<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________.
Commission File Number 1-5725
QUANEX CORPORATION
------------------
(Exact name of registrant as specified in its charter)
DELAWARE 38-1872178
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 West Loop South, Suite 1500, Houston, Texas 77027
------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (713) 961-4600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 31, 1996
- --------------------------------------- -------------------------------
Common Stock, par value $0.50 per share 13,517,825
<PAGE>
QUANEX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information:
Item 1: Financial Statements
Consolidated Balance Sheets - January 31, 1996 and
October 31, 1995 .................................. 1
Consolidated Statements of Income - Three Months
Ended January 31, 1996 and 1995 ................... 2
Consolidated Statements of Cash Flow - Three Months
Ended January 31, 1996 and 1995 ................... 3
Notes to Consolidated Financial Statements ............ 4-5
Item 2: Management's Discussion and Analysis of Results of
Operations and Financial Condition .................... 6-10
Part II. Other Information
Item 5: Other Information ..................................... 11
Item 6: Exhibits and Reports on Form 8-K ...................... 11
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
QUANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
January 31, October 31,
1996 1995
---------- ----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents ............................$ 17,565 $ 45,213
Accounts and notes receivable, net .............. 95,773 104,240
Inventories ..................................... 96,823 84,676
Deferred income taxes ........................... 6,829 6,848
Prepaid expenses ................................ 1,757 1,398
---------- ----------
Total current assets .................... 218,747 242,375
Property, plant and equipment ..................... 529,817 525,325
Less accumulated depreciation and amortization ....(275,556) (266,761)
---------- ----------
Property, plant and equipment, net ................ 254,261 258,564
Goodwill, net ..................................... 31,826 32,064
Other assets ...................................... 13,425 13,744
---------- ----------
$518,259 $546,747
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ................................... $ - $ 10,000
Accounts payable ................................ 73,473 91,730
Income taxes payable ............................ 2,965 423
Accrued expenses ................................ 35,484 42,087
Current maturities of long-term debt ............ 135 20,968
---------- ----------
Total current liabilities ............... 112,057 165,208
Long-term debt .................................... 138,060 111,894
Deferred pension credits .......................... 16,236 16,656
Deferred postretirement welfare benefits .......... 53,706 53,185
Deferred income taxes ............................. 27,546 29,278
---------- ----------
Total liabilities ....................... 347,605 376,221
Stockholders' equity:
Common stock, $.50 par value .................... 6,759 6,743
Additional paid-in capital ...................... 93,008 92,406
Retained earnings ............................... 73,923 74,426
Unearned compensation ........................... (304) (317)
Adjustment for minimum pension liability ........ (2,732) (2,732)
---------- ----------
Total stockholders' equity .............. 170,654 170,526
---------- ----------
$518,259 $546,747
========== ==========
</TABLE>
(1)
<PAGE>
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended January 31,
-----------------------------
1996 1995
----------- ----------
(Unaudited)
<S> <C> <C>
Net sales ............................................. $188,772 $199,886
Cost and expenses:
Cost of sales ....................................... 167,486 177,189
Selling, general and administrative expense ......... 11,609 12,286
----------- ----------
Operating income ...................................... 9,677 10,411
Other income (expense):
Interest expense .................................... (2,880) (3,116)
Capitalized interest ................................ 49 1,030
Other, net .......................................... 132 (303)
----------- ----------
Income before income taxes and extraordinary charge ... 6,978 8,022
Income tax expense .................................... (2,931) (3,369)
----------- ----------
Income before extraordinary charge .................... 4,047 4,653
Extraordinary charge - early extinguishment of debt ... (2,522) (2,021)
----------- ----------
Net income ............................................ 1,525 2,632
