NX - Earnings call transcript Q4 2018 | Quanex Building Products Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Quanex Building Products Corporation's Fourth Quarter and Full Fiscal Year 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the conference over to Scott Zuehlke, Vice President, Investor Relations and Treasurer. Sir, you may begin.

Scott Zuehlke

Thanks for joining the call this morning.

Chief me Executive Bill Chief Officer; and Wilson, with President our Financial call George Chief and Brent our the today Griffiths, is Chairman, Officer; On Officer. Operating Korb, our measures. will call and of forward-looking This conference contain some statements discussions non-GAAP

and differ call in any Forward-looking Quanex statements guidance materially release from guidance our results Actual undertakes on reflect current new events. to to statements and revise on such forward-looking based expectations. discussed update no or earnings this statements or and are events or obligation may and information

a I'll statement release measures earnings detailed reconciliation turn to over now measures, For discuss to more and non-GAAP our website. description see issued of the financial call yesterday GAAP forward-looking of results. to comparable please disclaimer Brent, our and the posted the directly most our a to

Brent Korb

will a fiscal $X.XX Thank the of the recovery XXXX XXXX. ended for compared well to growth on flow, three the you, XX, increases or the review per reported balance to compared or with over net around and XXXX will performance primarily impact. the income were I year million mainly ended going hand for diluted material months begin to same as of We October $X.XX share I expectations period foreign of as exchange our per and comments and million will during price and October finish increased strategy sales the Net as inflation to million increases by XX, forward. three to share diluted Bill market fourth a additional the cash XXXX. driven The related then Scott. million favorable raw $X.X full months our income for $XX.X for full X.X% quarter sheet, $XXX.X who the call with to the provide statement guidance. and well $XXX.X as color year X.X%

the transaction XXXX. in in Act, million million compared transaction $XX.X during income currency benefit share LIFO adjusted follows: last $X.X these tax advisory the quarter restructuring American income million plants, of fees. million basis, fourth fourth diluted North to fourth or of For compared adjustment, inventory was are price accelerated and or million per to XXXX manufacturing assets Cuts facility $XX.X depreciation for increased $XX.X The $X.XX fiscal for quarter intangible $X.XX fiscal during or net per XXXX. basis, an foreign year. reserve share to or the per closure Adjusted or the plant million and per of to compared an fourth accelerated decreased and consolidations, fiscal related re-layout recognition, diluted to diluted net $X.XX segment, XXXX, to purchase compared to the diluted the made net related Tax and in for EBITDA as for million of Components per income inventory share step-up share the diluted On for charges $XX.X impacts, share previously amortization fiscal to of and quarter depreciation equipment the Jobs adjusted Cabinet several per related $X.XX $XX.X On announced $X.XX share net or XXXX. XXXX for earnings quarter XXXX $X.XX was million to $XX adjustments being per $XX.X diluted share

and negative fiscal expense due in administrative increase adjusted to compared earnings was the are The million the selling, $XX.X impact in mostly full-year pressures expenses. driven to XXXX. EBITDA increase XXXX, throughout the $XX in by inflationary and SG&A of decreases The year was For in an adjusted million of general year for from expense respectively insurance an increase related a in one $X Insurance-related expenses and included legal legal benefit million insurance-related XXXX legal the year-over-year elevated and reimbursement of expenses. full accruals to our a $X incentive medical cost, million carriers. fourth higher of annual and quarter

want respect across debt less and years. two more maturity all in I on restrictive our everybody more to facility. date more including are remind and and is flexibility was than Before balance capital I improving on two our shareholders a cash give amended pricing grid to years it progress leverage This profile extended made and the tiers. covenant favorable new of XX basis the that our terms sheet, with the outstanding move point we by recently to to The returning credit flow us we've new underscores provides the the past and extended by benefits over number

sheet. the a activities capital. in XXXX streamline focused Now which to the balance and flow generated by effort to million largely to $XX.X by in cash was Cash XXXX. working million in of cash flow an XXXX We operating year-over-year, and million provided of $XX.X free XX% driven compared increase $XXX.X on represents

