Exhibit 99.1
Foundation Building Materials Announces Third Quarter 2018 Results and Provides Full Year 2018 and 2019 Guidance
2018 Third Quarter Highlights
| • | Record net sales of $542.3 million from continuing operations, an increase of 15.9% compared to the prior year period |
| • | Base business net sales of $472.1 million from continuing operations, an increase of 12.5% compared to the prior year period |
| • | Entered into definitive agreement to sell the Mechanical Insulation segment for $122.5 million, expected net proceeds of $116.0 million will be used to pay down debt |
| • | Completed refinance of Senior Secured Notes; expected to save $12.0 million to $15.0 million per year in cash interest |
| • | Net loss of $37.6 million from continuing operations; loss per share of $0.88; net loss primarily due to loss of $58.5 million related to refinancing of debt |
| • | Adjusted net income(1) of $8.2 million and adjusted earnings per share(1) of $0.19 |
| • | Adjusted EBITDA(1) of $43.7 million from continuing operations, an increase of 20.3% compared to the prior year period; Adjusted EBITDA margin(1) of 8.1% compared to 7.8% in the prior year period |
Tustin, CA, November 1, 2018 (Business Wire) - Foundation Building Materials, Inc. (the "Company") (NYSE: FBM), one of the largest specialty building product distributors of wallboard, suspended ceiling systems and metal framing in North America, today reported third quarter 2018 financial results and provided updated full year 2018 and full year 2019 financial guidance.
“We delivered strong third-quarter results highlighted by year-over-year net sales growth of 15.9% and base business growth of 12.5%,” said Ruben Mendoza, President and CEO. “Our record results demonstrate the on-going strength of our non-residential construction and commercial repair and remodel markets.”
On September 26, 2018, the Company entered into a definitive agreement to sell its mechanical insulation business. The previously reported amounts for the mechanical insulation segment have now been reclassified as discontinued operations. Our continuing operations now consist of what was previously reported as the Specialty Building Products segment. The transaction is expected to close during the fourth quarter of 2018.
The discussion below represents our continuing operations, unless otherwise noted.
2018 Third Quarter Results
Net sales for the three months ended September 30, 2018, were $542.3 million compared to $467.9 million for the three months ended September 30, 2017, representing an increase of $74.4 million, or 15.9%. Net sales from base business branches contributed $52.3 million, or 12.5%, of the increase which was driven by strong commercial activity, price increases and product expansion into new geographic markets. Net sales from acquired branches and existing branches that were strategically combined contributed $22.1 million of the increase.
Gross profit for the three months ended September 30, 2018, was $154.0 million compared to $135.9 million for the three months ended September 30, 2017, representing an increase of $18.2 million, or 13.4%. The increase in gross profit was primarily due to the increase in net sales. Gross margin for the three months ended September 30, 2018, was 28.4% compared to 29.0% for the three months ended September 30, 2017. The decrease in gross margin was primarily due to higher product costs.
(1) Adjusted net income, Adjusted earnings per share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “Non-GAAP (Generally Accepted Accounting Principles) Financial Measures” section below for a discussion of how the Company defines and calculates this measure, why the Company believes it is important, and a reconciliation thereof to the most directly comparable GAAP measure.
Selling, general and administrative, or SG&A, expenses for the three months ended September 30, 2018, were $113.3 million compared to $102.3 million for the three months ended September 30, 2017, representing an increase of $11.0 million, or 10.8%. As a percentage of net sales, SG&A expenses were 20.9% for the three months ended September 30, 2018, compared to 21.9% for the three months ended September 30, 2017. Excluding non-recurring adjustments of $3.0 million and $2.5 million for the three months ended September 30, 2018 and 2017, respectively, SG&A expenses as a percentage of net sales for the three months ended September 30, 2018, were 20.3% compared to 21.3% for the three months ended September 30, 2017. The decrease in SG&A expenses as a percentage of net sales was due to our continued focus on operating efficiencies, cost reduction initiatives and leveraging costs with the increase in net sales.
In August 2018, the Company completed the refinancing of its $575 million Senior Secured Notes. The refinancing resulted in a loss of $58.5 million consisting primarily of a write off of deferred financing costs and original issuance discounts and a prepayment premium. The Company expects to save $12.0 million to $15.0 million in cash interest on an annual basis.
Net loss for the three months ended September 30, 2018, was $37.6 million, or $0.88 per share, compared to net income of $0.1 million, or $0.00 per share for the three months ended September 30, 2017. Adjusted net income(1) for the three months ended September 30, 2018, was $8.2 million, or $0.19 per share, an increase of $6.4 million compared to an Adjusted net income(1) of $1.9 million, or $0.04 per share, for the three months ended September 30, 2017.
Adjusted EBITDA(1) was $43.7 million and Adjusted EBITDA margin(1) was 8.1% for the three months ended September 30, 2018, compared to Adjusted EBITDA(1) of $36.4 million and Adjusted EBITDA margin(1) of 7.8% for the three months ended September 30, 2017.
2018 Year-To-Date Results
Net sales for the nine months ended September 30, 2018, were $1,528.2 million compared to $1,346.4 million for the nine months ended September 30, 2017, representing an increase of $181.7 million, or 13.5%. Net sales from base business branches contributed $95.1 million, or 7.6%, of the increase which was driven by strong commercial activity, price increases and product expansion into new geographic markets. Net sales from acquired branches and existing branches that were strategically combined contributed $86.6 million of the increase.
