CHAP Chaparral Energy Inc

MIDLOTHIAN, Texas, Dec. 19 /PRNewswire-FirstCall/ -- Chaparral Steel Company (NASDAQ:CHAP) today reported record net income of $67.5 million ($1.40 per diluted share) for its second quarter ended November 30, 2006. This 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. This is $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 increased 83% compared to the second quarter of fiscal 2006 and exceeded the previous record set in the first quarter of this 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 Chief Executive Officer. "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." Shipments of approximately 541,000 tons were seasonally lower than the first quarter of this fiscal year but were comparable to the second quarter of fiscal year 2006. Average selling prices for this quarter of $682 per ton increased 4% from the first quarter of this fiscal year and nearly 18% 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% from the first quarter of fiscal 2007 as a result of a seasonally lower power costs at our Texas facility. The Company had a $1.9 million LIFO charge during the quarter compared to a $1.0 million charge for the first quarter of this fiscal year and $0.5 million charge for the comparable quarter of fiscal 2006. Included in the quarter was an insurance recovery of $3.5 million after tax ($0.07 per diluted share). For the six months ended November 30, 2006, the Company also had record net income of $126.6 million ($2.62 per diluted share). This 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. The Company 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. Based on current market conditions, our third fiscal quarter should continue to provide strong results. 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. Metal margins should remain strong as the Company's products are competitively priced to imports and scrap prices remain relatively stable. Energy costs will be seasonally higher compared to the second quarter of fiscal 2007. As a result, we anticipate earnings to be in the range of $1.15 to $1.25 per diluted share for the quarter. The Company's Second Quarter Earnings Teleconference will be held tomorrow, December 20, 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 the Company's business, construction activity in the Company's markets, changes in the costs of raw materials, fuel and energy, the impact of environmental laws, unexpected equipment failures, the effect of foreign currency valuations and regulatory and statutory changes, which are more fully described in the Company's Annual Report on Form 10-K filed with the SEC. Chaparral Steel Company, headquartered in Midlothian, Texas, is the second largest producer of structural steel beams in North America. The Company is also a 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 data) (Unaudited) Three months ended Six months ended November 30, November 30, ------------ ------------ 2006 2005 2006 2005 ---------- ---------- ---------- --------- Net sales $ 403,377 $ 348,130 $ 814,026 $686,535 Costs and expenses (income) Cost of products sold 288,184 283,247 594,952 580,441 Selling, general and administrative 14,089 9,484 24,748 16,923 Interest 7,918 7,982 15,964 16,146 Other income, net (7,742) (4,091) (11,229) (5,393) ---------- ---------- ---------- --------- 302,449 296,622 624,435 608,117 ---------- ---------- ---------- --------- Income before income taxes 100,928 51,508 189,591 78,418 Income taxes 33,461 17,505 63,037 26,664 ---------- ---------- ---------- --------- Net income $67,467 $34,003 $126,554 $ 51,754 ========== ========== ========== ========= Earnings per share: Basic $ 1.45 $ 0.74 $ 2.73 $ 1.13 ========== ========== ========== ========= Diluted $ 1.40 $ 0.72 $ 2.62 $ 1.11 ========== ========== ========== ========= Average shares outstanding: Basic 46,413 45,717 46,354 45,716 ========== ========== ========== ========= Diluted 48,292 47,296 48,212 46,691 ========== ========== ========== ========= Cash dividends per share $0.10 $--- $0.10 $--- ========== ========== ========== ========= CHAPARRAL STEEL COMPANY AND SUBSIDIARIES SUPPLEMENTAL OPERATING INFORMATION (Unaudited) Three months ended Six months ended November 