Oregon Steel Mills, Inc. (NYSE:OS): Third Quarter 2006 Highlights:
Sales were a record $429.1 million on 451,000 tons of shipments
with an average selling price of $951 per ton Operating income per
ton and operating margin were $227 per ton and 24 percent,
respectively Operating income and pretax income were the highest in
the Company�s history at $102.2 million and $77.8 million,
respectively Earnings before interest, taxes, depreciation and
amortization was $112.3 million, an increase of 145 percent from
last year The Company redeemed all of its 10 percent first mortgage
notes and recorded a pretax charge of $21.4 million ($.39 per
diluted share) Net income was a record $50.6 million ($1.40 per
diluted share). Before the note redemption charge, net income was
$64.5 million ($1.79 per diluted share) Oregon Steel Mills, Inc.
(NYSE:OS) today reported increases in third quarter 2006 operating
income and pretax income of 185 percent and 176 percent,
respectively, from that of the prior year, resulting in record net
income of $50.6 million ($1.40 per diluted share on 36.1 million
shares). This compares to net income in the third quarter of 2005
of $20.2 million ($.57 per diluted share on 35.8 million shares).
The Company�s net income of $127.9 million for the first nine
months of 2006 exceeded 2004�s previous record annual net income of
$116.7 million. As previously reported, on July 17, 2006, the
Company completed the redemption of all of its outstanding 10%
First Mortgage Notes (�Notes�) due on July 15, 2009, at a price
equal to 105% of the principal amount of the Notes being redeemed.
In connection with the redemption of the Notes, the Company
recorded a pretax charge of $21.4 million ($.39 per diluted share)
in the third quarter of 2006. Net income before the Note redemption
charge was $64.5 million ($1.79 per diluted share). Third quarter
2005 operating income was negatively impacted by approximately $5
million of pretax costs ($.10 per diluted share) related to the new
electric arc furnace installation and caster rebuild and related
equipment outages (�Furnace Installation�) at the Company�s
majority-owned subsidiary, Rocky Mountain Steel Mills (�RMSM�).
Sales for the third quarter of 2006 increased 43 percent to a
record $429.1 million at an average selling price of $951 per ton.
This compares with sales of $299.7 million in the third quarter
2005 at an average sales price per ton of $785. Total shipments for
the third quarter of 2006 of 451,000 tons were 18 percent higher
than 2005 third quarter shipments of 381,800 tons. The increase in
shipments was primarily due to increased shipments of plate and
coil, rail and welded and seamless pipe products, partially offset
by lower shipments of rod and bar products. The primary reason for
the decline in rod and bar shipments is due to the Company�s
decision to divert raw steel to the production of seamless pipe
product and away from rod and bar products. The Company�s seamless
pipe mill, which was idled in November of 2003, was restarted in
December of 2005 and shipped 17,200 tons of seamless pipe during
the third quarter of 2006. The increase in sales was primarily due
to the increased shipments of higher selling priced plate and
welded pipe noted above, the addition of seamless pipe (currently
the Company�s highest averaged selling priced product) and higher
average selling prices for all of the Company�s products. Operating
income for the third quarter of 2006 was $102.2 million, an average
of $227 per ton, both of which are quarterly records for the
Company. This compares to operating income for the third quarter of
2005 of $35.8 million, an average of $94 per ton. Operating margin
as a percentage of sales increased from 11.9 percent to 23.8
percent as the Company realized margin expansion in almost all of
its product lines. Earnings before interest, taxes, depreciation
and amortization (EBITDA) for the third quarter of 2006 was $112.3
million, also a quarterly record. This compares to EBITDA for the
third quarter of 2005 of $45.9 million. A reconciliation of EBITDA
is provided in the last table of this press release. Increased
operating income, operating margin and EBITDA during the third
quarter of 2006 compared to the third quarter of 2005 reflects the
higher shipments, improved product mix and higher average selling
prices, as discussed above, the absence of the RMSM Furnace
Installation expenses and lower steel slab costs at the Company�s
Oregon Steel Division, partially offset by higher scrap costs at
the RMSM Division. The Company had an effective income tax rate of
approximately 35 percent in the third quarter of 2006. This
compares to an effective income tax rate in the third quarter of
2005 of 28 percent. The effective income tax rate for the third
quarter of 2005 varied from the combined state and federal
statutory rate principally because the Company reversed a portion
of the valuation allowance ($3.4 million) previously established
due to less uncertainty regarding the realization of state tax
credits and net operating loss carry forwards. The Company expects
