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) May 31, 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(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 31, 2007, Quanex Corporation issued a press release (the "Press Release") reporting its earnings results for the second quarter 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 is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated May 31, 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) |
||
|
May 31, 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 May 31, 2007 | |
EXHIBIT 99.1
Quanex Fiscal Second Quarter 2007 Results
Company Experienced Sequential Improvement At Both Operating Groups
Raised 2007 EPS Guidance to Higher End of Range
Cash Provided by Operating Activities Remained Strong --
Rising to $84 Million YTD
HOUSTON, May 31, 2007 (PRIME NEWSWIRE) -- Quanex Corporation (NYSE:NX) today reported fiscal second quarter 2007 results for the period ending April 30, 2007. Net sales were $519.4 million compared to $507.2 million a year ago, and income from continuing operations was $32.8 million versus $42.8 million in the year ago period. Diluted earnings per share from continuing operations were $0.84 compared to $1.07 in the second quarter last year. Diluted earnings per share were $0.84. The latest 12 months return on invested capital was 15.7% compared to 19.1% a year ago.
Fiscal Second Quarter 2007 Highlights
* Vehicular Products net sales were $280.9 million versus $245.4 million a year ago; net sales at Building Products were $242.8 million compared to $266.9 million in the year ago quarter. * Vehicular Products reported operating income of $35.4 million versus $40.4 million a year ago; operating income at Building Products was $25.9 million compared to $35.1 million in the year ago period. * Cash plus short-term investments at quarter-end totaled $104.0 million. * Total debt less cash and investments to capitalization was 2.9% versus 8.4% a year ago. * The Company closed on the acquisition of Atmosphere Annealing Inc. (AAI) February 1, 2007. Its integration into Vehicular Products is proceeding well and AAI's operating results exceeded expectations. * Quanex announced a strategic review of its Building Products group on May 16, 2007. * For the first half of fiscal 2007, cash provided by operating activities was $84.4 million, compared to $67.5 million in the same period a year ago, and capital expenditures were $16.6 million versus $42.9 million in the first half of 2006, primarily the result of reduced spending at MACSTEEL.
Selected Financial Information
Fiscal Second Quarter 2007 Financials
($ in millions, except per share data)
2nd qtr 2nd qtr
2007 2006 inc/(dcr)
--------- --------- ---------
Net Sales $519.4 $507.2 2%
Operating Income 50.5 68.8 (27%)
Income from Continuing Ops. 32.8 42.8 (23%)
EPS: Basic Earnings from
Continuing Ops. $0.89 $1.14 (22%)
EPS: Diluted Earnings from
Continuing Ops. $0.84 $1.07 (21%)
Fiscal Second Quarter 2007 Commentary
VEHICULAR PRODUCTS ($ in millions)
2nd qtr 2nd qtr
2007 2006 inc/(dcr)
--------- --------- ---------
Net Sales $280.9 $245.4 14%
Operating Income 35.4 40.4 (12%)
Vehicular Products is focused on providing its customers with engineered steel bars and extensive value added services. About 75% of its products are used in light vehicle, heavy truck and off-road powertrain applications.
"Total steel bar tons shipped at MACSTEEL were strong, up 5% compared to second quarter 2006 shipments, due to our success in securing more business in both the automotive and non-automotive markets," said Raymond A. Jean, chairman and chief executive officer. "MACSTEEL's overall demand improved throughout the quarter and our growing automotive backlog gives us optimism for a better mix as we move forward. North American light vehicle builds in our second quarter were down 3% compared to a year ago, but the outlook calls for a gradual increase in builds during the second half of 2007 compared to the second half of 2006. As expected, operating income was down due to the mix shift, which included less value added bar product as a percent of sales, as well as from rising scrap costs through March."
"We are very pleased with the integration progress at Atmosphere Annealing. This is a great heat treating asset for us and it came with an excellent management team. Our vehicular sales team will now further enhance its value proposition to automotive powertrain customers. Operating results were better than planned and we continue to be impressed with AAI's industry leading capabilities," Jean said.
