Reported $0.32 EPS From Continuing Ops. Before a Non-Cash LIFO Charge
Company Outperformed the Market Via New Program Growth
$54 Million Cash and Equivalents On Balance Sheet
Operating Margin Exceeded 10%
HOUSTON, Aug. 28, 2008 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) today reported fiscal third quarter 2008 results for the period ending July 31. Income from continuing operations was $8.8 million compared to $21.7 million a year ago. Diluted earnings per share from continuing operations were $0.32 excluding an after tax LIFO charge of $3.3 million ($0.08 per share) compared to $0.54 in the third quarter 2007.
Fiscal Third Quarter 2008 Highlights
* David D. Petratis joined Quanex as President and Chief Executive Officer July 1. * Announced Brent L. Korb rejoined the Company as Senior Vice President and Chief Financial Officer effective August 1. * Deborah M. Gadin was promoted to Vice President - Corporate Controller June 16. * Net sales were $240.3 million compared to $269.5 million and $207.3 million in the year ago and sequential quarters, respectively. * Nine months ended cash provided by operating activities from continuing operations was $33.9 million compared to $64.5 million in the year ago period. * Capital expenditures for the nine months ended were $11.5 million versus $11.5 million a year ago. * Cash and equivalents totaled $53.9 million at quarter end. * Recorded a $5.5 million ($3.3 million after tax) LIFO charge primarily associated with the aluminum sheet business.
Selected Financial Information
Fiscal Third Quarter 2008 Financials
($ in millions, except per share data)
3rd qtr 2008 3rd qtr 2007 inc/(dcr)
------------ ------------ ---------
Net sales: $240.3 $269.5 (11%)
Operating income: 14.4 32.3 (55%)
Income from continuing ops: 8.8 21.7 (59%)
Diluted earnings per
share from continuing ops: $0.24 $0.54 (56%)
Fiscal Third Quarter 2008 Commentary
Engineered Products ($ in millions)
3rd qtr 2008 3rd qtr 2007 inc/(dcr)
------------ ------------ ---------
Net Sales: $115.3 $131.4 (12%)
Operating Income: $12.6 $17.7 (29%)
Engineered Products is focused on providing window and door customers with value-added fenestration products and components. Key market drivers are housing starts and remodeling activity.
"We continue to find ourselves in a very difficult housing market, with new home starts off 31% compared to our third quarter last year while remodeling activity is thought to be down about 10%. Our sales at Engineered Products, down about 12%, held up well when you consider the depressed state of these end markets. Our ability to consistently outperform the market is due in part to the strength of new programs and new customers. We also believe our larger window and door customers are making measurable gains selling more window and door products into the home remodeling market, which in turn directly benefits us," said David D. Petratis, president and chief executive officer of Quanex Building Products.
"The housing market continues to suffer from a large inventory of both new and existing homes available for sale, a rise in foreclosures and an ongoing tight credit market. The U.S. Department of Housing currently estimates an 11 months supply of homes available for sale. We did see a meaningful improvement in seasonal demand at Engineered Products, with sales up about 25% over our sequential second quarter. We remained diligent on costs, continued to drive productivity improvements and worked with customers on pricing initiatives in an effort to recover rising raw material costs. The Company disclosed last quarter we were combining two separate facilities at our window and door fenestration components business into a single, more efficient operation. We look to have this consolidation complete by year end," continued Petratis.
Aluminum Sheet Products ($ in millions)
3rd qtr 2008 3rd qtr 2007 inc/(dcr)
------------ ------------ ---------
Net Sales: $130.5 $143.7 (9%)
Operating Income: $12.1 $20.0 (39%)
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 third quarter shipped pounds at Nichols Aluminum were down 11% from year ago levels, but up 3% compared to the second quarter due to the seasonal increase in the building products markets. Nichols' spread (selling price less material costs) per pound in the quarter was down $0.03 from the year ago quarter primarily due to a lower mix of painted sheet sales. Compared to our sequential second quarter, unit sales price and spread were up consistent with higher aluminum ingot prices. Operating income compared to the third quarter 2007 was negatively impacted by a combination of a drop in shipped pounds, lower painted sheet sales and higher freight and energy costs. Compared to the sequential second quarter, operating income per pound was up 17%. In an effort to both further reduce our scrap costs and provide us with a wider range of available scrap, we recently invested in a new, high-torque scrap shredder at the Nichols Casting facility," Petratis said.
Cash Flow
"Our cash and equivalents at quarter end was a robust $54 million. We still have one remaining cash true-up item with Gerdau that involves a tax payment currently estimated to be some $20 million in our favor. Our total debt to capitalization remained minimal at 0.5%. Our year-to-date operating cash flow from continuing operations came in at a very healthy $33.9 million. We continue to closely monitor our working capital, and at quarter end, our conversion cycle was 32 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. On the acquisition front, we are actively evaluating various building products companies, both in the residential and commercial space. While we are experiencing some trepidation on the part of some acquisition candidates to sell at what appears to be the low point in the cycle, we are confident that our proven track record and financial position will enable us to successfully implement our growth strategy," said Petratis.
