UNITED STATES STEEL CORP [X] Filings

10-Q 1 x-20210930.htm 10-Q x-20210930

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, 2021


			☐			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 25, 2021 – 270,232,763 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	29
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
	Item 4.	Controls and Procedures	41
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	41
	Item 1A.	Risk Factors	46
	Item 2	Purchases of Equity Securities by Issuer and Affiliated Purchasers	46
	Item 3	Defaults upon Senior Securities	46
	Item 4.	Mine Safety Disclosure	46
	Item 5.	Other Information	46
	Item 6.	Exhibits	47
SIGNATURE			48
WEB SITE POSTING			48

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,” “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, 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, anticipated disruptions to our operations and industry due to the COVID-19 pandemic, changes in global supply and demand conditions and prices for our products, international trade duties and other aspects of international trade policy, the integration of Big River Steel in our existing business, business strategies related to the combined business 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, 2020 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, and (ii) “Big River Steel” refer to Big River Steel Holdings 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)	2021		2020		2021		2020
Net sales:
Net sales	$	5,623	$	2,072	$	13,676	$	6,469
Net sales to related parties (Note 19)	341		268		977		710
Total (Note 6)	5,964		2,340		14,653		7,179
Operating expenses (income):
Cost of sales	3,881		2,295		10,633		7,174
Selling, general and administrative expenses	108		65		316		199
Depreciation, depletion and amortization	196		162		587		481
(Earnings) loss from investees	(57)		31		(106)		78
Gain on sale of Transtar (Note 5)	(506)		—		(506)		—
Asset impairment charges (Note 1)	—		—		28		263
Gain on equity investee transactions (Note 5)	—		—		(111)		(31)
Restructuring and other charges (Note 20)	—		—		37		130
Net loss (gain) on sale of assets	7		(2)		(8)		(2)
Other (gains) losses, net	(7)		—		(18)		5
Total	3,622		2,551		10,852		8,297
Earnings (loss) before interest and income taxes	2,342		(211)		3,801		(1,118)
Interest expense	75		84		251		198
Interest income	(1)		(1)		(3)		(6)
Loss on debt extinguishment	26		—		282		—
Other financial costs (benefits)	17		(30)		39		(26)
Net periodic benefit income	(37)		(6)		(97)		(22)
Net interest and other financial costs	80		47		472		144
Earnings (loss) before income taxes	2,262		(258)		3,329		(1,262)
Income tax expense (benefit) (Note 12)	260		(24)		224		(48)
Net earnings (loss)	2,002		(234)		3,105		(1,214)
Less: Net earnings attributable to noncontrolling interests	—		—		—		—
Net earnings (loss) attributable to United States Steel Corporation	$	2,002	$	(234)	$	3,105	$	(1,214)
Earnings (loss) per common share (Note 13):
Earnings (loss) per share attributable to United States Steel Corporation stockholders:
-Basic	$	7.41	$	(1.06)	$	11.80	$	(6.43)
-Diluted	$	6.97	$	(1.06)	$	11.13	$	(6.43)

The accompanying notes are an integral part of these condensed consolidated financial statements.

-1-

UNITED STATES STEEL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020
Net earnings (loss)	$	2,002	$	(234)	$	3,105	$	(1,214)
Other comprehensive income (loss), net of tax:
Changes in foreign currency translation adjustments	(26)		34		(50)		31
Changes in pension and other employee benefit accounts	15		16		244		97
Changes in derivative financial instruments	60		8		9		18
Total other comprehensive income, net of tax	49		58		203		146
Comprehensive income (loss) including noncontrolling interest	2,051		(176)		3,308		(1,068)
Comprehensive income attributable to noncontrolling interest	—		—		—		—
Comprehensive income (loss) attributable to United States Steel Corporation	$	2,051	$	(176)	$	3,308	$	(1,068)

