United States Steel Corp. reported net income of $107 million on net sales of $3,200 million for the third quarter of 2005.

The $107 million net income ($0.82 per diluted share) compares to second quarter 2005 net income of $245 million ($1.88 per diluted share) and third quarter 2004 net income of $354 million ($2.72 per diluted share). Income from operations was $159 million, which compares with income from operations of $413 million in the second quarter of 2005 and $494 million in the third quarter of 2004.

Other items not allocated to segments reduced third quarter 2005 net income by $4 million (3 cents per diluted share) and second quarter 2005 net income by $3 million (2 cents per diluted share). Third quarter 2004 net
income was increased by $21 million (16 cents per diluted share) primarily resulting from a $24 million favorable effect related to the settlements of prior years' income tax audits.

Foreign currency gains were $1 million, compared to losses of $43 million in the second quarter of 2005 and gains of $4 million in the third quarter of 2004. The year-to-date losses in 2005 primarily reflect accounting re-measurement losses from the appreciation of the U.S. dollar functional currency versus the euro and other local currencies.

Reportable Segments—U. S. Steel's reportable segments and other businesses reported segment income from operations of $218 million ($47 per ton), which compares with $487 million ($100 per ton) in the second quarter of 2005 and $570 million ($108 per ton) in the third quarter of 2004.

The decrease in Flat-rolled income from operations (compared to the second quarter) is attributed primarily to lower spot prices and higher natural gas costs. The decline in European results was mainly due to lower spot market prices and shipments compared to the second quarter, partly resulting from a longer than anticipated outage at the No. 2 blast furnace in Slovakia.

Outlook—Commenting on U. S. Steel's outlook, Surma said, "With continuing reductions in service center inventory levels and firming spot prices, we expect fourth quarter market conditions to show improvement over the third, but results will remain well below those of the first two quarters of the year. Our order book remains strong across all industries, but we will continue to be affected by high natural gas prices and by reduced domestic raw steel capability for the duration of the Gary blast furnace rebuild."

For Flat-rolled, fourth quarter 2005 shipments and average realized prices are expected to improve compared to the third quarter; however, these effects could be more than offset by higher costs for natural gas. The company expects the Gary No. 14 blast furnace to start up in December and to reach full production early next year.

For U. S. Steel Europe (USSE), fourth quarter shipments are expected to improve compared to the third quarter with all five blast furnaces operational after the October 12 restart of No. 2 blast furnace in Slovakia. Average realized prices should also improve, reflecting the recent increase in spot prices. Raw material costs are expected to decline compared to the third quarter.

Fourth quarter 2005 shipments for the Tubular segment are expected to return to second quarter levels, while average realized prices should increase due to continued strong energy markets. The transfer price of tube rounds supplied by Flat-rolled was increased by $46 per ton effective October 1, 2005.

Common Stock Repurchase—On July 26, 2005, U. S. Steel announced that its Board of Directors had approved the repurchase of up to eight million shares of its common stock. During the third quarter, 1,210,000 shares were repurchased under this program for a total cost of $52 million.