EX-99.1 2 c78017exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
Exhibit 99.1
 
Quanex Building Products   News Release
Quanex Building Products Corporation
Fiscal Fourth Quarter and Fiscal 2008 Results
4th Quarter EPS from Continuing Operations of $0.32 before a LIFO Gain
Company’s Sales Outperformed the Market for the Quarter and Year
$65 Million Cash and Equivalents Less Debt
Houston, Texas, December 4, 2008 — Quanex Building Products Corporation (NYSE:NX) today reported fiscal fourth quarter and fiscal 2008 results for the period ending October 31, 2008. Income from continuing operations for the quarter and year were $11.9 million and $30.8 million, respectively, and diluted earnings per share from continuing operations for the quarter and year were $0.32 and $0.80, respectively, before spinoff related costs and LIFO impact.
Including spinoff related costs and LIFO impact, income from continuing operations for the quarter and year were $15.0 million and $15.9 million, respectively, and diluted earnings per share from continuing operations for the quarter and year were $0.40 and $0.41, respectively.
Fiscal Fourth Quarter and Fiscal 2008 Highlights
•   David D. Petratis, the company’s president and chief executive officer, assumed the additional role of chairman of the board upon the planned retirement of Raymond A. Jean, effective December 5.
 
•   Jairaj T. Chetnani joined the company as vice president and treasurer effective December 1.
 
•   Net sales in the quarter were $246.3 million versus $255.5 million in the year ago quarter. 2008 net sales were $868.9 million compared to $964 million in 2007.
 
•   Cash provided by operating activities from continuing operations in 2008 was $53 million.
 
•   Capital expenditures for the fiscal year were $15.8 million.
 
•   Cash and equivalents less debt totaled $65 million at year end.
 
•   LIFO transactions: recorded a fourth quarter LIFO gain of $5.1 million ($3.1 million after tax, $0.08 per diluted share). For 2008, recorded a LIFO charge of $0.4 million ($0.2 million after tax, $0.01 per diluted share). LIFO activity in 2008 was primarily associated with the aluminum sheet business.
 
•   Spinoff related costs: recorded fiscal 2008 costs of $26.5 million ($14.7 million after tax, $0.38 per diluted share).

 

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Fiscal Fourth Quarter and Fiscal 2008 Commentary
ENGINEERED PRODUCTS ($ in millions)
                                 
    4th qtr 2008     4th qtr 2007     FY 2008     FY 2007  
Net Sales
   $ 112.9     $ 123.9     $ 407.9     $ 457.8  
Operating Inc.
   $ 10.1     $ 13.2     $ 29.9     $ 43.8  
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 U.S. housing market deteriorated 35% in our fiscal fourth quarter compared to the year ago quarter, and starts for fiscal 2008 were off 31% compared to a year ago. Residential remodeling activity was estimated to be down 10% in fiscal 2008 compared to last year. Net sales for the quarter and year at our Engineered Products segment were down 9% and 11%, respectively. Our ability to consistently outperform the market, even in this very tough economic environment, is testimony to the market-leading positions our customers hold in the window and door industry, and importantly, our collaboration with them on new product and program initiatives,” said David D. Petratis, president and chief executive officer of Quanex Building Products. “We believe Engineered Products has one of the best combinations of engineering and design support, innovative products and components, and logistical support in the industry, all backed by the considerable financial strength of Quanex Building Products,” continued Petratis.
ALUMINUM SHEET PRODUCTS (in millions)
                                 
    4th qtr 2008     4th qtr 2007     FY 2008     FY 2007  
Net Sales
   $ 139.0     $ 136.1     $ 479.9     $ 524.2  
Operating Inc.
   $ 12.6     $ 18.3     $ 40.3     $ 65.7  
Shipped pounds
     81       84       285       311  
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, which together represent about 65% of the segment’s sales.
“Shipments at Nichols Aluminum were approximately 81 million pounds in the quarter, down 4% from the year ago quarter. 2008 shipments of 285 million pounds were off 8% from last year. Spread per pound (selling price less material cost) was down 5% from both the fourth quarter 2007 and third quarter of 2008. We were pleased with the spread at Nichols, however, reduced shipments and a lower mix of painted sheet hurt their bottom line,” Petratis said.

