UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
March 1, 2018
(Date of earliest event reported)
QUANEX BUILDING PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-33913 | 26-1561397 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 1800 West Loop South, Suite 1500, Houston, Texas |
77027 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: 713-961-4600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
On March 5, 2018, Quanex Building Products Corporation (the “Registrant”) issued a press release announcing its results of operations and financial condition for the fiscal quarter ended January 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
| Item 5.07. | Submission of Matters to a Vote of Security Holders |
On March 1, 2018, the Company held its Annual Meeting of Stockholders, pursuant to notice and proxy mailed on January 26, 2018, to the Company’s stockholders of record as of January 10, 2018. There were 35,070,482 shares of common stock entitled to vote at the meeting, and a total of 33,496,593 shares were represented at the meeting in person or by proxy.
At the Annual Meeting, four directors were elected for terms expiring at the Company’s 2019 Annual Meeting, with the following tabulation of votes for each nominee:
| Director Nominee |
Votes For | Votes Against |
Abstain | Broker Non-Votes |
Percent of Shares Cast in Favor * |
|||||||||||||||
| Robert R. Buck |
31,675,328 | 818,719 | 12,285 | 990,261 | 97.48 | % | ||||||||||||||
| Susan F. Davis |
32,098,854 | 396,548 | 10,930 | 990,261 | 98.78 | % | ||||||||||||||
| Joseph D. Rupp |
32,075,924 | 416,452 | 13,956 | 990,261 | 98.72 | % | ||||||||||||||
| Curtis M. Stevens |
32,134,613 | 359,269 | 12,450 | 990,261 | 98.89 | % | ||||||||||||||
| * | Excludes Abstentions and Broker Non-Votes |
In addition to the election of directors, stockholders at the Annual Meeting took the following actions:
| • | Provided an advisory “say on pay” vote approving the Company’s executive compensation programs; and |
| • | Ratified the Audit Committee’s appointment of Grant Thornton LLP as the Company’s independent auditor for the fiscal year ending October 31, 2018; |
The tabulation of votes for these proposals is set forth below:
| Proposal |
Votes For | Votes Against |
Abstain | Broker Non- Votes |
Percent of Shares Cast in Favor * |
|||||||||||||||
| Advisory Vote to Approve Executive Compensation |
32,053,722 | 364,089 | 88,521 | 990,261 | 98.88 | % | ||||||||||||||
| Ratification of Company’s Independent Auditor |
33,444,077 | 30,540 | 14,993 | 6,983 | 99.91 | % | ||||||||||||||
| * | Excludes Abstentions and Broker Non-Votes |
| Item 7.01 | Regulation FD Disclosure. |
On March 5, 2018, the Registrant issued a press release announcing that the Board had declared a quarterly cash dividend of $0.04 per share of common stock, payable on March 29, 2018, to stockholders of record on March 15, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| * | 99.1 | Press Release dated March 5, 2018 | ||
| * | Filed herewith. | |||
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| QUANEX BUILDING PRODUCTS CORPORATION | ||||||
| (Registrant) | ||||||
| March 5, 2018 |
/S/ KEVIN P. DELANEY | |||||
| (Date) | Kevin P. Delaney | |||||
| Senior Vice President – General Counsel and Secretary | ||||||
Exhibit 99.1
Quanex Building Products Announces First Quarter 2018 Results and Reaffirms Full Year 2018 Guidance
Solid Underlying Growth in NA and EU Engineered Components Segments
HOUSTON, TEXAS – March 5, 2018 - Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the three months ended January 31, 2018.
