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
Date of Report (Date of earliest event reported) February 28, 2008
QUANEX CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware |
1-5725 |
38-1872178 |
||
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(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
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1900 West Loop South, Suite 1500, Houston, Texas |
77027 |
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| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 713-961-4600
________________________________________________________________________________
(Former name or former address, if changed since last report)
| 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 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 February 28, 2008, Quanex Corporation issued a press release (the "Press Release") reporting its earnings results for the first quarter of fiscal year 2008. 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 are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated February 28, 2008
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.
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QUANEX CORPORATION
(Registrant) |
||
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February 29, 2008
(Date) |
/s/ THOMAS M. WALKER
Thomas M. Walker Senior Vice President - Finance and Chief Financial Officer, (Principal Financial Officer) |
EXHIBIT 99.1
Quanex Reports Fiscal First Quarter 2008 Results
Building Products Results Meet Expectations; Vehicular Products Reports Improved Volume
HOUSTON, Feb. 28, 2008 (PRIME NEWSWIRE) -- Quanex Corporation (NYSE:NX) today reported fiscal first quarter 2008 results for the period ending January 31. Diluted earnings per share were $0.42 excluding unusual items. Including unusual items of $13.7 million ($0.34 per share), diluted earnings per share were $0.08. In the first quarter 2007 diluted earnings per share were $0.55. Net sales for the first quarter 2008 were $447.6 million compared to $417.6 million a year ago.
Net income for the quarter was $3.1 million and included two unusual items: a $9.2 million after-tax loss associated with the premium paid on $9.4 million contingent convertible debenture principal; a $4.5 million after-tax cost associated with the Company's spin/merge transaction. Net income in the year ago quarter was $20.7 million. The latest 12 months return on invested capital was 12.3% compared to 17.5% a year ago.
Fiscal First Quarter 2008 Highlights
-- Vehicular Products' net sales were $272.6 million versus $217.3
million a year ago; net sales at Building Products were $179.3
million compared to $204.1 million in the year ago quarter.
-- Vehicular Products reported operating income of $25.4 million
versus $25.8 million a year ago; operating income at Building
Products was $7.5 million compared to $14.4 million in the year
ago period.
-- Cash provided by operating activities was $24.1 million compared
to $65.9 million a year ago, down primarily due to an increase in
working capital at Vehicular Products caused by a spike in scrap
costs, as well as lower operating income, and transaction related
deal costs. Capital expenditures were $7.2 million in the quarter
versus $9.6 million a year ago.
-- Cash plus short-term investments totaled $215 million.
-- Quanex booked a $1.1 million after-tax mark-to-market expense
associated with its Deferred Compensation Plan that resulted from
a higher common stock price at the end of the first fiscal
quarter 2008 compared to the end of the fiscal fourth quarter 2007.
-- $9.4 million principal of the Company's $125 million 2.5%
convertible debenture was converted for $2 million less than
what was contemplated in the merger agreement with Gerdau S.A.
Selected Financial Information
Fiscal First Quarter 2008 Financials
($ in millions, except per share data)
1st qtr 2008 1st qtr 2007 inc/(dcr)
------------ ------------ ---------
Net Sales $447.6 $417.6 7%
Operating Income 19.8 31.3 (37%)
Net Income 3.1 20.7 (85%)
EPS: Basic
Earnings per common
share: $0.08 $0.56 (86%)
EPS: Diluted
Earnings per common
share: $0.08 $0.55 (85%)
Fiscal First Quarter 2008 Commentary
VEHICULAR PRODUCTS ($ in millions)
1st qtr 2008 1st qtr 2007 inc/(dcr)
------------ ------------ ---------
Net Sales $272.6 $217.3 25%
Operating Income $25.4 $25.8 (2%)
Vehicular Products is focused on providing its customers with engineered steel bars and extensive value added services. Its key market driver is North American light vehicle builds (approx. 60% of sales).
