UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2017

Or

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

For the transition period from                      to                     .

(Exact name of registrant as specified in its charter)

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

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

(412) 433-1121

(Registrant’s telephone number,

including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [P] No []

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

YesNoP

Common stock outstanding at April 20, 2017 – 174,659,943 shares

INDEX

			Page
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Consolidated Statement of Operations (Unaudited)	1
		Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	2
		Consolidated Balance Sheet (Unaudited)	3
		Consolidated Statement of Cash Flows (Unaudited)	4
		Notes to Consolidated Financial Statements (Unaudited)	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
	Item 4.	Controls and Procedures	42
		Supplemental Statistics (Unaudited)	43
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	44
	Item 4.	Mine Safety Disclosure	50
	Item 6.	Exhibits	50
SIGNATURE			51
WEB SITE POSTING			51

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements” within the meaning of Section 27 of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. Generally, we have identified such forward-looking statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “target,” “forecast,” “aim,” "should," “will” and similar expressions or by using future dates in connection with any discussion of, among other things, operating performance, trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described in this report and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

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

UNITED STATES STEEL CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	Three Months Ended   March 31,
(Dollars in millions, except per share amounts)	2017			2016
Net sales:
Net sales	$	2,412		$	2,026
Net sales to related parties (Note 18)	313			315
Total	2,725			2,341
Operating expenses (income):
Cost of sales (excludes items shown below)	2,561			2,436
Selling, general and administrative expenses	97			69
Depreciation, depletion and amortization	137			129
Earnings from investees	(4		)	(45		)
Restructuring and other charges (Note 19)	33			10
Net (gain) loss on disposal of assets	(1		)	3
Total	2,823			2,602
Loss before interest and income taxes	(98		)	(261		)
Interest expense	58			53
Interest income	(4		)	(1		)
Other financial costs	9			13
Net interest and other financial costs (Note 7)	63			65
Loss before income taxes	(161		)	(326		)
Income tax provision (Note 9)	19			14
Net loss	(180		)	(340		)
Less: Net earnings attributable to noncontrolling interests	—			—
Net loss attributable to United States Steel Corporation	$	(180	)	$	(340	)
Loss per common share(Note 10):
Loss per share attributable to United States Steel Corporation stockholders:
-Basic	$	(1.03	)	$	(2.32	)
-Diluted	$	(1.03	)	$	(2.32	)

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

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UNITED STATES STEEL CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended   March 31,
(Dollars in millions)	2017			2016
Net loss	$	(180	)	$	(340	)
Other comprehensive income (loss), net of tax:
Changes in foreign currency translation adjustments	23			61
Changes in pension and other employee benefit accounts	46			(224		)
Other	—			11
Total other comprehensive loss, net of tax	69			(152		)
Comprehensive loss including noncontrolling interest	(111		)	(492		)
Comprehensive income attributable to noncontrolling interest	—			—
Comprehensive loss attributable to United States Steel Corporation	$	(111	)	$	(492	)

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

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UNITED STATES STEEL CORPORATION

CONSOLIDATED BALANCE SHEET

(Dollars in millions)	(Unaudited)   March 31,   2017			December 31,    2016
Assets
Current assets:
Cash and cash equivalents	$	1,326		$	1,515
Receivables, less allowance of $27 and $25	1,116			976
Receivables from related parties, less allowance of $268 and $265 (Note 18)	283			272
Inventories (Note 11)	1,718			1,573
Other current assets	35			20
Total current assets	4,478			4,356
Property, plant and equipment	14,210			14,196
Less accumulated depreciation and depletion	10,330			10,217
Total property, plant and equipment, net	3,880			3,979
Investments and long-term receivables, less allowance of $10 and $10	533			528
Long-term receivables from related parties, less allowance of $1,676 and $1,627	—			—
Intangibles – net (Note 5)	173			175
Deferred income tax benefits (Note 9)	4			6
Other noncurrent assets	118			116
Total assets	$	9,186		$	9,160
Liabilities
Current liabilities:
Accounts payable and other accrued liabilities	$	1,828		$	1,602
Accounts payable to related parties (Note 18)	83			66
Payroll and benefits payable	320			400
Accrued taxes	140			128
Accrued interest	66			85
Current portion of long-term debt (Note 13)	281			50
Total current liabilities	2,718			2,331
Long-term debt, less unamortized discount and debt issuance costs (Note 13)	2,752			2,981
Employee benefits	1,180			1,216
Deferred income tax liabilities (Note 9)	28			28
Deferred credits and other noncurrent liabilities	334			329
Total liabilities	7,012			6,885
Contingencies and commitments (Note 20)
Stockholders’ Equity (Note 16):
Common stock (176,424,554 shares issued) (Note10)	176			176
Treasury stock, at cost (1,786,599 shares and 2,614,378 shares)	(119		)	(182		)
Additional paid-in capital	3,969			4,027
Accumulated deficit	(425		)	(250		)
Accumulated other comprehensive loss (Note 17)	(1,428		)	(1,497		)
Total United States Steel Corporation stockholders’ equity	2,173			2,274
Noncontrolling interests	1			1
Total liabilities and stockholders’ equity	$	9,186		$	9,160

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

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UNITED STATES STEEL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Three Months Ended   March 31,
(Dollars in millions)	2017			2016
Increase (decrease) in cash and cash equivalents
Operating activities:
Net loss	$	(180	)	$	(340	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation, depletion and amortization	137			129
Restructuring and other charges (Note 19)	33			10
Provision for doubtful accounts	1			—
Pensions and other postretirement benefits	14			(9		)
Deferred income taxes	2			9
Net (gain) loss on disposal of assets	(1		)	3
Distributions received, net of equity investees earnings	(4		)	(43		)
Changes in:
Current receivables	(146		)	(63		)
Inventories	(140		)	285
Current accounts payable and accrued expenses	116			72
Income taxes receivable/payable	15			5
Bank checks outstanding	(1		)	24
All other, net	19			31
Net cash (used in) provided by operating activities	(135		)	113
Investing activities:
Capital expenditures	(47		)	(148		)
Change in restricted cash, net	(3		)	(3		)
Investments, net	(1		)	(1		)
Net cash used in investing activities	(51		)	(152		)
Financing activities:
Repayment of long-term debt	—			(17		)
Dividends paid	(9		)	(7		)
Receipt from exercise of stock options	12			—
Taxes paid for equity compensation plans (Note 3)	(7		)	—
Net cash used in financing activities	(4		)	(24		)
Effect of exchange rate changes on cash	1			13
Net decrease in cash and cash equivalents	(189		)	(50		)
Cash and cash equivalents at beginning of year	1,515			755
Cash and cash equivalents at end of period	$	1,326		$	705

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

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Notes to Consolidated Financial Statements (Unaudited)

1.    Basis of Presentation and Significant Accounting Policies

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

The year-end Consolidated Balance Sheet data was derived from audited statements but does not include all disclosures required for complete financial statements by accounting principles generally accepted in the United States of America (U.S. GAAP). The other information in these financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair statement of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. Additional information is contained in the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which should be read in conjunction with these financial statements.

Change in Accounting Estimate - Capitalization and Depreciation Method

During the first quarter of 2017, U. S. Steel completed a review of its accounting policy for property, plant and equipment depreciated on a group basis. As a result of this review, U. S. Steel changed its accounting method for property, plant and equipment from the group method of depreciation to the unitary method of depreciation, effective as of January 1, 2017. The Company believes the change from the group method to the unitary method of depreciation is preferable under U.S. GAAP as it will result in a more precise estimate of depreciation expense. Additionally, the change to the unitary method of depreciation is consistent with the depreciation method applied by our competitors, and improves the comparability of our results to our competitors. Our change in the method of depreciation is considered a change in accounting estimate effected by a change in accounting principle and has been applied prospectively. Due to the application of the unitary method of depreciation and resultant change in our capitalization policy, maintenance and outage spending that had previously been expensed will now be capitalized if it extends the useful life of the related asset. The effect of the change was a decrease in both income from continuing operations and net income by $2 million (which consists of increased depreciation expense of $19 million as a result of the impact of unitary depreciation on the existing net book value of fixed assets, as noted below, and the capitalization of maintenance and outage spending partially offset by a $17 million decrease in cost of sales due to the capitalization of maintenance and outage spending that would have been previously expensed) and a decrease in diluted earnings per share of $0.01 for the three months ended March 31, 2017. The tax effect of this change was immaterial to the consolidated financial statements.

