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United States Steel Corporation Reports 2008 First Quarter Results

PRNewswire-FirstCall
PITTSBURGH
(NYSE:X)
04.29.2008

PITTSBURGH, April 29 /PRNewswire-FirstCall/ --

  ------------------------------------------------------------------------
                           Earnings Highlights
  ------------------------------------------------------------------------
  (Dollars in millions, except per share amounts) 1Q 2008 4Q 2007  1Q 2007
  ------------------------------------------------------------------------
  Net sales                                        $5,196  $4,535   $3,756
  ========================================================================
  Segment income (loss) from operations
    Flat-rolled                                      $120     $53      $75
    U. S. Steel Europe                                161      85      206
    Tubular                                            51      83      102
    Other Businesses                                   (5)     36        2
  ------------------------------------------------------------------------
  Total segment income from operations               $327    $257     $385
  Retiree benefit income (expenses)                     1     (15)     (39)
  Other items not allocated to segments               (62)   (126)      --
  ------------------------------------------------------------------------
  Income from operations                             $266    $116     $346
  ========================================================================
  Net interest and other financial (income) costs    (32)     44        5
  ------------------------------------------------------------------------
  Income tax provision                                 58      31       66
  ========================================================================
  Net income                                         $235     $35     $273
  ------------------------------------------------------------------------
    - Per basic share                               $2.00   $0.29    $2.31
  ------------------------------------------------------------------------
    - Per diluted share                             $1.98   $0.29    $2.30
  ------------------------------------------------------------------------

United States Steel Corporation (NYSE: X) reported first quarter 2008 net income of $235 million, or $1.98 per diluted share, compared to fourth quarter 2007 net income of $35 million, or $0.29 per diluted share, and first quarter 2007 net income of $273 million, or $2.30 per diluted share.

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "Net sales grew to a quarterly record of $5.2 billion and profitability increased substantially from the fourth quarter, reflecting sharp improvements in our Flat-rolled and European segments on strong operating performances and higher shipments and prices. We've made excellent progress in integrating our Canadian facilities, which operated during the first quarter at the highest utilization rate in recent years."

The company reported first quarter 2008 income from operations of $266 million, compared with income from operations of $116 million in the fourth quarter of 2007 and $346 million in the first quarter of 2007.

Other items not allocated to segments in the first quarter of 2008 consisted of a previously disclosed $45 million pre-tax reserve established as a result of an adverse court ruling involving a power supply contract, and a $17 million pre-tax charge for inventory transition effects related to the acquisition of U. S. Steel Canada (USSC). These items reduced net income by $45 million, or 38 cents per diluted share. Other items not allocated to segments in the fourth quarter of 2007 decreased net income by $117 million, or 98 cents per diluted share.

Additionally, net interest and other financial costs in the first quarter of 2008 included a foreign currency gain that increased net income by $70 million, or 59 cents per diluted share, related to the remeasurement of a $1.1 billion U.S. dollar-denominated intercompany loan to a European affiliate, partially offset by euro-U.S. dollar derivatives activity. Net interest and other financial costs will continue to include foreign currency accounting remeasurement effects, partially offset by the use of euro-U.S. dollar derivatives. At March 31, 2008, U. S. Steel had open euro-U.S. dollar forward sales contracts with a total notional value of approximately $571 million.

During the first quarter of 2008, we repurchased 305,000 shares of common stock for $33 million.

Reportable Segments and Other Businesses

Management believes segment income from operations is a key measure to evaluate ongoing operating results and performance. Segment income from operations was $327 million, or $48 per ton, in the first quarter of 2008, compared with $257 million, or $43 per ton, in the fourth quarter of 2007 and $385 million, or $76 per ton, in the first quarter of 2007.

Segment income for Flat-rolled improved significantly from the fourth quarter of 2007. Flat-rolled operated at 92 percent of capability in the first quarter of 2008 compared to 82 percent in the fourth quarter, and shipments increased to 4.7 million net tons due to the higher operating rate and the inclusion of full-quarter results for USSC. Prices increased by $19 per net ton to $646 and reflected the initial effects of rapidly increasing spot prices and higher shipments of semi-finished and hot-rolled product, principally from USSC. Raw materials and energy costs also increased.

Results for U. S. Steel Europe were also substantially improved from the fourth quarter of 2007. Cost efficiencies from a record operating performance of 103 percent of capability helped offset the rapid rise in raw materials costs. Results also reflected a 253,000 net ton increase in shipments and a $39 per net ton increase in realized prices, including favorable foreign currency effects.

Tubular results decreased from the fourth quarter mainly due to the rapid increases in costs for semi-finished steel, which were not recovered through price increases during the quarter.

Normal seasonal effects at our iron ore operations in Minnesota caused the decline in results for Other Businesses.

Outlook

Looking ahead to the second quarter, Surma said, "We expect that segment income from operations will increase substantially compared to the first quarter of 2008 as realized price increases are expected to surpass continuing increases in scrap and other raw materials costs."

