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8-K - FORM 8-K - Summit Materials, LLCd579929d8k.htm

Exhibit 99.1

Summit Materials, LLC

August 8, 2013

Summit Materials, LLC Reports Second Quarter 2013 Results

 

    Operating margin increases 190 bps to 5.4%

 

    23.9% Adjusted EBITDA growth to $32.9 million

 

    Increase in average selling price, offset by volume declines

DENVER, CO - Summit Materials, LLC (“Summit Materials”) today reported financial results for the second quarter ended June 29, 2013. Notable items for the quarter include (all comparisons, unless noted, are with the prior year’s second quarter):

 

    Revenues of $254.8 million, slight decline of 0.3%.

 

    Operating earnings up $4.7 million driven by improved pricing and completion of low margin projects.

 

    Year-to-date pricing increased while volumes declined among the aggregate, asphalt and ready mix products.

 

    Year-to-date cement volumes increased 6.3% from sales to a new, high-volume customer.

On April 1, 2013, Summit Materials acquired certain assets of Lafarge in Wichita, Kansas and membership interests of Westroc near Salt Lake City, Utah. These acquisitions and related transaction fees were funded through borrowings under our senior secured revolving credit facility.

Tom Hill, the CEO of Summit Materials, stated, “Summit Materials will continue to pursue acquisitions in regions of the country that allow for synergies with our current operations and areas that have promising outlooks. The market overall is showing signs of improvement in the residential and private non-residential sectors. Demand in Texas, Colorado and Utah seem poised to lead a recovery.”

Financial Results

Mr. Hill continued, “This winter’s inclement weather led to a slight decline in our revenue as compared to the first half of 2012. All of our operations were impacted by adverse weather, but the construction and paving services were most directly affected. Pricing increases across our aggregate, asphalt and ready mix products somewhat offset these declines, which is a positive indication of the opportunity in the business once demand recovers.”

“This quarter our operating margin was 5.4%, an improvement from 3.5% last year. The increased margin was largely driven by the realization of price improvement and the completion of low margin projects, including grading and structural work in the West region.”

Central Region Results

Revenue in the Central region increased 7.9% this quarter. Revenue contribution from the Lafarge acquisition offset the severe winter that lowered activity and resulted in decreased aggregate, asphalt and ready mix volumes. From a shift in product mix, asphalt prices decreased 12.4% in the first half of 2013 compared to 2012. Cement volumes increased; however, the additional sales were to a new, high-volume customer at a reduced price.

West Region Results

The West region’s revenue declined 7.1% this quarter due to colder, wetter weather, as compared to 2012, and a strategic business decision to reduce grading and structural projects. These declines were partially offset by the Westroc acquisition. Even though we had fewer sales in the region, our Adjusted EBITDA increased $5.8 million this quarter compared to the second quarter in 2012. This inverse relationship was primarily driven by higher prices in aggregates, asphalt and ready mix and improved performance in Texas due to the completion of low margin grading and structural work.


East Region Results

This quarter the East region’s revenue and Adjusted EBITDA increased $1.7 million and $1.6 million, respectively. With low margin legacy contracts behind us and the disposal of non-core businesses, the East region was able to realign its focus on its primary operations. Operating margin in the East region improved 180 basis points due to improved pricing and cost savings initiatives implemented in 2012, including organizational restructuring.

Backlog

“Compared to this time last year, our aggregate backlog is up 36% with Texas, Missouri and Kansas particularly busy. Asphalt backlogs are down slightly, but this is primarily due to a large, low-margin highway project in Austin, Texas that we inherited from an acquisition and was completed in late 2012. Excluding this project, our asphalt backlog is actually up 9%. Our ready mix and paving and construction backlogs are slightly ahead of last year. In addition, the margin imbedded in the paving and construction backlog has improved as we have exited certain non-core, low-margin businesses,” added Mr. Hill.

