March 22, 2006 — Commercial Metals Co. (CMC) reported net earnings of $80.1 million on net sales of $1.6 billion for the second quarter, and net earnings of $150 million on net sales of $3.3 billion for the six months ended February 28, 2006.

Second Quarter Results—The quarter was CMC’s strongest second quarter ever reported and the second best quarter in the company’s history. The $80.1 million net earnings ($1.29 per diluted share) compares with net earnings of $56.6 million ($0.91 per diluted share) for the second quarter last year. Net sales of $1.6 billion compares with net sales of $1.6 billion for the second quarter last year. Results included after-tax LIFO income of $2.6 million ($0.04 per diluted share), which compares with an expense of $2.6 million ($0.04 per share) in last year's second quarter.

Six Month Results—Net earnings of $150 million ($2.44 per diluted share) compare to net earnings of $130 million ($2.11 per diluted share) for the same period last year. Net sales of $3.3 billion compare to net sales of $3.1 billion for the first six months of last year. After-tax LIFO expense was $11.5 million ($0.19 per share), which compares with an expense of $24.8 million ($0.40 per share) last year.

Management Comments—CMC Chairman and CEO Stanley A. Rabin said, "We again generated outstanding profits in what is typically our weakest quarter, results which exceeded our expectations and after a period of declining steel prices in many parts of the world. As we anticipated, the second quarter reflected some seasonal softness, although abnormally dry weather in the southwest U.S. aided shipping levels. Profitability was relatively strong in all of our segments except for CMCZ, but it performed better than the prior year as well. Currency changes were not significant. Our outlook for the third quarter and second half remains very positive. We believe product demand should accelerate further, and volume and prices remain strong. We anticipate third quarter LIFO diluted net earnings per share between $1.25 and $1.40."

Rabin added, "Our Domestic Mills segment's adjusted operating profit at $71 million was nearly double last year's historically strong second quarter. The LIFO expense was $686 thousand pre-tax in this year's second quarter compared with $983 thousand expense last year. Within the segment, adjusted operating profit for our steel minimills was almost 65% greater than a year earlier on the strength of higher selling prices combined with seasonally high finished goods shipments as well as a lower average cost for scrap utilized. Compared with last year's second quarter, the metal spread increased by 11% to $293 per ton. On a year-to-year basis, tonnage melted for the second quarter was up 8% to 577 thousand tons; tonnage rolled was 532 thousand tons, 13% above last year's second quarter; and shipments gained 19% to 603 thousand tons. Our average total mill selling price was $26 per ton above last year's level, and the average selling price for finished goods was up by $26 per ton to $516 per ton. By product line, the price premium of merchant bar over reinforcing bar remained relatively wide at $88 per ton. The average scrap purchase cost increased by 1% versus a year ago to $184 per ton. Total utility costs increased dramatically by $8.7 million compared with the second quarter last year, with increases in both electricity and natural gas. Year-over-year costs for ferroalloys, graphite electrodes and other supplies were mixed, while transportation rates rose significantly.

"The copper tube mill recorded an adjusted operating profit of $6.1 million, substantially above that of last year's second quarter. Included was a pre-tax LIFO expense of $1.7 million compared to a $1 million expense last year. Better supply/demand conditions in the industry resulted in an increased average selling price of $2.84 per pound and metal spreads widened to $1.11 per pound, up from 68 cents per pound, more than offsetting the pronounced rise in the cost of copper scrap. Against the same period last year, copper tube production edged higher to 16.7 million pounds while shipments were down 2% to 15.7 million pounds."

Rabin continued, "The Polish steel operation recorded a small adjusted operating loss of $584 thousand on a 100%-owned basis compared with an adjusted operating loss of $4.5 million the previous year. Operating levels and shipments were up significantly compared with the second quarter of fiscal 2005, even though severe weather slowed construction in Poland and surrounding areas; however, prices and margins continued to be squeezed. Exports did increase despite the relatively strong Polish Zloty. For the quarter, tons melted equaled 285 thousand versus 203 thousand last year; rolled tons equaled 261 thousand against 206 thousand last year; and shipments totaled 285 thousand tons (including billets) compared with 208 thousand last year. Meanwhile, the average selling price fell to PLN 1,238 per ton (including 7% billets) from PLN 1,523 per ton (including 7% billets) with particular weakness in the wire rod market. Accordingly, the average metal margin decreased further to PLN 546 per ton from an already inadequate PLN 619 per ton. During January 2006, we began to commission the new mega-shredder and construction of the greenfield rebar fabrication plant will begin shortly."