U. S. Steel's property, plant and equipment totaled $3,979 million at December 31, 2016. U. S. Steel allocated the existing net book value of group assets at the transition date to approximate a unitary depreciation methodology, and the fixed assets will be depreciated over their estimated remaining useful lives as follows:

	(In millions)
Remaining Useful Life of Assets	Net Book Value at December 31, 2016
Under 5 years	$	597
6-10 years	629
11-15 years	765
15-20 years	654
21-25 years	363
Over 25 years	479
Assets not subject to depreciation	492
Total	$	3,979

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2.    New Accounting Standards

On March 10, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-07, Compensation - Retirement Benefits (ASU 2017-07). ASU 2017-07 requires an employer who offers defined benefit and post retirement benefit plans to report the service cost component of the net periodic benefit cost in the same line item or items as other compensation cost arising from services rendered by employees during the period. The other components of net period benefit costs are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The ASU also allows for the service cost component of net periodic benefit cost to be eligible for capitalization into inventory when applicable. ASU 2017-07 is effective for periods beginning after December 15, 2017, including interim periods within those annual periods; early adoption is permitted. U. S. Steel is currently evaluating the financial implications of adopting ASU 2017-07.

On August 26, 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 reduces diversity in practice in how certain transactions are classified in the statement of cash flows by addressing eight specific cash receipt and cash payment issues. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. U. S. Steel is evaluating the financial statement implications of adopting ASU 2016-15.

On February 25, 2016, the FASB issued Accounting Standards Update 2016-02, Leases (ASU 2016-02). ASU 2016-02 supersedes prior lease accounting guidance. Under ASU 2016-02, for operating leases, a lessee should recognize in its statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term; recognize a single lease cost, which is allocated over the lease term, generally on a straight line basis, and classify all cash payments within the operating activities in the statement of cash flow. For financing leases, a lessee is required to recognize a right-of-use asset and a lease liability; recognize interest on the lease liability separately from amortization of the right-of-use asset, and classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability within the operating activities in the statement of cash flows. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. In addition, at the inception of a contract, an entity should determine whether the contact is or contains a lease. ASU 2016-02 is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, using a modified retrospective approach. U. S. Steel is evaluating the financial statement implications of adopting ASU 2016-02, but recognizing the lease liability and related right-of-use asset will impact our balance sheet.

On May 28, 2014, the FASB and the International Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2016; early application is not permitted. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date (ASU 2015-14). ASU 2015-14 defers the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period, and only permits entities to adopt the standard one year earlier as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. U. S. Steel is currently reviewing the significant customer contracts and associated revenue streams, accounting policies, information technology systems and related internal controls in anticipation of adopting ASU 2014-09 using a full retrospective approach on January 1, 2018. U. S. Steel does not expect a material financial statement impact relating to the adoption of this ASU.

3.    Recently Adopted Accounting Standards

On March 30, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-09, Compensation - Stock Compensation (ASU 2016-09). ASU 2016-09 simplifies the accounting and reporting of certain aspects of shared-based payment transactions, including income tax treatment of excess

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tax benefits, forfeitures, classification of share-based awards as either equity or liabilities, and classification in the statement of cash flows for certain share-based transactions related to tax benefits and tax payments. ASU 2016-09 was effective for public business entities for annual periods beginning after December 15, 2016.

On January 1, 2017, the Company adopted the provisions of ASU 2016-09. The adoption of ASU 2016-09 did not have a significant impact on the Company’s Consolidated Financial Statements and included the following items: (1) adoption on a prospective basis of the recognition of excess tax benefits and tax deficiencies in the Company’s income tax expense line in the Consolidated Statement of Operations for vested and exercised equity awards as discrete items in the period in which they occur; (2) adoption on a prospective basis of the classification of excess tax benefits in cash flows from operations in the Company’s Consolidated Statement of Cash Flows; (3) adoption on a retrospective basis of the classification of cash paid by the Company for directly withholding shares for tax withholding purposes in cash flows from financing activities, and (4) adoption on a prospective basis for the exclusion of the amount of excess tax benefits when applying the treasury stock method for the Company’s diluted earnings per share calculation.

Additionally, the Company continues to withhold the statutory minimum taxes for participants in the Company’s stock-based compensation plans and estimates forfeiture rates at the grant date and the expected term of its equity awards based on historical results.

On July 22, 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory(ASU 2015-11). ASU 2015-11 requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. ASU 2015-11 will not apply to inventories that are measured using either the last-in, first-out (LIFO) method or the retail inventory method. ASU 2015-11 was effective for public entities for financial statements issued for fiscal years beginning after December 15, 2016. U. S. Steel adopted ASU 2015-11 on January 1, 2017. The adoption did not have a significant financial statement impact to U. S. Steel.

4.    Segment Information

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

The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being earnings (loss) before interest and income taxes. Earnings (loss) before interest and income taxes for reportable segments and Other Businesses does not include net interest and other financial costs (income), income taxes, postretirement benefit expenses (other than service cost and amortization of prior service cost for active employees) and certain other items that management believes are not indicative of future results. Information on segment assets is not disclosed, as it is not reviewed by the chief operating decision maker. The chief operating decision maker assesses the Company's assets on an enterprise wide level, based upon the projects that yield the greatest return to the Company as a whole, and not on an individual segment level.

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

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The results of segment operations for the three months ended March 31, 2017 and 2016 are:

(In millions) First Quarter 2017	Customer Sales		Intersegment Sales			Net Sales			Earnings (loss) from investees		Earnings (loss) before interest and income taxes
Flat-Rolled	$	1,865	$	21		$	1,886		$	3	$	(90	)
USSE	673		13			686			—		87
Tubular	171		—			171			1		(57		)
Total reportable segments	2,709		34			2,743			4		(60		)
Other Businesses	16		30			46			—		13
Reconciling Items and Eliminations	—		(64		)	(64		)	—		(51		)
Total	$	2,725	$	—		$	2,725		$	4	$	(98	)
First Quarter 2016
Flat-Rolled	$	1,732	$	16		$	1,748		$	43	$	(188	)
USSE	476		1			477			—		(14		)
Tubular	108		—			108			2		(64		)
Total reportable segments	2,316		17			2,333			45		(266		)
Other Businesses	25		27			52			—		14
Reconciling Items and Eliminations	—		(44		)	(44		)	—		(9		)
Total	$	2,341	$	—		$	2,341		$	45	$	(261	)

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

	Three Months Ended March 31,
(In millions)	2017			2016
Items not allocated to segments:
Postretirement benefit (expense) / income (a)	$	(16	)	$	16
Other items not allocated to segments:
Loss on shutdown of certain tubular assets (b)	(35		)	—
Supplemental unemployment and severance costs (c)	—			(25		)
Total other items not allocated to segments	(35		)	(25		)
Total reconciling items	$	(51	)	$	(9	)

^(a) Consists of the net periodic benefit cost elements, other than service cost and amortization of prior service cost for active

employees, associated with our defined pension, retiree health care and life insurance benefit plans.

^(b) Included in Restructuring and other charges in the Consolidated Statement of Operations. See Note 19 to the Consolidated Financial Statements.

^(c) Approximately $15 million is included in Cost of sales and approximately $10 million is included in Restructuring and other

charges in the Consolidated Statement of Operations. See Note 19 to the Consolidated Financial Statements.