Fiscal 2008 Outlook
The Company does not expect any near term improvement in the housing market. Housing starts in fiscal 2008 are now expected to lag fiscal 2007 starts by 31% as the market struggles with the high inventory overhang and tougher credit requirements sought by lenders. However, the Company does expect to see higher demand from its Engineered Products customers in the fourth quarter compared to the third quarter based on seasonal improvements in the market, the growth of new programs and the uptick in remodeling activity on the part of customers. At Nichols Aluminum, fourth quarter volumes are expected to lag the year ago quarter by 10%. Spread per pound at Nichols in the fourth quarter is expected to be in line with third quarter spreads.
Forecasting the Company's financial results remains difficult given the current housing environment. The roll-up of income expectations by business indicates the Company will generate around $75 million of operating income before taking into account approximately $20 million of corporate expenses (excluding LIFO) in a normalized run rate. The current outlook for operating income is down $5 million from the previous guidance due primarily to lower spread and volume expectations at Nichols Aluminum. 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.
Non-GAAP Financial Measures
Income from Continuing Operations Excluding LIFO
Income from continuing operations excluding LIFO is a non-GAAP financial measure. The Company believes this non-GAAP financial measure provides a consistent basis for comparison between quarters and enhances the understanding of the performance of its operations.
Set forth below is a reconciliation of reported income from continuing operations and reported diluted earnings per share from continuing operations to income from continuing operations excluding LIFO and diluted earnings per share from continuing operations excluding LIFO. 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,
-----------------------------------------
2008 2007
-------------------- -------------------
Income (in Diluted Income (in Diluted
millions) EPS millions) EPS
----------- ------- ---------- -------
Income from continuing
operations, as reported: $8.8 $0.24 $21.7 $0.54
LIFO charge (income),
after tax $3.3 $0.08 $(0.2) --
----------- ------- ---------- -------
Income from continuing
operations, excluding LIFO $12.1 $0.32 $21.5 $0.54
=========== ======= ========== =======
Diluted weighted average
common shares outstanding
(in thousands) 37,509 39,992
Dividend Declared
The Board of Directors declared a quarterly cash dividend of $0.03 per share on the Company's common stock, payable September 29, 2008, to shareholders of record on September 15, 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 07/31/08
Book value per common share: $14.31; Total debt to capitalization: 0.5%; Actual number of common shares outstanding: 37,627,891
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;
Operating margin -- combined operating income of aluminum sheet products and engineered products divided by net sales.
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.
The Quanex Building Products Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1117
For additional information, visit the Company's website at www.quanex.com.
QUANEX BUILDING PRODUCTS CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Nine months ended
July 31, July 31,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Net sales:
$ 115,261 $ 131,445 Engineered Products $ 295,031 $ 333,898
130,540 143,667 Aluminum Sheet Products 340,889 388,092
---------- ---------- ---------- ----------
245,801 275,112 Building Products 635,920 721,990
(5,463) (5,606) Eliminations (13,332) (13,542)
---------- ---------- ---------- ----------
$ 240,338 $ 269,506 Net sales $ 622,588 $ 708,448
========== ========== ========== ==========
Operating income:
$ 12,590 $ 17,657 Engineered Products $ 19,781 $ 30,595
12,110 19,985 Aluminum Sheet Products 27,695 47,401
---------- ---------- --------- ---------
24,700 37,642 Building Products 47,476 77,996
(10,328) (5,370) Corporate and Other (50,493) (17,225)
---------- ---------- ---------- ----------
$ 14,372 $ 32,272 Operating Income (Loss) $ (3,017) $ 60,771
========== ========== ========== ==========
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
July 31, July 31,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
$ 240,338 $ 269,506 Net sales $ 622,588 $ 708,448
Cost of sales (exclusive of
200,443 210,602 items shown separately below) 518,296 565,749
Selling, general and
17,002 17,952 administrative expense 80,682 54,351
8,521 8,680 Depreciation and amortization 26,627 27,577
--------- --------- --------- ---------
14,372 32,272 Operating income (loss) (3,017) 60,771
(118) (140) Interest expense (356) (452)
326 99 Other, net 4,876 259
--------- --------- --------- ---------
Income (loss) from continuing
14,580 32,231 operations before income taxes 1,503 60,578
(5,762) (10,575) Income tax expense (609) (21,056)
--------- --------- --------- ---------
Income (loss) from continuing
8,818 21,656 operations 894 39,522
Income (loss) from discontinued
-- 16,991 operations, net of taxes 5,675 53,022
