<PAGE> 1
UNITED STATES
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 April 30, 1998
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 April 30, 1998
- ---------------------------------------- ------------------------------
Common Stock, par value $0.50 per share 14,171,704
<PAGE> 2
QUANEX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Item 1: Financial Statements
Consolidated Balance Sheets - April 30, 1998 and
October 31, 1997.............................................................. 1
Consolidated Statements of Income - Three and Six Months
Ended April 30, 1998 and 1997 ................................................ 2
Consolidated Statements of Cash Flow - Six months
Ended April 30, 1998 and 1997 ................................................ 3
Notes to Consolidated Financial Statements....................................... 4-8
Item 2: Management's Discussion and Analysis of Results of
Operations and Financial Condition .................................................. 9-15
Part II. Other Information
Item 1: Legal Proceedings.................................................................... 16
Item 4: Submission of Matters to a Vote of Security Holders.................................. 16
Item 6: Exhibits and Reports on Form 8-K..................................................... 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
QUANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents ....................... $ 47,110 $ 26,851
Accounts and notes receivable, net ......... 83,441 80,089
Inventories ................................ 70,194 73,035
Deferred income taxes ...................... 7,625 5,601
Prepaid expenses ........................... 2,322 1,320
--------- ---------
Total current assets ............... 210,692 186,896
Property, plant and equipment ................ 664,640 642,854
Less accumulated depreciation and amortization (283,309) (263,783)
--------- ---------
Property, plant and equipment, net ........... 381,331 379,071
Goodwill, net ................................ 94,787 91,496
Net assets of discontinued operations ........ -- 13,554
Other assets ................................. 16,144 14,688
--------- ---------
$ 702,954 $ 685,705
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................... $ 75,976 $ 71,317
Income taxes payable ....................... 2,609 8,503
Accrued expenses ........................... 47,728 43,208
Current maturities of long-term debt ....... 9,748 11,050
--------- ---------
Total current liabilities .......... 136,061 134,078
Long-term debt ............................... 192,618 201,858
Deferred pension credits ..................... 6,625 6,627
Deferred postretirement welfare benefits ..... 6,921 6,835
Deferred income taxes ........................ 51,284 48,111
Other liabilities ............................ 19,085 19,373
--------- ---------
Total liabilities .................. 412,594 416,882
Stockholders' equity:
Common stock, $.50 par value ............... 7,086 7,025
Additional paid-in capital ................. 108,058 105,146
Retained earnings .......................... 175,661 156,528
Foreign currency translation adjustment .... (147) 422
Adjustment for minimum pension liability ... (298) (298)
--------- ---------
Total stockholders' equity ......... 290,360 268,823
--------- ---------
$ 702,954 $ 685,705
========= =========
</TABLE>
(1)
<PAGE> 4
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------------ -------------------------
1998 1997 1998 1997
--------- ----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales ................................... $ 203,428 $ 185,999 $ 384,410 $ 353,954
Cost and expenses:
Cost of sales ............................. 166,421 151,108 320,703 289,605
Selling, general and administrative expense 11,995 10,799 23,335 21,613
Depreciation and amortization ............. 10,911 9,511 21,478 19,124
--------- --------- --------- ---------
Operating income ............................ 14,101 14,581 18,894 23,612
Other income (expense):
Interest expense .......................... (3,661) (4,917) (7,405) (9,768)
Capitalized interest ...................... 1,219 764 2,696 1,382
Other, net ................................ 351 860 1,352 1,251
--------- --------- --------- ---------
Income from continuing operations
before income taxes .................... 12,010 11,288 15,537 16,477
Income tax expense .......................... (4,254) (3,949) (5,488) (5,766)
--------- --------- --------- ---------
Income from continuing operations ........... 7,756 7,339 10,049 10,711
Income from discontinued operations, net of
income taxes ........................... -- 1,751 -- 2,705
Gain on sale of discontinued operations, net
of income taxes ........................ -- 36,290 13,606 36,290
--------- --------- --------- ---------
Net income .................................. $ 7,756 $ 45,380 $ 23,655 $ 49,706
========= ========= ========= =========
Earnings per common share:
Basic:
Continuing operations ................. $ 0.55 $ 0.53 $ 0.71 $ 0.78
Discontinued operations ............... -- 0.13 -- 0.20
Gain on sale of discontinued operations -- 2.65 0.97 2.65
--------- --------- --------- ---------
Total basic net earnings ........... $.0.55 $ 3.31 $ 1.68 $ 3.63
========= ========= ========= =========
Diluted:
Continuing operations ................. $ 0.51 $ 0.50 $ 0.70 $ 0.77
Discontinued operations ............... -- 0.10 -- 0.16
Gain on sale of discontinued operations -- 2.18 0.95 2.18
--------- --------- --------- ---------
Total diluted net earnings ......... $ 0.51 $ 2.78 $ 1.65 $ 3.11
========= ========= ========= =========
Weighted average shares outstanding:
Basic .................................... 14,154 13,716 14,119 13,680
========= ========= ========= =========
Diluted .................................. 17,110 16,661 14,331 16,635
========= ========= ========= =========
</TABLE>
(2)
<PAGE> 5
QUANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
------------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income ................................................................ $ 23,655 $ 49,706
Adjustments to reconcile net income
to cash provided by operating activities:
Income from discontinued operations .................................. -- (2,705)
Gain on sale of discontinued operations .............................. (13,606) (36,290)
Depreciation and amortization ........................................ 21,761 19,423
Deferred income taxes ................................................ 3,173 (2,210)
Deferred pension costs ............................................... (2) (94)
Deferred postretirement welfare benefits ............................. 86 157
-------- --------
35,067 27,987
Changes in assets and liabilities net of effects from acquisitions and
dispositions:
Increase in accounts and notes receivable ............................ (2,312) (4,109)
Decrease in inventory ................................................ 96 21
Increase in accounts payable ......................................... 5,048 778
Increase (decrease) in accrued expenses .............................. 745 (585)
Other, net ........................................................... (9,143) (4,003)
-------- --------
Cash provided by continuing operations .......................... 29,501 20,089
Cash used in discontinued operations ............................ -- (1,332)
-------- --------
Cash provided by operating activities ........................... 29,501 18,757
Investment activities:
