Investor Press Release
Quanex Reports Earnings for Fiscal 2001 First Quarter
HOUSTON, Feb. 22 /PRNewswire/ -- Quanex Corporation (NYSE: NX) today announced fiscal 2001 first quarter results for the period ending January 31. Sales for the first quarter were $193.8 million, compared with sales of $199.3 million for fiscal 2000's first quarter. Net income, excluding a $.4 million extraordinary gain, was $3.7 million, representing basic and diluted earnings per share of 27 cents. This compares with net income of $4.2 million and basic and diluted earnings per share of 29 cents for the same period last year.
Fiscal First Quarter Business Results
The MACSTEEL(R) Group, Quanex's engineered steel bar business, had first quarter net sales of $71.6 million versus $79.7 million for the same period last year. Operating income for the quarter was $7.3 million, compared with $11.8 million reported in the prior year's quarter.
The Nichols Aluminum Group, the company's aluminum sheet products business, had first quarter net sales of $78.8 million versus $79.7 million for the same period last year. Operating income for the quarter was $.3 million, compared with $2.2 million reported in the prior year's quarter.
The Engineered Products Group, Quanex's formed metal products business, had first quarter net sales of $26.0 million versus $18.4 million for the same period last year. Operating income for the quarter was $1.9 million, compared with $1.8 million reported in the prior year's quarter.
The Piper Impact Group, the company's impact extrusion business, had first quarter net sales of $22.8 million versus $26.8 million for the same period last year. Operating income for the quarter was $1.1 million versus a loss of $3.5 million reported in the prior year's quarter.
Statements that use the word "expect," "should," "will," "might," or similar words reflecting future expectations or beliefs are forward-looking statements. The following statements 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 filing (fiscal 2000 10-K filed January 5, 2001) under the Securities Exchange act of 1934, in particular, the sections titled, "Private Securities Litigation Reform Act" contained therein.
"We continue to experience slower demand for our automotive, building, and construction products during the first quarter of fiscal 2001 versus the first quarter of fiscal 2000," said Vernon E. Oechsle, chairman of the board and chief executive officer of Quanex. "Historically, this is the slowest period of the year for our businesses due to the seasonal nature of our markets, holiday shutdowns, and fewer production days. Making the period more difficult, of course, is the slow economy, particularly in the manufacturing area and a harsher winter than we've experienced in the last few years. When compared to business activity this time last year, demand now is certainly weaker across all product lines."
"MACSTEEL is currently operating at reduced levels but continues to maintain a five-day schedule. The slowing economy continues to negatively impact their primary markets, namely transportation and capital goods. We look for automotive builds in the 15.5 to 16 million range for 2001, down from the record 17.5 million the industry experienced in 2000. We expect only a modest improvement in their overall business activity for the second quarter but do look for an improving marketplace as the year progresses. MACSTEEL continues to maintain market share in its traditional areas and is also selling some bar products outside these markets as well. Given current business conditions, we believe Macsteel's operating results for the second quarter will fall short of last year's second quarter performance."
"Nichols Aluminum is also currently operating at a reduced capacity. Their reduced business activity is seen as a result of severe weather in addition to a general economic slowdown in the building and construction markets. Housing starts, while down from their peak last year, are still relatively strong. We look for more normalized spring season building activity. However, because of the general condition of the economy, we believe their second quarter operating results will trail last year's results."
"Engineered Products business activity remained fairly strong for the first quarter, given the state of the economy. We do, however, see some slowing in the second quarter. The group's results for the quarter also benefited from the acquisitions of Imperial Fabricated Products last year and Temroc Metals this past November. New products at AMSCO have allowed that business to move into more market areas. For the second quarter, we expect this group to show similar operating results compared to last year."
"Piper Impact experienced a much improved first quarter compared to last year. Sales are down versus this time last year as the group included sales at Piper Impact Europe, which was sold in the third quarter of 2000. Comparable net sales for Piper have them ahead about 13% for the first quarter. Meaningful operating improvements in the business allowed the group to report positive operating income, but a slowdown in air bag component sales is expected for Piper in the second half of the year."
