Oregon Steel Reports Results for the Second Quarter of 2006.PORTLAND Portland, town, England Portland, town (1991 pop. 12,945), Dorset, S England. It is on the Isle of Portland, a small rocky peninsula. Portland stone has been used in St. Paul's Cathedral and other important London buildings. Lobsters and crabs are harvested. , Ore. -- Oregon Oregon, city, United States Oregon, city (1990 pop. 18,334), Lucas co., NW Ohio, a suburb adjacent to Toledo, on Lake Erie; inc. 1958. It is a port with railroad-owned and -operated docks. The city has industries producing oil, chemicals, and metal products. Steel Mills, Inc. (NYSE NYSE See: New York Stock Exchange :OS): Second Quarter 2006 Highlights: --Sales were $349.6 million, the second highest in the Company's history on 393,200 tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. of shipments --Operating income per ton and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were $179 per ton and 20.2 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 $70.6 million and $65.1 million, respectively --Earnings before interest, taxes, depreciation and amortization was $82.7 million compared to $64.4 million in the second quarter of 2005 --Net income was $43.9 million ($1.22 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share), an increase of 54.6 percent --The Company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. all of its outstanding 10% First Mortgage Notes as of July July: see month. 15, 2006 Oregon Steel Mills, Inc. (NYSE:OS) today reported record quarterly 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. and pretax income of $70.6 million and $65.1 million, respectively. The Company also reported second quarter net income of $43.9 million ($1.22 per diluted share on 36 million shares) an increase of 54.6 percent over second quarter of 2005 net income of $28.4 million ($.80 per diluted share on 35.8 million shares). The Company's operating income in the second quarter of 2006 was negatively impacted by a $3.6 million charge ($.07 per diluted share) related to the cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. and buyout Buyout The purchase of a company or a controlling interest of a corporation's shares. Notes: A leveraged buyout is accomplished with borrowed money or by issuing more stock. costs of a contract to supply oxygen to the now closed melt shop at the Company's Portland, Oregon mill. Annual costs associated with this take or pay contract, which extended into the year 2011, were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.8 million per year. Also during the second quarter of 2006, the effective income tax rate of the Company was approximately 32 percent compared to an effective income tax rate of approximately 39 percent in the second quarter of 2005. Sales for the second quarter of 2006 increased 4.4 percent to $349.6 million compared with $335 million in the second quarter 2005. Average sales price per ton in the second quarter of 2006 was $889 compared to $882 in the second quarter of 2005. Total shipments for the second quarter of 2006 were 393,200 tons compared to 2005 second quarter shipments of 379,600 tons. The increase in shipments was primarily due to increased shipments of plate and coil, structural tubing, rail and seamless See seamless integration. pipe products, partially offset by lower shipments of welded pipe and rod and bar products. The Company's seamless pipe mill, which was idled in November November: see month. of 2003, was restarted in December December: see month. of 2005 and shipped 21,200 tons of seamless pipe during the second quarter of 2006. The increase in sales was primarily due to the higher shipments noted above, the addition of seamless pipe (currently the Company's highest averaged selling priced product) and higher average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. for ERW ERW Explosive Remnants of War ERW Erwachsen (German: adults) ERW Equal Rights Washington (LGBT advocacy organization in Washington State, USA) ERW Electric Resistance Weld pipe, rail and rod and bar products, partially offset by lower average selling prices for plate products. Operating income for the second quarter of 2006 was $70.6 million, an average of $179 per ton, both of which are quarterly records for the Company. This compares to operating income for the second quarter of 2005 of $54 million, an average of $142 per ton. Operating margin as a percentage of sales increased from 16.1 percent to 20.2 percent as the Company realized margin expansion in almost all of its product lines. 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 had an effective income tax rate of 32 percent in the second quarter of 2006. This compares to an effective income tax rate in the second quarter of 2005 of approximately 39 percent. The effective income tax rate for the second quarter of 2006 varied from the combined state and federal statutory rate principally because the Company reversed the remaining valuation allowance of $4 million ($.07 per diluted share) established in 2003 due to less uncertainty regarding the realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of deferred tax assets. The 2003 valuation allowance was established due to the uncertainties regarding the realization of certain federal and state 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, state tax credits and alternative minimum tax credits. The Company expects its effective income tax rate for all of 2006 to be approximately 35 percent. LIQUIDITY At June June: see month. 30, 2006, the Company had $277.8 million of cash, cash equivalents and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments. Total debt outstanding, net of cash, cash equivalents and short-term investments was $36.6 million at June 30, 2006 compared to $216.8 million at June 30, 2005 and $132.1 million at December 31, 2005. During the second quarter of 2006, the Company incurred capital expenditures of $23.5 million and depreciation and amortization was $10.9 million. For all of 2006, the Company anticipates that capital expenditures and depreciation and amortization will be approximately $92 million and $46 million, respectively. 2006 OUTLOOK For 2006, the Company expects to ship approximately 1.74 million tons of products and generate approximately $1.6 billion in sales. In the Oregon Steel Division the product mix is expected to consist of approximately 520,000 tons of plate and coil, 320,000 tons of welded pipe and 80,000 tons of structural tubing. The RMSM RMSM Revised Minimum Standard Model (World Bank) RMSM Royal Military School of Music (UK) RMSM Royal Marine School of Music (Portsmouth, UK) Division expects to ship approximately 415,000 tons of rail, 325,000 tons of rod and bar products and 80,000 tons of seamless pipe.
