Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 23, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | X | |
Entity Registrant Name | UNITED STATES STEEL CORP | |
Entity Central Index Key | 0001163302 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 143,383,893 |
CONSOLIDATED STATEMENT OF OPERA
CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Net sales: | ||
Net sales | $3,615 | $2,605 |
Net sales to related parties (Note 18) | 281 | 145 |
Total | 3,896 | 2,750 |
Operating expenses (income): | ||
Cost of sales (excludes items shown below) | 3,639 | 3,007 |
Selling, general and administrative expenses | 148 | 143 |
Depreciation, depletion and amortization (Note 6) | 165 | 158 |
Loss from investees | 5 | 21 |
Net gain on disposal of assets (Notes 4 and 19) | (3) | (97) |
Other income, net | (1) | (4) |
Total | 3,953 | 3,228 |
Loss from operations | (57) | (478) |
Interest expense | 43 | 36 |
Interest income | (3) | (2) |
Other financial costs (Note 8) | 68 | 37 |
Net interest and other financial costs | 108 | 71 |
Loss before income taxes | (165) | (549) |
Income tax benefit (Note 9) | (7) | (110) |
Net loss | (158) | (439) |
Less: Net loss attributable to noncontrolling interests | (1) | |
Net loss attributable to United States Steel Corporation | ($157) | ($439) |
Net loss per share attributable to United States Steel Corporation shareholders: | ||
- Basic | -1.1 | -3.78 |
- Diluted | -1.1 | -3.78 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | $1,386 | $1,218 |
Receivables, less allowance of $39 in both periods | 1,811 | 1,423 |
Receivables from related parties (Note 18) | 151 | 144 |
Inventories (Note 11) | 1,647 | 1,679 |
Income tax receivable (Note 9) | 21 | 214 |
Deferred income tax benefits (Note 9) | 297 | 299 |
Other current assets | 87 | 38 |
Total current assets | 5,400 | 5,015 |
Property, plant and equipment | 15,662 | 16,030 |
Less accumulated depreciation and depletion | 9,253 | 9,210 |
Total property, plant and equipment, net | 6,409 | 6,820 |
Investments and long-term receivables, less allowance of $22 in both periods | 658 | 695 |
Intangibles - net (Note 6) | 281 | 281 |
Goodwill (Note 6) | 1,754 | 1,725 |
Assets held for sale (Note 5) | 45 | 33 |
Deferred income tax benefits (Note 9) | 482 | 535 |
Other noncurrent assets | 298 | 318 |
Total assets | 15,327 | 15,422 |
Current liabilities: | ||
Accounts payable | 1,585 | 1,396 |
Accounts payable to related parties (Note 18) | 68 | 61 |
Bank checks outstanding | 14 | 23 |
Payroll and benefits payable | 711 | 854 |
Accrued taxes (Note 9) | 133 | 89 |
Accrued interest | 52 | 32 |
Short-term debt and current maturities of long-term debt (Note 13) | 21 | 19 |
Total current liabilities | 2,584 | 2,474 |
Long-term debt, less unamortized discount (Note 13) | 3,651 | 3,345 |
Employee benefits | 4,104 | 4,143 |
Deferred credits and other noncurrent liabilities | 431 | 481 |
Total liabilities | 10,770 | 10,443 |
Contingencies and commitments (Note 19) | ||
Stockholders' Equity (Note 17): | ||
Common stock (150,925,911 shares issued) (Note 10) | 151 | 151 |
Treasury stock, at cost (7,549,453 and 7,575,724 shares) | (606) | (608) |
Additional paid-in capital | 3,653 | 3,652 |
Retained earnings | 4,044 | 4,209 |
Accumulated other comprehensive loss | (2,686) | (2,728) |
Total United States Steel Corporation stockholders' equity | 4,556 | 4,676 |
Noncontrolling interests (Note 15) | 1 | 303 |
Total liabilities and stockholders' equity | $15,327 | $15,422 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
Receivables, allowance | $39 | $39 |
Investments and long-term receivables, allowance | $22 | $22 |
Common stock, shares issued | 150,925,911 | 150,925,911 |
Treasury stock, shares | 7,549,453 | 7,575,724 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating activities: | ||
Net loss | ($158) | ($439) |
Adjustments to reconcile to net cash provided by operating activities: | ||
Depreciation, depletion and amortization (Note 6) | 165 | 158 |
Provision for doubtful accounts | 3 | (3) |
Pensions and other postretirement benefits | (150) | 1 |
Deferred income taxes | 15 | (165) |
Net gain on disposal of assets (Notes 4 and 19) | (3) | (97) |
Distributions received, net of equity investees income | 8 | 28 |
Changes in: | ||
Current receivables | (426) | 722 |
Inventories | (11) | 350 |
Current accounts payable and accrued expenses | 269 | (344) |
Income taxes receivable/payable (Note 9) | 218 | 61 |
Bank checks outstanding | (9) | 1 |
Foreign currency translation | 51 | 61 |
All other, net | (31) | (25) |
Net cash (used in) provided by operating activities | (59) | 309 |
Investing activities: | ||
Capital expenditures | (125) | (118) |
Capital expenditures - variable interest entities (Note 15) | (45) | |
Disposal of assets | 65 | 303 |
Restricted cash, net | 6 | (2) |
Investments, net | (10) | (22) |
Net cash (used in) provided by investing activities | (64) | 116 |
Financing activities: | ||
Issuance of long-term debt, net of financing costs | 582 | |
Repayment of borrowings under revolving credit facilities | (270) | |
Repayment of long-term debt | (4) | (4) |
Common stock issued | 1 | |
Distributions from noncontrolling interests | 37 | |
Dividends paid | (7) | (35) |
Net cash provided by (used in) financing activities | 302 | (2) |
Effect of exchange rate changes on cash | (11) | (16) |
Net increase in cash and cash equivalents | 168 | 407 |
Cash and cash equivalents at beginning of year | 1,218 | 724 |
