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 23, 2006
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(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 February 23, 2006, Quanex Corporation issued a press release (the "Earnings Press Release") reporting its earnings results for the first quarter of 2006. The foregoing is qualified by reference to the Earnings Press Release which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure
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 23, 2006, Quanex Corporation (the "Company") issued a press release (the "Dividend Press Release") announcing that its Board of Directors raised the Company's common stock cash dividend. The Company also announced that in a separate action the Board of Directors declared a three for two stock split, to be issued in the form of a 50% stock dividend. The foregoing is qualified by reference to the Dividend Press Release which is filed as Exhibit 99.2 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 February 23, 2006 announcing the Company's first quarter 2006 earnings results
Exhibit 99.2. Press release dated February 23, 2006 announcing the Company's cash dividend increase and stock split in the form of a stock dividend
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) |
||
| February 23, 2006
(Date) |
/s/ RAYMOND A. JEAN
Raymond A. Jean Chairman of the Board, President and Chief Executive Officer |
| Exhibit Index | ||
| 99.1 | Press release dated February 23, 2006 announcing the Company's first quarter 2006 earnings results | |
| 99.2 | Press release dated February 23, 2006 announcing the Company's cash dividend increase and stock split in the form of a stock dividend | |
EXHIBIT 99.1
Quanex Fiscal First Quarter 2006 Results
Building Products Segment Posts Record 1st Qtr Sales and Operating Income
HOUSTON, Feb. 23, 2006 (PRIMEZONE) -- Quanex Corporation (NYSE:NX) today reported fiscal first quarter results for the period ending January 31, 2006. Net sales were $444.6 million compared to $465.2 million a year ago, and income from continuing operations was $33.5 million versus $33.9 million in the year-ago period. Diluted earnings per share from continuing operations were $1.27 compared to $1.32 in the first quarter last year. Diluted earnings per share were $1.25 versus $1.10 in the year-ago quarter. The latest 12 month return on invested capital was 20.3% compared to 11.5% a year ago.
First Quarter Highlights
-- Net sales at the Building Products segment were a first quarter
record $225.8 million compared to $195.6 million in the year-ago
quarter; the Vehicular Products segment reported $218.8 million
versus $269.6 million a year ago.
-- Building Products operating income was a first quarter record $26.7
million compared to $22.1 million in the year-ago quarter; the
Vehicular Products segment reported $33.2 million versus $44.6
million a year ago.
-- Cash provided by operating activities and capital expenditures were
$38.8 million and $21.4 million, respectively, compared to $10.4
million and $8.7 million, respectively, in the year-ago quarter.
-- Net sales for the quarter at Mikron Industries were up 34% from the
comparable period last year; earnings for Mikron were $0.07 per
diluted share after interest expense.
-- MACSTEEL successfully completed its 2006 pricing contracts.
-- Total debt less cash to capitalization was 10.0% compared to 33.2%
in the year-ago quarter.
-- 354,500 shares of common stock were repurchased at an average price
of $50.51.
-- Company began expensing stock options which amounted to $0.02 per
diluted share.
-- Temroc Metals was sold.
Selected Financial Information
First Quarter Financials
($ in millions, except per share data)
1st qtr 2006 1st qtr 2005 inc/(dcr)
------------ ------------ ---------
Net Sales $444.6 $465.2 (4%)
Operating Income 54.2 59.4 (9%)
Income from Continuing Ops. 33.5 33.9 (1%)
EPS: Basic Earnings from
Continuing Ops. $1.33 $1.36 (2%)
EPS: Diluted Earnings
from Continuing Ops. $1.27 $1.32 (4%)
EPS: Diluted Earnings $1.25 $1.10 14%
Segment Commentary
VEHICULAR PRODUCTS ($ in millions)
1st qtr 2006 1st qtr 2005 inc/(dcr)
------------ ------------ ---------
Net Sales $ 218.8 $ 269.6 (19%)
Operating Income $ 33.2 $ 44.6 (26%)
The Vehicular Products segment is focused on providing customers with engineered steel bar products and value added services. Key market drivers are light vehicle builds (approx. 65% of segment sales) and heavy duty truck builds (approx. 15% of segment sales).
