Oregon Steel Reports Loss for Quarter

Oregon Steel Mills, Inc. reported a second quarter net loss of $51.9 million loss, including asset impairment charges of $40.4 million after tax. For the second quarter last year the company reported net income of $5.2 million.

The asset impairments in the second quarter of 2003 consisted of fixed assets and related dedicated stores and other assets at the Company's Portland, Ore., and Pueblo, Co. steelmaking facilities totaling $36.1 million pre-tax and a $17.5 million charge to income tax expense due to a valuation allowance on recorded deferred tax assets.

During the second quarter the company shut down its Portland melt shop and has recorded an impairment charge of $27 million for the fixed assets and related assets. This decision was predicated on the determination that purchasing steel slabs was a better financial decision than continuing to operate the melt shop over the long term.

In addition, the company recognized an asset impairment charge of $9.1 million on a caster and related assets at the Rocky Mountain Steel Mills Division. The company completed design specifications in the second quarter for the new single furnace due to begin operation the middle of next year. The new single furnace will only require one caster. Accordingly, it was determined that one of the casters and related assets would have no future service potential.

Product revenues for the second quarter were $179.2 million on shipments of 422,400 tons, compared to product revenues of $217.8 million on shipments of 468,200 tons for the comparable 2002 quarter. The decrease in revenue and shipments is due to fewer shipments during the second quarter of 2003 of the company's welded pipe and rail products.

During the second quarter of 2003 the company shipped 79,000 tons of welded pipe and 86,800 tons of rail, compared to 110,200 tons of welded pipe and 101,200 tons of rail in the second quarter of 2002.

The company's average selling price per ton decreased 9 percent to $424 in the second quarter of 2003 compared to $465 during the second quarter of 2002. The reduction in average selling price is primarily related to the shift in product mix discussed above.

Operating loss for the second quarter of 2003, before impairments, was $12.5 million, compared to operating income of $17.0 million for the comparable 2002 quarter. Operating income was negatively impacted by higher-than-expected raw material costs (scrap and slabs), higher energy costs at the Company's RMSM Division and continued depressed pricing and markets for the OSM Division's flat roll products.

At the RMSM Division, energy costs were up $15 a ton compared to the second quarter of 2002 and purchased scrap was $13 per ton higher in the second quarter of 2003 compared to the second quarter of 2002.

Higher manufacturing costs at the Oregon Steel Division were primarily driven by significantly higher overall slab costs, approximately $45 per ton increase in the second quarter of 2003 compared to the second quarter of 2002. Energy costs increased minimally at the Oregon Steel Division.

Although the company recently announced sales price increases of $20 per ton for plate products, $20 per ton for coil products and $15 per ton for rod/bar products, the company believes that operating income in the second half of the year will continue to be negatively impacted by higher costs for raw materials and energy. As a result, the company expects to report losses for the second half of the year.