CHAP Chaparral Energy Inc

MIDLOTHIAN, Texas, July 12 /PRNewswire-FirstCall/ -- Chaparral Steel Company (NASDAQ:CHAP) today reported record net income of $56.1 million, or $2.33 per diluted share, for the 2006 fourth quarter and $157.1 million, or $6.64 per diluted share, for the 2006 fiscal year. By comparison, Chaparral reported net income of $14.7 million, or $0.65 per diluted share, in the 2005 fourth quarter and $78.1 million or $3.43 per diluted share, for the 2005 fiscal year. "It was a great year," stated Tommy A. Valenta, President and Chief Executive Officer. "These results are due to a combination of factors including, strong domestic and international demand, improvements in the non- residential construction market, consolidation in the steel industry, favorable exchange rates and most important a group of employees that focuses every day on doing things right. Based on those factors, we are optimistic about this coming year." Record operating profit of $94.7 million for the 2006 fourth quarter exceeded the previous record set in the third quarter of 2006 by 15% and was approximately 180% greater than the 2005 fourth quarter. For the 2006 fiscal year, operating profit was a record $271.4 million and exceeded our previous best year, set in 2005, by 62%. Shipping records were established for both the quarter and fiscal year. Fourth quarter shipments of 607,000 tons increased over 18% compared to the prior year's fourth quarter and were up almost 6% from last quarter. For the 2006 fiscal year, shipments of 2.3 million tons were 30% greater than the prior year. Average selling prices of $610 per ton for the quarter increased $10 from last quarter and $40 from the 2005 fourth quarter. For the year, average selling prices of $576 per ton were slightly better than $574 per ton for the 2005 fiscal year. Average metal margins of $422 per ton for the quarter were in-line with the prior quarter and were $30 per ton higher than the fourth quarter of fiscal 2005. Energy expense for the quarter was down 16% compared to last quarter and down 2% compared to the fourth quarter 2005 as a result of a decrease in natural gas prices. However, for the year, energy expense was 23% greater than fiscal year 2005 as a result of higher natural gas prices. Chaparral ended its fourth quarter with $206.6 million of cash, cash equivalents and short-term investments. Based on solid market fundamentals we are optimistic for the first quarter and the year. The positive factors that have been influencing our results appear to be sustainable and allow for the continuation of strong results. Factors that could negatively impact performance include the possibility of increased energy costs, foreign currency valuations, and the dampening effect of inflationary pressure on both the domestic and global economies. For the first quarter 2007, we expect net income to be in the range of $50 million. Compared to the fourth quarter, shipments will be down slightly due to lower inventory levels, production will be down slightly due to a shutdown at our Virginia facility, and energy costs for the summer quarter will be seasonally higher. However this will be the second or third best quarter in our Company's history. Power costs have been fixed through October thereby eliminating voluntary outages due to high prices. Our products remain competitively priced to imports and we expect that any increases in scrap will be offset by an increase in the raw material surcharge. Chaparral's Fourth Quarter Earnings Teleconference will be held tomorrow, July 13, 2006 at 10:00 a.m. Central Time. A real-time webcast of the conference is available by logging on to Chaparral's website at http://www.chapusa.com/ . Certain statements contained in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on Chaparral's business, construction activity in Chaparral's markets, changes in costs of raw materials, fuel and energy, the impact of environmental laws, unexpected equipment failures, the effect of foreign currencies valuations and other regulations as more fully described in Chaparral's Annual Report on SEC Form 10-K. Chaparral Steel Company, headquartered in Midlothian, Texas, is the second largest producer of structural steel beams in North America. Chaparral is also a significant supplier of steel bar products. In addition, Chaparral is a leading North American recycling company. Additional information may be found at http://www.chapusa.com/ . For further information contact Cary D. Baetz at 972-779-1032 or Terresa Van Horn at 972-779-1033. CHAPARRAL STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share) (Unaudited) Year Ended May 31, ------------------------------------------ 2006 2005 2004 ----------- ----------- ------------ Net sales $1,466,729 $1,116,376 $905,324 Costs and expenses (income): Cost of products sold 1,161,173 925,766 842,228 Selling, general and administrative 46,652 28,730 30,173 Interest 32,015 47,275 49,597 Other income, net (12,457) (5,605) (7,677) ----------- ----------- ------------ 1,227,383 996,166 914,321 ----------- ----------- ------------ Income (loss) before income taxes and accounting change 239,346 120,210 (8,997) Income taxes (benefit) 82,210 42,090 (3,199) ----------- ----------- ------------ Income (loss) before accounting change 157,136 78,120 (5,798) Cumulative effect of accounting change - net of income taxes --- --- 480 ----------- ----------- ------------ Net