Annual Report 2009Management Report
Management Report 2009 Contents01 Our Philosophy02 Financial Highlights04 Message from the Chairman and CEO08 Questions for the Group Management Board14 2009 Highlights16 Board of Directors20 Senior Management24 Business Strategy28 Corporate Responsibility42 Global Presence48 Operational Review58 Liquidity62 Market Information66 Corporate Governance76 Share Capital and Voting Rights78 Group Structure80 Additional Information about ArcelorMittalFinancial Information 2009 Contents01 Chief Executive Officer and Chief Financial Officer’s Responsibility Statement02 2009 Consolidated Financial Statements87 2009 Annual Accounts100 Proposed Allocation of Results for 2009DisclaimerIn this Annual Report, ArcelorMittal has made, and will continue to make,forward-looking statements with respect to, amongst other things, its financialposition, business strategy, projected costs, projected savings, and the plansand objectives of its management. Such statements are identified by the useof forward-looking words or phrases such as ‘anticipates’, ‘intends’, ‘expects’,‘plans’, ‘believes’, or ‘estimates’, or words or phrases with similar meaning. Theactual results may differ materially from those implied by such forward-lookingstatements on account of known and unknown risks and uncertainties, including,without limitation, the risks described in this Annual Report.ArcelorMittal does not make any representation, warranty or prediction that theresults anticipated by such forward-looking statements will be achieved. Suchforward-looking statements represent, in each case, only one of many possiblescenarios and should not be viewed as the most likely or standard scenario.ArcelorMittal undertakes no obligation to publicly update its forward-lookingstatements, whether as a result of new information, future events or otherwise.Unless indicated otherwise, or the context otherwise requires, referencesherein to ‘ArcelorMittal’, the ‘Group’ and the ‘Company’ or similar terms are toArcelorMittal, société anonyme, having its registered office at 19, avenue dela Liberté, L-2930 Luxembourg, Grand Duchy of Luxembourg, and, where thecontext requires, its consolidated subsidiaries.
ArcelorMittal Annual Report 2009Our Philosophy 01Our PhilosophyArcelorMittal’s core philosophyis to produce Safe, Sustainable, Steel.Safety is the Company’s top priority.Our safety performance has improvedconsistently over the last three years,most recently by 25% in 2009,and we will continue to target ourultimate goal of zero accidents.The Company’s leadership position in thesteel industry is the result of a consistentmanagement strategy that focuses onproduct diversity, geographic reach andvertical integration – both into raw materialproduction, designed to minimize riskcaused by economic cycles, anddownstream distribution, providingvalue-added and customized steel solutionsthrough further processing to meet specificcustomer requirements. Our customers arethe heart of our business. We collaborateclosely with them to ensure that we evolveand develop our products in line with theircontinually changing needs.ArcelorMittal is committed to its promiseof ‘transforming tomorrow’ and the threevalues that underpin it – Sustainability,Quality and Leadership. These values shapeour behavior. We recognize that theCompany has a duty to its stakeholdersto operate in a responsible and transparentmanner and to safeguard the wellbeingof all its stakeholders, including employees,contractors and the communities in whichit operates.That is why we have a strong focus onCorporate Responsibility. This is evidencedin numerous areas, for example theCompany’s efforts to develop breakthroughsteelmaking technologies, our leadership ofthe steel industry’s Ultra Low Carbon Steel(ULCOS) program and the global activitiesof the ArcelorMittal Foundation.No discussion of the Group’s philosophywould be complete without reference toour employees. The Company is only asgood as its people, and our journey throughthe crisis was helped by their efforts,flexibility and understanding.In 2009, ArcelorMittal had salesof approximately $65.1 billion 1 ,steel shipments of approximately71 million tonnes and crudesteel production of approximately73 million tonnes.1‘US$’, ‘$’, ‘dollars’, ‘USD’ or ‘U.S.dollars’ refers to United Statesdollars, the official currencyof the United States of America.
ArcelorMittal Annual Report 200902 Financial HighlightsFinancial HighlightsSales ($ million)2009200865,110124,936Shipments (million tonnes)2009200871.1101.7Net Income 1 ($ million)2009 11820089,446 2Basic Earnings per Share ($)2009 0.0820086.84 21Excluding non-controlling interests.2 As required by IFRS, the 2008 information has beenadjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitionsmade in 2008 (see Note 3 to ArcelorMittal’sconsolidated financial statements).3Shipments originating from a geographical location.4Includes tubular business.5Full Time Equivalent.6EU15 includes Austria, Belgium, Denmark,Finland, France, Germany, Greece, Ireland,Italy, Luxembourg, the Netherlands, Portugal,Spain, Sweden and the United Kingdom.7EU27 includes the EU15 countries plus Bulgaria,Cyprus, Czech Republic, Estonia, Hungary,Latvia, Lithuania, Malta, Poland, Romania,Slovakia and Slovenia.
ArcelorMittal Annual Report 2009Financial Highlights 032009 Steel shipments by geographic location (in thousand of tonnes) 3Flat Carbon Americas: 16,1211 North America 10,7512 South America 5,370Flat Carbon Europe: 21,7973 Europe 21,797Long Carbon: 19,9374 North America 3,8625 South America 4,4866 Europe 10,7537 Other 4 836Asia, Africa and CIS (AACIS): 11,7698 Africa 4,4179 Asia, CIS and other 7,352Stainless Steel: 1,447876594123Number of employees 5 at December 31, 2009 according to segmentsSegment Total %1 Flat Carbon Americas 29,248 10.42 Flat Carbon Europe 58,965 20.93 Long Carbon Americas and Europe 63,693 22.64 AACIS 92,910 33.05 Stainless Steel 11,135 3.96 Steel Solutions and Services 17,409 6.27 Other activities 8,343 3.0Total 281,703 1005647123Allocation of employees 5 at December 31, 2009 according to geographic location7 811 EU15 6 68,527 24.32 Rest EU (EU27) 7 40,923 14.53 Other European countries 47,997 17.04 North America 34,809 12.45 South America 24,803 8.86 Asia 45,594 16.27 Middle East 135 0.18 Africa 18,915 6.7Total 281,703 10065432
ArcelorMittal Annual Report 200904 Message from the Chairman and CEOMessage from the Chairman and CEODear Shareholders,It will come as no surprise to you that2009 was not only the most challengingyear since the creation of ArcelorMittalbut also the most difficult period thatmany of us will have experienced inour business lives. Enough has beenwritten on the causes of the globalfinancial crisis that there is little pointin elaborating further here. Suffice to saythat what started with problems in thefinancial sector sparked a chain reactionthat spilled over into the global economy,resulting in considerable challengesfor our Company – a number of whichI outlined to you in last year’s report.
ArcelorMittal Annual Report 2009Message from the Chairman and CEO 05The fundamental issue for ArcelorMittalwas the substantial drop in steeldemand, further exacerbated by a periodof considerable de-stocking throughoutthe steel supply chain. At the bottomof the cycle these combined factorsresulted in a drop in apparent demandof approximately 50%.Clearly this impacted the financialresults for the year. Revenues droppedto $65.1 billion and net income droppedto $0.1 billion.Whilst these numbers are disappointing– particularly when compared with resultsof the preceding years – it is a testamentto the Company and its stakeholdersthat we recorded a marginal net incomeduring such a difficult year. After a verychallenging first half, we returned toprofitability in the third quarter andsubsequently improved on this in thefourth quarter as inventories stabilized,customers resumed buying and pricesbegan to rise – albeit from low levels.I am also pleased with the progressin Health and Safety that we achievedin 2009. Health and Safety has remainedthe absolute priority for the Company andis a critical component of our philosophyto produce Safe, Sustainable, Steel. OurLost Time Injury Frequency Rate (LTIFR),which is the most important statistic wetrack to assess our progress in this area,continued to improve, falling from 2.5 permillion hours worked in 2008 to 1.9 in2009 for both steel and mining. This isgood progress, but we will not be satisfieduntil we have reached our ultimate goalof Journey to Zero. To leverage bestpractices and improve the Health andSafety performance across the Group,we initiated in 2009 a program to commitadditional resources for the developmentof specific programs to improve safetyperformance at 12 top priority sites.We have set ourselves a further LTIFRreduction target for 2010.In general, whilst none of us would wishto go through a similar period again,I am pleased with the way in whichArcelorMittal weathered the crisis.Within the first few weeks after thecollapse of Lehman Brothers, our Companyrallied around a crisis strategy that focusedon what we called the three Cs: Cash, Costand Customers. Our ability to implementthis strategy swiftly and decisively wasunderpinned not only by our global scaleand scope, but also by the spirit and cultureof the Company. A well-known challengefor fast-growing businesses is to holdon to the qualities that drove their successin the first place. The managementof this Company has always placed greatemphasis on maintaining the entrepreneurialspirit that enabled us to become the world’sleading steel company. Therefore, we haveboth the scale to optimize productionthrough temporary curtailments andthe agility to respond quickly to changingcircumstances. The ability to executerapidly is as important as the actualdecision. Cutting production approximately50% at the worst point of the crisis –as our Company did - was unprecedentedand very painful. However, it acceleratedthe required de-stocking period andalso resulted in fixed cost savings of$9.4 billion. Out of this, sustainablemanagement gains savings reached$2.7 billion by close of the fourth quarterof 2009, due to industrial optimization.Additionally, we conserved cash byreducing capital expenditures, temporarilyputting almost all growth projects on holdand aggressively reducing working capital.Regrettably, we also had to implementa Voluntary Separation Scheme acrossthe Group. This is not a decision thatmanagement took lightly, but we arepleased that we were able to achievethe necessary reductions in our workforcewithout implementing forced redundancies.I would like to take this opportunityto thank our employees and trade unionsacross the world for understandingthe severity of the situation, engagingwith us in frank and open discussionsand enabling us to find the right solutionsat our plants.As part of our three Cs strategy duringthe crisis, we also set ourselves a numberof key financial targets:•A $10 billion reduction of net debt 1by the end of 2009 from the debt levelat the end of the third quarter of 2008;•Management gains of $5 billion overfour years including selling, general andadministrative savings with $2 billionto be achieved by the end of 2009;•A reduction of the working capital rotationto a targeted range of 75-85 days.Looking ahead to the remainderof 2010, I am certainly more optimisticthan I was 12 months ago.The crisis has been very difficultfor all of us. But it has also actedas a catalyst to make many positiveand necessary changes that willsee us emerge as a stronger,leaner and more robust organization.1Net debt is defined as long-term debt plusshort-term debt less cash and cash equivalentsand restricted cash.
ArcelorMittal Annual Report 200906 Message from the Chairman and CEOWe have outperformed on all threeaspects. $2.7 billion of management gainshave already been achieved by year endwith the target of $5 billion over four yearsstill being relevant. Net debt by the endof 2009 was $18.8 billion – a reductionof $13.7 billion from $32.5 billion at theend of the third quarter of 2008.This reduction was achieved througha combination of cash flow generatedby working capital release, the equityportion ($3.9 billion) of the $13.1 billionraised by our successful fundraisingsin the capital markets, and a numberof other non-recurring factors. In regardto working capital, rotation days improvedfrom 96 days in December 2008 to63 days in December 2009. These areexcellent achievements, particularly in sucha difficult year. We therefore ended theyear not only with the worst of the crisisbehind us but with a much strengthenedbalance sheet and strong liquidity.Writing to you now, I can say with someconviction that we are through the worst.Whilst this is very welcome, we must notmislead ourselves that there will be a swiftreturn to the buoyant levels of growththat we had become accustomed to inrecent years. Although the major developedeconomies have now formally emergedfrom recession and manufacturing is againshowing signs of growth, the reality is thatactual growth and growth forecasts for thecoming year remain low. It will be sometime until we return to pre-crisis levels.Perhaps the most interesting outcomefrom the recent crisis is the increasingimportance the developing economieshave in the global economy. The growinginfluence of these economies is of coursenot a new trend; we have been talkingabout the rise of the so-called ‘BRICs 1 ’and other emerging economies for someyears now. Nevertheless their resiliencein the face of financial crisis and the speedat which they have resumed their growthpaths took many by surprise – evidenceof the significant role they now occupyin the global economy. Whilst per capitaGDP 2 in these economies still considerablylags that of their more developedcounterparts, the massive populationsin countries such as India and China implythat these countries will at some stagein this century be rivals for the positionof the largest economy in the world.That they still have a long journey to makeonly further confirms their considerablelong-term potential.This bodes well for ArcelorMittal, whichhas long embraced growth in thedeveloping economies as a cornerstoneof its strategy. We have a significantpresence in Brazil, South Africa and EasternEurope, including Ukraine and Kazakhstan.And our largest and most ambitiousexpansion projects are our potentialgreenfield plants in India. As we start toresume growth expenditure once again,this will also be focused on theseeconomies. Two notable examples are SaudiArabia where we signed in 2007 a jointventure agreement with the Bin JarallahGroup for the design and constructionof a seamless tube mill, and Brazil wherewe plan to expand capacity at theMonlevade plant with the constructionof a second blast furnace. Also, in 2008,we started two joint venture projects inChina with Hunan Valin Iron & Steel Group,related to electrical steel (ValinArcelorMittal Electrical Steel) andautomotive steel (Valin ArcelorMittalAutomotive Steel). These are the regionsfrom which long-term steel demandwill emanate, and we will remain focusedon these markets as the principal growthregions for our Company’s strategy.Although growth will come from thedeveloping economies, our operationsin the developed markets will always bean essential core of our Group, not leastbecause they are the innovative heartof the Company and have a key role to playin expanding the possibilities of steel.Innovation has always played a critical rolein the development of the steel industry -and never more so than in today’sincreasingly environmentally-focusedworld. Every business faces pressureto reduce its CO2 emissions and thisis particularly true for the steel industry,which relies on carbon to reduce iron orein a fundamental chemical processfor which no alternative currently exists.Nevertheless, steel is by nature themost sustainable of all materials andArcelorMittal intends to play a leading rolein further strengthening the future of steelby improving the characteristics of theproduct. Our Company is very activein addressing this challenge, both in termsof researching new breakthroughsteelmaking processes such as ULCOSand through developing new and moreenergy-efficient products – therebycontinually broadening the product scopethat is a second pillar of our Company’sstrategy. To contribute to CO2 emissionsreduction through lighter vehicles, wecontinue to develop innovative ultrahigh-strength steels that will bring majorenvironmental benefits in reducing theweight of some automotive parts up to30%. Our expertise in Advanced HighStrength Steels (AHSS) is being furtherapplied in our ‘S-in motion’ project toproduce new solutions that will reduce theweight of a 2008 reference vehicle by20%, while maintaining the safety andperformance that only steel can provide.Such continuous innovation is alsodemanded by our customers, with whomwe maintain a regular and close dialogue toensure we are able to meet their1BRICs refers to Brazil, Russia, India and China.2GDP refers to Gross Domestic Product.3Effective January 1, 2010.
ArcelorMittal Annual Report 2009Message from the Chairman and CEO 07challenging requirements like thedevelopment of industrial gas cylinderswith 30% weight reduction. In spite of thecrisis, we did not reduce Research andDevelopment (R&D) spending, and in 2009we invested $253 million into this area.The other strategic component of ourbusiness which has been reinforced throughthe crisis is the importance of our miningoperations. ArcelorMittal has long favoredan integrated business model and we firmlybelieve that self-sufficiency in key rawmaterials provides a competitive advantagethat will continue to be enhanced over time.In 2009, our self-sufficiency was 64%in iron ore and 21% in metallurgical coal,although these numbers also reflect theimpact of significantly lower steel productionduring the year because of the crisis.But we have ambitious plans to continueto expand in this area and increase our ownlevels of production. As a sign of theincreasing importance of this side of thebusiness, we have appointed Peter Kukielskito join 3 the Group Management Boardas Senior Executive Vice President andHead of Mining. His extensive experienceand leadership will further strengthen thefoundations to become a truly integratedglobal steel production and mining business.Even as we focus on improving our businessperformance, it is critical that we continueto live up to the responsibility we haveas a leading global company. This meanscontinuing to implement and improve ourCorporate Responsibility program in allcountries where we operate. During 2009we published our second full CorporateResponsibility report, ‘How will we achievesafe sustainable steel?’ I am pleased thatthis report, which documented ourresponsibilities in four distinct areas anddefined targets for which we will holdourselves accountable, has been wellreceived by our stakeholders. This actsas a benchmark against which we will holdourselves accountable. The follow-upreport, ‘Our progress towards SafeSustainable Steel’ will be published shortly.Looking ahead to the remainder of 2010,I am certainly more optimistic than Iwas 12 months ago. The crisis has beenvery difficult for all of us. But it has also actedas a catalyst to make many positive andnecessary changes that will see us emergeas a stronger, leaner and morerobust organization.Finally, I would like to take this opportunityto thank all our stakeholders for the loyaltythey have shown us during these difficulttimes. A company cannot thrive and growwithout the support of its stakeholders;and this year has reinforced not only thispoint but also the importance of stakeholderdialogue. I would also like to take theopportunity to welcome LuxembourgEconomy and Foreign Trade Minister JeannotKrecké to the Board of Directors, who bringsalong his extensive knowledge in economicand European Union matters.To our employees, customers,suppliers, the trade unions, shareholders,my colleagues on the GroupManagement Board and ManagementCommittee and of course the Boardof Directors – thank you for yourunderstanding, support and loyalty.The Company has come througha very difficult period; but the worstis now behind us and, as the recoverytakes shape, we will continueto further define ourselves as theworld’s leading steel company.Lakshmi N. MittalChairman and CEO
ArcelorMittal Annual Report 200908 Questions for the Group Management BoardQuestionsfor theGroupManagementBoard
ArcelorMittal Annual Report 2009Questions for the Group Management Board 09GMB members from left to right:Peter KukielskiSudhir MaheshwariAditya MittalGonzalo UrquijoLakshmi N. MittalChristophe CornierMichel WurthDavinder ChughWhen ArcelorMittal was created,the Company characteristicallymade some bold statementsabout what it wanted to stand for.Coming out of the crisis, does theCompany still hold the same values?Aditya Mittal: The purpose of our valuesis to set standards that the Companyshould maintain during all aspects of theeconomic cycle. This is not always easyto do, particularly in the midst of the worstcrisis for many years, but we have workedhard to maintain our values and ensurethey are still relevant to the business andour people. That doesn’t mean that wehaven’t had to take some very toughdecisions to adapt. And as a result of thesedecisions some things have changed. Forexample we are leaner, more cost focusedand more targeted on our growth projects.Change is always difficult, but we’veshown leadership, and as a result I believewe’re now a better and stronger company.Gonzalo Urquijo: We continue to liveand work by our values, but we havehad to adapt. Before the crisis, we sawleadership in terms of growth and size.Now the emphasis is on cost leadership,quality and customer service. Our targetis still to be the most admired steelcompany. We have had to make difficultdecisions in the past year but we have beencareful to make them in accordance withour values, maintaining a social partnershipwith our workforce. And we improvedthe sustainability of our business –and of all our stakeholders – going forward.Since January 1st, 2010, the GroupManagement Board (GMB) hasbeen comprised of eight members:Lakshmi N. Mittal, Aditya Mittal,Michel Wurth, Gonzalo Urquijo,Christophe Cornier, Sudhir Maheshwari,Davinder Chugh and Peter Kukielski.Here, the members give theirthoughts on the Company, its strategyand priorities.Sudhir Maheshwari: Our experienceof navigating through the most challengingbusiness environment has reinforced morethan ever the significance of ArcelorMittal’sbrand values, Sustainability, Qualityand Leadership. Focusing on customerservice, the quality of our products andservices, and still being prepared to leadwith bold strategic thinking, we wereable to take the right decisions and emergestronger from the crisis. I believe wehave lived by the ArcelorMittal values.How is the Company’s businessmodel evolving? Is it still a global,diversified, integrated model?Davinder Chugh: We continue withour three-dimensional business strategyof geographical and product diversification,as well as expanding our footprint alongthe value chain. Going forward, our growthprojects will be more focused towardsclear long-term growth markets suchas the BRICs, as well as enlarging ourfootprint on the steel value chain throughfurther backward integration and enhancingour distribution solutions. Our policyof backward integration was vindicatedas captive raw material sources helpedus sustain the business through the crisis.Michel Wurth: The importance of a globalmodel was demonstrated in the crisis.We did not abandon any single marketor country where we have production.It remains the key going forward. In 2010,it is clear that developing countries willdo best, and we want to tap into thatgrowth. As for integration, we continue tomake our value chain as long as possible –from upstream integration to downstreamdistribution and steel processing. The abilityto source a lot more of our raw materialsin-house gives us a distinct advantageover the competition.
ArcelorMittal Annual Report 200910 Questions for the Group Management BoardChristophe Cornier: The Company’sglobal thrust remains as importantas ever. The difference today is thatthe regions from which growth willcome have changed, with Asia and theemerging markets becoming increasinglyimportant. So we do have to adaptthe model to the reality of the marketplace and rebalance our objectives.Diversification and integration remainkey tenets of the model.What are the priorities right now?Davinder Chugh: Our critical focus areais to further improve our Health and Safetyperformance. We are working on contractorsafety through training programs andactive collaboration. Other critical areasinclude the improvement of our costcompetitiveness by sustainable reductionin variable and fixed costs. To support this,our efforts are directed towardsestablishing strong relationships withour suppliers, full implementation ofthe TCO (Total Cost of Ownership)approach across the Group’s supply chainand transforming our internal processesto smart and effective solutions.Sudhir Maheshwari: The Companyis today more battle-hardened thanbattle-weary and we aim to leveragethat momentum to achieve the highestefficiency in our operations in termsof costs, processes, etc. Also, efficientallocation of capital remains a top priority.This requires us to be more selectivewhen we evaluate opportunities asthere will be limited capital available.Finally, we will need to continually developour people so that the best continueto work for us to build a more sustainableand brighter future.Peter Kukielski: Our top prioritiesstart and finish with safety. We havea workforce of employees and contractorsthat is over 300,000 strong and spans60-odd countries. While our safetymetrics continue to show an improvement,and some of our mining operationsproduced outstanding safety results,it is tragic that we still had to reportfatalities in 2009. The task for 2010is to replicate the standards of the verybest sites everywhere else. BeyondHealth and Safety, the priority is todeliver value to our shareholders in termsof much enhanced profit – and quickly.What did the Company learn fromthe crisis?Michel Wurth: One of the major lessonswas that our people are key. We shouldpay a tribute to all of them. It is downto them – their efforts and in some casesthe sacrifices they made – that we gotthrough the crisis. It was a painful exercisebut we have come out stronger than whenwe went in. The other big lesson is thatwe need to think the unthinkable.Nobody anticipated the crisis: now weneed to be prepared for anything.Peter Kukielski: In general terms,we learned that cost is king. Cost drivescash and our ability to get our productsprofitably to our customers. Without ourdrive on costs last year, we would not havesurvived as well as we did. More specificallyfrom my vantage point, we learned thevalue of de-linking mining operationsfrom captive customers. With the captiveapproach, when a mill shuts downso does the mine. By contrast, mineswith external customers can still thrivein a downturn. ArcelorMittal Mines Canadawas a case in point, extending its salesto external customers in Europe, the MiddleEast and even China. As we build ourmining operations, the focus must beon world-scale ore bodies with accessto both internal and external customers.
ArcelorMittal Annual Report 2009Questions for the Group Management Board 11Aditya Mittal: Whilst none of uswould wish to go through 2009 again,it has served to reinforce the strongestparts of our business and strategyand highlight those areas wheresome element of change was needed.We have always been an entrepreneurialcompany and the crisis demonstratedthat we had maintained our senseof entrepreneurship that enabled usto respond swiftly. But we also learnedthat we need to be as productiveand as lean as possible at all times.We effected some considerablechanges during the crisis and ourability to make these changes wasmade possible only because of theoutstanding team of people wehave at ArcelorMittal.
Bernard FontanaExecutive Vice President of ArcelorMittal, Head of Human Resources
ArcelorMittal Annual Report 200914 2009 Highlights2009 HighlightsIn January 2009, ArcelorMittalbegan trading on a single orderbook in Paris, Amsterdam andBrussels, under the symbol MT.ArcelorMittal remains amember of key NYSE-Euronextindices, including the CAC40and the AEX. 11 For information about additionalexchanges where ArcelorMittal is listed,please refer to the ‘Market Information’section in this Annual Report.
ArcelorMittal Annual Report 20092009 Highlights 15JanuaryTransactionwith SotegArcelorMittal contributed its76.9% stake in Saar FerngasAG to Luxembourg-basedutility Soteg, in which it helda minority ownership stake.Upon completion, ArcelorMittal’sstake in Soteg increased from20% to 26.2%. ArcelorMittalthen sold 2.48% of Soteg to theGovernment of Luxembourgand SNCI (‘Société Nationalede Crédit et d’Investissement’),a Luxembourg governmentcontrolledinvestment. ArcelorMittalretains a 25.3% stake in Soteg,renamed Enovos.AprilEuropean WorksCouncil talksArcelorMittal met with itsEuropean Works Council to providean update on the temporarysuspension of productionat sites in Europe. In lightof the ongoing exceptionaleconomic environment,it was necessary to continueto suspend and optimizeproduction to ensure theCompany was well adaptedto the market reality.All production suspensionswere temporary and reviewedon a regular basis.MayAgreementwith CzechGovernmentArcelorMittal and the CzechGovernment agreed to resolveall pending arbitration and litigationregarding the privatization ofNova Hut and Vítkovice Steel.ArcelorMittal agreed to an amicablesettlement of all pending litigationand arbitration cases againstthe Czech Government and itsrelated entities. In addition,ArcelorMittal increased its stakein ArcelorMittal Ostrava toapproximately 83%.As a part of the overall settlementagreement, ArcelorMittalOstrava concluded a long-termsupply agreement for hot metalwith Evraz Vítkovice Steel.OctoberDisposalArcelorMittal signed a definitiveagreement to divest its minorityinterest in Wabush Mines, Canada,pursuant to which it will receive$34.28 million for its 28.6%stake. After the disposal,ArcelorMittal continued to havesignificant mining operations andresources in Canada includingArcelorMittal Mines Canada.NovemberIncreaseof stakeArcelorMittal acquired an additional13.9% stake in ArcelorMittalOstrava, increasing its staketo approximately 96.4%.The transaction was completedin January 2010.DecemberInternationalVolunteerWork DayArcelorMittal held its secondannual International VolunteerWork Day organized by theArcelorMittal Foundation.It consisted of a set of actionsimplemented by the Group’slocal units to encourageemployees to invest time andexpertise for the benefitof local communities.Recent DevelopmentsIncrease ofstake; jointventure andArcelorMittalFoundationFollowing the closing of a tender offeron January 7, 2010, ArcelorMittal acquireda 28.8% stake in Uttam Galva Steels Limited(“Uttam Galva”), a leading producer ofcold rolled steel, galvanized products andcolor coated coils and sheets based inWestern India that is listed on the major stockexchanges of India. The Company expectsto purchase an additional 4.9% from thePromoter R.K. Miglani family in due course.ArcelorMittal entered into initial discussionswith BHP Billiton to potentially combinetheir respective iron ore mining andinfrastructure interests in Liberia andGuinea within a joint venture.ArcelorMittal, through the ArcelorMittalFoundation, donated $1 million to helpthe relief efforts in Port-au-Prince, Haiti,following the earthquake that struckthe island on January 12, 2010.
ArcelorMittal Annual Report 200916 Board of DirectorsBoard of DirectorsArcelorMittal continues to place a strong emphasison corporate governance. ArcelorMittal has eight independentdirectors on its 11-member Board of Directors. ArcelorMittal’sAudit Committee and Appointments, Remunerationand Corporate Governance Committee are each comprisedof three independent directors and half of the membersof ArcelorMittal’s Risk Management Committee are requiredto be independent.On May 12, 2009, the expirations of the mandates of Sergio Silvade Freitas, Michel Angel Marti and Jean-Pierre Hansen wereaccepted by the annual general meeting. Narayanan Vaghul,Wilbur L. Ross and François Pinault were re-elected as membersof the Board of Directors. After the annual general meetingheld on May 12, 2009, Ignacio Fernandez Toxo resigned fromthe Board of Directors. On September 1, 2009, Malay Mukherjeeresigned from the Board of Directors.Georges Schmit resigned from the Board of Directorseffective December 31, 2009. In replacement of Mr. Schmit,the Board appointed Jeannot Krecké as an interim boardmember starting January 1, 2010. Mr. Krecké’s full appointmentto the Board of Directors will be proposed to the shareholdersat the Company’s annual general meeting on May 11, 2010.Like Mr. Schmit, Mr. Krecké will serve on ArcelorMittal’s Boardof Directors as a shareholder representative.
ArcelorMittal Annual Report 2009Board of Directors 17Lakshmi N. Mittal Lewis B. Kaden Vanisha Mittal BhatiaLakshmi N. Mittal, 59, is the Chairmanand CEO of ArcelorMittal. Mr. Mittal foundedMittal Steel Company (formerly the LNMGroup) in 1976 and guided its strategicdevelopment, culminating in the mergerwith Arcelor, agreed in 2006, to found theworld’s largest steelmaker. Since the merger,Mr. Mittal has led a successful integration,establishing ArcelorMittal as one of theworld’s foremost industrial companies.He is widely recognized for the leading rolehe has played in restructuring the steelindustry towards a more consolidated andglobalized model. Mr. Mittal is an activephilanthropist and a member of various trustsand boards, including the boards of directorsof Goldman Sachs, EADS and ICICI BankLimited. He is also a member of the ForeignInvestment Council in Kazakhstan, theInternational Investment Council in SouthAfrica, the Investors’ Council to the Cabinetof Ministers of Ukraine, the World EconomicForum’s International Business Council,the World Steel Association’s ExecutiveCommittee and the Presidential InternationalAdvisory Board of Mozambique. He alsosits on the Advisory Board of the KelloggSchool of Management in the United States.Mr. Mittal began his career workingin the family’s steelmaking business in India,and has over 30 years of experience workingin steel and related industries. In additionto forcing the pace of industry consolidation,he has also championed the developmentof integrated mini-mills and the use of DRIas a scrap substitute for steelmaking.Following the transaction combining IspatInternational and LNM Holdings to formMittal Steel in December 2004, togetherwith the simultaneous announcementof the acquisition of International SteelGroup in the United States to form the world’sthen-leading steel producer, Mr. Mittalwas awarded Fortune magazine’s ‘EuropeanBusinessman of the Year 2004’.In 1996, Mr. Mittal was awarded ‘Steelmakerof the Year’ by New Steel in the UnitedStates and the ‘Willy Korf Steel Vision Award’by World Steel Dynamics in 1998 foroutstanding vision, entrepreneurship,leadership and success in global steeldevelopment. Following the creationof ArcelorMittal, Mr. Mittal was awarded‘Business Person of 2006’ by theSunday Times, ‘International Newsmakerof the Year 2006’ by Time Magazineand ‘Person of the Year 2006’ by theFinancial Times for his outstanding businessachievements. In January 2007, Mr. Mittalwas presented with a fellowship fromKing’s College London, the college’shighest award. He also received the 2007Dwight D Eisenhower Global LeadershipAward, the Grand Cross of Civil Merit fromSpain and was named AIST Steelmakerof the Year. In January 2008, Mr. Mittal wasawarded the Padma Vibhushan, India’s secondhighest civilian honor, by the President of India.In September 2008, Mr. Mittal was chosenfor the third ‘Forbes Lifetime AchievementAward’, which honors heroes of entrepreneurialcapitalism and free enterprise.Mr. Mittal was born in Sadulpur in Rajasthan,India on June 15, 1950. He graduatedfrom St Xavier’s College in Kolkata wherehe received a Bachelor of Commerce degree.Mr. Mittal is married to Usha Mittal,and has a son, Aditya Mittal and a daughter,Vanisha Mittal Bhatia.Lewis B. Kaden, 67, is the Lead IndependentDirector of ArcelorMittal. He has approximately40 years of experience in corporategovernance, financial services, disputeresolution and economic policy. He iscurrently Vice Chairman of Citigroup.Prior to that, he was a partner of the lawfirm Davis Polk & Wardwell, and servedas Counsel to the Governor of New Jersey,as a Professor of Law at ColumbiaUniversity and as director of ColumbiaUniversity’s Center for Law and EconomicStudies. He has served as a directorof Bethlehem Steel Corporation for tenyears and is currently Chairman of theBoard of Directors of the MarkleFoundation. He is a member of the Councilon Foreign Relations and has been amoderator of the Business-Labor Dialogue.Mr. Kaden is a magna cum laude graduateof Harvard College and of Harvard LawSchool. He was the John Harvard Scholarat Emmanuel College, CambridgeUniversity. Mr. Kaden’s principal dutiesand responsibilities as Lead IndependentDirector are as follows:
ArcelorMittal Annual Report 200918 Board of DirectorsNarayanan Vaghul Wilbur L. Ross, Jr François Pinault José Ramón Álvarez Rendueles• Co-ordination of activitiesof the other Independent Directors;• Liaison between the Chairmanand the other Independent Directors;• Calling meetings of the IndependentDirectors when necessary andappropriate; and• Such other duties as are assignedfrom time to time by the Boardof Directors.Vanisha Mittal Bhatia, 29, was appointedas a member of the LNM Holdings Boardof Directors in June 2004. Mrs. VanishaMittal Bhatia was appointed to MittalSteel’s Board of Directors in December2004. She has a Bachelor of Arts degreein Business Administration from theEuropean Business School and hascompleted corporate internships atMittal Shipping Ltd., Mittal Steel HamburgGmbH and an Internet-based venturecapital fund. She is the daughter ofMr. Lakshmi N. Mittal.Narayanan Vaghul, 73, has over 50 yearsof experience in the financial sector.He was the Chairman of ICICI Bank Limitedbetween 2002 and April 2009. Previously,he served as the Chairman of the IndustrialCredit and Investment Corporation of India,a long-term credit development bankfor 17 years and, prior to that, servedas Chairman of the Bank of India andExecutive Director of the Central Bankof India. He was chosen as Businessmanof the Year in 1992 by Business India andhas served as a consultant to the WorldBank, the International Finance Corporationand the Asian Development Bank. Mr. Vaghulwas also a visiting Professor at the SternBusiness School at New York University.Mr. Vaghul is Chairman of the Indian Instituteof Finance Management & Research andis also a Board member of various othercompanies, including Wipro, Mahindra &Mahindra, Nicholas Piramal India, ApolloHospitals and Himatsingka Seide. NarayananVaghul was awarded the Padma Bhushan,the third highest civilian honor in India.The award will be formally conferred inApril 2010 by the President of India.Wilbur L. Ross, Jr., 72, has served asthe Chairman of the ISG Board of Directorssince ISG’s inception. Mr. Ross is theChairman and Chief Executive Officerof WL Ross & Co. LLC, a merchant bankingfirm, a position that he has held sinceApril 2000. Mr. Ross is also the Chairmanand Chief Executive Officer of WLRRecovery Fund L.P., WLR Recovery Fund IIL.P., Asia Recovery Fund, Asia RecoveryFund Co-Investment, Nippon InvestmentPartners and Absolute Recovery HedgeFund. Mr. Ross is also Chairman of InvescoPrivate Capital, Ohizumi ManufacturingCompany in Japan, International TextileGroup, International Coal Group and ofAmerican Home Mortgage Servicing Inc.Mr. Ross is a Board member of theTurnaround Management Association,Nikko Electric in Japan, Clarent HospitalCorp. and International AutomotiveComponents. He also serves as a Directorto Compagnie Européenne de Wagons SARL(Luxembourg), Wagon PLC (UK), the JapanSociety, the Whitney Museum of AmericanArt and the Yale School of Management.Previously, Mr. Ross served as theExecutive Managing Director at Rothschild,the investment banking firm, from October1974 to March 2000 and as Chairman ofthe Smithsonian Institution National Board.François Pinault, 73, set up his first companyin 1963, in the timber business.In 1988, the Pinault Group was listed on theParis stock exchange. Renamed PPR, thecompany founded by François Pinaultis today led by his son François Henri Pinault,has two major activities:• Retail business with CFAO, a leadingdistributor of household goods,La Redoute, a leader in mail order trading,La FNAC, a leading retailer of culturalproducts in Europe, and Puma, a leader insports products;• Luxury goods business with Gucci Group,the second biggest luxury group in theworld with famous brands suchas Gucci, Yves Saint-Laurent, BottegaVeneta, Sergio Rossi, Boucheron,Stella McCartney, Alexander McQueen,Bedat & Co and Balenciaga.
ArcelorMittal Annual Report 2009Board of Directors 19Jeannot KreckéJohn O. Castegnaro Antoine Spillmann H.R.H. Prince Guillaume de LuxembourgAt the same time, François Pinault set upa separate structure in order to investin companies with strong growth potential,but in sectors distinct from that of PPR.Founded in 1992 and fully controlledby François Pinault and his family, Artemiscontrols the famous French vineyardChateau-Latour, the news magazineLe Point, the auction house Christie’s,as well as part of the share capital of Vinci.François Pinault also owns the RennesFootball Club and the Marigny Theatre.As one of the largest collectors ofcontemporary art, François Pinault acquiredthe Palazzo Grassi in Venice in May 2005to display its art collection and to organizecultural events. He also acquired La PuntaDella Dogana in Venice to set up acontemporary art center. His collectionis also displayed outside Venice.José Ramón Álvarez Rendueles, 69,has extensive experience in the financial,economic and industrial sectors.He is a former Governor of the Bank ofSpain and President of the BankZaragozano. He is the President of theBoard of Directors of ArcelorMittalEspaña, Peugeot España and Sanitas.He is also a retired full professor of publicfinance at the Universidad Autónomade Madrid and a Director of GestevisiónTelecinco S.A., and Generali España.Jeannot Krecké, 59, started his universitystudies at the Université Libre de Bruxellesin 1969, from which he obtaineda degree in physical and sports education.He decided in 1983 to changeprofessional direction. His interests ledhim to retrain in economics, accountingand taxation. Following the Luxembourglegislative elections of June 13, 2004,Jeannot Krecké was appointed Ministerof the Economy and Foreign Trade as wellas Minister of Sports on July 31, 2004.Upon the return of the coalitiongovernment formed by the ChristianSocial Party (CSV) and the LuxembourgSocialist Workers’ Party (LSAP) as a resultof the legislative elections of June 7,2009, Jeannot Krecké retained theportfolio of Minister of the Economyand Foreign Trade on July 23, 2009.From July 2004, Jeannot Kreckérepresented the Luxembourg governmenton the Council of Ministers of theEuropean Union in the Internal Market andIndustry sections of its Competitivenessconfiguration as well as on the Economicand Financial Affairs Council andin the Energy section of its Transport,Telecommunications and Energyconfiguration. He was also a memberof the Eurogroup from July 2004to June 2009.John O. Castegnaro, 65, serves asa representative of the employeesof ArcelorMittal. He is a memberof the Luxembourg Parliament andHonorary Chairman of the OnhofhängegeGewerkschaftsbond Lëtzebuerg(OGB-L) trade union.Antoine Spillmann, 46, worked for leadinginvestment banks in London from1986 to 2000. He is an asset managerand executive partner at the firmBruellan Wealth Management, anindependent asset management companybased in Geneva. Mr. Spillmann studiedin Switzerland and London and holdsdegrees from the London BusinessSchool in Investment Management andCorporate Finance.H.R.H. Prince Guillaume de Luxembourg,46, worked for six months at theInternational Monetary Fund inWashington, DC, and spent two yearsworking for the Commission of EuropeanCommunities in Brussels. He studiedat the University of Oxford in theUnited Kingdom, and GeorgetownUniversity in Washington, DC, from whichhe graduated in 1987.
ArcelorMittal Annual Report 200920 Senior ManagementSenior ManagementGroup Management BoardThe strategic direction of the businessis the responsibility of the GMB underthe supervision of the Board of Directors.The GMB members are appointed bythe Board of Directors and the GMB isheaded by Lakshmi N. Mittal as ChiefExecutive Officer. On January 1, 2010,Peter Kukielski joined the GMB as Headof Mining, bringing a wealth of strategy,operations, project development andinternational experience to theCompany. The senior managementteam continues to enjoy the relevanttalent and expertise it needs to continueto deliver the best possible performanceto all stakeholders.
ArcelorMittal Annual Report 2009Senior Management 21Lakshmi N. MittalAditya MittalMichel WurthGonzalo UrquijoAditya Mittal, CFO, Responsiblefor Flat Americas, M&A, Investor Relations,Strategy and CommunicationsAditya Mittal, 33, is Chief FinancialOfficer of ArcelorMittal with additionalresponsibility for M&A Business & ProjectDevelopment, Flat Americas, Strategy,Investors Relations and Communications.Prior to the merger to create ArcelorMittal,Aditya Mittal held the position of Presidentand CFO of Mittal Steel Companyfrom October 2004 to 2006. He joinedMittal Steel in January 1997 and hasheld various finance and managementroles within the company. In 1999,he was appointed Head of Mergersand Acquisitions for Mittal Steel. In thisrole, he led the company’s acquisitionstrategy, resulting in Mittal Steel’sexpansion into Central Europe, Africaand the United States. Besides the M&Aresponsibilities, Aditya Mittal was involvedin post-integration, turnaround andimprovement strategies.Michel Wurth, Responsible for Flat Europe,Steel Solutions and Services, ProductsDevelopment and R&D, Global CustomersMichel Wurth, 55, was previouslyVice President of the Group ManagementBoard of Arcelor and Deputy CEO,with responsibility for Flat Carbon SteelEurope and Auto, Flat Carbon Steel Brazil,Coordination Brazil, CoordinationHeavy Plate, R&D, NSC Alliance. The mergerof Aceralia, Arbed and Usinor leadingto the creation of Arcelor in 2002 ledto Michel Wurth’s appointment as SeniorExecutive Vice President and CFO ofArcelor, with responsibility over Finance andManagement by Objectives. Michel Wurthjoined Arbed in 1979 and held a variety offunctions including Secretary of the Boardof Directors, head of the Arbed subsidiaryNovar and Corporate Secretary, beforejoining the Arbed Group ManagementBoard and becoming its Chief FinancialOfficer in 1996. He was named ExecutiveVice President in 1998. Michel Wurth holdsa law degree from the University ofGrenoble, a degree in Political Science fromthe Institut d’Études Politiques de Grenobleand a Master of Economics degree fromthe London School of Economics.Gonzalo Urquijo, Responsible for LongProducts, China, Stainless, TubularProducts, Corporate Responsibility:ArcelorMittal Foundation, InvestmentAllocation Committee (IAC) ChairmanGonzalo Urquijo, 48, previously memberof the Group Management Boardand Senior Executive Vice President andChief Financial Officer of Arcelor,held the following responsibilities:Finance, Purchasing, IT, Legal Affairs,Investor Relations, Arcelor Steel Solutionsand Services, and other activities.Gonzalo Urquijo also held several otherpositions within Arcelor, including DeputySenior Executive Vice President andHead of the functional directoratesof distribution. Until the creation of Arcelorin 2002, when he became ExecutiveVice President of the Operational UnitSouth of the Flat Carbon Steel sector,Mr. Urquijo was CFO of Aceralia. Between1984 and 1992, he held a varietyof positions at Citibank and Crédit Agricolebefore joining Aristrain in 1992 as CFOand later Co-CEO. Gonzalo Urquijo is agraduate in Economics and Political Scienceof Yale University and holds an MBAfrom the Instituto de Empresa in Madrid.
ArcelorMittal Annual Report 200922 Senior ManagementSudhir MaheshwariChristophe CornierDavinder ChughPeter KukielskiSudhir Maheshwari, Responsible forCorporate Finance, M&A and BusinessDevelopment including India, and RiskManagement; Alternate Chairman ofthe Corporate Finance and Tax Committeeand Chairman of the Risk ManagementCommittee (reporting to CFO)Mr. Maheshwari, 46, was previouslya Member of the Management Committeeof ArcelorMittal, Responsible for Financeand M&A. Prior to this, he was ManagingDirector, Business Development and Treasuryat Mittal Steel from January 2005 untilits merger with Arcelor in 2006 and ChiefFinancial Officer of LNM Holdings N.V.from January 2002 until its merger withIspat International in December 2004.Mr. Maheshwari has over 23 years ofexperience in the steel and related industries.He has played an integral and leading rolein all acquisitions in recent years includingthe ArcelorMittal merger and turnaroundand integration thereof. He also plays a keyleading role in various corporate finance,funding and capital market projects,including the initial public offering in 1997and the various banking and public marketfinancing transactions since then.Over a 21-year career with ArcelorMittal,he also held the positions of Chief FinancialOfficer at Mittal Steel Europe S.A.,Mittal Steel Germany and Mittal Steel PointLisas, and Director of Finance and M&Aat Mittal Steel. Mr Maheshwari alsoserves on the Board of various subsidiariesof ArcelorMittal. Mr. Maheshwari is an honorsgraduate in accounting and commercefrom St. Xavier’s College, Calcuttaand a fellow of The Institute of CharteredAccountants and The Institute of CompanySecretaries in India.This led to Mittal Steel emergingas the world’s largest and most globalsteel producer, growing its steelmakingcapacities fourfold. As CFO of MittalSteel, he also initiated and led Mittal Steel’soffer for Arcelor to create the first 100million tonne plus steel company.In 2008, Aditya Mittal was awarded‘European Business Leader of the Future’by CNBC Europe. In 2009, he wasalso ranked 4th in the ‘40-under-40’ listof Forbes magazine. He is a memberof the World Economic Forum’s YoungGlobal Leaders Forum, the YoungPresident’s Organization, a Board Memberat the Wharton School, a Board Memberat Bennett, Coleman & Co., a BoardMember at PPR and a member ofCitigroup’s International Advisory Board.Aditya Mittal holds a Bachelor’s degreeof Science in Economics withconcentrations in Strategic Managementand Corporate Finance from the WhartonSchool in Pennsylvania. Aditya Mittalis the son of Mr. Lakshmi N. Mittal.Christophe Cornier, Responsible for Asia,Africa, Technology and ProjectsChristophe Cornier, 57, was previouslya Member of the Management Committeeof ArcelorMittal, Responsible forFlat Carbon Western Europe. Prior to that,Christophe Cornier was responsiblefor Arcelor’s flat products activitiesin Europe and for its worldwide automotivesector since December 2005, when hewas appointed a member of the Arcelor’sManagement Committee. In June 2005,he was appointed head of Arcelor’s ClientValue Team. Upon the creation of Arcelorin 2002, he was named ExecutiveVice-President of FCS Commercial Auto.Before that, he was CEO of SollacMediterranée. In 1998, he was appointedCEO of La Magona, after joining SollacPackaging as Managing Director in 1993.In 1985 he joined Usinor, where hewas Business Development Directorand Chief Controller of Sollac. He beganhis career with the French Ministryof Industry, which he left as a DeputyDirector. Mr. Cornier is a graduateof the École Polytechnique and the Écoledes Mines in Paris.
ArcelorMittal Annual Report 2009Senior Management 23Davinder Chugh, Responsiblefor Shared Services (reporting to CEO),IAC MemberDavinder Chugh, 53, has over 30 yearsof experience in the steel industry ingeneral management, materials purchasing,marketing, logistics, warehousing andshipping. Davinder Chugh was previouslya Senior Executive Vice Presidentof ArcelorMittal responsible for SharedServices until 2007. Before becominga Senior Executive Vice Presidentof ArcelorMittal, he served as the CEOof Mittal Steel South Africa until 2006.Mr. Chugh also worked in South Africafrom 2002 after the acquisition of MittalSteel South Africa (ISCOR) and wasinvolved in the turnaround andconsolidation of the South Africanoperations of ArcelorMittal. He also servedas Director of Commercial and Marketingat Mittal Steel South Africa, among otherpositions. Mr. Chugh was Vice Presidentof Purchasing in Mittal Steel Europeuntil 2002, where he consolidatedprocurement and logistics across plantsin Europe. Prior to this, he held severalsenior positions at the Steel AuthorityIndia Limited in New Delhi, India. He holdsdegrees in science and law and hasa Master of Business Administration.Peter Kukielski, Senior Executive VicePresident, Head of MiningOn December 15, 2008, Peter Kukielski,53, was appointed Senior ExecutiveVice President and Head of Miningof ArcelorMittal. Mr. Kukielski willbe responsible for the Company’s miningbusiness and for driving its development.Mr. Kukielski was most recently ExecutiveVice President and Chief OperatingOfficer at Teck Cominco Limited. Priorto joining Teck Cominco, he was ChiefOperating Officer of Falconbridge Limitedbefore which he held senior engineeringand project management positionswith BHP Billiton and Fluor Corporation.Mr. Kukielski holds a Bachelor of Sciencedegree in civil engineering from theUniversity of Rhode Island and a Masterof Science degree in civil engineeringfrom Stanford University. Effectiveas of January 1, 2010, Peter Kukielskiwas appointed member of theGroup Management Board.Management CommitteeName Age 1 PositionBhikam Agarwal 57 Executive Vice President, Head of FinanceVijay Bhatnagar 62 Executive Vice President, CEO IndiaPhilippe Darmayan 57 Executive Vice President, CEO Steel Solutions and ServicesPhil du Toit 57 Executive Vice President, Head of Mining Projects and ExplorationBernard Fontana 48 Executive Vice President, Head of Human ResourcesJean-Yves Gilet 53 Executive Vice President, CEO StainlessPierre Gugliermina 58 Executive Vice President, Chief Technology OfficerRobrecht Himpe 51 Executive Vice President, CEO Flat EuropeGerson Alves Menezes 60 Executive Vice President, CEO Long Carbon Americas (LCA)Michael Pfitzner 60 Executive Vice President, Head of Marketing and Commercial CoordinationArnaud Poupart-Lafarge 44 Executive Vice President, CEO Africa and Commonwealth of Independent States (CIS)Gerhard Renz 62 Executive Vice President, CEO Long EuropeMichael Rippey 52 Executive Vice President, CEO USALou Schorsch 60 Executive Vice President, CEO Flat AmericasBill Scotting 51 Executive Vice President, Head of Strategy1Age as of December 31, 2009
ArcelorMittal Annual Report 200924 Business StrategyBusiness StrategyArcelorMittal’s successhas been built upona consistent strategy thatemphasizes size and scale,vertical integration, productdiversity, continuous growthin higher value productsand a strong customer focus.The Group intends tocontinue to be the globalleader in the steel industry,in particular through itsthree-dimensional strategyfor sustainability and growth.
ArcelorMittal Annual Report 2009Business Strategy 25ArcelorMittal has unique geographicaland product diversification,coupled with upstream and downstreamintegration that reduces exposureto risk and cyclicality. This strategycan be broken down into its threemajor elements:Geography: ArcelorMittal is the largestproducer of steel in Europe, Northand South America, Africa, the secondlargest steel producer in the CIS region,and has a growing presence in Asia,particularly in China. ArcelorMittal hassteelmaking operations in 20 countrieson four continents, including 65 integrated,mini-mill and integrated mini-millsteelmaking facilities which providea high degree of geographic diversification.Approximately 35% of its steel is producedin the Americas, approximately 47%is produced in Europe and approximately18% is produced in other countries,such as Kazakhstan, South Africa andthe Ukraine. ArcelorMittal is ableto improve management and spread itsrisk by operating in six segments(Flat Carbon Americas, Flat Carbon Europe,Long Carbon Americas and Europe,AACIS, Stainless Steel and Steel Solutionsand Services), reflecting its geographicand product diversity.Worldwide steel demand in recent yearshas been driven by growth in developingeconomies, in particular in the BRICET 1countries. The Company’s expansionstrategy in recent years has givenit a leading position in Africa, Centraland Eastern Europe, South America andCentral Asia. The Company is also buildingits presence in China and India and recentlymade its first strategic investmentin India in Uttam Galva.Products: As a global steel producer,ArcelorMittal is able to meet the needsof diverse markets. Steel consumptionand product requirements are differentin mature economy markets and developingeconomy markets. Steel consumptionin mature economies is weighted towardsflat products and a higher value-added mix,while developing markets utilize a higherproportion of long products and commoditygrades. As these economies develop,local customers will require increasinglyadvanced steel products as market needsevolve. To meet these diverse needs,ArcelorMittal maintains a high degreeof product diversification and seeksopportunities to increase the proportionof its product mix consisting of highervalue-added products. The Companyproduces a broad range of high-qualityfinished, semi-finished carbon steelproducts and stainless steel products.Worldwide steel demand in recentyears has been driven by growthin developing economies, in particularin the BRICET 1 countries.Value chain: ArcelorMittal has accessto high-quality and low-cost raw materialsthrough its captive sources and long-termcontracts. ArcelorMittal plans to continueto develop its upstream and downstreamintegration in the medium-term, followinga return to a more favorable marketenvironment. Accordingly, the Companyintends in the medium term to increaseselectively its access to and ownershipof low-cost raw material supplies,particularly in locations adjacent to oraccessible from its steel plant operations.Downstream integration is a key elementof ArcelorMittal’s strategy to builda global customer franchise. In high-valueproducts, downstream integration allowssteel companies to be closer to thecustomer and capture a greater shareof value-added activities. As its keycustomers globalize, ArcelorMittal intendsto invest in value-added downstreamoperations, such as steel service centersand building and construction supportservices for the construction industry.In addition, the Company intendsto continue to develop its distributionnetwork in selected geographic regions.ArcelorMittal believes that thesedownstream and distribution activitiesshould allow it to benefit from bettermarket intelligence and better manageinventories in the supply chain to reducevolatility and improve working capitalmanagement. Furthermore, ArcelorMittalwill continue to expand its productionof value-added products in developingmarkets, leveraging off its experiencein developed markets.Growth ProspectsNotwithstanding the difficult marketconditions of 2008 and 2009,ArcelorMittal’s management believesthat there will be strong global steeldemand growth in the medium to longterm. The Company will continueto invest opportunistically in expandingthe production capacity of its existingfacilities depending on market conditionsand projected global and regionaldemand trends.Mergers and acquisitions have historicallybeen a key pillar of ArcelorMittal’sstrategy to which it brings uniqueexperience, particularly in termsof integration. Instead of creating newcapacity, mergers and acquisitions increaseindustry consolidation and create synergies.ArcelorMittal has also placed strongemphasis on growth in emerging economiesthrough greenfield developments. In lightof the difficult economic and marketconditions prevailing in late 2008and 2009, ArcelorMittal curtailed mergersand acquisitions and greenfield investmentactivity. To the extent market conditionscontinue to improve, however,the Company gradually expects toresume mergers and acquisitionsand other investment activity in orderto take advantage of selected growthopportunities, mainly in emerging markets.In addition the Company remainsfocused on pursuing its greenfieldgrowth opportunities.1 BRICET refers to the countries of Brazil,Russia, India, China, Eastern Europe and Turkey.
Nicola DavidsonVice President of ArcelorMittal, Head of Corporate Communications
ArcelorMittal Annual Report 200928 Corporate ResponsibilityCorporate ResponsibilityArcelorMittal believes the sustainabilityof its business and the creationof long-term shareholder valuego hand-in-hand with the wellbeingof its people and the communitiesin which it operates.The Group’s Corporate Responsibility(CR) approach plays an important rolein helping it address key issues – both localand global – affecting its operations.Key impact areas are addressed throughits dedicated CR strategy. By operatingin a responsible and transparent mannerand establishing good relationships withstakeholders, ArcelorMittal is better ableto attract and retain top talent, managerisk and enhance value creation.ArcelorMittal aims to adhere tobest-practice guidelines in itsenvironmental, social and governancereporting. While the following pagesprovide an outline of the Group’s CRstrategy and performance, more detailedinformation and analysis is available in aseparate CR report published in tandemwith this Annual Report. This is availableat www.arcelormittal.com.CR GovernanceThe Board of Directors oversees CRacross the Company. Reports coveringdisclosure, environment, Health and Safety,community and employee engagement,and ArcelorMittal Foundation investmentswere submitted at each of its meetingsduring 2009.The Group Management Boardrepresentative for CR is Gonzalo Urquijo.Matters of specific relevance to the Group,such as community engagement,human rights and local CR governance,as part of summary CR reports, werediscussed at least every quarter at theGroup Management Board meetings.In parallel, specific presentations weremade on among other subjects:Health and Safety and environment.Key risks and mitigating actions are detailedin subsequent sections of this chapter.At Group level, the corporate CR teamis supported by the CR CoordinationGroup which acts as an adviser;reviewing standards, examining possiblerisks, monitoring the implementationof the CR strategy, and guidingcommunications. It consists of seniormanagement from other corporate areas,including Risk, Internal Assurance, CompanySecretary, Communications and Legal.The CR Coordination Group meetsperiodically through formal meetingsand workshops.At local level, the Group is in the processof establishing a participatory CRgovernance structure to promote effectivecommunity relations and CR management.This is supported by roles andaccountability descriptions for CEOs/plantmanagers and CR Coordinators at all levelswithin the Group.CR StrategyArcelorMittal’s CR strategy is structuredaround four focus areas that reflectthe key priorities of its business and itsstakeholders:• Investing in our people –It is a core tenet of Group policythat each and every person workingfor ArcelorMittal feels valued.• Making steel more sustainable –The Group is focused on achievinga continuous improvementin environmental performancethrough the development of cleanerprocesses and greener products.• Enriching our communities –ArcelorMittal plays an important rolein all the communities where it operates.• Transparent governance –The Group’s business strategy, operationsand everyday practices are underpinnedby transparent corporate governance.The four CR strategy areas aremeasured through 14 measurableKey Performance Indicators (KPIs).These are described in more detailin the stand-alone CR report.
