Net Sales by Product (In millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
Flat-Rolled
|
Mini Mill
|
USSE
|
Tubular
|
Other
|
Total
|
|
Semi-finished
|
$
|
12
|
|
$
|
—
|
|
$
|
3
|
|
$
|
—
|
|
$
|
—
|
|
$
|
15
|
|
|
Hot-rolled sheets
|
450
|
|
249
|
|
386
|
|
—
|
|
—
|
|
1,085
|
|
|
Cold-rolled sheets
|
784
|
|
79
|
|
83
|
|
—
|
|
—
|
|
946
|
|
|
Coated sheets
|
878
|
|
121
|
|
298
|
|
—
|
|
—
|
|
1,297
|
|
|
Tubular products
|
—
|
|
—
|
|
10
|
|
128
|
|
—
|
|
138
|
|
|
All Other (a)
|
148
|
|
1
|
|
18
|
|
6
|
|
10
|
|
183
|
|
|
Total
|
$
|
2,272
|
|
$
|
450
|
|
$
|
798
|
|
$
|
134
|
|
$
|
10
|
|
$
|
3,664
|
|
|
(a) Consists primarily of sales of raw materials and coke making by-products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
Flat-Rolled
|
|
USSE
|
Tubular
|
Other
|
Total
|
|
Semi-finished
|
$
|
27
|
|
|
$
|
1
|
|
$
|
—
|
|
$
|
—
|
|
$
|
28
|
|
|
Hot-rolled sheets
|
502
|
|
|
205
|
|
—
|
|
—
|
|
707
|
|
|
Cold-rolled sheets
|
598
|
|
|
45
|
|
—
|
|
—
|
|
643
|
|
|
Coated sheets
|
711
|
|
|
229
|
|
—
|
|
—
|
|
940
|
|
|
Tubular products
|
—
|
|
|
9
|
|
251
|
|
—
|
|
260
|
|
|
All Other (a)
|
136
|
|
|
16
|
|
4
|
|
14
|
|
170
|
|
|
Total
|
$
|
1,974
|
|
|
$
|
505
|
|
$
|
255
|
|
$
|
14
|
|
$
|
2,748
|
|
|
(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)
|
|
March 31, 2021
|
|
March 31, 2020
|
|
Cash and cash equivalents
|
|
$
|
753
|
|
|
$
|
1,350
|
|
|
Restricted cash in other current assets
|
|
7
|
|
|
4
|
|
|
Restricted cash in other noncurrent assets
|
|
122
|
|
|
143
|
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
882
|
|
|
$
|
1,497
|
|
Amounts included in restricted cash represent cash balances which are legally or contractually restricted, primarily for electric arc furnace construction, environmental and other capital expenditure 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 March 31, 2021 and December 31, 2020, the LIFO method accounted for 51 percent and 59 percent of total inventory values, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
|
December 31, 2020
|
|
Raw materials
|
$
|
578
|
|
|
$
|
416
|
|
|
Semi-finished products
|
807
|
|
|
633
|
|
|
Finished products
|
315
|
|
|
300
|
|
|
Supplies and sundry items
|
50
|
|
|
53
|
|
|
Total
|
$
|
1,750
|
|
|
$
|
1,402
|
|
Current acquisition costs were estimated to exceed the above inventory values by $878 million and $848 million at March 31, 2021 and December 31, 2020, respectively. As a result of the liquidation of LIFO inventories, cost of sales decreased and earnings before interest and income taxes increased by $1 million for the three months ended March 31, 2021. Cost of sales increased and the loss before interest and income taxes increased by $5 million for the three months ended March 31, 2020, as a result of liquidation of LIFO inventories.
9. Intangible Assets
Intangible assets that are being amortized on a straight-line basis over their estimated useful lives are detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
(In millions)
|
Useful
Lives
|
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Amount
|
|
Gross
Carrying
Amount
|
Accumulated Impairment (a)
|
Accumulated
Amortization
|
Net
Amount
|
|
Customer relationships
|
22 Years
|
|
$
|
413
|
|
$
|
4
|
|
$
|
409
|
|
|
$
|
132
|
|
$
|
55
|
|
$
|
77
|
|
$
|
—
|
|
|
Patents
|
10-15 Years
|
|
17
|
|
10
|
|
7
|
|
|
22
|
|
7
|
|
10
|
|
5
|
|
|
Energy Contract
|
10 Years
|
|
54
|
|
6
|
|
48
|
|
|
54
|
|
—
|
|
5
|
|
49
|
|
|
Other
|
4-20 Years
|
|
—
|
|
—
|
|
—
|
|
|
14
|
|
5
|
|
9
|
|
—
|
|
|
Total amortizable intangible assets
|
|
|
$
|
484
|
|
$
|
20
|
|
$
|
464
|
|
|
$
|
222
|
|
$
|
67
|
|
$
|
101
|
|
$
|
54
|
|
(a) The impairment charge was the result of the quantitative impairment analysis of the welded tubular asset group for the period ended March 31, 2020. See Note 1 for further details.
Total estimated amortization expense for the remainder of 2021 is $19 million. We expect approximately $25 million in annual amortization expense through 2026 and approximately $320 million in remaining amortization expense thereafter.
The carrying amount of acquired water rights with indefinite lives as of March 31, 2021 and December 31, 2020 totaled $75 million.
The purchase of the remaining equity interest in Big River Steel also included goodwill of $905 million which is included in our Mini Mill segment. Goodwill represents the excess of the cost of the purchase over the net fair value of acquired identifiable tangible and intangible assets and liabilities assumed. See Note 5 for further details. Below is a summary of goodwill by segment for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flat-Rolled
|
Mini Mill
|
USSE
|
Tubular
|
Total
|
|
Balance at December 31, 2020
|
$
|
—
|
|
$
|
—
|
|
$
|
4
|
|
$
|
—
|
|
$
|
4
|
|
|
Additions
|
—
|
|
905
|
|
—
|
|
—
|
|
905
|
|
|
Balance at March 31, 2021
|
$
|
—
|
|
$
|
905
|
|
$
|
4
|
|
$
|
—
|
|
$
|
909
|
|
10. Pensions and Other Benefits
The following table reflects the components of net periodic benefit cost for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Other
Benefits
|
|
(In millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Service cost
|
$
|
14
|
|
|
$
|
12
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Interest cost
|
40
|
|
|
48
|
|
|
12
|
|
|
16
|
|
|
Expected return on plan assets
|
(89)
|
|
|
(81)
|
|
|
(20)
|
|
|
(20)
|
|
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
(7)
|
|
|
(2)
|
|
|
Amortization of actuarial net loss (gain)
|
38
|
|
|
36
|
|
|
(6)
|
|
|
(4)
|
|
|
Net periodic benefit cost/(income), excluding below
|
3
|
|
|
15
|
|
|
(18)
|
|
|
(7)
|
|
|
Multiemployer plans
|
19
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
Settlement, termination and curtailment losses (a)
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
Net periodic benefit cost/(income)
|
$
|
22
|
|
|
$
|
42
|
|
|
$
|
(18)
|
|
|
$
|
(7)
|
|
|
(a) During the three months ended March 31, 2020, the pension plan incurred special termination charges of approximately $6 million, due to workforce restructuring.
|
Employer Contributions
During the first three months of 2021, U. S. Steel made cash payments of $18 million to the Steelworkers’ Pension Trust and $2 million of pension payments not funded by trusts.
