X - Earnings call transcript Q3 2019 | United States Steel Corporation

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Operator

Good morning, everyone, and welcome to the United States Steel Corporation's Third Quarter 2019 Earnings Conference Call and Webcast.

As a reminder, today's call is being recorded.

I'll now hand this call over to Kevin Lewis, General Manager of Investor Relations.

Kevin Lewis

Thank you and good morning. We appreciate your continued interest in U.S. to quarter you call. welcome and our earnings third Steel

CFO, will me Steel of Corporate our On the well CFO and X. transition with President on on who morning Christine Executive Bradley; be Rich Breves, Development, as President role Burritt; the call Vice into Dave and today's this Fruehauf. call U.S. Strategic will Senior as Planning CEO, President Vice November beginning Kevin Also and is

earnings will of release Investors slides close yesterday, on via results. business and for website. quarter under website. posted our The webcast, second earnings the the found slides and our After today's section On we presentation today's walk select our can of call our be link call, and we through also

some number let during our described and are materially. based in Before me provided results may may forward-looking are that and of and SEC a assumptions vary filings you remind subject statements information include start, to risks on that actual call future this as we uncertainties certain

statements actual that duty yesterday, update remarks as with our undertake unfold. as we are and to the release made Forward-looking along today, no of them issued today, press events in we

Steel CEO, the turn call would like on now today's I to Slide Dave will presentation over President to begin conference who U.S. and Burritt, X.

Dave Burritt

few in Thank you, past Kevin. U.S. a We've positioning Steel. U.S. interest making you everyone, been changes and your Good brighter the months, morning, Steel for big over thank future. for

been all to into both, competitive, model closed best But investment Big best world and which in the be plan best the yesterday. should mill our along, integrated coming has strategy of River mini strategy models. for focus of the of with you Our the become this Steel the

right our but one we us. the faster. success. that three It provides segments, were Our to clarity investment significant to remain headwinds all Big us Still, operating strategy does going across not this market River where for get is our helps in deter

result, assets. we and moving team of of River towards the are strategic priority. acquiring support and costs, revitalization centering ultimately our three American building quickly includes world-class our our This fixed a asset XXX% we North becoming, around with Big are cash in reducing As rescoping reprioritizing number a flat-rolled one footprint business program,

Now clear. let's be

in one While our our Steel with will their priority, strategic portfolio flexible spending projects investment of because our our of and the investment strategic River to Big intend is number fit be we all in strategic of completed profile. get we

operating progress executing our to we in our strategy We will made cover detail. with as in Kevin And also enhance plans better align Bradley announced full strategy. model important to financing our October,

at reported here This first, highlights. million. XX. provided top the and adjusted issued quarter range ahead on But the guidance September $XXX are XX, our EBITDA earnings of was end the in of October preliminary third on today's We of issued

we As advance convertible market is of reminder, October issued revenue offerings. preliminary know, notes XX, of a This you required earnings transaction. and senior our ahead in capital as bonds significant environmental on

the of the market operated significant Our flat-rolled face facilities well in headwinds.

above over outperformed our in significant commercial Our segment, teams pressure. remain margins our conditions and Tubular operations delivered all, market signs expectations life what and transpired under And In to Europe, savings cost decline. emerging. worsened the But the of continue In challenges results months. past market and as plan. on to year in out continued counts the remain based rig are market challenging market conditions two close flat-rolled

to materially demand steel support $XX a prices removes our UAW expected significant existed prices. improved for providing order The the flat-rolled Lead increase end GM strike scrap of are steel at market. in and that have times a have selling gap the approximately extended and ton rates

the market factors these us of from that here. confidence poised improve All provide is to

value core a is we safety our X, principles. are these pillar and principles Slide of delivering a to and on steel Turning

away metric safety duties in to our are safety our we safety being work take and employees environmental industry. safety leader work At their seriously. are and a and our first to Our improvement from is focus in very Thank in and stewardship commitment continued continued committed first you showcases safely. we for days U.S. Steel our to

Advisor His turn setting will has instrumental Kevin part leadership X, of Steel River agreed end U.S. and directly you, table for transforming of the our we to balance execution in strategic negotiating to Slide year. to on a River Thank sheet reality. the Bradley at critical Steel strong the strategic engaged he was providing Let's activities. across and CFO out to projects. the Big Kevin to Kevin, helping in Since And been has X. to more ensure contributions financing on Kevin On create our through in your President future to our a role. for Vice Kevin announced and U.S. October announcement, been Big as with transition me it the path. stronger our investment Executive successful flexibility embark us was Steel. a has stay make

special. establish come be steel more and Starting to Christie behind-the-scenes for cash provided anymore. next Steel Her strategic conversion a today's leadership and in so I Congratulations another it company week, as and path. program our leader, foundation on the been well-deserved. not yourselves and Christie. Christie for a a work the is makes Christine look forward to U.S. revitalization meeting setting her future. couldn't She CFO out you has U.S. Breves Steel's big leader but what to have cycle will asset finding contributor

was day detail same This Slide on that around excellence. announced is technological focused and X. an operational, model commercial operating our enhancement to Also

future operating us a This and our efficient to model executive are an more function, and accelerate structure create we and the the accelerate enhanced allowing We organizational to are nimble new faster implementing strategy. getting will to transformation. structure company's

a more we competitive We establish operational commercial cost and can technological are capabilities. our enhancing our enhance focus promoting innovation structure and and on excellence so

both our of highlights best key Slide Two that and the key A strategic competitive our world our transform actions framework business. illustrates drivers to strategy.

