United States Steel Corporation Reports Third Quarter 2020 Results

·15 min read
  • Net loss of $234 million, or $1.06 per diluted share

  • Adjusted net loss of $268 million, or $1.21 per diluted share

  • Adjusted EBITDA of $(49) million

  • Liquidity of $2.864 billion, including cash of $1.696 billion

United States Steel Corporation (NYSE: X) reported third quarter 2020 net loss of $234 million, or $1.06 per diluted share. Adjusted net loss was $268 million, or $1.21 per diluted share. This compares to third quarter 2019 net loss of $84 million, or $0.49 per diluted share. Adjusted net loss for third quarter 2019 was $35 million, or $0.21 per diluted share.

Earnings Highlights

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in millions, except per share amounts)

2020

2019

2020

2019

Net Sales

$

2,340

$

3,069

$

7,179

$

10,113

Segment (loss) earnings before interest and income taxes

Flat-Rolled

$

(159)

$

46

$

(523)

$

275

U. S. Steel Europe

13

(46)

(27)

(27)

Tubular

(52)

(25)

(147)

(21)

Other Businesses

(13)

8

(33)

26

Total segment (loss) earnings before interest and income taxes

$

(211)

$

(17)

$

(730)

$

253

Other items not allocated to segments

(63)

(388)

(107)

(Loss) earnings before interest and income taxes

$

(211)

$

(80)

$

(1,118)

$

146

Net interest and other financial costs

47

48

144

151

Income tax (benefit) provision

(24)

(44)

(48)

(43)

Net (loss) earnings

$

(234)

$

(84)

$

(1,214)

$

38

(Loss) earnings per diluted share

$

(1.06)

$

(0.49)

$

(6.43)

$

0.22

Adjusted net (loss) earnings (a)

$

(268)

(35)

$

(860)

124

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

$

(1.21)

$

(0.21)

$

(4.56)

$

0.71

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

$

(49)

144

$

(249)

707

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

"In the third quarter, the U. S. Steel team continued to execute with an unwavering commitment to safety as the market recovery took hold," said U. S. Steel President and Chief Executive Officer David B. Burritt. "Our third quarter results exceeded our guidance and demonstrated the power of the actions we have taken since the onset of COVID-19 with dramatically improved results in our Flat-rolled segment, positive EBITDA in U. S. Steel Europe, and cash from operations of $213 million. We expect to generate positive adjusted EBITDA in the fourth quarter with excitement about our ‘Best of Both’ future."

Commenting on the Company’s world competitive, "Best of Both" strategy, Burritt said, "I am pleased with the significant progress we have made executing our ‘Best of Both’ strategy so far this year. At the heart of our strategy is the customer, and this month we are celebrating the successful start-up of our electric arc furnace at Fairfield and the one-year anniversary of our investment in Big River Steel. Both of these investments expand our sustainable steel offerings for our customers. It has only been a year and we are confident and enthusiastic that the strategic rationale of our partnership with Big River Steel is being validated. Our teams of leading steel technologists are already proving that sustainable, high-end steel grades previously thought to be impossible for mini mills to produce can indeed be made at Big River with U. S. Steel R&D and know-how."

*****

The Company will conduct a conference call on third quarter 2020 earnings on Friday, October 30, 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 October 30.

UNITED STATES STEEL CORPORATION

PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

OPERATING STATISTICS

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

Flat-Rolled

712

732

714

771

U. S. Steel Europe

608

656

616

660

U. S. Steel Europe (€/net ton)

520

590

548

587

Tubular

1,230

1,417

1,271

1,501

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

Flat-Rolled

2,155

2,654

6,454

8,183

U. S. Steel Europe

790

765

2,201

2,833

Tubular

71

174

390

576

Total Steel Shipments

3,016

3,593

9,045

11,592

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

Flat-Rolled to Tubular

79

101

212

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

687

235

912

424

Raw steel production (thousands of net tons):

Flat-Rolled

2,207

2,783

6,823

8,842

U. S. Steel Europe

873

823

2,400

3,130

Raw steel capability utilization:(b)

