United States Steel Corporation
J.P. Morgan Global High Yield
& Leveraged Finance Conference
February 29 – March 2, 2016
© 2011 United States Steel Corporation
United States Steel Corporation
Forward-looking Statements
This presentation contains information that may constitute “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. Generally, we have identified such forward-looking statements
by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,”
“aim,” “will” and similar expressions or by using future dates in connection with any discussion of, among
other things, operating performance, trends, events or developments that we expect or anticipate will occur
in the future, statements relating to volume growth, share of sales and earnings per share growth, and
statements expressing general views about future operating results. However, the absence of these words or
similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are
not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which,
by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the
Company’s actual results and financial condition may differ, possibly materially, from the anticipated results
and financial condition indicated in these forward-looking statements. Management believes that these
forward-looking statements are reasonable as of the time made. However, caution should be taken not to
place undue reliance on any such forward-looking statements because such statements speak only as of the
date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required by law. In
addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual
results to differ materially from our Company's historical experience and our present expectations or
projections. These risks and uncertainties include, but are not limited to the risks and uncertainties
described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31,
2015, and those described from time to time in our future reports filed with the Securities and Exchange
Commission.
United States Steel Corporation
2
Investment Highlights
Strength & opportunity
Global leader with balanced business mix
Proactively realigning operations to navigate challenging steel
markets
Carnegie Way resulting in stronger financial position to weather
the downturn
Significant liquidity position
Aggressively maximizing cash flow generation
Significant operating leverage to take advantage of industry
recovery
United States Steel Corporation
3
The Carnegie Way
The
Iconic
Corporation
Stockholder
value-creation strategy
Phase 1: Earn the right to grow
Phase 2: Drive and sustain profitable growth
Critical Success Factors
▪
▪
▪
▪
Relentless focus on economic profit
Customer focus: quality and agility
Competitive cost structure and footprint
Investment in innovation and R&D
Operating our core business processes “The Carnegie Way”
with standards and consistent execution
Commercial
Supply
Chain
Manufacturing
Procurement
Innovation
Functional
Support
High Performing Organization: Flexible organization, industry-leading capabilities,
aligned by Performance Scorecard and incentive metrics, with an accountable culture
Operating as a Principled Company:
Safety, Core Values, Code of Conduct, and Gary Principles
United States Steel Corporation
4
Strategic Approach
Carnegie Way transformation
Phase 1: Earning the right to grow in search of:
• Economic profits
• Customer satisfaction and loyalty
• Process improvements and focused investment
Phase 2: Driving profitable growth with:
• Innovation and Technology
• Differentiated customer solutions
• Focused M&A
United States Steel Corporation
5
Carnegie Way Benefits
A strong performance in 2015 and a strong start in 2016
2016 - By Category
$815 million of Carnegie Way benefits
realized in 2015
•Flat-Rolled
$647
•Tubular
$ 44
•U. S. Steel Europe
$115
•Other Businesses
$
9
11%
2%
50%
12%
37%
Manufacturing
Supply Chain & Logistics
SG&A
Other
2016 - By Segment
7% 1%
55%
8%
$250 million of carryover impact in 2016
from projects that were implemented at
various points throughout 2015
84%
Flat-rolled
Source: Company filings
U. S. Steel Europe
Tubular
United States Steel Corporation
Other Businesses
6
Carnegie Way Transformation Improving Earnings Power
2015 vs. 2014 Flat-Rolled EBITDA
$ Millions
$61/ton ̶ Carnegie Way Benefits
$1,166
Price
($1,071)
$155
$647
Volume
($2,303)
$1,716
2014
EBITDA
Commercial
Costs & Other
Income
Carnegie Way
2015
EBITDA
Note: For reconciliation of non-GAAP amounts see Appendix
Source: Company filings
United States Steel Corporation
7
Competitive Landscape
Strong operating leverage when conditions improve
Import Levels Declining but Still Remain at Elevated Levels
Market conditions
• Tubular segment
• U. S. Steel Europe
700
Import Tons (000s)
• Flat-Rolled segment
800
600
500
400
300
200
100
-
Imports & trade
• Tariffs announced
HRC
CRC
Galv
• Volume trends
Challenging Energy Market Fundamentals
2,500
• Energy
Rig Count
• Steelmaking raw materials
$100
2,000
$80
1,500