to have an effective income tax rate for all of 2006 of
approximately 35 percent. FINANCING AND LIQUIDITY At September 30,
2006, total debt outstanding, net of cash, cash equivalents and
short-term investments was $18.6 million compared to $236.6 million
at September 30, 2005, and $132.1 million at December 31, 2005. As
a result of the Note redemption and lower net debt outstanding, net
interest cost declined to $1.1 million in the third quarter of 2006
from $6.8 million in the third quarter of 2005. During the third
quarter of 2006, the Company incurred capital expenditures of $22.4
million and depreciation and amortization was $11.2 million. For
all of 2006, the Company anticipates that capital expenditures and
depreciation and amortization will be approximately $80 million and
$46 million, respectively. OUTLOOK For the fourth quarter of 2006
and into 2007, the Company expects its primary facilities to
operate at high production levels, except for the RMSM Division rod
and bar mill, which has operated at 60 percent of its rated
capacity throughout 2006. The new large diameter pipe mill in
Portland, Oregon, has been commissioned and has received its
American Petroleum Institute (�API�) certificate to manufacture API
certified line pipe. Production at the new mill has begun, with
production and shipments for the fourth quarter of 2006 estimated
to be 40,000 tons and 28,000 tons, respectively. The mill is
expected to reach its rated production capability of 18,000 tons
per month in November. The Company�s large diameter pipe mill in
Camrose, Alberta, was down for scheduled maintenance during the
first three weeks of October. Production has resumed with expected
production and shipments for the fourth quarter of 2006 estimated
to be 45,000 tons and 35,000 tons, respectively. The combined
annual production capability of the two large diameter pipe mills
based on current product mix is approximately 430,000 tons. To
support the production and material supply chain build-up at the
large diameter pipe mills, during the fourth quarter of 2006 the
Company�s Portland, Oregon, steel mill will produce 40,000 more
tons of plate and coil for conversion into pipe for the pipe mills
than will be billed out as large diameter pipe to customers in the
fourth quarter. This material flow will have a negative overall
effect on total customer sales and shipments for the fourth
quarter. Expected fourth quarter of 2006 shipments, in tons, as
compared to previous quarters are as follows: Forecast Actual
Actual Q4 2006 Q3 2006 Q4 2005 Oregon Steel Division: Plate and
coil 215,000� 194,800� 206,700� Welded pipe(1) 90,000� 81,700�
58,200� Structural tubing 19,000� 19,800� 18,400� Less shipment to
affiliates (108,000) (54,600) (63,800) 216,000� � � 241,700� � �
219,500� RMSM Division: Rail 120,000� 123,800� 75,100� Rod and bar
67,000� 68,300� 84,600� Seamless pipe 13,000� 17,200� -� 200,000�
209,300� 159,700� Total 416,000� � � 451,000� � � 379,200� � (1)
Includes large diameter line pipe, ERW line pipe and ERW casing.
For 2006, the Company expects to ship approximately 1.66 million
tons of products and generate approximately $1.5 billion in sales.
In the Oregon Steel Division the product mix is expected to consist
of approximately 516,000 tons of plate and coil, 265,000 tons of
welded pipe and 77,000 tons of structural tubing. The RMSM Division
expects to ship approximately 448,000 tons of rail, 288,000 tons of
rod and bar products and 65,000 tons of seamless pipe. Jim
Declusin, the Company�s President and CEO, stated, �Oregon Steel is
pleased to announce for our Company, stockholders and employees our
best-ever quarterly financial performance. All of our market
categories performed well during the third quarter, as both of our
operating divisions set records for profitability. For the fourth
quarter, we expect pricing for most of our products to remain
steady. While overall margins will be strong, they will not be as
high as the level realized in the third quarter due to what we
believe to be a temporary increase in the cost of slab and reduced
shipments, as we start to fill the supply chain at our large
diameter pipe mills. In addition, our shipments will also be
negatively impacted as our distributor energy customers reduce
their inventories in response to lower energy prices. We feel that
this reduction is a temporary issue, as the North American rig
count continues to be at a high level and end user consumption is
robust. As a result of these factors, we expect operating income
for fourth quarter to be down relative to the third quarter.�
�Looking forward into 2007, we are optimistic about the future. We
believe that our plate, rail and energy markets will continue to be
strong and, with our large diameter pipe mills booked into 2008, we
estimate that our shipments could exceed 2 million tons for the
first time ever, resulting in another record annual performance for
our Company.� FORWARD-LOOKING STATEMENTS Forward-looking statements
in this release are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties
and actual results could differ materially from those projected.
