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Quanex Building Products Reports Fourth Quarter 2013 Results



Quanex Building Products Reports Fourth Quarter 2013 Results

  * Fourth quarter net sales increased 17% to $275 million vs. $235 million in
    Q4 2012
  * Fourth quarter EBITDA of $25 million vs. $10 million in Q4 2012
  * Fourth quarter net loss of $1.2 million vs. net income of $1.0 million in
    Q4 2012
  * Cash and cash equivalents were $50 million as of October 31, 2013

HOUSTON, Dec. 18, 2013 (GLOBE NEWSWIRE) -- Quanex Building Products
Corporation (NYSE:NX) today released results for its fourth fiscal quarter
ended October 31, 2013.

"EBITDA results for each of our business segments improved in the quarter,"
CEO Bill Griffiths said. "Results were favorably impacted by an improvement in
the housing market, coupled with savings generated from last year's insulating
glass facility consolidation and the addition of Aluminite earlier in
2013. Corporate results were negatively impacted as we recognized $15 million
of accelerated depreciation from the cessation of our ERP implementation."

Engineered Products Group (EPG)

EPG reported fourth quarter 2013 net sales of $167 million, an increase of 22%
(10% excluding Aluminite's sales), compared to $136 million in the fourth
quarter of 2012. Fourth quarter 2013 operating income was $18 million compared
to $14 million in the fourth quarter of 2012. EPG's fourth quarter 2013 EBITDA
was $26 million compared to $21 million in the fourth quarter of 2012. EPG's
results continue to be impacted by higher industry sales of lower performance
windows typically installed in new construction and continued weak residential
remodeling and replacement (R&R) sales.

Preliminary U.S. window shipments as reported by Ducker Worldwide (Ducker), a
market intelligence firm, increased 11% for the 12 months ended September 30,
2013, driven by a 24% increase in new construction units. U.S. window
shipments to the R&R market, as reported by Ducker, increased 4% for the 12
month period ended September 30, 2013. The Company estimates that
approximately 70% of EPG's sales are currently tied to R&R versus new
construction.   EPG's North American domestic fenestration sales, the most
comparable sales figure to those reported by Ducker, increased 18% (6%
excluding Aluminite) from the previous 12 months. 

Aluminum Sheet Products Group (Nichols)

The Aluminum Sheet Products Group reported fourth quarter 2013 net sales of
$111 million, an increase of 9% compared to $101 million in the fourth quarter
of 2012. Fourth quarter 2013 operating income was $4 million compared to an
operating loss of $1 million in the fourth quarter of 2012. Fourth quarter
2013 EBITDA was $6 million compared to $1 million in the fourth quarter of
2012.

The improved fourth quarter performance was due to an increase in shipped
pounds, primarily due to regaining market share from 2012 strike-related
losses and improved equipment reliability. Nichols' shipments for the 12
months ended October 31, 2013, increased 17%. Industry shipments, as reported
by the Aluminum Association, decreased 3% over the same period.  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 $0.42 per pound compared to $0.41
per pound in the year ago quarter, driven primarily by a modest improvement in
scrap spread.   Spread at Nichols remains challenging primarily due to a
larger reduction in aluminum prices compared to the reduction in scrap
aluminum prices, driven by tight scrap supply market.

Corporate and Other Items

Fourth quarter 2013 corporate costs were $24 million compared to $12 million
in the year ago fourth quarter. Fourth quarter results were negatively
impacted by a non-cash Enterprise Resource Planning (ERP)-related accelerated
depreciation charge of $15.3 million, partially offset by a LIFO inventory
adjustment of $2.6 million. Excluding the accelerated depreciation charge and
LIFO inventory adjustment, fourth quarter 2013 corporate expenses were $11.3
million. During the fourth quarter of 2013, the Company ceased the ERP
project. 

The cash balance improved significantly to $50 million at year-end. For the
year, cash provided by operating activities during 2013 was $44 million. There
were no outstanding borrowings against the revolving credit facility.

Additional information related to fourth quarter and full year 2013 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 figure, can be found in the supplemental schedules
accompanying this press release.

