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 2023 Form 10-K for further discussion and analysis of our 2022 financial condition and results of operations.
Overview
Business Update
As previously disclosed, on December 18, 2023, the Company entered into the Merger Agreement by and among the Company, Purchaser, Merger Sub, and solely as provided in Section 9.13 therein, NSC. Pursuant to the Merger Agreement, and upon the
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terms and subject to the conditions described therein, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Purchaser (the “Merger”).
The parties have substantially complied with the Second Requests issued on April 3, 2024 and the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has now expired. In addition, all required regulatory approvals outside of the United States related to the Merger have been received. The closing conditions to the Merger include clearance by the Committee on Foreign Investment in the United States (“CFIUS”) under the Defense Production Act of 1950, as amended. Following referral of the transaction by CFIUS to the President of the United States, on January 3, 2025, the President of the United States issued an order prohibiting the Merger and requiring the parties to abandon the Merger Agreement within thirty days. On January 10, 2025, CFIUS granted an extension of that deadline to June 18, 2025.
On January 6, 2025, the Company, NSC and Purchaser jointly filed a lawsuit in the United States Court of Appeals for the District of Columbia Circuit alleging that the President’s order blocking the Merger was issued for purely political reasons, which are irrelevant to U.S. national security, challenging the decision by the President of the United States and the CFIUS process as violating the constitutional due process rights of the Company, NSC and Purchaser, as well as the applicable statute governing CFIUS and the Administrative Procedure Act, and as an exercise of power that exceeded the authority provided to the President of the United States under the applicable statute. On the same day, the Company, NSC and Purchaser also filed a lawsuit in the United States District Court for the Western District of Pennsylvania against Cleveland-Cliffs Inc. (“Cliffs”), Cliffs’ Chief Executive Officer Lourenco Goncalves, and the President of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (the “USW”), David McCall, for engaging in a coordinated series of anticompetitive and racketeering activities illegally designed to prevent any party other than Cliffs from acquiring the Company as part of an illegal campaign to monopolize critical domestic steel markets.
Segments Update
In 2024, the Company continued to execute on its strategy by investing in and completing its key strategic projects. U. S. Steel’s results in 2024 decreased compared to the previous year for the four reportable segments due to the following factors:
• North American Flat-Rolled: Flat-Rolled results decreased primarily due to lower sales volume across most products and lower sales price across most products.
• Mini Mill: Mini Mill results decreased primarily due to lower sales volume across most products and lower sales price across all products.
• U. S. Steel Europe: USSE results decreased primarily due to lower sales volume across most products and lower sales price across all products.
• Tubular: Tubular results decreased primarily due to lower sales price.
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 anticipate inflation related headwinds for certain raw materials and other costs, and sales prices and sales volumes may continue to have an adverse effect on our results.
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
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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 2024 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 Accounting Standards Codification (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 judgments 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 of consolidated inventories at both December 31, 2024, and December 31, 2023. 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.
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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 and private credit. For its U.S. pension, U. S. Steel has a target allocation for plan assets of 68 percent in fixed income investments. The balance is invested in equity securities, 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 2025. 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 78 percent in fixed income and private credit. The balance is primarily invested in equity securities, 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 Benefits plan for 2025.
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, 2024, the weighted average discount rate used for our pension and Other Benefit obligations was determined to be 5.90 percent and 5.90 percent, respectively, compared to the weighted average discount rate used of 5.49 percent and 5.58 percent, respectively, at December 31, 2023. 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 85 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 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 (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 5.80 percent for 2025. 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 $139 million in 2025 compared to $82 million in 2024. The increase in net periodic pension benefit cost in 2025 is primarily due to a decrease in expected asset return and an increase in amortized actuarial losses. Net periodic other benefit (credit) in 2025 is expected to be approximately $(44) million, compared to $(102) million in 2024. The expected decrease in the 2025 net periodic other benefit (credit) is primarily due to decreases in prior service credits and amortized actuarial gains. See Note 18 to the Consolidated Financial Statements, “Pensions and Other Benefits.”
