Oregon Steel Mills, Inc. announced net income of $44.8 million on sales of $302.0 million for the fourth quarter of 2004.

Fourth Quarter Results—Net income of $44.8 million ($1.27 per diluted share) compares to a net loss of $44.0 million ($1.67 per diluted share) for the fourth quarter of 2003. Current results include a pretax charge of $2.0 million related to an early retirement option at majority-owned subsidiary, Rocky Mountain Steel Mills (RMSM). Fourth quarter 2003 results included a pretax charge of $31.1 million related to the RMSM labor dispute and a $2.1 million increase in environmental and workers' compensation reserves. Net income for the fourth quarter of 2004 before the Early Retirement Charge of $2.0 million was $46.7 million ($1.33 per diluted shares on 35.1 million shares), while the net loss for the fourth quarter of 2003, before the charge related to settlement of the labor dispute, was $12.9 million ($.49 loss per diluted share on 26.4 million shares).

Sales of $302.0 million compares to 2003 fourth quarter sales of $168.9 million. Average sales price per ton, $840, compares to $443 in the fourth quarter of 2003. Overall shipments were 359,400 tons compared to 2003 fourth quarter shipments of 381,400 tons. The decrease is primarily due to decreased shipments of rod and bar, large diameter pipe and seamless pipe products partially offset by higher shipments of plate, rail and structural tubing products. Increases in sales and average sales price per ton were primarily due to higher average selling prices for plate, coil, welded pipe, rail and rod and bar products partially offset by the decreased shipments noted above.

Operating income was $55.4 million (an average of $154 per ton), or $57.4 million (an average of $160 per ton) before the Early Retirement Charge of $2 million. This compares to an operating loss for the fourth quarter of 2003 of $38.4 million, including the $31.1 million charge related to the labor dispute settlement agreement. Operating loss before the charge related to settlement of the labor dispute was $7.3 million.

As previously reported, on January 15, 2004 the company announced a tentative agreement to settle a six-year old labor dispute between the United Steel Workers of America at RMSM. As a result, the company recorded a pretax charge of $31.1 million in the fourth quarter of 2003.

During the third quarter of 2004, the company finalized settlement of the RMSM labor dispute, ending the labor dispute and implementing new five-year collective bargaining agreements. As part of the settlement, the Rocky Mountain Steel Mills -- United Steelworkers of America Back Pay Trust was established. The company had originally planned to issue four million shares of company common stock to the Trust; however the parties later agreed instead that the Trust would receive cash in an amount equal to the gross proceeds from the sale of four million shares of company common stock in an underwritten stock offering. The four million shares were sold for $16 per share and shortly thereafter, $64.0 million was deposited with the Trust by the company on behalf of RMSM.

As part of the Settlement, RMSM offered certain bargaining unit employees an early retirement option based on seniority until a maximum of 200 employees have accepted the offer. The company finalized the Early Retirement Option during the fourth quarter of 2004 and recorded a net charge of $2.0 million.

EBITDA—Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2004 was $64.0 million ($66.0 million exclusive of the $2.0 million Early Retirement Charge) compared to a negative $25.4 million in the fourth quarter of 2003, including the $31.1 million charge related to settlement of the labor dispute. Higher operating income and EBITDA compared to the fourth quarter of 2003 reflects higher average selling prices partially offset by lower shipments, higher steel slab costs at the Oregon Steel Division and higher scrap costs at the Rocky Mountain Steel Mills Division. Average steel slab cost and average scrap cost were up approximately 89% and 71%, fourth quarter to fourth quarter, respectively.

Liquidity—At December 31, 2004, the company maintained a $65.0 million revolving credit facility of which $5.0 million was restricted, an additional $14.9 million was restricted under outstanding letters of credit, and $45.1 million was available for use. There were no amounts outstanding on the revolving credit facility as of December 31, 2004. Cash, cash equivalents and short-term investments at December 31, 2004 were $137.1 million. During the fourth quarter of 2004, the company incurred capital expenditures of $8.4 million; depreciation and amortization was $10.2 million. For all of 2004, capital expenditures and depreciation and amortization were approximately $23.8 million and $39.8 million, respectively.

On October 5, 2004, the company completed an underwritten offering of 8.625 million common stock shares at $16 per share (including the underwriters' over-allotment option of 1.125 million shares). After distribution to the Trust (noted above), the company received net proceeds of approximately $66.1 million from the offering.

2005 Outlook—For 2005, the company expects to ship approximately 1.7 million tons of product. In the Oregon Steel Division, the product mix is expected to consist of approximately 560,000 tons of plate and coil, 200,000 tons of welded pipe and 67,000 tons of structural tubing. At these shipment levels, the company expects its Portland mill to run at approximately 75% of its rated capacity and its welded pipe mills to run at approximately 60% of their rated capacities. The company's RMSM Division expects to ship approximately 390,000 tons and 480,000 tons of rail and rod and bar products, respectively. At these shipment levels the rail and rod mills would be at approximately 90% and 95%, respectively, of their rated capacities. The company is currently not forecasting any seamless pipe shipments for 2005.

First quarter 2005 shipments to customers are expected to be approximately 355,000 tons. In the Oregon Steel Division the product mix is expected to consist of approximately 120,000 tons of plate and coil, 25,000 tons of welded pipe and 15,000 tons of structural tubing. The company's RMSM Division expects to ship approximately 110,000 tons of rail and 85,000 tons of rod and bar products. During the first quarter of 2005, the company expects its Portland mill will ship approximately 68,000 tons of plate for conversion into large-diameter line pipe to the company's majority-owned Camrose pipe mill. While the company expects the majority of this plate will be converted into line pipe during the first quarter, because of sales and delivery terms, the Camrose pipe mill is expected to recognize sales on only approximately 5,000 tons of large-diameter pipe sales during the quarter. The company expects this shipment trend to reverse in the second quarter of 2005 when line pipe shipments from the Camrose pipe mill are expected to exceed plate received from the Portland mill by 50,000 tons. Accordingly, the company's total shipments to customers are expected to be negatively impacted during the quarter. With first quarter 2005 product mix shifting to products with a lower average selling price, average selling price is expected to be lower in the first quarter of 2005 than the fourth quarter of 2004. While these factors will cause the company's estimated first quarter 2005 operating income results to be less than fourth quarter of 2004 results, the company expects operating income results in the second quarter of 2005 to exceed that realized in the fourth quarter of 2004. The effective income tax rate for the first and second quarters of 2005 is expected to be approximately 36%.

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, bar, and tubular products.