-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QRcyTYtrfkzSWludJ4Y+hkm9zhsXZsFRkNj5ijgJDr2J+fN/XA4TngA2utenYhMF w2af9kgM/IXyV6Fix8dRNA== 0000927016-01-504306.txt : 20020413 0000927016-01-504306.hdr.sgml : 20020413 ACCESSION NUMBER: 0000927016-01-504306 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011213 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USX CORP CENTRAL INDEX KEY: 0000101778 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 250996816 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05153 FILM NUMBER: 1813580 BUSINESS ADDRESS: STREET 1: 600 GRANT ST STREET 2: ROOM 1312 CITY: PITTSBURGH STATE: PA ZIP: 15219-4776 BUSINESS PHONE: 4124331121 MAIL ADDRESS: STREET 1: 600 GRANT STREET STREET 2: ROOM 1312 CITY: PITTSBURGH STATE: PA ZIP: 15219-4776 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES STEEL CORP/DE DATE OF NAME CHANGE: 19860714 8-K 1 d8k.txt FORM 8K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 ----------- Date of Report (Date of earliest event reported): December 13, 2001 USX Corporation -------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-5153 25-0996816 - ---------------------- -------------------- -------------- (State or other (Commission File Number)(IRS EmployerIdentification jurisdiction of No). Incorporation) 600 Grant Street, Pittsburgh, PA 15219-2800 -------------------------------------- (Address of principal executive office) (Zip Code) (412) 433-1121 -------------------------------------- (Registrant's telephone number, including area code) Item 5. Other Events USX Corporation is furnishing information concerning a press release dated December 13, 2001 containing certain updated information concerning USX Corporation, the U. S. Steel Group of USX Corporation and of its wholly owned subsidiary United States Steel LLC . Attached is a copy of the press release in substantially the form released and of the following unaudited combined financial statements for United States Steel: Combined Statement of Operations - --Third Quarter and Nine Months Ended September 30,2001 and 2000; Combined Balance Sheet --at September 30, 2001 and December 31, 2000; Combined Statement of Cash Flows --Nine Months Ended September 30, 2001 and 2000; and Selected Notes to Combined Financial Statements, all of which are unaudited. This press release and these financial statements are incorporated by reference into Registration Statement on Form S-4 (No. 333-71454): Item 7. Financial Statements and Exhibits (a) Financial Statements 99.1. Combined financial statements of United States Steel (c) Exhibits 99.2. Press Release--"United States Steel Discloses Updated Outlook ." Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. USX CORPORATION By /s/ Larry G. Schultz Larry G. Schultz Vice President--Accounting Dated: December 14, 2001 EX-99.1 3 dex991.txt COMBINED FINANCIAL STATEMENTS OF USS CORP. Exhibit 99.1 Financial Statements UNITED STATES STEEL COMBINED STATEMENT OF OPERATIONS (Unaudited)
Third Quarter Ended Nine Months September 30 Ended September 30 -------------- ------------------ 2001 2000 2001 2000 ------ ------ --------- --------- (In millions) Revenues and other income: Revenues............................... $1,645 $1,462 $ 4,888 $ 4,673 Income from investees.................. 11 6 51 13 Net gains on disposal of assets........ 4 6 20 34 Other income (loss).................... -- 1 2 (1) ------ ------ --------- --------- Total revenues and other income...... 1,660 1,475 4,961 4,719 ------ ------ --------- --------- Costs and expenses: Cost of revenues (excludes items shown below)................................ 1,519 1,344 4,658 4,234 Selling, general and administrative expenses (credits).................... 7 (56) 19 (176) Depreciation, depletion and amortization.......................... 94 69 246 222 Taxes other than income taxes.......... 65 58 191 176 ------ ------ --------- --------- Total costs and expenses............. 1,685 1,415 5,114 4,456 ------ ------ --------- --------- Income (loss) from operations............ (25) 60 (153) 263 Net interest and other financial costs... 38 27 74 75 ------ ------ --------- --------- Income (loss) before income taxes........ (63) 33 (227) 188 Provision (credit) for income taxes...... (40) 14 (183) 70 ------ ------ --------- --------- Net income (loss)........................ (23) 19 (44) 118 Dividends on preferred stock............. 2 2 6 6 ------ ------ --------- --------- Net income (loss) available to USX's net investment.............................. $ (25) $ 17 $ (50) $ 112 ====== ====== ========= =========
