EDGAR 10-K Filing

Company CIK: 1163302
Filing Year: 2024
Filename: 1163302_10-K_2024_0001163302-24-000009.json

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ITEM 1. BUSINESS
Item 1. BUSINESS
United States Steel Corporation, with operations in the United States of America (U.S.) and Central Europe, is transforming itself into a customer-centric, world-competitive, Best for All® steelmaker by investing in the competitive advantages that differentiate us in our customers' eyes. We are executing on our strategy by investing where we have distinct cost and capability advantages so that we are a superior steel solutions provider for our customers. By offering the new steels that our customers are increasingly demanding, we aim to achieve world-competitive positioning in strategic, high-margin end markets and deliver high-quality, value-added products and innovative solutions utilizing a lower carbon footprint than previously available through our traditional integrated steelmaking model.
During 2023, U. S. Steel had annual raw steel production capability of 22.4 million net tons (17.4 million tons in North America and 5.0 million tons in Europe). U. S. Steel performs a wide range of applied research, development and technical support functions at facilities in Pennsylvania, Michigan, Texas and Slovakia. U. S. Steel supplies customers throughout the world primarily in the automotive, construction, consumer (packaging and appliance), electrical, industrial equipment, service center/distribution, structural tubing and energy (oil country tubular goods (OCTG) and line pipe) markets. According to the worldsteel Association’s latest published statistics, U. S. Steel is the third largest U.S. based steel producer and the twenty-seventh largest steel producer in the world. U. S. Steel is a Delaware corporation established in 1901.
Agreement and Plan of Merger with Nippon Steel Corporation
On December 18, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Nippon Steel North America, Inc., a New York corporation ("Purchaser"), 2023 Merger Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of Purchaser ("Merger Sub"), and, solely as provided in Section 9.13 therein, Nippon Steel Corporation, a Japanese corporation ("NSC"), pursuant to which Merger Sub will merge with and into the Company (the "Merger") with the Company surviving the Merger as a wholly-owned subsidiary of Purchaser. Subject to the terms and conditions set forth in the Merger Agreement, each share of the Company's common stock, par value $1.00 per share, outstanding immediately prior to the effective time of the Merger (the "Effective Time") will, at the Effective Time, automatically be converted into the right to receive $55.00 per share in cash, without interest, subject to any required tax withholding.
Segments
U. S. Steel has four reportable segments: North American Flat-Rolled (Flat-Rolled), Mini Mill, U. S. Steel Europe (USSE) and Tubular Products (Tubular). The Mini Mill segment reflects the full ownership of Big River Steel after January 15, 2021, when U. S. Steel purchased the remaining equity interest in Big River Steel that it did not previously own, and a second mini mill currently under construction near Osceola, Arkansas. Prior to the acquisition, the minority interest equity earnings of Big River Steel were included in the Other category. The Tubular segment includes the electric arc furnace at our Fairfield Tubular Operations in Fairfield, Alabama. The Other category includes results of our real estate business, the previously held equity method investment in Big River Steel, and our former Transtar business. On July 28, 2021, the Company sold 100% of the equity interests in Transtar, its short-line railroad business.
Flat-Rolled
The Flat-Rolled segment includes the operating results of U. S. Steel’s integrated steel plants and equity investees in North America involved in the production of slabs, strip mill plates, sheets and tin mill products, as well as all iron ore, direct reduced grade pellets, pig iron, and coke production facilities in the United States. These operations primarily serve North American customers in the automotive, appliance, construction, container, pipe and tube, sheet converter, solar, industrial equipment and service center markets.
During 2023, Flat-Rolled had aggregate annual raw steel production capability of 13.2 million tons at our Gary Works, Mon Valley Works, and Granite City Works facilities. In December 2021, U. S. Steel permanently idled the steelmaking operations at Great Lakes Works which reduced the Company's overall annual raw steel production capability by 3.8 million net tons. Raw steel production was 9.4 million tons in 2023, 8.8 million tons in 2022, and 9.9 million tons in 2021. Raw steel production averaged 71 percent of capability in 2023, 67 percent of capability in 2022, and 58 percent of capability in 2021.
Mini Mill
The Mini Mill segment includes the operating results of U. S. Steel's Big River Steel facility and a second mini mill currently under construction, both are located in Osceola, Arkansas. The Mini Mill segment produces hot-rolled, cold-rolled, coated sheets and electrical steels. This operation primarily serves North American customers in the automotive, construction, pipe and tube, sheet converter, electrical, solar, industrial equipment and service center markets.
Mini Mill has aggregate annual raw steel production capability of 3.3 million tons at our Big River Steel facility. Raw steel production was 3.0 million tons in 2023 and 2.7 million tons in both 2022 and 2021. Raw steel production averaged 89 percent of capability in 2023, 80 percent of capability in 2022, and 81 percent of capability in 2021.
European Operations
The USSE segment includes the operating results of U. S. Steel Košice (USSK), U. S. Steel’s integrated steel plant and coke production facilities in Slovakia, and its subsidiaries. USSE conducts its business mainly in Central and Western Europe and primarily serves customers in the European transportation (including automotive), construction, container, appliance, electrical, service center, conversion and oil, gas and petrochemical markets. USSE produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe.
USSE has annual raw steel production capability of 5.0 million tons. USSE’s raw steel production was 4.4 million tons in 2023, 3.8 million tons in 2022, and 4.9 million tons in 2021. USSE’s raw steel production averaged 88 percent of capability in 2023, 77 percent of capability in 2022, and 99 percent of capability in 2021.
Tubular
The Tubular segment includes the operating results of U. S. Steel’s tubular production facilities and an equity investee in the United States. These operations can produce and sell rounds, seamless and electric resistance welded (ERW) steel casing and tubing (commonly known as OCTG), and standard and line pipe and mechanical tubing and primarily serve customers in the oil, gas and petrochemical markets. U. S. Steel Tubular Products LLC (USSTP), a wholly owned subsidiary of U. S. Steel, designs and develops a range of premium and semi-premium connections to address our customers' needs. The Tubular segment has annual raw steel production capability of 900 thousand tons. Raw steel production was 568 thousand tons in 2023, 634 thousand tons in 2022, and 464 thousand tons in 2021. Raw steel production averaged 63 percent of capability in 2023, 70 percent of capability in 2022, and 52 percent of capability in 2021. Tubular has total production capability of 1.9 million tons. In 2020, Tubular indefinitely idled the Lone Star Tubular Operations and Lorain Tubular Operations thereby effectively reducing on-line tubular production capacity by 790 thousand and 380 thousand tons, respectively.
For further information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 to the Consolidated Financial Statements.
Steel Shipments by Market and Segment
The following table, except as noted in Footnote 1 below, does not include shipments to end customers by joint ventures and other equity investees of U. S. Steel. Shipments of materials to these entities are included in the “Further Conversion - Joint Ventures” market classification. No single customer accounted for more than 10 percent of gross annual revenue for the three consecutive years ended December 31, 2023.
(Thousands of Tons) Flat-Rolled Mini Mill USSE Tubular Total
Major Market - 2023
Steel Service Centers 1,506 1,116 848 - 3,470
Further Conversion - Trade Customers 1,940 729 293 - 2,962
- Joint Ventures (1)
211 - - - 211
Transportation and Automotive (1)
2,876 17 636 - 3,529
Construction and Construction Products 908 483 1,319 31 2,741
Containers and Packaging 570 1 312 - 883
Appliances and Electrical Equipment 429 78 172 - 679
Oil, Gas and Petrochemicals - - - 447 447
All Other 266 - 319 - 585
TOTAL 8,706 2,424 3,899 478 15,507
Major Market - 2022
Steel Service Centers 1,128 1,080 839 - 3,047
Further Conversion - Trade Customers 2,163 772 289 - 3,224
- Joint Ventures (1)
256 - - - 256
Transportation and Automotive (1)
2,611 20 619 - 3,250
Construction and Construction Products 922 310 1,052 30 2,314
Containers and Packaging 693 13 423 - 1,129
Appliances and Electrical Equipment 416 93 225 - 734
Oil, Gas and Petrochemicals - - 3 494 497
All Other 183 - 309 - 492
TOTAL 8,372 2,288 3,759 524 14,943
Major Market - 2021
Steel Service Centers 1,539 1,121 995 - 3,655
Further Conversion - Trade Customers 1,701 684 314 - 2,699
- Joint Ventures (1)
490 - - - 490
Transportation and Automotive (1)
2,355 17 590 - 2,962
Construction and Construction Products 1,224 282 1,346 18 2,870
Containers and Packaging 942 17 449 - 1,408
Appliances and Electrical Equipment 570 109 266 - 945
Oil, Gas and Petrochemicals - - 8 426 434
All Other 197 - 334 - 531
TOTAL 9,018 2,230 4,302 444 15,994
(1) PRO-TEC automotive substrate shipments are included in the Transportation and Automotive category.
Steel Industry Background and Competition
The global steel industry is cyclical, highly competitive and has historically been characterized by global overcapacity.
U. S. Steel's competitive position may be affected by, among other things, differences among U. S. Steel's and its competitors' cost structure, labor costs, environmental remediation and compliance costs, global capacity, achievement of innovations in new technologies and sustainable products and the existence and magnitude of government support.
U. S. Steel competes with many North American and international steel producers. Competitors include 1) integrated producers, which use iron ore and coke as the primary raw materials for steel production, 2) Electric Arc Furnace (EAF) producers, which primarily use steel scrap and other iron-bearing feedstocks as raw materials and 3) slab re-rollers, who purchase mostly imported, but some domestic, semi-finished products and convert them into sheet products. In addition, other materials, such as aluminum, plastics and composites, compete with steel in several applications. According to worldsteel Association, global steel production in 2023 was consistent compared to 2022, at approximately 1.89 billion metric tons. Among the top ten steel producing countries, steel production in China was flat, and production in India, the United States and Russia increased, while production in Europe, Brazil and Japan decreased. The top five steel producing countries accounted for 74 percent of the world's steel production in 2023.
See "International Trade" below for a discussion of global overcapacity and the Company's efforts to mitigate the competitive impact.
EAF producers typically require lower capital expenditures for construction and operation of facilities and may have lower total employment costs. Some EAF producers utilize thin slab casting technology to produce flat-rolled products and are increasingly able to compete directly with integrated producers in many flat-rolled product applications previously produced only by integrated steelmakers. Slab re-rollers do not incur the cost of melting steel; their input costs are largely driven by the market price of slabs.
U. S. Steel provides defined benefit pension and/or other post-employment benefits to approximately 60,000 current employees, retirees and their beneficiaries. Many of our competitors do not have comparable retiree obligations. Participation in U. S. Steel's main defined benefit pension plan was closed to new entrants on July 1, 2003 and benefit accruals for all non-represented participants were frozen effective December 31, 2015. Participation in U. S. Steel’s retiree medical and life insurance programs for United Steelworkers (USW)-represented employees was closed to employees hired or rehired (except in limited circumstances) on or after January 1, 2016. For non-represented employees, retiree medical benefits were eliminated December 31, 2017, and retiree life insurance benefits were eliminated for those who retired after December 31, 2017.
We believe that our major North American and many European integrated steel competitors are confronted with substantially similar environmental regulatory conditions and therefore do not believe that our relative position with regard to such competitors will be materially affected by the impact of environmental laws and regulations. However, if future regulations do not recognize that the integrated steel process involves a series of chemical reactions involving carbon that create carbon dioxide (CO2) emissions without linking these emissions to steel scrap as well, the competitive position of our integrated operations will be adversely impacted compared to mini mills. Our competitive position compared to producers in developing nations such as China, Russia, Brazil and India will be harmed unless such nations require commensurate reductions in CO2 emissions or there are policies to adjust for the carbon emissions disparities. Competing materials such as plastics may not be similarly impacted. The specific impact on each competitor will vary depending on a number of factors, including the age and location of its operating facilities and its production methods. U. S. Steel is also responsible for remediation costs related to former and present operating locations and disposal of environmentally sensitive materials. Many of our competitors, including North American producers, or their successors, that have been the subject of bankruptcy relief have no or substantially lower liabilities for such environmental remediation matters.
In 2024, we expect additional steelmaking capacity will enter the domestic steel market as competitors' growth projects come on-line or ramp up to full production in North America throughout the year.
Business Strategy
We are executing on our customer-centric Best for All® strategy to provide customers with profitable steel solutions for people and planet. Our strategy is focused on developing quality products and customer process solutions by investing where we have distinct cost or capability competitive advantages. We are expanding our competitive advantages in low-cost iron ore, mini mill steelmaking, and best-in-class finishing assets with innovative solutions and commercial acumen. These competitive advantages are built on a foundation of research, innovation and deep customer relationships. In executing our strategy, we aim to enhance our earnings profile, deliver long-term cash flow through industry cycles and reduce our cost, capital, and carbon intensity. By offering the product capabilities, including the more sustainable steels (steels made with lower greenhouse gas emissions) our customers are increasingly demanding, we can achieve more competitive positioning in strategic, high-margin end markets, and deliver high-quality, sustainable, value-added products and innovative solutions.
Our strategy is informed by our critical success factors, which are the bedrock of the Best for All® strategy: (1) Win in Strategic Markets; (2) Move Up the Talent Curve; and (3) Move Down the Cost Curve.
We are focused on strategic markets, where there is the greatest opportunity to provide differentiated, innovative and value-added solutions that will help our customers succeed. We are investing in new technologies to improve our cost position and increase our capabilities, including our mini mill steelmaking and best-in-class finishing capabilities. Beginning in 2021, we began investing nearly $4 billion in the Mini Mill segment to enhance our finishing and EAF capabilities. In 2023, we completed construction of a 200-thousand-ton, non-grain oriented (NGO) electrical steel line at our Big River Steel facility, which produced its first coil in September 2023, and industrial grade coils in October 2023. This project was completed on-time and on-budget. Construction of Big River 2 (BR2) near Osceola, Arkansas continued throughout 2023. This new mini mill is expected to have about 3 million tons per year of steelmaking capability and will combine two state-of-the-art EAFs with differentiated steelmaking and finishing technology, including endless casting and rolling equipment and a planned advanced high-strength steel (AHSS) finishing line. Our Board of Directors has authorized additional capital to ensure BR2 is completed successfully in the second half of 2024. The Company now expects total capital spend for BR2 will be approximately $3.2 billion. In addition, the construction of a 325 thousand ton dual Galvalume®/galvanized coating line at Big River Steel is expected to be completed in the second quarter of 2024. We are enhancing our competitive advantage in low-cost iron ore by expanding this advantage to serve our growing fleet of EAF producers. In our Flat-rolled segment, construction of a direct reduced (DR) grade pellet facility at the Company’s Keetac ore operations was completed on-time and on-budget in December 2023. We also completed our 500-thousand-ton, pig iron machine at Gary Works in 2022 and ramped to full run-rate production in 2023. Capital expenditures for strategic projects were $1.89 billion during the year ended December 31, 2023.
We know that to accomplish our objectives, we also need to continue to move up the talent curve. We are investing in our employees and providing the training and resources they need to succeed. This will help reinforce our culture of caring, where accountability, fairness and respect are foundational, and high performance and inclusion in all its forms are valued and celebrated. See "Human Capital Management" below for additional information on our talent attraction, development, and retention initiatives.
From time to time, U. S. Steel evaluates potential strategic and organizational opportunities, which may include the acquisition, divestiture or consolidation of assets. Given the cyclicality of our industry, we are focused on strategically deploying our capital, in-line with our capital allocation framework, in order to invest in areas consistent with the execution of our Best for All strategy and are considering various possibilities, including exiting lines of business and the sale of certain assets, that we believe would ultimately result in greater stockholder value. The Merger Agreement contains customary limitations on U. S. Steel's ability to engage in such transactions without the consent of Purchaser.
As the Company advances and expands its mini mill capability, it seeks to become better, not bigger and will adjust its footprint accordingly by re-evaluating cost and capability advantages within its evolving footprint. In December 2021 and June 2022, the Company permanently idled the steelmaking and ironmaking operations, respectively, at its Great Lakes Works facility. In addition, in March 2022, the Company permanently idled the finishing facilities at its East Chicago Tin operations, which had been idled on a temporary basis during 2019. The coil finishing process at Great Lakes Works continues to operate and remains a component of the Company's operating plans. In December 2022, the Company indefinitely idled the majority of tin operations at our Gary Works facility. In November 2023, the steel and ironmaking production facilities at Granite City Works were indefinitely idled. The plant continues to process slabs to produce hot-rolled, cold-rolled and coated sheets. Production at USS-UPI, LLC (UPI) was indefinitely idled in December 2023.
Commercial Strategy
Our commercial strategy is focused on providing customer-centric solutions with differentiated and value-added steel products, which includes advanced high strength steels such as our newer grades of generation 3 (GEN3) steel, coated sheets for the automotive and appliance industries, electrical steel sheets for the manufacture of motors and electrical equipment, both bare and prepainted galvanized and Galvalume® sheets for construction, heavy gauge hot rolled coils used in the production of
construction and agricultural-related heavy machinery as well as skelp for line pipe used for energy transmission as well as extraction, tin mill products for the packaging industry and OCTG pipe, connections, accessories and rig site services for use in drilling for oil and gas. In addition, our portfolio of customers serves a variety of different traditional and emerging industries meeting the needs of numerous markets.
U. S. Steel is committed to leveraging our Best for All strategy to develop and commercialize our low-carbon footprint and advanced high-strength steels for our current and future customers. The Company's current five year plan includes plans to develop and commercialize numerous differentiated grades of low-carbon footprint, high rate of recycled-content steels, providing compelling new options for customers in automotive, appliance, industrial equipment, construction, renewable energy and other markets to enhance the sustainability of their products. For example, in April 2021, we announced a new sustainable steel product line, verdeXTM, which is made with up to 90% recycled steel content and a reduced carbon footprint - as much as 70-80% less carbon emissions than traditional integrated steelmaking methods. After launching our verdeXTM brand of sustainable steel products in 2021, we worked closely with customers on their own sustainability goals. In 2022, we reached agreements with multiple customers on the sale of verdeXTM products moving forward, and in 2023, even more agreements have been put in place for use in industries such as automotive, appliance, construction, and renewable energy, setting the stage for increased sales of verdeXTM in these and other industries in the coming years. Also in 2023, with the completion of the NGO electrical steel line at our Big River Steel facility, the Company began production of its InduXTM electrical steel products which have all of the magnetic properties necessary for electric vehicles as well as generators and transformers. InduXTM electrical steel products are wide, ultra-thin, light-weight and infinitely recyclable. In addition, we continue to work with customers in numerous industries to help them implement AHSS solutions in the products they manufacture. While the automotive industry has been most active in the application of these products in new vehicle platforms, and it continues to accelerate the deployment of AHSS solutions in new vehicle launches, U. S. Steel is successfully introducing AHSS in other industries as well. In January 2023, we also enhanced our construction product offering by offering a best-in-class warranty of up to 60 years for our Galvalume® products, and in October 2023 launched Coastalume®, the first carbon steel solution designed for use in coastal construction applications.
We are responsive to our customers' changing needs by developing new steel products and uses for steel that meet their evolving markets and regulatory demands. We have research centers in Munhall, Pennsylvania, Košice, Slovakia, and Houston, Texas, as well as a technology center in Troy, Michigan. The focus of these centers is to engineer new products and to co-create innovative solutions that meet our customers' toughest challenges to reduce carbon emissions, increase strength, improve longevity and serve the needs of their customers.
For automotive customers leveraging advanced high strength steels, we commissioned a first of its kind GEN3 hot dipped galvanize line at our PRO-TEC Coating Company (PRO-TEC) joint venture in 2020, and have embedded application engineers at original equipment manufacturers (OEMs) to demonstrate how to best utilize the high strength, highly formable, cost effective material in body design to meet passenger safety requirements while significantly reducing weight to meet future vehicle fuel efficiency standards.
In our tubular markets, we continue development of premium and semi-premium tubular connections designed for our customers that operate in challenging drilling environments. These connections optimize well construction activities and provide outstanding sealing capabilities for onshore and offshore oil and gas drilling in North America. An example is the USS-TALON HTQ™, which was introduced in 2020 for customers that are constructing onshore natural gas and oil wells with long laterals requiring best-in-class torque capacity and optimized well-bore clearances.
Commercial Sales of Product
U. S. Steel characterizes sales as contract sales if sold pursuant to an agreement with a defined volume and pricing and a duration of longer than three months, and as spot if sold without a defined volume and pricing agreement, typically three months or less. In 2023, approximately 67 percent, 58 percent, 45 percent and 78 percent of sales by Flat-Rolled, Mini Mill, USSE and Tubular, respectively, were contract sales. Some contract pricing agreements include fixed prices while others are adjusted periodically based upon published prices of steel products or cost components.
Human Capital Management
At U. S. Steel, we are focused on attracting and retaining the top talent needed to support our strategic transformation and meet our customers’ evolving needs as a sustainable steel solutions provider. The support and development of our people is foundational to achieving our Best for All strategy. We refer to this strategic talent pillar as “Moving Up the Talent Curve.”
Our focus on people extends to our current and future employees. We aim to have an engaged and diverse workforce to promote new ideas and innovation, reflect the communities where we operate, and deliver exceptional customer service. We seek to build an inclusive environment where people feel free to bring their professional selves to work. To achieve the Best for All strategy, we must have the “Best from All.”
Active Employees as of December 31, 2023
North America 13,995
Slovakia 7,808
Total 21,803
Ethics & Compliance
Our culture is based on our S.T.E.E.L. Principles: Safety First; Trust and Respect; Environmental Stewardship; Excellence and Accountability; and Lawful and Ethical Conduct. We expect our employees and members of our board of directors to take personal responsibility to “do what’s right,” and our Code of Ethical Business Conduct serves as the foundation for the actions of our employees and directors. To further ensure that employees understand the Company’s expectations and all applicable rules, we provide annual formal ethics and compliance training to our employees and have frequent communications with information about key compliance topics, which include messages from senior management underscoring the importance of doing business with integrity. Employees also receive summaries of current events that demonstrate the need to do business lawfully and ethically that include reminders of the company’s expectations for all employees. In addition, through our annual policy certification process, employees of USSK, non-represented employees in the United States, and members of our board of directors certify their ongoing compliance with our Code of Ethical Business Conduct.
Employee Health & Safety
At U. S. Steel, we have a long-standing commitment to the safety and health of every person who works in our facilities. Every employee deserves to return home safely at the end of every day, and we are working to eliminate all injuries and incidents. In addition, the psychological safety of all employees is important to us. We have combined physical safety and psychological safety into the construct of 360° safety. Ensuring a safe workplace also improves productivity, quality, reliability and financial performance. By making safety and health a personal responsibility, our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensure safe working conditions for everyone. A “Safety First” mindset is as essential to our success as the tools and technologies we rely on to do business.
Our objective is to attain a sustainable zero harm culture supported by leadership and owned by an engaged and highly skilled workforce, empowered with the capabilities and resources needed to assess, reduce and eliminate workplace risks and hazards. In support of these objectives, we have developed an enhanced Safety Management System, initiated new safety communication methods and enhanced contractor safety processes. One of our most important safety protocols is our fatality prevention audit program. These proactive assessments of the processes and protocols we have in place, and adherence to them, to avoid fatalities and severe injuries are conducted annually at the enterprise level and more frequently at each of our facilities. We assess our safety performance through a variety of lagging and leading indicators, including OSHA Days Away From Work (DAFW). This measurement allows us to evaluate the frequency of injuries sustained at our facilities requiring an employee to stay at home for more than one day. U. S. Steel has achieved record-safety performance in this measurement in the last several years, routinely achieving performance better than industry benchmarks.
For 2023, we had a corporate DAFW rate of 0.04, which is 15 times better than the U.S. Bureau of Labor Statistics' Iron and Steel benchmark DAFW rate of 0.60.
Diversity, Equity, & Inclusion
Attracting, developing, and retaining a workforce of talented, diverse people is essential to having high-performing teams that drive results for our Company’s stakeholders. As part of our commitment to cultivating a culture of caring, we have inclusive benefits available for our U.S. non-represented workforce, including expanded parental leave, back-up dependent care, infertility coverage, gender reassignment coverage and healthcare continuation for the families of employees who suffered work-related or military service fatalities. We also support several employee resource groups (ERGs) to enhance employee engagement, promote a culture of belonging, foster diversity in the workplace, and raise awareness related to issues of identity and intersectionality. Our ERGs also provide training and education, mentorship and networking opportunities for their members.
Talent Attraction, Development and Retention
We believe that attraction, development and retention of talent is essential to our success, especially in today’s competitive labor market. We offer internship programs, partner with universities, community colleges and technical schools, and collaborate with community employment centers and economic development nonprofit organizations to build strong and diverse internal and external sources of potential employees and opportunities for our existing employee's growth and development.
Once at U. S. Steel, we seek to provide opportunities for continuous learning and development. All of our employees at a director-level and above have a formal professional development plan that is assessed at least annually. In addition, we proactively monitor our attrition rates and take targeted actions to ensure our highest potential and performing employees are motivated to remain with the Company. Over the past five years, our regrettable voluntary turnover rate has been at or below 5 percent.
We offer a competitive total rewards package of compensation and benefits that we regularly evaluate and benchmark across the manufacturing industry to ensure that we position U. S. Steel as an employer of choice.
Labor Relations
Approximately 80% of our employees in North America and Slovakia are covered by collective bargaining agreements. We work closely with union representatives to provide safe and productive workplaces that enable our employees to deliver high-quality products and meet the needs of our customers. Our relationship with the United Steelworkers includes not only a commitment to safety programs, but also a common approach to combating the unfairly traded imports that threaten our industry, our company and ultimately the jobs of our employees.
Certain hourly employees of U. S. Steel’s flat-rolled, tubular, cokemaking and iron ore operations in the United States are covered by collective bargaining agreements with the USW entered into effective September 1, 2022, (the 2022 Labor Agreements) that expire on September 1, 2026. The 2022 Labor Agreements include a signing bonus for each eligible USW-represented employee and annual 5% wage increases effective September 1, 2022, 2023, 2024, and 2025. The 2022 Labor Agreements also provide for certain increases to pension and retirement benefits, including increases in our defined benefit pension plan, retiree healthcare contributions, and to the contribution rate to the Steelworkers Pension Trust from $3.50 to $4.00 per hour, effective January 1, 2023. During the fourth quarter of 2022, U. S. Steel recorded a charge of approximately $67 million for the 2022 Labor Agreements signing bonus and related costs.
In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. The OPEB plans were modified to allow the Company to utilize a certain amount of surplus assets to pay additional legally permissible benefits previously paid by the Company. The arrangement permits the Company to utilize a target of $75 million annually for active and retiree employee benefits, with an annual minimum of $50 million, beginning in 2023 and continuing through December 31, 2026. For additional information, see Note 18 to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Capital Structure, Liquidity and Capital Allocation
Our Best for All strategy's primary financial goal is to enhance stockholder value by utilizing our capital structure, liquidity and enhanced capital allocation priorities to advance the Company's strategic objectives, generate long-term value and reward stockholders. Our cash deployment strategy is aligned with our corporate strategy and includes: executing on strategic projects and portfolio moves; maintaining a strong balance sheet and a healthy pension plan; and delivering sustainable growth with a focus on core values such as safety and environmental stewardship and rewarding stockholders for the continued progress we make. Cash deployment is also performed with a customer-centric focus on improving safety, our environment, quality, delivery and cost.
Our liquidity supports our ability to satisfy short-term obligations, fund working capital requirements and provides a foundation to execute key strategic priorities. We are focused on maintaining a strong balance sheet and may proactively refinance or repay our debt from time to time to protect our capital structure from unforeseen external events and re-financing risks.
On May 18, 2023, U. S. Steel closed on an offering consisting of an aggregate principal amount of $240 million unsecured Arkansas Development Finance Authority environmental improvement revenue bonds, which carry a green bond designation. The bonds, issued through Arkansas Development Finance Authority, have a coupon rate of 5.700% and carry a final maturity of 2053 (2053 ADFA Green Bonds). U. S. Steel received net proceeds of approximately $238 million after fees of approximately $2 million related to the underwriting and third-party expenses and will pay semiannual interest. The net proceeds from the issuance of the 2053 ADFA (Arkansas Development Finance Authority) Green Bonds were used to partially fund work related to BR2, currently under construction near Osceola, Arkansas. The Merger Agreement contains customary limitations on U. S. Steel's ability to incur additional indebtedness without the consent of Purchaser.
In 2023, we repaid approximately $89 million in debt, and we ended the year with $5.17 billion of total liquidity.
On July 25, 2022, following the completion of previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program for the repurchase of up to $500 million of the Company's outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
U. S. Steel repurchased 7.1 million shares of its common stock for approximately $175 million during the year ended December 31, 2023, and there is approximately $126 million remaining under the current stock repurchase authorization. In addition, the Board of Directors declared quarterly dividends of five cents per common share for each of the quarters in 2023. We do not expect to utilize the remainder of this authorization. The Merger Agreement contains a customary prohibition on U. S. Steel's ability to engage in additional share repurchases without the consent of Purchaser.
Facilities and Locations as of December 31, 2023
Flat-Rolled
The operating results of all of U. S. Steel's domestic-integrated steel and sheet plants, coke and iron ore operations and ore and sheet production joint ventures are included in Flat-Rolled. Also, included within Flat-Rolled is a research and technology center located in Munhall, Pennsylvania (near Pittsburgh) and a technology center in Troy, Michigan. The research and technology center carries out a wide range of applied research, development and technical support functions. The technology center brings automotive sales, service, distribution and logistics services, product technology and applications research into one location and much of U. S. Steel’s work in developing new grades of steel to meet the demands of automakers for high-strength, light-weight and formable materials is carried out at this location.
Flat-Rolled Operations Table
Operations, (Property Location) Annual Production Capability Principal Products and/or Services
Gary Works, (Gary, Indiana) (a)
7.5 million tons of raw steel which includes 0.5 million tons of pig iron capability strip mill plate in coil; hot-rolled, cold-rolled and coated sheets; tin mill products and pig iron
Midwest, (Portage, Indiana)
finishing facility hot-rolled, cold-rolled and coated sheets; and tin mill products
Great Lakes Works (b),
(Ecorse, River Rouge and Dearborn, Michigan)
finishing facility cold-rolled and coated sheets
Mon Valley Works (c):
Edgar Thompson, (Braddock, Pennsylvania),
Irvin, (West Mifflin, Pennsylvania), Fairless, (Fairless Hills, Pennsylvania), and
Clairton, (Clairton, Pennsylvania)
2.9 million tons of raw steel and 3.6 million tons of coke hot-rolled, cold-rolled and coated sheets; and coke and coke by-products
Granite City Works (d), (Granite City, Illinois)
2.8 million tons of raw steel hot-rolled, cold-rolled and coated sheets
Granite City Works, (Granite City, Illinois);
Gateway Energy and Coke Company LLC (Gateway)
coke supply agreement not applicable
USS-UPI, LLC (UPI) (e), (Pittsburg, California)
finishing facility cold-rolled and coated sheets; tin mill products
Fairfield Works, (Fairfield, Alabama)
finishing facility coated sheets
Minnesota Ore Operations: Minntac, (Mt. Iron, Minnesota) and Keetac, (Keewatin, Minnesota)
22.4 million tons of iron ore pellets which includes 4.0 million tons of DR-grade pellet capability iron ore pellets and DR (direct reduced) grade pellets
(a) The majority of tin operations were indefinitely idled as of December 31, 2022. Pig iron is sold on an intercompany basis to Big River Steel.
(b) The steel and ironmaking production facilities were permanently idled in December of 2021 and June of 2022, respectively. Great Lakes Works' pickle line, cold mill and CGL continue to operate, while the DESCO and electrolytic galvanizing lines are indefinitely idled.
(c) From time to time, we may swap coke with other domestic steel producers or sell on the open market. Coke by-products are sold to the chemicals and raw materials industries.
(d) In November 2023, the steel and ironmaking production facilities at Granite City Works were indefinitely idled. The plant continues to process slabs to produce hot-rolled, cold-rolled and coated sheets.
(e) In December 2023, production at UPI was indefinitely idled.
Joint Ventures Within Flat-Rolled
U. S. Steel participates in a number of joint ventures that are included in Flat-Rolled, most of which are conducted through subsidiaries. All of these joint ventures are accounted for under the equity method. The significant joint ventures and other investments are described below.
Joint Ventures (a) Within Flat-Rolled Table
Joint Venture, (Property Location) U. S. Steel's Ownership Percentage Annual Production Capability
Hibbing Taconite Company (Hibbing); (Hibbing, Minnesota)
14.7% 9 million tons of which U. S. Steel's share is 1.3 million tons
PRO-TEC Coating Company (PRO-TEC), (Leipsic, Ohio)
50.0% 2.0 million tons (b)
Double G Coatings Company (Double G) (c); Jackson, Mississippi
50.0% 315 thousand tons
Chrome Deposit Corporation (CDC), (six locations near major steel plants)
50.0% not applicable
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements.
(b) U. S. Steel's domestic production facilities supply PRO-TEC with cold-rolled sheets and U. S. Steel markets all of PRO-TEC's products.
(c) Each partner supplies its own steel to Double G and markets what is processed by Double G.
Mini Mill
The operations of Big River Steel are included in Mini Mill. Big River Steel, located in Osceola, Arkansas, is an EAF sheet steel production facility.
Mini Mill Operations Table
Operations, (Property Location) Annual Production Capability Principal Products and/or Services
Big River Steel, (Osceola, Arkansas)
3.3 million tons of raw steel hot-rolled, cold-rolled and coated sheets; and electrical steels
USSE
USSE operates in Košice, Slovakia an integrated facility and a research laboratory, which, in conjunction with our Research and Technology Center, supports efforts in coke making, electrical steels, other value-added products and design and instrumentation.
USSE Operations Table
Operations, (Property Location) Annual Production Capability Principal Products and/or Services
U. S. Steel Košice, (Košice, Slovakia)
5.0 million tons of raw steel coke; slabs; strip mill plate: hot, cold and coated sheets; tin mill products; and spiral welded pipe
Tubular
Tubular manufactures seamless and welded OCTG, standard pipe, line pipe and mechanical tubing.
Tubular Operations Table
Operations, (Property Location) Production Capability Principal Products and Services
Fairfield Tubular Operations, (Fairfield, Alabama)
0.9 million tons of raw steel (a) and 750 thousand tons of tubular
seamless tubular pipe
Lorain Tubular Operations (b), (Lorain, Ohio)
380 thousand tons of tubular seamless tubular pipe
Lone Star Tubular (b), (Lone Star, Texas)
#1 electric-weld pipe mill (EWPM) 400 thousand tons and #2 EWPM 380 thousand tons of tubular welded tubular pipe
Wheeling Machine Products (c), (Pine Bluff, Arkansas and Hughes Springs, Texas)
not applicable tubular couplings
Offshore Operations, (Houston, Texas)
not applicable tubular threading, inspection, accessories and storage services and premium connections
Tubular Processing (d), (Houston, Texas)
not applicable tubular processing
(a) Based on the rounds caster capacity which is its constraining production unit.
(b) In April 2020, the Lorain Tubular and Lone Star Tubular operations were indefinitely idled.
(c) In April 2020, the Wheeling Machine Products at Hughes Springs, Texas was indefinitely idled.
(d) Tubular Processing has been indefinitely idled since 2015.
Joint Ventures (a) Within Tubular Table
Operations, (Property Location) U. S. Steel's Ownership Percentage Production Capability Principal Products and/or Services
Patriot Premium Threading Services, (Midland, Texas)
50% not applicable Tubular threading, accessories and premium connections
(a) See further information about our equity investees in Note 12 to the Consolidated Financial Statements.
Other
U. S. Steel’s Other category includes the operating results relating to our real estate operations, the previously held equity method investment in Big River Steel, and our former railroad business. The Company owns approximately 40,500 acres of real estate assets, either held for development or managed, in Alabama, Illinois, Michigan, Minnesota and Pennsylvania.
Raw Materials and Energy
As a predominantly integrated producer, U. S. Steel’s primary raw materials are iron units in the form of iron ore pellets and sinter ore, carbon units in the form of coal and coke (which is produced from coking coal) and steel scrap. For our EAF production, our primary raw material is scrap. U. S. Steel’s raw materials supply strategy consists of acquiring and expanding captive sources of certain primary raw materials and entering into flexible supply contracts for certain other raw materials at competitive market prices that are subject to fluctuations based on market conditions at the time.
The amounts of such raw materials needed to produce a ton of steel will fluctuate based upon the specifications of the final steel products, the quality of raw materials and, to a lesser extent, differences among steel producing equipment. In broad terms, the Company's integrated steel process consumes approximately 1.4 tons of coal to produce one ton of coke and then it consumes approximately 0.3 tons of coke, 0.3 tons of steel scrap (approximately 60 percent of which is internally generated) and 1.3 tons of iron ore pellets to produce one ton of raw steel. In addition, we consume approximately 10 mmbtu’s of natural gas per ton produced. Generally, the Company's mini mill operations consumes approximately 0.8 tons of steel scrap, 0.3 tons of pig iron, and 0.1 tons of HBI to produce one ton of raw steel. In addition, the mini mill operations consume approximately 0.6 MKWH of electricity per ton of raw steel produced. While we believe that these estimated consumption amounts are useful for planning purposes, and are presented to give a general sense of raw material and energy consumption related to steel production, substantial variations may occur.
Iron Ore
(a) Includes our share of production from Hibbing through December 31, 2023.
The iron ore facilities at Minntac and Keetac contain approximately 900 million short tons of indicated resources and probable reserves and our share of recoverable reserves at the Hibbing joint venture is approximately 3 million short tons. Refer to Mining Properties in Item 2 of this Form 10-K for additional information. Recoverable reserves are defined as the tons of product that can be used internally or delivered to a customer after considering mining and beneficiation or preparation losses. Minntac and Keetac’s annual capability and our share of annual capability for the Hibbing joint venture total approximately 23 million tons. We have iron ore pellet production capability that exceeds our steelmaking capability in the U.S.
We historically have sold iron ore pellets to third parties, including in 2023, 2022, and 2021. The Company has agreements to supply iron ore pellets to third-party customers over the next several years.
Substantially all of USSE’s iron ore requirements are purchased from outside sources, primarily Ukrainian mining companies. Prices are determined in long-term contracts with strategic suppliers or as spot prices negotiated monthly or quarterly. USSE also has received iron ore from U. S. Steel’s iron ore facilities in North America. We believe that supplies of iron ore adequate to meet USSE’s needs are available at competitive market prices.
Coking Coal
All of U. S. Steel’s coal requirements for our cokemaking facilities are purchased from outside sources. Pricing for Flat-Rolled's coking coal contracts is typically negotiated on a yearly basis, and from time to time we have entered into multi-year agreements for a portion of our coking coal requirements.
Prices for European contracts are negotiated quarterly, annually or determined as index-based prices.
We believe that supplies of coking coal adequate to meet our needs are available from outside sources at competitive market prices. The main source of coking coal for Flat-Rolled is the United States, and sources for USSE include Poland, Ukraine, Canada, Australia and the United States.
Coke
In North America, the Flat-Rolled segment operates a cokemaking facility at the Clairton Plant of Mon Valley Works. At our Granite City Works, we have a 15-year coke supply agreement with Gateway that expires on December 31, 2024. Blast furnace injection of coal, and self-generated coke oven gas is also used to reduce coke usage.
With Flat-Rolled’s cokemaking facilities and the Gateway long-term supply agreement, it has the capability to be nearly self-sufficient with respect to its annual coke requirements at normal operating levels. Coke from time to time has been purchased from, sold to, or swapped with suppliers and other end-users to adjust for production needs and reduce transportation costs.
In Europe, the USSE segment operates cokemaking facilities at USSK. While USSE is self-sufficient for coke at normal operating levels, it periodically purchases coke from Polish and Czech coke producers to meet production needs. Volume and price are negotiated quarterly.
Steel Scrap and Other Materials
We believe that supplies of steel scrap and alloys that are adequate to meet our needs are readily available from outside sources at competitive market prices for the Flat-Rolled, Mini Mill and USSE segments. Generally, approximately 38 percent of our steel scrap requirements were internally generated through normal operations for these segments.
Limestone
All of Flat-Rolled’s limestone requirements and USSE's lime and limestone requirements are purchased from outside sources. We believe that supplies of limestone and lime adequate to meet our needs are readily available from outside sources at competitive market prices.
Zinc and Tin
We believe that supplies of zinc and tin required to fulfill the requirements for Flat-Rolled, Mini Mill and USSE are available from outside sources at competitive market prices. For Flat-Rolled and Mini Mill the main sources of zinc are Canada, Mexico and the United States and the main sources of tin are Bolivia, Brazil and Peru. For USSE, the main sources of zinc are Finland, Poland, the Netherlands and Slovakia, and the main sources of tin are Peru, Indonesia, China and Brazil.
During 2023, Flat-Rolled protected approximately 40 percent of its operation's zinc and tin requirements with financial swap derivatives to manage exposure to zinc and tin price fluctuations. During 2023, USSE protected approximately 35 percent of its operation's zinc purchases with forward physical contracts to manage our exposure to zinc price fluctuations and protected approximately 66 percent of its operation's tin purchases with financial swaps to manage our exposure to tin price fluctuations. For further information, see Note 16 to the Consolidated Financial Statements.
Natural Gas
All of U. S. Steel’s natural gas requirements are purchased from outside sources.
We believe that adequate supplies to meet Flat-Rolled’s, Mini Mill's and Tubular's needs are available at competitive market prices. For 2023, approximately 70 percent of our natural gas purchases in Flat-Rolled were based on bids solicited on a monthly basis from various vendors; the remainder were made daily or with term agreements.
We believe that adequate natural gas supplies to meet USSE’s needs are available at competitive market prices. During 2023, due to the uncertainty in the energy market, the procurement of natural gas in USSE was based on bids solicited primarily on a quarterly or monthly basis, with the remainder balanced on a daily basis.
Flat-Rolled and USSE use self-generated coke oven and blast furnace gas to reduce consumption of natural gas. USSE uses self-generated coke oven, converter and blast furnace gas to reduce consumption of steam coal that results in lower CO2 emissions production.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and access to additional supply from countries including Norway, the U.S. and Africa. Together, these sources are enough to support the country's expected consumption through the 2024 winter season, which includes demand for natural gas for our USSE segment operations.
Industrial Gases
U. S. Steel purchases industrial gas in the U.S. under long-term contracts with various suppliers, with an exception being at our Fairfield Works where the Company's air separation plant provides for the facility's industrial gas needs. USSE owns and operates its own industrial gas facility, but also may purchase industrial gases from time to time from third parties.
International Trade
U. S. Steel continues to face import competition, much of which is unfairly traded and fueled by massive global steel overcapacity, currently estimated to be over 674 million net tons per year-more than six times the entire U.S. steel market and over twenty times total U.S. steel imports. These imports and overcapacity negatively impact the Company’s operational and financial performance. U. S. Steel continues to lead efforts to address these challenges that threaten the Company, our workers, our stockholders and our country’s national and economic security.
As of the date of this filing, pursuant to a series of Presidential Proclamations issued in accordance with Section 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to a 25 percent tariff, except imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) the European Union (EU), Japan and the United Kingdom (UK) that are melted and poured in the EU/Japan/UK, within quarterly tariff-rate quota (TRQ) limits; (3) Canada and Mexico, which are not subject to tariffs or quotas, but tariffs could be re-imposed on surging product groups after consultations; (4) Ukraine and, if melted and poured in Ukraine, the EU, which are exempt from tariffs until June 1, 2024; and (5) Australia, which are not subject to tariffs, quotas or an anti-surge mechanism.
The U.S. Department of Commerce (DOC) is managing a process in which U.S. companies may request and/or oppose temporary product exclusions from the Section 232 tariffs and quotas. U. S. Steel opposes exclusion requests for imported products that are the same as, or substitutes for, products manufactured by U. S. Steel.
Multiple legal challenges to the Section 232 action continue before the U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC), the latter which has consistently rejected constitutional and statutory challenges to the Section 232 action. Several challenges to the Section 232 action and retaliation thereto continue at the World Trade Organization (WTO).
Since its implementation in March 2018, the Section 232 action has supported the U.S. steel industry's and U. S. Steel’s investments in advanced steel production capabilities, technology, and skills, strengthening U.S. national and economic security. The Company continues to actively defend the Section 232 action.
In February 2019, the European Commission (EC) implemented a definitive safeguard on global steel imports in the form of TRQs that impose 25 percent tariffs on steel imports that exceed the TRQ limit. The EC’s safeguard is currently set to expire in June 2024.
Antidumping duties (AD) and countervailing duties (CVD or antisubsidy duties) apply in addition to the Section 232 tariffs, quotas, TRQs and the EC’s safeguard, and AD/CVD (antidumping and countervailing duty) orders may continue beyond the Section 232 action and the EC’s safeguard. U. S. Steel continues to actively defend and maintain the 61 U.S. AD/CVD orders and 14 EU AD/
CVD orders covering U. S. Steel products in multiple proceedings before the DOC, U.S. International Trade Commission (ITC), CIT, CAFC, the EC and European courts, and the WTO.
In January 2023, Cleveland-Cliffs, Inc. and the USW filed new AD/CVD petitions on U.S. imports of tin mill products from eight countries. In January 2024, DOC issued affirmative final AD/CVD determinations regarding tin mill products from Canada, China, Germany, and Korea, but negative determinations for tin mill products from Netherlands, Taiwan, Turkey, and the UK. The ITC held its final phase hearing on January 4, 2024, and is scheduled to vote in February 2024.
In February 2023, President Biden announced additional increases to normal tariffs of up to 70 percent on certain products from Russia, including pig iron, certain steel products and ferroalloys, effective April 1, 2023.
Additional tariffs of 7.5 to 25 percent continue to apply to certain U.S. imports from China, including certain raw materials used in steel production, semi-finished and finished steel products, and downstream steel-intensive products, pursuant to Section 301 of the Trade Act of 1974. The Office of the United States Trade Representative (USTR) is currently conducting a statutory review of the Section 301 tariffs.
