UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
-----------------------
Date of Report (Date of earliest event reported):
January 22, 1999
USX Corporation
- --------------------------------------------------------------------------------
----
(Exact name of registrant as specified in its charter)
Delaware 1-5153 25-0996816
--------------- ------------ -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
600 Grant Street, Pittsburgh, PA 15219-4776
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(412) 433-1121
------------------------------
(Registrant's telephone number,
including area code)
<PAGE> 2
Item 5. Other Events
On January 22, 1999, USX Corporation announced fourth quarter and 1998
earnings for the Marathon Group and the U. S. Steel Group. Copies of the
earnings announcement are attached.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1. Marathon Group Earnings Release.
99.2. U. S. Steel Group Earnings Release.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
USX CORPORATION
By /s/ Kenneth L. Matheny
-----------------------
Kenneth L. Matheny
Vice President and Comptroller
Dated: January 22, 1999
Contact:William E.Keslar
Don H. Herring
(412) 433-6870
FOR IMMEDIATE RELEASE
<TABLE>
<CAPTION>
USX CORPORATION REPORTS LOWER FOURTH QUARTER AND 1998
MARATHON GROUP RESULTS REFLECTING LOWER COMMODITY PRICES
Earnings Highlights
(Dollars in millions except per diluted share data)
4Q 4Q
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income adjusted for
special items $13 $131 $321 $635
- per diluted share $0.04 $0.45 $1.09 $2.20
Net income (loss) ($86) $38 $310 $456
Net income (loss) per diluted
share ($0.29) $0.13 $1.05 $1.58
Revenues $5,353 $3,920 $22,075 $15,754
</TABLE>
PITTSBURGH, January 22, 1999 -- USX-Marathon Group's
(NYSE:MRO) net income adjusted for special items was $13
million, or 4 cents per diluted share, in fourth quarter
1998, compared with $131 million, or 45 cents per diluted
share, in fourth quarter 1997.
Primarily due to lower commodity prices, the Marathon
Group recorded a fourth quarter 1998 net loss of $86 million,
or 29 cents per diluted share. As a result of lower crude
oil, natural gas and refined product prices, Marathon
recorded an unfavorable inventory market valuation ("IMV")
reserve adjustment (see note 3 to the attached Marathon Group
Statement of Operations) and wrote-off several exploratory
wells which had encountered hydrocarbons, but had been
suspended pending further evaluation. In addition, Marathon
recorded favorable income tax accrual adjustments relating to
foreign operations. The net unfavorable aftertax effect of
these special items was $99 million. Net income in fourth
quarter 1997 was $38 million, or 13 cents per diluted share,
including a $93 million unfavorable aftertax IMV reserve
adjustment.
The Marathon Group reported 1998 net income adjusted for
special items of $321 million, or $1.09 per diluted share,
compared to 1997 adjusted net income of $635 million, or
$2.20 per diluted share.
For the year 1998, the Marathon Group recorded net
income of $310 million, or $1.05 per diluted share. In
addition to the fourth quarter special items discussed above,
net income for the year included impairment of certain
international investments, a change in interest gain and one-
time transition charges relating to the formation of Marathon
Ashland Petroleum LLC ("MAP"), and a natural gas contract
settlement gain. The net unfavorable aftertax effect of 1998
special items was $11 million. Net income for the year 1997
was $456 million, or $1.58 per diluted share, including a
$179 million unfavorable aftertax IMV reserve adjustment.
Commenting on 1998 performance, USX Corporation Board
Chairman Thomas J. Usher said, "The Marathon Group's earnings
were significantly impacted by lower worldwide liquid
hydrocarbon and natural gas prices. Nevertheless, 1998 saw
us gain momentum in growing and improving the business.
Marathon's upstream operations achieved nearly a 20 percent
growth in worldwide liquids production. Downstream, MAP had
a very successful first year of operations, achieving annual
repeatable operating efficiencies of approximately $150
million in 1998 and targeting an additional $100 million in
1999."
For 1998, financial measures such as revenues, income
from operations and capital expenditures include 100 percent
of MAP and are not comparable to prior period amounts (see
Note 2 to the attached Marathon Group Statement of
Operations). Marathon Group revenues were $5.4 billion in
fourth quarter 1998 and $22.1 billion for the year, compared
with $3.9 billion and $15.8 billion in the same periods of
1997.
Income for Marathon's reportable operating segments,
which include 100 percent of MAP, was $178 million in fourth
quarter 1998 and $1,207 million for the year 1998, compared
with $275 million and $1,384 million in the same periods of
1997.
Exploration and production (upstream) operating segment
income totaled $21 million in fourth quarter 1998 and $278
million for the year, compared with $178 million and $773
million in the same periods of 1997.
Excluding dispositions, Marathon replaced 242 percent of
its 1998 worldwide oil and gas production on a barrel of oil
equivalent (BOE) basis resulting in a five-year reserve
replacement average of 135 percent.
Domestic upstream income was $31 million in fourth
quarter 1998 and $190 million for the year, compared with
$124 million and $500 million in the same periods of 1997.
The decreases in domestic upstream income for both the fourth
quarter and the year were mainly due to significantly lower
liquid hydrocarbon and natural gas prices compared to 1997.
Liquid prices declined 41 percent in the fourth quarter and
38 percent for the year. Natural gas prices declined 28
percent and 19 percent respectively in the quarter and year.
These price decreases were partially offset by increased
liquid hydrocarbon and natural gas production. Domestic
liquid hydrocarbon production, which averaged 134,500 barrels
per day (bpd) in 1998, increased 19,700 bpd, or 17 percent,
over 1997 levels, primarily due to new production in the Gulf
of Mexico.
