EX-99.1 2 c73620exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
Exhibit 99.1
 
Quanex Building Products   News Release
Quanex Building Products Corporation Reports
Fiscal Second Quarter 2008 Results
Reported $0.17 EPS from Continuing Operations before Special Items
Company Continued to Outperform the Market
Expected Start-Up Cash of $52 million From the Spin / Merger Transactions
Company Essentially Debt Free, with Financial Wherewithal to Fund both Organic and
Acquisitive Growth
Houston, Texas, June 9, 2008 — Quanex Building Products Corporation (NYSE:NX) today reported fiscal second quarter 2008 results for the period ending April 30. Diluted earnings from continuing operations were $0.17 per share excluding special items. Including special items of $0.37 per share, diluted earnings from continuing operations were $(0.20) per share.
Income from continuing operations excluding special items was $6.5 million. Special items totaled $13.8 million after-tax, the result of transaction related costs. Income from continuing operations in the year ago quarter was $13.4 million, or $0.34 per diluted share.
Diluted earnings per share were $(0.14) in the quarter versus $0.86 in the second quarter 2007. Net sales for the second quarter 2008 were $207.3 million compared to $238.6 million a year ago.
Fiscal Second Quarter 2008 Highlights
•   Quanex Building Products Corporation was spun-off from Quanex Corporation on April 23rd.
 
•   Net sales were $207.3 million compared to $174.9 million and $238.6 million in the sequential and year ago quarters, respectively.
 
•   SG&A was $43.6 million, and included $25.7 million of corporate transaction related costs, of which $22.8 million were non-cash, stock-based compensation expenses paid by the acquirer of Quanex Corporation.
 
•   Cash provided by operating activities from continuing operations was $19.5 million, down from $31.9 million a year ago.
 
•   Capital expenditures were $6.9 million in the quarter versus $7.3 million a year ago.
 
•   Cash and equivalents totaled $40 million at quarter end.

 

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Selected Financial Information
Fiscal Second Quarter 2008 Financials
($ in millions, except per share data)
                         
    2nd qtr 2008     2nd qtr 2007     inc/(dcr)  
Net sales:
   $ 207.3     $ 238.6       (13 %)
 
                        
Operating income before special items:
     9.5       21.3       (55 %)
 
                        
Income from continuing operations before special items:
     6.5       13.4       (51 %)
 
                        
Diluted earnings per common share from continuing operations before special items:
   $ 0.17     $ 0.34       (50 %)
 
                        
Diluted earnings per common share from continuing operations
   $ (0.20 )   $ 0.34       —  
Fiscal Second Quarter 2008 Commentary
Engineered Products ($ in millions)
                         
    2nd qtr 2008     2nd qtr 2007     inc/(dcr)  
Net Sales
   $ 92.5     $ 103.6       (11 %)
Operating Income
   $ 5.3     $ 9.1       (42 %)
Engineered Products is focused on providing window and door customers with value added fenestration products and components. Key market drivers are housing starts and remodeling activity.
“The housing market slowdown continues, with new housing starts off 34% compared to our second quarter last year. Sales held up relatively well, off about 11%, based in part on the strength of our leading customers and new programs, and lower, but more resilient home repair and remodeling expenditures. The combination of a huge inventory overhang of both new and existing home stock, the rise of home foreclosures and a tight credit market is keeping the residential housing market in a depressed state. The U.S. Department of Housing currently estimates a 10 month supply of homes available for sale. The remodeling industry is experiencing a slowdown in activity as well, down some 5% to 10% from a year ago.

 

2

 

Engineered Products did see some seasonal improvement in demand over the first quarter, with April booking activity particularly noteworthy, and we look for higher overall sales at the segment in the third quarter. We continue to reduce expense levels in keeping with market realities, and are currently combining two separate facilities at our window and door fenestration components business into a single, more efficient operation. We expect to have this initiative completed by fiscal year end,” said Raymond A. Jean, President and Chief Executive Officer.
Aluminum Sheet Products ($ in millions)
                         
