Oregon Steel Mills, Inc. reported net income of $28.4 million on sales of $296 million for the first quarter of 2004.

The $28.4 million net income ($.79 per diluted share on 35.7 million shares) compares to a net income of $7.5 million ($.28 per diluted share on 26.7 million shares) for the first quarter of 2004. During the first quarter of 2004, the company recorded a pretax settlement charge of $7 million ($.26 per diluted share) related to the labor dispute at the company's majority-owned subsidiary, Rocky Mountain Steel Mills (RMSM), which was settled during the third quarter. Also during the first quarter of 2004, the company’s effective income tax rate was less than 1% compared to an effective income rate of approximately 36% in the first quarter of 2005. Without the settlement charge, first quarter 2004 net income would have been $14.5 million ($.54 per diluted share on 26.7 million shares).

Sales of $296 million represent a 17% increase over 2004 first quarter sales of $252.4 million. Average sales price per ton was $856 (a quarterly record for the company) compared to $530 in the first quarter of 2004. Overall shipments were 345,700 tons compared to 2004 first quarter shipments of 476,500 tons. Oregon Steel attributes the shipment decrease to decreased shipments of plate, welded pipe and rod and bar products partially offset by higher shipments of structural tubing and rail products. The increases in sales and average sales price are attributed to higher average selling prices across all product lines, partially offset by the decreased shipments.

The company's Portland mill shipped approximately 62,000 tons of plate to the Camrose pipe mill for conversion into large-diameter line pipe. While the majority of this plate was converted into line pipe during the first quarter, because of sales and delivery terms, the Camrose pipe mill recognized sales on approximately 14,000 tons of large-diameter pipe during the quarter. The company expects this shipment trend to reverse in the second quarter of 2005 when large-diameter line pipe shipments from the Camrose pipe mill are expected to exceed plate received from the Portland mill by 40,000 tons. In addition, rod shipments in the quarter were negatively impacted by customer inventory buildup in the fourth quarter of 2004 that is currently being consumed.

Operating income was $54.6 million (an average of $158 per ton). This compares to operating income for the first quarter of 2004 of $15.1 million, including the $7 million Settlement Charge. Operating income before the Settlement Charge was $22.1 million (an average of $46 per ton). Earnings before interest, taxes, depreciation and amortization (EBITDA) was $62.7 million. This compares to EBITDA for the first quarter of 2004 of $33.0 million (exclusive of the $7 million Settlement Charge). Increased operating income and EBITDA compared to the year-earlier quarter reflects higher average selling prices partially offset by decreased volume and higher steel slab costs at the company's Oregon Steel Division.

On March 30, 2005, the company purchased the 40% partnership interest in Camrose Pipe Co. that was owned by a subsidiary of Stelco, Inc., for $22.5 million (Canadian). Oregon Steel now indirectly owns 100% of Camrose. As a result of the purchase, the minority interest related to Camrose of $11.4 million that was carried on the company's books at December 31, 2004 has been eliminated effective March 30, 2005. The minority partner's share of Camrose's net income during the first quarter of 2005 was $2.2 million ($.06 per diluted share).

Liquidity—At March 31, 2005, the company had $116.9 million of cash, cash equivalents and short-term investments. Total debt outstanding, net of cash, cash equivalents and short-term investments was $211.8 million at March 31, 2005 compared to $304.9 million at March 31, 2004. During the first quarter of 2005, the company incurred capital expenditures of $8 million; depreciation and amortization was $9.7 million. For all of 2005, the company anticipates that capital expenditures and depreciation and amortization will be approximately $92 million and $39 million, respectively.

At March 31, 2005, inventories were $334 million, which compares to $235 million at December 31, 2004. The increase in inventory is primarily due to (1) increased volumes of plate (for conversion into large-diameter line pipe) and large-diameter pipe at the Camrose pipe mill to support existing orders and (2) the buildup of semi-finished inventory at RMSM in anticipation of the installation of a new electric arc furnace that is expected to occur in the third quarter of 2005. The new furnace installation is expected to take approximately 45 days, during which time both furnaces at RMSM will not be operating. The company anticipates that by the end of the year, inventories will be approximately $220 million.

Outlook—For 2005, the company expects to ship approximately 1.65 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 530,000 tons of plate and coil, 190,000 tons of welded pipe and 70,000 tons of structural tubing. At these shipment levels the company expects its Portland rolling mill to run at approximately 80% 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 410,000 tons and 440,000 tons of rail and rod and bar products, respectively. At these shipment levels the rail and rod mills would be at approximately 90% and 88%, respectively, of their rated capacities. Seamless pipe shipments will be dependent on market conditions in the drilling industry; at the present time the seamless mill is not operating.

Second quarter 2005 shipments to customers are expected to be approximately 425,000 tons. In the Oregon Steel Division the product mix is expected to consist of approximately 130,000 tons of plate and coil, 75,000 tons of welded pipe and 20,000 tons of structural tubing. The company's RMSM Division expects to ship approximately 100,000 tons of rail and 100,000 tons of rod and bar products.

With second quarter 2005 product mix shifting to products with a higher average selling price, average selling price is expected to be approximately the same as that realized in the first quarter of 2005 on higher shipments. Accordingly, the company believes that for the second quarter of 2005 it will have record quarterly sales. Based on performance to date, the company anticipates that net income for the second quarter of 2005 to be within a range of $.85 to $.95 per diluted share.

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.