the past two as our the is sheet balance the our our to several portion investment taken shown we have use business steps align debt of profile years as support with our in maturity to execute strength In strategy. to sheet extended horizon of strategy. diagram. just foundation Over our the the years We and we've to transform balance proactively our

notes senior next Our maturity until isn't XXXX.

the improvements, talent us strategic these on will of on to next up win strategy, factors, curve. position operating critical have our in focused The step on markets curve, announced down and moving deliver the our move we success Investments cost key attributes. is

investment as intend we low Steel acquire to fixed stability help structure call financial move in an example, combination highly of announced option. flexible due the provide the any market recently its cost, will long-term through dynamic. our down should Big cost River take to which sustaining curve This cost us and ultimately capital minimal Let's exercise cost, in requirements. It

River the and us adding move strategic end our talent serve our and portfolio Big River curve. to markets. broadens and offerings our presence the strategically to And U.S. in in Big positions to also existing will is up attractive Mexico, other win Southern us This mill markets. located markets in expands

mini best talent based We mill are the best steel EAF available. and some in the of North asset investing America in

and as from and and Big commercial them terms a capability, well will R&D qualifying trials We them intellectual valuable of running with and and have in we lot learn faster River property. to offer

step industry's third equip that our outlines in the steelmaking projects, The strategy, will investments, when advanced and us key sustainable strategic complete with most technology.

a creating on mill less beginning Our investments or with than building with of EBITDA And these realize capability advantage. benefits now each of at River's our investment electric furnace from aligned a we out in year is cost to or arc some Big distinct Tubular. the are

advanced investment, significant unlocks technologically startup and North still portfolio accelerates of Big drive II-A is mill value and in across strategy execute efficiencies. of to the path step footprint. as the expansion essentially River the our mode a newest double in footprint America, our capacity world in River Phase is both, competitive, Big Our but Steel on they towards the best entire most

end the both believe our River. spending platform flex cash of We are flow together world we integrated this long-term conscious showcases one But positioning industry offer We Slide to drive works of an do environment. By acquire will high customers. competitive Big and will to being margin of both cycles. what our can and us product through X mini best enhance in competitive, markets the market and capabilities mill best to strategy. strategy this to we of priority best unparalleled XXX% bringing enable the number strategic current support

will we to how our our outlines of prioritize XX strategy. deliverables the achieve investments Slide

executed. priority but best Ultimately we capability is money will Our strategy do create same. our the we mills differentiation because both this and strategy XXX% make ensure need one and is flexible to strategic Big a of of being mini to the trough number are footprint, to River cost ability world acquiring competitive in the deliver

tubular high-priority. is EAF Our also

procure project Casting for at substrates production EBITDA definition both. We seamless since we to pipe completed have Valley support around third-party. Mon the the benefits a of best are are Endless is sourcing largely project we of and The from in financing derisked that and the currently Rolling

States. Valley mill the we today Here making steel lowest mining technology cost our achieved available and are fully not throughout United at Mon mini with combining liquid best-in-class integrated coke in

still if and million which manage deliver EBITDA when both this annual And commitments. $XXX mistake, capability our project strategic gating cash cost deliver of project expected This rate will But no critical benefits is is needed meeting project appropriately course we run can stage be flows while flexible in complete. of differentiation. this to to make a

Asset of mill our hot expand We Revitalization is the that are in expected line's $XXX investment. million of Gary advantages, the part heavy-gauge project Program XX% series the through This implementing products. and competitive particularly will a projects approximately strip is at

investment well. Europe. to ability portion USSK the a the pace capabilities evaluating We are And to market. to in our of have of significant projects market Dynamo This in investment we remains strategic challenges expand Line as the pace the due these compelling the a remaining

of contract, EAF have optionality half number strategies, Based priority our these capital expect River second we our growth especially a flexibility XXXX. XXXX products. tubular to many times, be is discussed for and will one project the we As million. management current and Big component currently the is on market of we in key finish engineering, $XXX approximately conditions, and spending

demonstrating are to our cycle. on other projects We we execute through ensure our the flexibility

it will to update. give to a now Kevin I us financing Kevin? turn Bradley

Kevin Bradley

Dave. thanks, Hey

thank got my to. great a call, I've to want truly Board to I've been Given I team. the me exceptional an In to that the this opportunity that and for excited privilege the work I in last company change last the been take I has serve last company. incredible just of this global know the it everything about couple opportunity to the finance with you Dave of global that say a over to there's and chosen me team is but giving leadership learned bold couple and tremendous more for committed years and has strategy landscape be the seen years, this couldn’t steel, for

game small proud and an happen. changer I zero out I making in team it's absolute execute strategy. think that of am changing that leadership played part have this heck I this doubt game a to will the have

and improving this Dave, place an is see S&OPERATOR, pricing, quietly talent work quarters your great to a think to come is been on plumbing commercial She I company closely people comments IT it true that in see she able action. so time and hands lot touch is, that this and think and is to had gets many call on before and coming things been you've to just the chance to this in exceptional this I has work, with in I Christie the improve, call also owning individual. want you Christie the of a forward of matter and make I've echo Christie. related a a engineering, what going opportunity from to everybody will

So congratulations.