During the first three months of 2021, cash payments of $10 million were made for other postretirement benefit payments not funded by trusts.
Company contributions to defined contribution plans totaled $10 million for both the three months ended March 31, 2021 and 2020, respectively.
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 (the Committee) under the 2005 Stock Incentive Plan (the 2005 Plan) and the 2016 Omnibus Incentive Compensation Plan, as amended and restated (the Omnibus Plan). The Company's stockholders approved the Omnibus Plan and authorized the Company to issue up to 18,200,000 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 March 31, 2021, there were 1,777,012 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 three months of 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Grant Details
|
|
Shares(a)
|
Fair Value(b)
|
|
Shares(a)
|
Fair Value(b)
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
|
|
1,418,380
|
|
$
|
17.92
|
|
|
2,624,470
|
|
$
|
8.83
|
|
|
Performance Awards (c)
|
|
|
|
|
|
|
|
TSR
|
|
306,930
|
|
$
|
19.46
|
|
|
659,620
|
|
$
|
8.20
|
|
|
ROCE (d)
|
|
485,900
|
|
$
|
17.92
|
|
|
—
|
|
$
|
—
|
|
(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) The ROCE awards granted in 2020 and a portion of ROCE awards granted in 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 $11 million and $8 million in the three-month periods ended March 31, 2021 and 2020, respectively.
As of March 31, 2021, total future compensation expense related to nonvested stock-based compensation arrangements was $44 million, and the weighted average period over which this expense is expected to be recognized is approximately 19 months.
Restricted stock units awarded as part of annual grants generally vest ratably over three years. Their fair value is the 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 performance 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. 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.
For further details about our stock-based compensation incentive plans and stock awards see Note 15 of the United States Steel Corporation Annual Report on Form 10-K for the fiscal year-ended December 31, 2020.
12. Income Taxes
Tax provision
For the three months ended March 31, 2021 and 2020, the Company recorded a tax provision of $1 million and a tax benefit of $19 million, respectively. The tax provision for the first three months of 2021 was based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss. The 2021 tax provision includes a $4 million discrete benefit relating to favorably settling prior tax period state income tax matters, and the 2020 tax benefit includes a $10 million discrete benefit related to recording a loss from continuing operations and income from other comprehensive income categories. Due to the full valuation allowance on our domestic deferred tax assets, the tax provision in 2021 does not reflect any material tax expense for domestic pretax earnings.
During 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 2021 pretax results for foreign income or loss vary from estimates applied herein, the actual tax provision or benefit recognized in 2021 could be materially different from the forecasted amount used to estimate the tax benefit for the three months ended March 31, 2021.
13. Earnings and Dividends Per Common Share
Earnings (Loss) 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 months ended March 31, 2021 and March 31, 2020 were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(Dollars in millions, except per share amounts)
|
2021
|
2020
|
|
|
|
|
Earnings (loss) attributable to United States Steel Corporation stockholders
|
$
|
91
|
|
$
|
(391)
|
|
|
|
|
|
Weighted-average shares outstanding (in thousands):
|
|
|
|
|
|
|
Basic
|
249,351
|
|
170,224
|
|
|
|
|
|
Effect of Senior Convertible Notes
|
8,467
|
|
—
|
|
|
|
|
|
Effect of stock options, restricted stock units and performance awards
|
4,151
|
|
—
|
|
|
|
|
|
Adjusted weighted-average shares outstanding, diluted
|
261,969
|
|
170,224
|
|
|
|
|
|
Basic earnings (loss) per common share
|
$
|
0.36
|
|
$
|
(2.30)
|
|
|
|
|
|
Diluted earnings (loss) per common share
|
$
|
0.35
|
|
$
|
(2.30)
|
|
|
|
|
Excluded from the computation of diluted earnings (loss) per common share due to their anti-dilutive effect were 1.4 million and 4.9 million outstanding securities granted under the Omnibus Plan for the three months ended March 31, 2021 and 2020, respectively.
Dividends Paid Per Share
The dividend for each of the first quarter of 2021 and 2020 was one cent per common share.
14. Derivative Instruments
The USSE segment uses foreign exchange forward sales contracts (foreign exchange forwards) to exchange euros for U.S. dollars (USD), our Flat-Rolled segment used foreign exchange forwards to exchange USD for Canadian dollars and our Mini Mill segment uses foreign exchange forwards to exchange USD for euros. All of our foreign exchange forwards have maturities no longer than 16 months and are used to mitigate the risk of foreign currency exchange rate fluctuations and manage our foreign currency requirements. The USSE and Flat-Rolled segments use hedge accounting for their foreign exchange forwards. The Mini Mill segment has not elected hedge accounting; therefore, the changes in the fair value of their foreign exchange forwards are recognized immediately in the Condensed Consolidated Statements of Operations (mark-to-market accounting).
The Flat-Rolled and USSE segments also use financial swaps to protect from the commodity price risk associated with purchases of natural gas, zinc, tin and electricity (commodity purchase swaps). We elected cash flow hedge accounting for Flat-Rolled commodity purchase swaps for natural gas, zinc and tin and use mark-to-market accounting for electricity swaps used in our domestic operations and for commodity purchase swaps used in our European operations. The maximum derivative contract duration for commodity purchase swaps where hedge accounting was elected and was not elected is nine months and 33 months, respectively.
The Flat-Rolled and Mini-Mill segments have entered into financial swaps that are used to partially manage the sales price risk of certain hot-rolled coil sales (sales swaps). The Flat-Rolled segment uses hedge accounting for its sales swaps and the Mini Mill segment uses mark-to-market accounting for its sales swaps. Sales swaps have maturities of up to nine months.
For further details about our derivative instruments see Note 16 of the United States Steel Corporation Annual Report on Form 10-K for the fiscal year-ended December 31, 2020.
The table below shows the outstanding swap quantities used to hedge forecasted purchases and sales as of March 31, 2021 and March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge Contracts
|
Classification
|
March 31, 2021
|
|
March 31, 2020
|
|
Natural gas (in mmbtus)
|
Commodity purchase swaps
|
26,223,000
|
|
52,464,000
|
|
Tin (in metric tons)
|
Commodity purchase swaps
|
1,555
|
|
870
|
|
Zinc (in metric tons)
|
Commodity purchase swaps
|
19,021
|
|
21,044
|
|
Electricity (in megawatt hours)
|
Commodity purchase swaps
|
1,074,720
|
|
1,024,000
|
|
Hot-rolled coils (in tons)
|
Sales swaps
|
192,720
|
|
—
|
|
Foreign currency (in millions of euros)
|
Foreign exchange forwards
|
€
|
237
|
|
|
€
|
259
|
|
|
Foreign currency (in millions of dollars)
|
Foreign exchange forwards
|
$
|
9
|
|
|
$
|
—
|
|
|
Foreign currency (in millions of CAD)
|
Foreign exchange forwards
|
$
|
—
|
|
|
$
|
23
|
|
There were $13 million and $5 million in accounts receivable and $78 million and $54 million in accounts payable recorded for derivatives designated as hedging instruments as of March 31, 2021 and December 31, 2020, respectively. Amounts recorded in long-term asset and long-term liability accounts for derivatives were not material as of March 31, 2021 and December 31, 2020. Accounts payable recorded in the Condensed Consolidated Balance sheet for derivatives not designated as hedging instruments was $9 million as of March 31, 2021 and was immaterial as of December 31, 2020.
