Quanex Building Products Corporation Reports Third Quarter 2015 Results
September 21 2015 - 8:46PM
Core Business Generates Improved Margins
on Flat Year Over Year Sales
Acquisitions Add $340M of Sales and $49M
of EBITDA, Pro-Forma LTM
Quanex Building Products Corporation (NYSE:NX), a
leading OEM supplier of building products components, today
released results for the third quarter ended July 31, 2015.
"The third quarter was particularly exciting for Quanex Building
Products," said Chairman, President and Chief Executive Officer
Bill Griffiths. "Third quarter results were in line with
internal expectations and consistent with our recent guidance. This
included anticipated year-over-year margin improvement in our vinyl
profile business, despite lower year over year sales. We are
confident that this trend will continue under Tim Reese's proven
leadership. During the quarter we added HL Plastics, the fastest
growing vinyl window profile extruder in the UK, and recently
announced an agreement to acquire Woodcraft Industries, the largest
North American supplier of cabinet doors and components to kitchen
and bath cabinet OEMs. This positions Quanex as the largest OEM
supplier in the Building Products Industry, and the two
acquisitions add $340M of revenues and $49M of EBITDA on a pro
forma LTM basis to our core business."
Highlights for the third quarter include:
- Base business generates improved margins
- Reported EPS of $0.19 versus prior year's $0.23
- Base adjusted* EPS of $0.28 is a 21.7% increase over prior
year's adjusted* base EPS of $0.23
- Recently announced acquisitions add $340 million of sales, and
$49 million of EBITDA on a LTM pro forma basis
* Adjusted figures exclude certain
items such as the impact of HL Plastics, transaction costs and
foreign currency translation. A reconciliation of adjusted
EBITDA and adjusted EPS can be found in the tables that accompany
this release.
Revenue on a comparable basis was essentially flat, after
excluding HL Plastics ($14.2 million), FX impact ($2.5 million) and
the impact of a lower oil surcharge ($1.0 million). Slower
market growth in our accessories and spacer products was fully
offset by the expected reduction in vinyl profile revenues which
resulted in flat revenues overall. Third quarter 2015 gross margins
improved 200 basis points, on the same comparable flat revenue as
above, when compared to third quarter 2014 results, driven
primarily by labor as well as repair and maintenance improvement in
the vinyl business.
On June 15, 2015, the Company announced the acquisition of HL
Plastics, the UK's fastest growing window and door vinyl extruder,
for $149 million (five percent of which was deferred and will be
paid through a three year earn out mechanism). The transaction
was financed with cash on hand and borrowing under the Company's
$150 million revolving credit facility.
On August 31, 2015, the Company announced it had agreed to
acquire Woodcraft Industries, the largest North American supplier
of cabinet doors to OEMs, for $248.5 million. The transaction
is expected to close in the fourth calendar quarter of
2015. The transaction along with the existing revolver will be
refinanced by a new ABL revolving credit facility and new Term Loan
B.
The Board of Directors declared a quarterly cash dividend of
$0.04 per share on the company's common stock, payable September
30, 2015, to shareholders of record on September 18, 2015.
Additional information related to third quarter 2015 results,
including a reconciliation of EBITDA (defined as net income or loss
before interest, taxes, depreciation and amortization and other,
net) to its most comparable GAAP measure, can be found in the
supplemental schedules accompanying this press release.
Conference Call Information
Quanex will host its conference call today, September 9, 2015 at
11:00 a.m. (Eastern) to discuss its results and outlook. The call
will be available via webcast at www.quanex.com in the Investors
section.
Forward Looking Statements
Statements that use the words "estimated," "expect," "could,"
"should," "believe," "will," "might," or similar words reflecting
future expectations or beliefs are forward-looking statements. The
forward-looking statements include, but are not limited to, future
operating results of Quanex, the investments being made in our
vinyl business, the future financial condition of Quanex, future
uses of cash and other expenditures, expenses and tax rates,
expectations relating to the Company's industry, and the Company's
future growth, including revenue and EBITDA guidance. The
statements set forth in this release are based on current
expectations. Actual results or events may differ materially from
this release. Factors that could impact future results may include,
without limitation, the effect of both domestic and global economic
conditions, the impact of competitive products and pricing, the
availability and cost of raw materials, and customer demand. For a
more complete discussion of factors that may affect the Company's
future performance, please refer to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 2014, under the
sections entitled "Cautionary Note Regarding Forward-Looking
Statements" and "Risk Factors," in our other documents filed with
the Securities and Exchange Commission from time to time. Any
forward-looking statements in this press release are made as of the
date hereof, and Quanex Building Products Corporation undertakes no
obligation to update or revise any forward-looking statements to
reflect new information or events.
