Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - Quanex Building Products CORP | d109368d8ka.htm |
| EX-99.1 - EX-99.1 - Quanex Building Products CORP | d109368dex991.htm |
| EX-23.1 - EX-23.1 - Quanex Building Products CORP | d109368dex231.htm |
EXHIBIT 99.2
Unaudited Pro Forma Condensed Consolidated Financial Information
Basis of Presentation
The accompanying unaudited pro forma condensed consolidated balance sheet and statements of income (loss) were prepared based on the historical financial information of Quanex, WII Holding, Inc. and Subsidiaries, and gives effect to the purchase transaction which occurred on November 2, 2015, for $246.3 million in cash, net of cash acquired, subject to customary purchase price adjustments and a working capital adjustment.
We evaluated this acquisition in accordance with the “significance tests” prescribed by the Securities and Exchange Commission Rules, and determined that the acquisition is significant to us. This Current Report on Form 8-K includes the required financial information and the pro forma data required by the Securities and Exchange Commission Rules. In order to prepare the pro forma data, we are incorporating pro forma information provided in an amended Current Report on Form 8-K filed on August 21, 2015 related to another acquisition which was deemed to be significant, the June 15, 2015 acquisition of an extruder of vinyl lineal products and manufacturer of other plastic products (referred to as “HLP”) incorporated and registered in England and Wales. Therefore, our pro forma results related to the Woodcraft acquisition also reflect the pro forma results of the HLP acquisition, as previously reported.
Quanex has a different fiscal year end (October 31) than Woodcraft and HLP (December 31). The unaudited pro forma balance sheet at July 31, 2015, reflects the pro forma effect of the purchase transaction as if the transaction was consummated on that date. The unaudited pro forma condensed consolidated statements of income (loss) for the nine months ended July 31, 2015 and the year ended October 31, 2014 reflect the pro forma effect of the purchase transaction as if the transaction was consummated on November 1, 2013. In order to present a consolidated pro forma balance sheet, we have included the historical balance sheet of Quanex, which was included in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, and reflects the net assets and liabilities associated with the HLP purchase on June 15, 2015, and the unaudited balance sheet for Woodcraft as of September 30, 2015, which was prepared from historical information. To present the pro forma consolidated statement of income (loss) for the nine months ended July 31, 2015, we have included the historical statement of income (loss) for Quanex for the nine months ended July 31, 2015, the pro forma statement of income (loss) for HLP for the period January 1, 2015 through September 30, 2015 (derived from the pro forma data included in the Current Report on Form 8-K/A filed on August 21, 2015 for the period January 1, 2015 through June 15, 2015, plus actual results for the period from June 16, 2015 to September 30, 2015), less actual results for HLP for the period June 16, 2015 through July 31, 2015 (included in the consolidated results of Quanex for the nine months ended July 31, 2015), plus the unaudited statement of income (loss) for Woodcraft for the nine months ended September 30, 2015. In order to present the pro forma consolidated statement of income (loss) for the year ended October 31, 2014, we have included the historical statement of income (loss) of Quanex for the year ended October 31, 2014 which was included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014, and the pro forma statement of income (loss) for HLP (as derived from the Current Report on Form 8-K/A filed on August 21, 2015 by combining the columns titled “Combined Flamstead Group, Year End 12/31/14”, “Entities Not Acquired, Year End 12/31/14”, and “Pro Forma Adjustments, Year End 12/31/14”), and the audited statement of income (loss) for Woodcraft for the year ended December 31, 2014. The accompanying unaudited pro forma condensed consolidated financial information for Quanex should be read in conjunction with the consolidated financial statements and notes thereto included in the referenced filings, and the audited financial statements of Woodcraft accompanying this amended Current Report on Form 8-K/A.
