May 30, 2002
Quanex Announces Fiscal Second Quarter 2002 Results; Company Reports Record Second Quarter Earnings; Diluted Earnings Per Share Up 118% Versus a Year Ago; Company Announces Call for Redemption of Its 6.88% Debentures on May 9, 2002
HOUSTON, May 30 /PRNewswire-FirstCall/ -- Quanex Corporation (NYSE: NX)
today announced fiscal second quarter results for the period ending
April 30, 2002. Net sales for the quarter were $249.5 million, 13% higher
than a year ago. The Company commented that the momentum in order entry
experienced late in its first quarter was sustained throughout the second
quarter. Both the Vehicular Products and Building Products segments turned in
much better operating results for the quarter versus the first quarter 2002
and year ago results due, in part, to this improved demand. Operating income
and net income for the second quarter were $20.0 million and $10.6 million
respectively. EBITDA for the quarter improved 50% from a year ago to
$31.9 million. Diluted earnings per share from continuing operations were
$.70, a record for the quarter and 118% higher than a year ago.
Net sales for the second quarter 2001 were $220.3 million. Operating
income and net income were $9.8 million and $4.3 million respectively.
Diluted earnings per share were $.32.
Highlights
Regarding the Company's results, Raymond A. Jean, chairman and chief
executive officer stated, "The Vehicular Products and Building Products
segments each delivered improved results compared to last quarter and a year
ago, and significantly outperformed their served markets. Higher volumes,
strong operating leverage and cost reduction initiatives all contributed to
Quanex's improved financial performance for the quarter. Demand in the
Company's two primary markets, light vehicles and housing, remain at healthy
levels. Industry estimates for 2002 North American light vehicle builds has
increased from 15.2 million units to 15.8 million units and housing starts are
now expected to remain in the 1.6 million range for the year."
"Financially, Quanex is in a strong and enviable position. Improved
earnings, better working capital management and lower capital expenditures
have all contributed to the Company's ability to pay off $40 million in debt
in the first six months of the year. Moody's recognized this financial
strength by recently upgrading the Company's debt rating; and we expect our
financial position to continue to improve with the conversion of approximately
$58 million of debt to equity in the third quarter combined with continued
improved earnings," said Jean.
Quarterly Financials ($ in millions, except per share data)
2nd qtr 2002 2nd qtr 2001
Net Sales $ 249.5 $ 220.3
EBITDA* 31.9 21.4
Operating Income 20.0 9.8
Net Income 10.6 4.3
EPS: Basic $.77 $.32
EPS: Diluted $.70 $.32
*EBITDA, defined as earnings before interest, taxes, depreciation and
amortization, is calculated by adding back to the income before
extraordinary item the amounts of income tax expense, interest expense
(net of capitalized interest), depreciation and amortization.
Statements that use the words "expect," "should," "will," "might," or
similar words reflecting future expectations or beliefs are forward-looking
statements. The statements found above and below are based on current
expectations. Actual results or events may differ materially from this
release. Factors that could impact future results may include, without
limitation, the effect of both domestic and global economic conditions, the
impact of competitive products and pricing, and the availability and cost of
raw materials. For a more complete discussion of factors that may affect the
Company's future performance, please refer to the Company's most recent 10-K
filing (January 4, 2002) under the Securities Exchange Act of 1934, in
particular the sections titled, "Private Securities Litigation Reform Act"
contained therein.
Segment Commentary
VEHICULAR PRODUCTS ($ in millions)
2nd qtr 2002 2nd qtr 2001
Net Sales $ 117.6 $ 105.1
Operating Income 16.4 10.0
The Vehicular Products segment includes MACSTEEL, Piper Impact and Temroc
Metals. The segment's main driver is North American light vehicle builds.
For fiscal year 2002, the Company expects MACSTEEL's sales and operating
income to represent about 75% and 85% of the segment's results, respectively.
"On-going customer restocking efforts bolstered demand at MACSTEEL during
the quarter, with volumes up 22% compared to last year," continued Jean.
"MAC's traditional automotive customers came into the second quarter with
seasonally low inventories, and these same customers continued to restock
during the quarter in anticipation of another good year for light vehicle
sales. North American light vehicle builds for 2002 are now expected to
slightly exceed the 15.5 million units produced in 2001. A spike in the Class
8 heavy duty truck builds also contributed to higher demand for the division.
Because of increased customer demand through the second quarter, MACSTEEL
operated both plants at 6 days per week," said Jean.
