Quanex Building Products Announces Second Quarter 2018 Results and Reaffirms Full Year 2018 Guidance

Strong Underlying Growth in NA and EU Engineered Components Segments
Price Increases Taking Hold in Response to Inflationary Pressures
Solid Free Cash Flow Generation Further Improves Leverage Ratio

HOUSTON, June 04, 2018 (GLOBE NEWSWIRE) -- Quanex Building Products Corporation (NYSE:NX) (“Quanex” or the “Company”) today announced its results for the three months ended April 30, 2018.

Bill Griffiths, Chairman, President and Chief Executive Officer, commented, “Similar to the first quarter, we continued to see strong underlying growth in both our North American and European Engineered Components segments.  We also generated solid free cash flow during the second quarter, which enabled us to further strengthen our balance sheet by paying down bank debt and improving our leverage ratio.”

Mr. Griffiths continued, “While margins continued to be impacted by inflationary pressures, the margin contraction narrowed compared to the first quarter of 2018 as a result of the implementation of a series of price increases towards the end of the second quarter.  These increases should offset inflationary costs in the second half and together with continued improvements in operating efficiencies we should see margin expansion in the fourth quarter.  This, and the expected positive impact from seasonality, gives us confidence in reaffirming our full year guidance of $890 million to $900 million in revenues and adjusted EBITDA of $103 million to $108 million.”

Second Quarter 2018 Results Summary  

The Company reported the following selected financial results:

(See Non-GAAP Terminology Definitions and Disclaimers section, Non-GAAP Financial Measure Disclosure table and Selected Segment Data table for additional information)

The increase in net sales during the second quarter of 2018 was mainly driven by market and new products growth in addition to price increases largely related to raw material inflation recovery and a favorable foreign exchange impact.  (See Sales Analysis table for additional information)

The increase in earnings was largely due to lower stock-based compensation expense and a lower effective tax rate as a result of the enactment of the Tax Cuts and Jobs Act. 

As of April 30, 2018, the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA improved to 2.2x and Quanex expects to end fiscal 2018 with this leverage ratio below 2.0x.  (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)

Recent Events

The Company’s Board of Directors declared a quarterly cash dividend of $0.04 per share on Quanex’s common stock, payable June 30, 2018, to shareholders of record on June 15, 2018.

Conference Call and Webcast Information

The Company has scheduled a conference call for Tuesday, June 5, 2018, 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 6446248, 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, 2018.  To access the replay dial (855) 859-2056 for domestic callers and (404) 537-3406 for international callers, in both cases referencing conference passcode 6446248. 

About Quanex

Quanex 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, Vice President, Investor Relations & Treasurer, at 713-877-5327 or scott.zuehlke@quanex.com.

Non-GAAP Terminology Definitions and Disclaimers

Adjusted Net Income (Loss) (defined as net income further adjusted to exclude purchase price accounting inventory step-ups, transaction costs, gain/loss on the sale of fixed assets, restructuring 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, gain/loss on the sale of fixed assets, and restructuring charges) are non-GAAP financial measures that the Company uses to measure operational performance and assist with financial decision-making.  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.  Net Debt is calculated using the sum of current maturities of long-term debt and long-term debt, minus cash and cash equivalents.  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.   Quanex believes that the presented non-GAAP measures provide a consistent basis for comparison between periods, and will assist investors in understanding the Company’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.  Quanex 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 Statements

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, 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, 2017, 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.