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5.     Intangible Assets

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

		As of March 31, 2017						As of December 31, 2016
(In millions)	Useful Lives	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	12 Years	$	133	$	61	$	72	$	132	$	59	$	73
Patents	5-10 Years	22		3		19		22		2		20
Other	2-10 Years	14		7		7		14		7		7
Total amortizable intangible assets		$	169	$	71	$	98	$	168	$	68	$	100

The carrying amount of acquired indefinite lived water rights as of March 31, 2017 and December 31, 2016 totaled $75 million. The research and development activities of the Company's acquired indefinite lived in-process research and development patents was completed during the fourth quarter of 2016 and are now being amortized over their useful lives of approximately 10 years. The indefinite lived intangible assets are tested for impairment annually in the third quarter, or whenever events or circumstances indicate that the carrying value may not be recoverable.

Identifiable intangible assets with finite lives are reviewed for impairment whenever events or circumstances indicate that the carrying values may not be recoverable.

Amortization expense was $3 million and $2 million in the three months ended March 31, 2017 and March 31, 2016, respectively. The estimated future amortization expense of identifiable intangible assets during the next five years is $6 million for the remaining portion of 2017 and $9 million each year from 2018 to 2021.

6.    Pensions and Other Benefits

The following table reflects the components of net periodic benefit cost (income) for the three months ended March 31, 2017 and 2016:

	Pension Benefits						Other Benefits
(In millions)	2017			2016			2017			2016
Service cost	$	12		$	13		$	4		$	5
Interest cost	59			65			23			25
Expected return on plan assets	(97		)	(105		)	(16		)	(37		)
Amortization of prior service cost	—			3			7			6
Amortization of actuarial net loss	37			32			1			—
Net periodic benefit cost (income), excluding below	11			8			19			(1		)
Multiemployer plans	15			17			—			—
Settlement, termination and curtailment losses (a)	4			—			—			—
Net periodic benefit cost (income)	$	30		$	25		$	19		$	(1	)

^(a) During the first quarter of 2017, the non-qualified pension plan incurred settlement charges of approximately $4 million due to lump sum payments for certain individuals.

Employer Contributions

During the first three months of 2017, U. S. Steel made cash payments of $15 million to the Steelworkers’ Pension Trust and $7 million of pension payments not funded by trusts.

During the first three months of 2017, cash payments of $14 million were made for other postretirement benefit payments not funded by trusts.

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Company contributions to defined contribution plans totaled $9 million and $11 million for the three months ended March 31, 2017 and 2016, respectively.

Non-retirement postemployment benefits

U. S. Steel incurred costs of less than $1 million and $15 million for the three months ended March 31, 2017 and 2016, respectively, related to the accrual of employee costs for supplemental unemployment benefits and the continuation of health care benefits and life insurance coverage for employees associated with the temporary idling of certain facilities and reduced production at others. Payments during the three months ended March 31, 2017 and 2016 were $8 million and $18 million, respectively.

7.    Net Interest and Other Financial Costs

Net interest and other financial costs includes interest expense (net of capitalized interest), interest income, financing costs, derivatives gains and losses and foreign currency remeasurement gains and losses. Foreign currency gains and losses are primarily a result of foreign currency denominated assets and liabilities that require remeasurement and the impacts of euro-U.S. dollar derivatives activity. During the three months ended March 31, 2017 and 2016, net foreign currency losses of $5 million and $8 million respectively, were recorded in other financial costs.

See Note 12 for additional information on U. S. Steel’s use of derivatives to mitigate its foreign currency exchange rate exposure.

8.    Stock-Based Compensation Plans

U. S. Steel has outstanding stock-based compensation awards that were granted by the Compensation & Organization Committee of the Board of Directors (the Committee) under the 2005 Stock Incentive Plan (the Plan) and the 2016 Omnibus Incentive Compensation Plan (the Omnibus Plan), which are more fully described in Note 14 of the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and the 2017 Proxy Statement. On April 26, 2016, the Company's stockholders approved the Omnibus Plan and authorized the Company to issue up to 7,200,000 shares of U. S. Steel common stock under the Omnibus Plan. While the awards that were previously granted under the 2005 Plan remain outstanding, all future awards will be granted under the Omnibus Plan. As of March 31, 2017, there were 5,089,273 shares available for future grants under the Omnibus Plan.

Recent grants of stock-based compensation consist of stock options, restricted stock units, and total shareholder return (TSR) performance awards. Stock options are generally issued at the market price of the underlying stock on the date of the grant. Upon exercise of stock options, shares of U. S. Steel common stock are issued from treasury stock. The following table is a general summary of the awards made under the 2005 Plan and the Omnibus Plan during the first quarter of 2017 and 2016.

	2017			2016
Grant Details	Shares(a)	Fair Value(b)		Shares(a)	Fair Value(b)
Stock Options (c)	564,360	$	18.32	—	$	—
Restricted Stock Units (c)	291,490	$	39.03	—	$	—
TSR Performance Awards (d)	121,240	$	49.52	308,130	$	10.02

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

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

^(c) There were no Stock Options or Restricted Stock Unit Awards granted during the first quarter of 2016.

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

U. S. Steel recognized pretax stock-based compensation expense in the amount of $10 million and $6 million in the three month periods ended March 31, 2017 and 2016, respectively.

As of March 31, 2017, total future compensation expense related to nonvested stock-based compensation arrangements was $41 million, and the weighted average period over which this expense is expected to be recognized is approximately 1 year.

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Compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant, as calculated by U. S. Steel using the Black-Scholes model and the assumptions listed below. The stock options generally vest ratably over a three-year service period and have a term of ten years.

Black-Scholes Assumptions	2017 Grants
Grant date price per share of option award	$	39.27
Exercise price per share of option award	$	39.27
Expected annual dividends per share, at grant date	$	0.20
Expected life in years	5
Expected volatility	57		%
Risk-free interest rate	2		%
Grant date fair value per share of unvested option awards as calculated from above	$	18.32

The expected annual dividends per share are based on the latest annualized dividend rate at the date of grant; the expected life in years is determined primarily from historical stock option exercise data; the expected volatility is based on the historical volatility of U. S. Steel stock; and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected life of the option.

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

TSR performance awards generally vest at the end of a three-year performance period and the value of the award is based upon U. S. Steel's total shareholder return compared to the total shareholder return of a peer group of companies over the three-year performance period. The value of the performance awards is between zero and 200 percent of the target award. The fair value of the TSR performance awards is calculated using a Monte-Carlo simulation.

9.    Income Taxes

Tax provision

For the three months endedMarch 31, 2017 and 2016, we recorded a tax provision of $19 million on our pretax loss of $161 million and a tax provision of $14 million on our pretax loss of $326 million, respectively. Due to the full valuation allowance on our domestic deferred tax assets, the tax provision does not reflect any tax benefit for domestic pretax losses.

The tax provision for the first three months of 2017 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss.

During the year, management regularly updates forecasted annual pretax results for the various countries in which we operate based on changes in factors such as prices, shipments, product mix, plant operating performance and cost estimates. To the extent that actual 2017 pretax results for U.S. and foreign income or loss vary from estimates applied herein, the actual tax provision or benefit recognized in 2017 could be materially different from the forecasted amount used to estimate the tax provision for the three months endedMarch 31, 2017.

Deferred taxes

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

At March 31, 2017, U. S. Steel reviewed all available positive and negative evidence and determined that it is more likely than not that all of its net domestic deferred tax asset may not be realized.

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U. S. Steel will continue to monitor the realizability of its deferred tax assets on a quarterly basis. In the future, if we determine that realization is more likely than not for deferred tax assets with a valuation allowance, the related valuation allowance will be reduced, and we will record a non-cash benefit to earnings.

Unrecognized tax benefits

Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes pursuant to the guidance in ASC Topic 740 on income taxes. The total amount of gross unrecognized tax benefits was $70 million at March 31, 2017 and $72 million at December 31, 2016. The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $9 million as of both March 31, 2017 and December 31, 2016.

U. S. Steel records interest related to uncertain tax positions as a part of net interest and other financial costs in the Consolidated Statement of Operations. Any penalties are recognized as part of selling, general and administrative expenses. As of both March 31, 2017 and December 31, 2016, U. S. Steel had accrued liabilities of $4 million for interest and penalties related to uncertain tax positions.