Cash and cash equivalents at end of period | $1,386 | $1,131 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation | 1. Basis of Presentation United States Steel Corporation (U. S. Steel) produces and sells steel mill products, including flat-rolled and tubular products, in North America and Central Europe. Operations in North America also include transportation services (railroad and barge operations), real estate operations and engineering consulting services. 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. The other information in these financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These 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 accounting principles generally accepted in the United States of America for complete financial statements. Additional information is contained in the United States Steel Corporation Annual Report on Form 10-K for the year ended December31, 2009. |
New Accounting Standards
New Accounting Standards | |
3 Months Ended
Mar. 31, 2010 | |
New Accounting Standards | 2. New Accounting Standards On January1, 2010, U. S. Steel adopted updates to Accounting Standards Codification (ASC) Topic 810 related to improvements to financial reporting by enterprises involved with variable interest entities. The updates to ASC Topic 810 include a criterion that requires the primary beneficiary to have the power to direct the activities that most significantly impact the economic performance of the variable interest entity. Due to the addition of this criterion, the adoption resulted in the deconsolidation of Gateway Energy Coke Company, LLC and Daniel Ross Bridge, LLC from our consolidated financial statements on a prospective basis. The primary impact from the adoption of the updates to ASC Topic 810 was the removal of approximately $300 million of net assets, comprised mainly of property, plant and equipment, from our consolidated balance sheet. These net assets were entirely offset by noncontrolling interest, which was also removed upon adoption. There was an immaterial impact to our consolidated statement of operations. See note 15 for further details of these entities. On January1, 2010, U. S. Steel adopted updates to ASC Topic 860 related to the accounting for transfers of financial assets. As a result of the adoption, any transfers of receivables pursuant to our Receivables Purchase Agreement (RPA) no longer qualify as a sale and are now accounted for as secured borrowing transactions. Accordingly, receivable transfers as well as the related borrowings for equal amounts are required to be reflected on the consolidated balance sheet and the proceeds and repurchases related to the securitization program will be included in cash flows from financing activities in the statement of cash flows. U. S. Steel did not have any transactions under the RPA during the first quarter of 2010 or 2009. See note 13 for further details of our accounts receivable facility. |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information | 3. Segment Information U.S.Steel has three reportable segments: Flat-rolled Products (Flat-rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The results of several other operating segments that do not constitute reportable segments are combined and disclosed in the Other Businesses category. The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being income from operations. Income from operations for reportable segments and Other Businesses does not include net interest and other financial costs, income taxes, benefit expenses for current retirees and certain other items that management believes are not indicative of future results. Information on segment assets is not disclosed, as the chief operating decision maker does not review it. The accounting principles applied at the operating segment level in determining income from operations are generally the same as those applied at the consolidated financial statement level. The transfer value for steel rounds from Flat-rolled to Tubular is based on cost. All other intersegment sales and transfers are accounted for at market-based prices and are eliminated at the corporate consolidation level. Corporate-level selling, general and administrative expenses and costs related to certain former businesses are allocated to the reportable segments and Other Businesses based on measures of activity that management believes are reasonable. The results of segment operations for the first quarter of 2010 and 2009 are: (In millions) First Quarter 2010 Customer Sales Intersegment Sales Net Sales Loss from investees (Loss) Income from operations Flat-rolled $ 2,455 $ 219 $ 2,674 $ (5 ) $ (80 ) USSE 964 25 989 - 12 Tubular 445 1 446 - 45 Total reportable segments 3,864 245 4,109 (5 ) (23 ) Other Businesses 32 (21 ) 11 - 10 Reconciling Items - (224 ) (224 ) - (44 ) Total $ 3,896 $ - $ 3,896 $ (5 ) $ (57 ) First Quarter 2009 Flat-rolled $ 1,592 $ 53 $ 1,645 $ (21 ) $ (422 ) USSE 622 1 623 - (159 ) Tubular 515 3 518 - 127 Total reportable segments 2,729 57 2,786 (21 ) (454 ) Other Businesses 21 41 62 - (3 ) Reconciling Items - (98 ) (98 ) - (21 ) Total $ 2,750 $ - $ 2,750 $ (21 ) $ (478 ) The following is a schedule of reconciling items to loss from operations: ThreeMonthsEnded March31, (In millions) 2010 2009 Items not allocated to segments: Retiree benefit expenses $ (44 ) $ (32 ) Other items not allocated to segments: Net gain on th |
Acquisitions and Dispositions
Acquisitions and Dispositions | |
3 Months Ended
Mar. 31, 2010 | |