Flat-Rolled

52

%

65

%

53

%

70

%

U. S. Steel Europe

69

%

65

%

64

%

84

%

CAPITAL EXPENDITURES (dollars in millions)

Flat-Rolled

$

81

$

263

$

391

$

764

U. S. Steel Europe

16

36

64

111

Tubular

39

49

133

97

Other Businesses

2

3

6

Total

$

136

$

350

$

591

$

978

(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

Nine Months Ended

September 30,

September 30,

(Dollars in millions, except per share amounts)

2020

2019

2020

2019

NET SALES

$

2,340

$

3,069

$

7,179

$

10,113

OPERATING EXPENSES (INCOME):

Cost of sales (excludes items shown below)

2,295

2,902

7,174

9,301

Selling, general and administrative expenses

65

63

199

223

Depreciation, depletion and amortization

162

161

481

454

Loss (earnings) from investees

31

(31)

78

(68)

Asset impairment charges

263

Gain on equity investee transactions

(31)

Restructuring and other charges

54

130

54

Net (gain) loss on sale of assets

(2)

(1)

(2)

3

Other losses, net

1

5

Total operating expenses

2,551

3,149

8,297

9,967

(LOSS) EARNINGS BEFORE INTEREST AND INCOME TAXES

(211)

(80)

(1,118)

146

Net interest and other financial costs

47

48

144

151

(LOSS) EARNINGS BEFORE INCOME TAXES

(258)

(128)

(1,262)

(5)

Income tax (benefit) provision

(24)

(44)

(48)

(43)

Net (loss) earnings

(234)

(84)

(1,214)

38

Less: Net earnings (loss) attributable to noncontrolling interests

NET (LOSS) EARNINGS ATTRIBUTABLE TO UNITED STATES STEEL CORPORATION

$

(234)

$

(84)

$

(1,214)

$

38

COMMON STOCK DATA:

Net (loss) earnings per share attributable to

United States Steel Corporation stockholders:

Basic

$

(1.06)

$

(0.49)

$

(6.43)

$

0.22

Diluted

$

(1.06)

$

(0.49)

$

(6.43)

$

0.22

Weighted average shares, in thousands

Basic

220,402

170,801

188,766

171,882

Diluted

220,402

170,801

188,766

172,511

Dividends paid per common share

$

0.01

$

0.05

$

0.03

$

0.15

UNITED STATES STEEL CORPORATION

CONDENSED CASH FLOW STATEMENT (Unaudited)

Nine Months Ended

September 30,

(Dollars in millions)

2020

2019

Cash (used in) provided by operating activities:

Net (loss) earnings

$

(1,214)

$

38

Depreciation, depletion and amortization

481

454

Asset impairment charges

263

Gain on equity investee transactions

(31)

Restructuring and other charges

130

54

Pensions and other postretirement benefits

(18)

76

Deferred income taxes

(36)

(38)

Net (gain) loss on sale of assets

(2)

3

Working capital changes

210

(120)

Income taxes receivable/payable

13

27

Other operating activities

55

(98)

Total

(149)

396

Cash used in investing activities:

Capital expenditures

(591)

(978)

Investment in Big River Steel

(3)

Proceeds from sale of assets

3

4

Proceeds from sale of ownership interests in equity investees

8

Investments, net

(4)

Total

(587)

(974)

Cash provided by (used in) financing activities:

Issuance of short-term debt, net of financing costs

240

Revolving credit facilities - borrowings, net of financing costs

1,474

165

Revolving credit facilities - repayments

(1,633)

Issuance of long-term debt, net of financing costs

1,043

Net proceeds from public offering of common stock

410

Repayment of long-term debt

(8)

(4)

Proceeds from Stelco Option Agreement

55

Common stock repurchased

(88)

Dividends paid

(6)

(26)

Taxes paid for equity compensation plans

(1)

(7)

Total

1,574

40

Effect of exchange rate changes on cash

10

(6)

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

848

(544)

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

$

1,787

$

496

UNITED STATES STEEL CORPORATION

CONDENSED BALANCE SHEET (Unaudited)

September 30,

December 31,

(Dollars in millions)

