FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

 

December 16, 2005

 

Commission File Number: 333-119497

 

MECHEL OAO

(Translation of registrant’s name into English)

Krasnopresnenskaya Naberezhnaya 12

Moscow 123610

Russian Federation

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F ý   Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes o   No ý

 

Note: Regulation S-T Rule 101(b)(c) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes o   No ý

 

Note:  Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

 

Yes o   No ý

 

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

 

 

 


 

 


 

 

 

MECHEL REPORTS 9-MONTH 2005 RESULTS

 — Revenues increased 17.6% to $2.91 billion —

— Operating income of $452.03 million —

— Net income $314.72 million, $2.34 per ADR or $0.78 per diluted share —

— Corrects its 6-month and 3-month 2005 results to reflect the netting off of certain trading operations —

 

 

Moscow, Russia — December 16, 2005 — Mechel OAO (NYSE: MTL), a leading Russian integrated mining and steel group, today announced results for the nine months ended September 30, 2005.

 

 

US$ thousand

 

9M
2005

 

9M
2004

 

Change
Y-on-Y

 

Revenues

 

2,910,394

 

2,474,854

 

17.6

%

Net operating income

 

452,027

 

509,364

 

- 11.3

%

Net operating margin

 

15.5

%

20.6

%

-

 

Net income

 

314,717

 

420,815

 

- 25.2

%

EBITDA (1)

 

569,016

 

618,709

 

- 8.0

%

EBITDA margin

 

19.6

%

25.0

%

-

 


(1) See Attachment A.

 

Vladimir Iorich, Mechel’s Chief Executive Officer, commented: “In the third quarter 2005 we saw a slight improvement in market conditions, as compared to the second quarter, which enabled us to restore production in both segments to planned levels. Our programs targeted at efficiency growth in the steel segment started yielding positive results as well.  This, along with the continuing performance of our mining segment, confirms the strength of our strategy aimed at increasing overall value across both segments.”

 

Consolidated Results

 

Net revenue in the first nine months of 2005 rose 17.6% to $2.91 billion from $2.47 billion in the first nine months of 2004. Operating income was $452.03 million, or 15.5% of net revenue, versus operating income of $509.36 million, or 20.6% of net revenue, in 2004, a decrease of 11.3%.

 

For the first nine months of 2005, Mechel reported consolidated net income of $314.72 million, or $2.34 per ADR ($0.78 per diluted share)

 

Consolidated EBITDA decreased 8.0% to $569.02 million in the first nine months of 2005 from $618.71 million a year ago, reflecting the negative impact of unstable market conditions on average realized prices for the main categories of our products. Please see the attached tables for a reconciliation of consolidated EBITDA to net income.

 

 

 



 

Mining Segment Results

 

US$ thousand

 

9M
2005

 

9M
2004

 

Change
Y-on-Y

 

Revenues from external customers

 

823,548

 

556,880

 

47.9

%

Operating income

 

341,282

 

250,044

 

36.5

%

Net income

 

266,581

 

240,676

 

10.8

%

EBITDA

 

379,408

 

309,507

 

22.6

%

EBITDA margin

 

46.1

%

55.6

%

-

 

 

Mining segment output

 

Product

 

9M 2005, thousand tonnes

 

9M 2005 vs 9M 2004,%

 

Coal

 

11,670

 

+ 2.0

 

Coking coal

 

6,472

 

- 5.0

 

Steam coal

 

5,198

 

+ 11.0

 

Iron ore concentrate

 

3,374

 

+ 20.0

 

Nickel

 

9

 

- 8.0

 

 

Mining segment revenue for the first nine months of 2005 totaled $823.55 million, or 28.3%, of consolidated net revenue, an increase of 47.9% over segment revenue of $556.88 million, or 22.5%, of consolidated net revenue, in the first nine months of 2004. The increase in revenues reflects solid output, strong market positions, and an increase in sales of mining products to third parties.

 

Operating income for the first nine months of 2005 in the mining segment rose 36.5% to $341.28 million, or 41.4%, of total segment revenues, compared to operating income of $250.04 million, or 44.9%, of total segment revenues a year ago. This increase in profitability reflects Mechel’s control over costs and the overall efficiency of our mining operations. EBITDA in the mining segment for the first nine months of 2005 was $379.41 million, 22.6% higher than segment EBITDA of $309.51 million in the first nine months of 2004. The EBITDA margin of the mining segment was 46.1%.