$XX of result to a leverage of shareholders, with our in strong bank during debt to repaid continue our and we XXXX. As stock our in fourth million to $XX the flow capital fiscal million repurchased and cash commitment reduce returning while consistent quarter

EBITDA We of XXXX, even million debt $XX months the end-of-year our repurchase. ratio as stock net targeted of also October to achieved last after Xx leverage adjusted XX XX,

growth in points to Adjusted outlook of $XX From XXXX. XX expenditure the a in basis at forecasting approximately million we're our midpoint. represents of spend capital of to approximately guidance million release, expansion we $XXX margin expect revenue standpoint, EBITDA to XXXX. X% to year-over-year X% $XX million section in the of noted earnings As million $XX

appropriate is turn his approximately it approximately million remarks. the interest of of SG&A XX%. million, purposes, to for $XXX million, Depreciation and amortization million, I'll of tax modeling to expense $XX million, XXXX. a $XX of call now to of for approximately prepared $XXX assumptions Bill $XX rate following make over the For

William Griffiths

Brent. you, Thank

capital a to and balance As is excess we announced third the the quarter, sheet our maintain at healthy end return for foreseeable shareholders. of strategy future our to

management greater capital generation the working even flow quarter. during we As and on emphasis fourth had cash a result, an

As of $XX put fourth to million approximately exceptional free fiscal this this alone. the $XX into XXXX very XXXX To Brent which and just per of free to mentioned, to cash averages flow cash including the million perspective, favorably approximately compare flow share equates of yield peers. diluted in $XX strong both $X.XX a the flow in for led cash fiscal million quarter our free current for consensus

us repurchase $XX fund still we're strong flow a X.X maintaining Xx, the doubling free of comfortable dividend, the approximately cash with. the enabled million Our level to ratio shares of million for of leverage generation a while

achieved we while generated the medical XXXX higher with million incentives gross EBITDA softer quarter, end about outperform underlying were Components surrounding despite expected X.X%, in primarily This to shortfall strong to new in the underlying low higher to North payments quarter growth peers, compared this versus $XX Brexit, primarily we segment greater growth adjusted weighting North full-year gross result unforeseen this To Europe, were in approximately is than and to had shy prior with about $XX last Components flow Cabinet and softness, the expenses our due and continued of strong points XXXX, with performance our expenses. some of Despite industry perspective. market XXX consecutive margin guidance. August year. American margin driven of sales year. X.X%. cash This the our construction R&R of segment in Our all expansion million from XXXX million the cash was underlying all $XX almost more Engineered we growth growth of marks in provide medical of increased of The second increase fourth basis than segments was did in segment. underlying incentive by expansion $XX in context, American than a an round During turmoil This an the along significant we Consistent a experienced of all in free and free million was quarter September. as X.X% million $X in

We to derive productivity to focus excellence will further operational expansion. here and on continue our are pleased enhance with and margin progress

isn't compared growth sector, realized XXXX. is believe negative. X% X% the our currently current in underlying while view to see So the within we will building to some in growth revenue We pessimism XXXX products X% as there we

XXXX, that continue addition, healthcare initiatives. pass with In costs, inflation can confident to through we benefits respect we and we logistics, are particularly to in while these pricing expect costs on

pushed XXXX. XXXX which than $XX Even been million on was North in expect lower our aggressively $XX segment to remain EBITDA Cabinet further major fiscal margin continue slight expect fourth capital quarter is in flat to segment clearly continued in couple and working cash laser capital. million productivity we of American little in spending Components margins North manage of million such, XXXX. will American a million based to planned said, in in anticipate one-time we in Accordingly, on improvement a in We into this exceptional and in between delays a Engineered EBITDA our we segment performance this as meaningful with expectation the due fiscal XXXX flow Brent improvements. focused projects Components to As our margins European in slightly adjusted year. a carryover, Components $XX the with expansion adjusted The working CapEx $XXX and benefit. we Engineered have generating declining for