The United States and EU are currently negotiating a global sustainable steel arrangement to restore market-oriented conditions and address carbon intensity. In June 2023, to inform these ongoing discussions with the EU, USTR requested that the ITC conduct a Section 332 investigation to assess greenhouse gas emissions intensity of steel produced in the United States. The ITC initiated the Section 332 proceeding in July 2023, held a hearing on December 7, 2023, will collect information from domestic producers through mid-2024 and will issue a report in January 2025. U. S. Steel is actively participating in this Section 332 investigation. In the fourth quarter of 2023, the U.S. agreed to continue the Section 232 TRQs on U.S. imports from Europe through December 2025 and the EU agreed to continue to suspend retaliation on U.S. exports through March 2025.
U. S. Steel will continue to execute a broad, global strategy to maximize opportunities and navigate challenges presented by imports, global steel overcapacity, and international trade law and policy developments.
Environmental Stewardship
U. S. Steel is committed to effective environmental stewardship. We have implemented and continue to develop business practices that are designed to reduce negative environmental impacts. We believe part of being a good corporate citizen requires a dedicated focus on how our industry affects the environment. We have taken the actions described below in furtherance of that goal. U. S. Steel's environmental expenditures totaled $345 million in 2023, $334 million in 2022, and $302 million in 2021. Overall, environmental compliance expenditures represent approximately 2 percent of U. S. Steel’s total costs and expenses in 2023, 2022, and 2021. For further information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters.”
We continue to work on the promotion of cost-effective environmental strategies by supporting the development of appropriate air, water and waste laws and regulations at the local, state, national and international levels. We are committed to reducing our emissions and are investigating, creating and implementing innovative, best practice solutions throughout our operations to improve our environmental performance and to manage and reduce energy consumption.
U. S. Steel’s North America operations recycled 4.9 million and 4.8 million tons of purchased and produced steel scrap annually in 2023 and 2022, respectively. USSK recycled approximately 895 thousand tons and 754 thousand tons of produced steel scrap in 2023 and 2022, respectively. Because of steel’s physical properties, our products can be recycled at the end of their useful life without loss of quality, contributing to steel’s high recycling rate and affordability. In 2023, our North America operations recycled approximately 2.6 million tons of blast furnace slag, 107 thousand tons of Basic Oxygen Process steel slag, and 168 thousand tons of electric arc furnace slag by selling it for use as aggregate and in highway and other construction. In 2023, USSK recycled approximately 1.1 million tons of blast furnace slag, and 168 thousand tons of Basic Oxygen Process steel slag.
Many of our major production facilities have Environmental Management Systems that are certified to the ISO 14001 Standard. This standard, published by the International Organization for Standardization (ISO), provides the framework for the measurement and improvement of environmental impacts of the certified facility.
In 2019, and in each succeeding year since, we published the Clairton Operating and Environmental Report related to our Clairton Plant of Mon Valley Works. While U. S. Steel agreed to publish an annual report as part of the 2019 Allegheny County Health Department Settlement Order and Agreement, we took the opportunity to enhance the report by including detailed descriptions of our operations, our safety and environmental performance and community involvement in order to provide easily accessible information for the public. The Report details battery combustion stack and fugitive emission performance at Clairton and Clairton's continued commitment to environmental stewardship. In 2021, we published a similar report for the Edgar Thomson facility.
Reduction of Greenhouse Gas Emissions
In 2019, the Company announced its commitment to reduce greenhouse gas emissions intensity across its global footprint by 20 percent, as measured by the rate of CO2 equivalents emitted per ton of finished steel shipped, by 2030 based on 2018 baseline levels. Then, in 2021, the Company announced its goal to achieve net-zero emissions by 2050, as measured by the rate of CO2 equivalents emitted per ton of finished steel shipped. These targets apply to U. S. Steel’s global operations.
U. S. Steel plans to achieve its greenhouse gas emissions intensity reduction goals through the execution of multiple initiatives. These include the use of EAF steelmaking technology at U. S. Steel’s Fairfield Works and at Big River Steel, the first LEED-certified steel mill in the United States and the first steel mill in North America to receive ResponsibleSteel™ site certification. EAF steelmaking primarily relies on recycled scrap, rather than iron ore, to produce new steel products, which is a less carbon intensive process and leverages the ability to continuously recycle steel. Further carbon intensity reductions are expected to come from the implementation of ongoing energy efficiency measures, continued use of renewable energy sources and other process improvements to be developed.
The carbon reduction targets reflect our continued commitment to improvement in production efficiency and the manufacture of products that are environmentally friendly. In addition to a commitment to reduce its own greenhouse gas emissions intensity, U. S. Steel is committed to helping its customers achieve their environmental goals. Our industry-leading XG3™ advanced high-strength steel enables automakers to manufacture lighter weight vehicles that meet federal Corporate Average Fuel Economy (CAFE) standards with reduced carbon emissions. As part of our innovation efforts, we continue to look at new steelmaking technologies so that we can produce steels made with low greenhouse gas emissions intensity (green steels) and further reduce carbon emissions.
Environmental Matters, Litigation and Contingencies
Some of U. S. Steel’s facilities were in operation before 1900. Although the Company believes that its environmental practices have either led the industry or at least been consistent with prevailing industry practices, hazardous materials have been and may continue to be released at current or former operating sites or delivered to sites operated by third parties.
Our U.S. facilities are subject to environmental laws applicable in the U.S., including the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as well as state and local laws and regulations.
U. S. Steel has incurred and will continue to incur substantial capital, operating and maintenance and remediation expenditures as a result of environmental laws and regulations, related to release of hazardous materials, which in recent years have been mainly for process changes to meet CAA obligations and similar obligations in Europe.
EU Environmental Requirements and Slovak Operations
Phase IV of the EU Emissions Trading System (EU ETS) commenced on January 1, 2021, and will finish on December 31, 2030. The European Commission issued final approval of the updated 2021-2025 Slovak National Allocation table in February 2022. The Slovak Ministry of Environment allocated 6.2 million metric tons of European Union Emission Allowances (EUA) at no charge (free allowances or free allocation) to USSE in April 2023. As of December 31, 2023, we have pre-purchased and settled approximately 1.8 million EUA totaling €147 million (approximately $163 million) to cover the expected 2023 shortfall of emission allowances and a portion of the 2024 shortfall. In September and October 2023, we entered into forward agreements to purchase and settle €56.5 million of EUA in January and February 2024, for the anticipated 2024 shortfall.
The EU's Industrial Emissions Directive requires implementation of EU determined best available techniques (BAT) for Iron and Steel production to reduce environmental impacts as well as compliance with BAT associated emission levels. Total capital expenditures for projects to go beyond BAT requirements were €138 million (approximately $153 million). These costs were partially offset by the EU funding received and may be mitigated over the next measurement periods if USSK complies with certain financial covenants, which are assessed annually. If we are unable to meet these covenants in the future, USSK might be required to provide additional collateral (e.g., bank guarantee) to secure 50 percent of the EU funding received. USSK complied with these covenants as of December 31, 2023, and no additional collateral will be required by the end of June 30, 2024. By this next assessment date, we expect that two of the fifteen total projects will pass the sustainability monitoring and will be excluded from further assessment to provide additional collateral if the covenants are not met. The last assessment of financial covenants will be performed as of June 30, 2026.
For further discussion of laws applicable in Slovakia and the EU and their impact on USSE, see Note 26 to the Consolidated Financial Statements, “Contingencies and Commitments, Environmental Matters, EU Environmental Requirements.”
Minnesota Mining Operations - Water
The State of Minnesota has a sulfate wild rice water quality standard (WQS) set at 10mg/L, which was established in 1973. Since then, industry has been working with the legislature and the Minnesota Pollution Control Agency (MPCA) to reevaluate the environmental protection and science behind the 10 mg/L standard. In 2011, the legislature passed a law requiring MPCA to revise the sulfate standard. MPCA started the process to revise the rulemaking for the sulfate WQS, but it was never completed. During the interim the Keetac National Pollutant Discharge Elimination System (NPDES) permit was issued in November 2011, with a sulfate standard of 14 mg/L and a compliance schedule. Then in 2015, the Minnesota legislature passed a law that MPCA
could not require businesses to expend funds to comply with the sulfate limit until the rulemaking was revised by MPCA as directed by the legislature in 2011. To date the sulfate WQS rulemaking has not been revised. During this time Minntac has also received a NPDES permit with a sulfate limit and compliance schedule.
Both Minntac and Keetac have been working to determine the best options to address sulfate. One of the options in process is that both sites have submitted and even renewed site-specific standard (SSS) requests to MPCA. The SSSs present plans specific to each location and explain the actual impact on sulfate from the facilities. To date MPCA has not taken any action on the SSS plans. Minntac also submitted a compliance plan to MPCA. Discussions related to that plan are continuing. The United States Environmental Protection Agency (the U.S. EPA) partially rejected the CWA 303(d) list for impaired waters submitted by MPCA for 2021. The MPCA's impaired waters list was in part rejected to add Hay Lake as being impaired for wild rice sulfate. In February 2022, the U.S. EPA Region V sent a letter to MPCA recognizing the conflict between state law and the CWA. In October 2023, MPCA indicated that Dark River is now a designated Wild Rice Water, carrying a 10 mg/L sulfate limit. Also in October, MPCA and U. S. Steel entered into a voluntary Sulfate Monitoring Plan related to operational changes with the Keetac DR pellet project.
U. S. Steel is continuing to work to determine the most efficient and effective options to meet the applicable sulfate standards. However, if MPCA does not revise the sulfate standard of 10mg/L for the receiving waters of Minntac and Keetac or approve the SSSs, an impact on mining operations is likely as a result of extensive changes to water collection and treatment that will be required.
New and Emerging Environmental Regulations
United States and European Greenhouse Gas Emissions Regulations
The Phase IV EU ETS period spans 2021-2030 and began on January 1, 2021.The Phase IV period is divided into two sub periods (2021-2025 and 2026-2030), rules for the first subperiod are finalized, however we expect that rules for the second subperiod may be more stringent than those for the first one. Once approved, the rules may impact subperiod 2026-2030. Currently, the overall EU ETS target is a 40 percent reduction of 1990 emissions by 2030. Free allocation of CO2 allowances is based on reduced benchmark values which have been published in the first quarter of 2021 and historical levels of production from 2014-2018. Allocations to individual installations may be adjusted annually to reflect relevant increases and decreases in production. The threshold for adjustments is set at 15 percent and will be assessed on the basis of a rolling average of two precedent years. Production data verified by an external auditor shows that USSE's rolling average for 2021-2022 returned to the base limit for hot metal production resulting in an increase to the free allocation for 2023 compared to 2021, however the 2023 free allocation was still slightly reduced due to missing the 15 percent threshold for sinter production. Additionally, lower production in 2019 through 2023 will have an impact on the future free allocation for 2026-2030, where the historical production average for years 2019-2023 will be assessed. Based on actual production data for 2023, we expect that the free allocation for hot metal will remain unchanged for 2024, however allocations for sinter will be lower.
In order to achieve the EU political goal of carbon emissions neutrality by 2050, on July 14, 2021, the European Commission released a package of legislative proposals called Fit for 55. The proposals contain significant changes to current EU ETS functions and requirements, including: a new carbon border adjustment mechanism (CBAM) to impose carbon fees on EU imports, further reduction of free CO2 allowance allocation to heavy industry and measures to strengthen the supply of carbon allowances. The initial phase started on October 1, 2023, imposing only a reporting obligation without financial impact. The full scale of CBAM will commence on January 1, 2026. CBAM will have an impact on USSK's free allocation starting in 2026 where initial reduction to 97.5% starts until 2035 with no free allocation. Another implication of CBAM is the customs duty that will require USSK to cover all its imports from third parties with CBAM Certificates representing embedded emissions in goods imported. The legislative process is being impacted by the ongoing Russia-Ukraine crisis. The proposals are subject to the EU legislative process, and we cannot predict their future impact.
U. S. Steel continues to monitor emerging regulations on Per- and Polyfluoroalkyl Substances (PFAS). The U.S. EPA has issued regulations on PFAS under several environmental statutes and continues to introduce additional regulations. Thus far, those regulations do not directly impact U. S. Steel because the company does not knowingly introduce PFAS in its manufacturing processes, but U. S. Steel continues to review new regulations related to PFAS and their potential impact on the company.
United States - Air
The CAA imposes stringent limits on air emissions with a federally mandated operating permit program and civil and criminal enforcement sanctions. The CAA requires, among other things, the regulation of hazardous air pollutants through the development and promulgation of National Emission Standards for Hazardous Air Pollutants (NESHAP) and Maximum Achievable Control Technology (MACT) Standards. The U.S. EPA has developed various industry-specific MACT standards pursuant to this requirement. The CAA requires the U.S. EPA to promulgate regulations establishing emission standards for each category of Hazardous Air Pollutants. The U.S. EPA also must conduct risk assessments on each source category that is already subject to MACT standards and determine if additional standards are needed to reduce residual risks.
While our operations are subject to several different CAA rules and categories of NESHAP and MACT standards, the principal impact of these standards on U. S. Steel's operations includes those that are specific to coke making, iron making, steel making and iron ore processing. The U.S. EPA has several rules under consideration that will impact our operations, as described in the sections below. While many of these rules are not finalized and the impacts are not estimable at this time, the overall cumulative impact could be material.
On July 13, 2020, the U.S. EPA published a Residual Risk and Technology Review rule for the Integrated Iron and Steel MACT category in the Federal Register. Based on the results of the U.S. EPA’s risk review, the agency determined that risks due to emissions of air toxics from the Integrated Iron and Steel category are acceptable and that the current regulations provided an ample margin of safety to protect public health. Under the technology review, the U.S. EPA determined that there are no developments in practices, processes or control technologies that necessitate revision of the standards. In September 2020, several petitions for review of the rule, including those filed by the Company, the American Iron and Steel Institute (the AISI), Clean Air Council and others, were filed with the United States Court of Appeals for the D.C. Circuit. The cases were consolidated and are being held in abeyance until the U.S. EPA reviews and responds to administrative petitions for review. The U.S. EPA is required by court order to issue a final rule by March 11, 2024. The U.S. EPA proposed a revised iron and steel rule on July 31, 2023. U. S. Steel and other entities submitted extensive comments to the U.S. EPA on September 28, 2023. Since the revisions to the iron and steel rule are not final, any impacts are not estimable at this time.
For the Taconite Iron Ore Processing category, based on the results of the U.S. EPA's risk review, the agency promulgated a final rule on July 28, 2020, in which the U.S. EPA determined that risks from emissions of air toxics from this source category are acceptable and that the existing standards provide an ample margin of safety. Furthermore, under the technology review, the agency identified no cost-effective developments in controls, practices, or processes to achieve further emissions reductions. Petitions for review of the rule were filed in the United States Court of Appeals for the D.C. Circuit, in which the Company and the AISI intervened. The U.S. EPA is required by court order to issue a final rule by January 31, 2024. The U.S. EPA proposed the Taconite Rule on May 15, 2023, and comments were submitted on July 7, 2023. Since the revised taconite rule is not final, any impacts are not estimable at this time.
The U.S. EPA is in the process of conducting its statutorily obligated residual risk and technology review of coke oven standards. The U.S. EPA completed its review of the Coke MACT regulations and published the proposed rule on August 15, 2023, and U. S. Steel and other entities submitted extensive comments to the U.S. EPA on October 2, 2023. Since the rule is not final any impacts related to the U.S. EPA’s review of the coke standards cannot be estimated at this time. The U.S. EPA is under a court-ordered deadline to complete the residual risk and technology rulemaking by May 23, 2024.
In response to Court orders that invalidated prior U.S. EPA determinations regarding ozone attainment interference, on April 6, 2022, the U.S. EPA proposed a Federal Implementation Plan (that would replace several pending or disapproved State Implementation Plans) for Regional Ozone Transport for the 2015 Ozone National Ambient Air Quality Standard. The proposed rule would affect electric generating units (EGUs) in 26 states and certain non-EGU industries, including, among several others, coke ovens, taconite production kilns, boilers, blast furnaces, basic oxygen furnaces, reheating furnaces, and annealing furnaces in 23 states, including those where U. S. Steel has operations. The U.S. EPA announced the final rule on March 15, 2023. The final rule only included regulation of boilers and reheat furnaces for the iron and steel industry limiting the potential impacts on the Company. U. S. Steel filed an administrative petition for review and a petition for judicial review to the rule on August 4, 2023. The matter remains before the U.S. EPA Administrator (administrative) and the United States Court of Appeals for the D.C. Circuit (judicial). While U. S. Steel's and others' petitions to stay the effectiveness of the rule were denied by the United States Court of Appeals for the D.C. Circuit, the Company, as well as other petitioners, have filed applications to stay the effectiveness of the rule with the Supreme Court of the United States. Oral arguments regarding the applications to stay are scheduled for February 21, 2024.
The CAA also requires the U.S. EPA to develop and implement National Ambient Air Quality Standards (NAAQS) for criteria pollutants, which include, among others, particulate matter (PM) - consisting of PM10 and PM2.5, lead, carbon monoxide, nitrogen dioxide, sulfur dioxide (SO2) and ozone.
In October 2015, the U.S. EPA lowered the NAAQS for ozone from 75 parts per billion (ppb) to 70 ppb. On November 6, 2017, the U.S. EPA designated most areas in which we operate as attainment with the 2015 standard. In a separate ruling, on June 4, 2018, the U.S. EPA designated other areas in which we operate as “marginal nonattainment” with the 2015 ozone standard. On December 6, 2018, the U.S. EPA published a final rule regarding implementation of the 2015 ozone standard. Because no state regulatory or permitting actions to bring the ozone nonattainment areas into attainment have yet to be proposed or developed for U. S. Steel facilities, the operational and financial impact of the ozone NAAQS cannot be reasonably estimated at this time. On December 31, 2020, the U.S. EPA published a final rule pursuant to its statutorily required review of NAAQS that retains the ozone NAAQS at 70 ppb. In January 2021, New York, along with several states and non-governmental organizations filed petitions for judicial review of the action with the United States Court of Appeals for the D.C. Circuit. Several other states and industry trade groups intervened in support of the U. S. EPA’s action. The case remains in abeyance before the court as the U.S. EPA voluntarily reconsiders the ozone NAAQS. On January 3, 2024, U. S. EPA filed an unopposed motion to voluntarily remand without vacatur the 2020 rulemaking. In its motion, EPA advised the court that it intends to conduct the voluntary remand simultaneously as it conducts an entirely new review of the ozone standard; and that it intends to complete the new review
(which is already underway) "as expeditiously as possible". Any impacts related to EPA's consideration to revise the ozone NAAQS are not estimable at this time.
On December 18, 2020, the U.S. EPA published a final rule pursuant to its statutorily required review of NAAQS that retains the existing PM2.5 standards without revision. In early 2021, several states and non-governmental organizations filed petitions for judicial review of the action with the United States Court of Appeals for the D.C. Circuit. Several industry trade groups intervened in support of the U.S. EPA’s action. The case remains in abeyance before the court as the U.S. EPA voluntarily reconsiders the PM2.5 NAAQS. On January 6, 2023, the U.S. EPA proposed to lower the annual PM2.5 NAAQS from the current 12 ug/m3 standard to within the range of 9.0 to 10.0 ug/m3. The U.S. EPA expects to finalize a rule on the reconsideration in early 2024. U. S. Steel is currently reviewing the proposal and comments to determine the potential impacts on the Company. Because the U.S. EPA has proposed the rule without specificity, any impacts are not estimable at this time.
United States - Water
The definition of Waters of the United States (WOTUS) has had many changes and legal challenges over the last several years. In January 2023, the U.S. EPA issued a final rule redefining WOTUS that became effective March 1, 2023. The new WOTUS rule would have expanded the definition of what waters would be considered to be a WOTUS. However, in May 2023, the U.S. Supreme court issued a decision in Sackett v. EPA that significantly narrowed the definition of WOTUS, specifically as that definition relates to wetlands under the Clean Water Act. On August 29, 2023, the U.S. EPA re-issued its WOTUS rule, revised in accordance with the Sackett decision, as a final rule with no public notice and comment. As a result of ongoing litigation regarding the January 2023 Rule, the U.S. EPA and the Army Corps of Engineers are implementing the definition of WOTUS set forth in the August 2023 rule in 23 states, the District of Columbia, and the U.S. Territories. In the other 27 states and for certain parties, the agencies are interpreting WOTUS consistent with the pre-2015 regulatory regime and the Sackett decision until further notice. U. S. Steel will continue to review and follow the final WOTUS definition and associated litigation for its potential impact on the Company.
Environmental Remediation
For further discussion of relevant environmental matters, including environmental remediation obligations, see "Item 3. Legal Proceedings, Environmental Proceedings."
Property, Plant and Equipment Additions
For property, plant and equipment additions, including finance leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources” and Note 13 to the Consolidated Financial Statements.
Available Information
U. S. Steel’s Internet address is www.ussteel.com. We post our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our proxy statement, our current reports on Form 8-K, amendments to those reports and our interactive data files to our website free of charge as soon as reasonably practicable after such reports are filed, or furnished to, with the Securities and Exchange Commission (SEC). We also post all press releases and earnings releases to our website.
All other filings with the SEC are available via a direct link on the U. S. Steel website to the SEC’s website, www.sec.gov.
Also available on the U. S. Steel website are U. S. Steel’s Corporate Governance Principles, Code of Ethical Business Conduct and the charters of the Audit Committee, the Compensation & Organization Committee and the Corporate Governance & Sustainability Committee of the Board of Directors. These documents and the Annual Report on Form 10-K and proxy statement are also available in print to any stockholder who requests them. Such requests should be sent to the Office of the Corporate Secretary, United States Steel Corporation, 600 Grant Street, Suite 1844, Pittsburgh, Pennsylvania, 15219-2800 (telephone: 412-433-1121).
U. S. Steel does not incorporate into this document the contents of any website or the documents referred to in the immediately preceding paragraphs.
Other Information
Information on net sales, depreciation, capital expenditures, earnings (loss) before interest and income taxes and assets by reportable segment and for business in the Other category and on net sales and assets by geographic area are set forth in Note 4 to the Consolidated Financial Statements.
For significant operating data for U. S. Steel for each of the last five years, see “Five-Year Operating Summary (Unaudited)” within this document.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
Merger-Related Risk Factors
Failure to complete the Merger on a timely basis, or at all, would negatively impact our business and financial condition, as well as the price of our common stock.
We may not be able to complete the Merger on a timely basis, or at all. If the Merger is not completed, our ongoing business may be adversely affected as follows: (i) we may experience negative reactions from the financial markets, including negative impacts on the market price of our common stock; (ii) some of management's attention will have been directed to the Merger instead of being directed to our own operations and the pursuit of other opportunities that could have been beneficial to us; (iii) the manner in which customers, suppliers and other third parties perceive us may be negatively impacted, which in turn could affect our ability to compete for business; (iv) we may experience negative reactions from employees; (v) we will have expended time and resources that could otherwise have been spent on our business; and (vi) we may be required, in certain circumstances, to pay a termination fee of $565 million, as provided in the Merger Agreement. In addition, any significant delay in consummating the Merger could have an adverse effect on our operating results and adversely affect our relationships with customers and suppliers and would likely lead to a significant diversion of management and employee attention.
Additionally, in approving the Merger Agreement, the Board of Directors considered a number of factors and potential benefits, including the fact that the merger consideration to be received by holders of common stock represented a significant premium over the unaffected trading price, including a premium of 142% to the Company’s unaffected closing stock price of $22.72 on August 11, 2023, the last trading day before the Company's announcement of the strategic review process and a premium of 40% to the Company’s closing stock price of $39.33 on December 15, 2023, the last trading day before public announcement of the Merger Agreement. If the Merger is not completed, neither the Company nor the holders of our common stock will realize this benefit of the Merger. Moreover, we would also have nevertheless incurred substantial transaction-related fees and costs and the loss of management time and resources.
Expenses related to the pending Merger are significant and will adversely affect our operating results.
We have incurred and expect to continue to incur significant expenses in connection with the pending Merger, including legal and investment banking fees. We expect these costs to have an adverse effect on our operating results. If the Merger is not consummated, we may under certain circumstances be required to pay to Purchaser a termination fee of $565 million. Our financial position and results of operations may be adversely affected if we were required to pay the termination fee.
We are subject to business uncertainties and contractual restrictions while the Merger is pending, which could adversely affect our business.
The Merger Agreement requires us to operate in the ordinary course of business and restricts us, without the consent of Purchaser, from taking certain specified actions agreed by the parties to be outside the ordinary course of business until the pending Merger occurs or the Merger Agreement terminates. These restrictions may prevent us from pursuing otherwise attractive business opportunities and making other changes to our business before completion of the Merger or, if the Merger is not completed, termination of the Merger Agreement. In addition, matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by our management, which could divert their time and attention.
Litigation and union grievances and disputes could result in substantial costs and may delay or prevent the Merger from being completed.
In connection with the announcement of the Merger, we (along with our directors and officers) may face lawsuits, disputes and/or other actions (including union grievances or actions, several of which have been initiated against the Company by the United Steelworkers union under its Basic Labor Agreement with the Company). We may face additional lawsuits, disputes and/or other actions, including those brought by stockholders of the Company, in each case, seeking to enjoin, prevent, and/or delay us from consummating the Merger.
One of the conditions to the closing of the Merger is the absence of any injunction or similar order issued by any government entity in the U.S. or other specified jurisdiction or law in the U.S. or other specified jurisdiction that has the effect of prohibiting the consummation of the Merger or that makes consummation of the Merger illegal. Accordingly, if any plaintiff is successful in obtaining an injunction prohibiting the consummation of the Merger, then such injunction may prevent the Merger from becoming effective, or delay its becoming effective within the expected time frame. The ultimate resolution of any such proceedings cannot be predicted, and defending against such claims, even those without merit, could result in substantial costs (including costs in connection with the defense or settlement of stockholder litigation in connection with the Merger and costs associated with our indemnification obligations to our directors and officers), delay, and diversion of management’s time and resources, which may negatively impact our financial condition and adversely affect our business and results of operations. We may also file actions to assert our rights in connection with the Merger.
The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations.
Whether or not the proposed Merger is consummated, the proposed Merger may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. We cannot predict how our customers, distributors, suppliers and strategic partners will view or react to the proposed Merger upon consummation. If we are unable to reassure our, customers, distributors, suppliers and strategic partners to continue transacting business with us, our sales, financial condition, results of operations, cash flows and stock price may be adversely affected.
In addition, uncertainty about the effect of the Merger on our employees may have an adverse effect on our business. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter. Employee retention may be particularly challenging during the pendency of the Merger. If key employees depart and as we face additional uncertainties relating to the Merger, our business relationships may be subject to disruption as customers, suppliers and other third parties attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than the Company. If key employees depart or if our existing business relationships suffer, our results of operations may be adversely affected. The adverse effects of such disruptions could be further exacerbated by any delay in the completion of the Merger.
The Merger Agreement contains provisions that could discourage a potential competing acquirer of us.
The Merger Agreement contains non-solicitation provisions that, subject to limited exceptions, restrict our ability to solicit, initiate, or knowingly encourage or induce competing third-party proposals (or engage in, continue or otherwise participate in negotiations or discussions regarding such third-party proposals) for the acquisition of our stock or assets. Under certain limited circumstances, our Board of Directors may (i) withdraw, qualify or modify its recommendation that our stockholders adopt the Merger Agreement and/or (ii) terminate the Merger Agreement to enter into a definitive agreement with respect to a third-party acquisition proposal. However, before doing so, our Board of Directors must abide by certain procedures described in the Merger Agreement that give Purchaser an opportunity to negotiate in good faith to modify the terms of the Merger Agreement in a manner that any such third-party acquisition proposal would not constitute a superior proposal. In some circumstances, upon termination of the Merger Agreement, we will be required to pay a termination fee to Purchaser of $565 million.
These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of us from considering or proposing that acquisition, even if the acquirer was prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the Merger, or might otherwise result in a potential third-party acquirer proposing to pay a lower price to our stockholders than they might otherwise have proposed to pay due to the added expense of the termination fee that may become payable in certain circumstances.
If the Merger Agreement is terminated and we decide to seek another business combination, we may not be able to negotiate or consummate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.
All of the matters described above, alone or in combination, could materially and adversely affect our business, financial condition, results of operations and stock price.
Economic and Market Risk Factors
The changing global economic climate is having adverse impacts on our business, which may create new risks and exacerbate certain other risks set forth below.
Changes in the global economic environment, inflation, elevated interest rates, recessions or prolonged periods of slow economic growth, and global instability and actual and threatened geopolitical conflict, could have an adverse effect on our industry and business, as well as those of our customers and suppliers.
Overall economic conditions in the U.S. and globally, including in Europe, including adverse factors such as inflation, rising or sustained elevated interest rates, supply chain disruptions and geopolitical conflicts, including the impacts of the war in Ukraine, significantly impact our business. Periods of economic downturn or continued uncertainty could result in difficulty increasing or maintaining our level of sales or profitability and we may experience an adverse effect on our business, results of operations, financial condition and cash flows.
Our U.S. operations are subject to economic conditions, including credit and capital market conditions, inflation, prevailing interest rates, and political factors, which if changed could negatively affect our results of operations, cash flows and liquidity. Political factors include, but are not limited to, changes to tax laws and regulations resulting in increased income tax liability, increased regulation, such as carbon emissions limitations or trading mechanisms, limitations on exports of energy and raw
materials, and trade remedies. Actions taken by the U.S. government could affect our results of operations, cash flows and liquidity.
USSE is subject to economic conditions and political factors associated with the EU, Slovakia and neighboring countries, and the euro currency. Changes in any of these economic conditions or political factors could negatively affect our results of operations, cash flows and liquidity. Political factors include, but are not limited to, taxation, nationalization, inflation, government instability, regional conflict, civil unrest, increased regulation and quotas, tariffs, sanctions and other market-distorting measures. The ongoing war in Ukraine has had a broad range of adverse impacts on global economic conditions, some of which have had and are likely to continue to have adverse impacts on our business, including increased raw material and energy costs, softer customer demand and lower steel prices. USSE purchases a significant portion of its iron ore and coal from suppliers based in Ukraine.
Additionally, we are also exposed to risks associated with the business success and creditworthiness of our suppliers and customers. If our customers or suppliers are negatively impacted by a slowdown in economic markets, we may face the reduction, delay or cancellation of customer orders, delays or interruptions of the supply of raw materials, and increased risk of insolvency and other credit related issues of customers or suppliers, which could delay payments from customers, result in increased customer defaults and cause our suppliers to delay filling, or to be unable to fill, our needs at all or on a timely or cost-effective basis. The occurrence of any of these events may adversely affect our business, results of operations, financial condition and cash flows.
The steel industry, as well as the industries of our customers and suppliers upon whom we are reliant, is highly cyclical, which may have an adverse effect on our customer demand and results of operations.
Steel consumption is highly cyclical and generally follows economic and industrial conditions both worldwide and in regional markets. Price fluctuations are impacted by the timing, magnitude and duration of these cycles, and are difficult to predict. This volatility makes it difficult to balance the procurement of raw materials and energy with global steel prices, our steel production and customer product demand. U. S. Steel has implemented strategic initiatives to produce more stable and consistent results, even during periods of economic and market downturns, but this may not be enough to mitigate the effect that the volatility inherent in the steel industry has on our results of operations.
Additionally, our business is reliant on certain other industries that are cyclical in nature. We sell to the automotive, service center, converter, energy and appliance and construction-related industries. Some of these industries are highly sensitive to general economic conditions and may also face meaningful fluctuations in demand based on a number of factors outside of our control, including regulatory factors, supply chain disruptions, changing customer demand, economic conditions and raw material and energy costs. As a result, downturns or volatility in any of the markets we serve could adversely affect our financial position, results of operations and cash flows.
U. S. Steel has been and continues to be adversely affected by unfairly traded imports and global overcapacity, which may cause downward pricing pressure, lost sales and revenue and decreased market share, production, investment, and profitability.
Currently, global steel production capacity significantly exceeds global steel demand, which adversely affects U.S. and global steel prices. Global overcapacity continues to result in high levels of dumped and subsidized steel imports into the markets we serve. Domestic and international trade laws provide mechanisms to address the injury caused by such imports to domestic industries. Excessive steel imports have resulted and may continue to result in downward pricing pressure and lost sales and revenue, which adversely impacts our business, operations, financial condition and cash flows.
Although U. S. Steel currently benefits from 61 U.S. AD and CVD or anti-subsidy duty orders and 14 EU AD/CVD orders, petitions for trade relief are not always successful or effective. When implemented, such relief is generally subject to periodic reviews and challenges, which can result in revocation of AD/CVD orders or reduction of effective duty rates. There can be no assurance that any relief will be obtained or continued in the future or that such relief will adequately combat unfairly traded imports.
As of the date of this filing, pursuant to a series of Presidential Proclamations issued in accordance with Section 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to a 25 percent tariff, except imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) the EU, Japan, and UK that are melted and poured in the EU/Japan/UK, within quarterly TRQ limits; (3) Canada and Mexico, which are not subject to tariffs or quotas, but tariffs could be re-imposed on surging product groups after consultations; (4) Ukraine, which are exempt from tariffs until June 1, 2024; and (5) Australia, which are not subject to tariffs, quotas, or an anti-surge mechanism. The Section 232 national security action on steel imports currently provides U. S. Steel and other domestic steel producers critical relief from imports. With no scheduled end date, the future coverage and duration of the Section 232 action is not known. Further, the U.S. government may negotiate alternatives to the Section 232 tariffs for certain countries, similar to TRQ agreements with the EU, Japan, and the UK.
USTR's review of additional imports tariffs of 7.5 to 25 percent on certain U.S. imports from China, including certain raw materials used in steel production, semi-finished and finished steel products, and downstream steel-intensive products, pursuant to Section 301 of the Trade Act of 1974 could change the coverage and levels of such tariffs.
In February 2019, the EC implemented a definitive safeguard on global steel imports in the form of TRQs. The TRQs, which impose 25 percent tariffs on steel imports that exceed the TRQ limit, are currently effective through June 2024.
All of the above factors present a degree of uncertainty to our financial and operational performance, our customers, and overall economic conditions, all of which could impact steel demand and our performance. Faced with significant import competition and overcapacity in various markets, we will continue to evaluate potential strategic and organizational opportunities, which may include exiting lines of business and the sale of certain assets, temporary shutdowns or closures of facilities.
Shortages of skilled labor, increased labor costs or our failure to attract and retain other highly qualified personnel in the future could disrupt our operations and adversely affect our financial results.
We depend on skilled labor for the manufacture of our products. Some of our facilities are located in areas where demand for skilled labor often exceeds supply. Shortages of some types of skilled labor, such as electricians and qualified maintenance technicians, could restrict our ability to maintain or increase production rates, lead to production inefficiencies and increase our labor costs. Our shift to the Best for All strategy will also require a set of job skills that is different from our prior needs. Our continued success depends on the active participation of our key employees. We have recently observed an overall tightening and increasingly competitive labor market. The competitive nature of the labor markets in which we operate, the cyclical nature of the steel industry and our resulting needs for skilled employees increase our risk of not being able to recruit, train and retain the employees we require at efficient costs and on reasonable terms, and could lead to increased costs, such as increased overtime to meet demand and increased compensation to attract and retain employees. In addition, many companies, including U. S. Steel, have had employee layoffs as a result of reduced business activities during industry downturns. The loss of our key people or our inability to attract new key employees could adversely affect our operations. Additionally, layoffs or other adverse actions could result in an adverse relationship with our workforce or third-party labor providers. If we are unable to recruit, train and retain adequate numbers of qualified employees and third-party labor providers on a timely basis or at a reasonable cost or on reasonable terms, our business and results of operations could be adversely affected. Additionally, an overall labor shortage, lack of skilled labor, increased turnover, labor strikes or labor inflation as a result of general macroeconomic factors that affect our customers or suppliers could have a material adverse impact on the company’s operations, results of operations, liquidity or cash flows.
Strategic Risk Factors
Our investments in new technologies and products may not be fully successful.
Execution of our Best for All® strategy depends, in part, on the success of a number of investments we have made and plan to make in new facilities, technologies and products and successfully transitioning our footprint to a lower-cost, carbon and capital intensive model. Our Best for All strategy is centered around expanding our competitive advantages in low-cost iron ore mini mill steelmaking, and best-in-class finishing capabilities. These competitive advantages are built on a foundation of research, innovation and deep customer relationships. We are expanding our low-cost iron ore competitive advantage by investing in ways to translate the advantage to feed our growing EAF footprint. This includes investments in a pig iron caster at the Gary Works facility, which began production in the fourth quarter of 2022, and DR-grade pellet capabilities in Keetac, Minnesota, completed in December 2023. We are expanding our mini mill steelmaking capabilities through the construction of a second mini mill facility in Osceola, Arkansas. We are also expanding our best-in-class finishing capabilities through investments in a non-grain oriented electrical steel line and galvanizing construction line at Big River Steel. In executing our strategy, we aim to enhance our earnings profile, deliver long-term cash flow through industry cycles and reduce our cost, capital, and carbon intensity. By offering the product capabilities, including the more sustainable steels (steels made with lower greenhouse gas emissions) our customers are increasingly demanding, we believe that we can achieve more competitive positioning in strategic, high-margin end markets, and deliver high-quality, sustainable, value-added products and innovative solutions.
Construction and commissioning of our strategic projects are subject to changing market conditions and demand for our completed projects, delays, inflation and cost overruns, work stoppages, labor shortages, engineering issues, weather interferences, supply chain delays, changes required by governmental authorities, delays or the inability to acquire required permits or licenses, changes in the ability to finance the projects or disruption of existing operations, any of which could have an adverse impact on our operational and financial results. Furthermore, new product development or modification is costly, may be restricted by regulatory requirements, involves significant research, development, time, expense and human capital and may not necessarily result in the successful commercialization of new products, customer adoption of new technologies or products or new technologies may not perform as intended or expected. Unsuccessful execution of these strategic projects, underperformance of any of these assets or failure of new products to gain market acceptance could adversely affect our business, results of operations and financial condition and may limit the benefits of our stockholder value creation strategy.
From time to time, we engage in acquisitions, divestitures and joint ventures and may encounter difficulties in integrating and separating these businesses and therefore we may not realize the anticipated benefits.
As we pursue our Best for All® strategy, we may seek growth opportunities through strategic acquisitions as well as evaluate our portfolio for potential divestitures to optimize our business footprint and portfolio. The success of these transactions will depend on our ability to integrate or separate, as applicable, assets and personnel in these transactions and to cooperate with our strategic partners. We may encounter difficulties in integrating acquisitions with our operations as well as separating divested businesses, and in managing strategic investments. Furthermore, we may not realize the degree, or timing, of benefits we anticipate when we first enter into a transaction.
Additionally, we seek opportunities to monetize non-core and excess iron assets, including through real estate sales, third party agreements and option agreements. These opportunities may not materialize or generate the financial benefits expected. For example, Stelco Inc. holds an option (Option) to acquire an undivided 25 percent interest in a to-be-formed entity that will own the Company’s current iron ore mine located in Mt. Iron, Minnesota. There is a possibility that Stelco may not exercise its Option in the anticipated timeframe or at all. If the proposed joint venture with Stelco is not successful, fails to provide the benefits we expect, or is not created at all, we may in the future have more iron ore than we need to support the business. Additionally, the existence of the Option may deter future potential opportunities to monetize the iron ore assets. Any of the foregoing could adversely affect our business and results of operations.
Operational and Commercial Risk Factors
Our operational footprint, unplanned equipment outages and other unforeseen disruptions may adversely impact our results of operations or result in idle facility costs or impairment charges.
U. S. Steel has adjusted its operating configuration to advance its Best for All® strategy, in response to market conditions, including global economic volatility, declining steel prices, oil and gas industry disruption, global overcapacity and unfairly traded imports, and to optimize capability and cost performance, by idling and restarting production at certain facilities. Due to our existing operational footprint, the Company may not be able to respond in an efficient manner to fully realize the benefits from changing market conditions that are favorable to integrated steel producers or most efficiently mitigate the negative impacts of such changes. Our decisions concerning which facilities to operate and at what levels are made based upon execution of our Best for All strategy, market conditions, our customers’ orders for products as well as the capabilities and cost performance of our locations. We may concentrate production operations at several plant locations and not operate others, and as a result we may incur idle facility costs or impairment charges.
Our steel production depends on the operation of critical structures and pieces of equipment, such as blast furnaces, electric arc furnaces, steel shops, casters, hot strip mills and various structures and operations, including information technology systems, that support them, as well as finishing lines at our facilities and certain of our joint ventures. While we invested in operational and reliability enhancements to our assets through the asset revitalization program, launched in 2017, and continue to implement initiatives focused on proactive maintenance of key machinery and equipment at our production facilities, we may experience prolonged periods of reduced production and increased maintenance and repair costs due to equipment failures at our facilities or those of our key suppliers.
It is also possible that operations may be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, floods, earthquakes, pandemics, terrorism, accidents, severe weather conditions, changes in U.S., European Union and other foreign tariffs, free trade agreements, trade regulations, laws and policies. We are also exposed to similar risks involving major customers and suppliers such as force majeure events of raw materials suppliers that have occurred and may occur in the future. Availability of raw materials and delivery of products to customers could be affected by logistical disruptions, such as shortages of barges, ocean vessels, rail cars or trucks or unavailability of rail lines or of the locks on the Great Lakes or other bodies of water. To the extent that lost production could not be compensated for at unaffected facilities and depending on the length of the outage, our sales and our unit production costs could be adversely affected.
We are subject to outbreaks of infectious disease, such as risks related to the global COVID-19 pandemic, which had adverse impacts on economic and market conditions and our business. Public health crises, including COVID-19, have created and may create significant volatility, uncertainty and economic disruption in the regions in which we operate.
The physical impacts of climate change may also have a material adverse effect on our results of operations. Climate change may be associated with increased occurrence of extreme weather conditions, which could include, among other things, increased risk of flooding, extreme cold or potential heat stress at facilities and other natural disasters that may lead our customers to curtail or shut down production or to supply chain and operational disruptions.
We face increased competition within our industry and from alternative materials and risks concerning innovation, new technologies, products and increasing customer demand for lower-carbon products.
As a result of increasingly stringent regulatory requirements and increased market and technological changes driven by broader trends such as decarbonization and electrification efforts in response to climate change, designers, engineers and industrial manufacturers, especially those in the automotive industry, are increasing their use of lighter weight, less carbon intense and alternative materials, such as aluminum, composites, plastics and carbon fiber. Use of such materials could reduce the demand for our steel products or steel products generally, which may reduce our profitability and cash flow. Additionally, the trend toward light weighting in the automotive industry, which requires lighter gauges of steel at higher strengths, could result in lower steel volumes required by that industry over time.
Additionally, technologies such as direct iron reduction, oxygen-coal injection and experimental technologies such as molten oxide electrolysis and hydrogen flash smelting may be more cost effective than our current production methods. However, we may not have sufficient capital to invest in such technologies and may incur difficulties adapting and fully integrating these technologies into our existing operations. We may also encounter production restrictions, or not realize the cost benefit from such capital intensive technology adaptations to our current production processes.
Finally, we may face increased competition due to the rapid development and rising use of digital, artificial intelligence (AI) and machine learning technologies. Failure to early adopt and incorporate such technologies to improve productivity, yields, manufacturing technology or support functional teams may put us at a long-term competitive disadvantage.
Limited availability, or volatility in prices of raw materials, scrap and energy may constrain operating levels and reduce profit margins.
U. S. Steel and other steel producers have periodically faced problems obtaining sufficient raw materials and energy in a timely manner due to delays, defaults, severe weather conditions, or force majeure events, shortages or transportation problems (such as shortages of barges, ore vessels, rail cars or trucks, or disruption of rail lines, waterways, or natural gas transmission lines), resulting in production curtailments. As a result, we may be exposed to risks concerning pricing and availability of raw materials and energy resources from third parties as well as logistics constraints moving our own raw materials and scrap to our plants. USSE purchases substantially all of its iron ore and coking coal requirements from outside sources. Any curtailments or escalated costs may further reduce profit margins.
U. S. Steel has agreed, and may continue to agree, to purchase raw materials and energy at prices that have been, and may be, above future market prices or in greater volumes than required in the future. Additionally, any future decreases in iron ore, scrap, natural gas, electricity and oil prices may place downward pressure on steel prices. If steel prices decline, our profit margins on indexed contracts and spot business could be reduced.
A failure of our information technology infrastructure and cybersecurity threats may adversely affect our business operations.
Despite efforts to protect confidential business information, personally identifiable information (PII), and the control systems of manufacturing plants, U. S. Steel systems and those of our joint ventures and third-party service providers have been and may be subject to cyberattacks or system breaches. System breaches can lead to theft, unauthorized disclosure, modification or destruction of proprietary business data, PII, or other sensitive information, to defective products, production downtime and damage to production assets, and the inaccessibility of key systems, with a resulting impact to our reputation, competitiveness and operations. We have experienced cybersecurity attacks that have resulted in unauthorized persons gaining access to our information technology systems and networks, and we could in the future experience similar attacks. To date, no cybersecurity attack has had a material impact on our financial condition, results of operations or liquidity.
While the Company continually works to safeguard our systems and mitigate potential risks, there can be no assurance that such actions will be sufficient to prevent cyberattacks or security breaches or mitigate all potential risks to our systems, networks and data, particularly with the recent proliferation and sophistication of cyberattacks and cyber intrusions around the world. The potential consequences of a material cybersecurity attack include reputational damage, investigations and/or adverse proceedings with government regulators or enforcement agencies, litigation with third parties, disruption to our systems, including production capabilities, unauthorized release of confidential, personally identifiable or otherwise protected information, corruption of data, diminution in the value of our investment in research, development and engineering and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilities resulting from a cybersecurity attack.
We depend on third parties for transportation services and increases in costs or the availability of transportation may adversely affect our business and operations.
Our business depends on the transportation of a large number of products, both domestically and internationally. We rely primarily on third parties, including the recently divested Transtar business, for transportation of the products we manufacture as well as delivery of our raw materials. Any increase in the cost of the transportation of our raw materials or products, as a result of
increases in fuel or labor costs, higher demand for logistics services, consolidation in the transportation industry or otherwise, may adversely affect our results of operations as we may not be able to pass such cost increases on to our customers.
