Balance Sheet & Liquidity Remain Strong
Margin Expansion Realized in NA Fenestration Segment
Management Optimistic About RecoveryHOUSTON, June 04, 2020 (GLOBE NEWSWIRE) — Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the three months ended April 30, 2020.The Company reported the following selected financial results:(See Non-GAAP Terminology Definitions and Disclaimers section, Non-GAAP Financial Measure Disclosure table Selected Segment Data table and Free Cash Flow Reconciliation table for additional information)George Wilson, President and Chief Executive Officer, commented, “The first two months of our second quarter were very solid, but, as expected, April proved to be a challenge due to the ongoing COVID-19 pandemic. Despite the volume decline in April, we were able to realize Adjusted EBITDA margin expansion in our North American Fenestration segment and on a consolidated basis. “As previously disclosed, due to the uncertainty related to the COVID-19 pandemic, we withdrew guidance for 2020 and borrowed against our revolving credit facility as a precautionary measure. Our variable cost structure enables us to flex down as volume dictates to protect margins. As such, we implemented furloughs, reduced shift patterns, suspended all near-term non-essential capital requirements and we are engaged in ongoing discussions with our customers and suppliers with respect to managing working capital. As of today, all of our plants are operational, we have started to recall furloughed employees, our balance sheet and liquidity remain very strong, our dividend is currently safe and volume in May was not as soft as anticipated. We are optimistic about the recovery ahead, but we understand that challenges will persist in the near-term. We have worked hard over the past few years to make sure we have a flexible capital structure and a balance sheet that is strong enough to weather the challenges we are currently facing. As a result of these actions, we believe our Company is well positioned to take advantage of any opportunities that may arise as a result of this pandemic.” (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)Second Quarter 2020 Results Summary The decrease in net sales during the second quarter of 2020 was primarily attributable to softer demand in April related to the COVID-19 pandemic. Volume started to decline in all of Quanex’s manufacturing facilities in late March and the Company’s two manufacturing facilities in the UK were shut down completely on March 25, 2020 in compliance with government orders. (See Sales Analysis table for additional information)The increase in reported earnings was primarily the result of a $30.0 million, or $0.91 per diluted share, non-cash goodwill impairment in the North American Cabinet Components segment during the second quarter of 2019. The increase in adjusted earnings was driven by lower selling, general and administrative expense. Balance Sheet & Liquidity UpdateAs of April 30, 2020, Quanex’s leverage ratio of Net Debt to LTM Adjusted EBITDA was unchanged at 1.4x. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)The Company’s liquidity was $189.3 million as of April 30, 2020, consisting of $80.2 million in cash on hand plus availability under its Senior Secured Revolving Credit Facility due 2023, less letters of credit outstanding.Share RepurchasesQuanex’s Board of Directors authorized a $60 million share repurchase program in September of 2018. Repurchases under this program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. The program does not have an expiration date or a limit on the number of shares that may be repurchased. The Company repurchased 149,937 shares of common stock for approximately $2.1 million at an average price of $13.70 per share during the three months ended April 30, 2020. As of April 30, 2020, approximately $11.7 million remained under the existing share repurchase authorization. Recent EventsQuanex’s Board of Directors declared a quarterly cash dividend of $0.08 per share on the Company’s common stock, payable June 30, 2020, to shareholders of record on June 15, 2020.Conference Call and Webcast InformationThe Company has scheduled a conference call for Friday, June 5, 2020, 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 4662437, 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 June 12, 2020. To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 4662437. About QuanexQuanex 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, Senior Vice President, Chief Financial Officer & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.Non-GAAP Terminology Definitions and DisclaimersAdjusted Net Income (Loss) (defined as net income further adjusted to exclude purchase price accounting inventory step-ups, transaction costs, certain severance charges, gain/loss on the sale of certain fixed assets, restructuring charges, asset impairment charges, other net adjustments related to foreign currency transaction gain/loss and effective tax rates reflecting impacts of adjustments on a with and without basis) and Adjusted EPS are non-GAAP financial measures that Quanex believes provide a consistent basis for comparison between periods and more accurately reflects operational performance, as they are not influenced by certain income or expense items not affecting ongoing operations. 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, certain severance charges, gain/loss on the sale of certain fixed assets, restructuring charges and asset impairment charges) are non-GAAP financial measures that the Company uses to measure operational performance and assist with financial decision-making. The leverage ratio of Net Debt to LTM Adjusted EBITDA is a financial measure that the Company believes is useful to investors and financial analysts in evaluating Quanex’s leverage. In addition, with certain limited adjustments, this leverage ratio is the basis for a key covenant in the Company’s credit agreement. Free Cash Flow is a non-GAAP measure calculated using cash provided by operating activities less capital expenditures. Free Cash Flow is measured before application of certain contractual commitments (including capital lease obligations), and accordingly is not a true measure of Quanex’s residual cash flow available for discretionary expenditures. The Company believes that the presented non-GAAP measures provide a consistent basis for comparison between periods, and will assist investors in understanding Quanex’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. The Company 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 StatementsStatements 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 following: impacts from public health issues (including pandemics, such as the recent COVID-19 pandemic) on the economy and the demand for Quanex’s products, 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, 2019, and the Company’s Quarterly Reports on Form 10-Q 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
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