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United States Steel Corporation Reports 2012 Third Quarter Results

October 30, 2012

PITTSBURGH, Oct. 30, 2012 /PRNewswire-FirstCall/ — United States Steel Corporation (NYSE: X) reported third quarter 2012 net income of $44 million, or $0.28 per diluted share, compared to second quarter 2012 net income of $101 million, or $0.62 per diluted share, and third quarter 2011 net income of $22 million, or $0.15 per diluted share. Net income for the third quarter 2012 included a $22 million, or $0.13 per diluted share, after-tax charge for employee lump sum payments as provided in the new labor agreement. Net income for the second quarter 2012 included an $11 million after-tax early redemption premium on our $300 million 5.65% Senior Notes due 2013. Net income for the third quarter 2011 included $96 million of net foreign currency losses, primarily related to the accounting remeasurement of a U.S. dollar denominated intercompany loan to a European entity.

                                  Earnings Highlights
                                  -------------------

    (Dollars in
     millions, except
     per share amounts)                   3Q 2012       2Q 2012       3Q 2011
    -------------------                   -------       -------       -------
    Net Sales                                    $4,652        $5,017        $5,081
    ---------                                    ------        ------        ------
    Segment income
     (loss) from
     operations
               Flat-rolled                        $29          $177          $203
               U. S. Steel Europe                  27            34           (50)
               Tubular                            102           103           134
               Other Businesses                    13            16             8
               ----------------                   ---           ---           ---
    Total reportable
     segment and Other
     Businesses income
     from operations                             $171          $330          $295
    Postretirement
     benefit expense                              (74)          (77)          (96)
    Other items not
     allocated to
     segments                                     (35)            -             -
                                                                ---
    Income from
     operations                                   $62          $253          $199
    -----------                                   ---          ----          ----
    Net interest and
     other financial
     costs                                         45            82           144
    ----------------                              ---           ---           ---
    Income tax (benefit)
     provision                                    (27)           70            33
    --------------------                          ---           ---           ---
    Net income
     attributable to
     United States Steel
     Corporation                                  $44          $101           $22
    --------------------                          ---          ----           ---
    -Per basic share                            $0.30         $0.70         $0.15
    ----------------                            -----         -----         -----
    -Per diluted share                          $0.28         $0.62         $0.15
    ------------------                          -----         -----         -----

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, “Third quarter operating results were positive for all three reportable segments in an economic environment that was more challenging than the second quarter. Our Tubular segment once again had solid results despite declining rig activity and pricing pressure caused by rising oil country tubular goods inventory and continued high levels of imports. Our Flat-rolled and European segments were profitable but continue to be challenged by difficult global economic conditions. In addition, our Flat-rolled segment continued to be adversely affected by increased import levels.”

The company reported third quarter 2012 reportable segment and Other Businesses income from operations of $171 million, or $32 per ton, compared with income of $330 million, or $61 per ton, in the second quarter of 2012 and income of $295 million, or $54 per ton, in the third quarter of 2011.

Other items not allocated to segments in the third quarter of 2012 consisted of a $35 million pre-tax charge for employee lump sum payments as provided in the new labor agreement.

For the third quarter 2012, we recorded a tax benefit of $27 million on our pre-tax income of $17 million. The third quarter 2012 tax benefit includes $20 million, or $0.12 per diluted share, of favorable effects associated with the settlement of prior years’ income tax audits and $26 million, or $0.15 per diluted share, of a tax benefit to adjust our estimated 2011 federal income tax liability to our actual tax liability reflected in our tax return as filed in the third quarter. The tax benefit does not reflect any tax benefit for pre-tax losses in Canada, which is a jurisdiction where we have recorded a full valuation allowance on deferred tax assets.

As of September 30, 2012, U. S. Steel had $536 million of cash and $2.4 billion of total liquidity.