be And result, of sales confident flow free working a a level XXXX this percentage and should However, cash we million. $XX between $XX million of are in that as sustainable. capital is as

construction continue We will more than strengthen. residential repair continue new slowed. the de-lever will and agree R&R summary, to and But that we new market construction weighted stock. believe to buy has back In that we're remodel we and opportunistically to

we past a few balance labor a we're pessimism. In trend strong our lost than approach and the remain some business years. addition, to disciplined returning business capital of the optimism constraints allocation with All-in-all, shareholders. we by component with XXXX of outsourcing over We back winning committed as capital see more sheet to maintaining we to the also entered and more a customers favorable result

to Board Our take shareholder are with efficiencies that, our coming fundamental sustainable And deliver of in questions. management the and strength and and business growth in we'll ability draw now creation years. the and team the operator, our value confident

Operator

[Operator Securities. comes first Instructions] Our CJS Moore Daniel with question from

line open. is Your

Daniel Moore

'XX, to looking can a of starting You mouthful, that of you versus more any but on are you detail That's are impact business at volume? at price there? kind specifics give rates growth, know what terms –[indiscernible] told of terms I'm in and there I already, outlook line question next what fiscal just and gives to Bill, to a for on year X% you about answer ask top in tried maybe that confidence detail specifically I'll but I And what mentioned that. looking you you start based win the back FX talk or expand some we now? in going for lost, X% - to right know you with

William Griffiths

year 'XX. So, this you're some lost aware, as business the comps in 'XX versus included

you so that around the won't take year which I underlying numbers comps the X%, just XXXX. negative If out, we ones have and in those are quoted growth for full the are

expectation few for the growth some the home we'll we've builders of magnitude demonstrated that So now but down, is, softening as perhaps the see slow underlying past quarters.

of we In compensate to new strengthen. addition, continue will believe R&R to some the do construction, softness that in for

been quotation We product. contracts get very to will recently we pipeline it's to the of of that years, over last positively. considering $XX means, of We've new or of the made be business of any order business $XX that that of few awarded more actually of had couple worth business. decisions are That's those business not a under million right biggest outsourcing the in range and $XX negotiation potential pipeline by now million it lost awarded years. we'll have that the a some But of million customers healthy all in that to all we've are not business say but that's several

demonstrated mostly fall price it the So of large the pretty Obviously, And next about this big to the to SG&A. is, the new ended ability least of though expected through we We for year. was we pass soften are late it year we year, one-time somewhat couple at even part in items some of last collectively, where the miss optimistic inflationary first the albeit is gross year, kind the of into likely then to that be. our recognize I we of mean, half level construction a margin concerns. on

to initiatives working pass expect we currently pricing are for We in and those to clearly through. early XXXX be able on

the of when we all laid together, outlook put confident So you just out. very that are we

Daniel Moore

by detail gave you on it segment And on of Could bit out or year? rank next a order, top you line EBITDA by expectations little the perhaps break growth segment. expectations maybe is

William Griffiths

some see on assuming we're to going working the come growth North to we're of fruition. to think I Fenestration, in strong American in continue cabinets projects and some

uncertainty. with will be tougher think the growth in is And to expectation a clearly is that XXXX. slowest turmoil as Europe, in expand our in be There probably well. all of with great point. there I will on, the going margins probably We're Europe little deal that's everything we we this Europe probably pleased North way ended the a given in more pessimistic obviously very about at but year, the than America we're are

Daniel Moore

me on from SG&A the lastly front. And

sustained, should that? in in medical, guiding QX? You're compensation - key slight is drivers? what increase year in terms year accruing of kind spike that one-time how this next spike much or what And you're What are flat the very expectations think the And we versus for drove we - what are to obviously about that of in a for relatively QX. what a versus terms incentive of of are and

