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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2004

 

Or

 

  [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             .

 

UNITED STATES STEEL CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware   1-16811   25-1897152
(State or other
jurisdiction of
incorporation)		   (Commission
File Number)		   (IRS Employer
Identification No.)

 

600 Grant Street, Pittsburgh, PA   15219-2800
(Address of principal executive offices)   (Zip Code)

 

(412) 433-1121
(Registrant’s telephone number,
including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    X      No          

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes    X      No          

 

Common stock outstanding at April 30, 2004 – 113,300,086 shares

Table of Contents

UNITED STATES STEEL CORPORATION

FORM 10-Q

QUARTERLY PERIOD ENDED MARCH 31, 2004

 

INDEX

 

     Page
PART I – FINANCIAL INFORMATION     
     Item 1.    Financial Statements:     
          Statement of Operations (Unaudited)    2
          Balance Sheet (Unaudited)    4
          Statement of Cash Flows (Unaudited)    5
          Notes to Financial Statements (Unaudited)    6
     Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    23
     Item 3.    Quantitative and Qualitative Disclosures about Market Risk    35
     Item 4.    Controls and Procedures    36
          Supplemental Statistics    37
PART II – OTHER INFORMATION     
     Item 1.    Legal Proceedings    38
     Item 6.    Exhibits and Reports on Form 8-K    44
     SIGNATURE    46
     WEB SITE POSTING    46

 

Table of Contents

PART I – FINANCIAL INFORMATION

Item I – Financial Statements

 

UNITED STATES STEEL CORPORATION

STATEMENT OF OPERATIONS

(Unaudited)

 

     First Quarter
Ended		  
     March 31,
  
(Dollars in millions, except per share amounts)    2004     2003  
  

Revenues and other income:

                 

Revenues

    $ 2,686     $ 1,643  

Revenues from related parties

      220       255  

Income from investees

      6       1  

Net gains on disposal of assets (Note 8)

      42       2  

Other income (Note 9)

      9       6  
    
 

Total revenues and other income

      2,963       1,907  
    
 

Costs and expenses:

                 

Cost of revenues (excludes items shown below)

      2,524       1,732  

Selling, general and administrative expenses

      190       129  

Depreciation, depletion and amortization (Note 11)

      98       90  
    
 

Total costs and expenses

      2,812       1,951  
    
 

Income (loss) from operations

      151       (44 )

Net interest and other financial costs (Note 13)

      52       38  
    
 

Income (loss) before income taxes, minority interests and cumulative effect of change in accounting principle

      99       (82 )

Income tax provision (benefit) (Note 14)

      51       (49 )

Minority interests

      4       –  
    
 

Income (loss) before cumulative effect of change in accounting principle

      44       (33 )

Cumulative effect of change in accounting principle, net of tax (Note 18)

      14       (5 )
    
 

Net income (loss)

      58       (38 )

Dividends on preferred stock

      (4 )     (2 )
    
 

Net income (loss) applicable to common stock

      $54       $(40 )
  

 

The accompanying notes are an integral part of these financial statements.

 

2

Table of Contents

UNITED STATES STEEL CORPORATION

STATEMENT OF OPERATIONS (Continued)

(Unaudited)

 

     First Quarter Ended  
     March 31,
  
(Dollars in millions, except per share amounts)    2004    2003  
  

Income per common share (Note 15):

            

Income (loss) before cumulative effect of change in accounting principle per share:

            

– Basic

    $.38    $(.35 )

– Diluted

    $.36    $(.35 )

Cumulative effect of change in accounting principle, net of tax:

            

– Basic

    $.13    $(.05 )

– Diluted

    $.11    $(.05 )

Net income (loss) per share:

            

– Basic

    $.51    $(.40 )

– Diluted

    $.47    $(.40 )

Weighted average shares, in thousands:

            

– Basic

    106,653    102,731  

– Diluted

    123,254    102,731  

Dividends paid per share

    $.05    $.05  
  

Pro forma amounts assuming change in accounting principle was applied retroactively:

            

Income (loss) before cumulative effect of change in accounting principle, as reported

    $44    $(33 )

FIN 46R pro forma effect (Note 18)

    –    1  
    
  

Income (loss) before cumulative effect of change in accounting principle, adjusted

    $44    $(32 )

Per share adjusted:

            

– Basic

    .38    (.34 )

– Diluted

    .36    (.34 )

Net income (loss) adjusted

    44    (32 )

Per share adjusted:

            

– Basic

    .38    (.34 )

– Diluted

    .36    (.34 )
  

 

The accompanying notes are an integral part of these financial statements.