Expected third quarter of 2006 shipments, in tons, as compared to
previous quarters are as follows:
Forecast Actual Actual
Q3 2006 Q2 2006 Q3 2005
----------- ----------- ----------
Oregon Steel Division:
Plate and coil 210,000 211,100 152,000
Welded pipe(1) 82,000 31,600 29,500
Structural tubing 23,000 19,500 18,400
Less shipment to affiliates (71,000) (78,400) (31,300)
----------- ----------- ----------
244,000 183,800 168,600
----------------------------------
RMSM Division:
Rail 108,000 110,600 113,300
Rod and bar 87,000 77,600 99,900
Seamless pipe 21,000 21,200 -
----------- ----------- ----------
216,000 209,400 213,200
----------- ----------- ----------
Total 460,000 393,200 381,800
==================================
(1) Includes large diameter line pipe, ERW line pipe and ERW casing.
As previously reported, on July 17, 2006, the Company completed the redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. 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. The principal amount of Notes outstanding to third parties as of the date of the redemption was approximately $303 million. In connection with the redemption of the Notes, the Company will record a charge of $21.1 million ($.37 per diluted share) in the third quarter of 2006. The charge consists of approximately $15.1 million for the Notes call premium and $6 million for deferred financing costs and other costs related to the original issuance of the Notes. 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 record financial performance during the second quarter. All of our market segments performed well during the second quarter and are forecasted to remain strong through the rest of the year. During the second half of the year, we see our total volume increasing to record levels and our product mix shifting to a greater percentage of higher priced, higher margin energy-related products. At the same time, we have recently implemented price increases on selected non-energy-related products such as plate and rod. As a result of the anticipated volume increase and shift in product mix, we expect the second half of the year will result in records for revenue, shipments and operating income 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 Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , July 28, 2006, at 8:00 a.m. PT (11:00 a.m. ET). Jim Declusin, President and Chief Executive Officer and Ray Adams Adams, town (1990 pop. 9,445), Berkshire co., NW Mass., in the Berkshires, on the Hoosic River; inc. 1778. Its manufactures include chemicals, textiles, and paper products. The Berkshire region attracts tourists year-round. , Vice President of Finance and Chief Financial Officer will host the call. The conference call can be accessed in the U.S. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of 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 si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics 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 To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , 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 diameter - The diameter of a graph is the maximum value of the minimum distance between any two nodes. line pipe and casing) and structural tubing from plants located in Portland, Oregon and 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. , 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 tubular /tu·bu·lar/ (too´bu-lar) 1. shaped like a tube. 2. of or pertaining to a tubule. tubular 1. pertaining to renal tubules. 2. pertaining to fallopian tube. products.
