UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2019~~March 31, 2020



	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

United States Steel ~~Corporation~~Corporation

(Exact name of registrant as specified in its charter)



Delaware	1-16811	25-1897152
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)



600 Grant Street	Pittsburgh	PA	15219-2800
(Address of principal executive offices)			(Zip Code)

(412) 433-1121

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
United States Steel Corporation Common Stock	X	New York Stock Exchange
United States Steel Corporation Common Stock	X	Chicago Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



Large accelerated filer	x	Accelerated filer	o	Non-accelerated filer	o	Smaller reporting company	☐	Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.									o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

Common stock outstanding at ~~October 28, 2019~~April 27, 2020 – ~~170,037,954~~170,375,833 shares

INDEX



			Page
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Condensed Consolidated Statement of Operations (Unaudited)	1
		Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	2
		Condensed Consolidated Balance Sheet (Unaudited)	3
		Condensed Consolidated Statement of Cash Flows (Unaudited)	4
		Notes to Condensed Consolidated Financial Statements (Unaudited)	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3331
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5249
	Item 4.	Controls and Procedures	53
		~~Supplemental Statistics (Unaudited)~~	5450
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	5551
	Item 1A.	Risk Factors	6258
	Item 4.	Mine Safety Disclosure	6259
	Item 5.	Issuer Purchases of Equity Securities	6259
��	Item 6.	Exhibits	6359
SIGNATURE			6460
WEB SITE POSTING			6460

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report 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 those sections. Generally, we have identified such forward-looking statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,” “aim,” "should," ~~“will”~~“will,” "may" 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 changes, share of sales and earnings per share changes, anticipated cost savings, potential capital and operational cash improvements, U. S. Steel's future ability or plans to take ownership of the Big River Steel joint venture as a wholly owned subsidiary, 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 risks related to the satisfaction of the conditions of creating the joint venture with Stelco in the anticipated time frame or at all and the possibility that the option will not be exercised by Stelco, possible production or operations interruptions related to the novel coronavirus (COVID-19) pandemic that could disrupt supply or delivery of, or demand for, the Company's products, as well as the risks and uncertainties described in this report and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

References in this Quarterly Report on Form 10-Q to "U. S. Steel," "the Company," "we," "us," and "our" refer to United States Steel Corporation and its consolidated subsidiaries unless otherwise indicated by the context.

UNITED STATES STEEL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars in millions, except per share amounts)	2019			2018			2019			2018			2020			2019
Net sales:
Net sales	$	2,702		$	3,351		$	9,001		$	9,415		$	2,397		$	3,124
Net sales to related parties (Note 21)	367			378			1,112			1,072
Total (Note 5)	3,069			3,729			10,113			10,487
Net sales to related parties (Note 20)													351			375
Total (Note 6)													2,748			3,499
Operating expenses (income):
Cost of sales (excludes items shown below)	2,902			3,172			9,301			9,101			2,605			3,172
Selling, general and administrative expenses	63			81			223			251			72			78
Depreciation, depletion and amortization	161			126			454			384			160			143
Earnings from investees	(31		)	(17		)	(68		)	(39		)
Gain on equity investee transactions (Note 26)	—			—			—			(18		)
Restructuring charges (Note 22)	54			—			54			—
Net (gain) loss on disposal of assets	(1		)	(5		)	3			(3		)
Other expense (income), net	1			(1		)	—			—
Loss (earnings) from investees													8			(9		)
Tubular asset impairment charges (Notes 1 and 10)													263			—
Gain on equity investee transactions													(31		)	—
Restructuring and other charges (Note 21)													41			—
Net loss on sale of assets													—			4
Other losses, net													5			—
Total	3,149			3,356			9,967			9,676			3,123			3,388
(Loss) earnings before interest and income taxes	(80		)	373			146			811			(375		)	111
Interest expense	32			41			97			134			50			34
Interest income	(3		)	(6		)	(13		)	(16		)	(4		)	(5		)
Loss on debt extinguishment (Note 11)	—			3			—			77
Other financial (benefits) costs	(4		)	2			(2		)	4
Net periodic benefit cost (other than service cost)	23			19			69			53
Net interest and other financial costs (Note 11)	48			59			151			252
Other financial benefits													(3		)	(3		)
Net periodic benefit (income) cost (other than service cost)													(8		)	23
Net interest and other financial costs													35			49
(Loss) earnings before income taxes	(128		)	314			(5		)	559			(410		)	62
Income tax (benefit) provision (Note 13)	(44		)	23			(43		)	36			(19		)	8
Net (loss) earnings	(84		)	291			38			523			(391		)	54
Less: Net earnings attributable to noncontrolling interests	—			—			—			—			—			—
Net (loss) earnings attributable to United States Steel Corporation	$	(84	)	$	291		$	38		$	523		$	(391	)	$	54
(Loss) earnings per common share (Note 14):
Earnings per share attributable to United States Steel Corporation stockholders:
(Loss) earnings per share attributable to United States Steel Corporation stockholders:
-Basic	$	(0.49	)	$	1.64		$	0.22		$	2.96		$	(2.30	)	$	0.31
-Diluted	$	(0.49	)	$	1.62		$	0.22		$	2.92		$	(2.30	)	$	0.31

The accompanying notes are an integral part of these condensed consolidated financial statements.

UNITED STATES STEEL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars in millions)	2019			2018			2019			2018			2020			2019
Net (loss) earnings	$	(84	)	$	291		$	38		$	523		$	(391	)	$	54
Other comprehensive income (loss), net of tax:
Changes in foreign currency translation adjustments	(40		)	(10		)	(45		)	(58		)	(23		)	(17		)
Changes in pension and other employee benefit accounts	30			50			94			143			52			32
Changes in derivative financial instruments	(2		)	7			2			(11		)	(5		)	15
Total other comprehensive income, net of tax	(12		)	47			51			74			24			30
Comprehensive (loss) income including noncontrolling interest	(96		)	338			89			597			(367		)	84
Comprehensive income attributable to noncontrolling interest	—			—			—			—			—			—
Comprehensive (loss) income attributable to United States Steel Corporation	$	(96	)	$	338		$	89		$	597		$	(367	)	$	84

The accompanying notes are an integral part of these condensed consolidated financial statements.

UNITED STATES STEEL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(Dollars in millions) September 30, 2019 December 31,
2018
Assets
Current assets:
Cash and cash equivalents (Note 6) $ 476
$ 1,000
Receivables, less allowance of $27 and $29 1,183
1,435
Receivables from related parties (Note 21) 217
224
Inventories (Note 7) 2,071
2,092
Other current assets 95
79
Total current assets 4,042
4,830
Operating lease assets (Note 8) 239
—
Property, plant and equipment 16,725
16,008
Less accumulated depreciation and depletion 11,415
11,143
Total property, plant and equipment, net 5,310
4,865
Investments and long-term receivables, less allowance of $5 in both periods 576
513
Intangibles – net (Note 9) 152
158
Deferred income tax benefits (Note 13) 460
445
Other noncurrent assets 138
171
Total assets $ 10,917
$ 10,982
Liabilities
Current liabilities:
Accounts payable and other accrued liabilities $ 2,138
$ 2,454
Accounts payable to related parties (Note 21) 111
81
Payroll and benefits payable 345
440
Accrued taxes 107
118
Accrued interest 26
39
Current operating lease liabilities (Note 8) 56
—
Current portion of long-term debt (Note 16) 67
65
Total current liabilities 2,850
3,197
Noncurrent operating lease liabilities (Note 8) 189
—
Long-term debt, less unamortized discount and debt issuance costs (Note 16) 2,500
2,316
Employee benefits 905
980
Deferred income tax liabilities (Note 13) 8
14
Deferred credits and other noncurrent liabilities 265
272
Total liabilities 6,717
6,779
Contingencies and commitments (Note 23)

Stockholders’ Equity (Note 19):
Common stock (178,542,856 and 177,386,430 shares issued) (Note 14) 179
177
Treasury stock, at cost (8,505,376 shares and 2,857,578 shares) (173 ) (78 )
Additional paid-in capital 3,947
3,917
Retained earnings 1,221
1,212
Accumulated other comprehensive loss (Note 20) (975 ) (1,026 )
Total United States Steel Corporation stockholders’ equity 4,199
4,202
Noncontrolling interests 1
1
Total liabilities and stockholders’ equity $ 10,917
$ 10,982



(Dollars in millions)	March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents (Note 7)	$	1,350		$	749
Receivables, less allowance of $33 and $28	1,085			956
Receivables from related parties (Note 20)	87			221
Inventories (Note 8)	2,075			1,785
Other current assets	89			102
Total current assets	4,686			3,813
Long-term restricted cash (Note 7)	143			188
Operating lease assets (Note 9)	246			230
Property, plant and equipment	17,131			17,077
Less accumulated depreciation and depletion	11,724			11,630
Total property, plant and equipment, net	5,407			5,447
Investments and long-term receivables, less allowance of $8 and $5	1,421			1,466
Intangibles – net (Note 10)	134			150
Deferred income tax benefits (Note 13)	5			19
Other noncurrent assets	324			295
Total assets	$	12,366		$	11,608
Liabilities
Current liabilities:
Accounts payable and other accrued liabilities	$	2,033		$	1,970
Accounts payable to related parties (Note 20)	100			84
Payroll and benefits payable	325			336
Accrued taxes	118			116
Accrued interest	42			45
Current operating lease liabilities (Note 9)	60			60
Current portion of long-term debt (Note 16)	99			14
Total current liabilities	2,777			2,625
Noncurrent operating lease liabilities (Note 9)	193			177
Long-term debt, less unamortized discount and debt issuance costs (Note 16)	4,616			3,627
Employee benefits	584			532
Deferred income tax liabilities (Note 13)	6			4
Deferred credits and other noncurrent liabilities	464			550
Total liabilities	8,640			7,515
Contingencies and commitments (Note 22)
Stockholders’ Equity (Note 18):
Common stock (179,027,981 and 178,555,206 shares issued) (Note 14)	179			179
Treasury stock, at cost (8,653,246 and 8,509,337 shares)	(175		)	(173		)
Additional paid-in capital	4,024			4,020
Retained earnings	151			544
Accumulated other comprehensive loss (Note 19)	(454		)	(478		)
Total United States Steel Corporation stockholders’ equity	3,725			4,092
Noncontrolling interests	1			1
Total liabilities and stockholders’ equity	$	12,366		$	11,608

The accompanying notes are an integral part of these condensed consolidated financial statements.

UNITED STATES STEEL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars in millions)	2019			2018			2020			2019
Increase (decrease) in cash, cash equivalents and restricted cash
Operating activities:
Net earnings	$	38		$	523
Net (loss) earnings							$	(391	)	$	54
Adjustments to reconcile to net cash provided by operating activities:
Depreciation, depletion and amortization	454			384			160			143
Gain on equity investee transactions (Note 26)	—			(18		)
Restructuring charges (Note 22)	54			—
Loss on debt extinguishment (Note 11)	—			77
Provision for doubtful accounts	—			4
Tubular asset impairment charges (Notes 1 and 10)							263			—
Gain on equity investee transactions							(31		)	—
Restructuring and other charges (Note 21)							41			—
Pensions and other postretirement benefits	76			57			(1		)	30
Deferred income taxes (Note 13)	(38		)	1			6			6
Net loss (gain) on disposal of assets	3			(3		)
Net loss on sale of assets							—			4
Equity investee earnings, net of distributions received	(64		)	(35		)	8			(9		)
Changes in:
Current receivables	209			(357		)	(97		)	(124		)
Inventories	(4		)	(228		)	(204		)	(50		)
Current accounts payable and accrued expenses	(325		)	285			139			(73		)
Income taxes receivable/payable	27			53			3			41
Bank checks outstanding	—			1
All other, net	(34		)	(22		)	(38		)	7
Net cash provided by operating activities	396			722
Net cash (used in) provided by operating activities							(142		)	29
Investing activities:
Capital expenditures	(978		)	(646		)	(282		)	(302		)
Disposal of assets	4			10
Proceeds from sale of assets							1			—
Proceeds from sale of ownership interests in equity investees							8			—
Investments, net	—			(1		)	(4		)	—
Net cash used in investing activities	(974		)	(637		)	(277		)	(302		)
Financing activities:
Revolving and other credit facilities - borrowings, net (Note 16)	165			—
Revolving credit facilities - borrowings, net of financing costs (Note 16)							1,202			—
Revolving credit facilities - repayments (Note 16)							(281		)	—
Issuance of long-term debt, net of financing costs (Note 16)	—			640			67			—
Repayment of long-term debt (Note 16)	(4		)	(922		)	(2		)	—
Common stock repurchased (Note 25)	(88		)	—
Common stock repurchased (Note 24)							—			(42		)
Dividends paid	(26		)	(27		)	(2		)	(9		)
Receipt from exercise of stock options	—			34
Taxes paid for equity compensation plans (Note 12)	(7		)	(9		)	(1		)	(5		)
Net cash provided by (used in) financing activities	40			(284		)	983			(56		)
Effect of exchange rate changes on cash	(6		)	(13		)	(6		)	(2		)
Net decrease in cash, cash equivalents and restricted cash	(544		)	(212		)
Cash, cash equivalents and restricted cash at beginning of year (Note 6)	1,040			1,597
Cash, cash equivalents and restricted cash at end of period (Note 6)	$	496		$	1,385
Net increase (decrease) in cash, cash equivalents and restricted cash							558			(331		)
Cash, cash equivalents and restricted cash at beginning of year (Note 7)							939			1,040
Cash, cash equivalents and restricted cash at end of period (Note 7)							$	1,497		$	709



Supplemental Cash Flow Information:
Non-cash investing and financing activities:
Change in accrued capital expenditures	$	(66	)	$	(32	)
U. S. Steel common stock issued for employee/non-employee director stock plans	17			15
Capital expenditures funded by finance lease borrowings	29			16
Export Credit Agreement (ECA) financing	34			—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation and Significant Accounting Policies

United States Steel Corporation (U. S. Steel, or the Company) produces and sells steel products, including flat-rolled and tubular products, in North America and Europe. Operations in North America also include iron ore and coke production facilities, railroad services and real estate operations. Operations in Europe also include coke production facilities.

The year-end Condensed Consolidated Balance Sheet data was derived from audited statements but does not include all disclosures required for complete financial statements by accounting principles generally accepted in the United States of America (U.S. GAAP). The other information in these condensed financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair statement of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. Additional information is contained in the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, which should be read in conjunction with these condensed financial statements.

Property, plant and equipment

U. S. Steel evaluates impairment of its property, plant and equipment whenever circumstances indicate that the carrying value may not be recoverable. We evaluate impairment of long-lived assets at the asset group level. Our asset groups are Flat-Rolled, welded tubular, seamless tubular and U. S. Steel Europe (USSE). Asset impairments are recognized when the carrying value of an asset group exceeds its recoverable amount as determined by the asset group's aggregate projected discounted cash flows.

For the period ended March 31, 2020, the steep decline in oil prices that resulted from market oversupply and declining demand was considered a triggering event for the welded tubular and seamless tubular asset groups. A quantitative analysis was completed for both asset groups and a $263 million impairment, consisting of an impairment of $196 million for property, plant and equipment and $67 million for intangible assets (See Note 10) was recorded for the welded tubular asset group while 0 impairment was indicated for the seamless tubular asset group.

2. New Accounting Standards

In ~~August 2018,~~March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ~~2018-14,~~2020-04, ~~Compensation~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (ASU 2020-04). ASU 2020-04 provides optional exceptions for applying generally accepted accounting principles to modifications of contracts, hedging relationships, and other transactions that reference LIBOR or another rate that will be discontinued by reference rate reform if certain criteria are met. U. S. Steel is currently assessing the impact of the ASU but does not believe it will have a material impact on its Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - ~~Retirement Benefits - Defined Benefit Plans~~Simplifying the Accounting for Income Taxes ~~- General (Subtopic 715-20), Disclosure Framework - Changes~~(ASU 2019-12). ASU 2019-12 simplifies accounting for income taxes by removing certain exceptions from the general principles in Topic 740 including elimination of the exception to the ~~Disclosure Requirements~~incremental approach for ~~Defined Benefit Plans~~ (intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income. ASU ~~2018-14).~~2019-12 also clarifies and amends certain guidance in Topic 740. ASU ~~2018-14 removes certain disclosures that the FASB no longer considers cost beneficial, adds certain disclosure requirements and clarifies others. ASU 2018-14~~2019-12 is effective for public companies for fiscal years beginning after December 15, 2020, including interim periods, with early adoption of all amendments in the same period permitted. U. S. Steel is currently assessing the impact of the ASU, but does not believe it will have a significant impact on its ~~defined benefit plan disclosures.~~Consolidated Financial Statements.

3. Recently Adopted Accounting Standard

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurementof Credit Losses on Financial Instruments~~(ASU~~ (ASU 2016-13), which adds an impairment model that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 iswas effective for public companies for fiscal years beginning after December 15, 2019 including interim reporting ~~periods, with early adoption permitted.~~periods. U. S. Steel ~~is currently assessing the~~adopted this standard effective January 1, 2020. The impact of ~~the ASU, but does~~adoption was not ~~believe this ASU will have a~~ material ~~impact on its overall~~to the Condensed Consolidated Financial Statements.

3. ~~Recently Adopted Accounting Standards~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (ASU 2016-02). Under ASU 2016-02, for operating leases, a lessee should recognize in its statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term; recognize a single lease cost, which is allocated over the lease term, generally on a straight line basis, and classify all cash payments within operating activities in the statement of cash flows. For finance leases, a lessee is required to recognize a right-of-use asset and a lease liability; recognize interest on the lease liability separately from amortization of the right-of-use asset, and classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability within operating activities in the statement of cash flows. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. In July 2018, the FASB issued ASU 2018-11, ~~Leases (Topic 842) -Targeted Improvements~~ (ASU 2018-11), which provides an option to use a modified retrospective transition method at the adoption date. U. S. Steel adopted the new lease accounting standard effective January 1, 2019 using the optional modified retrospective transition method outlined in ASU 2018-11. As a result of the adoption, an operating lease asset and current and noncurrent liabilities for operating leases were recorded, and there was an insignificant reduction in prior year retained earnings for the cumulative effect of adoption for operating leases where payment started after lease commencement. See Note 8 for further details.

U. S. Steel's ~~adoption of the following ASU's effective January 1, 2019 did not have a material impact on~~significant financial instruments which are valued at cost are trade receivables (receivables). U. S. Steel's receivables carry standard industry terms and are categorized in two receivable pools, U.S. and U. S. Steel Europe (USSE). Both pools use customer specific risk ratings based on customer financial ~~position, results~~metrics, past payment experience and other factors and qualitatively consider economic conditions to assess the level of ~~operations~~allowance for doubtful accounts. USSE mitigates credit risk for over 70 percent of its receivables balance using credit insurance, letters of credit, bank guarantees, prepayments or ~~cash flows:~~other collateral. Below is a summary of the allowance for doubtful accounts for the segments. Additional reserve recorded in the period ended March 31, 2020 primarily reflects uncertainty over near-term anticipated market conditions.



~~Accounting Standard Update~~
~~2018-07~~	~~Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting~~
~~2018-15~~	~~Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs in a Cloud Computing Arrangement That is a Service Contract~~



(in millions)	U.S.		USSE		Total Allowance
Balance at December 31, 2019	$	12	$	16	$	28
Additional reserve	5		—		5
Balance at March 31, 2020	$	17	$	16	$	33

4. Segment Information

U. S. Steel has 3 reportable segments: ~~(1)~~North American Flat-Rolled ~~Products~~ (Flat-Rolled), which consists of the following 3 commercial entities that directly interact with our customers and service their needs: (i) automotive solutions, (ii) consumer solutions, and (iii) industrial, service center and mining solutions; (2) U. S. Steel Europe (USSE); and ~~(3)~~ Tubular Products (Tubular). ~~The~~U. S. Steel's investment in Big River Steel and the results of our railroad and real estate businesses that do not constitute reportable segments are combined and disclosed in the Other Businesses category.

The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being earnings (loss) before interest and income taxes. Earnings (loss) before interest and income taxes for reportable segments and Other Businesses does not include net interest and other financial costs (income), income taxes, and certain other items that management believes are not indicative of future results.

The accounting principles applied at the operating segment level in determining earnings (loss) before interest and income taxes are generally the same as those applied at the consolidated financial statement level. Intersegment sales and transfers are accounted for at market-based prices and are eliminated at the corporate consolidation level. Corporate-level selling, general and administrative expenses and costs related to certain former businesses are allocated to the reportable segments and Other Businesses based on measures of activity that management believes are reasonable.

The results of segment operations for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and~~ ~~2018~~are:

(In millions)
Three Months Ended September 30, 2019
Customer
Sales Intersegment
Sales Net
Sales Earnings
from
investees Earnings (loss) before interest and income taxes
Flat-Rolled $ 2,277
$ 86
$ 2,363
$ 30
$ 46
USSE 518
3
521
—
(46 )
Tubular 262
1
263
1
(25 )
Total reportable segments 3,057
90
3,147
31
(25 )
Other Businesses 12
28
40
—
8
Reconciling Items and Eliminations —
(118 ) (118 ) —
(63 )
Total $ 3,069
$ —
$ 3,069
$ 31
$ (80 )

Three Months Ended September 30, 2018
Flat-Rolled $ 2,632
$ 32
$ 2,664
$ 15
$ 305
USSE 767
4
771
—
72
Tubular 313
2
315
2
7
Total reportable segments 3,712
38
3,750
17
384
Other Businesses 17
31
48
—
16
Reconciling Items and Eliminations —
(69 ) (69 ) —
(27 )
Total $ 3,729
$ —
$ 3,729
$ 17
$ 373

~~The results of segment operations for the nine months ended September 30, 2019 and 2018 are:~~


(In millions) Nine Months Ended September 30, 2019	Customer Sales		Intersegment Sales			Net Sales			Earnings from investees		Earnings (loss) before interest and income taxes
(In millions) Three Months Ended March 31, 2020														Customer Sales		Intersegment Sales			Net Sales			Earnings (loss) from investees			Earnings (loss) before interest and income taxes
Flat-Rolled	$	7,221	$	250		$	7,471		$	63	$	275		$	1,974	$	62		$	2,036		$	4		$	(35	)
USSE	1,933		9			1,942			—		(27		)	505		1			506			—			(14		)
Tubular	921		4			925			5		(21		)	255		3			258			1			(48		)
Total reportable segments	10,075		263			10,338			68		227			2,734		66			2,800			5			(97		)
Other Businesses	38		88			126			—		26			14		28			42			(13		)	1
Reconciling Items and Eliminations	—		(351		)	(351		)	—		(107		)	—		(94		)	(94		)	—			(279		)
Total	$	10,113	$	—		$	10,113		$	68	$	146		$	2,748	$	—		$	2,748		$	(8	)	$	(375	)

Nine Months Ended September 30, 2018
Three Months Ended March 31, 2019
Flat-Rolled	$	7,114	$	148		$	7,262		$	34	$	562		$	2,405	$	69		$	2,474		$	7		$	95
USSE	2,438		20			2,458			—		297			737		3			740			—			29
Tubular	888		4			892			5		(55		)	343		2			345			2			10
Total reportable segments	10,440		172			10,612			39		804			3,485		74			3,559			9			134
Other Businesses	47		94			141			—		44			14		30			44			—			8
Reconciling Items and Eliminations	—		(266		)	(266		)	—		(37		)	—		(104		)	(104		)	—			(31		)
Total	$	10,487	$	—		$	10,487		$	39	$	811		$	3,499	$	—		$	3,499		$	9		$	111

The following is a schedule of reconciling items to consolidated earnings before interest and income taxes:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(In millions)	2019			2018			2019			2018			2020			2019
Items not allocated to segments:
Tubular asset impairment charges (Notes 1 and 10)													$	(263	)	$	—
Restructuring and other charges (Note 21)													(41		)	$	—
Gain on previously held investment in UPI													25			—
December 24, 2018 Clairton coke making facility fire	$	(9	)	$	—		$	(53	)	$	—		—			(31		)
Restructuring charges	(54		)	—			(54		)	—
Gain on equity investee transactions (Note 26)	—			—			—			18
Granite City Works restart costs	—			(27		)	—			(63		)
Granite City Works adjustment to temporary idling charges	—			—			—			8
Total reconciling items	$	(63	)	$	(27	)	$	(107	)	$	(37	)	$	(279	)	$	(31	)

5. Acquisition

On February 29, 2020, U. S. Steel purchased the remaining 50% ownership interest in USS-POSCO Industries (UPI) for $3 million, net of cash received of $2 million. There was an assumption of accounts payable owed to U. S. Steel for prior sales of steel substrate of $135 million associated with the purchase that is reflected as a reduction in receivables from related parties on the Company's Condensed Consolidated Balance Sheet. UPI is located in Pittsburg, California and markets sheet and tin mill products, principally in the western United States. UPI produces hot rolled pickled and oiled, cold-rolled sheets, galvanized sheets and tin mill products made from hot bands principally provided by U. S. Steel. UPI’s annual production capability is approximately 1.5 million tons. The remaining interest in UPI was purchased by the Company to obtain more control over the future of this investment. The Company had a liability that resulted from historical losses recorded due to our continuing involvement in the previously held equity investment in UPI. Using step acquisition accounting we increased the value of our previously held equity investment to its fair value of $5 million which resulted in a gain of approximately $25 million. The gain was recorded in gain on equity investee transactions in the Condensed Consolidated Statement of Operations.

There was a step-up to fair value for property, plant and equipment of $47 million and an intangible asset of $54 million that was recorded. The intangible asset arises from a land lease contract, under which a certain portion of payment owed to UPI is realized in the form of deductions from electricity costs. The intangible asset will be amortized over a ten year period. Transaction costs associated with the acquisition and the amount of revenue recognized in the Condensed Consolidated Statement of Operations as a result of the acquisition were not significant.

The following table presents the allocation of the aggregate purchase price based on estimated fair values.



	(in millions)
Assets Acquired:
Receivables	$	44
Inventories	96
Other current assets	3
Property, plant and equipment	97
Intangibles	54
Other noncurrent assets	1
Total Assets Acquired	$	295

Liabilities Assumed:
UPI accounts payable for substrate purchased from U. S. Steel ^(a)	$	135
Accounts payable and accrued liabilities	19
Payroll and benefits payable	15
Current portion of long-term debt	55
Employee benefits	63
Total Liabilities Assumed	$	287

Fair value of previously held investment in UPI	$	5
Purchase price - net of cash acquired	3
Difference in assets acquired and liabilities assumed	$	8

^(a)The transaction to purchase UPI included the assumption of $135 million of accounts payable owed to U. S. Steel for prior sales of steel substrate to UPI. This amount is reflected as a reduction in receivables from related parties in the Company's Condensed Consolidated Balance Sheet as both the corresponding receivable and payable amounts between U. S. Steel and UPI are eliminated in consolidation upon acquisition.

U. S. Steel is continuing to conform accounting policies and procedures and evaluate assets and liabilities assumed. The results of this process may lead to further adjustments to the purchase price allocation presented above.

5.6. Revenue

Revenue is generated primarily from contracts to produce, ship and deliver steel products, and to a lesser extent, ~~to deliver~~ raw materials sales such as iron ore pellets ~~to deliver~~and coke by-products and ~~for~~ railroad services and real estate sales. Generally, U. S. Steel’s performance obligations are satisfied ~~control of our products is transferred,~~ and revenue is recognized at a ~~single~~ point in time, when title transfers to our customer for product shipped or services are provided. Revenues are recorded net of any sales incentives. Shipping and other transportation costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. Costs related to obtaining sales contracts are incidental and are expensed when incurred. Because customers are invoiced at the time title transfers and U. S. Steel’s right to consideration is unconditional at that time, U. S. Steel does not maintain contract asset balances. Additionally, U. S. Steel does not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product. U. S. Steel offers industry standard payment terms.

U. S. Steel has 3 reportable segments: Flat-Rolled, USSE and Tubular. Flat-Rolled primarily generates revenue from sheet and coated product sales to North American customers. Flat-Rolled also sells slabs, iron ore pellets and coke making by-products. USSE sells slabs, sheet, strip mill plate, coated products and spiral welded pipe to customers primarily in the Eastern European market. Tubular sells seamless and electric resistance welded (ERW) steel casing and tubing (commonly known as oil country tubular goods or OCTG), standard and line pipe and mechanical tubing and primarily serves customers in the oil, gas and petrochemical markets. Revenue from our railroad and real estate businesses is reported in the Other Businesses category in our segment reporting structure. The following tables disaggregate our revenue by product for each of our reportable business segments for the three months ended March 31, 2020 and ~~nine months ended September 30,~~ 2019, ~~and 2018,~~ respectively:

Net Sales by Product (In millions):


Three Months Ended September 30, 2019	Flat-Rolled		USSE		Tubular		Other Businesses		Total
Three Months Ended March 31, 2020											Flat-Rolled		USSE		Tubular		Other Businesses		Total
Semi-finished	$	69	$	2	$	—	$	—	$	71	$	27	$	1	$	—	$	—	$	28
Hot-rolled sheets	537		199		—		—		736		502		205		—		—		707
Cold-rolled sheets	627		59		—		—		686		598		45		—		—		643
Coated sheets	765		231		—		—		996		711		229		—		—		940
Tubular products	—		11		257		—		268		—		9		251		—		260
All Other^(a)	279		16		5		12		312		136		16		4		14		170
Total	$	2,277	$	518	$	262	$	12	$	3,069	$	1,974	$	505	$	255	$	14	$	2,748

^(a)Consists primarily of sales of raw materials and coke making by-products.

