1.Does USX need to be restructured at this time? Your answer must include the relative performance of the Steel and Energy segments versus their respective industries and an evaluation of previous USX restructurings.

2.How much should USX be worth if Steel and Energy are broken apart? Include in your answer i) Ichans analysis and ii) comparable company valuation.

3.Provide an analysis and summary of the relative merits of Ichans proposal and the companys proposal.

4.What types of companies is targeted stock most important? Least important?

5.What other options should USX consider besides targeted stock or spin-off?

To ensure maximum value creation for shareholders, what specific provisions should the targeted stock

Exhibit 1: USX: Industry Trends: Financial Ratios and Common Stock Prices for the Steel and Integrated Domestic Oil Indu 1990 1989 1988 1987 1986 1985 1984 1983 1982 Retur (4.9%) 5.4% Retur (4.0%) 4.6% Debt 16.0% 16.0% Dividend yield High4.1% 2.3% Low 2.8% 1.8% Common stock price High $52.61 $60.57 Low $35.47 $47.71 7.4% 5.8% 18.0% 3.3% 3.1% 22.0% (6.5%) (7.5%) 30.0% (2.9%) (2.7%) 29.0% (1.3%) (1.2%) 32.0% (7.5%) (7.8%) 32.0% (8.2%) (8.1%) 31.0% 1.2% 0.9% 0.3% 0.2% 4.2% 2.7% 2.4% 2.0% 3.1% 2.0% 3.6% 2.5% 8.7% 5.4% $54.73 $40.84 $51.78 $28.62 $38.08 $24.13 $41.38 $33.38 $52.07 $33.56 $49.70 $34.25 $46.29 $28.41 3.6% 4.5% 30.0% 2.9% 3.6% 30.0% 1.5% 2.0% 30.0% 3.4% 3.3% 27.0% 6.2% 6.2% 19.0% 6.2% 5.8% 18.0% 6.9% 6.1% 21.0% 5.5% 4.5% 5.4% 3.8% 6.6% 5.3% 6.9% 5.4% 6.0% 4.9% 6.2% 4.7% 7.8% 5.3% $568.66 $466.50 $638.45 $446.61 $448.98 $362.41 $469.13 $369.30 $415.53 $339.76 $368.06 $278.14 $325.83 $221.06 Steel Integrated Domestic Oil Retur 3.3% 4.5% Retur 3.4% 5.0% Debt 29.0% 29.0% Dividend yield High4.8% 5.3% Low 4.1% 3.8% Common stock price High $762.79 $729.18 Low $648.46 $528.88 Definition of measurements: * "Return on total assets" means primary earnings from continuing operations, less preferred dividends, divided by total assets. * "Return on sales" means primary earnings from continuing operations, less preferred dividends, divided by total sales. * "Debt to total assets" means long-term debt (excluding current portion) divided by total assets. * "Dividend yield" means common stock dividend divided by stock price. * "Common stock price" refers to a Standard & Poor's index for each industry. Note: There are about eight companies included in the Standard & Poor's "Steel" index; USX was included through 1986. There are about eleven companies included in the Standard & Poor's "Integrated Domestic Oil" Index; USX was included starting in 1987. Source: "Standard & Poor's Analyst's Handbook" (annual editions); some calculations are by casewriter. tegrated Domestic Oil Industries, 1980-1990 1981 1980 5.7% 4.7% 19.0% 3.2% 2.7% 21.0% 7.2% 5.2% 7.9% 5.8% $60.94 $44.33 $51.40 $37.91 8.9% 7.1% 19.0% 9.3% 7.0% 18.0% 5.1% 3.6% 4.6% 2.3% $422.73 $295.89 $503.96 $258.52 total assets. sales. h 1986. There are about eleven Exhibit 2 USX: Trends, 1980-1990 ($ millions, except per share amounts) 1990 1989 1988 1987 1986 1985 1984 1983 1982 20,659 18,717 16,877 14,836 14,938 19,283 19,104 17,523 18,907 17,268 17,500 19,474 19,557 21,823 18,446 18,989 19,314 19,432 5,330 5,741 5,963 6,618 5,697 5,348 6,261 7,164 6,843 1,304 1,336 1,369 1,332 1,559 1,294 1,241 1,169 1,072 800 907 686 141 (1,925) 288 374 (1,245) (383) 1.40 1.40 1.25 1.20 1.20 1.10 1.00 1.00 1.75 37.50 29.63 39.50 28.88 34.38 26.00 39.38 21.00 28.75 14.50 33.00 24.38 33.25 22.00 31.00 19.63 30.13 16.00 Total sales Total assets Long-term debt Depreciati on, depletion, & amort. Earnings (losses) from continuin g ops. Common stock dividend Common stock price Hig h Low Note: 1986 and 1983 earnings include pretax restructuring charges of $1,457 million and $1,149 million, respectively. Reestructuring charges (credits) in o years are not material. Statistics are presented as reported in each year and do not reflect subsequent