Oregon Steel Mills, Inc. and Subsidiary Companies
Condensed Consolidated Income Statements (1)
(In thousands, except tonnage and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
Sales $349,589 $334,959 $704,877 $630,924
Cost of sales 259,587 266,834 535,019 490,263
Selling, general and
administrative expenses 19,641 14,330 40,928 32,384
Gain on sales of assets (205) (212) (372) (299)
-------- -------- -------- --------
Operating income 70,566 54,007 129,302 108,576
Interest expense, net (6,771) (8,326) (13,757) (16,968)
Other income, net 3,339 1,854 5,063 3,360
Minority interests (2,078) (1,176) (3,075) (4,252)
-------- -------- -------- --------
Income before income taxes 65,056 46,359 117,533 90,716
Income tax expense (21,120) (17,934) (40,246) (33,941)
-------- -------- -------- --------
Net income $ 43,936 $ 28,425 $ 77,287 $ 56,775
======== ======== ======== ========
Basic earnings per share $ 1.23 $ .80 $ 2.16 $ 1.60
Diluted earnings per share $ 1.22 $ .80 $ 2.15 $ 1.59
Basic weighted average shares
outstanding 35,781 35,439 35,749 35,419
Diluted weighted average shares
outstanding 36,031 35,750 35,980 35,762
Operating income per ton $ 179.47 $ 142.27 $ 163.12 $ 149.70
Operating margin 20.2% 16.1% 18.3% 17.2%
Depreciation and amortization $ 10,888 $ 9,714 $ 21,738 $ 19,445
EBITDA (see attached table) $ 82,715 $ 64,399 $153,028 $127,129
Total tonnage sold:
Oregon Steel Division:
Plate and coil 132,700 112,200 269,200 224,600
Welded pipe 31,600 66,900 93,900 97,200
Structural tubing 19,500 13,700 37,900 28,500
-------- -------- -------- --------
183,800 192,800 401,000 350,300
-------- -------- -------- --------
Rocky Mountain Steel Mills
Division:
Rail 110,600 103,200 203,900 205,000
Rod and bar 77,600 83,600 152,600 170,000
Seamless pipe 21,200 -- 35,200 --
-------- -------- -------- --------
209,400 186,800 391,700 375,000
-------- -------- -------- --------
Total Company 393,200 379,600 792,700 725,300
======== ======== ======== ========
Sales:
Oregon Steel Division $191,840 $214,314 $411,211 $386,452
Rocky Mountain Steel Mills
Division 157,749 120,645 293,666 244,472
-------- -------- -------- --------
Total Company $349,589 $334,959 $704,877 $630,924
======== ======== ======== ========
Operating income:
Oregon Steel Division $ 35,491 $ 32,675 $ 74,090 $ 68,830
Rocky Mountain Steel Mills
Division 35,075 21,332 55,212 39,746
-------- -------- -------- --------
Total Company $ 70,566 $ 54,007 $129,302 $108,576
======== ======== ======== ========
Average selling price per ton:
Oregon Steel Division $ 1,044 $ 1,112 $ 1,025 $ 1,103
Rocky Mountain Steel Mills
Division $ 753 $ 646 $ 750 $ 652
Total Company $ 889 $ 882 $ 889 $ 870
(1) Certain reclassifications have been made in prior years' periods
to conform to the current period presentations. Such
reclassifications do not affect results of operations as previously
reported.
Oregon Steel Mills, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets(1)
(In thousands)
June 30, December 31,
2006 2005
----------- -------------
(Unaudited)
-----------
Current assets:
Cash and cash equivalents $ 87,460 $ 74,965
Short-term investments 190,373 103,300
Trade accounts receivable, net 141,721 138,456
Inventories 307,233 301,546
Deferred taxes and other current
assets 31,714 17,753
------------- --------------
758,501 636,020
Property, plant and equipment, net 525,371 499,122
Goodwill 4,458 4,458
Intangibles, net 30,396 30,456
Other assets 1,180 5,824
------------- --------------
Total assets $ 1,319,906 $ 1,175,880
============= ==============
Current liabilities $ 507,651 $ 167,634
Long-term debt 6,525 308,337
Deferred taxes 56,109 43,133
Other liabilities 99,997 92,507
------------- --------------
670,282 611,611
Minority interest 14,944 11,869
Stockholders' equity 634,680 552,400
------------- --------------
Total liabilities and
stockholders' equity $ 1,319,906 $ 1,175,880
============= ==============
(1) Certain reclassifications have been made in prior years' periods
to conform to the current period presentations.
Oregon Steel Mills, Inc. and Subsidiary Companies
Calculation of EBITDA
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
--------- -------- -------- --------
Net income $ 43,936 $ 28,425 $ 77,287 $ 56,775
Income tax expense 21,120 17,934 40,246 33,941
--------- -------- -------- --------
Pre-tax income 65,056 46,359 117,533 90,716
Add back:
Interest expense 8,276 8,744 16,538 17,668
Interest capitalized (1,505) (418) (2,781) (700)
Depreciation 10,848 9,672 21,659 19,363
Amortization 40 42 79 82
--------- -------- -------- --------
EBITDA $ 82,715 $ 64,399 $153,028 $127,129
========= ======== ======== ========
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.
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