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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2022
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission file number
1-16811
United States Steel Corporation
(Exact name of registrant as specified in its charter)
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Delaware |
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25-1897152 |
(State or other jurisdiction of incorporation) |
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(IRS Employer Identification No.) |
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600 Grant Street, |
Pittsburgh, |
PA |
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15219-2800 |
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(Address of principal executive offices) |
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(Zip Code) |
(412) 433-1121
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
United States Steel Corporation Common Stock |
X |
New York Stock Exchange |
United States Steel Corporation Common Stock |
X |
Chicago Stock Exchange |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
x
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company”, and "emerging growth company" in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer |
x
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Accelerated filer |
o
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Non-accelerated filer |
o
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. |
o
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes ☐
No
x
Common stock outstanding at October 24, 2022 – 234,268,944
shares
INDEX
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PART I – FINANCIAL INFORMATION |
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Item 1. |
Financial Statements: |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II – OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2 |
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Item 3 |
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Item 4. |
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Item 5. |
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Item 6. |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains information that may constitute
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend the
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in those sections.
Generally, we have identified such forward-looking statements by
using the words “believe,” “expect,” “intend,” “estimate,”
“anticipate,” “project,” “target,” “forecast,” “aim,” “should,”
“plan,” “goal,” “future,” “will,” "may" and similar expressions or
by using future dates in connection with any discussion of, among
other things, the construction or operation of new or existing
facilities or operating capabilities, the timing, size and form of
share repurchase transactions, operating performance, trends,
events or developments that we expect or anticipate will occur in
the future, statements relating to volume changes, share of sales
and earnings per share changes, anticipated cost savings, potential
capital and operational cash improvements, changes in global supply
and demand conditions and prices for our products, international
trade duties and other aspects of international trade policy,
statements regarding our future strategies, products and
innovations, statements regarding our greenhouse gas emissions
reduction goals and statements expressing general views about
future operating results. However, the absence of these words or
similar expressions does not mean that a statement is not
forward-looking. Forward-looking statements are not historical
facts, but instead represent only the Company’s beliefs regarding
future events, many of which, by their nature, are inherently
uncertain and outside of the Company’s control. It is possible that
the Company’s actual results and financial condition may differ,
possibly materially, from the anticipated results and financial
condition indicated in these forward-looking statements. Management
believes that these forward-looking statements are reasonable as of
the time made. However, caution should be taken not to place undue
reliance on any such forward-looking statements because such
statements speak only as of the date when made. Our Company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In addition,
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from our Company's historical experience and our present
expectations or projections. These risks and uncertainties include,
but are not limited to, the risks and uncertainties described in
this report and in “Item 1A. Risk Factors” in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021 and
those described from time to time in our future reports filed with
the Securities and Exchange Commission.
References in this Quarterly Report on Form 10-Q to (i) "U. S.
Steel," "the Company," "we," "us," and "our" refer to United States
Steel Corporation and its consolidated subsidiaries unless
otherwise indicated by the context, (ii) “Big River Steel” refers
to Big River Steel Holdings LLC and its direct and indirect
subsidiaries unless otherwise indicated by the context and (iii)
”Transtar” refers to Transtar LLC and its direct and indirect
subsidiaries unless otherwise indicated by the
context.
UNITED STATES STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(Dollars in millions, except per share amounts) |
2022 |
2021 |
|
2022 |
2021 |
Net sales: |
|
|
|
|
|
Net sales |
$ |
4,667 |
|
$ |
5,623 |
|
|
$ |
15,304 |
|
$ |
13,676 |
|
Net sales to related parties (Note 19) |
536 |
|
341 |
|
|
1,423 |
|
977 |
|
Total (Note 6) |
5,203 |
|
5,964 |
|
|
16,727 |
|
14,653 |
|
Operating expenses (income): |
|
|
|
|
|
Cost of sales |
4,359 |
|
3,881 |
|
|
12,843 |
|
10,633 |
|
Selling, general and administrative expenses |
95 |
|
108 |
|
|
324 |
|
316 |
|
Depreciation, depletion and amortization |
198 |
|
196 |
|
|
594 |
|
587 |
|
Earnings from investees |
(71) |
|
(57) |
|
|
(202) |
|
(106) |
|
Gain on sale of Transtar (Note 5) |
— |
|
(506) |
|
|
— |
|
(506) |
|
Asset impairment charges (Note 1) |
— |
|
— |
|
|
157 |
|
28 |
|
Gain on equity investee transactions (Note 5) |
— |
|
— |
|
|
— |
|
(111) |
|
Restructuring and other charges (Note 20) |
23 |
|
— |
|
|
57 |
|
37 |
|
Net (gain) loss on sale of assets |
(6) |
|
7 |
|
|
(10) |
|
(8) |
|
Other gains, net |
(9) |
|
(7) |
|
|
(22) |
|
(18) |
|
Total |
4,589 |
|
3,622 |
|
|
13,741 |
|
10,852 |
|
Earnings before interest and income taxes |
614 |
|
2,342 |
|
|
2,986 |
|
3,801 |
|
Interest expense |
38 |
|
75 |
|
|
127 |
|
251 |
|
Interest income |
(15) |
|
(1) |
|
|
(20) |
|
(3) |
|
(Gain) loss on debt extinguishment |
(2) |
|
26 |
|
|
— |
|
282 |
|
Other financial costs |
9 |
|
17 |
|
|
27 |
|
39 |
|
Net periodic benefit income |
(60) |
|
(37) |
|
|
(182) |
|
(97) |
|
Net interest and other financial (benefits) costs |
(30) |
|
80 |
|
|
(48) |
|
472 |
|
Earnings before income taxes |
644 |
|
2,262 |
|
|
3,034 |
|
3,329 |
|
Income tax expense (Note 12) |
154 |
|
260 |
|
|
684 |
|
224 |
|
Net earnings |
490 |
|
2,002 |
|
|
2,350 |
|
3,105 |
|
Less: Net earnings attributable to noncontrolling
interests |
— |
|
— |
|
|
— |
|
— |
|
Net earnings attributable to United States Steel
Corporation |
$ |
490 |
|
$ |
2,002 |
|
|
$ |
2,350 |
|
$ |
3,105 |
|
Earnings per common share (Note 13):
|
|
|
|
|
|
Earnings per share attributable to United States Steel Corporation
stockholders: |
|
|
|
|
|
'-Basic
|
$ |
2.07 |
|
$ |
7.41 |
|
|
$ |
9.33 |
|
$ |
11.80 |
|
'-Diluted
|
$ |
1.85 |
|
$ |
6.97 |
|
|
$ |
8.38 |
|
$ |
11.13 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
UNITED STATES STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(Dollars in millions) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net earnings |
|
$ |
490 |
|
|
$ |
2,002 |
|
|
$ |
2,350 |
|
|
$ |
3,105 |
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
Changes in foreign currency translation adjustments |
|
(92) |
|
|
(26) |
|
|
(220) |
|
|
(50) |
|
Changes in pension and other employee benefit accounts |
|
— |
|
|
15 |
|
|
(2) |
|
|
244 |
|
Changes in derivative financial instruments |
|
18 |
|
|
60 |
|
|
54 |
|
|
9 |
|
Total other comprehensive (loss) income, net of tax |
|
(74) |
|
|
49 |
|
|
(168) |
|
|
203 |
|
Comprehensive income including noncontrolling interest |
|
416 |
|
|
2,051 |
|
|
2,182 |
|
|
3,308 |
|
Comprehensive income attributable to noncontrolling
interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Comprehensive income attributable to United States Steel
Corporation |
|
$ |
416 |
|
|
$ |
2,051 |
|
|
$ |
2,182 |
|
|
$ |
3,308 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
UNITED STATES STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
September 30, 2022 |
|
December 31, 2021 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents (Note 7) |
|
$ |
3,364 |
|
|
$ |
2,522 |
|
Receivables, less allowance of $37 and $44
|
|
1,859 |
|
|
1,968 |
|
Receivables from related parties (Note 19) |
|
176 |
|
|
121 |
|
Inventories (Note 8) |
|
2,759 |
|
|
2,210 |
|
Other current assets |
|
294 |
|
|
331 |
|
Total current assets |
|
8,452 |
|
|
7,152 |
|
Long-term restricted cash (Note 7) |
|
123 |
|
|
76 |
|
Operating lease assets |
|
154 |
|
|
185 |
|
Property, plant and equipment |
|
20,437 |
|
|
19,676 |
|
Less accumulated depreciation and depletion |
|
12,459 |
|
|
12,422 |
|
Total property, plant and equipment, net |
|
7,978 |
|
|
7,254 |
|
Investments and long-term receivables, less allowance of $4 in both
periods
|
|
832 |
|
|
694 |
|
Intangibles, net (Note 9) |
|
488 |
|
|
519 |
|
Deferred income tax benefits (Note 12) |
|
— |
|
|
32 |
|
Goodwill (Note 9) |
|
920 |
|
|
920 |
|
Other noncurrent assets |
|
1,011 |
|
|
984 |
|
Total assets |
|
$ |
19,958 |
|
|
$ |
17,816 |
|
Liabilities |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and other accrued liabilities |
|
$ |
3,116 |
|
|
$ |
2,809 |
|
Accounts payable to related parties (Note 19) |
|
164 |
|
|
99 |
|
Payroll and benefits payable |
|
482 |
|
|
425 |
|
Accrued taxes |
|
245 |
|
|
365 |
|
Accrued interest |
|
45 |
|
|
68 |
|
Current operating lease liabilities |
|
51 |
|
|
58 |
|
Short-term debt and current maturities of long-term debt (Note
15) |
|
59 |
|
|
28 |
|
Total current liabilities |
|
4,162 |
|
|
3,852 |
|
Noncurrent operating lease liabilities |
|
112 |
|
|
136 |
|
Long-term debt, less unamortized discount and debt issuance costs
(Note 15) |
|
3,863 |
|
|
3,863 |
|
Employee benefits |
|
204 |
|
|
235 |
|
Deferred income tax liabilities (Note 12) |