International upstream reported a loss of $10 million in
fourth quarter 1998 and income of $88 million for the year,
compared with income of $54 million and $273 million in the
same periods of 1997. These results also reflect
significantly lower liquid hydrocarbon prices, partially
offset by significantly increased liquid hydrocarbon volumes
reflecting liftings from acquired production in Canada and
new operations in Gabon.
On August 11, 1998, Marathon completed its acquisition
of Tarragon Oil and Gas Limited, a Canadian oil and gas
exploration and production company (see note 2 to the
attached Marathon Group Statement of Operations). Current
daily production from Tarragon properties is 160 mmcf of
natural gas and 17,000 barrels of liquids.
Usher commented, "Tarragon fits well into our growth
strategy and provides Marathon core production in one of
North America's most attractive gas basins. This acquisition
increased our worldwide reserves by 20 percent and provides
Marathon numerous growth opportunities in Canada."
Refining, marketing and transportation (downstream)
segment income, which includes 100 percent of the results of
MAP, was $147 million in fourth quarter 1998 and $896 million
for the year. On a pro forma basis, segment income for the
combined downstream operations of Marathon and Ashland would
have been $140 million for the fourth quarter 1997 and $869
million for the year 1997 (see note 2 to the attached
Marathon Group Statement of Operations). Usher noted that,
"During 1998, MAP was able to overcome significant decreases
in refining crack spreads through the realization of
operating efficiencies, a strong performance by its asphalt
and retail operations, and lower energy costs."
Administrative expenses were $22 million in fourth
quarter 1998 and $106 million for the year 1998, compared
with $34 million and $168 million in the same periods of
1997. These decreases were primarily due to certain
administrative costs now reported in MAP results and lower
accruals for employee benefit plans and litigation.
*****
This release contains forward-looking information concerning
the realization of MAP operating efficiencies. Factors that
could cause the realization of operating efficiencies at MAP to be less than
anticipated include the costs to implement shared technology
and delays in leveraging volume procurement advantages.
In accordance with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, USX has included in Form 10-K
for the year ended December 31, 1997 and in its Form 10-Q for the
first, second and third quarter of 1998, cautionary
statements identifying important factors, but not necessarily
all factors, that could cause actual results to differ
materially from those set forth in the forward-looking
statements.
Statements of Operations and Supplemental Statistics for
the Marathon Group and a consolidated Statement of Operations
for USX Corporation are attached.
For more information on USX Corporation and Marathon
Group, visit our websites at www.usx.com or www.marathon.com.
-o0o-
<TABLE>
MARATHON GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
-----------------------------------
<CAPTION>
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $5,327 $3,895 $21,726 $15,668
Dividend and affiliate income 13 14 50 36
Gain on disposal of assets 9 8 28 37
Gain on ownership change in Marathon Ashland
Petroleum LLC - - 245 -
Other income 4 3 26 13
------ ------ ------ ------
Total revenues 5,353 3,920 22,075 15,754
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of sales (excludes items shown below) 3,750 2,632 15,325 10,392
Selling, general and administrative expenses 122 92 505 355
Depreciation, depletion and amortization 240 167 941 664
Taxes other than income taxes 1,018 728 3,786 2,938
Exploration expenses 110 60 313 189
Inventory market valuation charges 245 147 267 284
------ ------ ------ ------
Total costs and expenses 5,485 3,826 21,137 14,822
------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (132) 94 938 932
Net interest and other financial costs 71 58 237 260
Minority interest in income (loss) of Marathon
Ashland Petroleum LLC (33) - 249 -
------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES (170) 36 452 672
Provision (credit) for estimated income taxes (84) (2) 142 216
------ ------ ------ ------
NET INCOME (LOSS) $(86) $38 $310 $456
====== ====== ====== ======
MARATHON STOCK DATA:
Net income (loss) per share
- Basic $(.29) $.14 $1.06 $1.59
- Diluted (.29) .13 1.05 1.58
Dividends paid per share .21 .19 .84 .76
Weighted average shares, in thousands
- Basic 301,624 288,566 292,876 288,038
- Diluted 301,624 289,275 293,435 290,520
<FN>
The following notes are an integral part of this financial statement.
</TABLE>
MARATHON GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT
-------------------------------------
1.The statement of operations of the Marathon Group includes the
results of operations for the businesses of Marathon Oil Company
(Marathon) and certain other subsidiaries of USX and a portion of
USX's net financial costs, general and administrative costs and
income taxes attributed to the groups in accordance with USX's
accounting and tax allocation policies. This statement should be
read in connection with the consolidated statement of operations of
USX.
2.In August 1998, Marathon acquired Tarragon Oil and Gas Limited
(Tarragon), a Canadian oil and gas exploration and production
company, for $1.1 billion. Securityholders of Tarragon received,
at their election, Cdn$14.25 for each Tarragon share, or the
economic equivalent in Exchangeable Shares of an indirect Canadian
subsidiary of Marathon, which are exchangeable solely on a one-for-
one basis into USX-Marathon Group Common Stock. The purchase price
included cash payments of $686 million, issuance of approximately
878,000 Exchangeable Shares valued at $29 million and the
assumption of $345 million in debt. Marathon accounted for the
acquisition using the purchase method of accounting. Results of
operations include the operations of Marathon Canada Limited,
formerly known as Tarragon, commencing August 12, 1998.
During 1997, Marathon and Ashland Inc. (Ashland) agreed to combine
the major elements of their refining, marketing and transportation
(RM&T) operations. On January 1, 1998, Marathon transferred
certain RM&T net assets to Marathon Ashland Petroleum LLC (MAP), a
new consolidated subsidiary. Also on January 1, 1998, Marathon
acquired certain RM&T net assets from Ashland in exchange for a 38%
interest in MAP. The acquisition was accounted for under the
purchase method of accounting. The purchase price was determined
to be $1.9 billion, based upon an external valuation. The change
in Marathon's ownership interest in MAP resulted in a gain of $245
million, which is included in 1998 revenues.
