Good morning, everyone, and welcome to United States Steel Corporation's First Quarter 2018 Earnings Conference Call and Webcast. As a reminder, today's call is being recorded. On the call this morning will be U.S.

Steel President and CEO, Dave Burritt; Executive Vice President and CFO, Kevin Bradley; and Dan Lesnak, General Manager of Investor Relations. After the close of business yesterday, the Company posted its earnings release, earnings presentation and an updated question-and-answer document under the Investors Section of its website.

Today's conference call contains forward-looking statements and future results may differ materially from statements or projections made on today's call.

The forward-looking statements and risk factors that could affect those statements are referenced at the end of the Company's earnings release, in the earnings presentation and in the question-and-answer document and are included in U.S.

Steel's most recent Annual Report on Form 10-K and updated on their Quarterly Reports on Form10-Q in accordance with the Safe Harbor Provisions. I'd now like to turn the conference over to your host U.S. Steel President and CEO, Dave Burritt..

Good morning and thank you for joining us today. We delivered has promised on our first quarter guidance. Our strategy is working. Our strategy to create value was centered around three major pillars.

One, aggressively managing cash and maintaining a very strong cash and liquidity position to support our disciplined resource allocation process for improving customer satisfaction.

Two, making disciplined investments for our customers to promote long-term earnings growth through both our asset revitalization program and the development of customer solutions, such as our Generation 3 advanced high strength steels and premium connections.

And three, improving our risk profile, including derisking our balance sheet and our exposure to legacy liabilities to be able to serve customers no matter the economic circumstances and we are making excellent progress in all three areas. While we may have near-term challenges to deal with we also have opportunities ahead of us.

We will not be distracted by near-term challenges and are focused on creating a sustainably profitable business model. The investments we are making in our assets and our people will help to reduce the amount of near-term challenges we will face going forward.

But more importantly, we will establish a solid foundation for stronger and more mutually beneficial customer relationships through increased product capabilities and improved quality and delivery performance, and of course, better consistent and long-term returns for our investors.

Enduring through the cycle, customer relationships are critical for long-term success in the cyclical industry.

Those with the short-term perspective will judge us by how we manage the near-term challenges, but those who have truly invested in our company and share our long-term perspective will judge us by how we develop and optimize our opportunities.

We are in this business for the long-term in our developing differentiated capabilities to serve customers and benefit not only them, but also our employees and investors through the business cycle. Turning briefly to our results.

The first quarter always has seasonal challenges primarily related to winter weather conditions, but this year we face some additional logistical challenge due to record rainfall, the worst in over a century disrupting river transportation in the Pittsburgh area. We also face some smaller unplanned operating issues.

But our people responded with great effort and they did it without compromising safety. I am so pleased with our employee’s efforts. We are working very hard to create a high performance culture with high levels of personal and professional accountability in an environment of fairness and respect.

Our priority in everything we do is the safety of our people and several programs we implemented in a cooperative effort with our represented employees in the first quarter added to our already industry-leading safety performance. We will never be satisfied until everyone in our facilities is safe.

Our ability to deliver results in line with our expectations in the face of unplanned operating issues due to the talent and commitment of our people and we applaud and thank them for their dedication to our Company and customers.

While our assets can be challenging, the performance of our people has never wavered, they have been and will continue to be our greatest strength. As we move forward in 2018, steel consumption in the U.S.

continues to grow in several markets that we serve, such as energy and construction, and remained steady in most of our other markets, including automotive.

While it is difficult to quantify the impact of the Section 232 actions, we believe the PRO business mindset of the current administration has been instrumental in providing much needed support for American manufacturing. The Section 232 remedy continues to evolve, but we are encouraged by the progress so far.

We are actively engaged in the country exemption and product exclusion process to achieve the goals of the administrations 232 report.

We are passionate about the importance of the strong manufacturing base to the security of our country and are counting on the administration to take the necessary actions to establish a fair and level playing field for U.S. manufacturing. Looking at the second quarter, we currently expect another strong performance from U.S.

Steel Europe and we expect improved market conditions for our tubular operations to begin to offset the near-term cost headwind we have been facing.

At our Flat-Rolled operations as we noted in our earnings release, we are currently dealing with an unplanned operating issue at the steel making operations in Great Lakes Works that will have an unfavorable impact on second quarter EBITDA of approximately $30 million.

We had an operational issue at one of the two vessels in the basic oxygen processed steel shop. This failure caused damage to the vessel aligning and we have just now completed the temporary repairs on the vessel aligning and we have returned it to service.