2 UNITED STATES STEEL COMBINED BALANCE SHEET (Unaudited)
September 30 December 31 ------------ ----------- (Dollars in millions) 2001 2000 - ------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents........................... $ 475 $ 219 Receivables, less allowance for doubtful accounts of $131 and $57....................................... 655 625 Receivables subject to a security interest.......... 350 350 Receivables from related parties.................... 380 366 Inventories......................................... 950 946 Deferred income tax benefits........................ 185 201 Other current assets................................ 6 10 ------ ------ Total current assets.............................. 3,001 2,717 Investments and long-term receivables, less reserves of $39 and $38....................................... 349 439 Long-term receivable from related parties............. 43 97 Property, plant and equipment, less accumulated depreciation, depletion and amortization of $6,775 and $6,531........................................... 3,089 2,739 Prepaid pensions...................................... 2,740 2,672 Other noncurrent assets............................... 115 47 ------ ------ Total assets...................................... $9,337 $8,711 ====== ====== LIABILITIES Current liabilities: Notes payable....................................... $ -- $ 70 Accounts payable.................................... 801 755 Accounts payable to related parties................. -- 5 Payroll and benefits payable........................ 228 202 Accrued taxes....................................... 259 173 Accrued interest.................................... 41 47 Long-term debt due within one year.................. 136 139 ------ ------ Total current liabilities......................... 1,465 1,391 Long-term debt, less unamortized discount............. 2,622 2,236 Deferred income taxes................................. 753 666 Employee benefits..................................... 1,936 1,767 Deferred credits and other liabilities................ 483 483 Preferred stock of subsidiary......................... 66 66 Mandatorily redeemable convertible preferred securities of a subsidiary trust holding solely junior subordinated convertible debentures of USX.... 183 183 EQUITY Preferred stock....................................... 2 2 USX's net investment.................................. 1,867 1,950 Deferred compensation................................. (7) (3) Accumulated other comprehensive loss.................. (33) (30) ------ ------ Total equity...................................... 1,829 1,919 ------ ------ Total liabilities and equity...................... $9,337 $8,711 ====== ======
3 UNITED STATES STEEL COMBINED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended September 30 ------------------ 2001 2000 -------- -------- (In millions) Increase (decrease) in cash and cash equivalents Operating activities: Net income (loss)......................................... $ (44) $ 118 Adjustments to reconcile to net cash provided from operating activities: Depreciation, depletion and amortization................ 246 222 Pensions and other postretirement benefits.............. (59) (234) Deferred income taxes................................... 84 208 Net gains on disposal of assets......................... (20) (34) Changes in: Current receivables................................... -- (33) Inventories........................................... 23 (113) Current accounts payable and accrued expenses......... 41 (138) All other--net.......................................... (92) 9 -------- -------- Net cash provided from operating activities........... 179 5 -------- -------- Investing activities: Capital expenditures.................................... (197) (133) Disposal of assets...................................... 17 17 Restricted cash--withdrawals............................ 5 3 - --deposits................................................ (2) (2) Investees--investments.................................. (3) (18) - --loans and advances -- (8) All other--net.......................................... 10 4 -------- -------- Net cash used in investing activities................. (170) (137) -------- -------- Financing activities: Increase in attributed portion of USX consolidated debt................................................... 300 206 Specifically attributed debt repayments................. (6) (6) Preferred stock repurchased............................. -- (12) Dividends paid.......................................... (46) (72) -------- -------- Net cash provided from financing activities........... 