Engineered Products Group Reports Strong Fourth
Quarter Earnings
Previously Announced Consolidation Plan for Its
Insulating Glass Spacer Business
Repurchased 750,000 Shares of Common Stock in
2011
2011 Year End Cash & Equivalents of $90
million
Quanex Building Products Corporation (NYSE:NX), a
leading manufacturer of engineered materials, components and
systems serving domestic and international window and door OEMs
through its Engineered Products and Aluminum Sheet Products groups,
today released fiscal 2011 fourth quarter and full year results for
the period ending October 31, 2011.
Fourth quarter 2011 net sales were $233.0 million, compared to
$222.3 million a year ago, and included $23.3 million of net sales
from Edgetech. Fourth quarter 2011 diluted earnings from continuing
operations were $0.17 per share, compared to $0.22 per share a year
ago, and included LIFO income of $0.03 per share and special item
expenses of $0.03 per share primarily associated with an asset
impairment charge related to Quanex's consolidation plan for its
U.S. insulating glass spacer business. Fourth quarter 2010 diluted
earnings of $0.22 included a LIFO expense of $0.03 per share and
special item expenses of $0.01 per share.
Net sales for 2011 were $848.3 million, compared to $798.3
million last year, and included $53.4 million of net sales from
Edgetech. 2011 diluted earnings from continuing operations were
$0.24 per share, compared to $0.64 per share last year, and
included $0.04 per share of LIFO expense and $0.21 per share of
special item expenses. 2010 diluted earnings of $0.64 included
$0.06 per share of LIFO expense and $0.02 per share of special item
income.
Engineered Products Group (EPG) is focused on
providing window and door OEMs with fenestration components,
products, and systems. Key end markets are residential repair &
remodel (R&R) and new home construction.
Fourth quarter 2011 net sales were $129.6 million, compared to
$101.8 million a year ago, and included $23.3 million of net sales
from Edgetech. Fourth quarter 2010 net sales had the benefit of a
$1500 window related tax credit. Despite the absence of credits in
the fourth quarter of 2011, EPG (pre-Edgetech) generated higher net
sales versus the year ago quarter due to higher volumes and
improved productivity.
Fourth quarter 2011 operating income was $14.9 million, compared
to $11.3 million a year ago, and included special item expenses of
$1.2 million primarily associated with asset impairment charges
related to the consolidation plan. Fourth quarter 2011 operating
income improved over a year ago due to higher sales and improved
productivity across EPG. Fourth quarter 2010 operating income of
$11.3 million included special item expenses of $0.8 million.
2011 net sales were $420.3 million, compared to $361.1 million
last year, and included $53.4 million of net sales from
Edgetech. 2011 operating income was $30.3 million, compared to
$34.3 million last year, and included special item expenses of $6.5
million. 2010 operating income of $34.3 million included
special item expenses of $0.8 million.
Engineered Products (in
millions) |
|
4th qtr 2011 |
4th qtr 2010 |
FY 2011 |
FY 2010 |
Net sales |
$129.6 |
$101.8 |
$420.3 |
$361.1 |
Operating income |
$ 14.9* |
$11.3 |
$ 30.3* |
$34.3 |
*Includes losses at Edgetech of
$0.4 million and $0.3 million in the quarter and year,
respectively. |
Quanex believes there is value in measuring its sales
performance against industry-related metrics. It compares
EPG's sales to U.S. window shipments as reported by Ducker
Worldwide, a market intelligence firm. For the 12 months ended
October 31, 2011, "same store" EPG sales were flat compared to
the previous 12 months, versus reported U.S. window shipments that
were down 5% over the same period.
Edgetech Integration
Quanex continues to place a high priority on the successful
integration of Edgetech into EPG. A review of the entire EPG
sales and marketing structure was undertaken earlier this year, and
from that evaluation, significant staffing changes were made in the
fourth quarter to maximize the group's value proposition to
existing and new customers. EPG experienced a significant
increase in the size of its sales and marketing team, while
reducing its comparable annualized sales and marketing costs.
IG Spacer Consolidation Plan
To further streamline its operations so that Quanex can better
serve its window and door customers, the company announced on
November 7, 2011, the consolidation of its IG spacer manufacturing
facility located in Barbourville, KY into its IG spacer
manufacturing facility in Cambridge, OH. At the completion of
the consolidation, the Barbourville facility will be permanently
closed. Quanex expects the consolidation to be concluded
sometime in its 2012 third quarter. Cash costs associated with
the plan have been estimated at about $16 million (absent the
pre-tax, non-cash impairment charge of $1.6 million), all of which
are expected to be spent in 2012. Quanex expects a payback
period on its investment to be about 2.6 years, based on annual
pre-tax cash savings of $9 million once the consolidation is
complete.