Liquidity and Capital Resources

Our primary sources of liquidity include cash on-hand, cash provided by our operations and amounts available for borrowing under our credit facilities. As of June 29, 2013, we had $7.7 million in cash and working capital of $124.9 million as compared to cash and working capital of $27.4 million and $114.4 million at December 29, 2012, respectively. We calculate working capital as current assets less current liabilities, excluding the current portion of long term debt and outstanding borrowings on our revolver facility.

Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year; these amounts are converted to cash as our operating cycle is completed each fiscal year. Our working capital requirements generally increase during the first half of the year as we build-up inventory and focus on repair and maintenance and other set-up costs for the upcoming season. Working capital levels then decrease as we wind down the construction season and enter the winter months, which is when we see significant inflows of cash from the collection of receivables during the peak months of the season.

Free cash outflow utilization, a non-GAAP measure defined as operating cash outflow less net capital expenditures, was $81.2 million and $50.2 million in the six month periods ended June 29, 2013 and June 30, 2012, respectively. Free cash outflow in 2013, as compared to 2012, was impacted by an additional $15.7 million of interest payments related to the timing and terms of our January 2012 refinancing and increased investment of $11.7 million in capital projects. In 2013, we have continued to develop an underground mine and storage dome at our cement plant in Hannibal, Missouri and are bringing a new hot mix asphalt plant on-line in Austin, Texas.

Our growth strategy contemplates future acquisitions for which we believe we have sufficient capital through committed funds from our sponsors, Blackstone Capital Partners V L.P. and Silverhawk Summit, L.P., and our borrowing capacity. Our remaining borrowing capacity on our revolving credit facility, net of $14.5 million of outstanding letters of credit, as of June 29, 2013 was $30.5 million, which is below normal levels as a result of funding the 2013 acquisitions with the revolver.

About Summit Materials, LLC

We are a leading, vertically-integrated, geographically-diverse, heavy-side building materials company. We supply aggregates, cement and related downstream products such as ready mixed concrete, asphalt paving mix, concrete products and paving and related construction services to a variety of end-uses in the U.S. construction industry, including public infrastructure projects, as well as private residential and non-residential construction. Summit has executed 27 transactions worth an enterprise value greater than $1.0 billion. Our nine operating companies make up our three distinct geographic regions that span 20 states and 23 metropolitan statistical areas.


For more information about Summit Materials, LLC refer to the Company’s website at http://www.summit-materials.com. The information contained on our website is not incorporated herein by reference.

Conference Call Information

The Company will conduct a conference call to discuss the financial results, forward-looking information and other matters at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Thursday, August 8, 2013. The conference call will be recorded and archived on the Company’s website after the call.

The conference call may be accessed at:

Webcast for Q2 2013 Summit Materials Earnings Call

 

Conference ID:    4633538
Domestic:    1-877-941-4774
International:    1-480-629-9760

Non-GAAP Financial Measures

Our chief operating decision maker evaluates the performance of our segments and allocates resources to them based on several factors including a measure we call segment profit, or Adjusted EBITDA by segment. We define Adjusted EBITDA as net income (loss) before income (loss) from discontinued operations, income tax expense (benefit), interest expense and depreciation, depletion, amortization and accretion. Accretion expense is recognized on our asset retirement obligations and reflects the time value of money. Given that accretion is similar in nature to interest expense, it is treated consistently with interest expense in determining Adjusted EBITDA. Adjusted EBITDA is determined before considering the loss from discontinued operations as results from discontinued operations is not viewed by management as part of our core business when management assesses the performance of our segments or allocation of resources. Therefore, it is not included in Adjusted EBITDA.

Adjusted EBITDA reflects an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to GAAP financial measures included in the tables below, may provide a more complete understanding of factors and trends affecting our business. However, it should not be construed as being more important than other comparable GAAP measures and must be considered in conjunction with the GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore, it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated interim financial statements in their entirety and not rely on any single financial measure.

