Feb. 9, 2006 — Earle M. Jorgensen Co. (EMJ) reported net income of $18.2 million on revenues of $428.8 million for its third fiscal quarter, and net income of $59.6 million on revenues of $1,285.7 million for the nine months ended December 30, 2005.

Third Quarter Results—Revenues of $428.8 million reflect an increase of 6.8% compared to $401.7 million for the three months ended December 31, 2004. Net income of $18.2 million compares to net income of $4.5 million for the same period in fiscal 2005. EBITDA was $47.0 million, compared to $19.4 million in the same period in fiscal 2005. Financial results include a pretax LIFO (last-in-first-out) charge of $1.9 million versus a charge of $18.1 million for the same quarter last year, which is included in cost of sales.

Diluted earnings per share was $0.35 per share, based on 52.5 million diluted weighted shares outstanding, compared to diluted earnings per share of $0.29, based on 15.7 million diluted weighted shares outstanding for the third quarter of fiscal 2005. The significant increase in the diluted weighted shares outstanding in fiscal 2006 is the result of the shares issued in conjunction with the company’s merger and financial restructuring and initial public offering in April 2005. Third quarter results include a non-cash $0.6 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 December 30, 2005. The mark-to-market adjustment was recorded as a decrease in general and administrative expenses. Further, during the third quarter of fiscal 2005, EMJ incurred $28.8 million of certain expenses related to the financial restructuring and IPO, including a $17.3 million non-cash charge for the initial valuation of the special contribution to the stock bonus plan and a $6.3 termination fee to Kelso & Co.

Volume was approximately 195,000 tons, compared to approximately 185,000 tons shipped in the third quarter of fiscal 2005. Pretax income was $30.1 million, a 13-fold increase over the third quarter of fiscal 2005 pretax income of $2.3 million.

Nine Month Results—Revenues of $1,285.7 reflect an increase of 11.5% from $1,152.6 million for the nine months ended December 31, 2004. Net income of $59.6 million reflects an increase of 56.6% over $38.1 million during the same period in fiscal 2005. EBITDA was $140.9 million, compared to $112.5 million during the first nine months of fiscal 2005. Financial results include a pretax LIFO charge of $9.7 million versus a charge of $42.5 million for the same period last year, which is included in cost of sales.

Diluted earnings per share was $1.18 per share, based on 50.7 million diluted weighted shares outstanding, compared to diluted earnings per share of $2.10, based on 15.5 million diluted weighted shares outstanding for the third quarter of fiscal 2005. Results included a one-time IPO cash bonus of $8.5 million, partially offset by a non-cash credit of $3.7 million to mark-to-market the value the company’s common stock obligation to its retirement savings plan, based on the per share price of common stock at December 30, 2005. The mark-to-market adjustment was recorded as a decrease in general and administrative expenses.

Volume was approximately 586,000 tons, compared to approximately 572,000 tons in the same period in fiscal 2005. Pretax income was $91.2 million, a 118.2% increase over pretax income of $41.8 million for the same period in fiscal 2005.

Management Comments—Maurice S. Nelson Jr., EMJ's CEO, stated, "We are very pleased with the strong results in the December quarter, which historically has been our slowest quarter. EMJ's line items shipped were the second highest quarterly total in company history. As we noted last quarter, we have seen gradual improvement in gross margin, which at 25.7% for the third quarter was 50 basis points higher than the second quarter at 25.2%. In addition, we continue to see a small amount of inflation in our inventory, which resulted in a $9.7 million LIFO charge in the first nine months of this year compared to $42.5 million in the same period last year."

Mr. Nelson continued, "We continue to develop the business and are pursuing strategies to strengthen our position in the marketplace. During the third quarter of fiscal 2006 we made substantial progress on our new Quebec City, Canada and Lafayette, Louisiana facilities. Quebec City began operations in January and we expect to begin operations in Lafayette in March. In each case these facilities will increase the service levels to our customers and those markets in which they serve. We have seen our locations that serve energy-related customers continue to have very solid performances with record-level volumes."

“Our revolving line of credit facility decreased $13.3 million during our third quarter of fiscal 2006 to $29.3 million from $42.6 million at September 28, 2005, while the balance at March 31, 2005 was $16.9 million,” continued Mr. Nelson. “At December 30, 2005, we had $257.1 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. Our Board has approved a new capital budget of $18.7 million for fiscal 2007. This 2007 budget includes expenditures for the previously announced development of a new facility in Portland, Oregon and significant expenditures for value-added processing equipment purchases throughout EMJ.”

Outlook—“We expect business to improve during our historically strong March quarter with increased volumes and substantially unchanged pricing and gross margin levels,” commented Mr. Nelson. “As such, we currently expect revenue for our fiscal fourth quarter ending March 31, 2006, to be in the range of $480-$500 million, EBITDA to be within a range of $54-$59 million and diluted earnings per share to be within a range of $0.48-$0.53, based on approximately 53.0 million diluted weighted shares outstanding. Full year totals for fiscal 2006 would be revenues in the range of $1.77 billion to $1.79 billion, EBITDA in the range of $195 million to $200 million, and diluted earnings per share in the range of $1.65 to $1.70, based on approximately 52.0 million diluted weighted shares outstanding.”

EMJ is one of the largest distributors of metal products in North America with 39 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.