$60
1,000
$40
500
$20
North American Rig Count
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Jul-13
Sep-13
May-13
Mar-13
$0
Jan-13
0
Sources:
Import Data - US Department of Commerce
Rig Counts - Baker Hughes
WTI Crude - Federal Reserve, Bloomberg
USD/bbl
Commodity prices
$120
WTI Crude Oil
United States Steel Corporation
8
Aligning Operations with Demand in Challenging Steel Markets
Shifting production to gain operating efficiencies
Flat-Rolled
• Idled / closed 3 blast furnaces representing approximately 25% of our steelmaking capacity
•
Commenced permanent shut-down of most of Fairfield Works flat-rolled facilities in August 2015
•
Idled Granite City Works in December 2015
• Deconsolidated high cost, high legacy liability Canadian operations in September 2014
•
Shifted automotive production to U.S. facilities from USSC for 2016
• Consolidating production at certain finishing facilities where appropriate
• Operating Minntac plant at reduced capacity to control pellet inventory levels
• Idled Keetac plant
Tubular
• Eliminating / deferring spending across all locations and functions
• Postponed construction of electric-arc furnace at Fairfield Works
• Consolidating production at certain locations where appropriate
• Operating remaining facilities at significantly reduced levels
• Eliminating / deferring spending across all locations and functions
Preserving optionality to bring capacity back online as market recovers
Source: Company filings
United States Steel Corporation
9
Financial Overview
United States Steel Corporation
10
FY 2015 Financial Performance Summary
$ in millions
2015 Adjusted EBITDA
2015 Cash flow from operations
$359
$202
$110
Efficient working capital
management
$85
$136
$20
$93
$79
$51
($13)
Q1'15
Q2'15
Q3'15
Q4'15
FY'15
Gross debt
Q1'15
Q2'15
Q3'15
Q4'15
FY'15
$3,939
Cash
$3,082
$3,498
$3,161
FY'12
FY'13
FY'14
FY'15
Note: For reconciliation of non-GAAP amounts see slide 27
Source: Company filings
Maintaining strong cash
and liquidity a strategic
priority
Liquidity
R/C
$3,938
Positive adjusted EBITDA
despite lowest utilization
rate since 2009
$2,375
$2,358
$2,278
$570
$604
$1,788
$1,674
$1,728
$1,620
FY'12
FY'13
FY'14
FY'15
$1,354
$1.6 billion in undrawn
revolving credit facility
availability
•
$755
Includes a $1.5
billion US credit
facility maturing in
2020
United States Steel Corporation
11
2016 Outlook
2016 Adjusted EBITDA Guidance
•
•
At current market conditions, which include spot prices, import volumes and
supply chain inventory levels, we would expect 2016 adjusted EBITDA to be
near breakeven.
As overall market conditions improve we would expect adjusted EBITDA to
improve consistent with the pace and magnitude of any improvement
in market conditions.
•
We expect improved results for Other Businesses, primarily from real estate.
•
We expect lower pension and other benefits costs.
•
At current market conditions, we expect approximately $500 million of cash
benefits from working capital in 2016, primarily related to better inventory
management.
Source: Company filings
United States Steel Corporation
12
2016 Liquidity
Liquidity and cash flow (US$mm)
$2,375
$2,175
($350)
$755
$500
($350)
$555
$1,620
2015 Liquidity
$1,620
2016E Capex
2016E Debt service,
dividends, pension
and OPEB
2016E
Working capital
Revolving credit facilities availability
Net estimated effect on
cash in 2016, excluding
cash impacts from
operating results, is
negative $200 million
EBITDA greater than
$200 million needed to
be cash positive in 2016
2016E Liquidity *
Cash
* Assumes borrowing base supports full availability of credit facilities at 12/31/16
Source: Company filings and guidance
United States Steel Corporation
13
Four Strategic Imperatives for 2016 to Weather the Trough
1. Working capital improvements
2. Additional Carnegie Way benefits
3. Financial flexibility & liquidity
4. Profitability priorities
United States Steel Corporation
14
Investment Highlights
Strength & opportunity
Global leader with balanced business mix
Proactively realigning operations to navigate challenging steel
markets
Carnegie Way resulting in stronger financial position to weather
the downturn
Significant liquidity position
Aggressively maximizing cash flow generation
Significant operating leverage to take advantage of industry
recovery
United States Steel Corporation
15
Appendix
United States Steel Corporation
16
Global Leader
• 15th largest in global steel production in 2014
• 2nd largest North American flat-rolled producer
• Largest domestic supplier of Oil Country Tubular Goods (OCTG)
• One of the largest Central European flat-rolled producers
World apparent steel use (finished steel)
191
155
185
130
202
142
120
84
140
130
147
145
150
143
154
145
660
735
711
707
704
544
563
156
123
139
133
588
641
146
112
168
152
124
378
418
447
551
317
422
463
465
393
462
492
507
523
535
2000
2006
2007
2008
2009
2010
2011
2012
2013
2014
Rest of World
China
NAFTA
2015E 2016E
EU-27*
* EU-27 through 2013. EU-28 from 2014 forward.
