UNITED STATES STEEL CORP [X] Filings

10-Q 1 x-20220930.htm 10-Q x-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2022


			☐			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)

Delaware

25-1897152

(State or other jurisdiction of incorporation)

(IRS Employer Identification No.)

600 Grant Street,

Pittsburgh,

15219-2800

(Address of principal executive offices)

(Zip Code)

(412) 433-1121

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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.

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


			Page
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations (Unaudited)	1
		Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	2
		Condensed Consolidated Balance Sheet (Unaudited)	3
		Condensed Consolidated Statement of Cash Flows (Unaudited)	4
		Notes to Condensed Consolidated Financial Statements (Unaudited)	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
	Item 4.	Controls and Procedures	41
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	42
	Item 1A.	Risk Factors	47
	Item 2	Purchases of Equity Securities by Issuer and Affiliated Purchasers	47
	Item 3	Defaults upon Senior Securities	47
	Item 4.	Mine Safety Disclosure	47
	Item 5.	Other Information	47
	Item 6.	Exhibits	48
SIGNATURE			49
WEB SITE POSTING			49

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.

-1-

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.

-2-

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.

-3-

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.

-4-

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.

-5-

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.

-6-

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

-7-

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