UNITED STATES STEEL CORPORATION PITTSBURGH, July 26, 2016 /PRNewswire/ -- United States Steel Corporation (NYSE: X) reported a second quarter 2016 net loss of $46 million, or $0.32 loss per diluted share, which included a favorable adjustment of $23 million, or $0.16 per diluted share, associated with a change in estimate for supplemental unemployment, severance and health care continuation costs and a loss on debt extinguishment of $24 million, or $0.17 loss per diluted share. This compared to a second quarter 2015 net loss of $261 million, or $1.79 loss per diluted share, and a first quarter 2016 net loss of $340 million, or $2.32 loss per diluted share.
For a description of the non-generally accepted accounting principles (non-GAAP) measures and a reconciliation from net earnings (loss) attributable to U. S. Steel, see the Non-GAAP Financial Measures section.
Earnings Highlights
-------------------
(Dollars in
millions, except
per share
amounts) 2Q 2016 1Q 2016 2Q 2015
Net Sales $2,584 $2,341 $2,900
------
Segment earnings
(loss) before
interest and
income taxes
Flat-Rolled $6 $(188) $(64)
U. S. Steel
Europe 55 (14) 20
Tubular (78) (64) (66)
Other Businesses 10 14 6
Total segment
loss before
interest and
income taxes $(7) $(252) $(104)
Postretirement
benefit income
(expense) 12 16 (14)
Other items not
allocated to
segments 23 (25) (274)
Earnings (loss)
before interest
and income taxes $28 $(261) $(392)
Net interest and
other financial
costs 81 65 55
---
Income tax
(benefit)
provision (7) 14 (186)
---------- ---
Less: Net
earnings
attributable to
the
noncontrolling
interests - - -
Net loss
attributable to
United States
Steel
Corporation $(46) $(340) $(261)
---------------- ----
-Loss per basic
share $(0.32) $(2.32) $(1.79)
------
-Loss per diluted
share $(0.32) $(2.32) $(1.79)
----------------- ------ ------ ------
Adjusted earnings
(loss) before
interest, income
taxes,
depreciation and
amortization
(EBITDA) (a) $134 $(107) $20
----------------- ---- ----- ---
((a) )Please refer to the Non-GAAP Financial Measures section of this document for the reconciliation of net loss attributable to United States Steel Corporation to adjusted EBITDA.
Commenting on results, U. S. Steel President and Chief Executive Officer Mario Longhi said, "Our second quarter results improved significantly from the first quarter as our European segment posted its best results since the third quarter of 2008 and our Flat-Rolled segment returned to profitability. Our improving cost structure continues to drive increases in our margins and the recent increases in steel prices started to be reflected in our results. Also, our successful debt offering, continued reductions in working capital, and increasing cash generation significantly improved financial flexibility and our cash and liquidity position. While market conditions have improved recently, we remain focused on lowering our break-even point and working closely with our customers to improve our market position and create value for all of our stakeholders."
Segment loss before interest and income taxes was $7 million, or $2 per ton, for the second quarter of 2016 compared with segment loss before interest and income taxes of $252 million, or $70 per ton, in the first quarter of 2016 and segment loss before interest and income taxes of $104 million, or $27 per ton, in the second quarter of 2015.
For the second quarter 2016, we recorded a tax benefit of $7 million on our pre-tax loss of $53 million. Due to the full valuation allowance on our domestic deferred tax assets, the tax provision does not reflect any tax benefit for domestic pretax losses.
We generated positive operating cash flow of $313 million for the six months ended June 30, 2016. As of June 30, 2016, U. S. Steel had $820 million of cash and $2.4 billion of total liquidity.
Segment Analysis
Second quarter results for our Flat-Rolled segment improved from the first quarter as steel prices increased throughout the quarter. The increase in average realized price reflects the flow through of higher index prices to our monthly contracts and increased pricing on spot business. Second quarter results also improved sequentially as the first quarter results included a $50 million unfavorable effect from planned liquidations of inventory costed using the last-in-first-out (LIFO) method related to our targeted working capital reductions in 2016. Maintenance and outage costs were higher in the second quarter due to planned and unplanned outages at Gary Works early in the quarter.