Such risks and uncertainties include, but are not limited to,
general business and economic conditions; competitive products and
pricing, as well as fluctuations in demand; cost and availability
of raw materials; potential equipment malfunction; and plant
construction and repair delays. For more detailed information,
please review the discussion of risks, which may cause results to
differ materially, in the Company�s most recently filed Form 10-K,
Form 10-Q and other SEC reports. These forward-looking statements
should not be relied upon as representing the Company�s views as of
any subsequent date, and the Company undertakes no obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise, after the
date they are made. CONFERENCE CALL WEBCAST The Company will
discuss its second quarter results in a conference call on Friday,
October 27, 2006, at 8:00 a.m. PT (11:00 a.m. ET). Jim Declusin,
President and Chief Executive Officer, and Ray Adams, Vice
President of Finance and Chief Financial Officer, will host the
call. The conference call can be accessed in the U.S. and Canada by
dialing 877-754-9773. International callers can access the call by
dialing 706-679-0390. Participants are encouraged to dial in 15
minutes prior to the beginning of the call and request conference
ID #2894991. A replay will be available for 48 hours after the live
broadcast and can be accessed by dialing 800-642-1687 or
706-645-9291. The call will be simultaneously web cast and can be
accessed on the Investor Relations page of the Company�s website,
www.osm.com. Listeners should go to the website at least 15 minutes
early to register, download, and install any necessary audio
software. Oregon Steel Mills, which is headquartered in Portland,
Oregon, is organized into two divisions. The Oregon Steel Division
produces as-rolled and heat-treated steel plate, coil, welded pipe
(both large and small diameter line pipe and casing) and structural
tubing from plants located in Portland, Oregon, and Camrose,
Alberta, Canada. The Rocky Mountain Steel Mills Division, located
in Pueblo, Colorado, produces steel rail, rod and bar, and seamless
tubular products. Oregon Steel Mills, Inc. and Subsidiary Companies
Condensed Consolidated Income Statements (In thousands, except
tonnage and per share amounts) (Unaudited) � Three Months Ended
September 30, Nine Months Ended September 30, � 2006� � 2005� �
2006� � 2005� � Sales $ 429,114� $ 299,680� $ 1,133,991� $ 930,603�
Cost of sales 306,054� 247,487� 841,073� 737,750� Labor dispute
settlement charges --� (665) --� (665) Selling, general and
administrative expenses 21,053� 14,969� 61,981� 47,351� Loss (gain)
on disposal of assets � (165) � 2,090� � (537) � 1,791� Operating
income 102,172� 35,799� 231,474� 144,376� Interest expense, net
(1,865) (7,459) (15,622) (24,427) Minority interests (2,140)
(1,330) (5,216) (5,582) Loss on early extinguishment of debt
(21,408) --� (21,408) --� Other income, net � 1,035� � 1,168� �
6,099� � 4,527� Income before income taxes 77,794� 28,178� 195,327�
118,894� Income tax expense � (27,207) � (7,938) � (67,453) �
(41,879) � Net income $ 50,587� $ 20,240� $ 127,874� $ 77,015� �
Basic earnings per share $ 1.41� $ .57� $ 3.57� $ 2.17� Diluted
earnings per share $ 1.40� $ .57� $ 3.55� $ 2.15� Basic weighted
average shares outstanding 35,814� 35,544� 35,771� 35,461� Diluted
weighted average shares outstanding 36,061� 35,818� 35,998� 35,760�
� Operating income per ton $ 226.55� $ 93.76� $ 186.12� $ 130.41�
Operating margin 23.8% 11.9% 20.4% 15.5% � Depreciation and
amortization $ 11,214� $ 10,260� $ 32,952� $ 29,705� EBITDA (see
attached table) $ 90,873� $ 45,897� $ 243,901� $ 173,026� EBITDA as
adjusted (see attached table) $ 112,281� $ 45,897� $ 265,309� $
173,026� � Total tonnage sold: Oregon Steel Division Plate and coil
140,200� 120,700� 409,400� 345,300� Structural tubing 19,800�
18,400� 57,800� 46,900� Welded pipe � 81,700� � 29,500� � 175,600�
� 126,700� 241,700� 168,600� 642,800� 518,900� Rocky Mountain Steel
Mills Division Rail 123,800� 113,300� 327,600� 318,300� Rod and bar