248 116 -------- -------- Effect of exchange rate changes on cash................... (1) -- -------- -------- Net increase (decrease) in cash and cash equivalents...... 256 (16) Cash and cash equivalents at beginning of year............ 219 22 -------- -------- Cash and cash equivalents at end of period................ $ 475 $ 6 ======== ======== Cash provided from (used in) operating activities included: Interest and other financial costs paid (net of amount capitalized)........................................... $ (155) $ (68) Income taxes refunded, including settlements with USX .. 387 85
4 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying combined financial statements represent a carve-out financial statement presentation of the businesses comprising United States Steel and are not intended to be a complete presentation of the financial position, the results of operations and cash flows of United States Steel on a stand-alone basis. These combined financial statements are presented as if United States Steel existed as an entity separate from the remaining businesses of USX Corporation (USX) during the periods presented. The accompanying combined financial statements include the historical operations of certain divisions of USX and certain subsidiaries of USX. In this context, no direct ownership existed among all the various units comprising United States Steel; accordingly, USX's net investment in United States Steel (USX's net investment) is shown in lieu of Common Stockholder's Equity in the combined financial statements. The combined financial statements included herein have been prepared from USX's historical accounting records. The information furnished 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 combined financial statements, including selected 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 generally accepted accounting principles for complete financial statements. 2. Effective January 1, 2001, United States Steel adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), as amended by SFAS Nos. 137 and 138. This Standard, as amended, requires recognition of all derivatives at fair value as either assets or liabilities. United States Steel uses commodity-based and foreign currency derivative instruments to manage its exposure to price risk. Management has authorized the use of futures, forwards, swaps and options to reduce the effects of fluctuations related to the purchase of natural gas and nonferrous metals and also certain business transactions denominated in foreign currencies. United States Steel has not elected to designate derivative instruments as qualifying for hedge accounting treatment. As a result, the changes in fair value of all derivatives are recognized immediately in earnings. The cumulative effect adjustment relating to the adoption of SFAS No. 133 was recognized in other comprehensive income. The cumulative effect adjustment relates only to deferred gains or losses existing as of the close of business on December 31, 2000, for hedge transactions under prior accounting rules. The effect of adoption of SFAS No. 133 was less than $1 million, net of tax. 3. In June 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141 "Business Combinations" (SFAS No. 141), No. 142 "Goodwill and Other Intangible Assets" (SFAS No. 142) and No. 143 "Accounting for Asset Retirement Obligations" (SFAS No. 143). SFAS No. 141 requires that all business combinations completed after June 30, 2001, be accounted for under the purchase method. This standard also establishes for all business combinations made after June 30, 2001, specific criteria for the recognition of intangible assets 5 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 3. Continued separately from goodwill. SFAS No. 141 also requires that the excess of fair value of acquired assets over cost in a business combination (negative goodwill) be recognized immediately as an extraordinary gain, rather than deferred and amortized. SFAS No. 142 addresses the accounting for goodwill and other intangible assets after an acquisition. The most significant changes made by SFAS No. 142 are: 1) goodwill and intangible assets with indefinite lives will no longer be amortized; 2) goodwill and intangible assets with indefinite lives must be tested for impairment at least annually; and 3) the amortization period for the intangible assets with indefinite lives will