|
588 |
|
|
122 |
|
Deferred credits and other noncurrent liabilities |
|
499 |
|
|
505 |
|
Total liabilities |
|
9,428 |
|
|
8,713 |
|
Contingencies and commitments (Note 21) |
|
|
|
|
Stockholders’ Equity (Note 17): |
|
|
|
|
Common stock (282,441,077 and 279,522,227 shares issued) (Note
13)
|
|
282 |
|
|
280 |
|
Treasury stock, at cost (48,172,133 shares and 15,708,839
shares)
|
|
(1,054) |
|
|
(334) |
|
Additional paid-in capital |
|
5,179 |
|
|
5,199 |
|
Retained earnings |
|
5,867 |
|
|
3,534 |
|
Accumulated other comprehensive income (Note 18) |
|
163 |
|
|
331 |
|
Total United States Steel Corporation stockholders’
equity |
|
10,437 |
|
|
9,010 |
|
Noncontrolling interests |
|
93 |
|
|
93 |
|
Total liabilities and stockholders’ equity |
|
$ |
19,958 |
|
|
$ |
17,816 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
UNITED STATES STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
(Dollars in millions) |
|
2022 |
|
2021 |
Increase (decrease) in cash, cash equivalents and restricted
cash |
|
|
|
|
Operating activities: |
|
|
|
|
Net earnings |
|
$ |
2,350 |
|
|
$ |
3,105 |
|
Adjustments to reconcile to net cash provided by operating
activities: |
|
|
|
|
Depreciation, depletion and amortization |
|
594 |
|
|
587 |
|
Gain on sale of Transtar (Note 5) |
|
— |
|
|
(506) |
|
Asset impairment charges (Note 1) |
|
157 |
|
|
28 |
|
Gain on equity investee transactions |
|
— |
|
|
(111) |
|
Restructuring and other charges (Note 20) |
|
57 |
|
|
37 |
|
Loss on debt extinguishment |
|
— |
|
|
282 |
|
Pensions and other postretirement benefits |
|
(164) |
|
|
(88) |
|
Deferred income taxes (Note 12) |
|
561 |
|
|
59 |
|
Net gain on sale of assets |
|
(10) |
|
|
(8) |
|
Equity investee earnings, net of distributions received |
|
(181) |
|
|
(106) |
|
Changes in: |
|
|
|
|
Current receivables |
|
(36) |
|
|
(1,281) |
|
Inventories |
|
(697) |
|
|
(539) |
|
Current accounts payable and accrued expenses |
|
188 |
|
|
968 |
|
Income taxes receivable/payable |
|
(88) |
|
|
137 |
|
All other, net |
|
19 |
|
|
41 |
|
Net cash provided by operating activities |
|
2,750 |
|
|
2,605 |
|
Investing activities: |
|
|
|
|
Capital expenditures |
|
(1,138) |
|
|
(460) |
|
Acquisition of Big River Steel, net of cash acquired (Note
5) |
|
— |
|
|
(625) |
|
Proceeds from sale of Transtar (Note 5) |
|
— |
|
|
627 |
|
Proceeds from cost reimbursement government grants (Note
21) |
|
53 |
|
|
— |
|
Proceeds from sale of assets |
|
28 |
|
|
25 |
|
Other investing activities |
|
(8) |
|
|
(3) |
|
Net cash used in investing activities |
|
(1,065) |
|
|
(436) |
|
Financing activities: |
|
|
|
|
Repayment of short-term debt (Note 15) |
|
— |
|
|
(180) |
|
Revolving credit facilities - borrowings, net of financing costs
(Note 15) |
|
— |
|
|
50 |
|
Revolving credit facilities - repayments (Note 15) |
|
— |
|
|
(911) |
|
Issuance of long-term debt, net of financing costs (Note
15) |
|
291 |
|
|
862 |
|
Repayment of long-term debt (Note 15) |
|
(375) |
|
|
(2,719) |
|
Net proceeds from public offering of common stock (Note
22) |
|
— |
|
|
790 |
|
Common stock repurchased (Note 22) |
|
(699) |
|
|
— |
|
Proceeds from government incentives (Note 21) |
|
82 |
|
|
— |
|
Other financing activities |
|
(51) |
|
|
(12) |
|
Net cash used in financing activities |
|
(752) |
|
|
(2,120) |
|
Effect of exchange rate changes on cash |
|
(46) |
|
|
(15) |
|
Net increase in cash, cash equivalents and restricted
cash |
|
887 |
|
|
34 |
|
Cash, cash equivalents and restricted cash at beginning of year
(Note 7) |
|
2,600 |
|
|
2,118 |
|
Cash, cash equivalents and restricted cash at end of period (Note
7) |
|
$ |
3,487 |
|
|
$ |
2,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
Change in accrued capital expenditures |
|
$ |
373 |
|
|
$ |
58 |
|
U. S. Steel common stock issued for employee/non-employee director
stock plans |
|
46 |
|
|
28 |
|
Capital expenditures funded by finance lease borrowings |
|
43 |
|
|
11 |
|
Export Credit Agreement (ECA) financing |
|
— |
|
|
23 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis
of Presentation and Significant Accounting Policies
The year-end Consolidated Balance Sheet data was derived from
audited statements but does not include all disclosures required
for complete financial statements by accounting principles
generally accepted in the United States of America (U.S. GAAP). The
other information in these condensed financial statements is
unaudited but, in the opinion of management, reflects all
adjustments necessary for a fair statement of the results for the
periods covered, including assessment of certain accounting matters
using all available information such as consideration of forecasted
financial information in context with other information reasonably
available to us. However, our future assessment of our current
expectations, including consideration of the unknown future impacts
of the COVID-19 pandemic, could result in material impacts to our
consolidated financial statements in future reporting periods. All
such adjustments are of a normal recurring nature unless disclosed
otherwise. These condensed financial statements, including notes,
have been prepared in accordance with the applicable rules of the
Securities and Exchange Commission and do not include all of the
information and disclosures required by U.S. GAAP for complete
financial statements. Additional information is contained in the
United States Steel Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 2021, which should be read
in conjunction with these condensed financial
statements.
Asset Impairments
In the second quarter 2022, the Company recognized charges of
approximately $151 million for the write-off of the blast
furnaces and related fixed assets for the permanent idling of the
iron making process at the Company's Great Lakes Works facility,
which had been idled on an indefinite basis during 2020. The coil
finishing process at Great Lakes Works continues to operate and
remains a component of the Company's operating plans.
In May 2019, U. S. Steel announced that it planned to construct a
new endless casting and rolling facility at its Edgar Thomson Plant
in Braddock, Pennsylvania, and a cogeneration facility at its
Clairton Plant in Clairton, Pennsylvania, both part of the
Company's Mon Valley Works. The Company purchased certain equipment
for this project before delaying groundbreaking in March 2020 in
response to COVID-19. In April 2021, the Company determined not to
pursue this project, re-evaluated the use of the already purchased
equipment, and subsequently transferred suitable equipment to the
Mini Mill segment to be used on the new three-million-ton mini mill
flat-rolled facility under construction in Osceola, Arkansas (BR2).
Total impairments of $56 million were recognized for this
project in 2021, $28 million of which was recognized during
the nine-month period ended September 30, 2021.
There were no triggering events that required an impairment
evaluation of our long-lived asset groups as of September 30,
2022.
2. New
Accounting Standards
In October 2021, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update 2021-08,
Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers
(ASU 2021-08). ASU 2021-08 requires that an entity recognize and
measure contract assets and contract liabilities acquired in a
business combination in accordance with Topic 606,
Revenue from Contracts with Customers.
ASU 2021-08 is effective for public companies with fiscal years
beginning after December 15, 2022, and interim periods within those
fiscal years, with early adoption of all amendments in the same
period permitted. The Company will apply the guidance prescribed by
ASU 2021-08 to business combinations, if any, that take place
subsequent to the effective date.
In September 2022, the FASB issued Accounting Standards Update
2022-04,
Disclosure of Supplier Finance Program Obligations
(ASU 2022-04). ASU 2022-04 requires that an entity disclose certain
information about supplier finance programs used in connection with
the purchase of goods and services. ASU 2022-04 is effective for
all entities with fiscal years beginning after December 15, 2022,
and interim periods within those fiscal years, except for the
amendment on roll forward information, which is effective for
fiscal years beginning after December 15, 2023. Early adoption of
all amendments is permitted. The Company is currently assessing the
impact of ASU 2022-04.
3. Recently
Adopted Accounting Standards
In August 2020, the FASB issued Accounting Standards Update
2020-06,
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity
(ASU 2020-06). ASU 2020-06 simplifies the accounting for certain
financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts on an
entity’s own equity. ASU 2020-06 also requires entities to provide
expanded disclosures about the terms and features of convertible
instruments and amends certain guidance in ASC 260 on the
computation of earnings per share (EPS) for convertible instruments
and contracts on an entity’s own equity. The update requires
entities to use the If-Converted Method for calculating diluted
earnings per share, retiring the previous alternative calculation
of the Treasury Stock Method for calculating diluted earnings per
share for convertible instruments.
U. S. Steel has adopted this guidance using the modified
retrospective implementation method as of January 1, 2022. The
cumulative effect of the changes made to our consolidated January
1, 2022, balance sheet for the adoption of ASU 2020-06 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
Balance as of December 31, 2021 |
Adjustments due to ASU 2020-06 |
Balance as of January 1, 2022 |
Condensed Consolidated Balance Sheet |
|
|
|
Assets |
|
|
|
Deferred income tax benefits |
32 |
4 |
36 |
|
|
|
|
Liabilities |
|
|
|
Long-term debt, less unamortized discount and debt issuance
costs |
3,863 |
74 |
3,937 |
Deferred income tax liabilities |
122 |
(15) |
107 |
|
|
|
|
Equity |
|
|
|
Additional paid-in capital |
5,199 |
(78) |
5,121 |
Retained Earnings |
3,534 |
22 |
3,556 |
In November 2021, the FASB issued Accounting Standards Update
2021-10,
Disclosures by Business Entities about Government Assistance
(ASU 2021-10). ASU 2021-10 provides expanded annual disclosure
requirements for business entities that account for a transaction
with a government by applying a grant or contribution accounting
model by analogy. U. S. Steel adopted this guidance effective
January 1, 2022. The adoption of this guidance did not have a
material impact on the Company's Condensed Consolidated Financial
Statements.