Acquisitions and Dispositions | 4. Acquisitions and Dispositions Wabush Mines Joint Venture On February1, 2010, U. S. Steel Canada Inc. (USSC) completed the previously announced sale of its 44.6 percent interest in the Wabush Mines Joint Venture (Wabush) for approximately $60million. Wabush owns and operates iron ore mining and pellet facilities in Newfoundland and Labrador and Quebec, Canada. U. S. Steel recognized an immaterial loss on the sale. Z-Line Company As a result of the minority owners exercise of a put option, U. S. Steel acquired the minority owners 40 percent ownership interest in Z-Line Company (Z-Line), a partnership, on December23, 2009 for C$26 million (approximately $24 million). Z-line, which owned and operated a galvanizing/galvannealing line, has subsequently been dissolved and the facility is now operated as part of our Hamilton Works located in Ontario, Canada. The acquisition has been accounted for in accordance with ASC Topic 810, Consolidations. Elgin, Joliet and Eastern Railway Company On January31, 2009, U. S. Steel completed the previously announced sale of the majority of the operating assets of Elgin, Joliet and Eastern Railway Company (EJE) to Canadian National Railway Company (CN) for approximately $300 million. U. S. Steel retained railroad assets, equipment, and employees that support the Gary Works. As a result of the transaction, U. S. Steel recognized a net gain of approximately $97 million, net of a $10 million pension curtailment charge (see Note 7), in the first quarter 2009. |
Assets Held for Sale
Assets Held for Sale | |
3 Months Ended
Mar. 31, 2010 | |
Assets Held for Sale | 5. Assets Held for Sale As of March31, 2010 and December31, 2009, U. S. Steel had classified certain assets at Hamilton Works, consisting primarily of property, plant and equipment, as held for sale in accordance with ASC Topic 360 on impairment and disposal of long-lived assets. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | |
3 Months Ended
Mar. 31, 2010 | |
Goodwill and Intangible Assets | 6. Goodwill and Intangible Assets The changes in the carrying amount of goodwill by segment for the three months ended March31, 2010 are as follows: Flat-rolled Segment Tubular Segment Total Balance at December31, 2009 $ 876 $ 849 $ 1,725 Currency translation 29 - 29 Balance at March31, 2010 $ 905 $ 849 $ 1,754 Goodwill represents the excess of the cost over the fair value of acquired identifiable tangible and intangible assets and liabilities assumed from businesses acquired. We have two reporting units that have a significant amount of goodwill. Our Flat-rolled reporting unit was allocated goodwill from the Stelco and Lone Star acquisitions in 2007. These amounts reflect the benefits we expect the Flat-rolled reporting unit to realize from expanding our flexibility in meeting our customers needs and running our Flat-rolled facilities at higher operating rates to source our semi-finished product needs. Our Texas Operations reporting unit, which is part of our Tubular operating segment, was allocated goodwill from the Lone Star acquisition, reflecting the benefits we expect the reporting unit to realize from the expansion of our tubular operations. Goodwill is tested for impairment at the reporting unit level annually in the third quarter and whenever events or circumstances indicate that the carrying value may not be recoverable. The evaluation of impairment involves comparing the estimated fair value of the associated reporting unit to its carrying value, including goodwill. U. S. Steel completed its annual goodwill impairment test during the third quarter of 2009 and determined that there was no goodwill impairment for either reporting unit. Goodwill impairment tests in prior years also indicated that goodwill was not impaired for either reporting unit. Accordingly, there are no accumulated impairment losses for goodwill. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives and are detailed below: As of March31, 2010 As of December31, 2009 (In millions) Useful Lives Gross Carrying Amount Accumulated Amortization Net Amount Gross Carrying Amount Accumulated Amortization Net Amount Customer relationships 22-23Years $ 219 $ 26 $ 193 $ 216 $ 24 $ 192 Other 2-20 Years 24 11 13 24 10 14 Total amortizable intangible assets $ 243 $ 37 $ 206 $ 240 $ 34 $ 206 The carrying amount of acquired water rights with indefinite lives as of March31, 2010 and December31, 2009 totaled $75 million. The water rights are tested for impairment annually in the third quarter. The 2009 test indicated that the fair value of the water rights exceeded the carrying value. Accordingly, no impairment loss was recognized. Amortization expense was $3 million in both the three months ended March31, 2010 and 2009. The estimated future amortization expense of identifiable intangible assets during the next five years is |
Pensions and Other Benefits
Pensions and Other Benefits | |
3 Months Ended
Mar. 31, 2010 | |
Pensions and Other Benefits | 7. Pensions and Other Benefits The following table reflects the components of net periodic benefit cost for the three months ended March31, 2010 and 2009: Pension Benefits Other Benefits (In millions) 2010 2009 2010 2009 Service cost $ 25 $ 26 $ 5 $ 5 Interest cost 135 142 57 62 Expected return on plan assets (167 ) (175 ) (27 ) (27 ) Amortization of prior service cost 6 6 6 6 Amortization of net loss (gain) 55 35 (3 ) (2 ) Net periodic benefit cost, excluding below 54 34 38 44 Multiemployer plans 13 12 - - Settlement, termination and curtailment benefits - 63 - 11 Net periodic benefit cost $ 67 $ 109 $ 38 $ 55 Nonretirement Postemployment Benefits U. S. Steel recorded a charge of $112 million in the three months ended March31, 2009 related to the recognition of current and estimated future employee costs for supplemental unemployment benefits, salary continuance and continuation of health care benefits and life insurance coverage for employees associated with the temporary idling of certain facilities and reduced production at others. The