 

Mr. Iorich commented on the results of the mining segment: “The negative trends we witnessed in major mining markets in the second quarter continued to affect our nine-month production. The slowdown in the coking coal market, caused by a decrease in production by a number of Russian steel companies, prompted our shift to increasing steam coal production.  Declining iron ore prices also influenced the segment’s margin negatively. Nevertheless, with its strong profitability, mining continues to be of primary interest for Mechel.”

 

 

Steel Segment Results

 

US$ thousand

 

9M
2005

 

9M
2004

 

Change
Y-on-Y

 

Revenues from external customers

 

2,086,846

 

1,917,974

 

8.8

%

Operating income

 

110,745

 

259,321

 

- 57.3

%

Net income

 

48,135

 

180,139

 

- 73.3

%

EBITDA

 

189,608

 

309,202

 

- 38.7

%

EBITDA margin

 

9.1

%

16.1

%

-

 

 

 

2


 

 


Steel segment output

 

Product

 

9M 2005, thousand tonnes

 

9M 2005 vs 9M 2004,%

 

Coke

 

1,963

 

- 11.0

 

Pig iron

 

2,475

 

- 10.0

 

Steel

 

4,420

 

- 3.0

 

Rolled products

 

3,450

 

+ 3.0

 

Hardware

 

441

 

+ 4.0

 

 

Revenue from Mechel’s steel segment increased 8.8% in the first nine months of 2005 from $1.92 billion to $2.09 billion, or 71.7%, of consolidated net revenue, as compared to the first nine months of 2004.

 

In the first nine months of 2005, the steel segment generated operating income of $110.75 million, or 5.3%, of total segment revenues, a decrease of 57.3% over operating income of $259.32 million, or 46.6%, of total segment revenues in the first nine months of 2004. EBITDA in the steel segment for the first nine months of 2005 was $189.61 million. The EBITDA margin of the steel segment increased from 6.9% in first half of 2005 to 9.1% in the first nine months of 2005.

 

Mr. Iorich commented, “The steel segment demonstrated an increase in EBITDA margin and net income over the previously reported period, reflecting the effect of a number of our ongoing improvement programs, including the commissioning of our new sinter plant at Chelyabinsk. We maintained our rolled product output by optimizing usage ratios, while reducing raw steel, pig iron, and coke output. We will continue to further improve usage ratios by putting our new continuous casting facilities into operation. At the same time, we see positive market trends, as steel products output has begun to pick up, and expect to fully restore production levels in the segment in response to growing demand.”

 

Recent Highlights

 

After a local water pump station failed on October 23, interrupting the supply of water to Chelyabinsk Metallurgical Plant, production at CMP was temporarily stopped. The plant’s personnel implemented all necessary emergency protocols to limit any negative consequences for the plant’s equipment and managed to fully restart production within two days, minimizing potential losses, which are not expected to exceed $1.5 million.

 

Mr. Iorich concluded, “The third quarter of 2005 remained a challenging time for us; however, we demonstrated that we are able to address the negative trends we saw this year by increasing sales volumes and the share of value-added products sales, as well as by raising the efficiency of the steel segment. Our overall profitability remains our focus, and we are confident that we will continue to see the positive impact of our ongoing modernization and efficiency-improvement programs in the coming year. We will concentrate on further lowering costs and improving usage ratios. We will also strive to increase our export of coal, thus increasing third-party sales of mining products, and at diversifying our product portfolio towards value-added products in the steel segment. Our extensive vertical integration, combined with management’s efforts and the continuation of our strategy, positions us well for the future.”

 

Financial Position

 

Cash expenditure on property, plant and equipment for the first nine months of 2005 amounted to $394.82 million, of which $199.77 million was invested in the mining segment and $195.05 million in the steel segment.

 

In the first nine months of 2005, Mechel spent $484 million on acquisitions, comprised of $411.2 million for 25%+1 share of Yakutugol Holding Company OAO, $3.5 million for 90.3% of the shares of Port Kambarka OAO, $15.7 million for 25.4% of the shares of Izhstal OAO, $50.2 million for 6.4% of the

 

 

3



 

 

shares of Chelyabinsk Metallurgical Plant OAO, and $1.5 million for 10.3% of the shares of Korshunov Mining Plant and $1.9 million was spent on acquisition of minority interest in other subsidiaries.