Christine Breves

you, Thank Kevin.

Kevin Bradley

Okay, so let's jump into Slide XX.

bonds, of $X.X The $XXX breakdown revenue weeks best able we've incremental announcement closed in our activity the ABL. to approximately million referred availability. $X.X billion approximately approximately competitive follows; on upsizing $XXX and financing notes, the earlier, as capital of billion U.S. an approximately last been begin of financing environmental from of as our few strategy, billion million Dave $XXX in million world we've both to added Big senior With and River, $X.X in

bonds and $XXX closed have notes a bank increased coupon. pleased appetite extended We new on XX. out our with a They million support X-year revenue ABL saw five five from of to facility. we And coupon $XXX by The quarters. very and maturity The last week We availability we unsecured, money of million October group. $X convertible closed XX-year at were approximately the $XXX and environmental billion senior and X% three on of our the represent years term million.

investment we this strategic yesterday, in to River drew a raise the line, fund facility the to announced weeks this of on in made Bottom As good meaningful last company. of couple we've the Big Steel. progress initial needs funding of portion

and cash investment will We continue financing the horizon. additional opportunities market evaluate requirements over evolve as to our conditions

at results about our out QX October talk This was we let's XX. preliminary million of expected top provided initial So financial Slide the we the delivering in We closed expectation EBITDA. stronger $XXX XX. on and than above range adjusted on

segment roughly impacted call million price. to our erosion. EBITDA directly was primarily market short-term of foreshadowed of is in on price our QX adjusted as flat-rolled this earnings changes segment than by related flat-rolled are $XXX We Our quarter, lower second XX% shipments the our market

in the dynamics as market have occur the expect into the continued fourth October. quarter to We declines

in Additionally, across weakness continue erode a QX. European fourth the our lower be typically we but pricing. tailwind contract Commercial see costs, by to QX. we shipment largely raw compounded should are decline in quarter. This our in third in Europe anticipating material should also seasonal be was financial Weakness quarter, headwinds performance. markets Energy segments costs by ironwork primarily the persist versus offset will a

substrate continues more commercial difficult. of than by market sequential This The to decline. market tubular was dynamics EBITDA segment partially be offset the lower XXX% decline drove Commercial costs.

as tubular lower to costs should narrow quarter for fourth in loss expect headwinds. than the more substrate the commercial offset We

With it back turn that, Dave. I'll to

Dave Burritt

you, Thank Kevin.

XX. to turn Slide Let's

world are a reality is both market lost best current not difficult right competitive This one. strategy We is in environment our of but right the here, proved anyone now. our on that has

We action. are control focused and taking are on what we can

ultimately capital XXX% and example, in Big strategy raised of have approximately acquiring is priority. one of our of again, that our billion number incremental River we For $X.X support articulated strategic

manage strategic to flexible remain pace the other of our will We investments.

$XXX the can We revitalization have and and are approximately the already prioritizing business couple next we to value CapEx what associated and begun And fixed long asset reducing approximately cash million million focusing the by becoming we investment re-scoping remain our control, on towards years. focused by $XXX million over reducing costs term. over we $XXX are

move Kevin, let's Q&A. to

Kevin Lewis

can yourself question questions? a ask follow-up, each everyone one Thank you, Dave. We limit opportunity you a ask has please question the for to you the that please so to and line question. Operator,

Operator

you. ahead. Please [Operator Instructions] The comes Thank question from Engler Martin first from Jefferies. go

Martin Engler

Hi, good morning, everyone.

Dave Burritt

Good morning, Martin.

Kevin Bradley

Good morning.

Martin Engler

and Congratulations on financing completing better the there. Big River acquisitions

Dave Burritt

you, Thank very much.

Martin Engler

does you Now financing pursue be to little would River that if based us on U.S. if to share can concluded, it's its required about JV a greenfield talk Big today? Steel a project, provide bit

Dave Burritt

involved have we negotiation, heavily is here and Sure, in that Rich Rich? so Fruehauf strategy the who

Richard Fruehauf

Dave. you, thank Yes,

growth, minerals, really close TPG ownership with be Dave off excited to yesterday. course as know focused talented coke, the the Dave acquisition be getting this II-A, of [ph] they're we're is XX.X% with So Steckler very said, with We're the completing of million line We really team, Arkansas Teachers X.X getting tons. did the I which ground. with Phase relationship Retirement the excited team member and his on to the on a to System, second and

certain so, going your consent that's we forward. But over be And focus to our customary question, actions. do going have material rights to

Big that on Group River table Investor have going projects bring forward. And the to the or may so evaluate the of to to any we're have going

how that's So approach it. to going we're

Martin Engler

Okay.