Three Months Ended September 30, 2018 Flat-Rolled USSE Tubular Other Businesses Total
Semi-finished $ 40
$ 83
$ —
$ —
$ 123
Hot-rolled sheets 764
267
—
—
1,031
Cold-rolled sheets 718
91
—
—
809
Coated sheets 829
282
—
—
1,111
Tubular products —
12
304
—
316
All Other ^(a)
281
32
9
17
339
Total $ 2,632
$ 767
$ 313
$ 17
$ 3,729

^(a)~~Consists primarily of sales of raw materials and coke making by-products.~~

Nine Months Ended September 30, 2019 Flat-Rolled USSE Tubular Other Businesses Total
Semi-finished $ 278
$ 11
$ —
$ —
$ 289
Hot-rolled sheets 1,982
818
—
—
2,800
Cold-rolled sheets 1,931
229
—
—
2,160
Coated sheets 2,309
779
—
—
3,088
Tubular products —
31
903
—
934
All Other^(a)
721
65
18
38
842
Total $ 7,221
$ 1,933
$ 921
$ 38
$ 10,113

^(a)~~Consists primarily of sales of raw materials and coke making by-products.~~


Nine Months Ended September 30, 2018	Flat-Rolled		USSE		Tubular		Other Businesses		Total
Three Months Ended March 31, 2019											Flat-Rolled		USSE		Tubular		Other Businesses		Total
Semi-finished	$	50	$	172	$	—	$	—	$	222	$	88	$	4	$	—	$	—	$	92
Hot-rolled sheets	1,976		959		—		—		2,935		763		332		—		—		1,095
Cold-rolled sheets	2,092		293		—		—		2,385		661		88		—		—		749
Coated sheets	2,332		889		—		—		3,221		728		279		—		—		1,007
Tubular products	—		37		862		—		899		—		9		335		—		344
All Other ^(a)	664		88		26		47		825		165		25		8		14		212
Total	$	7,114	$	2,438	$	888	$	47	$	10,487	$	2,405	$	737	$	343	$	14	$	3,499

^(a)Consists primarily of sales of raw materials and coke making by-products.

6.7. Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within U. S. Steel's Condensed Consolidated Balance Sheets that sum to the total of the same amounts shown in the Condensed Consolidated Statement of Cash Flows:

(In millions) September 30, 2019 September 30, 2018
Cash and cash equivalents $ 476
$ 1,344
Restricted cash in other current assets —
4
Restricted cash in other noncurrent assets 20
37
Total cash, cash equivalents and restricted cash $ 496
$ 1,385



(In millions)	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	1,350	$	676
Restricted cash in other current assets	4		2
Long-term restricted cash	143		31
Total cash, cash equivalents and restricted cash	$	1,497	$	709

In order to preserve cash and enhance our liquidity during the COVID-19 outbreak and disruptions in the oil and gas industry, we borrowed an additional $800 million under the Fifth Amended and Restated Credit Agreement which was held as cash on our Condensed Consolidated Balance Sheet at March 31, 2020.

Amounts included in restricted cash represent cash balances which are legally or contractually restricted, primarily for electric arc furnace construction, environmental capital expenditure projects and insurance purposes.

7.8. Inventories

Inventories are carried at the lower of cost or market for last-in, first-out (LIFO) inventories and lower of cost and net realizable value for first-in, first-out (FIFO) method inventories. The LIFO method is the predominant method of inventory costing in the United States. The FIFO method is the predominant inventory costing method in Europe. At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, the LIFO method accounted for 7165 percent and 7475 percent of total inventory values, respectively.


(In millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Raw materials	$	661	$	605	$	633	$	628
Semi-finished products	911		1,021		954		720
Finished products	441		404		428		376
Supplies and sundry items	58		62		60		61
Total	$	2,071	$	2,092	$	2,075	$	1,785

Current acquisition costs were estimated to exceed the above inventory values by $~~999~~762 million and ~~$1,038~~$735 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively. As a result of the liquidation of LIFO inventories, cost of sales decreased and earnings before interest and income taxes increased by~~ ~~$12 million~~ ~~and $5 million for the three and nine months ended September 30,~~ 2019, respectively. As a result of the liquidation of LIFO inventories, cost of sales ~~decreased~~increased and earnings before interest and income taxes ~~increased~~decreased by $4$5 million and $1 million for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2018.~~March 31, 2020 and March 31, 2019, respectively.

Inventory includes $40 million ~~and $39 million~~ of land held for residential/commercial development as of both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018, respectively.~~2019.

8.9. Leases

Effective January 1, 2019, U. S. Steel adopted ASU 2016-02 using the ~~optional~~ modified retrospective transition method outlined in ASU 2018-11 which permitted application of ASU 2016-02 on January 1, 2019 using a cumulative effect adjustment to the opening balance of retained earnings. As of September 30, 2019, an operating lease asset of $239 million and current and noncurrent liabilities for operating leases of $56 million and $189 million, respectively, were recorded (see below tabular disclosure for further details). There was an insignificant cumulative effect of adoption for operating lease liabilities that exceeded their related asset values for leases where payment started after lease commencement.

Operating lease assets consist primarily of office space, aircraft, heavy mobile equipment used in our mining operations and facilities and equipment under operating service agreements for electricity generation and scrap processing. ~~We also have operating lease assets for light mobile equipment and information technology assets.~~ Significant finance leases include the Fairfield slab caster lease and heavy mobile equipment used in our mining operations (see Note 16 for further details). Variable lease payments are primarily related to operating service agreements where payment is solely dependent on consumption of certain services, such as raw material and by-product processing. ~~Most long-term leases include renewal options and, in certain leases, purchase options.~~ Generally, we are not reasonably certain that ~~these~~renewal options or purchase options will be exercised. ~~We have residual value guarantees under certain light mobile equipment leases.~~ There is no impact to our leased assets for residual value guarantees as the potential loss is not probable (see “Other Contingencies” in Note 2322 for further details). We do not have material restrictive covenants associated with our leases or material amounts of sublease income. From time to time, U. S. Steel may enter into arrangements for the construction or purchase of an asset and then enter into a financing arrangement to lease the asset. U. S. Steel recognizes leased assets and liabilities under these arrangements when it obtains control of the asset.

U. S. Steel elected the option within ASU 2016-02 to straight-line expense and not record assets or liabilities for leases with an initial term of 12 months or less. For leases beginning in 2019 and later, we separate non-lease components from lease components for leases under operating service agreements. We do not separate non-lease components for other lease types as they are not significant. The Company does not have secured notes outstanding; therefore, we use an estimated secured borrowing rate as the discount rate for most of our leases. In accordance with the practical expedients outlined in ASU 2016-02, we did not use hindsight in determining the lease term for existing leases and elected not to reassess the following for existing leases: whether contracts contain a lease, lease classification, and initial direct costs.

The following table summarizes the lease amounts included in our Condensed Consolidated Balance Sheet as of ~~September 30,~~March 31, 2020 and December 31, 2019.


(In millions)	Balance Sheet Location	September 30, 2019		Balance Sheet Location	March 31, 2020		December 31, 2019
Assets
Operating	Operating lease assets ^(a)	$	239	Operating lease assets ^(a)	$	246	$	230
Finance	Property, plant and equipment ^(b)	49		Property, plant and equipment ^(b)	82		56
Total Lease Assets		$	288		$	328	$	286

Liabilities
Current
Operating	Current operating lease liabilities	$	56	Current operating lease liabilities	$	60	$	60
Finance	Current portion of long-term debt	8		Current portion of long-term debt	15		11
Non-Current
Operating	Noncurrent operating lease liabilities	189		Noncurrent operating lease liabilities	193		177
Finance	Long-term debt less unamortized discount and issue costs	47		Long-term debt less unamortized discount and issue costs	74		51
Total Lease Liabilities		$	300		$	342	$	299

^(a) Operating lease assets are recorded net of accumulated amortization of ~~$37 million.~~$57 million and $50 million as of March 31, 2020 and December 31, 2019, respectively.

^(b) Finance lease assets are recorded net of accumulated depreciation of ~~$24 million.~~$29 million and $27 million as of March 31, 2020 and December 31, 2019, respectively.

The following table summarizes lease costs included in our Condensed Consolidated Statement of Operations for the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2020 and March 31, 2019.



(In millions)	Classification	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating Lease Cost ^(a)	Cost of sales	$	18	$	21
Operating Lease Cost	Selling, general and administrative expenses	3		3
Finance Lease Cost
Amortization	Depreciation, depletion and amortization	3		1
Interest	Interest expense	1		—
Total Lease Cost		$	25	$	25

(In millions) Classification Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating Lease Cost ^(a)
Cost of sales $ 21
$ 61
Operating Lease Cost Selling, general and administrative expenses 2
8
Finance Lease Cost

Amortization Depreciation, depletion and amortization 2
4
Interest Interest expense 1
2
Total Lease Cost
$ 26
$ 75

^(a) Operating lease cost recorded in cost of sales includes $4$3 million and ~~$13~~$5 million of variable lease cost for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019, respectively. An immaterial amount of variable lease cost is included in selling, general and administrative expenses and immaterial amounts of short-term lease cost are included in cost of sales and selling, general and administrative expenses.

Lease liability maturities as of ~~September 30, 2019~~March 31, 2020 are shown below.


(In millions)	Operating		Finance		Total		Operating		Finance		Total
2019	$	22	$	4	$	26
2020	66		11		77		$	59	$	16	$	75
2021	55		11		66		64		19		83
2022	44		17		61		51		23		74
2023	35		6		41		39		12		51
After 2023	82		17		99
2024							31		9		40
After 2024							61		23		84
Total Lease Payments	$	304	$	66	$	370	$	305	$	102	$	407
Less: Interest	59		11		70		52		13		65
Present value of lease liabilities	$	245	$	55	$	300	$	253	$	89	$	342

~~Future minimum commitments for capital and operating leases having non-cancelable lease terms in excess of one year as of the year ended December 31, 2018 were as follows.~~

(In millions) Capital
Leases Operating
Leases
2019 $ 5
$ 66
2020 5
55
2021 5
45
2022 11
37
2023 —
28
After 2023 —
72
Total minimum lease payments $ 26
$ 303
Less imputed interest costs 4

Present value of net minimum lease payments included in long-term debt $ 22

Lease terms and discount rates are shown below.



	~~September 30, 2019~~As of March 31, 2020
Weighted average lease term
Finance	65 years
Operating	65 years

Weighted average discount rate
Finance	~~6.22~~5.07	%
Operating	~~7.74~~7.40	%

Supplemental cash flow information related to leases follows.


(In millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18	$	54	$	18	$	18
Operating cash flows from finance leases	1		2		1		—
Financing cash flows from finance leases	3		4		2		—
Right-of-use assets exchanged for lease liabilities:
Operating leases	14		38		32		8
Finance leases	2		37		29		16

9.10. Intangible Assets

Intangible assets that are being amortized on a straight-line basis over their estimated useful lives are detailed below:


		As of September 30, 2019						As of December 31, 2018							As of March 31, 2020								As of December 31, 2019
(In millions)	Useful Lives	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount		Useful Lives	Gross Carrying Amount		Accumulated Impairment		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	22 Years	$	132	$	75	$	57	$	132	$	70	$	62	22 Years	$	132	$	55	$	77	$	—	$	132	$	76	$	56
Patents	10-15 Years	22		8		14		22		7		15		10-15 Years	22		7		9		6		22		8		14
Other	4-20 Years	14		8		6		14		8		6
Energy Contract														10 Years	54		—		1		53		—		—		—
Other Intangibles														4-20 Years	14		5		9		—		14		9		5
Total amortizable intangible assets		$	168	$	91	$	77	$	168	$	85	$	83		$	222	$	67	$	96	$	59	$	168	$	93	$	75

Identifiable intangible assets with finite lives are reviewed for impairment whenever events or circumstances indicate that the carrying values may not be recoverable. For the period ended March 31, 2020, the steep decline in oil prices that resulted from market oversupply and declining demand was considered a triggering event for the welded tubular asset group. A quantitative analysis was completed and resulted in a $67 million impairment of the welded tubular asset group's intangible assets. See Note 1 for further details.

Amortization expense was $2$3 million ~~in both~~ and $2 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018. Amortization expense was $6 million in both the nine months ended September 30,~~March 31, 2019, ~~and 2018.~~respectively. The estimated amortization expense for the remainder of ~~2019~~2020 is $2$5 million. We expect ~~a consistent level of~~approximately $6 million in annual amortization expense through ~~2023.~~2024.

As part of the purchase of UPI, we acquired an intangible asset with a fair value of approximately $54 million that will be amortized over ten years. This asset arises from a land lease contract, under which a certain portion of payment owed to UPI is realized in the form of deductions from electricity costs. See Note 5 to the Condensed Consolidated Financial Statements for further details.

The carrying amount of acquired water rights with indefinite lives as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 totaled $75 million. The acquired water rights are tested for impairment annually in the third quarter, or whenever events or circumstances indicate the carrying value may not be recoverable. U. S. Steel performed a quantitative impairment evaluation of its acquired water rights during the third quarter of 2019. Based on the results of the evaluation, the water rights were not impaired.

~~10.~~11. Pensions and Other Benefits

The following table reflects the components of net periodic benefit cost for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019:


	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
(In millions)	2019			2018			2019			2018			2020			2019			2020			2019
Service cost	$	11		$	12		$	4		$	4		$	12		$	11		$	3		$	3
Interest cost	59			58			22			23			48			60			16			23
Expected return on plan assets	(81		)	(90		)	(19		)	(20		)	(81		)	(81		)	(20		)	(20		)
Amortization of prior service cost	—			—			8			7			—			—			(2		)	7
Amortization of actuarial net loss	33			38			—			1
Amortization of actuarial net loss (gain)													36			33			(4		)	1
Net periodic benefit cost, excluding below	22			18			15			15			15			23			(7		)	14
Multiemployer plans	20			16			—			—			21			18			—			—
Settlement, termination and curtailment losses ^(a)	3			10			—			—			6			—			—			—
Net periodic benefit cost	$	45		$	44		$	15		$	15
Net periodic benefit cost (income)													$	42		$	41		$	(7	)	$	14

^(a)During the three months ended ~~September 30, 2019 and 2018,~~March 31, 2020 the ~~non-qualified~~ pension plan incurred ~~settlement~~special termination charges of approximately $3$6 million ~~and $10 million, respectively,~~ due to ~~lump sum payments for certain individuals.~~workforce restructuring.

~~The following table reflects the components of net periodic benefit cost for the nine months ended September 30, 2019 and 2018:~~

Pension
Benefits Other
Benefits
(In millions) 2019 2018 2019 2018
Service cost $ 33
$ 37
$ 10
$ 12
Interest cost 178
174
68
69
Expected return on plan assets (243 ) (270 ) (59 ) (61 )
Amortization of prior service cost 1
—
22
22
Amortization of actuarial net loss 99
114
2
3
Net periodic benefit cost, excluding below 68
55
43
45
Multiemployer plans 57
45
—
—
Settlement, termination and curtailment losses ^(a)
3
10
—
—
Net periodic benefit cost $ 128
$ 110
$ 43
$ 45

^(a)During the first nine months of 2019 and 2018, the non-qualified pension plan incurred settlement charges of approximately $3 million and $10 million, respectively, due to lump sum payments for certain individuals.

Employer Contributions

During the first ~~nine~~three months of ~~2019~~2020, U. S. Steel made cash payments of ~~$58~~$20 million to the Steelworkers’ Pension Trust, ~~and $8~~$1 million of pension payments not funded by ~~trusts.~~

~~During the first~~ ~~nine~~ ~~months of~~ ~~2019, cash payments of $33~~trusts and $10 million ~~were made~~ for other postretirement benefit payments not funded by trusts.

Company contributions to defined contribution plans totaled ~~$12~~$10 million ~~and $13 million~~ for both the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018, respectively. Company contributions to defined contribution plans totaled $34 million and $35 million for the nine months ended September 30, 2019 and 2018, respectively.~~

~~11.~~ ~~Net Interest and Other Financial Costs~~

Net interest and other financial costs includes interest expense (net of capitalized interest), interest income, financing costs, net periodic benefit costs (other than service costs) related to pension and other post-employment benefits (OPEB) plans, and foreign currency derivative and remeasurement gains and losses. During the three months ended September 30, 2019 and ~~2018~~, net foreign currency gains of $8 million and $3 million, respectively were recorded in other financial costs. During the nine months ended September 30, 2019 and 2018, net foreign currency gains of $15 million and $11 million, respectively, were recorded in other financial costs. Additionally, during the nine months ended September 30, 2018, there was a loss on debt extinguishment recognized of $77 million. There were 0 debt extinguishment transactions during the nine months ended September 30, 2019.

~~See Note 15 for additional information on U. S. Steel’s use of derivatives to mitigate its foreign currency exchange rate exposure.~~

12. Stock-Based Compensation Plans

U. S. Steel has outstanding stock-based compensation awards that were granted by the Compensation & Organization Committee of the Board of Directors (the Committee) under the 2005 Stock Incentive Plan (the 2005 Plan) and the 2016 Omnibus Incentive Compensation Plan (the Omnibus Plan). On April 26, 2016, the Company's stockholders approved the Omnibus Plan and authorized the Company to issue up to 7,200,000 shares of U. S. Steel common stock under the Omnibus Plan. The Company's stockholders authorized the issuance of an additional 6,300,000 shares under the Omnibus Plan on April 25, 2017. While the awards that were previously granted under the 2005 Plan remain outstanding, all future awards will be granted under the Omnibus Plan. As of ~~September 30, 2019~~March 31, 2020, there were ~~6,996,547~~926,361 shares available for future grants under the Omnibus Plan. On April 28, 2020, our stockholders approved an additional 4,700,000 shares to be available for grant under the Omnibus Plan.

Recent grants of stock-based compensation consist of restricted stock units, total ~~shareholder~~stockholder return (TSR) performance awards and return on capital employed (ROCE) performance awards. Shares of common stock under the Omnibus Plan are issued from authorized, but unissued stock. The following table is a summary of the awards made under the Omnibus Plan during the first ~~nine~~three months of ~~2019~~2020 and ~~2018.~~2019.


	2019			2018			2020			2019
Grant Details	Shares^(a)	Fair Value^(b)		Shares^(a)	Fair Value^(b)		Shares^(a)	Fair Value^(b)		Shares^(a)	Fair Value^(b)
Restricted Stock Units	1,005,500	$	23.76	742,495	$	41.44	2,624,470	$	8.83	975,750	$	23.91
Performance Awards ^(c)
TSR	210,520	$	29.22	79,190	$	61.57	659,620	$	8.20	210,520	$	29.22
ROCE(d)	527,470	$	23.90	247,510	$	43.50	—	$	—	526,140	$	23.92

^(a) The share amounts shown in this table do not reflect an adjustment for estimated forfeitures.

^(b) Represents the per share ~~weighted-average~~weighted average for all grants during the period.

^(c) The number of performance awards shown represents the target value of the award.

^(d) The ROCE awards granted in 2020 are not shown in the table above because they were granted in cash.

U. S. Steel recognized pretax stock-based compensation expense in the amount of ~~$10~~$4 million and $9$8 million in the three-month periods ended ~~September 30, 2019~~March 31, 2020 and ~~2018, respectively, and $30 million and $26 million in the first nine months of~~ 2019, ~~and 2018,~~ respectively.

As of ~~September 30, 2019~~March 31, 2020, total future compensation expense related to nonvested stock-based compensation arrangements was $2730 million, and the weighted average period over which this expense is expected to be recognized is approximately 1821 months.

Restricted stock units awarded as part of annual grants generally vest ratably over three years. Their fair value is the market price of the underlying common stock on the date of grant. Restricted stock units granted in connection with new-hire or retention grants generally cliff vest three years from the date of the grant.

TSR performance awards may vest at varying levels at the end of a three-year performance period if U. S. Steel's total ~~shareholder~~stockholder return compared to the total ~~shareholder~~stockholder return of a peer group of companies meets specified performance criteria ~~during~~with each year in the three-year performance ~~period.~~period weighted at 20 percent and the full three-year performance period weighted at 40 percent. TSR performance awards can vest at between

0 and 200 percent of the target award. The fair value of the TSR performance awards is calculated using a Monte-Carlo simulation.

ROCE performance awards may vest at the end of a three-year performance period contingent upon meeting the specified ROCE goal. ROCE performance awards can vest at between 0 and 200 percent of the target award. The fair value of the ROCE performance awards is the average market price of the underlying common stock on the date of grant. The 2020 ROCE performance awards were granted in cash.

For further details about our stock-based compensation incentive plans and stock awards see Note 15 of the United States Steel Corporation Annual Report on Form 10-K for the fiscal year-ended December 31, ~~2018.~~2019.

13. Income Taxes

Tax provision

For the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, we recorded a tax benefit of $4319 million on our pretax loss of $5410 million and a tax provision of ~~$36~~$8 million on our pretax earnings of ~~$559~~$62 million, respectively. ~~The~~In general, the amount of tax ~~provision~~expense or benefit from continuing operations is determined without regard to the tax effect of other categories of income or loss, such as other comprehensive income. However, an exception to this rule applies when there is a loss from continuing operations and income from other categories. In 2020, the tax benefit includes a discrete benefit of $10 million related to this accounting exception. Due to the full valuation allowance on our domestic deferred tax assets, the tax benefit in ~~both periods~~2020 does not reflect any additional tax benefit for domestic pretax losses. In 2019, the tax provision reflects a benefit for percentage depletion in excess of cost depletion from iron ore that we produce and consume or sell. ~~In 2018, the tax provision also reflects a tax benefit for the release of a portion of the valuation allowance due to pretax income.~~

The tax provision for the first ~~quarter~~three months of ~~2019 was~~2020 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax ~~income~~earnings or loss. ~~For~~

During the quarters ended June 30, 2019 and September 30, 2019, the Company computed its tax benefit using a discrete period effective tax rate, which reflects the actual taxes attributable to year-to-date earnings and losses, because we determined that a reliable estimate of the expectedyear, management regularly updates forecasted annual ~~effective tax rate could not be made. A small change in our estimated marginal~~ pretax results for the ~~year~~various countries in which we operate based on changes in factors such as prices, shipments, product mix, plant operating performance and cost estimates. To the extent that actual 2020 pretax results for U.S. and foreign income or loss vary from estimates applied herein, the actual tax provision or benefit recognized in 2020 could be materially different from the forecasted amount used to estimate the tax provision for the three months ended ~~December~~March 31, 2019 could create a large change in the expected annual effective tax rate. The sensitivity of the effective tax rate was increased by the benefit for percentage depletion in excess of cost depletion for iron ore.2020.

Deferred taxes

Each quarter U. S. Steel analyzes the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not that some portion, or all, of the deferred tax asset may not be realized.

At ~~September 30, 2019,~~March 31, 2020, U. S. Steel reviewed all available positive and negative evidence and determined that it is more likely than not that ~~certain~~all of its net domestic deferred tax assets may not be realized.

U. S. Steel will continue to monitor the realizability of its deferred tax assets on a quarterly basis taking into consideration, among other items, the uncertainty regarding the Company's continued ability to generate domestic income in the near term. In the future, if we determine that realization is more likely than not for deferred tax assets with a valuation allowance, the related valuation allowance will be reduced, and we will record a non-cash benefit to earnings.

Unrecognized tax benefits

Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes pursuant to the guidance in Accounting Standards Codification (ASC) Topic 740 on income taxes. ~~As of September 30, 2019, and December 31, 2018, the~~The total amount of gross unrecognized tax benefits was ~~$33~~$3 million as of both March 31, 2020 and ~~$35 million, respectively.~~December 31, 2019. The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $2 million as of both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

U. S. Steel records interest related to uncertain tax positions as a part of net interest and other financial costs in the Condensed Consolidated Statement of Operations. Any penalties are recognized as part of selling, general and administrative expenses. As of both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, U. S. Steel had accrued liabilities of $1$2 million ~~and $2 million~~ for interest and penalties related to uncertain tax positions, respectively.

It is reasonably expected that during the next 12 months unrecognized tax benefits related to income tax positions will ~~decrease~~change by ~~approximately $32 million.~~an immaterial amount.

14. Earnings and Dividends Per Common Share

(Loss) Earnings Per Share Attributable to United States Steel Corporation Stockholders

Basic (loss) earnings per common share is based on the weighted average number of common shares outstanding during the period.

Diluted (loss) earnings per common share assumes the exercise of stock options and the vesting of restricted stock units and performance awards, provided in each case the effect is dilutive. The "treasury stock" method is used to calculate the dilutive effect of the Senior Convertible Notes due in 2026 (due to our current intent and policy, among other factors, to settle the principal amount of the 2026 Senior Convertible Notes in cash upon conversion).

The computations for basic and diluted (loss) earnings per common share from continuing operations are as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended March 31,
(Dollars in millions, except per share amounts)	2019			2018		2019		2018		2020			2019
(Loss) earnings attributable to United States Steel Corporation stockholders	$	(84	)	$	291	$	38	$	523	$	(391	)	$	54
Weighted-average shares outstanding (in thousands):
Basic	170,801			177,250		171,882		176,815		170,224			173,241
Effect of convertible notes										—			—
Effect of stock options, restricted stock units and performance awards	—			1,876		629		1,919		—			1,304
Adjusted weighted-average shares outstanding, diluted	170,801			179,126		172,511		178,734		170,224			174,545
Basic (loss) earnings per common share	$	(0.49	)	$	1.64	$	0.22	$	2.96	$	(2.30	)	$	0.31
Diluted (loss) earnings per common share	$	(0.49	)	$	1.62	$	0.22	$	2.92	$	(2.30	)	$	0.31

The following table summarizes the securities that were antidilutive, and therefore, were not included in the computations of diluted earnings per common share:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
(In thousands)	2019	2018	2019	2018	2020	2019
Securities granted under the 2016 Omnibus Incentive Compensation Plan, as amended	4,327	1,671	3,255	1,689	4,942	3,179
Securities convertible under the Senior Convertible Notes					—	—
Total					4,942	3,179

Dividends Paid Per Share

The dividend for ~~each of~~ the first ~~three quarters~~quarter of2020 and 2019 was one cent and~~2018~~ ~~was~~ five cents per common ~~share.~~share, respectively.

15. Derivative Instruments

U. S. Steel is exposed to foreign currency exchange rate risks in our European operations. USSE’s revenues are primarily in euros and costs are primarily in euros and U.S. dollars. U. S. Steel uses foreign exchange forward sales contracts (foreign exchange forwards) with maturities no longer than 12 months to exchange euros for U.S. dollars to manage our currency requirements and exposure to foreign currency exchange rate fluctuations. Derivative instruments are required to be recognized at fair value in the Condensed Consolidated Balance Sheet. U. S. Steel did not designate euro foreign exchange forwards entered into prior to July 1, 2019, as hedges; therefore, changes in their fair value were recognized immediately in the Condensed Consolidated Statements of Operations (mark-to-market accounting). For those contracts, U. S. Steel will continue to recognize changes in fair value immediately through earnings until the contracts mature. U. S. Steel elected cash flow hedge accounting for euro foreign exchange forwards prospectively effective July 1, 2019. Accordingly, future gains and losses for euro foreign exchange forwards entered into after July 1, 2019 will be recorded within accumulated other comprehensive income (AOCI) until the related contract impacts earnings. We mitigate the risk of concentration of counterparty credit risk by purchasing our forwards from several counterparties.

In 2018, U. S. Steel entered into long-term freight contracts in its domestic operations that require payment in Canadian dollars (CAD). We entered into foreign exchange forward contracts with remaining maturities up to

15 9 months to exchange USD for CAD to mitigate a portion of the related risk of exchange rate fluctuations and to manage our currency requirements. We elected to designate these contracts as cash flow hedges.

U. S. Steel may use fixed-price forward physical purchase contracts to partially manage our exposure to price risk related to the purchases of natural gas, zinc, and tin used in the production process. Generally, forward physical purchase contracts qualify for the normal purchase and normal sales exceptions described in ASC Topic 815 and are not subject to mark-to-market accounting. U. S. Steel also uses financial swaps to protect from the commodity price risk associated with purchases of natural gas, zinc and tin (commodity purchase swaps). In January 2020, the Company began purchasing commodity purchase swaps to mitigate variable purchase price risk for electricity at our Gary Works location. We elected cash flow hedge accounting for ~~domestic~~our U.S. commodity purchase swaps for natural gas, zinc and tin and use mark-to-market accounting for commodity purchase swaps used in our European ~~operations.~~

From time to time, we enter into financial swaps that are used to partially manage the sales price of certain hot-rolled coil and iron ore pellet sales (sales swaps). We elected cash flow hedge accounting for hot-rolled coil sales swaps effective January 1, 2018operations and for ~~iron ore pellet sales swaps effective January 1, 2019.~~electricity commodity purchase swaps.

In accordance with the guidance in ASC Topic 820 on fair value measurements and disclosures, the fair value of our foreign exchange forwards, commodity purchase swaps and sales swaps was determined using Level 2 inputs, which are defined as "significant other observable" inputs. The inputs used are from market sources that aggregate data based upon market transactions.

