Oregon Steel Mills, Inc. Announces Record Third Quarter Results.PORTLAND, Ore. -- Oregon Steel Mills, Inc. (NYSE NYSE See: New York Stock Exchange :OS): Third Quarter 2006 Highlights: * Sales were a record $429.1 million on 451,000 tons of shipments with an average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of $951 per ton * Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. per ton and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were $227 per ton and 24 percent, respectively * Operating income and pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. were the highest in the Company's history at $102.2 million and $77.8 million, respectively * Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
* The Company redeemed all of its 10 percent first mortgage notes and recorded a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern 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 Redemption charge The commission a mutual fund charges an investor who is redeeming shares. For example, a 2% redemption charge (also called a back end load) on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. , 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 An electric arc furnace (EAF) is a furnace that heats charged material by means of an electric arc. Arc furnaces range in size from small units of approximately one ton capacity (used in foundries for producing cast iron products) up to about 400 ton units used for secondary installation and caster rebuild and related equipment outages ("Furnace Installation") at the Company's majority-owned subsidiary majority-owned subsidiary A firm in which more than 50% of outstanding voting stock is owned by the parent company. , Rocky Mountain Steel Mills ("RMSM RMSM Revised Minimum Standard Model (World Bank) RMSM Royal Military School of Music (UK) RMSM Royal Marine School of Music (Portsmouth, UK) "). 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 (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) 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 operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. 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 The American Petroleum Institute, commonly referred to as API, is the main U.S. trade association for the oil and natural gas industry, representing about 400 corporations involved in production, refinement, distribution, and many other aspects of the industry. ("API (Application Programming Interface) A language and message format used by an application program to communicate with the operating system or some other control program such as a database management system (DBMS) or communications protocol. ") 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 Camrose, a small Canadian city, is situated in Central Alberta, amidst some of the richest farmland in the prairies. It is a relatively small city which originally grew up along a railroad and now grows along Highway 13. , 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 build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. 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: [TABLE OMITTED] 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 (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , 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 North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. 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 op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op 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 statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Forward-looking statements in this release are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 mal·func·tion v. 1. To fail to function. 2. To function improperly. n. 1. Failure to function. 2. Faulty or abnormal functioning. ; 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-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , Form 10-Q Form 10-Q See 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 Investor relations The process by which the corporation communicates with its investors. 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 The City of Pueblo (IPA: /'sɪti əv 'pwɛbloʊ/) is a Home Rule Municipality that is the county seat of Pueblo County, Colorado, USA. , produces steel rail, rod and bar, and seamless tubular products. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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