ArcelorMittal Annual Report 2009Corporate Responsibility 29Investing in our PeopleHealth and Safety: The Journey to ZeroWhatever the economic backdrop,ArcelorMittal’s first priority is to ensure thehighest standards of Health and Safety.The Group’s ‘Journey to Zero’ Healthand Safety improvement processis delivering concrete results – helpingArcelorMittal realize its goal of becomingone of the safest steel companiesin the world.Journey to ZeroAt ArcelorMittal, Health and Safety is thetop priority. The Group’s Health and Safetypolicy aims at reducing the frequencyof accidents and the occurrence of fatalitieson a continuing basis, and underlines thecommitment ArcelorMittal has made tothe wellbeing and safety of all employees– both on and off the job.Journey to Zero, ArcelorMittal’s Healthand Safety improvement process launchedin September 2008, is now the platformfor all measures aimed at improving Healthand Safety in the Group. The focus ison preventative activities and improvedstandards through the effectiveimplementation of best practices – includinghazard identification and risk analysis,accident/incident investigation, criticaltask analysis, follow-up on performanceindicators, system review and much more.PerformanceIn 2009, the Group’s Lost Time InjuryFrequency Rate improved again – falling to1.9 per million hours worked. That compareswith 2.5 in 2008, for both steel and mining.A 20% reduction is again targeted for2010. To leverage best practice and improvethe Health and Safety performance aroundthe Group, 12 top priority sites havebeen identified, for which a specific approachhas been defined to stimulate progress.Benchmarking is of major importancefor the Group since it will help the sitesto make faster progress on their Journeyto Zero. Benchmarking will be supportedby an appropriate multilingual IS/IT tool,of which a first version became availablein December 2009. It will be fully readyand deployed by April 2010.Global Joint Health and Safety AgreementArcelorMittal signed a Global Joint Healthand Safety Agreement, the first of its kind,with its labor unions in June 2008.In 2009, meetings of the Joint Global Healthand Safety Committee were held in LázaroCárdenas, in Mexico, Temirtau, in Kazakhstan(a follow-up visit), Ostrava, in CzechRepublic, and Galati, in Romania. TheCommittee also followed up on all actionsundertaken as a consequence of visitsmade since the start of this cooperation.A questionnaire was launched and evaluatedon how the sites perceive the JointHealth and Safety Committees and theadvantages they can draw from the process.The results were very positive.Health and Safety DayDespite the economic crisis, an enormouseffort was made across the Groupto maintain the momentum of previousHealth and Safety Days. As in prior years,the Group-wide Health and Safety Daywas observed in all of ArcelorMittal’sworldwide operations. It is an occasionto involve all staff in discussing safetyimprovements, new targets and associatedsafety programs at Group as well as plantlevel. The date – April 28 – was chosento coincide with the International LaborOrganization’s World Day for Safety andHealth at Work. Since ‘Leading by Example’is essential, the theme for Health and SafetyDay was ‘Leading the Journey’ – integrating‘Leading by Example’ and ‘Journey to Zero’.Extra emphasis was placed on health andthe sharing of best practices within theGroup-wide health network. The 2010Health and Safety Day will again take placeon April 28 and will reinforce the ‘Leadingby Example’ theme, as well as health topics.Achieving a quick reduction in fatalitiesConscious of the Company’s responsibilityto do all it can to avoid fatalities, newinitiatives were launched in 2009 to speedup the progress on fatality prevention.Implementation of the Fatality PreventionStandards of all sites is now being audited.This approach has been especially adoptedfor the top priority sites while other sitesare required to undertake self-assessmentsbased on questionnaires used Group-wide.The process involves the implementationof appropriate action plans by the sitesto close any gap between the standardsand reality, the dissemination of lessonslearned from fatalities in a closed loopapproach and a detailed investigationof other serious occurrences. A databasefor the follow-up has been created.Lost Time Injury Frequency RateSegment 2009 2008Flat Carbon Americas 2.1 2.1Flat Carbon Europe 1.8 2.4Long Carbon Americas and Europe 1.8 3.4AACIS 1.1 1.2Stainless Steel 1.8 2.2Steel Solutions and Services 3.9 3.8Total Steel 1.8 2.4Total Mines 2.4 3.4TOTAL (Steel and Mines) 1.9 2.5
ArcelorMittal Annual Report 200930 Corporate ResponsibilityInvesting in our PeopleArcelorMittalthe health ofas a key elemsuccess of itsHealth initiatives:Paying more attention to healthArcelorMittal views the health of itsworkforce as a key element in thesuccess of its operations. Maintaining goodhealth is critical to the Company’sHealth and Safety record. In this respecta major effort was made to developa check list for all sites to deal with theH1N1 Influenza.The network of ArcelorMittal medicalspecialists collaborating globally with theGroup was expanded in 2009, leadingto the creation of Communities of Practice.This will permit the Group to mount astronger campaign of preventative healthmeasures in 2010, targeting such problemsas asbestos and fibers, noise, harmfulparticulates, radiation, gasses, stress,ergonomics and respiratory protection.Other, more general areas to be targetedwill include vaccinations, travel, malaria, HIV,addiction and stress management(some of which are non-occupational).Product Safety initiatives:REACH and Product StewardshipArcelorMittal has continued to preparethe registration of all relevant substancesin conformity with the EU’s REACHlegislation, concerning the registration,evaluation, authorization and restrictionof chemicals. For some it is assumingthe role of lead registrant and takingan active role with others. Registrationwill be completed by the end ofNovember 2010.
ArcelorMittal Annual Report 2009Corporate Responsibility 31viewsits workforceent in theoperations.The Product Stewardship team hasconfirmed that in 2009, all requiredcertificates of products and by-productshave been provided to customers,supporting their selling. This approachleads to cooperation with externalpartners and R&D whenever requiredor appropriate, and will continuethroughout 2010.
ArcelorMittal Annual Report 200932 Corporate ResponsibilityInvesting in our PeopleHuman ResourcesThe ArcelorMittal Human Resources (HR)professionals help the Company leadershipattract, develop and retain tomorrow’sleaders, enable employees at all levelsto manage their performance, realize theirpotential and build and maintain goodrelations and social dialogue with employeesand their representatives. In 2009,they played a key role in developingthe necessary cost adaptation measuresin response to the economic crisis.Dialogue with trade unionsand employeesEfforts were stepped up in 2009 to keepemployees informed about the impactof the economic crisis on the businessand to outline the measures takento overcome the global downturn andto position the Company for future growth.The vast majority of ArcelorMittalemployees are represented by tradeunions. The Group is party to collectivebargaining agreements with many employeeorganizations as part of its commitmentto open dialogue.Social dialogue structure at all levelsin the Company facilitates regular,constructive discussions betweenmanagement and employee representatives.An intense social dialogue has taken placewhile necessary cost adaptation measureswere designed and deployed. The SelectCommittee of the European Works Councilmet on a monthly basis in order to becontinuously informed of the situationof the Company.To further enhance dialogue,ArcelorMittal signed an ‘anticipationof change’ agreement with the EuropeanMetalworkers Federation. The agreementaims to enhance and support sustainabilityand competitiveness of ArcelorMittaloperations in Europe specifically.Following the signing of a landmarkJoint Global Health and Safety (JG H&S)Agreement with all of its trade unionsa JG H&S Committee comprising bothmanagement and union representativeshas been established and meets quarterly.A Joint Health and Safety Committeein every plant now meet at least monthly.The process is monitored by theJG H&S Committee.Workforce plans, skills requirementidentification and trainingThe growth plans and the performancecontinuous improvement programsof the Company require the participationand the development of numerousperformers and talents all over the world.Through the Global ExecutiveDevelopment Program (GEDP),ArcelorMittal aligns the performanceobjectives of employees with the strategicgoals of the Company and regularly assessesits managers, providing them with feedbackand coaching and supporting theirdevelopment needs according to theemployees’ aspirations, the Companyvalues and core competencies.Appointments to new challenging jobsand participation in training programsare confirmed in Career Committeesthat cover all units.In 2009, ArcelorMittal Universitydelivered more than 40,000 daysof training to ArcelorMittal managers.Since September 2008, ArcelorMittalhas specifically followed 1,096 employeesindentified as ‘talents’, providing themwith development opportunitiesto participate to internal forums onstrategy, finance, human resources,as well as contributing to keyCompany projects.In ArcelorMittal’s plants, workforceplans are deployed at all levels in orderto identify the future skill gaps andto train ArcelorMittal employees accordingly.Workforce plans for the managementpopulation are consolidated to assessfuture scarce categories for whichspecific resourcing plans are then developed.In 2009, all ArcelorMittal major unitsupdated their workforce plans.Diversity & Inclusion PolicyArcelorMittal strives to build a modernand flexible work environmentwhich unleashes the diversity, talent,and originality of its workforce.The Company’s commitment towardsreaching this goal is embedded inits ‘Diversity & Inclusion’ policy thatwas launched in April 2009.JobMarketOnline (JMO)JobMarketOnline, the Company’sweb-based e-resourcing solution, allowsfor the managing of internal and externalresourcing across businesses, functionsand within countries. The internal JMO isavailable in ten languages. The usageof JMO, which recorded over 22,000internal unique visitors in 2009, wasconsiderably boosted with the launchof a monthly e-newsletter that promotesa selection of vacancies.Business Leaders ProgramThis program targets external recruitmentof MBAs or other functional Mastersdegrees with proven managerial experienceand gives them the opportunity to developinto the Group’s future leaders. By the endof 2009, there were 68 individualson the program and six had graduatedafter completing two assignments indeveloped and emerging marketsor by becoming a senior leader withinthe organization.Group Engineers Program (GEP)The GEP was developed in order to attractrecently graduated, talented and mobileengineers. Its aim is to create a poolof internationally mobile engineers –with strong potential for growth and theability to assume leading positionsin the future. In 2009, 133 GroupEngineers continued the program of which109 completed a one-year trainingand development period.International mobilityInternational mobility is a key leverfor the career development of employeesand a key competitive advantagefor ArcelorMittal. Some 220 mobilityplans were finalized in 2009.
ArcelorMittal Annual Report 2009Corporate Responsibility 33The purpose of the Steeland Mining Academy is to disseminatean understanding and masteryof steelmaking and related activities.Training and Development:ArcelorMittal UniversityArcelorMittal University plays a lead rolein the training and development of Groupemployees. In 2009, the Universitychanged the way it delivered muchof its training under the motto ‘Growwith us’.Training employees is essential forArcelorMittal. As a consequence,to maintain high levels of trainingin light of the economic environmentin 2009 and cost-saving efforts, a numberof the University’s programs moved online– allowing employees to learn anywhere,anytime at their own pace. Synchronizeddistance learning was introduced,making use of ‘virtual classrooms’for scattered target groups such ascommunities of subject experts based indifferent locations. In 2009, about 10,000employees spent 278,000 hours learningwith online programs. The number of usersof the Online English and the OnlineCampus programs increased during 2009,showing the success of these learning tools.However, local classroom training remainsthe most cost-effective solution for largergroups and consequently ArcelorMittalUniversity has rolled out its corporateprograms for local delivery. Among the newinitiatives were ‘Lunch & Learn’ local sessionson key topics for the Company and ‘ULearn’,a biweekly ‘e-magazine’ featuring articles,podcasts and white papers.The Leadership Academy introduceda specially designed program called‘Recognizing Potential’. Launched with700 participants from more than40 countries, the program combinede-learning, virtual conferencesand optional project work. A new programof ‘Talent Pipeline’ training will recommencein spring 2010.The Management Academy offersa range of programs to improve and enhancepersonal and team effectiveness, businessacumen and interpersonal skills, thusgiving opportunity to every employeeto enhance leadership and managementcapabilities. They were similarly deliveredthrough online modules in 2009. Trainingand specific tools on team effectivenessand cross-cultural awareness will bedeveloped in 2010.Functional Academies have been setup to offer learning, development,skill and competency enhancing trainingopportunities. They target each specificfunctional population, including, in 2009,Steel and Mining, Human Resources,Purchasing, Internal Assurance, IT,Sales and Marketing, Finance and R&D.Steel and Mining AcademyThe purpose of the Steel and MiningAcademy is to disseminate an understandingand mastery of steelmaking and relatedactivities. The academy now operatesthe University’s longstanding programssuch as ‘Steel for Steel People’ and‘Understanding Steel’, for which therewas increased participation in 2009.New programs were created in sinteringand wire drawing and modules on metallurgy,blast furnaces and cold rolling weredeveloped at the request of different plants.In all, more than 1,100 people took partin the academy’s programs, an increaseof more than 20% on the previous year.The Mining Academy, initiated in 2009,will provide a similar offer for the miningactivities in 2010.New Group programsThe Project Leaders Program aimsto create project management expertswithin the Company who understandthe ArcelorMittal ‘way’ of managingprojects and who can be quickly deployedto manage existing brownfieldand upcoming greenfield projects. A totalof 128 participants were nominatedfor the one-year program.A new 18-month program focusedon ‘talents’ with a strong financial backgroundand interested by key financial rolesin CIS countries was initiated. The program,titled ‘CIS-Finance Future Leaders Program’commenced with 22 participants fromCIS countries (Ukraine and Kazakhstan),who are interested in transitioning into localleadership positions in finance.In 2010, ArcelorMittal Universitywill continue to support the strengtheningof ArcelorMittal’s leadership andmanagement skills. Training is a priorityfor the whole Company, especiallyafter reshuffling teams in 2009.The Climate Survey circulated throughoutthe Company acknowledged the employees’desire for a continuous learningenvironment. Programs are designedto facilitate the development of skilledpeople that will lead ArcelorMittal intothe future. As a result, training will bepromoted further throughthe Functional Academies and specificprograms such as ‘Project LeadersProgram’ and ‘Future Leaders Program’.The 2010 programs combine online,distance and classroom training,thus providing an efficient and costeffective learning solution, which provedsuccessful in 2009.
ArcelorMittal Annual Report 200934 Corporate ResponsibilityMaking Steel more SustainableConfronting climate changeArcelorMittal recognizes its responsibilitytowards helping reduce greenhouse gasemissions. Steelmaking is a carbon-intensiveprocess. However, the steel industry in Europehas already taken considerable strides to reduceits carbon footprint, having more than halvedits emissions in the past 30 years. Achievingfurther reductions is a major challenge.
ArcelorMittal Annual Report 2009Corporate Responsibility 35However, the Group is respondingto that challenge with a varietyof initiatives. Some will bear fruit overthe medium term; others are essentiallylong term in nature.ArcelorMittal is committed to makinga progressive reduction in the amountof CO2 emitted in the steelmakingprocess over the next decade. The Grouphas set a target of reducing emissionsby 170kg per tonne of steel producedby 2020. That is equivalent to an 8%reduction in specific emissions.The target will be achieved througha combination of process improvementsand increased energy efficiency. It isdefined for the 2007 perimeter ofindustrial activities applying a rigorousaccounting method taking into accountall the emissions including upstreamand plant emissions. The target excludesthe specific use of scrap or direct reducediron (DRI) as a means to lower thecarbon emission.While many of the Group’s plants inEurope, North America and South Americaare close to the technical limits of whatcan be achieved in emissions reduction,there is still work to be done to bringother plants up to the standards of thebest. To that end, the Group has putin place a benchmarking system thathighlights where improvements can stillbe made. Detailed action plans havebeen drawn up that set realistic targetsfor improved efficiency and reducedenergy usage. As part of the process,2009 saw an acceleration in the sharingof best practice around the world.Recycling is an important part in combatingclimate change. Each year, more than25 million tonnes of products arerecovered and recycled, saving around36 million tonnes of CO2. At the sametime, ArcelorMittal has stepped upthe recycling of steelmaking residues.For instance, at the former steelmakingsite at Isbergues, northern France,residues from other French and Belgianplants are being reprocessed intoferro-alloys iron, road-building slagand zinc oxide dust, from whichother producers extract zinc.Due to the global economic crisis,the production levels of the Group weredrastically reduced as compared withprevious years. At the same time theemissions of green house gases decreasedaccordingly. Therefore, the emissionswill increase again when the economicactivity picks up. In the meantime,however, plans and actions are beingexecuted to improve the carbon efficiencyof the operations in line with thecommitment for 2020.As part of its longer-term approach,ArcelorMittal is working to developbreakthrough technologies. As a keymember of the EU Ultra Low CO2Steelmaking project (ULCOS), the Groupis developing a technology that combinesCO2 capture through top gas recyclingand a possible storage later on.A demonstration project includinga small blast furnace at ArcelorMittalEisenhüttenstadt in Germany anda full scale blast furnace at the Florangeplant in France is now being studiedby a consortium consisting of mostEuropean steelmakers.By using pure oxygen instead of airand recycling gas at the top of the blastfurnace, ArcelorMittal expects to achievea 25% reduction in the amount of carbonused. Around half of the CO2 emittedwill then be captured and stored.The technology has the potentialto transform the steel industry’s carbonfootprint. For more information,please see www.ulcos.org.ArcelorMittal receives secondconsecutive ENERGY STAR® honorOn March 2, 2009, ArcelorMittalwas selected for the second consecutiveyear as an ENERGY STAR® Partnerof the Year for its excellent energymanagement. ArcelorMittal continuesto be the only steel company to achievethis respected distinction granted bythe US Environmental Protection Agencyand the US Department of Energy.Since 2006, ArcelorMittal’s US facilitieshave focused on improving energyefficiency and reducing costs – all whileincreasing productivity. To accomplishthese goals, the Company launchedan Energy Reduction Initiative that,over the past three years, has helpedit reach a 4.1% improvement inenergy intensity. This is equivalent to$131 million of annualized savings.Over the past two years, ArcelorMittal’sUS facilities have achieved energysavings by reducing use of natural gas,fuel oil and purchased electricity.ArcelorMittal USA has also workedhard to spread the word about energyconservation to its employees,families, suppliers, end users andthe general public.
ArcelorMittal Annual Report 200936 Corporate ResponsibilityMaking Steel more SustainableEnvironmentThe Group constantly invests to developnew processes and more sustainablepractices, while working in partnershipwith its customers to help themdevelop more sustainable and moreenergy-efficient products.ArcelorMittal monitors air, water, energyand waste data from all of its facilities andcontinuously reviews all its environmentalimpact worldwide. By the end of 2009,93% of all main production sites hadachieved certification to ISO 14001.ISO 14001 is the internationally recognizedstandard for environmental managementsystems. Between 2008 and 2009,the plants achieving certification increasedfrom 142 to 168.Group-wide environmental and energypolicies, together with the Company’s energymanagement system, cover every aspectof energy purchase and usage. In 2009,new energy management objectiveswere set for every plant. They target anaverage energy saving of 5% by 2013and are supported by a list of best operationalpractices and technology standards.Innovations targeted at reducingenvironmental impactMajor advances are already being made.In 2009, ArcelorMittal Kryviy Rih in Ukrainewon three prizes in a national energyefficiency competition having implemented179 different energy saving measures overthe previous year. These resulted in savingsof 19,000 tonnes of equivalent fueland more than 15,000 kWh of energy.ArcelorMittal also works to reduce waterconsumption and is targeting high-prioritysites in areas where there are watershortages. The challenge is to employwater re-use techniques from the Group’stop-performing plants. Eight sites – in Brazil,Spain and South Africa – currently generatezero effluent.Reduction of by-products, such as dust,nitrous oxide, sulfur dioxide and volatileorganic compounds, are anotherenvironmental area of the Company’sfocus. In Ostrava, in Czech Republic,modernization of sinter plants Northand South is expected to reduce dustemissions by 70% and SO2 emissionsby 60%; the ongoing project will cost$80 million. In Galati, Romania, theinstallation of de-dusting equipment,completed in May 2009 at a costof $20 million, has led to a 95% reductionin dust emissions – beyond EU norms.In the quest for ever more sustainableproducts, a dedicated environment,life-cycle and materials team quantifiesthe end-to-end impact of the Group’ssteel products, including the evaluationand validation of new products in partnershipwith the Research and Development team.It applies the techniques conformingto the ISO 14040-44 life-cycleanalysis standard.ArcelorMittal has led in the developmentof stronger steels that enable its customersto create lighter and more energy-efficientproducts or reduce the environmentalimpact of their own activities. Its advancedhigh-strength steels can reduce theweight of industrial gas cylinders by 30%and the weight of automotive parts by 30%.The Group’s ‘S-in motion’ project, due fordeployment in mid-2010, uses the Group’sexpertise in Advanced High Strength Steels(AHSS) to produce new materials andpropose solutions that will reduce the weightof a typical automotive component bya further 20%, while maintaining safetyand performance.In the construction market, the Group’shigh-strength HISTAR steel offers anunprecedented combination of strength,safety and weldability, reducing theweight of steel columns by 32%, whichin turn can reduce the CO2 producedin the construction process by as muchas 30%. The Group’s range of solar panelsolutions, relaunched under the amhelios TMname, was extended in 2009.Over a 30-year lifetime, amhelios TMcan save 75 tonnes of CO2 in typicalWestern European weather and upto 400 tonnes in other locations.Research and DevelopmentIn the difficult climate in 2009,Research and Development has showngreat flexibility and determinationat the same time. With15 major researchcenters, R&D spending in 2009 amountedto $253 million. While the focus shiftedto projects capable of speedy value creation,expenditure on breakthrough researchwas unchanged and new areas suchas mining and mineral processing startedgenerating a high return on investment.One of the lessons of 2009 is thattechnological differentiation is crucialto sustainability. The ability to offer a rangeof products that is clearly differentiatedin terms of quality and functionality,and to do so at the lowest possible cost,is especially important at a time of economiccontraction. R&D has played a key role inminimizing the impact of the economic crisisby deploying new products and solutionsthat help customers maintain their long-termcompetitiveness, by providing increasedtechnical assistance to plants worldwide andby supporting production stoppages andcontributing to the fast re-start of theGroup’s blast furnaces and coke ovens.AutomotiveR&D’s five-year development plan recognizesfour key factors that are driving the evolutionof the automotive market: globalizationthat combines worldwide vehicle design withregional production, increased passengersafety, reduction in CO2 emissions,and a shift to low-cost cars. ArcelorMittalcontinues to reinforce its relationship withcustomers at the early stage of vehicleconception. Through worldwide projectsthat bring together its European and USautomotive research centers, the Groupaims to meet auto manufacturers’ needfor identical or equivalent product deliveredworldwide in a timely fashion.ArcelorMittal continues to launch newAdvanced High Strength Steels (AHSS)to satisfy the demand for increased safetytogether with weight reduction.Primarily, the offer of coated productsfor hot stamping has been extended.Last year also saw the further developmentof the Group’s new coating product offerwith the roll out of products with enhancedpaint appearance for outer panels andcoatings, delivering better and cheapercorrosion resistance.
ArcelorMittal Annual Report 2009Corporate Responsibility 37In the area of steel solutions for vehicledesign, the Group has reinforced itscatalogue of lightweight steel designsolutions. ArcelorMittal is working aswell on the ‘S-in motion’ project whichwill deliver in 2010 up-to-date and efficientideas for optimizing weight and costsfor key modules of the vehicle.AppliancesLast year saw the implementation ofa global R&D project organization to servicecustomers with a worldwide footprint.A number of new products were broughtto fruition for launch in 2010. They includedinnovation in the field of steels for enamelingand several new products in the surfaceand coatings area. A new coating offerfor improved energy efficiency is proposedfor development in 2010.PackagingThe major development in 2009 wasa new ‘Easy Open End’ offer, designedto reduce the weight of the ends of cans.It will be launched commercially in 2010.ConstructionThe Group is recognized as a world leaderin structural products and has playeda major role in some of the world’smost remarkable constructions – includingthe Burj Khalifa Tower in Dubai,the tallest building in the world. R&D focuseson reinforcing the appeal of the Group’sproducts and solutions in a variety of ways,especially in comparison to the design ofother materials or to competing suppliers.Recent examples include new WeatheringSteel grades for bridges and a corrosionresistantsteel grade for improved corrosionresistance for sheet piles. In the areaof improved surface performance,examples include Granite®Diamond,a stone-look organic coating, Hairclynand Granite®Forever, easy-to-clean coatedsteels for outdoor applications.R&D also develops solutions that combinesteel with complementary materialsto deliver improved thermal, acoustic,mechanical or aesthetic performance.The recently launched Granite®Comfortrange of Infrared-reflective paints improvesenergy efficiency by reducing the solarheat input.Harvesting renewable energies is a strongsocietal driver which is reflected withinR&D by the launching of the Ekinox‚photovoltaic roof and co-engineeringactions for wind turbines.ArcelorMittal Piracicaba developseco-brick solution in BrazilArcelorMittal Piracicaba, in partnershipwith the University of the Stateof São Paulo, São Carlos unit, has finisheddeveloping a new technology to produceconstruction bricks, replacing the mixof sand and crushed rock commonlyused. The bricks are produced using steelmill slag, a by-product from steelmakingthat has historically been considereda waste product. The new bricksreduce the need for natural resources,such as sand and rock, that have to beextracted from the local environment.ProcessProcess R&D focused on raw materialsubstitution through the increased useof internal resources and support for blastfurnace and coke oven stoppages andre-starts. In addition, R&D contributed byimproving rebar corrosion at Kryviy Rih andaccelerated the implementation of a numberof plant-specific solutions. R&D activity wasinitiated in two areas associated withArcelorMittal’s mining operations. The firstwas the characterization of mineral depositsto assess the qualities of the iron and coalfrom existing and prospective ArcelorMittalmines. The second area, based on thecharacterization data, was laboratory workto advise on optimization of the beneficiationroute, the energy consumption involvedand the possible upgrading of currentlydiscarded ores. Studies were performedfor both the Group’s existing operationsand those reserves under development.ULCOSDuring the year, the work on the ULCOSproject aiming at developing new steelproduction technologies with low CO2emissions progressed well. The EU-backedULCOS 1 project will finish at the endof 2010. Plans for further developmentsof the most promising technologies arealso advancing.Stainless, alloyed steels, specialtiesand tubular productsR&D has mainly focused on synergiesbetween the different market segmentsand the development of new grades withreduced alloying elements withoutcompromising service properties.Part of ArcelorMittal’s commitmentto making steel more sustainable is to findinnovative ways to manage its residues.Not only will this result in cost savingsto the Company, but it will also improvethe environment by reducing the amountof waste we produce. The efficacyof this new brick-making technologywas proven by the construction ofan experimental model house usingbricks created from slag. The housewas finished in July 2009 and theenvironmental viability of these bricksis being assessed by the São Paulo StateOrgan for Environmental Sanitation.This has resulted for example in thedevelopment of:• Lean alloyed high strength steels in U.S.,European and Algerian production mills;• A new duplex stainless steel offer in theGroup’s European and Brazilian facilitiesfor the most severe corrosion resistanceapplications;• New stainless ferritic grades withoutNickel, designed to replace the moreexpensive austenitics;• A new mold steel family for plasticinjection applications as dashboardsfor car industry;• New tenasteel grade designed toimprove the punching conditionsof high strength steels.The second major R&D contribution hasbeen in the development of new productsand solutions in the area of green energies.This includes the strong involvement in thedevelopment of new designs for photovoltaicand thermal solar panels, as well as newelectrical steels with low losses and highmagnetic properties for the next generationof electrical vehicles and transformers.The futureIn 2010, the scope of the Group’s ProcessR&D activities will be extended to commitmore resources to areas such as cokeand coal, refractories, environmental issues,by-products and water conservation.There will also be a new focus on pipesand tubes. Most exciting of all, the yearis expected to mark the industrializationof a number of breakthrough productswith important implications for the Group’sfuture competitiveness.
ArcelorMittal Annual Report 200938 Corporate ResponsibilityEnriching our CommunitiesCommunity Engagement StandardArcelorMittal plays an important rolein all the communities where it operates.Many of the Group’s plants are locatedin developing countries that are facingeconomic and social challenges.This makes it even more important toencourage economic growth and fosterthe development of strong and sustainablelocal communities. The Group does thisby working in active partnership withlocal organizations in an open andtransparent manner that is sensitiveto local issues and priorities.ArcelorMittal recognizes that whatit does has an impact on others.The Group needs to understand exactlywhat these impacts are and manage themproactively, taking people’s rights andpriorities into account. ArcelorMittalhas started to invest significant timeand resources in improving and growingour community engagement programs.There is a mandatory communityengagement standard in place that all majorindustrial sites have to follow. This issupported by a detailed manual and anonline training course that offers practicalguidance about setting up and runningcommunity engagement activities.In 2009, ArcelorMittal engaged ina wide range of different projects – aimedat education and skills development,employment, healthcare, infrastructureand a variety of social issues. Further detailsare available in the Group’s CR Report.ArcelorMittal FoundationEstablished in 2007, the ArcelorMittalFoundation is a non-profit organization,with the mission to promote ArcelorMittal’scommitment to the local communitieswhere the Group operates and tocontribute to their development in asustainable manner. Working with the localbusiness units, its priority areas areeducation, health and social promotion.The Foundation engages in initiatives thatmaximize long-term economic growthand foster entrepreneurship, whilerespecting the needs of local people.Preference is given to projects that canquickly become self-sustainable sincethese tend to benefit the maximum numberof people. The Foundation operatesin 27 countries and it also acts asa worldwide organization investing in globalprograms to support humanitarianinitiatives. In 2009, it supported morethan 550 projects with a monetary valueof $31.3 million, reaching 8.86 milliondirect beneficiaries.The Foundation’s initiatives are alignedwith the United Nation’s eightMillennium Development Goals.International Volunteer Work DayFriday, December 4, 2009 markedthe Group’s second International VolunteerWork Day, organized by the ArcelorMittalFoundation. More than 8,500 employeesgave a part of their day to contributingto their local community. Highlights ofthe day included:• In France, employees of ArcelorMittalAtlantique reaffirmed their commitmentto the French bone marrow registryand took part in a swim-a-thon to raisemoney for the French Associationagainst Myopathies.• In Kazakhstan, employees painted andrepaired the apartments of World War IIveterans and opened the youth clubat a school for orphaned children.• In Brazil, employees from Timóteojoined those from 50 other organizationsin an educational and healthcare eventthat attracted 3,000 local residents.One of the objectives of the event wasto collect food supplies and more than1,600 basic food kits were provided.Preparing India’s ‘green leaders’ArcelorMittal has committed significantdonations over four years to work withthe Indian NGO, the Centre for EnvironmentEducation (CEE), in a two-phasecampaign aimed at spreadingenvironmental awareness among thenation’s schoolchildren. In the first phase,conducted over 18 months, children wereinvited to vote for an ‘EnvironmentAmbassador of India’. More than 200,000children took part, voting for their teachers,environmentalists and celebrities ina poll called ‘CO2: Pick Right’. The poll wasconducted in 15 different languages.The children chose Dr APJ Abdul Kalam,a former President of India and a highlyrespected scientist and engineer,who will now become a spokespersonon climate change and other environmentalissues. In the second phase of the campaign,the CEE, supported by ArcelorMittal,will work to spread awarenessof environmental issues among 20 millionchildren from 200,000 schools andprepare them as ‘Green Leaders’.This phase will run through to 2012.
ArcelorMittal Annual Report 2009Corporate Responsibility 39Xinhuamen Primary SchoolIn the Sichuan earthquake in 2008,Xinhuamen Primary School in China’s GansuProvince suffered irreparable damageand had to be demolished. The ArcelorMittalFoundation subsequently made a significantdonation to help with its reconstruction,using a steel design to offer a high degreeof earthquake resistance.The building also boasts a numberof ‘green’ features which studentscan see at work as part of theirenvironmental education.These include a solar collectorfor hot water, a rainwater collectionsystem for irrigation and a greenroof which reduces the temperaturewithin the building and increasesthe durability of the roof.
Lakshmi N. MittalChairman and CEO
ArcelorMittal Annual Report 200942 Global PresenceGlobal PresenceArcelorMittal is the largestproducer of steel in Europe,North and South America,Africa, the second largest steelproducer in the CIS region,and has a growing presencein Asia, particularly in China.ArcelorMittal has steelmakingoperations in 20 countrieson four continents, including65 integrated, mini-mill andintegrated mini-mill steelmakingfacilities which providea high degree of geographicdiversification.
ArcelorMittal Annual Report 2009Global Presence 43Fire Lake; Mont-Wright, QuébecHibbing (JV); Minorca; Virginia, MinnesotaBurns Harbor; East Chicago; Gary, IndianaChicago, IllinoisRiverdale, IllinoisContrecoeur; Coteau du Lac;La Prairie; Longueuil; Montreal, QuébecFerndale, Michigan (JV)Cleveland; Pioneer; Richfield, OhioLondon; Woodstock, OntarioBrampton; Concord; Hamilton;Stoney Creek (JV); Windsor (JV), OntarioVinton, TexasSonoraGallatin (JV); Ghent (JV), KentuckyPine Bluff, ArkansasBirmingham; Mobile (JV), AlabamaJackson (JV), MississippiMonterreyNew Carlisle (JV), IndianaLaPlace,LouisianaMarion; Shelby, OhioColumbus; Obetz, OhioHarriman,TennesseWarren, OhioParsippany, New JerseyCoatesville; Steelton;Conshohocken, PennsylvaniaMonessen, PennsylvaniaMcDowell; Princeton; Weirton, West VirginiaPiedmont, North CarolinaGeorgetown, South CarolinaOrlando, Florida (JV)Celaya; Silao, GuanajuatoLázaro CárdenasMexico City; Peña; Tultitlán, Estado de MéxicoCórdoba, VeracruzPoint LisasCaldera; Escazit;Guapiles; TibasBarquisimeto;Caracas;UniconMatanzasAmericasApproximately 35% of ArcelorMittalsteel is produced in the Americas.Feira de SantanaMap incorporates steel production sites(including Wire Drawing and Tubular products) and mines.João Monlevade; TimóteoBelo Horizonte; Contagem; Sabará; VespasianoItaúnaCariacica;SerraPiracicaba; SumaréHortolândia; Ribeirão Pires; São PauloSão Francisco do SulJuiz de ForaCórdoba; HerediaNavarro; RosarioVilla MercedesSan Nicolás; Villa ConstituciónMontevideoLa Tablada
ArcelorMittal Annual Report 200944 Global PresenceTallinnSheffieldHamburgWarsawCharleroi; Châtelet;Fontaine; La PrayeGentHautmontDunkerque; MardyckDesvresEpone; IsberguesAncerville; Montataire; Vitry le François; Vitry-sur-SeineMouzonAmilly; Chevillon; Manois; Marnaval; Sainte-ColombeBasse-IndreAsturias (Avilés & Gijón);LangreoBergara; Olaberría;ZumárragaBasauri; Etxebarri; SestaoPérigueuxImphyLe CreusotSaint-Chély d’ApcherLesaka; BerrioplanoZaragozaCommercyBremenDuisburgGeel; GenkLiègePont de RoideRevignyGueugnonBourg-en-Bresse; Châteauneuf; Firminy;Saint-ChamondFos-sur-MerZdzieszowiceSzengotthárdEisenhüttenstadtBelval; Bettembourg; Bissen; Differdange; Dommeldange;Dudelange; Rodange; SchifflangeFlorange; GandrangePiombino; VerderioGardanneUsti Nad LabemPrijedorChorzów; Dąbrowa Górnicza;Sosnowiec; ŚwiętochłowiceKrakówFrýdek Místek; Karvina; OstravaHunedoaraZenicaSkopjeRomanIasiGalatiKryviy RihToledoMadridSaguntoAvellinoEuropeAbout 47% of ArcelorMittal steelis produced in Europe.Map incorporates steel production sites(including Wire Drawing and Tubular products) and mines.
ArcelorMittal Annual Report 2009Global Presence 45GemlikAnnabaJorf el LasfarNadorOuenzaBoukhadraYekepaBuchananAfricaAbout 14% of ArcelorMittal steelis produced in Africa.ThabazimbiMap incorporates steel production sites(including Wire Drawing and Tubular products) and mines.PretoriaVanderbijlpark; VereenigingNewcastleSaldanha
ArcelorMittal Annual Report 200946 Global PresenceLisakovskStepnyakTemirtauKarazhalAbay; Karaganda; Saran; ShakhtinskKarkaralinskAktauHebei (JV)Rongcheng (JV)Jubail (JV)Hunan (JV)AsiaAbout 4% of ArcelorMittal steelis produced in Asia.Map incorporates steel production sites(including Wire Drawing and Tubular products) and mines.
ArcelorMittal Annual Report 2009Global Presence 47The Company graduallyexpects to resume mergersand acquisitions andother investment activityin order to take advantageof selected growth opportunities,mainly in emergingmarkets. In addition theCompany remains focusedon pursuing its greenfieldgrowth opportunities.
ArcelorMittal Annual Report 200948 Operational ReviewOperational ReviewArcelorMittal reports itsoperations in six segments:Flat Carbon Americas,Flat Carbon Europe,Long Carbon Americasand Europe, Asia, Africaand CIS (AACIS), Stainless Steeland Steel Solutions and Services.The information in thissection relates to the yearended December 31, 2009,compared to the yearended December 31, 2008.
ArcelorMittal Annual Report 2009Operational Review 49
ArcelorMittal Annual Report 200950 Operational ReviewSales for the YearSteel Shipments for the Yearended December 31 1 ended December 31 1 Changes inSteelAverage Steel2008 2009 2008 2009 Sales Shipments Selling PriceSegment (in $ millions) (in $ millions) (thousands of MT) (thousands of MT) (%) (%) (%)Flat Carbon Americas 27,031 13,340 25,810 16,121 (51) (38) (24)Flat Carbon Europe 38,300 19,981 33,512 21,797 (48) (35) (22)Long Carbon Americas and Europe 32,268 16,767 27,115 19,937 (48) (26) (30)AACIS 13,133 7,627 13,296 11,769 (42) (11) (37)Stainless Steel 8,341 4,234 1,958 1,447 (49) (26) (31)Steel Solutions and Services 2 23,126 13,524 19,143 16,794 (42) (12) (34)Total 124,936 65,110 101,691 71,071 (48) (30) (27)Sales, Steel Shipmentsand Average Steel Selling PricesThe table above provides a summaryof ArcelorMittal’s sales by reportablesegment for the year endedDecember 31, 2009 as comparedto the year ended December 31, 2008.ArcelorMittal had sales of $65.1 billion for the yearended December 31, 2009, representing a decreaseof 48% from sales of $124.9 billion for the year endedDecember 31, 2008 primarily due to decreasesin average steel selling prices and lower shipmentsresulting from the global economic crisis.1Amounts are prior to intra-company eliminationsand include non-steel sales.2Steel Solutions and Services shipments are eliminatedin consolidation as they primarily represent shipmentsoriginating from other ArcelorMittal operating subsidiaries.The fall in sales was felt most acutely duringthe first half of 2009. Sales in the first halfof 2009 were $30.3 billion, down 55% fromthe same period in 2008, while sales in thesecond half of the year were $34.8 billion,down 39% from the same period in 2008.ArcelorMittal had steel shipmentsof 71.1 million tonnes for the year endedDecember 31, 2009, representing a30% decrease from steel shipments of101.7 million tonnes for the year endedDecember 31, 2008. Average steel sellingprice for the year ended December 31, 2009decreased 27% compared to the year endedDecember 31, 2008. Steel shipments andaverage steel selling price were lower in allsegments, reflecting the reduction in demanddue to the global economic crisis.Shipment volumes started to recoverin the second half of the year but averagesteel selling prices, while gradually increasing,remained low as compared to the secondhalf of 2008 due to the gradual and uncertainnature of the economic recovery, high sellingprices that had prevailed through the thirdquarter of 2008 and a time lag effectresulting from pricing terms in certain salescontracts. Shipments were 32.9 milliontonnes in the first half of 2009, down44% from the same period in 2008,while shipments in the second half ofthe year were 38.1 million tonnes, down11% from the same period in 2008.Average steel selling price in the first halfof 2009 was down 23% from the sameperiod in 2008, while average steel sellingprice in the second half of the year wasdown 32% from the same period in 2008.Flat Carbon AmericasSales in the Flat Carbon Americas segmentwere $13.3 billion for the year endedDecember 31, 2009, representing20% of the Company’s total consolidatedsales for 2009, a decrease of 51% ascompared to $27.0 billion, or 22% of totalconsolidated sales, for the year endedDecember 31, 2008. Sales fell primarily dueto a 38% fall in steel shipments and a 24% fallin average steel selling prices. The fall in salesin this segment was felt most acutely duringthe first half of the year. Sales in the first halfof 2009 were $6.0 billion, down 57% fromthe same period in 2008, while sales in thesecond half of the year were $7.4 billion,down 44% from the same period in 2008.Total steel shipments were16.1 million tonnes for the year endedDecember 31, 2009, a decrease of 38%from shipments for the year ended December31, 2008. Shipments were 7.1 million tonnesin the first half of 2009, down 53% fromthe same period in 2008, while shipmentsin the second half of the year were9.0 million tonnes, down 17% from thesame period in 2008.Average steel selling price decreased 24%for the year ended December 31, 2009as compared to the year endedDecember 31, 2008. Average steel sellingprice in the first half of 2009 was down13% from the same period in 2008, whileaverage steel selling price in the second halfof the year was down 36% from the sameperiod in 2008.
ArcelorMittal Annual Report 2009Operational Review 51Flat Carbon EuropeSales in the Flat Carbon Europe segmentwere $20.0 billion for the year endedDecember 31, 2009, representing 31%of the Company’s total consolidated salesfor 2009, a decrease of 48% as compared to$38.3 billion, or 31% of the total consolidatedsales, for the year ended December 31, 2008.The decrease was primarily due to a 35% fallin steel shipments and a 22% decrease inaverage steel selling price. The fall in salesin this segment was felt most acutely duringthe first half of the year. Sales in the first halfof 2009 were $9.2 billion, down 57% fromthe same period in 2008, while sales in thesecond half of the year were $10.8 billion,down 37% from the same period in 2008.Total steel shipments reached21.8 million tonnes for the year endedDecember 31, 2009, a decline of 35%from steel shipments for the year endedDecember 31, 2008. Shipments were9.8 million tonnes in the first half of 2009,down 49% from the same period in 2008,while shipments in the second half of theyear were 12.0 million tonnes, down 16%from the same period in 2008.Average steel selling price fell 22% for theyear ended December 31, 2009 as comparedto the year ended December 31, 2008.Average steel selling price in the first half of2009 was down 18% from the same periodin 2008, while average steel selling price inthe second half of the year was down 26%from the same period in 2008.Long Carbon Americas and EuropeIn the Long Carbon Americas and Europesegment, sales were $16.8 billion for the yearended December 31, 2009, representing26% of the Company’s total consolidatedsales for 2009, a decrease of 48% fromsales of $32.3 billion, or 26% of the totalconsolidated sales, for the year endedDecember 31, 2008. The decrease wasprimarily due to a 26% fall in steel shipmentsand a 30% decrease in average steel sellingprice. The fall in sales in this segment wasfelt most acutely during the first half of theyear. Sales in the first half of 2009 were$7.9 billion, down 55% from the sameperiod in 2008, while sales in the secondhalf of the year were $8.9 billion, down39% from the same period in 2008.Total steel shipments were 19.9 million tonnesfor the year ended December 31, 2009,a decrease of 26% from steel shipmentsfor the year ended December 31, 2008.Shipments were 9.7 million tonnesin the first half of 2009, down 39% fromthe same period in 2008, while shipmentsin the second half of the year were10.3 million tonnes, down 9% from thesame period in 2008.Average steel selling price decreased 30%for the year ended December 31, 2009as compared to the year ended December31, 2008. Average steel selling price in thefirst half of 2009 was down 25% from thesame period in 2008, while average steelselling price in the second half of the year wasdown 35% from the same period in 2008.AACISIn the AACIS segment, sales were $7.6 billionfor the year ended December 31, 2009,representing 12% of the Company’s totalconsolidated sales in 2009, a decreaseof 42% over sales of $13.1 billion, or 11%of total consolidated sales, for the year endedDecember 31, 2008. The decrease wasdue to an 11% fall in steel shipments and,especially, a 37% decrease in average steelselling price. The fall in sales in this segmentwas felt most acutely during the first halfof the year. Sales in the first half of 2009were $3.4 billion, down 51% from the sameperiod in 2008, while sales in the secondhalf of the year were $4.3 billion, down 32%from the same period in 2008.Total steel shipments reached11.8 million tonnes for the year endedDecember 31, 2009, a decrease of 11%from steel shipments for the year endedDecember 31, 2008. Shipments were5.7 million tonnes in the first half of 2009,down 27% from the same period in 2008,while shipments in the second half of the yearwere 6.1 million tonnes, up 11% from thesame period in 2008, mainly reflecting thesharp decline that had occurred in the CISregion starting in the second half of 2008.Average steel selling price decreased37% for the year ended December 31, 2009,as compared to the year endedDecember 31, 2008. Average steel sellingprice in the first half of 2009 was down 35%from the same period in 2008, while averagesteel selling price in the second half of theyear was down 41% from the same periodin 2008.Stainless SteelSales in the Stainless Steel segmentwere $4.2 billion for the year endedDecember 31, 2009, representing 7% of theCompany’s total consolidated sales in 2009,a decrease of 49% over sales of $8.3 billion,or 7% of total consolidated sales, for the yearended December 31, 2008. This decreasewas primarily due to a 26% fall in shipmentsand 31% fall in average steel selling price.The fall in sales in this segment was feltmost acutely during the first half of theyear. Sales in the first half of 2009 were$1.9 billion, down 61% from the same periodin 2008, while sales in the second halfof the year were $2.3 billion, down 31%from the same period in 2008.Total steel shipments reached1.4 million tonnes for the year endedDecember 31, 2009, a decrease of 26%from steel shipments for the year endedDecember 31, 2008. Shipments were0.7 million tonnes in the first half of 2009,down 39% from the same period in 2008,while shipments in the second half of theyear were 0.8 million tonnes, down 10%from the same period in 2008.Average steel selling price decreased 31%for the year ended December 31, 2009as compared to the year endedDecember 31, 2008. Average steel sellingprice in the first half of 2009 was down37% from the same period in 2008, whileaverage steel selling price in the second halfof the year was down 22% from the sameperiod in 2008.Steel Solutions and ServicesIn the Steel Solutions and Services segment,sales were $13.5 billion for the year endedDecember 31, 2009, representing 21%of the Company’s total consolidated salesfor 2009, a decrease of 42% over sales of$23.1 billion, or 19% of the total consolidatedsales, for the year ended December 31, 2008.This decrease was primarily due to a 12%fall in shipments and 34% fall in average steelselling price. The fall in sales in this segmentwas felt most acutely during the first halfof the year. Sales in the first half of 2009were $6.8 billion, down 47% from the sameperiod in 2008, while sales in the secondhalf of the year were $6.7, down 35% fromthe same period in 2008.Total steel shipments reached16.8 million tonnes for the year endedDecember 31, 2009, a decrease of 12%from steel shipments for the year endedDecember 31, 2008. Shipments were8.4 million tonnes in the first half of 2009,down 25% from the same period in 2008,while shipments in the second half of the yearwere 8.4 million tonnes, up 5% from thesame period in 2008.Average steel selling price fell 34% forthe year ended December 31, 2009as compared to the year ended December31, 2008. Average steel selling pricein the first half of 2009 was down 30%from the same period in 2008, while averagesteel selling price in the second half ofthe year was down 38% from the sameperiod in 2008.
ArcelorMittal Annual Report 200952 Operational ReviewOperating IncomeYear ended December 31,Operating Margin2008 2 2009 2008 2 2009Segments 1 (in $ millions) (in $ millions) (%) (%)Flat Carbon Americas 2,638 (757) 10 (6)Flat Carbon Europe 2,773 (540) 7 (3)Long Carbon Americas and Europe 4,154 (29) 13 —AACIS 3,145 265 24 3Stainless Steel 383 (172) 5 (4)Steel Solutions and Services 181 (286) 1 (2)Operating IncomeThe table above provides a summaryof the operating income and operatingmargin of ArcelorMittal for the year endedDecember 31, 2009, as compared with theoperating income and operating margin forthe year ended December 31, 2008.ArcelorMittal’s operating loss for the year endedDecember 31, 2009 amounted to $1.7 billion,compared to operating income of $12.3 billionfor the year ended December 31, 2008.The overall operating loss and the sharp deteriorationacross each segment were due to lower sales,lower average steel selling prices and lowershipment volumes as described above whichreflected the impact of the global economic crisis.1Amounts are prior to intra-company eliminations andinclude non-steel sales.2As required by IFRS, the 2008 information has beenadjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions madein 2008 (see Note 3 to ArcelorMittal’s consolidatedfinancial statements).Operating losses of $2.7 billion wererecorded during the first half of the year,and were partially offset by operatingincome during the second half of the yearof $989 million.Contributing substantially to the operatingloss were $2.4 billion of pre-tax expensesthat ArcelorMittal recorded in the firsthalf of the year, also resulting fromthe ongoing weak steel market conditions.These consisted of write-downs ofinventory (approximately $2.1 billion)and provisions for workforce reductions,including voluntary separation programs(approximately $0.3 billion).Further details of these expenses areset out below:• Write-downs of inventory. On eachreporting date, inventories are measuredand valued at the lower of cost and netrealizable value. Due to the rapid andsharp decline in demand for, and pricesof, steel products, the net realizablevalue of certain inventories of finishedsteel products, works-in-processand raw materials, in particular iron oreand coking coal, (assuming the processingof these raw materials or works-in-processinto steel products) were lower thantheir cost, resulting in write-downs.See Note 6 to ArcelorMittal’sconsolidated financial statements.• Provision for onerous raw materialsupply contracts. ArcelorMittal sourcesa portion of its raw materials requirementsunder contracts whereby it has a firmcommitment to purchase specifiedquantities at a set price over a set period.Due to the ongoing decline in steelselling prices in the first half of 2009,the Company recorded provisions withrespect to raw materials sourced underthese contracts because the net realizablevalue of such raw materials (assuming theirprocessing into steel products at year-end)was expected to be lower than theircost and to result in write-downs.See Note 19 to ArcelorMittal’sconsolidated financial statements.• Provision for workforce reduction(including voluntary separation programs).This provision taken in the first quarterof 2009 relates to costs (includingseverance costs) expected to be incurredin connection with the voluntary separationprograms that ArcelorMittal implementedin response to the economic crisis and thesharp drop in steel demand. The provisionwas in addition to a $0.9 billion provisionfor workforce reduction recorded at theend of 2008, and relates to an expansionof the voluntary separation programthat was announced during the first quarterof 2009. See Note 19 to ArcelorMittal’sconsolidated financial statements.
ArcelorMittal Annual Report 2009Operational Review 53Operating income for the year endedDecember 31, 2009 was also reducedby impairment expenses amountingto $564 million consisting primarilyof $237 million on various idled assets(including $92 million relating to animpairment on coke oven assets ofArcelorMittal Galati and $65 million atArcelorMittal Las Truchas), $122 millionimpairment on various tubular productoperations (primarily $65 million inArcelorMittal Roman), $172 million onother impairments (including $117 millionat ArcelorMittal Construction France).In determining these expenses, the Companyanalyzed the recoverable amount of thesefacilities based on their value in use anddetermined that the recoverable amountfrom these facilities was less than theircarrying amount. These impairment lossescompared to impairment losses for thetwelve months ended December 31, 2008of $1.1 billion, consisting of assetimpairments of $499 million, goodwillimpairment of $131 million and reductionof goodwill of $429 million.Conversely, operating income increasedby $979 million in 2009 due to the recyclingin the statement of operations of a gainrecorded to equity at year-end 2008in connection with the unwind of a U.S. dollardenominated raw material purchaseshedged transaction until 2012. In addition,during the fourth quarter of 2009 theCompany recorded an exceptional gainof $0.4 billion relating to the write-backof a litigation provision previously recordedin the fourth quarter of 2008, followingthe Paris Court of Appeals decisionto reduce the fine imposed on certain Frenchdistribution subsidiaries of ArcelorMittalby the French Competition Authority from€302 million ($441 million) to €42 million($61 million). Operating income in thefourth quarter of 2009 also includeda gain of $108 million recorded on thesale of carbon dioxide credits purchasedsince 2007.Flat Carbon AmericasOperating loss for the Flat Carbon Americassegment amounted to $0.8 billion for theyear ended December 31, 2009, comparedto operating income of $2.6 billion for theyear ended December 31, 2008. Thisoperating loss reflected lower sales, steelshipments and selling prices resulting fromthe global economic crisis, and also includedcharges of $0.7 billion related to writedownsof inventory, provision for workforcereductions and provisions for onerous rawmaterial supply contracts. The operating lossfor the segment amounted to $1.0 billion forthe first half of the year, and was partiallyoffset by operating income during thesecond half of the year of $0.3 billion,reflecting the gradual improvement inmarket conditions.Flat Carbon EuropeOperating loss for the Flat CarbonEurope segment for the year endedDecember 31, 2009 was $0.5 billioncompared to operating income of $2.8 billionfor the year ended December 31, 2008.This operating loss reflected the lower sales,steel shipments and selling prices resultingfrom the global economic crisis, and alsoincluded expenses of $0.9 billion related towrite-downs of inventory and provision forworkforce reductions. Operating results werealso affected by impairment expenses of$0.1 billion primarily related to the impairmentof coke oven assets at ArcelorMittal Galati.The operating loss for the segmentamounted to $0.6 billion for the first halfof the year, and was partially offset byoperating income during the secondof the year of $0.1 billion reflecting thegradual improvement in market conditions.Operating income in the fourth quarterof 2009 also included a gain of $108 millionrecorded on the sale of carbon dioxidecredits bought in 2007 and 2008.Long Carbon Americas and EuropeOperating loss for the Long CarbonAmericas and Europe segment for theyear ended December 31, 2009 was$29 million compared to operatingincome of $4.2 billion for the year endedDecember 31, 2008. This operating lossreflected the lower sales, steel shipmentsand selling prices resulting from thedeteriorating global economy, and alsoincluded charges of $0.3 billion relatedto write-downs of inventory and provisionfor workforce reductions. Operating incomewas affected by impairment expensesof $0.3 billion for asset impairments inthe segment’s tubular business and idledassets (including $0.1 billion at ArcelorMittalRoman and ArcelorMittal Las Truchas).The operating loss for the segmentamounted to $0.2 billion for the firsthalf of the year, and was partially offsetby operating income during the secondof the year of $0.2 billion, reflecting thegradual improvement in market conditions.AACISOperating income for the AACISsegment for the year endedDecember 31, 2009 was $0.3 billion,compared to operating incomeof $3.1 billion for the year endedDecember 31, 2008. This sharply loweroperating income reflected the lowersales, steel shipments and selling pricesresulting from the global economic crisis,and also included charges of $0.2 billionprimarily related to write-downsof inventory. The operating incomefor the segment amounted to $2 millionfor the first half of the year, and improvedduring the second half of the year to$0.2 billion, reflecting the gradualimprovement in market conditions.Stainless SteelOperating loss for the StainlessSteel segment for the year endedDecember 31, 2009 was $0.2 billion,compared to operating incomeof $0.4 billion for the year endedDecember 31, 2008. This operatingloss reflected the lower sales, steelshipments and selling prices resultingfrom the global economic crisis, and alsoincluded charges of $0.1 billion primarilyrelated to write-downs of inventory.The operating loss for the segmentamounted to $0.2 billion for the first halfof the year, and was partially offset byoperating income during the second halfof the year of $0.1 billion, reflecting thegradual improvement in market conditions.
ArcelorMittal Annual Report 200954 Operational ReviewNotwithstanding thedifficult market conditionsof 2008 and 2009,ArcelorMittal’smanagement believesthat there will be strongglobal steel demandgrowth in the medium tolong term. The Company
ArcelorMittal Annual Report 2009Operational Review 55will continue to investopportunistically inexpanding the productioncapacity of its existingfacilities dependingon market conditionsand projectedglobal and regionaldemand trends.
ArcelorMittal Annual Report 200956 Operational ReviewSteel Solutions and ServicesOperating loss for the Steel Solutionsand Services segment for the year endedDecember 31, 2009 was $0.3 billion,compared to operating incomeof $0.2 billion for the year endedDecember 31, 2008. The operating lossreflected the lower sales, steel shipmentsand selling prices resulting from the globaleconomic crisis, and also included charges of$0.2 billion primarily related to write-downsof inventory. Operating income was affectedby impairment expenses of $0.1 billionat ArcelorMittal Construction France forthe year ended December 31, 2009.The operating loss for the segmentamounted to $0.5 billion for the first halfof the year, and was partially offset byoperating income during the second halfof the year of $0.2 billion, reflecting thegradual improvement in market conditionsand an exceptional gain of $0.4 billionrelating to the write-back of a litigationprovision recorded in the fourth quarterof 2008.Income from Investment inAssociates and Joint VenturesArcelorMittal recorded income of $0.1 billionfrom investments accounted for usingthe equity method for the year endedDecember 31, 2009, as compared withincome from equity method investmentsof $1.7 billion for the twelve months endedDecember 31, 2008. The decrease wasdue to lower income from the Company’sinvestments due to the global economiccrisis, as well as the gain recordedin 2008 from the sale of a stake in DHS.Financing CostsNet financing costs include net interestexpense, revaluation of financial instruments,net foreign exchange income/expense(i.e., the net effects of transactions in aforeign currency other than the functionalcurrency of a subsidiary) and other financingcosts. Net financing costs were 20% higherfor the year ended December 31, 2009,at $2.8 billion, as compared with $2.4 billionfor the year ended December 31, 2008.Net interest expense (interest expenseless interest income) was flat at $1.5 billionfor the year ended December 31, 2009as compared to the year endedDecember 31, 2008. Interest expensedecreased to $1.7 billion for the yearended December 31, 2009, compared tointerest expense of $2.0 billion for the yearended December 31, 2008, due to adecrease in gross debt, partially offsetby higher interest rates on its 2009 bondissuances. Interest income for the yearended December 31, 2009 decreasedto $0.2 billion compared to interestincome of $0.5 billion for the yearended December 31, 2008, due toa decrease in interest rates as well as anoverall lower cash balance during the year.Foreign exchange and other net financingcosts (which include bank fees, intereston pensions and impairments of financialinstruments) for the year ended December31, 2009 amounted to costs of $0.4 billion,as compared to costs of $0.6 billionfor the year ended December 31, 2008.Other financing costs for the yearended December 31, 2009 also includeda loss of $0.9 billion as a result of markto-marketadjustments on the conversionoptions embedded in its convertible bondsissued in the second quarter of 2009.On April 1, 2009 and May 6, 2009,the Company issued approximately $2.5 billionof bonds (approximately $1.7 billiondenominated in euro and balance $0.8 billiondenominated in U.S. dollars) which areconvertible into shares at the option of thebondholders. Under the terms of the bondsthe Company has the option to settle thebonds for shares or for an amount equivalentto the cash value of the shares at the dateof the settlement. The Company hasdetermined that the convertible bonds arehybrid instruments as defined by IFRS as theconversion option gives the bondholder theright to put the bond back to the Company.In addition, the Company identified certaincomponents of the contract to be embeddedderivatives in accordance with IAS 39.Therefore, the Company separated theembedded derivatives and recorded theirfair value at inception ($597 million)as liabilities (out of the net financial debt).At each reporting period, changes in thefair value of the embedded derivatives arerecorded to the statement of operations.As from October 28, 2009 noteholdersof the ArcelorMittal $800 million convertiblebonds due 2014 were notified thatArcelorMittal has decided to irrevocablywaive the option to deliver the cash valueof the shares upon conversion. As a resultof this waiver, the embedded derivativerecorded as a liability in the amountof $279 million was transferred to equityand hence will no longer affect the statementof operations going forward.Losses related to the fair value of derivativeinstruments for the year ended December31, 2009 amounted to $28 million,as compared with loss of $177 million forthe year ended December 31, 2008.See Note 17 to ArcelorMittal’s consolidatedfinancial statements.Income TaxArcelorMittal recorded a consolidatedincome tax benefit of $4.5 billion for theyear ended December 31, 2009, comparedto a consolidated income tax expenseof $1.1 billion for the year ended December31, 2008. The income tax benefit for theyear is primarily due to ArcelorMittal’s 2009loss as compared with 2008 profit,and its geographical mix. For additionalinformation related to ArcelorMittal’sincome taxes, see Note 18 to ArcelorMittal’sconsolidated financial statements.Non-Controlling InterestLoss from non-controlling interest(referred to in previous years as ‘MinorityInterest’) was $43 million for the yearended December 31, 2009, as comparedwith a profit of $1 billion for the yearended December 31, 2008. The decreaserelates to lower income in subsidiarieswith non-controlling interest due to theglobal economic crisis.Net Income Attributable to EquityHolders of the ParentArcelorMittal’s net income attributableto equity holders of the parent for theyear ended December 31, 2009 decreasedto $0.1 billion from a net incomeof $9.4 billion for the year ended December31, 2008, for the reasons discussed above.