income (loss) $157,136 $78,120 $(5,318) =========== =========== ============ Basic earnings (loss) per share: Income (loss) before accounting change $6.87 $3.43 $(.25) Cumulative effect of accounting change --- --- .02 ----------- ----------- ------------ Net income (loss) $6.87 $3.43 $(.23) =========== =========== ============ Diluted earnings (loss) per share: Income (loss) before accounting change $6.64 $3.43 $(.25) Cumulative effect of accounting change --- --- .02 ----------- ----------- ------------ Net income (loss) $6.64 $3.43 $(.23) =========== =========== ============ Average shares outstanding: Basic 22,878 22,804 22,804 =========== =========== ============ Diluted 23,673 22,804 22,804 =========== =========== ============ CHAPARRAL STEEL COMPANY AND SUBSIDIARIES SUPPLEMENTAL OPERATING INFORMATION (Unaudited) Three months ended Twelve months ended --------------------------------- --------------------- May 31, February 28, May 31, -------- ----------- -------- 2006 2005 2006 2006 2005 --------- --------- --------- --------- --------- Net Sales (in 000's) 405,545 317,357 374,649 1,466,729 1,116,376 Operating Profit (in 000's) 94,745 33,850 82,052 271,361 167,485 Shipments (000's) Structural Mills 505 412 469 1,916 1,425 Bar Mill 102 100 104 415 370 --------- --------- --------- --------- --------- Total 607 512 573 2,331 1,795 ========= ========= ========= ========= ========= Price($/Ton excluding delivery fees) Structural Mills $614 $549 $605 $576 $554 Bar Mill 593 658 577 578 647 --------- --------- --------- --------- --------- Combined $610 $570 $600 $576 $574 CHAPARRAL STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) May 31, --------------------------- 2006 2005 ----------- ------------ Assets Current assets: Cash and cash equivalents $42,583 $9,287 Short-term investments 164,000 --- Accounts receivable - net 159,721 127,383 Inventories 159,803 246,223 Receivable from TXI --- 40,734 Prepaid expenses 7,465 11,097 ----------- ------------ Total current assets 533,572 434,724 ----------- ------------ Other assets: Goodwill 85,166 85,166 Investments and deferred charges 16,807 5,099 ----------- ------------ 101,973 90,265 ----------- ------------ Property, plant and equipment: Land and land improvements 96,926 93,937 Buildings 55,570 54,954 Machinery and equipment 1,032,697 1,025,475 Construction in process 28,867 28,074 ----------- ------------ 1,214,060 1,202,440 Less depreciation 620,083 575,187 ----------- ------------ 593,977 627,253 ----------- ------------ $1,229,522 $1,152,242 =========== ============ Liabilities and Stockholders' Equity Current liabilities: Trade accounts payable $49,979 $88,980 Accrued wages, taxes and other liabilities 55,392 20,933 ----------- ------------ Total current liabilities 105,371 109,913 ----------- ------------ Deferred income taxes and other credits 155,645 147,563 Long-term debt 300,000 --- Long-term payable to Texas Industries, Inc. --- 543,246 Stockholders' equity: Common stock, $0.01 par value 231 228 Additional paid-in capital 707,804 206,818 Retained earnings (deficit) (39,529) 144,474 ----------- ------------ 668,506 351,520 ----------- ------------ $1,229,522 $1,152,242 =========== ============ CHAPARRAL STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Year Ended May 31, ------------------------------------------ 2006 2005 2004 ----------- ----------- ------------ Operating activities: Net income (loss) $157,136 $78,120 $(5,318) Adjustments to reconcile net income (loss) to net cash provided by operating activities Cumulative effect of accounting change --- --- (480) Depreciation 50,116 48,881 49,599 Deferred income taxes 741 33,572 13,865 Other - net 4,595 3,397 345 Changes in operating assets and liabilities Accounts receivable (32,338) (24,211) (101,187) Inventories 86,419 (69,063) 2,766 Prepaid expenses 3,915 (4,290) 8,138 Accounts payable (39,001) 33,920 1,252 Accrued wages, taxes and other 35,912 3,548 4,108 Other credits 5,943 40 1,352 Receivable from or payable to TXI (10,286) (76,227) 44,875 ----------- ----------- ------------ Net cash provided by operating activities 263,152 27,687 19,315 ----------- ----------- ------------ Investing activities: Capital expenditures (16,424) (26,581) (13,875) Purchases of short-term investments (3,162,385) --- --- Sales of short-term investments 2,998,385 --- --- Other - net (914) (395) (193) ----------- ----------- ------------ Net cash used by investing activities (181,338) (26,976) (14,068) ----------- ----------- ------------ Financing activities: Long-term debt 350,000 --- --- Debt retirements (50,000) --- --- Debt issuance costs (9,500) --- --- Dividend to Texas Industries, Inc. (341,139) --- --- Issuance of common stock 2,121 1 --- ----------- ----------- ------------ Net cash provided (used) by financing activities (48,518) 1 --- ----------- ----------- ------------ Increase in cash and cash equivalents 33,296 712 5,247 Cash and cash equivalents at beginning of period 9,287 8,575 3,328 ----------- ----------- ------------ Cash and cash equivalents at end of period $42,583 $9,287 $8,575 =========== =========== ============ http://www.newscom.com/cgi-bin/prnh/20050713/CHAPLOGO http://photoarchive.ap.org/ DATASOURCE: Chaparral Steel Company CONTACT: Cary D. Baetz, +1-972-779-1032, or Terresa Van Horn, +1-972-779-1033, both of Chaparral Steel Company Web site: http://www.chapusa.com/

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