Preferred dividends ................................... - (1,484)
----------- ----------
Net income attributable to common stockholders ........ $ 1,525 $ 1,148
Earnings per common share:
Earnings before extraordinary charge ............... $ 0.30 $ 0.23
Extraordinary charge ............................... (0.19) (0.15)
----------- ----------
Earnings per common share ....................... $ 0.11 $ 0.08
Weighted average shares outstanding ................... 13,595 13,566
=========== ==========
</TABLE>
(2)
<PAGE>
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended January 31,
------------------------------
1996 1995
--------- ---------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income ................................................... $ 1,525 $ 2,632
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization ........................... 9,347 8,494
Deferred income taxes ................................... (1,732) (532)
Deferred pension costs .................................. (420) (336)
Deferred postretirement welfare benefits ................ 521 676
--------- ---------
9,241 10,934
Changes in assets and liabilities net of effects from
acquisitions and dispositions:
Decrease (increase) in accounts and notes receivable .... 8,467 (14,491)
Decrease (increase) in inventory ........................ (12,147) (11,991)
Increase (decrease) in accounts payable ................. (18,257) 12,336
Increase (decrease) in accrued expenses ................. (6,603) (1,378)
Other, net .............................................. 2,202 10
--------- ---------
Cash provided (used) by operating activities ....... (17,097) (4,580)
Investment activities:
Capital expenditures, net of retirements ..................... (4,502) (9,242)
Decrease in short-term investments ........................... - 54,070
Other, net ................................................... 15 216
--------- ---------
Cash provided (used) by investment activities ...... (4,487) 45,044
Cash provided (used) by operating and --------- ---------
investment activities ........................... (21,584) 40,464
Financing activities:
Notes payable borrowings(repayments) ......................... (10,000) 10,000
Purchase of Senior Notes ..................................... (44,667) (59,500)
Bank borrowings (repayments), net ............................ 50,000 -
Common dividends paid ........................................ (2,028) (1,879)
Preferred dividends paid ..................................... - (1,484)
Other, net ................................................... 631 1,095
--------- ---------
Cash used by financing activities .................. (6,064) (51,768)
Increase (decrease) in cash and equivalents .................... (27,648) (11,304)
Cash and equivalents at beginning of period .................... 45,213 34,041
--------- ---------
Cash and equivalents at end of period .......................... $17,565 $22,737
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ....................................................... $ 5,369 $ 2,475
Income taxes ................................................... $ 273 $ 1,147
</TABLE>
(3)
<PAGE>
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
- ----------------------
The interim consolidated financial statements of Quanex Corporation and
subsidiaries are unaudited, but include all adjustments which the Company
deems necessary for a fair presentation of its financial position and
results of operations. All such adjustments are of a normal recurring nature.
Results of operations for interim periods are not necessarily indicative of
results to be expected for the full year. All significant accounting policies
conform to those previously set forth in the Company's fiscal 1995 Annual Report
on Form 10-K, which is incorporated by reference. Certain amounts for prior
periods have been reclassified in the accompanying consolidated financial
statements to conform to 1996 classifications.
2. Inventories
- --------------
<TABLE>
<CAPTION>
Inventories consist of the following: January 31, October 31,
1996 1995
---------- ----------
(In thousands)
<S> <C> <C>
Inventories valued at lower of cost
(principally LIFO method) or market:
Raw materials .......................... $33,110 $27,655
Finished goods and work in process...... 53,376 48,071
---------- ---------
86,486 75,726
Other...................................... 10,337 8,950
---------- ---------
$96,823 $84,676
========== =========
</TABLE>
With respect to inventories valued using the LIFO method, replacement cost
exceeded the LIFO value by approximately $22 million at January 31, 1996, and
$24 million at October 31, 1995.
