Quanex Building Products Corporation Fiscal Third Quarter 2010 Operating Results
Earnings From Continuing Operations of $0.27 Per Diluted Share
Company Outperformed Its Blended End Market
$169 Million Cash and Equivalents
Repurchased $2.2 Million of Common Stock
HOUSTON, Aug. 26, 2010 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) today released fiscal third quarter 2010 results for the period ending July 31. The company reported that operating results at its two business segments -- Engineered Products and Aluminum Sheet Products -- were well ahead of a year ago and were also better than the company's sequential second quarter, despite the weak economy and slowdown in new home starts. Quanex reported that its two operating segments also outperformed their blended end market (residential remodeling and residential new construction) in the quarter.
Third quarter net sales were $225.2 million compared to $164.0 million a year ago. Income from continuing operations was $10.4 million (including an after-tax LIFO expense of $0.6 million) compared to $8.3 million a year ago (including an after-tax LIFO gain of $1.4 million). Diluted earnings per share from continuing operations were $0.27 (including a LIFO expense of $0.02 per diluted share) compared to $0.22 (including a LIFO gain of $0.04 per diluted) in the year ago quarter.
Quarterly Highlights
-- August J. (Gus) Coppola was promoted to Senior Vice President and will lead the company's Project Nexus growth initiative. -- Repurchased 125,000 shares ($2.2 million) of common stock. -- Operating margins at Engineered Products and Aluminum Sheet Products were 13% and 7%, respectively. -- Net sales were $225.2 million, up 37% over the year ago quarter, based on higher aluminum shipments, market share gains, and an improvement in residential remodeling activity. -- Consolidated operating income of $16.2 million that included $1.0 million LIFO expense compared to $12.7 million a year ago that included a $2.3 million LIFO gain. -- Cash provided by operating activities from continuing operations for the nine months ended was $64.2 million compared to $33.2 million in the year ago period. -- Capital expenditures for the nine months ended were $11.8 million. -- Cash and equivalents totaled $168.7 million.
Segment Commentary
Engineered Products is focused on providing OEM window and door customers with value-added fenestration components, products, and systems. Key markets are residential remodeling (approx. 60% of sales) and new residential construction (approx. 40% of sales).
Engineered Products results (in millions) 3rd 3rd qtr qtr 2010 2009 ------ ----- Net sales $101.7 $93.4 Operating income $13.1 $11.5
"For the third quarter, our market drivers -- residential remodeling activity and housing starts -- were estimated to be down 9% on a blended basis compared to a year ago, but our Engineered Products business experienced healthy growth, especially from remodeling activity," said David D. Petratis, president and chief executive officer of Quanex Building Products. "Despite this 9% market decline, sales at Engineered Products grew by 9% from the year ago quarter. Our growth this quarter further illustrates the logic of the segment's continued emphasis to gain share in the more active residential remodeling market. Operating income was up 14% over the year ago quarter, which reflected higher sales and disciplined cost control. While we hired additional employees in the quarter to help us meet customer demand, we will continue to watch our labor situation closely given the slowdown we are beginning to see in the building and construction market," Petratis added.
"We continued to make good progress with our Project Nexus initiative and we now have the leadership team in place to drive the program forward. This quarter, we promoted Gus Coppola, formerly our president of Truseal, to champion the initiative. Gus is forming a strong leadership team and they are quickly getting the sales and marketing teams reorganized," said Petratis.
Aluminum Sheet Products is a leading provider of common alloy aluminum sheet through its Nichols Aluminum operation and primarily serves new residential construction and residential remodeling (approx. 70% of sales) and transportation (approx. 15% of sales) markets.
Aluminum Sheet Products results (in millions) 3rd 3rd qtr qtr 2010 2009 ------ ----- Net sales $127.6 $74.3 Operating income $8.9 $3.5 Shipped pounds 90 65
"Compared to the third quarter of 2009, our shipped pounds were up a very respectable 39% to 90 million pounds, while comparable industry shipments were up 26% over the same period. At these shipment levels, we were sold out in the third quarter, and we expect a repeat of that in the fourth quarter. Nichols Aluminum sales were $128 million, 72% higher than a year ago, due to better shipments and higher average aluminum prices. Our overall aluminum spread (sales less material costs) was up 3% from the year ago quarter but down 4% from the sequential second quarter as the aluminum scrap market remained tight due to the limited presence of industrial scrap, a result of the slowdown in U.S. manufacturing," Petratis said.