The table below summarizes the effect of hedge accounting on AOCI and amounts reclassified from AOCI into earnings for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Derivatives in AOCI
|
|
|
Amount of Gain (Loss) Recognized in Income
|
|
(In millions)
|
Three Months Ended March 31, 2021
|
Three Months Ended March 31, 2020
|
|
Location of Reclassification from AOCI (a)
|
Three Months Ended March 31, 2021
|
Three Months Ended March 31, 2020
|
|
Sales swaps
|
$
|
(44)
|
|
$
|
—
|
|
|
Net sales
|
$
|
(10)
|
|
$
|
—
|
|
|
Commodity purchase swaps
|
10
|
|
(8)
|
|
|
Cost of sales (b)
|
(1)
|
|
(8)
|
|
|
Foreign exchange forwards
|
19
|
|
5
|
|
|
Cost of sales
|
(5)
|
|
—
|
|
(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, $7 million currently in AOCI as of March 31, 2021 will be recognized as a decrease in cost of sales over the next year and $71 million currently in AOCI as of March 31, 2021 will be recognized as a decrease in net sales over the next year.
The loss recognized for sales swaps where hedge accounting was not elected was $9 million and was recognized in cost of sales for the three month period ended March 31, 2021. The loss recognized for sales swaps where hedge accounting was not elected was not material for the three month period ended March 31, 2020.
15. Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Issuer/Borrower
|
Interest
Rates %
|
Maturity
|
March 31, 2021
|
|
December 31, 2020
|
|
2037 Senior Notes
|
U. S. Steel
|
6.650
|
2037
|
350
|
|
|
350
|
|
|
2029 Senior Secured Notes
|
Big River Steel
|
6.625
|
2029
|
900
|
|
|
—
|
|
|
2029 Senior Notes
|
U. S. Steel
|
6.875
|
2029
|
750
|
|
|
—
|
|
|
2026 Senior Notes
|
U. S. Steel
|
6.250
|
2026
|
618
|
|
|
650
|
|
|
2026 Senior Convertible Notes
|
U. S. Steel
|
5.000
|
2026
|
350
|
|
|
350
|
|
|
2025 Senior Notes
|
U. S. Steel
|
6.875
|
2025
|
731
|
|
|
750
|
|
|
2025 Senior Secured Notes
|
U. S. Steel
|
12.000
|
2025
|
—
|
|
|
1,056
|
|
|
Arkansas Teacher Retirement System Notes Payable
|
Big River Steel
|
5.500 - 7.750
|
2023
|
106
|
|
|
—
|
|
|
Export-Import Credit Agreement
|
U. S. Steel
|
Variable
|
2021
|
—
|
|
|
180
|
|
|
Environmental Revenue Bonds
|
U. S. Steel
|
4.125 - 6.750
|
2024 - 2050
|
717
|
|
|
717
|
|
|
Environmental Revenue Bonds
|
Big River Steel
|
4.500 - 4.750
|
2049
|
752
|
|
|
—
|
|
|
Finance leases and all other obligations
|
U. S. Steel
|
Various
|
2021 - 2029
|
80
|
|
|
81
|
|
|
Finance leases and all other obligations
|
Big River Steel
|
Various
|
2021 - 2031
|
119
|
|
|
—
|
|
|
Export Credit Agreement (ECA)
|
U. S. Steel
|
Variable
|
2031
|
136
|
|
|
113
|
|
|
Credit Facility Agreement, $2.0 billion
|
U. S. Steel
|
Variable
|
2024
|
—
|
|
|
500
|
|
|
Big River Steel ABL Facility, $350 million
|
Big River Steel
|
Variable
|
2022
|
30
|
|
|
—
|
|
|
USSK Credit Agreement
|
U. S. Steel Kosice
|
Variable
|
2023
|
205
|
|
|
368
|
|
|
USSK Credit Facilities
|
U. S. Steel Kosice
|
Variable
|
2021
|
—
|
|
|
—
|
|
|
Total Debt
|
|
|
|
5,844
|
|
|
5,115
|
|
|
Less unamortized discount, premium, and debt issuance costs
|
|
|
|
12
|
|
|
228
|
|
|
Less short-term debt and long-term debt due within one year
|
|
|
|
45
|
|
|
192
|
|
|
Long-term debt
|
|
|
|
$
|
5,787
|
|
|
$
|
4,695
|
|
To the extent not otherwise discussed below, information concerning the senior notes and other listed obligations can be found in Note 17 of the audited financial statements in the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Senior Secured Notes, Senior Notes and Export-Import Credit Agreement Repayments
The following debt repayments occurred during the three month period ended March 31, 2021:
•In January and February 2021, U. S. Steel voluntarily repaid in full all of the remaining outstanding principal of approximately $180 million and accrued interest under the Export-Import Credit Agreement. There were approximately $3 million in non-cash debt extinguishment costs associated with the repayment. The Export-Import Credit Agreement and related security interests were terminated in conjunction with the payment in full. No early termination penalties applied with respect to the prepayment.
•In March 2021, U. S. Steel completed an optional full redemption of its outstanding 12.000% Senior Secured Notes due 2025 for an aggregate principal amount of approximately $1.056 billion. There were redemption premiums and unamortized discount and debt issuance write-offs of approximately $181 million and $71 million, respectively related to the repayment.
•In March 2021, U. S. Steel completed open market repurchases of approximately $32 million and $19 million of aggregate principal of its 6.250% Senior Notes due 2026 and its 6.875% Senior Notes due 2025, respectively.
2029 Senior Notes
On February 11, 2021, U. S. Steel issued $750 million aggregate principal amount of 6.875% Senior Notes due 2029 (2029 Senior Notes). U. S. Steel received net proceeds of approximately $739 million after fees of approximately $11 million related to underwriting and third party expenses. The net proceeds from the issuance of the 2029 Senior Notes, together with the proceeds of our recent common stock issuance were used to redeem all of our outstanding 2025 Senior Secured Notes as discussed above. See Note 22 for further details regarding our recent common stock issuance. The 2029 Senior Notes will pay interest semi-annually in arrears on March 1 and September 1 of each year beginning on September 1, 2021, and will mature on March 1, 2029, unless earlier redeemed or repurchased.
On and after March 1, 2024, the Company may redeem the 2029 Senior Notes at its option, at any time in whole or from time to time in part, upon not less than 15 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount) listed below, plus accrued and unpaid interest on the 2029 Senior Notes, if any, to, but excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on March 1 of each of the years indicated below.
|
|
|
|
|
|
|
|
Year
|
Redemption Price
|
|
2024
|
103.438
|
%
|
|
2025
|
101.719
|
%
|
|
2026 and thereafter
|
100.000
|
%
|
At any time prior to March 1, 2024, U. S. Steel may also redeem the 2029 Senior Notes, 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 2029 Senior Notes to be redeemed, or the sum of the present value of the redemption price of the 2029 Senior Notes if they were redeemed on March 1, 2024 plus interest payments due through March 1, 2024 discounted to the date of redemption on a semi-annual basis at the applicable treasury yield, plus 50 basis points and accrued and unpaid interest, if any.