William Griffiths

target always QX. the the at of of year That - review exceptional of then obviously cetera, on sustainable that's and because transplant, on we or at believe the we quarter as focus at cetera, QX. performance. after the a costs we a cash et up. and The third baby a medical is based generating the through end So adjust But et on on all about. drove those we the we in the premature primarily self-insured, strategic had higher which target we renewed beginning announcement some go a the incentives, year accrue and can't Clearly, than in excessive drove heart unique result we're in drove that and what that was a claims bad of is talk number turn performance, incentives

unpredictable heart token, increase seen anyway, $X is baby same really factored and a general we've a premature healthcare the the is attack costs, what an benefits million. but medical in or that's costs bulk also and what's completely into by elevated Now that drove so of XXXX

Operator

Thompson Kathryn Our next comes question Research. from with Thompson

is open. line Your

Brian Biros

softening This Biros to is for taking the questions. wanted mentioned August start on in you Kathryn, for I thanks Brian with September. my and off

could is a maybe impact cause there a it into at that on any be basis, that you If falls or If segment as expand on buckets would all. helpful.

William Griffiths

to was of for quarter short, succinct the the is summer the most the end soft and there as of because so well customers. Yes, answer part the builders you're September home for aware, reported the pretty number our fiscal end a

seen their many closed, and intake quarter strong was month order a significantly September, fiscal our slowdown. pretty of because August After the So up customers and slowed very actually us. orders think in window for October again I a home builders picked in their had October

pretty November, recovery of year. is, So looked we're optimistic frankly well month the of some in which also level and of of one we're last reasons the to October, closing our in strong process relative as the

Brian Biros

million of program, kind a just spent, private placement, does I On the of opportunity share a that over so of of program - to in this? you quarter, pipeline whatever are how to like be get desire ready we and of that through move the the I to or is about previous commentary that think think do $XX quarters, over multiple half next was because one-off half over repurchase, the kind or guys the was million entire that the we in signal $XX that it think $XX million million $XX spent would buyback on on

William Griffiths

a burn that - $XX through an Yes, not quickly. ongoing one-time so million part the was to opportunity, of strategy

any a limited days share and based trade number at-market, we Xx limited the plan. of of between in we we're the we on one that have And number the point relatively it's price. obviously we can balance around a opportunistic, we Therefore, repurchase As shares a the said, float ratio that buy cognizant keeping time. the an leverage obviously of of not at XXbX-X is low have because share can and

time spending planning probably that some today's us. I window we will for call, be significant and next assume opens get to think it's week safe when once for I through moves the Brent

$XX the to some I expect So million through still to go we XXXX. of time as balance take consume

Operator

Capital Zener KeyBanc Kenneth question Markets. with next comes Our from

open. is line Your

Unidentified Analyst

for This is [Brandon] on Ken, actually.

create a get end touched understand low this is What margin can it just before, guidance? little volume end Is but high if You or trying the can still and your price, sales tied happens you it you pricing? what to of to on target? hit that can't

William Griffiths

mean trickles the I this back now difficulty push food down, home sentiment there will in is But passing Yes. obviously, can will much at but as very of clearly, environment. through, I least. eventually They home but I higher the the get with confident have threshold at will builders consumers chain don't the leverage on volume a important. is it think pricing, through prices we price builders see. have That and think and to the end we're reached some see maybe home lower as we're we

So, we're expansion. to in it hedge confident, an there terms more the of is margin guidance. margin in environment, inflationary get but difficult Clearly, is

Operator

Our Company. Romero next Julio comes Sidoti question from with &

is open. line Your

Julio Romero

So, I on I of XQ there, segment. XX.X% cabinet just wanted with the to the comment the gross Can believe. margins start since you that, I 'XX might out strongest be saw

that just and you for what's can look gross XXXX? So what margins like should about talk driving

William Griffiths

we're improvements through. to of shifting those the with lot two but along, there. the Yes, slow in in business, in invested quarters It's all awful at an we've flowing that been had of resources money as productivity finally I strong we've in more common, same and happening think improvement seeing been We've margin line what's results the marketplace. improvements of product the said into be while look time, mix productivity time

the we've similar as to in portion that quarter. a working go improvement too of expectation we the capital is automatically reduction that know of out craft inventory cause XXXX, reduction the through productivity and these a through before, inventory in and of part improvements see corollary improvement wood we came as to of good you Our operation explained will the fourth a level continue