10.    Earnings and Dividends Per Common Share

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

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

Diluted earnings (loss) per common share assumes the exercise of stock options, the vesting of restricted stock units and performance awards, provided in each case the effect is dilutive.

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

	Three Months Ended March 31,
(Dollars in millions, except per share amounts)	2017			2016
Loss attributable to United States Steel Corporation stockholders	$	(180	)	$	(340	)
Weighted-average shares outstanding (in thousands):
Basic	174,242			146,402
Effect of stock options, restricted stock units and performance awards	—			—
Adjusted weighted-average shares outstanding, diluted	174,242			146,402
Basic loss per common share	$	(1.03	)	$	(2.32	)
Diluted loss per common share	$	(1.03	)	$	(2.32	)

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

	Three Months Ended March 31,
(In thousands)	2017	2016
Securities granted under the 2005 Stock Incentive Plan, as amended, and the 2016 Omnibus Incentive Compensation Plan	8,162	8,567

Dividends Paid Per Share

The dividend for the first quarter of 2017 and 2016 was five cents per common share.

11.    Inventories

Inventories are carried at the lower of cost or market for last-in, first-out (LIFO) inventories and lower of cost and net realizable value for first-in, first-out (FIFO) inventories. The LIFO method is the predominant method of inventory costing in the United States. The FIFO method is the predominant inventory costing method in

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Europe. At March 31, 2017 and December 31, 2016, the LIFO method accounted for 70 percent and 75 percent of total inventory values, respectively.

(In millions)	March 31, 2017		December 31, 2016
Raw materials	$	494	$	449
Semi-finished products	773		686
Finished products	394		375
Supplies and sundry items	57		63
Total	$	1,718	$	1,573

Current acquisition costs were estimated to exceed the above inventory values by $760 million and $489 million at March 31, 2017 and December 31, 2016, respectively. As a result of the liquidation of LIFO inventories, cost of sales increased and earnings (loss) before income and income taxes decreased by $6 million and $46 million in the three months ended March 31, 2017 and March 31, 2016, respectively.

Inventory includes $51 million and $54 million of land held for residential/commercial development as of March 31, 2017 and December 31, 2016, respectively.

12.    Derivative Instruments

U. S. Steel is exposed to foreign currency exchange rate risks as a result of our European operations. USSE’s revenues are primarily in euros and costs are primarily in U.S. dollars and euros. In addition, cash requirements may be funded by intercompany loans, which may create intercompany monetary assets and liabilities in currencies other than the functional currency of the entities involved and affect income when remeasured at the end of each period.

U. S. Steel uses euro forward sales contracts with maturities no longer than 12 months to exchange euros for U.S. dollars to manage our currency requirements and exposure to foreign currency exchange rate fluctuations. Derivative instruments are required to be recognized at fair value in the Consolidated Balance Sheet. U. S. Steel has not elected to designate these euro forward sales contracts as hedges. Therefore, changes in their fair value are recognized immediately in the Consolidated Statements of Operations.

As of March 31, 2017, U. S. Steel held euro forward sales contracts with a total notional value of approximately $182 million. We mitigate the risk of concentration of counterparty credit risk by purchasing our forward sales contracts from several counterparties.

Additionally, U. S. Steel uses fixed-price forward physical purchase contracts to partially manage our exposure to price risk related to the purchases of natural gas and certain nonferrous metals used in the production process. During 2017 and 2016, the forward physical purchase contracts for natural gas and nonferrous metals qualified for the normal purchases and normal sales exemption described in ASC Topic 815 and were not subject to mark-to-market accounting.

The following summarizes the location and amounts of the fair values and gains or losses related to derivatives included in U. S. Steel's consolidated financial statements as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016:

		Fair Value		Fair Value
(In millions)	Balance Sheet Location	March 31, 2017		December 31, 2016
Foreign exchange forward contracts	Accounts receivable	$	5	$	9
Foreign exchange forward contracts	Accounts payable	$	1	$	—

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(In millions)	Statement of Operations Location	Amount of (Loss)			Amount of Gain
		Three Months Ended March 31, 2017			Three Months Ended March 31, 2016
Foreign exchange forward contracts	Other financial costs	$	(2	)	$	10

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

13.    Debt

(In millions)	Interest Rates %	Maturity	March 31, 2017		December 31, 2016
2037 Senior Notes	6.65	2037	$	350	$	350
2022 Senior Notes	7.50	2022	400		400
2021 Senior Secured Notes	8.375	2021	980		980
2021 Senior Notes	6.875	2021	200		200
2020 Senior Notes	7.375	2020	432		432
2018 Senior Notes	7.00	2018	161		161
Environmental Revenue Bonds	5.50 - 6.88	2017 - 2042	447		447
Recovery Zone Facility Bonds	6.75	2040	70		70
Fairfield Caster Lease		2022	28		28
Other capital leases and all other obligations		2019	1		1
Third Amended and Restated Credit Agreement	Variable	2020	—		—
USSK Revolver	Variable	2020	—		—
USSK credit facilities	Variable	2017 - 2018	—		—
Total Debt			3,069		3,069
Less unamortized discount and debt issuance costs			36		38
Less short-term debt and long-term debt due within one year			281		50
Long-term debt			$	2,752	$	2,981

To the extent not otherwise discussed below, information concerning the Senior Notes and other listed obligations can be found in Note 16 of the audited financial statements in the United States Steel Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Redemption of Recovery Zone Facility Bonds

On March 10, 2017, U. S. Steel announced its intent to permanently shut down the No. 6 Quench & Temper Mill at Lorain Tubular Operations in Lorain, Ohio. Under the terms of the Trust Indenture dated as of December 1, 2010, between the Lorain County Port Authority and The Bank of New York Mellon Trust Company, N.A., as Trustee (the Indenture), this action and our decision to relocate the Lorain No. 6 Quench & Temper equipment to one of several other sites under consideration to optimize our operations, triggered an Extraordinary Mandatory Redemption of the Lorain County Port Authority Recovery Zone Facility Revenue Bonds (the Recovery Zone Bonds) and accordingly requires U. S. Steel to redeem the Recovery Zone Bonds and repay in full the principal amount plus accrued interest. In accordance with the terms of the Indenture, U. S. Steel intends to pay in full all amounts due under the Indenture, comprised of $70 million principal and accrued interest of approximately $2 million, on or about April 27, 2017.

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Third Amended and Restated Credit Agreement

As of March 31, 2017, there were no amounts drawn on the $1.5 billion credit facility agreement (Third Amended and Restated Credit Agreement). However, since the value of our inventory and trade receivable amounts less specified reserves calculated in accordance with the Third Amended and Restated Credit Agreement do not support the full amount of the facility at March 31, 2017, the amount available to the Company under this facility was reduced by $100 million. Additionally, U. S. Steel must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most recent four consecutive quarters when availability under the Third Amended and Restated Credit Agreement is less than the greater of 10 percent of the total aggregate commitments and $150 million. Based on the most recent four quarters as of March 31, 2017, we would not meet this covenant. As long as we are unable to meet this covenant, the amount available to the Company under this facility is effectively reduced by $150 million. As a result, availability under the Third Amended and Restated Credit Agreement was $1,250 million as of March 31, 2017.

The Third Amended and Restated Credit Agreement provides for borrowings at interest rates based on defined, short-term market rates plus a spread based on availability and includes other customary terms and conditions including restrictions on our ability to create certain liens and to consolidate, merge or transfer all, or substantially all, of our assets. The Third Amended and Restated Credit Agreement expires in July 2020. Maturity may be accelerated 91 days prior to the stated maturity of any outstanding senior debt if excess cash and credit facility availability do not meet the liquidity conditions set forth in the Third Amended and Restated Credit Agreement. Borrowings are secured by liens on certain domestic inventory and trade accounts receivable.

The Third Amended and Restated Credit Agreement permits incurrence of additional secured debt up to 15% of the Company's Consolidated Net Tangible Assets.