accrual was recorded in accordance with the guidance in ASC Topic 712, Compensation Nonretirement Postemployment Benefits, which requires that costs associated with such ongoing benefit arrangements be recorded no later than the period when it becomes probable that the costs will be incurred and the costs are reasonably estimable. U. S. Steel recorded a credit of less than $5 million in the three months ended March31, 2010 related to favorable adjustments to these benefits as a result of facility restarts. As of March31, 2010, there was no accrual for these benefits. Settlements, Terminations and Curtailments During the first quarter of 2009, approximately 500 non-represented employees in the United States elected to retire under a Voluntary Early Retirement Program (VERP). Expenses for termination benefits, curtailment and settlement charges totaled $53 million for defined benefit plans and $11 million for other benefit plans and were recorded in cost of sales. As discussed below, other pension charges related to the VERP were incurred for defined contribution plans totaling $13 million. In connection with the sale of the majority of EJE on January31, 2009 (see Note 4), a pension curtailment charge of approximately $10 million, which reduced the gain related to this transaction, was recognized in the first quarter of 2009. Employer Contributions During the first quarter of 2010, U. S. Steel made a voluntary contribution of $140 million to its main defined benefit pension plan. U. S. Steel also made $21 million in required cash contributions to the main USSC pension plans, cash payments of $13 million to the Steelworkers Pension Trust and $4 million in cash payments to other defined benefit pension plans. During the first quarter of 20 |
Net Interest and Other Financia
Net Interest and Other Financial Costs | |
3 Months Ended
Mar. 31, 2010 | |
Net Interest and Other Financial Costs | 8. Net Interest and Other Financial Costs Other financial costs primarily include financing costs as well as foreign currency gains and losses as a result of transactions denominated in currencies other than the functional currencies of U. S. Steels operations. During the first quarter of 2010 and 2009, net foreign currency losses of $63 million and $34 million, respectively, were recorded in other financial costs. See note 12 for additional information on U. S. Steels use of derivatives to mitigate its foreign currency exchange rate exposure. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | 9. Income Taxes Tax benefits The first quarter 2010 effective tax benefit rate of four percent is lower than the statutory rate largely because losses in Canada and Serbia, which are jurisdictions where we have recorded full valuation allowances on deferred tax assets, do not generate a tax benefit for accounting purposes. Also included in the first quarter 2010 tax benefit is a net tax benefit of approximately $30 million relating to adjustments to tax reserves, offset by a tax charge of approximately $27million as a result of the U.S. health care legislation enacted in the first quarter (see note 7). The first quarter 2010 tax benefit is based on an estimated annual effective rate, which requires management to make its best estimate of annual forecasted pretax income or loss for the year. 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 pretax results for U.S. and foreign income or loss in 2010 vary from forecast estimates applied at the end of the most recent interim period, the actual tax provision or benefit recognized in 2010 could be materially different from the forecasted amount as of the end of the first quarter. Income tax receivable During the first quarter 2010, U. S. Steel received $208 million representing the majority of its expected federal income tax refund related to the carryback of our 2009 losses to prior years. Deferred taxes As of March31, 2010, the net domestic deferred tax asset was $680 million compared to $731million at December31, 2009. A substantial amount of U. S. Steels domestic deferred tax assets relates to employee benefits that will become deductible for tax purposes over an extended period of time as cash contributions are made to employee benefit plans and payments are made to retirees. As a result of our cumulative historical earnings, we continue to believe it is more likely than not that the net domestic deferred tax asset will be realized. As of March31, 2010, the net foreign deferred tax asset was $99 million, net of established valuation allowances of $635 million. At December31, 2009, the net foreign deferred tax asset was $103 million, net of established valuation allowances of $575 million. Net foreign deferred tax assets will fluctuate as the value of the U.S. dollar changes with respect to the euro, the Canadian dollar and the Serbian dinar. A full valuation allowance is recorded for both the Canadian and Serbian deferred tax assets due to the absence of positive evidence to support the realizability of the deferred tax assets. If USSC and U. S. Steel Serbia (USSS) generate sufficient income, the valuation allowance of $573 million for Canadian deferred tax assets and $48 million for Serbian deferred tax assets as of March31, 2010, would be partially or fully reversed at such time that it is more likely than not that the Company will realize the deferred tax assets. Any reversals of these amounts will result in a decrease to tax expense. Unrecogn |
Common Shares and Income Per Co
Common Shares and Income Per Common Share | |
3 Months Ended
Mar. 31, 2010 | |
