AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 2002
REGISTRATION NO. 333-99273
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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UNITED STATES STEEL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 25-1897152
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
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600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219-2800, (412) 433-1121
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices and agent for service)
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DAN D. SANDMAN, ESQ.,
VICE CHAIRMAN AND CHIEF LEGAL &
ADMINISTRATIVE OFFICER
600 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219-2800
(412) 433-1121
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time
after the effective date of this Registration Statement, as determined by market
conditions.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] --------------------
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1)(2) OFFERING PRICE(1)(3) REGISTRATION FEE
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Debt Securities(4)(12).......................
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Preferred Stock(5)(12).......................
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Depositary Shares(6)(12).....................
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Common Stock(7)(12)..........................
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Warrants to Purchase United States Steel
Corporation Debt Securities, Preferred
Stock or Common Stock(8)(12)...............
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Common Stock reserved for issuance upon
conversion or exchange of Debt Securities
or Preferred Stock(9)......................
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Stock Purchase Contracts(10)(12).............
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Stock Purchase Units(11)(12).................
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Total.................................... $600,000,000 $600,000,000 $55,200.00
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(1) Pursuant to General Instruction II.D to Form S-3, the amount to be
registered, proposed maximum aggregate offering price per security and
proposed maximum aggregate offering price has been omitted for each class
of securities that is registered hereby.
(2) The proposed maximum aggregate offering price per security will be
determined from time to time by the registrant in connection with the
issuance of the securities registered hereunder.
(3) Excludes an aggregate of $197,887,500 unsold securities (Debt Securities;
Preferred Stock; Depository Shares; Common Stock; Warrants to purchase Debt
Securities, Preferred Stock or Common Stock; and Common Stock reserved for
issuance upon conversion or exchange of Debt Securities or Preferred Stock)
included in Registration Statement Number 333-84200 for which a
registration fee was paid in connection with the filing thereof. The above
excluded securities are covered by the Prospectus included in this
Registration Statement pursuant to Rule 429. As a result, up to an
aggregate of $797,887,500 of all of the securities referred to in this
table may be sold pursuant to the Prospectus included in this Registration
Statement. The amount of the filing fee associated with the above excluded
securities previously paid with the above mentioned registration statement
is $18,205.65.
(4) An indeterminate number of debt securities of United States Steel
Corporation are covered by this registration statement. Debt securities may
also be issued upon exercise of warrants to purchase debt securities that
are registered hereby.
(5) An indeterminate number of shares of preferred stock of United States Steel
Corporation are covered by this registration statement. Preferred stock may
also be issued upon exercise of warrants to purchase preferred stock that
are registered hereby.
(6) There is being registered hereunder an indeterminate number of Depositary
Shares as may be issued if United States Steel Corporation elects to offer
fractional interests in the Preferred Stock offered hereby.
(7) An indeterminate number of shares of common stock, par value $1.00 per
share, of United States Steel Corporation are covered by this registration
statement. Common stock may also be issued upon exercise of warrants to
purchase common stock that are registered hereby.
(8) An indeterminate number of warrants, representing rights to purchase debt
securities, preferred stock or common stock of United States Steel
Corporation, each of which is registered hereby, are covered by this
registration statement.
(9) Such indeterminate number of shares of Common Stock as may be issued upon
conversion of or in exchange for any Debt Securities, Preferred Stock or
Depositary Shares that provide for such conversion or exchange are being
registered hereby. No separate consideration will be received for the
Common Stock issuable upon such conversion or exchange.
(10) An indeterminate amount and number of stock purchase contracts,
representing obligations to purchase preferred stock, depositary shares,
common stock or other securities are covered by this registration
statement.
(11) An indeterminate amount and number of stock purchase units, consisting of
stock purchase contracts together with debt securities, preferred stock,
warrants or debt obligations of third parties securing the holders'
obligations to purchase the securities under the stock purchase contracts
are covered by this registration statement.
(12) An indeterminate amount of securities as may be issued in exchange for, or
upon conversion or exercise of, as the case may be, the debt securities,
preferred stock, depositary shares or warrants registered hereunder and
such indeterminate amount of securities as may be issued upon settlement of
the stock purchase contracts or stock purchase units registered hereunder
are covered by this registration statement. No separate consideration will
be received for any securities registered hereunder that are issued in
exchange for, or upon conversion of, as the case may be, the debt
securities, preferred stock, depositary shares or warrants.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT WILL ALSO BE USED FOR PURPOSES OF
SECTION 10(a)(3) OF THE ACT IN CONNECTION WITH SECURITIES REGISTERED ON FORM
S-3, REGISTRATION NUMBER 333-84200.
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PROSPECTUS
UNITED STATES STEEL CORPORATION
DEBT SECURITIES PREFERRED STOCK AND DEPOSITARY SHARES
COMMON STOCK WARRANTS
[US STEEL LOGO] STOCK PURCHASE UNITS STOCK PURCHASE CONTRACTS
We may issue and offer any of the following from time to CONSIDER THE RISK FACTORS BEGINNING
time: ON PAGE 2 OF THIS PROSPECTUS AND ANY
IN THE PROSPECTUS SUPPLEMENT
- Debt securities. CAREFULLY.
- Shares of or interests in preferred stock. We produce, transport and sell steel
mill products, coke, taconite pellets
- Shares of common stock. (iron ore) and coal in the United
States and, through our subsidiary U.
- Warrants to buy any of the foregoing. S. Steel Kosice, produce and sell
steel mill products in Central
- Stock Purchase Contracts. Europe.
- Stock Purchase Units.
or any combination of these securities.
The maximum total public offering price of all the
securities offered will not exceed $797,887,500.
We will provide specific terms of these securities in
supplements to this prospectus. You should read this
prospectus and any prospectus supplement carefully before
you invest.
We may sell these securities through underwriters, agents or directly to other
purchasers.
COMMON STOCK SYMBOL: X
Our common stock is listed on the New York Stock Exchange, the Chicago Stock
Exchange and the Pacific Exchange.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Please refer to the prospectus supplement for more complete information. Neither
this prospectus nor any prospectus supplement is an offer to sell these
securities and is not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
The date of this Prospectus is October 18, 2002.
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION......................... ii
OUR COMPANY................................................. 1
RISK FACTORS................................................ 2
SUMMARY CONSOLIDATED FINANCIAL INFORMATION.................. 14
RATIO OF EARNINGS TO FIXED CHARGES.......................... 16
USE OF PROCEEDS............................................. 16
DESCRIPTION OF THE DEBT SECURITIES.......................... 16
DESCRIPTION OF CAPITAL STOCK................................ 26
DESCRIPTION OF DEPOSITARY SHARES............................ 31
DESCRIPTION OF WARRANTS..................................... 34
DESCRIPTION OF CONVERTIBLE OR EXCHANGEABLE SECURITIES....... 35
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE
UNITS..................................................... 35
PLAN OF DISTRIBUTION........................................ 35
VALIDITY OF SECURITIES...................................... 37
EXPERTS..................................................... 37
You should rely only on the information contained in this prospectus, the
prospectus supplement or in documents we have referred you to. We have not
authorized anyone to provide you with information that is different.
i
WHERE YOU CAN FIND MORE INFORMATION
USS files annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. Our SEC filings are also accessible
through the Internet at the SEC's website at http://www.sec.gov. Many of our SEC
filings are also accessible on our website at http://www.ussteel.com.
The SEC allows us to "incorporate by reference" into this prospectus the
information in documents we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus, and later information that we file with the SEC will update and
supersede this information. We incorporate by reference the following documents
and any future filings we make with the SEC under Section 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 until all the offered securities
are sold:
(a) USS' Annual Report on Form 10-K for the year ended December 31,
2001;
(b) USS' Proxy Statement on Form 14A dated March 11, 2002;
(c) USS' Quarterly Reports on Form 10-Q for the quarters ended March
31 and June 30, 2002, and
(d) USS' Current Reports on Form 8-K dated February 8, March 1, May
14, May 17, June 4, June 28, and October 16, 2002.
We also incorporate by reference the consolidated/combined financial
statements and supplemental schedule included in Item 8 of the Annual Report on
Form 10-K of Republic Technologies International Holdings, LLC ("Republic") for
the year ended December 31, 2001, the unaudited consolidated financial
statements included in Part I, Item I of the Quarterly Report on Form 10-Q of
Republic for the three month period ended March 31, 2002 and Republic's Current
Report on Form 8-K dated August 19, 2002.
Any statement contained in a document incorporated by reference to this
prospectus will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any such statement so modified or superseded will not
be deemed to constitute a part of this prospectus except as so modified or
superseded.
We will provide, upon written or oral request, to each person to whom a
prospectus is delivered, including any beneficial owner, a copy of any or all of
the information that has been incorporated by reference in the prospectus but
not delivered with the prospectus. You may request a copy of these filings at no
cost.
Requests for documents should be directed to:
UNITED STATES STEEL CORPORATION
Shareholder Services
600 Grant Street, Room 611
Pittsburgh, Pennsylvania 15219-2800
(412) 433-4801
(866) 433-4801 (toll free)
(412) 433-4818 (fax)
ii
OUR COMPANY
We are the largest integrated steel producer in North America. Integrated
steel producers make steel from iron ore, unlike mini-mills that mostly melt
scrap to make steel products. We have a broad product mix with particular focus
on value-added products and serve customers in the automotive, appliance,
distribution and service center, container, industrial machinery, construction
and oil and petrochemical markets. We currently have annual steel-making
capability of 17.8 million tons through our four integrated steel mills. In
addition, we have a diversified mix of assets that provide us with a varied
stream of revenues.
We operate three integrated steel mills and six finishing facilities in
North America and produce, transport and sell a variety of sheet, tin, plate and
tubular products, as well as coke, iron ore and coal. We participate in several
joint ventures engaged in steel processing and finishing. We also participate in
the real estate, resource management, and engineering and consulting services
businesses. We have a significant market presence in each of our major product
areas and have long-term relationships with many of our major customers. We have
annual steel-making capability in the U.S. of 12.8 million tons through Gary
Works in Indiana, Mon Valley Works in Pennsylvania, and Fairfield Works in
Alabama. We operate finishing facilities in those three states and Ohio. We are
the largest domestic producer of seamless oil country tubular goods and one of
the two largest producers of tin mill products in North America. We produce most
of the iron ore and coke and a portion of the coal we use as raw materials in
our steel-making process.
In November 2000, we acquired U. S. Steel Kosice, s.r.o. ("USSK"),
headquartered in Kosice in the Slovak Republic, the largest flat-rolled producer
in Central Europe. USSK has annual steel-making capability of 5.0 million tons
and produces and sells sheet, tin, tubular and specialty products, as well as
coke. The acquisition of USSK has enabled us to establish a low-cost
manufacturing base in Europe and better positioned us to serve our global
customers.
Before December 31, 2001 our businesses were owned by USX Corporation. USX
had two outstanding classes of common stock: USX-Marathon Group common stock,
that was intended to reflect the performance of USX's energy business, and
USX-U. S. Steel Group common stock ("Steel Stock"), that was intended to reflect
the performance of USX's steel business. On December 31, 2001, in a series of
transactions that we call the Separation, each share of USX-U. S. Steel Group
common stock was converted into the right to receive one share of our stock and
USX changed its name to Marathon Oil Corporation ("Marathon"). As a consequence
of the Separation, we became a separate publicly owned corporation.
The net assets of United States Steel Corporation after Separation were
approximately the same as the net assets attributed to Steel Stock at the time
of the Separation, except for a $900 million value transfer (the "Value
Transfer") in the form of additional net debt and other obligations retained by
Marathon.
In connection with the Separation, we entered into a series of agreements
with Marathon governing our relationship after the Separation and providing the
allocation of tax and certain other liabilities and obligations arising from
periods prior to the Separation. These agreements included a financial matters
agreement under which we assumed obligations relating to industrial development
bonds, leases and guarantee obligations and a tax sharing agreement that deals
with tax matters and sharing of taxes arising prior to Separation.
United States Steel Corporation is a Delaware corporation. Our principal
offices are at 600 Grant Street, Pittsburgh PA 15219-2800 and our telephone
number is (412) 433-1121. References in this prospectus to the "Company,"
"United States Steel," "USS," "we," "us" and "our" are to United States Steel
Corporation and its subsidiaries.
1
RISK FACTORS
You should carefully consider the following risk factors and the other
information contained elsewhere or incorporated by reference in this prospectus
and the prospectus supplement before making an investment decision.
RISKS RELATED TO OUR BUSINESS
OVERCAPACITY IN THE STEEL INDUSTRY MAY NEGATIVELY AFFECT OUR PRODUCTION LEVELS
AND SHIPMENTS.
There is an excess of global steel-making capacity over global consumption
of steel products. This has caused shipment and production levels for our
domestic operations to vary from year to year and quarter to quarter, affecting
our results of operations and cash flows. Over the past five years, our domestic
steel shipments have varied from a high of 11.6 million net tons in 1997 to a
low of 9.8 million net tons in 2001. Production levels as a percentage of
capacity have ranged from a high of 96.5% in 1997 to a low of 78.9% in 2001.
Many factors influence these results, including demand in the domestic market,
international currency conversion rates and domestic and international
government actions.
OUR BUSINESS IS CYCLICAL. FUTURE ECONOMIC DOWNTURNS, A STAGNANT ECONOMY OR
CURRENCY FLUCTUATIONS MAY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS
AND FINANCIAL CONDITION.
Demand for most of our products is cyclical in nature and sensitive to
general economic conditions. Our business supports cyclical industries such as
the automotive, appliance, construction and energy industries. As a result,
future downturns in the U.S. or European economy or any of these industries
could adversely affect our results of operations and cash flows.
Because we and other integrated steel producers generally have high fixed
costs, reduced volumes result in operating inefficiencies, such as those
experienced in 2001. Over the past five years, our net income has varied from a
high of $452 million in 1997 to a loss of $218 million in 2001 as our domestic
steel shipments have varied from a high of 11.6 million net tons in 1997 to a
low of 9.8 million net tons in 2001. Future economic downturns, a stagnant
economy or currency fluctuations may adversely affect our business, results of
operations and financial condition.
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS AND OTHER OBLIGATIONS, WHICH COULD
LIMIT OUR OPERATING FLEXIBILITY AND OTHERWISE ADVERSELY AFFECT OUR FINANCIAL
CONDITION.
As of June 30, 2002, we were liable for indebtedness of approximately $1.4
billion. This does not include obligations of Marathon for which we are
contingently liable and that are not recorded on our balance sheet. As of June
30, 2002, such obligations of Marathon were $334 million. Marathon paid a
portion of this debt in July 2002 leaving USS contingently liable for debt and
other obligations of Marathon in the amount of $175 million as of July 31, 2002.
We may incur other obligations for working capital, refinancing of a portion of
the $1.4 billion referred to above or for other purposes. This substantial
amount of indebtedness and related covenants could limit our operating
flexibility and could otherwise adversely affect our financial condition.
Our high degree of leverage could have important consequences to you,
including the following:
- our ability to satisfy our obligations with respect to any other debt
securities or preferred stock may be impaired in the future;
- it may become difficult for us to obtain additional financing for working
capital, capital expenditures, debt service requirements, acquisitions or
general corporate or other purposes in the future;
- a substantial portion of our cash flow from operations must be dedicated
to the payment of principal and interest on our indebtedness, thereby
reducing the funds available to us for other purposes;
2
- some of our borrowings are and are expected to be at variable rates of
interest (including borrowings under our inventory credit facility),
which will expose us to the risk of increased interest rates;
- the sale prices, costs of selling receivables and amounts available under
our accounts receivable program fluctuate due to factors that include the
amount of eligible receivables available, the costs of the commercial
paper funding and our long-term debt ratings; and
- our substantial leverage may limit our flexibility to adjust to changing
economic or market conditions, reduce our ability to withstand
competitive pressures and make us more vulnerable to a downturn in
general economic conditions.