Proceeds from the sale of discontinued operations ......................... 31,434 63,900
Capital expenditures of continuing operations,
net of retirements ................................................... (27,134) (35,482)
Capital expenditures of discontinued operations ........................... -- (2,174)
Other, net ................................................................ (1,868) (6,169)
-------- --------
Cash provided by investment activities .......................... 2,432 20,075
-------- --------
Cash provided by operating and
investment activities ........................................ 31,933 38,832
Financing activities:
Bank borrowings (repayments), net ......................................... (10,144) (40,000)
Common dividends paid ..................................................... (4,522) (4,110)
Issuance of common stock under benefit plans .............................. 2,973 3,281
Other, net ................................................................ -- 831
======== ========
Cash used in financing activities ............................... (11,693) (39,998)
Effect of exchange rate changes on cash and equivalents ..................... 19 --
-------- --------
Increase (decrease) in cash and equivalents ................................. 20,259 (1,166)
Cash and equivalents at beginning of period ................................. 26,851 35,962
======== ========
Cash and equivalents at end of period ....................................... $ 47,110 $ 34,796
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .................................................................... $ 7,173 $ 10,127
Income taxes ................................................................ $ 10,032 $ 11,269
</TABLE>
(3)
<PAGE> 6
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
The interim consolidated financial statements of Quanex Corporation and
subsidiaries (the "Company"), 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 1997 Annual Report on Form 10-K, as amended, which is
incorporated by reference. Certain amounts for prior periods have been
reclassified in the accompanying consolidated financial statements to
conform to 1998 classifications.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
------------ -------------
(In thousands)
<S> <C> <C>
Raw materials .......................... $22,394 $19,432
Finished goods and work in process ..... 41,646 47,739
------- -------
64,040 67,171
Other .................................. 6,154 5,864
------- -------
$70,194 $73,035
======= =======
</TABLE>
The values of inventories in the consolidated balance sheets are based on
the following accounting methods:
<TABLE>
<S> <C> <C>
LIFO ................................... $48,324 $51,517
FIFO ................................... 21,870 21,518
------- -------
$70,194 $73,035
======= =======
</TABLE>
With respect to inventories valued using the LIFO method, replacement
cost exceeded the LIFO value by approximately $19 million at April 30, 1998,
and $16 million at October 31, 1997.
3. Acquisition
On October 29, 1997, the Company, through its Dutch subsidiary, Piper Impact
Europe B.V., ("Piper Europe"), acquired the net assets of Advanced Metal
Forming C.V., a Dutch limited partnership, for approximately $30 million.
Based on preliminary purchase accounting, the goodwill associated with Piper
Europe is approximately NLG 26 million or $13 million as of April 30, 1998.
Piper Europe produces aluminum impact extrusions and precision steel
stampings for the automotive and electronics industries in Europe and North
America. Piper Europe employs approximately 260 people, and its
manufacturing facilities are located near Zwolle in The Netherlands.
(4)
<PAGE> 7
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Long-Term Debt and Financing Arrangements
The Company has an unsecured $250 million Revolving Credit and Term Loan
Agreement ("Bank Agreement"). The Bank Agreement consists of a revolving
line of credit ("Revolver"). In July 1997, the term loan provisions of the
Bank Agreement expired. The Bank Agreement expires July 23, 2002, and
provides for up to $25 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 (a) the
Prime Rate or the Federal Funds Rate plus one percent, whichever is higher,
or (b) a Eurodollar-based Rate. At April 30, 1998, the Company had $90
million outstanding under the Revolver.
On October 28, 1997, Piper Europe executed a stand-alone secured credit
facility ("Credit Facility") providing up to 50 million Dutch Guilders
("NLG"). At April 30, 1998, 1 NLG was equal to 0.4949 U.S. dollars. The
Credit Facility consists of a Roll-Over Term Loan, a Medium Term Loan and an
Overdraft Facility. The Roll-Over Term Loan provides NLG 15 million for loan
periods of 1, 2, 3, 6, or 12 months with repayment of outstanding borrowings
on October 27, 2002. Interest is payable on the repayment date at the
Amsterdam Interbank Offering Rate (AIBOR) plus 90 basis points. In the case
of a loan period of twelve months, interest is payable six months after the
beginning of the loan period and on the repayment date. The Medium Term Loan
provides NLG 15 million at 6.375% interest payable quarterly in arrears from
March 1, 1998, with quarterly repayments of principal in equal amounts of
NLG 500 thousand commencing January 1, 1999 through April 1, 2006. The
Overdraft Facility provides an aggregate amount of NLG 20 million to cover
overdrafts or up to NLG 15 million of loans for a period of one year,
subject to annual renewal. Overdrafts bear interest at the Bank's published
rate for overdraft facilities plus 1% per annum. Loans under the Overdraft
Facility bear interest at AIBOR plus 45 to 55 basis points. The terms of
Overdraft Facility loans are selected by Piper Europe to be a period of 1,
2, 3, 6, or 12 months. Interest on overdrafts is paid quarterly in arrears.
Interest on loans under the Overdraft Facility is payable on the repayment
date, however, in the case of a loan period of twelve months, interest is
payable six months after the beginning of the loan period and on the
repayment date. At April 30, 1998, Piper Europe had NLG 35.7 million
outstanding under the Credit Facility.
(5)
<PAGE> 8
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Discontinued Operations
In April 1997, the Company completed the sale of its LaSalle Steel Company
("LaSalle") subsidiary. The Company recorded an after tax gain on the sale
of $36.3 million in the second quarter of fiscal 1997. In the first quarter
of fiscal 1998, an additional after tax gain of $833 thousand was recorded
as a result of post-closing adjustments. LaSalle's results of operations
have been reclassified as discontinued operations in the prior period and
prior periods have been restated. For business segment reporting purposes,
LaSalle's data was previously classified as "Cold Finished Steel Bars".
In December 1997, the Company completed the sale of its tubing
operations, comprised of Michigan Seamless Tube, Gulf States Tube and the
Tube Group Administrative Office ("Tubing Operations"). The sale was
effective November 1, 1997. The Company recorded a net gain on the sale of
$12.8 million in the first quarter of fiscal 1998. Included in the gain is
an accrual for the Company's best estimate of potential environmental
clean-up costs at one of the discontinued operating facilities. Results of
these operations have been reclassified as discontinued operations in the
prior period and prior periods have been restated. For business segment
reporting purposes, Tubing Operations were previously classified as "Steel
Tubes".