Reportable Segments and Other Businesses

Flat-rolled third quarter results decreased from the second quarter primarily due to a $31 per ton decrease in average realized prices, as significant price decreases for domestic scrap and globally traded steelmaking raw materials placed downward pressure on spot and index-based pricing mechanisms in North America in the third quarter. The spot market continues to be pressured by high import volumes, which for sheet products have increased 13 percent year over year through the first nine months of 2012. Proceeds from steel substrate sales to our Tubular segment have also decreased. Shipments and operating costs for our Flat-rolled segment were comparable to the second quarter.

Despite the continued economic challenges, third quarter results remained positive for our European segment. Results were lower than the second quarter as average realized prices decreased compared to the second quarter due to weaker spot market prices. Shipments were also lower in the third quarter as a result of the continued conservative buying pattern by service centers and distributors, reduced automotive production schedules and the normal summer holiday outages. Operating costs decreased compared to the second quarter due to lower raw materials prices and good operating cost performance.

Third quarter results for our Tubular segment were in line with the second quarter. Shipments decreased as end users adjusted their drilling plans and curtailed spending due to economic uncertainty and concern over energy prices. Average realized prices declined slightly as import levels remained high resulting in pricing pressure from increased supply. Operating costs decreased compared to the second quarter due to lower substrate costs.

Outlook

Commenting on U. S. Steel’s outlook for the fourth quarter, Surma said, “Our results are expected to reflect continued weakness in the European and emerging market economies, as well as economic uncertainty in North America. We expect total reportable segment and Other Businesses operating results to be around breakeven for the fourth quarter with decreased results in all reportable segments.”

We expect a loss for our Flat-rolled segment due to slightly lower average realized prices, as well as lower shipments and higher operating costs. Average realized prices and shipments are expected to be lower compared to the third quarter as a result of cautious purchasing patterns early in the quarter created by the uncertain global economic outlook; however, market conditions have recently begun improving in North America, and we believe that we are already beyond the spot price trough of the fourth quarter. New spot orders are being transacted at higher prices for delivery later this quarter. Operating costs are expected to increase due to scheduled blast furnace and other maintenance projects.

We expect our European segment results to be around breakeven. Average realized prices are expected to decrease reflecting lower spot market and quarterly contract pricing. Shipments are projected to decrease compared to the third quarter due to lower consumption in automotive and other end user industries. Operating costs are expected to decrease compared to the third quarter primarily due to lower raw materials costs.

We expect fourth quarter results for our Tubular segment to remain profitable but well below third quarter results. Average realized prices are expected to be lower and shipments are projected to be significantly lower than the third quarter as imports continue at high levels despite end users decreasing drilling activity in order to operate within their 2012 capital budgets. Inventory management by our customers may also be a considerable factor as we approach year-end. Operating costs are expected to increase due to operating inefficiencies caused by lower production volumes.

We expect a minimal tax provision/benefit in the fourth quarter primarily due to the full valuation allowance on deferred tax assets in Canada.

*****

This release contains forward-looking statements with respect to market conditions, operating costs, shipments, prices, capital spending, and employee benefit costs and payments. Although we believe that we are experiencing a gradual economic recovery, there are signs of continued economic issues in Europe and U. S. Steel cannot control or predict the impact. Other more normal 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 sunsets; (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 CO(2) emissions, climate change and shale gas development. Economic conditions and political factors in Europe and Canada that may affect U. S. Steel Europe’s and U. S. Steel Canada’s results include, but are not limited to: (l) taxation; (m) nationalization; (n) inflation; (o) government instability; (p) political unrest; (q) regulatory actions; and (r) quotas, tariffs, and other protectionist measures. To the extent that actual 2012 results for U.S. and foreign income or loss vary from estimates applied at the end of the most recent interim period, the actual tax provision or benefit recognized in 2012 could be materially different from the forecasted amount. 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, 2011, 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 30, at 2 p.m. EDT. To listen to the webcast of the conference call, visit the U. S. Steel website, www.ussteel.com, and click on “Current Information” under the “Investors” section.

For more information on U. S. Steel, visit our website at www.ussteel.com.