ArcelorMittal remains optimisticabout the industry’s medium-termgrowth prospects, and is reinitiatingcautiously some projects tocapture growth in key emergingmarkets as deleveragingis completed.ArcelorMittal Annual Report 2009Operational Review 57
ArcelorMittal Annual Report 200958 LiquidityLiquidityArcelorMittal’s principal sources of liquidityare cash generated from its operations,its credit facilities at the corporate leveland various working capital credit linesat its operating subsidiaries.In management’s opinion, ArcelorMittal’scredit facilities are adequate for its presentrequirements. Because ArcelorMittal isa holding company, it is dependent uponthe earnings and cash flows of, anddividends and distributions from, itsoperating subsidiaries to pay expensesand meet its debt service obligations.Some of these operating subsidiaries havedebt outstanding or are subject to acquisitionagreements that impose restrictionsor prohibitions on such operatingsubsidiaries’ ability to pay dividends.As of December 31, 2009, ArcelorMittal’scash and cash equivalents, includingrestricted cash and short-terminvestments, amounted to $6.0 billion,as compared to $7.6 billion as ofDecember 31, 2008. In addition,ArcelorMittal had available borrowingcapacity of $11.2 billion under its existingcredit facilities as of December 31, 2009,as compared to $5.8 billion as ofDecember 31, 2008. ArcelorMittal also hasa €3.0 billion (approximately $4.3 billion)commercial paper program (of whichapproximately $1.5 billion was outstandingas of December 31, 2009) and its policyhas been to maintain availability underits credit facilities as back-up for itscommercial paper program.As of December 31, 2009, ArcelorMittal’stotal debt, which includes long-term debtand short-term debt was $24.8 billion(compared to $34.1 billion as ofDecember 31, 2008). Net debt(defined as long-term debt plus short-termdebt less cash and cash equivalents andrestricted cash) was $18.8 billion asof December 31, 2009, down from$26.5 billion at December 31, 2008.Most of the external debt is borrowedby the parent company on an unsecuredbasis and bears interest at varying levelsbased on a combination of fixed andvariable interest rates. Gearing (definedas net debt divided by total equity) atDecember 31, 2009 was 29% as comparedto 45% at December 31, 2008. Total debtand net debt decreased year-on-yearprimarily due to various debt reductionmeasures taken by the Company in 2009,including reduced costs and dividends,increased cash generation from workingcapital, and issuances of equityand convertible bonds (part of the latterbeing accounted for as derivatives ornon-controlling interest rather than debt).ArcelorMittal’s principal financingfacilities, which are the €17 billion(approximately $25 billion) comprising€12 billion term loan facility (as ofDecember 31, 2009, €2.4 billionoutstanding) and a €5 billion revolvingcredit facility initially entered into onNovember 30, 2006 and subsequentlyamended and restated (the ‘€17 BillionFacility’), the $4 billion revolving credit facilityinitially entered into on May 13, 2008 andsubsequently amended (the ‘$4 BillionFacility’), and the $800 million committedmulti-currency letter of credit facility initiallyentered into on December 30, 2005 andsubsequently amended (the ‘Letter of CreditFacility’), contain restrictive covenants.Among other things, these covenantslimit encumbrances on the assets ofArcelorMittal and its subsidiaries, the abilityof ArcelorMittal’s subsidiaries to incur debtand the ability of ArcelorMittal and itssubsidiaries to dispose of assets in certaincircumstances. These agreements alsorequire compliance with financial covenants,as summarized below.The €17 Billion Facility, the $4 BillionFacility and the Letter of Credit Facility,as well as certain other smaller facilities,have the following financial covenant:the Company must ensure that the ratioof ‘Consolidated Total Net Borrowings’(consolidated total borrowings lessconsolidated cash and cash equivalents)to ‘Consolidated EBITDA’ (the consolidatednet pre-taxation profits of the ArcelorMittalgroup for a Measurement Period, subjectto certain adjustments as set out in thefacilities) does not, at the end of each‘Measurement Period’ (each period of12 months ending on the last day of afinancial half-year or a financial year of theCompany), exceed a certain ratio, initiallyagreed to be 3.5 to one. The Companyrefers to this ratio as the ‘Leverage Ratio’.As of December 31, 2009, the LeverageRatio stood at approximately 3.2 to one,up from 1.7 to one as of June 30, 2009,and 1.1 to one as of December 31, 2008.In August 2009, the Company signedagreements with its creditors underthe €17 Billion Facility and the €4 BillionFacility to amend the Leverage Ratio from3.5to one as originally provided, to 4.5to one as of December 31, 2009, to 4.0to one as of June 30, 2010, and revertingto 3.5 to one as of December 31, 2010.Although the Company incurred fees inconnection with the covenant amendment,the Company’s ongoing borrowing costsunder the facilities will not increase unlessits Leverage Ratio becomes greater than3.5 to one for a Measurement Period thatis subject to the amendment. Since theLeverage Ratio remained below 3.5 to oneas of December 31, 2009, this will notapply unless the Leverage Ratio rises above3.5 to one as of the Measurement Periodending on June 30, 2010. In such a case,the Company will also be subject to certainadditional non-financial restrictivecovenants, including in relation torestrictions on dividends and sharereductions, acquisitions, capital expenditureand the giving of loans and guarantees.By the end of 2009, the Company hadreached similar agreements to amendeach of its smaller facilities that aresubject to this covenant, or in certaincases simply prepaid such smaller facilities.In December 2009, the Company alsoamended the Letter of Credit Facilityto replace the interest coverage ratiocovenant that previously applied underthat facility with the same Leverage Ratiocovenant as described above.
ArcelorMittal’sprincipal sourcesof liquidity are cashgenerated fromits operations,its credit facilitiesat the corporatelevel and variousworking capital creditlines at its operatingsubsidiaries.ArcelorMittal Annual Report 2009Liquidity 59
ArcelorMittal Annual Report 2009Liquidity 61In August 2009, Forward Startcommitments of $3.175 billion werereinstated in connection with $4 BillionRevolving Credit Facility, effectivelyextending its maturity (to the extentof $3.175 billion) to 2012.In 2007 and 2008, ArcelorMittal Financehad entered into bilateral credit facilitiestotaling €800 million ($1.2 billion). Duringthe year ended December 31, 2008,all of these facilities were transferred toArcelorMittal. These credit facilities werecanceled in the third quarter of 2009.In 2009, ArcelorMittal completedseveral capital markets transactions,the proceeds of which, totalingapproximately $13.1 billion were principallyused to refinance existing indebtedness.The transactions consisted of:• an offering of €1.25 billion(approximately $1.6 billion)of 7.25% bonds convertible intoand/or exchangeable for newor existing ArcelorMittal shares(OCEANE) due 2014 which closedon April 1, 2009;• an offering of 140,882,634 commonshares for $3.2 billion which closedon May 6, 2009 (described in furtherdetail below);• an offering of 5% convertible notesdue 2014 for $800 million thatwas made and closed simultaneouslywith the offering of common shares;• an offering of two series of U.S. dollardenominated notes (9% Notes due2015 and 9.85% Notes due 2019)totaling $2.25 billion which closedon May 20, 2009;• an offering of two series ofeuro-denominated notes (8.25% Notesdue 2013 and 9.375% Notes due 2016)totaling €2.5 billion ($ 3.5 billion)which closed on June 3, 2009;• an offering of $1 billion of U.S. dollardenominated 7% notes due 2039which closed on October 1, 2009; and• a private placement of a $750 million,17-month mandatorily convertiblebond by a wholly-ownedLuxembourg subsidiary of the Companyto a Luxembourg affiliate of Calyon,with the proceeds invested in noteslinked to shares of Erdemir of Turkeyand Macarthur Coal Limited of Australia,both of which are publicly-listedcompanies in which ArcelorMittal holdsa minority stake. In ArcelorMittal’sconsolidated financial statementsfor the year ended December 31, 2009,the mandatorily convertible bondwas recorded as non-controlling interestof $695 million ($684 million netof fees and tax) and $55 million as debt.The offering of 140,882,634 commonshares was priced at €17.10 (or $22.77)per share. Ispat International Investments,S.L. (‘Ispat’), a holding company beneficiallyowned by Mr. Lakshmi N. Mittal andMrs. Usha Mittal, subscribed for14,088,263 common shares (or 10%) inthe offering on a deferred-delivery basis.The offering was settled by the Companyon May 6, 2009 (except with respectto Ispat) with 98 million common sharesborrowed from Ispat pursuant to a sharelending agreement, with the remaindersettled using shares held in treasury.The Company returned the borrowedshares to, and delivered the sharessubscribed by Ispat on June 22, 2009,pursuant to the issuance by the Companyof 112,088,263 shares followingshareholder approval at an extraordinarygeneral meeting held on June 17, 2009of a resolution broadening the authorizationof the Board of Directors to increase theCompany’s share capital.The Company lengthened its overalldebt maturity profile in 2009 as a resultof debt repayments made with proceedsfrom the Company’s capital marketstransactions. These actions had theeffect of significantly reducing near-termrefinancing requirements and haveincreased the average debt maturityof the Company to 4.8 years as ofDecember 31, 2009, as comparedto 2.6 years as of December 31, 2008.As of December 31, 2009, the balanceof indebtedness scheduled to maturewithin three years was $9.9 billionin the aggregate, reduced from a totalof $20.4 billion as of December 2008.Notwithstanding the reduction intotal debt, ArcelorMittal’s financing costshave increased as a result of its 2009bond issuances.In September 2009, the Companyalso established new targets for maintainingits gearing and leverage going forward,establishing a target range for gearingof between 25% to 40%, and also settinggoals for leverage levels (which it measuresby dividing net debt by EBITDA basedon a yearly average EBITDA fromJanuary 1, 2004) of between 0.5x to 1.8x.Further information regardingArcelorMittal’s outstanding long-termindebtedness as of December 31, 2009is set forth in Note 14 to ArcelorMittal’sconsolidated financial statements.Credit RatingsArcelorMittal’s long-term corporatecredit rating is currently BBB accordingto Standard & Poor’s Rating Servicesand Fitch Ratings, and Baa3 accordingto Moody’s Investors’ Service.On May 20, 2009, Fitch Ratings andMoody’s both lowered their ratingsfor ArcelorMittal by one notch, from BBB+to BBB, and Baa2 to Baa3, respectively,and assigned a stable outlook. On June 5,2009, Standard & Poor’s lowered itsrating for ArcelorMittal from BBB+ to BBBand assigned a negative outlook, subjectto continuing review in light of the verydifficult economic climate. On July 31, 2009,Fitch Rating revised its outlook from stableto negative.
ArcelorMittal Annual Report 200962 Market InformationMarket InformationArcelorMittal is listed on the stockexchanges of New York, Amsterdam,Paris, Brussels and Luxembourg (MT)and on the Spanish stock exchangesof Barcelona, Bilbao, Madrid andValencia (MTS).ArcelorMittal, with its diversified businessmodel, strong cash-flow and costleadership position, is well placed toweather the current challenging economicenvironment and has the ambition todevelop and balance its shareholderbase on the major listed markets andto attract new investors.ArcelorMittal remains optimistic aboutthe industry’s medium-term growthprospects, and is reinitiating cautiouslysome projects to capture growthin key emerging markets as deleveragingis completed.Share price performanceAs a result of the Group’s stronginitiatives to react to the crisis and theend of the destocking in the differentregions of the world, the price of theArcelorMittal share increased by 86%in 2009 and by 33% since the creationof the Group. Compared to thehighest share price in early June 2008,the ArcelorMittal share price decreasedby approximately 56% and reflectsthe economic environment whichremains challenging.IndexesArcelorMittal is member of more than120 indices including the followingleading indices: DJ STOXX 50, DJ EUROSTOXX 50, CAC40, AEX, FTSE Eurotop100, MSCI Pan-Euro, DJ Stoxx 600,S&P Europe 500, Bloomberg World Indexand NYSE Composite Index. Recognizedfor its commitment to SustainableDevelopment, the Group is alsoa member of the FTSE4Good index.DividendConsidering the exceptional globaleconomic conditions, ArcelorMittal’s Boardof Directors has recommended to maintainthe annual dividend per share at $0.75for 2010, subject to the approval of theannual general meeting of shareholderson May 11, 2010. Once market conditionshave normalized, the Board of Directorswill review the dividend policy.The dividend payments will occuron a quarterly basis for the full year2010 (see financial calendar).Dividends are announced in $ and paidin $ for shares listed on the New YorkStock Exchange and paid in eurosfor shares listed on the European stockexchanges (The Netherlands, France,Spain, Luxembourg and Belgium).Investor RelationsBy implementing high standardsof financial information disclosure andproviding clear, regular, transparentand even-handed information to allits shareholders, ArcelorMittal aims to bethe first choice for investors in the sector.To meet this objective and provideinformation to fit the needs of all parties,ArcelorMittal has decided to implementan active and broad communications policy:road shows with the financial community,conference calls, plant visits, meetingswith individual investors, a virtual meetingand conference center on Second Lifeand a website featuring managementcomments on quarterly, half-yearand full-year results.Individual InvestorsArcelorMittal’s senior management plansto meet individual investors andshareholder associations in road showsthroughout 2010. In order to improvethe communication and debate with itsindividual investors, ArcelorMittal hasopened a virtual meeting and conferencecenter on Second Life. The ArcelorMittalvirtual meeting and conference centerenables investors to have access to Groupdocumentation, corporate videos, discussin real time with Company representativesor other shareholders present on thelocation or leave questions in the dedicatedquestion box. This is also the optimallocation to arrange interactive Grouppresentations and courses. A dedicatedtoll free number for individual investorsis available at 00800 4792 4792.Requests for information or meetingson the virtual meeting and conferencecenter may also be sent to:PrivateInvestors@arcelormittal.com
ArcelorMittal Annual Report 2009Market Information 63ArcelorMittal share price performance since creationBase 100 at 1st August 2006 (US$)340290ArcelorMittal240190140Global Metals & Mining Index904001/08/06 20/10/06 08/01/07 29/03/07 17/06/07 05/09/07 24/11/07 12/02/08 02/05/08 21/07/08 09/10/08 28/12/08 18/03/09 06/06/09 25/08/09 13/11/09 31/12/09Analysts and InvestorsAs the world’s leading steel Companyand major investment vehicle in the steelsector, ArcelorMittal constantly seeksto develop relationships with financialanalysts and international investors.Depending on their geographical location,investors may use the following e-mails:InstitutionalsAmericas@arcelormittal.comInstitutionalsEurope@arcelormittal.comSocially Responsible InvestorsThe Investor Relations team is alsoa privileged source of informationthe growing Socially ResponsibleInvestment community. The teamorganizes special events on ArcelorMittal’sCorporate Responsibility strategy andanswers all requests for information sentto the Group (SRI@arcelormittal.com).Credit and Fixed Income InvestorsCredit, Fixed Income Investors andrating agency are followed bya dedicated team from Investor Relations(CreditFixedIncome@arcelormittal.com).Financial CalendarFinancial Results*February 10, 2010 Results for 4th quarter 2009 and 12 months 2009April 29, 2010 Results for 1st quarter 2010July 28, 2010 Results for 2nd quarter 2010 and 6 months 2010October 26, 2010 Results for 3rd quarter 2010 and 9 months 2010* Earnings results are issued before the opening of the stock exchanges on which ArcelorMittal is listed.Dividend paymentMarch 15, 2010June 14, 2010September 13, 2010December 15, 2010** Subject to shareholder approval.Shareholder and investor meetingsMarch 24 and 26, 2010May 11, 2010June 16, 2010September 15, 20101st quarterly payment of base dividend (interim dividend)2nd quarterly payment of base dividend**3rd quarterly payment of base dividend**4th quarterly payment of base dividend**Plant tour with analysts and institutional investorsAnnual shareholder meeting in LuxembourgIndividual investor eventInvestor Day with Group Management Board membersTo subscribe to ArcelorMittal releases and results, please visit the subscription form section under‘Investors & Shareholders – Contacts’ on www.arcelormittal.com
Robrecht HimpeExecutive Vice President of ArcelorMittal, CEO Flat Europe
ArcelorMittal Annual Report 200966 Corporate GovernanceCorporate GovernanceBoard of Directors,Group Management Board andManagement CommitteeArcelorMittal is governed by a Boardof Directors and a Group Management Board.The Group Management Board is assistedby a Management Committee.A number of corporate governance provisionsin the Articles of Association of ArcelorMittalreflect provisions of the Memorandumof Understanding signed on June 25, 2006(prior to Mittal Steel’s acquisition of Arcelor),amended in April 2008, and which partlyexpired on August 1, 2009 (the ‘MoU’).Board of DirectorsThe Board of Directors is in charge ofthe overall management of ArcelorMittal.It is responsible for the performance of allacts of administration necessary or usefulin furtherance of the corporate purposeof ArcelorMittal, except for matters expresslyreserved by Luxembourg law or the Articlesof Association to the general meetingof shareholders. The Articles of Associationprovide that the Board of Directorsis composed of a minimum of three anda maximum of 18 members, all of whom,except the Chief Executive Officer, mustbe non-executive directors. None of themembers of the Board of Directors, exceptfor the Chief Executive Officer, may hold anexecutive position or executive mandatewithin ArcelorMittal or any entity controlledby ArcelorMittal.Mr. Lakshmi N. Mittal was electedChairman of the Board of Directorson May 13, 2008. Mr. Mittal is alsoArcelorMittal’s Chief Executive Officer.As of date hereof, the Board of Directorsis comprised of 11 members in total:10 non-executive directors and one executivedirector. The Chief Executive Officer ofArcelorMittal is the sole executive director.Eight of the 11 members of the Boardof Directors are independent. A directoris considered ‘independent’ if (a) he or sheis independent within the meaning of theListed Company Manual of the New YorkStock Exchange, as amended from time totime, or any successor manual or provisions,subject to the exemptions available forforeign private issuers (the ‘NYSE standards’),(b) he or she is unaffiliated with anyshareholder owning or controlling morethan two percent of the total issued sharecapital of ArcelorMittal, and (c) the Board ofDirectors makes an affirmative determinationto this effect. For these purposes, a person isdeemed affiliated to a shareholder if he or sheis an executive officer, a director who alsois an employee, a general partner, a managingmember or a controlling shareholderof such shareholder. There is no requirementin the Articles of Association that directorsbe shareholders of the Company.The Articles of Association provide thatdirectors are elected and removed by thegeneral meeting of shareholders by a simplemajority of votes cast. No shareholder hasany specific right to nominate, elect or removedirectors. Directors are elected by the generalmeeting of shareholders for three-year terms.In the event that a vacancy arises on theBoard of Directors for any reason, theremaining members of the Board of Directorsmay, by a simple majority elect a new directorto temporarily fulfill the duties attaching tothe vacant post until the next general meetingof the shareholders.None of the members of the Boardof Directors, including the executive director,have entered into service contracts withArcelorMittal or any of its subsidiaries thatprovide for benefits upon the terminationof their mandate.Operation of the Board of DirectorsGeneralLuxembourg law permits the Boardof Directors to engage the services of externalexperts or advisers, as well as to take allactions necessary or useful to implement theCompany’s corporate purpose.MeetingsThe Board of Directors meets whenconvened by the Chairman of the Boardor two members of the Board of Directors.The Board of Directors holds physical meetingsat least on a quarterly basis as five regularmeetings are scheduled per year. The Boardof Directors holds additional meetings ifand when circumstances require, in personor by teleconference. The Board of Directorsheld seven meetings in 2009. The averageattendance rate of the directors at the Boardof Directors’ meetings held in 2009 was 86%.In order for a meeting of the Boardof Directors to be validly held, a majorityof the directors must be present orrepresented, including at least the Chairmanand a majority of the independent directors.In the absence of the Chairman, the Boardof Directors will appoint by majority votea chairman ‘pro tempore’ for the meetingin question. The Chairman may decidenot to participate in a Board of Directorsmeeting, provided he has given a proxy toone of the directors who will be present atthe meeting. For any meeting of the Boardof Directors, a director may designate anotherdirector to represent him or her and votein his or her name, provided that the directorso designated may not represent more thanone of his or her colleagues at any time.VotesEach director has one vote and noneof the directors, including the Chairman,has a casting vote. Decisions of the Boardof Directors are made by a majority of thedirectors present and represented at a validlyconstituted meeting.Lead Independent DirectorIn April 2008, the Board of Directorscreated the role of Lead Independent Director.The Lead Independent Director replacesthe ‘President’ of the Board of Directorsas previously provided by the MoU and hisor her function is to:• co-ordinate the activities of theindependent directors;• liaise between the Chairmanof the Board of Directors andthe independent directors;• call meetings of the independent directorswhen necessary and appropriate; and• perform such other duties as maybe assigned to him or her by the Boardof Directors from time to time.Mr. Lewis B. Kaden was elected by theBoard of Directors as ArcelorMittal’s firstLead Independent Director in April 2008.The agenda of the meeting of the Boardof Directors is agreed by the Chairmanof the Board of Directors and the LeadIndependent Director.Board of Directors Self-Evaluationand Continuing Education ProgramThe Board of Directors decided in 2008to conduct an annual self-evaluation of itsfunctioning in order to identify potential areasfor improvement. The first self-evaluationprocess was carried out in early 2009.The self-evaluation process was implementedthrough a questionnaire addressed toeach director and a different questionnaireaddressed to each member of the Board’sCommittees. The process is coordinatedby the Company Secretary under thesupervision of the Chairman and the LeadIndependent Director. Its findings are examinedby the Appointments, Remuneration andCorporate Governance Committee andpresented with recommendations to theBoard of Directors for implementation.The second self-evaluation began inDecember 2009 and is currently in progress.
ArcelorMittal Annual Report 2009Corporate Governance 67The Board of Directors believes that itsmembers have the appropriate rangeof skills, knowledge and experience necessaryto enable them to effectively governthe Company’s business.To further bolster these skills,the Board of Directors launched in 2009a continuous education program for itsmembers. The topics to be addressed throughthe program include areas of importancefor the future growth and developmentof the Company (e.g., strategy, marketing,human resources, industrial development,corporate governance, legal and regulatory).Additional topics may be added at the requestof the members of the Board of Directors.The education program usually consistsof an introduction by recognized expertsin the relevant fields, who may be practitionersor academics, followed by a facilitateddiscussion between the presenter and theBoard of Directors. The members of theBoard of Directors also have the opportunityto participate in specific programs designedfor directors of publicly listed companiesat reputable academic institutions andbusiness schools. The Board of Directorshas a yearly budget dedicated to thecontinuing education program.Separate Meetings ofIndependent DirectorsThe independent members of the Boardof Directors may schedule meetings outsidethe presence of non-independent directors.Five meetings of the independent directorsoutside the presence of management andnon-independent directors were held in 2009.Board of Directors CommitteesThe Board of Directors has three committees:the Audit Committee, the Appointments,Remuneration and Corporate GovernanceCommittee and the Risk ManagementCommittee. The creation of the RiskManagement Committee was announcedon June 5, 2009.Audit CommitteeThe Audit Committee must be composedsolely of independent members of the Boardof Directors. The members are appointedby the Board of Directors each year afterthe annual general meeting. The membersmust be independent as defined in Rule 10A-3of the U.S. Securities Exchange Act of 1934,as amended. The Audit Committee makesdecisions by a simple majority with no memberhaving a casting vote.The primary function of the Audit Committeeis to assist the Board of Directors in fulfillingits oversight responsibilities by reviewing:• the financial reports and other financialinformation provided by ArcelorMittalto any governmental body or the public;• ArcelorMittal’s system of internalcontrol regarding finance, accounting,legal compliance and ethics that the Boardof Directors and senior managementhave established; and• ArcelorMittal’s auditing, accounting andfinancial reporting processes generally.The Audit Committee’s primary dutiesand responsibilities are to:• be an independent and objective partyto monitor ArcelorMittal’s financial reportingprocess and internal controls system;• review and appraise the audit effortsof ArcelorMittal’s independent auditorsand internal auditing department;• provide an open avenue of communicationamong the independent auditors,senior management, the internal auditdepartment and the Board of Directors;• approve the appointment and feesof the independent auditors; and• monitor the independence of theindependent auditors.The four members of the Audit Committeeare Messrs. Narayanan Vaghul, José RamónÁlvarez Rendueles, Wilbur L. Ross and AntoineSpillmann, each of whom is an independentdirector according to the NYSE standards andthe 10 Principles of Corporate Governanceof the Luxembourg Stock Exchange.The Chairman of the Audit Committee isMr. Vaghul, who has significant experienceand financial expertise. Mr. Vaghul was untilApril 2009 the non-executive chairman ofICICI Bank Ltd., a major Indian commercial bankalso listed on the NYSE. He is also a formerchairman of the Mumbai (Bombay) StockExchange. Mr. Álvarez Rendueles, a formerGovernor of the Banco de España, formerPresident of the Banco Zaragozano and formerchairman of Aceralia (which after a three-waymerger in 2002 became part of Arcelor)also has significant experience and financialexpertise. Mr. Ross was the Chairmanof International Steel Group (ISG) from itscreation until its acquisition by ArcelorMittalin 2005. He is the Chairman of a numberof international companies including theInternational Auto Components Group andis the Chairman and Chief Executive Officerof private equity firm WL Ross & Co. LLC.As such, he has acquired significant experiencein the steel industry and in the managementof international companies in various economicsectors. Mr. Spillmann also has significantfinancial expertise, having worked for severalmajor banks, mainly in the United Kingdom,and is currently an executive partner atBruellan, an asset management firm inGeneva, Switzerland.The Committee may also seek the adviceof outside experts. According to its charter,the Audit Committee is required to meet atleast four times a year. During 2009, the AuditCommittee met seven times. The averageattendance rate of the directors at the AuditCommittee meetings held in 2009 was 75%.Appointments, Remuneration and CorporateGovernance CommitteeThe Appointments, Remuneration andCorporate Governance Committee(the ‘ARCG Committee’) is comprised of threedirectors, each of whom is independent underthe NYSE standards and the 10 Principlesof Corporate Governance of the LuxembourgStock Exchange. The members are appointedby the Board of Directors each year afterthe annual general meeting of shareholders.The ARCG Committee makes decisionsby a simple majority with no member havinga casting vote.The Board of Directors has establishedthe ARCG Committee to:• determine, on its behalf and on behalfof the shareholders within agreed termsof reference ArcelorMittal’s compensationframework, including the stock optionsfor the Chief Executive Officer, the ChiefFinancial Officer, the members of the GroupManagement Board and the membersof the Management Committee;• consider any candidate for appointmentor reappointment to the Board of Directorsat the request of the Board of Directorsand provide advice and recommendationsto it regarding the same;• evaluate the functioning of the Boardof Directors and monitor Directors’self-assessment process; and• develop, monitor and reviewcorporate governance principles applicableto ArcelorMittal.The ARCG Committee’s principal criteriain determining the compensation of executivesis to encourage and reward performancethat will lead to long-term enhancementof shareholder value. The ARCG Committeemay seek the advice of outside experts.The three members of the ARCG Committeeare Lewis B. Kaden, HRH Prince Guillaumeof Luxembourg and Narayanan Vaghul, eachof whom is independent in accordance withthe NYSE standards and the 10 Principlesof Corporate Governance of the LuxembourgStock Exchange. The Chairman of theARCG Committee is Mr. Kaden.The ARCG Committee is required to meetat least twice a year. During 2009,this committee met five times. The averageattendance rate at the ARCG Committeemeetings held in 2009 was 77%.
ArcelorMittal Annual Report 200968 Corporate GovernanceRisk Management CommitteeAs announced on June 5, 2009, the Boardof Directors created a Risk ManagementCommittee to assist it with risk management,in line with recent developments in corporategovernance best practices and in parallelwith the creation of a Group Risk ManagementCommittee (‘GRMC’) at the executive level.The members are appointed by the Boardof Directors each year after the annualgeneral meeting of shareholders. The RiskManagement Committee must be comprisedof at least two members. At its creation,the Risk Management Committee had twomembers, Antoine Spillmann and GeorgesSchmit. Sudhir Maheshwari, a memberof the Group Management Board who chairsthe GRMC, is an invitee to the meetingsof the Risk Management Committee. At leasthalf of the members of the Risk ManagementCommittee must be independent underthe NYSE standards and the 10 Principlesof Corporate Governance of the LuxembourgStock Exchange. Mr. Schmit resignedfrom the Board of Directors effectiveDecember 31, 2009. His replacementon the Risk Management Committee isJeannot Krecké, effective February 10, 2010.The Risk Management Committee met forthe first time on July 28, 2009 and had a totalof two meetings in 2009. According toits charter, it is required to meet at least fourtimes per year on a quarterly basis or morefrequently if circumstances so require.The average attendance rate at the RiskManagement Committee meetings heldin 2009 was 100%.The members of the Risk ManagementCommittee may decide to appoint a Chairmanby majority vote. Mr. Spillmann was designatedas Chairman. The Chairman of the GRMCwill be an invitee to the Risk ManagementCommittee and, in addition, it may inviteany other member of the GRMC or anyother expert from within the ArcelorMittalgroup to participate in a meeting. The RiskManagement Committee may also seekthe advice of outside experts.Decisions and recommendations of theRisk Management Committee are adoptedat a simple majority. In case of deadlock,any Committee member may bring the matterbefore the Board of Directors. The Chairmanor, in the absence of the Chairman, any othermember of the Risk Management Committee,will report to the Board of Directors at eachof the latter’s quarterly meetings or morefrequently if circumstances so require.The Risk Management Committee willconduct an annual self-evaluation of its ownperformance, its interaction with the GRMCand the Board of Directors as well as of itseffectiveness and compliance with its charter.The purpose of the Risk ManagementCommittee is to support the Board ofDirectors in fulfilling its corporate governanceand oversight responsibilities by assistingwith the monitoring and review of therisk management framework and processof ArcelorMittal. Its main responsibilities andduties are to assist the Board of Directorsby developing recommendations regardingthe following matters:• The oversight, development andimplementation of a risk identificationand management process and the reviewand reporting on the same in a consistentmanner throughout the ArcelorMittal Group;• The review of the effectiveness of theGroup-wide risk management framework,policies and process at Corporate, Segmentand Business Unit levels, and the proposingof improvements, with the aim of ensuringthat the Group’s management is supportedby an effective risk management system;• The promotion of constructive and openexchanges on risk identification andmanagement among senior management(through the GRMC), the Board of Directors,the Internal Assurance department, the LegalDepartment and other relevant departmentswithin the ArcelorMittal Group;• The review of proposals for assessing,defining and reviewing the risk appetite/tolerance level of the Group and ensuringthat appropriate risk limits/tolerance levelsare in place, with the aim of helping to definethe Group’s risk management strategy;• The review of the Group’s internal andexternal audit plans to ensure that theyinclude a review of the major risks facingthe ArcelorMittal Group; and• Making recommendations within the scopeof its charter to ArcelorMittal’s seniormanagement and to the Board of Directorsabout senior management’s proposalsconcerning risk management.Group Management BoardThe Group Management Board is entrustedwith the day-to-day managementof ArcelorMittal. Mr. Lakshmi N. Mittal,the Chief Executive Officer, is the Chairmanof the Group Management Board.The members of the Group ManagementBoard are appointed and dismissed by theBoard of Directors. As the Group ManagementBoard is not a corporate body createdby Luxembourg law or ArcelorMittal’s Articlesof Association, the Group ManagementBoard may exercise only the authoritygranted to it by the Board of Directors.In establishing ArcelorMittal’s strategicdirection and corporate policies,Mr. Lakshmi N. Mittal is supported bymembers of ArcelorMittal’s seniormanagement, who have substantialprofessional and worldwide steel industryexperience. Some of the membersof ArcelorMittal’s senior managementteam are also members of the GroupManagement Board.Management CommitteeThe Group Management Board is assistedby a Management Committee comprisedof the members of the Group ManagementBoard and 15 other senior executive officers.The Management Committee discussesand prepares Group decisions on mattersof Group-wide importance, integratesthe geographical dimension of theGroup, ensures in-depth discussions withArcelorMittal’s operational and resourcesleaders, and shares information about thesituation of the Group and its markets.Succession PlanningSuccession management at ArcelorMittalis a systematic and deliberate processfor identifying and preparing employees withpotential to fill key organizational positionsshould the current incumbent’s term expire.This process applies to all ArcelorMittalexecutives up to and including the GroupManagement Board. Succession managementaims to ensure the continued effectiveperformance of the organization by providingfor the availability of experienced and capableemployees who are prepared to assume theseroles as they become available. For eachposition, candidates are identified basedon performance and potential and their ‘yearsto readiness’ and development needs arediscussed and confirmed. Regular reviews ofsuccession plans are conducted to ensure thatthey are accurate and up to date. Successionmanagement is a necessary process to reducerisk, create a pipeline of future leaders, ensuresmooth business continuity and improve
ArcelorMittal Annual Report 2009Corporate Governance 69employee motivation. Although ArcelorMittal’spredecessor companies each had certainsuccession planning processes in place, theprocess has been reinforced, widened andmade more systematic since 2006.Other Corporate Governance PracticesArcelorMittal is committed to adopt bestpractice standards in terms of corporategovernance in its dealings with shareholdersand aims to ensure good corporategovernance by applying rules on transparency,quality of reporting and the balanceof powers. ArcelorMittal continually monitorsU.S., European Union and Luxembourg legalrequirements and best practices in orderto make adjustments to its corporategovernance controls and procedures whennecessary. ArcelorMittal complies with theTen Principles of Corporate Governanceof the Luxembourg Stock Exchange in allrespects except for the recommendationto separate the posts of chairman of theBoard of Directors and chief executive officer.The nomination of the same person for bothpositions was approved in 2007 by theshareholders (with the Significant Shareholderabstaining) of Mittal Steel Company N.V.,which was at that time the parent companyof the combined ArcelorMittal Group.Ethics and Conflict of InterestEthics and conflicts of interest are governedby ArcelorMittal’s Code of Business Conduct,which establishes the standards for ethicalbehavior that are to be followed by allemployees and directors of ArcelorMittalin the exercise of their duties. They mustalways act in the best interests of ArcelorMittaland must avoid any situation in which theirpersonal interests conflict, or could conflict,with their obligations to ArcelorMittal.As employees, they must not acquire anyfinancial or other interest in any business orparticipate in any activity that could depriveArcelorMittal of the time or the attentionneeded to devote to the performance theirduties. Any behavior that deviates from theCode of Business Conduct is to be reportedto the employee’s supervisor, a memberof the management, the head of the legaldepartment or the head of the internalassurance department. Code of BusinessConduct training is offered throughoutArcelorMittal. All new employees ofArcelorMittal must acknowledge the Codeof Business Conduct in writing upon joiningand are periodically trained about theCode of Business Conduct in each locationwhere ArcelorMittal has operations.The Code of Business Conduct is availablein the ‘Corporate Governance—Code ofBusiness Conduct’ section of ArcelorMittal’swebsite at www.arcelormittal.comProcess for Handling Complaintson Accounting MattersAs part of the procedures of the Boardof Directors for handling complaints orconcerns about accounting, internal controlsand auditing issues, ArcelorMittal’s Anti-FraudPolicy and Code of Business Conductencourages all employees to bring suchissues to the Audit Committee’s attentionon a confidential basis. In accordance withArcelorMittal’s Anti-Fraud and WhistleblowerPolicy, concerns with regard to possiblefraud or irregularities in accounting, auditingor banking matters or bribery withinArcelorMittal or any of its subsidiariesor other controlled entities may also becommunicated through the ‘CorporateGovernance – Whistleblower’ sectionof the ArcelorMittal website atwww.arcelormittal.com, where ArcelorMittal’sAnti-Fraud Policy and Code of BusinessConduct are also available in each of the mainworking languages used within the Group.During 2009, 126 total complaintswere referred to the Company’s InternalAssurance team (described below).Following review, none of these complaintswas found to be significant.Internal AssuranceArcelorMittal has an Internal Assurancefunction that, through its Head of InternalAssurance, reports to the Audit Committee.The function is staffed by full-time professionalstaff located within each of the principaloperating subsidiaries and at the corporatelevel. Recommendations and matters relatingto internal control and processes are madeby the Internal Assurance function and theirimplementation is regularly reviewed by theAudit Committee.Independent AuditorsThe appointment and determination of feesof the independent auditors is the directresponsibility of the Audit Committee.The Audit Committee is further responsiblefor obtaining, at least once each year, a writtenstatement from the independent auditorsthat their independence has not been impaired.The Audit Committee has also obtaineda confirmation from ArcelorMittal’s principalindependent auditors to the effect that noneof its former employees are in a positionwithin ArcelorMittal that may impairthe principal auditors’ independence.Measures to Prevent Insider Dealing andMarket ManipulationThe Board of Directors of ArcelorMittalhas adopted Insider Dealing Regulations (‘IDR’),which are updated when necessary andin relation to which training is conductedthroughout the Group. The IDR’s most recentversion is available on ArcelorMittal’s website,www.arcelormittal.com, under ‘Investors& Shareholders—Corporate Governance—Insider Dealing Regulations’.The IDR apply to the worldwide operationsof ArcelorMittal. The Company Secretaryof ArcelorMittal is the IDR compliance officerand answers questions that membersof senior management, the Board of Directors,or employees may have about the IDR’sinterpretation. ArcelorMittal maintains a listof insiders as required by the Luxembourgmarket manipulation (abus de marché)law of May 9, 2006. The compliance officermay assist senior executives and directorswith the filing of notices required byLuxembourg law to be filed with theLuxembourg financial regulator, the CSSF(Commission de Surveillance du SecteurFinancier). Furthermore, the complianceofficer has the power to conduct investigationsin connection with the application andenforcement of the IDR, in which anyemployee or member of senior managementor of the Board of Directors is requiredto cooperate.Selected new employees of ArcelorMittalare required to participate in a training courseabout the IDR upon joining ArcelorMittaland every three years thereafter.The individuals who must participate in theIDR training include the members of seniormanagement, employees who work in finance,legal, sales, mergers and acquisitionsand other areas that the Company maydetermine from time to time. In addition,ArcelorMittal’s Code of Business Conductcontains a section on ‘Trading in theSecurities of the Company’ that emphasizesthe prohibition to trade on the basisof inside information.
ArcelorMittal Annual Report 200970 Corporate GovernanceCompensationBoard of DirectorsThe total annual compensation of the members of ArcelorMittal’s Board of Directors paid in 2008 and 2009 was as follows:Year endedYear endedDecember 31, December 31,(Amounts in $ thousands except option information) 2008 2009Base salary and/or directors fees $5,569 $4,290Short-term performance-related bonus 2,200 2,115Long-term incentives (number of options) 60,000 60,000The annual compensation paid to the members of ArcelorMittal’s Board of Directors for services in all capacities in 2008 and 2009 was as follows:2008 2009 2008 2009Short-term Short-term Long-term Long-termPerformance Performance Number Number(Amounts in $ thousands except option information) 2008 1 2009 1 Related Related of Options of OptionsLakshmi N. Mittal $1,916 $1,492 $2,200 $2,115 60,000 60,000Vanisha Mittal Bhatia 199 164 — — — —Narayanan Vaghul 240 200 — — — —Malay Mukherjee 2 — 154 — — — —Wilbur L. Ross, Jr. 224 177 — — — —Lewis B. Kaden 221 246 — — — —François Pinault 176 144 — — — —Joseph Kinsch 3 368 99 — — — —José Ramón Álvarez Rendueles 227 184 — — — —Sergio Silva de Freitas 4 206 168 — — — —Georges Schmit 5 196 164 — — — —Edmond Pachura 6 227 67 — — — —Michel Angel Marti 7 199 164 — — — —Manuel Fernández López 8 187 56 — — — —Jean-Pierre Hansen 9 199 151 — — — —John Castegnaro 199 164 — — — —Antoine Spillmann 10 196 164 — — — —HRH Prince Guillaume de Luxembourg 199 161 — — — —Romain Zaleski 11 190 27 — — — —Ignacio Fernández Toxo 12 — 144 — — — —Total 5,569 4,290 2,200 2,115 60,000 60,0001Represents actual payments made to directorsin a calendar year. Compensation with respect to 2007(paid after shareholder approval at the annual generalmeeting held on May 13, 2008), and attendance feesfor 2007 amounting to approximately $0.4 million(paid in February 2008) are included in the 2008column. Compensation with respect to 2008(paid after shareholder approval at the annual generalmeeting held on May 12, 2009) and attendance feesfor 2008 amounting to approximately $0.4 million(paid in February 2009) are included in the 2009column. Compensation and attendance fees withrespect to 2009 will be paid in 2010 and are notincluded in the 2009 column.2Mr. Mukherjee was elected to ArcelorMittal’s Boardof Directors on May 13, 2008, prior to which he wasa Member of the Group Management Board, responsiblefor Asia, Africa, Mining and CIS.Mr. Mukherjee was compensated as a memberof senior management in 2008 until his appointment tothe Board, and as a Director thereafter. The table aboverelates solely to compensation received by Mr. Mukherjeewhile a Director. Mr. Mukherjee resigned effective as ofSeptember 1, 2009.3The mandate of Mr. Kinsch ended on May 13, 2008.4The mandate of Mr. Silva de Freitas ended onMay 12, 2009.5Mr. Schmit resigned effective as of December 31, 2009.6The mandate of Mr. Pachura ended on May 13, 2008.7The mandate of Mr. Marti ended on May 12, 2009.8Mr. Fernández López resigned on May 13, 2008.9The mandate of Mr. Hansen ended on May 12, 2009.10Mr. Spillmann was elected to ArcelorMittal’s Boardof Directors on May 13, 2008, replacing CorporaciónJMAC. Mr. Spillmann had been the representativeof Corporación JMAC on the Board beforeMay 13, 2008. Compensation received by Mr. Spillmannboth as a representative of Corporación JMAC andas a Director in his own right is included in this table.11Mr. Zaleski resigned on March 5, 2008.12Mr. Fernández Toxo was elected to ArcelorMittal’s Boardof Directors on May 13, 2008. Mr. Fernández Toxoresigned effective as of May 12, 2009.
ArcelorMittal Annual Report 2009Corporate Governance 71On February 10, 2009, the Boardof Directors decided that it would proposeto the next annual general meetingof shareholders to reduce the annualcompensation of board members(including that of the Chairman and ChiefExecutive Officer) by 15% as compared tothe previous year as an additional measurein light of prevailing difficult conditionsin the steel industry and to show leadershipand solidarity with the Company’semployees affected by redundanciesand temporary lay-offs. The proposalwas approved by the annual generalmeeting held on May 12, 2009.As of December 31, 2008and 2009, ArcelorMittal did not haveoutstanding any loans or advancesto members of its Board of Directorsand, as of December 31, 2009,ArcelorMittal had not given anyguarantees for the benefit of anymember of its Board of Directors.The following table provides a summaryof the options outstanding and the exerciseprice of the options granted to ArcelorMittal’sBoard of Directors as of December 31, 2009(in 2001, 2003 and 2004, no optionswere granted to members of ArcelorMittal’sBoard of Directors):WeightedAverageGranted Granted Granted Granted Granted Granted Granted Exercisein 2000 in 2002 in 2005 in 2006 in 2007 in 2008 in 2009 Total PriceLakshmi N. Mittal 80,000 80,000 100,000 100,000 60,000 60,000 60,000 540,000 $33.75Vanisha Mittal Bhatia — — — — — — — — —Narayanan Vaghul — — — — — — — — —Malay Mukherjee 13 — — — — — — — — —Wilbur L. Ross — — — — — — — — —Lewis B. Kaden — — — — — — — — —François Pinault — — — — — — — — —José Ramón Álvarez Rendueles — — — — — — — — —Sergio Silva de Freitas 14 — — — — — — — — —Georges Schmit 15 — — — — — — — — —Michel Angel Marti 16 — — — — — — — — —Jean-Pierre Hansen 17 — — — — — — — — —John Castegnaro — — — — — — — — —Antoine Spillmann — — — — — — — — —HRH Prince Guillaumede Luxembourg — — — — — — — — —Ignacio Fernández Toxo 18 — — — — — — — — —Total 80,000 80,000 100,000 100,000 60,000 60,000 60,000 540,000 —Exercise price $8.57 $2.26 $28.75 $33.76 $64.30 $82.57 $38.30 — $33.75Term (in years) 10 10 10 10 10 10 10 — —Expiration date Jun. 1, Apr. 5, Aug. 23, Sep. 1, Aug. 2, Aug. 5, Aug. 4,2010 2012 2015 2016 2017 2018 2019 — —Senior ManagementThe total compensation paid in 2009to members of ArcelorMittal’s seniormanagement (including Lakshmi N. Mittalin his capacity as CEO) was $15.4 millionin base salary (including various allowancespaid in cash) and $18.1 million inshort-term performance related variablepay, which included a bonus linkedto 2008 results and the first partof a bonus linked to 2009 results thatwas paid partly with cash and partlywith share-based compensation.As of December 31, 2009, approximately$1.2 million was accrued by ArcelorMittalto provide pension benefits to itssenior management.In connection with the Board of Directors’decision in February 2009 to reduceits compensation in light of conditionsin the steel market, Group ManagementBoard members voluntarily decidedto reduce their salary by 12%,and the members of the ManagementCommittee voluntarily decidedto reduce their salary by 10%,as compared to the previous year.No loans or advances to ArcelorMittal’ssenior management were madeduring 2009 and no such loansor advances were outstandingas of December 31, 2009.13Mr. Mukherjee was elected to ArcelorMittal’sBoard of Directors on May 13, 2008, prior to which pointhe was a member of the Group Management Boardresponsible for Asia, Africa, Mining and CIS.Mr. Mukherjee was compensated as a member of seniormanagement in 2007 and in 2008 until his appointmentto the Board of Directors on May 13, 2008, and as adirector since then. Mr. Mukherjee resigned from theBoard of Directors effective asof September 1, 2009.14The mandate of Mr. Silva de Freitas endedon May 12, 2009.15Mr. Schmit resigned effective as ofDecember 31, 2009.16The mandate of Mr. Marti ended on May 12, 2009.17The mandate of Mr. Hansen ended on May 12, 2009.18Mr. Fernández Toxo resigned effective asof May 12, 2009.
ArcelorMittal Annual Report 200972 Corporate GovernanceBoard of Directors and SeniorManagement Compensation PolicyPhilosophyThe ArcelorMittal CompensationPolicy for executives is based onthe following principles:• Provide total compensationcompetitive with executive compensationlevels of industrial companiesof a similar size and scope;• Promote internal equity and marketmedian base pay levels for ourexecutives, combined with‘pay for performance’;• Motivate managers towardsthe achievement of Group-wideand personal goals, includingefficiency and growth; and• Retain individuals who consistentlyperform at expected levelsand contribute to the successof the organization.Governance PrinciplesThe Appointments, Remunerationand Corporate Governance Committeeof ArcelorMittal draws up proposalsannually for the Board of Directorson ArcelorMittal’s executive compensation.The Committee also prepares proposalson the fees to be paid annually tothe members of the Board of Directors.Such proposals relating to executivecompensation comprise thefollowing elements:• Fixed annual salary;• Short-term incentives, e.g.,performance-related bonus; and• Long-term incentives, e.g., stock options.They apply to the following groupof senior executives:• the Chief Executive Officer;• the members of the Group ManagementBoard; and• the members of the ManagementCommittee.Decisions on short- and long-termincentive plans may apply to a largergroup of employees. The Appointments,Remuneration and CorporateGovernance Committee receives updatesabout the application of these planson a regular basis.Fixed Annual SalaryThe size of the fixed annual salaryis targeted to the median salarylevel of the peer group of companies,i.e., industrial companies of a similarsize and scope. The base salary levelsare reviewed annually to ensure thatArcelorMittal remains competitive.Short-Term Incentives:Performance-Related BonusArcelorMittal has a discretionary bonusplan. The performance of the ArcelorMittalGroup as a whole, the performanceof the relevant business units, theachievement of specific objectivesand the individual’s overall performanceand potential determine the outcomeof the bonus calculation. This bonus plan,called the Global Performance BonusPlan, is applicable to more than 2,000executives and managers worldwide.The bonus is calculated as a percentageof the individual’s base salary. Differentpercentage ranges are used dependingon the hierarchical level of the individual.Performance-related bonuses are paidonly if certain minimum performancethresholds are exceeded by theArcelorMittal Group as a whole and/orthe relevant business segment.In 2009, the Global Performance Bonuswas divided into two parts, with 30%related to the Company’s objectives duringthe first six months of the year in orderto focus management on the short-termand rapid actions required in responseto the economic crisis. Wherever possible,40% of the 2008 Global PerformanceBonus and 2009 Global PerformanceBonus were paid in shares as per theresolution approved by the annualgeneral meeting of May 12, 2009.Long-Term Incentives: Stock OptionsThe Chief Executive Officer, the GroupManagement Board members andthe Management Committee membersbenefit from the Global Stock OptionPlan. This plan also applies to a largergroup of employees. The overall capon options available for grants duringa year is approved by the shareholdersat the annual general meeting.Other BenefitsIn addition to the main compensationelements described above, otherbenefits may be provided to executives,such as company cars and contributionsto pension plans and insurance policies.Stock Option PlanIn 1999, the Company established theArcelorMittal Global Stock Option Plan,known as ‘ArcelorMittalShares’ witha duration of 10 years. As the initial planreached expiration, a new ‘ArcelorMittalGlobal Stock Option Plan 2009-2018’was adopted by the annual generalmeeting shareholders on May 12, 2009and took effect as of May 15, 2009.Under the terms of this new stock optionplan, ArcelorMittal may grant optionsto purchase common stock to seniormanagement of ArcelorMittal and itsassociates for up to 100,000,000 sharesof common stock. The exercise priceof each option equals not less than thefair market value of ArcelorMittal stockon the grant date, with a maximum termof 10 years. Options are granted at thediscretion of ArcelorMittal’s Appointments,Remuneration and Corporate GovernanceCommittee, or its delegate. The optionsvest either ratably upon each of the firstthree anniversaries of the grant date,or, in total, upon the death, disabilityor retirement of the participant.On August 5, November 10 andDecember 15, 2008, ArcelorMittal granted7,255,950, 20,585 and 48,000 options,respectively, under the ArcelorMittalSharesplan to a group of key employees atan exercise price of $82.57, $22.25and $23.75, respectively. The optionsexpire on August 5, November 10 andDecember 15, 2018, respectively.On August 4, 2009, ArcelorMittalgranted 6,128,900 options under thenew ArcelorMittal Global Stock Option Plan2009-2018 to a group of key employeesat an exercise price of $38.30. The optionsexpire on August 4, 2019.The Company determines the fair valueof the options at the date of grant usingthe Black-Scholes option pricing model.The fair values for options and othershare-based compensation are recordedas expenses in the consolidated statementof operations over the relevant vesting orservice periods, adjusted to reflect actualand expected levels of vesting.The fair value of each option grantto purchase ArcelorMittal commonshares is estimated on the dateof the grant using the Black-Scholesoption pricing model with thefollowing weighted average assumptions(based on the year of the grant):
ArcelorMittal Annual Report 2009Corporate Governance 732008 2009Exercise Price $82.57–22.25 $38.30Dividend yield 1.82%–6.74% 1.96%Expected annualized volatility 45%–57% 62%Discount rate – bond equivalent yield 4.02%–2.52% 3.69%Weighted average share price $82.57–22.25 $38.30Expected life in years 6 6Fair value of options (per share) $34–9 $20The expected life of the optionsis estimated by observing general optionholder behavior and actual historicallives of ArcelorMittal stock option plans.In addition, the expected annualizedvolatility has been set by referenceto the implied volatility of options availableon ArcelorMittal shares in the open market,as well as historical patterns of volatility.The compensation expense recognizedfor stock option plans was $228 millionand $176 million for the years endedDecember 31, 2008, and 2009, respectively.Option activity with respect toArcelorMittalShares is summarizedbelow as of and for the years endedDecember 31, 2008, and 2009:Range ofWeightedAverageNumber Exercise Prices Exercise Priceof Options (per option) (per option)Outstanding, December 31, 2007 13,579,438 $2.26–74.54 $46.15Granted 7,324,535 22.25–82.57 82.01Exercised (954,844) 2.26–64.30 31.88Canceled (347,034) 2.26–82.57 51.28Forfeitures (43,629) 28.75–64.30 43.35Outstanding, December 31, 2008 19,558,466 2.26–82.57 60.01Granted 6,128,900 38.30 38.30Exercised (456,251) 2.26–33.76 24.56Canceled (539,023) 33.76–82.57 70.02Forfeitures (644,712) 2.26–82.57 52.20Outstanding, December 31, 2009 24,047,380 2.26–82.57 55.22Exercisable, December 31, 2009 11,777,703 2.26–82.57 52.46Exercisable, December 31, 2008 6,011,214 2.26–82.57 39.75Exercisable, December 31, 2007 2,595,164 2.26–64.30 24.49The following table summarizes certain information regarding total stock options of the Company outstanding as of December 31, 2009:Options OutstandingWeighted averagecontractual lifeOptions exercisable(number ofExercise Prices (per option) Number of options (in years) options)82.57 6,831,783 8.60 2,379,76274.54 13,000 7.95 8,66664.30 5,244,202 7.59 3,571,92943.40 1,394,326 3.50 1,394,32638.30 6,121,900 9.60 27,00033.76 2,425,857 6.67 2,425,43428.75 1,552,547 5.65 1,552,54723.75 48,000 8.96 15,99822.25 20,585 8.87 6,86120.38 11,429 2.50 11,42916.53 29,373 1.50 29,3738.57 150,200 0.42 150,2002.26 204,178 2.26 204,178$2.26 – 82.57 24,047,380 7.84 11,777,703
ArcelorMittal Annual Report 200974 Corporate GovernanceShare OwnershipAs of December 31, 2009, the aggregate beneficialshare ownership of ArcelorMittal directors and senior management(31 individuals) totaled 1,887,008 ArcelorMittal shares (excluding sharesowned by ArcelorMittal’s Significant shareholder and including optionsto acquire 1,013,386 ArcelorMittal common shares that are exercisablewithin 60 days of December 31, 2009), representing 0.12% of the totalissued share capital of ArcelorMittal. Excluding options to acquireArcelorMittal common shares, these 31 individuals beneficially own873,622 ArcelorMittal common shares.Other than the Significant shareholder,each director and member of seniormanagement beneficially owns less than1% of ArcelorMittal’s shares. The percentageof total common shares (including treasurystock) in the possession of the Significantshareholder decreased from 44.79% priorto November 13, 2007 to 43.05% afterthat date as a result of the second stepof the merger of Mittal Steel and Arcelor.In 2009 the percentage of total commonshares (including treasury stock) in thepossession of the Significant shareholderdecreased further to 40.84% as a resultof the offering of 140,882,634 shares,of which the Significant shareholder acquired10%. To close this offering, 112,088,263new shares were offered and 28,794,371shares were taken from treasury. In 2008,the number of ArcelorMittal options grantedto directors and then-senior management(including the Significant shareholder)was 693,000 at an exercise price of $82.57.In 2009, the number of ArcelorMittal optionsgranted to directors and senior management(including the Significant shareholder)was 761,500 at an exercise price of $38.30.The Mittal Steel and ArcelorMittal optionsvest either ratably upon each of the first threeanniversaries of the grant date (or in totalupon the death, disability or retirementof the grantee) and expire ten years afterthe grant date.In 2001, 2003 and 2004, no optionswere granted to members of Mittal Steel’ssenior management.In accordance with the Luxembourg StockExchange’s Ten Principles of CorporateGovernance, independent non-executivemembers of ArcelorMittal’s Boardof Directors do not receive share options.Employee Share Purchase Plan (ESPP)At the Annual General Shareholders’ meetingheld on May 12, 2009, the shareholdersadopted an Employee Share Purchase Planas part of a global employee engagementand participation policy. As with the previousEmployee Share Purchase Plan implementedin 2008, the plan’s goal was to strengthenthe link between the Group and its employeesand to align the interests of ArcelorMittalemployees and shareholders. The mainfeatures of the plan, which was implementedin November 2009, were the following:The plan was offered to 204,072 employeesin 22 jurisdictions. ArcelorMittal offereda maximum total number of 2,500,000shares (0.2% of the current issued shareson a fully diluted basis). A total of 392,282shares were subscribed, 1,300 of whichwere subscribed by Members of the GroupManagement Board and the ManagementCommittee of the Company. The subscriptionprice was $36.56 before discounts. Thesubscription ran from November 10, 2009until November 19, 2009 and was settledwith treasury shares on January 21, 2010.Pursuant to the plan, eligible employeescould apply to purchase a number of sharesnot exceeding that number of whole sharesequal to the lower of (1) 200 shares and(2) the number of whole shares that maybe purchased for $15,000 (rounded downto the nearest whole number of shares).The purchase price was equal to the averageof the opening and the closing prices ofthe ArcelorMittal shares trading on the NYSEon the exchange day immediately precedingthe opening of the subscription period,which is referred to as the ‘reference price,’less a discount equal to:(a) 15% of the reference price for a purchaseorder not exceeding the lower of (1)100 shares, and (2) the number of shares(rounded down to the nearest whole number)corresponding to an investment of $7,500(the first cap); and thereafter;
ArcelorMittal Annual Report 2009Corporate Governance 75(b) 10% of the reference price for anyadditional acquisition of shares up to a numberof shares (including those in the first cap) notexceeding the lower of (x) 200 shares, and(y) the number of shares (rounded downto the nearest whole number) correspondingto an investment of $15,000 (the second cap).All shares purchased under the ESPPare currently held in custody for the benefitof the employees in global accounts openedby BNP Paribas Securities Services, exceptfor shares purchased by Canadian and U.S.employees, which are held in custodyin one global account maintained by MellonInvestors LLC Services.Shares purchased under the plan are subjectto a three-year lock-up period as fromthe settlement date, except for the followingearly exit events: permanent disabilityof the employee, termination of theemployee’s employment or death of theemployee. At the end of this lock-up period,the employees will have a choice eitherto sell their shares (subject to compliance withArcelorMittal’s insider dealing regulations)or keep their shares and have them deliveredto their personal securities account ormake no election, in which case shares willbe automatically sold. Shares may be soldor released within the lock-up periodin the case of early exit events.During this period, and subject to the earlyexit events, dividends paid on sharesare held for the employee’s accountand accrue interest. Employee shareholdersare entitled to any dividends paid byArcelorMittal after the settlement dateand they are entitled to vote their shares.The following table summarizes outstanding share options, as of December 31, 2009, granted to the members of senior management ofArcelorMittal (or its predecessor company Mittal Steel, depending on the year):AverageYear of Year of Year of Year of Year of Year of Year of weightedGrant Grant Grant Grant Grant Grant Grant Exercise2000 2002 2005 2006 2007 2008 2009 Total* price*Senior Managers**(including Significantshareholder) 87,500 105,000 255,346 348,539 609,001 693,000 761,500 2,891,886Exercise price $8.57 $2.26 $28.75 $33.76 $64.30 $82.57 $38.30 $59.39Term (in years) 10 10 10 10 10 10 10 — —Expiration date Jun. 1, Apr. 5, Aug. 23, Sep. 1, Aug. 2, Aug. 5, Aug. 4,2010 2012 2015 2016 2017 2018 2019 — —* The options granted by Arcelor (noted above)have been included in the total number of optionsand the average weighted exercise price(at a conversion rate of 1 euro = 1.3705 U.S. dollars)and 32,000 options granted on December 15, 2008at an exercise price of $23.75.** Includes options granted to Mr. Malay Mukherjee,all of which were received in his capacityas a member of senior management. Mr. Mukherjeewas elected to ArcelorMittal’s Board of Directorson May 13, 2008, prior to which point he was a Memberof the Group Management Board, responsible for Asia,Africa, Mining and CIS, and resigned from ArcelorMittal’sBoard of Directors effective as of September 1, 2009.
