UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sectionn13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 6, 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 December 6, 2006, Quanex Corporation issued a press release (the "Press Release") reporting its earnings results for the fourth quarter and fiscal year of 2006 and issued an additional press release correcting the fiscal year 2006 earnings per share (the "Press Release Correction"). The foregoing is qualified by reference to the Press Release and Press Release Correction which are filed as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K and are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
| 99.1 | Press release dated December 6, 2006 |
| 99.2 | Press Release Correction dated December 6, 2006 |
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 6, 2006
(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 6, 2006 | |
| 99.2 | Press Release Correction dated December 6, 2006 | |
EXHIBIT 99.1
Quanex Fiscal Fourth Quarter and 2006 Annual Results
Record 2006 Sales of $2+ Billion
Record Vehicular Products Fourth Quarter
Sales & Operating Income
Best-Ever Aluminum Sheet Products Fourth Quarter
Sales & Operating Income
HOUSTON, Dec. 6, 2006 (PRIME NEWSWIRE) -- Quanex Corporation (NYSE:NX) today reported fiscal fourth quarter and 2006 annual results for the period ending October 31, 2006. Net sales for the quarter and year were records at $527.7 million and $2,032.6 million, respectively, compared to $483.3 million and $1,969.0 million, respectively, in the year ago periods. Income from continuing operations was $39.1 million for the quarter and $160.3 million for the year, compared to the $46.7 million and $177.2 million, respectively, reported a year ago. Diluted earnings per share from continuing operations were $1.03 for the fourth quarter and $4.15 for the year, compared to $1.17 and $4.50, respectively, last year. Diluted earnings per share were $1.03 and $4.15 for the quarter and the year, respectively. Return on invested capital at fiscal year end was 19.4% compared to 20.8% a year ago.
Highlights
* Vehicular Products and Aluminum Sheet Products each reported
record sales and operating income for a fourth quarter. Engineered
Products reported record net sales for the year. Consolidated 2006
net sales of the Company's three reportable segments were best ever
at $2.0 billion.
* Cash provided by operating activities for 2006 was $190.3 million,
a second-best year ever, compared to $249.1 million for 2005.
* Total debt less cash to capitalization stood at 3.1% compared to
10.9% a year ago.
* The Company entered into a new, unsecured revolving credit
facility in September 2006. The $350 million facility has a term of
five years with no outstanding loan balance.
* The Phase 9 capital program at the MACSTEEL Monroe facility was
completed in the quarter. The $38 million project adds extensive
value added processes to the facility, including a MACPLUS turning
and polishing line, bar straightening and testing.
* A $7.1 million ($0.12 per diluted share) non-cash LIFO charge was
taken in the fourth quarter, and for fiscal 2006, LIFO charges
totaled $13.1 million ($0.21 per diluted share). The LIFO charges
reflect the substantial rise in the price of the London Metal
Exchange (LME) aluminum ingot and higher steel scrap costs at
MACSTEEL. Quanex uses the LIFO method of accounting, which requires
it to forecast year-end inventory prices and levels and
periodically adjust interim inventory balances with a true-up in
the fourth quarter.
* During 2006, the Company purchased a total of 1,573,950 shares of
outstanding common stock at an average price of $37.06 and a
3-for-2 stock split was distributed in March.
* The 2006 cash dividend was increased 35% on an annualized basis to
56 cents per share.
Selected Financial Information
------------------------------
Fourth Quarter and Fiscal Year Financials
($ in millions, except per share data)
4th qtr 4th qtr inc/ FY FY inc/
2006 2005 (dcr) 2006 2005 (dcr)
------ ------ ---- -------- -------- -----
Net Sales $527.7 $483.3 9% $2,032.6 $1,969.0 3%
Operating
Income 59.3 70.6 (16%) 251.4 292.8 (14%)
Income from
Continuing
Ops. 39.1 46.7 (16%) 160.3 177.2 (10%)
EPS: Basic
Earnings from
Continuing
Ops. $1.06 $1.23 (14%) $4.35 $4.69 (7%)
EPS: Diluted
Earnings from
Continuing
Ops. $1.03 $1.17 (12%) $4.15 $4.50 (8%)
EPS: Diluted
Earnings $1.03 $0.78 32% $4.15 $3.95 5%
Segment Commentary
------------------
VEHICULAR PRODUCTS
($ in millions)
4th qtr 2006 4th qtr 2005 FY 2006 FY 2005
------------ ------------ ------- --------
Net Sales $264.8 $230.0 $988.8 $1,017.2
Operating Income $ 40.6 $ 36.7 $154.6 $ 190.7
Vehicular Products is focused on providing customers with custom engineered steel bar products and value added services. The segment's key market driver is light vehicle builds, which account for 65% of the segment's sales.