    2nd qtr 2008     2nd qtr 2007     inc/(dcr)  
Net Sales
   $ 118.3     $ 139.2       (15 %)
Operating Income
   $ 10.0     $ 16.8       (41 %)
Aluminum Sheet Products is a leading provider of common alloy aluminum sheet products for the building and construction, transportation and other consumer durable markets. Key market drivers are housing starts and remodeling activity and together they represent about 65% of the division’s sales.
“Our second quarter shipped pounds at Nichols Aluminum were down about 12% from year ago levels, but up some 23% compared to first quarter shipments due to the seasonal increase in the building products markets. Sales price per pound was off about 4% from the year ago period while our spread per pound (selling price less material costs) in the quarter was off about 7% due primarily to a lower mix of value-added painted sheet sales and a lower London Metal Exchange aluminum ingot price compared to a year ago. However, these prices increased during our second quarter and will benefit us going forward. Operating income was negatively impacted by a combination of the drop in shipped pounds, lower painted sheet sales and the weaker spread. During the quarter, we idled the rolling capacity at our Alabama finishing facility and moved that production to our Lincolnshire facility, thereby improving operating rates at the other plants,” Jean said.
Cash Flow
“Cash and equivalents at quarter end was $40 million, including some $28 million of the expected $52 million start-up cash, and total debt to capitalization remained minimal at 0.5%. Operating cash flow from continuing operations came in at a very healthy $19.5 million. We continue to closely monitor our working capital, and at quarter end, our conversion cycle was about 31 days. With our healthy cash balance, strong cash flow and $270 million revolving credit facility, we have the financial wherewithal to fund attractive growth opportunities, both organic and acquisition related,” said Jean.

 

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Fiscal 2008 Outlook
The Company does not expect any near term improvement in the housing market, with industry prognosticators continuing to push out the timing of the expected trough, now estimated to occur in the fourth calendar quarter of 2008. Housing starts in fiscal 2008 are now expected to lag fiscal 2007 starts by 35% as the market struggles with the high inventory overhang and tougher credit requirements sought by mortgage lenders. However, the Company does expect to see higher demand from its Engineered Products customers in the second half of the fiscal year compared to the first half due to seasonal improvements in the market and the growth of new programs.
At Nichols Aluminum, volumes are expected to lag year ago quarters throughout the remainder of fiscal 2008. Spread per pound at Nichols, however, is expected to be more robust in the second half of the year compared to the first half in keeping with higher anticipated aluminum ingot prices.
The greater than expected intensity and duration of the housing storm makes forecasting particularly difficult. The current roll-up of income expectations by business still indicates the Company will generate around $80 million of operating income before taking into account approximately $20 million of corporate expenses in a normalized run rate. But given the economy’s fragile state, the uncertainty attending this forecast is high and the risks remain to the downside. However, the Company does expect to continue to outperform the market and generate significant cash flow, and is well positioned to experience significant operating leverage when the market improves.
Dividend Declared
The Board of Directors previously declared a quarterly cash dividend of $0.03 per share on the Company’s common stock, payable June 30, 2008, to shareholders of record on June 16, 2008.
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 an ROIC driven company that grows shareholder returns through a combination of organic growth via new products and programs, and strategic acquisitions.
Financial Statistics as of 04/30/08
Book value per common share: $13.97; Total debt to capitalization: 0.5%; Actual number of common shares outstanding: 37,608,153

 

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Non-GAAP Financial Measures
Operating Income and Income from Continuing Operations Excluding Special Items
Operating income and income from continuing operations excluding special items are non-GAAP financial measures. The Company believes these non-GAAP financial measures provide a consistent basis for comparison between quarters and enhance the understanding of the performance of its ongoing operations, as they are not influenced by certain costs incurred during the quarter and are believed to be special and related to specific, infrequent items.
Set forth below is a reconciliation of reported operating income, reported income from continuing operations and reported diluted earnings per share from continuing operations to operating income excluding special items, income from continuing operations excluding special items and diluted earnings per share from continuing operations excluding special items, respectively. 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.

 

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    Three months ended April 30,  
    2008     2007  
(in millions except diluted EPS)   Income             Income          
 
                                
Operating income, as reported
   $ (16.2 )           $ 21.3          
 
                                
Reconciling items associated with the Company’s spin-off:
                                
Stock based compensation expense
     22.8               —          
Transaction costs associated
     1.9               —          
Executive incentives & other benefits
     1.0               —          
 
                            
 
                                
Selling, general & administrative expense unusual items
     25.7               —          
 
                            
 
                                
Operating income, excluding unusual items
   $ 9.5             $ 21.3          
 
                            
                                 
    Three months ended April 30,  
    2008     2007  
            Diluted             Diluted  
(in millions except diluted EPS)   Income     EPS     Income     EPS  
 
                                
Income (loss) from continuing operations, as reported
   $ (7.3 )   $ (0.20 )   $ 13.4     $ 0.34  
 
                                
After-tax reconciling items associated with the Company’s spin-off:
                                
Stock based compensation expense
     13.7       0.37       —       —  
Transaction costs
     1.9       0.05       —       —  
Executive incentives & other benefits
     0.6       0.01       —       —  
 