"MACSTEEL's earnings also started to benefit from the additional value-
added services at the Jackson facility, which included more heat treated
products, higher MAC+ turned bar production and bar cutting services. Phase
VI at the Fort Smith facility will be fully operational by the end of the
third quarter, several months ahead of schedule. Management expects to have
the additional capacity from the Fort Smith project sold out by the end of the
fiscal year."
"MAC is currently involved in 7 new, major programs for its larger OEM
customers, with 3 of those programs calling for value-added services. A
relatively new program underway involves supplying one of the "Big Three"
automakers with 100% of its steel camshaft blank needs. The on-going results
of these very positive developments at MACSTEEL will be partially offset by
rising steel scrap prices. Over half of MAC's business is based on one year
fixed contracts, so their ability to recover rising scrap prices is somewhat
limited on a near term basis."
"Piper Impact was profitable on slightly lower sales, with income up 10%
over a year ago. Sales of aluminum air bag components declined from year ago
levels, which was not unexpected, while new programs helped offset that
decline. Piper is on-track to add about $10 million of new business this
year. As further testimony to their ongoing productivity improvements, Piper
Impact earned the "Excellence Award" for quality from the Mississippi Quality
Awards Program. The Mississippi Quality Awards Program is a professional
association providing structure for organizational self-assessment using the
Malcolm Baldridge National Quality Award criteria. The annual awards are
designed to encourage the application of continuous improvement principles and
sharing of best practices."
BUILDING PRODUCTS ($ in millions)
2nd qtr 2002 2nd qtr 2001
Net sales $ 131.9 $ 115.1
Operating income 7.6 3.8
The Building Products segment includes Engineered Products and Nichols
Aluminum. The main drivers of the segment are residential housing starts and
remodeling expenditures. For fiscal year 2002, the Company expects Engineered
Products sales and operating income to represent about 30% and 65% of the
segment's results, respectively.
"Engineered Products achieved record second quarter sales and operating
income. The combination of an abbreviated winter, new products, low customer
inventories, the acquisition of Colonial Craft and solid productivity
improvements at the Homeshield operation all contributed to the group's
excellent performance. It's important to highlight that the group would have
achieved these operating records even without including the results of
Colonial Craft, with 'same store' sales up about 6%. New programs continue to
be a key driver in the success of Engineered Products. This year, the group
has over a dozen major new programs underway with its customers. The
integration of Colonial Craft is progressing well, and the business will be
implementing a major new project with one of its leading window customers
during the second half of the year."
"I'm pleased to report that the strength in orders we experienced at
Nichols Aluminum late in the first quarter held up well through the second
quarter, allowing Nichols to increase volumes by about 20% over last year.
These higher volumes resulted in operating income for the division to be up
more than double last year's level. However, scrap availability and pricing
were an issue for Nichols during the quarter, with April being particularly
difficult. With scrap pricing rising quicker than the group's ability to
raise prices in the short term, spreads for the quarter deteriorated from both
first quarter and year ago levels. The 2 rotary barrel furnaces at the
casting plant helped mitigate some of this spread compression as they allowed
for the use of a broader range of low grade scraps. With industry wide price
increases firming and scrap availability beginning to loosen up, we expect
Nichols to be able to increase spreads modestly throughout the remainder of
the fiscal year," said Jean.
Outlook
Higher customer demand in the Company's two primary markets -- vehicular
products and building products -- drove income from continuing operations to
record levels for the second quarter. Diluted earnings per share for the
first half of fiscal 2002 are up 85% over the first half of fiscal 2001.
First half fiscal 2001 operating results were well below historical levels
as customers during that time were reducing inventories as the economy slowed.
This compares to the rapid restocking activities the Company experienced
during the first half of fiscal 2002.
Second half fiscal 2001 operating results were more typical as customer
demand improved last year. For the second half of fiscal 2002, the Company
expects to operate at strong demand levels and anticipates third quarter
diluted earnings per share to be about 30% higher than year ago results of
$.67. For fiscal 2002, the Company expects diluted earnings per share to be
up some 40% over fiscal 2001 diluted earnings of $2.05. This earnings growth
is primarily driven by new customer programs, increased market share,
operating leverage and lean initiatives.
Other
As of November 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets".
Under SFAS 142, goodwill is no longer amortized, but is reviewed for
impairment annually or more frequently if certain indicators arise. Goodwill
amortization for the prior year ended October 31, 2001 was $2.3 million or
$.10 diluted earnings per share. Also, in accordance with SFAS 142, the
Company completed the transitional impairment test of goodwill during the
second quarter of fiscal 2002, which indicated that no impairment of goodwill
existed.