 

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Cash Flow
“Our cash and equivalents less debt at year end were $65 million. We have one remaining favorable cash true-up item for taxes related to the merger of Quanex Corporation with Gerdau S.A. We currently estimate the true-up to be $15 million, down from the original estimate of $20 million as the various tax returns near completion. We expect to receive this cash in the first calendar quarter of 2009. Operating cash flow from continuing operations in 2008 came in at $53 million. We continue to closely monitor our working capital, and at quarter end, our conversion cycle, the time required to convert a customer order to cash, was approximately 31 days,” continued Petratis.
Outlook
The company’s fiscal first quarter segment operating income has historically been its lowest when compared to the other quarters of the year as there are fewer production days and a marked decline in residential building and remodeling activity during this time. This seasonality will be exacerbated given today’s weak economic conditions. First quarter 2009 expectations indicate the company will report an operating loss of between $7 million to $11 million before taking into account approximately $5.5 million of corporate expenses (excluding any LIFO impact). The majority of the loss is expected to come from Aluminum Sheet Products due to significantly lower shipments and a deteriorating spread. As in most years, the company expects to report improved operating results each sequential quarter of fiscal 2009.
While the company expects to continue to outperform the market, the overall economic volatility and the ongoing uncertainty surrounding 2009 housing starts and residential remodeling activity does not allow it to reasonably predict fiscal 2009 operating income at this time. However, the company does expect to be profitable for the year. The company will continue to monitor and analyze ongoing economic changes and the impact those changes will have on its operating performance throughout the year. Estimates for fiscal 2009 depreciation / amortization, and capital expenditures are $35 million and $18 million, respectively.
Non-GAAP Financial Measures
Income from Continuing Operations Before Spinoff Related Costs and LIFO Impact
Income from continuing operations before spinoff related costs and LIFO impact is a non-GAAP financial measure. The company believes this non-GAAP financial measure provides a consistent basis for comparison between quarters and years, and enhances the understanding of the performance of its operations as they are not influenced by certain costs incurred during the periods that are believed to be special and related to specific, infrequent items.

 

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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 spinoff related costs and LIFO impact and diluted earnings per share from continuing operations before spinoff related costs and LIFO impact. 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 October 31,     Twelve months ended October 31,  
    2008     2007     2008     2007  
(in millions except   Net     Diluted     Net     Diluted     Net     Diluted     Net     Diluted  
diluted EPS)   Income     EPS     Income     EPS     Income     EPS     Income     EPS  
 
                                                                
Income from continuing operations, as reported
   $ 15.0     $ 0.40     $ 17.6     $ 0.44     $ 15.9     $ 0.41     $ 57.1     $ 1.45  
 
                                                                
LIFO charge (income)
     (3.1 )     (0.08 )     (0.3 )     —       0.2       0.01       (0.8 )     (0.03 )
 
                                                                
After-tax reconciling items associated with the company’s spinoff:
                                                                
 
                                                                
Stock based compensation expense
     —       —       —       —       13.7       0.36       —       —  
Transaction costs
     —       —       —       —       2.9       0.08       —       —  
Executive incentives & other benefits
     —       —       —       —       0.5       —       —       —  
 
                                                
Selling, general & administrative expense
     —       —       —       —       17.1       0.44       —       —  
Rabbi trust merger consideration
     —       —       —       —       (2.4 )     (0.06 )     —       —  
 
                                                
Total after-tax spinoff related costs
     —       —       —       —       14.7       0.38       —       —  
 
                                                
 
                                                                
Income from continuing operations, excluding LIFO & spinoff related costs
   $ 11.9     $ 0.32     $ 17.3     $ 0.44     $ 30.8     $ 0.80     $ 56.3     $ 1.42  
 
                                                                
 
                                                
 
                                                                
Diluted weighted average common shares outstanding (in thousands)
             37,466               39,703               38,528               39,509  
Dividend Declared
The Board of Directors declared a quarterly cash dividend of $0.03 per share on the company’s common stock, payable December 31, 2008, to shareholders of record on December 18, 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.

