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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 

HOUSTON, March 07, 2016 (GLOBE NEWSWIRE) --  Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company) today announced its results for the three months ended January 31, 2016.

Bill Griffiths, Chairman, President and Chief Executive Officer, commented, “Despite the fact that the first quarter of each year is typically challenging for our industry, we are off to a strong start in 2016 and at this time we are confident the full year 2016 guidance we previously provided is achievable.  Our continued focus on operational excellence is the primary reason for the margin improvements during the quarter, most notably in our vinyl profiles business in North America.  As stated previously, we anticipated realizing benefits of the capital investment we made in this business by the end of 2015.  We clearly saw the positive impact of this in the fourth quarter and that improvement carried forward into the first quarter of 2016. In addition, the integration of HL Plastics and Woodcraft is progressing as planned and both had a positive impact on first quarter results.”

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 $201.5 million during the first quarter of 2016, an increase of 58% compared to the first quarter of 2015.  The increase was primarily driven by contributions resulting from the acquisitions of HL Plastics and Woodcraft Industries in 2015 combined with steady growth amongst all other product lines, slightly offset by foreign exchange impact. 

EBITDA for the three months ending January 31, 2016 was $10.8 million.  After adjusting for selected items related to transaction costs and a purchase price accounting inventory step-up at Woodcraft, the Company reported adjusted EBITDA of $18.2 million for the quarter, an increase of $15.6 million compared to the same period of 2015.  An adjusted EBITDA margin of 9% during the first quarter of 2016 represented a significant improvement compared to 2% for the first quarter of 2015.  Margin expansion was realized across all product lines during the quarter, the majority of which came from Quanex’s vinyl profiles business in North America.      

The Company reported a net loss from continuing operations of ($7.2) million, or ($0.21) per diluted share for the quarter ending January 31, 2016, compared to a net loss from continuing operations of ($3.1) million, or ($0.09) per diluted share for the quarter ending January 31, 2015.  After adjusting for a foreign currency transaction loss in addition to the aforementioned selected items, Quanex reported an adjusted net loss from continuing operations of ($0.8) million, or ($0.02) per diluted share for the quarter, compared to an adjusted net loss of ($3.0) million, or ($0.08) per diluted share in the first quarter of 2015.

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 March 4, 2016.

  • Election of Directors - William C. Griffiths and LeRoy 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 ending October 31, 2016

Additionally, the Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share on Quanex’s common stock, payable March 31, 2016, to shareholders of record on March 18, 2016.

Conference Call and Webcast Information

The Company has scheduled a conference call for Tuesday, March 8, 2016, at 11:00 a.m. ET (10:00 a.m. CT). To participate in the conference call dial (877) 356-0537 for domestic callers and (913) 667-2634 for international callers, in both cases using the conference passcode 48047821, and ask for the Quanex call a few minutes prior to the start time.  The conference call will also be webcast live over the Internet on the Company’s website at http://www.quanex.com in the Investors section under Quarterly Earnings Webcast.  A telephonic replay of the call will be available approximately two hours after the live broadcast ends and will be accessible through March 15, 2016.  To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 48047821. 

About Quanex

Quanex Building Products Corporation is an industry-leading manufacturer of components sold to Original Equipment Manufacturers (OEMs) in the building products industry.  Quanex designs and produces energy-efficient fenestration products in addition to kitchen and bath cabinet components.

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 October 31, 2015, under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” in our other documents filed with the Securities and Exchange Commission from time to time.  Any forward-looking statements in this press release are made as of the date hereof, and Quanex Building Products Corporation undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.

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 contact
Scott Zuehlke, Vice President
of Investor Relations & Treasurer,
at 713-877-5327
or scott.zuehlke@quanex.com.

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