OUR BUSINESS REQUIRES SUBSTANTIAL DEBT SERVICE, CAPITAL INVESTMENT, OPERATING
LEASE, CAPITAL COMMITMENTS AND MAINTENANCE EXPENDITURES THAT WE MAY BE UNABLE
TO FULFILL.
With approximately $1.4 billion of debt outstanding as of June 30, 2002, we
have substantial debt service requirements. Based on this outstanding debt, our
combined principal and interest payments will average approximately $150 million
annually over the next five years. At June 30, 2002, USS had approximately $94
million of variable rate debt outstanding, therefore, a 1% annualized increase
in interest rates would increase annual debt service requirements by
approximately $900,000. We made a payment of $37.5 million to VSZ in July 2002
and are required to make another $37.5 million payment in July of 2003 in
connection with our acquisition of USSK. Our operations are capital intensive.
For the five-year period ended December 31, 2001, total capital expenditures
were $1.4 billion, and through June 30, 2002, capital expenditures totaled $104
million. As of December 31, 2001, we were obligated to make aggregate lease
payments of $325 million under operating leases over the next five years. Our
business also requires substantial expenditures for routine maintenance.
Some of our operating lease agreements include contingent rental charges
that are not determinable to any degree of certainty. These charges are
primarily based on utilization of the power generation facility at our Gary
Works location and operating expenses incurred related to our headquarters'
office space.
USSK has a commitment to the Slovak government for a capital improvements
program over a period commencing with the acquisition date and ending on
December 31, 2010, and, as of June 30, 2002, the remaining commitment under this
program was $600 million. At June 30, 2002, our domestic contract commitments to
acquire property, plant and equipment totaled $18 million.
As of June 30, 2002 we had contingent obligations consisting of indemnity
obligations under active surety bonds totaling approximately $134 million,
guarantees of approximately $31 million of indebtedness for unconsolidated
entities and commitments under take or pay arrangements of approximately $764
million. As the general partner of the Clairton 1314B Partnership, L.P., we are
obligated to fund cash shortfalls incurred by that partnership but may withdraw
as the general partner if we are required to fund in excess of $150 million in
operating cash shortfalls. As of June 30, 2002, we were also contingently liable
for $334 million of debt and other obligations of Marathon. In July 2002,
Marathon paid a portion of this debt leaving USS contingently liable for $175
million of debt and other obligations as of July 31, 2002.
Our business may not generate sufficient operating cash flow or external
financing sources may not be available in an amount sufficient to enable us to
service or refinance our indebtedness or to fund other liquidity needs.
WE HAVE INCURRED OPERATING AND CASH LOSSES AND WILL HAVE FEWER SOURCES OF CASH,
INCLUDING CASH FROM MARATHON TAX SETTLEMENTS.
For the six months ended June 30, 2002, we had a loss from operations of
$14 million and net cash used in operating activities was $107 million.
For the year ended December 31, 2001, we had a loss from operations of $405
million and net cash used in operating activities was $150 million excluding the
income tax settlements received from Marathon.
3
Prior to the Separation, we funded our negative operating cash flow through
an increase in USX debt attributable to the U. S. Steel Group. Before the
Separation, the USX tax allocation policy required the U. S. Steel Group and the
Marathon Group to pay the other for tax benefits resulting from tax attributes
that could not be utilized by the group to which those tax attributes were
attributable on a stand-alone basis but which could be used on a consolidated,
combined or unitary basis. The net amount of cash settlements made by Marathon
to USS for prior years, subject to adjustment, was $819 million, $91 million and
$(2) million in 2001, 2000 and 1999, respectively. These payments allowed USS to
realize the cash value of its tax benefits on a current basis. Now if USS
generates losses or other tax attributes we can generally realize the cash value
from them only if and when we generate enough taxable income in future years to
use those tax losses or other tax attributes on a stand-alone basis. This delay
in realizing tax benefits may adversely affect our cash flow.
Because we are no longer owned by USX, we are not able to rely on USX for
financial support or benefit from a relationship with USX to obtain credit. Our
lower credit ratings have resulted in higher borrowing costs and make obtaining
necessary capital more difficult.
THE TIGHT SURETY BOND MARKET MAY ADVERSELY IMPACT OUR LIQUIDITY.
We use surety bonds to provide financial assurance for certain transactions
and business activities. The total amount of active surety bonds currently being
used for financial assurance purposes is approximately $134 million, $70 million
of which is expected to be terminated in the third quarter of 2002. Recent
events have caused major changes in the surety bond market including significant
increases in surety bond premiums and reduced market capacity. These factors,
together with our non-investment grade credit rating, have caused us to replace
some surety bonds with other forms of financial assurance. The use of other
forms of financial assurance and collateral have a negative impact on liquidity.
During the first six months of 2002, USS used $54 million of liquidity sources
to provide financial assurance and expects to use an additional amount of
approximately $6 million during the second half of 2002 and approximately $70
million in 2003.
IMPORTS OF STEEL MAY DEPRESS DOMESTIC PRICE LEVELS AND HAVE AN ADVERSE EFFECT
ON OUR RESULTS OF OPERATIONS AND CASH FLOWS.
Steel imports to the United States accounted for an estimated 24% of the
domestic steel market in the first six months of 2002 and for the year 2001, and
27% for the year 2000. We believe that steel imports into the United States
involve widespread dumping and subsidy abuses, and that the remedies provided by
United States law to private litigants are insufficient to correct the root
causes of these problems. Imports of steel involving dumping and subsidy abuses
depress domestic price levels, and have an adverse effect upon our revenue,
income and cash flows. Over the past five years, the average transaction prices
for our domestic steel products have decreased from a high of $479 per net ton
in 1997 to a low of $427 per net ton in 2001.
The trade remedies announced by President Bush, under Section 201 of the
Trade Act of 1974, on March 5, 2002 became effective for imports entering the
U.S. on and after March 20, 2002 and are intended to provide protection against
imports from certain countries, but there are products and countries not covered
and imports of these exempt products or of products from these countries may
still have an adverse effect upon our revenues and income. Since March 5, 2002
the Department of Commerce and the Office of the United States Trade
Representative have announced the exclusion of 727 products from the trade
remedies. When announcing the seventh set of exclusions on August 22, 2002 they
also announced that no further exclusions will be granted this year and that
beginning in November, 2002 there will be another opportunity for parties to
submit exclusion requests for consideration by March 2003. The exclusions
granted impact a number of products we produce and have weakened the protection
initially provided by this relief. Various countries have challenged President
Bush's action with the World Trade Organization and taken other actions
responding to the Section 201 remedies.
4
On September 28, 2001, United States Steel Corporation and other domestic
producers filed anti-dumping and counterveiling duty petitions against cold
rolled carbon steel flat products from 20 countries. The U.S. Department of
Commerce ("Commerce") found preliminary margins against all the countries and,
to date, has made final determinations with respect to five of the countries. On
August 27, 2002, the U.S. International Trade Commission ("ITC") made negative
injury findings with respect to the five countries. This terminates the
proceedings with respect to those five countries without granting relief to the
domestic industry. The ITC will vote regarding the remaining countries after
Commerce makes its final determinations in those investigations.
Although we believe the relief provided to the domestic industry is
inadequate, it is possible even that level of relief will not be continued.
On December 20, 2001, the European Commission commenced an anti-dumping
investigation concerning the import of hot-rolled coils and hot-rolled pickled
and oiled coils from Slovakia and five other countries. In mid-February, USSK
submitted a response to the anti-dumping questionnaire and an injury submission.
By law the investigation should be concluded within one year from the date of
initiation, but provisional measures have already been imposed.
On March 21, 2002, the Canadian International Trade Tribunal ("CITT")
initiated a safeguard inquiry to determine whether imports of certain steel
goods from countries, including the U.S., had injured the Canadian steel
industry. On July 5, 2002, the CITT announced its determination that the
Canadian steel industry had been injured by reason of imports of certain
products including the following which are made by USS: cut-to-length plate,
cold-rolled steel sheet and standard pipe up to 16" o.d. On August 20, 2002, the
CITT announced that it was recommending as a remedy a three-year quota, with
tariffs imposed on tonnages exceeding the quota. This resulted in quota levels
for the U.S. which are lower than 2001 shipments. For shipments exceeding the
quota levels, tariffs will be imposed ranging from 15-25% in the first year,
11-18% in the second year and 7-12% in the third year. The CITT's remedy
recommendations will be forwarded to the Ministry of Finance and the final
remedy decision will be made by the Prime Minister.
MANY OF OUR INTERNATIONAL COMPETITORS ARE LARGER AND HAVE HIGHER CREDIT RATINGS.
Based on International Iron and Steel Institute statistics, we rank as the
largest domestic integrated steel producer but, in 2001, were only the eleventh
largest steel producer in the world. Many of our larger competitors have
investment grade credit ratings, and, because of their larger size and superior
credit ratings, we may be at a disadvantage in competing with them. Terms of our
indebtedness contain covenants that may also limit our ability to participate in
consolidations.
COMPETITION FROM MINI-MILL PRODUCERS HAS CONTRIBUTED TO LOST MARKET SHARE AND
COULD HAVE AN ADVERSE EFFECT ON OUR SELLING PRICES AND SHIPMENT LEVELS.
Domestic integrated producers, such as USS, have lost market share in
recent years to domestic mini-mill producers. Mini-mills produce steel by
melting scrap in electric furnaces. Although mini-mills generally produce a
narrower range of steel products than integrated producers, they typically enjoy
competitive advantages such as lower capital expenditures for construction of
facilities, lower raw material costs and non-unionized work forces with lower
employment costs and more flexible work rules. An increasing number of
mini-mills utilize thin slab casting technology to produce flat-rolled products.
Through the use of thin slab casting, mini-mill competitors are increasingly
able to compete directly with integrated producers of flat-rolled products,
especially hot-rolled and plate products. Depending on market conditions, the
additional production generated by flat-rolled mini-mills could have an adverse
effect on our selling prices and shipment levels. Mini-mills entered the
flat-rolled product market around 1990. Although we cannot determine how much
competition from mini-mills has affected our market share, based on statistics
supplied by the American Iron and Steel Institute, we believe our domestic
flat-rolled market share has dropped from 19.4% in 1990 to 13.3% in 2001.
5
COMPETITION FROM OTHER MATERIALS MAY NEGATIVELY AFFECT OUR RESULTS OF
OPERATIONS.
In many applications, steel competes with other materials, such as
aluminum, cement, composites, glass, plastic and wood. Additional substitutes
for steel products could adversely affect future market prices and demand for
steel products.
HIGH ENERGY COSTS ADVERSELY IMPACT OUR RESULTS OF OPERATIONS.
Our operations consume large amounts of energy and we consume significant
amounts of natural gas. Domestic natural gas prices increased from an average of
$2.27 per million BTU in 1999 to an average of $4.96 per million BTU in 2001. At
normal annual consumption levels, a $1.00 per million BTU change in domestic
natural gas prices would result in an estimated $50 million change in our annual
domestic pretax operating costs.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION COULD RESULT IN SUBSTANTIALLY
INCREASED CAPITAL REQUIREMENTS AND OPERATING COSTS.
Our domestic businesses are subject to numerous federal, state and local
laws and regulations relating to the protection of the environment. These laws
are constantly evolving and becoming increasingly stringent. The ultimate impact
of complying with existing laws and regulations is not always clearly known or
determinable because regulations under some of these laws have not yet been
promulgated or are undergoing revision. These environmental laws and
regulations, particularly the Clean Air Act, could result in substantially
increased capital, operating and compliance costs. We are also involved in a
number of environmental remediation projects at both former and present
operating locations and are involved in a number of other remedial actions under
federal and state law. Our worldwide environmental expenditures were $231
million in 2001, $230 million in 2000 and $253 million in 1999. For more
information see "Management's Discussion and Analysis of Environmental Matters,
Litigation and Contingencies" in our Annual Report on Form 10-K for the year
ended December 31, 2001, our Report on Form 10-Q for the quarter ended June 30,
2002 and subsequent filings.
We believe all of our domestic steel competitors are subject to similar
environmental laws and regulations. The specific impact on each competitor may
vary, however, depending upon a number of factors, including the age and
location of operating facilities, production processes (such as a mini-mill
versus an integrated producer) and the specific products and services it
provides. To the extent that competitors, particularly foreign steel producers
and manufacturers of competitive products, are not required to undertake
equivalent costs, our competitive position could be adversely impacted.
USSK is subject to the laws of the Slovak Republic. The environmental laws
of the Slovak Republic generally follow the requirements of the European Union,
which are comparable to domestic standards.
OUR RETIREE EMPLOYEE HEALTH CARE AND RETIREE LIFE INSURANCE COSTS ARE HIGHER
THAN THOSE OF MANY OF OUR COMPETITORS.
We maintain defined benefit retiree health care and life insurance plans
covering substantially all domestic employees upon their retirement. Health care
benefits are provided through comprehensive hospital, surgical and major medical
benefit provisions or through health maintenance organizations, both subject to
various cost-sharing features. Life insurance benefits are provided to nonunion
retiree beneficiaries primarily based on employees' annual base salary at
retirement. For domestic union retirees, benefits are provided for the most part
based on fixed amounts negotiated in labor contracts with the appropriate
unions. As of December 31, 2001, United States Steel reported an unfunded
obligation for these benefit obligations in the amount of $1.8 billion and
recorded $129 million in related costs during the year. Mini-mills, foreign
competitors and many producers of products that compete with steel provide
lesser benefits to their employees and retirees and this difference in costs
could adversely impact our competitive position.
6
DECLINES IN THE VALUE OF INVESTMENTS OF OUR MAJOR PENSION TRUSTS COULD
MATERIALLY REDUCE OUR STOCKHOLDERS' EQUITY.
Based on current conditions, we broadly estimate that a charge to equity of
approximately $750 million (net of tax) may be required at December 31, 2002.
Under accounting principles generally accepted in the United States changes
in the market value of the assets held in trust for pension purposes can result
in significant changes in the sponsor's balance sheet. The accounting rules
provide that if at any plan measurement date (which in our case is December 31
of each year or an earlier date if certain significant plan events occur) the
fair value of plan assets is less than the plan's accumulated benefit obligation
("ABO"), the sponsor must establish a liability at least equal to the amount by
which the ABO exceeds the fair value of the plan assets and any prepaid pension
assets must be removed from the balance sheet. The sum of the liability and
prepaid pension assets must be offset by the recognition of an intangible asset
and/or as a direct charge against stockholders' equity, net of tax effects. Such
adjustments will have no direct impact on earnings per share or cash. As of
September 30, 2002, the fair value of plan assets for the USS pension plan for
union employees was $4.4 billion. Assuming no further changes in value prior to
year-end, we estimate the ABO for this plan at the year-end measurement date
would exceed the fair value of plan assets by approximately $500 million. The
resulting required minimum liability entries would include a charge to equity of
approximately $750 million at December 31, 2002.
