UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
May 26, 2005
(Date of earliest event reported)
QUANEX CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware |
1-5725 |
38-1872178 |
||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
|
1900 West Loop South, Suite 1500, Houston, Texas |
77027 |
|||
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 713-961-4600
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02 Results of Operations and Financial Condition
This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On May 26, 2005, Quanex Corporation issued a press release
(the "Press Release") reporting its earnings results for the second
quarter of fiscal year 2005. The foregoing is qualified by reference to the Press Release which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated May 26, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
QUANEX CORPORATION
(Registrant) |
||
|
May 26, 2005
(Date) |
/s/ TERRY M. MURPHY
Terry M. Murphy Senior Vice President - Finance & Chief Financial Officer |
| Exhibit Index | ||
| 99.1 | Press release dated May 26, 2005 | |
EXHIBIT 99.1
Quanex Fiscal Second Quarter 2005 Results
Record Net Sales & Income from Continuing Operations
Record Diluted Earnings per Share from Continuing Operations
Best Ever First Half Cash Provided by Operations - $73 million
FY2005 EPS Guidance Raised to $5.75 - $6.00 from $5.00 - $5.40
HOUSTON, May 26, 2005 (PRIMEZONE) -- Quanex Corporation (NYSE:NX) today reported record net sales and income from continuing operations for its fiscal second quarter. Diluted earnings per share from continuing operations of $1.95 set a new quarterly record and increased fourfold from the year ago quarter of $0.43. Diluted earnings per share were $1.93. The Company's return on invested capital was 16.5% compared to 8.3% in the year ago period.
Quarterly Highlights
-- Record second quarter net sales were $533.8 million, up 43% over
the year ago quarter.
-- Net sales from the Company's December 9, 2004, acquisition of
Mikron Industries were up 21% from their year ago quarter.
-- Record income from continuing operations for the quarter was
$51.4 million compared to $10.8 million in the year ago quarter.
-- Mikron Industries second quarter earnings were accretive by $0.06
per share (after interest expense).
-- Cash provided by operating activities for six months ended April
was $72.2 million compared to $5.3 million in the year ago
period.
-- Since the Company's purchase of Mikron, bank revolver debt has
been reduced by $90 million; total debt to capitalization at
quarter end was 29.9%; cash and equivalents were $16.8 million.
-- On March 21, 2005, the Company completed the acquisition of
Besten Inc., a small manufacturer of assembly and glazing
equipment used extensively in the insulating glass window
industry.
-- The Company approved a $38 million capital project (Phase 9) at
MACSTEEL to be implemented over the next 18 months that will
produce value added products, such as MACPLUS turned and polished
bars, on world-class equipment at MACSTEEL-Monroe.
Selected Quarterly Financial Information
2nd qtr 2005 2nd qtr 2004 inc/(dcr)
------------ ------------ ---------
Net Sales $533.8 $372.9 43%
Operating Income 86.0 18.5 364%
Income from Continuing
Ops. 51.4 10.8 377%
EPS: Basic Earnings from
Continuing Ops. $2.04 $0.44 364%
EPS: Diluted Earnings
from Continuing Ops. 1.95 0.43 353%
Segment Commentary
Vehicular Products
2nd qtr 2005 2nd qtr 2004 inc/(dcr)
------------ ------------ ---------
Net Sales $289.4 $213.5 36%
Operating Income 61.0 13.0 370%
The Vehicular Products segment is focused on providing customers with value-added, engineered steel bar and extrusion products. Key market drivers are light vehicle and heavy duty truck builds.
"North American light vehicle builds were down about 5% in our second quarter compared to the year ago quarter, with domestic "Big 3" builds down about 12%, partially offset by a 12% increase in light vehicle builds by the New American Manufacturers (NAMs). Demand from heavy duty truck customers continued to grow, with overall production up some 45% over our second quarter last year. Actual shipments were off from the year ago period because orders were set-back by customers as they adjusted inventories consistent with the reduction in light vehicle build rates initiated by some of the domestic automotive companies," said Raymond A. Jean, chairman and chief executive officer. "Segment operating income compared to the year ago quarter benefited from new customer programs, cost improvements, higher selling prices, and falling scrap costs. MACSTEEL-Monroe had a great quarter as the business continues to improve its product mix and operating efficiency compared to earlier periods," continued Jean.
