Loss of $0.38 per Diluted Share from Continuing Operations
excluding Special Items
Loss of $1.08 per Diluted Share from Continuing Operations
Generated $15 Million of Cash from Six Months Operating Activities
$85 Million Cash and Equivalents Balance
HOUSTON, May 28, 2009 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) today reported fiscal second quarter 2009 results for the period ending April 30. Loss from continuing operations was $14.0 million, or $0.38 per diluted share, excluding special items, and $40.1 million, or $1.08 per diluted share, including special items. Special items were an after-tax impairment charge of $29.0 million, or $0.78 per diluted share, and after-tax LIFO income of $2.9 million, or $0.08 per diluted share.
Quarterly Highlights
* Net sales were $113.2 million. * Operating loss was $16.4 million excluding special items. * Reduced inventories by $21.6 million. * Cash and equivalents totaled $85.4 million. * Recorded a $45.3 million pre-tax true-up impairment charge. * Recorded $4.5 million pre-tax LIFO income. * Capital expenditures were $5.0 million. * Cash provided by operating activities was $14.6 million for the six months.
Quarterly Commentary
ENGINEERED PRODUCTS (in millions)
2nd qtr 2nd qtr
2009 2008
-------- --------
Net sales $ 65.2 $ 92.5
Operating income (loss) excluding special items $ (0.8) $ 5.3
Engineered Products is focused on providing leading window and door customers with value-added fenestration components, products, and systems. Key market drivers are residential housing starts and residential remodeling activity.
"The U.S. residential housing market dropped 49% in our second quarter compared to a year ago, while residential remodeling activity was estimated to be off 10% to 15% over this same timeframe," said David D. Petratis, president and chief executive officer of Quanex Building Products. "Net sales at Engineered Products were down 29% as business conditions remained difficult. However, we did see demand improve during the quarter, particularly in April, due to the seasonal nature of our building products markets," Petratis continued. "While discussions with our customers currently reflect a bit of optimism for the second half of the year, home inventories remain at high levels. Therefore, we will continue to size the business and our inventories at conservative levels."
ALUMINUM SHEET PRODUCTS (in millions)
2nd qtr 2nd qtr
2009 2008
-------- --------
Net sales $ 50.4 $ 118.3
Operating income (loss) $ (11.6) $ 10.0
Shipped pounds 44 72
Aluminum Sheet Products is a leading provider of common alloy aluminum sheet products for the building & construction, transportation and other consumer durable markets. Key market drivers are residential housing starts and residential remodeling activity.
"London Metal Exchange (LME) aluminum prices in the second quarter fell to a new inflation-adjusted low of $0.57 per pound, before climbing back to $0.65 per pound by quarter end. These historically low prices, combined with relatively high aluminum scrap costs, continued to negatively impact our spread (sales price less material costs), which was down 51% and 33% from the second quarter 2008 and first quarter 2009, respectively. Shipped pounds were 44 million, down 39% from the year ago quarter and reflected the deterioration in demand in the building and construction market," said Petratis. "For the second half of the year, we expect spread to rise as the bulk of this high priced scrap has now been processed and LME aluminum prices have stabilized. However, shipped pounds are expected to continue to significantly trail year ago levels."
Cash Flow
"Generating good cash flow and carefully watching our spending remain paramount. During the quarter, we reduced company-wide inventories by $22 million, with particular progress at Nichols Aluminum, where inventory pounds were reduced by almost 50%, leaving it with an inventory level 25% lower than at any point in the last 10 years. We believe there is still room for incremental improvements company-wide. As we continue to monitor our working capital, we are also closely watching the aging of receivables. At quarter end, we had a healthy cash balance of $85 million," Petratis said.
Outlook
"Rising unemployment, difficult lending practices, high home inventories and troubling foreclosure rates have resulted in a difficult market environment for Quanex Building Products," said Petratis. "We responded to these challenges and made significant reductions in our workforce, consolidated and idled facilities, and leaned out working capital to maximize our cash flow. However, negative economic factors will continue to be a significant drag on U.S. residential build rates and remodeling activity, and at this time we cannot estimate what the rate of these activities will be in fiscal 2009. This uncertainty also carries through to our ability to precisely estimate operating income for the second half of the year," Petratis said. "At this time and subject to change, we expect our Engineered Products segment to report some $12 million to $15 million of operating income in the second half of the year, and our Aluminum Sheet Products segment to approach breakeven in the same period. Second half segment estimates exclude corporate expenses. For the company, we expect to report a loss for fiscal 2009 as previously reported, excluding impairment charges and LIFO income."
Impairment Charge
"In the first quarter of 2009, we determined there were sufficient indicators to require us to perform an interim goodwill and other intangible asset impairment analysis. As a result, we booked estimated goodwill and other intangible asset impairment charges of $137.3 million pre-tax in the first quarter. We completed this goodwill analysis during the second quarter and booked an additional $45.3 million pre-tax impairment charge," said Petratis.
