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Quanex Building Products Corporation Reports Third Quarter 2013 Results



Quanex Building Products Corporation Reports Third Quarter 2013 Results

      Consolidated Net Income of $5.0 Million or $0.13 Per Diluted Share
   EPG Net Sales Increase 17.0%; Operating Income Improves to $18.6 Million
ERP Project Stopped; Company to Focus on Revenue and Profit Growth Initiatives

HOUSTON, Sept. 4, 2013 (GLOBE NEWSWIRE) -- Quanex Building Products
Corporation (NYSE:NX), a leading manufacturer of fenestration products for the
global window and door industry, today released fiscal 2013 third quarter
results for the period ended July 31, 2013.

  * Consolidated third quarter 2013 net sales increased 8.9 percent to $259.2
    million, compared to $237.9 million a year ago.
  * Third quarter 2013 net income was $5.0 million, or $0.13 per diluted share
    compared to net income of $1.5 million, or $0.04 per diluted share in the
    year ago quarter.
  * Consolidated third quarter EBITDA, a non-GAAP measure, was $19.3 million,
    compared to $10.6 million a year ago.
  * Year-to-date consolidated 2013 net sales were $677.3 million, compared to
    $593.9 million a year ago. 
  * Year-to-date consolidated net loss was $10.5 million compared to a loss of
    $17.5 million a year ago.
  * Consolidated year-to-date EBITDA, a non-GAAP measure, was $17.4 million,
    compared to $2.5 million a year ago.

The 2013 year-to-date results, when measured against comparable prior year
periods, benefitted from the inclusion of sales related to the Aluminite
acquisition completed in December 2012 and the elimination of 2012
strike-related costs at Nichols Aluminum. Adjusting for these items, third
quarter and year-to-date results improved as a result of higher sales across
all divisions under the Engineered Products Group (EPG) segment and cost
savings associated with the company's insulating glass systems facility
consolidation that occurred in 2012. This was partially offset by higher
information technology and Enterprise Resource Planning (ERP) implementation
costs. 

Dividend Declared

On August 29, 2013, the Board of Directors declared a quarterly cash dividend
of $0.04 per share on the company's common stock, payable September 30, 2013,
to shareholders of record on September 16, 2013.

Engineered Products Group (EPG) is focused on providing window and door OEMs
with fenestration components, products, and systems. Key end markets are
residential repair & remodel (R&R) and new home construction.

(in millions)                              
                 Q3 2013 Q3 2012 YTD 2013 YTD 2012
Net sales        $156.8  $134.1  $388.1   $342.2
Operating income 18.6    13.1    27.3     14.9
EBITDA           26.6    20.0    50.9     35.9

  * Global EPG sales for the 12 months ended July 31, 2013 were up 11.2%.
    EPG's North American domestic fenestration sales, the most comparable
    sales figure to those reported by Ducker, increased 11.5% (3.4% excluding
    Aluminite) from the previous 12 months.
  * Preliminary U.S. window shipments as reported by Ducker increased 10.1%
    over the 12 months ended June 30, 2013, driven by a 27.6% increase in new
    construction units.  U.S. window shipments to the residential R&R market
    as reported by Ducker increased 1.3% for the 12 month period ended June
    30, 2013. A greater portion of EPG's sales are tied to R&R versus new
    construction.
  * EPG sales results continue to be negatively impacted by lower vinyl
    pricing, higher industry sales of lower performance windows typically
    installed in new construction and continued weak R&R sales.

Aluminum Sheet Products Group is a leading provider of aluminum sheet coil
through its Nichols Aluminum operation. Key end markets are residential R&R,
new home construction and transportation.

(in millions, except for spread)
                 Q3 2013 Q3 2012 YTD 2013 YTD 2012
Net sales         $105.2  $107.0 $299.5   $261.0
Operating loss   (0.5)   (3.2)    (5.2)   (16.2)
EBITDA           1.3      (1.5)  (0.0)    (10.1)
Shipped pounds    77     75       213      180
Spread per pound 0.39      0.38            

  * The improvement in shipped pounds was primarily due to increased seasonal
    demand for aluminum sheet product.
  * Profitability was negatively impacted by product mix, with increased
    demand for mill finished product, which commands a lower price when
    compared to painted sheet.
  * Spread improved $0.01 per pound to $0.39 per pound compared to $0.38 per
    pound in the year ago quarter, but was down sequentially when compared to
    the $0.42 per pound result achieved in the second quarter of 2013.  
  * Spread at Nichols remains challenging primarily due to a larger reduction
    in aluminum prices compared to the reduction in scrap aluminum prices, as
    well as a tight scrap supply market.
  * Nichols Aluminum's shipments for the 12 months ended July 31, 2013,
    increased 16.5%.
  * Industry shipments as reported by the Aluminum Association decreased 0.6%
    over the same period.

