Oregon Steel Mills, Inc. reported net income of $20.2 million on sales of $299.7 million for the third quarter of 2005.

The $20.2 million net income ($.57 per diluted share on 35.8 million shares) compares to a net income of $50.3 million ($1.87 per diluted share on 26.9 million shares) for the third quarter of 2004. Operating income was negatively impacted by approximately $5 million of pretax costs related to the new electric arc furnace installation and caster rebuild and related equipment outages at the company's majority-owned subsidiary, Rocky Mountain Steel Mills (RMSM). During the third quarter of 2004, the company recorded pretax charges of $4.5 million as part of the settlement of a labor dispute at RMSM and additions to long-term environmental reserves of $1.6 million. Also during the third quarter of 2004, the company’s effective income tax rate was less than 3% compared to an effective income tax rate of approximately 28% in the third quarter of 2005.

Sales, $299.7 million, compares to 2004 third quarter sales of $348.3 million. Average sales price per ton was $785, which compares to $761 in the third quarter of 2004. Total shipments were 381,800 tons compared to 2004 third quarter shipments of 457,700 tons. The decrease in shipments was primarily due to decreased shipments of plate and coil, welded pipe and rod and bar products, partially offset by higher shipments of rail products. The decrease in sales is primarily due to the decreased shipments noted above, partially offset by higher average selling prices. Higher average selling prices were primarily due to increased selling prices for plate, welded pipe and rail products which more than offset declines in the average selling prices of rod and bar and structural tubing products.

Operating income was $35.8 million (an average of $94 per ton), which compares to operating income for the third quarter of 2004 of $64 million, including the $4.5 million Settlement Charge. Third quarter 2004 operating income before the Settlement Charge was $68.5 million (an average of $150 per ton). Earnings before interest, taxes, depreciation and amortization (EBITDA) was $45.9 million, which compares to EBITDA for the third quarter of 2004 of $70.5 million ($75 million exclusive of the $4.5 million Settlement Charge).

Liquidity—At September 30, 2005, the company had $74.1 million of cash, cash equivalents and short-term investments. Total debt outstanding, net of cash, cash equivalents and short-term investments was $236.6 million at September 30, 2005 compared to $237.6 million at September 30, 2004. During the third quarter of 2005, the company incurred capital expenditures of $36.4 million; depreciation and amortization was $10.3 million. For all of 2005, the company anticipates that capital expenditures and depreciation and amortization will be approximately $87 million and $40 million, respectively.

Inventories of $346.7 million at September 30, 2005 compares to $235 million at December 31, 2004. The increase is primarily due to (1) increased volume of higher cost steel slab, (2) inventory buildup for expected welded pipe demand at the Camrose pipe mill and (3) the buildup of semi-finished inventory at RMSM in anticipation of the Furnace Installation which occurred during September and October. The new furnace has been installed and is in a startup phase and is expected to be fully operational by the middle of November. The Company anticipates end of the year inventories will be approximately $250 million.

Outlook—The furnace installation and associated outages at RMSM negatively impacted third quarter operating income by approximately $5 million. The company anticipates the furnace installation will negatively impact the fourth quarter by another $3 million. The company's large-diameter line pipe mill at Camrose, Alberta, which has been out of service for the past three months for equipment upgrades, restarted on October 24. Total shipments from Camrose are expected to be approximately 75,000 tons in the fourth quarter. Total large-diameter line pipe backlog for Oregon Steel is currently 156,000 tons. The previously announced startup of the seamless pipe mill at RMSM is proceeding with shipments anticipated to begin in February of 2006.

For 2005, Oregon Steel Mills expects to ship approximately 1.5 million tons of products and generate approximately $1.3 billion in sales. In the Oregon Steel Division the product mix is expected to consist of approximately 480,000 tons of plate and coil, 200,000 tons of welded pipe and 65,000 tons of structural tubing. The company's RMSM Division expects to ship approximately 420,000 tons and 345,000 tons of rail and rod and bar products, respectively.

Comments—Jim Declusin, the company's President and CEO, stated, "With the completion of the new single furnace installation at RMSM and the restarting of the large diameter pipe mill at Camrose, we expect operations throughout the company to return to normal. We believe that inventory levels at the service centers bottomed during the third quarter and we have begun to see some pick up in our plate market both in terms of price and volume. At the same time, market conditions for our energy related products continue to gain momentum. As we anticipated, the price of slab is declining and is now 30% off its high of earlier this year. Accordingly, we expect that fourth quarter 2005 operating income will be significantly higher than that realized in the third quarter with operating income from continuing operations to be within a range of $48 million to $52 million."

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