"Total steel bar tons shipped at MACSTEEL in the quarter were up 5% over fourth quarter 2005 shipments and up 1% compared to the third quarter 2006, due in part to stronger than expected demand in October," said Raymond A. Jean, chairman and chief executive officer. "MACSTEEL's bar shipments in the quarter were up even though North American light vehicle builds during our fourth quarter were down 11% compared to the fourth quarter 2005, demonstrating our ability to outperform the market. Shipments for fiscal 2006 were flat versus 2005, while light vehicle builds were off 2% overall."
"Vehicular Products operating income was up 10% from last year's fourth quarter due to higher shipments and material spreads. We are realizing the benefits of both additional value added capacity and new programs with the 'Big Three' and transplant automotive companies," continued Jean.
BUILDING PRODUCTS
ENGINEERED PRODUCTS
($ in millions)
4th qtr 2006 4th qtr 2005 FY 2006 FY 2005
------------ ------------ ------- -------
Net Sales $132.2 $150.6 $524.6 $487.6
Operating Income $ 13.4 $ 20.9 $ 52.5 $ 59.2
Engineered Products is focused on providing window and door OEM customers with engineered products and components. Key market drivers are housing starts (approximately 60% of segment sales) and remodeling activity (approximately 40% of segment sales).
"Engineered Products posted a 12% decrease in fiscal fourth quarter net sales compared to the year ago quarter, while housing starts for the same period were off 22%. Rising new home inventories and mounting cancellations are producing a sharp response from home-builders who continue to reduce builds, and as a result, our window and door components business experienced much slower demand. For 2006, net sales and operating income for the segment were up 8% and down 11%, respectively, over 2005," said Jean.
ALUMINUM SHEET PRODUCTS
($ in millions)
4th qtr 2006 4th qtr 2005 FY 2006 FY 2005
------------ ------------ ------- -------
Net Sales $135.2 $107.8 $539.8 $484.1
Operating Income $ 17.9 $ 14.3 $ 82.2 $ 72.2
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 accounts for 60% of segment sales.
"Net sales and operating income were both up 25% in the fourth quarter compared to the year ago period. Nichols Aluminum sheet pounds shipped in the quarter were up 3% compared to the year ago quarter, but off 14% from the third quarter 2006. Shipments for 2006 were down 4% versus 2005. Spread per pound (selling price less raw material costs) for the quarter and year were both up 11% compared to last year as scrap costs have lagged increases in aluminum prices on the LME. Operating income for the year was up 14% to $82.2 million, a record for Nichols Aluminum," Jean said.
Cash Flow
"The Company continued to generate excellent cash flow. Cash provided by operating activities for the year was $190.3 million. Cash and equivalents were $105.7 million at year end, after buying back some $58 million of our common stock, making $16 million of contributions to the pension funds and investing some $74 million on capital projects for added productivity and capability. For 2007, we expect continued strong cash flow based on healthy earnings and much lower capital expenditures," said Jean.
Outlook
The first quarter is historically the Company's least profitable quarter as there are fewer production days due to the holidays and there is reduced home building activity during the winter period. Net sales for the first fiscal quarter of 2007 are expected to be down some 10% from first quarter 2006 sales, and the Company expects its market drivers to be down appreciably from the year ago period.
VEHICULAR PRODUCTS
Vehicular Products fiscal first quarter 2007 steel bar ton shipments are estimated to be down about 10% compared to the first quarter 2006, a result of cutbacks made by the Company's Tier 1 and Tier 2 customers, principally in response to the Big Three's estimated 10% light vehicle build rate reduction. Total light vehicle builds in the fiscal first quarter are projected to be down 5% from the year ago quarter. The Vehicular Products segment is expected to outperform the market for fiscal 2007 with new programs at both the "Big Three" and transplant automotive companies.
BUILDING PRODUCTS
At Engineered Products, 2007 fiscal first quarter net sales are expected to be down some 20% compared to the first quarter 2006, as the segment experiences lower demand for its window and door components in the face of declining housing starts and reduced remodeling expenditures. Total housing starts are expected to be down 20% in the quarter.
