United States Steel Corporation Reports 2009 Third Quarter Results

PITTSBURGH, Oct. 27 /PRNewswire-FirstCall/ --

-- Net loss of $303 million, or $2.11 per share
-- Shipments of 4.2 million tons, an increase of 41 percent from second
quarter 2009
-- Net sales of $2.8 billion, an increase of 32 percent from second
quarter
2009
-- Year to date cash flow from operations of $118 million

-- Maintained strong liquidity position with $1.5 billion of cash and
$2.7
billion of total liquidity

United States Steel Corporation (NYSE: X) reported a third quarter 2009 net
loss of $303 million, or $2.11 per diluted share, compared to a net loss of
$392 million, or $2.92 per diluted share, in the second quarter of 2009 and
net income of $919 million, or $7.79 per diluted share, in the third quarter
of 2008.

Earnings Highlights
-------------------------------------------------------------------------
(Dollars in millions except per 3Q 2009 2Q 2009 3Q 2008
share data)
-------------------------------------------------------------------------
Net sales $2,817 $2,127 $7,312
=========================================================================
Segment (loss) income from operations
Flat-rolled $(370) $(362) $846
U. S. Steel Europe 7 (53) 173
Tubular (21) (88) 420
Other Businesses 5 (7) 22
-------------------------------------------------------------------------
Total segment (loss) income from
operations $(379) $(510) $1,461
Retiree benefit expenses (33) (34) (6)
Other items not allocated to segments - 79 (128)
-------------------------------------------------------------------------
(Loss) income from operations $(412) $(465) $1,327
=========================================================================
Net interest and other financial costs 25 9 46
-------------------------------------------------------------------------
Income tax (benefit) provision (130) (82) 339
=========================================================================
Net (loss) income attributable to
United States Steel Corporation $(303) $(392) $919
-------------------------------------------------------------------------
- Per basic share $(2.11) $(2.92) $7.84
- Per diluted share $(2.11) $(2.92) $7.79
-------------------------------------------------------------------------

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said,
"Shipment volumes and operating rates for all of our reportable segments
increased significantly from the very low levels of the second quarter as we
brought several idled facilities online to satisfy increased customer order
rates. Our European and Tubular segments had improved financial performance
and our Flat-rolled segment's results were in line with the prior quarter
despite the effects of continued low operating rates and facility restart
costs."

The company reported a third quarter 2009 loss from operations of $412
million, compared with a loss of $465 million in the second quarter of 2009
and income from operations of $1,327 million in the third quarter of 2008.

The third quarter 2009 loss from operations did not include any other items
not allocated to segments. Other items not allocated to segments in the
second quarter of 2009 increased net income by $49 million, or 36 cents per
diluted share. Other items not allocated to segments in the third quarter of
2008 reduced net income by $79 million, or 67 cents per diluted share.

Net interest and other financial costs in the third quarter of 2009 included a
foreign currency gain that increased net income by $24 million, or 16 cents
per diluted share. The net gain resulted from the remeasurement of an $828
million U.S. dollar-denominated intercompany loan to a European affiliate,
partially offset by losses on euro-U.S. dollar derivatives activity. This
compares to a foreign currency gain that increased net income by $41 million,
or 31 cents per diluted share, in the second quarter of 2009 and a foreign
currency loss that decreased net income by $39 million, or 33 cents per
diluted share, in the third quarter of 2008.

The effective tax benefit rate of 22 percent for the first nine months of 2009
is lower than the statutory rate because losses in Canada and Serbia, which
are jurisdictions where we have recorded a full valuation allowance on
deferred tax assets, do not generate a tax benefit for accounting purposes.
Third quarter 2009 results included a $23 million, or 16 cents per diluted
share, catch-up benefit adjustment as a result of a slight increase in the
estimated annual effective tax benefit rate.

During the third quarter of 2009, we made a voluntary contribution of $140
million to our main defined benefit pension plan in the United States. We
ended the quarter with $1.5 billion of cash and total liquidity of $2.7
billion.

U. S. Steel's annual goodwill impairment test, which was completed during the
third quarter, resulted in no impairment to the approximately $1.7 billion of
goodwill on our balance sheet.

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 a segment loss from operations of $379 million, or $91 per
ton, in the third quarter of 2009, compared to a loss of $510 million, or $173
per ton, in the second quarter of 2009 and segment income from operations of
$1,461 million, or $227 per ton, in the third quarter of 2008.