Kevin Bradley

We're better Big make with very learn team, work company from with to them and them so together. and a we're impressed entire much going much River the

Martin Engler

fruition look would it, incremental ability at Greenfield to want decision, stay it you from if project, time you evaluate or whether to that something along a Okay, have and make to the a capital correct? come so a like were take and at on go the to it sounds away provide

Dave Burritt

I those and projects say we'll to think the we have rights we I'd investor come will use we way any that the an investor that the you'd evaluate any as as of along. have expect customary rights yes,

Martin Engler

you detail. understand the outlay Big stake, the option the some I acquire also formula thanks us the to call help that River, framework remaining can And moving Okay, appreciate on future? in provide potential to capital agreed the on regarding upon on there

Kevin Bradley

formula. way but I'm of a detail still in because a lot works the first the some is going so Yes, it into of the effectively of it get acquired can not to years of period, and confidential, four-year couple on fixed second XX.X% the based be

based cash performance or and Phase get metrics and can are be adjusted the that formula free As move so and metrics business's you against how to business calculated. four other certain going performance of performance into Those that's flow, up three certain years be it the down. II-A tied it's to and metrics on completion could

Operator

question BMO next Please go The Capital ahead. Markets. from Gagliano from comes David

David Gagliano

thanks focus Hi for XXXX wondering a the if could my taking minute. was questions. for I we in on capital spending

of If Fairfield? asset the you through million buckets Valley, revitalization $XXX Mon could the between CapEx, just sustaining major walk and that allocation

Dave Burritt

Sure Dave. this is

the make into points We're both of I a our to Before the Everybody this XXXX to key know for and I company world investments capital this. few the the on on required position believe I transforming should are we we best strongly on details want get have strategy. announced in spend, competitive this business future. touch sure

strategy. and second for we're strategy stockholders. on employees and part is, The feedback committed has strategic all The you logic, customers, this delivering this agree to all our with been positive the our

million flexibility. know And that's asked that to We about. $XXX strategy requires that the also delivering you the that

optionality this into so management, we this in engineering, we're to got we ensure and deliver And procurement, on. flexible. be order that realities, our hard market our working know strategy, build our to today's we've that Given to project

predict market focused control. fundamentals earlier, going going or Europe what to to And of is change, are to in the we in be the we're in we're million adaptable. the they're not XXXX be We're We're time on we executing what as but appropriate going CapEx or how U.S. said this going to can on at to believe focus point going $XXX in. and investment I

here examples that of and in thinking being are some said, next So about our flexibility currently year. action we're how

base we investment spend mill. this think million including arc projecting is $XXX spending, between strip electric hot continued across attractive next footprint, $XXX currently complete the our recently So, the allows project and with in Gary complete offering to $XXX project completed this expect you us project. environmental year spend we to bond million and to and, about great if that a returns revenue in to Related to the the XXXX million to furnace, capital the around this

Mon our then at the mill extremely lowest so is transforms our Rolling this our about, mill And because capable into continue is it Casting as Endless we an most to this investment be future. important Valley, and excited to cost

that Our profile within hard fits develop engineering working without teams the current been have business compromising budget case or our our XXXX the to timeline. spending

we in off this phase steel permitting, And as project we you dynamo in delivers, line development already less So partnership then XXXX, Europe. of at site that. state know, emphasis $XXX volume as spend the customers million, some early our fabrication currently and construction electrical And on on with for you the like have things in place and art than expect line. of the and to know, this an also for USSK,

to time have to the opportunity project our of and challenging the it. project ensure materially a this bit this And working they when flex delay we without the are changing customers with deliver Europe in conditions line. market But and we we're spending some need

their or at meet are so our with about closely So customers next that we're million $XX year working looking needs. in to region and

David Gagliano

very you. Thank Okay, that's helpful, helpful.

or on down that, there less it's And example, Now, looks million I the think the indications, when of can from least doesn't tell just it $XXX which at $XXX best validate if previously mistaken. prior it to point, the - what historically, just so think know just timeline a Whereas, I versus guys? as I this I to second up Mon was of that's at is come a changes, quarter, I million me least, sorry $XXX allocated look Valley, bit. asset like, like as look at million Can was number also I at for much follow as numbers there's this to than and revitalization. I'm anything not then mentioned now you side, one terms in as the

Dave Burritt

or got me want one? question do the to second, a another you answer first You

David Gagliano

to finish this question, changes of timeline validate just the the Well And EBITDA do target incremental $XXX XXXX/XXXX? those does are then by to million accurate. of the if just what those secondly,

Dave Burritt

revitalization both Okay, changes part River the of think desire if pivot and that strategy, organizationally, our the ultimately and that, and XXX% factor towards doing changes with with we're asset the first program own that to the you of making about here, get best the we're big strategy. the of Big

so, $XXX when base $XXX million you capital the as think about mentioned, to million the it's spending, I And in range.

a so We become And safety, cost less we're the have you're right, so. that we and pivot. was than icon and million XXX, before an we'd be doing that dynamo but from portion, And same, terms the think that actually asset in targets, EAF right drop to the XXX. future of on the at $XXX obviously would on to company revitalization we I on that the quality, and the to is pivoting or line, want all said our around targets now. roughly the about delivery so we're project hit and that so the looking opportunity do focusing