At any time prior to March 1, 2024 we may also purchase up to 35% of the original aggregate principal amount of the 2029 Senior Notes at 106.875%, plus accrued and unpaid interest, if any, up to, but excluding the applicable date of redemption, with proceeds from equity offerings.
Similar to our other senior notes, the indenture governing the 2029 Senior Notes restricts our ability to create certain liens, to enter into sale leaseback transactions and to consolidate, merge, transfer or sell all, or substantially all of our assets. It also contains provisions requiring that U. S. Steel make an offer to purchase the 2029 Senior Notes from holders upon a change of control under certain specified circumstances, as well as other customary provisions.
2029 Senior Secured Notes
On September 18, 2020, Big River Steel's indirect subsidiaries, Big River Steel LLC and BRS Finance Corp. (the "Issuers"), issued $900 million in aggregate principal amount of 6.625% Senior Secured Notes (Green Bonds) (2029 Senior Secured Notes). The 2029 Senior Secured Notes pay interest semi-annually in arrears on January 31 and July 31 of each year and will mature on January 31, 2029, unless earlier redeemed or repurchased.
On and after September 15, 2023, Big River Steel LLC may redeem the 2029 Senior Secured Notes 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 Notes, if any, to, but excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of each of the years indicated below.
|
|
|
|
|
|
|
|
Year
|
Redemption Price
|
|
2023
|
103.313
|
%
|
|
2024
|
101.656
|
%
|
|
2025 and thereafter
|
100.000
|
%
|
The obligations under the 2029 Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a secured basis by the Issuers’ parent company, BRS Intermediate Holdings LLC (“BRS Intermediate”), which is a direct subsidiary of Big River Steel, and by all future direct and indirect wholly owned domestic subsidiaries of the Issuers. Additionally, the 2029 Senior Secured Notes and related guarantees are secured by (i) first priority liens on most of the tangible and intangible assets of the Issuers and the guarantors and all of the equity interests of the Issuers held by BRS Intermediate (shared in equal priority with each other pari passu lien secured party) (ii) and second priority liens on accounts receivable, inventory and certain other related assets of the Issuers and the guarantors (shared in equal priority with each other pari passu lien secured party).
If the Issuers or BRS Intermediate experience specified change in control events the Issuers must make an offer to purchase the 2029 Senior Secured Notes. If the Issuers sell assets under specified circumstances, the Issuers must make an offer to purchase the 2029 Senior Secured Notes at a price equal to 100% of the aggregate principal amount plus accrued and unpaid interest. The Indenture also limits the ability of the Issuers and their restricted subsidiaries to: incur or guarantee additional indebtedness; pay dividends and make other restricted payments; make investments; consummate certain asset sales; engage in transactions with affiliates; grant or assume liens; and consolidate, merge or transfer all or substantially all of their assets. The Indenture also includes other customary events of default.
Big River Steel Environmental Revenue Bonds - Series 2019
On May 31, 2019, Arkansas Development Finance Authority (ADFA) issued $487 million of tax-exempt bonds and loaned 100% of the proceeds to Big River Steel LLC under a bond financing agreement to finance the expansion of Big River Steel's electric arc furnace steel mill and fund the issuance cost of the bonds (2019 ADFA Bonds). The 2019 ADFA Bonds accrue interest at the rate of 4.50% per annum payable semiannually on March 1 and September 1 of each year with a final maturity of September 1, 2049.
The 2019 ADFA Bonds are subject to optional redemption during the periods and at the redemption prices shown below plus, in each case, accrued interest.
|
|
|
|
|
|
|
|
Year
|
Redemption Price
|
|
September 1, 2026 to August 31, 2027
|
103
|
%
|
|
September 1, 2027 to August 31, 2028
|
102
|
%
|
|
September 1, 2028 to August 31, 2029
|
101
|
%
|
|
On and after September 1, 2029
|
100
|
%
|
Prior to September 1, 2026, the 2019 ADFA Bonds are not redeemable.
The 2019 ADFA Bonds are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by first priority liens on most of the tangible and intangible assets and second priority liens on accounts receivable, inventory and certain other related assets of BRS Intermediate and by all future direct and indirect wholly owned domestic subsidiaries of the Issuers.
The 2019 ADFA Bonds are subject to certain mandatory sinking fund redemption provisions beginning in 2040, as well as extraordinary mandatory redemption, at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the date fixed for redemption, from surplus funds at the earlier of the completion of the tax-exempt project or expiration of a certain period for construction financings, and upon an event of taxability. The 2019 ADFA Bonds are subject to substantially similar asset sale offer and change of control offer provisions, affirmative and negative covenants, events of default and remedies as the Indenture governing the 2029 Senior Secured Notes.
Big River Steel Environmental Revenue Bonds - Series 2020
On September 10, 2020, ADFA issued $265 million of tax-exempt bonds with a green bond designation and loaned 100% of the proceeds to Big River Steel LLC under a bond financing agreement to finance or refinance the expansion of Big River Steel's electric arc furnace steel mill and fund the issuance cost of the bonds (2020 ADFA Bonds). The 2020 ADFA Bonds accrue interest at 4.75% per annum payable semi-annually on March 1 and September 1 of each year with final maturity on September 1, 2049.
The 2020 ADFA Bonds are subject to optional redemption during the periods and at the redemption prices shown below, plus, in each case accrued interest.
|
|
|
|
|
|
|
|
Year
|
Redemption Price
|
|
September 1, 2027 to August 31, 2028
|
103
|
%
|
|
September 1, 2028 to August 31, 2029
|
102
|
%
|
|
September 1, 2029 to August 31, 2030
|
101
|
%
|
|
On and after September 1, 2030
|
100
|
%
|
At any time prior to September 1, 2027, Big River Steel LLC may also redeem the 2020 ADFA Bonds, at its 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 2020 ADFA Bonds to be redeemed, or the present value of the redemption price of the 2020 ADFA Bonds if they were redeemed on September 1, 2027 plus interest payments due through September 1, 2027 discounted to the date of redemption on a semi-annual basis at the applicable tax exempt municipal bond rate and accrued and unpaid interest to the date fixed for redemption.
The 2020 ADFA Bonds are fully and unconditionally guaranteed, jointly and severally, on a secured basis by certain of Big River Steel's subsidiaries and subject to first priority liens and second priority liens on certain Big River Steel collateral.
The 2020 ADFA Bonds are subject to substantially similar asset sale offer and change of control offer provisions, affirmative and negative covenants, events of default and remedies as the Indenture governing the 2029 Senior Secured Notes.
