X 2014.9.30 Earnings Release

PITTSBURGH, October 28, 2014 – United States Steel Corporation (NYSE: X) reported a third quarter 2014 net loss of $207 million, or $1.42 per diluted share, compared to a third quarter 2013 net loss of $1,791 million, or $12.38 per diluted share, and a second quarter 2014 net loss of $18 million, or $0.12 per diluted share. Adjusted net income for the third quarter of 2014 was $325 million, or $2.16 per diluted share. This excludes non-cash charges for strategic actions of $577 million, or $3.88 per diluted share, as well as a $45 million, or $0.30 per diluted share, gain on the sale of real estate assets. See the Non-GAAP Financial Measures section for a description of the non-GAAP measures and a reconciliation to net loss attributable to U. S. Steel and income (loss) from operations.



Earnings Highlights

(Dollars in millions, except per share amounts)	3Q 2014			2Q 2014			3Q 2013
Net Sales	$	4,587		$	4,400		$	4,131
Segment income (loss) from operations
Flat-rolled	$	347		$	30		$	82
U. S. Steel Europe	29			38			(32		)
Tubular	69			47			49
Other Businesses	34			17			14
Total reportable segment and Other Businesses income from operations	$	479		$	132		$	113
Postretirement benefit expense	(26		)	(32		)	(55		)
Other items not allocated to segments	(594		)	(65		)	(1,760		)
(Loss) income from operations	$	(141	)	$	35		$	(1,702	)
Net interest and other financial costs	60			64			85
Income tax provision (benefit)	6			(11		)	4
Less: Net loss attributable to the noncontrolling interests	—			—			—
Net loss attributable to United States Steel Corporation	$	(207	)	$	(18	)	$	(1,791	)
-Per basic share	$	(1.42	)	$	(0.12	)	$	(12.38	)
-Per diluted share	$	(1.42	)	$	(0.12	)	$	(12.38	)

Commenting on results, U. S. Steel President and Chief Executive Officer Mario Longhi said, “We experienced a significant improvement in Total reportable segments and Other Businesses income from operations in the third quarter, the highest level since the market peak in 2008. Steel market conditions in the U.S. have remained stable and our operations have performed well, particularly our Flat-rolled segment, where we returned to more normal operating levels and income from operations increased by over $300 million from the second quarter. Our results reflect the significant improvement in our earnings power from our Carnegie Way transformation efforts."

Results for our Flat-rolled segment improved significantly from the second quarter. Shipments increased as we returned to normal operations in the third quarter, while the relatively flat market conditions during the quarter resulted in average realized prices that were consistent with the second quarter. There was a favorable impact of approximately $150 million in the third quarter from reduced repairs and maintenance costs and increased operating efficiencies along with the increased shipments. Operating costs also reflected a decrease in energy costs. Additionally, third quarter results included a $20 million operating loss for U. S. Steel Canada for the period prior to its CCAA filing on September 16, 2014.

We reported decreased results for our European segment as compared to the second quarter. Scheduled caster and blast furnace maintenance along with the normal impact of the European holiday season resulted in lower shipments and higher repairs and maintenance costs related to the planned outages. These negative impacts were partially offset by a decrease in raw materials costs, primarily for iron ore. Average realized euro-based prices were in line with the second quarter.

Commenting on U. S. Steel's outlook for the fourth quarter, Longhi said, “Our Carnegie Way progress so far has exceeded our expectations in this multi-year journey. We expect to continue to see increasing benefits from our Carnegie Way transformation which focuses on building stockholder value. We expect fourth quarter segment income from operations to decrease compared to the third quarter primarily due to significantly lower results for our Flat-rolled segment. Results for our European and Tubular segments are expected to improve slightly compared to the third quarter.”

