Quanex Building Products Corporation Reports Second Quarter 2014 Results

Quanex Building Products Corporation Reports Second Quarter 2014 Results    *Net sales increased 8% to $135 million vs. $125 million in Q2 2013   *EBITDA of $5.7 million vs. $1.2 million in Q2 2013   *Net loss from continuing operations of $2.0 million vs. net loss of $6.9     million in Q2 2013  HOUSTON, June 5, 2014 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX), a leading supplier of window and door components, today released results for its second fiscal quarter ended April 30, 2014.  "Despite poor weather throughout much of the second quarter and recent weakness in housing and construction data, we continued to enjoy encouraging growth in all of our product lines," Chairman, President and CEO Bill Griffiths said. "With the seasonally strongest part of the year ahead of us, Quanex is optimistic that it can sustain growth rates in the 8-9 percent range for the full year."  Second quarter 2014 net sales grew to $135 million, an increase of 8% over the second quarter of 2013. Second quarter 2014 operating loss was $2.8 million compared to an operating loss of $8.6 million in the second quarter of 2013. Second quarter 2014 EBITDA was $5.7 million compared to $1.2 million in the second quarter of 2013. Operating loss and EBITDA results were negatively impacted by the inability to pass through a 12% vinyl resin price increase on approximately 60 percent of vinyl shipments as a result of previously agreed to contractual obligations, which will expire at the end of the calendar year. At the same time, repair and maintenance costs were abnormally high during the quarter as Quanex continues to invest in upgrading its vinyl profile equipment and facilities. This is expected to continue into the 3^rd quarter of 2014.  Preliminary U.S. window shipments as reported by Ducker Worldwide, LLC (Ducker), a market intelligence firm, increased 7.4% for the twelve months ended March 31, 2014. North American domestic fenestration sales, the most comparable sales figure to those reported by Ducker, increased 8.1% from the previous twelve months. Industry window shipment growth was driven by a 13.3% increase in new construction units and a 3.7% increase in residential remodeling and replacement units (R&R).  Corporate and Other Items  Second quarter 2014 corporate costs were $6.8 million compared to $14.5 million in the year ago second quarter.Second quarter 2014 results included deferred compensation costs of $0.1 million, compared to a benefit of $0.5 million in the second quarter of 2013.  Second quarter 2014 cash balances totaled $127 million, which included the $110 million received for the sale of Nichols.For the year, cash used by operating activities was $11 million (inclusive of discontinued operation results).There were no outstanding borrowings against the revolving credit facility.  On February 10, 2014, Quanex announced the sale of Nichols to Aleris for $110 million in an all-cash transaction.The transaction was completed on April 1, 2014.  Additional information related to second quarter 2014 results, including a reconciliation of EBITDA (defined as net income or loss before interest, taxes, depreciation and amortization and other, net) and to its most comparable GAAP figure, can be found in the supplemental schedules accompanying this press release.  Dividend Declared  On May 29, 2014, the Board of Directors declared a quarterly cash dividend of $0.04 per share on the company's common stock, payable June 30, 2014, to shareholders of record on June 16, 2014.  2014 Guidance  Ducker is currently forecasting calendar year 2014 U.S. window shipments to increase 7.5%, with new construction increasing 12.5% and R&R increasing 4.2% when compared to 2013 shipments.For fiscal year 2014, Quanex expects revenue to grow approximately 8 to 9 percent over 2013 results. Given the margin headwinds in the vinyl profile business this year, Quanex expects EBITDA to be in a range of $55-$60 million, rather than the previously stated guidance of $55 to $65 million, which included the expected full year results for Nichols Aluminum. The EBITDA guidance assumes no further increases in resin prices for the remainder of 2014.  Corporate expenses during 2014 are expected to total $28-$30 million (excluding transaction and deferred compensation-related costs).Capital expenditures are expected to be $40 million in 2014; $30 million from continuing operations and $10 million from discontinued operations. All capital expenditures will be focused on improvements in growth initiatives, operational efficiency and cost reduction.Depreciation and amortization is expected to be approximately $34 million during 2014.  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, June 5, 2014 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, 2013, under the section entitled "Cautionary Note Regarding Forward-Looking Statements."             For additional information, please visit www.quanex.com.  QUANEX BUILDING PRODUCTS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)                                                                                         Three Months Ended April Six Months Ended April 30,                            30,                           2014         2013        2014         2013                           (In thousands, except per share data) Net sales                  $135,208   $125,140  $261,587   $231,259 Cost and expenses:                                             Cost of sales (excluding depreciation and           108,649     95,730     204,838     179,025 amortization) Selling, general and       20,393      28,202     42,895      52,026 administrative Depreciation and           8,494       9,812      17,038      17,842 amortization Asset impairment charges   500         —           505         — Operating loss             (2,828)     (8,604)    (3,689)     (17,634) Non-operating income                                           (expense): Interest expense           (143)       (174)      (284)       (294) Other, net                 (22)        9          74          (82) Loss from continuing operations before income   (2,993)     (8,769)    (3,899)     (18,010) taxes Income tax benefit         963         1,906      658         5,977 Loss from continuing       (2,030)     (6,863)    (3,241)     (12,033) operations Income (loss) from discontinued operations,   22,161      (485)      19,472      (3,433) net of taxes Net income (loss)          $20,131    $(7,348)  $16,231    $(15,466)                                                               Basic earnings (loss) per                                      common share: Loss per share from        $(0.05)    $(0.19)   $(0.09)    $(0.33) continuing operations Earnings (loss) per share from discontinued          0.59        (0.01)     0.53        (0.09) operations Earnings (loss) per share, $0.54      $(0.20)   $0.44      $(0.42) basic                                                               Diluted earnings (loss)                                        per common share: Loss per share from        $(0.05)    $(0.19)   $(0.09)    $(0.33) continuing operations Earnings (loss) per share from discontinued          0.58        (0.01)     0.52        (0.09) operations Earnings (loss) per share, $0.53      $(0.20)   $0.43      $(0.42) diluted                                                               Weighted-average common                                        shares outstanding: Basic                      37,217      36,850     37,108      36,830 Diluted                    37,838      36,850     37,726      36,830                                                               Cash dividends per share   $0.04      $0.04     $0.08      $0.08   QUANEX BUILDING PRODUCTS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)                                                                                                            April 30, 2014 October 31, 2013                                               (In thousands) ASSETS                                                        Current assets:                                               Cash and cash equivalents                      $126,984     $49,734 Accounts receivable, net                       52,335        59,460 Inventories, net                               54,986        41,679 Deferred income taxes                          20,502        16,348 Prepaid and other current assets               5,068         4,912 Current assets of discontinued operations      —              64,151 Total current assets                           259,875       236,284 Property, plant and equipment, net             111,906       106,821 Deferred income taxes                          7,004         7,030 Goodwill                                       72,411        71,866 Intangible assets, net                         75,106        78,962 Other assets                                   5,638         5,572 Non-current assets of discontinued operations  —              65,283 Total assets                                   $531,940     $571,818                                                              LIABILITIES AND STOCKHOLDERS' EQUITY                          Current liabilities:                                          Accounts payable                               $42,134      $37,533 Accrued liabilities                            31,262        34,810 Income taxes payable                           998           — Current maturities of long-term debt           178           162 Current liabilities of discontinued operations —              49,364 Total current liabilities                      74,572        121,869 Long-term debt                                 593           701 Deferred pension and postretirement benefits   3,935         3,479 Liability for uncertain tax positions          5,481         5,396 Other liabilities                              11,351        14,640 Non-current liabilities of discontinued        —              9,539 operations Total liabilities                              95,932        155,624 Stockholders' equity:                                         Common stock                                   376           377 Additional paid-in-capital                     247,695       247,642 Retained earnings                              190,690       177,456 Accumulated other comprehensive loss           (982)         (2,400) Treasury stock at cost                         (1,771)       (6,881) Total stockholders' equity                     436,008       416,194 Total liabilities and stockholders' equity     $531,940     $571,818   QUANEX BUILDING PRODUCTS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)                                                                                                     Six Months Ended April 30,                                          2014              2013                                          (In thousands) Operating activities:                                       Net Income (loss)                         $16,231         $(15,466) Adjustments to reconcile net income (loss) to cash used for operating                           activities: Depreciation and amortization             20,078           21,196 Stock-based compensation                  1,944            3,408 Deferred income tax provision (benefit)   8,128            (8,740) Excess tax benefit from share-based       (639)            (171) compensation Asset impairment charges                  1,007            ― Gain on sale of discontinued operations   (39,645)         ― Other, net                                1,427            778 Changes in assets and liabilities, net of effects from acquisitions and                               dispositions: (Increase) decrease in accounts           3,964            (6,380) receivable Increase in inventory                     (22,834)         (6,267) (Increase) decrease in other current      (583)            1,046 assets Increase (decrease) in accounts payable   10,127           (4,236) Decrease in accrued liabilities           (6,234)          (7,468) Increase in income taxes payable          1,667            1,766 Increase (decrease) in deferred pension   297              (1,475) and postretirement benefits Increase (decrease) in other long-term    (3,539)          1,066 liabilities Other, net                                (2,419)          160 Cash used for operating activities        (11,023)         (20,783) Investing activities:                                       Proceeds from sale of discontinued        110,000          ― operations Acquisitions, net of cash acquired        (5,161)          (22,096) Capital expenditures                      (18,597)         (24,983) Proceeds from property insurance claim    1,400            ― Proceeds from disposition of capital      304              22 assets Cash provided by (used in) investing      87,946           (47,057) activities Financing activities:                                       Borrowings under credit facility          ―                 14,500 Repayments of credit facility borrowings  ―                 (4,500) Repayments of other long-term debt        (144)            (142) Common stock dividends paid               (2,989)          (2,964) Issuance of common stock                  2,882            694 Excess tax benefit from share-based       639              171 compensation Debt issuance costs                       ―                 (1,163) Other                                     35               ― Cash provided by financing activities     423              6,596                                                            Effect of exchange rate changes on cash   (96)             (383) and cash equivalents                                                            Increase (decrease) in cash and cash      77,250           (61,627) equivalents Cash and cash equivalents at beginning of 49,734           71,255 period Cash and cash equivalents at end of       $126,984        $9,628 period                                                            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                                  (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 April 30, Six Months Ended April 30,                       2014           2013          2014         2013                       (In thousands)               (In thousands) Loss from continuing   $(2,030)     $(6,863)    $(3,241)   $(12,033) operations Income tax benefit     (963)         (1,906)      (658)       (5,977) Other, net             22            (9)          (74)        82 Interest expense       143           174          284         294 Operating loss from    (2,828)       (8,604)      (3,689)     (17,634) continuing operations Depreciation and       8,494         9,812        17,038      17,842 amortization EBITDA                 $5,666       $1,208      $13,349    $208                                                                                                                             Financial Statistics                                           as of April 30, 2014 Book value per common  $11.62                                   share: Total debt to          0.2%                                     capitalization: Return on invested     4.9%                                     capital: Actual number of common shares          37,514,676                               outstanding:   QUANEX BUILDING PRODUCTS CORPORATION PRE-TAX & AFTER TAX PRESENTATION (In millions, except per share data) (Unaudited)                                                                          Pre-Tax      Q2 2014           Q2 2013           FY 2014           FY 2013    Presentation $MM                $MM                $MM                $MM Operating Income (Loss) from  $(2.8)          $(8.6)          $(3.7)          $(17.6)  Continuing Operations As Reported Benefit (Reduction)                                                               to Operating Income: IG Warranty Reserve      ―                ―               (2.8)            ―          Benefit Asset Impairment   0.5              ―               0.5              ―          Charge Transaction Related      ―               ―               0.1              1.0       Expenses Discontinued ERP          0.3              3.7              0.5              5.3       Expenses* Operating Income (Loss) from  $(2.0)          $(4.9)          $(5.4)          $(11.3)  Continuing Operations As Adjusted                                                                                                                                                   After-Tax    Q2 2014  Q2 2014   Q2 2013  Q2 2013   FY 2014  FY 2014   FY 2013   FY 2013 Presentation $MM      EPS       $MM      EPS       $MM      EPS       $MM       EPS Income (Loss) from Continuing   $(2.0) $(0.05) $(6.9) $(0.19) $(3.2) $(0.09) $(12.0) $(0.33) Operations As Reported Benefit (Reduction)                                                               to EPS: IG Warranty Reserve      ―      ―       ―      ―       (2.4)   (0.06)   ―       ― Benefit Asset Impairment   0.4     0.01     ―      ―       0.4     0.01     ―       ― Charge Transaction Related      ―      ―       ―      ―       0.1     0.00     0.7      0.02 Expenses Discontinued 0.2     0.01     3.0     0.08     0.4     0.01     3.6      0.10 ERP Expenses Diluted Earnings (Loss) from Continuing   $(1.4) $(0.04) $(3.9) $(0.11) $(4.7) $(0.12) $(7.7)  $(0.21) Operations As Adjusted *                                                                          * Q2 2014 and YTD 2014 includes $258K and $509k, respectively, of depreciation related to the discontinued SAP project.  CONTACT: Financial Contact:          Marty Ketelaar, 713-877-5402          Media Contact:          Valerie Calvert, 713-877-5305  Quanex Building Products Corporation Logo  
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