The following excerpt is from the company's SEC filing.
EPS Improves Year-over-Year
Margin Expansion Continues in Cabinet Components Segment
Strong Free Cash Flow Generation Allows $22 Million of Debt Repayment
HOUSTON, Sept. 06, 2017 (GLOBE NEWSWIRE) --
Quanex Building Products Corporation
(NYSE:NX) (“Quanex” or the “Company”) today announced its results for the quarter ended July 31, 2017.
Bill Griffiths, Chairman, President and Chief Executive Officer, commented, “Overall, third quarter revenues came in a little softer than expected; however, we realized significant earnings per share growth and our consolidated Adjusted EBITDA margin percentage improved. In addition, strong cash flow generation during the quarter enabled us to repay more than $22 million in outstanding debt and we expect to generate even stronger cash flow in the fourth quarter. Looking ahead, the recent promotion of George Wilson to the newly created position of Chief Operating Officer will allow me to spend more time concentrating on strategy while he builds on the progress we have made towards operational excellence, margin expansion and cash flow generation, all of which will contribute toward the goal of further enhancing and creating value for our shareholders.”
Third Quarter 2017 Results Summary
The Company reported net sales of $229.4 million for the three months ended July 31, 2017, compared to $248.1 million for the three months ended July 31, 2016. Similar to the first and second quarters of 2017, the decrease was primarily attributable to Quanex’s previously disclosed decision to exit product lines and less profitable business that does not meet the Company’s financial objectives. (See Sales Analysis table for additional information)
Net income increased to $10.2 million, or $0.29 per diluted share, during the third quarter of 2017, compared to a net loss of $4.0 million, or $0.12 per diluted share, in the third quarter of 2016. Adjusted EBITDA decreased slightly to $32.2 million during the third quarter of 2017, compared to $33.1 million during the third quarter of 2016, but consolidated Adjusted EBITDA margin percentage increased by approximately 70 basis points. (See Non-GAAP Terminology Definitions and Disclaimers section and Selected Segment Data table for additional information)
Cash provided by operating activities for the three months ended July 31, 2017, was $29.6 million, compared to $25.2 million during the same period of 2016. Quanex generated Free Cash Flow of $20.0 million during the third quarter of 2017, representing an increase of approximately 20% compared to the third quarter of 2016. As of July 31, 2017, the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA was 2.5x. As expected, Quanex’s leverage ratio decreased quarter-over-quarter largely as a result of the repayment of approximately $22 million in debt. The Company remains focused on generating Free Cash Flow to pay down debt and continues to anticipate a further improvement in the leverage ratio by year-end 2017. (See Free Cash Flow Reconciliation table and Non-GAAP Terminology Definitions and Disclaimers section for additional information)
Three Months Ended July 31, 2017
Three Months Ended July 31, 2016
($ in thousands, except per share data)
Cost of sales
Selling, general and administrative
Depreciation and amortization
Operating income (loss)
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss)
Diluted earnings (loss) per share
(1) Cost of sales adjustment relates solely to purchase price accounting inventory step-up impact from HL Plastics acquisition.
(2) SG&A adjustments are for acquisition related transaction costs.
(3) Restructuring charges relate to the closure of several manufacturing plant facilities.
(4) D&A adjustments relate to accelerated depreciation and amortization for restructured PP&E and intangible assets.
(5) Interest expense adjustments relate to write off of deferred loan costs, unamortized original issuance discount, and prepayment call premium related to debt refinance.
(6) Other, net adjustments relate to foreign currency transaction (gains) losses.
(7) Effective tax rate reflects impacts of adjustments on a with and without basis.
(8) Adjusted EPS for 2016 is calculated using diluted shares outstanding of 34.5 million, respectively.
Quanex’s Board of Directors declared a quarterly cash dividend of $0.04 per share on the Company’s common stock, payable September 29, 2017, to shareholders of record on September 18, 2017.
During the third quarter of 2017, Quanex transferred operating responsibility of two wood-based accessory plants from the North American Engineered Components segment to the North American Cabinet Components segment. These moves have been contemplated since the Company acquired Woodcraft and better align manufacturing capability and capacity. (See Segment Reconciliation table for additional information)
Conference Call and Webcast Information
The Company has scheduled a conference call for Thursday, September 7, 2017, 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 66331845, 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 14, 2017. To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 66331845.
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 firstname.lastname@example.org.
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 related to the plant closure in Mexico, one-time employee benefit adjustment 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. Adjusted Net Income (Loss) is a non-GAAP financial measure that excludes certain charges and credits because the Company believes that such items are not indicative of its core operating results and trends, and do not provide meaningful comparisons with other reporting periods. Quanex believes that the presented non-GAAP measures provide a consistent basis for comparison between periods, and will assist investors in understanding the Company’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. Quanex 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, 2016, 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.
QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
Nine Months Ended July 31,
Income (loss) per common share, basic
Income (loss) per common share, diluted
Weighted average common shares outstanding:
Cash dividends per share
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents
Accounts receivable, net
Prepaid and other current assets
Total current assets
Property, plant and equipment, net
Intangible assets, net
LIABILITIES AND STOCKHOLDERS' EQUITY
Income taxes payable
Current maturities of long-term debt
Total current liabilities
Deferred pension and postretirement benefits
Deferred income taxes
Accumulated other comprehensive loss
Treasury stock at cost
Total stockholders’ equity
Total liabilities and stockholders' equity
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Excess tax benefit from share-based compensation
Charge for deferred loan costs and debt discount
Changes in assets and liabilities, net of effects from acquisitions:
Decrease in accounts receivable
Increase in inventory
Increase in other current assets
Decrease in accounts payable
Decrease in accrued liabilities
Increase in income taxes payable
Increase in deferred pension and postretirement benefits
Increase in other long-term liabilities
Acquisitions, net of cash acquired
Proceeds from disposition of capital assets
Cash used for investing activities
Borrowings under credit facilities
Repayments of credit facility borrowings
Debt issuance costs
Repayments of other long-term debt
Common stock dividends paid
Issuance of common stock
Cash (used for) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
FREE CASH FLOW RECONCILIATION
The following table reconciles the Company's calculation of Free Cash Flow, a non-GAAP measure, to its most directly comparable GAAP measure. The Company defines Free Cash Flow as cash provided by operating activities less capital expenditures.
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 and nine-months ended July 31, 2016, to the current presentation:
Corp & Other
Three months ended July 31, 2016
As previously reported
Nine months ended July 31, 2016
SELECTED SEGMENT DATA
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.
Three months ended July 31, 2017
Transaction related costs
Adjusted EBITDA Margin %
Three months ended July 31, 2016
Nine months ended July 31, 2017
Mexico restructuring, loss on sale of fixed assets
One-time employee benefit adjustment
Nine months ended July 31, 2016
(1) Updated to reflect transfer of operating facilities from NA Engineered Components to NA Cabinet Components. See Reconciliation for additional details.
United States - fenestration
International - fenestration
United States - non-fenestration
International - non-fenestration
EU Engineered Components
United States - non-fenestration
Unallocated Corporate & Other:
(2) Reflects the loss of revenue associated with eliminated products of $20.1 million and $53.4 million for the three-months and nine-months ended July 31, 2017, respectively.
(3) Reflects the loss of revenue associated with foreign currency impacts of $2.6 million and $11.7 million for the three-months and nine-months ended July 31, 2017, respectively.
(4) Reflects the loss of revenue associated with eliminated products of $2.9 million and $8.3 million for the three-months and nine-months ended July 31, 2017, respectively.
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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