Arkansas Teacher Retirement System Notes Payable
Big River Steel entered into three financing agreements with the Arkansas Teacher Retirement System during 2018 and 2019. The interest rates on the notes range from 5.50% to 7.75% at present. Interest on these agreements may be paid-in-kind through the respective dates of maturity and therefore requires no interim debt service by Big River Steel prior to the date of maturity or early repayment, as the case may be. Big River Steel may prepay amounts owed under these agreements at any time without penalty. One such agreement has the benefit of a pledge of future income streams generated through an anticipated monetization of recycling tax credits provided by the State of Arkansas in conjunction with the expansion of Big River Steel. As of March 31, 2021, the outstanding balance for these financing agreements was $106 million.
Big River Steel ABL Facility
On August 23, 2017, subsidiaries of Big River Steel entered into a senior secured asset-based revolving credit facility and subsequently amended such facility (Big River Steel ABL Facility) by entering into the First Amendment to the Big River Steel ABL Credit Agreement, dated as of September 10, 2020. The Big River Steel ABL 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.
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. The Big River Steel ABL Facility matures on August 23, 2022. The outstanding principal balance was $30 million at March 31, 2021. Availability under the Big River Steel ABL Facility, pursuant to the available borrowing base was $251 million at March 31, 2021.
The Big River Steel ABL Facility provides for borrowings at interest rates based on defined, short-term market rates plus a spread based on availability. The Big River Steel ABL Facility also requires a commitment fee on the unused portion of the Big River Steel ABL Facility, determined quarterly based on Big River Steel LLC's utilization levels.
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 March 31, 2021, Big River steel would have met the fixed charge coverage ratio test. The Big River Steel ABL Facility includes affirmative and negative covenants that are customary for facilities of this type. The Big River Steel ABL Facility also includes customary events of default.
Credit Facility Agreement
As of March 31, 2021, there were approximately $5 million of letters of credit issued, and no loans drawn under the $2.0 billion Fifth Amended and Restated Credit Facility Agreement (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 total aggregate commitments and $200 million. Based on the most recent four quarters as of March 31, 2021, the Company would not have met the fixed charge coverage ratio test; therefore, the amount available to the Company under this facility is effectively reduced by $200 million. In addition, since the value of our inventory and trade accounts receivable less specified reserves calculated in accordance with the Credit Facility Agreement do not support the full amount of the facility at March 31, 2021, the amount available to the Company under this facility was further reduced by $252 million. The availability under the Credit Facility Agreement was $1.543 billion as of March 31, 2021.
The Credit Facility Agreement provides for borrowings at interest rates based on defined, short-term market rates plus a spread based on availability and includes other customary terms and conditions including restrictions on our ability to create certain liens and to consolidate, merge or transfer all, or substantially all, of our assets. The Credit Facility Agreement expires in October 2024. Maturity may be accelerated 91 days prior to the stated maturity of any outstanding senior debt if excess cash and credit facility availability do not meet the liquidity conditions set forth in the Credit Facility Agreement. Borrowings are secured by liens on certain North American inventory and trade accounts receivable. Availability under this facility may be impacted by additional footprint decisions that are made to the extent the value of the collateral pool of inventory and accounts receivable that support our borrowing availability are reduced.
The Credit Facility Agreement has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition that is not disclosed in our last published financial results. The facility also has customary defaults, including a cross-default to material indebtedness of U. S. Steel and our subsidiaries.
On September 30, 2020, U. S. Steel entered into Amendment No. 1 to the Credit Facility Agreement to permit U. S. Steel and United States Steel International Inc. to enter into, and grant the applicable collateral pursuant to, the Export-Import Credit Agreement.
On March 26, 2021, U. S. Steel entered into an Amendment No. 2 to the Credit Facility Agreement to change certain procedures related to letters of credit issued under the Credit Facility Agreement, and to modify certain collateral eligibility criteria.
U. S. Steel Košice (USSK) Credit Facilities
At March 31, 2021, USSK had borrowings of €175 million (approximately $205 million) under its €460 million (approximately $539 million) revolving credit facility (USSK Credit Agreement). The USSK Credit Agreement expires in September 2023. The USSK Credit Agreement contains certain USSK specific financial covenants including a minimum stockholders' equity and subordinated debt to assets ratio and net debt to EBITDA ratio. The covenants are measured semi-annually at June and December each year for the period covering the last twelve calendar months, with the first net debt to EBITDA measurement occurring at June 2021. USSK must maintain a net debt to EBITDA ratio of less than 6.5 as of June 30, 2021 and 3.5 for semi-annual measurements starting December 31, 2021. If covenant compliance requirements are not met and the covenants are not amended or waived, noncompliance may result in an event of default, in which case USSK may not draw upon the facility, and the majority lenders, as defined in the USSK Credit Agreement, may cancel any and all commitments, and/or accelerate full repayment of any or all amounts outstanding under the USSK Credit Agreement. An event of default under the USSK Credit Agreement could also result in an event of default under the Credit Facility Agreement.
The USSK Credit Agreement contains customary representations and warranties, terms and conditions, including, as a condition to borrowing, that it met certain financial covenants since the last measurement date, and that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, and representations as to no material adverse change in our business or financial condition since December 31, 2017. The USSK Credit Facility Agreement also contains customary events of default, including a cross-default upon acceleration of material indebtedness of USSK and its subsidiaries.
At March 31, 2021, USSK had no borrowings under its €20 million and €10 million credit facilities (collectively, approximately $35 million) and the availability was approximately $28 million due to approximately $7 million of customs and other guarantees outstanding.
Each of these facilities bear interest at the applicable inter-bank offer rate plus a margin and contain customary terms and conditions.
Change in control event
If there is a change in control of U. S. Steel, the following may occur: (a) debt obligations totaling $4,112 million as of March 31, 2021 may be declared due and payable; and (b) substantially all of our debt arrangements may be terminated and any amounts declared due and payable. If there is a future change in control of either Big River Steel or USSK, debt obligations of $956 million and $205 million as of March 31, 2021 may be declared due and payable, respectively.
16. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, current accounts and notes receivable, accounts payable, bank checks outstanding, 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.
Big River Steel
On October 31, 2019, a wholly owned subsidiary of U. S. Steel purchased a 49.9% ownership interest in Big River Steel. The transaction included a call option (U. S. Steel Call Option) to acquire the remaining equity interest within the next four years at an agreed-upon price formula. The investment purchase included other options that were marked to fair value during 2020. The net change in fair value of the options during the three months ended March 31, 2020 resulted in an $11 million decrease to other financial costs. When the U. S. Steel Call Option was exercised on December 8, 2020, the other options were legally extinguished and a new contingent forward asset was recorded for $11 million. As the contingent forward was a contract to purchase a business, it was no longer considered a derivative subject to ASC 815, Derivative Instruments and Hedging Activities, and was not subject to subsequent fair value adjustments. The contingent forward asset was removed with the recognition of the gain on the previously held investment in Big River Steel when the purchase of the remaining interest closed on January 15, 2021. See Note 20 in the Consolidated Financial Statements in our Annual Report on Form 10-K for the year-ended December 31, 2020 and Note 5 for further details.
Prior to exercise of the U. S. Steel Call Option, the options were marked to fair value each period using a Monte Carlo simulation which is considered a Level 3 valuation technique. Level 3 valuation techniques include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement. The simulation relied on assumptions that included Big River Steel's equity value, volatility, the risk free interest rate and U. S. Steel's credit spread.