--------- --------- --------- ---------
$ 8,818 $ 38,647 Net income (loss) $ 6,569 $ 92,544
========= ========= ========= =========
Basic earnings per common share:
Earnings (loss) from
$ 0.24 $ 0.59 continuing operations $ 0.02 $ 1.07
Income (loss) from
$ -- $ 0.45 discontinued operations $ 0.16 $ 1.43
--------- --------- --------- ---------
Basic earnings (loss) per
$ 0.24 $ 1.04 common share $ 0.18 $ 2.50
--------- --------- --------- ---------
Diluted earnings per common share:
Earnings (loss) from
$ 0.24 $ 0.54 continuing operations $ 0.02 $ 1.00
Income (loss) from
$ -- $ 0.44 discontinued operations $ 0.15 $ 1.38
--------- --------- --------- ---------
Diluted earnings (loss)
$ 0.24 $ 0.98 per share $ 0.17 $ 2.38
--------- --------- --------- ---------
Weighted average common shares
outstanding:
37,333 37,012 Basic 37,255 36,951
37,509 39,992 Diluted 38,896 39,449
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
July 31, October 31,
2008 2007
----------------------------------------------------------------------
Assets
$ 53,932 Cash and equivalents $ 1,778
99,077 Accounts and notes receivable, net 80,095
59,851 Inventories, net 53,556
1,899 Deferred income taxes 5,370
5,116 Other current assets 4,372
-- Current assets of discontinued operations 431,326
---------- ---------------------------------------------- -----------
219,875 Total current assets 576,497
163,142 Property, plant and equipment, net 173,590
12,697 Deferred income taxes --
196,368 Goodwill 196,385
63,550 Intangible assets, net 68,199
8,859 Other assets 9,225
-- Assets of discontinued operations 310,926
---------- ---------------------------------------------- -----------
$ 664,491 Total assets $ 1,334,822
========== ============================================== ===========
Liabilities and stockholders' equity
$ 71,121 Accounts payable $ 68,167
33,217 Accrued liabilities 37,102
4,415 Income taxes payable --
363 Current maturities of long-term debt 1,464
-- Current liabilities of discontinued operations 242,570
---------- ---------------------------------------------- -----------
109,116 Total current liabilities 349,303
2,188 Long-term debt 2,551
-- Deferred income taxes 34,457
2,979 Non-current environmental reserves 4,239
11,675 Other liabilities 13,889
-- Liabilities of discontinued operations 47,234
---------- ---------------------------------------------- -----------
125,958 Total liabilities 451,673
538,533 Total stockholders' equity 883,149
---------- ---------------------------------------------- -----------
$ 664,491 Total liabilities and stockholders' equity $ 1,334,822
========== ============================================== ===========
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Nine months ended
July 31,
--------------------
2008 2007
--------- ---------
Operating activities:
Net income $ 6,569 $ 92,544
Income from discontinued operations (5,675) (53,022)
--------- ---------
Net income from continuing operations 894 39,522
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 26,648 27,584
Deferred income taxes 2,891 81
Stock-based compensation 25,504 3,829
--------- ---------
55,937 71,016
Changes in assets and liabilities, net of
effects from acquisitions, dispositions
and the Separation:
Decrease (Increase) in accounts and notes
receivable (19,147) (10,212)
Decrease (Increase) in inventory (6,337) (1,402)
Decrease (Increase) in other current assets 820 601
Increase (Decrease) in accounts payable 3,461 1,821
Increase (Decrease) in accrued liabilities (1,840) (2,906)
Increase (Decrease) in income taxes payable 3,774 (10)
Other, net (2,741) 5,555
--------- ---------
Cash provided by (used for) operating activities
from continuing operations 33,927 64,463
Cash provided by (used for) operating activities
from discontinued operations 25,127 69,879
--------- ---------
Cash provided by (used for) operating activities 59,054 134,342
--------- ---------
Investing activities:
Capital expenditures, net of retirements (11,529) (11,512)
Other, net (23) --
--------- ---------
Cash provided by (used for) investing activities
from continuing operations (11,552) (11,512)
Cash provided by (used for) investing activities
from discontinued operations 34,113 (111,681)
--------- ---------
Cash provided by (used for) investing activities 22,561 (123,193)
--------- ---------
Financing activities:
Repayments of long-term debt (1,464) (2,721)
Common dividends paid (1,128) --
Funding from Separation 32,735 --
Transfers to Quanex Corporation -- (49,559)
Other, net (293) --
--------- ---------
Cash provided by (used for) financing activities
from continuing operations 29,850 (52,280)
Cash provided by (used for) financing activities
from discontinued operations (46,183) 39,051
--------- ---------
Cash provided by (used for) financing activities (16,333) (13,229)
--------- ---------
Effect of exchange rate changes on cash and
equivalents (71) 44
LESS: (Increase) Decrease in cash and equivalents
from discontinued operations (13,057) 2,751
--------- ---------
Increase (Decrease) in cash and equivalents from
continuing operations 52,154 715
Beginning of period cash and equivalents 1,778 2,247
--------- ---------
End of period cash and equivalents $ 53,932 $ 2,962
========= =========