Jan. 30, 2007 — United States Steel Corp. reported net income of $297 million on net sales of $3.8 billion for the fourth quarter, and net income of $1,374 million on net sales of $15.7 billion for the full year 2006.

Fourth Quarter Results—The $297 million net income ($2.50 per diluted share) compares to third quarter 2006 net income of $417 million ($3.42 per diluted share) and fourth quarter 2005 net income of $109 million ($0.85 per diluted share).

Income from operations was $341 million, which compares with income from operations of $561 million in the third quarter of 2006 and income from operations of $222 million in the fourth quarter of 2005.

Net interest and other financial costs included a $32 million pre-tax charge related to the early redemption of most of the company’s 10-3/4% Senior Notes. This item and other items not allocated to segments decreased net income by $33 million (28 cents per diluted share). Other items not allocated to segments in the third quarter of 2006 reduced net income by $21 million (17 cents per diluted share). An income tax charge and other items not allocated to segments reduced fourth quarter 2005 net income by $39 million (30 cents per diluted share).

Full-Year Results—The $1,374 million net income ($11.18 per diluted share) compares to 2005 net income of $910 million ($7.00 per diluted share).

Income from operations was $1,785 million versus income from operations of $1,439 million for the year 2005.

Comments—"Our performance in 2006 resulted in another outstanding year, with record sales, operating income and net earnings,” said U. S. Steel Chairman and CEO John P. Surma. “During the year, our strong cash flow generation enabled us to reduce our debt by almost $600 million, to repurchase common shares for $442 million, to make voluntary cash contributions of $190 million to our domestic benefit plans, to make significant capital investments and to double our common dividend rate to 20 cents per share. Our safety performance also improved substantially from last year thanks to the continuing efforts of our employees. All in all, 2006 will go down as one of the best years in our long history."

The annual effective tax rate for 2006 was lower than previously expected, and the company reduced its fourth quarter income tax provision by $58 million in order to adjust tax expense previously recorded. This adjustment primarily reflected a higher-than-anticipated percentage of total pre-tax earnings generated by the company’s European operations, and the impact of accounting rules on remeasuring the status of the company’s main defined benefit pension plan at year end.

Reportable Segments and Other Businesses—U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $414 million ($85 per ton) in the fourth quarter of 2006, compared with $652 million ($117 per ton) in the third quarter of 2006 and $313 million ($63 per ton) in the fourth quarter of 2005. Although the company’s fourth quarter was significantly better than the year-earlier fourth quarter, it was weaker than the earlier 2006 quarters as inventory rebalancing and high import levels reduced domestic demand for steel.

Segment income from operations for full-year 2006 was $2,074 million ($96 per ton), compared with $1,675 million ($85 per ton) for 2005.

The company’s Flat-rolled division's fourth quarter results were significantly lower than the third quarter, as shipment volumes and average realized prices decreased. Production costs increased as operating rates were curtailed to 67% of capability. The company attributes the decrease in fourth quarter 2006 European income from operations (compared to the third quarter) to higher costs, partially offset by higher average realized prices. Fourth quarter Tubular results decreased from the third quarter due mainly to lower shipments resulting from high levels of imports and customer inventories. Results for Other Businesses in the fourth quarter included approximately $25 million related to land sales by our real estate unit.

Outlook—Commenting on U. S. Steel's outlook, Surma said, "We expect first quarter results to decline from the fourth quarter, but flat-rolled demand is firming and we have restarted several domestic blast furnaces to bring our production in line with improving order rates."

For Flat-rolled, the company expects first quarter 2007 shipments to improve compared to the fourth quarter of 2006. The company says that average realized prices should remain at about the fourth quarter level as contract price improvements offset lower spot prices.

For U. S. Steel Europe (USSE), the company expects first quarter shipments to increase from the fourth quarter, with average realized prices expected to be slightly lower as the result of increased import product availability on the European market.

The company expects shipments and average realized prices for the Tubular segment are expected to decrease in the first quarter of 2007 compared to the fourth quarter as import levels and customer inventories remain high. The company also expects first quarter costs for all of its reportable segments to be in line with the fourth quarter.

The company expects first quarter 2007 results for Other Businesses to be consistent with historical first quarter results, but says they will decline substantially from the fourth quarter due primarily to normal seasonal effects at the company’s iron ore operations in Minnesota and the non-recurrence of the fourth quarter land sales.

The company also expects capital expenditures to total approximately $750 million in 2007, reflecting domestic spending of approximately $545 million and European spending of approximately $205 million.