4. Segment
Information
U. S. Steel has four reportable segments: North American
Flat-Rolled (Flat-Rolled), Mini Mill, U. S. Steel Europe (USSE);
and Tubular Products (Tubular). The Mini Mill segment reflects the
acquisition of Big River Steel after the purchase of the remaining
equity interest on January 15, 2021 (see Note 5 for further
details) and Big River 2 (BR2) which is under construction in
Osceola, Arkansas. The Tubular segment includes the electric arc
furnace at our Fairfield Tubular Operations in Fairfield, Alabama.
The results of our real estate businesses and of our former
railroad business are combined and disclosed in the Other
category.
The results of segment operations for the three months ended
September 30, 2022 and 2021 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) Three Months Ended September 30, 2022 |
Customer
Sales |
Intersegment
Sales |
Net
Sales |
Earnings
from
investees |
Earnings (loss) before interest and income taxes |
Flat-Rolled |
$ |
3,248 |
|
$ |
104 |
|
$ |
3,352 |
|
$ |
59 |
|
$ |
505 |
|
Mini Mill |
602 |
|
60 |
|
662 |
|
— |
|
1 |
|
USSE |
925 |
|
2 |
|
927 |
|
— |
|
(32) |
|
Tubular |
425 |
|
— |
|
425 |
|
12 |
|
155 |
|
Total reportable segments |
5,200 |
|
166 |
|
5,366 |
|
71 |
|
629 |
|
Other |
3 |
|
— |
|
3 |
|
— |
|
21 |
|
Reconciling Items and Eliminations |
— |
|
(166) |
|
(166) |
|
— |
|
(36) |
|
Total |
$ |
5,203 |
|
$ |
— |
|
$ |
5,203 |
|
$ |
71 |
|
$ |
614 |
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
|
|
|
|
Flat-Rolled |
$ |
3,541 |
|
$ |
36 |
|
$ |
3,577 |
|
$ |
53 |
|
$ |
1,015 |
|
Mini Mill |
949 |
|
156 |
|
1,105 |
|
— |
|
424 |
|
USSE |
1,246 |
|
2 |
|
1,248 |
|
— |
|
394 |
|
Tubular |
216 |
|
6 |
|
222 |
|
4 |
|
— |
|
Total reportable segments |
5,952 |
|
200 |
|
6,152 |
|
57 |
|
1,833 |
|
Other |
12 |
|
9 |
|
21 |
|
— |
|
(2) |
|
Reconciling Items and Eliminations |
— |
|
(209) |
|
(209) |
|
— |
|
511 |
|
Total |
$ |
5,964 |
|
$ |
— |
|
$ |
5,964 |
|
$ |
57 |
|
$ |
2,342 |
|
The results of segment operations for the nine months ended
September 30, 2022 and 2021 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) Nine Months Ended September 30, 2022 |
Customer
Sales |
Intersegment
Sales |
Net
Sales |
Earnings
from
investees |
Earnings (loss) before interest and income taxes |
Flat-Rolled |
$ |
9,926 |
|
$ |
303 |
|
$ |
10,229 |
|
$ |
175 |
|
$ |
1,795 |
|
Mini Mill |
2,158 |
|
337 |
|
2,495 |
|
— |
|
549 |
|
USSE |
3,518 |
|
10 |
|
3,528 |
|
— |
|
512 |
|
Tubular |
1,115 |
|
5 |
|
1,120 |
|
27 |
|
339 |
|
Total reportable segments |
16,717 |
|
655 |
|
17,372 |
|
202 |
|
3,195 |
|
Other |
10 |
|
— |
|
10 |
|
— |
|
16 |
|
Reconciling Items and Eliminations |
— |
|
(655) |
|
(655) |
|
— |
|
(225) |
|
Total |
$ |
16,727 |
|
$ |
— |
|
$ |
16,727 |
|
$ |
202 |
|
$ |
2,986 |
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
|
|
|
|
|
Flat-Rolled |
$ |
8,804 |
|
$ |
142 |
|
$ |
8,946 |
|
$ |
90 |
|
$ |
1,740 |
|
Mini Mill |
2,158 |
|
360 |
|
2,518 |
|
— |
|
840 |
|
USSE |
3,122 |
|
4 |
|
3,126 |
|
— |
|
706 |
|
Tubular |
534 |
|
13 |
|
547 |
|
10 |
|
(29) |
|
Total reportable segments |
14,618 |
|
519 |
|
15,137 |
|
100 |
|
3,257 |
|
Other |
35 |
|
65 |
|
100 |
|
6 |
|
20 |
|
Reconciling Items and Eliminations |
— |
|
(584) |
|
(584) |
|
— |
|
524 |
|
Total |
$ |
14,653 |
|
$ |
— |
|
$ |
14,653 |
|
$ |
106 |
|
$ |
3,801 |
|
A summary of total assets by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
September 30, 2022 |
|
December 31, 2021 |
Flat-Rolled |
|
$ |
7,534 |
|
|
$ |
7,337 |
|
Mini Mill(a)
|
|
5,660 |
|
|
4,715 |
|
USSE |
|
6,019 |
|
|
6,111 |
|
Tubular |
|
1,122 |
|
|
1,054 |
|
Total reportable segments |
|
$ |
20,335 |
|
|
$ |
19,217 |
|
Other |
|
$ |
130 |
|
|
$ |
88 |
|
Corporate, reconciling items, and eliminations(b)
|
|
(507) |
|
|
(1,489) |
|
Total assets |
|
$ |
19,958 |
|
|
$ |
17,816 |
|
(a)Includes
assets of $1.1 billion and $347 million at
September 30, 2022 and December 31, 2021, respectively,
related to BR2 under construction in Osceola,
Arkansas.
(b)The
majority of corporate, reconciling items, and eliminations is
comprised of cash and the elimination of intersegment
amounts.
The following is a schedule of reconciling items to consolidated
earnings before interest and income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(In millions) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Items not allocated to segments: |
|
|
|
|
|
|
|
|
Restructuring and other charges (Note 20) |
|
$ |
(23) |
|
|
$ |
— |
|
|
$ |
(57) |
|
|
$ |
(37) |
|
Asset impairment charges (Note 1) |
|
— |
|
|
— |
|
|
(157) |
|
|
(28) |
|
Other charges, net |
|
(13) |
|
|
12 |
|
|
(11) |
|
|
(36) |
|
(Losses) gains on assets sold and previously held
investments |
|
— |
|
|
(7) |
|
|
— |
|
|
119 |
|
Gain on sale of Transtar (Note 5) |
|
— |
|
|
506 |
|
|
— |
|
|
506 |
|
Total reconciling items |
|
$ |
(36) |
|
|
$ |
511 |
|
|
$ |
(225) |
|
|
$ |
524 |
|
5. Acquisitions and
Dispositions
Big River Steel Acquisition
On January 15, 2021, U. S. Steel purchased the remaining equity
interest in Big River Steel for approximately $625 million in
cash net of $36 million and $62 million in cash and
restricted cash received, respectively, and the assumption of
liabilities of approximately $50 million. There were
acquisition related costs of approximately $9 million recorded
in 2021.
Prior to the closing of the acquisition on January 15, 2021, U. S.
Steel accounted for its 49.9% equity interest in Big River Steel
under the equity method. As a result of the acquisition, the
Company adjusted the carrying amount of its previously held equity
investment to its fair value of $770 million which resulted in
a gain of approximately $111 million. The gain was recorded in
gain on equity investee transactions in the Condensed Consolidated
Statement of Operations.
The following unaudited pro forma information for U. S. Steel
includes the results of the Big River Steel acquisition as if it
had been consummated on January 1, 2020. The unaudited pro forma
information is based on historical information and is adjusted for
amortization of intangible asset, property, plant and equipment and
debt fair value step-ups. The pro forma information does not
include any anticipated cost savings or other effects of the
integration of Big River Steel. Accordingly, the unaudited pro
forma information does not necessarily reflect the actual results
that would have occurred, nor is it necessarily indicative of
future results of operations.
|
|
|
|
|
|
|
Nine Months Ended September 30, |
(in
millions) |
2021 |
Net sales |
$ |
14,725 |
|
Net earnings (loss) |
$ |
3,034 |
|
Transtar Disposition
On July 28, 2021, U. S. Steel completed the sale of 100 percent of
its equity interests in its wholly-owned short-line railroad,
Transtar, LLC (Transtar) to an affiliate of Fortress Transportation
and Infrastructure Investors, LLC. The
Company received net cash proceeds of $627 million, subject to
certain customary adjustments as set forth in the Membership
Interest Purchase Agreement, and recognized a pretax gain of
approximately $506 million in 2021. In connection with the
closing of the transaction, the Company entered into certain
ancillary agreements including a railway services agreement,
providing for continued rail services for its Gary and Mon Valley
Works facilities, and a transition services agreement. Because
Transtar does not represent a significant component of U. S.
Steel's business and does not constitute a reportable business
segment, its results through the date of disposition are reported
in the Other category. See Note 4 for further details.
Other Transactions
In December 2021, the Company entered into an agreement to sell
certain assets related to a component of its flat-roll business. As
a result of this commitment, the Company has recognized a total of
$119 million in restructuring-related charges,
$89 million during the fourth quarter 2021 and
$30 million during the nine months ended September 30, 2022.