The reconciliation to net income (loss) is included in the tables attached to this press release.

Cautionary Statement Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans or intentions. Any and all statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results.


In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in our prospectus dated June 10, 2013 (the “Prospectus”), filed with the Securities and Exchange Commission (the “SEC”) in accordance with Rule 424(b) of the Securities Act of 1933, as amended, on June 10, 2013 and other filings with the SEC.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

 

     June 29,     December 29,  
     2013     2012  
     (unaudited)     (audited)  
Assets     

Current assets:

    

Cash

   $ 7,655     $ 27,431  

Accounts receivable, net

     119,557       100,298  

Costs and estimated earnings in excess of billings

     24,356       11,575  

Inventories

     110,153       92,977  

Other current assets

     11,996       10,068  
  

 

 

   

 

 

 

Total current assets

     273,717       242,349  

Property, plant and equipment, less accumulated depreciation, depletion and amortization (June 29, 2013 - $183,094 and December 29, 2012 - $156,313)

     858,519       813,607  

Goodwill

     192,505       179,120  

Intangible assets, less accumulated amortization (June 29, 2013 - $1,712 and December 29, 2012 - $1,354)

     15,595       8,606  

Other assets

     36,429       37,531  
  

 

 

   

 

 

 

Total assets

   $ 1,376,765     $ 1,281,213  
  

 

 

   

 

 

 
Liabilities, Redeemable Noncontrolling Interest and Member’s Interest     

Current liabilities:

    

Current portion of debt

   $ 108,165     $ 4,000  

Current portion of acquisition-related liabilities

     11,115       9,525  

Accounts payable

     75,828       61,634  

Accrued expenses

     56,263       49,822  

Billings in excess of costs and estimated earnings

     5,583       6,926  
  

 

 

   

 

 

 

Total current liabilities

     256,954       131,907  

Long-term debt

     660,241       635,843  

Acquisition-related liabilities

     28,052       23,919  

Other noncurrent liabilities

     81,133       84,266  
  

 

 

   

 

 

 

Total liabilities

     1,026,380       875,935  
  

 

 

   

 

 

 

Redeemable noncontrolling interest

     23,150       22,850  

Member’s interest:

    

Member’s equity

     485,698       484,584  

Accumulated deficit

     (150,362 )     (94,085 )

Accumulated other comprehensive loss

     (9,130 )     (9,130 )
  

 

 

   

 

 

 

Member’s interest

     326,206       381,369  

Noncontrolling interest

     1,029       1,059  
  

 

 

   

 

 

 

Total member’s interest

     327,235       382,428  
  

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and member’s interest

   $ 1,376,765     $ 1,281,213  
  

 

 

   

 

 

 


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

(In thousands)

 

     Three Months Ended     Six Months Ended  
     June 29,
2013
    June 30,
2012
    June 29,
2013
    June 30,
2012
 

Revenue:

        

Product

   $ 169,041      $ 166,436      $ 237,181      $ 233,996   

Service

     85,801        89,120        124,490        141,443   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     254,842        255,556        361,671        375,439   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue (exclusive of items shown separately below):

        

Product

     115,960        123,655        181,932        186,967   

Service

     65,883        71,126        95,984        118,576   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     181,843        194,781        277,916        305,543   
  

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative expenses

     39,392        34,923        73,395        65,917   

Depreciation, depletion, amortization and accretion

     18,894        17,240        36,026        33,603   

Transaction costs

     982        (403     2,464        1,532   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     13,731        9,015        (28,130     (31,156

Other (income) expense, net

     (269     587        163        941   

(Gain) loss on debt financings

     —          (879     3,115        8,160   

Interest expense

     14,482        14,713        27,849        28,826   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before taxes

     (482     (5,406     (59,257     (69,083

Income tax (benefit) expense

     (726     215        (3,347     (1,963
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     244        (5,621     (55,910     (67,120