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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)
Expected return on plan assets
Incremental (decrease) increase in:
Net periodic pension and other benefits costs for 2025
Discount rate
Incremental (decrease) increase in:
Net periodic pension and other benefits costs for 2025
Pension & other benefits obligations at December 31, 2024
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 long-lived assets for potential impairment at the asset group level. Our primary asset groups are flat-rolled, mini mill, USSE, welded tubular and seamless tubular.
In 2024, the Company recognized impairment charges of approximately $19 million for certain indefinitely idled assets at Granite City Works and certain permanently idled assets at Clairton Works. In 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 were recognized for the write-off of iron making and steel making assets at Great Lakes Works in 2022. The coil finishing processes at Granite City Works and Great Lakes Works continue to operate and remain components of the Company’s operating plans. These impairment charges were the result of actions impacting specific, identifiable assets and were not significantly adverse to the flat-rolled long-lived asset group. No triggering events that required an impairment evaluation of our long-lived asset groups were identified during the years ended December 31, 2024, 2023 and 2022.
Taxes – U. S. Steel records a valuation allowance, related to certain state and foreign net operating losses, state and foreign 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.
At the end of both 2024 and 2023, 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 four sites under the CERCLA as of December 31, 2024. 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 nine 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.
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U. S. Steel’s accrual for environmental liabilities for U.S. and international facilities as of December 31, 2024, and 2023 was $108 million and $107 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. Business—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, 2024, and 2023 are set forth in the following table:
Years Ended December 31,
(Dollars in millions, excluding intersegment sales)
% Change
Flat-Rolled
Mini Mill
USSE
Tubular
Total sales from reportable segments
Other
Net Sales
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:
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Steel Products (a)
Year Ended December 31, 2024 versus Year Ended December 31, 2023
Volume
Price
Mix
Other (C)
Net
Change
Flat-Rolled
Mini Mill
USSE
Tubular
(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, 2024, compared to the same period in 2023 were $15,640 million and $18,053 million, respectively.
• For the Flat-Rolled segment, the decrease in sales primarily resulted from decreased shipments (861 thousand tons) across most products and lower average realized prices ($17 per ton) across most products.
• For the Mini Mill segment, the decrease in sales primarily resulted from decreased shipments (117 thousand tons) from lower value products and lower average realized prices ($18 per ton) across all products.
• For the USSE segment, the decrease in sales primarily resulted from decreased shipments (321 thousand tons) across most products and lower average realized prices ($69 per ton) across all products.
• For the Tubular segment, the decrease in sales primarily resulted from lower average realized prices ($1,232 per ton) and mix changes to lower value products.
Operating Expenses
Union profit-sharing costs
Year Ended December 31,
(Dollars in millions)
Allocated to segment results
The amounts above represent profit-sharing amounts paid to active USW-represented employees and are included in cost of sales on the Consolidated Statements 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 $108 million in 2024 and $116 million in 2023.
Other benefit service cost included in cost of sales totaled $4 million in 2024 and $6 million in 2023.
Costs related to defined contribution plans totaled $48 million in 2024 and $50 million in 2023.
Selling, general and administrative expenses
Selling, general and administrative expenses were $435 million and $501 million for the years ended December 31, 2024, and December 31, 2023, respectively. The change between periods was primarily due to decreased costs related to pension and OPEB benefits and variable compensation.
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
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In December 2024, the Company temporarily idled Blast Furnace #3 at USSE until demand improves. It is expected that Blast Furnace #3 will be restarted in the first quarter of 2025 based on market conditions.
In 2023, the Company indefinitely idled its subsidiary in Pittsburg, California, USS-UPI, LLC (UPI), resulting in restructuring and other charges of $3 million and $30 million in 2023 and 2022, respectively. Also, in 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 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, 2024, the carrying value of the indefinitely idled tin mill operations assets at Gary Works is $65 million. Tin mill operations continue to operate at the Midwest plant.