                                                                                                    UNITED STATES STEEL CORPORATION
                                                                                           CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

                                                                                      Quarter Ended                                              Nine Months Ended
                                                                                      -------------                                              -----------------
                                                                                  Sept. 30                                    June 30                              Sept. 30                 September 30
    (Dollars in millions)                                                                        2012                                       2012                               2011                         2012             2011
    --------------------                                                                         ----                                       ----                               ----                         ----             ----

    NET SALES                                                                                  $4,652                                     $5,017                             $5,081                      $14,841          $15,065

    OPERATING EXPENSES (INCOME):
              Cost of sales (excludes items shown
              below)                                                       4,311                           4,477                                           4,560                    13,414                        13,679
              Selling, general and administrative
              expenses                                                       166                             173                                             181                       512                           550
              Depreciation, depletion and
              amortization                                                   163                             164                                             172                       490                           512
             Income from investees                                           (48)                            (44)                                            (27)                     (116)                          (66)
              Net (gain) loss on disposal of
              assets                                                          (1)                              -                                               -                       308                           (10)
             Other income, net                                                (1)                             (6)                                             (4)                       (9)                           (8)
                                                                             ---

                                                  Total operating expenses                      4,590                                      4,764                              4,882                       14,599           14,657
                                                                                                -----                                      -----                              -----                       ------           ------

    INCOME FROM OPERATIONS                                                                         62                                        253                                199                          242              408
    Net interest and other financial costs                                                         45                                         82                                144                          177              136
                                                                                                  ---                                        ---                                ---                          ---              ---

    INCOME BEFORE INCOME TAXES
             AND NONCONTROLLING INTERESTS                                     17                             171                                              55                        65                           272
    Income tax (benefit) provision                                                                (27)                                        70                                 33                          139              114
                                                                                                  ---                                        ---                                ---                          ---              ---

    Net income (loss)                                                                              44                                        101                                 22                          (74)             158
              Less: Net income attributable to
              the
             noncontrolling interests                                          -                               -                                               -                         -                             -
                                                                             ---
    NET INCOME (LOSS) ATTRIBUTABLE TO
             UNITED STATES STEEL CORPORATION                                 $44                            $101                                             $22                      $(74)                         $158
                                                                             ===

    COMMON STOCK DATA:
    ------------------

    Net income (loss) per share attributable to
    United States Steel Corporation shareholders:
             -Basic                                                                             $0.30                                      $0.70                              $0.15                       $(0.51)           $1.10
             -Diluted                                                                           $0.28                                      $0.62                              $0.15                       $(0.51)           $1.02

    Weighted average shares, in thousands
             -Basic                                                                           144,350                                    144,176                            144,067                      144,199          143,932
             -Diluted                                                                         171,673                                    171,416                            144,452                      144,199          171,534

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

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

                                                                                                           Nine Months Ended
                                                                                                              September 30
                                                                                                              ------------
    (Dollars in millions)                                                                                                2012                              2011
    --------------------                                                                                                 ----                              ----

    Cash (used in) provided by operating activities:
                           Net (loss) income                                                         $(74)                          $158
                            Depreciation,
                            depletion and
                            amortization                                                              490                            512
                            Pensions and other
                            postretirement benefits                 (112)                                                 (74)
                            Deferred income
                            taxes                                                                      86                             10
                            Net loss on
                            disposal of
                            assets                                                                    308                            (10)
                            Working capital
                            changes                                                                   215                           (623)
                            Income taxes
                            receivable/
                            payable                                                                    27                            148
                            Currency
                            remeasurement
                            loss (gain)                                                               (13)                           (26)
                            Other operating
                            activities                                                                 31                             13

                           Total                                                                                          958                               108
                                                                                                                          ---                               ---

    Cash (used in) provided by investing activities:
                            Capital
                            expenditures(a)                                                          (536)                          (626)
                           Disposal of assets                                                         141                             16
                            Other investing
                            activities                                                                (71)                            (1)