3. Long-Term Debt and Financing Arrangements
- --------------------------------------------
On June 30, 1995, the Company exercised its right under the terms of its
Cumulative Convertible Exchangeable Preferred Stock to exchange such stock for
an aggregate of $84,920,000 of its 6.88% Convertible Subordinated Debentures due
June 30, 2007 ("Debentures"). Interest is payable semi-annually on June 30 and
December 31 of each year. The Debentures are subject to mandatory annual sinking
fund payments sufficient to redeem 25% of the Debentures issued on each of June
30, 2005 and June 30, 2006, to retire a total of 50% of the Debentures before
maturity. The Debentures are subordinate to all senior indebtedness of the
Company and are convertible, at the option of the holder, into shares of the
Company's common stock at a conversion price of $31.50 per share.
In December 1995, the Company acquired all of its outstanding 10.77% Senior
Notes for a purchase price equal to 107.5% of the principal amount plus accrued
interest. The acquisition and related expenses resulted in an after-tax
extraordinary charge of approximately $2.5 million ($4.3 million before tax) in
the first quarter of 1996.
At January 31, 1996, the Company had $50.0 million outstanding under its
unsecured $75 million Revolving Credit and Letter of Credit Agreement ("Bank
Agreement"). In December 1995, the Bank Agreement was amended to increase the
amount of the credit facility from $48 million to $75 million. The Bank
Agreement consists of a revolving line of credit ("Revolver"), which expires
March 31, 1999, and up to $20 million for standby letters of credit, limited to
the undrawn amount available under the Revolver. All borrowings under the
Revolver bear interest, at the option of the Company, at either floating prime
or a reserve adjusted Eurodollar rate. Borrowings under the Revolver during the
first quarter of 1996 were used to fund the repurchase of the Company's 10.77%
Senior Notes.
(4)
<PAGE>
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Industry Segment Information
Quanex is principally a specialty metals producer. The Company's operations
primarily consist of four segments: hot rolled steel bars, cold finished steel
bars, steel tubes, and aluminum products.
<TABLE>
<CAPTION>
Cold Corporate
Three Months Ended Hot Rolled Finished Steel Aluminum and Consoli-
January 31, 1996 Steel Bars Steel Bars Tubes Products Other(1) dated
------------------ ---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Units shipped:
To unaffiliated companies 103.2 Tons 39.4 Tons 22.9 Tons 49,874 Lbs.
Intersegment............ 7.6 - - -
------- ------- ------- -------
Total.................... 110.8 Tons 39.4 Tons 22.9 Tons 49,874 Lbs.
======= ======= ======= =======
Net Sales:
To unaffiliated companies $57,108 $37,625 $30,150 $63,889 - $188,772
Intersegment(2)......... 4,443 - - - $(4,443) -
------- ------- ------- ------- ------- -------
Total.................... $61,551 $37,625 $30,150 $63,889 $(4,443) $188,772
======= ======= ======= ======= ======= =======
Operating income (loss).. $ 7,335 $ 2,672 $ 1,955 $ 1,651 $(3,936) $ 9,677
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Cold Corporate
Three Months Ended Hot Rolled Finished Steel Aluminum and Consoli-
January 31, 1995 Steel Bars Steel Bars Tubes Products Other(1) dated
------------------ ---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Units shipped:
To unaffiliated companies 111.9 Tons 48.0 Tons 22.8 Tons 51,173 Lbs.
Intersegment............ 5.2 - - -
------- ------- ------- -------
Total.................... 117.1 Tons 48.0 Tons 22.8 Tons 51,173 Lbs.
======= ======= ======= =======
Net Sales:
To unaffiliated companies $59,564 $43,327 $28,795 $68,200 - $199,886
Intersegment(2)......... 2,916 - - - $(2,916) -
------- ------- ------- ------- ------- -------
Total.................... $62,480 $43,327 $28,795 $68,200 $(2,916) $199,886
======= ======= ======= ======= ======= =======
Operating income (loss).. $ 6,976 $ 2,669 $ 1,879 $ 4,185 $(5,298) $ 10,411
======= ======= ======= ======= ======= =======
</TABLE>
(1) Included in "Corporate and Other" are intersegment eliminations and
corporate expenses.
(2) Intersegment sales are conducted on an arm's-length basis.