These charges are expected to be paid out on a long-term basis.
This transaction is expected to result in a gain upon closure,
which is subject to customary closing conditions.
6. Revenue
Revenue is generated primarily from contracts to produce, ship and
deliver steel products, and to a lesser extent, raw materials sales
such as iron ore pellets and coke by-products and real estate
sales. Generally, U. S. Steel’s performance obligations
are satisfied and revenue is recognized when title transfers to our
customer for product shipped or services are provided. Revenues are
recorded net of any sales incentives. Shipping and other
transportation costs charged to customers are treated as
fulfillment activities and are recorded in both revenue and cost of
sales at the time control is transferred to the customer. Costs
related to obtaining sales contracts are incidental and are
expensed when incurred. Because customers are invoiced at the time
title transfers and U. S. Steel’s right to consideration
is unconditional at that time, U. S. Steel does not maintain
contract asset balances. Additionally, U. S. Steel does not
maintain contract liability balances, as performance obligations
are satisfied prior to customer payment for product.
U. S. Steel offers industry standard payment
terms.
The following tables disaggregate our revenue by product for each
of the reportable business segments for the three months and nine
months ended September 30, 2022 and 2021,
respectively:
Net Sales by Product (In millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
Flat-Rolled |
Mini Mill |
USSE |
Tubular |
Other |
Total |
Semi-finished |
$ |
48 |
|
$ |
— |
|
$ |
27 |
|
$ |
— |
|
$ |
— |
|
$ |
75 |
|
Hot-rolled sheets |
622 |
|
332 |
|
389 |
|
— |
|
— |
|
1,343 |
|
Cold-rolled sheets |
974 |
|
92 |
|
73 |
|
— |
|
— |
|
1,139 |
|
Coated sheets |
1,127 |
|
176 |
|
376 |
|
— |
|
— |
|
1,679 |
|
Tubular products |
— |
|
— |
|
20 |
|
418 |
|
— |
|
438 |
|
All Other
(a)
|
477 |
|
2 |
|
40 |
|
7 |
|
3 |
|
529 |
|
Total |
$ |
3,248 |
|
$ |
602 |
|
$ |
925 |
|
$ |
425 |
|
$ |
3 |
|
$ |
5,203 |
|
(a)
Consists primarily of sales of raw materials and coke making
by-products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2021 |
Flat-Rolled |
Mini Mill |
USSE |
Tubular |
Other |
Total |
Semi-finished |
$ |
— |
|
$ |
— |
|
$ |
35 |
|
$ |
— |
|
$ |
— |
|
$ |
35 |
|
Hot-rolled sheets |
887 |
|
571 |
|
657 |
|
— |
|
— |
|
2,115 |
|
Cold-rolled sheets |
1,037 |
|
159 |
|
145 |
|
— |
|
— |
|
1,341 |
|
Coated sheets |
1,216 |
|
219 |
|
356 |
|
— |
|
— |
|
1,791 |
|
Tubular products |
— |
|
— |
|
21 |
|
217 |
|
— |
|
238 |
|
All Other
(a)
|
401 |
|
— |
|
32 |
|
(1) |
|
12 |
|
444 |
|
Total |
$ |
3,541 |
|
$ |
949 |
|
$ |
1,246 |
|
$ |
216 |
|
$ |
12 |
|
$ |
5,964 |
|
(a)
Consists primarily of sales of raw materials and coke making
by-products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2022 |
Flat-Rolled |
Mini Mill |
USSE |
Tubular |
Other |
Total |
Semi-finished |
$ |
177 |
|
$ |
— |
|
$ |
90 |
|
$ |
— |
|
$ |
— |
|
$ |
267 |
|
Hot-rolled sheets |
1,846 |
|
1,238 |
|
1,618 |
|
— |
|
— |
|
4,702 |
|
Cold-rolled sheets |
3,053 |
|
307 |
|
335 |
|
— |
|
— |
|
3,695 |
|
Coated sheets |
3,687 |
|
606 |
|
1,315 |
|
— |
|
— |
|
5,608 |
|
Tubular products |
— |
|
— |
|
56 |
|
1,103 |
|
— |
|
1,159 |
|
All Other
(a)
|
1,163 |
|
7 |
|
104 |
|
12 |
|
10 |
|
1,296 |
|
Total |
$ |
9,926 |
|
$ |
2,158 |
|
$ |
3,518 |
|
$ |
1,115 |
|
$ |
10 |
|
$ |
16,727 |
|
(a)
Consists primarily of sales of raw materials and coke making
by-products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2021 |
Flat-Rolled |
Mini Mill |
USSE |
Tubular |
Other |
Total |
Semi-finished |
$ |
12 |
|
$ |
— |
|
$ |
84 |
|
$ |
— |
|
$ |
— |
|
$ |
96 |
|
Hot-rolled sheets |
1,990 |
|
1,271 |
|
1,604 |
|
— |
|
— |
|
4,865 |
|
Cold-rolled sheets |
2,710 |
|
365 |
|
330 |
|
— |
|
— |
|
3,405 |
|
Coated sheets |
3,114 |
|
519 |
|
988 |
|
— |
|
— |
|
4,621 |
|
Tubular products |
— |
|
— |
|
45 |
|
523 |
|
— |
|
568 |
|
All Other
(a)
|
978 |
|
3 |
|
71 |
|
11 |
|
35 |
|
1,098 |
|
Total |
$ |
8,804 |
|
$ |
2,158 |
|
$ |
3,122 |
|
$ |
534 |
|
$ |
35 |
|
$ |
14,653 |
|
(a)
Consists primarily of sales of raw materials and coke making
by-products.
|
7. Cash,
Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash
equivalents and restricted cash reported within U. S. Steel's
Condensed Consolidated Balance Sheets that sum to the total of the
same amounts shown in the Condensed Consolidated Statement of Cash
Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
September 30, 2022 |
|
|
|
December 31, 2021 |
|
September 30, 2021 |
Cash and cash equivalents |
|
$ |
3,364 |
|
|
|
|
$ |
2,522 |
|
|
$ |
2,044 |
|
Restricted cash in other current assets |
|
— |
|
|
|
|
2 |
|
|
17 |
|
Restricted cash in other noncurrent assets |
|
123 |
|
|
|
|
76 |
|
|
91 |
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents
and restricted cash |
|
$ |
3,487 |
|
|
|
|
$ |
2,600 |
|
|
$ |
2,152 |
|
Amounts included in restricted cash represent cash balances which
are legally or contractually restricted, primarily for electric arc
furnace construction, environmental liabilities and other capital
projects and insurance purposes.
8. Inventories
The LIFO method is the predominant method of inventory costing for
our Flat-Rolled and Tubular segments. The FIFO and moving average
methods are the predominant inventory costing methods for our Mini
Mill segment and the FIFO method is the predominant inventory
costing method for our USSE segment. At September 30, 2022 and
December 31, 2021, the LIFO method accounted for 40 percent
and 46 percent of total inventory values,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
September 30, 2022 |
|
December 31, 2021 |
Raw materials |
$ |
1,225 |
|
|
$ |
713 |
|
Semi-finished products |
1,043 |
|
|
1,056 |
|
Finished products |
435 |
|
|
388 |
|
Supplies and sundry items |
56 |
|
|
53 |
|
Total |
$ |
2,759 |
|
|
$ |
2,210 |
|
Current acquisition costs were estimated to exceed the above
inventory values by $1.4 billion and $896 million at
September 30, 2022 and December 31, 2021, respectively.
Cost of sales decreased and earnings before interest and income
taxes increased by $1 million and $8 million for the three and nine
months ended September 30, 2022, respectively, as a result of
liquidation of LIFO inventories. Cost of sales decreased and
earnings before interest and
income taxes increased by $5 million and $12 million for the three
and nine months ended September 30, 2021, respectively, as a
result of liquidation of LIFO inventories.
9. Intangible
Assets and Goodwill
Intangible assets that are being amortized on a straight-line basis
over their estimated useful lives are detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2022 |
|
As of December 31, 2021 |
(In millions) |
Useful
Lives |
|
Gross
Carrying
Amount |
Accumulated
Amortization |
Net
Amount |
|
Gross
Carrying
Amount |
Accumulated
Amortization |
Net
Amount |
Customer relationships |
22 Years
|
|
$ |
413 |
|
$ |
32 |
|
$ |
381 |
|
|
$ |
413 |
|
$ |
18 |
|
$ |
395 |
|
Patents |
5-15 Years
|
|
17 |
|
12 |
|
5 |
|
|
17 |
|
11 |
|
6 |
|
Energy Contract |
2 Years
|
|
54 |
|
27 |
|
27 |
|
|
54 |
|
11 |
|
43 |
|
Total amortizable intangible assets |
|
|
$ |
484 |
|
$ |
71 |
|
$ |
413 |
|
|
$ |
484 |
|
$ |
40 |
|
$ |
444 |
|
Total estimated amortization expense for the remainder of 2022 is
$11 million. We expect approximately $120 million in total
amortization expense from 2023 through 2027 and approximately $282
million in remaining amortization expense thereafter.
The carrying amount of acquired water rights with indefinite lives
as of September 30, 2022 and December 31, 2021 totaled
$75 million.