Any such reduction in stockholders' equity is not expected to affect any of
our debt covenants or borrowing arrangements or result in any requirements for
pension plan cash funding in 2002 or 2003. The foregoing estimates are
forward-looking statements. Predictions as to the value of and return on plan
assets and the resulting impact on equity are subject to substantial
uncertainties such as (among other things) investment performance and interest
rates.
THE RECENT INVESTMENT PERFORMANCE OF PENSION PLAN EQUITY HOLDINGS WILL
UNFAVORABLY IMPACT OUR RESULTS OF OPERATIONS AND COULD AFFECT FUTURE
PROFITABILITY AND CASH FLOW.
The investment performance of pension plan equity holdings over the last
three years will unfavorably impact net periodic pension cost during 2003
through the use of a lower asset base in calculating expected return on plan
assets and may impact future profitability and liquidity, which could affect
debt covenants and borrowing arrangements. Holding all other assumptions
constant and based on market values at September 2002 projected to the end of
the year, we estimate an unfavorable impact on 2003 net periodic pension cost of
$110 million.
Our expected annual return on pension plan assets of 8.9% for the 2002 plan
year is consistent with the 2001 plan year and is based on the historical
long-term rate of return on our investments and our investment mix. In light of
recent developments in the market, this expected annual return rate might be
changed at the next measurement date. We currently estimate this may result in a
reduction of up to one percentage point in our expected annual return on pension
plan assets for 2003. A one percentage point decline in the expected annual rate
of return for our two main pension plans for the 2003 plan year would increase
our annual pension expense by approximately $80 million which would be in
addition to the $110 million increase for the reduced asset value previously
discussed. These estimates are forward-looking statements. Predictions regarding
the return on plan assets and the resulting pension expenses are subject to
substantial uncertainties such as (among other things) investment performance
and interest rates.
BANKRUPTCIES OF DOMESTIC COMPETITORS HAVE LOWERED THEIR OPERATING COSTS.
Since 1998, more than 30 domestic steel companies have sought protection
under Chapter 11 of the United States Bankruptcy Code. Many of these companies
have continued to operate. Some have reduced prices to maintain volumes and cash
flow and obtained concessions from their labor unions and suppliers. In some
cases, they have even expanded and modernized while in bankruptcy. Upon
emergence from bankruptcy, these companies, or new entities that purchase their
facilities through the bankruptcy process,
7
may be relieved of many environmental, employee, retiree and other obligations.
As a result, they are able to operate with lower costs.
MANY LAWSUITS HAVE BEEN FILED AGAINST US INVOLVING ASBESTOS-RELATED INJURIES
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL POSITION.
We are a defendant in a large number of cases in which approximately 18,000
claimants allege injury resulting from exposure to asbestos. Nearly all of these
cases involve multiple defendants. These claims fall into three major groups:
(1) claims made under certain federal and general maritime law by employees of
the Great Lakes Fleet or Intercoastal Fleet, former operations of USS; (2)
claims made by persons who performed work at USS facilities; and (3) claims made
by industrial workers allegedly exposed to an electrical cable product formerly
manufactured by USS. To date all actions resolved have been either dismissed or
resolved for immaterial amounts. In 2001, we disposed of claims from
approximately 11,300 claimants with aggregate total payments of less than
$200,000 and approximately 10,000 new claims were filed. The factual issues with
respect to each claimant vary considerably due to the nature and duration of the
alleged exposure of each individual claimant to USS products or premises, the
exposure of each individual claimant to products or premises of other
defendants, the nature and seriousness of the alleged injuries asserted by each
claimant and the other possible causes of any such injuries (such as the use of
tobacco products or exposure to other substances). In addition, because most
claimants assert their claims against multiple defendants, fail to allege
specific damage amounts in their complaints, fail to allocate the alleged
liability among the various defendants, and frequently amend their complaints
including any allegations of amounts sought, it is not possible to reasonably
estimate the amount claimed by any given claimant or the claimants as a whole in
pending cases. In the cases where the claimants have asserted specific dollar
damages against USS, the amounts claimed are not material either individually or
in the aggregate. It is also not possible to predict with certainty the outcome
of these matters; however, based upon present knowledge, management believes
that it is unlikely that the resolution of the pending actions will in the
aggregate have a material adverse effect on our financial condition. Among the
factors that management considered in reaching this conclusion are: (1) that USS
has been subject to a total of approximately 32,000 asbestos claims over the
last twelve years that have been administratively dismissed due to the failure
of the claimants to present any medical evidence supporting their claims, (2)
that over the last several years the total number of pending claims has remained
steady, (3) that it has been many years since USS employed maritime workers or
manufactured electrical cable and (4) USS's history of trial outcomes,
settlements and dismissals. For more information see our Report on Form 10-Q for
the quarter ended June 30, 2002. This statement of belief is a forward-looking
statement. Predictions as to the outcome of pending litigation are subject to
substantial uncertainties with respect to (among other things) factual and
judicial determinations, and actual results could differ materially from those
expressed in this forward-looking statement.
OUR INTERNATIONAL OPERATIONS EXPOSE US TO UNCERTAINTIES AND RISKS FROM ABROAD,
WHICH COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.
USSK, located in the Slovak Republic, constitutes 28% of our total raw
steel capability and accounted for 17% of revenue for 2001. USSK exports about
80% of its products, with the majority of its sales being to other European
countries. USSK is affected by the worldwide overcapacity in the steel industry
and the cyclical nature of demand for steel products and that demand's
sensitivity to worldwide general economic conditions. In particular, USSK is
subject to economic conditions and political factors in Europe, which if changed
could negatively affect its results of operations and cash flow. Political
factors include, but are not limited to, taxation, nationalization, inflation,
currency fluctuations, increased regulation and protectionist measures. USSK is
also subject to foreign currency exchange risks because its revenues are
primarily in euros and its costs are primarily in Slovak korunas and United
States dollars.
The Slovak Republic has applied for membership in the European Union and
may be required to amend its environmental, tax and other laws to secure that
membership. Changes in those laws could adversely impact USSK.
8
THE TERMS OF OUR INDEBTEDNESS RESTRICT OUR ABILITY TO PAY DIVIDENDS.
Under the terms of our 10 3/4% Senior Notes due 2008 (the "Senior Notes"),
we may not be able to pay dividends on capital stock unless we can meet certain
restricted payment tests, including a 2 to 1 interest coverage test for the
preceding 12 month period except we may pay common stock dividends through
December 31, 2003 in an aggregate amount up to $50 million. We may also be
unable to pay dividends due to inadequate cash flow and borrowing capacity.
THE TERMS OF OUR INDEBTEDNESS AND OUR ACCOUNTS RECEIVABLE PROGRAM CONTAIN
RESTRICTIVE COVENANTS, CROSS-DEFAULT, CROSS ACCELERATION AND OTHER PROVISIONS
THAT MAY LIMIT OUR OPERATING FLEXIBILITY.
We currently have Senior Notes outstanding in the aggregate principal
amount of $535 million. The Senior Notes impose significant restrictions on us
such as the following:
- Limits on additional borrowings, including limits on the amount of
borrowings secured by inventories or accounts receivable;
- Limits on sale/leasebacks;
- Limits on the use of funds from asset sales and sale of the stock of
subsidiaries; and
- Restrictions on our ability to invest in joint ventures or make certain
acquisitions.
We also have a revolving credit agreement secured by inventory that imposes
additional restrictions on us including the following:
- Effective September 30, 2002, we must meet an interest coverage ratio of
at least 2 to 1, and effective March 31, 2003, that ratio must be at
least 2.5 to 1;
- We must meet leverage ratios (total debt to operating cash flow) of no
more than 6 to 1 beginning on September 30, 2002 through December 30,
2002, 5.5 to 1 through March 30, 2003, 5 to 1 through June 29, 2003, 4.5
to 1 through September 29, 2003, 4 to 1 through March 30, 2004 and 3.75
to 1 thereafter;
- Limitations on capital expenditures; and
- Restrictions on investments.
The accounts receivable program terminates on the occurrence and failure to
cure certain events, including, among others:
- certain defaults with respect to the inventory facility and other debt
obligations;
- failure to maintain certain ratios related to the collectability of
receivables; and
- failure of the commercial paper conduits' liquidity providers to extend
their commitments that currently expire on November 27, 2002.
If these covenants are breached or if we fail to make payments under our
material debt obligations or our receivables purchase agreement, creditors would
be able to terminate their commitments to make further loans, declare their
outstanding obligations immediately due and payable and foreclose on any
collateral, and it may also cause a default under the Senior Notes. Additional
indebtedness that USS may incur in the future may also contain similar
covenants, as well as other restrictive provisions. Cross-default and
cross-acceleration clauses in our revolving credit facility, the Senior Notes,
the accounts receivable program and any future additional indebtedness could
have an adverse effect upon our financial position and liquidity. Such defaults
include provisions applicable to failure to make payments when due, failure to
comply with the covenants described above and failure to pay judgments entered
against USS (which may include any judgments resulting from the environmental
and asbestos litigation matters described in this prospectus and the documents
incorporated by reference).
9
The sale prices, costs of selling receivables and amounts available under
our accounts receivable program fluctuate due to factors that include the amount
of eligible receivables available, costs of commercial paper funding and our
long-term debt ratings. The amount available under our secured inventory
facility fluctuates based on our eligible inventory levels.
We are currently in compliance with all terms of our outstanding
indebtedness. Under the terms of the Senior Notes, additional debt of
approximately $1.7 billion could have been incurred as of June 30, 2002. Of this
amount, $200 million would be subordinate to the Senior Notes and the remainder
would rank equal to the Senior Notes.
"CHANGE IN CONTROL" CLAUSES REQUIRE US TO IMMEDIATELY PURCHASE OR REPAY DEBT.
Upon the occurrence of "change in control" events specified in our Senior
Notes, inventory facility and various other loan documents, the holders of our
indebtedness may require us to immediately purchase or repay that debt on less
than favorable terms. We may not have the financial resources to make these
purchases and repayments, and a failure to purchase or repay such indebtedness
would trigger cross-acceleration clauses under the Senior Notes and other
indebtedness.
OUR OPERATIONS ARE SUBJECT TO BUSINESS INTERRUPTIONS AND CASUALTY LOSSES THAT
MAY ADVERSELY AFFECT OUR CASH FLOWS.
Steel-making, product marketing and raw material operations are subject to
unplanned events such as explosions, fires, inclement weather, accidents and
transportation interruptions. To the extent these events are not covered by
insurance, our cash flows may be adversely impacted by such events.
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE ADVERSELY
IMPACTED BY STRIKES OR WORK STOPPAGES BY OUR UNIONIZED EMPLOYEES.
Substantially all hourly employees of our domestic steel, coke and taconite
pellet facilities are covered by a collective bargaining agreement with the
United Steelworkers of America that expires in August 2004 and includes a
no-strike provision. Other hourly employees (for example, those engaged in coal
mining and transportation activities) are represented by the United Mine Workers
of America, United Steelworkers of America and other unions. The majority of
USSK employees are represented by a union and are covered by a collective
bargaining agreement that expires in February 2004, and is subject to annual
wage negotiations. Any potential strikes or work stoppages and the resulting
adverse impact on our relationships with our customers could have a material
adverse effect on our business, financial condition or results of operations. In
addition, mini-mill producers and certain foreign competitors and producers of
comparable products do not have unionized work forces. This may place us at a
competitive disadvantage.
PROVISIONS OF DELAWARE LAW, OUR GOVERNING DOCUMENTS AND OUR RIGHTS PLAN MAY
MAKE A TAKEOVER OF USS MORE DIFFICULT.
Certain provisions of Delaware law, our certificate of incorporation and
by-laws and our rights plan could make more difficult or delay our acquisition
by means of a tender offer, a proxy contest or otherwise and the removal of
incumbent directors. These provisions are intended to discourage certain types
of coercive takeover practices and inadequate takeover bids, even though such a
transaction may offer our stockholders the opportunity to sell their stock at a
price above the prevailing market price.
RISKS RELATED TO PROPOSED CONSOLIDATION
On December 4, 2001, we announced our support for significant consolidation
in the domestic integrated steel industry and we continue to be interested in
participating in consolidation of the domestic steel industry. We have had and
continue to have discussions with several parties regarding consolidation
opportunities. Among the factors that would impact our participation in
consolidation are the nature and extent of relief from the burden of retiree
obligations relating to existing retirees from other domestic steel companies,
which may come through the bankruptcy process or otherwise, the terms of a new
labor
10
agreement and progress in President Bush's program to address overcapacity. We
may also make additional investments in Central Europe to expand our business
and to better serve our customers who are seeking worldwide supply arrangements.
On March 5, 2002, President Bush imposed tariffs of 8% to 30% on most steel
imports, but did not express support for a government-sponsored program to
provide relief from the industry's retiree legacy costs. No legislation had been
enacted and two proposals to amend pending legislation to address retiree legacy
costs failed to obtain sufficient votes. Although we will continue to explore
attractive acquisitions, joint ventures and other growth opportunities in the
U.S. and Central Europe, the extent of any significant consolidation in the
domestic or European steel industries remains unclear.
CONSOLIDATIONS MAY NOT OCCUR OR MAY BE DELAYED AND THE ANTICIPATED COST SAVINGS
FROM CONSOLIDATION MAY NOT MATERIALIZE.
We will not participate in steel industry consolidation unless it is in the
best interest of our customers, shareholders, creditors, employees and other
constituencies. The conditions precedent to any consolidation are beyond our
control, and may not be satisfied.
The benefits of any consolidation in large measure flow from anticipated
cost savings. We may not be able to achieve all of these savings or may not
achieve them as quickly as we expect. In addition, any rationalization of steel
facilities may result in environmental, post-employment, and other shut-down
costs.
ACQUIRED COMPANIES AND ASSETS MAY INCREASE OUR INDEBTEDNESS AND OTHER
OBLIGATIONS AND REQUIRE SIGNIFICANT EXPENDITURES.
Possible future acquisitions could result in the incurrence of additional
debt and related interest expense, underfunded pension and other post-retirement
obligations, contingent liabilities and amortization expenses related to
intangible assets, all of which could have a material adverse effect on our
financial condition, operating results and cash flow.
Many of the available domestic acquisition targets may require significant
capital and operating expenditures to return them to profitability. Financially
distressed steel companies typically do not maintain their assets adequately.
Such assets may need significant repairs and improvements. We may also have to
buy sizable amounts of raw materials, spare parts and other materials for these
facilities before they can resume profitable operation.
Many potential acquisition candidates are financially distressed steel
companies that may not have maintained appropriate environmental programs. These
problems may require significant expenditures.
WE MAY HAVE DIFFICULTY OR MAY NOT BE ABLE TO OBTAIN FINANCING NECESSARY TO
PURSUE CONSOLIDATIONS.
We may not be able to obtain financing for acquisitions of other companies
or their assets on favorable terms or at all.
CUSTOMERS MAY PURCHASE LESS FROM A CONSOLIDATED COMPANY THAN THEY DID FROM THE
INDIVIDUAL PRODUCERS AND MAY INSIST ON PRICE CONCESSIONS.
Customers may not buy as much steel from us after consolidation as they
previously bought from the separate companies in order to diversify their
suppliers. They may also insist upon significant price concessions.
INTERNATIONAL ACQUISITIONS MAY EXPOSE US TO ADDITIONAL RISKS.