"Total steel bar tons shipped at MACSTEEL were up a respectable 8% compared to first quarter 2007, slightly better than we had anticipated, while total North American light vehicle builds were off some 3% in the fiscal quarter versus this time last year," said Raymond A. Jean, chairman and chief executive officer. "Demand at MACSTEEL held up well and we ended the first quarter with a higher backlog compared to the first quarter of 2007. Operating income was below our expectations as the segment was again impacted by rising indirect material costs. Steel scrap costs also spiked in the quarter, which hurt results, but MACSTEEL's scrap surcharge has since risen to cover these higher costs going forward, and with scrap costs starting to dip, we expect MACSTEEL to recover some of the margin compression over the next couple of quarters," Jean said.
BUILDING PRODUCTS
Engineered Products ($ in millions)
1st qtr 2008 1st qtr 2007 inc/(dcr)
------------ ------------ ---------
Net Sales $87.3 $98.9 (12%)
Operating Income $1.9 $3.9 (51%)
Engineered Products is focused on providing window and door customers with value added fenestration products and components. Key market drivers are remodeling activity (approx. 60% of sales) and housing starts (approx. 40% of sales).
"The downturn in the housing market continues, with housing starts off 31% compared to our first quarter last year, in part the result of an ongoing glut in the inventory of both new and unsold homes in the marketplace. With homebuilders sharply curtailing construction, Engineered Products sales and operating income substantially lagged year ago results. Operating income was also negatively impacted by several unusual items amounting to around $1 million in the quarter. We expect a seasonal up-tick in demand during our second quarter, followed with the beginning of a recovery later this year," said Jean.
Aluminum Sheet Building Products ($ in millions)
1st qtr 2008 1st qtr 2007 inc/(dcr)
------------ ------------ ---------
Net Sales $92.1 $105.2 (13%)
Operating Income $5.6 $10.6 (47%)
Aluminum Sheet Products is a leading provider of common alloy aluminum sheet products for the building and construction, transportation and other consumer durable markets. Key market drivers are housing starts and remodeling activity (approx. 60% of sales).
"Our first quarter shipped pounds at Nichols Aluminum were down about 5% from a year ago, reasonable performance given the ongoing softness in our primary construction and secondary markets. Sales price per pound was down about 8% from the year ago period based on lower London Metal Exchange (LME) aluminum pricing and our selling less value added painted sheet. Spread (selling price less material costs) in the quarter was off some 11% due primarily to lower LME prices compared to a year ago. Operating income was negatively impacted by a combination of the drop in volume, lower painted sheet sales and the weaker spread," Jean said.
Cash Flow
"Cash plus short-term investments were $215 million at quarter end, and total debt to capitalization was 11.9%. We continue to closely monitor our working capital, and for the quarter end, our conversion cycle was about 40 days," said Jean.
Fiscal 2008 Outlook
Current demand in the Company's two end markets, housing and automotive, is expected to remain soft, and the outlook for the next couple of quarters remains guarded.
For fiscal 2008, total North American light vehicle builds are expected to be down 3% compared to 2007. At the Vehicular Products segment, MACSTEEL expects to meet or slightly exceed fiscal 2007 shipment levels based in part on the strength of new programs with the Big Three and transplant automotive customers. However, higher indirect material costs are expected to continue to negatively impact the operating income of the segment. Therefore, the Vehicular Products segment is expected to generate results around the low end of its current fiscal 2008 guidance of $140 million to $150 million of operating income.
For the Building Products segment, the housing market correction appears it has further to go. Housing starts in calendar 2008 are now expected to lag 2007 starts by more than 30% as the market struggles with a high home inventory overhang and tougher credit requirements by mortgage lenders. Demand from our Engineered Products customers is expected to remain weak as the sentiment of many of our major customers regarding the market deteriorated during the quarter. At Nichols Aluminum, quarterly volumes are expected to lag year ago periods for most of fiscal 2008. Spread at Nichols, however, has the potential to rise over the balance of the year in response to increasing aluminum prices. While Quanex anticipates its Building Products segment will continue to outperform the market, the Company now expects the segment to perform around the bottom of its fiscal 2008 guidance of $80 million to $95 million of operating income.