|
QUANEX BUILDING PRODUCTS
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
(In thousands, except per share
data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended July 31, |
Nine Months Ended
July 31, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Net sales |
$ 180,206 |
$ 169,981 |
$ 450,069 |
$ 431,568 |
Cost of sales |
136,853 |
130,706 |
353,468 |
335,544 |
Selling, general and administrative |
25,023 |
18,097 |
64,157 |
60,992 |
Depreciation and amortization |
8,502 |
8,512 |
24,542 |
25,550 |
Asset impairment charges |
-- |
-- |
-- |
505 |
Operating income |
9,828 |
12,666 |
7,902 |
8,977 |
Interest expense |
(338) |
(135) |
(624) |
(419) |
Other, net |
566 |
(8) |
300 |
66 |
Income before income
taxes |
10,056 |
12,523 |
7,578 |
8,624 |
Income tax expense |
(3,585) |
(3,956) |
(1,907) |
(3,298) |
Income from continuing operations |
6,471 |
8,567 |
5,671 |
5,326 |
Income (loss) from discontinued operations,
net of taxes |
456 |
(520) |
479 |
18,952 |
Net income |
$ 6,927 |
$ 8,047 |
$ 6,150 |
$ 24,278 |
|
|
|
|
|
Earnings (loss) per common
share: |
|
|
|
|
From continuing operations |
$ 0.20 |
$ 0.23 |
$ 0.17 |
$ 0.14 |
From discontinued operations |
$ 0.01 |
$ (0.01) |
$ 0.01 |
$ 0.51 |
|
|
|
|
|
Diluted earnings (loss) per common
share: |
|
|
|
|
From continuing operations |
$ 0.19 |
$ 0.23 |
$ 0.17 |
$ 0.14 |
From discontinued operations |
$ 0.01 |
$ (0.02) |
$ 0.01 |
$ 0.50 |
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
33,618 |
37,296 |
34,111 |
37,171 |
Diluted |
34,142 |
37,823 |
34,626 |
37,756 |
|
|
|
|
|
Cash dividends per share |
$ 0.04 |
$ 0.04 |
$ 0.12 |
$ 0.12 |
|
QUANEX BUILDING PRODUCTS
CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In thousands) |
(Unaudited) |
|
|
|
|
July 31, 2015 |
October 31,
2014 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 27,011 |
$ 120,384 |
Accounts receivable, net |
62,523 |
55,193 |
Inventories, net |
72,948 |
57,358 |
Deferred income taxes |
18,508 |
21,442 |
Prepaid and other current assets |
8,576 |
6,052 |
Total current assets |
189,566 |
260,429 |
Property, plant and equipment, net |
140,549 |
109,487 |
Deferred income taxes |
-- |
1,545 |
Goodwill |
130,861 |
70,546 |
Intangible assets, net |
124,502 |
70,150 |
Other assets |
7,302 |
4,956 |
Total assets |
$ 592,780 |
$ 517,113 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 45,712 |
$ 41,488 |
Accrued liabilities |
32,250 |
32,482 |
Income taxes payable |
150 |
107 |
Current maturities of long-term debt |
9,468 |
199 |
Total current liabilities |
87,580 |
74,276 |
Long-term debt |
82,575 |
586 |
Non Current Deferred Tax |
6,605 |
-- |
Deferred pension and postretirement
benefits |
6,621 |
4,818 |
Liability for uncertain tax positions |
548 |
4,626 |
Other liabilities |
21,811 |
11,887 |
Total liabilities |
205,740 |
96,193 |
Stockholders' equity: |
|
|
Common stock |
376 |
376 |
Additional paid-in-capital |
250,229 |
249,600 |
Retained earnings |
213,571 |
202,319 |
Accumulated other comprehensive loss |
(8,175) |
(5,708) |
Treasury stock at cost |
(68,961) |
(25,667) |
Total stockholders' equity |
387,040 |
420,920 |
Total liabilities and stockholders'
equity |
$ 592,780 |
$ 517,113 |
|
QUANEX BUILDING PRODUCTS
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOW |
(In thousands) |
(Unaudited) |
|
|
|
|
Nine Months Ended
July 31, |
|
2015 |
2014 |
Operating activities: |
|
|
Net (loss) income |
$ 6,150 |
$ 24,278 |
Adjustments to reconcile net income
(loss) to cash provided by operating activities: |
|
|
Depreciation and amortization |
24,541 |
28,590 |
Stock-based compensation |
3,391 |
2,835 |
Deferred income tax (benefit)
provision |
1,576 |
11,036 |
Excess tax benefit from share-based
compensation |
(60) |
(643) |