BUILDING PRODUCTS
Engineered Products ($ in millions)
2nd qtr 2nd qtr
2007 2006 inc/(dcr)
--------- --------- ---------
Net Sales $103.6 $127.4 (19%)
Operating Income 9.1 12.7 (28%)
Engineered Products is focused on providing window and door customers with value added fenestration products and components. Key market drivers are housing starts (approximately 60% of sales) and remodeling activity (approximately 40% of sales).
"The housing market slump continues to negatively impact the financial results of Engineered Products. Housing starts were off 24% compared to our second quarter last year, the result of an ongoing inventory overhang in the market. As expected, we did see a seasonal pickup in our business late in the quarter, and we look for that upturn in demand to hold through the summer," said Jean.
Aluminum Sheet Building Products ($ in millions)
2nd qtr 2nd qtr
2007 2006 inc/(dcr)
--------- --------- ---------
Net Sales $139.2 $139.5 --
Operating Income 16.8 22.4 (25%)
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 (approximately 60% of sales).
"Second quarter shipped pounds at Nichols Aluminum were off 7% from a year ago as the business continued to experience weak demand in its building and construction markets, as well as softness in its secondary markets. Operating income was off from a year ago due to reduced shipments and less value added painted sheet sales as a percent of the mix," Jean said.
Cash Flow
"Cash plus short-term investments were $104 million at the end of our second quarter after having acquired AAI for some $58 million, and total debt less cash and investments to capitalization was 2.9%. We aggressively manage our working capital, and for the quarter end, our conversion cycle was 34 days. Cash provided by operating activities remained excellent at $84 million for the first half of 2007," said Jean.
Fiscal 2007 Outlook
Quanex continues to experience relatively soft demand in its end markets, but expects to see sequential quarterly improvement in operating results through the remainder of fiscal 2007 based on an improving automotive build schedule and an improvement in housing starts.
At Vehicular Products, demand is expected to continue to improve as light vehicle build rates increase. MACSTEEL's bar shipments in the second half of fiscal 2007 are expected to exceed the comparable 2006 period, based in part on the strength of new programs with both the Big Three and transplant automotive customers. Material spreads are expected to improve sequentially as the product mix improves with more powertrain bar sales and the cost of steel scrap moderates. Light vehicle builds of 15.3 million in calendar 2007 are expected to be about even with 2006.
For Building Products, housing starts in calendar 2007 are expected to lag 2006 by some 23%. Customer demand at Engineered Products is expected to improve over the course of the year based on a very gradual improvement in housing starts. New programs with both existing and new customers will further bolster results. At Nichols Aluminum, second half fiscal 2007 aluminum sheet shipments are expected to exceed first half 2007 but lag second half 2006 shipments, and spreads are expected to remain robust.
For the fiscal third quarter, Quanex expects to report diluted earnings per share from continuing operations within a range of $0.90 to $0.98, which includes an estimated $0.03 per share LIFO charge. Guidance for the year is $3.35 to $3.60, and includes an estimated $0.10 per share LIFO charge. Current guidance was raised toward the higher end of the previous range of $3.10 to $3.60 due in part to an improving automotive outlook at Vehicular Products and new programs at Engineered Products.
Other
On May 16, 2007, the Company announced that its Board of Directors had initiated a review of strategic alternatives with respect to its Building Products group. The group consists of Engineered Products and Aluminum Sheet Products. Strategic alternatives to be considered include, but are not limited to, a tax-free spin-off to Quanex shareholders, a sale or a joint venture. At this time, there can be no assurance that this strategic review will result in any type of transaction and the Company does not intend to provide an update to this process.
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 $41.33 for its second quarter, the Company's diluted earnings per share from continuing operations were reduced by $0.03.
Quanex uses the Last In First Out (LIFO) method of accounting, which requires it to forecast year-end inventory prices and levels and periodically adjust interim inventory balances. For the second quarter, the Company booked a $3.0 million ($0.05 per diluted share) non-cash LIFO charge that primarily reflects the rise in the cost of steel scrap at the Company's Vehicular Products group.
