Quanex Corp. reported record net income from continuing operations of $33.7 million on record net sales of $470.2 million for its fiscal first quarter.

First Quarter Results—Net income from continuing operations of $33.7 million compares to $6.6 million in the year-ago first quarter. Net sales of $470.2 million compare to net sales of $252.0 million in the year-ago first quarter. Diluted earnings per share from continuing operations of $1.31 also established a new record, over four times the $0.27 for the year-ago quarter. Diluted earnings per share were $1.10 after taking into account the impact of the first quarter operating loss of Piper Impact and the associated loss on the sale of the business.

Record first quarter net sales of $470.2 million represent an 87% increase over the year-ago quarter. Combined net sales from the company's December 31, 2003, acquisitions of MacSteel Monroe and TruSeal Technologies were $123.7 million.

Record income from continuing operations of $33.7 million compares to $6.6 million in the year-ago quarter. Combined first quarter earnings of MacSteel Monroe and TruSeal Technologies contributed $0.36 (after interest expense) to diluted earnings per share versus $0.04 per share reported for one month's combined results in last year's first quarter.

Return on invested capital was 11.6%, a 47% improvement from the year ago period. Total debt-to-capitalization was 36.8%; cash and equivalents at quarter end were $28.2 million.

In other events, the company completed its acquisition of Mikron Industries, a leading supplier of vinyl and composite window profiles serving the North American market, on December 9, 2004. Piper Impact was sold on January 25, 2005.

The Vehicular Products segment is focused on providing customers with value-added, engineered steel bar and extrusion products. Key market drivers are light vehicle and heavy duty truck builds. "North American light vehicle builds were up about 3% during our first quarter compared to the year ago quarter, and demand from heavy duty truck customers continued to grow, with overall production up some 60% over last year's first quarter. We ran all three of our engineered steel bar operations at very high utilization rates," said Raymond A. Jean, Chairman and CEO. "Segment operating income for the quarter compared to the year-ago quarter benefited from new customer programs, cost improvements, higher selling prices, falling scrap costs and the acquisition of MacSteel Monroe. The Monroe facility is now demonstrating its strong earnings potential," continued Jean.

Quanex’s Building Products segment is focused on providing window and door OEM customers with engineered products and components, and is a large producer of common alloy aluminum sheet. Key market drivers are housing starts and remodeling activity. "Housing starts and remodeling activity during our first quarter remained at surprisingly good levels considering the adverse impact winter weather always brings. Order rates at our window and door components business remained healthy," continued Jean. "Additionally, our aluminum sheet business had an especially strong first quarter. Shipments to our traditional building and construction customers remained excellent, while sales to our capital equipment, service center, and transportation customers remained above year ago levels. This strong demand allowed for higher selling prices during the quarter," Jean said.

Working Capital—"Last year, both our Vehicular Products and Building Products segments made outstanding progress in improving their respective working capital positions and this favorable trend continued into the first quarter. We measure our progress by the improvement in our conversion cycle, which is the sum of inventory days, plus trade receivable days, less payable days, all based on average daily sales. For the first quarter, our conversion cycle improved to 43 days from 57 days in the year ago quarter," said Jean.

Acquisitions—On December 9, 2004, the company announced the purchase of Mikron Industries, an industry-leading manufacturer of engineered vinyl and thermoplastic alloy composite window components, window coverings and door components. "The addition of Mikron is consistent with our strategy of growing our core Engineered Products business," Jean said. "Mikron will allow Quanex to further expand customer offerings into the rapidly growing vinyl and composite window markets and we expect it to be accretive to earnings in the first year," continued Jean.

Outlook—Overall customer demand in the company's two target markets, vehicular products and building products, is expected to remain robust through fiscal 2005.

For the Vehicular Products segment, light vehicle build rates for the second fiscal quarter are expected to remain at healthy levels, although lower than a year ago, particularly for the domestic producers. However, new programs, ongoing excellent heavy truck demand and the strength in secondary markets including farm and construction equipment, capital goods and defense will keep the segment at high operating rates throughout the second quarter.

For the Building Products segment, segment drivers remain positive, supported by favorable interest rates and an improving job outlook. The segment will also benefit from very strong organic growth, a more balanced supply/demand aluminum marketplace and the Mikron acquisition.

Taken together, Quanex expects to report record fiscal 2005 diluted earnings per share from continuing operations in the range of $5.00 to $5.40, a significant improvement over fiscal 2004's $2.30. For the second quarter, the company expects diluted earnings per share from continuing operations to be in the range of $1.40 to $1.50, up from the $0.43 reported in the second quarter 2004. Quanex cautions that the combination of short cycle businesses and volatile raw material input costs makes forecasting problematic.

Quanex Corp., with 2004 sales of $1.5 billion, is an industry-leading manufacturer of value-added, engineered materials and components serving the vehicular products and building products markets.