See attached supplemental unaudited pro forma data relating to the
inclusion of Tarragon and MAP operations.
3.When USX acquired Marathon in March 1982, crude oil and refined
product prices were at historically high levels. USX established a
new LIFO cost basis for Marathon's inventories by reference to
these prices.
Generally accepted accounting principles require that inventories
be reported at the lower of recorded cost or current market value.
Marathon has established an inventory market valuation (IMV)
reserve to reduce the cost basis of its inventories to current
market value. Quarterly adjustments to the IMV reserve result in
noncash charges or credits to income from operations. Decreases in
market prices below the cost basis result in charges to income from
operations. Once a reserve has been established, subsequent
increases in prices (up to the cost basis) result in credits to
income from operations.
The charges or credits to income resulting from IMV reserve
adjustments affect the comparability of financial results from
period to period. They also affect comparisons with other energy
companies, many of which do not have such adjustments. Therefore,
USX reports separately the effects of IMV reserve adjustments on
financial results. In management's opinion, the effects of such
adjustments should be considered separately when evaluating
operating performance.
MARATHON GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
3.(Continued)
When USX acquired the crude oil and refined product inventories
associated with Ashland's RM&T operations in January 1998, a new
cost basis was established for those inventories. The acquisition
cost of these inventories lowered the overall average cost of the
combined RM&T inventories; as a result, the price threshold at
which an IMV reserve will be recorded has also been lowered. This
acquisition resulted in a one-time reduction in the IMV reserve,
yielding a net favorable IMV reserve adjustment in the first
quarter of 1998.
<TABLE>
<CAPTION>
MARATHON GROUP OF USX CORPORATION
SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 1998 1997 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME (LOSS) FROM OPERATIONS
Exploration & Production ("E&P")
Domestic $31 $124 $190 $500
International (10) 54 88 273
------ ------ ------ ------
Income For E&P Reportable Segment 21 178 278 773
Refining, Marketing & Transportation(a) 147 88 896 563
Other Energy Related Businesses(b) 10 9 33 48
------ ------ ------ ------
Income For Reportable Segments $178 $275 $1,207 $1,384
Items Not Allocated To Reportable Segments:
Administrative Expenses $(22) $(34) $(106) $(168)
Inventory Market Val. Res. Adjustment. (245) (147) (267) (284)
Gain on Ownership Change
& Transition Charges-MAP - - 223 -
E&P Int'l Property Impairments, Suspended Expl.
Well Write-offs & Gas Contract Settlement (43) - (119) -
------ ------ ------ ------
Marathon Group Income From Operations $(132) $94 $938 $932
CAPITAL EXPENDITURES (a) $435 $386 $1,270 $1,038
INVESTMENTS IN EQUITY AFFILIATES-NET 23 36 75 233
OPERATING STATISTICS
Net Liquid Hydrocarbon Production (c):
Domestic 137.0 117.4 134.5 114.8
International (Liftings) 67.5 45.8 61.3 49.4
------ ------ ------ ------
Worldwide 204.5 163.2 195.8 164.2
Net Natural Gas Production (d):
Domestic 775.0 737.4 743.8 721.9
International - Equity 524.0 415.5 441.2 423.1
International - Other (e) 19.6 27.9 22.7 31.7
------- ------- ------- -------
Total Consolidated 1318.6 1180.8 1207.7 1176.7
Equity Affiliate 30.7 41.7 33.2 42.3
------- ------- ------- -------
Worldwide 1349.3 1222.5 1240.9 1219.0
Average Equity Sales Prices (f):
Liquid Hydrocarbons (per Bbl)
Domestic $9.57 $16.25 $10.42 $16.88
International 11.31 18.37 12.24 18.77
Natural Gas (per Mcf)
Domestic $1.72 $2.38 $1.79 $2.20
International 1.72 1.99 1.94 2.00
Natural Gas Sales (d) (g):
Domestic 1208.4 1106.4 1143.8 1136.9
International 543.7 443.4 463.9 454.8
------- ------- ------- -------
Total Consolidated 1752.1 1549.8 1607.7 1591.7
Equity Affiliate 30.7 41.7 33.2 42.3
------- ------- ------- -------
Worldwide 1782.8 1591.5 1640.9 1634.0
Crude Oil Refined (a) (c) 862.1 558.6 883.9 524.6
Refined Products Sold (a) (c) 1238.8 824.6 1197.6 775.4
Matching buy/sell volumes included in refined
products sold (a) (c)........................ 40.7 58.8 39.0 51.0
- --------------
<FN>
(a) In 1998, income from operations, capital expenditures,
refined products sold, crude oil refined and matching buy/sell
volumes include 100 percent of MAP and are not comparable to
prior periods. For further discussion of MAP, see Note 2 to
the Marathon Group Statement Of Operations.
(b) Includes domestic natural gas and crude oil marketing and
transportation, and power generation
(c) Thousands of barrels per day
(d) Millions of cubic feet per day
(e) Represents gas acquired for injection and subsequent
resale
(f) Prices exclude gains and losses from hedging activities
(g) Represents equity, royalty and resale volumes
</TABLE>
MARATHON GROUP OF USX CORPORATION
SUPPLEMENTAL STATISTICS (Continued) (Unaudited)
-----------------------------------
The following unaudited pro forma data for the Marathon Group includes
the pro forma results of operations of Tarragon for the years 1998 and
1997 and fourth quarter 1997; and the Ashland RM&T net assets for
1997, giving effect to the acquisitions as if they had been
consummated at the beginning of the years presented. The pro forma
data is based on historical information and does not necessarily
reflect the actual results that would have occurred, nor is it
necessarily indicative of future results of operations. See Note 2 to
the Marathon Group Statement Of Operations for additional information.
