Chaparral Steel Co. reported record net income of $34.0 million for the second quarter ended November 30, 2005.

Second Quarter Results—The $34.0 million record net income ($1.44 per diluted share) reflects an increase of $13.0 million compared to net income of $21.0 million ($0.92 per diluted share) for the second quarter of fiscal 2005. Second quarter net income is also $16.2 million better than net income of $17.8 million ($0.77 per diluted share) for the first quarter ended August 31, 2005.

Record operating profit of $59.5 million reflects a 34% increase compared to the second quarter of fiscal 2005, and a 70% increase compared to the first quarter of this fiscal year. Second quarter operating profit exceeded the previous record set in the first quarter of fiscal 2005 by almost 8%.

"The results for the second quarter were great, even though our operations continue to be hampered by volatile energy costs," stated Tommy A. Valenta, President and CEO. "We are continuing to see signs of improvement in non-residential activity in the United States and we are well positioned to take advantage of that strong end user demand."

Shipments of 548,000 tons were 41% higher than the 389,000 tons shipped in the second quarter of fiscal 2005, and 9% lower compared to the first quarter ended August 31, 2005. Average selling prices were down 1% from the second quarter of fiscal 2005 but up 13% from the first quarter of this fiscal year. Average metal margins of $409 per ton were down slightly from the second quarter of fiscal 2005 but increased over 11% from the first quarter of this year. Energy expense was up 25% from the first quarter.

Six Month Results—Record net income of $51.8 million ($2.22 per diluted share) compares to net income of $49.1 million ($2.15 per diluted share) for the first six months of fiscal 2005. Average selling prices were down 3% compared to the first six months of fiscal 2005 while total shipments of 1.15 million tons increased over 30%.

The company ended the quarter with $113.4 million of cash, cash equivalents and short-term investments. On December 2, 2005, the company completed its offer to exchange its outstanding 10% senior notes due 2013 that were issued in a private offering in July 2005, for 10% senior notes due 2013, which are registered under the Securities Act of 1933.

Outlook—Chaparral Steel believes that end user demand for its products will remain strong for the third quarter of fiscal 2006, and is forecasting third quarter operating profit to be approximately $45 million. However, the company also expects that slightly lower seasonally-adjusted volumes and continued high energy costs for the winter months will result in margin compression in the third quarter compared to second quarter results.