At Great Lakes Works, the Company permanently idled the ironmaking operations in 2022, which resulted in non-cash impairment of $151 million. 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, 2024. The carrying value of the Lorain Tubular Operations assets is $50 million as of December 31, 2024.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expenses were $913 million in 2024 and $916 million in 2023.
Earnings from investees
Earnings from investees were $112 million in 2024 compared to $115 million in 2023. The decrease in 2024 from the prior year is primarily due to decreased earnings from Hibbing Development Company and Patriot Premium Threading Services, partially offset by our PRO-TEC joint venture.
Restructuring and other charges
During 2024, the Company recorded restructuring and other charges of $8 million, which related primarily to idling of certain coke-making facilities. 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, taxes, depreciation and amortization by segment
Segment performance is measured primarily on the basis of segment level earnings (loss) before interest, taxes, depreciation and amortization (EBITDA). EBITDA 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.
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Earnings (loss) before interest, taxes, depreciation and amortization by segment (a)
Year Ended December 31,
(Dollars in Millions)
Flat-Rolled
Mini Mill
USSE
Tubular
Other loss before interest, taxes, depreciation and amortization
Depreciation, depletion and amortization
Segment earnings before interest and income taxes
Other items not allocated to segments:
Restructuring and other charges (b)
Stock-based compensation expense
Asset impairment charges (c)
Environmental remediation charges
Strategic alternatives review process costs
Granite City idling costs
Other charges, net
Total earnings before interest and income taxes
(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) See Note 1 to the Consolidated Financial Statements for further details.
Segment results for Flat-Rolled
Year Ended December 31,
Change
(Dollars in Millions)
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Depreciation, depletion and amortization
Earnings before interest and income taxes
Gross margin
Raw steel production (mnt)
Capability utilization
Steel shipments (mnt)
Average realized steel price per ton
The decrease in Flat-Rolled EBITDA for 2024 compared to 2023 was primarily due to:
• lower average realized prices, including mix (approximately $50 million)
• decreased shipments (approximately $220 million)
• lower other sales (approximately $70 million)
• higher operating costs (approximately $110 million),
these changes were partially offset by:
• lower raw material costs, including inventory revaluations (approximately $90 million)
• lower energy costs (approximately $105 million)
• favorable equity affiliate income (approximately $70 million)
• lower other costs, primarily profit-based payments (approximately $95 million).
Gross margin for 2024 as compared to 2023 was unchanged.
Segment results for Mini Mill
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Year Ended December 31,
Change
(Dollars in Millions)
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Depreciation, depletion and amortization
Earnings before interest and income taxes
Gross margin
Raw steel production (mnt)
Capability utilization
Steel shipments (mnt)
Average realized steel price per ton
The decrease in Mini Mill EBITDA results for 2024 compared to 2023 was primarily due to:
• lower average realized prices, including mix (approximately $55 million)
• decreased shipments (approximately $140 million)
• higher other costs, primarily strategic projects startup costs (approximately $105 million),
these changes were partially offset by:
• lower raw material costs (approximately $150 million).
Gross margin for 2024 as compared to 2023 decreased primarily due to lower sales volume and price.
Segment results for USSE
Year Ended December 31,
Change
(Dollars in Millions)
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Depreciation, depletion and amortization
(Loss) earnings before interest and income taxes
Gross margin
Raw steel production (mnt)
Capability utilization
Steel shipments (mnt)
Average realized steel price per ton
The decrease in USSE EBITDA results for 2024 compared to 2023 was primarily due to:
• lower average realized prices, including mix (approximately $220 million)
• decreased shipments, including volume inefficiencies (approximately $70 million)
• lower other sales (approximately $5 million)
• higher operating costs (approximately $40 million),
these changes were partially offset by:
• lower raw material costs, including inventory revaluations and CO 2 accrual adjustments (approximately $215 million)
• lower energy costs (approximately $85 million)
• lower other costs (approximately $5 million)
• strengthening of the U.S. dollar versus the Euro (approximately $5 million).
Gross margin for 2024 as compared to 2023 was unchanged.