If we acquire companies or facilities outside the United States, we may be
exposed to increased risks including the following:
- economic and political conditions in the countries where the facilities
are located and where the products made at those facilities are marketed;
11
- currency fluctuations;
- uncertain sources of raw materials;
- economic disruptions in less developed economies where many potential
acquisition candidates have facilities or market products;
- expenditures necessary to bring such facilities to profitable operation;
- foreign tax risks; and
- expenditures required to comply with potential new environmental
requirements.
RISKS RELATED TO THE SEPARATION
Prior to December 31, 2001, our businesses were owned by USX Corporation,
now named Marathon Oil Corporation.
USS IS SUBJECT TO CERTAIN CONTINUING CONTINGENT LIABILITIES OF MARATHON THAT
COULD ADVERSELY AFFECT OUR CASH FLOW AND OUR ABILITY TO INCUR ADDITIONAL
INDEBTEDNESS AND COULD CAUSE A DEFAULT UNDER OUR BORROWING FACILITIES.
USS is contingently liable for debt and other obligations of Marathon in
the amount of $334 million as of June 30, 2002. In July 2002, Marathon paid a
portion of this debt leaving USS contingently liable for $175 million of debt
and other obligations as of July 31, 2002. Marathon is not limited by agreement
with USS as to the amount of indebtedness that it may incur. In the event of the
bankruptcy of Marathon, these obligations for which USS is contingently liable,
as well as obligations relating to industrial development and environmental
improvement bonds and notes that were assumed by USS from Marathon, may be
declared immediately due and payable. If that occurs USS may not be able to
satisfy those obligations. In addition, if Marathon loses its investment grade
ratings, certain of these obligations will be considered indebtedness under our
indentures and for covenant calculations under our revolving credit facility.
This occurrence could prevent USS from incurring additional indebtedness under
our indentures or may cause a default under our revolving credit facility.
Under the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder, USS and each subsidiary of USS that was a
member of the Marathon consolidated group during any taxable period or portion
thereof ending on or before the effective time of the Separation is jointly and
severally liable for the federal income tax liability of the entire Marathon
consolidated group for that taxable period. Other provisions of federal law
establish similar liability for other matters, including laws governing tax
qualified pension plans as well as other contingent liabilities.
THE SEPARATION MAY BE CHALLENGED BY CREDITORS AS A FRAUDULENT TRANSFER OR
CONVEYANCE THAT COULD PERMIT UNPAID CREDITORS OF MARATHON TO SEEK RECOVERY FROM
US.
If a court in a suit by an unpaid creditor or representative of creditors
of Marathon, such as a trustee in bankruptcy, or Marathon, as
debtor-in-possession, in a reorganization case under the United States
Bankruptcy Code, were to find that:
- the Separation and the related transactions were undertaken for the
purpose of hindering, delaying or defrauding creditors, or
- Marathon received less than reasonably equivalent value or fair
consideration in connection with the Separation and the transactions
related thereto and (1) Marathon was insolvent at the effective time of
the Separation and after giving effect thereto, (2) or Marathon as of the
effective time of the Separation and after giving effect thereto,
intended or believed that it would be unable to pay its debts as they
became due, or (3) the capital of Marathon, at the effective time of the
Separation and after giving effect thereto, was inadequate to conduct its
business,
12
then the court could determine that the Separation and the related transactions
violated applicable provisions of the United States Bankruptcy Code and/or
applicable state fraudulent transfer or conveyance laws. Such a determination
would permit the bankruptcy trustee or debtor-in-possession or unpaid creditors
to rescind the Separation and permit unpaid creditors of Marathon to seek
recovery from us.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied.
Generally, an entity is considered insolvent if either:
- the sum of its liabilities, including contingent liabilities, is greater
than its assets, at a fair valuation; or
- the present fair saleable value of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities, including contingent liabilities, as they become absolute
and matured.
THE SEPARATION MAY BECOME TAXABLE UNDER SECTION 355(e) OF THE INTERNAL REVENUE
CODE IF 50% OR MORE OF USS'S SHARES OR MARATHON OIL CORPORATION'S SHARES ARE
ACQUIRED AS PART OF A PLAN WHICH WOULD MATERIALLY AFFECT OUR FINANCIAL
CONDITION.
The Separation may become taxable to Marathon pursuant to section 355(e) of
the Internal Revenue Code if 50% or more of either Marathon's shares or our
shares are acquired, directly or indirectly, as part of a plan or series of
related transactions that include the Separation. If section 355(e) applies,
Marathon would be required to pay a corporate tax based on the excess of the
fair market value of the shares distributed over Marathon's tax basis for such
shares. The amount of this tax would be materially greater if the Separation
were deemed to be a distribution of Marathon's shares. If an acquisition occurs
that results in the Separation being taxable under section 355(e), a Tax Sharing
Agreement between USS and Marathon provides that the resulting corporate tax
liability will be borne by the entity, either USS or Marathon, that is deemed to
have been acquired.
WE MAY BE RESPONSIBLE FOR A CORPORATE TAX IF THE SEPARATION FAILS TO QUALIFY AS
A TAX-FREE TRANSACTION, WHICH WOULD HAVE AN ADVERSE AFFECT ON OUR FINANCIAL
CONDITION.
Based on representations made by USX Corporation prior to the Separation,
the Internal Revenue Service issued a private letter ruling that the Separation
was tax-free to Marathon and its shareholders. To the extent a breach of one of
those representations results in a corporate tax being imposed on Marathon, the
breaching party, either USS or Marathon, will be responsible for payment of the
corporate tax. If the Separation fails to qualify as a tax-free transaction
through no fault of either USS or Marathon, the resulting tax liability, if any,
is likely to be borne by us under the tax sharing agreement.
13
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Prior to December 31, 2001, the businesses of USS comprised an operating
unit of Marathon. Marathon had two outstanding classes of common stock:
USX-Marathon Group common stock, which was intended to reflect the performance
of Marathon's energy business, and USX-U. S. Steel Group common stock ("Steel
Stock"), which was intended to reflect the performance of Marathon's steel
business. On December 31, 2001, in a series of transactions we call the
separation, USS was capitalized through the issuance of 89.2 million shares of
common stock to holders of Steel Stock in exchange for all outstanding shares of
Steel Stock on a one-for-one basis. On May 20, 2002, we issued an additional
10,925,000 shares of common stock in an underwritten public offering.
The following table sets forth summary financial data for USS. Consolidated
balance sheet data as of December 31, 2001 and June 30, 2002 and statement of
operations data for the six months ended June 30, 2002 reflect USS as a
separate, stand-alone entity. All other balance sheet and statement of
operations data in the table below represent a carve-out presentation of the
businesses comprising United States Steel, and are not intended to be a complete
presentation of the financial position or results of operations for USS on a
stand-alone basis. This information should be read in conjunction with the more
detailed information and consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2001, our Current
Report on Form 8-K dated June 4, 2002, our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002 and the additional reports and documents
incorporated by reference in this prospectus.
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues and other income(1).................... $3,241 $3,301 $6,375 $6,132 $5,470 $6,477 $7,156
Income (loss) from operations................... (14) (128) (405) 104 150 579 773
Income (loss) before extraordinary losses(2).... (56) (21) (218) (21) 51 364 452
Net income (loss)............................... (56) (21) (218) (21) 44 364 452
PER COMMON SHARE DATA -- BASIC AND DILUTED:
Income (loss) before extraordinary losses(3).... $(0.60) $(0.24) $(2.45) $(0.24) $ 0.57 $ 4.08 $ 5.07
Net income (loss)(3)............................ (0.60) (0.24) (2.45) (0.24) 0.49 4.08 5.07
Dividends paid(4)............................... 0.10 0.35 0.55 1.00 1.00 1.00 1.00
ADJUSTED STATEMENT OF OPERATIONS DATA(5):
Income (loss) before extraordinary loss......... $ (56) $ (21) $ (218) $ (21) $ 51
Add back: Excess over cost amortization......... -- -- -- 1 1
------ ------ ------ ------ ------
Adjusted income (loss) before extraordinary
loss.......................................... $ (56) $ (21) $ (218) $ (20) $ 52
Net income (loss)............................... $ (56) $ (21) $ (218) $ (21) $ 44
Add back: Excess over cost amortization....... -- -- -- 1 1
------ ------ ------ ------ ------
Adjusted net income (loss)...................... $ (56) $ (21) $ (218) $ (20) $ 45
ADJUSTED PER COMMON SHARE DATA -- BASIC AND
DILUTED(3)(5):
Income (loss) before extraordinary loss......... $(0.60) $(0.24) $(2.45) $(0.24) $ 0.57
Add back: Excess over cost amortization....... -- -- -- 0.01 0.02
------ ------ ------ ------ ------
Adjusted income (loss) before extraordinary
loss.......................................... $(0.60) $(0.24) $(2.45) $(0.23) $ 0.59
Net income (loss)............................... $(0.60) $(0.24) $(2.45) $(0.24) $ 0.49
Add back: Excess over cost amortization....... -- -- -- 0.01 0.02
------ ------ ------ ------ ------
Adjusted net income (loss)...................... $(0.60) $(0.24) $(2.45) $(0.23) $ 0.51
BALANCE SHEET DATA -- AS OF PERIOD END
Total assets.................................... $8,614 $8,954 $8,337 $8,711 $7,525 $6,749 $6,694
Capitalization:
Notes payable................................. $ -- $ 123 $ -- $ 70 $ -- $ 13 $ 13
Long-term debt, including amount due within
one year(6)................................. 1,446 2,309 1,466 2,375 915 476 510
Preferred stock of subsidiary................. -- 66 -- 66 66 66 66
Trust preferred securities.................... -- 183 -- 183 183 182 182
Equity........................................ 2,670 1,860 2,506 1,919 2,056 2,093 1,782
------ ------ ------ ------ ------ ------ ------
Total capitalization........................ $4,116 $4,541 $3,972 $4,613 $3,220 $2,830 $2,553
====== ====== ====== ====== ====== ====== ======
14
---------------
(1) Consists of revenues, dividend and investee income (loss), net gains on
disposal of assets, gain on investee stock offering and other income (loss).
(2) SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections, rescinds previous
accounting guidance which required all gains and losses from extinguishment
of debt to be classified as an extraordinary item in the statement of
operations. As a result, the criteria contained in Accounting Principles
Board Opinion No. 30, Reporting the Results of Operations -- Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, will be used to classify
these gains and losses. This provision of SFAS No. 145 is effective for
fiscal years beginning after May 15, 2002 and will be adopted by USS on
January 1, 2003.
(3) Per common share data for the six months ended June 30, 2002 is based on the
weighted average outstanding common shares during the period. Per common
share data for all other periods presented is based on the outstanding
common shares at December 31, 2001 as a result of the Separation and the
initial capitalization of USS on that date.
(4) Dividends paid per share for all periods presented, except for the six
months ended June 30, 2002, represents amounts paid on USX-U. S. Steel Group
common stock.
(5) Statement of Financial Accounting Standards No. 142 (SFAS No. 142), Goodwill
and Other Intangible Assets, addresses the accounting for goodwill and other
intangible assets after an acquisition. The most significant changes made by
SFAS No. 142 are 1) goodwill and intangible assets with indefinite lives
will no longer be amortized; 2) goodwill and intangible assets with
indefinite lives must be tested for impairment at least annually; and 3) the
amortization period for the intangible assets with finite lives will no
longer be limited to forty years. Paragraph 61 of SFAS No. 142, requires
disclosure of what reported income before extraordinary items and net income
would have been in all periods presented exclusive of amortization expense
(including any related tax effects) recognized in those periods related to
goodwill, intangible assets that are no longer being amortized, any deferred
credit to an excess over cost, equity method goodwill, and changes in
amortization periods for intangible assets that will continue to be
amortized (including any related tax effects). Similarly adjusted per share
amounts are also required to be disclosed for all periods presented. USS
initially applied this Statement on January 1, 2002, and there was no
financial statement implication related to the adoption of this standard.
(6) The increase in equity and the decrease in long-term debt, preferred stock
of subsidiary and trust preferred securities from December 31, 2000 to 2001
and from June 30, 2001 to 2002 were primarily due to transactions related to
the Separation, including the $900 million value transfer. The increase in
long-term debt from December 31, 1999 to 2000 was primarily due to cash used
in operating activities of $627 million (including $500 million in elective
funding to a voluntary employee benefit trust) and the $325 million of debt
included in the acquisition of USSK.
15
RATIO OF EARNINGS TO FIXED CHARGES
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
CONTINUING OPERATIONS
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31,
------------- -------------------------------------
2002 2001 2001 2000 1999 1998 1997
----- ----- ----- ----- ----- ----- -----
Ratio of earnings to fixed charges(a)... -- -- -- 1.13 2.33 5.89 5.39
Ratio of earnings to combined fixed
charges and preferred stock
dividends(a).......................... -- -- -- 1.05 2.10 5.15 4.72
---------------
(a) For the purposes of calculating the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock
dividends, "earnings" are defined as income before income taxes and
extraordinary items adjusted for minority interests in consolidated
subsidiaries, income (loss) from equity investees, and capitalized interest,
plus fixed charges, amortization of capitalized interest and distributions
from equity investees. "Fixed charges" consist of interest, whether expensed
or capitalized, on all indebtedness, amortization of premiums, discounts and
capitalized expenses related to indebtedness, and an interest component
equal to one-third of rental expense, representing the portion of rental
expense that management believes is attributable to interest. "Preferred
dividends" consists of pretax earnings required to cover preferred stock
dividends associated with the 6.50% Preferred Stock attributed to USS by
Marathon prior to the Separation which was retained and subsequently repaid
by Marathon in connection with the Separation. Earnings were deficient in
covering fixed charges by $66 million and $196 million for the six months
ended June 30, 2002 and 2001, respectively and by $586 million for the year
ended December 31, 2001. Earnings were deficient in covering combined fixed
charges and preferred stock dividends by $66 million for the six months
ended June 30, 2002, $202 million for the six months ended June 30, 2001 and
by $598 million for the year ended December 31, 2001.
USE OF PROCEEDS
The net proceeds from the sale of the offered securities will be used for
general corporate purposes unless we specify otherwise in the prospectus
supplement applicable to a particular offering. We may use those funds to repay
debt, to finance acquisitions, for stock repurchases, for capital expenditures,
for investments in subsidiaries and joint ventures, and for working capital.
DESCRIPTION OF THE DEBT SECURITIES
The following is a general description of the debt securities (the "Debt
Securities") that we may offer from time to time. The particular terms of the
Debt Securities offered by any prospectus supplement and the extent, if any, to
which the general provisions described below may apply will be described in the
applicable prospectus supplement.
The Debt Securities will be either senior Debt Securities or subordinated
Debt Securities. We will issue the senior Debt Securities under the senior
indenture between The Bank of New York, or any successor trustee, and USS. We
will issue the subordinated Debt Securities under a subordinated indenture
between The Bank of New York, or any successor trustee, and USS. The senior
indenture and the subordinated indenture are collectively referred to in this
prospectus as the indentures, and each of the trustee under the senior indenture
and the trustee under the subordinated indenture are referred to in this
prospectus as trustee.
The following description is only a summary of the material provisions of
the indentures. We urge you to read the appropriate indenture because it, and
not this description, defines your rights as holders of the
16
notes or bonds. See the information under the heading "Where You Can Find More
Information" to contact us for a copy of the appropriate indenture.
