Analysis of Debt
Total Debt (Carrying Amount)
United States Steel Corp., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of the annual debt data reveals notable fluctuations in both short-term and long-term debt components over the five-year period.
- Short-term debt and current maturities
- This category experienced significant volatility. At the end of 2018, the short-term debt stood at 65 million USD, followed by a sharp decrease to 14 million USD in 2019. However, in 2020, it surged dramatically to 192 million USD, before dropping again to 28 million USD in 2021, and rising moderately to 63 million USD in 2022. This pattern indicates irregular short-term borrowing, possibly reflecting variable liquidity needs or refinancing activities.
- Long-term debt, excluding current maturities
- The long-term debt showed an increasing trend from 2018 through 2020, growing from 2,316 million USD to a peak of 4,695 million USD. This substantial growth could suggest increased reliance on long-term financing during this period. However, in 2021, the long-term debt decreased significantly to 3,863 million USD and then stabilized somewhat in 2022 at 3,914 million USD. This decline and stabilization may indicate repayments, refinancing, or adjustments in capital structure.
- Total debt (carrying amount)
- Total debt mirrored the pattern of its components, increasing from 2,381 million USD in 2018 to a high of 4,887 million USD in 2020. Subsequently, total debt decreased sharply to 3,891 million USD in 2021 and remained relatively steady at 3,977 million USD in 2022. The peak in 2020 followed by a reduction suggests a period of aggressive borrowing followed by debt reduction or restructuring initiatives.
Overall, the data reflects a period of escalating indebtedness reaching its zenith in 2020, followed by efforts to reduce or stabilize the debt levels in subsequent years. The short-term debt's volatility contrasts with the more gradual changes in long-term debt, indicating different management strategies or financing conditions for short-term obligations versus long-term liabilities.
Total Debt (Fair Value)
| Dec 31, 2022 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Debt, excludes finance lease obligations | 3,815) |
| Finance lease obligations | 276) |
| Total debt (fair value) | 4,091) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.03 |
Based on: 10-K (reporting date: 2022-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 6.12%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 6.65% | 274) | 18) | |
| 6.63% | 720) | 48) | |
| 6.88% | 475) | 33) | |
| 5.00% | 350) | 18) | |
| 6.75% | 924) | 62) | |
| 4.75% | 752) | 36) | |
| 5.79% | 123) | 7) | |
| Total | 3,618) | 221) | |
| 6.12% | |||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × 221 ÷ 3,618 = 6.12%
Interest Costs Incurred
United States Steel Corp., interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Interest Expense
- The interest expense showed a decreasing trend from 2018 to 2019, falling from 168 million USD to 142 million USD. However, in 2020, there was a significant increase to 280 million USD, followed by a further rise to 313 million USD in 2021. By 2022, interest expense had decreased noticeably to 159 million USD, indicating some reduction in borrowing costs or repayment of interest-bearing liabilities.
- Interest Capitalized
- Interest capitalized exhibited a consistent upward trend throughout the period analyzed. Starting at 7 million USD in 2018, the amount increased steadily each year, reaching 20 million USD in 2019, 26 million USD in 2020, 29 million USD in 2021, and peaking at 59 million USD in 2022. This suggests an increasing amount of interest costs are being added to the cost of assets rather than being expensed immediately.
- Interest Incurred
- The total interest incurred, combining interest expense and interest capitalized, followed a pattern similar to that of interest expense, with an overall increase from 175 million USD in 2018 to a peak of 342 million USD in 2021. It declined to 218 million USD in 2022. The rise between 2019 and 2021 was pronounced, nearly doubling, which indicates an increasing debt burden or higher borrowing costs during that period before decreasing in the last year of the dataset.
- Overall Analysis
- The data reveals considerable fluctuations in interest-related costs over the period. The sharp rise in both interest expense and interest incurred from 2019 to 2021 suggests either increased borrowing, changes in interest rates, or a combination of both. The steady increase in interest capitalized indicates a growing investment in capital projects financed through debt. The drop in 2022 in both interest expense and interest incurred could reflect deleveraging efforts, improved refinancing, or lower interest rates impacting the cost of debt.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 3,418 ÷ 159 = 21.50
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest incurred
= 3,418 ÷ 218 = 15.68
Over the analyzed period, the interest coverage ratios for the company exhibit significant volatility and eventual improvement. The standard interest coverage ratio, calculated without capitalized interest, shows a clear downward trend from 2018 through 2020, moving from a positive 5.83 to negative values in 2019 (-2.18) and 2020 (-3.67). This indicates an increasing difficulty in covering interest expenses during these two years. However, a marked recovery is evident from 2021 onwards, with ratios climbing sharply to 14.88 and further to 21.5 in 2022, suggesting a considerably stronger ability to meet interest obligations.
A similar pattern is observed for the adjusted interest coverage ratio, which includes capitalized interest. It begins at 5.6 in 2018, then declines to negative values of -1.91 in 2019 and -3.36 in 2020. This index also recovers beginning in 2021, increasing to 13.62 and then to 15.68 in 2022. Although the adjusted ratio follows the same trend as the unadjusted ratio, it consistently remains slightly lower during the recovery phase, indicating that capitalized interest slightly impacts the overall coverage measurement but does not alter the general trend.
The data suggests that the company experienced financial stress or reduced profitability between 2019 and 2020, impairing its interest coverage capacity. However, from 2021, the financial position improved significantly, allowing for a substantial increase in the ability to cover interest expenses both before and after adjusting for capitalized interest. The strong rebound by 2022 highlights enhanced earnings or reduced interest burdens, or both, improving financial stability after the challenging period.