Aluminum Sheet Products Group is a leading
provider of aluminum sheet through its Nichols Aluminum
operation. Key end markets are residential repair &
remodel (R&R) and new home construction.
Fourth quarter 2011 shipments, net sales and operating income
were 66 million pounds, $106.2 million and $3.1 million,
respectively. Results were down from the year ago quarter due
to weaker demand, in part because of the absence of the window
related tax credit this quarter compared to the available credit
last year. This time last year, customers were building
inventory to handle the pick-up in demand the tax credit
generated. In the fourth quarter of 2011, customers were
de-stocking.
Operating income in the quarter was further impacted by higher
repair & maintenance expenses (R&M) and reduced painted
shipments compared to the year ago quarter. Nichols' spread
(sales less material costs) was up 10% from the year ago quarter,
primarily due to average selling prices that rose faster than
average material costs.
2011 shipments, net sales and operating income were 277 million
pounds, $440.5 million and $17.1 million,
respectively. Results were down from last year due to lower
shipments, lower painted sales, and higher R&M
expenses. Nichols Aluminum is a high fixed cost business, so
as shipments drop due to weaker demand, its ability to
substantially reduce operating costs is limited.
Aluminum Sheet Products
(in millions) |
|
4th qtr 2011 |
4th qtr 2010 |
FY 2011 |
FY 2010 |
Net sales |
$106.2 |
$123.3 |
$440.5 |
$449.5 |
Operating income |
$3.1 |
$10.5 |
$17.1 |
$30.2 |
Shipped pounds |
66 |
88 |
277 |
323 |
Nichols Aluminum compares its shipments to industry shipments as
reported by the Aluminum Association. For the 12 months ended
October 31, 2011, Nichols' shipments were down 14% from a year ago,
versus industry shipments that were up 2%. The
underperformance is attributed to weaker residential demand, where
Nichols Aluminum has a large presence, compared to stronger
distribution and transportation demand, where it has a smaller
presence.
Corporate and Other Items
Corporate expenses in the fourth quarter and year were $6.2
million and $30.9 million respectively, and included, in part:
acquisition related expenses and ERP program expenses in the fourth
quarter of $0.7 million and $0.6 million, respectively, and for the
year, $4.1 million and $1.5 million, respectively. There were
no related expenses in 2010.
Cash Position
Quanex had a cash balance of $89.6 million and total debt
outstanding of $1.7 million at year end. Cash provided by
operating activities from continuing operations for the 12 months
ended was $52.9 million. At year end, the company had no
borrowings under its $270 million revolving credit facility;
however, due to the facility's EBITDA covenant requirements, the
available capacity at year end was approximately $188
million. Future uses of cash could be to fund organic growth
activities, fund cash dividends on the company's common stock, make
acquisitions, and repurchase outstanding shares. During the
fourth quarter, Quanex purchased 493,751 shares of common stock at
an average price of $11.73, including commissions. During
2011, the company purchased 750,000 shares of common stock at an
average price of $13.44, including commissions.
Business Outlook
Stagnant R&R demand and new home starts, high levels of
homes available for sale, and a tight credit market will continue
to create a difficult housing environment. The company
currently expects calendar year 2012 home starts and U.S. window
shipments to be flat at 600,000 and 38 million units,
respectively. Quanex, however, remains positive on the long
term prospects of its residential and commercial markets and will
continue to invest in its future. To that end, the company
will continue to invest in its growth, through both internal
programs and acquisitions, as it believes this is the best way to
maximize long term returns for shareholders.
Dividend Declared
The Board of Directors declared a quarterly cash dividend of
$0.04 per share on the company's common stock, payable December 30,
2011, to shareholders of record on December 15, 2011.
Financial Statistics as of 10/31/11
Book value per common share: $11.88; Total debt to
capitalization: 0.4%; Return on invested capital: 2.1%; Actual
number of common shares outstanding: 36,807,846.
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;
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, references to synergies derived from the
acquisition of Edgetech, future operating results of Quanex, the
financial condition of Quanex, future uses of cash, expectations
relating to the consolidation of the company's IG spacer
manufacturing facilities, 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 10-K filing on December
20, 2010, under the Securities Exchange Act of 1934 ("Exchange
Act"), in particular the section titled, "Private Securities
Litigation Reform Act" contained therein and the company's 10-Q
filings made for its fiscal year 2011 under the Exchange Act.