The table below shows the outstanding swap quantities used to hedge forecasted purchases and sales as of ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018:~~March 31, 2019:


Hedge Contracts	Classification	September 30, 2019		September 30, 2018		Classification	March 31, 2020		March 31, 2019
Natural gas (in mmbtus)	Commodity purchase swaps	56,873,000		12,345,000		Commodity purchase swaps	52,464,000		56,894,000
Tin (in metric tons)	Commodity purchase swaps	530		470		Commodity purchase swaps	870		1,475
Zinc (in metric tons)	Commodity purchase swaps	14,561		13,886		Commodity purchase swaps	21,044		13,651
Hot-rolled coils (in tons)	Sales swaps	—		38,000
Electricity (in megawatt hours)						Commodity purchase swaps	1,024,000		—
Foreign currency (in millions of euros)	Foreign exchange forwards	€	316	€	275	Foreign exchange forwards	€	259	€	296
Foreign currency (in millions of CAD)	Foreign exchange forwards	C$	33	C$	58	Foreign exchange forwards	C$	23	C$	48

The following summarizes the fair value amounts included in our Condensed Consolidated Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(In millions) Designated as Hedging Instruments	Balance Sheet Location	September 30, 2019		December 31, 2018		Balance Sheet Location	March 31, 2020	December 31, 2019
Sales swaps	Accounts payable	$	—	$	1
Commodity purchase swaps	Accounts receivable	3		2		Accounts receivable	2	1
Commodity purchase swaps	Accounts payable	14		17		Accounts payable	27	17
Commodity purchase swaps	Investments and long-term receivables	1		—		Investments and long-term receivables	—	1
Commodity purchase swaps	Other long-term liabilities	8		1		Other long-term liabilities	5	7
Foreign exchange forwards	Accounts receivable	3		—		Accounts receivable	6	—
Foreign exchange forwards	Accounts payable	1		1		Accounts payable	2	1
Foreign exchange forwards	Other long-term liabilities	—		1

Not Designated as Hedging Instruments
Commodity purchase swaps						Accounts payable	1	—
Commodity purchase swaps						Other long-term liabilities	1	—
Foreign exchange forwards	Accounts receivable	9		12		Accounts receivable	3	4

The table below summarizes the effect of hedge accounting on AOCI and amounts reclassified from AOCI into earnings for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Gain (Loss) on Derivatives in AOCI						Amount of Gain (Loss) Recognized in Income						Gain (Loss) on Derivatives in AOCI				Amount of Gain (Loss) Recognized in Income
(In millions)	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018		Location of Reclassification from AOCI ^(a)	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Three Months Ended March 31, 2020		Three Months Ended March 31, 2019	Location of Reclassification from AOCI ^(a)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Sales swaps ^(b)	$	—		$	6	Net sales	$	—		$	(6	)
Commodity purchase swaps	(6		)	—		Cost of sales ^(c)	(4		)	(4		)	(8	)	18	Cost of sales ^(b)	(8	)	(4	)
Foreign exchange forwards	3			—		Cost of sales	—			—			5		1	Cost of sales	—		—

^(a) The earnings impact of our hedging instruments substantially offsets the earnings impact of the related hedged items since ineffectiveness is less than $1 million.

^(b)~~U. S. Steel has elected hedge accounting prospectively for iron ore pellet sales swaps on January 1, 2019.~~

^(c)Costs for commodity purchase swaps are recognized in cost of sales as products are sold.

The table below summarizes the impact of derivative activity where hedge accounting has not been elected on our Condensed Consolidated Statement of Operations for the three months ended March 31, 2020 and 2019:


	Gain (Loss) on Derivatives in AOCI							Amount of Gain (Loss) Recognized in Income							Amount of Gain (Loss) Recognized in Income
(In millions)	Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018			Location of Reclassification from AOCI ^(a)	Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018			Statement of Operations Location	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Sales swaps ^(b)	$	1		$	(6	)	Net sales	$	(1	)	$	(9	)
Commodity purchase swaps	(2		)	(7		)	Cost of sales ^(c)	(14		)	(3		)
Commodity purchase swaps ^(a)														Cost of sales	(2	)	—
Foreign exchange forwards	4			—			Cost of sales	—			—			Other financial costs	4		9

^(a) ~~The earnings impact of our hedging instruments substantially offsets the earnings impact of the related hedged items since ineffectiveness is less than $1 million.~~

^(b)~~U. S. Steel has elected hedge accounting prospectively for iron ore pellet sales swaps on~~In January ~~1, 2019.~~

^(c) ~~Costs for~~2020, we began utilizing commodity purchase swaps ~~are recognized in cost of sales as products are sold.~~to mitigate variable electricity price risk at our Gary Works location.

For euro foreign exchange forward derivatives where hedge accounting was not elected, there were gains of $11 million and $5 million in the three-month periods ended September 30, 2019 and 2018, respectively, and gains of $18 million in both the first nine months of 2019 and 2018, respectively, recognized in other financial costs. There were no other material impacts for derivatives where hedge accounting was not elected.

At current contract values, $9$21 million currently in AOCI as of ~~September 30, 2019~~March 31, 2020 will be recognized as an increase in cost of sales over the next year as related hedged items are recognized in earnings. The maximum derivative contract duration for commodity purchase swaps where hedge accounting was elected is 2721 months. ~~There are 0 outstanding contracts~~The maximum contract duration for ~~sales swaps.~~commodity purchase swaps where hedge accounting was not elected is 34 months.

16. Debt


(In millions)	Interest Rates %	Maturity	September 30, 2019		December 31, 2018		Interest Rates %	Maturity	March 31, 2020		December 31, 2019
2037 Senior Notes	6.650	2037	$	350	$	350	6.650	2037	$	350	$	350
2026 Senior Notes	6.250	2026	650		650		6.250	2026	650		650
2026 Senior Convertible Notes							5.000	2026	350		350
2025 Senior Notes	6.875	2025	750		750		6.875	2025	750		750
Environmental Revenue Bonds	5.750 - 6.875	2019 - 2042	400		400		4.875 - 6.750	2024 - 2049	620		620
Fairfield Caster Lease		2022	20		22			2022	18		18
Other finance leases and all other obligations		2019 - 2029	40		6			2021 - 2029	75		48
Fourth Amended and Restated Credit Agreement	Variable	2023	—		—
ECA Credit Agreement							Variable	2031	104		—
Amended Credit Facility, $2.0 billion							Variable	2024	1,500		600
UPI Amended Credit Facility							Variable	2020	79		—
USSK Credit Agreement	Variable	2023	381		229		Variable	2023	384		393
USSK credit facilities	Variable	2021	—		—
USSK Credit Facilities							Variable	2021	—		—
Total Debt			2,591		2,407				4,880		3,779
Less unamortized discount and debt issuance costs			24		26				165		138
Less short-term debt and long-term debt due within one year			67		65				99		14
Long-term debt			$	2,500	$	2,316			$	4,616	$	3,627

To the extent not otherwise discussed below, information concerning the senior notes, the Senior Convertible Notes and other listed obligations can be found in Note 17 of the audited financial statements in the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Export Credit Agreement

Funding of U. S. Steel’s vendor supported Export Credit Agreement (ECA) occurred on February 19, 2020. U. S. Steel borrowed $104 million under the ECA as of March 31, 2020. Loan repayments start six months after the starting point of credit as defined in the loan agreement with a total repayment term up to eight years. Loan availability and repayment terms are subject to certain customary covenants and events of default. The purpose of the ECA is to finance equipment purchased for the endless casting and rolling facility under construction at our Mon Valley Works facility in Braddock, Pennsylvania. In response to the decline in demand for our products resulting from the COVID-19 outbreak, we have delayed construction of our endless casting and rolling line at Mon Valley Works. We have also paused our borrowing under the ECA pending an update to the agreement or resumption of construction.

Amended and Restated Credit Agreement

As of ~~September 30, 2019~~March 31, 2020, there ~~were~~ 0 ~~amounts~~was $1.5 billion drawn under the ~~$1.5~~$2.0 billion ~~Fourth Amended and Restated~~Fifth Credit Facility Agreement (Credit Facility Agreement). U. S. Steel must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most recent four consecutive quarters when availability under the Credit Facility Agreement is less than the greater of 10 percent of the total aggregate commitments and ~~$150~~$200 million. Based on the most recent four quarters as of ~~September 30, 2019,~~March 31, 2020, we would not have met ~~this covenant. As a result,~~the fixed charge coverage ratio test; therefore, the amount available to the Company under this facility ~~will be~~is effectively reduced by ~~$150 million and the~~$200 million. The availability under the Credit Facility Agreement was ~~$1.35 billion~~$300 million as of ~~September 30, 2019.~~March 31, 2020.

The Credit Facility Agreement provides for borrowings at interest rates based on defined, short-term market rates plus a spread based on availability and includes other customary terms and conditions including restrictions on our ability to create certain liens and to consolidate, merge or transfer all, or substantially all, of our assets. The Credit Facility Agreement expires in ~~February 2023.~~October 2024. Maturity may be accelerated 91 days prior to the stated maturity of any outstanding senior debt if excess cash and credit facility availability do not meet the liquidity conditions set forth in the Credit Facility Agreement. Borrowings are secured by liens on certain North American inventory and trade accounts receivable. The value of our inventory and trade accounts receivable less specified reserves calculated with the Amended and Restated Credit Agreement supported the full amount of the facility at March 31, 2020.

On October 25, 2019, we entered into a new five-year senior secured asset-based revolving credit facility in an aggregate amount up to $2.0 billion (Fifth Credit Facility Agreement) to replace the existing Credit Facility Agreement. The ~~Fifth~~ Credit Facility Agreement has ~~substantially the same terms~~customary representations and warranties including, as ~~the existing Credit Facility Agreement, except the Fifth Credit Facility Agreement will mature five years from~~a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of ~~effectiveness, includes~~the borrowing, including representations as to no material adverse change in our business or financial condition that is not disclosed in our last published financial results. The facility also has customary defaults, including a ~~“first-in, last-out” tranche in an amount up~~cross-default to ~~$150 million~~material indebtedness of U. S. Steel and includes certain other changes, including changes to the fixed charge coverage ratio allowing us to exclude (i) certain capital expenditures from the calculation of the ratio and (ii) any restricted payments made pursuant to any share repurchase program from the calculation of "consolidated fixed charges." On October 30, 2019, we drew $700 million on the Fifth Credit Facility Agreement to fund the closing of our ~~acquisition of a 49.9% interest in Big River Steel.~~subsidiaries.

U. S. Steel Košice (USSK) ~~credit facilities~~Credit Facilities

At ~~September 30, 2019,~~March 31, 2020, USSK had borrowings of €350 million (approximately ~~$381~~$384 million) under its €460 million (approximately ~~$501~~$504 million) ~~unsecured~~ revolving credit ~~facility.~~facility (USSK Credit Agreement). The USSK Credit Agreement contains

certain USSK specific financial covenants including ~~a maximum net debt to EBITDA ratio and~~ a minimum stockholders' equity to assets ratio and net debt to EBITDA ratio. The covenants are measured semi-annually at June and December each year for the period covering the last twelve calendar months, with the first net debt to EBITDA measurement occurring at June 2021. USSK must maintain a net debt to EBITDA ratio of less than 6.5 as of June 30, 2021 and ~~calculated~~3.5 for semi-annual measurements starting December 31, 2021. If the challenging market conditions in Europe due to COVID-19 persisted for a long period and negatively impacted USSK's projected EBITDA, and if covenant compliance requirements are not amended or waived, it may result in an event of default, under which USSK may not draw upon the facility, and the majority lenders, as ~~set forth~~defined in the USSK Credit Agreement, may cancel any and all commitments, and/or accelerate full repayment of any or all amounts outstanding under the USSK Credit Agreement. IfOn December 23, 2019, USSK ~~does not comply with~~entered into a supplemental agreement that amended the USSK Credit Agreement ~~financial covenants, it may not draw on the facility until the next measurement date, outstanding borrowings may be accelerated, or the margin on outstanding borrowings may be increased.~~ leverage covenant and pledged certain USSK trade receivables and inventory as collateral in support of USSK's obligations.

At ~~September 30, 2019,~~March 31, 2020, USSK had availability of €110 million (approximately $120 million) under the USSK Credit Agreement. The USSK Credit Agreement expires in September 2023.

The USSK Credit Agreement contains customary representations and warranties including, as a condition to borrowing, that it met certain financial covenants since the last measurement date, and that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, and representations as to no material adverse change in our business or financial condition since December 31, 2017. The facility also has customary defaults, including a cross-default upon acceleration of material indebtedness of USSK and its subsidiaries.

At ~~September 30, 2019,~~March 31, 2020, USSK had 0 borrowings under its €20 million and €10 million ~~unsecured~~ credit facilities (collectively, approximately $33 million) and the availability was approximately $32 million due to approximately $1 million of customs and other guarantees outstanding.

Each of these facilities bear interest at the applicable inter-bank offer rate plus a margin and contain customary terms and conditions.

USS-POSCO Industries Credit Facility

~~Environmental Revenue Bonds~~

~~On October 10, 2019, we launched offerings~~At March 31, 2020, USS-POSCO Industries (UPI) had borrowings of ~~2 series of environmental revenue bonds in aggregate principal amount of approximately $368~~$79 million ~~that will mature between 2024~~under its $110 million revolving credit facility (UPI Amended Credit Facility). Borrowings are secured by liens on certain UPI inventory and ~~2049 (collectively, the “2019 Environmental Revenue Bonds”). Proceeds of the 2019 Environmental Revenue Bonds in the amount of approximately $93 million will be used to redeem~~trade accounts receivable. The UPI Amended Credit Facility provides for borrowings at interest rates based on defined, short-term market rates plus a portion of our existing outstanding environmental revenue bonds for which we issued a conditional redemption notice. Proceeds of the 2019 Environmental Revenue Bonds in the amount of $275 million will be used to finance or refinance the acquisition, construction, equippingspread based on availability and ~~installation of certain solid waste disposal facilities, including an electric arc furnace and~~includes other ~~equipment and facilities at the Company’s Fairfield Works. The 2019 Environmental Revenue Bonds closed on October 25, 2019.~~

~~2026 Senior Convertible Notes~~

On October 21, 2019, U. S. Steel issued an aggregate principal amount of $300 million of 5.00% Senior Convertible Notes due November 1, 2026 (2026 Senior Convertible Notes), with a 30-day option to purchase up to an additional $50 million in aggregate principal amount of 2026 Senior Convertible Notes, on the samecustomary terms and conditions. ~~On October 25, 2019, U. S. Steel issued an additional $50~~At March 31, 2020, UPI had availability of $13 million ~~of 2026 Senior Convertible Notes after~~under the full option was exercised. U. S. Steel received net proceeds of approximately $340 million from the sale of the 2026 Senior Convertible Notes after deducting underwriting fees and estimated offering expenses.UPI Amended Credit Facility. The Company intends to use the net proceeds for general corporate purposes, including, without limitation, for previously announced strategic investments and capital expenditures. Interest on the 2026 Senior Convertible Notes is payable semi-annually on May 1 and November 1 of each year, commencing on May 1,agreement expires in August 2020.

Prior to August 1, 2026, holders of notes may convert all or a portion of their notes at their option only upon the satisfaction of specified conditions and during certain periods. On or after August 1, 2026, holders may convert all or a portion of their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, we will satisfy the obligation with cash, common stock, or a combination thereof, at our election. U. S. Steel may not redeem the 2026 Senior Convertible Notes prior to November 5, 2023. On or after November 5, 2023 and prior to August 1, 2026, if the price per share of U. S. Steel's common stock has been at least 130% of the conversion price for specified periods, U. S. Steel may redeem all or a portion of the 2026 Senior Convertible Notes at a cash redemption price of 100% of the principal amount, plus accrued and unpaid interest.

If U. S. Steel undergoes a fundamental change, as defined in the 2026 Senior Convertible Notes, holders may require us to repurchase the 2026 Senior Convertible Notes in whole or in part for cash at a price equal to 100% of the principal amount of the 2026 Senior Convertible Notes to be purchased plus any accrued and unpaid interest (including additional interest, if any) up to, but excluding the repurchase date.

For accounting purposes, the proceeds received from the issuance of the notes will be allocated between debt and equity to reflect the fair value of the conversion option embedded in the notes and the fair value of similar debt without the conversion option. As a result, based on the aggregate principal amount of $350 million, we estimate that we will record approximately $106 million of the gross proceeds of the 2026 Senior Convertible Notes as an increase in additional paid-in capital with the offsetting amount recorded as a debt discount. The debt discount will be amortized over the term of the 2026 Senior Convertible Notes using an estimated interest

~~rate of 10.5% (the estimated effective borrowing rate for nonconvertible debt at the time of issuance) which will accrete the carrying value of the notes to the principal amount at maturity.~~

Change in control event

If there is a change in control of U. S. Steel, the following may occur: (a) debt obligations totaling ~~$2,131~~$4,166 million as of ~~September 30, 2019~~March 31, 2020 may be declared due and payable; (b) the Credit Facility Agreement and the USSK credit

facilities may be terminated and any amounts outstanding declared due and payable; and (c) U. S. Steel may be required to either purchase the leased Fairfield Works slab caster for approximately $2119 million or provide a letter of credit to secure the remaining obligation.

17.~~Asset Retirement Obligations~~

~~U. S. Steel’s asset retirement obligations (AROs) primarily relate to mine, landfill closure and post-closure costs. The following table reflects changes in the carrying values of AROs:~~

(In millions) September 30, 2019 December 31, 2018
Balance at beginning of year $ 60
$ 69

Obligations settled (7 ) (12 )
Accretion expense 2
3

Balance at end of period $ 55
$ 60

Certain AROs related to disposal costs of the majority of fixed assets at our integrated steel facilities have not been recorded because they have an indeterminate settlement date. These AROs will be initially recognized in the period in which sufficient information exists to estimate their fair value.

~~18.~~ Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, current accounts and notes receivable, accounts payable, bank checks outstanding, and accrued interest included in the Condensed Consolidated Balance Sheet approximate fair value. See Note 15 for disclosure of U. S. Steel’s derivative instruments, which are accounted for at fair value on a recurring basis.

On October 31, 2019, a wholly owned subsidiary of U. S. Steel purchased a 49.9% ownership interest in Big River Steel. The transaction included a call option (U. S. Steel Call Option) to acquire the remaining 50.1% within the next four years at an agreed-upon price formula, which in years three and four is based on Big River Steel’s achievement of certain metrics that include: free cash flow, product development, safety and the completion of a proposed expansion of Big River Steel's existing manufacturing line. The transaction also included options where the other Big River Steel equity owners can require U. S. Steel to purchase their 50.1% ownership interest (Class B Common Put Option) or require U. S. Steel to sell its ownership interest (Class B Common Call Option) after the U. S. Steel Call Option expires.

All of the options are marked to fair value each period using a Monte Carlo simulation which is considered a Level 3 valuation technique. Level 3 valuation techniques include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement. The net change in fair value of the options during the three months ended March 31, 2020 resulted in an $11 million decrease to net interest and other financial costs. The financial impact was due to an increase in U. S. Steel’s credit spread partially offset by a lower risk free interest rate and a lower Big River Steel equity value.

The following table shows the change in fair value by option.



(In millions)	Balance Sheet Location	Fair Value asset/(liability) at December 31, 2019			Fair Value Mark to Market gain/(loss)			Fair Value asset/(liability) at March 31, 2020
U. S. Steel Call Option	Investments and Long-Term Receivables	$	166		$	(28	)	$	138
Class B Common Put Option	Deferred credits and other noncurrent liabilities	$	(192	)	$	39		$	(153	)
Class B Common Call Option	Deferred credits and other noncurrent liabilities	$	(2	)	$	—		$	(2	)
Net Mark to Market Impact					$	11

The fair value of the U. S. Steel Call Option and Class B Common Put Option are most significantly impacted by certain unobservable inputs including: Big River Steel’s equity value (Equity Value); and Volatility, which is calculated from the market price movements of certain peer companies. Increases in Equity Value increase the fair value of the U. S. Steel Call Option and decrease the fair value of the Class B Common Put Option. For the period ended March 31, 2020, the equity value was adjusted downward to reflect uncertainty in the market related to COVID-19 impacts. Increases in Volatility increase both the fair value of the U. S. Steel Call Option and the Class B Common Put Option. The Class B Common Put Option is also significantly impacted by U. S. Steel’s credit spread (Credit Spread) which is the estimated premium to borrow money in excess of the risk-free rate considering the subordinated nature of the Class B Common Put Option. Increases in the Credit Spread reduce the fair value of the Class B Common Put Option. See Note 20 of the audited financial statements in the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for further details.

The following table summarizes U. S. Steel’s financial liabilities that were not carried at fair value at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019.


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(In millions)	Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount
Financial liabilities:
Long-term debt ^(a)	$	2,229	$	2,452	$	2,182	$	2,353	$	4,009	$	4,621	$	3,576	$	3,575

(a) Excludes finance lease obligations.

The ~~following methods and assumptions were used to estimate the~~ fair value of ~~financial instruments included in the table above:~~

~~Long-term~~long-term debt~~: Fair value~~ was determined using Level 2 inputs which were derived from quoted market prices and is based on the yield on public debt where available or current borrowing rates available for financings with similar terms and maturities.

Fair value of the financial liabilities disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

Financial guarantees are U. S. Steel’s only unrecognized financial instrument. For details relating to financial guarantees see Note ~~23.~~22.

~~19.~~18. Statement of Changes in Stockholders’ Equity

The following table reflects the first ~~nine~~three months of ~~2019~~2020 and ~~2018~~2019 reconciliation of the carrying amount of total equity, equity attributable to U. S. Steel and equity attributable to noncontrolling interests:

Nine Months Ended
September 30, 2019
(In millions) Total Retained Earnings Accumulated
Other
Comprehensive
(Loss) Income Common
Stock Treasury
Stock Paid-in
Capital Non-
Controlling
Interest
Balance at beginning of year $ 4,203
$ 1,212
$ (1,026 ) $ 177
$ (78 ) $ 3,917
$ 1
Comprehensive income (loss):

Net earnings 54
54

Other comprehensive income (loss), net of tax:

Pension and other benefit adjustments 32

32

Currency translation adjustment (17 )
(17 )

Derivative financial instruments 15
15

Employee stock plans 2

1
(6 ) 7

Common stock repurchased (42 )

(42 )

Dividends paid on common stock (9 ) (9 )

Cumulative effect upon adoption of lease accounting standard (2 ) (2 )

Balance at March 31, 2019 4,236
1,255
(996 ) 178
(126 ) 3,924
1
Comprehensive income (loss):

Net earnings 68
68

Other comprehensive income (loss), net of tax:

Pension and other benefit adjustments 32

32

Currency translation adjustment 12

12

Derivative financial instruments (11 )

(11 )

Employee stock plans 12

1
(1 ) 12

Common stock repurchased (28 )

(28 )

Dividends paid on common stock (9 ) (9 )

Balance at June 30, 2019 4,312
1,314
(963 ) 179
(155 ) 3,936
1
Comprehensive income (loss):
Net loss (84 ) (84 )

Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments 30

30

Currency translation adjustment (40 )

(40 )

Derivative financial instruments (2 )

(2 )

Employee stock plans 11

11

Common stock repurchased (18 )

(18 )

Dividends paid on common stock (8 ) (8 )

Other (1 ) (1 )

Balance at September 30, 2019 $ 4,200
$ 1,221
$ (975 ) $ 179
$ (173 ) $ 3,947
$ 1



Three Months Ended March 31, 2020 (In millions)	Total			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Common Stock		Treasury Stock			Paid-in Capital		Non- Controlling Interest
Balance at beginning of year	$	4,093		$	544		$	(478	)	$	179	$	(173	)	$	4,020	$	1
Comprehensive income (loss):
Net loss	(391		)	(391		)
Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments	52						52
Currency translation adjustment	(23		)				(23		)
Derivative financial instruments	(5		)				(5		)
Employee stock plans	2											(2		)	4
Dividends paid on common stock	(2		)	(2		)
Balance at March 31, 2020	3,726			151			(454		)	179		(175		)	4,024		1


Nine Months Ended September 30, 2018 (In millions)	Total			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Common Stock		Treasury Stock			Paid-in Capital			Non- Controlling Interest
Three Months Ended March 31, 2019 (In millions)																				Total			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Common Stock		Treasury Stock			Paid-in Capital		Non- Controlling Interest
Balance at beginning of year	$	3,321		$	133		$	(845	)	$	176	$	(76	)	$	3,932		$	1	$	4,203		$	1,212		$	(1,026	)	$	177	$	(78	)	$	3,917	$	1
Comprehensive income (loss):
Net earnings	18			18																54			54
Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments	46						46													32						32
Currency translation adjustment	40						40													(17		)				(17		)
Derivative financial instruments	(16		)				(16		)											15						15
Employee stock plans	39									1		75			(37		)			2									1		(6		)	7
Common stock repurchased																				(42		)									(42		)
Dividends paid on common stock	(9		)	(9		)														(9		)	(9		)
Balance at March 31, 2018	3,439			142			(775		)	177		(1		)	3,895			1
Comprehensive income (loss):
Net earnings	214			214
Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments	47						47
Currency translation adjustment	(87		)				(87		)
Derivative financial instruments	(3		)				(3		)
Employee stock plans	5														5
Dividends paid on common stock	(9		)	(9		)
Balance at June 30, 2018	3,606			347			(818		)	177		(1		)	3,900			1
Comprehensive income (loss):
Net earnings	291			291
Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments	50						50
Currency translation adjustment	(10		)				(10		)
Derivative financial instruments	7						7
Employee stock plans	7											(2		)	9
Dividends paid on common stock	(9		)	(9		)
Balance at September 30, 2018	$	3,942		$	629		$	(771	)	$	177	$	(3	)	$	3,909		$	1
Cumulative effect upon adoption of lease accounting standard																				(2		)	(2		)
Balance at March 31, 2019																				4,236			1,255			(996		)	178		(126		)	3,924		1

~~20.~~19. Reclassifications from Accumulated Other Comprehensive Income (AOCI)


(In millions)	Pension and Other Benefit Items			Foreign Currency Items			Unrealized Gain (Loss) on Derivatives			Total			Pension and Other Benefit Items			Foreign Currency Items			Unrealized Gain (Loss) on Derivatives			Total
Balance at December 31, 2018	$	(1,416	)	$	403		$	(13	)	$	(1,026	)
Other comprehensive (loss) income before reclassifications	(3		)	(45		)	(12		)	(60		)
Balance at December 31, 2019													$	(843	)	$	381		$	(16	)	$	(478	)
Other comprehensive income (loss) before reclassifications													7			(23		)	(17		)	(33		)
Amounts reclassified from AOCI ^(a)	97			—			14			111			45			—			12			57
Net current-period other comprehensive income (loss)	94			(45		)	2			51			52			(23		)	(5		)	24
Balance at September 30, 2019	$	(1,322	)	$	358		$	(11	)	$	(975	)
Balance at March 31, 2020													$	(791	)	$	358		$	(21	)	$	(454	)

Balance at December 31, 2017	$	(1,309	)	$	463		$	1		$	(845	)
Balance at December 31, 2018													$	(1,416	)	$	403		$	(13	)	$	(1,026	)
Other comprehensive (loss) income before reclassifications ^(b)	(6		)	(58		)	1			(63		)	—			(17		)	25			8
Amounts reclassified from AOCI ^(a)(b)	149			—			(12		)	137			32			—			(10		)	22
Net current-period other comprehensive income (loss)	143			(58		)	(11		)	74			32			(17		)	15			30
Balance at September 30, 2018	$	(1,166	)	$	405		$	(10	)	$	(771	)
Balance at March 31, 2019													$	(1,384	)	$	386		$	2		$	(996	)

(a)See table below for further details.

(b)The Company previously disclosed in Note 1920 to the Condensed Consolidated Financial Statements in its Quarterly Report on Form 10-Q for the period ended ~~September 30, 2018,~~March 31, 2019, an increase to AOCI of ~~$292~~$63 million in the Other comprehensive income before reclassifications line item and a decrease to AOCI of ~~$149~~$31 million in the Amounts reclassified from AOCI line item for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 amounts for Pension and Other Benefit Items. These amounts should have been disclosed as ~~a decrease~~an increase to AOCI of $6$0 million and an increase to AOCI of ~~$149~~$32 million, respectively, which have been corrected in the table above. The Company concluded that the errors were not material to the financial statements of any prior annual or interim period and therefore, amendments of previously filed reports are not required. The revision had no impact on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Cash Flows or the Condensed Consolidated Statements of Comprehensive Income (Loss). Quarterly periods not presented herein will be revised, as applicable, in future filings.

Amount reclassified from AOCI ^(c)
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) Details about AOCI components 2019 2018 2019 2018
Amortization of pension and other benefit items

Prior service costs ^(a)
$ 8
$ 7
$ 23
$ 22

Actuarial losses ^(a)
33
39
101
117

Settlement, termination and
curtailment losses ^(a)
3
10
3
10
Total pensions and other benefits items 44
56
127
149
Derivative reclassifications from AOCI 5
(11 ) 19
(12 )
Total before tax 49
45
146
137

Tax benefit ^(b)
(12 ) —
(35 ) —
Net of tax $ 37
$ 45
$ 111
$ 137



	Amount reclassified from AOCI ^(b)
(In millions)	Three Months Ended March 31,
Details about AOCI components	2020			2019
Amortization of pension and other benefit items
Prior service costs ^(a)	$	(2	)	$	7
Actuarial losses ^(a)	32			34
UPI Purchase Accounting Adjustment	23			—
Total pensions and other benefits items	53			41
Derivative reclassifications to Condensed Consolidated Statements of Operations	12			(13		)
Total before tax	65			28
Tax provision	(8		)	(6		)
Net of tax	$	57		$	22

(a)These AOCI components are included in the computation of net periodic benefit cost (see Note 1011 for additional details).

(b)~~Amounts in 2018 do not reflect a tax provision as a result of a full valuation allowance on our domestic deferred tax assets.~~

~~(c)~~The corrections noted in footnote ^(b) to the table above are consistently reflected in this table.

~~21.~~20. Transactions with Related Parties

Net sales to related parties and receivables from related parties primarily reflect sales of raw materials and steel products to equity investees. Generally, transactions are conducted under long-term contractual arrangements. Related party sales and service transactions were $~~367~~351 million and $~~378~~375 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, ~~respectively and $1,112~~respectively. The transaction to purchase UPI included the assumption of $135 million ~~and $1,072 million~~of accounts payable owed to U. S. Steel for prior sales of steel substrate to UPI. This amount is reflected as a reduction in receivables from related parties on the ~~nine months ended September 30, 2019 and 2018, respectively.~~Company's Condensed Consolidated

Balance Sheet as both the corresponding receivable and payable amounts between U. S. Steel and UPI are eliminated in consolidation upon acquisition. See Note 5 to the Condensed Consolidated Financial Statements for further details.