Common Shares and Income Per Common Share | 10. Common Shares and Income Per Common Share Common Stock Issued On May4, 2009, U. S. Steel issued 27,140,000 shares of common stock (par value of $1 per share) at a price of $25.50 per share. The underwriting discount and third-party expenses related to the issuance of the common stock of $31 million was recorded as a decrease to additional paid-in capital, resulting in net proceeds of $661 million. Net Loss Per Share Attributable to United States Steel Corporation Shareholders Basic net income or loss per common share is based on the weighted average number of common shares outstanding during the period. Diluted net income per common share assumes the exercise of stock options and the vesting of restricted stock, restricted stock units, performance awards and the conversion of convertible notes (under the if-converted method), provided in each case the effect is dilutive. Due to the net loss position for the quarters ended March31, 2010 and 2009, no securities were included in the computation of diluted net loss per common share because the effect would be antidilutive. However, securities granted under our 2005 Stock Incentive Plan represented 3,088,984 and 1,619,358 potentially dilutive shares for the quarters ended March31, 2010 and 2009, respectively. Securities convertible under our Senior Convertible Notes represented 27,058,719 potentially dilutive shares for the quarter ended March31, 2010. The computations for basic and diluted earnings per common share from continuing operations are as follows: ThreeMonthsEnded March31, (Dollars in millions, except per share amounts) 2010 2009 Net loss attributable to United States Steel Corporation shareholders $ (157 ) $ (439 ) Plus income effect of assumed conversion-interest on convertible notes - - Net loss after assumed conversion $ (157 ) $ (439 ) Weighted-average shares outstanding (in thousands): Basic 143,390 116,103 Effect of convertible notes - - Effect of stock options - - Effect of dilutive restricted stock, performance awards and restricted stock units - - Adjusted weighted-average shares outstanding, diluted 143,390 116,103 Basic earnings per common share $ (1.10 ) $ (3.78 ) Diluted earnings per common share $ (1.10 ) $ (3.78 ) Dividends Paid Per Share The dividend rate for the first quarters of 2010 and 2009 was five cents per common share and 30 cents per common share, respectively. |
Inventories
Inventories | |
3 Months Ended
Mar. 31, 2010 | |
Inventories | 11. Inventories Inventories are carried at the lower of cost or market on a worldwide basis. The first-in, first-out method is the predominant method of inventory costing in Europe and Canada. The last-in, first-out (LIFO) method is the predominant method of inventory costing in the United States. At March31, 2010 and December31, 2009, the LIFO method accounted for 56 percent and 49 percent of total inventory values, respectively. (In millions) March31, 2010 December31, 2009 Raw materials $ 449 $ 492 Semi-finished products 769 741 Finished products 319 336 Supplies and sundry items 110 110 Total $ 1,647 $ 1,679 Current acquisition costs were estimated to exceed the above inventory values by $850 million and $1.1 billion at March31, 2010 and December31, 2009, respectively. Cost of sales was reduced by an immaterial amount and $38 million in the first quarters of 2010 and 2009, respectively, as a result of liquidations of LIFO inventories. Lower of cost or market (LCM) charges were immaterial for the three months ended March31, 2010. During the three months ended March31, 2009, we recorded LCM charges totaling approximately $60 million. Inventory includes $92 million and $101million of land held for residential or commercial development as of March31, 2010 and December31, 2009, respectively. From time to time, U. S. Steel enters into coke swap agreements with other steel manufacturers designed to reduce transportation costs. U. S. Steel shipped approximately 166,000 tons and received approximately 174,000 tons of coke under swap agreements during the first three months of 2010. U. S. Steel did not ship or receive any coke under swap agreements during the first three months of 2009. U. S. Steel also has entered into iron ore pellet swap agreements with an iron ore mining and processing company. Under these agreements, U. S. Steel shipped and received approximately 141,000 tons of iron ore pellets during the first three months of 2010 and shipped and received approximately 327,000 tons of iron ore pellets during the first three months of 2009. The coke and iron ore pellet swaps are recorded at cost as nonmonetary transactions. There was no income statement impact related to these swaps in either 2010 or 2009. |
Derivative Instruments
Derivative Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Derivative Instruments | 12. Derivative Instruments U. S. Steel is exposed to foreign currency exchange rate risks as a result of our European and Canadian operations. USSEs revenues are primarily in euros and costs are primarily in U.S.dollars, euros and Serbian dinars. USSCs revenues and costs are denominated in both Canadian and U.S. dollars. In addition, the acquisition of USSC in 2007 was funded both from the United States and through the reinvestment of undistributed earnings from USSE, creating intercompany monetary assets and liabilities in currencies other than the functional currency of the entities involved, which can affect income when remeasured at the end of each quarter. A $1.2billion U.S. dollar-denominated intercompany loan (the Intercompany Loan) from a U.S. subsidiary to a European subsidiary was the primary exposure at March31, 2010. U. S. Steel uses euro forward sales contracts with maturities no longer than 12 months to exchange