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) December 04, 2007
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
________________________________________________________________________________
(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 December 4, 2007, Quanex Corporation issued a press release (the "Press Release") reporting its earnings results for the fourth quarter and fiscal year of 2007. 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 December 4, 2007
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) |
||
|
December 05, 2007
(Date) |
/s/ THOMAS M. WALKER
Thomas M. Walker Senior Vice President - Finance and Chief Financial Officer, (Principal Financial Officer) |
| Exhibit Index | ||
| 99.1 | Press release dated December 04, 2007 | |
EXHIBIT 99.1
Quanex Fiscal Fourth Quarter and 2007 Annual Results
Record Fourth Quarter and Annual Sales
Strong Performance by Operating Groups Versus Served Markets
HOUSTON, Dec. 4, 2007 (PRIME NEWSWIRE) -- Quanex Corporation (NYSE:NX) today reported fiscal fourth quarter and 2007 annual results for the period ending October 31, 2007. Net sales for the quarter were a record $557.9 million compared to $527.7 million last year. Annual sales were a record at $2,049.0 million compared to $2,032.6 million last year. Net income from continuing operations was $41.6 million for the quarter and $134.6 million for the year, compared to $39.1 million and $160.3 million, respectively, reported a year ago. Diluted earnings per share from continuing operations were $1.05 for the fourth quarter and $3.41 for the year, compared to $1.03 and $4.09, respectively, in 2006. Diluted earnings per share were $1.05 and $3.41 for the quarter and the year, respectively.
Highlights
-- Quanex's consolidated 2007 net sales of $2,049.0 million were
best ever.
-- Fourth quarter net income from continuing operations was $41.6
million, up 6% over a year ago.
-- Vehicular Products reported record fourth quarter net sales and
operating income of $302.3 million and $41.1 million,
respectively.
-- Building Products reported fourth quarter net sales and operating
income of $260.0 million and $31.6 million, respectively.
-- Cash provided by operating activities for 2007 was $224.1 million
compared to $190.3 million for 2006.
-- The Company's cash and investments were $217.6 million at year
end.
-- Quanex announced its Building Products business will be spunoff
to shareholders, followed by the merger of Quanex with Gerdau S.A.
(NYSE:GGB) for $39.20 per share.
Selected Financial Information
Fourth Quarter and Fiscal Year Financials
($ in millions, except per share data)
4th qtr 4th qtr inc/ inc/
2007 2006 (dcr) FY 2007 FY 2006 (dcr)
---- ---- ----- ------- ------- -----
Net Sales $ 557.9 $ 527.7 6% $ 2,049.0 $ 2,032.6 1%
Operating
Income 62.9 59.3 6% 202.9 251.4 (19%)
Income from
Continuing
Ops 41.6 39.1 6% 134.6 160.3 (16%)
EPS: Basic
Earnings from
Continuing
Ops $ 1.12 $ 1.06 6% $ 3.64 $ 4.28 (15%)
EPS: Diluted
Earnings from
Continuing
Ops $ 1.05 $ 1.03 2% $ 3.41 $ 4.09 (17%)
EPS: Diluted
Earnings $ 1.05 $ 1.03 2% $ 3.41 $ 4.08 (16%)
Segment Commentary
VEHICULAR PRODUCTS ($ in millions)
4th qtr 2007 4th qtr 2006 FY 2007 FY 2006
------------ ------------ ------- -------
Net Sales $ 302.3 $ 264.8 $ 1,085.0 $ 988.8
Operating Income $ 41.1 $ 40.6 $ 132.7 $ 154.6
Vehicular Products is focused on providing customers with engineered steel bar quality products and value added services. The segment's key market driver is light vehicle builds, which account for 65% of the segment's sales.
"MACSTEEL's tons shipped were second best ever in both the quarter and the year as demand for our steel bar products and value added services improved throughout the year. Our sales reflected sequentially improving demand in the North American transportation market, while recent capital spending and the strength of new programs allowed us to maintain a favorable product mix for much of the year, along with high utilization rates at our operations. Operating income was down due to rising consumable supply costs throughout the year, and higher alloy costs in the back half of the year," said Raymond A. Jean, chairman and chief executive officer. "MACSTEEL's bar shipments for the year were up about 2% on the strength of new programs with our automotive customers, while North American light vehicle builds were down some 2% over the same period."
BUILDING PRODUCTS
ENGINEERED PRODUCTS ($ in millions)
4th qtr 2007 4th qtr 2006 FY 2007 FY 2006
------------ ------------ ------- -------
Net Sales $ 123.9 $ 132.2 $ 457.8 $ 524.6
Operating Income $ 13.2 $ 13.4 $ 43.8 $ 52.5
Engineered Products is focused on providing window and door OEM customers with engineered products and components. Key market drivers are housing starts (apprx. 50% of segment sales) and remodeling activity (apprx. 50% of segment sales).
