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8-K - 8-K - Summit Materials, LLCd768591d8k.htm

Exhibit 99.1

 

LOGO

Summit Materials Announces Second Quarter 2014 Results

Denver, Colorado (August 6, 2014)—Summit Materials, LLC today announced results for the quarter ended June 28, 2014.

Notable items for the quarter and first half of 2014, as compared to the prior year, include:

 

    Revenue increased 27%.

 

    Operating income increased 147%.

 

    Adjusted EBITDA increased 70%.

 

    Aggregates, ready-mixed concrete and asphalt volumes increased 35%, 139% and 21%, respectively, in the first half of 2014, while cement volumes decreased 3%.

 

    Cement and ready-mixed concrete pricing improved 11% and 2%, respectively, in the first half of 2014, while aggregates and asphalt pricing decreased 1% and 4%, respectively.

Tom Hill, the President and CEO of Summit Materials, stated, “This quarter, we continued to build off of the momentum we had at the start of the year and we were able to achieve a $56.8 million increase in product revenue and a $69.5 million increase in total revenue compared to the second quarter of 2013. Our operating income improved 147% and Adjusted EBITDA increased 70%, while SG&A expenses fell to 11% of net sales, which is a 4% reduction as compared to the second quarter of 2013. Our product pricing increased in many of our markets, most notably in Missouri and Kansas. We continue to focus on growing our materials and products sales and improving margins in our paving and other services. It is encouraging seeing our aggregate backlog 6% greater than it was at this point last year and an 8% increase in our aggregate volumes from organic growth, reflecting an overall increase in market demand. In addition, this quarter we increased our presence in Texas with the acquisition of Troy Vines., Inc, an integrated aggregates and ready-mixed concrete business. We also acquired Buckhorn Materials LLC, an aggregates business serving North and South Carolina. In addition, our January acquisition of Alleyton Resources continues to provide strong results and is being seamlessly integrated with the rest of the company.”

Second Quarter Regional Results

West Region Results – The West Region’s revenue increased 44% due to higher aggregates, ready-mixed concrete and asphalt volumes and improved aggregate pricing. The increase in volumes was driven primarily by the Alleyton and Troy Vines acquisitions, contributing approximately $42.6 million of revenue. Adjusted EBITDA in the West Region increased $23.9 million. This was primarily driven by improved margins and the volume increases, primarily from our acquisitions in Texas.

Central Region Results – The Central Region’s revenue increased 18%, which was primarily through organic growth. Aggregates, ready-mixed concrete and asphalt volumes improved and the region experienced pricing improvements across the majority of the product lines. Adjusted EBITDA improved $3.7 million primarily due to the revenue growth and realized cost efficiencies.

East Region Results – The East Region’s revenue and Adjusted EBITDA remained relatively consistent.

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 28, 2014, we had $20.8 million in cash and working capital of $128.7 million as compared to cash and working capital of $14.9 million and $85.4 million, respectively, at December 28, 2013. We calculate working capital as current assets less current liabilities, excluding the current portion of long term debt and outstanding borrowings on our revolving credit facility (“Revolver”). As of June 28, 2014, our remaining borrowing capacity on our Revolver was $62.2 million, net of $22.8 million of outstanding letters of credit.

Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the 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 generally decrease toward the end of the year, which is when we generally see significant inflows of cash from the collection of receivables.

 

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Free cash flow, a non-GAAP measure defined as net cash used for operating activities less net capital expenditures, was $89.2 million and $81.1 million in the six month periods ended June 28, 2014 and June 29, 2013, respectively. We invested $8.7 million more in capital projects and generated $1.1 million less from asset sales in the first half of 2014 compared to 2013.

About Summit Materials, LLC

Summit Materials is a leading U.S. aggregates based construction materials company that supplies aggregates, cement, ready-mixed concrete, and provides paving and other services. We are committed to promoting the success of our businesses by offering a safe place to work and implementing best practices, while striving to exceed our environmental and social responsibilities. Summit Materials was formed in 2008 by its President and CEO Tom W. Hill and a small group of investors, including members of its management team, Blackstone Capital Partners (an affiliate of The Blackstone Group) and Silverhawk Capital Partners. Since then, Summit Materials has completed 31 acquisitions, which are organized into nine operating companies in three distinct geographic regions across the United States.

For more information about Summit Materials, please contact us at info@summit-materials.com.

Conference Call Information

The Company will conduct a conference call at 1:00 p.m. Eastern Time (11:00 a.m. Mountain Time) on Wednesday, August 6, 2014. Interested parties may access this event at https://viavid.webcasts.com/starthere.jsp?ei=1040202.

