Reported $0.17 EPS from Continuing Operations before Special Items
Company Continued to Outperform the Market
Expected Start-Up Cash of $52 million From the Spin / Merger
Transactions
Company Essentially Debt Free, with Financial Wherewithal to Fund Both
Organic and Acquisitive Growth
HOUSTON, June 9, 2008 (PRIME NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) today reported fiscal second quarter 2008 results for the period ending April 30. Diluted earnings from continuing operations were $0.17 per share excluding special items. Including special items of $0.37 per share, diluted earnings from continuing operations were $(0.20) per share.
Income from continuing operations excluding special items was $6.5 million. Special items totaled $13.8 million after-tax, the result of transaction related costs. Income from continuing operations in the year ago quarter was $13.4 million, or $0.34 per diluted share.
Diluted earnings per share were $(0.14) in the quarter versus $0.86 in the second quarter 2007. Net sales for the second quarter 2008 were $207.3 million compared to $238.6 million a year ago.
Fiscal Second Quarter 2008 Highlights
* Quanex Building Products Corporation was spun-off from Quanex Corporation on April 23rd. * Net sales were $207.3 million compared to $174.9 million and $238.6 million in the sequential and year ago quarters, respectively. * SG&A was $43.6 million, and included $25.7 million of corporate transaction related costs, of which $22.8 million were non-cash, stock-based compensation expenses paid by the acquirer of Quanex Corporation. * Cash provided by operating activities from continuing operations was $19.5 million, down from $31.9 million a year ago. * Capital expenditures were $6.9 million in the quarter versus $7.3 million a year ago. * Cash and equivalents totaled $40 million at quarter end.
Selected Financial Information
Fiscal Second Quarter 2008 Financials
($ in millions, except per share data)
2nd qtr 2nd qtr inc/
2008 2007 (dcr)
------ ------ ------
Net sales: $207.3 $238.6 (13%)
Operating income before special items:
9.5 21.3 (55%)
Income from continuing operations before
special items: 6.5 13.4 (51%)
Diluted earnings per common share from
continuing operations before special
items: $ 0.17 $ 0.34 (50%)
Diluted earnings per common share
from continuing operations $(0.20) $ 0.34 --
Fiscal Second Quarter 2008 Commentary
Engineered Products ($ in millions)
2nd qtr 2nd qtr inc/
2008 2007 (dcr)
------ ------ ------
Net Sales $92.5 $103.6 (11%)
Operating Income $ 5.3 $ 9.1 (42%)
Engineered Products is focused on providing window and door customers with value added fenestration products and components. Key market drivers are housing starts and remodeling activity.
"The housing market slowdown continues, with new housing starts off 34% compared to our second quarter last year. Sales held up relatively well, off about 11%, based in part on the strength of our leading customers and new programs, and lower, but more resilient home repair and remodeling expenditures. The combination of a huge inventory overhang of both new and existing home stock, the rise of home foreclosures and a tight credit market is keeping the residential housing market in a depressed state. The U.S. Department of Housing currently estimates a 10 month supply of homes available for sale. The remodeling industry is experiencing a slowdown in activity as well, down some 5% to 10% from a year ago. Engineered Products did see some seasonal improvement in demand over the first quarter, with April booking activity particularly noteworthy, and we look for higher overall sales at the segment in the third quarter. We continue to reduce expense levels in keeping with market realities, and are currently combining two separate facilities at our window and door fenestration components business into a single, more efficient operation. We expect to have this initiative completed by fiscal year end," said Raymond A. Jean, President and Chief Executive Officer.
Aluminum Sheet Products ($ in millions)
2nd qtr 2nd qtr inc/
2008 2007 (dcr)
------ ------ ------
Net Sales $118.3 $139.2 (15%)
Operating Income $ 10.0 $ 16.8 (41%)
Aluminum Sheet Products is a leading provider of common alloy aluminum sheet products for the building and construction, transportation and other consumer durable markets. Key market drivers are housing starts and remodeling activity and together they represent about 65% of the division's sales.