"Engineered Products reported a 6% decrease in fiscal fourth quarter net sales with little change in operating income compared to the year ago quarter, while housing starts for the same period were down some 22%. For 2007, net sales and operating income for the segment were down 13% and 17%, respectively, from last year," said Jean. "Rising home inventories and a significant tightening in the credit markets dramatically slowed residential construction activity, which in turn had an adverse impact on OEM demand for our window and door products. However, we were able to markedly offset this sector decline in 2007. We believe our customer base, comprised of companies considered the leaders in this industry, have generally performed better than the market as a whole. Also, our Engineered Products business has continued to benefit from extensive new programs with new and existing customers, the introduction of new products, and ongoing lean initiatives," Jean said.
ALUMINUM SHEET PRODUCTS ($ in millions)
4th qtr 2007 4th qtr 2006 FY 2007 FY 2006
------------ ------------ ------- -------
Net Sales $ 136.1 $ 135.2 $ 524.2 $ 539.8
Operating Income $ 18.3 $ 17.9 $ 65.7 $ 82.2
Aluminum Sheet Products is a leading-provider of common alloy aluminum sheet products for the building and construction, transportation and other consumer durable markets. Its primary market drivers are housing starts and remodeling activity, which account for 60% of segment sales.
"Nichols Aluminum had a great finish to the year. Both net sales and operating income were up in the fourth quarter compared to the year ago quarter, even in the face of a 22% drop in housing starts over the same period. Aluminum sheet shipped pounds in the quarter were up 3% as the business benefited from a slight rise in remodeling demand. For the year, our shipped pounds were off some 7% compared to last year, relatively good performance given the year's market environment. Nichols' spread (selling price less raw material cost) in the quarter was down 5% and 3% compared to the year ago period and sequential quarter, respectively, but remained at relatively strong levels as the LME price of aluminum ingot has remained historically high. Our scrap based, relatively energy efficient process provides significant competitive advantage in a time of very high energy costs," Jean added.
Cash Flow
"Through the careful management of our conversion cycle, we continue to generate excellent cash flow, as 'cash provided by operating activities' for the year came in at $224.1 million, despite the challenging market conditions we experienced throughout the year. Cash and investments were $217.6 million at year end. Our 2007 return on invested capital was 14.5%, exceeding our weighted average cost of capital," continued Jean.
Outlook
Vehicular Products
Fiscal first quarter 2008 light vehicle production at the "Big Three" is expected to be down 2% from a year ago, while total North American light vehicle builds are projected to be down 1% compared to the fiscal first quarter of 2007. MACSTEEL will continue to focus on increasing its content with the "Big Three," while taking advantage of rising transplant opportunities as the domestic sourcing of powertrain components grows.
For fiscal 2008, total North American light vehicle builds are expected to be down 3% compared to 2007. MACSTEEL expects its total 2008 shipped tons to be up slightly from 2007, and operating income is expected to be in a range of $140 million to $150 million. Depreciation and amortization costs are estimated at $40 million.
Building Products
Fiscal first quarter and full year housing starts are expected to be down 26% and 24%, respectively, over the year ago periods as the market continues to face difficult conditions brought on by tougher credit requirements by lenders and an expanding inventory of available homes for sale. For the full year, the Building Products business expects net sales to be down some 5% compared to 2007. The group's ability to consistently outperform the market is a testimony to its success in introducing new products, and capturing new programs and customers. Building Products also has an outstanding customer base that continues to experience meaningful growth with the "Big Box" outlets. While new home starts will remain under pressure during 2008, there is evidence our customers are now starting to focus more of their efforts on stimulating the remodeling markets. Operating income in 2008 is expected to be in a range of $80 million to $95 million. Depreciation and amortization costs are estimated at $37 million.
Quanex
The Company's fiscal first quarter (Nov - Jan) financial results are generally its weakest of the year due to fewer production days associated with the holidays and reduced home building activity during the winter season. Quarterly financial results typically improve through the remainder of the year, culminating with fourth quarter earnings that are usually the Company's strongest. For fiscal 2008, Quanex assumes a corporate expense run rate of approximately $25 million, which includes a $4 million estimate for stock options.
LIFO
A $3.9 million ($0.06 per diluted share) non-cash LIFO charge was taken in the fourth quarter of 2007, and for the year, LIFO charges totaled $9.9 million ($0.16 per diluted share). The LIFO charges reflect the rise in steel scrap and alloy costs at MACSTEEL. Quanex uses the LIFO method of accounting that requires it to forecast both year-end inventory prices and levels. Periodically, it will adjust interim inventory balances with a final reconciliation in the fourth quarter.