Cash Position
"We had a cash balance of $169 million and our total debt outstanding stood at $1.9 million," Petratis continued. "Cash provided by operating activities from continuing operations in the first nine months of 2010 was $64 million. Our $270 million revolving credit facility remains untapped. Possible uses of cash will be to fund our Project Nexus initiative and other organic growth opportunities, fund the common stock dividend, make acquisitions, and repurchase outstanding shares. During the quarter, we repurchased $2.2 million of common stock at an average price of $17.35 per share."
2010 Business Outlook
"Although the U.S. residential building and construction market has remained historically weak all year, our two operating groups have turned in solid performance over the same period. We know programs like the $8,000 first time homebuyers' tax credit, which has now expired, and to a lesser extent, the $1,500 tax credit for energy efficient replacement windows, which expires at year-end, were certainly positives for our industry, but they do create 'pull forward' demand. As a result, we believe second half 2010 residential building demand will be slower than normal and wind down earlier than usual," said Petratis.
"Throughout the year, we remained concerned about the ongoing weakness in the U.S. economy and we shared that concern with investors, employees and customers. Today, we see little reason for optimism in the coming months. Based on current macroeconomics, we believe the residential building and construction market will continue to slow between now and the end of the year. Expressing the slowdown in terms of sales, we are now estimating fourth quarter sales at Engineered Products to be flat compared to the sequential third quarter, and in turn, we tightened our guidance to a range of $32 million to $35 million (from $32 million to $37 million) for their 2010 operating income," continued Petratis.
"Because of ongoing capacity constraints in the aluminum sheet market, our guidance for Nichols Aluminum operating income remains unchanged at $27 million," Petratis said. "Our guidance for the two business segments excludes estimated corporate expenses of $23 million and any impact from LIFO. Estimates for capital expenditures, and depreciation and amortization, are $18 million and $30 million, respectively," concluded Petratis.
Project Nexus
Project Nexus is the company's long term organic growth program that is focused on connecting (Nexus) its Engineered Products Group (EPG) businesses: Mikron, Truseal and Homeshield. The sales and marketing teams of the three EPG businesses, each of which operated independently in the past, have been combined to utilize their capabilities to expand sales opportunities. Nexus activities are focused on the existing customer base that traditionally has been national window and door OEMs, and now includes more diverse regional OEM opportunities. The EPG engineering teams are also working together to develop products and systems that provide customers with the latest innovations in technology and energy efficiency.
Other
The company reported fiscal third quarter 2010 blended market demand (new home starts and remodeling expenditures) was down 9% from the third quarter of 2009. The company calculated the change using data from external sources: The National Association of Home Builders (NAHB) for new home starts and Harvard University's Joint Center for Housing Studies for remodeling expenditures.
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, 2010, to shareholders of record on September 15, 2010.
Corporate Profile
Quanex Building Products Corporation is an industry-leading manufacturer of engineered materials, components and systems serving the U.S. residential window and door markets. It is a ROIC-driven company that grows shareholder returns through a combination of organic growth via new products and new programs like Project Nexus, and strategic acquisitions.
The Quanex Building Products Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1117
Financial Statistics as of 7/31/10
Book value per common share: $11.56; Total debt to capitalization: 0.4%; Return on invested capital: 7.1%; Actual number of common shares outstanding: 37,635,316.
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.
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 10-K filing on December 18, 2009, under the Securities Exchange Act of 1934, in particular the section titled, "Private Securities Litigation Reform Act" contained therein.