Our transportation service providers may face disruptions due to weather conditions or events, strikes, labor shortages or other constraints. If any of these providers were to fail to deliver raw materials to us or deliver our products in a timely manner, we may be unable to manufacture and deliver our products in response to customer demand. In addition, if any of these third parties were to cease operations or cease doing business with us, we may be unable to replace them at a reasonable cost. Such failure of a third-party transportation provider could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial position and results of operations.
Our 2022 Labor Agreements with the USW contain provisions that may impact certain business activities.
Our 2022 Labor Agreements with the USW contain provisions that grant the USW a limited right to bid on the Company’s sale of a facility (or sale of a controlling interest in an entity owning a facility) covered by the 2022 Labor Agreements, excluding public equity offerings and/or the transfer of assets between U. S. Steel and its wholly owned subsidiaries. The 2022 Labor Agreements also require a minimum level of capital expenditures (subject to approval of the Board of Directors) to maintain the competitive status of the covered facilities, and place certain limited restrictions on our ability to replace product produced at a covered facility with product produced at other than Company facilities or affiliates or U.S. or Canadian facilities with employee protections similar to the protections found in the 2022 Labor Agreements when the Company is operating covered facilities below capacity. The provisions in the 2022 Labor Agreements, as well as current or future proposed labor legislation or regulations, could unfavorably impact certain business activities including pricing, operating costs, margins and/or our competitiveness in the marketplace.
Financial Risk Factors
Our business and execution of our strategy require substantial expenditures for capital investments, debt service obligations, operating leases and maintenance that we may be unable to fund, which may require other actions to satisfy our obligations under our debt.
We have approximately $4.1 billion of long-term debt (see Note 17 to the Consolidated Financial Statements). If our cash flows and capital resources are insufficient to fund our planned capital expenditures or debt service obligations, we may face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, terminate strategic projects, or to dispose of material assets or operations or issue additional debt or equity. We may not be able to take such actions, if necessary, on commercially reasonable terms or at all. The Credit Facility Agreement, the documents governing the USSK Credit Facility, the documents governing the Big River Steel ABL (Asset Based Loan) Facility and Big River Steel notes, and the indentures governing our existing senior unsecured notes may restrict our ability to dispose of assets and may also restrict our ability to raise debt or equity capital to be used to repay other debt when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results or operations and may place us at a competitive disadvantage with competitors who may have less indebtedness and other obligations or greater access to financing. In addition, the availability under our Credit Facility Agreement and Big River ABL Facility may be reduced if we have insufficient collateral, or if we do not meet a fixed charge coverage ratio test. Availability under the USSK Credit Agreement could be limited if USSK does not meet certain financial covenants.
Our ability to service or refinance our debt or fund investments and capital expenditures required to maintain or expand our business operations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control, such as supply and demand conditions, inflation, prevailing interest rates, supply chain disruptions and the impacts of the war in Ukraine. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to satisfy our liquidity needs. In addition, the availability under certain of our debt instruments may be limited if we do not meet certain financial covenants. Furthermore, the agreements governing the BRS (Big River Steel) ABL Facility and other outstanding indebtedness of Big River Steel LLC and its subsidiaries limit their ability, subject to certain exceptions, to pay dividends or distributions or make other restricted payments, such that we may not be able to access the cash generated by these subsidiaries to fund our other expenditures.
If we cannot make scheduled payments on our debt, we will be in default and holders of our senior unsecured notes could declare all outstanding principal and interest to be due and payable, the lenders under the Sixth Amended and Restated Credit Agreement, the USSK Credit Facility and the Export Credit Agreement could terminate their commitments to loan money, accelerate full repayment of any or all amounts outstanding (which may result in the cross acceleration of certain of our other debt obligations) and the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. All of these events would materially and adversely affect our financial position and results of operations.
Furthermore, ratings agencies could downgrade our ratings either due to factors specific to our business, a prolonged cyclical downturn in the steel industry, macroeconomic trends such as global or regional recessions and trends in credit and capital markets more generally. Ratings agencies also may lower, suspend or withdraw ratings on the outstanding securities of U. S. Steel or Big River Steel. Any lowering, suspension or withdrawal of such ratings may have an adverse effect on the market prices of such securities.
Any decline in our operating results or downgrades in our credit ratings may make raising capital or entering into any business transaction more difficult, lead to reductions in the availability of credit or increased cost of credit, adversely affect the terms of future borrowings, may limit our ability to take advantage of potential business opportunities, may have an adverse effect on the terms under which we purchase goods and services, and lead to reductions in the availability of credit.
We have significant retiree health care, retiree life insurance and pension plan costs, which may negatively affect our results of operations and cash flows.
We maintain retiree health care and life insurance and defined benefit pension plans covering many of our domestic employees and former employees upon their retirement. Some of these benefit plans are not fully funded, and thus will require cash funding in future years. Minimum contributions to domestic qualified pension plans (other than contributions to the Steelworkers Pension Trust (SPT) described below) are regulated under the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 (PPA).
The level of cash funding for our defined benefit pension plans in future years depends upon various factors, including voluntary contributions that we may make, future pension plan asset performance, actual interest rates under the law, the impact of business acquisitions or divestitures, union negotiated benefit changes and future government regulations, many of which are not within our control. In addition, assets held by the trusts for our pension plan and our trust for retiree health care and life insurance benefits are subject to the risks, uncertainties and variability of the financial markets. Future funding requirements could also be materially affected by differences between expected and actual returns on plan assets, actuarial data and assumptions relating to plan participants, the discount rate used to measure the pension obligations and changes to regulatory funding requirements. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 18 to the Consolidated Financial Statements for a discussion of assumptions and further information associated with these benefit plans.
U. S. Steel contributes to a domestic multiemployer defined benefit pension plan, the SPT, for USW-represented employees formerly employed by National Steel and represented employees hired after May 2003. We have legal requirements for future funding of this plan should the SPT become significantly underfunded or we decide to withdraw from the plan. Either of these scenarios may negatively impact our future cash flows. The 2022 Labor Agreements increased the contribution rate for most steelworker employees. Collectively bargained company contributions to the plan could increase further as a result of future changes agreed to by the Company and the USW.
The accounting treatment of goodwill, equity method investments and other long-lived assets could result in future asset impairments, which would reduce our earnings.
We periodically test our goodwill, equity method investments and other long-lived assets to determine whether their estimated fair value is less than their value recorded on our balance sheet. The results of this testing for potential impairment may be adversely affected by uncertain market conditions for the global steel industry and general economic conditions. If we determine that the fair value of any of these assets is less than the value recorded on our balance sheet, and, in the case of equity method investments the decline is other than temporary, we would likely incur a non-cash impairment loss that would negatively impact our results of operations. We have incurred asset impairment charges in recent years, including during the year ended December 31, 2023, and there can be no assurances that continued market dynamics or other factors may not result in future impairment charges.
We are subject to foreign currency risks, which may negatively impact our profitability and cash flows.
The financial condition and results of operations of USSE are reported in euros and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. The appreciation of the U.S. dollar against the euro negatively affects our Consolidated Results of Operations. International cash requirements have been and in the future may be funded by intercompany loans, which may create intercompany monetary assets and liabilities in currencies other than the functional currencies of the entities involved, which can have a non-cash impact on income when they are remeasured at the end of each period. Procurement of equipment of announced strategic projects may be denominated in foreign currencies, which could adversely affect the costs of these projects.
In addition, foreign producers, including foreign producers of subsidized or unfairly traded steel with foreign currency denominated costs may gain additional competitive advantages or target our home markets if the U.S. dollar or euro exchange rates strengthen relative to those producers' currencies. Volatility in the markets and exchange rates for foreign currencies and contracts in foreign currencies could have a significant impact on our reported financial results and condition.
Financial regulatory frameworks introduced by U.S. and EU regulators may limit our financial flexibility or increase our costs.
We use swaps, forward contracts and similar agreements to mitigate our exposure to volatility, which entails a variety of risks. The Commodity Future Trading Commission’s Dodd Frank and the EU’s European Market Infrastructure Regulation and other government agencies' regulatory frameworks can limit the Company’s ability to hedge interest rate, foreign exchange (FX), or commodity pricing exposures, which could expose us to increased economic risk. These frameworks may introduce additional compliance costs or liquidity requirements. Some counterparties may cease hedging as a result of increased regulatory cost burdens, which in turn may reduce U. S. Steel’s ability to hedge its interest rate, FX or commodity exposures.
We are a party to various legal proceedings, the resolution of which could negatively affect our profitability and cash flows in a particular period.
We are involved at any given time in various litigation matters, including administrative and regulatory proceedings, governmental investigations, environmental matters and commercial disputes. Our profitability and cash flows in a particular period could be negatively affected by an adverse ruling or settlement in any legal proceeding or investigation. While we believe that we have taken appropriate actions to mitigate and effectively manage these risks, due to the nature of our operations, these risks will continue to exist and additional legal proceedings or investigations may arise from time to time.
Additionally, we may be subject to product liability claims that may have an adverse effect on our financial position, results of operations and cash flows. Events such as well failures, line pipe leaks, blowouts, bursts, fires and product recalls could result in claims that our products or services were defective and caused death, personal injury, property damage or environmental pollution. The insurance we maintain may not be adequate, available to protect us in the event of a claim, or its coverage may be limited, canceled or otherwise terminated, or the amount of our insurance may be less than the related impact on our enterprise value after a loss. We establish reserves based on our assessment of contingencies, including contingencies for claims asserted against us in connection with litigation, arbitrations and environmental issues. Adverse developments in litigation, arbitrations, environmental issues or other legal proceedings may affect our assessment and estimates of the loss contingency recorded as a reserve and require us to make payments in excess of our reserves, which could negatively affect our operations, financial results and cash flows. See "Item 3. Legal Proceedings" and Note 26 to the Consolidated Financial Statements for further details.
Regulatory Risk Factors
Compliance with existing and new environmental regulations, environmental permitting and approval requirements may result in delays or other adverse impacts on planned projects, our results of operations and cash flows.
Steel producers in the U.S., along with their customers and suppliers, are subject to numerous federal, state and local laws and regulations relating to the protection of the environment. These laws and regulations concern the generation, storage, transportation, treatment, disposal, release, emission or discharge of pollutants, contaminants, petroleum, and hazardous substances into the environment, the reporting of such matters, and the general protection of public health and safety, natural resources, wildlife and the environment. Steel producers in the EU are subject to similar laws. These laws and regulations continue to evolve and are becoming increasingly stringent. For example, the U.S. EPA has proposed to lower the NAAQS for fine particular matter (PM2.5), which would result in stringent and costly requirements to control emissions from existing operations and restrictions on new projects. The ultimate impact of complying with such laws and regulations is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated, and the subject of ongoing litigation or are undergoing revision, and new versions or interpretations of existing laws may take effect. Additionally, compliance with certain of these laws and regulations, such as the CAA and state and local requirements governing air emissions, could result in substantially increased capital requirements and operating costs and could require changes to the equipment or facilities we operate. Compliance with current or future laws and regulations could entail substantial costs and could have a negative impact on our results of operations and cash flows. The amount and timing of environmental expenditures is difficult to predict.
In addition, the Company must obtain, maintain and comply with numerous permits, leases, approvals, consents and certificates from various governmental authorities in connection with the construction and operation of new production facilities or modifications to existing facilities. In connection with such activities, the Company may need to make significant capital and operating expenditures to detect, repair and/or control air emissions, to control water discharges or to perform certain corrective actions to meet the conditions of the permits issued pursuant to applicable environmental laws and regulations.
There can be no assurance that future approvals, licenses and permits will be granted or that we will be able to maintain and renew the approvals, licenses and permits we currently hold. Failure to do so could have a material adverse effect on our results of operations and cash flows. Furthermore, compliance with environmental permitting and approval requirements may be costly and time consuming and could result in delays or other adverse impacts on planned projects, our results of operations and cash flows.
Failure to comply with legal requirements, including permits, leases, approvals, consents and certificates, may result in administrative, civil and criminal penalties, and revocation of permits and our authority to conduct business or construct certain facilities, substantial fines or sanctions, or citizens' suits or enforcement actions (including orders limiting our operations or requiring corrective measures), among other consequences.
We have significant environmental remediation costs that negatively affect our results of operations and cash flows.
Various environmental laws impose liability on a current or former owner or operator of real property for investigation or cleanup of hazardous substances or petroleum products at, on under or migrating from our currently or formerly owned or leased real property. Some of U. S. Steel's current and former facilities were in operation before such environmental regulations were in place. Hazardous materials associated with those facilities have been and may continue to be encountered at current or former operating sites or delivered to sites operated by third parties. In some cases, liability may be imposed without regard to contribution or to whether we knew of, or caused, the release of hazardous substances. Liability under these laws may be joint and several, meaning that we could be required to bear 100% of the liability even if other parties are also liable. U. S. Steel is involved in numerous remediation projects at currently operating facilities, facilities that have been closed or sold to unrelated parties and other sites where material generated by U. S. Steel was deposited. In addition, there are numerous other former operating or disposal sites that could become subject to remediation, which may negatively affect our results of operations and cash flows. Contamination at our current properties could result in limitations on or interruptions to our operations and liens in favor of the government for costs the government incurs in cleaning up contamination. In addition, we may be liable for the costs of investigating or remediating contamination at off-site waste facilities where we have arranged for the disposal, or treatment of hazardous substances, without regard to whether we complied with environmental laws in doing so.
Reducing greenhouse gas (GHG) emissions from steelmaking operations to meet corporate targets or comply with new regulations as well as stakeholder expectations and mitigate potential physical impacts of climate change could significantly increase costs to manufacture future materials or reduce the amount of materials being manufactured.
Iron and steel producers around the world are facing mounting pressure to reduce greenhouse gas emissions from operations. The majority of greenhouse gas emissions from the production of iron and steel are caused by the combustion of fossil fuels, the use of electrical energy, and the use of coal, lime, and iron ore as feedstock. The two main production processes are the integrated route of blast furnace ironmaking in combination with basic oxygen furnace steelmaking (BOF) and the alternative route of electric arc furnace steelmaking. Both routes generate greenhouse gas emissions with the latter process, involving the electric arc melting of a majority of steel scrap, generating less than half that of the traditional integrated steelmaking process.
Federal, state and local governmental agencies within the United States may introduce regulatory changes in response to the potential impacts of climate change, including the introduction of carbon emissions limitations or trading mechanisms. Any such regulation regarding climate change and GHG emissions could impose significant costs on our operations and on the operations of our customers and suppliers, including increased energy, capital equipment, emissions controls, environmental monitoring and reporting and other costs in order to comply with current or future laws or regulations concerning climate change and GHG emissions. Any adopted future climate change and GHG regulations could negatively impact our ability, and that of our customers and suppliers, to compete with companies situated in areas not subject to or not complying with such limitations. Inconsistency of regulations may also change the attractiveness of the locations of some of the Company's assets and investments. In addition, changes in certain environmental regulations, including those that may impose output limitations or higher costs associated with climate change or greenhouse gas emissions, could substantially increase the cost of manufacturing and raw materials to us and other steel producers. For additional details, see “Part I - Item 1, Business - New and Emerging Environmental Regulations - United States and European Greenhouse Gas Emissions Regulations” above.
Additionally, the European Union has established aggressive CO2 reduction targets of 40 percent by 2030, against a 1990 baseline, and full carbon neutrality by 2050. As part of the European Green Deal the Commission proposed in September 2020 to raise the 2030 reduction target to at least 55 percent compared to 1990. The new target has since been endorsed by the European Parliament. An emission trading system (ETS) was established to encourage compliance with set emissions reduction targets. These aggressive targets require drastic measures within the steel industry to comply. The transition to EAF technology, as well as incremental gains in energy reduction, use of renewable energy, hydrogen-based steelmaking and continued asset and process improvements are expected to reduce our GHG footprint. However, the development of breakthrough technologies is likely required to continue the path of low to no carbon footprint in the steel industry. Implementation of new technologies will most likely require significant amounts of capital and an abundant source of low-cost hydrogen and/or green power, most likely leading to an increase in the cost of future steelmaking. In addition, the cost of emission allowances is forecast to increase, along with the number of allowances decreasing in the next several years. The price of CO2 emission allowances was 77 euro per metric ton as of December 31, 2023, and forecasts call for potential prices exceeding 100 euro per metric ton in future years.
Environmental, social and governance matters may impact our business and reputation.
In addition to the changing rules and regulations related to environmental, social and governance (ESG) matters imposed by governmental and self-regulatory organizations such as the SEC and the New York Stock Exchange, a variety of third-party organizations and institutional investors evaluate the performance of companies on ESG topics, and the results of these
assessments are widely publicized. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. Reduced access to or increased cost of capital may occur as financial institutions and investors increase expectations related to ESG matters.
Developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards. We may also communicate certain initiatives and goals, regarding environmental matters, diversity, social investments and other ESG-related matters, in our SEC filings or in other public disclosures. These initiatives and goals within the scope of ESG could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Furthermore, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals, including our previously announced commitments to reduce greenhouse gas emissions, within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
New and changing data privacy laws and cross-border transfer requirements could have a negative impact on our business and operations.
Our business depends on the processing and transfer of data between our affiliated entities, to and from our business partners, and with third-party service providers, and of our employees, which may be subject to data privacy laws and/or cross-border transfer restrictions. In North America and Europe, new legislation and changes to the requirements or applicability of existing laws, as well as evolving standards and judicial and regulatory interpretations of such laws, may impact U. S. Steel’s ability to effectively process and transfer data both within the United States and across borders in support of our business operations and/or keep pace with specific requirements regarding processing and safeguarding personal information. While U. S. Steel takes steps to comply with these legal requirements, non-compliance could lead to possible administrative, civil, or criminal liability, as well as reputational harm to the Company and its employees. The costs of compliance with privacy laws and the potential for fines and penalties in the event of a breach may have a negative impact on our business and operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Item 2. PROPERTIES
See Item 1. Business, Facilities and Locations for listings of U. S. Steel’s main properties, their locations and their products and services.
U. S. Steel and its predecessors have owned their properties for many years with no material adverse title claims asserted. In the case of Great Lakes Works, Granite City Works, the Midwest Plant and Keetac iron ore operations, U. S. Steel or its subsidiaries are the beneficiaries of bankruptcy laws and orders providing that properties are held free and clear of past liens and liabilities. In addition, U. S. Steel or its predecessors obtained title insurance, local counsel opinions or similar protections when significant properties were initially acquired or since acquisition.
At the Midwest Plant in Indiana, U. S. Steel has a supply agreement for various utility services with a company that owns a cogeneration facility located on U. S. Steel property. The Midwest Plant agreement expires in 2028.
U. S. Steel leases its headquarters office space in Pittsburgh, Pennsylvania.
For property, plant and equipment additions, including finance leases, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources” and Note 13 to the Consolidated Financial Statements.
Mining Properties
Summary Overview of Mining Operations
U. S. Steel operates two surface iron ore mining complexes in Minnesota consisting of the Minntac Mine and Pellet Plant and the Keetac Mine and Pellet Plant, which are wholly owned by the Company. As of December 31, 2023, U. S. Steel owns a minority interest in the iron ore mining assets of Hibbing Taconite Company.
The following table provides a summary of the net book value of the land and PP&E at the Minntac and Keetac mines as of December 31, 2023:
Gross Accumulated Net Book
(in millions) Value Depreciation Value
Minntac Mine and Pellet Plant
Land $ 34 $ - $ 34
Other property, plant and equipment 1,681 1,289 392
Total $ 1,715 $ 1,289 $ 426
Keetac Mine and Pellet Plant
Land $ 7 $ - $ 7
Other property, plant and equipment 449 195 254
Total $ 456 $ 195 $ 261
The following table provides a summary of our mineral production by mining complex for each reportable period:
Iron Ore Pellets Production
(Millions of short tons) 2023 2022 2021
Iron Ore Pellets
Minntac Mine and Pellet Plant 15.5 15.1 16.1
Keetac Mine and Pellet Plant 5.5 5.9 6.0
Hibbing Taconite Company (1)
1.1 0.9 1.3
Total 22.1 21.9 23.4
(1) Represents U. S. Steel's proportionate share of production as these investments are unconsolidated equity affiliates.
We engaged DRA Global and Barr Engineering Co. ("DRA") to provide feasibility studies and technical report summaries for our material mining operations at Minntac and Keetac. Indicated and inferred mineral resources and probable mineral reserve information for 2023 for the Minntac and Keetac mines have been updated based on a recent DRA estimations. Changes as result of this study were due to improved resource and reserve estimation methodology. The majority shareholders of the Hibbing Taconite Company separately engaged qualified persons to perform the same procedures at the Hibbing Taconite Mine in 2021. Accordingly, the figures below for the Hibbing Taconite Mine were provided by the majority shareholders using the reports provided by the qualified persons. The tables showing resources and reserves by mining property were prepared using the results of the procedures performed by the qualified persons designated by each organization, which have no affiliation with or interest in our material mining properties.
Minntac Mine and Pellet Plant
The Minntac Mine and Pellet Plant is located in Mountain Iron, Minnesota and is wholly owned and operated by U. S. Steel. On April 30, 2020, the Company granted Stelco Inc. (Stelco) a purchase option to acquire a 25 percent interest in the Minntac mining operations. The option can be exercised at any time before January 31, 2027. For more information regarding the purchase option, please see Note 20 to the Consolidated Financial Statements. The Minntac Mine has 25,420 acres of surface rights. The surface mine in the production stage whereby taconite iron ore is mined using the Truck-Shovel method. The mine is approximately 56 years old and has been operated by U. S. Steel since 1967. For discussions regarding encumbrances, violations, fines, etc. related to the Minntac Mine, see Item 3. Legal Proceedings.
The following table provides details of our iron ore resources and reserves at Minntac as of December 31, 2023, and December 31, 2022. Resources below are stated exclusive of reserves.
Minntac Mine and Pellet Plant
Amount Grades/Qualities Cut-off Grades Metallurgical Recovery
(Millions of short tons) Pellets 2023 Pellets 2022 Change (%) MagFe% Concentrate Silica % Min MagFe % Max Concentrate Silica % Weight Recovery %
Measured mineral resources - - - % - - - - -
Indicated mineral resources 234.2 251.0 (7) % 18.19 5.82 14.00 9.99 26.98
Measured + indicated mineral resources 234.2 251.0 (7) % 18.19 5.82 14.00 9.99 26.98
Inferred mineral resources 96.7 149.1 (35) % 18.29 6.22 14.00 9.99 27.31
Proven mineral reserves - - - % - - - - -
Probable mineral reserves 280.5 266.1 5 % 19.11 6.20 14.00 9.99 28.55
Total mineral reserves 280.5 266.1 5 % 19.11 6.20 14.00 9.99 28.55
Keetac Mine and Pellet Plant
The Keetac Mine and Pellet Plant is located in Keewatin, Minnesota and is wholly owned and operated by U. S. Steel. The Keetac Mine has 18,020 acres of surface rights. The surface mine is in the production stage whereby taconite iron ore is mined using the Truck-Shovel method. The mine is approximately 56 years old and has been operated by U. S. Steel since 2003, when it was acquired as part of the Company's purchase of National Steel Corporation. For discussions regarding encumbrances, violations, fines, etc. related to the Keetac Mine, see Item 3. Legal Proceedings.
The following table provides details of our iron ore resources and reserves at Keetac as of December 31, 2023, and December 31, 2022. Resources below are stated exclusive of reserves.
Keetac Mine and Pellet Plant
Amount Grades/Qualities Cut-off Grades Metallurgical Recovery
(Millions of short tons) DR Grade Pellets 2023 Pellets 2023 Pellets 2022 Change (%) MagFe% Concentrate Silica % Min MagFe % Max Concentrate Silica % Weight Recovery %
Measured mineral resources - - - - % - - - - -
Indicated mineral resources 153.3 214.7 192.90 11 % 18.88 3.45 14.00 9.99 27.31
Measured + indicated mineral resources 153.3 214.7 192.90 11 % 18.88 3.45 14.00 9.99 27.31
Inferred mineral resources 108.9 163.2 160.50 2 % 18.39 4.37 14.00 9.99 26.83
Proven mineral reserves - - - - % - - - - -
Probable mineral reserves 126.4 180.6 179.30 1 % 19.36 3.82 14.00 9.99 28.00
Total mineral reserves 126.4 180.6 179.30 1 % 19.36 3.82 14.00 9.99 28.00
Hibbing Taconite Mine
U. S. Steel maintains a minority interest in the Hibbing Taconite Mine, which is majority-owned by Cleveland-Cliffs, Inc. and located in Hibbing, Minnesota. The Hibbing Mine has 30,760 acres of surface rights, of which 1,150 acres are associated with mineral leases. The majority of the mineral rights are leased. 6,640 acres of mineral leases are expiring between 2024 and 2056. The taconite iron ore mine is currently in the production stage.
The following table provides details of our proportionate share of iron ore pellet resources and reserves at Hibbing as of December 31, 2023, and December 31, 2022. Resources below are stated exclusive of reserves.
Hibbing Taconite Company (1)
Amount Grades/Qualities
(Millions of short tons) Pellets 2023 Pellets 2022 Change (%) MagFe%
Measured mineral resources 0.40 0.40 - % 19.20
Indicated mineral resources - - - % 18.70
Measured + indicated mineral resources 0.40 0.40 - % 19.20
Inferred mineral resources - - - % -
Proven mineral reserves 2.20 3.30 (33.33) % 18.70
Probable mineral reserves 0.40 0.40 - % 18.70
Total mineral reserves 2.60 3.70 (29.73) % 18.70
(1) Represents U. S. Steel’s proportionate share of proven and probable reserves and production as these investments are unconsolidated equity affiliates.
Internal Controls
U. S. Steel estimates its iron ore resources and reserves using exploration drill holes, physical inspections, sampling, laboratory testing, 3-D computer models, economic pit analysis and fully-developed pit designs for its operating mines. Estimates for our share of unconsolidated equity affiliates are based upon information supplied by the joint ventures. Refer to sections 2 and 3 of the technical report summaries filed as Exhibit 96.1 to this Form 10-K for further details.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
General Litigation
On June 8, 2021, JSW Steel (USA) Inc. and JSW Steel USA Ohio, Inc. (collectively, JSW), U.S. based subsidiaries of Indian steelmaker JSW Steel, filed suit in the United States District Court for the Southern District of Texas against Nucor, U. S. Steel, AK Steel Holding Group and Cleveland-Cliffs (collectively, the JSW Defendants) alleging that the Defendants operated as a cartel and formed a conspiracy to boycott JSW from obtaining semi-finished steel slabs. JSW alleges that the JSW Defendants acted in violation of Section 1 of the Sherman Act and the Clayton Act (federal antitrust), and violation of the Texas Free Enterprise and Antitrust Act. JSW also alleges that the JSW Defendants formed a civil conspiracy in violation of Texas common law, and that the JSW Defendants tortiously interfered with JSW’s business relationships. The basis for JSW’s allegations relate to the JSW Defendants participation in the DOC's Section 232 process, including the JSW Defendants’ support of the enactment of the President’s Section 232 proclamation, statements made by the JSW Defendants after the enactment of Section 232, and the JSW Defendants’ participation in the Section 232 exclusion process. Plaintiffs seek monetary damages including $45 million for payment of Section 232 tariffs and unspecified amounts for financial penalties, termination fees and lost profits as well as other damages. U. S. Steel, along with the other JSW Defendants, filed a Motion to Dismiss the case on August 17, 2021. On February 17, 2022, the Court issued an opinion dismissing JSW’s antitrust complaint with prejudice. JSW filed a timely notice of appeal with the United States Court of Appeals for the Fifth Circuit. The Fifth Circuit held oral argument on the appeal on February 6, 2023, and we are awaiting a ruling from the Court. The Company continues to vigorously defend the matter.
On December 24, 2018, U. S. Steel's Clairton Plant experienced a fire, affecting portions of the facility involved in desulfurization of the coke oven gas generated during the coking process. With the desulfurization process out of operation as a result of the fire, U. S. Steel was not able to certify compliance with Clairton Plant’s Title V permit levels for sulfur emissions. U. S. Steel promptly notified ACHD (Allegheny County Health Department), which has regulatory jurisdiction for the Title V permit, and updated the ACHD regularly on efforts to mitigate any potential environmental impacts until the desulfurization process was returned to normal operations. Of the approximately 2,400 hours between the date of the fire and April 4, 2019, when the Company resumed desulfurization, there were ten intermittent hours where average SO2 emissions exceeded the hourly NAAQS for SO2 at the Allegheny County regional air quality monitors located in Liberty and North Braddock boroughs, which are near U. S. Steel's Mon Valley Works facilities. On April 29, 2019, PennEnvironment and Clean Air Council, both environmental, non-governmental organizations filed a Complaint in Federal Court in the Western District of Pennsylvania. The ACHD was subsequently granted intervenor status. Collectively the parties seek injunctive relief and civil penalties regarding the alleged Permit violations following the fire. Discovery has concluded. The court denied the parties’ respective Motions for Summary Judgment. A non-jury trial which was scheduled to take place in April and May of 2023 is being held in abeyance as the parties reached a tentative settlement agreement, signed a term sheet, and advised the Court accordingly. The parties have signed a Consent Decree which is subject to Court approval. Pursuant to the proposed Consent Decree U. S. Steel will undertake operational improvements at Clairton Works, permanently idle Coke Battery #15 and pay a $500,000 penalty to the ACHD. In addition, U. S. Steel will fund community-beneficial projects throughout the Mon Valley over a period of five years through contributions which total $4.5 million and pay counsel fees in the amount of $3.0 million. The Consent Decree also establishes a new H2S Coke Oven Gas standard for Clairton Works. Separately, a class action has been filed in the Court of Common Pleas of Allegheny County on behalf of approximately 123,000 persons who claim that the impacts from the fire created a nuisance and seek damages for loss of use and enjoyment of properties. That action has been certified as a class action and the Company intends to vigorously defend against it.
Asbestos Litigation
See Note 26 to our Consolidated Financial Statements, Contingencies and Commitments for a description of our asbestos litigation.
ENVIRONMENTAL PROCEEDINGS
The following is a summary of the proceedings of U. S. Steel that were pending or contemplated as of December 31, 2023, under federal and state environmental laws, and which U. S. Steel reasonably believes may result in monetary sanctions of at least $1 million (the threshold chosen by U. S. Steel as permitted by Item 103 of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended). Information about specific sites where U. S. Steel is or has been engaged in significant clean up or remediation activities is also summarized below. Except as described herein, it is not possible to accurately predict the ultimate outcome of these matters.
CERCLA Remediation Sites
Claims under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) have been raised with respect to the cleanup of various waste disposal and other sites. Under CERCLA, potentially responsible parties (each, a PRP) for a site include current owners and operators, past owners and operators at the time of disposal, persons who arranged for disposal of a hazardous substance at a site and persons who transported a hazardous substance to a site. CERCLA imposes strict and joint and several liabilities. Because of various factors, including the ambiguity of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the
uncertainty as to the most desirable remediation techniques, and the amount of damages and cleanup costs and the time period during which such costs may be incurred, we are unable to reasonably estimate U. S. Steel’s ultimate liabilities under CERCLA.
As of December 31, 2023, U. S. Steel has received information requests or been identified as a PRP at a total of five CERCLA sites, three of which have liabilities that have not been resolved. Based on currently available information, which is in many cases preliminary and incomplete, management believes that U. S. Steel’s liability for CERCLA cleanup and remediation costs at one of the other sites will be over $5 million as described below.
Duluth Works
The former U. S. Steel Duluth Works site was placed on the National Priorities List under CERCLA in 1983 and on the State of Minnesota’s Superfund list in 1984. Liability for environmental remediation at the site is governed by a Response Order by Consent executed with the MPCA in 1985 and a Record of Decision signed by MPCA in 1989. U. S. Steel has partnered with the Great Lakes National Program Office (GLNPO) of the U.S. EPA Region 5 to address contaminated sediments in the St. Louis River Estuary and several other operable units that could impact the estuary if not addressed. An amendment to the Project Agreement between U. S. Steel and GLNPO was executed during the second quarter of 2018 to recognize the initial costs associated with implementing the first two phases of the proposed remedial plan at the site.
Remediation contracts were issued by both U. S. Steel and GLNPO for the first phase of the remedial work at the site during the fourth quarter of 2020. U. S. Steel and GLNPO have completed the second phase of work at the site which extended through early 2022. The final phase of the remedial design has been defined and another amendment to the Project Agreement between U.S. Steel and GLNPO was executed in December 2021. Execution of this final phase is in progress and is expected to extend through 2024 for habitat restoration. U. S. Steel's portion of additional, design, oversight costs, and implementation of all three phases of the preferred remedial alternative on the upland property and Estuary are currently estimated as of December 31, 2023, at approximately $11 million.
Resource Conservation Recovery Act and Other Remediation Sites
U. S. Steel may be liable for remediation costs under other environmental statutes, both federal and state, or where private parties are seeking to impose liability on U. S. Steel for remediation costs through discussions or litigation. There are eight such sites where remediation is being sought involving amounts in excess of $1 million. Based on currently available information, which is in many cases preliminary and incomplete, management believes that liability for cleanup and remediation costs in connection with four sites may involve remediation costs between $1 million and $5 million per site and four sites are estimated to, or could have, costs for remediation, investigation, restoration or compensation in excess of $5 million per site.
For more information on the status of remediation activities at U. S. Steel’s significant sites, see the discussions below.
Gary Works
On October 23, 1998, the U.S. EPA issued a final Administrative Order on Consent (Order) addressing Corrective Action for Solid Waste Management Units (SWMU) throughout Gary Works. This Order requires U. S. Steel to perform an RCRA Facility Investigation, a Corrective Measures Study and Corrective Measure Implementation. Evaluations are underway at six groundwater areas on the east side of the facility. A remedial groundwater treatment system has been operating at one of the six areas since 2021. An Interim Stabilization Measure work plan was approved by the U.S. EPA for a second area and a contractor has completed installation and start-up of the remedial system. Until the remaining Phase I work and Phase II field investigations are completed, it is not possible to assess what additional expenditures will be necessary for Corrective Action projects at Gary Works. In total, the accrued liability for Corrective Action projects is approximately $23 million as of December 31, 2023, based on our current estimate of known remaining costs.
Geneva Works
At U. S. Steel’s former Geneva Works, liability for environmental remediation, including the closure of three hazardous waste impoundments and facility-wide corrective action, has been allocated between U. S. Steel and the current property owner pursuant to an agreement and a permit issued by the Utah Department of Environmental Quality (UDEQ). Having completed the investigation on a majority of the remaining areas identified in the permit, U. S. Steel had determined the most effective means to address the remaining impacted material was to manage those materials in a previously approved on-site Corrective Action Management Unit (CAMU). U. S. Steel awarded a contract for the implementation of the CAMU project during the fourth quarter of 2018. Construction, waste stabilization and placement, along with closure of the CAMU, were substantially completed in the fourth quarter of 2020. U. S. Steel has an accrued liability of approximately $18 million as of December 31, 2023, for our estimated share of the remaining costs of remediation at the site.
USS-UPI LLC (UPI)
In February 2020, U. S. Steel purchased the remaining 50 percent interest in USS-POSCO Industries, a former joint venture that is located in Pittsburg, California between subsidiaries of U. S. Steel and POSCO, now known as USS-UPI, LLC. Prior to formation of the joint venture, UPI's facilities were previously owned and operated solely by U. S. Steel, which assumed
responsibility for the existing environmental conditions. U. S. Steel continues to monitor the impacts of the remedial plan implemented in 2016 to address groundwater impacts from trichloroethylene at SWMU 4. Work will begin in early 2024 to complete removal of hazardous materials and decommission the northwest portion of Building A (SWMU 4.1) and the 54” and 66” Pickle Lines. Additionally, evaluations continue for the SWMUs, known as the Northern Boundary Group, and it is likely that corrective measures will be required, but it is not possible at this time to define a scope or estimate costs for what may be required by the California Department of Toxic Substances Control. As such, there has been no material change in the status of the project during the year ended December 31, 2023. As of December 31, 2023, approximately $4 million has been accrued for ongoing environmental studies, investigations, remedial work and remedy monitoring. Significant additional costs associated with this site are possible and are referenced in Note 26 to the Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”
Fairfield Works
A consent decree was signed by U. S. Steel, the U.S. EPA and the U.S. Department of Justice and filed with the United States District Court for the Northern District of Alabama (United States of America v. USX Corporation) in December 1997. In accordance with the consent decree, U. S. Steel initiated a RCRA corrective action program at the Fairfield Works facility. The Alabama Department of Environmental Management (ADEM), with the approval of the U.S. EPA, assumed primary responsibility for regulation and oversight of the RCRA corrective action program at Fairfield Works. Corrective Measure Implementation Plans (CMIPs) have been submitted to and approved by ADEM for the last two areas on site where impacts to soil and sediments are required to be addressed. Plans are being finalized for contracting the work required under the CMIPs. U. S. Steel has an accrued liability of approximately $8 million at December 31, 2023 for the estimated remaining costs of remediation at the site.
Air Related Matters
Granite City Works
In October 2015, Granite City Works received a Notice of Violation (NOV) from the Illinois Environmental Protection Agency (IEPA) alleging that U. S. Steel violated the emission limits for nitrogen oxides (NOx) and volatile organic compounds from the Basic Oxygen Furnace Electrostatic Precipitator Stack. In addition, the IEPA alleges that U. S. Steel exceeded its natural gas usage limit at its CoGeneration Boiler. U. S. Steel continues to negotiate resolution of the NOV with IEPA.
Although discussions with IEPA regarding the foregoing alleged violations are ongoing and the resolution of these matters is uncertain at this time, it is not anticipated that the result of those discussions will be material to U. S. Steel.
Minnesota Ore Operations
On February 6, 2013, the U.S. EPA published a FIP that applies to taconite facilities in Minnesota. The FIP establishes and requires emission limits and the use of low NOx reduction technology on indurating furnaces as Best Available Retrofit Technology (BART). While U. S. Steel installed low NOx burners on three furnaces at Minntac and is currently obligated to install low NOx burners on the two other furnaces at Minntac pursuant to existing agreements and permits, the rule would require the installation of a low NOx burner on the one furnace at Keetac for which U. S. Steel did not have an otherwise existing obligation. U. S. Steel estimates expenditures associated with the installation of low NOx burners of as much as $25 million to $30 million. In 2013, U. S. Steel filed a petition for administrative reconsideration to the U.S. EPA and a petition for judicial review of the 2013 FIP and denial of the Minnesota state implementation plan (SIP) to the Eighth Circuit. In April 2016, the U.S. EPA promulgated a revised FIP with the same substantive requirements for U. S. Steel. In June 2016, U. S. Steel filed a petition for administrative reconsideration of the 2016 FIP to the U.S. EPA and a petition for judicial review of the 2016 FIP before the Eighth Circuit Court of Appeals. While the proceedings regarding the petition for judicial review of the 2013 FIP remained stayed, oral arguments regarding the petition for judicial review of the 2016 FIP were heard by the Eighth Circuit Court of Appeals on November 15, 2017. Thus, both petitions for judicial review remain with the Eighth Circuit. On December 4, 2017, the U.S. EPA published a notification in the Federal Register in which the U.S. EPA denied U. S. Steel’s administrative petitions for reconsideration and stay of the 2013 FIP and 2016 FIP. On February 1, 2018, U. S. Steel filed a petition for judicial review of the U.S. EPA’s denial of the administrative petitions for reconsideration to the Eighth Circuit Court of Appeals. The U.S. EPA and U. S. Steel reached a settlement regarding the five indurating lines at Minntac. After proposing a revised FIP and responding to public comments, on March 2, 2021, the U.S. EPA promulgated a final revised FIP incorporating the conditions and limits for Minntac to which the parties agreed. U. S. Steel and the U.S. EPA continue to negotiate resolution for Keetac.
Mon Valley Works
On March 7, 2022, the Company received an enforcement order from the ACHD that includes a civil penalty demand for $1.8 million. In the Order, the ACHD alleges that the Company’s Clairton plant is solely and entirely culpable for 153 alleged exceedances of the Pennsylvania hydrogen sulfide ambient air standard that are reported to have occurred during January 1, 2020 through March 1, 2022. The Company disagrees with the bases for the demand. On April 5, 2022, the Company appealed the Order and is vigorously defending the matter. The ACHD Hearing Officer has scheduled a hearing on the appeal for July 8, 2024.
On March 24, 2022, the Company received an enforcement order from the ACHD that includes a civil penalty demand for $4.6 million for alleged air permit violations occurring between January 1, 2020 through March 15, 2022 regarding the Company’s Clairton plant’s coke oven pushing emission control systems. The Company disagrees with the bases for the demand and has appealed the Order. The ACHD Hearing Officer has scheduled a hearing on the appeal for July 15, 2024.
On December 29, 2023, the Company received an enforcement order from the ACHD that includes a civil penalty demand for $2.2 million. In the Order, the ACHD alleges that the Company’s Clairton plant was the cause for 159 alleged exceedances of the Pennsylvania hydrogen sulfide ambient air standard that are reported to have occurred from March 2, 2022 through November 30, 2023. The Company disagrees with the bases for the demand and intends to appeal the Order.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. MINE SAFETY DISCLOSURE
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-K.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The executive officers of U. S. Steel and their ages as of February 1, 2024, are as follows:
Name Age Title Executive Officer
Since
Daniel R. Brown 51 Senior Vice President - Advanced Technology Steelmaking & Chief Operating Officer, Big River Steel February 1, 2022
James E. Bruno 58 Senior Vice President - Global Information Technology and President, USSE December 1, 2014
Scott D. Buckiso 56 Senior Vice President and Chief Manufacturing Officer North American Flat-Rolled May 31, 2015
David B. Burritt 68 President & Chief Executive Officer September 1, 2013
Jessica T. Graziano 50 Senior Vice President & Chief Financial Officer August 8, 2022
Manpreet S. Grewal 44 Vice President, Controller & Chief Accounting Officer March 30, 2020
Duane D. Holloway 51 Senior Vice President, General Counsel and Chief Ethics & Compliance Officer April 16, 2018
Kenneth E. Jaycox 56 Senior Vice President and Chief Commercial Officer September 28, 2020
Messrs. Brown, Bruno, Buckiso, Burritt, and Holloway have held responsible management or professional positions with U. S. Steel or its subsidiaries for more than the past five years. Prior to joining U. S. Steel in 2022, Ms. Graziano spent eight years with United Rentals, Inc, culminating in her position as Executive Vice President and Chief Financial Officer. Prior to her work with United Rentals, Ms. Graziano spent five years at Revlon, Inc. where she advanced through positions of increasing responsibility culminating in her being named Senior Vice President, Chief Accounting Officer and Corporate Controller. Prior to joining U. S. Steel in 2020, Mr. Grewal served as vice president, business finance, controller and chief accounting officer at Covanta since February 2017. Prior to Covanta, Mr. Grewal spent fourteen years at Johnson Controls Incorporated (formerly Tyco International) in increasingly responsible roles, including internal audit, accounting, controllership, and financial planning and analysis. Prior to joining U. S. Steel in 2020, Mr. Jaycox served as Vice President, Transformation at Sysco Corporation where during his seven-year tenure, he progressed through a series of executive responsibilities including transformation, sales development and support, and revenue management.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Information
The principal market on which United States Steel Corporation (U. S. Steel) common stock is traded is the New York Stock Exchange, where the common stock trades under trading symbol "X". U. S. Steel common stock is also traded on the Chicago Stock Exchange under the symbol "X".
As of January 29, 2024, there were 10,072 registered holders of U. S. Steel common stock.
The Board of Directors currently intends to declare and pay dividends on shares of U. S. Steel common stock based on the financial condition and results of operations of U. S. Steel out of legally available funds and in accordance with the requirements set forth by applicable law. Quarterly dividends were declared by U. S. Steel in 2023 and 2022 in the amount of five cents per share.
Purchases of Equity Securities by the Issuer and the Affiliated Purchasers
There were no share repurchases in the fourth quarter of fiscal 2023. There is approximately $126 million remaining under the Company's share repurchase program.
Stockholder Return Performance
The graph below assumes $100 invested on December 31, 2018, and compares the yearly change in cumulative total stockholder return of our common stock with the cumulative total return of the Standard & Poor’s (S&P) 500 Stock Index and the S&P 600 Steel Index, and assumes that all dividends were reinvested. U. S. Steel is not included in either the S&P 500 Stock Index or S&P 600 Steel Index as to provide a clearer comparison to the selected indices.
Comparison of Cumulative Total Return
on $100 Invested in U. S. Steel Stock on December 31, 2018
vs
S&P 500 and S&P 600 Steel Index
For information on securities authorized for issuance under our equity compensation plans, see "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."
Unregistered Sales of Equity Securities
U. S. Steel had no sales of unregistered equity securities during the period covered by this report.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. RESERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related Notes that appear elsewhere in this document. Please refer to Item 7 of our 2022 Form 10-K for further discussion and analysis of our 2021 financial condition and results of operations.
Overview
In 2023, the Company continued to execute on its strategy, investing in its future by progressing on key strategic projects, and rewarding stockholders with direct returns, including a quarterly dividend and share repurchases. In the second half of 2023, we quickly responded to changing market dynamics by temporarily idling certain operations, including the indefinite idling of the iron and steel assets at Granite City Works, to better balance steel supply with customer demand.
U. S. Steel's results in 2023 generally declined compared to the previous year for the four reportable segments, except for Tubular Products, due to lower sales prices for products and other challenging business conditions:
•North American Flat-Rolled: Flat-Rolled results declined primarily due to lower sales prices across most product categories.
•Mini Mill: Mini Mill results declined primarily due to lower sales prices across all product categories.
•U. S. Steel Europe: USSE results declined primarily due to lower sales prices across all product categories.
•Tubular: Tubular results improved primarily due to lower variable compensation, increased equity investee earnings, and higher sales prices.
Fluctuations in the market price of raw materials and other inflationary impacts have affected the results of each of our reportable segments, and fluctuations going-forward are reasonably likely to have a material impact on future results. We may continue to experience inflation related headwinds for certain raw materials and other costs.
In February 2022, Russia invaded Ukraine and active conflict continues in the country. The war in Ukraine has caused disruptions and instability in Russia, Ukraine, as well as the markets in which we operate. The Company is constantly monitoring the situation for impacts and risks to the business and is implementing risk mitigating strategies where possible. As a result of the invasion, governments around the world, including the European Union and the United States of America (U.S.), have enacted sanctions against Russia and Russian interests. We are complying with all applicable sanctions that impact our business.