We have a schedule to 52 day blast furnace outage in the third quarter at Great Lakes Works and will make additional repairs to this vessel during that outage.

To be clear, our revitalization of assets is working very well, but we can have issues for those assets like the Great Lakes Works, steel shop vessel that have not had all their planned projects completed yet. Also as we announced in March, we’re in the process of restarting the steel making operations at Granite City Works.

The sooner we restart the greater our benefits, but there are no shortcuts been taken and we are committed to an injury free return to making steel at Granite City. I recently visited Granite City and was energized by the passion and commitment of our people and I'm very pleased with the progress we are making.

We have received an excellent response from our employees and are glad to see them returning to work after two long years. Market conditions continue to be supportive of the restart and the production of from Granite City will improve our ability to serve our customers as we continue with our asset revitalization efforts.

In the initial stages of our asset revitalization program, we have prioritized our most critical assets and we are seeing substantial and sustainable performance improvements, our confidence that we will deliver our 2020 object about 15% to 20% return on our investment and in incremental 1 million tons of production capability grows with each project we complete.

We believe that every dollar we reinvest in our business moves us closer to sustainable profitability and increases our opportunities for future growth.

Dan?.

Thanks, Dave. Kevin, can you please queue the line for questions. [Operator Instructions] Your first question comes from the line of Curt Woodworth from Credit Suisse. Please go ahead..

Thanks. Good morning Dan and Dave..

Good morning..

So first question I guess with respect to guidance and thinking about volume progression in Flat-Rolled, the first quarter shipments were the highest since Q2 2016, but clearly the issues at Great Lakes and you mentioned 52 day outage as well in the third quarter.

Should we expect the base business outside of Granite City, volumes to be relatively flat consistent with what did in the first quarter or should there be from this lower given some of the outage costs you mentioned?.

Yes, so this is Dan. We do still expect 10 million tons out of Gary, Great Lakes, and Mon Valley. The incremental tons from Granite City in the back half we think about 100,000 tons a month, given the operational outages at Great Lakes, second quarter shipments maybe down a little from the first quarter, but probably nothing dramatic..

Okay, and then I guess with respect to the guidance, when you sort of shifted your methodology in March to giving sort of your best guess first spot based estimate. I think it sort of was a de facto removal of guidance, given there was and context around it.

So can you help us understand a little bit of some of your assumptions into the back half of the year? For example, would you expect Tubular to get back into profitability by the back half of the year? And can you give us some sense of the backwardation of the curve you're using in terms of the spot price for the Flat-Rolled segment? Thank you..

Hey, Curt, this is Kevin. Thanks for the question. Yes, we went to more of a traditional kind of guidance methodology. A lot of that’s because of some of the uncertainty out there. We're doing a lot of revitalization. We've got the 232 and that whole process playing out. We went out just before we went into the capital markets.

We thought it was appropriate to give appropriate to give the investors what we thought was our best look we gave firm guidance and reiterated it for Q1 and switch into early March to full guidance versus outlook for the year again.

Obviously with our visibility which is always going to be different than our investors we thought given the market what we believe to be our best estimate of full-year was the appropriate thing. I can say for tubular the answer will be yes, we do expect to get to positive EBITDA in the back half of the year.

But bottom line we try to be extremely transparent and we try to be very responsive in terms of dealing with our investors and in a year of a lot of change both internally on our part doing a lot of work on our assets but also with the backdrop of 232 and other things that are hard to handicap, we felt we owed it to our investors to give them our best look at full-year..

Right. If your best look I mean I understand that without giving the market some context around it. It's hard for us to kind of reconcile relative your previous guidance. So for example the four curves actually been moving up into the past couple weeks from the May 1 deadline.

So when you gave that guidance the crude price I think was about $85 per ton lower than it is today.

So clearly there's a big variance depending on what your forward look would be and I understand you're not going to give us that number, but can you can you comment on some level of backwardation or conservatism or kind of how you see the market playing out I mean obviously seasonality effect for the quarter?.

Yes. We're trying not to tie to a specific CRU forecast because candidly it's just one very important but it's one of many elements that's driving our overview of the year. I can tell you when we went out in early March just before the bond deal within two weeks I think CRU was up probably $84.

So there was versus what we had expected it was faster climbed then we had anticipated. I think where from our perspective what's happened it's been obviously very positive accelerated in terms of the pace.

I think where we may be disconnected in some cases from expectations is really around not the amount of benefit we're going to pull through but the timing of that benefit when you get into the mix of spot monthly, quarterly and fixed contracts and the mix across customers.

