Quanex Building Products Corporation Fiscal 2013 Second Quarter Results
Net Loss of
EPG Net Sales Increase 15%; Operating Income Improves to
Nichols Aluminum Net Sales Increase 24%; Shipped Volume Increases 27%
Consolidated second quarter 2013 net sales were
Fiscal year-to-date consolidated 2013 net sales were
The 2013 second quarter and year-to-date results, when measured against comparable prior year periods, benefitted from the elimination of strike-related costs at Nichols Aluminum. Adjusting for strike-related costs, second quarter and year-to-date results were negatively impacted by lower spread at Nichols resulting from lower aluminum prices and higher corporate expenses from Enterprise Resource Planning (ERP) implementation costs.
Quanex's two business segments are highly cyclical with the building and construction market and the impact of adverse winter weather. As a result, Quanex typically reports lower revenue and operating income results during the first half of its fiscal year when building and construction activity is reduced compared to the second half of its fiscal year.
EPG's second quarter 2013 net sales were
EPG's second quarter 2013 EBITDA was
Engineered Products Group (in millions) | ||||
Q2 2013 | Q2 2012 | YTD 2013 | YTD 2012 | |
Net sales | 125.2 | 108.8 | 231.3 | 208.1 |
Operating income | 5.9 | 0.1 | 8.7 | 1.9 |
EBITDA | 14.0 | 7.1 | 24.3 | 15.9 |
Quanex believes there is value in measuring its sales performance against industry-related metrics, and compares EPG's sales results to U.S. window shipments as reported by Ducker Worldwide, a market intelligence firm. Global EPG sales for the 12 months ended
EPG experienced above market growth for the period, although they are being negatively impacted by lower vinyl pricing, sales of low performance windows and reduced volumes from a few national accounts due to seasonality and weak R&R sales.
Nichols Aluminum continued to make operational improvements during the second quarter, including equipment reliability and on-time delivery to customers. Shipped pounds increased more than 27% from the year ago quarter due primarily to increased equipment reliability, standardized work procedures and improved labor efficiency.
Nichols second quarter 2013 EBITDA was
Aluminum Sheet Products (in millions, except for spread) | ||||
Q2 2013 | Q2 2012 | YTD 2013 | YTD 2012 | |
Net sales | 109.7 | 88.3 | 194.3 | 154 |
Operating loss | (0.5) | (7.5) | (4.7) | (13.1) |
EBITDA | 1.3 | (5.5) | (1.3) | (8.6) |
Shipped pounds | 78 | 61 | 137 | 105 |
Spread per pound | 0.42 | 0.37 |
Nichols Aluminum's shipments for the 12 months ended
Nichols Aluminum's new operating principles are focused on significantly improving quality and on-time delivery through process improvements, and a proactive maintenance program that requires additional capital investment. As a result, Nichols Aluminum estimates annual capital expenditures in a range of
Corporate and Other Items
Corporate expenses in the quarter were
In 2011, Quanex launched a multi-year, company-wide program to transform business processes, including the transition to a single ERP software system, which is expected to improve accessibility and consistency of information, enable standardized business activities, help deliver business process improvements and support business growth. To date, the company has spent
At quarter end, Quanex had total cash of
Business Outlook and Second Half Guidance
The key economic indicators that drive our results are mixed: new housing starts have increased, with growth currently driven primarily by multi-family units, but the R&R window market remains challenging. Quanex is pleased to see a rebound in new construction and believes that growth will continue. New home construction, the R&R market and prime window demand remain low when compared to historical growth figures, and present a challenging environment, as does unemployment and tight credit conditions. Additionally, increased global supply of aluminum product, coupled with tight regional aluminum scrap supply, continue to create a challenging spread environment for Nichols Aluminum. Quanex expects calendar year 2013 U.S. window shipments to be approximately 42 million units, a 5% increase above 2012 levels but nearly 12% below Ducker's current forecasted shipments of 47 million. The company believes the majority of the improvement in U.S. window shipments will come from new construction (primarily multi-family units, where Quanex has less exposure) and R&R window shipments will be relatively flat in 2013 when compared to 2012 shipments.
With the spring building season underway, EPG is expected to report net sales during the second half of 2013 of about
For the second half of 2013, Nichols Aluminum is expected to ship about 160 million pounds at an estimated spread of
Corporate expenses during the second half of 2013 are expected to total
Quanex remains very positive on the long-term growth prospects of its residential and commercial markets and expects to continue to invest for its future through both organic growth initiatives and acquisitions.
Dividend Declared
On
Financial Statistics as of
Book value per common share:
Return on invested capital: (3.0%); Actual number of common shares outstanding: 37,062,915.
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;
EBITDA – calculated as earnings before interest, taxes, depreciation and amortization and impairment charges;
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 "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 financial condition of Quanex, future uses of cash and other expenditures, expectations relating EPG and Nichols Aluminum financial performance for the second half of 2013, expectations relating to 2013 expenditures, expenses and tax rates, expectations relating to the company's ERP implementation, expectations relating to the company's industry, and the company's future growth. The statements 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 Form 10-K filing on
For additional information, please visit www.quanex.com.
