Quanex Building Products Posts Loss in Second QuarterJune 14th, 2011 | Category: Industry News
Quanex Building Products Corp. reported a diluted loss from continuing operations of $0.04 per share in its fiscal 2011 second quarter results released yesterday for the period ending April 30, 2011. The quarter included Edgetech transaction costs of $0.03 per share.
Additionally, the company reports that second-quarter earnings from continuing operations were down from a year ago primarily due to weaker results at the Engineered Products Group (EPG), which had both lower sales and higher organic growth initiative expenses.
Second-quarter revenue for EPG was $82.5 million, which included one month of Edgetech sales of $6.4 million, and was lower than a year ago as demand at that time benefitted from two housing related tax credit programs, according to the company. Operating income of $1.9 million was down from a year ago due to lower revenue and higher growth initiative costs of about $0.6 million. EPG’s income included one month’s operating loss at Edgetech of $0.9 million. Those Edgetech results were negatively impacted by a step-up in inventory expense related to the purchase method of accounting of $0.9 million.
With the purchase of Edgetech on March 31, its successful integration into EPG remains a high priority and good progress was made in the first month. Teams were assigned to this critical task and integration is on schedule. For the second half of fiscal 2011, Edgetech’s results are estimated to be sales of about $45 million; depreciation and amortization of about $4 million; and operating income of about $2 million. These second-half results do not include $2 million to $3 million of expected annualized synergies.
Quanex estimates a more normalized 12-month run rate for Edgetech, post the step-up in inventory, of: sales of about $80 million; depreciation and amortization of about $8 million; and operating income of about $5 million. These estimates do not include any synergies and are subject to change.
Quanex had a cash balance of $57.7 million and total debt outstanding stood at $2.0 million at the end of the quarter. The company used $104.4 million to acquire Edgetech and used $6.4 million to purchase the lineal extrusion assets of Jeld-Wen’s Yakima, Wash., facility. Cash used by operating activities from continuing operations for the first half of 2011 was $5.4 million.
The company’s $270 million revolving credit facility remained untapped, but due to the facility’s covenant requirements, the available capacity at quarter end was $214.7 million. Future uses of cash could be to fund organic growth activities, fund the common stock dividend, make acquisitions, and repurchase outstanding shares.