Gross profit for the nine months ended September 30, 2018, was $434.7 million compared to $389.0 million for the nine months ended September 30, 2017, representing an increase of $45.7 million, or 11.7%. The increase in gross profit was primarily due to the increase in net sales. Gross margin for the nine months ended September 30, 2018, was 28.4% compared to 28.9% for the nine months ended September 30, 2017. The decrease in gross margin was primarily due to higher product costs.
SG&A expenses for the nine months ended September 30, 2018, were $328.1 million compared to $299.3 million for the nine months ended September 30, 2017, representing an increase of $28.8 million, or 9.6%. As a percentage of net sales, SG&A expenses were 21.5% for the nine months ended September 30, 2018 compared to 22.2% for the nine months ended September 30, 2017. Excluding non-recurring adjustments of $6.9 million and $11.1 million, respectively, SG&A expenses as a percentage of net sales for the nine months ended September 30, 2018 were 21.0% compared to 21.4% for the nine months ended September 30, 2017. The decrease in SG&A expenses as a percentage of net sales was due to our continued focus on operating efficiencies, cost reduction initiatives and leveraging costs with the increase in net sales.
Net loss for the nine months ended September 30, 2018, was $38.3 million, or $0.89 per share, compared to net income of $3.1 million, or $0.08 per share for the nine months ended September 30, 2017. Adjusted net income(1) for the nine months ended September 30, 2018, was $10.6 million, or $0.25 per share, an increase of $8.1 million compared to an Adjusted net income(1) of $2.5 million, or $0.06 per share, for the nine months ended September 30, 2017.
Adjusted EBITDA(1) was $114.0 million and Adjusted EBITDA margin(1) was 7.5% for the nine months ended September 30, 2018, compared to Adjusted EBITDA(1) of $102.0 million and Adjusted EBITDA margin(1) of 7.6% for the nine months ended September 30, 2017.
Acquisitions and Greenfield Branches
On October 1, 2018, the Company completed the acquisition of Agan Drywall Supply and its related companies ("Agan"), adding three additional branches serving the South Dakota and Iowa markets. For the fourth quarter of 2018, Agan is expected to contribute $5.0 million to $7.0 million to net sales. Through November 1, 2018, the Company has completed four acquisitions totaling 16 branches with
(1) Adjusted net income, Adjusted earnings per share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “Non-GAAP (Generally Accepted Accounting Principles) Financial Measures” section below for a discussion of how the Company defines and calculates this measure, why the Company believes it is important, and a reconciliation thereof to the most directly comparable GAAP measure.
combined annualized net sales in excess of $130.0 million. The Company expects to continue to supplement organic growth with strategic acquisitions.
As of September 30, 2018, the Company has opened four specialty building products greenfield branches and expects to open one to two more branches by the end of 2018, for a total of five to six branches. These greenfield branches are projected to yield high returns on invested capital within the first few years of startup. They also serve to further leverage the Company’s national scale, increase the Company’s market share, generate economies of scale and support the Company’s organic growth.
2018 and 2019 Outlook for Continuing Operations
For 2018, the Company expects full year net sales to be in the range of $2.0 billion to $2.06 billion. The Company expects Adjusted EBITDA margin(2) for full year 2018 to be between 7.3% and 7.5%, with expected full year 2018 Adjusted EBITDA(2) of $146.0 million to $150.0 million. These expected results include anticipated contributions from acquisitions and greenfield branches.
For 2019, the Company expects full year net sales to be in the range of $2.10 billion to $2.25 billion. The Company expects Adjusted EBITDA margin(2) for full year 2019 to be between 7.6% and 8.0%, with expected full year 2019 Adjusted EBITDA(2) of $160.0 million to $180.0 million. These expected results include anticipated contributions from acquisitions and greenfield branches.
Third Quarter Earnings Release and Conference Call
In conjunction with this release, the Company will host a conference call today, Thursday, November 1, 2018, at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, and John Moten, Vice President Investor Relations, will host the call.
The call can be accessed three ways:
| • | At the FBM website: www.fbmsales.com in the Investors section of the Company’s website; |
| • | By telephone: For both listen only participants and those who wish to take part in the question and answer portion of the call, the telephone dial-in number in the U.S. is (855) 327-6837. For participation outside the U.S., the dial-in number is (631) 891-4304; and |
| • | Audio Replay: A replay of the call will be available beginning at 11:30 AM Eastern Time on Thursday, November 1, 2018, and ending 11:59 PM Eastern Time November 8, 2018. Dial-in numbers for U.S. based participants are (844) 512-2921. Participants outside the U.S. should use the replay dial-in number of (412) 317-6671. All callers will be required to provide the Conference ID of 10005665 |
About Foundation Building Materials
Foundation Building Materials, Inc. is a specialty building products distributor of wallboard, suspended ceiling systems, and metal framing throughout North America. Based in Tustin, California, the Company employs more than 3,400 people and operates more than 170, branches across the U.S. and Canada.
Forward-Looking Statements
This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” or words or phrases with similar meaning. Forward-looking statements contained in this press release relate to, among other things, the Company’s projected financial performance, including cash interest savings, and operating results, including net sales, Adjusted EBITDA and Adjusted EBITDA margin, and the Company’s strategic plans and objectives including acquisitions and greenfields. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on our management’s current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of the Company’s control, that may cause the Company’s business, strategy or actual results to differ materially from the forward-looking statements. The Company does not intend, and undertakes no obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Investors are referred to the Company’s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.