Purchases from related parties for outside processing services provided by equity investees amounted to $728 million and $89 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, ~~respectively and $23 million for both the nine months ended September 30, 2019 and 2018.~~respectively. Purchases of iron ore pellets from related parties amounted to ~~$27~~$18 million and $2320 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $78 million and $66 million for the nine months ended September 30, 2019 and 2018,~~ respectively.

Accounts payable to related parties include balances due to PRO-TEC Coating Company, LLC (PRO-TEC) of $~~109~~91 million and $8082 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, respectively for invoicing and receivables collection services provided by U. S. Steel on PRO-TEC's behalf. U. S. Steel, as PRO-TEC’s exclusive sales agent, is responsible for credit risk related to those receivables. U. S. Steel also provides PRO-TEC marketing, selling and customer service functions. Payables to other related parties totaled $29 million and $1$2 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, respectively.

~~22.~~21. Restructuring and Other Charges

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company recorded restructuring and other charges of ~~$54~~$41 million, which consists of charges of ~~$25 million at USSK for headcount reductions and plant exit costs, and $29~~$22 million for the ~~intended~~ indefinite idling of ~~our East Chicago Tin operations~~a significant portion of the Great Lakes Works, $13 million for the indefinite idling of Lorain Tubular Operations and ~~our finishing facility in Dearborn, Michigan.~~a significant portion of Lone Star Tubular Operations and $6 million for special pension termination charges related to the Company-wide headcount reductions. Cash payments were made related to severance and exit costs of ~~$20~~$8 million.

Charges for restructuring initiatives are recorded in the period U. S. Steel commits to a restructuring plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. Charges for restructuring are reported in restructuring and other charges in the Condensed Consolidated Statements of Operations.

The activity in the accrued balances incurred in relation to restructuring programs during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 were as follows:


(In millions)	Employee Related Costs			Exit Costs			Non-cash Charges^(a)			Total			Employee Related Costs			Exit Costs			Total
Balance at December 31, 2018	$	—		$	17		$	—		$	17
Balance at December 31, 2019													$	87		$	125		$	212
Additional charges	28			9			17			54			18			23			41
Cash payments/utilization	(14		)	(6		)	(17		)	(37		)	(4		)	(4		)	(8		)
Balance at September 30, 2019	$	14		$	20		$	—		$	34
Balance at March 31, 2020													$	101		$	144		$	245

^(a)~~Non-cash charges primarily relate to accelerated depreciation associated with the intended indefinite idling of our ECT operations and Dearborn, Michigan finishing facility.~~

Accrued liabilities for restructuring programs are included in the following balance sheet lines:


(In millions)	September 30, 2019		March 31, 2020		December 31, 2019
Accounts payable	$	14	$	66	$	46
Payroll and benefits payable	14		73		64
Employee benefits			28		23
Deferred credits and other noncurrent liabilities	6		78		79
Total	$	34	$	245	$	212

~~23.~~22. Contingencies and Commitments

U. S. Steel is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the Condensed Consolidated Financial Statements. However, management

believes that U. S. Steel will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.

U. S. Steel accrues for estimated costs related to existing lawsuits, claims and proceedings when it is probable that it will incur these costs in the future and the costs are reasonably estimable.

Asbestos matters – As of ~~September 30, 2019~~March 31, 2020, U. S. Steel was a defendant in approximately ~~796~~808 active cases involving approximately ~~2,380~~2,400 plaintiffs. The vast majority of these cases involve multiple defendants. About 1,540, or approximately 6564 percent, of these plaintiff claims are currently pending in jurisdictions which permit filings with massive numbers of plaintiffs. At December 31, ~~2018,~~2019, U. S. Steel was a defendant in approximately ~~755~~800 cases involving approximately ~~2,320~~2,390 plaintiffs. Based upon U. S. Steel’s experience in such cases, it believes that the actual number of plaintiffs who ultimately assert claims against U. S. Steel will likely be a small fraction of the total number of plaintiffs.

The following table shows the number of asbestos claims in the current period and the prior three years:


Period ended	Opening Number of Claims	Claims Dismissed, Settled and Resolved ^(a)	New Claims	Closing Number of Claims	Opening Number of Claims	Claims Dismissed, Settled and Resolved ^(a)	New Claims	Closing Number of Claims
December 31, 2016	3,315	225	250	3,340
December 31, 2017	3,340	275	250	3,315	3,340	275	250	3,315
December 31, 2018	3,315	1,285	290	2,320	3,315	1,285	290	2,320
September 30, 2019	2,320	150	210	2,380
December 31, 2019					2,320	195	265	2,390
March 31, 2020					2,390	90	100	2,400

(a) The period ending December 31, 2018 includes approximately 1,000 dismissed cases previously pending in the State of Texas.

Historically, asbestos-related claims against U. S. Steel fall into 3 groups: (1) claims made by persons who allegedly were exposed to asbestos on the premises of U. S. Steel facilities; (2) claims made by persons allegedly exposed to products manufactured by U. S. Steel; and (3) claims made under certain federal and maritime laws by employees of former operations of U. S. Steel.

The amount U. S. Steel accrues for pending asbestos claims is not material to U. S. Steel’s financial condition. However, U. S. Steel is unable to estimate the ultimate outcome of asbestos-related claims due to a number of uncertainties, including: (1) the rates at which new claims are filed, (2) the number of and effect of bankruptcies of other companies traditionally defending asbestos claims, (3) uncertainties associated with the variations in the litigation process from jurisdiction to jurisdiction, (4) uncertainties regarding the facts, circumstances and disease process with each claim, and (5) any new legislation enacted to address asbestos-related claims.

Further, U. S. Steel does not believe that an accrual for unasserted claims is required. At any given reporting date, it is probable that there are unasserted claims that will be filed against the Company in the future. In ~~2018,~~2019, the Company engaged an outside valuation consultant to assist in assessing its ability to estimate an accrual for unasserted claims. This assessment was based on the Company's settlement experience, including recent claims trends. The analysis focused on settlements made over the last several years as these claims are likely to best represent future claim characteristics. After review by the valuation consultant and U. S. Steel management, it was determined that the Company could not estimate an accrual for unasserted claims.

Despite these uncertainties, management believes that the ultimate resolution of these matters will not have a material adverse effect on U. S. Steel’s financial condition.

Environmental matters – U. S. Steel is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. Changes in accrued liabilities for remediation activities where U. S. Steel is identified as a named party are summarized in the following table:

(In millions) Nine Months Ended September 30, 2019
Beginning of period $ 187
Accruals for environmental remediation deemed probable and reasonably estimable 6
Obligations settled (17 )
End of period $ 176



(In millions)	Three Months Ended March 31, 2020
Beginning of period	$	186
Accruals for environmental remediation deemed probable and reasonably estimable	1
Obligations settled	(9		)
End of period	$	178

Accrued liabilities for remediation activities are included in the following Condensed Consolidated Balance Sheet lines:


(In millions)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Accounts payable	$	41	$	37	$	55	$	53
Deferred credits and other noncurrent liabilities	135		150		123		133
Total	$	176	$	187	$	178	$	186

Expenses related to remediation are recorded in cost of sales and were immaterial for both ~~the~~ three ~~and nine-month~~month periods ended ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018.~~March 31, 2019. It is not currently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Due to uncertainties inherent in remediation projects and the associated liabilities, it is reasonably possible that total remediation costs for active matters may exceed the accrued liabilities by as much as 1520 to 30 percent.

Remediation Projects

U. S. Steel is involved in environmental remediation projects at or adjacent to several current and former U. S. Steel facilities and other locations that are in various stages of completion ranging from initial characterization through post-closure monitoring. Based on the anticipated scope and degree of uncertainty of projects, we categorize projects as follows:

(1)

Projects with Ongoing Study and Scope Development - Projects which are still in the development phase. For these projects, the extent of remediation that may be required is not yet known, the remediation methods and plans are not yet developed, and/or cost estimates cannot be determined. Therefore, significant costs, in addition to the accrued liabilities for these projects, are reasonably possible. There are 6 environmental remediation projects where additional costs for completion are not currently estimable, but could be material. These projects are at Fairfield Works, Lorain Tubular, USS-POSCO Industries (UPI), the Fairless Plant, Gary Works and the former steelmaking plant at Joliet, Illinois. As of ~~September 30, 2019,~~March 31, 2020, accrued liabilities for these projects totaled $2 million for the costs of studies, investigations, interim measures, design and/or remediation. It is reasonably possible that additional liabilities associated with future requirements regarding studies, investigations, design and remediation for these projects could be as much as $30 million to $45 million.

(2)

Significant Projects with Defined Scope - Projects with significant accrued liabilities with a defined scope. As of ~~September 30, 2019,~~March 31, 2020, there are 4 significant projects with defined scope greater than or equal to $5 million each, with a total accrued liability of ~~$130~~$118 million. These projects are Gary Resource Conservation and Recovery Act (RCRA) (accrued liability of ~~$25~~$24 million), the former Geneva facility (accrued liability of ~~$50~~$41 million), the Cherryvale zinc site (accrued liability of ~~$10~~$9 million) and the former Duluth facility St. Louis River Estuary (accrued liability of ~~$45~~$44 million).

(3)

Other Projects with a Defined Scope - Projects with relatively small accrued liabilities for which we believe that, while additional costs are possible, they are not likely to be significant, and also include those projects for which we do not yet possess sufficient information to estimate potential costs to U. S. Steel. There are 2 other environmental remediation projects which each had an accrued liability of between $1 million and $5 million. The total accrued liability for these projects at ~~September 30, 2019~~March 31, 2020 was $4 million. These projects have progressed through a significant portion of the design phase and material additional costs are not expected.

The remaining environmental remediation projects each have an accrued liability of less than $1 million each. The total accrued liability for these projects at ~~September 30, 2019~~March 31, 2020 was approximately $43 million. We do not foresee material additional liabilities for any of these sites.

Post-Closure Costs – Accrued liabilities for post-closure site monitoring and other costs at various closed landfills totaled $2223 million at ~~September 30, 2019~~March 31, 2020 and were based on known scopes of work.

Administrative and Legal Costs – As of ~~September 30, 2019~~March 31, 2020, U. S. Steel had an accrued liability of $911 million for administrative and legal costs related to environmental remediation projects. These accrued liabilities were based on projected administrative and legal costs for the next three years and do not change significantly from year to year.

Capital Expenditures – For a number of years, U. S. Steel has made substantial capital expenditures to comply with various regulations, laws and other requirements relating to the environment. In the first ~~nine~~three months of ~~2019~~2020 and ~~2018,~~2019, such capital expenditures totaled ~~$40~~$4 million and ~~$55~~$16 million, respectively. U. S. Steel anticipates making additional such expenditures in the future, which may be material; however, the exact amounts and timing of such expenditures are uncertain because of the continuing evolution of specific regulatory requirements.

EU Environmental Requirements - Under the Emissions Trading Scheme (ETS), USSK's final allocation of allowances for the Phase III period, which covers the years 2013 through 2020 is 48 million allowances. Based on projected total production levels, we started to purchase allowances in the third quarter of 2017 to meet the annual compliance submission in the future. As of ~~September 30, 2019,~~March 31, 2020, we have purchased approximately 1212.2 million European Union Allowances (EUA) totaling ~~€132~~€141.1 million (approximately ~~$144~~$154.6 million). to cover the estimated shortfall of emission allowances. We estimate that the total shortfall will be approximately 1212.5 million allowances for the Phase III period. ~~Although the~~The full cost of complying with the ETS regulations ~~depends~~will depend on future production levels and future emissions intensity ~~levels, at this time we do not believe that the cost for the Phase III period will be significantly different from the costs we have already incurred.~~levels.

The EU’s Industrial Emissions Directive requires implementation of EU determined best available techniques (BAT) for Iron and Steel production to reduce environmental impacts as well as compliance with BAT associated emission levels. Our most recent ~~broad~~ estimate of ~~future~~total capital expenditures for projects to comply with or go beyond BAT requirements is €138 million (approximately ~~$150~~$151 million) over the ~~2017 to 2020~~actual program period. These costs may be mitigated if USSK complies with certain financial covenants, which are assessed annually. USSK complied with these covenants as of ~~September 30, 2019.~~March 31, 2020. If we are unable to meet these covenants in the future, USSK might be required to provide additional collateral (e.g. bank guarantee) to secure the full value of estimated expenditures. There could be increased operating costs associated with these projects, such as increased energy and maintenance costs. We are currently unable to reliably estimate what the increase in operating costs will be as many projects are in the development stage.

Environmental indemnifications – Throughout its history, U. S. Steel has sold numerous properties and businesses and many of these sales included indemnifications and cost sharing agreements related to the assets that were divested. These indemnifications and cost sharing agreements have included provisions related to the condition of the property, the approved use, certain representations and warranties, matters of title, and

environmental matters. While most of these provisions have not specifically dealt with environmental issues, there have been transactions in which U. S. Steel indemnified the buyer for clean-up or remediation costs relating to the business sold or its then existing conditions or past practices related to non-compliance with environmental laws. Most of the recent indemnification and cost sharing agreements are of a limited nature, only applying to non-compliance with past and/or current laws. Some indemnifications and cost sharing agreements only run for a specified period of time after the transactions close and others run indefinitely. In addition, current owners or operators of property formerly owned or operated by U. S. Steel may have common law claims and cost recovery and contribution rights against U. S. Steel related to environmental matters. The amount of potential environmental liability associated with these transactions and properties is not estimable due to the nature and extent of the unknown conditions related to the properties divested and deconsolidated. Aside from the environmental liabilities already recorded as a result of these transactions due to specific environmental remediation activities and cases (included in the ~~$176~~$178 million of accrued liabilities for remediation discussed above), there are no other known probable and estimable environmental liabilities related to these transactions.

Guarantees – The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $4 million at ~~September 30, 2019~~March 31, 2020.

Other contingencies – Under certain operating lease agreements covering various equipment, U. S. Steel has the option to renew the lease or to purchase the equipment at the end of the lease term. If U. S. Steel does not exercise the purchase option by the end of the lease term, U. S. Steel guarantees a residual value of the

equipment as determined at the lease inception date (totaling approximately $2126 million at ~~September 30, 2019~~March 31, 2020). NaN liability has been recorded for these guarantees as the potential loss is not probable.

Insurance – U. S. Steel maintains insurance for certain property damage, equipment, business interruption and general liability exposures; however, insurance is applicable only after certain deductibles and retainages. U. S. Steel is self-insured for certain other exposures including workers’ compensation (where permitted by law) and auto liability. Liabilities are recorded for workers’ compensation and personal injury obligations. Other

costs resulting from losses under deductible or retainage amounts or not otherwise covered by insurance are charged against income upon occurrence.

U. S. Steel uses surety bonds, trusts and letters of credit to provide whole or partial financial assurance for certain obligations such as workers’ compensation. The total amount of active surety bonds, trusts and letters of credit being used for financial assurance purposes was approximately $~~161~~170 million as of ~~September 30, 2019~~March 31, 2020, which reflects U. S. Steel’s maximum exposure under these financial guarantees, but not its total exposure for the underlying obligations. A significant portion of our trust arrangements and letters of credit are collateralized by our Credit Facility Agreement. The remaining trust arrangements and letters of credit are collateralized by restricted cash. Restricted cash, which is recorded in other current and noncurrent assets, totaled $20147 million and $40190 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, respectively.

Capital Commitments – At ~~September 30, 2019~~March 31, 2020, U. S. Steel’s contractual commitments to acquire property, plant and equipment totaled $~~977~~895 million.

Contractual Purchase Commitments – U. S. Steel is obligated to make payments under contractual purchase commitments, including unconditional purchase obligations. Payments for contracts with remaining terms in excess of one year are summarized below (in millions):

Remainder of 2019 2020 2021 2022 2023 Later
Years Total
$219 $599 $397 $330 $322 $723 $2,590



Remainder of 2020	2021	2022	2023	2024	Later Years	Total
$568	$675	$568	$335	$108	$612	$2,866

The majority of U. S. Steel’s unconditional purchase obligations relate to the supply of industrial gases, and certain energy and utility services with terms ranging from two to 16 years. Unconditional purchase obligations also include coke and steam purchase commitments related to a coke supply agreement with Gateway Energy & Coke Company LLC (Gateway) under which Gateway is obligated to supply a minimum volume of the expected targeted annual production of the heat recovery coke plant, and U. S. Steel is obligated to purchase the coke from Gateway at the contract price. As of ~~September 30, 2019~~March 31, 2020, if U. S. Steel were to terminate the agreement, it may be obligated to pay in excess of $~~117~~131 million.

Total payments relating to unconditional purchase obligations were $~~167~~168 million and $~~147~~158 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, ~~respectively, and $493 million and $454 million for the nine months ended September 30, 2019 and 2018,~~ respectively.

~~24.~~23. Significant Equity Investments

Summarized unaudited income statement information for our significant equity investments for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is reported below (amounts represent 100% of investee financial information):


(In millions)	2019		2018		2020		2019
Net sales	$	1,857	$	1,662	$	317	$	299
Cost of sales	1,624		1,510		287		259
Operating income	190		114		17		28
Net earnings	172		101		10		25
Net earnings attributable to significant equity investments	172		101		10		25

U. S. Steel's portion of the equity in net earnings of the significant equity investments above was ~~$66~~$6 million and ~~$37~~$14 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, which is included in the earnings from investees line on the Condensed Consolidated Statement of Operations.

~~25.~~24. Common Stock Repurchase Program

In November 2018, U. S. Steel announced a two year common stock repurchase program that ~~allows~~allowed for the repurchase of up to $300 million of its outstanding common stock from time to time in the open market or privately negotiated transactions at the discretion of management. During the ~~nine~~three months ended ~~September 30,~~March 31, 2019, U. S. Steel repurchased ~~5,289,475~~2,115,875 shares of common stock for approximately ~~$88~~$42 million. AsIn December 2019, the Board of ~~September 30, 2019, there is approximately $137 million remaining under~~Directors terminated the ~~share~~authorization for the common stock repurchase ~~authorization.~~program.

~~26.~~25. ~~Equity Investee Transactions~~Subsequent Events

~~On May 31, 2018,~~Flat-Rolled Operating Configuration

In April of 2020, U. S. Steel ~~assigned~~announced operational adjustments across its ~~equity ownership interest~~North American footprint, including idling its Keetac Iron Ore Operations, Blast Furnaces #6 and #8 at Gary Works and Blast Furnace #1 at Mon Valley Works, reductions to coke production at its Clairton Plant, and reduced operating levels in ~~Leeds Retail Center, LLC~~the Tubular business and ~~recognized a pre-tax gain~~other production facilities, for an indefinite period of ~~approximately $18 million.~~

~~27.~~ ~~Subsequent Events~~

~~Big River Steel Acquisition~~

~~On September 30, 2019, a wholly owned subsidiary of~~time. Additionally, U. S. Steel will adjust production at its Minntac operations in line with the blast furnace idlings. These actions will be taken to further enhance U. S. Steel’s ability to preserve cash and liquidity given the continued uncertainty from the coronavirus (COVID-19) and the continued headwinds in global oil and gas markets. As a result, we expect to record one-time restructuring charges of approximately $40 million to $50 million in the second quarter of 2020. Operating configurations are continuously being evaluated to properly respond to ever changing conditions. If further operational adjustments are made, additional one-time restructuring charges will be incurred.

USSK Labor Productivity Strategy

In April of 2020, USSK amended its labor agreement to include a Voluntary Early Retirement Program (VERP) that will be offered to certain employees of USSK. Employees can elect early retirement under the VERP between May 4, 2020 and May 22, 2020 with a termination date of June 30, 2020 for most employees. Special termination benefit charges of $25 million to $35 million are expected to be recorded in the second quarter of 2020 related to this VERP.

Minntac Mine Option Agreement

On April 30, 2020 (the Effective Date), the Company entered into ~~2 separate equity interest purchase agreements,~~an Option Agreement (Option Agreement) with Stelco Inc., a corporation governed under the laws of Canada (Stelco), pursuant to which, among other things, ~~U. S. Steel agreed~~the Company granted Stelco the option (Option) to acquire an undivided 25% interest (the Option Interest) in a ~~49.9% ownership interest~~to-be-formed entity (the Joint Venture) that will own the Company’s current iron ore mine located in ~~Big River Steel at a purchase price~~Mt. Iron, Minnesota (the Minntac Mine). As consideration for the Option, Stelco will pay the Company an aggregate amount of ~~approximately $700~~$100 million in ~~cash, with a call option~~5 $20 million installments, which began on the Effective Date and will end on or before December 31, 2020 (the date upon which the final installment is paid, the Final Payment Date). In the event Stelco exercises the Option, Stelco will contribute an additional $500 million to the Joint Venture, and the parties will engage in good faith negotiations to finalize the master agreement (pursuant to which Stelco will acquire the ~~remaining 50.1% within the next four years at an agreed-upon price formula based on Big River Steel’s achievement of certain metrics that include: free cash flow, product development, safety~~Option Interest) and the ~~completion~~limited liability company agreement of ~~a proposed expansion of Big River Steel's existing manufacturing line. Big River Steel currently operates a technologically advanced mini mill~~the Joint Venture. Concurrently with, ~~approximately 1.7 million tons of steel making capacity. The acquisition closed on October 31, 2019.~~

~~U. S. Steel will account for its investment in Big River Steel under the equity method as control~~ and risk of loss are shared among the partnership members. Under the equity method of accounting, U. S. Steel will recognize its share of Big River Steel's after tax net income or loss as well as the amortization of any basis differences duesubject to, the ~~step-up to fair value~~execution and delivery of ~~certain assets~~the Option Agreement, the Company and ~~liabilities attributable to Big River Steel.~~

Stelco also entered into an Amended and Restated ~~Credit Agreement~~Pellet Sale and Purchase Contract.

Subject to the ~~fixed charge coverage ratio allowing us to exclude (i) certain capital expenditures from the calculation~~terms and conditions of the ~~ratio and (ii) any restricted payments made pursuant to any share repurchase program from~~Option Agreement, Stelco may exercise the calculation of "consolidated fixed charges." On October 30, 2019, we drew $700 million on the Fifth Credit Facility Agreement to fund the closing of our acquisition of a 49.9% interest in Big River Steel.

~~Environmental Revenue Bonds~~

On October 10, 2019, we launched offerings of 2 series of environmental revenue bonds in aggregate principal amount of approximately $368 million, that will mature between 2024 and 2049 (collectively, the “2019 Environmental Revenue Bonds”). Proceeds of the 2019 Environmental Revenue Bonds in the amount of approximately $93 million will be used to redeem a portion of our existing outstanding environmental revenue bonds for which we issued a conditional redemption notice. Proceeds of the 2019 Environmental Revenue Bonds in the amount of $275 million will be used to finance or refinance the acquisition, construction, equipping and installation of certain solid waste disposal facilities, including an electric arc furnace and other equipment and facilities at the Company’s Fairfield Works. The 2019 Environmental Revenue Bonds closed on October 25, 2019.

~~2026 Senior Convertible Notes~~

offering expenses. The Company intends to use the net proceeds for general corporate purposes, including, without limitation, for previously announced strategic investments and capital expenditures. Interest on the 2026 Senior Convertible Notes is payable semi-annually on May 1 and November 1 of each year, commencing on May 1, 2020. See Note 16 for further details.

Prior to August 1, 2026, holders of notes may convert all or a portion of their notes at their option only upon the satisfaction of specified conditions and during certain periods. On or after August 1, 2026, holders may convert all or a portion of their notesOption at any time ~~prior to~~during the ~~close of business~~period commencing on the ~~second scheduled trading day immediately preceding the maturity date. Upon conversion, we will satisfy the obligation with cash, common stock, or a combination thereof,~~Final Payment Date and expiring at our election. U. S. Steel may not redeem the 2026 Senior Convertible Notes prior to November 5, 2023. On or after November 5, 2023 and prior to August 1, 2026, if the price per share of U. S. Steel's common stock has been at least 130% of the conversion price for specified periods, U. S. Steel may redeem all or a portion of the 2026 Senior Convertible Notes at a cash redemption price of 100% of the principal amount, plus accrued and unpaid interest.11:59 p.m. Eastern Time on January 31, 2027 unless earlier terminated.



Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

U. S. Steel's results in the ~~third~~first quarter of ~~2019~~2020 were significantly impacted by market challenges in each of the Company's three reportable segments: North American Flat-Rolled (Flat-Rolled), U. S. Steel Europe (USSE) and Tubular Products (Tubular). In Flat-Rolled, ~~our contract and spot orders~~the results were largely impacted by the ~~continued decline~~reset of calendar year fixed contract prices and lost shipments at quarter end due to many customers ceasing operations due to restrictions put in ~~weekly index prices.~~place in response to the coronavirus (COVID-19) pandemic. USSE continues to experience margin compression due to ongoing weak performance of the manufacturing sector and continued high levels of ~~imports~~imports. In Tubular, the COVID-19 outbreak and ~~significantly weaker economic conditions, primarily~~the disruptions in the ~~manufacturing sector. In Tubular, continued high levels of imports~~oil and gas industry are negatively impacting the market.

Net sales by segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ are set forth in the following table:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars in millions, excluding intersegment sales)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Flat-Rolled	$	2,277	$	2,632	(13	)%	$	7,221	$	7,114	2	%	$	1,974	$	2,405	(18	)%
USSE	518		767		(32	)%	1,933		2,438		(21	)%	505		737		(31	)%
Tubular	262		313		(16	)%	921		888		4	%	255		343		(26	)%
Total sales from reportable segments	3,057		3,712		(18	)%	10,075		10,440		(3	)%	2,734		3,485		(22	)%
Other Businesses	12		17		(29	)%	38		47		(19	)%	14		14		—	%
Net sales	$	3,069	$	3,729	(18	)%	$	10,113	$	10,487	(4	)%	$	2,748	$	3,499	(21	)%

Management’s analysis of the percentage change in net sales for U. S. Steel’s reportable business segments for the three months ended ~~September 30, 2019~~March 31, 2020 versus the three months ended ~~September 30, 2018~~March 31, 2019 is set forth in the following table:

~~Three Months Ended September 30, 2019 versus Three Months Ended September 30, 2018~~


	Steel Products^(a)						Steel Products^(a)
	Volume	Price	Mix	FX^(b)	Coke & Other^(c)	Net Change	Volume	Price	Mix	FX^(b)	Coke & Other^(c)	Net Change
Flat-Rolled	—%	(12)%	(1)%	—%	—%	(13)%	(7)%	(12)%	2%	—%	(1)%	(18)%
USSE	(30)%	(3)%	5%	(3)%	(1)%	(32)%	(24)%	(6)%	2%	(2)%	(1)%	(31)%
Tubular	(4)%	(8)%	(2)%	—%	(2)%	(16)%	(9)%	(14)%	(2)%	—%	(1)%	(26)%

^(a) Excludes intersegment sales

^(b) Foreign currency translation effects

^(c) Includes sales of coke and scrap inventory

Net sales were ~~$3,069~~$2,748 million in the three months ended ~~September 30, 2019,~~March 31, 2020, compared with ~~$3,729~~$3,499 million in the same period last year. The decrease in sales for the Flat-Rolled segment resulted from lower realized prices (decrease of ~~$127~~$87 per net ton), notably for hot-rolled products and decreased shipments (decrease of 216 thousand tons) notably for lower value-added products. The USSE segment continues to experience significant market challenges, which resulted in decreased sales versus the same period last year. The change in sales for the USSE segment was primarily due to decreased shipments (decrease of ~~336~~263 thousand net tons) in most product categories from continued high levels of imports and significantly weaker economic conditions, primarily in the manufacturing sector. The ~~weakening of the euro versus the U.S. dollar was also an adverse impact in the third quarter of 2019. The~~ decrease in sales for the Tubular segment resulted from lower average realized prices (decrease of ~~$185~~$266 per net ton) and decreased shipments (decrease of 1020 thousand net tons) from lower demand ~~in seamless products.~~

~~Management’s analysis~~and continued high levels of ~~the~~ ~~percentage change in net sales~~ ~~for U. S. Steel’s reportable business segments for the nine months ended September 30, 2019 versus the nine months ended September 30, 2018 is set forth~~imports in the ~~following table:~~

~~Nine Months Ended September 30, 2019 versus Nine Months Ended September 30, 2018~~

Steel Products^(a)

Volume Price Mix
FX^(b)

Coke & Other^(c)
Net Change
Flat-Rolled 5% (3)% (1)% —% 1% 2%
USSE (16)% (2)% 3% (6)% —% (21)%
Tubular 3% 2% —% —% (1)% 4%

^(a) ~~Excludes intersegment sales~~

^(b) ~~Foreign currency translation effects~~

^(c) ~~Includes sales of coke and scrap inventory~~

Net sales were $10,113 million in the nine months ended September 30, 2019, compared with $10,487 million in the same period in the prior year. The increase in sales for the Flat-Rolled segment primarily reflects increased shipments (increase of 406 thousand net tons) of semi-finished and hot rolled products. The decrease in sales for the USSE segment was primarily due to decreased shipments (decrease of 551 thousand net tons) in most product categories due to increased import competition, flat to declining demand and the weakening of the euro versus the U.S. dollar. The increase in sales for the Tubular segment resulted from higher realized prices (increase of $24 per net ton) and increased shipments (increase of 12 thousand net tons).tubular market.

Pension and other benefits costs

Pension and other benefit costs (other than service cost) are reflected within net interest and other financial costs and the service cost component is reflected within cost of sales in the Condensed Consolidated Statements of Operations.