Aluminum Sheet shipments are expected to be down about 10% compared to year ago first quarter shipments, with momentum expected to return in January. LME aluminum ingot prices are expected to remain high through the first quarter, which should allow for continued healthy material spreads at Nichols Aluminum.
Taken together, the Company expects fiscal first quarter 2007 earnings from continuing operations to be in a range of $0.35 to $0.45 per share.
For fiscal 2007, the Company expects to build momentum in all of its businesses as the year progresses. Quanex cautions that it expects its financial performance in the first half of 2007 to lag the first half of 2006. Light vehicle builds and housing starts in the first half of 2007 are forecasted to be down about 6% and 22%, respectively, from the first half of 2006. In the second half of 2007, the Company expects its market drivers to improve over the second half of 2006. Accordingly, fiscal 2007 earnings per share from continuing operations are expected to be in a range of $3.10 to $3.60 per share.
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 $33.19 for the fourth quarter, the Company's fourth quarter diluted earnings from continuing operations reflect a reduction of $0.02 per share, and with an average stock closing price of $38.22 for the year, represent a reduction of $0.13 per share.
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, 2006, to shareholders of record on December 18, 2006.
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 10/31/06
Book value per common share: $20.51; Total debt to capitalization: 15.0%; Return on invested capital: 19.4%; Return on common equity: 22.7%; Actual number of common shares outstanding: 36,989,014.
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 section 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.primenewswire.com/newsroom/prs/?pkgid=1117
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Twelve months ended
October 31, October 31,
--------------------- ---------------------
2006 2005 2006 2005
--------- --------- ---------- ----------
Net sales:
$ 264,793 $ 230,038 Vehicular Products $ 988,799 $1,017,188
Engineered
132,157 150,559 Building Products 524,625 487,578
Aluminum Sheet
135,192 107,759 Building Products 539,773 484,112
--------- --------- ---------- ----------
267,349 258,318 Building Products 1,064,398 971,690
(4,422) (5,086) Corporate and Other (20,625) (19,871)
--------- --------- ---------- ----------
$ 527,720 $ 483,270 Net sales $2,032,572 $1,969,007
========= ========= ========== ==========
Operating income:
$ 40,603 $ 36,725 Vehicular Products $ 154,571 $ 190,667
Engineered
13,379 20,850 Building Products 52,540 59,207
Aluminum Sheet
17,927 14,314 Building Products 82,177 72,225
--------- --------- ---------- ----------
31,306 35,164 Building Products 134,717 131,432
(12,611) (1,241) Corporate and Other (37,894) (29,324)
--------- --------- ---------- ----------
$ 59,298 $ 70,648 Operating Income $ 251,394 $ 292,775
========= ========= ========== ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
October 31, October 31,
------------------ ----------------------
2006 2005 2006 2005
-------- -------- ---------- ----------
$527,720 $483,270 Net sales $2,032,572 $1,969,007
425,985 371,083 Cost of sales 1,617,399 1,512,980
Selling, general and
23,929 23,982 administrative expense 92,705 97,851
Depreciation and
18,508 17,557 amortization 71,074 65,401
-------- -------- ---------- ----------
59,298 70,648 Operating income 251,394 292,775
(1,129) (1,542) Interest expense (4,818) (9,300)
1,477 2,233 Other, net 4,240 151
-------- -------- ---------- ----------
Income from continuing
59,646 71,339 operations before taxes 250,816 283,626
(20,517) (24,659) Income tax expense (90,503) (106,393)
-------- -------- ---------- ----------
Income from continuing
39,129 46,680 operations 160,313 177,233
Gain (loss) from
discontinued operations,
46 (15,455) net of taxes (130) (22,073)
-------- -------- ---------- ----------
$ 39,175 $ 31,225 Net income $ 160,183 $ 155,160
======== ======== ========== ==========
Basic earnings per
common share:
Earnings from
$ 1.06 $ 1.23 continuing operations $ 4.35 $ 4.69
Gain (loss) from
discontinued
$ -- $ (0.41) operations $ -- $ (0.58)
-------- -------- ---------- ----------
Basic earnings
$ 1.06 $ 0.82 per share $ 4.35 $ 4.11
-------- -------- ---------- ----------
Diluted earnings per
common share:
Earnings from
$ 1.03 $ 1.17 continuing operations $ 4.15 $ 4.50
Gain (loss) from
discontinued
$ -- $ (0.39) operations $ -- $ (0.55)
-------- -------- ---------- ----------
Diluted earnings
$ 1.03 $ 0.78 per share $ 4.15 $ 3.95