Richard Fruehauf

And revitalization. spending Yes the we looking million suggested shy we and XXXX about million in spent the XXXX add remaining that at revitalization, were to part $XXX through revitalization. $XXX to if $XXX If we that about as $XXX where million asset of just we to program. just were we announced we were million million of Dave on on $XXX you that, think to think previously reduction

million that the And about million or spend Gary the strip of budget, next would hot so. at we year. the new now expect Gary directed kind mill. to towards spend strip That $XXX largely With of mill $XXX hot revitalization imply a is remaining

is really that's spend and spend capability down revitalization the right, remaining you're obviously the as we indicated, and aligning around required. So, we're cost differentiation

Rolling On in as mentioned, we're line a the the project maybe moment, to Dave ask of and expand projects the always things looking Casting design $XXX when we estimate was the is and our for Valley, million Christie previously. I'll one at here But optionality. initial Endless Mon we growth when upon communicated

we So very the and the the work be that engineering, management make through process hard sure flexible. can procurement, we to project

as year do case if we're So compromising believe we any endless mentioned, spend and timeline we the on way. Dave just shy not the this or casting in of $XXX million rolling, business

investment. So the as of to EBITDA the we expect expectations remain a change pacing the and timeline result intact the of don't materially

Our it going business but the goal to know required. for value to is for outcomes We to what's do the ultimately be is how to our deliver needed strategy, will our important customers it creates the we we're get so done. and flexible,

Christine Breves

gates. we yes, are the at that would engineering works the add, and project stage way Hey just looking on I Kevin,

to we So right look flexibility and really build up front.

And to going this project change. completion so, don't though we XXXX the of the to expect not spend much even in we're

good they other And to also build I into we to contracts. our try where relationships contracts have have those think as to in Procurement build we we flexibility really flexibility we're optionality suppliers. them. if and designing of with and our about thing, also really writes flex them all try mean we projects, also And - one

these cash at we're suppliers to like understanding and the working looking done, are looks with always behind But, of us market of get the projects. because helpful that's the projects accordingly. flexing what thought so kind Our our process very the pacing and

Operator

go question Bank. Terry comes Deutsche ahead. Chris from The next Please from

Chris Terry

a everyone. angle CapEx Yes, up for little morning, to on Good next just year. further the bit follow

I the think the for Gary mill $XXX $XXX million. hot to million of a $XXX you million strip said portfolio including

million So sustaining. $XXX $XXX to million imply would that around of

if this or sustaining normal can you you key you your wondered core if is total is assets based operating? what Thanks. level this or as have your see for we that could Just comment expect currently whether and on assets new the

Kevin Lewis

Chris. This thanks is Yes, Kevin.

you share million So long-term a all $XXX a the ago of did the about That to quarters million. business. sustaining kind few $XXX the of with requirements we capital chart suggested about

The and that change chart year, important estimate three average thing to proxy will each we things and that's period. as is for every obviously a over note a cycle but are a on that multiyear that an using

think here in with in is we're speaks manner don't year, flexibility and marketplace capital So, have I our and most possible. inconsistent least, for to next the the it to anywhere where business initially at deploy efficient we that the coming the to responsiveness within

I we capital the aligns advantage. we're the that the have are on across sure focused clearly cost enterprise making and think dedicated a deploying capability with that assets strategy towards

great Our on reduction of and strip a revitalization proof is spreads Gary that. and hot focus our the mill

we will future ourselves it's what we've said So, about where consistent find the that is we think in the strategy an enterprise number, number we and progresses. as talked for sustaining our and CapEX with

Chris Terry

the for just anything little Big profitability, provide on give tonnage, wondering Okay, on maybe a could the could comment the thanks River you on color? just bit to officially transaction, of the you've business, now there. the if performance actual Thanks. I'm color on that some the you closed more

Kevin Lewis

limiting the the Yes, really transaction was unfortunately performance. factor closing sharing in of not the financial

able So to give - we're not lot I'll But a of additional emphasize. just color color.

mill running through I been our team. Rich by that this And mean you I what see that is the advisors. typical assets. profitability diligence our are cycle, a mini these well state-of-the-art assets, is great Their said, and the team, by a performance financial great newer think Dave team I think has

returns. I'll have ask Rich little same We types to no reason to more bit But color. of believe won't this maybe add generate those that a

Richard Fruehauf

you thing tons million line have original to how impressive. I online. other X.XX is, brought hitch be it I'd just in and impressed They and fast only the team I online, said that without mean original to a that's The record you hitch. Yes. really add the quickly Kevin did really mean, without time with what a

that to to II-A, now million, so, high working confidence, they're at going X.X what second they're And that look in we on their getting phase up, hit getting have when we line of targets they're million by impressive. you when on And about XXX think steel roughly leverage then be is X.X tons going that. to really operating achieve going to that made the people,

So I performance now what can think of the about that's business. the on right say we

Dave Burritt

impressive. are They

this there We our from we're been time, have to we're will only a our because have and them, work startup business, short with and to remember with leverage incredible and we together marriage why to a excited about them, XXX% them learn able an capabilities business. work going at R&D incredibly create They've get of that's together all to to ultimately this the commercial and be attributes to company. other were

Operator

instructions] [Operator Merrill Tanners from question America of comes go from ahead. next The Bank Please Timna Lynch.

