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United States Steel Corporation Reports 2007 Second Quarter Results

PRNewswire-FirstCall
PITTSBURGH
(NYSE:X)
07.24.2007

PITTSBURGH, July 24 /PRNewswire-FirstCall/ --

                           Earnings Highlights
  ----------------------------------------------------------------------
  (Dollars in millions
   except per share data)          2Q 2007         1Q 2007      2Q 2006
  ----------------------------------------------------------------------
  Net sales                        $4,228          $3,756        $4,107
  ======================================================================
  Segment income from operations
     Flat-rolled                      $92             $75          $212
     U. S. Steel Europe               244             206           188
     Tubular                           97             102           146
     Other Businesses                   1               2            33
  ----------------------------------------------------------------------
  Total segment income from
   operations                        $434            $385          $579
  Retiree benefit expenses            (43)            (39)          (65)
  ----------------------------------------------------------------------
  Income from operations             $391            $346          $514
  ======================================================================
  Net interest and other
   financial costs                     34               5            14
  ----------------------------------------------------------------------
  Income tax provision                 53              66            91
  ======================================================================
  Net income                         $302            $273          $404
  ----------------------------------------------------------------------
   - Per basic share                $2.55           $2.31         $3.60
   - Per diluted share              $2.54           $2.30         $3.22
  ======================================================================

United States Steel Corporation (NYSE: X) reported second quarter 2007 net income of $302 million, or $2.54 per diluted share, compared to first quarter 2007 net income of $273 million, or $2.30 per diluted share, and second quarter 2006 net income of $404 million, or $3.22 per diluted share.

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "We had another good quarter with record results for U. S. Steel Europe (USSE). During the quarter, we completed the $2 billion acquisition of Lone Star Technologies (Lone Star) and we're pleased with the progress we've made to date in integrating our new facilities and employees into U. S. Steel. Also during the quarter, we issued $1.1 billion of senior notes, expanded our credit facilities and retired $378 million of 9.75% senior notes that were due in 2010."

The company reported second quarter 2007 income from operations of $391 million, compared with income from operations of $346 million in the first quarter of 2007 and $514 million in the second quarter of 2006.

In the second quarter of 2007, net interest and other financial costs included a $23 million pre-tax charge related to the early redemption of our 9.75% Senior Notes due 2010. This charge reduced net income by $14 million or 12 cents per diluted share. In the first quarter of 2007, net interest and other financial costs included a $3 million pre-tax charge related to the early redemption of our 10% Senior Quarterly Income Debt Securities. This charge reduced net income by $2 million or 2 cents per diluted share. The income tax provision in the second quarter of 2006 included a favorable adjustment of $15 million, or 12 cents per diluted share, related to estimated 2005 tax accruals.

We repurchased 304,900 shares of common stock for $33 million during the second quarter.

Reportable Segments and Other Businesses

Management believes segment income from operations is a key measure in evaluating company performance. U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $434 million, or $79 per ton, in the second quarter of 2007, compared with $385 million, or $76 per ton, in the first quarter of 2007 and $579 million, or $99 per ton, in the second quarter of 2006.

The increase in second quarter 2007 Flat-rolled income from operations compared to the first quarter mainly resulted from higher shipments and an increased utilization rate, with partial offsets from higher outage and raw material costs. The improvement in European operating results was due primarily to higher prices. Tubular operating results remained strong, but declined as expected from the first quarter due mainly to lower prices. The operating results of Lone Star are included in Tubular effective June 14th, including increased depreciation and amortization as a result of purchase accounting asset valuations. Lone Star added 47,000 tons to second quarter Tubular shipments.

Outlook

Commenting on U. S. Steel's outlook, Surma said, "We expect continued strong performance by our three reportable segments in the third quarter of 2007, with overall operating results improving from the second quarter, excluding any charges resulting from Lone Star integration activities."

For Flat-rolled, third quarter results are expected to improve from the second quarter due primarily to reduced outage and related costs and higher shipments, partially offset by slightly lower average realized prices, reflecting current spot market conditions and higher semi-finished product shipments.

