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Quanex Building Products Corporation Reports Full Year 2014 Results

  • Net sales increased 7.3% to $595 million vs. $555 million in 2013
  • 2014 income from continuing operations of $8.3 million vs. loss of ($12.4) million in 2013
  • 2014 diluted EPS from continuing operations of $0.22 vs. loss of ($0.34) in 2013
  • 2014 EBITDA increases 38.7% to $48.1 million vs. $34.7 million in 2013

HOUSTON, Dec. 12, 2014 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX), a leading supplier of window and door components, today released results for the fiscal year ended October 31, 2014.

"2014 was a successful year for Quanex. Revenues and EBITDA increased 7.3% and 38.7%, respectively, compared to 2013 results, the highest level since the spin-off of Quanex Building Products Corporation in 2008," Chairman, President and CEO Bill Griffiths said. "Despite a sputtering housing recovery, and a $20 million EBITDA drag on earnings from our vinyl profile business, we made good progress in 2014 and are well positioned for the future. All of our other operations are performing at a high level and managed to offset some of the shortfall in the vinyl business. We are confident that our vinyl business will return to more normalized levels of profitability as we exit 2015 and enter 2016, and will therefore contribute positively to our long-term goal of 14% to 15% total company EBITDA margins," said Griffiths.

2014 income from continuing operations was $8.3 million compared to a loss from continuing operations of $12.4 million in 2013. 2014 EBITDA was $48.1 million compared to $34.7 million in 2013. Additional information related to 2014 results, including a reconciliation of EBITDA (defined as net income or loss before interest, taxes, depreciation and amortization and other, net) to its most comparable GAAP measure, can be found in the supplemental schedules accompanying this press release.

Quanex believes there is value in measuring its sales performance against industry-related metrics and compares its sales results to U.S. window shipments as reported by Ducker Worldwide, a market intelligence firm. The company's North American fenestration sales for the last 12 months, those most comparable to Ducker Worldwide, have grown 5.4% over the prior year. This growth rate is consistent with preliminary U.S. window shipment growth of 5.3% for the 12 months ended September 30, 2014.

Corporate and Other Items

2014 corporate costs were $28 million compared to $64 million in 2013. The reduction in corporate costs is primarily related to the cessation of the Company's ERP implementation in fiscal 2013. 2014 results included stock-based compensation costs of $5.7 million, compared to $5.5 million in 2013. At year end, cash balances totaled $120.4 million, and there were no outstanding borrowings against the revolving credit facility.

On September 5, 2014, the Board of Directors authorized a new $75 million share repurchase program. Repurchases under the new program are being made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. During the fiscal year, Quanex repurchased 1,316,326 shares at an average cost of $18.41 per share (inclusive of sales commissions).

Business Outlook and Guidance

"As we have consistently stated, we believe the housing recovery will follow a slow, steady path of mid to high single digit growth rates over an extended period of four to five years," said Griffiths. "This would return U.S. window shipments to a mid-cycle level of approximately 65 million units through a combination of increased housing starts and a recovery in the remodel and replacement market," said Griffiths.

At the mid-cycle U.S. window shipment levels noted above, Quanex expects its revenues, absent any acquisitions, to be $825 to $875 million and total company (inclusive of corporate expenses) EBITDA to be $115 million to $130 million.

For fiscal 2015, Quanex anticipates a slow start, with sluggish growth through the winter months, coupled with a continued drag on earnings from its vinyl business during the first half of 2015. As such, first quarter 2015 is expected to be at breakeven EBITDA on flat sales. For the full year, Quanex expects revenue growth in the 5% to 7% range, with a recovery in the second half of the year in its vinyl profile business, leading to full year EBITDA of $57 to $63 million. Capital expenditures and depreciation and amortization are expected to be $35 million and $36 million, respectively.

Dividend Declared

On December 4, 2014, the Board of Directors declared a quarterly cash dividend of $0.04 per share on the company's common stock, payable December 29, 2014, to shareholders of record on December 15, 2014.

Conference Call Information

Quanex will host its conference call today, December 12, 2014 at 11:00 a.m. (Eastern) to discuss its results and outlook. The call will be available via webcast at www.quanex.com in the Investors section.

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 future financial condition of Quanex, future uses of cash and other expenditures, expenses and tax rates, expectations relating to the Company's industry, the Company's future growth, including revenue and EBITDA guidance, and the consummation of any share repurchases. 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, 2013, under the section entitled "Cautionary Note Regarding Forward-Looking Statements," and 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.