"Segment demand was off compared to the allocation environment we experienced in the year-ago quarter, and consequently, steel bar tons shipped were down about 12%," said Raymond A. Jean, chairman and chief executive officer. "However, our monthly shipped tons improved throughout the quarter, with January's tons within 7% of January 2005. Our customers' inventories are at relatively normalized levels following very heavy buying this time last year, and light vehicle builds in our first quarter were up 3% from the year-ago period. Lower material costs and a favorable product mix resulted in a slightly higher spread per ton in the segment. The order backlog continues to improve and we expect second quarter bar shipments to be essentially in-line with the year-ago level" continued Jean.
BUILDING PRODUCTS ($ in millions)
1st qtr 2006 1st qtr 2005 inc/(dcr)
------------ ------------ ---------
Net Sales $ 225.8 $ 195.6 15%
Operating Income $ 26.7 $ 22.1 21%
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 (approx. 50% of segment sales) and remodeling activity (approx. 50% of segment sales).
"Overall housing and remodeling activity was seasonally strong during the quarter, in part, due to mild weather conditions across the Midwest and Northeast. Annualized housing starts held firm at the 2 million mark. Customer orders for our window and door components business products remained steady throughout the quarter and exceeded our expectations. Our Nichols Aluminum business had a 19% drop in pounds shipped during the quarter as we continued to experience the effects of customer destocking; however, pounds shipped in January rebounded nicely, to within 8% of last year, and our customer backlog continues to improve. Our spread per pound improved 9% from a year ago, the result of higher sheet prices, relatively low scrap costs, and a better mix of painted sheet sales," said Jean.
Cash Flow
"Cash provided by operating activities in the quarter remained excellent at $38.8 million, a 273% improvement over the year-ago period, while our quarter ended total debt less cash to capitalization was 10%. During the quarter, we repurchased some 354,000 shares of our common stock at an average price of $50.51, and we will continue to make purchases at appropriate times as a means to return value to our shareholders," continued Jean.
Outlook
Overall demand in the Company's two target markets continues to improve compared to the second half of fiscal 2005 and is bolstered by a healthy economy and historically favorable interest rates. In the Vehicular Products segment, business activity is expected to continue to improve, and bar shipments in 2006 are expected to approach 2005 levels, in part, on the strength of new programs. Light vehicle builds in calendar year 2006 are expected to remain strong at an estimated 15.6 million builds, essentially flat to 2005, while heavy truck builds should remain robust at some 340,000 units as producers attempt to sell ahead of new 2007 EPA mandated engine emission requirements. The segment's steel scrap costs are expected to continue to fluctuate during the year and the segment's scrap surcharge mechanism should maintain margin rates over time.
In the Company's Building Products segment, housing starts in 2006 are expected to slow modestly from 2005's record starts, while remodeling and replacement activity are expected to remain very strong. At the segment's window and door components business, overall order activity is seasonally strong, and the outlook for the year remains excellent. It is estimated that their fast growing vinyl window profile demand will drive the business's top line growth by some 15% over last year. At the segment's Nichols Aluminum business, demand continues to rebound. London Metal Exchange (LME) aluminum ingot prices have risen to high levels, while aluminum scrap cost increases have been more modest, improving Nichol's spread.
Taken together, the fiscal 2006 sales and earnings outlook for the Company remains very favorable. Accordingly, for its second quarter and full year, Quanex expects to report diluted earnings per share from continuing operations within a range of $1.30 to $1.40 and $5.40 to $5.80, respectively.
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 and using an average stock closing price of $55.92 for its first quarter, the Company's diluted earnings per share from continuing operations were reduced by $0.03.
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 01/31/06
Book value per common share: $26.76; Total debt to capitalization: 16.8%; Return on invested capital: 20.3%; Return on common equity: 26.1%; Actual number of common shares outstanding: 25,152,307.
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, 2005) 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.
