Quanex Building Products Announces First Quarter 2016 Results and Reaffirms Full Year 2016 Guidance
Margin Expansion Led by Improvement in North America Vinyl Profiles Business
Significant EBITDA Contribution from HL Plastics & Woodcraft Acquisitions
First Quarter 2016 Highlights
- Adjusted EBITDA* increased to
$18.2 million compared to$2.6 million in Q1 2015 - Adjusted EBITDA* margin improved by ~700 basis points to 9% vs. Q1 2015
- Adjusted net loss* from continuing operations of
($0.8) million , or($0.02) per diluted share vs. adjusted net loss of($3.0) million , or($0.08) per diluted share in Q1 2015 - Pro forma net debt/adjusted EBITDA* leverage ratio improved by 0.2x to 2.7x since closing the Woodcraft acquisition on
November 2, 2015
*Adjusted EBITDA excludes selected items related to transaction costs and a purchase price accounting inventory step-up at Woodcraft. Adjusted net loss excludes a foreign currency transaction loss in addition to the aforementioned selected items.
Quanex generated net sales of
EBITDA for the three months ending
The Company reported a net loss from continuing operations of
Additional information related to first quarter 2016 results, including a reconciliation of EBITDA (defined as net income or loss before interest, taxes, depreciation and amortization and other, net), Adjusted EBITDA and Adjusted Net Loss to their most comparable GAAP measures, can be found in the supplemental schedules accompanying this press release.
Recent Events
The stockholders approved each of the following proposals voted on at the Company’s annual meeting held on
- Election of Directors -
William C. Griffiths andLeRoy D. Nosbaum were elected to serve as Class III directors on the Quanex Board of Directors until the Company’s Annual Meeting of Stockholders in 2019 - Advisory Vote Approving Named Executive Officer Compensation - the stockholders approved the Company’s executive officer compensation structure
- Amendment to Certificate of Incorporation to Declassify Board of Directors - Quanex’s Certificate of Incorporation was amended to declassify the Company’s Board of Directors over a three-year period commencing at the 2017 Annual Meeting of Stockholders
- Amendment to Certificate of Incorporation to Set Supermajority Voting Provisions - Quanex’s Certificate of Incorporation was amended to set certain “supermajority voting provisions” with respect to amendments to the Certificate of Incorporation and Bylaws at 66 2/3% of the voting power of the Company’s shares
- Ratification of Appointment of
Grant Thornton LLP as Independent Public Accountants -Grant Thornton LLP was ratified as Quanex’s independent registered public accounting firm for the fiscal year endingOctober 31, 2016
Additionally, the Company’s Board of Directors declared a quarterly cash dividend of
Conference Call and Webcast Information
The Company has scheduled a conference call for
About Quanex
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 repositioning of the Company’s vinyl business, the future 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, including revenue and EBITDA guidance. The statements and guidance set forth 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
QUANEX BUILDING PRODUCTS CORPORATION | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) | |||||||||
(In thousands, except per share data) | |||||||||
(Unaudited) | |||||||||
Three Months Ended January 31, | |||||||||
2016 | 2015 | ||||||||
Net sales | $ | 201,468 | $ | 127,893 | |||||
Cost of sales | 159,348 | 105,804 | |||||||
Selling, general and administrative | 31,288 | 19,496 | |||||||
Depreciation and amortization | 12,970 | 8,208 | |||||||
Operating loss | (2,138 | ) | (5,615 | ) | |||||
Interest expense | (6,491 | ) | (141 | ) | |||||
Other, net | (2,361 | ) | (151 | ) | |||||
Loss before income taxes | (10,990 | ) | (5,907 | ) | |||||
Income tax benefit | 3,741 | 2,813 | |||||||
Loss from continuing operations | (7,249 | ) | (3,094 | ) | |||||
Income from discontinued operations, net of taxes | - | 23 | |||||||
Net loss | $ | (7,249 | ) | $ | (3,071 | ) | |||
Loss per common share: | |||||||||
From continuing operations | $ | (0.21 | ) | $ | (0.09 | ) | |||
From discontinued operations | $ | - | $ | - | |||||