no longer be limited to forty years. United States Steel will adopt SFAS No. 142 effective January 1, 2002, as required. The adoption of SFAS No. 142 is not expected to have a material impact on the results of operations or financial position for United States Steel. SFAS No. 143 establishes a new accounting model for the recognition and measurement of retirement obligations associated with tangible long-lived assets. SFAS No. 143 requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. United States Steel will adopt the Statement effective January 1, 2003. The transition adjustment resulting from the adoption of SFAS No. 143 will be reported as a cumulative effect of a change in accounting principle. At this time, United States Steel cannot reasonably estimate the effect of the adoption of this Statement on either its financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). This Statement establishes a single accounting model for long-lived assets to be disposed of by sale and provides additional implementation guidance for assets to be held and used and assets to be disposed of other than by sale. There will be no financial implication related to the adoption of SFAS No. 144, and the guidance will be applied on a prospective basis. United States Steel will adopt the Statement effective January 1, 2002. 4. The financial statement provision for income taxes and related tax payments or refunds have been reflected in United States Steel's financial statements in accordance with USX's tax allocation policy. In general, such policy provides that the consolidated tax provision and related tax payments or refunds are allocated to United States Steel principally upon its financial income, taxable income, credits, preferences and other directly related amounts. The provision for income taxes for United States Steel is based on tax rates and amounts which recognize management's best estimate of current and deferred tax assets and liabilities. 5. On November 24, 2000, United States Steel acquired U. S. Steel Kosice, s.r.o. (USSK), which is primarily located in the Slovak Republic. USSK was formed in June 2000 to hold the steel operations and related assets of VSZ a.s. (VSZ), a diversified Slovak corporation. The acquisition was accounted for under the purchase method of accounting. On March 1, 2001, United States Steel completed the purchase of the tin mill products business of LTV Corporation (LTV), which is now operated as East Chicago Tin. In this noncash transaction, United States Steel assumed approximately $66 million of certain employee related obligations from LTV. The acquisition was accounted for using the purchase method of accounting. Results of operations for the nine months of 2001 include the operations of East Chicago Tin from the date of acquisition. 6 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 5. Continued On March 23, 2001, Transtar, Inc. (Transtar) completed its previously announced reorganization with its two voting shareholders, USX and Transtar Holdings, L.P. (Holdings), an affiliate of Blackstone Capital Partners L.P. As a result of this transaction, United States Steel became sole owner of Transtar and certain of its subsidiaries. Holdings became owner of the other subsidiaries of Transtar. United States Steel accounted for the change in its ownership interest in Transtar using the purchase method of accounting. United States Steel recognized in the nine months of 2001 a pretax gain of $68 million (included in income from investees) and a favorable deferred tax adjustment of $33 million related to this transaction. United States Steel previously accounted for its investment in Transtar under the equity method of accounting. The following unaudited pro forma data for United States Steel includes the results of operations of the above acquisitions giving effect to them as if they had been consummated at the beginning of the periods presented. The nine month 2001 pro forma results exclude the $68 million gain and $33 million tax benefit recorded as a result of the Transtar transaction. In addition, VSZ did not historically provide carve-out financial information for its steel activities prepared in accordance with generally accepted accounting principles in the United States. Therefore, United States Steel made certain estimates and assumptions regarding revenues and costs used in the preparation of the unaudited pro forma data relating to USSK for the nine months of 2000. The following pro forma data is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations.
