Attached files

file filename
8-K - FORM 8-K - Quanex Building Products CORPf8k_082611.htm
EX-99 - EXHIBIT 99.2 - Quanex Building Products CORPexh_992.htm

EXHIBIT 99.1

Quanex Building Products Corporation Fiscal 2011 Third Quarter Results

Performance, Before Certain Special Items, In-Line With Prior Year

Repurchased 169,600 Shares of Common Stock for $2.8 million

Truseal Instituted an Oil Based Raw Material Surcharge

HOUSTON, Aug. 25, 2011 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX), a leading manufacturer of engineered materials, components and systems serving domestic and international window and door OEMs through its Engineered Products and Aluminum Sheet Products groups, today released fiscal 2011 third quarter results for the period ending July 31, 2011. Net sales were $252.4 million, 12% higher than a year ago, due primarily to the acquisition of Edgetech.

Quanex reported diluted earnings from continuing operations of $0.24 per share, which included $0.01 per share from Edgetech's results. The $0.24 per share also included special expense items totaling $0.06 per share. In the third quarter of 2010, diluted earnings from continuing operations were $0.27 per share, which included special expense items of $0.02 per share. Excluding results of Edgetech and special expense items, third quarter 2011 earnings were even to a year ago.

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. Third quarter net sales were $124.1 million, which included $23.7 million of net sales from Edgetech. Excluding Edgetech, net sales were nearly flat compared to the third quarter of 2010, which had the benefit of a $1500 energy efficient window tax credit program. There were no similar tax credits in the third quarter of 2011.

Third quarter operating income was $14.1 million, which included $1.0 million of operating income from Edgetech. Edgetech's results were negatively impacted in the quarter by a step-up in inventory expense of $0.7 million related to the purchase method of accounting. Excluding Edgetech, operating income was equal to the third quarter of 2010 despite headwinds in the end markets. EPG experienced higher raw material costs in the quarter, which were generally offset by higher prices, surcharges and productivity improvements. Truseal, one of the company's warm edge, insulating glass spacer divisions, initiated an oil based raw material surcharge effective May 1. The surcharge helped Truseal offset the rising cost of butyl, a key raw material of the business.

  3rd qtr 2011 3rd qtr 2010
Net sales  $124.1 $101.7
Operating income  $14.1 $13.1
(in millions)    

Quanex believes there is value in measuring its sales performance against industry indexes. EPG compares its sales to US window shipments as reported by Ducker Worldwide, a market intelligence firm. For the 12 months ended July 31, 2011, EPG sales (excluding acquisitions) were down 1% compared to the previous 12 months, versus US window shipments that were down 6%. With the coupling of excellent businesses like Edgetech, the company is confident its long term initiatives will allow EPG to outperform the industry.

Edgetech Integration

With Quanex's purchase of Edgetech, its successful integration into EPG remains a high priority. Excellent progress was made in the quarter and the integration activities remain on schedule. As previously announced, Michael Hovan, Edgetech's past president, assumed the lead role for the sales and marketing team at EPG. A review of that organization's structure was undertaken, and from that evaluation, changes were made to ensure the fullest extent of EPG's value proposition (design/engineering/sales/logistics) is at the disposal of both current and future customers.

Aluminum Sheet Products Group is a leading provider of aluminum sheet through its Nichols Aluminum operation. Key end markets are residential repair & remodel (R&R) and new home construction. Shipments, net sales and operating income in the third quarter were 80 million pounds, $132.1 million and $7.4 million, respectively. Net sales were higher than a year ago due primarily to higher aluminum prices.

Both shipments and operating income were lower compared to the year ago quarter due to weaker demand for residential building & construction sheet. Operating income was further impacted by higher repair & maintenance costs and reduced value-added painted shipments compared to a year ago. Nichols' spread (sales less material costs) was up 13% and 4% from the year ago quarter and the sequential second quarter, respectively, due to aluminum prices that rose faster than material costs.

