Commercial Metals Co. reported record net earnings of $83.7 million on net sales of $1.7 billion for the fourth quarter and record net earnings of $286 million on net sales of $6.6 billion for the year ended August 31, 2005.

Fourth Quarter Results—Net earnings were a record for any quarter at $83.7 million ($1.38 per diluted share), which compares with net earnings of $47.4 million ($0.78 per diluted share) in the year-ago fourth quarter. Net sales of $1.7 billion compare with net sales of $1.5 billion in the year-ago fourth quarter.

Results include pre-tax income of $11.6 million for final settlement of business interruption insurance claims for the transformer failures in previous years at the Texas and South Carolina mills. Results also included pre-tax LIFO income of $16.7 million ($0.18 per diluted share) compared with an historically high LIFO expense of $38.9 million ($0.83 per diluted share) in the prior year quarter.

Full-Year Results—Record net earnings of $286 million ($4.63 per diluted share) compare with net earnings of $132 million ($2.21 per diluted share) last year. Net sales of $6.6 billion compare to net sales of $4.8 billion last year, which was the previous record year. The company's net earnings return on beginning equity was 43%.

Results include pre-tax income of $20.1 million for final settlement of business interruption insurance claims for transformer failures at the Texas and South Carolina mills. Results also included pre-tax LIFO income of $19.3 million ($0.20 per diluted share) compared with an historically high LIFO expense of $74.8 million ($1.63 per diluted share) in the previous year. The effective tax rate for the year was 35.7%, up substantially from last year's 30.7% as profits shifted from low tax jurisdictions such as Poland.

General Conditions—CMC Chairman, President and CEO Stanley A. Rabin said, "We had thought that fiscal 2004 was a phenomenal year, only to be surpassed by an even more remarkable fiscal 2005. We continued to benefit in the fourth quarter from favorable market conditions for most of our businesses and achieved excellent performance in the Domestic Mills, Domestic Fabrication, Recycling, and Marketing & Distribution segments. Meanwhile, results for our Polish steel manufacturing operation, CMC Zawiercie (CMCZ), exhibited improvement over the third quarter. Some of our markets were softer during the quarter, although still relatively strong, and they continued to gyrate. The ferrous scrap market was especially volatile, but on balance moved upward, notably toward the end of the quarter. Steel mill prices were following the upswing as the quarter ended."

Rabin added, "Our Domestic Mills segment set an all-time earnings record for a quarter although overall production and shipping levels were mixed compared with last year's fourth quarter. The segment's adjusted operating profit of $73.1 million for the fourth quarter was more than double last year's comparable quarter. This year's quarter included the $11.6 million business interruption insurance recovery and pre-tax LIFO income of $11.9 million compared with a $14.9 million pre-tax LIFO expense in last year's fourth quarter.”

Quarterly adjusted operating profit for CMC’s steel minimills — $72.9 million — was over 200% greater than a year earlier on the strength of continued high metal margins and higher shipments.

Rabin said, "It was a better quarter sequentially for CMCZ, although far below last year's extraordinarily strong fourth quarter. The steel minimill (and related operations) in Poland generated net sales of $137.5 million and recorded an adjusted operating profit of $1.9 million on a 100%-owned basis. Market conditions remained difficult, and the average sales price was 28% lower than last year at PLN 1,149 per short ton. This price was PLN 164 per short ton below the third quarter of this year, but operating levels and shipments picked up substantially. Meanwhile, the average scrap purchase cost was PLN 27 per short ton below this year's third quarter and decreased 25% from the fourth quarter last year to PLN 524 per short ton. The metal margin was PLN 544 per ton compared with fiscal 2004's fourth quarter spread of PLN 834 per ton. For the quarter, melted tons equaled 351 thousand, rolled tons equaled 264 thousand and shipments totaled 389 thousand tons, including billets. Comparable data for last year were 383 thousand tons, 281 thousand tons and 364 thousand tons, respectively."

Outlook—Rabin concluded, "As we look forward to fiscal 2006 we are optimistic for the first quarter and year. We anticipate that the positive factors which have been driving our markets are sustainable and allow a continuation of healthy margins and volume for our goods and services, although we must be concerned about the dampening effect of inflationary pressures on the global economy, the decline in consumer confidence in the United States, and significantly increased energy costs for our operations. Still, the U.S. economy in particular has proven quite resilient and went into September 2005 with significant momentum in the manufacturing and construction sectors. Additionally, by the end of our fourth quarter it appeared that the issue of excess inventories in the steel supply chain had been worked through in most markets. The passage of the multi-year transportation bill in the United States during August 2005 was especially good news. However, increased availability of steel globally has had a softening effect on prices, mainly caused by apparent Chinese overproduction in certain product areas.

"An especially important factor going forward is the impact of Hurricanes Katrina and Rita on our industry sectors and CMC specifically. We have experienced some short-term disruptions to our Gulf Coast operations and markets, including some power outages and transportation difficulties, but overall effects are not major. Moreover, medium-term and longer-term effects should be extremely positive because of substantially increased demolition and recycled metals and the consequent reconstruction requirements in the United States Gulf area."

Rabin continued, "By segment, we anticipate in the first quarter continued strong performance from Domestic Mills and Domestic Fabrication, a slight profit at CMCZ (including scheduled major maintenance), and good results in Recycling and Marketing & Distribution. Accordingly, we anticipate first quarter LIFO diluted net earnings per share between $1.10 and $1.25."

Commercial Metals Co. and 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.