By KEVIN NEVERS

U.S. Steel Corporation (USS) is reporting a record net income of $668 million or $5.65 per diluted share for the second quarter of 2008, compared to $235 million or $1.98 per diluted share for the first quarter and $302 million or $2.54 per diluted share for the year-ago period.

“We recorded the highest quarterly sales and net income in U.S. Steel’s history during the second quarter, as all three reporting segments posted record results, reflecting strong operating performance and favorable global pricing dynamics,” USS Chair and CEO John Surma said in a statement released today.

“Second quarter 2008 income from operations of $954 million more than tripled our first quarter 2008 income of $266 million and more than doubled our last year’s second quarter income of $391 million,” the statement said.

Items not allocated to segments in the second quarter included a charge for inventory transition effects related to the acquisition of U.S. Steel Canada (USSC), which reduced net income by $4 million or 3 cents per diluted share. Items not allocated to segments in the first quarter reduced net income by $45 million or 36 cents per diluted share, while net income in the year-ago period was reduced by $14 million or 12 cents per diluted share by a pre-tax charge related to the early redemption of debt.

Income from Operations

In the Second Quarter

•Flat-rolled reported $478 million, compared to $120 million in the first quarter and $92 million in the year-ago period.

•U.S. Steel Europe (USSE) reported $298 million, compared to $161 million in the first quarter and $244 million in the year-ago period.

•Tubular reported $177 million, compared to $51 million in the first quarter and $97 million in the year-ago period.

•Other businesses reported $6 million, compared to a net loss of $5 million in the first quarter and a net income of $1 million in the year-ago period.

“The significant increases in results for all three reportable segments resulted primarily from substantial price increase, which outpaced increases in raw materials costs,” the statement said. “Shipments for all segments were also at record levels for the quarter as strong operating results were achieved. Raw steel capability utilization, up slightly from the first quarter, was 92.7 percent in North America, including 101.1 percent for out Canadian operations, and 104.3 percent in Europe.

More Numbers

•The average realized price per net ton of flat-rolled was $777, compared to $646 in the first quarter and $652 in the year-ago period; for USSE, $986 per net ton, compared to $791 in the first quarter and $726 in the year-ago period; and for tubular, $1,690 per net ton, compared to $1,297 in the first quarter and $1,389 in the year-ago period.

•USS and USSE shipped a total of 7,045 net tons, compared to 6,772 in the first quarter and 5,503 in the year-ago period. North American facilities produced 5,614 net tons, compared to 5,558 in the first quarter and 4,116 in the year-ago period, while USSE produced 1,925 net tons, compared to 1,908 in the first quarter and 1,865 in the year-ago period.

•USS reported net sales of $6.744 billion, compared to $5.196 billion in the first quarter and $4.228 billion in the year-ago period.

•Total income from operations was $954 million, compared to $266 million in the first quarter and $391 million in the year-ago period.

•Total capital expenditures were $213 million, compared to $127 million in the first quarter and $142 million in the year-ago period. Flat-rolled capital expenditures were $145 million, compared to $83 million in the first quarter and $69 million in the year-ago period.

Outlook

“We expect another excellent quarter with continued earnings improvement as price increases implemented during the second quarter and early in the third quarter are expected to improve average realized prices for each of our reportable segments,” Surma said.

“For flat-rolled, third quarter results are expected to improve substantially from the second quarter, reflecting continued realization of price increases,” the statement said. “Raw steel capability utilization and shipments are expected to remain near second quarter levels, and raw materials costs are expected to increase.”

“We are currently working with the United Steelworkers for a replacement of the agreement covering most of our domestic operations,” the statement added. “We expect to have a new agreement in place before the Sept. 1 expiration of the current agreement.”

Posted 7/29/2008