UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 25, 2011
Quanex Building Products Corporation
(Exact name of registrant as specified in its charter)
Delaware |
001-33913 |
26-1561397 |
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
1900 West Loop South, Suite 1500, Houston, Texas |
77027 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 713-961-4600
________________________________________________________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On August 25, 2011, Quanex Building Products Corporation (the "Company") issued a press release (the "Earnings Press Release") reporting its earnings results for the third quarter of fiscal year 2011. The foregoing is qualified by reference to the Earnings Press Release which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure
This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On August 26, 2011, the Company issued a press release (the "Stock Buyback Reload Press Release") announcing that its Board of Directors authorized a reload to its existing stock buyback program of up to 1.0 million shares. The foregoing is qualified by reference to the Stock Buyback Reload Press Release which is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1 Earnings Press Release dated August 25, 2011 announcing the Company's third quarter 2011 earnings results
Exhibit 99.2 Stock Buyback Reload Press Release dated August 26, 2011 announcing the reload to the Company's existing stock buyback program
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Quanex Building Products Corporation
(Registrant) |
||
August 26, 2011
(Date) |
/s/ Deborah M. Gadin
Deborah M. Gadin Vice President Controller |
EXHIBIT 99.1
Performance, Before Certain Special Items, In-Line With Prior Year
Repurchased 169,600 Shares of Common Stock for $2.8 million
Truseal Instituted an Oil Based Raw Material Surcharge
HOUSTON, Aug. 25, 2011 (GLOBE NEWSWIRE) -- 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 third quarter results for the period ending July 31, 2011. Net sales were $252.4 million, 12% higher than a year ago, due primarily to the acquisition of Edgetech.
Quanex reported diluted earnings from continuing operations of $0.24 per share, which included $0.01 per share from Edgetech's results. The $0.24 per share also included special expense items totaling $0.06 per share. In the third quarter of 2010, diluted earnings from continuing operations were $0.27 per share, which included special expense items of $0.02 per share. Excluding results of Edgetech and special expense items, third quarter 2011 earnings were even to a year ago.
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. Third quarter net sales were $124.1 million, which included $23.7 million of net sales from Edgetech. Excluding Edgetech, net sales were nearly flat compared to the third quarter of 2010, which had the benefit of a $1500 energy efficient window tax credit program. There were no similar tax credits in the third quarter of 2011.
Third quarter operating income was $14.1 million, which included $1.0 million of operating income from Edgetech. Edgetech's results were negatively impacted in the quarter by a step-up in inventory expense of $0.7 million related to the purchase method of accounting. Excluding Edgetech, operating income was equal to the third quarter of 2010 despite headwinds in the end markets. EPG experienced higher raw material costs in the quarter, which were generally offset by higher prices, surcharges and productivity improvements. Truseal, one of the company's warm edge, insulating glass spacer divisions, initiated an oil based raw material surcharge effective May 1. The surcharge helped Truseal offset the rising cost of butyl, a key raw material of the business.
3rd qtr 2011 | 3rd qtr 2010 | |
Net sales | $124.1 | $101.7 |
Operating income | $14.1 | $13.1 |
(in millions) |
Quanex believes there is value in measuring its sales performance against industry indexes. EPG compares its sales to US window shipments as reported by Ducker Worldwide, a market intelligence firm. For the 12 months ended July 31, 2011, EPG sales (excluding acquisitions) were down 1% compared to the previous 12 months, versus US window shipments that were down 6%. With the coupling of excellent businesses like Edgetech, the company is confident its long term initiatives will allow EPG to outperform the industry.
Edgetech Integration
With Quanex's purchase of Edgetech, its successful integration into EPG remains a high priority. Excellent progress was made in the quarter and the integration activities remain on schedule. As previously announced, Michael Hovan, Edgetech's past president, assumed the lead role for the sales and marketing team at EPG. A review of that organization's structure was undertaken, and from that evaluation, changes were made to ensure the fullest extent of EPG's value proposition (design/engineering/sales/logistics) is at the disposal of both current and future customers.