 

As of  September 30, 2005, total debt(1) was at $386.9 million. Cash and cash equivalents amounted to $312.2 million at the end of the 9 months 2005 and net debt amounted to $(74.7) million (net debt is defined as total debt outstanding less cash and cash equivalents).

 

Correction of 6-Month and 3-Month 2005 Results

 

Mechel also announced today the correction of its 6-month and 3-month 2005 results. In connection with the preparation for its 9-month 2005 closing, Mechel identified, through its internal processes, an error in not netting off certain trading transactions within the steel segment. These transactions related to a series of trades in which Mechel bought back from one of its customers steel product which was then re-sold to third parties at the same price at which the product had been purchased by Mechel, resulting in no-margin trades. Previously, Mechel had included these resales as revenue, and the amount paid to the initial customer was included in cost of goods sold. As the total amount of such resales and purchases was the same in both periods, this correction has no effect on gross or net operating income, and affects only revenue, cost of goods sold, and margin percentages deriving from such for the consolidated, as well as steel segment, results. There is no effect on any other item in the financial statements, while affected lines should be corrected as follows:

 

Corrected Numbers for Six Months ended June 30, 2005

 

 

 

As previously reported

 

Corrected by

 

As corrected

 

Revenue

 

2,143,349

 

(64,130

)

2,079,219

 

Cost of goods sold

 

(1,342,932

)

64,130

 

(1,278,802

)

Gross margin % - as it was

 

37.3

%

(1.2

)%

38.5

%

Net operating margin

 

16.9

%

(0.5

)%

17.4

%

Consolidated EBITDA margin

 

19.7

%

(0.6

)%

20.3

%

Steel segment

 

 

 

 

 

 

 

Revenues from external customers

 

1,549,260

 

(64,130

)

1,485,130

 

EBITDA margin

 

6.6

%

(0.3

)%

6.9

%

 

Corrected Numbers for Three Months ended March 31, 2005

 

 

 

As previously reported

 

Corrected by

 

As corrected

 

Revenue

 

1,049,383

 

(9,927

)

1,039,456

 

Cost of goods sold

 

(599,424

)

9,927

 

(589,497

)

Gross margin % - as it was

 

42.9

%

(0.4

)%

43.3

%

Net operating margin

 

21.6

%

(0.2

)%

21.8

%

Consolidated EBITDA margin

 

26.7

%

(0.2

)%

26.9

%

Steel segment

 

 

 

 

 

 

 

Revenues from external customers

 

735,747

 

(9,927

)

725,820

 

EBITDA margin

 

12.7

%

(0.2

)%

12.9

%

 

The management of Mechel will host a conference call today at 11 a.m. New York time (4 p.m. London time, 7 p.m. Moscow time) to review Mechel’s financial results and comment on current operations.  The call may be accessed via the Internet at http://www.mechel.com, under the Investor Relations section.

 


(1)           Total debt is comprised of short-term borrowings and long-term debt

 

4



 

***

Mechel OAO

Irina Ostryakova

Director of Communications

Phone: 7-095-258-18-28

Fax: 7-095-258-18-38

irina.ostryakova@mechel.com

***

Mechel is one of the leading Russian mining and metals companies. Mechel unites producers of coal, iron ore, nickel, steel, rolled products, and hardware. Mechel products are marketed domestically and internationally.

 

***

 

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel files from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Form 20-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions.

 

 

 

5


 


 

Attachments to the 9M 2005 Earnings Press Release

 

 

Attachment A

Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.

Earnings Before Interest, Depreciation and Amortization (EBITDA) and EBITDA margin. EBITDA represents earnings before interest, depreciation and amortization. EBITDA margin is defined as EBITDA as a percentage of our net revenues. Our EBITDA may not be similar to EBITDA measures of other companies; is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While interest, depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry. EBITDA can be reconciled to our consolidated statements of operations as follows:

 

US$ thousands

 

9M 2005

 

9M 2004

 

Net income

 

314,717

 

420,815

 

Add:

 

 

 

 

 

Depreciation, depletion and amortization

 

115,375

 

99,709

 

Interest expense

 

43,669

 

42,007 

 

Income taxes

 

95,255

 

56,178

 

Consolidated EBITDA

 

569,016

 

618,709

 

 

 

EBITDA margin can be reconciled as a percentage to our Revenues as follows:

 

US$ thousands

 

9M 2005

 

