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Stelco Reports 3rd Quarter Results, Status of Acquisition

10/25/2007 - Stelco reports net income of $38 million on sales of $634 million for the quarter, and a net loss of $42 million on sales of $1.96 billion for the nine months ended September 30, 2007.

Stelco Inc. reported net income of $38 million on sales of $634 million for the quarter, and a net loss of $42 million on sales of $1.96 billion for the nine months ended September 30, 2007.
 
Third Quarter Results—Net income of $38 million ($1.26 per fully diluted share) compares to a net loss of $41 million (loss of $1.51 per share) for the second quarter of 2007 and a loss of $25 million (loss of $0.93 per share) in the third quarter of 2006. Results included workforce reduction costs of $5 million and foreign-exchange gains of $36 million.
 

Shareholders owning more than 76% of Stelco's outstanding common shares have entered into agreements with U.S. Steel whereby they have irrevocably agreed to vote in favor of the acquisition at the meeting.
 
EBITDA* was $67 million, a $14-million improvement of over the second quarter of 2007. The increase was largely driven by the significantly improved cost structure that resulted from strategic and operational restructuring initiatives over the past 18 months plus lower input costs. The improvements were offset by lower selling prices.

 
Proposed Acquisition by U.S. Steel—Stelco entered into an arrangement agreement with U.S. Steel Corp. on August 26, 2007, providing for a subsidiary of U.S. Steel to acquire all of the outstanding Stelco common shares for $38.50 (cash) per common share. Stelco would become an indirect wholly-owned subsidiary of U.S. Steel under a plan of arrangement pursuant to the provisions of applicable corporate legislation.
 
As part of the acquisition, holders of warrants to purchase common shares would receive, for each warrant held, a cash payment from Stelco equal to $27.50 (which is the difference between $38.50 and the exercise price of the warrants). Holders of options to purchase common shares would receive, for each option held, a cash payment from Stelco equal to the difference between $38.50 and the exercise price of such option.
 
In connection with the acquisition, the companies anticipate that the floating rate notes will be redeemed and Stelco's secured term and asset based loans, as well as a term loan made by a subsidiary of Stelco, will be retired.
 
Completion of the acquisition is subject to customary conditions, including Stelco shareholder approval, court approval and receipt of certain regulatory approvals. Subject to the satisfaction of such conditions, it is anticipated that the acquisition will be completed on or about October 31, 2007.
 
A special meeting of the Stelco shareholders has been scheduled for October 26, 2007 for the purpose of considering a special resolution approving the acquisition. The resolution must be approved by at least two-thirds of the votes cast by shareholders represented in person or by proxy at the meeting.
 
Shareholders owning more than 76% of Stelco's outstanding common shares have entered into agreements with U.S. Steel whereby they have irrevocably agreed to vote in favor of the acquisition at the meeting.
 
* EBITDA is a non-Canadian GAAP measure which may not be comparable to measures used by other companies.
 
Stelco, one of Canada's largest steel companies, is focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke. These operations produce high quality value-added hot rolled, cold rolled, coated sheet and bar products.