The unaudited pro forma condensed consolidated balance sheet is presented in tabular format as follows: (i) historical consolidated results; (ii) Woodcraft unaudited results; (iii) plus pro forma adjustments, to arrive at the pro forma results. The statement of income (loss) for the nine months ended July 31, 2015 is presented in tabular format as follows: (i) historical consolidated results, as previously filed; (ii) HLP pro forma results; (iii) less HLP results included in (i); (iv) plus Woodcraft results; (v) plus pro forma adjustments, to arrive at the pro forma results. The statement of income (loss) for the year ended October 31, 2014 is presented in tabular format as follows: (i) historical consolidated results, as previously filed; (ii) HLP pro forma results; (iii) Woodcraft historical results; (iv) plus pro forma adjustments, to arrive at pro forma results.
The unaudited pro forma condensed consolidated balance sheet and statements of income (loss) include pro forma adjustments which reflect transactions and events that are directly attributable to the transaction and are factually supportable. These pro forma adjustments are described in the notes which accompany these unaudited pro forma condensed consolidated financial statements.
QUANEX BUILDING PRODUCTS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JULY 31, 2015
| Consolidated As Reported |
Woodcraft |
Pro Forma Adjustments (a) |
Pro Forma | |||||||||||||
| As of 7/31/15 |
As of 9/30/15 |
As of 7/31/15 |
As of 7/31/15 |
|||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 27,011 | $ | 4,754 | $ | — | $ | 31,765 | ||||||||
| Accounts receivable, net |
62,523 | 23,025 | — | 85,548 | ||||||||||||
| Inventories, net |
72,948 | 28,767 | 1,148 | 102,863 | ||||||||||||
| Deferred income taxes |
18,508 | 1,825 | — | 20,333 | ||||||||||||
| Prepaid and other current assets |
8,576 | 867 | — | 9,443 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total current assets |
189,566 | 59,238 | 1,148 | 249,952 | ||||||||||||
| Property, plant and equipment, net |
140,549 | 41,596 | 23,077 | 205,222 | ||||||||||||
| Goodwill |
130,861 | 95,641 | (5,364 | ) | 221,138 | |||||||||||
| Intangible assets, net |
124,502 | 182 | 103,818 | 228,502 | ||||||||||||
| Other assets |
7,302 | 1,438 | 8,525 | 17,265 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 592,780 | $ | 198,095 | $ | 131,204 | $ | 922,079 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: |
||||||||||||||||
| Accounts payable |
$ | 45,712 | $ | 4,871 | $ | — | $ | 50,583 | ||||||||
| Accrued liabilities |
32,250 | 10,058 | 15,545 | 57,853 | ||||||||||||
| Income tax payable |
150 | — | — | 150 | ||||||||||||
| Current maturities of long-term debt |
9,468 | 5,190 | (5,190 | ) | 9,468 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total current liabilities |
87,580 | 20,119 | 10,355 | 118,054 | ||||||||||||
| Long-term debt |
82,575 | 108,635 | 142,463 | 333,673 | ||||||||||||
| Deferred pension and postretirement benefits |
6,621 | — | — | 6,621 | ||||||||||||
| Liability for uncertain tax positions |
548 | — | — | 548 | ||||||||||||
| Long-term deferred tax liabilities |
6,605 | 4,102 | 50,301 | 61,008 | ||||||||||||
| Other liabilities |
21,811 | 344 | — | 22,155 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
205,740 | 133,200 | 203,119 | 542,059 | ||||||||||||
| Commitments and contingencies |
||||||||||||||||
| Stockholders’ equity |
387,040 | 64,895 | (71,915 | ) | 380,020 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities and stockholders’ equity |
$ | 592,780 | $ | 198,095 | $ | 131,204 | $ | 922,079 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
QUANEX BUILDING PRODUCTS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED JULY 31, 2015
| Consolidated As Reported YTD 7/31/15 |
HLP Pro Forma YTD 9/30/15 |
Exclude HLP Amounts in Quanex Consoli- dated |
Woodcraft Unaudited YTD 9/30/15 |
Pro Forma Adjustments(a) |