So obviously we're always going to have more visibility to that’s in our investors when we put all that all together we think we're actually fairly aligned with general expectations out there but the cadence well that's see much more of a coming in Q3 to Q4 versus Q2..

Yes, this is Dave. Clearly the first quarter where the low water mark for us and the back half is going to be much stronger.

And when you look at the estimates that everybody comes up what we feel that we are in the best position to make those estimates and so we're getting more clear guidance and what others have given anywhere in the industry and we think that bias given more specificity even by quarter that should help keep everybody together and eventually will get people pivoting toward the longer-term which is where the value is.

Where focus here on 20/20 i.e. is on the prize with the 15% to 20% return for the business, we're managing cash tightly, we're doing the resource allocation, we're going the business because the asset revitalization program and the work we're doing with the Gen 3 steels and premium connections.

And they are the balance sheet is the best in modern times.

So we want people to start pivoting away from the short-term there's low watermark place and start thinking longer-term about what's happening to this business and this industry which to me it's the best it's ever been since I've been here with the company and it feels like a renaissance and as long as we can get more focused on the future with discipline and focus in the current term to deliver the future I think we're going to have a really good business that can weather the economic circumstance..

Your next question comes from the line of Chris Terry from Deutsche Bank. Please go ahead..

Hi, guys. Thanks for taking my questions. Just wondering if you could talk a little bit more about the Great Lakes and potential impact into 3Q, you’re saying that 52 days. So is it going to be provided on the 30 million you think it can be all wrapped up in that timeframe..

Hey, this is Dan, Chris.

Now the 52 days blast providers that’s a scheduled planned event that we have, so the Great Lakes vessel with the short-term event that occurred in April, we completed repairs on it where we put back and service this morning, where back making steel, what we are saying is we have a scheduled blast furnace outage, normal planned outage coming up, that will give the chance maybe get into that vessel and maybe do something a little bit more enduring repairs, but we are up and running the 52 days blast furnace outage as a planned event or separate event.

All those planned events already embedded in our outlook..

And to be clear, this vessel, vessel number 25 is back in service. And I got to tell you, I had to thank the folks there run [indiscernible] and his team for their hard work getting this thing back into service.

And this was not part of the program and it will be and when we get after these assets and put them through the program they actually perform very well. So accelerating manufacturing performance is working and working exceptionally well, but we will have these occasional events. Hat's off to Doug Matthews and his team at Gary Works.

I think that’s about the best March and years and they're very focused on this discipline and the hot trip mill is running very well and the mining operations at Larry Sutherland are performing exceptionally well too, but we will have issues and do have issues.

But when we put in place the asset revitalization program, I frankly get amazed and delighted because we don't just getting back to their original shape, we get them in the best shape ever, and we have a number of success stories with that.

So we feel pretty good about the program we're working on, but there will be events from time to time, but overall it will offset those as we get further down their asset revitalization program and we’re on target. We're doing everything we said we're going to do with the program..

Hey, Chris just wanted to follow-up a little bit on the other part of your question about Q3. Some of the commercial impacts will spill into Q3; right now we're kind of estimating that just below $10 million in Q3..

Okay. Thanks for the color. And then just on 2Q, the guidance of $400 million, was it around $460 million coming into that. And you’ve talked a little bit on the earlier question about the mix and where your contracts work et cetera.

We take out the 30 mill Great Lakes, is there anything else in there that you can talk through or potential conservatism within that number?.

Hi, Chris. This is Dan again. I think really as Kevin point out earlier a lot of it I think is just a time difference on lagging prices. We're looking at lead times for us because we're running a little bit of 8 weeks to 10 weeks.

So even if spot price increase takes a lot of time to get into our numbers, so I think probably the biggest difference other than the Great Lakes discrete event is probably just a timing difference on prices actually flowing in..

Your next question comes from the line of Seth Rosenfeld from Jefferies. Please go ahead..

Good morning, Seth..

Good morning. The question please on the European business, you obviously saw a very robust performance this past quarter. However, looking at the waterfall chart, it looks like if the majority of this strength came out of just FX tailwind.

I guess when I look at spot metal spreads in the region there appear to be quite strongly both year-over-year and quarter-over-quarter in euros and especially strong in dollars.

So can you walk us through any pressure you might be seeing in the European region preventing your full realization about spot market strength?.

Hey, Seth. I don't think so, that facility runs well all the time. It's very consistent. The only quarter-to-quarter variability we ever see much is when we are taking planned outages there. So we don't see really any growth headwind there related to realizing that the market prices in Europe at this time..