Rabin said, "Profitability in the Domestic Fabrication segment was a record for a second quarter. We recorded an 80% increase in adjusted operating profit to $38.5 million, including $9.7 million pre-tax LIFO income (reduced inventories). Last year's pre-tax LIFO expense was $4.6 million. Total shipments jumped 23% compared with the prior year's second quarter and were up across-the-board for the various product areas. Realized selling prices were mostly higher, with all products sustaining strong levels. Construction activity was relatively strong in all areas. Public and institutional construction continued at a very solid level, and various sectors of commercial construction showed further improvement. Almost all product areas — rebar fabrication, construction-related products (CRP), steel fence posts, steel joist manufacturing, cellular beam manufacturing, structural steel fabrication, and heat treating — contributed to the improvement in profitability. Shipments from our fab plants totaled 363 thousand tons, while the composite average fab selling price (excluding stock and buyouts) increased by $22 per ton."

According to Rabin, "The Recycling segment achieved a near record second quarter with net sales up by 21% compared with one year ago, marked by record nonferrous price levels. The adjusted operating profit of $18.6 million was off 7% from last year's record second quarter. LIFO expense was $3.2 million pre-tax this quarter versus an income of $1.0 million the prior year. The ferrous scrap market was still strong — and notably volatile — although on balance down in price from the second quarter of last year. Versus last year, the average ferrous scrap sales price for the quarter decreased by 4% to $190 per short ton while stock shipments increased 6% to 490 thousand short tons. The average nonferrous scrap sales price for the quarter jumped by 33% compared with a year ago, while nonferrous stock shipments were 3% higher. Inventory turnover across the board remained extremely rapid. The total volume of scrap processed, including all our domestic processing plants, equaled 862 thousand tons against 822 thousand tons last year."

"Adjusted operating profit for the Marketing and Distribution segment of $12.9 million was significantly below last year's very strong second quarter on considerably lower net sales, mostly due to what we believe were temporary factors," Rabin said. "Business was mixed by geography and product line. This segment recorded LIFO expense of $1.8 million pre-tax compared with pre-tax income of $519 thousand the year before. Global sales and prices of steel declined, especially in Europe and Asia, resulting in lower profitability for this large product line. The margins for aluminum, copper and stainless steel semis decreased over the prior year, and sales and margins for industrial materials and products were down as well from recent record levels. Our value-added downstream and processing businesses continued to perform well, although not as robust as recent quarters because of the generally weaker steel markets."

Financial Condition—According to Rabin, "Our financial position remains strong. At February 28, 2006, our stockholders' equity exceeded $1 billion for the first time. At quarter end, our working capital was $962 million, and the current ratio was 2.2. Our coverage ratios remain strong. Long-term debt as a percentage of total capitalization was 26%, as was the ratio of total debt to total capitalization plus short-term debt. Both ratios include the debt of CMCZ which has recourse only to the assets of CMCZ.

"Following up on the company's previously announced intent to increase the regular quarterly cash dividend, on March 13, 2006, the board declared a cash dividend of 10 cents per share, up from the prior 6 cents per share. This increase, effective with the dividend to be paid on April 21, 2006, to stockholders of record April 7, 2006, represents an increase of 67%."

Outlook—Rabin continued, "As the quarter ended, the global steel market in particular had reversed course, resulting in another price rally. The end of de-stocking in most markets, disciplined production rates by EU mills, and a rapid Asian turnaround all contributed to the upswing. Generally good economic conditions prevail. Manufacturing activity continues to expand. While residential construction in the U.S. has pulled back from its peak, worldwide non-residential construction notably is expected to strengthen. More specifically, construction materials generally are in strong demand. Our domestic steel mill markets continue at relatively strong levels, underpinned by the growing U.S. economy and solid construction markets. Imports of carbon steel bar products recently have increased into the U.S.; although at reasonable levels relative to demand, the situation bears watching. Our mill shipments should accelerate during the third quarter, and steel prices should remain firm. Steel scrap prices remain relatively strong, domestically and internationally, although a continuation of the unprecedented price volatility we have seen in recent quarters appears inevitable. The outlook for nonferrous markets remains favorable, although prices are off from recent highs. Demand for downstream products and services remains vibrant.

"Accordingly, total earnings from our domestic steel mills should remain strong during the third quarter. The copper tube business should be steady at the improved level. Results at CMCZ are expected to improve significantly based on increased selling prices and shipments. Our anticipation remains that fabrication profits will expand yet further given robust prices and volumes. Our Recycling segment will again post strong results buoyed by relatively firm markets. We expect the Marketing and Distribution segment to pick up again, driven by higher volume and margins in various steel markets, led by firmer market conditions in China."

Commercial Metals Co. and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel minimills, steel fabrication and processing plants, construction-related product warehouses, a copper tube mill, metal recycling facilities and marketing and distribution offices in the United States and in strategic overseas markets.