EX-99.1 2 os101200ex991.htm EXHIBIT 99.1

Exhibit 99.1

OREGON STEEL MILLS, INC.
Portland, Oregon

For Immediate Release

October 31, 2005

Contact:

Ray Adams

 

Chief Financial Officer

 

(503) 240-5223

OREGON STEEL MILLS, INC. ANNOUNCES
THIRD QUARTER RESULTS

Third Quarter 2005 Highlights:

 

•

Sales were $299.7 million on 381,800 tons of shipments with, an average selling price of $785 per ton

 

•

Operating income was $35.8 million, compared to $64 million in the third quarter of 2004

 

•

Operating income per ton and operating margin  were  $94 per ton and 11.9 percent, respectively

 

•

Earnings before interest, taxes, depreciation and amortization  was $45.9 million, compared to $70.5 million  in the third quarter of 2004

 

•

Net income was $20.2 million ($.57 per diluted share), compared to $50.3 million ($1.87 per diluted share) in the third quarter of 2004

Portland, Oregon, October 31, 2005/Business Wire/--Oregon Steel Mills, Inc. (NYSE: OS) today reported third quarter net income of $20.2 million ($.57 per diluted share on 35.8 million shares) compared to a net income of $50.3 million ($1.87 per diluted share on 26.9 million shares) for the third quarter of 2004. 

Third quarter 2005 operating income was negatively impacted by approximately $5 million of pretax costs 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”). During the third quarter of 2004, the Company recorded pretax charges of $4.5 million (“Settlement Charge”) as part of the settlement of a labor dispute (“Settlement”) at RMSM and additions to long-term environmental reserves of $1.6 million. The Company finalized the settlement of the labor dispute during the third quarter of 2004. Also during the third quarter of 2004, the effective income tax rate of the Company was less than 3 percent compared to an effective income tax rate of approximately 28 percent in the third quarter of 2005.

Sales for the third quarter of 2005 were $299.7 million. This compares to 2004 third quarter sales of $348.3 million.  Average sales price per ton in the third quarter of 2005 was $785 compared to $761 in the third quarter of 2004. Total shipments for the third quarter of 2005 were 381,800 tons compared to 2004 third quarter shipments of 457,700 tons.  The decrease in shipments was primarily due to decreased shipments of plate and coil, welded pipe and rod and bar products, partially offset by higher shipments of rail products.  The decrease in sales is primarily due to the decreased shipments noted above, partially offset by higher average selling prices. Higher average selling prices were primarily due to increased  selling prices for plate, welded pipe and rail products which more than offset declines in the average selling prices of rod and bar  and structural tubing products.


Operating income for the third quarter of 2005 was $35.8 million (an average of $94 per ton). This compares to operating income for the third quarter of 2004 of $64 million, including the $4.5 million Settlement Charge noted above. Third quarter 2004 operating income before the Settlement Charge was $68.5 million (an average of $150 per ton).  Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of 2005 was $45.9 million.  This compares to EBITDA for the third quarter of 2004 of $70.5 million ($75 million exclusive of the $4.5 million Settlement Charge).  A reconciliation of EBITDA is provided in the last table of this press release.  Decreased operating income and EBITDA during the third quarter of 2005 compared to the third quarter of 2004 reflects the decreased shipments and RMSM Furnace Installation expenses noted above, higher unit conversion cost as a result of lower production of plate and rod and bar products and higher steel slab costs (up 14 percent from the third quarter of 2004) at the Company’s Oregon Steel Division partially offset by lower average scrap costs at RMSM.

The Company had an effective income tax rate of approximately 28 percent in the third quarter of 2005. This compares to an effective income tax rate in the third quarter of 2004 of less than 3 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 effective income tax rate for the third quarter of 2004 varied from the combined state and federal statutory rate principally because the Company reversed a portion of the valuation allowance ($19.9 million) established in 2003 due to less uncertainty regarding the realization of deferred tax assets.  The Company expects to have an effective income tax rate of approximately 37 percent for the fourth quarter of 2005.