 

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Financial Statistics as of 10/31/08
Book value per common share: $14.55; Total debt to capitalization: 0.5%; Actual number of common shares outstanding: 37,657,891
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;
Operating margin — combined operating income of aluminum sheet products and engineered products divided by combined net sales.
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         Twelve months ended  
October 31,         October 31,  
2008     2007         2008     2007  
               
Net sales:
                
$ 112,866     $ 123,866    
Engineered Products
   $ 407,896     $ 457,764  
  139,037       136,123    
Aluminum Sheet Products
     479,925       524,215  
           
 
            
  251,903       259,989    
Building Products
     887,821       981,979  
               
 
                
  (5,558 )     (4,463 )  
Eliminations
     (18,888 )     (18,005 )
           
 
            
$ 246,345     $ 255,526    
Net sales
   $ 868,933     $ 963,974  
           
 
            
               
 
                
               
Operating income:
                
$ 10,101     $ 13,220    
Engineered Products
   $ 29,881     $ 43,815  
  12,565       18,330    
Aluminum Sheet Products
     40,260       65,732  
           
 
            
  22,666       31,550    
Building Products
     70,141       109,547  
               
 
                
  1,332       (4,152 )  
*Corporate and Other
     (49,160 )     (21,378 )
           
 
            
               
 
                
$ 23,998     $ 27,398    
*Operating Income (Loss)
   $ 20,981     $ 88,169  
           
 
            
 
     
*   Corporate and Other and Operating Income for the three and twelve months ended October 31, 2008 include
 
    $5.1 million LIFO income and $0.4 million LIFO expense, respectively. In addition, Corporate and Other and
 
    Operating Income for the twelve months ended October 31, 2008 include $26.5 million of special charges
 
    associated with the spin-off / merger transaction which predominantly occurred in the second quarter of 2008.

 

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QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
                                 
Three months ended         Twelve months ended  
October 31,         October 31,  
2008     2007         2008     2007  
               
 
                
$ 246,345     $ 255,526    
Net sales
   $ 868,933     $ 963,974  
  199,080       201,389    
Cost of sales (exclusive of items shown separately below)
     717,376       767,138  
  14,822       16,325    
Selling, general and administrative expense
     95,504       70,676  
  8,445       10,414    
Depreciation and amortization
     35,072       37,991  
           
 
            
  23,998       27,398    
Operating income (loss)
     20,981       88,169  
  (124 )     (139 )  
Interest expense
     (480 )     (591 )
  312       124    
Other, net
     5,188       383  
           
 
            
  24,186       27,383    
Income (loss) from continuing operations before income taxes
     25,689       87,961  
  (9,176 )     (9,774 )  
Income tax expense
     (9,785 )     (30,830 )
           
 
            
  15,010       17,609    
Income (loss) from continuing operations
     15,904       57,131  
  —       24,470    
Income (loss) from discontinued operations, net of taxes
     5,675       77,491  
           
 
            
$ 15,010     $ 42,079    
Net income (loss)
   $ 21,579     $ 134,622  
           
 
            
               
 
                
               
Basic earnings per common share:
                
$ 0.40     $ 0.47    
Earnings (loss) from continuing operations
   $ 0.43     $ 1.54  
$ —     $ 0.66    
Income (loss) from discontinued operations
   $ 0.15     $ 2.10  
           
 
            
$ 0.40     $ 1.13    
Basic earnings (loss) per common share
   $ 0.58     $ 3.64  
           
 
            
               
 
                
               
Diluted earnings per common share:
                
$ 0.40     $ 0.44    
Earnings (loss) from continuing operations
   $ 0.41     $ 1.45  
$ —     $ 0.62    
Income (loss) from discontinued operations
   $ 0.15     $ 1.96  
           
 
            
$ 0.40     $ 1.06    
Diluted earnings (loss) per share
   $ 0.56     $ 3.41  
           
 
            
               
 
                
               
Weighted average common shares outstanding:
                
  37,333       37,075    
Basic
     37,274       36,982  
  37,466       39,703    
Diluted
     38,528       39,509  

 

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QUANEX BUILDING PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                 
October 31,         October 31,  
2008         2007  
       
Assets
        
$ 67,413    
Cash and equivalents
   $ 1,778  
  101,211    
Accounts and notes receivable, net
     80,095  
  63,848    
Inventories, net
     53,556  
  10,932    
Deferred income taxes
     5,370  
  6,239    
Other current assets
     4,372  
  —    
Current assets of discontinued operations
     431,326  
     