Since the onset of the war, and before, USSE has been procuring iron ore and coal through alternate sources than Russia, which previously supplied some of USSE's raw materials. With the EU prohibiting purchases of coal from suppliers in Russia, new purchases of coal originating from Russia have stopped. The Company has built up sufficient inventory on site or in-transit to meet current customer demand and alternate supply chains have been fully implemented.
Additionally, Russian supply of natural gas to Europe has decreased significantly in response to enacted sanctions. However, Slovakia has natural gas storage and access to additional supply from countries including Norway, the U.S. and Africa. Together, these sources are enough to support the country's expected consumption through the 2024 winter season, which includes demand for natural gas for our USSE segment operations.
Critical Accounting Estimates
Management’s discussion and analysis of U. S. Steel’s financial condition and results of operations is based upon U. S. Steel’s financial statements, which have been prepared in accordance with accounting standards generally accepted in the United States (U.S. GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end and the reported amount of revenues and expenses during the year. Management regularly evaluates these estimates, including those related to employee benefits liabilities and assets held in trust relating to such liabilities; the carrying value of property, plant and equipment; intangible assets; valuation allowances for receivables, inventories and deferred income tax assets; liabilities for deferred income taxes; potential tax deficiencies; environmental obligations; potential litigation claims and settlements and put and call option assets and liabilities. Management’s estimates are based on historical experience, current business and market conditions, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from current expectations under different assumptions or conditions.
Management believes that the following are the more significant judgments and estimates used in the preparation of the financial statements.
Goodwill and intangible assets - Goodwill represents the excess of the cost over the fair value of acquired identifiable tangible and intangible assets and liabilities assumed from businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment testing annually, or more frequently if events or changes in circumstances indicate the asset might be impaired. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Application of the goodwill impairment test requires judgment.
We review goodwill for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and we determine that the fair value of the reporting unit more likely than not
exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the quantitative goodwill impairment test, we compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, we do not consider the goodwill impaired. If the carrying value is higher than the fair value, we recognize the difference as an impairment loss.
A quantitative goodwill impairment testing process requires valuation of the respective reporting unit, which we primarily determine using an income approach based on a discounted cash flow forecast covering discrete periods of time including a terminal value. We compute the terminal value using the constant growth method, which values the forecasted cash flows in perpetuity. The assumptions about future cash flows and growth rates are based on the respective reporting unit's long-term forecast and are subject to review and approval by senior management. A reporting unit's discount rate is a significant assumption and is a risk-adjusted weighted average cost of capital, which we believe approximates the rate from a market participant's perspective. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures. We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
Our Mini Mill reporting unit holds the goodwill recognized as a result of the Company's acquisition of Big River Steel and currently is our only reporting unit that has a significant amount of goodwill. This goodwill is primarily attributable to Big River Steel's operational abilities, workforce and the anticipated benefits from their recent expansion. U. S. Steel completed its annual goodwill impairment test using a qualitative assessment during the fourth quarter of 2023 and determined there was no impairment of goodwill.
Intangible assets with indefinite lives are also subject to at least annual impairment testing, which compares the fair value of the intangible assets with their carrying amounts. U. S. Steel has determined that certain of its acquired intangible assets have indefinite useful lives. These assets are also reviewed for impairment annually in the fourth quarter and whenever events or circumstances indicate the carrying value may not be recoverable. U. S. Steel completed its annual evaluation of its indefinite-lived water rights using a qualitative assessment and determined there was no indication of impairment. Key assumptions included in this test relate to the relevant market rate of an acre foot of water.
If business conditions deteriorate or other factors have an adverse effect on our qualitative and quantitative estimates, inclusive of discounted future cash flows or assumed growth rates, or if we experience a sustained decline in our market capitalization, future assessments of goodwill for impairment may result in impairment charges.
Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and are tested for impairment when events occur that indicate that the net book value will not be recovered over future cash flows.
Business combinations - We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill.
Purchased intangibles are initially recognized at fair value and amortized over their useful lives unless those lives are determined to be indefinite. The valuation of acquired assets will impact future operating results. The fair value of identifiable intangible assets is determined using an income approach on an individual asset basis. Specifically, we use the multi-period excess earnings method to estimate the fair value of the customer relationships intangible asset. Determining the fair value of the customer relationships intangible asset involves significant judgements and assumptions, including expected realized price, base year metallic costs, contributory asset charges, and customer attrition rate.
Inventories - Inventories are carried at the lower of cost or market for last-in, first-out (LIFO), moving average and first-in, first-out (FIFO) method inventories. The predominant method of inventory costing for Flat-Rolled and Tubular is LIFO. The Mini Mill segment uses FIFO for raw materials and a moving average costing method to account for semi-finished and finished products. FIFO is the predominant inventory costing method used by the USSE segment. The LIFO method of inventory costing was used on 53 percent and 43 percent of consolidated inventories at December 31, 2023, and 2022, respectively. Since the LIFO inventory valuation methodology is an annual calculation, interim estimates of the annual LIFO valuation are required. We recognize the effects of the LIFO inventory valuation method on an interim basis by estimating the year-end inventory amounts. The projections of annual LIFO inventory amounts are updated quarterly. Changes in U.S. GAAP rules or tax law, such as the elimination of the LIFO method of accounting for inventories, could negatively affect our profitability and cash flow.
Pensions and Other Benefits - The recording of net periodic benefit costs for defined benefit pensions and Other Benefits is based on, among other things, assumptions of the expected annual return on plan assets, discount rate, mortality, escalation or other changes in retiree health care costs and plan participation levels. Changes in the assumptions or differences between actual and expected changes in the present value of liabilities or assets of U. S. Steel’s plans could cause net periodic benefit costs to increase or decrease materially from year to year as discussed below.
U. S. Steel’s investment strategy for its U.S. pension and Other Benefits plan assets provides for a diversified mix of high-quality bonds, public equities and selected smaller investments in private equities, private credit, timber and mineral interests. For its U.S. pension, U. S. Steel has a target allocation for plan assets of 69 percent in fixed income investments. The balance is invested in equity securities, timber, private equity and real estate partnerships. U. S. Steel believes that returns on equities over the long term will be higher than returns from fixed-income securities as actual historical returns from U. S. Steel’s trusts have shown. Returns on bonds tend to offset some of the short-term volatility of stocks. Both equity and fixed-income investments are made across a broad range of industries and companies (both domestic and foreign) to provide protection against the impact of volatility in any single industry as well as company specific developments. U. S. Steel will use a 6.90 percent assumed rate of return on assets for the development of net periodic cost for the main defined benefit pension plan in 2024. Actual returns since the inception of the plan have exceeded this 6.90 percent rate and while recent annual returns have been volatile, it is U. S. Steel’s expectation that rates will achieve this level in future periods.
For its Other Benefits plan, U. S. Steel is employing a liability driven investment strategy. The plan assets are allocated to match the plan cash flows with maturing investments. To achieve this strategy, U. S. Steel has a target allocation for plan assets of 80 percent in fixed income and private credit. The balance is primarily invested in equity securities, timber, private equity and real estate partnerships. U. S. Steel will use a 6.00 percent assumed rate of return on assets for the development of net periodic cost for its Other Benefit plans for 2024. The 2024 assumed rate of return was updated after a review of capital market forecasted returns based on target allocations. Therefore, the expected asset return for 2024 will be 6.00 percent.
The expected long-term rate of return on plan assets is applied to the market value of assets as of the beginning of the period less expected benefit payments and considering any planned contributions.
To determine the discount rate used to measure our pension and Other Benefit obligations for U.S. plans we utilize a bond matching approach to select specific bonds that would satisfy our projected benefit payments. At December 31, 2023, the weighted average discount rate used for our pension and Other Benefit obligations was determined to be 5.49 percent and 5.58 percent, respectively, compared to the weighted average discount rate used of 5.55 percent and 5.66 percent, respectively, at December 31, 2022. The discount rate reflects the current rate at which we estimate the pension and Other Benefits liabilities could be effectively settled at the measurement date.
U. S. Steel reviews its actual historical rate experience and expectations of future health care cost trends to determine the escalation of per capita health care costs under U. S. Steel’s benefit plans. Approximately 80 percent of our costs for the domestic United Steelworkers participants’ retiree health benefits in the Company’s main domestic benefit plan are limited to a per capita dollar maximum calculation based on 2006 base year actual costs incurred under the main U. S. Steel benefit plan for USW participants (cost cap). The full effect of the cost cap is expected to be realized around 2030. After 2030, the Company’s costs for a majority of USW retirees and their dependents are expected to remain fixed and as a result, the cost impact of health care escalation for the Company is projected to be limited for this group (see Note 18 to the Consolidated Financial Statements). For measurement of its domestic retiree medical plans where health care cost escalation is applicable, U. S. Steel has assumed an initial escalation rate of 5.90 percent for 2024. This rate is assumed to decrease gradually to an ultimate rate of 4.50 percent in 2038 and remain at that level thereafter.
Net periodic pension benefit cost (credit), including multiemployer plans, is expected to total approximately $88 million in 2024 compared to $51 million in 2023. Excluding settlement and special termination losses totaling $13 million in 2023, the increase in net periodic pension benefit cost in 2024 is primarily due to delayed recognition of prior year asset losses. Net periodic other benefit (credit) in 2024 is expected to be approximately $(102) million, compared to $(83) million in 2023. The expected increase in the 2024 net periodic other benefit (credit) is primarily due to the higher expected return on assets in 2024. See Note 18 to the Consolidated Financial Statements, “Pensions and Other Benefits.”
The table below projects the incremental effect of a hypothetical one percentage point change in significant assumptions used in determining the funded status and net periodic benefit cost for pension and other benefits:
Hypothetical Rate Change Increase (Decrease)
(In millions) 1% (1)%
Expected return on plan assets
Incremental (decrease) increase in:
Net periodic pension and other benefits costs for 2024 $ (55) $ 55
Discount rate
Incremental (decrease) increase in:
Net periodic pension and other benefits costs for 2024 $ (9) $ 11
Pension & other benefits obligations at December 31, 2023 $ (390) $ 455
Changes in the assumptions for expected annual return on plan assets and the discount rate used for accounting purposes do not impact the funding calculations used to derive minimum funding requirements for the pension plan. However, the discount rate required for minimum funding purposes is also based on corporate bond related indices and as such, the same general
sensitivity concepts as above can be applied to increases or decreases to the funding obligations of the plans assuming the same hypothetical rate changes. See Note 18 to the Consolidated Financial Statements for a discussion regarding legislation enacted in March of 2021 that impacts the discount rate used for funding purposes. For further cash flow discussion see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.”
Long-lived assets - U. S. Steel evaluates long-lived assets, primarily property, plant and equipment for impairment whenever changes in circumstances indicate that the carrying amounts of those productive assets exceed their recoverable amount as determined by the asset group's projected undiscounted cash flows. We evaluate the impairment of long-lived assets at the asset group level. Our primary asset groups are Flat-Rolled, Mini Mill, USSE, welded tubular and seamless tubular.
In the fourth quarter 2023, the Company recognized charges of approximately $123 million for impairment of indefinitely idled iron and steel making assets at Granite City Works. Impairment charges of approximately $151 million and $128 million were recognized for the write-off of iron making and steel making assets at Great Lakes Works in 2022 and 2021, respectively. The coil finishing processes at Granite City Works and Great Lakes Works continue to operate and remain components of the Company's operating plans. In 2021, there were additional impairments of $88 million and $56 million for equipment at Gary Works related to steel production intended for petroleum conveying pipe and the transfer of endless casting and rolling equipment from Mon Valley Works to BR2, respectively.
There were no other triggering events that required an impairment evaluation of our long-lived asset groups during the years ended December 31, 2023, 2022 and 2021.
Taxes - U. S. Steel records a valuation allowance, related to certain state net operating losses, state tax credits and unused capital losses, to reduce deferred tax assets to the amount that is more likely than not to be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Each quarter U. S. Steel analyzes the likelihood that our deferred tax assets will be realized. In the future, if we determine that it is more likely than not that we will be able to realize all or a portion of our deferred tax assets, the valuation allowance will be reduced, and we will record a non-cash net benefit to earnings.
In 2021, U. S. Steel determined, based upon weighing all positive and negative evidence, that a full valuation allowance for the domestic deferred tax assets was no longer required. Accordingly, we reversed all of the domestic valuation allowance except for a portion of the domestic valuation allowance related to certain state net operating losses and state tax credits. During the year ended December 31, 2021, we realized a non-cash net benefit of $715 million related to the valuation allowance release, which was partially offset by the addition of a valuation allowance of $82 million, the majority of which relates to an unused capital loss generated in the fourth quarter of 2021.
At the end of both 2023 and 2022, U. S. Steel did not have any undistributed foreign earnings and profits for which U.S. deferred taxes have not been provided.
For further information on income taxes see Note 11 to the Consolidated Financial Statements.
Environmental remediation - U. S. Steel has been identified as a PRP at five sites under the CERCLA as of December 31, 2023. Of these, there are three sites where information requests have been received or there are other indications that U. S. Steel may be a PRP under CERCLA, but where sufficient information is not presently available to confirm the existence of liability or to make a reasonable estimate with respect to any potential liabilities. There are also eight additional sites where U. S. Steel may be liable for remediation costs in excess of $1 million under other environmental statutes, both federal and state, or where private parties are seeking to impose liability on U. S. Steel for remediation costs through discussions or litigation. At many of these sites, U. S. Steel is one of a number of parties involved and the total cost of remediation, as well as U. S. Steel’s share, is frequently dependent upon the outcome of ongoing investigations and remedial studies. U. S. Steel accrues for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs is reasonably determinable. As environmental remediation matters proceed toward ultimate resolution or as remediation obligations arise, charges in excess of those previously accrued may be required.
U. S. Steel's accrual for environmental liabilities for U.S. and international facilities as of December 31, 2023, and 2022 was $107 million and $126 million, respectively. These amounts exclude liabilities related to asset retirement obligations, disclosed in Note 19 to the Consolidated Financial Statements.
U. S. Steel is the subject of, or a 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. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the Consolidated Financial Statements.
For discussion of relevant environmental items, see “Part I. Item 3. Legal Proceedings-Environmental Proceedings.”
Segments
U. S. Steel has four reportable segments: North American Flat-Rolled, Mini Mill, USSE and Tubular Products. For further description of segment operations and information see Item 1 Segments and Note 4 to the Consolidated Financial Statements, respectively.
Net Sales
Net Sales by Segment
Net sales by segment for the years ended December 31, 2023, and 2022 are set forth in the following table:
Years Ended December 31,
(Dollars in millions, excluding intersegment sales) 2023 2022 % Change
Flat-Rolled $ 10,744 $ 12,522 (14) %
Mini Mill 2,223 2,681 (17) %
USSE 3,525 4,243 (17) %
Tubular 1,551 1,611 (4) %
Total sales from reportable segments 18,043 21,057 (14) %
Other 10 8 25 %
Net Sales $ 18,053 $ 21,065 (14) %
Management’s analysis of the percentage change in net sales for U. S. Steel’s reportable business segments is set forth in the following table:
Steel Products(a)
Year Ended December 31, 2023 versus Year Ended December 31, 2022 Volume Price Mix FX(b)
Other(c)
Net
Change
Flat-Rolled 3 % (15) % (1) % - % (1) % (14) %
Mini Mill 6 % (26) % 3 % - % - % (17) %
USSE 3 % (20) % (3) % 3 % - % (17) %
Tubular (9) % 5 % (1) % - % 1 % (4) %
(a) Excludes intersegment sales.
(b) Foreign currency translation effects.
(c) Primarily consists of sales of raw material and coke making by-products
Net sales for the year ended December 31, 2023, compared to the same period in 2022 were $18,053 million and $21,065 million, respectively.
•For the Flat-Rolled segment, the decrease in sales primarily resulted from lower average realized prices ($231 per ton) across most products, partially offset by increased shipments (333 thousand tons) from a mix of product values.
•For the Mini Mill segment, the decrease in sales primarily resulted from lower average realized prices ($259 per ton)
across all products, partially offset by increased shipments (137 thousand tons) from higher value products.
•For the USSE segment, the decrease in sales primarily resulted from lower average realized prices ($217 per ton)
across all products, partially offset by increased shipments (140 thousand tons) from lower value products.
•For the Tubular segment, the decrease in sales primarily resulted from decreased shipments (45 thousand tons), partially offset by higher average realized prices ($159 per ton).
Operating Expenses
Union profit-sharing costs
Year Ended December 31,
(Dollars in millions) 2023 2022
Allocated to segment results $ 149 $ 442
The amounts above represent profit-sharing amounts paid to active USW-represented employees and are included in cost of sales on the Consolidated Statement of Operations.
Profit-based amounts are calculated and paid on a quarterly basis as a percentage of consolidated earnings before interest and income taxes based on 7.5 percent of profit between $10 and $50 per ton and 15 percent of profit above $50 per ton.
Net periodic pension and other benefits costs
Pension and other benefit costs (other than service cost) are reflected within net interest and other financial (benefits) costs and the service cost component is reflected within cost of sales in the Consolidated Statements of Operations.
Defined benefit and multiemployer pension plan costs included in cost of sales totaled $116 million in 2023 and $119 million in 2022.
Other benefit service cost included in cost of sales totaled $6 million in 2023 and $9 million in 2022.
Costs related to defined contribution plans totaled $50 million in 2023 and $47 million in 2022.
Selling, general and administrative expenses
Selling, general and administrative expenses were $501 million and $422 million for the years ended December 31, 2023, and December 31, 2022, respectively. The change between periods was primarily due to increased costs related to the Company's strategic alternatives review process.
Operating configuration adjustments
The Company adjusts its operating configuration in response to changes in market conditions, global overcapacity, import competition arising from unfair trade practices, and changes in customer demand. These operating configuration adjustments can include indefinitely and temporarily idling certain of its facilities as well as restarting production at certain of its facilities.
Idled Operations
In the fourth quarter of 2023, the Company indefinitely idled its subsidiary in Pittsburg, California, USS-UPI, LLC ("UPI"), resulting in restructuring and other charges in 2023 of $3 million and $30 million and $89 million in 2022 and 2021, respectively. Also, in the fourth quarter of 2023, the Company indefinitely idled the iron and steel making assets at Granite City Works which resulted in a non-cash asset impairment of $123 million and additional charges of $107 million primarily for take-or-pay commitments and employee-related costs. The hot-strip mill, cold mill and coating lines at Granite City Works continue to operate.
In the first quarter of 2023, the Company completed the previously announced permanent shutdown of coke batteries numbers 1 through 3 at the Mon Valley Works.
In 2022, U. S. Steel indefinitely idled the majority of the tin mill operations at Gary Works. This included the Tin Line #5 and the Tin Line #6. As of December 31, 2023, the carrying value of the indefinitely idled tin mill operations assets at Gary Works is $70 million. Tin mill operations continue to operate at the Midwest plant.
At Great Lakes Works, the Company permanently idled the steelmaking operations in 2021, and the ironmaking operations in 2022, which resulted in non-cash impairments of $128 million and $151 million, respectively. The coil finishing process at Great Lakes Works continues to operate and remains a component of the Company's operating plans.
The Company's Lorain Tubular Operations, Lone Star Tubular Operations and the Wheeling Machine Products coupling production facility at Hughes Springs, Texas were initially idled in 2020 and remained indefinitely idled as of December 31, 2023. The carrying value of the Lorain Tubular Operations assets is $55 million as of December 31, 2023.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expenses were $916 million in 2023 and $791 million in 2022. The increase in 2023 from the prior year is due to accelerated depreciation resulting from operational decisions at facilities in the Flat-Rolled segment, primarily UPI and Granite City Works.
Earnings from investees
Earnings from investees were $115 million in 2023 compared to $243 million in 2022. The decrease in 2023 from the prior year is primarily due to decreased current year earnings from our PRO-TEC joint venture from higher input costs.
Restructuring and Other Charges
During 2023, the Company recorded restructuring and other charges of $36 million, which relate primarily to Company-wide headcount reductions. Charges for restructuring and ongoing cost reduction initiatives are recorded in the period U. S. Steel commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. Charges related to restructuring and cost reductions are reported in Restructuring and other charges in the Consolidated Statements of Operations.
Earnings (loss) before interest and income taxes by segment (a)
Year Ended December 31,
(Dollars in Millions) 2023 2022
Flat-Rolled $ 418 $ 2,008
Mini Mill 215 481
USSE 4 444
Tubular 589 544
Total earnings from reportable segments 1,226 3,477
Other $ (3) 22
Segment earnings before interest and income taxes 1,223 3,499
Other items not allocated to segments:
Restructuring and other charges (b)
(36) (48)
Stock-based compensation expense (c)
(51) (57)
Asset impairment charges (d)
(127) (163)
Environmental remediation charges (11) (13)
Strategic alternatives review process costs (79) -
Granite City idling costs (121) -
United Steelworkers labor agreement signing bonus and related costs - (64)
Gains on assets sold & previously held investments - 6
Other items, net 1 -
Total earnings before interest and income taxes $ 799 $ 3,160
(a) See Note 4 to the Consolidated Financial Statements for reconciliations and other details.
(b) Included in restructuring and other charges on the Consolidated Statements of Operations. See Note 25 to the Consolidated Financial Statements for further details.
(c) The prior year was retroactively adjusted to reflect the reclassification of stock-based compensation expense.
(d) See Note 1 to the Consolidated Financial Statements for further details.
Segment results for Flat-Rolled
Year Ended December 31, %
Change
2023 2022
Earnings before interest and taxes ($ in millions)
$ 418 $ 2,008 (79) %
Gross margin 11 % 20 % (9) %
Raw steel production (mnt) 9,399 8,846 6 %
Capability utilization 71 % 67 % 4 %
Steel shipments (mnt) 8,706 8,373 4 %
Average realized steel price per ton 1,030 1,261 (18) %
The decrease in Flat-Rolled results for 2023 compared to 2022 was primarily due to:
•lower average realized prices, including mix (approximately $1,925 million)
•unfavorable equity investees income and other impacts (approximately $200 million)
•lower non-prime and other sales (approximately $25 million),
these changes were partially offset by:
•increased shipments, including volume efficiencies (approximately $95 million)
•lower raw material costs, including inventory revaluations (approximately $215 million)
•lower energy costs (approximately $100 million)
•lower operating costs (approximately $45 million)
•lower other costs, primarily variable compensation (approximately $105 million).
Gross margin for 2023 as compared to 2022 decreased primarily as a result of lower average realized prices, partially offset by higher sales volume.
Segment results for Mini Mill
Year Ended December 31, %
Change
2023 2022
Earnings before interest and taxes ($ in millions) $ 215 $ 481 (55) %
Gross margin 19 % 25 % (6) %
Raw steel production (mnt) 2,953 2,650 11 %
Capability utilization 89 % 80 % 9 %
Steel shipments (mnt) 2,424 2,287 6 %
Average realized steel price per ton 875 1,134 (23) %
The decrease in Mini Mill results for 2023 compared to 2022 was primarily due to:
•lower average realized prices, including mix (approximately $660 million),
these changes were partially offset by:
•increased shipments (approximately $220 million)
•lower raw material costs (approximately $145 million)
•lower energy costs (approximately $15 million)
•lower other costs (approximately $10 million).
Gross margin for 2023 as compared to 2022 decreased primarily as a result of lower average realized sales prices, partially offset by higher sales volume.
Segment results for USSE
Year Ended December 31, %
Change
2023 2022
Earnings before interest and taxes ($ in millions) $ 4 $ 444 (99) %
Gross margin 4 % 13 % (9) %
Raw steel production (mnt) 4,395 3,839 14 %
Capability utilization 88 % 77 % 11 %
Steel shipments (mnt) 3,899 3,759 4 %
Average realized steel price per ton 873 1,090 (20) %
The decrease in USSE results for 2023 compared to 2022 was primarily due to:
•lower average realized prices, including mix (approximately $840 million)
•lower other sales (approximately $20 million),
these changes were partially offset by:
•increased shipments (approximately $15 million)
•lower raw material costs, including inventory revaluations (approximately $285 million)
•lower operating costs (approximately $35 million)
•lower energy costs (approximately $30 million)
•strengthening of the euro versus the U.S. dollar (approximately $15 million)
•lower other costs, primarily variable compensation (approximately $40 million).
Gross margin for 2023 as compared to 2022 decreased primarily as a result of lower average realized prices, partially offset by higher sales volume and lower material costs.
Segment results for Tubular
Year ended December 31, %
Change
2023 2022
Earnings before interest and taxes ($ in millions) $ 589 $ 544 8 %
Gross margin 40 % 37 % 3 %
Raw steel production (mnt) 568 634 (10) %
Capability utilization 63 % 70 % (7) %
Steel shipments (mnt) 478 523 (9) %
Average realized steel price per ton 3,137 2,978 5 %
The increase in Tubular results for 2023 compared to 2022 was primarily due to:
•higher average realized prices (approximately $70 million)
•lower raw material costs (approximately $20 million)
•lower energy costs (approximately $5 million)
•improved other, primarily consisting of reduced variable compensation and increased equity investee income (approximately $75 million),
these changes were partially offset by:
•decreased shipments, including volume inefficiencies (approximately $115 million)
•higher operating costs (approximately $10 million).
Gross margin for 2023 as compared to 2022 increased primarily as a result of lower variable compensation and raw material costs.
Results for Other
The Other category had a loss of $3 million for the year ended December 31, 2023, compared to earnings of $22 million for the year ended December 31, 2022.
Net Interest and Other Financial Costs
Year Ended December 31,
(Dollars in millions) 2023 2022
Interest expense 72 159
Interest income (141) (44)
Other financial costs 18 32
Net periodic benefit income (154) (246)
Net gain from investments related to active employee benefits (43) -
Net interest and other financial benefits $ (248) $ (99)
Net interest and other financial benefits improved in 2023 compared to 2022 primarily due to increased interest income on cash deposits, lower interest expense as a result of increased capitalized interest and gains on investments related to active employee benefits from the initial asset base increase from the transfer of certain VEBA investments previously reported under net periodic benefit income. These changes were partially offset by reduced net periodic benefit income due to 2022 plan asset performance, a reduced asset base from the transfer of certain VEBA investments to the active employee benefits subaccount and increased prior service cost. For additional information on U. S. Steel indebtedness see Note 17 to the Consolidated Financial Statements.
For additional information on U. S. Steel’s foreign currency exchange activity see Note 16 to the Consolidated Financial Statements and Item 7A. "Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Exchange Rate Risk.”
Income Tax
The income tax expense for the year ended December 31, 2023, was $152 million compared to an income tax expense of $735 million in 2022. The change from the prior year period was primarily due to a decrease in earnings before taxes. In addition, the current year period includes a benefit of $43 million related to the 2022 federal income tax return, as well as an additional benefit of $12 million related to the adjustment of prior years’ federal income taxes. Also included in the 2023 provision is a benefit of $23 million related to the recognition of a deferred tax asset on unrecognized currency losses in branch operations pursuant to proposed regulations under Internal Revenue Code Section 987.
The Organization for Economic Co-operation and Development (the "OECD"), an international association of 38 countries including the U.S., has proposed changes to numerous long-standing tax principles, including a global minimum tax initiative. On December 12, 2022, the European Union member states agreed to implement the OECD's Pillar 2 global corporate minimum tax
rate of 15% on companies with revenues of at least $790,000, which would go into effect in 2024. The law on minimum top-up tax for multinational enterprise groups and large-scale domestic groups in Slovakia was approved by the parliament on December 8, 2023 with the effective date of December 31, 2023. The law was signed by the President on December 21, 2023. The Company will continue to analyze the law to determine potential impacts. At this time, the Company does not expect the Pillar 2 legislation to have a material impact on its consolidated financial statements.
For further information on income taxes see Note 11 to the Consolidated Financial Statements.
Net earnings attributable to U. S. Steel
Net earnings attributable to U. S. Steel in 2023 was $895 million compared to net earnings of $2,524 million in 2022. The decrease was primarily attributable to the factors discussed above.
Liquidity and Capital Resources
Cash Flows and Capital Requirements
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $2,100 million in 2023 compared to $3,505 million in 2022. The decrease in 2023 compared to 2022 was primarily due to decreased net earnings partially offset by changes in working capital and distributions from equity investees. Changes in working capital can vary significantly depending on factors such as the timing of inventory production and purchases, which is affected by the length of our business cycles as well as our captive raw materials position, customer payments of accounts receivable and payments to vendors in the regular course of business.
Our cash conversion cycle decreased by 10 days in the fourth quarter of 2023 from the fourth quarter of 2022 as shown below:
Cash Conversion Cycle 2023 2022
$ millions Days $ millions Days
Accounts receivable, net (a)
$ 1,549 34 $ 1,634 39
+ Inventories (b)
$ 2,128 53 $ 2,359 60
- Accounts Payable and Other Accrued Liabilities (c)
$ 2,867 68 $ 2,831 70
= Cash Conversion Cycle (d)
19 29
(a) Calculated as Average Accounts Receivable, net divided by total Net Sales multiplied by the number of days in the period.
(b) Calculated as Average Inventory divided by total Cost of Sales multiplied by the number of days in the period.
(c) Calculated as Average Accounts Payable and Other Accrued Liabilities less bank checks outstanding and other current liabilities divided by total Cost of Sales multiplied by the number of days in the period.
(d) Calculated as Accounts Receivable Days plus Inventory Days less Accounts Payable Days.
The cash conversion cycle is a non-GAAP financial measure. We believe the cash conversion cycle is a useful measure in providing investors with information regarding our cash management performance and is a widely accepted measure of working capital management efficiency. The cash conversion cycle should not be considered in isolation or as an alternative to other GAAP metrics as an indicator of performance.
The LIFO inventory method is the predominant method of inventory costing for our Flat-Rolled and Tubular segments. The first-in, first-out FIFO and moving average methods are the predominant inventory costing methods for our Mini Mill segment and the FIFO method is the predominant inventory costing method for our USSE segment. In the U.S., management monitors the inventory realizability by comparing the LIFO cost of inventory with the replacement cost of inventory. To the extent the replacement cost (i.e., market value) of inventory is lower than the LIFO cost of inventory, management will write the inventory down. As of December 31, 2023, and 2022, the replacement cost of the LIFO inventory was higher by approximately $1,248 million and $1,154 million, respectively.
Net cash provided by operating activities for 2023 and 2022 reflects employee benefits payments as shown in the following table.
Benefits Payments for Employees Year Ended December 31,
(Dollars in millions) 2023 2022
Other employee benefits payments not funded by trusts 40 32
Payments to a multiemployer pension plan 84 74
Pension related payments not funded by trusts 3 2
Reductions in cash flows from operating activities $ 127 $ 108
Net Cash Used in Investing Activities
Net cash used in investing activities was $2,568 million in 2023 compared to $1,679 million in 2022. The increase in net cash used in investing activities was primarily due to increased capital expenditures (discussed in more detail below).
Capital expenditures in 2023 were $2,576 million compared to $1,769 million in 2022. Mini Mill capital expenditures were $1,899 million and included $1,436 million for BR2, exclusive of the air separation unit, as well as spending for the continuous galvanizing line (CGL) and the NGO being built at the existing Big River Steel facility. Flat-Rolled capital expenditures were $536 million and included spending for the construction of a DR grade pellet facility at Keetac and the Gary Works pig iron facility, as well as mining equipment, other infrastructure and environmental projects across the Flat-Rolled footprint. USSE capital expenditures were $109 million and included spending for the USSK waste water quality - soluble matters reduction project, enterprise resource planning (ERP) project, 5-stand control system upgrades, blast furnace and various other projects. Tubular capital expenditures were $32 million and included spending to support steelmaking, infrastructure and environmental projects within the Tubular footprint.
Net Cash used in Financing Activities
Net cash used in financing activities was $98 million for the twelve months ended December 31, 2023, compared to net cash used in financing activities of $868 million for the same period in 2022. The period over period change in financing activities was primarily due to lower repurchases of common stock and repayments of debt in the current year period, partially offset by reduced issuance of debt.
Debt Financing
In 2023 U. S. Steel received net proceeds of approximately $238 million after closing on an aggregate principal amount of $240 million unsecured Arkansas Development Finance Authority environmental improvement revenue bonds with a coupon rate of 5.700% and a final maturity of 2053.
Certain of our credit facilities, including the Credit Facility Agreement, the Big River Steel ABL Facility, the USSK Credit Agreement and the Export Credit Agreement, contain standard terms and conditions including customary material adverse change clauses. If a material adverse change was to occur, our ability to fund future operating and capital requirements could be negatively impacted. On September 28th, 2023, the Company elected to reduce the size of the USSK Credit Agreement from €300 million to €150 million (approximately $166 million). The USSK Credit Agreement contains certain USSK specific financial covenants. The USSK Credit Agreement requires USSK to maintain a net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio of less than 3.50:1 (the “EBITDA Ratio Covenant”), as measured on a rolling twelve months basis on June 30th and December 31st of each year. After determining that USSK may not be able to comply with the EBITDA Ratio Covenant at June 30, 2023, USSK requested and received an unanimously approved waiver of the EBITDA Ratio Covenant from its lenders for the period ending June 30, 2023. As of December 31, 2023 USSK was in compliance with the EBITDA Ratio Covenant and a waiver was not needed and therefore not requested. There are currently no amounts outstanding under the facility.
We use surety bonds, trusts and letters of credit to provide financial assurance for certain transactions and business activities. The use of some forms of financial assurance and cash collateral have a negative impact on liquidity. U. S. Steel has committed $192 million of liquidity sources for financial assurance purposes as of December 31, 2023. Increases in certain of these commitments which use collateral are reflected within cash, cash equivalents and restricted cash on the Consolidated Statement of Cash Flows.
The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $7 million at December 31, 2023. If any default related to the guaranteed indebtedness occurs, U. S. Steel has access to its interest in the assets of the investees to reduce its potential losses under the guarantees.
We may from time to time seek to retire or repurchase our outstanding long-term debt through open market purchases, privately negotiated transactions, exchange transactions, redemptions or otherwise. Such purchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements and other factors and may be commenced or suspended at any time. The amounts involved may be material. See Note 17 to the Consolidated Financial Statements for further details regarding U. S. Steel's debt.
Share Repurchases
In the third quarter of 2022, following the completion of the previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program that allows for the repurchase of up to $500 million of our outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares. Common stock repurchased under our share repurchase programs totaled 7.1 million shares and approximately $175 million in the year ended December 31, 2023. We do not expect to utilize the remainder of this authorization. The Merger Agreement contains a customary prohibition on our ability to engage in additional share repurchases without the consent of Purchaser. See Note 27 to the Consolidated Financial Statements, “Common Stock Issued and Repurchased” for further details.
Capital Requirements
Our major cash requirements in 2024 are expected to be for capital expenditures, including strategic priorities, employee benefits and operating costs, which includes purchases of raw materials. We ended 2023 with $2,948 million of cash and cash equivalents and $5,174 million of total liquidity. Available cash is left on deposit with financial institutions or invested in highly liquid securities with parties we believe to be creditworthy.
Capital expenditures for 2024 are expected to total approximately $1.7 billion, most of which is focused on in-flight construction and commissioning for strategic projects, as we work to expand our competitive advantages in low-cost iron ore, mini mill steelmaking and best-in-class finishing capabilities. Increased inflation, supply chain challenges and severe weather have all impacted the BR2 budget, and the Board of Directors authorized additional capital towards completing the project. While mitigating actions are being taken to address this impact, the company now expects BR2 capital spending to be approximately $3.2 billion.
U. S. Steel’s contractual commitments to acquire property, plant and equipment at December 31, 2023, totaled $1,479 million.
Liquidity
The following table summarizes U. S. Steel’s liquidity as of December 31, 2023:
(Dollars in millions)
Cash and cash equivalents $ 2,948
Amount available under Credit Facility Agreement 1,746
Amount available under Big River Steel - Revolving Line of Credit 299
Amounts available under USSK Credit Agreement and USSK Credit Facility 181
Total estimated liquidity $ 5,174
As of December 31, 2023, $325 million of the total cash and cash equivalents was held by our foreign subsidiaries. Substantially all of the liquidity attributable to our foreign subsidiaries can be accessed without the imposition of income taxes as a result of the election effective December 31, 2013, to liquidate for U.S. income tax purposes a foreign subsidiary that holds most of our international operations.
We expect that our estimated liquidity requirements will consist primarily of our 2024 planned strategic capital expenditures, working capital requirements, debt service, and operating costs and employee benefits for our operations after taking into account the footprint actions and cost reductions at our plants and headquarters. Our available liquidity at December 31, 2023, consists principally of our cash and cash equivalents and available borrowings under the Credit Facility Agreement, Big River Steel ABL Facility, USSK Credit Agreement and the USSK Credit Facility. Management continues to evaluate market conditions in our industry and our global liquidity position, and may consider additional actions to further strengthen our balance sheet and optimize liquidity, including but not limited to the repayment or refinancing of outstanding debt and the incurrence of additional debt to opportunistically finance strategic projects.
U. S. Steel management believes that U. S. Steel’s liquidity will be adequate to satisfy our cash requirements and obligations for the next twelve months and for the foreseeable future, including obligations to complete currently authorized capital spending programs. Future requirements for U. S. Steel’s business needs, including the funding of acquisitions and capital expenditures, scheduled debt maturities, repurchase of debt, share buybacks, dividends, contributions to employee benefit plans and any amounts that may ultimately be paid in connection with contingencies, are expected to be funded by a combination of internally generated funds (including asset sales), proceeds from the sale of stock, borrowings, refinancings and other external financing sources.
The Company has a supply chain finance (SCF) arrangement with a third-party administrator which allows participating suppliers, at their sole discretion, to make offers to sell payment obligations of the Company prior to their scheduled due dates at a discounted price to a participating financial institution. The third-party administrator entered into a separate agreement with the Export Import Bank of the United States to guarantee 90 percent of supplier obligations sold for up to $200 million. No guarantees or collateral are provided by the Company or any of its subsidiaries under the SCF program.
The Company’s goal is to capture overall supplier savings and improve working capital efficiency. The agreements facilitate the suppliers’ ability to sell payment obligations, while providing them with greater working capital flexibility. The Company has no economic interest in the sale of the suppliers’ receivables and no direct financial relationship with the financial institution concerning these services. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to sell amounts under the arrangements. The SCF program requires the Company to pay the third-party administrator the stated amount of the confirmed participating supplier invoices. The payment terms for confirmed invoices range from 75 to 90 days after the end of the month in which the invoice was issued.
The underlying costs from suppliers that elected to participate in the SCF program are generally recorded in cost of sales in the Company’s Consolidated Statement of Operations. Amounts due to suppliers who participate in the SCF program are reflected in accounts payable and accrued expenses on the Company’s Consolidated Balance Sheet and payments on the obligations by our suppliers are included in cash used in operating activities in the Consolidated Statement of Cash Flows. As of December 31, 2023, accounts payable and accrued expenses included $84 million of outstanding payment obligations which suppliers elected to sell to participating financial institutions.
The following table summarizes the Company's contractual obligations at December 31, 2023, and the effect such obligations are expected to have on our liquidity and cash flows in future periods.
(Dollars in millions)
Payments Due by Period
Contractual Obligations Total 2024 2025
through
2026 2027 through
2028 Beyond
Debt (including interest) and finance leases(a)
$ 7,382 $ 398 $ 1,082 $ 537 $ 5,365
Operating leases(b)
132 50 58 21 3
Contractual purchase commitments(c)
6,100 5,180 389 198 333
Capital commitments(d)
1,479 1,115 364 - -
Environmental commitments(d)
107 27 - - 80
Steelworkers Pension Trust(e)
436 84 173 179 -
Employee related benefits(f)
147 32 59 56 -
Total contractual obligations $ 15,783 $ 6,886 $ 2,125 $ 991 $ 5,781
(a) See Note 17 to the Consolidated Financial Statements.
(b) See Note 24 to the Consolidated Financial Statements.
(c) Reflects estimated contractual purchase commitments under purchase orders and “take or pay” arrangements. “Take or pay” arrangements are primarily for purchases of gases and certain energy and utility services.
(d) See Note 26 to the Consolidated Financial Statements.
(e) While it is difficult to make a prediction of cash requirements beyond the term of the 2022 Labor Agreements with the USW, which expire on September 1, 2026, projected amounts shown through 2028 assume the contribution rate per hour included in the 2022 Labor Agreements of $4.00 per hour worked.
(f) The amounts reflect corporate cash outlays for expected benefit payments to be paid by the Company. (See Note 18 to the Consolidated Financial Statements.) The accuracy of this forecast of future cash flows depends on future medical health care escalation rates and restrictions related to our trusts for retiree healthcare and life insurance (VEBA) that impact the timing of the use of trust assets. Projected amounts have been reduced to reflect withdrawals from the USW VEBA trust available under its agreements with the USW. Due to these factors, it is not possible to reliably estimate cash requirements beyond five years and actual amounts experienced may differ significantly from those shown.
Other Commercial Commitments
The following table summarizes U. S. Steel’s commercial commitments at December 31, 2023, and the effect such commitments could have on our liquidity and cash flows in future periods.
(Dollars in millions)
Scheduled Reductions by Period
Commercial Commitments Total 2024 2025
through
2026 2027
through
2028 Beyond
Standby letters of credit(a)
$ 61 $ 42 $ 1 $ - $ 18 (b)
Surety bonds(a)
100 - - - 100 (b)
Funded Trusts(a)
31 - - - 31 (b)
Total commercial commitments $ 192 $ 42 $ 1 $ - $ 149
(a)Reflects a commitment or guarantee for which future cash outflow is not considered likely.
(b)Timing of potential cash outflows is not determinable.
Off-Balance Sheet Arrangements
U. S. Steel has invested in several joint ventures that are reported as equity investments. Several of these investments involved a transfer of assets in exchange for an equity interest. U. S. Steel has supply arrangements with several of these joint ventures.
U. S. Steel’s other off-balance sheet arrangements include guarantees, indemnifications, unconditional purchase obligations, surety bonds, trusts and letters of credit disclosed in Note 26 to the Consolidated Financial Statements.
Derivative Instruments
See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for discussion of derivative instruments and associated market risk for U. S. Steel.
Environmental Matters
U. S. Steel’s environmental expenditures were as follows:
(Dollars in millions)
2023 2022 2021
North America:
Capital $ 60 $ 38 $ 27
Compliance
Operating & maintenance 243 255 201
Remediation(a)
15 18 57
Total North America $ 318 $ 311 $ 285
USSE:
Capital $ 10 $ 6 $ -
Compliance
Operating & maintenance 12 11 10
Remediation(a)
5 6 7
Total USSE $ 27 $ 23 $ 17
Total U. S. Steel $ 345 $ 334 $ 302
(a) These amounts include spending charged against remediation reserves, net of recoveries where permissible, but do not include non-cash provisions recorded for environmental remediation.
U. S. Steel’s environmental capital expenditures accounted for 3 percent of total capital expenditures in 2023 and 2 percent in 2022 and 3 percent in 2021.
Environmental compliance expenditures represented 2 percent of U. S. Steel's total costs and expenses in 2023, 2022, and 2021. Remediation spending during 2021 through 2023 was mainly related to remediation activities at former and present operating locations.
For discussion of other relevant environmental items see “Part I, Item 3. Legal Proceedings - Environmental Proceedings.”
The following table shows activity with respect to environmental remediation liabilities for the years ended December 31, 2023, and December 31, 2022. These amounts exclude liabilities related to asset retirement obligations accounted for in accordance with ASC Topic 410. See Note 19 to the Consolidated Financial Statements.
(Dollars in millions) 2023 2022
Beginning Balance $ 126 $ 158
Plus: Additions 15 20
Adjustments for changes in estimates (11) 3
Less: Obligations settled (23) (55)
Ending Balance $ 107 $ 126
New or expanded environmental requirements, which could increase U. S. Steel’s environmental costs, may arise in the future. U. S. Steel intends to comply with all legal requirements regarding the environment, but since many of them are not fixed or presently determinable (even under existing legislation) and may be affected by future legislation, it is not possible to predict accurately the ultimate cost of compliance, including remediation costs which may be incurred and penalties which may be imposed. U. S. Steel’s environmental capital expenditures are expected to be approximately $81 million in 2024, $10 million of which is related to projects at USSE. U. S. Steel's environmental expenditures for 2024 for operating and maintenance and for remediation projects are expected to be approximately $247 million and $39 million, respectively, of which approximately $10 million and $4 million for operating and maintenance and remediation, respectively, is related to USSE. Although, the outcome of pending environmental matters is not estimable at this time, it is reasonably possible that U. S. Steel's environmental capital and operating and maintenance expenditures could materially increase as a result of the future resolution of these matters. Predictions of future environmental expenditures beyond 2024 can only be broad-based estimates, which have varied, and will continue to vary, due to the ongoing evolution of specific regulatory requirements, the possible imposition of more stringent requirements and the availability of new technologies to remediate sites, among other factors.
Accounting Standards
See Notes 2 and 3 to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
U. S. Steel is exposed to certain risks related to its ongoing business operations, including financial, market, political, and economic risks. The following discussion provides information regarding U. S. Steel’s exposure to the risks of changing foreign currency exchange rates, commodity prices and interest rates.
U. S. Steel may enter into derivative financial instrument transactions in order to manage or reduce these market risks. The use of derivative instruments is subject to our corporate governance policies. These instruments are used solely to mitigate market exposure and are not used for trading or speculative purposes.
U. S. Steel may elect to use hedge accounting for certain commodity or currency transactions. For those transactions, the impact of the hedging instrument will be recognized in other comprehensive income until the transaction is settled. Once the transaction is settled, the effect of the hedged item will be recognized in income. For further information regarding derivative instruments see Notes 1 and 16 to the Consolidated Financial Statements.
Foreign Currency Exchange Rate Risk
U. S. Steel is subject to the risk of price fluctuations due to the effects of exchange rates on revenues and operating costs, firm commitments for capital expenditures and existing assets or liabilities denominated in currencies other than the U.S. dollar, particularly the euro. U. S. Steel historically has made limited use of forward currency contracts to manage exposure to certain currency price fluctuations. U. S. Steel elected cash flow hedge accounting for foreign exchange forwards and had no material open forward exchange contracts that were subject to mark-to-market accounting as of December 31, 2023.