ArcelorMittal Annual Report 200976 Share Capital and Voting RightsShare Capital and Voting RightsShare CapitalAs of December 31, 2009, the authorizedshare capital of ArcelorMittal consistedof 1,617,000,000 common shares withoutnominal value. At December 31, 2009,1,560,914,610 common shares, comparedto 1,448,826,347 common sharesat December 31, 2008, were issuedand 1,509,541,518 common shares,compared to 1,366,002,278 commonshares at December 31, 2008,were outstanding.The following table sets forth informationas of December 31, 2009 with respectto the beneficial ownership of ArcelorMittalcommon shares by each person whois known to be the beneficial owner of morethan 5% of the shares and all directorsand senior management as a group.ArcelorMittal Common Shares 1Number %Significant shareholder 2 637,944,863 40.87Treasury Stock 3 49,919,706 3.20Other public shareholders 873,050,041 55.93Total 1,560,914,610 100.00Directors and Senior Management 4,5 1,887,008 0.12
ArcelorMittal Annual Report 2009Share Capital and Voting Rights 77The ArcelorMittal common sharesmay be held in registered form only.Registered shares may consist of (1) sharestraded on the NYSE, or New York Shares,which are registered in a register kept byor on behalf of ArcelorMittal by its NewYork transfer agent, or (2) shares tradedon Euronext Amsterdam by NYSE Euronext,Euronext Brussels by NYSE Euronext,Euronext Paris by NYSE Euronext, theregulated market of the Luxembourg StockExchange and the Spanish Stock Exchanges(Madrid, Bilbao, Valencia and Barcelona),which are registered in ArcelorMittal’sshareholders’ register, or ArcelorMittalEuropean Register Shares, which areregistered in a local shareholder registerkept by or on behalf of ArcelorMittalby BNP Paribas Securities Services inAmsterdam, or directly on ArcelorMittal’sLuxembourg shareholder register withoutbeing held on ArcelorMittal’s local Dutchshareholder register. Under Luxembourglaw, the ownership of registered sharesis evidenced by the inscription of thename of the shareholder, the numberof shares held by such shareholder andthe amount paid up on each share inthe shareholder register of ArcelorMittal.At December 31, 2009, there were 2,824shareholders other than the Significantshareholder holding an aggregate of41,662,061 ArcelorMittal common sharesregistered in ArcelorMittal’s shareholderregister, representing approximately3% of the common shares issued(including treasury shares).At December 31, 2009, there were160 U.S. shareholders holdingan aggregate of 49,348,870 New YorkShares, representing approximately3.17% of the common shares issued(including treasury shares). ArcelorMittal’sknowledge of the number of New YorkShares held by U.S. holders is basedsolely on the records of its New Yorktransfer agent regarding registeredArcelorMittal common shares.At December 31, 2009, there were832,885,242 ArcelorMittal commonshares being held through theEuroclear/Iberclear clearing systemin The Netherlands, France,Luxembourg and Spain.Voting RightsAs of December 31, 2009, ArcelorMittal’sSignificant shareholder owned directlyand indirectly through holding companies637,504,863 ArcelorMittal commonshares, representing approximately40.84% of the combined voting interestin ArcelorMittal. In the merger betweenArcelorMittal and Arcelor, 31,619,094ArcelorMittal shares were issued onNovember 13, 2007. After closingof the third offer period for Arcelor shareson November 17, 2006, a total of679,416,607 shares had been issuedto the shareholders of Arcelor sinceJuly 31, 2006, as partial payment forArcelor (the other part was paid in cash).Prior to closing of the third offer periodfor Arcelor shares on November 17, 2006,Mittal Steel’s Significant shareholderowned directly and indirectly throughholding companies 165,794,790Mittal Steel class A common shares(approximately 67% of the issuedand outstanding class (except forclass A common shares held in treasury))and 457,490,210 Mittal Steel class Bcommon shares (100% of the issuedand outstanding class), representingapproximately 98% of the combinedvoting interest in Mittal Steel. Uponcompletion of the merger with ISG onApril 15, 2005, 60,891,883 shares wereissued to the former shareholders of ISGas partial payment for ISG (the otherpart was paid in cash). Prior to the mergerwith ISG, Mittal Steel’s Significantshareholder owned directly and indirectlythrough holding companies 165,794,790Mittal Steel class A common shares(approximately 89.5% of the issuedand outstanding class (except for class Acommon shares held in treasury))and 457,490,210 Mittal Steel class Bcommon shares (100% of the issuedand outstanding class), representingapproximately 99.6% of the combinedvoting interest in Mittal Steel.On completion of the acquisitionof LNM Holdings on December 17, 2004,139,659,790 Mittal Steel class A commonshares and 385,340,210 Mittal Steelclass B common shares were issuedto an intermediate holding companyowned by the Significant shareholder.Prior to the completion of the acquisitionof LNM Holdings, the Significant shareholderowned 26,135,000 Mittal Steel class Acommon shares (approximately 57.5%of the then issued and outstanding class(save for class A common shares held intreasury)) and 72,150,000 Mittal Steelclass B common shares (100% of the thenissued and outstanding class), representingapproximately 97.5% of the combinedvoting interest in Mittal Steel.1 For purposes of this table, a person or group of persons isdeemed to have beneficial ownership of any ArcelorMittalcommon shares as of a given date on which such personor group of persons has the right to acquire such shareswithin 60 days after December 31, 2009 upon exerciseof vested portions of stock options. The first-third of thestock options granted on August 5, 2008 and the firstandsecond-thirds of the stock options granted on August2, 2007 vested on August 5, 2009, and August 2, 2009,respectively, and all stock options of the previous grantshave vested. None of the stock options granted onAugust 4, 2009 has vested; the first-third of such options,however, will vest on August 4, 2010.2Mr. Lakshmi Mittal and his wife, Mrs. Usha Mittal, havedirect ownership of ArcelorMittal common shares andindirect ownership of holding companies that ownArcelorMittal common shares. Ispat InternationalInvestments S.L. is the owner of 112,338,263ArcelorMittal common shares. Mittal Investments S.à r.l.,a limited liability company organized under the laws ofLuxembourg, is the owner of 525,000,000 ArcelorMittalcommon shares. Mr. Mittal is the direct owner of141,600 ArcelorMittal common shares and holds optionsto acquire an additional 540,000 ArcelorMittal commonshares, of which 420,000 are, for the purposes ofthis table, deemed to be beneficially owned by Mr. Mittaldue to the fact that those options are exercisable within60 days. Mrs. Mittal is the direct owner of 25,000ArcelorMittal common shares and holds options to acquirean additional 20,000 ArcelorMittal common shares,of which all 20,000 options are, for the purposes of thistable, deemed to be beneficially owned by Mrs. Mittal dueto the fact that those options are exercisable within 60days. Mr. Mittal and Mrs. Mittal share equally beneficialownership of 100% of Ispat International Investments S.L.and share equally beneficial ownership of 100% of MittalInvestments S.à r.l. Accordingly, Mr. Mittal is the beneficialowner of 637,899,863 ArcelorMittal common sharesand Mrs. Mittal is the beneficial owner of 637,383,263common shares. Excluding options, Mr. Lakshmi Mittaland Mrs. Usha Mittal together, directly and indirectlythrough intermediate holding companies, own637,504,863 ArcelorMittal common shares.3Represents ArcelorMittal common shares repurchasedpursuant to share repurchase programs in prior years andfractional shares returned in various transactions andexcludes (1) 28,794,371 treasury shares to settle thecommon stock offering on May 6, 2009; (2) 801,890shares awarded to senior management asbonus shares in respect of 2008 and 123,766shares awarded to senior management as bonusshares in respect of 2009; (3) 1,119,165 sharescontributed to the ArcelorMittal USA Pension Trust;(4) shares used to settle purchases under the ESPPoffering that closed on January 21, 2010;(5) 456,251 options that were exercised, during theJanuary 1, 2009—December 31, 2009 period and(6) 1,013,386 stock options that can be exercisedby directors and senior management (other than theSignificant shareholder), and 440,000 stock optionsthat can be exercised by the Significant shareholder,in each case within 60 days of December 31, 2009.Holders of these stock options are deemed to beneficiallyown ArcelorMittal common shares for the purposesof this table due to the fact that such options areexercisable within 60 days.4Excludes shares beneficially owned by theSignificant shareholder.5These 1,887,008 ArcelorMittal common shares areincluded in shares owned by the public shareholdersindicated above.
ArcelorMittal Annual Report 200978 Group StructureGroup StructureArcelorMittalFlat Carbon AmericasFlat Carbon EuropeLong CarbonAmericas and EuropeArcelorMittal BrasilArcelorMittal MinesCanadaArcelorMittalAtlantique &LorraineArcelorMittalBelgiumAcindarArcelorMittal Belval& DifferdangeArcelorMittal LázaroCárdenasArcelorMittalDofascoArcelorMittalEspañaArcelorMittal FlatCarbon EuropeArcelorMittal BrasilArcelorMittalHamburgArcelorMittalUSAArcelorMittalGalatiArcelorMittal PolandArcelorMittalHochfeldArcelorMittalLas TruchasIndusteel BelgiumIndusteel FranceArcelorMittal MadridArcelorMittalMontrealArcelorMittalGipuzkoa, S.L.ArcelorMittalOstravaArcelorMittalPoint LisasArcelorMittal PolandArcelorMittalRuhrortSonasid
ArcelorMittal Annual Report 2009Group Structure 79AACIS Stainless Steel Steel Solutionsand ServicesArcelorMittalKryviy RihArcelorMittalSouth AfricaArcelorMittal InoxBrasilArcelorMittalStainless BelgiumArcelorMittalInternationalLuxembourgArcelorMittalTemirtauArcelorMittal S.A. is a holding company with no business operations ofits own. All of its significant operating subsidiaries are indirectly ownedby ArcelorMittal through intermediate holding companies. The followingchart represents the current operational structure of the Company,including its significant operating subsidiaries, and not its legal orownership structure. For a list of ArcelorMittal’s significant operatingsubsidiaries by reportable segment, please refer to Note 13 to theconsolidated financial statements.
ArcelorMittal Annual Report 200980 Additional Information about ArcelorMittalAdditional Information about ArcelorMittalArcelorMittal as Parent CompanyArcelorMittal, a société anonymeincorporated under the laws ofLuxembourg, is the parent companyof the Group and is expected to continuethis role over the coming years. TheCompany has no branch offices andgenerated a loss of $507 million in 2009.Group Companies Listed on theLuxembourg Stock ExchangeArcelorMittal’s securities are tradedon several exchanges, including theLuxembourg Stock Exchange, andits primary stock exchange regulatoris the Luxembourg CSSF (Commissionde Surveillance du Secteur Financier).ArcelorMittal’s CSSF issuer numberis E-0001.In addition to ArcelorMittal, thesecurities of two other ArcelorMittalGroup companies are listedon the Luxembourg Stock Exchange.ArcelorMittal Finance S.C.A. is a sociétéen commandite par actions with registeredoffice address at 19, avenue de la Liberté,L-2930 Luxembourg, Grand-Duchyof Luxembourg, registered with theRegistre du Commerce et des SociétésLuxembourg under number B 13.244.ArcelorMittal Finance is indirectly 100%owned by ArcelorMittal. ArcelorMittalFinance was, until June 18, 2008, theprincipal finance vehicle of the Group and,in this connection, it issued a number ofbonds listed on the Luxembourg StockExchange. ArcelorMittal Finance’s CSSFissuer number is E-0225.ArcelorMittal Rodange & Schifflange S.A.is a société anonyme with registeredoffice address at 2, rue de l’Industrie,L- 4823 Rodange, Grand-Duchyof Luxembourg, registered with theRegistre du Commerce et des SociétésLuxembourg under number B 10.643.The share capital of ArcelorMittal Rodange& Schifflange is approximately 78.63%owned indirectly by ArcelorMittaland its shares are listed on the LuxembourgStock Exchange. Its CSSF issuer numberis E-0003.Minority Shareholders LitigationOn January 8, 2008, ArcelorMittalreceived a writ of summons on behalfof four hedge fund shareholders ofArcelor to appear before the civil courtof Luxembourg. The summons wasalso served on all natural persons sittingon the Board of Directors of ArcelorMittalat the time of the merger and on theSignificant shareholder. The claimantsrequest, among other things (1) thecancellation and the amendment ofthe corporate decisions relating to thesecond-step merger in order to reflectan exchange ratio of 11 ArcelorMittal(the entity resulting from the first-stepmerger) shares for seven Arcelor shares(ignoring the impact of the share capitalrestructuring of Arcelor) accompanied bythe allocation by the Significant shareholderor the Company of additional sharesto the claimants to reflect this revisedratio, and alternatively (2) the paymentof damages by the defendants (jointlyand severally or severally, at the court’sdiscretion), in an amount of €180 million.ArcelorMittal submitted its brief inresponse on October 16, 2008, challengingthe validity, the admissibility and themerits of the claims. The claimants filedtheir conclusions on January 5, 2010.Hearing and judgment in the first instanceare not expected before the end of 2010.
Photography: ArcelorMittal Photo Library; ArcelorMittal University; Liu Chao from Sohu; istockphoto;wide.lu.Designed and produced by www.thoburns.com (United Kingdom).Printed by Royle Print, London.Copyright 2010 ArcelorMittal.
Published in April 2010.To receive a copy of the Annual Report,please contact:ArcelorMittalLuxembourg:19, Avenue de la LibertéL-2930 LuxembourgGrand-Duchy of LuxembourgT: +352 4792 2652London:7th Floor, Berkeley Square HouseBerkeley SquareLondon W1J 6DAUnited Kingdomwww.arcelormittal.com
Annual Report 2009Financial Information
Financial Information 2009 Contents01 Chief Executive Officer and Chief Financial Officer’s Responsibility Statement02 2009 Consolidated Financial Statements87 2009 Annual Accounts100 Proposed Allocation of Results for 2009Management Report 2009 Contents01 Our Philosophy02 Financial Highlights04 Message from the Chairman and CEO08 Questions for the Group Management Board14 2009 Highlights16 Board of Directors20 Senior Management24 Business Strategy28 Corporate Responsibility42 Global Presence48 Operational Review58 Liquidity62 Market Information66 Corporate Governance76 Share Capital and Voting Rights78 Group Structure80 Additional Information about ArcelorMittalDisclaimerIn this Annual Report, ArcelorMittal has made, and will continue to make,forward-looking statements with respect to, amongst other things, its financialposition, business strategy, projected costs, projected savings, and the plansand objectives of its management. Such statements are identified by the useof forward-looking words or phrases such as ‘anticipates’, ‘intends’, ‘expects’,‘plans’, ‘believes’, or ‘estimates’, or words or phrases with similar meaning. Theactual results may differ materially from those implied by such forward-lookingstatements on account of known and unknown risks and uncertainties, including,without limitation, the risks described in this Annual Report.ArcelorMittal does not make any representation, warranty or prediction that theresults anticipated by such forward-looking statements will be achieved. Suchforward-looking statements represent, in each case, only one of many possiblescenarios and should not be viewed as the most likely or standard scenario.ArcelorMittal undertakes no obligation to publicly update its forward-lookingstatements, whether as a result of new information, future events or otherwise.Unless indicated otherwise, or the context otherwise requires, referencesherein to ‘ArcelorMittal’, the ‘Group’ and the ‘Company’ or similar terms are toArcelorMittal, société anonyme, having its registered office at 19, avenue dela Liberté, L-2930 Luxembourg, Grand Duchy of Luxembourg, and, where thecontext requires, its consolidated subsidiaries.
ArcelorMittal Annual Report 2009Chief Executive Officer and Chief Financial Officer’s Responsibility Statement 01Chief Executive Officer and Chief Financial Officer’s Responsibility StatementWe confirm to the best of our knowledge that:1. the consolidated financial statements of ArcelorMittal presented in this Annual Reportand established in conformity with International Financial Reporting Standards asadopted in the European Union give a true and fair view of the assets, liabilities,financial position and profit of ArcelorMittal and the undertakings included within theconsolidation taken as a whole; and2. the management report includes a fair review of the development and performanceof the business and position of ArcelorMittal and the undertakings included withinthe consolidation taken as a whole, together with a description of the principal risksand uncertainties they face.By order of the Board of DirectorsChief Executive OfficerLakshmi N. MittalFebruary 19, 2010Chief Financial OfficerAditya MittalFebruary 19, 2010
ArcelorMittal Annual Report 200902 Consolidated Financial StatementsConsolidated Statements of Financial PositionArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)AssetsDecember 31, December 31,2008* 2009Current assets:Cash and cash equivalents 7,576 5,919Restricted cash 11 90Assets held for sale (note 4) 910 1Trade accounts receivable and other (note 5) 6,737 5,750Inventories (note 6) 24,754 16,835Prepaid expenses and other current assets (note 7) 4,430 4,212Total current assets 44,418 32,807Non-current assets:Goodwill and intangible assets (note 8) 16,636 17,034Property, plant and equipment (note 9) 60,251 60,385Investments in associates and joint ventures (note 10) 8,512 9,628Other investments (note 11) 437 424Deferred tax assets (note 18) 805 4,838Other assets (note 12) 2,096 2,581Total non-current assets 88,737 94,890Total assets 133,155 127,697Liabilities and equityDecember 31, December 31,2008* 2009Current liabilities:Short-term debt and current portion of long-term debt (note 14) 8,409 4,135Trade accounts payable and other 10,501 10,676Short-term provisions (note 19) 3,292 1,433Liabilities held for sale (note 4) 370 11Accrued expenses and other liabilities (note 20) 7,236 6,961Income tax liabilities (note 18) 775 314Total current liabilities 30,583 23,530Non-current liabilities:Long-term debt, net of current portion (note 14) 25,667 20,677Deferred tax liabilities (note 18) 6,394 5,144Deferred employee benefits (note 22) 7,111 7,583Long-term provisions (note 19) 2,343 2,121Other long-term obligations 1,740 3,244Total non-current liabilities 43,255 38,769Total liabilities 73,838 62,299Commitments and contingencies (note 21 and note 23)Equity (note 16):Common shares (no par value, 1,617,000,000 and 1,617,000,000 shares authorized, 1,448,826,347and 1,560,914,610 shares issued, and 1,366,002,278 and 1,509,541,518 shares outstandingat December 31, 2008 and 2009, respectively) 9,269 9,950Treasury shares (82,824,069 and 51,373,092 common shares at December 31, 2008 and 2009,respectively, at cost) (5,800) (2,823)Additional paid-in capital 20,575 20,808Retained earnings 30,470 29,738Reserves 744 3,372Equity attributable to the equity holders of the parent 55,258 61,045Non-controlling interests 4,059 4,353Total equity 59,317 65,398Total liabilities and equity 133,155 127,697* As required by International Financial Reporting Standards (IFRS), the 2008 information has been adjusted retrospectivelyfor the finalization in 2009 of the allocation of purchase price of acquisitions made in 2008 (see note 3).The accompanying notes are an integral part of these consolidated financial statements.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 03Consolidated Statements of OperationsArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Year Ended Year EndedDecember 31, December 31,2008* 2009Sales(including 6,411 and 3,170 of sales to related parties for 2008 and 2009, respectively) 124,936 65,110Cost of sales(including depreciation and impairment of 6,104 and 5,458 and 2,391 and 1,945 of purchases fromrelated parties for 2008 and 2009 respectively) 106,021 62,913Gross margin 18,915 2,197Selling, general and administrative 6,590 3,875Operating income (loss) 12,325 (1,678)Income from investments in associates and joint ventures 1,653 58Financing costs – net (note 17) (2,352) (2,817)Income (loss) before taxes 11,626 (4,437)Income tax expense (benefit) (note 18) 1,128 (4,512)Net income (including non-controlling interests) 10,498 75Net income attributable to:Equity holders of the parent 9,466 118Non-controlling interests 1,032 (43)Net income (including non-controlling interests) 10,498 75Year Ended Year EndedDecember 31, December 31,2008* 2009Earnings per common share (in U.S. dollars)Basic common shares 6.84 0.08Diluted common shares 1 6.83 0.08Weighted average common shares outstanding (in millions) (note 16)Basic common shares 1,383 1,445Diluted common shares 1 1,386 1,4461Diluted common shares relate to the effect of stock options (note 16).* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).The accompanying notes are an integral part of these consolidated financial statements.
ArcelorMittal Annual Report 200904 Consolidated Financial StatementsConsolidated Statements of Comprehensive IncomeArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Year EndedYear EndedDecember 31, December 31,2008* 2009Net income (including non-controlling interests) 10,498 75Available-for-sale investments:Gain (loss) arising during the period(net of tax benefit (expense) of 9 and (3) for 2008 and 2009, respectively) (207) 22Reclassification adjustments for (gain) loss included in the statement of operations(net of tax expense of nil and nil for 2008 and 2009, respectively) 123 (8)(84) 14Derivative financial instruments:(Loss) gain arising during the period(net of tax expense of 672 and 34 for 2008 and 2009, respectively) 1,436 59Reclassification adjustments for (gain) loss included in the statement of operations(net of tax expense (benefit) of (196) and 208 for 2008 and 2009, respectively) 403 (590)1,839 (531)Exchange differences arising on translation of foreign operations(net of tax expense of 12 and 352 for 2008 and 2009, respectively) (5,980) 3,100Share of other comprehensive income (loss) related to associates and joint ventures (768) 473Total other comprehensive income (loss) (4,993) 3,056Total other comprehensive income (loss) attributable to:Equity holders of the parent (4,363) 2,628Non-controlling interests (630) 428(4,993) 3,056Total comprehensive income 5,505 3,131Total comprehensive income attributable to:Equity holders of the parent 5,103 2,746Non-controlling interests 402 385Total comprehensive income 5,505 3,131* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).The accompanying notes are an integral part of these consolidated financial statements.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 05Consolidated Statements of Changes in EquityArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Unrealized Unrealized EquityGains Gains attributableForeign (Losses) on (Losses) on to theAdditional Currency Derivative Available equity Non-Share Treasury Paid-in Retained Translation Financial for Sale holders of controlling TotalShares 1 capital Shares Capital Earnings Adjustments Instruments Securities the parent interests EquityBalance at December 31, 2007 1,422 9,269 (1,552) 20,309 23,552 4,656 (356) 807 56,685 4,850 61,535Net income — — — — 9,466 — — — 9,466 1,032 10,498Other comprehensive income (loss) — — — — — (6,129) 1,844 (78) (4,363) (630) (4,993)Total comprehensive income (loss) — — — — 9,466 (6,129) 1,844 (78) 5,103 402 5,505Recognition of share based payments 2 — 62 337 — — — — 399 — 399Treasury shares (note 16) (58) — (4,310) (71) — — — — (4,381) — (4,381)Dividend (1.50 per share) — — — — (2,068) — — — (2,068) (508) (2,576)Acquisition of non-controllinginterests (note 3) — — — — — — — — — (1,297) (1,297)Dilution of interest in consolidatedsubsidiary and others — — — — (480) — — — (480) 612 132Balance at December 31, 2008* 1,366 9,269 (5,800) 20,575 30,470 (1,473) 1,488 729 55,258 4,059 59,317Net income — — — — 118 — — — 118 (43) 75Other comprehensive income (loss) — — — — — 3,115 (535) 48 2,628 428 3,056Total comprehensive income (loss) — — — — 118 3,115 (535) 48 2,746 385 3,131Recognition of share based payments 2 — 44 (27) — — — — 17 — 17Treasury shares (note 16) 1 — 43 (4) — — — — 39 — 39Dividend (0.75 per share) — — — — (1,084) — — — (1,084) (254) (1,338)Offering of common shares 141 2 681 2,890 264 — — — — 3,835 — 3,835Acquisition of non-controllinginterests (note 3) — — — — — — — — — (353) (353)Cancellation of cash settlementoption on 800 convertible seniornotes (note 14) — — — — 198 — — — 198 — 198Issuance of bonds mandatorilyconvertible in shares of subsidiaries — — — — — — — — — 684 684Other movements — — — — 36 — — — 36 (168) (132)Balance at December 31, 2009 1,510 9,950 (2,823) 20,808 29,738 1,642 953 777 61,045 4,353 65,398Reserves1Excludes treasury shares2Includes the issuance of 29 million treasury shares* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalizationin 2009 of the allocation of purchase price of acquisitions made in 2008 (see note 3).The accompanying notes are an integral part of these consolidated financial statements.
ArcelorMittal Annual Report 200906 Consolidated Financial StatementsConsolidated Statements of Cash FlowsArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Year Ended Year EndedDecember 31, December 31,2008* 2009Operating activities:Net income 10,498 75Adjustments to reconcile net income to net cash provided by operations and payments:Depreciation 5,045 4,894Impairment 1,059 564Interest expense 2,044 1,696Income tax expense (benefit) 1,128 (4,512)Write-downs of inventories to net realizable value and expense related to onerous supply contracts** 3,451 2,730Labor agreements and separation plans 2,577 280Litigation provisions 595 (445)Recycling of deferred gain on raw material hedges — (979)Change in fair value of conversion options on Convertible Bonds — 897Unrealized foreign exchange effects, provisions and other non-cash operating expenses (net) (571) (1,202)Changes in operating assets, liabilities and provisions net of effects from acquisitions:Trade accounts receivable 2,139 1,578Inventories (7,724) 5,356Interest paid and received (1,943) (1,443)Taxes paid (2,724) (357)Trade accounts payable (2,485) (360)Cash received from settlement of hedges not recognized in the statement of operations 2,509 —Cash paid for separation plans — (685)Other working capital and provisions movements (946) (809)Net cash provided by operating activities 14,652 7,278Investing activities:Purchase of property, plant and equipment (5,531) (2,792)Acquisition of net assets of subsidiaries and non-controlling interests, net of cash acquired of 103 and 15 respectively (6,201) (120)Investments in associates and joint ventures accounted for under equity method (3,114) (33)Disposals of financial assets*** 2,226 116Other investing activities (net) 192 45Net cash used in investing activities (12,428) (2,784)Financing activities:Offering of common shares — 3,153Proceeds from mandatorily convertible bonds — 750Proceeds from short-term debt 7,121 1,727Proceeds from long-term debt, net of debt issuance costs 14,599 9,558Payments of short-term debt (11,720) (10,446)Payments of long-term debt (5,127) (9,433)Purchase of treasury shares (4,440) —Sale of treasury shares for stock option exercises 68 12Dividends paid(includes 508 and 254 of dividends paid to non-controlling shareholders in 2008 and 2009, respectively) (2,576) (1,338)Other financing activities (net) (57) (330)Net cash used in financing activities (2,132) (6,347)Effect of exchange rate changes on cash (376) 196Net increase (decrease) in cash and cash equivalents (284) (1,657)Cash and cash equivalents:At the beginning of the year 7,860 7,576At the end of the year 7,576 5,919* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).** Refer to Note 6 for more information on inventory write-downs and note 19 for more information on onerous contracts.*** Refer to Note 4, 10 and 11 for more information on disposals of investments.The accompanying notes are an integral part of these consolidated financial statements.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 07Notes to the Consolidated Financial StatementsArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 1: Nature of Business,Basis of Presentation and ConsolidationNature of businessArcelorMittal (“ArcelorMittal”, or “MittalSteel”, or the “Company”), together with itssubsidiaries, is a manufacturer of steel andsteel related products. ArcelorMittal ownsand operates manufacturing facilities inEurope, North and South America, Asia andAfrica. These manufacturing facilities, eachof which includes its respective subsidiaries,are referred to in these consolidatedfinancial statements as the “OperatingSubsidiaries”. These consolidated financialstatements were authorized for issuance onFebruary 9, 2010 by the Company’s Boardof Directors.Basis of presentationThe consolidated financial statements havebeen prepared on a historical cost basis,except for available for sale financial assetsand derivative financial instruments, whichare measured at fair value, and inventorieswhich are measured at the lower of netrealizable value or cost. The consolidatedfinancial statements have been preparedin accordance with International FinancialReporting Standards (“IFRS”) as issuedby the International Accounting StandardsBoard (“IASB”) and as adopted by theEuropean Union (the “EU”), and arepresented in U.S. dollars with all amountsrounded to the nearest million, except forshare and per share data.Adoption of new IFRS standards,amendments and interpretationsapplicable in 2009The following new standards, amendedstandards or interpretations were adoptedby the Company on January 1, 2009. Theeffects from the adoption of these standards,revisions or interpretations were not materialto the consolidated financial statements.• Amendments to IFRS 2,“Share-based Payment”• IFRS 8, “Operating Segments”• International AccountingStandard (“IAS”) 1 (revised),“Presentation of Financial Statements”• Amendments to IAS 7,“Statement of Cash Flows”• Amendments to IAS 16,“Property, Plant and Equipment”• Amendments to IAS 19,“Employee Benefits”• Amendments to IAS 20,“Accounting for Government Grants andDisclosure of Government Assistance”• Amendments to IAS 23,“Borrowing Costs”• Amendments to IAS 27 (revised),“Consolidated and SeparateFinancial Statements”• Amendments to IAS 28,“Investments in Associates”• Amendments to IAS 29,“Reporting in HyperinflationaryEconomies”• Amendments to IAS 31,“Interests in Joint Ventures”• Amendments to IAS 32,“Financial Instruments: Presentation”• Amendments to IAS 36,“Impairment of Assets”• Amendments to IAS 38,“Intangible Assets”• Amendments to IAS 39,“Financial Instruments:Recognition and Measurement”• Amendments to IAS 40,“Investment Property”• International Financial ReportingInterpretations Committee (“IFRIC”) 13,“Customer Loyalty Programs”• IFRIC 15,“Agreements for theConstruction of Real Estate”• IFRIC 16,“Hedges of a Net Investmentin a Foreign Operation”• IFRIC 18,“Transfers of Assets from Customers”(adopted for transfers of assetsfrom customers received on or afterJuly 1, 2009)The following new and revised standardshave been adopted in the current periodand have affected the presentation ofthese consolidated financial statements.Amendments to IFRS 7,“Financial Instruments: Disclosures”The amendments to IFRS 7 requiredisclosure of financial assets and liabilitiesin a three-level hierarchy based upon theinput data required by an entity to arriveat an asset or liability’s fair value. Expandedliquidity risk disclosures are also required.The Company has applied theserequirements in note 15.IAS 1 (revised),“Presentation of Financial Statements”IAS 1 introduced terminology changesincluding revised titles for the consolidatedfinancial statements and change in theformat and content of the consolidatedfinancial statements. In addition toterminology changes, a consolidatedstatement of comprehensive income isnow part of the consolidated financialstatements as required by the revisionof IAS 1.New IFRS standards and interpretationsapplicable from 2010 onwardUnless otherwise indicated below,the Company is still in the processof assessing whether there will be anysignificant changes to its consolidatedfinancial statements upon adoptionof these new standards, interpretations,or amendments. The Company does notplan to early adopt any of these newstandards, interpretations, or amendments.
ArcelorMittal Annual Report 200908 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)IFRS 1 (revised), “First Time Adoption ofInternational Financial Reporting Standards”and IAS 27 (revised), “Consolidated andSeparate Financial Statements”In May 2008, the IASB issued revisions toIFRS 1, “First Time Adoption of InternationalFinancial Reporting Standards” and IAS 27,“Consolidated and Separate FinancialStatements.” The revisions allow first-timeadopters to use a deemed cost of eitherfair value or the carrying amount undera previous accounting practice to measurethe initial cost of investments insubsidiaries, jointly controlled entitiesand associates in the separate financialstatements. The amendments also removethe definition of the cost method from IAS27 and replace it with a requirement topresent dividends as income in the separatefinancial statements of the investor. Therevisions of IFRS 1 are effective for annualperiods beginning on or after July 1, 2009but are not applicable to the Company as ithas previously adopted IFRS. The revisionsof IAS 27 are effective for annual periodsbeginning on or after July 1, 2009 but arenot expected to have a significant impacton its consolidated financial statements.IFRS 2 (revised), “Share-based Payment”In June 2009, the IASB issued amendmentsto IFRS 2, “Share-based Payment”. Theseamendments clarify the scope of IFRS 2,as well as the accounting for cash-settled(by the parent) share-based paymenttransactions in the separate or individualfinancial statements of a subsidiaryreceiving the goods or services whenanother subsidiary or shareholder has theobligation to settle the award. The revisionsto IFRS 2 are effective for annual periodsbeginning on or after January 1, 2010.The Company does not expect that theamendments will have a significant impacton its consolidated financial statements.The amendments to IFRS 2 have not yetbeen endorsed by the EU.IFRS 3 (revised), “Business Combinations”and IAS 27 (revised), “Consolidated andSeparate Financial Statements”In January 2008, the IASB issued revisionsto IFRS 3, “Business Combinations” andIAS 27, “Consolidated and SeparateFinancial Statements” which are effectivefor any transactions with acquisition datesthat are on or after the beginning of thefirst annual reporting period beginningon or after July 1, 2009. Among otherchanges, the revisions will require theacquirer to expense direct acquisition costsas incurred; to revalue to fair value anypre-existing ownership in an acquiredcompany at the date on which theCompany takes control, and record theresulting gain or loss in net income; torecord in net income adjustments tocontingent consideration which occur aftercompletion of the purchase price allocation;to record directly in equity the effect oftransactions after taking control of theacquiree which increase or decrease theCompany’s interest but do not affectcontrol; to revalue upon divesting controlany retained shareholding in the divestedcompany at fair value and record theresulting gain or loss in net income;and to attribute to non-controllingshareholders their share of any deficit in theequity of a non wholly-owned subsidiary.The Company does not currently expectthat the application of IFRS 3 (revised)and IAS 27 (revised) will have a significantimpact on its financial statements, but willevaluate the impact for each businesscombination that occurs.IFRS 5 (revised), “Non-current AssetsHeld for Sale and Discontinued Operations”In May 2008, the IASB issued revisions toIFRS 5, “Non-current Assets Held for Saleand Discontinued Operations” which areeffective for annual periods beginning on orafter July 1, 2009. The amendment clarifiesthat all of a subsidiary’s assets and liabilitiesshould be classified as held for sale if apartial disposal sale plan will result in lossof control. Relevant disclosure should alsobe made for this subsidiary if the definitionof a discontinued operation is met.The Company does not expect that theamendment will have a significant impacton its consolidated financial statements.IFRS 9, “Financial Instruments”In November 2009, the IASB issued IFRS 9,“Financial Instruments” as the first step inits project to replace IAS 39, “FinancialInstruments: Recognition and Measurement”.IFRS 9 introduces new requirementsfor classifying and measuring financialinstruments, including:• The replacement of the multipleclassification and measurement modelsin IAS 39, “Financial Instruments:Recognition and Measurement”with a single model that has only twoclassification categories: amortizedcost and fair value• The replacement of the requirementto separate embedded derivatives fromfinancial asset hosts with a requirementto classify a hybrid contract in its entiretyat either amortized cost or fair value• The replacement of the cost exemptionfor unquoted equities and derivatives onunquoted equities with guidance on whencost may be an appropriate estimate offair value.This standard is effective for annual periodsbeginning on or after January 1, 2013, withearlier adoption permitted. IFRS 9 has notyet been endorsed by the EU.IAS 24, “Related Party Disclosures”In November 2009, the IASB amendedIAS 24, “Related Party Disclosures”for annual periods beginning on or afterJanuary 1, 2011, with earlier applicationpermitted. The revisions simplify thedisclosure requirements for governmentrelatedentities and clarify the definition ofa related party. The amendments to IAS 24have not yet been endorsed by the EU.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 09IAS 28, “Investments in Associates”In January 2008, the IASB amended IAS 28,“Investments in Associates” for annualperiods beginning on or after July 1, 2009.The amendment states that an investmentin associate should be treated as a singleasset for the purposes of impairmenttesting and impairment losses should not beallocated to specific assets included withinthe investment, such as goodwill. Reversalsof impairment should be recorded as anadjustment to the investment balance tothe extent that the recoverable amountof the associate increases. In addition, onlycertain disclosures required by IAS 28 mustbe made when an investment in associateis accounted for in accordance with IAS 39,“Financial Instruments: Recognition andMeasurement.” The Company does notbelieve there will be any significant changesto its consolidated financial statementsupon adoption of the amended standard.IAS 32,“Financial Instruments – Presentation”In October 2009, the IASB amended IAS 32,“Financial Instruments: Presentation”for annual periods beginning on or afterFebruary 1, 2010. The amendment addressesthe accounting for rights issues that aredenominated in a currency other thanthe functional currency of the issuer.The amendment requires that, providedcertain conditions are met, such rights issuesshould be treated as equity regardlessof the currency in which the exercise priceis denominated. There will be no changesto the Company’s financial statements uponadoption of the amended standard.IAS 39, “Financial Instruments:Recognition and Measurement”In July 2008, the IASB amended IAS 39,“Financial Instruments: Recognition andMeasurement” for annual periods onor after July 1, 2009. The amendmentsprovide clarification on two aspects ofhedge accounting: identifying inflationas a hedged item and hedging with options.Inflation qualifies as a hedged item onlyif changes in inflation are a contractuallyspecified portion of cash flows of arecognized financial instrument. IAS 39permits an entity to designate purchasedoptions as a hedging instrument in a hedgeof a financial or non-financial item. Theamendments make clear that the intrinsicvalue, not the time value, of an optionreflects a one-sided risk and, therefore,an option designated in its entirety cannot beperfectly effective. The Company does notbelieve there will be any significant changesto its consolidated financial statements uponadoption of the amended standard.Amendments to IFRIC 9,“Reassessment of Embedded Derivatives”and IAS 39, “Financial Instruments:Recognition and Measurement”In March 2009, the IASB amended IFRIC 9,“Reassessment of Embedded Derivatives”and IAS 39, “Financial Instruments:Recognition and Measurement” for annualperiods beginning on or after June 30,2009. These amendments to IFRIC 9and IAS 39 clarify that on reclassificationof a financial asset out of the fair valuethrough profit or loss category, allembedded derivatives have to be assessedand, if necessary, separately accounted forin the consolidated financial statements.Amendments to IFRIC 14, “IAS 19 – TheLimit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction”In November 2009, the IASB amendedIFRIC 14, “IAS 19 – The Limit on aDefined Benefit Asset, Minimum FundingRequirements and their Interaction”. Theamendments apply in limited circumstances:when an entity is subject to minimumfunding requirements and makes an earlypayment of contributions to cover thoserequirements. The amendments permitsuch an entity to treat the benefit of such anearly payment as an asset. The amendmentsare effective for annual periods beginningon or after January 1, 2011, with earlierapplication permitted. The amendmentsmust be applied retrospectively to theearliest comparative period presented.The amendments to IFRIC 14 have not yetbeen endorsed by the EU.IFRIC 17,“Distributions of Non-cash Assetsto Owners”In November 2008, the IFRIC issuedIFRIC 17, “Distributions of Non-cashAssets to Owners”. The interpretationclarifies that a dividend payable shouldbe recognized when the dividend isappropriately authorized and is no longerat the discretion of the entity. The dividendpayable should be measured at the fairvalue of the net assets to be distributed.The entity should recognize the differencebetween the dividend paid and the carryingamount of the net assets distributed inprofit or loss and the entity needs toprovide additional disclosures if the netassets that are being held for distributionto owners meet the definition of adiscontinued operation. This interpretationapplies prospectively to pro ratadistributions of non-cash assets exceptfor common control transactions andis effective for annual periods beginningon or after July 1, 2009. Earlier applicationis permitted.IFRIC 19, “Extinguishing Financial Liabilitieswith Equity Instruments”In November 2009, the IFRIC issuedIFRIC 19, “Extinguishing Financial Liabilitieswith Equity Instruments”. The interpretationclarifies the requirements of IFRS when anentity renegotiates the terms of a financialliability with its creditor and the creditoragrees to accept the entity’s shares or otherequity instruments to settle the financialliability fully or partially. The interpretation iseffective for annual periods beginning on orafter July 1, 2010 with earlier applicationpermitted. IFRIC 19 has not yet beenendorsed by the EU.Amendments to IFRS 2,“Share-based Payment”The amendments to IFRS 2 are effectivefor annual periods beginning on or afterJuly 1, 2009. The amendments confirmthat contributions of a business onformation of a joint venture and commoncontrol transactions are excluded from thescope of IFRS 2. The amendments to IFRS 2have not yet been endorsed by the EU.Amendments to IFRS 5,“Non-current Assets Held for Saleand Discontinued Operations”The amendments to IFRS 5 are effectivefor annual periods beginning on or afterJanuary 1, 2010. The revisions clarifythat the disclosure requirements instandards other than IFRS 5 generallydo not apply to non-current assetsclassified as held for sale and discontinuedoperations. The Company does not believethere will be any significant changes to itsconsolidated financial statements uponadoption of the amended standard. Theamendments to IFRS 5 have not yet beenendorsed by the EU.Amendments to IFRS 8,“Operating Segments”The amendments to IFRS 8 are effectivefor annual periods beginning on or afterJanuary 1, 2010. The amendments clarifythat an entity is required to disclose ameasure of segment assets only if thatmeasure is regularly reported to the chiefoperating decision maker. The Companydoes not believe there will be anysignificant changes to its consolidatedfinancial statements upon adoption ofthe amended standard. The amendmentsto IFRS 8 have not yet been endorsedby the EU.
ArcelorMittal Annual Report 200910 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Amendments to IAS 1,“Presentation of Financial Statements”The amendments to IAS 1 are effectivefor annual periods beginning on or afterJanuary 1, 2010 and clarify that the potentialsettlement of a liability by the issue of equityis not relevant to its classification as currentor non-current. By amending the definitionof current liability, the amendment permitsa liability to be classified as non-currentnotwithstanding the fact that theentity could be required by the counterpartyto settle in shares at any time. Theamendments to IAS 1 have not yet beenendorsed by the EU.Amendments to IAS 7,“Statement of Cash Flows”The amendments to IAS 7 are effectivefor annual periods beginning on or afterJanuary 1, 2010 and specify that onlyexpenditures that result in a recognizedasset in the statement of financial positioncan be classified as investing activities inthe statement of cash flows. Consequently,cash flows related to development coststhat do not meet the criteria in IAS 38,“Intangible Assets” must be classifiedas operating activities in the statementof cash flows. The amendments to IAS 7have not yet been endorsed by the EU.Amendments to IAS 17, “Leases”Prior to the amendments, IAS 17 generallyrequired leases of land with an indefiniteuseful life to be classified as operating leases.Following the amendments, leases of land areclassified as either ‘finance’ or ‘operating’in accordance with the general principlesof IAS 17. These amendments are to beapplied retrospectively to unexpired leasesas of the effective date if the necessaryinformation was available at the inception ofthe lease. Otherwise, the amended standardwill be applied based on the facts andcircumstances existing on the effective dateand entities will recognize assets and liabilitiesrelated to land leases newly classified asfinance leases at their fair values on thatdate; any difference between those fair valueswill be recognized in retained earnings. Theamendments to IAS 17 are effective for annualperiods beginning on or after January 1, 2010.The amendments to IAS 17 have not yet beenendorsed by the EU.Amendments to IAS 36,“Impairment of Assets”The amendments to IAS 36 are effective forannual periods beginning on or after January1, 2010 and clarify that the largest cashgeneratingunit (or group of units) to whichgoodwill should be allocated for the purposesof impairment testing is an operatingsegment as defined by paragraph 5 of IFRS 8,“Operating Segments”. The adoption of theseamendments will not have an impact on theCompany’s consolidated financial statements.The amendments to IAS 36 have not yetbeen endorsed by the EU.Amendments to IAS 38, “Intangible Assets”The amendments to IAS 38 are effectivefor annual periods beginning on or after July1, 2009 and clarify the requirements underIFRS 3 (revised), “Business Combinations”regarding accounting for intangible assetsacquired in a business combination.Further amendments to IAS 38 areeffective for annual periods beginningon or after January 1, 2010 and clarifythe description of valuation techniquescommonly used by entities when measuringthe fair value of intangible assets acquiredin a business combination that are nottraded in active markets. The amendmentsto IAS 38 have not yet been endorsedby the EU.Amendments to IAS 39,“Financial Instruments: Recognitionand Measurement”The amendments to IAS 39 are effectivefor annual periods beginning on or afterJanuary 1, 2010 and clarify that loanprepayment options, the exercise priceof which compensates the lender forloss of interest by reducing the economicloss from reinvestment risk, should beconsidered closely related to the hostdebt contract.There were also amendments to IAS 39to clarify that the scope exemption onlyapplies to binding (forward) contractsbetween and acquirer and a vendor in abusiness combination to buy an acquireeat a future date, the term of the forwardcontract should not exceed a reasonableperiod normally necessary to obtain anyrequired approvals and to complete thetransaction, and the exemption should notbe applied to option contracts (whether ornot currently exercisable) that on exercisewill result in control of an entity, nor byanalogy to investments in associates andsimilar transactions.Further amendments to IAS 39 clarifywhen to recognize gains or losses onhedging instruments as a reclassificationadjustment in a cash flow hedgeof a forecast transaction that resultssubsequently in the recognition of afinancial instrument. The amendmentclarifies that gains or losses should bereclassified from equity to profit or lossin the period in which the hedged forecastcash flow affects profit or loss. Theamendments to IAS 39 have not yet beenendorsed by the EU.Amendments to IFRIC 9,“Reassessment of Embedded Derivatives”The amendment to IFRIC 9 is effectivefor annual periods beginning on or afterJuly 1, 2009 and excludes embeddedderivatives in contracts acquired in businesscombination or in combinations of entitiesunder common control or in the formationof joint ventures from the scope of thisinterpretation. The amendments to IFRIC 9have not yet been endorsed by the EU.Amendments to IFRIC 16,“Hedges of a Net Investmentin a Foreign Operation”The amendment to IFRIC 16 is effective forannual periods beginning on or after July 1,2009 and permits entities to designate aninstrument that is held by a foreignoperation as a hedge of the net investmentin that foreign operation. The amendmentsto IFRIC 16 have not yet been endorsedby the EU.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 11Basis of consolidationThe consolidated financial statementsinclude the accounts of the Company, itsOperating Subsidiaries, and its respectiveinterest in associated companies and jointlycontrolled entities. Subsidiaries areconsolidated from the date of acquisitionwhich is considered to be the date theCompany obtains control until the datecontrol ceases. Control is defined as thepower to govern the financial and operatingpolicies of an entity, so as to obtain benefitsderived from its activities. Control ispresumed to exist when the Company holdsmore than half of the voting rights.Associated companies are those companiesover which the Company has the ability toexercise significant influence on the financialand operating policy decisions which arenot Operating Subsidiaries. Generally,significant influence is presumed to existwhen the Company holds more than 20%of the voting rights. In addition, jointlycontrolled entities are companies overwhose activities the Company has jointcontrol under a contractual agreement.The consolidated financial statementsinclude the Company’s share of the totalrecognized gains and losses of associatesand jointly controlled entities on an equityaccounted basis from the date thatsignificant influence commences until thedate significant influence ceases, adjustedfor any impairment loss. Adjustments to thecarrying amount may also be necessary forchanges in the Company’s proportionateinterest in the investee arising fromchanges in the investee’s equity that havenot been recognized in the investee’s profitor loss. The Company’s share of thosechanges is recognized directly in equity.Other investments are classified as availablefor sale and are stated at fair value whentheir fair value can be reliably measured.When fair value cannot be measuredreliably, the investments are carried at costless impairment.Intra-company balances and transactions,including income, expenses and dividends,are eliminated in the preparation of theconsolidated financial statements. Gainsand losses resulting from intra-companytransactions that are recognized in assetsare eliminated.Non-controlling interests represent theportion of profit or loss and net assets notheld by the Company and are presentedseparately in the statement of operationsand within equity in the consolidatedstatement of financial position.Note 2: Summary of SignificantAccounting PoliciesTranslation of financial statementsdenominated in foreign currencyThe functional currency of each of themajor Operating Subsidiaries is the localcurrency, except for ArcelorMittal SA,OJSC ArcelorMittal Kryviy Rih, ArcelorMittalLázaro Cárdenas S.A. de C.V., ArcelorMittalBrasil, ArcelorMittal Galati S.A., ArcelorMittalCanada Inc., ArcelorMittal Mines CanadaInc. and ArcelorMittal Temirtau, whosefunctional currency is the U.S. dollar.Transactions in currencies other than thefunctional currency of a subsidiary arerecorded at the rates of exchange prevailingat the date of the transaction. Monetaryassets and liabilities in currencies other thanthe functional currency are remeasuredat the rates of exchange prevailing at thestatement of financial position date andthe related transaction gains and lossesare reported in the consolidated statementof operations.Upon consolidation, the results ofoperations of ArcelorMittal’s subsidiariesand associates whose functional currencyis other than the U.S. dollar are translatedinto U.S. dollars at the monthly averageexchange rates and assets and liabilities aretranslated at the year-end exchange rates.Translation adjustments are recognizeddirectly in other comprehensive incomeand are included in net earnings only uponsale or liquidation of the underlying foreignsubsidiary or associate.Business combinationsAcquisitions of subsidiaries and businessesare accounted for using the purchasemethod. The cost of the acquisition ismeasured at the aggregate of the fairvalues (at the date of exchange) of assetsgiven, liabilities incurred or assumed, andequity instruments issued by ArcelorMittalin exchange for control of the acquiree,plus any costs directly attributable tothe business combination. The acquiree’sidentifiable assets (including previouslyunrecognized intangible assets), liabilitiesand contingent liabilities are recognizedat their fair values at the acquisition date.The interest of non-controlling shareholdersin the acquiree is initially measured at thenon-controlling shareholder’s proportionof the net fair value of the assets, liabilitiesand contingent liabilities recognized.When an acquisition is achieved in stages,each significant transaction is consideredindividually for the purpose of thedetermination of the fair value of theidentifiable assets, liabilities and contingentliabilities acquired and hence for thegoodwill associated with the acquisition.The fair values of the identifiable assets andliabilities acquired can vary at the date ofeach transaction. Interests previously heldin that entity are re-valued on the basisof the fair values of the identifiable assetsand liabilities at the date of eachsubsequent transaction until control isobtained. The excess of the cost over thefair value of the net assets acquired isrecorded as goodwill or as a gain in thestatement of operations when the fair valueof the asset acquired exceeds the cost.Subsequent purchases, after the Companyhas obtained control, are treated as theacquisitions of shares from non-controllingshareholders: the identifiable assets andliabilities of the entity are not subjectto a further revaluation and the positiveor negative difference between the costof such subsequent acquisitions and the netvalue of the additional proportion of thecompany acquired is recorded as goodwillor directly as a gain in the statement ofoperations when the difference is negative.Cash and cash equivalentsCash and cash equivalents consist of cashand short-term highly liquid investmentsthat are readily convertible to cash withoriginal maturities of three months orless at the time of purchase and are carriedat cost plus accrued interest, whichapproximates fair value.Restricted cashRestricted cash represents cash and cashequivalents not readily available to theCompany, mainly related to insurancedeposits, various other deposits or requiredbalance obligations related to letters ofcredit and credit arrangements, and escrowaccounts created as a result of acquisitions.Changes in restricted cash are includedwithin other investing activities (net) in thestatement of cash flows.
ArcelorMittal Annual Report 200912 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Trade accounts receivableTrade accounts receivable are initiallyrecorded at their fair value and do not carryany interest. ArcelorMittal maintains anallowance for doubtful accounts at anamount that it considers to be a sufficientestimate of losses resulting from theinability of its customers to make requiredpayments. An allowance is recorded andcharged to expense when an accountis deemed to be uncollectible. In judgingthe adequacy of the allowance fordoubtful accounts, ArcelorMittal considersmultiple factors including historical baddebt experience, the current economicenvironment and the aging of thereceivables. Recoveries of trade receivablespreviously reserved in the allowance fordoubtful accounts are recorded as gainsin the statement of operations.ArcelorMittal’s policy is to provide forall receivables over 180 days becausehistorical experience is such thatreceivables that are past due beyond180 days are generally not recoverable.Trade receivables between 60 days and180 days are provided for based onestimated irrecoverable amounts from thesale of goods and/or services, determinedby reference to past default experience.InventoriesInventories are carried at the lower of costand net realizable value. Cost is determinedusing the first-in, first-out (“FIFO”) methodor average cost method. Costs ofproduction in process and finished goodsinclude the purchase costs of raw materialsand conversion costs such as direct laborand an allocation of fixed and variableproduction overheads. Raw materials andspare parts are valued at cost inclusiveof freight and shipping and handling costs.Net realizable value represents the estimatedselling price at which the inventories canbe realized in the normal course of businessafter allowing for the cost of conversionfrom their existing state to a finishedcondition and for the cost of marketing,selling, and distribution. Costs incurredwhen production levels are abnormally loware partially capitalized as inventories andpartially recorded as a component of costof sales in the statement of operations.Goodwill and negative goodwillGoodwill arising on an acquisitionis recognized as an asset and initiallymeasured at cost, being the excess of thecost of the business combination overArcelorMittal’s interest in the net fairvalue of the identifiable assets, liabilitiesand contingent liabilities recognized.Goodwill is allocated to the cashgeneratingunits expected to benefitfrom the synergies of the combinationfor the purpose of impairment testing.The allocation is made to those groups ofcash-generating units that are expectedto benefit from the business combinationin which the goodwill arose. Goodwill isreviewed at the groups of cash-generatingunits level for impairment annually orwhenever changes in circumstancesindicate that the carrying amount maynot be recoverable. The recoverableamounts of the groups of cash-generatingunits are determined from the higherof fair value less cost to sell or valuein use calculations, as described in theimpairment of tangible and intangibleassets. The key assumptions for the valuein use calculations are those regarding thediscount rates, growth rates and expectedchanges to selling prices, shipments anddirect costs during the period. Managementestimates discount rates using pre-taxrates that reflect current market rates forinvestments of similar risk. The growthrates are based on the Company’s growthforecasts which are in line with industrytrends. Changes in selling prices, shipmentsand direct costs are based on historicalexperience and expectations of futurechanges in the market.Cash flow forecasts are derived fromthe most recent financial forecastsfor the next five years. Beyond thespecifically forecasted period, the Companyextrapolates cash flows for the remainingyears based on an estimated growth rate.This rate does not exceed the averagelong-term growth rate for the relevantmarkets. Once recognized, impairmentlosses recognized for goodwill arenot reversed.ArcelorMittal has historically purchasedcertain steel assets involved in variousprivatization programs in formergovernment controlled economies.Businesses with these characteristicstypically have been purchased for anamount that does not exceed net assetfair value, thus producing negative goodwillfor accounting purposes. In a businesscombination in which the fair valueof the identifiable net assets acquiredexceeds the cost of the acquired business,the Company reassesses the fair value ofthe assets acquired. If, after reassessment,ArcelorMittal’s interest in the net fairvalue of the acquiree’s identifiable assets,liabilities and contingent liabilities exceedsthe cost of the business combination, theexcess (negative goodwill) is recognizedimmediately in the statement of operations.Intangible assetsIntangible assets are recognized only whenit is probable that the expected futureeconomic benefits attributable to theassets will accrue to the Company and thecost can be reliably measured. Intangibleassets acquired separately by ArcelorMittalare initially recorded at cost and thoseacquired in a business combination arerecorded at fair value. These primarilyinclude the cost of technology and licensespurchased from third parties. Intangibleassets are amortized on a straight-linebasis over their estimated economicuseful lives which typically are notto exceed five years.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 13Costs incurred on internally developedproducts are recognized as intangible assetsfrom the date that all of the followingconditions are met: (i) completion of thedevelopment is considered technicallyfeasible and commercially viable; (ii) it isthe intention and ability of the Companyto complete the intangible asset and useor sell it; (iii) it is probable that theintangible asset will generate futureeconomic benefits; (iv) adequate technical,financial, and other resources to completethe development and to use or sell theintangible asset are available; and (v) it ispossible to reliably measure the expenditureattributable to the intangible asset duringits development. The intangible assetcapitalized includes the cost of materials,direct labor costs and an appropriateproportion of overheads incurred duringits development. Capitalized developmentexpenditures are stated at cost lessaccumulated amortization and impairmentlosses. Other development expendituresthat do not meet the conditions forrecognition as an asset are recognizedas an expense as part of operatingincome in the statement of operationsin the period in which it is incurred.Property, plant and equipmentProperty, plant and equipment is recordedat cost less accumulated depreciation andimpairment. Cost includes professionalfees and, for assets constructed by theCompany, any related works to the extentthat these are directly attributable to theacquisition or construction of the asset.Property, plant and equipment exceptland are depreciated using the straightline method over the useful lives of therelated assets which are presented in thetable below.Asset CategoryLandBuildingsSteel plant equipmentAuxiliary facilitiesOther facilitiesUseful Life RangeNot depreciated10 to 50 years15 to 30 years15 to 30 years5 to 20 yearsMajor improvements, which add toproductive capacity or extend the lifeof an asset, are capitalized, while repairsand maintenance are charged to expenseas incurred. Where a tangible fixed assetcomprises major components havingdifferent useful lives, these componentsare accounted for as separate items.Property, plant and equipment used inmining activities is depreciated over itsuseful life or over the remaining life of themine if shorter and if there is no alternativeuse possible. For the majority of assetsused in mining activities, the economicbenefits from the asset are consumed ina pattern which is linked to the productionlevel and accordingly, assets used in miningactivities are depreciated on a unit ofproduction basis.Property, plant and equipment underconstruction is recorded as constructionin progress until they are ready fortheir intended use; thereafter theyare transferred to the related categoryof property, plant and equipment anddepreciated over their estimated usefullives. Interest incurred during constructionis capitalized. Gains and losses onretirement or disposal of assets arereflected in the statement of operations.Property, plant and equipment acquiredby way of finance leases is stated at anamount equal to the lower of the fair valueand the present value of the minimum leasepayments at the inception of the lease.Each lease payment is allocated betweenthe finance charges and a reduction of thelease liability. The interest element of thefinance cost is charged to the statementof operations over the lease period soas to achieve a constant rate of intereston the remaining balance of the liability.Investment in associates, joint venturesand other entitiesInvestments in associates and jointventures, in which ArcelorMittal has theability to exercise significant influence,are accounted for under the equitymethod. The investment is carried at thecost at the date of acquisition, adjustedfor ArcelorMittal’s equity in undistributedearnings or losses since acquisition,less dividends received and impairment.Any excess of the cost of the acquisitionover the Company’s share of the net fairvalue of the identifiable assets, liabilities,and contingent liabilities of the associateor joint venture recognized at the dateof acquisition is recognized as goodwill.The goodwill is included in the carryingamount of the investment and is evaluatedfor impairment as part of the investment.ArcelorMittal reviews all of its investmentsin associates and joint ventures at eachreporting date to determine whetherthere is an indicator that the investmentmay be impaired. If objective evidenceindicates that the investment is impaired,ArcelorMittal calculates the amount of theimpairment of the investments as being thedifference between the higher of the fairvalue less costs to sell or its value in useand its carrying value. The amount of anyimpairment is included in the overall incomefrom investments in associated companiesin the statement of operations.Investments in other entities, overwhich the Company and/or its OperatingSubsidiaries do not have the abilityto exercise significant influence and havea readily determinable fair value, areaccounted for at fair value with anyresulting gain or loss included in equity.To the extent that these investmentsdo not have a readily determinable fairvalue, they are accounted for underthe cost method.Assets held for saleNon-current assets, and disposal groups,are classified as held for sale and aremeasured at the lower of carrying amountand fair value less costs to sell. Assets anddisposal groups are classified as held forsale if their carrying amount will berecovered through a sale transaction ratherthan through continuing use. This conditionis regarded as met only when the sale ishighly probable and the asset, or disposalgroup, is available for immediate sale in itspresent condition and is marketed for saleat a price that is reasonable in relation toits current fair value. Assets held for saleare presented separately on the statementof financial position and are not depreciated.Deferred employee benefitsDefined contribution plans are thoseplans where ArcelorMittal pays fixedcontributions to an external life insuranceor pension fund for certain categoriesof employees. Contributions are paidin return for services rendered by theemployees during the period. They areexpensed as they are incurred in linewith the treatment of wages and salaries.No provisions are established in respectof defined contribution plans, as theydo not generate future commitmentsfor ArcelorMittal.