Segment results for Tubular
Year ended December 31,
Change
(Dollars in Millions)
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Depreciation, depletion and amortization
Earnings before interest and income taxes
Gross margin
Raw steel production (mnt)
Capability utilization
Steel shipments (mnt)
Average realized steel price per ton
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The decrease in Tubular EBITDA results for 2024 compared to 2023 was primarily due to:
• lower average realized prices (approximately $520 million)
• decreased shipments (approximately $35 million),
these changes were partially offset by:
• lower raw material costs (approximately $20 million)
• lower other costs, primarily variable compensation (approximately $30 million).
Gross margin for 2024 as compared to 2023 decreased primarily as a result of lower average realized prices.
Results for Other
The Other category had a loss before interest, taxes, depreciation and amortization of $7 million for the year ended December 31, 2024, compared to a loss before interest, taxes, depreciation and amortization of $3 million for the year ended December 31, 2023.
Net Interest and Other Financial Costs
Year Ended December 31,
(Dollars in millions)
Interest expense
Interest income
Loss on debt extinguishment
Other financial costs
Net periodic benefit income
Net gain from investments related to active employee benefits
Net interest and other financial benefits
Net interest and other financial benefits declined in 2024 compared to 2023 primarily due to reduced net periodic benefit income from increases in actuarial losses, reduced investment gains related to active employee benefits from lower 2024 asset performance, and decreased interest income from a lower cash balance. These were partially offset by lower interest expense as a result of increased capitalized interest. 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, 2024, was $54 million compared to an income tax expense of $152 million in 2023. 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 $59 million related to the 2023 federal and state income tax returns.
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 2024 were $384 million compared to net earnings of $895 million in 2023. 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 $919 million in 2024 compared to $2,100 million in 2023. The decrease in 2024 compared to 2023 was primarily due to lower net earnings and changes in working capital. 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 increased by 7 days in the fourth quarter of 2024 from the fourth quarter of 2023 as shown below:
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Cash Conversion Cycle
$ millions
Days
$ millions
Days
Accounts receivable, net (a)
+ Inventories (b)
- Accounts Payable and Other Accrued Liabilities (c)
= Cash Conversion Cycle (d)
(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 days in our cash conversion cycle in comparison to the prior year increased primarily from higher inventory levels in our Mini Mill segment due to the BR2 start-up and lower net sales in the fourth quarter of the current year compared to the same period in the prior year.
The LIFO inventory method is the predominant method of inventory costing for our Flat-Rolled and Tubular segments. The FIFO and moving average methods are the predominant inventory costing methods for our Mini Mill segment and the FIFO method is the predominant inventory costing method for our USSE segment. 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, 2024, and 2023, the replacement cost of the LIFO inventory was higher by approximately $1,143 million and $1,248 million, respectively.
Net cash provided by operating activities for 2024 and 2023 reflects employee benefits payments as shown in the following table.
Benefits Payments for Employees
Year Ended December 31,
(Dollars in millions)
Other employee benefits payments not funded by trusts
Payments to a multiemployer pension plan
Pension related payments not funded by trusts
Reductions in cash flows from operating activities
Net Cash Used in Investing Activities
Net cash used in investing activities was $2,276 million in 2024 compared to $2,568 million in 2023. The decrease in net cash used in investing activities was primarily due to decreased capital expenditures (discussed in more detail below).
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Capital expenditures in 2024 were $2,287 million compared to $2,576 million in 2023. Mini Mill capital expenditures were $1,641 million and included $1,368 million for BR2, exclusive of the air separation unit, which began operations during the fourth quarter, as well as spending for the dual Galvalume®/galvanized coating and color coating lines at the existing Big River Steel facility. Flat-Rolled capital expenditures were $495 million which includes spending for the DR grade pellet facility at Keetac, as well as for mining equipment, blast furnace repairs and a stove rebuild at Gary Works, and other infrastructure and environmental projects across the Flat-Rolled footprint. USSE capital expenditures were $118 million and included spending for the blast furnace stove repairs and upgrades, enterprise resource planning (ERP) project, 5-stand control system upgrades, and various other projects. Tubular capital expenditures were $33 million and included spending to support steelmaking, infrastructure, and environmental projects within the Tubular footprint. Other businesses had no capital expenditures.