(5)
<PAGE>
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
The Company classifies its operations into four business segments: hot
rolled steel bars, cold finished steel bars, steel tubes and aluminum products.
The Company's products are marketed to the industrial machinery and capital
equipment industries, the transportation industry, the energy processing
industry and the home building and remodeling industries.
The Company's steel businesses reflected slight improvements in
operating income for the first quarter of fiscal 1996 as compared to the first
quarter of fiscal 1995. The improvements were due primarily to higher selling
prices and lower variable costs. Volume was lower in both the hot rolled steel
bar business and the cold finished steel bar business. The improved results in
the Company's steel businesses reflect the benefits realized from the Company's
capital improvement programs, which have allowed the Company to increase
capacity, improve quality and manage manufacturing costs. Hot rolled steel bar
volume was down during the first quarter by 5% as compared to the first quarter
of fiscal 1995. Cold finished steel bar volume was also down for the first
quarter by 18% as compared to the first quarter of fiscal 1995.
The lower sales volumes in the Company's steel businesses were
primarily attributable to a slowdown in the markets served by these businesses
from the high levels experienced in the first quarter of fiscal 1995 and reflect
historical seasonal trends in these businesses. Although the Company's first
fiscal quarter is typically the slowest quarter with lower sales volumes than
the prior fourth quarter, the first quarter of fiscal 1995 did not follow this
trend of lower sales volumes due to unusually high demand in the markets served
by these businesses.
The improvements realized in the Company's steel businesses were offset
by lower profits in the Company's aluminum products business. The Company's
aluminum products business was affected by weaker margins between selling prices
and raw material costs. These margins, referred to herein as "price spreads",
are a key financial performance indicator in the aluminum products business.
The Company currently expects that volume levels in the steel
businesses should increase for the balance of fiscal 1996 and is currently
seeing an increase in orders. Continued improved financial results, however,
will be dependent upon, among other things, the strength of the economy,
improvements in the markets which the Company serves and improvement in the
price spreads of aluminum products.
In December 1995, the Company acquired its remaining 10.77% Senior
Notes for a purchase price equal to 107.5% of the principal amount plus accrued
interest. The purchase resulted in an extraordinary loss of $2.5 million in the
first quarter of fiscal 1996.
(6)
<PAGE>
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
The following table sets forth selected operating data for the Company's four
businesses:
Three Months Ended
January 31,
---------------------
1996 1995
---- ----
(In thousands)
Hot Rolled Steel Bars:
Units shipped (Tons)...................... 110.8 117.1
Net Sales................................. $ 61,551 $ 62,480
Operating income.......................... $ 7,335 $ 6,976
Depreciation and amortization............. $ 4,590 $ 3,870
Identifiable assets....................... $168,405 $170,467
Cold Finished Steel Bars:
Units shipped (Tons)...................... 39.4 48.0
Net Sales................................. $ 37,625 $ 43,327
Operating income.......................... $ 2,672 $ 2,669
Depreciation and amortization............. $ 420 $ 346
Identifiable assets....................... $ 55,588 $ 57,143
Steel Tubes:
Units shipped (Tons)...................... 22.9 22.8
Net Sales................................. $ 30,150 $ 28,795
Operating income.......................... $ 1,955 $ 1,879
Depreciation and amortization............. $ 595 $ 525
Identifiable assets....................... $ 43,857 $ 39,452
Aluminum Products:
Units shipped (Pounds).................... 49,874 51,173
Net Sales................................. $ 63,889 $ 68,200
Operating income.......................... $ 1,651 $ 4,185
Depreciation and amortization............. $ 3,483 $ 3,331
Identifiable assets....................... $232,616 $245,021
Consolidated net sales for the three months ended January 31, 1996,
were $188.8 million representing a decrease of $11.1 million or 6% when compared
to the same period last year. The decrease was due principally to lower volume
in the hot rolled and cold finished steel bar businesses and lower volume and
selling prices in the aluminum products business.