Second quarter Flat-rolled results are expected to improve significantly from the first quarter as higher spot prices are realized throughout the quarter. Operating levels and shipments are expected to be comparable to the first quarter, while raw materials and energy costs are expected to increase.

For USSE, we expect second quarter results to be higher than the first quarter on increased prices and comparable operating and shipping levels, despite higher raw materials costs.

We expect second quarter Tubular results to improve over the first quarter as higher prices and shipments are partially offset by further increases in costs, principally for semi-finished steel.

Results for Other Businesses are expected to increase primarily due to normal seasonal improvements at our iron ore operations in Minnesota.

We expect the annual effective tax rate to be approximately 25 percent although some discrete items lowered the rate in the first quarter.

This release contains forward-looking statements with respect to market conditions, operating costs, shipments, prices, income taxes and foreign currency impacts. Some factors, among others, that could affect market conditions, costs, shipments and prices for both North American 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 prices and availability; the impact of fixed prices in energy and raw materials contracts (many of which have terms of one year or longer) as compared to short-term contract and spot prices of steel products; changes in environmental, tax, pension and other laws; employee strikes; power outages; 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 and Canada that may affect USSE's and USSC's results include, but are not limited to, taxation, nationalization, inflation, currency fluctuations, government instability, political unrest, regulatory changes, export quotas, tariffs, and other protectionist measures. The annual effective tax rate will depend upon our financial performance, which is affected by all of the factors discussed above. Future foreign currency impacts will depend upon changes in currencies, the extent to which we engage in derivatives transactions and repayments of the $1.1 billion intercompany loan. The amount and timing of such repayments will depend upon profits and cash flows of our international operations, future international investments and financing activities, all of which will be impacted by the many factors discussed above. 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, 2007, and in subsequent filings for U. S. Steel.

A Statement of Operations (Unaudited), Other Financial Data (Unaudited) and Preliminary Supplemental Statistics (Unaudited) for U. S. Steel are attached.

The company will conduct a conference call on first quarter earnings on Tuesday, April 29, 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 our web site at http://www.ussteel.com/.

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

                                                     Quarter Ended
                                           --------------------------------
                                            March 31     Dec. 31   March 31
  (Dollars in millions)                        2008        2007       2007
  -------------------------------------------------------------------------
  NET SALES                                $   5,196  $    4,535  $   3,756

  OPERATING EXPENSES (INCOME):
    Cost of sales (excludes items shown
     below)                                    4,643       4,110      3,179
    Selling, general and administrative
     expenses                                    142         178        139
    Depreciation, depletion and amortization     156         153        111
    Income from investees                         (7)         (7)        (2)
    Net gains on disposal of assets               (1)         (3)       (10)
    Other income, net                             (3)        (12)        (7)
                                           ---------  ----------  ---------
      Total operating expenses                 4,930       4,419      3,410
                                           ---------  ----------  ---------
  INCOME FROM OPERATIONS                         266         116        346
  Net interest and other financial
   (income) costs                                (32)         44          5
                                           ---------  ----------  ---------
  INCOME BEFORE INCOME TAXES AND MINORITY
   INTERESTS                                     298          72        341
  Income tax provision                            58          31         66
  Minority interests                               5           6          2
                                           ---------  ----------  ---------
  NET INCOME                               $     235  $       35  $     273
                                           =========  ==========  =========

  COMMON STOCK DATA:
  -------------------------------------------------------------------------
  Net income per share:
    - Basic                                $    2.00  $     0.29  $    2.31
    - Diluted                              $    1.98  $     0.29  $    2.30

  Weighted average shares, in thousands
    - Basic                                  117,595     117,813    118,244
    - Diluted                                118,405     118,581    119,005

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



                     UNITED STATES STEEL CORPORATION
                     OTHER FINANCIAL DATA (Unaudited)
                     --------------------------------

                                                           Quarter Ended
                                                              March 31
                                                           --------------
  Cash Flow Data                 (In millions)             2008      2007
  -----------------------------------------------------------------------
  Cash provided by operating activities:
    Net income                                       $      235 $     273
    Depreciation, depletion and amortization                156       111
    Pensions and other postretirement benefits             (110)      (49)
    Working capital changes                                  30       (36)
    Other operating activities                              (74)       22
                                                         ------    ------
      Total                                                 237       334
                                                         ------    ------
  Cash used in investing activities:
    Capital expenditures                                   (127)     (108)
    Disposal of assets                                        4         5
    Other investing activities                              (24)       (4)
                                                         ------    ------
      Total                                                (147)     (107)
                                                         ------    ------
  Cash used in financing activities:
    Repayment of debt                                        (3)      (53)
    Common stock issued                                       4         5
    Common stock repurchased                                (33)      (25)
    Dividends paid                                          (29)      (24)
    Other financing activities                               10        (2)
                                                         ------    ------
      Total                                                 (51)      (99)
                                                         ------    ------
  Effect of exchange rate changes on cash                    14         2
                                                         ------    ------
  Net increase in cash and cash equivalents                  53       130
  Cash and cash equivalents at beginning of the year        401     1,422
                                                         ------    ------
  Cash and cash equivalents at end of the period     $      454 $   1,552
                                                         ======    ======