2014 Business Outlook and Guidance

"The key indicators that impact our markets are encouraging," Griffiths
continued. "New housing starts have improved, home prices are increasing and
consumers are beginning to invest in R&R. Much of the recovery in new
construction is weighted more toward entry level windows; and, consumers are
investing R&R dollars in items such as paint, cabinets and appliances, but not
yet into windows. Prime window demand for the R&R market, which has been flat
for the past several years, will remain challenging and we believe a
measurable recovery is likely 12-18 months away, as low energy costs and tough
financing conditions discourage homeowners from replacing windows." 

Ducker is currently forecasting 2014 U.S. window shipments to increase 12%,
with new construction increasing 22% and R&R increasing 6%.  In 2014, EPG's
revenue is expected to grow 5%-6% over 2013 results. EPG's EBITDA margins are
expected to be similar to 2013 levels. Pricing pressure, particularly on vinyl
profiles, is expected to remain throughout 2014.

As a result of the continued uncertainty surrounding the changes to the
aluminum warehouse rules and their impact on net spread levels, it is
difficult to provide specific EBITDA guidance for Nichols. Nichol's EBITDA
sensitivity to an improvement in net spread is roughly $3 million of EBITDA
improvement for every $0.01 improvement in the net spread. Notwithstanding
this, we expect 2014 revenue growth in the mid to high single digit range and
operational improvements to contribute modestly to Nichol's profitability in a
steady spread environment.

Corporate expenses during 2014 are expected to total $30 million (excluding
LIFO, transaction and deferred compensation-related costs). Capital
expenditures are expected to be $40 million in 2014, with $28 million being
attributable to EPG, $11 million to Nichols and $1 million to Corporate. All
capital expenditures will be aimed toward improvements in worker safety,
operational efficiency, cost reduction and growth initiatives.

Quanex remains very positive on the long-term growth prospects of its markets
and expects to continue to invest for its future through both organic growth
initiatives and acquisitions.

Conference Call Information

Quanex will host its conference call today, December 18, 2013 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
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. 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
Annual Report on Form 10-K for the fiscal year ended October 31, 2012, under
the Securities Exchange Act of 1934 ("Exchange Act"), in particular the
section titled, "Private Securities Litigation Reform Act" contained therein,
and subsequently filed Exchange Act reports.

           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 October                         Twelve Months Ended October
31,                                                31,
2013          2012                                 2013          2012
                                                                  
 $ 275,297     $ 235,048   Net sales                $ 952,642     $ 828,976
 222,242       193,302     Cost of sales            799,077       703,844
 26,262        30,641      Selling, general and     109,325       111,577
                           administrative
 27,115        9,215       Depreciation and         60,504        37,596
                           amortization
 1,465         912         Asset impairment         1,465         912
                           charges
 (1,787)       978         Operating income (loss)  (17,729)      (24,953)
 (145)         (106)       Interest expense         (640)         (454)
 296           23          Other, net               168           222
 (1,636)       895         Income (loss) before     (18,201)      (25,185)
                           income taxes
 430           73          Income tax benefit       6,498         8,651
                           (expense)
 $ (1,206)     $ 968       Net income (loss)        $ (11,703)    $ (16,534)
                                                                  
                           Earnings (loss) per                    
                           common share:
 $ (0.03)      $ 0.03      Basic                    $ (0.32)      $ (0.45)
 $ (0.03)      $ 0.03      Diluted                  $ (0.32)      $ (0.45)
                                                                  
                           Weighted average common                
                           shares outstanding:
 36,941        36,737      Basic                    36,864        36,622
 36,941        37,322      Diluted                  36,864        36,622
                                                                  
 $ 0.04        $ 0.04      Cash dividends per       $ 0.16        $ 0.16
                           share
                                                                  