Income from operations for Flat-rolled was comparable to the second quarter,
reflecting improved operating efficiencies, higher shipments and lower
inventory write-downs, offset by lower average realized prices, higher raw
material costs and approximately $65 million of facility restart costs. Raw
steel capability utilization for the quarter increased to 58 percent versus 32
percent in the second quarter. Shipments improved by 50 percent to 2.7
million tons while average realized prices decreased by 11 percent to $605 per
net ton. Third quarter results reflected continuing employee and other costs
for idled facilities totaling approximately $165 million, compared to $285
million in the second quarter of 2009, reflecting steelmaking facility
restarts at our Granite City Works, Great Lakes Works, Hamilton Works and our
raw materials operations; however, given current order rates, we plan to
adjust our operating configuration as discussed below in the Outlook section.

Our European segment recorded a small profit in the third quarter compared to
the second quarter loss as lower raw material and energy costs and improved
operating efficiencies were somewhat offset by the non-recurrence of a $34
million second quarter gain on sales of emissions allowances. Raw steel
capability utilization for the quarter increased from 57 percent in the second
quarter to 82 percent in the third quarter as we restarted our third blast
furnace at U. S. Steel Kosice (USSK) in early September and operated both
blast furnaces at U. S. Steel Serbia for most of the third quarter. Shipments
increased by 24 percent to 1.3 million tons and average realized prices
increased by two percent to $615 per net ton as a decrease in euro-based
prices was more than offset by foreign currency translation effects.

Tubular reported a reduced operating loss in the third quarter of 2009
compared to the second quarter mainly due to higher shipments and lower
inventory write-downs, partially offset by lower average realized prices.
Shipments and average realized prices continued to be depressed by the
inventory glut created by the surge of unfairly traded and subsidized product
from China. Shipments increased by 64 percent to 151 thousand tons, which is
still well below historical levels, and average realized prices decreased by
three percent to $1,474 per net ton. Third quarter results reflected
continuing employee and other costs for idled facilities totaling
approximately $25 million, in line with the second quarter of 2009 as we
operated our welded facilities at reduced levels.

Outlook
Commenting on U. S. Steel's outlook, Surma said, "We expect improvement in our
overall fourth quarter results mainly as a result of increased demand for
Flat-rolled products in North America, driven primarily by automotive markets
and continued strength in tin mill markets. However, we expect to report an
overall operating loss in the fourth quarter due primarily to continued low
operating rates and idled facility carrying costs for our Flat-rolled and
Tubular segments. We remain cautious in our outlook for end user demand as
customer order rates in Flat-rolled and U. S. Steel Europe (USSE) have
decreased from the third quarter, partly due to seasonal slowdowns, and we
will continue to adjust production to meet our customers' demand. Despite
these concerns and uncertainties, we believe that the U.S. and global
economies are in the early stages of a gradual recovery, which has been aided
by global stimulus policies and may be supported by continued improvement in
credit markets and inventory restocking."

For Flat-rolled, fourth quarter results are expected to improve somewhat from
the third quarter due primarily to higher average realized prices and
increased shipments; however, we expect to report an operating loss for the
fourth quarter primarily due to low operating rates and continued carrying
costs for idled facilities. In order to adjust production to meet customer
order rates, during the fourth quarter we expect to idle the #14 Blast Furnace
at our Gary Works for necessary repairs, as well as one of two furnaces at
Granite City Works. As a result, we currently expect fourth quarter raw steel
capability utilization rates to be in line with third quarter levels. The
labor agreement covering our Lake Erie Works operations has expired and we
have not yet reached a successor agreement.

We expect fourth quarter results for USSE to be in line with the third quarter
as higher average realized prices are offset by higher raw material costs and
slightly lower shipments. Due to a planned maintenance outage for one of the
three blast furnaces at USSK, we expect raw steel capability utilization rates
to be lower than third quarter levels. The blast furnace operating
configuration in Serbia will be adjusted as required in the fourth quarter to
coincide with customer order rates.

Fourth quarter results for Tubular are expected to be comparable to the third
quarter as operating levels, shipments and prices remain around prior quarter
levels and we continue to incur carrying costs for idled facilities.

On October 9, 2009, U. S. Steel Canada (USSC) entered into an agreement with
an unaffiliated third party providing for the sale of USSC's 44.6 percent
interest in the Wabush Mines Joint Venture (Wabush) for approximately $53
million. Wabush owns and operates iron ore mining and pellet facilities in
Newfoundland and Labrador and Quebec, Canada. On October 12, 2009, Cliffs
Natural Resources Inc., one of the other owners of Wabush, exercised its right
of first refusal and is now obligated to acquire USSC's interest in Wabush.
Completion of the transaction is subject to customary closing conditions,
including regulatory approvals and third party consents, and is scheduled to
occur in the fourth quarter of 2009.