Non-GAAP Financial Measures
Income (loss) from continuing operations excluding special items, diluted earnings (loss) per share from continuing operations excluding special items, and operating income (loss) excluding special items are non-GAAP financial measures.
We believe these non-GAAP financial measures provide a consistent basis for comparison between quarters, and enhance the understanding of the performance of our operations as they are not influenced by certain costs incurred during the periods that are believed to be special and related to specific, infrequent items.
Set forth below is a reconciliation of reported operating income (loss) to operating income (loss) excluding special items; reported income (loss) from continuing operations to income (loss) from continuing operations excluding special items; and reported diluted earnings (loss) per share from continuing operations to diluted earnings (loss) per share from continuing operations excluding special items. We do not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
GAAP reconciliations
Three months ended April 30, 2009
------------------------------------------------------
Operating
Income
(in millions) Aluminum Corporate
Engineered Sheet and
Products Products Other Consolidated
------------ ------------ ------------ ------------
Operating
income
(loss),
as reported $ (46.1) $ (11.6) $ 0.5 $ (57.2)
LIFO charge
(income) -- -- (4.5) (4.5)
Impairment
of goodwill 45.3 -- -- 45.3
Charges
associated
with the
Company's
Separation
(stock-
based
compensation,
Transaction
costs
and other) -- -- -- --
------------ ------------ ------------ ------------
Operating
income
(loss),
excluding
special
items $ (0.8) $ (11.6) $ (4.0) $ (16.4)
============ ============ ============ ============
Three months ended April 30, 2008
------------------------------------------------------
(in millions) Aluminum Corporate
Engineered Sheet and
Products Products Other Consolidated
------------ ------------ ------------ ------------
Operating
income
(loss),
as reported $ 5.3 $ 10.0 $ (31.5) $ (16.2)
LIFO charge
(income) -- -- -- --
Impairment
of goodwill -- -- -- --
Charges
associated
with the
Company's
Separation
(stock-
based
compensation,
Transaction
costs
and other) -- -- 25.7 25.7
------------ ------------ ------------ ------------
Operating
income
(loss),
excluding
special
items $ 5.3 $ 10.0 $ (5.8) $ 9.5
============ ============ ============ ============
Net Income Three months ended April 30,
(in millions except -------------------------------------
diluted EPS) 2009 2008
----------------- ------------------
Diluted Diluted
Income EPS Income EPS
-------- -------- -------- --------
Income (loss) from continuing
operations, as reported $ (40.1) $ (1.08) $ (7.3) $ (0.20)
LIFO charge (income) (2.9) (0.08) -- --
Impairment of goodwill 29.0 0.78 -- --
Charges associated with
the Company's
Separation (stock-based
compensation, transaction
costs and other) -- -- 13.8 0.37
-------- -------- -------- --------
Income (loss) from continuing
operations, excluding
special items $ (14.0) $ (0.38) $ 6.5 $ 0.17
======== ======== ======== ========
Diluted weighted average
common shares outstanding
(in thousands) 37,333 37,265
Dividend Declared
The Board of Directors declared a quarterly cash dividend of $0.03 per share on the company's common stock, payable June 30, 2009, to shareholders of record on June 15, 2009.
Corporate Profile
Quanex Building Products Corporation is an industry-leading manufacturer of value-added, engineered materials and components serving the building products markets. It is a long term ROIC-driven company that grows shareholder returns through a combination of organic growth via new products and programs and strategic acquisitions.
The Quanex Building Products Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1117
Financial Statistics as of 04/30/09
Book value per common share: $10.67; Total debt to capitalization: 0.6%; Actual number of common shares outstanding: 37,653,350.
