Rouge Industries Posts $6.9 Million Second Quarter Earnings
26 July 2000
Rouge Industries Posts $6.9 Million Second Quarter Earnings
DEARBORN, Mich. - Rouge Industries, Inc. reported net income of $6.9 million
or $0.31 per share for the second quarter of 2000, compared to a net loss of
$14.8 million or $0.67 per share in the second quarter of 1999, which was
adversely impacted by the February 1, 1999 Rouge Complex Powerhouse explosion
and fire. Steel product shipments in the second quarter of 2000 totaled 638,000
tons, 266,000 tons or 72% higher than the second quarter of 1999. Raw steel
production in the second quarter totaled 834,000 tons, setting a new quarterly
production record. The Company also received 44,000 tons of purchased slabs in
the second quarter to partially offset the lost production in the first quarter
relating to a mechanical system failure at the Basic Oxygen Furnace facility
and a plant-wide power failure.
"We have accomplished a great deal in the second quarter and I'm
particularly encouraged by the outstanding recovery and record production
levels our primary operations made following the unplanned outages in the
first quarter," said Carl L. Valdiserri, the Company's chairman and chief
executive officer. "In addition, we reached a settlement on virtually all of
Rouge Steel's major first-party property damage and business interruption
insurance claims through March 31, 2000 related to our steelmaking operations.
This settlement resulted in the receipt of an additional $40 million of
insurance proceeds bringing the total cash recoveries through June 30, 2000 to
$224 million.
"On June 1, we began to enjoy the benefits of lower utility rates stemming
from our contract with Dearborn Industrial Generation. We have also
successfully restarted our Waste Oxide Reclamation Facility in late June
following necessary modifications at the Basic Oxygen Furnace facility,"
continued Mr. Valdiserri.
"We are presently encountering a weakening of steel market conditions
beyond the impact of the typical customer vacation shutdowns and model
changeovers in the third quarter. This softening, in our opinion, is due to
the combined effects of inventory corrections, increased imports and concerns
about the economy in light of higher interest rates. Although we are
concerned about the consequences of a weakened market in the third quarter,
we remain positive about the future and our ability to sustain the
improvements in cost and productivity that we made in the second quarter,"
concluded Mr. Valdiserri.
The Company's operating income in the second quarter was adversely
impacted by $26.6 million of direct and indirect costs attributable to the
Powerhouse explosion. This total includes $16.1 million of business
interruption, including temporary facility costs, $9.4 million of property
damage and $1.1 million of non-recoverable professional services. These
business interruption and property damage costs have been more than offset by
the recording of $40.1 million of actual and anticipated insurance recoveries,
including the reduction of $10.3 million of previously recorded reserves that
are no longer needed following the partial settlement.
Since February 1, 1999, the Company has recorded $259.4 million of direct
and indirect costs attributable to the Powerhouse explosion. Insurance
recoveries of $226.4 million have been accrued against property damage and
business interruption costs of $253.3 million. The anticipated recovery
amount is net of a $26.9 million reserve and $6.1 million of professional
services and other non-recoverable costs. The Company will continue to record
Powerhouse-related costs and insurance recovery amounts until the final
disposition of the Powerhouse is resolved and the replacement plant commences
operation. At this time, the Company expects the new power plant to begin
providing electricity and steam by November of this year.
On June 30, 2000, Rouge Steel Company and the United Auto Workers reached
a tentative settlement agreement on a new four-year collective bargaining
agreement covering Rouge Steel's 2,400 production and maintenance employees.
Although the ratification of the early settlement was not successful, the
Company has resumed discussions with the UAW in hopes of a timely and amicable
resolution prior to the August 1, 2000 expiration of the present agreement.
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(Unaudited)
June 30 December 31
2000 1999
Assets
Current Assets
Cash and Cash Equivalents $ 42,144 $ 1,861
Accounts Receivable 175,196 181,316
Inventories 223,393 269,808
Other Current Assets 12,912 27,530
Total Current Assets 453,645 480,515
Net Property, Plant, and Equipment 251,412 278,610
Investment in Unconsolidated Subsidiaries 70,107 71,258
Deferred Charges and Other 54,997 37,223
Total Assets $830,161 $867,606
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $221,585 $201,627
Deferred Insurance Recovery 11,268 24,671
Current Portion of Long-Term Debt - 4,800
Accrued Liabilities 59,753 51,119
Total Current Liabilities 292,606 282,217
Long - Term Debt 54,300 100,000
Other Postretirement Benefits 68,863 63,936
Other Liabilities 11,959 11,678
Stockholders' Equity 402,433 409,775
Total Liabilities and Stockholders' Equity $830,161 $867,606
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
Unaudited
For the Quarter Ended For the Six Months Ended
June 30 June 30
2000 1999 2000 1999
Total Sales $276,243 $173,238 $591,043 $407,151
Costs and Expenses
Costs of Goods Sold 284,870 239,159 612,868 537,529
Depreciation and
Amortization 14,611 15,469 29,762 20,986
Selling and Administrative
Expenses 6,949 8,488 14,415 14,908
Amortization of Excess of
Net Assets Acquired
Over Cost - (1,449) - (2,898)
Total Costs and
Expenses 306,430 261,667 657,045 570,525
Operating Loss (30,187) (88,429) (66,002) (163,374)
Net Interest Income
(Expense) (497) 80 (2,362) (142)
Insurance Recovery 40,083 64,006 55,678 122,408
Other - Net 83 (478) 948 (2,597)
Income (Loss) Before Income
Taxes and Equity
In Unconsolidated
Subsidiaries 9,482 (24,821) (11,738) (43,705)
Income Tax (Provision)
Benefit (3,305) 10,444 4,506 17,636
Equity in Unconsolidated
Subsidiaries 684 (450) 1,196 (340)
Net Income (Loss) $6,861 $(14,827) $(6,036) $(26,409)
Earnings Per Share -
Basic and Diluted $0.31 $(0.67) $(0.27) $(1.19)
Weighted Average Shares
Outstanding (000) 22,136 22,126 22,135 22,112
Shipments (000) NT 638 372 1,382 913
Raw Steel Production
(000) NT 834 341 1,505 578