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
2008 SECOND QUARTER RESULTS

Earnings Highlights

(Dollars in millions except per share data)
  
2Q 2008
  
1Q 2008
  
2Q 2007
  
Net sales
  
$
6,744
  
$
5,196
  
$
4,228
  
                     
Segment income from operations
                    
Flat-rolled
  
$
478
  
$
120
  
$
92
  
U. S. Steel Europe
    
298
    
161
    
244
  
Tubular
    
177
    
51
    
97
  
Other Businesses
    
6
    
(5
)
  
1
  
Total segment income from operations
  
$
959
  
$
327
  
$
434
  
Retiree benefit expenses
    
1
    
1
    
(43
)
Other items not allocated to segments
    
(6
)
  
(62
)
  
-
  
Income from operations
  
$
954
  
$
266
  
$
391
  
                     
Net interest and other financial costs
    
25
    
(32
)
  
34
  
Income tax provision
    
255
    
58
    
53
  
                     
Net income
  
$
668
  
$
235
  
$
302
  
- Per basic share 
  
$
5.69
  
$
2.00
  
$
2.55
  
- Per diluted share 
  
$
5.65
  
$
1.98
  
$
2.54
  

PITTSBURGH, July 29, 2008 – United States Steel Corporation (NYSE: X) reported second quarter 2008 net income of $668 million, or $5.65 per diluted share, compared to first quarter 2008 net income of $235 million, or $1.98 per diluted share, and second quarter 2007 net income of $302 million, or $2.54 per diluted share.


Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, “We recorded the highest quarterly sales and net income in U. S. Steel’s history during the second quarter as all three reportable segments posted record results, reflecting strong operating performance and favorable global pricing dynamics.”
 
Second quarter 2008 income from operations of $954 million more than tripled our first quarter 2008 income of $266 million and more than doubled our last year’s second quarter income of $391 million.
 
Other items not allocated to segments in the second quarter of 2008 consisted of a charge for inventory transition effects related to the acquisition of U. S. Steel Canada (USSC) that reduced net income by $4 million, or 3 cents per diluted share. Other items not allocated to segments in the first quarter of 2008 reduced net income by $45 million, or 38 cents per diluted share. 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 debt, which reduced net income by $14 million, or 12 cents per diluted share.
 
Foreign currency effects related to the remeasurement of a U.S. dollar-denominated intercompany loan to a European affiliate were largely offset by euro-U.S. dollar derivatives activity during the second quarter. This compares to a foreign currency gain of $70 million, or 59 cents per diluted share, for these items in the first quarter of 2008. At June 30, 2008, U. S. Steel had open euro-U.S. dollar forward sales contracts with a total notional value of approximately $614 million. In early July, the outstanding balance on the intercompany loan was reduced from $1.1 billion to $836 million.
 
We repurchased 320,000 shares of common stock for $52 million during the second quarter.

2

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 $959 million, or $136 per ton, in the second quarter of 2008, compared with $327 million, or $48 per ton, in the first quarter of 2008 and $434 million, or $79 per ton, in the second quarter of 2007.
 
The significant increases in results for all three reportable segments resulted primarily from substantial price increases, which outpaced increases in raw materials costs. Shipments for all segments were also at record levels for the quarter as strong operating results were achieved. Raw steel capability utilization, up slightly from the first quarter, was 92.7 percent in North America, including 101.1 percent for our Canadian operations, and 104.3 percent in Europe.
 
Outlook
 
Commenting on U. S. Steel’s outlook for the third quarter, Surma said, “We expect another excellent quarter with continued earnings improvement as price increases implemented during the second quarter and early in the third quarter are expected to improve average realized prices for each of our reportable segments.”
 
For Flat-rolled, third quarter results are expected to improve substantially from the second quarter, reflecting continued realization of price increases. Raw steel capability utilization and shipments are expected to remain near second quarter levels, and raw materials costs are expected to increase.
 
Third quarter results are expected to decrease for U. S. Steel Europe (USSE). While average realized prices should be higher, raw materials costs are also expected to increase, and shipments and operating costs will be negatively affected by a planned blast furnace reline at U. S. Steel Košice that is scheduled to begin shortly and continue into the fourth quarter.
 
3
 
Third quarter results for Tubular are expected to increase significantly as price increases continue to be realized. Semi-finished steel costs will increase and shipments are expected to be at about the second quarter level.
 
We are currently negotiating with the United Steelworkers for a replacement of the agreement covering most of our domestic operations. We expect to have the new agreement in place before the September 1 expiration of the current agreement.
 
*****
 
This release contains forward-looking statements with respect to market conditions, operating costs, shipments and prices. 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; the terms of replacement collective bargaining agreements; employee strikes or other labor issues; 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. 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.
 