Defined benefit and multiemployer pension plan costs included in cost of goods sold totaled ~~$31~~$33 million and ~~$90~~$29 million in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019,~~, respectively, compared to $28 million and $82 million in the comparable periods in 2018.~~ respectively.

Costs related to defined contribution plans totaled ~~$12 million and $35 million for the three and nine months ended September 30, 2019, respectively, compared to~~ $11 million and ~~$32~~$12 million in the ~~comparable periods in 2018.~~

three months ended March 31, 2020 and 2019 respectively.

Other benefit expense included in cost of sales totaled ~~$4 million and $10~~$3 million in both the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020~~, respectively,~~ and ~~$4 million and $12 million in the comparable periods in 2018.~~2019.

Selling, general and administrative expenses

Selling, general and administrative expenses were ~~$63~~$72 million and ~~$223~~$78 million in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~respectively, compared to $81 million and $251 million in the three and nine months ended September 30, 2018,~~ respectively. ~~For both the three and nine months ended September 30, 2019 the decrease is primarily due to a decrease in variable compensation.~~

Restructuring and other charges

During the three months ~~and nine months~~ ended ~~September 30, 2019,~~March 31, 2020, the Company recorded restructuring and other charges of ~~$25~~$41 million, ~~related to its labor productivity strategy within its USSE segment and $29~~which consists of charges of $22 million for the ~~intended~~ indefinite idling of ~~its East Chicago Tin operations~~a significant portion of Great Lakes Works, $13 million for the indefinite idling of our of Lone Star Tubular Operations and ~~its finishing facility in Dearborn, Michigan within its Flat-Rolled segment, see further details below.~~Lorain Tubular Operations and $6 million for Company-wide headcount reductions.

Charges for restructuring initiatives are recorded in the period the Company commits to a restructuring plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. Charges related to restructuring are reported in restructuring and other charges in the Condensed Consolidated Statements of Operations.

~~Business Strategy~~

U. S. Steel is executing a transformational strategy to develop the “best of both” integrated and mini mill capabilities to improve competitiveness and drive through-cycle cash flow. Through a series of operational improvements, strategic investments and portfolio moves, to be completed over the next several years, U. S. Steel plans to execute a strategy focused on acquiring technology and capabilities to improve competitiveness and drive through-cycle cash flow generation. Execution of U. S. Steel’s strategy will position the Company with a suite of world-class assets with distinct advantages to serve current and future customers with high-tech, sustainable steel solutions. The strategy is focused on commercial differentiation, which the Company currently believes can be achieved by investing in three core market-leading, differentiated and technologically advanced assets at Mon Valley Works (located near Pittsburgh, Pennsylvania), Gary Works (located in Gary, Indiana) and Big River Steel (located in Osceola, Arkansas). The Company will be able to compete effectively in strategic end markets based on cost and/or capabilities to offer customers differentiated products to deliver highly competitive long-term cash flow generation through higher earnings and lower sustaining capital expenditures.

Strategic projects and technology investments

The Company expects to invest approximately $500 million, of which approximately 40 percent has already been spent, to upgrade the Gary Works hot strip mill through a series of projects focused on expanding the line's competitive

advantages. The Gary Works hot strip mill will further differentiate itself as a leader in heavy-gauge products in strategic markets. The Company currently has paused planned upgrades and will continue to evaluate the pace and timeline for completing the remaining investments in the Gary Works hot strip mill.

In October ~~31,~~ 2019, the Company completed the first step in acquiring Big River Steel in Osceola, Arkansas through the purchase of a 49.9% ownership interest at a purchase price of approximately $700 million in cash, with a call option to acquire the remaining 50.1% within the next four years at an agreed-upon price formula based on Big River Steel’s achievement of certain metrics that include: free cash flow, product development, safety and the completion of a proposed expansion of Big River Steel's existing manufacturing line. Big River Steel currently operates a technologically advanced mini mill with approximately ~~1.7~~1.65 million tons of steel making capacity.

In May 2019, U. S. Steel announced that it will construct a new endless casting and rolling facility at its Edgar Thomson Plant in Braddock, Pennsylvania, and a cogeneration facility at its Clairton Plant in Clairton, Pennsylvania, both part of the Company's Mon Valley Works. This investment in state-of-the-art sustainable steel technology is expected to significantly upgrade the production capability of our lowest liquid steel cost mill in the U.S., while further reducing conversion costs through improved process efficiencies, yield and energy consumption. The investment is currently expected to be at least ~~$1.2~~$1.5 billion ~~through 2022~~ and is expected to generate run-rate earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $275 million ~~beginning in 2023.~~upon completion. The Company continues to evaluate design and engineering for the project.

The ~~installation of endless casting and rolling technology will allow differentiated product capabilities~~company currently expects groundbreaking for this project to ~~serve strategic markets. The Mon Valley Works will also~~be delayed for an indeterminate period until market conditions become ~~the principal source of substrate for the production of the Company's industry-leading XG3~~^TM Advanced High Strength Steel (AHSS), a market leading solution for our customers to improve fuel efficiency. The cogeneration facility, equipped with state-of-the-art emissions control systems at the Company's Clairton Plant, will convert a portion of the coke oven gas generated at its Clairton Plant into electricity to power the steelmaking and finishing facilities throughout U. S. Steel's Mon Valley operations. This project, in addition to producing

sustainable AHSS, is expected to improve environmental performance, energy conservation and reduce our carbon footprint associated with Mon Valley Works. First steel production is expected in 2022, contingent upon permitting and construction.more certain.

In February 2019, U. S. Steel restarted construction of the EAF steelmaking facility at its Tubular Operations in Fairfield, Alabama. The EAF is expected to strengthen our competitive position and reduce rounds cost by $90 per ton as the Company becomes self-sufficient in its rounds ~~supply, which is expected to generate approximately $80 million of annual EBITDA contribution beginning in 2021.~~supply. The EAF is expected to begin producing steel in the second half of 2020.

In January 2019, U. S. Steel announced the construction of a new Dynamo line at USSE. The new line, a $130 million investment, has an annual capacity of approximately 100,000 metric tons. Construction on the Dynamo line began in mid-2019 and ~~under the original business plan~~ was targeted to be operational in the fourth quarter of ~~2020.~~2020 but based on current market conditions, the project is delayed. Upon its completion, the new line will enable production of sophisticated silicon grades of non-grain oriented (NGO) electrical steels to support increased demand in vehicles and generators.

COVID-19 and Disruptions in the Oil and Gas Industries

The ~~project is expected~~global pandemic resulting from the novel coronavirus designated as COVID-19 has had a significant impact on economies, businesses and individuals around the world. Efforts by governments around the world to ~~contribute $35 million of run-rate EBITDA. Due~~contain the virus have involved, among other things, border closings and other significant travel restrictions; mandatory stay-at-home and work-from-home orders in numerous countries, including the United States; mandatory business closures; public gathering limitations; and prolonged quarantines. These efforts and other governmental and individual reactions to the pandemic have led to significant ~~market challenges in Europe,~~disruptions to commerce, lower consumer demand for goods and services and general uncertainty regarding the ~~Company will evaluate~~near-term and long-term impact of the ~~pace~~COVID-19 virus on the domestic and international economy and on public health. These developments and other consequences of ~~this investment.~~the outbreak have and could continue to materially adversely impact the Company's results of operations, financial condition and cash flows.

~~As part~~The U.S. Department of ~~its asset revitalization program (described below), the Company expects to invest approximately $500 million, of which approximately 30 percent~~Homeland Security guidance has already been spent, to upgrade the Gary Works hot strip mill through a series of projects focused on expanding the line's competitive advantages. The Gary Works hot strip mill will further differentiate itselfidentified U. S. Steel's business as a ~~leader~~critical infrastructure industry, essential to the economic prosperity, security and continuity of the United States. Similarly, in ~~heavy gauge products~~Slovakia, U. S. Steel Košice (USSK)was identified by the government as a strategic and critical company, essential to economic prosperity, and continues to operate. We are following and exceeding the Centers for Disease Control guidelines to keep our employees safe.

The duration, severity, speed and scope of the COVID-19 outbreak is highly uncertain and the extent to which COVID-19 will affect our operations will depend on future developments which cannot be predicted at this time. Although we continue to operate, we have experienced, and are likely to continue to experience, significant reductions in strategic markets. Asset revitalization investments are also being made at other critical Flat-Rolled steel making assets, including the Mon Valley Works steel shop, which will provide high quality, low cost liquid steeldemand for our ~~future~~products.

In addition, the oil and gas industry, which is one of our significant end markets, has been experiencing a significant amount of disruption and oversupply at a time of declining demand, resulting in a decline in profitability. Our Tubular operations support the oil and gas industry, and therefore the industry's decline has led to a significant decline in demand for our Tubular products. The steep decline in oil prices was considered a triggering event for our welded tubular and seamless tubular asset groups, and as a consequence, we have recorded a $263 million impairment

charge for the welded tubular asset group (see Note 1 to the Condensed Consolidated Financial Statements for further details).

In response to the decline in demand for our products resulting from the COVID-19 outbreak and the disruptions in the oil and gas industry, we have taken a number of actions to preserve cash and enhance our liquidity. On March 23, 2020, we borrowed an additional $800 million under the Fifth Amended and Restated Credit Agreement, and will hold the cash on our balance sheet. We also announced a $125 million reduction in expected 2020 capital expenditures, including a delay in the construction of our endless casting and rolling ~~line.~~line at Mon Valley Works. We are also evaluating the potential loan and other financial assistance programs available under the federal CARES Act, which was signed into law on March 27, 2020, to support companies adversely impacted by the COVID-19 pandemic.

Operating configuration changes in response to market conditions and COVID-19

AsThe Company has adjusted its operating configuration in response to changing market conditions including the ~~Company invests~~economic impacts from the COVID-19 pandemic, significant recent changes in ~~differentiated technology~~global oil and ~~re-centers around~~gas markets and increasing global overcapacity and unfairly traded imports by indefinitely and temporarily idling certain of its ~~core assets, it~~facilities. U. S. Steel will ~~also~~continue to adjust its operating configuration in order to ~~best facilitate execution~~align production with its order book and meet the needs of our customers.

In March and April of 2020, we took additional footprint actions to temporarily idle certain operations for an indefinite period to better align production with customer demand, including:

Blast Furnaces #4, #6 and #8 at Gary Works

Blast Furnace A at Granite City Works

Blast Furnace #1 at Mon Valley Works

Lone Star Tubular Operations

All or most of Lorain Tubular Operations

Keetac Iron Ore Operations

Additionally, U. S. Steel will reduce coke production at its ~~strategy~~Clairton Plant and will adjust production at its Minntac operations in line with the blast furnace idlings. U. S. Steel will reduce operating levels in the Tubular business and other production facilities and will continue to evaluate its operating configuration to properly respond to ever changing conditions. When market conditions improve, we will assess the footprint required to support our customers’ needs and ~~customer demand.~~make decisions about resuming production at idled facilities or increasing production at facilities operating at reduced levels.

~~On October 8,~~

As of March 31, 2020 the carrying value of the idled fixed assets within the facilities noted above was: Gary Works blast furnaces, $130 million; Granite City Works Blast Furnace A, $65 million; Mon Valley Works Blast Furnace #1, $35 million; Lone Star Tubular Operations, $10 million; Lorain Tubular Operations, $75 million; and Keetac Iron Ore Operations, $80 million.

In December 2019, U. S. Steel announced that it would indefinitely idle a significant portion of Great Lakes Works. The Company began idling the iron and steelmaking facilities in March 2020 and expects to begin idling the hot strip mill rolling facility before the end of 2020. The carrying value of the Great Lakes Works facilities that we intend to indefinitely idle was approximately $370 million as of March 31, 2020.

In December 2019, the Company completed the indefinite idling of its East Chicago Tin (ECT) operations within its Flat-Rolled segment. ECT was indefinitely idled primarily due to increased tin import levels in the U.S. Additionally, U. S. Steel indefinitely idled its finishing facility in Dearborn, Michigan (which operates an electrolytic galvanizing line), during the fourth quarter of 2019. The carrying value of these facilities was approximately $20 million as of March 31, 2020.

In October 2019, the Company announced ~~that it is implementing~~ an enhanced operating model and organizational structure to accelerate the Company’s strategic transformation and better serve its customers. The new operating model ~~will be~~was effective January 1, 2020 and ~~will be~~is centered around manufacturing, commercial, and technological excellence. Our former “commercial entity” structure was put into place to deepen understanding of business ownership and our relationships with customers and allowed the Company to identify the technology that would differentiate our products and processes on the basis of cost and/or capabilities. The new enhanced operating model is a logical next step in the execution of the Company’s strategy and will make us a more nimble company positioned to deliver the benefits of our strategy through the cycle.

In August 2019, the Company began the process of indefinitely idling its East Chicago Tin operations within its Flat-Rolled segment due primarily to increased tin import levels in the U.S. We anticipate completion of this process, which will include headcount reductions of approximately 150, sometime during the fourth quarter of 2019. Additionally, U. S. Steel intends to indefinitely idle its finishing facility in Dearborn, Michigan (which operates an electrolytic galvanizing line) during the fourth quarter of 2019.

In July 2019, U. S. Steel began implementing a labor productivity strategy at USSK so that it could better compete in the European steel market, which has experienced softening demand as well as a significant increase in imports. It is anticipated that the labor productivity strategy will result in total headcount reductions, including contractors, of approximately 2,500 by the end of 2021. As of ~~September 30, 2019,~~March 31, 2020, approximately ~~1,800~~1,950 positions, including approximately ~~400~~425 contractors, were eliminated.

In June 2019, ~~U. S. Steel idled two blast furnaces in the U.S. and one blast furnace in Europe~~ to better align global production with its order ~~book. As~~book U. S. Steel idled a ~~result,~~blast furnace in Europe resulting in a monthly blast furnace production capacity ~~was reduced by~~reduction of approximately ~~200,000 - 225,000 tons in the U.S. and~~ 125,000 ~~tons in Europe.~~tons. Blast furnace production ~~at one or more of the idled furnaces~~ may resume when market conditions improve.

~~In June 2019, U. S. Steel restarted~~As of March 31, 2020 the No. 1 Electric-Weld Pipe Mill (No. 1 Pipe Mill) at its Lone Star Tubular Operations to enable the Company to support increased demand for high-quality electric-welded pipe produced in the United States. The No. 1 Pipe Mill produces 7-16 inch welded pipe and is complementing our current Tubular product offerings. It had beencarrying value of this idled ~~since 2016.~~

~~In June and October 2018, U. S. Steel restarted the "B"~~ blast furnace ~~and steelmaking facilities and the "A" blast furnace, respectively, at its Granite City Works facility in response to increased demand at the time.~~

U. S. Steel will continue to evaluate potential strategic and organizational opportunities, which may include the acquisition, divestiture or consolidation of assets. Given the cyclicality of our industry, we are focused on strategically maintaining and spending cash (including strategic capital expenditures in technology investments), in order to invest in areas consistent with our long-term strategy, such as sustainable steel technologies, and are considering various possibilities, including exiting lines of business and the sale of certain assets, that we believe would ultimately result in greater stockholder value. The Company will pursue opportunities based on its long-term strategy, and what the Board of Directors determines to be in the best interests of the Company's stockholders at the time.

~~Asset Revitalization~~was $10 million.

In 2017, we launched our asset revitalization program, a multi-year, comprehensive $2 billion investment (which included $1.5 billion in capital spending) in our most critical assets within our Flat-Rolled segment. The program is composed of many projects designed to continuously improve safety, quality, delivery and cost performance. As we revitalize our assets, we are increasing profitability, productivity and operational stability, and reducing volatility. This program is designed to prioritize investment in the areas with the highest returns, like the Gary Works hot strip mill investments described above. As the Company refocuses its strategy on technology investments, it will rescope the asset revitalization program, and currently plans to reduce the program by approximately $200-250 million. We currently expect capital spending for the entire program to be approximately $1.3 billion, $800 million of which has already been spent. As we continue with the implementation of our asset revitalization program on selective assets, we expect the sustainable improvements in safety, quality, delivery and costs we are targeting to position us to succeed over the long term and support future growth initiatives. In view of our having substantially implemented the program, and because the program has been reprioritized in order to invest in other opportunities, the Company no longer intends to provide annual scorecards against the original target metrics.

Earnings (loss) before interest and income taxes by segment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is set forth in the following table:


		Three Months Ended September 30,						% Change			Nine Months Ended September 30,								% Change			Three Months Ended March 31,							% Change
	(Dollars in millions)	2019			2018					2019				2018				(Dollars in millions)	% Change		2020				2019				% Change
Flat-Rolled	Flat-Rolled	$	46		$	305		% Change	(85	)%		$	275			$	562			(51	)%	Flat-Rolled	$	(35	)		$	95		(137	)%
USSE	USSE	(46		)	72			(164	)%		(27		)		297				(109	)%	USSE	(14		)		29			(148	)%
Tubular	Tubular	(25		)	7			(457	)%		(21		)		(55		)		62	%	Tubular	(48		)		10			(580	)%
	Total earnings from reportable segments	(25		)	384			(107	)%		227				804				(72	)%	Total earnings from reportable segments	(97		)		134			(172	)%
Other Businesses	Other Businesses	8			16			(50	)%		26				44				(41	)%	Other Businesses	1				8			(88	)%
	Segment (loss) earnings before interest and income taxes	(17		)	400			(104	)%		253				848				(70	)%	Segment (loss) earnings before interest and income taxes	(96		)		142			(168	)%
Items not allocated to segments:	Items not allocated to segments:																				Items not allocated to segments:
	December 24, 2018 Clairton coke making facility fire	(9		)	—						(53		)		—						Tubular asset impairment charges	(263		)		—
	Restructuring charges	(54		)	—						(54		)		—						Gain on previously held investment in UPI	25				—
	Gain on equity investee transactions	—			—						—				18						Restructuring and other charges	(41		)		—
	Granite City Works restart costs	—			(27		)				—				(63		)				December 24, 2018 Clairton coke making facility fire	—				(31		)
	Granite City Works adjustment to temporary idling charges	—			—						—				8
Total (loss) earnings before interest and income taxes	Total (loss) earnings before interest and income taxes	$	(80	)	$	373		(121	)%		$	146			$	811			(82	)%	Total (loss) earnings before interest and income taxes	$	(375	)		$	111		(438	)%

Segment results for Flat-Rolled


	Three Months Ended September 30,						% Change		Nine Months Ended September 30,						% Change		Three Months Ended March 31,						% Change
	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Earnings before interest and taxes ($ millions)	$	46		$	305		(85	)%	$	275		$	562		(51	)%	$	(35	)	$	95		(137	)%
Gross margin	8		%	16		%	(8	)%	10		%	14		%	(4	)%	7		%	10		%	(3	)%
Raw steel production (mnt)	2,783			2,933			(5	)%	8,842			8,558			3	%	3,148			3,075			2	%
Capability utilization	65		%	68		%	(3	)%	70		%	67		%	3	%	74		%	73		%	1	%
Steel shipments (mnt)	2,654			2,659			—	%	8,183			7,777			5	%	2,509			2,725			(8	)%
Average realized steel price per ton	$	732		$	859		(15	)%	$	771		$	807		(4	)%	$	711		$	798		(11	)%
Intersegment sales to Tubular (mnt)																	$	92		$	81		14	%

The decrease in Flat-Rolled results for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018~~2019 was primarily due to lower average realized prices (approximately ~~$335~~$255 million) and ~~continued high levels of imports.~~decreased shipments, including substrate to our Tubular segment (approximately $55 million). This change was partially offset by lower raw material costs, primarily for purchased scrap and better blast furnace usage from improved reliability (approximately ~~$15~~$75 million), decreased energy costs (approximately ~~$10~~$75 million), ~~a contingency gain from recovered claims arising out of the bankruptcy of a supplier~~decreased operating costs (approximately ~~$10~~$15 million) and decreased other costs, including ~~variable compensation~~sales, general and administrative (approximately ~~$40 million).~~

The decrease in Flat-Rolled results for the nine months ended September 30, 2019 compared to the same period in 2018 was primarily due to lower average realized prices (approximately $230 million), higher raw material costs (approximately $75 million) and increased spending for operating costs (approximately $85 million). These changes were partially offset by increased shipments, including substrate to our Tubular segment (approximately $65 million) and decreased other costs, including variable compensation (approximately $40$15 million).

Gross margin for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018~~2019 decreased primarily as a result of lower average realized prices.

Segment results for USSE


	Three Months Ended September 30,						% Change		Nine Months Ended September 30,						% Change		Three Months Ended March 31,						% Change
	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
(Loss) earnings before interest and taxes ($ millions)	$	(46	)	$	72		(164	)%	$	(27	)	$	297		(109	)%	$	(14	)	$	29		(148	)%
Gross margin	(2		)%	13		%	(15	)%	4		%	16		%	(12	)%	4		%	9		%	(5	)%
Raw steel production (mnt)	823			1,210			(32	)%	3,130			3,810			(18	)%	882			1,159			(24	)%
Capability utilization	65		%	96		%	(31	)%	84		%	102		%	(18	)%	71		%	94		%	(23	)%
Steel shipments (mnt)	765			1,101			(31	)%	2,833			3,384			(16	)%	801			1,064			(25	)%
Average realized steel price per ($/ton)	$	656		$	669		(2	)%	$	660		$	695		(5	)%	$	611		$	670		(9	)%
Average realized steel price per (€/ton)	€	590		€	575		3	%	€	587		€	582		1	%	€	554		€	590		(6	)%

The decrease in USSE results for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018~~2019 was primarily due to ~~the continued market challenges and continued high levels of imports in Europe and the significant compression in margins from~~ lower average realized prices (approximately ~~$15~~$40 million), decreased shipments, including volume inefficiencies (approximately ~~$50~~$25 million), and the weakening of the euro versus the U.S. dollar (approximately $10 million)~~, higher raw material~~. This change was partially offset by lower spending and other costs (approximately ~~$35 million) which includes an unfavorable first-in-first-out (FIFO) inventory impact, and higher energy costs (approximately $10~~$30 million).

~~The decrease in USSE results~~Gross margin for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018 were significantly impacted by continued market challenges~~2019 decreased primarily as a result of lower average realized prices.

Segment results for Tubular



	Three Months Ended March 31,						% Change
	2020			2019			% Change
(Loss) earnings before interest and taxes ($ millions)	$	(48	)	$	10		(580	)%
Gross margin	(12		)%	7		%	(19	)%
Steel shipments (mnt)	187			207			(10	)%
Average realized steel price per ton	$	1,283		$	1,549		(17	)%

The decrease in ~~Europe and~~Tubular results for the three months ended March 31, 2020 as compared to the same period in 2019 was primarily due to lower average realized prices (approximately $45 million), decreased shipments, including volume inefficiencies (approximately ~~$60~~$20 million), ~~the weakening of the euro versus the U.S. dollar (approximately $65 million), higher raw material~~increased investment related costs (approximately ~~$90 million) which includes an unfavorable FIFO inventory impact, increased spending on operating costs (approximately $25~~$10 million), higher energy costs (approximately ~~$25~~$5 million) and increased other costs ~~including carbon dioxide (CO~~₂~~) emissions allowance (approximately $15 million).~~

Gross margin for the three and nine months ended September 30, 2019 compared to the same period in 2018 decreased primarily as a result of lower average realized prices and higher raw material and energy costs.

~~Segment results for Tubular~~

Three Months Ended
September 30, %
Change Nine Months Ended
September 30, %
Change
2019 2018 2019 2018
(Loss) earnings before interest and taxes ($ millions) $ (25 ) $ 7
(457 )% $ (21 ) $ (55 ) 62 %
Gross margin (4 )% 7 % (11 )% 2 % — % 2 %
Steel shipments (mnt) 174
184
(5 )% 576
564
2 %
Average realized steel price per ton $ 1,417
$ 1,602
(12 )% $ 1,501
$ 1,477
2 %

The decrease in Tubular results for the three months ended September 30, 2019 as compared to the same period in 2018 was primarily due to lower average realized prices (approximately $30 million) and decreased shipments (approximately $5 million) due to the continued high levels of imports, increased spending on operating costs (approximately $10 ~~million) and increased costs associated with the continued execution of the commercial and technology strategy (approximately $15~~ million). These changes were partially offset by lower substrate and rounds costs (approximately $30 million).

The increase in Tubular results for the nine months ended September 30, 2019 compared to the same period in 2018 was primarily due to higher average realized prices (approximately $15 million) and lower substrate and rounds costs (approximately $50 million). These changes were partially offset by increased spending on operating costs (approximately $20 million) and increased costs associated with the continued execution of the commercial and technology strategy (approximately $10 million).

Gross margin for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018~~2019 decreased primarily as a result of lower average realized ~~prices. Gross margin for~~from lower demand and continued high levels of imports in the ~~nine months ended September 30, 2019 compared to the same period in 2018 increased primarily as a result of higher average realized prices and lower substrate and rounds costs.~~tubular market.

Results for Other Businesses

Other Businesses had earnings of $8$1 million and ~~$26~~$8 million in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~compared to earnings of $16 million and $44 million in the three and nine months ended~~ ~~September 30, 2018~~.respectively.

Items not allocated to segments

We recorded ~~$54~~tubular asset impairment charges of $263 million ofin the three months ended March 31, 2020 as described in Notes 1 and 10 to the Condensed Consolidated Financial Statements.

We recorded a $25 million ~~restructuring charges~~gain on our previously held investment in UPI in the three ~~and nine~~ months ended ~~September 30, 2019 for our labor productivity strategy at USSK~~March 31, 2020 as described in Note 5 to the Condensed Consolidated Financial Statements.

We recorded in the three months ended March 31, 2020 restructuring and other charges of $41 million as described under the ~~intended indefinite idling of East Chicago Tin~~"Restructuring and ~~our finishing facility in Dearborn, Michigan within the Flat-Rolled segment.~~other charges" headingabove.

We incurred ~~$9 million and $53~~$31 million of costs associated with the December 24, 2018 Clairton coke making facility fire in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 ~~respectively~~ (see Environmental Matters, Litigation and Contingencies in the Liquidity and Capital Resources section for more details).

~~We recognized a~~ ~~gain on equity investee transactions~~ ~~of $18 million in the nine months ended September 30, 2018 as a result of the assignment of our entire equity ownership interest in Leed's Retail Center, LLC in May 2018.~~

~~We recognized $27 million and $63 million in~~ ~~Granite City Works restart costs~~ ~~in the three and nine months ended September 30, 2018 as a result of costs associated with the restart of the "B" blast furnace at Granite City Works.~~

~~We recorded an $8 million favorable adjustment in the nine months ended September 30, 2018 related to~~ ~~Granite City Works temporary idling charges~~ ~~as a result of the decision to restart the "B" blast furnace and steelmaking facilities at this facility in 2018.~~

Net interest and other financial costs


	Three Months Ended September 30,						% Change			Nine Months Ended September 30,								% Change		Three Months Ended March 31,							% Change
(Dollars in millions)	2019			2018					2019				2018				2020				2019						% Change
Interest expense	$	32		$	41		% Change	(22	)%		$	97			$	134		% Change			(28	)%	$	50			$	34	47	%
Interest income	(3		)	(6		)	(50	)%		(13		)		(16		)		(19	)%	(4		)		(5		)	(20	)%
Loss on debt extinguishment	—			3			(100	)%		—				77				(100	)%
Other financial costs	(4		)	2			(300	)%		(2		)		4				(150	)%
Net periodic benefit cost (other than service cost)	23			19			21	%		69				53				30	%
Other financial benefits																				(3		)		(3		)	—	%
Net periodic benefit (income) cost (other than service cost)																				(8		)		23			(135	)%
Total net interest and other financial costs	$	48		$	59		(19	)%		$	151			$	252			(40	)%	$	35			$	49		(29	)%

The decrease in net interest and other financial costs in the three months ended ~~September 30, 2019~~March 31, 2020 as compared to the same period last year is primarily due to ~~reduced interest expense due to our~~ lower ~~average cost of debt.~~

The decrease in net interest and other financial costs in the nine months ended September 30, 2019 as compared to the same period last year is primarily due to the loss on debt extinguishment in the nine months ended September 30, 2018 as described below and reduced interest expense due to our improved debt profile, partially offset by higher net periodic benefit cost as(as discussed ~~below.~~

~~During the nine months ended September 30, 2018, U. S. Steel issued $650 million aggregate principal amount~~below) partially offset by a higher level of 2026 Senior Notes and repurchased through a tender offer and redemption $780 million of its 2021 Senior Secured Notes for an aggregate cash outflow of approximately $840 million, which included $60 million in premiums. Additionally, U. S. Steel repurchased approximately $75 million of its 2020 Senior Notes during the first nine months of 2018. The loss on debt extinguishment line in the table above includes $66 million in premiums and $11 million in unamortized debt issuance costs which were written off in connection with the extinguishment of debt. ~~For further information, see Note 16 to the Condensed Consolidated Financial Statements.~~

The net periodic benefit cost (other than service cost) components of pension and other benefit costs are reflected in the table above, and ~~increased~~decreased in the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 as compared to the same periods last year primarily due to ~~a lower expected return on asset assumption for pension assets, a lower asset return~~the better than expected 2019 asset performance, lower amortization of prior service costs, lower future healthcare costs, and reduced participation in ~~2018 partially offset by the natural maturation of the plan and increased discount rates.~~

Total net periodic pension cost, including service cost and multiemployer plans, is expected to total approximately $170 million in 2019. Total other benefits costs, including service cost, in 2019 are expected to total approximately $57 million. The pension cost projection includes approximately $77 million of contributions to the Steelworkers Pension Trust.our retiree health plans.

