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) June 1, 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 June 1, 2006, Quanex Corporation issued a press release (the "Earnings Press Release") reporting its earnings results for the second 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 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated June 1, 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.
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QUANEX CORPORATION
(Registrant) |
||
|
June 1, 2006
(Date) |
/s/ KEVIN P. DELANEY
Kevin P. Delaney Senior Vice President - General Counsel and Secretary |
| Exhibit Index | ||
| 99.1 | Press release dated June 1, 2006 | |
EXHIBIT 99.1
Quanex Fiscal Second Quarter 2006 Results
Building Products Segment Posts Record 2nd Quarter Net Sales and Operating Income
Order Backlog Continues to Build
HOUSTON, June 1, 2006 (PRIMEZONE) -- Quanex Corporation (NYSE:NX) today reported fiscal second quarter results for the period ending April 30, 2006. Net sales were $507.2 million compared to $528.0 million a year ago, and income from continuing operations was $68.8 million versus $86.5 million in the year ago period. Diluted earnings per share from continuing operations were $1.07 compared to $1.31 in the second quarter last year. Diluted earnings per share were $1.07 versus $1.29 in the year ago quarter. The latest 12 month return on invested capital was 19.1% compared to 16.6% a year ago.
Second Quarter Highlights
-- Net sales at the Building Products segment were a second
quarter record $261.8 million compared to $244.3 million in
the year ago quarter; net sales at the Vehicular Products
segment were $245.4 million versus $283.7 million a year ago.
-- Building Products operating income was a second quarter record
$35.1 million compared to $31.3 million in the year ago quarter;
Vehicular Products operating income was $40.4 million versus
$61.5 million a year ago.
-- Order backlogs in the quarter were up 22% and 31% for MACSTEEL
and Nichols Aluminum, respectively, compared to the first
quarter.
-- Cash provided by operating activities and capital expenditures
for the first half of 2006 were $67.5 million and $42.9
million, respectively, compared to $72.9 million and $21.9
million, respectively, in the same period last year.
-- Total debt less cash (net debt) to capitalization was 8.4%
compared to 27.7% a year ago.
-- Stock option expenses were $0.02 per diluted share for the
quarter.
Selected Financial Information
Second Quarter Financials
($ in millions, except per share data)
2nd qtr 2nd qtr
2006 2005 inc/(dcr)
--------- --------- ---------
Net Sales $507.2 $528.0 ( 4%)
Operating Income 68.8 86.5 (20%)
Income from Continuing Ops. 42.8 51.7 (17%)
EPS: Basic Earnings from
Continuing Ops. $1.14 $1.37 (17%)
EPS: Diluted Earnings
from Continuing Ops. $1.07 $1.31 (18%)
EPS: Diluted Earnings $1.07 $1.29 (17%)
Segment Commentary
VEHICULAR PRODUCTS ($ in millions)
2nd qtr 2nd qtr
2006 2005 inc/(dcr)
--------- --------- ---------
Net Sales $245.4 $283.7 (13%)
Operating Income $ 40.4 $ 61.5 (34%)
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 improved markedly through the quarter and, consequently, our steel bar tons shipped came within 1% of year ago shipments, a period in which the segment had been in an oversold position," said Raymond A. Jean, Chairman and Chief Executive Officer. "North American light vehicle builds in our second quarter were off about 1% compared to the second quarter 2005. Operating income was down from last year's difficult benchmark due to very high raw material surcharges at the time, but our margins this quarter were still very strong at some 16.5%. Our second quarter backlog increased 22% over the first quarter, indicating lower inventory levels in the supply chain, the ramp-up of new programs, and further strengthening in our secondary markets," said Jean.
BUILDING PRODUCTS ($ in millions)
2nd qtr 2nd qtr
2006 2005 inc/(dcr)
--------- --------- ---------
Net Sales $261.8 $244.3 7%
Operating Income $ 35.1 $ 31.3 12%
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).
"New home construction and remodeling activity was seasonally strong during the quarter, with annualized housing starts of approximately two million. Customer demand at our engineered window and door components business was excellent in the quarter and we continue to build momentum. Aluminum sheet shipments at Nichols Aluminum were off 6% compared to the year ago quarter, a period when we had many of our customers on allocation. The backlog continued to improve throughout the quarter. Net sales at Nichols were $139.5 million and our spread per pound improved 11% compared to a year ago, the result of higher selling prices and relatively low scrap costs," said Jean.
Outlook
Overall demand in the second half of 2006 is expected to be up appreciably compared to the second half of 2005, supported by a healthy economy, historically low interest rates and new programs at both operating segments.