9M 2004

 

Revenue, net

 

2,910,394

 

2,474,854

 

EBITDA

 

569,016

 

618,709

 

EBITDA margin

 

19.6

%

25.0

%

 

 

6



 

MECHEL OAO
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2005 AND DECEMBER 31, 2004

(in thousands of U.S. dollars, except share amounts)

 

 

 

September 30,

 

December 31,

 

 

 

2005

 

2004

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

312 239

 

$

1 024 761

 

Accounts receivable, net of allowance for doubtful accounts

 

161 012

 

135 597

 

Due from related parties

 

234

 

16 458

 

Inventories

 

449 091

 

568 545

 

Deferred cost of inventory in transit

 

91 904

 

0

 

Current assets of discontinued operations

 

997

 

1 247

 

Deferred income taxes

 

7 531

 

7 491

 

Prepayments and other current assets

 

382 131

 

349 106

 

Total current assets

 

1 405 139

 

2 103 205

 

 

 

 

 

 

 

Long-term investments in related parties

 

411 975

 

9 270

 

Other long-term investments

 

21 498

 

66 663

 

Non-current assets of discontinued operations

 

100

 

165

 

Intangible assets

 

5 445

 

6 379

 

Property, plant and equipment, net

 

1 432 580

 

1 274 722

 

Mineral reserves, net

 

248 553

 

166 483

 

Deferred income taxes

 

20 097

 

11 940

 

Goodwill

 

39 441

 

39 441

 

Total assets

 

$

3 584 828

 

$

3 678 268

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Short-term borrowings and current maturities of long-term debt

 

$

170 508

 

$

348 880

 

Accounts payable and accrued expenses:

 

 

 

 

 

Advances received

 

75 617

 

94 964

 

Accrued expenses and other current liabilities

 

70 193

 

69 847

 

Taxes and social charges payable

 

164 929

 

145 527

 

Trade payable to vendors of goods and services

 

209 744

 

186 233

 

Due to related parties

 

2 145

 

2 048

 

Current liabilities of discontinued operations

 

11

 

30

 

Deferred income taxes

 

25 415

 

26 521

 

Asset retirement obligation

 

6 109

 

8 219

 

Deferred revenue

 

91 300

 

760

 

Pension obligations

 

6 796

 

6 261

 

Dividends payable

 

87

 

 

Total current liabilities

 

822 854

 

889 290

 

 

 

 

 

 

 

Restructured taxes and social charges payable, net of current portion

 

56 261

 

87 364

 

Long-term debt, net of current portion

 

216 390

 

216 113

 

Deferred income taxes

 

103 651

 

105 330

 

Pension obligations

 

42 080

 

40 720

 

Asset retirement obligation

 

65 173

 

66 758

 

Other long-term liabilities

 

87

 

240

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Minority interests

 

139 952

 

214 824

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Common shares

 

133 507

 

133 507

 

Treasury shares, at cost

 

(4 187

)

(4 187

)

Additional paid-in capital

 

304 404

 

304 404

 

Other comprehensive income

 

53 875

 

93 687

 

Retained earnings

 

1 650 781

 

1 530 218

 

Total shareholders’ equity

 

2 138 380

 

2 057 629

 

Total liabilities and shareholders’ equity

 

$

3 584 828

 

$

3 678 268

 

 

 

7


 


 

 

MECHEL OAO
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 2005 AND 2004

(in thousands of U.S. dollars)

 

 

 

9 months ended September 30,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

314 717

 

420 815

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

106 368

 

78 104

 

Depletion and amortization

 

9 007

 

19 488

 

Foreign exchange (gain) loss

 

35 231

 

(1 095

)

Deferred income taxes

 

(9 193

)

(8 803

)

(Recovery of) provision for doubtful accounts

 

7 580

 

1 986

 

Inventory write-down

 

1 943

 

488

 

Accretion expense

 

1 806

 

2 946

 

Minority interest

 

3 779

 

16 858

 

(Income) loss from equity investments

 

(9 979

)

(3 831

)

Non-cash interest on long-term tax and pension liabilities

 

8 176

 

14 160

 

Loss (gain) on sale of property, plant and equipment

 

957

 

(1 953

)

(Gain) loss on sale of long-term investments

 

(1 669

)

2 394

 

Loss from discontinued operations

 

403

 

9 893

 

Gain on accounts payable with expired legal term

 