Nine Months Ended September 30 2001 2000 -------- -------- (In millions) Revenues and other income................................... $ 4,939 $ 5,643 Net income (loss)........................................... (147) 176
7 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 6. United States Steel consists of two reportable operating segments: 1) Domestic Steel and 2) U. S. Steel Kosice (USSK). Domestic Steel includes the United States operations of United States Steel while USSK includes the United States Steel operations primarily located in the Slovak Republic. Domestic Steel is engaged in the domestic production, sale and transportation of steel mill products, coke, taconite pellets and coal; the management of mineral resources; real estate development; and engineering and consulting services. USSK is engaged in the production and sale of steel mill products and coke and primarily serves central European markets. The results of segment operations are as follows:
Domestic Total Steel USSK Segments - -------------------------------------------------------------------------------- (In millions) THIRD QUARTER 2001 - ------------------ Revenues and other income: Customer............................................. $ 1,359 $ 285 $ 1,644 Intersegment (a)..................................... 2 -- 2 Other subsidiaries of USX (a)........................ 2 -- 2 Equity in earnings of unconsolidated investees....... 11 -- 11 Other................................................ 2 1 3 ------- ----- ------- Total revenues and other income.................... $ 1,376 $ 286 $ 1,662 ======= ===== ======= Segment income (loss).................................. $ (47) $ 39 $ (8) ======= ===== ======= THIRD QUARTER 2000 - ------------------ Revenues and other income: Customer............................................. $ 1,457 $ -- $ 1,457 Other subsidiaries of USX (a)........................ 5 -- 5 Equity in earnings of unconsolidated investees....... 6 -- 6 Other................................................ 7 -- 7 ------- ----- ------- Total revenues and other income.................... $ 1,475 $ -- $ 1,475 ======= ===== ======= Segment income......................................... $ 23 $ -- $ 23 ======= ===== =======
(a) Revenues and transfers between segments and with other subsidiaries of USX were conducted under terms comparable to those with unrelated parties. 8 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 6. (Continued)
Domestic Total (In millions) Steel USSK Segments - -------------------------------------------------------------------------------- NINE MONTHS 2001 - ---------------- Revenues and other income: Customer.............................................. $4,068 $ 815 $4,883 Intersegment (a)...................................... 5 -- 5 Other subsidiaries of USX (a)......................... 6 -- 6 Equity in earnings of unconsolidated investees........ 50 1 51 Other................................................. 19 2 21 ------ ----- ------ Total revenues and other income..................... $4,148 $ 818 $4,966 ====== ===== ====== Segment income (loss)................................... $ (267) $ 121 $ (146) ====== ===== ====== NINE MONTHS 2000 - ---------------- Revenues and other income: Customer.............................................. $4,660 $ -- $4,660 Other subsidiaries of USX (a)......................... 13 -- 13 Equity in earnings of unconsolidated investees........ 13 -- 13 Other................................................. 33 -- 33 ------ ----- ------ Total revenues and other income..................... $4,719 $ -- $4,719 ====== ===== ====== Segment income.......................................... $ 145 $ -- $ 145 ====== ===== ======
- ---------- (a) Revenues and transfers between segments and with other subsidiaries of USX were conducted under terms comparable to those with unrelated parties. 9 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 6. (Continued) The following schedules reconcile segment amounts to amounts reported in United States Steel's combined financial statements:
Third Quarter Ended September 30, -------------------- 2001 2000 --------- --------- (in millions) Revenues and other income: Revenues and other income of reportable segments........ $ 1,662 $ 1,475 Elimination of intersegment revenues.................... (2) -- --------- --------- Total revenues and other income........................ $ 1,660 $ 1,475 ========= ========= Income: Income (loss) for reportable segments................... $ (8) $ 23 Items not allocated to segments: Administrative expenses................................. (5) (7) Net pension credits..................................... 38 67 Costs related to: Former business activities............................. (21) (23) Fairless facility shutdowns............................ (29) -- --------- --------- Total income (loss) from operations.................... $ (25) $ 60 ========= ========= Nine Months Ended September 30, -------------------- 2001 2000 --------- --------- (in millions) Revenues and other income: Revenues and other income of reportable segments........ $ 4,966 $ 4,719 Elimination of intersegment revenues.................... (5) -- --------- --------- Total revenues and other income........................ $ 4,961 $ 4,719 ========= ========= Income: Income (loss) for reportable segments................... $ (146) $ 145 Items not allocated to segments: Administrative expenses................................. (20) (18) Net pension credits..................................... 110 199 Costs related to: Former business activities............................. (59) (63) Fairless facility shutdowns............................ (29) -- Proposed Separation.................................... (9) -- --------- --------- Total income (loss) from operations.................... $ (153) $ 263 ========= =========
10 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 7. On August 14, 2001, United States Steel announced its intention to permanently close the cold rolling and tin mill operations at United States Steel's Fairless Works. In the third quarter of 2001, United States Steel recorded a pretax charge of $29 million related to the shutdown of these operations, of which $12 million is included in depreciation, depletion and amortization and $17 million is included in cost of revenues. 8. United States Steel's total comprehensive income (loss) was $(23) million for the third quarter of 2001, $17 million for the third quarter of 2000, $(47) million for the nine months of 2001 and $115 million for the nine months of 2000. 9. United States Steel has a 16% investment in Republic Technologies International LLC (Republic) which was accounted for under the equity method of accounting. During the first quarter of 2001, United States Steel discontinued applying the equity method since investments in and advances to Republic had been reduced to zero. Also, United States Steel has recognized certain debt obligations of $14 million previously assumed by Republic. On April 2, 2001, Republic filed a voluntary petition with the U.S. Bankruptcy Court to reorganize its operations under Chapter 11 of the U.S. Bankruptcy Code. In the first quarter of 2001, as a result of Republic's action, United States Steel recorded a pretax charge of $74 million for potentially uncollectible receivables from Republic. 10. Inventories are carried at the lower of cost or market. Cost of inventories is determined primarily under the last-in, first-out (LIFO) method.