(2) Adjusted net income, Adjusted earnings per share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “Non-GAAP (Generally Accepted Accounting Principles) Financial Measures” section below for a discussion of how the Company defines and calculates this measure and why the Company believes it is important.
Contact Information:
Investor Relations:
John Moten
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com
Media Relations:
Joele Frank, Wilkinson Brimmer Katcher
Jed Repko or Ed Trissel
212-355-4449
- Financial Tables Follow -
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(in thousands, except share and per share data)
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Net sales | | $ | 542,273 | | | $ | 467,891 | | | $ | 1,528,153 | | | $ | 1,346,441 | |
Cost of goods sold | | | 388,236 | | | | 332,008 | | | | 1,093,412 | | | | 957,404 | |
Gross profit | | | 154,037 | | | | 135,883 | | | | 434,741 | | | | 389,037 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 113,279 | | | | 102,259 | | | | 328,088 | | | | 299,298 | |
Depreciation and amortization | | | 19,771 | | | | 18,234 | | | | 56,922 | | | | 52,662 | |
Total operating expenses | | | 133,050 | | | | 120,493 | | | | 385,010 | | | | 351,960 | |
Income from operations | | | 20,987 | | | | 15,390 | | | | 49,731 | | | | 37,077 | |
Loss on extinguishment of debt | | | (58,475 | ) | | | - | | | | (58,475 | ) | | | - | |
Interest expense | | | (12,576 | ) | | | (15,054 | ) | | | (43,028 | ) | | | (45,147 | ) |
Other (expense) income, net | | | (8 | ) | | | 25 | | | | 126 | | | | 13,424 | |
(Loss) income before income taxes | | | (50,072 | ) | | | 361 | | | | (51,646 | ) | | | 5,354 | |
Income tax (benefit) expense | | | (12,519 | ) | | | 239 | | | | (13,299 | ) | | | 2,205 | |
(Loss) income from continuing operations | | | (37,553 | ) | | | 122 | | | | (38,347 | ) | | | 3,149 | |
Income from discontinued operations, net of tax | | | 2,772 | | | | 1,277 | | | | 7,913 | | | | 3,439 | |
Net (loss) income | | $ | (34,781 | ) | | $ | 1,399 | | | $ | (30,434 | ) | | $ | 6,588 | |
| | | | | | | | | | | | | | | | |
(Loss) earnings per share data: | | | | | | | | | | | | | | | | |
(Loss) earnings from continuing operations per share - basic | | $ | (0.88 | ) | | $ | 0.00 | | | $ | (0.89 | ) | | $ | 0.08 | |
(Loss) earnings from continuing operations per share - diluted | | $ | (0.88 | ) | | $ | 0.00 | | | $ | (0.89 | ) | | $ | 0.08 | |
| | | | | | | | | | | | | | | | |
Earnings from discontinued operations per share - basic | | $ | 0.07 | | | $ | 0.03 | | | $ | 0.18 | | | $ | 0.08 | |
Earnings from discontinued operations per share - diluted | | $ | 0.07 | | | $ | 0.03 | | | $ | 0.18 | | | $ | 0.08 | |
| | | | | | | | | | | | | | | | |
(Loss) earnings per share - basic | | $ | (0.81 | ) | | $ | 0.03 | | | $ | (0.71 | ) | | $ | 0.16 | |
(Loss) earnings per share - diluted | | $ | (0.81 | ) | | $ | 0.03 | | | $ | (0.71 | ) | | $ | 0.16 | |
| | | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 42,894,474 | | | | 42,865,407 | | | | 42,889,430 | | | | 41,021,808 | |
Diluted | | | 42,917,230 | | | | 42,870,391 | | | | 42,905,273 | | | | 41,023,935 | |
| | | | | | | | | | | | | | | | |
Comprehensive (loss) income: | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (34,781 | ) | | $ | 1,399 | | | $ | (30,434 | ) | | $ | 6,588 | |
Foreign currency translation adjustment | | | 1,481 | | | | 3,037 | | | | (2,724 | ) | | | 5,695 | |
Unrealized (loss) gain on derivative, net of taxes of $0.5 million and $1.0 million, respectively and $0.5 million and $1.9 million, respectively | | | (1,420 | ) | | | (1,647 | ) | | | 839 | | | | (3,047 | ) |
Total other comprehensive income (loss) | | | 61 | | | | 1,390 | | | | (1,885 | ) | | | 2,648 | |
Total comprehensive (loss) income | | $ | (34,720 | ) | | $ | 2,789 | | | $ | (32,319 | ) | | $ | 9,236 | |
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
| | September 30, 2018 | | | December 31, 2017 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 10,560 | | | $ | 12,101 | |
Accounts receivable—net of allowance for doubtful accounts of $3,297 and $3,494, respectively | | | 316,290 | | | | 238,091 | |
Other receivables | | | 50,808 | | | | 55,487 | |
Inventories | | | 158,766 | | | | 148,246 | |
Prepaid expenses and other current assets | | | 12,304 | | | | 11,785 | |
Current assets held for sale | | | 128,188 | | | | 82,948 | |
Total current assets | | | 676,916 | | | | 548,658 | |
Property and equipment, net | | | 153,386 | | | | 144,524 | |
Intangible assets, net | | | 145,379 | | | | 164,536 | |
Goodwill | | | 481,260 | | | | 452,728 | |
Other assets | | | 6,928 | | | | 5,604 | |
Noncurrent assets held for sale | | | - | | | | 38,220 | |
Total assets | | $ | 1,463,869 | | | $ | 1,354,270 | |
Liabilities and stockholders' equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 130,169 | | | $ | 134,460 | |