LIQUIDITY

At September 30, 2005, the Company had $74.1 million of cash, cash equivalents and short-term investments.  Total debt outstanding, net of cash, cash equivalents and short-term investments was $236.6 million at September 30, 2005 compared to $237.6 million at September 30, 2004.  During the third quarter of 2005, the Company incurred capital expenditures of $36.4 million; depreciation and amortization was $10.3 million.  For all of 2005, the Company anticipates that capital expenditures and depreciation and amortization will be approximately $87 million and $40 million, respectively.

At September 30, 2005, inventories were $346.7 million. This compares to $235 million at December 31, 2004. The increase in inventory is primarily due to (1) increased volume of higher cost steel slab, (2) inventory buildup for expected welded pipe demand at the Camrose pipe mill and (3) the buildup of semi-finished inventory at RMSM in anticipation of the Furnace Installation which occurred during September and October. The new furnace has been installed and is in a startup phase and is expected to be fully operational by the middle of November. The Company anticipates end of the year inventories will be approximately $250 million.

OUTLOOK

As noted above, the Furnace Installation at RMSM negatively impacted third quarter operating income by approximately $5 million. The Company anticipates the Furnace Installation will negatively impact the fourth quarter by another $3 million. The Company’s large diameter line pipe mill at Camrose, Alberta, which has been out of service for the past three months for equipment upgrades, restarted on October 24. Total shipments from Camrose in the fourth quarter are expected to be approximately 75,000 tons. Total large diameter line pipe backlog for Oregon Steel is currently 156,000 tons. The previously announced startup of the seamless pipe mill at RMSM is proceeding with shipments anticipated to begin in February of 2006.

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Expected fourth quarter 2005 shipments, in tons, as compared to previous quarters are as follows:

 

 

Forecast
Q4 2005

 

Actual
Q3 2005

 

Actual
Q4 2004

 

 

 

 

 

 

Plate and coil

 

 

200,000

 

 

152,000

 

 

155,200

 

Welded pipe

 

 

75,000

 

 

29,500

 

 

29,300

 

Structural tubing

 

 

18,000

 

 

18,400

 

 

10,000

 

Less shipment to affiliates

 

 

(65,000

)

 

(31,300

)

 

(10,800

)

Rail

 

 

100,000

 

 

113,300

 

 

97,600

 

Rod and bar

 

 

77,000

 

 

99,900

 

 

78,100

 

 

 

 

 

 

Total

 

 

405,000

 

 

381,800

 

 

359,400

 

 

 

 

 

 

For 2005, the Company expects to ship approximately 1.5 million tons of products and generate approximately $1.3 billion in sales.  In the Oregon Steel Division the product mix is expected to consist of approximately 480,000 tons of plate and coil, 200,000 tons of welded pipe and 65,000 tons of structural tubing. The Company’s RMSM Division expects to ship approximately 420,000 tons and 345,000 tons of rail and rod and bar products, respectively.

Jim Declusin, the Company’s President and CEO, stated, “With the completion of the new single furnace installation at RMSM and the restarting of the large diameter pipe mill at Camrose, we expect operations throughout the Company to return to normal. We believe that inventory levels at the service centers bottomed during the third quarter and we have begun to see some pick up in our plate market both in terms of price and volume. At the same time market conditions for our energy related products continue to gain momentum. As we anticipated, the price of slab is declining and is now 30 percent off its high of earlier this year. Accordingly, we expect that fourth quarter 2005 operating income will be significantly higher than that realized in the third quarter with operating income from continuing operations to be within a range of $48 million to $52 million.”

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

On Tuesday, November 1, 2005, at 8:00 a.m. PT (11:00 a.m. ET), the Company will hold a conference call to discuss the results of the third quarter.  You are invited to listen to a live broadcast of the Company’s conference call over the Internet, accessible at www.osm.com on the Investor Relations’ page.

Oregon Steel Mills, Inc. is organized into two divisions.  The Oregon Steel Division produces steel plate, coil, welded pipe 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.

