The Steel Weekly. December 8, 2008

Transcription

1 Analysts: BOB RICHARD, CFA T: E: LUKE FOLTA T: E: The Steel Weekly An investigation of debt levels of the companies in our steel coverage universe (less GTI) is enclosed. We find current debt covenants less than restrictive, 2009 debt maturities modest, and NUE, ZEUS, and SCHN probably the most conservatively positioned of our covered companies from a financial leverage standpoint. Industry: STEEL With a decent domestic mill backlog, remote probability of inventory write-downs, a higher than guided to LIFO benefit, and probable share buyback activity, there is a basis for optimism regardting CMC s 1Q09 results which will probably be announced sometime next week. Coverage: Ticker Rating Price AKS Neutral $7.15 CMC Neutral $9.52 GNA Neutral $3.74 GTI Neutral $6.41 NUE Buy $36.45 RS Neutral $18.06 SCHN Neutral $26.52 STLD Neutral $8.15 WOR Neutral $12.45 X Buy $28.76 ZEUS Neutral $15.19 In light of the recent WOR $100 million inventory write-down, we do not expect RS or ZEUS to incur similar charges this quarter due to sales mix, inventory costing methods, and higher turnover. A detailed discussion of SCHN ferrous scrap export volumes is enclosed, showing its dependence on Turkish and Asian steel production trends. November s steel product import licensing trends are reviewed inside. Fortified by significant sequential decline in semi-finished, flat rolled, and bar imports, we continue to expect very modest imports in the medium term, but note the continued surge in Chinese OCTG volumes. Trends in North American automotive production (per Ward's, down to 13.2 million units in 2008), SBB international hot rolled price (U.S., at $550, well below group average of $658), non-residential construction spending (down 19% year over year on an adjusted dollar basis), and international scrap price (at a perceived bottom) are enclosed. Important Disclosures are found on last page. Longbow Research, 6000 Lombardo Center, Suite 500, Independence, Ohio USA T: F:

2 The following are our key takeaways from an analysis of the balance sheets of our coverage universe, less GTI. Based on our estimates for calendar FY09E EBITDA and current balance sheet account values, none of the companies in our coverage universe that release details of leverage limits is in violation of current debt covenants. Companies that are closest to violating their covenants include NUE (with debt to total capital of 40% vs. its 60% limit) and WOR (with debt to total capital of 34% vs. its limit of 55%). We believe that neither will have an issue remaining below these targets for the foreseeable future. We expect WOR to take advantage of its enhanced free cash flow during this period of inventory de-stocking to pay down debt. NUE has considerable flexibility with $1.4 billion on its balance sheet that is not taken into consideration in their above covenant. In calendar 2009, WOR (42%) and CMC (16%) have the largest debt maturities coming due that represent significant portions of our forecast FY09 EBITDA. While CMC currently has enough cash on its balance sheet to cover the obligation, WOR will likely have to refinance the debt or fund it with the use of cash generated throughout the year. With the exception of WOR and CMC, 2009 debt maturities represent less than 5% of FY09E EBITDA for all other Companies under our coverage. Companies with debt/leverage ratios above the industry average include STLD, CMC, RS, and GNA. Companies with lower debt/leverage ratios include AKS, SCHN, and NUE. While we find interest coverage ratios healthy for our coverage universe as a whole, NUE, SCHN, and ZEUS are in a particularly strong position, each with coverage ratios over 25x. The lowest of the group include GNA, STLD, and RS, but we expect these Companies to generate 7x-9x their interest expense in EBITDA in Industry Update Page 2

3 The following tables summarize the debt covenants associated with the Companies in our steel coverage universe, their debt maturity schedules and select leverage and liquidity ratios. Steel Coverage Debt Covenants AKS X The company has a covenant on Senior debt Issue restricting the payment of dividends or the repurchase of shares based on a formula of cumulative net earnings. The formula limits restricted payments (i.e., dividends and share repurchases) to $25 million plus 50% of cumulative net income or 100% of cumulative net loss from 4/2002. The senior note indenture also includes restrictive covenants regarding (a) the use of proceeds from asset sales, (b) some investments, (c) the amount of sale/leaseback transactions, and (d) transactions by subsidiaries and with affiliates. Under the Company's $850 million Asset Backed Revolving Credit Facility, dividends are limited to $12 million annually should availability on the revolver fall below $150 million. If availability falls below $125 million, a minimum fixed charge coverage ratio of 1.0x applies. If the interest coverage ratio falls below 2.5x, the additional debt that AKS could incur would be limited to $100 million (Calculated here as EBITDA / Interest Expense). The company has a 2007 Revolving Credit ($750 million) Facility and two Term Loans ($500 million each) which restrict interest coverage (EBITDA / Total Interest Expense) to 2.1x and leverage (Total Debt to EBITDA of 3.25x). Three Senior Notes contain covenants restricting X's ability to create liens and engage in sale-leasebacks and require the purchase of the notes upon a change of control under specified circumstances, as well as other customary provisions. NUE The company has a $1 billion Revolving Credit Facility which restricts debt to capital to 60%. CMC GNA The indenture governing CMC's 2009, 2013, 2017, and 2018 notes contains restrictions on its ability to create liens, sell assets, enter into sale and leaseback transactions, and consolidate or merge. CMC's credit facility also requires that it meet certain financial tests and maintain certain financial ratios, including a maximum debt to capitalization and interest coverage ratios, although the specific limits were not provided. The Term Loan Facility includes financial covenants requiring Gerdau S.A. and its subsidiaries on a consolidated basis to satisfy maximum total debt to EBITDA and minimum EBITDA to interest expense tests, and the value of Gerdau S.A. s and certain of its subsidiaries receivables under certain off-take supply contracts to at all times exceed the principal amount of the outstanding term loans. Specific limits were not provided. STLD RS WOR ZEUS SCHN STLD's senior secured credit agreement contains financial covenants and other covenants that limit or restrict its ability to make capital expenditures, incur indebtedness, permit liens on property, enter into transactions with affiliates, make restricted payments or investments, enter into mergers, enter into acquisitions, enter into consolidations, conduct asset sales, pay dividends or distributions, and enter into other specified transactions and activities. Specific limits were not provided. RS' existing debt agreements contain financial and restrictive covenants that limit the conmpany's ability to incur additional debt, including the financing of future operations or other capital needs, and to engage in other activities that it may believe are in its long-term best interests, including the disposition of or acquisition of assets or other companies or the payment of dividends to shareholders. Specific limits were not provided. Covenants related to WOR's revolving credit facility include, among others, maintenance of a debt-to-totalcapitalization ratio of not more than 55% at the end of any fiscal quarter and the maintenance of an interest coverage ratio of not less than 3.25x through maturity. Source: Company Reports ZEUS' credit facility requires it to comply with various covenants. The most significant include minimum availability of $10 million (tested monthly), a minimum fixed charge coverage ratio of 1.25x, and a maximum leverage ratio of 1.75x (tested quarterly), restrictions on additional indebtedness, and limitations on capital expenditures and investments. SCHN's two bank credit agreements contain various representations and warranties, events of default, and financial and other covenants. Material covenants include maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. Specific limits were not provided. Industry Update Page 3