This release contains forward-looking statements with respect to market
conditions, operating costs, shipments and prices. U. S. Steel has been, and
we expect will continue to be, negatively impacted by the current global
credit and economic problems. U. S. Steel cannot control or predict the
extent and timing of economic recovery. As the recovery occurs, U. S. Steel
is incurring and will continue to incur costs to restart idled facilities and
to rebuild working capital, but we cannot accurately forecast the amount of
such costs. Other more normal factors 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, usage and availability;
raw materials and transportation prices and availability; international trade
developments; 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 collective bargaining agreements
including any successor to the labor agreement covering our Lake Erie Works
operations; 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, including those related to CO(2)
emissions and climate change. 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. Consummation of the sale of our
interest in Wabush is subject to regulatory approvals, third party consents
and other customary closing conditions. 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, 2008, and in subsequent
filings for U. S. Steel.

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

The company will conduct a conference call on third quarter earnings on
Tuesday, October 27, 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
"Overview" then "Current Information" under the "Investors" section.

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

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

Quarter Ended Nine Months Ended
-------------------------- ----------------
Sept. 30 June 30 Sept. 30 Sept. 30
(Dollars in millions) 2009 2009 2008 2009 2008
-------------------------------------------------------------------------

NET SALES $2,817 $2,127 $7,312 $7,694 $19,252

OPERATING EXPENSES (INCOME):
Cost of sales (excludes
items shown below) 2,902 2,340 5,752 8,249 15,892
Selling, general and
administrative expenses 163 154 151 460 464
Depreciation, depletion
and amortization 167 159 149 484 464
Loss (income) from
investees 1 10 (51) 32 (92)
Net gains on disposal of
assets (1) (36) (6) (134) (8)
Other income, net (3) (35) (10) (42) (15)
------ ------ ------ ------ ------
Total operating expenses 3,229 2,592 5,985 9,049 16,705
------ ------ ------ ------ ------
(LOSS) INCOME FROM
OPERATIONS (412) (465) 1,327 (1,355) 2,547
Net interest and other
financial costs 25 9 46 105 39
------ ------ ------ ------ ------
(LOSS) INCOME BEFORE
INCOME TAXES AND
MINORITY INTERESTS (437) (474) 1,281 (1,460) 2,508
Income tax (benefit)
provision (130) (82) 339 (322) 652
------ ------ ------ ------ ------
Net (loss) income (307) (392) 942 (1,138) 1,856
Less: Net (loss) income
attributable to the
noncontrolling interests (4) - 23 (4) 34
------ ------ ------ ------ ------
NET (LOSS) INCOME ATTRIBUTABLE
TO UNITED STATES STEEL
CORPORATION $(303) $(392) $919 $(1,134) $1,822
====== ====== ====== ====== ======

COMMON STOCK DATA:
-------------------------------------------------------------------------
Net (loss) income per
share:
- Basic $(2.11) $(2.92) $7.84 $(8.62) $15.51
- Diluted $(2.11) $(2.92) $7.79 $(8.62) $15.43

Weighted average shares, in
thousands
- Basic 143,363 134,634 117,169 131,466 117,423
- Diluted 143,363 134,634 117,826 131,466 118,051

Dividends paid per common
share $.05 $.05 $.30 $.40 $.80

UNITED STATES STEEL CORPORATION
CONSOLIDATED CASH FLOW STATEMENT (Unaudited)
--------------------------------------------

Nine Months Ended
September 30
-----------------
(Dollars in millions) 2009 2008
-------------------------------------------------------------------------
Cash provided from operating activities:
Net (loss) income $(1,138) $1,856
Depreciation, depletion and amortization 484 464
Pensions and other postretirement benefits (160) (388)
Deferred income taxes (258) 262
Net gains on disposal of assets (134) (8)
Changes in: Current receivables 671 (1,264)
Inventories 865 (478)
Current accounts payable and accrued
expenses (237) 931
Bank checks outstanding (10) (9)
Other operating activities 35 (35)
------ ------
Total 118 1,331
------ ------
Cash used in investing activities:
Capital expenditures (323) (539)
Capital expenditures - variable interest entities (126) (94)
Acquisition of pickle lines - (36)
Acquisition of Stelco Inc. - (1)
Disposal of assets 340 19
Other investing activities (101) (14)
------ ------
Total (210) (665)
------ ------
Cash provided from (used in) financing activities:
Issuance of long-term debt 839 -
Repayment of long-term debt (671) (359)
Revolving credit facilities - borrowings - 359
- repayments - (44)
Common stock issued 667 11
Common stock repurchased - (214)
Dividends paid (49) (94)
Other financing activities 127 68
------ ------
Total 913 (273)
------ ------
Effect of exchange rate changes on cash (2) (1)
------ ------
Net increase in cash and cash equivalents 819 392
Cash at beginning of the year 724 401
------ ------
Cash at end of the period $1,543 $793
====== ======