For those investors without online web access, the conference call may be accessed at:

 

 

Conference ID:

   1501711

Domestic:

   1-888-806-6231

International:

   1-913-643-4201

Non-GAAP Financial Measures

The rules of the Securities and Exchange Commission (the “SEC”) regulate the use in filings with the SEC of “non-GAAP financial measures,” such as Adjusted EBITDA, Pro Forma Adjusted EBITDA and free cash flow, that are derived on the basis of methodologies other than in accordance with GAAP. We have provided Adjusted EBITDA and Pro Forma Adjusted EBITDA because we believe that they provide investors with additional information to measure our performance, evaluate our ability to service our debt and evaluate certain flexibility under our restrictive covenants. Pro Forma Adjusted EBITDA is defined in our senior secured credit facilities and used to measure compliance with covenants, including interest coverage and debt incurrence, and is used to measure our debt incurrence and restricted payment capacity under the indenture governing our senior notes. Our use of the terms Adjusted EBITDA and Pro Forma Adjusted EBITDA may vary from the use of such terms by others and should not be considered as alternatives to net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with GAAP as measures of operating performance or to cash flows as measures of liquidity.

Adjusted EBITDA and Pro Forma Adjusted EBITDA and other non-GAAP measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of the limitations of Adjusted EBITDA and Pro Forma Adjusted EBITDA are that these measures do not reflect: (i) changes in, or cash requirements for, our working capital needs; (ii) the significant interest expense or cash requirements necessary to service interest and principal payments on our debt; and (iii) any cash requirements for the replacement cost of assets being depreciated or amortized. Because of these limitations, we rely primarily on our GAAP results and use Adjusted EBITDA and Pro Forma Adjusted EBITDA only supplementally.

We define free cash flow as net cash provided by (used for) operating activities less purchases of property, plant and equipment. It is a metric used by our senior management to assess the performance of our segments.

Adjusted EBITDA, Pro Forma Adjusted EBITDA and free cash flow reflect 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 attached to this press release, may provide a more complete understanding of factors and trends affecting our business. However, non-GAAP financial measures should not be construed as being more important than other comparable GAAP financial measures and

 

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should 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 financial statements in their entirety and not rely on any single financial measure.

Reconciliations of net income (loss) to Adjusted EBITDA and cash flows used for operations to free cash flow for the three and six months ended June 28, 2014 and of net income (loss) to Pro Forma Adjusted EBITDA for the twelve months ended June 28, 2014 and December 28, 2013 are included in the tables attached to this press release.

Cautionary Statement Regarding Forward-Looking Statements

This press release 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,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. Any and all statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, sales volumes 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 Annual Report on Form 10-K for the fiscal year ended December 28, 2013, filed with the SEC as such factors may be updated from time to time in our periodic 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.

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands)

 

     June 28,
2014
(unaudited)
    December 28,
2013
(audited)
 

Assets

    

Current assets:

    

Cash

   $ 20,802     $ 14,917  

Accounts receivable, net

     143,768       99,337  

Costs and estimated earnings in excess of billings

     21,779       10,767  

Inventories

     119,171       96,432  

Other current assets

     13,235       13,181  
  

 

 

   

 

 

 

Total current assets

     318,755       234,634  

Property, plant and equipment, less accumulated depreciation, depletion and amortization (June 28, 2014 - $246,098 and December 28, 2013 - $212,382)

     920,513       831,778  

Goodwill

     317,323       127,038  

Intangible assets, less accumulated amortization (June 28, 2014 - $2,577 and December 28, 2013 - $2,192)

     15,275       15,147  

Other assets

     45,774       39,197  
  

 

 

   

 

 

 

Total assets

   $ 1,617,640     $ 1,247,794  
  

 

 

   

 

 

 

Liabilities, Redeemable Noncontrolling Interest and Member’s Interest

    

Current liabilities:

    

Current portion of debt

   $ 69,220     $ 30,220  

Current portion of acquisition-related liabilities

     19,039       10,635  

Accounts payable

     78,244       72,104  

Accrued expenses

     87,913       57,251  

Billings in excess of costs and estimated earnings

     4,902       9,263  
  

 

 

   

 

 

 

Total current liabilities

     259,318       179,473  

Long-term debt

     938,290       658,767  

Acquisition-related liabilities

     40,947       23,756  

Other noncurrent liabilities

     83,415       77,480  
  

 

 

   

 

 

 

Total liabilities

     1,321,970       939,476  
  

 

 

   

 

 

 

Redeemable noncontrolling interest

     26,825        24,767  

Member’s interest:

    

Member’s equity

     512,297        486,896  

Accumulated deficit

     (239,213     (198,511 )

Accumulated other comprehensive loss

     (5,472     (6,045 )
  

 

 

   

 

 

 

Member’s interest

     267,612        282,340  

Noncontrolling interest

     1,233        1,211  
  

 

 

   

 

 

 