Dividend Declared
The Board of Directors declared the Company's quarterly cash dividend of $0.14 per share on the common stock, payable March 28, 2008, to shareholders of record on March 14, 2008.
Corporate Profile
Quanex Corporation is an industry-leading manufacturer of value-added, engineered materials and components serving the vehicular products and building products markets.
The Quanex Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=1117
Financial Statistics as of 01/31/08
Book value per common share: $23.79; Total debt to capitalization: 11.9%; Return on invested capital: 12.3%; Return on common equity: 13.9%; Actual number of common shares outstanding: 37,292,378
Non-GAAP Financial Measures
Net Income Excluding Unusual Items
Net income excluding unusual items is a non-GAAP financial measure. We believe this non-GAAP financial measure provides a consistent basis for comparison between quarters and enhances the understanding of the performance of our ongoing operations, as it is not influenced by certain costs incurred during the quarter that we believe to be unusual and related to specific infrequent items.
Set forth below is a reconciliation of reported net income and reported diluted earnings per share to net income and diluted earnings per share excluding unusual items. We do not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
Three months ended January 31,
-----------------------------------------
(in millions except
diluted EPS) 2008 2007
------------------- ----------------
Net Diluted Net Diluted
Income EPS Income EPS
------ ------- ------ -------
Net income
reported $ 3.1 $ 0.08 $ 20.7 $ 0.55
After-tax
reconciling items:
Loss on early
extinguishment of
debentures 9.2 0.23 -- --
Transaction costs
associated with
the Company's
spin / merge 4.5 0.11 -- --
------ ------ ------ ------
Total after-tax
unusual items 13.7 0.34 -- --
------ ------ ------ ------
Net income excluding
unusual items $ 16.8 $ 0.42 $ 20.7 $ 0.55
====== ====== ====== ======
Diluted weighted
average common
shares outstanding
(in thousands) 40,168 38,809
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 14, 2007) under the Securities Exchange Act of 1934, in particular the section titled, "Private Securities Litigation Reform Act" contained therein.
This press release may be deemed to be soliciting material relating to the proposed merger transaction between Quanex Corporation and a wholly owned subsidiary of Gerdau S.A. In connection with the proposed merger, Quanex will file a proxy statement and other relevant documents concerning the proposed merger with the SEC. Investors and securities holders of Quanex are urged to read the proxy statement when it becomes available because that document will contain important information about the proposed merger. The definitive proxy statement will be mailed to Quanex stockholders. Investors and security holders may obtain a copy of such documents free of charge from the SEC's website at www.sec.gov. Copies of such documents may also be obtained free of charge from Quanex's website at www.quanex.com.
For additional information, visit the Company's website at www.quanex.com.
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended
January 31,
----------------------
2008 2007
--------- ---------
Net sales:
Vehicular Products $ 272,640 $ 217,250
Engineered Building Products 87,275 98,870
Aluminum Sheet Building Products 92,068 105,236
--------- ---------
Building Products 179,343 204,106
Corporate and Other (4,431) (3,715)
--------- ---------
Net sales $ 447,552 $ 417,641
========= =========
Operating income:
Vehicular Products $ 25,437 $ 25,823
Engineered Building Products 1,895 3,850
Aluminum Sheet Building Products 5,602 10,587
--------- ---------
Building Products 7,497 14,437
Corporate and Other (13,182) (8,928)
--------- ---------
Operating Income $ 19,752 $ 31,332
========= =========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended
January 31,
----------------------
2008 2007
--------- ---------
Net sales $ 447,552 $ 417,641
Cost of sales (exclusive of items
shown separately below) 378,561 341,614
Selling, general and administrative
expense 30,320 25,699
Depreciation and amortization 18,919 18,996