Timna Tanners

Hey, good morning.

my first is we Kevin's if quarter. to review comments fourth the just could question on So

I a and to conditions Is and tubular U.S. through, costs. so substrate if sequentially go understood bottoming conditions it So side fair given for the on lower pricing the may then flat-rolled, that summary? at worsen be least conditions on can just improving quarter fourth Europe volume sounds like for into maybe

Kevin Bradley

Yes. is And Kevin. this

spot, going on that We have negatively the adjustable our the same it happened environment. what's is quarterlies, that of to we couple given happened though is we forward in impact more the we're Unfortunately, seen and we a that that price can't our saw months quarter basis, made adjustable pricing tons. fourth in optimistic feel but on about we've North last on flow change bottom go our the what's on with comments tons, QX our that American over dynamic monthlies, flat-rolled,

Dave Burritt

that could seeing with good And we to conditions here, that to going come right be to the flexible, future the should if we have adapt company right forecasting make we're that be spending a this next Timna move of as of not is and we best the certainly going fourth strategy. be into that not If they it does quarter, year, will at and well. committed really see be to to is both we're going healthy better, a bottom amount we're making things. we'll to spend time. to adapt that, we quarter back, going but what's of going but as it prices we're the to but business this forward We're to going get worsened, these for feel like obviously the happening adapt, We're sure

Timna Tanners

Got you, so…

Kevin Bradley

tubular tubular, continues. substrate largely then the in and know, in, more also think, do on up Narrowing costs a little expect see you summed side, tailwind from European material costs. better you Europe and And bit loss to difficult in we market I a correctly. lower it But

Timna Tanners

follow thanks. I on I sure to And up it. a then Okay, question, wanted that understood just make

course, relationship remind non-union, have said switch? there? exposure given us Can electric union question Thanks. that comments but annual you've prioritizing a of and CapEx operations. arc with seeing and know to regarding furnaces unions, about different your have that union you're on you're could and that and but you on If you Big further But, really good how the your earlier, of these of dialogue River spending I ask less characterize you some is the deemphasizing the you you with contracts, if a any I wanted the way. in the some have

Dave Burritt

our frequently, market understand them leadership. and our have dynamics We with on union work think very well. relationship especially trade, Well, related an safety, to we I excellent union, they the areas areas with related to

and company And a to employees work so, continue to position going we're with our with to future. for them this better

about been be premature discussions think lot at to the of at and impact We've this up discussions not will been be in involved acquisition about it's a have Big River terms the Steel. had stage. of River furnace helpful that of full Big related to arc I won't detailed getting running. what ultimate very or But thinking the Fairfield and electric about in We they've

Richard Fruehauf

you color We're to update of to middle the related now. you you question in but no first right discussions customers. share with time, contracts. annual now. the and just Timna and had Yes our to that appropriate relationships those the respect We'll right with at address We process additional

Operator

The Blunden next ahead. Please from from comes Goldman question of the line Karl go Sachs.

Karl Blunden

and for I Thanks to can clarity your just wanted guys. bit a morning, the good on get I financing do if time. Hi, cash needs. see more

comfortable - $XXX year a $XXX in context as have a that been we it was as balance minimum million think million think I level. last was this cash a described and I as may year described

I'm So change more does wondering with focused portfolio? that the

is, update you River the second haven't financing explicit slides the put acquisition I we in and with then out Big one an guess And that seen of XQ. then the

Now some Steel and things also timing has needs come prices down, gone have CapEx have your changed, right? but down.

So like that interested convertibles slide Is number the what in financing would the plus? that million of now, should million think of as rest today? plus $XXX look needs raised you've million we $XXX $XXX

Kevin Bradley

can between of the Karl, going said then or $XXX solving more liquidity. is so kind investment going thanks to we and a and the ABL Yes feel million and today where Okay, us feel then be level $X And cash through that's for forward operations also this so maintaining CapEx where availability cash of you on we're period from comfortable kind and XXX less see our we question. about still balance, our in we're new billion we ABL of to that committed comfortable. for

things I changed. would say have

gone right receptivity conditions where But expectations we're the to business, and as CapEx in remarks, with level flow, I cash and when different. be to us, that's we through given go a market and capital their continue just markets said Our the opening the can. Dave, we've bit to opportunistic little and watch of in as to my going now

now I'm to there here. opportunities kind out on able been happy numerous been the strategy. got Big River to deal, we've and we've new say So where good time calls, we're after patient, look be and execute. some just that of to to the to sidelines, We're get be able going due to we've the to fund going for

the job a under a the over of a partners Treasury think manner has nice I pretty leadership to last done capital working our get team with of efficient lot in [indiscernible] weeks. couple

Karl Blunden

the added perspective to EBITDA. cost might outlay That's item helpful that from flexibility CapEx the cash, on quarter back a trend look you've have is like now, flexibility - This Do you you in you and had the built and in restructuring was forward, charges especially then and that on just a perspective? that both some does smaller sense cash that some from going discussed. some how have of

Kevin Bradley

a charges our naming took Yes, the business within were be a couple largely of to actions units few. USSK, we to restructuring [indiscernible] related

kind keep of isolated So you we third this the third and expect be in such is quarter we'll updated But those largely of changes. to isolated in the quarter.

