United States Steel Corporation
Public Affairs
600 Grant Street
Pittsburgh, PA 15219-2800

News
 
Contacts:
Media
John Armstrong
(412) 433–6792
Investors/Analysts
Nick Harper
(412) 433–1184
 
FOR IMMEDIATE RELEASE
UNITED STATES STEEL CORPORATION REPORTS
2007 FOURTH QUARTER AND FULL-YEAR RESULTS

Earnings Highlights
(Dollars in millions except per share data)
  
4Q 2007
  
3Q 2007
  
4Q 2006
  
2007
  
2006
  
                       
Net sales
  
$
4,535
  
$
4,354
  
$
3,774
  
$
16,873
  
$
15,715
  
Segment income from operations
                                
Flat-rolled
  
$
53
  
$
170
  
$
31
  
$
390
  
$
600
  
U. S. Steel Europe
    
85
    
152
    
182
    
687
    
714
  
Tubular
    
83
    
74
    
144
    
356
    
631
  
Other Businesses
    
36
    
37
    
57
    
76
    
129
  
Total segment income from operations
  
$
257
  
$
433
  
$
414
  
$
1,509
  
$
2,074
  
Retiree benefit expenses
    
(15
)
  
(46
)
  
(53
)
  
(143
)
  
(243
)
Other items not allocated to segments
    
(126
)
  
(27
)
  
(20
)
  
(153
)
  
(46
)
Income from operations
  
$
116
  
$
360
  
$
341
  
$
1,213
  
$
1,785
  
Net interest and other financial costs
    
44
    
22
    
25
    
105
    
62
  
Income tax provision
    
31
    
68
    
7
    
218
    
324
  
Net income
  
$
35
  
$
269
  
$
297
  
$
879
  
$
1,374
  
   –  Per basic share 
  
$
0.29
  
$
2.28
  
$
2.51
  
$
7.44
  
$
11.88
  
   –  Per diluted share 
  
$
0.29
  
$
2.27
  
$
2.50
  
$
7.40
  
$
11.18
  
 
PITTSBURGH, January 29, 2008 - United States Steel Corporation (NYSE: X) reported fourth quarter 2007 net income of $35 million, or $0.29 per diluted share, compared to third quarter 2007 net income of $269 million, or $2.27 per diluted share, and fourth quarter 2006 net income of $297 million, or $2.50 per diluted share. Fourth quarter 2007 net income was reduced by $117 million, or $0.98 per diluted share, due to inventory transition effects and a workforce reduction charge as discussed below.

 
For full-year 2007, U. S. Steel reported net income of $879 million or $7.40 per diluted share, which was reduced by $158 million, or $1.33 per diluted share, from inventory transition effects, a workforce reduction charge, early debt redemption expense and several discrete tax charges. Full-year 2006 net income was $1,374 million, or $11.18 per diluted share.
 
U. S. Steel Chairman and CEO John P. Surma said, “This past year was an important period of growth for our company as we completed major acquisitions in both our flat-rolled and tubular businesses and commissioned our new automotive galvanizing line in Europe. We are making steady progress with integration activities on both acquisitions, and we still expect to achieve the anticipated synergies.”
 
The company reported fourth quarter 2007 income from operations of $116 million, compared with income from operations of $360 million in the third quarter of 2007 and $341 million in the fourth quarter of 2006. For the year 2007, income from operations was $1,213 million versus income from operations of $1,785 million for the year 2006.
 
Other items not allocated to segments in the fourth quarter of 2007 consisted of a $69 million pre-tax charge related to inventory transition effects following the two major acquisitions and a $57 million pre-tax charge resulting from a voluntary early retirement program at U. S. Steel Kosice (USSK). These items decreased fourth quarter 2007 net income by $117 million, or 98 cents per diluted share. In the third quarter of 2007, a $27 million pre-tax charge related to inventory acquired in the Lone Star acquisition was not allocated to segments, and the tax provision included several discrete charges totaling $11 million. These items reduced third quarter 2007 net income by $28 million, or 23 cents per diluted share. In the fourth quarter of 2006, net interest and other financial costs included a $32 million pre-tax charge related to the early redemption of debt. This item and other items not allocated to segments decreased net income by $33 million or 28 cents per diluted share.