Other
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 while the premium amount of the debentures may be settled in any combination of cash and common stock when they become convertible and are surrendered by the holders thereof. Allowing for this election using a $25.45 conversion price and an average stock closing price of $43.44 for the fourth quarter, the Company's fourth quarter diluted earnings from continuing operations reflect a reduction of $0.06 per share, and with an average stock closing price of $42.34 for the year, represent a reduction of $0.18 per share.
On November 19, 2007, the Company announced plans to separate its Building Products and Vehicular Products businesses. The Building Products business will be spun off, virtually debt-free to existing shareholders, followed by the merger of Quanex with Gerdau Delaware, Inc., a wholly owned subsidiary of Gerdau S.A. for $39.20 in cash per share. The merger transaction is expected to close by the end of the first calendar quarter of 2008, and is subject to approval by Quanex shareholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Exon-Florio Provision and other customary closing conditions.
Dividend Declared
The Board of Directors declared the Company's quarterly cash dividend of $0.14 per share on the common stock, payable December 31, 2007, to shareholders of record on December 18, 2007.
Corporate Profile
Quanex Corporation is an industry-leading manufacturer of value added, engineered materials and components serving the vehicular products and building products markets.
Financial Statistics as of 10/31/07
Book value per common share: $23.75; Total debt to capitalization: 12.7%; Return on invested capital: 14.5%; Return on common equity: 16.5%; Actual number of common shares outstanding: 37,189,587.
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, 2006) 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 about Quanex, visit its website at www.quanex.com.
The Quanex Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=1117
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Twelve months ended
October 31, October 31,
------------------ ----------------------
2007 2006 2007 2006
-------- -------- ---------- ----------
Net sales:
$302,332 $264,793 Vehicular Products $1,085,047 $ 988,799
Engineered Building
123,866 132,157 Products 457,764 524,625
Aluminum Sheet Building
136,124 135,192 Products 524,215 539,773
-------- -------- ---------- ----------
259,990 267,349 Building Products 981,979 1,064,398
(4,464) (4,422) Corporate and Other (18,005) (20,625)
-------- -------- ---------- ----------
$557,858 $527,720 Net sales $2,049,021 $2,032,572
======== ======== ========== ==========
Operating income:
$ 41,109 $ 40,603 Vehicular Products $ 132,723 $ 154,571
Engineered Building
13,220 13,379 Products 43,814 52,540
Aluminum Sheet Building
18,331 17,927 Products 65,732 82,177
-------- -------- ---------- ----------
31,551 31,306 Building Products 109,546 134,717
(9,805) (12,611) Corporate and Other (39,329) (37,894)
-------- -------- ---------- ----------
$ 62,855 $ 59,298 Operating Income $ 202,940 $ 251,394
======== ======== ========== ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
October 31, October 31,
------------------ ----------------------
2007 2006 2007 2006
-------- -------- ---------- ----------
$557,858 $527,720 Net sales $2,049,021 $2,032,572
Cost of sales (exclusive
of items shown separately
451,863 425,985 below) 1,671,052 1,617,399
Selling, general and
22,795 23,929 administrative expense 97,989 92,705
Depreciation and
20,345 18,508 amortization 77,040 71,074
-------- -------- ---------- ----------
62,855 59,298 Operating income 202,940 251,394
(983) (1,129) Interest expense (4,054) (4,818)
2,792 1,477 Other, net 8,178 4,240
-------- -------- ---------- ----------
Income from continuing
64,664 59,646 operations before taxes 207,064 250,816
(23,106) (20,517) Income tax expense (72,442) (90,503)
-------- -------- ---------- ----------
Income from continuing
41,558 39,129 operations 134,622 160,313
Income (loss) from
discontinued operations,
-- 46 net of taxes -- (130)
-------- -------- ---------- ----------
$ 41,558 $ 39,175 Net income $ 134,622 $ 160,183
======== ======== ========== ==========
Basic earnings per common
share:
Earnings from continuing
$ 1.12 $ 1.06 operations $ 3.64 $ 4.28
Income (loss) from
$ -- $ -- discontinued operations $ -- $ (0.01)
-------- -------- ---------- ----------
$ 1.12 $ 1.06 Basic earnings per share $ 3.64 $ 4.27
-------- -------- ---------- ----------
Diluted earnings per
common share:
Earnings from continuing
$ 1.05 $ 1.03 operations $ 3.41 $ 4.09
Income (loss) from
$ -- $ -- discontinued operations $ -- $ (0.01)
-------- -------- ---------- ----------
$ 1.05 $ 1.03 Diluted earnings per share $ 3.41 $ 4.08
-------- -------- ---------- ----------