The fair value of our derivatives is determined using Level 2 inputs, which are defined as “significant other observable” inputs. The inputs used include quotes from counterparties that are corroborated with market sources.
Volatility in the foreign currency markets could have significant implications for U. S. Steel as a result of foreign currency transaction effects. Future foreign currency impacts will depend upon changes in currencies and the extent to which we engage in derivatives transactions. For additional information on U. S. Steel’s foreign currency exchange activity, see Note 16 to the Consolidated Financial Statements.
Commodity Price Risk and Related Risks
In the normal course of our business, U. S. Steel is exposed to market risk or price fluctuations related to the purchase, production or sale of steel products. U. S. Steel is also exposed to price risk related to the purchase, production or sale of coal, coke, natural gas, steel scrap, iron ore and pellets, and zinc, tin and other nonferrous metals used as raw materials. U. S. Steel is also subject to market price risk for the purchase of a portion of its electricity at certain facilities. See Note 16 to the Consolidated Financial Statements for further details on U. S. Steel’s derivatives.
U. S. Steel’s market risk strategy has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand; however, from time to time U. S. Steel has made forward physical purchases to manage exposure to price risk related to the purchases of natural gas and certain non-ferrous metals used in the production process. As of December 31, 2023, U. S. Steel, through U. S. Steel Europe, had $14 million forward buy contracts for zinc. There were no forward buy contracts for natural gas or any of the other significant raw materials used in the domestic production process.
Interest Rate Risk
U. S. Steel is subject to the effects of interest rate fluctuations on the fair value of certain of our non-derivative financial instruments. A sensitivity analysis of the projected incremental effect of a hypothetical 10 percent increase/decrease in year-end 2023 and 2022 interest rates on the fair value of U. S. Steel’s non-derivative financial instruments is provided in the following table:
(Dollars in millions) 2023 2022
Non-Derivative Financial Instruments(a)
Fair Value(b)
Change in
Fair Value(c)
Fair Value(b)
Change in
Fair Value(c)
Financial liabilities:
Debt(d)(e)
$ 4,797 $ 325 $ 3,815 $ 116
(a)Fair values of cash and cash equivalents, current accounts and notes receivable, accounts payable, bank checks outstanding and accrued interest approximate carrying value and are relatively insensitive to changes in interest rates due to the short-term maturity of the instruments. Accordingly, these instruments are excluded from the table.
(b)See Note 20 to the Consolidated Financial Statements for carrying value of instruments.
(c)Reflects, by class of financial instrument, the estimated incremental effect of a hypothetical 10 percent change in interest rates at December 31, 2023, and 2022, on the fair value of U. S. Steel’s non-derivative financial instruments. For financial liabilities, this assumes a 10 percent decrease in the weighted average yield to maturity of U. S. Steel’s long-term debt at December 31, 2023, and December 31, 2022.
(d)Excludes finance lease obligations.
(e)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.
U. S. Steel’s sensitivity to interest rate declines and corresponding increases in the fair value of our debt portfolio would unfavorably affect our results and cash flows only to the extent that we elected to repurchase or otherwise retire all or a portion of our fixed-rate debt portfolio at prices above carrying value.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in our Consolidated Financial Statement contained in this Annual Report on Form 10-K. Specific financial statements can be found at the page listed below:
PAGE
MANAGEMENT'S REPORT TO STOCKHOLDERS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 238)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2023, AND 2022
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTARY DATA (UNAUDITED)
MANAGEMENT’S REPORT TO STOCKHOLDERS
February 2, 2024
To the Stockholders of United States Steel Corporation:
Financial Statements and Practices
The accompanying consolidated financial statements of United States Steel Corporation are the responsibility of and have been prepared by United States Steel Corporation in conformity with accounting principles generally accepted in the United States of America. They necessarily include some amounts that are based on our best judgments and estimates. United States Steel Corporation’s financial information displayed in other sections of this report is consistent with these financial statements.
United States Steel Corporation seeks to assure the objectivity and integrity of its financial records by careful selection of its managers, by organizational arrangements that provide an appropriate division of responsibility and by communication programs aimed at assuring that its policies, procedures and methods are understood throughout the organization.
United States Steel Corporation has a comprehensive, formalized system of internal controls designed to provide reasonable assurance that assets are safeguarded, that financial records are reliable and that information required to be disclosed in reports filed with or submitted to the Securities and Exchange Commission is recorded, processed, summarized and reported within the required time limits. Appropriate management monitors the system for compliance and evaluates it for effectiveness, and the independent registered public accounting firm measures its effectiveness and recommends possible improvements thereto.
The Board of Directors exercises its oversight role in the area of financial reporting and internal control over financial reporting through its Audit Committee. This committee, composed solely of independent directors, regularly meets (jointly and separately) with the independent registered public accounting firm, management, internal audit and other executives to monitor the proper discharge by each of their responsibilities relative to internal control over financial reporting and United States Steel Corporation’s financial statements.
Internal Control Over Financial Reporting
United States Steel Corporation’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of United States Steel Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, United States Steel Corporation conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, United States Steel Corporation’s management concluded that United States Steel Corporation’s internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of United States Steel Corporation’s internal control over financial reporting as of December 31, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
/s/ David B. Burritt /s/ Jessica T. Graziano
David B. Burritt Jessica T. Graziano
President and
Chief Executive Officer Senior Vice President and
Chief Financial Officer
/s/ Manpreet S. Grewal
Manpreet S. Grewal
Vice President, Controller
& Chief Accounting Officer
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of United States Steel Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of United States Steel Corporation and its subsidiaries (the “Company”) as of December 31, 2023, and 2022, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report to Stockholders on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sales Recognition
As described in Notes 1 and 6 to the consolidated financial statements, revenue is generated primarily from contracts to produce, ship and deliver steel products, and to a lesser extent, raw materials such as iron ore pellets and coke by-products. Sales are recognized when the Company's performance obligations are satisfied. Generally, the Company's performance obligations are satisfied, control of products is transferred, and revenue is recognized at a single point in time, when title transfers to customers for products shipped. For the year ended December 31, 2023, the Company's net sales were $18.1 billion.
The principal consideration for our determination that performing procedures relating to sales recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company's sales recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the sales recognition process. These procedures also included, among others, for certain components (i) evaluating revenue transactions by testing the issuance and settlement of invoices and credit memos (ii) tracing transactions not settled to a detailed listing of accounts receivable, (iii) testing the completeness and accuracy of data provided by management, and (iv) confirming a sample of outstanding customer invoice balances as of December 31, 2023 and, for confirmations not returned, obtaining and inspecting source documents, such as invoices, delivery documents, and subsequent cash receipts. For other components, these procedures included testing the revenue recognized for a sample of revenue transactions by obtaining and inspecting source documents, such as evidence of customer arrangement, invoices, proof of shipment, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 2, 2024
We have served as the Company’s auditor since 1903.
UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
(Dollars in millions, except per share amounts) 2023 2022 2021
Net sales:
Net sales $ 16,038 $ 19,123 $ 18,964
Net sales to related parties (Note 23)
2,015 1,942 1,311
Total (Note 6) 18,053 21,065 20,275
Operating expenses (income):
Cost of sales (excludes items shown below) 15,803 16,777 14,533
Selling, general and administrative expenses 501 422 426
Depreciation, depletion and amortization (Notes 13 and 14) 916 791 791
Earnings from investees (Note 12) (115) (243) (170)
Gain on sale of Transtar (Note 5) - - (506)
Asset impairment charges (Note 1) 129 163 273
Restructuring and other charges (Note 25) 36 48 128
Gain on equity investee transactions (Note 12) - (6) (111)
Other gains, net (16) (47) (35)
Total 17,254 17,905 15,329
Earnings before interest and income taxes 799 3,160 4,946
Interest expense 72 159 313
Interest income (141) (44) (4)
Loss on debt extinguishment (Note 7) - - 292
Other financial costs 18 32 46
Net periodic benefit income (154) (246) (45)
Net gain from investments related to active employee benefits (Note 20) (43) - -
Net interest and other financial (benefits) costs (Note 7) (248) (99) 602
Earnings before income taxes 1,047 3,259 4,344
Income tax expense (Note 11) 152 735 170
Net earnings 895 2,524 4,174
Less: Net earnings attributable to noncontrolling interests - - -
Net earnings attributable to United States Steel Corporation $ 895 $ 2,524 $ 4,174
Earnings per common share (Note 8)
Earnings per share attributable to United States Steel Corporation stockholders:
- Basic $ 3.98 $ 10.22 $ 15.77
- Diluted $ 3.56 $ 9.16 $ 14.88
The accompanying notes are an integral part of these Consolidated Financial Statements.
UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Year Ended December 31,
(Dollars in millions) 2023 2022 2021
Net earnings $ 895 $ 2,524 $ 4,174
Other comprehensive income (loss), net of tax:
Changes in foreign currency translation adjustments (a)
54 (91) (78)
Changes in pension and other employee benefit accounts (a)
81 (297) 433
Changes in derivative financial instruments (a)
(9) (28) 23
Changes in fair value of active employee benefit investments (a)
5 - -
Total other comprehensive income (loss), net of tax 131 (416) 378
Comprehensive income including noncontrolling interest 1,026 2,108 4,552
Comprehensive income attributable to noncontrolling interest - - -
Comprehensive income attributable to United States Steel Corporation $ 1,026 $ 2,108 $ 4,552
(a) Related income tax (provision) benefit:
Foreign currency translation adjustments $ (3) $ 24 $ 32
Pension and other benefits adjustments (24) 95 (147)
Derivative adjustments 3 9 (6)
Active employee benefit investments (2) - -
The accompanying notes are an integral part of these Consolidated Financial Statements.
UNITED STATES STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in millions) 2023 2022
Assets
Current assets:
Cash and cash equivalents (Note 9) $ 2,948 $ 3,504
Receivables, less allowance of $38 in both periods
1,390 1,485
Receivables from related parties (Note 23) 158 150
Inventories (Note 10) 2,128 2,359
Other current assets 319 368
Total current assets 6,943 7,866
Long-term restricted cash (Note 9) 32 31
Investments and long-term receivables, less allowance of $3 and $4 (Note 12)
761 840
Operating lease assets (Note 24) 109 146
Property, plant and equipment, net (Note 13) 10,393 8,492
Intangibles, net (Note 14) 436 478
Deferred income tax benefits (Note 11) 19 10
Goodwill (Note 14) 920 920
Other noncurrent assets 838 675
Total assets $ 20,451 $ 19,458
Liabilities
Current liabilities:
Accounts payable and other accrued liabilities $ 2,889 $ 2,873
Accounts payable to related parties (Note 23) 139 143
Payroll and benefits payable 442 493
Accrued taxes 222 271
Accrued interest 70 67
Current operating lease liabilities (Note 24) 44 49
Short-term debt and current maturities of long-term debt (Note 17) 142 63
Total current liabilities 3,948 3,959
Noncurrent operating lease liabilities (Note 24) 73 105
Long-term debt, less unamortized discount and debt issuance costs (Note 17) 4,080 3,914
Employee benefits (Note 18) 126 209
Deferred income tax liabilities (Note 11) 587 456
Deferred credits and other noncurrent liabilities 497 504
Total liabilities 9,311 9,147
Contingencies and commitments (Note 26)
Stockholders’ Equity
Common stock issued - 285,959,739 and 282,487,412 shares issued (par value $1 per share, authorized 400,000,000 shares) (Note 8)
286 283
Treasury stock, at cost (62,288,523 shares and 54,089,559 shares)
(1,418) (1,204)
Additional paid-in capital 5,253 5,194
Retained earnings 6,880 6,030
Accumulated other comprehensive income (loss) (Note 21) 46 (85)
Total United States Steel Corporation stockholders’ equity 11,047 10,218
Noncontrolling interests 93 93
Total liabilities and stockholders’ equity $ 20,451 $ 19,458
The accompanying notes are an integral part of these Consolidated Financial Statements.
UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
(Dollars in millions) 2023 2022 2021
Increase (decrease) in cash and cash equivalents
Operating activities:
Net earnings $ 895 $ 2,524 $ 4,174
Adjustments to reconcile net cash provided by operating activities:
Depreciation, depletion and amortization (Notes 13 and 14) 916 791 791
Gain on sale of Transtar (Note 5) - - (506)
Asset impairment charges (Note 1) 129 163 273
Gain on equity investee transactions (Note 12) - (6) (111)
Restructuring and other charges (Note 25) 36 48 128
Loss on debt extinguishment (Note 7) - - 292
Pensions and other post-employment benefits (157) (213) 15
Active employee benefit investments 32 - -
Deferred income taxes (Note 11) 97 501 (52)
Net gain on sale of assets (6) (12) (7)
Equity investees earnings, net of distributions received (1) (215) (168)
Changes in:
Current receivables 103 370 (955)
Inventories 257 (222) (677)
Current accounts payable and accrued expenses 25 (180) 783
Income taxes receivable/payable (27) (15) 161
All other, net (199) (29) (51)
Net cash provided by operating activities 2,100 3,505 4,090
Investing activities:
Capital expenditures (2,576) (1,769) (863)
Acquisition of Big River Steel, net of cash acquired (Note 5) - - (625)
Proceeds from sale of Transtar (Note 5) - - 627
Proceeds from cost reimbursement government grants (Note 26) - 54 -
Proceeds from sale of assets 8 32 26
Proceeds from sale of ownership interests in equity investees (Note 12) - 12 -
Other investing activities - (8) (5)
Net cash used in investing activities (2,568) (1,679) (840)
Financing activities:
Repayment of short-term debt (Note 17) - - (180)
Revolving credit facilities - borrowings, net of financing costs (Note 17) - - 50
Revolving credit facilities - repayments (Note 17) - - (911)
Issuance of long-term debt, net of financing costs (Note 17) 241 343 864
Repayment of long-term debt (Note 17) (89) (382) (3,183)
Net proceeds from public offering of common stock (Note 27) - - 790
Common stock repurchased (Note 27) (175) (849) (150)
Proceeds from government incentives (Note 26) - 82 -
Other financing activities (75) (62) (27)
Net cash used in financing activities (98) (868) (2,747)
Effect of exchange rate changes on cash 15 (19) (21)
Net (decrease) increase in cash, cash equivalents and restricted cash (551) 939 482
Cash, cash equivalents and restricted cash at beginning of year (Note 9) 3,539 2,600 2,118
Cash, cash equivalents and restricted cash at end of year (Note 9) $ 2,988 $ 3,539 $ 2,600
See Note 22 for supplemental cash flow information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Dollars in Millions Shares in Thousands
2023 2022 2021 2023 2022 2021
Common stock:
Balance at beginning of year $ 283 $ 280 $ 229 282,487 279,522 229,106
Common stock issued 3 3 51 3,473 2,965 50,416
Balance at end of year $ 286 $ 283 $ 280 285,960 282,487 279,522
Treasury stock:
Balance at beginning of year $ (1,204) $ (334) $ (175) (54,090) (15,709) (8,673)
Common stock repurchased (175) (849) (150) (7,092) (37,559) (6,557)
Excise tax on common stock repurchased (1) - - - - -
Common stock (repurchased) reissued for employee/non-employee director stock plans (38) (21) (9) (1,107) (822) (479)
Balance at end of year $ (1,418) $ (1,204) $ (334) (62,289) (54,090) (15,709)
Additional paid-in capital:
Balance at beginning of year $ 5,194 $ 5,199 $ 4,402
Dividends on common stock - - (5)
Common stock issued - - 742
Employee stock plans 59 72 60
Cumulative effect upon adoption of Accounting Standards Update 2020-06 - (77) -
Balance at end of year $ 5,253 $ 5,194 $ 5,199
The accompanying notes are an integral part of these Consolidated Financial Statements.
UNITED STATES STEEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Continued)
Comprehensive Income (Loss)
(Dollars in millions) 2023 2022 2021 2023 2022 2021
Retained earnings:
Balance at beginning of year $ 6,030 $ 3,534 $ (623)
Net earnings attributable to United States Steel Corporation 895 2,524 4,174 $ 895 $ 2,524 $ 4,174
Dividends on common stock (45) (50) (18)
Cumulative effect upon adoption of Accounting Standards Update 2020-06 - 22 -
Other - - 1
Balance at end of year $ 6,880 $ 6,030 $ 3,534
Accumulated other comprehensive income (loss):
Pension and other benefit adjustments (Note 18):
Balance at beginning of year $ (322) $ (25) $ (458)
Changes during year, net of taxes (a)
79 (304) 433 79 (304) 433
Changes during year, equity investee net of taxes (a)
2 7 - 2 7 -
Balance at end of year $ (241) $ (322) $ (25)
Foreign currency translation adjustments:
Balance at beginning of year $ 280 $ 371 $ 449
Changes during year, net of taxes (a)
54 (91) (78) 54 (91) (78)
Balance at end of year $ 334 $ 280 $ 371
Derivative financial instruments:
Balance at beginning of year $ (43) $ (15) $ (38)
Changes during year, net of taxes (a)
(9) (28) 23 (9) (28) 23
Balance at end of year $ (52) $ (43) $ (15)
Fair value of active employee benefit investments
Balance at beginning of year $ - $ - $ -
Changes during year, net of taxes (a)
5 - - 5 - -
Balance at end of year $ 5 $ - $ -
Total balances at end of year $ 46 $ (85) $ 331
Total stockholders’ equity $ 11,047 $ 10,218 $ 9,010
Noncontrolling interests:
Balance at beginning of year $ 93 $ 93 $ 93
Net loss - - - - - -
Balance at end of year $ 93 $ 93 $ 93
Total comprehensive income $ 1,026 $ 2,108 $ 4,552
(a) Related income tax benefit (expense):
Foreign currency translation adjustments $ (3) $ 24 $ 32
Pension and other benefits adjustments (24) 95 (147)
Derivative adjustments 3 9 (6)
Active employee benefit investments (2) - -
The accompanying notes are an integral part of these Consolidated Financial Statements.
1. Nature of Business and Significant Accounting Policies
Nature of Business
U. S. Steel produces and sells steel products, including flat-rolled and tubular products, in North America and Europe. Operations in the United States also include iron ore and coke production facilities and real estate operations. Operations in Europe also include coke production facilities.
Agreement and Plan of Merger with Nippon Steel Corporation
On December 18, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Nippon Steel North America, Inc., a New York corporation ("Purchaser"), 2023 Merger Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of Purchaser ("Merger Sub"), and, solely as provided in Section 9.13 therein, Nippon Steel Corporation, a Japanese corporation ("NSC"), pursuant to which Merger Sub will merge with and into the Company (the "Merger") with the Company surviving the Merger as a wholly-owned subsidiary of Purchaser. Subject to the terms and conditions set forth in the Merger Agreement, each share of the Company's common stock, par value $1.00 per share, outstanding immediately prior to the effective time of the Merger (the "Effective Time") will, at the Effective Time, automatically be converted into the right to receive $55.00 per share in cash, without interest, subject to any required tax withholding.
The Merger Agreement requires us to operate in the ordinary course of business and restricts us, without the consent of Purchaser, from taking certain specified actions agreed by the parties to be outside the ordinary course of business until the pending Merger occurs or the Merger Agreement terminates.
Significant Accounting Policies
Principles applied in consolidation
These financial statements include the accounts of U. S. Steel and its majority-owned subsidiaries. Additionally, variable interest entities for which U. S. Steel is the primary beneficiary are included in the Consolidated Financial Statements, and their impacts are either partially or completely offset by noncontrolling interests. Intercompany accounts, transactions and profits have been eliminated in consolidation.
Investments in entities over which U. S. Steel has significant influence are accounted for using the equity method of accounting and are carried at U. S. Steel’s share of net assets plus loans, advances and our share of earnings less distributions.
Earnings or loss from investees includes U. S. Steel’s share of earnings or loss from equity method investments (and any amortization of basis differences), which are generally recorded a month in arrears.
Use of estimates
Generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end and the reported amounts of revenues and expenses during the year. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment; intangible assets; the fair value of assets or liabilities acquired in a business combination; valuation allowances for receivables, inventories and deferred income tax assets and liabilities; environmental liabilities; liabilities for potential tax deficiencies; potential litigation claims and settlements; assets and obligations related to employee benefits; and restructuring and other charges. Actual results could differ materially from the estimates and assumptions used.
The preparation of the financial statements includes an assessment of certain accounting matters using all available information including consideration of forecasted financial information in context with other information reasonably available to us. However, our future assessment of current expectations could result in material impacts to our consolidated financial statements in future reporting periods. All such adjustments are of a normal recurring nature unless disclosed otherwise.
Sales recognition
Sales are recognized when U. S. Steel's performance obligations are satisfied. Generally, U. S. Steel’s performance obligations are satisfied, control of our products is transferred, and revenue is recognized at a single point in time, when title transfers to our customer for product shipped or when services are provided. Revenues are recorded net of any sales incentives. Shipping and other transportation costs charged to customers are treated as fulfillment activities and are recorded as additional net sales and cost of sales at the time control is transferred to the customer. See Note 6 for further details on U. S. Steel’s revenue.
Inventories
Inventories are carried at the lower of cost or net realizable value. Fixed costs related to abnormal production capacity are expensed in the period incurred rather than capitalized into inventory.
LIFO is the predominant method of inventory costing for inventories held by the Flat-Rolled and Tubular segments. The Mini Mill segment uses a moving average costing method to account for semi-finished and finished products and FIFO to account for raw materials. FIFO is the predominant method used by the USSE segment. The LIFO method of inventory costing was used on 53 percent and 43 percent of consolidated inventories at December 31, 2023, and 2022, respectively.
Derivative instruments
From time to time, U. S. Steel may use fixed price forward physical purchase contracts to partially manage our exposure to price risk. Generally, forward physical purchase contracts qualify for the normal purchase normal sales exclusion in Accounting Standards Codification (ASC) 815, Derivatives and Hedging, and are not subject to mark-to-market accounting. U. S. Steel also uses derivatives such as commodity-based financial swaps and foreign currency exchange forward contracts to manage its exposure to purchase and sale price fluctuations and foreign currency exchange rate risk. The USSE and Flat-Rolled segments elect hedge accounting for some of their derivatives. Under hedge accounting, fluctuations in the value of the derivative are recognized in Accumulated other comprehensive (loss) income (AOCI) until the associated underlying is recognized in earnings. When the associated underlying is recognized in earnings, the value of the derivative is reclassified to earnings from AOCI. The Mini Mill segment has not elected hedge accounting. Therefore, the changes in fair value of the Mini Mill segment's foreign exchange forwards, as well as fair value changes for other derivatives where hedge accounting has not been elected, are recognized immediately in earnings. In accordance with the guidance in ASC Topic 820 on fair value measurements and disclosures, the fair value of our foreign exchange forwards, commodity purchase swaps and sales swaps was determined using Level 2 inputs, which are defined as "significant other observable" inputs. The inputs used are from market sources that aggregate data based upon market transactions. See Note 16 for further details on U. S. Steel’s derivatives.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and is depreciated on a straight-line basis over the estimated useful lives of the assets.
Depletion of mineral properties is based on rates which are expected to amortize cost over the estimated tonnage of minerals to be removed.
When property, plant and equipment is sold or otherwise disposed of, any gains or losses are reflected in income. If a loss on disposal is expected, such losses are recognized when the assets are reclassified as assets held for sale or when impaired as part of an asset group’s impairment.
Asset Impairment
U. S. Steel evaluates impairment of its property, plant and equipment whenever circumstances indicate that the carrying value may not be recoverable. We evaluate the impairment of long-lived assets at the asset group level. Our asset groups are flat-rolled, mini mill, welded tubular, seamless tubular and USSE. Asset impairments are recognized when the carrying value of an asset group exceeds its recoverable amount as determined by the asset group's aggregate projected undiscounted cash flows.
In the fourth quarter 2023, the Company recognized charges of approximately $123 million for impairment of indefinitely idled iron and steel making assets at Granite City Works. Impairment charges of approximately $151 million and $128 million were recognized for the write-off of iron making and steel making assets at Great Lakes Works in 2022 and 2021, respectively. The coil finishing processes at Granite City Works and Great Lakes Works continue to operate and remain components of the Company's operating plans. In 2021, there were additional impairments of $88 million and $56 million for equipment at Gary Works related to steel production intended for petroleum conveying pipe and the transfer of endless casting and rolling equipment from Mon Valley Works to BR2, respectively.
There were no other triggering events that required an impairment evaluation of our long-lived asset groups during the years-ended December 31, 2023, 2022, and 2021.
Goodwill and identifiable intangible assets
Goodwill represents the excess of the cost over the fair value of acquired identifiable tangible and intangible assets and liabilities assumed from businesses acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment testing annually, or more frequently if events or changes in circumstances indicate the asset might be impaired. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis.
We review goodwill for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and we determine that the fair value of the reporting unit more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the quantitative goodwill impairment test, we compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill.
If the fair value of the reporting unit exceeds its carrying value, we do not consider the goodwill impaired. If the carrying value is higher than the fair value, we recognize the difference as an impairment loss.
A quantitative goodwill impairment testing process requires valuation of the respective reporting unit, which we primarily determine using an income approach based on a discounted cash flow forecast covering discrete periods of time including a terminal value. We compute the terminal value using the constant growth method, which values the forecasted cash flows in perpetuity. The assumptions about future cash flows and growth rates are based on the respective reporting unit's long-term forecast and are subject to review and approval by senior management. A reporting unit's discount rate is a significant assumption and is a risk-adjusted weighted average cost of capital, which we believe approximates the rate from a market participant's perspective. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures. We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
Our Mini Mill reporting unit holds the goodwill recognized as a result of the Company's acquisition of Big River Steel and currently is our only reporting unit that has a significant amount of goodwill. This goodwill is primarily attributable to Big River Steel's operational abilities, workforce and the anticipated benefits from their recent expansion. U. S. Steel completed its annual goodwill impairment test using a qualitative assessment during the fourth quarter of 2023 and determined there was no impairment of goodwill.
Intangible assets with indefinite lives are also subject to at least annual impairment testing, which compares the fair value of the intangible assets with their carrying amounts. U. S. Steel has determined that certain of its acquired intangible assets have indefinite useful lives. These assets are also reviewed for impairment annually in the fourth quarter and whenever events or circumstances indicate the carrying value may not be recoverable. U. S. Steel completed its annual evaluation of its indefinite-lived water rights using a qualitative assessment and determined there was no indication of impairment.
Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives and are tested for impairment when events occur that indicate that the net book value will not be recovered over future cash flows.
Environmental remediation
Environmental expenditures are capitalized if the costs mitigate or prevent future contamination or if the costs improve existing assets’ environmental safety or efficiency. U. S. Steel provides for remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs is reasonably estimable. The timing of remediation accruals typically coincides with completion of studies defining the scope of work to be undertaken or when it is probable that a formal plan of action will be approved by the oversight agency. Remediation liabilities are accrued based on estimates of believed environmental exposure and are discounted if the amount and timing of the cash disbursements are readily determinable.
Asset retirement obligations
Asset retirement obligations (AROs) are initially recorded at fair value and are capitalized as part of the cost of the related long-lived asset and depreciated in accordance with U. S. Steel’s depreciation policies for property, plant and equipment. The fair value of the obligation is determined as the discounted value of expected future cash flows. Accretion expense is recorded each month to increase this discounted obligation over time. Certain AROs related to disposal costs of the majority of assets at our integrated steel facilities are not recorded because they have an indeterminate settlement date. These AROs will be initially recognized in the period in which sufficient information exists to estimate their fair value. See Note 19 for further details on U. S. Steel's AROs.
Pensions and other post-employment benefits
U. S. Steel has defined contribution plans or multiemployer arrangements for pension benefits for approximately 85 percent of its employees in the United States and defined benefit pension plans covering the remaining employees. For hires before January 1, 2016, U. S. Steel has defined benefit retiree health care and life insurance plans (Other Benefits) that cover its represented employees in North America upon their retirement. Government-sponsored programs into which U. S. Steel makes required contributions cover U. S. Steel’s European employees. For more details regarding pension and other post-employment benefits see Note 18 of the Consolidated Financial Statements.
The pension and Other Benefits obligations and the related net periodic benefit costs are based on, among other things, assumptions regarding the discount rate, estimated return on plan assets, salary increases, the projected mortality of participants and the current level and future escalation of health care costs. Additionally, U. S. Steel recognizes an obligation to provide post-employment benefits for disability-related claims covering indemnity and medical payments for certain employees in North America. The obligation for these claims and the related periodic costs are measured using actuarial techniques and assumptions. Actuarial gains and losses occur when actual experience differs from any of the many assumptions used to value the benefit plans, or when assumptions change. For pension and Other Benefits, the Company recognizes into income on an annual basis a portion of unrecognized actuarial net gains or losses that exceed 10 percent of the larger of projected benefit obligations or plan assets (the corridor). These unrecognized amounts in excess of the corridor are amortized over the plan participants' average life expectancy or average future service,
depending on the demographics of the plan. Unrecognized actuarial net gains and losses for disability-related claims are immediately recognized into income.
Deferred taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The realization of deferred tax assets is assessed quarterly based on several interrelated factors. These factors include U. S. Steel’s expectation to generate sufficient future taxable income and the projected time period over which these deferred tax assets will be realized. U. S. Steel records a valuation allowance when necessary to reduce deferred tax assets to the amount that will more likely than not be realized. See Note 11 for further details of deferred taxes.
2. New Accounting Standards
During the year ended December 31, 2023, there were no new accounting standards and interpretations issued which are expected to have a material impact on the Company's financial position, operations or cash flows.
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 includes requirements that an entity disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are greater than five percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The standard also requires that entities disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) each disaggregated between domestic and foreign. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. U. S. Steel is currently assessing the impact of ASU 2023-09 on its disclosures.
In November 2023, the FASB issued Accounting Standards Update 2023-07, Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 includes requirements that an entity disclose the title of the chief operating decision maker (CODM) and on an interim and annual basis, significant segment expenses and the composition of other segment items for each segment's reported profit. The standard also permits disclosure of additional measures of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. U. S. Steel is currently assessing the impact of ASU 2023-07 on its disclosures.
3. Recently Adopted Accounting Standards
In September 2022, the FASB issued Accounting Standards Update 2022-04, Disclosure of Supplier Finance Program Obligations (ASU 2022-04). ASU 2022-04 requires that an entity disclose certain information about supplier finance programs used in connection with the purchase of goods and services. ASU 2022-04 is effective for all entities with fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. U. S. Steel adopted this guidance effective January 1, 2023, with the exception of the amendment on roll-forward information, which will be adopted in our fiscal year beginning on January 1, 2024.
The Company has a SCF arrangement with a third-party administrator which allows participating suppliers, at their sole discretion, to make offers to sell payment obligations of the Company prior to their scheduled due dates at a discounted price to a participating financial institution. The third-party administrator entered into a separate agreement with the Export Import Bank of the United States to guarantee 90 percent of supplier obligations sold for up to $200 million. No guarantees or collateral are provided by the Company or any of its subsidiaries under the SCF program, and the Company does not benefit from any preferential payment terms or discounts as a result of supplier participation.
The Company’s goal is to capture overall supplier savings and improve working capital efficiency. The agreements facilitate the suppliers’ ability to sell payment obligations, while providing them with greater working capital flexibility. The Company has no economic interest in the sale of the suppliers’ receivables and no direct financial relationship with the financial institution concerning these services. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to sell amounts under the arrangements. The SCF program requires the Company to pay the third-party administrator the stated amount of the confirmed participating supplier invoices. The payment terms for confirmed invoices range from 75 to 90 days after the end of the month in which the invoice was issued.
The underlying costs from suppliers that elected to participate in the SCF program are generally recorded in cost of sales in the Company’s Consolidated Statement of Operations. Amounts due to suppliers who participate in the SCF program are reflected in accounts payable and accrued expenses on the Company’s Consolidated Balance Sheet and payments on the obligations by our suppliers are included in cash used in operating activities in the Consolidated Statement of
Cash Flows. As of December 31, 2023, accounts payable and accrued expenses included $84 million of outstanding payment obligations which suppliers elected to sell to participating financial institutions.
In October 2021, the FASB issued Accounting Standards Update 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08). ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for public companies with fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption of all amendments in the same period permitted. U. S. Steel adopted this guidance effective January 1, 2023, and will apply it to any future business combinations.
In August 2020, the FASB issued Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 also requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260 on the computation of earnings per share (EPS) for convertible instruments and contracts on an entity’s own equity. The update requires entities to use the If-Converted Method for calculating diluted EPS, retiring the previous alternative calculation of the Treasury Stock Method for calculating diluted EPS for convertible instruments.
U. S. Steel has adopted this guidance using the modified retrospective implementation method as of January 1, 2022. The cumulative effect of the changes made to our consolidated January 1, 2022, balance sheet for the adoption of ASU 2020-06 was as follows:
(in millions) Balance as of December 31, 2021 Adjustments due to ASU 2020-06 Balance as of January 1, 2022
Consolidated Balance Sheet
Assets
Deferred income tax benefits $32 $4 $36
Liabilities
Long-term debt, less unamortized discount and debt issuance costs $3,863 $74 $3,937
Deferred income tax liabilities $122 $(15) $107
Equity
Additional paid-in capital $5,199 $(78) $5,121
Retained Earnings $3,534 $22 $3,556
In November 2021, the FASB issued Accounting Standards Update 2021-10, Disclosures by Business Entities about Government Assistance (ASU 2021-10). ASU 2021-10 provides expanded disclosure requirements for business entities that account for a transaction with a government by applying a grant or contribution accounting model by analogy. The Company adopted this guidance effective January 1, 2022. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.
4. Segment Information
U. S. Steel has four reportable segments: North American Flat-Rolled, Mini Mill, USSE and Tubular Products. The results of our real estate business, the previously held equity method investment in Big River Steel, and of our former railroad businesses are combined and disclosed in the Other category. The majority of U. S. Steel's customers are located in North America and Europe. No single customer accounted for more than 10 percent of gross annual revenues.
The Flat-Rolled segment includes the operating results of U. S. Steel’s integrated steel plants and equity investees in the United States involved in the production of slabs, strip mill plates, sheets and tin mill products, as well as all pig iron, iron ore and coke production facilities in the United States. These operations primarily serve North American customers in the service center, conversion, transportation (including automotive), construction, container and appliance and electrical markets.
The Mini Mill segment reflects the acquisition of Big River Steel after the purchase of the remaining equity interest on January 15, 2021, (see Note 5 for further details) and BR2 facility, which is under construction in Osceola, Arkansas. The Mini Mill segment includes the operating results of U. S. Steel’s two electric arc furnace steel plant in Osceola, Arkansas involved in the production of sheets and electrical products. These operations primarily serve North American customers in the service center, conversion, transportation (including automotive), construction, container and appliance and electrical markets.
The USSE segment includes the operating results of USSK, U. S. Steel’s integrated steel plant and coke production facilities in Slovakia, and its subsidiaries. USSE conducts its business mainly in Central and Western Europe and primarily serves customers in the European transportation (including automotive), construction, container, appliance, electrical, service center, conversion and oil, gas and petrochemical markets. USSE produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe.
The Tubular segment includes the operating results of U. S. Steel’s tubular production facilities and an equity investee in the United States. These operations produce and sell rounds, seamless and electric resistance welded (welded) steel casing and tubing (commonly known as oil country tubular goods or OCTG), standard and line pipe and mechanical tubing and primarily serve customers in the oil, gas and petrochemical markets. The Tubular segment includes the electric arc furnace at our Fairfield Tubular Operations in Fairfield, Alabama.
The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being earnings (loss) before interest and income taxes. Earnings (loss) before interest and income taxes for reportable segments and the Other category does not include net interest and other financial costs (income), income taxes, and certain other items that management believes are not indicative of future results.
The accounting principles applied at the operating segment level in determining earnings (loss) before interest and income taxes are generally the same as those applied at the consolidated financial statement level. 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 based on measures of activity that management believes are reasonable.
The results of segment operations are as follows:
(In millions) Customer
Sales Intersegment
Sales Net
Sales Earnings
from
investees Earnings (loss) before interest and income taxes(a)
Depreciation,
depletion &
amortization Capital
expenditures
Flat-Rolled $ 10,744 $ 365 $ 11,109 $ 72 $ 418 $ 605 $ 536
Mini Mill (b)
2,223 455 2,678 - 215 168 1,899
USSE 3,525 25 3,550 - 4 94 109
Tubular 1,551 1 1,552 43 589 49 32
Total reportable segments 18,043 846 18,889 115 1,226 916 2,576
Other 10 - 10 - (3) - -
Reconciling Items and Eliminations - (846) (846) - (424) - -
Total $ 18,053 $ - $ 18,053 $ 115 $ 799 $ 916 $ 2,576
Flat-Rolled $ 12,522 $ 350 $ 12,872 $ 220 $ 2,008 $ 499 $ 503
Mini Mill (b)
2,681 366 3,047 - 481 158 1,159
USSE 4,243 13 4,256 - 444 85 90
Tubular 1,611 5 1,616 23 544 48 17
Total reportable segments 21,057 734 21,791 243 3,477 790 1,769
Other 8 1 9 - 22 1 -
Reconciling Items and Eliminations - (735) (735) - (339) - -
Total $ 21,065 $ - $ 21,065 $ 243 $ 3,160 $ 791 $ 1,769
Flat-Rolled $ 12,180 $ 178 $ 12,358 $ 150 $ 2,685 $ 491 $ 422
Mini Mill (b)
3,008 508 3,516 - 1,206 151 331
USSE 4,262 4 4,266 - 975 98 57
Tubular 789 20 809 14 1 46 51
Total reportable segments 20,239 710 20,949 164 4,867 786 861
Other 36 65 101 6 (11) 5 2
Reconciling Items and Eliminations - (775) (775) - 90 - -
Total $ 20,275 $ - $ 20,275 $ 170 $ 4,946 $ 791 $ 863
(a) Earnings (loss) before interest and income taxes has been updated for 2022 and 2021 for Flat-Rolled and Reconciling Items and Eliminations. This is the result of a retroactive adjustment for the reclassification of stock-based compensation expense as an item not allocated to segment results. See the schedule of reconciling items to consolidated earnings before interest and income taxes below for further details.
(b) Includes capital expenditures related to BR2 of $1.5 billion, $0.8 billion, and $0.1 billion in 2023, 2022, and 2021, respectively.
A summary of total assets by segment is as follows:
December 31,
(In millions) 2023 2022
Flat-Rolled $ 7,546 $ 7,936
Mini Mill (a)
7,569 5,787
USSE (b)
2,229 2,175
Tubular
1,002 1,140
Total reportable segments
$ 18,346 $ 17,038
Other $ 140 $ 141
Corporate, reconciling items, and eliminations (b) (c)
1,965 2,279
Total assets
$ 20,451 $ 19,458
(a)Includes assets related to BR2 of $3.0 billion and $1.4 billion in 2023 and 2022, respectively.
(b)In the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the amounts disclosed for total assets for USSE and Corporate were inadvertently misstated for an intersegment balance. Management determined the disclosure misstatement was not material to the 2022 financial statements. The revised amounts have been included in the table above.
(c)The majority of Corporate, reconciling items, and eliminations total assets is comprised of cash and the elimination of intersegment amounts.
The detail of reconciling items to consolidated earnings before interest and income taxes is as follows:
(In millions) 2023 2022 2021
Items not allocated to segments:
Restructuring and other charges (Note 25) $ (36) $ (48) $ (128)
Stock-based compensation expense (Note 15) (51) (57) (55)
Asset impairment charges (127) (163) (273)
Environmental remediation charges (11) (13) (43)
Strategic alternatives review process costs (79) - -
Granite City idling costs (121) - -
United Steelworkers labor agreement signing bonus and related costs - (64) -
Gains on assets sold & previously held investments - 6 118
Gain on sale of Transtar (Note 5) - - 506
Other charges, net 1 - (35)
Total reconciling items $ (424) $ (339) $ 90
Geographic Area:
The information below summarizes external sales, property, plant and equipment and equity method investments based on the location of the operating segment to which they relate.
(In millions) Year External
Sales Assets
North America 2023 $ 14,528 $ 10,223 (a)
2022 16,822 8,459 (a)
2021 16,013 7,034 (a)
Europe 2023 3,525 910
2022 4,243 843
2021 4,262 880
Total 2023 18,053 11,133
2022 21,065 9,302
2021 20,275 7,914
(a)Assets with a book value of $10,223 million, $8,459 million, and $7,034 million were located in the United States at December 31, 2023, 2022, and 2021, respectively.
5. Dispositions and Acquisitions
USS-UPI, LLC Disposition
In the fourth quarter of 2023 the Company indefinitely idled its subsidiary in Pittsburg, California, USS-UPI, LLC (“UPI”) which primarily produces galvanized sheet and tin mill products. The Company made payments of approximately $13 million of exit costs and employee benefits during the fourth quarter 2023. As of December 31, 2023, the Company had remaining accrued liabilities that totaled $108 million for severance, exit costs and employee benefits.
Transtar Disposition
On July 28, 2021, U. S. Steel completed the sale of 100 percent of its equity interests in its wholly-owned short-line railroad, Transtar, LLC (Transtar) to an affiliate of Fortress Transportation and Infrastructure Investors, LLC. The Company received net cash proceeds of $627 million, subject to certain customary adjustments as set forth in the Membership Interest Purchase Agreement, and recognized a pretax gain of approximately $506 million in 2021. In connection with the closing of the transaction, the Company entered into certain ancillary agreements including a railway services agreement, providing for continued rail services for its Gary Works and Mon Valley Works facilities, and a transition services agreement. Because Transtar does not represent a significant component of U. S. Steel's business and does not constitute a reportable business segment, its results through the date of disposition are reported in the Other category. See Note 4 for further details.
Big River Steel Acquisition
On January 15, 2021, U. S. Steel purchased the remaining equity interest in Big River Steel for approximately $625 million in cash net of $36 million and $62 million in cash and restricted cash received, respectively, and the assumption of liabilities of approximately $50 million. There were acquisition related costs of approximately $9 million during the twelve months ended December 31, 2021.
Prior to the closing of the acquisition on January 15, 2021, U. S. Steel accounted for its 49.9% equity interest in Big River Steel under the equity method as control and risk of loss were shared among the joint venture members. Using step acquisition accounting the Company increased the value of its previously held equity investment to its fair value of $770 million which resulted in a gain of approximately $111 million. The fair value of the previously held equity investment was determined using Level 3 valuation techniques, including the significant factors and assumptions used to value Big River Steel disclosed below. The gain was recorded in gain on equity investee transactions in the Consolidated Statement of Operations.
The acquisition has been accounted for in accordance with ASC 805, Business combinations. There were step-ups to fair value of approximately $308 million, $194 million and $24 million for property, plant and equipment, debt and inventory, respectively. An intangible asset for customer relationships and goodwill of approximately $413 million and $916 million were also recorded, respectively. Goodwill represents the excess of purchase price over the fair market value of the net assets. Goodwill is primarily attributable to Big River Steel's operational abilities, workforce and the anticipated benefits from their recent expansion and is expected to be tax deductible. The inventory step-up was fully amortized as of March 31, 2021, the intangible asset will be amortized over a 22-year period, and the debt step-up will be amortized over the contractual life of the underlying debt.
The value of Big River Steel was determined using Level 3 valuation techniques. Level 3 valuation techniques include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement. A significant factor in determining the equity value was the discounted forecasted cash flows of Big River Steel. Forecasted cash flows are primarily impacted by the forecasted market price of steel and metallic inputs as well as the expected timing of significant capital expenditures. The model utilized a risk adjusted discount rate of 11.0% and a terminal growth rate of 2%.
The following table presents the allocation of the aggregate purchase price based on estimated fair values:
(in millions)
Assets Acquired:
Receivables $ 166
Receivables with U. S. Steel (1)
Inventories 184
Other current assets 16
Property, plant and equipment 2,188
Intangibles 413
Goodwill 916
Other noncurrent assets 19
Total Assets Acquired $ 4,001
Liabilities Assumed:
Accounts payable and accrued liabilities $ 224
Payroll and benefits payable 27
Accrued taxes 9
Accrued interest 33
Short-term debt and current maturities of long-term debt 29
Long-term debt 1,997
Deferred income tax liabilities 26
Deferred credits and other long-term liabilities 211
Total Liabilities Assumed $ 2,556
Fair value of previously held investment in Big River Steel $ 770
Purchase price, including assumed liabilities and net of cash acquired 675
Difference in assets acquired and liabilities assumed $ 1,445
(1) The transaction to purchase Big River Steel included receivables for payments made by Big River Steel on behalf of U. S. Steel for retention bonuses of $22 million that impacted the previously held equity investment and for U. S. Steel liabilities assumed in the purchase of approximately $50 million. In addition, there were assumed receivables of approximately $27 million for steel substrate sales from Big River Steel to U. S. Steel. The receivables with U. S. Steel eliminate in consolidation with offsetting intercompany payables from U. S. Steel.
The following unaudited pro forma information for U. S. Steel includes the results of the Big River Steel acquisition as if it had been consummated on January 1, 2020. The pro forma information does not include any anticipated cost savings or other effects of the integration of Big River Steel. Accordingly, the unaudited pro forma information does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations.
Year Ended December 31,
(in millions) 2021
Net sales $ 20,347
Net earnings (loss) $ 4,103
6. Revenue
Revenue is generated primarily from contracts to produce, ship and deliver steel products, and to a lesser extent, raw materials sales such as iron ore pellets and coke by-products and real estate sales. Generally, U. S. Steel’s performance obligations are satisfied and revenue is recognized when title transfers to our customer for product shipped or services are provided. Revenues are recorded net of any sales incentives. Shipping and other transportation costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control to the related good being shipped is transferred to the customer. Costs related to obtaining sales contracts are incidental and are expensed when incurred. Because customers are invoiced at the time title transfers and U. S. Steel’s right to consideration is unconditional at that time, U. S. Steel does not maintain contract asset balances. Additionally, U. S. Steel does not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product. U. S. Steel offers industry standard payment terms.