4
 
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 29, at 2 p.m. EDT. 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 its web site at www.ussteel.com.
 
-oOo -
 
5
 
 
UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
 
   
Quarter Ended
  
Six Months Ended
  
   
June 30
  
Mar. 31
  
June 30
  
June 30
  
(Dollars in millions)
  
2008
  
2008
  
2007
  
2008
  
2007
  
                       
NET SALES
  
$
6,744
  
$
5,196
  
$
$ 4,228
  
$
11,940
  
$
7,984
  
                                 
OPERATING EXPENSES (INCOME):
                                
Cost of sales (excludes items shown below)
    
5,497
    
4,643
    
3,595
    
10,140
    
6,774
  
Selling, general and administrative expenses
    
171
    
142
    
138
    
313
    
277
  
Depreciation, depletion and amortization
    
159
    
156
    
118
    
315
    
229
  
Income from investees
    
(34
)
  
(7
)
  
(10
)
  
(41
)
  
(12
)
Net gains on disposal of assets
    
(1
)
  
(1
)
  
(3
)
  
(2
)
  
(13
)
Other income, net
    
(2
)
  
(3
)
  
(1
)
  
(5
)
  
(8
)
Total operating expenses
    
5,790
    
4,930
    
3,837
    
10,720
    
7,247
  
INCOME FROM OPERATIONS
    
954
    
266
    
391
    
1,220
    
737
  
Net interest and other financial costs
    
25
    
(32
)
  
34
    
(7
)
  
39
  
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS
    
929
    
298
    
357
    
1,227
    
698
  
Income tax provision
    
255
    
58
    
53
    
313
    
119
  
Minority interests
    
6
    
5
    
2
    
11
    
4
  
NET INCOME
  
$
668
  
$
235
  
$
302
  
$
903
  
$
575
  
                                 
COMMON STOCK DATA:
                                
Net income per share:
                                
- Basic
  
$
5.69
  
$
2.00
  
$
2.55
  
$
7.68
  
$
4.86
  
- Diluted
  
$
5.65
  
$
1.98
  
$
2.54
  
$
7.64
  
$
4.83
  
                                 
Weighted average shares, in thousands
                                
- Basic
    
117,507
    
117,595
    
118,221
    
117,551
    
118,232
  
- Diluted
    
118,217
    
118,405
    
118,891
    
118,190
    
118,920
  
                                 
Dividends paid per common share
  
$
.25
  
$
.25
  
$
.20
  
$
.50
  
$
.40
  
 

UNITED STATES STEEL CORPORATION
CASH FLOW STATEMENT (Unaudited)
 
   
Six Months Ended
  
   
June 30
  
(Dollars in millions)
    
2008
 
 
2007
  
Cash provided from operating activities:
              
Net income
  
$
903
  
$
575
  
Depreciation, depletion and amortization
    
315
    
229
  
Pensions and other postretirement benefits
    
(216
)
  
(85
)
Deferred income taxes
    
97
    
49
  
Net gains on disposal of assets
    
(2
)
  
(13
)
Changes in: Current receivables
    
(1,053
)
  
(297
)
Inventories
    
(292
)
  
108
  
Current accounts payable and accrued expenses
    
798
    
229
  
Bank checks outstanding
    
(5
)
  
63
  
Other operating activities
    
(82
)
  
(2
)
Total
    
463
    
856
  
Cash used in investing activities:
              
Capital expenditures
    
(340
)
  
(250
)
Acquisition of Lone Star Technologies, Inc.
    
-
    
(1,990
)
Acquisition of Stelco Inc.
    
(1
)
  
-
  
Disposal of assets
    
7
    
18
  
Other investing activities
    
(16
)
  
(1
)
Total
    
(350
)
  
(2,223
)
Cash (used in) provided from financing activities:
              
Issuance of long-term debt
    
-
    
1,583
  
Repayment of long-term debt
    
(36
)
  
(449
)
Common stock issued
    
11
    
15
  
Common stock repurchased
    
(85
)
  
(58
)
Dividends paid
    
(59
)
  
(47
)
Other financing activities
    
34
    
1
  
Total
    
(135
)
  
1,045
  
Effect of exchange rate changes on cash
    
12
    
3
  
Net increase (decrease) in cash and cash equivalents
    
(10
)
  
(319
)
Cash at beginning of the year
    
401
    
1,422
  
Cash at end of the period
  
$
391
  
$
1,103
  
 

UNITED STATES STEEL CORPORATION
CONDENSED BALANCE SHEET (Unaudited)
 
   
June 30
 
Dec. 31
 
(Dollars in millions)
 
