Rouge Industries Posts Fourth Quarter Loss of $7.4 Million
DEARBORN, Mich., Feb. 5 -- Rouge Industries, Inc. reported a net loss of $7.4 million, or
$0.33 per share, for the fourth quarter of 2002. This loss includes a one-
time charge of $4.5 million resulting from the sale of the Company's 11% joint
venture interest in TWB Company, L.L.C., a laser welding facility.
Shipments in the fourth quarter totaled 647,000 tons, 28,000 tons or 4.5%
higher than the fourth quarter of 2001, but 45,000 tons or 6.5% lower than the
third quarter of 2002. Sales in the fourth quarter totaled $285.3 million,
$61.8 million or 27.6% higher than the fourth quarter of 2001, but $18.2
million or 6.0% below the third quarter of 2002.
Full Year 2002
The Company reported a net loss of $52.3 million, or $2.35 per share, for
the year ended December 31, 2002. This net loss included charges of $10.3
million associated with unrecoverable insurance costs attributable to the fire
at Double Eagle Steel Coating Company ("Double Eagle"), the Company's
electrogalvanizing joint venture, and a charge of $4.5 million from the sale
of the Company's interest in TWB. Absent these charges, the Company's net
loss would have been $37.5 million or $1.69 per share. Shipments and sales in
2002 totaled 2.7 million tons and $1,127 million, respectively, up 10.9% and
22.0%, respectively, from 2001.
Chairman's Comments
"I continue to be very proud and appreciative of the Company's employees
for their strong focus and commitment to overcome the challenges facing our
Company and the domestic steel industry," remarked Carl L. Valdiserri, the
Company's chairman and chief executive officer. "The performance of our
Primary Operations was particularly important to the Company's financial
results in 2002. The blast furnaces set an all time annual production record
and the basic oxygen furnace and continuous caster crews processed that hot
metal efficiently and economically thereby reducing the Company's slab
production costs by four percent as compared to 2001. In addition, the
Company's Finishing Facilities, including Spartan Steel Coating, also had an
exemplary year, recording significant quality, productivity and cost
improvements. We were also very pleased by the efforts of our employees and
the team of engineers and contractors who returned Double Eagle to production
in early September 2002, on time and below budget, following the major fire at
that facility on December 15, 2001. Without these outstanding efforts and our
continuing focus on productivity and cost reduction which resulted in a $12
per ton benefit improvement over 2001, 2002 would have been a much more
difficult year.
"Unfortunately, the fundamentals of the domestic steel industry have not
improved sufficiently to accelerate Rouge Industries' return to anticipated
profitability levels. Despite the Bush Administration's Section 201 relief,
which took effect just nine months ago, flat rolled steel imports have surged
from countries that were excluded from tariffs, resulting in higher levels of
imports in 2002. Furthermore, two domestic steel companies that were closed
at the end of 2001 have now reopened under new ownership and without the
substantial costs and liabilities for employee and retiree health care and
pensions. There is no question that the rise in steel prices associated with
tariff implementation was a critically positive factor, but of equal
importance was the strong demand for steel led by the automotive market in the
face of a nervous economy. Although we remain cautiously optimistic about
2003, due in part to improved contract pricing, spot market prices have
steadily and substantially declined from their peak late last year due to the
uncertain domestic economy and world situation. As a result, the challenges
for Rouge Industries and the domestic steel industry remain," continued Mr.
Valdiserri.
Double Eagle Update
As previously announced, Double Eagle restarted in early September
following a nine-month outage. The launch of the refurbished line went very
well and was declared fully operational before year end.
During the fourth quarter, the Company's operating income was adversely
impacted by $2.9 million of continuing business interruption costs related to
the Double Eagle fire. No property damage costs were incurred during the
quarter. This business interruption cost was recorded as costs of goods sold
but was offset by $3.1 million of income including a $200,000 reduction in the
insurance recovery reserve. Insurance recoveries totaling $2.1 million,
associated with capitalized repairs during the fourth quarter, will be
recognized when the insurance claim is fully settled.