68,300� 99,900� 220,900� 269,900� Seamless pipe � 17,200� � --� �
52,400� � --� � 209,300� � 213,200� � 600,900� � 588,200� Total
Company � 451,000� � 381,800� � 1,243,700� � 1,107,100� � Sales:
Oregon Steel Division $ 271,030� $ 170,457� $ 682,241� $ 556,908�
Rocky Mountain Steel Mills Division � 158,084� � 129,223� �
451,750� � 373,695� Total Company $ 429,114� $ 299,680� $
1,133,991� $ 930,603� � Operating income: Oregon Steel Division $
63,229� $ 20,463� $ 137,320� $ 89,294� Rocky Mountain Steel Mills
Division � 38,943� � 15,336� � 94,154� � 55,082� Total Company $
102,172� $ 35,799� $ 231,474� $ 144,376� � Average selling price
per ton: Oregon Steel Division $ 1,121� $ 1,011� $ 1,061� $ 1,073�
Rocky Mountain Steel Mills Division $ 755� $ 606� $ 752� $ 635�
Total Company $ 951� $ 785� $ 912� $ 841� Oregon Steel Mills, Inc.
and Subsidiary Companies Condensed Consolidated Balance Sheets (In
thousands) (Unaudited) September 30, 2006 December 31, 2005 Current
assets: Cash and cash equivalents, including restricted cash of $0
and $22,052 $ 8,765� $ 74,965� Short-term investments -� 103,300�
Trade accounts receivable, net 167,961� 138,456� Inventories
278,068� 301,546� Deferred taxes and other current assets � 20,102�
� 17,753� 474,896� 636,020� Property, plant and equipment, net
534,034� 499,122� Goodwill 3,716� 4,458� Intangibles, net 30,356�
30,456� Other assets � 909� � 5,824� Total assets $ 1,043,911� $
1,175,880� � Current liabilities $ 151,143� $ 167,634� Long-term
debt 26,176� 308,337� Deferred taxes 66,629� 43,133� Other
liabilities � 97,295� � 92,507� 341,243� 611,611� Minority
interests 16,685� 11,869� Stockholders' equity � 685,983� �
552,400� Total liabilities and stockholders' equity $ 1,043,911� $
1,175,880� Oregon Steel Mills, Inc. and Subsidiary Companies
Calculation of EBITDA and EBITDA as adjusted (In thousands)
(Unaudited) � Three Months Ended September 30, Nine Months Ended
September 30, � 2006� � 2005� � 2006� � 2005� � Net income $
50,587� $ 20,240� $ 127,874� $ 77,015� Income tax expense � 27,207�
� 7,938� � 67,453� � 41,879� Pre-tax income 77,794� 28,178�
195,327� 118,894� � Add back (subtract): Interest expense 2,249�
8,338� 18,787� 26,006� Interest capitalized (384) (879) (3,165)
(1,579) Depreciation 11,175� 10,218� 32,834� 29,581� Amortization �
39� � 42� � 118� � 124� EBITDA 90,873� 45,897� 243,901� 173,026� �
Add back (subtract): Loss on early extinguishment of debt � 21,408�
� --� � 21,408� � --� EBITDA as adjusted $ 112,281� $ 45,897� $
265,309� $ 173,026� � EBITDA is a non-generally accepted accounting
principles (�GAAP�) measure. The Company believes that EBITDA is
useful to investors because it is a basis upon which we assess our
financial performance, it provides useful information regarding our
ability to service our debt and because it is a commonly used
financial analysis tool for measuring and comparing companies in
several areas of liquidity, operating performance and leverage. The
Company believes EBITDA, excluding the effects of the loss on early
extinguishment of debt, is useful to investors because the Company
believes the excluded item is nonrecurring. Therefore, the Company
believes this financial measure is more useful to investors when
comparing the reported results to previous periods. Oregon Steel
Mills, Inc. (NYSE:OS): Third Quarter 2006 Highlights: -- Sales were
a record $429.1 million on 451,000 tons of shipments with an
average selling price of $951 per ton -- Operating income per ton
and operating margin were $227 per ton and 24 percent, respectively
-- Operating income and pretax income were the highest in the
Company's history at $102.2 million and $77.8 million, respectively
-- Earnings before interest, taxes, depreciation and amortization
was $112.3 million, an increase of 145 percent from last year --
The Company redeemed all of its 10 percent first mortgage notes and
recorded a pretax charge of $21.4 million ($.39 per diluted share)
-- Net income was a record $50.6 million ($1.40 per diluted share).