euros for U.S. dollars to manage our exposure to foreign currency exchange rate fluctuations. The gains and losses recognized on these euro forward sales contracts may also partially offset the remeasurement gains and losses recognized on the Intercompany Loan. As of March31, 2010, U. S. Steel held euro forward sales contracts with a total notional value of approximately $200 million. We mitigate the risk of concentration of counterparty credit risk by purchasing our forward sales contracts from several counterparties. Derivative instruments are required to be recognized at fair value in the balance sheet. U. S. Steel has not elected to designate these euro forward sales contracts as hedges. Therefore, changes in their fair value are recognized immediately in the results of operations. Additionally, we routinely enter into fixed-price forward physical purchase contracts to partially manage our exposure to price risk related to the purchases of natural gas and certain nonferrous metals used in the production process. Historically, the forward physical purchase contracts for natural gas and nonferrous metals have qualified for the normal purchases and normal sales exemption described in ASC Topic 815. However, due to reduced natural gas consumption in 2009, we net settled some of our excess natural gas purchase contracts for certain facilities. Therefore, the remaining contracts related to 2009 natural gas purchases at those facilities no longer met the exemption criteria and were therefore subject to mark-to-market accounting. During 2010, all natural gas purchase contracts qualified and were accounted for in accordance with the normal purchases and normal sales exemption under ASC Topic 815 and were not subject to mark-to-market accounting. The following summarizes the location and amounts of the fair values and gains or losses related to derivatives included in U. S. Steels financial statements as of March31, 2010 and December31, 2009 and for the three months ended March31, 2010 and 2009: (In millions) Locationof FairValuein BalanceSheet FairValue March31,2010 Fair Value December31,2009 Foreign exchange forward contracts Accounts(payable) receivable $ 10 |
Debt
Debt | |
3 Months Ended
Mar. 31, 2010 | |
Debt | 13. Debt (In millions) Interest Rates% Maturity March31, 2010 December31, 2009 2037 Senior Notes 6.65 2037 $ 350 $ 350 2020 Senior Notes 7.375 2020 600 - 2018 Senior Notes 7.00 2018 500 500 2017 Senior Notes 6.05 2017 450 450 2014 Senior Convertible Notes 4.00 2014 863 863 2013 Senior Notes 5.65 2013 300 300 Province Note (C$150 million) 1.00 2015 147 142 Environmental Revenue Bonds 4.75-6.88 20112030 458 458 Fairfield Caster Lease 20102012 29 29 Other capital leases and all other obligations 20102014 25 30 Amended Credit Agreement, $750 million Variable 2012 - - USSK Revolver, 200million ($270 million and $288 million at March31, 2010 and December31, 2009) Variable 2011 - 288 USSK credit facilities, 70million ($94 million and $101 million at March31, 2010 and December31, 2009) Variable 20112012 - - USSS credit facilities, 40 and 800million Serbian Dinar ($65 million and $69 million at March31, 2010 and December31, 2009) Variable 2010 - - Total 3,722 3,410 Less Province Note fair value adjustment 39 40 Less unamortized discount 11 6 Less short-term debt and long-term debt due within one year 21 19 Long-term debt $ 3,651 $ 3,345 Issuance of Senior Notes due 2020 On March19, 2010, U. S. Steel issued $600 million of 7.375% Senior Notes due April1, 2020 (2020 Senior Notes). The 2020 Senior Notes were issued at 99.125% of their principal amount. U.S. Steel received net proceeds from the offering of $582 million after fees of $13 million related to the underwriting discount and third party expenses. The fees and discount for the issuance of the 2020 Senior Notes will be amortized to interest expense over the term of the 2020 Senior Notes. The net proceeds from the issuance of the 2020 Senior Notes will be used for general corporate purposes. The 2020 Senior Notes are senior and unsecured obligations that will rank equally in right of payment with all of our other existing and future senior indebtedness. U. S. Steel will pay interest on the notes semi-annually in arrears on April1st and October1st of each year, commencing on October1, 2010. If an event of default regarding the 2020 Senior Notes should occur and be continuing, either the trustee or the holders of not less than 25% in principal amount of the outstanding 2020 Senior Notes may declare the 2020 Senior Notes immediately due and payable. The 2020 Senior Notes were issued under U. S. Steels shelf registration statement and are not listed on any national securities exchange. U. S. Steel has the option to redeem the 2020 Senior Notes, at any time in whole, or from time to time in part at a price as defined within the 2020 Senior Notes. If a change of control repurchase event occurs, as defined within the 2020 Senior Notes, U |
Asset Retirement Obligations
Asset Retirement Obligations | |
3 Months Ended
Mar. 31, 2010 | |
Asset Retirement Obligations | 14. Asset Retirement Obligations U. S. Steels asset retirement obligations primarily relate to mine and landfill closure and post-closure costs. The following table reflects changes in the carrying values of asset retirement obligations: (In millions) March31, 2010 December31, 2009 Balance at beginning of year 45 48 Obligations settled (2 ) (7 ) Foreign currency translation effects (2 ) 1 Accretion expense 1 3 Balance at end of period 42 45 Certain asset retirement obligations related to disposal costs of certain fixed assets at our steel facilities have not been recorded because they have an indeterminate settlement date. These asset retirement obligations will be initially recognized in the period in which sufficient information exists to estimate their fair value. |