Bill Griffiths, Chairman, President and Chief Executive Officer, stated, “First quarter results tracked the typical seasonality of our businesses; however, raw material price and labor inflation pressured margins across the board. We expect to recover some of the increase in raw materials prices in the coming months via contractual pass through or targeted price increases and we will work hard to cover the balance with operational efficiency improvements. Excluding eliminated products, our legacy fenestration business in the U.S. grew at 4.4% during the quarter, which compares favorably to Ducker’s latest window shipment estimate of 4.2% growth for the three months ended December 31, 2017. Similarly, underlying growth in our European Engineered Components segment was 5.4%. We generated positive free cash flow during the first quarter of 2018, which allowed us to pay down bank debt during the quarter of the year where we have historically had to borrow. Despite the recent gyrations in the stock market, the fundamentals for our business remain positive, and as such we are comfortable reaffirming our full year 2018 guidance and expect a strong second half of the year.”
First Quarter 2018 Results Summary
The Company reported the following selected financial results:
| Three Months Ended January 31, | ||||||||
| 2018 | 2017 | |||||||
| Net Sales |
$ | 191.7 | $ | 195.1 | ||||
| Net Income (Loss) |
$ | 4.9 | ($ | 3.7 | ) | |||
| Diluted EPS |
$ | 0.14 | ($ | 0.11 | ) | |||
| Adjusted Net Loss |
($ | 1.5 | ) | ($ | 1.4 | ) | ||
| Adjusted Diluted EPS |
($ | 0.04 | ) | ($ | 0.04 | ) | ||
| Adjusted EBITDA |
$ | 13.2 | $ | 13.0 | ||||
(See Non-GAAP Terminology Definitions and Disclaimers section, Non-GAAP Financial Measure Disclosure table and Selected Segment Data table for additional information)
The slight decrease in net sales during the first quarter of 2018 was largely the result of portfolio rationalization and divestitures that occurred throughout 2017. The loss of revenues in the first quarter of 2018 associated with the aforementioned actions that took place in 2017 was somewhat offset by solid underlying growth in the North American and European Engineered Components segments. (See Sales Analysis table for additional information)
1
The increase in earnings was predominantly attributable to lower stock-based compensation expense and a $6.5 million, or $0.19 per diluted share, net tax benefit as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017. The Tax Cuts and Jobs Act reduces the federal corporate tax rate on U.S. earnings to 21% and moves from a global taxation regime to a modified territorial regime. The lower tax rate will be phased in over time since Quanex has an October 31 fiscal year-end. Including the net tax benefit realized in the first quarter of 2018, the Company estimates that its effective tax rate for fiscal 2018 will be approximately 9%, or approximately 24% excluding the net tax benefit. Quanex will continue to evaluate the impact of the tax reform through the remainder of fiscal 2018.
As of January 31, 2018, the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA was unchanged at 2.3x. Quanex remains focused on generating Free Cash Flow to pay down debt and expects to end fiscal 2018 with a leverage ratio below 2.0x. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
Recent Events
The stockholders approved each of the following proposals voted on at the Company’s annual meeting held on March 1, 2018.
| • | Election of Directors – Robert R. Buck, Susan F. Davis, Joseph D. Rupp and Curtis M. Stevens were elected to serve as 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 supported Quanex’s executive officer compensation structure |
| • | Ratification of Appointment of Grant Thornton LLP as Independent Public Accountants – the stockholders ratified the Company’s appointment of Grant Thornton LLP as its independent registered public accounting firm for the fiscal year ending October 31, 2018 |
Additionally, Quanex’s Board of Directors declared a quarterly cash dividend of $0.04 per share on the Company’s common stock, payable March 29, 2018, to shareholders of record on March 15, 2018.
Conference Call and Webcast Information
The Company has scheduled a conference call for Tuesday, March 6, 2018, at 11:00 a.m. ET (10:00 a.m. CT). To participate in the conference call dial (877) 388-2139 for domestic callers and (541) 797-2983 for international callers, in both cases using the conference passcode 1039546, and ask for the Quanex call a few minutes prior to the start time. A link to the live audio webcast will also be available on the Company’s website at http://www.quanex.com in the Investors section under Presentations & Events. A telephonic replay of the call will be available approximately two hours after the live broadcast ends and will be accessible through March 13, 2018. To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 1039546.
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. For more information contact Scott Zuehlke, Vice President, Investor Relations & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.
