Rouge Industries Posts First Quarter Loss
DEARBORN, Mich., April 29 -- Rouge Industries, Inc. (BULLETIN BOARD: RGID) reported a net loss of $11.4 million, or $0.51 per share, for the first quarter of 2003, $30.1 million or $1.36 per share better than the net loss recorded in the first quarter of 2002. The Company attributes this improvement to higher steel selling prices, the Double Eagle insurance settlement and comprehensive cost reduction efforts.
Shipments in the first quarter totaled 675,000 tons, 8,000 tons higher than the first quarter of 2002. Sales in the first quarter totaled $296.5 million, $47.7 million or 19.2% higher than the first quarter of 2002. Steel selling prices in both the contract and spot markets were much higher than a year ago although they were offset slightly by a less favorable market and product mix. Raw steel production in the first quarter totaled 698,000 tons, 40,000 tons or 5.4% lower than the first quarter of 2002 due in part to a weak market demand.
Chairman's Comments
"The Company has made significant strides in cutting its losses from this time one year ago, but overall, the situation for our Company and the domestic steel industry remains unsettled," said Carl L. Valdiserri, chairman and chief executive officer. "Many of the positive attributes of the recovery during the second and third quarters of 2002 have given way to the effects of chronically high steel import levels, the overhang of world tensions and the fragile state of the domestic economy. The steel market has weakened significantly since its peak in the third quarter of 2002 and it now appears this weakness will continue into the second quarter of this year. The first quarter saw service center demand and prices decline as steel producers rebalanced production, sales and inventories. The Company took advantage of the relatively low demand in this period to address planned equipment maintenance issues. Unfortunately, other unscheduled outages and dramatically higher natural gas and scrap costs contributed to the first quarter loss," continued Mr. Valdiserri.
"Looking ahead, we expect that the timely resolution of the situation in Iraq should lead to increased consumer confidence, a stronger U.S. economy, more robust automotive build schedules and an upturn in orders from all steel market segments. The Company has weathered a myriad of complex and challenging issues without seriously impairing its liquidity and we are taking steps, including significant workforce consolidation and other cost reductions, to protect our cash reserves until the market returns to a more acceptable level," concluded Mr. Valdiserri.
Double Eagle Insurance Claim Settlement
On April 4, 2003, the Company reached a final settlement with its insurers' representatives on the Double Eagle fire loss. Insurance recoveries totaling $13.9 million were recorded in the first quarter to cover a $1.0 million charge to operating income and the reversal of $12.9 million of previously recorded insurance recovery reserves and deferred insurance recoveries. Of the $52.3 million net final settlement, the Company had received $33.3 million in proceeds from its insurers through December 31, 2002. Additional proceeds of $12.0 million were received in the first quarter of 2003 bringing total proceeds received through March 31, 2003 to $45.3 million. The Company will receive the remaining $7.0 million of proceeds and record the corresponding insurance recoveries in the second quarter of 2003.
Liquidity
"The Company's debt at March 31, 2003 totaled $150.4 million, $35.8 million lower than the December 31, 2002 level," said Gary P. Latendresse, vice chairman and chief financial officer. "This reduction in the Company's debt is attributable to lower inventories and insurance proceeds. As of March 31, 2003, the Company had $195.2 million available to borrow, of which $150.4 was already borrowed. Given the uncertainties of the domestic steel market and the U.S. economy, we have focused on managing our cash and as a result, the Company's availability on April 25, 2003 was $53.9 million, $25.2 million higher than December 31, 2002. That notwithstanding, we are pursuing additional sources of liquidity to bridge the Company to a period of economic stability," concluded Mr. Latendresse.
Ethics and Compliance Hotline
To comply with the provisions of the Sarbanes-Oxley Act of 2002, the Company launched its Ethics and Compliance Hotline (the "Hotline") on April 25, 2003. The purpose of the Hotline is to provide a means for any person to report matters of concern to the Company's management and board of directors. For information regarding the Hotline, visit the Rouge Industries web site at www.rougeindustries.com . The toll-free number to report any unethical or improper activity is 1-888-270-5941.
Rouge Industries Common Stock
During the first quarter, a variety of factors caused the price of Rouge Industries class A common stock to decline to the point where Rouge Industries had fallen below two of the New York Stock Exchange's continued listing standards. As a consequence, on March 24, 2003, the New York Stock Exchange suspended trading of Rouge Industries stock. Rouge stock is now being quoted on the OTCBB (over-the-counter bulletin board) under the ticker symbol RGID.
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 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)
March 31 December 31
2003 2002
(Unaudited)
Assets
Current Assets
Cash, Cash Equivalents and Marketable
Securities $2,799 $2,620
Accounts Receivable 80,459 83,187
Inventories 179,027 220,568
Other Current Assets 9,164 16,600
Total Current Assets 271,449 322,975
Net Property, Plant and Equipment 212,693 215,008
Investment in Unconsolidated Subsidiaries 76,893 77,521
Deferred Charges and Other 37,588 36,896
Total Assets $598,623 $652,400
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $142,137 $134,070
Deferred Insurance Recovery - 13,900
Short-Term Debt 65,368 101,181
Accrued Liabilities 40,977 50,425
Total Current Liabilities 248,482 299,576
Long-Term Debt 85,000 85,000
Pensions and Other Postretirement Benefits 180,148 172,744
Other Liabilities 15,698 15,571
Stockholders' Equity 69,295 79,509
Total Liabilities and
Stockholders' Equity $598,623 $652,400
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
Unaudited
For the Quarter Ended
March 31
2003 2002
Total Sales $296,454 $248,805
Costs and Expenses
Costs of Goods Sold 309,204 285,111
Depreciation and Amortization 6,040 6,638
Selling and Administrative Expenses 4,673 3,386
Total Costs and Expenses 319,917 295,135
Operating Loss (23,463) (46,330)
Net Interest Expense (2,323) (2,376)
Insurance Recovery 13,917 5,979
Other - Net (180) (22)
Loss Before Income Taxes and Equity
In Unconsolidated Subsidiaries (12,049) (42,749)
Equity in Unconsolidated Subsidiaries 689 1,250
Net Loss $(11,360) $(41,499)
Earnings Per Share - Basic and Diluted $(0.51) $(1.87)
Weighted Average Shares Outstanding (000) 22,248 22,247
Shipments (000) NT 675 667
Raw Steel Production (000) NT 698 738