Net sales and income from discontinued operations are as follows:
<TABLE>
<CAPTION>
April 30, 1997
Three Months Six Months
Ended Ended
-------------------------------
(In Thousands)
<S> <C> <C>
Net sales................................. $ 59,544 $ 124,771
======== =========
Income before income taxes................ 2,696 4,163
Income tax expense........................ (945) (1,458)
-------- ---------
Income from discontinued operations.... $ 1,751 $ 2,705
======== =========
</TABLE>
<TABLE>
<CAPTION>
October 31,
1997
------------------
(In Thousands)
<S> <C>
Net Assets of Discontinued Operations
Current assets............................. $ 24,388
Property, plant and equipment, net......... 17,357
Other assets............................... 2,784
Current liabilities........................ (11,241)
Deferred pension credits................... (4,373)
Deferred postretirement welfare benefits... (22,406)
Deferred income taxes...................... 6,718
Adjustment for minimum pension liability... 327
--------
Net assets of discontinued operations... $ 13,554
========
</TABLE>
(6)
<PAGE> 9
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Earnings Per Share
The following tables present information necessary to calculate basic and
diluted earnings per share per FAS 128 for the periods indicated (in
thousands except per share amounts):
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
April 30, 1998 April 30, 1997
-----------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income from Cont. Oper. $ 7,756 14,154 $ 0.55 $ 7,339 13,716 $ 0.53
Income from Discont. Oper. -- -- 1,751 0.13
Gain on sale of Discont. Oper. -- -- 36,290 2.65
--------- ------ --------- -------
Total basic net earnings $ 7,756 $ 0.55 $ 45,380 $ 3.31
========= ====== ========= =======
EFFECT OF DILUTIVE SECURITIES
Effect of common stock Equiv.
arising from stock options -- 260 -- 249
Effect of conversion of
subordinated debentures $ 999 2,696 $ 999 2,696
DILUTED EPS
Income from Cont. Oper. $ 8,755 17,110 $0.51 $ 8,338 16,661 $ 0.50
Income from Discont. Oper. -- -- 1,751 0.10
Gain on sale of Discont. Oper. -- -- 36,290 2.18
--------- ------ --------- -------
Total diluted net earnings $ 8,755 $0.51 $ 46,379 $ 2.78
========= ====== ========= =======
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended For the Six Months Ended
April 30, 1998 April 30, 1997
-----------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income from Cont. Oper. $ 10,049 14,119 $0.71 $ 10,711 13,680 $ 0.78
Income from Discont. Oper. -- -- 2,705 0.20
Gain on sale of Discont. Oper. 13,606 0.97 36,290 2.65
--------- ------ --------- -------
Total basic net earnings $ 23,655 $1.68 $ 49,706 $ 3.63
========= ====== ========= =======
EFFECT OF DILUTIVE SECURITIES
Effect of common stock Equiv.
arising from stock options -- 212 -- 259
Effect of conversion of
subordinated debentures(1) -- -- $ 1,998 2,696
DILUTED EPS
Income from Cont. Oper. $ 10,049 14,331 $0.70 $ 12,709 16,635 $ 0.77
Income from Discont. Oper. -- -- 2,705 0.16
Gain on sale of Discont. Oper. 13,606 0.95 36,290 2.18
--------- ------ --------- -------
Total diluted net earnings $ 23,655 $1.65 $ 51,704 $ 3.11
========= ====== ========= =======
</TABLE>
- ----------------
(1) Conversion of the Company's 6.88% convertible subordinated debentures
into common stock was not considered in the computation of diluted EPS for
the six months ended April 30, 1998 because it was antidilutive.
(7)
<PAGE> 10
QUANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Industry Segment Information
Quanex is principally a specialized metals and metal products producer. The
Company's continuing operations primarily consists of two segments:
engineered steel bars and aluminum products.
<TABLE>
<CAPTION>
Corporate
Three Months Ended Engineered Aluminum and
April 30, 1998 Steel Bars Products Other(1) Consolidated
- -----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Net Sales:
To unaffiliated companies......... $ 88,231 $ 115,197 $ -- $ 203,428
Intersegment(2).................... 722 -- (722) --
--------- --------- --------- ---------
Total ............................. $ 88,953 $ 115,197 $ (722) $ 203,428
========= ========= ========= =========
Operating income (loss) ........... $ 16,363 $ 779 $ (3,041) $ 14,101
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Corporate
Three Months Ended Engineered Aluminum and
April 30, 1997 Steel Bars Products Other(1) Consolidated
- -----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Net Sales:
To unaffiliated companies ........ $ 78,031 $ 107,968 $ -- $185,999
Intersegment(2)................... 4,067 -- (4,067)(3) --
-------- --------- -------- --------
Total ............................. $ 82,098 $ 107,968 $ (4,067) $185,999
======== ========= ======== ========
Operating income (loss) ........... $ 13,200 $ 3,839 $ (2,458) $ 14,581
======== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Corporate
Six Months Ended Engineered Aluminum and
April 30, 1998 Steel Bars Products Other(1) Consolidated
- -----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Net Sales:
To unaffiliated companies ........ $ 167,428 $ 216,982 $ -- $ 384,410
Intersegment(2)................... 1,616 -- (1,616) --
--------- --------- --------- ---------
Total ............................. $ 169,044 $ 216,982 $ (1,616) $ 384,410
========= ========= ========= =========
Operating income (loss) ........... $ 28,122 $ (1,862) $ (7,366) $ 18,894
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Corporate
Six Months Ended Engineered Aluminum and
April 30, 1997 Steel Bars Products Other(1) Consolidated
- -----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Net Sales:
To unaffiliated companies ........ $ 146,226 $ 207,728 $ -- $ 353,954
Intersegment(2)................... 8,359 -- (8,359)(3) --
--------- --------- --------- ---------
Total ............................. $ 154,585 $ 207,728 $ (8,359) $ 353,954
========= ========= ========= =========
Operating income (loss) ........... $ 22,840 $ 7,053 $ (6,281) $ 23,612
========= ========= ========= =========
</TABLE>
(1) Included in "Corporate and Other" are intersegment eliminations and
corporate expenses.