2

Reportable Segments and Other Businesses
 
Management believes segment income from operations is a key measure to evaluate ongoing operating results and performance. U. S. Steel’s reportable segments and Other Businesses reported segment income from operations of $257 million, or $43 per ton, in the fourth quarter of 2007, compared with $433 million, or $78 per ton, in the third quarter of 2007 and $414 million, or $85 per ton, in the fourth quarter of 2006.
 
Flat-rolled’s fourth quarter results were significantly lower than the third quarter and included the operating results of U. S. Steel Canada (USSC) effective October 31. Flat-rolled operated at 82 percent of capability, including only 60 percent for USSC, as we completed a number of blast furnace repair outages, both planned and unplanned, during the quarter. Lower average realized prices compared to the third quarter primarily reflected a shift in product mix to hot-rolled and semi-finished with the USSC acquisition. In addition, production costs increased due mainly to higher raw material, natural gas, outage and modernization-related costs. USSC added 557,000 tons to fourth quarter Flat-rolled shipments under commercial arrangements in place at the time of acquisition. An operating loss was incurred as unplanned blast furnace outages limited shipments and resulted in high unit production costs.
 
The decrease in fourth quarter 2007 European income from operations compared to the third quarter was mainly due to a decline in euro-based prices as high imports, particularly from China, and high service center inventories pressured spot prices and order rates. Operating rates were curtailed to 79 percent of capability as a result of two planned blast furnace outages. Shipments were reduced by the outages and outbound rail transportation service disruptions late in the quarter. Additionally, raw material and energy costs increased.

3

Fourth quarter Tubular results improved slightly from the third quarter due mainly to higher average realized prices resulting from a change in product mix, and improved overall cost performance. These were partially offset by lower shipments.
 
Additional Fourth Quarter 2007 Items
 
In December 2007, U. S. Steel and the United Steelworkers (USW) agreed that U. S. Steel will provide health care and life insurance benefits to certain former National Steel employees and their eligible dependents under a U. S. Steel insurance plan, using funds that had been accrued based on a provision of the 2003 Basic Labor Agreement. Funds totaling $468 million were contributed to our trust for retiree health care and life insurance in December.
 
As a result of this agreement, our other postretirement benefits (OPEB) obligation increased by $314 million. While a funding obligation continues through the August 31, 2008 expiration of the 2003 Basic Labor Agreement, the profit-based expense has been eliminated beginning with the fourth quarter of 2007 as reflected in “retiree benefit expenses.”
 
Net interest and other financial costs increased by $22 million in the fourth quarter of 2007 compared to the third quarter, mainly reflecting interest expense resulting from debt incurred to fund the Stelco acquisition.
 
Our effective tax rate for the year was higher than projected at the end of the third quarter as a result of the inclusion of USSC and a change in the profile of global earnings. As a result, the tax provision in the fourth quarter included approximately $20 million to apply this higher tax rate to income for the prior three quarters.

4

Outlook
 
Commenting on U. S. Steel’s outlook, Surma said, “We expect first quarter results to continue to reflect the volatile cost and pricing dynamics in our three major segments. Overall, we should be in a good position as 2008 progresses to take advantage of favorable supply side conditions, our expanded product and geographic positions in North America, and our new galvanizing line at USSK."
 
For Flat-rolled, we expect improvement from fourth quarter results as shipments and operating rates are expected to increase compared to the fourth quarter, with the inclusion of USSC for the full quarter and the completion of the blast furnace projects. Our facilities in Canada have been operating much more reliably. Prices are also expected to be higher as increasing spot market prices will be realized throughout the quarter. In addition, customer commitments in place at USSC at the time of the acquisition are being completed and new commitments consistent with U. S. Steel’s commercial policies are being made. We also expect significant cost increases for raw materials, particularly for purchased scrap, coke and alloys.
 
For U. S. Steel Europe (USSE), we expect higher euro-based prices; and shipments should increase as a result of higher facility availability in the quarter. Escalating raw material costs are expected to partially offset these improvements.
 
Shipments and prices for the Tubular segment are expected to remain in line with the fourth quarter, and semi-finished steel costs will increase.
 
Other Businesses will reflect the normal unfavorable seasonal effects of the closing of the Great Lakes for taconite pellet shipments.
 
Capital expenditures for 2008 are expected to total approximately $940 million.
 
