Nov. 1, 2006 — United States Steel Corp. reported net income of $417 million on net sales of $4106 million for the third quarter, and net income of $1077 million on net sales of $11.9 billion for the first nine months of 2006.

Third Quarter Results—The $417 million net income ($3.42 per diluted share) compares to second quarter 2006 net income of $404 million ($3.22 per diluted share) and third quarter 2005 net income of $93 million ($0.71 per diluted share). Net sales of 4106 million compare to second quarter 2006 net sales of $4107 million and third quarter 2005 net sales of $3200 million.

The company reported income from operations of $561 million, which compares with income from operations of $514 million in the second quarter of 2006 and $148 million in the third quarter of 2005.

Items not allocated to segments reduced net income by $21 million (17 cents per diluted share) and consisted of employee severance and benefit charges for a workforce reduction of over 20% at the company’s Serbian operations. In the second quarter of 2006, the income tax provision included a favorable adjustment of $15 million (12 cents per diluted share) related to the 2005 tax accrual.

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "Earnings for each of our business segments improved from the second quarter, reflecting a very strong operating performance and favorable steel
market conditions."

The company repurchased 4.7 million shares of U. S. Steel common stock for $279 million during the third quarter, bringing total repurchases to 12.4 million shares for $650 million since the repurchase program was originally authorized in July 2005.

Reportable Segments and Other Businesses—U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $652 million ($117 per ton), which compares with $579 million ($99 per ton) in the second quarter of 2006 and $207 million ($44 per ton) in the third quarter of 2005.

Segment income from operations increased in comparison to the second quarter as average realized prices strengthened in all of the company’s reportable segments. Higher average realized prices were partially offset by higher raw material costs and reduced shipment volumes.

Outlook—Commenting on U. S. Steel's outlook, Surma said, "We expect continued strong results from our European and Tubular segments in the fourth quarter; however, overall operating results are expected to decline from the third quarter, primarily reflecting reduced profitability in our Flat-rolled segment. Recent weakening in the U.S. economy coupled with high imports and customer inventory levels have resulted in softer flat-rolled spot markets in the near term."

“For Flat-rolled,” continued Surma, “we expect fourth quarter 2006 average realized prices and shipments to be lower than in the third quarter, and costs are expected to increase primarily due to several blast furnace outages and lower operating rates. We will adjust the duration of these outages so that our operations are in balance with our anticipated customer demand.

“Fourth quarter average realized prices are expected to remain around the third quarter level for U. S. Steel Europe (USSE),” said Surma, “and higher costs are expected to more than offset the anticipated increase in shipment volumes.

“Average realized prices for the Tubular segment in the fourth quarter of 2006 are expected to decline slightly from third quarter levels,” said Surma, “and shipments will be significantly lower due to high levels of imports and customer efforts to bring their inventories in line with demand.

“Our longer-term outlook will be determined by overall economic growth trends.”