2
Non-GAAP Terminology Definitions and Disclaimers
Adjusted Net Income (Loss) (defined as net income further adjusted to exclude purchase price accounting inventory step-ups, transaction costs, gain/loss on the sale of fixed assets, restructuring charges, other net adjustments related to foreign currency transaction gain/loss and effective tax rates reflecting impacts of adjustments on a with and without basis) and Adjusted EPS are non-GAAP financial measures that Quanex believes provide a consistent basis for comparison between periods and more accurately reflects operational performance, as they are not influenced by certain income or expense items not affecting ongoing operations. 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, and restructuring charges) are non-GAAP financial measures that the Company uses to measure operational performance and assist with financial decision-making. Net Debt is calculated using the sum of current maturities of long-term debt and long-term debt, minus cash and cash equivalents. The leverage ratio of Net Debt to LTM Adjusted EBITDA is a financial measure that Quanex believes is useful to investors and financial analysts in evaluating the Company’s leverage. In addition, with certain limited adjustments, this leverage ratio is the basis for a key covenant in Quanex’s credit agreement. Free Cash Flow is a non-GAAP measure calculated using cash provided by operating activities less capital expenditures. The Company believes that the presented non-GAAP measures provide a consistent basis for comparison between periods, and will assist investors in understanding Quanex’s financial performance when comparing results to other investment opportunities. The presented non-GAAP measures may not be the same as those used by other companies. The Company does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with U.S. GAAP.
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 October 31, 2017, under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. Any forward-looking statements in this press release are made as of the date hereof, and Quanex undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.
3
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)
| Three Months Ended January 31, | ||||||||
| 2018 | 2017 | |||||||
| Net sales |
$ | 191,666 | $ | 195,096 | ||||
| Cost of sales |
154,440 | 154,947 | ||||||
| Selling, general and administrative |
24,076 | 27,445 | ||||||
| Restructuring charges |
366 | 1,139 | ||||||
| Depreciation and amortization |
13,273 | 15,406 | ||||||
|
|
|
|
|
|||||
| Operating loss |
(489 | ) | (3,841 | ) | ||||
| Interest expense |
(2,441 | ) | (2,160 | ) | ||||
| Other, net |
317 | 661 | ||||||
|
|
|
|
|
|||||
| Loss before income taxes |
(2,613 | ) | (5,340 | ) | ||||
| Income tax benefit |
7,560 | 1,614 | ||||||
|
|
|
|
|
|||||
| Net income (loss) |
$ | 4,947 | $ | (3,726 | ) | |||
|
|
|
|
|
|||||
| Income (loss) per common share, basic |
$ | 0.14 | $ | (0.11 | ) | |||
| Income (loss) per common share, diluted |
$ | 0.14 | $ | (0.11 | ) | |||
| Weighted average common shares outstanding: |
||||||||
| Basic |
34,662 | 34,055 | ||||||
| Diluted |
35,286 | 34,055 | ||||||
| Cash dividends per share |
$ | 0.04 | $ | 0.04 | ||||
4
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| January 31, 2018 | October 31, 2017 | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,757 | $ | 17,455 | ||||
| Accounts receivable, net |
62,119 | 79,411 | ||||||
| Inventories, net |
95,843 | 87,529 | ||||||
| Prepaid and other current assets |
7,451 | 7,406 | ||||||
|
|
|
|
|
|||||