(2) Intersegment sales are conducted on an arm's-length basis.
(3) Includes intersegment sales of $3.6 and $7.2 million to discontinued
operations for the three and six month periods ended April 30, 1997.
(8)
<PAGE> 11
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
The Company classifies its operations into two business segments: engineered
steel bars and aluminum products. The Company's products are marketed to the
transportation, capital equipment, homebuilding and remodeling, defense and
other commercial industries.
In April 1997, the Company completed the sale of its LaSalle Steel Company
("LaSalle") subsidiary. LaSalle's results of operations have been classified as
discontinued operations and prior periods have been restated. For business
segment reporting purposes, LaSalle's data was previously classified as "Cold
Finished Steel Bars".
In October 1997, the Company, through its Dutch subsidiary, Piper Europe,
purchased the net assets of Advanced Metal Forming C.V., a Dutch limited
partnership, for approximately $30 million. The Company's balance sheet as of
October 31, 1997 includes Piper Europe.
In December 1997, the Company completed the sale of its tubing operations
("Tubing Operations"), comprised of Michigan Seamless Tube, Gulf States Tube and
the Tube Group Administrative Office. The sale was effective November 1, 1997.
Results of these operations have been reclassified as discontinued operations in
the prior period and prior periods have been restated. For business segment
reporting purposes, Tubing Operations were previously classified as "Steel
Tubes". Two small divisions, Heat Treat Division and Nitro Steel Division, which
were previously included with this segment, were retained by the Company and are
now included in the engineered steel bars segment.
The Company's engineered steel bars business reflected record quarterly and
six month earnings and sales for the period ended April 30, 1998. These results
were due primarily to higher sales volume, but also reflect the benefits
realized from the Company's capital expenditure programs, which have allowed the
Company to increase production, enhance quality and manage manufacturing costs.
The Company's aluminum products business experienced an operating loss for
the first six months of 1998 despite increased net sales which were primarily
due to the acquisition of Piper Europe. The Nichols Aluminum division was
affected by seasonal and weather-related weakness in the homebuilding business
and compressed margins due to extreme tightness in the market for premium-grade
raw materials. These margins, referred to herein as "price spreads", are a key
financial performance indicator in the aluminum sheet business. Piper Impact
continued to experience high start-up costs at its new plant during the first
six months of 1998, but showed improvement and returned to profitability in the
last two months of the period.
The Company currently expects that overall business levels for the
remainder of fiscal 1998 should be similar to those experienced during 1997.
Start-up costs at Piper Impact's new plant are expected to decrease with the use
of key new equipment. Aluminum products pricing pressures and weaker margins, if
they continue, could impact operating results for the remainder of fiscal 1998.
The sale of LaSalle in April 1997 and the Tubing Operations in December 1997
will affect income for the remainder of fiscal 1998 by the difference between
the amount LaSalle and the Tubing Operations would have earned and the reduction
in interest expense as a result of the repayment of debt with the net proceeds
from the sale. Domestic and global market factors will impact the Company and
any slowdown in the U.S. economy could affect demand and pricing for many of the
Company's products. Improved financial results will be dependent upon, among
other things, whether the continued strength of the economy can be sustained,
improvements in the markets which the Company serves and improvement in the
price spreads of aluminum products.
(9)
<PAGE> 12
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 two
business segments:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------------------ -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Engineered Steel Bars:
Net Sales..................... $ 88,953 $ 82,098 $169,044 $154,585
Operating Income.............. $ 16,363 $ 13,200 $ 28,122 $ 22,840
Depreciation and amortization. $ 3,385 $ 3,520 $ 6,762 $ 7,040
Identifiable assets........... $205,472 $179,801 $205,472 $179,801
Aluminum Products:
Net Sales..................... $115,197 $107,968 $216,982 $207,728
Operating Income.............. $ 779 $ 3,839 $( 1,862) $ 7,053
Depreciation and amortization. $ 7,492 $ 5,968 $ 14,648 $ 12,038
Identifiable assets........... $442,706 $417,078 $442,706 $417,078
</TABLE>
Consolidated net sales for the three and six months ended April 30, 1998,
were $203.4 and $384.4 million, respectively, representing an increase of $17.4
million, or 9%, and $30.5 million or 9%, when compared to consolidated net sales
for the same periods last year. The improvement reflects improved sales volume
in the Company's engineered steel bar business, sales by Piper Europe and $3.6
and $7.2 million of sales to discontinued operations reflected as inter-segment
sales in the three and six months ended April 30, 1997.
Net sales from the Company's engineered steel bar business for the three
and six months ended April 30, 1998, were $89.0 and $169.0 million representing
an increase of $6.9 million, or 8%, and $14.5 million, or 9%, when compared to
the same period last year. The improvements were primarily due to sales volume
increases as compared to the same prior year periods. The increase in net sales
at the engineered steel bar business is principally due to the continued
strength in the durable goods market, particularly transportation and capital
goods, and increased production capacity resulting from capital expansion
programs.
Net sales from the Company's aluminum products business for the three and
six months ended April 30, 1998, were $115.2 and $217.0 million representing an
increase of $7.2 million, or 7%, and $9.3 million, or 4%, when compared to the
same periods last year. Included in the net sales for the three and six month
ended April 30, 1998 are $7.9 and $13.8 million of sales by Piper Europe.
Consolidated operating income for the three and six months ended April 30,
1998 was $14.1 and $18.9 million representing a decrease of $480 thousand, or
3%, and $4.7 million, or 20%, when compared to the same periods last year. The
decrease was due to lower operating earnings from the aluminum products business
partly offset by improved earnings in the engineered steel bar business.
Operating income from the Company's engineered steel bar business for the
three and six months ended April 30, 1998, was $16.4 and $28.1 million,
respectively, representing an increase of $3.2 million, or 24% and $5.3 million,
or 23%, when compared to the same periods last year. This improvement was
attributable to higher sales due to increased capacity and strong demand.
(10)
<PAGE> 13
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
Operating income from the Company's aluminum products business for the three and
six months ended April 30, 1998, was $779 thousand and a loss of $1.9 million,
respectively, compared to operating income of $3.8 and $7.1 million for the same
periods last year. The earnings decline in this segment is a result of weakened
margins at Nichols Aluminum due to extreme tightness in the market for
premium-grade raw materials as well as continued start-up costs, including
higher labor and training expenses and the temporary use of less efficient
production processes, at Piper Impact's new plant in New Albany, Mississippi.