Second quarter results for our European segment increased compared to the first quarter. Higher average realized euro-based prices combined with higher volumes, favorable raw material prices, improved operating efficiencies, and increased Carnegie Way benefits contributed to better results.
Second quarter results for our Tubular segment decreased compared to the first quarter primarily due to lower shipments and prices. Shipments were adversely impacted as average rig counts were lower in the second quarter.
2016 Outlook
Commenting on U. S. Steel's outlook for 2016, Longhi said, "The significant improvements we have made to our earnings power through our Carnegie Way transformation will become more apparent as market prices recover from the very low levels at the end of 2015. While we began to realize some benefit from recent price increases in the second quarter, we will see better average realized prices, primarily in our Flat-Rolled and European segments, in the second half of the year. The steel industry continues to face challenging conditions as a result of global overcapacity and unfair trade practices. We remain focused on improving our trade laws and their enforcement, and we are encouraged that final affirmative determinations in recent trade cases have been a catalyst for increasing steel prices. Our Carnegie Way journey continues to create improvements in our business model that will enable us to be profitable across the business cycle."
If market conditions, which include spot prices, customer demand, import volumes, supply chain inventories, rig counts and energy prices, remain at their current levels, we would expect:
-- 2016 net earnings to be approximately $50 million, or $0.34 per share,
and adjusted EBITDA to be approximately $850 million.
-- Results for our Flat-Rolled and European segments should each be higher
than their 2015 results and results for our Tubular segment should be
lower than their 2015 results.
-- To be cash positive for the year, including approximately $400 million
of cash benefits from working capital improvements in 2016, primarily
related to better inventory management, driven by improved sales and
operations planning practices, helping to offset growing accounts
receivables balances.
We believe market conditions will change, and as changes occur during the balance of 2016, our net earnings and adjusted EBITDA should change consistent with the pace and magnitude of changes in market conditions.
We expect improved results for Other Businesses, primarily from real estate, and approximately $60 million of post retirement benefit income.
Please refer to the Non-GAAP Financial Measures section of this document for the reconciliation of the Outlook net earnings to adjusted EBITDA.
*****
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 the net earnings (loss), is a relevant indicator of trends relating to cash generating activity 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) and adjusted net earnings (loss) per diluted share are non-GAAP measures that exclude the effects of restructuring charges, impairment charges, losses associated with U. S. Steel Canada and losses on debt extinguishment that are not part of the Company's core operations. Adjusted EBITDA is also a non-GAAP measure that excludes the effects of restructuring charges, impairment charges and losses associated with U. S. Steel Canada. We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA to enhance the understanding of our ongoing operating performance and established trends affecting our core operations, particularly cash generating activity, by excluding the effects of restructuring charges, impairment charges and losses associated with non-core operations that can obscure underlying trends. U. S. Steel's management considers adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA useful to investors by facilitating a comparison of our operating performance to the operating performance of our competitors, many of which use adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA as alternative measures of operating performance. Additionally, the presentation of adjusted net earnings (loss), adjusted net earnings (loss) 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 adjusting items when evaluating the Company's financial performance or in preparing the Company's annual financial outlook. Adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA should not be considered a substitute for net earnings (loss), earnings (loss) 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 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 second quarter earnings on Wednesday, July 27, at 8:30 a.m. Eastern Daylight. 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.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains information that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, we have identified such forward-looking statements by using the words "believe," "expect," "intend," "estimate," "anticipate," "project," "target", "forecast", "aim," "will", "should" 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 growth, share of sales and earnings per share growth, 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, 2015, and those described from time to time in our future reports filed with the Securities and Exchange Commission.
UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
----------------------------------
Quarter Ended Six Months Ended
------------- ----------------
June 30 March 31 June 30 June 30,
(Dollars in millions, except per share amounts) 2016 2016 2015 2016 2015
---------------------------------------------- ---- ---- ---- ---- ----
NET SALES $2,584 $2,341 $2,900 $4,925 $6,172
OPERATING EXPENSES (INCOME):
Cost of sales (excludes
items shown below) 2,397 2,436 2,792 4,833 5,858
Selling, general and
administrative expenses 64 69 107 133 209
Depreciation, depletion and
amortization 129 129 138 258 282
Earnings from investees (28) (45) (17) (73) (23)
Loss on write-down of
retained interest in USSC - - 255 - 255
Restructuring and other
charges (6) 10 19 4 172
Net loss (gain) on disposal
of assets - 3 (1) 3 (1)
Other income, net - - (1) - (1)
-----------
Total operating expenses 2,556 2,602 3,292 5,158 6,751
-----------
EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES 28 (261) (392) (233) (579)
Net interest and other financial costs 81 65 55 146 117
--- --- --- --- ---
LOSS BEFORE INCOME TAXES (53) (326) (447) (379) (696)
Income tax (benefit) provision (7) 14 (186) 7 (360)
--- --- ---- --- ----
Net loss (46) (340) (261) (386) (336)
Less: Net loss attributable
to the
noncontrolling interests - - - - -
-----------
NET LOSS ATTRIBUTABLE TO
UNITED STATES STEEL
CORPORATION $(46) $(340) $(261) $(386) $(336)
==========
COMMON STOCK DATA:
------------------
Net loss per share attributable to
United States Steel Corporation stockholders:
Basic $(0.32) $(2.32) $(1.79) $(2.64) $(2.31)
Diluted $(0.32) $(2.32) $(1.79) $(2.64) $(2.31)
Weighted average shares, in thousands
Basic 146,582 146,402 145,962 146,492 145,848
Diluted 146,582 146,402 145,962 146,492 145,848
Dividends paid per common share $0.05 $0.05 $0.05 $0.10 $0.10
------------------------------- ----- ----- ----- ----- -----
UNITED STATES STEEL CORPORATION
CASH FLOW STATEMENT (Unaudited)
------------------------------
Six Months Ended
June 30,
--------
(Dollars in millions) 2016 2015
-------------------- ---- ----
Cash provided by (used in) operating activities:
Net loss $(386) $(336)
Depreciation,
depletion and
amortization 258 282
Loss on write-
down of retained
interest in USSC - 255
Restructuring and
other charges 4 172
Pensions and
other
postretirement
benefits (21) (24)
Deferred income
taxes 2 (345)
Net gain on
disposal of
assets 3 (1)
Working capital
changes(a) 435 162
Income taxes
receivable/
payable 6 18
Other operating
activities 12 (32)
---
Total 313 151
--- ---
Cash (used in) provided by investing activities:
Capital
expenditures(a) (217) (212)
Acquisitions - (25)
Disposal of
assets 1 1
Other
investing
activities (18) 5
Total (234) (231)
---- ----
Cash (used in) provided by financing activities:
Issuance of long-
term debt, net
of financing
costs 958 -
Repayment of
long-term
debt (962) (18)
Receipts from
exercise of
stock options - 1
Dividends
paid (15) (15)
Total (19) (32)
--- ---
Effect of exchange rate changes on
cash 5 (32)
--- ---
Net increase (decrease) in cash and
cash equivalents 65 (144)
Cash and cash equivalents at
beginning of the year 755 1,354
--- -----
Cash and cash equivalents at end of
the period $820 $1,210
----------------------------------- ---- ------
((a))2015 amounts have been revised to correct a prior period error that resulted in decreased capital expenditures of $64 million with the offsetting change to accounts payable. Without the correction, 2015 capital expenditures would have been $276 million.