U. S. Steel Košice (USSK) credit facilities

At March 31, 2017, USSK had no borrowings under its €200 million (approximately $214 million) unsecured revolving credit facility (the USSK Credit Agreement). The USSK Credit Agreement contains certain USSK financial covenants, including maximum Leverage, maximum Net Debt to Tangible Net Worth, and minimum Interest Cover ratios as defined in the agreement. The covenants are measured semi-annually for the period covering the last twelve calendar months. USSK may not draw on the USSK Credit Agreement if it does not comply with any of the financial covenants until the next measurement date. At March 31, 2017, USSK had full availability under the USSK Credit Agreement. The USSK Credit Agreement expires in July 2019. The USSK Credit Agreement also permits up to two additional one-year extensions to the final maturity date at the mutual consent of USSK and its lenders. On January 23, 2017, USSK's lenders confirmed the first maturity extension request to July 2020 under the USSK Credit Agreement.

At March 31, 2017, USSK had no borrowings under its €40 million and €10 million unsecured credit facilities (collectively approximately $53 million) and the availability was approximately $52 million due to approximately $1 million of customs and other guarantees outstanding. On November 2, 2016, USSK entered into an amendment to its €10 million unsecured credit agreement to extend the agreement's final maturity date from December 2016 to December 2017. The amendment also permits up to two additional one-year extensions to the final maturity date at the mutual consent of USSK and its lender.

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

Change in control event

If there is a change in control of U. S. Steel, the following may occur: (a) debt obligations totaling $2,523 million as of March 31, 2017 (including the Senior Notes and the Senior Secured Notes) may be declared due and payable; (b) the Third Amended and Restated Credit Agreement, and USSK's €200 million Revolving Credit Agreement may be terminated and any amounts outstanding declared due and payable; and (c) U. S. Steel may be required to either repurchase the leased Fairfield Works slab caster for $29 million or provide a letter of credit to secure the remaining obligation.

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14.    Asset Retirement Obligations

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

(In millions)	March 31, 2017			December 31, 2016
Balance at beginning of year	$	79		$	89
Additional obligations incurred	—			2
Obligations settled	(1		)	(15		)
Change in estimate of obligations	(2		)	—
Foreign currency translation effects	—			—
Accretion expense	1			3
Balance at end of period	$	77		$	79

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

15.    Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, current accounts and notes receivable, accounts payable, bank checks outstanding, and accrued interest included in the Consolidated Balance Sheet approximate fair value. See Note 12 for disclosure of U. S. Steel’s derivative instruments, which are accounted for at fair value on a recurring basis.

The following table summarizes U. S. Steel’s financial liabilities that were not carried at fair value at March 31, 2017 and December 31, 2016.

	March 31, 2017				December 31, 2016
(In millions)	Fair Value		Carrying Amount		Fair Value		Carrying Amount
Financial liabilities:
Long-term debt(a)	$	3,166	$	3,004	$	3,139	$	3,002

(a) Excludes capital lease obligations.

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

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

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

Financial guarantees are U. S. Steel’s only unrecognized financial instrument. For details relating to financial guarantees see Note 20.

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16.    Statement of Changes in Stockholders’ Equity

The following table reflects the first three months of 2017 and 2016 reconciliation of the carrying amount of total equity, equity attributable to U. S. Steel and equity attributable to noncontrolling interests:

Three Months Ended March 31, 2017 (In millions)	Total			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Common Stock		Treasury Stock			Paid-in Capital			Non- Controlling Interest
Balance at beginning of year	$	2,275		$	(250	)	$	(1,497	)	$	176	$	(182	)	$	4,027		$	1
Comprehensive income (loss):
Net loss	(180		)	(180		)
Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments	46						46
Currency translation adjustment	23						23
Employee stock plans	14											63			(49		)
Dividends paid on common stock	(9		)												(9		)
Other	5			5
Balance at March 31, 2017	$	2,174		$	(425	)	$	(1,428	)	$	176	$	(119	)	$	3,969		$	1

Three Months Ended March 31, 2016 (In millions)	Total			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss) Income			Common Stock		Treasury Stock			Paid-in Capital			Non- Controlling Interest
Balance at beginning of year	$	2,437		$	190		$	(1,169	)	$	151	$	(339	)	$	3,603		$	1
Comprehensive income (loss):
Net loss	(340		)	(340		)
Other comprehensive income (loss), net of tax:
Pension and other benefit adjustments	(224		)				(224		)
Currency translation adjustment	61						61
Employee stock plans	5											14			(9		)
Dividends paid on common stock	(7		)												(7		)
Other	11						11
Balance at March 31, 2016	$	1,943		$	(150	)	$	(1,321	)	$	151	$	(325	)	$	3,587		$	1

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17.    Reclassifications from Accumulated Other Comprehensive Income (AOCI)

(In millions) (a)	Pension and Other Benefit Items				Foreign Currency Items		Other			Total
Balance at December 31, 2016	$	(1,771	)		$	274	$	—		$	(1,497	)
Other comprehensive income before reclassifications	95				23		5			123
Amounts reclassified from AOCI	(49		)	(b)	—		(5		)	(54		)
Net current-period other comprehensive income	46				23		—			69
Balance at March 31, 2017	$	(1,725	)		$	297	$	—		$	(1,428	)

(a)Amounts do not reflect a tax benefit as a result of a full valuation allowance on our domestic deferred tax assets.

(b)See table below for further details.

		Amount reclassified from AOCI
		Three Months Ended March 31,
(In millions) (a)	Details about AOCI components	2017			2016
	Amortization of pension and other benefit items
	Prior service costs (b)	$	(7	)	$	(9	)
	Actuarial losses (b)	(38		)	(32		)
	Settlement, termination and curtailment gains (b)	(4		)	—
	Total before tax	(49		)	(41		)
	Tax benefit (c)	—			—
	Net of tax	$	(49	)	$	(41	)

(a)Amounts in parentheses indicate decreases in AOCI.

(b)These AOCI components are included in the computation of net periodic benefit cost (see Note 6 for additional details).

(c)Amounts do not reflect a tax benefit as a result of a full valuation allowance on our domestic deferred tax assets.

18.    Transactions with Related Parties

Net sales to related parties and receivables from related parties primarily reflect sales of raw materials and steel products to equity investees and U. S. Steel Canada Inc. (USSC) after the Canada Companies' Creditor Arrangement Act (CCAA) filing on September 16, 2014. Generally, transactions are conducted under long-term market-based contractual arrangements. Related party sales and service transactions were $313 million and $315 million for the three months ended March 31, 2017 and 2016, respectively.

Purchases from related parties for outside processing services provided by equity investees and USSC after the CCAA filing on September 16, 2014 amounted to $14 million and $19 million for the three months ended March 31, 2017 and 2016, respectively. Purchases of iron ore pellets from related parties amounted to $36 millionand$46 million for the three months ended March 31, 2017 and 2016 respectively.

Accounts payable to related parties include balances due to PRO-TEC Coating Company (PRO-TEC) of $79 million and $63 million at March 31, 2017 and December 31, 2016, respectively for invoicing and receivables collection services provided by U. S. Steel. U. S. Steel, as PRO-TEC’s exclusive sales agent, is responsible for credit risk related to those receivables. U. S. Steel also provides PRO-TEC marketing, selling and customer service functions. Payables to other related parties, including USSC after the CCAA filing on September 16, 2014, totaled $4 million and $3 million at March 31, 2017 and December 31, 2016, respectively.

19. Restructuring and Other Charges

During the three months ended March 31, 2017, the Company recorded a net restructuring charge of approximately $33 million, which consists of charges of $35 million related to the permanent shutdown of the No. 6 Quench & Temper Mill at Lorain Tubular Operations and a favorable adjustment of $2 million primarily associated with a change in estimate for previously recorded environmental costs. Cash payments were made related to severance and exit costs of $11 million.

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As a result of continued low steel and energy prices and decreased demand for steel products, during the three months ended March 31, 2016, the Company recorded a charge of $10 million associated with Company wide headcount reductions, including within our Flat-Rolled, Tubular and USSE segments. This charge includes costs for supplemental unemployment and severance benefits as well as the continuation of health care benefits.

