Welcome to the Business Journal Archives
Search for articles below, or continue to the all new BusinessJournalDaily.com now.
Search
United States Steel Corp. Nets $58 Million for First Quarter
PITTSBURGH -- United States Steel Corp. today reported first quarter 2004 net income of $58 million, or 47 cents per diluted share, compared to a net loss of $22 million, or 26 cents per diluted share, in last year's fourth quarter and a net loss of $38 million, or 40 cents per diluted share, in the first quarter of 2003.Also today, Chairman and Chief Executive Officer Thomas J. Usher announced that he has elected to retire as chief executive officer at the end of September, to be replaced Oct. 1 by current President and Chief Operating Officer John P. Surma. Usher, who has served as chairman of the board and chief executive officer of U. S. Steel since it was spun off from USX Corp. at year-end 2001, will continue as chairman of the board of directors through April 2007. As chairman, Usher intends to focus on strategic initiatives and organizational development for the corporation.Reported first quarter 2004 diluted earnings per share reflect the assumed conversion of the company's convertible preferred shares into approximately 16 million common shares, and net income available to common shareholders was not adjusted for preferred dividends. Income from operations for the quarter was $151 million, sharply improved from losses from operations of $34 million and $44 million in the fourth and first quarters of 2003, respectively."Results for our domestic flat-rolled business improved significantly as the quarter progressed due to strengthening demand and rising prices, with March prices ending significantly higher than the first quarter average," Usher says. "The business further benefited from operational synergies and cost reductions we achieved in connection with the National acquisition and our administrative process changes. These improvements were partially offset by increasing costs for purchased raw materials."As announced previously, under an agreement resolving a dispute between the Slovak government and the European Commission, U. S. Steel Kosice retains a potential tax benefit of $430 million over a ten-year period ending in 2009 and is required to make income tax payments of $16 million in each of 2004 and 2005. As a result, U. S. Steel recorded a $32 million income tax charge in the first quarter of 2004.Reportable Segments and Other BusinessesThe company's reportable segments and Other Businesses reported segment income from operations of $162 million, or $29 per ton, in the first quarter of 2004, compared with $49 million, or $9 per ton, in fourth quarter 2003 and $2 million, or $1 per ton, in 2003's first quarter. Segment results for the first quarter of 2004 improved by $113 million from the fourth quarter of 2003. Domestic results benefited from higher prices, greater shipments of value-added products, the absence of costs for major scheduled repair outages and the absence of $18 million in operating losses incurred at Straightline. Partially offsetting these positives were increased costs for purchased raw materials and natural gas.In Europe, results improved by $3 million from the fourth quarter of 2003 as increases in realized prices were substantially offset by increased raw material costs, primarily coke, and the effects of operational difficulties with a blast furnace in Slovakia.Effective with the first quarter of 2004, U. S. Steel has four reportable segments: Flat-rolled Products (Flat-rolled), U. S. Steel Europe (USSE), Tubular Products (Tubular) and Real Estate. As of Jan. 1, the residual results of Straightline are included in the Flat-rolled segment. On March 9, the company issued eight million shares of common stock for net proceeds of $294 million. The proceeds from the offering were used to exercise optional redemption provisions under the company's senior notes indentures. On April 19, the company redeemed $187 million principal amount of its 10-3/4% Senior Notes due Aug. 1, 2008, at a premium of 10.75%, and $72 million principal amount of its 9-3/4% Senior Notes due May 15, 2010, at a premium of 9.75%. The redemptions will result in a $33 million charge to second quarter 2004 net interest and other financial costs for the redemption premium and unamortized issuance and discount costs. Ongoing annual interest and amortization expense will be reduced by approximately $28 million as a result of the redemptions.Looking ahead, Usher states, "The recent significant increases in domestic pricing will have a greater impact in the second quarter and contribute to improved profitability. We are seeing strong steel demand as virtually all domestic steel consumers continue to benefit from a stronger economy. In Europe, prices also continue to move higher as supply is tight and steel producers look to cover increasing raw material costs."Officials anticipate that these favorable market conditions will continue to positively impact the results of the Flat-rolled segment in the second quarter, with prices increasing well in excess of March levels. Average second quarter realized prices are expected to improve significantly more than the $52 per ton average improvement in the first quarter. These favorable effects will be partially offset by expected further increases in costs for purchased coke and other raw materials. Supply disruptions from several of U. S. Steel's coal suppliers continue to affect coke operations and reduced coke production to 92% of capacity in the first quarter. In the second quarter, the company expects to purchase approximately 240,000 tons of coke for domestic operations at significantly higher prices than those in the first quarter and will accelerate a blast furnace outage, which was scheduled for later in the year.Flat-rolled shipments in the second quarter are expected to decline by approximately 200,000 tons compared to the first quarter as a result of slightly lower steel production and reduced residual shipments from Straightline; however, for full-year 2004, Flat-rolled shipments are expected to increase from the previous estimate of 15.5 million tons to approximately 15.9 million tons.For USSE, second quarter 2004 profit margins will continue to be affected by raw material cost pressures, particularly in Serbia where new raw material positions are being established. Realized prices are expected to be significantly higher than in the first quarter as the company implements an announced increase of a minimum of 40 euros per metric ton, effective April 1, 2004. Shipments for the quarter are expected to improve by about 10%. Shipments for full-year 2004 are currently estimated at 5.0 million net tons.In the second quarter of 2004, the Tubular segment is expected to benefit from significantly higher prices, although shipments could be affected by shortages of rounds from outside suppliers. The Tubular segment continues to expect annual shipments of 1.0 million tons, which reflects a year over year improvement of about 18%.For the second quarter of 2004, the company expects improved seasonal results from taconite pellet operations. Additionally, with improving profitability, U. S. Steel expects higher costs related to profit-based payments under the labor agreement with the United Steelworkers of America.Visit United States Steel Corp.: www.ussteel.com"