4 Steel Coverage Debt Maturity Schedules Maturity Schedule Company Later Total AKS $1 $1 $1 $551 $101 $654 X $141 $393 $459 $420 $1,741 $3,154 NUE $180 $0 $0 $650 $1,420 $2,250 CMC $106 $28 $25 $25 $1,120 $1,304 GNA $0 $0 $1,201 $1,300 $555 $3,055 STLD $56 $56 $56 $1,054 $513 $1,735 RS $11 $78 $245 $0 $676 $1,011 WOR $145 $0 $0 $0 $100 $245 ZEUS $0 $0 $0 $0 $0 $0 SCHN $0 $0 $0 $150 $8 $158 Maturity as % of Total Debt Company Later Total AKS 0% 0% 0% 84% 15% 100% X 4% 12% 15% 13% 55% 100% NUE 8% 0% 0% 29% 63% 100% CMC 8% 2% 2% 2% 86% 100% GNA 0% 0% 39% 43% 18% 100% STLD 3% 3% 3% 61% 30% 100% RS 1% 8% 24% 0% 67% 100% WOR 59% 0% 0% 0% 41% 100% ZEUS 0% 0% 0% 0% 0% 0% SCHN 0% 0% 0% 95% 5% 100% Maturity as % of FY09E EBITDA Company Later Total AKS 0% 0% 0% 70% 13% 83% X 5% 14% 17% 15% 63% 114% NUE 5% 0% 0% 17% 38% 60% CMC 16% 4% 4% 4% 173% 201% GNA 0% 0% 114% 123% 52% 289% STLD 4% 4% 4% 73% 36% 120% RS 2% 12% 36% 0% 99% 149% WOR 42% 0% 0% 0% 29% 71% ZEUS 0% 0% 0% 0% 0% 0% SCHN 0% 0% 0% 74% 4% 78% Industry Update Page 4

5 Steel Coverage Leverage / Liquidity Ratios Net Debt to Total Capital Net Debt to FTM EBITDA Debt to Equity Interest Coverage FTM Current Ratio Net Working Capital AKS ,333 X ,287 NUE ,511 CMC ,485 GNA ,341 STLD RS ,973 WOR ZEUS SCHN Average ,701 Source: LBR, Baseline Baseline Steel Index Cash & Equivalents - $ millions (most recent quarter) Interest Bearing Debt (ST & LT) = Net Debt Carpenter Technology CRS (72) Quanex NX (51) Mesabi Trust MSB (14) Friedman Industries FRD (12) Universal Stainless USAP (10) Great Northern Iron GNI (1) Eastern EML China Precision Steel CPSL Haynes International HAYN Synalloy SYNL Olympic Steel ZEUS NN NNBR Northwest Pipe NWPX Graftech International GTI Castle CAS Schnitzer Steel Industries SCHN AK Steel Holding AKS Allegheny Technologies ATI General Steel Holdings GSI Novamerican Steel TONS Worthington Industries WOR Commercial Metals CMC ,117 NUCOR NUE ,627 Tenaris TS ,797 Reliance Steel & Aluminum RS ,233 United States Steel X ,432 Ternium SA TX ,477 Gerdau Ameristeel GNA ,726 Steel Dynamics STLD ,854 Mechel Open Joint Stock Company MTL ,112 Companhia Siderurgica Nacional SID ,292 Gerdau SA GGB ,041 Acelor Mittal MT ,515 Source: Baseline Bold indicates current steel coverage Industry Update Page 5