The European operations have been running consistently for the last eight quarters. We've been counting on them at their newer operations and they’re well led with Scott [indiscernible] over there and a fantastic team that's very focused on. Making sure we're after this safety, quality and delivering cost like the betting of the drum.

So this is – it's not our best operation certainly at the top in terms of the work that's going on there. So hats off to the folks in Europe..

Great. Thank you. And just one follow-up. Obviously, we've seen the European price is going to stabilize at a quite high levels over the past couple of months, while raw material costs have come down.

In the past, you’ve commented about Europe being something of kind of spread business and not just for yourself, but across the whole market given the lack of vertical integration.

Do you have any expectations for the sustainability of prices going into the second quarter in light of falling raw materials and perhaps any spillover impact from Section 232 with higher imports into Europe?.

Unless I don't know that we can speculate on 232, but I think we've seen pretty consistently, there is a more costs for relationship in Europe usually about a quarter lag. So I don't think we see any that the sort that right now. You're right, something related to trait could, but I don't think we could speculate on at right now..

I think the Eurozone, I think everybody knows it. It's continued to expand in Q1 supported by the global economic activity growth and export demand and what we see is the main force behind expansion in economic activity was investment driven by favorable financing conditions and still upward trending capacity utilization.

So we think the whole region is in better shape and I think this kind of pro-business climate that U.S. has started its finding way elsewhere in the world..

Your next question comes from the line of Novid Rassouli from Cowen & Company. Please go ahead..

Hey, guys. Thanks for taking my questions. So first we saw the uptick in your cost per ton on the U.S. Flat-Rolled side. I think the expectation was for more stability on the cost side last time we spoke.

Can you just give us a sense of costs trajectory for the balance of 2018 and if we should expect costly more volatile than we had previously expected?.

This is Dan. One of the big factors in that first quarter number is seasonality mining. That seasonality impact embedded in those numbers. So certainly if you look back historically, generally our first quarter numbers reflect that it flows in costs.

But other than that, we don't see anything to create any more volatility that we've seen in the past from an input cost side, whether you’re talking materials. Operating volatility is what we're working hard to address.

I think that play has created the most fluctuations surpassed, but we’re focused on – on try to minimize that with our asset revitalization program..

And again as we said in the opening comments, the first quarter is plagued by the weather conditions this time of year. But the waterfall particularly around Pittsburgh area was really tough and that had a lot of problems of barge traffic and that impacts the processing of coal and so on.

So of course those things are again the low point here in the first quarter that that will get better through the balance of the year in terms of costs..

Got it, and then is the incremental Granite City tonnage? Is that included in your 10 million shipment guidance or is that incremental?.

That would be incremental Novid. So we expect to do about 100,000 tons a month what we’re up in running. So assuming we get hit our target and get running going to back half. You could see 600,000 of tons from there. So that the incremental to the 10..

Got it and then your average price per ton on Tubular was down $30 quarter-over-quarter, but OCTG index prices have been kind of steadily rising.

I just want to see if you can help us understand what drove of the move down?.

Sure, we had an outage of planned outage that our Fairfield [indiscernible]. So we had a mix shift in the quarter. We did more welded pipe than we did in prior quarter. So that's really a mix fact there..

And that outage was more challenging that what we expect it to be, so we definitely had – the month of January was really tough on the Tubular folks because of that outage..

Your next question comes from the line of David Gagliano from BMO Capital Markets. Please go ahead..

Hi, just – actually just a quick follow-up to the prior question, on the Tubular side. Should that mix shift more favorably in the rest of the year and obviously that mix shifts – favorable shift embedded in your guidance? That's my first question..

Yes, Dave. You're absolutely right. Not at the Fairfield is over we would expect the mix to include more seamless that we did in the first quarter and that definitely in our full-year thinking..

Okay, and then just on – a lot of my questions already been answered, but on the 232, I think you did highlight that you are actively engaged in this country in production exemption process.

So I do realize a bit of a tricky fluid situation, but if you could just tell us in somewhat general terms, in your view what's sort of the most likely outcome from the negotiations are happening ahead of this May 1 expiration for the exemptions?.

I just say, I'm optimistic that the President will continue a strong stance on protecting the national security United States and we know that there's a lot of activity going on at this point, but having spent time in the White House and been with him face-to-face about how strongly he feels about this issue.

Quite confident that we’re in get a right – to a right conclusion, obviously there's always the socialization of what's going on, but we have to get that utilization up to a minimum of 80% and the President knows that if you use exclusions, it could be a lot of exclusions, it could be problematic that's why we have to have a different disciplined approach to remain at 80% utilization and I have every reason to believe that that's what he said and that's what he'll do..