QUANEX BUILDING PRODUCTS CORPORATION | ||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
(In thousands, except per share data) | ||||
(Unaudited) | ||||
Three Months Ended | Six Months Ended | |||
April 30, | April 30, | |||
2013 | 2012 | 2013 | 2012 | |
$232,458 | $194,444 | Net sales | $418,171 | $356,023 |
198,963 | 171,837 | Cost of sales (exclusive of items shown separately below) | 361,653 | 309,879 |
31,329 | 29,125 | Selling, general and administrative | 58,380 | 54,277 |
11,539 | 9,561 | Depreciation and amortization | 21,196 | 19,250 |
(9,373) | (16,079) | Operating income (loss) | (23,058) | (27,383) |
(174) | (114) | Interest expense | (313) | (240) |
9 | (39) | Other, net | (82) | 178 |
(9,538) | (16,232) | Income (loss) before income taxes | (23,453) | (27,445) |
2,190 | 3,947 | Income tax benefit (expense) | 7,987 | 8,412 |
$(7,348) | $(12,285) | Net income (loss) | $(15,466) | $(19,033) |
Earnings (loss) per common share: | ||||
$(0.20) | $(0.34) | Basic | $(0.42) | $(0.52) |
$(0.20) | $(0.34) | Diluted | $(0.42) | $(0.52) |
Weighted average common shares outstanding: | ||||
36,850 | 36,567 | Basic | 36,830 | 36,557 |
36,850 | 36,567 | Diluted | 36,830 | 36,557 |
$0.04 | $0.04 | Cash dividends per share | $0.08 | $0.08 |
QUANEX BUILDING PRODUCTS CORPORATION | ||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
(In thousands) | ||||
(Unaudited) | ||||
Three Months Ended | Six Months Ended | |||
April 30, | April 30, | |||
2013 | 2012 | 2013 | 2012 | |
$(7,348) | $(12,285) | Net income (loss) | $(15,466) | $(19,033) |
Other comprehensive income (loss): | ||||
(1,227) | 876 | Foreign currency translation adjustments (pretax) | (326) | (1,094) |
148 | (203) | Foreign currency translation adjustments tax benefit | 273 | (66) |
(1,079) | 673 | Other comprehensive income (loss), net of tax | (53) | (1,160) |
$(8,427) | $(11,612) | Comprehensive income (loss) | $(15,519) | $(20,193) |
QUANEX BUILDING PRODUCTS CORPORATION | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(In thousands) | ||
(Unaudited) | ||
April 30, 2013 |
October 31, 2012 | |
Assets | ||
$9,628 | Cash and equivalents | $71,255 |
95,584 | Accounts receivable, net | 85,644 |
77,208 | Inventories, net | 65,904 |
27,163 | Deferred income taxes | 20,439 |
5,576 | Prepaid and other current assets | 7,628 |
215,159 | Total current assets | 250,870 |
179,041 | Property, plant and equipment, net | 168,877 |
10,808 | Deferred income taxes | 8,911 |
71,003 | Goodwill | 68,331 |
82,970 | Intangible assets, net | 78,380 |
15,677 | Other assets | 14,169 |
$574,658 | Total assets | $589,538 |
Liabilities and stockholders' equity | ||
$77,628 | Accounts payable | $80,985 |
39,980 | Accrued liabilities | 46,459 |
278 | Current maturities of long-term debt | 368 |
117,886 | Total current liabilities | 127,812 |
11,072 | Long-term debt | 1,033 |
5,398 | Deferred pension and postretirement benefits | 6,873 |
6,844 | Liability for uncertain tax positions | 6,736 |
9,230 | Non-current environmental reserves | 9,827 |
17,154 | Other liabilities | 15,430 |
167,584 | Total liabilities | 167,711 |
407,074 | Total stockholders' equity | 421,827 |
$574,658 | Total liabilities and stockholders' equity | $589,538 |
QUANEX BUILDING PRODUCTS CORPORATION | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||
(In thousands) | ||
(Unaudited) | ||
Six Months Ended | ||
April 30, | ||
2013 | 2012 | |
Operating activities: | ||
Net income (loss) | $(15,466) | $(19,033) |
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: | ||
Depreciation and amortization | 21,324 | 19,285 |
Restructuring charges | — | 2,759 |
Deferred income taxes | (8,740) | (10,064) |
Stock-based compensation | 3,565 | 2,879 |
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | ||
Decrease (increase) in accounts and notes receivable | (6,380) | 111 |
Decrease (increase) in inventory | (6,267) | (9,658) |
Decrease (increase) in other current assets | 1,046 | (705) |
Increase (decrease) in accounts payable | (4,236) | 3,493 |
Increase (decrease) in accrued liabilities | (7,039) | (883) |
Increase (decrease) in income taxes | 1,766 | 425 |