| Total current assets |
179,170 | 191,801 | ||||||
| Property, plant and equipment, net |
213,014 | 211,131 | ||||||
| Goodwill |
226,927 | 222,194 | ||||||
| Intangible assets, net |
138,743 | 139,778 | ||||||
| Other assets |
9,180 | 8,975 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 767,034 | $ | 773,879 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 39,868 | $ | 44,150 | ||||
| Accrued liabilities |
29,559 | 38,871 | ||||||
| Income taxes payable |
2,664 | 2,192 | ||||||
| Current maturities of long-term debt |
20,773 | 21,242 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
92,864 | 106,455 | ||||||
| Long-term debt |
215,362 | 218,184 | ||||||
| Deferred pension and postretirement benefits |
5,293 | 4,433 | ||||||
| Deferred income taxes |
14,771 | 21,960 | ||||||
| Other liabilities |
15,787 | 16,000 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
344,077 | 367,032 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
375 | 375 | ||||||
| Additional paid-in-capital |
253,638 | 255,719 | ||||||
| Retained earnings |
228,293 | 225,704 | ||||||
| Accumulated other comprehensive loss |
(14,623 | ) | (25,076 | ) | ||||
| Treasury stock at cost |
(44,726 | ) | (49,875 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
422,957 | 406,847 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 767,034 | $ | 773,879 | ||||
|
|
|
|
|
|||||
5
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
| Three Months Ended January 31, | ||||||||
| 2018 | 2017 (1) | |||||||
| Operating activities: |
||||||||
| Net income (loss) |
$ | 4,947 | $ | (3,726 | ) | |||
| Adjustments to reconcile net income (loss) to cash provided by operating activities: |
|
|||||||
| Depreciation and amortization |
13,273 | 15,406 | ||||||
| Stock-based compensation |
580 | 2,226 | ||||||
| Deferred income tax |
(8,483 | ) | (3,684 | ) | ||||
| Other, net |
130 | 1,241 | ||||||
| Changes in assets and liabilities: |
||||||||
| Decrease in accounts receivable |
18,378 | 21,143 | ||||||
| Increase in inventory |
(6,926 | ) | (7,622 | ) | ||||
| Decrease (increase) in other current assets |
73 | (438 | ) | |||||
| Decrease in accounts payable |
(4,523 | ) | (7,232 | ) | ||||
| Decrease in accrued liabilities |
(10,629 | ) | (17,971 | ) | ||||
| Increase in income taxes |
344 | 2,761 | ||||||
| Increase in deferred pension and postretirement benefits |
860 | 837 | ||||||
| Increase in other long-term liabilities |
181 | 366 | ||||||
| Other, net |
(13 | ) | (226 | ) | ||||
|
|
|
|
|
|||||
| Cash provided by operating activities |
8,192 | 3,081 | ||||||
| Investing activities: |
||||||||
| Acquisitions, net of cash acquired |
— | (8,497 | ) | |||||
| Capital expenditures |
(7,811 | ) | (8,141 | ) | ||||
| Proceeds from disposition of capital assets |
65 | 390 | ||||||
|
|
|
|
|
|||||
| Cash used for investing activities |
(7,746 | ) | (16,248 | ) | ||||
| Financing activities: |
||||||||
| Borrowings under credit facilities |
9,500 | 24,000 | ||||||
| Repayments of credit facility borrowings |
(13,750 | ) | (20,875 | ) | ||||
| Repayments of other long-term debt |
(255 | ) | (429 | ) | ||||
| Common stock dividends paid |
(1,397 | ) | (1,372 | ) | ||||
| Issuance of common stock |
2,231 | 1,383 | ||||||
| Payroll tax paid to settle shares forfeited upon vesting of stock |
(706 | ) | (957 | ) | ||||
|
|
|
|
|
|||||
| Cash (used for) provided by financing activities |
(4,377 | ) | 1,750 | |||||
| Effect of exchange rate changes on cash and cash equivalents |
233 | (35 | ) | |||||
|
|
|
|
|
|||||
| Decrease in cash and cash equivalents |
(3,698 | ) | (11,452 | ) | ||||
