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Quanex Building Products Corporation Fiscal Second Quarter 2010 Operating Results

Earnings from Continuing Operations of $0.12 per Diluted Share
Company Outperformed End Markets
$153 Million Cash and Equivalents

HOUSTON, May 27, 2010 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) today released fiscal second quarter 2010 results for the period ending April 30. The company reported that customer demand at its two operating segments -- Engineered Products and Aluminum Sheet Products -- was much stronger as compared to both the second quarter 2009 and the sequential first quarter 2010. The company also stated that its operating segments had significantly outperformed their two primary end markets (new residential construction and residential remodeling) in the quarter.

Second quarter net sales were $199.4 million compared to $113.2 million a year ago. Income from continuing operations was $4.4 million (including an after-tax bargain purchase gain of $1.3 million and an after-tax LIFO expense of $0.8 million) compared to a loss of $40.0 million a year ago (including an after-tax impairment charge of $29.0 million and an after-tax LIFO gain of $2.9 million). Diluted earnings per share from continuing operations were $0.12 (including a bargain purchase gain of $0.03 per diluted share and a LIFO expense of $0.02 per diluted share) compared to a loss of $1.07 a year ago (including a $0.78 per diluted share impairment charge and a $0.08 per diluted share LIFO gain).

Quarterly Highlights

  • Net sales were $199.4 million, up 76% over the year ago quarter, based on higher aluminum prices, market share gains, improved product pricing and a pickup in residential construction.
  • Operating margins at Engineered Products and Aluminum Sheet Products were 7% and 6%, respectively.
  • Consolidated operating income of $5.7 million included a $1.3 million LIFO expense compared to a year ago loss of $57.0 million that included a $45.3 million impairment charge and a $4.5 million LIFO gain. The significant improvement in operating income was primarily the result of significantly higher sales, new products, price increases and reduced operating costs.
  • The company reported a non-recurring after-tax bargain purchase gain of $1.3 million, or $0.03 per diluted share, associated with its $1.6 million purchase of certain wood extrusion assets valued at $2.9 million.
  • Capital expenditures were $3.7 million.
  • Cash provided by operating activities from continuing operations for the six months ended was $40.6 million.
  • Cash and equivalents totaled $153.0 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)

                          2nd
                            qtr    2nd qtr
                            2010    2009(1)
                           ------  -------
    Net sales              $84.7    $65.3
    Operating income        $5.8  ($45.9)
  
  

(1) Second quarter 2009 operating income
includes non-cash impairment charges of $45.3 million.

"For the second quarter, our market drivers -- U.S. residential housing starts and residential remodeling activity - were estimated to be down 6% on a combined basis compared to a year ago, but our Engineered Products business experienced exceptional growth," said David D. Petratis, president and chief executive officer of Quanex Building Products. "Against this 6% drop in market growth, our sales growth was compelling, up a very respectable 30% over the second quarter of 2009. Our sales and marketing teams continue to keep and win new business on the strength of the value proposition our highly engineered window and door products offer our customers."

"While driving profitable sales growth is critical, so is the need to control costs. This quarter Engineered Products did a great job in holding down expenses, keeping variable costs in line, and maintaining our disciplined approach to managing inventories. All of these imperatives, when combined, allowed us to report a very healthy $5.8 million in operating income," Petratis added.

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)

                          
                       2nd qtr    2nd qtr
                          2010    2009
                         ------  -------
  Net sales              $117.1    $50.3
  Operating income         $7.2  ($11.6)
  Shipped pounds             83       44

"Aluminum sheet sales of $117 million were 133% higher than a year ago due to much higher shipments and improved aluminum prices. Compared to the second quarter of 2009, our shipments were up a remarkable 90% while comparable industry shipments were up 52% over the same period. Our aluminum spread (sales less material costs) was up 67% compared to the year ago quarter, but down 4% from our sequential first quarter," Petratis said. "Given the overall condition of our end markets, performance at Nichols Aluminum this quarter was simply outstanding and demonstrated the level of commitment we have to supporting our aluminum customers at a time when we believe competitors are hampered and industry capacities reduced."