Below is a summary of goodwill by segment for the three months
ended September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flat-Rolled |
Mini Mill |
USSE |
Tubular |
Total |
Balance at December 31, 2021 |
$ |
— |
|
$ |
916 |
|
$ |
4 |
|
$ |
— |
|
$ |
920 |
|
Additions |
— |
|
— |
|
— |
|
— |
|
— |
|
Balance at September 30, 2022 |
$ |
— |
|
$ |
916 |
|
$ |
4 |
|
$ |
— |
|
$ |
920 |
|
10. Pensions
and Other Benefits
The following table reflects the components of net periodic benefit
(income) cost for the three months ended September 30, 2022 and
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
(In millions) |
2022 |
|
2021 |
|
2022 |
|
2021 |
Service cost |
$ |
11 |
|
|
$ |
12 |
|
|
$ |
2 |
|
|
$ |
3 |
|
Interest cost |
40 |
|
|
41 |
|
|
13 |
|
|
13 |
|
Expected return on plan assets |
(89) |
|
|
(91) |
|
|
(23) |
|
|
(21) |
|
Amortization of prior service credit |
— |
|
|
— |
|
|
(6) |
|
|
(7) |
|
Amortization of actuarial net loss (gain) |
18 |
|
|
29 |
|
|
(13) |
|
|
(6) |
|
Net periodic benefit (income) cost, excluding below |
(20) |
|
|
(9) |
|
|
(27) |
|
|
(18) |
|
Multiemployer plans |
18 |
|
|
19 |
|
|
— |
|
|
— |
|
Settlement, termination and curtailment losses
(a)
|
— |
|
|
5 |
|
|
— |
|
|
— |
|
Net periodic benefit (income) cost |
$ |
(2) |
|
|
$ |
15 |
|
|
$ |
(27) |
|
|
$ |
(18) |
|
(a) During the three months ended September 30, 2021, pension
benefits incurred settlement charges of approximately
$5 million due to lump sum payment to certain
individuals.
|
The following table reflects the components of net periodic benefit
(income) cost for the nine months ended September 30, 2022 and
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
(In millions) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Service cost |
|
$ |
33 |
|
|
$ |
40 |
|
|
$ |
6 |
|
|
$ |
9 |
|
Interest cost |
|
118 |
|
|
122 |
|
|
37 |
|
|
37 |
|
Expected return on plan assets |
|
(267) |
|
|
(269) |
|
|
(68) |
|
|
(61) |
|
Amortization of prior service cost |
|
1 |
|
|
1 |
|
|
(19) |
|
|
(21) |
|
Amortization of actuarial net loss (gain) |
|
54 |
|
|
104 |
|
|
(39) |
|
|
(18) |
|
Net periodic benefit (income) cost, excluding below |
|
(61) |
|
|
(2) |
|
|
(83) |
|
|
(54) |
|
Multiemployer plans |
|
56 |
|
|
56 |
|
|
— |
|
|
— |
|
Settlement, termination and curtailment losses
(a)
|
|
4 |
|
|
8 |
|
|
2 |
|
|
— |
|
Net periodic benefit (income) cost |
|
$ |
(1) |
|
|
$ |
62 |
|
|
$ |
(81) |
|
|
$ |
(54) |
|
(a) During the nine months ended September 30, 2022, pension
and other postretirement benefits incurred special termination
charges of approximately $6 million due to workforce
restructuring. During the nine months ended September 30, 2021, the
pension plan incurred settlement and curtailment charges of
approximately $8 million due to lump sum payments to certain
individuals and the sale of Transtar.
|
Employer Contributions
During the first nine months of 2022, U. S. Steel made cash
payments of $56 million to the Steelworkers Pension Trust and $1
million of pension payments not funded by trusts.
During the first nine months of 2022, cash payments of $21 million
were made for other postretirement benefit payments not funded by
trusts.
Company contributions to defined contribution plans totaled $11
million for both the three months ended September 30, 2022 and
2021. Company contributions to defined contribution plans totaled
$34 million and $32 million for the nine months ended
September 30, 2022 and 2021, respectively.
Transtar Disposition
In connection with the Transtar sale, U. S. Steel remeasured its
main pension benefit plan as of June 30, 2021. As a result of the
remeasurement, the net pension obligation was reduced by
$255 million.
11. Stock-Based
Compensation Plans
U. S. Steel has outstanding stock-based compensation awards that
were granted by the Compensation & Organization Committee of
the Board of Directors, or its designee, under the 2005 Stock
Incentive Plan (2005 Plan) and the 2016 Omnibus Incentive
Compensation Plan, as amended and restated (Omnibus Plan). The
Company's stockholders approved the Omnibus Plan and authorized the
Company to issue up to 32,700,000 shares of U. S. Steel common
stock under the Omnibus Plan. While the awards that were previously
granted under the 2005 Plan remain outstanding, all future awards
will be granted under the Omnibus Plan. As of September 30,
2022, there were 8,832,318 shares available for future grants under
the Omnibus Plan.
Recent grants of stock-based compensation consist of restricted
stock units, total stockholder return (TSR) performance awards and
return on capital employed (ROCE) performance awards. Shares of
common stock under the Omnibus Plan are issued from authorized, but
unissued stock. The following table is a summary of the awards made
under the Omnibus Plan during the first nine months of 2022 and
2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Grant Details |
|
Shares(a)
|
Fair Value(b)
|
|
Shares(a)
|
Fair Value(b)
|
|
|
|
|
|
|
|
Restricted Stock Units |
|
1,225,820 |
|
$ |
24.26 |
|
|
1,831,880 |
|
$ |
19.65 |
|
Performance Awards
(c)
|
|
|
|
|
|
|
TSR |
|
236,520 |
|
$ |
28.41 |
|
|
306,930 |
|
$ |
19.46 |
|
ROCE
(d)
|
|
408,870 |
|
$ |
23.59 |
|
|
485,900 |
|
$ |
17.92 |
|
Performance-Based Restricted Stock Units |
|
83,951 |
|
$ |
23.07 |
|
|
— |
|
$ |
— |
|
(a)
The share amounts shown in this table do not reflect an adjustment
for estimated forfeitures.
(b)
Represents the per share weighted average for all grants during the
period.
(c)
The number of performance awards shown represents the target share
grant of the award.
(d)
A portion of ROCE awards granted in 2022 and 2021
are not shown in the table because they were granted in
cash.
U. S. Steel recognized pretax stock-based compensation expense in
the amount of $13 million and $15 million in the three-month
periods ended September 30, 2022 and 2021, respectively and
$45 million and $41 million in the first nine months of 2022 and
2021, respectively.
As of September 30, 2022, total future compensation expense
related to nonvested stock-based compensation arrangements was $58
million, and the weighted average period over which this expense is
expected to be recognized is approximately 19 months.
Stock Options
Compensation expense for stock options is recorded over the vesting
period based on the fair value on the date of grant, as calculated
by U. S. Steel using the Black-Scholes model and the assumptions
listed below. Awards generally vest ratably over a
three-year service period and have a term of ten years.
Stock options are generally issued at the average market price of
the underlying stock on the date of the grant. Upon exercise of
stock options, shares of U. S. Steel stock are issued from treasury
stock or from authorized, but unissued common stock. There have
been no stock options granted since 2017 other than the 171,000
performance-based stock options granted in December 2021, which are
further described below.
The expected annual dividends per share are based on the latest
annualized dividend rate at the date of grant; the expected life in
years is determined primarily from historical stock option exercise
data; the expected volatility is based on the historical volatility
of U. S. Steel stock; and the risk-free interest rate is based on
the U.S. Treasury strip rate for the expected life of the
option.
The 171,000 performance-based stock options granted in December
2021 do not become vested and exercisable until the Company's
20-trading day average closing stock price meets or exceeds the
following stock price hurdles during the
seven-year period beginning on the grant date, as
follows:
|
|
|
|
|
|
|
|
|
20-trading day Average Closing Stock Price Achievement During
7-Year Period Beginning on Grant Date(a)
|
|
Percentage of Performance-Based Stock Options
Exercisable |
$ |
35.00 |
|
|
33.33 |
% |
$ |
45.00 |
|
|
33.33 |
% |
$ |
55.00 |
|
|
33.34 |
% |
(a)
The $35.00 tranche vested in April 2022.
Stock Awards
Restricted stock units awarded as part of annual grants generally
vest ratably over three years. Their fair value is the average
market price of the underlying common stock on the date of grant.
Restricted stock units granted in connection with new-hire or
retention grants generally cliff vest three years from the date of
the grant.
TSR performance awards may vest at varying levels at the end of a
three-year performance period if U. S. Steel's total
stockholder return compared to the total stockholder return of a
peer group of companies meets specified performance criteria with
each year in the three-year performance period weighted at 20
percent and the full three-year period weighted at 40 percent. TSR
performance awards can vest at between zero and 200 percent of the
target award. The fair value of the TSR performance awards is
calculated using a Monte Carlo simulation.
ROCE performance awards may vest at the end of a three-year
performance period contingent upon meeting the specified ROCE
performance metric. For the 2022 ROCE performance awards, each year
in the three-year performance period is weighted at 20 percent and
the full three-year period is weighted at 40 percent of the total
award. ROCE performance awards can vest between zero and 200
percent of the target award. The fair value of the ROCE performance
awards is the average market price of the underlying common stock
on the date of grant.
In December 2021 and August 2022, special performance-based
restricted stock unit awards (PSUs) were granted to members of the
Company’s executive leadership team. Shares are earned based on the
achievement of certain pre-set quantitative performance criteria
during the
four-year performance period, January 1, 2022 through
December 31, 2025. Shares may vest following the expiration of the
Performance Period if the Company satisfies the performance
criteria.
The Chief Executive Officer was granted PSUs that vest with the
following, equally weighted, performance metrics: (i) EBITDA margin
expansion, (ii) greenhouse gas emissions intensity reduction, (iii)
asset portfolio optimization, (iv) leverage metrics and (v)
corporate relative valuation. Other members of the executive
leadership team were granted PSUs that vest with performance
criteria related to: (i) on time and on budget completion of BR2
(30% of the grant), (ii) EBITDA margin expansion (40% of the grant)
and (iii) greenhouse gas emissions intensity reduction (30% of the
grant).
For the PSU awards, a payout is achievable at threshold (50% of
target), target (100% of target) or maximum (200% of target)
performance achievement. Payout amounts will be interpolated
between the threshold, target and maximum amounts.