Corporate and Other Items

  * Corporate expenses in the quarter were $11.0 million compared to $8.4
    million in the year ago quarter primarily due to higher ERP expenses of
    $2.0 million, (including $1.7 million of higher depreciation) and $1.1
    million in higher IT-related costs, partially offset by $0.6 million in
    lower stock-based compensation costs.
  * In August 2013, following a management recommendation, the company's board
    of directors voted to cease the implementation of the ERP project.  The
    proposal was made based on management's belief that investments made in
    initiatives that will drive greater revenue growth and profitability will
    be more impactful to increasing shareholder value than continuing to
    invest in the ERP system.
  * Total cash of $16.1 million.
  * No outstanding borrowings against the revolving credit facility.
  * Cash provided by operating activities for the first nine months of 2013
    was $6.6 million.
  * Available capacity under the company's revolving credit facility was
    approximately $82.5 million.

Conference Call Information

Quanex will host its conference call today, September 4, 2013 at 9:00 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 Statement

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
financial condition of Quanex, future uses of cash and other expenditures,
expenses and tax rates, expectations relating to the company's ERP project,
expectations relating to the company's industry, and the company's future
growth. The statements 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 Form 10-K filing
on December 31, 2012, under the Securities Exchange Act of 1934 ("Exchange
Act"), in particular the section titled, "Private Securities Litigation Reform
Act" contained therein.

           For additional information, please visit www.quanex.com

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,
2013          2012                                  2013          2012
                                                                   
 $ 259,174     $ 237,905    Net sales                $ 677,345     $ 593,928
 215,182       200,663      Cost of sales            576,835       510,542
 24,683        26,659       Selling, general and     83,063        80,936
                            administrative
 12,193        9,131        Depreciation and         33,389        28,381
                            amortization
 7,116         1,452        Operating income (loss)  (15,942)      (25,931)
 (182)         (108)        Interest expense         (495)         (348)
 (46)          21           Other, net               (128)         199
 6,888         1,365        Income (loss) before     (16,565)      (26,080)
                            income taxes
 (1,919)       166          Income tax benefit       6,068         8,578
                            (expense)
 $ 4,969       $ 1,531      Net income (loss)        $ (10,497)    $ (17,502)
                                                                   
                            Earnings (loss) per                    
                            common share:
 $ 0.13        $ 0.04       Basic                    $ (0.28)      $ (0.48)
 $ 0.13        $ 0.04       Diluted                  $ (0.28)      $ (0.48)
                                                                   
                            Weighted average common                
                            shares outstanding:
 36,856        36,637       Basic                    36,838        36,584
 37,413        37,163       Diluted                  36,838        36,584
                                                                   
 $ 0.04        $ 0.04       Cash dividends per       $ 0.12        $ 0.12
                            share

 
 
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS                       
(In thousands)                                              
(Unaudited)
                                                            
                                             July 31, 2013 October 31, 2012
Assets                                                      
Cash and equivalents                          $ 16,073      $ 71,255
Accounts receivable, net                      99,051        85,644
Inventories, net                              67,839        65,904
Deferred income taxes                         24,497        20,439
Prepaid and other current assets              6,592         7,628
Total current assets                          214,052       250,870
Property, plant and equipment, net            176,033       168,877
Deferred income taxes                         12,381        8,911
Goodwill                                      71,302        68,331
Intangible assets, net                        80,757        78,380
Other assets                                  17,036        14,169
Total assets                                  $ 571,561     $ 589,538
                                                            
Liabilities and stockholders' equity                        
Accounts payable                              $ 78,479      $ 80,985
Accrued liabilities                           45,357        46,459
Current maturities of long-term debt          375           368
Total current liabilities                     124,211       127,812
Long-term debt                                753           1,033
Deferred pension and postretirement benefits  5,862         6,873
Liability for uncertain tax positions         5,416         6,736
Non-current environmental reserves            9,037         9,827
Other liabilities                             13,008        15,430
Total liabilities                             158,287       167,711
Total stockholders' equity                    413,274       421,827
Total liabilities and stockholders' equity    $ 571,561     $ 589,538

                                                                   
                                                                   
QUANEX BUILDING PRODUCTS CORPORATION                               
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW                     
(In thousands)
(Unaudited)
                                                                   
                                                    Nine Months Ended July 31,
                                                    2013          2012
Operating activities:                                              
Net loss                                             $ (10,497)    $ (17,502)
Adjustments to reconcile net loss to cash provided                 
by operating activities:
Depreciation and amortization                        33,389        28,381
Stock-based compensation                             3,856         3,180
Deferred income tax benefit                          (6,862)       (9,437)
Excess tax benefit from share-based compensation     (172)         (413)
Restructuring charges                                —             1,206
Other, net                                           698           2,133
Changes in assets and liabilities, net of effects                  
from acquisitions and dispositions:
Increase in accounts receivable                      (9,642)       (7,114)
Decrease (increase) in inventory                     3,095         (7,515)
Decrease (increase) in other current assets          241           (757)
Increase (decrease) in accounts payable              (2,990)       10,242
Increase (decrease) in accrued liabilities           (6,883)       5,789
Increase (decrease) in income taxes                  1,622         (771)
Decrease in deferred pension and postretirement      (1,011)       (1,572)
benefits
Increase in other long-term liabilities              1,229         488
Other, net                                           504           (351)
Cash provided by operating activities                6,577         5,987
Investing activities:                                              
Acquisitions, net of cash acquired                   (22,096)      — 
Capital expenditures                                 (34,517)      (31,710)
Proceeds from disposition of capital assets          335           36
Proceeds from property insurance claim               —             479
Cash used for investing activities                   (56,278)      (31,195)
Financing activities:                                              
Borrowings under credit facility                     23,500        — 
Repayments of credit facility borrowings             (23,500)      — 
Repayments of other long-term debt                   (364)         (339)
Common stock dividends paid                          (4,446)       (4,413)
Issuance of common stock                             909           2,501
Excess tax benefit from share-based compensation     172           413
Debt issuance costs                                  (1,163)       — 
Purchase of treasury stock                           —             (1,284)
Cash used for financing activities                   (4,892)       (3,122)
                                                                   