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. Shipments, net sales and operating income in the third quarter were 80 million pounds, $132.1 million and $7.4 million, respectively. Net sales were higher than a year ago due primarily to higher aluminum prices.
Both shipments and operating income were lower compared to the year ago quarter due to weaker demand for residential building & construction sheet. Operating income was further impacted by higher repair & maintenance costs and reduced value-added painted shipments compared to a year ago. Nichols' spread (sales less material costs) was up 13% and 4% from the year ago quarter and the sequential second quarter, respectively, due to aluminum prices that rose faster than material costs.
3rd qtr 2011 | 3rd qtr 2010 | |
Net sales | $132.1 | $127.6 |
Operating income | $7.4 | $8.9 |
Shipped pounds | 80 | 90 |
(in millions) |
Nichols Aluminum compares its shipments to the industry's non-can sheet shipments as reported by the Aluminum Association. In the third quarter, Nichols' shipments were down 11% from a year ago, versus Association shipments that were up 4%. Nichols' underperformance is attributed to weaker building and construction demand, where it 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 quarter were $6.9 million and included, in part, the following items: acquisition related expenses; ERP program expenses; stock based compensation expenses; LIFO expense.
Cash Position
Quanex had a cash balance of $62.4 million and total debt outstanding stood at $1.7 million at the end of the quarter. Cash provided by operating activities from continuing operations for the nine months ended was $9.9 million. The company's $270 million revolving credit facility remained untapped, but due to the facility's EBITDA covenant requirements, the available capacity at quarter end was approximately $204 million. Future uses of cash could be to fund organic growth activities, pay common stock dividends, make acquisitions, and repurchase outstanding shares. During the third quarter, Quanex purchased 169,600 shares of common stock at an average price of $16.42, including commissions. From the end of the third quarter through August 24, the company purchased an additional 239,050 shares of common stock at an average price of $12.21, including commissions.
Business Outlook
Stagnant home construction and R&R activity, high levels of homes available for sale, high unemployment and a tight credit market continues to create a difficult business environment for Quanex. A case for a lack of recovery in the housing market in 2012 continues to build, and the company now anticipates flat to reduced customer demand in the coming quarters. In light of these new expectations, 2011 segment guidance has been reduced at the Aluminum Sheet Products Group.
For 2011, operating income guidance for the Aluminum Sheet Products Group is estimated at about $22 million, compared to previous guidance of about $25 million. The Group earned $30 million in 2010. Operating income in 2011 is down from 2010 due to reduced mill-finished shipments, reduced painted shipments and higher costs, offset somewhat by a higher spread.
For 2011, operating income guidance for the Engineered Products Group is unchanged at about $30 million (excludes an estimated $2 million from Edgetech's results). The Group earned $34 million in 2010. Operating income in 2011 is down from 2010 due to expenses associated with the Group's long term growth initiatives, and higher raw material costs.
Segment guidance excludes certain 2011 expenses that are detailed in the table below:
(in millions) |
Quanex (excluding Edgetech) |
Acquisition Related Items |
Total Quanex |
Corporate expenses | $ 24.0 | $ 4.0 | $ 28.0 |
LIFO charge (income) | $ 5.0 | $ -- | $ 5.0 |
Capital expenditures | $ 25.0 | $ 2.0 | $ 27.0 |
Corporate expenses and capital expenditures include $2 million and $6 million, respectively, of costs associated with the launch of Quanex's $30 million, multi-year ERP program.
Non-GAAP Financial Measures
Income from Continuing Operations before special items is a non-GAAP financial measure. The company believes this non-GAAP financial measure provides a consistent basis for comparison between periods and enhances the understanding of the performance of its operations.