Selling, general and administrative expenses increased by $1.2 million, or
11%, and $1.7 million, or 8% for the three and six months ended April 30, 1998,
as compared to the same periods of last year. These increases are principally
due to the inclusion of Piper Europe and the higher sales levels of the Company.
Depreciation and amortization increased by $1.4 million, or 15%, and $2.4
million, or 12% for the three and six months ended April 30, 1998 as compared to
the same periods of last year. The increase is principally due to increased
depreciation at Piper Impact and the inclusion of Piper Europe.
Interest expense decreased by $1.3 and $2.4 million for the three and six
months ended April 30, 1998, as compared to the same periods of 1997 as a result
of reducing bank borrowings with proceeds received from the sale of LaSalle and
the Tubing Operations.
Capitalized interest increased by $455 thousand and $1.3 million for the
three and six months ended April 30, 1998, as compared to the same periods of
1997 primarily due to Phase III and IV of the MACSTEEL expansion project.
"Other, net" decreased $509 thousand for the three months ended April 30,
1998, as compared to the same period of 1997 primarily as a result of a life
insurance gain in 1997. "Other, net" remained relatively constant for the six
months ended April 30, 1998, as compared to the same period of 1997 as increased
investment income in 1998 offset the 1997 life insurance gain mentioned above.
Income from continuing operations increased $417 thousand, or 6%, for the
three months ended April 30, 1998 compared to the same period of 1997. This
increase is due primarily to the reduced interest expense, partially offset by
the decline in operating income for the period. Income from continuing
operations decreased $662 thousand, or 6% for the six months ended April 30,
1998, as compared to the same period of 1997. The decrease is primarily due to
decreased operating income, partially offset by decreased interest expense and
increased capitalized interest.
Included in net income for the six months ended April 30, 1998 is $13.6
million of gain on sale of discontinued operations, net of income taxes.
Included in net income for the three and six months ended April 30, 1997 is
$36.3 million gain on the sale of discontinued operations, net of taxes, and
$1.8 and $2.7 million, respectively, of income from discontinued operations, net
of taxes.
(11)
<PAGE> 14
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are cash on hand, cash flow from
operations, and borrowings under an unsecured $250 million Revolving Credit and
Term Loan Agreement ("Bank Agreement"). The Bank Agreement consists of a
revolving line of credit ("Revolver"). In July 1997, the term loan provisions of
the Bank Agreement expired. The maturity date of the Bank Agreement, however,
was extended by one year to July 23, 2002. The Bank Agreement also provides for
up to $25 million for 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 (i) the Prime Rate or the Federal Funds Rate
plus one percent, whichever is higher, or (ii) a Eurodollar-based Rate. In the
fourth quarter of fiscal 1996, the Company entered into interest rate swap
agreements, which effectively converted $100 million of its variable rate debt
under the Bank Agreement to fixed rate. Under these agreements, payments are
made each quarter based on a fixed rate ($50 million at 7.025%, and $50 million
at 6.755%) and payments are received each quarter on a LIBOR based variable rate
(5.6875% at April 30, 1998). Differentials to be paid or received under the
agreements are recognized as interest expense. Payments under the swap
agreements are tied to the interest periods for the borrowings under the Bank
Agreement. The swap agreements mature July 29, 2003. 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. Under the Bank
Agreement, at April 30, 1998, there was $90 million of outstanding Revolver
borrowings.
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.
On April 18, 1997, the Company completed the sale of LaSalle for
approximately $65 million in cash. The proceeds were used to pay down the
Company's Revolver.
(12)
<PAGE> 15
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
On October 29, 1997, the Company acquired, through its Dutch subsidiary, Piper
Europe, substantially all of the assets of Advance Metal Forming C.V., a Dutch
limited partnership, for approximately $30 million. The acquisition was financed
with existing cash and bank borrowings of 35 million Dutch Guilders. Piper
Europe's primary source of funds is a stand-alone secured credit facility
("Credit Facility") providing up to 50 million Dutch Guilders ("NLG"). At April
30, 1998, 1 NLG was equal to 0.4949 dollars. The Credit Facility consists of a
Roll-Over Term Loan, a Medium Term Loan and an Overdraft Facility. The Roll-Over
Term Loan provides NLG 15 million for loan periods of 1, 2, 3, 6, or 12 months
with repayment of outstanding borrowings on October 27, 2002. Interest is
payable on the repayment date at the Amsterdam Interbank Offering Rate (AIBOR)
plus 90 basis points. In the case of a loan period of twelve months, interest is
payable six months after the beginning of the loan period and on the repayment
date. The Medium Term Loan provides NLG 15 million at 6.375% interest payable
quarterly in arrears from March 1, 1998, with quarterly repayments of principal
in equal amounts of NLG 500 thousand commencing January 1, 1999 through April 1,
2006. The Overdraft Facility provides an aggregate amount of NLG 20 million to
cover overdrafts or up to NLG 15 million of loans for a period of one year,
subject to annual renewal. Overdrafts bear interest at the Bank's published rate
for overdraft facilities plus 1% per annum. Loans under the Overdraft Facility
bear interest at AIBOR plus 45 to 55 basis points. The terms of Overdraft
Facility loans are selected by Piper Europe to be a period of 1, 2, 3, 6, or 12
months. Interest on overdrafts is paid quarterly in arrears. At April 30, 1998,
Piper Europe had NLG 35.7 million outstanding under the Credit Facility.
On December 3, 1997, the Company completed the sale of its Tubing
Operations for approximately $30 million in cash. The proceeds were used to
improve the Company's debt structure and for investment in the Company's
value-added businesses.
On December 22, 1997, the Company renewed its letter of intent to purchase
Decatur Aluminum Corp., a Decatur, Alabama based aluminum sheet manufacturer.
The acquisition of Decatur Aluminum is subject to the results of on-going
negotiations of a definitive agreement.
At April 30, 1998, the Company had commitments of $30 million for the
purchase or construction of capital assets, primarily relating to the Company's
continued expansions and improvements programs at MacSteel, Piper and Nichols
Aluminum. The Company plans to fund these capital expenditures through cash flow
from operations and, if necessary, additional borrowings.