Variable Interest Entities
Variable Interest Entities | |
3 Months Ended
Mar. 31, 2010 | |
Variable Interest Entities | 15. Variable Interest Entities Effective January1, 2010, U. S. Steel adopted updates to ASC Topic 810 related to improvements to financial reporting by enterprises involved with variable interest entities. The updates to ASC Topic 810 include a criterion that requires the primary beneficiary to have the power to direct the activities that most significantly impact the economic performance of the variable interest entity. Due to the addition of this criterion, the adoption resulted in the deconsolidation of the following entities from our consolidated financial statements on a prospective basis. Gateway Energy Coke Company, LLC Gateway Energy Coke Company, LLC (Gateway) is a wholly owned subsidiary of SunCoke Energy, Inc. in which U. S. Steel has no ownership interest. Gateway has constructed a heat recovery coke plant with an expected annual capacity of 651,000 tons of coke at U. S. Steels Granite City Works that began operations in the fourth quarter of 2009. U. S. Steel has a 15-year arrangement to purchase coke from Gateway under which Gateway is obligated to supply 90percent to 105 percent of the expected annual capacity of the heat recovery coke plant, and U.S.Steel is obligated to purchase the coke from Gateway at the contract price. As of March31, 2010, a maximum default payment of approximately $285 million would apply if U. S. Steel terminates the agreement. There are three activities that most significantly impact Gateways economic performance: procurement of coking coal used in the production of coke, direction of the operations associated with the production of coke and steam and direction of the sale of coke and steam. U. S. Steel and Gateway jointly direct the sale of coke and steam due to the 15-year arrangement described above; however, U. S. Steel does not have the power to direct the other activities that most significantly impact Gateways economic performance. Since the only activity in which U. S. Steel shares power is less significant than the combination of the other significant activities, U. S. Steel is not the primary beneficiary. Accordingly, as of January1, 2010, U. S. Steel deconsolidated Gateway and all activity with Gateway is now accounted for as third party transactions. Daniel Ross Bridge, LLC Daniel Ross Bridge, LLC (DRB) was established for the development of a 1,600 acre master-planned community in Hoover, Alabama. The economic performance of DRB is significantly impacted by the fair value of the underlying property. The activities that most directly impact DRBs economic performance are the development, marketing, and sale of the underlying property, none of which are directed by U. S. Steel. Since U. S. Steel does not have the power to direct the activities that most significantly impact DRBs economic performance, U. S. Steel is not the primary beneficiary. Accordingly, U. S. Steel deconsolidated DRB and began accounting for this entity using the equity method of accounting effective January1, 2010. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value of Financial Instruments | 16. Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of financial instruments: Current assets and current liabilities: Fair value approximates the carrying value due to the short-term maturity of the instruments. Investments and long-term receivables: Fair value is based on discounted cash flows. U.S.Steel is subject to market risk and liquidity risk related to its investments; however, these risks are not readily quantifiable. Long-term debt instruments: Fair value was determined using Level 2 inputs which were derived from quoted market prices and is based on the yield on public debt where available or current borrowing rates available for financings with similar terms and maturities. Fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement. The following table summarizes financial instruments, excluding derivative financial instruments disclosed in Note12, by individual balance sheet account. U.S.Steels financial instruments at March31,2010 and December31, 2009 were: March31,2010 December31,2009 (In millions) Fair Value Carrying Amount Fair Value Carrying Amount Financial assets: Cash and cash equivalents $ 1,386 $ 1,386 $ 1,218 $ 1,218 Receivables 1,811 1,811 1,423 1,423 Receivables from related parties 151 151 144 144 Investments and long-term receivables(a) 26 26 26 26 Total financial assets $ 3,374 $ 3,374 $ 2,811 $ 2,811 Financial liabilities: Accounts payable (b) $ 1,599 $ 1,599 $ 1,419 $ 1,419 Accounts payable to related parties 68 68 61 61 Accrued interest 52 52 32 32 Debt (c) 4,571 3,618 4,004 3,307 Total financial liabilities $ 6,290 $ 5,337 $ 5,516 $ 4,819 (a) Excludes equity method investments. (b) Includes bank checks outstanding. (c) Excludes capital lease obligations. Financial guarantees are U.S.Steels only unrecognized financial instrument. For details relating to financial guarantees see note19. |
Statement of Changes in Stockho
Statement of Changes in Stockholders' Equity | |
3 Months Ended
Mar. 31, 2010 | |