                                                       March 31   Dec. 31
  Balance Sheet Data           (In millions)               2008      2007
  -----------------------------------------------------------------------
  Cash and cash equivalents                           $     454 $     401
  Receivables, net                                        2,398     2,077
  Inventories                                             2,339     2,279
  Other current assets                                      204       202
  Property, plant and equipment, net                      6,832     6,688
  Investments and long-term receivables, net                763       694
  Pension asset                                             799       734
  Goodwill and intangible assets, net                     1,987     2,131
  Other assets                                              401       426
                                                         ------    ------
  Total assets                                        $  16,177 $  15,632
                                                         ======    ======
  Accounts payable                                    $   1,973 $   1,730
  Payroll and benefits payable                              955       995
  Short-term debt and current maturities of
   long-term debt                                           110       110
  Other current liabilities                                 357       168
  Long-term debt, less unamortized discount               3,142     3,147
  Employee benefits                                       3,078     3,187
  Other long-term liabilities and minority interests        784       764
  Stockholders' equity                                    5,778     5,531
                                                         ------    ------
  Total liabilities and stockholders' equity          $  16,177 $  15,632
                                                         ======    ======



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

                                                     Quarter Ended
                                              ----------------------------
                                              March 31   Dec. 31  March 31
  (Dollars in millions)                           2008      2007      2007
  ------------------------------------------------------------------------
  INCOME FROM OPERATIONS
  Flat-rolled (a)                                 $120       $53       $75
  U. S. Steel Europe                               161        85       206
  Tubular (b)                                       51        83       102
  Other Businesses (c)                              (5)       36         2
                                                 -----     -----     -----
  Segment Income from Operations                   327       257       385
    Retiree benefit expenses(d)                      1       (15)      (39)
    Other items not allocated to segments:
      Litigation reserve                           (45)       --        --
      Flat-rolled inventory transition effects     (17)      (58)       --
      Tubular inventory transition effects          --       (11)       --
      Workforce reduction charges                   --       (57)       --
                                                 -----     -----     -----
        Total Income from Operations              $266      $116      $346

  CAPITAL EXPENDITURES
    Flat-rolled (a)                                $83       $79       $50
    U. S. Steel Europe                              32        86        30
    Tubular (b)                                      4        10         2
    Other Businesses (c)                             8        40        26
                                                 -----     -----     -----
      Total                                       $127      $215      $108

  (a)   Includes the results of the businesses acquired from Stelco Inc. as
        of October 31, 2007, excluding the iron ore and real estate
        interests.
  (b)   Includes the results of the businesses acquired from Lone Star
        Technologies, Inc. as of June 14, 2007.
  (c)   Includes the results of the iron ore and real estate interests
        acquired from Stelco Inc. as of October 31, 2007.
  (d)   The first quarter of 2007 includes certain profit-based expenses for
        former National employees pursuant to provisions of the 2003 labor
        agreement with the United Steelworkers.



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

                                                    Quarter Ended
                                             -----------------------------
                                             March 31    Dec. 31  March 31
  (Dollars in millions)                          2008       2007      2007
  ------------------------------------------------------------------------
  OPERATING STATISTICS
    Average realized price: ($/net ton)(a)
      Flat-rolled(b)                             $646       $627      $650
      U. S. Steel Europe                          791        752       669
      Tubular(c)                                1,297      1,299     1,435

    Steel Shipments:(a)(d)
      Flat-rolled Products                      4,701      4,146     3,188
      U. S. Steel Europe                        1,638      1,385     1,652
      Tubular Products                            433        427       247
                                                -----      -----     -----
        Total Steel Shipments                   6,772      5,958     5,087

    Intersegment Shipments:(d)
      Flat-rolled to Tubular                      445        314       174
    Raw Steel Production:(d)
      North American facilities                 5,558      4,681     3,713
      U. S. Steel Europe                        1,908      1,467     1,799
    Raw Steel Capability Utilization:(e)
      North American facilities                  91.7%      82.0%     77.6%
      U. S. Steel Europe                        103.4%      78.6%     98.2%

  (a)   Excludes intersegment shipments.
  (b)   Includes the results of the businesses acquired from Stelco Inc. as
        of October 31, 2007, excluding the iron ore and real estate
        interests.
  (c)   Includes the results of the businesses acquired from Lone Star
        Technologies, Inc. as of June 14, 2007.
  (d)   Thousands of net tons.
  (e)   Based on annual raw steel production capability of 19.4 million net
        tons for North American facilities prior to October 31, 2007 and
        24.3 million net tons thereafter, and 7.4 million net tons for U. S.
        Steel Europe.

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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