GENERAL
The senior Debt Securities are unsubordinated obligations, will rank on par
with all other debt obligations of USS and, unless otherwise indicated in the
related Prospectus Supplement, will be unsecured. The subordinated Debt
Securities will be subordinate, in right of payment to Senior Debt. A
description of the subordinated Debt Securities is provided below under
" -- Subordinated Debt Securities". The specific terms of any subordinated Debt
Securities will be provided in the related Prospectus Supplement. For a complete
understanding of the provisions pertaining to the subordinated Debt Securities,
you should refer to the subordinated indenture attached as an exhibit to the
Registration Statement.
TERMS
The indentures do not limit the principal amount of debt we may issue.
We may issue notes or bonds in traditional paper form, or we may issue a
global security. The Debt Securities of any series may be issued in definitive
form or, if provided in the related prospectus supplement, may be represented in
whole or in part by a Global Security or Securities, registered in the name of a
depositary designated by USS. Each Debt Security represented by a Global
Security is referred to as a "Book-Entry Security."
Debt Securities may be issued from time to time pursuant to this
prospectus, and will be offered on terms determined by market conditions at the
time of sale. Debt Securities may be issued in one or more series with the same
or various maturities and may be sold at par, a premium or an original issue
discount. Debt Securities sold at an original issue discount may bear no
interest or interest at a rate that is below market rates. Unless otherwise
provided in the prospectus supplement, Debt Securities denominated in U.S.
dollars will be issued in denominations of $1,000 and integral multiples
thereof.
Please refer to the prospectus supplement for the specific terms of the
Debt Securities offered including the following:
1. Designation of an aggregate principal amount, purchase price and
denomination;
2. Date of maturity;
3. If other than U.S. currency, the currency for which the Debt
Securities may be purchased;
4. The interest rate or rates and the method of calculating
interest;
5. The times at which any premium and interest will be payable;
6. The place or places where principal, any premium and interest
will be payable;
7. Any redemption or sinking fund provisions or other repayment
obligations;
8. Any index used to determine the amount of payment of principal of
and any premium and interest on the Debt Securities;
9. The application, if any of the defeasance provisions to the Debt
Securities;
10. If other than the entire principal amount, the portion of the
Debt Securities that would be payable upon acceleration of the maturity
thereof;
11. If other than the entire principal amount plus accrued interest,
the portion of the Change of Control purchase price or prices applicable to
purchases of Debt Securities upon a Change of Control;
12. Whether the Debt Securities will be issued in whole or in part in
the form of one or more global securities, and in such case, the depositary
for the global securities;
17
13. Any additional covenants applicable to the Debt Securities being
offered;
14. Any additional events of default applicable to the Debt
Securities being offered;
15. The terms of subordination, if applicable;
16. The terms of conversion, if applicable; and
17. Any other specific terms including any terms that may be required
by or advisable under applicable law.
Except with respect to Book-Entry Securities, Debt Securities may be
presented for exchange or registration of transfer, in the manner, at the places
and subject to the restrictions set forth in the Debt Securities and the
prospectus supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the indentures.
CERTAIN COVENANTS OF USS IN THE INDENTURES
PAYMENT
USS will pay principal of and premium, if any, and interest on the Debt
Securities at the place and time described in the Debt Securities. (Section
1001) Unless otherwise provided in the prospectus supplement, USS will pay
interest on any Debt Security to the person in whose name that security is
registered at the close of business on the regular record date for that interest
payment. (Section 307)
Any money deposited with the trustee or any paying agent for the payment of
principal of or any premium or interest on any Debt Security that remains
unclaimed for two years after that amount has become due and payable will be
paid to USS at its request. After this occurs, the holder of that security must
look only to USS for payment of that amount and not to the trustee or paying
agent. (Section 1003)
LIENS
If USS or any subsidiary of USS mortgages, pledges, encumbers or subjects
to a lien (a "Mortgage") as security for money borrowed any blast furnace
facility or steel producing facility, or casters that are part of a plant that
includes such a facility, having a net book value in excess of 1% of
Consolidated Net Tangible Assets at the time of determination (each, a
"Principal Property") or any shares of stock or other equity interests in any of
USS' subsidiaries that own one or more Principal Properties, USS will secure or
will cause such subsidiary to secure the Debt Securities equally and ratably
with all indebtedness or obligations secured by the Mortgage then being given
and with any other indebtedness of USS or the subsidiary of USS then entitled
thereto; provided, however, that this covenant shall not apply in the case of:
(a) any Mortgage existing on the date of the indentures (whether or not such
Mortgage includes an after-acquired property provision); (b) any Mortgage,
including a purchase money Mortgage, incurred in connection with the acquisition
of any Principal Property, the assumption of any Mortgage previously existing on
such acquired Principal Property or any Mortgage existing on the property of any
corporation when it becomes a subsidiary of USS; (c) any Mortgage on such
Principal Property in favor of the United States, or any State, or
instrumentality of either, to secure partial, progress or advance payments to
USS or any subsidiary of USS under any contract or statute; (d) any Mortgage in
favor of the United States, any State, or instrumentality of either, to secure
borrowings for the purchase or construction of the Principal Property mortgaged;
(e) any Mortgage on any Principal Property arising in connection with or to
secure all or any part of the cost of the repair, construction, improvement,
alteration or development of the Principal Property or any portion thereof; or
(f) any renewal of or substitution for any Mortgage permitted under the
preceding clauses.
USS may and may permit its subsidiaries to (1) grant Mortgages or incur
liens on Principal Property (or on equity interests in subsidiaries that own
Principal Property) covered by the restriction described above and (2) sell or
transfer any Principal Property with the intention of taking back a lease on
that Principal Property so long as the net book value of the Principal Property
(or equity interests) so
18
encumbered or transferred, together with all property then permitted to be
encumbered or subject to a sale-leaseback under this clause, does not at the
time such Mortgage or lien is granted or such property is transferred exceed 10%
of Consolidated Net Tangible Assets. (Section 1005)
"Consolidated Net Tangible Assets" means the aggregate value of all assets
of USS and its subsidiaries after deducting (a) all current liabilities
(excluding all long-term debt due within one year), (b) all investments in
unconsolidated subsidiaries and all investments accounted for on the equity
basis and (c) all goodwill, patent and trademarks, unamortized debt discount and
other similar intangibles (all determined in conformity with generally accepted
accounting principles and calculated on a basis consistent with USS' most recent
audited consolidated financial statements). (Section 101)
LIMITATIONS ON CERTAIN SALE AND LEASEBACKS
USS will not, nor will it permit any subsidiary to, sell or transfer any
Principal Property with the intention of taking back a lease thereof, provided,
however, this covenant shall not apply if (a) the lease is to a subsidiary of
USS (or to USS in the case of a subsidiary of USS); (b) the lease is for a
temporary period by the end of which it is intended that the use of the
Principal Property by the lessee will be discontinued; (c) USS or a subsidiary
of USS could, as described under the caption "Liens" above, Mortgage such
property without equally and ratably securing the Debt Securities; or (d) USS
promptly informs the trustee of such sale, the net proceeds of such sale are at
least equal to the fair value (as determined by resolution adopted by the Board
of Directors of USS) of such Principal Property and USS within 180 days after
such sale applies an amount equal to such net proceeds (subject to reduction by
reason of credits to which USS is entitled, under the conditions specified in
the indentures) to the retirement or in substance defeasance of funded debt of
USS or a subsidiary of USS. This covenant does not apply to sales and leases
solely among USS and its subsidiaries. (Section 1006)
MERGER AND CONSOLIDATION
USS will not merge or consolidate with any other entity or sell or convey
all or substantially all of its assets to any person, firm, corporation or other
entity, except that USS may merge or consolidate with, or sell or convey all or
substantially all of its assets to, any other entity if (i) USS is the
continuing entity or the successor entity (if other than USS) is organized and
existing under the laws of the United States of America or a State thereof and
such entity expressly assumes payment of the principal and interest on all the
Debt Securities, and the performance and observance of all of the covenants and
conditions of the applicable indenture to be performed by USS and (ii) there is
no default under the applicable indenture. Upon such a succession, USS will be
relieved from any further obligations under the applicable indenture. For
purposes of this paragraph, "substantially all of its assets" means, at any
date, a portion of the non-current assets reflected in USS' consolidated balance
sheet as of the end of the most recent quarterly period that represents at least
66 2/3% of the total reported value of such assets. (Section 801)
WAIVER OF CERTAIN COVENANTS
Unless otherwise provided in the prospectus supplement, USS may, with
respect to the Debt Securities of any series, omit to comply with any provision
of the covenants described under "-- Liens" and "-- Limitations on Certain Sale
and Leasebacks" above or under "Purchase of Debt Securities Upon a Change of
Control" or in any covenant provided in the terms of those Debt Securities if,
before the time for such compliance, holders of at least a majority in principal
amount of the outstanding Debt Securities of that series waive such compliance
in that instance or generally.
PURCHASE OF DEBT SECURITIES UPON A CHANGE IN CONTROL
If any Change in Control (hereinafter defined) of USS occurs, each holder
of Debt Securities will have the right, at that holder's option, subject to the
terms and conditions of the indentures, to require USS to become obligated to
purchase all of that holder's Debt Securities on the date that is 35 Business
Days after the occurrence of such Change in Control (the "Change in Control
Purchase Date") at a cash
19
price equal to (i) unless otherwise specified in the terms of such Debt
Securities, 100% of the principal amount thereof, together with accrued interest
to such Change in Control Purchase Date (except that interest installments due
prior to such Change in Control Purchase Date will be payable to the holders of
such Debt Securities of record at the close of business on the relevant record
dates according to their terms and the provisions of the indentures), or (ii)
such other price or prices as may be specified in the terms of such Debt
Securities (the "Change in Control Purchase Prices"). (Section 1007)
Under the indentures, a "Change in Control" of USS occurs if (i) any
"person" or "group" of persons (excluding USS, any subsidiary, any employee
stock ownership plan, any other employee benefit plan of USS or any person
holding Voting Stock for any employee benefit plan of USS) acquires "beneficial
ownership" (within the meaning of Section 13(d) or 14(d) of the Exchange Act) of
shares of Voting Stock representing at least 35% of the outstanding Voting Power
of USS, (ii) during any period of twenty-five consecutive months, commencing
before or after the date of the indentures, individuals who at the beginning of
such 25-month period were directors of USS (together with any replacement or
additional directors whose election was recommended by incumbent management of
USS or who were elected by a majority of directors then in office) cease to
constitute a majority of the board of directors of USS, or (iii) any person or
group of related persons shall acquire all or substantially all of the assets of
USS; provided, a Change in Control shall not have occurred if USS has merged or
consolidated with or transferred all or substantially all of its assets to
another entity in compliance with the provisions of Section 801 of the
indentures (relating to when USS may merge or transfer assets) and the surviving
or successor or transferee entity is no more leveraged than was USS immediately
prior to such event. The term "leveraged" means the percentage represented by
the total assets of that entity divided by its stockholders' or member's equity,
as would be shown on a consolidated balance sheet of that entity prepared in
accordance with generally accepted accounting principles in the United States of
America. The term "substantially all of its assets" used above means, at any
date, a portion of the non-current assets reflected in USS' consolidated balance
sheet as of the end of the most recent quarterly period that represents at least
66 2/3% of the total reported value of such assets.
"Voting Stock" means stock of USS having ordinary voting power for the
election of the directors of USS, other than stock having such power only by
reason of the happening of a contingency. "Voting Power" means the total voting
power represented by all outstanding shares of all classes of Voting Stock.
(Section 101)
To exercise this right to require USS to purchase a holder's Debt
Securities after a Change of Control, the holder must deliver, at any time prior
to the Change of Control purchase date specified in a notice delivered by USS
after that Change of Control, a written notice of purchase to the paying agent
specified in USS' notice. The holder's notice must state the numbers of the
certificates of any Debt Securities that the holder will deliver to be purchased
and that those Debt Securities are to be purchased under the terms and
conditions specified in the indentures and USS' notice.
If a Change in Control occurs, USS intends to comply with any applicable
securities laws or regulations, including any applicable requirements of Rule
14e-1 under the Exchange Act. The Change in Control purchase feature of the Debt
Securities may in certain circumstances make more difficult or discourage a
takeover of USS. The Change in Control purchase feature, however, is not the
result of management's knowledge of any specific effort to accumulate shares of
Common Stock or to obtain control of USS by means of a merger, tender offer,
solicitation or otherwise, or part of a plan by management to adopt a series of
anti-takeover provisions. The Change in Control purchase feature is similar to
that contained in other debt of USS as a result of negotiations between USS and
the underwriters or holders of that debt.
Except as discussed, the Change in Control purchase feature does not afford
holders of the Debt Securities protection against possible adverse effects of a
reorganization, restructuring, merger or similar transaction involving USS.
Our ability to purchase Debt Securities in the future may be limited by the
terms of any then existing borrowing arrangements and by our financial
resources.
20
EVENTS OF DEFAULT
An Event of Default occurs with respect to any series of Debt Securities
when: (i) USS defaults in paying principal of or premium, if any, on any of the
Debt Securities of such series when due; (ii) USS defaults in paying interest on
the Debt Securities of such series when due, continuing for 30 days; (iii) USS
defaults in paying the Change in Control Purchase Price of any of the Debt
Securities of such series as and when the same shall become due and payable;
(iv) USS defaults in making deposits into any sinking fund payment with respect
to any Debt Security of such series when due; (v) failure by USS in the
performance of any other covenant or warranty in the Debt Securities of such
series or in the applicable indenture continued for a period of 90 days after
notice of such failure as provided in that indenture; (vi) certain events of
bankruptcy, insolvency, or reorganization occur; or (vii) any other Event of
Default provided with respect to Debt Securities of that series. (Section 501)
USS is required annually to deliver to the trustee officers' certificates
stating whether or not the signers have any knowledge of any default in the
performance by USS of certain covenants. (Section 1004)
If an Event of Default shall occur and be continuing with respect to any
series, the trustee or the holders of not less than 25% in principal amount of
the Debt Securities of such series then outstanding may declare the Debt
Securities of such series to be due and payable. If an Event of Default
described in clause (vi) of the first paragraph under "Events of Default" occurs
with respect to any series of Debt Securities, the principal amount of all Debt
Securities of that series (or, if any securities of that series are original
issue discount securities, the portion of the principal amount of such
securities as may be specified by the terms thereof) will automatically become
due and payable without any declaration by the trustee or the holders. (Section
502) The trustee is required to give holders of the Debt Securities of any
series written notice of a default with respect to such series as and to the
extent provided by the Trust Indenture Act, except that the trustee may not give
such notice of a default described in clause (v) of the first paragraph under
"Events of Default" until at least 60 days after the default. As used in this
paragraph, a "default" means an event described in the first paragraph under
"Events of Default" without including any applicable grace period. (Section 602)
If at any time after the Debt Securities of such series have been declared
due and payable, and before any judgment or decree for the moneys due has been
obtained or entered, USS shall pay or deposit with the trustee amounts
sufficient to pay all matured installments of interest upon the Debt Securities
of such series and the principal of all Debt Securities of such series which
shall have become due, otherwise than by acceleration, together with interest on
such principal and, to the extent legally enforceable, on such overdue
installments of interest and all other amounts due under the applicable
indenture shall have been paid, and any and all defaults with respect to such
series under that indenture shall have been remedied, then the holders of a
majority in aggregate principal amount of the Debt Securities of such series
then outstanding, by written notice to USS and the trustee, may rescind and
annul the declaration that the Debt Securities of such series are due and
payable. (Section 502) In addition, the holders of a majority in aggregate
principal amount of the Debt Securities of such series may waive any past
default and its consequences with respect to such series, except a default in
the payment of the principal of or any premium or interest on any Debt
Securities of such series or a default in the performance of a covenant that
cannot be modified under the indentures without the consent of the holder of
each affected Debt Security. (Section 513)
The trustee is under no obligation to exercise any of the rights or powers
under the indentures at the request, order or direction of any of the holders of
Debt Securities, unless such holders shall have offered to the trustee
reasonable security or indemnity. (Section 603) Subject to such provisions for
the indemnification of the trustee and certain limitations contained in the
indentures, the holders of a majority in aggregate principal amount of the Debt
Securities of each series at the time outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the trustee, or exercising any trust or power conferred on the trustee, with
respect to the Debt Securities of such series. (Section 512)
21
No holder of Debt Securities will have any right to institute any
proceeding, judicial or otherwise, with respect to the indentures, for the
appointment of a receiver or trustee or for any other remedy under the
indentures unless:
- the holder has previously given written notice to the trustee of a
continuing Event of Default with respect to the Debt Securities of that
series; and
- the holders of at least 25% in principal amount of the outstanding Debt
Securities of that series have made a written request to the trustee, and
offered reasonable indemnity, to the trustee to institute proceedings as
trustee, the trustee has failed to institute the proceedings within 60
days and the trustee has not received from the holders of a majority in
principal amount of the Debt Securities of that series a direction
inconsistent with that request. (Section 507)
Notwithstanding the foregoing, the holder of any Debt Security will have an
absolute and unconditional right to receive payment of the principal of and any
premium and, subject to the provisions of the applicable indenture regarding the
payment of default interest, interest on that Debt Security on the due dates
expressed in that security and to institute suit for the enforcement of payment.