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

The activity in the accrued balances incurred in relation to restructuring and other cost reduction programs during the three months ended March 31, 2017 were as follows:

	Employee Related			Exit			Non-cash
(in millions)	Costs			Costs			Charges			Total
Balance at December 31, 2016	$	14		$	60		$	—		$	74
Additional charges	1			—			35			36
Cash payments/utilization	(4		)	(7		)	(35		)	(46		)
Other adjustments and reclassifications	(1		)	(2		)	—			(3		)
Balance at March 31, 2017	$	10		$	51		$	—		$	61

Accrued liabilities for restructuring and other cost reduction programs are included in the following balance sheet lines:

(in millions)	March 31, 2017		December 31, 2016
Accounts payable	$	42	$	50
Payroll and benefits payable	7		11
Employee Benefits	1		1
Deferred credits and other noncurrent liabilities	11		12
Total	$	61	$	74

20.    Contingencies and Commitments

U. S. Steel is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the Consolidated Financial Statements. However, management believes that U. S. Steel will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.

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

Asbestos matters– As of March 31, 2017, U. S. Steel was a defendant in approximately 850 active cases involving approximately 3,345 plaintiffs. The vast majority of these cases involve multiple defendants. At December 31, 2016, U. S. Steel was a defendant in approximately 845 active cases involving approximately 3,340 plaintiffs. About 2,500, or approximately 75 percent, of these plaintiff claims are currently pending in jurisdictions which permit filings with massive numbers of plaintiffs. Based upon U. S. Steel’s experience in such cases, it believes that the actual number of plaintiffs who ultimately assert claims against U. S. Steel will likely be a small fraction of the total number of plaintiffs. During the three months ended March 31, 2017, settlements and other dispositions resolved approximately 55 cases, and new case filings added approximately 60 cases. During 2016, settlements and other dispositions resolved approximately 225 cases, and new case filings added approximately 250 cases.

The following table shows the activity with respect to asbestos litigation:

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Period ended	Opening Number of Claims	Claims Dismissed, Settled and Resolved	New Claims	Closing Number of Claims
December 31, 2014	3,320	190	325	3,455
December 31, 2015	3,455	415	275	3,315
December 31, 2016	3,315	225	250	3,340
March 31, 2017	3,340	55	60	3,345

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

The amount U. S. Steel accrues for pending asbestos claims is not material to U. S. Steel’s financial condition. However, U. S. Steel is unable to estimate the ultimate outcome of asbestos-related claims due to a number of uncertainties, including: (1) the rates at which new claims are filed, (2) the number of and effect of bankruptcies of other companies traditionally defending asbestos claims, (3) uncertainties associated with the variations in the litigation process from jurisdiction to jurisdiction, (4) uncertainties regarding the facts, circumstances and disease process with each claim, and (5) any new legislation enacted to address asbestos-related claims. Despite these uncertainties, management believes that the ultimate resolution of these matters will not have a material adverse effect on U. S. Steel’s financial condition, although the resolution of such matters could significantly impact results of operations for a particular quarter.

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

(In millions)	Three Months Ended March 31, 2017
Beginning of period	$	179
Accruals for environmental remediation deemed probable and reasonably estimable	2
Obligations settled	(3		)
End of period	$	178

Accrued liabilities for remediation activities are included in the following balance sheet lines:

(In millions)	March 31, 2017		December 31, 2016
Accounts payable	$	19	$	19
Deferred credits and other noncurrent liabilities	159		160
Total	$	178	$	179

Expenses related to remediation are recorded in cost of sales and were immaterial for both three month periods ended March 31, 2017 and March 31, 2016. It is not currently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Due to uncertainties inherent in remediation projects and the associated liabilities, it is reasonably possible that total remediation costs for active matters may exceed the accrued liabilities by as much as 15 to 25 percent.

Remediation Projects

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

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(1) Projects with Ongoing Study and Scope Development - Projects which are still in the development phase. For these projects, the extent of remediation that may be required is not yet known, the remediation methods and plans are not yet developed, and/or cost estimates cannot be determined. Therefore, significant costs, in addition to the accrued liabilities for these projects, are reasonably possible. There are five environmental remediation projects where additional costs for completion are not currently estimable, but could be material. These projects are at Fairfield Works, Lorain Tubular, USS-POSCO Industries (UPI), the Fairless Plant, and the former steelmaking plant at Joliet, Illinois. As of March 31, 2017, accrued liabilities for these projects totaled $1 million for the costs of studies, investigations, interim measures, design and/or remediation. It is reasonably possible that additional liabilities associated with future requirements regarding studies, investigations, design and remediation for these projects could be as much as $25 million to $40 million.

(2) Significant Projects with Defined Scope - Projects with significant accrued liabilities with a defined scope. As of March 31, 2017, there are three significant projects with defined scope greater than or equal to $5 million each, with a total accrued liability of $138 million. These projects are Gary RCRA (accrued liability of $27 million), the former Geneva facility (accrued liability of $63 million), and the former Duluth facility St. Louis River Estuary (accrued liability of $48 million).

(3) Other Projects with a Defined Scope - Projects with relatively small accrued liabilities for which we believe that, while additional costs are possible, they are not likely to be significant, and also include those projects for which we do not yet possess sufficient information to estimate potential costs to U. S. Steel. There are two other environmental remediation projects which each had an accrued liability of between $1 million and $5 million. The total accrued liability for these projects at March 31, 2017 was $4 million. These projects have progressed through a significant portion of the design phase and material additional costs are not expected.

The remaining environmental remediation projects each had an accrued liability of less than $1 million. The total accrued liability for these projects at March 31, 2017 was approximately $6 million. We do not foresee material additional liabilities for any of these sites.

Post-Closure Costs – Accrued liabilities for post-closure site monitoring and other costs at various closed landfills totaled $23 million at March 31, 2017 and were based on known scopes of work.

Administrative and Legal Costs – As of March 31, 2017, U. S. Steel had an accrued liability of $6 million for administrative and legal costs related to environmental remediation projects. These accrued liabilities were based on projected administrative and legal costs for the next three years and do not change significantly from year to year.

Capital Expenditures – For a number of years, U. S. Steel has made substantial capital expenditures to bring existing facilities into compliance with various laws relating to the environment. In the first three months of 2017 and 2016, such capital expenditures totaled $11 million and $8 million, respectively. U. S. Steel anticipates making additional such expenditures in the future; however, the exact amounts and timing of such expenditures are uncertain because of the continuing evolution of specific regulatory requirements.

Under the Emission Trading System (ETS) USSK's final allocation of free allowances for the Phase III period, which covers the years 2013 through 2020 is approximately 48 million allowances. However, following the judgment of the Court of Justice of the European Union in April 2016, the volume of free allocations for the years 2018-2020 will be reduced. Until a new calculation by the European Commission (EC) is adopted, we cannot reliably estimate the impact on USSK's free allocation volume. Prior to the ruling we estimated a shortfall of approximately 16 million allowances for the entire Phase III period. The actual shortfall will depend upon the reductions resulting from the Court of Justice ruling. Based on the 2016 emission intensity levels and projected future production levels, and as a result of carryover allowances from the NAP II period, the earliest we anticipate having to purchase allowances to meet the annual compliance submission would be the first quarter of 2018. However, due to a number of variables such as the future market value of allowances, future production levels and future emissions intensity levels, we cannot reliably estimate the full cost of complying with the ETS regulations at this time.

The EU’s Industry Emission Directive will require implementation of EU determined best available techniques (BAT) to reduce environmental impacts as well as compliance with BAT associated emission levels. Our most recent broad estimate of likely capital expenditures for projects to comply with or go beyond BAT requirements is €138 million (approximately $148 million) over the 2017 to 2020 period. There are ongoing efforts to seek EU grants to fund a portion of these capital expenditures. The actual amount spent will depend largely upon

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the amount of EU incentive grants received. See Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Environmental Matters, Litigation and Contingencies, Slovak Operations.