Fourth quarter results for our Flat-rolled segment are expected to decrease significantly compared to the third quarter but are expected to exceed $100 million. Overall, repairs and maintenance costs are expected to increase by approximately $150 million as compared to the third quarter due primarily to a reline of a blast furnace at Mon Valley Works and planned blast furnace maintenance projects at Granite City and Great Lakes, which will result in lower operating levels. Shipments, which no longer include U. S. Steel Canada, are expected

Fourth quarter results for our Tubular segment are expected to increase slightly compared to the third quarter. We expect average realized prices to increase compared to the third quarter due to continued improved pricing, including the positive impact of the OCTG case decision, and an improved mix as a result of a reduction in our exposure to welded line pipe. Shipments are projected to decrease slightly due to the indefinite idling of the McKeesport and Bellville facilities.

This release contains forward-looking statements with respect to market conditions, operating costs, shipments and prices. Factors that could affect market conditions, costs, shipments and prices for both North American and European operations include: (a) foreign currency fluctuations and related activities; (b) global product demand, prices and mix; (c) global and company steel production levels; (d) plant operating performance; (e) natural gas, electricity, raw materials and transportation prices, usage and availability; (f) international trade developments, including court decisions, legislation and agency decisions on petitions and sunset reviews; (g) 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; (h) changes in environmental, tax, pension and other laws; (i) the terms of collective bargaining agreements; (j) employee strikes or other labor issues; and (k) 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, including those related to CO₂ emissions, climate change and shale gas development. Economic conditions and political factors in Europe that may affect U. S. Steel Europe's results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) fiscal instability; (p) political issues; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures. We present adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and Adjusted EBITDA, which are non-GAAP measures, as an additional measurement to enhance the understanding of our operating performance and

facilitate a comparison with that of our competitors. 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 U. S. Steel’s Annual Report on Form 10-K for the year ended December 31, 2013, and in subsequent filings for U. S. Steel.



UNITED STATES STEEL CORPORATION
STATEMENT OF OPERATIONS (Unaudited)

			Quarter Ended									Nine Months Ended
			Sept. 30			June 30			Sept. 30			September 30,
(Dollars in millions, except per share amounts)			2014			2014			2013			2014			2013
NET SALES			$	4,587		$	4,400		$	4,131		$	13,435		$	13,155

OPERATING EXPENSES (INCOME):
	Cost of sales (excludes items shown below)		3,848			4,097			3,749			11,983			12,105
	Selling, general and administrative expenses		125			143			153			406			449
	Depreciation, depletion and amortization		158			165			173			489			514
	Income from investees		(50		)	(57		)	(26		)	(103		)	(31		)
	Impairment of goodwill		—			—			1,783			—			1,783
	Restructuring and other charges		236			18			—			254			—
	Loss on deconsolidation of U. S. Steel Canada and other charges		413			—			—			413			—
	Net gain on disposal of assets		(2		)	(1		)	—			(23		)	—
	Other (income) expense, net		—			—			1			—			6

		Total operating expenses	4,728			4,365			5,833			13,419			14,826

(LOSS) INCOME FROM OPERATIONS			(141		)	35			(1,702		)	16			(1,671		)
Net interest and other financial costs			60			64			85			193			257

LOSS BEFORE INCOME TAXES
	AND NONCONTROLLING INTERESTS		(201		)	(29		)	(1,787		)	(177		)	(1,928		)
Income tax provision (benefit)			6			(11		)	4			(4		)	14

Net loss			(207		)	(18		)	(1,791		)	(173		)	(1,942		)
	Less: Net loss attributable to the
	noncontrolling interests		—			—			—			—			—
NET LOSS ATTRIBUTABLE TO
	UNITED STATES STEEL CORPORATION		$	(207	)	$	(18	)	$	(1,791	)	$	(173	)	$	(1,942	)

COMMON STOCK DATA:

Net loss per share attributable to
United States Steel Corporation shareholders:
	-Basic		$	(1.42	)	$	(0.12	)	$	(12.38	)	$	(1.19	)	$	(13.44	)
	-Diluted		$	(1.42	)	$	(0.12	)	$	(12.38	)	$	(1.19	)	$	(13.44	)

Weighted average shares, in thousands
	-Basic		145,348			144,884			144,727			144,999			144,523
	-Diluted		145,348			144,884			144,727			144,999			144,523

Dividends paid per common share			$	0.05		$	0.05		$	0.05		$	0.15		$	0.15



UNITED STATES STEEL CORPORATION
CASH FLOW STATEMENT (Unaudited)