Accrued payroll and employee benefits | | | 25,777 | | | | 17,920 | |
Accrued taxes | | | 11,775 | | | | 7,003 | |
Tax receivable agreement | | | 15,892 | | | | 15,892 | |
Current portion of term loan | | | 3,375 | | | | - | |
Other current liabilities | | | 22,995 | | | | 37,270 | |
Current liabilities held for sale | | | 26,599 | | | | 29,733 | |
Total current liabilities | | | 236,582 | | | | 242,278 | |
Asset-based revolving credit facility | | | 305,704 | | | | 47,486 | |
Long-term debt, net | | | 438,841 | | | | 534,379 | |
Tax receivable agreement | | | 119,912 | | | | 119,912 | |
Deferred income taxes, net | | | 5,200 | | | | 17,912 | |
Other liabilities | | | 9,545 | | | | 12,657 | |
Noncurrent liabilities held for sale | | | - | | | | 982 | |
Total liabilities | | | 1,115,784 | | | | 975,606 | |
Commitments and contingencies | | | | | | | | |
| | | | | | | | |
Stockholders' equity: | | | | | | | | |
Preferred stock, $0.001 par value, authorized 10,000,000 shares; 0 shares issued | | | — | | | | — | |
Common stock, $0.001 par value, authorized 190,000,000 shares; 42,894,965 and 42,865,407 shares issued, respectively | | | 13 | | | | 13 | |
Additional paid-in capital | | | 331,667 | | | | 330,113 | |
Retained earnings | | | 15,936 | | | | 46,184 | |
Accumulated other comprehensive income | | | 469 | | | | 2,354 | |
Total stockholders' equity | | | 348,085 | | | | 378,664 | |
Total liabilities and stockholders' equity | | $ | 1,463,869 | | | $ | 1,354,270 | |
FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN
(UNAUDITED)
| | Three Months Ended September 30, | | | Change | |
| | 2018 | | | 2017 | | | $ | | | % | |
(dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | |
Wallboard (1) | | $ | 203,991 | | | | 37.6 | % | | $ | 179,362 | | | | 38.3 | % | | $ | 24,629 | | | | 13.7 | % |
Suspended ceiling systems | | | 104,422 | | | | 19.3 | % | | | 91,933 | | | | 19.6 | % | | | 12,489 | | | | 13.6 | % |
Metal framing | | | 98,576 | | | | 18.2 | % | | | 71,420 | | | | 15.3 | % | | | 27,156 | | | | 38.0 | % |
Complementary and other products | | | 135,284 | | | | 24.9 | % | | | 125,176 | | | | 26.8 | % | | | 10,108 | | | | 8.1 | % |
Total net sales | | $ | 542,273 | | | | 100.0 | % | | $ | 467,891 | | | | 100.0 | % | | $ | 74,382 | | | | 15.9 | % |
Total gross profit | | $ | 154,037 | | | | | | | $ | 135,883 | | | | | | | $ | 18,154 | | | | 13.4 | % |
Total gross margin | | | 28.4 | % | | | | | | | 29.0 | % | | | | | | | (0.6 | )% | | | | |
(1) | For the three months ended September 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation. |
| | Nine Months Ended September 30, | | | Change | |
| | 2018 | | | 2017 | | | $ | | | % | |
(dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | |
Wallboard (1) | | $ | 583,242 | | | | 38.2 | % | | $ | 528,556 | | | | 39.3 | % | | $ | 54,686 | | | | 10.3 | % |
Suspended ceiling systems | | | 288,356 | | | | 18.9 | % | | | 247,921 | | | | 18.4 | % | | $ | 40,435 | | | | 16.3 | % |
Metal framing | | | 264,019 | | | | 17.3 | % | | | 212,486 | | | | 15.8 | % | | $ | 51,533 | | | | 24.3 | % |
Complementary and other products | | | 392,536 | | | | 25.7 | % | | | 357,478 | | | | 26.5 | % | | $ | 35,058 | | | | 9.8 | % |
Total net sales | | $ | 1,528,153 | | | | 100.0 | % | | $ | 1,346,441 | | | | 100.0 | % | | $ | 181,712 | | | | 13.5 | % |
Total gross profit | | | 434,741 | | | | | | | | 389,037 | | | | | | | $ | 45,704 | | | | 11.7 | % |
Total gross margin | | | 28.4 | % | | | | | | | 28.9 | % | | | | | | | (0.5 | )% | | | | |
(1) | For the nine months ended September 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation. |
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES (UNAUDITED)
| | Three Months Ended September 30, | | | Change | |
| | 2018 | | | 2017 | | | $ | | | % | |
(dollars in thousands) | | | | | | | | | | | | | | | | |
Base business (1) | | $ | 472,116 | | | $ | 419,823 | | | $ | 52,293 | | | | 12.5 | % |
Acquired and combined (2) | | | 70,157 | | | | 48,068 | | | | 22,089 | | | | 46.0 | % |
Net sales | | $ | 542,273 | | | $ | 467,891 | | | $ | 74,382 | | | | 15.9 | % |
(1) | Represents net sales from branches that were owned by us since January 1, 2017 and branches that were opened by us during such period. |
(2) | Represents branches acquired and existing branches combined with acquired branches after January 1, 2017. |
| | Nine Months Ended September 30, | | | Change | |
| | 2018 | | | 2017 | | | $ | | | % | |
(dollars in thousands) | | | | | | | | | | | | | | | | |
Base business (1) | | $ | 1,339,918 | | | $ | 1,244,778 | | | $ | 95,140 | | | | 7.6 | % |
Acquired and combined (2) | | | 188,235 | | | | 101,663 | | | | 86,572 | | | | 85.2 | % |
Net sales | | $ | 1,528,153 | | | $ | 1,346,441 | | | $ | 181,712 | | | | 13.5 | % |
(1) | Represents net sales from branches that were owned by us since January 1, 2017 and branches that were opened by us during such period. |