 
      
  249,643    
Total current assets
     576,497  
  157,389    
Property, plant and equipment, net
     173,590  
  3,875    
Deferred income taxes
     —  
  196,338    
Goodwill
     196,385  
  62,476    
Intangible assets, net
     68,199  
  11,126    
Other assets
     9,225  
  —    
Assets of discontinued operations
     310,926  
     
 
      
$ 680,847    
Total assets
   $ 1,334,822  
     
 
      
       
Liabilities and stockholders’ equity
        
$ 79,512    
Accounts payable
   $ 68,167  
  38,316    
Accrued liabilities
     37,102  
  —    
Income taxes payable
     —  
  363    
Current maturities of long-term debt
     1,464  
  —    
Current liabilities of discontinued operations
     242,570  
     
 
      
  118,191    
Total current liabilities
     349,303  
  2,188    
Long-term debt
     2,551  
  —    
Deferred income taxes
     34,457  
  2,485    
Non-current environmental reserves
     4,239  
  10,155    
Other liabilities
     13,889  
  —    
Liabilities of discontinued operations
     47,234  
     
 
      
  133,019    
Total liabilities
     451,673  
  547,828    
Total stockholders’ equity
     883,149  
     
 
      
$ 680,847    
Total liabilities and stockholders’ equity
   $ 1,334,822  
     
 
      

 

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QUANEX BUILDING PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
                 
    Twelve months ended  
    October 31,  
    2008     2007  
Operating activities:
                
Net income
   $ 21,579     $ 134,622  
Income from discontinued operations
     (5,675 )     (77,491 )
 
            
Net income from continuing operations
     15,904       57,131  
Adjustments to reconcile net income to cash provided by operating activities:
                
Depreciation and amortization
     35,111       38,000  
Deferred income taxes
     2,984       796  
Stock-based compensation
     26,378       4,925  
 
            
 
     80,377       100,852  
Changes in assets and liabilities, net of effects from acquisitions, dispositions and the Separation:
                
Decrease (Increase) in accounts and notes receivable
     (21,495 )     (1,140 )
Decrease (Increase) in inventory
     (10,398 )     2,012  
Decrease (Increase) in other current assets
     (390 )     177  
Increase (Decrease) in accounts payable
     11,406       (868 )
Increase (Decrease) in accrued liabilities
     (3,285 )     (2,356 )
Increase (Decrease) in income taxes payable
     1,088       (736 )
Increase (Decrease) in deferred pension and postretirement benefits
     (2,515 )     2,851  
Other, net
     (1,824 )     3,518  
 
            
Cash provided by (used for) operating activities from continuing operations
     52,964       104,310  
Cash provided by (used for) operating activities from discontinued operations
     25,127       119,764  
 
            
Cash provided by (used for) operating activities
     78,091       224,074  
 
            
Investing activities:
                
Capital expenditures, net of retirements
     (15,815 )     (15,904 )
Other, net
     (23 )     —  
 
            
Cash provided by (used for) investing activities from continuing operations
     (15,838 )     (15,904 )
Cash provided by (used for) investing activities from discontinued operations
     34,113       (121,070 )
 
            
Cash provided by (used for) investing activities
     18,275       (136,974 )
 
            
Financing activities:
                
Repayments of long-term debt
     (1,464 )     (2,721 )
Common dividends paid
     (2,258 )     —  
Funding from Separation
     32,735       —  
Transfers to Quanex Corporation
     —       (86,312 )
Other, net
     (302 )     —  
 
            
Cash provided by (used for) financing activities from continuing operations
     28,711       (89,033 )
Cash provided by (used for) financing activities from discontinued operations
     (46,183 )     68,906  
 
            
Cash provided by (used for) financing activities
     (17,472 )     (20,127 )
 
            
Effect of exchange rate changes on cash and equivalents
     (202 )     158  
LESS: (Increase) Decrease in cash and equivalents from discontinued operations
     (13,057 )     (67,600 )
 
            
Increase (Decrease) in cash and equivalents from continuing operations
     65,635       (469 )
Beginning of period cash and equivalents
     1,778       2,247  
 
            
End of period cash and equivalents
   $ 67,413     $ 1,778  
 
            

 

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