6 In our opinion, there is reason to believe CMC will exceed earnings expectations for the quarter ending November. In preparation for CMC s 1Q09 earnings call, expected on or around December 15, we provide the following. Recently, investor relations material on the Company website guided to fairly healthy domestic mill backlogs, heavily weighted towards highway work. With their considerable Texas production presence, where highway activity is believed strongest, some baseline level of mill throughput is assured. The guided to 1Q09 pre-tax LIFO benefit of approximately $50 million (which is $0.40 accretive) is probably understated, due to more rapid decline in ferrous scrap pricing during the quarter than expectations. We find the likelihood of scrap inventory write-downs less for CMC than for STLD, as the latter accounts for inventory costing on a FIFO basis. As of the end of 4Q08, the Company s share repurchase authorization was over 10 million shares. In the last conference call, the Company alluded to a higher likelihood of share buybacks than acquisitions in light of the hundreds of millions of dollars available through working capital reductions, especially (in our opinion) from the Company s international trading business. Although we believe share buybacks are an unpopular use of cash in this environment, we find CMC more likely to buy back shares than any of its competitors. Some CMC share buyback activity was most probably executed this quarter. Offsetting the above tailwinds to 1Q09 reported earnings, we suspect CMC s international marketing and distribution business faced considerable difficulty in the quarter, due to falling commodity prices and the dollar strengthening in the quarter (see exhibit five and six below). This segment contributed 30% of operating income in CMC s FY08. Reduced contribution at least through 1Q09 and probably through the first half of CMC s fiscal year is a reasonable expectation. 90 U.S. DOLLAR INDEX US Dollar Index /25/ /18/ /11/ /4/ /28/ /21/ /14/ /7/2008 9/30/2008 9/23/2008 9/16/2008 9/9/2008 9/2/2008 Source: Baseline U.S. DOLLAR INDEX Industry Update Page 6

7 $110 Indian Iron Ore - China import $105 $100 $95 $90 $/tonne $85 $80 $75 $70 $65 $60 Source: SBB Sep 08 Oct 08 Nov 08 Indian Iron Ore 63% Fe dry / China import CFR N.China port $/t We maintain a level of caution on CMC, and note that most recently its shares trade closely with European rebar price. With no signs of inflection from a possible bottom in a very difficult demand environment, we hold pause on establishing a position at this time. CMC Share Price vs. European Domestic Rebar Price $1,275 $1,175 Correlation = 60% $40 $35 European Domestic Rebar Price; $/s.ton $1,075 $975 $875 $775 $675 $575 $475 $375 Source: SBB & Baseline Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Rebar / Europe domestic delivered $/s.ton Aug-07 CMC Share Price Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 $30 $25 $20 $15 $10 $5 $0 CMC Share Price Industry Update Page 7

8 Last week, WOR announced their intention of taking a $100 million ($0.85 per share) pre-tax inventory write-down due to lower of cost or market adjustments. We remind investors WOR is on FIFO, and it stands to reason a FIFO company will be more likely to suffer lower of cost or market adjustments when finished steel prices collapse. The higher priced inventory WOR purchased at the tail end of the steel price run-up will be consumed last when costing inventory for this past quarter s sales. When shipments decline in the quarter ending in November as they have, this higher priced material, still sitting in inventory after the books are closed, has to be re-valued to market. It also stands to reason that WOR, with higher exposure to light gauge carbon steel products for automotive, construction, and metal faming purposes, would be more likely to suffer lower of cost or market inventory adjustments. Pricing for these products have fallen more than heavier gauge plate products, where pricing has held up better. We do not expect RS or ZEUS to suffer such inventory adjustments this quarter. Each turn over their inventory faster than WOR, do not use FIFO, and have higher exposure to more price resistant, heavier gauge plate products. 7.5 Service Center Inventory Turnover Inventory Turnover = Annualized COGS / Average Inventory Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 Source: LBR & Company Reports Note: ZEUS & RS on fiscal quarters and WOR most recent, 1Q09 ending in August compared. RS ZEUS WOR 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Industry Update Page 8

9 We remind investors that, since their fiscal 2006 start, SCHN s ferrous export volumes have become much greater than their domestic ferrous tonnage. MIX OF SCHN FERROUS VOLUMES; EXPORT AND DOMESTIC SALES 1100 SCHN data 's ferrous tons Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 SCHN quarter SCHN DOMESTIC FERROUS VOLUMES SCHN EXPORT FERROUS VOLUMES Exhibits 10 and 11 illustrate the strong correlation between SCHN export volumes versus Turkish and Asian steel production. TRENDS IN SCHN FERROUS SCRAP VOLUMES VS. TURKISH STEEL PRODUCTION WSA, SCHN data, correlation = 88% , ,548 7,500 SCHN ferrous scrap export volume, 000's t ,394 up 18% 642 up 71% 7,000 6,500 6,000 5,500 5,000 Turkish steel production, 000's t 300 4, ,000 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 SCHN fiscal quarter SCHN EXPORT FERROUS VOLUMES TURKISH CRUDE STEEL PRODUCTION Industry Update Page 9

10 TRENDS IN SCHN VOLUMES VS. ASIAN STEEL PRODUCTION WSA, SCHN data, corr = 86% 187,067 up 6% , ,026 SCHN ferrous export volumes, 000 t up 71% 180, , , ,000 Asian steel production, 000 t ,000 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 SCHN fiscal quarter SCHN EXPORT FERROUS VOLUMES ASIAN CRUDE STEEL PRODUCTION In light of the recent IISI/WSA production data through October, we expect a sequential decline in SCHN s shipping volumes in its fiscal quarter that ended in November (1Q09). TRENDS IN ASIAN AND TURKISH STEEL PRODUCTION 8,000 7,500 WSA data 198,026 7, ,000 11% decline Turkish steel production, 000's tons 7,000 6,500 6,000 5,500 5,000 20% decline 5, , , , ,000 Asian steel production, 000's tons 120,000 4,500 4, ,000 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09E SCHN quarter TURKISH STEEL PRODUCTION ASIAN STEEL PRODUCTION Industry Update Page 10