<TABLE>
<CAPTION>
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marathon Group:
Revenues $5,353 $5,736 $22,169 $23,333
Income for reportable segments (a) 178 335 1,199 1,728
Net income (loss)(b) (86) 47 279 457
Net income (loss) per common share:
Basic (.29) .16 .95 1.58
Diluted (.29) .16 .95 1.58
RM&T Operations (c) (d):
Income for reportable segment (a) $147 $140 $896 $869
Thousands of barrels per day:
Crude oil refined 862.1 909.6 883.9 869.3
Refined products sold 1238.8 1234.6 1197.6 1186.9
Matching buy/sell volumes include in refined
products sold 40.7 67.5 39.0 68.6
<FN>
(a) Excludes the inventory market valuation reserve
adjustments, administrative expenses and items not allocated to
reportable segments.
(b) Excluding the inventory market valuation reserve
adjustment, pro forma net income would have been $383 million
for 1998 and $132 million and $619 million for the 1997 fourth
quarter and twelve months, respectively.
(c) Pro forma data is based on results of operations from RM&T
assets contributed to MAP by Marathon and Ashland, purchase
accounting effects and other pro forma adjustments and
reclassifications.
(d) Results for 1998 are actuals. There are no pro forma
effects in 1998, since MAP commenced operations January 1,
1998.
</TABLE>
<TABLE>
<CAPTION>
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $6,659 $5,650 $27,887 $22,375
Dividend and affiliate income 13 44 96 105
Gain on disposal of assets 24 37 82 94
Gain on ownership change in Marathon Ashland
Petroleum LLC - - 245 -
Other income 4 3 25 14
------ ------ ------ ------
Total revenues 6,700 5,734 28,335 22,588
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of sales (excludes items shown below) 4,947 4,095 20,712 16,047
Selling, general and administrative expenses 71 55 304 218
Depreciation, depletion and amortization 303 245 1,224 967
Taxes other than income taxes 1,061 786 3,998 3,178
Exploration expenses 110 60 313 189
Inventory market valuation charges 245 147 267 284
------ ------ ------ ------
Total costs and expenses 6,737 5,388 26,818 20,883
------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (37) 346 1,517 1,705
Net interest and other financial costs 53 75 279 347
Minority interest in income (loss) of Marathon
Ashland Petroleum LLC (33) - 249 -
------ ------ ------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (57) 271 989 1,358
Provision (credit) for estimated income taxes (47) 81 315 450
------ ------ ------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS (10) 190 674 908
------ ------ ------ ------
DISCONTINUED OPERATIONS:
Loss from operations (net of income tax) - - - (1)
Gain on disposal (net of income tax) - 81 - 81
------ ------ ------ ------
INCOME FROM DISCONTINUED OPERATIONS - 81 - 80
------ ------ ------ ------
NET INCOME (LOSS) (10) 271 674 988
Noncash credit from exchange of preferred stock - - - 10
Dividends on preferred stock (2) (3) (9) (13)
------ ------ ------ ------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKS $(12) $268 $665 $985
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
------------------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
APPLICABLE TO MARATHON STOCK:
Net income (loss) $(86) $38 $310 $456
- Per share - basic (.29) .14 1.06 1.59
- diluted (.29) .13 1.05 1.58
Dividends paid per share .21 .19 .84 .76
Weighted average shares, in thousands
- Basic 301,624 288,566 292,876 288,038
- Diluted 301,624 289,275 293,435 290,520
APPLICABLE TO STEEL STOCK:
Net income $74 $149 $355 $449
- Per share - basic .83 1.74 4.05 5.24
- diluted .81 1.64 3.92 4.88
Dividends paid per share .25 .25 1.00 1.00
Weighted average shares, in thousands
- Basic 88,354 86,285 87,508 85,672
- Diluted 95,613 94,274 94,943 94,203
<FN>
The following notes are an integral part of this financial statement.
</TABLE>
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. In August 1998, Marathon Oil Company (Marathon) acquired Tarragon Oil and
Gas Limited (Tarragon), a Canadian oil and gas exploration and production
company, for $1.1 billion. Securityholders of Tarragon received, at their
election, Cdn$14.25 for each Tarragon share, or the economic equivalent in
Exchangeable Shares of an indirect Canadian subsidiary of Marathon, which
are exchangeable solely on a one-for-one basis into USX-Marathon Group
Common Stock. The purchase price included cash payments of $686 million,
issuance of approximately 878,000 Exchangeable Shares valued at $29 million
and the assumption of $345 million in debt. USX accounted for the
acquisition using the purchase method of accounting. Results of operations
include the operations of Marathon Canada Limited, formerly known as
Tarragon, commencing August 12, 1998.
During 1997, Marathon and Ashland Inc. (Ashland) agreed to combine the major
elements of their refining, marketing and transportation (RM&T) operations.
On January 1, 1998, Marathon transferred certain RM&T net assets to Marathon
Ashland Petroleum LLC (MAP), a new consolidated subsidiary. Also on January
1, 1998, Marathon acquired certain RM&T net assets from Ashland in exchange
for a 38% interest in MAP. The acquisition was accounted for under the
purchase method of accounting. The purchase price was determined to be
$1.9 billion, based upon an external valuation. The change in Marathon's
ownership interest in MAP resulted in a gain of $245 million, which is
included in 1998 revenues.