                           Total                                                                                         (466)                             (611)
                                                                                                                         ----                              ----

    Cash provided by (used in) financing activities:
                            Revolving credit
                            facilities                      - borrowings                              523                          3,316
                                                                          - repayments                                   (653)                           (3,163)
                            Receivables Purchase Agreement
                            (payments) proceeds                     (380)                                                  75
                            Issuance of long-term debt,
                            net of financing costs                   485                                                    -
                            Repayment of long-
                            term debt                                                                (319)                           (18)
                            Common stock
                            issued                                                                      -                              4
                           Dividends paid                                                             (22)                           (22)
                            Other financing
                            activities                                                                  -                              1
                           Total                                                                                         (366)                              193
                                                                                                                         ----                               ---

    Effect of exchange rate changes on cash                                                                                 2                                 2
                                                                                                                          ---                               ---

    Net increase (decrease) in cash and cash equivalents                                                                  128                              (308)
    Cash and cash equivalents at beginning of the year                                                                    408                               578

    Cash and cash equivalents at end of the period                                                                       $536                              $270
                                                                                                                         ====                              ====

    (a)Excludes the change in accrued capital expenditures of $50 million for the nine months ended September 30, 2012.  The change in
     accrued capital expenditures was immaterial for the nine months ended September 30, 2011.
                                   UNITED STATES STEEL CORPORATION
                           CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

                                                       Sept. 30               Dec. 31
    (Dollars in
     millions)                                                   2012                  2011
    -----------                                                  ----                  ----

    Cash and cash
     equivalents                                                 $536                  $408
    Receivables, net                                          2,412                 2,053
    Receivables sold to
     third party
     conduits                                                     -                   380
    Inventories                                               2,525                 2,775
    Other current
     assets                                                     173                   158
                                                                ---                   ---
             Total current
             assets                    5,646                            5,774
    Property, plant and
     equipment, net                                           6,390                 6,579
    Investment and
     long-term
     receivables, net                                           645                   683
    Goodwill and
     intangible assets,
     net                                                      2,071                 2,045
    Other assets                                                744                   992
                                                                ---                   ---

            Total assets                                    $15,496               $16,073

    Accounts payable                                         $1,948                $2,063
    Payroll and
     benefits payable                                         1,048                 1,003
    Short-term debt
     and current
     maturities of
     long-term debt                                               1                    20
    Borrowings under
     Receivables
     Purchase Agreement                                           -                   380
    Other current
     liabilities                                                270                   183
                                                                ---                   ---
             Total current
             liabilities               3,267                            3,649
    Long-term debt,
     less unamortized
     discount                                                 3,939                 3,828
    Employee benefits                                         3,989                 4,600
    Other long-term
     liabilities                                                438                   495
    United States Steel
     Corporation
     stockholders'
     equity                                                   3,861                 3,500
    Noncontrolling
     interests                                                    2                     1
                                                                ---                   ---

             Total
             liabilities
             and
             stockholders'
             equity                  $15,496                          $16,073
             =============

                                                                                                                                               UNITED STATES STEEL CORPORATION
                                                                                                                                       PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

                                                                                                                                                         Quarter Ended                                        Nine Months Ended
                                                                                                                                                         -------------                                        -----------------
                                                                                                                                                     Sept. 30                             June 30                                       Sept. 30                         September 30
    (Dollars in millions)                                                                                                                                       2012                                  2012                                          2011                               2012                                      2011
    --------------------                                                                                                                                        ----                                  ----                                          ----                               ----                                      ----

    INCOME (LOSS) FROM OPERATIONS
                         Flat-rolled                                                                                                    $29                                $177                                          $203                                $389                                      $541
                         U. S. Steel Europe                                                                                              27                                  34                                           (50)                                 27                                       (73)
                         Tubular                                                                                                                                 102                                   103                                           134                                334                                       197
                         Other Businesses                                                                                                13                                  16                                             8                                  46                                        30