restatements. Source: Company Annual Reports 1981 1980 13,941 12,492 13,316 11,748 2,340 2,401 571 524 1,077 505 2.00 1.60 35.25 23.38 25.88 16.25 structuring charges (credits) in other Exhibit 3 USX: Segment Sales Information ($ million) Unaffiliate d Between customers segments Total Energy # # # # # # # ### ### ### ### ### ### ### 30 55 66 63 68 82 105 14,616 12,264 9,949 10,078 8,963 12,074 12,314 # # # # # # # ### ### ### ### ### ### ### 8 6 3 10 128 320 409 5,473 5,730 5,807 3,673 3,708 5,929 5,916 Steel Diversified businesses # # # # # # # 608 784 ### ### ### ### ### 106 125 714 909 399 301 348 653 670 1,589 1,536 2,811 3,831 4,046 Corporate eliminations # # # # # # # ### ### ### ### ### ### ### ### ### ### ### ### ### ### Total consolidated # # # # # ### ### ### ### ### ### ### ### ### ### # ### # ### ### ### Note: Intersegment sales and transfers are, for the most part, accounted for at commercial prices. Source: Company Annual Reports Exhibit 5 USX Financial Data on Comparable Energy and Steel Companies ($ millions except per share data) Steel Companies Armco 1990 1989 Bethlehem Steel 1990 1989 Energy Com Inland Steel 1990 1989 Amerada Hess 1990 1989 Atlantic Richfield 1990 Revenues Restructu ring charges Operating profit EBITDA Net income from continuin g operation s Net income including discontinu ed 1,735 2,422 4,899 5,251 3,870 4,147 7,081 5,679 19,896 0 43 550 105 0 0 0 0 0 77 117 116 173 (443) (137) 267 592 2 121 231 362 706 1,450 618 1,164 2,568 4,290 (63) 202 (487) 219 (48) 113 483 476 1,685 (98) 157 (463) 246 (48) 113 483 476 2,008 2,532 2,348 5,997 Operation s and extraordin ary items Long-term debt (at year-end) Preferred stock (at year-end) Per share 367 423 590 656 692 578 93 93 308 320 339 339 Net inco me fro m con tinu ing ope rati ons (0.71) Net inco me incl udin g disc onti nue d ope rati ons and extr aor dina ry ite ms (1.10) Divi den ds on com mo n stoc 0.40 k 2.28 (6.45) 2.93 (1.41) 3.15 5.96 5.87 10.20 1.78 (6.45) 2.93 (1.41) 3.15 5.96 5.87 12.15 0.30 0.40 0.20 1.40 1.40 0.60 0.60 5.00 13.500 9.500 21.125 10.625 28.500 15.375 36.375 20.875 48.500 31.375 56.000 42.875 51.875 31.000 ### ### 10.750 14.875 18.500 10.98 15.56 22.37 Common stock Hig 11.250 h Low 3.875 At end of year 5.125 Boo k valu e per shar 9.54 24.75 41.27 33.75 43.00 46.375 38.34 48.750 31.69 123.625 44.83 # of shar es o/s at year end (mill ions ) 88.5 88.4 75.9 75.2 30.9 34.7 81.0 80.8 158.9 Note: "Operating profit" excludes interest expense and income, income taxes, income from equity investments, gain or loss on assets sales, and minority Source: Company Annual Reports and Bloomberg r share data) Energy Companies Atlantic Richfield 1989 Phillips Petroleum 1990 1989 16,815 13,975 Unocal 1990 1989 12,492 11,808 11,353 0 0 0 0 0 2,209 3,957 1,435 2,243 1,073 2,179 625 1,649 685 1,558 1,949 541 219 401 358 779 219 401 260 3,839 3,939 4,047 3,887 1,949 5,313 11.26 2.18 0.90 1.71 1.53 11.26 3.13 0.90 1.71 1.11 4.50 1.03 0.94 0.70 0.60 ### 80.375 31.125 22.500 30.125 19.125 34.500 24.625 31.250 18.875 ### 26.125 25.250 26.250 29.750 39.64 10.51 8.74 10.87 9.83 164.2 258.7 243.9 234.5 234.0 s on assets sales, and minority interest; it includes, however, restructuring charges. Exhibit 6 USX: Balance Sheets, 1989-1990 ($ millions) USX - Marathon Group December 31 1990 1989 USX - Steel Group December 31 1990 1989 Assets Assets Current assets Current assets Cas h and cash equi vale nts Rec eiva bles Rec eiva ble fro m U.S. Stee l Gro up Inve ntor ies Oth er curr ent aset s 193 490 721 557 - 31 1,336 1,203 107 100 2,357 2,381 Cas h and cash equi vale nts Rec eiva bles Rec eiva ble fro m the Mar ath on Gro Inve ntor ies Long-term receivable s & other investmen ts USX Consolidated December 31 1990 1989 Assets Current assets 70 296 Cash 263 786 535 373 Recei 1,249 914 Inven 2,032 1,751 Other 109 100 240 - 696 548 1,541 1,217 773 887 Long-term Total3,653 current asets 3,551 1,158 1,414 