 

3

Table of Contents

UNITED STATES STEEL CORPORATION

BALANCE SHEET

(Unaudited)

 

(Dollars in millions)   

March 31,

2004

    

December 31,

2003

  
  

Assets

             

Current assets:

             

Cash and cash equivalents

    $764     $316  

Receivables, less allowance of $118 and $129 (Note 18)

    1,302     1,075  

Receivables from related parties (Note 21)

    102     144  

Inventories (Note 16)

    1,180     1,283  

Deferred income tax benefits (Note 14)

    239     245  

Other current assets

    35     44  
    
 

Total current assets

    3,622     3,107  

Investments and long-term receivables, less allowance of $4 and $4

    291     289  

Long-term receivables from related parties (Note 21)

    6     6  

Property, plant and equipment, less accumulated depreciation and depletion of $7,035 and $6,957

    3,398     3,415  

Pension asset

    7     8  

Intangible pension asset

    440     440  

Other intangible assets, less amortization of $5 and $4

    36     37  

Deferred income tax benefits (Note 14)

    327     365  

Other noncurrent assets

    187     172  
    
 

Total assets

    $8,314     $7,839  
  

Liabilities

             

Current liabilities:

             

Accounts payable

    $1,036     $970  

Accounts payable to related parties (Note 21)

    71     58  

Payroll and benefits payable

    585     650  

Accrued taxes (Note 14)

    382     360  

Accrued interest

    45     50  

Long-term debt due within one year (Note 17)

    313     43  
    
 

Total current liabilities

    2,432     2,131  

Long-term debt, less unamortized discount (Note 17)

    1,628     1,890  

Deferred income tax liabilities (Note 14)

    4     6  

Employee benefits

    2,432     2,382  

Deferred credits and other liabilities

    312     335  
    
 

Total liabilities

    6,808     6,744  
    
 

Contingencies and commitments (Note 22)

    –     –  

Minority interests (Note 18)

    28     2  

Stockholders’ Equity:

             

Preferred shares – 7% Series B Mandatory Convertible

             

Preferred issued – 5,000,000 shares (no par value,
liquidation preference $50 per share) (Note 19)

    222     226  

Common stock issued – 113,258,662 shares and
103,663,467 shares (Note 19)

    113     104  

Additional paid-in capital

    3,012     2,687  

Retained deficit

    (363 )   (421 )

Accumulated other comprehensive loss (Note 20)

    (1,504 )   (1,501 )

Deferred compensation

    (2 )   (2 )
    
 

Total stockholders’ equity

    1,478     1,093  
    
 

Total liabilities and stockholders’ equity

    $8,314     $7,839  
  

 

The accompanying notes are an integral part of these financial statements.

 

4

Table of Contents

UNITED STATES STEEL CORPORATION

STATEMENT OF CASH FLOWS

(Unaudited)

 

       First Quarter Ended
March 31,
  
(Dollars in millions)          2004        2003  
  

Increase (decrease) in cash and cash equivalents

                  

Operating activities:

                  

Net income (loss)

      $58        $(38 )

Adjustments to reconcile to net cash provided by (used in) operating activities:

                  

Cumulative effect of change in accounting principle, net of tax

      (14 )      5  

Depreciation, depletion and amortization

      98        90  

Provision for doubtful accounts

      (11 )      2  

Pensions and other postretirement benefits

      58        53  

Minority interests

      4        –  

Deferred income taxes

      33        (49 )

Net gains on disposal of assets

      (42 )      (2 )

Income from sale of coal seam gas interests

      (7 )      –  

Loss (income) from equity investees, and distributions received

      (2 )      3  

Changes in:

                  

Current receivables – operating turnover

      (161 )      (173 )

Inventories

      104        (47 )

Current accounts payable and accrued expenses

      31        156  

All other, net

      (52 )      (44 )
      
    

Net cash provided by (used in) operating activities

      97        (44 )
      
    

Investing activities:

                  

Capital expenditures

      (70 )      (63 )

Disposal of assets

      80        12  

Sale of coal seam gas interests

      7        –  

Restricted cash – withdrawals

      1        –  

    – deposits

      (4 )      (23 )

Investees – investments

      –        (1 )
      
    

Net cash provided by (used in) investing activities

      14        (75 )
      
    

Financing activities:

                  

Revolving credit facility – borrowings

      40        –  

     – repayments

      (30 )      –  

Repayment of long-term debt

      (2 )      –  

Preferred stock issued

      –        242  

Common stock issued

      339        6  

Dividends paid

      (9 )      (5 )
      
    

Net cash provided by financing activities

      338        243  
      
    

Effect of exchange rate changes on cash

      (1 )      –  
      
    

Net increase in cash and cash equivalents

      448        124  

Cash and cash equivalents at beginning of year

      316        243  
      
    

Cash and cash equivalents at end of period

      $764        $367  
  

Cash provided by (used in) operating activities included:

                  

Interest and other financial costs paid (net of amount capitalized)

      $(58 )      $(34 )

Income taxes paid to taxing authorities

      (1 )      (1 )
  

 

The accompanying notes are an integral part of these financial statements.

 

5

Table of Contents
1. Basis of Presentation

 

United States Steel Corporation (U. S. Steel) through its domestic operations, is engaged in the production, sale and transportation of steel mill products, coke and iron-bearing taconite pellets; the management and development of real estate; and engineering and consulting services and, through its European operations, which include U. S. Steel Kosice (USSK) located in Slovakia and U. S. Steel Balkan (USSB), acquired on September 12, 2003 and located in Serbia, is engaged in the production and sale of steel mill products primarily for the central and western European markets. As reported in Note 3, until June 30, 2003, U. S. Steel was also engaged in the mining, processing and sale of coal.

 

The information in these financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Certain reclassifications of prior year data have been made to conform to 2004 classifications. Additional information is contained in the United States Steel Corporation Annual Report on Form 10-K for the year ended December 31, 2003.

 

2. Business Combinations