    Reportable Segment and Other Businesses Income from Operations                                                                                               171                                   330                                           295                                796                                       695
                         Postretirement benefit expense                                                                                 (74)                                (77)                                          (96)                               (228)                                     (287)
                          Other items not allocated to
                          segments:
                          Loss on sale of U. S. Steel
                          Serbia                                                                                                          -                                   -                                             -                                (399)                                        -
                          Gain on sale of transportation
                          assets                                                                                                          -                                   -                                             -                                  89                                         -
                         Property tax settlements                                                                                         -                                   -                                             -                                  19                                         -
                          Labor agreement lump sum
                          payments                                                                                                      (35)                                  -                                             -                                 (35)                                        -
                                                                                                                                        ---                                 ---                                           ---                                 ---                                       ---

                                                          Total Income from Operations                                                                           $62                                  $253                                          $199                               $242                                      $408

    CAPITAL EXPENDITURES
                         Flat-rolled                                                                                                    $89                                $151                                          $160                                $421                                      $427
                         U. S. Steel Europe                                                                                              15                                  12                                            26                                  29                                        93
                         Tubular                                                                                                                                  17                                     4                                            30                                 25                                        94
                         Other Businesses                                                                                                 8                                   1                                             9                                  11                                        12

                                                          Total                                                                                                 $129                                  $168                                          $225                               $486   (a)                                $626

    (a) Capital expenditures include $50 million of changes in accrued but unpaid capital expenditures for the nine months ended September 30, 2012.  Changes in the accrued but unpaid capital expenditures for the nine months ended September 30, 2011 were not material.


                                                                                                                                        UNITED STATES STEEL CORPORATION
                                                                                                                                PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)

                                                                                                                                          Quarter Ended                                       Nine Months Ended
                                                                                                                                          -------------                                       -----------------
                                                                                                                                     Sept. 30                              June 30                                     Sept. 30                            September 30
                                                                                                                                                2012                                  2012                                        2011                                   2012                                   2011
                                                                                                                                                ----                                  ----                                        ----                                   ----                                   ----

    OPERATING STATISTICS
                              Average realized price: ($/net
                              ton) (a)
                             Flat-rolled                                                                                741                                   772                                         773                                   759                                    765
                             U. S. Steel Europe                                                                         731                                   767                                         862                                   749                                    868
                             Tubular                                                                                  1,676                                 1,706                                       1,699                                 1,704                                  1,576
                             Steel Shipments: (a) (b)
                             Flat-rolled                                                                              3,972                                 3,986                                       3,835                                12,050                                 11,725
                             U. S. Steel Europe                                                                         911                                   955                                       1,196                                 2,911                                  3,779
                             Tubular                                                                                    457                                   493                                         481                                 1,479                                  1,330
                                                                                                                        ---                                   ---                                         ---                                 -----                                  -----

                                                                 Total Steel Shipments                                                         5,340                                 5,434                                       5,512                                 16,440                                 16,834
                             Intersegment Shipments: (b)
                             Flat-rolled to Tubular                                                                     456                                   460                                         492                                 1,415                                  1,339
                              U. S. Steel Europe to Flat-
                              rolled                                                                                    128                                    44                                           -                                   249                                     71
                             Raw Steel Production: (b)
                             Flat-rolled                                                                              4,699                                 4,688                                       4,516                                14,430                                 14,008
                             U. S. Steel Europe                                                                       1,140                                 1,173                                       1,317                                 3,553                                  4,429
                              Raw Steel Capability Utilization:
                              (c)
                             Flat-rolled                                                                                 77%                                   77%                                         74%                                   79%                                    77%
                             U. S. Steel Europe                                                                          90%                                   94%                                         71%                                   90%                                    80%
                                USSK                                                                                     90%                                   94%                                         82%                                   92%                                    87%

                             (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.  Subsequent to the sale of USSS
                             on January 31, 2012, annual raw steel production capability for USSE is 5.0 million net tons.

SOURCE United States Steel Corporation


Source: PR Newswire