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, ----------------------- ------------------------- 2010 2009 2010 2009 ----------- ---------- ----------- ------------ Net Sales: $ 101,746 $ 93,352 Engineered Products $ 259,272 $ 223,419 127,600 74,254 Aluminum Sheet 326,252 175,419 ----------- ---------- Products ----------- ------------ 229,346 167,606 Building Products 585,524 398,838 (4,143) (3,629) (9,513) (8,767) ----------- ---------- Eliminations ----------- ------------ $ 225,203 $ 163,977 $ 576,011 $ 390,071 =========== ========== Net Sales =========== ============ Operating Income (1): $ 13,131 $ 11,512 Engineered Products $ 22,969 $ (155,820) 8,866 3,467 Aluminum Sheet 19,732 (36,295) ----------- ---------- Products ----------- ------------ 21,997 14,979 Building Products 42,701 (192,115) (5,798) (2,267) Corporate and Other (18,976) (7,535) ----------- ---------- (2) ----------- ------------ $ 16,199 $ 12,712 Operating Income $ 23,725 $ (199,650) =========== ========== (Loss) =========== ============
------------------------------------------------------------------------------------------ (1) 2009 Operating income (loss) reflects non-cash impairment charges of $0 and $182,562 (in thousands): Period Ending July 31, 2009 -------------------------- Three Months Nine Months ------------ ------------ (In Thousands) Engineered Products $ -- $ (162,173) Aluminum Sheet Products -- (20,389) ------------ ------------ Total impairment loss $ -- $ (182,562) ============ ============ (2) Corporate and Other for the three and nine months ended July 31, 2010 includes $1.0 million and $2.3 million of LIFO expense while the three and nine months ended July 31, 2009 includes $2.3 million and $6.8 million, respectively of LIFO income.
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, ----------------------- ------------------------- 2010 2009 2010 2009 ----------- ---------- ----------- ------------ $ 225,203 $ 163,977 Net sales $ 576,011 $ 390,071 Cost of sales (exclusive of items 184,799 128,996 shown separately below) 478,559 340,043 17,566 14,331 Selling, general and administrative 52,719 42,667 -- -- Impairment of goodwill and intangibles -- 182,562 6,639 7,938 21,008 24,449 ----------- ---------- Depreciation and amortization ----------- ------------ 16,199 12,712 Operating income (loss) 23,725 (199,650) (106) (128) Interest expense (333) (360) 997 27 2,502 325 ----------- ---------- Other, net ----------- ------------ Income (loss) from continuing operations 17,090 12,611 before income taxes 25,894 (199,685) (6,661) (4,262) (9,998) 47,788 ----------- ---------- Income tax benefit (expense) ----------- ------------ Income (loss) from continuing 10,429 8,349 operations 15,896 (151,897) (148) (212) Income (loss) from discontinued (1,108) (525) ----------- ---------- operations, net of taxes ----------- ------------ $ 10,281 $ 8,137 $ 14,788 $ (152,422) =========== ========== Net income (loss) =========== ============ Basic earnings per common share: Earnings (loss) from continuing $ 0.28 $ 0.22 operations $ 0.43 $ (4.07) $ -- $ -- Income (loss) from discontinued $ (0.03) $ (0.01) ----------- ---------- operations ----------- ------------ $ 0.28 $ 0.22 Basic earnings (loss) per common ----------- ---------- share $ 0.40 $ (4.08) Diluted earnings per common share: Earnings (loss) from continuing $ 0.27 $ 0.22 operations $ 0.42 $ (4.07) $ -- $ -- Income (loss) from discontinued $ (0.03) $ (0.01) ----------- ---------- operations ----------- ------------ $ 0.27 $ 0.22 $ 0.39 $ (4.08) ----------- ---------- Diluted earnings (loss) per share ----------- ------------ Weighted average common shares outstanding: 37,350 37,335 Basic 37,349 37,334 37,983 37,581 Diluted 37,882 37,334