 
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                               
                                                               
                                             October 31, 2013 October 31, 2012
Assets                                                         
Cash and cash equivalents                     $ 49,736         $ 71,255
Accounts receivable, net                      98,833           85,644
Inventories, net                              58,316           65,904
Deferred income taxes                         22,786           20,439
Prepaid and other current assets              6,612            7,628
Total current assets                          236,283          250,870
Property, plant and equipment, net            157,219          168,877
Deferred income taxes                         13,444           8,911
Goodwill                                      71,866           68,331
Intangible assets, net                        78,962           78,380
Other assets                                  14,041           14,169
Total assets                                  $ 571,815        $ 589,538
                                                               
Liabilities and stockholders' equity                           
Accounts payable                              $ 76,900         $ 80,985
Accrued liabilities                           44,785           46,459
Current maturities of long-term debt          183              368
Total current liabilities                     121,868          127,812
Long-term debt                                752              1,033
Deferred pension and postretirement benefits  3,712            6,873
Liability for uncertain tax positions         5,396            6,736
Non-current environmental reserves            9,255            9,827
Other liabilities                             14,638           15,430
Total liabilities                             155,621          167,711
Total stockholders' equity                    416,194          421,827
Total liabilities and stockholders' equity    $ 571,815        $ 589,538
                                                               

 
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
                                                                
                                                                
                                               Twelve Months Ended October 31,
                                               2013            2012
Operating activities:                                           
Net loss                                        $ (11,703)      $ (16,534)
Adjustments to reconcile net loss to cash                       
provided by operating activities:
Depreciation and amortization                   60,504          37,596
Loss (gain) on disposition of property assets   449             (989)
Stock-based compensation                        4,910           4,403
Deferred income tax benefit                     (8,288)         (9,843)
Excess tax benefit from share-based             (236)           (496)
compensation
Asset impairment charges                        1,465           912
Restructuring charges                           —               (122)
Other, net                                      781             2,638
Changes in assets and liabilities, net of                       
effects from acquisitions and dispositions:
Decrease (increase) in accounts receivable      (9,204)         (4,250)
Decrease (increase) in inventory                12,791          (10,288)
Decrease (increase) in other current assets     1,622           (50)
Increase (decrease) in accounts payable         (5,903)         14,920
Increase (decrease) in accrued liabilities      (7,473)         8,539
Increase (decrease) in income taxes             1,708           (547)
Increase (decrease) in deferred pension and     (164)           (693)
postretirement benefits
Increase (decrease) in other long-term          1,574           678
liabilities
Other, net                                      688             604
Cash provided by operating activities           43,521          26,478
Investing activities:                                           
Acquisitions, net of cash acquired              (22,096)        — 
Capital expenditures                            (37,931)        (42,871)
Proceeds from disposition of capital assets     340             44
Proceeds from property insurance claim          —               1,123
Cash used for investing activities              (59,687)        (41,704)
Financing activities:                                           
Borrowings under credit facility                23,500          — 
Repayments of credit facility borrowings        (23,500)        — 
Repayments of other long-term debt              (557)           (264)
Common stock dividends paid                     (5,931)         (5,891)
Issuance of common stock                        2,583           3,015
Excess tax benefit from share-based             236             496
compensation
Debt issuance costs                             (1,200)         — 
Purchase of treasury stock                      —               (1,284)
Cash used for financing activities              (4,869)         (3,928)
                                                                
Effect of exchange rate changes on cash and     (484)           790
equivalents
                                                                
Decrease in cash and equivalents                (21,519)        (18,364)
Cash and equivalents at beginning of period     71,255          89,619
Cash and equivalents at end of period           $ 49,736        $ 71,255
                                                                

QUANEX BUILDING PRODUCTS CORPORATION
SEGMENT INFORMATION
(In thousands)
(Unaudited)
                                                                  
                                                                  
Three Months Ended October                         Twelve Months Ended October
31,                                                31,
2013          2012                                 2013          2012
                           Net Sales:                             
 $ 166,879     $ 136,355   Engineered Products      $ 554,980     $ 478,578
 110,888       101,298     Aluminum Sheet Products  410,380       362,315
 277,767       237,653     Building Products        965,360       840,893
                                                                  
 (2,470)       (2,605)     Eliminations             (12,718)      (11,917)
                                                                  