			Nine Months Ended
			September 30,
(Dollars in millions)			2014			2013
Cash provided by (used in) operating activities:
	Net loss		$	(173	)	$	(1,942	)
	Depreciation, depletion and amortization		489			514
	Impairment of goodwill		—			1,783
	Restructuring and other charges		254			—
	Loss on deconsolidation of U. S. Steel Canada and other charges		413			—
	Pensions and other postretirement benefits		(266		)	(143		)
	Deferred income taxes		6			3
	Net gain on disposal of assets		(23		)	—
	Working capital changes		337			158
	Income taxes receivable/payable		167			1
	Currency remeasurement loss		32			8
	Other operating activities		11			39
		Total	1,247			421

Cash (used in) provided by investing activities:
	Capital expenditures		(282		)	(328		)
	Acquisition of intangible assets		—			(12		)
	Disposal of assets		28			—
	Other investing activities		20			31
		Total	(234		)	(309		)

Cash (used in) provided by financing activities:
	Issuance of long-term debt, net of financing costs		—			575
	Repayment of long-term debt		(323		)	(542		)
	Receipts from exercise of stock options		10			—
	Dividends paid		(22		)	(22		)
		Total	(335		)	11

Effect of exchange rate changes on cash			(25		)	4

Net increase in cash and cash equivalents			653			127
Cash and cash equivalents at beginning of the year			604			570

Cash and cash equivalents at end of the period			$	1,257		$	697



UNITED STATES STEEL CORPORATION
CONDENSED BALANCE SHEET (Unaudited)

		Sept. 30		Dec. 31
(Dollars in millions)		2014		2013
Cash and cash equivalents		$	1,257	$	604
Receivables, net		2,072		2,160
Inventories		2,199		2,688
Other current assets		573		626
	Total current assets	6,101		6,078
Property, plant and equipment, net		4,570		5,922
Investments and long-term receivables, net		986		621
Intangible assets, net		205		271
Other assets		146		251

	Total assets	$	12,008	$	13,143

Accounts payable		$	2,072	$	1,754
Payroll and benefits payable		925		974
Short-term debt and current maturities of long-term debt		336		323
Other current liabilities		217		194
	Total current liabilities	3,550		3,245
Long-term debt, less unamortized discount		3,162		3,616
Employee benefits		554		2,064
Other long-term liabilities ^(a)		799		842
United States Steel Corporation stockholders' equity ^(a)		3,942		3,375
Noncontrolling interests		1		1

	Total liabilities and stockholders' equity	$	12,008	$	13,143

We present adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA, which are non-GAAP measures, as an additional measurement to enhance the understanding of our operating performance and facilitate a comparison with that of our competitors. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA and adjusted net income (loss) are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with GAAP and are not necessarily comparable to similarly titled measures used by other companies.



RECONCILIATION OF ADJUSTED NET INCOME (LOSS)

		Quarter Ended
		Sept. 30			June 30			Sept. 30
(Dollars in millions, except per share amounts)		2014			2014			2013
Reconciliation to net loss attributable to United States Steel Corporation
	Adjusted net income (loss) attributable to United States Steel Corporation	$	325		$	25		$	(20	)
	Loss on deconsolidation of U. S. Steel Canada and other charges	(384		)	—			—
	Impairment of carbon alloy facilities at Gary Works	(163		)	—			—
	Write-off of pre-engineering costs at Keetac	(30		)	—			—
	Gain on sale of real estate assets	45			—			—
	Litigation reserves	—			(46		)	—
	Loss on assets held for sale	—			(9		)	—
	Curtailment gain	—			12			—
	Impairment of goodwill	—			—			(1,771		)
	Total Adjustments	(532		)	(43		)	(1,771		)
	Net loss attributable to United States Steel Corporation, as reported	$	(207	)	$	(18	)	(1,791		)