                        
Selling, general & administrative expense
     16.2       0.43       —       —  
Rabbi trust merger consideration
     (2.4 )     (0.06 )     —       —  
 
                        
Total after-tax unusual items
     13.8       0.37       —       —  
 
                        
 
                                
Income from continuing operations, excluding special items
   $ 6.5     $ 0.17     $ 13.4     $ 0.34  
 
                        
 
                                
Diluted weighted average common shares outstanding (in thousands)
             37,265               39,416  
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 Registration Statement on Form 10, filed with the SEC on April 4, 2008 pursuant to the Securities Exchange Act of 1934, in particular the section titled, “Special Note About Forward-Looking Statements” contained therein.
Financial Contact: Jeff Galow, 713/877-5327
Media Contact: Valerie Calvert, 713/877-5305
For additional information, visit the Company’s website at www.quanex.com.

 

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QUANEX BUILDING PRODUCTS CORPORATION
INDUSTRY SEGMENT INFORMATION
(In thousands)
(Unaudited)
                                 
Three months ended         Six months ended  
April 30,         April 30,  
2008     2007         2008     2007  
               
Net sales:
                
$ 92,494     $ 103,583    
Engineered Products
   $ 179,770     $ 202,452  
  118,281       139,188    
Aluminum Sheet Products
     210,348       244,425  
           
 
            
  210,775       242,771    
Building Products
     390,118       446,877  
               
 
                
  (3,437 )     (4,220 )  
Eliminations
     (7,868 )     (7,935 )
           
 
            
               
 
                
$ 207,338     $ 238,551    
Net sales
   $ 382,250     $ 438,942  
           
 
            
               
 
                
               
Operating income:
                
$ 5,296     $ 9,087    
Engineered Products
   $ 7,190     $ 12,938  
  9,982       16,828    
Aluminum Sheet Products
     15,585       27,416  
           
 
            
  15,278       25,915    
Building Products
     22,775       40,354  
               
 
                
  (31,500 )     (4,620 )  
Corporate and Other *
     (40,164 )     (11,855 )
           
 
            
               
 
                
$ (16,222 )   $ 21,295    
Operating Income (Loss) *
   $ (17,389 )   $ 28,499  
           
 
            
 
     
*   Corporate and Other and Operating Loss for the three months and six months ended April 30, 2008 include $25.7 million and $26.4 million, respectively, of special items associated with the spin-off / merger transaction.

 

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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,  
2008     2007         2008     2007  
               
 
                
$ 207,338     $ 238,551    
Net sales
   $ 382,250     $ 438,942  
  170,776       191,000    
Cost of sales (exclusive of items shown separately below)
     317,853       355,147  
  43,637       17,196    
Selling, general and administrative expense
     63,680       36,399  
  9,147       9,060    
Depreciation and amortization
     18,106       18,897  
           
 
            
  (16,222 )     21,295    
Operating income (loss)
     (17,389 )     28,499  
  (100 )     (150 )  
Interest expense
     (238 )     (312 )
  4,242       81    
Other, net
     4,550       160  
           
 
            
  (12,080 )     21,226    
Income (loss) before income taxes
     (13,077 )     28,347  
  4,765       (7,849 )  
Income tax expense
     5,153       (10,481 )
           
 
            
  (7,315 )     13,377    
Income (loss) from continuing operations
     (7,924 )     17,866  
  1,982       19,866    
Income (loss) from discontinued operations, net of taxes
     5,675       36,031  
           
 
            
$ (5,333 )   $ 33,243    
Net income (loss)
   $ (2,249 )   $ 53,897  
           
 
            
               
 
                
               
Basic earnings per common share:
                
$ (0.20 )   $ 0.36    
Earnings (loss) from continuing operations
   $ (0.21 )   $ 0.48  
$ 0.06     $ 0.54    
Income (loss) from discontinued operations
   $ 0.15     $ 0.98  
           
 
            
$ (0.14 )   $ 0.90    
Basic earnings (loss) per common share
   $ (0.06 )   $ 1.46  
           
 
            
               
 
                
               
Diluted earnings per common share:
                
$ (0.20 )   $ 0.34    
Earnings (loss) from continuing operations
   $ (0.21 )   $ 0.46  
$ 0.06     $ 0.52    
Income (loss) from discontinued operations
   $ 0.15     $ 0.94  
           
 
            
$ (0.14 )   $ 0.86    
Diluted earnings (loss) per share
   $ (0.06 )   $ 1.40  
           
 
            
               
 
                
               
