Quanex Building Products Announces Third Quarter 2016 Results

Margin Expansion Continues

Debt Refinancing Complete

HOUSTON, Sept. 06, 2016 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the quarter ended July 31, 2016.

Third Quarter 2016 Highlights

• Net sales increased 38% to $248.1 million compared to $180.2 million in Q3 2015
• Loss from continuing operations of $4.0 million, driven largely by interest expense related to the debt refinancing, compared to income from continuing operations of $6.5 million in Q3 2015
• Adjusted EBITDA increased 32% to $33.1 million versus $25.1 million in Q3 2015
• Debt refinancing complete, significantly reducing future annual interest expense
• Year-to-date cash provided by operating activities increased 78% to $49.1 million compared to $27.5 million during the same period last year

Bill Griffiths, Chairman, President and Chief Executive Officer, commented, “Our ongoing focus on improved profitability and margin expansion at the operational level through efficiency gains continues to be effective.  In fact, the third quarter marks the fourth consecutive quarter of margin expansion at the operational level.  Cash generation was solid during the quarter, and as a result, our leverage ratio is now below 2.5x and we expect further improvement in the fourth quarter.  The recent refinancing of our debt not only reduces future annual interest expense by approximately $13 million, it also provides us with sufficient flexibility and a capital structure that enables us to better manage our business over the coming years.”

Third Quarter 2016 Results Summary

Quanex reported net sales of $248.1 million for the three months ended July 31, 2016, an increase of 38% compared to $180.2 million for the three months ended July 31, 2015.  The increase was primarily driven by revenue generated from the acquisitions of HL Plastics and Woodcraft Industries in 2015, partially offset by foreign exchange translation impact.  (See Sales Analysis table for additional information).

Adjusted EBITDA increased to $33.1 million during the third quarter, compared to $25.1 million during the same quarter of 2015.  Margin expansion continues due to the successful implementation of several ongoing operational initiatives that are designed to reduce costs while improving productivity.  For its “legacy” U.S. windows components business, the Company realized EBITDA margin improvements of approximately 140 basis points during the three months ended July 31, 2016, and approximately 300 basis points for the nine months ended July 31, 2016.  (See Non-GAAP Financial Measure Disclosure table and Selected Segment Data table for additional information)

As of July 31, 2016, Quanex’s leverage ratio of Net Debt to LTM Pro Forma Adjusted EBITDA was 2.4x.  This leverage ratio uses LTM Pro Forma Adjusted EBITDA, which is a non-GAAP measure that, in accordance with the Company’s credit facility, assumes the acquisitions of HL Plastics and Woodcraft Industries occurred at a date prior to the actual date of acquisition, and thus includes pro forma adjustments to calculate the trailing twelve months of EBITDA including the HL Plastics and Woodcraft Industries acquisitions.  (See Non-GAAP Financial Measure Disclosure table for additional information)

On July 29, 2016, and as previously disclosed, Quanex entered into new senior secured credit facilities (the “New Senior Credit Facilities”) that mature in 2021 and provide for aggregate borrowings of $450 million, comprised of a $300 million revolving credit facility and a $150 million Term Loan A.  The New Senior Credit Facilities replaced the Company’s previous $310 million Term Loan B and $100 million Asset-Based Lending facility.  Borrowings under the New Senior Credit Facilities will bear interest on a tiered rate based on Quanex’s consolidated leverage ratio and was initially set at LIBOR plus 200 basis points, reducing the Company’s credit spread by approximately 375 basis points.  Based on current debt outstanding, the New Senior Credit Facilities reduce Quanex’s future annual interest expense by approximately $13 million, greater than a 60% reduction.     

Recent Events

The Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share on Quanex’s common stock, payable September 30, 2016, to shareholders of record on September 16, 2016.

Conference Call and Webcast Information

The Company has scheduled a conference call for Tuesday, September 6, 2016, at 5:00 p.m. ET (4:00 p.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 60445165, 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 September 13, 2016.  To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 60445165. 

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 of Investor Relations & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.

Non-GAAP Terminology Definitions and Disclaimers

Each of the Non-GAAP measures discussed in this Press Release are defined below.  More information and reconciliations related to each of these measures can be found in the tables that accompany this Press Release.

EBITDA for each reported period is defined as net income or loss before interest, taxes, depreciation and amortization and other, net.

Adjusted EBITDA for each reported period is defined as EBITDA excluding transaction costs and purchase price accounting adjustments related to inventory step-ups. 

LTM Pro Forma Adjusted EBITDA is defined as Adjusted EBITDA for the past twelve months, assuming that the acquisitions of HL Plastics and Woodcraft Industries occurred at a date prior to the actual date of acquisition and thus includes pro forma adjustments to calculate the trailing twelve months of EBITDA including the HL Plastics and Woodcraft Industries acquisitions.  These adjustment items are not historical in nature and therefore cannot be reconciled to a comparable GAAP measure.

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, and Quanex’s future growth, including any guidance discussed in this press release.  Guidance is a forward-looking estimate of performance and may not be indicative of actual results.  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, 2015, under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” and in Quanex’s 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.