Quanex Building Products (US:NX)2023-03-09 16:00Financial Performance - Net sales for the three months ended January 31, 2023, were $261,916, a decrease of 1.4% from $267,040 in the same period of 2022[11]. - Operating income decreased significantly to $4,403, down 68.9% from $14,126 year-over-year[11]. - Net income for the quarter was $1,909, a decline of 83.0% compared to $11,239 in the prior year[11]. - Comprehensive income for the quarter was $13,281, compared to $8,080 in the same quarter of 2022, indicating an increase of 64.3%[13]. - The company reported a foreign currency translation gain of $11,372 for the quarter, contrasting with a loss of $3,159 in the prior year[13]. - For the three months ended January 31, 2023, net sales were $261.9 million, a decrease of 1.4% compared to $267.0 million for the same period in 2022[34]. - Operating income for the three months ended January 31, 2023, was $4.403 million, down from $14.126 million in the prior year, indicating a 68.9% decrease[100]. - The company recorded a net income of $1.909 million for the three months ended January 31, 2023, compared to $11.239 million for the same period in 2022, representing an 83.0% decline[100]. Assets and Liabilities - Total assets increased to $827,026 as of January 31, 2023, up 14.2% from $724,617 at October 31, 2022[9]. - Long-term debt rose to $151,682, a substantial increase from $29,628 in the previous year[9]. - Cash and cash equivalents decreased to $43,055 from $55,093, reflecting a decline of 22.0%[9]. - Total lease assets increased to $103,219,000 as of January 31, 2023, from $78,003,000 as of October 31, 2022, representing a 32.3% increase[48]. - Total lease liabilities rose to $102,021,000 as of January 31, 2023, compared to $76,165,000 as of October 31, 2022, marking a 34.0% increase[48]. - Long-term debt increased significantly to $151,682,000 as of January 31, 2023, from $29,628,000 as of October 31, 2022, reflecting a 411.5% increase[53]. Cash Flow and Investments - Cash provided by operating activities was $3,135, a recovery from cash used of $(21,651) in the same period last year[16]. - The company made a business acquisition costing $92,000 during the quarter, impacting cash used in investing activities significantly[16]. - Cash provided by operating activities increased by $24.8 million, reaching $3.1 million for the three months ended January 31, 2023, compared to a cash outflow of $21.7 million in the prior year[145]. - Cash used for investing activities increased by $92.1 million, primarily due to the acquisition of LMI[146]. - Cash provided by financing activities was $83.3 million, including $86.4 million of net borrowings of long-term debt[147]. - As of January 31, 2023, the company had $43.1 million in cash and equivalents and $219.9 million available under the credit facility[141]. Acquisitions and Goodwill - The company acquired LMI Custom Mixing for $92 million in cash, with net sales from LMI contributing $16.5 million and operating income of $2.0 million since the acquisition[37]. - The preliminary purchase price allocation for LMI includes $42.1 million in goodwill and $19.5 million in intangible assets, reflecting the strategic value of the acquisition[39]. - The acquisition of LMI contributed $42.091 million to the goodwill balance, increasing the total goodwill to $184.706 million as of January 31, 2023[99]. Market Conditions and Forecasts - The NAHB forecasts housing starts to be 1.1 million in 2023, indicating a potential slowdown in the housing market[119]. - Ducker's forecast predicts a 5.7% decrease in total window shipments for 2023, reflecting weaker market demand[119]. - The ongoing geopolitical tensions and inflationary pressures are expected to impact commodity prices and operational costs[114]. Expenses and Cost Management - Selling, general and administrative expenses decreased by $1.1 million, or 8%, for the three months ended January 31, 2023, attributed to lower labor costs[126]. - Cost of sales increased by $8.8 million, or 8%, primarily due to inflation in raw materials and the inclusion of LMI's cost of sales[125]. - Depreciation and amortization expense increased by $1.1 million, or 27%, primarily due to the acquisition of LMI's property and equipment[127]. Tax and Compensation - The effective tax rate from continuing operations for the three months ended January 31, 2023, was 19.18%, compared to 17.70% for the same period in 2022[63]. - The company has a liability for uncertain tax positions (UTP) of $1.4 million related to U.S. federal and state tax items as of January 31, 2023[64]. - The total unrecognized compensation cost related to unamortized restricted stock awards was $3.7 million as of January 31, 2023, expected to be recognized over a remaining weighted average vesting period of 2.3 years[79]. Internal Controls and Compliance - There have been no changes in internal controls over financial reporting that materially affect the company, except for the internal controls of LMI acquired on November 1, 2022[162]. - Management is currently evaluating internal control procedures for LMI to comply with the Sarbanes-Oxley Act of 2002 by October 31, 2023[162].