Karl Blunden

Kevin. thanks Great,

Operator

Jarmoszuk is go next Stifel. The Nick Please caller from ahead.

Nick Jarmoszuk

morning. good Hi,

business reactionary a that a whether proactive With to about market exercise transformation, adverse and hoping review, could you I the view Thanks. portfolio more as any ongoing you conditions? process being or talk steelmaking was

Dave Burritt

I sorry, say over. I'm didn't again, Could understand start you it. it

Nick Jarmoszuk

the in the move River Valley, got you’re obviously and trying in lower cost bringing Big down You business transformation investing to on a business. fixed you're EAF Steel, Mon you're in the

lower invested portfolio cash? How are Some the proactive burning assets in this operations you in going obviously, portfolio against you the moves steel steelmaking going market start to they is higher be not is to and adjusted be being steelmaking view overall a cost, do are operations. or steelmaking pricing adjusted this margin manner when and to they

Dave Burritt

turn sure. I a I'm still Bradley am to here in going minute. to not it say, just I’ll Kevin

Valley in with focus on hot of this of Just the we River, the and both best with to Big strategy on strip Gary Mon mill. moving be clear here, the are direction

the mill focus with strategy to on and that strategy where curve direction the with now we're a at casting of endless is priorities. Gary. for this as great to rolling So we primary on moving right well, Big and technology River. mini elevating heavy our Valley be. in sites emphasis other but going the we're moving the that with are other down to our focused get go and at That's going We're have Mon We're going those capabilities top and cost the capability

Kevin Bradley

proactive. being are or question, your of part think we reactive I Yes,

as of I right. I And bit a think more responsive. it’s little think it's both

down We Those responsive that are did in Those on take. things that we furnaces see our we the book short-term are demand we’re that our reality are over summer. business. reflecting like of just toggling blast we the actions that of

our we In in investments, through terms footprint, capabilities, our look basis. a that of at more on term in cycle in long our

and at out capability, looking footprint. on based several differentiated we're economics cost across as proactive, through real priority cycle our are pointed with those times, and So David a

So it's a bit little both. of

Richard Fruehauf

stage mean Yes executing purposefully and we to said, on and last almost what the we've ago, to summer, developed stage. add been publicly over now able to strategy and about it was kind a that largely talk to by you I year are Kevin of

project icon, negotiations in Big endless in obviously, the we're the you and May So is resume and heard rolling which us Fairfield, We casting EAF launched the River. winter. in for

of that a deal beginning We couldn't we the about once we say October. got but announced anything that, done, at

So, on strategy. we've been that purposely executing

We we've the in key Dave conditions. those articulated, to year. strategy to go three been has we have market past goal, the as make out rolling been tactical facilities response when adjustments it But methodically been and has over the

Dave Burritt

be trough in trough best so, and say them. resilience more had I'd that's say conditions, everybody market plans clear call, I competitive. because of we we we strategy Yes deal robust between then respond, the both this And pick to this the everything react in we've plans, we with And ever than have would should don't world listening also on place.

of but question? best that your to responsive so, a way, competitive to answer going this be purposeful, both deliberate of completion And what having we're Does to we're walk comes world our strategy.

Christine Breves

No thing the that's that only at operations. would every we routinely the signal. mean, review to the normal demand add I market We I single just is, where month look is.

strategy. about proactive The is talking our towards other we're very a march

Operator

The John Tumazos Tumazos Research. next from question comes Very from John ahead. Please Independent go

John Tumazos

you much. Thank very

dropped And big rolled worse. ton businesses, richer Europe? like hot the wasn't $XX/$XX It It that mix price, but performance are of in the price you Your tons got weren't fewer about cetera. pleased you very profitable doing looks disclosures that rose as commercial review each I'm the three a XXX,XXX by you? how like it of et tons. tons for particularly the changed $X. the fell, clear a not looks chunk like very looks volume, realize Could we're mix much

Dave Burritt

a that's fair think I assessment.

changes mix to book - are how team, we we think the always optimize the we order our mentioned don't sure monitor we and well. and of make economics profile. sell one things we to book, hesitate I to as monitoring of Christy commercial order the the customers strategy make as And the the

So right. when absolutely think you're Europe, you look I at

blast we in really, improve American CRW the In book relative it second North if kind look the seamless you tubular the furnaces prices the the [indiscernible] And order mix even improved. selective to the we’re third because we were and mix of quarter. The at did in quarter more that weaken though down. of selling had of mix flat-rolled, profile tons took did

change the in of So segment. mix that that some drove

John Tumazos

Did the workforce fall each in by at XXX least segment?

Dave Burritt

footprint part to I sure share – by evidenced I'm this as John, employment we you available as but with at are with specifics to have share of I information and charges, take time. don't there changes restructuring levels, anytime any actions that if readily of you, not but have to

John Tumazos

Thank you for service and results. your good the

Dave Burritt

Thank you.