"Our second quarter shipped pounds at Nichols Aluminum were down about 12% from year ago levels, but up some 23% compared to first quarter shipments due to the seasonal increase in the building products markets. Sales price per pound was off about 4% from the year ago period while our spread per pound (selling price less material costs) in the quarter was off about 7% due primarily to a lower mix of value-added painted sheet sales and a lower London Metal Exchange aluminum ingot price compared to a year ago. However, these prices increased during our second quarter and will benefit us going forward. Operating income was negatively impacted by a combination of the drop in shipped pounds, lower painted sheet sales and the weaker spread. During the quarter, we idled the rolling capacity at our Alabama finishing facility and moved that production to our Lincolnshire facility, thereby improving operating rates at the other plants," Jean said.
Cash Flow
"Cash and equivalents at quarter end was $40 million, including some $28 million of the expected $52 million start-up cash, and total debt to capitalization remained minimal at 0.5%. Operating cash flow from continuing operations came in at a very healthy $19.5 million. We continue to closely monitor our working capital, and at quarter end, our conversion cycle was about 31 days. With our healthy cash balance, strong cash flow and $270 million revolving credit facility, we have the financial wherewithal to fund attractive growth opportunities, both organic and acquisition related," said Jean.
Fiscal 2008 Outlook
The Company does not expect any near term improvement in the housing market, with industry prognosticators continuing to push out the timing of the expected trough, now estimated to occur in the fourth calendar quarter of 2008. Housing starts in fiscal 2008 are now expected to lag fiscal 2007 starts by 35% as the market struggles with the high inventory overhang and tougher credit requirements sought by mortgage lenders. However, the Company does expect to see higher demand from its Engineered Products customers in the second half of the fiscal year compared to the first half due to seasonal improvements in the market and the growth of new programs.
At Nichols Aluminum, volumes are expected to lag year ago quarters throughout the remainder of fiscal 2008. Spread per pound at Nichols, however, is expected to be more robust in the second half of the year compared to the first half in keeping with higher anticipated aluminum ingot prices.
The greater than expected intensity and duration of the housing storm makes forecasting particularly difficult. The current roll-up of income expectations by business still indicates the Company will generate around $80 million of operating income before taking into account approximately $20 million of corporate expenses in a normalized run rate. But given the economy's fragile state, the uncertainty attending this forecast is high and the risks remain to the downside. However, the Company does expect to continue to outperform the market and generate significant cash flow, and is well positioned to experience significant operating leverage when the market improves.
Dividend Declared
The Board of Directors previously declared a quarterly cash dividend of $0.03 per share on the Company's common stock, payable June 30, 2008, to shareholders of record on June 16, 2008.
Corporate Profile
Quanex Building Products Corporation is an industry-leading manufacturer of value-added, engineered materials and components serving the building products markets. It is an ROIC-driven company that grows shareholder returns through a combination of organic growth via new products and programs, and strategic acquisitions.
Financial Statistics as of 04/30/08
Book value per common share: $13.97; Total debt to capitalization: 0.5%; Actual number of common shares outstanding: 37,608,153
Non-GAAP Financial Measures
Operating Income and Income From Continuing Operations Excluding Special Items
Operating income and income from continuing operations excluding special items are non-GAAP financial measures. The Company believes these non-GAAP financial measures provide a consistent basis for comparison between quarters and enhance the understanding of the performance of its ongoing operations, as they are not influenced by certain costs incurred during the quarter and are believed to be special and related to specific, infrequent items.
Set forth below is a reconciliation of reported operating income, reported income from continuing operations and reported diluted earnings per share from continuing operations to operating income excluding special items, income from continuing operations excluding special items and diluted earnings per share from continuing operations excluding special items, respectively. 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,
----------------
2008 2007
----------------
(in millions except diluted EPS) Income Income
------ ------
Operating income, as reported $(16.2) $21.3
Reconciling items associated with the Company's
spin-off:
Stock based compensation expense 22.8 --
Transaction costs associated 1.9 --
Executive incentives & other benefits 1.0 --
------ ------
Selling, general & administrative expense
unusual items 25.7 --
------ ------
Operating income, excluding unusual items $ 9.5 $21.3
====== ======
Three months ended April 30,
-------------------------------
2008 2007
-------------- --------------
Diluted Diluted
Income EPS Income EPS
------ ------ ------ ------
Income (loss) from continuing
operations, as reported $(7.3) $(0.20) $13.4 $0.34
After-tax reconciling items
associated with the Company's
spin-off:
Stock based compensation expense 13.7 0.37 -- --
Transaction costs 1.9 0.05 -- --
Executive incentives & other
benefits 0.6 0.01 -- --
------ ------ ------ ------
Selling, general &
administrative expense 16.2 0.43 -- --
Rabbi trust merger consideration (2.4) (0.06) -- --
------ ------ ------ ------
Total after-tax unusual items 13.8 0.37 -- --
------ ------ ------ ------
Income from continuing operations,
excluding special items $ 6.5 $0.17 $13.4 $0.34
====== ====== ====== ======
Diluted weighted average common
shares outstanding (in thousands) 37,265 39,416
Definitions
Book value per common share - calculated as total stockholders' equity as of balance sheet date divided by actual number of common shares outstanding;
Total debt to capitalization - calculated as the sum of both the current and long term portion of debt, as of balance sheet date, divided by the sum of both the current and long term portion of debt plus total stockholders' equity as of balance sheet date.