QUANEX BUILDING PRODUCTS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) July 31, October 31, 2010 2009 ----------- --------------------------- ----------- Assets $ 168,738 Cash and equivalents $ 123,499 79,539 Accounts receivable, net 80,171 54,127 Inventories 46,515 12,882 Deferred income taxes 20,611 Prepaid and other current 6,311 assets 5,177 Current assets of 47 discontinued operations 232 ----------- --------------------------- ----------- 321,644 Total current assets 276,205 Property, plant and 135,223 equipment, net 141,286 34,321 Deferred income taxes 42,923 25,189 Goodwill 25,189 45,444 Intangible assets, net 47,359 17,007 Other assets 9,114 Assets of discontinued -- operations 1,524 ----------- --------------------------- ----------- $ 578,828 Total assets $ 543,600 =========== =========================== =========== Liabilities and stockholders' equity $ 74,205 Accounts payable $ 67,010 35,485 Accrued liabilities 30,320 Current maturities of 327 long-term debt 323 Current liabilities of 16 discontinued operations 9 ----------- --------------------------- ----------- Total current 110,033 liabilities 97,662 1,620 Long-term debt 1,943 Deferred pension and 3,948 postretirement benefits 6,655 Non-current environmental 12,027 reserves 1,767 16,208 Other liabilities 13,047 ----------- --------------------------- ----------- 143,836 Total liabilities 121,074 Total stockholders' 434,992 equity 422,526 ----------- --------------------------- ----------- Total liabilities and $ 578,828 stockholders' equity $ 543,600 =========== =========================== ===========
QUANEX BUILDING PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Nine months ended July 31, ------------------------- 2010 2009 ----------- ------------ Operating activities: Net income (loss) $ 14,788 $ (152,422) (Income) loss from discontinued operations 1,108 525 ----------- ------------ Income (loss) from continuing operations 15,896 (151,897) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 21,060 24,500 Gain on bargain purchase (1,272) -- Impairment of goodwill and intangibles -- 182,562 Deferred income taxes 6,524 (30,497) Stock-based compensation 3,218 2,328 ----------- ------------ 45,426 26,996 Changes in assets and liabilities, net of effects from acquisitions and dispositions: Decrease (Increase) in accounts receivable 1,601 28,113 Decrease (Increase) in inventory (5,788) 23,762 Decrease (Increase) in other current assets (889) (105) Increase (Decrease) in accounts payable 7,961 (25,505) Increase (Decrease) in accrued liabilities 5,084 (6,799) Increase (Decrease) in income taxes payable 11,934 (18,726) Increase (Decrease) in deferred pension and postretirement benefits (2,706) 2,201 Other, net 1,533 3,295 ----------- ------------ Cash provided by (used for) operating activities from continuing operations 64,156 33,232 Cash provided by (used for) operating activities from discontinued operations (415) (609) ----------- ------------ Cash provided by (used for) operating activities 63,741 32,623 ----------- ------------ Investing activities: Acquisitions, net of cash acquired (1,590) -- Capital expenditures (11,779) (12,357) Proceeds from property insurance claims 392 1,000 Other, net 40 -- ----------- ------------ Cash provided by (used for) investing activities from continuing operations (12,937) (11,357) Cash provided by (used for) investing activities from discontinued operations 90 (456) ----------- ------------ Cash provided by (used for) investing activities (12,847) (11,813) ----------- ------------ Financing activities: Repayments of long-term debt (319) (361) Common stock dividends paid (3,775) (3,390) Issuance of common stock from stock option exercises, including related tax benefits 495 -- Funding from Separation -- 15,401 Purchase of treasury stock (2,169) -- Other, net (235) (675) ----------- ------------ Cash provided by (used for) financing activities from continuing operations (6,003) 10,975 Cash provided by (used for) financing activities from discontinued operations 235 665 ----------- ------------ Cash provided by (used for) financing activities (5,768) 11,640 ----------- ------------ Effect of exchange rate changes on cash and equivalents 23 33 LESS: (Increase) Decrease in cash and equivalents from discontinued operations 90 400 ----------- ------------ Increase (Decrease) in cash and equivalents from continuing operations 45,239 32,883 Beginning of period cash and equivalents 123,499 66,871 ----------- ------------ End of period cash and equivalents $ 168,738 $ 99,754 =========== ============
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SOURCE: Quanex Building Products Corporation
CONTACT: Quanex Building Products Corporation Financial Contact: Jeff Galow 713-877-5327 Media Contact: Valerie Calvert 713-877-5305