-------- -------- ---------- ----------
Weighted average
common shares
outstanding:
36,847 37,983 Basic 36,859 37,772
38,494 40,446 Diluted 39,089 39,809
Cash dividends
$ 0.1400 $ 0.1033 per share $ 0.4833 $ 0.3733
QUANEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
October 31, October 31,
2006 2005
------------------------------------------------------------------
Assets
$ 105,708 Cash and equivalents $ 49,681
184,311 Accounts and notes receivable, net 152,072
142,788 Inventories 133,003
12,218 Deferred income taxes 12,864
5,584 Other current assets 4,669
-- Current assets of discontinued operations 5,504
---------- ----------------------------------------- ----------
450,609 Total current assets 357,793
432,058 Property, plant and equipment, net 423,942
196,350 Goodwill 196,341
29,108 Cash surrender value insurance policies 28,442
75,285 Intangible assets, net 82,360
18,742 Other assets 20,054
-- Assets of discontinued operations 5,846
---------- ----------------------------------------- ----------
$1,202,152 Total assets $1,114,778
========== ========================================= ==========
Liabilities and stockholders' equity
$ 137,564 Accounts payable $ 129,152
54,943 Accrued liabilities 64,466
13,185 Income taxes payable 14,465
2,721 Current maturities of long-term debt 2,459
Current liabilities of discontinued
-- operations 4,208
---------- ----------------------------------------- ----------
208,413 Total current liabilities 214,750
130,680 Long-term debt 133,462
1,115 Deferred pension credits 8,158
7,300 Deferred postretirement welfare benefits 7,519
66,189 Deferred income taxes 58,836
14,186 Non-current environmental reserves 17,784
15,754 Other liabilities 15,407
-- Liabilities of discontinued operations 2,120
---------- ----------------------------------------- ----------
443,637 Total liabilities 458,036
758,515 Total stockholders' equity 656,742
---------- ----------------------------------------- ----------
Total liabilities and
$1,202,152 stockholders' equity $1,114,778
========== ========================================= ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Twelve months ended
October 31,
-------------------
2006 2005
-------- --------
Operating activities:
Net income $160,183 $155,160
Loss from discontinued operations 130 22,073
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 71,657 65,987
Deferred income taxes 7,084 (438)
Stock-based compensation 5,298 946
-------- --------
244,352 243,728
Changes in assets and liabilities,
net of effects from
acquisitions and dispositions:
Decrease (Increase) in accounts and
notes receivable (32,229) 32,165
Decrease (Increase) in inventory (9,753) (8,847)
Increase (Decrease) in accounts payable 8,326 (43,696)
Increase (Decrease) in accrued liabilities (8,059) (419)
Increase (Decrease) in income taxes payable (736) 19,624
Increase (Decrease) in deferred pension and
postretirement benefits (10,524) 3,015
Other, net (390) 4,825
-------- --------
Cash provided by (used for) operating
activities from continuing operations 190,987 250,395
Cash provided by (used for) operating
activities from discontinued operations (716) (1,275)
-------- --------
Cash provided by operating activities 190,271 249,120
Investment activities:
Acquisitions, net of cash acquired -- (200,550)
Proceeds from sale of discontinued
operations 5,683 11,710
Capital expenditures, net of retirements (72,262) (50,792)
Retired executive life insurance proceeds 461 --
Other, net 593 (46)
-------- --------
Cash used for investing activities from
continuing operations (65,525) (239,678)
Cash used for investment activities from
discontinued operations (14) (1,059)
-------- --------
Cash used for investment activities (65,539) (240,737)
Financing activities:
Bank borrowings (repayments), net (2,519) (180)
Purchases of Quanex common stock (58,326) --
Common dividends paid (18,362) (14,296)
Issuance of common stock from option
exercises, including related tax
benefits 11,094 14,295
Other, net (547) (70)
-------- --------
Cash provided by (used for) financing
activities from continuing operations (68,660) (251)
Cash used for financing activities
from discontinued operations (56) (211)
-------- --------
Cash provided by (used for)
financing activities (68,716) (462)
-------- --------
Effect of exchange rate changes
on cash and equivalents 11 17
Increase (Decrease) in cash and
equivalents 56,027 7,938
Beginning of period cash and equivalents 49,681 41,743
-------- --------
End of period cash and equivalents $105,708 $ 49,681
======== ========
CONTACT: Quanex Corporation
Financial Contact:
Jeff Galow
(713) 877-5327
Media Contact:
Valerie Calvert
(713) 877-5305