Source: worldsteel Association
United States Steel Corporation
17
Flat-Rolled
Strong market share in value-added products
Annual raw steel production
capability – 17.0 million net
tons
Balanced facility capabilities
Tilden Mining Company
Minnesota Ore Operations
Balanced contract and spot
commercial position
Strong research and
development activities
Hibbing Taconite
Company
Worthington Specialty
Processing
USS-POSCO
Great Lakes Works
DESCO
Fairless
Gary Works
Plant
PRO-TEC
Mon Valley Works
Feralloy
Granite City Works
Processing
Corporation
Strong raw materials position
Self-sufficient North American
iron ore pellet production
capability
Significant portion of coal
requirements under multi-year
contracts
Double G
Fairfield
Works
Self-sufficient under normal
operating conditions in coke
making capability
Acero
Prime
Operations
Source: Company filings
Joint Ventures
United States Steel Corporation
18
Flat-Rolled
Strong market share in value-added products
Commercial Entities
creating
differentiated
customer solutions
in the automotive,
consumer,
industrial, service
center and mining
end markets
Balanced business
mix with strong
market share in
value-added
products
Continued
development of
advanced high
strength steels to
serve the needs of
the automotive
market
Source: Company filings
By Product - 2015
9%
3%
By Market - 2015
2%
Hot-rolled Sheet
Further Conversion
6%
4%
31%
24%
Cold-rolled Sheet
Coated Sheet
Steel Service Centers
6%
40%
7%
Transportation
Containers
Construction
Tin Mill Products
Appliances & Electrical
Semi-finished & Plates
33%
Market Position
19%
Exports
16%
Other
Significance
Automotive Solutions
Services domestic and transplant automakers in
North America
Metallurgically demanding applications with
specialized customer service and technical support
Consumer Solutions
Services the appliance, packaging, container and
construction markets
Just-in-time inventory requirements favor domestic
suppliers
Industrial Solutions
Services the industrial equipment and pipe and
tube manufacturing markets
Production costs globally competitive
Service Center Solutions
Services the service center and distributor
markets
Mining Solutions
Incorporates our Keetac and Minntac operations
as well as the mining joint ventures
Strong diversification through leading positions in key
end markets
Mini-mills typically do not make certain value-added
products
United States Steel Corporation
19
Tubular
Providing solutions to the energy industry for over a century
Largest domestic supplier of Oil Country Tubular Goods (OCTG)
• Substantial raw material self-sufficiency
• 2.8 million net tons of raw tube capacity
Domestic capabilities
• Seamless products
− 1.9” to 26” outside diameter and 0.140” to 2.312” wall
thickness
• Welded products
− 2.375” to 16” outside diameter and 0.154” to 0.670” wall
thickness
Products & services aligned with market needs
• OCTG and Standard & Line pipe
• Proprietary premium and semi-premium connections
• Rig Site Services
• Coupling production and threading
• Threading, inspection, and accessories
Source: Company filings
United States Steel Corporation
20
U. S. Steel Europe
Well positioned to serve growing markets
By Region- 2015
Key industries:
automotive,
construction, service
center, packaging and
conversion
6%
COKE
U. S. Steel Košice
Slovak Republic
Capacity: 5.0 MMNT
50%
44%
Automotive/appliance
galvanizing line
V4
Historically favorable
growth rates and
infrastructure
investment in primary
geographic market –
V4*
Rest of EU-28
By Product - 2015
Rest of World
By Market - 2015
11%
7%
16%
17%
31%
27%
Significant coke making
and power generating
capability
6%
10%
1%
20%
Semi-finished & Plates
Cold-rolled
Hot-rolled
Standard & Line Pipe
Coated
Tin Mill
5%
39%
10%
Construction
Appliances & Electrical
Steel Service Centers
Transportation
Containers
All Other
Further Conversion
* Visegrad Group – Czech Republic, Hungary, Poland and Slovakia
Source: Company filings
United States Steel Corporation
21
Pension and OPEB
Expense and funded status*
3.0
$2.7
OPEB - Underfunded Status
$ Billion
$2.2
2.0
$1.4
1.0
$0.6
$0.3
0.0
2011
2012
2013
2014
2015
Total - Underfunded Status
$602
6.0
$5.1
$ Billion
5.0
$4.9
4.0
$2.5
3.0
$1.6
2.0
$1.1
1.0
0.0
2011
2012
2013
2014
Major Assumptions:
Discount rate: 5.00% for 2011, 4.50% for 2012, 3.75% for 2013, 4.50% for 2014, 3.75% for 2015, and 4.25% for 2016E
Expected rate of return on assets: 8.00% in U.S. & 7.50% in Canada for 2011, 7.75% in U.S. & 7.25% in Canada for 2012 through 2014, 7.50% in U.S. for 2015 and 2016E
Includes U. S. Steel Canada up until the deconsolidation on September 16, 2014
* The retiree medical plan was remeasured as of 1/31/2016 due to the ratification of the 2015 Labor Agreements. A discount
United States Steel Corporation
rate of 4.00% was used in the remeasurement. The underfunded status of OPEB at 1/31/2016 totaled $0.6 billion.