ArcelorMittal Annual Report 200914 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Defined benefit plans are those plans thatprovide guaranteed benefits to certaincategories of employees, either by wayof contractual obligations or through acollective agreement. For defined benefitplans, the cost of providing benefits isdetermined using the Projected Unit CreditMethod, with actuarial valuations beingcarried out at each statement of financialposition date. Actuarial gains and lossesthat exceed ten per cent of the greaterof the present value of the Company’sdefined benefit obligation and the fair valueof plan assets at the end of the prior yearare amortized over the expected averageremaining working lives of the participatingemployees. Past service cost is recognizedimmediately to the extent that the benefitsare already vested, and otherwise isamortized on a straight-line basis overthe average period until the benefitsbecome vested.The retirement benefit obligationrecognized in the statement of financialposition represents the present valueof the defined benefit obligation as adjustedfor unrecognized actuarial gains and lossesand unrecognized past service cost, andas reduced by the fair value of plan assets.Any asset resulting from this calculationis limited to unrecognized actuarial lossesand past service cost, plus the presentvalue of available refunds and reductionsin future contributions to the plan.Voluntary retirement plans primarilycorrespond to the practical implementationof social plans or are linked to collectiveagreements signed with certain categoriesof employees. Early retirement plansare those plans that primarily correspondto terminating an employee’s contractbefore the normal retirement date.Early retirement plans are consideredeffective when the affected employees haveformally been informed and when liabilitieshave been determined using an appropriateactuarial calculation. Liabilities relating to theearly retirement plans are calculated annuallyon the basis of the effective number ofemployees likely to take early retirementand are discounted using an interest ratewhich corresponds to that of highly-ratedbonds that have maturity dates similar tothe terms of the Company’s early retirementobligations. Termination benefits areprovided in connection with voluntaryseparation plans. The Company recognizesa liability and expense when it has a detailedformal plan which is without realisticpossibility of withdrawal and the planhas been communicated to employeesor their representatives.Other long-term employee benefits includevarious plans that depend on the length ofservice, such as long service and sabbaticalawards, disability benefits and long-termcompensated absences such as sick leave.The amount recognized as a liability is thepresent value of benefit obligations at thestatement of financial position date, and allchanges in the provision (including actuarialgains and losses or past service costs) arerecognized in the statement of operations.Provisions and accrualsArcelorMittal recognizes provisions forliabilities and probable losses that havebeen incurred when it has a present legalor constructive obligation as a resultof past events and it is probable thatthe Company will be required to settlethe obligation and a reliable estimateof the amount of the obligation canbe made. If the effect of the time valueof money is material, provisions arediscounted using a current pre-tax ratethat reflects, where appropriate, the risksspecific to the liability. Where discountingis used, the increase in the provision dueto the passage of time is recognized asa financing cost. Provisions for onerouscontracts are recorded in the statementof operations when it becomes knownthat the unavoidable costs of meeting theobligations under the contract exceed theeconomic benefits expected to be received.Provisions for restructuring relate to theestimated costs of initiated reorganizationsthat have been approved by the GroupManagement Board, and which involvethe realignment of certain parts of theindustrial and commercial organization.When such reorganizations requirediscontinuance and/or closure of linesor activities, the anticipated costs ofclosure or discontinuance are includedin restructuring provisions. A liabilityis recognized for those costs only whenthe Company has a detailed formal planfor the restructuring and has raised a validexpectation with those affected that it willcarry out the restructuring by starting toimplement that plan or announcing its mainfeatures to those affected by it.Environmental costsEnvironmental costs that relate to currentoperations are expensed or capitalized asappropriate. Environmental costs that relateto an existing condition caused by pastoperations, and which do not contribute tocurrent or future revenue generation or costreduction, are expensed. Liabilities are recordedwhen environmental assessments and/orremedial efforts are probable and the cost canbe reasonably estimated based on ongoingengineering studies, discussions withthe environmental authorities and otherassumptions relevant to the nature andextent of the remediation that may berequired. The ultimate cost to ArcelorMittalis dependent upon factors beyond its controlsuch as the scope and methodology of theremedial action requirements to be establishedby environmental and public health authorities,new laws or government regulations, rapidlychanging technology and the outcome of anypotential related litigation. Environmentalliabilities are discounted if the aggregateamount of the obligation and the amountand timing of the cash payments are fixedor reliably determinable.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 15Asset retirement obligationsArcelorMittal records asset retirementobligations (“ARO”) initially at the fair valueof the legal liability in the period in whichit is incurred and capitalizes the ARO byincreasing the carrying amount of the relatednon-current asset. The fair value of theobligation is determined as the discountedvalue of the expected future cash flows. Theliability is accreted to its present value eachperiod and the capitalized cost is depreciated inaccordance with the Company’s depreciationpolicies for property, plant and equipment.Income taxesThe tax currently payable is based ontaxable profit for the year. Taxable profitdiffers from profit as reported in theconsolidated statement of operationsbecause it excludes items of income orexpense that are taxable or deductiblein other years and it further excludesitems that are never taxable or deductible.The Company’s liability for current tax iscalculated using tax rates that have beenenacted or substantively enacted by thestatement of financial position date.Deferred tax is recognized on differencesbetween the carrying amounts of assetsand liabilities in the financial statementsand the corresponding tax basis used inthe computation of taxable profit, and isaccounted for using the statement offinancial position liability method. Deferredtax liabilities are generally recognized forall taxable temporary differences, anddeferred tax assets are generally recognizedfor all deductible temporary differences tothe extent that it is probable that taxableprofits will be available against which thosedeductible temporary differences canbe utilized. Such assets and liabilities arenot recognized if the taxable temporarydifference arises from the initial recognitionof goodwill or if the differences arise fromthe initial recognition (other than in abusiness combination) of other assets andliabilities in a transaction that affects neitherthe taxable profit nor the accounting profit.Deferred tax liabilities are recognized fortaxable temporary differences associated withinvestments in subsidiaries and associates, andinterests in joint ventures, except where theCompany is able to control the reversal of thetemporary difference and it is probable thatthe temporary difference will not reverse inthe foreseeable future. Deferred tax assetsarising from deductible temporary differencesassociated with such investments and interestsare only recognized to the extent that it isprobable that there will be sufficient taxableprofits against which to utilize the benefitsof the temporary differences and they areexpected to reverse in the foreseeable future.Deferred tax assets and liabilities aremeasured at the tax rates that areexpected to apply in the period in whichthe liability is settled or the asset realized,based on tax rates (and tax laws) thathave been enacted or substantivelyenacted by the statement of financialposition date. The measurement ofdeferred tax liabilities and assets reflectsthe tax consequences that would followfrom the manner in which the Companyexpects, at the reporting date, to recoveror settle the carrying amount of its assetsand liabilities. The carrying amount ofdeferred tax assets is reviewed at eachstatement of financial position date andreduced to the extent that it is no longerprobable that sufficient taxable profitswill be available to allow all or part of theasset to be recovered.Deferred tax assets and liabilities are offsetwhen there is a legally enforceable rightto set off current tax assets against currenttax liabilities and when they relate toincome taxes levied by the same taxationauthority and the Company intends tosettle its current tax assets and liabilitieson a net basis.Financial instrumentsDerivative financial instrumentsSee critical accounting judgments.Non-derivative financial instrumentsNon-derivative financial instrumentsinclude cash and cash equivalents,trade and other receivables, investmentsin equity securities, trade and otherpayables and debt and other liabilities.These instruments are recognized initiallyat fair value when the Company becomesa party to the contractual provisions of theinstrument. They are derecognized if theCompany’s contractual rights to the cashflows from the financial instruments expireor if the Company transfers the financialinstruments to another party withoutretaining control or substantially all risksand rewards of the instruments.The Company classifies its investmentsin equity securities that have readilydeterminable fair values as available-for-salewhich are recorded at fair value. Unrealizedholding gains and losses, net of the related taxeffect, on available-for-sale equity securitiesare reported as a separate component ofequity until realized. Realized gains and lossesfrom the sale of available-for-sale securitiesare determined on a first-in, first-out basis.Investments in privately held companiesthat are not considered equity methodinvestments are carried at cost.Debt and liabilities, other than provisions,are stated at amortized cost. However,loans that are hedged under a fair valuehedge are re-measured for the changesin the fair value that are attributable tothe risk that is being hedged.Impairment of financial assetsA financial asset is considered to be impairedif objective evidence indicates that one ormore events have had a negative effect onthe estimated future cash flows of that asset.Estimated future cash flows are determinedusing various assumptions and techniques,including comparisons to published pricesin an active market and discounted cash flowprojections using projected growth rates,weighted average cost of capital, and inflationrates. In the case of available-for-salesecurities, a significant or prolonged declinein the fair value of the security below its costis considered an indicator that the securitiesare impaired. If any such evidence existsfor available-for-sale financial assets, thecumulative loss measured as the differencebetween the acquisition cost and the currentfair value less any impairment loss on thatfinancial asset previously recognized in thestatement of operations is removed fromequity and recognized in the statementof operations.If objective evidence indicates thatcost-method investments need to be testedfor impairment, calculations are based oninformation derived from business plans andother information available for estimatingtheir value in use. Any impairment loss ischarged to the statement of operations.An impairment loss related to financial assetsis reversed if and to the extent there has beena change in the estimates used to determinethe recoverable amount. The loss is reversedonly to the extent that the asset’s carryingamount does not exceed the carryingamount that would have been determinedif no impairment loss had been recognized.Reversals of impairment are recognizedin net income except for reversals ofimpairment of available-for-sale equitysecurities, which are recognized in equity.
ArcelorMittal Annual Report 200916 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Emission rightsArcelorMittal’s industrial sites whichare regulated by the European Directive2003/87/EC of October 13, 2003 on carbondioxide (“CO2”) emission rights, effectiveas of January 1, 2005, are located primarilyin Germany, Belgium, Spain, France, Poland,Romania, Czech Republic and Luxembourg.The emission rights allocated to the Companyon a no-charge basis pursuant to the annualnational allocation plan are recorded on thestatement of financial position at nil valueand purchased emission rights are recorded atcost. Gains and losses from the sale of excessallowances are recognized in the statementof operations. If at the statement of financialposition date the Company is short of emissionrights, it will record a provision through thestatement of operations.Revenue recognitionRevenue is measured at the fair valueof the consideration received or receivable.Revenue is reduced for estimated customerreturns and other similar allowances.Revenue from the sale of goods is recognizedwhen the Company has transferred to thebuyer the significant risks and rewards ofownership of the goods, no longer retainscontrol over the goods sold, the amount ofrevenue can be measured reliably, it is probablethat the economic benefits associated withthe transaction will flow to the Company, andthe costs incurred or to be incurred in respectof the transaction can be measured reliably.Shipping and handling costsArcelorMittal records amounts billed to acustomer in a sale transaction for shippingand handling costs as sales and the relatedshipping and handling costs incurred as costof sales.Financing costsFinancing costs include interest incomeand expense, amortization of discountsor premiums on borrowings, amortizationof costs incurred in connection with thearrangement of borrowings and net gain orloss from foreign exchange on translationof long-term debt, net of unrealized gainsand losses on foreign exchange contracts.Earnings per common shareBasic earnings per common share iscomputed by dividing net income by theweighted average number of common sharesoutstanding during the year. Diluted earningsper share is computed by dividing incomeavailable to equity holders and assumedconversion by the weighted average numberof common shares and potential commonshares from outstanding stock options aswell as potential common shares from theconversion of certain convertible bondswhenever the conversion results in a dilutiveeffect. Potential common shares arecalculated using the treasury stock methodand represent incremental shares issuableupon exercise of the Company’s outstandingstock options.Stock option plan/share-based paymentsArcelorMittal issues equity-settledshare-based payments to certainemployees. Equity-settled share-basedpayments are measured at fair value(excluding the effect of non market-basedvesting conditions) at the date of grant.The fair value determined at the grant dateof the equity-settled share-basedpayments is expensed on a graded vestingbasis over the vesting period, based on theCompany’s estimate of the shares that willeventually vest and adjusted for the effectof non market-based vesting conditions.Fair value is measured using the Black-Scholes pricing model. The expected lifeused in the model has been adjusted, basedon management’s best estimate, for theeffects of non-transferability, exerciserestrictions and behavioral considerations.Segment reportingArcelorMittal reports its operations insix segments: Flat Carbon Americas, FlatCarbon Europe, Long Carbon Americas andEurope, Asia, Africa and Commonwealthof Independent States (“AACIS”), StainlessSteel and ArcelorMittal Steel Solutions andServices (“Steel Solutions and Services”).Operating segments are components of theCompany that engage in business activitiesfrom which they may earn revenues and incurexpenses (including revenues and expensesrelating to transactions with othercomponents of the Company), for whichdiscrete financial information is availableand whose operating results are evaluatedregularly by the chief operating decisionmaker to make decisions about resourcesto be allocated to the segment and assess itsperformance. ArcelorMittal’s chief operatingdecision maker is the Group ManagementBoard. Operating segments are aggregatedwhen they have similar economiccharacteristics on the basis of the nature ofproducts and services, production processes,the type of customers and the methods usedto distribute products or provide services.Long Carbon Americas, Long Carbon Europe,and Tubular Products have been combined forreporting purposes.These operating segments include attributablegoodwill, intangible assets, property, plant andequipment, and equity method investments.They do not include cash and short-termdeposits, short-term investments, tax assets,and other current financial assets. Attributableliabilities are also those resulting from thenormal activities of the segment, excludingtax liabilities and indebtedness but includingpost retirement obligations where directlyattributable to the segment. Financing itemsare managed centrally for the Company asa whole and so are not directly attributableto individual operating segments.Geographical information is separatelydisclosed and represents ArcelorMittal’s mostsignificant regional markets. Attributed assetsare operational assets employed in eachregion and include items such as pensionbalances that are specific to a country. Theydo not include attributed goodwill, deferredtax assets, other investments or receivablesand other non-current financial assets.Attributed liabilities are those arising withineach region, excluding indebtedness.Financing items are managed centrally for theCompany as a whole and so are not directlyattributable to individual geographical areas.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 17Critical accounting judgmentsThe critical accounting judgments andsignificant assumptions made bymanagement in the preparation of thesefinancial statements are provided below.Purchase AccountingAccounting for acquisitions requiresArcelorMittal to allocate the cost of theenterprise to the specific assets acquired andliabilities assumed based on their estimatedfair values at the date of the acquisition.In connection with each of its acquisitions,the Company undertakes a process to identifyall assets and liabilities acquired, includingacquired intangible assets. The judgmentsmade in identifying all acquired assets,determining the estimated fair value assignedto each class of assets acquired and liabilitiesassumed, as well as asset lives, can materiallyimpact results of operations. Estimated fairvalues are based on information availablenear the acquisition date and onexpectations and assumptions that havebeen deemed reasonable by management.There are several methods that can beused to determine the fair value of assetsacquired and liabilities assumed. Forintangible assets, the Company typicallyuses the “income method”. This methodis based on the forecast of the expectedfuture cash flows adjusted to present valueby applying an appropriate discount ratethat reflects the risk factors associatedwith the cash flow streams. Some of themore significant estimates and assumptionsinherent in the income method or othermethods include: the amount and timingof projected future cash flows; the discountrate selected to measure the risks inherentin the future cash flows (weighted averagecost of capital); the assessment of theasset’s life cycle and the competitive trendsimpacting the asset, including considerationof any technical, legal, regulatory,or economic barriers to entry.The most common purchase accountingadjustments relate to the following assetsand liabilities:• The fair value of identifiable intangibleassets (generally, patents, customerrelationships and favorable andunfavorable contracts) is estimatedas described above.• Property, plant and equipment is recordedat market value, or, if market value is notavailable, depreciated replacement cost.• The fair value of pension and otherpost-employment benefits is determinedseparately for each plan using actuarialassumptions valid as of the acquisitiondate relating to the population ofemployees involved and the fair valueof plan assets.• Inventories are estimated based onexpected selling prices at the date ofacquisition reduced by an estimate of sellingexpenses and a normal profit margin.• Adjustments to deferred tax assets andliabilities of the acquiree are recorded toreflect purchase price adjustments, otherthan goodwill.Determining the estimated useful livesof tangible and intangible assets acquiredrequires judgment, as different types ofassets will have different useful lives andcertain intangible assets may be consideredto have indefinite useful lives.If the fair value of the net assets acquiredexceeds their acquisition cost, the excessis recognized directly as a gain in thestatement of operations.Deferred Tax AssetsArcelorMittal records deferred tax assetsand liabilities based on the differencesbetween the carrying amount of assetsand liabilities in the financial statements andthe corresponding tax bases. Deferred taxassets are also recognized for the estimatedfuture effects of tax losses carried forward.ArcelorMittal reviews the deferred taxassets in the different jurisdictions in whichit operates periodically to assess thepossibility of realizing such assets basedon projected taxable profit, the expectedtiming of the reversals of existingtemporary differences, the carry forwardperiod of temporary differences and taxlosses carried forward and the implementationof tax-planning strategies.Note 18 describes the total deferred taxassets recognized in the consolidatedstatement of financial positions and theestimated future taxable income requiredto utilize the recognized deferred tax assets.Provisions for Pensions andOther Post Employment BenefitsArcelorMittal’s Operating Subsidiaries havedifferent types of pension plans for theiremployees. Also, some of the OperatingSubsidiaries offer other post-employmentbenefits, principally post-employmentmedical care. The expense associated withthese pension plans and post-employmentbenefits, as well as the carrying amount ofthe related liability/asset on the statementof financial position is based on a numberof assumptions and factors such as discountrates, expected rate of compensationincrease, expected return on plan assets,healthcare cost trend rates, mortality rates,and retirement rates.• Discount rates. The discount rate is basedon several high-quality corporate bondindexes in the appropriate jurisdictions(rated AA or higher by a recognized ratingagency). Nominal interest rates varyworldwide due to exchange rates andlocal inflation rates.• Rate of compensation increase. The rateof compensation increase reflects actualexperience and the Company’s long-termoutlook, including contractually agreedupon wage rate increases for representedhourly employees.• Expected return on plan assets. Theexpected return on plan assets is derivedfrom detailed periodic studies, which includea review of asset allocation strategies,anticipated long-term performance ofindividual asset classes, risks (standarddeviations), and correlations of returnsamong the asset classes that comprise theplans’ asset mix.• Healthcare cost trend rate. The healthcarecost trend rate is based on historicalretiree cost data, near-term healthcareoutlook, including appropriate costcontrol measures implemented bythe Company, and industry benchmarksand surveys.• Mortality and retirement rates. Mortalityand retirement rates are based on actualand projected plan experience.
ArcelorMittal Annual Report 200918 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)In accordance with IFRS, actuarial gainsor losses resulting from experience andchanges in assumptions are recognizedin ArcelorMittal’s statement of operationsonly if the net cumulative unrecognizedactuarial gains and losses at the end of theprevious reporting period exceeded thegreater of 10% of the present value of thedefined benefit obligation at that date and10% of the fair value of any plan asset atthat date. The fraction exceeding 10% isthen recognized over the expected averageremaining working lives of the employeesparticipating in the plans.Note 22 details the net liabilities of pensionplans and other post-employment benefitsincluding a sensitivity analysis illustratingthe effects of changes in assumptions.Environmental and Other ContingenciesArcelorMittal is subject to changing andincreasingly stringent environmental laws andregulations concerning air emissions, waterdischarges and waste disposal, as well ascertain remediation activities that involve theclean-up of soil and groundwater. ArcelorMittalis currently engaged in the investigation andremediation of environmental contaminationat a number of its facilities. Most of these arelegacy obligations arising from acquisitions.ArcelorMittal recognizes a liability forenvironmental remediation when it is morelikely than not that such remediation will berequired and the amount can be estimated.The estimates of loss contingencies forenvironmental matters and othercontingencies are based on various judgmentsand assumptions including the likelihood,nature, magnitude and timing of assessment,remediation and/or monitoring activities andthe probable cost of these activities. In somecases, judgments and assumptions are maderelating to the obligation or willingness andability of third parties to bear a proportionateor allocated share of cost of these activities,including third parties who sold assets toArcelorMittal or purchased assets from itsubject to environmental liabilities.ArcelorMittal also considers, among otherthings, the activity to date at particular sites,information obtained through consultationwith applicable regulatory authorities andthird-party consultants and contractors and itshistorical experience with other circumstancesjudged to be comparable. Due to the numerousvariables associated with these judgments andassumptions, and the effects of changes ingovernmental regulation and environmentaltechnologies, both the precision and reliabilityof the resulting estimates of the relatedcontingencies are subject to substantialuncertainties. As estimated costs to remediatechange, the Company will reduce or increasethe recorded liabilities through creditsor charges in the statement of operations.ArcelorMittal does not expect theseenvironmental issues to affect the utilizationof its plants, now or in the future.Impairment of Tangible and IntangibleAssets, including GoodwillAt each reporting date, ArcelorMittalreviews the carrying amounts of its tangibleand intangible assets (excluding goodwill)to determine whether there is any indicationthat the carrying amount of those assetsmay not be recoverable through continuinguse. If any such indication exists, therecoverable amount of the asset isreviewed in order to determine the amountof the impairment, if any. The recoverableamount is the higher of its net selling price(fair value reduced by selling costs) andits value in use.In assessing its value in use, the estimatedfuture cash flows are discounted to theirpresent value using a pre-tax discount ratethat reflects current market assessments ofthe time value of money and the risks specificto the asset. For an asset that does notgenerate cash inflows largely independentof those from other assets, the recoverableamount is determined for the cash-generatingunit to which the asset belongs. The cashgeneratingunit is the smallest identifiablegroup of assets corresponding to operatingunits that generate cash inflows. If therecoverable amount of an asset (or cashgenerating unit) is estimated to be less thanits carrying amount, an impairment loss isrecognized. An impairment loss is recognizedas an expense immediately as part of operatingincome in the statement of operations.An impairment loss recognized in prioryears is reversed if, and only if, therehas been a change in the estimates usedto determine the asset’s recoverableamount since the last impairment losswas recognized. However, the increasedcarrying amount of an asset due to areversal of an impairment loss will notexceed the carrying amount that wouldhave been determined (net of amortizationor depreciation) had no impairment lossbeen recognized for the asset in prior years.A reversal of an impairment loss is recognizedimmediately as part of operating income inthe statement of operations.Goodwill is reviewed at the group ofcash-generating units level for impairmentannually, as of November 30, or wheneverchanges in circumstances indicate that thecarrying amount may not be recoverable.The recoverable amounts of the groupsof cash-generating units are determinedfrom the higher of its net selling price(fair value reduced by selling costs) orits value in use calculations, as describedabove. The key assumptions for the valuein use calculations are those regarding thediscount rates, growth rates and expectedchanges to selling prices and direct costsduring the period. Management estimatesdiscount rates using pre-tax rates thatreflect current market rates for investmentsof similar risk. The growth rates are basedon industry growth forecasts. Changesin selling prices and direct costs are basedon historical experience and expectationsof future changes in the market.Cash flow forecasts are derived from themost recent financial budgets for the nextfive years. Beyond the specifically forecastedperiod, the Company extrapolates cashflows for the remaining years based on anestimated growth rate. This rate does notexceed the average long-term growth ratefor the relevant markets. Once recognized,impairment losses recognized for goodwillare not reversed.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 19Derivative financial instrumentsThe Company enters into derivativefinancial instruments principally to manageits exposure to fluctuation in interest rates,exchange rates, prices of raw materials,energy and emission rights allowances.Derivative financial instruments areclassified as current assets or liabilitiesbased on their maturity dates and areaccounted for at trade date. Embeddedderivatives are separated from the hostcontract and accounted for separately ifrequired by IAS 39, “Financial Instruments:Recognition and Measurement”.The Company measures all derivativefinancial instruments based on fairvalues derived from market prices of theinstruments or from option pricing models,as appropriate. Gains or losses arising fromchanges in fair value of derivatives arerecognized in the statement of operations,except for derivatives that are highlyeffective and qualify for cash flowor net investment hedge accounting.Changes in the fair value of a derivativethat is highly effective and that isdesignated and qualifies as a fair valuehedge, along with the gain or loss on thehedged asset, liability, or unrecognizedfirm commitment of the hedged itemthat is attributable to the hedged risk, arerecorded in the statement of operations.Changes in the fair value of a derivativethat is highly effective and that isdesignated and qualifies as a cash flowhedge are recorded in equity. Amountsdeferred in equity are recorded in thestatement of operations in the periodswhen the hedged item is recognizedin the statement of operations and withinthe same line item.The Company formally assesses, both atthe hedge’s inception and on an ongoingbasis, whether the derivatives that areused in hedging transactions are highlyeffective in offsetting changes in fair valuesor cash flows of hedged items. When ahedging instrument is sold, terminated,expires or is exercised the cumulatedunrealized gain or loss on the hedginginstrument is maintained in equity untilthe forecasted transaction occurs. If thehedged transaction is no longer probable,the cumulative unrealized gain or loss,which had been recognized in equity,is reported immediately in the statementof operations.Foreign currency differences arisingon the retranslation of a financial liabilitydesignated as a hedge of a net investmentin a foreign operation are recognizeddirectly as a separate component of equity,to the extent that the hedge is effective.To the extent that the hedge is ineffective,such differences are recognized in thestatement of operations.Use of estimatesThe preparation of financial statementsin conformity with IFRS recognition andmeasurement principles and, in particular,making the aforementioned criticalaccounting judgments require the useof estimates and assumptions that affectthe reported amounts of assets, liabilities,revenues and expenses. Managementreviews its estimates on an ongoing basisusing currently available information.Changes in facts and circumstances mayresult in revised estimates, and actualresults could differ from those estimates.Note 3: AcquisitionsAcquisitions have been accounted forusing the purchase method of accountingand, accordingly, the assets acquired andliabilities assumed have been recordedat their estimated fair values as of thedate of acquisition.Significant acquisitions made during theyears ended December 31, 2008 and2009 include:UniconOn April 4, 2008, the Companycompleted the acquisition of IndustriasUnicon (“Unicon”), Venezuela’s leadingmanufacturer of welded steel pipes for atotal consideration of 350 (336 net of 14of cash acquired). The Company completedthe purchase price allocation in 2009.Intangible assets were recognized fora total amount of 130 with respect tothe valuation of trade mark and customerrelationships. The acquisition of Uniconresulted in the consolidation of total assetsof 591 and total liabilities of 413. The finalgoodwill amounted to 158.Russian coal minesOn April 10, 2008, the Companycompleted the acquisition fromSeverstal of three coal mines(Berezovskaya, Pervomayskaya andAnzherskoye) and associated assets locatedin the Kemerovo region in Russia for a totalconsideration of 720 (715 net of 5 of cashacquired) consisting of 272 for the sharesand 448 related to a debt repayment. TheCompany completed the purchase priceallocation in 2009. The fair value of themining reserves was stated at 365 andgoodwill amounted to 169. The acquisitionof the Russian coal mines resulted in theconsolidation of total assets of 887 andtotal liabilities of 789. The operatingsubsidiary has been subsequently renamedArcelorMittal Northern Kuzbass.Bayou SteelOn July 31, 2008, ArcelorMittal completedthe acquisition of Bayou Steel, LLC, aproducer of structural steel products withfacilities in LaPlace, Louisiana and Harriman,Tennessee (USA) for a total considerationof 509 (504 net of 5 of cash acquired).The Company completed the purchaseprice allocation in 2009. The acquisitionof Bayou Steel resulted in the consolidationof total assets of 494 and total liabilitiesof 153. The final goodwill amountedto 163. The operating subsidiary has beensubsequently renamed ArcelorMittal LaPlace.Mid Vol and ConceptOn June 30, 2008, the Companycompleted the acquisition of Mid Vol CoalGroup for a total consideration of 491(453 net of 38 of cash acquired). OnAugust 18, 2008, ArcelorMittal finalizedthe acquisition of Concept Group for a totalconsideration of 166 (152 net of 14 ofcash acquired). These acquisitions operatecoal mines in the states of West Virginiaand Virginia (USA). The Companycompleted the purchase price allocation in2009. The fair value of the mining reserveswas 474 for Mid Vol and 177 for Concept.The acquired liabilities included 551assigned to unfavorable selling contractsthat are being amortized over the termof the associated contracts ranging fromfour months to two years. The acquisitionof Mid Vol and Concept resulted in theconsolidation of total assets of 1,061 andtotal liabilities of 655. The goodwill was145 for Mid Vol and 54 for Concept.The operating subsidiary was subsequentlyrenamed ArcelorMittal Princeton.
ArcelorMittal Annual Report 200920 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)London MiningOn August 20, 2008, the Company acquiredLondon Mining South America Limited, aniron ore mine located in the Serra Azul regionin Brazil for a total consideration of 818(813 net of 5 of cash acquired) consistingof 772 for the shares and 46 related to a debtrepayment. Following the finalization of theallocation of the purchase price in 2009, themining reserve was stated at 319 and goodwillamounted to 441. The acquisition of LondonMining resulted in the consolidation of totalassets of 405 and total liabilities of 79.The operating subsidiary was subsequentlyrenamed ArcelorMittal Serra Azul.Koppers MonessenOn October 1, 2008, the Companycompleted the acquisition of KoppersMonessen Partners LP, a coke plant locatedin Monessen, Pennsylvania (USA) for a totalconsideration of 170 (169 net of 1 of cashacquired). The Company completed thepurchase price allocation in 2009. Theacquisition of Koppers Monessen resultedin the consolidation of total assets of 152and total liabilities of 137. The resulting finalgoodwill amounted to 154. The acquiredassets included 61 assigned to favorable coalpurchase contracts and the acquired liabilitiesincluded 125 assigned to unfavorablecoal supply contracts. As the unfavorablecoal supply contracts were supplying theCompany itself, a gain of 125 was recognizedafter the acquisition as a result of thesettlement of pre-existing relationshipbetween the acquirer and the acquiree.DSTC FZCOOn January 31, 2009, ArcelorMittalcompleted the acquisition of 60%of DSTC FZCO, a newly incorporatedcompany located in the Dubai free zonewhich will acquire the main business ofDubai Steel Trading Company LLC, a steeldistributor in the United Arab Emirates,for a total consideration of 67. An optionfor an additional 10% stake can beexercised between September 1, 2010and January 31, 2011. The allocation ofthe total purchase price was preliminaryas of December 31, 2009. The preliminarygoodwill amounted to 50. The net resultconsolidated since the acquisition dateamounts to 1.Noble BVOn May 8, 2009, ArcelorMittal signeda definitive purchase agreement withNoble European Holdings B.V.’s (“Noble BV”)parent Noble International, Ltd., which filedfor reorganization under the bankruptcylaws of the United States on April 15,2009. Following the approval from theEuropean Commission on July 8, 2009,the Company completed on July 17, 2009,the acquisition of all the issued and outstandingshares of Noble BV, a Dutch private limitedliability company engaged in laser weldedblanks operations primarily in Europe.Total consideration paid was 2 and cashacquired was 15. Total debt assumedamounted to 80. The purchase wasmade under section 363 of Chapter 11of the United States Bankruptcy Codeby authorization of the United StatesBankruptcy Court for the Eastern Districtof Michigan. The allocation of the totalpurchase price was preliminary as ofDecember 31, 2009. The net resultconsolidated since the acquisition dateamounts to (8).Acquisitions of non-controlling interestsThe Company acquired significant noncontrollinginterests in 2008 and 2009.ArcelorMittal Kryviy RihThe Company’s ownership in ArcelorMittalKryviy Rih increased from 95.02% in 2008to 95.13% in 2009. In 2009, the reductionin non-controlling interests was 6 and theresulting goodwill amounted to 1. In 2008,the reduction in non-controlling interestswas 18 and the resulting goodwillamounted to 38.ArcelorMittal Inox BrasilOn April 4, 2008 the Companycompleted the delisting offer to acquireall of the remaining outstanding sharesof ArcelorMittal Inox Brasil. Followingthe squeeze out, the Company’s stakeincreased from 57.4% to 100% for a totalconsideration of 1,757. The transactionresulted in a reduction of non-controllinginterests of 863 and goodwill of 894.AcindarOn November 20, 2008 the Companycompleted the delisting offer to acquireall of the remaining outstanding shares ofAcindar Industria Argentina de Aceros S.A.Following the squeeze out, the Companyacquired a 35% stake for a totalconsideration of 564. The transactionresulted in a reduction of non-controllinginterests of 321 and goodwill of 243.ArcelorMittal OstravaIn July 2009, the Company increasedits stake in ArcelorMittal Ostrava to82.55% through the acquisition from theCzech Government of a 10.97% stakerepresented by 1,359,083 shares.The total acquisition price was 375,of which 55 was paid at closing ofthe agreement with the remaining320 to be paid in six annual installments.The resulting negative goodwill amountedto 82.On October 30, 2009, ArcelorMittalsigned an agreement to acquire anadditional 13.88% in ArcelorMittal Ostravafrom a subsidiary of PPF Group N.V. Theconsideration to be paid amounts to 371and the transaction was completed inJanuary 2010 upon settlement of thepurchase price.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 21Summary of significant acquisitionsThe tables below summarize the estimated fair value of the assets acquired and liabilities assumed for significant acquisitions and theacquisition of non-controlling interests:2008 2009AcquisitionAcquisitionRussian of non- of noncoalMid Vol & London Koppers Bayou controlling controllingmines 1 Concept 1 Unicon 1 Mining 1 Monessen 1 Steel 1 interests Others DSTC 2 Noble 2 interestsCurrent assets 145 35 280 54 25 202 — 320 57 90 —Property, plant and equipment 716 736 181 350 40 212 — 336 1 105 —Other assets 26 290 130 1 87 80 — 47 — 26 —Total assets acquired 887 1,061 591 405 152 494 — 703 58 221 —Current liabilities 179 172 255 54 137 44 — 185 30 139 —Long-term debt 449 — 78 15 — 2 — 138 — 92 —Other long-term liabilities 125 426 6 3 — 11 — 8 1 3 —Deferred tax liabilities 36 57 68 7 — 96 — 4 — — —Non-controlling interests — — 6 — — — 1,365 — — — 353Total liabilities assumed 789 655 413 79 137 153 1,365 335 31 234 353Total net assets 98 406 178 326 15 341 1,365 368 27 (13) 353Non-controlling interests — — — — — — — 75 10 — —Net assets acquired 98 406 178 326 15 341 1,365 293 17 (13) 353Fair value of shares issued — — — — — — — — — — —Cash paid, net 715 605 336 813 169 504 2,648 411 67 (13) 66Debt repayment (448) — — (46) — — — (117) — — —Debt outstanding on acquisition — — — — — — — 76 — — 207Equity investment — — — — — — — — — — —Purchase price, net 267 605 336 767 169 504 2,648 370 67 (13) 273Revaluation of interests previously held — — — — — — — — — — —Goodwill 169 199 158 441 154 163 1,300 89 50 — 2Negative goodwill (17) (12) (82)1During 2009, the Company finalized the purchase price allocation for Russian Mines, Mid Vol and Concept, Unicon, London Mining,Koppers Monessen and Bayou Steel. 2008 information has been adjusted retrospectively as required by IFRS.2Based on a preliminary purchase price allocation, which is subject to change.The total purchase price for the significant acquisitions consists of the following:Russiancoal Mid Vol & London Koppers Bayoumines Concept Unicon Mining Monessen SteelCash paid to stockholders, gross 719 655 349 814 170 509Transaction related fees 1 2 1 4 — —Total purchase price 720 657 350 818 170 509Debt repayment (448) — — (46) — —Cash acquired (5) (52) (14) (5) (1) (5)Equity investments acquired — — — — — —Total purchase price, net 267 605 336 767 169 5042008
ArcelorMittal Annual Report 200922 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The table below summarizes the finalization in 2009 of the purchase price allocation for acquisitions made in 2008:Preliminaryallocation Adjustments allocationCurrent assets 1,010 51 1,061Property, plant & equipment 3,183 (612) 2,571Other assets 599 62 661Total assets acquired 4,792 (499) 4,293Current liabilities 1,074 (48) 1,026Long-term loan 682 — 682Other long-term liabilities 433 146 579Deferred tax liabilities 270 (2) 268Non-controlling interests 44 37 81Total liabilities assumed 2,503 133 2,636Total net assets acquired 2,289 (632) 1,657Purchase price, net 3,047 (29) 3,018Goodwill 758 603 1,361 1Final1Includes negative goodwill of 12As a result of the finalization of the purchase price allocation for acquisitions made in 2008, net income for the year endedDecember 31, 2008 was increased by 59.The preliminary fair value adjustments for acquisitions made in 2009 are as follows:Historical Preliminary PreliminaryIFRS fair value allocation ofinformation adjustments purchase priceCurrent assets 171 (24) 147Property, plant and equipment 122 (16) 106Other assets 14 12 26Total assets acquired 307 (28) 279Current liabilities 130 39 169Long-term debt 92 — 92Other long-term liabilities 3 1 4Deferred tax liabilities — — —Non-controlling interests 20 (10) 10Total liabilities assumed 245 30 275Total net assets acquired 62 (58) 4Purchase price, net 54 — 54Goodwill (8) 58 50
ArcelorMittal Annual Report 2009Consolidated Financial Statements 23Pro Forma ResultsThe following pro forma financial information presents the results of operations of ArcelorMittal for 2008 as if all acquisitionshad occurred as of the beginning of the periods presented. The pro forma financial information is not necessarily indicativeof what consolidated results of operations would have been had the acquisitions been completed at the dates indicated. In addition,the pro forma financial information does not purport to project the future results of operations of the combined company. Pro formainformation was not presented for 2009 as the impact is not material.Unaudited Pro Formafor the year endedDecember 31, 2008*Sales 125,614Net income 9,468Per share amountsBasic earnings per common share 6.85Diluted earnings per common share 6.83* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see above).Note 4: Assets and Liabilities Held For SaleOn August 30, 2007 the Company acquired a 76.9% stake in the German gas distribution company Saar Ferngas AG (“Saar Ferngas”)for total consideration of 542. Following the contribution of the total stake in Saar Ferngas of 540 on January 23, 2009 to anArcelorMittal associated company Soteg, the stake held by ArcelorMittal in Soteg, a Luxembourg gas and electricity producer anddistributor, increased from 20% to 26.15%. This was a non-cash investing activity. On February 16, 2009, ArcelorMittal sold 2.48%of Soteg to the Government of Luxembourg and Société Nationale de Crédit et d’Investissement (“SNCI”), a Luxembourg governmentcontrolled investment company for proceeds of 58 and a gain of 3.On October 9, 2009, the Company signed an agreement to divest its 28.6% stake in Wabush mines in Canada for a total considerationof 38. The transaction was completed on February 1, 2010.December 31, December 31,2008 2009Assets classified as held for sale:Property, plant and equipment 417 —Trade accounts receivable and other 201 —Other assets 292 1Total 910 1December 31, December 31,2008 2009Liabilities classified as held for sale:Trade accounts payable and other 271 1Other liabilities 99 10Total 370 11
ArcelorMittal Annual Report 200924 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 5: Trade Accounts Receivable and OtherTotal trade accounts receivable (net of allowances) held by ArcelorMittal amounted to 6,737 and 5,750 at December 31, 2008,and 2009, respectively.Before accepting any new customer, ArcelorMittal uses an internally developed credit scoring system to assess the potential customer’scredit quality and to define credit limits by customer. For all significant customers the credit terms must be approved by the creditcommittees of each individual segment. Limits and scoring attributed to customers are reviewed periodically. There are no customerswho represent more than 5% of the total balance of trade accounts receivable.Included in ArcelorMittal’s trade accounts receivable balance are debtors with a carrying amount of 5,125 and 4,459 as of December31, 2008 and 2009, respectively, which were not past due at the reporting date.The trade accounts receivable balances are as follows as of December 31, 2008 and 2009:2008 2009Gross amount 7,108 6,132Allowance for doubtful accounts (371) (382)Total 6,737 5,750Exposure to credit risk by reportable segmentThe maximum exposure to credit risk for trade accounts receivable at December 31 by reportable segment is:2008 2009Flat Carbon Americas 543 701Flat Carbon Europe 1,330 831Long Carbon Americas and Europe 1,777 1,740Steel Solutions and Services 1,914 1,412AACIS 505 584Stainless Steel 454 290Other activities 214 192Total 6,737 5,750Exposure to credit risk by geographyThe maximum exposure to credit risk for trade accounts receivable at December 31 by geographical area is:2008 2009Europe 4,280 3,318North America 909 752South America 884 1,015Africa and Asia 542 528Middle East 122 137Total 6,737 5,750
ArcelorMittal Annual Report 2009Consolidated Financial Statements 25Aging of trade accounts receivableThe aging of trade accounts receivable as of December 31 is as follows:2008 2009Gross Allowance Gross AllowanceNot past due 5,125 (50) 4,459 (61)Past due 0-30 days 1,159 (50) 862 (13)Past due 31-120 days 552 (181) 376 (25)More than 120 days 272 (90) 435 (283)Total 7,108 (371) 6,132 (382)The movement in the allowance for doubtful accounts in respect of trade accounts receivable during the year is as follows:Balance as of Deductions/ Balance as ofDecember 31, 2007 Additions Releases Others December 31, 2008417 68 (81) (33) 371Balance as of Deductions/ Balance as ofDecember 31, 2008 Additions Releases Others December 31, 2009371 66 (73) 18 382The Company has established sales without recourse of trade accounts receivable programs with financial institutions, referred to asTrue Sale of Receivables (“TSR”). Through the TSR programs, Operating Subsidiaries surrender control, risks and the benefits associatedwith the accounts receivable sold; therefore, the amount of receivables sold is recorded as a sale of financial assets and the balances areremoved from the statement of financial position at the moment of sale. Expenses incurred under the TSR programs are recognized inthe statement of operations and amounted to 228 and 110 in 2008 and 2009, respectively.Note 6: InventoriesInventory, net of allowance for slow-moving inventory, excess of cost over net realizable value and obsolescence of 3,519 and 1,540as of December 31, 2008 and 2009, respectively, is comprised of the following:December 31, December 31,2008* 2009Finished products 7,788 5,391Production in process 4,501 3,513Raw materials 9,784 5,921Manufacturing supplies, spare parts and other 2,681 2,010Total 24,754 16,835The amount of inventory pledged as collateral was 352 and 116 as of December 31, 2008 and 2009, respectively.* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 200926 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The movement in the allowance for obsolescence is as follows:Balance as of Deductions/ Balance as ofDecember 31, 2007 Additions Consumption Others December 31, 2008799 3,049 (303) (26) 3,519Balance as of Deductions/ Balance as ofDecember 31, 2008 Additions Consumption Others December 31, 20093,519 2,374 (4,405) 52 1,540The cost of inventories recognized as an expense during the period was 42,433 and 31,369 in 2008 and 2009, respectively.Due to the sharp decline in the market prices of raw materials and steel demand in the last quarter of 2008 and in the beginning of2009, the Company wrote down its inventory to its net realizable value. The amount of write-down of inventories to net realizablevalue recognized as an expense was 3,049 and 2,374 in 2008 and 2009, respectively, and was reduced by 303 and 4,405 in 2008and 2009, respectively, due to normal inventory consumption.Note 7: Prepaid Expenses and Other Current AssetsOther current assets consist of advance payments to taxing and other public authorities (including value-added tax (“VAT”), advances toemployees, prepayments, accrued interest, dividends receivable and other miscellaneous receivables.December 31, December 31,2008* 2009VAT recoverable 1,758 1,298Income tax receivable 837 983Revaluation of derivative financial instruments 320 735Other 1,515 1,196Total 4,430 4,212* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 2009Consolidated Financial Statements 27Note 8: Goodwill and Intangible AssetsGoodwill and intangible assets are summarized as follows:ConcessionsGoodwill on patents Favorableacquisition and licenses contracts Other TotalCostAt December 31, 2007 12,966 669 1,023 1,883 16,541Acquisitions* 2,673 128 76 17 2,894Disposals — (66) — (270) (336)Adjustment on allocation of purchase price (194) — — 65 (129)Foreign exchange differences* (586) (85) (35) (143) (849)Transfers and other movements* 154 289 64 267 774At December 31, 2008* 15,013 935 1,128 1,819 18,895Acquisitions 52 32 — 12 96Disposals (116) (12) (59) (1) (188)Foreign exchange differences 595 77 21 107 800Transfers and other movements 11 31 (23) 76 95At December 31, 2009 15,555 1,063 1,067 2,013 19,698Accumulated amortization and impairment lossesAt December 31, 2007 303 220 634 353 1,510Disposals — (63) — (268) (331)Impairment and reduction of goodwill 560 — — — 560Amortization charge* — 100 271 223 594Foreign exchange differences (26) (62) (30) (27) (145)Transfers and other movements — 33 44 (6) 71At December 31, 2008* 837 228 919 275 2,259Disposals (116) (9) (59) (1) (185)Amortization charge — 80 128 242 450Foreign exchange differences 11 46 22 34 113Transfers and other movements (5) 40 (10) 2 27At December 31, 2009 727 385 1,000 552 2,664Carrying amountAt December 31, 2008* 14,176 707 209 1,544 16,636At December 31, 2009 14,828 678 67 1,461 17,034* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 200928 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Goodwill acquired in business combinations and acquisitions of non-controlling interests are as follows:AcquisitionsExchange rateNet value (including differences Impairment Adjustment on Net valueDecember 31, non-controlling and other and other allocation of December 31,2007 interests) movements reductions purchase price 2008Flat Carbon Europe 2,925 511 (183) (248) — 3,005Flat Carbon Americas 3,536 369 189 (17) — 4,077Long Carbon Europe 1,252 — (13) (2) — 1,237Long Carbon Americas 1,674 423 78 (292) (131) 1,752Tubular Products — 158 — — — 158AACIS 1,400 207 (95) — — 1,512Stainless 926 902 (280) — (63) 1,485Steel Solutions and Services 933 100 (82) (1) — 950Others 17 3 (20) — — —Total 12,663 2,673 (406) (560) (194) 14,176AcquisitionsExchange rateNet value (including differences Impairment Adjustment on Net valueDecember 31, non-controlling and other and other allocation of December 31,2008 interests) movements reductions purchase price 2009Flat Carbon Europe 3,005 — 190 — — 3,195Flat Carbon Americas 4,077 — 2 — — 4,079Long Carbon Europe 1,237 — 43 — — 1,280Long Carbon Americas 1,752 — 7 — — 1,759Tubular Products 158 — — — — 158AACIS 1,512 1 5 — — 1,518Stainless 1,485 — 303 — — 1,788Steel Solutions and Services 1 950 51 50 — — 1,051Others — — — — — —Total 14,176 52 600 — — 14,8281Subject to change upon finalization of purchase price allocationThe allocation by segment and operating unit has been aligned with the group of cash-generating units (“GCGU”) defined for impairmenttesting purposes and presented in the table above. This represents the lowest level at which goodwill is monitored for internalmanagement purposes and in all cases is at or below the Company’s operating segment.Goodwill is tested at the GCGU level for impairment annually, as of November 30, or whenever changes in circumstances indicatethat the carrying amount may not be recoverable. The recoverable amounts of the GCGUs are determined based on their value in use.The Company determined to calculate value in use for purposes of its impairment testing and, accordingly, did not determine the fairvalue of the GCGUs as the carrying value of the GCGUs was lower than their value in use. The key assumptions for the value in usecalculations are primarily the discount rates, growth rates and expected changes to average selling prices, shipments and direct costsduring the period.The value in use of each GCGU was determined by estimating cash flows for a period of five years. Assumptions for average sellingprices and shipments are based on historical experience and expectations of future changes in the market. Cash flow forecasts arederived from the most recent financial plans approved by management.Beyond the specifically forecasted period of five years, the Company extrapolates cash flows for the remaining years based onan estimated constant growth rate of 2%. This rate does not exceed the average long-term growth rate for the relevant markets.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 29Management estimates discount rates using pre-tax rates that reflect current market rates for investments of similar risk. The rate foreach GCGU was estimated from the weighted average cost of capital of producers which operate a portfolio of assets similar to thoseof the Company’s assets.SteelFlat Flat Long Long SolutionsCarbon Carbon Carbon Carbon Tubular Stainless andEurope Americas Europe Americas Products AACIS Steel ServicesGCGU weighted average pre-taxdiscount rate used in 2008 (in %) 14.3 15.7 13.9 17.3 19.8 15.5 13.6 12.3GCGU weighted average pre-taxdiscount rate used in 2009 (in %) 13.9 13.8 14.1 16.2 20.2 17.6 14.8 13.6When estimating average selling price, the Company used a range of assumptions between $540 per tonne and $820 per tonneincreased by a range on average of 3% over the next four years depending on the markets in which each GCGU is operating. RegardingStainless Steel activities, the Company used a range (Stainless Base Price 304 Germany) of €1,294 in 2010 to €1,300 per tonne in2014 with a maximum of €1,356 in 2011.As a result of the significance of the global economic slowdown, its impact on the Company and the expected pace of recovery, thevalue in use calculated for all GCGU in 2009 has decreased from that determined in 2008. However, the results of the Company’sgoodwill impairment test as of November 30, 2009 for each GCGU did not result in an impairment of goodwill as the value in useexceeded, in each case, the carrying value of the GCGU.In validating the value in use determined for the GCGU, key assumptions used in the discounted cash-flow model (such as discountrates, average selling prices, shipments and terminal growth rate) were sensitized to test the resilience of value in use. Managementbelieves that reasonably possible changes in key assumptions would cause an impairment loss to be recognized in respect of AACIS andStainless Steel. AACIS produces a combination of flat and long products and tubular products. Its facilities are located in Asia, Africa andCommonwealth of Independent States. Stainless Steel produces flat and long stainless steel and alloy products from its plants in Europeand South America.The following changes in key assumptions in projected earnings in every year of the initial five-year period, assuming unchanged valuesfor the other assumptions, would cause the recoverable amount to equal the respective carrying value.AACISStainlessSteelExcess of recoverable amount over carrying amount 1 20 175Increase in pre-tax discount rate (change in basis points) 2 32Decrease in average selling price (change in %) 2 0.15 —Decrease in raw material margin (change in %) 2 — 0.75Decrease in shipments (change in %) 0.06 0.75Decrease in terminal growth rate used for the years beyond the five-year plan (change in basis points) 4 481As required by IFRS, the amount for AACIS considers the imputed goodwill related to non-controlling interests primarily in South Africa.2The Company determined that the relevant key assumption for Stainless Steel was raw material margin rather than average selling price.During 2008, the Company recorded a reduction of goodwill of 429 and an impairment of goodwill of 131. The reduction of goodwill isdue to the recognition of deferred tax assets on acquired net operating losses not previously recognized in purchase accounting becausethey did not satisfy the criteria for separate recognition when the business combination was initially accounted for. These amounts havebeen included within cost of sales in the statement of operations.The impairment of goodwill recorded in 2008 included primarily the write-of in full of the goodwill associated with Noble International Ltd.of 116 and a partial write-down of the goodwill associated with ArcelorMittal Skopje (15). These two subsidiaries represent the onlysubsidiaries for which goodwill has been allocated and are internally monitored for goodwill impairment at the individual cash-generatingunit (“CGU”). The recognition of these impairment losses resulted from a decline in the specific economic conditions faced by thesetwo subsidiaries.
ArcelorMittal Annual Report 200930 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)At December 31, 2008 and 2009, the Company had 16,636 and 17,034 of intangible assets, of which 14,176 and 14,828represented goodwill, respectively. Other intangible assets of 1,544 and 1,461 as of December 31, 2008 and 2009, respectively,were comprised primarily of customer relationships, trademarks and technology, and have definite useful lives.Research and development costs not meeting the criteria for capitalization are expensed and included in selling, general andadministrative expenses within the statement of operations. These costs amounted to 295 and 253 in the years endedDecember 31, 2008, and 2009, respectively.Note 9: Property, Plant and EquipmentProperty, plant and equipment are summarized as follows:Land, buildings and Machinery and Constructionimprovements equipment in progress TotalCostAt December 31, 2007 19,170 55,100 3,779 78,049Additions 350 1,771 3,410 5,531Acquisitions through business combinations 1,745 747 79 2,571Foreign exchange differences (2,308) (6,412) (321) (9,041)Disposals (150) (873) (39) (1,062)Other movements 412 3,158 (2,875) 695At December 31, 2008* 19,219 53,491 4,033 76,743Additions 119 787 1,656 2,562Acquisitions through business combinations 58 44 4 106Foreign exchange differences 1,142 3,770 164 5,076Disposals (116) (729) (104) (949)Other movements 413 2,257 (2,304) 366At December 31, 2009 20,835 59,620 3,449 83,904Accumulated depreciation and impairmentAt December 31, 2007 3,252 12,755 48 16,055Depreciation charge for the year* 702 4,019 3 4,724Impairment 101 387 11 499Disposals (73) (773) — (846)Foreign exchange differences (854) (3,598) (12) (4,464)Other movements 46 484 (6) 524At December 31, 2008* 3,174 13,274 44 16,492Depreciation charge for the year 677 3,895 4,572Impairment 70 367 127 564Disposals (59) (681) (42) (782)Foreign exchange differences 460 2,173 (1) 2,632Other movements 95 (42) (12) 41At December 31, 2009 4,417 18,986 116 23,519Carrying amountAt December 31, 2008* 16,045 40,217 3,989 60,251At December 31, 2009 16,418 40,634 3,333 60,385* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization of the allocationof purchase price of acquisitions made in 2008 (see note 3).Other movements represent mostly transfers between the categories and changes in the consolidation scope.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 31During the year ended December 31, 2009and in conjunction with its testing ofgoodwill for impairment, the Companyanalyzed the recoverable amount of itsproperty, plant, and equipment. Property,plant, and equipment was tested at theCGU level, which was comprised of anOperating Subsidiary or a group ofOperating Subsidiaries. The recoverableamounts of the CGUs are determinedbased on value in use calculation and followsimilar assumptions as those used for thetest on impairment for goodwill.Management estimates discount ratesusing pre-tax rates that reflect currentmarket rates for investments of similarrisk. The rate for each CGU was estimatedfrom the weighted average cost of capitalof producers which operate a portfolioof assets similar to those of theCompany’s assets.The impairment loss recorded in 2008 of499 was recognized as an expense as partof operating income (loss) in the statementof operations and consisted primarily of thedisposal of the Sparrows Point plant in theUnited States (200) and asset impairmentsat various ArcelorMittal USA sites (74),Gandrange, France (60) and Zumarraga,Spain (54), as these assets were consideredidled based on management decisions andstrategic planning and due to the economicdownturn at the end of 2008. The facilitiesin the US were included in the reportablesegment Flat Carbon Americas and theothers in the reportable segment LongCarbon Americas & Europe.In connection with management’s annualtest for impairment of goodwill as ofNovember 30, 2009, property, plant andequipment was also tested for impairmentat that date. Management concluded thatthe value in use of certain of the Company’sproperty, plant, and equipment was lessthan its carrying amount due primarilyto the economic downturn in 2008 whichcontinued to have an impact on 2009.Accordingly, an impairment loss of 564was recognized as an expense as part ofoperating income (loss) in the statementof operations for the year ended December31, 2009. Management does not expectthis trend to continue. This impairmentconsisted primarily of the following:• 237 of various idle assets (including92 at ArcelorMittal Galati (coke ovenbatteries) and 65 at ArcelorMittalLas Truchas (primarily an electric arcfurnace, rolling mill, oxygen furnaceand wire rod mill)• 122 of various tubular productoperations (primarily 65 at ArcelorMittalTubular Products Roman, using a pre-taxdiscount rate of 16.9% in 2009(14.9% in 2008)• 172 of other impairments (primarily 117at ArcelorMittal Construction in France,using a pre-tax discount rate of 14.3%in 2009 (12.5% in 2008)ArcelorMittal Galati, ArcelorMittalTubular Products Roman and ArcelorMittalConstruction were included in the FlatCarbon Europe, Long Carbon Americas &Europe and Steel Solutions and Servicesreportable segments, respectively.The carrying amount of property, plantand equipment includes 361 and 499 ofcapital leases as of December 31, 2008and 2009, respectively. The carryingamount of these capital leases is includedin machinery and equipment.The Company has pledged 580 and750 in property, plant and equipmentas of December 31, 2008 and 2009,respectively, to secure banking facilitiesgranted to the Company. These facilitiesare further disclosed in note 14.
ArcelorMittal Annual Report 200932 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 10: Investments In Associates and Joint VenturesThe Company had the following investments in associates and joint ventures:Ownership Net asset Net asset% at value at value atDecember 31, December 31, December 31,Investee Location 2009 2008 2009Eregli Demir Ve Celik Fab.T.AS 1 Turkey 25.78% 1,633 1,524DHS Group Germany 33.43% 1,262 1,320China Oriental Group Company Ltd 2 China 47.03% 1,187 1,241Hunan Valin 3 China 33.02% 780 803Macarthur Coal 4 Australia 16.60% 515 716Enovos 5 Luxembourg 25.29% 44 643Gestamp Spain 35% 404 445Kalagadi Manganese (Propriety) Limited South Africa 50% 360 440Gonvarri Industrial Consolidated Spain 35% 376 359Other 1,951 2,137Total 8,512 9,6281As of December 31, 2008 and 2009, the investment had a market value of 766 and 1,203, respectively.2On November 8, 2007, ArcelorMittal purchased approximately 820,000,000 China Oriental shares for a total consideration of 644 (HK$ 5.02 billion), or a 28.02% equity interest.On December 13, 2007, the Company entered into a shareholder’s agreement which enabled it to become the majority shareholder of China Oriental and to raise eventually its equitystake in China Oriental to 73.13%. At the time of the close of its tender offer on February 4, 2008 ArcelorMittal had reached a 47% shareholding in China Oriental. Given the 45.4%shareholding by the founding shareholders, this left a free float of 7.6% against a minimum Hong Kong Stock Exchange (“HKSE”) listing requirement of 25%. The measures to restorethe minimum free float have been achieved by means of sale of 17.4% stake to ING Bank N.V. (“ING”) and Deutsche Bank Aktiengesellschaft (“Deutsche Bank”) together with put optionagreements. The Company has not derecognized the 17.4% stake as it retained the significant risk and rewards of the investment. As of December 31, 2009, the investment had a marketvalue of 563 (228 in 2008).3As of December 31, 2008 and 2009, the investment had a market value of 604 and 1,017, respectively.4 On May 21, 2008, ArcelorMittal acquired a 14.9% stake in Macarthur Coal Limited. On July 10, 2008, the Company has increased its stake from 14.9% to 19.9%, following the acquisitionof 10,607,830 shares from Talbot Group Holdings. The total acquisition price in Macarthur Coal is 812. In the second quarter of 2009, ArcelorMittal did not subscribe to a capital increasein Macarthur Coal Limited and the stake decreased to 16.6%. As of December 31, 2009, the investment had a market value of 427 (87 in 2008). Through review of its ownership interest,the Company concluded it has significant influence over Macarthur Coal due to the existence of significant coal supply contracts between the Company and Macarthur Coal and thereforeaccounts for its investment in Macarthur Coal under the equity method.5On January 23, 2009, the Company contributed its 76.9% stake in Saar Ferngas AG to an associated company, Soteg. Following this transaction, ArcelorMittal’s stake in Soteg increasedfrom 20% to 26.15%. On February 16, 2009, the Company sold 2.48% of Soteg to the Luxembourg state and SNCI for proceeds of 58 and a gain of 3. In September 2009, the internalrestructuring of Enovos (previously called Soteg) was completed with the cancellation of 58,000 treasury shares held by Saar Ferngas and Cegedel in Soteg. The resulting stake held byArcelorMittal was 25.29%, after internal reorganization.Summarized financial information, in the aggregate, for associates and joint ventures is as follows:December 31, December 31,2008 2009Condensed statement of operationsGross revenue 45,101 33,274Net income 3,319 448Condensed statement of financial positionTotal assets 40,671 44,507Total liabilities 21,181 24,268The Company assessed the recoverability of its investments accounted for using the equity method. In determining the value in useof its investments, the Company estimated its share in the present value of the projected future cash flows expected to be generatedby operations of associates and joint ventures. Based on this analysis, the Company concluded that no impairment was required.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 33Note 11: Other InvestmentsThe Company holds the following other investments:December 31, December 31,2008 2009Available-for-sale securities (at fair value) 56 74Investments accounted for at cost 381 350Total 437 424The change in fair value of available-for-sale securities for the period was recorded directly in equity as an unrealized result of(78) and 48 for the years ended December 31, 2008, and 2009, respectively, net of income tax and non-controlling interests.An impairment expense of 109 was recognized in 2008 because the Company determined that the market value decline forcertain of its available-for-sale securities was either significant or prolonged.Note 12: Other AssetsOther long-term receivables consist mainly of assets related to derivative financial instruments, value-added tax (“VAT”) receivable,loans, cash guarantees and deposits.On April 30, 2008, in order to restore the public float of China Oriental on the HKSE, the Company entered into a sale and purchaseagreement with ING and Deutsche Bank for the sale of 509,780,740 shares representing approximately 17.40% of the issuedshare capital of China Oriental. The transaction also includes put option agreements entered into with both banks. The considerationfor the disposal of the shares was paid to Deutsche Bank and ING as collateral to secure the obligations of the Company under theput agreements.December 31, December 31,2008* 2009Revaluation of derivative financial instruments 240 515Assets in pension funds 491 294Long-term VAT receivables 215 587Collateral related to the put agreement on China Oriental 381 381Other financial assets 769 804Total 2,096 2,581* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 200934 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Note 13: Balances and Transactions with Related PartiesTransactions with related parties, including associates and joint ventures of the Company, were as follows:SalesTrade accounts receivableYear ended Year ended Year ended Year endedDecember 31, December 31, December 31, December 31,Transactions 2008 2009 2008 2009Macsteel Int’l Holding & Subsidiaries 729 590 25 20I/N Kote 347 319 — —Coils Lamiere Nastri (CLN) SPA 797 238 51 31Gonvarri Brasil SA 314 229 13 34Gonvarri Industrial SA 553 223 25 47Borcelik Celik Sanayii Ticaret AS 315 221 — 41Polski Koks 632 194 31 56Noble B.V.* — 91 — —Berg Steel Pipe Corp 113 85 — 12Gouvauto SA 239 84 22 8Gestamp Servicios 70 82 3 14Bamesa Celik Servis Sanayii Ticaret AS 92 81 9 18ArcelorMittal Gonvarri SSC Slovakia 121 80 1 6Rogesa GmbH 7 69 1 —Stalprofil S.A. 111 55 9 3Hierras Aplanaciones SA 93 47 11 —Gonvarri Productos Siderurgicos SA 82 43 3 —Westfälische Drahtindustrie 94 42 1 3Florin Centrum 64 40 6 7Noury SA 62 38 3 —WDI 106 37 — 3Arcelor SSC Sverige AB 63 35 6 4Alcat SP 71 24 6 3Consolidated Wire Industries Limited 52 19 1 —GTC 167 6 34 2Laminés Marchands Européens SA 165 5 5 9Zaklad Przetworstwa 240 — 5 —Condesa Favril Sa 136 — 4 —Noble International Ltd* 113 — 21 —Glacier Trading Centre FZE 55 — 13 —Other 408 193 64 71Total 6,411 3,170 373 392* During 2008, the Company granted a convertible subordinated loan to Noble International Ltd of 50. This loan wasfully impaired at December 31, 2008 (see note 3). It also granted a subordinated loan of 35 to Noble B.V., the subsidiaryof Noble International Ltd. This loan is no longer considered to be a related party transaction following the acquisitionof Noble B.V. on July 17, 2009 (see note 3).