The Company believes that it has sufficient funds and adequate financial
sources available to meet its anticipated liquidity needs. The Company also
believes that cash flow from operations, cash balances and available borrowings
will be sufficient for the foreseeable future to finance anticipated working
capital requirements, capital expenditures, debt service requirements and
environmental expenditures.
Operating Activities
Cash provided by operating activities during the six months ended April 30, 1998
was $29.5 million as compared to $18.8 million provided during the six months
ended April 30, 1997. The increase was principally due to lower working capital
requirements and higher depreciation expense from continuing operations, and the
elimination of cash used by discontinued operations.
(13)
<PAGE> 16
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
Investment Activities
Net cash provided by investment activities during the six months ended April 30,
1998, was $2.4 million as compared to $20.1 million for the same 1997 period.
The decrease in cash provided by investment activities was principally due to
decreased proceeds from the sale of discontinued operations, but partially
offset by decreased capital expenditures on continuing operations and the
elimination of capital expenditures on discontinued operations. The Company
estimates that fiscal 1998 capital expenditures will be approximately $70 to $80
million.
Financing Activities
Cash used in financing activities for the six months ended April 30, 1998, was
$11.7 million, as compared to $40.0 million for the same 1997 period. The cash
used in both periods primarily consists of repayments of bank borrowings.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
which is effective for the Company's year ending October 31, 1999. SFAS No. 130
establishes standards for the reporting and displaying of comprehensive income
and its components. The Company will be analyzing SFAS No. 130 during 1998 to
determine what, if any, additional disclosures will be required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for the Company's
year ended October 31, 1999. This statement establishes standards for the
reporting of information about operating segments. The Company will be analyzing
SFAS No. 131 during 1998 to determine what, if any, additional disclosures will
be required.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits", which is effective for the
Company's year ended October 31, 1999. This statement defines new disclosure
requirements for pension and other postretirement benefits in an effort to
facilitate financial analysis by adding useful information and deleting
disclosures that the FASB considers no longer useful. The Company will be
analyzing SFAS No. 132 during 1998 to determine what additional disclosures will
be required.
(14)
<PAGE> 17
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition (Continued)
PRIVATE SECURITIES LITIGATION REFORM ACT
Certain forward looking information contained herein is being provided in
accordance with the provisions of the Private Securities Litigation Reform Act.
Such information is subject to certain assumptions and beliefs based on current
information known to the Company and is subject to factors that could result in
actual results differing materially from those anticipated in the forward
looking statements contained in this report. Such factors include domestic and
international economic activity, prevailing prices of steel and aluminum scrap
and other raw material costs, interest rates, construction delays, market
conditions for the Company's customers, any material changes in purchases by the
principal customers of AMSCO and Piper Impact, environmental regulations and
changes in estimates of costs for known environmental remediation projects and
situations, world-wide political stability and economic growth, the Company's
successful implementation of its internal operating plans, performance issues
with key customers, suppliers and subcontractors, and regulatory changes and
legal proceedings. Accordingly, there can be no assurance that the
forward-looking statements contained herein will occur or that objectives will
be achieved.
YEAR 2000
In response to the Year 2000 issue, the Company initiated a project in early
1997 to identify, evaluate and implement changes to its existing computerized
business systems. The Company is addressing the issue through a combination of
modifications to existing programs and conversions to Year 2000 compliant
software. In addition, the Company will be communicating with its major
customers, suppliers, and other service providers to determine whether they are
actively involved in projects to ensure that their products and business systems
will be Year 2000 compliant. Although the Company currently anticipates that it
will not incur material expenditures or disruption of operations relating to
year 2000 processing issues, if the Company or its key customers or key vendors
are unable to resolve, in a timely manner, any significant processing issues
that may arise, such inability could have an adverse effect on the Company's
business, financial condition and results of operations. Accordingly, the
Company plans to devote the necessary resources to resolve all significant year
2000 issues in a timely manner.
ENVIRONMENTAL MATTERS
The Company's former Tube Group Division once owned and operated a plant in
Redford Township, Michigan. The Michigan Department of Environmental Quality has
alleged that the Company is liable for contamination there and asked the Company
to undertake clean-up actions in response thereto. Quanex contests its alleged
responsibility for the contamination, but conditionally has offered to enter
into negotiations with the State and other potentially responsible parties
concerning participation in clean-up work.
(15)
<PAGE> 18
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings.
Other than the proceedings described under Part I Item 2, "Environmental
Matters", there are no material legal proceedings to which Quanex, its
subsidiaries, or their property is subject.
Item 4 - Submission of Matters to a Vote of Security Holders.
On February 26, 1998, the Company held its regular Annual Meeting of
Stockholders (the "Annual Meeting").
At the Annual Meeting, Carl E. Pfeiffer, Vincent R. Scorsone, and Donald G.
Barger, Jr. were elected as directors for a three year term. The following sets
forth the number of shares that voted for and for which votes were withheld of
each of such persons:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Carl E. Pfeiffer 11,862,722 89,505
Vincent R. Scorsone 11,879,292 72,935
Donald G. Barger, Jr. 11,879,792 72,435
</TABLE>
In addition, at the Annual Meeting, the stockholders of the Company ratified the
appointment of Deloitte & Touche LLP as the Company's independent auditors and
approved the Company's 1997 Non-Employee Director Stock Option Plan.
The ratification of Deloitte & Touche LLP as the Company's independent auditors
was approved with 11,889,806 votes cast for approval, 28,117 votes cast against,
and 34,290 abstentions. The Company's 1997 Non-Employee Director Stock Option
Plan was approved with 10,742,410 votes cast for approval, 1,090,795 votes cast
against, and 118,999 abstentions.
Item 6 - Exhibits and Reports on Form 8-K.
Exhibit 11 - Statement re computation of earnings per share.
Exhibit 27.1 - Financial Data Schedule - April 30, 1998.
Exhibit 27.2 - Amended Financial Data Schedule - January 31, 1998.
Exhibit 27.3 - Restated Financial Data Schedule - Fiscal Years Ended
1997, 1996, and 1995.
Exhibit 27.4 - Restated Financial Data Schedule - Fiscal Quarters
Ended 1997.