(Section 508)
MODIFICATION OF THE INDENTURES
Each indenture contains provisions permitting USS and the trustee to modify
that indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not
adversely affect the interests of the holders of the Debt Securities, including,
without limitation, the following: (a) to evidence the succession of another
corporation to USS; (b) to add to the covenants of USS further covenants for the
benefit or protection of the holders of any or all series of Debt Securities or
to surrender any right or power conferred upon USS by that indenture; (c) to add
any additional events of default with respect to all or any series of Debt
Securities; (d) to add to or change any of the provisions of that indenture to
facilitate the issuance of Debt Securities in bearer form with or without
coupons, or to permit or facilitate the issuance of Debt Securities in
uncertificated form; (e) to add to, change or eliminate any of the provisions of
that indenture in respect of one or more series of Debt Securities thereunder,
under certain conditions designed to protect the rights of any existing holder
of those Debt Securities; (f) to secure all or any series of Debt Securities;
(g) to establish the forms or terms of the Debt Securities of any series; (h) to
evidence the appointment of a successor trustee and to add to or change
provisions of that indenture necessary to provide for or facilitate the
administration of the trusts under that indenture by more than one trustee; (i)
to cure any ambiguity, to correct or supplement any provision of that indenture
which may be defective or inconsistent with another provision of that indenture;
(j) to make other amendments that do not adversely affect the interests of the
holders of any series of Debt Securities in any material respect; and (k) to add
or change or eliminate any provision of that indenture as shall be necessary or
desirable in accordance with any amendments to the Trust Indenture Act. (Section
901)
USS and the trustee may otherwise modify each indenture or any supplemental
indenture with the consent of the holders of not less than a majority in
aggregate principal amount of each series of Debt Securities affected thereby at
the time outstanding, except that no such modifications shall (i) extend the
fixed maturity of any Debt Securities or any installment of interest or premium
on any Debt Securities, or reduce the principal amount thereof or reduce the
rate of interest or premium payable upon redemption, or reduce the amount of
principal of an original issue discount Debt Security or any other Debt Security
that would be due and payable upon a declaration of acceleration of the maturity
thereof, or change the currency in which the Debt Securities are payable or
impair the right to institute suit for the enforcement of any payment after the
stated maturity thereof or the redemption date, if applicable, or adversely
affect any right of the holder of any Debt Security to require USS to repurchase
that security, without the consent of the holder of each Debt Security so
affected, (ii) reduce the percentage of Debt Securities of any series, the
consent of the holders of which is required for any waiver or supplemental
indenture, without the consent of the holders of all Debt Securities affected
thereby then outstanding or (iii) modify the provisions of that indenture
relating to the waiver of past defaults or the waiver or certain covenants or
22
the provisions described under "Modification of the indentures," except to
increase any percentage set forth in those provisions or to provide that other
provisions of that indenture may not be modified without the consent of the
holder of each Debt Security affected thereby, without the consent of the holder
of each Debt Security affected thereby. (Section 902)
SATISFACTION AND DISCHARGE; DEFEASANCE AND COVENANT DEFEASANCE
Each indenture shall be satisfied and discharged if (i) USS shall deliver
to the trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities not delivered to the trustee for cancellation shall have become
due and payable, are to become due and payable within one year or are to be
called for redemption within one year and USS shall deposit an amount sufficient
to pay the principal, premium, if any, and interest to the date of maturity,
redemption or deposit (in the case of Debt Securities that have become due and
payable), provided that in either case USS shall have paid all other sums
payable under that indenture. (Section 401)
Each indenture provides, if such provision is made applicable to the Debt
Securities of a series, that USS may elect either (A) to defease and be
discharged from any and all obligations with respect to any Debt Security of
such series (except for the obligations to register the transfer or exchange of
such Debt Security, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Security under Sections
801, 803, 1005, 1006, 1007 and 1009 of that indenture (being the restrictions
described above under "Certain Covenants of USS in the indentures" and USS'
obligations described under "Purchase of Debt Securities upon a Change in
Control") together with additional covenants that may be included for a
particular series and (ii) that Sections 501(4), 501(5) (as to Sections 801,
803, 1005, 1006, 1007 and 1009) and 501(8), as described in clauses (iv), (v)
and (vii) under "Events of Default," shall not be Events of Default under that
indenture with respect to such series ("covenant defeasance"), upon the deposit
with the trustee (or other qualifying trustee), in trust for such purpose, of
money certain U.S. government obligations and/or, in the case of Debt Securities
denominated in U.S. dollars, certain state and local government obligations
which through the payment of principal and interest in accordance with their
terms will provide money, in an amount sufficient to pay the principal of (and
premium, if any) and interest on such Debt Security, on the scheduled due dates.
In the case of defeasance, the holders of such Debt Securities are entitled to
receive payments in respect of such Debt Securities solely from such trust. Such
a trust may only be established if, among other things, USS has delivered to the
trustee an Opinion of Counsel (as specified in the indentures) to the effect
that the holders of the Debt Securities affected thereby will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
Opinion of Counsel, in the case of defeasance under clause (A) above, must refer
to and be based upon a ruling of the Internal Revenue Service or a change in
applicable Federal income tax law occurring after the date of the indentures.
(Section 1304)
RECORD DATES
The indentures provide that in certain circumstances USS may establish a
record date for determining the holders of outstanding Debt Securities of a
Series entitled to join in the giving of notice or the taking of other action
under the applicable indenture by the holders of the Debt Securities of such
Series.
SUBORDINATED DEBT SECURITIES
Although the senior indenture and the subordinated indenture are generally
similar and many of the provisions discussed above pertain to both senior and
subordinated Debt Securities, there are many substantive differences between the
two. This section discusses some of those differences.
23
Subordination
Subordinated Debt Securities will be subordinate, in right of payment, to
all Senior Debt. "Senior Debt" is defined to mean, with respect to USS, the
principal, premium, if any, and interest on
(1) all indebtedness of USS, whether outstanding on the date hereof or
hereafter created, incurred or assumed, which is for money borrowed, or
evidenced by a note or similar instrument given in connection with the
acquisition of any business, properties or assets, including securities,
(2) any indebtedness of others of the kinds described in the preceding
clause (1) for the payment of which USS is responsible or liable (directly
or indirectly, contingently or otherwise) as guarantor or otherwise and
(3) amendments, renewals, extensions and refundings of any
indebtedness described in the preceding clauses (1) or (2), unless in any
instrument or instruments evidencing or securing such indebtedness or
pursuant to which the same is outstanding, or in any such amendment,
renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to the Debt Securities of
any series.
Difference Between Subordinated Debt Security Covenants and Debt Security
Covenants and Events of Default
Subordinated Debt Securities may not have the advantage of all of the
covenants and Events of Default provided in the senior indenture. For example,
relating to Liens, Limitations on Certain Sale and Leasebacks and Purchase of
senior Debt Securities upon a Change in Control as discussed above are not
applicable to securities issued pursuant to the subordinated indenture. Also,
the event of default for failure to pay the Change of Control Purchase Price
when due is not available to subordinated Debt Securities.
Terms of Subordinated Debt Securities may contain Conversion or Exchange
Provisions
The Prospectus Supplement for a particular series of subordinated Debt
Securities will describe the specific terms discussed above that apply to the
subordinated Debt Securities being offered thereby as well as any applicable
conversion or exchange provisions.
Modification of the Indenture Relating to Subordinated Debt Securities
The subordinated indenture may be modified by USS and the trustee without
the consent of the Holders of the subordinated Debt Securities for one or more
of the purposes discussed above under "--Modification of the indentures." USS
and the trustee may also modify the subordinated indenture to make provision
with respect to any conversion or exchange rights for a given issue of
subordinated Debt Securities.
GOVERNING LAW
The laws of the State of New York govern each indenture and will govern the
Debt Securities. (Section 112)
BOOK-ENTRY SECURITIES
The following description of book-entry securities will apply to any series
of Debt Securities issued in whole or in part in the form of one or more global
securities except as otherwise described in the prospectus supplement.
Book-entry securities of like tenor and having the same date will be
represented by one or more global securities deposited with and registered in
the name of a depositary that is a clearing agent registered under the Exchange
Act. Beneficial interests in book-entry securities will be limited to
institutions that have accounts with the depositary ("participants") or persons
that may hold interests through participants. Ownership of beneficial interests
by participants will only be evidenced by, and the transfer of that
24
ownership interest will only be effected through, records maintained by the
depositary. Ownership of beneficial interests by persons that hold through
participants will only be evidenced by, and the transfer of that ownership
interest within such participant will only be effected through, records
maintained by the participants. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in a global security.
Payment of principal of and any premium and interest on book-entry
securities represented by a global security registered in the name of or held by
a depositary will be made to the depositary, as the registered owner of the
global security. Neither USS, the trustee nor any agent of USS or the trustee
will have any responsibility or liability for any aspect of the depositary's
records or any participant's records relating to or payments made on account of
beneficial ownership interests in a global security or for maintaining,
supervising or reviewing any of the depositary's records or any participant's
records relating to the beneficial ownership interests. Payments by participants
to owners of beneficial interests in a global security held through such
participants will be governed by the depositary's procedures, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the sole responsibility of such participants.
A global security representing a book-entry security is exchangeable for
definitive Debt Securities in registered form, of like tenor and of an equal
aggregate principal amount registered in the name of, or is transferrable in
whole or in part to, a person other than the depositary for that global
security, only if (a) the depositary notifies USS that it is unwilling or unable
to continue as depositary for that global security or the depositary ceases to
be a clearing agency registered under the Exchange Act, (b) there shall have
occurred and be continuing an Event of Default with respect to the Debt
Securities of that Series or (c) other circumstances exist that have been
specified in the terms of the Debt Securities of that Series. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
registered in the name or names of such person or persons as the depositary
shall instruct the trustee. It is expected that such instructions may be based
upon directions received by the depositary from its participants with respect to
ownership of beneficial interests in such global security.
Except as provided above, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purpose
under the indentures, and no global security shall be exchangeable, except for a
security registered in the name of the depositary. This means each person owning
a beneficial interest in such global security must rely on the procedures of the
depositary and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a holder under the indentures. USS understands that under existing industry
practices, if USS requests any action of holders or an owner of a beneficial
interest in such global security desires to give or take any action that a
holder is entitled to give or take under the indentures, the depositary would
authorize the participants holding the relevant beneficial interests to give or
take such action, and such participants would authorize beneficial owners owning
through such participant to give or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
CONCERNING THE TRUSTEE
The Bank of New York is also trustee for our 10 3/4% Senior Notes due
August 1, 2008, for our Senior Quarterly Income Debt Securities, for a leverage
lease in which USS is the lessor and for several series of obligations issued by
various governmental authorities relating to environmental projects at various
USS facilities. The Bank of New York is a lender under our revolving credit
facility. USS and its subsidiaries also maintain ordinary banking relationships,
including loans and deposit accounts, with The Bank of New York and anticipate
that they will continue to do so.
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DESCRIPTION OF CAPITAL STOCK
The following is a description of the material terms of the capital stock
of USS included in its certificate of incorporation. This description is
qualified by reference to the certificate of incorporation, and the Rights
Agreement (the "Rights Agreement") between USS and Mellon Bank, N.A., as Rights
Agent (the "Rights Agent"), that have been filed as exhibits to the registration
statement of which this prospectus is a part.
GENERAL
The authorized capital stock of USS consists of 14 million shares of
preferred stock, without par value, and 200 million shares of common stock with
a par value of $1.00 per share. As of July 31, 2002, there were no shares of
preferred stock outstanding and 101,827,613 shares of common stock outstanding.
PREFERRED STOCK
The preferred stock may be issued without the approval of the holders of
common stock in one or more series, from time to time. The designation, powers,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions of any preferred stock will be
stated in a resolution providing for the issue of that series adopted by our
board of directors and will be described in the appropriate prospectus
supplement (if any), including the following:
1. When to issue the preferred stock, whether in one or more series so long
as the total number of shares does not exceed 14 million;
2. The powers, preferences and relative participation, optional or other
special rights, and qualifications, limits or restrictions on preferred
stock;
3. The dividend rate of each series, the terms of payment, the priority of
payment versus any other class of stock and whether the dividends will
be cumulative;
4. Terms of redemption;
5. Any convertible features;
6. Any voting rights;
7. Liquidation preferences; and
8. Any other terms.
Holders of preferred stock will be entitled to receive dividends (other
than dividends of common stock) before any dividends are payable to holders of
common stock.
The future issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of USS.
COMMON STOCK
The holders of common stock will be entitled to receive dividends when, as
and if declared by the USS board of directors out of funds legally available
therefor, subject to the rights of any shares of preferred stock at the time
outstanding. The holders of common stock will be entitled to one vote for each
share on all matters voted on generally by stockholders under our certificate of
incorporation, including the election of directors. Holders of common stock do
not have any cumulative voting, conversion, redemption or preemptive rights. In
the event of dissolution, liquidation or winding up of USS, holders of the
common stock will be entitled to share ratably in any assets remaining after the
satisfaction in full of the prior rights of creditors, including holders of any
then outstanding indebtedness, and subject to the aggregate liquidation
preference and participation rights of any preferred stock then outstanding. The
issuance of additional shares of authorized stock by USS may occur at such times
and under such circumstances as to have a dilutive effect on earnings per share
and on the equity ownership of the holders of common stock.
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STOCK TRANSFER AGENT AND REGISTRAR
USS maintains its own stock transfer department at the following address:
United States Steel Corporation, Shareholders Services Department, 600 Grant
Street, Room 611, Pittsburgh, PA 15219-2800. Certificates representing shares
can also be presented for registration of transfer at Mellon Shareholder
Services, 120 Broadway, 13th Floor, New York, NY 10021.