(2 755

)

-

 

Gain on forgiveness of fines and penalties

 

(15 863

)

(17 958

)

Stock-based compensation expense

 

-

 

1 400

 

Amortization of capitalized costs on bonds issue

 

1 171

 

1 140

 

Pension service cost and amortization of prior year service cost

 

818

 

423

 

Net change before changes in working capital

 

452 497

 

536 455

 

Changes in working capital items, net of effects from acquisition of new subsidiaries:

 

 

 

 

 

Accounts receivable

 

17 712

 

(34 267

)

Inventories

 

111 745

 

(135 505

)

Trade payable to vendors of goods and services

 

5 910

 

21 998

 

Advances received

 

(13 016

)

69 971

 

Accrued taxes and other liabilities

 

24 123

 

(47 601

)

Settlements with related parties

 

13 936

 

3 138

 

Current assets and liabilities of discontinued operations

 

(259

)

(8 169

)

Deferred revenue and cost of inventory in transit, net

 

(1 354

)

(20 849

)

Other current assets

 

(57 787

)

(97 455

)

Net cash provided by operating activities

 

553 507

 

287 715

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Acquisition of subsidiaries, less cash acquired

 

(3 497

)

(53 142

)

Acquisition of minority interest in subsidiaries

 

(69 198

)

(16 282

)

Investment in Yakutugol

 

(411 182

)

-

 

Investments in other non-marketable securities

 

(7 039

)

(1 665

)

Proceeds from disposal of non-marketable equity securities

 

1 389

 

1 667

 

Proceeds from disposals of property, plant and equipment

 

1 838

 

1 663

 

Purchases of property, plant and equipment

 

(303 804

)

(192 698

)

Purchase of mineral licenses

 

(91 012

)

 

 

Net cash used in investing activities

 

(882 505

)

(260 457

)

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

Proceeds from short-term borrowings

 

763 040

 

874 621

 

Repayment of short-term borrowings

 

(938 222

)

(823 724

)

Dividends paid

 

(194 154

)

(5 573

)

Proceeds from long-term debt

 

3 124

 

3 059

 

Repayment of long-term debt

 

(12 536

)

(29 454

)

Net cash provided by (used in) financing activities

 

(378 748

)

18 929

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(4 776

)

186

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(712 522

)

46 373

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

1 024 761

 

19 303

 

Cash and cash equivalents at end of period

 

312 239

 

65 676

 

 

 

8


 


 

 

MECHEL OAO
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(in thousands of U.S. dollars, except share amounts)

 

 

 

9 months ended September 30,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Revenue, net

 

2 910 394

 

2 474 854

 

Cost of goods sold

 

-1 852 054

 

-1 506 660

 

Gross margin

 

1 058 340

 

968 194

 

Selling, distribution and operating expenses:

 

 

 

 

 

Selling and distribution expenses

 

-341 689

 

-254 963

 

Taxes other than income tax

 

-70 427

 

-35 993

 

Accretion expenses

 

-1 806

 

-2 945

 

Provision for doubtful accounts

 

-7 580

 

-1 986

 

General, administrative and other operating expenses

 

-184 811

 

-162 943

 

Total selling, distribution and operating expenses

 

-606 313

 

-458 830

 

Operating income

 

452 027

 

509 364

 

Other income and (expense):

 

 

 

 

 

Income from equity investees

 

9 979

 

3 831

 

Interest income

 

9 327

 

7 920

 

Interest expense

 

-43 669

 

-42 007

 

Foreign exchange gain (loss)

 

-35 231

 

1 095

 

Other income, net

 

21 721

 

23 542

 

Total other income and (expense)

 

-37 873

 

-5 619

 

Income before income tax, minority interest, discontinued operations, extraordinary gain and change in accounting principle

 

414 154

 

503 745

 

 

 

 

 

 

 

Income tax expense

 

-95 255

 

-56 178

 

Minority interest in (income) loss of subsidiaries

 

-3 779

 

-16 858

 

Income from continuing operations

 

315 120

 

430 709

 

Income (loss) from discontinued operations, net of tax

 

-403

 

-9 894

 

Net income

 

314 717

 

420 815

 

 

 

9


 

 


 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

MECHEL OAO

 

 

 

 

By:

Vladimir Iorich

 

Name:

Vladimir Iorich

 

Title:

CEO

 

 

 

Date:   December 16, 2005

 

 

10