12. Income
Taxes
Tax provision
For the nine months ended September 30, 2022, and 2021, the
Company recorded a tax provision of $684 million and $224
million, respectively. Additionally, in accordance with the
adoption of ASU 2020-06, the Company recorded an increase in its
long-term state deferred tax asset of $4 million and a
decrease in its long-term federal deferred tax liability of
$15 million in the first quarter of 2022. The tax provisions
for the first nine months of 2022 and 2021 were based on an
estimated annual effective rate, which requires management to make
its best estimate of annual pretax income or loss and discrete
items recognized during the period.
The tax provision for the nine months ended September 30, 2022,
includes an expense of $19 million related to the filing of
the 2021 federal income tax return, as well as an additional
expense of $13 million related to the reduction in the
Pennsylvania corporate net income tax rate which is being phased in
over nine years beginning in 2023.
The tax provision for the nine months ended September 30,
2021, includes a benefit of $514 million for the release of
the domestic valuation allowance recorded against domestic deferred
tax assets that are more likely than not to be realized. During the
second quarter of 2021, the Company evaluated all available
positive and negative evidence, including the impact of
profitability generated from current year operations and future
projections of profitability. As a result, the Company determined
that all of its domestic deferred tax assets were more likely than
not to be realized with the exception of certain of its state net
operating losses and state tax credits and reversed the valuation
allowance against those deferred tax assets
accordingly.
Throughout the year, management regularly updates forecasted annual
pretax results for the various countries in which we operate based
on changes in factors such as prices, shipments, product mix, plant
operating performance and cost estimates. To the extent that actual
2022 pretax results for U.S. and foreign income or loss vary from
estimates applied herein, the actual tax provision or benefit
recognized in 2022 could be materially different from the
forecasted amount used to estimate the tax provision for the nine
months ended September 30, 2022.
In March 2022, the Company and the Arkansas Economic Development
Commission entered into the Recycling Tax Credit Incentive
Agreement, whereby the Company may earn state income tax credits in
an amount equal to 30% of the cost of waste reduction, reuse, or
recycling equipment, subject to meeting the requirements of the
Arkansas Code Ann. Section 26-51-506, for BR2 which is under
construction in Osceola, Arkansas. Documentation supporting the
Company's investment in qualifying equipment must be submitted as
part of an application for certification expected to be completed
on or before 2025. In March 2022, the Company received a lump-sum
payment of approximately $82 million as proceeds from the sale
of a portion of expected future tax credits to be earned by the
Company (see Note 21 for additional information). The Company
estimates that it could earn tax credits in excess of
$700 million, exclusive of the amount sold in March 2022,
which the Company will recognize in the year the assets are placed
into service and meet the requirements of Arkansas Code Ann.
Section 26-51-506. Any unused tax credit that cannot be claimed in
a tax year may be carried forward indefinitely by the Company and
applied to its future state tax liability.
On August 16, 2022, H.R. 5376 (commonly called the Inflation
Reduction Act of 2022) was signed into law, which, among other
things, implemented a corporate alternative minimum tax (CAMT) of
15 percent on book income of certain large corporations, a 1
percent excise tax on net stock repurchases and several tax
incentives to promote clean energy. The provision pertaining to an
excise tax on corporate stock repurchases imposes a nondeductible 1
percent excise tax on a publicly traded corporation for the net
value of certain stock that the corporation repurchases. The value
of the repurchases subject to the tax is reduced by the value of
any stock issued by the corporation during the tax year, including
stock issued or provided to the employees. The CAMT imposes a
minimum tax on net income adjusted for certain items prescribed by
the legislation. Both the CAMT and the excise tax provisions of
this legislation are effective for tax years beginning after
December 31, 2022. Although management is currently assessing the
impact of the law change and awaiting guidance from the Department
of Treasury, the Company anticipates being subject to the new CAMT
but does not believe that it will have a material impact on its
Condensed Consolidated Financial Statements.
13. Earnings
and Dividends Per Common Share
Earnings Per Share Attributable to United States Steel Corporation
Stockholders
The effect of dilutive securities on weighted average common shares
outstanding included in the calculation of diluted earnings per
common share for the three and nine months ended September 30,
2022 and September 30, 2021 were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(Dollars in millions, except per share amounts) |
2022 |
2021 |
|
2022 |
2021 |
Earnings attributable to United States Steel Corporation
stockholders: |
|
|
|
|
|
Basic |
$ |
490 |
|
$ |
2,002 |
|
|
$ |
2,350 |
|
$ |
3,105 |
|
Interest expense on Senior Convertible Notes, net of
tax |
3 |
|
— |
|
|
10 |
|
— |
|
Diluted |
$ |
493 |
|
$ |
2,002 |
|
|
$ |
2,360 |
|
$ |
3,105 |
|
Weighted-average shares outstanding (in thousands): |
|
|
|
|
|
Basic |
237,094 |
|
270,175 |
|
|
251,848 |
|
263,209 |
|
Effect of Senior Convertible Notes |
26,194 |
|
12,199 |
|
|
26,194 |
|
11,082 |
|
Effect of stock options, restricted stock units and performance
awards |
2,976 |
|
5,089 |
|
|
3,527 |
|
4,812 |
|
Diluted |
266,264 |
|
287,463 |
|
|
281,569 |
|
279,103 |
|
Earnings per share attributable to United States Steel Corporation
stockholders: |
|
|
|
|
|
Basic |
$ |
2.07 |
|
$ |
7.41 |
|
|
$ |
9.33 |
|
$ |
11.80 |
|
Diluted |
$ |
1.85 |
|
$ |
6.97 |
|
|
$ |
8.38 |
|
$ |
11.13 |
|
Excluded from the computation of diluted earnings per common share
due to their anti-dilutive effect were 1.7 million and
0.7 million outstanding securities granted under the Omnibus
Plan for the three and nine months ended September 30, 2022,
respectively, and 0.6 million and 1.2 million outstanding
securities granted under the Omnibus Plan for the three and nine
months ended September 30, 2021, respectively.
Dividends Paid Per Share
The dividend for each of the first, second and third quarters of
2022 was five cents per common share. The dividend for each of the
first, second and third quarters of 2021 was one cent per common
share.
14. Derivative
Instruments
U. S. Steel uses foreign exchange forward sales contracts (foreign
exchange forwards) with maturities up to 25 months to manage our
currency requirements and exposure to foreign currency exchange
rate fluctuations. The USSE and Flat-Rolled segments use hedge
accounting for their foreign exchange forwards. The Mini Mill
segment has foreign exchange forwards for which hedge accounting
has not been elected; therefore, the changes in the fair value of
their foreign exchange forwards are recognized immediately in the
Consolidated Statements of Operations (mark-to-market
accounting).
U. S. Steel also uses financial swaps to protect from the commodity
price risk associated with purchases of natural gas, zinc, tin,
electricity and iron ore pellets (commodity purchase swaps). We
elected cash flow hedge accounting for commodity purchase swaps for
natural gas, zinc and tin and iron ore pellets and use
mark-to-market accounting for electricity swaps. The commodity
purchase swaps have maturities of up to 15 months.
U. S. Steel has entered into financial swaps that are used to
partially manage the sales price risk of certain hot-rolled coil
sales (sales swaps) and iron ore pellet sales (zero cost collars).
Both the sales swaps and the zero cost collars are accounted for
using hedge accounting and have maturities of up to 3
months.
The table below shows the outstanding swap quantities used to hedge
forecasted purchases and sales as of September 30, 2022 and
September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge Contracts |
Classification |
September 30, 2022 |
|
September 30, 2021 |
Natural gas (in mmbtus) |
Commodity purchase swaps |
59,215,000 |
|
38,661,000 |
Tin (in metric tons) |
Commodity purchase swaps |
885 |
|
1,384 |
Zinc (in metric tons) |
Commodity purchase swaps |
10,666 |
|
12,853 |
Electricity (in megawatt hours) |
Commodity purchase swaps |
547,680 |
|
909,240 |
|
|
|
|
|
Iron ore pellets (in metric tons) |
Zero-cost collars |
432,000 |
|
— |
Hot-rolled coils (in tons) |
Sales swaps |
44,000 |
|
97,320 |
Foreign currency (in millions of euros) |
Foreign exchange forwards |
€ |
292 |
|
|
€ |
290 |
|
Foreign currency (in millions of dollars) |
Foreign exchange forwards |
$ |
118 |
|
|
$ |
9 |
|
Foreign currency (in millions of CAD) |
Foreign exchange forwards |
$ |
4 |
|
|
$ |
— |
|
The following summarizes the fair value amounts included in our
Condensed Consolidated Balance Sheets as of September 30,
2022, and December 31, 2021:
|
|
|
|
|
|
|
|
|
Balance Sheet Location (in millions) |
September 30, 2022 |
December 31, 2021 |
Designated as Hedging Instruments |
|
|
Accounts receivable |
$ |
88 |
|
$ |
42 |
|
Accounts payable |
44 |
|
59 |
|
Investments and long-term receivables |
7 |
|
2 |
|
Other long-term liabilities |
13 |
|
4 |
|
Not Designated as Hedging Instruments |
|
|
Accounts receivable |
20 |
|
5 |
|
Investments and long-term receivables |
5 |
|
5 |
|
The table below summarizes the effect of hedge accounting on
Accumulated Other Comprehensive Income (AOCI) and amounts
reclassified from AOCI into earnings for the three and nine months
ended September 30, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Derivatives in AOCI |
|
|
Amount of Gain (Loss) Recognized in Income |
(In millions) |
Three Months Ended September 30, 2022 |
Three Months Ended September 30, 2021 |
|
Location of Reclassification from AOCI
(a)
|
Three Months Ended September 30, 2022 |
Three Months Ended September 30, 2021 |
Sales swaps |
$ |
9 |
|
$ |
52 |
|
|
Net sales |
$ |
9 |
|
$ |
(60) |
|
Commodity purchase swaps |
2 |
|
20 |
|
|
Cost of sales
(b)
|
46 |
|
14 |
|
Foreign exchange forwards |
13 |
|
8 |
|
|
Cost of sales |
— |
|
1 |
|
(a)
The earnings impact of our hedging instruments substantially
offsets the earnings impact of the related hedged items resulting
in immaterial ineffectiveness.