Dividend Declared
The Board of Directors declared the Company's quarterly cash dividend of $0.14 per share on the common stock, payable June 29, 2007 to shareholders of record on June 15, 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 04/30/07
Book value per common share: $21.74; Total debt to capitalization: 14.0%; Return on invested capital: 15.7%; Return on common equity: 18.1%; Actual number of common shares outstanding: 37,066,472.
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 15, 2006) under the Securities Exchange Act of 1934, in particular the section titled, "Private Securities Litigation Reform Act" contained therein.
For additional information, visit the Company's website at www.quanex.com.
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net sales:
$ 280,887 $ 245,397 Vehicular Products $ 498,137 $ 464,170
Engineered
103,583 127,355 Building Products 202,452 253,641
Aluminum Sheet
139,188 139,530 Building Products 244,425 243,510
--------- --------- --------- ---------
242,771 266,885 Building Products 446,877 497,151
(4,220) (5,046) Corporate and Other (7,935) (9,516)
--------- --------- --------- ---------
$ 519,438 $ 507,236 Net sales $ 937,079 $ 951,805
========= ========= ========= =========
Operating income:
$ 35,413 $ 40,422 Vehicular Products $ 60,284 $ 73,671
Engineered
9,088 12,657 Building Products 12,938 23,275
Aluminum Sheet
16,828 22,408 Building Products 27,416 38,497
--------- --------- --------- ---------
25,916 35,065 Building Products 40,354 61,772
(10,787) (6,642) Corporate and Other (19,715) (12,374)
--------- --------- --------- ---------
$ 50,542 $ 68,845 Operating Income $ 80,923 $ 123,069
========= ========= ========= =========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
$ 519,438 $ 507,236 Net sales $ 937,079 $ 951,805
Cost of sales (exclusive
of items shown separately
424,457 396,541 below) 767,022 748,625
Selling, general and
24,872 23,940 administrative expense 50,571 44,813
Depreciation and
19,567 17,910 amortization 38,563 35,298
--------- --------- --------- ---------
50,542 68,845 Operating income 80,923 123,069
(1,024) (1,215) Interest expense (2,059) (2,455)
1,733 356 Other, net 3,707 467
--------- --------- --------- ---------
Income from continuing
51,251 67,986 operations before taxes 82,571 121,081
(18,451) (25,155) Income tax expense (29,726) (44,800)
--------- --------- --------- ---------
Income from
32,800 42,831 continuing operations 52,845 76,281
Income (loss) from
discontinued operations,
-- 19 net of taxes -- (406)
--------- --------- --------- ---------
$ 32,800 $ 42,850 Net income $ 52,845 $ 75,875
========= ========= ========= =========
Basic earnings per common share:
Earnings from
$ 0.89 $ 1.14 continuing operations $ 1.43 $ 2.02
Income (loss) from
discontinued
$ -- $ -- operations $ -- $ (0.01)
--------- --------- --------- ---------
$ 0.89 $ 1.14 Basic earnings per share $ 1.43 $ 2.01
--------- --------- --------- ---------
Diluted earnings per common share:
Earnings from
$ 0.84 $ 1.07 continuing operations $ 1.38 $ 1.93
Income (loss) from
discontinued
$ -- $ -- operations $ -- $ (0.01)
--------- --------- --------- ---------
Diluted earnings
$ 0.84 $ 1.07 per share $ 1.38 $ 1.92
--------- --------- --------- ---------
Weighted average common shares outstanding:
36,943 37,677 Basic 36,920 37,677
39,416 40,327 Diluted 39,113 40,131
$ 0.1400 $ 0.1200 Cash dividends per share $ 0.2800 $ 0.2233
QUANEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
April 30, October 31,
2007 2006
---------------------------------------------------------------------
Assets
$ 63,961 Cash and equivalents $ 105,708
40,000 Short-term investments --
211,685 Accounts and notes receivable, net 184,311
164,131 Inventories 142,788
12,429 Deferred income taxes 12,218
5,792 Other current assets 5,584
----------- ------------------------------------------ ----------
497,998 Total current assets 450,609