11 Using prior historical relationships between SCHN ferrous export volumes and the above production statistics, we estimate ferrous export volumes will fall sequentially 43%, to 630,000 tons, in 1Q09. TRENDS IN SCHN FERROUS EXPORT VOLUMES , 's ferrous export tons % drop Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 SCHn fiscal quarter 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09E SCHN FERROUS EXPORT VOLUMES We maintain a level of comfort in our 1Q09 total SCHN ferrous scrap volumes of 850,000 tons. This assumes the above 630,000 tons of ferrous export volumes, plus a 40% sequential reduction in domestic ferrous scrap shipments. That seems reasonable in the very difficult SCHN 1Q09. November s total steel import licenses (released by the Import Administration on December 2 nd ) decreased sequentially by 23% and are down 2% from the comparable period last year. Total licenses were 2.1 million tonnes. Pipe and tube carbon and alloy (C&A), 45% of total, increased 7% sequentially and is up 44% year over year. Imports of OCTG grew 25% sequentially, largely due to Chinese imports, which were up a staggering 196% over last year s comparable period. We expect recent domestic OCTG price decreases will mitigate future imports to some extent. Alternatively, flat rolled (C&A), 33% of total, declined 15% from October s level, and is down 2% from last year. Decreases from both Canada and China are noted. Imports of bar (C&A), 6% of total, decreased substantially by 53% month-over-month, and was also off 43% from last year s comparable. Lesser Mexican and Japanese rebar imports both contributed to decline. Structurals (C&A), 2% of total, were down 38% from last November and also declined 4% on a sequential basis. Industry Update Page 11

12 Indicative of the lackluster demand, semi-finished products (C&A) were off 75% month over month and 59% from last November. Decreases are noted from Mexico, Ukraine, Canada, and Brazil. Regionally, steel imports declined sequentially from North America (-57%), European Union (-1%), Pacific Rim (-15%), and South / Central America (-68%). Alternatively imports increased from total Europe (+3%), NICS [Newly Industrialized Countries] (+28%), and other countries (+71%). The following graphs provide an overview of recent steel import trends by product and regions. Total U.S. Steel Imports; All Shapes; Broken Down by Grade 2,850, ,000 2,650,000 95,000 Carbon & Alloy Total (metric tons) 2,450,000 2,250,000 2,050,000 1,850,000 1,650,000 90,000 85,000 80,000 Stainless Steel Total (metric tons) 1,450,000 75,000 1,250,000 70,000 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 FINISHED CARBON & ALLOY TOTAL STEEL IMPORTS TOTAL STAINLESS Source: US Department of Commerce, Import Administration Industry Update Page 12

13 U.S. Steel Imports; All Shapes; All Grades; Finished - Semi-finished Breakdown 3,000,000 2,500,000 Imports (metric tons) 2,000,000 1,500,000 1,000, ,000 0 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 Source: US Department of Commerce, Import Administration TOTAL STEEL IMPORTS TOTAL FINISHED TOTAL SEMI-FINISHED 100,000 U.S. Stainless Steel Imports; Finished vs Semi-Finished 90,000 80,000 70,000 Imports (metric tons) 60,000 50,000 40,000 30,000 20,000 10,000 0 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 TOTAL STAINLESS TOTAL STAINLESS FINISHED STAINLESS SEMI-FINISHED Source: US Department of Commerce, Import Administration Industry Update Page 13

14 60,000 U.S. Stainless Steel Imports; Finished Product; By Shape 50,000 Imports (metric tons) 40,000 30,000 20,000 10,000 0 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 FLAT ROLLED BAR PIPE AND TUBE WIRE Source: US Department of Commerce, Import Administration -Stainless structural and rail imports are very modest, and removed for clarity. 3,000,000 U.S. Steel Imports; Carbon & Alloy Products; Finished vs Semi-Finished 2,500,000 Imports (metric tons) 2,000,000 1,500,000 1,000, ,000 0 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 TOTAL CARBON & ALLOY FINISHED CARBON & ALLOY SEMI-FINISHED Source: US Department of Commerce, Import Administration Industry Update Page 14

15 1,000,000 U.S. Steel Imports; Carbon & Alloy; By Shape 900, , ,000 Imports (metric tons) 600, , , , , ,000 0 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 FLAT ROLLED BAR PIPE AND TUBE WIRE PRODUCTS STRUC TURAL & RAIL Source: US Department of Commerce, Import Administration -Tool steels are removed for clarity. These imports are alloy grade and average 20K tons per month. -Flat rolled includes HRC,CRC,CTD, and PLT products. U.S. Steel Imports; Rebar 180, , , ,000 Imports (metric tons) 120, ,000 80,000 60,000 40, ,663 55,408 60,888 49, , , ,462 51,307 60,723 79,308 75,503 52,870 33,343 20,000 20,687 0 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 Bars-Reinforcing -- C & A Source: US Department of Commerce, Import Administration Industry Update Page 15

16 U.S. Steel Imports; OCTG 575, , , , , , ,487 Imports (metric tons) 375, , , , , , , , , , , , , , , , ,233 75,000 94,045 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 OCTG Source: US Department of Commerce, Import Administration 1,100,000 U.S. Steel Imports; All Shapes & Grades; By Major Regions 1,000, ,000 Imports (metric tons) 800, , , , , , ,000 Nov-08 L Oct-08 L Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 CANADA Europe Pacific Rim Countries Source: US Department of Commerce, Import Administration -Russia, Ukraine, and Germany are the largest European contributors. -China, Japan, Korea, and Taiwan are the largest Pacific Rim contributors. Industry Update Page 16

17 U.S. Steel Imports; All Shapes & Grades; By Major Regions 350, , ,000 Imports (metric tons) 200, , ,000 50,000 0 Sep-07 Oct-07 Nov-07 Dec-07 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 South/Central America MEXICO Other Countries Sep-08 Oct-08 L Nov-08 L Source: US Department of Commerce, Import Administration Industry Update Page 17

18 On December 1 st Ward s updated October s final North American vehicle production, which totaled 1.16 million units. Final production was 3% lower than Ward s estimated, and is up sequentially (+3%), but declined 20% year-over-year. Total North American vehicle production is forecast to be 13.2 million units in FY08, the lowest level since Total North American Vehicle Production & Forecast vehicles; units in millions Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yearly North American Vehicle Production 18.0 Vehicle Production (millions) Total North American Vehicle Production (in millions) (E) Industry Update Page 18