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, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents (Note 7)	$	2,044	$	1,985
Receivables, less allowance of $43 and $34	2,275		914
Receivables from related parties (Note 19)	128		80
Inventories (Note 8)	2,086		1,402
Other current assets	266		51
Total current assets	6,799		4,432
Long-term restricted cash (Note 7)	91		130
Operating lease assets	198		214
Property, plant and equipment	19,880		17,704
Less accumulated depreciation and depletion	12,500		12,260
Total property, plant and equipment, net	7,380		5,444
Investments and long-term receivables, less allowance of $4 and $5	628		1,177
Intangibles, net (Note 9)	527		129
Deferred income tax benefits (Note 12)	46		22
Goodwill (Note 9)	909		4
Other noncurrent assets	755		507
Total assets	$	17,333	$	12,059
Liabilities
Current liabilities:
Accounts payable and other accrued liabilities	$	2,870	$	1,779
Accounts payable to related parties (Note 19)	130		105
Payroll and benefits payable	542		308
Accrued taxes	315		154
Accrued interest	52		59
Current operating lease liabilities	60		59
Short-term debt and current maturities of long-term debt (Note 15)	61		192
Total current liabilities	4,030		2,656
Noncurrent operating lease liabilities	148		163
Long-term debt, less unamortized discount and debt issuance costs (Note 15)	4,272		4,695
Employee benefits	202		322
Deferred income tax liabilities (Note 12)	200		11
Deferred credits and other noncurrent liabilities	473		333
Total liabilities	9,325		8,180
Contingencies and commitments (Note 21)
Stockholders’ Equity (Note 17):
Common stock (279,350,782 and 229,105,589 shares issued) (Note 13)	279		229
Treasury stock, at cost (9,133,393 shares and 8,673,131 shares)	(184)		(175)
Additional paid-in capital	5,185		4,402
Retained earnings (accumulated deficit)	2,480		(623)
Accumulated other comprehensive income (loss) (Note 18)	156		(47)
Total United States Steel Corporation stockholders’ equity	7,916		3,786
Noncontrolling interests	92		93
Total liabilities and stockholders’ equity	$	17,333	$	12,059

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)	2021		2020
Increase (decrease) in cash, cash equivalents and restricted cash
Operating activities:
Net earnings (loss)	$	3,105	$	(1,214)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation, depletion and amortization	587		481
Gain on sale of Transtar (Note 5)	(506)		—
Asset impairment charges (Note 1)	28		263
Gain on equity investee transactions	(111)		(31)
Restructuring and other charges (Note 20)	37		130
Loss on debt extinguishment	282		—
Pensions and other postretirement benefits	(88)		(18)
Deferred income taxes (Note 12)	59		(36)
Net gain on sale of assets	(8)		(2)
Equity investee (earnings) loss, net of distributions received	(106)		78
Changes in:
Current receivables	(1,281)		(18)
Inventories	(539)		495
Current accounts payable and accrued expenses	968		(267)
Income taxes receivable/payable	137		13
All other, net	41		(23)
Net cash provided by (used in) operating activities	2,605		(149)
Investing activities:
Capital expenditures	(460)		(591)
Acquisition of Big River Steel, net of cash acquired (Note 5)	(625)		—
Investment in Big River Steel	—		(3)
Proceeds from sale of Transtar (Note 5)	627		—
Proceeds from sale of assets	25		3
Proceeds from sale of ownership interests in equity investees	—		8
Other investing activities	(3)		(4)
Net cash used in investing activities	(436)		(587)
Financing activities:
Issuance of short-term debt, net of financing costs (Note 15)	—		240
Repayment of short-term debt (Note 15)	(180)		—
Revolving credit facilities - borrowings, net of financing costs (Note 15)	50		1,474
Revolving credit facilities - repayments (Note 15)	(911)		(1,633)
Issuance of long-term debt, net of financing costs (Note 15)	862		1,043
Repayment of long-term debt (Note 15)	(2,719)		(8)
Proceeds from public offering of common stock (Note 22)	790		410
Proceeds from Stelco Option Agreement	—		55
Other financing activities	(12)		(7)
Net cash (used in) provided by financing activities	(2,120)		1,574
Effect of exchange rate changes on cash	(15)		10
Net increase in cash, cash equivalents and restricted cash	34		848
Cash, cash equivalents and restricted cash at beginning of year (Note 7)	2,118		939
Cash, cash equivalents and restricted cash at end of period (Note 7)	$	2,152	$	1,787


