Earle M. Jorgensen Co. reported net income of $18.9 million on revenues of $412.9 million for the second fiscal quarter ended September 28, 2005.

Second Quarter Results—The $18.9 million net income compares to net income of $21.9 million for the same period in fiscal 2005. Revenues, $412.9 million, reflect a 6.1% increase compared to $389.3 million for the three months ended September 29, 2004. Sales volume was 190,000 tons, compared to 192,000 tons shipped in the second quarter of fiscal 2005.

Pretax income was $ 27.3 million, a 17.9% increase over the second quarter of fiscal 2005 pretax income of $23.2 million. EBITDA was $43.9 million, compared to $50.6 million in the same period in fiscal 2005. Financial results include a pretax LIFO charge of $2.8 million versus a charge of $13.0 million for the same quarter last year, which is included in cost of sales.

Diluted earnings were $0.36 per share, based on 52.6 million diluted weighted shares outstanding, compared to diluted earnings per share of $1.23, based on 15.5 million diluted weighted shares outstanding for the second quarter of fiscal 2005. The significant increase in the diluted weighted shares outstanding is the result of the shares issued in conjunction with EMJ’s merger and financial restructuring and initial public offering in April 2005. Results include a non-cash $1.2 million mark-to-market adjustment to value the company’s common stock obligation to its retirement savings plan, based on the per-share price of common stock at September 28, 2005. The mark-to-market adjustment was recorded as an increase in general and administrative expenses.

Six Month Results—Net income was $41.5 million, an increase of 23.6% over $33.6 million during the same period in fiscal 2005. Revenues of $856.9 million reflect a 14.1% increase compared to $750.9 million for the six months ended September 29, 2004. Sales volume was 391,000 tons, compared to 387,000 tons in the same period in fiscal 2005.

Pretax income was $61.1 million, a 54.7% increase over pretax income of $39.5 million for the same period in fiscal 2005. EBITDA was $93.9 million, compared to $93.1 million during the first six months of fiscal 2005. Financial results include a pretax LIFO charge of $7.8 million versus a charge of $24.4 million for the same period last year, which are included in cost of sales. Diluted earnings were $0.83 per share, based on 49.8 million diluted weighted shares outstanding, compared to diluted earnings per share of $1.81, based on 15.5 million diluted weighted shares outstanding for the second quarter of fiscal 2005.

The first half of fiscal 2006 included a one-time IPO cash bonus of $8.5 million, partially offset by a favorable non-cash $3.1 million to mark-to-market adjustment to value the company’s common stock obligation to its retirement savings plan, based on the per-share price of common stock at September 28, 2005. The mark-to-market adjustment was recorded as a decrease in general and administrative expenses.

Comments—Maurice S. Nelson Jr., EMJ's President and CEO, stated, “Although revenues for the second quarter exceeded our projection, as expected, we have seen continued pressure on our gross margins, which at 25.2% for the second quarter of fiscal 2006 is slightly below our first quarter margins of 26.0% and lower than our second quarter margins in fiscal 2005 of 28.4%. The gross margin decline is the result of continued competitive pressures and an increase in the availability of various products when compared to same period last fiscal year. In addition, we saw minimal inflation in our inventory which resulted in a $7.8 million LIFO charge in the first six months of this year compared to $24.4 million last year.

Mr. Nelson continued, “We continue to develop the business and are pursuing strategies to strengthen our position in the marketplace. During the second quarter of fiscal 2006 we elected to pursue additional capital investment opportunities, including the acquisition of our leased Hayward, Calif., facility for $6.5 million, which will be completed in our third fiscal quarter of 2006, and our decision to build a new, larger Portland, Ore., facility for approximately $5.1 million. We are also pleased with the recent progress of our Hartford, Conn., facility in which we started shipping this month, and the groundbreaking at our new Lafayette, La., and Quebec City facilities. In each case these facilities will increase the service levels to our customers and those markets in which they serve.

“Our revolving line of credit facility decreased $29.6 million during our second quarter of fiscal 2006 to $42.6 million from $72.2 million at June 29, 2005, while the balance at March 31, 2005 was $16.9 million. At September 28, 2005, we had $245.4 million available under our revolving line of credit facility. Largely, as a result of our increased investments in new and expanded facilities, we currently expect our capital expenditures for fiscal 2006 to be approximately $33 million.”

Outlook—“We currently expect business to continue at the same levels experienced in the first six months, and continued competitive pressures on pricing will result in gross margins consistent with the levels realized during the second quarter ended September 28, 2005,” said Mr. Nelson. “As such, we currently expect revenue for our fiscal third quarter ending December 30, 2005, to be in the range of $390-$410 million, EBITDA to be within a range of $39-$43 million and diluted earnings per share to be within a range of $0.28 -$0.32, based on 52.0 million diluted weighted shares outstanding.”

EMJ is one of the largest distributors of metal products in North America with 38 service and processing centers. EMJ inventories more than 25,000 different bar, tubing, plate, and various other metal products, specializing in cold finished carbon and alloy bars, mechanical tubing, stainless bars and shapes, aluminum bars, shapes and tubes, and hot-rolled carbon and alloy bars.