Rouge Industries Posts a First Quarter Loss of $59.8
Million
DEARBORN, Mich., April 26 Rouge Industries, Inc.
reported a net loss of $59.8 million, or $2.69 per share, for the
first quarter of 2001, compared to a net loss of $12.9 million or $0.58 per
share in the first quarter of 2000. The loss in 2001 included a $7.4 million
benefit for indemnification by the Company's former parent for environmental
liabilities related to the cleanup of the Rouge Complex. Steel product
shipments in the first quarter of 2001 totaled 581,000 tons, 163,000 tons or
21.9% lower than the first quarter of 2000. Raw steel production in the
quarter totaled 556,000 tons, 115,000 tons or 17.1% lower than last year's
first quarter production level.
During the first quarter of 2001, the Company closed on a new $250 million
revolving loan facility with Congress Financial Corporation. Borrowings under
the new loan facility are limited to specified percentages of inventories and
receivables. At March 31, 2001, the Company had $102.8 million of debt
outstanding.
The Company's production and shipments in the quarter were adversely
impacted by the continuing weakness in the automotive market and by
excessively high inventories resulting from the continuing onslaught of steel
imports into the Company's markets. As a result, the Company idled the
smaller of its two blast furnaces for 60 days during the quarter to help
balance production with sales. The idled blast furnace resumed full
production in early March to coincide with an increased order rate going into
April.
"The first quarter was another difficult quarter marked by substantially
reduced automotive production schedules, steel selling prices in the spot
market that reached a twenty-year low and a continuing glut of foreign steel
imports into the U.S.," said Carl L. Valdiserri, chairman and chief executive
officer. "For the past three years, unfairly traded steel imports have
created a domestic steel crisis of major proportions. This is evidenced by 16
steel companies in bankruptcy and the many thousands of steel related jobs
that have been lost during this period. To exacerbate the problem, natural
gas costs in the first quarter increased 125% over the first quarter of 2000.
The natural gas increase alone accounted for a $12 million cost increase from
a year ago," said Mr. Valdiserri.
The Company's operating income was also adversely impacted by $17.7
million of direct and indirect costs attributable to the Rouge Complex
Powerhouse explosion and fire that occurred in 1999. These costs include
$13.3 million for business interruption, $3.5 million for property damage
costs and $900,000 for professional services and other costs. These costs
were partially offset by $6.4 million of income for anticipated insurance
recovery. The insurance recovery amount reflects a reduction in a previously
recorded reserve for potential insurance recovery shortfalls.
"The Company's insurance carrier suspended its business interruption
coverage effective December 31, 2000," said Gary P. Latendresse, vice chairman
and chief financial officer. "This cessation of coverage caused the Company
to absorb more than $13 million of excess utility costs and blast furnace gas
flaring penalties during the quarter. Excess utility costs and blast furnace
gas flaring penalties were fully covered in the first quarter of 2000. The
new co-generation power plant, under construction by an affiliate of CMS
Energy, did not commence operations in the first quarter and caused us to
continue to rely upon the higher cost, natural gas-fueled, temporary steam
boilers. At this point, the new power plant's blast furnace gas burning
boilers are being tested and we expect steam supply to commence by the end of
May," concluded Mr. Latendresse.
Through March 31, 2001, the Company has recorded costs of $319.3 million
directly and indirectly attributable to the explosion. Insurance recoveries
of $268.0 million have been recorded through March for property damage and
business interruption losses. To date, Rouge Industries has been advanced
$298.1 million. The Company will continue to record Powerhouse explosion-
related costs and insurance recovery amounts until the new power plant is
operational and the disposition of the idled Powerhouse is resolved.
"Our order book continues to improve, and we expect shipments to increase
in the second quarter by 15% to 20% over the first quarter level. Natural gas
usage will abate as the heating season ends and the new power plant commences
commercial steam production. All of these factors should contribute to the
Company's improved financial results in the second quarter. The outlook for
the second half of 2001 is still quite cloudy due to the unstable economy and
questions surrounding the ongoing strength of the automotive market. We hope
that the U.S. government will support the domestic steel industry's efforts
to survive, and we continue all out efforts to improve our yield and
productivity, with the goal of returning to profitability by the end of the
year," concluded Mr. Valdiserri.
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
Unaudited
For the Quarter Ended
March 31
2001 2000
Total Sales $230,195 $321,606
Costs and Expenses
Costs of Goods Sold 281,747 334,838
Depreciation and Amortization 6,541 15,151
Selling and Administrative Expenses 5,625 7,467
Total Costs and Expenses 293,913 357,456
Operating Loss (63,718) (35,850)
Net Interest Expense (2,711) (1,865)
Insurance Recovery 6,393 15,595
Other - Net 989 900
Loss Before Income Taxes and Equity
In Unconsolidated Subsidiaries (59,047) (21,220)
Income Tax Benefit - 7,811
Equity in Unconsolidated Subsidiaries (709) 512
Net Loss $(59,756) $(12,897)
Earnings Per Share - Basic and Diluted $ (2.69) $ (0.58)
Weighted Average Shares Outstanding (000) 22,236 22,134
Shipments (000) NT 581 744
Raw Steel Production (000) NT 556 671
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
Unaudited
March 31 December 31
2001 2000
Assets
Current Assets
Cash and Cash Equivalents $ 7,548 $ 5,433
Accounts Receivable 135,239 130,537
Inventories 206,780 269,245
Other Current Assets 5,335 8,499
Total Current Assets 354,902 413,714
Net Property, Plant and Equipment 246,700 244,368
Investment in Unconsolidated Subsidiaries 66,792 66,918
Deferred Charges and Other 29,886 16,018
Total Assets $698,280 $741,018
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $179,452 $199,775
Deferred Insurance Recovery 42,224 44,000
Accrued Liabilities 46,780 52,179
Total Current Liabilities 268,456 295,954
Long-Term Debt 102,810 66,500
Other Postretirement Benefits 75,813 73,288
Other Liabilities 18,544 12,430
Stockholders' Equity 232,657 292,846
Total Liabilities and Stockholders'
Equity $698,280 $741,018