

(11

)

Total

 

(362

)

 

 

366

 

 

 

 

 

Cash used in investing activities:

 

 

 

Capital expenditures

 

(455

)

 

 

(628

)

Investment in Big River Steel

 

(3

)

 

 

 

Proceeds from sale of assets

 

1

 

 

 

1

 

Proceeds from sale of ownership interests in equity investees

 

8

 

 

 

 

Investments, net

 

(4

)

 

 

 

Total

 

(453

)

 

 

(627

)

 

 

 

 

Cash provided by (used in) financing activities:

 

 

 

Revolving credit facilities - borrowings, net of financing costs

 

1,462

 

 

 

 

Revolving credit facilities - repayments

 

(644

)

 

 

 

Issuance of long-term debt, net of financing costs

 

1,048

 

 

 

 

Net proceeds from public offering of common stock

 

410

 

 

 

 

Repayment of long-term debt

 

(6

)

 

 

(1

)

Proceeds from Stelco Option Agreement

 

40

 

 

 

 

Common stock repurchased

 

 

 

 

(70

)

Dividends paid

 

(3

)

 

 

(18

)

Taxes paid for equity compensation plans

 

(1

)

 

 

(7

)

Total

 

2,306

 

 

 

(96

)

 

 

 

 

Effect of exchange rate changes on cash

 

(1

)

 

 

(1

)

 

 

 

 

Net Increase (decrease) in cash, cash equivalents and restricted cash

 

1,490

 

 

 

(358

)

Cash, cash equivalents and restricted cash at beginning of the year

 

939

 

 

 

1,040

 

 

 

 

 

Cash, cash equivalents and restricted cash at end of the period

$

2,429

 

 

$

682

 

UNITED STATES STEEL CORPORATION

CONDENSED BALANCE SHEET (Unaudited)

 

June 30,

 

December 31,

(Dollars in millions)

2020

 

2019

Cash and cash equivalents

$

2,300

 

 

$

749

 

Receivables, net

939

 

 

1,177

 

Inventories

1,634

 

 

1,785

 

Other current assets

51

 

 

102

 

Total current assets

4,924

 

 

3,813

 

Operating lease assets

236

 

 

230

 

Property, plant and equipment, net

5,410

 

 

5,447

 

Investments and long-term receivables, net

1,376

 

 

1,466

 

Intangible assets, net

132

 

 

150

 

Deferred income tax benefits

19

 

 

19

 

Other noncurrent assets

454

 

 

483

 

 

 

 

 

Total assets

$

12,551

 

 

$

11,608

 

 

 

 

 

Accounts payable and other accrued liabilities

1,459

 

 

2,054

 

Payroll and benefits payable

354

 

 

336

 

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

94

 

 

14

 

Other current liabilities

234

 

 

221

 

Total current liabilities

2,141

 

 

2,625

 

Noncurrent operating lease liabilities

185

 

 

177

 

Long-term debt, less unamortized discount and debt issuance costs

5,505

 

 

3,627

 

Employee benefits

563

 

 

532

 

Other long-term liabilities

503

 

 

554

 

United States Steel Corporation stockholders' equity

3,617

 

 

4,092

 

Noncontrolling interests

37

 

 

1

 

 

 

 

 

Total liabilities and stockholders' equity

$

12,551

 

 

$

11,608

 

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED NET (LOSS) EARNINGS

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(Dollars in millions, except per share amounts) (a)

2020

 

2019

 

2020

 

2019

Reconciliation to adjusted net (loss) earnings attributable to United States Steel Corporation

 

 

 

 

 

 

 

Net (loss) earnings attributable to United States Steel Corporation

$

(589

)

 

$

68

 

 

$

(980

)

 

$

122

 

Tubular asset impairment charge

 

 

 

 

 

 

 

263

 

 

 

 

Restructuring and other charges

 

82

 

 

 

 

 

 

123

 

 

 

 

Gain on previously held investment in UPI

 

 

 

 

 

 

 

(25

)

 

 

 

Tubular Inventory Impairment

 

24

 

 

 

 

 

 

24

 

 

 

 

December 24, 2018 Clairton coke making facility fire

 

(4

)

 

 

10

 

 

 

(4

)

 

 

37

 

Big River Steel options mark to market

 

5

 

 

 

 

 

 

(6

)

 

 

 

FIN 48 Reserve

 

13

 

 

 

 

 

 

13

 

 

 

 

Total adjustments

 

120

 

 

 

10

 

 

 

388

 

 

 

37

 

Adjusted net (loss) earnings attributable to United States Steel Corporation

$

(469

)

 

 

78

 

 

$

(592

)

 

 

159

 

 

 

 

 

 

 

 

 

Reconciliation to adjusted diluted net (loss) earnings per share

 

 

 

 

 

 

 

Diluted net earnings per share

$

(3.36

)

 

$

0.39

 

 

$

(5.67

)

 

$

0.70

 

Tubular asset impairment charge

 

 

 

 

 

 

 

1.52

 

 

 

 

Restructuring and other charges

 

0.47

 

 

 

 

 

 

0.70

 

 

 

 

