By KEVIN NEVERS

U.S. Steel Corporation (USS) reported a net income of $1.374 billion or $11.38 per diluted share in 2006, compared to a net income of $910 million or $7 per diluted share in 2005.

For the fourth quarter of 2006 USS reported a net income of $297 million or $2.50 per diluted share, compared to a net income of $417 million or $3.42 per diluted share for the third quarter of 2006, and $109 million or 85 cents per diluted share for the year-ago period.

“Our performance in 2006 resulted in another outstanding year, with record sales, operating income, and net earnings,” USS Chair and CEO John Surma said in a statement released on Monday. “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.”

Income from Operations by Reportable Segment

•Flat-rolled reported $31 million in the fourth quarter ($230 million in the third quarter, $36 million year-ago) and $600 million for the year ($602 million in 2005). “Flat-rolled’s fourth quarter results were significantly lower than the third quarter as shipment volumes and average realized prices decreased, and production costs increased as operating sales were curtailed to 67 percent of capability,” USS said.

•U.S. Steel Europe (USSE) reported $182 million in the fourth quarter ($219 in the third quarter, $122 million year-ago) and $714 million for the year ($502 million in 2005). “The decrease in fourth quarter 2006 European income from operations compared to the third quarter was mainly due to higher costs, partially offset by higher average realized prices,” USS said.

•Tubular products reported $144 million in the fourth quarter ($164 million in the third quarter, $149 million year-ago) and $631 million for the year ($528 million in 2005). “Fourth quarter tubular results decreased from the third quarter due mainly to lower shipments resulting from high levels of imports and customer inventories,” USS said.

•Other businesses reported $57 million in the fourth quarter ($39 million in the third quarter, $16 million year-ago) and $129 million for the year ($43 million in 2005). “Results from other businesses in the fourth quarter included approximately $25 million related to land sales by our real estate unit,” USS said.

•Total segment income from operations for the four quarter was $414 million ($652 million in the third quarter, $313 million year ago) and $2.074 billion for the year or $96 per ton ($1.675 billion in 2005 or $85 per ton).

•Total income from operations in the fourth quarter—after deducting $53 million in retiree benefit expenses and other items—was $341 million ($561 in the third quarter, $222 million year-ago); and—after deducting $243 million in retiree benefit expenses and other items—$1.785 billion for the year ($1.439 billion in 2005).

More Numbers

•The average realized price per net ton for flat-rolled in the fourth quarter was $648 ($651 in the third quarter, $597 year-ago); for USSE $665 in the fourth quarter ($640 in the third quarter, $550 year-ago); and for tubular, $1,523 in the fourth quarter ($1,491 in the third quarter, $1,456 year-ago). The average realized price per net ton for flat-rolled in 2006 was $634 ($617 in 2005); for USSE, $608 ($610 in 2005); and for tubular, $1,499 ($1,326 in 2005).

•USS and USSE shipped a total of 4,898 net tons in the fourth quarter (5,550 in the third quarter, 4,997 year-ago) and 21,632 net tons for the year (19,663 in 2005).

•The company’s facilities utilized 66.9 percent of their raw steel capability in the fourth quarter (89.1 percent in the third quarter, 80.3 percent year-ago) and 84.3 percent for the year (79.1 percent in 2005). USSE utilized 94.7 percent of its raw steel capability in the fourth quarter (92.7 percent in the third quarter, 88.2 percent year-ago) and 95.4 percent for the year (79.5 percent in 2005).

•USS reported net sale in the fourth quarter of $3.774 billion ($4.106 billion in the third quarter, $3.470 billion year-ago) and $15.175 billion for the year ($14.039 in 2005).

•At year-end 2006 USS was reporting its defined benefit pension plans to be overfunded by $210 billion on a projected benefit obligation basis.

•In the fourth quarter USS repurchased over 700,000 share of the company’s common stock for $46 million, bringing total repurchases to 13.1 million shares for $696 million since the repurchase program was originally authorized in July 2005. As of Dec. 21, 2006, 7.7 million shares remained authorized for repurchase.

Outlook for First Quarter 2007

“We expect first quarter results to decline from the fourth quarter,” Surma said, “but flat-rolled demand is firming and we have restarted several domestic blast furnaces to bring our production in line with improving order rates.”

Flat-rolled shipments are expected to improve in the first quarter of 2007, compared to the fourth quarter of 2006, and average realized prices should remain at roughly the fourth-quarter level as contract price improvements offset lower spot prices, USS said.

USSE shipments are also expected to increase from the fourth quarter but average realized prices are expected to be slightly lower as the result of increased import product availability on the European market, USS said.

Tubular shipments and average realized prices are expected to decrease from the fourth quarter, as import levels and customer inventories remain high, USS said.

First-quarter costs for all reportable segments are expected to be in line with fourth-quarter costs, USS said.

Results for other businesses are expected to be consistent with historical first-quarter results but off substantially from fourth-quarter results 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, USS said.

The company expects to make approximately $750 million in capital expenditures in 2007: $545 million on domestic facilities, $205 million on European ones.

Posted 1/30/2007