Pro Forma | |||||||||||||||||||
| Nine Months Ended 7/31/15 |
Nine Months Ended 9/30/15 |
Period 6/16/15 to 7/31/15 |
Nine Months Ended 9/30/15 |
Nine Months Ended 9/30/15 |
Nine Months Ended 7/31/15 |
|||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||
| Net sales |
$ | 450,069 | $ | 75,669 | $ | (14,220 | ) | $ | 177,034 | $ | — | $ | 688,552 | |||||||||||
| Cost and expenses: |
||||||||||||||||||||||||
| Cost of sales (exclusive of items shown separately below) |
353,469 | 50,999 | (12,550 | ) | 144,429 | 1,052 | (b) | 537,399 | ||||||||||||||||
| Selling, general and administrative |
64,157 | 9,184 | (1,752 | ) | 9,803 | (4,433 | )(c) | 76,959 | ||||||||||||||||
| Depreciation and amortization |
24,541 | 5,577 | (746 | ) | 4,170 | 6,931 | (d) | 40,473 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income (loss) |
7,902 | 9,909 | 828 | 18,632 | (3,550 | ) | 33,721 | |||||||||||||||||
| Non-operating income (expense): |
||||||||||||||||||||||||
| Interest income (expense) |
(624 | ) | (963 | ) | (58 | ) | (4,667 | ) | (6,866 | )(e) | (13,178 | ) | ||||||||||||
| Other, net |
300 | 692 | 49 | 323 | 789 | (f) | 2,153 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income (loss) before income taxes |
7,578 | 9,638 | 819 | 14,288 | (9,627 | ) | 22,696 | |||||||||||||||||
| Income tax benefit (expense) |
(1,907 | ) | (1,365 | ) | (295 | ) | (5,476 | ) | 3,369 | (g) | (5,674 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) from continuing operations |
$ | 5,671 | $ | 8,273 | $ | 524 | $ | 8,812 | $ | (6,258 | ) | $ | 17,022 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Earnings(loss) per common share: | ||||||||||||||||||||||||
| Basic |
$ | 0.17 | $ | 0.50 | ||||||||||||||||||||
| Diluted |
$ | 0.17 | $ | 0.49 | ||||||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||||||
| Basic |
34,111 | 34,111 | ||||||||||||||||||||||
| Diluted |
34,626 | 34,626 | ||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
QUANEX BUILDING PRODUCTS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED OCTOBER 31, 2014
| Consolidated As Reported |
HLP Pro Forma |
Woodcraft | Pro Forma Adjustments(a) |
Pro Forma | ||||||||||||||||
| Year Ended 10/31/14 |
Year Ended 12/31/14 |
Year Ended 12/31/14 |
Year Ended 10/31/14 |
Year Ended 10/31/14 |
||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| Net sales |
$ | 595,384 | $ | 96,106 | $ | 238,261 | $ | — | $ | 929,751 | ||||||||||
| Cost and expenses: |
||||||||||||||||||||
| Cost of sales (exclusive of items shown separately below) |
464,584 | 68,632 | 197,793 | (474 | )(b) | 730,535 | ||||||||||||||
| Selling, general and administrative |
82,150 | 11,893 | 11,909 | — | 105,952 | |||||||||||||||
| Depreciation and amortization |
33,869 | 6,355 | 5,882 | 9,241 | (d) | 55,347 | ||||||||||||||
| Asset impairment charges |
505 | — | — | — | 505 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
14,276 | 9,226 | 22,677 | (8,767 | ) | 37,412 | ||||||||||||||
| Non-operating income (expense): |
||||||||||||||||||||
| Interest income (expense) |
(562 | ) | (2,078 | ) | (10,213 | ) | (8,730 | )(e) | (21,583 | ) | ||||||||||
| Other, net |
92 | 5,719 | (206 | ) | 1,547 | (f) | 7,152 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income (loss) before income taxes |
13,806 | 12,867 | 12,258 | (15,950 | ) | 22,981 | ||||||||||||||
| Income tax benefit (expense) |
(5,468 | ) | (3,142 | ) | (4,280 | ) | 5,583 | (g) | (7,307 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
$ | 8,338 | $ | 9,725 | $ | 7,978 | $ | (10,367 | ) | $ | 15,674 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Earnings (loss) per common share: | ||||||||||||||||||||
| Basic |
$ | 0.22 | $ | 0.42 | ||||||||||||||||
| Diluted |
$ | 0.22 | $ | 0.42 | ||||||||||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||||||
| Basic |
37,128 | 37,128 | ||||||||||||||||||
| Diluted |
37,679 | 37,679 | ||||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or statements of income (loss):
