Co-Steel Reports Quarterly Loss

Co-Steel Inc. announced its preliminary financial results for the fourth quarter and year ended December 31. For the quarter ended December 31, Co-Steel reported a net loss of $26.5 million compared with a net loss of $2.5 million the same time the previous year.

For the year the company reported a net loss of $115.8 million, compared to net income of $38.5 million.

Co-Steel's revenue for the quarter was $236.6 million, down $19.9 million from the same period last year, primarily due to declines in shipments. Shipments in the quarter fell to 532,000 tons, down from 574,000 in the fourth quarter of 2000. Revenue was $1.05 billion, down $230.9 million from 2000. Shipments in 2001 were 2,354,000 tons, compared to 2,742,000 tons in 2000.

"In 2001, Co-Steel effectively weathered a series of challenges. We endured high energy prices, a three-month labor disruption, a slowing economy and an unprecedented level of unfairly priced imports. However, we took measures necessary to ensure the viability of our operations in an environment that forced several of our competitors to seek bankruptcy protection," said Terry Newman, president and CEO of Co-Steel Inc. "Those measures included aggressive cost-cutting, the introduction of new products and services, and direct participation in political discussions to stem the tide of unfairly priced imports. These initiatives, combined with an anticipated favorable U.S. safeguard ruling, will have a positive impact on the company in 2002."

In commenting on current operations, Mr. Newman noted a number of positive factors:

After several months of negotiations, Co-Steel reached an agreement in principle with senior lenders that will increase the company's total credit facilities by $20 million.

Prices for Co-Steel's products appear to have bottomed and have started to improve. Co-Steel Sayreville announced a price increase of $15 per ton for rebar for the second quarter of 2002 from current prices of about $250 per ton and Co-Steel Raritan has announced price increases of $20 to $35 per ton also for the second quarter of 2002 from current prices of about $280 per ton.

A broad-based cost reduction program is being implemented which should produce annualized savings of over $20 million of which about $14 million is expected to be realized in 2002. This is in addition to the permanent cost savings of approximately $10 million realized in 2001.

The outlook for the three major raw materials consumed by Co-Steel are positive:

scrap prices during the fourth quarter, in comparison to historical levels were very low. Scrap prices are expected to remain relatively low throughout the first half of 2002.

Over the past 18 months, Co-Steel has focused on producing more steel with less people. The number of employees has decreased from approximately 1,770 employees at the end of 1999 to approximately 1,383 at the end of 2001.

Energy costs, which account for approximately 15 percent of the cost of steel produced, have dropped dramatically from early 2001, and while the Company has entered into natural gas prices which fix the price of approximately 67 percent of forecast gas consumption for 2002, the remainder of the consumed gas will be purchased based on current prices.

Gallatin has a strong order book and is producing at record rates with announced price increases through the second quarter of 2002 of $60 per ton over December 2001 selling prices;

Co-Steel's Recycling operations continue to perform well in a difficult market environment, earning EBITDA of $1.3 million in the fourth quarter of 2001. New non-ferrous processing facilities and improved access to rail should enhance earnings of this division in the second quarter of 2002.