Cash Position

"We had a cash balance of $153 million and the company continued to be essentially debt-free," Petratis continued. "Cash provided by operating activities from continuing operations in the first half of 2010 was $41 million. Our $270 million revolving credit facility remains untapped. Possible uses of cash will be to fund Project Nexus initiatives and other organic growth opportunities, fund the common stock dividend, make acquisitions, and repurchase outstanding shares."

Fiscal 2010 Business Outlook

"While new home starts were up 13% during the first half of fiscal 2010 compared to the first half of fiscal 2009, remodeling activity remained disappointing, down an estimated 8% over the same time period. Ongoing high levels of residential defaults and foreclosures remain a concern, but we noted that the change in foreclosures from the fourth calendar quarter 2009 to the first calendar quarter 2010 was essentially flat - a hopeful sign. We continue to see a healthy recovery in demand across all of our businesses, and we expect full year sales and earnings to be much improved over 2009," said Petratis.

"We raised our 2010 operating income guidance for Engineered Products to a range of $32 million to $37 million (up from previous guidance of $25 million to $30 million) compared to a $141 million loss (including a $162 million impairment charge) in 2009. Higher operating income in 2010 will come from a combination of new product offerings, higher prices, new customers, and modest improvement in our two end markets."

"We raised our 2010 operating income guidance for Aluminum Sheet Products to around $27 million (up from previous guidance of around $20 million) compared to a $26 million loss (including a $20 million impairment charge) in 2009. The change in guidance is based primarily on substantially higher second half projected shipments given their strength in the first half."

"Our guidance for the two segments excludes estimated corporate expenses of $25 million and any impact from LIFO. Estimates for capital expenditures, and depreciation & amortization are $22 million and $30 million, respectively," concluded Petratis.

Project Nexus

Project Nexus is the company's new long term growth program that is focused on connecting (Nexus) its Engineered Products Group (EPG) businesses: Mikron, Truseal and Homeshield. The sales, marketing and engineering efforts of the three EPG businesses, each of which operated independently in the past, are now collaborating 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 include more diverse regional OEM opportunities. EPG is 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 second quarter 2010 combined market demand (new home starts and remodeling expenditures) was down 6% from the second quarter of 2009. The company calculated the change using data from external sources - IHS Global Insight 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 June 30, 2010, to shareholders of record on June 16, 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 4/30/10

Book value per common share: $11.32; Total debt to capitalization: 0.5%; Actual number of common shares outstanding: 37,754,455.

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.

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                                     Six months ended
         April 30,                                             April 30,
  ------------------------                             -------------------------
     2010         2009                                    2010          2009
  -----------  -----------                             -----------  ------------
                            Net Sales:
     $ 84,717     $ 65,249   Engineered Products         $ 157,527     $ 130,067
      117,088       50,356                                 198,651       101,164
  -----------  -----------   Aluminum Sheet Products   -----------  ------------
      201,805      115,605     Building Products           356,178       231,231

      (2,419)      (2,399)                                 (5,370)       (5,137)
  -----------  -----------     Eliminations            -----------  ------------

    $ 199,386    $ 113,206                               $ 350,808     $ 226,094
  ===========  ===========       Net Sales             ===========  ============
                            Operating Income (1):
      $ 5,760   $ (45,904)   Engineered Products           $ 9,838   $ (167,331)
        7,232     (11,558)                                  10,866      (39,762)
  -----------  -----------   Aluminum Sheet Products   -----------  ------------
       12,992     (57,462)     Building Products            20,704     (207,093)

      (7,313)          474     Corporate and Other        (13,178)       (5,269)
  -----------  -----------      (2)                    -----------  ------------

      $ 5,679   $ (56,988)       Operating Income          $ 7,526   $ (212,362)
  ===========  ===========        (Loss)               ===========  ============

  -----------

(1) 2009 Operating income (loss) reflects non-cash impairment charges of
$45,263 and $182,562 (in thousands):

                                           Period Ending April
                                                    30, 2009
                                              ----------------------
                                                Three
                                                Months    Six Months
                                              ----------  ----------
                                                 (In Thousands)
    Engineered Products                        $(45,263)  $(162,173)
    Aluminum Sheet Products                           --    (20,389)
                                              ----------  ----------
      Total impairment loss                    $(45,263)  $(182,562)
                                              ==========  ==========

(2) Corporate and Other for the three and six months ended
April 30, 2010 include $1.3 million of LIFO expense while the three
and six months ended April 30, 2009 include $4.5 million of LIFO income.