Before the note redemption charge, net income was $64.5 million
($1.79 per diluted share) Oregon Steel Mills, Inc. (NYSE:OS) today
reported increases in third quarter 2006 operating income and
pretax income of 185 percent and 176 percent, respectively, from
that of the prior year, resulting in record net income of $50.6
million ($1.40 per diluted share on 36.1 million shares). This
compares to net income in the third quarter of 2005 of $20.2
million ($.57 per diluted share on 35.8 million shares). The
Company's net income of $127.9 million for the first nine months of
2006 exceeded 2004's previous record annual net income of $116.7
million. As previously reported, on July 17, 2006, the Company
completed the redemption of all of its outstanding 10% First
Mortgage Notes ("Notes") due on July 15, 2009, at a price equal to
105% of the principal amount of the Notes being redeemed. In
connection with the redemption of the Notes, the Company recorded a
pretax charge of $21.4 million ($.39 per diluted share) in the
third quarter of 2006. Net income before the Note redemption charge
was $64.5 million ($1.79 per diluted share). Third quarter 2005
operating income was negatively impacted by approximately $5
million of pretax costs ($.10 per diluted share) related to the new
electric arc furnace installation and caster rebuild and related
equipment outages ("Furnace Installation") at the Company's
majority-owned subsidiary, Rocky Mountain Steel Mills ("RMSM").
Sales for the third quarter of 2006 increased 43 percent to a
record $429.1 million at an average selling price of $951 per ton.
This compares with sales of $299.7 million in the third quarter
2005 at an average sales price per ton of $785. Total shipments for
the third quarter of 2006 of 451,000 tons were 18 percent higher
than 2005 third quarter shipments of 381,800 tons. The increase in
shipments was primarily due to increased shipments of plate and
coil, rail and welded and seamless pipe products, partially offset
by lower shipments of rod and bar products. The primary reason for
the decline in rod and bar shipments is due to the Company's
decision to divert raw steel to the production of seamless pipe
product and away from rod and bar products. The Company's seamless
pipe mill, which was idled in November of 2003, was restarted in
December of 2005 and shipped 17,200 tons of seamless pipe during
the third quarter of 2006. The increase in sales was primarily due
to the increased shipments of higher selling priced plate and
welded pipe noted above, the addition of seamless pipe (currently
the Company's highest averaged selling priced product) and higher
average selling prices for all of the Company's products. Operating
income for the third quarter of 2006 was $102.2 million, an average
of $227 per ton, both of which are quarterly records for the
Company. This compares to operating income for the third quarter of
2005 of $35.8 million, an average of $94 per ton. Operating margin
as a percentage of sales increased from 11.9 percent to 23.8
percent as the Company realized margin expansion in almost all of
its product lines. Earnings before interest, taxes, depreciation
and amortization (EBITDA) for the third quarter of 2006 was $112.3
million, also a quarterly record. This compares to EBITDA for the
third quarter of 2005 of $45.9 million. A reconciliation of EBITDA
is provided in the last table of this press release. Increased
operating income, operating margin and EBITDA during the third
quarter of 2006 compared to the third quarter of 2005 reflects the
higher shipments, improved product mix and higher average selling
prices, as discussed above, the absence of the RMSM Furnace
Installation expenses and lower steel slab costs at the Company's
Oregon Steel Division, partially offset by higher scrap costs at
the RMSM Division. The Company had an effective income tax rate of
approximately 35 percent in the third quarter of 2006. This
compares to an effective income tax rate in the third quarter of
2005 of 28 percent. The effective income tax rate for the third
quarter of 2005 varied from the combined state and federal
statutory rate principally because the Company reversed a portion
of the valuation allowance ($3.4 million) previously established
due to less uncertainty regarding the realization of state tax
credits and net operating loss carry forwards. The Company expects
to have an effective income tax rate for all of 2006 of
approximately 35 percent. FINANCING AND LIQUIDITY At September 30,
2006, total debt outstanding, net of cash, cash equivalents and
short-term investments was $18.6 million compared to $236.6 million
at September 30, 2005, and $132.1 million at December 31, 2005. As