Set forth below is a reconciliation of reported income from continuing operations and reported diluted earnings per share from continuing operations to income from continuing operations before special items and diluted earnings per share from continuing operations before special items. 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 July 31, | ||||
2011 | 2010 | |||
(in millions except diluted EPS) |
Income |
Diluted EPS |
Income |
Diluted EPS |
Income (loss) from continuing operations, as reported |
$ 9.0 | $ 0.24 | $ 10.4 | $ 0.27 |
After tax Non-GAAP adjustments: | ||||
LIFO charge (income) | $ 1.2 | $ 0.03 | $ 0.6 | $ 0.02 |
Acquisition related costs | $ 0.9 | $ 0.02 | $ -- | $ -- |
ERP program costs | $ 0.2 | $ 0.01 | $ -- | $ -- |
Income from continuing operations, excluding special items |
$ 11.3 | $ 0.30 | $ 11.0 | $ 0.29 |
Organic Growth Initiatives
EPG's organic programs are focused on driving profitable growth through one sales and marketing organization, coupled with the engineering collaboration of its family of businesses: Mikron, Homeshield, Truseal and Edgetech. Activities are focused on both national and regional window and door companies. EPG is also collectively working to develop new products and systems that provide its customers with the latest innovations in energy efficiency.
On September 12-14, 2011, Quanex will be exhibiting at GlassBuild America, the largest gathering of glass, window and door components companies in North America. Quanex will be highlighting its components, products, and systems, as well as communicating its new marketing strategy to national and regional window and door companies.
Dividend Declared
The Board of Directors declared a quarterly cash dividend of $0.04 per share on the company's common stock, payable September 30, 2011, to shareholders of record on September 15, 2011.
Financial Statistics as of 07/31/11
Book value per common share: $11.80; Total debt to capitalization: 0.4%; Return on invested capital: 2.6%; Actual number of common shares outstanding: 37,312,532.
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;
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.
The Quanex Building Products Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1117
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 and financial condition of Quanex and Edgetech and future uses of cash. 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, in particular the section titled, "Private Securities Litigation Reform Act" contained therein.
QUANEX BUILDING PRODUCTS CORPORATION | ||||
SEGMENT INFORMATION | ||||
(In thousands) | ||||
(Unaudited) | ||||
Three months ended July 31, |
Nine months ended July 31, |
|||
2011 | 2010 | 2011 | 2010 | |
Net Sales: | ||||
$124,119 | $101,746 | Engineered Products | $290,623 | $259,272 |
132,130 | 127,600 | Aluminum Sheet Products | 334,328 | 326,252 |
256,249 | 229,346 | Building Products | 624,951 | 585,524 |
(3,836) | (4,143) | Eliminations | (9,618) | (9,513) |
$252,413 | $225,203 | Net Sales | $615,333 | $576,011 |
Operating Income (Loss): | ||||
$ 14,146 | $ 13,131 | Engineered Products | $ 15,411 | $ 22,969 |
7,417 | 8,866 | Aluminum Sheet Products | 14,027 | 19,732 |
21,563 | 21,997 | Building Products | 29,438 | 42,701 |
(6,926) | (5,798) | Corporate and Other | (24,752) | (18,976) |
$ 14,637 | $ 16,199 | Operating Income (Loss) | $ 4,686 | $ 23,725 |
QUANEX BUILDING PRODUCTS CORPORATION | ||||
CONSOLIDATED STATEMENTS OF INCOME | ||||
(In thousands, except per share data) | ||||
(Unaudited) | ||||
Three months ended July 31, |
Nine months ended July 31, |
|||
2011 | 2010 | 2011 | 2010 | |
$252,413 | $225,203 | Net sales | $615,333 | $576,011 |
209,667 | 184,799 | Cost of sales (exclusive of items shown separately below) | 524,834 | 478,559 |
18,912 | 17,566 | Selling, general and administrative | 61,230 | 52,719 |