Mellon Investor Services LLC, 500 Grant Street, Pittsburgh, PA 15219 is the
Registrar for all the Common Stock.
RIGHTS PLAN
The following is a brief description of the terms of the stockholders
rights plan set forth in the Rights Agreement between USS and Mellon Investor
Services LLC, as Rights Agent.
The purpose of the Rights Agreement is to:
- give our board of directors the opportunity to negotiate with any persons
seeking to obtain control of USS;
- deter acquisitions of voting control of USS without assurance of fair and
equal treatment of all USS stockholders; and
- prevent a person from acquiring in the market a sufficient amount of
voting power to be in a position to block an action sought to be taken by
our stockholders.
The exercise of the Rights would cause substantial dilution to a person
attempting to acquire USS on terms not approved by our board of directors and
would therefore significantly increase the price that person would have to pay
to complete the acquisition. The Rights Agreement may deter a potential
acquisition or tender offer.
Under the Rights Agreement, the Right to purchase from USS one-hundredth of
a share of Series A Junior Preferred Stock, no par value (the "Junior Preferred
Stock"), at a purchase price of $110 in cash, subject to adjustment, is attached
to each share of common stock.
The Rights will expire at the close of business on December 31, 2011,
unless that date is extended or the rights are earlier redeemed or exchanged by
USS as described below.
Until the Rights are distributed, they will:
- not be exercisable;
- be represented by the same certificates that represent the common stock;
and
- trade together with the common stock.
If the Rights are distributed, they will become exercisable, and USS would
issue separate certificates representing the Rights, which would trade
separately from USS' common stock.
The Rights would be distributed upon the earlier of
- 10 business days following a public announcement that a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired
(except pursuant to a Qualifying Offer (defined in the Rights Agreement
as an all-cash tender offer for all outstanding shares of common stock
meeting certain prescribed requirements)), or obtained the right to
acquire, beneficial ownership of common stock representing 15% or more of
the total voting power of all outstanding shares of common stock (the
"Stock Acquisition Date"), or
- 10 business days (or upon such later date as may be determined by the
board of directors) following the commencement of a tender offer or
exchange offer (other than a Qualifying Offer) that would result in a
person or a group beneficially owning common stock representing 15% or
more of the total voting power of all outstanding shares of common stock.
27
However, an "Acquiring Person" will not include USS, any of its
subsidiaries, any of its employee benefit plans or any person organized pursuant
to those employee benefit plans or a person acquiring pursuant to a Qualifying
Offer. The Rights Agreement also contains provisions designed to prevent the
inadvertent triggering of the Rights by institutional or certain other
stockholders.
If a person or group becomes the beneficial owner of common stock
representing 15% or more of the total voting power of all outstanding shares of
common stock (except pursuant to a Qualifying Offer), the Rights "flip-in" and
entitle each holder of a Right (other than the Acquiring Person and certain
related parties) to receive, upon exercise, common stock (or in certain
circumstances, cash, property, or other securities of USS), having a value equal
to two times the exercise price of the Right. However, Rights are not
exercisable until such time as the Rights are no longer redeemable by USS as set
forth below.
If at any time following the Stock Acquisition Date, (i) USS consolidates
with, or merges with and into, any other person in a transaction in which USS is
not the surviving corporation (other than a merger that follows a Qualifying
Offer) or another person consolidates with, or merges with or into, USS and USS'
common stock is changed into or exchanged for securities of another person or
cash or other property, or (ii) 50% or more of USS' assets, earning power or
cash flow is sold or transferred, the Rights "flip-over" and entitle each holder
of a Right (other than an Acquiring Person and certain related parties) to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right.
USS reserves the right, before the occurrence of an event described in the
two preceding paragraphs, to require that upon an exercise of Rights, a number
of Rights be exercised so that only whole shares of Junior Preferred Stock would
be issued.
At any time until the earlier of 10 business days following the Stock
Acquisition Date and December 31, 2011 (subject to extension), USS may redeem
the Rights in whole, but not in part, at a price of $.01 per whole Right payable
in stock or cash or any other form of consideration deemed appropriate by its
board of directors (the "Redemption Price"). Immediately upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of the Rights will be to receive the
Redemption Price.
The board of directors may, at its option, at any time after any person
becomes an Acquiring Person, exchange all or part of the outstanding and
exercisable Rights (other than Rights held by the Acquiring Person and certain
related parties) for shares of common stock at an exchange ratio of one share of
common stock for each Right (subject to certain anti-dilution adjustments).
However, the board of directors may not effect such an exchange at any time any
person or group beneficially owns common stock representing 50% or more of the
total voting power of the common stock then outstanding. Immediately after the
board of directors orders such an exchange, the right to exercise the Rights
will terminate, and the only right of the holders of the Rights will be to
receive shares of common stock at the exchange ratio.
As long as the Rights are attached to shares of common stock, USS will
issue Rights on each share of common stock issued prior to the earlier of the
rights distribution date and the expiration date of the Rights so that all such
shares will have attached Rights.
A holder of Rights will not, as such, have any rights as a shareholder of
USS, including rights to vote or receive dividends.
The purchase price payable upon exercise of the Rights is subject to
adjustment from time to time to prevent dilution, subject to the qualifications
set forth in the rights agreement:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Junior Preferred Stock;
- if holders of Junior Preferred Stock are granted certain rights or
warrants to subscribe for Junior Preferred Stock or securities
convertible into Junior Preferred Stock at less than the market price of
the Junior Preferred Stock; or
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- upon the distribution to holders of the Junior Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those
referred to above).
At any time prior to the distribution of the Rights, the board of directors
may amend any provision of the Rights Agreement. After the distribution of the
Rights, the board of directors may amend the provisions of the Rights Agreement
in order to:
- cure any ambiguity;
- correct any defective or inconsistent provision;
- shorten or lengthen any time period under the Rights Agreement, subject
to the limitations specified in the rights agreement; or
- make changes that will not adversely affect the interests of the holders
of Rights (other than an Acquiring Person and certain related parties);
provided, that no amendment may be made when the Rights are not redeemable.
The distribution of the Rights will not be taxable to USS or its
stockholders. A stockholder may recognize taxable income in the event that the
Rights become exercisable for common stock (or other consideration) of USS or
common stock of an acquiring company.
This description is only a summary of the material provisions of the rights
agreement. We urge you to read the Rights Agreement because it, and not this
description, defines your rights as holders of Rights. A copy of the Rights
Agreement is available free of charge from the Rights Agent by writing to Mellon
Investor Services, LLC at 500 Grant Street, Room 2122, Pittsburgh, Pennsylvania
15219 or from USS. (See "Where You Can Find More Information.")
DELAWARE LAW, OUR CERTIFICATE OF INCORPORATION AND BY-LAWS CONTAIN PROVISIONS
THAT MAY HAVE AN ANTI-TAKEOVER EFFECT
Certain provisions of Delaware law and our certificate of incorporation
could make more difficult or delay a change in control of USS by means of a
tender offer, a proxy contest or otherwise and the removal of incumbent
directors. These provisions are intended to discourage certain types of coercive
takeover practices and inadequate takeover bids, even though such a transaction
may offer our stockholders the opportunity to sell their stock at a price above
the prevailing market price. Our board of directors believes that these
provisions are appropriate to protect the interests of USS and of its
stockholders.
Delaware Law. We are governed by the provisions of Section 203 of the
Delaware General Corporation Law. In general, Section 203 prohibits a public
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless:
- before the business combination, the corporation's board of directors
approved either the business combination or the transaction that resulted
in the stockholder's becoming an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder's
becoming an interested stockholder, the stockholder owned at least 85% of
the outstanding voting stock of the corporation at the time the
transaction commenced, excluding for the purpose of determining the
number of shares outstanding those shares owned by the corporation's
officers and directors and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- at or subsequent to the time, the business combination is approved by the
corporation's board of directors and authorized at an annual or special
meeting of its stockholders, and not by written
29
consent, by the affirmative vote of at least 66 2/3% of its outstanding
voting stock that is not owned by the interested stockholder.
A "business combination" includes mergers, asset sales or other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years did own) 15% or more of the corporation's voting stock.
Certificate of Incorporation and By-Laws. Our certificate of incorporation
provides that our board of directors is classified into three classes of
directors, each class consisting of approximately one-third of the directors.
Directors serve a three-year term, with a different class of directors up for
election each year. Under Delaware law, directors of a corporation with a
classified board may be removed only for cause unless the corporation's
certificate of incorporation provides otherwise. Our certificate of
incorporation does not provide otherwise. Board classification could prevent a
party who acquires control of a majority of USS' outstanding voting stock from
obtaining control of its board of directors until the second annual
stockholders' meeting following the date that party obtains that control.
Our certificate of incorporation also provides that any action required or
permitted to be taken by its stockholders must be effected at a duly called
annual or special meeting and may not be taken by written consent.
Our by-laws provide that special meetings of stockholders may be called
only by the board of directors and not by the stockholders. Our by-laws include
advance notice and informational requirements and time limitations on any
director nomination or any new proposal that a stockholder wishes to make at a
meeting of stockholders. In general, a stockholder's notice of a director
nomination or proposal will be timely if delivered or mailed to our Secretary at
our principal executive offices not less than 45 days and, in certain
situations, 90 days, before the annual meeting or within 10 days following the
announcement of the date of the meeting. These provisions may preclude
stockholders from bringing matters before a meeting or from making nominations
for directors at these meetings.
Our certificate of incorporation and by-laws do not include a provision for
cumulative voting for directors. Under cumulative voting, a minority stockholder
holding a sufficient percentage of a class of shares may be able to ensure the
election of one or more directors.
Our certificate of incorporation provides for the issuance of preferred
stock, at the discretion of our board of directors, from time to time, in one or
more series, without further action by our stockholders, unless approval of our
stockholders is deemed advisable by our board of directors or required by
applicable law, regulation or stock exchange listing requirements. In addition,
our authorized but unissued shares of our common stock will be available for
issuance from time to time at the discretion of our board of directors without
the approval of our stockholders, unless such approval is deemed advisable by
our board of directors or required by applicable law, regulation or stock
exchange listing requirements. One of the effects of the existence of
authorized, unissued and unreserved shares of our common stock and preferred
stock could be to enable our board of directors to issue shares to persons
friendly to current management that could render more difficult or discourage an
attempt to obtain control of USS by means of a merger, tender offer, proxy
contest or otherwise, and thereby protect the continuity of our management. Such
additional shares also could be used to dilute the stock ownership of persons
seeking to obtain control of USS.
Our certificate of incorporation provides that vacancies in our board of
directors may be filled only by the affirmative vote of a majority of the
remaining directors. The certificate of incorporation also provides that
directors may be removed from office only with cause and only by the affirmative
vote of holders of a majority of the shares then entitled to vote at an election
of directors. These provisions preclude stockholders from removing directors
without cause and filling vacancies with their own nominees.
Our Rights will permit disinterested stockholders to acquire additional
shares of USS, or of an acquiring company, at a substantial discount in the
event of certain changes in control. See "Description of Capital Stock -- Rights
Plan."
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Certain provisions described above may have the effect of delaying
stockholder actions with respect to certain business combinations. As such, the
provisions could have the effect of discouraging open market purchases of our
shares of common stock because such provisions may be considered disadvantageous
by a stockholder who desires to participate in a business combination.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that a director is not personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty as a director, except (1) for breach of the director's duty of
loyalty to us and our stockholders, (2) for acts and omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (3) under
Section 174 of the Delaware General Corporation Law or (4) for any transaction
from which the director derived an improper personal benefit. These provisions
of our certificate of incorporation are intended to afford directors protection,
and limit their potential liability, to the fullest extent permitted by Delaware
law. Because of these provisions, stockholders may be unable to recover monetary
damages against directors for actions taken by them that constitute negligence
or gross negligence or that are in violation of some of their fiduciary duties.
These provisions do not affect a director's responsibilities under any other
laws, such as the federal securities laws.
In addition, our By-Laws provide that we will indemnify our directors and
officers to the fullest extent permitted by law.
We have obtained directors' and officers' insurance for our directors and
officers for specified liabilities.
DESCRIPTION OF DEPOSITARY SHARES
The following briefly summarizes the material provisions of the deposit
agreement and of the depositary shares and depositary receipts, other than
pricing and related terms disclosed for a particular issuance in an accompanying
prospectus supplement. You should read the particular terms of any depositary
shares and any depositary receipts that we offer and any deposit agreement
relating to a particular series of preferred stock which will be described in
more detail in a prospectus supplement. The prospectus supplement will also
state whether any of the generalized provisions summarized below do not apply to
the depositary shares or depositary receipts being offered. A copy of the form
of deposit agreement, including the form of depositary receipt, is incorporated
by reference as an exhibit in the registration statement of which this
prospectus forms a part. You can obtain copies of these documents by following
the directions on page ii. You should read the more detailed provisions of the
deposit agreement and the form of depositary receipt for provisions that may be
important to you.
GENERAL
USS may, at its option, elect to offer fractional shares of preferred
stock, rather than full shares of preferred stock. In such event, we will issue
receipts for depositary shares, each of which will represent a fraction of a
share of a particular series of preferred stock.
The shares of any series of preferred stock represented by depositary
shares will be deposited under a deposit agreement between USS and a bank or
trust company selected by USS having its principal office in the United States
and having a combined capital and surplus of at least $50 million, as preferred
stock depositary. Each owner of a depositary share will be entitled to all the
rights and preferences of the underlying preferred stock, including dividend,
voting, redemption, conversion and liquidation rights, in proportion to the
applicable fraction of a share of preferred stock represented by such depositary
share.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of preferred stock in accordance
with the terms of the applicable prospectus supplement.
31
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of the deposited preferred stock to the
record holders of depositary shares relating to such preferred stock in
proportion to the number of such depositary shares owned by such holders.
The preferred stock depositary will distribute any property received by it
other than cash to the record holders of depositary shares entitled thereto. If
the preferred stock depositary determines that it is not feasible to make such
distribution, it may, with the approval of USS, sell such property and
distribute the net proceeds from such sale to such holders.
REDEMPTION OF PREFERRED STOCK
If a series of preferred stock represented by depositary shares is to be
redeemed, the depositary shares will be redeemed from the proceeds received by
the preferred stock depositary resulting from the redemption, in whole or in
part, of such series of preferred stock. The depositary shares will be redeemed
by the preferred stock depositary at a price per depositary share equal to the
applicable fraction of the redemption price per share payable in respect of the
shares of preferred stock so redeemed.
Whenever USS redeems shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will redeem as of the same date the
number of depositary shares representing shares of preferred stock so redeemed.
If fewer than all the depositary shares are to be redeemed, the depositary
shares to be redeemed will be selected by the preferred stock depositary by lot
or ratably as the preferred stock depositary may decide.
VOTING DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
deposited preferred stock are entitled to vote, the preferred stock depositary
will mail the information contained in such notice of meeting to the record
holders of the depositary shares relating to such series of preferred stock.
Each record holder of such depositary shares on the record date will be entitled
to instruct the preferred stock depositary to vote the amount of the preferred
stock represented by such holder's depositary shares. The preferred stock
depositary will try to vote the amount of such series of preferred stock
represented by such depositary shares in accordance with such instructions.