ArcelorMittal Annual Report 2009Consolidated Financial Statements 35Purchases of rawmaterials and othersTrade accountspayableYear ended Year ended Year ended Year endedDecember 31, December 31, December 31, December 31,Transactions 2008 2009 2008 2009E.I.M.P 274 443 — —Polski Koks 490 227 21 75Borcelik Celik Sanayiii Ticaret AS 188 203 20 37Forges et Acieries de Dillingen 129 161 41 2Noble B.V. — 144 — —Baycoat LP — 86 — 7I/N Tek (Tolling charges) 57 84 — 4ArcelorMittal Gonvarri SSC Slovakia 1 77 4 7Peña Colorada 85 63 39 31Belgian BunkeringConcidar Trading NV 32 54 — 33Enovos 107 52 24 16Macarthur Coal LTD 132 33 30 19Eko Recycling GmbH 50 15 1 2ATIC Services 79 13 2 4SOMEF 59 9 9 5Cia Hispano Brasileira de Pelotizaçao SA 98 — 18 —Noble International Ltd 63 — 17 —ArcelorMittal Insurance Consultants SA 51 — 9 —Dillinger Hütte Saarstahl AG 8 — 1 —Other 488 281 106 95Total 2,391 1,945 342 337Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated in consolidationand are not disclosed in this note. Refer to note 25 for disclosure of transactions with key management personnel.The above mentioned transactions between ArcelorMittal and the respective entities were conducted on an arms’ length basis.
ArcelorMittal Annual Report 200936 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The principal subsidiaries of the Company in 2009 were as follows:Name of Subsidiary Abbreviation CountryFlat Carbon AmericasArcelorMittal Dofasco Inc. Dofasco CanadaArcelorMittal Lázaro Cárdenas S.A. de C.V. ArcelorMittal Lázaro Cárdenas MexicoArcelorMittal USA Inc. ArcelorMittal USA USAArcelorMittal Mines Canada Inc ArcelorMittal Mines Canada CanadaArcelorMittal Brasil S.A. ArcelorMittal Brasil BrazilFlat Carbon EuropeArcelorMittal Atlantique et Lorraine SAS ArcelorMittal Atlantique et Lorraine FranceArcelorMittal Belgium N.V. ArcelorMittal Belgium BelgiumArcelorMittal España S.A. ArcelorMittal España SpainArcelorMittal Flat Carbon Europe SA AMFCE LuxembourgArcelorMittal Galati S.A. ArcelorMittal Galati RomaniaArcelorMittal Poland S.A. ArcelorMittal Poland PolandIndusteel Belgium S.A. Industeel Belgium BelgiumIndusteel France S.A. Industeel France FranceLong Carbon Americas and EuropeAcindar Industria Argentina de Aceros S.A. Acindar ArgentinaArcelorMittal Belval & Differdange SA ArcelorMittal Belval & Differdange LuxembourgArcelorMittal Brasil S.A. ArcelorMittal Brasil BrazilArcelorMittal Hamburg GmbH ArcelorMittal Hamburg GermanyArcelorMittal Hochfeld GmbH ArcelorMittal Hochfeld GermanyArcelorMittal Las Truchas, S.A. de C.V. Sicartsa MexicoArcelorMittal Madrid S.L. ArcelorMittal Madrid SpainArcelorMittal Montreal Inc ArcelorMittal Montreal CanadaArcelorMittal Gipuzkoa S.L. ArcelorMittal Gipuzkoa SpainArcelorMittal Ostrava a.s. ArcelorMittal Ostrava Czech RepublicArcelorMittal Point Lisas Ltd. ArcelorMittal Point Lisas Trinidad and TobagoArcelorMittal Poland S.A. ArcelorMittal Poland PolandArcelorMittal Ruhrort GmbH ArcelorMittal Ruhrort GermanySociété Nationale de Sidérurgie S.A. Sonasid MoroccoAACISArcelorMittal South Africa Ltd. ArcelorMittal South Africa South AfricaJSC ArcelorMittal Temirtau ArcelorMittal Temirtau KazakhstanOJSC ArcelorMittal Kryviy Rih ArcelorMittal Kryviy Rih UkraineStainless SteelArcelorMittal Inox Brasil S.A. Acesita or ArcelorMittal Inox Brasil BrazilArcelorMittal Stainless Belgium AMSB BelgiumSteel Solutions and ServicesArcelorMittal International Luxembourg SA ArcelorMittal International Luxembourg
ArcelorMittal Annual Report 2009Consolidated Financial Statements 37Note 14: Short-Term and Long-Term DebtShort-term debt, including the current portion of long-term debt, consisted of the following:December 31, December 31,2008 2009Short-term bank loans and other credit facilities 4,564 2,744Current portion of long-term debt 3,777 1,297Revaluation of interest rate hedge instruments (note 15) 3 —Lease obligations 65 94Total 8,409 4,135Short-term debt includes short-term loans, overdrafts and commercial paper.Commercial paperThe Company has a commercial paper program enabling borrowings of up to €3,000 (4,322). As of December 31, 2009,the outstanding amount was 1,474.BondsDuring 2003, ArcelorMittal Finance issued €600 million unsecured and unsubordinated fixed rate notes, in two tranches of €500 millionon September 24 and €100 million on December 4. The notes bear interest at 5.125% per annum. The loans are due on September 24,2010. The loans are included in the current portion of long-term debt line in the table above.Other loansIn 2007, the acquisition of Rozak included the assumption of 267 in principal amount of borrowings maturing between 2008 and 2010and bearing interest at fixed interest rates between 4.5% and 8.37%. The loans are included in the current portion of long-term debtline in the table above.In 2007, the acquisition of Rongcheng included the assumption of 66 in principal amount of borrowings maturing between 2008 and2010 of which 40% bears interest at fixed rates and 60% bears variable interest at rates based on 6 months LIBOR. The loans areincluded in the current portion of long-term debt line in the table above.
ArcelorMittal Annual Report 200938 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Long-term debt is comprised of the following as of December 31:Year of Type of Interestmaturity Interest rate 1 2008 2009Corporate€12 billion term loan 2011 Floating 0.85%-1.36% 9,836 3,493€5 billion revolving credit facility 2012 Floating — 6,453 —$4 billion credit facility 2010-2011 Floating — — —$3.2 billion credit facility Floating — 3,181 —€1.5 billion unsecured bonds 2013 Fixed 8.25% — 2,146€1.0 billion unsecured bonds 2016 Fixed 9.38% — 1,426$1.5 billion unsecured bonds 2013 Fixed 5.38% 1,500 1,500$1.0 billion unsecured bonds 2039 Fixed 7.00% — 943$1.5 billion unsecured bonds 2018 Fixed 6.13% 1,500 1,500$0.75 billion unsecured notes 2015 Fixed 9.00% — 740$1.5 billion unsecured notes 2019 Fixed 9.85% — 1,457€1.25 billion convertible bonds 2014 Fixed 7.25% — 1,369$800 convertible senior notes 2014 Fixed 5.00% — 617€0.1 billion unsecured notes 2014 Fixed 5.50% 139 144€0.5 billion unsecured bonds 2014 Fixed 4.63% 696 720€0.6 billion unsecured bonds 2010 Fixed 5.13% 835 864€0.1 billion unsecured bonds 2009 Fixed — 139 —EBRD loans 2012-2015 Floating 1.30%-1.59% 304 238Other loans – Floating rates 2010-2035 Floating 1.0%-4.50% 1,385 1,486Other loans – Fixed rates 2010-2016 Fixed 3.83%-6.4% 724 678Total Corporate 26,692 19,321Americas800 senior secured notes 2014 Fixed 9.75% 420 420600 senior unsecured notes 2014 Fixed 6.50% 500 500Other loans 2010-2019 Fixed/Floating 0.75%-21.74% 1,461 1,131Total Americas 2,381 2,051Europe, Asia & AfricaOther loans 2010-2022 Fixed/Floating 0.8%-16% 155 205Total Europe, Asia & Africa 155 205Total 29,228 21,577Less current portion of long-term debt 3,777 1,297Total long-term debt (excluding lease obligations) 25,451 20,280Lease obligations 2 216 397Total long-term debt, net of current portion 25,667 20,6771Rates applicable to balances outstanding at December 31, 2009.2Net of current portion of 65 and 94 in 2008 and 2009, respectively.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 39Corporate€17 billion credit facilityOn November 30, 2006, the Companyentered into a €17 billion credit agreement,comprised of a €12 billion term loan facilityand a €5 billion revolving credit facility,with a group of lenders to refinance certainof the Company’s existing credit facilities.The maturity of the €5 billion revolvingcredit facility is November 30, 2012. Outof the outstanding amount of €2.4 billionunder the €12 billion term loan, €1.2 billionis due in May 2011 and €1.2 billion is duein November 2011. The €5 billion revolvingcredit facility remains unutilized as ofDecember 31, 2009, as the outstandingloan balances under the facility wererepaid during the second quarter of 2009with proceeds from the Company’s debt,convertible debt and equity issuances(described below). During the year endedDecember 31, 2009, the Company repaid€4.8 billion of the outstanding amountunder the €12 billion term loan facility.$4 billion credit facilityOn May 13, 2008 ArcelorMittalentered into a $4 billion revolving creditfacility which may be utilized for generalcorporate purposes. ArcelorMittal has todate not utilized this facility and it remainsfully available. Approximately one-thirdof the facility matures in May 2010and approximately two-thirds maturesin May 2011. A Forward Start facility of3,175 has been reinstated in connectionwith this facility, effectively extending itsmaturity (to the extent of 3,175) to 2012.$3.2 billion credit facilityOn April 7, 2005, the Company andcertain subsidiaries entered into afive-year $3.2 billion credit facility(consisting of a $1.7 billion term loanfacility and a $1.5 billion revolving creditfacility) with a consortium of banks.This credit facility was cancelled duringthe third quarter of 2009.Convertible BondsOn April 1, 2009, the Company issued€1.25 billion (1,662) of unsecured andunsubordinated convertible bonds dueApril 1, 2014 (the “€1.25 billion convertiblebonds”). These bonds bear interest at 7.25%per annum payable semi-annually on April 1and October 1 of each year commencingon October 1, 2009.On May 6, 2009, ArcelorMittal issued800 of unsecured and unsubordinatedconvertible senior notes (the “800 convertiblesenior notes”) due May 15, 2014. Thesenotes bear interest at 5.00% per annumpayable semi-annually on May 15 andNovember 15 of each year commencingon November 15, 2009. The €1.25 billionconvertible bonds and the 800 convertiblesenior notes are collectively referred toherein as the Convertible Bonds.The €1.25 billion convertible bonds maybe converted by the bondholders fromMay 11, 2009 until the end of the seventhbusiness day preceding maturity. The 800convertible senior notes may be convertedby the noteholders from May 6, 2009until the end of the seventh business daypreceding maturity.At inception, the Company had theoption to settle the Convertible Bonds forcommon shares or the cash value of thecommon shares at the date of settlementas defined in the Convertible Bonds’documentation. The Company determinedthat the agreements related to theConvertible Bonds were hybrid instrumentsas the conversion option gave the holdersthe right to put the Convertible Bonds backto the Company in exchange for commonshares or the cash equivalent of thecommon shares of the Company basedupon the Company’s share price at the dateof settlement. In addition, the Companyidentified certain components of theagreements to be embedded derivatives.On October 28, 2009, the Companyannounced that it had decided toirrevocably waive the option to settlethe 800 convertible senior notes in cashfor the cash value of the common sharesat the date of settlement.At the inception of the Convertible Bonds,the Company determined the fair valueof the embedded derivatives using thebinomial option valuation methodology andrecorded the amounts as financial liabilitiesin other long-term obligations of 408 and189 for the €1.25 billion convertible bondsand the 800 convertible senior notes,respectively. As a result of the waiver ofthe option to settle the 800 convertiblesenior notes in cash for the cash valueof the common shares at the date ofsettlement, the Company determinedthat the conversion option was an equityinstrument. As a consequence, its fair valueof 279 (198 net of tax) at the date of thewaiver was transferred to equity.
ArcelorMittal Annual Report 200940 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)As of December 31, 2009, the fair value of the embedded derivative for the €1.25 billion convertible bonds was 1,249. The change infair value of 897 related to the Convertible Bonds was a non-cash activity and was recorded in the statement of operations for the yearended December 31, 2009 as financing costs. Assumptions used in the fair value determination at inception and as of December 31,2009 were as follows:€1.25 billion convertible bonds 800 convertible senior notesDecember 31, October 28,At inception 2009 At inception 2009*Spot value of shares €16.01 €32.18 $27.56 $34.15Quote of convertible bonds €21.62 €36.61 $113.22 $137.00Credit spread (basis points) 1,049 167 602 265Dividend per quarter €0.135 €0.1309 $0.1875 $0.1875* Date of the waiver of the cash option as described above.The Convertible Bonds did not have a dilutive impact on earnings per share for the year ended December 31, 2009.On December 28, 2009, the Company issued through a wholly-owned subsidiary an unsecured and unsubordinated 750 bondmandatorily convertible into preferred shares of such subsidiary. The bond was placed privately with a Luxembourg affiliate of Calyonand is not listed. The bond matures on May 25, 2011. The Company has the option to call the mandatorily convertible bond fromMay 3, 2010 until ten business days before the maturity date. The subsidiary invested the proceeds of the bond issuance and an equitycontribution by the Company in notes issued by subsidiaries of the Company linked to shares of Eregli Demir Ve Celik Fab. T.A.S.(“Erdemir”) of Turkey and Macarthur Coal Limited of Australia, both of which are publicly-listed companies in which such subsidiarieshold a minority stake. The subsidiary may also, in agreement with Calyon, invest in other financial instruments. This bond bears a floatinginterest based on three months Libor plus a margin payable on each February 25, May 25, August 25 and November 25. The Companydetermined the bond met the definition of a compound financial instrument in accordance with IFRS. As such the Company determinedthe fair value of the financial liability component of the bond was 55 on the date of issuance. As of December 31, 2009, 55 is includedin long-term debt and carried at amortized cost. The financial liability component is presented in the other loans at floating rates in theabove table. The value of the equity component of 695 (684 net of tax and fees) was determined based upon the difference of thecash proceeds received from the issuance of the bond and the fair value of the financial liability component on the date of issuance andis included in equity as non-controlling interests.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 41BondsOn July 15, 2004, ArcelorMittal Financeissued €100 million principal amount ofunsecured and unsubordinated fixed ratednotes bearing interest at 5.50% per annum(issued at 101.97%) due July 15, 2014.On November 7, 2004, ArcelorMittalFinance issued €500 million principalamount of unsecured and unsubordinatedfixed rated bonds bearing interest at4.625% per annum (issued at 99.195%)due November 7, 2014.On December 10, 2004, ArcelorMittalFinance issued €100 million principalamount of unsecured and unsubordinatedfixed rated bonds bearing interest at3.395% per annum (issued at 100.00%)due December 10, 2009. On December10, 2009 the bonds were repaid.On May 27, 2008, the Company issued3,000 principal amount of unsecured andunsubordinated fixed rated bonds in twotranches. The first tranche of 1,500 bearsinterest at 5.375% (issued at 99.722%)due June 2013 and the second trancheof 1,500 bears interest at 6.125%(issued at 99.571%) due June 2018.On May 20, 2009, the Company issuedunsecured and unsubordinated notes intwo tranches for an aggregate principalamount of 2,250 consisting of 750(issued at 98.931%) bearing interestat 9% per annum maturing February 15,2015 and 1,500 (issued at 97.522%)bearing interest at 9.85% per annummaturing June 1, 2019.On June 3, 2009, the Company issuedunsecured and unsubordinated bonds intwo tranches for an aggregate principalamount of €2.5 billion (3,560) consistingof €1.5 billion (issued at 99.589%)bearing interest at 8.25% per annummaturing June 3, 2013 and € 1 billion(issued at 99.381%) bearing interestat 9.375% per annum maturingJune 3, 2016.On October 1, 2009, the Companyissued unsecured and unsubordinatednotes for an aggregate principal amountof 1,000 (issued at 95.202%) bearinginterest at 7% per annum maturingOctober 15, 2039.Bonds and notes denominated in Euro(excluding convertible bonds) amountedto €3.7 billion as of December 31, 2009.Bonds and notes denominated in U.S. dollars(excluding convertible bonds) amountedto 7,173 as of December 31, 2009.European Bank for Reconstructionand Development (“EBRD”) LoansThe Company entered into fiveseparate agreements with the EBRDfor on-lending to the followingsubsidiaries on the following dates:ArcelorMittal Galati on November 18,2002, ArcelorMittal Kryviy Rih on April 4,2006, ArcelorMittal Temirtau on June 15,2007, ArcelorMittal Skopje andArcelorMittal Zenica on November 10,2005. The last installment under theseagreements is due in January 2015.The outstanding amount in total as ofDecember 31, 2008 and 2009 was 304and 238, respectively. The agreementrelated to ArcelorMittal Galati was fullyrepaid on November 23, 2009.Other facilitiesOn July 24, 2007, ArcelorMittal Finance,together with a subsidiary, signed a fiveyear €500 million loan due 2012.In 2007 and 2008, ArcelorMittal Financeentered into certain bilateral creditfacilities totaling €950 million. During theyear ended December 31, 2008, all thesecredit facilities were transferred toArcelorMittal. During the year endedDecember 31, 2009, these bilateral creditfacilities matured or were cancelled.Forward Start facilitiesDuring the first half of 2009, ArcelorMittalentered into facilities totaling approximately6,000 referred to as “Forward Start”facilities, in order to extend the maturityof various facilities. A Forward Start facilityprovides a borrower with a committedfacility to refinance an existing facility uponits maturity, and therefore certainty as tothe availability of funds for that refinancing.In conjunction with the Company’s bonds,convertible bonds and equity issuancesin the second quarter of 2009, thecommitments under these Forward Startfacilities were ratably cancelled, as providedfor in the facility. Subsequently, a 3,175Forward Start facility was reinstated,extending the maturity of part of the$4 billion credit facility (to the extentof 3,175) until 2012.AmericasSenior Secured NotesOn March 25, 2004, Ispat Inland ULCissued Senior Secured Notes with anaggregate principal amount of 800of which 150 were floating rate notesbearing interest at LIBOR plus 6.75%due April 1, 2010 and 650 were fixedrate notes bearing interest at 9.75%(issued at 99.212% to yield 9.875%) dueApril 1, 2014 (the “Senior Secured Notes”).On December 28, 2007, ArcelorMittalFinancial Services LLC, a newly formedlimited liability company organized underthe laws of Delaware, became the Issuerof the Senior Secured Notes, andwas substituted for Ispat Inland ULC(the initial issuer of the Senior SecuredNotes) for all purposes under the Indentureand Pledge Agreement. On June 13, 2008,ArcelorMittal USA Partnership, a generalpartnership under the laws of Delaware,became the Issuer of the Senior SecuredNotes and was substituted for ArcelorMittalFinancial Services LLC for all purposesunder the Indenture and Pledge Agreement.423 (420 net of discount) was outstandingas of December 31, 2008 and 2009.
ArcelorMittal Annual Report 200942 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The Senior Secured Notes are securedby a pledge of 423 of ArcelorMittalUSA’s First Mortgage Bonds and by asecond position lien on the inventoryof ArcelorMittal USA. As further creditenhancement, the Senior Secured Notesare fully and unconditionally guaranteedby ArcelorMittal USA, certain of itssubsidiaries, ArcelorMittal and certainother subsidiaries. The terms of the SeniorSecured Notes place certain limitationson the ability of ArcelorMittal USAand its subsidiaries to incur additionalindebtedness, pay dividends or make otherdistributions and various other activities.The indenture also contains covenantsthat are applicable to ArcelorMittal.These limitations are subject to a numberof exceptions and qualifications. The SeniorSecured Notes became investment graderated as of January 19, 2006. As a result,many of the above limitations were suspended,including restrictions on paying dividends ormaking other distributions to shareholders.Senior Unsecured NotesOn April 14, 2004, ArcelorMittal USAissued 600 of senior, unsecured debtsecurities due in 2014. The debt securitiesbear interest at a rate of 6.5% per annumand were issued at a discount of 5,which is amortized as interest expenseover the life of the senior unsecured notes.On July 22, 2005, ArcelorMittal USArepurchased 100 of unsecured notesleaving an outstanding balance of 500.These bonds are fully and unconditionallyguaranteed by certain wholly-ownedsubsidiaries of ArcelorMittal USA and,as of March 9, 2007, by ArcelorMittal.Other loansThe other loans relate mainly to loanscontracted by ArcelorMittal Inox Brasil SA,ArcelorMittal Brasil and Vega do Sul withdifferent counterparties.On April 24, 2008 ArcelorMittal Brasilentered into a BRL 600 million loanagreement due 2010 and bearinga floating interest rate.In 2008, the acquisition of IndustriasUnicon included the assumption of a 232principal amount of loan maturing between2009 and 2012 of which 17% bearingfixed rates and 83% bearing floatinginterest rates.OtherCertain debt agreements of the Companyor its subsidiaries contain certain restrictivecovenants. Among other things, thesecovenants limit encumbrances on theassets of ArcelorMittal and its subsidiaries,the ability of ArcelorMittal’s subsidiariesto incur debt and ArcelorMittal’s ability todispose of assets in certain circumstances.Certain of these agreements also requirecompliance with financial maintenancetests, including financial ratios and minimumlevels of net worth.The Company’s principal credit facilitiesalso include the following financialcovenant: the Company must ensurethat the ratio of “Consolidated TotalNet Borrowings” (consolidated totalborrowings less consolidated cash andcash equivalents) to “Consolidated EBITDA”(the consolidated net pre-taxationprofits of the Company for a MeasurementPeriod, subject to certain adjustmentsas defined in the facilities) does not,at the end of each “Measurement Period”(each period of 12 months ending on thelast day of a financial half-year or afinancial year of the Company), exceeda certain ratio. In 2009, the Companysigned agreements with its lendersto amend this ratio (where applicable),referred to as its “Leverage Ratio”,from 3.5 to one as originally provided,to 4.5 to one as of December 31, 2009,to 4.0 to one as of June 30, 2010,and reverting to 3.5 to one as ofDecember 31, 2010.The Company also agreed to theimposition of certain additional temporaryrestrictive covenants on its activities ifthe Leverage Ratio exceeds 3.5 to one forany Measurement Period. These includerestrictions on dividends and sharereductions, acquisitions, capital expenditureand the giving of loans and guarantees.Limitations arising from the restrictiveand financial covenants describedabove could limit the Company’s abilityto distribute dividends, make capitalexpenditures or engage in strategicacquisitions or investments. Failure tocomply with any covenant would enablethe lenders to accelerate the Company’srepayment obligations. Moreover, theCompany’s debt facilities have provisionswhereby certain events relating to otherborrowers within the Company’s subsidiariescould, under certain circumstances, lead toacceleration of debt repayment under suchcredit facilities. Any invocation of thesecross-acceleration or cross-default clausescould cause some or all of the other debt toaccelerate. The Company was in compliancewith the financial covenants contained withinthe amended agreements related to all of itsborrowings as of December 31, 2009.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 43Scheduled maturities of long-term debt including lease obligations as of December 31, 2009 are as follows:2010 1,3912011 4,3112012 1,4582013 4,1322014 3,965Subsequent years 6,811Total 22,068The following table presents the structure of the Company’s net debt in original currencies:In USD equivalent as of December 31, 2009TotalOtherUSD EUR USD BRL PLN CAD (in USD)Short-term debt and currentportion of long-term debt 4,135 2,783 894 99 8 13 338Long-term debt 20,677 10,181 9,856 378 — 10 252Cash 6,009 2,912 2,036 209 22 9 821As a part of the Company’s overall risk and cash management strategies, several loan agreements have been swapped from their originalcurrencies to other foreign currencies.At the reporting date the carrying amount and fair value of the Company’s interest-bearing financial instruments is:December 31, 2008 December 31, 2009Carrying Fair Carrying FairAmount Value Amount ValueInstruments payable bearing interest at fixed rates 6,914 5,150 15,596 16,938Instruments payable bearing interest at variable rates 22,595 17,709 6,472 6,069Note 15: Financial Instruments and Credit RiskThe Company enters into derivative financial instruments to manage its exposure to fluctuations in interest rates, exchange rates andthe price of raw materials, energy and emission rights allowances arising from operating, financing and investment activities.Fair values versus carrying amountsThe estimated fair values of certain financial instruments have been determined using available market information or other valuationmethodologies that require considerable judgment in interpreting market data and developing estimates.Cash and cash equivalents, restricted cash, short-term investments and trade receivables are included in the “Loans and receivables”category, which is measured at amortized cost. Other current assets include derivative instruments of 560 and 1,250 as of December31, 2008 and 2009, respectively, which are classified as “Financial assets at fair value through profit or loss”. Other investments areclassified as “Available-for-sale” with gains or losses arising from changes in fair value recognized in equity. Other assets are classifiedas “Financial assets at fair value through profit or loss”.Except for derivative financial instruments, amounting to 1,473 and 1,375 as of December 31, 2008 and 2009, respectively, which areclassified as “Financial liabilities at fair value through profit or loss”, financial liabilities are classified as “Financial liabilities measured atamortized cost”.The Company’s short and long-term debt consists of debt instruments which bear interest at fixed rates and variable rates tied tomarket indicators. The fair value of the Company’s variable rate debt approximates its carrying amount given its floating interest rates.The fair value of fixed rate debt is based on estimated future cash flows, which are discounted using current market rates for debt withsimilar remaining maturities and credit spreads.The following table summarizes the bases used to measure certain assets and liabilities at their fair value. Assets and liabilities carriedat fair value have been classified into three levels based upon a fair value hierarchy that reflects the significance of the inputs used inmaking the measurements.
ArcelorMittal Annual Report 200944 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The levels are as follows:Level 1: Quoted prices in active markets for identical assets or liabilities;Level 2: Significant inputs other than within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)or indirectly (i.e. derived from prices);Level 3: Inputs for the assets or liabilities that are not based on observable market data and require management assumptions or inputsfrom unobservable markets.Level 1 Level 2 Level 3 TotalAssets at fair value:Available-for-sale financial assets 74 — — 74Derivative financial assets — 1,250 — 1,250Total assets at fair value 74 1,250 — 1,324Liabilities at fair valueDerivative financial liabilities — 1,375 1,249 2,624Total liabilities at fair value — 1,375 1,249 2,624Available for sale financial assets classified as Level 1 refer to listed securities quoted in active markets. The total fair value is eitherthe price of the most recent trade at the time of the market close or the official close price as defined by the exchange on whichthe asset is most actively traded on the last trading day of the period, multiplied by the number of units held without considerationof transaction costs.Derivative financial assets and liabilities classified as Level 2 refer to instruments to hedge fluctuations in interest rates, foreignexchange rates, raw materials (base metal), freight, energy and emission rights. The total fair value is based on the price a dealer wouldpay or receive for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtainedfrom well established and recognized vendors of market data and the fair value is calculated using standard industry models based onsignificant observable market inputs such as foreign exchange rates, commodity prices, swap rates and interest rates.Derivative financial liabilities classified as level 3 refer to the conversion option in the €1.25 billion convertible bonds (see note 14).The fair value is derived through the use of a binominal model.The following table summarizes the reconciliation of the fair value of the conversion option classified as Level 3 with respect to the€1.25 billion convertible bonds and the 800 convertible senior notes for the year ended December 31, 2009 respectively until thewaiver of the cash settlement option:Fair value of conversion optionFair value of conversion option – €1.25 billion convertible bondsDecemberAt inception 31, 2009408 1,249Fair value of conversion option – 800 convertible senior notesOctoberAt inception 28, 2009*189 279* Date of the waiver of the cash option as described in note 14.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 45Portfolio of DerivativesThe Company manages the counter-party risk associated with its instruments by centralizing its commitments and by applyingprocedures which specify, for each type of transaction and underlying, risk limits and/or the characteristics of the counter-party.The Company does not generally grant to or require from its counter-parties guarantees over the risks incurred. Allowing for exceptions,the Company’s counter-parties are part of its financial partners and the related market transactions are governed by framework agreements(mainly of the International Swaps and Derivatives Association agreements which allow netting in case of counter-party default).The portfolio associated with derivative financial instruments as of December 31, 2008 is as follows:Notional Fair Average Notional Fair AverageAmount Value Rate* Amount Value Rate*Interest rate swaps – fixed rate borrowings/loans 1,320 42 4.11% 264 (3) 5.37%Other interest rate instrument 135 — —Total interest rate instruments 42 (3)Foreign exchange rate instrumentsForward purchase of contracts 3,842 131 8,117 (530)Forward sale of contracts 6,678 244 7,407 (186)Exchange option purchases 1,818 37 — —Exchange options sales — 1,941 (33)Total foreign exchange rate instruments 412 (749)Raw materials (base metal), freight, energy,emission rightsTerm contracts sales 81 9 174 (79)Term contracts purchases 197 50 1,342 (540)Swaps using raw materials pricing index 10 — 35 (15)Options sales/purchases 144 47 282 (87)Total raw materials (base metal),freight, energy, emission rights 106 (721)Total 560 (1,473)AssetsLiabilities* The average rate is determined for fixed rate instruments on the basis of the U.S. dollar and foreign currency ratesand for the variable rate instruments generally on the basis of Euribor or Libor.The portfolio associated with derivative financial instruments as of December 31, 2009 is as follows:Notional Fair Average Notional Fair AverageAmount Value Rate* Amount Value Rate*Interest rate swaps – fixed rate borrowings/loans 1,085 32 4.11% 288 (9) 3.36%Other interest rate instrument 140 1 — —Total interest rate instruments 33 (9)Foreign exchange rate instrumentsForward purchase of contracts 5,362 111 10,145 (957)Forward sale of contracts 11,036 962 9,776 (276)Exchange option purchases 1,657 23 — —Exchange options sales — — 1,369 (7)Total foreign exchange rate instruments 1,096 (1,240)Raw materials (base metal), freight, energy, emission rightsTerm contracts sales 118 20 196 (24)Term contracts purchases 698 101 412 (102)Swaps using raw materials pricing index 10 — — —Options sales/purchases 4 — 4 —Total raw materials (base metal), freight, energy, emission rights 121 (126)Total 1,250 (1,375)AssetsLiabilities* The average rate is determined for fixed rate instruments on the basis of the U.S. dollar and foreign currency ratesand for the variable rate instruments generally on the basis of Euribor or Libor.
ArcelorMittal Annual Report 200946 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Interest rate riskThe Company utilizes certain instrumentsto manage interest rate risks. Interest rateinstruments allow the Company to borrowlong-term at fixed or variable rates, andto swap the rate of this debt either atinception or during the lifetime of theloan. The Company and its counter-partyexchange, at predefined intervals, thedifference between the agreed fixed rateand the variable rate, calculated on thebasis of the notional amount of the swap.Similarly, swaps may be used for theexchange of variable rates against othervariable rates.Interest rate derivatives used by theCompany to manage changes in thevalue of fixed rate loans qualify as fairvalue hedges.Exchange rate riskThe Company is exposed to changes invalues arising from foreign exchange ratefluctuations generated by its operatingactivities. Because of a substantial portionof ArcelorMittal’s assets, liabilities,sales and earnings are denominatedin currencies other than the U.S. dollar(its reporting currency), ArcelorMittalhas an exposure to fluctuations in thevalues of these currencies relativeto the U.S. dollar. These currencyfluctuations, especially the fluctuationof the value of the U.S. dollar relativeto the euro, the Canadian dollar, Brazilianreal and South African rand, as wellas fluctuations in the other countriescurrencies in which ArcelorMittal hassignificant operations and/or sales,could have a material impact on itsresults of operations.ArcelorMittal faces transaction risk,where its businesses generate salesin one currency but incur costs relatingto that revenue in a different currency.For example, ArcelorMittal’s non-U.S.subsidiaries may purchase raw materials,including iron ore and coking coal,in U.S. dollars, but may sell finished steelproducts in other currencies. Consequently,an appreciation of the U.S. dollar willincrease the cost of raw materials; therebyimpacting negatively on the Company’soperating margins.Following its Treasury and Financial RiskManagement Policy, the Company hedgesits net exposure to exchange rates throughforwards, options and swaps.ArcelorMittal faces translation risk,which arises when ArcelorMittal translatesthe statement of operations of itssubsidiaries, its corporate net debtand other items denominated incurrencies other than the U.S. dollars,for inclusion in the ArcelorMittalConsolidated Financial Statements.The Company also uses the derivativeinstruments, described above, at thecorporate level to hedge debt recordedin foreign currency other than thefunctional currency or the balance sheetrisk incurred on certain monetary assetsdenominated in a foreign currency otherthan the functional currency.Liquidity RiskArcelorMittal’s principal sources ofliquidity are cash generated from itsoperations, its credit lines at the corporatelevel and various working capital credit linesat its operating subsidiaries. The Companyactively manages its liquidity. Following theTreasury and Financial Risk ManagementPolicy, the levels of cash, credit lines anddebt are closely monitored and appropriateactions are taken in order to complywith the covenant ratios, leverage,fixed and floating ratios, maturity profileand currency mix.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 47The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impactof netting agreements:December 31, 2008Carrying Contractual Less than 1-2 2-5 More thanamount Cash Flows 1 Year Years Years 5 YearsNon-derivative financial liabilitiesBonds/notes over 100 (5,730) (7,722) (477) (1,458) (3,966) (1,821)Loans over 100 (25,011) (29,391) (9,675) (11,318) (8,060) (338)Trade and other payables (10,501) (10,501) (10,501) — — —Other non-derivative financial liabilities (3,335) (3,582) (1,866) (876) (651) (189)Total (44,577) (51,196) (22,519) (13,652) (12,677) (2,348)Derivative financial liabilitiesInterest rate instruments (3) (3) (3) — — —Foreign exchange contracts (749) (749) (461) (97) (191) —Other commodities contracts (721) (721) (654) (36) (31) —Total (1,473) (1,473) (1,118) (133) (222) —December 31, 2009Carrying Contractual Less than 1-2 2-5 More thanamount Cash Flows 1 Year Years Years 5 YearsNon-derivative financial liabilitiesConvertible Bonds (2,041) (4,253) (204) (937) (3,112) —Other bonds (12,363) (19,517) (1,782) (873) (7,792) (9,070)Loans over 100 (6,918) (7,270) (1,701) (3,851) (1,412) (306)Trade and other payables (10,676) (10,676) (10,676) — — —Other non-derivative financial liabilities (3,490) (4,040) (1,848) (1,143) (453) (596)Financial guarantees (3,307) (3,307) (1,536) (283) (546) (942)Total (38,795) (49,063) (17,747) (7,087) (13,315) (10,914)Derivative financial liabilitiesInterest rate instruments (9) (9) — — (9) —Foreign exchange contracts (1,240) (1,240) (825) (407) (8) —Other commodities contracts (126) (126) (80) (22) (24) —Total (1,375) (1,375) (905) (429) (41) —
ArcelorMittal Annual Report 200948 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Cash flow hedgesThe following table presents the periods in which cash flows hedges are expected to mature:(liabilities)December 31, 2008(outflows)/inflowsCarrying 3 months More thanamount and less 3-6 months 6-12 months 1-2 Years 2 yearsForward exchange contracts 16 15 — 1 — —Commodities (310) (156) (24) (83) (47) —Emission rights (127) (33) (1) (20) (20) (53)Total (421) (174) (25) (102) (67) (53)(liabilities)December 31, 2009(outflows)/inflowsCarrying 3 months More thanamount and less 3-6 months 6-12 months 1-2 Years 2 yearsCommodities (2) (6) 1 3 — —Emission rights (48) — — (14) (13) (21)Total (50) (6) 1 (11) (13) (21)The following table presents the periods in which cash flows hedges are expected to impact the statement of operations:(liabilities)December 31, 2008(expense)/incomeCarrying 3 months More thanamount and less 3-6 months 6-12 months 1-2 Years 2 yearsForward exchange contracts 16 14 1 1 — —Commodities (310) (15) (160) (113) (22) —Emission rights (127) (33) (1) (20) (20) (53)Total (421) (34) (160) (132) (42) (53)(liabilities)December 31, 2009(expense)/incomeCarrying 3 months More thanamount and less 3-6 months 6-12 months 1-2 Years 2 yearsCommodities (2) (7) — 4 1 —Emission rights (48) — — (14) (13) (21)Total (50) (7) — (10) (12) (21)
ArcelorMittal Annual Report 2009Consolidated Financial Statements 49Several forward exchange and options contracts related to the purchase of raw materials denominated in U.S. dollars were unwoundduring 2008. As of December 31, 2008 the effective portion recorded in equity was 2,678, excluding deferred tax expense of 777.The effective portion represents a deferred gain that will be recycled to the statement of operations when the converted raw materialsare sold. In 2008, prior to unwinding the contracts the ineffective portion of 349 was recorded as operating income. During 2009,979 was recycled to cost of sales related to the sale of inventory in 2009 and changes in the estimated future raw material purchasesexpected to occur. Including the effects of foreign currency fluctuations, the deferred gain was 1,736, excluding deferred tax expenseof 503, as of December 31, 2009. The deferred gain is expected to be recycled to the statement of operations as follows:Year2010 4472011 6472012 5702013 72Total 1,736AmountRaw materials, freight, energy risks and emission rightsThe Company uses financial instruments such as forward purchases or sales, options and swaps for certain commodities in order tomanage the volatility of prices of certain raw materials, freight and energy. The Company is exposed to risks in fluctuations in pricesof raw materials (including base metals such as zinc, nickel, aluminum, tin and copper) freight and energy, both through the purchaseof raw materials and through sales contracts.Fair values of raw material freight, energy and emission rights instruments are as follows:At December 31, At December 31,2008 2009Base metals (150) 32Freight (66) 4Energy (oil, gas, electricity) (366) 7Emission rights (33) (48)Total (615) (5)Assets associated with raw material, energy, freight and emission rights 106 121Liabilities associated with raw material, energy, freight and emission rights (721) (126)Total (615) (5)ArcelorMittal, consumes large amounts of raw materials (the prices of which are related to the London Metals Exchange price index),ocean freight (the price of which is related to a Baltic Exchange Index), and energy (the prices of which are related to the New YorkMercantile Exchange index, the Intercontinental Exchange index and the Powernext index). As a general matter, ArcelorMittal is exposedto price volatility with respect to its purchases in the spot market and under its long-term supply contract. In accordance with its riskmanagement policy, ArcelorMittal hedges a part of its risk exposure to its raw materials procurements.The fair value of raw material freight, energy and emission rights derivatives liabilities decreased from (721) to (126) as hedgesmatured during 2009.Emission rightsPursuant to the application of the European Directive 2003/87/EC of October 13, 2003, establishing a scheme for emission allowancetrading, the Company enters into certain types of derivatives (cash purchase and sale, forward transactions and options) in order toimplement its management policy for associated risks. As of December 31, 2008 and 2009, the Company had a net notional positionof 171 with a net fair value of (32) and a net notional position of 162 with a net fair value of (47), respectively.
ArcelorMittal Annual Report 200950 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Credit riskThe Company’s treasury department monitors various market data regarding the credit standings and overall reliability of the financialinstitutions for all countries where the Company’s subsidiaries operate. The choice of the financial institution for the financialtransactions must be approved by the treasury department. Credit risk related to customers, customer credit terms and receivablesis discussed in note 5.Sensitivity analysisForeign currency sensitivityThe following table details the Company’s sensitivity as it relates to derivative financial instruments to a 10% strengthening and a 10%weakening in the U.S. dollar against the other currencies to which the Company is exposed. The sensitivity analysis does not includenon-derivative foreign currency-denominated monetary items. A positive number indicates an increase in profit or loss and other equitywhere a negative number indicates a decrease in profit or loss and other equity.December 31, 2008 December 31, 2009Income Other Equity Income Other Equity10% strengthening in U.S. dollar (288) 120 (655) —10% weakening in U.S. dollar 288 (120) 655 —Cash flow sensitivity analysis for variable rate instrumentsThe following table details the Company’s sensitivity as it relates to variable interest rate instruments. A change of 100 basis points(“bp”) in interest rates during the period would have increased (decreased) profit or loss by the amounts shown below. This analysisassumes that all other variables, in particular foreign currency rates, remain constant.December 31, 2008Interest Rate Cash FlowRate Swaps/Forward SensitivityInstrument Rate Agreements (net)100 bp increase (153) (19) (172)100 bp decrease 153 20 173December 31, 2009Interest Rate Cash FlowRate Swaps/Forward SensitivityInstrument Rate Agreements (net)100 bp increase (29) (11) (40)100 bp decrease 29 11 40
ArcelorMittal Annual Report 2009Consolidated Financial Statements 51Base metals, energy, freight, emissions rightsThe following table details the Company’s sensitivity to a 10% increase and decrease in the price of the relevant base metals, energy,freight, and emissions rights. The sensitivity analysis includes only outstanding, un-matured base metal derivative instruments bothheld for trading at fair value through statement of operations and those designated in hedge accounting relationships.December 31, 2008 December 31, 2009OtherOtherEquity CashEquity CashFlow HedgingFlow HedgingIncome Value Income Value+10% in pricesBase Metals 18 9 13 10Freights 2 — (3) —Emission rights — 12 — 8Energy 12 21 7 2-10% in pricesBase Metals (18) (9) (13) (10)Freights (2) — 3 —Emission rights — (12) — (8)Energy (12) (21) (7) (2)Note 16: EquityOn August 28, 2007, at the Extraordinary General Meeting of Mittal Steel the shareholders approved the merger of Mittal Steel intothe former ArcelorMittal, a wholly-owned subsidiary of Mittal Steel. This merger was effective on September 3, 2007 and was the firststep in the two-step merger process between Mittal Steel and Arcelor. Holders of Mittal Steel shares automatically received one newlyissued share of the former ArcelorMittal for every one Mittal Steel share on the basis of their respective holdings. The Mittal Steel ClassA common shares and the Mittal Steel Class B common shares have disappeared in this merger.On November 5, 2007, at the Extraordinary General Meeting of ArcelorMittal and Arcelor, shareholders approved the merger of formerArcelorMittal into Arcelor effective on November 13, 2007. In this second step in the two-step merger process, a holder of the formerArcelorMittal shares received one newly issued Arcelor share for every one former ArcelorMittal share (the “Exchange Ratio”). ThisExchange Ratio followed the completion of a share capital restructuring of Arcelor pursuant to which each seven pre-capital restructuringshares of Arcelor were exchanged for eight post-capital restructuring shares of Arcelor. After the second step merger Arcelor was renamedArcelorMittal.In addition, new share capital was approved of €6.4 billion represented by 1,470 million shares without nominal value for a period endingon November 5, 2012. At the Extraordinary General Meeting held on May 13, 2008, the shareholders approved an increase of theauthorized share capital of ArcelorMittal by €644 million represented by 147 million shares, or approximately 10% of ArcelorMittal’soutstanding capital. The new total authorized share capital was €7.1 billion represented by 1,617 million shares without nominal value.
ArcelorMittal Annual Report 200952 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)On April 29, 2009, the Companyannounced an offering of approximately141 million common shares which wasclosed on May 6, 2009 (the “Offering”).Pending shareholder approval forauthorization to increase issued sharecapital, the Company entered into a ShareLending Agreement dated April 29, 2009(the “Agreement”), with Ispat InternationalInvestments S.L. (“Ispat”), a companycontrolled by Mr. Lakshmi and Mrs. UshaMittal, under which the Company borrowed98 million shares. The 98 million borrowedshares were accounted for as treasuryshares and then issued, along with 29million other treasury shares, to fulfillall subscriptions to the Offering other thanthe 14 million shares subscribed by Ispat.On June 17, 2009, at an ExtraordinaryGeneral Meeting, the shareholdersapproved an authorization for the Boardof Directors to increase the issued sharecapital of the Company by a maximumof 168,173,653 shares during a periodof five years. On June 22, 2009,the Company issued and returned the98 million borrowed shares to Ispat andissued to Ispat the 14 million subscribedby it in the Offering. The proceeds fromthe Offering, net of transaction costs,were 3.2 billion. Under the terms of theAgreement, the Company paid a sharelending fee to Ispat of 2.4. As a result ofthe Offering, the Company realized a losson the sale of its treasury shares for taxpurposes and reversed the deferred taxliability of 682, which was previouslyrecognized in 2008. The deferred taxliability related to the potential futurerecapture of an impairment expenseon treasury shares (see note 18).Following the capital increase, the issuedcorporate share capital amounted to€6,837 million (9,950) represented byapproximately 1,561 million shares, ofwhich approximately 1,510 million shareswere outstanding as of December 31,2009. The authorized share capitalof €7,082 million is representedby 1,617 million shares, withoutnominal value, for a period endingon July 14, 2014.On December 28, 2009, the Companyissued through a wholly-owned subsidiaryan unsecured and unsubordinated750 million bond mandatorily convertibleinto preferred shares of such subsidiary.The bond was placed privately with aLuxembourg affiliate of Calyon and is notlisted. The bond matures on May 25, 2011.The Company has the option to call themandatorily convertible bond from May 3,2010 until 10 business days beforeconversion. The subsidiary investedthe proceeds of the bond issuance andan equity contribution by the Companyin notes issued by subsidiaries of theCompany linked to shares of Erdemirof Turkey and Macarthur Coal Limitedof Australia, both of which are publiclylisted companies in which such subsidiarieshold a minority stake. In the Company’sconsolidated financial statements for theyear ended December 31, 2009, themandatory convertible bond is recordedas non-controlling interests of 684 anddebt of 55. (See note 14).Employee Share Purchase PlanAt the Annual General Shareholders’meeting held on May 12, 2009 theshareholders of ArcelorMittal adopted anEmployee Share Purchase Plan (“ESPP”) aspart of a global employee engagement andparticipation policy. Similar to the previousESPP implemented in 2008 and authorizedat the Annual General Shareholders’meeting of May 13, 2008, the plan’s goalis to strengthen the link between theCompany and its employees and to alignthe interests of ArcelorMittal employeesand shareholders. The main features of the2009 and 2008 plans are the following:• In 2009, the plan was offered to 204,072employees in 22 jurisdictions. ArcelorMittaloffered a maximum total number of2,500,000 treasury shares (0.2% of thecurrent issued shares on a fully diluted basis).A total of 392,282 shares were subscribed(of which 1,300 shares by Membersof the Group Management Board and theManagement Committee of the Company).The subscription price was $36.56 beforediscounts. The subscription period ran fromNovember 10, 2009 until November 19,2009 and was settled with treasury shareson January 21, 2010.• In 2008, the plan was offered to216,311 employees in 22 jurisdictions.The Company offered a maximum totalnumber of 2,500,000 treasury shares(0.2% of issued shares). A total of955,820 shares were subscribed, whichare held in treasury for the employees.The implementation of the plan was splitinto two tranches (in September andNovember 2008). The subscriptionprice for the first tranche was $57.05and $21.71 for the second tranche,before discounts.• Pursuant to the plans, eligible employeescould apply to purchase a number ofshares not exceeding that number ofwhole shares equal to the lower of (i)200 shares and (ii) the number of wholeshares that may be purchased for fifteenthousand U.S. dollars (rounded downto the neared whole number of shares).For both 2009 and 2008 plans, thepurchase price is equal to the averageof the opening and the closing pricesof the Company shares trading on theNew York Stock Exchange on the exchangeday immediately preceding the openingof the relevant subscription period,which is referred to as the “reference price”,less a discount equal to:a) 15% of the reference price fora purchase order not exceedingthe lower of (i) 100 shares, and(ii) the immediately lower wholenumber of shares corresponding toan investment of seven thousand fivehundred U.S. dollars, and thereafter;b) 10% of the reference price for anyadditional acquisition of shares upto a number of shares (includingthose in the first cap) not exceedingthe lower of (i) 200 shares, and (ii) theimmediately lower whole number ofshares corresponding to an investmentof fifteen thousand U.S. dollars.All shares purchased under the ESPP arecurrently held in custody for the benefitof the employees in global accounts openedby BNP Paribas Securities Services, exceptfor shares purchased by Canadian andU.S. employees, which are held in custodyin one global account by Mellon InvestorsLLC Services.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 53Shares purchased under the plans aresubject to a three-year lock-up period,except for the following exceptions:permanent disability of the employee,termination of the employee’s employmentwith the Company or death of theemployee. At the end of this lock-upperiod, the employees will have a choiceeither to sell their shares, subject tocompliance with the Company’s insiderdealing regulations, or keep their sharesand have them delivered to their personalsecurities account or make no election,in which case shares will be automaticallysold. Shares may be sold or released withinthe lock-up period in the case of earlyexit events. During this period, and subjectto the early exit events, dividends paid onshares are held for the employee’s accountand accrue interest. Employee shareholdersare entitled to any dividends paid bythenCompany after the settlement dateand they are entitled to vote their shares.DividendsCalculations to determine the amountsavailable for dividends are based onArcelorMittal’s Luxembourg statutoryaccounts which are based on generallyaccepted accounting principles and inaccordance with the laws and regulations inforce in the Grand-Duchy of Luxembourg,rather than its consolidated accounts whichare based on IFRS. ArcelorMittal has nosignificant manufacturing operations of itsown. Accordingly, it can only pay dividendsor distributions to the extent it is entitledto receive cash dividend distributions fromits subsidiaries’ recognized gains, from thesale of its assets or records share premiumfrom the issuance of (new) common shares.Dividends are declared in U.S. dollars andare payable in either U.S. dollars or in Euros.On November 14, 2007, ArcelorMittalannounced its Board of Directors hadrecommended increasing the Company’sbase dividend by 20 cents from $1.30to $1.50 per share. The policy reconfirmsa mechanism that will allow ArcelorMittalto return 30% of net income toshareholders through an annual basedividend, supplemented by additionalshare buy-backs. Based on the annualnet income attributable to equityholders of the parent for the yearended December 31, 2007 of 10,368,ArcelorMittal would return a total of 3,068to shareholders by paying a cash dividendof 2,068 and implementing a 1,000 sharebuy-back. This distribution policy wasimplemented as of January 1, 2008.The dividend for 2008 amounted to 2,068($1.50 per share) and was paid quarterly($0.375 cents per share) on March 17,2008, June 16, 2008, September 15,2008 and December 15, 2008.In light of the adverse economic andmarket conditions, ArcelorMittal’sBoard of Directors recommended onFebruary 10, 2009, to reduce the annualdividend in 2009 to $0.75 per share (withquarterly dividend payment of $0.1875).The reduced dividend was approved bythe annual general meeting of shareholderson May 12, 2009. The new quarterlydividend payments took place on March16, 2009 (an interim dividend), June 15,2009, September 14, 2009 and December14, 2009. The Company has suspendedits previously announced policy to return30% of net income to shareholders throughan annual base dividend supplemented byshare buy-backs.On October 27, 2009, the Board ofDirectors recommended to maintain theCompany’s dividend at $0.75 per sharefor the full year of 2010 with quarterlydividend payments of $0.1875 to occuron March 15, 2010, June 14, 2010,September 13, 2010 and December 15,2010, taking into account that the firstquarterly dividend payment to be paid onMarch 15, 2010 will be an interim dividend.Treasury sharesOn November 5, 2007, ArcelorMittalannounced the start of a 1.0 billion sharebuy-back program valid for a period of18 months or until the date of its renewalby a resolution of the general meetingof shareholders if such renewal dateis prior to such period. This program wascompleted on February 19, 2008 withthe acquisition of 14.6 million sharesfrom Carlo Tassara International S.A.(“Carlo Tassara”) at a price of €46.60($68.70) per share for a total amountof €680 million (1,003). Carlo Tassarais controlled by the Zygmunt Lubicz-ZaleskiFoundation. Mr. Romain Zaleski was amember of the ArcelorMittal Board ofDirectors at the time of this transaction.On December 12, 2007, ArcelorMittalannounced the start of a share buy-backprogram for up to 44 million shares. Thisprogram has a two year term, and sharesbought under this program may be usedin potential future corporate opportunitiesor for cancellation. The Company acquiredapproximately 130,000 shares under thisprogram through December 31, 2007,for a total amount of 9 at an average priceof $70.38 per share.During 2008, ArcelorMittal acquiredapproximately 43.8 million shares underthe 44 million share buy-back programfor a total amount of 3,440 at an averageprice of $78.58 per share. Of this amount,10.4 million shares were acquired onFebruary 19, 2008 from Carlo Tassara ata price of €46.40 ($68.70) per share. Intotal, 25 million shares were acquired fromCarlo Tassara. As of December 31, 2008,ArcelorMittal had acquired approximately43.9 million shares under the 44 millionshare buy-back program for a totalamount of 3,449 at an average priceof $78.56 per share.On April 28, 2009, ArcelorMittal formallyannounced the termination of the sharebuy-back programs under which shareswere repurchased until September 5, 2008.As of December 31, 2009, ArcelorMittalowned 51,373,092 treasury sharesThe decrease in the number of treasuryshares since December 31, 2008is primarily related to the Offeringpreviously described for 28,794,371shares, to the transfer to ArcelorMittalUSA of 1,119,165 shares in order tomeet their pension fund requirements(see note 22) and to the exercise of stockoptions during the period for 456,251shares (as described below).