| Cash and cash equivalents at beginning of period |
17,455 | 25,526 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents at end of period |
$ | 13,757 | $ | 14,074 | ||||
|
|
|
|
|
|||||
| (1) | Updated to reflect adoption of ASU 2016-09. |
6
QUANEX BUILDING PRODUCTS CORPORATION
NON-GAAP FINANCIAL MEASURE DISCLOSURE
(In thousands, except per share data)
(Unaudited)
| Reconciliation of Adjusted Net Income (Loss) and Adjusted EPS | Three Months Ended January 31, 2018 |
Three Months Ended January 31, 2017 |
||||||||||||||||||||||
| Net Income |
Diluted EPS |
Net Income |
Diluted EPS |
|||||||||||||||||||||
| Net income (loss) as reported |
$ | 4,947 | $ | 0.14 | $ | (3,726 | ) | $ | (0.11 | ) | ||||||||||||||
| Reconciling items from below |
(6,485 | ) | (0.18 | ) | 2,358 | 0.07 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Adjusted net loss and adjusted EPS |
$ | (1,538 | ) | $ | (0.04 | ) | $ | (1,368 | ) | $ | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Reconciliation of Adjusted EBITDA | Three Months Ended January 31, 2018 |
Three Months Ended January 31, 2017 |
||||||||||||||||||||||
| Reconciliation | Reconciliation | |||||||||||||||||||||||
| Net income (loss) as reported |
$ | 4,947 | $ | (3,726 | ) | |||||||||||||||||||
| Income tax benefit |
(7,560 | ) | (1,614 | ) | ||||||||||||||||||||
| Other, net |
(317 | ) | (661 | ) | ||||||||||||||||||||
| Interest expense |
2,441 | 2,160 | ||||||||||||||||||||||
| Depreciation and amortization |
13,273 | 15,406 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| EBITDA |
12,784 | 11,565 | ||||||||||||||||||||||
| Reconciling items from below |
378 | 1,470 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Adjusted EBITDA |
$ | 13,162 | $ | 13,035 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Reconciling Items | Three Months Ended January 31, 2018 |
Three Months Ended January 31, 2017 |
||||||||||||||||||||||
| Income Statement |
Reconciling Items |
Income Statement |
Reconciling Items |
|||||||||||||||||||||
| Net sales |
$ | 191,666 | $ | — | $ | 195,096 | $ | — | ||||||||||||||||
| Cost of sales |
154,440 | — | 154,947 | (14 | ) | (1 | ) | |||||||||||||||||
| Selling, general and administrative |
24,076 | (12 | ) | (2 | ) | 27,445 | (317 | ) | (2 | ) | ||||||||||||||
| Restructuring charges |
366 | (366 | ) | (3 | ) | 1,139 | (1,139 | ) | (3 | ) | ||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| EBITDA |
12,784 | 378 | 11,565 | 1,470 | ||||||||||||||||||||
| Depreciation and amortization |
13,273 | — | 15,406 | (2,533 | ) | (4 | ) | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Operating loss |
(489 | ) | 378 | (3,841 | ) | 4,003 | ||||||||||||||||||
| Interest expense |
(2,441 | ) | — | (2,160 | ) | — | ||||||||||||||||||
| Other, net |
317 | (299 | ) | (5 | ) | 661 | (630 | ) | (5 | ) | ||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Loss before income taxes |
(2,613 | ) | 79 | (5,340 | ) | 3,373 | ||||||||||||||||||
| Income tax benefit |
7,560 | (6,564 | ) | (6 | ) | 1,614 | (1,015 | ) | (6 | ) | ||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Net income (loss) |
$ | 4,947 | $ | (6,485 | ) | $ | (3,726 | ) | $ | 2,358 | ||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Diluted earnings (loss) per share |
$ | 0.14 | $ | (0.11 | ) | |||||||||||||||||||
| (1) | Relates solely to purchase price accounting inventory step-up impact from HL Plastics acquisition. |
| (2) | Acquisition related transaction costs and loss on sale of fixed assets related to the closure of a plant in 2017. |