For additional information, please visit www.quanex.com

QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)
Three Months Ended October 31, Twelve Months Ended October 31,
2014 2013 2014 2013
$ 163,816 $ 166,843 Net sales $ 595,384 $ 554,867
129,040 124,682 Cost of sales 464,584 419,733
21,158 23,944 Selling, general and administrative 82,150 98,969
8,319 25,305 Depreciation and amortization 33,869 53,521
-- 1,465 Asset impairment charges 505 1,465
5,299 (8,553) Operating income (loss) 14,276 (18,821)
(143) (145) Interest expense (562) (621)
26 297 Other, net 92 170
5,182 (8,401) Income (loss) before income taxes 13,806 (19,272)
(2,170) 2,924 Income tax (expense) benefit (5,468) 6,888
3,012 (5,477) Income (loss) from continuing operations 8,338 (12,384)
1,944 4,271 Income from discontinued operations, net of taxes 20,896 681
$ 4,956 $ (1,206) Net income (loss) $ 29,234 $ (11,703)
Earnings (loss) per common share:
$ 0.08 $ (0.15) Continuing operations $ 0.22 $ (0.34)
$ 0.05 $ 0.12 Discontinued operations $ 0.57 $ 0.02
Diluted earnings (loss) per common share:
$ 0.08 $ (0.15) Continuing operations $ 0.22 $ (0.34)
$ 0.05 $ 0.12 Discontinued operations $ 0.56 $ 0.02
Weighted average common shares outstanding:
37,000 36,941 Basic 37,128 36,864
37,534 36,941 Diluted 37,679 36,864
$ 0.04 $ 0.04 Cash dividends per share $ 0.16 $ 0.16
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, 2014 October 31, 2013
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 120,384 $ 49,734
Accounts receivable, net 55,193 59,460
Inventories, net 57,358 41,679
Deferred income taxes 21,442 16,348
Prepaid and other current assets 6,052 4,911
Current assets of discontinued operations -- 64,151
Total current assets 260,429 236,283
Property, plant and equipment, net 109,487 106,821
Deferred income taxes 1,545 7,030
Goodwill 70,546 71,866
Intangible assets, net 70,150 78,962
Other assets 4,956 5,570
Non-current assets of discontinued operations -- 65,283
Total assets $ 517,113 $ 571,815
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,488 $ 37,532
Accrued liabilities 32,482 34,810
Income taxes payable 107 --
Current maturities of long-term debt 199 162
Current liabilities of discontinued operations -- 49,364
Total current liabilities 74,276 121,868
Long-term debt 586 701
Deferred pension and postretirement benefits 4,818 3,479
Liability for uncertain tax positions 4,626 5,396
Other liabilities 11,887 14,638
Non-current liabilities of discontinued operations -- 9,539
Total liabilities 96,193 155,621
Stockholders' equity:
Common stock 376 377
Additional paid-in-capital 249,600 247,642
Retained earnings 202,319 177,456
Accumulated other comprehensive loss (5,708) (2,400)
Treasury stock at cost (25,667) (6,881)
Total stockholders' equity 420,920 416,194
Total liabilities and stockholders' equity $ 517,113 $ 571,815
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Twelve Months Ended October 31,
2014 2013
(In thousands)
Operating activities:
Net income (loss) $ 29,234 $ (11,703)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization 36,910 60,504
Loss on disposition of capital assets 586 449
Stock-based compensation 3,925 4,910
Deferred income tax provision (benefit) 14,246 (8,288)
Excess tax benefit from share-based compensation (654) (236)
Asset impairment charges 1,007 1,465
Gain on sale of discontinued operations (39,122) --
Other, net (303) 781
Changes in assets and liabilities, net of effects from acquisitions:
Decrease (increase) in accounts receivable 484 (9,204)
(Increase) decrease in inventory (25,650) 12,791
(Increase) decrease in other current assets (1,098) 1,622
Increase (decrease) in accounts payable 12,842 (5,903)
Decrease in accrued liabilities (6,871) (7,473)
Increase in income taxes payable 866 1,708
Decrease in deferred pension and postretirement benefits (347) (164)
(Decrease) increase in other long-term liabilities (2,172) 1,574
Other, net (3,105) 686
Cash provided by operating activities 20,778 43,519
Investing activities:
Net proceeds from sale of discontinued operations 107,431 --
Acquisitions, net of cash acquired (5,161) (22,096)
Capital expenditures (33,779) (37,931)
Proceeds from property insurance claim 4,801 --
Proceeds from disposition of capital assets 832 340
Cash provided by (used in) investing activities 74,124 (59,687)
Financing activities:
Borrowings under credit facility -- 23,500
Repayments of credit facility borrowings -- (23,500)
Repayments of other long-term debt (175) (557)
Common stock dividends paid (5,992) (5,931)
Issuance of common stock 3,249 2,583