  3rd qtr 2011 3rd qtr 2010
Net sales  $132.1 $127.6
Operating income $7.4 $8.9
Shipped pounds 80 90
(in millions)    

Nichols Aluminum compares its shipments to the industry's non-can sheet shipments as reported by the Aluminum Association. In the third quarter, Nichols' shipments were down 11% from a year ago, versus Association shipments that were up 4%. Nichols' underperformance is attributed to weaker building and construction demand, where it has a large presence, compared to stronger distribution and transportation demand, where it has a smaller presence.

Corporate and Other Items

Corporate expenses in the quarter were $6.9 million and included, in part, the following items: acquisition related expenses; ERP program expenses; stock based compensation expenses; LIFO expense.

Cash Position

Quanex had a cash balance of $62.4 million and total debt outstanding stood at $1.7 million at the end of the quarter. Cash provided by operating activities from continuing operations for the nine months ended was $9.9 million. The company's $270 million revolving credit facility remained untapped, but due to the facility's EBITDA covenant requirements, the available capacity at quarter end was approximately $204 million. Future uses of cash could be to fund organic growth activities, pay common stock dividends, make acquisitions, and repurchase outstanding shares. During the third quarter, Quanex purchased 169,600 shares of common stock at an average price of $16.42, including commissions. From the end of the third quarter through August 24, the company purchased an additional 239,050 shares of common stock at an average price of $12.21, including commissions.

Business Outlook

Stagnant home construction and R&R activity, high levels of homes available for sale, high unemployment and a tight credit market continues to create a difficult business environment for Quanex. A case for a lack of recovery in the housing market in 2012 continues to build, and the company now anticipates flat to reduced customer demand in the coming quarters. In light of these new expectations, 2011 segment guidance has been reduced at the Aluminum Sheet Products Group.

For 2011, operating income guidance for the Aluminum Sheet Products Group is estimated at about $22 million, compared to previous guidance of about $25 million. The Group earned $30 million in 2010. Operating income in 2011 is down from 2010 due to reduced mill-finished shipments, reduced painted shipments and higher costs, offset somewhat by a higher spread.

For 2011, operating income guidance for the Engineered Products Group is unchanged at about $30 million (excludes an estimated $2 million from Edgetech's results). The Group earned $34 million in 2010. Operating income in 2011 is down from 2010 due to expenses associated with the Group's long term growth initiatives, and higher raw material costs.

Segment guidance excludes certain 2011 expenses that are detailed in the table below:
 

 (in millions)  Quanex
(excluding Edgetech)
 Acquisition
Related Items 
 Total 
Quanex 
       
 Corporate expenses   $ 24.0  $ 4.0  $ 28.0
 LIFO charge (income)   $ 5.0  $ --   $ 5.0
 Capital expenditures   $ 25.0  $ 2.0  $ 27.0

Corporate expenses and capital expenditures include $2 million and $6 million, respectively, of costs associated with the launch of Quanex's $30 million, multi-year ERP program.

Non-GAAP Financial Measures

Income from Continuing Operations before special items is a non-GAAP financial measure. The company believes this non-GAAP financial measure provides a consistent basis for comparison between periods 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 before special items and diluted earnings per share from continuing operations before special items. 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,
  2011 2010
 (in millions except diluted EPS) 
Income
 Diluted
EPS 

Income
 Diluted 
EPS 
         
Income (loss) from continuing operations,
as reported 
 $ 9.0  $ 0.24  $ 10.4  $ 0.27
         
After tax Non-GAAP adjustments:         
LIFO charge (income)   $ 1.2  $ 0.03  $ 0.6  $ 0.02
Acquisition related costs   $ 0.9  $ 0.02  $ --   $ -- 
ERP program costs   $ 0.2  $ 0.01  $ --   $ -- 
Income from continuing operations,
excluding special items 
 $ 11.3  $ 0.30  $ 11.0  $ 0.29

Organic Growth Initiatives

EPG's organic programs are focused on driving profitable growth through one sales and marketing organization, coupled with the engineering collaboration of its family of businesses: Mikron, Homeshield, Truseal and Edgetech. Activities are focused on both national and regional window and door companies. EPG is also collectively working to develop new products and systems that provide its customers with the latest innovations in energy efficiency.

