Imperial building in Chicago Built with U.S.S.
CONTENTS Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Message From Our Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PART I Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Item 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Item 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 37 Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . 49 EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . . .. 50 Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 52 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . 82 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. F-1 ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Item 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Item 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . 85 Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . 86 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . 86
PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . 87 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 GLOSSARY OF CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 SUPPLEMENTARY DATA DISCLOSURES ABOUT FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 96 TOTAL NUMBER OF PAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 99
FINANCIAL HIGHLIGHTS Dollars in millions, except per share data
2010
Net Sales
2009
2008
$23,574
$11,052
$16,873
Income From Operations
3,069
(1,684)
1,213
Net Income
2,112
(1,401)
879
Balance Sheet Data at December 31
2010
Total Assets
2009
2008
$16,087
$15,422
$15,632
Debt
3,145
3,145
3,257
Stockholders’ Equity
4,895
4,895
5,531
Total Capitalization
8,040
8,040
8,788
Balance Sheet Data at December 31
2009
2010
2008
Net Income Per Share - Basic
$18,04
$10,42
$7,44
17,96
10,42
7,40
- Basic
117,102
134,469
118,090
- Diluted
117,621
134,469
118,815
- Diluted Weighted Average Shares, In Thousands
At U.S.S. factory
WHILE 2011 WILL be remembered for the
historic financial crisis and global economic downturn that dramatically affected United States Steel Corporation, our employees and their families, and the customers and suppliers we do busi-ness with every day, we must also reflect on the continued impro-vement in our safety performance during this challenging period.
At U.S.S. factory
A MESSAGE FROM OUR CHAIRMAN
W
hile 2009 will be remembered for the historic fi nancial crisis and global economic downturn that dramatically affected United States Steel Corporation, our employees and their families, and the customers and suppliers we do business with every day, we must also refl ect on the continued improvement in our safety performance during this challenging period. The fi ve-year trends for both our global rate of recordable injuries and our global days away from work rate continued to refl ect the hard work and commitment of our workforce to our company’s most important core value, showing improvements of 42 percent and 60 percent, respectively. Despite the volatile business climate in 2009, our employees remained focused on performing their responsibilities safely every day and making sure that their co-workers did the same. As business conditions improve and more of our colleagues return to work, we will continue to actively engage our employees to help ensure ongoing workplace safety improvement – improvement that will bring us closer to our goal of zero injuries and incidents across our company. The global economic crisis that began during the fourth quarter of 2008 and continued throughout 2009 created
prolonged periods of uncertainty and instability in the markets we serve. This resulted in dramatic, unprecedented reductions in demand for nearly all of our product lines. Our strong fi nancial performance and balanced approach to capital allocation in recent years positioned our company well at the start of the recession, but John P. Surma there was no way for us Chairman of the Board of Directors to escape the effects of and Chief Executive Officer the downturn given the extent of its reach. As a result, we took a number of steps throughout the year to enhance our liquidity, maintain a solid balance sheet and position us for success in the longer term. Those measures included: idling all or portions of numerous steelmaking, fi nishing, iron ore processing and tubular operations
in the United States, Canada and Europe to match our customers’ lower demand requirements; reducing our quarterly dividend; completing successful offerings of Senior Convertible Notes and common stock; renegotiating the provisions of existing fi nancial covenants with certain lenders; curtailing capital spending; initiating substantial cost reduction activities at all locations; reducing our workforce through layoffs, restructurings and our Voluntary Early Retirement Program; reaching an agreement with the United Steelworkers to defer certain mandatory retiree trust contributions; freezing hiring and annual merit-based salary increases; suspending the company match on our 401(k) Program; and reducing fees for our Board of Directors and base salaries for all general managers and executives. As our company’s senior leader, I thought it appropriate that I should have the largest salary reduction of 20 percent, and I also declined to be considered for any long-term incentive grants in 2009. These were very diffi cult decisions that were given careful and thoughtful consideration. We realized the profound impact these actions would have on our shareholders as well as our employees, their families and the communities where we operate and live, but the diffi cult steps we took are now enabling our company to take advantage of what appears to be the very early stages of a gradual economic recovery. While we were not alone in dealing with this diffi cult economic environment, our company can be proud of the way our entire workforce responded. The thousands of talented men and women who work at our facilities
around the world drew on their diverse backgrounds and experiences to reduce and eliminate costs where possible, identify new approaches that helped to streamline our organization, and preserve our cash and liquidity, all while maintaining a strong focus on safety and a commitment to customer service. We will continue to closely monitor the economy’s overall direction in the months ahead and employ the same balanced, responsible approach to managing our company’s affairs that has steered U. S. Steel through prior market downturns during our 100-plus year history. While the return of more normalized steel consumption rates around the world will play an important role in our company’s ability to return to profi tability, several key public policy issues – including trade, particularly as it relates to China, and climate change – could also have an impact on our operations.
Global OSHA Recordable Injury Rate Per 200,000 Hours Worked 2010
2009
2008
2007
2006 0.0
0.5
1.0
1.5
2.0
2.5
Portland Steel Bridge built with U.S.S.
Despite the volatile business
climate, our employees remained focused on performing their
responsibilities safely every day and making sure that their co-workers did the same.
We continued to take an active role in efforts to defend and enforce trade laws in the areas in which we operate. Those efforts included joining other tubular products manufacturers and the United Steelworkers in fi ling trade cases against China related to several types of tubular goods exported to the United States. The favorable results of those cases to date highlight China’s ongoing failure to abide by agreed-upon international obligations as well as the need for aggressive enforcement of existing trade laws in order to maintain a level playing fi eld. We will continue to pursue all appropriate measures in this area to ensure that our company’s right to participate in global steel industry trading that is both free and fair remains intact. The climate change policy debate accelerated this year due to highprofi le international summits designed to foster agreement among nations about this issue, as well as ongoing efforts by countries to legislate and regulate greenhouse gas emissions. In our opinion, no global climate change policy solution can be achieved unless all countries participate in the process on comparable terms. U. S. Steel, as well as the steel trade associations to which we belong, continued to educate policymakers on the signifi cant voluntary progress we have made to reduce energy consumption and greenhouse gas emissions as well as the important role steel as a material can – and must – play in worldwide sustainability efforts moving forward. We will remain actively
Global Days Away From Work Injury Rate Per 200,000 Hours Worked 2010
2009
2008
2007
2006 0.0
0.2
0.4
0.6
0.8
1.0
engaged in this area to ensure that manufacturing jobs from developed nations do not migrate to countries where a lack of carbon constraints provide them with a relative cost advantage and the world with substantially increased global greenhouse gas emissions – defi nitely a lose-lose proposition. While the return of more normalized steel consumption rates around the world will play an important role in our company’s ability to return to profi tability, several key public policy issues – including trade, particularly as it relates to China, and climate change – could also have an impact on our operations. Throughout 2009, we invested considerable time and effort to ensure that our industry’s and company’s voices were heard on these matters, which resulted in some positive outcomes.
Sincerely,
John P. Surma
Chairman of the Board of Directors and Chief Executive Offi cer
At U.S.S. factory
UNITED STATES STEEL CORPORATION www.ussteel.com