Quanex Building Products Announces Second Quarter 2017 Results and Reaffirms Full Year 2017 Guidance
Consolidation of U.S. Vinyl Profiles Business Complete
Solid Margin Performance Continues
Second Quarter 2017 Results Summary
The Company reported net sales of
Net income decreased to
As of
Three Months Ended April 30, 2017 | Three Months Ended April 30, 2016 | |||||||||||||||||||||||
($ in thousands, except per share data) | Results Before Adjustments |
Adjustments | Adjusted Results |
Results Before Adjustments |
Adjustments | Adjusted Results |
||||||||||||||||||
Net sales | $ | 209,133 | $ | - | $ | 209,133 | $ | 229,460 | $ | - | $ | 229,460 | ||||||||||||
Cost of sales (1) | 162,132 | (90 | ) | 162,042 | 176,497 | (90 | ) | 176,407 | ||||||||||||||||
Selling, general and administrative (2) | 26,916 | (353 | ) | 26,563 | 28,591 | 212 | 28,803 | |||||||||||||||||
Restructuring charges (3) | 1,080 | (1,080 | ) | - | - | - | - | |||||||||||||||||
EBITDA | 19,005 | 1,523 | 20,528 | 24,372 | (122 | ) | 24,250 | |||||||||||||||||
Depreciation and amortization (4) | 14,380 | (1,692 | ) | 12,688 | 13,816 | - | 13,816 | |||||||||||||||||
Operating income (loss) | 4,625 | 3,215 | 7,840 | 10,556 | (122 | ) | 10,434 | |||||||||||||||||
Interest expense | (2,391 | ) | - | (2,391 | ) | (5,633 | ) | - | (5,633 | ) | ||||||||||||||
Other, net (5) | (135 | ) | 155 | 20 | 848 | (835 | ) | 13 | ||||||||||||||||
Income (loss) before income taxes | 2,099 | 3,370 | 5,469 | 5,771 | (957 | ) | 4,814 | |||||||||||||||||
Income tax (expense) benefit (6) | (637 | ) | (1,040 | ) | (1,677 | ) | (1,836 | ) | 304 | (1,532 | ) | |||||||||||||
Net income (loss) | $ | 1,462 | $ | 2,330 | $ | 3,792 | $ | 3,935 | $ | (653 | ) | $ | 3,282 | |||||||||||
Diluted earnings per share | $ | 0.04 | $ | 0.11 | $ | 0.11 | $ | 0.10 | ||||||||||||||||
(1) Cost of sales adjustment relates solely to purchase price accounting inventory step-up impact from HL Plastics acquisition. | ||||||||||||||||||||||||
(2) SG&A adjustments are for acquisition related transaction costs and in 2017, gain on sale of fixed assets related to the closure of the plant in Mexico and a one-time employee benefit adjustment. | ||||||||||||||||||||||||
(3) Restructuring charges relate to the closure of several manufacturing plant facilities. | ||||||||||||||||||||||||
(4) D&A adjustments relate to accelerated amortization for restructured PP&E and intangible assets. | ||||||||||||||||||||||||
(5) Other, net adjustments relate to foreign currency transaction (gains) losses. | ||||||||||||||||||||||||
(6) Effective tax rate reflects impacts of adjustments on a with and without basis. | ||||||||||||||||||||||||
Recent Events
Quanex’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
For more information contact
Non-GAAP Terminology Definitions and Disclaimers
EBITDA (defined as net income or loss before interest, taxes, depreciation and amortization and other, net) and Adjusted EBITDA (defined as EBITDA further adjusted to exclude purchase price accounting inventory step-ups, transaction costs, gain/loss on the sale of fixed assets related to the plant closure in