On September 12-14, 2011, Quanex will be exhibiting at GlassBuild America, the largest gathering of glass, window and door components companies in North America. Quanex will be highlighting its components, products, and systems, as well as communicating its new marketing strategy to national and regional window and door companies. 

Dividend Declared

The Board of Directors declared a quarterly cash dividend of $0.04 per share on the company's common stock, payable September 30, 2011, to shareholders of record on September 15, 2011.

Financial Statistics as of 07/31/11

Book value per common share: $11.80; Total debt to capitalization: 0.4%; Return on invested capital: 2.6%; Actual number of common shares outstanding: 37,312,532.

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;

Return on invested capital – calculated as the total of the prior 12 months net income plus prior 12 months after-tax interest expense and capitalized interest, the sum of which is divided by the trailing five quarters average total debt (current and long term) and total stockholders' equity.

The Quanex Building Products Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1117

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, references to synergies derived from the acquisition of Edgetech, future operating results and financial condition of Quanex and Edgetech and future uses of cash. 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 10-K filing on December 20, 2010, under the Securities Exchange Act of 1934, in particular the section titled, "Private Securities Litigation Reform Act" contained therein.

QUANEX BUILDING PRODUCTS CORPORATION
SEGMENT INFORMATION
(In thousands)
(Unaudited)
         
         
Three months ended
July 31,
  Nine months ended
July 31,
2011 2010   2011 2010
    Net Sales:    
 $124,119  $101,746 Engineered Products   $290,623  $259,272
 132,130  127,600 Aluminum Sheet Products   334,328  326,252
 256,249  229,346 Building Products  624,951  585,524
         
 (3,836)  (4,143) Eliminations  (9,618)  (9,513)
         
 $252,413  $225,203  Net Sales   $615,333  $576,011
         
    Operating Income (Loss):    
 $ 14,146  $ 13,131 Engineered Products   $ 15,411  $ 22,969
 7,417  8,866 Aluminum Sheet Products   14,027  19,732
 21,563  21,997 Building Products  29,438  42,701
         
 (6,926)  (5,798) Corporate and Other  (24,752)  (18,976)
         
 $ 14,637  $ 16,199  Operating Income (Loss)   $ 4,686  $ 23,725
 
 
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
         
         
Three months ended
July 31,
  Nine months ended
July 31,
2011 2010   2011 2010
         
 $252,413  $225,203 Net sales  $615,333  $576,011
 209,667  184,799 Cost of sales (exclusive of items shown separately below)  524,834  478,559
 18,912  17,566 Selling, general and administrative  61,230  52,719
 9,197  6,639 Depreciation and amortization  24,583  21,008
 14,637  16,199 Operating income (loss)  4,686  23,725
 (110)  (106) Interest expense  (341)  (333)
 (311)  997 Other, net  127  2,502
 14,216  17,090 Income (loss) from continuing operations before income taxes  4,472  25,894
 (5,200)  (6,661) Income tax benefit (expense)  (1,573)  (9,998)
         
 9,016  10,429 Income (loss) from continuing operations  2,899  15,896
         
 --   (148) Income (loss) from discontinued operations, net of taxes  (12)  (1,108)
 $ 9,016  $ 10,281 Net income (loss)  $ 2,887  $ 14,788
         
    Basic earnings per common share:    
 $ 0.24  $ 0.28 Earnings (loss) from continuing operations  $ 0.08  $ 0.43
 --   --  Income (loss) from discontinued operations  --   (0.03)
 $ 0.24  $ 0.28 Basic earnings (loss) per share  $ 0.08  $ 0.40
         
    Diluted earnings per common share:    
 $ 0.24  $ 0.27 Earnings (loss) from continuing operations  $ 0.08  $ 0.42
 --   --  Income (loss) from discontinued operations  --   (0.03)
 $ 0.24  $ 0.27 Diluted earnings (loss) per share  $ 0.08  $ 0.39
         
    Weighted average common shares outstanding:    
37,125 37,350 Basic 37,103 37,349
37,684 37,983 Diluted 37,710 37,882
 