Third quarter results are expected to decrease for U. S. Steel Europe mainly as a result of higher costs resulting from outage spending and related effects, including a blast furnace reline in Serbia, which will begin in September. Shipments are expected to decrease while average realized prices should increase slightly from second quarter levels.

Third quarter average realized prices for Tubular are expected to decrease from second quarter levels, including the effects of product mix. Results will reflect the inclusion of Lone Star for the entire quarter. Third quarter Tubular results may be negatively impacted as we address inventory issues in conjunction with the integration.

This release contains forward-looking statements with respect to expected synergies from the Lone Star acquisition, market conditions, operating costs, shipments and prices. Factors that may affect expected synergies from the Lone Star acquisition include management's ability to successfully integrate Lone Star's operations; reactions of customers and joint venture and alliance partners; operating levels in the Tubular segment; and expansions or acquisitions by major tubular competitors. Some factors, among others, that could affect market conditions, costs, shipments and prices for both domestic operations and USSE include global product demand, prices and mix; global and company steel production levels; plant operating performance; the timing and completion of facility projects; natural gas and electricity prices and usage; raw materials and transportation availability and prices; the impact of fixed prices in energy and raw materials contracts (many of which have terms of one year or longer) as compared to shorter-term contracts and spot prices of steel products; changes in environmental, tax and other laws; employee strikes; power outages or curtailments; and U.S. and global economic performance and political developments. Domestic steel shipments and prices could be affected by import levels and actions taken by the U.S. Government and its agencies. Economic conditions and political factors in Europe that may affect USSE's results include, but are not limited to, taxation, nationalization, inflation, currency fluctuations, increased regulation, export quotas, tariffs, and other protectionist measures. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward- looking statements have been included in the Form 10-K of U. S. Steel for the year ended December 31, 2006, and in subsequent filings for U. S. Steel.

A Statement of Operations (Unaudited), Cash Flow Statement (Unaudited), Condensed Balance Sheet (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached.

The company will conduct a conference call on second quarter earnings on Tuesday, July 24, at 2 p.m. EDT. To listen to the webcast of the conference call, visit the U. S. Steel web site, http://www.ussteel.com/, and click on the "Investors" button.

For more information on U. S. Steel, visit its web site at http://www.ussteel.com/.

  2007-036



                     UNITED STATES STEEL CORPORATION
                   STATEMENT OF OPERATIONS (Unaudited)
                   ------------------------------------

                                    Quarter Ended           Six Months Ended
                              ---------------------------   ----------------
                               June 30  Mar. 31  June 30       June 30
  (Dollars in millions)          2007     2007     2006     2007     2006
  --------------------------------------------------------------------------

  NET SALES                     $4,228   $3,756   $4,107   $7,984   $7,835

  OPERATING EXPENSES (INCOME):
     Cost of sales (excludes
      items shown below)         3,595    3,179    3,339    6,774    6,437
     Selling, general and
      administrative expenses      138      139      156      277      314
     Depreciation, depletion
      and amortization             118      111      114      229      226
     Income from investees         (10)      (2)     (13)     (12)     (20)
     Net gains on disposal of
      assets                        (3)     (10)      (1)     (13)      (2)
     Other income, net              (1)      (7)      (2)      (8)      (3)
                                 -----    -----    -----    -----    -----
        Total operating expenses 3,837    3,410    3,593    7,247    6,952
                                 -----    -----    -----    -----    -----
  INCOME FROM OPERATIONS           391      346      514      737      883
  Net interest and other
   financial costs                  34        5       14       39       30
                                 -----    -----    -----    -----    -----
  INCOME BEFORE INCOME TAXES
   AND MINORITY INTERESTS          357      341      500      698      853
  Income tax provision              53       66       91      119      181
  Minority interests                 2        2        5        4       12
                                 -----    -----    -----    -----    -----
  NET INCOME                       302      273      404      575      660
  Dividends on preferred stock      --       --       (4)      --       (8)
                                 -----    -----    -----    -----    -----
  NET INCOME APPLICABLE TO
   COMMON STOCK                 $  302   $  273   $  400   $  575   $  652
                                 =====    =====    =====    =====    =====