The Quanex Building Products Corporation logo is available
at http://www.globenewswire.com/newsroom/prs/?pkgid=1117
For additional information, please visit
www.quanex.com
QUANEX BUILDING PRODUCTS
CORPORATION |
INDUSTRY SEGMENT
INFORMATION |
(In thousands) |
(Unaudited) |
|
|
|
|
|
Three months
ended October 31, |
|
Twelve months
ended October 31, |
2011 |
2010 |
|
2011 |
2010 |
|
|
Net Sales: |
|
|
$ 129,635 |
$ 101,789 |
Engineered Products |
$ 420,258 |
$ 361,062 |
106,168 |
123,278 |
Aluminum Sheet Products |
440,495 |
449,529 |
235,803 |
225,067 |
Building Products |
860,753 |
810,591 |
|
|
|
|
|
(2,842) |
(2,764) |
Eliminations |
(12,459) |
(12,277) |
|
|
|
|
|
$ 232,961 |
$ 222,303 |
Net Sales |
$ 848,294 |
$ 798,314 |
|
|
|
|
|
|
|
Operating Income
(Loss): |
|
|
$ 14,881 |
$ 11,310 |
Engineered Products |
$ 30,293 |
$ 34,278 |
3,088 |
10,490 |
Aluminum Sheet Products |
17,115 |
30,223 |
17,969 |
21,800 |
Building Products |
47,408 |
64,501 |
|
|
|
|
|
(6,177) |
(8,228) |
Corporate and Other |
(30,930) |
(27,204) |
|
|
|
|
|
$ 11,792 |
$ 13,572 |
Operating Income (Loss) |
$ 16,478 |
$ 37,297 |
|
|
QUANEX BUILDING PRODUCTS
CORPORATION |
CONSOLIDATED STATEMENTS
OF INCOME |
(In thousands, except per share
data) |
(Unaudited) |
|
|
|
|
|
Three months
ended October 31, |
|
Twelve months
ended October 31, |
2011 |
2010 |
|
2011 |
2010 |
|
|
|
|
|
$ 232,961 |
$ 222,303 |
Net sales |
$ 848,294 |
$ 798,314 |
187,257 |
182,290 |
Cost of sales (exclusive of items shown
separately below) |
712,091 |
660,849 |
22,764 |
19,235 |
Selling, general and administrative |
83,994 |
71,954 |
9,349 |
7,206 |
Depreciation and amortization |
33,932 |
28,214 |
1,799 |
-- |
Asset impairment charges |
1,799 |
-- |
11,792 |
13,572 |
Operating income
(loss) |
16,478 |
37,297 |
(108) |
(107) |
Interest expense |
(449) |
(440) |
(641) |
143 |
Other, net |
(514) |
2,645 |
11,043 |
13,608 |
Income (loss) from continuing
operations before income taxes |
15,515 |
39,502 |
(4,864) |
(5,303) |
Income tax benefit (expense) |
(6,437) |
(15,301) |
|
|
|
|
|
6,179 |
8,305 |
Income (loss) from continuing
operations |
9,078 |
24,201 |
|
|
|
|
|
-- |
5 |
Income (loss) from discontinued
operations, net of taxes |
(12) |
(1,103) |
$ 6,179 |
$ 8,310 |
Net income (loss) |
$ 9,066 |
$ 23,098 |
|
|
|
|
|
|
|
Basic earnings per common
share: |
|
|
$ 0.17 |
$ 0.22 |
Earnings (loss) from continuing
operations |
$ 0.24 |
$ 0.65 |
-- |
-- |
Income (loss) from discontinued
operations |
-- |
(0.03) |
$ 0.17 |
$ 0.22 |
Basic earnings (loss) per share |
$ 0.24 |
$ 0.62 |
|
|
|
|
|
|
|
Diluted earnings per common
share: |
|
|
$ 0.17 |
$ 0.22 |
Earnings (loss) from continuing
operations |
$ 0.24 |
$ 0.64 |
-- |
-- |
Income (loss) from discontinued
operations |
-- |
(0.03) |
$ 0.17 |
$ 0.22 |
Diluted earnings (loss) per share |
$ 0.24 |
$ 0.61 |
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
36,723 |
37,147 |
Basic |
37,007 |
37,220 |
37,021 |
37,667 |
Diluted |
37,537 |
37,671 |
|
|
QUANEX BUILDING PRODUCTS
CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In thousands) |
(Unaudited) |
|
|
|
October 31,
2011 |
|
October 31,
2010 |
|
Assets |
|
$ 89,619 |
Cash and equivalents |
$ 187,178 |
81,969 |
Accounts receivable, net |
87,007 |
55,842 |
Inventories |
45,200 |
11,220 |
Deferred income taxes |
10,547 |
6,423 |
Prepaid and other current assets |
8,229 |
-- |
Current assets of
discontinued operations |
462 |
245,073 |
Total current
assets |
338,623 |
158,209 |
Property, plant and equipment, net |
135,517 |
7,669 |
Deferred income taxes |
30,563 |
69,432 |
Goodwill |
25,189 |
87,943 |
Intangible assets, net |
44,668 |
16,603 |
Other
assets |
16,690 |
$ 584,929 |
Total
assets |
$ 591,250 |
|
Liabilities and stockholders'
equity |
|