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended
January 31,
----------------------
2006 2005
--------- ---------
Net sales $ 444,569 $ 465,202
Cost of sales 352,084 368,004
Selling, general and administrative
expense 20,873 22,810
Depreciation and amortization 17,388 14,943
--------- ---------
Operating income 54,224 59,445
Interest expense (1,240) (2,352)
Other, net 111 (1,917)
--------- ---------
Income from continuing operations
before taxes 53,095 55,176
Income tax expense (19,645) (21,245)
--------- ---------
Income from continuing operations 33,450 33,931
Gain (loss) from discontinued operations,
net of taxes (425) (5,696)
--------- ---------
Net income $ 33,025 $ 28,235
========= =========
Basic earnings per common share:
Earnings from continuing operations $ 1.33 $ 1.36
Gain (loss) from discontinued operations $ (0.02) $ (0.23)
--------- ---------
Basic earnings per share $ 1.31 $ 1.13
--------- ---------
Diluted earnings per common share:
Earnings from continuing operations $ 1.27 $ 1.32
Gain (loss) from discontinued operations $ (0.02) $ (0.22)
--------- ---------
Diluted earnings per share $ 1.25 $ 1.10
--------- ---------
Weighted average common shares outstanding:
Basic 25,244 24,984
Diluted 26,710 25,770
Cash dividends per share $ 0.1550 $ 0.1350
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended
January 31,
--------------------------
2006 2005
--------- ---------
Net sales:
Vehicular Products $ 218,773 $ 269,590
Building Products 225,796 195,612
--------- ---------
Net sales $ 444,569 $ 465,202
--------- ---------
Operating income:
Vehicular Products $ 33,249 $ 44,552
Building Products 26,707 22,141
Corporate and Other (5,732) (7,248)
--------- ---------
Operating Income $ 54,224 $ 59,445
--------- ---------
QUANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
January 31, October 31,
---------------------------------------------------------------------
2006 2005 2005 2004
---------------------------------------------------------------------
Assets
$ 54,762 $ 28,191 Cash and equivalents $ 49,681 $ 41,743
Accounts and notes
153,465 193,953 receivable, net 152,072 172,582
149,298 140,776 Inventories 133,003 112,993
Deferred income
11,467 11,181 taxes 12,864 11,182
8,388 4,804 Other current assets 4,669 2,387
Current assets of
discontinued
-- 5,093 operations 5,504 16,068
---------- ---------- -------------------- ---------- ----------
Total current
377,380 383,998 assets 357,793 356,955
Property, plant and
990,907 1,008,954 equipment 969,962 833,797
Less accumulated
(561,177) (582,771) depreciation (546,020) (488,604)
---------- ---------- ---------- ----------
Property, plant and
429,730 426,183 equipment, net 423,942 345,193
196,348 183,593 Goodwill 196,341 121,174
Cash surrender value
insurance policies,
24,647 24,122 net 24,927 24,439
Intangible assets,
80,591 88,463 net 82,360 27,556
8,290 9,161 Other assets 9,002 9,207
Assets of
discontinued
-- 22,050 operations 5,846 45,619
---------- ---------- -------------------- ---------- ----------
$1,116,986 $1,137,570 Total assets $1,100,211 $ 930,143
========== ========== ==================== ========== ==========
Liabilities and
stockholders' equity
$ 141,624 $ 159,888 Accounts payable $ 129,152 $ 159,379
58,550 54,312 Accrued liabilities 73,616 45,380
25,122 9,140 Income taxes payable 14,465 4,323
Current maturities
2,440 269 of long-term debt 2,459 246
Current liabilities
of discontinued
-- 4,093 operations 4,208 7,520
---------- ---------- -------------------- ---------- ----------
Total current
227,736 227,702 liabilities 223,900 216,848
133,450 305,909 Long-term debt 133,462 128,680
Deferred pension
7,410 6,710 credits 8,158 8,804
Deferred post-
retirement welfare
7,560 7,710 benefits 7,519 7,745
Deferred income
59,104 44,813 taxes 58,836 53,514
Non-current
environmental
6,046 8,966 reserves 6,732 8,188
2,639 2,950 Other liabilities 2,742 2,828
Liabilities of
discontinued
-- 2,729 operations 2,120 2,829
---------- ---------- -------------------- ---------- ----------
443,945 607,489 Total liabilities 443,469 429,436
Total stockholders'
673,041 530,081 equity 656,742 500,707
---------- ---------- -------------------- ---------- ----------