Effect of exchange rate changes on cash and          (589)         1,003
equivalents
                                                                   
Decrease in cash and equivalents                     (55,182)      (27,327)
Cash and equivalents at beginning of period          71,255        89,619
Cash and equivalents at end of period                $ 16,073      $ 62,292

 
 
QUANEX BUILDING PRODUCTS CORPORATION
SEGMENT INFORMATION
(In thousands)
(Unaudited)
                                                                   
Three Months Ended July 31,                         Nine Months Ended July 31,
2013          2012                                  2013          2012
                            Net Sales:                             
 $ 156,823     $ 134,060    Engineered Products      $ 388,099     $ 342,223
 105,198       107,024      Aluminum Sheet Products  299,493       261,017
 262,021       241,084      Building Products        687,592       603,240
                                                                   
 (2,847)       (3,179)      Eliminations             (10,247)      (9,312)
                                                                   
 $ 259,174     $ 237,905    Net Sales                $ 677,345     $ 593,928
                                                                   
                            Operating Income (Loss)                
 $ 18,561      $ 13,063     Engineered Products      $ 27,303      $ 14,949
 (490)         (3,162)      Aluminum Sheet Products  (5,187)       (16,213)
 18,071        9,901        Building Products        22,116        (1,264)
                                                                   
 (10,955)      (8,449)      Corporate & Other        (38,058)      (24,667)
                                                                   
 $ 7,116       $ 1,452      Operating Income (Loss)  $ (15,942)    $ (25,931)

 
 
QUANEX BUILDING PRODUCTS CORPORATION
NON-GAAP FINANCIAL MEASURE DISCLOSURE
(In thousands)
(Unaudited)
 
EBITDA is a non-GAAP financial measure that Quanex management uses to measure its operational
performance and assist with financial decision-making. We believe this non-GAAP measure provides
a consistent basis for comparison between periods, and will assist investors in understanding
our financial performance, including under market conditions outlined in our forward-looking
guidance. The company does not intend for this information to be considered in isolation or as a
substitute for other measures prepared in accordance with GAAP.
 
Three Months Ended July 31, 2013                      Nine Months Ended July 31, 2013
Engineered Aluminum Corporate                         Engineered Aluminum  Corporate
Products   Sheet    & Other   Quanex                  Products   Sheet     & Other   Quanex
           Products                                              Products
                               $ 4,969   Net income                                   $ (10,497)
                                         (loss)
                                         Income tax
                               1,919     expense                                      (6,068)
                                         (benefit)
                               46        Other, net                                   128
                               182       Interest                                     495
                                         expense
                                         Operating
 18,561     (490)    (10,955)  7,116     income        27,303     (5,187)   (38,058)  (15,942)
                                         (loss)
                                         Depreciation
 8,067      1,820    2,306     12,193    and           23,637     5,173     4,579     33,389
                                         amortization
 26,628     1,330    (8,649)   19,309    EBITDA        50,940     (14)      (33,479)  17,447
                                                                                      
                                                                                      
                                                                                      
Three Months Ended July 31, 2012                      Nine Months Ended July 31, 2012
Engineered Aluminum Corporate                         Engineered Aluminum  Corporate
Products   Sheet    & Other   Quanex                  Products   Sheet     & Other   Quanex
           Products                                              Products
                               $ 1,531   Net income                                   $ (17,502)
                                         (loss)
                                         Income tax
                               (166)     expense                                      (8,578)
                                         (benefit)
                               (21)      Other, net                                   (199)
                               108       Interest                                     348
                                         expense
                                         Operating
 13,063     (3,162)  (8,449)   1,452     income        14,949     (16,213)  (24,667)  (25,931)
                                         (loss)
                                         Depreciation
 6,911      1,697    523       9,131     and           20,961     6,154     1,266     28,381
                                         amortization
 19,974     (1,465)  (7,926)   10,583    EBITDA        35,910     (10,059)  (23,401)  2,450
                                                                                      
                                                                                      
Financial Statistics as of July 31, 2013                                              
Book value per common share:  $11.15                                                  
Total debt to                 0.3%                                                    
capitalization: 
Return on invested capital:   (2.2%)                                                  
Actual number of common       37,049,551                                              
shares outstanding: 

CONTACT: Financial Contact: Marty Ketelaar,
         713-877-5402;
         Media Contact: Valerie Calvert,
         713-877-5305

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