2. Effective October 31, 1997, USX sold its stock in Delhi Gas Pipeline
Corporation and other subsidiaries of USX that comprised all of the Delhi
Group. The 1997 financial results of the Delhi Group have been reclassified
as discontinued operations in the Consolidated Statement of Operations.
3. When USX acquired Marathon in March 1982, crude oil and refined product
prices were at historically high levels. USX established a new LIFO cost
basis for Marathon's inventories by reference to these prices.
Generally accepted accounting principles require that inventories be
reported at the lower of recorded cost or current market value. Marathon
has established an inventory market valuation (IMV) reserve to reduce the
cost basis of its inventories to current market value. Quarterly
adjustments to the IMV reserve result in noncash charges or credits to
income from operations. Decreases in market prices below the cost basis
result in charges to income from operations. Once a reserve has been
established, subsequent increases in prices (up to the cost basis) result in
credits to income from operations.
The charges or credits to income resulting from IMV reserve adjustments
affect the comparability of financial results from period to period. They
also affect comparisons with other energy companies, many of which do not
have such adjustments. Therefore, USX reports separately the effects of IMV
reserve adjustments on financial results. In management's opinion, the
effects of such adjustments should be considered separately when evaluating
operating performance.
When USX acquired the crude oil and refined product inventories associated
with Ashland's RM&T operations in January 1998, a new cost basis was
established for those inventories. The acquisition cost of these
inventories lowered the overall average cost of the combined RM&T
inventories; as a result, the price threshold at which an IMV reserve will
be recorded has also been lowered. This acquisition resulted in a one-time
reduction in the IMV reserve, yielding a net favorable IMV reserve
adjustment in the first quarter of 1998.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
4. In December 1996, USX issued $117 million of debt (notes) indexed to the
common stock price of RTI International Metals, Inc. (RTI) (formerly RMI
Titanium Company). At maturity in February 2000, USX must exchange these
notes for shares of RTI common stock, or redeem the notes for the equivalent
amount of cash. Since USX's investment in RTI is attributed to the U. S.
Steel Group, the indexed debt is also attributed to the U. S. Steel Group.
Generally accepted accounting principles require that indexed debt be
reported at the settlement value. Quarterly adjustments to the carrying
value of this indexed debt result in noncash charges or credits to interest
and other financial costs.
Net interest and other financial costs included credits of $37 million and
$4 million in the fourth quarter of 1998 and 1997, respectively, as a result
of the quarterly adjustments in the carrying value of indexed debt. For the
years 1998 and 1997, such adjustments were credits of $44 million and $10
million, respectively.
USX holds a 26% interest in RTI and accounts for this investment under the
equity method of accounting. Changes in the market value of USX's
investment in RTI generally offset changes in the settlement value of the
indexed debt. However, under the equity method of accounting, USX cannot
recognize in income these corresponding changes in the market value of its
investment in RTI. Such changes will be realized upon disposition of this
investment.
The charges or credits to income resulting from indexed debt adjustments
affect the comparability of financial results from period to period.
Therefore, USX discusses separately the effects of indexed debt adjustments
on financial results. In management's opinion, the effects of such
adjustments should be considered separately when evaluating financial
performance.
Contact: W. E. Keslar
Don H. Herring
(412) 433-6870
FOR IMMEDIATE RELEASE
<TABLE>
<CAPTION>
USX CORPORATION REPORTS DECLINE IN FOURTH QUARTER
AND 1998 U. S. STEEL GROUP RESULTS DUE TO RECORD IMPORTS
Earnings Highlights
(Dollars in millions except per share data)
4Q 4Q
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income adjusted for special
items $59 $141 $315 $417
- per diluted share $.63 $1.52 $3.40 $4.51
Net income $76 $152 $364 $452
Net income per diluted share $.81 $1.64 $3.92 $4.88
Revenues $1,357 $1,838 $6,283 $6,941
</TABLE>
PITTSBURGH, January 22, 1999 -- USX-U. S. Steel Group
(NYSE: X) reported fourth quarter 1998 adjusted net income of
$59 million, or 63 cents per diluted share, compared to $141
million, or $1.52 per diluted share in the fourth quarter
1997. Revenues were $1.4 billion in fourth quarter 1998
compared to $1.8 billion in the same period of 1997.
U. S. Steel Group recorded fourth quarter 1998 net
income of $76 million, or 81 cents per diluted share.
Results included a $23 million aftertax reduction to interest
expense as a result of adjusting the carrying value of
indexed debt (see note 2 to the attached U. S. Steel Group
statement of operations), partially offset by a $6 million
aftertax charge related to a voluntary early retirement
program. Fourth quarter 1997 net income of $152 million, or
$1.64 per diluted share, included a gain on the sale of a
plate mill and a reduction to interest expense related to
indexed debt. The favorable aftertax effect of these special
items was $11 million.
Fourth quarter 1998 segment income for U. S. Steel
operations was $29 million, or $ 12 per ton, which included a
$10 million pretax charge related to a voluntary early
retirement program. Fourth quarter 1997 income for U. S.
Steel operations was $208 million, or $70 per ton, which
included a $15 million gain on the sale of a plate mill.
Fourth quarter 1998 results were negatively impacted by the
combined effects of a dramatic increase in imported steel and
the decline in demand for tubular products, resulting in
lower average realized prices and a 21 percent decline in U.
S. Steel's fourth quarter shipments. Shipments in fourth
quarter 1998 were 2.3 million net tons, compared to 3.0
million net tons in fourth quarter 1997. In response to
market conditions, operating levels were reduced to a less
efficient 76 percent of raw steel capability in fourth
quarter 1998, versus 99 percent in the comparable 1997
quarter.