Gain on previously held investment in UPI

 

 

 

 

 

 

 

(0.14

)

 

 

 

Tubular Inventory Impairment

 

0.14

 

 

 

 

 

 

0.14

 

 

 

 

December 24, 2018 Clairton coke making facility fire

 

(0.02

)

 

 

0.06

 

 

 

(0.02

)

 

 

0.22

 

Big River Steel options mark to market

 

0.03

 

 

 

 

 

 

(0.03

)

 

 

 

FIN 48 Reserve

 

0.07

 

 

 

 

 

 

0.07

 

 

 

 

Total adjustments

 

0.69

 

 

 

0.06

 

 

 

2.24

 

 

 

0.22

 

Adjusted diluted net (loss) earnings per share

$

(2.67

)

 

$

0.45

 

 

$

(3.43

)

 

$

0.92

 

(a) The adjustments included in this table for the three and six months ended June 30, 2020 have been tax affected for our European operations and not tax affected for our U.S. operations due to the full valuation allowance on our domestic deferred tax assets. The adjustments included in this table for the three and six months ended June 30, 2019 have been tax effected.

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED EBITDA

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(Dollars in millions)

2020

 

2019

 

2020

 

2019

Reconciliation to Adjusted EBITDA

 

 

 

 

 

 

 

Net (loss) earnings attributable to United States Steel Corporation

$

(589

)

 

$

68

 

 

$

(980

)

 

$

122

 

Income tax (benefit) provision

 

(5

)

 

 

(7

)

 

 

(24

)

 

 

1

 

Net interest and other financial costs

 

62

 

 

 

54

 

 

 

97

 

 

 

103

 

Depreciation, depletion and amortization expense

 

159

 

 

 

150

 

 

 

319

 

 

 

293

 

EBITDA

 

(373

)

 

 

265

 

 

 

(588

)

 

 

519

 

Tubular asset impairment charge

 

 

 

 

 

 

 

263

 

 

 

 

Restructuring and other charges

 

89

 

 

 

 

 

 

130

 

 

 

 

Gain on previously held investment in UPI

 

 

 

 

 

 

 

(25

)

 

 

 

Tubular inventory impairment charge

 

24

 

 

 

 

 

 

24

 

 

 

 

December 24, 2018 Clairton coke making facility fire

 

(4

)

 

 

13

 

 

 

(4

)

 

 

44

 

Adjusted EBITDA

$

(264

)

 

$

278

 

 

$

(200

)

 

$

563

 

We present adjusted net (loss) earnings, adjusted net (loss) earnings per diluted share, (loss) earnings 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 and segment EBITDA, considered along with net (loss) earnings and segment (loss) earnings before interest and income taxes, are relevant indicators of trends relating to our operating performance and provide management and investors with additional information for comparison of our operating results to the operating results of other companies.

Adjusted net (loss) earnings and adjusted net (loss) earnings per diluted share are non-GAAP measures that exclude the effects of items such as the Tubular asset impairment charge, restructuring and other charges, the gain on previously held investment in UPI, the Tubular inventory impairment, the December 24, 2018 Clairton coke making facility fire, the Big River Steel options mark to market and the FIN 48 reserve that are not part of the Company's core operations (Adjustment Items). Adjusted EBITDA is also a non-GAAP measure that excludes the financial effects of the Adjustment Items. We present adjusted net (loss) earnings, adjusted net (loss) earnings per diluted share and adjusted EBITDA to enhance the understanding of our ongoing operating performance and established trends affecting our core operations, by excluding the Adjustment Items. U. S. Steel's management considers adjusted net (loss) earnings, adjusted net (loss) earnings per diluted share and adjusted EBITDA as alternative measures of operating performance and not alternative measures of the Company's liquidity. U. S. Steel's management considers adjusted net (loss) earnings, adjusted net (loss) earnings per diluted share and adjusted EBITDA useful to investors by facilitating a comparison of our operating performance to the operating performance of our competitors. Additionally, the presentation of adjusted net (loss) earnings, adjusted net (loss) earnings per diluted share and adjusted EBITDA provides insight into management's view and assessment of the Company's ongoing operating performance, because management does not consider the Adjustment Items when evaluating the Company's financial performance. Adjusted net (loss) earnings, adjusted net (loss) earnings per diluted share and adjusted EBITDA should not be considered a substitute for net (loss) earnings, (loss) earnings per diluted share or other financial measures as computed in accordance with U.S. GAAP and is not necessarily comparable to similarly titled measures used by other companies. A condensed consolidated statement of operations (unaudited), condensed consolidated cash flow statement (unaudited), condensed consolidated balance sheet (unaudited) and preliminary supplemental statistics (unaudited) for U. S. Steel are attached.

CAUTIONARY NOTE REGARDING 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," "may" 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 changes, 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 River Steel joint venture as a wholly owned subsidiary, and statements expressing general views about future operating results. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2020 and June 30, 2020, and those described from time to time in our future reports filed with the Securities and Exchange Commission. References to "we," "us," "our," the "Company," and "U. S. Steel," refer to United States Steel Corporation and its consolidated subsidiaries.

2020-031

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