Rouge Industries Posts First Quarter Loss of $12.9 Million
27 April 2000
Rouge Industries Posts First Quarter Loss of $12.9 Million
DEARBORN, Mich., April 26 Rouge Industries, Inc.
(NYSE: ROU) reported a net loss of $12.9 million or $0.58 per share for the
first quarter of 2000 compared to a net loss of $11.6 million or $0.52 per
share in the first quarter of 1999. The loss in the first quarter of 2000 was
due in large part to the continuing effects of last year's Powerhouse
explosion and four unplanned production outages during the quarter.
Steel product shipments totaled 744,000 tons, 203,000 tons or 38% higher
than the first quarter of 1999 and 9,000 tons higher than the fourth quarter
of last year. Raw steel production in the first quarter totaled 671,000 tons,
434,000 tons higher than the first quarter of last year but 69,000 tons lower
than the fourth quarter of 1999. In order to offset the consequences of the
unplanned production outages, the Company purchased 90,000 tons of slabs, of
which 47,000 tons were received during the first quarter.
The most significant of these outages occurred at the basic oxygen
facility ("BOF") on January 7. Repairs to the cooling hood and air evacuation
system at one of the two BOF vessels necessitated a cutback of normal
production rates for nearly two months during the quarter. The second most
significant outage occurred on March 31 at the temporary substation built
following the 1999 Powerhouse explosion and resulted in the complete loss of
utility services to the entire Rouge Complex. Utility services were gradually
restored over a 36-hour period; however, several Rouge Steel operations
suffered extensive property damage. Included in operating income is $14.4
million of estimated property damage and business interruption costs for these
two events plus two other minor outages. The Company does not anticipate a
financial impact in subsequent quarters as a result of these events. Although
the Company does not expect a recurrence of these events, the temporary
utility systems are susceptible to problems and future power outages are still
a concern.
In addition to the events discussed above, the Company's operating income
in the first quarter was also adversely impacted by $5.5 million of direct and
indirect costs attributable to the 1999 Powerhouse explosion. These costs
include $4.5 million of additional property damage and business interruption
costs and $1 million of professional services that are not covered by the
insurance policy. The Company, after considering insurance policy deductibles
and policy limitations, has recorded $15.6 million of income for anticipated
insurance recovery. This recovery includes a $2.8 million reduction to the
previously recorded reserve. The reserve at the end of the first quarter is
now $37.2 million which is deemed appropriate given the complexity of the
insurance claim process and the progress made to date relative to insurance
payments received. During the first quarter, the Company received an
additional insurance claim advance of $25 million bringing the total amount
collected to $184 million. The Company's long-term debt as of the end of the
first quarter totaled $55 million, down from $105 million at year-end 1999.
"We consider ourselves to be very fortunate that these most recent
occurrences didn't result in greater damage to our equipment and we are
relieved that our work force only sustained one minor injury from these
events. It is a tribute to the skill and resourcefulness of our employees
that they could safely deal with these situations and resume production as
quickly as they did. It was truly a remarkable accomplishment. We continue
to be reminded how fragile our temporary utility supply system is and we will
be greatly relieved when the new power plant comes on line late in the third
quarter," said Carl L. Valdiserri, the Company's chairman and chief executive
officer.
"I believe we have taken a conservative approach as to the reserves booked
for equipment damage and business interruption expenses and we will expend
every energy to maximize the insurance recovery amount," continued Valdiserri.
"We are off to a good start in the second quarter from a production
standpoint and the order book continues to be strong. Construction of the new
power plant is progressing and the planning for the switchover, which will be
a substantial undertaking, is being discussed daily to minimize any chance of
a future unplanned power outage," concluded Valdiserri.
The Company and the United Auto Workers opened labor contract negotiations
on April 14, 2000. The current five-year agreement, covering 2,400
production, maintenance and laboratory workers, expires on August 1, 2000.
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
Unaudited
(Unaudited)
For the Quarter Ended
March 31
2000 1999
Total Sales $314,765 $233,912
Costs and Expenses
Costs of Goods Sold 327,997 298,263
Depreciation and Amortization 15,151 5,624
Selling and Administrative Expenses 7,467 6,419
Amortization of Excess of Net Assets
Acquired Over Cost - (1,449)
Total Costs and Expenses 350,615 308,857
Operating Loss (35,850) (74,945)
Net Interest Expense (1,865) (222)
Insurance Recovery 15,595 58,402
Other - Net 900 (2,119)
Loss Before Income Taxes and Equity in
Unconsolidated Subsidiaries (21,220) (18,884)
Income Tax Benefit 7,811 7,192
Equity in Unconsolidated Subsidiaries 512 110
Net Loss $(12,897) $(11,582)
Earnings Per Share - Basic and Diluted $(0.58) $(0.52)
Weighted Average Shares Outstanding 22,133 22,098
Shipments (000)NT 744 541
Raw Steel Production (000)NT 671 237
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(Unaudited)
March 31 December 31
2000 1999
Assets
Current Assets
Cash and Cash Equivalents $19,145 $1,861
Accounts Receivable 182,246 181,316
Inventories 196,908 269,808
Other Current Assets 6,620 27,530
Total Current Assets 404,919 480,515
Net Property, Plant, and Equipment 265,677 278,610
Investment in Unconsolidated
Subsidiaries 70,751 71,258
Deferred Charges and Other 56,978 37,223
Total Assets $798,325 $867,606
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $203,974 $201,627
Deferred Insurance Recovery 15,420 24,671
Current Portion of Long-Term Debt - 4,800
Accrued Liabilities 49,489 51,119
Total Current Liabilities $268,883 $282,217
Long - Term Debt 55,000 100,000
Other Postretirement Benefits 66,398 63,936
Other Liabilities 11,819 11,678
Stockholders' Equity 396,225 409,775
Total Liabilities and Stockholders'
Equity $798,325 $867,606