Net sales from the Company's hot rolled steel bar business for the
three months ended January 31, 1996, were $61.6 million as compared to $62.5
million for the same 1995 period. This represents a decrease of $929 thousand or
1%. This decrease was attributable to a 5% decrease in volume, principally
automotive related business. This decrease was substantially offset by a 4%
increase in average selling prices.
Net sales from the Company's cold finished steel bar business for the
three months ended January 31, 1996, were $37.6 million as compared to $43.3
million for the same 1995 period. This represents a decrease of $5.7 million or
13%. The decrease reflects a 18% decrease in volume that was partially offset by
a 6% increase in average selling prices. The decrease in volume was largely due
to steel service center customers working off excess inventories.
(7)
<PAGE>
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
Net sales from the Company's steel tube business for the three months
ended January 31, 1996, increased 5% from $28.8 million in 1995 to $30.2 million
for the first fiscal quarter of 1996. The increase was principally attributable
to a 4% improvement in average selling prices. Average prices also improved
partly due to product mix changes and continued strength in the heat
exchanger/condenser markets.
Net sales from the Company's aluminum products business for the three
months ended January 31, 1996, were $63.9 million as compared to $68.2 million
for the same 1995 period. This decrease of $4.3 million, or 6%, was attributable
to a 3% decrease in volume and a 4% decrease in average selling prices. These
decreases reflect a return to a more typical seasonal pattern as the first
quarter of fiscal 1995 benefitted from unusually strong demand.
Consolidated operating income for the three months ended January 31,
1996, was $9.7 million, representing a decrease of $734 thousand, or 7%, when
compared to the same period last year. This decrease was principally due to
lower sales volume in all but the steel tubes business and substantially lower
margins in the Company's aluminum products business.
Operating income from the Company's hot rolled steel bar business for
the three months ended January 31, 1996, was $7.3 million as compared to $7.0
million for the same 1995 period. This increase of approximately 5% was due to
higher selling prices and lower variable costs per ton. The resulting
improvement in margins was mostly offset by lower sales volume.
Operating income from the Company's cold finished steel bar business
for the three months ended January 31, 1996, was $2.7 million and was
essentially unchanged as compared to the same 1995 period. Lower volume was
offset by higher selling prices and improved margins.
Operating income from the Company's steel tube business for the three
months ended January 31, 1996, was up 4% to $2.0 million as compared to $1.9
million for the same 1995 period.
Operating income from the Company's aluminum products business for the
three months ended January 31, 1996, was $1.7 million as compared to $4.2
million for the same 1995 period. The $2.5 million decrease reflected weaker
price spreads as well as lower sales volume.
Selling, general and administrative expenses decreased by $677
thousand, or 6%, for the three months ended January 31, 1996, as compared to the
same period of 1995, primarily due to decreased levels of business activity.
Selling, general and administrative expenses were unchanged as a percentage of
net sales from the same period last year.
Interest expense decreased by $236 thousand, to $2.9 million, for the
three months ended January 31, 1996, as compared to the same period of 1995
primarily as a result of the early extinguishment of a portion of the Company's
senior debt late in the first quarter of fiscal 1995 and the early
extinguishment of the Company's remaining senior debt in the first fiscal
quarter of 1996. The decrease in interest associated with the Company's senior
debt was offset by interest on the Company's $84.9 million of 6.88% Convertible
Subordinated Debentures that were issued in June 1995 in exchange for the
Company's outstanding preferred stock.