(2) | Represents branches acquired and existing branches combined with acquired branches after January 1, 2017. |
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY PRODUCT
(UNAUDITED)
| | Three Months Ended September 30, 2017 | | | Base Business Net Sales Change | | | Acquired and Combined Net Sales Change | | | Three Months Ended September 30, 2018 | | | Total Net Sales % Change | | | | Base Business Net Sales % Change (1) | | | Acquired and Combined Net Sales % Change (2) | |
(dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Wallboard (3) | | $ | 179,362 | | | $ | 13,766 | | | $ | 10,863 | | | $ | 203,991 | | | | 13.7 | % | | | | 8.5 | % | | | 61.3 | % |
Suspended ceiling systems | | | 91,933 | | | | 7,168 | | | | 5,321 | | | | 104,422 | | | | 13.6 | % | | | | 8.7 | % | | | 55.1 | % |
Metal framing | | | 71,420 | | | | 21,938 | | | | 5,218 | | | | 98,576 | | | | 38.0 | % | | | | 33.8 | % | | | 79.6 | % |
Complementary and other products | | | 125,176 | | | | 9,421 | | | | 687 | | | | 135,284 | | | | 8.1 | % | | | | 8.5 | % | | | 4.9 | % |
Total net sales | | $ | 467,891 | | | $ | 52,293 | | | $ | 22,089 | | | $ | 542,273 | | | | 15.9 | % | | | | 12.5 | % | | | 46.0 | % |
Average daily net sales | | $ | 7,547 | | | $ | 830 | | | $ | 351 | | | $ | 8,608 | | | | 14.1 | % | | | | 12.3 | % | | | 45.2 | % |
(1) | Represents base business net sales increase as a percentage of base business net sales for the three months ended September 30, 2017. |
(2) | Represents acquired and combined net sales increase as a percentage of acquired and combined net sales for the three months ended September 30, 2017. |
(3) | For the three months ended September 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation. |
| | Nine Months Ended September 30, 2017 | | | Base Business Net Sales Change | | | Acquired and Combined Net Sales Change | | | Nine Months Ended September 30, 2018 | | | Total Net Sales % Change | | | | Base Business Net Sales % Change (1) | | | Acquired and Combined Net Sales % Change (2) | |
(dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Wallboard (3) | | $ | 528,556 | | | $ | 18,836 | | | $ | 35,850 | | | $ | 583,242 | | | | 10.3 | % | | | | 3.8 | % | | | 94.4 | % |
Suspended ceiling systems | | | 247,921 | | | | 20,276 | | | | 20,159 | | | | 288,356 | | | | 16.3 | % | | | | 8.8 | % | | | 113.1 | % |
Metal framing | | | 212,486 | | | | 38,750 | | | | 12,783 | | | | 264,019 | | | | 24.3 | % | | | | 19.4 | % | | | 96.7 | % |
Complementary and other products | | | 357,478 | | | | 17,277 | | | | 17,781 | | | | 392,536 | | | | 9.8 | % | | | | 5.3 | % | | | 54.5 | % |
Total net sales | | $ | 1,346,441 | | | $ | 95,139 | | | $ | 86,573 | | | $ | 1,528,153 | | | | 13.5 | % | | | | 7.6 | % | | | 85.2 | % |
Average daily net sales | | $ | 7,087 | | | $ | 498 | | | $ | 453 | | | $ | 8,001 | | | | 12.9 | % | | | | 7.6 | % | | | 84.7 | % |
(1) | Represents base business net sales increase as a percentage of base business net sales for the nine months ended September 30, 2017. |
(2) | Represents acquired and combined net sales increase as a percentage of acquired and combined net sales for the nine months ended September 30, 2017. |
(3) | For the nine months ended September 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation. |
Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
In addition to results under GAAP, this press release contains certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted earnings per share ("EPS"), which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. The Company calculates Adjusted EBITDA as net (loss) income before interest expense net, loss on extinguishment of debt, income tax (benefit) expense, depreciation and amortization, unrealized losses on derivative financial instruments, IPO and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as non-cash purchase accounting effects, losses on the disposal of property and equipment, transaction costs, management fees and hurricane related costs. The Company calculates Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. The Company calculates Adjusted net income as net income before unrealized losses (gains) on derivative financial instruments, IPO and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as non-cash purchase accounting adjustments, losses on the disposal of property and equipment, transaction costs, management fees and hurricane related costs. The Company calculates Adjusted EPS as Adjusted net income on a per weighted average share outstanding basis.
These non-GAAP financial measures are presented because they are important metrics used by management as a means by which it assesses financial performance. These measures may also be used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. These measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company’s financial condition and results of operations.