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, the Company’s future operating results, future financial condition, future uses of cash and other expenditures, expenses and tax rates, expectations relating to Quanex’s industry, and the Company’s future growth, including any guidance discussed in this press release. The statements and guidance set forth in this release are based on current expectations. Actual results or events may differ materially from this release. For a complete discussion of factors that may affect Quanex’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 April 30, | Six Months Ended April 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net sales | $ | 209,133 | $ | 229,460 | $ | 404,229 | $ | 430,928 | ||||||||
Cost of sales | 162,132 | 176,497 | 317,079 | 335,845 | ||||||||||||
Selling, general and administrative | 26,916 | 28,591 | 54,361 | 59,879 | ||||||||||||
Restructuring charges | 1,080 | - | 2,219 | - | ||||||||||||
Depreciation and amortization | 14,380 | 13,816 | 29,786 | 26,786 | ||||||||||||
Operating income | 4,625 | 10,556 | 784 | 8,418 | ||||||||||||
Interest expense | (2,391 | ) | (5,633 | ) | (4,551 | ) | (12,124 | ) | ||||||||
Other, net | (135 | ) | 848 | 526 | (1,513 | ) | ||||||||||
Income (loss) before income taxes | 2,099 | 5,771 | (3,241 | ) | (5,219 | ) | ||||||||||
Income tax (expense) benefit | (637 | ) | (1,836 | ) | 977 | 1,905 | ||||||||||
Net income (loss) | $ | 1,462 | $ | 3,935 | $ | (2,264 | ) | $ | (3,314 | ) | ||||||
Income (loss) per common share, basic | $ | 0.04 | $ | 0.12 | $ | (0.07 | ) | $ | (0.10 | ) | ||||||
Income (loss) per common share, diluted | $ | 0.04 | $ | 0.11 | $ | (0.07 | ) | $ | (0.10 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 34,146 | 33,873 | 34,099 | 33,818 | ||||||||||||
Diluted | 34,769 | 34,449 | 34,099 | 33,818 | ||||||||||||
Cash dividends per share | $ | 0.04 | $ | 0.04 | $ | 0.08 | $ | 0.08 | ||||||||
QUANEX BUILDING PRODUCTS CORPORATION | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
April 30, 2017 | October 31, 2016 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 14,513 | $ | 25,526 | |||||
Accounts receivable, net | 79,735 | 83,625 | |||||||
Inventories, net | 91,675 | 84,335 | |||||||
Prepaid and other current assets | 8,111 | 10,488 | |||||||
Total current assets | 194,034 | 203,974 | |||||||
Property, plant and equipment, net | 213,468 | 198,497 | |||||||
Goodwill | 219,883 | 217,035 | |||||||
Intangible assets, net | 147,231 | 154,180 | |||||||
Other assets | 7,834 | 6,667 | |||||||
Total assets | $ | 782,450 | $ | 780,353 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 41,239 | $ | 47,781 | |||||
Accrued liabilities | 39,639 | 55,101 | |||||||
Income taxes payable | 1,603 | 732 | |||||||
Current maturities of long-term debt | 20,206 | 10,520 | |||||||
Total current liabilities | 102,687 | 114,134 | |||||||
Long-term debt | 266,442 | 259,011 | |||||||
Deferred pension and postretirement benefits | 9,848 | 8,167 | |||||||
Deferred income taxes | 15,372 | 18,322 | |||||||
Other liabilities | 14,670 | 12,888 | |||||||
Total liabilities | 409,019 | 412,522 | |||||||
Stockholders’ equity: | |||||||||
Common stock | 375 | 376 | |||||||
Additional paid-in-capital | 255,119 | 254,540 | |||||||