Exhibit 27.5 - Restated Financial Data Schedule - Fiscal Quarters
Ended 1996.
A Report on Form 8-K was filed by the Company on December 17, 1997,
regarding the completion of the sale of its Tubing Operations and
containing certain pro forma financial statements of the Company and notes
thereto regarding the sale.
(16)
<PAGE> 19
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
---------------------------------------
Viren M. Parikh
Controller (Chief Accounting Officer)
Date June 9, 1998
-------------
(17)
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
Exhibit 11 - Statement re computation of earnings per share.
Exhibit 27.1 - Financial Data Schedule - April 30, 1998.
Exhibit 27.2 - Amended Financial Data Schedule - January 31, 1998.
Exhibit 27.3 - Restated Financial Data Schedule - Fiscal Years Ended
1997, 1996, and 1995.
Exhibit 27.4 - Restated Financial Data Schedule - Fiscal Quarters
Ended 1997.
Exhibit 27.5 - Restated Financial Data Schedule - Fiscal Quarters
Ended 1996.
</TABLE>
<PAGE> 1
QUANEX CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------ ------------------
1998 1997 1998 1997
------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Income from continuing operations ................... $ 7,756 $ 7,339 $10,049 $10,711
Income from discontinued operations, net of
income taxes ..................................... -- 1,751 -- 2,705
Gain on sale of discontinued operations, net
of income taxes ................................ -- 36,290 13,606 36,290
------- ------- ------- -------
Income before extraordinary charge .................. 7,756 45,380 23,655 49,706
Extraordinary charge - early
extinguishment of debt ........................... -- -- -- --
------- ------- ------- -------
Net income .......................................... $ 7,756 $45,380 $23,655 $49,706
======= ======= ======= =======
Weighted average shares
outstanding-basic ................................. 14,154 13,716 14,119 13,680
======= ======= ======= =======
Earnings per common share:
Basic:
Income from continuing operations ............... $ 0.55 $ 0.53 $ 0.71 $ 0.78
Income from discontinued operations ............. -- 0.13 -- 0.20
Gain on sale of discontinued operations ......... -- 2.65 0.97 2.65
------- ------- ------- -------
Earnings per common share ..................... $ 0.55 $ 3.31 $ 1.68 $ 3.63
======= ======= ======= =======
Income from continuing operations ................... $ 7,756 $ 7,339 $10,049 $10,711
Income from discontinued operations, net of
income taxes ..................................... -- 1,751 -- 2,705
Gain on sale of discontinued operations, net
of income taxes ................................ -- 36,290 13,606 36,290
------- ------- ------- -------
Income before extraordinary charge .................. 7,756 45,380 23,655 49,706
Extraordinary charge - early
extinguishment of debt ........................... -- -- -- --
------- ------- ------- -------
Net income .......................................... $ 7,756 $45,380 $23,655 $49,706
Interest on 6.88% convertible subordinated
debentures and amortization of related issuance
costs, net of applicable income taxes ............. 999 999 1,998(1) 1,998
------- ------- ------- -------
Adjusted net income ................................. $ 8,755 $46,379 $23,655 $51,704
======= ======= ======= =======
Weighted average shares
outstanding-basic ................................. 14,154 13,716 14,119 13,680
Effect of common stock equivalents
arising from stock options ........................ 260 249 212 259
Subordinated debentures assumed
converted to common stock ......................... 2,696 2,696 2,696(1) 2,696
------- ------- ------- -------
Weighted average shares
outstanding-diluted ............................... 17,110 16,661 14,331 16,635
======= ======= ======= =======
Earnings per common share:
Diluted:
Income from continuing operations ............... $ 0.51 $ 0.50 $ 0.70 $ 0.77
Income from discontinued operations ............. -- 0.10 -- 0.16
Gain on sale of discontinued operations ......... -- 2.18 0.95 2.18
------- ------- ------- -------
Earnings per common share ..................... $ 0.51 $ 2.78 $ 1.65 $ 3.11
======= ======= ======= =======
</TABLE>
- ----------------
(1) The conversion of the 6.88% subordinated debentures would be
antidilutive for the period presented and therefore, it is not included in the
computation of diluted earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF APRIL 30, 1998 AND THE INCOME STATEMENT FOR THE THREE AND SIX MONTHS
ENDED APRIL 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<CASH> 47,110
<SECURITIES> 0
<RECEIVABLES> 83,441
<ALLOWANCES> 0
<INVENTORY> 70,194
<CURRENT-ASSETS> 210,692
<PP&E> 664,640
<DEPRECIATION> 283,309
<TOTAL-ASSETS> 702,954
<CURRENT-LIABILITIES> 136,061
<BONDS> 192,618
0
0
<COMMON> 7,086
<OTHER-SE> 283,274
<TOTAL-LIABILITY-AND-EQUITY> 702,954
<SALES> 384,410
<TOTAL-REVENUES> 384,410
<CGS> 342,181
<TOTAL-COSTS> 342,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,405
<INCOME-PRETAX> 15,537