Income taxes

The income tax (benefit) provision was ~~$(44)~~$(19) million and ~~$(43)~~$8 million in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~compared~~respectively. In general, the amount of tax expense or benefit from continuing operations is determined without regard to ~~$23 million~~the tax effect of other categories of income or loss, such as other comprehensive income. However, an exception to this rule applies when there is a loss from continuing operations and ~~$36 million~~income from other categories. Included in the tax benefit in the first three ~~and nine~~ months ~~ended~~ ~~September 30, 2018. The~~of 2020 is a discrete benefit of $10 million related to this accounting exception. Due to the full valuation allowance on our domestic deferred tax assets, the tax benefit in 2020 does not reflect any additional tax benefit for domestic pretax losses. In 2019, the tax provision ~~in both periods~~ reflects a benefit for percentage depletion in excess of cost depletion from iron ore that we produce and consume or sell. ~~In 2018, the tax provision also reflects a tax benefit for the release of a portion of the valuation allowance due to pretax income.~~

The tax provision for the first quarter of 2019 was based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss. For the quarters ended June 30, 2019 and September 30, 2019, the Company computed its tax benefit using the discrete period effective tax rate, which reflects the actual taxes attributable to year-to-date earnings and losses, because we determined that a reliable estimate of the expected annual effective tax rate could not be made. A small change in our estimated marginal pretax results for the year ended December 31, 2019 could create a large change in the expected annual effective tax rate. The sensitivity of the effective tax rate was increased by the benefit for percentage depletion in excess of cost depletion for iron ore.

For further information on income taxes see Note 13 to the Condensed Consolidated Financial Statements.

~~Net earnings attributable to~~For the three months ended March 31, 2020 and March 31, 2019 United States Steel Corporation ~~were $(84)~~had a net loss of $391 million and ~~$38 million in the three and nine months ended~~ ~~September 30, 2019, compared to~~ net earnings of ~~$291~~$54 million, ~~and $523 million in the three and nine months ended~~ ~~September 30, 2018~~.respectively. The changes primarily reflect the factors discussed above.

BALANCE SHEET

~~Accounts Receivable~~Cash ~~decreased~~increased by ~~$259~~$601 million from year-end ~~2018~~2019 primarily as a result of ~~lower sales.~~borrowings on our revolving credit facilities. See Note 7 to the Condensed Consolidated Financial Statements for further details.

~~Operating lease assets~~Receivables from related parties decreased by $134 million primarily from the transaction to purchase USS-POSCO Industries (UPI) which included the assumption of $135 million of accounts payable owed to U. S. Steel for prior sales of steel substrate to UPI. This amount is reflected as a reduction in receivables from related parties as both the corresponding receivable and payable amounts between U. S. Steel and UPI are eliminated in consolidation upon acquisition. See Note 5 to the Condensed Consolidated Financial Statements for further details.

Inventories increased by ~~$239~~$290 million from year-end ~~2018~~2019 primarily as a result of decreased sales and the ~~adoption~~addition of the ~~new accounting standard for leases (see Note 8 for further details).~~UPI inventory amount to our Condensed Consolidated Balance Sheet.

Property, plant and equipment, net ~~increased~~decreased by ~~$445~~$40 million from year-end ~~2018~~2019 primarily due to a $196 million write-down of impaired welded tubular assets (see Note 1 to the Condensed Consolidated Financial Statements for further details) partially offset by additional property, plant and equipment of $97 million due to the consolidation of UPI as a result of the acquisition of the remaining 50% ownership interest and the level of capital expenditures exceeding depreciation expense.

Intangibles - net decreased by $16 million from year-end 2019 primarily due to a $67 million write-down of impaired welded tubular intangible assets partially offset by an acquired intangible asset of $54 million related to a UPI electricity contract. See Note 10 to the Condensed Consolidated Financial Statements for further details.

Accounts payable and other accrued liabilities ~~decreased~~increased by ~~$286~~$79 million from year-end ~~2018~~2019 primarily as a result of ~~lower production levels for our Flat-Rolled and USSE segments.~~an increase in the days in accounts payable cash conversion cycle.

~~Payroll and benefits payable~~Current portion of long-term debt ~~decreased~~increased by ~~$95~~$85 million from year-end ~~2018~~2019 primarily ~~due to profit-based incentive payments related to 2018 financial performance that were paid in the first quarter of 2019.~~

~~Current operating lease liabilities~~ ~~increased by $56 million from year-end 2018~~ as a result of adding the ~~adoption~~UPI Amended Credit Facility acquired through U. S. Steel's purchase of the ~~new accounting standard for leases (see Note 8 for further details).~~

~~Noncurrent operating lease liabilities~~ ~~increased by $189 million from year-end 2018 as a result of the adoption of the new accounting standard for leases (see Note 8 for further details).~~50% ownership interest in UPI.

Long-term debt, less unamortized discount and debt issuance costs increased by $~~184~~989 million from year-end ~~2018~~2019 primarily due to borrowings on the ~~USSK~~Fifth Credit Facility Agreement. See Note 16 to the Condensed Consolidated Financial Statements for further details.

Employee benefits ~~decreased~~increased by ~~$75~~$52 million from year-end ~~2018~~2019 primarily as a result of ~~impacts~~adding the UPI other postretirement employee benefit plans to our Condensed Consolidated Balance Sheet.

Deferred credits and other noncurrent liabilities decreased by $86 million primarily from liabilities eliminated as a result of U. S. Steel's purchase of the ~~natural maturation~~50% ownership interest in UPI and the change in value of the put option acquired with our ~~pension plans.~~purchase of Big River Steel.

CASH FLOW

Net cash ~~provided~~used by operating activities was ~~$396~~$142 million for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to net cash provided by operating activities of ~~$722~~$29 million in the same period last year. The decrease in cash from operations is primarily due to lower financial results, partially offset by changes in working capital period over period.

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 key working capital components include accounts receivable and inventory. The accounts receivable and inventory turnover ratios for the three months and twelve months ended ~~September 30,~~March 31, ~~2019~~2020 and ~~2018~~2019 are as follows:


	Three Months Ended September 30,		Twelve Months Ended September 30,		Three Months Ended March 31,		Twelve Months Ended March 31,
	2019	2018	2019	2018	2020	2019	2020	2019
Accounts Receivable Turnover	2.0	2.3	9.0	8.5	2.3	2.1	8.4	8.8
Inventory Turnover	1.4	1.7	6.2	6.4	1.3	1.5	5.5	6.4

The ~~decrease~~increase in the accounts receivable turnover approximates 5 days for the three months ended ~~September 30, 2019~~March 31, 2020 as compared to the same period ended ~~September 30, 2018~~March 31, 2019 and is primarily due to ~~decreased~~receivable collections exceeding the decrease in sales ~~as a result of~~from lower shipments and average realized prices inacross all of our ~~Flat-Rolled segment.~~segments. The ~~increase~~decrease in the accounts receivable turnover approximates 2 days for the twelve months ended ~~September 30, 2019~~March 31, 2020 as compared to the same period ended ~~September 30, 2018~~March 31, 2019 and is primarily due to ~~increased~~decreased sales as a result of lower shipments inand average realized prices across all of our ~~Flat-Rolled and Tubular~~ segments.

The decrease in the inventory turnover approximates 127 days and 210 days for the three and twelve months ended ~~September 30, 2019~~March 31, 2020 as compared to the three months and twelve months ended ~~September 30, 2018,~~March 31, 2019, respectively, and is primarily due to decreased shipments inacross all our ~~USSE segment.~~segments.

The last-in, first-out (LIFO) inventory method is the predominant method of inventory costing in the United States. The LIFO method accounted for 7165 percent and 73 percent of total inventory values at ~~both September 30,~~the three months ended March 31, 2020 and 2019 ~~and September 30, 2018.~~respectively. In the U.S., management monitors 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 ~~September 30, 2019,~~March 31, 2020, and December 31, ~~2018~~2019 the replacement cost of the inventory was higher by approximately ~~$999~~$762 million and ~~$1,038~~$735 million, respectively. Additionally, based on the Company’s latest internal forecasts and its inventory requirements, management does not believe there will be significant permanent LIFO liquidations that would impact earnings for the remainder of ~~2019.~~2020.

Our cash conversion cycle for the ~~third~~first quarter of ~~2019 increased~~2020 decreased by ~~nine days~~one day as compared to the fourth quarter of ~~2018~~2019 as shown below:


Cash Conversion Cycle	2019		2018		2020		2019
	$ millions	Days	$ millions	Days	$ millions	Days	$ millions	Days
Accounts receivable, net ^(a)	$1,400	45	$1,659	42	$1,172	39	$1,177	42

+ Inventories ^(b)	$2,071	67	$2,092	58	$2,075	68	$1,785	64

- Accounts Payable and Other Accrued Liabilities^(c)	$2,182	75	$2,477	72	$2,075	71	$1,970	69


= Cash Conversion Cycle ^(d)		37		28		36		37

^(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-generally accepted accounting principles (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.



CAPITAL EXPENDITURES	Three Months Ended March 31,
(dollars in millions)	2020	2019
Flat-Rolled ^(a)	192	247
U. S. Steel Europe	34	34
Tubular	54	19
Other Businesses	2	2
Total	282	302

~~Capital expenditures~~ ~~for~~For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, capital expenditures were ~~$978~~$282 million, compared with ~~$646~~$302 million in the same period in ~~2018~~2019. Flat-Rolled capital expenditures were ~~$764~~$192 million and included spending for ~~the~~ Mon Valley ~~No. 3 Blast Furnace outage, Mon Valley~~

Endless Casting and Rolling, Gary Hot Strip Mill upgrades, ~~Great Lakes B2 Blast Furnace, Midwest Tin Cold Mill upgrades,~~Mining Equipment, and various other infrastructure, environmental, and strategic projects. USSE capital expenditures of $34 million consisted of spending for improved Sinter Strand Emission control and improved Ore Bridges Emission control and various other infrastructure and environmental projects. Tubular capital expenditures were ~~$97~~$54 million and included spending for the Fairfield Electric Arc Furnace (EAF) project Offshore Operations threading line and swage extension and various other strategic capital projects. USSE capital expenditures of $111 million consisted of spending for improved Sinter Strand emission control, improved Ore Bridges Emission control, the new Dynamo line and various other infrastructure and environmental projects.

To align its strategic projects with the current market realities, the Company announced a reduction in total planned capital expenditures for 2020 by $125 million to approximately $750 million.

U. S. Steel’s contractual commitments to acquire property, plant and equipment at ~~September 30, 2019,~~March 31, 2020, totaled ~~$977~~$895 million.

Capital expenditures for 2019 are expected to total approximately $1.24 billion, not including the acquisition of a 49.9% ownership interest in Big River Steel, and remain focused largely on projects that further our strategy, infrastructure and environmental projects.

Revolving ~~and other~~ credit facilities - borrowings, net of financing costs totaled ~~$165~~$1,202 million ~~in the three and nine months ended September 30, 2019~~primarily due to ~~our borrowing~~borrowings on the ~~USSK~~Fifth Credit Facility Agreement.

~~Common stock repurchased~~ under our common stock repurchase program approved in 2018 totaled 5,289,475 shares and approximately $88 million in the nine months ended September 30, 2019. See Note 25 to the Condensed Consolidated Financial Statements for further details.

Issuance of long-term debt, net of financing costs totaled ~~$640~~$67 million primarily due to borrowings under our Export Credit Agreement.

Revolving credit facilities - repayments totaled $281 million in the ~~nine~~three months ended ~~September 30, 2018. During~~March 31, 2020 primarily due to repayments on the ~~nine months ended September 30, 2018,~~Fifth Credit Facility Agreement and USSK Credit Agreement.

Critical Accounting Estimates

Long-lived assets – U. S. Steel ~~issued $650 million aggregate principal~~evaluates long-lived assets, primarily property, plant and equipment for impairment whenever changes in circumstances indicate that the carrying amounts of those productive assets exceed their recoverable amount as determined by the asset group's projected undiscounted cash flows. We evaluate the impairment of ~~2026 Senior Notes.~~long-lived assets at the asset group level. Our primary asset groups are Flat-Rolled, welded tubular, seamless tubular and USSE.

During 2019, the challenging steel market environment in the U.S. and Europe and recent losses in the welded tubular asset group were considered triggering events for the Flat-Rolled, USSE and welded tubular asset groups. U. S. Steel ~~received~~completed a quantitative analysis of its long-lived assets for these asset groups and determined that the assets were not impaired. The percentage excess of estimated future cash flows over the net ~~proceeds from~~assets was greater than 30 percent for our welded tubular asset group. The key assumptions used to estimate the ~~offering~~recoverable amounts for the welded tubular asset group were estimates of ~~approximately $640 million after fees~~future commercial prices, commercial program management and efficiency improvements over the 12-year remaining useful life of ~~approximately $10 million related~~the primary welded tubular assets. The percentage excess of estimated future cash flows over the net assets was greater than 75 percent for both the Flat-Rolled and USSE asset groups. In 2019, there were no triggering events for the seamless tubular asset group that required long-lived assets to ~~underwriting and third party expenses.~~

be evaluated for impairment.

~~Repayment~~For the period ended March 31, 2020, the steep decline in oil prices that resulted from market oversupply and declining demand was considered a triggering event for the welded tubular and seamless tubular asset groups. A quantitative analysis was completed for both asset groups. The percentage excess of ~~long-term debt~~ ~~totaled $922 million~~estimated future cash flows over the net assets was greater than 100% for the seamless tubular asset group but indicated an impairment and required further evaluation of the net assets in the ~~nine months ended September 30, 2018. U. S. Steel repurchased through a tender offer~~welded tubular asset group. The liquidation method was used to determine the fair value of the welded tubular assets which resulted in an impairment of $196 million and ~~subsequent redemption approximately $780~~$67 million ~~of its outstanding 2021 Senior Secured Notes~~to property, plant and ~~paid premiums of $60 million~~equipment and intangibles, respectively. There were no triggering events for the ~~tender. Additionally, U. S. Steel repurchased approximately $75 million~~Flat-Rolled and USSE asset groups that required long-lived assets to be evaluated for impairment as of ~~its 2020 Senior Notes through a series of open market purchases and paid premiums of approximately $5 million.~~March 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes U. S. Steel’s liquidity as of ~~September 30, 2019~~March 31, 2020:


(Dollars in millions)
Cash and cash equivalents	$	476	$	1,350
Amount available under $1.5 Billion Credit Facility Agreement	1,350
Amount available under $2.0 Billion Credit Facility Agreement			300
Amount available under USSK credit facilities	152		152
UPI Amended Credit Facility			13
Total estimated liquidity	$	1,978	$	1,815

As of ~~September 30, 2019~~March 31, 2020, ~~$79~~$228 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.

During March 2020, as a precautionary measure taken to mitigate the potential economic impacts of the COVID-19 pandemic, U. S. Steel increased its borrowings under its Fifth Credit Facility Agreement. As of ~~September 30, 2019,~~March 31, 2020, there ~~were no amounts~~was $1.5 billion drawn under the ~~$1.5~~$2.0 billion Fifth Credit Facility Agreement. U. S. Steel must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most recent four consecutive quarters when availability under the Credit Facility Agreement is less than the greater of 10 percent of the total aggregate commitments and ~~$150~~$200 million. Based on the four quarters as of ~~September 30, 2019,~~March 31, 2020, we would not have met this covenant. So long as we continue to not meet this covenant, the amount available to the Company is effectively reduced by ~~$150~~$200 million. As a result, availability under this facility was ~~$1,350~~$300 million as of ~~September 30, 2019.~~March 31, 2020. Availability under this facility may be impacted by additional footprint decisions that are made to the extent the value of the collateral pool of inventory and accounts receivable that support our borrowing availability are reduced.

On October 10, 2019, we launched offerings of two series of environmental revenue bonds in aggregate principal amount of approximately $368 million, that will mature between 2024 and 2049 (collectively, the “2019 Environmental Revenue Bonds”). Proceeds of the 2019 Environmental Revenue Bonds in the amount of approximately $93 million will be used to redeem a portion of our existing outstanding environmental revenue bonds for which we issued a conditional redemption notice. Proceeds of the 2019 Environmental Revenue Bonds in the amount of $275 million will be used to finance or refinance the acquisition, construction, equipping and installation of certain solid waste disposal facilities, including an electric arc furnace and other equipment and facilities at the Company’s Fairfield Works. The 2019 Environmental Revenue Bonds closed on October 25, 2019.

On October 21, 2019, U. S. Steel issued an aggregate principal amount of $300 million of 5.00% Senior Convertible Notes due November 1, 2026 (2026 Senior Convertible Notes), with a 30-day option to purchase up to an additional $50 million in aggregate principal amount of 2026 Senior Convertible Notes, on the same terms and conditions. On October 25, 2019, U. S. Steel issued an additional $50 million of 2026 Senior Convertible Notes after the full option was exercised. U. S. Steel received net proceeds of approximately $340 million from the sale of the 2026 Senior Convertible Notes after deducting underwriting fees and estimated offering expenses. The Company intends to use the net proceeds for general corporate purposes, including, without limitation, for previously announced strategic investments and capital expenditures. Interest on the 2026 Senior Convertible Notes is payable semi-annually on May 1 and November 1 of each year, commencing on May 1, 2020. See Note 16 to the Condensed Consolidated Financial Statements for further details.

~~At September 30, 2019,~~March 31, 2020, USSK had borrowings of €350 million (approximately ~~$381~~$384 million) under its €460 million (approximately ~~$501~~$504 million) ~~unsecured~~ revolving credit facility. The USSK Credit Agreement contains certain USSK financial covenants, including a maximum net debt to EBITDA ratio and a minimum stockholders' equity to assets ratio. The covenants are measured semi-annually at June and December each year for the period covering the last twelve calendar months, with the first net debt to EBITDA measurement occurring at June 2021. USSK must maintain a net debt to EBITDA ratio of less than 6.5 as of June 30, 2021 and 3.5 for semi-annual measurements starting December 31, 2021. If the challenging market conditions in Europe due to COVID-19 persisted for a long period and negatively impacted USSK's projected EBITDA, and if covenant compliance requirements are not amended or waived, it may result in an event of default, under which USSK may not draw upon the facility, and the majority lenders, as defined in the USSK Credit Agreement, may cancel any and all commitments, and/or accelerate full repayment of any or all amounts outstanding under the USSK Credit Agreement.

At ~~September 30, 2019,~~March 31, 2020, USSK had availability of €110 million (approximately $120 million) under the USSK Credit Agreement. The USSK Credit Agreement expires in September 2023.

~~At September 30, 2019,~~As of March 31, 2020, USSK had no borrowings under its €20 million and €10 million ~~unsecured~~ credit facilities (collectively, approximately $33 million) and the availability was approximately $32 million due to approximately $1 million of customs and other guarantees outstanding. These facilities expire in December 2021.

At March 31, 2020, UPI had borrowings of $79 million under its $110 million revolving credit facility (UPI Amended Credit Facility). Borrowings are secured by liens on certain UPI inventory and trade accounts receivable. The UPI Amended Credit Facility provides for borrowings at interest rates based on defined, short-term market rates plus a spread based on availability and includes other customary terms and conditions. At March 31, 2020, UPI had availability of $13 million under the UPI Amended Credit Facility. The agreement expires in August 2020.

As of March 31, 2020, we had borrowings of $104 million under the Export Credit Agreement (ECA). Loan repayments start six months after the starting point of credit as defined in the loan agreement with a total repayment term up to eight years. Loan availability and repayment terms are subject to certain customary covenants and events of default. The purpose of the ECA is to finance equipment purchased for the endless casting and rolling facility under construction at our Mon Valley Works facility in Braddock, Pennsylvania. In response to the decline in demand for our products resulting from the COVID-19 outbreak, we have delayed construction of our endless casting and rolling line at Mon Valley Works. We have also paused our borrowing under the ECA pending an update to the agreement or resumption of construction.

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.

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 ~~$161~~$170 million of liquidity sources for financial assurance purposes as of ~~September 30, 2019.~~March 31, 2020. Increases in certain of these commitments which use collateral are reflected within cash, cash equivalents and restricted cash on the Condensed Consolidated Statement of Cash Flows.

At ~~September 30, 2019,~~March 31, 2020, in the event of a change in control of U. S. Steel, the following may occur: (a) debt obligations totaling ~~$2,131 million~~$4.2 billion as of ~~September 30, 2019~~March 31, 2020 may be declared due and payable; (b) the Credit Facility Agreement and the USSK credit facilities may be terminated and any amounts outstanding declared due and payable; and (c) U. S. Steel may be required to either repurchase the leased Fairfield slab caster for ~~$21~~$19 million or provide a cash collateralized letter of credit to secure the remaining obligation.

The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $4 million at ~~September 30, 2019.~~March 31, 2020. 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.

Our major cash requirements in ~~2019~~2020 are expected to be for capital expenditures, ~~the acquisition of Big River Steel (which closed on October 31, 2019),~~ employee benefits and operating costs, which includes purchases of raw materials. We finished the ~~third~~first quarter of ~~2019~~2020 with ~~$476~~$1,350 million of cash and cash equivalents and ~~$2.0~~$1.8 billion of total liquidity. Available cash is left on deposit with financial institutions or invested in highly liquid securities with parties we believe to be creditworthy.

In March 2020, U. S. Steel announced that as part of its response to the COVID-19 pandemic, it is planning to reduce its 2020 capital spending by $125 million to approximately $750 million. The Company ~~currently~~plans to delay construction of the endless casting and rolling line and cogeneration facility at its Mon Valley Works and has paused upgrades to capital spending for improvements to the Gary Works hot strip mill. The investment in a new non-grain oriented electrical steel line at USSE remains delayed. The Company expects ~~approximately $950~~to complete the EAF at Tubular as planned, with first arc anticipated in the second half of 2020 as this project was prefunded with environmental revenue bonds issued in the fourth quarter of 2019.

On April 30, 2020 (the Effective Date), the Company entered into an Option Agreement (Option Agreement) with Stelco Inc., a corporation governed under the laws of Canada (Stelco), pursuant to which, among other things, the Company granted Stelco the option (Option) to acquire an undivided 25% interest (the Option Interest) in a to-be-formed entity (the Joint Venture) that will own the Company’s current iron ore mine located in Mt. Iron, Minnesota (the Minntac Mine). As consideration for the Option, Stelco will pay the Company an aggregate amount of $100 million in five $20 million installments, which began on the Effective Date and will end on or before December 31, 2020 (the date upon which the final installment is paid, the Final Payment Date). In the event Stelco exercises the Option, Stelco will contribute an additional $500 million to the Joint Venture, and the parties will engage in good faith negotiations to finalize the master agreement (pursuant to which Stelco will acquire the Option Interest) and the limited liability company agreement of the Joint Venture. Concurrently with, and subject to, the execution and delivery of the Option Agreement, the Company and Stelco also entered into an Amended and Restated Pellet Sale and Purchase Contract.

Subject to the terms and conditions of the Option Agreement, Stelco may exercise the Option at any time during the period commencing on the Final Payment Date and expiring at 11:59 p.m. Eastern Time on January 31, 2027 unless earlier terminated.

If U. S. Steel management determines that market conditions are favorable, after taking into account our liquidity requirements, including the amounts available under our existing credit facilities, we may seek opportunities to improve our liquidity position by raising capital ~~expenditures for 2020,~~through the issuance of equity or equity-linked securities, the incurrence of additional indebtedness, which ~~includes spending for strategic projects described earlier.~~may include the issuance of debt securities, including debt securities that may be convertible into our equity interests, secured by certain of our assets, and/or guaranteed by certain of our subsidiaries, or a combination of one or more of the foregoing transactions, which we may conduct through one or more public or private transactions.

The Company’s credit ratings were recently downgraded by three credit ratings agencies, all citing, among other things, the uncertainty in duration and impact of the COVID-19 outbreak on our business.

U. S. Steel management believes that U. S. Steel's liquidity will be adequate to satisfy our obligations for the foreseeable future, including obligations to complete currently authorized capital spending programs. Future requirements for U. S. Steel’s business needs, including the funding of acquisitions and capital expenditures, scheduled debt maturities, repurchase of debt, share buyback, contributions to employee benefit plans, and any amounts that may ultimately be paid in connection with contingencies, are expected to be financed by a combination of internally generated funds (including asset sales), proceeds from the sale of stock, borrowings, refinancings and other external financing sources. Certain of our credit facilities, including the Fifth Credit Facility Agreement, the USSK Credit Agreement and the ECA, contain standard terms and conditions including customary material adverse change clauses. If a material adverse change were to occur, our ability to fund future operating and capital requirements could be negatively impacted.

Environmental Matters, Litigation and Contingencies

Some of U. S. Steel’s facilities were in operation before 1900. Although ~~management~~the Company believes that ~~U. S. Steel’s~~its environmental practices have either led the industry or at least been consistent with prevailing industry practices, hazardous materials ~~may~~ have been and may continue to be released at current or former operating sites or delivered to sites operated by third parties.

Our U.S. facilities are subject to environmental laws applicable in the U.S., including the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as well as state and local laws and regulations.

U. S. Steel has incurred and will continue to incur substantial capital, operating, and maintenance and remediation expenditures as a result of environmental laws and regulations, related to release of hazardous materials, which in recent years have been mainly for process changes to meet CAA obligations and similar obligations in Europe.

~~Midwest Plant Incident~~

On April 11, 2017, there was a process waste water release at our Midwest Plant (Midwest) in Portage, Indiana that impacted a water outfall that discharges to Burns Waterway near Lake Michigan. U. S. Steel identified the source of the release and made the necessary repairs. We determined that all repairs were safely working as intended and, on April 14, 2017, resumed operations in a controlled, phased and highly monitored approach with extensive input from participating government agencies. The Company has since implemented substantial operational, process and notification improvements at Midwest. The Company has been presented with cost reimbursements, loss of use and penalty requests from the involved governmental agencies. In January of 2018, The Surfrider Foundation and the City of Chicago initiated suits in the Northern District of Indiana alleging CWA and Permit violations at Midwest. On April 2, 2018, the U.S. Environmental Protection Agency (U.S. EPA) and the State of Indiana initiated a separate action against the Company and lodged a Consent Decree negotiated between U. S. Steel and the relevant governmental agencies consisting of all material terms to resolve the CWA and National Pollutant Discharge Elimination System (NPDES) violations at the Midwest Plant. A public comment period for the Consent Decree ensued. The suits that the Surfrider Foundation and the City of Chicago filed are currently stayed. The Surfrider Foundation and the City of Chicago also filed motions, which were granted, to intervene in the Consent Decree case. U. S. Steel continues to work with United States Department of Justice, U.S. EPA, and Indiana Department of Environmental Management (IDEM) towards a finalized Consent Decree.

EU Environmental Requirements and Slovak Operations

Under the Emissions Trading Scheme (ETS), USSK's final allocation of allowances for the Phase III period, which covers the years 2013 through 2020 is 48 million allowances. Based on projected ~~future~~total production levels, we started to purchase allowances in the third quarter of 2017 to meet the annual compliance submission in the future. As of ~~September 30, 2019,~~March 31, 2020, we have purchased approximately 1212.2 million European Union Allowances (EUA) totaling ~~€132~~€141.1 million (approximately ~~$144~~$154.6 million). to cover the estimated shortfall of emission allowances. We estimate that the total shortfall will be approximately 1212.5 million allowances for the Phase III period. ~~Although the~~The full cost of complying with the ETS regulations ~~depends~~will depend on future production levels and future emissions intensity ~~levels, at this time we do not believe that the cost for the Phase III period will be significantly different from the costs we have already incurred.~~levels.

The EU’s Industrial Emissions Directive requires implementation of EU determined best available techniques (BAT) for ~~iron~~Iron and ~~steel~~Steel production, to reduce environmental impacts as well as compliance with BAT associated emission levels. Our most recent broad estimate of ~~future~~total capital expenditures for projects ~~that~~to comply with or go beyond BAT requirements is ~~up to~~ €138 million (approximately ~~$150~~$151 million) over the ~~2017 to 2020~~actual program period. These costs may be mitigated if USSK complies with certain financial covenants, which are assessed annually. USSK complied with these covenants as of ~~September 30, 2019.~~March 31, 2020. If we are unable to meet these covenants in the future, USSK might be required to provide additional collateral (e.g. bank guarantee) to secure the full value of estimated expenditures. There could be increased operating costs associated with these projects, such as increased energy and maintenance costs. We are currently unable to reliably estimate what the increase in operating costs will be as many projects are ~~still~~ in the development stage.

For further discussion of laws applicable in Slovakia and the EU and their impact on USSK, see Note 2322 to the Condensed Consolidated Financial Statements, “Contingencies and Commitments - Environmental Matters, EU Environmental Requirements.”

New and Emerging Environmental Regulations

United States and European Greenhouse Gas Emissions Regulations

Future compliance with CO₂ emission requirements may include substantial costs for emission allowances, restriction of production and higher prices for coking coal, natural gas and electricity generated by ~~carbon based~~carbon-based systems. Because we cannot predict what requirements ultimately will be imposed in the U.S. and Europe, it is difficult to estimate the likely impact on U. S. Steel, but it could be substantial. On March 28, 2017, President Trump signed Executive Order 13783 instructing the ~~U.S. EPA~~United States Environmental Protection Agency (U.S. EPA) to review the Clean Power Plan. On October 16, 2017, the U.S. EPA proposed to repeal the Clean Power Plan after reviewing the plan pursuant to President Trump’s executive order. Any repeal and/or replacement of the Clean Power Plan is likely to be challenged by various proponents of the plan, such as environmental groups and certain states. Any impacts to our operations as a result of any future greenhouse gas regulations are not estimable at this time since the matter is unsettled. In any case, to the extent expenditures associated with any greenhouse gas regulation, as with all costs, are not ultimately reflected in the prices of U. S. Steel's products and services, operating results will be reduced.

There have been no material changes in U. S. Steel’s exposure to European Greenhouse Gas Emissions regulations since December 31, ~~2018.~~2019.