On May 10, 2002, Notice of Redemption was sent to the registered holders
of the Quanex 6.88% Convertible Subordinated Debentures Due 2007. The Company
set a Redemption Date of June 12, 2002 for all Debentures outstanding.
Holders of the Debentures have the right to convert the Debentures into shares
of common stock at a conversion price of $31.50 per share, which expires at
the close of business on June 5, 2002.
Moody's Investor Services announced on May 10, 2002, that it upgraded its
ratings for Quanex Corporation. The following ratings were upgraded:
$250 million unsecured revolving credit facility to Ba1 from Ba2, the
$59 million of 6.88% convertible subordinated debentures due 2007 to Ba3 from
B1, its senior implied rating to Ba1 from Ba2, and senior unsecured issuer
rating to Ba1 from Ba2. In support of the upgrade Moody's cited the Company's
strong performance in a difficult industry and its prospects for further
improved financial performance.
Dividend Declared
The Board of Directors declared a quarterly dividend of $.16 per share on
the Company's common stock, payable June 28, 2002 to shareholders of record on
June 14, 2002.
Corporate Profile
Quanex is an industry-leading manufacturer of engineered materials and
components for the Vehicular Products and Building Products markets.
Latest 12 Months Financial Information (from continuing operations,
excluding unusual charges and gains)
Sales: $957.9 million; EBITDA: $116.2 million; Operating income:
$69.2 million; Net income: $36.9 million; Basic earnings per share: $2.74;
Quarterly common dividend rate (per share): $.16; Book value per common share:
$22.20; Long-term debt to capitalization: 35.20%; Return on common equity:
12.71%; Actual number of common shares outstanding: 14,185,707; Common stock
price range (52-week hi - low): $38.35 - $20.75.
For further information visit the Company website at www.quanex.com .
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three months ended Six months ended
April 30, April 30,
2002 2001 2002 2001
(Unaudited) (Unaudited)
$ 249,500 $ 220,257 Net sales $ 453,743 $ 420,199
204,371 186,260 Cost of sales 375,413 355,044
13,697 12,968 Selling, general and 25,861 24,696
administrative expense
11,399 11,185 Depreciation and 22,592 22,421
amortization
20,033 9,844 Operating income 29,877 18,038
(4,668) (4,122) Interest expense (8,109) (8,283)
803 432 Capitalized interest 1,533 746
446 444 Other, net 1,844 1,767
16,614 6,598 Income before income 25,145 12,268
taxes and extraordinary
gain
(5,982) (2,309) Income tax expense (9,053) (4,294)
10,632 4,289 Income before 16,092 7,974
extraordinary gain
--- --- Extraordinary gain on --- 372
early extinguishment of
debt, net of income taxes
$ 10,632 $ 4,289 Net income $ 16,092 $ 8,346
Weighted average common
shares outstanding:
13,881 13,389 Basic 13,665 13,407
16,107 13,481 Diluted 15,848 13,523
Earnings per common share:
Basic:
$ 0.77 $ 0.32 Income before $ 1.18 $ 0.59
extraordinary gain
--- --- Extraordinary gain --- 0.03
$ 0.77 $ 0.32 Total basic net $ 1.18 $ 0.62
earnings
Diluted:
$ 0.70 $ 0.32 Income before $ 1.10 $ 0.59
extraordinary gain
--- --- Extraordinary gain --- 0.03
$ 0.70 $ 0.32 Total diluted net $ 1.10 $ 0.62
earnings
$ 0.16 $ 0.16 Common stock dividends $ 0.32 $ 0.32
per share
QUANEX CORPORATION INDUSTRY SEGMENT INFORMATION
(In thousands)
Three months ended Six months ended
April 30, April 30,
2002 2001 2002 2001
(Unaudited) (Unaudited)
Vehicular Products:
$ 117,640 $ 105,124 Net sales $ 220,073 $ 204,200
$ 16,356 $ 10,002 Operating income $ 27,098 $ 18,375
Building Products:
$ 131,860 $ 115,133 Net sales $ 233,670 $ 215,999
$ 7,643 $ 3,802 Operating income $ 10,017 $ 6,121
Corporate and Other:
$ --- $ --- Intercompany sales $ --- $ ---
elimination
$ (3,966) $ (3,960) Corporate charges $ (7,238) $ (6,458)
Total:
$ 249,500 $ 220,257 Net sales $ 453,743 $ 420,199