Stelco Option for Minntac Mine Interest
On April 30, 2020 (the Effective Date), the Company entered into an Option Agreement with Stelco, Inc. (Stelco), that grants Stelco the option to purchase a 25 percent interest (the Option Interest) in a to-be-formed entity (the Joint Venture) that will own the Company’s current iron ore mine located in Mt. Iron, Minnesota (the Minntac Mine). As consideration for the Option, Stelco paid the Company an aggregate amount of $100 million in five $20 million installments, which began on the Effective Date and ended on December 31, 2020 and are recorded net of transaction costs in noncontrolling interest in the Condensed Consolidated Balance Sheet. 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 March 31, 2021 and December 31, 2020. The fair value of long-term debt was determined using Level 2 inputs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In millions)
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Short-term and long-term debt (a)
|
$
|
6,196
|
|
|
$
|
5,527
|
|
|
$
|
5,323
|
|
|
$
|
4,806
|
|
(a) Excludes finance lease obligations.
17. Statement of Changes in Stockholders’ Equity
The following table reflects the first three months of 2021 and 2020 reconciliation of the carrying amount of total equity, equity attributable to U. S. Steel and equity attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021 (In millions)
|
Total
|
Accumulated Deficit
|
Accumulated
Other
Comprehensive
Loss
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 (In millions)
|
Total
|
Retained Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Common
Stock
|
Treasury
Stock
|
Paid-in
Capital
|
Non-
Controlling
Interest
|
|
Balance at beginning of year
|
$
|
4,093
|
|
$
|
544
|
|
$
|
(478)
|
|
$
|
179
|
|
$
|
(173)
|
|
$
|
4,020
|
|
$
|
1
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Net loss
|
(391)
|
|
(391)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
Pension and other benefit adjustments
|
52
|
|
—
|
|
52
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Currency translation adjustment
|
(23)
|
|
—
|
|
(23)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Derivative financial instruments
|
(5)
|
|
—
|
|
(5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Employee stock plans
|
2
|
|
—
|
|
—
|
|
—
|
|
(2)
|
|
4
|
|
—
|
|
|
Dividends paid on common stock
|
(2)
|
|
(2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Balance at March 31, 2020
|
$
|
3,726
|
|
$
|
151
|
|
$
|
(454)
|
|
$
|
179
|
|
$
|
(175)
|
|
$
|
4,024
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18. Reclassifications from Accumulated Other Comprehensive Income (AOCI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Pension and
Other Benefit
Items
|
|
Foreign
Currency
Items
|
|
Unrealized Gain (Loss) on Derivatives
|
|
Total
|
|
Balance at December 31, 2020
|
$
|
(458)
|
|
|
$
|
449
|
|
|
$
|
(38)
|
|
|
$
|
(47)
|
|
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
(47)
|
|
|
(34)
|
|
|
(81)
|
|
|
Amounts reclassified from AOCI (a)
|
24
|
|
|
—
|
|
|
14
|
|
|
38
|
|
|
Net current-period other comprehensive income (loss)
|
24
|
|
|
(47)
|
|
|
(20)
|
|
|
(43)
|
|
|
Balance at March 31, 2021
|
$
|
(434)
|
|
|
$
|
402
|
|
|
$
|
(58)
|
|
|
$
|
(90)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
(843)
|
|
|
$
|
381
|
|
|
$
|
(16)
|
|
|
$
|
(478)
|
|
|
Other comprehensive income (loss) before reclassifications
|
7
|
|
|
(23)
|
|
|
(17)
|
|
|
(33)
|
|
|
Amounts reclassified from AOCI (a)
|
45
|
|
|
—
|
|
|
12
|
|
|
57
|
|
|
Net current-period other comprehensive income (loss)
|
52
|
|
|
(23)
|
|
|
(5)
|
|
|
24
|
|
|
Balance at March 31, 2020
|
$
|
(791)
|
|
|
$
|
358
|
|
|
$
|
(21)
|
|
|
$
|
(454)
|
|
(a)See table below for further details.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount reclassified from AOCI (a)
|
|
|
Three Months Ended March 31,
|
|
|
|
Details about AOCI components (in millions)
|
2021
|
|
2020
|
|
|
|
|
|
Amortization of pension and other benefit items
|
|
|
|
|
|
|
|
|
Prior service costs (a)
|
$
|
(7)
|
|
|
$
|
(2)
|
|
|
|
|
|
|
Actuarial losses (a)
|
31
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPI Purchase Accounting Adjustment
|
—
|
|
|
23
|
|
|
|
|
|
|
Total pensions and other benefits items
|
24
|
|
|
53
|
|
|
|
|
|
|
Derivative reclassifications to Condensed Consolidated Statements of Operations
|
15
|
|
|
12
|
|
|
|
|
|
|
Total before tax
|
39
|
|
|
65
|
|
|
|
|
|
|
Tax provision
|
(1)
|
|
|
(8)
|
|
|
|
|
|
|
Net of tax
|
$
|
38
|
|
|
$
|
57
|
|
|
|
|
|
(a)These AOCI components are included in the computation of net periodic benefit cost (see Note 10 for additional details).
19. Transactions with Related Parties
Related party sales and service transactions are primarily related to equity investees and were $295 million and $351 million for the three months ended March 31, 2021 and 2020.
Accounts payable to related parties include balances due to PRO-TEC Coating Company, LLC (PRO-TEC) of $124 million and $86 million at March 31, 2021 and December 31, 2020, respectively for invoicing and receivables collection services provided by U. S. Steel on PRO-TEC's behalf. U. S. Steel, as PRO-TEC’s exclusive sales agent, is responsible for credit risk related to those receivables. U. S. Steel also provides PRO-TEC marketing, selling and customer service functions. Payables to other related parties totaled $2 million and $19 million for the periods ending March 31, 2021 and December 31, 2020, respectively.
Purchases from related parties for outside processing services provided by equity investees amounted to $20 million and $28 million for the three months ended March 31, 2021 and 2020, respectively. Purchases of iron ore pellets from related parties amounted to $24 million and $18 million for the three months ended March 31, 2021 and 2020, respectively.
Upon the acquisition of Big River Steel on January 15, 2021, there were related party payables of approximately $27 million for steel substrate sales from Big River Steel to U. S. Steel. After the acquisition, the related party payables became intercompany payables that are eliminated in consolidation.
Upon the acquisition of UPI on February 29, 2020 there were $135 million of related party receivables for prior sales of steel substrate from U. S. Steel to UPI. After the acquisition, the related party receivables became intercompany receivables that are eliminated in consolidation.
20. Restructuring and Other Charges
During the three months ended March 31, 2021, the Company recorded insignificant restructuring and other charges of $6 million. Cash payments were made related to severance and exit costs of approximately $29 million.
During the three months ended March 31, 2020, the Company recorded restructuring and other charges of $41 million, which consists of charges of $22 million for the indefinite idling of a significant portion of Great Lakes Works, $13 million for the indefinite idling of Lorain Tubular Operations and a significant portion of Lone Star Tubular Operations and $6 million for special pension termination charges related to the Company-wide headcount reductions. Cash payments were made related to severance and exit costs of $8 million.