Total costs for pension plans and OPEB are expected to be approximately $200 million in 2008 compared to $266 million in 2007, primarily due to lower pension expense.

5

Volatility in net interest and other financial costs could increase going forward as a result of foreign currency accounting remeasurement effects, primarily on a $1.2 billion intercompany loan to a European affiliate, related to the acquisition of USSC. As this intercompany loan is repaid, our exposure will decrease. Also, we expect to mitigate a portion of this volatility with our normal hedging activity.
 
Common Stock Repurchase Program
 
We repurchased 295,000 shares of U. S. Steel common stock for $30 million during the fourth quarter, bringing total repurchases to 14.3 million shares for $812 million since the repurchase program was originally authorized in July 2005. As of December 31, 2007, 6.5 million shares remained authorized for repurchase under our stock repurchase program.
 
*****
 
This release contains forward-looking statements with respect to market conditions, operating costs, shipments, prices, capital spending and employee benefit costs. 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 prices, usage and supply disruptions; availability and prices of purchased coke and other raw materials; changes in environmental, tax and other laws; employee strikes; power outages; and U.S. and global economic performance and political developments. Domestic steel shipments and prices could also be affected by import levels, currency fluctuations and actions taken by the U.S. Government. 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, environmental permitting, nationalization, inflation, currency fluctuations, increased regulation, export quotas, tariffs, and other protectionist measures. Factors that may affect our ability to construct new facilities include levels of cash flow from operations, general economic conditions, business conditions, availability of capital, whether or not assets are purchased or financed by operating leases, receipt of necessary permits and unforeseen hazards such as contractor performance, material shortages, weather conditions, explosions or fires, which could delay the timing of completion of particular capital projects. Factors that may affect the amount of net periodic benefit costs include, among others, changes to laws affecting benefits, pension fund investment performance, liability changes and interest rates. 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.
 
*****

6

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 fourth quarter earnings on Tuesday, January 29, at 3 p.m. EST. To listen to the webcast of the conference call, visit the U. S. Steel web site, www.ussteel.com, and click on the “Investors” button.
 
For more information on U. S. Steel, visit our web site at www.ussteel.com.
 
-oOo-
 
7

UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)

   
Quarter Ended
  
Year Ended
December 31
  
   
Dec. 31
  
Sept. 30
  
Dec. 31
  
 
  
(Dollars in millions)
  
2007
  
2007
  
2006
  
2007
  
2006
  
                       
NET SALES
  
$
4,535
  
$
4,354
  
$
3,774
  
$
16,873
  
$
15,715
  
                                 
OPERATING EXPENSES (INCOME):
                                
Cost of sales (excludes items shown below)
    
4,110
    
3,749
    
3,223
    
14,633
    
12,968
  
Selling, general and administrative expenses
    
178
    
134
    
146
    
589
    
604
  
Depreciation, depletion and amortization
    
153
    
124
    
102
    
506
    
441
  
Income from investees
    
(7
)
  
(7
)
  
(18
)
  
(26
)
  
(57
)
Net gains on disposal of assets
    
(3
)
  
(7
)
  
(11
)
  
(23
)
  
(13
)
Other (income) loss, net
    
(12
)
  
1
    
(9
)
  
(19
)
  
(13
)
 
          
 
    
 
    
 
    
 
  
Total operating expenses
    
4,419
    
3,994
    
3,433
    
15,660
    
13,930
  
 
                 
 
     
 
      
 
  
INCOME FROM OPERATIONS
    
116
    
360
    
341
    
1,213
    
1,785
  
Net interest and other financial costs
    
44
    
22
    
25
    
105
    
62
  
 
          
 
    
 
    
 
    
 
  
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 
    
72
    
338
    
316
    
1,108
    
1,723
  
Income tax provision
    
31
    
68
    
7
    
218
    
324
  
Minority interests
    
6
    
1
    
12
    
11
    
25
  
 
          
 
    
 
    
 
    
 
  
NET INCOME
    
35
    
269
    
297
    
879
    
1,374
  
Dividends on preferred stock
    
-
    
-
    
-
    
-
    
(8
)
 
          
 
    
 
    
 
    
 
  
NET INCOME APPLICABLE TO COMMON STOCK
  
$
35
  
$
269
  
$
297
  
$
879
  
$
1,366
  
 
          
 
    
 
    
 
    