Weighted average common shares outstanding:
                
  37,265       36,943    
Basic
     37,215       36,920  
  37,265       39,416    
Diluted
     37,215       39,113  

 

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QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                 
April 30,         October 31,  
2008         2007  
       
Assets
        
$ 40,450    
Cash and equivalents
   $ 1,778  
  85,834    
Accounts and notes receivable, net
     80,095  
  56,647    
Inventories, net
     53,556  
  1,901    
Deferred income taxes
     5,370  
  10,349    
Other current assets
     4,372  
  —    
Current assets of discontinued operations
     431,326  
     
 
      
  195,181    
Total current assets 576,497
        
  165,786    
Property, plant and equipment, net
     173,590  
  12,584    
Deferred income taxes
     —  
  196,372    
Goodwill
     196,385  
  64,838    
Intangible assets, net
     68,199  
  9,499    
Other assets
     9,225  
  —    
Assets of discontinued operations
     310,926  
     
 
      
$ 644,260    
Total assets
   $ 1,334,822  
     
 
      
       
Liabilities and stockholders’ equity
        
$ 68,614    
Accounts payable
   $ 68,167  
  32,155    
Accrued liabilities
     37,102  
  363    
Current maturities of long-term debt
     1,464  
  —    
Current liabilities of discontinued operations
     242,570  
     
 
      
  101,132    
Total current liabilities
     349,303  
  2,388    
Long-term debt
     2,551  
  —    
Deferred income taxes
     34,457  
  3,458    
Non-current environmental reserves
     4,239  
  11,891    
Other liabilities
     13,889  
  —    
Liabilities of discontinued operations
     47,234  
     
 
      
  118,869    
Total liabilities
     451,673  
  525,391    
Total stockholders’ equity
     883,149  
     
 
      
$ 644,260    
Total liabilities and stockholders’ equity
   $ 1,334,822  
     
 
      

 

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QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
                 
    Six months ended  
    April 30,  
    2008     2007  
Operating activities:
                
Net income
   $ (2,249 )   $ 53,897  
Income from discontinued operations
     (5,675 )     (36,031 )
 
            
Net income from continuing operations
     (7,924 )     17,866  
Adjustments to reconcile net income to cash provided by operating activities:
                
Depreciation and amortization
     18,111       18,901  
Deferred income taxes
     2,999       (782 )
Stock-based compensation
     24,936       3,006  
 
            
 
     38,122       38,991  
Changes in assets and liabilities, net of effects from acquisitions, dispositions and the Separation:
                
Decrease (Increase) in accounts and notes receivable
     (5,896 )     (12,080 )
Decrease (Increase) in inventory
     (3,127 )     (8,080 )
Decrease (Increase) in other current assets
     (4,872 )     633  
Increase (Decrease) in accounts payable
     954       16,184  
Increase (Decrease) in accrued liabilities
     (2,294 )     (8,510 )
Increase (Decrease) in income taxes payable
     (646 )     (3 )
Other, net
     (2,773 )     4,742  
 
            
Cash provided by (used for) operating activities from continuing operations
     19,468       31,877  
Cash provided by (used for) operating activities from discontinued operations
     25,127       52,507  
 
            
Cash provided by (used for) operating activities
     44,595       84,384  
 
            
 
                
Investment activities:
                
Capital expenditures, net of retirements
     (6,941 )     (7,292 )
 
            
Cash provided by (used for) investing activities from continuing operations
     (6,941 )     (7,292 )
Cash provided by (used for) investing activities from discontinued operations
     34,113       (107,515 )
 
            
Cash provided by (used for) investment activities
     27,172       (114,807 )
 
            
 
                
Financing activities:
                
Repayments of long-term debt
     (1,264 )     (2,521 )
Funding from Separation
     27,755       —  
Transfers to Quanex Corporation
             (22,638 )
Other, net
     (290 )     —  
 
            
Cash provided by (used for) financing activities from continuing operations
     26,201       (25,159 )
Cash provided by (used for) financing activities from discontinued operations
     (46,183 )     13,824  
 
            
Cash provided by (used for) financing activities
     (19,982 )     (11,335 )
 
            
Effect of exchange rate changes on cash and equivalents
     (56 )     11  
LESS: (Increase) Decrease in cash and equivalents from discontinued operations
     (13,057 )     41,184  
 
            
Increase (Decrease) in cash and equivalents from continuing operations
     38,672       (563 )
Beginning of period cash and equivalents
     1,778       2,247  
 
            
End of period cash and equivalents
   $ 40,450     $ 1,684  
 
            

 

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