  COMMON STOCK DATA:
  --------------------------------------------------------------------------
  Net income per share:
     - Basic                   $  2.55  $  2.31  $  3.60  $  4.86  $  5.93
     - Diluted                 $  2.54  $  2.30  $  3.22  $  4.83  $  5.26

  Weighted average shares,
   in thousands
     - Basic                   118,221  118,244  111,129  118,232  109,949
     - Diluted                 118,891  119,005  125,242  118,920  125,371

  Dividends paid per common
   share                       $   .20  $   .20   $  .15   $  .40   $  .25



                     UNITED STATES STEEL CORPORATION
                     CASH FLOW STATEMENT (Unaudited)
                   ------------------------------------
                                                        Six Months Ended
                                                            June 30
                                                      -------------------
  (Dollars in millions)                               2007           2006
  --------------------------------------------------------------------------
  Cash provided from operating activities:
     Net income                                    $   575        $   660
     Depreciation, depletion and amortization          229            226
     Pensions and other postretirement benefits       (105)           (50)
     Deferred income taxes                              49             43
     Net gains on disposal of assets                   (13)            (2)
     Changes in: Current receivables                  (297)          (367)
                 Inventories                           108            (30)
                 Current accounts payable and
                  accrued expenses                     229            115
     Other operating activities                         15            (27)
                                                    ------         ------
        Total                                          790            568
                                                    ------         ------

  Cash used in investing activities:
     Capital expenditures                             (250)          (251)
     Acquisition of Lone Star Technologies, Inc.    (1,990)            --
     Disposal of assets                                 18              6
     Other investing activities                         (1)            --
                                                    ------         ------
        Total                                       (2,223)          (245)
                                                    ------         ------

  Cash (used in) provided from financing
   activities:
     Issuance of long-term debt                      1,583             --
     Repayment of long-term debt                      (449)          (156)
     Common stock issued                                15             10
     Common stock repurchased                          (58)          (117)
     Dividends paid                                    (47)           (36)
     Change in bank checks outstanding                  63            (13)
     Other financing activities                          1            (12)
                                                    ------         ------
        Total                                        1,108           (324)
                                                    ------         ------
  Effect of exchange rate changes on cash                6             (1)
                                                    ------         ------
  Net increase (decrease) in cash and cash
   equivalents                                        (319)            (2)
  Cash at beginning of the year                      1,422          1,479
                                                    ------         ------
  Cash at end of the period                       $  1,103       $  1,477
                                                    ======         ======



                     UNITED STATES STEEL CORPORATION
                   CONDENSED BALANCE SHEET (Unaudited)
                   ------------------------------------

                                                    June 30       Dec. 31
  (Dollars in millions)                               2007          2006
  --------------------------------------------------------------------------
  Cash and cash equivalents                       $  1,103       $  1,422
  Receivables, net                                   2,260          1,799
  Inventories                                        2,055          1,604
  Other current assets                                 338            371
                                                    ------         ------
     Total current assets                            5,756          5,196
  Property, plant and equipment, net                 4,932          4,429
  Investments and long-term receivables, net           333            336
  Pension asset                                        441            330
  Intangible assets                                    267             --
  Goodwill                                             972             --
  Other assets                                         212            295
                                                    ------         ------
     Total assets                                 $ 12,913       $ 10,586
                                                    ======         ======
  Accounts payable                                $  1,626       $  1,313
  Payroll and benefits payable                       1,049          1,028
  Short-term debt and current maturities
   of long-term debt                                    49             82
  Other current liabilities                            373            279
                                                    ------         ------
     Total current liabilities                       3,097          2,702
  Long-term debt                                     2,125            943
  Employee benefits                                  2,152          2,174
  Other long-term liabilities and minority
   interests                                           579            402
  Stockholders' equity                               4,960          4,365
                                                    ------         ------
     Total liabilities and stockholders' equity   $ 12,913       $ 10,586
                                                    ======         ======