Building Products
2nd qtr 2005 2nd qtr 2004 inc/(dcr)
------------ ------------ ---------
Net Sales $244.3 $159.4 53%
Operating Income 31.3 11.4 175%
The Building Products segment is focused on providing window and door OEM customers with engineered products and components, and is also a leading provider of common alloy aluminum sheet. Key market drivers are housing starts and remodeling activity.
"The housing outlook remained quite positive during our second quarter, although demand was adversely impacted by severe weather in many regions of the country. Our wood window components business units were particularly hard hit," Jean said. "Offsetting the seasonal factors, our aluminum sheet business had an exceptionally strong quarter. Shipments to our traditional building and construction customers remained steady, while sales to our capital equipment, service center, and transportation customers were more robust than year ago levels. Overall market dynamics allowed for higher selling prices compared to both the previous and year ago quarters and aluminum scrap remained plentiful and reasonably priced. Also, we're very pleased with the progress we are seeing at Mikron. The growth of new programs is helping them outgrow their served market, and with lean practices taking on more emphasis, we expect them to continue to improve their returns," said Jean.
Working Capital
"In fiscal 2004, our Vehicular Products and Building Products segments made outstanding progress in improving their respective working capital positions and the trend continued this quarter. Progress is measured by the improvement in our conversion cycle, which is the sum of inventory days, plus trade receivable days, less payable days, all based on average daily sales. For the quarter, our conversion cycle improved to 42 days compared to 47 days in the year ago quarter," said Jean.
Fiscal 2005 Outlook
Overall customer demand in the Company's two target markets, vehicular products and building products, is expected to remain healthy through fiscal 2005.
Vehicular Products segment - Light vehicle build rates for the third fiscal quarter are expected to remain in line with last year, although production cuts by the domestic "Big 3" producers, a major customer group of the segment, will reduce demand from a year ago. However, we do expect new programs, ongoing very strong heavy duty truck builds and the strength in secondary markets including farm and construction equipment, capital goods and defense to keep the segment at respectable operating rates through the quarter.
Building Products segment - The drivers within the segment remain positive, supported by still favorable interest rates and an improving job outlook. The segment will also benefit from very strong organic growth, a more balanced supply/demand aluminum marketplace and the Mikron acquisition.
Taken together, Quanex expects to report record fiscal 2005 diluted earnings per share from continuing operations in the range of $5.75 to $6.00, a significant improvement over fiscal 2004's $2.30. For the third quarter, the Company expects diluted earnings per share from continuing operations to be in the range of $1.35 to $1.45, up from the $0.82 reported in its third quarter 2004. The Company cautions that its combination of short cycle businesses and volatile raw material costs, particularly for steel scrap, makes forecasting problematic.
Other
The Company continues to account for stock options using the current transition provisions of SFAS No. 123. Accordingly, Quanex does not reflect the option expense in its income statement or diluted earnings per share. However, the Company does disclose the impact on net income and diluted earnings per share in the footnotes to its SEC financial statements. Expensing stock options in the second quarter would have reduced net income by about $0.5 million, and would have reduced diluted earnings per share by $0.02. Quanex expects to begin expensing stock options in its fiscal 2006 first quarter.
On January 26, 2005, the Company irrevocably elected, pursuant to the indenture governing its 2.50% convertible senior debentures due 2034, to settle the principal amount of the debentures in cash when they become convertible and are surrendered by the holders thereof. Allowing for this election and using an average stock price of $54.35 for its second fiscal quarter, the Company's diluted earnings per share were reduced by $0.05. The Company estimates that for each $3.00 increase in its stock price above the debenture's conversion price of approximately $38.30, diluted earnings per share will be reduced by about $0.01 per quarter. On May 2, 2005, the Company announced that its debentures were convertible by holders in accordance with the terms of the indenture.
Dividend Declared
The Board of Directors declared the Company's quarterly cash dividend of $0.135 per share on the common stock, payable June 30, 2005, to shareholders of record on June 17, 2005.
Corporate Profile
Quanex Corporation, with expected 2005 sales of $2 billion, is an industry-leading manufacturer of value-added, engineered materials and components serving the vehicular products and building products markets.
Financial Statistics as of 04/30/05
Book value per common share: $23.10; Total debt to capitalization: 29.86%; Return on invested capital: 16.53%; Return on common equity: 22.59%; Actual number of common shares outstanding: 25,228,278
Definitions
Book value per common share - calculated as total stockholders' equity as of balance sheet date divided by actual number of common shares outstanding;
Total debt to capitalization - calculated as the sum of both the current and long term portion of debt, as of balance sheet date, divided by the sum of both the current and long term portion of debt plus total stockholders' equity as of balance sheet date;
Return on invested capital - calculated as the total of the prior 12 months net income plus prior 12 months after-tax interest expense and capitalized interest, the sum of which is divided by the trailing five quarters average total debt (current and long term) and total stockholders' equity;
Return on common equity - calculated as the prior 12 months net income, divided by the trailing five quarters average common stockholders' equity.