September December 30, 2001 31, 2000 --------- -------- (in millions) Raw materials................................................ $178 $214 Semi-finished products....................................... 419 429 Finished products............................................ 247 210 Supplies and sundry items.................................... 106 93 ---- ---- Total....................................................... $950 $946 ==== ====
Cost of revenues were reduced by $13 million in the nine months of 2001 as a result of liquidations of LIFO inventories. 11. At September 30, 2001, and December 31, 2000, estimated income tax receivables from USX included in receivables from related parties were $379 million and $364 million, respectively. In addition, long-term receivables from related parties at September 30, 2001, and December 31, 2000, were $43 million and $97 million, respectively, of income taxes receivable from USX. These amounts have been determined in accordance with the tax allocation policy discussed in Note 4. 12. Interest and other financial costs in the nine months of 2001 included a favorable adjustment of $67 million and provision for income taxes included an unfavorable adjustment of $15 million, both of which are related to prior years' taxes. 13. United States Steel is the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments relating to United States Steel involving a variety of matters including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the United States Steel combined financial statements. 11 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) United States Steel is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At September 30, 2001, and December 31, 2000, accrued liabilities for remediation totaled $139 million and $137 million, respectively. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. For a number of years, United States Steel has made substantial capital expenditures to bring existing facilities into compliance with various laws relating to the environment. In the first nine months of 2001 and for the years 2000 and 1999, such capital expenditures totaled $11 million, $18 million and $32 million, respectively. United States Steel anticipates making additional such expenditures in the future; however, the exact amounts and timing of such expenditures are uncertain because of the continuing evolution of specific regulatory requirements. Guarantees by United States Steel of the liabilities of affiliated entities of United States Steel totaled $33 million at September 30, 2001. In the event that any defaults of guaranteed liabilities occur, USX has access to its interest in the assets of the affiliates to reduce United States Steel losses resulting from these guarantees. As of September 30, 2001, the largest guarantee for a single affiliate was $24 million. United States Steel's contract commitments to acquire property, plant and equipment at September 30, 2001, totaled $77 million compared with $206 million at December 31, 2000. 14. On July 31, 2001, USX announced that its board of directors approved the definitive plan of reorganization to separate the energy and steel businesses of USX (Proposed Separation). The Proposed Separation envisions a tax-free spin-off of the steel business of USX into a freestanding, publicly traded company to be known as United States Steel Corporation. Holders of current USX-U.S. Steel Group Common Stock would become holders of United States Steel Corporation Common Stock. Holders of current USX-Marathon Group Common Stock would remain holders of such stock which would be renamed Marathon Oil Corporation Common Stock. The Proposed Separation does not contemplate a cash distribution to stockholders. Each company would carry approximately the same assets and liabilities now associated with its existing business, except for a value transfer of approximately $900 million from Marathon Oil Corporation to United States Steel Corporation, intended to maintain United States Steel Corporation as a strong, independent company. The form of the value transfer would be a reattribution of USX corporate debt between the USX-Marathon Group and the USX-U. S. Steel Group. The Proposed Separation was approved by the shareholders at an October 25, 2001 meeting and is subject to receipt of a favorable private letter ruling from the Internal Revenue Service ("IRS") on the tax-free nature of the transaction, completion of necessary financing arrangements and receipt of necessary regulatory and third party consents. The Proposed Separation is expected to occur on or about December 31, 2001, subject to the absence of any materially adverse change in business conditions for the energy and/or steel business, delay in obtaining the IRS ruling or other unfavorable circumstances. Costs related to the Proposed Separation include professional fees and other expenses and are included in selling, general and administrative expenses (credits). These costs in the nine months of 2001 were $9 million. 