Balance Sheet & Liquidity Remain Strong
Repaid $78 Million of Bank Debt
Over 50% Increase in Cash Provided by Operations
Margin Expansion Realized in EU Fenestration Segment
Management Remains Optimistic on RecoveryHOUSTON, Sept. 03, 2020 (GLOBE NEWSWIRE) — Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the three months ended July 31, 2020.The Company reported the following selected financial results:George Wilson, President and Chief Executive Officer, stated, “Despite the impact from the COVID-19 pandemic, third quarter results proved better than we expected and exceeded the guidance we provided on our last earnings call. Volumes increased steadily throughout the quarter, especially in Europe, and we remain optimistic on the recovery. We continue to focus on managing working capital and generating cash. As a result, we realized an increase of over 50% in cash provided by operating activities as compared to the same period of 2019. We were also able to repay $78 million of bank debt during the quarter, $50 million of which was drawn as a precautionary measure in response to the pandemic, and our leverage ratio of Net Debt to LTM Adjusted EBITDA improved to a level below where we ended fiscal 2019. We have worked tirelessly over the past several years to make sure we have a flexible capital structure and a strong balance sheet, which has left our Company well positioned to navigate the challenges presented by the COVID-19 pandemic.”
Consistent with most companies, we withdrew guidance for fiscal 2020 in March due to the uncertainty surrounding the COVID-19 pandemic. Our results have been negatively impacted by the pandemic; however, we continue to be positively surprised by the pace at which demand for our products has returned. As such, we are now comfortable providing full year 2020 guidance of $832 million to $837 million in net sales and $97 million to $102 million in Adjusted EBITDA*. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)*When Quanex provides expectations for Adjusted EBITDA on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and corresponding GAAP measures is generally not available without unreasonable effort. Certain items required for such a reconciliation are outside of the Company’s control and/or cannot be reasonably predicted or estimated, such as the provision for income taxes.Third Quarter 2020 Results Summary The decrease in net sales during the third quarter of 2020 was largely attributable to softer demand related to the COVID-19 pandemic. The Company’s two manufacturing facilities in the UK were shut down in compliance with government orders on March 25, 2020, and manufacturing operations at those plants did not restart until mid-to-late May. However, volume across all segments increased significantly in June and net sales in July exceeded prior year on a consolidated basis. (See Sales Analysis table for additional information)The decrease in reported earnings was primarily due to reduced operating leverage as a result of softer volumes related to the pandemic. Balance Sheet & Liquidity UpdateAs of July 31, 2020, the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA improved to 1.1x. Quanex expects to exit fiscal 2020 with a leverage ratio of Net Debt to LTM Adjusted EBITDA at or below 1.0x. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)The Company’s liquidity increased to $223.2 million as of July 31, 2020, consisting of $41.1 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 did not repurchase any shares of common stock during the three months ended July 31, 2020. As of July 31, 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 September 30, 2020, to shareholders of record on September 16, 2020.Conference Call and Webcast InformationThe Company has scheduled a conference call for Friday, September 4, 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 6194308, 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 11, 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 6194308. 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
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CONDENSED CONSOLIDATED BALANCE SHEETS
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
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FREE CASH FLOW RECONCILIATION
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(Unaudited)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.QUANEX BUILDING PRODUCTS CORPORATION
NON-GAAP FINANCIAL MEASURE DISCLOSURE
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SELECTED SEGMENT DATA
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SALES ANALYSIS
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