July 26, 2006 — United States Steel Corp. reported net income of $404 million on sales of $4.1 billion for the second quarter of 2006.

The $404 million net income ($3.22 per diluted share) compares to first quarter 2006 net income of $256 million ($2.04 per diluted share) and second quarter 2005 net income of $249 million ($1.91 per diluted share).

Commenting on results, U. S. Steel Chairman and CEO John P. Surma said, "Solid demand in our key end markets, outstanding operating performance, strong shipments and firming prices, particularly in spot markets, resulted in an excellent second quarter with earnings significantly higher than both the previous quarter and the same quarter last year. We operated at high rates of production capability in the U.S. and Europe, reflecting an outstanding performance by our people and the benefits of our recent capital programs."

The company reported income from operations of $514 million, which compares with income from operations of $369 million in the first quarter of 2006 and $421 million in the second quarter of 2005. The income tax provision included a favorable adjustment of $15 million (12 cents per diluted share) related to the 2005 estimated tax accrual.

During the second quarter of 2006, U. S. Steel’s 7.00% Series B Mandatory Convertible Preferred Shares automatically converted into common stock, increasing common stock outstanding by approximately 16 million shares. During the second quarter, the company repurchased 1.9 million shares of common stock for $117 million, bringing the total shares repurchased to 7.7 million for $371 million since the repurchase program was authorized in July 2005.

Reportable Segments—U. S. Steel's reportable segments and Other Businesses reported segment income from operations of $579 million ($99 per ton) in the second quarter of 2006, compared with $429 million ($80 per ton) in the first quarter of 2006 and $495 million ($102 per ton) in the second quarter of 2005.

The increase in second quarter 2006 Flat-rolled income from operations compared to the first quarter mainly resulted from higher average realized prices and shipment volumes. Costs remained in line with first quarter levels as lower energy and outage costs were offset by higher raw material and profit-based costs. The improvement in European operating results was due primarily to higher prices and record shipments. Tubular operating results remained strong, but declined as expected from the first quarter due to scheduled maintenance outages, which were completed as planned.

Outlook—Commenting on U. S. Steel's outlook, Surma said, “We expect continued strong operating results for our three reportable segments in the third quarter of 2006. Healthy steel consumption levels are expected during the quarter along with further increases in flat-rolled prices in the U.S. and in Europe.”

“For Flat-rolled, we expect increased third quarter 2006 average realized prices, partially offset by increased costs for raw materials and outages, and shipments are expected to be comparable to second quarter levels.

“Third quarter average realized prices are also expected to improve for U. S. Steel Europe (USSE), partially offset by higher costs, primarily for raw materials,” continued Surma. “Shipments are expected to remain at second quarter levels. In Serbia, we are currently involved in discussions with our employees, unions and government agencies regarding a workforce reduction plan that may be initiated as early as the third quarter.

“Shipments and average realized prices for the Tubular segment in the third quarter of 2006 are expected to be in line with second quarter levels,” said Surma, “and costs are expected to improve due mainly to lower outage costs.”