a result of the Note redemption and lower net debt outstanding, net
interest cost declined to $1.1 million in the third quarter of 2006
from $6.8 million in the third quarter of 2005. During the third
quarter of 2006, the Company incurred capital expenditures of $22.4
million and depreciation and amortization was $11.2 million. For
all of 2006, the Company anticipates that capital expenditures and
depreciation and amortization will be approximately $80 million and
$46 million, respectively. OUTLOOK For the fourth quarter of 2006
and into 2007, the Company expects its primary facilities to
operate at high production levels, except for the RMSM Division rod
and bar mill, which has operated at 60 percent of its rated
capacity throughout 2006. The new large diameter pipe mill in
Portland, Oregon, has been commissioned and has received its
American Petroleum Institute ("API") certificate to manufacture API
certified line pipe. Production at the new mill has begun, with
production and shipments for the fourth quarter of 2006 estimated
to be 40,000 tons and 28,000 tons, respectively. The mill is
expected to reach its rated production capability of 18,000 tons
per month in November. The Company's large diameter pipe mill in
Camrose, Alberta, was down for scheduled maintenance during the
first three weeks of October. Production has resumed with expected
production and shipments for the fourth quarter of 2006 estimated
to be 45,000 tons and 35,000 tons, respectively. The combined
annual production capability of the two large diameter pipe mills
based on current product mix is approximately 430,000 tons. To
support the production and material supply chain build-up at the
large diameter pipe mills, during the fourth quarter of 2006 the
Company's Portland, Oregon, steel mill will produce 40,000 more
tons of plate and coil for conversion into pipe for the pipe mills
than will be billed out as large diameter pipe to customers in the
fourth quarter. This material flow will have a negative overall
effect on total customer sales and shipments for the fourth
quarter. Expected fourth quarter of 2006 shipments, in tons, as
compared to previous quarters are as follows: -0- *T Forecast
Actual Actual Q4 2006 Q3 2006 Q4 2005 --------- -------- --------
Oregon Steel Division: Plate and coil 215,000 194,800 206,700
Welded pipe(1) 90,000 81,700 58,200 Structural tubing 19,000 19,800
18,400 Less shipment to affiliates (108,000) (54,600) (63,800)
--------- -------- -------- 216,000 241,700 219,500
----------------------------- RMSM Division: Rail 120,000 123,800
75,100 Rod and bar 67,000 68,300 84,600 Seamless pipe 13,000 17,200
- --------- -------- -------- 200,000 209,300 159,700 ---------
-------- -------- Total 416,000 451,000 379,200
============================= (1) Includes large diameter line
pipe, ERW line pipe and ERW casing. *T For 2006, the Company
expects to ship approximately 1.66 million tons of products and
generate approximately $1.5 billion in sales. In the Oregon Steel
Division the product mix is expected to consist of approximately
516,000 tons of plate and coil, 265,000 tons of welded pipe and
77,000 tons of structural tubing. The RMSM Division expects to ship
approximately 448,000 tons of rail, 288,000 tons of rod and bar
products and 65,000 tons of seamless pipe. Jim Declusin, the
Company's President and CEO, stated, "Oregon Steel is pleased to
announce for our Company, stockholders and employees our best-ever
quarterly financial performance. All of our market categories
performed well during the third quarter, as both of our operating
divisions set records for profitability. For the fourth quarter, we
expect pricing for most of our products to remain steady. While
overall margins will be strong, they will not be as high as the
level realized in the third quarter due to what we believe to be a
temporary increase in the cost of slab and reduced shipments, as we
start to fill the supply chain at our large diameter pipe mills. In
addition, our shipments will also be negatively impacted as our
distributor energy customers reduce their inventories in response
to lower energy prices. We feel that this reduction is a temporary
issue, as the North American rig count continues to be at a high
level and end user consumption is robust. As a result of these
factors, we expect operating income for fourth quarter to be down
relative to the third quarter." "Looking forward into 2007, we are
optimistic about the future. We believe that our plate, rail and
energy markets will continue to be strong and, with our large
diameter pipe mills booked into 2008, we estimate that our
shipments could exceed 2 million tons for the first time ever,
resulting in another record annual performance for our Company."