Asset impairment charges |
-- |
1,007 |
Gain on sale of discontinued
operations |
-- |
(39,122) |
Gain on involuntary conversion |
(1,263) |
-- |
Other, net |
655 |
1,723 |
Changes in assets and liabilities, net of
effects from acquisitions and dispositions: |
|
|
Decrease in accounts receivable |
4,328 |
162 |
Increase in inventory |
(51) |
(23,232) |
Increase in other current assets |
(1,568) |
(999) |
(Decrease) increase in accounts
payable |
(5,236) |
17,435 |
Decrease in accrued liabilities |
(5,606) |
(12,111) |
(Decrease) increase in income taxes
payable |
(817) |
1,998 |
Increase in deferred pension and
postretirement benefits |
1,873 |
1,008 |
Decrease in other long-term
liabilities |
(162) |
(1,719) |
Other, net |
(202) |
(2,492) |
Cash used for operating activities |
27,549 |
9,754 |
Investing activities: |
|
|
Proceeds from sale of discontinued
operations |
-- |
107,431 |
Acquisitions, net of cash acquired |
(131,689) |
(5,161) |
Capital expenditures |
(21,918) |
(29,026) |
Proceeds from property insurance
claim |
1,263 |
1,400 |
Proceeds from disposition of capital
assets |
207 |
807 |
Cash used in investing activities |
(152,137) |
75,451 |
Financing activities: |
|
|
Credit facility borrowings |
92,000 |
-- |
Repayments of credit facility
borrowings |
(8,000) |
-- |
Repayments of other debt & capital
lease obligations |
(411) |
(160) |
Common stock dividends paid |
(4,158) |
(4,491) |
Issuance of common stock |
4,309 |
3,219 |
Excess tax benefit from share-based
compensation |
60 |
643 |
Purchase of treasury stock |
(52,719) |
-- |
Other |
-- |
98 |
Cash used in financing activities |
31,081 |
(691) |
|
|
|
Effect of exchange rate changes on cash and
cash equivalents |
134 |
(18) |
|
|
|
(Decrease) increase in cash and cash
equivalents |
(93,373) |
84,496 |
Cash and cash equivalents at beginning of
period |
120,384 |
49,734 |
Cash and cash equivalents at end of
period |
$ 27,011 |
$ 134,230 |
|
|
|
NOTE: The cash flow statement
presentation includes the sources and uses of cash for the
discontinued operations as operating, investing and financing cash
flows, as applicable, combined with such cash flows for continuing
operations, as permitted by U.S. GAAP. |
|
QUANEX BUILDING PRODUCTS
CORPORATION |
NON-GAAP FINANCIAL
MEASURE DISCLOSURE |
(In thousands) |
(Unaudited) |
|
EBITDA (defined as net income or
loss before interest, taxes, depreciation and amortization and
other, net) is a non-GAAP financial measure that Quanex's
management uses to measure its operational performance and assist
with financial decision-making. EBITDA is a key metric used by
management in determining the value of annual incentive awards for
its employees. We believe non-GAAP measures presented (included
under market conditions outlined in our forward-looking guidance)
provide a consistent basis for comparison between periods, and will
assist investors in understanding our financial performance when
comparing our results to other investment opportunities. The
definition of non-GAAP financial measures used by Quanex may not be
the same as that used by other companies. The company does not
intend for this information to be considered in isolation or as a
substitute for other measures prepared in accordance with US
GAAP. |
|
|
|
|
|
|
Three Months
Ended July 31, |
Nine Months Ended
July 31, |
|
2015 |
2014 |
2015 |
2014 |
|
Quanex |
Quanex |
Quanex |
Quanex |
Net income |
$ 6,927 |
$ 8,047 |
$ 6,150 |
$ 24,278 |
(Income) loss from discontinued
operations, net of taxes |
(456) |
520 |
(479) |
(18,952) |
Income tax expense |
3,585 |
3,956 |
1,907 |
3,298 |
Other, net |
(566) |
8 |
(300) |
(66) |
Interest expense |
338 |
135 |
624 |
419 |
Operating income |
9,828 |
12,666 |
7,902 |
8,977 |
Depreciation and amortization |