(8)
<PAGE>
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
Net income attributable to common shareholders for the three months
ended January 31, 1996, was $1.5 million as compared to $1.1 million for the
same 1995 period, after deducting preferred dividends of $1.5 million from the
1995 period. The improvement was principally attributable to nondeductible
preferred stock dividend requirements on the Company's Cumulative Convertible
Exchangeable Preferred Stock ("Preferred Stock") in 1995 being replaced by tax
deductible interest in 1996 on the Company's 6.88% Convertible Subordinated
Debentures due June 30, 2007 (the "Debentures") issued in exchange therefor, and
investment losses of $293 thousand in 1995 compared to investment income of $332
thousand in 1996. These improvements were partly offset by lower operating
income and capitalized interest.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are cash on hand, cash flow
from operations, and borrowings under a $75 million unsecured revolving credit
facility with a group of banks (the "Bank Agreement"). All borrowings under the
Bank Agreement bear interest, at the option of the Company, at either floating
prime or a reserve adjusted Eurodollar rate. The Bank Agreement contains
customary affirmative and negative covenants and requirements to maintain a
minimum consolidated tangible net worth, as defined. The Bank Agreement limits
the payment of dividends and certain restricted investments. The Bank Agreement
was amended in December 1994 to extend the maturity of the facility to March 31,
1999. In December 1995, the Bank Agreement was amended to increase the amount of
the credit facility to $75 million. Under the Bank Agreement, at January 31,
1996, there were $50.0 million of outstanding borrowings and $2.1 million of
outstanding letters of credit. The amount outstanding under the Bank Agreement
increased during the quarter ended January 31, 1996, in order to fund the
repurchase of the Company's remaining senior debt.
In December 1995, the Company acquired all of its outstanding 10.77%
Senior Notes for a purchase price equal to 107.5% of the principal amount plus
accrued interest. The acquisition and related expenses resulted in an after-tax
extraordinary charge of approximately $2.5 million in the first quarter of 1996.
The acquisition was funded with cash and additional short-term borrowings
On June 30, 1995, the Company exercised its right under the terms of
the Preferred Stock to exchange such stock for $84,920,000 of Debentures.
Interest on the Debentures is payable semi-annually on June 30 and December 31
of each year. The Debentures are subject to mandatory annual sinking fund
payments sufficient to redeem 25% of the Debentures issued on each of June 30,
2005 and June 30, 2006, to retire a total of 50% of the Debentures before
maturity. The Debentures are subordinate to all senior indebtedness of the
Company and are convertible, at the option of the holder, into shares of the
Company's common stock at a conversion price of $31.50 per share.
At January 31, 1996, the Company had commitments of $10 million for the
purchase or construction of capital assets. The Company's $52 million (not
including approximately $9 million in capitalized interest) Phase II MacSteel
Ultra Clean Steel Program, which increased capacity by approximately 50,000
tons, was completed in fiscal 1995. In December 1995, the Company's Board of
Directors approved Phase III of the MacSteel expansion project. Phase III is
designed to improve melting and casting capabilities and is expected to increase
capacity by approximately 70,000 tons. The project also includes significant
upgrades to pollution control systems to ensure compliance with new EPA
standards under the Clean Air Act. Phase III is expected to cost approximately
$60 million and should be completed during fiscal year 1998. The Company plans
to fund this capital investment through cash flow from operations and, if
necessary, additional borrowings.
(9)
<PAGE>
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
In management's opinion, the Company currently has sufficient funds and
adequate financial sources available to meet its anticipated liquidity needs.
Management believes that cash flow from operations, cash balances and available
borrowings should be sufficient for the foreseeable future to finance
anticipated working capital requirements, capital expenditures, debt service
requirements and dividends.
Operating Activities
Cash used by operating activities during the three months ended January
31, 1996, was $17.1 million as compared to $4.6 million during the three months
ended January 31, 1995. The increase in cash used by operating activities was
principally due to increased working capital requirements.
Investment Activities
Net cash used by investment activities during the three months ended
January 31, 1996, was $4.5 million as compared to net cash provided by
investment activities of $45.0 million for the same 1995 period. The decrease in
cash provided by investment activities was principally due to decreases in
short-term investments during the three months ended January 31, 1995. Capital
expenditures for the three months ended January 31, 1996, were $4.5 million as
compared to $9.2 million for the same 1995 period. The Company estimates that
fiscal 1996 capital expenditures will approximate $50 to $60 million.