Non-cash investing and financing activities:
Change in accrued capital expenditures	$	58	$	(109)
U. S. Steel common stock issued for employee/non-employee director stock plans	28		18
Capital expenditures funded by finance lease borrowings	11		30
Export Credit Agreement (ECA) financing	23		34

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 including 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, 2020, which should be read in conjunction with these condensed financial statements.

Asset Impairment

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 and is re-evaluating uses for the already purchased equipment, including at the Company's recently announced potential mini mill investment. An impairment of $28 million was recognized for this project during the three-month period ended June 30, 2021.

2. New Accounting Standards

In August 2020, the Financial Accounting Standards Board (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 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 EPS for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for public companies for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption of all amendments in the same period permitted. The Company is continuing to assess the impact of adoption of the ASU.

3. Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 simplifies accounting for income taxes by removing certain exceptions from the general principles in Topic 740 including elimination of the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income. U. S. Steel adopted this guidance on January 1, 2021. 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. Prior to the purchase, the equity earnings of Big River Steel were included in the Other segment. The Tubular Products segment includes the newly constructed electric arc furnace at our Fairfield Tubular Operations in Fairfield, Alabama. The results of our real estate business, the previously held equity method investment in Big River Steel, and of our former railroad business are combined and disclosed in the Other category.

-5-

The results of segment operations for the three months ended September 30, 2021 and 2020 are:


(In millions) Three Months Ended September 30, 2021	Customer Sales		Intersegment Sales		Net Sales		Earnings (loss) from investees		Earnings (loss) before interest and income taxes
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

Three Months Ended September 30, 2020
Flat-Rolled	$	1,728	$	71	$	1,799	$	(3)	$	(159)
USSE	495		1		496		—		13
Tubular	96		—		96		—		(52)
Total reportable segments	2,319		72		2,391		(3)		(198)
Other	21		23		44		(28)		(13)
Reconciling Items and Eliminations	—		(95)		(95)		—		—
Total	$	2,340	$	—	$	2,340	$	(31)	$	(211)

The results of segment operations for the nine months ended September 30, 2021 and 2020 are:


(In millions) Nine Months Ended September 30, 2021	Customer Sales		Intersegment Sales		Net Sales		Earnings (Loss) from investees		Earnings (loss) before interest and income taxes
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

Nine Months Ended September 30, 2020
Flat-Rolled	$	5,199	$	175	$	5,374	$	(15)	$	(523)
USSE	1,403		3		1,406		—		(27)
Tubular	533		6		539		3		(147)
Total reportable segments	7,135		184		7,319		(12)		(697)
Other	44		70		114		(66)		(33)
Reconciling Items and Eliminations	—		(254)		(254)		—		(388)
Total	$	7,179	$	—	$	7,179	$	(78)	$	(1,118)

-6-

A summary of total assets by segment is as follows:


(In millions)	September 30, 2021		December 31, 2020
Flat-Rolled	$	7,846	$	7,099
Mini Mill	4,314		—
USSE	6,116		5,502
Tubular	1,041		887
Total reportable segments	$	19,317	$	13,488
Other	$	135	$	911
Corporate, reconciling items, and eliminations(a)	(2,119)		(2,340)
Total assets	$	17,333	$	12,059

(a)The majority of Corporate, reconciling items, and eliminations total assets 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)	2021		2020		2021		2020
Items not allocated to segments:
Gain on previously held investment in Big River Steel	$	—	$	—	$	111	$	—
Big River Steel - inventory step-up amortization	—		—		(24)		—
Big River Steel - unrealized gains (losses) (a)	12		—		(3)		—
Big River Steel - acquisition costs	—		—		(9)		—