Rouge Industries Posts Third Quarter Loss of $6.3 Million
25 October 2000
Rouge Industries Posts Third Quarter Loss of $6.3 Million
DEARBORN, Mich., Oct. 25 Rouge Industries, Inc.
reported a net loss of $6.3 million or $0.28 per share for the
third quarter of 2000, compared to a net loss of $11.0 million or $0.49 per
share in the third quarter of 1999. The third quarter of 2000 included a net
income tax benefit of $4.4 million or $0.20 per share relating to the
Company's assessment of its deferred tax assets and a change in the related
valuation allowance. Steel product shipments in the third quarter of 2000
totaled 622,000 tons, 49,000 tons or 7.3% lower than the third quarter of
1999. Raw steel production in the third quarter totaled 747,000 tons, 31,000
tons below the third quarter of 1999 and 87,000 tons or 10.4% below the record
setting second quarter of 2000.
"Raw steel production in the third quarter was lowered intentionally to
balance production with sales," said Carl L. Valdiserri, the Company's
chairman and chief executive officer. "The dramatic drop in spot market steel
prices coupled with a softer order book made it prudent to curtail production
and reduce costs. Surging steel imports, aided by the stronger U.S. dollar,
and higher interest rates and fuel prices, have caused our customers to become
very cautious about steel buying. Many still have large inventories and most
are waiting until the very last minute to place orders. The result is spot
market prices that are approaching the depressed levels experienced in the
early 1990s.
"At this point," continued Mr. Valdiserri, "we expect these adverse market
conditions to continue through the end of 2000 and into the first quarter of
2001. For the fourth quarter of 2000, reduced shipments (5% to 10% lower than
the third quarter), along with increasing natural gas costs, a planned
maintenance outage on the Company's smaller blast furnace, and the upcoming
holidays, are expected to adversely impact earnings.
"Although we are disappointed and concerned about the market, the Company
remains optimistic about its ability to weather these conditions due to our
strong balance sheet and cost cutting actions, including the curtailment of
higher cost productivity enhancing practices, such as the use of scrap
products and natural gas and oxygen injection at the Company's blast
furnaces," concluded Mr. Valdiserri.
The Company's operating income in the third quarter was adversely impacted
by $13.7 million of direct and indirect costs attributable to the lingering
effects of the February 1999 Rouge Complex Powerhouse explosion. These costs
have been partially offset by the recording of $13.2 million of actual and
anticipated insurance recoveries. The Company received insurance recovery
advances of $34.8 million during the third quarter and has collected $258.8
million since the explosion.
The Company will continue to record Powerhouse-related costs and insurance
recovery amounts until the new power plant commences operation. The start-up
of the new power plant's steam generating boilers is now scheduled for late in
the first quarter of 2001. Beyond the start-up of the new power plant, costs
and recoveries relating to the clean-up and final disposition of the
Powerhouse will continue.
On August 9, 2000, the United Auto Workers ratified a new four-year
contract covering Rouge Steel's 2,400 production and maintenance employees.
This new contract provides for wage and benefit improvements in each of the
four years, expanded means for employees to participate in the success of the
business and provisions for the Company to more effectively and efficiently
utilize its workforce.
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(Unaudited)
September 30 December 31
2000 1999
Assets
Current Assets
Cash and Cash Equivalents $ 3,844 $ 1,861
Accounts Receivable 163,764 181,316
Inventories 242,014 269,808
Other Current Assets 14,216 27,530
Total Current Assets 423,838 480,515
Net Property, Plant, and Equipment 249,293 278,610
Investment in Unconsolidated Subsidiaries 69,011 71,258
Deferred Taxes 48,952 23,108
Deferred Charges and Other 17,085 14,115
Total Assets $808,179 $867,606
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $192,163 $201,627
Deferred Insurance Recovery 30,876 24,671
Current Portion of Long-Term Debt - 4,800
Accrued Liabilities 56,675 51,119
Total Current Liabilities 279,714 282,217
Long - Term Debt 49,400 100,000
Other Postretirement Benefits 71,326 63,936
Other Liabilities 12,100 11,678
Stockholders' Equity 395,639 409,775
Total Liabilities and Stockholders'
Equity $808,179 $867,606
ROUGE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
Unaudited
For the For the
Quarter Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
Total Sales $257,931 $261,153 $848,974 $668,303
Costs and Expenses
Costs of Goods Sold 267,752 283,294 880,618 820,777
Depreciation and
Amortization 13,803 19,915 43,567 40,942
Selling and
Administrative
Expenses 6,497 5,693 20,912 20,606
Amortization of Excess
of Net Assets Acquired
Over Cost - (1,449) - (4,347)
Total Costs and
Expenses 288,052 307,453 945,097 877,978
Operating Loss (30,121) (46,300) (96,123) (209,675)
Net Interest Expense (737) (980) (3,099) (1,121)
Insurance Recovery 13,233 26,841 68,911 149,249
Other - Net 366 1,407 1,314 (1,189)
Loss Before Income Taxes
and Equity in
Unconsolidated
Subsidiaries (17,259) (19,032) (28,997) (62,736)
Income Tax Benefit 10,239 7,600 14,745 25,236
Equity in Unconsolidated
Subsidiaries 741 482 1,937 141
Net Loss $(6,279) $(10,950) $(12,315) $(37,359)
Earnings Per Share -
Basic and Diluted $(0.28) $(0.49) $(0.56) $(1.69)
Weighted Average Shares
Outstanding (000) 22,146 22,130 22,139 22,118
Shipments (000) NT 622 671 2,004 1,584
Raw Steel Production
(000) NT 747 778 2,252 1,356