Your next question comes from the line of Timna Tanners from Bank of America. Please go ahead..

Yes, good morning, and happy Friday..

Good morning, Timna..

Would you mind on the tubular side reminding us a little bit about what spare capacity you might be looking at either restarting or where you are regarding utilization in light of the improving market conditions as you know stock prices and this having maybe some on three year but have shot up in recent months and the Korean outcomes seems pretty favorable.

So you just give us a little bit more thoughts on the market into the second half and your potential to increase exposure to it?.

Well, Timna, I would say that you know for Fairfield and Lone Star those facilities there are very much in line the onshore rig counts, so they are run in a better levels and they’re seeing the benefit of the range capacity, is really five to deepwater gulf that really we have to picked up.

If you look back historically we've seen our price goals run in good market 75% of the theoretical capacity that's fine not a bad target to see upside for Fairfield and Lone Star, but the range continue to run it very low level.

So yes, I really to keep on your thinking when they think of volume for tubular, as far as to the Korean stock level or see what happens whether that's just why but right now imports are still very, very high in tubular.

And where we don't see any relief from that, at least in the next month or so that we can so we see what happens, but imports are still biggest in tubular. We'll see how effective the Korean piece of that is not..

Okay. Thanks for that.

And then I was wondering if you could elaborate a little bit on what you are seeing with regard to called out and galvanize premiums I know it mentioned and when you update your guidance there's something that that we need - maybe need to recalibrate our model is called out premiums have been about $2 in a bucks $10 over hot-rolled that narrowed with recent on trends.

Reconfirmed of this too much galvanized kind of being added as there are enough demand for all of it and then on your own upgrades. So just what - how do we see that trending and why relative to hot-rolled? Thanks..

Yes, Timna I think that spreads have narrowed, but I think it's narrowed because we've also come up not that many cold-rolled galvanizes are pressured. It's just hot-rolled who adopt so quickly I think that's what reason spreads arrowed. We're seeing at in the 130 range that’s actually I think a pretty in argued fairly stable number.

So I think it's more of the benefits of hot-rolled scene in hot-rolled market getting tighter as opposed to pressure on the cold-rolled galvanize markets..

Okay. Thanks a lot..

Your next question comes from the line of Philip Gibbs from KeyBanc. Please go ahead..

Good morning..

Good morning, Philip..

I'm just curious in general Dave, what happen in the Carnegie Way in terms of the disclosure on it.

I mean I know that you did put out some prepared slides and there didn't appear to be any color in this and I am just curious if you're shifting away from talking about it?.

Well, I think what we're focused on this revitalization of assets in the Carnegie Way is built into our D&A, is the six sigma methodology, a defined measure analyze improvement control it's across all of our facilities, it helps us in terms of running our projects and since we're moving to the next phase of our ARPU to the people and our culture of caring and asset revitalization and all those things Carnegie Way part of our D&A.

We launched projects that help us achieve the goal.

So we don't need to talk about it so much anymore because that's actually the how we get to the asset revitalization and we can report on those things but what we found is we weren't getting many questions about it anymore and it was time for us to actually pivot toward asset revitalization and reliability center maintenance and of course our matter of safety quality delivering cost.

So Carnegie Way is live and well that's it’s where we accomplish goals that it's not something that we feel and we need to report on because it’s again imbedded in our D&A..

Thanks for the explanation on that.

A question on cash conversion cycle, Kevin are we still think that that moves to close to 40 this year is that a good kind of bunch mark to use?.

Yes. Obviously, we were very pleased to be able to hold at 30 level in Q1, but clearly we're expecting it to move up into the mid-to-high 30’s. We still think it'll be upper quartile against all of our peers on performance, but we want to have the right amount of inventory to service our customers.

And so right now we're thinking it will still travel higher, but still the upper quartile performance relative to peers..

Thank you..

Your next question comes from the line of Alex Hacking from Citi. Please go ahead..

Yes. Good morning, gentlemen. Dave you mentioned that the progress of success that you're seeing with the asset revitalization, and I think you guys have visibility into that. You can see reduced downtime and whatnot, but it's very hard for investors sitting on the outside given all the moving parts.

Is there any sort of metric or something that investors should be looking at in order to sort of assess the success of the asset revitalization or more realistically do we have to wait until 2020 until we can see the whole thing come together? Thanks..