|
(b)
Costs for commodity purchase swaps are recognized in cost of sales
as products are sold.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Derivatives in AOCI |
|
|
|
Amount of Gain (Loss) Recognized in Income |
(In millions) |
Nine Months Ended September 30, 2022 |
Nine Months Ended September 30, 2021 |
|
Location of Reclassification from AOCI
(a)
|
|
Nine Months Ended September 30, 2022 |
Nine Months Ended September 30, 2021 |
Sales swaps |
$ |
33 |
|
$ |
(71) |
|
|
Net sales |
|
$ |
(29) |
|
$ |
(93) |
|
Commodity purchase swaps |
17 |
|
52 |
|
|
Cost of sales
(b)
|
|
89 |
|
18 |
|
Foreign exchange forwards |
22 |
|
29 |
|
|
Cost of sales |
|
30 |
|
(9) |
|
(a)
The earnings impact of our hedging instruments substantially
offsets the earnings impact of the related hedged items resulting
in immaterial ineffectiveness.
|
(b)
Costs for commodity purchase swaps are recognized in cost of sales
as products are sold.
|
At current contract values, $30 million currently in AOCI as of
September 30, 2022, will be recognized as a decrease in cost
of sales over the next year and $14 million currently in AOCI
as of September 30, 2022, will be recognized as an increase in
net sales over the next year.
The gain recognized for foreign exchange forwards and financial
swaps where hedge accounting was not elected was $18 million
and $12 million for the three and nine months ended
September 30, 2022, respectively. The gain recognized for
sales swaps where hedge accounting was not elected was
$12 million for the three months ended
September 30, 2021, and the loss of $3 million was
recognized in cost of sales for the nine months ended
September 30, 2021.
15. Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
Issuer/Borrower |
Interest
Rates % |
Maturity |
September 30, 2022 |
|
December 31, 2021 |
2037 Senior Notes |
U. S. Steel |
6.650 |
2037 |
274 |
|
|
350 |
|
2029 Senior Secured Notes |
Big River Steel |
6.625 |
2029 |
720 |
|
|
720 |
|
2029 Senior Notes |
U. S. Steel |
6.875 |
2029 |
475 |
|
|
750 |
|
2026 Senior Convertible Notes |
U. S. Steel |
5.000 |
2026 |
350 |
|
|
350 |
|
Environmental Revenue Bonds |
U. S. Steel |
4.125 - 6.750
|
2024 - 2052 |
924 |
|
|
647 |
|
Environmental Revenue Bonds |
Big River Steel |
4.500 - 4.750
|
2049 |
752 |
|
|
752 |
|
Finance leases and all other obligations |
U. S. Steel |
Various |
2022 - 2029 |
96 |
|
|
67 |
|
Finance leases and all other obligations |
Big River Steel |
Various |
2022 - 2031 |
124 |
|
|
122 |
|
Export Credit Agreement |
U. S. Steel |
Variable |
2031 |
136 |
|
|
136 |
|
Credit Facility Agreement |
U. S. Steel |
Variable |
2027 |
— |
|
|
— |
|
Big River Steel ABL Facility |
Big River Steel |
Variable |
2026 |
— |
|
|
— |
|
USSK Credit Agreement |
U. S. Steel Kosice |
Variable |
2026 |
— |
|
|
— |
|
USSK Credit Facility |
U. S. Steel Kosice |
Variable |
2024 |
— |
|
|
— |
|
Total Debt |
|
|
|
3,851 |
|
|
3,894 |
|
Less unamortized discount, premium, and debt issuance
costs |
|
|
|
(71) |
|
|
3 |
|
Less short-term debt, long-term debt due within one year, and
short-term issuance costs |
|
|
|
59 |
|
|
28 |
|
Long-term debt |
|
|
|
$ |
3,863 |
|
|
$ |
3,863 |
|
The following is a summary of debt repayments of certain Senior
Notes and environmental revenue bonds made during the nine months
ended September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
Debt Instrument (in Millions)
|
Date |
Debt Extinguished |
2037 Senior Notes(a)
|
Third quarter 2022 |
$ |
76 |
|
2029 Senior Notes(b)
|
Third quarter 2022 |
225 |
Hoover, AL Environmental Revenue Bonds |
Second quarter 2022 |
14 |
2029 Senior Notes(b)
|
Second quarter 2022 |
48 |
2029 Senior Notes(b)
|
First quarter 2022 |
2 |
Total |
|
$ |
365 |
|
(a)
There were redemption discounts and unamortized debt issuance cost
write-offs of $6 million and $1 million, respectively,
included in (gain) loss on debt extinguishment on the Consolidated
Statement of Operations related to the repayment.
(b)
During the nine months ended September 30, 2022, there were no
redemption premiums paid and a net loss of $4 million for the
write-off of unamortized discounts and debt issuance costs,
included in (gain) loss on debt extinguishment on the Consolidated
Statement of Operations, as a result of these debt
repayments.
Arkansas Development Finance Authority Environmental Improvement
Revenue Bonds, Series 2022 (United States Steel Corporation
Project) (Green Bonds)
On September 6, 2022, U. S. Steel closed on an offering of
$290 million aggregate principal amount of 5.450%
Environmental Improvement Revenue Bonds due 2052 (2052 ADFA Green
Bonds). U. S. Steel received net proceeds of approximately
$287 million after fees of approximately $3 million
related to the underwriting and third-party expenses. The net
proceeds from the issuance of the 2052 ADFA Green Bonds will be
used to partially fund work related to U. S. Steel's solid waste
disposal facilities, including two electric arc furnaces (EAF) and
other equipment facilities at its new technologically-advanced flat
rolled steel making facility, BR2, currently under construction
near Osceola, Arkansas.
On and after September 1, 2025, the Company may redeem the 2052
ADFA Green Bonds at its option, at any time in whole or from time
to time in part at the redemption prices (expressed in percentages
of principal amount) listed below, plus accrued and unpaid interest
on the 2052 ADFA Green Bonds, if any, to, but excluding, the
applicable redemption date, if redeemed during the twelve-month
period beginning on September 1 of each of the years indicated
below.
|
|
|
|
|
|
Year |
Redemption Price |
2025 |
105.000 |
% |
2026 |
104.000 |
% |
2027 |
103.000 |
% |
2028 |
102.000 |
% |
2029 |
101.000 |
% |
2030 and thereafter |
100.000 |
% |
At any time prior to September 1, 2025, U. S. Steel may also redeem
the 2052 ADFA Green Bonds, at our option, in whole or in part, or
from time to time, at a price equal to the greater of 100 percent
of the principal amount of the 2052 ADFA Green Bonds plus accrued
and unpaid interest, if any, or the sum of the present value of the
redemption price of the 2052 ADFA Green Bonds if they were redeemed
on September 1, 2025, plus interest payments due through September
1, 2025, discounted to the date of redemption on a semi-annual
basis at the applicable tax-exempt municipal bond rate, plus
accrued and unpaid interest, if any.
2026 Senior Convertible Notes
In October 2019, U. S. Steel issued $350 million of 5.00%
Senior Convertible Notes due November 1, 2026 (2026 Senior
Convertible Notes). Interest on the 2026 Senior Convertible Notes
is payable semi-annually on May 1 and November 1 of each year. The
initial conversion rate for the 2026 Senior Convertible Notes is
74.8391 shares of U. S. Steel common stock per $1,000 principal
amount, equivalent to an initial conversion price of approximately
$13.36 per share of common stock, subject to adjustment pursuant to
the 2026 Senior Convertible Notes indenture. Based on the initial
conversion rate, the 2026 Senior Convertible Notes are convertible
into 26,193,685 shares of U. S. Steel common stock and we reserved
for the possible issuance of 33,396,930 shares, which is the
maximum amount that could be issued upon conversion. Prior to
August 1, 2026, holders of notes may convert all or a portion of
their notes at their option only upon the satisfaction of specified
conditions and during certain periods. On or after August 1, 2026,
holders may convert all or a portion of their notes prior to the
maturity date. Upon conversion, we will satisfy the obligation with
cash, common stock, or a combination thereof, at our election. U.
S. Steel may not redeem the 2026 Senior Convertible Notes prior to
November 5, 2023. On or after November 5, 2023, and prior to August
1, 2026, if the price per share of U. S. Steel's common stock has
been at least 130% of the conversion price for specified periods,
U. S. Steel may redeem all or a portion of the 2026 Senior
Convertible Notes at a cash redemption price of 100% of the
principal amount, plus accrued and unpaid interest.
If U. S. Steel undergoes a fundamental change, as defined in the
2026 Senior Convertible Notes, holders may require us to repurchase
the 2026 Senior Convertible Notes in whole or in part for cash at a
price equal to 100% of the principal amount of the 2026 Senior
Convertible Notes to be purchased plus any accrued and unpaid
interest up to, but excluding the repurchase date.
Big River Steel - Sustainability Linked ABL Facility
Big River Steel's amended senior secured asset-based revolving
credit facility (Big River Steel ABL Facility) matures on July 23,
2026. The facility is secured by first-priority liens on accounts
receivable and inventory and certain other assets and second
priority liens on most tangible and intangible assets of Big River
Steel in each case subject to permitted liens. Additionally, the
amendment includes sustainability targets related to greenhouse gas
emissions intensity reduction, safety performance and facility
certification by ResponsibleSteel™.
The Big River Steel ABL Facility provides for borrowings for
working capital and general corporate purposes in an amount equal
up to the lesser of (a) $350 million and (b) a borrowing base
calculated based on specified percentages of eligible accounts
receivables and inventory, subject to certain adjustments and
reserves.