Total liabilities
and stockholders'
$1,116,986 $1,137,570 equity $1,100,211 $ 930,143
========== ========== ==================== ========== ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three months ended
January 31,
----------------------
2006 2005
--------- ---------
Operating activities:
Net income $ 33,025 $ 28,235
Loss from discontinued operations 425 5,696
--------- ---------
Net income from continuing operations 33,450 33,931
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 17,554 15,089
Deferred income taxes 1,950 --
Stock-based compensation 886 208
Deferred pension and postretirement
benefits (708) (2,131)
--------- ---------
53,132 47,097
Changes in assets and liabilities, net
of effects from acquisitions and
dispositions:
Decrease (Increase) in accounts and
notes receivable (1,385) (10,052)
Decrease (Increase) in inventory (16,279) (17,851)
Increase (Decrease) in accounts payable 12,471 (12,411)
Increase (Decrease) in accrued liabilities (15,076) (7,860)
Increase (Decrease) in income taxes payable 10,362 12,273
Other, net (3,677) (797)
Cash provided by (used for) operating
activities from discontinued operations (761) 16
--------- ---------
Cash provided by operating activities 38,787 10,415
Investment activities:
Acquisitions , net of cash acquired -- (197,376)
Proceeds from sale of discontinued
operations 5,432 11,592
Capital expenditures, net of retirements (21,405) (8,734)
Other, net -- (352)
Cash used for investment activities from
discontinued operations (14) (262)
--------- ---------
Cash used for investment activities (15,987) (195,132)
Financing activities:
Bank borrowings (repayments), net (30) 170,077
Purchases of Quanex common stock (17,906) --
Common dividends paid (3,964) (3,473)
Issuance of common stock, net 4,217 4,438
Other, net -- 166
Cash used for financing activities from
discontinued operations (56) (53)
--------- ---------
Cash provided by (used for)
financing activities (17,739) 171,155
--------- ---------
Effect of exchange rate changes on
cash and equivalents 20 10
Increase (Decrease) in cash
and equivalents 5,081 (13,552)
Beginning of period cash and equivalents 49,681 41,743
--------- ---------
End of period cash and equivalents $ 54,762 $ 28,191
========= =========
The Quanex Corporation logo is available at: http://www.primezone.com/newsroom/prs/?pkgid=1117.
CONTACT: Quanex Corporation
Financial:
Jeff Galow
713-877-5327
Media:
Valerie Calvert
713/877-5305
EXHIBIT 99.2
Quanex Increased Cash Dividend 16 Percent
Declared 3 for 2 Stock Split in the Form of a Stock Dividend
HOUSTON, Feb. 23, 2006 (PRIMEZONE) -- Quanex Corporation (NYSE:NX) today announced that its Board of Directors raised the Company's common stock cash dividend by 16%, or $0.10 per share, on an annualized basis. In a separate action, the Board declared a three for two stock split in the form of a 50% stock dividend (the "stock dividend").
"Quanex's stock split, and the increase in our cash dividend are appropriate actions by the Company's Board of Directors given our outstanding financial results, high stock price and very favorable business outlook," stated Raymond A. Jean, chairman and chief executive officer.
The increase in the quarterly cash dividend to $0.18 is prior to giving effect to the 50% stock dividend. This amount is the equivalent of $0.12 after giving effect to the 50% stock dividend. Both the cash dividend and the stock dividend are effective to shareholders of record on March 15, 2006. Both dividends, along with such cash payments in lieu of fractional shares as may be necessary, will be paid on March 31, 2006.
Quanex is a $2 billion industry-leading manufacturer of value-added, engineered materials and components serving the Vehicular Products and Building Products markets.
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, 2005) under the Securities Exchange Act of 1934, in particular the sections titled, "Private Securities Litigation Reform Act" contained therein.
For further 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
CONTACT: Quanex Corporation
Financial:
Jeff Galow
713/877-5327
Media:
Valerie Calvert
713/877-5305