Weighted average common
shares outstanding:
37,075 36,847 Basic 36,982 37,479
39,703 38,494 Diluted 39,509 39,708
Cash dividends declared
$ 0.1400 $ 0.1400 per share $ 0.5600 $ 0.4833
QUANEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
October 31, October 31,
2007 2006
---------------------------------------------------------------------
Assets
$ 172,838 Cash and equivalents $ 105,708
44,750 Short-term investments --
189,754 Accounts and notes receivable, net 184,311
152,185 Inventories 142,788
11,904 Deferred income taxes 12,218
5,066 Other current assets 5,584
---------- --------------------------------------------- ----------
576,497 Total current assets 450,609
1,085,569 Property, plant and equipment 1,040,217
(659,537) Less accumulated depreciation (608,159)
---------- ----------
426,032 Property, plant and equipment, net 432,058
203,065 Goodwill 196,350
29,934 Cash surrender value insurance policies 29,108
85,514 Intangible assets, net 75,285
13,780 Other assets 18,742
---------- --------------------------------------------- ----------
$1,334,822 Total assets $1,202,152
========== ============================================= ==========
Liabilities and stockholders' equity
$ 149,512 Accounts payable $ 137,564
58,896 Accrued liabilities 54,943
14,431 Income taxes payable 13,185
126,464 Current maturities of long-term debt 2,721
---------- --------------------------------------------- ----------
349,303 Total current liabilities 208,413
2,551 Long-term debt 130,680
4,093 Deferred pension credits 1,115
6,745 Deferred postretirement welfare benefits 7,300
60,233 Deferred income taxes 66,189
12,738 Non-current environmental reserves 14,186
16,010 Other liabilities 15,754
---------- --------------------------------------------- ----------
451,673 Total liabilities 443,637
883,149 Total stockholders' equity 758,515
---------- --------------------------------------------- ----------
$1,334,822 Total liabilities and stockholders' equity $1,202,152
========== ============================================= ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Twelve months ended
October 31,
--------------------
2007 2006
--------- ---------
Operating activities:
Net income $ 134,622 $ 160,183
Loss from discontinued operations -- 130
--------- ---------
Net income from continuing operations 134,622 160,313
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 77,308 71,657
Deferred income taxes (5,922) 7,084
Stock-based compensation 6,036 5,298
--------- ---------
212,044 244,352
Changes in assets and liabilities,
net of effects from acquisitions and
dispositions:
Decrease (Increase) in accounts and
notes receivable (1,747) (32,229)
Decrease (Increase) in inventory (7,828) (9,753)
Increase (Decrease) in accounts payable 13,685 8,326
Increase (Decrease) in accrued liabilities (533) (8,059)
Increase (Decrease) in income taxes payable 455 (736)
Increase (Decrease) in deferred pension
and postretirement benefits 8,035 (10,524)
Other, net (37) (390)
--------- ---------
Cash provided by (used for) operating
activities from continuing operations 224,074 190,987
Cash provided by (used for) operating
activities from discontinued operations -- (716)
--------- ---------
Cash provided by (used for) operating activities 224,074 190,271
Investment activities:
Purchases of short-term investments (106,114) --
Proceeds from sales of short-term investments 61,150 --
Acquisitions, net of cash acquired (58,493) --
Capital expenditures, net of retirements (34,396) (72,262)
Proceeds from sale of discontinued operations -- 5,683
Retired executive life insurance proceeds 249 461
Other, net 630 593
--------- ---------
Cash provided by (used for) investing
activities from continuing operations (136,974) (65,525)
Cash used for investment activities from
discontinued operations -- (14)
--------- ---------
Cash provided by (used for) investment
activities (136,974) (65,539)
Financing activities:
Repayments of long-term debt (4,386) (2,519)
Common dividends paid (20,776) (18,362)
Issuance of common stock from option exercises,
including related tax benefits 5,045 11,094
Purchases of treasury stock -- (58,326)
Other, net (11) (547)
--------- ---------
Cash provided by (used for) financing
activities from continuing operations (20,128) (68,660)
Cash used for financing activities from
discontinued operations -- (56)
--------- ---------
Cash provided by (used for) financing activities (20,128) (68,716)
--------- ---------
Effect of exchange rate changes on
cash and equivalents 158 11
Increase (Decrease) in cash and equivalents 67,130 56,027
Beginning of period cash and equivalents 105,708 49,681
--------- ---------
End of period cash and equivalents $ 172,838 $ 105,708
========= =========
CONTACT: Quanex Corporation
Financial Contact:
Jeff Galow
713/877-5327
Media Contact:
Valerie Calvert
713/877-5305