Oregon Steel Mills, Inc. reported record net income of $14.0 million on record sales of $281.8 million for the second quarter of 2004.

Second Quarter Results—Net income of $14.0 million ($.53 per share), a quarterly record for the company, compares to a net loss of $51.9 million (a negative $1.97 per share) for the second quarter of 2003. Results include an additional labor dispute settlement charge of $31.9 million. Net income for the second quarter of 2004 exclusive of the Settlement Charge was $45.9 million ($1.73 per share).

Sales, $281.8 million, also set a quarterly record for the company. This compares to second quarter 2003 sales of $189.9 million. Average sales price per ton, $654, compares to $450 in the second quarter of 2003. Total shipments of 431,000 tons compare to second quarter 2003 shipments of 422,400 tons. This increase in shipments is primarily due to increased shipments of plate, coil, structural tubing, rail, rod and bar products partially offset by lower welded and seamless pipe shipments. The increases in sales and average sales price were primarily due to higher average selling prices for plate, coil, welded pipe, rail and rod and bar products and the increased shipments noted above.

Operating income was $20.3 million (an average of $47 per ton), including the $31.9 million Settlement Charge. Operating income before the Settlement Charge was $52.2 million (an average of $121 per ton). This compares to an operating loss of $48.6 million in the second quarter of 2003, which included impairment charges of $36.1 million. The operating loss for the second quarter of 2003 before the asset impairment charges was $12.5 million.

During the second quarter of 2004, Oregon Steel recorded a pretax Settlement Charge of $31.9 million, of which $28.7 million was non-cash, related to the previously announced tentative agreement to issue four million shares of company common stock to a labor dispute settlement trust as part of the settlement of the labor dispute at the company's majority-owned subsidiary, Rocky Mountain Steel Mills. The non-cash portion of the charge is a result of adjusting the previously recorded value of the shares to market value; this adjustment will continue on a quarterly basis through the effective date of the Settlement. The company expects the Settlement will be finalized in August.

The company recorded an additional charge of approximately $3.2 million as part of the cost of Settlement related to the issuance of the shares to the Trust.

The second quarter of 2003 included after-tax asset impairment charges of $40.4 million ($1.53 per share). These asset impairments consisted of fixed assets and related dedicated stores and other assets at the company's Portland, Ore., and Pueblo, Colo., steelmaking facilities totaling $36.1 million pre-tax ($22.9 million after-tax) and a $17.5 million charge to income tax expense due to a valuation allowance on recorded deferred tax assets. During the second quarter of 2003, the company shut down its Portland, Ore., meltshop and recorded an impairment charge of $27.0 million for the fixed assets and related assets. This decision was predicated on the determination that purchasing steel slabs was a better financial decision than continuing to operate the meltshop over the long term. In addition, the company recognized an asset impairment charge of $9.1 million on a caster and related assets at the Rocky Mountain Steel Mills Division. The company completed design specifications in the second quarter of 2003 for the new single furnace, which is due to begin operation in late 2005. As the new single furnace will only require one caster, it was determined that one of the casters and related assets would have no future service potential.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2004 was $32.1 million (or $60.8 million exclusive of the $28.7 million non-cash portion of the Settlement Charge) compared to a negative $34.8 million (or $8.2 million in the second quarter of 2003 exclusive of the asset impairment charges). A reconciliation of EBITDA and EBITDA as adjusted is provided in the last table of this press release. The higher operating income and EBITDA during the second quarter of 2004 compared to the second quarter of 2003 reflects increased volume and higher average selling prices, as discussed above, partially offset by higher steel slab costs at the Oregon Steel Division, and higher scrap costs at the Rocky Mountain Steel Division. Average steel slab cost and average scrap cost were up 32% and 57%, quarter to quarter, respectively.

EBITDA is a non-GAAP (generally accepted accounting principles) measure of liquidity. The company believes that EBITDA is useful to investors because it is a basis upon which financial performance is assessed, it provides useful information regarding the company’s ability to service its 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. Oregon Steel believes EBITDA (excluding the effects of the non-cash portion of the labor dispute settlement charges and fixed and other asset impairment charges) is useful to investors because the company believes the excluded items are nonrecurring, except for additional labor dispute settlement charges that may occur based on market value of the company's shares of common stock.

Comments—Jim Declusin, Oregon Steel's President and CEO, stated, "We at Oregon Steel are very pleased to announce second quarter results that are a record for the company, its stockholders and its 1,400 employees. These results were fueled by very strong steel markets, both domestically and globally, that have increased demand for the products we produce. All of our market segments have shown strength during the second quarter and for the most part are forecasted to remain that way through the third quarter. Our ability to raise steel prices during the period has certainly contributed to our record profitability but other very important factors have been the ongoing efforts of our workforce to achieve cost reductions, quality improvements and productivity gains across all product lines."

Liquidity—At June 30, 2004, Oregon Steel maintained a $65 million revolving credit facility, of which $5.0 million was restricted, an additional $15.4 million was restricted under outstanding letters of credit and $44.6 million was available for use. There were no amounts outstanding on the revolving credit facility as of June 30, 2004. During the quarter, the company generated $51.1 million of cash flow from operations and as a result, total debt outstanding, net of cash of $53 million, was $259 million at June 30, 2004. This compares to total debt, net of cash, of $296 million at December 31, 2003 and $305 million at March 31, 2004. During the second quarter of 2004, the company incurred capital expenditures of $5.1 million; depreciation and amortization was $9.7 million. For all of 2004, the company anticipates that capital expenditures and depreciation and amortization will be approximately $28 million and $39 million, respectively.

2004 Outlook—For 2004, the company expects to ship approximately 1,720,000 tons of products and generate over $1 billion in sales. In the Oregon Steel Division the sales product mix is expected to consist of 615,000 tons of plate and coil, 175,000 tons of welded pipe and 70,000 tons of structural tubing. At these shipment levels the company expects to run its Portland combination mill at approximately 80 percent of its rated capacity, the welded pipe mills at approximately 25 percent of their rated capacities and the structural tubing mill at approximately 50 percent of its rated capacity. The company's RMSM Division expects to sell approximately 362,000 tons and 500,000 tons of rail and rod and bar products, respectively. At these shipment levels the rail and rod mills would be at approximately 90% and 100%, respectively, of their rated capacities. Seamless pipe shipments will be dependent on market conditions in the drilling industry. At the present time the company's large diameter weld pipe and seamless pipe mills are not operating.

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, Ore.; Napa, Calif.; and Camrose, Alta., Canada. The Rocky Mountain Steel Mills Division, located in Pueblo, Colo., produces steel rail, rod, bar, and tubular products.