In the Vehicular Products segment, business activity is expected to continue to improve, with second half 2006 steel bar ton shipments now expected to be much stronger than the second half of 2005, based on the strength of new powertrain related programs. Light vehicle builds are expected to remain on a 15.5 million annualized units pace while heavy truck production should remain robust at some 360,000 annualized builds as manufacturers attempt to sell ahead of 2007 EPA mandated diesel engine emission requirements. Steel scrap costs have experienced a modest upward swing recently, but the scrap surcharge mechanism will continue to maintain margin rates over time.
In the Building Products segment, housing starts in the second half of 2006 are expected to slow modestly from this time last year, while remodeling and replacement activities are expected to remain strong. At the segment's engineered window and door components business, overall order activity is excellent. Through a combination of organic growth and recent acquisitions, the 2006 revenue growth in the window and door components business is expected to be some 15% over 2005. At the segment's Nichols Aluminum sheet business, demand continues to rebound and the business now expects second half 2006 aluminum sheet shipments to be much stronger than second half 2005 shipments. With London Metal Exchange (LME) aluminum ingot prices at high levels and aluminum scrap cost increases expected to remain relatively more modest, Nichols expects to continue experiencing strong material spreads in the second half of 2006.
Cash provided by operating activities is expected to be stronger in the second half of 2006 on rising earnings compared to the first half of the year. Taken together, the 2006 sales and earnings outlook for Quanex is very favorable. Accordingly, for its third quarter and full year, Quanex expects to report diluted earnings per share from continuing operations within a range of $1.10 to $1.16 and $4.00 to $4.20, respectively.
Note that the substantial rise in LME aluminum ingot prices associated with the Nichols Aluminum business could require Quanex to book a non-cash LIFO charge for 2006.
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 $42.82 for its second quarter, the Company's diluted earnings per share from continuing operations were reduced by $0.04.
Dividend Declared
The Board of Directors declared the Company's quarterly cash dividend of $0.12 per share on the common stock, payable June 30, 2006, to shareholders of record on June 15, 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 01/31/06
Book value per common share: $18.94; Total debt to capitalization: 15.7%; Return on invested capital: 19.1%; Return on common equity: 23.3%; Actual number of common shares outstanding: 37,999,276.
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.
The Quanex Corporation logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1117
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.
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
$507,236 $527,976 Net sales $951,805 $993,178
396,541 400,570 Cost of sales 748,625 768,574
Selling, general
and administrative
23,940 24,121 expense 44,813 46,931
Depreciation and
17,910 16,824 amortization 35,298 31,767
-------- -------- -------- --------
68,845 86,461 Operating income 123,069 145,906
(1,215) (2,943) Interest expense (2,455) (5,295)
356 578 Other, net 467 (1,339)
-------- -------- -------- --------
Income from continuing
67,986 84,096 operations before taxes 121,081 139,272
(25,155) (32,379) Income tax expense (44,800) (53,624)
-------- -------- -------- --------
Income from continuing
42,831 51,717 operations 76,281 85,648
Gain (loss) from
discontinued operations,
19 (732) net of taxes (406) (6,428)
-------- -------- -------- --------
$ 42,850 $ 50,985 Net income $ 75,875 $ 79,220
======== ======== ======== ========
Basic earnings per
common share:
Earnings from continuing
$ 1.14 $ 1.37 operations $ 2.02 $ 2.28
Gain (loss) from
$ -- $ (0.02) discontinued operations $ (0.01) $ (0.17)
-------- -------- -------- --------
$ 1.14 $ 1.35 Basic earnings per share $ 2.01 $ 2.11
-------- -------- -------- --------
Diluted earnings per
common share:
Earnings from continuing
$ 1.07 $ 1.31 operations $ 1.93 $ 2.20
Gain (loss) from
$ -- $ (0.02) discontinued operations $ (0.01) $ (0.16)
-------- -------- -------- --------
$ 1.07 $ 1.29 Diluted earnings per share $ 1.92 $ 2.04
-------- -------- -------- --------
Weighted average common
shares outstanding:
37,677 37,767 Basic 37,677 37,620
40,327 39,936 Diluted 40,131 39,353
$ 0.1200 $ 0.0900 Cash dividends per share $ 0.2233 $ 0.1800
QUANEX CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
-------------------- --------------------
2006 2005 2006 2005
-------- -------- -------- --------
Net sales:
$245,397 $283,666 Vehicular Products $464,170 $553,256
261,839 244,310 Building Products 487,635 439,922
-------- -------- -------- --------
$507,236 $527,976 Net sales $951,805 $993,178