 
  
COMMON STOCK DATA:
                                
                                 
Net income per share:
                                
- Basic
  
$
0.29
  
$
2.28
  
$
2.51
  
$
7.44
  
$
11.88
  
- Diluted
  
$
0.29
  
$
2.27
  
$
2.50
  
$
7.40
  
$
11.18
  
                                 
Weighted average shares, in thousands:
                                
- Basic
    
117,813
    
118,086
    
118,343
    
118,090
    
114,918
  
- Diluted
    
118,581
    
118,755
    
119,011
    
118,815
    
122,918
  
                                 
Dividends paid per common share
  
$
.20
  
$
.20
  
$
.20
  
$
.80
  
$
.60
  
 
 
UNITED STATES STEEL CORPORATION
CASH FLOW STATEMENT (Unaudited)
 
   
Year Ended
  
   
December 31
  
(Dollars in millions)
  
2007
  
2006
  
               
Cash provided from operating activities:
              
Net income
  
$
879
  
$
1,374
  
Depreciation, depletion and amortization
    
506
    
441
  
Pensions and other postretirement benefits
    
(157
)
  
(209
)
Deferred income taxes
    
53
    
(3
)
Net gains on disposal of assets
    
(23
)
  
(13
)
Changes in:   Current receivables
    
238
    
(93
)
Inventories
    
468
    
(109
)
Current accounts payable and accrued expenses
    
(441
)
  
274
  
Other operating activities
    
183
    
19
  
           
Total
    
1,706
    
1,681
  
           
Cash used in investing activities:
              
Capital expenditures
    
(675
)
  
(612
)
Acquisition of Lone Star Technologies, Inc., net of cash received
    
(1,990
)
  
-
  
Acquisition of Stelco Inc., net of cash received.
    
(2,036
)
  
-
  
Disposal of assets
    
42
    
26
  
Other investing activities
    
23
    
(4
)
           
Total
    
(4,636
)
  
(590
)
           
Cash used in financing activities:
              
Borrowings and repayments of debt, net
    
2,103
    
(607
)
Common stock issued
    
18
    
33
  
Common stock repurchased
    
(117
)
  
(442
)
Dividends paid
    
(95
)
  
(77
)
Change in bank checks outstanding
    
(13
)
  
(49
)
Other financing activities
    
(5
)
  
(13
)
           
Total
    
1,891
    
(1,155
)
           
Effect of exchange rate changes on cash
    
18
    
7
  
           
Total net cash flow
    
(1,021
)
  
(57
)
Cash at beginning of the year
    
1,422
    
1,479
  
           
Cash at end of the year
  
$
401
  
$
1,422
  

 
UNITED STATES STEEL CORPORATION
CONDENSED BALANCE SHEET (Unaudited)

(Dollars in millions)
  
Dec. 31
2007
  
Dec. 31
2006
  
Cash and cash equivalents 
  
$
401
  
$
1,422
  
Receivables, net 
    
2,077
    
1,799
  
Inventories 
    
2,269
    
1,604
  
Other current assets 
    
259
    
371
  
               
Total current assets 
    
5,006
    
5,196
  
Property, plant and equipment, net 
    
6,688
    
4,429
  
Investments and long-term receivables, net 
    
696
    
336
  
Prepaid pensions  
    
733
    
330
  
Intangible assets, net 
    
419
    
-
  
Goodwill 
    
1,676
    
-
  
Other assets 
    
382
    
295
  
               
Total assets 
  
$
15,600
  
$
10,586
  
Accounts payable 
    
1,712
    
1,313
  
Payroll and benefits payable 
    
972
    
1,028
  
Short-term debt and current maturities of long-term debt 
    
110
    
82
  
Other current liabilities 
    
168
    
279
  
               
Total current liabilities 
    
2,962
    
2,702
  
Long-term debt 
    
3,147
    
943
  
Employee benefits 
    
3,212
    
2,174
  
Other long-term liabilities 
    
690
    
364
  
Minority interests 
    
58
    
38
  
Stockholders’ equity 
    
5,531
    
4,365
  
               
Total liabilities and stockholders’ equity 
  
$
15,600
  
$
10,586
  
 
 
 
UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

   
Quarter Ended
  
Year Ended
  
   
Dec. 31
  
Sept. 30
  
Dec. 31
  
December 31
  
(Dollars in millions)
  