Due to other EU legislation, we will be required to make changes to the boilers at our steam and power generation plant in order to comply with stricter air emission limits for large combustion plants, which will result in the construction of a new boiler and certain upgrades to our existing boilers. In January 2014, the operation of USSK's boilers was approved by the EC as part of Slovakia's Transitional National Plan (TNP) for bringing all boilers in Slovakia into compliance by no later than 2020. The TNP establishes emissions ceilings for each category of emissions (Total Suspended Particulate, SO₂, and NO_x) for both stacks within the PowerPlant. The allowable amount of discharged emissions will decrease each year until mid 2020. An emission ceiling will be a limiting factor for future operation of the boilers. The boiler projects have been approved by our Board of Directors and we are now in the execution phase. These projects will result in a reduction in electricity, CO₂ emissions and operating, maintenance and waste disposal costs once completed. The construction of the new boiler is complete with a total final projected cost of €75 million (approximately $80 million). Reconstruction of the existing boiler with a projected cost of €52 million (approximately $55 million) is in progress. The total remaining to be spent on the projects is projected to be €31 million (approximately $33 million). Broad legislative changes were enacted by the Slovak Republic to extend the scope of support for renewable sources of energy, that are intended to allow USSK to participate in Slovakia's renewable energy incentive program once the boiler projects are completed.

Guarantees – The maximum guarantees of the indebtedness of unconsolidated entities of U. S. Steel totaled $4 million at March 31, 2017.

EPA Region V Federal Lawsuit – This is a Clean Air Act (CAA) enforcement action pending in Federal Court in the Northern District of Indiana. The U.S. Government, joined by the States of Illinois, Indiana, and Michigan initiated the action alleging the Company violated the CAA and failed to have in place appropriate pollution control equipment at Gary Works, Granite City Works, and Great Lakes Works. A Consent Decree with proposed settlement agreement was filed with the Court on November 22, 2016. As part of the settlement agreement, U. S. Steel agreed to perform seven supplemental environmental projects totaling approximately $3 million and pay a civil penalty of approximately $2 million. The enforcement action concluded on March 30, 2017 when the Court signed and entered the Consent Decree.

CCAA - On September 16, 2014 USSC commenced court-supervised restructuring proceedings under CCAA before the Ontario Superior Court of Justice (the Court). As part of the CCAA proceedings, U. S. Steel submitted both secured and unsecured claims of approximately C$2.2 billion which were verified by the court-appointed Monitor. U. S. Steel's claims were challenged by a number of interested parties and on February 29, 2016, the Court denied those challenges and verified U. S. Steel's secured claims in the amount of approximately $119 million and unsecured claims of approximately C$1.8 billion and $120 million. The interested parties have appealed the determinations of the Court.

Other contingencies– Under certain operating lease agreements covering various equipment, U. S. Steel has the option to renew the lease or to purchase the equipment at the end of the lease term. If U. S. Steel does not exercise the purchase option by the end of the lease term, U. S. Steel guarantees a residual value of the equipment as determined at the lease inception date (totaling approximately $8 million at March 31, 2017). No liability has been recorded for these guarantees as the potential loss is not probable.

Insurance– U. S. Steel maintains insurance for certain property damage, equipment, business interruption and general liability exposures; however, insurance is applicable only after certain deductibles and retainages. U. S. Steel is self-insured for certain other exposures including workers’ compensation (where permitted by law) and auto liability. Liabilities are recorded for workers’ compensation and personal injury obligations. Other costs resulting from losses under deductible or retainage amounts or not otherwise covered by insurance are charged against income upon occurrence.

U. S. Steel uses surety bonds, trusts and letters of credit to provide whole or partial financial assurance for certain obligations such as workers’ compensation. The total amount of active surety bonds, trusts and letters of credit being used for financial assurance purposes was approximately $160 million as of March 31, 2017, which reflects U. S. Steel’s maximum exposure under these financial guarantees, but not its total exposure for the underlying obligations. A significant portion of our letters of credit are collateralized by our Third Amended and Restated Credit Agreement. The remaining trust arrangements and letters of credit are collateralized by

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restricted cash. Restricted cash, which is recorded in other current and noncurrent assets, totaled $43 million and $40 million at March 31, 2017 and December 31, 2016, respectively.

Capital Commitments– At March 31, 2017, U. S. Steel’s contractual commitments to acquire property, plant and equipment totaled $31 million.

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

Remainder of 2017	2018	2019	2020	2021	Later Years	Total
$840	$696	$384	$310	$306	$1,063	$3,599

The majority of U. S. Steel’s unconditional purchase obligations relates to the supply of industrial gases, and certain energy and utility services with terms ranging from two to 15 years. Unconditional purchase obligations also include coke and steam purchase commitments related to a coke supply agreement with Gateway Energy & Coke Company LLC (Gateway) under which Gateway is obligated to supply a minimum volume of the expected targeted annual production of the heat recovery coke plant, and U. S. Steel is obligated to purchase the coke from Gateway at the contract price. As of March 31, 2017, if U. S. Steel were to terminate the agreement, it may be obligated to pay in excess of $200 million.

Total payments relating to unconditional purchase obligations were $140 million and $132 million for the three months ended March 31, 2017 and 2016, respectively.

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

RESULTS OF OPERATIONS

Net sales by segment for the three months ended March 31, 2017 and 2016 are set forth in the following table:

	Three Months Ended   March 31,
(Dollars in millions, excluding intersegment sales)	2017		2016		% Change
Flat-Rolled Products (Flat-Rolled)	$	1,865	$	1,732	8	%
U. S. Steel Europe (USSE)	673		476		41	%
Tubular Products (Tubular)	171		108		58	%
Total sales from reportable segments	2,709		2,316		17	%
Other Businesses	16		25		(36	)%
Net sales	$	2,725	$	2,341	16	%

Management’s analysis of the percentage change in net sales for U. S. Steel’s reportable business segments for the three months ended March 31, 2017 versus the three months ended March 31, 2016 is set forth in the following table:

Three Months Ended March 31, 2017 versus Three Months Ended March 31, 2016

	Steel Products (a)
	Volume		Price		Mix		FX (b)		Coke & Other (c)		Net Change
Flat-Rolled	(3	)%	40	%	(25	)%	—	%	(4	)%	8	%
USSE	10	%	39	%	(4	)%	(4	)%	—	%	41	%
Tubular	83	%	(5	)%	(30	)%	—	%	10	%	58	%

^(a) Excludes intersegment sales

^(b) Foreign currency translation effects

^(c) Includes sales of coke and scrap inventory

Net sales were $2,725 million in the three months ended March 31, 2017, compared with $2,341 million in the same period last year. The increase in sales for the Flat-Rolled segment primarily reflected higher average realized prices (increase of $108 per net ton) as a result of improved market conditions, partially offset by a decrease in shipments (decrease of 94 thousand net tons) due to operating challenges at our Flat-Rolled facilities that prevented us from benefiting fully from the improved market conditions. The increase in sales for the USSE segment was primarily due to higher average realized euro-based prices (increase of €143 per net ton) and an increase in shipments (increase of 105 thousand net tons), both as a result of lower imports. The increase in sales for the Tubular segment primarily reflected increased shipments (increase of 55 thousand net tons) as a result of improved market conditions.

Pension and other benefits costs

Pension and other benefit costs are reflected in our cost of sales and selling, general and administrative expense line items in the Consolidated Statements of Operations.

Defined benefit and multiemployer pension plan costs totaled $30 million in the three months ended March 31, 2017, compared to $25 million in the three months ended March 31, 2016. The $5 million increase in expense is primarily due to lower expected return on assets.

Costs related to defined contribution plans totaled $11 million for both of the three months ended March 31, 2017 and 2016.

Other benefit expense (income), which is included in earnings (loss) before interest and taxes, totaled $19 million in the three months ended March 31, 2017, compared to $(1) million in the three months ended March 31, 2016. The

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$20 million increase in expense is primarily due to a lower return on asset assumption as a result of actions taken in 2016 to de-risk the other post-employment benefit (OPEB) plans.