Retained earnings | 208,629 | 214,047 | |||||||
Accumulated other comprehensive loss | (32,189 | ) | (38,765 | ) | |||||
Treasury stock at cost | (58,503 | ) | (62,367 | ) | |||||
Total stockholders’ equity | 373,431 | 367,831 | |||||||
Total liabilities and stockholders' equity | $ | 782,450 | $ | 780,353 | |||||
QUANEX BUILDING PRODUCTS CORPORATION | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
Six Months Ended April 30, | |||||||||
2017 | 2016 | ||||||||
Operating activities: | |||||||||
Net loss | $ | (2,264 | ) | $ | (3,314 | ) | |||
Adjustments to reconcile net loss to cash provided by operating activities: | |||||||||
Depreciation and amortization | 29,786 | 26,786 | |||||||
Stock-based compensation | 3,222 | 3,830 | |||||||
Deferred income tax | (4,233 | ) | (4,253 | ) | |||||
Excess tax benefit from share-based compensation | (98 | ) | (1 | ) | |||||
Other, net | 1,355 | 1,503 | |||||||
Changes in assets and liabilities, net of effects from acquisitions: | |||||||||
Decrease in accounts receivable | 4,564 | 3,059 | |||||||
Increase in inventory | (6,593 | ) | (5,181 | ) | |||||
Increase in other current assets | (506 | ) | (1,527 | ) | |||||
Decrease in accounts payable | (7,170 | ) | (157 | ) | |||||
Decrease in accrued liabilities | (8,426 | ) | (1,769 | ) | |||||
Increase in income taxes payable | 3,215 | 3,394 | |||||||
Increase in deferred pension and postretirement benefits | 1,682 | 1,659 | |||||||
Increase in other long-term liabilities | 945 | 695 | |||||||
Other, net | 195 | (136 | ) | ||||||
Cash provided by operating activities | 15,674 | 24,588 | |||||||
Investing activities: | |||||||||
Acquisitions, net of cash acquired | (8,497 | ) | (245,904 | ) | |||||
Capital expenditures | (17,550 | ) | (17,419 | ) | |||||
Proceeds from disposition of capital assets | 593 | 935 | |||||||
Cash used for investing activities | (25,454 | ) | (262,388 | ) | |||||
Financing activities: | |||||||||
Borrowings under credit facilities | 53,500 | 332,800 | |||||||
Repayments of credit facility borrowings | (52,250 | ) | (79,775 | ) | |||||
Debt issuance costs | - | (8,713 | ) | ||||||
Repayments of other long-term debt | (1,363 | ) | (1,165 | ) | |||||
Common stock dividends paid | (2,749 | ) | (2,731 | ) | |||||
Issuance of common stock | 1,726 | 3,042 | |||||||
Excess tax benefit from share-based compensation | 98 | 1 | |||||||
Cash (used for) provided by financing activities | (1,038 | ) | 243,459 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (195 | ) | 217 | ||||||
(Decrease) increase in cash and cash equivalents | (11,013 | ) | 5,876 | ||||||
Cash and cash equivalents at beginning of period | 25,526 | 23,125 | |||||||
Cash and cash equivalents at end of period | $ | 14,513 | $ | 29,001 | |||||
QUANEX BUILDING PRODUCTS CORPORATION | ||||||||||||||||||||
SELECTED SEGMENT DATA | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
This table provides operating income (loss), EBITDA, and Adjusted EBITDA by reportable segment. Non-operating expense and income tax expense are not allocated to the reportable segments. | ||||||||||||||||||||
NA Engineered Components |
EU Engineered Components |
NA Cabinet Components |
Unallocated Corp & Other |