UNITED STATES STEEL CORPORATION
CONDENSED BALANCE SHEET (Unaudited)
----------------------------------
June 30 Dec. 31
(Dollars in
millions) 2016 2015
----------- ---- ----
Cash and
cash
equivalents $820 $755
Receivables,
net 1,250 1,063
Inventories 1,675 2,074
Other
current
assets 32 25
--- ---
Total current
assets 3,777 3,917
Property,
plant and
equipment,
net 4,306 4,411
Investments
and long-
term
receivables,
net 534 540
Intangible
assets,
net 193 196
Other
assets 131 103
--- ---
Total assets $8,941 $9,167
Accounts
payable $1,631 $1,493
Payroll and
benefits
payable 455 462
Short-term
debt and
current
maturities
of long-
term debt 82 45
Other
current
liabilities 155 148
--- ---
Total current
liabilities 2,323 2,148
Long-term
debt, less
unamortized
discount 3,058 3,093
Employee
benefits 1,260 1,101
Other long-
term
liabilities 386 388
United
States
Steel
Corporation
stockholders'
equity 1,913 2,436
Noncontrolling
interests 1 1
--- ---
Total
liabilities
and
stockholders'
equity $8,941 $9,167
------------- ------ ------
UNITED STATES STEEL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
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 the net earnings (loss), is a relevant indicator of trends relating to cash generating activity 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) and adjusted net earnings (loss) per diluted share are non-GAAP measures that exclude the effects of restructuring charges, impairment charges, losses associated with USSC and losses on debt extinguishment that are not part of the Company's core operations. Adjusted EBITDA is also a non-GAAP measure that excludes the effects of restructuring charges, impairment charges and losses associated with U. S. Steel Canada. We present adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA to enhance the understanding of our ongoing operating performance and established trends affecting our core operations, particularly cash generating activity, by excluding the effects of restructuring charges, impairment charges and losses associated with non-core operations that can obscure underlying trends. U. S. Steel's management considers adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA useful to investors by facilitating a comparison of our operating performance to the operating performance of our competitors, many of which use adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA as alternative measures of operating performance. Additionally, the presentation of adjusted net earnings (loss), adjusted net earnings (loss) 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 adjusting items when evaluating the Company's financial performance or in preparing the Company's annual financial outlook. Adjusted net earnings (loss), adjusted net earnings (loss) per diluted share and adjusted EBITDA should not be considered a substitute for net earnings (loss), earnings (loss) 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.
RECONCILIATION OF ADJUSTED EBITDA
---------------------------------
Quarter Ended
-------------
June 30 March 31 June 30
(Dollars in millions) 2016 2016 2015
-------------------- ---- ---- ----
Reconciliation to Adjusted
EBITDA
Net loss attributable to United
States Steel Corporation $(46) $(340) $(261)
Income tax (benefit) provision (7) 14 (186)
Net interest and other financial
costs 81 65 55
Depreciation, depletion and
amortization expense 129 129 138
---
EBITDA 157 (132) (254)
Supplemental unemployment and
severance costs (23) 25 19
Loss on write-down of retained
interest in USSC - - 255
---
Adjusted EBITDA 134 (107) 20
--------------- --- ---- ---
UNITED STATES STEEL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
RECONCILIATION OF ADJUSTED NET LOSS
-----------------------------------
Quarter Ended(a)
---------------
June 30 March 31 June 30
(Dollars in millions, except
per share amounts) 2016 2016 2015
---------------------------- ---- ---- ----
Reconciliation to adjusted net loss
attributable to United States Steel
Corporation
Net loss attributable to United
States Steel Corporation $(46) $(340) $(261)
Supplemental unemployment and
severance costs (23) 25 10
Loss on write-down of retained
interest in USSC - - 136
Loss on debt extinguishment 24 - -
---
Total adjustments 1 25 146
---
Adjusted net loss attributable to
United States Steel Corporation $(45) $(315) $(115)
---
Reconciliation to adjusted diluted net loss
per share
Diluted net loss per share $(0.32) $(2.32) $(1.79)
Supplemental unemployment and
severance costs (0.16) 0.17 0.07
Loss on write-down of retained
interest in USSC - - 0.93
Loss on debt extinguishment 0.17 - -
----
Total adjustments 0.01 0.17 1.00
----
Adjusted diluted net loss per share $(0.31) $(2.15) $(0.79)
----------------------------------- ------ ------ ------
((a) )The adjustments included in this table for the quarter ended June 30, 2015 have been tax effected at the quarterly effective tax rate while the adjustments for the quarters ended June 30, 2016 and March 31, 2016 have been tax effected at a 0% tax rate due to the recognition of a full valuation allowance.