For the year 1998, U. S. Steel Group net income
adjusted for special items was $315 million, or $3.40 per
diluted share, compared to $417 million, or $4.51 per diluted
share in 1997. Revenues in 1998 were $6.3 billion compared
with $6.9 billion in 1997.
For the year 1998, the U. S. Steel Group recorded net
income of $364 million, or $3.92 per diluted share, which
included the following special items: favorable effects of
indexed debt adjustments; blast furnace insurance litigation
recoveries; a favorable foreign tax adjustment; and a charge
for the voluntary early retirement program. The net
favorable aftertax effect of these special items was $49
million. For the year 1997, the U. S. Steel Group recorded
net income of $452 million, or $4.88 per diluted share, which
included the following special items: blast furnace insurance
recoveries; a gain on the plate mill sale; favorable effects
of indexed debt adjustments; and unfavorable environmental
accrual adjustments. The net favorable aftertax effect of
these special items was $35 million.
Segment income for l998 for U. S. Steel operations was
$330 million, or $31 per ton, on shipments of 10.7 million
net tons. These results included approximately $30 million
for the blast furnace insurance litigation recoveries and a
$10 million charge for the voluntary early retirement
program. This compares with 1997 income for U. S. Steel
operations of $618 million, or $53 per ton, on shipments of
11.6 million net tons. These 1997 results included $40
million in blast furnace insurance recoveries, a $15 million
gain on the plate mill sale, and a net charge of $9 million
for environmental accrual adjustments.
Commenting on the l998 results, USX Board Chairman
Thomas J. Usher said, "During the first half of l998, the U.
S. Steel Group achieved solid financial results comparable to
the record 1997 pace. However, in mid-l998 imported steel,
including unprecedented volumes at predatory prices, began
flooding U. S. markets. As a result, the Group's shipments,
average steel prices and operating levels suffered
dramatically throughout the remainder of the year."
In an attempt to stem the tide of imports, U. S. Steel
joined an industry-labor coalition and filed trade cases for
hot rolled products against Japan, Russia and Brazil in
September. "As a result of this action," added Usher, "the
U. S. International Trade Commission (ITC), in its
preliminary determination, found the domestic steel industry
was being threatened with material injury as a result of
imports of hot-rolled carbon sheet products from these three
countries. This preliminary determination of injury is
subject to further investigation by the ITC and U.S.
Department of Commerce. In addition, the Department of
Commerce is expected to announce its preliminary
determination on anti-dumping duties on February 12, l999."
In early January 1999, the Clinton Administration sent
a congressionally mandated report to Congress outlining its
plan for responding to the increase in steel imports. "Unfortunately,
the Administration's Plan was extremely disappointing and fell
far short of what will be required to rectify the import
crisis and the extreme hardship it is imposing on the
domestic steel industry, its workers and their communities,"
said Usher. "Through the coalition, we will continue to work
with the Administration and Congress in seeking immediate
actions to restore fair trade."
Added Usher, "The flood of imports caused U. S. Steel
to curtail production to less efficient levels at all
locations in the fourth quarter. One blast furnace remained
idle at Gary Works. Raw steel production at the Mon Valley
and Fairfield Works continued at levels well below
capability. In addition, sections of the plant were idled at
Fairless Works and one of five taconite pellet production
lines in Minnesota was idled."
To reduce costs, a voluntary early retirement program
was offered to certain nonunion employees in November. Based
on the acceptance by approximately 400 employees, a $10
million pretax charge was recorded in fourth quarter 1998
results. Most of the retirements will occur by March 31,
1999.
Looking ahead, Usher said, "It is uncertain at this
time how soon the import crisis will be resolved. Steel
consumption in the U.S. remains strong entering 1999. With
current world conditions, the import problem is far broader
than hot-rolled products from three countries and we continue
to evaluate new trade cases against these and other nations
covering a number of products."
******
Statements of Operation and Supplemental Statistics for
the U. S. Steel Group and a Consolidated Statement of
Operations for USX Corporation are attached.
For more information on USX Corporation and U. S. Steel
Group, visit our websites at www.usx.com or www.ussteel.com.
<TABLE>
U. S. STEEL GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
------------------------------------
<CAPTION>
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $1,342 $1,779 $6,184 $6,814
Income from affiliates - 30 46 69
Gain on disposal of assets 15 29 54 57
Other income (loss) - - (1) 1
------ ------ ------ ------
Total revenues 1,357 1,838 6,283 6,941
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of sales (excludes items shown below) 1,207 1,487 5,410 5,762
Selling, general and administrative
expenses (credits) (51) (37) (201) (137)
Depreciation, depletion and amortization 63 78 283 303
Taxes other than income taxes 43 58 212 240
------ ------ ------ ------
Total costs and expenses 1,262 1,586 5,704 6,168
------ ------ ------ ------
INCOME FROM OPERATIONS 95 252 579 773
Net interest and other financial costs (18) 17 42 87
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 113 235 537 686
Provision for estimated income taxes 37 83 173 234
------ ------ ------ ------
NET INCOME 76 152 364 452
Noncash credit from exchange of preferred stock - - - 10
Dividends on preferred stock (2) (3) (9) (13)
------ ------ ------ ------
NET INCOME APPLICABLE TO STEEL STOCK $74 $149 $355 $449
====== ====== ====== ======
STEEL STOCK DATA:
Net income per share
- Basic $.83 $1.74 $4.05 $5.24
- Diluted .81 1.64 3.92 4.88
Dividends paid per share .25 .25 1.00 1.00
Weighted average shares, in thousands
- Basic 88,354 86,285 87,508 85,672
- Diluted 95,613 94,274 94,943 94,203
<FN>
The following notes are an integral part of this financial statement.