2015
22
Carnegie Way Transformation Improving Earnings Power
2015 vs. 2014 Consolidated Adjusted EBITDA
$ Millions
$1,698
$202
($613)
$815
2015
Adjusted EBITDA
excl. Carnegie Way
Benefits
Carnegie Way Benefits
($5,933)
$3,622
2014
Adjusted EBITDA
Revenue
Cost & Other Income
excl. Carnegie Way
Benefits
2015
Adjusted EBITDA
Note: For reconciliation of non-GAAP amounts see slide 27
Source: Company filings
United States Steel Corporation
23
Carnegie Way Transformation Improving Earnings Power
2015 vs. 2014 Segment EBITDA
Flat-Rolled
$ Millions
Tubular
$ Millions
$61/ton ̶ Carnegie Way Benefits
$327
Price
($1,071)
$1,166
$74/ton ̶ Carnegie Way Benefits
Price
($128)
$155
$44
($115)
$647
Volume
($1,685)
Volume
($2,303)
$1,327
$1,716
2014
EBITDA
Commercial
Costs & Other
Income
Carnegie
Way
2015
EBITDA
2014
EBITDA
U. S. Steel Europe
$ Millions
$228
Commercial
Costs & Other
Income
Carnegie
Way
2015
EBITDA
$26/ton ̶ Carnegie Way Benefits
Price
($631)
$115
$162
$358
Volume
$92
2014
EBITDA
Commercial
Note: For reconciliation of non-GAAP amounts see slide 28
Source: Company filings
Costs & Other
Income
Carnegie
Way
2015
EBITDA
United States Steel Corporation
24
Adjusted Results
Reconciliation of adjusted EBITDA
FY 2015
4Q 2015
3Q 2015
2Q 2015
1Q 2015
FY 2014
($1,202)
($453)
($170)
($392)
($187)
$413
547
129
136
138
144
627
(655)
(324)
(34)
(254)
(43)
1,040
Loss on shutdown of coke production facilities
153
─
─
─
153
─
Loss on shutdown of Fairfield Works Flat-Rolled Operations (a)
91
─
91
─
─
─
Losses associated with U. S. Steel Canada Inc.
392
121
16
255
─
416
Granite City Works temporary idling charges
99
99
─
─
─
─
Impairment of equity investment
18
18
─
─
─
─
Restructuring and other charges (b)
78
47
12
19
─
─
Postemployment benefit actuarial adjustment
26
26
Impairment of carbon alloy facilities
─
─
─
─
─
195
Write-off of pre-engineering costs at Keetac
─
─
─
─
─
37
Gain on sale of real estate assets
─
─
─
─
─
(55)
Litigation reserves
─
─
─
─
─
70
Loss on assets held for sale
─
─
─
─
─
14
Curtailment gain
─
─
─
─
─
(19)
Adjusted EBITDA
$202
($13)
$85
$20
$110
$1,698
($ millions)
Reported (loss) earnings before interest and income taxes
(EBIT)
Depreciation expense
EBITDA
(a) Includes the shutdown of the blast furnace and associated steelmaking operations, along with most of the flat-rolled finishing operations at Fairfield Works, and
does not include the slab and rounds caster and #5 coating line.
(b) Consists primarily of employee related costs, including costs for severance, supplemental unemployment
United States Steel Corporation
benefits and continuation of health care benefits.
25
Adjusted Results
Reconciliation of segment EBITDA
Segment EBITDA – Flat-Rolled
FY 2015
4Q 2015
3Q 2015
2Q 2015
1Q 2015
FY 2014
($237)
($88)
($18)
($64)
($67)
$709
Depreciation
$392
$90
99
99
104
457
Segment EBITDA
$155
$2
$81
$35
$37
$1,166
FY 2015
4Q 2015
3Q 2015
2Q 2015
1Q 2015
FY 2014
($179)
($64)
($50)
($66)
$1
$261
64
16
14
17
17
66
($115)
($48)
($36)
($49)
$18
$327
FY 2015
4Q 2015
3Q 2015
2Q 2015
1Q 2015
FY 2014
Segment EBIT
$81
$6
$18
$20
$37
$133
Depreciation
$81
20
21
20
20
95
Segment EBITDA
$162
$26
$39
$40
$57
$228
($ millions)
Segment EBIT
Segment EBITDA – Tubular
($ millions)
Segment EBIT
Depreciation
Segment EBITDA
Segment EBITDA – U. S. Steel Europe
($ millions)
United States Steel Corporation
26