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Forward-looking Statements
This presentation contains forward-looking statements with respect to market conditions, operating costs, shipments and prices. Factors that could affect market conditions, costs, shipments and prices for both North American and European operations include: (a) foreign currency fluctuations and related activities; (b) global product demand, prices and mix; (c) global and company steel production levels; (d) plant operating performance; (e) natural gas, electricity, raw materials and transportation prices, usage and availability; (f) international trade developments, including court decisions, legislation and agency decisions on petitions and sunset reviews; (g) the impact of fixed prices in energy and raw materials contracts (many of which have terms of one year or longer) as compared to short-term contract and spot prices of steel products; (h) changes in environmental, tax, pension and other laws; (i) the terms of collective bargaining agreements; (j) employee strikes or other labor issues; and (k) U.S. and global economic performance and political developments. Domestic steel shipments and prices could be affected by import levels and actions taken by the U.S. Government and its agencies, including those related to CO2 emissions, climate change and shale gas development. Economic conditions and political factors in Europe and Canada that may affect U. S. Steel Europes and U. S. Steel Canadas results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) fiscal instability; (p) political issues; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures. We present adjusted net income and adjusted net income per diluted share, which are non-GAAP measures, as an additional measurement to enhance the understanding of our operating performance and facilitate a comparison with that of our competitors. In accordance with safe harbor provisions of the Private Securities Litigation Reform Act of 1995, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward-looking statements have been included in U. S. Steels Annual Report on Form 10-K for the year ended December 31, 2012, and in subsequent filings for U. S. Steel.
United States Steel Corporation 2
$150
$146 $113
$100
$59
$0.25 $0.00
$38
$0
$ per share
$ Millions
$50
$0.27
Positive reportable segment and other businesses income from operations for eight consecutive quarters
($0.14)
($50)
($20)
($0.25)
($0.41)
($59)
($0.50)
Operating income per ton increased $6 from third quarter, and $19 from fourth quarter 2012
($0.75)
Reportable segment and other businesses income from operations Adjusted net income Adjusted diluted EPS
$752 $721
$75
$700
$50
Improving spot price momentum maintained throughout the fourth quarter Lead times for value-added products extended during the fourth quarter Outages completed efficiently and repairs and maintenance spending discipline maintained
$82
$25
$87
$600
$0
$11
$500
$400
Shipments
(net tons in thousands)
4Q 2012 3,924
3Q 2013 3,428
4Q 2013 3,470
$1,543
$1,509
$1,500
$50
$1,624
Highest quarterly level of shipments of semipremium connections Rig efficiency and well completion rates continue to improve
$1,200 $25
$600
Shipments
(net tons in thousands)
4Q 2012 407
3Q 2013 459
4Q 2013 414
United States Steel Corporation 5
$714 $692
$700
$25
$718
Operating income per ton increased $49 from the third quarter Production and shipments returned to normal levels after scheduled blast furnace outage was completed in the third quarter
$0
$7
$12
$600
($32)
($25) $500
($50)
4Q 2012 3Q 2013 4Q 2013
$400
Shipments
(net tons in thousands)
4Q 2012 905
3Q 2013 861
4Q 2013 1,029
United States Steel Corporation 6
Strategic Approach
Priorities and objectives
Business measurements to motivate a greater sense of urgency Investor communications Reducing complexity and streamlining business processes
$600 $159 $500 $100 $400 $55 $191 $300 $443 $136 $149 $100 $129 $78 $0 2007 2008 2009 2010 2011 2012 2013 2014E $271 $276 $152
$15
$200
$412
$396 $330
Unfunded status of pension and OPEB plans at 12/31/13 is $2.5 billion, as compared to $4.9 billion at 12/31/12
$ Millions
Pension Expense
OPEB Expense
Major Assumptions: Discount rate: 5.75% for 2007 & 2008, 6.00% for 2009, 5.50% for 2010, 5.00% for 2011, 4.50% for 2012, 3.75% for 2013, and 4.50% for 2014E Expected rate of return on assets: 8.00% in U.S. & 7.50% in Canada for 2007 through 2011 Expected rate of return on assets: 7.75% in U.S. & 7.25% in Canada for 2012 through 2014E
United States Steel Corporation 8
Cash Flow
Cash flow from operations excluding working capital changes
($ in millions)
2011
2012
2013
Total
$1,000
Cash from operations Working capital changes Cash from operations excluding working capital changes
1,717 (374)
$800
$600
2,091
$ Millions
$400
$720
$809 $562
Capital expenditures
848
723
477
2,048
$200
$0
1,800
2,360
2,278
2011
2012
2013
Note: Cash from operations includes voluntary pension contributions of $140 million in each year
Market Updates
Major industry summary and market fundamentals Flat-rolled
Automotive production in 2013 best since 2002, expected to increase in 2014 Service center shipments improved in second half of 2013, inventories down from end of 2012 Non-residential construction expected to improve per consensus forecasts
U. S. Steel Europe
Automotive production in 2014 expected to be comparable to 2013, sales expected to increase in 2014 Appliance, tin plate and construction expected to increase from 2013 levels Service center inventories expected to remain in-line with sales activity. Sales expected to improve from 2013 levels