Statements that use the words "expect," "should," "believe," "will," "might," or similar words reflecting future expectations or beliefs are forward-looking statements. The statements found above are based on current expectations. Actual results or events may differ materially from this release. Factors that could impact future results may include, without limitation, the effect of both domestic and global economic conditions, the impact of competitive products and pricing, and the availability and cost of raw materials. For a more complete discussion of factors that may affect the Company's future performance, please refer to the Company's most recent 10-K filing (December 21, 2004) under the Securities Exchange Act of 1934, in particular the sections titled, "Private Securities Litigation Reform Act" contained therein.
For additional information, visit the Company's website at www.quanex.com.
The Quanex Corporation logo is available at: http://www.primezone.com/newsroom/prs/?pkgid=1117
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
------------------ -----------------------
2005 2004 2005 2004
-------- -------- ---------- ----------
$533,758 $372,912 Net sales $1,003,941 $ 624,919
406,158 324,691 Cost of sales 778,960 542,505
Selling, general and
24,588 16,411 administrative expense 47,736 28,424
Depreciation and
17,008 13,275 amortization 32,127 24,862
-- -- Gain on sale of land -- (454)
-------- -------- ---------- ----------
86,004 18,535 Operating income 145,118 29,582
(2,971) (1,831) Interest expense (5,350) (2,756)
581 382 Other, net (1,339) 822
-------- -------- ---------- ----------
Income from continuing
83,614 17,086 operations before taxes 138,429 27,648
(32,191) (6,298) Income tax expense (53,295) (10,213)
-------- -------- ---------- ----------
Income from continuing
51,423 10,788 operations 85,134 17,435
Gain (loss) from
discontinued operations,
(438) 756 net of taxes (5,914) 536
-------- -------- ---------- ----------
$ 50,985 $ 11,544 Net income $ 79,220 $ 17,971
======== ======== ========== ==========
Basic earnings per
common share:
Earnings from continuing
$ 2.04 $ 0.44 operations $ 3.40 $ 0.71
Gain (loss) from
$ (0.02) $ 0.03 discontinued operations $ (0.24) $ 0.02
-------- -------- ---------- ----------
$ 2.02 $ 0.47 Basic earnings per share $ 3.16 $ 0.73
-------- -------- ---------- ----------
Diluted earnings per
common share:
Earnings from continuing
$ 1.95 $ 0.43 operations $ 3.29 $ 0.70
Gain (loss) from
$ (0.02) $ 0.03 discontinued operations $ (0.23) $ 0.02
-------- -------- ---------- ----------
Diluted earnings per
$ 1.93 $ 0.46 share $ 3.06 $ 0.72
-------- -------- ---------- ----------
Weighted average common
shares outstanding:
25,178 24,635 Basic 25,080 24,555
26,624 25,035 Diluted 26,235 24,959
$ 0.1350 $ 0.1133 Cash dividends per share $ 0.2700 $ 0.2267
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
---------------------- ----------------------
2005 2004 Net sales: 2005 2004
---------- ---------- ---------- ----------
$ 289,441 $ 213,482 Vehicular Products $ 564,017 $ 344,528
244,317 159,430 Building Products 439,924 280,391
---------- ---------- ---------- ----------
$ 533,758 $ 372,912 Net sales $1,003,941 $ 624,919
---------- ---------- ---------- ----------
Operating income:
$ 61,004 $ 12,986 Vehicular Products $ 105,223 $ 22,578
31,321 11,352 Building Products 53,464 16,312
Corporate and
Other Operating
(6,321) (5,803) Income (13,569) (9,308)
---------- ---------- ---------- ----------
$ 86,004 $ 18,535 $ 145,118 $ 29,582
---------- ---------- ---------- ----------
QUANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
April 30, October 31,
-------------------------------------------------------------------
2005 2004 2004 2003
-------------------------------------------------------------------
Assets
$ 16,830 $ 5,290 Cash and equivalents $ 41,743 $ 22,108
Accounts and
notes receivable,
211,332 177,205 net 176,358 104,009
139,280 126,844 Inventories 115,367 68,626
Deferred
11,742 8,487 income taxes 10,744 5,320
Other current
4,223 4,147 assets 2,363 1,499
Current assets of
discontinued
280 32,604 operations 9,759 31,886