2020

2019

Cash and cash equivalents

$

1,696

$

749

Receivables, net

1,099

1,177

Inventories

1,398

1,785

Other current assets

51

102

Total current assets

4,244

3,813

Operating lease assets

225

230

Property, plant and equipment, net

5,430

5,447

Investments and long-term receivables, net

1,286

1,466

Intangible assets, net

131

150

Deferred income tax benefits

21

19

Other noncurrent assets

394

483

Total assets

$

11,731

$

11,608

Accounts payable and other accrued liabilities

1,646

2,054

Payroll and benefits payable

312

336

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

262

14

Other current liabilities

243

221

Total current liabilities

2,463

2,625

Noncurrent operating lease liabilities

174

177

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

4,628

3,627

Employee benefits

543

532

Other long-term liabilities

419

554

United States Steel Corporation stockholders' equity

3,449

4,092

Noncontrolling interests

55

1

Total liabilities and stockholders' equity

$

11,731

$

11,608

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED NET (LOSS) EARNINGS

Three Months Ended

Nine Months Ended

September 30,

September 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

$

(234)

$

(84)

$

(1,214)

$

38

Asset impairment charge

263

Restructuring and other charges

42

123

42

Gain on previously held investment in UPI

(25)

Tubular Inventory Impairment

24

December 24, 2018 Clairton coke making facility fire

7

(4)

44

Big River Steel options mark to market

(34)

(40)

FIN 48 Reserve

13

Total adjustments

(34)

49

354

86

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

$

(268)

(35)

$

(860)

124

Reconciliation to adjusted diluted net (loss) earnings per share

Diluted net earnings per share

$

(1.06)

$

(0.49)

$

(6.43)

$

0.22

Asset impairment charge

1.39

Restructuring and other charges

0.24

0.64

0.24

Gain on previously held investment in UPI

(0.13)

Tubular Inventory Impairment

0.13

December 24, 2018 Clairton coke making facility fire

0.04

(0.02)

0.25

Big River Steel options mark to market

(0.15)

(0.21)

FIN 48 Reserve

0.07

Total adjustments

(0.15)

0.28

1.87

0.49

Adjusted diluted net (loss) earnings per share

$

(1.21)

$

(0.21)

$

(4.56)

$

0.71

(a) The adjustments included in this table for the three and nine months ended September 30, 2020 have been tax effected for our European operations and not tax effected 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 nine months ended September 30, 2019 have been tax effected.

UNITED STATES STEEL CORPORATION

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED EBITDA

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in millions)

2020

2019

2020

2019

Reconciliation to Adjusted EBITDA

Net (loss) earnings attributable to United States Steel Corporation

$

(234)

$

(84)

$

(1,214)

$

38

Income tax (benefit) provision

(24)

(44)

(48)

(43)

Net interest and other financial costs

47

48

144

151

Depreciation, depletion and amortization expense

162

161

481

454

EBITDA

(49)

81

(637)

600

Asset impairment charges

263

Restructuring and other charges

54

130

54

Gain on previously held investment in UPI

(25)

Tubular inventory impairment charge

24

December 24, 2018 Clairton coke making facility fire

9

(4)

53

Adjusted EBITDA

$

(49)

$

144

$

(249)

$

707

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 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 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.

Founded in 1901, the United States Steel Corporation is a Fortune 250 company and leading integrated steel producer. With extensive iron ore production and an annual raw steelmaking capability of 22 million net tons, U. S. Steel produces high value-added steel products for the automotive, infrastructure, appliance, container, and energy industries. The company’s "best of both" integrated and mini-mill technology strategy is advancing a more secure, sustainable future for U. S. Steel and its stakeholders. With renewed emphasis on innovation and customer focus, the company produces cutting-edge products such as U. S. Steel’s proprietary XG3™ advanced high-strength steel. U. S. Steel is headquartered in Pittsburgh, Pennsylvania, with world-class operations across the United States and in Central Europe. For more information, please visit www.ussteel.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006219/en/

Contacts

Media
John Ambler
Vice President
Corporate Communications
T - (412) 433-2407
E - joambler@uss.com

Investors/Analysts
Kevin Lewis
Vice President
Investor Relations and Corporate FP&A
T - (412) 433-6935
E - klewis@uss.com