$ 20,033 $ 9,844 Operating income $ 29,877 $ 18,038
QUANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
April 30, October 31,
2002 2001 2001 2000
(Unaudited) Assets (Audited)
$ 3,898 $ 17,332 Cash and equivalents $ 29,573 $ 22,409
113,290 104,600 Accounts and notes receivable, 109,706 98,465
net
87,394 98,880 Inventories 83,109 101,274
14,636 15,012 Other current assets 14,490 13,798
219,218 235,824 Total current assets 236,878 235,946
360,019 348,308 Property, plant and equipment, 357,635 338,248
net
66,726 60,720 Goodwill, net 59,226 47,539
47,228 25,284 Other assets 43,892 24,126
$ 693,191 $ 670,136 Total assets $ 697,631 $ 645,859
Liabilities and stockholders' equity
$ 87,051 $ 74,771 Accounts payable $ 76,831 $ 77,339
49,735 45,735 Accrued expenses 50,659 50,189
2,686 1,815 Income taxes payable 1,087 3,218
4,035 2,153 Other current liabilities 5,593 ---
434 421 Current portion of long-term debt 420 256
143,941 124,895 Total current liabilities 134,590 131,002
171,037 221,578 Long-term debt 219,608 191,657
6,434 5,882 Deferred pension credits 7,962 7,026
7,811 7,701 Deferred postretirement welfare 7,777 7,634
benefits
31,761 26,096 Deferred income taxes 29,282 27,620
17,277 17,544 Other liabilities 18,435 14,423
378,261 403,696 Total liabilities 417,654 379,362
314,930 266,440 Total stockholders' equity 279,977 266,497
$ 693,191 $ 670,136 Total liabilities and $ 697,631 $ 645,859
stockholders' equity
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
Three months ended Six months ended
April 30, April 30,
2002 2001 2002 2001
(Unaudited) (Unaudited)
Operating activities:
$ 10,632 $ 4,289 Net income $ 16,092 $ 8,346
--- --- Extraordinary gain on --- (372)
early extinguishments
of debt (net of taxes)
11,486 11,313 Depreciation and 22,765 22,675
amortization
1,071 (1,760) Deferred income taxes 2,480 (1,801)
59 (726) Deferred pension and (1,494) (1,077)
postretirement benefits
23,248 13,116 39,843 27,771
(20,414) (10,021) Increase in accounts and (1,715) (2,811)
notes receivable
564 4,745 (Increase) decrease in (1,887) 5,037
inventory
21,411 5,861 Increase (decrease) in 9,556 (4,629)
accounts payable
5,139 3,984 Increase (decrease) in (1,922) (5,835)
accrued expenses
2,634 (363) Other, net (including 1,175 (1,273)
income tax refund)
32,582 17,322 Cash provided by operating 45,050 18,260
activities
Investment activities:
(17,365) --- Acquisition of Colonial (17,365) ---
Craft, net of cash
acquired
--- --- Acquisition of Temroc --- (17,922)
Metals, net of cash
acquired
(8,819) (14,511) Capital expenditures, (20,109) (26,485)
net of retirements
(171) 496 Cash provided (used) by (646) (1,094)
other investment
activities
(26,355) (14,015) Cash used by investment (38,120) (45,501)
activities
Financing activities:
(35,000) (1,000) Bank borrowings (40,000) 32,000
(repayments), net
(7,029) --- Prepayment of note (7,029) ---
payable
--- --- Purchase of subordinated --- (3,942)
debentures
--- (1,626) Purchases of Quanex --- (1,990)
common stock
(2,253) (2,155) Common dividends paid (4,412) (4,322)
18,093 730 Issuance of common 20,453 1,530
stock, net
(1,318) (803) Cash used by other (1,617) (1,112)
financing activities
(27,507) (4,854) Cash provided (used) (32,605) 22,164
by financing activities
(21,280) (1,547) Decrease in cash (25,675) (5,077)
25,178 18,879 Beginning of period 29,573 22,409
cash and equivalents
$ 3,898 $ 17,332 End of period cash and $ 3,898 $ 17,332
equivalents
Financial Contact: Jeff Galow, 713/877-5327
Media Contact: Valerie Calvert, 713/877-5305
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SOURCE Quanex Corporation
Web site: http: //www.quanex.com
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CONTACT: financial, Jeff Galow, +1-713-877-5327, or media, Valerie Calvert, +1-713-877-5305, both of Quanex Corporation
CAPTION: NXLOGO QUANEX CORPORATION LOGO Quanex Corporation logo. (PRNewsFoto)[HD] HOUSTON, TX USA 05/17/1999