For the full year, the Company's operating income was adversely impacted
by $41.7 million of costs related to the Double Eagle fire. These costs were
offset by $31.4 million of income, net of a $3.4 million reserve. Insurance
recoveries associated with $17.3 million of capitalized repairs were deferred
during 2002 and will be recognized when the claim is fully settled. The
Company expects that a final insurance settlement will be reached in the first
quarter of 2003. To date, the Company has been advanced $43.3 million by its
insurers for property damage and business interruption costs.
Liquidity
As of December 31, 2002, the Company had $214.9 million available to
borrow, of which $186.2 was already borrowed. The Company's debt at December
31, 2002 was $5.1 million lower than its September 30, 2002 level.
Safe Harbor Statement
This press release contains forward-looking information about the Company.
A number of factors could cause the Company's actual results to differ
materially from those anticipated, including changes in the general economic
or political climate, the supply of or demand for and the pricing of steel
products in the Company's markets, plant operating performance, product
quality, potential environmental liabilities, the availability and prices of
raw materials, supplies, utilities and other services and items required by
the Company's operations, the level of imports and import prices in the
Company's markets, the availability of sufficient cash to support the
Company's operations, uncertainty regarding the Company's ability to resolve
the Double Eagle insurance claim and higher than expected costs. For further
information on these and other factors that could impact the Company and the
statements contained herein, reference should be made to the Company's filings
with the Securities and Exchange Commission.
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
December 31 December 31
2002 2001
Assets
Current Assets
Cash and Cash Equivalents $2,620 $3,235
Accounts Receivable 83,187 71,417
Inventories 220,568 232,937
Other Current Assets 16,600 10,636
Total Current Assets 322,975 318,225
Net Property, Plant and Equipment 215,008 237,193
Investment in Unconsolidated Subsidiaries 77,521 72,455
Deferred Charges and Other 36,896 45,434
Total Assets $652,400 $673,307
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $134,070 $163,926
Deferred Insurance Recovery 13,900 -
Short-Term Debt 101,181 145,549
Accrued Liabilities 50,425 51,440
Total Current Liabilities 299,576 360,915
Long-Term Debt 85,000 -
Pensions and Other Postretirement Benefits 172,744 121,003
Other Liabilities 15,571 20,816
Stockholders' Equity 79,509 170,573
Total Liabilities and
Stockholders' Equity $652,400 $673,307
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
Unaudited
For the For the
Quarter Ended Twelve Months Ended
December 31 December 31
2002 2001 2002 2001
Total Sales $285,298 $223,537 $1,127,001 $923,546
Costs and Expenses
Costs of Goods Sold 278,535 225,289 1,162,187 1,067,673
Depreciation and Amortization 6,034 6,484 24,783 25,992
Selling and Administrative
Expenses 4,769 4,226 17,066 20,612
Total Costs and Expenses 289,338 235,999 1,204,036 1,114,277
Operating Loss (4,040) (12,462) (77,035) (190,731)
Net Interest Expense (2,812) (1,802) (10,406) (8,378)
Insurance Recovery 3,139 - 31,383 81,533
Other - Net (4,172) (1,099) (5,981) (2,087)
Loss Before Income
Taxes and Equity In
Unconsolidated Subsidiaries (7,885) (15,363) (62,039) (119,663)
Income Tax Benefit - - 2,456 -
Equity in Unconsolidated
Subsidiaries 513 1,266 7,250 8,145
Net Loss $(7,372) $(14,097) $(52,333) $(111,518)
Earnings Per Share -
Basic and Diluted $(0.33) $(0.63) $(2.35) $(5.01)
Weighted Average Shares
Outstanding (000) 22,247 22,244 22,247 22,242
Shipments (000) NT 647 619 2,707 2,440
Raw Steel Production (000) NT 744 725 3,060 2,829