 $ 275,297     $ 235,048   Net Sales                $ 952,642     $ 828,976
                                                                  
                           Operating Income (Loss)                
 $ 18,021      $ 13,541    Engineered Products      $ 45,324      $ 28,490
 4,191         (885)       Aluminum Sheet Products  (996)         (17,098)
 22,212        12,656      Building Products        44,328        11,392
                                                                  
 (23,999)      (11,678)    Corporate & Other        (62,057)      (36,345)
                                                                  
 $ (1,787)     $ 978       Operating Income (Loss)  $ (17,729)    $ (24,953)
                                                                  

 
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
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 October 31, 2013                    Twelve Months Ended October 31, 2013
Engineered Aluminum  Corporate                         Engineered Aluminum  Corporate  
           Sheet     &                                            Sheet     &
Products   Products  Other     Quanex                  Products   Products  Other     Quanex
                                $ (1,206) Net income                                   $ (11,703)
                                          (loss)
                                          Income tax
                                (430)     expense                                      (6,498)
                                          (benefit)
                                (296)     Other, net                                   (168)
                                145       Interest                                     640
                                          expense
                                          Operating
 18,021     4,191     (23,999)  (1,787)   income        45,324     (996)     (62,057)  (17,729)
                                          (loss)
                                          Depreciation
 7,731      1,810     17,574    27,115    and           31,368     6,983     22,153    60,504
                                          amortization
 25,752     6,001     (6,425)   25,328    EBITDA        76,692     5,987     (39,904)  42,775
                                                                                       
                                                                                       
                                                                                       
Three Months Ended October 31, 2012                    Twelve Months Ended October 31, 2012
Engineered Aluminum  Corporate                         Engineered Aluminum  Corporate  
           Sheet     &                                            Sheet     &
Products    Products Other     Quanex                  Products   Products  Other     Quanex
                                $ 968     Net income                                   $ (16,534)
                                          (loss)
                                          Income tax
                                (73)      expense                                      (8,651)
                                          (benefit)
                                (23)      Other, net                                   (222)
                                106       Interest                                     454
                                          expense
                                          Operating
 13,541     (885)     (11,678)  978       income        28,490     (17,098)  (36,345)  (24,953)
                                          (loss)
                                          Depreciation
 7,154      1,467     594       9,215     and           28,115     7,621     1,860     37,596
                                          amortization
 20,695     582       (11,084)  10,193    EBITDA        56,605     (9,477)   (34,485)  12,643
                                                                                       
                                                                                       
Financial Statistics as of                                                             
October 31, 2013
Book value per common share:   $11.20                                                  
Total debt to capitalization:  0.2%                                                    
Return on invested capital:    -2.7%                                                   
Actual number of common shares 37,165,254                                              
outstanding: 

 
 
QUANEX BUILDING PRODUCTS CORPORATION
Supplemental Financial Disclosures
(In millions, except spread per pound)
(Unaudited)
                                                                       
Engineered Products Group (EPG) is focused on providing window and door OEMs
with fenestration components, products, and systems. Key end market are
residential remodeling and replacement (R&R) and new home construction.
                                                                       
                                                                       
                     Q4 2013   Q4 2012   Change   FY 2013   FY 2012   Change
                     (In millions)
Net sales             $ 166.9   $ 136.4   $ 30.5   $ 555.0   $ 478.6   $ 76.4
Operating income      18.0      13.5      4.5      45.3      28.0      17.3
EBITDA                $ 25.8    $ 20.7    $ 5.1    $ 76.7    $ 57.0    $ 19.7
                                                                       
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.
                                                                       
                                                                       
                     Q4 2013   Q4 2012   Change   FY 2013   FY 2012   Change
                     (In millions, except for spread)
Net sales             $ 110.9   $ 101.3   $ 9.6    $ 410.4   $ 362.3   $ 48.1
Operating income      4.2       (0.9)     5.1      (1.0)     (17.1)    16.1
(loss)
EBITDA                6.0       0.6       5.4      6.0       (9.5)     15.5
Shipped pounds        83        73        10       296       253       43
Spread per pound      $ 0.42    $ 0.41    $ 0.01   $ 0.41    $ 0.41    $ -- 
                                                                       