Net Cash used in Financing Activities
Net cash used in financing activities was $199 million for the twelve months ended December 31, 2024, compared to net cash used in financing activities of $98 million for the same period in 2023. The period over period change in financing activities was primarily due to the absence of proceeds received from the issuance of long-term debt in the current year period, partially offset by the absence of repurchases of common stock in the current year period.
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. The €150 million (approximately $156 million) USSK Credit Agreement contains certain USSK specific financial covenants. The USSK Credit Agreement requires USSK to maintain a net debt to EBITDA ratio of less than 3.50:1 (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, 2024 USSK was in compliance with the EBITDA Ratio Covenant. 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, 2024. 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, 2024. 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
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In the third quarter of 2022, the Board of Directors authorized a 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. In the twelve months ended December 31, 2024 no c ommon stock was repurchased under our share repurchase program. We do not expect to utilize the remainder of this authorization as 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 Repurchased” for further details.
Capital Requirements
Capital expenditures for 2025 are expected to total approximately $1.0 billion and are significantly lower than 2024 due to the on time completion of several strategic projects as well as the nearing completion and commissioning of the remaining strategic projects to expand our competitive advantages in low-cost iron ore, mini mill steelmaking and best-in-class finishing capabilities.
U. S. Steel’s contractual commitments to acquire property, plant and equipment at December 31, 2024, totaled $683 million.
Liquidity
The following table summarizes U. S. Steel’s liquidity as of December 31, 2024:
(Dollars in millions)
Cash and cash equivalents
Amount available under Credit Facility Agreement
Amount available under Big River Steel - Revolving Line of Credit
Amounts available under USSK Credit Agreement and USSK Credit Facility
Total estimated liquidity
As of December 31, 2024, $171 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 2025 planned strategic capital expenditures, working capital requirements, debt service, and operating costs and employee benefits for our operations. Our available liquidity at December 31, 2024, 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 capital expenditures, scheduled debt maturities, repurchase of debt, dividends, contributions to employee benefit plans and any amounts that may ultimately be paid
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in connection with contingencies, are expected to be funded by a combination of internally generated funds (including asset sales), 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 $95 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 45 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 Statements 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 Sheets and payments on the obligations by our suppliers are included in cash used in operating activities in the Consolidated Statements of Cash Flows. As of December 31, 2024, accounts payable and accrued expenses included $62 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, 2024, 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
through
2028 through
Beyond
Debt (including interest) and finance leases (a)
Operating leases (b)
Contractual purchase commitments (c)
Capital commitments (d)
Environmental commitments (d)
Steelworkers Pension Trust (e)
Employee related benefits (f)
Total contractual obligations
(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, 2024, and the effect such commitments could have on our liquidity and cash flows in future periods.
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(Dollars in millions)
Scheduled Reductions by Period
Commercial Commitments
Total
through
through
Beyond
Standby letters of credit (a)
Surety bonds (a)
Funded Trusts (a)
Total commercial commitments
(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)
North America:
Capital
Compliance
Operating & maintenance
Remediation (a)
Total North America
USSE:
Capital
Compliance
Operating & maintenance
Remediation (a)
Total USSE
Total U. S. Steel
(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 4 percent of total capital expenditures in 2024, 3 percent in 2023 and 2 percent in 2022.
Environmental compliance expenditures represented 2 percent of U. S. Steel’s total costs and expenses in 2024, 2023, and 2022. Remediation spending during 2022 through 2024 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, 2024, and December 31, 2023. 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.
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(Dollars in millions)
Beginning Balance
Plus: Additions
Adjustments for changes in estimates
Less: Obligations settled
Ending Balance
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 $156 million in 2025, $6 million of which is related to projects at USSE. U. S. Steel’s environmental expenditures for 2025 for operating and maintenance and for remediation projects are expected to be approximately $273 million and $65 million, respectively, of which approximately $14 million and $5 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 2025 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.