You see in the slide deck, we actually have a chart that tells annually how we update on that when we report out it each quarter with the notionally we were headed, but just to give you some stats on this, reliability of our priority assets has improved about 12.5% over the 2016 base, and that’s kind of the headline for us and with each project we're delivering on the promise on each one of those.

So you see we got metrics for EBITDA, we got metrics for that capital spend then we have metrics for quality and we've got metrics for the reliability and delivery performance. So we're all over that and we're actually seeing substantial improvements in throughput where we've exercised the asset revitalization program.

I mean some of these assets are really old and when we fix them, frankly I'm not that – I'm relatively new to the steel industry. I am impressed with how much better the assets run once we do that. So clearly we are monitoring the assets we have, our operating equipment effectiveness measures that we go through and cascade through the organization.

We put in a new incentive scheme for senior leaders at cascade through the organization and we're doing a better job linking that with employees and so that they see the rewards and recognitions more clearly.

And I think we're in just the second year of this, and frankly, I'm really pleased that we're able to demonstrate that we are on track even this early in the game. And I think we have the performance throughput again with the priority assets are always better than where we were in 2016 and we continue to gain momentum.

So I’m – in each of these categories the iron making, the steel making, the hot rolling and the finishing, we do measure that and we do make sure that we report to you guys with surety at the end of the year.

What we're trying to do is not show you volatility by quarter, it just feed to the beast and we're on track, and we're disclosing frankly more than I think most any other steel company that I've seen in terms of guidance, and we will continue to be a leader in transparency that – the asset revitalization program it's a success so far, a lot of work to do.

But the 15% to 20% return is certainly on track. So I hope that helps a bit..

Yes. Thanks for the color. I appreciate that. This next question maybe a little premature, but can you give us an update on how you're thinking or what market conditions you're thinking about to restart the second blast furnace at Granite City? Thank you..

That's a great question because all these things depend upon demand, and of course, we're working hard, ready to go, and with the right demand situation and we'll see how the 232 plays out, we will see how our customers responding. If they want more volume, we'll give it to them.

We've got the capability to ramp this up and do it quickly and we're impressed with the speed by which we're moving Granite City ahead. Now we’ve got some cost pulled forward because frankly we're bringing back people faster. And I say when I was there just a couple weeks ago meeting with the people.

There is some really incredible energy that we have there and it is impressive and I hope that when we get to the point we can open up a blast furnace, that enthusiasm continues and I will say it's not just our employee, but that you are steelworker leadership. They've been great partners in this kind of stuff, and I’m impressed with them.

They are completely aligned with us on safety. They're completely aligned with us on trade, in fact this is a great work on trade and we look forward to resolving the contract later this year.

We've got a great relationship with it and we're trying to do things simply, more simpler and more aligned and we understand that we have a right cycles in good times and bad.

But I didn’t know it frankly feels like a renaissance for me and we just got to make sure we keep our heads down and not get distracted by short-term noise and I know that’s really hard because we had quarterly reporting all that, but we’re making the progress on the things we said we're going to make the progress on and the closer we get to 2020, the greater the business we have..

Your next question comes from the line of Andreas Bokkenheuser from UBS. Please go ahead..

Thank you very much. Thank you for taking my question. And you just mentioned demand; you said it early on, you saying that auto was stable and construction showing signs of strengths. Are you able to quantify this in anyway? I'm not sure how to think about that I mean auto stable.

Does that mean demand growth material or does it mean the demand is actually growing construction? Do you have a sense – I mean the range to quantify that we talk 3% to 5% it more, is it less? Just trying to get some numbers on the overall demand strength? Thank you..

Yes, sure Andreas. This is Dan. Yes, we're looking at the same market space relative to automotive books could, like I said, pretty steady. We're not seeing disruption there. So, on the construction energy, you're seeing growth, those are quite – faster growth on total. I'd say we're still thinking along the lines of overall U.S.

consumption up 2% to 3% is I think –that we’re seeing out there as far as most that are reporting. I don't think we disagree with that..

Yes, I think actually in our slide deck Page 16 does a pretty decent job laying that out, and maybe that will help provide some detail color that you’re looking for..

That's very clear and on growth in general, are you also – are you seeing any inorganic growth? Are you seeing yourself capturing market shares in some segments as well obviously with Granite City opening up that's certainly something to think about going forward, but at the moment, how you're looking at inorganic growth versus organic growth of your overall sales volumes?.

I would say, we are – as we improve our operating performance, our customers are telling us that we do better. We will win more business. So that's our strategy. That's our focus. The incremental comes from Granite City that probably luxury that is going to spot opportunity for us.

Some of that will help support our contract customers, but that's – those give us a little more spot opportunity with these kind of good thing..