FORWARD-LOOKING STATEMENTS Forward-looking statements in this
release are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties
and actual results could differ materially from those projected.
Such risks and uncertainties include, but are not limited to,
general business and economic conditions; competitive products and
pricing, as well as fluctuations in demand; cost and availability
of raw materials; potential equipment malfunction; and plant
construction and repair delays. For more detailed information,
please review the discussion of risks, which may cause results to
differ materially, in the Company's most recently filed Form 10-K,
Form 10-Q and other SEC reports. These forward-looking statements
should not be relied upon as representing the Company's views as of
any subsequent date, and the Company undertakes no obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise, after the
date they are made. CONFERENCE CALL WEBCAST The Company will
discuss its second quarter results in a conference call on Friday,
October 27, 2006, at 8:00 a.m. PT (11:00 a.m. ET). Jim Declusin,
President and Chief Executive Officer, and Ray Adams, Vice
President of Finance and Chief Financial Officer, will host the
call. The conference call can be accessed in the U.S. and Canada by
dialing 877-754-9773. International callers can access the call by
dialing 706-679-0390. Participants are encouraged to dial in 15
minutes prior to the beginning of the call and request conference
ID #2894991. A replay will be available for 48 hours after the live
broadcast and can be accessed by dialing 800-642-1687 or
706-645-9291. The call will be simultaneously web cast and can be
accessed on the Investor Relations page of the Company's website,
www.osm.com. Listeners should go to the website at least 15 minutes
early to register, download, and install any necessary audio
software. Oregon Steel Mills, which is headquartered in Portland,
Oregon, is organized into two divisions. The Oregon Steel Division
produces as-rolled and heat-treated steel plate, coil, welded pipe
(both large and small diameter line pipe and casing) and structural
tubing from plants located in Portland, Oregon, and Camrose,
Alberta, Canada. The Rocky Mountain Steel Mills Division, located
in Pueblo, Colorado, produces steel rail, rod and bar, and seamless
tubular products. -0- *T Oregon Steel Mills, Inc. and Subsidiary
Companies Condensed Consolidated Income Statements (In thousands,
except tonnage and per share amounts) (Unaudited) Three Months
Ended Nine Months Ended September 30, September 30,
------------------- ----------------------- 2006 2005 2006 2005
--------- --------- ----------- ----------- Sales $429,114 $299,680
$1,133,991 $ 930,603 Cost of sales 306,054 247,487 841,073 737,750
Labor dispute settlement charges -- (665) -- (665) Selling, general
and administrative expenses 21,053 14,969 61,981 47,351 Loss (gain)
on disposal of assets (165) 2,090 (537) 1,791 --------- ---------
----------- ----------- Operating income 102,172 35,799 231,474
144,376 Interest expense, net (1,865) (7,459) (15,622) (24,427)
Minority interests (2,140) (1,330) (5,216) (5,582) Loss on early
extinguishment of debt (21,408) -- (21,408) -- Other income, net
1,035 1,168 6,099 4,527 --------- --------- ----------- -----------
Income before income taxes 77,794 28,178 195,327 118,894 Income tax
expense (27,207) (7,938) (67,453) (41,879) --------- ---------
----------- ----------- Net income $ 50,587 $ 20,240 $ 127,874 $
77,015 ========= ========= =========== =========== Basic earnings
per share $ 1.41 $ .57 $ 3.57 $ 2.17 Diluted earnings per share $
1.40 $ .57 $ 3.55 $ 2.15 Basic weighted average shares outstanding
35,814 35,544 35,771 35,461 Diluted weighted average shares
outstanding 36,061 35,818 35,998 35,760 Operating income per ton $
226.55 $ 93.76 $ 186.12 $ 130.41 Operating margin 23.8% 11.9% 20.4%
15.5% Depreciation and amortization $ 11,214 $ 10,260 $ 32,952 $
29,705 EBITDA (see attached table) $ 90,873 $ 45,897 $ 243,901 $
173,026 EBITDA as adjusted (see attached table) $112,281 $ 45,897 $
265,309 $ 173,026 Total tonnage sold: Oregon Steel Division Plate