United States - Air

The CAA imposes stringent limits on air emissions with a federally mandated operating permit program and civil and criminal enforcement sanctions. The CAA requires, among other things, the regulation of hazardous air pollutants through the development and promulgation of National Emission Standards for Hazardous Air Pollutants (NESHAP) and Maximum Achievable Control Technology (MACT) Standards. The U.S. EPA has developed various industry-specific MACT standards pursuant to this requirement. The CAA requires the U.S. EPA to promulgate regulations establishing emission standards for each category of Hazardous Air Pollutants. The U.S. EPA also must conduct risk assessments on each source category that is already subject to MACT standards and determine if additional standards are needed to reduce residual risks.

While our operations are subject to several different categories of NESHAP and MACT standards, the principal impact of these standards on U. S. Steel operations includes those that are specific to coke making, iron making, steel making and iron ore processing.

The U.S. EPA is currently in the process of completing a Residual Risk and Technology Review of the Integrated Iron and Steel MACT regulations, Coke MACT regulations, and Taconite Iron Ore Processing MACT regulations as required by the CAA. The U.S. EPA is under a court order to complete the Residual Risk and Technology Review of the Integrated Iron and Steel regulations no later than ~~March 13,~~May 5, 2020; and to complete the Residual Risk and Technology Review of the Taconite Iron Ore Processing Regulations by June 30, 2020.

On August 16, 2019, U.S. EPA published a proposed Residual Risk and Technology Review (RTR) rule for the Integrated Iron and Steel MACT category in the Federal Register. Based on the results of U.S. EPA’s risk review, the Agency proposed that risks due to emissions of air toxics from the Integrated Iron and Steel category are acceptable and that the current regulations provided an ample margin of safety to protect public health. Under the technology review, U.S. EPA proposed that there are no developments in practices, processes or control technologies that necessitate revision of the standards. ~~However, the Agency is taking comment on the consideration of work practices for the control of certain unmeasurable fugitive and intermittent particulate sources.~~ U.S. EPA ~~is accepting comment~~accepted comments on the proposed rule until November 7, 2019. Based upon our analysis of the integrated iron and steel proposed rule, the Company does not expect any material impact if the rule is finalized as proposed. For the Taconite Iron Ore Processing category, based on the results of the Agency’s risk review, U.S. EPA is proposing that risks from emissions of air toxics from this source category are acceptable and that the existing standards provide an ample margin of safety. Furthermore, under the technology review, the Agency identified no cost-effective developments in controls, practices, or processes to achieve further emissions reductions. Therefore, U.S. EPA is proposing no revisions to the existing standards based on the RTRs. U.S. EPA ~~is accepting~~accepted comments on the taconite proposed rule until October 25, 2019. Based upon our analysis of the proposed taconite rule, the Company does not expect any material impact if the rule is finalized as proposed. Because the U.S. EPA has not completed its review of the Coke MACT regulations, any impacts related to the U.S. EPA’s review of the coke standards cannot be estimated at this time.

On March 12, 2018, the New York State Department of Environmental Conservation (DEC), along with other petitioners, submitted a CAA Section 126(b) petition to the U.S. EPA. In the petition, the DEC asserts that stationary sources from the following nine states are interfering with attainment or maintenance of the 2008 and 2015 ozone National Ambient Air Quality Standards (NAAQS) in New York: Illinois, Indiana, Kentucky, Maryland, Michigan, Ohio, Pennsylvania, Virginia, and West Virginia. DEC is requesting the U.S. EPA to require sources of nitrogen oxides in the nine states to reduce such emissions. On May 4, 2018, citing Section 307(d)(10) of the CAA, the U.S. EPA issued a notice extending the deadline for the agency to respond to the petition until November 9, 2018. On May 20, 2019, U.S. EPA published a notice in the ~~Federal Register~~ ~~in which it proposed to deny DEC’s 126(b) petition. The public comment period for the proposed action closed on July 15, 2019. On September 20, 2019, U.S. EPA signed~~In a final rule ~~denying~~promulgated in the ~~petition~~.October 18, 2019, Federal Register, EPA denied the petition. On October 29, 2019, New York, New Jersey, and the City of New York petitioned the United States Court of Appeals for the District of Columbia Circuit for review of U. S. EPA’s denial of the petition. The matter remains before the Court.

The CAA also requires the U.S. EPA to develop and implement NAAQS for criteria pollutants, which include, among others, particulate matter (PM) - consisting of PM₁₀ and PM_2.5, lead, carbon monoxide, nitrogen dioxide, sulfur dioxide (SO₂), and ozone.

In June 2010, the U.S. EPA significantly lowered the primary NAAQS for SO₂ from 140 parts per billion (ppb) on a 24-hour basis to an hourly standard of 75 ppb. Subsequently, U.S. EPA designated the areas in which Great Lakes Works and Mon Valley Works facilities are located as nonattainment with the 2010 standard for the SO₂ NAAQS. The non-attainment designation requires the region to implement operational and/or capital improvements to demonstrate attainment with the 2010 standard. U. S. Steel worked with the Allegheny County Health Department (ACHD) in developing a State Implementation Plan (SIP) for the Allegheny County portion of the Pennsylvania SIP that includes reductions of SO₂ and improved dispersion from U. S. Steel sources. On November 19, 2018, U.S. EPA published a proposed rule to approve the SIP. ~~Comments~~Pursuant to a consent decree in Center for Biological Diversity, et al., v. Wheeler,

No. 4:18-cv-03544 (N.D. Cal.), EPA has agreed to take final action on the ~~proposed rule were accepted until December 19, 2018.~~SIP submittal no later than April 30, 2020. In addition, as noted in the Legal Proceedings section, U. S. Steel continues to work with the regulatory authorities to address the Wayne County, Michigan (where Great Lakes Works is located) nonattainment status. The operational and financial impacts of the SO₂ NAAQS are not estimated to be material at this time.

In October 2015, the U.S. EPA lowered the NAAQS for ozone from 75 ppb to 70 ppb. On November 6, 2017, the U.S. EPA designated most areas in which we operate as attainment with the 2015 standard. In a separate ruling, on June 4, 2018, the U.S. EPA designated other areas in which we operate as “marginal nonattainment” with the 2015 ozone standard. ~~While on~~On December 6, 2018, U.S. EPA published a final rule regarding implementation of the 2015 ozone standard. Because no state regulatory or permitting actions to bring the ozone nonattainment areas into attainment have yet to be proposed or developed for U. S. Steel facilities, the operational and financial impact of the ozone NAAQS cannot be reasonably estimated at this time.

On December 14, 2012, the U.S. EPA lowered the annual standard for PM_2.5 from 15 micrograms per cubic meter (ug/m3) to 12 ug/m3, and retained the PM_2.5 24-hour and PM₁₀ NAAQS rules. In December 2014, the U.S. EPA designated some areas in which U. S. Steel operates as nonattainment with the 2012 annual PM_2.5 standard. On April 6, 2018, the U.S. EPA published a notice that Pennsylvania, California and Idaho failed to submit a SIP to demonstrate attainment with the 2012 fine particulate standard by the deadline established by the CAA. As a result of the notice, Pennsylvania, a state in which we operate, iswas required to submit a SIP to the U.S. EPA no later than November 7, 2019 to avoid sanctions. On April 29, 2019, the ACHD published a draft SIP for the Allegheny County nonattainment area which demonstrates that all of Allegheny County will meet its reasonable further progress requirements and be in attainment with the 2012 PM_2.5 annual and 24-hour NAAQS by December 31, 2021 with the existing controls that are in place. On September 12, 2019, the Allegheny County Board of Health unanimously approved the draft SIP. The draft SIP was then sent to the Pennsylvania Department of Environmental Protection (PADEP). ~~After its review,~~ PADEP ~~will then send~~submitted the SIP to ~~the~~ U.S. EPA for ~~approval.~~

~~In 2010, the U.S. EPA retained the annual nitrogen dioxide NAAQS standard, but created a new 1-hour NAAQS and established new data reduction and monitoring requirements. While the~~approval on November 1, 2019. To date, U.S. EPA has ~~classified all areas as being in attainment or unclassifiable, it is requiring implementation of a network of monitoring stations~~not taken action on PADEP’s submittal. On April 14, 2020, EPA proposed to ~~assess air quality. Until~~retain the ~~network is implemented~~12 ug/m3 annual and ~~further designations are made, the impact on operations at U. S. Steel facilities cannot be reasonably estimated.~~35 ug/3 24-hour PM_2.5 standards without revision.

In July 2018, the ACHD provided U. S. Steel, ACHD Regulation Subcommittee members and interested parties with draft regulations that would modify the existing air regulations applicable to coke plants in Allegheny County. While ACHD currently has some of the most stringent air regulations in the country governing coke plants, which apply to U. S. Steel’s coke plant in Clairton, Pennsylvania (the only remaining coke plant in Allegheny County and one of ~~three~~two remaining in Pennsylvania), the draft regulations would reduce the current allowable emissions from coke plant operations and would be more stringent than the Federal Best Available Control Technology and Lowest Achievable

Emission Rate requirements. In various meetings with ACHD, U. S. Steel has raised significant objections, in particular, that ACHD has not demonstrated that continuous compliance with the draft rule is economically and technologically feasible. While U. S. Steel continues to meet with ACHD regarding the draft rule, U. S. Steel believes that any rule promulgated by ACHD must comply with its statutory authority. If the draft rule or similar rule is adopted, the financial and operational impacts to U. S. Steel could be material. To assist in developing rules objectively and with adequate technical justification, the June 27, 2019, Settlement Agreement, establishes procedures that would be used when developing a new rule. For further details on the June 27, 2019 Settlement Agreement with ACHD see "Item 1. Legal Proceedings - Environmental Proceedings - Mon Valley Works."

Environmental Remediation

In the United States, U. S. Steel has been identified as a potentially responsible party (PRP) at ~~seven~~six sites under CERCLA as of ~~September 30, 2019.~~March 31, 2020. Of these, there are three sites for which information requests have been received or there are other indications that U. S. Steel may be a PRP under CERCLA, but 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 1817 additional sites for which U. S. Steel may be liable for remediation costs in excess of $100,000 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 estimable. As environmental remediation matters proceed toward ultimate resolution or as remediation obligations arise, charges in excess of those previously accrued may be required.

For further discussion of relevant environmental matters, see "Item 1. Legal Proceedings - Environmental Proceedings."

OFF-BALANCE SHEET ARRANGEMENTS

U. S. Steel did not enter into any new material off-balance sheet arrangements during the ~~third~~first quarter of ~~2019.~~2020.

INTERNATIONAL TRADE

U. S. Steel continues to face import competition, much of which is unfairly traded, supported by foreign governments, and fueled by massive global steel ~~overcapacity.~~overcapacity, currently estimated to be over 440 million metric tons per year. These imports, as well as the underlying policies/practices and overcapacity, impact the Company’s operational and financial performance. U. S. Steel continues to lead ~~the industry in~~ efforts to address these challenges that threaten the Company, our workers, our stockholders, and our country’s national and economic security.

As of the date of this filing, pursuant to a series of Presidential Proclamations issued in accordance with Section 232 of the Trade Expansion Act of 1962, U.S. imports of certain steel products are subject to a 25 percent tariff, except for imports from: (1) Argentina, Brazil, and South Korea, which are subject to restrictive quotas; (2) Canada and Mexico, which are ~~currently~~ not subject to either tariffs or quotas but tariffs could be re-imposed on surging product groups after consultations; and (3) Australia, which is not subject to tariffs, quotas, or an anti-surge mechanism. A January 24, 2020, Presidential Proclamation expanded the Section 232 tariffs to cover imports of certain downstream steel products from countries subject to the Section 232 tariffs, effective February 8, 2020.

The U.S. Department of Commerce (DOC) is managing a process in which U.S. companies may request and/or oppose temporary product exclusions from the Section 232 tariffs or quotas. Over ~~93,000~~133,000 exclusions have been requested for steel products. U. S. Steel ~~is opposing~~opposes exclusion requests for products that are the same as, or substitute products for, those produced by U. S. Steel.

Several legal challenges and retaliatory trade measures have been initiated in response to the Section 232 action. The American Institute for International Steel’s appeal of the March 2019 U.S. Court of International Trade (CIT) decision upholding the constitutionality of the Section 232 statute is pending beforeIn February 2020, the U.S. Court of Appeals for the Federal Circuit (CAFC)~~. In July 2019, JSW Steel Ltd (JSW) filed a complaint against~~ upheld the ~~DOC in~~constitutionality of the ~~CIT, challenging the DOC’s denial of its~~ Section 232 ~~exclusion requests~~statute. The American Institute for ~~semi-finished steel products,~~International Steel has appealed the CAFC’s decision to the Supreme Court, which ~~were opposed~~will decide whether to hear the appeal by ~~U. S. Steel and other domestic steel producers.~~October 2020. There are currently twenty Section 232 challenges before the U.S. Court of International Trade (CIT). Multiple countries have challenged the Section 232 action at the World Trade Organization (WTO), imposed retaliatory tariffs, and/or acted to safeguard their domestic steel industries from increased steel imports. In turn, the United States has challenged the retaliation at the WTO. ~~Decisions in these WTO disputes are not expected until the fourth quarter of 2019, at the earliest.~~

Since its implementation in March 2018, the Section 232 action has supported the U.S. steel industry's and U. S. Steel’s ~~multiple restarts~~investments in advanced steel capacity, technology, and ~~investment initiatives.~~skills, thereby strengthening U.S. national and economic security. The Company continues to actively defend the Section 232 action through all available tools and strategies, including by highlighting these benefits and the importance of maintaining the Section 232 action.

In February 2019, the European Commission (EC) imposed a definitive tariff rate quota ~~(TRQ)~~ safeguard on certain steel imports: 25 percent tariffs on certain steel imports that exceed quotas ~~based on 105 percent of average import volumes for 2015-2017 and automatically increasing 5 percent annually,~~ effective ~~February 2019~~ through June 2021. In ~~July 2019,~~February 2020, the ~~automatic 5 percent quota increase went into effect, despite opposition from the EU steel industry and the EC’s ongoing annual~~EC initiated a second review of the ~~measures. In September 2019, the EC completed its review, announcing several revisions~~steel safeguard to ~~the safeguard, including a reduction of the annual quota increase to 3 percent and tightening of certain product-specific quotas, effective October 1, 2019.~~consider whether any adjustments should be made.

Antidumping (AD) and countervailing (CVD or antisubsidy) duties apply in addition to the Section 232 tariffs and quotas and the EC’s ~~TRQ~~ safeguard, and AD/CVD orders will last beyond the Section 232 action and EC’s ~~TRQ~~ safeguard. Thus, U. S. Steel continues to actively defend and maintain the 54 U.S. AD/CVD orders and 11 EU AD/CVD orders covering products U. S. Steel produces in multiple proceedings before the DOC, U.S. International Trade Commission (ITC), CIT, CAFC, the EC and European courts, and the WTO.

InFollowing the 2018 ~~following an~~ investigation ~~of China’s technology transfer and intellectual property violations by the U.S. Trade Representative (USTR)~~ under Section 301 of the Trade Act of 1974, the United States ~~imposed tariffs on approximately $250 billion of U.S. imports from China, including finished steel couplings, some products used in steel production, and certain downstream products. The original 10~~began imposing 15 to 25 percent tariffs on ~~these products were uniformly 25 percent by May 2019. In September 2019, USTR announced that~~certain imports from China, including certain steel products. Following the U.S.-China “Phase One” Trade Agreement, effective February 14, 2020, the 15 percent tariffs ~~would be imposed in two stages on all remaining imports from China, with~~were reduced to 7.5 percent but the ~~first set of 15~~25 percent tariffs ~~taking effect on September 1, 2019, and~~remain in place pending the ~~remaining 15 percent tariffs taking effect December 15, 2019. The United States continues to negotiate with China on structural trade issues, including China's subsidies and government support~~negotiation of ~~its steel industry.~~a Phase Two agreement.

The ~~G-20’s~~ Global Forum on Steel Excess Capacity, ~~continues to work to reduce global steel overcapacity, currently estimated at 440 million metric tons. The~~the Organization for Economic Co-operation and Development Steel Committee and trilateral negotiations between the United States, EU, and Japan ~~also~~ continue to address global ~~steel~~ overcapacity.

U. S. Steel will continue to execute a broad, global strategy to maximize opportunities and navigate challenges presented by imports, global steel overcapacity, and international trade law and policy developments.

NEW ACCOUNTING STANDARDS

See Notes 2 and 3 to the Condensed Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.



Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There were no material changes in~~ U. S. ~~Steel's exposure~~Steel is exposed to certain risks related to its ongoing business operations, including financial, market, ~~risk~~political, and economic risks. The global pandemic resulting from ~~December~~the novel coronavirus designated as COVID-19 has had a significant impact on our business and the global economy. The economic uncertainty has increased volatility in the financial markets and could adversely affect our liquidity and ability to access the capital markets. In response to the decline in demand for our products resulting from the COVID-19 outbreak, we borrowed an additional $800 million under the Fifth Credit Facility Agreement during the three month period ended March 31, ~~2018.~~2020. As of March 31, 2020, the Company had approximately $2.1 billion in outstanding variable interest debt. An increase in the variable interest rate increases our interest expense and interest paid. A quarter percent increase in the variable interest rate on the amount of variable interest rate indebtedness as of March 31, 2020 would increase annual interest expense by approximately $5 million. See Note 16 in the Notes to the Condensed Consolidated Financial Statements for further details. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility.



Item 4.	CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

U. S. Steel has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of ~~September 30, 2019~~March 31, 2020. These disclosure controls and procedures are the controls and other procedures that were designed to ensure that information required to be disclosed in reports that are filed with or submitted to the U.S. Securities and Exchange Commission are: (1) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (2) recorded, processed, summarized and reported within the time periods specified in applicable law and regulations. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2019~~March 31, 2020, U. S. Steel’s disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have not been any changes in U. S. Steel’s internal control over financial reporting that occurred during the fiscal quarter covered by this quarterly report, which have materially affected, or are reasonably likely to materially affect, U. S. Steel’s internal control over financial reporting.

~~UNITED STATES STEEL CORPORATION~~

~~SUPPLEMENTAL STATISTICS (Unaudited)~~

Three Months Ended
September 30, Nine Months Ended September 30,
(Dollars in millions) 2019 2018 2019 2018
SEGMENT EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES:

Flat-Rolled $ 46
$ 305
$ 275
$ 562
U. S. Steel Europe (46 ) 72
(27 ) 297
Tubular (25 ) 7
(21 ) (55 )
Total reportable segments (25 ) 384
227
804
Other Businesses 8
16
26
44
Items not allocated to segments:

December 24, 2018 Clairton coke making facility fire (9 ) —
(53 ) —
Restructuring charges (54 ) —
(54 ) —
Gain on equity investee transactions —
—
—
18
Granite City Works restart costs —
(27 ) —
(63 )
Granite City Works adjustment to temporary idling charges —
—
—
8
Total (loss) earnings before interest and income taxes $ (80 ) $ 373
$ 146
$ 811
CAPITAL EXPENDITURES (dollars in millions)

Flat-Rolled $ 263
$ 213
$ 764
$ 531
U. S. Steel Europe 36
25
111
63
Tubular 49
9
97
33
Other Businesses 2
18
6
19
Total $ 350
$ 265
$ 978
$ 646
OPERATING STATISTICS

Average realized price: ($/net ton unless otherwise noted)^(a)

Flat-Rolled $ 732
$ 859
$ 771
$ 807
U. S. Steel Europe 656
669
660
695
U. S. Steel Europe (€/net ton) 590
575
587
582
Tubular 1,417
1,602
1,501
1,477
Steel shipments (thousands of net tons):^(a)

Flat-Rolled 2,654
2,659
8,183
7,777
U. S. Steel Europe 765
1,101
2,833
3,384
Tubular 174
184
576
564
Intersegment steel (unless otherwise noted) shipments (thousands of net tons):

Flat-Rolled to Tubular 79
26
212
158
Flat-Rolled to U. S. Steel Europe (iron ore pellets and fines) 235
—
424
—
U. S. Steel Europe to Flat-Rolled —
—
—
22
Raw steel production (thousands of net tons):

Flat-Rolled 2,783
2,933
8,842
8,558
U. S. Steel Europe 823
1,210
3,130
3,810
Raw steel capability utilization:^(b)

Flat-Rolled 65 % 68 % 70 % 67 %
U. S. Steel Europe 65 % 96 % 84 % 102 %

^(a)~~Excludes intersegment transfers.~~

^(b)~~Based on annual raw steel production capability of 17.0 million net tons for Flat-Rolled and 5.0 million net tons for USSE.~~

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

GENERAL LITIGATION

On April 11, 2017, there was a process ~~waste water~~waste-water release at our Midwest Plant (Midwest) in Portage, Indiana, that impacted a water outfall that discharges to Burns Waterway near Lake Michigan. U. S. Steel identified the source of the release and made the necessary repairs. We determined that all repairs were safely working as intended and, on April 14, 2017, resumed operations in a controlled, phased and highly monitored approach with extensive input from participating government agencies. The Company has since implemented substantial operational, process and notification improvements at Midwest. The Company has been presented with cost reimbursements, loss of use and penalty requests from the involved governmental agencies. In January of 2018, The Surfrider Foundation and the City of Chicago initiated suits in the Northern District of Indiana alleging Clean Water Act (CWA) and Permit violations at Midwest. On April 2, 2018, the U.S. EPA and the State of Indiana initiated a separate action against the Company and lodged a Consent Decree negotiated between U. S. Steel and the relevant governmental agencies consisting of all material terms to resolve the CWA and National Pollutant Discharge Elimination System violations at the Midwest Plant. A public comment period for the Consent Decree ensued. The suits that the Surfrider Foundation and the City of Chicago filed are currently stayed. The Surfrider Foundation and the City of Chicago also filed motions, which were granted, to intervene in the Consent Decree case. ~~U. S. Steel continues to work with~~The United States Department of Justice ~~U.S. EPA,~~(DOJ) filed a revised Consent Decree and ~~Indiana Department~~a motion with the Court to enter the Consent Decree as final on November 20, 2019. Surfrider Foundation, City of ~~Environmental Management towards a finalized~~Chicago and other non-governmental organizations filed objections to the revised Consent Decree. The DOJ and U. S. Steel made filings in support of the revised Consent Decree.

On November 30, 2018, the Minnesota Pollution Control Agency (MPCA) issued a new Water Discharge Permit for the Minntac Tailings Basin waters. The Permit contains new sulfate limitations applicable to water in the Tailings Basin and groundwater flowing from U. S. Steel’s property. The MPCA also acted on the same date, denying the Company’s requests for variances from ground and surface water standards and request for a contested case hearing. U. S. Steel filed appeals with the Minnesota Court of Appeals ~~on December 19, 2018~~ challenging the actions taken by the MPCA. Separate appeals ~~have been~~were filed by a Minnesota Native American Tribe (Fond du Lac Band) and a nonprofit environmental group (Water Legacy). All cases were consolidated. On December 9, 2019, the court issued a favorable ruling to U. S. Steel, ~~has~~removing the sulfate limitations for the Tailings Basin and groundwater. The opposing parties filed ~~Petitions~~appeals with the Minnesota Supreme Court on January 8, 2020 which were accepted by that Court. The appeals are currently on hold awaiting a separate related decision of the U. S. Supreme Court case which could impact the Court of Appeals decision. The litigation is expected to ~~Intervene~~resume in ~~both cases. The briefing is now complete and~~ the ~~matter is pending a determination by the Court.~~summer of 2020.

On October 2, 2017, an Amended Shareholder Class Action Complaint was filed in Federal Court in the Western District of Pennsylvania consolidating previously-filed actions. Separately, five related shareholder derivative lawsuits were filed in State and Federal courts in Pittsburgh, Pennsylvania and the Delaware Court of Chancery. The underlying consolidated class action lawsuit alleges that U. S. Steel, certain current and former officers, an upper level manager of the Company and the financial underwriters who participated in the August 2016 secondary public offering of the Company's common stock (collectively, Defendants) violated federal securities laws in making false statements and/or failing to discover and disclose material information regarding the financial condition of the Company. The lawsuit claims that this conduct caused a prospective class of plaintiffs to sustain damages during the period from January 27, 2016 to April 25, 2017 as a result of the prospective class purchasing the Company's common stock at artificially inflated prices and/or suffering losses when the price of the common stock dropped. The derivative lawsuits generally make the same allegations against the same officers and also allege that certain current and former members of the Board of Directors failed to exercise appropriate control and oversight over the Company and were unjustly compensated. The plaintiffs seek to recover losses that were allegedly sustained. The class action Defendants moved to dismiss plaintiffs’ claims. On September 29, 2018 the Court ruled on those motions granting them in part and denying them in part. On March 18, 2019, the plaintiffs withdrew the claims against the Defendants related to the 2016 secondary offering. As a result, the underwriters are no longer parties to the case. ~~Plaintiffs have moved to certify the class of claimants which is being challenged by the remaining Defendants.~~ The Company and the individual defendants are vigorously defending the remaining claims. On December 31, 2019, the Court granted Plaintiffs’ motion to certify the proceeding as a class action. The Company's appeal of that decision has been denied by the Third Circuit Court of Appeals. Discovery is proceeding.

ENVIRONMENTAL PROCEEDINGS

The following is a summary of the proceedings of U. S. Steel that were pending or contemplated as of ~~September 30, 2019,~~March 31, 2020, under federal and state environmental laws. Information about specific sites where U. S. Steel is or has been engaged in significant clean up or remediation activities is also summarized below. Except as described herein, it is not possible to accurately predict the ultimate outcome of these matters.

CERCLA Remediation Sites

Claims under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) have been raised with respect to the cleanup of various waste disposal and other sites. Under CERCLA, potentially responsible parties (PRPs) for a site include current owners and operators, past owners and operators at the time of disposal, persons who arranged for disposal of a hazardous substance at a site, and persons who transported a hazardous substance to a site. CERCLA imposes strict and joint and several liabilities. Because of various factors, including the ambiguity of the regulations, the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques, and the amount of damages and cleanup costs and the time period during which such costs may be incurred, we are unable to reasonably estimate U. S. Steel’s ultimate liabilities under CERCLA.

As of ~~September 30, 2019,~~March 31, 2020, U. S. Steel has received information requests or been identified as a PRP at a total of ~~seven~~six CERCLA sites, three of which have liabilities that have not been resolved. Based on currently available information, which is in many cases preliminary and incomplete, management believes that U. S. Steel’s liability for CERCLA cleanup and remediation costs at the other ~~four~~three sites will be between $100,000 and $1 million for ~~three~~two of the sites, and over $5 million for one site as described below.

Duluth Works

The former U. S. Steel Duluth Works site was placed on the National Priorities List under CERCLA in 1983 and on the State of Minnesota’s Superfund list in 1984. Liability for environmental remediation at the site is governed by a Response Order by Consent executed with the MPCA in 1985 and a Record of Decision signed by MPCA in 1989. U. S. Steel has partnered with the Great Lakes National Program Office (GLNPO) of U.S. EPA Region 5 to address contaminated sediments in the St. Louis River Estuary and several other Operable Units that could impact the Estuary if not addressed. An amendment to the Project Agreement between U. S. Steel and GLNPO was executed during the second quarter of 2018 to recognize the costs associated with implementing the proposed remedial plan at the site.

While work continues on ~~completion of~~requesting proposals for implementing the remedial design, permitting and educating the public and key stakeholders on the details of the plan, there has been no material change in the status of the project during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Additional study, investigation, design, oversight costs, and implementation of U. S. Steel's preferred remedial alternatives on the upland property and Estuary are currently estimated as of ~~September 30, 2019~~March 31, 2020 at approximately ~~$45~~$44 million.

Resource Conservation Recovery Act (RCRA) and Other Remediation Sites

U. S. Steel may be liable for remediation costs under other environmental statutes, both federal and state, or where private parties are seeking to impose liability on U. S. Steel for remediation costs through discussions or litigation. There are 1817 such sites where remediation is being sought involving amounts in excess of $100,000. Based on currently available information, which is in many cases preliminary and incomplete, management believes that liability for cleanup and remediation costs in connection with ~~eight~~seven sites have potential costs between $100,000 and $1 million per site, five sites may involve remediation costs between $1 million and $5 million per site and five sites are estimated to or could have, costs for remediation, investigation, restoration or compensation in excess of $5 million per site.

For more information on the status of remediation activities at U. S. Steel’s significant sites, see the discussions related to each site below.

Gary Works

On October 23, 1998, the U.S. EPA issued a final Administrative Order on Consent (Order) addressing Corrective Action for Solid Waste Management Units (SWMU) throughout Gary Works. This Order requires U. S. Steel to perform a RCRA Facility Investigation (RFI), a Corrective Measures Study (CMS) and Corrective Measure Implementation.

Evaluations are underway at six groundwater areas on the east side of the facility and it is likely that corrective measures will be required, but it is not possible at this time to define a scope or estimate costs for what may be required by the U.S. EPA. Until the remaining Phase I work and Phase II field investigations are completed, it is not possible to assess what additional expenditures will be necessary for Corrective Action projects at Gary Works. In total, the accrued liability for Corrective Action projects is approximately ~~$25~~$24 million as of ~~September 30, 2019,~~March 31, 2020, based on our current estimate of known remaining costs. Significant additional costs associated with the six groundwater areas at this site

are possible and are referenced in Note 2322 to the Condensed Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”

Geneva Works

At U. S. Steel’s former Geneva Works, liability for environmental remediation, including the closure of three hazardous waste impoundments and facility-wide corrective action, has been allocated between U. S. Steel and the current property owner pursuant to an agreement and a permit issued by the Utah Department of Environmental Quality (UDEQ). Having completed the investigation on a majority of the remaining areas identified in the permit, U. S. Steel has determined the most effective means to address the remaining impacted material is to manage those materials in a previously approved on-site Corrective Action Management Unit (CAMU). U. S. Steel awarded a contract for the implementation of the CAMU project during the fourth quarter of 2018. Construction, waste stabilization and placement along with closure of the CAMU are ~~expected~~scheduled to be complete in 2020. U. S. Steel has an accrued liability of approximately ~~$50~~$41 million as of ~~September 30, 2019,~~March 31, 2020, for our estimated share of the remaining costs of remediation.