The following tables disaggregates our revenue by product for each of our reportable business segments for the years ended December 31, 2023, 2022, and 2021, respectively (Net Sales by Product, in millions, excluding intersegment sales):
Year Ended December 31, 2023 Flat-Rolled Mini Mill USSE Tubular Other Total
Semi-finished $ 242 $ - $ 168 $ - $ - $ 410
Hot-rolled sheets 1,926 1,215 1,637 - - 4,778
Cold-rolled sheets 3,568 365 269 - - 4,202
Coated sheets 3,484 639 1,278 - - 5,401
Tubular products - - 52 1,528 - 1,580
All other (a)
1,524 4 121 23 10 1,682
Total $ 10,744 $ 2,223 $ 3,525 $ 1,551 $ 10 $ 18,053
(a) Consists primarily of sales of raw materials and coke making by-products
Year Ended December 31, 2022 Flat-Rolled Mini Mill (b)
USSE Tubular Other Total
Semi-finished $ 193 $ - $ 103 $ - $ - $ 296
Hot-rolled sheets 2,338 1,570 1,919 - - 5,827
Cold-rolled sheets 3,898 356 385 - - 4,639
Coated sheets 4,461 745 1,622 - - 6,828
Tubular products - - 68 1,594 - 1,662
All other (a)
1,632 10 146 17 8 1,813
Total $ 12,522 $ 2,681 $ 4,243 $ 1,611 $ 8 $ 21,065
(a) Consists primarily of sales of raw materials and coke making by-products.
Year Ended December 31, 2021 Flat-Rolled Mini Mill (b)
USSE Tubular Other Total
Semi-finished $ 12 $ - $ 126 $ - $ - $ 138
Hot-rolled sheets 2,592 1,744 2,149 - - 6,485
Cold-rolled sheets 3,785 526 448 - - 4,759
Coated sheets 4,408 732 1,376 - - 6,516
Tubular products - - 58 781 - 839
All other (a)
1,383 6 105 8 36 1,538
Total $ 12,180 $ 3,008 $ 4,262 $ 789 $ 36 $ 20,275
(a) Consists primarily of sales of raw materials and coke making by-products.
(b) Mini Mill segment added after January 15, 2021 with the purchase of the remaining equity interest in Big River Steel.
7. Net Interest and Other Financial Costs
(In millions) 2023 2022 2021
Interest income:
Interest income $ (141) $ (44) $ (4)
Interest expense and other financial costs:
Interest incurred 234 218 342
Less interest capitalized 162 59 29
Total interest expense 72 159 313
Loss on debt extinguishment (a)
- - 292
Net periodic benefit income (154) (246) (45)
Net gain from investments related to active employee benefits (43) - -
Foreign currency net (gain) loss (b)
(5) 11 17
Financial costs on:
Amended Credit Agreement 5 5 6
USSK Credit Facility 4 3 4
Other 5 4 5
Amortization of discounts and deferred financing costs 9 9 14
Total other financial costs (benefits) 18 32 46
Net interest and other financial (benefits) costs $ (248) $ (99) $ 602
(a)Represents a net pretax charge of $292 million during 2021 related to the repayments of the Export-Import Credit Agreement, 2025 Senior Secured Notes, 2025 Senior Notes, 2026 Senior Notes, 2029 Senior Secured Notes, Credit Facility Agreement and Environmental Revenue Bonds.
(b)The functional currency for USSE is the euro. Foreign currency net loss (gain) is a result of transactions denominated in currencies other than the euro.
8. Earnings and Dividends Per Common Share
Earnings per Share Attributable to United States Steel Corporation Stockholders
Basic earnings per common share is based on the weighted average number of common shares outstanding during the period.
Diluted earnings per common share assumes the exercise of stock options, the vesting of restricted stock units and performance awards, provided in each case the effect is dilutive. In 2023 and 2022, the "if-converted" method is used to calculate the dilutive effect of the Senior Convertible Notes due in 2026 as a result of ASU 2020-06. In 2021, the "treasury stock" method was used to calculate the dilutive effect of the Senior Convertible Notes due in 2026 (due to our intent and policy, among other factors, to settle the principal amount of the 2026 Senior Convertible Notes in cash upon conversion).
The computations for basic and diluted earnings per common share from continuing operations are as follows:
(Dollars in millions, except per share amounts) 2023 2022 2021
Net earnings attributable to United States Steel Corporation stockholders
Basic $ 895 $ 2,524 $ 4,174
Interest expense on Senior Convertible Notes, net of tax 13 13 -
Diluted $ 908 $ 2,537 $ 4,174
Weighted-average shares outstanding (in thousands):
Basic 224,761 246,986 264,667
Effect of Senior Convertible notes 26,194 26,194 11,126
Effect of stock options, restricted stock units and performance awards 4,405 3,783 4,651
Diluted 255,360 276,963 280,444
Net earnings per share attributable to United States Steel Corporation stockholders:
Basic $ 3.98 $ 10.22 $ 15.77
Diluted $ 3.56 $ 9.16 $ 14.88
The following table summarizes the securities that were antidilutive, and therefore, were not included in the computation of diluted earnings per common share:
(In thousands) 2023 2022 2021
Securities granted under the 2016 Omnibus Incentive Compensation Plan, as amended and restated 475 960 1,185
Dividends Paid per Share
Quarterly dividends on common stock were five cents per share for each quarter in 2023 and 2022. Quarterly dividends on common stock were one cent per share in the first, second and third quarters of 2021 and five cents per share in the fourth quarter of 2021.
9. Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within U. S. Steel's Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statement of Cash Flows:
December 31,
(In millions) 2023 2022 2021
Cash and cash equivalents $ 2,948 $ 3,504 $ 2,522
Restricted cash in other current assets 8 4 2
Long-term restricted cash 32 31 76
Total cash, cash equivalents and restricted cash $ 2,988 $ 3,539 $ 2,600
Amounts included in restricted cash represent cash balances which are legally or contractually restricted, primarily for insurance purposes, environmental liabilities and other capital projects.
10. Inventories
(In millions) December 31, 2023 December 31, 2022
Raw materials $ 773 $ 1,098
Semi-finished products 877 811
Finished products 428 398
Supplies and sundry items 50 52
Total $ 2,128 $ 2,359
Current acquisition costs for LIFO inventories were estimated to exceed the above inventory values by $1.2 billion at both December 31, 2023 and December 31, 2022. As a result of the liquidation of LIFO inventories, cost of sales decreased and earnings before interest and income taxes increased by $43 million, $44 million, and $11 million in 2023, 2022, and 2021, respectively.
11. Income Taxes
Components of earnings before income taxes:
(In millions) 2023 2022 2021
United States $ 1,041 $ 2,847 $ 3,400
Foreign 6 412 944
Earnings before income taxes $ 1,047 $ 3,259 $ 4,344
At the end of 2023, 2022, and 2021, U. S. Steel does not have any undistributed foreign earnings and profits for which U.S. deferred taxes have not been provided.
Income tax provision (benefit):
2023 2022 2021
(In millions) Current Deferred Total Current Deferred Total Current Deferred Total
Federal $ 56 $ 116 $ 172 $ 101 $ 451 $ 552 $ (7) $ 8 $ 1
State and local (3) (14) (17) 54 43 97 50 (71) (21)
Foreign 2 (5) (3) 79 7 86 179 11 190
Total $ 55 $ 97 $ 152 $ 234 $ 501 $ 735 $ 222 $ (52) $ 170
A reconciliation of the federal statutory tax rate of 21 percent to total provision follows:
(In millions) 2023 2022 2021
Statutory rate applied to earnings before income taxes $ 220 $ 684 $ 912
Valuation allowance (14) (38) (633)
Excess percentage depletion (18) (48) (66)
Capital loss generated - - (139)
State and local income taxes after federal income tax effects (1) 97 83
Effects of foreign operations (3) 85 191
U.S. impact of foreign operations (19) 6 4
Impact of tax credits (7) (83) (173)
Adjustment of prior years' federal income taxes (32) 40 (5)
Nondeductible executive compensation 16 6 3
Other 10 (14) (7)
Total provision $ 152 $ 735 $ 170
Included in the 2023 provision is a benefit of $43 million related to the 2022 federal and state income tax returns, as well as an additional benefit of $12 million related to the adjustment of prior years’ federal income taxes. Also included in the 2023 provision is a benefit of $23 million related to the recognition of a deferred tax asset on unrecognized currency losses in branch operations pursuant to proposed regulations under Internal Revenue Code Section 987.
In March 2022, the Company and the Arkansas Economic Development Commission entered into the Recycling Tax Credit Incentive Agreement, whereby the Company may earn state income tax credits in an amount equal to 30 percent of the cost of waste reduction, reuse, or recycling equipment, subject to meeting the requirements of the Arkansas Code Ann. Section 26-51-506, for BR2 which is currently under construction near Osceola, Arkansas. Documentation supporting the Company's investment in qualifying equipment must be submitted as part of an application for certification expected to be completed on or before 2025. In March 2022, the Company received a lump-sum payment of approximately $82 million as proceeds from the sale of a portion of expected future tax credits to be earned by the Company (see Note 26 for additional information). The Company estimates that it could earn tax credits in excess of $700 million, exclusive of the amount sold in March 2022, which the Company will recognize in the year the assets are placed into service and meet the requirements of Arkansas Code Ann. Section 26-51-506. Any unused tax credit that cannot be claimed in a tax year may be carried forward indefinitely by the Company and applied to its future state tax liability.
On August 16, 2022, H.R. 5376 (commonly called the Inflation Reduction Act of 2022) was signed into law, which, among other things, implemented a corporate alternative minimum tax (CAMT) of 15 percent on net book income of certain large corporations adjusted for certain items prescribed by the legislation. The tax provision in 2023 reflects the impact of CAMT, which is not material to the Consolidated Financial Statements.
Included in the 2021 provision is a benefit of $715 million related to the reversal of a portion of the valuation allowance recorded against the Company’s net domestic deferred tax asset, partially offset by the addition of a valuation allowance of $82 million, the majority of which relates to an unused capital loss carryforward.
Deferred taxes
Deferred tax assets and liabilities resulted from the following:
December 31,
(In millions) 2023 2022
Deferred tax assets:
Federal tax loss carryforwards (no expiration) $ 1 $ 1
Federal tax loss carryforwards (expiring in 2037) - 1
Federal capital loss carryforwards (expiring in 2026) 69 69
State tax credit carryforwards (expiring in 2024 through 2032) 14 10
State tax loss carryforwards (expiring in 2025 through 2043) 80 77
State capital loss carryforwards (expiring in 2026 through 2036) 23 28
Foreign tax loss and credit carryforwards (expiring in 2027 through 2028) 8 67
Contingencies and accrued liabilities - 64
Operating lease liabilities 28 37
Capitalized research and development 69 35
Receivables, payables and debt 140 13
Inventory 57 14
Other temporary differences 41 53
Valuation allowance (101) (119)
Total deferred tax assets $ 429 $ 350
Deferred tax liabilities:
Property, plant and equipment $ 642 $ 589
Operating right-of-use assets 26 35
Investments in subsidiaries and equity investees 184 141
Employee benefits 72 31
Contingencies and accrued liabilities 73 -
Total deferred tax liabilities $ 997 $ 796
Net deferred tax liability $ (568) $ (446)
U. S. Steel recognizes deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The realization of deferred tax assets is assessed quarterly based on several interrelated factors. These factors include U. S. Steel’s expectation to generate sufficient future taxable income and the projected time period over which these deferred tax assets will be realized.
Each quarter U. S. Steel analyzes the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.
At June 30, 2021, U. S. Steel determined, based upon weighing all positive and negative evidence, that a full valuation allowance for the domestic deferred tax assets was no longer required. Accordingly, we reversed all of the domestic valuation allowance except for a portion of the domestic valuation allowance related to certain state net operating losses and state tax credits.
During the year ended December 31, 2021, U. S. Steel realized a non-cash net benefit of $715 million related to the valuation allowance release, which was partially offset by the addition of a valuation allowance of $82 million, the majority of which relates to an unused capital loss generated in the fourth quarter of 2021.
At December 31, 2023, the net domestic deferred tax liability was $566 million, net of an established valuation allowance of $98 million. At December 31, 2022, the net domestic deferred tax liability was $437 million, net of an established valuation allowance of $116 million.
At December 31, 2023, the net foreign deferred tax liability was $2 million, net of an established valuation allowance of $3 million. At December 31, 2022, the net foreign deferred tax liability was $9 million, net of an established valuation allowance
of $3 million. The net foreign deferred tax asset will fluctuate as the value of the U.S. dollar changes with respect to the euro.
U. S. Steel will continue to monitor the realizability of its deferred tax assets on a quarterly basis. In the future, if we determine that realization is more likely than not for a deferred tax asset with a valuation allowance, the related valuation allowance will be reduced, and we will record a non-cash benefit to earnings.
Unrecognized tax benefits
Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes pursuant to the guidance in ASC Topic 740 on income taxes. The total amount of unrecognized tax benefits was $4 million, $2 million, and $3 million as of December 31, 2023, 2022, and 2021, respectively.
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $4 million and $2 million as of December 31, 2023, and 2022, respectively.
U. S. Steel records interest related to uncertain tax positions as a part of net interest and other financial costs in the Consolidated Statements of Operations. Any penalties are recognized as part of selling, general and administrative expenses. U. S. Steel had accrued liabilities of $2 million for interest and penalties related to uncertain tax positions as of both December 31, 2023, and 2022.
A tabular reconciliation of unrecognized tax benefits follows:
(In millions) 2023 2022 2021
Unrecognized tax benefits, beginning of year $ 2 $ 3 $ 16
Decreases - tax positions taken in prior years - - (13)
Increases - current tax positions 2 - -
Lapse of statute of limitations - (1) -
Unrecognized tax benefits, end of year $ 4 $ 2 $ 3
Tax years subject to examination
Below is a summary of the tax years open to examination by major tax jurisdiction:
U.S. Federal - 2019 and forward
U.S. States - 2019 and forward
Slovakia - 2012 and forward
Status of Internal Revenue Service (IRS) examinations
The IRS completed its audit of the Company’s 2017-2018 federal consolidated tax returns in 2023.
12. Investments, Long-Term Receivables and Equity Investee Transactions
December 31,
(In millions) 2023 2022
Equity method investments $ 740 $ 810
Receivables due after one year, less allowance of $3 and $4
19 22
Other 2 8
Total $ 761 $ 840
Summarized financial information of all investees accounted for by the equity method of accounting is as follows (amounts represent 100% of investee financial information):
(In millions) 2023 2022 2021
Income data - year ended December 31:
Net Sales $ 3,335 $ 3,222 $ 2,229
Operating income 342 492 376
Net earnings 319 462 346
Balance sheet date - December 31:
Current Assets $ 876 $ 1,085 $ 744
Noncurrent Assets 844 974 1,084
Current liabilities 255 314 293
Noncurrent Liabilities 398 513 529
U. S. Steel's portion of the income (loss) from investees reflected on the Consolidated Statements of Operations was $115 million, $243 million, and $170 million for the years ended December 31, 2023, 2022, and 2021, respectively.
All of our significant investees are located in the U.S. Investees accounted for using the equity method include:
Investee December 31, 2023 Interest
Chrome Deposit Corporation 50 %
Double G Coatings Company, Inc. 50 %
Hibbing Development Company 24.1 %
Hibbing Taconite Company(a)
14.7 %
Patriot Premium Threading Services, LLC 50 %
PRO-TEC Coating Company, LLC 50 %
Strategic Investment Fund Partners II(b)
5.2 %
(a)Hibbing Taconite Company (Hibbing) is an unincorporated joint venture that is owned, in part, by Hibbing Development Company (HDC), which is accounted for using the equity method. Through HDC we are able to influence the activities of HTC, and as such, its activities are accounted for using the equity method.
(b)Strategic Investment Fund Partners II is a limited partnership and in accordance with ASC Topic 323, the financial activities are accounted for using the equity method.
In 2022, the Company recognized pre-tax gains on equity investee transactions of approximately $6 million from Worthington Specialty Processing pertaining to the sale of the former joint venture's facilities and subsequent distribution to the investors. The joint venture was dissolved in 2023 resulting in an immaterial distribution to the Company.
Dividends or partnership distributions received from equity investees were $114 million, $28 million and $2 million in 2023, 2022 and 2021 respectively.
U. S. Steel evaluates impairment of its equity method investments whenever circumstances indicate that a decline in value below carrying value is other than temporary. Under these circumstances, we would adjust the investment down to its estimated fair value, which then becomes its new carrying value.
We supply substrate to certain of our equity method investees and from time to time will extend the payment terms for their trade receivables. For discussion of transactions and related receivable and payable balances between U. S. Steel and its investees, see Note 23.
13. Property, Plant and Equipment
December 31,
(In millions) Useful Lives 2023 2022
Land and depletable property - $ 216 $ 210
Buildings 35-40 years
1,854 1,530
Machinery and equipment
Steel producing 2-30 years
16,806 15,900
Other 5-30 years
97 95
Information technology 5-15 years
829 805
Assets under finance lease 5-15 years
302 212
Construction in process - 3,871 2,470
Total 23,975 21,222
Less accumulated depreciation and depletion 13,582 12,730
Net $ 10,393 $ 8,492
Amounts in accumulated depreciation and depletion for assets acquired under finance leases were $126 million and $86 million at December 31, 2023, and 2022, respectively.
14. Goodwill and Intangible Assets
Intangible assets are being amortized on a straight-line basis over their estimated useful lives and are detailed below:
As of December 31, 2023 As of December 31, 2022
(In millions) Useful
Lives Gross
Carrying
Amount Accumulated
Amortization Net
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Amount
Customer relationships 22 Years
$ 413 $ 56 $ 357 $ 413 $ 37 $ 376
Patents 5-15 Years
17 13 4 17 12 5
Energy Contract 2 Years
54 54 - 54 32 22
Total amortizable intangible assets $ 484 $ 123 $ 361 $ 484 $ 81 $ 403
Amortization expense was $42 million for both years ending December 31, 2023, and 2022. We expect approximately $98 million in total amortization expense from 2024 through 2028 and approximately $263 million in remaining amortization expense thereafter.
The carrying amount of acquired water rights with indefinite lives as of December 31, 2023, and December 31, 2022, totaled $75 million.
Below is a summary of goodwill by segment for the twelve months ended December 31, 2023:
(In millions) Flat-Rolled Mini Mill USSE Tubular Total
Balance at December 31, 2022 $ - $ 916 $ 4 $ - $ 920
Additions - - - - -
Balance at December 31, 2023 $ - $ 916 $ 4 $ - $ 920
15. Stock-Based Compensation Plans
U. S. Steel has outstanding stock-based compensation awards that were granted by the Compensation & Organization Committee of the Board of Directors (the Committee), or its designee, under the 2005 Stock Incentive Plan (the 2005 Plan) and the 2016 Omnibus Incentive Compensation Plan, as amended and restated (the Omnibus Plan) (collectively the Plans). On April 26, 2016, the Company's stockholders approved the Omnibus Plan and authorized the Company to issue up to 7,200,000 shares of U. S. Steel common stock under the Omnibus Plan. The Company's stockholders authorized the issuance of an additional 6,300,000 shares under the Omnibus Plan on April 25, 2017, an additional 4,700,000 shares under the Omnibus Plan on April 28, 2020, and an additional 14,500,000 shares under the Omnibus Plan on April 27, 2021. While awards that were previously granted under the 2005 Plan remain outstanding, all future awards will be granted under the Omnibus Plan. As of December 31, 2023, there were 4,695,672 shares available for future grants under the Omnibus Plan.
Generally, a share issued under the Omnibus Plan pursuant to an award other than a stock option will reduce the number of shares available under the Stock Plan by 1.78 shares. Shares related to awards under either plan (i) that are forfeited, (ii) that terminate without shares having been issued or (iii) for which payment is made in cash or property other than shares, are again available for awards under the Omnibus Plan. Shares delivered to U. S. Steel or withheld for purposes of satisfying the exercise price or tax withholding obligations are not available for future awards. The purpose of the Plans is to attract, reward and retain employees and non-employee directors who create long-term value for our stockholders by delivering on objectives that support our long-term strategy. The Committee administers the Plans, and under the Omnibus Plan may make grants of stock options, restricted stock units (RSUs), performance awards, and other stock-based awards.
The following table summarizes the total stock-based compensation awards granted during the years 2023, 2022, and 2021:
Stock Options Restricted Stock Units TSR Performance Awards ROCE Performance Awards Performance-Based Restricted Stock Units
2023 - 2,126,020 185,120 357,020 -
2022 - 1,249,830 236,520 408,870 83,951
2021 171,000 1,891,481 306,930 485,900 676,954
Stock-based compensation expense
The following table summarizes the total compensation expense recognized for stock-based compensation awards:
(In millions, except per share amounts) Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021
Stock-based compensation expense recognized:
Cost of sales $ 16 $ 15 $ 14
Selling, general and administrative expenses 35 42 41
Total 51 57 55
Related deferred income tax benefit (a)
12 14 14
Decrease in net income 39 43 41
Decrease in basic earnings per share 0.17 0.18 0.16
Decrease in diluted earnings per share 0.15 0.16 0.15
As of December 31, 2023, total future compensation cost related to nonvested stock-based compensation arrangements was $58 million and the average period over which this cost is expected to be recognized is approximately 25 months.
Stock options
Compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant, as calculated by U. S. Steel using the Black-Scholes model and the assumptions listed below. Awards generally vest ratably over a three-year service period and have a term of ten years. Stock options are generally issued at the average market price of the underlying stock on the date of the grant. Upon exercise of stock options, shares of U. S. Steel stock are issued from treasury stock or from authorized, but unissued common stock. There were 171,000 performance-based stock options granted in 2021. There were no stock options granted in 2023 and 2022.
The 171,000 performance-based stock options granted in December 2021 do not become vested and exercisable until the Company's 20-trading day average closing stock price meets or exceeds the following stock price hurdles during the seven-year period beginning on the grant date, as follows:
20-trading day Average Closing Stock Price Achievement During 7-Year Period Beginning on Grant Date (a)
Percentage of Performance-Based Stock Options Exercisable
$ 35.00 33.33 %
$ 45.00 33.33 %
$ 55.00 33.34 %
(a) The $35.00 tranche vested in April 2022 and the $45.00 tranche vested in January 2024.
The following table shows a summary of the status and activity of stock options for the year ended December 31, 2023:
Shares Weighted-
Average
Exercise Price
(per share) Weighted-
Average
Remaining
Contractual Term
(in years) Aggregate
Intrinsic
Value
(in millions)
Outstanding at January 1, 2023 1,210,215 $ 26.88
Granted - $ -
Exercised (397,854) $ 24.63
Forfeited or expired (52,123) $ 25.39
Outstanding at December 31, 2023 760,238 $ 27.98 2.70 $ 16
Exercisable at December 31, 2023 646,238 $ 28.77 2.29 $ 13
Exercisable and expected to vest at December 31, 2023 760,238 $ 27.98 2.70 $ 16
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (difference between our closing stock price on the last trading day of 2023 and the exercise price, multiplied by the number of in-the-money options). Intrinsic value changes are a function of the fair market value of our stock.
The total intrinsic value of stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the option) was $4 million, $5 million, and $3 million during the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively. The total amount of cash received by U. S. Steel from the exercise of options was $10 million and $8 million during the years ended December 31, 2023, and December 31, 2022, respectively. The related net tax benefit realized from the exercise of these options was immaterial in 2023 and 2022.
Stock awards
Compensation expense for nonvested stock awards is recorded over the vesting period based on the fair value at the date of grant.
RSUs awarded as part of annual grants generally vest ratably over three years. Their fair value is the average market price of the underlying common stock on the date of grant. RSUs granted in connection with new-hire or retention awards generally cliff vest three years from the date of the grant.
Total shareholder return (TSR) performance awards may vest at varying levels at the end of a three-year performance period if U. S. Steel’s total shareholder return compared to the total shareholder return of a peer group of companies meets performance criteria during the three-year performance period. TSR is calculated as follows: 20 percent for each year in the three-year performance period and 40 percent for the full three-year period. TSR performance awards may vest and pay out 50 percent at the threshold level, 100 percent at the target level and 200 percent at the maximum level. Payment for performance in between the threshold percentages will be interpolated. The fair value of the performance awards is calculated using a Monte-Carlo simulation.
Performance awards based on the return on capital employed (ROCE) metric were granted in equity in 2023, 2022, and 2021. ROCE awards granted will be measured based on the Company’s consolidated worldwide earnings (loss) before interest and income taxes, as adjusted, divided by consolidated worldwide capital employed, as adjusted, over a three year period.
For the 2021 ROCE-based equity awards, ROCE is calculated over the three-year period based on the ROCE achieved in the first, second and third years of the performance period, weighted at 20 percent, 30 percent and 50 percent, respectively. For the 2023 and 2022 ROCE-based equity awards, ROCE is calculated based on the ROCE achieved in the first, second and third years of the performance period, weighted at 20 percent for each year in the three-year performance period and 40 percent for the full three-year period. The ROCE awards will pay out 50 percent at the threshold level, 100 percent at the target level and 200 percent at the maximum level. Payment for performance in between the threshold percentages will be interpolated.
Compensation expense associated with the ROCE awards will be contingent based upon the achievement of the specified ROCE performance goals and will be adjusted on a quarterly basis to reflect the probability of achieving the ROCE metric.
ROCE performance awards may vest at the end of a three-year performance period contingent upon meeting ROCE performance goals approved by the Committee. The fair value of the ROCE performance awards is the average market price of the underlying common stock on the date of grant.
In December 2021 and August 2022, special performance-based restricted stock unit awards (PSUs) were granted to members of the Company’s executive leadership team. Shares are earned based on the achievement of certain pre-set quantitative performance criteria during the four-year performance period, January 1, 2022, through December 31, 2025. Shares may vest following the expiration of the Performance Period if the Company satisfies the performance criteria.
The Chief Executive Officer was granted PSUs that vest with the following, equally weighted, performance metrics: (i) EBITDA margin expansion, (ii) greenhouse gas emissions intensity reduction, (iii) asset portfolio optimization, (iv) leverage metrics and (v) corporate relative valuation. Other members of the executive leadership team were granted PSUs that vest with performance criteria related to: (i) on time and on budget completion of the second mini mill (30% of the grant), (ii) EBITDA margin expansion (40% of the grant) and (iii) greenhouse gas emissions intensity reduction (30% of the grant).
For the PSU awards, a payout is achievable at threshold (50% of target), target (100% of target) or maximum (200% of target) performance achievement. Pay out amounts will be interpolated between the threshold, target and maximum amounts.
The following table shows a summary of the performance awards outstanding as of December 31, 2023, and their fair market value on the respective grant date:
Performance Period Fair Value
(in millions) Minimum
Shares Target
Shares Maximum
Shares
2023 - 2025 $ 17 - 537,091 1,074,182
2022 - 2024 $ 16 - 635,042 1,270,084
2021 - 2023 $ 26 - 1,206,891 2,413,782
The following table shows a summary of the status and activity of nonvested stock awards for the year ended December 31, 2023:
Restricted
Stock Units TSR Performance
Awards (a)
ROCE Performance
Awards (a)
Performance-Based Restricted Stock Units (a)
Total Weighted-
Average
Grant-Date
Fair Value
Nonvested at January 1, 2023 3,325,747 1,184,455 876,603 697,485 6,084,290 $ 19.02
Granted 2,126,020 185,120 357,020 - 2,668,160 31.68
Vested (1,919,009) (555,623) (530,838) - (3,005,470) 14.89
Performance adjustment factor (b)
- (85,382) 265,419 - 180,037 22.56
Forfeited or expired (100,420) - (15,235) - (115,655) 25.49
Nonvested at December 31, 2023 3,432,338 728,570 952,969 697,485 5,811,362 $ 26.95
(a)The number of shares shown for the performance awards is based on the target number of share awards.
(b)Consists of adjustments to vested performance awards to reflect actual performance.
The following table presents information on RSUs and performance awards granted:
2023 2022 2021
Number of awards granted 2,668,160 1,979,171 3,361,265
Weighted-average grant-date fair value per share $ 31.68 $ 24.52 $ 20.24
During the years ended December 31, 2023, 2022, and 2021, the total fair value of shares vested was $45 million, $45 million, and $29 million, respectively.
16. Derivative Instruments
U. S. Steel is exposed to foreign currency exchange rate risks in our European operations. USSE’s revenues are primarily in euros and costs are primarily in euros and U.S. dollars. U. S. Steel uses foreign exchange forward sales contracts (foreign exchange forwards) with maturities up to 12 months to manage our currency requirements and exposure to foreign currency exchange rate fluctuations. Derivative instruments are required to be recognized at fair value in the Consolidated Balance Sheet. The USSE and Flat-Rolled segments use hedge accounting for their foreign exchange forwards. The Mini Mill segment has foreign exchange forwards for which hedge accounting has not been elected; therefore, the changes in the fair value of their foreign exchange forwards are recognized immediately in the Consolidated Statements of Operations (mark-to-market accounting).
U. S. Steel also uses financial swaps to protect from the commodity price risk associated with purchases of natural gas, zinc, tin, electricity, and iron ore pellets (commodity purchase swaps). We elected cash flow hedge accounting for
commodity purchase swaps for natural gas, zinc, tin, iron ore pellets, and electricity. The commodity purchase swaps where hedge accounting was elected have maturities up to 12 months.
U. S. Steel has entered into financial swaps that are used to partially manage the sales price risk of certain hot-rolled coil sales (sales swaps) and iron ore sales (zero cost collars and swaps). Both the sales swaps and the zero cost collars are accounted for using hedge accounting and have maturities of up to 12 months.
Generally, forward physical purchase contracts qualify for the normal purchase and normal sales exceptions described in ASC Topic 815 and are not subject to mark-to-market accounting. In accordance with the guidance in ASC Topic 820 on fair value measurements and disclosures, the fair value of our foreign exchange forwards, commodity purchase swaps and sales swaps was determined using Level 2 inputs, which are defined as "significant other observable" inputs. The inputs used are from market sources that aggregate data based upon market transactions.
The table below shows the outstanding swap quantities used to hedge forecasted purchases and sales as of December 31, 2023, and December 31, 2022:
Hedge Contracts Classification December 31, 2023 December 31, 2022
Natural gas (in mmbtus) Commodity purchase swaps 20,625,000 45,174,000
Tin (in metric tons) Commodity purchase swaps 5 738
Zinc (in metric tons) Commodity purchase swaps 26,148 5,222
Electricity (in megawatt hours) Commodity purchase swaps 183,288 460,320
Iron ore pellets (in metric tons) Commodity purchase swaps - 280,000
Iron ore pellets (in metric tons) Zero cost collars - 108,000
Iron ore pellets (in metric tons) Sales swaps 120,834 1,087,500
Hot-rolled coils (in tons) Sales swaps 261,000 11,000
Foreign currency (in millions of euros) Foreign exchange forwards €452 €266
Foreign currency (in millions of dollars) Foreign exchange forwards $37 $90
Foreign currency (in millions of CAD) Foreign exchange forwards $0 $1
The following summarizes the fair value amounts included in our Consolidated Balance Sheets as of December 31, 2023, and December 31, 2022:
Balance Sheet Location (in millions) December 31, 2023 December 31, 2022
Designated as Hedging Instruments
Accounts receivable $ 4 $ 20
Accounts payable 81 68
Investments and long-term receivables - -
Other long-term liabilities 2 15
Not Designated as Hedging Instruments
Accounts receivable - 13
Investments and long-term receivables - 1
The table below summarizes the effect of hedge accounting on AOCI and amounts reclassified from AOCI into earnings for 2023, 2022, and 2021:
(Loss) Gain on Derivatives in AOCI Amount of (Loss) Gain Recognized in Income
(In millions) 2023 2022 2021 Location of Reclassification from AOCI (a)
2023 2022 2021
Sales swaps $ (41) $ 14 $ 7 Net sales $ (15) $ (18) $ (170)
Commodity purchase swaps 34 (35) (11) Cost of sales (b)
(105) 103 57
Foreign exchange forwards (5) (16) 33 Cost of sales (1) 44 (3)
(a) The earnings impact of our hedging instruments substantially offsets the earnings impact of the related hedged items resulting in immaterial ineffectiveness.
(b) Costs for commodity purchase swaps are recognized in cost of sales as products are sold.
The table below summarizes the impact of derivative activity where hedge accounting has not been elected on our Consolidated Statements of Operations for 2023, 2022, and 2021:
Amount of (Loss) Gain Recognized in Income
(In millions) Consolidated Statement of Operations Location 2023 2022 2021
Commodity purchase swaps Cost of sales $ (13) $ 18 $ 19
Foreign exchange forwards Other financial costs 1 (7) 2
At current contract values, $28 million in AOCI as of December 31, 2023, will be recognized as an increase in cost of sales over the next year, and $49 million in AOCI as of December 31, 2023, will be recognized as a decrease in net sales over the next year.
17. Debt
December 31,
(In millions) Issuer/Borrower Interest
Rates % Maturity 2023 2022
2037 Senior Notes U. S. Steel 6.650 2037 $ 274 $ 274
2026 Senior Convertible Notes U. S. Steel 5.000 2026 350 350
2029 Senior Notes U. S. Steel 6.875 2029 475 475
2029 Senior Secured Notes Big River Steel 6.625 2029 720 720
Environmental Revenue Bonds U. S. Steel 4.125 - 6.750
2024 - 2053 1,164 924
Environmental Revenue Bonds Big River Steel 4.500 - 4.750
2049 752 752
Finance leases and all other obligations U. S. Steel Various 2023-2029 157 100
Finance leases and all other obligations Big River Steel Various 2023-2027 167 176
ECA Credit Agreement U. S. Steel Variable 2031 97 136
Credit Facility Agreement U. S. Steel Variable 2027 - -
Big River Steel ABL Facility Big River Steel Variable 2026 - -
USSK Credit Agreement U. S. Steel Kosice Variable 2026 - -
USSK Credit Facility U. S. Steel Kosice Variable 2024 - -
Total debt 4,156 3,907
Less unamortized discount, premium and debt issuance costs (66) (70)
Less short-term debt, long-term debt due within one year, and short-term issuance costs 142 63
Long-term debt $ 4,080 $ 3,914
Arkansas Development Finance Authority Environmental Improvement Revenue Bonds, Series 2023 (United States Steel Corporation Project) (Green Bonds)
On May 18, 2023, U. S. Steel closed on an offering consisting of an aggregate principal amount of $240 million unsecured Arkansas Development Finance Authority environmental improvement revenue bonds, which carry a green bond designation. The bonds, issued through Arkansas Development Finance Authority, have a coupon rate of 5.700% and a final maturity of 2053 (2053 ADFA Green Bonds). U. S. Steel received net proceeds of approximately $238 million after fees of approximately $2 million related to the underwriting and third-party expenses, and will pay semiannual interest. The net proceeds from the issuance of the 2053 ADFA Green Bonds were used to partially fund work related to BR2, currently under construction near Osceola, Arkansas.
On and after May 1, 2026, the Company may redeem the 2053 ADFA Green Bonds at its option, at any time in whole or from time to time in part at the redemption prices (expressed in percentages of principal amount) listed below, plus accrued and unpaid interest on the 2053 ADFA Green Bonds, if any, to, but excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of each of the years indicated below.
Year Redemption Price
2026 105.000 %
2027 104.000 %
2028 103.000 %
2029 102.000 %
2030 101.000 %
2031 and thereafter 100.000 %
At any time prior to May 1, 2026, U. S. Steel may also redeem the 2053 ADFA Green Bonds, at our option, in whole or in part, or from time to time, at a price equal to the greater of 100 percent of the principal amount of the 2053 ADFA Green Bonds plus accrued and unpaid interest, if any, or the sum of the present value of the redemption price of the 2053 ADFA Green Bonds if they were redeemed on May 1, 2026, plus interest payments due through May 1, 2026, discounted to the date of redemption on a semi-annual basis at the applicable tax-exempt municipal bond rate, plus accrued and unpaid interest, if any.
Arkansas Development Finance Authority Environmental Improvement Revenue Bonds, Series 2022 (United States Steel Corporation Project) (Green Bonds)
On September 6, 2022, U. S. Steel closed on an offering consisting of an aggregate principal amount of $290 million unsecured Arkansas Development Finance Authority environmental improvement revenue bonds, which carry a green bond designation. The bonds, issued through Arkansas Development Finance Authority, have a coupon rate of 5.450% and a final maturity of 2052 (2052 ADFA Green Bonds). U. S. Steel received net proceeds of approximately $287 million after fees of approximately $3 million related to the underwriting and third-party expenses, and will pay semiannual interest. The net proceeds from the issuance of the 2052 ADFA Green Bonds were used to partially fund work related to BR2, currently under construction near Osceola, Arkansas.
On and after September 1, 2025, the Company may redeem the 2052 ADFA Green Bonds at its option, at any time in whole or from time to time in part at the redemption prices (expressed in percentages of principal amount) listed below, plus accrued and unpaid interest on the 2052 ADFA Green Bonds, if any, to, but excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on September 1 of each of the years indicated below.
Year Redemption Price
2025 105.000 %
2026 104.000 %
2027 103.000 %
2028 102.000 %
2029 101.000 %
2030 and thereafter 100.000 %
At any time prior to September 1, 2025, U. S. Steel may also redeem the 2052 ADFA Green Bonds, at our option, in whole or in part, or from time to time, at a price equal to the greater of 100 percent of the principal amount of the 2052 ADFA Green Bonds plus accrued and unpaid interest, if any, or the sum of the present value of the redemption price of the 2052 ADFA Green Bonds if they were redeemed on September 1, 2025, plus interest payments due through September 1, 2025, discounted to the date of redemption on a semi-annual basis at the applicable tax-exempt municipal bond rate, plus accrued and unpaid interest, if any.
2026 Senior Convertible Notes
In October 2019, U. S. Steel issued $350 million of 5.00% Senior Convertible Notes due November 1, 2026 (2026 Senior Convertible Notes). Interest on the 2026 Senior Convertible Notes is payable semi-annually on May 1 and November 1 of each year. The initial conversion rate for the 2026 Senior Convertible Notes is 74.8391 shares of U. S. Steel common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $13.36 per share of common stock, subject to adjustment pursuant to the 2026 Senior Convertible Notes indenture. Based on the initial conversion rate, the 2026 Senior Convertible Notes are convertible into 26,193,685 shares of U. S. Steel common stock and we reserved for the possible issuance of 33,396,930 shares, which is the maximum amount that could be issued upon conversion. Prior to August 1, 2026, holders of notes may convert all or a portion of their notes at their option only upon the satisfaction of specified conditions and during certain periods. On or after August 1, 2026, holders may convert all or a portion of their notes prior to the maturity date. Upon conversion, we will satisfy the obligation with cash, common stock, or a combination thereof, at our election. U. S. Steel may not redeem the 2026 Senior Convertible Notes prior to November 5, 2023. On or after November 5, 2023, and prior to August 1, 2026, if the price per share of U. S. Steel's common stock has been at least 130% of the conversion price for specified periods, U. S. Steel may redeem all or a portion of the 2026 Senior Convertible Notes at a cash redemption price of 100% of the principal amount, plus accrued and unpaid interest.
If U. S. Steel undergoes a fundamental change, as defined in the 2026 Senior Convertible Notes, holders may require us to repurchase the 2026 Senior Convertible Notes in whole or in part for cash at a price equal to 100% of the principal amount of the 2026 Senior Convertible Notes to be purchased plus any accrued and unpaid interest up to, but excluding the repurchase date.
Big River Steel - Sustainability Linked ABL Facility
Big River Steel's amended senior secured asset-based revolving credit facility (Big River Steel ABL Facility) matures on July 23, 2026. The facility is secured by first-priority liens on accounts receivable and inventory and certain other assets and second priority liens on most tangible and intangible assets of Big River Steel in each case subject to permitted liens. Additionally, the amendment includes sustainability targets related to greenhouse gas emissions intensity reduction, safety performance and facility certification by ResponsibleSteel™.
The Big River Steel ABL Facility provides for borrowings for working capital and general corporate purposes in an amount equal up to the lesser of (a) $350 million and (b) a borrowing base calculated based on specified percentages of eligible accounts receivables and inventory, subject to certain adjustments and reserves.
Big River Steel LLC must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most recent twelve consecutive months when availability under the Big River Steel ABL Facility is less than the greater of ten percent of the borrowing base availability and $13 million. Based on the most recent four quarters as of December 31, 2023, Big River Steel would have met the fixed charge coverage ratio test. The facility includes affirmative and negative covenants and events of default that are customary for facilities of this type.
There were no loans outstanding under the Big River Steel ABL Facility at December 31, 2023. Availability under the Big River Steel ABL Facility, pursuant to the available borrowing base was $299 million at December 31, 2023.
U. S. Steel - Sustainability Linked Credit Facility Agreement
On May 27, 2022, U. S. Steel entered into the Sixth Amended and Restated Credit Facility Agreement (Credit Facility Agreement) to replace the existing Fifth Amended and Restated Credit Facility Agreement (Fifth Credit Facility Agreement). The Credit Facility Agreement has substantially the same terms as the Fifth Credit Facility Agreement, except the Credit Facility Agreement references the Secured Overnight Financing Rate instead of the London Interbank Offered Rate, adjusts the individual lenders' commitments, and renews the five-year maturity to May 27, 2027. The Credit Facility Agreement also adjusts the threshold for the fixed charge coverage ratio. The total availability under the facility remained the same at $1,750 million, and the financial impact from replacing the Fifth Credit Facility Agreement was immaterial. Consistent with the Fifth Credit Facility Agreement, the Credit Facility Agreement is secured by first-priority liens on certain accounts receivable and inventory and includes targets related to greenhouse gas emissions intensity reduction, safety performance and facility certification by ResponsibleSteel™.
The Credit Facility Agreement provides for borrowings for working capital and general corporate purchases in an amount equal to the lesser of (a) $1,750 million or (b) a borrowing base calculated based on specified percentages of eligible accounts receivable and inventory, subject to certain adjustments and reserves. As of December 31, 2023, there were approximately $4 million of letters of credit issued and no loans drawn under the Credit Facility Agreement. U. S. Steel must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most recent four consecutive quarters when availability under the Credit Facility Agreement is less than the greater of ten percent of the maximum facility availability and $140 million. Based on the most recent four quarters as of December 31, 2023, the Company would have met the fixed charge coverage ratio test.
USSK Credit Facilities
On September 28, 2023, the Company elected to reduce the size of the USSK Credit Agreement from €300 million to €150 million (approximately $166 million). The reduced credit facility size supports USSK’s liquidity needs and is consistent with efforts to optimize costs and the global liquidity position. The USSK Credit Agreement matures in 2026 and contains sustainability targets related to greenhouse gas emissions intensity reduction, safety performance and facility certification by ResponsibleSteel™.
Under the USSK Credit Agreement, USSK is required to maintain a net debt to EBITDA ratio of less than 3.50:1.00 (the “EBITDA Ratio Covenant”), as measured on a rolling twelve month basis on June 30th and December 31st of each year. As of December 31, 2023, USSK met the EBITDA Ratio Covenant, and the USSK Credit Agreement was undrawn and fully available.
During the first quarter of 2023, USSK increased the size of its €20 million credit facility to €30 million (approximately $33 million) (the USSK Credit Facility). At December 31, 2023, USSK had no borrowings under the USSK Credit Facility, and the availability was approximately $15 million due to approximately $18 million of customs and other guarantees outstanding.
Debt Maturities - Aggregate maturities of debt are as follows (in millions):
2024 2025 2026 2027 2028 Later Years Total
$ 145 $ 73 $ 530 $ 110 $ 28 $ 3,270 $ 4,156
18. Pensions and Other Benefits
U. S. Steel has defined contribution plans or multiemployer retirement benefits for approximately 85 percent of its employees in the United States and non-contributory defined benefit pension plans covering the remaining employees. Benefits under the defined benefit pension plans are based upon years of service and final average pensionable earnings, with a minimum benefit based upon years of service. In addition, pension benefits for most non-represented employees under these plans are based upon a percent of total career pensionable earnings. Effective December 31, 2015, non-represented participants in the defined benefit plan no longer accrue additional benefits under the plan. For those non-represented employees without defined benefit coverage (the defined benefit pension plan was closed to new participants in 2003) and those for which the defined benefit plan was frozen, the Company also provides in the defined contribution plans (401(k) plans) a retirement account benefit based on salary and attained age. Most non-represented employees also participate in the 401(k) plans whereby the Company matches a certain percentage of salary based on the amount contributed by the participant. As of December 31, 2023, more than 75 percent of U. S. Steel’s represented employees in the United States are covered by the SPT, a multiemployer pension plan, to which U. S. Steel contributes on the basis of a fixed dollar amount for each hour worked.
Certain hourly employees of U. S. Steel’s flat-rolled, tubular, cokemaking and iron ore operations in the United States are covered by collective bargaining agreements with the USW entered into effective September 1, 2022, (the 2022 Labor Agreements) that expire on September 1, 2026. The 2022 Labor Agreements include a signing bonus for each eligible USW-represented employee and annual 5% wage increases effective September 1, 2022, 2023, 2024, and 2025. Additionally, the 2022 Labor Agreements provide for increases to our pension and retirement benefits, including increases to our defined benefit pension plan, and to the contribution rate to the SPT from $3.50 to $4.00 per hour effective January 1, 2023. During the fourth quarter of 2022, U. S. Steel recorded a charge of approximately $67 million for the 2022 Labor Agreements signing bonus and related costs which was recognized primarily as a component of Cost of sales on the Consolidated Statements of Operations.
In addition, as part of the collective bargaining process, U. S. Steel and the USW agreed to leverage the overfunded OPEB plans to support the benefits provided to active represented employees. Beginning January 1, 2023, this agreement allows the Company to use a certain amount of surplus VEBA assets (the surplus amount) to pay for legally permissible benefits under Section 501(c)(9) of the Internal Revenue Code for active employees and retirees of the USW. The surplus amount will represent a one-time transfer of VEBA assets to a subaccount to be used for these employees and retirees, which will take place in the first quarter 2023. The surplus amount of $595 million was determined as of December 31, 2022, (after merger of the UPI VEBA) and is the balance of VEBA assets in excess of 135% of the retiree obligation. The Company is permitted to withdraw a target of $75 million annually, with a guaranteed annual minimum of $50 million, and which may be in excess of $75 million in certain circumstances, on a quarterly pro rata basis, from the subaccount to cover the cost of the permissible benefits for active USW employees and USW retirees. As a result of its designation for this purpose, the surplus amount is presented as $89 million in Other current assets and $481 million in Other noncurrent assets on the Consolidated Balance Sheet as of December 31, 2023. Pursuant to the agreement with the USW, the Company merged the United States Steel Corporation Plan for Active Employee Insurance Benefits with and into the United States Steel Corporation Plan for Retiree Insurance Benefits effective January 1, 2023. Upon the one-time transfer from the VEBA to the subaccount, the surplus assets will no longer be accounted for under ASC 715, Compensation-Retirement Benefits and is instead expected to be accounted for primarily under the provisions of ASC 825 Financial Instruments, which is likely to
result in the portfolio being accounted for on a fair value basis, with gains and losses recognized in earnings, and reported as activity in Other financial costs (benefits) on the Company's Consolidated Statements of Operations.