Net periodic pension cost, including multiemployer plans, is expected to total approximately $104 million in 2017. Total other benefits costs in 2017 are expected to total approximately $78 million. The pension cost projection includes approximately $57 million of contributions to the Steelworkers Pension Trust.

A sensitivity analysis of the projected incremental effect of a hypothetical one percentage point change in the significant inputs used in the calculation of pension and other benefits net periodic benefit costs is provided in the following table:

	Hypothetical Rate Increase (Decrease)
(Dollars in millions)	1%			(1)%
Expected return on plan assets
Incremental (decrease) increase in:
Net periodic pension cost for 2017	$	(75	)	$	75
Discount rate
Incremental (decrease) increase in:
Net periodic pension & other benefits costs for 2017	$	(5	)	$	5
Pension & other benefits obligations	$	(736	)	$	874
Health care cost escalation trend rates
Incremental increase (decrease) in:
Other postretirement benefit obligations	$	100		$	(86	)
Service and interest cost components for 2017	$	5		$	(4	)

Non-retirement postemployment benefits

U. S. Steel incurred costs of less than $1 millionand$15 million for the three months ended March 31, 2017 and 2016, respectively, related to employee costs for supplemental unemployment benefits and the continuation of health care benefits and life insurance coverage for employees associated with the temporary idling of certain facilities and reduced production at others. Payments for these benefits during the three months ended March 31, 2017 and 2016 were $8 million and $18 million, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $97 million in the three months ended March 31, 2017, compared to $69 million in the three months ended March 31, 2016. The increase is primarily related to increased pension and other benefit costs as explained above.

Operating configuration adjustments                                 Over the past three years, the Company has adjusted its operating configuration in response to challenging market conditions as a result of global overcapacity and unfair trade practices by indefinitely and temporarily idling production at certain of its facilities. As of March 31, 2017, there were no facilities indefinitely idled.

As of March 31, 2017, the following facilities are temporarily idled:

Temporarily Idled:

Lone Star Tubular (Idled in April 2016; anticipated start up during the second quarter of 2017)

Tubular Processing (Idled in April 2015)

Granite City Works - Steelmaking Operations (Idled in December 2015)        

The carrying value of the long-lived assets associated with temporarily idled facilities listed above total approximately $322 million.

In March of 2017, U. S. Steel made the strategic decision to permanently shut down the Lorain #6 Quench & Temper Mill as a result of the challenging market conditions for tubular products.

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In December of 2016, U. S. Steel made the strategic decision to permanently shutdown the Lorain #4 and Lone Star #1 pipe mills and the Bellville Tubular Operations (which had been indefinitely idled) after considering a number of factors, including challenging market conditions for tubular products, reduced rig counts and unfairly traded imports.

U. S. Steel will continue to evaluate potential strategic and organizational opportunities, which may include the acquisition, divestiture or consolidation of assets. Given recent market conditions, the cyclicality of our industry, and the continued challenges faced by the Company, we are focused on strategically maintaining and spending cash, in order to invest in areas consistent with our long-term strategy, and are considering various possibilities, including exiting lines of business and the sale of certain assets, that we believe would further that goal and ultimately result in a stronger balance sheet and greater stockholder value. The Company will pursue opportunities based on its long-term strategy, and what the Board of Directors determines to be in the best interests of the Company's stockholders at the time.

While market conditions have continued to improve in recent months, operating challenges at our Flat-Rolled facilities prevented us from benefiting fully from the improved market conditions. The execution of our asset revitalization program and the continued implementation of reliability centered maintenance practices are critical to achieving sustainable improvements in our operating performance and costs. We have built the financial strength and resources to move forward more aggressively on these initiatives, and remain focused on providing the service and solutions that will create value for our stockholders, customers, employees, and other stakeholders.

Restructuring and Other Charges

During the three months ended March 31, 2017, the Company recorded a net restructuring charge of approximately $33 million, which consists of charges of $35 million related to the permanent shutdown of the No. 6 Quench & Temper Mill at Lorain Tubular Operations and a favorable adjustment of $2 million primarily associated with a change in estimate for previously recorded environmental costs. Cash payments were made related to severance and exit costs of $11 million.

As a result of continued low steel and energy prices and decreased demand for steel products, during the three months ended March 31, 2016, the Company recorded a charge of $10 million associated with Company-wide headcount reductions, including within our Flat-Rolled, Tubular and USSE segments. This charge includes costs for supplemental unemployment and severance benefits as well as the continuation of health care benefits.

Charges for restructuring and ongoing cost reduction initiatives are recorded in the period the Company commits to a restructuring or cost reduction plan, or executes specific actions contemplated by the plan and all criteria for liability recognition have been met. Charges related to the restructuring and cost reductions include severance costs, accelerated depreciation, asset impairments and other closure costs.

Management believes its actions with regards to the Company’s operations will potentially impact the Company’s annual cash flows by approximately $300 million over the course of subsequent periods as a result of decreased employee, maintenance and other facility costs, as well as eliminating the need for capital investment at the facilities. These actions will result in other non-cash savings of approximately $90 million, primarily related to reduced depreciation expense in future periods. Management does not believe there will be any significant impact related to the Company’s revenues as a result of these actions. The Company has realized actual cash savings of approximately $280 million related to restructuring efforts through March 31, 2017.

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Earnings (loss) before interest and income taxes by segment for the three months ended March 31, 2017 and 2016 is set forth in the following table:

	Three Months Ended   March 31,						% Change
(Dollars in millions)	2017			2016
Flat-Rolled	$	(90	)	$	(188	)	52	%
USSE	87			(14		)	721	%
Tubular	(57		)	(64		)	11	%
Total loss from reportable segments	(60		)	(266		)	77	%
Other Businesses	13			14			(7	)%
Segment loss before interest and income taxes	(47		)	(252		)	81	%
Items not allocated to segments:
Postretirement (expense) benefit income	(16		)	16			(200	)%
Other items not allocated to segments:
Loss on shut down of certain tubular assets	(35		)	—			(100	)%
Supplemental unemployment and severance costs	—			(25		)	100	%
Total loss before interest and income taxes	$	(98	)	$	(261	)	(62	)%

Segment results for Flat-Rolled

	Three Months Ended   March 31,						% Change
	2017			2016
Loss before interest and taxes ($ millions)	$	(90	)	$	(188	)	52	%
Gross margin	3		%	(4		)%	7	%
Raw steel production (mnt)	2,714			2,779			(2	)%
Capability utilization	64		%	66		%	(2	)%
Steel shipments (mnt)	2,404			2,498			(4	)%
Average realized steel price per ton	$	719		$	611		18	%

The increase in Flat-Rolled results for the three months ended March 31, 2017 compared to the same period in 2016 resulted from higher average realized prices (approximately $275 million) as a result of improved market conditions, partially offset by higher raw materials costs (approximately $25 million), increased planned outage costs and other operating expenses (approximately $70 million), lower results from our mining operations (approximately $40 million), higher energy costs (approximately $25 million) and restart costs associated with the Granite City hot strip mill and our Keetac iron ore mine (approximately $10 million).

Gross margin for the three months ended March 31, 2017 compared to the same period in 2016 increased primarily as a result of higher average realized prices due to improved contract and spot market prices.

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Segment results for USSE

	Three Months Ended   March 31,						% Change
	2017			2016
Earnings (loss) before interest and taxes ($ millions)	$	87		$	(14	)	721	%
Gross margin	17		%	4		%	13	%
Raw steel production (mnt)	1,258			1,152			9	%
Capability utilization	102		%	92		%	10	%
Steel shipments (mnt)	1,109			1,004			10	%
Average realized steel price per ton	$	594		$	458		30	%

The increase in USSE results for the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to higher average realized euro-based prices (approximately $185 million) and a favorable first-in-first-out (FIFO) inventory impact (approximately $65 million), partially offset by higher raw materials costs (approximately $145 million).

Gross margin for the three months ended March 31, 2017 compared to the same period in 2016 increased primarily