Operator

of next the go Matt line Lynch. America/Merrill ahead. from of question comes Please The Fields Bank from

Matthew Fields

free over this time, everyone. for in at to flow, you it's in quarter $XXX number, a what's time? you for XX responding market but big a Hey, the rationale at share flexibility I appreciate your not down buybacks of taking CapEx burned know shares. same bought But the conditions. million cash million I where back

Kevin Bradley

XXB, yes a it So, program terminated we in a that we is got program run. as XXB place, stepped we obviously, We in on but let a close deal, and we this we the River in really going had had Kevin. Big and

Matthew Fields

more So foreseeable will for forward buybacks there going the future? be share no

Dave Burritt

complete is we the strategy dynamics to This purchasing again, this to on first We again, done. is of make any our now, of focused part of this in right sure continued need to getting under still approval. of both our we acquisition to best of strategy. forward, the moving going part intend River. priority And that make We to market need that sure be flexibility. But we're Big our part the are. understand the We what is but this long-term have

Matthew Fields

picture billion next, And are then debt great. Okay, of kind $X.X at sheet, just big of you balance now.

You the incurred $X.X quarter, fourth $X.X. about in that's

your to to second sheet. million like debt River’s the on then XX%. you're $XXX and committing $XXX or million, buy pay $XXX going million another X.X balance consolidate That's to You're Big

steel case on sort all of So work? of cash makes and that what's makes of it pricing all it generation flow EBITDA solving your for base market, kind the volumes kind assumption of that kind the and work,

Kevin Bradley

of evaluate kinds deal forward investments strategy - as is, we said in environment. to past, I've looking our and so average through these Yes, considering we're tend cycle, the

out, in we're evaluate pointed around doing as everything and we Dave sensitivities between As always trough it. peak and

will reality the get not markets be from today to going the market this any right. eye investment We're do. I'm but point expectations on to ahead. realities we've generation not EBITDA around committed aware leverage We're going of take be going excited in think Please we're perspective. and markets what we're with been will of going the speculate is the dynamics to We're we it. execute over a respect main and to I of serve. flow the make and a sheet go and We're the trying realities We're capabilities to to to the right? the and fully, going but that period, cash flexibility, shortcuts about keen strategy. it We're to balance acutely it it current on permitted the markets, our

Richard Fruehauf

coming are our I within great raised take consideration you advance I into the that where projects. think think at tubular, just I say of to only The thing I example. will is, look – that's the strategic funds projects, from to add the have you would a the each been also, if values have

on value de-risked. from the at took not rounds, we're it's – an and and of largely our sourcing It's it successful look the - in absolute market-driven It's know, contribution at but all. completion we environmental of in revenue cost reduction. You bonds,

are Kevin of at benefits look streams. to outcome. commercial through not everything on certain XXX% as but we're we certainly none mentioned, all looking cycle, the So, projects diversify And a - also the these dependent

Dave Burritt

think about Yes, through average steel what prices cycle. you the I know think everybody are the should the this, way

in the steel You also know have gotten ugly even past. how recent prices

could peaks what be. know the You

at that. peak do planning actually resilience in we anywhere low between. the and this So we're Obviously to trough from end of

resilience a of planning. So lot we're doing

us be and in beat get here about we done ways we teams, We the do different lot to, in hat this we to up we're and there's get looked can't cycle. what black be We're and that tells nothing have investing we excited looks numbers couldn't seems more outside done that through strategy trough a able of strategy it and future. a we've and this the

Operator

next Bradford question Research. And from comes go from the Please Charles ahead. Bradford

Charles Bradford

the continue was in labor neutrality previous the morning. Good that your contracts? Does contract current clause

Dave Burritt

current mean and neutrality that? bit that you Those are contract little explain by what clause. a you more labor Could

Charles Bradford

was In at to you section the to union labor a the that were to neutral there contract you basis required on anything your access employees allow buy. in past,

Dave Burritt

to is if certainly The employees way want me of these something is have. But let situations, We representation, that they're them law essential Well, representation. welcome say which union just what our it's allow to union absolutely have certainly to approach we the types to represented, have not do. to this. be us tells

will be we through. - be process further clearly, the working as So about we'll it's talking in something that get and

Charles Bradford

of political raises a of related how so your far lot on? situation to current Can and are about as levels as issues The much Okay. fracking current fracking. us tubular tell shipping products you

Kevin Bradley

happy you, but Yes, available have - in for information to don't we don't that provide the that readily up. follow I

Operator

now turn with time. you. Okay. closing or this to no There your call back are presentation continue further Please questions I remarks. the will at

Kevin Lewis

for remarks today? any closing very Thank Dave, you much.

Dave Burritt

But for off, few Yes, everyone I Steel. before reinforce U.S. to signing thanks your key a messages. in interest want

unprecedented thoughtfully, strategy focus conditions that's cash are are company stockholder are doing. we to proof our another finally, accelerating what changing why a just We becoming, we long-term point and we market are are executing value. the on and Today's purposefully, in with thankful on to just And our are decisions you've difficult for our to a uncertainties. there change lot hard I very, future. all short is change continue have we I of have a accomplished. to and Well, very of undergone we make time. employees, am period know about

work back safely. get Now let's to

Operator

does for ask please That the We conclude today. and lines. conference you your participation thank call disconnect you for your that

United States Steel (X) 1 Nov 192019 Q3 Earnings call transcript