On November 8, 2021, U. S. Steel entered into a commitment agreement with Banner Life Insurance Company and William Penn Life Insurance Company of New York (the “Insurers”) and State Street Global Advisors Trust Company, as independent fiduciary to the United States Steel Corporation Plan for Employee Pension Benefits (Revision of 2003), for the plan to purchase group annuity contracts and transfer approximately $284 million of its pension plan obligations to the Insurers. The purchase of the group annuity contracts was funded directly by the assets of the pension plan. The purchase resulted in the transfer of administrative and benefit-paying responsibilities for approximately 17,800 U.S. retirees and beneficiaries to the Insurers. The Insurers began paying benefits for certain retirees and beneficiaries in the Plan on January 1, 2022. There was no change to the pension benefits for any retirees and beneficiaries as a result of the transaction. As a result of the transaction, the Corporation recognized a non-cash pension settlement charge of approximately $93 million. This amount was reclassified to earnings through Net interest and other financial costs from Accumulated other comprehensive loss.
In addition during 2021, the Company recorded termination charges of approximately $34 million in pensions and $17 million in other benefits related to the planned disposition of a component within the flat-roll segment. These charges were recognized as Restructuring and other charges on the Consolidated Statements of Operations.
On October 26, 2022, U. S. Steel entered into an agreement with Pacific Life Insurance Company (the Insurer) and State Street Global Advisors Trust Company, as independent fiduciary to the UPI Pension Plan, for the plan to purchase group annuity contracts and transfer approximately $115 million of its pension plan obligations to the Insurer. The purchase of the group annuity contracts was completed on November 1, 2022, and funded directly by the assets of the pension plan. The purchase resulted in the transfer of the administrative and benefit-paying responsibilities for approximately 850 U.S. retirees and beneficiaries to the Insurer. The Insurer began paying benefits for certain retirees and beneficiaries in the Plan on January 1, 2023. There was no change to the pension benefits for any retirees and beneficiaries as a result of the transaction. As a result of the transaction, the Corporation recognized a non-cash pension settlement credit of approximately $3 million. This amount was reclassified to earnings through Net interest and other financial costs from accumulated other comprehensive loss.
Effective as of December 15, 2022, the UPI Pension Plan was merged into the U. S. Steel pension plan.
U. S. Steel’s defined benefit retiree health care and life insurance plans (Other Benefits) cover the majority of its represented employees in the United States upon their retirement. Health care benefits are provided for Medicare and pre-Medicare retirees, with Medicare retirees largely enrolled in Medicare Advantage Plans. Both are subject to various cost sharing features, and in most cases domestically, an employer cap on total costs. The Other Benefits plan was closed to represented employees hired or rehired under certain conditions on or after January 1, 2016.
The retiree medical and retiree life insurance plans, for non-represented employees were amended to eliminate retiree medical benefits effective December 31, 2017, and to eliminate retiree life insurance benefits for employees who retired after December 31, 2017.
The majority of U. S. Steel’s European employees are covered by government-sponsored programs into which U. S. Steel makes required contributions. Also, U. S. Steel sponsors defined benefit plans for most European employees covering benefit payments due to employees upon their retirement, some of which are government mandated. These same employees receive service awards throughout their careers based on stipulated service and, in some cases, age and service.
U. S. Steel uses a December 31 measurement date for its plans and may have an interim measurement date if significant events occur. Details relating to pension benefits and Other Benefits are below.
Pension Benefits Other Benefits
(In millions) 2023 2022 2023 2022
Change in benefit obligations
Benefit obligations at January 1 $ 4,186 $ 5,422 $ 1,236 $ 1,620
Service cost 33 45 6 9
Interest cost 220 157 67 49
Plan amendments - 120 - 10
Actuarial losses (gains) 24 (1,011) (77) (332)
Exchange rate gain (1) (1) - -
Settlements, curtailments and termination benefits 12 (108) - 2
Benefits paid (403) (438) (113) (122)
Benefit obligations at December 31 $ 4,071 $ 4,186 $ 1,119 $ 1,236
Change in plan assets
Fair value of plan at January 1 $ 4,170 $ 5,632 $ 1,151 $ 2,094
Actual return on plan assets 406 (904) 98 (258)
Plan Spin-Offs and Mergers - - - (595)
Asset reversion - - (2) -
Employer contributions - - - 2
Settlements - (121) - -
Benefits paid from plan assets (402) (437) (75) (92)
Fair value of plan assets at December 31 $ 4,174 $ 4,170 $ 1,172 $ 1,151
Funded status of plans at December 31 103 (16) 53 (85)
For pension benefits, the largest contributor to the actuarial loss in 2023 was the decrease in the discount rate from 5.55% at December 31, 2022, to 5.49% at December 31, 2023. In 2022, the largest contributor of actuarial gain was the increase in the discount rate from 3.01% at December 31, 2021, to 5.55% at December 31, 2022.
For Other Benefits, the largest contributor to the actuarial gain in 2023 was attributable to reductions in future health care costs. In 2022, the largest contributor of actuarial gain was the increase in the discount rate from 3.11% at December 31, 2021, to 5.66% at December 31, 2022. There were also gains at December 31, 2022, attributable to reductions in future health care costs.
Amounts recognized in accumulated other comprehensive loss:
(In millions) 12/31/2022 Amortization Activity 12/31/2023
Pensions
Prior Service Cost $ 130 $ (17) $ - $ 113
Actuarial Losses 1,476 (13) (54) 1,409
Other Benefits
Prior Service Credit (41) 23 - (18)
Actuarial Gains (622) 72 (114) (664)
As of December 31, 2023, and 2022, the following amounts were recognized in the Consolidated Balance Sheet:
Pension Benefits Other Benefits
(In millions) 2023 2022 2023 2022
Noncurrent assets $ 131 $ 10 $ 57 $ -
Current liabilities (2) (2) (1) (37)
Noncurrent liabilities (26) (24) (3) (48)
Accumulated other comprehensive loss (a)
1,522 1,606 (682) (663)
Net amount recognized $ 1,625 $ 1,590 $ (629) $ (748)
(a) Accumulated other comprehensive loss effects associated with accounting for pensions and other benefits in accordance with ASC Topic 715 at December 31, 2023, and December 31, 2022, respectively, are reflected net of tax of $602 million and $626 million respectively, on the Consolidated Statements of Stockholders’ Equity.
The Accumulated Benefit Obligation (ABO) for all defined benefit pension plans was $3,956 million and $4,103 million at December 31, 2023, and 2022, respectively.
December 31,
(In millions) 2023 2022
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
Aggregate accumulated benefit obligations (ABO) $ (21) $ (19)
Aggregate projected benefit obligations (PBO) (28) (26)
Aggregate fair value of plan assets - -
The aggregate PBO in excess of plan assets reflected above is included in the payroll and benefits payable and employee benefits lines on the Consolidated Balance Sheet.
Following are the details of net periodic benefit costs (credits) related to Pension and Other Benefits:
Pension Benefits Other Benefits
(In millions) 2023 2022 2021 2023 2022 2021
Components of net periodic benefit cost (credits):
Service cost $ 33 $ 45 $ 53 $ 6 $ 9 $ 11
Interest cost 220 157 163 67 49 50
Expected return on plan assets (328) (357) (361) (61) (91) (81)
Amortization - prior service costs (credits) 17 2 2 (23) (24) (29)
- actuarial losses (gains) 13 73 132 (72) (53) (23)
Net periodic benefit cost, excluding below (45) (80) (11) (83) (110) (72)
Multiemployer plans (a)
83 74 75 - - -
Settlement, termination and curtailment losses 13 12 135 - 2 19
Net periodic benefit cost (credits) $ 51 $ 6 $ 199 $ (83) $ (108) $ (53)
(a) Primarily represents pension expense for the SPT covering USW employees hired from National Steel Corporation and new USW employees hired after May 21, 2003.
Net periodic benefit expense (credits) for pensions and Other Benefits is projected to be approximately $88 million and approximately $(102) million, respectively, in 2024. The pension cost projection includes approximately $84 million of contributions to the SPT.
Weighted average assumptions used to determine the benefit obligation at December 31 and net periodic benefit cost for the year ended December 31 are detailed below.
Pension Benefits Other Benefits
2023 2022 2023 2022
U.S. and Europe U.S. and Europe U.S. U.S.
Actuarial assumptions used to determine benefit obligations at December 31:
Discount rate 5.49 % 5.55 % 5.58 % 5.66 %
Increase in compensation rate 3.15 % 3.15 % N/A N/A
Pension Benefits Other Benefits
2023 2022 2021 2023 2022 2021
U.S. and Europe U.S. and Europe U.S. and Europe U.S. U.S. U.S.
Actuarial assumptions used to determine net periodic benefit cost for the year ended December 31:
Discount rate 5.55 % 3.01 % 2.72 % 5.66 % 3.11 % 2.80 %
Expected annual return on plan assets 6.90 % 6.82 % 6.82 % 4.50 % 4.50 % 4.25 %
Increase in compensation rate 3.15 % 2.60 % 2.60 % N/A N/A N/A
The discount rate reflects the current rate at which the pension and Other Benefit liabilities could be effectively settled at the measurement date. In 2017, we refined our discount rate determination process for our U.S. plans by using a bond matching approach to select specific bonds that would satisfy our projected benefit payments. We believe the bond matching approach more closely reflects the process we would employ to settle our pension and other benefits obligations. For our European pension plan, the discount rate is determined using data published by European Central Bank and underlying data provided by EuroMTS Ltd. The discount rate assumptions are updated annually.
2023 2022
Assumed health care cost trend rates at December 31: U.S. U.S.
Health care cost trend rate assumed for next year 5.90% 6.00%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.50% 4.50%
Year that the rate reaches the ultimate trend rate 2038 2038
U. S. Steel reviews its actual historical rate experience and expectations of future health care cost trends to determine the escalation of per capita health care costs under U. S. Steel’s benefit plans. About 80 percent of our costs for the domestic USW participants’ retiree health benefits in the Company’s main domestic benefit plan are limited to a per capita dollar maximum calculation based on 2006 base year actual costs incurred under the main U. S. Steel benefit plan for USW participants (cost cap). The full effect of the cost cap is expected to be realized around 2031. After 2031, the Company’s costs for a majority of USW retirees and their dependents are expected to remain fixed and as a result, the cost impact of health care escalation for the Company is projected to be limited for this group.
Plan Assets
ASC Topic 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Plan's investments, and requires additional disclosure about fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy are summarized below:
•Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
•Level 2 - Inputs to the valuation methodology include:
◦Quoted prices for similar assets or liabilities in active markets;
◦Quoted prices for identical or similar assets or liabilities in inactive markets;
◦Inputs other than quoted prices that are observable for the asset or liability;
◦Inputs that are derived principally from or corroborated by observable market data by correlation or other means
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
•Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
An instrument’s level is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2023, and 2022.
Short-term investments are valued at amortized cost which approximates fair value due to the short-term maturity of the instruments. Equity securities - U.S. & International are valued at the closing price reported on the active exchange on which the individual securities are traded. U.S. and Non U.S. government bonds are valued using pricing models maximizing the use of observable inputs for similar securities. Corporate U.S. & Non U.S. bonds are also valued using pricing models maximizing the use of observable inputs for similar securities, which includes basing value on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar bonds, the bond is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. Mortgage and asset-backed securities are valued using quotes from a broker dealer. Private equities and real estate are valued using information provided by external managers for each individual investment held in the fund or using NAV (net asset value) as a practical expedient. Timberland investments are valued at their appraised value. Mineral Interests and other alternatives are valued at the present value of estimated future cash flows discounted at estimated market rates for assets of similar quality and duration.
The fair value of U. S. Steel's pension plan assets by asset category at December 31 was as follows (in millions):
2023 2022
Level 1 Level 2 Level 3 measured at NAV (a)
Total Level 1 Level 2 Level 3 measured at NAV (a)
Total
Asset Category
Equity
U. S. companies $ 332 $ - $ - $ - $ 332 $ 273 $ - $ - $ - $ 273
International companies 433 - - - 433 366 - - - 366
Derivative financial instruments - 7 - - 7 - - - - -
Total equity 765 7 - - 772 639 - - - 639
Fixed Income
Corporate Bonds - U.S. - 654 - - 654 - 989 - - 989
Corporate Bonds - Non-U.S. - 129 - - 129 - 206 - - 206
U.S. government and agencies - 197 - - 197 - 244 - - 244
Non-U.S. government - 43 - - 43 - 51 - - 51
Mortgage and asset-backed securities - 9 - - 9 - 10 - - 10
Derivative financial instruments - 6 - - 6 (7) 7 - - -
Total fixed income - 1,038 - - 1,038 (7) 1,507 - - 1,500
Alternatives
Timberlands - - - 21 21 - - - 19 19
Mineral Interests and other alternatives - - - 239 239 - - 54 125 179
Private equity - - 235 235 - - 251 251
Real estate - - - 245 245 - - 35 193 228
Total alternatives - - - 740 740 - - 89 588 677
Commingled Funds - - - 1,499 1,499 - - - 1,176 1,176
Short-Term Investments 106 5 - - 111 116 39 - - 155
Other (b)
14 - - - 14 23 - - - 23
Total assets at fair value $ 885 $ 1,050 $ - $ 2,239 $ 4,174 $ 771 $ 1,546 $ 89 $ 1,764 $ 4,170
(a)In accordance with ASC Topic 820, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
(b)Includes cash, accrued income, and miscellaneous payables.
The following table sets forth a summary of changes in the fair value of U. S. Steel’s Pension plan Level 3 assets for the years ended December 31, 2023, and 2022:
Level 3 assets only
(In millions) 2023 2022
Balance at beginning of period $ 89 $ 54
Transfers in and/or out of Level 3 (89) -
Actual return on plan assets:
Realized gain - 1
Net unrealized gain - 6
Purchases, sales, issuances and settlements:
Purchases - 33
Sales - (5)
Balance at end of period $ - $ 89
The fair value of U. S. Steel's Other Benefits plan assets by asset category at December 31 was as follows (in millions):
2023 2022
Level 1 Level 2 Level 3 measured at NAV (a)
Total Level 1 Level 2 Level 3 measured at NAV (a)
Total
Asset Category
Equity
U. S. companies $ 65 $ - $ - $ - $ 65 $ 50 $ - $ - $ - $ 50
International companies 31 - - - 31 19 - - - 19
Total equity 96 - - - 96 69 - - - 69
Fixed Income
Corporate Bonds - U.S. - 476 - - 476 - 479 - - 479
Corporate Bonds - Non-U.S. - 108 - - 108 - 112 - - 112
U.S. government and agencies - 105 - - 105 - 26 - - 26
Non-U.S. government - 14 - - 14 - 5 - - 5
Mortgage and asset-backed securities - 11 - - 11 - 4 - - 4
Total fixed income - 714 - - 714 - 626 - - 626
Alternatives
Timberlands - - - 3 3 - - - 2 2
Other alternatives - - - 41 41 - - 47 29 76
Private equity - - - 54 54 - - - 39 39
Real estate - - - 30 30 - - - 17 17
Total alternatives - - - 128 128 - - 47 87 134
Commingled Funds - - - 190 190 - - - 262 262
Short-Term Investments 13 1 - - 14 33 9 - - 42
Other (b)
30 - - - 30 18 - - - 18
Total assets at fair value (c)
$ 139 $ 715 $ - $ 318 $ 1,172 $ 120 $ 635 $ 47 $ 349 $ 1,151
(a)In accordance with ASC Topic 820, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
(b)Includes cash, accrued income, and miscellaneous payables.
(c)The classification within the fair value hierarchy and the composition of the asset categories for the VEBA assets surplus amount of $595 million was the same as the Other Benefits plan assets as of December 31, 2022.
The following table sets forth a summary of changes in the fair value of U. S. Steel’s Other Benefits plan Level 3 assets for the years ended December 31, 2023, and 2022:
Level 3 assets only
(In millions) 2023 2022
Balance at beginning of period $ 47 $ 39
Transfers in and/or out of Level 3 (47) (25)
Actual return on plan assets:
Realized gain - -
Net unrealized loss - (2)
Purchases, sales, issuances and settlements:
Purchases - 35
Sales - -
Balance at end of period $ - $ 47
U. S. Steel’s investment strategy for its U.S. pension and Other Benefits plan assets provides for a diversified mix of high quality bonds, public equities and selected smaller investments in private equities, private credit, timber and mineral interests. For its U.S. pension, U. S. Steel has a target allocation for plan assets of 69 percent in corporate bonds, government bonds and mortgage, private credit, and asset-backed securities. The balance is invested in equity securities, timber, private equity and real estate partnerships. U. S. Steel believes that returns on equities over the long term will be higher than returns from fixed-income securities as actual historical returns from U. S. Steel’s trusts have shown. Returns on bonds tend to offset some of the short-term volatility of stocks. Both equity and fixed-income investments are made across a broad range of industries and companies (both domestic and foreign) to provide protection against the impact of volatility in any single industry as well as company specific developments. U. S. Steel will use a 6.90 percent assumed rate of return on assets for the development of net periodic cost for the main defined benefit pension plan in 2024. Actual
returns since the inception of the plan have exceeded this 6.90 percent rate and while recent annual returns have been volatile, it is U. S. Steel’s expectation that rates will achieve this level in future periods.
For its Other Benefits plan, U. S. Steel is employing a liability driven investment strategy. The plan assets are allocated to match the plan cash flows with maturing investments. To achieve this strategy, U. S. Steel has a target allocation for plan assets of 80 percent in fixed income and private credit. The balance is primarily invested in equity securities, timber, private equity and real estate partnerships. U. S. Steel will use a 6.00 percent assumed rate of return on assets for the development of net periodic cost for its Other Benefit plans for 2024. The 2024 assumed rate of return was updated after a review of capital market forecasted returns based on target allocations. As a result, the expected asset return for 2024 was increased to 6.00 percent from the rate of return used for 2023 domestic net periodic benefit cost of 4.50 percent.
Steelworkers Pension Trust
For most bargaining unit employees participating in the SPT, U. S. Steel contributed to the SPT a fixed dollar amount for each hour worked of $3.50 through December 31, 2022. SPT contributions per hour of $4.00 was effective January 1, 2023. U. S. Steel’s contributions to the SPT represented greater than 30% of the total combined contributions of all employers participating in the plan for the years ended December 31, 2023, 2022, and 2021.
Participation in a multiemployer pension plan agreed to under the terms of a collective bargaining agreement differ from a traditional qualified single employer defined benefit pension plan. The SPT shares risks associated with the plan in the following respects:
a. Contributions to the SPT by U. S. Steel may be used to provide benefits to employees of other participating employers;
b. If a participating employer stops contributing to the SPT, the unfunded obligations of the plan may be borne by the remaining participating employers;
c. If U. S. Steel chooses to stop participating in the SPT, U. S. Steel may be required to pay an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
On March 21, 2011, the Board of Trustees of the SPT elected funding relief which has the effect of decreasing the amount of required minimum contributions in near-term years, but will increase the minimum funding requirements during later plan years. As a result of the election of funding relief, the SPT’s zone funding under the Pension Protection Act may be impacted.
In addition to the funding relief election, the Board of Trustees also elected a special amortization rule, which allows the SPT to separately amortize investment losses incurred during the SPT’s December 31, 2008 plan year-end over a 29 year period, whereas they were previously required to be amortized over a 15 year period.
U. S. Steel’s participation in the SPT for the annual periods ended December 31, 2023, 2022, and 2021 is outlined in the table below.
Employer
Identification
Number/
Pension Plan
Number Pension
Protection
Act Zone
Status as of
December 31 (a)
FIP/RP Status
Pending/Implemented(b)
U.S. Steel
Contributions
(in millions) Surcharge
Imposed(c)
Expiration Date
of Collective
Bargaining
Agreement
Pension Fund 2023 2022 2023 2022 2021 2023 2022
Steelworkers Pension Trust 23-6648508/499 Green Green No $ 82 $ 74 $ 75 No No September 1, 2026
(a)The zone status is based on information that U. S. Steel received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80 percent funded, while plans in the yellow zone are less than 80 percent funded and plans in the red zone are less than 65 percent funded.
(b)Indicates if a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented.
(c)Indicates whether there were charges to U. S. Steel from the plan.
Cash Flows
The following information is in addition to the contributions to the SPT noted in the table above.
Employer Contributions - U. S. Steel did not make any voluntary or mandatory contributions to the U. S. Steel Retirement Plan Trust in 2023 or 2022. The U. S. Steel Retirement Plan Trust is the funding vehicle for the Company's main defined benefit pension plan.
For pension plans not funded by trusts, U. S. Steel made $3 million, $2 million, and $11 million of pension payments not funded by trusts in 2023, 2022, and 2021, respectively.
Cash payments totaling $40 million, $32 million, and $46 million were made for other post-employment benefit payments not funded by trusts in 2023, 2022, and 2021, respectively. In 2023, 2022, and 2021, U. S. Steel continued to use assets from our VEBA trust for represented retiree health care and life insurance benefits to pay USW post-employment benefit claims.
Estimated Future Benefit Payments - The following benefit payments, which reflect expected future service as appropriate, are expected to be paid from U. S. Steel’s defined benefit plans:
(In millions) Pension Benefits Other Benefits
2024 $ 431 $ 104
2025 377 100
2026 356 108
2027 351 110
2028 341 112
Years 2029 - 2031 1,571 483
Defined contribution plans
U. S. Steel also contributes to several defined contribution plans for its salaried employees. Effective January 1, 2016, all non-represented salaried employees in North America receive pension benefits in the form of a separate retirement account through a defined contribution plan with contribution percentages based upon age, for which company contributions totaled $21 million, $21 million, and $20 million in 2023, 2022, and 2021, respectively. U. S. Steel’s matching contributions to salaried employees’ defined contribution plans, which are 100 percent of the employees’ contributions up to six percent of their eligible salary, totaled $20 million, $19 million, and $18 million in 2023, 2022, and 2021, respectively. U. S. Steel also maintains non-qualified defined contribution plans to provide benefits which are otherwise limited by the Internal Revenue Code for qualified plans. U. S. Steel’s contributions under these defined contribution plans were $2 million in 2023, less than $1 million in 2022, and $1 million in 2021.
Most represented employees are eligible to participate in a defined contribution plan where there is no company match on savings except for certain Tubular hourly employees. Effective with the 2015 Labor Agreement, represented hires on or after January 1, 2016, are eligible for a $0.50 per hour savings account contribution. As a result of the 2018 Labor Agreements, the savings account contribution for each hour worked increased to $0.55 effective January 1, 2019, $0.60 effective January 1, 2020, and $0.65 effective January 1, 2021. As a result of the 2022 Labor Agreements, the savings account contribution for each hour worked increased to $0.75 effective January 1, 2023. These Company contributions for represented employees totaled $7 million, $5 million, and $4 million in 2023, 2022, and 2021, respectively.
Other post-employment benefits
The Company provides benefits to former or inactive employees after employment but before retirement. Certain benefits including workers’ compensation and black lung benefits represent material obligations to the Company and under the guidance for nonretirement post-employment benefits, have historically been treated as accrued benefit obligations. Liabilities for these benefits recorded at December 31, 2023, totaled $91 million as compared to $88 million at December 31, 2022. Liability amounts were developed assuming a discount rate of 5.66% and 5.65% at December 31, 2023, and 2022. Net periodic benefit cost for these benefits is projected to be $17 million in 2024 compared to $24 million in 2023 and $(1) million in 2022.
Pension Funding
In March 2021, the American Rescue Plan Act (ARPA - H.R. 1319) further extended the pension relief interest rate corridor used to measure defined benefit pension obligations for calculating minimum annual contributions. The new interest rate formula results in higher interest rates for minimum funding calculations as compared to prior law over the next few years, which will improve the funded status of our main defined benefit pension plan and reduce minimum required contributions.
U. S. Steel will monitor the funded status of the plan to determine when voluntary contributions may be prudent in order to mitigate potentially larger mandatory contributions in later years.
19. Asset Retirement Obligations
U. S. Steel’s asset retirement obligations (AROs) primarily relate to mine, landfill closure and post-closure costs. The following table reflects changes in the carrying values of AROs for the years ended December 31, 2023, and 2022:
December 31,
(In millions) 2023 2022
Balance at beginning of year $ 66 $ 66
Additional obligations incurred 12 13
Obligations settled (1) (12)
Change in estimate of obligations - (5)
Foreign currency translation effects - -
Accretion expense 2 4
Balance at end of period $ 79 $ 66
Certain AROs related to disposal costs of the majority of fixed assets at our integrated steel facilities have not been recorded because they have an indeterminate settlement date. These AROs will be initially recognized in the period in which sufficient information exists to estimate their fair value.
20. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, current accounts and notes receivable, accounts payable and accrued interest included in the Consolidated Balance Sheet approximate fair value. See Note 16 for disclosure of U. S. Steel’s derivative instruments, which are accounted for at fair value on a recurring basis.
Stelco Option for Minntac Mine Interest
On April 30, 2020, the Company entered into an Option Agreement with Stelco, that grants Stelco the option to purchase a 25 percent interest (the Option Interest) in a to-be-formed entity (the Joint Venture) that will own the Company’s current iron ore mine located in Mt. Iron, Minnesota (the Minntac Mine). As consideration for the option, Stelco paid the Company an aggregate amount of $100 million in five $20 million installments during the year-ended December 31, 2020, which are recorded net of transaction costs in the Consolidated Balance Sheet. In the event Stelco exercises the option, Stelco will contribute an additional $500 million to the Joint Venture, which amount shall be remitted solely to U. S. Steel in the form of a one-time special distribution, and the parties will engage in good faith negotiations to finalize the master agreement (pursuant to which Stelco will acquire the Option Interest) and the limited liability company agreement of the Joint Venture.
Surplus VEBA assets
During the fourth quarter 2022, U. S. Steel and the USW agreed to utilize the overfunded OPEB plans to support the benefits provided to active represented employees. Beginning January 1, 2023, this agreement allows the Company to use a certain amount of surplus VEBA assets (the surplus amount) to pay for legally permissible benefits under Section 501(c)(9) of the Internal Revenue Code for active employees and retirees of the USW. The surplus amount of $595 million was determined as of December 31, 2022, and was the balance of VEBA assets in excess of 135% of the retiree obligation at that time. On January 1, 2023, a subaccount was created and consisted of a pro-rata share of the existing trust. On February 1, 2023, using January 31, 2023 asset values, a new investment strategy was implemented and comprised of existing investments from the VEBA trust and cash. On February 1, 2023, certain assets were transferred from the VEBA to the subaccount. The Company is permitted to withdraw a target of $75 million annually, with a guaranteed annual minimum of $50 million, on a quarterly pro rata basis, from the subaccount to cover the cost of the permissible benefits for active USW employees and USW retirees. The surplus VEBA assets subaccount portfolio consists of fixed income securities including corporate bonds, U.S. government bonds, and U.S. Treasury notes, in addition to alternatives including investments in private credit partnerships and real estate funds. A portion of the corporate bonds are classified as available-for-sale debt securities, with unrealized gains and losses reported in Accumulated other comprehensive loss. Upon sale, realized gains and losses are reported in earnings. All other investments in the subaccount are financial instruments measured at fair value or net asset value, with gains and losses recognized through net earnings and are reported as Net gain from investments related to active employee benefits on the Company's Consolidated Statements of Operations.
As of December 31, 2023, the fair value of the surplus VEBA assets subaccount portfolio was $570 million, with $89 million in Other current assets and $481 million in Other noncurrent assets on the Consolidated Balance Sheet. As of December 31, 2023, the value of the investment in corporate bonds classified as available-for-sale debt securities was $208 million.
During 2023, pretax net gains of $43 million and $7 million were recognized in Net gain from investments related to active employee benefits and in Accumulated other comprehensive income (loss), respectively.
The fair value of the subaccount portfolio by asset category as of December 31, 2023 was as follows (in millions):
December 31, 2023
Level 1 Level 2 Level 3 measured at NAV (a)
Total
Asset Category
Fixed Income
Corporate bonds - U.S. - 191 - - 191
Corporate bonds - Non-U.S. - 56 - - 56
U.S. government bonds - 86 - - 86
Mortgage and asset-backed securities - 12 - - 12
Total fixed income $ - $ 345 $ - $ - $ 345
Alternatives
Private credit partnerships - - 58 64 122
Other alternatives - - - 18 18
Total alternatives $ - $ - $ 58 $ 82 $ 140
Commingled Funds - - - 61 61
Other (b)
25 - (1) - 24
Total assets at fair value $ 25 $ 345 $ 57 $ 143 $ 570
(a) In accordance with ASC Topic 820, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
(b) Includes cash, accrued income, and miscellaneous payables.
The following table summarizes U. S. Steel’s financial assets and liabilities that were not carried at fair value at December 31, 2023, and 2022.
December 31, 2023 December 31, 2022
(In millions) Fair Value Carrying
Amount Fair Value Carrying
Amount
Financial liabilities:
Long-term debt (a)
$ 4,797 $ 3,899 $ 3,815 $ 3,701
(a)Excludes finance lease obligations.
The fair value of long-term debt was determined using Level 2 inputs which were derived from quoted market prices.
Fair value of the financial assets and liabilities 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.
Financial guarantees are U. S. Steel’s only unrecognized financial instrument. For details relating to financial guarantees see Note 26.
21. Reclassifications from Accumulated Other Comprehensive Income (AOCI)
(In millions) Pension and
Other Benefit
Items Foreign
Currency
Items Unrealized (Loss) Gain on Derivatives Active Employee Benefit Investments Total
Balance at December 31, 2021 $ (25) $ 371 $ (15) $ - $ 331
Other comprehensive (loss) income before reclassifications (292) (91) 74 - (309)
Amounts reclassified from AOCI (a)
(5) - (102) - (107)
Net current-period other comprehensive loss (297) (91) (28) - (416)
Balance at December 31, 2022 $ (322) $ 280 $ (43) $ - $ (85)
Other comprehensive income (loss) before reclassifications 131 54 (77) 6 114
Amounts reclassified from AOCI (a)
(50) - 68 (1) 17
Net current-period other comprehensive income (loss) 81 54 (9) 5 131
Balance at December 31, 2023 $ (241) $ 334 $ (52) $ 5 $ 46
(a)See table below for further details.
Details about AOCI components (a)
Amount reclassified from AOCI
(In millions) 2023 2022 2021
Amortization of pension and other benefit items
Prior service credits (a)
$ (6) $ (23) $ (27)
Actuarial (gains) losses (a)
(60) 20 109
Settlements, termination and curtailment losses (gains) (a)
1 (3) 100
Total pensions and other benefits items (65) (6) 182
Derivative reclassifications to Consolidated Statements of Operations 143 (133) 105
Active employee benefit investment reclassifications to Consolidated Statements of Operations (1) - -
Total before tax 77 (139) 287
Tax (benefit) provision (60) 32 (72)
Net of tax $ 17 $ (107) $ 215
(a)These AOCI components are included in the computation of net periodic benefit cost (see Note 18 for additional details).
22. Supplemental Cash Flow Information
Year Ended December 31,
(In millions) 2023 2022 2021
Net cash used in operating activities included:
Interest and other financial costs paid (net of amount capitalized) $ (68) $ (161) $ (319)
Income taxes paid $ (86) $ (242) $ (75)
Non-cash investing and financing activities:
Change in accrued capital expenditures $ (2) $ 351 $ 40
U. S. Steel common stock issued for employee/non-employee director stock plans $ 45 $ 46 $ 28
Capital expenditures funded by finance lease borrowings $ 90 $ 52 $ 18
Export Credit Agreement (ECA) financing $ 5 $ - $ 23
23. Transactions with Related Parties
Related party sales and service transactions are primarily related to equity investees and were $2,015 million, $1,942 million, and $1,311 million in 2023, 2022, and 2021, respectively.
Accounts payable to related parties include balances due to PRO-TEC Coating Company (PRO-TEC) of $137 million and $142 million at December 31, 2023, and 2022, respectively for invoicing and receivables collection services provided by
U. S. Steel on PRO-TEC's behalf. U. S. Steel, as PRO-TEC’s exclusive sales agent, is responsible for credit risk related to those receivables. U. S. Steel also provides PRO-TEC marketing, selling and customer service functions. Payables to other related parties totaled $2 million and $1 million at December 31, 2023, and 2022, respectively.
Purchases from related parties for outside processing services provided by equity investees amounted to $26 million, $27 million, and $38 million during 2023, 2022, and 2021, respectively. Purchases of iron ore pellets from related parties amounted to $157 million, $131 million, and $111 million for the years ended December 31, 2023, 2022, and 2021, respectively.
24. Leases
Operating lease assets consist primarily of office space, heavy mobile equipment used in our mining operations and facilities and equipment under operating service agreements for electricity generation and scrap processing. We also have operating lease assets for light mobile equipment and information technology assets. The Company also has short-term leases related to transportation services for which we apply the short-term lease exception. Significant finance leases primarily consist of heavy mobile equipment used in our mining operations. Variable lease payments are primarily related to operating service agreements where payment is solely dependent on consumption of certain services, such as raw material and by-product processing. Most long-term leases include renewal options and, in certain leases, purchase options. Generally, we are not reasonably certain that these options will be exercised. We have residual value guarantees under certain light mobile equipment leases. There is no impact to our leased assets for residual value guarantees as the potential loss is not probable (see “Other Contingencies” in Note 26 for further details). We do not have material restrictive covenants associated with our leases or material amounts of sublease income. From time to time, U. S. Steel may enter into arrangements for the construction or purchase of an asset and then enter into a financing arrangement to lease the asset. U. S. Steel recognizes leased assets and liabilities under these arrangements when it obtains control of the asset.
The following table summarizes the lease amounts included in our Consolidated Balance Sheet as of December 31, 2023.
(In millions) Balance Sheet Location December 31, 2023 December 31, 2022
Assets
Operating Operating lease assets (a)
$ 109 $ 146
Finance Property, plant and equipment (b)
176 126
Total Lease Assets $ 285 $ 272
Liabilities
Current
Operating Current operating lease liabilities $ 44 $ 49
Finance Current portion of long-term debt 43 25
Non-Current
Operating Noncurrent operating lease liabilities 73 105
Finance Long-term debt less unamortized discount and issue costs 137 98
Total Lease Liabilities $ 297 $ 277
(a) Operating lease assets are recorded net of accumulated amortization of $138 million and $142 million as of December 31, 2023, and December 31, 2022, respectively.
(b) Finance lease assets are recorded net of accumulated depreciation of $126 million and $86 million as of December 31, 2023, and December 31, 2022, respectively.
The following table summarizes lease costs included in our Consolidated Statement of Operations for the years ended December 31, 2023, December 31, 2022, and December 31, 2021.
(In millions) Classification Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021
Operating Lease Cost (a)
Cost of sales $ 54 $ 65 $ 69
Operating Lease Cost Selling, general and administrative expenses 15 14 14
Finance Lease Cost
Amortization Depreciation, depletion and amortization 42 26 21
Interest Interest expense 11 9 9
Total Lease Cost $ 122 $ 114 $ 113
(a) Operating lease cost recorded in cost of sales includes $12 million of variable lease cost for both the years ended December 31, 2023, December 31, 2022. Operating lease cost recorded in cost of sales includes $11 million of variable lease cost for the year ended December 31, 2021. Operating lease cost recorded in selling, general and administrative expenses includes $1 million of variable lease cost for both the years ended December 31, 2023, and December 31, 2022. An immaterial amount of variable lease cost was included in cost of sales and selling, general and administrative expenses for the year ended December 31, 2021. $1 million of short-term lease cost is included in cost of sales and selling, general and administrative expenses for the years ended December 31, 2023, December 31, 2022, and December 31, 2021.
Lease liability maturities as of December 31, 2023, are shown below.
(In millions) Operating Finance Total
2024 $ 50 $ 59 $ 109
2025 35 56 91
2026 23 49 72
2027 14 31 45
2028 7 12 19
After 2028 3 1 4
Total Lease Payments $ 132 $ 208 $ 340
Less: Interest 15 28 43
Present value of lease liabilities $ 117 $ 180 $ 297
Lease terms and discount rates are shown below.
December 31, 2023
Weighted average lease term
Finance 4 years
Operating 3 years
Weighted average discount rate
Finance 5.84 %
Operating 6.93 %
Supplemental cash flow information related to leases is as follows:
(In millions) Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 55 $ 66 $ 70
Operating cash flows from finance leases 11 9 9
Financing cash flows from finance leases 34 20 30
Right-of-use assets exchanged for lease liabilities:
Operating leases 14 20 40
Finance leases 90 52 18
25. Restructuring and Other Charges
During 2023, the Company recorded restructuring and other charges of $36 million, which relate primarily to Company-wide headcount reductions. Cash payments were made related to severance and exit costs of approximately $75 million.
During 2022, the Company recorded restructuring and other charges of $48 million, which consists of charges of $30 million related to the planned disposition of a component within the Flat-Rolled segment, $23 million related to headcount reductions under a voluntary early retirement program (VERP) offered at USSK, a $9 million favorable adjustment to the expected exit costs of indefinitely idled facilities, and $4 million of severance-related charges at other facilities. Cash payments were made related to severance and exit costs of approximately $95 million.
During 2021, the Company recorded restructuring and other charges of $128 million, which consists of charges of $29 million for Great Lakes Works, charges of approximately $89 million related to the planned disposition of a component within the Flat-Rolled segment, and environmental-related charges at other facilities of $10 million. Cash payments were made related to severance and exit costs of approximately $58 million.
Charges for restructuring and ongoing cost reduction initiatives are recorded in the period U. S. Steel commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. Charges related to the restructuring and cost reductions are reported in restructuring and other charges in the Consolidated Statements of Operations.
The activity in the accrued balances incurred in relation to restructuring during the years ended December 31, 2022, and December 31, 2023, were as follows:
(in millions) Employee Related Costs Exit Costs Non-cash Charges Total
Balance at December 31, 2021 $ 91 $ 149 $ - $ 240
Additional charges 58 (10) - $ 48
Cash payments/utilization (a)
(17) (89) - (106)
Balance at December 31, 2022 $ 132 $ 50 $ - $ 182
Additional charges 25 11 - 36
Release of prior accruals and other adjustments (b)
(2) (1) (3)
Cash payments/utilization (45) (30) - (75)
Balance at December 31, 2023 $ 110 $ 30 $ - $ 140
(a)$11 million, and $4 million of payments were made from the pension fund trust assets in the Employee Related Cost column during the years ended December 31, 2022, and 2023, respectively.
(b)Includes releases of accruals to reflect the current estimate of costs to complete approved restructuring programs.
26. 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 and the costs are reasonably estimable.
Asbestos matters - As of December 31, 2023, U. S. Steel was a defendant in approximately 915 active cases involving approximately 2,505 plaintiffs. The vast majority of these cases involve multiple defendants. About 1,545, or approximately 62 percent, of these plaintiff claims are currently pending in jurisdictions which permit filings with massive numbers of plaintiffs. At December 31, 2022, U. S. Steel was a defendant in approximately 920 cases involving approximately 2,510 plaintiffs. Based upon U. S. Steel’s experience in such cases, it believes that the actual number of plaintiffs who ultimately assert claims against U. S. Steel will likely be a small fraction of the total number of plaintiffs.
The following table shows the number of asbestos claims in the current year and the prior two years:
Period ended Opening
Number
of Claims Claims Dismissed, Settled and Resolved New
Claims Closing
Number
of Claims
December 31, 2021 2,445 200 260 2,505
December 31, 2022 2,505 230 235 2,510
December 31, 2023 2,510 235 230 2,505
The amount U. S. Steel accrues for pending asbestos claims is not material to U. S. Steel’s financial condition. However, U. S. Steel is unable to estimate the ultimate outcome of asbestos-related claims due to a number of uncertainties, including: (1) the rates at which new claims are filed, (2) the number of and effect of bankruptcies of other companies traditionally defending asbestos claims, (3) uncertainties associated with the variations in the litigation process from jurisdiction to jurisdiction, (4) uncertainties regarding the facts, circumstances and disease process with each claim, and (5) any new legislation enacted to address asbestos-related claims.
Further, U. S. Steel does not believe that an accrual for unasserted claims is required. At any given reporting date, it is probable that there are unasserted claims that will be filed against the Company in the future. The Company engages an outside valuation consultant to assist in assessing its ability to estimate an accrual for unasserted claims. This assessment is based on the Company's settlement experience, including recent claims trends. This analysis focuses on settlements made over the last several years as these claims are likely to best represent future claim characteristics. After review by the valuation consultant and U. S. Steel management, it was determined that the Company could not estimate an accrual for unasserted claims.
Despite these uncertainties, management believes that the ultimate resolution of these matters will not have a material adverse effect on U. S. Steel’s financial condition.
Environmental Matters - U. S. Steel is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. Changes in accrued liabilities for remediation activities where U. S. Steel is identified as a named party are summarized in the following table:
Year Ended December 31,
(In millions) 2023 2022
Beginning of period $ 126 $ 158
Accruals for environmental remediation deemed probable and reasonably estimable 15 20
Adjustments for changes in estimates (11) 3
Obligations settled (23) (55)
End of period $ 107 $ 126
Accrued liabilities for remediation activities are included in the following Consolidated Balance Sheet lines:
(In millions) December 31, 2023 December 31, 2022
Accounts payable $ 27 $ 32
Deferred credits and other noncurrent liabilities 80 94
Total $ 107 $ 126
Expenses related to remediation are recorded in cost of sales and were $13 million and $21 million for the years ended December 31, 2023, and December 31, 2022, respectively. It is not currently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Due to uncertainties inherent in
remediation projects and the associated liabilities, it is reasonably possible that total remediation costs for active matters may exceed the accrued liabilities by as much as 10 to 15 percent.
Remediation Projects
U. S. Steel is involved in environmental remediation projects at or adjacent to several current and former U. S. Steel facilities and other locations that are in various stages of completion ranging from initial characterization through post-closure monitoring. Based on the anticipated scope and degree of uncertainty of projects, we categorize projects as follows:
(1) Projects with Ongoing Study and Scope Development - Projects which are still in the development phase. For these projects, the extent of remediation that may be required is not yet known, the remediation methods and plans are not yet developed, and/or cost estimates cannot be determined. Therefore, significant costs, in addition to the accrued liabilities for these projects, are reasonably possible. There are two environmental remediation projects where additional costs for completion are not currently estimable, but could be material. These projects are at UPI formerly known as USS-POSCO Industries and the former steelmaking plant at Joliet, Illinois. As of December 31, 2023, accrued liabilities for these projects totaled $4 million for the costs of studies, investigations, interim measures, design and/or remediation. It is reasonably possible that additional liabilities associated with future requirements regarding studies, investigations, design and remediation for these projects could be as much as $8 million to $11 million.
(2) Significant Projects with Defined Scope - Projects with significant accrued liabilities with a defined scope. As of December 31, 2023, there are four significant projects with defined scope greater than or equal to $5 million each, with a total accrued liability of $60 million. These projects are: Gary Resource Conservation and Recovery Act (RCRA) (accrued liability of $23 million), Duluth Works (accrued liability of $11 million), Fairfield Works (accrued liability of $8 million) and the former Geneva facility (accrued liability of $18 million).
(3) Other Projects with a Defined Scope - Projects with relatively small accrued liabilities for which we believe that, while additional costs are possible, they are not likely to be significant, and also include those projects for which we do not yet possess sufficient information to estimate potential costs to U. S. Steel. There are four other environmental remediation projects which each had an accrued liability of between $1 million and $5 million. The total accrued liability for these projects at December 31, 2023, was $6 million. These projects have progressed through a significant portion of the design phase and material additional costs are not expected.
The remaining environmental remediation projects each have an accrued liability of less than $1 million each. The total accrued liability for these projects at December 31, 2023, was approximately $4 million. The Company does not foresee material additional liabilities for any of these sites.
Post-Closure Costs - Accrued liabilities for post-closure site monitoring and other costs at various closed landfills totaled $23 million at December 31, 2023, and were based on known scopes of work.
Administrative and Legal Costs - As of December 31, 2023, U. S. Steel had an accrued liability of $9 million for administrative and legal costs related to environmental remediation projects. These accrued liabilities were based on projected administrative and legal costs for the next three years and do not change significantly from year to year.
Capital Expenditures - For a number of years, U. S. Steel has made substantial capital expenditures to comply with various regulations, laws, and other requirements relating to the environment. Such capital expenditures totaled $70 million and $43 million In 2023 and 2022, respectively. U. S. Steel anticipates making additional such expenditures in the future, which may be material; however, the exact amounts and timing of such expenditures are uncertain because of the continuing evolution of specific regulatory requirements.
European Union (the EU) Environmental Requirements - Phase IV of the EU Emissions Trading System (the EU ETS) commenced on January 1, 2021, and will finish on December 31, 2030. The European Commission issued final approval of the updated 2021-2025 Slovak National Allocation table in February 2022. The Slovak Ministry of Environment has allocated 6.2 million metric tons of European Union Emission Allowances (EUA) at no charge (free allowances or free allocation) to USSE in April 2023. As of December 31, 2023, we have pre-purchased and settled approximately 1.8 million EUA totaling €147 million (approximately $163 million) to cover the expected 2023 shortfall of emission allowances and a portion of the 2024 shortfall. In September and October 2023, we have also entered into forward agreements to purchase and settle €56.5 million of EUA in January and February 2024, for the anticipated 2024 shortfall.