That is very clear. Thank you very much..

Your next question comes from the line of Karl Blunden from Goldman Sachs. Please go ahead..

Hey, good morning guys. Thanks for taking the question. For the revitalization programs going on for some time now, I have two questions on that.

Is there a way to just simplify how much of your asset base has now been revitalized and as you think about the issues you've uncovered Great Lakes, does that change the way you think about it going forward? Is there any thought to broadening it or is that CapEx increase just for this year and just for the issues you've covered so far?.

The way we think about revitalization, if we could move it faster and get the benefits faster, we're going to do it. And clearly, we stay in this disciplined approach. We do have some distraction from time-to-time, but as far as when we put the projects in place, we deliver on those projects.

So we feel again really good about where we are today and where we're headed on that. But we're not going to be shy about increasing CapEx if we see an opportunity to move faster and in this climate this – I think pro-business climate we feel pretty good. You think about this U.S.

steel demand and it remains quite good with most every major industry segment consuming more steel than a year-ago. And so if there's an opportunity for us to move faster we will..

Got it. And then just on the first part of the question.

Do you have a sense of how far along you are in the process and do you feel like you’ve look at all the assets at this point in time and – are pretty comfortable with your initial CapEx and cost outlook on that?.

We feel good about what we’ve looked at so far, but if we find other things will go after that as well.

Remember this is North American Flat-Rolled that we’re focused on and if we see opportunities to expand this to the Tubular business or even in Europe that’s performing very well or even in the mining sides where we will certainly do it, but we're focused on North American flat-rolled because this is where we see the best benefit.

But again, we're going to let the market conditions help guide us in terms of how we deliver the value because if we can get the value to be greater by 2020 and help us manage the cycle. We want to make money in the trough. We are going to prove to people that we're going to be able to make money in trough.

When you do that kind of thing that's when you get to kind of EBITDA multiple that you can be proud of. And so we've got some work to do. This is a hard journey, but it's a very focused disciplined journey and we're doing everything to get us there..

The only thing I’ll add to that is with the possibility to expand the other segments is one thing, but the plan we put in place for Flat-Rolled segment was very, very comprehensive across the assets.

So Great Lakes assets, they're in the program, we just – there is time just how we can do everything alone where we have to major our downtime versus – making sure we take care of our customers. That’s kind of the limiting factor. So those assets were definitely part of the plan, we just haven’t got doing it..

And we’ve got a really great team here, Christie Breves who leads this initiative. She is the SVP in that area with Jim Dudek, and [Melissa Summers]. These people are good solid high performing individuals that know how to leverage the collective wisdom of the organization with discipline projects to succeed. So it's been said a lot.

First that who then the what. We are getting the right people in the right seats and I'm pretty impressed with the folks we've got leading these things..

Your next question comes from the line of Piyush Sood from Morgan Stanley. Please go ahead..

Hey. Good morning, Dave, Kevin, Dan. I also have a couple of questions on asset revitalization.

So at this point various thing you’ve completed, a lot of asset revitalization project, any facility that’s the ahead the others and you would expect a fewer unplanned outages or any facility that’s behind the others?.

Hi. I will take a shot at that. I actually think Gary is doing a really great job here. We've had some success at Great Lakes Works for the B2 Blast Furnace and in the Mon Valley operations they're making improvements as well.

We've been focused a lot on the iron making and steel making processes at this point and you see the scheduling there in terms of where we're spending the money.

But I would say across the board where we’ve indicated, how much we're spending that's what we're trying to do stay as close to those tenders we possibly can and then we'll update with detail at the end of the year..

I’d just echo that Gary, probably in terms of the amount spent so far in the program is reflecting probably the highest benefit year-on-year. The strip mill consumed a fair amount of capital.

It's one of the most critical assets we have in the company in terms of sheer tonnage that goes through it and we're seeing more improvement in yield and production throughput..

To be clear, this is not all about just the spend. This is about leadership development and employee performance. And we're doing our best to hold people to high kind of accountability standards. Personal and professional accountability, it’s important to us. We try to create this appropriate culture so that people can succeed. It's a tough place here.

It's not always easy every day, but we're getting more and more focused every day on the vital few things that I have to be successful in this revitalization of asset. It's vital to our future and it’s going to help us ride the economic wave. I'm very confident that we're going to get this done..

Just a little bit more color to or perspectives to some of these assets. We talked about the – Q3 work on the blast furnace in Great Lakes Works. You go in 52 days later a lot of work is done from a revitalization standpoint. But a lot of these other assets you're talking about dozens of projects that are happening over many quarters.