These non-GAAP financial measures have certain limitations. These measures should not be considered as alternatives to measures of financial performance derived in accordance with GAAP. In addition, these measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be liquidity measures. Other companies, including other companies in the Company’s industry, may not use these measures or may calculate these measures differently than the Company does, limiting their usefulness as comparative measures.
The following is a reconciliation of Adjusted EBITDA to the nearest GAAP measure, net (loss) income (unaudited):
| Three Months Ended September 30, | | Three Months Ended September 30, | |
| 2018 | | 2017 | |
| Reconciliation To Net Loss From Continuing Operations | | Reconciliation To Net Income From Discontinued Operations (e) | | Reconciliation To Net Loss | | Reconciliation To Net Income From Continuing Operations | | Reconciliation To Net Income From Discontinued Operations (e) | | Reconciliation To Net Income | |
(in thousands) | | | | | | | | | | | | | | | | | | |
Net (loss) income | $ | (37,553 | ) | $ | 2,772 | | $ | (34,781 | ) | $ | 122 | | $ | 1,277 | | $ | 1,399 | |
Interest expense, net | | 12,544 | | | 11 | | | 12,555 | | | 15,028 | | | 15 | | | 15,043 | |
Loss on extinguishment of debt | | 58,475 | | | - | | | 58,475 | | | - | | | - | | | - | |
Income tax (benefit) expense | | (12,519 | ) | | 991 | | | (11,528 | ) | | 239 | | | 973 | | | 1,212 | |
Depreciation and amortization | | 19,771 | | | 1,561 | | | 21,332 | | | 18,234 | | | 1,495 | | | 19,729 | |
Unrealized losses on derivative financial instruments | | 78 | | | - | | | 78 | | | 111 | | | - | | | 111 | |
IPO and public company readiness expenses | | - | | | - | | | - | | | 519 | | | - | | | 519 | |
Stock-based compensation | | 633 | | | 44 | | | 677 | | | 203 | | | 10 | | | 213 | |
Non-cash purchase accounting effects (a) | | 6 | | | - | | | 6 | | | 166 | | | 112 | | | 278 | |
Loss on disposal of property and equipment | | 339 | | | 8 | | | 347 | | | 53 | | | (23 | ) | | 30 | |
Hurricane related costs (b) | | (241 | ) | | - | | | (241 | ) | | 376 | | | 54 | | | 430 | |
Transaction costs (c) | | 2,208 | | | 386 | | | 2,594 | | | 1,315 | | | 1 | | | 1,316 | |
Adjusted EBITDA | $ | 43,741 | | $ | 5,773 | | $ | 49,514 | | $ | 36,366 | | $ | 3,914 | | $ | 40,280 | |
Adjusted EBITDA margin (d) | | 8.1 | % | | 7.0 | % | | 7.9 | % | | 7.8 | % | | 5.8 | % | | 7.5 | % |
(a) | Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions. |
(b) | Represents insurance proceeds for hurricane related costs for the three months ended September 30, 2018; represents costs related to payroll and inventory resulting from Hurricanes Harvey and Irma for the three months ended September 30, 2017. |
(c) | Represents one-time costs related to our transactions, including fees to financial advisors, accountants, attorneys, other professionals and certain internal corporate development costs. |
(d) | Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales. |
(e) | The operating results reflected above do not fully represent the mechanical insulation's segment historical operating results, as the results reported within net income from discontinued operations only include expenses that are directly attributable to the mechanical insulation segment. |
| Nine Months Ended September 30, | | Nine Months Ended September 30, | |
| 2018 | | 2017 | |
| Reconciliation To Net Loss From Continuing Operations | | Reconciliation To Net Income From Discontinued Operations (f) | | Reconciliation To Net Loss | | Reconciliation To Net Income From Continuing Operations | | Reconciliation To Net Income From Discontinued Operations (f) | | Reconciliation To Net Income | |
(in thousands) | | | | | | | | | | | | | | | | | | |
Net (loss) income | $ | (38,347 | ) | $ | 7,913 | | $ | (30,434 | ) | $ | 3,149 | | $ | 3,439 | | $ | 6,588 | |
Interest expense, net | | 42,957 | | | 36 | | | 42,993 | | | 45,058 | | | 47 | | | 45,105 | |
Loss on extinguishment of debt | | 58,475 | | | - | | | 58,475 | | | - | | | - | | | - | |
Income tax (benefit) expense | | (13,299 | ) | | 3,169 | | | (10,130 | ) | | 2,205 | | | 2,433 | | | 4,638 | |
Depreciation and amortization | | 56,922 | | | 4,637 | | | 61,559 | | | 52,662 | | | 4,490 | | | 57,152 | |
Unrealized gains on derivative financial instruments | | (56 | ) | | - | | | (56 | ) | | (13,045 | ) | | - | | | (13,045 | ) |
IPO and public company readiness expenses | | 89 | | | - | | | 89 | | | 4,929 | | | - | | | 4,929 | |
Stock-based compensation | | 1,512 | | | 103 | | | 1,615 | | | 1,667 | | | 287 | | | 1,954 | |
Non-cash purchase accounting effects (a) | | 413 | | | - | | | 413 | | | 830 | | | 112 | | | 942 | |
Loss on disposal of property and equipment | | 614 | | | 42 | | | 656 | | | 171 | | | 31 | | | 202 | |
Hurricane related costs (b) | | (83 | ) | | - | | | (83 | ) | | 376 | | | 54 | | | 430 | |
Transaction costs (c) | | 4,753 | | | 958 | | | 5,711 | | | 3,635 | | | 251 | | | 3,886 | |
