International Steel Group Inc. reported third quarter 2004 net income of $256.4 million on net sales of $2.6 billion, and net income of $421.4 million on net sales of $6.5 billion for the nine months ended September 30, 2004.

Third Quarter Results—Net income of $256.4 million ($2.51 per diluted share) was 172% higher than the $94.1 million in the second quarter 2004. Net sales, $2,608.3 million, represent an increase of $524.5 million (25%) from the second quarter 2004. As a result of recent acquisitions, shipments improved from 3,814,000 tons in the second quarter to 4,039,000 tons in the third quarter. Average sales per ton shipped increased to $646 from $546 in the second quarter.

Operating income improved by about 163% from $129.5 million ($34 per ton shipped) in the second quarter 2004 to $340.4 million ($84 per ton shipped) in the third quarter 2004.

Cost of sales improved to 83% of sales compared to 89% in the second quarter. Variable compensation, including profit sharing for all employees, production bonuses and contributions to the United Steelworkers of America (USWA) VEBA trust based on profits, totaled about $42 per ton shipped in the third quarter compared to about $15 per ton shipped in the second quarter.

Raw material costs for iron ore, scrap and alloys were also higher in the third quarter while coke costs declined. The company’s LIFO provision was $24 million, for the third quarter principally as total costs for all items in the company’s single pool increased slightly. Costs per ton also increased during the third quarter due to a higher cost product mix following the Weirton acquisition and the startup of the Georgetown operation. Weirton was acquired in May 2004 while Georgetown was acquired in June 2004.

Nine Month Results—Net income of $421.4 million equates to $4.15 per diluted share. With total shipments of 11,715,000 tons, the operating income of $556.4 equates to an operating income of $47 per ton shipped.

Liquidity and Cash Flow from Operations—With liquidity defined as cash position and remaining availability under the revolving credit facility, ISG’s liquidity was $828.4 million at September 30, 2004, consisting of cash of $603.7 million and available borrowing capacity of $224.7 million under the revolving credit facility. As of December 31, 2003, ISG had liquidity of $432.7 million.

Cash provided by operating activities was $358.8 for the third quarter and $568.7 million for the nine months.

Capital Expenditures—Capital expenditures and other investments for 2004 currently stand at $150.7 million, and ISG anticipates total capital expenditures of about $250 to $275 million for the year 2004 as the caster at Burns Harbor is upgraded during the fourth quarter 2004. Proceeds from asset sales were $16.1 million in the nine months ended September 2004, and the company expects an additional $11 million in the fourth quarter of 2004.

Outlook—During the fourth quarter, at Burns Harbor, ISG plans a fourteen-day blast furnace and a 45-day caster outage to improve quality and productivity. At Weirton, there is a planned nine-day blast furnace/caster outage as well as a fifteen-day maintenance outage at the hot strip mill. The company expects, however, shipments and prices to remain about the same in the fourth quarter as in the third quarter.

International Steel Group Inc. is one of the largest steel producers in North America. It produces a variety of steel products including hot-rolled, cold-rolled and coated sheets, tin mill products, carbon and alloy plates, wire rod and rail products and semi-finished shapes to serve the automotive, construction, pipe and tube, appliance, container and machinery markets.