USS-POSCO Industries (UPI)

AIn February 2020, U. S. Steel purchased the remaining 50 percent interest in UPI, a former joint venture that is located in Pittsburg, California between subsidiaries of U. S. Steel and ~~POSCO,~~POSCO. Prior to formation of the joint venture, UPI's facilities were previously owned and operated solely by U. S. Steel which ~~retains primary~~assumed responsibility for the existing environmental conditions. U. S. Steel continues to monitor the impacts of the remedial plan implemented in 2016 to address groundwater impacts from trichloroethylene at SWMU 4. Evaluations continue for the SWMUs known as the Northern Boundary Group and it is likely that corrective measures will be required, but it is not possible at this time to define a scope or estimate costs for what may be required by the California Department of Toxic Substances Control. As such, there has been no material change in the status of the project during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, approximately ~~$1 million~~$942,000 has been accrued for ongoing environmental studies, investigations and remedy monitoring. Significant additional costs associated with this site are possible and are referenced in Note 2322 to the Condensed Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.” See Note 5 to the Condensed Consolidated Financial Statements "Acquisition" for further details regarding U. S. Steel's purchase of UPI.

Fairfield Works

A consent decree was signed by U. S. Steel, the U.S EPA and the U.S. Department of Justice and filed with the United States District Court for the Northern District of Alabama (United States of America v. USX Corporation) in December 1997. In accordance with the consent decree, U. S. Steel initiated a RCRA corrective action program at the Fairfield Works facility. The Alabama Department of Environmental Management, with the approval of the U.S EPA, assumed primary responsibility for regulation and oversight of the RCRA corrective action program at Fairfield Works. While work continues on different aspects of the program, there has been no material change in the status of the project during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. In total, the accrued liability for remaining work under the Corrective Action Program, was approximately ~~$213,000~~$174,000 at ~~September 30, 2019.~~March 31, 2020. Significant additional costs associated with this site are possible and are referenced in Note 2322 to the Condensed Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”

Fairless Plant

In April 1993, U. S. Steel entered into a consent order with the U.S EPA pursuant to RCRA, under which U. S. Steel would perform Interim Measures (IM), an RFI and CMS at our Fairless Plant. A Phase I RFI Final Report was submitted in September of 1997. With U.S EPA’s agreement, in lieu of conducting subsequent phases of the RFI and the CMS, U. S. Steel has been working through the Pennsylvania Department of Environmental Protection Act 2 Program to characterize and remediate facility parcels for redevelopment. While work continues on these items, there has been

no material change in the status of the project during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, the accrued liability to maintain the interim measures, and clear properties through the Act 2 process is approximately ~~$141,000.~~$213,000. Significant additional costs associated with this site are possible and are referenced in Note 2322 to the Condensed Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”

Lorain Tubular Operations

In September 2006, U. S. Steel and the Ohio Environmental Protection Agency (OEPA) commenced discussions about RCRA Corrective Action at Lorain Tubular Operations. A Phase I RFI on the identified SWMUs and Areas of Contamination was submitted in March 2012. While discussions continue with OEPA on drafting the Statement of Basis identifying potential remedies to address areas documented in the Phase II RFI, there has been no material change in the status of the project during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, costs to complete additional projects are estimated to be approximately $79,000. Significant additional costs associated with this site are possible and are referenced in Note 2322 to the Condensed Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”

Joliet Works

The 50-acre parcel at the former Joliet Works is enrolled in the Illinois Environmental Protection Agency’s (IEPA) voluntary Site Remediation Program (the Program). The Program requires investigation and establishment of cleanup objectives followed by submission/approval of a Remedial Action Plan to meet those objectives. The 50-acre parcel was divided into four subareas with remedial activities completed in 2015 for three of the subareas. While work continues to define the ~~requirements for further investigation~~extent of impacts at the remaining subarea, there has been no material change in the status of the project during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. U. S. Steel has an accrued liability of ~~$273,000~~$258,000 as of ~~September 30, 2019.~~March 31, 2020. Significant additional costs associated with this site are possible and are referenced in Note 2322 to the Condensed Consolidated Financial Statements “Contingencies and Commitments - Environmental Matters - Remediation Projects - Projects with Ongoing Study and Scope Development.”

Cherryvale (KS) Zinc

In April 2003, U. S. Steel and Salomon Smith Barney Holdings, Inc. (SSB) entered into a Consent Order with the Kansas Department of Health & Environment (KDHE) concerning a former zinc smelting operation in Cherryvale, Kansas. Remediation of the site proper was essentially completed in 2007. The Consent Order was amended on May 3, 2013, to require investigation (but not remediation) of potential contamination beyond the boundary of the former zinc smelting operation. On November 22, 2016, KDHE approved a State Cooperative Final Agency Decision Statement that identified the remedy selected to address potential contamination beyond the boundary of the former zinc smelting site. The Removal Action Design Plan was approved during the second quarter of 2018. The Waste Deposition Area design and the Interim Risk Management Plan (which includes institutional controls) were approved by KDHE during the fourth quarter of 2018. An amended consent order for remediation was signed in May 2019 and a remediation contract was executed in June 2019. U. S. Steel has an accrued liability of approximately ~~$10~~$9 million as of ~~September 30, 2019,~~March 31, 2020, for our estimated share of the cost of remediation.

South Works

On August 29, 2017, U. S. Steel was notified by the U.S. Coast Guard of a sheen on the water in the North Vessel Slip at our former South Works in Chicago, Illinois. U. S. Steel has been working with the IEPA under their voluntary Site Remediation Program since 1993 to evaluate the condition of the property including the North Vessel Slip. The result of this cooperative effort has been the issuance of a series of “No Further Remediation” (NFR) notices to U. S. Steel including one specific to the North Vessel Slip. U. S. Steel has notified the IEPA of the potential changed condition and is working closely with the IEPA and the U. S. Coast Guard to determine the source of the sheen and options to address the issue. U. S. Steel has an accrued liability of ~~$285,000~~$97,000 as of ~~September 30, 2019.~~March 31, 2020.

Air Related Matters

Great Lakes Works

In June 2010, the EPA significantly lowered the primary (NAAQS) for SO₂ from 140 ppb on a 24-hour basis to an hourly standard of 75 ppb. Based upon the 2009-2011 ambient air monitoring data, the U.S. EPA designated the area in which Great Lakes Works is located as nonattainment with the 2010 SO₂ NAAQS.

As a result, pursuant to the CAA, the Michigan Department of Environment, Great Lakes and Energy (EGLE) was required to submit a SIP to the U.S. EPA that demonstrates that the entire nonattainment area (and not just the monitor) would be in attainment by October 2018 by using conservative air dispersion modeling. To develop the SIP, U. S. Steel met with EGLE on multiple occasions and had offered reduction plans to EGLE but the parties could not agree to a plan. EGLE, instead promulgated Rule 430 which was solely directed at U. S. Steel. The Company challenged Rule 430 before the Michigan Court of Claims who by Order dated October 4, 2017, granted the Company’s motion for summary disposition voiding Rule 430 finding that it violated rule-making provisions of the Michigan Administrative Procedures Act and Michigan Constitution. Since Rule 430 has been invalidated and EGLE's SIP has not been approved, U.S. EPA has indicated that it would promulgate a Federal Implementation Plan (FIP) pursuant to its obligations and authority under the CAA. Because development of the FIP is in the early stages, the impacts of the nonattainment designation to the Company are not estimable at this time.

On January 17, 2019, U. S. Steel and EGLE met to discuss resolution of violations that were alleged to have occurred intermittently in 2017 and 2018 regarding opacity from: the D4 Blast Furnace slag pit, D4 Blast Furnace backdraft stack, B2 Blast Furnace casthouse roof monitor, B2 Blast Furnace backdraft stack, and Basic Oxygen Furnace Shop Roof Monitor; and exceedances of applicable limits at the pickle line. More recently, EGLE advised U. S. Steel that it was assessing a civil penalty of approximately ~~$380,000~~$370,000 for these alleged violations. U. S. Steel and EGLE continue to negotiate resolution.

Granite City Works

In October 2015, Granite City Works received a Violation Notice from IEPA in which the IEPA alleges that U. S. Steel violated the emission limits for nitrogen oxides (NOx) and volatile organic compounds from the Basic Oxygen Furnace Electrostatic Precipitator Stack. In addition, the IEPA alleges that U. S. Steel exceeded its natural gas usage limit at its CoGeneration Boiler. U. S. Steel responded to the notice and is currently discussing resolution of the matter with IEPA.

Although discussions with IEPA regarding the foregoing alleged violations are ongoing and the resolution of these matters is uncertain at this time, it is not anticipated that the result of those discussions will be material to U. S. Steel.

Minnesota Ore Operations

On February 6, 2013, the U.S. EPA published a FIP that applies to taconite facilities in Minnesota. The FIP establishes and requires emission limits and the use of low NOx reduction technology on indurating furnaces as Best Available Retrofit Technology (BART). While U. S. Steel installed low NOx burners on three furnaces at Minntac and is currently obligated to install low NOx burners on the two other furnaces at Minntac pursuant to existing agreements and permits, the rule would require the installation of a low NOx burner on the one furnace at Keetac for which U. S. Steel did not have an otherwise existing obligation. U. S. Steel estimates expenditures associated with the installation of low NOx burners of as much as $25 to $30 million. In 2013, U. S. Steel filed a petition for administrative reconsideration to the U.S. EPA and a petition for judicial review of the 2013 FIP and denial of the Minnesota SIP to the Eighth Circuit. In April 2016, the EPA promulgated a revised FIP with the same substantive requirements for U. S. Steel. In June 2016, U. S. Steel filed a petition for administrative reconsideration of the 2016 FIP to the U.S. EPA and a petition for judicial review of the 2016 FIP before the Eighth Circuit Court of Appeals. While the proceedings regarding the petition for judicial review of the 2013 FIP remained stayed, oral arguments regarding the petition for judicial review of the 2016 FIP were heard by the Eighth Circuit Court of Appeals on November 15, 2017. Thus, both petitions for judicial review remain with the Eighth Circuit. On December 4, 2017, U.S. EPA published a notification in the Federal Register in which the U.S. EPA denied U. S. Steel’s administrative petitions for reconsideration and stay of the 2013 FIP and 2016 FIP. On February 1, 2018, U. S. Steel filed a petition for judicial review of U.S. EPA’s denial of the administrative petitions for reconsideration to the Eighth Circuit Court of Appeals. U.S. EPA and U. S. Steel reached a settlement

regarding the five indurating lines at Minntac. Notice of a 30-day comment period of the settlement agreement was published in the September 11, 2019, Federal Register. The comment period expired on October 11, 2019. U. S. Steel will work with U.S. EPA to address any comments. U. S. Steel and U.S. EPA continue to negotiate resolution for Keetac.

Mon Valley Works

On November 9, 2017, U.S. EPA Region III and the Allegheny County Health Department (ACHD) jointly issued a Notice of Violation (NOV) regarding the Company’s Edgar Thomson facility in Braddock, PA. In addition, on November 20, 2017, ACHD issued a separate, but related NOV to the Company regarding the Edgar Thomson facility. In the NOVs, based upon their inspections and review of documents collected throughout the last two years, the agencies

allege that the Company has violated the CAA by exceeding the allowable visible emission standards from certain operations during isolated events. In addition, the agencies allege that the Company has violated certain maintenance, reporting, and recordkeeping requirements. U. S. Steel met with U.S. EPA Region III and ACHD several times. ACHD, U.S. EPA Region III and U. S. Steel continue to negotiate a potential resolution of the matter.

On June 27, 2019, U. S. Steel and ACHD entered into a Settlement Agreement that is now in effect resolving four appeals of four separate Enforcement Orders issued by the ACHD in 2018 and 2019. A comment period expired on July 31, 2019 after a public hearing that was held on July 30, 2019. The Settlement Agreement requires that U. S. Steel pay a civil penalty and create a Community Benefit Trust totaling $2,732,504, with 90% of this value going into the trust; and 10% going into ACHD’s Clean Air Fund. In addition, U. S. Steel agreed to complete several actions which are aimed at reducing emissions including: complete refractory repairs on Batteries 1, 2, 3 and 15; enhance training for certain coke plant employees; have third party audits conducted; complete projects on B Battery to reduce the potential for fugitive emissions, and complete upgrades on the Pushing Emission Control devices for Batteries 13-15; and 19-20. U. S Steel is working with ACHD in responding to comments.

On December 24, 2018, U. S. Steel's Clairton Plant experienced a fire, affecting portions of the facility involved in desulfurization of the coke oven gas generated during the coking process. With the desulfurization process out of operation as a result of the fire, U. S. Steel was not able to certify compliance with Clairton Plant’s Title V permit levels for sulfur emissions. U. S. Steel promptly notified ACHD, which has regulatory jurisdiction for the Title V permit, and updated the ACHD regularly on our efforts to mitigate any potential environmental impacts until the desulfurization process was returned to normal operations. Of the approximately 2,400 hours between the date of the fire and April 4, 2019, when the Company resumed desulfurization, there were ten intermittent hours where average SO₂SO2 emissions exceeded the hourly NAAQS for SO₂SO2 at the Allegheny County regional air quality monitors located in Liberty and North Braddock boroughs which are near U. S. Steel's Mon Valley Works facilities. ACHD has asserted that these emission levels were the result of our inability to complete the desulfurization process following the fire and informed U. S. Steel that it will pursue enforcement action against the Company following restoration of the desulfurization process to normal operations. On February 13, 2019, PennEnvironment and Clean Air Council, both environmental, non-governmental organizations, sent U. S. Steel a 60-day notice of intent to sue letter pursuant to the CAA. The letter ~~alleges~~alleged Title V permit violations at the Clairton, Irvin, and Edgar Thomson facilities as a result of the December 24, 2018 Clairton Plant fire. The 60-day notice letter also alleged that the violations caused adverse public health and welfare impacts to the communities surrounding the Clairton, Irvin, and Edgar Thomson facilities. PennEnvironment and Clean Air Council subsequently filed a Complaint in Federal Court in the Western District of Pennsylvania on April 29, 2019 to which U. S. Steel has responded. On May 3, 2019, ACHD filed a motion to intervene in the lawsuit which was granted by the Court. On June 25, 2019, ACHD filed its Complaint in Intervention, seeking injunctive relief and civil penalties regarding the alleged Permit violations following the December 24, 2018 fire. ~~An initial Court status conference was held on August 22, 2019 and the~~The parties are currently engaged in discovery.

Following up to its May 2, 2019, notice of intent to sue U. S. Steel, on August 26, 2019 the Environmental Integrity Project, the Breathe Project and Clean Air Council, environmental, non-governmental organizations, filed a complaint in the Western District Court of Pennsylvania alleging that the Company did not report releases of reportable quantities of hydrogen sulfide, benzene, and coke oven emissions from the Clairton, ~~plant, the~~ Edgar Thomson ~~plant,~~ and ~~the~~ Irvin ~~plant~~facilities as would be required under CERCLA because of the fire. The Company will vigorously defend against these claims.

On April 24, 2019, U. S. Steel was served with a class action complaint that was filed in the Allegheny Court of Common Pleas related to the December 24, 2018 fire at Clairton. The complaint asserts common law nuisance and negligence claims and seeks compensatory and punitive damages that allegedly were the result of U. S. Steel's conduct that resulted in the fire and U. S. Steel's operations subsequent to the fire. ~~An initial Court status conference was held on June 27, 2019 and the~~The parties are currently engaged in discovery. U. S. Steel is vigorously defending the matter.

ASBESTOS LITIGATION

As of ~~September 30, 2019,~~March 31, 2020, U. S. Steel was a defendant in approximately ~~796~~808 active cases involving approximately ~~2,380~~2,400 plaintiffs. The vast majority of these cases involve multiple defendants. About 1,540, or approximately 6564 percent, of these plaintiff claims are currently pending in jurisdictions which permit filings with massive numbers of plaintiffs. At December 31, ~~2018,~~2019, U. S. Steel was a defendant in approximately ~~755~~800 active cases involving approximately ~~2,320~~2,390 plaintiffs. Based upon U. S. Steel’s experience in such cases, it believes that the actual number of plaintiffs who ultimately assert claims against U. S. Steel will likely be a small fraction of the total number of plaintiffs.

The following table shows activity with respect to asbestos litigation:


Period ended	Opening Number of Claims	Claims Dismissed, Settled and Resolved^(a)	New Claims	Closing Number of Claims	Opening Number of Claims	Claims Dismissed, Settled and Resolved^(a)	New Claims	Closing Number of Claims
December 31, 2016	3,315	225	250	3,340
December 31, 2017	3,340	275	250	3,315	3,340	275	250	3,315
December 31, 2018	3,315	1,285	290	2,320	3,315	1,285	290	2,320
September 30, 2019	2,320	150	210	2,380
December 31, 2019					2,320	195	265	2,390
March 31, 2020					2,390	90	100	2,400

(a) The period ending December 31, 2018 includes approximately 1,000 dismissed cases previously pending in the State of Texas.

Historically, asbestos-related claims against U. S. Steel fall into three groups: (1) claims made by persons who allegedly were exposed to asbestos on the premises of U. S. Steel facilities; (2) claims made by persons allegedly exposed to products manufactured by U. S. Steel; and (3) claims made under certain federal and maritime laws by employees of former operations of U. S. Steel.

Further, U. S. Steel does not believe that an accrual for unasserted claims is required. At any given reporting date, it is probable that there are unasserted claims that will be filed against the Company in the future. In 2018 and 2019, the Company engaged an outside valuation consultant to assist in assessing its ability to estimate an accrual for unasserted claims. This assessment was based on the Company's settlement experience, including recent claims trends. The analysis focused on settlements made over the last several years as these claims are likely to best represent future claim characteristics. After review by the valuation consultant and U. S. Steel management, it was determined that the Company could not estimate an accrual for unasserted claims.

Despite these uncertainties, management believes that the ultimate resolution of these matters will not have a material adverse effect on U. S. Steel’s financial condition.

Item 1A. Risk Factors

~~Our Investments~~The outbreak of COVID-19 and disruptions in ~~New Technologies May Not Be Fully Successful~~

~~Execution of our strategy depends, in part, on~~ the ~~success of a number of investments we~~oil and gas industry have ~~made in new technologies. All of our investments~~had, and are expected to ~~deliver~~continue to have, an ~~enhanced “best~~adverse impact on the Company’s results of ~~both”~~operations, financial condition and cash flows.

The global pandemic resulting from the novel coronavirus designated as COVID-19 has had a significant impact on economies, businesses and individuals around the world. Efforts by governments around the world to contain the virus have involved, among other things, border closings and other significant travel restrictions; mandatory stay-at-home and work-from-home orders in numerous countries, including the United States; mandatory business ~~model that delivers cost and/or capability differentiation~~closures; public gathering limitations; and prolonged quarantines. These efforts and other governmental, business and individual responses to the COVID-19 pandemic have led to significant disruptions to commerce, lower consumer demand for goods and services and general uncertainty regarding the near-term and long-term impact of the COVID-19 virus on the domestic and international economy and on public health. These developments and other consequences of the outbreak have and could continue to materially adversely impact the Company's results of operations, financial condition and cash flows.

The U.S. Department of Homeland Security guidance has identified U. S. Steel's business as a critical infrastructure industry, essential to the economic prosperity, security and continuity of the United States. Similarly, in Slovakia, U. S. Steel Kosice was identified by the government as a strategic and critical company, essential to economic prosperity, and continues to operate. However, although we continue to operate, we have experienced and are likely to continue to experience, significant reductions in demand. For example, the oil and gas industry, which is one of our significant end markets, has been experiencing a significant amount of disruption and has been experiencing oversupply at a time of declining demand, resulting in a decline in profitability. Our Tubular operations support the oil and gas industry, and therefore the industry's decline has led to a significant decline in demand for our ~~stakeholders. Our intent~~Tubular products. We also may experience disruptions to ~~eventually acquire 100%~~our operations resulting from changes in government policy or guidance; quarantines of ~~Big River Steel, like~~employees, customers and suppliers in areas affected by the outbreak; and closures of businesses or manufacturing facilities that are critical to our business or our supply chain.

The COVID-19 pandemic could also adversely affect our liquidity and ability to access the capital markets. The Company’s credit ratings were recently downgraded by three credit ratings agencies, all citing, among other ~~investments~~things, the uncertainty in ~~state-of-the-art sustainable~~duration and impact of the COVID-19 outbreak on our business. Uncertainty regarding the duration of the COVID-19 pandemic and disruptions to the oil and gas industry may, for example, adversely impact our ability to raise additional capital, or require additional capital, or require additional reductions in capital expenditures that are otherwise needed, to support working capital or continuation of our "best of both" strategy. Additionally, government stimulus programs may not be available to the Company, its customers, or its suppliers, or may prove to be ineffective. Furthermore, in the event that the impact from the COVID-19 outbreak causes us to be unable to satisfy any of our financial covenants under the agreements governing our outstanding indebtedness, the availability of credit facilities may become limited, or we may be required to renegotiate such agreements on less favorable terms. For example, based on the most recent four quarters as of March 31, 2020, we have not met the fixed charge negative covenant test under our Credit Facility Agreement, and accordingly, the amount available to the Company under this facility was reduced by $200 million, meaning that as of March 31, 2020, the availability under the Credit Facility Agreement was $300 million. If we are unable to access additional credit at the levels we require, or the cost of credit is greater than expected, it could materially adversely affect our operating results.

COVID-19 could negatively affect our internal controls over financial reporting as a portion of our workforce is required to work from home and therefore new processes, procedures, and controls could be required to respond to changes in our business environment.

The Company may be susceptible to increased litigation related to, among other things, the financial impacts of the pandemic on its business, its ability to meet contractual obligations due to the pandemic, employment practices or policies adopted during the health crisis, or litigation related to individuals contracting COVID-19 as result of alleged exposures on Company premises.

In addition, the COVID-19 outbreak has significantly increased economic and demand uncertainty. The current outbreak and continued spread of COVID-19 could cause a global recession, which would have a further material adverse impact on our results of operations, financial condition and cash flows. The full extent to which the COVID-19 outbreak will affect our operations, and the steel ~~technologies~~industry generally, remains highly uncertain and will ultimately depend on future developments which cannot be predicted at this time, including, but not limited to, the ~~endless casting~~duration, severity, speed and ~~rolling line at Mon Valley Works~~scope of the outbreak, the length of time required for demand to return and ~~XG3 at our PRO-TEC joint venture, is a significant element~~normal economic and operating conditions

to resume. The impact of the COVID-19 outbreak may also have the effect of exacerbating many of the other risks described in Item 1A. "Risk Factors" of our ~~strategy. If our investment in Big River Steel fails to provide~~Annual Report on Form 10-K for the benefits we expect or our financial condition is constrained, we may choose not to exercise our option to acquire its remaining outstanding ownership interests. In addition, if Big River Steel does not achieve the expected financial performance, we still may be required to acquire the remaining ownership interests at a discounted purchase price. Additionally, like with any significant construction project, we may be subject to changing market conditions and demand for our completed projects, delays and cost overruns, work stoppages, labor shortages, engineering issues, weather interferences, changes required by governmental authorities, delays or the inability to acquire required permits or licenses, the ability to finance the projects or disruption of existing operations, any of which could have an adverse impact on our operational and financial results. Furthermore, new product development or modification is costly, involves significant research, development, time and expense and may not necessarily result in the successful commercialization of any new products, or new technologies may not perform as intended or expected. Unsuccessful execution of these strategic projects or underperformance of any of these assets could adversely affect our business, results of operations and financial condition.fiscal year ended December 31, 2019.



Item 4.	MINE SAFETY DISCLOSURES

The information concerning mine safety violations and other regulatory matters required by Section 150 of the Dodd-Frank Wall Street Reform Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-Q.



Item 5.	~~ISSUER PURCHASES OF EQUITY SECURITIES~~OTHER INFORMATION

~~Purchases of Equity Securities by the Issuer and the Affiliated Purchasers~~

~~Share repurchase activity under the Company's stock repurchase program during the three months ended September 30, 2019 was as follows:~~

Period Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(a)
July 1 - 31, 2019 672,942
$ 14.684
672,942
$ 145,075,025
August 1 - 31, 2019 652,342
$ 12.506
652,342
$ 136,917,011
September 1 - 30, 2019 —
$ —
—
$ 136,917,011
Quarter ended September 30, 2019 1,325,284
$ 13.612
1,325,284
$ 136,917,011

^(a)On November 1, 2018, the Company announced that its Board of Directors authorized a stock repurchase program to repurchase up to $300 million of our outstanding common stock over a two-year period at the discretion of management, of which approximately $163 million had been utilized as of September 30, 2019. The Company’s stock repurchase program does not obligate it to acquire any specific number of shares. Under this program, the shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending upon market conditions.None.



Item 6.	EXHIBITS




10.1		Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Performance Cash Award Grant Agreement (ROCE Grant).*

10.2		Form of United States Steel Corporation 2016 Omnibus Incentive Compensation Plan Restricted Stock Unit Grant Agreement (Retention Grant).*

10.3		Administrative Procedures for the Executive Management Annual Incentive Compensation Plan under the United States Steel Corporation 2016 Omnibus Incentive Compensation Plan, as approved on February 25, 2020.*

31.1		Certification of Chief Executive Officer required by Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as promulgated by the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer required by Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as promulgated by the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95		Mine Safety Disclosure required under Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

101		The following financial information from United States Steel Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019~~March 31, 2020 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Statement of Operations, (ii) the Condensed Consolidated Statement of Comprehensive Income (Loss), (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned chief accounting officer thereunto duly authorized.



UNITED STATES STEEL CORPORATION

By		/s/ ~~Kimberly D. Fast~~Manpreet S. Grewal

		~~Kimberly D. Fast~~Manpreet S. Grewal
		~~Acting~~Vice President & Controller

~~November~~May 1, ~~2019~~2020

WEB SITE POSTING

This Form 10-Q will be posted on the U. S. Steel web site, www.ussteel.com, within a few days of its filing.

~~-64-~~-60-



(Dollars in millions)	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents (Note 6)	$	476		$	1,000
Receivables, less allowance of $27 and $29	1,183			1,435
Receivables from related parties (Note 21)	217			224
Inventories (Note 7)	2,071			2,092
Other current assets	95			79
Total current assets	4,042			4,830
Operating lease assets (Note 8)	239			—
Property, plant and equipment	16,725			16,008
Less accumulated depreciation and depletion	11,415			11,143
Total property, plant and equipment, net	5,310			4,865
Investments and long-term receivables, less allowance of $5 in both periods	576			513
Intangibles – net (Note 9)	152			158
Deferred income tax benefits (Note 13)	460			445
Other noncurrent assets	138			171
Total assets	$	10,917		$	10,982
Liabilities
Current liabilities:
Accounts payable and other accrued liabilities	$	2,138		$	2,454
Accounts payable to related parties (Note 21)	111			81
Payroll and benefits payable	345			440
Accrued taxes	107			118
Accrued interest	26			39
Current operating lease liabilities (Note 8)	56			—
Current portion of long-term debt (Note 16)	67			65
Total current liabilities	2,850			3,197
Noncurrent operating lease liabilities (Note 8)	189			—
Long-term debt, less unamortized discount and debt issuance costs (Note 16)	2,500			2,316
Employee benefits	905			980
Deferred income tax liabilities (Note 13)	8			14
Deferred credits and other noncurrent liabilities	265			272
Total liabilities	6,717			6,779
Contingencies and commitments (Note 23)
Stockholders’ Equity (Note 19):
Common stock (178,542,856 and 177,386,430 shares issued) (Note 14)	179			177
Treasury stock, at cost (8,505,376 shares and 2,857,578 shares)	(173		)	(78		)
Additional paid-in capital	3,947			3,917
Retained earnings	1,221			1,212
Accumulated other comprehensive loss (Note 20)	(975		)	(1,026		)
Total United States Steel Corporation stockholders’ equity	4,199			4,202
Noncontrolling interests	1			1
Total liabilities and stockholders’ equity	$	10,917		$	10,982



(In millions)	Capital Leases		Operating Leases
2019	$	5	$	66
2020	5		55
2021	5		45
2022	11		37
2023	—		28
After 2023	—		72
Total minimum lease payments	$	26	$	303
Less imputed interest costs	4
Present value of net minimum lease payments included in long-term debt	$	22



		Amount reclassified from AOCI ^(c)
		Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	Details about AOCI components	2019			2018			2019			2018
	Amortization of pension and other benefit items
	Prior service costs ^(a)	$	8		$	7		$	23		$	22
	Actuarial losses ^(a)	33			39			101			117
	Settlement, termination and curtailment losses ^(a)	3			10			3			10
	Total pensions and other benefits items	44			56			127			149
	Derivative reclassifications from AOCI	5			(11		)	19			(12		)
	Total before tax	49			45			146			137
	Tax benefit ^(b)	(12		)	—			(35		)	—
	Net of tax	$	37		$	45		$	111		$	137



Remainder of 2019	2020	2021	2022	2023	Later Years	Total
$219	$599	$397	$330	$322	$723	$2,590



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(a)
July 1 - 31, 2019	672,942	$	14.684	672,942	$	145,075,025
August 1 - 31, 2019	652,342	$	12.506	652,342	$	136,917,011
September 1 - 30, 2019	—	$	—	—	$	136,917,011
Quarter ended September 30, 2019	1,325,284	$	13.612	1,325,284	$	136,917,011