30 August 31 November 30 ----------- --------- ----------- 2006 2005 2006 2006 2005 ---------- ---------- ---------- --------- --------- Net sales (in $ 000's) 403,377 348,130 410,649 814,026 686,535 Operating profit (in $ 000's) 108,846 59,490 96,709 205,555 94,564 Shipments (000's) Structural mills 458 449 478 936 942 Bar mill 83 99 89 172 209 ---------- ---------- ---------- --------- --------- Total 541 548 567 1,108 1,151 ========== ========== ========== ========= ========= Price ($/ton excluding delivery fees) Structural mills 686 578 656 671 541 Bar mill 661 590 655 658 571 ---------- ---------- ---------- --------- --------- Combined 682 580 656 669 546 ========== ========== ========== ========= ========= CHAPARRAL STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) November 30, May 31, 2006 2006 ------------- ----------- Assets Current assets: Cash and cash equivalents $34,568 $42,583 Short-term investments 289,150 164,000 Accounts receivable 170,743 159,721 Inventories 190,951 159,803 Prepaid expenses 6,665 7,465 ------------- ----------- Total current assets 692,077 533,572 ------------- ----------- Other assets: Goodwill 85,166 85,166 Investments and deferred charges 17,784 16,807 ------------- ----------- 102,950 101,973 ------------- ----------- Property, plant and equipment: Land and land improvements 96,926 96,926 Buildings 56,075 55,570 Machinery and equipment 1,037,392 1,032,697 Construction in progress 33,017 28,867 ------------- ----------- 1,223,410 1,214,060 Less depreciation 644,130 620,083 ------------- ----------- 579,280 593,977 ------------- ----------- $1,374,307 $1,229,522 ============= =========== Liabilities and Stockholders' Equity Current liabilities: Trade accounts payable $75,121 $49,979 Accrued wages, taxes and other liabilities 51,556 55,392 ------------- ----------- Total current liabilities 126,677 105,371 ------------- ----------- Deferred income taxes and other credits 149,238 155,645 Long-term debt 300,000 300,000 Stockholders' equity: Common stock, $0.01 par value 464 462 Additional paid-in capital 715,538 707,573 Retained earnings (deficit) 82,390 (39,529) ------------- ----------- Total stockholders' equity 798,392 668,506 ------------- ----------- $1,374,307 $1,229,522 ============= =========== CHAPARRAL STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six months ended November 30, ------------ 2006 2005 ------------- ----------- Operating activities: Net income $126,554 $51,754 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 24,074 24,883 Deferred income taxes (5,048) 1,358 Stock-based compensation 1,636 79 Other - net (456) 668 Changes in operating assets and liabilities Accounts receivable (11,022) (4,412) Inventories (31,148) 67,433 Prepaid expenses 721 (2,201) Accounts payable 25,142 (6,079) Accrued wages, taxes and other liabilities (2,783) 37,405 Other credits (1,288) 488 Receivable from or payable to TXI --- (10,286) ------------- ------------ Net cash provided by operating activities 126,382 161,090 ------------- ------------ Investing activities: Capital expenditures (9,409) (8,128) Purchases of short-term investments (6,431,360) (317,130) Sales of short-term investments 6,306,210 274,355 Other - net (490) (595) Net cash used by investing activities (135,049) (51,498) Financing activities: Long-term borrowings --- 350,000 Debt retirements --- (50,000) Debt issuance costs --- (9,469) Dividend paid to Texas Industries, Inc. --- (341,139) Issuance of common stock 698 24 Tax benefits from exercise of stock options 4,589 2,337 Common dividends paid (4,635) --- ------------- ------------ Net cash provided (used) by financing activities 652 (48,247) ------------- ------------ Increase (decrease) in cash and cash equivalents (8,015) 61,345 Cash and cash equivalents at beginning of period 42,583 9,287 ------------- ------------ Cash and cash equivalents at end of period $34,568 $70,632 ============= ============ DATASOURCE: Chaparral Steel Company CONTACT: Cary D. Baetz, Vice President and Treasurer, +1-972-779-1032, or fax, +1-972-779-1951, or , or Terresa Van Horn, +1-972-779-1033, both of Chaparral Steel Company Web site: http://www.chapusa.com/

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