UNITED STATES STEEL CORPORATION
RECONCILIATION OF ANNUAL ADJUSTED EBITDA OUTLOOK
------------------------------------------------
Year Ended
Dec. 31
(Dollars in millions) 2016
-------------------- ----
Reconciliation to Projected Annual Adjusted EBITDA
Included in Outlook
Projected net earnings
attributable to United States
Steel Corporation included in
Outlook $50
Estimated income tax expense 30
Estimated net interest and
other financial costs 265
Estimated depreciation,
depletion and amortization 505
---
Projected annual adjusted
EBITDA included in Outlook $850
-------------------------- ----
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
----------------------------------------------
Quarter Ended Six Months Ended
------------- ----------------
June 30 March 31 June 30 June 30,
(Dollars in millions) 2016 2016 2015 2016 2015
-------------------- ---- ---- ---- ---- ----
SEGMENT EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES
Flat-Rolled $6 $(188) $(64) $(182) $(131)
U. S. Steel Europe 55 (14) 20 41 57
Tubular (78) (64) (66) (142) (65)
Other Businesses 10 14 6 24 14
---
Total Segment Earnings (Loss) Before Interest and Income Taxes (7) (252) (104) (259) (125)
Postretirement benefit income (expense) 12 16 (14) 28 (27)
Other items not allocated to segments:
Supplemental unemployment and severance costs 23 (25) - (2) -
Loss on write-down of retained interest in USSC - - (255) - (255)
Loss on shutdown of coke production facilities - - - - (153)
Restructuring and other charges - - (19) - (19)
---
Earnings (loss) before interest and income taxes $28 $(261) $(392) $(233) $(579)
===
CAPITAL EXPENDITURES
Flat-Rolled(a) $28 $46 $56 $74 $124
U. S. Steel Europe 22 29 24 51 45
Tubular 18 52 24 70 40
Other Businesses 1 21 - 22 3
---
Total(a) $69 $148 $104 $217 (b) $212 (b)
------- --- ---- ---- ---- --- ---- ---
((a))The amount for the six months ended June 30, 2015 has been revised to correct a prior period error that resulted in decreased capital expenditures of $64 million. Without the correction, total capital expenditures for the six months ended June 30, 2015 would have been $276 million.
((b)) Excludes the (decrease) increase in accrued capital expenditures of $(96) million and $46 million for the six months ended June 30, 2016, and 2015, respectively.
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
----------------------------------------------
Quarter Ended Six Months Ended
------------- ----------------
June 30 March 31 June 30 June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
OPERATING STATISTICS
Average realized price: (a)
Flat-Rolled ($/net ton) 642 611 695 625 731
U. S. Steel Europe ($/net ton) 485 458 533 472 532
U. S. Steel Europe (euro/net
ton) 430 415 483 423 476
Tubular ($/net ton) 1,050 1,180 1,651 1,123 1,641
Steel Shipments (thousands of net
tons):(a)
Flat-Rolled 2,692 2,498 2,712 5,188 5,329
U. S. Steel Europe 1,125 1,004 1,091 2,129 2,355
Tubular 70 89 92 159 312
Total Steel Shipments 3,887 3,591 3,895 7,476 7,996
===== ===== ===== ===== =====
Intersegment Shipments (thousands
of net tons):
Flat-Rolled to Tubular - 42 96 - 245
Raw Steel Production (thousands of
net tons):
Flat-Rolled 2,735 2,779 2,808 5,514 5,676
U. S. Steel Europe 1,258 1,152 1,200 2,410 2,483
Raw Steel Capability Utilization:
(b)
66
Flat-Rolled 65% % 58% 65 % 59%
U. S. Steel Europe 101% 92% 96% 97 % 100%
------------------ --- --- --- --- --- ---
( (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. Prior to the permanent shutdown of the blast furnace and associated steelmaking operations, along with most of the flat-rolled finishing operations at Fairfield Works late in the third quarter of 2015, annual raw steel production capability for Flat-Rolled was 19.4 million net tons.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/united-states-steel-corporation-reports-improved-2016-second-quarter-results-and-stronger-cash-and-liquidity-position-300304364.html
SOURCE United States Steel Corporation