  QUANEX BUILDING PRODUCTS CORPORATION
  CONSOLIDATED STATEMENTS OF INCOME
  (In thousands, except per share data)
  (Unaudited)

     Three months ended                                                    Six months ended
         April 30,                                                            April 30,
  ------------------------                                            -------------------------
     2010         2009                                                   2010          2009
  -----------  -----------                                            -----------  ------------
    $ 199,386    $ 113,206  Net sales                                   $ 350,808     $ 226,094
                            Cost of sales (exclusive of items shown
      167,626      104,385   separately below)                            293,760       211,047
       19,046       12,682  Selling, general and administrative            35,153        28,336
           --       45,263  Impairment of goodwill and intangibles             --       182,562
        7,035        7,864                                                 14,369        16,511
  -----------  -----------  Depreciation and amortization             -----------  ------------
        5,679     (56,988)  Operating income (loss)                         7,526     (212,362)
        (103)        (110)  Interest expense                                (227)         (232)
        1,427          178                                                  1,505           298
  -----------  -----------  Other, net                                -----------  ------------
                            Income (loss) from continuing operations
        7,003     (56,920)  before income taxes                             8,804     (212,296)
      (2,619)       16,948                                                (3,337)        52,050
  -----------  -----------  Income tax benefit (expense)              -----------  ------------
        4,384     (39,972)  Income (loss) from continuing operations        5,467     (160,246)
         (71)        (174)  Income (loss) from discontinued                 (960)         (313)
  -----------  -----------   operations, net of taxes                 -----------  ------------
      $ 4,313   $ (40,146)                                                $ 4,507   $ (160,559)
  ===========  ===========  Net income (loss)                         ===========  ============
                            Basic earnings per common share:
                              Earnings (loss) from continuing
       $ 0.12     $ (1.07)     operations                                  $ 0.15      $ (4.29)
           --       (0.01)    Income (loss) from discontinued              (0.03)        (0.01)
  -----------  -----------     operations                             -----------  ------------
       $ 0.12     $ (1.08)                                                 $ 0.12      $ (4.30)
  -----------  -----------    Basic earnings (loss) per common share  -----------  ------------
                            Diluted earnings per common share:
                              Earnings (loss) from continuing
       $ 0.12     $ (1.07)     operations                                  $ 0.14      $ (4.29)
       (0.01)       (0.01)    Income (loss) from discontinued              (0.02)        (0.01)
  -----------  -----------     operations                             -----------  ------------
       $ 0.11     $ (1.08)                                                 $ 0.12      $ (4.30)
  -----------  -----------    Diluted earnings (loss) per share       -----------  ------------
                            Weighted average common shares
                             outstanding:
       37,357       37,333    Basic                                        37,348        37,333
       37,892       37,333    Diluted                                      37,835        37,333
  QUANEX BUILDING PRODUCTS CORPORATION
  CONDENSED CONSOLIDATED BALANCE SHEETS
  (In thousands)
  (Unaudited)