 
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
         
         
July 31,
2011
      October 31,
2010
    Assets     
 $ 62,420   Cash and equivalents    $ 187,178
 100,829   Accounts receivable, net    87,007
 65,296   Inventories    45,200
 13,210   Deferred income taxes    10,547
 8,916   Prepaid and other current assets    8,229
 --    Current assets of discontinued operations    462
 250,671   Total current assets    338,623
 157,118   Property, plant and equipment, net    135,517
 8,512   Deferred income taxes    30,563
 69,611   Goodwill    25,189
 91,081   Intangible assets, net    44,668
 17,340   Other assets    16,690
 $594,333   Total assets    $ 591,250
    Liabilities and stockholders' equity    
 $ 75,586   Accounts payable    $ 70,986
 36,856   Accrued liabilities    43,447
 746   Income taxes payable    -- 
 352   Current maturities of long-term debt    327
--   Current liabilities of discontinued operations   30
 113,540   Total current liabilities    114,790
 1,323   Long-term debt    1,616
 4,631   Deferred pension and postretirement benefits    3,667
 11,322   Non-current environmental reserves    12,027
 23,351   Other liabilities    17,718
 154,167   Total liabilities    149,818
 440,166   Total stockholders' equity    441,432
 $594,333   Total liabilities and stockholders' equity    $ 591,250
 
 
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
     
  Nine months ended
July 31,
  2011 2010
Operating activities:    
Net income (loss)  $ 2,887  $ 14,788
(Income) loss from discontinued operations  12  1,108
     
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities from continuing operations:    
Depreciation and amortization  24,635  21,060
Gain on bargain purchase   --  (1,272)
Deferred income taxes  (295)  6,524
Stock-based compensation  3,599  3,218
     
Changes in assets and liabilities, net of effects from acquisitions and dispositions:    
Decrease (increase) in accounts receivable  (4,991)  1,601
Decrease (increase) in inventory  (9,778)  (5,788)
Decrease (increase) in other current assets  244  (889)
Increase (decrease) in accounts payable  (2,801)  7,961
Increase (decrease) in accrued liabilities  (6,879)  5,084
Increase (decrease) in income taxes payable  (1,392)  11,934
Increase (decrease) in deferred pension and postretirement benefits  965  (2,706)
Other, net  3,686  1,533
     
Cash provided by (used for) operating activities from continuing operations  9,892  64,156
     
Cash provided by (used for) operating activities from discontinued operations  (68)  (415)
Cash provided by (used for) operating activities  9,824  63,741
Investing activities:    
Acquisitions, net of cash acquired  (110,845)  (1,590)
Capital expenditures  (16,969)  (11,779)
Proceeds from property insurance claim  --  392
Proceeds from executive life insurance  683  --
Other, net  75  40
Cash provided by (used for) investing activities from continuing operations  (127,056)  (12,937)
Cash provided by (used for) investing activities from discontinued operations  --  90
Cash provided by (used for) investing activities  (127,056)  (12,847)
Financing activities:    
Repayments of long-term debt  (333)  (319)
Common stock dividends paid  (4,500)  (3,775)
Issuance of common stock from stock option exercises, including related tax benefits  1,089  495
Purchase of treasury stock  (4,289)  (2,169)
Other, net  392  (235)
Cash provided by (used for) financing activities from continuing operations  (7,641)  (6,003)
Cash provided by (used for) financing activities from discontinued operations  (392)  235
Cash provided by (used for) financing activities  (8,033)  (5,768)
Effect of exchange rate changes on cash and equivalents  47  23
     
LESS: (Increase) decrease in cash and equivalents from discontinued operations  460  90
Increase (decrease) in cash and equivalents from continuing operations  (124,758)  45,239
Cash and equivalents at beginning of period  187,178  123,499
Cash and equivalents at end of period  $ 62,420  $ 168,738
CONTACT: Financial Contact: Jeff Galow, 713-877-5327;
         Media Contact: Valerie Calvert, 713-877-5305
         www.quanex.com