19 December s international hot rolled coil prices look to decline 4% sequentially, on average, according to data released by SBB last week. Brazil remained the highest at $1,016 per ton, while Chinese coil was the lowest at $442 per ton. The U.S. price is $550 per ton, modestly below the group average of $658 per ton. 1,300 International Hot Rolled Coil Price Trends 1,200 1,100 1,000 $/ton Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 North Europe ,059 1, South Europe ,009 1,079 1,095 1, United States ,010 1,093 1,090 1,080 1,030 1, Turkey ,089 1,189 1,234 1,234 1, China Japan Mexico ,116 1,152 1,170 1, Brazil ,048 1,093 1,261 1,266 1,207 1,121 1,016 1,016 Average ,037 1,081 1, Source: SBB 1,400 International Hot Rolled Coil Price Trends; Low, Average, High 1,300 1,200 1,100 1,000 $/ton Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Average High Low Industry Update Page 19

20 Data released last week by the U.S. Census indicates current private nonresidential construction spending remains up 13% year over year, but spending on an inflation adjusted basis declined 19% over the same period in October. The following graphs show comparative trends between current and deflated private nonresidential construction spending. The declining year-over-year trends of deflated spending indicate volumes used for construction projects are decreasing from the year ago period, although costs are higher. $40,000 Private Nonresidential Construction Spending; Millions of Dollars (current vs 1993 dollars) Private Nonresidential Construction Spending; Millions of Dollars $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 Source: BLS, US Census Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Total Private Construction Nonresidential Spending (millions) Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Private Construction Spending (millions of 1993 dollars) 25% Private Nonresidential Construction Spending 20% 15% 10% Year-Over-Year Change 5% 0% -5% -10% -15% -20% -25% Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 y/y change 1993 dollars y/y current dollars Source: BLS, US Census, LBR Industry Update Page 20

21 Per data from SBB, international obsolete scrap grades average $167 per ton, while prime grades are $183 in December. Sequentially, on average, obsolete grades declined 4%, while prime grades were up 31%. Both grades are down year over year. We find the slight sequential price uptick and lesser decreases positive for SCHN, although hold pause regarding scrap demand due to severe production curtailments by mills worldwide. $725 International Average Scrap Price Trends (Obsolete vs. Prime) International Average Scrap Price Trends; $/s.t. $625 $525 $425 $325 $225 $125 Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 Aug-07 Jul-07 Jun-07 May-07 Apr-07 Mar-07 Feb-07 Jan-07 Dec-06 Nov-06 Oct-06 Sep-06 Aug-06 Jul-06 Jun-06 May-06 Apr-06 Mar-06 Feb-06 Jan-06 Source: SBB Obsolete Average Prime Average International Scrap Price Trends Europe UK Rotterdam East Asia Turkey N. America N. America China Japan Japan Japan Obsolete Prime Shredded Structural Shredded HMS HMS Shredded Bundles Heavy Melt H2 New Cut Shredded Average Average Dec-07 $268 $234 $268 $359 NM $277 $284 $391 $311 $331 $317 $303 $307 Nov-08 $145 $77 $141 $218 $241 $157 $121 $306 $136 $159 $143 $173 $140 Dec-08 $138 $55 $127 $227 NM $181 $199 $311 $144 $168 $152 $167 $183 m/m -4% -29% -10% 4% NM 16% 65% 2% 6% 6% 6% -4% 31% y/y -48% -76% -53% -37% NM -35% -30% -20% -54% -49% -52% -45% -40% YTD 39% 30% 33% 38% NM 42% 78% 46% 43% 43% 42% 40% 59% Source: SBB Note: $/s.tons Industry Update Page 21

22 Steel Industry Charts Sheet, hot-rolled, $/ton $1,200 $1,100 $1,000 $900 $800 $/ton $700 $600 $500 $660 $400 $300 $200 $100 $0 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 Jul-04 Jan-04 Jul-03 Jan-03 Jul-02 Jan-02 Jul-01 Jan-01 Jul-00 Jan-00 Jul-99 Jan-99 Jul-98 Jan-98 Jul-97 Jan-97 Jul-96 Jan-96 Jul-95 Jan-95 Source: AMM & LBR Sheet, hot-rolled sheet, $/ton Plate, cut-to-length, $/ton $1,600 $1,400 $1,200 $1,251 $1,000 $/ton $800 $600 $400 $200 $0 Oct-08 Jun-08 Feb-08 Oct-07 Jun-07 Feb-07 Oct-06 Jun-06 Feb-06 Oct-05 Jun-05 Feb-05 Oct-04 Jun-04 Feb-04 Oct-03 Jun-03 Feb-03 Oct-02 Jun-02 Feb-02 Oct-01 Jun-01 Feb-01 Oct-00 Jun-00 Feb-00 Oct-99 Jun-99 Feb-99 Source: AMM Plate, cut-to-length, $/ton Industry Update Page 22

23 Bar, merchant products, Reinforcing bar, grade 60, no. 5, $/ton $1,200 $1,000 $800 $/ton $600 $703 $400 $200 $0 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 Jul-04 Jan-04 Jul-03 Jan-03 Jul-02 Jan-02 Jul-01 Jan-01 Jul-00 Jan-00 Jul-99 Jan-99 Jul-98 Jan-98 Jul-97 Jan-97 Jul-96 Jan-96 Jul-95 Jan-95 Jul-94 Jan-94 Jul-93 Source: AMM Bar, merchant products, Reinforcing bar, grade 60, no. 5, $/ton Beams, wide-flange (avg), $/ton $1,200 $1,000 $800 $905 $/ton $600 $400 $200 $0 Oct-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07 Oct-06 Jul-06 Apr-06 Jan-06 Oct-05 Jul-05 Apr-05 Jan-05 Oct-04 Jul-04 Apr-04 Jan-04 Oct-03 Jul-03 Apr-03 Jan-03 Oct-02 Jul-02 Apr-02 Jan-02 Oct-01 Jul-01 Apr-01 Jan-01 Oct-00 Jul-00 Apr-00 Jan-00 Source: SBB Beams, wide-flange (avg), $/ton Industry Update Page 23