Financing Activities
Cash used by financing activities for the three months ended January
31, 1996, was $6.1 million, principally consisting of $44.7 million for the
early extinguishment of long-term debt, a $10.0 million reduction in notes
payable and $2.0 million in common dividends. These uses of funds were mostly
offset by long-term bank borrowings of $50.0 million.
(10)
<PAGE>
PART II. OTHER INFORMATION
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K.
- -----------------------------------------
Exhibit 11 Statement re computation of per share earnings.
Exhibit 27 Financial Data Schedule.
No reports on Form 8-K were filed by the Company during the quarter for which
this report is being filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUANEX CORPORATION
/s/ Viren M. Parikh
-------------------
Viren M. Parikh
Controller (Chief Accounting Officer)
Date March 8, 1996
-------------
(11)
EXHIBIT 11
QUANEX CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended January 31,
-------------------------
1996 1995
-------- ---------
(Unaudited)
<S> <C> <C>
Income before extraordinary charge ................... $4,047 $ 4,653
Extraordinary charge - early extinguishment of debt .. (2,522) (2,021)
-------- ---------
Net income ........................................... 1,525 2,632
Preferred dividend requirements ...................... - (1,484)
-------- ---------
Net income attributable to
common stockholders ................................ $1,525 $ 1,148
======== =========
Weighted average shares
outstanding-primary ................................ 13,595 13,566
======== =========
Earnings per common share:
Primary:
Income before extraordinary charge ............... $ 0.30 $ 0.23
Extraordinary charge ............................. (0.19) (0.15)
-------- ---------
Earnings per common share ...................... $ 0.11 $ 0.08
======== =========
Income before extraordinary charge ................... $4,047 $ 4,653
Extraordinary charge - early extinguishment of debt .. (2,522) (2,021)
-------- ---------
Net income ........................................... 1,525 2,632
Interest on 6.88% convertible subordinated
debentures and amortization of related issuance
costs, net of applicable income taxes .............. 893 -
-------- ---------
Adjusted net income .................................. $2,418 $ 2,632
======== =========
Weighted average shares
outstanding-primary ................................ 13,595 13,566
Effect of common stock equivalents
arising from stock options ......................... 18 -
Preferred stock assumed converted
to common stock .................................... - 2,738
Subordinated debentures assumed
converted to common stock .......................... 2,696 -
-------- ---------
Weighted average shares
outstanding-fully diluted .......................... 16,309 16,304
======== =========
Earnings per common share:
Assuming full dilution:
Earnings before extraordinary charge ............. $ 0.30 $ 0.28
Extraordinary charge ............................. (0.15) (0.12)
-------- ---------
Earnings per common share ...................... $ 0.15 $ 0.16
======== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet as of January 31, 1996 and the income statement for the
three months ended January 31, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 17,565
<SECURITIES> 0
<RECEIVABLES> 95,773
<ALLOWANCES> 0
<INVENTORY> 96,823
<CURRENT-ASSETS> 218,747
<PP&E> 529,817
<DEPRECIATION> 275,556
<TOTAL-ASSETS> 518,259
<CURRENT-LIABILITIES> 112,057
<BONDS> 138,060
<COMMON> 6,759
0
0
<OTHER-SE> 163,895
<TOTAL-LIABILITY-AND-EQUITY> 518,259
<SALES> 188,772
<TOTAL-REVENUES> 188,772
<CGS> 167,486
<TOTAL-COSTS> 167,486
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,880
<INCOME-PRETAX> 6,978
<INCOME-TAX> 2,931
<INCOME-CONTINUING> 4,047
<DISCONTINUED> 0
<EXTRAORDINARY> 2,522
<CHANGES> 0
<NET-INCOME> 1,525
<EPS-PRIMARY> 0.110
<EPS-DILUTED> 0.150
</TABLE>