--------- ---------
Operating income 19,752 31,332
Interest expense (929) (1,035)
Other, net (6,872) 1,974
--------- ---------
Income before income taxes 11,951 32,271
Income tax expense (8,867) (11,617)
--------- ---------
Net income $ 3,084 $ 20,654
========= =========
Earnings per common share:
Basic $ 0.08 $ 0.56
Diluted $ 0.08 $ 0.55
Weighted average common shares
outstanding:
Basic 37,166 36,897
Diluted 40,168 38,809
Cash dividends declared per share $ 0.1400 $ 0.1400
QUANEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
January 31, October 31,
2008 2007
---------- ---------------------------------------- ----------
Assets
$ 210,274 Cash and equivalents $ 172,838
4,750 Short-term investments 44,750
172,769 Accounts and notes receivable, net 189,754
169,454 Inventories, net 152,185
11,896 Deferred income taxes 11,904
5,021 Other current assets 5,066
---------- ---------------------------------------- ----------
574,164 Total current assets 576,497
416,244 Property, plant and equipment, net 426,032
203,052 Goodwill 203,065
30,038 Cash surrender value insurance policies 29,934
83,537 Intangible assets, net 85,514
13,005 Other assets 13,780
---------- ---------------------------------------- ----------
$1,320,040 Total assets $1,334,822
========== ======================================== ==========
Liabilities and stockholders' equity
$ 147,723 Accounts payable $ 149,512
43,476 Accrued liabilities 58,896
5,968 Income taxes payable 14,431
117,063 Current maturities of long-term debt 126,464
---------- ---------------------------------------- ----------
314,230 Total current liabilities 349,303
2,538 Long-term debt 2,551
5,861 Deferred pension credits 4,093
6,739 Deferred postretirement welfare benefits 6,745
55,434 Deferred income taxes 60,233
11,958 Non-current environmental reserves 12,738
36,132 Other liabilities 16,010
---------- ---------------------------------------- ----------
432,892 Total liabilities 451,673
887,148 Total stockholders' equity 883,149
---------- ---------------------------------------- ----------
Total liabilities and
$1,320,040 stockholders' equity $1,334,822
========== ======================================== ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three months ended
January 31,
----------------------
2008 2007
--------- ---------
Operating activities:
Net income $ 3,084 $ 20,654
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 18,986 19,063
Loss on early extinguishment
of debentures 9,683 --
Deferred income taxes (1,067) (1,186)
Stock-based compensation 932 2,643
--------- ---------
31,618 41,174
Changes in assets and liabilities,
net of effects from acquisitions
and dispositions:
Decrease (Increase) in accounts
and notes receivable 17,042 24,216
Decrease (Increase) in
inventory (17,303) 3,328
Increase (Decrease) in accounts
payable (1,788) (2,055)
Increase (Decrease) in accrued
liabilities (16,888) (11,183)
Increase (Decrease) in income
taxes payable 8,295 8,191
Increase (Decrease) in deferred
pension and postretirement
benefits 2,003 1,630
Other, net 1,091 553
--------- ---------
Cash provided by (used for)
operating activities 24,070 65,854
Investment activities:
Purchases of short-term
investments -- (40,000)
Proceeds from sales of short-term
investments 40,000 --
Capital expenditures, net of
retirements (7,155) (9,613)
Other, net 92 (173)
--------- ---------
Cash provided by (used for)
investment activities 32,937 (49,786)
Financing activities:
Early extinguishment of debentures (18,825) --
Repayments of long-term debt (14) (21)
Common dividends paid (5,213) (5,210)
Issuance of common stock from
option exercises, including
related tax benefits 4,536 997
Other, net -- (11)
--------- ---------
Cash provided by (used for)
financing activities (19,516) (4,245)
--------- ---------
Effect of exchange rate changes
on cash and equivalents (55) (26)
Increase (Decrease) in cash and
equivalents 37,436 11,797
Beginning of period cash and
equivalents 172,838 105,708
--------- ---------
End of period cash and equivalents $ 210,274 $ 117,505
========= =========
CONTACT: Quanex Corporation
Financial Contact:
Jeff Galow
713/877-5327
Media Contact:
Valerie Calvert
713/877-5305