Statements that use the words "expect," "should," "believe," "will," "might," or similar words reflecting future expectations or beliefs are forward-looking statements. The statements found above 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, and the availability and cost of raw materials. For a more complete discussion of factors that may affect the Company's future performance, please refer to the Company's Registration Statement on Form 10, filed with the SEC on April 4, 2008 pursuant to the Securities Exchange Act of 1934, in particular the section titled, "Special Note About Forward-Looking Statements" contained therein.
For additional information, visit the Company's website at www.quanex.com.
The Quanex Building Products Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=1117
QUANEX BUILDING PRODUCTS CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net sales:
$ 92,494 $103,583 Engineered Products $179,770 $202,452
118,281 139,188 Aluminum Sheet Products 210,348 244,425
-------- -------- -------- --------
210,775 242,771 Building Products 390,118 446,877
(3,437) (4,220) Eliminations (7,868) (7,935)
-------- -------- --------------------- -------- --------
$207,338 $238,551 Net sales $382,250 $438,942
======== ======== ======== ========
Operating income:
$ 5,296 $ 9,087 Engineered Products $ 7,190 $ 12,938
9,982 16,828 Aluminum Sheet Products 15,585 27,416
-------- -------- -------- --------
15,278 25,915 Building Products 22,775 40,354
(31,500) (4,620) Corporate and Other* (40,164) (11,855)
-------- -------- -------- --------
$(16,222) $ 21,295 Operating Income (Loss)* $(17,389) $ 28,499
======== ======== ======== ========
-----------------------
* Corporate and Other and Operating Loss for the three months and six
months ended April 30, 2008 include $25.7 million and $26.4 million,
respectively, of special items associated with the spin-off / merger
transaction.
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
$207,338 $238,551 Net sales $382,250 $438,942
Cost of sales (exclusive of
170,776 191,000 items shown separately below) 317,853 355,147
Selling, general and
43,637 17,196 administrative expense 63,680 36,399
9,147 9,060 Depreciation and amortization 18,106 18,897
-------- -------- -------- --------
(16,222) 21,295 Operating income (loss) (17,389) 28,499
(100) (150) Interest expense (238) (312)
4,242 81 Other, net 4,550 160
-------- -------- -------- --------
Income (loss) before
(12,080) 21,226 income taxes (13,077) 28,347
4,765 (7,849) Income tax expense 5,153 (10,481)
-------- -------- -------- --------
Income (loss) from continuing
(7,315) 13,377 operations (7,924) 17,866
Income (loss) from discontinued
1,982 19,866 operations, net of taxes 5,675 36,031
-------- -------- -------- --------
$ (5,333) $ 33,243 Net income (loss) $ (2,249) $ 53,897
======== ======== ======== ========
Basic earnings per common share:
Earnings (loss) from
$ (0.20) $ 0.36 continuing operations $ (0.21) $ 0.48
Income (loss) from
$ 0.06 $ 0.54 discontinued operations $ 0.15 $ 0.98
-------- -------- -------- --------
Basic earnings (loss)
$ (0.14) $ 0.90 per common share $ (0.06) $ 1.46
-------- -------- -------- --------
Diluted earnings per common share:
Earnings (loss) from
$ (0.20) $ 0.34 continuing operations $ (0.21) $ 0.46
Income (loss) from
$ 0.06 $ 0.52 discontinued operations $ 0.15 $ 0.94
-------- -------- -------- --------
Diluted earnings (loss)
$ (0.14) $ 0.86 per share $ (0.06) $ 1.40
-------- -------- -------- --------
Weighted average common shares
outstanding:
37,265 36,943 Basic 37,215 36,920
37,265 39,416 Diluted 37,215 39,113
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
April 30, October 31,
2008 2007
----------------------------------------------------------------------
Assets
$ 40,450 Cash and equivalents $ 1,778
85,834 Accounts and notes receivable, net 80,095
56,647 Inventories, net 53,556
1,901 Deferred income taxes 5,370
10,349 Other current assets 4,372