</TABLE>
U. S. STEEL GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT
--------------------------------------
1.The statement of operations of the U. S. Steel Group includes the
results of operations for the businesses of USX other than
businesses included in the Marathon Group and a portion of USX's
net financial costs, general and administrative costs and income
taxes attributed to the groups in accordance with USX's accounting
and tax allocation policies. This statement should be read in
connection with the consolidated statement of operations of USX.
2.In December 1996, USX issued $117 million of debt (notes) indexed
to the common stock price of RTI International Metals, Inc. (RTI)
(formerly RMI Titanium Company). At maturity in February 2000, USX
must exchange these notes for shares of RTI common stock, or redeem
the notes for the equivalent amount of cash. Since USX's
investment in RTI is attributed to the U. S. Steel Group, the
indexed debt is also attributed to the U. S. Steel Group.
Generally accepted accounting principles require that indexed debt
be reported at the settlement value. Quarterly adjustments to the
carrying value of this indexed debt result in noncash charges or
credits to interest and other financial costs.
Net interest and other financial costs included credits of $37
million and $4 million in the fourth quarter of 1998 and 1997,
respectively, as a result of the quarterly adjustments in the
carrying value of indexed debt. For the years 1998 and 1997, such
adjustments were credits of $44 million and $10 million,
respectively.
USX holds a 26% interest in RTI and accounts for this investment
under the equity method of accounting. Changes in the market value
of USX's investment in RTI generally offset changes in the
settlement value of the indexed debt. However, under the equity
method of accounting, USX cannot recognize in income these
corresponding changes in the market value of its investment in RTI.
Such changes will be realized upon disposition of this investment.
The charges or credits to income resulting from indexed debt
adjustments affect the comparability of financial results from
period to period. Therefore, USX discusses separately the effects
of indexed debt adjustments on financial results. In management's
opinion, the effects of such adjustments should be considered
separately when evaluating financial performance.
<TABLE>
<CAPTION>
U.S. STEEL GROUP OF USX CORPORATION
SUPPLEMENTAL STATISTICS (Unaudited)
-----------------------------------
($ in Millions)
Fourth Quarter Year
Ended Ended
December 31 December 31
1998 1997(e) 1998 1997(e)
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES $1,357 $1,838 $6,283 $6,941
INCOME FROM OPERATIONS
U. S. Steel Operations(a) $29 $208 $330 $618
Unallocated:
Pension credits 93 78 373 313
Administrative expenses (4) (7) (24) (33)
Costs related to former business activities(b)(23) (27) (100) (125)
---- ---- ---- ----
Total U. S. Steel Group $95 $252 $579 $773
PENSION COSTS INCLUDED IN U. S. STEEL OPERATIONS $54 $44 $187 $169
CAPITAL EXPENDITURES $82 $85 $310 $261
OPERATING STATISTICS
Steel Shipments (c) 2,342 2,973 10,686 11,643
Raw Steel-Production (c) 2,440 3,193 11,214 12,350
Raw Steel-Capability Utilization (d) 75.6% 99.0% 87.6% 96.5%
- ------------
<FN>
(a) Includes the production and sale of steel
products, coke and taconite pellets; domestic coal
mining; the management of mineral resources;
engineering and consulting services; and equity income
from joint ventures and partially-owned companies, such
as USS/Kobe Steel Company, USS-POSCO Industries, PRO-
TEC Coating Company, Transtar, Inc., and RTI
International Metals, Inc. (formerly RMI Titanium
Company). Also includes results of real estate
development and management, and leasing and financing
activities.
(b) Includes other postretirement benefit costs and
certain other expenses principally attributable to
former business units of the U. S. Steel Group. 1997
results included charges of $9 million related to
environmental accruals and the adoption of SOP 96-1.
(c) Thousands of net tons.
(d) Based on annual raw steel production capability of
12.8 million tons.
(e) Certain 1997 amounts have been reclassified to
conform to 1998 classifications.
</TABLE>
<TABLE>
<CAPTION>
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $6,659 $5,650 $27,887 $22,375
Dividend and affiliate income 13 44 96 105
Gain on disposal of assets 24 37 82 94
Gain on ownership change in Marathon Ashland
Petroleum LLC - - 245 -
Other income 4 3 25 14
------ ------ ------ ------
Total revenues 6,700 5,734 28,335 22,588
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of sales (excludes items shown below) 4,947 4,095 20,712 16,047
Selling, general and administrative expenses 71 55 304 218
Depreciation, depletion and amortization 303 245 1,224 967
Taxes other than income taxes 1,061 786 3,998 3,178
Exploration expenses 110 60 313 189
Inventory market valuation charges 245 147 267 284
------ ------ ------ ------
Total costs and expenses 6,737 5,388 26,818 20,883
------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (37) 346 1,517 1,705
Net interest and other financial costs 53 75 279 347
Minority interest in income (loss) of Marathon
Ashland Petroleum LLC (33) - 249 -
------ ------ ------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (57) 271 989 1,358
Provision (credit) for estimated income taxes (47) 81 315 450
------ ------ ------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS (10) 190 674 908
------ ------ ------ ------
DISCONTINUED OPERATIONS:
Loss from operations (net of income tax) - - - (1)
Gain on disposal (net of income tax) - 81 - 81
------ ------ ------ ------
INCOME FROM DISCONTINUED OPERATIONS - 81 - 80
------ ------ ------ ------
NET INCOME (LOSS) (10) 271 674 988
Noncash credit from exchange of preferred stock - - - 10
Dividends on preferred stock (2) (3) (9) (13)
------ ------ ------ ------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKS $(12) $268 $665 $985
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
------------------------------------------------------------
Fourth Quarter Year
Ended Ended
December 31 December 31
(Dollars in millions, except per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
APPLICABLE TO MARATHON STOCK:
Net income (loss) $(86) $38 $310 $456
- Per share - basic (.29) .14 1.06 1.59
- diluted (.29) .13 1.05 1.58
Dividends paid per share .21 .19 .84 .76
Weighted average shares, in thousands
- Basic 301,624 288,566 292,876 288,038
- Diluted 301,624 289,275 293,435 290,520
APPLICABLE TO STEEL STOCK:
Net income $74 $149 $355 $449
- Per share - basic .83 1.74 4.05 5.24
- diluted .81 1.64 3.92 4.88
Dividends paid per share .25 .25 1.00 1.00
Weighted average shares, in thousands
- Basic 88,354 86,285 87,508 85,672
- Diluted 95,613 94,274 94,943 94,203
<FN>
The following notes are an integral part of this financial statement.