$ 66,339 |
Accounts payable |
$ 70,986 |
38,058 |
Accrued liabilities |
43,447 |
352 |
Current maturities of long-term debt |
327 |
-- |
Current liabilities of
discontinued operations |
30 |
104,749 |
Total current
liabilities |
114,790 |
1,314 |
Long-term debt |
1,616 |
7,784 |
Deferred pension and postretirement
benefits |
3,667 |
8,412 |
Liability for uncertain tax
positions |
6,327 |
11,221 |
Non-current environmental reserves |
12,027 |
14,223 |
Other liabilities |
11,391 |
147,703 |
Total liabilities |
149,818 |
437,226 |
Total
stockholders' equity |
441,432 |
$ 584,929 |
Total liabilities
and stockholders' equity |
$ 591,250 |
|
|
QUANEX BUILDING PRODUCTS
CORPORATION |
CONSOLIDATED STATEMENTS
OF CASH FLOW |
(In thousands) |
(Unaudited) |
|
|
|
|
Twelve months
ended October 31, |
|
2011 |
2010 |
Operating activities: |
|
|
Net income (loss) |
$ 9,066 |
$ 23,098 |
(Income) loss from discontinued
operations |
12 |
1,103 |
|
|
|
Adjustments to reconcile net income
(loss) to cash provided by (used for) operating activities from
continuing operations: |
|
|
Depreciation and amortization |
34,000 |
28,283 |
Asset impairment charges |
1,799 |
-- |
Gain on bargain purchase |
-- |
(1,272) |
Deferred income taxes |
3,361 |
12,294 |
Stock-based compensation |
4,852 |
4,456 |
|
|
|
Changes in assets and liabilities, net of
effects from acquisitions and dispositions: |
|
|
Decrease (increase) in accounts
receivable |
13,761 |
(6,365) |
Decrease (increase) in inventory |
(530) |
3,142 |
Decrease (increase) in other current
assets |
741 |
(510) |
Increase (decrease) in accounts
payable |
(13,349) |
4,572 |
Increase (decrease) in accrued
liabilities |
(6,952) |
9,509 |
Increase (decrease) in income taxes
payable |
(493) |
9,599 |
Increase (decrease) in deferred pension
and postretirement benefits |
2,768 |
(1,846) |
Other, net |
3,908 |
3,499 |
Cash provided by (used for) operating
activities from continuing operations |
52,944 |
89,562 |
Cash provided by (used for) operating
activities from discontinued operations |
(68) |
(430) |
Cash provided by (used for) operating
activities |
52,876 |
89,132 |
Investing activities: |
|
|
Acquisitions, net of cash acquired |
(110,845) |
(1,590) |
Capital expenditures |
(25,312) |
(14,720) |
Proceeds from property insurance
claim |
-- |
392 |
Proceeds from executive life
insurance |
683 |
-- |
Other, net |
107 |
43 |
Cash provided by (used for) investing
activities from continuing operations |
(135,367) |
(15,875) |
Cash provided by (used for) investing
activities from discontinued operations |
-- |
90 |
Cash provided by (used for) investing
activities |
(135,367) |
(15,785) |
Financing activities: |
|
|
Repayments of long-term debt |
(340) |
(323) |
Common stock dividends paid |
(5,979) |
(5,275) |
Issuance of common stock from stock
option exercises, including related tax benefits |
1,093 |
502 |
Purchase of treasury stock |
(10,080) |
(4,274) |
Other, net |
392 |
(665) |
Cash provided by (used for) financing
activities from continuing operations |
(14,914) |
(10,035) |
Cash provided by (used for) financing
activities from discontinued operations |
(392) |
665 |
Cash provided by (used for) financing
activities |
(15,306) |
(9,370) |
Effect of exchange rate changes on cash
and equivalents |
(222) |
27 |
LESS: (Increase) decrease in cash and
equivalents from discontinued operations |
460 |
(325) |
Increase (decrease) in cash and equivalents
from continuing operations |
(97,559) |
63,679 |
Cash and equivalents at beginning of
period |
187,178 |
123,499 |
Cash and equivalents at end of period |
$ 89,619 |
$ 187,178 |
CONTACT: Financial Contact:
Jeff Galow
713-877-5327
Media Contact:
Valerie Calvert
713-877-5305
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