United States Steel Corp. reported net income of $211 million on total revenues of $3,466 million for the second quarter of 2004.

Second Quarter Results—Net income of $211 million ($1.62 per diluted share) compares to net income of $58 million (47 cents per diluted share) in 2004's first quarter, and a net loss of $49 million (51 cents per diluted share after preferred stock dividends) in the second quarter of 2003. Diluted earnings per share for both 2004 quarters reflect the assumed conversion of the company's convertible preferred shares into approximately 16 million common shares. Revenues of $3,466 million compare to revenues of $2,362 million in the second quarter of 2003.

Income from operations was $388 million — more than double the first quarter amount of $151 million, and a dramatic recovery from the $42 million in last year's second quarter.

Commenting on the quarter's results, U. S. Steel Chairman and CEO Thomas J. Usher said, "Results for all major operating segments increased significantly compared to last quarter, reflecting strong demand across steel product lines and significantly better margins, as average prices increased steadily during the quarter. In fact, second quarter net income was the highest recorded since we began reporting steel results separately in 1991, and exceeded the previous best quarter by $59 million. We also continue to benefit from the acquisition of National and our ongoing cost reduction efforts."

Net interest and other financial costs in second quarter 2004 included a $33 million charge resulting from the previously reported early redemption of senior debt in April. This charge and a small other item not allocated to segments reduced second quarter 2004 net income by $22 million (17 cents per diluted share). Other items not allocated to segments had favorable net income effects of $22 million (18 cents per diluted share) on first quarter 2004 results and $23 million (22 cents per diluted share) on second quarter 2003 results. First quarter 2004 results also included an income tax charge of $32 million (26 cents per diluted share).

Reportable Segments and Other Businesses—U. S. Steel's reportable segments and Other Businesses generated segment income from operations of $454 million ($82 per ton) in the second quarter of 2004, compared with $162 million ($29 per ton) in first quarter 2004 and $27 million ($6 per ton) in 2003's second quarter. Of the $454 million total segment income, $335 million or 74% is attributable to the Flat Rolled Products Segment; $76 million or 17% is attributable to U. S. Steel Europe; and $25 million or 6% is attributable to the Tubular Products Segment.

Second quarter 2004 domestic and European results benefited from significantly improved prices and margins, despite increased costs for purchased raw materials. Domestic results also included higher costs related to profit-based payments under the labor agreement with the United Steelworkers of America, which increased in line with improved profitability, and costs related to two blast furnace repair outages at Gary Works. One of these was completed during the second quarter and the other was completed in late July.

Outlook—Looking ahead, Usher stated, "We expect continued strong profitability through year-end resulting from robust worldwide steel pricing and tight supplies, as the world economy continues to recover and as demand from developing countries, especially China, remains at very high levels."

Average prices for the Flat-rolled segment in the third quarter are expected to exceed second quarter levels, and benefits will be realized from a renegotiated coke sales agreement. Costs will continue to be affected by relatively high prices for purchased coke, scrap and natural gas. Flat-rolled segment shipments in the third quarter are expected to decline by approximately 200,000 tons compared to the second quarter mainly due to blast furnace outages and a planned third quarter blast furnace outage at Granite City Works. These outages will increase third quarter costs by approximately $20 million versus the second quarter. For full-year 2004, Flat-rolled segment shipments are expected to be 15.8 million tons.

For U. S. Steel Europe (USSE), third quarter 2004 profit margins are expected to increase from the second quarter with realized prices improving due to the announced July 1 price increase. Higher raw material costs and planned outages on a number of key units will partially offset the price increase. Shipments for the quarter are expected to about equal second quarter levels and full-year 2004 shipments are currently estimated at 5.1 million net tons.

For the Tubular segment, prices are expected to continue to increase, reflecting full-quarter realization of price increases implemented during the second quarter, as well as additional price increases. The Tubular segment expects annual shipments of about 1.0 million tons.