Big River Steel LLC must maintain a fixed charge coverage ratio of
at least 1.00 to 1.00 for the most recent twelve consecutive months
when availability under the Big River Steel ABL Facility is less
than the greater of ten percent of the borrowing base availability
and $13 million. Based on the most recent four quarters as of
September 30, 2022, Big River Steel would have met the fixed
charge coverage ratio test. The facility includes affirmative and
negative covenants and events of default that are customary for
facilities of this type.
There were no loans outstanding under the Big River Steel ABL
Facility at September 30, 2022.
U. S. Steel - Sustainability Linked Credit Facility
Agreement
On May 27, 2022, U. S. Steel entered into the Sixth Amended and
Restated Credit Facility Agreement (Credit Facility Agreement) to
replace the existing Fifth Amended and Restated Credit Facility
Agreement (Fifth Credit Facility Agreement). The Credit Facility
Agreement has substantially the same terms as the Fifth Credit
Facility Agreement, except the Credit Facility Agreement references
the Secured Overnight Financing Rate instead of the London
Interbank Offered Rate, adjusts the individual lenders'
commitments, and renews the five-year maturity to May 27, 2027. The
Credit Facility Agreement also adjusts the threshold for the fixed
charge coverage ratio. The total availability under the facility
remained the same at $1,750 million, and the financial impact
from replacing the Fifth Credit Facility Agreement was immaterial.
Consistent with the Fifth Credit Facility Agreement, the Credit
Facility Agreement is secured by first-priority liens on certain
accounts receivable and inventory and includes targets related to
greenhouse gas emissions intensity reduction, safety performance
and facility certification by ResponsibleSteel™.
The Credit Facility Agreement provides for borrowings for working
capital and general corporate purchases in an amount equal to the
lesser of (a) $1,750 million or (b) a borrowing base
calculated based on specified percentages of eligible accounts
receivable and inventory, subject to certain adjustments and
reserves. As of September 30, 2022, there were approximately
$4 million of letters of credit issued and no loans drawn
under the Credit Facility Agreement. U. S. Steel must maintain
a fixed charge coverage ratio of at least 1.00 to 1.00 for the most
recent four consecutive quarters when availability under the Credit
Facility Agreement is less than the greater of ten percent of the
maximum facility availability and $140 million. Based on the
most recent four quarters as of September 30, 2022, the
Company would have met the fixed charge coverage ratio
test.
U. S. Steel Košice
(USSK)
Credit Facilities
On September 29, 2021, USSK entered into a €300 million
(approximately $292 million) unsecured sustainability linked credit
agreement (USSK Credit Agreement). The USSK Credit Agreement
matures in 2026 and contains sustainability targets related to
greenhouse gas emissions intensity reduction, safety performance
and facility certification by ResponsibleSteel™. At
September 30, 2022, USSK had no borrowings under the USSK
Credit Agreement.
At September 30, 2022, USSK had no borrowings under its €20
million credit facility (approximately $20 million) (USSK Credit
Facility) and the availability was approximately $5 million due to
approximately $15 million of customs and other guarantees
outstanding.
16. Fair
Value of Financial Instruments
The carrying value of cash and cash equivalents, current accounts
and notes receivable, accounts payable and accrued interest
included in the Condensed Consolidated Balance Sheet approximate
fair value. See Note 14 for disclosure of U. S. Steel’s derivative
instruments, which are accounted for at fair value on a recurring
basis.
Stelco Option for Minntac Mine Interest
On April 30, 2020 (Effective Date), the Company entered into an
Option Agreement with Stelco, Inc. (Stelco), that grants Stelco the
option to purchase a 25 percent interest (Option Interest) in a
to-be-formed entity (Joint Venture) that will own the Company’s
current iron ore mine located in Mt. Iron, Minnesota (Minntac
Mine). As consideration for the Option, Stelco paid the Company an
aggregate amount of $100 million in five $20 million
installments during the year-ended December 31, 2020 which are
recorded net of transaction costs in the Condensed Consolidated
Balance Sheet. The option can be exercised any time before January
31, 2027, and in the event Stelco exercises the option, Stelco will
contribute an additional $500 million to the Joint Venture,
which amount shall be remitted solely to U. S. Steel in
the form of a one-time special distribution, and the parties will
engage in good faith negotiations to finalize the master agreement
(pursuant to which Stelco will acquire the Option Interest) and the
limited liability company agreement of the Joint
Venture.
The following table summarizes U. S. Steel’s financial liabilities
that were not carried at fair value at September 30, 2022 and
December 31, 2021. The fair value of long-term debt was
determined using Level 2 inputs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
(In millions) |
Fair
Value |
|
Carrying
Amount |
|
Fair
Value |
|
Carrying
Amount |
Financial liabilities: |
|
|
|
|
|
|
|
Long-term debt
(a)
|
$ |
3,551 |
|
|
$ |
3,702 |
|
|
$ |
4,379 |
|
|
$ |
3,702 |
|
(a)
Excludes finance lease obligations.
17. Statement
of Changes in Stockholders’ Equity
The following table reflects the first nine months of 2022 and 2021
reconciliation of the carrying amount of total equity, equity
attributable to U. S. Steel and equity attributable to
noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 (In millions) |
Total |
Retained Earnings |
Accumulated
Other
Comprehensive
Income |
Common
Stock |
Treasury
Stock |
Paid-in
Capital |
Non-
Controlling
Interest |
Balance at beginning of year |
$ |
9,103 |
|
$ |
3,534 |
|
$ |
331 |
|
$ |
280 |
|
$ |
(334) |
|
$ |
5,199 |
|
$ |
93 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
Net earnings |
882 |
|
882 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
Pension and other benefit adjustments |
(3) |
|
— |
|
(3) |
|
— |
|
— |
|
— |
|
— |
|
Currency translation adjustment |
(28) |
|
— |
|
(28) |
|
— |
|
— |
|
— |
|
— |
|
Derivative financial instruments |
22 |
|
— |
|
22 |
|
— |
|
— |
|
— |
|
— |
|
Employee stock plans |
7 |
|
— |
|
— |
|
2 |
|
(20) |
|
25 |
|
— |
|
Common Stock Repurchased |
(123) |
|
— |
|
— |
|
— |
|
(123) |
|
— |
|
— |
|
Dividends paid on common stock |
(13) |
|
(13) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Cumulative effect upon adoption of Accounting Standards Update
2020-06 |
(56) |
|
22 |
|
— |
|
— |
|
— |
|
(78) |
|
— |
|
Balance at March 31, 2022 |
$ |
9,791 |
|
$ |
4,425 |
|
$ |
322 |
|
$ |
282 |
|
$ |
(477) |
|
$ |
5,146 |
|
$ |
93 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
Net earnings |
978 |
|
978 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
Pension and other benefit adjustments |
1 |
|
— |
|
1 |
|
— |
|
— |
|
— |
|
— |
|
Currency translation adjustment |
(100) |
|
— |
|
(100) |
|
— |
|
— |
|
— |
|
— |
|
Derivative financial instruments |
14 |
|
— |
|
14 |
|
— |
|
— |
|
— |
|
— |
|
Employee stock plans |
19 |
|
— |
|
— |
|
— |
|
(1) |
|
20 |
|
— |
|
Common Stock Repurchased |
(399) |
|
— |
|
— |
|
— |
|
(399) |
|
— |
|
— |
|
Dividends paid on common stock |
(13) |
|
(13) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022 |
$ |
10,291 |
|
$ |
5,390 |
|
$ |
237 |
|
$ |
282 |
|
$ |
(877) |
|
$ |
5,166 |
|
$ |
93 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
Net earnings |
490 |
|
490 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
Pension and other benefit adjustments |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Currency translation adjustment |
(92) |
|
— |
|
(92) |
|
— |
|
— |
|
— |
|
— |
|
Derivative financial instruments |
18 |
|
— |
|
18 |
|
— |
|
— |
|
— |
|
— |
|
Employee stock plans |
13 |
|
— |
|
— |
|
— |
|
— |
|
13 |
|
— |
|
Common Stock Repurchased |
(177) |
|
— |
|
— |
|
— |
|
(177) |
|
— |
|
— |
|
Dividends paid on common stock |
(12) |
|
(12) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Other |
(1) |
|
(1) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Balance at September 30, 2022 |
$ |
10,530 |
|
$ |
5,867 |
|
$ |
163 |
|
$ |
282 |
|
$ |
(1,054) |
|
$ |
5,179 |
|
$ |
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 (In millions) |
Total |
(Accumulated Deficit) Retained Earnings |
Accumulated
Other
Comprehensive
(Loss) Income |
Common
Stock |
Treasury
Stock |
Paid-in
Capital |
Non-
Controlling
Interest |
Balance at beginning of year |
$ |
3,879 |
|
$ |
(623) |
|
$ |
(47) |
|
$ |
229 |
|
$ |
(175) |
|
$ |
4,402 |
|
$ |
93 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
Net earnings |
91 |
|
91 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
Pension and other benefit adjustments |
24 |
|
— |
|
24 |
|
— |
|
— |
|
— |
|
— |
|
Currency translation adjustment |
(47) |
|
— |
|
(47) |
|
— |
|
— |
|
— |
|
— |
|
Derivative financial instruments |
(20) |
|
— |
|
(20) |
|
— |
|
— |
|
— |
|
— |
|
Employee stock plans |
6 |
|
— |
|
— |
|
2 |
|
(7) |
|
11 |
|
— |
|
Common Stock Issued |
790 |
|
— |
|
— |
|
48 |
|
— |
|
742 |
|
— |
|
Dividends paid on common stock |
(3) |
|
— |
|
— |
|
— |
|
— |
|
(3) |
|
— |
|
Balance at March 31, 2021 |
$ |
4,720 |
|
$ |
(532) |
|
$ |
(90) |
|
$ |
279 |
|
$ |
(182) |
|
$ |
5,152 |
|
$ |
93 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
Net earnings |
1,012 |
|
1,012 |
|
|