Diluted loss per common share: | |||||||||
From continuing operations | $ | (0.21 | ) | $ | (0.09 | ) | |||
From discontinued operations | $ | - | $ | - | |||||
Weighted average common shares outstanding: | |||||||||
Basic | 33,763 | 35,079 | |||||||
Diluted | 33,763 | 35,079 | |||||||
Cash dividends per share | $ | 0.04 | $ | 0.04 | |||||
QUANEX BUILDING PRODUCTS CORPORATION | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
January 31, 2016 | October 31, 2015 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 27,748 | $ | 23,125 | |||||
Accounts receivable, net | 65,762 | 64,080 | |||||||
Inventories, net | 97,144 | 63,029 | |||||||
Prepaid and other current assets | 10,953 | 7,992 | |||||||
Total current assets | 201,607 | 158,226 | |||||||
Property, plant and equipment, net | 200,494 | 140,672 | |||||||
Deferred income taxes | - | 8,783 | |||||||
Goodwill | 237,229 | 129,770 | |||||||
Intangible assets, net | 174,888 | 120,810 | |||||||
Other assets | 15,644 | 8,529 | |||||||
Total assets | $ | 829,862 | $ | 566,790 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 43,298 | $ | 47,778 | |||||
Accrued liabilities | 34,776 | 37,364 | |||||||
Income taxes payable | 496 | 747 | |||||||
Current maturities of long-term debt | 8,752 | 2,359 | |||||||
Total current liabilities | 87,322 | 88,248 | |||||||
Long-term debt | 312,125 | 55,041 | |||||||
Deferred pension and postretirement benefits | 6,385 | 5,701 | |||||||
Deferred income tax liabilities | 20,956 | - | |||||||
Other liabilities | 22,286 | 22,505 | |||||||
Total liabilities | 449,074 | 171,495 | |||||||
Stockholders’ equity: | |||||||||
Common stock | 376 | 376 | |||||||
Additional paid-in-capital | 250,478 | 250,937 | |||||||
Retained earnings | 213,087 | 222,138 | |||||||
Accumulated other comprehensive loss | (20,074 | ) | (10,049 | ) | |||||
Treasury stock at cost | (63,079 | ) | (68,107 | ) | |||||
Total stockholders’ equity | 380,788 | 395,295 | |||||||
Total liabilities and stockholders' equity | $ | 829,862 | $ | 566,790 |
QUANEX BUILDING PRODUCTS CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Three Months Ended January 31, | ||||||||
2016 | 2015 | |||||||
Operating activities: | ||||||||
Net loss | $ | (7,249 | ) | $ | (3,071 | ) | ||
Adjustments to reconcile net loss to cash provided by (used for) operating activities: | ||||||||
Depreciation and amortization | 12,970 | 8,208 | ||||||
Stock-based compensation | 1,527 | 1,264 | ||||||
Deferred income tax provision | (6,158 | ) | (3,239 | ) | ||||
Excess tax benefit from share-based compensation | (1 | ) | (60 | ) | ||||
Other, net | 1,012 | (478 | ) | |||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | ||||||||
Decrease in accounts receivable | 20,912 | 15,323 | ||||||
Increase in inventory | (4,499 | ) | (2,920 | ) | ||||
Decrease (increase) in other current assets | 1,178 | (12 | ) | |||||
Decrease in accounts payable | (8,305 | ) | (10,298 | ) | ||||
Decrease in accrued liabilities | (11,879 | ) | (10,934 | ) | ||||
Increase (decrease) in income taxes payable | 300 | (58 | ) | |||||
Increase in deferred pension and postretirement benefits | 684 | 520 | ||||||
Increase in other long-term liabilities | 361 | 13 | ||||||
Other, net | (74 | ) | (5 | ) | ||||
Cash provided by (used for) operating activities | 779 | (5,747 | ) | |||||
Investing activities: | ||||||||
Acquisitions, net of cash acquired | (245,946 | ) | - | |||||
Capital expenditures | (8,652 | ) | (7,321 | ) | ||||
Proceeds from property insurance claim | - | 513 | ||||||
Proceeds from disposition of capital assets | 561 | - | ||||||
Cash used in investing activities | (254,037 | ) | (6,808 | ) | ||||
Financing activities: | ||||||||
Borrowings under credit facility | 332,800 | - | ||||||
Repayments of credit facility borrowings | (68,500 | ) | - | |||||
Debt issuance costs | (8,349 | ) | - | |||||
Repayments of other long-term debt | (546 | ) | (23 | ) | ||||
Common stock dividends paid | (1,362 | ) | (1,448 | ) | ||||
Issuance of common stock | 2,920 | - | ||||||
Excess tax benefit from share-based compensation | 1 | 60 | ||||||
Purchase of treasury stock | - | (42,748 | ) | |||||
Cash provided by (used in) financing activities | 256,964 | (44,159 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 917 | 254 | ||||||