The EU’s Industrial Emissions Directive requires implementation of EU-determined best available techniques (BAT) for Iron and Steel production to reduce environmental impacts as well as compliance with BAT associated emission levels. Total capital expenditures for projects to go beyond BAT requirements were €138 million (approximately $153 million). These costs were partially offset by the EU funding received and may be mitigated over the next measurement periods if USSK complies with certain financial covenants, which are assessed annually. If we are unable to meet these covenants in the future, USSK might be required to provide additional collateral (e.g., bank guarantee) to secure 50 percent of the EU funding received. USSK complied with these covenants as of December 31, 2023, and no additional collateral will be required by the end of June 30, 2024. By this next assessment date, we expect that two projects of the total fifteen will
pass the sustainability monitoring and will be excluded from further assessment to provide additional collateral if the covenants are not met. The last assessment of financial covenants will be performed as of June 30, 2026.
Environmental indemnifications - Throughout its history, U. S. Steel has sold numerous properties and businesses and many of these sales included indemnifications and cost sharing agreements related to the assets that were divested. The amount of potential environmental liability associated with these transactions and properties is not estimable due to the nature and extent of the unknown conditions related to the properties divested and deconsolidated. Aside from the environmental liabilities already recorded as a result of these transactions due to specific environmental remediation activities and cases (included in the $107 million of accrued liabilities for remediation discussed above), there are no other known probable and estimable environmental liabilities related to these transactions.
Guarantees - The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $7 million at December 31, 2023.
Other contingencies - Under certain finance lease agreements covering various equipment, U. S. Steel has the option to renew the lease or to purchase the equipment at the end of the lease term. If U. S. Steel does not exercise the purchase option by the end of the lease term, U. S. Steel guarantees a residual value of the equipment as determined at the lease inception date (totaling approximately $12 million at December 31, 2023). No liability has been recorded for these guarantees as the potential loss is not probable.
The Company's BR2 project in Osceola, Arkansas qualifies for financing and related economic incentives associated with the acquisition, development, construction and operation of the facility. These incentives consist of advance lump-sum payments which are included in deferred credits and other noncurrent liabilities on the Consolidated Balance Sheet. In March 2022, the Company received a lump-sum payment of approximately $82 million as proceeds from the sale of a portion of expected future tax credits to be earned by the Company under the State of Arkansas's Recycling Tax Credit program. These funds are to be used primarily for the acquisition of project related equipment, however they may also be used for the training and development of new employees hired for the project. The Company is contingently liable for certain repayment penalties if the Company fails to meet certain employment requirements in any given period. In April 2022, the Company received a $3 million grant from Mississippi County, Arkansas, and in May 2022, the Company received a $50 million grant from the State of Arkansas Quick Action Closing Fund. Both grants pertain to the reimbursement of qualifying project costs. For each of these incentives and grants, the balance of deferred income will be recognized into Other gains, net in the accompanying Consolidated Statements of Operations on a systematic basis over the periods in which the Company earns the granted funds by complying with the investment and employment requirements of the grant programs.
We have incurred and expect to continue to incur significant expenses in connection with the pending Merger, including legal and investment banking fees. If the Merger is not consummated, we may under certain circumstances be required to pay to Purchaser a termination fee of $565 million.
Insurance - U. S. Steel maintains insurance for certain property damage, equipment, business interruption and general liability exposures; however, insurance is applicable only after certain deductibles and retainages. U. S. Steel is self-insured for certain other exposures including workers’ compensation (where permitted by law) and auto liability. Liabilities are recorded for workers’ compensation and personal injury obligations. Other costs resulting from losses under deductible or retainage amounts or not otherwise covered by insurance are charged against income upon occurrence.
U. S. Steel uses surety bonds, trusts and letters of credit to provide whole or partial financial assurance for certain obligations such as workers’ compensation. The total amount of active surety bonds, trusts and letters of credit being used for financial assurance purposes was approximately $192 million as of December 31, 2023, which reflects U. S. Steel’s maximum exposure under these financial guarantees, but not its total exposure for the underlying obligations. A significant portion of our trust arrangements and letters of credit are collateralized by the Credit Facility Agreement. The remaining trust arrangements and letters of credit are collateralized by restricted cash. Restricted cash, which is recorded in other current and noncurrent assets, totaled $40 million and $35 million at December 31, 2023, and December 31, 2022, respectively.
Capital Commitments - At December 31, 2023, U. S. Steel’s contractual commitments to acquire property, plant and equipment totaled $1.48 billion.
Contractual Purchase Commitments - U. S. Steel is obligated to make payments under contractual purchase commitments, including unconditional purchase obligations. Payments for contracts with remaining terms in excess of one year are summarized below (in millions):
2024 2025 2026 2027 2028 Later years Total
$515 $212 $178 $126 $73 $333 $1,437
The majority of U. S. Steel’s unconditional purchase obligations relate to the supply of industrial gases, and certain energy and utility services with terms ranging from 16 months to 12 years. Unconditional purchase obligations also include coke
and steam purchase commitments related to a coke supply agreement with Gateway Energy & Coke Company LLC (Gateway) under which Gateway is obligated to supply a minimum volume of the expected targeted annual production of the heat recovery coke plant, and U. S. Steel is obligated to purchase the coke from Gateway at the contract price. As of December 31, 2023, if U. S. Steel were to terminate the agreement, it may be obligated to pay in excess of $42 million.
In December 2023, we recognized liabilities of $86 million for unconditional purchase obligations as a result of the indefinite idling of Granite City Works.
Total payments relating to unconditional purchase obligations were approximately $787 million in 2023, $850 million in 2022, and $767 million in 2021.
27. Common Stock Issued and Repurchased
On October 25, 2021, the Board of Directors authorized a share repurchase program that allowed for the repurchase of up to $300 million of its outstanding common stock from time to time in the open market or privately negotiated transactions. On January 24, 2022, the Board of Directors authorized an additional $500 million under the share repurchase program.
On July 25, 2022, following the completion of the previously authorized $800 million share repurchase programs, the Board of Directors authorized a new share repurchase program that allows for the repurchase of up to $500 million of its outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. The Company's share repurchase program does not obligate it to acquire any specific number of shares.
U. S. Steel repurchased 7.1 million, 37.6 million, and 6.6 million shares of common stock for approximately $175 million, $849 million, and $150 million under these programs during 2023, 2022, and 2021, respectively. We do not expect to utilize the remainder of this authorization. The Merger Agreement prohibits us from engaging in additional share repurchases without the consent of Purchaser.
In February 2021, U. S. Steel issued 48.3 million shares of common stock for net proceeds of approximately $790 million.
FIVE-YEAR OPERATING SUMMARY (Unaudited)
(Thousands of tons, unless otherwise noted) 2023 2022 2021 2020 2019
Raw Steel Production
Gary, IN 5,587 5,326 5,664 4,675 4,974
Great Lakes, MI - - - 328 1,964
Mon Valley, PA 2,650 2,161 2,668 2,552 2,331
Granite City, IL 1,162 1,359 1,549 1,758 2,140
Total Flat-Rolled facilities 9,399 8,846 9,881 9,313 11,409
Mini Mill facility 2,953 2,650 2,688 - -
U. S. Steel Košice 4,395 3,839 4,931 3,366 3,903
Tubular facility 568 634 464 16 -
Total 17,315 15,969 17,964 12,695 15,312
Raw Steel Capability
Flat-Rolled 13,200 13,200 13,200 17,000 17,000
Mini Mill 3,300 3,300 3,300 - -
USSE 5,000 5,000 5,000 5,000 5,000
Tubular (c)
900 900 900 900 -
Total 22,400 22,400 22,400 22,900 22,000
Production as % of total capability:
Flat-Rolled 71 % 67 % 58 % 55 % 67 %
Mini Mill 89 % 80 % 81 % - % - %
USSE 88 % 77 % 99 % 67 % 78 %
Tubular (c)
63 % 70 % 52 % 7 % - %
Coke Production
Flat-Rolled 3,295 3,627 3,848 2,557 3,485
USSE 1,485 1,407 1,548 1,116 1,328
Total 4,780 5,034 5,396 3,673 4,813
Iron Ore Pellet Production (a)
Total 22,134 22,059 23,369 16,981 21,450
Steel Shipments by Segment (b)
Flat-Rolled 8,706 8,373 9,018 8,711 10,700
Mini Mill 2,424 2,287 2,230 - -
USSE 3,899 3,759 4,302 3,041 3,590
Tubular 478 523 444 464 769
Total steel shipments 15,507 14,942 15,994 12,216 15,059
Average Realized Price (dollars per net ton)
Flat-Rolled $ 1,030 $ 1,261 $ 1,172 $ 718 $ 753
Mini Mill $ 875 $ 1,134 $ 1,314 $ - $ -
USSE $ 873 $ 1,090 $ 966 $ 626 $ 652
Tubular $ 3,137 $ 2,978 $ 1,696 $ 1,271 $ 1,450
(a)Includes our share of production from Hibbing.
(b)Does not include intersegment shipments or shipments by joint ventures and other equity investees of U. S. Steel. Includes shipments from U. S. Steel to joint ventures and equity investees of substrate materials, primarily hot-rolled and cold-rolled sheets.
(c)The Fairfield Electric Arc Furnace commenced operation in October 2020. The 2020 production as a % of total capability amount is based on an October 1, 2020, start date.
FIVE-YEAR OPERATING SUMMARY (Unaudited) (Continued)
(Thousands of net tons) 2023 2022 2021 2020 2019
Steel Shipments by Market - North American Facilities (a)
Steel service centers 2,622 2,208 2,660 1,450 1,902
Further conversion:
Trade customers 2,669 2,935 2,385 2,063 2,823
Joint ventures (b)
211 256 490 415 819
Transportation and automotive (b)
2,893 2,631 2,372 2,012 2,620
Construction and construction products 1,422 1,261 1,524 1,295 1,120
Containers and packaging 571 706 959 913 652
Appliances and electrical equipment 507 509 679 497 570
Oil, gas and petrochemicals 447 494 426 430 725
All other 266 183 197 100 238
Total 11,608 11,183 11,692 9,175 11,469
Steel Shipments by Market - USSE
Steel service centers 848 839 995 690 740
Further conversion:
Trade customers 293 289 314 202 214
Transportation and automotive 636 619 590 517 676
Construction and construction products 1,319 1,052 1,346 775 1,048
Containers and packaging 312 423 449 435 440
Appliances and electrical equipment 172 225 266 194 220
Oil, gas and petrochemicals - 3 8 5 -
All other 319 309 334 223 252
Total 3,899 3,759 4,302 3,041 3,590
(a)Does not include shipments by joint ventures and other equity investees of U. S. Steel, but instead reflects the shipments of substrate materials, primarily hot-rolled and cold-rolled sheets, to those entities.
(b)PRO-TEC automotive substrate shipments are included in the Transportation and Automotive category.
FIVE-YEAR FINANCIAL SUMMARY (Unaudited) (Continued)
(Dollars in millions, except per share amounts) 2023 2022 2021 2020 2019
Net sales by segment:
Flat-Rolled $ 11,109 $ 12,872 $ 12,358 $ 7,279 $ 9,560
Mini Mill 2,678 3,047 3,516 - -
USSE 3,550 4,256 4,266 1,970 2,420
Tubular 1,552 1,616 809 646 1,191
Total reportable segments $ 18,889 $ 21,791 $ 20,949 $ 9,895 $ 13,171
Other 10 9 101 162 168
Intersegment sales (846) (735) (775) (316) (402)
Total $ 18,053 $ 21,065 $ 20,275 $ 9,741 $ 12,937
Segment earnings (loss) before interest and income taxes:
Flat-Rolled $ 418 $ 1,951 $ 2,630 $ (596) $ 196
Mini Mill 215 481 1,206 - -
USSE 4 444 975 9 (57)
Tubular 589 544 1 (179) (67)
Total reportable segments $ 1,226 $ 3,420 $ 4,812 $ (766) $ 72
Other (3) 22 (11) (39) 23
Items not allocated to segments (a)
(424) (282) 145 (270) (325)
Total earnings (loss) before interest and income taxes $ 799 $ 3,160 $ 4,946 $ (1,075) $ (230)
Net interest and other financial costs (248) (99) 602 232 222
Income tax expense (benefit) 152 735 170 (142) 178
Net earnings (loss) attributable to United States Steel Corporation $ 895 $ 2,524 $ 4,174 $ (1,165) $ (630)
Per common share:
- Basic $ 3.98 $ 10.22 $ 15.77 $ (5.92) $ (3.67)
- Diluted $ 3.56 $ 9.16 $ 14.88 $ (5.92) $ (3.67)
(a)See Note 4 to the Consolidated Financial Statements.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of U. S. Steel’s management, including the chief executive officer and chief financial officer, U. S. Steel conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, U. S. Steel’s chief executive officer and chief financial officer concluded that U. S. Steel’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
See “Item 8. Financial Statements and Supplementary Data - Management’s Reports to Stockholders - Internal Control Over Financial Reporting.”
Attestation Report of Independent Registered Public Accounting Firm
See “Item 8. Financial Statements and Supplementary Data - Report of Independent Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting
There have not been any changes in U. S. Steel’s internal control over financial reporting that occurred during the fourth quarter of 2023 which have materially affected, or are reasonably likely to materially affect, U. S. Steel’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. OTHER INFORMATION
U. S. Steel has an Insider Trading Policy governing the purchase, sale and other dispositions of its securities by directors, officers and employees that is reasonably designed to promote compliance with insider trading laws, rules and regulations and NYSE listing standards. The Insider Trading Policy is filed with this Form 10-K as Exhibit 19.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning the directors of U. S. Steel required by this item is incorporated and made part hereof by reference to the material appearing under the heading “Election of Directors” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, no later than 120 days after the end of the fiscal year. Information concerning the Audit Committee and its financial expert required by this item is incorporated and made part hereof by reference to the material appearing under the heading “Corporate Governance - Board Committees - Audit” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders. Information regarding the Nominating Committee required by this item is incorporated and made part hereof by reference to the material appearing under the heading “Corporate Governance - Board Committees - Corporate Governance & Sustainability” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders. Information regarding the ability of stockholders to communicate with the Board of Directors is incorporated and made part hereof by reference to the material appearing under the heading “Corporate Governance - Commitment to Stockholder Engagement - Communications from Stockholders and Interested Parties” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders. Information regarding compliance with Section 16(a) of the Exchange Act required by this item is incorporated and made part hereof by reference to the material appearing under the heading “Delinquent Section 16(a) Reports” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders. Information concerning the executive officers of U. S. Steel is contained in Part I of this Form 10-K under the caption “Information about our Executive Officers.”
U. S. Steel has adopted a Code of Ethical Business Conduct that applies to all of our directors and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. U. S. Steel will provide a copy of this code free of charge upon request. To obtain a copy, contact the Office of the Corporate Secretary, United States Steel Corporation, 600 Grant Street, Pittsburgh, Pennsylvania, 15219-2800 (telephone:
412-433-1121). The Code of Ethical Business Conduct is also available through the Company’s website at www.ussteel.com. U. S. Steel does not intend to incorporate the contents of our website into this Annual Report on Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated and made part hereof by reference to the material appearing under the heading “Compensation & Organization Committee Report” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
Plan Category (1) Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights (2) Weighted-average
exercise price of
outstanding options,
warrants and rights (3) Number of securities
remaining available for
future issuance under
equity compensation
plans excluding
securities reflected in
Column (1) (b)
Equity compensation plans approved by security holders (a)
9,676,983 $27.98 4,695,672
Equity compensation plans not approved by security holders(c)
- (one for one) -
Total 9,676,983 - 4,695,672
(a)The numbers in columns (1) and (2) of this row contemplate all shares that could potentially be issued as a result of outstanding grants under the 2005 Stock Incentive Plan and the 2016 Omnibus Incentive Compensation Plan, as amended and restated as of December 31, 2023. (For more information, see Note 15 to the Consolidated Financial Statements). Column (1) includes (i) 726,359 shares of common stock that could be issued for the Common Stock Units outstanding under the Deferred Compensation Program for Non-Employee Directors and (ii) 4,758,048 shares that could be issued for the 2,379,024 performance awards outstanding under the Long-Term Incentive Compensation Program (a program under the 2016 Omnibus Incentive Compensation Plan, as amended and restated). The calculation in column (2) does not include the Common Stock Units since the weighted average exercise price for Common Stock Units is one for one; that is, one share of common stock will be given in exchange for each unit of such phantom stock accumulated through the date of the director’s retirement. Also, the calculation in column (2) does not include the performance awards since the shares issued for performance awards can range from zero for one to two for one; that is, performance awards may result in up to 4,758,048 of common stock being issued (two for one), or some lesser number of shares (including zero shares of common stock issued), depending upon the Corporation’s common stock performance versus that of a peer group of companies or the Corporation's return on capital employed performance over a performance period.
(b)Represents shares available under the 2016 Omnibus Incentive Compensation Plan, as amended and restated.
(c)At December 31, 2023, U. S. Steel had no securities remaining for future issuance under equity compensation plans that had not been approved by security holders. Column (1) represents Common Stock Units that were issued pursuant to the Deferred Compensation Plan for Non-Employee Directors prior to its being amended to make it a program under the 2005 Stock Incentive Plan and 2016 Omnibus Incentive Compensation Plan, as amended and restated. The weighted average exercise price for Common Stock Units in column (2) is one for one; that is, one share of common stock will be given in exchange for each unit of phantom stock upon the director’s retirement from the Board of Directors. All future grants under this amended plan/program will count as shares issued under to the 2016 Omnibus Incentive Compensation Plan, as amended and restated, a stockholder approved plan.
Other information required by this item is incorporated and made part hereof by reference to the material appearing under the headings “Stock Ownership of Directors and Executive Officers” and “Stock Ownership of Certain Beneficial Owners” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item is incorporated and made part hereof by reference to the material appearing under the headings “Corporate Governance - Related Person Transactions Policy” and “Corporate Governance - Director Independence” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this item is incorporated and made part hereof by reference to the material appearing under the heading “Audit Fees” in U. S. Steel’s Proxy Statement for the 2024 Annual Meeting of Stockholders.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
A. Documents Filed as Part of the Report
1. Financial Statements and Supplementary Data
Financial Statements filed as part of this report are included in “Item 8 - Financial Statements and Supplementary Data”.
2. Financial Statement Schedules
See “Schedule II - Valuation and Qualifying Accounts and Reserves" for years ended December 31, 2023, 2022, and 2021. All other schedules are omitted because they are not applicable or the required information is contained in the applicable financial statements or notes thereto.
B. Exhibits
Exhibit No.
2. Plan of acquisition, reorganization, arrangement, liquidation or succession
(a) Agreement and Plan of Merger, dated as of December 18, 2023, by and among the Company, Parent, Merger Sub and NSC (solely as provided in Section 9.13 therein).**
Incorporated by reference to Exhibit 2.1 to United States Steel Corporation's Form 8-K filed on December 18, 2023, Commission File Number 1-16811.
(b) Call Option Equity Purchase Agreement, by and among U. S. Steel Holdco LLC, Big River Steel Holdings LLC, Pinnacle Mountain Holding Company III, LLC and Consolidated Steel Equity Investors, LLC, dated as of December 15, 2020.
Incorporated by reference to Exhibit 2.1 to United States Steel Corporation's Form 8-K filed on December 18, 2020, Commission File Number 1-16811.
3. Articles of Incorporation and By-Laws
(a) Amended and Restated Certificate of Incorporation of United States Steel Corporation, dated April 25, 2017
Incorporated by reference to Exhibit 3.1 to United States Steel Corporation's Form 8-K filed on April 28, 2017, Commission File Number 1-16811.
(b) Amended and Restated By-Laws of United States Steel Corporation, dated as of January 31, 2023.
Incorporated by reference to Exhibit 3.1 to United States Steel Corporation's Form 8-K filed on February 2, 2023, Commission File Number 1-16811.
4. Instruments Defining the Rights of Security Holders, Including Indentures
(a) Indenture between United States Steel Corporation and The Bank of New York Mellon (f/k/a The Bank of New York, dated as of May 21, 2007.
Incorporated by reference to Exhibit 4.1 to United States Steel Corporation’s Form 8-K filed on May 22, 2007, Commission File Number 1-16811.
(b) First Supplemental Indenture between United States Steel Corporation and The Bank of New York Mellon(f/k/a The Bank of New York, dated as of May 21, 2007).
Incorporated by reference to Exhibit 4.2 to United States Steel Corporation’s Form 8-K filed on May 22, 2007, Commission File Number 1-16811.
(c) Tenth Supplemental Indenture between United States Steel Corporation and The Bank of New York Mellon, dated as of February 11, 2021.
Incorporated by reference to Exhibit 4.1 to United States Steel Corporation’s Form 8-K filed on February 11, 2021, Commission File Number 1-16811.
(d) Indenture by and between United States Steel Corporation and The Bank of New York Mellon, dated as of October 21, 2019.
Incorporated by reference to Exhibit 4.1 to United States Steel Corporation’s Form 8-K filed on October 21, 2019, Commission File Number 1-16811.
(e) Indenture among Big River Steel LLC, BRS Finance Corp., BRS Intermediate Holdings LLC, each Guarantor that may become party thereto and U.S. Bank National Association, dated as of September 18, 2020.
Incorporated by reference to Exhibit 4.1 to United States Steel Corporation’s Form 8-K filed on January 19, 2021, Commission File Number 1-16811.
(f) Description of Securities.
Incorporated by reference to Exhibit 4.1 to United States Steel Corporation’s Form 10-K filed on February 14, 2020, Commission File Number 1-16811.
Certain long-term debt instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. U. S. Steel agrees to furnish to the Commission on request a copy of any instrument defining the rights of holders of long-term debt of U. S. Steel and of any subsidiary for which consolidated or unconsolidated financial statements are required to be filed.
10. Material Contracts
(a) Recapitalization and Equity Purchase Agreement by and among U. S. Steel Holdco LLC, BRS Stock Holdco LLC, Big River Steel Holdings LLC, the Equityholders of Big River Steel Corp. and Big River Steel Holdings LLC and United States Steel Corporation, dated as of September 30, 2019.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on October 1, 2019, Commission File Number 1-16811.
(b) Purchase and Sale Agreement by and among U. S. Steel Holdco LLC, United States Steel Corporation and TPG Growth II BDH, L.P, dated as of September 30, 2019.
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 8-K filed on October 1, 2019, Commission File Number 1-16811.
(c) Option Agreement by and between United States Steel Corporation and Stelco Inc., dated as of April 30, 2020. on and Stelco.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on April 30, 2020, Commission File Number 1-16811.
(d) Underwriting Agreement by and between United States Steel Corporation and Credit Suisse Securities (USA) LLC on behalf of the several Underwriters, dated February 8, 2021.
Incorporated by reference to Exhibit 1.1 to United States Steel Corporation’s Form 8-K filed on February 11, 2021, Commission File Number 1-16811.
(e) Membership Interest Purchase Agreement by and between United States Steel Corporation and Percy Acquisition LLC, dated June 7, 2021.**
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on June 8, 2021, Commission File Number 1-16811.
(f) Commitment Agreement by and among United States Steel Corporation, Banner Life Insurance Company, William Penn Life Insurance Company of New York and State Street Global Advisors Trust Company, dated November 9, 2021.**
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(g) Sixth Amended and Restated Credit Agreement, dated as of May 27, 2022, among United States Steel Corporation, the Subsidiary Guarantors from time to time party thereto, the Lenders party thereto, the LC Issuing Banks party thereto, and JPMorgan Chase Bank, N.A., as Administrative and Collateral Agent.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on June 3, 2022, Commission File Number 1-16811.
(h) Amendment No. 1 to Sixth Amended and Restated Credit Agreement, dated as of December 19, 2022, among United States Steel Corporation, the Subsidiary Guarantors from time to time party thereto, the Lenders party thereto, the LC Issuing Banks party thereto, and JPMorgan Chase Bank, N.A., as Administrative and Collateral Agent.**
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-K filed on February 3, 2023, Commission File Number 1-16811.
(i) Third Amended and Restated Borrower Security Agreement, dated as of May 27, 2022, between United States Steel Corporation and JPMorgan Chase Bank, N.A., as Collateral Agent.
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 8-K filed on June 3, 2022, Commission File Number 1-16811.
(j) Third Amended and Restated Subsidiary Security Agreement, dated as of May 27, 2022, between the Subsidiary Guarantors and JPMorgan Chase Bank, N.A., as Collateral Agent.
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 8-K filed on June 3, 2022, Commission File Number 1-16811.
(k) Second Amended and Restated Borrower Canadian Security Agreement, dated as of May 27, 2022, between United States Steel Corporation and JPMorgan Chase Bank, N.A., as Collateral Agent.
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 8-K filed on June 3, 2022, Commission File Number 1-16811.
(l) Agreement of Sale between United States Steel Corporation and The Industrial Development Board of the City of Hoover, dated as of October 1, 2019.
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 8-K filed on October 28, 2019, Commission File Number 1-16811.
(m) Loan Agreement between United States Steel Corporation and the Allegheny County Industrial Development Authority, dated as of October 1, 2019.
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 8-K filed on October 28, 2019, Commission File Number 1-16811.
(n) Amended and Restated Credit Agreement, dated December 22, 2022, among Exploratory Ventures, LLC, as Borrower, United States Steel Corporation, as Parent Guarantor, KFW IPEX-Bank GMBH, as Mandated Lead Arranger and ECA Structuring Bank, KFW IPEX-Bank GMBH, as Facility Agent and ECA Agent, and lenders party thereto from time to time.**
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on October 27, 2023, Commission File Number 1-16811.
(o) Agreement of Sale between United States Steel Corporation and The Industrial Development Board of the City of Hoover regarding $63,400,000 million 6.375% Environmental Improvement Revenue Bonds, Series 2020 (United States Steel Corporation Project), dated as of November 1, 2020.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on November 24, 2020, Commission File Number 1-16811.
(p) Loan Agreement dated between United States Steel Corporation and the Indiana Finance Authority regarding $33,300,000 Indiana Finance Authority Environmental Improvement Revenue Bonds, Series 2020A (United States Steel Corporation Project) and Indiana Finance Authority Environmental Improvement Revenue Refunding Bonds, Series 2020B (United States Steel Corporation Project), dated as of November 1, 2020.
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 8-K filed on November 24, 2020, Commission File Number 1-16811.
(q) ABL Credit Agreement by and among Big River Steel LLC, BRS Intermediate Holdings LLC, Goldman Sachs Bank USA and each lender party thereto, dated as of August 23, 2017.**
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(r) First Amendment to ABL Credit Agreement by and among Big River Steel LLC, BRS Intermediate Holdings LLC, Goldman Sachs Bank USA and each lender party thereto, dated as of September 10, 2020.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on January 19, 2021, Commission File Number 1-16811.
(s) Second Amendment to ABL Credit Agreement by and among Big River Steel LLC, BRS Intermediate Holdings LLC, Goldman Sachs Bank USA and each lender party thereto, dated as of July 23, 2021.
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-Q filed on July 30, 2021, Commission File Number 1-16811.
(t) Third Amendment to ABL Credit Agreement by and among Big River Steel LLC, BRS Intermediate Holdings LLC, Goldman Sachs Bank USA and each lender party thereto, dated as of December 19, 2022.**
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-K filed on February 3, 2023, Commission File Number 1-16811.
(u) Fourth Amendment to ABL Credit Agreement by and among BRS Intermediate Holdings LLC, Big River Steel LLC, BRS Finance Corp. and Goldman Sachs Bank USA and each lender party thereto, dated as of June 16, 2023.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on July 28, 2023, Commission File Number 1-16811.
(v) Bond Financing Agreement between Arkansas Development Finance Authority and each of Big River Steel LLC, BRS Finance Corp. and BRS Intermediate Holdings LLC relating to $265 million Arkansas Development Finance Authority Industrial Development Revenue Bonds (Big River Steel Project), Tax-Exempt Series 2020 (Green Bonds), dated as of September 10, 2020.
Incorporated by reference to Exhibit 10.2.1 to United States Steel Corporation’s Form 8-K filed on January 19, 2021, Commission File Number 1-16811.
(w) Definitions Annex relating to Arkansas Development Finance Authority Industrial Development Revenue Bonds (Big River Steel Project), Tax-Exempt Series 2020 (Green Bonds), dated as of September 10, 2020.
Incorporated by reference to Exhibit 10.2.2 to United States Steel Corporation’s Form 8-K filed on January 19, 2021, Commission File Number 1-16811.
(x) Bond Financing Agreement between Arkansas Development Finance Authority and each of Big River Steel LLC, BRS Finance Corp. and BRS Intermediate Holdings LLC relating to $487 million Arkansas Development Finance Authority Industrial Development Revenue Bonds (Big River Steel Project), Series 2019, dated as of May 31, 2019.
Incorporated by reference to Exhibit 10.3.1 to United States Steel Corporation’s Form 8-K filed on January 19, 2021, Commission File Number 1-16811.
(y) Definitions Annex relating to Arkansas Development Finance Authority Industrial Development Revenue Bonds (Big River Steel Project), Series 2019, dated as of May 31, 2019.
Incorporated by reference to Exhibit 10.3.2 to United States Steel Corporation’s Form 8-K filed on January 19, 2021, Commission File Number 1-16811.
(z) Loan Agreement between Arkansas Development Finance Authority and each of United States Steel Corporation and Exploratory Ventures, LLC relating to $290,000,000 Arkansas Development Finance Authority Environmental Improvement Revenue Bonds, Series 2022 (United States Steel Corporation Project) (Green Bonds), dated as of September 1, 2022.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on October 28, 2022, Commission File Number 1-16811.
(aa) EUR 300,000,000 Unsecured Sustainability Linked Revolving Credit Facility Agreement among U. S. Steel Košice, s.r.o., and ING Bank N.V., Komerèní banka, a.s., Slovenská sporiteľňa, a.s., UniCredit Bank Czech Republic and Slovakia , a.s., Československá Obchodná banka, a.s., and Citibank Europe plc, dated September 29, 2021.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on October 1, 2021, Commission File Number 1-16811.
(bb) Supplemental Agreement No. 9 between U. S. Steel Košice, s.r.o. and ING Bank N.V., dated December 3, 2021.
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(cc) First Supplemental Agreement, dated December 15, 2022, between U. S. Steel Košice, s.r.o., and ING Bank N.V., as Facility Agent, relating to an up to EUR 300,000,000 credit agreement dated September 29, 2021.**
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-K filed on February 3, 2023, Commission File Number 1-16811.
(dd) United States Steel Corporation 2005 Stock Incentive Plan, Effective April 26, 2005.*
Incorporated by reference to Appendix B to United States Steel Corporation’s Definitive Proxy Statement on Schedule 14A filed on March 11, 2005, Commission File Number 1-16811.
(ee) United States Steel Corporation 2005 Stock Incentive Plan, Amended and Restated Effective April 27, 2010.*
Incorporated by reference to Appendix A to United States Steel Corporation’s Definitive Proxy Statement on Schedule 14A filed on March 12, 2010, Commission File Number 1-16811.
(ff) United States Steel Corporation 2005 Stock Incentive Plan, Amended and Restated Effective April 29, 2014.*
Incorporated by reference to Appendix A to United States Steel Corporation’s Definitive Proxy Statement on Schedule 14A filed on March 14, 2014, Commission File Number 1-16811.
(gg) Form of Stock Option Grant under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10(x) to United States Steel Corporation’s Form 10-K filed on February 27, 2007, Commission File Number 1-16811.
(hh) Form of Performance Award Grant Agreement under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on April 26, 2011, Commission File Number 1-16811.
(ii) Form of Stock Option Grant Agreement under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on April 26, 2011, Commission File Number 1-16811.
(jj) Form of Restricted Stock Unit Retention Grant Agreement under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-Q filed on April 26, 2011, Commission File Number 1-16811
(kk) Form of Restricted Stock Unit Annual Grant Agreement under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-Q filed on April 26, 2011, Commission File Number 1-16811.
(ll) Form of Retention Performance Award Grant Agreement under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 8-K filed on July 2, 2012, Commission File Number 1-16811.
(mm) Form of Non-Qualified Stock Option Grant Agreement under the Long-Term Incentive Compensation Program, a program under the United States Steel Corporation 2005 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 29, 2015, Commission File Number 1-16811.
(nn) Administrative Regulations for the Long-Term Incentive Compensation Program under the United States Steel Corporation 2005 Stock Incentive Plan, Amended and Restated Effective May 28, 2013.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on May 30, 2013, Commission File Number 1-16811.
(oo) Administrative Regulations for the Long-Term Incentive Compensation Program under the United States Steel Corporation 2005 Stock Incentive Plan, Amended and Restated Effective February 25, 2014.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on March 3, 2014, Commission File Number 1-16811.
(pp) Administrative Procedures for the Long-Term Incentive Compensation Program under the United States Steel Corporation 2005 Stock Incentive Plan, as Amended and Restated, and under the United States Steel Corporation 2010 Annual Incentive Compensation Plan, as amended February 24, 2015.*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on April 29, 2015, Commission File Number 1-16811.
(qq) Administrative Procedures for the Long-Term Incentive Compensation Program under the United States Steel Corporation 2005 Stock Incentive Plan, as Amended and Restated, and under the United States Steel Corporation Annual Incentive Compensation Plan, Effective February 22, 2016.*
Incorporated by reference to Exhibit 10(kk) to United States Steel Corporation’s Form 10-K filed on February 29, 2016, Commission File Number 1-16811.
(rr) United States Steel Corporation Deferred Compensation Program for Non-Employee Directors, a program under the 2005 Stock Incentive Plan, effective as of November 29, 2005.*
Incorporated by reference to Exhibit 10(d) to United States Steel Corporation’s Form 10-K filed on February 28, 2012, Commission File Number 1-16811.
(ss) United States Steel Corporation 2010 Annual Incentive Compensation Plan, Effective April 27, 2010.*
Incorporated by reference to Appendix B to United States Steel Corporation’s Definitive Proxy Statement on Schedule 14A filed on March 12, 2010, Commission File Number 1-16811.
(tt) Form of Incentive Award Agreement under the United States Steel Corporation 2010 Annual Incentive Compensation Plan.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on April 29, 2015, Commission File Number 1-16811.
(uu) Administrative Regulations for the Executive Management Annual Incentive Compensation Program under the United States Steel Corporation 2010 Annual Incentive Compensation Plan, as amended January 27, 2014.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on January 31, 2014, Commission File Number 1-16811.
(vv) Administrative Procedures for the Executive Management Annual Incentive Compensation Program under the United States Steel Corporation 2010 Annual Incentive Compensation Plan, as amended January 27, 2015*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-Q filed on April 29, 2015, Commission File Number 1-16811.
(ww) Administrative Procedures for the Executive Management Annual Incentive Compensation Program under the United States Steel Corporation 2010 Annual Incentive Compensation Plan, as amended February 22, 2016.*
Incorporated by reference to Exhibit 10(ll) to United States Steel Corporation’s Form 10-K filed on February 29, 2016, Commission File Number 1-16811.
(xx) Administrative Procedures for the Executive Management Annual Incentive Compensation Program under the United States Steel Corporation 2010 Annual Incentive Compensation Plan, as amended November 1, 2016.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on November 2, 2016, Commission File Number 1-16811.
(yy) United States Steel Corporation Supplemental Thrift Program, Amended and Restated Effective July 31, 2013.*
Incorporated by reference to Exhibit 10.7 to United States Steel Corporation’s Form 10-Q filed on October 29, 2013, Commission File Number 1-16811.
(zz) United States Steel Corporation Supplemental Thrift Program, Amended and Restated Effective November 1, 2016.*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on November 2, 2016, Commission File Number 1-16811.
(aaa) United States Steel Corporation Supplemental Thrift Program, Amended and Restated Effective January 1, 2019.*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-Q filed on May 3, 2019, Commission File Number 1-16811.
(bbb) United States Steel Corporation Non Tax-Qualified Retirement Account Program, Amended and Restated Effective November 13, 2013.
Incorporated by reference to Exhibit 10(dd) to United States Steel Corporation’s Form 10-K filed on February 25, 2014, Commission File Number 1-16811.
(ccc) United States Steel Corporation Non Tax-Qualified Retirement Account Program, Amended and Restated Effective January 1, 2016.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on November 2, 2016, Commission File Number 1-16811.
(ddd) United States Steel Corporation Non Tax-Qualified Retirement Account Program, Amended and Restated Effective January 1, 2019.*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on May 3, 2019, Commission File Number 1-16811.
(eee) United States Steel Corporation Non Tax-Qualified Pension Plan, Amended and Restated Effective December 31, 2015.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on August 21, 2015, Commission File Number 1-16811.
(fff) United States Steel Corporation Executive Management Supplemental Pension Program, Amended and Restated Effective December 31, 2015.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 8-K filed on August 21, 2015, Commission File Number 1-16811.
(ggg) United States Steel Corporation Supplemental Retirement Account Program, Amended and Restated Effective January 1, 2016.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on November 4, 2015, Commission File Number 1-16811.
(hhh) United States Steel Corporation Supplemental Retirement Account Program, Amended and Restated Effective January 1, 2019.*
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-Q filed on May 3, 2019, Commission File Number 1-16811.
(iii) United States Steel Corporation Change in Control Severance Plan, Effective January 1, 2016.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on November 6, 2015, Commission File Number 1-16811.
(jjj) United States Steel Corporation Change in Control Severance Plan, Amended and Restated Effective July 28, 2020*.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on July 30, 2020, Commission File Number 1-16811.
(kkk) United States Steel Corporation Executive Severance Plan, Effective December 14, 2021.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on December 20, 2021, Commission File Number 1-16811.
(lll) United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective April 26, 2016.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 27, 2016, Commission File Number 1-16811.
(mmm) First Amendment to United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective February 28, 2017.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 26, 2017, Commission File Number 1-16811.
(nnn) United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Amended and Restated Effective April 28, 2020*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 8-K filed on May 1, 2020, Commission File Number 1-16811.
(ooo) United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Amended and Restated Effective April 27, 2021.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(ppp) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Retention Grant)*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on July 27, 2016, Commission File Number 1-16811.
(qqq) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Annual Grant)*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on July 27, 2016, Commission File Number 1-16811
(rrr) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan (Stock Option Grant).*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on July 27, 2016, Commission File Number 1-16811.
(sss) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Annual Grant).*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 27, 2018, Commission File Number 1-16811.
(ttt) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Retention Grant).*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on April 27, 2018, Commission File Number 1-16811.
(uuu) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (TSR Grant).*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on April 27, 2018, Commission File Number 1-16811.
(vvv) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (ROCE Grant).*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-Q filed on April 27, 2018, Commission File Number 1-16811.
(www) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (TSR Grant).*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on May 3, 2019, Commission File Number 1-16811.
(xxx) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Cash Award Grant Agreement (ROCE Grant).*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on May 1, 2020, Commission File Number 1-16811.
(yyy) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Retention Grant).*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on May 1, 2020, Commission File Number 1-16811.
(zzz) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (2021 Grants).*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(aaaa) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Cash Award Grant Agreement (2021 Grants).*
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(bbbb) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (2021 Grants).*
Incorporated by reference to Exhibit 10.6 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(cccc) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Retention Restricted Stock Unit Grant Agreement (2021 Grants).*
Incorporated by reference to Exhibit 10.7 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(dddd) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan TSR Performance Share Award Grant Agreement (2021 Grants).*
Incorporated by reference to Exhibit 10.8 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(eeee) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (2021 SVP Performance Awards)* **
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(ffff) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (2021 CEO Performance Award)* **
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(gggg) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Non-Qualified Stock Option Grant Agreement (2021 CEO PSO)* **
Incorporated by reference to Exhibit 10.6 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(hhhh) Form of United States Steel Corporation 2016 Omnibus Incentive Plan Performance Share Award Grant Agreement (ROCE Grant)*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on April 29, 2022, Commission File Number 1-16811.
(iiii) Form of United States Steel Corporation 2016 Omnibus Incentive Plan Performance Share Award Grant Agreement (TSR Grant)*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on April 29, 2022, Commission File Number 1-16811.
(jjjj) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (2023 ROCE Grants).*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on April 28, 2023, Commission File Number 1-16811.
(kkkk) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Share Award Grant Agreement (2023 TSR Grants).*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on April 28, 2023, Commission File Number 1-16811.
(llll) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (2023 Annual Grants).*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-Q filed on April 28, 2023, Commission File Number 1-16811.
(mmmm) Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (2023 Retention Grants).*
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-Q filed on April 28, 2023, Commission File Number 1-16811.
(nnnn) Administrative Procedures for the Executive Management Annual Compensation Incentive Program under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective February 27, 2018.*
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-Q filed on April 27, 2018, Commission File Number 1-16811.
(oooo) Administrative Procedures for the Executive Management Annual Incentive Compensation Plan under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective February 26, 2019.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-Q filed on May 3, 2019, Commission File Number 1-16811.
(pppp) Administrative Procedures for the Executive Management Annual Incentive Compensation Plan under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective February 25, 2020.*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-Q filed on May 1, 2020, Commission File Number 1-16811.
(qqqq) Administrative Procedures for the Executive Management Annual Incentive Compensation Plan under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective February 23, 2021.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 30, 2021, Commission File Number 1-16811.
(rrrr) Administrative Procedures for the Executive Management Annual Incentive Compensation Plan under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective February 28, 2023.*
Incorporated by reference to Exhibit 10.6 to United States Steel Corporation’s Form 10-Q filed on April 28, 2023, Commission File Number 1-16811.
(ssss) United States Steel Corporation Deferred Compensation Program for Non-Employee Directors, a program under the United States Steel Corporation 2016 Omnibus Incentive Plan, effective as of July 26, 2016, as amended on October 30, 2018.*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-K filed on February 15, 2019, Commission File Number 1-16811.
(tttt) United States Steel Corporation Deferred Compensation Program for Non-Employee Directors, a program under the United States Steel Corporation 2016 Omnibus Incentive Plan, effective as of July 26, 2016, as amended on October 28, 2019.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-K filed on February 14, 2020, Commission File Number 1-16811.
(uuuu) United States Steel Corporation Deferred Compensation Program for Non-Employee Directors, a program under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, Effective January 1, 2022.*
Incorporated by reference to Exhibit 10.7 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(vvvv) United States Steel Corporation Non-Employee Director Stock Program of the 2016 Omnibus Incentive Compensation Plan, Effective November 1, 2019.*
Incorporated by reference to Exhibit 10.2 to United States Steel Corporation’s Form 10-K filed on February 14, 2020, Commission File Number 1-16811.
(wwww) United States Steel Corporation Non-Employee Director Compensation Policy, Effective as of January 1, 2022.*
Incorporated by reference to Exhibit 10.8 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(xxxx) United States Steel Corporation Non-Employee Director Compensation Policy, Adopted as of December 14, 2021, Amended as of December 15, 2022.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 28, 2023, Commission File Number 1-16811.
(yyyy) Letter Agreement between Scott D. Buckiso and United States Steel Corporation, dated July 30, 2020.*
Incorporated by reference to Exhibit 10.4 to United States Steel Corporation’s Form 10-K filed on February 12, 2021, Commission File Number 1-16811.
(zzzz) Separation Agreement and Release by and between Kevin P. Bradley and United Stated Steel Corporation, dated October 7, 2019.*
Incorporated by reference to Exhibit 10.3 to United States Steel Corporation’s Form 10-K filed on February 14, 2020, Commission File Number 1-16811.
(aaaaa) Separation Agreement and Release by and between Douglas R. Matthews and United States Steel Corporation, dated December 24, 2020.*
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-K filed on February 12, 2021, Commission File Number 1-16811.
(bbbbb) Form of Offer Letter to Kenneth E. Jaycox Jr., dated September 19, 2020.*
Incorporated by reference to Exhibit 10.9 to United States Steel Corporation’s Form 10-K filed on February 11, 2022, Commission File Number 1-16811.
(ccccc) Special Transition Agreement and Release by and between Christine S. Breves and United States Steel Corporation, dated February 15, 2022.
Incorporated by reference to Exhibit 10.1 to United States Steel Corporation’s Form 10-Q filed on April 29, 2022, Commission File Number 1-16811.
(ddddd) Form of Offer Letter to Jessica T. Graziano, dated June 6, 2022.**
Incorporated by reference to Exhibit 10.5 to United States Steel Corporation’s Form 10-Q filed on July 29, 2022, Commission File Number 1-16811.
10.1
United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Non-Employee Directors - Base Retainer)
10.2
United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Non-Employee Directors - Chair Retainer)
10.3
United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Deferred Stock Unit Grant Agreement (Non-Employee Directors - Base Retainer)
10.4
United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Deferred Stock Unit Grant Agreement (Non-Employee Directors - Chair Retainer)
United States Steel Corporation Insider Trading Policy, effective February 27, 2023.
List of Subsidiaries
Consent of PricewaterhouseCoopers LLP
Powers of Attorney
31.1
Certification of Chief Executive Officer required by Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as promulgated by the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer required by Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as promulgated by the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Mine Safety Disclosure required under Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
96.1
Technical Report Summary relating to the Minntac and Keetac iron ore mines, dated February 1, 2024.
United States Steel Corporation Executive Officer Recoupment (Clawback) Policy, effective July 25, 2023.
101 The following financial information from United States Steel Corporation's Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Statement of Operations, (ii) the Consolidated Statement of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheet, (iv) the Consolidated Statement of Cash Flows, and (v) Notes to the Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Indicates management contract or compensatory plan or arrangement.
** Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Corporation hereby undertakes to furnish supplemental copies of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021
(millions of dollars)
Additions Deductions
Description Balance at
Beginning
of Period Charged to
Costs and
Expenses Charged
to Other
Accounts Charged to
Costs and
Expenses Charged
to Other
Accounts Balance
at End
of Period
Year ended December 31, 2023:
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts $ 38 $ 14 $ - $ - $ 14 $ 38
Investments and long-term receivables reserve 4 - - - 1 3
Deferred tax valuation allowance:
Domestic 116 - - 18 - 98
Foreign 3 - - - - 3
Year ended December 31, 2022:
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts $ 44 $ 17 $ - $ - $ 23 $ 38
Investments and long-term receivables reserve 4 - - - - 4
Deferred tax valuation allowance:
Domestic 159 18 - 61 - 116
Foreign 3 - - - - 3
Year ended December 31, 2021:
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts $ 34 $ 16 $ 4 $ - $ 10 $ 44
Investments and long-term receivables reserve 5 - - - 1 4
Deferred tax valuation allowance:
Domestic 793 86 25 745 - 159
Foreign 3 - - - - 3