ArcelorMittal Annual Report 200954 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Earnings per common shareThe following table provides the numerator and a reconciliation of the denominators used in calculating basic and diluted earningsper common share for the years ended December 31, 2008 and 2009:Year EndedYear EndedDecember 31, December 31,2008* 2009Net income attributable to equity holders of the parent 9,466 118Weighted average common shares outstanding (in millions) for the purposes of basic earnings per share 1,383 1,445Incremental shares from assumed conversion of stock options (in millions) 3 1Weighted average common shares assuming conversions (in millions)used in the calculation of diluted earnings per share 1,386 1,446* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocation of purchase price of acquisitions made in 2008 (see note 3).For the purpose of calculating earnings per common share, diluted weighted average common shares outstanding excludes 9 million and26 million potential common shares from stock options outstanding for the years ended December 31, 2008 and 2009, respectively,because such stock options are anti-dilutive. Diluted weighted average common shares outstanding also excludes nil and 64 millionpotential common shares from the Convertible Bonds described in note 14 for the years ended December 31, 2008 and 2009 becausethe potential common shares are anti-dilutive.Share Retention AgreementsArcelorMittal Temirtau has entered into share retention agreements with the EBRD and the International Finance Corporation (“IFC”).Until the date on which the EBRD and IFC loans have been repaid in full, ArcelorMittal Temirtau’s holding company or its nominee shallnot, unless EBRD and IFC otherwise agree in writing, transfer, assign, pledge, dispose or encumber 67% of its share holding inArcelorMittal Temirtau.The Company has pledged 38.6% of its shareholding in ArcelorMittal Galati to AVAS (the governmental body in Romania responsiblefor privatization) in relation to the Company’s ten-year capital expenditure commitment at ArcelorMittal Galati which commencedNovember 2001.The Company has entered into a share pledge agreement with AVAS for 100% of its shareholding in ArcelorMittal Tubular ProductsRoman’s share capital with respect to its investment commitment from 2003 to February 1, 2014.The Company has also entered into a share pledge agreement with AVAS for 58% of its shareholding in ArcelorMittal Hunedoara’s sharecapital towards its capital expenditure commitments for five years commencing April 2004. This share pledge agreement is still effectiveon December 31, 2009, as the Company did not receive written confirmation from AVAS on due fulfillment of the investmentobligations undertaken for the five investment years.Stock Option PlansIn 1999, the Company established the ArcelorMittal Global Stock Option Plan, known as “ArcelorMittalShares” with duration of tenyears. As the initial plan reached expiration, a new “ArcelorMittal Global Stock Option Plan 2009-2018” was adopted by the AnnualGeneral Meeting shareholders on May 12, 2009 and took effect as of May 15, 2009. Under the terms of this new stock option plan,ArcelorMittal may grant options to purchase common stock to senior management of ArcelorMittal and its associates for up to100,000,000 shares of common stock. The exercise price of each option equals not less than the fair market value of ArcelorMittalstock on the grant date, with a maximum term of 10 years. Options are granted at the discretion of ArcelorMittal’s Appointments,Remuneration and Corporate Governance Committee, or its delegate. The options vest either ratably upon each of the first threeanniversaries of the grant date, or, in total, upon the death, disability or retirement of the participant.On August 5, November 10 and December 15, 2008, ArcelorMittal granted 7,255,950, 20,585 and 48,000 options, respectively,under the ArcelorMittalShares plan to a group of key employees at an exercise price of $82.57, $22.25 and $23.75, respectively.The options expire on August 5, November 10 and December 15, 2018, respectively.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 55On August 4, 2009, ArcelorMittal granted 6,128,900 options under the new ArcelorMittal Global Stock Option Plan 2009-2018to a group of key employees at an exercise price of $38.30. The options expire on August 4, 2019.The Company determines the fair value of the options at the date of grant using the Black-Scholes model. The fair values for optionsand other share-based compensation is recorded as an expense in the consolidated statement of operations over the relevant vestingor service periods, adjusted to reflect actual and expected levels of vesting.The fair value of each option grant to purchase ArcelorMittal common shares is estimated on the date of grant using the Black-Scholesoption pricing model with the following weighted average assumptions (based on year of grant):Year of grantYear of grant2008 2009Exercise price per share $82.57-22.25 $38.30Dividend yield 1.82%-6.74% 1.96%Expected annualized volatility 45%-57% 62%Discount rate – bond equivalent yield 4.02%-2.52% 3.69%Weighted average share price $82.57-22.25 $38.30Expected life in years 6 6Fair value of options (per share) $34-9 $20The expected life of the options is estimated by observing general option holder behavior and actual historical lives of ArcelorMittalstock option plans. In addition, the expected annualized volatility has been set by reference to the implied volatility of options availableon ArcelorMittal shares in the open market, as well as, historical patterns of volatility.The compensation expense recognized for stock option plans was 228 and 176 for each of the years ended December 31, 2008,and 2009, respectively.Option activity with respect to ArcelorMittalShares is summarized below as of and for each of the years ended December 31, 2008,and 2009:Range ofWeightedAverageNumber of Exercise Prices Exercise PriceOptions (per option) (per option)Outstanding, December 31, 2007 13,579,438 2.26-74.54 46.15Granted 7,324,535 22.25-82.57 82.01Exercised (954,844) 2.26-64.30 31.88Cancelled (347,034) 2.26-82.57 51.28Forfeitures (43,629) 28.75-64.30 43.35Outstanding, December 31, 2008 19,558,466 2.26-82.57 60.01Granted 6,128,900 38.30 38.30Exercised (456,251) 2.26-33.76 24.56Cancelled (539,023) 33.76-82.57 70.02Forfeitures (644,712) 2.26-82.57 52.20Outstanding, December 31, 2009 24,047,380 2.26-82.57 55.22Exercisable, December 31, 2009 11,777,703 2.26-82.57 52.46Exercisable, December 31, 2008 6,011,214 2.26-82.57 39.75
ArcelorMittal Annual Report 200956 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following table summarizes information about total stock options of the Company outstanding as of December 31, 2009:Options OutstandingWeightedaverageOptionsexercisableNumber of contractual life (numberExercise Prices (per option) Options (in years) of options)82.57 6,831,783 8.60 2,379,76274.54 13,000 7.95 8,66664.30 5,244,202 7.59 3,571,92943.40 1,394,326 3.50 1,394,32638.30 6,121,900 9.60 27,00033.76 2,425,857 6.67 2,425,43428.75 1,552,547 5.65 1,552,54723.75 48,000 8.96 15,99822.25 20,585 8.87 6,86120.38 11,429 2.50 11,42916.53 29,373 1.50 29,3738.57 150,200 0.42 150,2002.26 204,178 2.26 204,178$2.26-82.57 24,047,380 7.84 11,777,703Note 17: Financial Income and ExpenseFinancial income and expense recognized in the years ended December 31, 2008 and 2009 is as follows:2008* 2009Recognized in the statement of operationsInterest expense (2,044) (1,696)Interest income 497 190Fair value adjustment on Convertible Bonds — (897)Net gain (loss) on derivative instruments (177) (28)Net foreign exchange result and others (628) (386)Total (2,352) (2,817)Recognized in equity (Company share)Net change in fair value of available-for-sale financial assets (78) 48Effective portion of changes in fair value of cash flow hedge 1,844 (535)Foreign currency translation differences for foreign operations (6,129) 3,115Total (4,363) 2,628* As required IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).Net foreign exchange result and others include the net foreign exchange impact, bank fees, interest on defined benefit obligationsand impairments of financial instruments. Bank fees, interests on defined benefit obligations and amounts related to taxes have beenreclassified from interest expense to others to conform to current year presentation.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 57Note 18: Income TaxIncome tax expense (benefit)The breakdown of the income tax expense (benefit) for each of the years ended December 31, 2008 and 2009, respectively,is summarized as follows:Year endedYear endedDecember 31, December 31,2008* 2009Total current income tax expense 2,494 354Total deferred tax expense (benefit) (1,366) (4,866)Total income tax expense (benefit) 1,128 (4,512)* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).The following table reconciles the income tax expense (benefit) to the statutory tax expense (benefit) as calculated:Year endedYear endedDecember 31, December 31,2008* 2009Net income: 9,466 118Non-controlling interests 1,032 (43)Income from investments in associates and joint ventures (1,653) (58)Income tax expense (benefit) 1,128 (4,512)Income (loss) before tax and income from investments in associates and joint ventures: 9,973 (4,495)Tax expense (benefit) at the domestic rates applicable to profits (losses) in the countries 1,429 (2,975)Permanent items (544) (1,325)Benefit arising from interest in partnership (21) (19)Rate changes (151) (13)Net change in measurement of deferred tax assets (410) 230Benefit of tax holiday (7) 72Effects of foreign currency translation 728 (521)Tax deduction — —Tax credits (95) (296)Other taxes 177 216Others 22 119Income tax expense (benefit) 1,128 (4,512)* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 200958 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The 2008 permanent items of (544) resultfrom deemed deductions on taxable incomeof (979), tax expense relating to interestrecaptures of 184, tax expense of 177relating to non-deductible provisions andtax expense of 74 relating to otherpermanent items.The 2009 permanent items of (1,325)result from deemed deductions on taxableincome of (1,149), tax profit of (131)relating to tax exempt reversal on provisionfor litigation, tax profit of (99) relating totax deductible capital loss on sale of sharesand tax expense of 54 relating to otherpermanent items.The 2008 tax benefit from rate changesof (151) mainly results from the decreaseof corporate income tax rates inKazakhstan, Luxembourg, South-Africaand Russia.The 2008 net change in measurementof deferred tax assets of (410) primarilyconsists of a net tax benefit of 295 forrecognition of acquired deferred tax assetsand other net tax benefit of 115, mainlyrelating to recognized deferred tax assetsfor not acquired deferred tax assets, partlyoffset by non-recognition of deferred taxassets for losses of the year.The 2009 net change in measurementof deferred tax assets of 230 primarilyconsists of tax expense of 467 due to notrecognizing certain deferred tax assets in2009 offset by additional recognition ofdeferred tax assets for losses of previousyears of (161) and other items of (76).Certain agreements, for example, taxholidays, relating to acquisitions and capitalinvestments undertaken by the Company,provide reduced tax rates, fixed amountsof tax as in Kazakhstan (expiring in 2009),or, in some cases exemption from incometax as in Algeria (expiring in 2014).The effects of foreign currency translationof 728 and 521 at December 31, 2008and 2009, respectively, pertain to certainentities with the US dollar as functionalcurrency and the local currency fortax purposes.The tax credits of 95 and 296 in 2008 and2009 respectively are mainly attributableto our operating subsidiaries in Spain.They relate to credits claimed on researchand development, credits on investmentand to tax sparing credits.Other taxes include withholding taxes ondividends, services, royalties and interests.It also includes Secondary Taxation onCompanies (“STC”), which is a tax leviedon dividends declared by South Africancompanies. STC is not included in thecomputation of current or deferredtax as these amounts are calculatedat the statutory company tax rate onundistributed earnings. On declarationof a dividend, the South African OperatingSubsidiary includes the STC tax in itscomputation of the income tax expense.If the South African Operating Subsidiarydistributed all of its undistributed retainedearnings of 2,978 and 2,956 in 2008 and2009, respectively, it would be subject toadditional taxes of 271 and 269, respectively.STC on dividends declared in 2008 and 2009were 31 and 17, respectively.Others of 119 in 2009 mainlyconsists of a tax provision of 40 forthe restructuring of a US subsidiary,tax expense of 51 due to recognitionof a flat tax effect in Mexico and taxexpense of 28 due to prior period taxes.The net deferred tax benefit (expense)recorded directly to equity was (789) and406 as of December 31, 2008 and 2009,respectively. The net current tax benefit(expense) recorded directly to equity was(67) and 18 as of December 31, 2008 and2009, respectively.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 59Income tax recognized directly in equity2008 2009Current taxRecognized in other comprehensive income on:Foreign currency translation adjustments (67) 18(67) 18Deferred taxRecognized in other comprehensive income on:Unrealized gain (loss) on available-for-sale securities 9 (3)Unrealized gain (loss) on derivative financial instruments (868) 174Foreign currency translation adjustments 55 (370)Recognized in additional paid-in capital on:Movements on treasury shares 15 682Recognized in retained earnings on:Cancellation of cash settlement option on 800 convertible senior notes — (81)Recognized in non-controlling interests on:Issuance of bonds mandatorily convertible in shares of subsidiaries — 4(789) 406In 2008, the Company recognized an impairment expense for tax purposes as the market value of its treasury shares was lowerthan the recorded value. The impairment expense resulted in the recognition of a deferred tax asset as the Company had tax losscarryforwards in Luxembourg. In addition, the Company recognized a deferred tax liability for the potential future recapture of therecognized impairment expense. In accordance with IFRS, the corresponding tax benefit and expenses, netting to zero, was recognizedin the consolidated statements of changes in equity. As a result of the Offering, the Company realized a loss on the sale of shares fortax purposes and reversed 682 of the deferred tax liability previously recognized.The origin of deferred tax assets and liabilities is as follows:Assets Assets Liabilities Liabilities Net Net2008* 2009 2008* 2009 2008* 2009Intangible assets 179 167 (1,195) (1,104) (1,016) (937)Property, plant and equipment 237 277 (9,712) (9,293) (9,475) (9,016)Inventories 565 421 (470) (425) 95 (4)Available-for-sale financial assets — — (14) (12) (14) (12)Financial instruments 77 436 (67) (92) 10 344Other assets 98 258 (1,533) (665) (1,435) (407)Provisions 2,755 2,806 (574) (1,008) 2,181 1,798Other liabilities 861 455 (343) (677) 518 (222)Tax losses carried forward 3,164 7,468 — — 3,164 7,468Tax credits 424 724 — — 424 724Untaxed reserves — — (41) (42) (41) (42)Deferred tax assets/(liabilities) 8,360 13,012 (13,949) (13,318) (5,589) (306)Deferred tax assets 805 4,838Deferred tax liabilities (6,394) (5,144)* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 200960 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Deferred tax assets not recognized by the Company as of December 31, 2008* were as follows:Totaldeferred Recognized UnrecognizedGross tax deferred tax deferredamount assets assets tax assetsTax losses carried forward 11,370 3,557 3,164 393Tax credits and other tax benefits 719 719 424 295Other temporary differences 15,928 5,017 4,772 245Total 9,293 8,360 933* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009of the allocation of purchase price of acquisitions made in 2008 (see note 3).Deferred tax assets not recognized by the Company as of December 31, 2009 were as follows:Totaldeferred Recognized UnrecognizedGross tax deferred tax deferredamount assets assets tax assetsTax losses carried forward 27,315 8,220 7,468 752Tax credits and other tax benefits 1,410 844 724 120Other temporary differences 15,845 4,966 4,820 146Total 14,030 13,012 1,018ArcelorMittal had unrecognized deferred tax assets relating to tax loss carry forwards and other temporary differences, amountingto 933 and 1,018 as of December 31, 2008 and 2009, respectively. As of December 31, 2009, most of the deferred tax assets notrecognized relate to tax loss carry forwards attributable to various subsidiaries located in different jurisdictions (primarily Belgium, Brazil,Luxembourg, Mexico and the United States) with different statutory tax rates. Therefore, the amount of the total deferred tax assets isthe aggregate amount of the various deferred tax assets recognized and unrecognized at the various subsidiaries and not the result of acomputation with a given blended rate. The majority of unrecognized tax losses have an expiration date. In addition, the utilization of taxloss carry forwards is restricted to the taxable income of the subsidiary or tax consolidated group to which it belongs.At December 31, 2009, based upon the level of historical taxable income and projections for future taxable income over the periodsin which the deductible temporary differences are anticipated to reverse, management believes it is probable that ArcelorMittal willrealize the benefits of the total deferred tax assets of 4,838 recognized. The amount of future taxable income required to be generatedby ArcelorMittal’s subsidiaries to utilize the total deferred tax assets is approximately 16,409. Historically, the Company has been ableto generate taxable income in sufficient amounts and believes that it will generate sufficient levels of taxable income in upcoming yearsto permit the Company to utilize tax benefits associated with tax loss carry forwards and other deferred tax assets that have beenrecognized in its consolidated financial statements. However, the amount of the deferred tax asset considered realizable could beadjusted in the future if estimates of taxable income are revised.In 2007, ArcelorMittal has recorded approximately 35 of deferred income tax liabilities on the undistributed earnings of its foreignsubsidiaries for income taxes due if these earnings would be distributed. There was no material change to these liabilities as ofDecember 31, 2008 and December 31, 2009. Investments in our subsidiaries are not expected to reverse in the foreseeable futureand therefore capital gains are not anticipated. The aggregate amount of deferred tax liabilities relating to investments in subsidiaries,branches and associates and investments that is not recognized is approximately 471.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 61Tax loss carry forwardsAt December 31, 2009, the Company had total estimated net tax loss carry forwards of 27,315.Such amount includes net operating losses of 5,914 primarily related to subsidiaries in Canada, Mexico, Poland, Romania, Spain, Russiaand the United States, which expire as follows:Year expiring2010 702011 42012 82013 372014 1,1742015-2029 4,621Total 5,914The remaining tax loss carry forwards of 21,401 are indefinite and primarily attributable to the Company’s operations in Belgium, Brazil,France, Germany, Luxembourg and Trinidad and Tobago.Tax loss carry forwards are denominated in the currency of the countries in which the respective subsidiaries are located and operate.Fluctuations in currency exchange rates could reduce the U.S. dollar equivalent value of these tax loss carry forwards in future years.AmountNote 19: ProvisionsThe movements by provision were as follows:DeductionsEffects ofForeignBalance at – Payments Exchange Balance atDecember 31, and other and other December 31,2007 Additions releases Acquisitions movements 2008Environmental (see note 23) 889 125 (146) — (99) 769Asset retirement obligations 176 22 (3) 71 12 278Restructuring 565 215 (117) 8 (105) 566Voluntary separation plans 1 — 945 — — (10) 935Litigation (see note 23) 1,023 847 (252) 66 (83) 1,601Commercial agreements and onerous contracts 134 743 (29) 12 (5) 855Other 2 813 317 (519) 16 4 6313,600 3,214 (1,066) 173 (286) 5,635Short-term provisions 1,144 3,292Long-term provisions 2,456 2,3433,600 5,6351 Voluntary separation plans were announced at the end of 2008 by the Group Management Board and were largely completed in 2009.As of December 2009, the outstanding provision relates to remaining plans primarily in France, Romania, USA, Poland, Bosnia, Ukraine,Belgium, Czech Republic, Argentina, Kazakhstan, Germany and Spain.2Other includes provisions for technical warranties, guarantees as well as other disputes.
ArcelorMittal Annual Report 200962 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)DeductionsEffects ofForeignBalance at – Payments Exchange Balance atDecember 31, and other and other December 31,2008 Additions releases Acquisitions movements 2009Environmental (see note 23) 769 72 (131) — 33 743Asset retirement obligations 278 49 (2) — 11 336Restructuring 566 78 (131) 1 (183) 331Voluntary separation plans 1 935 280 (685) — (218) 312Litigation (see note 23) 1,601 296 (803) 2 125 1,221Commercial agreements and onerous contracts 855 471 (1,150) — (2) 174Other 2 631 266 (321) 3 (142) 4375,635 1,512 (3,223) 6 (376) 3,554Short-term provisions 3,292 1,433Long-term provisions 2,343 2,1215,635 3,5541 Voluntary separation plans were announced at the end of 2008 by the Group Management Board and were largely completed in 2009.As of December 2009, the outstanding provision relates to remaining plans primarily in France, Romania, USA, Poland, Bosnia, Ukraine,Belgium, Czech Republic, Argentina, Kazakhstan, Germany and Spain.2Other includes provisions for technical warranties, guarantees as well as other disputes.There are uncertainties regarding the timing of the provisions which are planned to be used in a period of one to four years except forthe environmental provisions which are planned to be used for up to 20 years.Note 20: Accrued Expenses and Other LiabilitiesAccrued expenses were comprised of the following as of December 31:2008* 2009Accrued payroll and employee related expenses 1,949 1,949Other payables 1,942 1,810Other creditors 1,143 1,349Revaluation of derivative instruments 1,094 905Other amounts due to public authorities 791 731Unearned revenue and accrued payables 317 217Total 7,236 6,961* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalizationin 2009 of the allocation of purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 2009Consolidated Financial Statements 63Note 21: CommitmentsThe Company’s commitments consist of three main categories:• non-cancellable operating leases,• various purchase and capital expenditure commitments,• pledges, guarantees and other collateral instruments given to secure financial debt and credit lines.Operating leasesThe Company leases various facilities, land and equipment under non-cancellable lease arrangements. Future payments required underoperating leases that have initial or remaining non-cancellable terms as of December 31, 2009 according to maturity periods are as follows:Less than 1 year 881-3 years 1724-5 years 120More than 5 years 141Total 521The operating leases are mainly related to land, properties, warehouses, machineries and technical equipment.Commitments givenDecember 31. December 31.2008 2009Purchase commitments 29,724 26,229Capital expenditure commitments 2,233 1,515Guarantees, pledges and other collateral 4,796 4,944Other commitments 5,759 5,895Total 42,512 38,583Purchase commitmentsPurchase commitments consist primarily of major agreements for procuring iron ore, coking coal, coke and hot metal. The Company alsohas a number of agreements for electricity, industrial and natural gas, as well as freight contracts.Guarantees, property and other collateralProperty pledges and guarantees mainly relate to mortgages entered into by the Company’s Operating Subsidiaries and guaranteesissued related to external debt financing.Guarantees consist of guarantees of financial loans and credit lines granted to non-consolidated subsidiaries and investments and jointventures accounted for under the equity method, first demand and documentary guarantees, as well as guarantees provided to stateauthorities such as customs.Other collateral and guarantees include documentary credits, letters of credit and sureties.Other commitments givenOther commitments given comprise commitments incurred for the long-term use of goods belonging to a third party, commitmentsincurred under operating leases and credit lines confirmed to customers but not drawn, and commitments relating to grants.
ArcelorMittal Annual Report 200964 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Commitments receivedDecember 31. December 31.2008 2009Endorsements and guarantees received from non-consolidated companies 921 1,033Other commitments received 7,037 13,647Total 7,958 14,680Other commitments receivedOther commitments received includes commitments deriving from bills, sureties and guarantees provided by third parties.It also includes the unutilized and available portions of the Company’s €5 billion revolving credit facility and $4 billion credit facility(see note 14).Multi-currency Letter of Credit Facility: On December 30, 2005 the Company entered into a multi-currency revolving letter of creditfacility in an aggregate amount equal to 800 with a consortium of lenders. The amount available under this facility was 418 as ofDecember 31, 2009. This facility is used by the Company and its subsidiaries for the issuance of letters of credit and guarantees. Theterms of the letter of credit and guarantees contain certain restrictions as to duration. On December 16, 2009 the financial covenanthas been aligned to the financial covenant included in the €17 billion credit facility and the $4 billion credit facility.Other guarantee credit and letter of credit facilities: In 2004, 2005 and 2006 the Company entered guarantee credit facilities currentlytotaling €220 million (317).
ArcelorMittal Annual Report 2009Consolidated Financial Statements 65Note 22: Deferred Employee BenefitsArcelorMittal’s Operating Subsidiaries havedifferent types of pension plans for theiremployees. Also, some of the OperatingSubsidiaries offer other post-employmentbenefits, principally healthcare. The expenseassociated with these pension plans andemployee benefits, as well as the carryingamount of the related liability/asset on thestatements of financial position are basedon a number of assumptions and factorssuch as the discount rate, expectedcompensation increases, expected returnon plan assets, future healthcare costtrends and market value of the underlyingassets. Actual results that differ fromthese assumptions are accumulatedand amortized over future periods and,therefore, will affect the statement ofoperations and the recorded obligationin future periods. The total accumulatedunrecognized actuarial loss amountedto 1,678 for pensions and 401 forother post retirement benefits asof December 31, 2009.On August 30, 2008 ArcelorMittal USAreached a labor agreement with the UnitedSteelworkers of America (the “USW”) formost of its steel plants and iron oreoperations in the US. The USW ratified thisagreement on October 21, 2008. Theagreement increased wages, provided asigning bonus of six thousand dollars peremployee, increased the pension multiplierfor certain employees, increased paymentsinto Steelworkers pension trust, providedfor a lump sum payment upon retirementfor certain employees, and reduced thepremium retirees must pay for healthcare.The most significant change to thisagreement is the change in the fundingprinciples of a Voluntary Employee BenefitAssociation (“VEBA”) for retiree healthcare.Previously this fund was accounted for as aprofit-sharing arrangement. The change inthe contractual obligation led to therecognition in 2008 of a liability and otherpost-employment expense of 1,424 forthose obligations had previously vested.The cash outflow related to these benefitsis a requirement to fund 25 per quarter intothe VEBA for the first four years plusa cash payment of 90 in 2008 for profitsearned prior to signing the contract. Theimpact of those changes is discussedfurther in the post-employment benefitssection of this note.The Company agreed in 2008 to transfer toArcelorMittal USA a number of shares held intreasury equal to 130, subject to certainadjustments, in several tranches until the endof 2010 to provide a means for ArcelorMittalUSA to meet its cash funding requirementsto the ArcelorMittal USA Pension Trust. Thefirst tranche, consisting of 1,121,995treasury shares, was transferred onDecember 29, 2008 for consideration of$23.72 per share, the New York StockExchange opening price on December 23,2008. The second tranche, consisting of119,070 treasury shares, was transferred onJune 29, 2009 for consideration of $32.75per share, the New York Stock Exchangeopening price on June 26, 2009. The thirdtranche, consisting of 1,000,095 treasuryshares, was transferred on September 15,2009, for consideration of $39.00 per share,the New York Stock Exchange opening priceon September 14, 2009.Pension PlansA summary of the significant defined benefitpension plans is as follows:U.S.ArcelorMittal USA’s Pension Plan andPension Trust is a non-contributorydefined benefit plan covering approximately24% of its employees. Benefits for mostnon-represented employees who receivepension benefits are determined undera “Cash Balance” formula as an accountbalance which grows as a result of interestcredits and of allocations based on apercentage of pay. Benefits for othernon-represented salaried employees whoreceive pension benefits are determinedas a monthly benefit at retirementdepending on final pay and service.Benefits for wage and salaried employeesrepresented by a union are determinedas a monthly benefit at retirement basedon fixed rate and service.CanadaThe primary pension plans are thoseof ArcelorMittal Dofasco and ArcelorMittalMines Canada. The ArcelorMittal Dofascopension plan is a hybrid plan providingthe benefits of both a defined benefitand defined contribution pension plan.The defined contribution componentis financed by both employer andemployee contributions. The employeralso contributes a percentage of profitsin the defined contribution plan.The ArcelorMittal Mines Canada definedbenefit plan provides salary related benefitfor non-union employees and a flat dollarpension depending on an employee’s lengthof service. This plan was closed for newhires on December 31, 2009, and replacedby a defined contribution pension plan withcontributions related to age and services.The ArcelorMittal Mines Canada hourlyworkers’ defined benefit plan is a unionizedplan and is still open to new hires.BrazilThe primary defined benefit plans,financed through trust funds, have beenclosed to new entrants. Brazilian entitieshave all established defined contributionplans that are financed by employer andemployee contributions.EuropeCertain European Operating Subsidiariesmaintain primarily unfunded definedbenefit pension plans for a certain numberof employees. Benefits are based on suchemployees’ length of service and applicablepension table under the terms of individualagreements. Some of these unfunded planshave been closed to new entrants andreplaced by defined contributions pensionplans for active members financed byemployer and employee contributions.South AfricaThere are two primary defined benefitpension plans. These plans are closed tonew entrants. The assets are held in pensionfunds under the control of the trustees andboth funds are wholly funded for qualifyingemployees. South African entities have alsoimplemented defined contributions pensionplans that are financed by employers’ andemployees’ contributions.OtherA limited number of funded definedbenefit plans are in place in countrieswhere funding of multi-employer pensionplans is mandatory.
ArcelorMittal Annual Report 200966 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Plan AssetsThe weighted-average asset allocations for the funded defined benefit pension plans by asset category were as follows:December 31, 2008U.S. Canada Brazil Europe South Africa OthersEquity Securities 45% 55% 7% 13% 34% 39%Fixed Income (including cash) 35% 40% 91% 69% 52% 56%Real Estate 7% — — — — —Other 13% 5% 2% 18% 14% 5%Total 100% 100% 100% 100% 100% 100%December 31, 2009U.S. Canada Brazil Europe South Africa OthersEquity Securities 55% 57% 9% 10% 34% 28%Fixed Income (including cash) 25% 41% 89% 79% 48% 72%Real Estate 4% — — 1% 1% —Other 16% 2% 2% 10% 17% —Total 100% 100% 100% 100% 100% 100%These assets do not include any direct investment in ArcelorMittal or in property or other assets occupied or used by ArcelorMittalexcept for the transaction explained previously. This does not exclude ArcelorMittal shares included in mutual fund investments.The invested assets produced an actual return of (1,128) and 950 in 2008 and 2009, respectively.The Finance and Retirement Committees of the Board of Directors for the respective Operating Subsidiaries have general supervisoryauthority over the respective trust funds. These committees have established the following asset allocation targets. These targets areconsidered benchmarks and are not mandatory.December 31, 2009U.S. Canada Brazil Europe South Africa OthersEquity Securities 63% 60% 15% 15% 35% 50%Fixed Income (including cash) 23% 40% 85% 77% 55% 50%Real Estate 5% — — 2% — —Other 9% — — 6% 10% —Total 100% 100% 100% 100% 100% 100%
ArcelorMittal Annual Report 2009Consolidated Financial Statements 67The following tables detail the reconciliation of defined benefit obligation, plan assets and statement of financial position.Year December 31, 2008Total U.S. Canada Brazil Europe South Africa OtherChange in benefit obligationBenefit obligation at beginning of the period 10,512 3,078 3,034 639 2,486 1,069 206Service cost 163 42 61 11 38 — 11Interest cost 625 181 161 69 127 69 18Plan amendments 180 155 11 — 10 — 4Plan participants’ contribution 6 — 1 3 1 — 1Acquisition 20 — — — — — 20Curtailments and settlements 12 — (1) (1) (12) — 26Actuarial (gain) loss (141) 50 (248) 37 42 (15) (7)Benefits paid (760) (225) (167) (37) (194) (92) (45)Foreign currency exchange rate differencesand other movements (1,258) — (577) (171) (182) (288) (40)Benefit obligation at end of the period 9,359 3,281 2,275 550 2,316 743 194Change in plan assetsFair value of plan assets atbeginning of the period 8,091 2,627 2,707 731 623 1,290 113Expected return on plan assets 584 215 182 82 25 69 11Actuarial loss (1,712) (915) (631) (24) (24) (103) (15)Employer contribution 458 213 170 18 56 — 1Plan participants’ contribution 6 — 1 3 1 — 1Settlements (11) — — — (11) — —Benefits paid (589) (224) (166) (37) (64) (92) (6)Foreign currency exchange rate differencesand other movements (1,039) — (477) (184) (40) (338) —Fair value of plan assets at end of the period 5,788 1,916 1,786 589 566 826 105(Unfunded) funded status of the plans (3,571) (1,365) (489) 39 (1,750) 83 (89)of which net present value offunded obligation (2,170) (1,323) (477) 39 (506) 83 14of which present value of unfunded obligation (1,401) (42) (12) — (1,244) — (103)Unrecognized net actuarial loss 1,969 1,700 179 44 22 — 24Unrecognized past service cost 29 28 — — 1 — —Prepaid due to unrecoverable surpluses (155) — — (69) (3) (83) —Net amount recognized (1,728) 363 (310) 14 (1,730) — (65)Net assets related to funded obligations 491 406 49 17 — — 19Recognized liabilities (2,219) (43) (359) (3) (1,730) — (84)
ArcelorMittal Annual Report 200968 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Year December 31, 2009Total U.S. Canada Brazil Europe South Africa OtherChange in benefit obligationBenefit obligation at beginningof the period 9,359 3,281 2,275 550 2,316 743 194Service cost 160 53 51 10 37 — 9Interest cost 635 183 168 70 126 71 17Plan amendments 46 — 6 — 35 — 5Plan participants’ contribution 5 — 1 2 1 — 1Acquisition 3 — — — 3 — —Curtailments and settlements (24) — — (10) (9) — (5)Actuarial (gain) loss 330 — 168 22 141 (4) 3Benefits paid (769) (247) (174) (43) (188) (90) (27)Foreign currency exchangerate differencesand other movements 867 — 393 198 82 190 4Benefit obligation at end of the period 10,612 3,270 2,888 799 2,544 910 201Change in plan assetsFair value of plan assets at beginningof the period 5,788 1,916 1,786 589 566 826 105Expected return on plan assets 479 156 140 79 23 71 10Actuarial gain (loss) 471 265 130 39 42 (4) (1)Employer contribution 302 48 202 13 38 — 1Plan participants’ contribution 5 — 1 2 1 — 1Settlements (3) — — (9) 6 — —Benefits paid (613) (244) (173) (43) (55) (90) (8)Foreign currency exchange rate differencesand other movements 766 — 310 215 23 218 —Fair value of plan assets at endof the period 7,195 2,141 2,396 885 644 1,021 108(Unfunded) funded status of the plans (3,417) (1,129) (492) 86 (1,900) 111 (93)of which net present value offunded obligation (1,883) (1,095) (477) 86 (519) 111 11of which present valueof unfunded obligation (1,534) (34) (15) — (1,381) — (104)Unrecognized net actuarial loss 1,678 1,242 251 30 127 — 28Unrecognized past service cost 3 2 — — 1 — —Prepaid due to unrecoverable surpluses (221) — (3) (104) (3) (111) —Net amount recognized (1,957) 115 (244) 12 (1,775) — (65)Net assets related to funded obligations 294 194 65 17 — — 18Recognized liabilities (2,251) (79) (309) (5) (1,775) — (83)Asset CeilingThe amount not recognized in the fair value of plan assets due to the asset ceiling was 155 and 221 at December 31, 2008and 2009, respectively.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 69The following tables detail the components of net periodic pension cost:Year December 31, 2008Total U.S. Canada Brazil Europe South Africa OtherNet periodic pension cost (benefit)Service cost 163 42 61 11 38 — 11Interest cost 625 181 161 69 127 69 18Expected return on plan assets (584) (215) (182) (82) (25) (69) (11)Charges due to unrecoverable surpluses (8) — — (11) 3 — —Curtailments and settlements 25 — (1) — — — 26Amortization of unrecognized pastservice cost 152 127 11 — 10 — 4Amortization of unrecognizedactuarial (gain) loss 78 69 (6) 12 2 — 1Total 451 204 44 (1) 155 — 49Year Ended December 31, 2009Total U.S. Canada Brazil Europe South Africa OtherNet periodic pension costService cost 160 53 51 10 37 — 9Interest cost 635 183 168 70 126 71 17Expected return on plan assets (479) (156) (140) (79) (23) (71) (10)Charges due to unrecoverable surpluses 13 — 3 10 — — —Curtailments and settlements (13) — — 1 (11) — (3)Amortization of unrecognizedpast service cost 72 26 6 — 35 — 5Amortization of unrecognizedactuarial loss 201 184 10 6 — — 1Total 589 290 98 18 164 — 19Other post-employment benefitsArcelorMittal’s principal Operating Subsidiaries in the U.S., Canada and Europe, among certain others, provide other post-employmentbenefits (“OPEB”), including medical benefits and life insurance benefits, to retirees. Substantially all union-represented ArcelorMittalUSA employees are covered under post-employment life insurance and medical benefit plans that require deductible and co-insurancepayments from retirees. The post-employment life insurance benefit formula used in the determination of post-employment benefitcost is primarily based on applicable annual earnings at retirement for salaried employees and specific amounts for hourly employees.ArcelorMittal USA does not pre-fund most of these post-employment benefits.In connection with the current labor agreement between ArcelorMittal USA and the USW, the Company agreed to changes to an existingVoluntary Employee Benefit Association (“VEBA”). The VEBA provided limited healthcare benefits to the retirees of certain companieswhose assets were acquired (referred to as Legacy Retirees). Contributions into the trust were calculated based on quarterly operatingincome and on certain overtime hours worked. Benefits paid were based on the availability of funds in the VEBA.Under the current agreement ArcelorMittal USA agreed to contribute a fixed amount of 25 per quarter and to develop a program ofbenefits for the Legacy Retirees. Agreements with the USW capped ArcelorMittal USA’s share of healthcare costs for ArcelorMittal USAretirees at 2008 levels for years 2010 and beyond. The VEBA will be responsible for reimbursing ArcelorMittal USA for any costs inexcess of the cap for retirees of ArcelorMittal USA. Because the current labor agreement specifies the level of benefits to be providedand ArcelorMittal USA is the only source of funding, the obligation meets the definition of a defined benefit plan. Accordingly,ArcelorMittal USA recognized a liability of 571 for the actuarial determined amount of benefits expected to be paid to the LegacyRetirees net of the existing assets in the VEBA trust in 2008. Since these individuals have all retired, the expense was recognizedimmediately in 2008. ArcelorMittal USA also determined that removing the cap on future healthcare costs increased the defined benefitobligation by 1,061 of which 853 was vested and recognized immediately in 2008. The remaining balance will be recognized evenlyover the average period of estimated future service life until the benefits become vested.The Company has significant assets mostly in the aforementioned VEBA post employment benefit plans. These assets consist of 99%in fixed income and 1% in cash. The total fair value of the assets in VEBA trust was 531 as of December 31, 2009.
ArcelorMittal Annual Report 200970 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Summary of changes in the other post employment benefit obligation and the change in plan assets:Year December 31, 2008Total U.S. Canada Brazil Europe OtherChange in post-employment benefit obligationBenefit obligation at beginning of period 2,805 1,215 983 6 522 79Service cost 54 12 14 — 23 5Interest cost 212 121 48 1 34 8Plan amendment 1,695 1,642 2 — 8 43Actuarial loss (gain) 224 379 (155) — (18) 18Benefits paid (250) (135) (36) (1) (78) —Curtailments and settlements 4 4 — — — —Divestitures (47) (47) — — — —Foreign currency exchange rate changes and other movements 557 670 1 (189) (1) 112 (35)Benefits obligation at end of period 5,254 3,861 667 5 603 118Fair value of assets 635 623 — — 12 —Unfunded (net) status of the plans (4,619) (3,238) (667) (5) (591) (118)of which net present value of funded obligation (774) (742) — — (32) —of which present value of unfunded obligation (3,845) (2,496) (667) (5) (559) (118)Unrecognized net actuarial loss (gain) 454 695 (223) — (35) 17Unrecognized past service cost (benefit) 199 197 (1) — 3 —Net amount recognized (3,966) (2,346) (891) (5) (623) (101)1Includes the existing VEBA trust assets.Year December 31, 2009Total U.S. Canada Brazil Europe OtherChange in post-employment benefit obligationBenefit obligation at beginning of period 5,254 3,861 667 5 603 118Service cost 60 26 10 — 19 5Interest cost 299 217 46 — 29 7Plan amendment 42 24 — — 18 —Actuarial loss (gain) 46 38 (17) (1) 32 (6)Benefits paid (327) (203) (36) — (68) (20)Curtailments and settlements (70) — — — (70) —Divestitures (4) — — — (4) —Foreign currency exchange rate changes andother movements 116 — 108 1 5 2Benefits obligation at end of period 5,416 3,963 778 5 564 106Fair value of assets 577 559 — — 18 —Unfunded (net) status of the plans (4,839) (3,404) (778) (5) (546) (106)of which net present value of funded obligation (747) (715) — — (32) —of which present value of unfunded obligation (4,092) (2,689) (778) (5) (514) (106)Unrecognized net actuarial loss (gain) 401 670 (259) — (20) 10Unrecognized past service cost 131 129 — — 2 —Net amount recognized (4,307) (2,605) (1,037) (5) (564) (96)
ArcelorMittal Annual Report 2009Consolidated Financial Statements 71The following tables detail the components of net periodic other post-employment cost:Year December 31, 2008Total U.S. Canada Brazil Europe OtherComponents of net periodic OPEB costService cost 54 12 14 — 23 5Interest cost 212 121 48 1 34 8Expected return on plan assets (16) (15) — — (1) —Curtailments and settlements 6 6 — — — —Amortization of unrecognized past service cost 1,504 1,458 1 — 2 43Amortization of unrecognized actuarial (gain) loss 6 12 (15) — 9 —Total 1,766 1,594 48 1 67 56Year December 31, 2009Total U.S. Canada Brazil Europe OtherComponents of net periodic OPEB cost (benefit)Service cost 60 26 10 — 19 5Interest cost 299 217 46 — 29 7Expected return on plan assets (39) (38) — — (1) —Curtailments and settlements (70) — — — (70) —Amortization of unrecognized past service cost 110 92 — — 18 —Amortization of unrecognized actuarial (gain) loss 35 32 (16) (1) 19 1Total 395 329 40 (1) 14 13Weighted-average assumptions used to determine benefit obligations at December 31:Pension PlansOther Post-employment Benefits2008 2009 2008 2009Discount rate 5.42%-10.77% 4.97%-15% 4.25%-10.77% 4.5%-10.77%Rate of compensation increase 2.50%-9.2% 1.71%-14% 1.5%-7.12% 2%-7.12%Expected long-term rate of return on plan assets 3.47%-11.72% 3.52%-11.26% 4.5%-6.11% 4.5%-6.12%Healthcare Cost Trend RateDecember 31, December 31,2008 2009Healthcare cost trend rate assumed 3%-5.71% 3%-5.4%Cash ContributionsIn 2010, the Company expects its cash contributions to amount to 546 for pension plans, 203 for other post employment benefitsplans and 149 for the defined contribution plans. Cash contributions to the defined contribution plans, sponsored by the Company,were 207 in 2009.
ArcelorMittal Annual Report 200972 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Statement of Financial PositionTogether with plans and obligations that do not constitute pension or other post-employment benefits, the total deferred employeebenefits are as follows:December 31, December 31,2008 2009Pension plan benefits 2,219 2,251Other post-employment benefits 3,966 4,307Early retirement benefits 669 886Other long-term employee benefits 257 139Total 7,111 7,583Sensitivity analysisThe following information illustrates the sensitivity to a change in certain assumptions related to ArcelorMittal’s pension plans(as of December 31, 2009, the defined benefit obligation (“DBO”) for pension plans was 10,612):Effect on 2010Pre-Tax Pension Expense(sum of service cost December 31,Change in assumption and interest cost) 2009 DBO100 basis point decrease in discount rate (11) 1,134100 basis point increase in discount rate 8 (948)100 basis point decrease in rate of compensation (33) (255)100 basis point increase in rate of compensation 39 278100 basis point decrease in expected return on plan assets (67) —100 basis point increase in expected return on plan assets 67 —Effect ofThe following table illustrates the sensitivity to a change in the discount rate assumption related to ArcelorMittal’s OPEB plans(as of December 31, 2009 the DBO for post-employment benefit plans was 5,416):Effect on 2010Pre-Tax OPED Expense(sum of service cost December 31,Change in assumption and interest cost) 2009 DBO100 basis point decrease in discount rate (10) 640100 basis point increase in discount rate 8 (532)100 basis point decrease in healthcare cost trend rate (39) (504)100 basis point increase in healthcare cost trend rate 42 576The above sensitivities reflect the effect of changing one assumption at a time. Actual economic factors and conditions often affectmultiple assumptions simultaneously, and the effects of changes in key assumptions are not necessarily linear.Effect of
ArcelorMittal Annual Report 2009Consolidated Financial Statements 73Experience adjustmentsThe two year history of the present value of the defined benefit obligations, the fair value of the plan assets and the surplus or thedeficit in the pension plans is as follows:At December 31, At December 31,2008 2009Present value of the defined benefit obligations (9,359) (10,612)Fair value of the plan assets 5,788 7,195Deficit (3,571) (3,417)Experience adjustments: (increase)/decrease plan liabilities (122) (161)Experience adjustments: increase/(decrease) plan assets (1,712) 471This table illustrates the present value of the defined benefit obligations, the fair value of the plan assets and the surplus or the deficitfor the OPEB plans:At December 31, At December 31,2008 2009Present value of the defined benefit obligation (5,254) (5,416)Fair value of the plan assets 635 577Deficit (4,619) (4,839)Experience adjustments: (increase)/decrease in plan liabilities (142) 14Experience adjustments: increase/(decrease) in plan assets (19) 11Note 23: ContingenciesArcelorMittal may be involved in litigation, arbitration or other legal proceedings. Provisions related to legal and arbitral proceedings arerecorded in accordance with the principles described in note 2.Most of these claims involve highly complex issues, actual damages and other matters. Often these issues are subject to substantialuncertainties and, therefore, the probability of loss and an estimation of damages are difficult to ascertain. Consequently, for a largenumber of these claims, the Company is unable to make a reasonable estimate of the expected financial effect that will result fromultimate resolution of the proceeding. In those cases, the Company has disclosed information with respect to the nature of thecontingency. The Company has not accrued a reserve for the potential outcome of these cases.In the cases in which quantifiable fines and penalties have been assessed, the Company has indicated the amount of such fine or penaltyor the amount of provision accrued that is the estimate of the probable loss.In a limited number of ongoing cases, the Company is able to make a reasonable estimate of the expected loss or range of possible lossand have accrued a provision for such loss, but believe that publication of this information on a case-by-case basis would seriouslyprejudice the Company’s position in the ongoing legal proceedings or in any related settlement discussions. Accordingly, in these cases,the Company has disclosed information with respect to the nature of the contingency, but has not disclosed our estimate of the rangeof potential loss.These assessments can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.These assessments are based on estimates and assumptions that have been deemed reasonable by management. The Company believesthat the aggregate provisions recorded for the above matters are adequate based upon currently available information. However, giventhe inherent uncertainties related to these cases and in estimating contingent liabilities, the Company could, in the future, incurjudgments that could have a material adverse effect on its results of operations in any particular period.
ArcelorMittal Annual Report 200974 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Environmental LiabilitiesArcelorMittal’s operations are subject to abroad range of laws and regulations relatingto the protection of human health and theenvironment at its multiple locations andoperating subsidiaries. As of December 31,2009, ArcelorMittal had establishedreserves of 743 for environmental remedialactivities and liabilities, including 348 inprovisions relating to Europe, 219 inprovisions relating to the United States,151 in provisions relating to South Africaand 17 in provisions relating to Canada.ArcelorMittal and the previous ownersof its facilities have expended substantialamounts to achieve or maintain ongoingcompliance with applicable environmentallaws and regulations. ArcelorMittal expectsto continue recording provisions in thisrespect in the future.United StatesArcelorMittal USA’s environmentalprovisions of 210 are mainly related toinvestigation, monitoring and remediationof soil and groundwater investigationat its current and former facilities andto removal and disposal of PCBs andasbestos-containing material. Theenvironmental provisions include oneto address ArcelorMittal USA’s potentialliability at two Superfund sites.ArcelorMittal USA’s largest environmentalprovisions relate to investigation andremediation at Indiana Harbor (East),Lackawanna, and its closed miningoperations in southwestern Pennsylvania.In 1990, ArcelorMittal USA’s Indiana Harbor(East) facility was party to a lawsuit filed bythe U.S. Environmental Protection Agency(the “EPA”) under the U.S. ResourceConservation and Recovery Act (“RCRA”).In 1993, ArcelorMittal Indiana Harbor(East) entered into a Consent Decree,which, among other things, requiresfacility-wide RCRA Corrective Action andsediment assessment and remediation inthe adjacent Indiana Harbor Ship Canal.ArcelorMittal USA’s provisions forenvironmental liabilities includeapproximately 11 for RCRA CorrectiveAction, and 25 for sediment assessmentand remediation at this site. Remediationultimately may be necessary for othercontamination that may be present atIndiana Harbor (East), but the potentialcosts of any such remediation cannotyet be reasonably estimated.ArcelorMittal USA’s properties inLackawanna, New York are subject to anAdministrative Order on Consent with theEPA requiring facility-wide RCRA CorrectiveAction. The Administrative Order, enteredinto in 1990 by the former owner,Bethlehem Steel, requires the Company toperform a Remedial Facilities Investigation(“RFI”) and a Corrective Measures Study, toimplement appropriate interim and finalremedial measures, and to perform requiredpost-remedial closure activities. In 2006,the New York State Department ofEnvironmental Conservation and the EPAconditionally approved the RFI.ArcelorMittal USA has executed Orders onConsent to perform certain interimcorrective measures while advancing theCorrective Measures Study. These includeinstallation and operation of a ground watertreatment system and dredging of a localwaterway known as Smokes Creek. TheCompany executed a Corrective MeasureOrder on Consent in 2009 for other siteremediation activities. ArcelorMittal USA’sprovisions for environmental liabilitiesinclude approximately 47 for anticipatedremediation and post remediation activitiesat this site. The reserved amount is basedon the extent of soil and groundwatercontamination identified by the RFI and theremedial measures likely to be required,including excavation and consolidation ofcontainments in an on-site landfill andcontinuation of groundwater pump andtreatment systems.ArcelorMittal USA is required to prevent acidmine drainage from discharging to surfacewaters at closed mining operations insouthwestern Pennsylvania. In 2003,ArcelorMittal USA entered into a ConsentOrder and Agreement with the PennsylvaniaDepartment of Environmental Protection(the “PaDEP”) requiring submission of anoperational improvement plan to improvetreatment facility operations and lowerlong-term wastewater treatment costs. TheConsent Order and Agreement also requiredArcelorMittal USA to propose a long-termfinancial assurance mechanism. In 2004,ArcelorMittal USA entered into a revisedConsent Order and Agreement outlining aschedule for implementation of capitalimprovements and requiring theestablishment of a treatment trust that thePaDEP has estimated to be thenet present value of all future treatmentcost. ArcelorMittal USA has been funding thetreatment trust and has a period of upto ten years to reach the current target valueof approximately 29. After the treatmenttrust is fully funded, the treatment trust willthen be used to fund the continuing cost oftreatment of acid mine drainage. Althoughremote, ArcelorMittal USA could be requiredto make up any deficiency in the treatmenttrust in the future. ArcelorMittal USA’sprovisions for environmental liabilities includeapproximately 28 for this matter.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 75On August 8, 2006, the U.S. EPA Region Vissued ArcelorMittal USA’s Burns Harbor,Indiana facility a Notice of Violation (“NOV”)alleging that in early 1994 the facility (thenowned by Bethlehem Steel, from whom theassets were acquired out of bankruptcy)commenced a major modification of its #2Coke Battery without obtaining a Preventionof Significant Deterioration (“PSD”) permitand has continued to operate without theappropriate PSD permit. ArcelorMittal USAhas discussed the allegations with the EPA,but to date there have been no furtherformal proceedings. The U.S. EPA Region Valso has conducted a series of inspectionsand submitted information requests underthe U.S. Clean Air Act relating to the BurnsHarbor facility and several otherArcelorMittal facilities located in Indianaand Ohio. ArcelorMittal has held discussionswith the EPA and state environmentalagencies regarding their concerns. Duringsuch discussions, in addition to the mattersraised in the NOV, EPA alleged thatArcelorMittal’s Burns Harbor, Indiana Harborand Cleveland facilities were non-compliantwith certain requirements of the U.S. CleanAir Act. Some of EPA’s allegations relateto recent compliance performance andsome relate to acts by former facilityowners that occurred 15-25 years ago.Preliminary analysis by counsel indicatesthat the allegations related to the actsof former owners appear to be unsoundand that the current operations at theBurns Harbor, Indiana Harbor and Clevelandfacilities achieve high rates of compliancewith existing or, where applicable,anticipated permits and regulations underthe U.S. Clean Air Act. Further discussionswith EPA and affected state environmentalagencies are planned with regard to EPA’sexpressed concerns.EuropeProvisions total 348 and are mainlyrelated to investigation and remediationof environmental contamination at currentand former operating sites in France(119), Luxembourg (99) and Belgium (97).This remediation work relates to variouselements such as decontamination ofwater discharges, waste disposal, cleaningwater ponds and certain remediationactivities that involve the clean-up ofsoil and groundwater. These reserves arealso related to human health protectionmeasures such as fire prevention andadditional contamination preventionmeasures to comply with local healthand safety regulations.FranceIn France, there is an environmental provisionof 119, principally relating to the remediationof former coke plant sites and the cappingand monitoring of landfills or basins previouslyused for residues and secondary materials.The remediation of the coke plants concernsmainly the Thionville, Moyeuvre Grande,Homecourt and Hagondange sites and isrelated to treatment of soil and groundwater.Douchy’s basins will be covered and closedand major treatments will be carried out withrespect to the Charleville, Mézières andBiache basins. The Besseges site, an oldwiredrawing factory in south of France, alsorequires significant environmental remediationsuch as soil and groundwater treatment andremediation of waste equipment.ArcelorMittal Atlantique et Lorraine hasan environmental provision that principallyrelates to the remediation and theimprovement of storage of secondarymaterials and disposal of waste at differentponds and landfills and an action plan forremoving asbestos from the installations.Most of the provision relates to the stockingareas at the Dunkirk site that will needto be restored to comply with local law.The environmental provisions also includetreatment of slag dumps at Florange andDunkirk sites as well as removal and disposalof PCBs and asbestos-containing material atthe Dunkirk, Montataire and Mardyck sites.The Stainless France environmentalprovision relates to the demolition andclean-up of the Ardoise plant followingthe end of activity at this site. For theIsbergues site, the provision is relatedto environmental risks (PCB and asbestosremoval) and demolition and clean-up foradaptation of the activity. A provision atGueugnon plant is related to environmentalrisks such as soil remediation, PCB removaland asbestos removal.LuxembourgIn Luxembourg, there is an environmentalprovision of 99, which relates to thepost-closure monitoring and remediationof former landfill and mining sites.ArcelorMittal Belval and Differdangehas a provision to clean pond waterin Differdange in order to meet therequirements of the LuxembourgEnvironment Administration (Administrationde l’Environnement) regarding discharge inthe Chiers River and maintaining sufficientcold water reserves to permit theproduction of degassed steel in warmermonths. The cleaning started in 2006 andis expected to complete in 2011.In 2007, ArcelorMittal Luxembourg soldthe former Ehlerange slag deposit (93hectares) to the State of Luxembourg.ArcelorMittal Luxembourg is contractuallyobligated to clean the site and moveapproximately 530,000 cubic metersof material to other sites.ArcelorMittal Luxembourg also hasa provision to secure, stabilize and conductwaterproofing treatment on mining galleriesand entrances and various dumps inMonderçange, Dudelange, Differdangeand Dommeldange. Soil and groundwatertreatment needs to be performed inTerre-Rouge within the next two years,to eliminate the sludge and clean thesoil to accommodate the expansionof the city of Esch-sur-Alzette.BelgiumIn Belgium, there is an environmentalprovision of 97, of which the mostsignificant elements are legal obligationslinked to the dismantling of steelmakinginstallations and soil treatment. Soiltreatment is mainly related to cleaningof the groundwater underneath the CokingPlant at the AM Gent site and cleaningof the soil at the Cockerill Sambre site.The provisions also concern the removalof transformers and the disposal of wastethat cannot be recycled internally on theAM Gent site and the removal and disposalof PCBs and asbestos-containing material.South AfricaArcelorMittal South Africa hasenvironmental provisions of approximately151 to be used over 20 years, mainlyrelating to environmental remediationobligations that represent the present valueof the costs of remedial action to clean andsecure a site. These actions are primarilyattributable to historical or legacy wastedisposal activities. With subsequentchanges in national environmentallegislation, the unit has a legal obligationto remediate these facilities.Approximately 48 relates to thedecommissioned Pretoria Works site. Thissite is in a state of partial decommissioningand rehabilitation with one coke batteryand a rolling facility still in operation.ArcelorMittal South Africa is in the processof transforming this old plant into anindustrial hub for light industry, a processthat commenced in the late 1990s.Particular effort is directed to landfill sites.Remediation actions for these sites arelong-term in nature due to a complex legalprocess that needs to be followed. TheVanderbijlpark Works site, the main flatcarbon steel operation of the South Africaunit, has been in operation for more than66 years, and thus contains a numberof legacy facilities and areas requiringretirement and remediation. Approximately57 of the obligation is allocated to this site.
ArcelorMittal Annual Report 200976 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The ground and surface water allocationlargely represent the cost of investigatorywork. Consequently, the percentageallocation is expected to increase once theinvestigatory work is complete and finalremediation actions are devised. NewcastleWorks site is the main long carbon steeloperation of the South Africa unit hasbeen in operation for more than 30 years.Approximately 35 of the obligation isallocated to this site. As with all operatingsites of the South African unit the aboveretirement and remediation actions dovetailwith numerous large capital expenditureprojects dedicated to environmentalmanagement. In the case of the Newcastlesite, such dovetailing is currentlyparticularly prevalent with regards to watertreatment. The remainder of the obligationof approximately 11 relates to theVereeniging and Saldanha site.Asset Retirement Obligations (“AROs”)AROs arise from legal requirements andrepresent management’s best estimateof the present value of the costs that willbe required to retire plant and equipment.As of December 31, 2009, ArcelorMittalhad established reserves for assetretirement obligations of 35 in provisionsrelating to Canada and 27 in provisionsrelating to South Africa. Most of theAROs relate to ancillary plants andequipment that will be retired as partof the closure of the facilities subjectto remediation obligations.The AROs in Canada are legal obligationsfor site restoration and dismantlingof the facilities near the mining sitein Mont-Wright and at the facilityof Port-Cartier in Quebec, upon closureof the mine pursuant to the restoringplan of the mine.The AROs of approximately 27 forutilization over 18 years in South Africaare spread evenly between the Pretoriaand Vanderbijlpark sites, and relatesto the closure and clean-up of the plantassociated with decommissioned tankfarms, tar plants, chemical stores, railwaylines, pipelines and defunct infrastructure.Environmental RemediationObligations (“EROs”)EROs arise from legal requirements andrepresent management’s best estimateof the present value of the costs that willbe required to restore a site at the end ofits useful life. As of December 31, 2009,ArcelorMittal had established reserves forenvironmental remediation obligations of130 in provisions relating to Ukraine and96 in provisions relating to Russia.The EROs in Ukraine are legal obligations forsite rehabilitation at the iron ore mining sitein Kryviy Rih, upon closure of the minepursuant to the restoration plan of the mine.The EROs in Russia are related torehabilitation of three coal mines uponclosure of the mines pursuant to the miningplan. It is mainly related to quality control ofwater pumped out of mines and monitoringof gas drainage bore-holes, soil and air.Legal ClaimsArcelorMittal is a party to various legalactions. The principal legal actions aredisclosed below.Tax ClaimsArcelorMittal is a party to various taxclaims. As of December 31, 2009,ArcelorMittal has established reservesin the aggregate of approximately 9 forthe claims disclosed below.BrazilThe Brazilian Federal Revenue Servicehas claimed that ArcelorMittal Brasil owes138 for IPI (Manufactured Goods Tax)concerning (1) its use of tax credits onthe purchase of raw materials that werenon-taxable, exempt from tax or subjectto a 0% tax rate and (2) the disallowanceof IPI credits recorded five to ten yearsafter the relevant acquisition. On March 31,2009, ArcelorMittal Brasil agreed toparticipate in a Federal Revenue programsettling a number of these disputes. OnNovember 30, 2009, ArcelorMittal Brasilpaid the full amount due under the program(i.e., 60) with 13 in cash and the remainderby utilization of tax loss carryforwards,closing this case.In 2003, the Brazilian Federal RevenueService granted ArcelorMittal Brasil(through its predecessor company, thenknown as CST) a tax benefit for certaininvestments. ArcelorMittal Brasil hadreceived certificates from SUDENE,the former Agency for the Developmentof the Northeast Region of Brazil,confirming ArcelorMittal Brasil’s entitlementto this benefit. In September 2004,ArcelorMittal Brasil was notified of theannulment of these certificates.ArcelorMittal Brasil has pursued its rightto this tax benefit though the courtsagainst both ADENE, the successor toSUDENE, and against the Brazilian FederalRevenue Service. The Brazilian FederalRevenue Service issued a tax assessmentin this regard for 451 in December 2007.Taking into account interest and currencyfluctuations, this amount totaled 690 atDecember 31, 2009. In December 2008,the administrative tribunal of first instanceupheld the amount of the assessment,ArcelorMittal Brasil is appealing to theadministrative tribunal of second instance.The Brazilian Social Security Administrationhas claimed that ArcelorMittal Brasil owescertain amounts for social contributions inrespect of amounts paid by ArcelorMittalBrasil to employees under its profit sharingscheme for the 1998-2005 period. InDecember 2007, it issued a further 11tax assessments to ArcelorMittal Brasilin respect of the same subject matter,bringing the total amount claimed to 112.On November 30, 2009, ArcelorMittaladhered to a Federal Revenue programpursuant to which it was required to pay56 of which 40 is payable in 30 monthlyinstallments and the remainder byutilization of tax loss carryforwards,closing this case.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 77SpainSpanish tax authorities have claimed thatamortization recorded by the formerSiderúrgica del Mediterraneo, S.A.(currently ArcelorMittal Segunto S.L.) in1995, 1996 and 1997 is non-deductiblefor corporation tax purposes. Spanish taxauthorities seek payment of 61, includingthe amount of tax, interest and penalties.A first instance judgment dated April 30,2009 cancelled any liability for 1995and 1996 and penalties for all three years.The tax liability of ArcelorMittal for 1997was assessed at 8 (including interest).Both parties are appealing the decision.Competition/Antitrust ClaimsArcelorMittal is a party to variouscompetition/antitrust claims.As of December 31, 2009, ArcelorMittalhas established reserves of approximately235 in the aggregate for the claimsdisclosed below:United StatesOn September 12, 2008, Standard IronWorks filed a purported class actioncomplaint in U.S. District Court in theNorthern District of Illinois againstArcelorMittal, ArcelorMittal USA Inc.,and other steel manufacturers, allegingthat the defendants had conspired since2005 to restrict the output of steelproducts in order to fix, raise, stabilizeand maintain prices at artificially high levelsin violation of U.S. antitrust law. Since thefiling of the Standard Iron Works lawsuit,other similar lawsuits have been filed inthe same court and have been consolidatedwith the Standard Iron Works lawsuit. InJanuary 2009, ArcelorMittal and the otherdefendants filed a motion to dismiss theclaims. On June 12, 2009, the court deniedthe motion to dismiss. It is too early in theproceedings for ArcelorMittal to determinethe amount of its potential liability, if any.ArcelorMittal considers the allegationsagainst it to be entirely unfounded.BrazilIn September 2000, two constructioncompanies filed a complaint with theBrazilian Economic Law Departmentagainst three long steel producers,including ArcelorMittal Brasil. The complaintalleged that these producers colluded toraise prices in the Brazilian rebar market,thereby violating applicable antitrust laws.In September 2005, the Brazilian AntitrustCouncil (CADE) issued a decision againstArcelorMittal Brasil that resulted inArcelorMittal Brasil’s having to pay apenalty of 62. ArcelorMittal Brasil hasappealed the decision to the BrazilianFederal Court. In September 2006,ArcelorMittal Brasil offered a letterguarantee and obtained an injunctionto suspend enforcement of this decisionpending the court’s judgment.There is also a related class actioncommenced by the Federal PublicProsecutor of the state of Minas Geraisagainst ArcelorMittal Brasil for damagesbased on the alleged violations investigatedby CADE.EuropeIn late 2002, three subsidiaries ofArcelorMittal (Tréfileurope, TréfileuropeItalia S.r.l. and Fontainunion S.A.) – nowknown as ArcelorMittal Wire France,ArcelorMittal Verderio and ArcelorMittalFontaine – and two former subsidiaries ofArcelorMittal España (Emesa and Galycas),along with other European manufacturersof pre-stressed wire and strands steelproducts, received notice that the EuropeanCommission was conducting aninvestigation into possible anti-competitivepractices by these companies. In 2004,Emesa and Galycas were sold. ArcelorMittaland its subsidiaries are cooperating fullywith the European Commission in thisinvestigation. On October 2, 2008, theEuropean Commission sent a Statement ofObjections to (1) ArcelorMittal Wire France,ArcelorMittal Verderio and ArcelorMittalFontaine for their involvement in thealleged practices under investigation;and (2) ArcelorMittal France (as successorof Usinor), ArcelorMittal Espana andArcelorMittal (as legal successor to MittalSteel) in their capacity as former or currentparent companies of the current andformer subsidiaries involved in theinvestigation. The Statement of Objectionsdoes not indicate the amount of the finethat the European Commission intends toimpose on any of the companies.A response to the Statement of Objectionswas submitted in December 2008and a hearing took place in February 2009.The European Commission can impose finesfor breaches of EU competition law ofup to a maximum of 10% of the worldwideannual revenues of the relevant entity inthe business year preceding the Commission’sdecision. The amount of the fine isinfluenced by, inter alia, the relevant entity’sdirect or indirect involvement in the allegedanti-competitive practices. ArcelorMittalis currently unable to assess the amountof any fines that will result. ArcelorMittalis contractually required to indemnify thepresent owner of Emesa and Galycas if afine is imposed on it relating to any mattersthat occurred while these entities wereowned by Arcelor.On April 23, 2007, ArcelorMittal receiveda decision of the Financial Directorate inOstrava, Czech Republic, which orderedArcelorMittal Ostrava to pay approximately120 for allegedly abusing its economicposition and, as a result, acquiringunjustified profits in respect of pricesof blast furnace coke produced byArcelorMittal Ostrava and deliveredin 2004. The Financial Directoratesubsequently ordered ArcelorMittal Ostravato pay an additional fine of 28 for theperiod from January to March 2005. Afterits previous decision in October 2006 wascancelled by the Czech Ministry of Finance,the matter was returned to the FinancialDirectorate in Ostrava for reexamination.ArcelorMittal Ostrava received notice onJune 14, 2007 that the Ministry of Financehad upheld the Financial Directorate ofOstrava’s decision. ArcelorMittal Ostravafiled a petition against the decision withthe Municipal Court of Prague on June 29,2007. Filing the petition had the effectof suspending payment of the fines.In 2004, the French competition authorities(La Direction Générale de la Consommationet de la Repression des Fraudes) commencedan investigation into alleged anti-competitivepractices in the steel distribution sectorin France, including by Arcelor NégoceDistribution, a subsidiary of Arcelor. The casewas then referred to the French CompetitionCouncil (Conseil de la Concurrence), whichconducted an investigation. On March 5,2008, a Statement of Objections wasissued to three subsidiaries of ArcelorMittal(PUM Service d’Acier, Arcelor Profil and AMDSud/Ouest). On December 16, 2008, theFrench Competition Council imposed finesof €575 million, of which €302 million wasapportioned to subsidiaries of ArcelorMittal.In its decision, the French CompetitionCouncil concluded that these companies hadagreed to fix prices and allocate markets andcustomers from the period of 1999 to 2004through regular meetings and exchangesof information. ArcelorMittal appealed theamount of the fine in January 2009 and inJanuary 2010, the Paris Court of Appealsreduced it from €575 million to €74 million(of which €42 million is payable byArcelorMittal). This decision is subjectto appeal.