443,031 Property, plant and equipment, net 432,058
201,732 Goodwill 196,350
29,588 Cash surrender value insurance policies 29,108
90,740 Intangible assets, net 75,285
15,577 Other assets 18,742
----------- ------------------------------------------ ----------
$1,278,666 Total assets $1,202,152
========== ========================================== ==========
Liabilities and stockholders' equity
$ 181,438 Accounts payable $ 137,564
51,950 Accrued liabilities 54,943
5,351 Income taxes payable 13,185
1,464 Current maturities of long-term debt 2,721
----------- ------------------------------------------ ----------
240,203 Total current liabilities 208,413
129,416 Long-term debt 130,680
1,457 Deferred pension credits 1,115
7,426 Deferred postretirement welfare benefits 7,300
64,203 Deferred income taxes 66,189
13,254 Non-current environmental reserves 14,186
16,902 Other liabilities 15,754
----------- ------------------------------------------ ----------
472,861 Total liabilities 443,637
805,805 Total stockholders' equity 758,515
---------- ------------------------------------------ ----------
Total liabilities and
$1,278,666 stockholders' equity $1,202,152
========== ========================================== ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Six months ended
April 30,
---------------------
2007 2006
--------- ---------
Operating activities:
Net income $ 52,845 $ 75,875
Loss from discontinued operations -- 406
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 38,697 35,612
Deferred income taxes (2,200) 1,180
Stock-based compensation 3,685 2,797
--------- ---------
93,027 115,870
Changes in assets and liabilities, net of
effects from acquisitions and dispositions:
Decrease (Increase) in accounts and
notes receivable (22,716) (42,506)
Decrease (Increase) in inventory (19,853) (22,874)
Increase (Decrease) in accounts payable 42,626 33,669
Increase (Decrease) in accrued
liabilities (4,134) (11,686)
Increase (Decrease) in income taxes
payable (7,718) (1,575)
Increase (Decrease) in deferred pension
and postretirement benefits 2,888 632
Other, net 264 (3,327)
--------- ---------
Cash provided by (used for) operating
activities from continuing operations 84,384 68,203
Cash provided by (used for) operating
activities from discontinued operations -- (742)
--------- ---------
Cash provided by operating activities 84,384 67,461
Investment activities:
Purchases of short-term investments (46,150) --
Proceeds from sales of short-term investment 6,150 --
Acquisitions, net of cash acquired (58,493) --
Capital expenditures, net of retirements (16,626) (42,915)
Proceeds from sale of discontinued operations -- 5,432
Retired executive life insurance proceeds -- 461
Other, net 312 320
--------- ---------
Cash used for investing activities from
continuing operations (114,807) (36,702)
Cash used for investment activities from
discontinued operations -- (14)
--------- ---------
Cash used for investment activities (114,807) (36,716)
Financing activities:
Repayments of long-term debt (2,521) (2,307)
Common dividends paid (10,374) (8,588)
Issuance of common stock from option
exercises, including related tax
benefits 1,571 10,724
Purchases of treasury stock -- (17,906)
Other, net (11) --
--------- ---------
Cash provided by (used for) financing
activities from continuing operations (11,335) (18,077)
Cash used for financing activities from
discontinued operations -- (56)
--------- ---------
Cash provided by (used for) financing
activities (11,335) (18,133)
--------- ---------
Effect of exchange rate changes on cash
and equivalents 11 13
Increase (Decrease) in cash and equivalents (41,747) 12,625
Beginning of period cash and equivalents 105,708 49,681
--------- ---------
End of period cash and equivalents
$ 63,961 $ 62,306
========= =========
CONTACT: Quanex Corporation
Financial Contact:
Jeff Galow
713/877-5327
Media Contact:
Valerie Calvert
713/877-5305