Management fees (d) | | - | | | - | | | - | | | 353 | | | - | | | 353 | |
Adjusted EBITDA | $ | 113,950 | | $ | 16,858 | | $ | 130,808 | | $ | 101,990 | | $ | 11,144 | | $ | 113,134 | |
Adjusted EBITDA margin (e) | | 7.5 | % | | 7.1 | % | | 7.4 | % | | 7.6 | % | | 5.6 | % | | 7.3 | % |
(a) | Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions. |
(b) | Represents insurance proceeds for hurricane related costs for the nine months ended September 30, 2018; represents costs related to payroll and inventory resulting from Hurricanes Harvey and Irma for the nine months ended September 30, 2017. |
(c) | Represents one-time costs related to our transactions, including fees to financial advisors, accountants, attorneys, other professionals and certain internal corporate development costs. |
(d) | Represents fees paid to our former private equity sponsor for services provided pursuant to past management agreements. These fees are no longer being incurred. |
(e) | Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales. |
(f) | The operating results reflected above do not fully represent the mechanical insulation's segment historical operating results, as the results reported within net income from discontinued operations only include expenses that are directly attributable to the mechanical insulation segment. |
The following is a reconciliation of Adjusted net income to the nearest GAAP measure, net (loss) income (unaudited):
| | Three Months Ended September 30, 2018 | | | Three Months Ended September 30, 2017 | |
| | Reconciliation To Net Loss From Continuing Operations | | Reconciliation to Net Income From Discontinued Operations(e) | | Reconciliation To Net Loss | | | Reconciliation To Net Income From Continuing Operations | | Reconciliation to Net Income From Discontinued Operations(e) | | Reconciliation To Net Income | |
(in thousands, except share and per share data) | | | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (37,553 | ) | $ | 2,772 | | $ | (34,781 | ) | | $ | 122 | | $ | 1,277 | | $ | 1,399 | |
Loss on extinguishment of debt | | | 58,475 | | | - | | | 58,475 | | | | - | | | - | | | - | |
Unrealized (gains) losses on derivative financial instruments | | | 78 | | | - | | | 78 | | | | 111 | | | - | | | 111 | |
IPO and public company readiness expenses | | | - | | | - | | | - | | | | 519 | | | - | | | 519 | |
Stock-based compensation | | | 633 | | | 44 | | | 677 | | | | 203 | | | 10 | | | 213 | |
Non-cash purchase accounting effects (a) | | | 6 | | | - | | | 6 | | | | 166 | | | 112 | | | 278 | |
Loss on disposal of property and equipment | | | 339 | | | 8 | | | 347 | | | | 53 | | | (23 | ) | | 30 | |
Hurricane related costs (b) | | | (241 | ) | | 0 | | | (241 | ) | | | 376 | | | 54 | | | 430 | |
Transaction costs (c) | | | 2,208 | | | 386 | | | 2,594 | | | | 1,315 | | | 1 | | | 1,316 | |
Tax effect of adjustments (d) | | | (15,719 | ) | | (112 | ) | | (15,831 | ) | | | (1,001 | ) | | (56 | ) | | (1,057 | ) |
Adjusted net income | | $ | 8,226 | | $ | 3,098 | | $ | 11,324 | | | $ | 1,864 | | $ | 1,375 | | $ | 3,239 | |
| | | | | | | | | | | | | | | | | | | | |
Earnings per share (as reported): | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | (0.88 | ) | $ | 0.07 | | $ | (0.81 | ) | | | - | | $ | 0.03 | | $ | 0.03 | |
Diluted | | $ | (0.88 | ) | $ | 0.07 | | $ | (0.81 | ) | | | - | | $ | 0.03 | | $ | 0.03 | |
Adjusted earnings per share: | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.19 | | $ | 0.07 | | $ | 0.26 | | | $ | 0.04 | | $ | 0.03 | | $ | 0.08 | |
Diluted | | $ | 0.19 | | $ | 0.07 | | $ | 0.26 | | | $ | 0.04 | | $ | 0.03 | | $ | 0.08 | |
| | | | | | | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | |
Basic | | | 42,894,474 | | | 42,894,474 | | | 42,894,474 | | | | 42,865,407 | | | 42,865,407 | | | 42,865,407 | |
Diluted | | | 42,917,230 | | | 42,917,230 | | | 42,917,230 | | | | 42,870,391 | | | 42,870,391 | | | 42,870,391 | |
(a) | Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions. |
(b) | Represents insurance proceeds for hurricane related costs for the three months ended September 30, 2018; represents costs related to payroll and inventory resulting from Hurricanes Harvey and Irma for the three months ended September 30, 2017. |
(c) | Represents one-time costs related to transactions, including fees to financial advisors, accountants, attorneys, other professionals and certain internal corporate development costs. |
(d) | Represents the tax effect of the adjustments to reflect corporate income taxes at the statutory rates of 25.5% and 36.5% for the three months ended September 30, 2018 and 2017, respectively. |
(e) | The operating results reflected above do not fully represent the mechanical insulation's segment historical operating results, as the results reported within net income from discontinued operations only include expenses that are directly attributable to the mechanical insulation segment. |
| | Nine Months Ended September 30, 2018 | | | Nine Months Ended September 30, 2017 | |
