Oregon Steel Mills (NYSE:OS)
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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.
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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
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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
============= ============
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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.
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