2008
 
2007
  
Cash and cash equivalents
  
$
391
  
$
401
  
Receivables, net
    
3,183
    
2,077
  
Inventories
    
2,593
    
2,279
  
Other current assets
    
202
    
202
  
Total current assets
    
6,369
    
4,959
  
Property, plant and equipment, net
    
6,890
    
6,688
  
Investments and long-term receivables, net
    
770
    
694
  
Pension asset 
    
871
    
734
  
Goodwill and intangible assets, net
    
1,992
    
2,131
  
Other assets
    
415
    
426
  
Total assets
  
$
17,307
  
$
15,632
  
Accounts payable
  
$
2,357
  
$
1,730
  
Payroll and benefits payable
    
1,040
    
995
  
Short-term debt and current maturities of long-term debt
    
110
    
110
  
Other current liabilities
    
366
    
168
  
Total current liabilities
    
3,873
    
3,003
  
Long-term debt, less unamortized discount
    
3,110
    
3,147
  
Employee benefits
    
3,016
    
3,187
  
Other long-term liabilities and minority interests
    
899
    
764
  
Stockholders’ equity
    
6,409
    
5,531
  
Total liabilities and stockholders’ equity
  
$
17,307
  
$
15,632
  


UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
 
   
Quarter Ended
  
Six Months Ended
  
   
June 30
  
Mar. 31
  
June 30
  
June 30
  
(Dollars in millions)
 
 
2008
 
 
2008
 
 
2007
 
 
2008
 
 
2007
  
                                 
INCOME FROM OPERATIONS
                                
Flat-rolled (a)
  
$
478
  
$
120
  
$
92
  
$
598
  
$
167
  
U. S. Steel Europe
    
298
   
161
   
244
   
459
   
450
 
Tubular (b)
    
177
   
51
   
97
   
228
   
199
 
Other Businesses (c) 
    
6
   
(5
)
  
1
   
1
   
3
 
Segment Income from Operations
    
959
   
327
   
434
   
1,286
   
819
 
Retiree benefit expenses (d)
    
1
   
1
   
(43
)
  
2
   
(82
)
Other items not allocated to segments:
                                
Flat-rolled inventory transition effects
    
(6
)
  
(17
)
  
-
   
(23
)
  
-
 
Litigation reserve
    
-
   
(45
)
  
-
   
(45
)
  
-
 
Total Income from Operations
  
$
954
  
$
266
  
$
391
  
$
1,220
  
$
737
  
                                 
CAPITAL EXPENDITURES
                                
Flat-rolled (a)
  
$
145
  
$
83
  
$
69
  
$
228
  
$
119
  
U. S. Steel Europe 
    
49
   
32
   
47
   
81
   
77
 
Tubular (b)
    
5
   
4
   
1
   
9
   
3
 
Other Businesses (c)
    
14
   
8
   
25
   
22
   
51
 
Total
  
$
213
  
$
127
  
$
142
  
$
340
  
$
250
  
 
 
(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 second quarter and first six months of 2007 include 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
  
Six Months Ended
  
   
June 30
  
Mar. 31
  
June 30
  
June 30
  
(Dollars in millions)
    
2008
 
 
2008
 
 
2007
 
 
2008
 
 
2007
 
                                 
OPERATING STATISTICS
                                
Average realized price:($/net ton) (a)
                                
Flat-rolled (b)
    
777
   
646
   
652
   
713
   
651
 
U. S. Steel Europe
    
986
   
791
   
726
   
890
   
697
 
Tubular (c)
    
1,690
   
1,297
   
1,389
   
1,508
   
1,410
 
Steel Shipments: (a) (d)
                                
Flat-rolled (b)
    
4,849
   
4,701
   
3,599
   
9,550
   
6,787
 
U. S. Steel Europe
    
1,696
   
1,638
   
1,616
   
3,334
   
3,268
 
Tubular (c)
    
500
   
433
   
288
   
933
   
535
 
Total Steel Shipments
    
7,045
   
6,772
   
5,503
   
13,817
   
10,590
 
Intersegment Shipments: (d)
                                
Flat-rolled to Tubular
    
472
   
445
   
164
   
917
   
338
 
Raw Steel-Production: (d)
                                
North American facilities (b)
    
5,614
   
5,558
   
4,116
   
11,172
   
7,829
 
U. S. Steel Europe
    
1,925
   
1,908
   
1,865
   
3,833
   
3,664
 
Raw Steel-Capability Utilization: (e)
                                
North American facilities (b)
    
92.7
%
  
91.7
%
  
85.1
%
  
92.2
%
  
81.4
%
U. S. Steel Europe
    
104.3
%
  
103.4
%
  
100.8
%
  
103.9
%
  
99.5
%
 
 
(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.