The activity in the accrued balances incurred in relation to restructuring programs during the three months ended March 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Employee Related Costs
|
Exit Costs
|
Non-cash Charges
|
Total
|
|
Balance at December 31, 2020
|
$
|
51
|
|
$
|
126
|
|
$
|
—
|
|
$
|
177
|
|
|
Additional charges
|
3
|
|
2
|
|
1
|
|
6
|
|
|
Cash payments/utilization
|
(12)
|
|
(17)
|
|
(1)
|
|
(30)
|
|
|
Balance at March 31, 2021
|
$
|
42
|
|
$
|
111
|
|
$
|
—
|
|
$
|
153
|
|
Accrued liabilities for restructuring programs are included in the following balance sheet lines:
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2021
|
December 31, 2020
|
|
Accounts payable
|
$
|
37
|
|
$
|
34
|
|
|
Payroll and benefits payable
|
20
|
|
29
|
|
|
Employee benefits
|
22
|
|
22
|
|
|
Deferred credits and other noncurrent liabilities
|
74
|
|
92
|
|
|
Total
|
$
|
153
|
|
$
|
177
|
|
21. Contingencies and Commitments
U. S. Steel is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the Condensed Consolidated Financial Statements. However, management believes that U. S. Steel will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.
U. S. Steel accrues for estimated costs related to existing lawsuits, claims and proceedings when it is probable that it will incur these costs in the future and the costs are reasonably estimable.
Asbestos matters – As of March 31, 2021, U. S. Steel was a defendant in approximately 895 active cases involving approximately 2,485 plaintiffs. The vast majority of these cases involve multiple defendants. About 1,550, or approximately 62 percent, of these plaintiff claims are currently pending in a jurisdiction which permits filings with massive numbers of plaintiffs. At December 31, 2020, U. S. Steel was a defendant in approximately 855 cases involving approximately 2,445 plaintiffs. Based upon U. S. Steel’s experience in such cases, it believes that the actual number of plaintiffs who ultimately assert claims against U. S. Steel will likely be a small fraction of the total number of plaintiffs.
The following table shows the number of asbestos claims in the current period and the prior three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended
|
|
Opening
Number
of Claims
|
|
Claims
Dismissed,
Settled and
Resolved (a)
|
|
New Claims
|
|
Closing
Number
of Claims
|
|
December 31, 2018
|
|
3,315
|
|
1,285
|
|
290
|
|
2,320
|
|
December 31, 2019
|
|
2,320
|
|
195
|
|
265
|
|
2,390
|
|
December 31, 2020
|
|
2,390
|
|
240
|
|
295
|
|
2,445
|
|
March 31, 2021
|
|
2,445
|
|
35
|
|
75
|
|
2,485
|
(a) The period ending December 31, 2018 includes approximately 1,000 dismissed cases previously pending in the State of Texas.
The amount U. S. Steel accrues for pending asbestos claims is not material to U. S. Steel’s financial condition. However, U. S. Steel is unable to estimate the ultimate outcome of asbestos-related claims due to a number of uncertainties, including: (1) the rates at which new claims are filed, (2) the number of and effect of bankruptcies of other companies traditionally defending asbestos claims, (3) uncertainties associated with the variations in the litigation process from jurisdiction to jurisdiction, (4) uncertainties regarding the facts, circumstances and disease process with each claim, and (5) any new legislation enacted to address asbestos-related claims.
Further, U. S. Steel does not believe that an accrual for unasserted claims is required. At any given reporting date, it is probable that there are unasserted claims that will be filed against the Company in the future. In 2020 and 2019, the Company engaged an outside valuation consultant to assist in assessing its ability to estimate an accrual for unasserted claims. This assessment was based on the Company's settlement experience, including recent claims trends. The analysis focused on settlements made over the last several years as these claims are likely to best represent future claim characteristics. After review by the valuation consultant and U. S. Steel management, it was determined that the Company could not estimate an accrual for unasserted claims.
Despite these uncertainties, management believes that the ultimate resolution of these matters will not have a material adverse effect on U. S. Steel’s financial condition.
Environmental matters – U. S. Steel is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. Changes in accrued liabilities for remediation activities where U. S. Steel is identified as a named party are summarized in the following table:
|
|
|
|
|
|
|
|
(In millions)
|
Three Months Ended March 31, 2021
|
|
Beginning of period
|
$
|
146
|
|
|
Accruals for environmental remediation deemed probable and reasonably estimable
|
2
|
|
|
Obligations settled
|
(5)
|
|
|
End of period
|
$
|
143
|
|
Accrued liabilities for remediation activities are included in the following Condensed Consolidated Balance Sheet lines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Accounts payable and other accrued liabilities
|
|
$
|
43
|
|
|
$
|
43
|
|
|
Deferred credits and other noncurrent liabilities
|
|
100
|
|
|
103
|
|
|
Total
|
|
$
|
143
|
|
|
$
|
146
|
|
Expenses related to remediation are recorded in cost of sales and were immaterial for both the three-month periods ended March 31, 2021 and March 31, 2020. It is not currently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Due to uncertainties inherent in remediation projects and the associated liabilities, it is reasonably possible that total remediation costs for active matters may exceed the accrued liabilities by as much as 20 to 30 percent.
Remediation Projects
U. S. Steel is involved in environmental remediation projects at or adjacent to several current and former U. S. Steel facilities and other locations that are in various stages of completion ranging from initial characterization through post-closure monitoring. Based on the anticipated scope and degree of uncertainty of projects, the Company categorizes projects as follows:
(1)Projects with Ongoing Study and Scope Development - Projects which are still in the development phase. For these projects, the extent of remediation that may be required is not yet known, the remediation methods and plans are not yet developed, and/or cost estimates cannot be determined. Therefore, significant costs, in addition to the accrued liabilities for these projects, are reasonably possible. There are four environmental remediation projects where additional costs for completion are not currently estimable, but could be material. These projects are at Fairfield Works, Lorain Tubular, USS-POSCO Industries (UPI), and the former steelmaking plant at Joliet, Illinois. As of March 31, 2021, accrued liabilities for these projects totaled $1 million for the costs of studies, investigations, interim measures, design and/or remediation. It is reasonably possible that additional liabilities associated with future requirements regarding studies, investigations, design and remediation for these projects could be as much as $22 million to $36 million.
(2)Significant Projects with Defined Scope - Projects with significant accrued liabilities with a defined scope. As of March 31, 2021, there are four significant projects with defined scope greater than or equal to $5 million each, with a total accrued liability of $85 million. These projects are Gary Resource Conservation and Recovery Act (RCRA) (accrued liability of $25 million), the former Geneva facility (accrued liability of $20 million), the Cherryvale zinc site (accrued liability of $5 million) and the former Duluth facility St. Louis River Estuary (accrued liability of $35 million).
(3)Other Projects with a Defined Scope - Projects with relatively small accrued liabilities for which we believe that, while additional costs are possible, they are not likely to be significant, and also include those projects for which we do not yet possess sufficient information to estimate potential costs to U. S. Steel. There are three other environmental remediation projects which each had an accrued liability of between $1 million and $5 million. The total accrued liability for these projects at March 31, 2021 was $5 million. These projects have progressed through a significant portion of the design phase and material additional costs are not expected.