| | Reconciliation To Net Loss From Continuing Operations | | Reconciliation to Net Income From Discontinued Operations(f) | | Reconciliation To Net Loss | | | Reconciliation To Net Income From Continuing Operations | | Reconciliation to Net Income From Discontinued Operations(f) | | Reconciliation To Net Income | |
(in thousands, except share and per share data) | | | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (38,347 | ) | $ | 7,913 | | $ | (30,434 | ) | | $ | 3,149 | | $ | 3,439 | | $ | 6,588 | |
Loss on extinguishment of debt | | | 58,475 | | | - | | | 58,475 | | | | - | | | - | | | - | |
Unrealized (gains) losses on derivative financial instruments | | | (56 | ) | | - | | | (56 | ) | | | (13,045 | ) | | - | | | (13,045 | ) |
IPO and public company readiness expenses | | | 89 | | | - | | | 89 | | | | 4,929 | | | - | | | 4,929 | |
Stock-based compensation | | | 1,512 | | | 103 | | | 1,615 | | | | 1,667 | | | 287 | | | 1,954 | |
Non-cash purchase accounting effects (a) | | | 413 | | | - | | | 413 | | | | 830 | | | 112 | | | 942 | |
Loss on disposal of property and equipment | | | 614 | | | 42 | | | 656 | | | | 171 | | | 31 | | | 202 | |
Hurricane related costs (b) | | | (83 | ) | | - | | | (83 | ) | | | 376 | | | 54 | | | 430 | |
Transaction costs (c) | | | 4,753 | | | 958 | | | 5,711 | | | | 3,635 | | | 251 | | | 3,886 | |
Management fees (d) | | | - | | | - | | | - | | | | 353 | | | - | | | 353 | |
Tax effect of adjustments (e) | | | (16,797 | ) | | (282 | ) | | (17,079 | ) | | | 395 | | | (268 | ) | | 127 | |
Adjusted net income | | $ | 10,573 | | $ | 8,734 | | $ | 19,307 | | | $ | 2,460 | | $ | 3,906 | | $ | 6,366 | |
| | | | | | | | | | | | | | | | | | | | |
Earnings per share (as reported): | | �� | | | | | | | | | | | | | | | | | | |
Basic | | $ | (0.89 | ) | $ | 0.18 | | $ | (0.71 | ) | | $ | 0.08 | | $ | 0.08 | | $ | 0.16 | |
Diluted | | $ | (0.89 | ) | $ | 0.18 | | $ | (0.71 | ) | | $ | 0.08 | | $ | 0.08 | | $ | 0.16 | |
Adjusted earnings per share: | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.25 | | $ | 0.20 | | $ | 0.45 | | | $ | 0.06 | | $ | 0.10 | | $ | 0.16 | |
Diluted | | $ | 0.25 | | $ | 0.20 | | $ | 0.45 | | | $ | 0.06 | | $ | 0.10 | | $ | 0.16 | |
| | | | | | | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | |
Basic | | | 42,889,430 | | | 42,889,430 | | | 42,889,430 | | | | 41,021,808 | | | 41,021,808 | | | 41,021,808 | |
Diluted | | | 42,905,273 | | | 42,905,273 | | | 42,905,273 | | | | 41,023,935 | | | 41,023,935 | | | 41,023,935 | |
(a) | Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions. |
(b) | Represents insurance proceeds for hurricane related costs for the three months ended September 30, 2018; represents costs related to payroll and inventory resulting from Hurricanes Harvey and Irma for the three months ended September 30, 2017. |
(c) | Represents one-time costs related to transactions, including fees to financial advisors, accountants, attorneys, other professionals and certain internal corporate development costs. |
(d) | Represents fees paid to our former private equity sponsor for services provided pursuant to past management agreements. These fees are no longer being incurred subsequent to our initial public offering. |
(e) | Represents the tax effect of the adjustments to reflect corporate income taxes at the statutory rates of 25.5% and 36.5% for the three months ended September 30, 2018 and 2017, respectively. |
(f) | The operating results reflected above do not fully represent the mechanical insulation's segment historical operating results, as the results reported within net income from discontinued operations only include expenses that are directly attributable to the mechanical insulation segment. |
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS (UNAUDITED)
(MECHANICAL INSULATION BUSINESS)
(in thousands)
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Net sales | | $ | 82,533 | | | $ | 67,555 | | | $ | 237,923 | | | $ | 197,692 | |
Cost of goods sold | | | 60,125 | | | | 48,655 | | | | 172,682 | | | | 142,503 | |
Gross profit | | | 22,408 | | | | 18,900 | | | | 65,241 | | | | 55,189 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 17,078 | | | | 15,150 | | | | 49,481 | | | | 44,775 | |
Depreciation and amortization | | | 1,561 | | | | 1,495 | | | | 4,637 | | | | 4,490 | |
Total operating expenses | | | 18,639 | | | | 16,645 | | | | 54,118 | | | | 49,265 | |
Income from operations | | | 3,769 | | | | 2,255 | | | | 11,123 | | | | 5,924 | |
Interest expense | | | (11 | ) | | | (15 | ) | | | (36 | ) | | | (47 | ) |
Other income (expense), net | | | 5 | | | | 10 | | | | (5 | ) | | | (5 | ) |
Income from discontinued operations before income taxes | | | 3,763 | | | | 2,250 | | | | 11,082 | | | | 5,872 | |
Income tax expense | | | 991 | | | | 973 | | | | 3,169 | | | | 2,433 | |
Net income from discontinued operations, net of tax | | $ | 2,772 | | | $ | 1,277 | | | $ | 7,913 | | | $ | 3,439 | |