                                                                       
Corporate & Other Items
                     Q4 2013   Q4 2012   Change   FY 2013   FY 2012   Change
                     (In millions)
ERP implementation    $ 5.2     $ 2.7     $ 2.5    $ 16.3    $ 6.9     $ 9.4
costs
ERP accelerated       15.3      --        15.3     15.3      --        15.3
depreciation
LIFO adjustment       (2.6)     (1.7)     (0.9)    (2.6)     (1.7)     (0.9)
Stock-based           1.4       1.8       (0.4)    5.2       5.6       (0.4)
compensation cost
Transaction costs     --        --        --       1.0       --        1.0
Other costs           4.7       8.9       (4.2)    26.9      25.5      1.4
Total corporate       $ 24.0    $ 11.7    $ 12.3   $ 62.1    $ 36.3    $ 25.8
costs
                                                                       

 
QUANEX BUILDING PRODUCTS CORPORATION
PRE-TAX & AFTER TAX PRESENTATION
(In millions, except per share data)
(Unaudited)
 
               Segment Q4 2013            Q4             FY 2013             FY 2012    
                                          2012
Pre-Tax                $MM                $MM            $MM                 $MM        
Presentation
Operating
Income (Loss)           $ (1.8)            $ 1.0          $ (17.7)            $ (25.0)  
As Reported
Benefit
(Reduction) to                                                                          
Operating
Income:
Strike Related Nichols  --                 --             --                  (11.1)    
Facility       EPG      --                 0.7            --                  (8.0)     
Consolidations
IG Warranty    EPG      --                 0.1            --                  0.9       
Reserve
Asset          EPG      (1.5)              (0.9)          (1.5)               (0.9)     
Impairment
Transaction    Corp     --                 --             (1.0)               --        
Related
Discontinued   Corp     (20.0)             (2.3)          (29.7)              (5.0)     
ERP expenses*
LIFO Income    Corp     2.6                1.7            2.6                 1.7       
(Charge)
Operating
Income As               $ 17.1             $ 1.7          $ 11.9              $ (2.6)   
Adjusted
 
               Segment Q4 2013  Q4 2013   Q4     Q4 2012 FY 2013   FY 2013   FY 2012   FY 2012
                                          2012
After-Tax              $MM      EPS       $MM    EPS     $MM       EPS       $MM       EPS
Presentation
Income (Loss)           $ (1.2)  $ (0.03)  $ 1.0  $ 0.03  $ (11.7)  $ (0.32)  $ (16.5)  $ (0.45)
As Reported
Benefit
(Reduction) to                                                                          
EPS:
Strike Related Nichols  --       --        --     --      --        --        (7.3)     (0.20)
Facility       EPG      --       --        0.4    0.01    --        --        (5.3)     (0.14)
Consolidations
IG Warranty    EPG      --       --        0.1    --      --        --        0.6       0.01
Reserve
Asset          EPG      (0.9)    (0.02)    (0.6)  (0.02)  (0.9)     (0.03)    (0.6)     (0.02)
Impairment
Transaction    Corp     --       --        --     --      (0.6)     (0.02)    --        -- 
Related
Discontinued   Corp     (12.9)   (0.33)    (1.5)  (0.04)  (19.1)    (0.51)    (3.3)     (0.09)
ERP expenses
LIFO Income    Corp     1.7      0.04      1.1    0.03    1.7       0.04      1.1       0.03
(Charge)
Diluted
Earnings                $ 10.9   $ 0.28    $ 1.5  $ 0.05  $ 7.2     $ 0.20    $ (1.7)   $ (0.04)
(Loss) As
Adjusted *
 
Notes:
* Q4 2013 and 2013 figures include $15.3M of accelerated depreciation related to ERP
Columns may not add up due to rounding

CONTACT: Financial Contact:
         Marty Ketelaar
         713-877-5402

         Media Contact:
         Valerie Calvert
         713-877-5305

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