The remaining environmental remediation projects each have an accrued liability of less than $1 million each. The total accrued liability for these projects at March 31, 2021 was approximately $3 million. The Company does not foresee material additional liabilities for any of these sites.
Post-Closure Costs – Accrued liabilities for post-closure site monitoring and other costs at various closed landfills totaled $23 million at March 31, 2021 and were based on known scopes of work.
Administrative and Legal Costs – As of March 31, 2021, U. S. Steel had an accrued liability of $13 million for administrative and legal costs related to environmental remediation projects. These accrued liabilities were based on projected administrative and legal costs for the next three years and do not change significantly from year to year.
Capital Expenditures – For a number of years, U. S. Steel has made substantial capital expenditures to comply with various regulations, laws and other requirements relating to the environment. In the first three months of 2021 and 2020, such capital expenditures totaled $3 million and $4 million, respectively. U. S. Steel anticipates making additional such expenditures in the future, which may be material; however, the exact amounts and timing of such expenditures are uncertain because of the continuing evolution of specific regulatory requirements.
EU Environmental Requirements - Under the EU Emissions Trading System (EU ETS), USSE's final allocation for the Phase III period, which covered the years 2013 through 2020 was 48 million European Union Allowances (EUA). During the years 2017 - 2020 we purchased approximately 12.3 million EUA totaling €141 million (approximately $165 million) to cover the Phase III period shortfall of EUA.
Phase IV commenced on 1 January 2021 and will finish on 31 December 2030. The decision on USSE’s free allocation for the first five years of the Phase IV period is expected by the end of June 2021. In the fourth quarter of 2020 USSE started with purchases of EUA for Phase IV period. As of March 31, 2021, we have pre-purchased approximately 1.6 million EUA totaling €38 million (approximately $46 million).
The EU’s Industrial Emissions Directive requires implementation of EU determined best available techniques (BAT) for Iron and Steel production to reduce environmental impacts as well as compliance with BAT associated emission levels. Total capital expenditures for projects to comply with or go beyond BAT requirements were €138 million (approximately $162 million) over the actual program period. These costs were partially offset by the EU funding received and may be mitigated over the next measurement periods if USSK complies with certain financial covenants, which are assessed annually. USSK complied with these covenants as of March 31, 2021. If we are unable to meet these covenants in the future, USSK might be required to provide additional collateral (e.g. bank guarantee) to secure 50 percent of the EU funding received.
Environmental indemnifications – Throughout its history, U. S. Steel has sold numerous properties and businesses and many of these sales included indemnifications and cost sharing agreements related to the assets that were divested. The amount of potential environmental liability associated with these transactions and properties is not estimable due to the nature and extent of the unknown conditions related to the properties divested and deconsolidated. Aside from the environmental liabilities already recorded as a result of these transactions due to specific environmental remediation activities and cases (included in the $143 million of accrued liabilities for remediation discussed above), there are no other known probable and estimable environmental liabilities related to these transactions.
Guarantees – The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $7 million at March 31, 2021.
Other contingencies – Under certain operating lease agreements covering various equipment, U. S. Steel has the option to renew the lease or to purchase the equipment at the end of the lease term. If U. S. Steel does not exercise the purchase option by the end of the lease term, U. S. Steel guarantees a residual value of the equipment as determined at the lease inception date (totaling approximately $22 million at March 31, 2021). No liability has been recorded for these guarantees as the potential loss is not probable.
Insurance – U. S. Steel maintains insurance for certain property damage, equipment, business interruption and general liability exposures; however, insurance is applicable only after certain deductibles and retainages. U. S. Steel is self-insured for certain other exposures including workers’ compensation (where permitted by law) and auto liability. Liabilities are recorded for workers’ compensation and personal injury obligations. Other costs resulting from losses under deductible or retainage amounts or not otherwise covered by insurance are charged against income upon occurrence.
U. S. Steel uses surety bonds, trusts and letters of credit to provide whole or partial financial assurance for certain obligations such as workers’ compensation. The total amount of active surety bonds, trusts and letters of credit being used for financial assurance purposes was approximately $220 million as of March 31, 2021, which reflects U. S. Steel’s maximum exposure under these financial guarantees, but not its total exposure for the underlying obligations. A significant portion of our trust arrangements and letters of credit are collateralized by the Credit Facility Agreement. The remaining trust arrangements and letters of credit are collateralized by restricted cash. Restricted cash, which is recorded in other current and noncurrent assets, totaled $129 million and $133 million at March 31, 2021 and December 31, 2020, respectively.
Capital Commitments – At March 31, 2021, U. S. Steel’s contractual commitments to acquire property, plant and equipment totaled $588 million.
Contractual Purchase Commitments – U. S. Steel is obligated to make payments under contractual purchase commitments, including unconditional purchase obligations. Payments for contracts with remaining terms in excess of one year are summarized below (in millions):
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Remainder of 2021
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2022
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2023
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2024
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2025
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Later
Years
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Total
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$865
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$1,076
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$453
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$215
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$188
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$836
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$3,633
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The majority of U. S. Steel’s unconditional purchase obligations relates to the supply of industrial gases, and certain energy and utility services with terms ranging from two to 15 years. Unconditional purchase obligations also include coke and steam purchase commitments related to a coke supply agreement with Gateway Energy & Coke Company LLC (Gateway) under which Gateway is obligated to supply a minimum volume of the expected targeted annual production of the heat recovery coke plant, and U. S. Steel is obligated to purchase the coke from Gateway at the contract price. As of March 31, 2021, if U. S. Steel were to terminate the agreement, it may be obligated to pay in excess of $103 million.
Total payments relating to unconditional purchase obligations were $200 million and $168 million for the three months ended March 31, 2021 and 2020, respectively.
22. Common Stock Issued
During February 2021, we issued 48,300,000 shares of common stock for net proceeds of approximately $791 million.
23. Subsequent Events
Mon Valley Works Endless Casting and Rolling Project
On April 12, 2021, United States Steel Corporation entered into a Notice and Acknowledgement with the Export Credit Agreement (ECA) lender, facility agent and ECA agent, KFW IPEX-BANK GMBH to acknowledge that the previously announced endless casting and rolling project at Mon Valley Works would no longer be pursued and the associated equipment for the project is now being evaluated for other uses. Use of the Export Credit Agreement for further equipment purchases is also being evaluated. As of March 31, 2021, U. S. Steel has capitalized approximately $200 million related to the project. At this time, we do not expect that these actions will have a material impact on our operations or financial results.
Debt Repayments
The following debt repayments occurred after March 31, 2021:
•During April 2021, U. S. Steel completed open market repurchases of approximately $18 million and $14 million of aggregate principal of its 6.250% Senior Notes due 2026 and its 6.875% Senior Notes due 2025, respectively.
•During April 2021, payments of €50 million (approximately $60 million) were made on the USSK Credit Facility.
•On April 30, 2021, a payment of approximately $30 million was made on the Big River Steel ABL Facility.