Statement of Changes in Stockholders' Equity | 17. Statement of Changes in Stockholders Equity The following table reflects the first quarter 2010 and 2009 reconciliation of the carrying amount of total equity, equity attributable to United States Steel Corporation and equity attributable to the noncontrolling interests: Three Months Ended March31, 2010 Total Comprehensive Income (Loss) Retained Earnings AccumulatedOther Comprehensive Income (Loss) Common Stock Treasury Stock Paid-in Capital Non- Controlling Interest Balance at beginning of year $ 4,979 $ 4,209 $ (2,728 ) $ 151 $ (608 ) $ 3,652 $ 303 Comprehensive income: Net loss (158 ) (158 ) (157 ) (1 ) Other comprehensive income (loss), net of tax: Pension and other benefit adjustments 60 60 60 Currency translation adjustment (18 ) (18 ) (18 ) Employee stock plans 3 2 1 Dividends paid on common stock (7 ) (7 ) Adoption of ASC Topic 810 (301 ) (301 ) Cumulative effect of ASC Topic 810 adoption (1 ) (1 ) Balance at March31,2010 $ 4,557 $ (116 ) $ 4,044 $ (2,686 ) $ 151 $ (606 ) $ 3,653 $ 1 Three Months Ended March31, 2009 Total Comprehensive Income (Loss) Retained Earnings AccumulatedOther Comprehensive Income (Loss) Common Stock Treasury Stock Paid-in Capital Non- Controlling Interest Balance at beginning of year $ 5,059 $ 5,666 $ (3,269 ) $ 124 $ (612 ) $ 2,986 $ 164 Comprehensive income: Net loss (439 ) (439 ) (439 ) Other comprehensive income (loss), net of tax: Pension and other benefit adjustments 18 18 18 Currency translation adjustment (72 ) (72 ) (71 ) (1 ) Employee stock plans 11 (1 ) 12 Dividends paid on common stock (35 ) (35 ) Partner contributions 37 37 Balance at March31, 2009 $ 4,579 $ (493 ) $ 5,192 $ (3,322 ) $ 124 $ (613 ) $ 2,998 $ 200 |
Related Party Transactions
Related Party Transactions | |
3 Months Ended
Mar. 31, 2010 | |
Related Party Transactions | 18. Related Party Transactions Net sales to related parties and receivables from related parties primarily reflect sales of steel products to equity and certain other investees. Generally, transactions are conducted under long-term market-based contractual arrangements. Related party sales and service transactions were $281 million and $145million for the quarters ended March31, 2010 and 2009, respectively. Purchases from equity investees for outside processing services amounted to $9 million and $65million for the quarters ended March31, 2010 and 2009. There were no purchases of iron ore pellets from equity method investees for the quarter ended March31, 2010. Purchases of iron ore pellets from equity investees amounted to $11 million for the quarter ended March31, 2009. Accounts payable to related parties include balances due to PRO-TEC Coating Company (PRO-TEC) of $65 million and $58 million at March31, 2010 and December31, 2009, respectively, for invoicing and receivables collection services provided by U. S. Steel. U. S. Steel, as PRO-TECs 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 equity investees totaled $3 million at both March31, 2010 and December31, 2009. |
Contingencies and Commitments
Contingencies and Commitments | |
3 Months Ended
Mar. 31, 2010 | |
Contingencies and Commitments | 19. 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 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. Asbestos matters As of March31, 2010, U.S. Steel was a defendant in approximately 450 active cases involving approximately 3,010 plaintiffs. Many of these cases involve multiple defendants (typically from fifty to more than one hundred). Almost 2,560, or approximately 85percent, of these claims are currently pending in jurisdictions which permit filings with massive numbers of plaintiffs. Based upon U.S.Steels 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. During the three months ended March31, 2010, U.S.Steel paid approximately $2 million in settlements. These settlements and other dispositions resolved approximately 105 claims. New case filings in the first three months of 2010 added approximately 75 claims. At December31, 2009, U. S. Steel was a defendant in approximately 440 active cases involving approximately 3,040 plaintiffs. During 2009, U. S. Steel paid approximately $7 million in settlements. These settlements and other dispositions resolved approximately 200 claims. New case filings in the year ended December31, 2009 added approximately 190 claims. Most claims filed in 2010 and 2009 involved individual or small groups of claimants as many jurisdictions no longer permit the filing of mass complaints. Historically, these claims against U.S.Steel fall into three major groups: (1)claims made by persons who allegedly were exposed to asbestos at U.S.Steel facilities (referred to as premises claims); (2)claims made by industrial workers allegedly exposed to products manufactured by U.S.Steel; and (3)claims made under certain federal and general maritime laws by employees of former operations of U. S. Steel. In general, the only insurance available to U. S. Steel with respect to asbestos claims is excess casualty insurance, which has multi-million dollar retentions. To date, U.S.Steel has received minimal payments under these policies relating to asbestos claims. These asbestos cases allege a variety of respiratory and other diseases based on alleged exposure to asbestos. U.S.Steel is currently a defendant in cases in which a total of approximately 200 plaintiffs allege that they are suffering from mesothelioma. The potential for damages against defendants may be greater in cases in which the plaintiffs can prove mesotheliom |
Subsequent Event
Subsequent Event | |
3 Months Ended
Mar. 31, 2010 | |
Subsequent Event | 20. Subsequent Event On April15, 2010, the United Steelworkers (USW) represented employees at U. S. Steel Canadas Lake Erie Works ratified a new three year labor contract. The agreement covers approximately 800 USW represented employees and includes a signing bonus of $3,000 per employee. Additionally, the agreement closes the defined benefit pension plan to new entrants. |