Increase (decrease) in cash and cash equivalents | 4,623 | (56,460 | ) | |||||
Cash and cash equivalents at beginning of period | 23,125 | 120,384 | ||||||
Cash and cash equivalents at end of period | $ | 27,748 | $ | 63,924 | ||||
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's management uses to measure its operational performance and assist with financial decision-making. EBITDA is a key metric used by management in determining the value of annual incentive awards for its employees. The Company believes this non-GAAP measure (included under market conditions outlined in our forward-looking guidance) provides a consistent basis for comparison between periods, and will assist investors in understanding our financial performance when comparing our results to other investment opportunities. EBITDA may not be the same as that used by other companies. Quanex does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with US GAAP. | |||||||||
Three Months Ended January 31, | |||||||||
2016 | 2015 | ||||||||
Net loss | $ | (7,249 | ) | $ | (3,071 | ) | |||
Income from discontinued operations, net of taxes | - | (23 | ) | ||||||
Income tax benefit | (3,741 | ) | (2,813 | ) | |||||
Other, net | 2,361 | 151 | |||||||
Interest expense | 6,491 | 141 | |||||||
Operating loss | (2,138 | ) | (5,615 | ) | |||||
Depreciation and amortization | 12,970 | 8,208 | |||||||
EBITDA | $ | 10,832 | $ | 2,593 | |||||
Transaction related costs | 5,090 | - | |||||||
Woodcraft PPA--Inventory Step-up | 2,287 | - | |||||||
EBITDA as adjusted | $ | 18,209 | $ | 2,593 | |||||
EBITDA Margin as adjusted | 9 | % | 2 | % | |||||
Financial Statistics as of January 31, 2016 | |||||||||
Book value per common share: | $ | 11.28 | |||||||
Total debt to capitalization: | 45.7 | % | |||||||
Return on invested capital: | 3.6 | % | |||||||
Actual number of common shares outstanding: | 34,218,744 | ||||||||
QUANEX BUILDING PRODUCTS CORPORATION | |||||||||||||||||
PRE-TAX & AFTER TAX PRESENTATION | |||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Income (Loss) from Continuing Operations As Adjusted and Diluted Earnings (Loss) from Continuing Operations As Adjusted are non-GAAP financial measures that exclude certain charges and credits because Quanex believes that such items are not indicative of its core operating results, are not indicative of trends, and do not provide meaningful comparisons with other reporting periods. The Company believes non-GAAP measures presented (included under market conditions outlined in our forward-looking guidance) provide a consistent basis for comparison between periods, and will assist investors in understanding our financial performance when comparing our results to other investment opportunities. The definition of non-GAAP financial measures used by Quanex may not be the same as that used by other companies. Quanex does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with US GAAP. | |||||||||||||||||
Pre-Tax Presentation | Q1 2016 | Q1 2015 | |||||||||||||||
Loss Before Income Taxes from Continuing Operations As Reported | $ | (10,990 | ) | $ | (5,907 | ) | |||||||||||
Benefit (Reduction) to Operating Income (Loss): | |||||||||||||||||
Transaction Related Expenses | 5,090 | - | |||||||||||||||
Woodcraft PPA--Inventory Step-up | 2,287 | - | |||||||||||||||
Net Foreign Currency Transaction Loss | 2,475 | 182 | |||||||||||||||
Loss Before Income Taxes from Continuing Operations As Adjusted | $ | (1,138 | ) | $ | (5,725 | ) | |||||||||||
Q1 2016 | Q1 2016 | Q1 2015 | Q2 2015 | ||||||||||||||
After-Tax Presentation | EPS | EPS | |||||||||||||||
Loss from Continuing Operations As Reported | $ | (7,249 | ) | $ | (0.21 | ) | $ | (3,094 | ) | $ | (0.09 | ) | |||||
Benefit (Reduction) to EPS: | |||||||||||||||||
Transaction Related Expenses | 3,357 | 0.10 | - | - | |||||||||||||
Woodcraft PPA--Inventory Step-up | 1,508 | 0.04 | - | - | |||||||||||||
Net Foreign Currency Transaction Loss | 1,632 | 0.05 | 121 | 0.01 | |||||||||||||
Loss from Continuing Operations As Adjusted | (752 | ) | $ | (0.02 | ) | (2,973 | ) | $ | (0.08 | ) |
For more information contactScott Zuehlke , Vice President of Investor Relations & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.