| (3) | Restructuring charges relate to the closure of several manufacturing plant facilities. |
| (4) | Accelerated depreciation and amortization for restructured PP&E and intangible assets. |
| (5) | Foreign currency transaction gains. |
| (6) | Impact on a with and without basis. Includes $6.5 million adjustment related to the Tax Cuts and Jobs Act in 2018. |
7
QUANEX BUILDING PRODUCTS CORPORATION
SEGMENT RECONCILIATION
(In thousands)
(Unaudited)
The following tables reconcile the Company’s segment presentation to account for the transfer of operating facilities from the North American Engineered Components segment to the Cabinet Components segment, as previously reported in our earnings release for the three-months ended January 31, 2017, to the current presentation:
| NA Engineered Components |
EU Engineered Components |
NA Cabinet Components |
Unallocated Corp & Other |
Total | ||||||||||||||||
| Three months ended January 31, 2017 |
||||||||||||||||||||
| As previously reported |
||||||||||||||||||||
| Net sales |
$ | 111,073 | $ | 31,569 | $ | 52,997 | $ | (543 | ) | $ | 195,096 | |||||||||
| Cost of sales |
86,393 | 22,538 | 46,237 | (221 | ) | 154,947 | ||||||||||||||
| Selling, general and administrative |
13,735 | 4,772 | 4,110 | 4,828 | 27,445 | |||||||||||||||
| Restructuring costs |
566 | — | 573 | — | 1,139 | |||||||||||||||
| Depreciation and amortization |
10,078 | 2,056 | 3,135 | 137 | 15,406 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
$ | 301 | $ | 2,203 | $ | (1,058 | ) | $ | (5,287 | ) | $ | (3,841 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Reclassification |
||||||||||||||||||||
| Net sales |
$ | (4,990 | ) | $ | — | $ | 5,633 | $ | (643 | ) | $ | — | ||||||||
| Cost of sales |
(4,415 | ) | — | 5,058 | (643 | ) | — | |||||||||||||
| Selling, general and administrative |
(204 | ) | — | 204 | — | — | ||||||||||||||
| Restructuring costs |
— | — | — | — | — | |||||||||||||||
| Depreciation and amortization |
(140 | ) | — | 140 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
$ | (231 | ) | $ | — | $ | 231 | $ | — | $ | — | |||||||||
|
|
|
|
|
|
|
|
|
|
|
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| Current presentation |
||||||||||||||||||||
| Net sales |
$ | 106,083 | $ | 31,569 | $ | 58,630 | $ | (1,186 | ) | $ | 195,096 | |||||||||
| Cost of sales |
81,978 | 22,538 | 51,295 | (864 | ) | 154,947 | ||||||||||||||
| Selling, general and administrative |
13,531 | 4,772 | 4,314 | 4,828 | 27,445 | |||||||||||||||
| Restructuring costs |
566 | — | 573 | — | 1,139 | |||||||||||||||
| Depreciation and amortization |
9,938 | 2,056 | 3,275 | 137 | 15,406 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
$ | 70 | $ | 2,203 | $ | (827 | ) | $ | (5,287 | ) | $ | (3,841 | ) | |||||||
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8
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 January 31, 2018 |
||||||||||||||||||||
| Net sales |
$ | 102,727 | $ | 33,996 | $ | 55,922 | $ | (979 | ) | $ | 191,666 | |||||||||
| Cost of sales |
80,026 | 24,833 | 50,210 | (629 | ) | 154,440 | ||||||||||||||
| Selling, general and administrative |
13,827 | 5,450 | 4,788 | 11 | 24,076 | |||||||||||||||
| Restructuring charges |
251 | — | 115 | — | 366 | |||||||||||||||
| Depreciation and amortization |
7,012 | 2,449 | 3,686 | 126 | 13,273 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
1,611 | 1,264 | (2,877 | ) | (487 | ) | (489 | ) | ||||||||||||
| Depreciation and amortization |
7,012 | 2,449 | 3,686 | 126 | 13,273 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
8,623 | 3,713 | 809 | (361 | ) | 12,784 | ||||||||||||||