Income (loss) from discontinued operations

     26        (2,221     (97     (1,724
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     270        (7,842     (56,007     (68,844

Net income (loss) attributable to noncontrolling interest

     1,939        (175     (1,518     (519
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to member of Summit Materials, LLC

   $ (1,669   $ (7,667   $ (54,489   $ (68,325
  

 

 

   

 

 

   

 

 

   

 

 

 


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

     Six months ended  
     June 29,     June 30,  
     2013     2012  

Cash flow from operating activities:

    

Net loss

   $ (56,007   $ (68,844

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation, depletion, amortization and accretion

     39,033        37,512   

Share-based compensation expense

     1,114        1,419   

Deferred income tax benefit

     (2,969     (540

Loss on property, plant and equipment disposals and revaluations

     5,574        340   

Loss on debt financings

     2,989        8,160   

Other

     755        1,194   

(Increase) decrease in operating assets, net of acquisitions:

    

Account receivable

     (11,610     (23,788

Inventories

     (13,222     (6,044

Costs and estimated earnings in excess of billings

     (13,688     (10,247

Other current assets

     (491     (1,701

Other assets

     (118     2,226   

Increase (decrease) in operating liabilities, net of acquisitions:

    

Accounts payable

     6,691        15,736   

Accrued expenses

     (4,722     16,787   

Billings in excess of costs and estimated earnings

     (1,493     1,133   

Other liabilities

     404        (1,796
  

 

 

   

 

 

 

Net cash used in operating activities

     (47,760     (28,453
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Acquisitions, net of cash acquired

     (60,779     (42,933

Purchases of property, plant and equipment

     (40,528     (24,669

Proceeds from the sale of property, plant and equipment

     7,086        2,946   
  

 

 

   

 

 

 

Net cash used for investing activities

     (94,221     (64,656
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Net proceeds from debt issuance

     186,974        693,434   

Payments on long-term debt

     (61,343     (618,441

Payments on acquisition-related liabilities

     (3,426     (2,670

Other

     —          (701
  

 

 

   

 

 

 

Net cash provided by financing activities

     122,205        71,622   
  

 

 

   

 

 

 

Net decrease in cash

     (19,776     (21,487

Cash – beginning of period

     27,431        42,790   
  

 

 

   

 

 

 

Cash – end of period

   $ 7,655      $ 21,303   
  

 

 

   

 

 

 


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Financial Highlights

(In thousands)

 

     Three months ended     Six months ended  
     June 29,
2013
    June 30,
2012
    June 29,
2013
    June 30,
2012
 

Revenue by product:*

        

Aggregates

   $ 47,439      $ 42,735      $ 68,304      $ 66,681   

Asphalt

     55,857        62,960        75,208        82,166   

Ready mix

     33,279        30,942        46,412        46,537   

Cement

     21,474        21,096        30,914        31,377   

Construction and paving

     125,536        130,750        171,946        184,087   

Other

     (28,743     (32,927     (31,113     (35,409
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ 254,842      $ 255,556      $ 361,671      $ 375,439   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  * Revenue by product includes intercompany sales transferred at market value. The elimination of intercompany transactions is included in Other

 

     Three months ended      Six months ended  
     June 29,
2013
     June 30,
2012
     June 29,
2013
     June 30,
2012
 

Revenue by region:

           

Central region

   $ 92,780       $ 86,006       $ 128,680       $ 128,497   

West region

     119,656         128,867         179,719         196,125   

East region

     42,406         40,683         53,272         50,817   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 254,842       $ 255,556       $ 361,671       $ 375,439   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

    Six Months Ended
June 29, 2013
    Six Months Ended
June 30, 2012
    Percentage Change in  
    Volume (1)
(in thousands)
    Average Selling
Price (2)
    Volume (1)
(in thousands)
    Average Selling
Price (2)
    Volume     Average Selling
Price
 

Aggregate

    7,542      $ 9.06        7,556      $ 8.45        (0.2 %)      7.2

Asphalt

    1,366        54.65        1,670        49.23        (18.2 %)      11.0

Ready mix

    500        92.76        512        90.91        (2.3 %)      2.0

Cement

    407        80.61        383        86.18        6.3     (6.5 %) 

 

(1) Volumes are shown in tons for aggregates, asphalt and cement and in cubic yards for ready mix.
(2) Average selling prices are shown on a per ton basis for aggregates, asphalt and cement and on a per cubic yard basis for ready mix.