So sustainability a percentage of together the working of confidence two sales. as us the gives again are the that capital levels and tied

Julio Romero

And you the to you component that's improvement. a volume laid slight bridge going or segment. driver leverage just an another in Components that that of out based that? American North expectation the Is of Can the drive kind improvement expected just on key out for Engineered there is there margin

William Griffiths

volume, mostly in are be the it'll price. passed No, costs leverage inflationary assumption underlying that through with

Julio Romero

just CapEx. then on And

full million. $XX about You year of had

I think million in came the had that little million guys of mentioned kind us. projects. what for initially you some Does of a than that maybe bit $X delayed targeted of $XX the million, Just CapEx reconcile of mentioned was you can $X lower or deployed? million earlier growth $XX you that that only imply hoping year you

William Griffiths

Yes.

we initially CapEx. $XX guided So towards million of

as ongoing $XX And the and we've million to we As say of think the projects investment to I a is pretty a and this we non-recessionary $XX million non-recessionary XXXX. into run - $X reduced because years clearly past $XX rate after guidance in to a of million $X year, year, put commencing about the consistently went close million are we $XX and The right was in are environment. that on could we $XX million three that million - I think said shortfall year delayed did now need really not business. already million through see that that extra to two I the that

Julio Romero

this growth a the guidance? more the guess $XX $XX that to year it little implied in I in $X so million than or imply million, is does for that CapEx million And

William Griffiths

that's Yes, right. about

Julio Romero

million back repurchase, on statement and if left a coming half the here. free strong financial expect in the next then cash and million cash your just one cash is about to me free as the the is it given good $XX repurchase debt flow maybe half? into deployed for have share in think for just pay-down you've last I some year, good prudent usage, back but very And $XX was the the expected you of cash

William Griffiths

be as that's of not expect right loaded, generate as to year, a we will will to our end know, de-lever share that think we're up be often of this first lot you're we consumer as fact in but our the But right, the about cash half That's all in the use million as continue if of authorization and know year. continue we exactly $XX expectation back-end the we buybacks, most to way you the you is, but the it the because cash. well when by year, of could it,

Operator

follow-up is Our from with Securities. next Daniel CJS Moore question a

open. is line Your

Daniel Moore

into quarter and on October do How I kind full-year just guide, around your color out gave know to first think margins, any you to but year relative of first growth quarterly cadence get we of half you don't want about comments kind bouncing the guide? interesting of back. starting the or

William Griffiths

as So, said, was we strong. were - I October

think actually. compared not I aggressive the half around the R&R. think in of new terms from winter into growth are as of beginning levels we're get looks on I and new of November the be mean, make the with September. that was for to year. uncertainty into it I next the do early in now certainly I read too first And, shortfall But particularly slow half of and too decent in recovering the the winter. was much that though wouldn't year, going of first some the up August I to pretty we'll and would holidays high construction. spring construction.

Daniel Moore

relative to it positive growth your least doesn't first coming at But sound negative is expectations. out like the quarter

William Griffiths

At if this be it's point, I shocked would negative.

Operator

for further at now like And I'd Griffiths I'm to Bill CEO, showing remarks. you. back the turn questions over Thank call the to closing no time. this

William Griffiths

in you everyone Thanks Thank everybody joining us Happy to look to talking for forward today. March. you. we and to holidays

Operator

today's participation. Thank your day. for you Ladies Have concludes wonderful a this and gentlemen, conference.

Scott Zuehlke	VP, IR and Treasurer
William Griffiths	Chairman, President and CEO
Brent Korb	CFO
George Wilson	COO
Daniel Moore	CJS Securities
Brian Biros	Thompson Research
Julio Romero	Sidoti & Company

Quanex Building Products (NX) 11 Dec 182018 Q4 Earnings call transcript