Reconciliation to diluted net loss per share
	Adjusted diluted net income (loss) per share	$	2.16		$	0.17		$	(0.14	)
	Loss on deconsolidation of U. S. Steel Canada and other charges	(2.54		)	—			—
	Impairment of carbon alloy facilities at Gary Works	(1.08		)	—			—
	Write-off of pre-engineering costs at Keetac	(0.21		)	—			—
	Gain on sale of real estate assets	0.30			—			—
	Litigation reserves	—			(0.31		)	—
	Loss on assets held for sale	—			(0.06		)	—
	Curtailment gain	—			0.08			—
	Impairment of goodwill	—			—			(12.24		)
	Additional dilutive effects of securities	(0.05		)	—			—
	Total adjustments	(3.58		)	(0.29		)	(12.24		)
	Diluted net loss per share, as reported	$	(1.42	)	$	(0.12	)	$	(12.38	)



RECONCILIATION OF ADJUSTED EBITDA

		Quarter Ended
		Sept. 30			June 30			Sept. 30
(Dollars in millions)		2014			2014			2013
Reconciliation to (loss) income from operations
	Adjusted EBITDA	$	611		$	265		$	231
	Restructuring and other charges	(236		)	—			—
	Loss on deconsolidation of U. S. Steel Canada and other charges	(413		)	—			—
	Gain on sale of real estate assets	55			—			—
	Litigation reserves	—			(70		)	—
	Loss on assets held for sale	—			(14		)	—
	Curtailment gain	—			19			—
	Impairment of goodwill	—			—			(1,783		)
	Supplier contract dispute settlement	—			—			23
	EBITDA	17			200			(1,529		)
	Depreciation expense	(158		)	(165		)	(173		)
	(Loss) income from operations, as reported	(141		)	35			(1,702		)



UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

		Quarter Ended									Nine Months Ended
		Sept. 30			June 30			Sept. 30			September 30,
(Dollars in millions)		2014			2014			2013			2014				2013
INCOME (LOSS) FROM OPERATIONS
	Flat-rolled	$	347		$	30		$	82		$	462			$	18
	U. S. Steel Europe	29			38			(32		)	99				16
	Tubular	69			47			49			140				158
	Other Businesses	34			17			14			64				62

Reportable Segment and Other Businesses Income from Operations		479			132			113			765				254
	Postretirement benefit expense	(26		)	(32		)	(55		)	(90		)		(165		)
	Other items not allocated to segments:
	Loss on deconsolidation of U. S. Steel Canada and other charges	(413		)	—			—			(413		)		—
	Impairment of carbon alloy facilities	(199		)	—			—			(199		)		—
	Write-off of pre-engineering costs	(37		)	—			—			(37		)		—
	Gain on sale of real estate assets	55			—			—			55				—
	Litigation reserves	—			(70		)	—			(70		)		—
	Loss on assets held for sale	—			(14		)	—			(14		)		—
	Curtailment gain	—			19			—			19				—
	Impairment of goodwill	—			—			(1,783		)	—				(1,783		)
	Supplier contract dispute settlement	—			—			23			—				23

	Total (Loss) Income from Operations	$	(141	)	$	35		$	(1,702	)	$	16			$	(1,671	)

CAPITAL EXPENDITURES
	Flat-rolled	$	56		$	47		$	72		$	158			$	248
	U. S. Steel Europe	23			17			14			58				32
	Tubular	13			31			19			60				42
	Other Businesses	4			1			2			6				6

	Total	$	96		$	96		$	107		$	282		^(a)	$	328		^(a)



UNITED STATES STEEL CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

				Quarter Ended						Nine Months Ended
				Sept. 30		June 30		Sept. 30		September 30,
				2014		2014		2013		2014		2013
OPERATING STATISTICS
	Average realized price: ($/net ton) ^(a)
		Flat-rolled		777		774		752		771		731
		Flat-rolled U.S. Facilities ^(b)		786		788		750		783		735
		U. S. Steel Europe		671		691		714		691		711
		Tubular		1,567		1,479		1,543		1,508		1,536
	Steel Shipments: ^{(a) (c)}
		Flat-rolled		3,692		3,527		3,428		10,893		11,174
		U. S. Steel Europe		987		1,053		861		3,071		2,971
		Tubular		428		449		459		1,296		1,343
			Total Steel Shipments	5,107		5,029		4,748		15,260		15,488