USS will agree to take all actions that the preferred stock depositary
determines are necessary to enable the preferred stock depositary to vote as
instructed. The preferred stock depositary will abstain from voting shares of
any series of preferred stock held by it for which it does not receive specific
instructions from the holders of depositary shares representing such shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between USS and the preferred stock depositary. However, any amendment that
materially and adversely alters any existing right of the holders of depositary
shares (other than certain changes in the fees of the preferred stock
depositary) will not be effective unless such amendment has been approved by the
holders of at least a majority of the depositary shares then outstanding. Every
holder of an outstanding depositary receipt at the time any such amendment
becomes effective shall be deemed, by continuing to hold such depositary
receipt, to consent and agree to such amendment and to be bound by the deposit
agreement, as amended thereby. The deposit agreement may be terminated only if:
- all outstanding depositary shares have been redeemed; or
- a final distribution in respect of the preferred stock has been made to
the holders of depositary shares in connection with any liquidation,
dissolution or winding up of USS.
32
CHARGES OF PREFERRED STOCK DEPOSITARY, TAXES AND OTHER GOVERNMENT CHARGES
USS will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. USS also will pay
charges of the depositary in connection with the initial deposit of preferred
stock and any redemption of preferred stock. Holders of depositary receipts will
pay other transfer and other taxes and governmental charges and such other
charges, including a fee for the withdrawal of shares of preferred stock upon
surrender of depositary receipts, as are expressly provided in the deposit
agreement to be for their accounts.
APPOINTMENT, RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depository will be appointed by USS. The preferred
stock depositary may resign at any time by delivering to USS notice of its
intent to do so and USS may at any time remove the preferred stock depositary,
any such resignation or removal to take effect upon the appointment of a
successor preferred stock depositary and its acceptance of such appointment.
Such successor preferred stock depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50 million.
MISCELLANEOUS
USS will transmit to the record holders of depositary shares all notices
and reports that USS is required to furnish to the holders of the depositary
shares.
Neither the preferred stock depositary nor USS will be liable under the
deposit agreement other than for its negligence or willful misconduct. The
preferred stock depositary and USS will not be obligated to prosecute or defend
any legal proceeding in respect of any depositary shares, depositary receipts or
shares of preferred stock unless satisfactory indemnity is furnished. USS and
the preferred stock depositary may rely upon written advice of counsel or
accountants, or upon information provided by holders of depositary receipts or
other persons believed to be competent and on documents believed to be genuine.
The preferred stock depositary will not be responsible for any failure to carry
out any instruction to vote any shares of preferred stock, as long as that
action or non-action is in good faith.
33
DESCRIPTION OF WARRANTS
USS may issue Warrants for the purchase of Debt Securities, preferred stock
or common stock (each a "USS Security," and together the "USS Securities").
Warrants may be issued independently or together with any USS Security offered
by any prospectus supplement and may be attached to or separate from any such
USS Security. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between USS and a bank or
trust company, as warrant agent (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of USS in connection with the Warrants and will not
assume any obligation or relationship of agency or trust for or with any holders
or beneficial owners of Warrants. The following summary of certain provisions of
the Warrants does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the Warrant Agreement that will
be filed with the SEC in connection with the offering of such Warrants.
DEBT WARRANTS
The prospectus supplement relating to a particular issue of Warrants to
issue Debt Securities ("Debt Warrants") will describe the terms of such Debt
Warrants, including the following (if applicable): (a) the title of such Debt
Warrants; (b) the offering price for such Debt Warrants; (c) the aggregate
number of such Debt Warrants; (d) the designation and terms of the Debt
Securities purchasable upon exercise of such Debt Warrants; (e) the designation
and terms of the Debt Securities with which such Debt Warrants are issued and
the number of such Debt Warrants issued with each such Debt Security; (f) the
date from and after which such Debt Warrants and any Debt Securities issued
therewith will be separately transferable; (g) the principal amount of Debt
Securities purchasable upon exercise of a Debt Warrant and the price at which
such principal amount of Debt Securities may be purchased upon exercise (which
price may be payable in cash, securities, or other property); (h) the date on
which the right to exercise such Debt Warrants shall commence and the date on
which such right shall expire; (i) the minimum or maximum amount of such Debt
Warrants that may be exercised at any one time; (j) whether the Debt Warrants
represented by the Debt Warrant certificates, or Debt Securities that may be
issued upon exercise of the Debt Warrants, will be issued in registered or
bearer form; (k) information with respect to book-entry procedures; (l) the
currency or currency units in which the offering price and the exercise price
are payable; (m) a discussion of material United States federal income tax
considerations; (n) the redemption or call provisions applicable to such Debt
Warrants; and (o) any additional terms of the Debt Warrants, including terms,
procedures, and limitations relating to the exchange and exercise of such Debt
Warrants.
STOCK WARRANTS
The prospectus supplement relating to any particular issue of Warrants to
issue preferred stock, depositary shares representing fractional shares of
preferred stock or common stock will describe the terms of such Warrants,
including the following (if applicable): (a) the title of such Warrants; (b) the
offering price for such Warrants; (c) the aggregate number of such Warrants; (d)
the designation and terms of the preferred stock or common stock purchasable
upon exercise of such Warrants; (e) the designation and terms of the USS
Securities with which such Warrants are issued and the number of such Warrants
issued with each such USS Security; (f) the date from and after which such
Warrants and any USS Securities issued therewith will be separately
transferable; (g) the number of shares of preferred stock or common stock
purchasable upon exercise of a Warrant and the price at which such shares may be
purchased upon exercise; (h) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (i) the
minimum or maximum amount of such Warrants that may be exercised at any one
time; (j) the currency or currency units in which the offering price and the
exercise price are payable; (k) a discussion of material United States federal
income tax considerations; (l) the antidilution provisions of such Warrants; (m)
the redemption or call provisions applicable to such Warrants; and (n) any
additional terms of the Warrants, including terms, procedures, and limitations
relating to the exchange and exercise of such Warrants.
34
DESCRIPTION OF CONVERTIBLE OR EXCHANGEABLE SECURITIES
If any Debt Security, Preferred Stock, depositary shares representing
fractional shares of preferred stock or Warrant is converted or exchanged into
any other security the conversion or exchange terms thereof will be set forth in
the Prospectus Supplement issued for the sale of such convertible or
exchangeable security. These terms will include some or all of the terms
described for Warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
USS may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to holders, a specified number of
shares of common stock at a future date or dates. The consideration per share of
common stock may be fixed at the time the stock purchase contracts are issued or
may be determined by reference to a specific formula described in the stock
purchase contracts. USS may issue the stock purchase contracts separately or as
a part of stock purchase units consisting of a stock purchase contract and one
or more shares of our preferred stock or debt securities or debt obligations of
third parties (including U.S. Treasury securities) securing the holders'
obligations to purchase the shares of common stock under the stock purchase
contracts. The stock purchase contracts may require us to make periodic payments
to the holders of stock purchase units or vice-versa. These payments may be
unsecured or prefunded on some basis. The stock purchase contracts may require
holders to secure their obligations in a specified manner. The applicable
prospectus supplement will describe the specific terms of any stock purchase
contracts or stock purchase units.
PLAN OF DISTRIBUTION
We may offer the offered securities in one or more of the following ways
from time to time:
- to or through underwriting syndicates represented by managing
underwriters;
- through one or more underwriters without a syndicate for them to offer
and sell to the public;
- through dealers or agents;
- to investors directly in negotiated sales or in competitively bid
transactions; or
- to holders of other securities in exchanges in connection with
acquisitions;
The prospectus supplement for each series of securities we sell will
describe the offering, including:
- the name or names of any underwriters;
- the purchase price and the proceeds to us from that sale;
- any underwriting discounts and other items constituting underwriters'
compensation, which in the aggregate will not exceed eight percent of the
gross proceeds of the offering;
- any commissions paid to agents;
- the initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
- any securities exchanges on which the securities may be listed.
UNDERWRITERS
If underwriters are used in a sale, we will execute an underwriting
agreement with them regarding those securities. Unless otherwise described in
the prospectus supplement, the obligations of the underwriters to purchase these
securities will be subject to conditions, and the underwriters must purchase all
of these securities if any are purchased.
The securities subject to the underwriting agreement may be acquired by the
underwriters for their own account and may be resold by them from time to time
in one or more transactions, including
35
negotiated transactions, at a fixed offering price or at varying prices
determined at the time of sale. Underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and
may also receive commissions from the purchasers of these securities for whom
they may act as agent. Underwriters may sell these securities to or through
dealers. These dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent. Any initial offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
We may authorize underwriters to solicit offers by institutions to purchase
the securities subject to the underwriting agreement from us, at the public
offering price stated in the prospectus supplement under delayed delivery
contracts providing for payment and delivery on a specified date in the future.
If we sell securities under these delayed delivery contracts, the prospectus
supplement will state that this is the case and will describe the conditions to
which these delayed delivery contracts will be subject and the commissions
payable for that solicitation.
In connection with underwritten offerings of the securities, the
underwriters may engage in over-allotment, stabilizing transactions, covering
transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934, as follows:
- Over-allotment involves sales in excess of the offering size, which
creates a short position for the underwriters.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Covering transactions involve purchases of the securities in the open
market after the distribution has been completed in order to cover short
positions.
- Penalty bids permit the underwriters to reclaim a selling concession from
a broker/dealer when the securities originally sold by that broker/dealer
are repurchased in a covering transaction to cover short positions.
These stabilizing transactions, covering transactions and penalty bids may
cause the price of the securities to be higher than it would otherwise be in the
absence of these transactions. If these transactions occur, they may be
discontinued at any time.
AGENTS
We may also sell any of the securities through agents designated by us from
time to time. We will name any agent involved in the offer or sale of these
securities and will list commissions payable by us to these agents in the
prospectus supplement. These agents will be acting on a best efforts basis to
solicit purchases for the period of its appointment, unless we state otherwise
in the prospectus supplement.
DIRECT SALES
We may sell any of the securities directly to purchasers. In this case, we
will not engage underwriters or agents in the offer and sale of these
securities.
In addition, debt securities or shares of common stock or preferred stock
may be issued upon the exercise of warrants.
INDEMNIFICATION
We may indemnify underwriters, dealers or agents who participate in the
distribution of securities against certain liabilities, including liabilities
under the Securities Act of 1933, and may agree to contribute to payments that
these underwriters, dealers or agents may be required to make.
36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission filing fee............... $ 55,200
Costs of printing and engraving............................. 90,000
Accounting fees and expenses................................ 55,000
Miscellaneous expenses...................................... 20,000
--------
Total............................................. $220,200
========
All of these foregoing expenses are estimated except for the Securities and
Exchange Commission filing fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the Corporation's By-Laws provides that the Corporation shall
indemnify to the fullest extent permitted by law any person who is made or is
threatened to be made a party or is involved in any action, suit, or proceeding
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as an officer, director,
employee or agent of another corporation, partnership, joint venture, trust,
enterprise, or nonprofit entity.
The Corporation is empowered by Section 145 of the Delaware General
Corporation Law, subject to the procedures and limitations stated therein, to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was
an officer, employee, agent or director of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Corporation may
indemnify any such person against expenses (including attorneys' fees) in an
action by or in the right of the Corporation under the same conditions, except
that no indemnification is permitted without judicial approval if such person is
adjudged to be liable to the Corporation. To the extent a director or officer is
successful on the merits or otherwise in the defense of any action referred to
above, the Corporation must indemnify him against the expenses that he actually
and reasonably incurred in connection therewith.
Policies of insurance are maintained by the Corporation under which
directors and officers of the Corporation are insured, within the limits and
subject to the limitations of the policies, against certain expenses in
connection with the defense of actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such actions, suits or
proceedings, to which they are parties by reason of being or having been such
directors or officers.
The Corporation's Certificate of Incorporation provides that no director
shall be personally liable to the Corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director, except
(i) for breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit.
II-1
ITEM 16. LIST OF EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table on the cover of this registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) USS hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of USS' annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
USS pursuant to the foregoing provisions, or otherwise, USS has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by USS of
expenses incurred or paid by a director, officer or controlling person of USS in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, USS will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-2
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PITTSBURGH, COMMONWEALTH
OF PENNSYLVANIA, ON OCTOBER 18, 2002.
UNITED STATES STEEL CORPORATION
(Registrant)
By: /s/ LARRY G. SCHULTZ
--------------------------------------
Vice President & Controller
Pittsburgh, Pennsylvania
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON OCTOBER 18, 2002.
SIGNATURE TITLE
--------- -----
* Chairman Board of Directors, Chief
----------------------------------------------------- Executive Officer, President and Director
Thomas J. Usher (Principal Executive Officer)
* Vice Chairman and Chief Operating Officer
----------------------------------------------------- and Director
Roy G. Dorrance
* Vice Chairman and Chief Legal &
----------------------------------------------------- Administrative Officer and Director
Dan D. Sandman
* Vice Chairman & Chief Financial Officer
----------------------------------------------------- and Director
John P. Surma Jr.
/s/ LARRY G. SCHULTZ Vice President & Controller
----------------------------------------------------- (Principal Accounting Officer)
Larry G. Schultz
* Director
-----------------------------------------------------
J. Gary Cooper
* Director
-----------------------------------------------------
Robert J. Darnall
* Director
-----------------------------------------------------
Shirley Ann Jackson
* Director
-----------------------------------------------------
Charles R. Lee
* Director
-----------------------------------------------------
Seth E. Schofield
II-3
SIGNATURE TITLE
--------- -----
* Director
-----------------------------------------------------
John W. Snow
* Director
-----------------------------------------------------
Douglas C. Yearley
*By /s/ GRETCHEN R. HAGGERTY
----------------------------------------------------
Gretchen R. Haggerty
Attorney in Fact
II-4
EXHIBIT INDEX
EXHIBIT
NUMBER
-------
*1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of USS dated December 31, 2001,
as currently in effect. (Incorporated by reference to
Exhibit 3(a) to USS' Report on Form 10-K dated for the year
ended December 31, 2001.)
**4.1 Form of Indenture for Debt Securities with Form of Debt
Securities.
**4.2 Form of Subordinated Indenture for Debt Securities with Form
of Debt Securities.
*4.3 Form of Deposit Agreement for Depositary Shares.
4.4 Rights Agreement. (Incorporated by Reference to Exhibit 4 to
the Registration Statement of USS on Form 8-A/A filed on
December 31, 2001.)
**5 Opinion and consent of R. M. Stanton, Esq.
12.1 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends. (Incorporated by reference to
Exhibit 12.1 to USS' Report on Form 10-Q for the quarterly
period ended June 30, 2002.)
12.2 Computation of Ratio of Earnings to Fixed Charges.
(Incorporated by reference to Exhibit 12.2 to USS' Report on
Form 10-Q for the quarterly period ended June 30, 2002.)
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Deloitte & Touche LLP.
**23.3 Consent of R. M. Stanton, Esq. (Included in Exhibit 5.)
**24 Powers of Attorney.
**25.1 Statement of Eligibility of Trustee for Indenture for Debt
Securities.
**25.2 Statement of Eligibility of Trustee for Subordinated
Indenture for Debt Securities.
------------------
* The Company will file as an exhibit to a current report on Form 8-K: (i) any
underwriting agreement relating to securities offered hereby, (ii) the
instruments setting forth the terms of any debt securities, preferred stock
or warrants, (iii) any Deposit Agreement for Depositary Shares, (iv) the
instruments setting forth the terms of any stock purchase contracts or stock
purchase units, (v) any additional required opinion of counsel to the Company
as to the legality of the securities offered hereby or (vi) any required
opinion of counsel to the Company as to certain tax matters relative to
securities offered hereby.
** Previously filed.