12 UNITED STATES STEEL SELECTED NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Unaudited) 15. On July 2, 2001, a corporate reorganization was implemented to create a new holding company structure. USX became a holding company that owns all of the outstanding equity of Marathon Oil Company, an Ohio Corporation which, directly and indirectly, owns and operates the businesses of the USX-Marathon Group, and United States Steel LLC, a Delaware limited liability company which, directly and indirectly, owns and operates the businesses of the USX-U. S. Steel Group. The reorganization did not have any impact on the results of operations or financial position of USX Corporation, the Marathon Group or the U. S. Steel Group. This reorganization in corporate form was independent of the Proposed Separation of the energy and steel businesses of USX Corporation. 13 EX-99.2 4 dex992.txt PRESS RELEASE Exhibit 99.2 Form of Press Release United States Steel Discloses Updated Outlook PITTSBURGH, December 13, 2001 -- USX Corporation USX-Marathon Group (NYSE: MRO) and USX-U. S. Steel Group (NYSE: X) today announced that in connection with the previously announced exchange offers by United States Steel LLC for certain outstanding equity securities of USX Corporation and its wholly-owned subsidiaries, it wishes to update the Outlook for the U. S. Steel Group that was included in USX's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and to report certain recent developments since the filing of the Form 10-Q and subsequent filings on Form 8-K. Outlook Our orders for fourth quarter domestic steel shipments are well below the third quarter rate. Accordingly, in the fourth quarter, we expect domestic steel shipments to be approximately 2.2 million net tons, down from the 2.6 million net tons shipped in the third quarter. Average realized prices are expected to be about flat compared to the third quarter. We have seen an increase in the steel order rate over the last several weeks; however, most of these orders will ship in early 2002. With slow market conditions in the fourth quarter, we advanced the schedule for a maintenance outage on the Gary Works No. 6 blast furnace, which stopped production in mid-October. Production costs in the fourth quarter will be higher than the prior quarter, related to lower and less efficient operating rates as fourth quarter raw steel production is expected to be approximately two-thirds of capability, down from the 83 percent utilization rate in the third quarter. Tubular markets, which had been strong earlier in the year, have also weakened markedly. In addition, our raw material shipments and production have been reduced as a result of reduced demand from our own steel producing locations and from facilities idled by several financially distressed raw material customers. On May 31, 2001, a major fire damaged the cold-rolling mill at USS- POSCO, which is fifty percent owned by U. S. Steel Group. Damage was predominantly limited to the cold-rolling mill area of the plant. USS-POSCO maintains insurance coverage against such losses, including coverage for business interruption. Claims for reimbursement for higher costs and lost volumes under USS-POSCO's business interruption insurance coverage are pending and will be reflected in income as received in future periods. The mill is expected to resume production in the first quarter of 2002, although full-production may not be achieved until mid-2002. Until such time, the plant will continue customer shipments using cold-rolled coils from U. S. Steel Group and POSCO as substitute feedstock. For U. S. Steel Kosice ("USSK"), we expect fourth quarter shipments to be approximately 0.8 million tons and fourth quarter average realized prices to be about flat compared to the third quarter. Also, USSK has scheduled several outages in the fourth quarter which will increase repair and maintenance expenses, and expects to temporarily idle most operations between December 22, 2001 and January 7, 2002 due to low order levels and seasonal operation curtailments by customers. For 2001, total shipments are expected to be approximately 13.3 to 13.5 million net tons with Domestic Steel shipments of approximately 9.8 million net tons and USSK shipments of approximately 3.6 