   April 30,                                October 31,
     2010                                      2009
  -----------  ---------------------------  -----------
               Assets
    $ 152,980  Cash and equivalents           $ 123,499
       80,203  Accounts receivable, net          80,171
       50,881  Inventories                       46,515
       14,525  Deferred income taxes             20,611
               Prepaid and other current
        5,406   assets                            5,177
               Current assets of
          167   discontinued operations             232
  -----------  ---------------------------  -----------
      304,162      Total current assets         276,205
               Property, plant and
      138,167   equipment, net                  141,286
       34,470  Deferred income taxes             42,923
       25,189  Goodwill                          25,189
       46,216  Intangible assets, net            47,359
       15,501  Other assets                       9,114
               Assets of discontinued
           --   operations                        1,524
  -----------  ---------------------------  -----------
    $ 563,705  Total assets                   $ 543,600
  ===========  ===========================  ===========
               Liabilities and
                stockholders' equity
     $ 69,666  Accounts payable                $ 67,010
       32,039  Accrued liabilities               30,320
               Current maturities of
          326   long-term debt                      323
               Current liabilities of
           51   discontinued operations               9
  -----------  ---------------------------  -----------
                   Total current
      102,082       liabilities                  97,662
        1,824  Long-term debt                     1,943
               Deferred pension and
        7,500   postretirement benefits           6,655
               Non-current environmental
       10,920   reserves                          1,767
       13,992  Other liabilities                 13,047
  -----------  ---------------------------  -----------
      136,318      Total liabilities            121,074
      427,387  Total stockholders' equity       422,526
  -----------  ---------------------------  -----------
               Total liabilities and
    $ 563,705   stockholders' equity          $ 543,600
  ===========  ===========================  ===========
  QUANEX BUILDING PRODUCTS CORPORATION
  CONSOLIDATED STATEMENTS OF CASH FLOW
  (In thousands)
  (Unaudited)
                                                 Six months ended
                                                    April 30,
                                            -------------------------
                                               2010          2009
                                            -----------  ------------
  Operating activities:
    Net income (loss)                           $ 4,507   $ (160,559)
    Income from discontinued operations             960           313
                                            -----------  ------------
    Net income from continuing operations         5,467     (160,246)
    Adjustments to reconcile net income
     (loss) to cash provided by
    operating activities:
      Depreciation and amortization              14,404        16,546
      Gain on bargain purchase                  (1,272)            --
      Impairment of goodwill and
       intangibles                                   --       182,562
      Deferred income taxes                       2,363      (34,730)
      Stock-based compensation                    2,252         1,403
                                            -----------  ------------
                                                 23,214         5,535
    Changes in assets and liabilities, net
     of effects from
    acquisitions and dispositions:
      Decrease (Increase) in accounts
       receivable                                   743        47,106
      Decrease (Increase) in inventory          (2,536)        26,979
      Decrease (Increase) in other current
       assets                                      (95)         (188)
      Increase (Decrease) in accounts
       payable                                    2,307      (43,190)
      Increase (Decrease) in accrued
       liabilities                                2,412       (5,519)
      Increase (Decrease) in income taxes
       payable                                   12,005      (19,626)
      Increase (Decrease) in deferred
       pension and postretirement benefits          845         1,492
      Other, net                                  1,706         2,339
                                            -----------  ------------
    Cash provided by (used for) operating
     activities from
    continuing operations                        40,601        14,928
    Cash provided by (used for) operating
     activities from
    discontinued operations                       (361)         (328)
                                            -----------  ------------
  Cash provided by (used for) operating
   activities                                    40,240        14,600
                                            -----------  ------------
  Investing activities:
    Acquisitions, net of cash acquired          (1,590)            --
    Capital expenditures, net of
     retirements                                (7,404)       (9,130)
    Proceeds from property insurance
     claims                                         105            --
                                            -----------  ------------
      Cash provided by (used for)
       investing activities from
      continuing operations                     (8,889)       (9,130)
      Cash provided by (used for)
       investing activities from
      discontinued operations                        90         (438)
                                            -----------  ------------
  Cash provided by (used for) investing
   activities                                   (8,799)       (9,568)
                                            -----------  ------------
  Financing activities:
    Repayments of long-term debt                  (115)         (163)
    Common stock dividends paid                 (2,264)       (2,260)
    Issuance of common stock, net                   364            --
    Funding from Separation                          --        15,401
    Other, net                                    (246)       (1,476)
                                            -----------  ------------
      Cash provided by (used for)
       financing activities from
      continuing operations                     (2,261)        11,502
      Cash provided by (used for)
       financing activities from
      discontinued operations                       246         1,476
                                            -----------  ------------
  Cash provided by (used for) financing
   activities                                   (2,015)        12,978
                                            -----------  ------------
    Effect of exchange rate changes on
     cash and equivalents                            30          (17)
  LESS: (Increase) Decrease in cash and
   equivalents from
  discontinued operations                            25         (710)
                                            -----------  ------------
  Increase (Decrease) in cash and
   equivalents from continuing operations        29,481        17,283
  Beginning of period cash and equivalents      123,499        66,871
                                            -----------  ------------
  End of period cash and equivalents          $ 152,980      $ 84,154
                                            ===========  ============

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Quanex Building Products Corporation

CONTACT:  Quanex Building Products Corporation
Financial Contact:
Jeff Galow
713-877-5327
Media Contact:
Valerie Calvert
713-877-5305
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