                     UNITED STATES STEEL CORPORATION
             PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
             -----------------------------------------------

                                    Quarter Ended           Six Months Ended
                              ---------------------------   ----------------
                               June 30  Mar. 31  June 30       June 30
  (Dollars in millions)          2007     2007     2006     2007     2006
  --------------------------------------------------------------------------
  INCOME FROM OPERATIONS
  Flat-rolled                    $  92    $  75    $ 212    $ 167    $ 339
  U. S. Steel Europe               244      206      188      450      313
  Tubular                           97      102      146      199      323
  Other Businesses                   1        2       33        3       33
                                 -----    -----    -----    -----    -----
  Segment Income from Operations   434      385      579      819    1,008
  Retiree benefit expenses(a)      (43)     (39)     (65)     (82)    (120)
  Other items not allocated
   to segments:
     Asset impairment charge        --       --       --       --       (5)
                                 -----    -----    -----    -----    -----
        Total Income from
         Operations               $391     $346     $514     $737     $883

  CAPITAL EXPENDITURES
  Flat-rolled                      $69      $50      $32     $119     $101
  U. S. Steel Europe                47       30       51       77       95
  Tubular                            1        2        1        3        1
  Other Businesses                  25       26       40       51       54
                                 -----    -----    -----    -----    -----
     Total                        $142     $108     $124     $250     $251

  -----------
  (a) Includes certain profit-based expenses for U. S. Steel retirees and
      National retirees pursuant to provisions of the 2003 labor agreement
      with the United Steelworkers.




                     UNITED STATES STEEL CORPORATION
             PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
             -----------------------------------------------

                                    Quarter Ended           Six Months Ended
                              ----------------------------------------------
                               June 30  Mar. 31  June 30       June 30
  (Dollars in millions)          2007     2007     2006     2007     2006
  --------------------------------------------------------------------------

  OPERATING STATISTICS
     Average realized price:
      ($/net ton)(a)
        Flat-rolled               $652     $650     $624     $651     $620
        U. S. Steel Europe         726      669      581      697      563
        Tubular(b)               1,389    1,435    1,479    1,410    1,493
     Steel Shipments:(a)(c)
        Flat-rolled              3,599    3,188    3,878    6,787    7,407
        U. S. Steel Europe       1,616    1,652    1,652    3,268    3,160
        Tubular(b)                 288      247      298      535      617
                                 -----    -----    -----    -----    -----
           Total Steel
            Shipments            5,503    5,087    5,828   10,590   11,184
     Raw Steel-Production:(c)
        Flat-rolled              4,116    3,713    4,585    7,829    8,726
        U. S. Steel Europe       1,865    1,799    1,803    3,664    3,556
        Tubular(b)                  16       --       --       16       --
     Raw Steel-Capability
      Utilization:(d)
        Flat-rolled               85.1%    77.6%    94.8%    81.4%    90.7%
        U. S. Steel Europe       100.8%    98.2%    97.4%    99.5%    96.6%
     Domestic iron ore
      production(c)              4,949    4,895    5,493    9,844   10,966
     Domestic coke
      production(c)(e)           1,299    1,366    1,485    2,665    2,975
  -----------
  (a) Excludes intersegment transfers.
  (b) Includes Lone Star as of June 14, 2007.
  (c) Thousands of net tons.
  (d) Based on annual raw steel production capability for Flat-rolled of
      19.4 million net tons and annual raw steel production capability for
      U. S. Steel Europe of 7.4 million net tons.
  (e) Includes the Clairton 1314B Partnership.

SOURCE: United States Steel Corporation

CONTACT: Media, John Armstrong, +1-412-433-6792, or Investors &
Analysts, Nick Harper, +1-412-433-1184, both of United States Steel
Corporation

Web site: http://www.ussteel.com/

Company News On-Call: http://www.prnewswire.com/comp/929150.html

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