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, 2008, 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,
--------------------- ---------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net Sales:
$ 65,249 $ 92,494 Engineered Products $ 130,067 $ 179,770
50,356 118,281 Aluminum Sheet Products 101,164 210,348
---------- ---------- ---------- ----------
115,605 210,775 Building Products 231,231 390,118
(2,399) (3,437) Eliminations (5,137) (7,868)
---------- ---------- ---------- ----------
$ 113,206 $ 207,338 Net Sales $ 226,094 $ 382,250
========== ========== ========== ==========
Operating Income*:
$ (46,135) $ 5,296 Engineered Products $(167,750) $ 7,190
(11,558) 9,982 Aluminum Sheet Products (39,762) 15,585
---------- ---------- ---------- ----------
(57,693) 15,278 Building Products (207,512) 22,775
474 (31,500) Corporate and Other (5,268) (40,164)
---------- ---------- ---------- ----------
Operating Income
$ (57,219) $ (16,222) (Loss) $(212,780) $ (17,389)
========== ========== ========== ==========
* Operating income reflects non-cash impairment charge of $45.3 million and $182.6 million, respectively:
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)
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,
--------------------- ---------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
$ 113,206 $ 207,338 Net sales $ 226,094 $ 382,250
Cost of sales (exclusive
of items shown
104,387 170,776 separately below) 211,051 317,853
Selling, general and
12,846 43,637 administrative expense 28,627 63,680
Impairment of goodwill and
45,263 -- intangibles 182,562 --
Depreciation and
7,929 9,147 amortization 16,634 18,106
---------- ---------- ---------- ----------
(57,219) (16,222) Operating income (loss) (212,780) (17,389)
(109) (100) Interest expense (231) (238)
177 4,242 Other, net 299 4,550
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
(57,151) (12,080) before income taxes (212,712) (13,077)
Income tax benefit
17,005 4,765 (expense) 52,153 5,153
---------- ---------- ---------- ----------
Income (loss) from
(40,146) (7,315) continuing operations (160,559) (7,924)
Income (loss) from
discontinued operations,
-- 1,982 net of taxes -- 5,675
---------- ---------- ---------- ----------
$ (40,146) $ (5,333) Net income (loss) $(160,559) $ (2,249)
========== ========== ========== ==========
Basic and diluted
earnings per
common share:
Earnings (loss) from
$ (1.08) $ (0.20) continuing operations $ (4.30) $ (0.21)
Income (loss) from
discontinued
$ -- $ 0.06 operations $ -- $ 0.15
---------- ---------- ---------- ----------
Basic earnings (loss)
$ (1.08) $ (0.14) per common share $ (4.30) $ (0.06)
---------- ---------- ---------- ----------
Weighted average common
shares outstanding:
37,333 37,265 Basic and diluted 37,333 37,215
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
April 30, Oct. 31,
2009 2008
------------------------------------------------------------------
Assets
$ 85,406 Cash and equivalents $ 67,413
52,584 Accounts receivable, net 101,211
36,918 Inventories, net 63,848
9,314 Deferred income taxes 10,932
6,712 Other current assets 6,239
--------- ------------------------------------------ ---------
190,934 Total current assets 249,643
151,639 Property, plant and equipment, net 157,389
58,013 Deferred income taxes 3,875
25,189 Goodwill 196,338
48,868 Intangible assets, net 62,476
10,586 Other assets 11,126
--------- ------------------------------------------ ---------
$ 485,229 Total assets $ 680,847
========= ========================================== =========
Liabilities and stockholders' equity
$ 36,402 Accounts payable $ 79,512
28,224 Accrued liabilities 38,316
323 Current maturities of long-term debt 363
--------- ------------------------------------------ ---------
64,949 Total current liabilities 118,191
2,143 Long-term debt 2,188
1,887 Non-current environmental reserves 2,485
14,327 Other liabilities 10,155
--------- ------------------------------------------ ---------
83,306 Total liabilities 133,019
401,923 Total stockholders' equity 547,828
--------- ------------------------------------------ ---------
$ 485,229 Total liabilities and stockholders' equity $ 680,847
========= ========================================== =========
QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Six months ended
April 30,
----------------------
2009 2008
---------- ----------
Operating activities:
Net income $(160,559) $ (2,249)
Income from discontinued operations -- (5,675)
---------- ----------
Net income from continuing operations (160,559) (7,924)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 16,668 18,111
Impairment of goodwill and intangibles 182,562 --
Deferred income taxes (34,730) 2,999
Stock-based compensation 1,403 24,936
---------- ----------
5,344 38,122
Changes in assets and liabilities, net of
effects from acquisitions, dispositions
and the Separation:
Decrease (Increase) in
accounts receivable 47,103 (5,896)
Decrease (Increase) in inventory 26,913 (3,127)
Decrease (Increase) in other
current assets (188) (4,872)
Increase (Decrease) in accounts payable (43,190) 954
Increase (Decrease) in
accrued liabilities (5,522) (2,294)
Increase (Decrease) in income taxes (19,729) (646)
Other, net 3,869 (2,773)
---------- ----------
Cash provided by (used for) operating
activities from continuing operations 14,600 19,468
Cash provided by (used for) operating
activities from discontinued operations -- 25,127
---------- ----------
Cash provided by (used for)
operating activities 14,600 44,595
---------- ----------
Investing activities:
Capital expenditures, net of retirements (9,567) (6,941)
---------- ----------
Cash provided by (used for) investing
activities from continuing operations (9,567) (6,941)
Cash provided by (used for) investing
activities from discontinued operations -- 34,113
---------- ----------
Cash provided by (used for)
investing activities (9,567) 27,172
---------- ----------
Financing activities:
Repayments of long-term debt (163) (1,264)
Common dividends paid (2,260) --
Funding from Separation 15,401 27,755
Other, net -- (290)
---------- ----------
Cash provided by (used for) financing
activities from continuing operations 12,978 26,201
Cash provided by (used for) financing
activities from discontinued operations -- (46,183)
---------- ----------
Cash provided by (used for)
financing activities 12,978 (19,982)
---------- ----------
Effect of exchange rate changes on
cash and equivalents (18) (56)
LESS: (Increase) Decrease in cash and
equivalents from discontinued operations -- (13,057)
---------- ----------
Increase (Decrease) in cash and equivalents
from continuing operations 17,993 38,672
Beginning of period cash and equivalents 67,413 1,778
---------- ----------
End of period cash and equivalents $ 85,406 $ 40,450
========== ==========