24 OCTG tubing, Carbon-annealed ERW, $/ton $3,000 $2,500 $2,742 $2,000 $/ton $1,500 $1,000 $500 $0 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 Jul-04 Jan-04 Jul-03 Jan-03 Jul-02 Jan-02 Jul-01 Jan-01 Jul-00 Jan-00 Jul-99 Jan-99 Jul-98 Jan-98 Jul-97 Jan-97 Jul-96 Jan-96 Jul-95 Jan-95 Source: AMM Steel, OCTG tubing, Carbon-annealed ERW, last month, $/ton 800 Weekly U.S. Domestic and Export Scrap Prices $ per gross ton /5/ /28/ /21/ /14/ /7/ /31/ /24/ /17/ /10/ /3/2008 9/26/2008 9/19/2008 9/12/2008 9/5/2008 No.1 Bundles No.1 Heavy Melt No.1 Busheling No.1 Heavy Melt, Boston Export No.1 Heavy Melt L.A. Export Source: AMM, LBR Industry Update Page 24

25 Weekly Steel Output and Capacity Utilization Weekly domestic steel production was 1,197,000 tons and capacity utilization is 50.2%. Year-todate production is down 3.0%. This is the lowest level on record since January Net Tons (000s) 2,500 2,300 2,100 1,900 1,700 1, Capacity Utilization % 1, , Nov-08 Oct-08 Aug-08 Jun-08 Apr-08 Mar-08 Feb-08 Dec-07 Nov-07 Sep-07 Aug-07 Jul-07 May-07 Apr-07 Mar-07 Jan-07 Dec-06 Oct-06 Sep-06 Aug-06 Jun-06 May-06 Apr-06 Feb-06 Jan-06 Source: AISI Net Tons (000s) Capacity Utilization Stainless steel (grade 304) prices will decrease in January (-12% sequentially to $ per lb). Base prices are flat in January at $0 7040/lb $/ton $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 Grade 304 Stainless Sheet $3,000 $2,000 $1,000 $0 Feb-09 Nov-08 Aug-08 May-08 Feb-08 Nov-07 Aug-07 May-07 Feb-07 Nov-06 Aug-06 May-06 Feb-06 Nov-05 Aug-05 May-05 Feb-05 Nov-04 Aug-04 May-04 Feb-04 Source:Metalprices, LBR 304 Base 304 Surcharge Industry Update Page 25

26 $28 LME Nickel Price /lb $23 $24.37 $18 $ /lb $15.06 $13 $8 $4.59 $4.12 $3 Nov-08 Sep-08 Jun-08 Mar-08 Dec-07 Sep-07 Jun-07 Mar-07 Dec-06 Sep-06 Jun-06 Mar-06 Dec-05 Sep-05 Jun-05 Mar-05 Dec-04 Sep-04 Jun-04 Mar-04 Dec-03 Sep-03 Jun-03 Apr-03 Jan-03 Source: Metalprices.com October s seasonally adjusted total steel product shipments decreased 8% sequentially and 23% year over year. Unadjusted total steel product shipments also decreased 3% over last month and were 23% below last year. tons (000'S) 5,000 4,800 4,600 4,400 4,200 4,000 3,800 3,600 MSCI Total Steel Product Shipments 4,422 3,865 3,726 3,400 3,200 3,418 3,000 Oct '08 Sep '08 Aug '08 July '08 June '08 May '08 Apr '08 Mar '08 Feb '08 Jan '08 Dec '07 Nov '07 Oct '07 Sep '07 Aug '07 July '07 June '07 May '07 Apr '07 Mar '07 Feb '07 Jan '07 Source: MSCI TOTAL STEEL PRODUCTS SEASONALLY ADJUSTED PRODUCT SHIPMENTS TOTAL STEEL PRODUCTS NON SEASONALLY ADJUSTED PRODUCT SHIPMENTS Industry Update Page 26

27 Service center demand for steel products declined 35% year over year in October. 6,000 5,500 MSCI Service Center Demand for Total Steel Products 5,000 4,617 tons (,000) 4,500 4,000 3,966 3,500 3,373 3,000 2,995 2,500 Oct '08 Sep '08 Aug '08 July '08 June '08 May '08 Apr '08 Mar '08 Feb '08 Jan '08 Dec '07 Nov '07 Oct '07 Sep '07 Aug '07 July '07 June '07 May '07 Apr '07 Mar '07 Feb '07 Jan '07 Dec '06 Nov '06 Oct '06 Sep '06 Aug '06 Jul '06 Jun '06 May '06 Apr '06 Mar '06 Feb '06 Jan '06 TOTAL STEEL PRODUCTS NON SEASONALLY ADJUSTED PRODUCT SHIPMENTS SERVICE CENTER DEMAND OF TOTAL STEEL PRODUCTS Source: MSCI Service Center Demand = Shipments + (Current Inventory - Prior Month's Inventory) Imports licenses for carbon and alloy flat decreased 11% sequentially and long products increased 30% per preliminary license data for November. MT (000's) Monthly Import Licenses: Carbon & Alloy Flat & Long Product Imports Jan '05 Feb '05 Mar '05 Apr '05 May '05 Jun '05 Jul '05 Aug '05 Sep '05 Oct '05 Nov '05 Dec '05 Jan '06 Feb '06 Mar '06 C&A Long Products C&A Flat Rolled Products Source: U.S. Dept of Commerce Apr '06 May '06 Jun '06 Jul '06 Aug '06 Sep '06 Oct '06 Nov '06 Dec '06 Jan '07 Feb '07 Mar '07 Apr '07 May '07 Jun '07 Jul '07 Aug '07 Sep '07 Oct '07 Nov '07 Dec '07 Jan '08 Feb '08 Mar '08 Apr '08 May '08 Jun '08 Jul '08 Aug '08 Sep '08 Oct '08 (P) Nov '08 (L) Industry Update Page 27