| (a) | The unaudited pro forma condensed consolidated balance sheet at July 31, 2015 presents the preliminary purchase price allocation for the Woodcraft purchase reflecting consideration paid of $246.3 million, net of cash acquired, resulting in goodwill of approximately $90.3 million, customer relationship intangible asset of approximately $104.0 million, long-term deferred tax liabilities of $54.4 million and certain working capital changes. The funding reflects debt borrowings of $251.1 million, net of discount of $6.2 million, less amounts outstanding under Woodcraft’s existing credit facilities (incremental debt of approximately $137.3 million at September 30, 2015). In addition, the unaudited pro forma condensed consolidated balance sheet includes an adjustment to record accrued liabilities of $15.5 million, of which $8.5 million relates to deferred financing fees associated with financing the Woodcraft acquisition (with an offsetting long-term asset) and $7.0 million of direct transaction fees, which reduce stockholder’s equity. Inventory step-up to fair value of $1.3 million is partially offset by the reversal of an inventory reserve (described at (b) below). The unaudited pro forma condensed consolidated statements of income (loss) presented excludes estimated transaction fees and the impact of the step-up of inventory to fair value related to the Woodcraft and HLP transactions. These items are not deemed to have a continuing impact to the ongoing operations of Quanex. |
| (b) | This adjustment removes the effect of adjustments related to the last-in, first-out (LIFO) inventory valuation reserve at Woodcraft. The inventories will be accounted for using first-in, first-out (FIFO) post-acquisition. |
| (c) | This adjustment represents $3.7 million of direct transaction-related costs associated with the HLP acquisition which were expensed as part of the consolidated results of Quanex for the nine months ended July 31, 2015, and $0.7 million of direct expenses incurred by Woodcraft associated with the Woodcraft acquisition. These expenses have been removed as the costs are not deemed to have a continuing impact on the ongoing operations of Quanex. |
| (d) | Incremental depreciation and amortization expense is associated with the $23.1 million step-up of fixed assets (assumes a 10 year life, straight-line) to fair value and the definite-term intangible assets identified at the date of the acquisition of $103.8 million (assumes a 15 year life, straight-line), assuming the transaction occurred on the first day of each of the respective reporting periods. |
| (e) | Incremental interest expense has been calculated based on an increase in debt of $134.0 million and $127.4 million for the nine months ended September 30, 2015 and the year ended October 31, 2014, respectively, applying our incremental borrowing rate (6.44%), as well as amortization of the debt discount at the applicable rate. Amortization of non-recurring deferred financing fees has been excluded from the statement of income (loss) pro forma presentation. The calculation assumes the transaction occurred on the first day of each of the respective reporting periods. A 1⁄8th percent change in the rate used to calculate pro forma interest expense on incremental debt would increase or decrease the pre-tax pro forma interest amount by $0.8 million and $1.1 million, respectively, for the nine months ended September 30, 2015 and the year ended December 31, 2014. |
| (f) | This adjustment relates to applying the functional currency for Woodcraft’s Mexican operation as the United States dollar. Amounts which had previously been included in accumulated other comprehensive income are presented as foreign exchange gains or losses. |
| (g) | This adjustment represents the tax effect associated with the pro forma adjustments referenced above applying the United States statutory rate of 35%. |