</TABLE>
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. In August 1998, Marathon Oil Company (Marathon) acquired Tarragon Oil and
Gas Limited (Tarragon), a Canadian oil and gas exploration and production
company, for $1.1 billion. Securityholders of Tarragon received, at their
election, Cdn$14.25 for each Tarragon share, or the economic equivalent in
Exchangeable Shares of an indirect Canadian subsidiary of Marathon, which
are exchangeable solely on a one-for-one basis into USX-Marathon Group
Common Stock. The purchase price included cash payments of $686 million,
issuance of approximately 878,000 Exchangeable Shares valued at $29 million
and the assumption of $345 million in debt. USX accounted for the
acquisition using the purchase method of accounting. Results of operations
include the operations of Marathon Canada Limited, formerly known as
Tarragon, commencing August 12, 1998.
During 1997, Marathon and Ashland Inc. (Ashland) agreed to combine the major
elements of their refining, marketing and transportation (RM&T) operations.
On January 1, 1998, Marathon transferred certain RM&T net assets to Marathon
Ashland Petroleum LLC (MAP), a new consolidated subsidiary. Also on January
1, 1998, Marathon acquired certain RM&T net assets from Ashland in exchange
for a 38% interest in MAP. The acquisition was accounted for under the
purchase method of accounting. The purchase price was determined to be
$1.9 billion, based upon an external valuation. The change in Marathon's
ownership interest in MAP resulted in a gain of $245 million, which is
included in 1998 revenues.
2. Effective October 31, 1997, USX sold its stock in Delhi Gas Pipeline
Corporation and other subsidiaries of USX that comprised all of the Delhi
Group. The 1997 financial results of the Delhi Group have been reclassified
as discontinued operations in the Consolidated Statement of Operations.
3. When USX acquired Marathon in March 1982, crude oil and refined product
prices were at historically high levels. USX established a new LIFO cost
basis for Marathon's inventories by reference to these prices.
Generally accepted accounting principles require that inventories be
reported at the lower of recorded cost or current market value. Marathon
has established an inventory market valuation (IMV) reserve to reduce the
cost basis of its inventories to current market value. Quarterly
adjustments to the IMV reserve result in noncash charges or credits to
income from operations. Decreases in market prices below the cost basis
result in charges to income from operations. Once a reserve has been
established, subsequent increases in prices (up to the cost basis) result in
credits to income from operations.
The charges or credits to income resulting from IMV reserve adjustments
affect the comparability of financial results from period to period. They
also affect comparisons with other energy companies, many of which do not
have such adjustments. Therefore, USX reports separately the effects of IMV
reserve adjustments on financial results. In management's opinion, the
effects of such adjustments should be considered separately when evaluating
operating performance.
When USX acquired the crude oil and refined product inventories associated
with Ashland's RM&T operations in January 1998, a new cost basis was
established for those inventories. The acquisition cost of these
inventories lowered the overall average cost of the combined RM&T
inventories; as a result, the price threshold at which an IMV reserve will
be recorded has also been lowered. This acquisition resulted in a one-time
reduction in the IMV reserve, yielding a net favorable IMV reserve
adjustment in the first quarter of 1998.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT (Continued)
-------------------------------------------------
4. In December 1996, USX issued $117 million of debt (notes) indexed to the
common stock price of RTI International Metals, Inc. (RTI) (formerly RMI
Titanium Company). At maturity in February 2000, USX must exchange these
notes for shares of RTI common stock, or redeem the notes for the equivalent
amount of cash. Since USX's investment in RTI is attributed to the U. S.
Steel Group, the indexed debt is also attributed to the U. S. Steel Group.
Generally accepted accounting principles require that indexed debt be
reported at the settlement value. Quarterly adjustments to the carrying
value of this indexed debt result in noncash charges or credits to interest
and other financial costs.
Net interest and other financial costs included credits of $37 million and
$4 million in the fourth quarter of 1998 and 1997, respectively, as a result
of the quarterly adjustments in the carrying value of indexed debt. For the
years 1998 and 1997, such adjustments were credits of $44 million and $10
million, respectively.
USX holds a 26% interest in RTI and accounts for this investment under the
equity method of accounting. Changes in the market value of USX's
investment in RTI generally offset changes in the settlement value of the
indexed debt. However, under the equity method of accounting, USX cannot
recognize in income these corresponding changes in the market value of its
investment in RTI. Such changes will be realized upon disposition of this
investment.
The charges or credits to income resulting from indexed debt adjustments
affect the comparability of financial results from period to period.
Therefore, USX discusses separately the effects of indexed debt adjustments
on financial results. In management's opinion, the effects of such
adjustments should be considered separately when evaluating financial
performance.