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Oregon Steel Mills, Inc. and Subsidiary Companies
Condensed Consolidated Income Statements (1)
(In thousands, except tonnage and per share amounts)
(Unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

Sales

 

$

299,680

 

$

348,332

 

$

930,603

 

$

882,498

 

Cost of sales

 

 

247,487

 

 

261,141

 

 

737,750

 

 

691,271

 

Labor dispute settlement charges

 

 

(665

)

 

4,532

 

 

(665

)

 

43,400

 

Selling, general and administrative expenses

 

 

14,969

 

 

17,672

 

 

47,351

 

 

47,686

 

Loss on disposal of assets

 

 

2,090

 

 

1,036

 

 

1,791

 

 

743

 

 

 

 

 

 

 

Operating income

 

 

35,799

 

 

63,951

 

 

144,376

 

 

99,398

 

Interest expense, net

 

 

(7,459

)

 

(8,454

)

 

(24,427

)

 

(25,482

)

Other income, net

 

 

1,168

 

 

893

 

 

4,527

 

 

2,364

 

Minority interests

 

 

(1,330

)

 

(4,564

)

 

(5,582

)

 

(2,950

)

 

 

 

 

 

 

Income before income taxes

 

 

28,178

 

 

51,826

 

 

118,894

 

 

73,330

 

Income tax expense

 

 

(7,938

)

 

(1,483

)

 

(41,879

)

 

(1,442

)

 

 

 

 

 

 

Net income

 

$

20,240

 

$

50,343

 

$

77,015

 

$

71,888

 

 

 

 

 

 

 

Basic earnings per share

 

$

.57

 

$

1.89

 

$

2.17

 

$

2.70

 

Diluted earnings per share

 

$

.57

 

$

1.87

 

$

2.15

 

$

2.69

 

Basic weighted average shares outstanding

 

 

35,544

 

 

26,683

 

 

35,461

 

 

26,585

 

Diluted weighted average shares outstanding

 

 

35,818

 

 

26,924

 

 

35,760

 

 

26,753

 

Operating income per ton

 

$

93.76

 

$

139.72

 

$

130.41

 

$

72.79

 

Operating margin

 

 

11.9

%

 

18.4

%

 

15.5

%

 

11.3

%

Depreciation and amortization

 

$

10,260

 

$

10,205

 

$

29,705

 

$

29,922

 

EBITDA (see attached table)

 

$

45,897

 

$

70,485

 

$

173,026

 

$

128,734

 

EBITDA as adjusted (see attached table)

 

$

45,232

 

$

75,017

 

$

172,361

 

$

172,134

 

Total tonnage sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

Oregon Steel Division

 

 

 

 

 

 

 

 

 

 

 

 

 

Plate and coil

 

 

120,700

 

 

167,100

 

 

345,300

 

 

476,800

 

Structural tubing

 

 

18,400

 

 

16,600

 

 

46,900

 

 

45,900

 

Welded pipe

 

 

29,500

 

 

56,400

 

 

126,700

 

 

164,700

 

 

 

 

 

 

 

 

 

 

168,600

 

 

240,100

 

 

518,900

 

 

687,400

 

Rocky Mountain Steel Mills Division

 

 

 

 

 

 

 

 

 

 

 

 

 

Rail

 

 

113,300

 

 

100,700

 

 

318,300

 

 

294,600

 

Rod and bar

 

 

99,900

 

 

116,900

 

 

269,900

 

 

380,200

 

Seamless pipe

 

 

—  

 

 

—  

 

 

—  

 

 

3,300

 
   

 

 

 
 

 

 

 

213,200

 

 

217,600

 

 

588,200

 

 

678,100

 

 

 

 

 

 

 

Total Company

 

 

381,800

 

 

457,700

 

 

1,107,100

 

 

1,365,500

 

 

 

 

 

 

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Oregon Steel Division

 

$

170,457

 

$

208,455

 

$

556,908

 

$

510,515

 

Rocky Mountain Steel Mills Division

 

 

129,223

 

 

139,877

 

 

373,695

 

 

371,983

 

 

 

 

 

 

 

Total Company

 

$

299,680

 

$

348,332

 

$

930,603

 

$

882,498

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Oregon Steel Division

 

$

20,463

 

$

41,897

 

$

89,294

 