-------- -------- -------- --------
Operating income:
$ 40,422 $ 61,459 Vehicular Products $ 73,671 $106,011
35,066 31,322 Building Products 61,772 53,464
(6,643) (6,320) Corporate and Other (12,374) (13,569)
-------- -------- -------- --------
$ 68,845 $ 86,461 Operating Income $123,069 $145,906
-------- -------- -------- --------
QUANEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
April 30, October 31,
2006 2005
-------------------------------------------------------------------
Assets
$ 62,306 Cash and equivalents $ 49,681
194,590 Accounts and notes receivable, net 152,072
155,911 Inventories 133,003
11,468 Deferred income taxes 12,864
7,455 Other current assets 4,669
Current assets of discontinued
-- operations 5,504
---------- --------------------------------------- ----------
431,730 Total current assets 357,793
1,012,125 Property, plant and equipment 969,962
(577,125) Less accumulated depreciation (546,020)
---------- --------------------------------------- ----------
435,000 Property, plant and equipment, net 423,942
196,351 Goodwill 196,341
Cash surrender value insurance
24,129 policies, net 24,927
78,822 Intangible assets, net 82,360
8,509 Other assets 9,002
-- Assets of discontinued operations 5,846
---------- --------------------------------------- ----------
$1,174,541 Total assets $1,100,211
========== ======================================= ==========
Liabilities and stockholders' equity
$ 162,821 Accounts payable $ 129,152
61,944 Accrued liabilities 73,616
12,890 Income taxes payable 14,465
2,734 Current maturities of long-term debt 2,459
Current liabilities of
-- discontinued operations 4,208
---------- --------------------------------------- ----------
240,389 Total current liabilities 223,900
130,880 Long-term debt 133,462
8,861 Deferred pension credits 8,158
7,448 Deferred postretirement welfare benefits 7,519
58,633 Deferred income taxes 58,836
5,999 Non-current environmental reserves 6,732
2,626 Other liabilities 2,742
-- Liabilities of discontinued operations 2,120
---------- --------------------------------------- ----------
454,836 Total liabilities 443,469
719,705 Total stockholders' equity 656,742
---------- --------------------------------------- ----------
Total liabilities and
$1,174,541 stockholders' equity $1,100,211
========== ======================================= ==========
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Six months ended
April 30,
---------------------
2006 2005
-------- ---------
Operating activities:
Net income $ 75,875 $ 79,220
Loss from discontinued operations 406 6,428
-------- ---------
Net income from continuing operations 76,281 85,648
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 35,612 32,059
Deferred income taxes 1,180 750
Stock-based compensation 2,797 263
Deferred pension and postretirement benefits 632 (975)
-------- ---------
116,502 117,745
Changes in assets and liabilities, net of
effects from acquisitions and dispositions:
Decrease (Increase) in accounts and
notes receivable (42,506) (23,814)
Decrease (Increase) in inventory (22,874) (12,303)
Increase (Decrease) in accounts payable 33,669 (22,487)
Increase (Decrease) in accrued liabilities (11,686) 2,189
Increase (Decrease) in income taxes payable (1,575) 13,633
Other, net (3,327) (326)
-------- ---------
Cash provided by (used for) operating
activities from continuing operations 68,203 74,637
Cash provided by (used for) operating
activities from discontinued operations (742) (1,745)
-------- ---------
Cash provided by operating activities 67,461 72,892
Investment activities:
Acquisitions, net of cash acquired -- (200,009)
Proceeds from sale of discontinued operations 5,432 11,592
Capital expenditures, net of retirements (42,915) (21,894)
Retired executive life insurance proceeds 461 --
Other, net 320 (128)
-------- ---------
Cash used for investing activities from
continuing operations (36,702) (210,439)
Cash used for investment activities from
discontinued operations (14) (362)
-------- ---------
Cash used for investment activities (36,716) (210,801)
Financing activities:
Bank borrowings (repayments), net (2,307) 110,076
Purchases of Quanex common stock (17,906) --
Common dividends paid (8,588) (6,870)
Issuance of common stock from option
exercises, including related tax benefits 10,724 9,623
Other, net -- 260
-------- ---------
Cash provided by (used for) financing
activities from continuing operations (18,077) 113,089
Cash used for financing activities from
discontinued operations (56) (105)
-------- ---------
Cash provided by (used for) financing
activities (18,133) 112,984
-------- ---------
Effect of exchange rate changes on cash
and equivalents 13 12
Increase (Decrease) in cash and equivalents 12,625 (24,913)
Beginning of period cash and equivalents 49,681 41,743
-------- ---------
End of period cash and equivalents $ 62,306 $ 16,830
======== =========
CONTACT: Quanex Corporation
Financial:
Jeff Galow
(713) 877-5327
Media:
Valerie Calvert
(713) 877-5305