-- Current assets of discontinued operations 431,326
---------- --------------------------------------------- ----------
195,181 Total current assets 576,497
165,786 Property, plant and equipment, net 173,590
12,584 Deferred income taxes --
196,372 Goodwill 196,385
64,838 Intangible assets, net 68,199
9,499 Other assets 9,225
-- Assets of discontinued operations 310,926
---------- --------------------------------------------- ----------
$ 644,260 Total assets $1,334,822
========== ============================================== ==========
Liabilities and stockholders' equity
$ 68,614 Accounts payable $ 68,167
32,155 Accrued liabilities 37,102
363 Current maturities of long-term debt 1,464
-- Current liabilities of discontinued operations 242,570
---------- ---------------------------------------------- ----------
101,132 Total current liabilities 349,303
2,388 Long-term debt 2,551
-- Deferred income taxes 34,457
3,458 Non-current environmental reserves 4,239
11,891 Other liabilities 13,889
-- Liabilities of discontinued operations 47,234
---------- ---------------------------------------------- ----------
118,869 Total liabilities 451,673
525,391 Total stockholders' equity 883,149
---------- ---------------------------------------------- ----------
$ 644,260 Total liabilities and stockholders' equity $1,334,822
========== ============================================== ==========
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Six months ended
April 30,
----------------------
2008 2007
---------- ----------
Operating activities:
Net income $ (2,249) $ 53,897
Income from discontinued operations (5,675) (36,031)
---------- ----------
Net income from continuing operations (7,924) 17,866
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 18,111 18,901
Deferred income taxes 2,999 (782)
Stock-based compensation 24,936 3,006
---------- ----------
38,122 38,991
Changes in assets and liabilities, net of
effects from acquisitions, dispositions
and the Separation:
Decrease (Increase) in accounts and notes
receivable (5,896) (12,080)
Decrease (Increase) in inventory (3,127) (8,080)
Decrease (Increase) in other current
assets (4,872) 633
Increase (Decrease) in accounts payable 954 16,184
Increase (Decrease) in accrued
liabilities (2,294) (8,510)
Increase (Decrease) in income taxes
payable (646) (3)
Other, net (2,773) 4,742
---------- ----------
Cash provided by (used for) operating
activities from continuing operations 19,468 31,877
Cash provided by (used for) operating
activities from discontinued operations 25,127 52,507
---------- ----------
Cash provided by (used for) operating
activities 44,595 84,384
---------- ----------
Investment activities:
Capital expenditures, net of retirements (6,941) (7,292)
---------- ----------
Cash provided by (used for) investing
activities from continuing operations (6,941) (7,292)
Cash provided by (used for) investing
activities from discontinued operations 34,113 (107,515)
---------- ----------
Cash provided by (used for) investment
activities 27,172 (114,807)
---------- ----------
Financing activities:
Repayments of long-term debt (1,264) (2,521)
Funding from Separation 27,755 --
Transfers to Quanex Corporation (22,638)
Other, net (290) --
---------- ----------
Cash provided by (used for) financing
activities from continuing operations 26,201 (25,159)
Cash provided by (used for) financing
activities from discontinued operations (46,183) 13,824
---------- ----------
Cash provided by (used for) financing
activities (19,982) (11,335)
---------- ----------
Effect of exchange rate changes on cash
and equivalents (56) 11
LESS: (Increase) Decrease in cash and
equivalents from discontinued operations (13,057) 41,184
---------- ----------
Increase (Decrease) in cash and equivalents
from continuing operations 38,672 (563)
Beginning of period cash and equivalents 1,778 2,247
---------- ----------
End of period cash and equivalents $ 40,450 $ 1,684
========== ==========