and coil 140,200 120,700 409,400 345,300 Structural tubing 19,800
18,400 57,800 46,900 Welded pipe 81,700 29,500 175,600 126,700
--------- --------- ----------- ----------- 241,700 168,600 642,800
518,900 Rocky Mountain Steel Mills Division Rail 123,800 113,300
327,600 318,300 Rod and bar 68,300 99,900 220,900 269,900 Seamless
pipe 17,200 -- 52,400 -- --------- --------- -----------
----------- 209,300 213,200 600,900 588,200 --------- ---------
----------- ----------- Total Company 451,000 381,800 1,243,700
1,107,100 ========= ========= =========== =========== Sales: Oregon
Steel Division $271,030 $170,457 $ 682,241 $ 556,908 Rocky Mountain
Steel Mills Division 158,084 129,223 451,750 373,695 ---------
--------- ----------- ----------- Total Company $429,114 $299,680
$1,133,991 $ 930,603 ========= ========= =========== ===========
Operating income: Oregon Steel Division $ 63,229 $ 20,463 $ 137,320
$ 89,294 Rocky Mountain Steel Mills Division 38,943 15,336 94,154
55,082 --------- --------- ----------- ----------- Total Company
$102,172 $ 35,799 $ 231,474 $ 144,376 ========= =========
=========== =========== Average selling price per ton: Oregon Steel
Division $ 1,121 $ 1,011 $ 1,061 $ 1,073 Rocky Mountain Steel Mills
Division $ 755 $ 606 $ 752 $ 635 Total Company $ 951 $ 785 $ 912 $
841 *T -0- *T Oregon Steel Mills, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
September 30, December 31, 2006 2005 ------------- ------------
Current assets: Cash and cash equivalents, including restricted
cash of $0 and $22,052 $ 8,765 $ 74,965 Short-term investments -
103,300 Trade accounts receivable, net 167,961 138,456 Inventories
278,068 301,546 Deferred taxes and other current assets 20,102
17,753 ------------- ------------ 474,896 636,020 Property, plant
and equipment, net 534,034 499,122 Goodwill 3,716 4,458
Intangibles, net 30,356 30,456 Other assets 909 5,824 -------------
------------ Total assets $1,043,911 $1,175,880 =============
============ Current liabilities $ 151,143 $ 167,634 Long-term debt
26,176 308,337 Deferred taxes 66,629 43,133 Other liabilities
97,295 92,507 ------------- ------------ 341,243 611,611 Minority
interests 16,685 11,869 Stockholders' equity 685,983 552,400
------------- ------------ Total liabilities and stockholders'
equity $1,043,911 $1,175,880 ============= ============ *T -0- *T
Oregon Steel Mills, Inc. and Subsidiary Companies Calculation of
EBITDA and EBITDA as adjusted (In thousands) (Unaudited) Three
Months Ended Nine Months Ended September 30, September 30,
------------------ ------------------- 2006 2005 2006 2005
--------- -------- --------- --------- Net income $ 50,587 $20,240
$127,874 $ 77,015 Income tax expense 27,207 7,938 67,453 41,879
--------- -------- --------- --------- Pre-tax income 77,794 28,178
195,327 118,894 Add back (subtract): Interest expense 2,249 8,338
18,787 26,006 Interest capitalized (384) (879) (3,165) (1,579)
Depreciation 11,175 10,218 32,834 29,581 Amortization 39 42 118 124
--------- -------- --------- --------- EBITDA 90,873 45,897 243,901
173,026 Add back (subtract): Loss on early extinguishment of debt
21,408 -- 21,408 -- --------- -------- --------- --------- EBITDA
as adjusted $112,281 $45,897 $265,309 $173,026 ========= ========
========= ========= EBITDA is a non-generally accepted accounting
principles ("GAAP") measure. The Company believes that EBITDA is
useful to investors because it is a basis upon which we assess our
financial performance, it provides useful information regarding our
ability to service our debt and because it is a commonly used
financial analysis tool for measuring and comparing companies in
several areas of liquidity, operating performance and leverage. The
Company believes EBITDA, excluding the effects of the loss on early
extinguishment of debt, is useful to investors because the Company
believes the excluded item is nonrecurring. Therefore, the Company
believes this financial measure is more useful to investors when
comparing the reported results to previous periods. *T
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