ArcelorMittal Annual Report 200978 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)South AfricaArcelorMittal South Africa was involvedin a dispute with Harmony Gold MiningCompany Limited and Durban RoodeportDeep Limited in which the latter companiesalleged that ArcelorMittal South Africawas in violation of the Competition Act.In 2007, the Competition Tribunal ruledin favor of the plaintiffs and imposeda penalty on ArcelorMittal South Africaof approximately 97 and behavioralremedies. On May 29, 2009, theCompetition Appeal Court ordered bothdecisions of the Competition Tribunal of2007 to be set aside, both on the meritsand on the remedies thereof, and referredthe matter back to the CompetitionTribunal. On September 14, 2009,the plaintiffs withdrew their complaintbefore the Competition Tribunal againstArcelorMittal South Africa following asettlement between the parties, which didnot include any admission of liability orwrongdoing by ArcelorMittal South Africa.In February 2007, the complaint previouslyfiled with the South African CompetitionCommission by Barnes Fencing, a SouthAfrican producer of galvanized wire,alleging that ArcelorMittal South Africa,as a “dominant firm”, discriminated inpricing its low carbon wire rod, wasreferred to the Competition Tribunal.The claimant seeks, among othersanctions, a penalty of 10% ofArcelorMittal South Africa’s sales for2006 in respect of low carbon wire rodand an order that ArcelorMittal SouthAfrica cease its pricing discrimination.In March 2008, the Competition Tribunalaccepted the claimants’ application forleave to intervene, prohibiting, however,the claimant from seeking as relief theimposition of an administrative penalty.ArcelorMittal is unable to assess theoutcome of this proceeding or the amountof ArcelorMittal South Africa’s potentialliability, if any.On September 1, 2009, the South AfricanCompetition Commission referred acomplaint against four producers of longcarbon steel in South Africa, includingArcelorMittal South Africa, and the SouthAfrican Iron and Steel Institute to theCompetition Tribunal. The complaint referralfollowed an investigation into allegedcollusion among the producers initiated inApril 2008, on-site inspections conductedat the premises of some of the producersand a leniency application by Scaw SouthAfrica, one of the producers underinvestigation. The Competition Commissionrecommended that the CompetitionTribunal impose an administrative penaltyagainst ArcelorMittal South Africa, CapeGate and Cape Town Iron Steel Worksin the amount of 10% of their annualrevenues in South Africa and exports fromSouth Africa for 2008. The referral andthe allegations are currently being analyzedand it is too early for ArcelorMittal toassess the potential outcome of theprocedure, including the financial impact.Other Legal ClaimsArcelorMittal is a party to various otherlegal claims. As of December 31, 2009,ArcelorMittal has established reservesof approximately 65 in the aggregate forthe claims disclosed below.United StatesIn July 2004, the Illinois EnvironmentalProtection Agency (the “IEPA”) notifiedIndiana Harbor (East) that it had identifiedthat facility as a potentially responsibleparty in connection with allegedcontamination relating to Hillside MiningCo. (“Hillside”), a company that IndianaHarbor (East) acquired in 1943, operateduntil the late 1940s and whose assets itsold in the early 1950s, in conjunction withthe corporate dissolution of that company.The IEPA has required other potentiallyresponsible parties to conduct aninvestigation of certain areas of potentialcontamination and it is likely thatArcelorMittal USA may be required toparticipate at some level in the future.ArcelorMittal USA intends to defend itselffully in this matter. As of December 31,2009, ArcelorMittal was not able toreasonably estimate the amount ofliabilities relating to this matter, if any.BrazilCompanhia Vale do Rio Doce (“Vale”)has commenced arbitral proceedingsagainst ArcelorMittal España in Brazil,claiming damages arising from allegedlydefective rails supplied by ArcelorMittalEspaña to Vale for the Carajas railwayin Brazil, which Vale alleges causeda derailment on the railway line.Vale quantifies its claim as 64. Initialsubmissions were filed by the parties onNovember 26, 2009 and rebuttals werefiled on January 29, 2010. ArcelorMittalEspaña intends to defend itself fullyin this matter.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 79CanadaIn 2008, two complaints filed by CanadianNatural Resources Limited (“CNRL”) inCalgary, Alberta against ArcelorMittal,ArcelorMittal USA Inc, Mittal Steel NorthAmerica Inc. and ArcelorMittal TubularProducts Roman S.A were filed. CNRLalleges negligence in both complaints,seeking damages of 50 and 22,respectively. The plaintiff alleges that itpurchased a defective pipe manufacturedby ArcelorMittal Tubular Products Romanand sold by ArcelorMittal Tubular ProductsRoman and Mittal Steel North America Inc.In May 2009, in agreement with CNRL,ArcelorMittal and ArcelorMittal USA weredismissed from the cases without prejudiceto CNRL’s right to reinstate the parties laterif justified. ArcelorMittal is unable toreasonably estimate the amount of MittalSteel North America Inc.’s and ArcelorMittalTubular Products Roman’s liabilities relatingto this matter, if any.MexicoSicartsa is involved in a dispute with EjidoSanta Maria of the Municipality of La UnionGuerrero over the payment of materialsand related damages under a joint ventureagreement between the parties. In October2006, the Agrarian Unity Tribunal entereda judgment ordering Sicartsa to pay theplaintiff damages of 54. In April 2007,upon appeal by Sicartsa, a higher court setaside the judgment and ordered furtherexpert evidence relating to the matters indispute. The accounting expert appointedby the Agrarian Unity Tribunal filed itsreport on September 5, 2008 stating thatthe amount to be paid to Ejido Santa Mariais approximately seven hundred fiftyUS dollars. In June 2009, the court ruledthat ArcelorMittal should pay five hundredseventy-one US dollars. The claimant hasappealed this decision.FranceIn May 2008, the liquidator of SAFETbrought an action in the Commercial Courtof Nanterre against the Directors of SAFET,including ArcelorMittal Packaging, allegingthat the Directors are liable for all ofSAFET’s debts amounting to 52 due totheir default in the management of SAFET’sbusiness. ArcelorMittal and the otherdirectors are vigorously defending theaction. It is too early in the proceedingsfor ArcelorMittal to determine the amountof its liability, if any. However, ArcelorMittalconsiders the allegations against it to beentirely unfounded.Various retired or present employeesof certain French subsidiaries of the formerArcelor have initiated lawsuits to obtaincompensation for asbestos exposure inexcess of the amounts paid by French socialsecurity (“Social Security”). Asbestos claimsin France initially are made by way of adeclaration of a work-related illness by theclaimant to the Social Security authoritiesresulting in an investigation and a levelof compensation paid by Social Security.Once the Social Security authoritiesrecognize the work-related illness, theclaimant, depending on the circumstances,can also file an action for inexcusablenegligence (faute inexcusable) to obtainadditional compensation from the companybefore a special tribunal. Where proceduralerrors are made by Social Security, it isrequired to assume full payment ofdamages awarded to the claimants. Due tofewer procedural errors and, consequently,fewer rejected cases, ArcelorMittal wasrequired to pay some amounts in damagesin 2009.The number of claims outstanding forasbestos exposure at December 31, 2009was 402, as compared to 431 at December31, 2008. The range of amounts claimedfor the year ended December 31, 2009was €7,500 to €865,000 (approximatelyten thousand US dollars to one millionone hundred fifty thousand US dollars).The aggregate costs and settlements forthe year ended December 31, 2009 were3.5, of which 0.4 represents legal fees and3 represents damages paid to the claimant.The aggregate costs and settlements forthe year ended December 31, 2008 wereapproximately five hundred ten thousandUS dollars and zero, respectively.in number of cases2008 2009Claims unresolved atbeginning of period 449 431Claims filed 63 76Claims settled, dismissedor otherwise resolved (81) 1 (105)Claims unresolvedat December 31 431 4021After purchase of a new company, sale of a subsidiaryand further verification.
ArcelorMittal Annual Report 200980 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Minority Shareholder Claims Regardingthe Exchange Ratio in the Second-StepMerger of ArcelorMittal into ArcelorSeveral former minority shareholdersof Arcelor or their representatives havebrought legal proceedings relating to theexchange ratio in the second-step mergerbetween ArcelorMittal and Arcelor. Inproceedings that remain ongoing followingthe completion of the merger process thatare summarized below, the claimants makethe following principal allegations:• The exchange ratio in the second-stepmerger should have been the same asthat of the secondary exchange offercomponent of Mittal Steel’s June 2006tender offer for Arcelor (i.e., 11 MittalSteel shares for seven Arcelor shares),and investors had a legitimateexpectation that this would be the casebased on Mittal Steel’s and Arcelor’sdisclosure and public statements;• The exchange ratio applied in thesecond-step merger was unfair tominority shareholders of Arcelor,particularly in light of developmentsbetween the June 2006 tender offer andthe merger of Mittal Steel into Arcelor;• Mittal Steel’s disclosure regardingthe merger of Mittal Steel into Arcelorand specifically the exchange ratio(in the second-step merger) was late,insufficient and misleading;• The two-step process was detrimentalto interests of Arcelor minorityshareholders; and• The second-step merger did not complywith certain provisions of Luxembourgcompany law.ArcelorMittal believes that the allegationsmade and claims brought by the minorityshareholders regarding the exchange ratioapplied in the second step merger andthe merger process as a whole are withoutmerit and that such exchange ratio andprocess complied with the requirementsof applicable law, were consistent withprevious guidance on the principles thatwould be used to determine the exchangeratio in the second-step merger and thatthe merger exchange ratio was relevantand reasonable to shareholders of bothmerged entities.The following summarizes the currentstatus of proceedings brought by minorityshareholders in this regard:In June and July 2007, two hedge fundsthat were shareholders of Arcelor wroteto the Netherlands Authority for theFinancial Markets (the Stichting AutoriteitFinanciële Markten, or the “AFM”), theDutch securities regulator, requesting it totake various measures against Mittal Steelrelating in particular to disclosure regardingthe proposed exchange ratio, and makingin substance the allegations summarizedabove. On August 17, 2007 the AFMrejected the claimants’ demands.On September 20, 2007, the claimantsfiled formal objections with the AFMagainst the decision of August 17, 2007,asking the AFM to overturn its decisionon the same grounds as those presentedin support of their initial request.On February 4, 2008, the AFM confirmedits decision of August 17, 2007. OnMarch 13, 2008, the claimants lodgedan appeal against the AFM’s decisionwith the Rotterdam Administrative Court.By judgment dated December 10, 2008,the Court nullified the AFM’s decisionof February 4, 2008, on the groundsthat the AFM’s limited investigationwas an insufficient basis for its decision,and requiring it to conduct a furtherinvestigation and issue a new decision.The AFM and ArcelorMittal are bothappealing the court’s ruling.On October 18, 2007 and November 19,2007, ArcelorMittal (the entity resultingfrom the first-step merger) and Arcelorwere notified of an appeal by three formerhedge fund shareholders of Arcelor beforethe administrative court of Luxembourgagainst the March 2, 2007 decision of theCSSF exempting the significant shareholderfrom the obligation (under the Luxembourglaw implementing the European TakeoverDirective) under specified circumstances tolaunch a tender offer for all Arcelor sharesoutstanding after the merger. The CSSFhad based its grant of an exemption on thefact that the merger would not result eitherin an acquisition of shares or in a changeof the ultimate control of the company.The hearing took place on July 7, 2008.In its decision of August 26, 2009, thecourt rejected the appeal. The decisionis final and no longer appealable.
ArcelorMittal Annual Report 2009Consolidated Financial Statements 81On January 8, 2008, ArcelorMittal receiveda writ of summons on behalf of four hedgefund shareholders of Arcelor to appearbefore the civil court of Luxembourg.The summons was also served on all naturalpersons sitting on the Board of Directorsof ArcelorMittal at the time of the mergerand on the significant shareholder. Theclaimants request, among other things(1) the cancellation and the amendmentof the corporate decisions relating to thesecond-step merger in order to reflectan exchange ratio of 11 ArcelorMittal(the entity resulting from the first stepmerger) shares for seven Arcelor shares(ignoring the impact of the share capitalrestructuring of Arcelor) accompaniedby the allocation by the significantshareholder or the company of additionalshares to the claimants to reflect thisrevised ratio, and alternatively, (2) thepayment of damages by the defendants(jointly and severally or severally,at the court’s discretion), in an amountof €180 million. ArcelorMittal submittedits brief in response on October 16, 2008,challenging the validity, the admissibilityand the merits of the claims. The claimantsfiled their conclusions on January 5, 2010.Hearing and judgment in the first instanceare not expected before the end of 2010.Note 24: Segment and GeographicInformationArcelorMittal has a high degree }of geographic diversification relativeto other steel companies. During 2009,ArcelorMittal shipped its products tocustomers in approximately 177 countries,with its largest markets in the Flat CarbonEurope, Flat Carbon Americas and LongCarbon Americas and Europe segments.ArcelorMittal conducts its business throughits Operating Subsidiaries. Many of theseoperations are strategically located withaccess to on-site deep water port facilities,which allow for cost-efficient import ofraw materials and export of steel products.As of December 31, 2009, ArcelorMittalemployed approximately 282,000 persons.The Company adopted IFRS 8, “OperatingSegments” on January 1, 2009. As theCompany previously defined its operatingsegments in alignment with the GroupManagement Board’s responsibilities, theadoption of IFRS 8 did not impact theCompany’s segment presentation.An operating segment is a componentof the Company:• that is engaged in business activitiesfrom which it earns revenues and incursexpenses (including revenues andexpenses relating to transactions withother components of the Company);• whose operating results are regularlyreviewed by the Company’s chiefoperating decision-makers to makedecisions about resourcesto be allocated to the segment andto assess its performance;• and for which discrete financialinformation is available.Reportable segmentsArcelorMittal reports its operations insix segments: Flat Carbon Americas, FlatCarbon Europe, Long Carbon Americas andEurope, AACIS, Stainless Steel and SteelSolutions and Services.• Flat Carbon Americas represents theflat facilities of the Company located onthe American Continent (Canada, Brazil,Mexico, United States). Flat CarbonAmericas produces slabs, hot-rolled coil,cold-rolled coil, coated steel and plate.These products are sold primarily tocustomers in the following industries:distribution and processing, automotive,pipe and tubes, construction, packaging,and appliances;• Flat Carbon Europe is the largest flat steelproducer in Europe, with operations thatrange from Spain in the west to Romaniain the east, and covering the flat carbonsteel product portfolio in all majorcountries and markets. Flat CarbonEurope produces hot-rolled coil, coldrolledcoil, coated products, tinplate, plateand slab. These products are soldprimarily to customers in the automotive,general industry and packaging industries;• Long Carbon Americas and Europeoperates in Europe and America.Production consists of sections, wire rod,rebar, billets, blooms and wire drawing,and tubular products;• AACIS produces a combination of flat andlong products and tubular products. Itsfacilities are located in Asia, Africa andCommonwealth of Independent States;• Stainless Steel produces flat and longstainless steel and alloy products from itsplants in Europe and South America; and• ArcelorMittal Steel Solutions and Servicesis primarily an in-house trading anddistribution arm of ArcelorMittal. It alsoprovides value-added and customizedsteel solutions through further steelprocessing to meet specific customerrequirements.
ArcelorMittal Annual Report 200982 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The following table summarizes certain financial data relating to ArcelorMittal’s operations in its different reportable segments.LongFlat Flat Carbon Asia &Carbon Carbon Americas Africa Stainless Steel Solutions Others/Americas Europe & Europe & CIS Steel and Services Eliminations* TotalYear ended December 31, 2008***Sales to external customers 24,687 31,402 27,812 9,218 7,978 21,061 2,778 124,936Intersegment sales** 2,344 6,898 4,456 3,915 363 2,065 (20,041) —Operating income 2,638 2,773 4,154 3,145 383 181 (949) 12,325Depreciation 937 1,648 1,269 540 323 200 128 5,045Impairment 291 276 456 9 20 5 2 1,059Capital expenditures 1,082 1,443 1,195 891 262 280 378 5,531Total assets 22,474 35,083 19,837 8,533 7,447 6,546 33,235 133,155Total liabilities 7,375 11,853 6,571 2,222 1,738 3,842 40,237 73,838Year ended December 31, 2009Sales to external customers 11,608 16,284 14,836 5,349 4,077 12,382 574 65,110Intersegment sales** 1,732 3,697 1,931 2,278 157 1,142 (10,937) —Operating income (loss) (757) (540) (29) 265 (172) (286) (159) (1,678)Depreciation 1,129 1,417 1,092 544 315 215 182 4,894Impairment 41 88 287 3 14 141 (10) 564Capital expenditures 523 937 545 435 127 131 94 2,792Total assets 17,571 29,627 25,778 7,648 3,772 4,845 38,456 127,697Total liabilities 8,687 10,026 6,083 1,727 1,466 3,075 31,235 62,299* Others/Eliminations includes all other operations than mentioned above, together with inter-segment elimination,and/or non-operational items which are not segmented.** Transactions between segments are conducted on the same basis of accounting as transactions with third parties.*** As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).The reconciliation from operating income (loss) to net income is as follows:Year EndedYear EndedDecember 31, December 31,2008* 2009Operating income (loss) 12,325 (1,678)Income from investments in associates and joint ventures 1,653 58Financing costs – net (2,352) (2,817)Income (loss) before taxes 11,626 (4,437)Income tax expense (benefit) 1,128 (4,512)Net income (including non-controlling interests) 10,498 75* As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).
ArcelorMittal Annual Report 2009Consolidated Financial Statements 83Geographical informationSales (by destination)Year Ended Year EndedDecember 31, December 312008 2009AmericasUnited States 20,200 9,444Brazil 9,759 4,809Canada 4,505 2,070Argentina 1,485 875Others 4,989 2,815Total Americas 40,938 20,013EuropeGermany 14,185 6,500France 9,578 5,288Spain 8,441 4,006Poland 5,113 2,444Italy 5,782 2,337United Kingdom 2,605 1,742Turkey 3,001 1,693Belgium 2,574 1,231Czech Republic 2,492 1,052Romania 1,347 633Others 12,247 6,736Total Europe 67,365 33,662Asia & AfricaSouth Africa 5,163 2,514Others 11,470 8,921Total Asia & Africa 16,633 11,435Total 124,936 65,110
ArcelorMittal Annual Report 200984 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)Capital expenditures and assets* per significant countryCapital expenditures Total assets Non-current assetsFor the year ended For the year ended As of December 31, As of December 31, As of December 31, As of December 31,December 31, 2008 December 31, 2009 2008** 2009 2008** 2009AmericasBrazil 621 361 12,358 12,165 8,729 9,081United States 530 225 10,918 9,511 6,471 6,279Canada 267 136 5,598 5,753 4,151 4,281Mexico 195 89 2,561 2,120 1,698 1,614Others 66 48 2,412 1,921 1,433 1,085Total Americas 1,679 859 33,847 31,470 22,482 22,340EuropeFrance 680 432 17,506 15,658 7,624 7,540Luxembourg 212 105 4,822 5,041 2,689 2,716Belgium 345 220 8,700 7,460 5,470 5,414Spain 219 135 6,874 6,081 4,591 4,520Ukraine 309 136 5,446 5,295 4,611 4,514Poland 265 156 4,801 4,294 3,171 3,207Germany 282 116 6,685 5,465 3,681 3,665Czech Republic 227 91 2,518 1,604 1,010 995Romania 148 96 1,940 1,271 874 708Italy 36 12 1,192 815 411 395Others 164 40 3,675 3,281 1,481 1,788Total Europe 2,887 1,539 64,159 56,265 35,613 35,462Asia & AfricaSouth Africa 203 110 3,753 3,808 1,703 2,152Kazakhstan 305 183 2,493 2,242 1,754 1,734Liberia 275 56 299 68 285 58Others 182 45 2,578 2,178 874 846Total Africa & Asia 965 394 9,123 8,296 4,616 4,790Unallocated assets — — 26,026 31,666 26,026 32,298Total 5,531 2,792 133,155 127,697 88,737 94,890* Assets are operational assets, which include intangible assets and property, plant and equipment, as well as current assetsused in the operating activities. They do not include goodwill, deferred tax assets, other investments or receivables andother non-current financial assets. Such assets are shown under the caption “Unallocated assets”.** As required by IFRS, the 2008 information has been adjusted retrospectively for the finalization in 2009 of the allocationof purchase price of acquisitions made in 2008 (see note 3).Note 25: Employees and Key Management PersonnelThe total annual compensation of ArcelorMittal’s employees paid in 2008, and 2009 was as follows:Year EndedYear EndedDecember 31, December 31,2008 2009Employee InformationWages and salaries 12,593 9,759Pension cost 2,080 593Total 14,673 10,352
ArcelorMittal Annual Report 2009Consolidated Financial Statements 85The total annual compensation of ArcelorMittal’s key management personnel, including its Board of Directors, paid in 2008, and 2009was as follows:Year EndedYear EndedDecember 31, December 31,2008 2009Base salary and/or directors fees 24 18Short-term performance-related bonus 21 18Post-employment benefits 1 1Share based compensation 18 20The fair value of the stock options granted to the ArcelorMittal’s key management personnel is recorded as an expense in the consolidatedstatement of operations over the relevant vesting periods. The Company determines the fair value of the options at the date of thegrant using the Black-Scholes model.As of December 31, 2008 and 2009, ArcelorMittal did not have outstanding any loans or advances to members of its Board of Directorsor key management personnel, and, as of December 31, 2008 and 2009, ArcelorMittal had not given any guarantees for the benefitof any member of its Board of Directors or key management personnel.Note 26: Subsequent EventsOn January 19, 2010, the Company announced it had entered into initial discussions with BHP Billiton to potentially combine itsrespective iron ore mining and infrastructure interests in Liberia and Guinea within a joint venture.In January 2010, the Company completed the acquisition of an additional 13.88% in ArcelorMittal Ostrava from a subsidiaryof PPF Group N.V. for a total consideration amounting to 371.Following the closure of the tender offer on January 7, 2010, the Company acquired a 28.8% stake in Uttam Galva Steels Limited,a leading producer of cold rolled steel, galvanized products (including plain and corrugated) and color coated coils and sheets basedin Western India that is listed on the major stock exchanges of India.
ArcelorMittal Annual Report 200986 Auditors’ Report on the Consolidated Financial StatementsAuditors’ Report on the Consolidated Financial StatementsReport of the Reviseur D’entreprisesTo the shareholders ofArcelorMittal, Société Anonyme19, avenue de la LibertéL-2930 LuxembourgReport on the consolidated financial statementsFollowing our appointment by the General Meetings of the Shareholders held on May 12, 2009, we have audited the accompanyingconsolidated financial statements of ArcelorMittal and its subsidiaries, which comprise the consolidated statement of financial positionas at December 31, 2009, and the consolidated statements of operations, comprehensive income, changes in equity, and cash flowsfor the year then ended, and a summary of significant accounting policies and other explanatory notes.Board of directors’ responsibility for the consolidated financial statementsThe board of directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith International Financial Reporting Standards as adopted by the European Union. This responsibility includes: designing, implementingand maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.Responsibility of the réviseur d’entreprisesOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit inaccordance with International Standards on Auditing as adopted by the Institut des réviseurs d’entreprises. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financialstatements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financialstatements. The procedures selected depend on the judgment of the réviseur d’entreprises, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, theréviseur d’entreprises considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financialstatements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity’s internal control.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby the board of directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of ArcelorMittalas of December 31, 2009, and of its consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with International Financial Reporting Standards as adopted by the European Union.Report on other legal and regulatory requirementsThe management report, which is the responsibility of the board of directors, is consistent with the consolidated financial statements.Deloitte S.A.Réviseur d’entreprisesEric van de KerkhovePartnerFebruary 19, 2010560, rue de NeudorfL-2220 Luxembourg
ArcelorMittal Annual Report 2009Annual Accounts 87Balance SheetArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars)December 31, December 31,2009 2008AssetsC. Fixed assets 72,251 72,347I. Intangible assets Note 3 64 632. Concessions, patents, licences, trademarks and similar rights and assets 64 63II. Tangible assets Note 4 48 431. Land and buildings 42 233. Other fixtures and fittings, tools and equipment 5 54. Payment on account and tangible assets in course of construction 1 15III. Financial assets Note 5 72,139 72,2411. Shares in affiliated undertakings 67,125 68,6452. Loans to affiliated undertakings 3,972 2,5283. Participating interests 985 1,0155. Securities held as fixed assets 47 476. Other loans 10 6D. Current assets 20,453 10,954II. Debtors becoming due in one year or less 19,710 9,6411. Trade debtors — 52. Amounts owed by affiliated undertakings Note 6 19,694 9,6264. Other debtors 16 10III. Transferable securities Note 7 742 1,2982. Treasury shares (23,054,885 own shares with an accounting par value of USD 6.37) 742 1,298IV. Cash at bank, cash in postal cheque accounts, cheques and cash in hand 1 15E. Prepayments and accrued income 187 49Total assets 92,891 83,350The accompanying notes are an integral part of these annual accounts.
ArcelorMittal Annual Report 200988 Annual AccountsBalance Sheet continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars)December 31, December 31,2009 2008LiabilitiesA. Capital and reserves Note 8 57,875 56,939I. Subscribed capital 9,950 9,269II. Share premium account 19,682 17,811IV. Reserves 1,669 2,1201. Legal reserve 927 8222. Reserve for treasury shares 742 1,298V. Profit brought forward 27,081 8,645VI. Profit/(Loss) for the financial year (507) 19,094B. Provisions for liabilities and charges 5 391. Provisions for pensions and similar obligations 5 63. Other provisions Note 9 — 33C. Liabilities Note 10 35,011 26,3721.a Convertible debenture loans Note 11 2,639 —Becoming due in one year or less 38 —Becoming due in more than one year 2,601 —1.b Non convertible debenture loans Note 12 10,191 3,089Becoming due in one year or less 250 —Becoming due in more than one year 9,941 3,0892. Amounts owed to credit institutions Note 13 5,408 20,944Becoming due in one year or less 1,625 6,144Becoming due in more than one year 3,783 14,8004. Trade payables becoming due in one year or less 47 546. Amounts owed to affiliated undertakings Note 14 16,687 2,087Becoming due in one year or less 16,658 2,057Becoming due in more than one year 29 308. Tax and social security liabilities becoming due in one year or less — 1249. Other liabilities becoming due in one year or less 39 74Total liabilities 92,891 83,350The accompanying notes are an integral part of these annual accounts.
ArcelorMittal Annual Report 2009Annual Accounts 89Profit and Loss AccountArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars)Year ended Year endedDecember 31, December 31,2009 2008A. Expenses3. Staff costs 110 137a) Wages and salaries 85 86b) Social security costs attributable to wages and salaries 8 8c) Supplementary pensions 11 14d) Other social security costs 6 294. a) Value adjustments in respect of formation expenses and tangible and intangible fixed assets Note 4 7 45. Other operating expenses Note 15 227 2846. Value adjustments in respect of financial assets and of transferablesecurities held as current assets Note 5, 7 80 2,6557. Interest payable and similar expenses Note 16 3,799 1,078a) In respect of affiliated undertakings 128 653b) Other interest payable and expenses 3,671 42513. Profit/(Loss) for the financial year (507) 19,094Total expenses 3,716 23,252Year ended Year endedDecember 31, December 31,2009 2008B. Income4. Other operating income 30 4375. Income from participating interests Note 17 54 18,701a) Derived from affiliated undertakings 54 18,7016. Income from other transferable securities and from loans forming part of the fixed assets 2,652 662a) Derived from affiliated undertakings 191 662b) Other income Note 7 2,461 —7. Other interest receivable and similar income Note 16 980 3,452a) Derived from affiliated undertakings 382 76b) Other interest receivable and similar income 598 3,376Total income 3,716 23,252The accompanying notes are an integral part of these annual accounts.
ArcelorMittal Annual Report 200990 Annual AccountsNotes to the Annual AccountsArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 1: GeneralArcelorMittal (‘the Company’) wasincorporated as a ‘Société Anonyme’ underLuxembourg law on June 8, 2001 for anunlimited period.The Company has its registered office in19 avenue de la Liberté, Luxembourg Cityand is registered at the Register of Tradeand Commerce of Luxembourg under thenumber B82.454.The financial year of the Company startson January 1 and ends on December 31each year.The Company’s corporate goal is themanufacturing, processing and marketingof steel products and all other metallurgicalproducts; and any other activity directlyor indirectly related thereto. The Companyrealizes its corporate goal either directlyor through the creation of companiesor the acquisition and holding of interestsin companies, partnership, associations,consortia and joint-ventures.In conformity with the requirements ofLuxembourg laws and regulations, theCompany publishes consolidated financialstatements in accordance with InternationalFinancial Reporting Standards as adoptedby the European Union.Note 2: Summary of SignificantAccounting PrinciplesGeneral principlesThese annual accounts correspondingto the standalone financial statementsof the parent company, ArcelorMittal, havebeen prepared in accordance with generallyaccepted accounting principles and inaccordance with the laws and regulationsin force in the Grand-Duchy of Luxembourg.Main valuation rulesTranslation of currenciesThe Company maintains its accountingrecords in United States Dollars (‘USD’)and the annual accounts are preparedin this currency. Unless otherwise stated,all amounts in the annual accounts arestated in millions of USD.The following principles are applied toitems denominated in a currency otherthan the USD:• Fixed assets and creditors due aftermore than one year are translated athistorical exchange rates or the currentrate if unrealized exchange losses exist.Differences in the exchange rates leadingto an unrealized loss are recorded in theprofit and loss for the year. A reversalof the unrealized loss is recorded to theextent the factors, which caused its initialrecording, have ceased to exist.• Foreign currency swaps are accounted forat the current rate and unrealized foreignexchange gains and losses are recognizedso as to offset unrealized foreignexchange gains and losses with respectto hedged debenture loans and amountsowed to credit institutions.• Other balance sheet items are translatedat the year-end exchange rate andrelated exchange differences are recordedin the profit and loss for the year.• Profit and loss items are translatedat the exchange rate prevailing at thetransaction date.• Off balance sheet commitments aredisclosed based upon the historicalexchange rate.Financial assetsShares in affiliated undertakings,associates and participating interestsare recorded at acquisition cost includingrelated acquisition costs. At the end ofeach accounting period, shares in affiliatedundertakings are subject to an impairmentreview. Where a permanent diminutionin value is identified, this diminution isrecorded in the profit and loss accountas a value adjustment. A reversal of thevalue adjustment is recorded to the extentthe factors, which caused its initial recording,have ceased to exist.Loans to affiliated undertakings and otherloans are recorded in the balance sheetat their nominal value. At the end of eachaccounting period value adjustments arerecorded on loans which appear to be partlyor wholly irrecoverable.DebtorsDebtors are recorded in the balance sheetat their nominal value. At the end of eachaccounting period value adjustments arerecorded on debtors, which appear to bepartly or wholly irrecoverable.Transferable securitiesTransferable securities are valued at thelower of cost or market value. A valueadjustment is recorded when the marketprice is lower than the acquisition price.A reversal of the value adjustment isrecorded to the extent the factors, whichcaused its initial recording, have ceasedto exist.Provisions for liabilities and chargesProvisions for liabilities and charges arerecorded to cover all foreseeable liabilitiesand charges for which there is a legalor constructive obligation as a resultof past events as of the balance sheetdate. Provisions relating to previous periodsare regularly reviewed and released if thereasons for which the provisions wererecorded have ceased to apply.LiabilitiesLiabilities are recorded in the balancesheet at their nominal value.
ArcelorMittal Annual Report 2009Annual Accounts 91Note 3: Intangible AssetsConcessions, patents,licences, trademarksand similar rights and assetsAcquisition costOpening balance 64Additions 2Closing balance 66Value adjustmentOpening balance (1)Charge for the year (1)Closing balance (2)Net book valueOpening balance 63Closing balance 64Note 4: Tangible AssetsPaymenton accountOther fixtures, and tangiblefittings tools assets underLand and buildings and equipment construction TotalAcquisition costOpening balance 29 14 15 58Additions 14 2 — 16Transfers 14 — (14) —Disposals (8) (8) — (16)Closing balance 49 8 1 58Value adjustmentOpening balance (6) (9) — (15)Charge for the year (2) (1) — (3)Disposals 1 7 — 8Closing balance (7) (3) — (10)Net book valueOpening balance 23 5 15 43Closing balance 42 5 1 48Note 5: Financial AssetsShares in Loans to Securitiesaffiliated affiliated Participating held asundertakings undertakings interests fixed assets Other loans TotalAcquisition costOpening balance 68,645 2,528 1,209 47 6 72,435Additions 561 18,451 — — 10 19,022Disposals (2,081) — — — (6) (2,087)Transfer to current assets — (16,919) — — — (16,919)Foreign exchange differences — (38) — — — (38)Closing balance 67,125 4,022 1,209 47 10 72,413Value adjustmentsOpening balance — — (194) — — (194)Charge for the year — (50) (30) — — (80)Closing balance — (50) (224) — — (274)Net book valueOpening balance 68,645 2,528 1,015 47 6 72,241Closing balance 67,125 3,972 985 47 10 72,139
ArcelorMittal Annual Report 200992 Annual AccountsNotes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Shares in affiliated undertakingsCapital and reservesPercentage of Result (including resultName and registered office Carrying amount Capital held % for 2009* for 2009)*AMO Holding Switzerland A.G. Zug (Switzerland) 26,387 100.00 — 56,286ArcelorMittal Cyprus Holding Limited, Nicosia (Cyprus) 18,332 100.00 59 17,023ArcelorMittal Finance and Services Belgium S.A., Brussels (Belgium) 12,024 26.74 1,949 50,185AM Global Holding S.à.r.l., Luxembourg (Luxembourg) 6,705 100.00 (1,073) 5,034ArcelorMittal Investment S.A., Luxembourg (Luxembourg) 3,057 100.00 (889) 9,075Hera Ermac S.A., Luxembourg (Luxembourg) 420 100.00 69 489ArcelorMittal Canada Holdings Inc. , Contrecoeur (Canada) 97 1.18** 273 3,100Other 103Total 67,125* In accordance with unaudited IFRS reporting packages** 100.00% of voting rightsParticipating interestsCapital and reservesPercentage of Result (including resultName and registered office Carrying amount Capital held % for 2009* for 2009)*Hunan Valin Steel Co., Ltd., Changsha (China) 552 33.02 18 2,220Kalagadi Manganese (Pty) Ltd. Rivonia (South Africa) 433 50.00 (33) 172Total 985* In accordance with unaudited IFRS reporting packagesDescription of main changesDuring the year, the Company has granted a facility of 2,300 to ArcelorMittal USA Holdings Inc. maturing on June 18, 2014.Total borrowings under the facility as at December 31, 2009 were 1,982.On February 27, 2009, ArcelorMittal Finance S.C.A. transferred to the Company a loan to AMO Group Finance (Dubai) Ltd. amountingto EUR 12,739 (16,283). This loan was transferred to current assets on December 16, 2009 following the rescheduling of the maturityof the loan (see note 6).As part of the legal reorganization in Canada in May 2009, 4313267 Canada Inc. reduced its outstanding capital througha cash disbursement and the remaining investment held by the Company was contributed to ArcelorMittal Canada Holdings Inc.Contrecoeur (Canada) in exchange of new shares in this company representing 1.18% of the capital and 100.00% of the votingrights. As of May 28, 2009, 4313267 Canada Inc. merged into ArcelorMittal Canada Holdings Inc.On December 28, 2009, the Company made an equity contribution amounting to 420 in Hera Ermac S.A., a wholly-owned Luxembourgaffiliate, which also placed with an affiliate of Calyon an unsecured and unsubordinated 750 bond mandatorily convertible into preferredshares of such subsidiary. The total proceeds were invested in notes issued by affiliates of the Company and linked to shares of the listedrelated parties Erdemir (Turkey) and Mac Arthur Coal Ltd. (Australia) (note 19). The Company has the option to call the mandatorilyconvertible bond from May 3, 2010 until ten business days before the maturity date.Note 6: Amounts Owed by Affiliated UndertakingsAmounts owed by affiliated undertakings have increased by 10,068 over the year under review. This change is primarily a consequenceof the following elements:1) The transfer to current assets of the loan to AMO Group Finance (Dubai) Ltd. amounting to EUR 12,739 (18,352 as ofDecember 31, 2009). The interest rate on the loan is EURIBOR + margin of 1.1% per annum. The initial maturity date for the loanas per the agreement was three years following the drawdown date of January 18, 2008. On December 16, 2009, the maturitywas amended to December 20, 2010 by virtue of an addendum to the original agreement.2) The cash-pooling accounts held with ArcelorMittal Treasury S.N.C. which have decreased by 6,308 over the year as a resultof the funding of the loan mentioned above.3) The decrease by 1,422 of amounts receivable from other Group companies with respect to the tax consolidation (note 18).
ArcelorMittal Annual Report 2009Annual Accounts 93Note 7: Transferable SecuritiesTreasury sharesAcquisition costOpening balance 3,759Additions 2,231Disposals (5,248)Closing balance 742Value adjustmentsOpening balance (2,461)Charge for the year —Utilization 1,289Reversal 1,172Closing balance —Net book valueOpening balance 1,298Closing balance 742As of December 31, 2009, the Company holds 23,054,885 (2008: 54,490,240) of treasury shares (shares owned by the Company).On April 29, 2009, the Company announced an offering of 140,882,634 common shares which was closed on May 6, 2009(the ‘Offering’). Pending shareholder approval for authorization to increase issued share capital, the Company entered into a ShareLending Agreement dated April 29, 2009 (the ‘Agreement’), with Ispat International Investments S.L. (‘Ispat’), a company controlledby Mr Lakshmi and Mrs Usha Mittal, under which the Company borrowed 98,000,000 shares. The 98,000,000 borrowed shares wereaccounted for as treasury shares and then issued, along with 28,794,371 other treasury shares, to fulfill all subscriptions to the Offeringother than the 14,088,263 shares subscribed by Ispat. As a result of the Offering, the sale of treasury shares utilized 1,282 of thevalue adjustment recognized as of December 31, 2008. Under the terms of the Agreement, the Company paid a share lending fee of 2.Other transactions on treasury shares resulted in an additional utilization of the value adjustment for 7. The remaining value adjustmentrecognized in 2008 and amounting to 1,172 was reversed in 2009 as a result of the increase of the market value of the treasury sharesabove the aggregate cost (note 16).Note 8: Capital and ReservesShare Reserve ProfitNumber of Subscribed premium Legal for treasury brought Profit/(Loss)shares capital account reserve shares forward for the year TotalBalance as atJanuary 1, 2008 1,448,826,347 9,269 17,811 822 1,298 8,645 19,094 56,939Allocation of net result 105 18,989 (19,094)Profit/(Loss) for the year (507) (507)Director’s fees (3) (3)Dividends paid* (1,106) (1,106)Capital increase 112,088,263 681 1,871 2,552Reserve for treasury shares (556) 556Balance as atDecember 31, 2009 1,560,914,610 9,950 19,682 927 742 27,081 (507) 57,875* Equivalent to the 2008 Dividend of 1,086; net of dividends on treasury shares.
ArcelorMittal Annual Report 200994 Annual AccountsNotes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)8.1: Share capital and share premium accountAt December 31, 2009 the subscribed capital comprises 1,560,914,610 ordinary shares, fully paid up and amounting toEUR 6,836,805,992 (9,950).At December 31, 2008 the subscribed capital comprised 1,448,826,347 ordinary shares, fully paid up and amounting toEUR 6,345,859,400 (9,269). The ordinary shares do not have a nominal value.On June 17, 2009, at an Extraordinary General Meeting, the shareholders approved an authorization for the Board of Directors toincrease the issued share capital of the Company by a maximum of 168,173,653 shares during a period of five years. On June 22, 2009,the Company issued 112,088,263 shares to Ispat as a return of the 98,000,000 borrowed shares and delivery of the 14,088,263shares subscribed under the Offering for a total amount of EUR 1,907,281,883 of which EUR 490,946,592 (681) allocated tosubscribed capital and EUR 1,416,335,291 (1,871) allocated to share premium.To the knowledge of the Board, the shareholding may be specified as follows:December 31, 2009Mittal Investments S.à r.l. 33.63%Ispat International Investment S.L. 7.20%Other shareholders* 59.17%Total 100.00%* Including treasury shares and shares held by affiliated undertakings.8.2: Legal reserveIn accordance with Luxembourg Company law, the Company is required to transfer a minimum of 5% of its net profits for each financialyear to a legal reserve. This requirement ceases to be necessary once the balance of the legal reserve reaches 10% of the subscribedcapital. The legal reserve is not available for distribution to the shareholders.8.3: Reserve for treasury sharesThe Board of Directors shall request the upcoming General Meeting of Shareholders to approve the release of 556 from the reservefor treasury shares equivalent to the carrying value (note 7) of its treasury shares in accordance with Luxembourg Company Law.In anticipation of such an approval this has been already reflected in the annual accounts.Note 9: Other ProvisionsThe Company is jointly and severally liable for the following entities:– ArcelorMittal Finance S.C.A. (Luxembourg)– ArcelorMittal Treasury S.N.C. (France)The provision equivalent to 22 recognized in 2008 in connection with ArcelorMittal Finance S.C.A. was utilized in 2009.
ArcelorMittal Annual Report 2009Annual Accounts 95Note 10: Maturity of LiabilitiesDecember 31, 2009 December 31, 2008From 1 5 years From 1 5 yearsUp to 1 year to 5 years or more Total Up to 1 year to 5 years or more TotalConvertible debenture loans 38 2,601 — 2,639 — — — —Non convertibledebenture loans 250 3,661 6,280 10,191 — 1,500 1,589 3,089Amounts owed to creditinstitutions 1,625 3,742 41 5,408 6,144 14,800 — 20,944Trade payables 47 — — 47 54 — — 54Amounts owed toaffiliated undertakings 16,658 — 29 16,687 2,057 30 — 2,087Tax and socialsecurity liabilities — — — — 124 — — 124a) Tax — — — — 121 — — 121b) Social security — — — — 3 — — 3Other liabilities 39 — — 39 74 — — 7418,657 10,004 6,350 35,011 8,453 16,330 1,589 26,372Note 11: Convertible Debenture LoansOn April 1, 2009, the Company issued EUR1.25 billion (1,662) of unsecured and unsubordinated convertible bonds due April 1, 2014.These bonds bear interest at 7.25% per annum payable semi-annually on each April 1 and October 1 of each year commencing onOctober 1, 2009. As of December 31, 2009, the amount was 1,801.On May 6, 2009, ArcelorMittal issued 800 of unsecured and unsubordinated convertible senior notes due May 15, 2014. These notesbear interest at 5.00% per annum payable semi-annually on each May 15 and November 15 of each year commencing on November15, 2009.At inception, the Company had the option to settle the convertible debentures for common shares or the cash value of the commonshares upon exercise of the conversion option by the bondholders, as defined in the debentures. On October 28, 2009, the Companyannounced that it had decided to irrevocably waive the option to settle the 800 convertible senior notes in cash for the cash value ofthe common shares at the date of the settlement.The EUR 1.25 billion convertible bonds may be converted by the bondholders from May 11, 2009 until the end of the seventh businessday preceding maturity. The 800 convertible senior notes may be converted by the bondholders from May 6, 2009 until the end of theseventh business day preceding maturity.Note 12: Non Convertible Debenture LoansOn May 27, 2008, ArcelorMittal issued secured, redeemable and non convertible debentures in the form of 5 year and 10 year bonds,with an aggregate principal amount of 3,000 split equally between the 5 year and the 10 year issue. The bonds will bear interest at arate of 5.375% for the 5 year issue and 6.125% for the 10 year issue and will mature on June 1, 2013 and June 1, 2018, respectively.On May 20, 2009, the Company issued unsecured and unsubordinated notes in two tranches for an aggregate principal amount of2,250 consisting of 750 (issued at 98.391%) maturing February 15, 2015 and 1,500 (issued at 97.522%) maturing June 1, 2019.These notes bear interest at 9.00% per annum payable semi-annually on August 16 and February 16 of each year commencing onAugust 17, 2009 and 9.85% per annum payable semi-annually on December 1 and June 1 of each year commencing onDecember 1, 2009, respectively.On June 3, 2009, the Company issued unsecured and unsubordinated bonds in two tranches for an aggregate principal amount ofEUR 2.5 billion (3,560) consisting of EUR 1.5 billion (issued at 99.589%) maturing June 3, 2013 and EUR 1 billion (issued at 99.381%)maturing June 3, 2016. These notes bear interest at 8.25% per annum and 9.375% per annum, respectively payable annually onJune 3 of each year commencing on June 3, 2009. As of December 31, 2009, the amount was 3,602.On October 1, 2009, the Company issued unsecured and unsubordinated notes for an aggregate principal amount of 1,000 issuedat 95.202% maturing October 15, 2039. These notes bear interest at 7.0% per semi-annum payable annually on April 15 andOctober 15 of each year commencing on April 15, 2010.
ArcelorMittal Annual Report 200996 Annual AccountsNotes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 13: Amounts Owed to Credit InstitutionsOn April 7, 2005, Mittal Steel, prior to the merger with the Company, and certain subsidiaries signed a five-year 3,200 credit facilitywith a consortium of banks. This facility bears interest at a variable rate. On September 5, 2008, the total outstanding amount underthis credit facility was transferred from ArcelorMittal Finance S.C.A. to the Company. In 2009 the total outstanding amount of 1,500was repaid and the 2005 Credit Facility was cancelled.On November 30, 2006, the Company and ArcelorMittal Finance S.C.A. entered into a EUR 17 billion credit agreement, comprisedof a EUR 12 billion term loan facility and a EUR 5 billion revolving credit facility, with a group of lenders to refinance certain of theCompany’s existing credit facilities. The maturity of the EUR 5 billion revolving credit facility is November 30, 2012. These facilitiesbear interest at a variable rate. On October 31, 2008, the total outstanding amount under this credit facility was transferred fromArcelorMittal Finance S.C.A. to the Company. Out of the outstanding amount of EUR 2.4 billion under the EUR 12 billion term loan,EUR 1.2 billion is due in May 2011 and EUR 1.2 billion is due in November 2011. The EUR 5 billion revolving credit facility remainsunutilized as of December 31, 2009 as the outstanding loan balances under the facility were repaid during the second quarter of 2009with proceeds from the Company’s debt, convertible debt and equity issuances. During the year ended December 31, 2009, theCompany repaid EUR 4.8 billion of the outstanding amount under the EUR 12 billion term loan facility. The outstanding amount underthis contract as of December 31, 2009 was 3,493 (2008: 16,289).The Company runs a commercial paper program enabling borrowing of up to EUR 3 billion. The balance outstanding under this programas of December 31, 2009 amounts to 1,474 (2008: 2,433).Note 14: Amounts Owed to Affiliated UndertakingsThe increase in amounts owed to affiliated undertakings by 14,600 in 2009 includes mainly the funding through cash pooling of theloan to AMO Group Finance (Dubai) Ltd. amounting to EUR 12,739 (18,352 as of December 31, 2009) and which was transferredfrom ArcelorMittal Finance S.C.A. to the Company (notes 5 and 6).Note 15: Other Operating ExpensesOther operating expenses correspond to expenses incurred to operate the Company net of recharged service fees.Note 16: Interest Receivable/Payable and Similar Income/(Expenses)Year ended Year ended Year ended Year endedDecember 31, December 31, December 31, December 31,2009 2009 2008 2008expenses income expenses incomeInterests in respect of affiliated undertakings (128) 382 (653) 76Interests in respect of credit institutions (366) 1 (206) —Interests in respect of bonds (628) — (105) —Fees (378) 2 (114) 116Loss on disposal of treasury shares (2,299) — — —Effects of foreign exchange — 583 — 1,469Amounts received in connection with tax consolidation (note 18) — 12 — 1,772Other — — — 19Total similar income (expenses) (3,671) 598 (425) 3,376Total interest and similar income (expenses) (3,799) 980 (1,078) 3,452The loss on disposal of treasury shares is mainly related to the borrowing of 98,000,000 shares accounted for as treasury shares andthen issued, along with the disposal of 28,794,371 other treasury shares (note 7).Interests in respect of bonds increased as a result of the issuance of convertible and non convertible debenture loans during the year.Effects on foreign exchange are mainly due to gains related to cash-pooling balances denominated in Euros.
ArcelorMittal Annual Report 2009Annual Accounts 97Note 17: Income from Participating InterestsYear endedYear endedDecember 31, December 31,2009 2008Dividends received 1 12 3,639Profit on disposal of financial assets 2 42 15,062Others — —Total 54 18,7011 This amount included in 2008 a dividend-in-kind of 3,563 received from ArcelorMittal Investment S.A.in connection with a legal reorganization.2 This amount included in 2008 profits of 14,692 related to the disposal of the Company’s investmentin ArcelorMittal Belgium Holding S.A. in connection with a legal reorganization.Note 18: Income TaxThe Company is the head of a tax consolidation and is fully liable for the overall tax liability. Each of the entities included in the taxconsolidation is charged with the amount of tax that relates to its individual taxable profit.As a consequence of the net tax losses within the tax consolidation, no income tax is payable in respect of 2009 (2008: nil).The amount charged to affiliated undertakings amounts to 12 (2008:1,772).Note 19: Commitments and ContingenciesCommitments givenYear endedYear endedDecember 31, December 31,2009 2008Guarantees on debts 1 923 939Other commitments 2 1,870 1,134Foreign exchange derivative instruments 3 22,831 4,989Total 25,624 7,0621Excluding the debt of ArcelorMittal Finance S.C.A. for which the Company is jointly and severallyliable (2,924 and 3,075 for 2009 and 2008 respectively).2Other commitments comprise amounts committed with regard to credit lines and guaranteesgiven on behalf of Group companies.3Foreign exchange derivative instruments mainly consist of EUR/USD currency swaps whose maturityis comprised between January 2010 and November 2011. As of December 31, 2009, a loss amountingto 246 (2008: -87) has been recognized as effects on foreign exchange on these instruments.With respect to the notes linked to shares of the listed related parties Erdemir (Turkey) and Macarthur Coal Ltd. (Australia) and issuedby its affiliates ArcelorMittal Netherlands BV, Arcelor Investment Services S.A. and Expert Placement Services Ltd. (note 5), theCompany warrants to own directly or indirectly the entire legal and beneficial interest in the share capital of such companies for so longas any notes remain outstanding. ArcelorMittal also undertakes to provide any funding which would be necessary to these affiliates tomeet their obligations with respect to the notes.Available lines of creditThe Company has available lines of credit for an aggregate amount of 11,240 as of December 31, 2009 (2008: 5,829).ContingenciesOn January 8, 2008, ArcelorMittal received a writ of summons on behalf of four hedge fund shareholders of Arcelor to appear before thecivil court of Luxembourg. The summons was also served on all natural persons sitting on the Board of Directors of ArcelorMittal at the timeof the merger and on the Significant shareholder. The claimants request, among other things (1) the cancellation and the amendment of thecorporate decisions relating to the second-step merger in order to reflect an exchange ratio of 11 ArcelorMittal (the entity resulting fromthe first step merger) shares for seven Arcelor shares (ignoring the impact of the share capital restructuring of Arcelor) accompanied by theallocation by the Significant shareholder or the company of additional shares to the claimants to reflect this revised ratio, and alternatively,(2) the payment of damages by the defendants (jointly and severally or severally, at the court’s discretion), in an amount of EUR 180 million.ArcelorMittal submitted its brief in response on October 16, 2008, challenging the validity, the admissibility and the merits of the claims.The Claimants filed their conclusions on January 5, 2010. Hearing and judgment in the first instance are not expected before the end of 2010.
ArcelorMittal Annual Report 200998 Annual AccountsNotes to the Annual Accounts continuedArcelorMittal, Société Anonyme(expressed in millions of U.S. dollars, unless otherwise stated)Note 20: StaffAverage number of staffYear endedYear endedDecember 31, December 312009 2008Employees 386 411Workers 20 28Total 406 439Note 21: Directors’ RemunerationMembers of the Board of Directors are entitled to a total remuneration of 6.4 for the year 2009 (2008: 7.8).Note 22: Stock Option PlanOn August 4, 2009 ArcelorMittal granted 6,128,900 options to a group of key employees at an exercise price of 38.30. The optionsexpire on August 4, 2019.Allocated share options at December 31, 2009 are as follows:Number of shares Exercise price MaturityPlan 2000 (legacy Mittal Steel) 150,200 8.57 June 1, 2010Plan 2002 (legacy Mittal Steel) 204,178 2.26 April 5, 2012Plan 2004 29,373 16.53 June 30, 2011Plan 2005 (legacy Mittal Steel) 1,552,547 28.75 August 23, 2015Plan 2005 11,429 20.38 June 30, 2012Plan 2006 (legacy Mittal Steel) 2,425,857 33.76 September 1, 2016Plan 2006 1,394,326 43.40 June 30, 2013Plan August 2007 5,244,202 64.30 August 2, 2017Plan December 2007 13,000 74.53 December 11, 2017Plan August 2008 6,831,783 82.57 August 5, 2018Plan November 2008 20,585 22.25 November 10, 2018Plan December 2008 48,000 23.75 December 15, 2018Plan August 2009 6,121,900 38.30 August 4, 2019The movements in the number of outstanding share options during the year are as follows:Number of shares options 2009 2008Options outstanding at the beginning of the year 19,558,466 13,579,438Options granted during the year 6,128,900 7,324,535Options forfeited during the year (644,712) (43,629)Options exercised during the year (456,251) (954,844)Options expired during the year (539,023) (347,034)Options outstanding at the end of the year 24,047,380 19,558,466
ArcelorMittal Annual Report 2009Annual Accounts 99Auditors’ Report on the Annual AccountsReport of the Reviseur D’entreprisesTo the shareholders ofArcelorMittal, Société Anonyme19, avenue de la LibertéL-2930 LuxembourgReport on the annual accountsFollowing our appointment by the General Meeting of the Shareholders held on May 12, 2009, we have audited the accompanyingannual accounts of ArcelorMittal, which comprise the balance sheet as at December 31, 2009 and the profit and loss account forthe year then ended, and a summary of significant accounting policies and other explanatory notes.Board of directors’ responsibility for the annual accountsThe board of directors is responsible for the preparation and fair presentation of these annual accounts in accordance with theLuxembourg legal and regulatory requirements relating to the preparation of the annual accounts. This responsibility includes: designing,implementing and maintaining internal control relevant to the preparation and fair presentation of annual accounts that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.Responsibility of the réviseur d’entreprisesOur responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance withInternational Standards on Auditing as adopted by the Institut des réviseurs d’entreprises. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual accounts are free frommaterial misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts.The procedures selected depend on the judgement of the réviseur d’entreprises, including the assessment of the risks of materialmisstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the réviseur d’entreprisesconsiders internal control relevant to the entity’s preparation and fair presentation of the annual accounts in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby the board of directors, as well as evaluating the overall presentation of the annual accounts. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the annual accounts give a true and fair view of the financial position of ArcelorMittal as of December 31, 2009 andof the results of its operations for the year then ended in accordance with the Luxembourg legal and regulatory requirements relatingto the preparation of the annual accounts.Report on other legal and regulatory requirementsThe management report, which is the responsibility of the board of directors, is consistent with the annual accounts.Deloitte S.A.Réviseur d’entreprisesEric van de KerkhovePartnerFebruary 19, 2010560, rue de NeudorfL-2220 Luxembourg
ArcelorMittal Annual Report 2009100 Annual AccountsProposed Allocation of Results for 2009Proposed allocation of results and determination of dividend:In U.S. dollarsLoss for the year (507,141,204)Profit brought forward (Report à nouveau) 26,525,260,379Results to be allocated and distributed 26,018,119,175Release of reserve for treasury shares (555,778,723)Allocation to the legal reserve —Directors’ fees, compensation and attendance fees 2,564,923Dividend of 0.75 (gross) per share for the 2009 financial year* 1,132,156,138Profit carried forward 25,439,176,837*On the basis of 1,509,541,518 in issue at December 31, 2009 net of treasury shares.Dividends are paid quarterly, resulting in a total annualized cash dividend per share of $0.75.
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Published in April 2010.To receive a copy of the Annual Report,please contact:ArcelorMittalLuxembourg:19, Avenue de la LibertéL-2930 LuxembourgGrand-Duchy of LuxembourgT: +352 4792 2652London:7th Floor, Berkeley Square HouseBerkeley SquareLondon W1J 6DAUnited Kingdomwww.arcelormittal.com