Long-term receivable s & other investmen ts Property, plant, and equipmen t, less accum. deprec. of $6,614 and $6,995 Prepaid pensions Other noncurren t assets Property, plant, and equipmen t, less accum. deprec. of $5,595 and $5,353 385 8,836 202 151 11,931 527 2,748 Deferred income tax 9,428 benefits Prepaid pensions 161 Other noncurren t assets 125 12,622 Liabilities Current liabilities Current liabilities 106 12 1,601 1,353 72 70 Not es pay able Acc oun ts pay able Payr oll and ben efits pay able 11,584 11,995 574 454 190 Prepaid pe 656 351 66 64 Other nonc 217 189 5,582 Liabilities Not es pay able Acc oun ts pay able Payr oll and ben efits pay able - 2,567 Property, 5,499 17,268 Total assets 17,500 Liabilities Current liabilities 32 4 Notes 138 16 600 646 Accou 2,196 1,983 171 205 Payro 243 275 Accr ued taxe s Pay able to U.S. Stee l Gro up Accr ued inte rest Lon gter m deb t due with in one Long-term debt Deferred income taxes Deferred credits and other liabilities 293 240 539 - Accr ued taxe s Pay able to the Mar ath on Gro up Accr ued inte rest 122 213 Accru 415 752 31 Accru 113 118 31 31 Long- 197 134 64 47 - 82 87 133 87 2,527 2,148 3,926 4,348 1,480 1,894 373 550 891 874 8,306 8,940 3,338 3,444 Lon gter m deb t due with in one Long-term debt Deferred income taxes Deferred credits and other liabilities Total3,302 current liabilities 3,278 1,020 1,177 Long-term 5,330 5,741 1,404 1,393 Deferred i 1,503 1,320 - 1,264 1,424 23 Deferred cr 11,399 Total liabilities11,763 Stockholders' Equity Stockhol ders' Equity Stockhol ders' Equity Preferred stock Preferred stock Common equity Other equity adjustme nts 83 295 3,550 3,391 (8) Common equity 25 Preferred s 108 382 87 Common sto 269 269 2,228 1,976 Treasury c (462) (422) (4) (9) (8) Additional 3,520 3,512 3,625 3,682 2,244 11,931 12,622 2,055 Net income Other equi 2,451 (17) 2,008 (12) 5,582 5,499 Other equity adjustme nts 5,737 Total5,869 stockholders' equity 17,268 Total liabilities17,500 & stockholders' equity Casewriter Note: The financial statements presented in Exhibit 6 are taken from the USX Corporation shareholder proxy statement dated April 10, 1991. These statements therefore reflect additional analysis that the company did after the case Notes: * For the consolidated company, the average number of common shares outstanding in 1990, 1989, and 1988 was 255 million, Source: Proxy Statement, April 10, 1991. USX: Income Statements, 1988-1990 ($ millions) (cont'd) Exhibit 6 Marathon Group 1990 1989 1988 U.S. Steel Group 1990 1989 1988 12,264 9,949 6,073 6,509 6,996 20,659 18,717 16,877 Operating costs Cost 10,485 8,507 Inven (140) (145) Selli 383 378 Depre 1,026 1,029 Taxes 1,552 1,400 Explo 229 165 Restr Total 13,535 operating 11,334 costs 6,699 (23) 352 1,006 1,291 191 9,516 5,216 (97) 278 201 5,598 5,378 (23) 307 207 5,869 5,510 (45) 363 236 (50) 6,014 15,671 (140) 286 1,304 1,753 229 19,103 13,827 (145) 355 1,336 1,607 167 17,147 12,141 (23) 307 1,369 1,527 191 (50) 15,462 Operating Other Inter Inter 433 62 92 (499) 475 58 102 (198) 640 292 93 (238) 982 147 107 (332) 1,556 37 136 (513) 1,570 406 222 (840) 1,415 209 199 (831) Total inco 779 571 88 Less provision for U.S. and foreign incom 271 146 35 437 787 904 1,216 1,358 992 127 247 201 398 393 236 Net incom Divid 508 (14) 425 (41) 53 (39) 310 (4) 540 (17) 703 (31) 818 (18) 965 (58) 756 (70) Net income 494 384 14 306 523 672 800 907 686 Sales 14,616 1,081 (21) 34 (315) 930 114 129 (602) USX Consolidated 1990 1989 1988 Notes: + The large "other income" figures for 1989 and 1988 were due primarily to gains on disposals of assets. + Selling, general & admin. expenses were negative for U.S. Steel because of large offsetting credits from earnings on pension plan assets. + Corporate general and administrative expenses were $92 million, $93 million, and $76 million in 1990, 1989, and 1988, respectively. Source: Proxy Statement, April 10, 1991; and internal company source