Total member’s interest

     268,845        283,551  
  

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and member’s interest

   $ 1,617,640     $ 1,247,794  
  

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

($ in thousands)

 

     Three months ended     Six months ended  
     June 28,
2014
    June 29,
2013
    June 28,
2014
    June 29,
2013
 

Revenue:

        

Product

   $ 225,808      $ 169,041      $ 329,769      $ 237,181   

Service

     98,487        85,801        145,617        124,490   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     324,295        254,842        475,386        361,671   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue (excluding items shown separately below):

        

Product

     155,984        115,960        245,003        181,932   

Service

     75,778        65,883        115,434        95,984   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     231,762        181,843        360,437        277,916   
  

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative expenses

     34,867        39,392        70,355        73,395   

Depreciation, depletion, amortization and accretion

     21,339        18,894        40,695        36,026   

Transaction costs

     2,405        982        4,996        2,464   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     33,922        13,731        (1,097     (28,130

Other (income) expense, net

     (697     (269     (891     163   

Loss on debt financings

     —          —          —          3,115   

Interest expense

     21,651        14,482        40,470        27,849   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     12,968        (482     (40,676     (59,257

Income tax benefit

     (864     (726     (1,460     (3,347
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     13,832        244        (39,216     (55,910

(Income) loss from discontinued operations

     (369     (26     (349     97   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     14,201        270        (38,867     (56,007

Net income (loss) attributable to noncontrolling interest

     1,946        1,939        (569     (1,518
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to member of Summit Materials, LLC

   $ 12,255      $ (1,669   $ (38,298   $ (54,489
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

 

     Six months ended  
     June 28,
2014
    June 29,
2013
 

Cash flow from operating activities:

    

Net loss

   $ (38,867   $ (56,007

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

    

Depreciation, depletion, amortization and accretion

     43,296        37,404   

Financing fee amortization

     470        1,629   

Share-based compensation expense

     1,138        1,114   

Deferred income tax benefit

     (525     (2,969

Net (gain) loss on asset disposals

     (76     5,574   

Loss on debt financings

     —          2,989   

Other

     559        755   

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

    

Account receivable, net

     (28,917     (11,610

Inventories

     (17,820     (13,222

Costs and estimated earnings in excess of billings

     (10,246     (13,688

Other current assets

     (2,128     (491

Other assets

     2,214        (118

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

    

Accounts payable

     3,589        6,691   

Accrued expenses

     8,511        (4,722

Billings in excess of costs and estimated earnings

     (4,361     (1,493

Other liabilities

     (2,717     404   
  

 

 

   

 

 

 

Net cash used for operating activities

     (45,880     (47,760
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Acquisitions, net of cash acquired

     (234,870     (60,779

Purchases of property, plant and equipment

     (49,260     (40,528

Proceeds from the sale of property, plant and equipment

     5,985        7,086   

Other

     757        —     
  

 

 

   

 

 

 

Net cash used for investing activities

     (277,388     (94,221
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Proceeds from investment by member

     24,350        —     

Proceeds from debt issuances

     424,750        189,681   

Payments on long-term debt

     (109,246     (61,343

Payments on acquisition-related liabilities

     (4,259     (3,426

Financing costs

     (6,354     (2,707

Other

     (88     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     329,153        122,205   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     5,885        (19,776

Cash – beginning of period

     14,917        27,431   
  

 

 

   

 

 

 

Cash – end of period

   $ 20,802      $ 7,655   
  

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Financial Highlights

($ in thousands)

 

     Three months ended     Six months ended  
     June 28,
2014
    June 29,
2013
    June 28,
2014
    June 29,
2013
 

Revenue by product:*

        

Aggregates

   $ 59,816      $ 47,439      $ 91,365      $ 68,304   

Cement

     26,181        21,474        33,387        30,914   

Ready-mixed concrete

     71,389        33,279        113,769        46,412   

Asphalt

     74,686        55,857        99,082        75,208   

Paving and related services

     143,918        125,536        199,420        171,946   

Other

     (51,695     (28,743     (61,637     (31,113
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ 324,295      $ 254,842      $ 475,386      $ 361,671   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

     Three months ended      Six months ended  
     June 28,
2014
     June 29,
2013
     June 28,
2014
     June 29,
2013
 

Revenue:

           

West region

   $ 172,236       $ 119,656       $ 267,130       $ 179,719   

Central region

     109,117         92,780         156,659         128,680   

East region

     42,942         42,406         51,597         53,272   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 324,295       $ 254,842       $ 475,386       $ 361,671   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Six months ended
     Volume in 2014
Compared to 2013
  Pricing in 2014
Compared to 2013

Aggregate

   35%   (1%)

Cement

   (3%)   11%

Ready-mixed concrete

   139%   2%

Asphalt

   21%   (4%)

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Reconciliations of Non-GAAP Financial Measures

($ in thousands)

The tables below reconcile our net income (loss) to Adjusted EBITDA and present Adjusted EBITDA by segment for the three and six month periods ended June 28, 2014 and June 29, 2013.