$

91,430

 

Rocky Mountain Steel Mills Division

 

 

15,336

 

 

22,054

 

 

55,082

 

 

7,968

 

 

 

 

 

 

 

Total Company

 

$

35,799

 

$

63,951

 

$

144,376

 

$

99,398

 

 

 

 

 

 

 

Average selling price per ton:

 

 

 

 

 

 

 

 

 

 

 

 

 

Oregon Steel Division

 

$

1,011

 

$

868

 

$

1,073

 

$

743

 

Rocky Mountain Steel Mills Division

 

$

606

 

$

643

 

$

635

 

$

549

 

Total Company

 

$

785

 

$

761

 

$

841

 

$

646

 

(1)

Certain reclassifications have been made in prior years’ periods to conform to the current period presentations. Such reclassifications do not affect operating income as previously reported.

4


Oregon Steel Mills, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets(1)
(In thousands)

 

 

September 30,
2005

 

December 31,
2004

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents, including restricted cash of $22,450 and $0

 

$

65,497

 

$

77,026

 

Short-term investments

 

 

8,621

 

 

60,110

 

Trade accounts receivable, net

 

 

118,046

 

 

118,952

 

Inventories

 

 

346,698

 

 

235,010

 

Deferred taxes and other current assets

 

 

20,161

 

 

14,561

 

Assets held for sale

 

 

27,898

 

 

28,448

 

 

 

 

 

 

 

 

586,921

 

 

534,107

 

Property, plant and equipment, net

 

 

486,334

 

 

451,674

 

Goodwill

 

 

4,458

 

 

520

 

Intangibles, net

 

 

32,955

 

 

33,396

 

Other assets

 

 

6,908

 

 

10,004

 

 

 

 

 

Total assets

 

$

1,117,576

 

$

1,029,701

 

 

 

 

 

Current liabilities

 

$

133,473

 

$

145,046

 

Long-term debt

 

 

308,720

 

 

313,699

 

Deferred taxes

 

 

31,101

 

 

5,164

 

Other liabilities

 

 

108,249

 

 

104,578

 

 

 

 

 

 

 

 

581,543

 

 

568,487

 

Minority interest (2)

 

 

14,710

 

 

22,706

 

Stockholders’ equity

 

 

521,323

 

 

438,508

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

1,117,576

 

$

1,029,701

 

 

 

 

 

(1)

Certain reclassifications have been made in prior years’ periods to conform to the current period presentations.

(2)

Included in minority interest at December 31, 2004 was $11.4 million related to the 40 percent of Camrose Pipe Company that was not owned by the Company. On March 30, 2005 the Company purchased, for cash, the 40 percent interest.

5


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,

 

 

 

 

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

Net income

 

$

20,240

 

$

50,343

 

$

77,015

 

$

71,888

 

Income tax expense

 

 

7,938

 

 

1,483

 

 

41,879

 

 

1,442

 

 

 

 

 

 

 

Pre-tax income

 

 

28,178

 

 

51,826

 

 

118,894

 

 

73,330

 

Add back (subtract):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

8,338

 

 

8,692

 

 

26,006

 

 

26,178

 

Interest capitalized

 

 

(879

)

 

(238

)

 

(1,579

)

 

(696

)

Depreciation

 

 

10,218

 

 

10,058

 

 

29,581

 

 

29,492

 

Amortization

 

 

42

 

 

147

 

 

124

 

 

430

 

 

 

 

 

 

 

EBITDA

 

 

45,897

 

 

70,485

 

 

173,026

 

 

128,734

 

Add back (subtract):

 

 

 

 

 

 

 

 

 

 

 

 

 

Labor dispute settlement charges

 

 

(665

)

 

4,532

 

 

(665

)

 

43,400

 

 

 

 

 

 

 

EBITDA as adjusted

 

$

45,232

 

$

75,017

 

$

172,361

 

$

172,134

 

 

 

 

 

 

 

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 labor dispute settlement charge is useful to investors because the Company believes the excluded items are nonrecurring.  Therefore, the Company believes this financial measure is more useful to investors when comparing the reported results to previous periods.

6