Tubular
Rig counts are stable and footage drilled per rig expected to continue to increase Imports remain challenging Oil prices remain supportive of current drilling levels Natural gas prices are expected to increase per Wood Mackenzie Natural gas storage levels at end of withdrawal season expected to be at lowest level in six years
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Flat-rolled
Operating results expected to improve as compared to fourth quarter
U. S. Steel Europe
Operating results expected to be comparable to fourth quarter
Tubular
Operating results expected to decrease as compared to fourth quarter Average realized prices expected to decrease as compared to fourth quarter Shipments expected to be higher than fourth quarter Operating costs expected to be lower as compared to fourth quarter Substrate costs expected to increase
Lower repairs and maintenance costs Higher raw materials and operating costs Higher scrap and energy costs
11
Strategic update
Actions and initiatives
12
Q&A
January 28, 2014
2011 United States Steel Corporation
13
Appendix
14
Sources: Wards / Customer Financial Reports / AISI / CMI / Economic Planning Assoc / AHAM / US Census Bureau / AIA / AEM / MSCI
2013 vehicles sales hit expectations at 15.53 million; up 7.5% year over year and best since 2007 Production exceeded 16 million in 13; best since 2002. Expected to grow again in 2014 1st quarter 14 build projected to exceed 4th quarter; best unit build since 2nd quarter Vehicle inventory increases during the year by 6 days to 64 Tractor and Combine retail sales up 9% in 2013; 2014 outlook is mixed Railcar deliveries projected down 14% versus 2012; 2013 Order intake up 17% and in line with projected 2014 delivery forecasts Full year metal can shipments increased a modest 1% in 2013 Metal food can shipments increased year over year for the first time since 2008 Imports averaged up 18% versus 2012 Major home appliance shipments up 10% through November versus 2012, and no major forward changes up or down projected. Structural tubing demand is consistent and appears to be meeting customer expectations Line pipe market is extremely slow with minimal award activity in 2nd half 13 and early 14
Construction recovery slow in 2013, as Non-Residential spending was flat in 2013, but expected to improve by 5.8% based on consensus forecasts. ABI falls in Nov and Dec (seasonally typical); Billings index averaged 52 in 2013; up from 50 in 2012 MSCI carbon flat-rolled improved as year progressed; 2nd Half USA shipments +8.9% versus 2H 2012 USA inventory down 4% from prior year end; Canada sheds almost 36% Combined USA and Canada flat rolled inventory was reduced by 600,000 tons during 2013
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Tubular Segment
Market Fundamentals Oil Directed Rig Count Gas Directed Rig Count Natural Gas Storage Level Oil Price
Sources: Baker Hughes, Energy Information Administration, Preston Publishing, Spears & Associates, Wood Mackenzie, Internal
Currently 1,416 rigs, up 8% year over year. The oil directed rig count increased modestly during the fourth quarter and increased 4% during 2013.
Currently 356 rigs, down 18% year over year. The natural gas directed rig count decreased 13% during 2013. Currently 2.42 tcf, 19.8% below last year, and 13.2% below the five year average. Inventories are expected to end the withdrawal season (End of March) between 1.4 and 1.6 Tcf which could be the lowest end of season inventory level in six years. The West Texas Intermediate oil price averaged $97.50 per barrel during the fourth quarter, down $8.50 or 8% from the third quarter. Wood Mackenzie forecasts an average first quarter price of $94.50 per barrel. Wood Mackenzie forecasts an average first quarter natural gas price of $4.12/MMBtu, representing increases of $0.27 (7%) and $0.63 (18%) respectively from the previous quarter and first quarter of 2013. During the fourth quarter of 2013, import share of apparent market demand averaged roughly 50% for OCTG and 49% for line pipe.
November 2013 OCTG inventory is estimated to be about 3.1 million tons, approximately 5.9 months of supply.
United States Steel Corporation 16
Automotive
Appliance
Tin Plate
Construction
Service Centers
Flat-rolled
Tubular
U. S. Steel Kosice
Market Based Monthly 10%
Market Based Market Based Semi-annual * Quarterly * <1% 20% Cost Based 13% Firm 22% Market Based Monthly * 16%
Program 55%
Spot 29%
Cost Based 1%
* - Annual contract volume commitments with price adjustments in stated time frame
Other Items
Capital Spending
Fourth quarter actual $149 million, full year 2013 actual $477 million, 2014 estimate $650 million
Pension and Other Benefits Cash Payments (excluding any voluntary pension contributions)
Fourth quarter actual $3 million, full year 2013 actual $338 million, 2014 estimate $540 million
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Safety Performance
Global Safety Performance - 2005 to 2013
Days Away From Work Cases 31 Days
(Frequency Rates per 200,000 Hours Worked)
1.00
0.80
0.787
0.40
0.346
0.342
0.351 0.317
0.306
0.308
0.216 0.20 0.187 0.073 0.037 0.00 2005 2006 2007 2008 2009 2010 2011 2012 U. S. Steel 2013 0.037
0.041
0.026
0.015
0.013
BLS Manufacturing
Source: Bureau of Labor Statistics (BLS) and U. S. Steel. BLS data not available for 2013
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Safety Performance
Global Safety Performance
Days Away From Work Injury Rate
(Frequency Rates per 200,000 Hours Worked)
1.20
1.00
0.80
0.20
0.35 0.26 0.15 0.13 2008 0.14 2009 0.17 2010 0.12 2011 0.11 2012 0.11 2013
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