 

     Three months ended     Six months ended  
Reconciliation of Net Loss to Adjusted EBITDA    June 28,
2014
    June 29,
2013
    June 28,
2014
    June 29,
2013
 

(in thousands)

        

Net income (loss)

   $ 14,201      $ 270      $ (38,867   $ (56,007

Income tax benefit

     (864     (726     (1,460     (3,347

Interest expense

     21,651        14,482        40,470        27,849   

Depreciation, depletion and amortization

     21,121        18,714        40,270        35,674   

Accretion

     218        180        425        352   

(Income) loss from discontinued operations

     (369     (26     (349     97   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 55,958      $ 32,894      $ 40,489      $ 4,618   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA by Segment

        

(in thousands)

        

West

   $ 30,750      $ 6,807      $ 32,541      $ 85   

Central

     28,823        25,136        28,400        19,182   

East

     7,932        7,155        (1,406     (2,377

Corporate

     (11,547     (6,204     (19,046     (12,272
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 55,958      $ 32,894      $ 40,489      $ 4,618   
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table reconciles net cash used for operating activities to free cash flow for the three and six month periods ended June 28, 2014 and June 29, 2013.

 

     Three months ended     Six months ended  
     June 28,
2014
    June 29,
2013
    June 28,
2014
    June 29,
2013
 

Net income (loss)

   $ 14,201      $ 270      $ (38,867   $ (56,007

Non- cash items

     23,522        23,388        44,862        46,496   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) adjusted for non-cash items

     37,723        23,658        5,995        (9,511

Change in working capital accounts

     (33,228     (25,522     (51,875     (38,249
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) operating activities

     4,495        (1,864     (45,880     (47,760

Capital expenditures, net of asset sales

     (25,536     (22,896     (43,275     (33,442
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ (21,041   $ (24,760   $ (89,155   $ (81,202
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Reconciliations of Non-GAAP Financial Measures

($ in thousands)

The following table presents a reconciliation of net income (loss) to Pro Forma Adjusted EBITDA for the twelve months ended June 28, 2014 and December 28, 2013.

 

     Twelve months ended
June 28, 2014
    Twelve months ended
December 28, 2013
 

Net loss

   $ (86,538   $ (103,679

Interest expense

     69,064        56,443   

Income tax expense

     (760     (2,647

Depreciation, depletion, amortization and accretion expense

     77,602        72,934   
  

 

 

   

 

 

 

EBITDA

   $ 59,368      $ 23,051   
  

 

 

   

 

 

 

EBITDA for certain acquisitions

     27,597        (1,596

Discontinued operations

     426        678   

Transaction expenses

     6,521        3,990   

Monitoring fees and expenses

     3,724        2,620   

Strategic fees and initiatives

     2,711        3,887   

Goodwill impairment

     68,202        68,202   

Non-cash compensation

     2,339        2,315   

Deferred financing fees written off at re-financing

     —          3,115   

Loss on disposal and impairment of fixed assets

     6,770        12,419   

Severance and relocation costs

     2,340        2,755   

Other

     2,588        7,015   
  

 

 

   

 

 

 

Pro Forma Adjusted EBITDA

   $ 182,586      $ 128,451   
  

 

 

   

 

 

 

 

9


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Credit Statistics

($ in millions)

The following is a summary of our credit statistics as of and for the twelve months ended June 28, 2014 and December 28, 2013:

 

     June 28, 2014            December 28, 2013        

Cash

   $         20.8         $         14.9     
  

 

 

      

 

 

   

Debt

         

Revolving credit facility ($150M capacity)

   $ 65.0         $ 26.0     

Senior secured term loan

     417.8           419.9     

Capital leases

     23.4           8.0     

Other debt

     0.4           1.6     
  

 

 

      

 

 

   

Total senior secured debt

   $ 506.6         $ 455.5     

10.5 % senior notes

     510.0           250.0     

Acquisition related liabilities

     60.0           34.4     
  

 

 

      

 

 

   

Total debt

   $ 1,076.6         $ 739.9     

Leverage Ratio Calculations

         

Senior secured net debt

   $ 485.8         $ 440.6     

Total net debt

   $ 1,055.8         $ 725.0     

Pro Forma Adjusted EBITDA

   $ 182.6         $ 128.5     

Senior Secured Net Leverage

     2.66        x         3.43        x   

Covenant Senior Secured Net Leverage Limit

     4.75        x         4.75        x   

Total Net Leverage

     5.78        x         5.64        x   

 

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

 

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