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Non-GAAP Financial Measures

(In thousands)

The tables below reconcile our net income (loss) to Adjusted EBITDA and illustrate Adjusted EBITDA by segment for the three and six month periods ended June 29, 2013 and June 30, 2012.

 

     Three Months Ended     Six Months Ended  
Reconciliation of Net Income (Loss) to Adjusted EBITDA    June 29,
2013
    June 30,
2012
    June 29,
2013
    June 30,
2012
 
(in thousands)                         

Net income (loss)

   $ 270      $ (7,842   $ (56,007   $ (68,844

Income (benefit) tax expense

     (726     215        (3,347     (1,963

Interest expense

     14,482        14,713        27,849        28,826   

Depreciation, depletion and amortization

     18,714        17,098        35,674        33,354   

Accretion

     180        142        352        249   

(Income) loss from discontinued operations

     (26     2,221        97        1,724   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 32,894      $ 26,547      $ 4,618      $ (6,654
  

 

 

   

 

 

   

 

 

   

 

 

 
Adjusted EBITDA by Segment                         
(in thousands)                         

Central

   $ 25,136      $ 23,901      $ 19,182      $ 22,617   

West

     6,807        980        85        (9,650

East

     7,155        5,575        (2,377     (8,573

Corporate

     (6,204     (3,909     (12,272     (11,048
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 32,894      $ 26,547      $ 4,618      $ (6,654
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table sets forth a reconciliation of free cash outflow for the six month period ended June 29, 2013 and June 30, 2012.

 

     Six Months Ended  
     June 29,
2013
    June 30,
2012
 

Net loss

   $ (56,007   $ (68,844

Non- cash items

     46,496        48,085   
  

 

 

   

 

 

 

Loss, net of non-cash items

     (9,511     (20,759

Change in working capital accounts

     (38,249     (7,694
  

 

 

   

 

 

 

Net cash used in operating activities

     (47,760     (28,453

Capital expenditures, net of asset sales

     (33,442     (21,723
  

 

 

   

 

 

 

Free cash flow

   $ (81,202   $ (50,176
  

 

 

   

 

 

 


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Financial Highlights

(In millions)

The following is a summary of our credit statistics:

 

     June 29, 2013     December 29, 2012  

Cash & Cash Equivalents

   $ 7.7      $ 27.4   
  

 

 

   

 

 

 

Debt

    

Revolving Credit Facility ($150M Capacity)

   $ 105.0      $ —     

Senior Secured Term Loan

     421.0        398.0   

Capital Leases

     5.4        3.1   

Other Debt

     3.3        0.6   
  

 

 

   

 

 

 

Total Senior Secured Debt

   $ 534.7      $ 401.7   

Senior Notes

     250.0        250.0   
  

 

 

   

 

 

 

Total Debt

   $ 784.7      $ 651.7   

Leverage Ratio Calculations

    

Senior Secured Net Debt

   $ 527.0      $ 374.3   

Total Net Debt

   $ 777.0      $ 624.3   

Pro Forma Adjusted EBITDA

   $ 128.2      $ 120.3   

Senior Secured Net Leverage

     4.11  x      3.1  x 

Covenant Senior Secured Net Leverage Limit

     4.75  x      4.75  x 

Total Net Leverage

     6.1  x      5.2  x 

 

Contact:    info@summit-materials.com
   303-893-0012