million net tons. For the longer term, domestic shipment levels and realized prices will be influenced by the strength and timing of a recovery in the manufacturing sector of the domestic economy, levels of imported steel (see "International Trade" below) and production capability changes by domestic competitors. Many factors, including developments from the events of September 11, will determine the strength and timing of such recovery and the other factors. For USSK, economic and political developments in Europe and elsewhere will impact USSK's results of operations in 2002 and thereafter. Capital expenditures are expected to be approximately $285 million for the full year, including expenditures related to the recently acquired facilities of USSK, Transtar, and East Chicago Tin. USX owns a 16 percent equity method investment in Republic, through USX's ownership in Republic Technologies International Holdings, LLC, which is the sole owner of Republic. Republic is a major purchaser of raw materials from U. S. Steel Group and the primary supplier of rounds for the tubular facility in Lorain, Ohio. On April 2, 2001, Republic filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Republic has continued to supply the Lorain mill since filing for bankruptcy and no supply interruptions are anticipated. At September 30, 2001, U. S. Steel Group's remaining pre-petition financial exposure to Republic, after recording various losses and reserves, totaled approximately $30 million. Additional Financing On November 28, 2001,United States Steel entered into a new $400 million accounts receivable program and on November 30, 2001 United States Steel executed a revolving credit agreement secured by inventory that provides for borrowings of up to $400 million. No amounts are currently drawn under either financing. International Trade On December 7, 2001 the commissioners of the International Trade Commission ("ITC") announced their remedy recommendations resulting from the ITC's investigation of steel imports under Section 201 of the Trade Act of 1974. The ITC had previously found that flat-rolled steel products, among others, are being imported in such quantities as to be a substantial cause of serious injury to the domestic industry. Five of the six Commissioners recommended that tariffs of 20% to 40% be imposed on imports of hot-rolled, cold-rolled and corrosion-resistant products for four years, subject to reductions of the tariffs from year to year. The three commissioners who had previously found that imports of tin mill products were a cause of serious injury to the domestic industry recommended the same tariff remedies be applied to that product that they recommended for hot-rolled, cold-rolled and corrosion-resistant product. Two of the commissioners recommended the same remedy for imports of slabs, while four of the commissioners recommended subjecting slab imports to these tariffs only after certain quantities of slabs enter the country without special tariffs. The remaining commissioner recommended declining levels of quotas for a three year period. The ITC is required to forward its recommendations with explanations to the President by December 19. The President will then have up to 60 days to review the recommendations and determine what remedies to impose. In response to the recommendations, the Company announced that in these market conditions, 20% tariffs are inadequate and urged the President to act quickly to adopt 40% tariffs on all flat-rolled imports, including slabs. oOo This release contains forward-looking statements with respect to the expected restart of the USS-POSCO cold rolling mill, market conditions, costs, shipments, prices and remedies that may be imposed under Section 201 of the Trade Act of 1974. One factor, among others, that may affect the restart of the cold rolling mill at the USS-POSCO joint venture is the timing of completion of repairs. Some factors, among others, that could affect full year 2001 and early 2002 market conditions, costs, shipments and prices include import levels, customer inventory levels, plant operating performance, domestic natural gas prices and usage, and U.S. and European economic performance and political developments. The ultimate decision concerning remedies under Section 201 are made by the President of the United States. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, USX has included in Form 10-K for the year ended December 31, 2000, as amended in Forms 10-K/A, and in subsequent Forms 10-Q and Forms 8-K, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward- looking statements. -----END PRIVACY-ENHANCED MESSAGE-----