2007
  
2007
  
2006
  
2007
  
2006
  
                       
INCOME (LOSS) FROM OPERATIONS
                                
Flat-rolled(a) 
  
$
53
  
$
170
  
$
31
  
$
390
  
$
600
  
U. S. Steel Europe 
    
85
   
152
   
182
   
687
   
714
 
Tubular(b) 
    
83
   
74
   
144
   
356
   
631
 
Other Businesses(c) 
    
36
   
37
   
57
   
76
   
129
 
                                 
Segment Income from Operations
    
257
   
433
   
414
   
1,509
    
2,074
 
Retiree benefit expenses(d) 
    
(15
)
  
(46
)
  
(53
)
  
(143
)
  
(243
)
Other items not allocated to segments:
                                
Flat-rolled inventory transition effects 
    
(58
)
  
-
   
-
   
(58
)
  
-
 
Tubular inventory transition effects 
    
(11
)
  
(27
)
  
-
   
(38
)
  
-
 
Out of period adjustments 
    
-
   
-
   
(15
)
  
-
   
(15
)
Workforce reduction charges  
    
(57
)
  
-
   
-
   
(57
)
  
(21
)
Loss from sale of certain assets 
    
-
   
-
   
(5
)
  
-
   
(5
)
Asset impairment loss 
    
-
   
-
   
-
   
-
   
(5
)
                                 
Total Income from Operations 
  
$
116
  
$
360
  
$
341
  
$
1,213
  
$
1,785
  
                                 
CAPITAL EXPENDITURES
                                
Flat-rolled(a) 
  
$
79
  
$
121
  
$
127
  
$
319
  
$
274
  
U. S. Steel Europe 
    
86
   
52
   
49
   
215
   
211
 
Tubular(b) 
    
10
   
10
   
2
   
23
   
4
 
Other Businesses 
    
40
   
27
   
37
   
118
   
123
 
                                 
Total 
  
$
215
  
$
210
  
$
215
  
$
675
  
$
612
  
 
 
 
(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)
Includes certain profit-based expenses for U. S. Steel retirees and 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
  
Year Ended
  
   
Dec. 31
  
Sept. 30
  
Dec. 31
  
December 31
  
(Dollars in millions)
  
2007
  
2007
  
2006
  
2007
  
2006
  
                       
OPERATING STATISTICS
                                
Average realized price: ($/net ton)(a)
                                
Flat-rolled(b) 
  
$
627
  
$
643
  
$
648
  
$
642
  
$
634
  
U. S. Steel Europe 
    
752
   
738
   
665
   
720
   
608
 
Tubular(c) 
    
1,299
   
1,282
   
1,523
   
1,335
   
1,499
 
Steel Shipments:(a)(d)
                                
Flat-rolled(b) 
    
4,146
   
3,601
   
3,078
   
14,534
   
14,180
 
U. S. Steel Europe 
    
1,385
   
1,486
   
1,549
   
6,139
   
6,261
 
Tubular(c) 
    
427
   
473
   
271
   
1,435
   
1,191
 
                                 
Total Steel Shipments 
    
5,958
   
5,560
   
4,898
   
22,108
   
21,632
 
Intersegment Shipments:(d)
                                
Flat-rolled to Tubular 
    
314
   
260
   
176
   
912
   
858
 
Raw Steel-Production:(d)
                                
Flat-rolled(b) 
    
4,681
   
4,328
   
3,270
   
16,838
   
16,355
 
U. S. Steel Europe 
    
1,467
   
1,661
   
1,772
   
6,792
   
7,062
 
Raw Steel-Capability Utilization:(e)
                              
Flat-rolled(b) 
    
82.0
%
  
88.5
%
  
66.9
%
  
83.3
%
  
84.3
%
U. S. Steel Europe 
    
78.6
%
  
89.0
%
  
94.7
%
  
91.8
%
  
95.4
%
Domestic iron ore production(d) 
    
5,679
   
5,323
   
5,144
   
20,846
   
22,063
 
Domestic coke production(d) 
    
1,511
   
1,382
   
1,393
   
5,558
   
5,814
 
 
 
 
(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 Flat-rolled prior to October 31, 2007 and 24.3 million net tons thereafter, and 7.4 million net tons for U. S. Steel Europe.