Excess tax benefit from share-based compensation 654 236
Debt issuance costs -- (1,200)
Purchase of treasury stock (22,281) --
Other 86 --
Cash used in financing activities (24,459) (4,869)
Effect of exchange rate changes on cash and cash equivalents 207 (484)
Increase (decrease) in cash and cash equivalents 70,650 (21,521)
Cash and cash equivalents at beginning of period 49,734 71,255
Cash and cash equivalents at end of period $ 120,384 $ 49,734
NOTE: The cash flow statement presentation includes the sources and uses of cash for the discontinued operations as operating, investing and financing cash flows, as applicable, combined with such cash flows for continuing operations, as permitted by U.S. GAAP.
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 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. We believe 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. 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 October 31, 2014 Twelve Months Ended October 31, 2014
Engineered
Products
Corporate &
Other
Quanex Engineered Products Corporate &
Other
Quanex
$ 3,012 Income (loss) from continuing operations $ 8,338
2,170 Income tax expense (benefit) 5,468
(26) Other, net (92)
143 Interest expense 562
12,525 (7,226) 5,299 Operating income (loss) 42,270 (27,994) 14,276
7,689 630 8,319 Depreciation and amortization 30,786 3,083 33,869
$ 20,214 $ (6,596) $ 13,618 EBITDA $ 73,056 $ (24,911) $ 48,145
Three Months Ended October 31, 2013 Twelve Months Ended October 31, 2013
Engineered
Products
Corporate &
Other
Quanex Engineered Products Corporate &
Other
Quanex
$ (5,477) Income (loss) from continuing operations $ (12,384)
(2,924) Income tax expense (benefit) (6,888)
(297) Other, net (170)
145 Interest expense 621
18,019 (26,572) (8,553) Operating income (loss) 45,318 (64,139) (18,821)
7,730 17,575 25,305 Depreciation and amortization 31,368 22,153 53,521
$ 25,749 $ (8,997) $ 16,752 EBITDA $ 76,686 $ (41,986) $ 34,700
Financial Statistics as of October 31, 2014
Book value per common share: $11.18
Total debt to capitalization: 0.1%
Return on invested capital: 5.5%
Actual number of common shares outstanding: 37,633,932
QUANEX BUILDING PRODUCTS CORPORATION
Supplemental Financial Disclosures
(In millions)
(Unaudited)
Engineered Products Group (EPG) is focused on providing window and door OEMs with fenestration components, products, and systems. Key end market are residential remodeling and replacement (R&R) and new home construction.
Q4 2014 Q4 2013 Change FY 2014 FY 2013 Change
(In millions)
Net sales $ 163.8 $ 166.8 $ (3.0) $ 595.4 $ 554.9 $ 40.5
Operating income 12.5 18.0 (5.5) 42.3 45.3 (3.0)
EBITDA $ 20.2 $ 25.7 $ (5.5) $ 73.1 $ 76.7 $ (3.6)
Corporate & Other Items
Q4 2014 Q4 2013 Change FY 2014 FY 2013 Change
(In millions)
ERP implementation costs $ -- $ 5.2 $ (5.2) $ -- $ 16.3 $ (16.3)
ERP accelerated depreciation -- 15.3 (15.3) 0.5 15.3 (14.8)
LIFO adjustment (0.1) (0.1) -- (0.1) (0.1) --
Stock-based compensation cost 1.9 1.7 0.2 5.7 5.5 0.2
Transaction costs 0.3 0.2 0.1 0.5 1.2 (0.7)
Other costs 5.1 4.3 0.8 21.4 25.9 (4.5)
Operating expense $ 7.2 $ 26.6 $ (19.4) $ 28.0 $ 64.1 $ (36.1)
QUANEX BUILDING PRODUCTS CORPORATION
PRE-TAX & AFTER TAX PRESENTATION
(In millions, except per share data)
(Unaudited)
Q4 2014 Q4 2013 FY 2014 FY 2013
Pre-Tax Presentation $MM $MM $MM $MM
Operating Income (Loss) from Continuing Operations As Reported $ 5.3 $ (8.6) $ 14.3 $ (18.8)
Benefit (Reduction) to Operating Income (Loss):
IG Warranty Reserve Benefit -- -- (2.8) --
Asset Impairment Charge -- -- 0.5 1.5
Transaction Related Expenses 0.3 -- 0.5 1.2
Discontinued ERP Expenses* -- 3.2 0.5 9.2
Operating Income (Loss) from Continuing Operations As Adjusted $ 5.6 $ (5.4) $ 13.0 $ (6.9)
Q4 2014 Q4 2014 Q4 2013 Q4 2013 FY 2014 FY 2014 FY 2013 FY 2013
After-Tax Presentation $MM EPS $MM EPS $MM EPS $MM EPS
Income (Loss) from Continuing Operations As Reported $ 3.0 $ 0.08 $ (5.5) $ (0.15) $ 8.3 $ 0.22 $ (12.4) $ (0.34)
Benefit (Reduction) to EPS:
IG Warranty Reserve Benefit -- -- -- -- (1.6) (0.05) -- --
Asset Impairment Charge -- -- -- -- 0.3 0.01 1.0 0.03
Transaction Related Expenses 0.2 -- -- -- 0.3 0.01 0.8 0.02
Discontinued ERP Expenses -- -- 2.0 0.06 0.3 0.01 6.1 0.17
Diluted Earnings (Loss) from Continuing Operations As Adjusted * $ 3.2 $ 0.08 $ (3.5) $ (0.09) $ 7.6 $ 0.20 $ (4.5) $ (0.12)
* YTD 2014 includes $509k of depreciation related to the discontinued SAP project.

CONTACT: Financial Contact: Marty Ketelaar, 713-877-5402; Media Contact: Valerie Calvert, 713-877-5305

Source:Quanex Building Products Corporation