Total | ||||||||||||||||
Three months ended April 30, 2017 | ||||||||||||||||||||
Net sales | $ | 116,410 | $ | 34,205 | $ | 59,147 | $ | (629 | ) | $ | 209,133 | |||||||||
Cost of sales | 88,424 | 23,764 | 50,281 | (337 | ) | 162,132 | ||||||||||||||
Selling, general and administrative | 13,466 | 5,198 | 4,401 | 3,851 | 26,916 | |||||||||||||||
Restructuring charges | 914 | - | 166 | - | 1,080 | |||||||||||||||
Depreciation and amortization | 8,669 | 2,306 | 3,265 | 140 | 14,380 | |||||||||||||||
Operating income (loss) | 4,937 | 2,937 | 1,034 | (4,283 | ) | 4,625 | ||||||||||||||
Depreciation and amortization | 8,669 | 2,306 | 3,265 | 140 | 14,380 | |||||||||||||||
EBITDA | 13,606 | 5,243 | 4,299 | (4,143 | ) | 19,005 | ||||||||||||||
Transaction related costs | - | - | - | 232 | 232 | |||||||||||||||
Mexico restructuring, gain on sale of fixed assets | - | - | (67 | ) | - | (67 | ) | |||||||||||||
One-time employee benefit adjustment | - | - | 188 | - | 188 | |||||||||||||||
PPA-Inventory Step-up | - | 90 | - | - | 90 | |||||||||||||||
Restructuring charges | 914 | - | 166 | - | 1,080 | |||||||||||||||
Adjusted EBITDA | $ | 14,520 | $ | 5,333 | $ | 4,586 | $ | (3,911 | ) | $ | 20,528 | |||||||||
Adjusted EBITDA Margin % | 12.5 | % | 15.6 | % | 7.8 | % | 9.8 | % | ||||||||||||
Three months ended April 30, 2016 | ||||||||||||||||||||
Net sales | $ | 134,519 | $ | 36,965 | $ | 59,555 | $ | (1,579 | ) | $ | 229,460 | |||||||||
Cost of sales | 101,193 | 25,518 | 50,801 | (1,015 | ) | 176,497 | ||||||||||||||
Selling, general and administrative | 16,456 | 5,890 | 4,233 | 2,012 | 28,591 | |||||||||||||||
Depreciation and amortization | 7,153 | 2,393 | 4,129 | 141 | 13,816 | |||||||||||||||
Operating income (loss) | 9,717 | 3,164 | 392 | (2,717 | ) | 10,556 | ||||||||||||||
Depreciation and amortization | 7,153 | 2,393 | 4,129 | 141 | 13,816 | |||||||||||||||
EBITDA | 16,870 | 5,557 | 4,521 | (2,576 | ) | 24,372 | ||||||||||||||
Transaction related costs | - | - | - | (212 | ) | (212 | ) | |||||||||||||
PPA-Inventory Step-up | - | 90 | - | - | 90 | |||||||||||||||
Adjusted EBITDA | $ | 16,870 | $ | 5,647 | $ | 4,521 | $ | (2,788 | ) | $ | 24,250 | |||||||||
Adjusted EBITDA Margin % | 12.5 | % | 15.3 | % | 7.6 | % | 10.6 | % | ||||||||||||
Six months ended April 30, 2017 | ||||||||||||||||||||
Net sales | $ | 227,483 | $ | 65,774 | $ | 112,144 | $ | (1,172 | ) | $ | 404,229 | |||||||||
Cost of sales | 174,817 | 46,302 | 96,518 | (558 | ) | 317,079 | ||||||||||||||
Selling, general and administrative | 27,201 | 9,970 | 8,511 | 8,679 | 54,361 | |||||||||||||||
Restructuring charges | 1,480 | - | 739 | - | 2,219 | |||||||||||||||
Depreciation and amortization | 18,747 | 4,362 | 6,400 | 277 | 29,786 | |||||||||||||||
Operating income (loss) | 5,238 | 5,140 | (24 | ) | (9,570 | ) | 784 | |||||||||||||
Depreciation and amortization | 18,747 | 4,362 | 6,400 | 277 | 29,786 | |||||||||||||||
EBITDA | 23,985 | 9,502 | 6,376 | (9,293 | ) | 30,570 | ||||||||||||||
Transaction related costs | - | - | - | 292 | 292 | |||||||||||||||
Mexico restructuring, loss on sale of fixed assets | - | - | 190 | - | 190 | |||||||||||||||
One-time employee benefit adjustment | - | - | 188 | - | 188 | |||||||||||||||