The second and fourth quarters are typically the Company's most profitable quarters. The first quarter is historically the least profitable for the reasons given above. For the second quarter, business activity in the Company's primary markets is expected to be down significantly when compared to the second quarter of 2000; hence, operating results are expected to lag the $0.61 fully diluted earnings per share reported in the second quarter last year.
The Company previously reported full year 2001 earnings guidance (quarterly update, January 19, 2001) indicating that the Company believed it would earn in excess of the $2.44 fully diluted earnings per share (excluding unusual items) reported for fiscal 2000. At this time, the Company no longer expects to exceed those results but believes its annual results will be near that level.
In December 1999, Quanex announced a formal program to repurchase up to 2 million shares of the Company's common stock. The Company repurchased 45,900 shares of common stock, of which 20,000 settled in the first quarter. Since inception of the program, Quanex has purchased approximately 880,000 shares at a cost of $18.0 million.
During the quarter, the Company also purchased $4.6 million of its 6.88% convertible subordinated debentures for a total of $3.9 million.
At the annual meeting of Quanex shareholders held February 22, 2001, Carl E. Pfeiffer and Vincent R. Scorsone were elected to the board of directors for terms expiring in 2004.
The Board of Directors declared a regular quarterly dividend of $0.16 per share on the Company's common stock, payable March 30, 2001, to shareholders of record on March 16, 2001.
Our strategy for enhancing long-term shareholder value will be accomplished through enhanced sales and earnings growth. We will strive to achieve this by consistently earning a cash return in excess of our cost of capital; by being the low cost / high quality producers in our industries; and by investing in internal capital projects and acquisitions that will provide growth and high cash returns.
Quanex is a technological leader in the production of value-added, engineered steel bars; aluminum flat-rolled products; and engineered, formed- metal products for customers in the transportation, capital equipment, packaging, homebuilding and remodeling, defense, and other commercial markets.
Latest 12 Months Financial Information
(from continuing operations, excluding unusual items)
Sales: $928.7 million; EBITDA: $115.0 million; Operating income: $66.6 million; Net income: $35.4 million; Basic earnings per share: $2.61; Quarterly common dividend rate (per share): $.16; Book value per common share: $19.9; Long-term debt to capitalization: 45.5%; Return on common equity: 12.5%; Actual number of common shares outstanding: 13,418,102; Common stock price range (52 week hi - low): $23.69 - $14.38.
QUANEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three months ended January 31 2001 2000 (Unaudited) Net sales $193,825 $199,294 Cost of sales 162,667 165,643 Selling, general and administrative expense 11,728 13,282 Depreciation and amortization 11,236 12,162 Operating income 8,194 8,207 Interest expense (3,968) (3,330) Capitalized interest 314 544 Other, net 1,130 1,002 Income before income taxes and extraordinary gain 5,670 6,423 Income tax expense (1,985) (2,248) Income before extraordinary gain 3,685 4,175 Extraordinary gain on early extinguishment of debt, net of income taxes 372 --- Net income $4,057 $4,175 Weighted average common shares outstanding: Basic 13,424 14,172 Diluted 13,562 14,360 Earnings per common share: Basic: Income before extraordinary gain $0.27 $0.29 Extraordinary gain 0.03 --- Total basic net earnings $0.30 $0.29 Diluted: Income before extraordinary gain $0.27 $0.29 Extraordinary gain 0.03 --- Total diluted net earnings $0.30 $0.29 Common stock dividends per share $0.16 $0.16 QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION (In thousands) Three months ended January 31 2001 2000 (Unaudited) Engineered Steel Bars: Net sales $71,598 $79,742 Operating income $7,335 $11,835 Aluminum Mill Sheet Products: Net sales $78,816 $79,720 Operating income $280 $2,203 Engineered Products: Net sales $25,963 $18,418 Operating income $1,933 $1,847 Piper Impact: Net sales $22,849 $26,799 Operating income / (loss) $1,144 $(3,473) Corporate and Other: Net sales $(5,401) $(5,385) Operating loss $(2,498) $(4,205) Total: Net sales $193,825 $199,294 Operating income $8,194 $8,207 QUANEX CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands) January 31 October 31 2001 2000 2000 1999 (Unaudited) Assets (Audited) $18,879 $21,955 Cash and equivalents $22,409 $25,874 94,579 91,816 Accounts and notes receivable, 98,465 87,204 net 103,625 97,594 Inventories 101,274 78,463 15,210 13,505 Other current assets 13,798 20,846 232,293 224,870 Total current assets 235,946 212,387 344,362 416,543 Property, plant and equipment, 338,248 406,841 net 61,316 47,715 Goodwill, net 47,539 48,990 26,083 23,812 Other assets 24,126 22,228 $664,054 $712,940 Total assets $645,859 $690,446 Liabilities and stockholders' equity $68,910 $79,004 Accounts payable $77,339 $70,187 --- 13,462 Accrued payable - acquisition --- --- 41,751 47,615 Accrued expenses 50,189 54,305 5,552 3,176 Income taxes payable 3,218 1,103 688 --- Other current liabilities --- --- 427 9,226 Current portion of long-term 256 10,545 debt 117,328 152,483 Total current liabilities 131,002 136,140 222,492 188,121 Long-term debt 191,657 179,121 6,601 7,004 Deferred pension credits 7,026 6,691 7,708 7,452 Deferred postretirement welfare 7,634 7,490 benefits 26,232 43,531 Deferred income taxes 27,620 43,910 17,369 14,711 Other liabilities 14,423 16,033 397,730 413,302 Total liabilities 379,362 389,385 266,324 299,638 Total stockholders' equity 266,497 301,061 $664,054 $712,940 Total liabilities and $645,859 $690,446 stockholders' equity QUANEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) Three months ended January 31 2001 2000 (Unaudited) Operating activities: Net income $4,057 $4,175 Extraordinary gain on early extinguishment of debt (net of taxes of $201) (372) --- Depreciation and amortization 11,362 12,300 Noncash income from derivative instruments (1,064) --- Deferred income taxes (41) 30 Deferred pension and postretirement benefits (351) 273 13,591 16,778 Decrease in accounts and notes receivable 7,210 811 (Increase) decrease in inventory 292 (6,103) Increase (decrease) in accounts payable (10,490) 4,150 Decrease in accrued expenses (9,819) (9,642) Other, net (including income tax refund) 154 8,107 Cash provided by operating activities 938 14,101 Investment activities: Acquisition of Golden Aluminum, net of cash acquired --- (6,406) Acquisition of Temroc Metals, net of cash acquired (17,922) --- Capital expenditures, net of retirements (11,974) (14,458) Cash used by other investment activities (1,590) (892) Cash used by investment activities (31,486) (21,756) Financing activities: Bank borrowings, net 33,000 9,169 Purchase of subordinated debentures (3,942) --- Purchases of Quanex common stock (364) (3,785) Common dividends paid (2,167) (2,296) Issuance of common stock, net 800 620 Cash used by other financing activities (309) (24) Cash provided by financing activities 27,018 3,684 Effect of exchange rate changes on cash and equivalents --- 52 Decrease in cash (3,530) (3,919) Beginning of period cash and equivalents 22,409 25,874 End of period cash and equivalents $18,879 $21,955
SOURCE Quanex Corporation
Web site: http: //www.quanex.com
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CONTACT: financial, Jeff Galow, 713-877-5327, or media, Marianne Gooch, 713-877-5389, both of Quanex Corporation
CAPTION: NXLOGO QUANEX CORPORATION LOGO Quanex Corporation logo. (PRNewsFoto)[HD] HOUSTON, TX USA 05/17/1999