And so when you declare the assets being fully revitalized, it is actually happening over time. So it’s not always discreet on all, we should see the improvement, it’s kind of a migration through a number of projects that improve the throughput..

That’s very useful color.

One related question, Granite City restart, how operationally reliability you expect that side to be, if you were to compare it with the other operations?.

The Granite City steel making are in very good condition. We’ve had really no issues. Start ups is going very well, so we do expect those to run well when we get them up and running. They were maintained very well while they were down, so we do not anticipate any kind of issues there. Those are ready to go..

Just a reminder, a lot of the people that we're bringing in are return experienced employees, so I should add to the reliability as well..

And we’re spending a lot of time on the safety. We’re working hard. So there's no injuries here and there's a four day training program and then kind of field inform type session and our folks are responding very well to that and we're bringing dozens of people back every week.

And frankly it's going much better than I thought, I mean sadly a lot of these people didn't have jobs and they're back in that once we get greater fairness in this country and get to this pro-business climate. I think it's going to get better for the whole United States all of manufacturing will be uplifted..

We'll go to the line of Matthew Fields from Bank of America. Please go ahead..

Hi everyone. I know you’ve mentioned you want to sort of upgrade to non-upgrade, but be eventually sort of a solid middle of the road double B credit right now in a single B range.

Do you think that you can sort of just back into that with all the progress you've done, especially taking out the secured notes or is there anything else just going to sort of have to actively do to get there whether it's voluntary pension contributions maybe in early take out of the 2020 warrants or sale of any other assets or JV interest or something like that?.

Thanks Matt. Obviously we're doing a lot of work. Q1 was very busy in strengthening the balance sheet and improving the capital structure. We really are happy with the work in refinancing our ABL, the $1.5 billion more flexible better rates, we also really happy with the execution by our bank group, so really good support.

I think deleveraging, taking out the secured debt, the $780 million and replacing it with $650 million. So we had $130 million deleveraging in the quarter. Certainly that's – we think that’s good work. At the same time it was over 200 basis point reduction in interest rate.

So now we're up to roughly secured capacity available of $1 billion, candidly from a metrics perspective, we believe we're already a solid double B.

The key is sustainability right through cycle and that's really a lot of what we're focused on is how do we have a more predictable operation and make sure that what we think is really strong credit metrics on net debt in every other measurement is sustainable. And so we feel really good. We're not done.

We will look for other opportunities to deleverage. We've made great progress on our unfunded pension liability, last year we expect that work to continue. So we're focus. We're making progress and constantly looking for ways to strengthen the company..

That's a great answer. Thanks a lot Kevin. Appreciate it..

Hey, Matt, the other thing I would add is I mean more pretty broad, if you take a look at Page 7 of the presentation from where we hit the kind of low watermarking 16, when we had to go debt market, but certainly in our capital structure. We think is really impressive. We encourage over it take a look at slide.

We think that's a really good story for us..

Yes, I mean we've reduced our debt, but an important element of this, if you look at what we've done in last couple of years, we now have approximately 80% of our debt is not mature or at least seven years or longer. That hasn't happened in this company a very long time. So we've got some real strength, but we're not done..

You have a follow-up from the line of Piyush Sood from Morgan Stanley. Please go ahead..

Thanks for taking the call.

So going back to Granite City, how would you think about starting of the second furnace and then using those volumes to help take bigger outages in the other operations effectively getting through the asset revitalization more quickly?.

Piyush, that – we did say that having that capacity online does give us more flexibility. We will see how the – we’ll see how much field customers need. It gives us an opportunity to move faster and asset revitalization. We will certainly take that opportunity..

And again as Dave touched on this rate, what we need in terms of other blast furnace in order to turn it on is just to see the demand that’s sustainable. We have no hesitation in bringing on that capacity when we see sustainable demand..

Great. Thank you. End of Q&A.

All right. That is – we are through the queue.

So Dave, do you have some final comments for us?.

Sure. Thanks Dan. And thanks to everybody for joining today. We are working really hard every day and are focused on delivering long-term value without being distracted by short-term market volatility.

We believe our intense focus on our operations and improving safety, quality, delivery and cost will result in more reliable and consistent results and create value for all of our stakeholders, our stockholders, our customers, our employees and the communities where we operate.

We are building the kind of results that should give investors more confidence in our ability to create value by delivering cost effective and reliable solutions for our customers. We are pleased with the progress so far and we won’t take our eyes of the 2020 price for our employees, customers and stockholders. Thank you.

It's time to get back to work..

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