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United States Steel Corp. Reports Operating Results (10-Q)

July 31, 2012 | About:

10qk

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United States Steel Corp. (X) filed Quarterly Report for the period ended 2012-06-30.

United States Steel Corporation has a market cap of $2.75 billion; its shares were traded at around $20.53 with a P/E ratio of 14.4 and P/S ratio of 0.1. The dividend yield of United States Steel Corporation stocks is 1.1%.

Highlight of Business Operations:

Managements analysis of the percentage change in net sales for U. S. Steels reportable business segments for the six months ended June 30, 2012 versus the six months ended June 30, 2011 is set forth in the following table:

Net sales were $10,189 million in the first six months of 2012, compared with $9,984 million in the same period last year. The increase in sales for the Flat-rolled segment primarily reflected higher shipments (increase of 188 thousand tons) and average realized prices (increase of $7 per ton) as a result of improved end user demand and higher average contract prices. The decrease in sales for the European segment was primarily due to decreased shipments (decrease of 583 thousand tons) primarily due to the sale of USSS, and decreased average realized prices (decrease of $113 per ton) and changes in foreign currency translation effects. The increase in sales for the Tubular segment primarily reflected higher average realized prices (increase of $211 per ton) and shipments (increase of 173 thousand tons) as a result of increased drilling activity, mainly due to the continued strength of oil directed drilling.

The recently enacted pension stabilization legislation includes a revised interest rate formula used to measure defined benefit pension obligations for calculating minimum annual contributions. The new interest rate formula is expected to result in higher interest rates compared to prior law over the next few years which will improve the funded status of our main defined benefit pension plan and reduce minimum required contributions. U. S. Steel made voluntary contributions to our main U.S. defined benefit plan of $140 million in the first quarter of 2012 and for several prior years. U. S. Steel will likely make voluntary contributions of similar amounts in future periods in order to continue to mitigate potentially larger mandatory contributions in later years. Assuming future asset performance consistent with our expected long-term earnings rate assumption of 7.75%, we anticipate that the pension stabilization legislation interest rate changes will allow us to continue to make voluntary contributions of approximately $140 million per year through 2015 before we could be required to contribute more than that amount should the current low interest rate environment persist.

The decrease in Flat-rolled results in the second quarter of 2012 compared to the same period in 2011 resulted from a decrease of $31 per ton in average realized prices (approximately $120 million), increased other operating costs (approximately $65 million, which includes facility maintenance and outage costs), higher raw materials costs (approximately $45 million) and unfavorable changes from steel substrate sales to our Tubular segment (approximately $40 million). These decreases were partially offset by reduced energy costs primarily due to lower natural gas prices (approximately $65 million) and an increase of 50 thousand tons in shipments (approximately $10 million).

The improvement in Flat-rolled results in the first half of 2012 compared to the same period in 2011 resulted mainly from decreased energy costs primarily due to a reduction in natural gas prices (approximately $110 million) and an increase of $7 per ton in average realized prices (approximately $60 million) and an increase of 188 thousand tons in shipments (approximately $30 million). These improvements were partially offset by increased other operating costs (approximately $75 million, which includes facility maintenance and outage costs), unfavorable changes from steel substrate sales to our Tubular segment (approximately $35 million) higher accruals for profit-based payments (approximately $30 million), decreased shipment volumes (approximately $25 million) and higher raw material costs (approximately $15 million).

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