8,502 |
8,512 |
24,542 |
25,550 |
EBITDA |
$ 18,330 |
$ 21,178 |
$ 32,444 |
$ 34,527 |
Transactions related costs |
3,824 |
64 |
3,930 |
146 |
IG warranty reserve benefit |
-- |
-- |
-- |
(2,800) |
Asset impairment charge |
-- |
-- |
-- |
505 |
Discontinued ERP expenses |
-- |
-- |
-- |
500 |
HL Plastics - loss |
81 |
-- |
81 |
-- |
Foreign currency impact - excluding HL
Plastics |
109 |
64 |
418 |
92 |
EBITDA as adjusted |
$ 22,344 |
$ 21,306 |
$ 36,873 |
$ 32,970 |
|
|
|
|
|
|
|
|
|
|
Financial Statistics as of July 31,
2015 |
|
|
|
|
Book value per common share: |
|
$11.51 |
|
|
Total debt to capitalization: |
|
19.2% |
|
|
Return on invested capital: |
|
2.8% |
|
|
Actual number of common shares
outstanding: |
|
33,916,727 |
|
|
|
QUANEX BUILDING PRODUCTS
CORPORATION |
PRE-TAX & AFTER TAX
PRESENTATION |
(In millions, except per share
data) |
(Unaudited) |
Operating Income (Loss) from
Continuing Operations As Adjusted and Diluted Earnings (Loss) from
Continuing Operations As Adjusted are non-GAAP financial measures
that exclude certain charges and credits because Quanex believes
that such items are not indicative of its core operating results,
are not indicative of trends, and do not provide meaningful
comparisons with other reporting periods. We believe non-GAAP
measures presented (included under market conditions outlined in
our forward-looking guidance) provide a consistent basis for
comparison between periods, and will assist investors in
understanding our financial performance when comparing our results
to other investment opportunities. The definition of non-GAAP
financial measures used by Quanex may not be the same as that used
by other companies. The company does not intend for this
information to be considered in isolation or as a substitute for
other measures prepared in accordance with US GAAP. |
|
|
|
|
|
|
|
|
|
|
Q3 2015 |
|
Q3 2014 |
|
FY 2015 |
|
FY 2014 |
|
Pre-Tax
Presentation |
$MM |
|
$MM |
|
$MM |
|
$MM |
|
Operating Income from Continuing
Operations As Reported |
$ 9.8 |
|
$ 12.7 |
|
$ 7.9 |
|
$ 9.0 |
|
Benefit (Reduction) to Operating Income: |
|
|
|
|
|
|
|
|
IG Warranty Reserve Benefit |
-- |
|
-- |
|
-- |
|
(2.8) |
|
Asset Impairment Charge |
-- |
|
-- |
|
-- |
|
0.5 |
|
Discontinued ERP Expenses |
-- |
|
-- |
|
-- |
|
0.5 |
|
Foreign Currency Translation Impact -
Excluding HL Plastics |
0.1 |
|
0.1 |
|
0.4 |
|
0.1 |
|
HL Plastics - loss |
0.8 |
|
-- |
|
0.8 |
|
-- |
|
Transaction Related Expenses |
3.8 |
|
-- |
|
3.9 |
|
0.1 |
|
Operating Income from Continuing
Operations As Adjusted |
$ 14.5 |
|
$ 12.8 |
|
$ 13.0 |
|
$ 7.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2015 |
Q3 2015 |
Q3 2014 |
Q3 2014 |
FY 2015 |
FY 2015 |
FY 2014 |
FY 2014 |
After-Tax
Presentation |
$MM |
EPS |
$MM |
EPS |
$MM |
EPS |
$MM |
EPS |
Income from Continuing Operations As
Reported |
$ 6.5 |
$ 0.19 |
$ 8.6 |
$ 0.23 |
$ 5.7 |
$ 0.17 |
$ 5.3 |
$ 0.14 |
Benefit to EPS: |
|
|
|
|
|
|
|
|
IG Warranty Reserve Benefit |
-- |
-- |
-- |
-- |
-- |
-- |
(1.6) |
(0.04) |
Asset Impairment Charge |
-- |
-- |
-- |
-- |
-- |
-- |
0.3 |
0.01 |
Discontinued ERP Expenses |
-- |
-- |
-- |
-- |
-- |
-- |
0.3 |
0.01 |
Foreign Currency Translation Impact-IG
Systems |
0.1 |
0.00 |
0.1 |
-- |
0.3 |
0.01 |
0.1 |
0.00 |
HL Plastics - loss |
0.5 |
0.02 |
-- |
-- |
0.5 |
0.02 |
-- |
-- |
Transaction Related Expenses |
2.5 |
0.07 |
-- |
-- |
2.8 |
0.08 |
0.1 |
0.00 |
Diluted Earnings from Continuing
Operations As Adjusted |
$ 9.6 |
$ 0.28 |
$ 8.7 |
$ 0.23 |
$ 9.3 |
$ 0.28 |
$ 4.5 |
$ 0.12 |
CONTACT: Financial Contact: Marty Ketelaar, 713-877-5402
Media Contact: Valerie Calvert, 713-877-5305
For additional information, please visit www.quanex.com
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