<INCOME-TAX> 5,488
<INCOME-CONTINUING> 10,049
<DISCONTINUED> 0
<EXTRAORDINARY> 13,606
<CHANGES> 0
<NET-INCOME> 23,655
<EPS-PRIMARY> 1.680
<EPS-DILUTED> 1.650
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JANUARY 31, 1998 AND THE INCOME STATEMENT FOR THE THREE MONTHS ENDED
JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 43,080
<SECURITIES> 0
<RECEIVABLES> 70,294
<ALLOWANCES> 0
<INVENTORY> 66,665
<CURRENT-ASSETS> 190,199
<PP&E> 651,201
<DEPRECIATION> 273,406
<TOTAL-ASSETS> 679,473
<CURRENT-LIABILITIES> 120,671
<BONDS> 191,482
0
0
<COMMON> 7,054
<OTHER-SE> 276,348
<TOTAL-LIABILITY-AND-EQUITY> 679,473
<SALES> 180,982
<TOTAL-REVENUES> 180,982
<CGS> 164,849
<TOTAL-COSTS> 164,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,744
<INCOME-PRETAX> 3,527
<INCOME-TAX> 1,234
<INCOME-CONTINUING> 2,293
<DISCONTINUED> 0
<EXTRAORDINARY> 13,606
<CHANGES> 0
<NET-INCOME> 15,899
<EPS-PRIMARY> 1.130
<EPS-DILUTED> 1.110
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF OCTOBER 31, 1997, 1996 AND 1995 AND THE INCOME STATEMENT FOR THE
YEARS ENDED OCTOBER 31, 1997, 1996, AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1996 OCT-31-1995
<PERIOD-START> NOV-01-1996 NOV-01-1995 NOV-01-1994
<PERIOD-END> OCT-31-1997 OCT-31-1996 OCT-31-1995
<CASH> 26,851 35,962 45,192
<SECURITIES> 0 0 0
<RECEIVABLES> 80,089 78,439 74,622
<ALLOWANCES> 10,338 7,703 2,933
<INVENTORY> 73,035 78,828 49,422
<CURRENT-ASSETS> 186,896 202,641 176,487
<PP&E> 642,854 551,314 433,598
<DEPRECIATION> 263,783 232,149 199,616
<TOTAL-ASSETS> 685,705 638,948 466,458
<CURRENT-LIABILITIES> 134,078 114,403 122,858
<BONDS> 201,858 253,513 111,894
0 0 0
0 0 0
<COMMON> 7,025 6,795 6,743
<OTHER-SE> 261,798 190,214 166,071
<TOTAL-LIABILITY-AND-EQUITY> 685,705 638,948 466,458
<SALES> 746,093 620,069 603,985
<TOTAL-REVENUES> 746,093 620,069 603,985
<CGS> 647,287 528,677 522,779
<TOTAL-COSTS> 647,287 528,677 522,779
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 2,674 10,462 574
<INTEREST-EXPENSE> 17,541 11,929 10,742
<INCOME-PRETAX> 42,643 39,617 40,311
<INCOME-TAX> 14,925 16,639 16,931
<INCOME-CONTINUING> 27,718 22,978 23,380
<DISCONTINUED> 5,176 9,912 10,480
<EXTRAORDINARY> 36,290 (2,522) (2,021)
<CHANGES> 0 0 0
<NET-INCOME> 69,184 30,368 31,839
<EPS-PRIMARY> 5.010 2.240 2.070
<EPS-DILUTED> 4.380 2.080 2.050
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AS OF JANUARY 31, APRIL 30, AND JULY 31, 1997 AND THE INCOME STATEMENT
FOR THE THREE, SIX AND NINE MONTHS, RESPECTIVELY ENDED JANUARY 31, APRIL 30,
AND JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1997 OCT-31-1997
<PERIOD-START> NOV-01-1996 NOV-01-1996 NOV-01-1996
<PERIOD-END> JAN-31-1997 APR-30-1997 JUL-31-1997
<CASH> 37,179 34,796 25,658
<SECURITIES> 0 0 0
<RECEIVABLES> 71,506 82,548 79,378
<ALLOWANCES> 0 0 0
<INVENTORY> 77,518 78,807 76,780
<CURRENT-ASSETS> 197,435 207,240 192,724
<PP&E> 569,133 586,338 603,442
<DEPRECIATION> 240,920 249,132 256,613
<TOTAL-ASSETS> 653,437 652,180 646,974
<CURRENT-LIABILITIES> 94,917 120,443 119,134
<BONDS> 284,052 214,163 194,273
0 0 0
0 0 0
<COMMON> 6,839 6,863 7,002
<OTHER-SE> 194,734 239,023 252,672
<TOTAL-LIABILITY-AND-EQUITY> 653,437 652,180 646,974
<SALES> 167,955 353,954 550,543
<TOTAL-REVENUES> 167,955 353,954 550,543
<CGS> 148,110 308,729 477,415
<TOTAL-COSTS> 148,110 308,729 477,415
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 4,851 9,768 13,808
<INCOME-PRETAX> 5,189 16,477 29,721
<INCOME-TAX> 1,817 5,766 10,403
<INCOME-CONTINUING> 3,372 10,711 19,318
<DISCONTINUED> 954 2,705 3,518
<EXTRAORDINARY> 0 36,290 36,290
<CHANGES> 0 0 0
<NET-INCOME> 4,326 49,706 59,126
<EPS-PRIMARY> 0.320 3.630 4.310
<EPS-DILUTED> 0.310 3.110 3.740
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AS OF JANUARY 31, APRIL 30, AND JULY 31, 1996 AND THE INCOME STATEMENT
FOR THE THREE, SIX AND NINE MONTHS, RESPECTIVELY ENDED JANUARY 31, APRIL 30, AND
JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1996 OCT-31-1996 OCT-31-1996
<PERIOD-START> NOV-01-1995 NOV-01-1995 NOV-01-1995
<PERIOD-END> JAN-31-1996 APR-30-1996 JUL-31-1996
<CASH> 17,542 38,253 31,510
<SECURITIES> 0 0 0
<RECEIVABLES> 67,685 71,659 66,231
<ALLOWANCES> 0 0 0
<INVENTORY> 59,828 57,060 59,941
<CURRENT-ASSETS> 152,319 173,906 164,464
<PP&E> 436,942 442,797 448,955
<DEPRECIATION> 207,509 216,901 224,455
<TOTAL-ASSETS> 442,461 457,661 449,520
<CURRENT-LIABILITIES> 74,137 85,221 87,385
<BONDS> 138,060 138,195 118,195
0 0 0
0 0 0
<COMMON> 6,759 6,760 6,763
<OTHER-SE> 166,183 172,340 179,588
<TOTAL-LIABILITY-AND-EQUITY> 442,461 457,661 449,520
<SALES> 121,845 265,342 425,636
<TOTAL-REVENUES> 121,845 265,342 425,636
<CGS> 107,417 233,259 367,445
<TOTAL-COSTS> 107,417 233,259 367,445
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 2,880 5,140 7,453
<INCOME-PRETAX> 2,629 11,688 24,579
<INCOME-TAX> 1,105 4,910 10,323
<INCOME-CONTINUING> 1,524 6,778 14,256
<DISCONTINUED> 2,523 5,401 7,068
<EXTRAORDINARY> (2,522) (2,522) (2,522)
<CHANGES> 0 0 0
<NET-INCOME> 1,525 9,657 18,802
<EPS-PRIMARY> 0.110 0.710 1.390
<EPS-DILUTED> 0.110 0.710 1.320
</TABLE>