9,197 | 6,639 | Depreciation and amortization | 24,583 | 21,008 |
14,637 | 16,199 | Operating income (loss) | 4,686 | 23,725 |
(110) | (106) | Interest expense | (341) | (333) |
(311) | 997 | Other, net | 127 | 2,502 |
14,216 | 17,090 | Income (loss) from continuing operations before income taxes | 4,472 | 25,894 |
(5,200) | (6,661) | Income tax benefit (expense) | (1,573) | (9,998) |
9,016 | 10,429 | Income (loss) from continuing operations | 2,899 | 15,896 |
-- | (148) | Income (loss) from discontinued operations, net of taxes | (12) | (1,108) |
$ 9,016 | $ 10,281 | Net income (loss) | $ 2,887 | $ 14,788 |
Basic earnings per common share: | ||||
$ 0.24 | $ 0.28 | Earnings (loss) from continuing operations | $ 0.08 | $ 0.43 |
-- | -- | Income (loss) from discontinued operations | -- | (0.03) |
$ 0.24 | $ 0.28 | Basic earnings (loss) per share | $ 0.08 | $ 0.40 |
Diluted earnings per common share: | ||||
$ 0.24 | $ 0.27 | Earnings (loss) from continuing operations | $ 0.08 | $ 0.42 |
-- | -- | Income (loss) from discontinued operations | -- | (0.03) |
$ 0.24 | $ 0.27 | Diluted earnings (loss) per share | $ 0.08 | $ 0.39 |
Weighted average common shares outstanding: | ||||
37,125 | 37,350 | Basic | 37,103 | 37,349 |
37,684 | 37,983 | Diluted | 37,710 | 37,882 |
QUANEX BUILDING PRODUCTS CORPORATION | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(In thousands) | ||||
(Unaudited) | ||||
July 31, 2011 |
October 31, 2010 |
|||
Assets | ||||
$ 62,420 | Cash and equivalents | $ 187,178 | ||
100,829 | Accounts receivable, net | 87,007 | ||
65,296 | Inventories | 45,200 | ||
13,210 | Deferred income taxes | 10,547 | ||
8,916 | Prepaid and other current assets | 8,229 | ||
-- | Current assets of discontinued operations | 462 | ||
250,671 | Total current assets | 338,623 | ||
157,118 | Property, plant and equipment, net | 135,517 | ||
8,512 | Deferred income taxes | 30,563 | ||
69,611 | Goodwill | 25,189 | ||
91,081 | Intangible assets, net | 44,668 | ||
17,340 | Other assets | 16,690 | ||
$594,333 | Total assets | $ 591,250 | ||
Liabilities and stockholders' equity | ||||
$ 75,586 | Accounts payable | $ 70,986 | ||
36,856 | Accrued liabilities | 43,447 | ||
746 | Income taxes payable | -- | ||
352 | Current maturities of long-term debt | 327 | ||
-- | Current liabilities of discontinued operations | 30 | ||
113,540 | Total current liabilities | 114,790 | ||
1,323 | Long-term debt | 1,616 | ||
4,631 | Deferred pension and postretirement benefits | 3,667 | ||
11,322 | Non-current environmental reserves | 12,027 | ||
23,351 | Other liabilities | 17,718 | ||
154,167 | Total liabilities | 149,818 | ||
440,166 | Total stockholders' equity | 441,432 | ||
$594,333 | Total liabilities and stockholders' equity | $ 591,250 |
QUANEX BUILDING PRODUCTS CORPORATION | ||
CONSOLIDATED STATEMENTS OF CASH FLOW | ||
(In thousands) | ||
(Unaudited) | ||
Nine months ended July 31, |
||
2011 | 2010 | |
Operating activities: | ||
Net income (loss) | $ 2,887 | $ 14,788 |
(Income) loss from discontinued operations | 12 | 1,108 |
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities from continuing operations: | ||
Depreciation and amortization | 24,635 | 21,060 |
Gain on bargain purchase | -- | (1,272) |
Deferred income taxes | (295) | 6,524 |
Stock-based compensation | 3,599 | 3,218 |
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | ||
Decrease (increase) in accounts receivable | (4,991) | 1,601 |
Decrease (increase) in inventory | (9,778) | (5,788) |
Decrease (increase) in other current assets | 244 | (889) |
Increase (decrease) in accounts payable | (2,801) | 7,961 |
Increase (decrease) in accrued liabilities | (6,879) | 5,084 |
Increase (decrease) in income taxes payable | (1,392) | 11,934 |
Increase (decrease) in deferred pension and postretirement benefits | 965 | (2,706) |
Other, net | 3,686 | 1,533 |