		Flat-rolled U.S. Facilities Steel Shipments^(b)		3,213		3,006		3,281		9,334		10,282

	Intersegment Shipments: ^(c)
		Flat-rolled to Tubular		439		457		450		1,331		1,336
		U. S. Steel Europe to Flat-rolled		—		75		—		75		—
	Raw Steel Production: ^(c)
		Flat-rolled		4,675		4,132		4,261		13,298		13,393
		Flat-rolled U.S. Facilities ^(b)		4,166		3,528		4,261		11,587		12,788
		U. S. Steel Europe		1,111		1,223		1,032		3,475		3,393
	Raw Steel Capability Utilization: ^(d)
		Flat-rolled		86	%	75	%	70	%	81	%	74	%
		Flat-rolled U.S. Facilities ^(e)		85	%	73	%	87	%	80	%	88	%
		U. S. Steel Europe		88	%	98	%	82	%	93	%	91	%

U. S. Steel Europe. Prior to the permanent shut down of the iron and steelmaking facilities at Hamilton Works on December 31, 2013, annual raw steel production capability for Flat-rolled was 24.3 million net tons. Subsequent to the CCAA filing and deconsolidation of U. S. Steel Canada, annual raw steel production capability for Flat-rolled is 19.4 million net ton. The quarter and nine months ended September 30, 2014 shipments and raw steel production amounts for Flat-rolled do not include U. S. Steel Canada after September 15, 2014.

As a result of the CCAA proceedings, the financial position of U. S. Steel Canada has been deconsolidated from U. S. Steel's September 30, 2014 balance sheet. The following table represents U. S. Steel Canada’s assets, liabilities and accumulated other comprehensive loss which have been deconsolidated from U. S. Steel’s September 30, 2014 consolidated balance sheet. The amounts presented are before the elimination of balances with U. S. Steel, presenting U. S. Steel Canada as if on a stand-alone basis.



U. S. STEEL CANADA CONDENSED BALANCE SHEET (Unaudited)

(Dollars in millions)	Deconsolidated as of September 30, 2014
Assets
Current assets:
Cash and cash equivalents	$	80
Receivables	291
Inventories	373
Other current assets	6
Total current assets	750
Property, plant and equipment, net	840
Other noncurrent assets	126
Total assets	$	1,716
Liabilities
Current liabilities:
Accounts payable	$	435
Other current liabilities	149
Total current liabilities	584
Long-term debt	126
Long-term notes payable	1,733
Employee benefits	948
Other noncurrent liabilities	29
Total liabilities	3,420
Stockholders’ Equity
Additional paid-in capital	2,268
Retained earnings	(3,504		)
Accumulated other comprehensive loss	(468		)
Total stockholders’ equity	(1,704		)
Noncontrolling interests	—
Total liabilities and stockholders’ equity	$	1,716

U. S. Steel Canada’s results of operations have been removed from U. S. Steel’s consolidated statement of operations beginning September 16, 2014. The table below shows U. S. Steel Canada’s results of operations for the periods presented which are included in our consolidated statements of operations. The amounts presented are before the elimination of transactions with U. S. Steel, presenting U. S. Steel Canada as if on a stand-alone basis.



U. S. STEEL CANADA STATEMENT OF OPERATIONS (Unaudited)

	Quarter Ended						Nine Months Ended
	Sept. 30		June 30		Sept. 30		September 30,
(Dollars in millions)	2014		2014		2013		2014		2013

Net Sales	447		542		282		1,508		960
Total Operating Expenses	467		572		1,026		1,587		1,941
Loss from Continuing Operations	(20	)	(30	)	(744	)	(79	)	(981	)
Net interest and other financial costs	37		40		39		121		142
Loss before income taxes	(57	)	(70	)	(783	)	(200	)	(1,123	)
Income tax benefit	—		—		—		—		—
Net loss	(57	)	(70	)	(783	)	(200	)	(1,123	)


•	Adjusted net income of $325 million, or $2.16 per diluted share; reported net loss of $207 million, or $1.42 per diluted share


•	Total liquidity of $3.0 billion, including $1.3 billion of cash