-------------------------------------------------------------------
Total current
383,687 354,577 assets 356,334 233,448
Property, plant
950,285 830,446 and equipment 842,147 742,602
Less accumulated
(519,547) (467,350) depreciation (491,165) (443,869)
--------- --------- --------- ---------
Property, plant
and equipment,
430,738 363,096 net 350,982 298,733
198,957 137,756 Goodwill, net 134,670 66,436
Cash surrender
value insurance
23,896 24,991 policies, net 24,439 24,536
85,898 28,718 Intangibles, net 27,556 2,755
9,256 5,993 Other assets 9,391 3,517
Long-term assets
of discontinued
2,678 52,370 operations 26,150 53,689
-------------------------------------------------------------------
$1,135,110 $ 967,501 Total assets $ 929,522 $ 683,114
===================================================================
Liabilities and
stockholders'
equity
$ 152,843 $ 134,118 Accounts payable $ 161,674 $ 80,791
65,545 41,814 Accrued liabilities 45,844 33,764
10,314 5,752 Income taxes payable 4,127 7,641
Current maturities
493 3,751 of long-term debt 456 3,877
Current liabilities
of discontinued
379 14,418 operations 4,102 14,592
--------------------------------------------------------------------
Total current
229,574 199,853 liabilities 216,203 140,665
247,607 215,817 Long-term debt 130,496 15,893
Deferred pension
7,977 2,018 credits 8,804 7,781
Deferred
postretirement
7,597 7,782 welfare benefits 7,745 7,845
Deferred income
47,030 59,401 taxes 53,983 49,938
Non-current
environmental
9,019 13,351 reserves 8,188 13,517
2,989 2,587 Other liabilities 2,973 283
Long-term
liabilities of
discontinued
423 1,772 operations 423 2,033
---------------------- ---------------------------------------------
552,216 502,581 Total liabilities 428,815 237,955
Total stockholders'
582,894 464,920 equity 500,707 445,159
--------------------------------------------------------------------
Total liabilities
and stockholders'
$1,135,110 $ 967,501 equity $ 929,522 $ 683,114
====================================================================
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Six months ended
April 30,
----------------------
2005 2004
-------- --------
Operating activities:
Net income $ 79,220 $ 17,971
Loss from discontinued
operations 5,914 (536)
Net income from continuing
operations
Adjustments to reconcile
net income to cash provided
by operating activities:
Gain on sale of land -- (454)
Depreciation and amortization 32,427 25,115
Deferred income taxes (6,704) 4,560
Deferred pension and
postretirement benefits (975) (5,826)
-------- --------
109,882 40,830
Changes in assets and
liabilities, net of effects
from acquisitions and
dispositions:
Decrease (Increase) in
accounts and notes
receivable (23,303) (50,160)
Decrease (Increase) in
inventory (12,613) (18,536)
Increase (Decrease) in
accounts payable (22,299) 31,406
Increase (Decrease) in
accrued liabilities 2,371 1,999
Increase (Decrease) in
income taxes payable 21,096 (2,040)
Other, net (113) 161
Operating cash flow from
discontinued operations (2,129) 1,688
-------- --------
Cash provided by operating
activities 72,892 5,348
Investment activities:
Acquisitions, net of
cash acquired (200,009) (214,573)
Proceeds from sale of land -- 637
Proceeds from sale of
discontinued operations 11,592 --
Capital expenditures, net
of retirements (22,069) (7,673)
Other, net (136) (535)
Cash used for investment
activities from discontinued
operations (179) (615)
-------- --------
Cash used for investment
activities (210,801) (222,759)
Financing activities:
Bank borrowings (repayments),
net 109,973 200,000
Common dividends paid (6,870) (5,591)
Issuance of common stock,
net 9,623 7,223
Other, net 258 (1,064)
-------- --------
Cash provided by financing
activities 112,984 200,568
-------- --------
Effect of exchange rate
changes on cash and
equivalents 12 25
Decrease in cash (24,913) (16,818)
Beginning of period cash
and equivalents 41,743 22,108
-------- --------
End of period cash and
equivalents $ 16,830 $ 5,290
======== ========
CONTACT: Quanex Corporation
Financial Contact:
Jeff Galow, 713/877-5327
Media Contact:
Valerie Calvert, 713/877-5305