Cash provided by (used for) operating activities from continuing operations | 9,892 | 64,156 |
Cash provided by (used for) operating activities from discontinued operations | (68) | (415) |
Cash provided by (used for) operating activities | 9,824 | 63,741 |
Investing activities: | ||
Acquisitions, net of cash acquired | (110,845) | (1,590) |
Capital expenditures | (16,969) | (11,779) |
Proceeds from property insurance claim | -- | 392 |
Proceeds from executive life insurance | 683 | -- |
Other, net | 75 | 40 |
Cash provided by (used for) investing activities from continuing operations | (127,056) | (12,937) |
Cash provided by (used for) investing activities from discontinued operations | -- | 90 |
Cash provided by (used for) investing activities | (127,056) | (12,847) |
Financing activities: | ||
Repayments of long-term debt | (333) | (319) |
Common stock dividends paid | (4,500) | (3,775) |
Issuance of common stock from stock option exercises, including related tax benefits | 1,089 | 495 |
Purchase of treasury stock | (4,289) | (2,169) |
Other, net | 392 | (235) |
Cash provided by (used for) financing activities from continuing operations | (7,641) | (6,003) |
Cash provided by (used for) financing activities from discontinued operations | (392) | 235 |
Cash provided by (used for) financing activities | (8,033) | (5,768) |
Effect of exchange rate changes on cash and equivalents | 47 | 23 |
LESS: (Increase) decrease in cash and equivalents from discontinued operations | 460 | 90 |
Increase (decrease) in cash and equivalents from continuing operations | (124,758) | 45,239 |
Cash and equivalents at beginning of period | 187,178 | 123,499 |
Cash and equivalents at end of period | $ 62,420 | $ 168,738 |
CONTACT: Financial Contact: Jeff Galow, 713-877-5327; Media Contact: Valerie Calvert, 713-877-5305 www.quanex.com
EXHIBIT 99.2
HOUSTON, Aug. 26, 2011 (GLOBE NEWSWIRE) -- 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 announced that on August 25, 2011, its Board of Directors approved a reload to its existing common stock buyback program.
Quanex's buyback program commenced on May 27, 2010, and it authorized the company to purchase up to 1 million shares of common stock with the intent to offset dilution and to take advantage of opportunistic circumstances. Through August 24, 2011, Quanex has purchased 745,299 shares at an average price per share of $15.41, including commissions. Assuming no meaningful change in its stock price, the company estimated it would exhaust its authorized share balance in the coming months. Therefore, the Board authorized a 1 million share reload with the same goals – offset dilution and take advantage of buying opportunities as they present themselves.
"Because Quanex remains in a strong financial position, we are able to use our cash in a combination of ways that best drive value for our long term shareholders," said David Petratis, chairman and CEO of Quanex Building Products. "This year, we made a great acquisition with the cash purchase of Edgetech and we remain acquisitive, we continue to pay a respectable dividend, and we've been opportunistically buying back common stock. Our long term view of Quanex is extremely favorable, and when short term opportunities arise for us to repurchase shares at attractive prices, it only makes sense to do so."
The Quanex Building Products Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1117
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 and financial condition of Quanex and Edgetech and future uses of cash. 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, in particular the section titled, "Private Securities Litigation Reform Act" contained therein.
For additional information, please visit www.quanex.com
CONTACT: Financial Contact: Jeff Galow 713-877-5327 Media Contact: Valerie Calvert 713-877-5305