Dec. 20, 2006 — Chaparral Steel Co. reported record net income of $67.5 million for its second quarter, and record net income of $126.6 million for the six months ended November 30, 2006.
Second Quarter Results—Record net income of $67.5 million ($1.40 per diluted share) represents a 98% increase in net income over the $34.0 million ($0.72 per diluted share) earned in the second quarter of fiscal 2006. Results are $8.4 million better than the previous record of $59.1 million ($1.23 per diluted share) earned the first quarter of this fiscal year.
Record operating profit of $108.8 million reflects an 83% increase compared to the second quarter of fiscal 2006. Operating profit exceeded the previous record set in the first quarter of the current fiscal year by almost 13%.
"This is our fifth straight record quarter and our seventh consecutive quarter of earnings growth," stated Tommy A. Valenta, President and CEO. "We are constantly monitoring domestic and international markets and both continue to be strong. Based on global dynamics, we remain optimistic for the structural steel market and our financial performance in calendar year 2007."
Manufacturing Results—Shipments of approximately 541,000 tons were seasonally lower than the fiscal first quarter, but were comparable to the second quarter of fiscal year 2006. Average selling prices of $682 per ton reflect a 4% increase from the fiscal first quarter and a nearly 18% increase from the comparable quarter in fiscal year 2006. Metal margins of $493 were almost 9% higher compared to the first quarter of this fiscal year and over 20% higher compared to the second quarter of fiscal year 2006.
Energy cost was down over 12% compared to the fiscal first quarter as a result of a seasonally lower power costs at the company’s Texas facility.
Chaparral had a $1.9-million LIFO charge during the quarter, which compares to a $1.0-million charge for the fiscal first quarter and a $0.5-million charge for the comparable quarter of fiscal 2006. Results included an insurance recovery of $3.5 million after tax ($0.07 per diluted share).
Six Month Results—Record net income of $126.6 million ($2.62 per diluted share) compares to net income of $51.8 million ($1.11 per diluted share) for the first six months of fiscal 2006. Average selling prices were up over 22% compared to the first six months of fiscal 2006, while total shipments of 1.1 million tons decreased slightly due to lower levels of available inventory in the current period.
Financial Position—Chaparral Steel ended the quarter with $324 million of cash, cash equivalents and short-term investments. During the quarter, the company initiated its first quarterly dividend of $0.10 per share. No shares of the company's common stock were repurchased during the quarter pursuant to the stock repurchase plan adopted in October 2006.
Outlook—Based on current market conditions, the company expects continued strong results through the third fiscal quarter. The company believes that end user demand for its products will remain strong. Shipments are historically weakest in the company's third quarter due to holidays, inclement winter weather, and inventory reductions by calendar year-end companies. The company says that metal margins should remain strong as the company's products are competitively priced to imports and scrap prices remain relatively stable. The company further expects energy costs to be seasonally higher compared to the second quarter, and that earnings will be in the range of $1.15 to $1.25 per diluted share for the quarter.
Headquartered in Midlothian, Texas, Chaparral Steel is the second-largest producer of structural steel beams in North America. The company also supplies steel bar products, and is a leading North American recycling company.