| Transaction related costs |
— | — | — | 12 | 12 | |||||||||||||||
| Restructuring charges |
251 | — | 115 | — | 366 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 8,874 | $ | 3,713 | $ | 924 | $ | (349 | ) | $ | 13,162 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA Margin % |
8.6 | % | 10.9 | % | 1.7 | % | 6.9 | % | ||||||||||||
| Three months ended January 31, 2017 |
||||||||||||||||||||
| Net sales |
$ | 106,083 | $ | 31,569 | $ | 58,630 | $ | (1,186 | ) | $ | 195,096 | |||||||||
| Cost of sales |
81,978 | 22,538 | 51,295 | (864 | ) | 154,947 | ||||||||||||||
| Selling, general and administrative |
13,531 | 4,772 | 4,314 | 4,828 | 27,445 | |||||||||||||||
| Restructuring charges |
566 | — | 573 | — | 1,139 | |||||||||||||||
| Depreciation and amortization |
9,938 | 2,056 | 3,275 | 137 | 15,406 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
70 | 2,203 | (827 | ) | (5,287 | ) | (3,841 | ) | ||||||||||||
| Depreciation and amortization |
9,938 | 2,056 | 3,275 | 137 | 15,406 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EBITDA |
10,008 | 4,259 | 2,448 | (5,150 | ) | 11,565 | ||||||||||||||
| Transaction related costs |
— | — | — | 60 | 60 | |||||||||||||||
| Mexico restructuring, loss on sale of fixed assets |
— | — | 257 | — | 257 | |||||||||||||||
| Restructuring charges |
566 | — | 573 | — | 1,139 | |||||||||||||||
| PPA-Inventory Step-up |
— | 14 | — | — | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA |
$ | 10,574 | $ | 4,273 | $ | 3,278 | $ | (5,090 | ) | $ | 13,035 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Adjusted EBITDA Margin % |
10.0 | % | 13.5 | % | 5.6 | % | 6.7 | % | ||||||||||||
9
QUANEX BUILDING PRODUCTS CORPORATION
SALES ANALYSIS
(In thousands)
(Unaudited)
| Three Months Ended | ||||||||
| January 31, 2018 | January 31, 2017 (1) | |||||||
| NA Engineered Components: |
||||||||
| United States - fenestration (2) |
$ | 88,216 | $ | 89,711 | ||||
| International - fenestration |
7,008 | 6,341 | ||||||
| United States - non-fenestration |
4,147 | 5,831 | ||||||
| International - non-fenestration |
3,356 | 4,200 | ||||||
|
|
|
|
|
|||||
| $ | 102,727 | $ | 106,083 | |||||
| EU Engineered Components (3): |
||||||||
| United States - fenestration |
$ | — | $ | 35 | ||||
| International - fenestration (4) |
29,869 | 28,905 | ||||||
| International - non-fenestration |
4,127 | 2,629 | ||||||
|
|
|
|
|
|||||
| $ | 33,996 | $ | 31,569 | |||||
| NA Cabinet Components: |
||||||||
| United States - fenestration |
$ | 3,445 | $ | 3,332 | ||||
| United States - non-fenestration (5) |
52,006 | 54,691 | ||||||
| International - non-fenestration |
471 | 607 | ||||||
|
|
|
|
|
|||||
| $ | 55,922 | $ | 58,630 | |||||
| Unallocated Corporate & Other: |
||||||||
| Eliminations |
$ | (979 | ) | $ | (1,186 | ) | ||
|
|
|
|
|
|||||
| $ | (979 | ) | $ | (1,186 | ) | |||
|
|
|
|
|
|||||
| Net Sales |
$ | 191,666 | $ | 195,096 | ||||
|
|
|
|
|
|||||
| (1) | Updated to reflect transfer of operating facilities from NA Engineered Components to NA Cabinet Components. See Reconciliation for additional details. |
| (2) | Reflects the loss of revenue associated with eliminated products of $5.2 million for the three-months ended January 31, 2018. |
| (3) | Reflects a gain of $3.1 million in revenue associated with foreign currency exchange rate impacts. |
| (4) | Reflects loss of revenue associated with eliminated products of $2.4 million for the three-months ended January 31, 2018. |
| (5) | Reflects the loss of revenue associated with eliminated products of $2.4 million for the three-months ended January 31, 2018. |
10