28 Stainless steel imports, strongly correlated with domestic prices, are likely to decline through the balance of the year. Imports (MT in 000's) Stainless Imports vs 304 CR Sheet Prices $ /lb N '06 O '06 S '06 A '06 J '06 J '06 M '06 A '06 M '06 F '06 J '06 D '05 N '05 O '05 S '05 A '05 J '05 J '05 M '05 A '05 M '05 F '05 J '05 Source: US Commerce, Metalprices.com Imports (MT in 000's) J '09 D '08 N '08 O '08 S '08 A '08 J '08 J '08 M '08 A '08 M '08 F '08 J '08 D '07 N '07 O '07 S '07 A '07 J '07 J '07 M '07 A '07 M '07 F '07 J '07 D ' CR Sheet Price 0 World Crude Steel Production World steel production in October is 16% lower than the similar period last year. 140, , ,000 Tonnes in 000's 80,000 60,000 40,000 20,000 0 Source: IISI Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Industry Update Page 28

29 Total Construction Spending Total U.S. construction spending in October was down 7.3% compared to the same period last year. Millions of Current Dollars 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 1,000, , ,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: U.S. Census Bureau Private U.S. nonresidential construction spending in September was up 12.5% over the prior year. Millions of Current Dollars 450, , , , , , ,000 Private Nonresidential Construction Spending 100,000 50,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: U.S. Census Bureau Industry Update Page 29

30 Worldwide rig counts were up 13% in October over the prior year. 4,000 Worldwide Rig Count 3,500 # of Operating Rigs 3,000 2,500 2,000 1,500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Baker Hughes Appliance shipments to retailers in October declined 9% year over year to 3.0 million. 5,250 4,500 Manufacturer Shipments of AHAM 6 Category Appliances to U.S. Retailers By Month ( ) 3,750 Shipments (000) 3,000 2,250 1, JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ,465 2,941 3,638 2,850 2,807 3,698 2,904 3,140 3,623 2,982 3,001 3, ,595 2,935 4,128 2,865 2,965 3,977 2,709 2,882 4,099 2,824 2,711 3, ,378 2,794 3,824 2,767 2,804 3,757 2,765 3,207 4,120 3,021 2,863 3, ,596 3,115 4,126 3,005 3,234 4,003 2,892 3,198 4,092 3,077 3,330 4, ,074 3,236 4,073 2,943 3,151 4,211 3,217 3,508 4,524 3,173 3,341 4, ,097 3,425 4,659 3,323 3,426 4,558 3,301 3,779 4,785 3,374 3,581 4, ,833 3,442 4,640 3,262 3,556 4,713 3,276 3,969 5,005 3,814 3,768 4, ,965 3,512 5,111 3,436 3,582 4,540 3,362 4,027 4,765 3,328 3,397 4, ,625 3,245 4,649 3,333 3,505 4,594 3,204 3,562 4,690 3,291 3,224 4, ,450 2,869 4,225 3,050 3,278 4,158 3,164 3,200 3,883 3, Source: AHAM Industry Update Page 30

31 The Baltic Capesize Index is averaging 841 in December, a sequential decrease of 18%. The index is down 94% yearover-year. The trade weighted dollar index is at Freight Rates vs. Trade Weighted Dollar 20,000 18,000 16,000 14,000 Index Value ,000 10,000 8,000 Index Value 85 6, , , Oct '08 Jul '08 Apr '08 Jan '08 Oct '07 Jul '07 Apr '07 Jan '07 Oct '06 Jul '06 Apr '06 Jan '06 Oct '05 Jul '05 Apr '05 Jan '05 Oct '04 Jul '04 Apr '04 Jan '04 Oct '03 Jul '03 Apr '03 Jan '03 Oct '02 Jul '02 Apr '02 Jan '02 Oct '01 Jul '01 Apr '01 Jan '01 Oct '00 Jul '00 Apr '00 Jan '00 Source: Baseline, Baltic Exchange Trade Weighted Dollar Baltic Capesize Index NUE vs STLD vs AKS vs X vs CMC 100% 80% 60% 40% Percentage Change 20% 0% -20% -40% NUE, -39% CMC, -69% -60% -80% -100% GNA, -70% X, -70% STLD, -72% AKS, -85% Dec-08 Oct-08 Sep-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Source: Baseline NUE STLD AKS X CMC GNA Industry Update Page 31

32 ZEUS vs WOR vs RS 225% 175% Percentage Change 125% 75% 25% -25% -75% WOR, -43% ZEUS, -48% RS, -65% Nov-08 Oct-08 Sep-08 Aug-08 Aug-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Source: Baseline ZEUS WOR RS SCHN vs GTI vssteel 105% 85% 65% 45% 25% 5% -15% -35% -55% SCHN, -59% STEEL, -61% GTI, -64% -75% Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Aug-08 Aug-08 Sep-08 Oct-08 Nov-08 Source: Baseline STEEL SCHN GTI Industry Update Page 32