Increase (decrease) in deferred pension and postretirement benefits | (1,475) | (2,453) |
Other, net | 1,119 | 2,054 |
Cash provided by (used for) operating activities | (20,783) | (11,790) |
Investing activities: | ||
Acquisitions, net of cash acquired | (22,096) | — |
Capital expenditures | (24,983) | (21,311) |
Other, net | 22 | 21 |
Cash provided by (used for) investing activities | (47,057) | (21,290) |
Financing activities: | ||
Borrowings under credit facility | 14,500 | — |
Repayments of credit facility borrowings | (4,500) | — |
Repayments of long-term debt | (142) | (131) |
Common stock dividends paid | (2,964) | (2,939) |
Purchase of treasury stock | — | (1,284) |
Issuance of common stock from stock option exercises, including related tax benefits | 865 | 1,427 |
Debt issuance costs | (1,163) | — |
Cash provided by (used for) financing activities | 6,596 | (2,927) |
Effect of exchange rate changes on cash and equivalents | (383) | 533 |
Increase (decrease) in cash and equivalents | (61,627) | (35,474) |
Cash and equivalents at beginning of period | 71,255 | 89,619 |
Cash and equivalents at end of period | $9,628 | $54,145 |
QUANEX BUILDING PRODUCTS CORPORATION | ||||
INDUSTRY SEGMENT INFORMATION | ||||
(In thousands) | ||||
(Unaudited) | ||||
Three Months Ended | Six Months Ended | |||
April 30, | April 30, | |||
2013 | 2012 | 2013 | 2012 | |
Net Sales: | ||||
$125,158 | $108,770 | Engineered Products | $231,277 | $208,163 |
109,691 | 88,293 | Aluminum Sheet Products | 194,294 | 153,993 |
234,849 | 197,063 | Building Products | 425,571 | 362,156 |
(2,391) | (2,619) | Eliminations | (7,400) | (6,133) |
$232,458 | $194,444 | Net Sales | $418,171 | $356,023 |
Operating Income (Loss): | ||||
$5,908 | $83 | Engineered Products | $8,741 | $1,887 |
(468) | (7,533) | Aluminum Sheet Products | (4,698) | (13,051) |
5,440 | (7,450) | Building Products | 4,043 | (11,164) |
(14,813) | (8,629) | Corporate and Other | (27,101) | (16,219) |
$(9,373) | $(16,079) | Operating Income (Loss) | $(23,058) | $(27,383) |
QUANEX BUILDING PRODUCTS CORPORATION | ||||||||
NON-GAAP FINANCIAL MEASURE DISCLOSURE | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
EBITDA is a non-GAAP financial measure that Quanex management uses to measure its operational performance and assist with financial decision-making. We believe this non-GAAP measure provides a consistent basis for comparison between periods, and will assist investors in understanding our financial performance, including under market conditions outlined in our forward-looking guidance. The company does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP. | ||||||||
Three Months Ended | Six Months Ended | |||||||
April 30, 2013 | April 30, 2013 | |||||||
Aluminum | Aluminum | |||||||
Engineered | Sheet | Corporate | Engineered | Sheet | Corporate | |||
Products | Products | & Other | Quanex | Products | Products | & Other | Quanex | |
$(7,348) | Net income (loss) | $(15,466) | ||||||
(2,190) | Income tax expense (benefit) | (7,987) | ||||||
(9) | Other, net | 82 | ||||||
174 | Interest Expense | 313 | ||||||
$5,908 | (468) | (14,813) | (9,373) | Operating income (loss) | $8,741 | (4,698) | (27,101) | (23,058) |
8,097 | 1,727 | 1,715 | 11,539 | Depreciation and amortization | 15,570 | 3,354 | 2,272 | 21,196 |
14,005 | 1,259 | (13,098) | 2,166 | EBITDA | 24,311 | (1,344) | (24,829) | (1,862) |
Three Months Ended | Six Months Ended | |||||||
April 30, 2012 | April 30, 2012 | |||||||
Aluminum | Aluminum | |||||||
Engineered | Sheet | Corporate | Engineered | Sheet | Corporate | |||
Products | Products | & Other | Quanex | Products | Products | & Other | Quanex | |
$(12,285) | Net income (loss) | $(19,033) | ||||||
(3,947) | Income tax expense (benefit) | (8,412) | ||||||
39 | Other, net | (178) | ||||||
114 | Interest Expense | 240 | ||||||
$83 | (7,533) | (8,629) | (16,079) | Operating income (loss) | $1,887 | (13,051) | (16,219) | (27,383) |
7,038 | 1,997 | 526 | 9,561 | Depreciation and amortization | 14,050 | 4,457 | 743 | 19,250 |
7,121 | (5,536) | (8,103) | (6,518) | EBITDA | 15,937 | (8,594) | (15,476) | (8,133) |
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