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

Sept. 30 Dec. 31
(Dollars in millions) 2009 2008
-------------------------------------------------------------------------
Cash and cash equivalents $1,543 $724
Receivables, net 1,638 2,288
Inventories 1,677 2,492
Other current assets 398 228
------- -------
Total current assets 5,256 5,732
Property, plant and equipment, net 6,860 6,676
Investments and long-term receivables, net 697 695
Goodwill and intangible assets, net 1,983 1,891
Other assets 1,053 1,093
------- -------
Total assets $15,849 $16,087
======= =======
Accounts payable $1,490 $1,483
Payroll and benefits payable 770 967
Short-term debt and current maturities
of long-term debt 19 81
Other current liabilities 187 247
------- -------
Total current liabilities 2,466 2,778
Long-term debt, less unamortized discount 3,346 3,064
Employee benefits 4,593 4,767
Other long-term liabilities 405 419
United States Steel Corporation stockholders'
equity 4,749 4,895
Noncontrolling interests 290 164
------- -------
Total liabilities and stockholders' equity $15,849 $16,087
======= =======

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

Quarter Ended Nine Months Ended
-------------------------------- -----------------
(Dollars in Sept. 30 June 30 Sept. 30 September 30
millions) 2009 2009 2008 2009 2008
-------------------------------------------------------------------------

(LOSS) INCOME FROM
OPERATIONS
Flat-rolled(a) $(370) $(362) $846 $(1,154) $1,411
U. S. Steel
Europe 7 (53) 173 (205) 632
Tubular (21) (88) 420 18 648
Other Businesses(a) 5 (7) 22 (5) 56
----- ----- ----- ----- -----
Segment (Loss)
Income from
Operations (379) (510) 1,461 (1,346) 2,747
Retiree benefit
expenses (33) (34) (6) (99) (4)
Other items not
allocated to
segments:
Federal excise
tax refund - 34 - 34 -
Litigation
reserve - 45 - 45 (45)
Net gain on sale
of assets - - - 97 -
Workforce
reduction charges - - - (86) -
Labor agreement
signing payments - - (105) - (105)
Environmental
remediation - - (23) - (23)
Flat-rolled
inventory
transition
effects - - - - (23)
----- ----- ----- ----- -----
Total (Loss)
Income from
Operations $(412) $(465) $1,327 $(1,355) $2,547

CAPITAL EXPENDITURES(b)

Flat-rolled(a) $68 $65 $155 $231 $357
U. S. Steel
Europe 46 18 62 74 143
Tubular 3 3 9 9 18
Other
Businesses(a) - 2 13 9 21
----- ----- ----- ----- -----
Total $117 $88 $239 $323 $539

(a) Effective with the fourth quarter of 2008, the operating results of
our iron ore operations, which were previously included in Other
Businesses, are included in the Flat-rolled segment. Prior periods
have been restated to reflect this change.
(b) Excludes capital spending by variable interest entities, which is
not funded by U. S. Steel.

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

Quarter Ended Nine Months Ended
------------------------------- -----------------
(Dollars in Sept. 30 June 30 Sept. 30 September 30
millions) 2009 2009 2008 2009 2008
-------------------------------------------------------------------------

OPERATING STATISTICS
Average realized
price:($/net ton)(a)
Flat-rolled 605 677 907 660 775
U. S. Steel
Europe 615 602 1,086 627 948
Tubular 1,474 1,526 2,390 1,889 1,823

Steel Shipments:(a)(b)
Flat-rolled 2,722 1,815 4,505 6,660 14,055
U. S. Steel
Europe 1,285 1,035 1,409 3,217 4,743
Tubular 151 92 519 450 1,452
----- ----- ----- ----- -----
Total Steel
Shipments 4,158 2,942 6,433 10,327 20,250
Intersegment
Shipments:(b)
Flat-rolled to
Tubular 123 34 540 245 1,457
Raw Steel-Production:(b)
Flat-rolled 3,548 1,964 5,282 7,791 16,454
U. S. Steel
Europe 1,528 1,059 1,623 3,586 5,456
Raw Steel-Capability
Utilization:( c )
Flat-rolled 57.9% 32.4% 86.2% 42.9% 90.2%
U. S. Steel
Europe 82.0% 57.4% 87.0% 64.8% 98.2%

(a) Excludes intersegment shipments.
(b) Thousands of net tons.
( c ) Based on annual raw steel production capability of 24.3 million net
tons for Flat-rolled and 7.4 million net tons for U. S. Steel
Europe.

SOURCE United States Steel Corporation

Media, Erin DiPietro, +1-412-433-6845, Investors/Analysts, Dan Lesnak,
+1-412-433-1184, both of United States Steel Corporation