33 60% STEEL Index vs S&P % 20% 0% -20% -40% SPX, -41% -60% STEEL, -61% -80% Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Aug-08 Aug-08 Sep-08 Oct-08 Nov-08 Source: Baseline STEEL SPX Steel Industry Valuation Summary Most Recent Year End Consensus Valuation Classification Market Rev. per EBITDA/Book Val/ Ent Val/ Current Current Next Price/ Fwd Price/ EV/ Price/ $ values in millions Cap Share E.P.S. Share Share Share Quarter Year Year Earnings Sales EBITDA Book Mini-mills 3, Integrated Mills 5, All Steel Producers 5, Distributors Recyclers 1, NM Fabricators 1, Pipe & Tube 3, Total Steel Industry 3, Industry Update Page 33

34 Recent Stock Performance of Our Steel Coverage Universe Company Ticker December 6, 2008 Week YTD 6 months LTM U.S. Steel (B) X $ % -76.2% -84.3% -71.4% ArcelorMittal (N) MT $ % -72.6% -79.6% -70.8% Nucor Corp (B) NUE $ % -38.4% -54.7% -40.5% Steel Dynamics (N) STLD $ % -72.6% -78.6% -70.1% Commercial Metals (N) CMC $ % -67.7% -74.6% -70.1% Gerdau Ameristeel (N) GNA $ % -73.7% -79.1% -72.0% A K Steel (N) AKS $ % -84.5% -89.9% -84.9% Reliance Steel & Aluminum (N) RS $ % -66.7% -74.2% -66.4% Olympic Steel (N) ZEUS $ % -52.1% -77.5% -51.1% Worthington Industries (N) WOR $ % -30.4% -36.0% -44.0% Schnitzer Steel (N) SCHN $ % -61.6% -74.4% -60.4% Graftech (N) GTI $ % -63.9% -76.7% -66.1% Cleveland Cliffs (B) CLF $ % -60.7% -81.8% -58.7% Group Average NM NM -8.7% -63.2% -74.0% -63.6% *(B) - BUY, (N)- Neutral, (S) - Sell, (NR)- Not Rated Industry Update Page 34

35 Steel Peer Group Valuation Market Stats Most Recent Year End Consensus Valuation Current Week--- Market Rev. per EBITDA/ Book Val/ Ent Val/ Current Current Next Price/ FTM Price/ EV/ Price/ Company Name Rating Ticker Price High Low Cap Share E.P.S. Share Share Share Quarter Year Year Earnings Sales EBITDA Book Integrated Producers Arcelor Mittal Adr - MT , United States Steel BUY X , Ak Steel Holdg NEU AKS Mini-mills Nucor BUY NUE , Steel Dynamics NEU STLD , Commercial Metals NEU CMC , Gerdau Ameristeel NEU GNA , Pipe & Tube Producers Friedman Industries - FRD NM Northwest Pipe - NWPX Tenaris Adr - TS , Steel Service Center Olympic Steel NEU ZEUS Castle (A.M.) - CAS Reliance Steel/Almu NEU RS , Steel Fabricators Gibraltar Industries - ROCK Harsco - HSC , Insteel Industries - IIIN Precision Castparts - PCP , Worthington Indus NEU WOR Foster (L.B.) - FSTR Graphite Electrodes Graftech Int'L NEU GTI Metal Recyclers Schnitzer Steel Ind NEU SCHN Metalico - MEA TOTALS Industry Update Page 35

36 Industry Update Page 36

37 B. Richard, CFA L. Folta Analyst Certification: The research Analyst(s) who prepared the research report hereby certifies that the views expressed in the research report accurately reflect the analyst(s) personal views about the subject companies and their securities. The Research Analyst(s) also certifies that the Analyst(s) have not been, are not, and will not be receiving direct or indirect compensation for expressing the specific recommendation(s) or view(s) in this report. Ratings Distributions for Longbow Research: Rating Category Count Percent Buy % Neutral % Sell 0 0.0% RATING SYSTEM: Buy means that Longbow Securities expects total return to exceed 10% over a twelve-month period. Neutral means that Longbow Securities expects total return to be within a range of plus or minus 10% over a twelve-month period. Sell means that Longbow Securities expects total return to be negative by greater than 10% over a twelve-month period. DESCRIPTION: Longbow Securities is a third-party research provider established in 2003 and headquartered at 6000 Lombardo Center, Suite 500, Independence, Ohio USA. The company provides research services to institutional investors, investment advisers, and professional money managers. DISCLAIMER: The information, opinions, estimates, and projections contained in this report were prepared by Longbow Securities and constitute the current judgment of Longbow Securities as of the date of this report. Additional information may be available from Longbow Securities upon request. The information contained herein is believed to be reliable and has been obtained from sources believed to be reliable, but Longbow Securities makes no representation or warranty, either expressed or implied, as to the accuracy, completeness, or reliability of such information. Longbow Securities does not undertake, and has no duty, to advise you as to any information that comes to its attention after the date of this report or any changes in its opinion, estimates, or projections. Prices and availability of securities are also subject to change without notice. Longbow Securities does not make a market in any securities, nor does it hold a principal position in any security. However, any officer, director, or stockholder of Longbow Securities or any member of their families may have a position in and may from time to time purchase or sell any of the securities mentioned or any related securities. Additional information concerning Longbow Securities is contained in its Disclosure Brochure, which contains information required by Part II of Form ADV and is available at or by calling (216) By accepting this report, the reader acknowledges that the report does not purport to meet the objectives or needs of specific investors, and, accordingly, constitutes only impersonal advisory services as that term is defined in Rule under the Investment Advisers Act of 1940 and that any advice in this report is furnished solely through uniform publications distributed to subscribers thereto within the meaning of Section 2(a)(20)(i) of the Investment Company Act of Industry Update Page 37