PPA-Inventory Step-up | - | 104 | - | - | 104 | |||||||||||||||
Restructuring charges | 1,480 | - | 739 | - | 2,219 | |||||||||||||||
Adjusted EBITDA | $ | 25,465 | $ | 9,606 | $ | 7,493 | $ | (9,001 | ) | $ | 33,563 | |||||||||
Adjusted EBITDA Margin % | 11.2 | % | 14.6 | % | 6.7 | % | 8.3 | % | ||||||||||||
Six months ended April 30, 2016 | ||||||||||||||||||||
Net sales | $ | 255,567 | $ | 70,033 | $ | 108,080 | $ | (2,752 | ) | $ | 430,928 | |||||||||
Cost of sales | 194,921 | 49,165 | 93,340 | (1,581 | ) | 335,845 | ||||||||||||||
Selling, general and administrative | 30,978 | 11,474 | 8,331 | 9,096 | 59,879 | |||||||||||||||
Depreciation and amortization | 14,361 | 4,851 | 7,274 | 300 | 26,786 | |||||||||||||||
Operating income (loss) | 15,307 | 4,543 | (865 | ) | (10,567 | ) | 8,418 | |||||||||||||
Depreciation and amortization | 14,361 | 4,851 | 7,274 | 300 | 26,786 | |||||||||||||||
EBITDA | 29,668 | 9,394 | 6,409 | (10,267 | ) | 35,204 | ||||||||||||||
Transaction related costs | - | - | - | 4,878 | 4,878 | |||||||||||||||
PPA-Inventory Step-up | - | 284 | 2,287 | - | 2,571 | |||||||||||||||
Adjusted EBITDA | $ | 29,668 | $ | 9,678 | $ | 8,696 | $ | (5,389 | ) | $ | 42,653 | |||||||||
Adjusted EBITDA Margin % | 11.6 | % | 13.8 | % | 8.0 | % | 9.9 | % | ||||||||||||
QUANEX BUILDING PRODUCTS CORPORATION | ||||||||||||||||||||
SALES ANALYSIS | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Sales Bridge for Three Months Ended April 30, 2017 | ||||||||||||||||||||
NA Engineered | EU Engineered | NA Cabinet | Unallocated | |||||||||||||||||
Components | Components | Components | Corporate & Other | Consolidated | ||||||||||||||||
Net sales, three months ended April 30, 2016 | $ | 134,519 | $ | 36,965 | $ | 59,555 | $ | (1,579 | ) | $ | 229,460 | |||||||||
Market volume | (1,129 | ) | 1,778 | 4,986 | 950 | 6,585 | ||||||||||||||
Eliminated products | (18,841 | ) | (642 | ) | (5,391 | ) | - | (24,874 | ) | |||||||||||
Price changes | 276 | 256 | 593 | - | 1,125 | |||||||||||||||
Foreign currency impacts | - | (4,152 | ) | - | - | (4,152 | ) | |||||||||||||
Raw material pass through adjustments | 1,585 | - | (596 | ) | - | 989 | ||||||||||||||
Net Sales, three months ended April 30, 2017 | $ | 116,410 | $ | 34,205 | $ | 59,147 | $ | (629 | ) | $ | 209,133 | |||||||||
Sales Bridge for Six Months Ended April 30, 2017 | ||||||||||||||||||||
NA Engineered | EU Engineered | NA Cabinet | Unallocated | |||||||||||||||||
Components | Components | Components | Corporate & Other | Consolidated | ||||||||||||||||
Net sales, six months ended April 30, 2016 | $ | 255,567 | $ | 70,033 | $ | 108,080 | $ | (2,752 | ) | $ | 430,928 | |||||||||
Market volume | (696 | ) | 5,342 | 10,143 | 1,580 | 16,369 | ||||||||||||||
Eliminated products | (29,806 | ) | (642 | ) | (6,493 | ) | - | (36,941 | ) | |||||||||||
Price changes | 265 | 91 | 1,009 | - | 1,365 | |||||||||||||||
Foreign currency impacts | - | (9,050 | ) | - | - | (9,050 | ) | |||||||||||||
Raw material pass through adjustments | 2,153 | - | (595 | ) | - | 1,558 | ||||||||||||||
Net Sales, six months ended April 30, 2017 | $ | 227,483 | $ | 65,774 | $ | 112,144 | $ | (1,172 | ) | $ | 404,229 | |||||||||