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| 8-K - 8-K - Foundation Building Materials, Inc. | a123117fbm8kcoverpage.htm |
Foundation Building Materials, Inc. Announces Fourth Quarter and Full Year 2017 Results
2017 Fourth Quarter Highlights
• | Net sales of $516.8 million, an increase of 11.8% compared to the prior year period |
• | Earnings per share of $1.77 and Adjusted earnings per share(1) of $0.19 |
• | Net income of $75.9 million, compared to a net loss of $8.8 million in the prior year period |
• | Adjusted EBITDA(1) of $36.9 million and Adjusted EBITDA margin(1) of 7.1% |
• | Completed two acquisitions in the quarter |
2017 Full Year Highlights
• | Record net sales of $2,060.9 million, an increase of 48.0% compared to the prior year |
• | Base business net sales increased $44.4 million, an increase of 5.8% compared to the prior year |
• | Earnings per share of $1.99 and Adjusted earnings per share(1) of $0.35 |
• | Net income of $82.5 million, compared to a net loss of $28.4 million in the prior year |
• | Adjusted EBITDA(1) of $150.1 million and Adjusted EBITDA margin(1) of 7.3% |
• | Completed 10 acquisitions adding 19 branches across the U.S. and Canada |
Tustin, CA, February 27, 2018 (Business Wire) - Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building product distributors of wallboard, suspended ceiling systems and mechanical insulation in North America, today reported fourth quarter and full year 2017 financial results.
“2017 was a milestone year for Foundation Building Materials as we completed our first year as a publicly traded company, posted record financial results, and significantly expanded our geographic footprint in the markets we serve,” said Ruben Mendoza, President and CEO. “We recorded solid fourth quarter financial performance, highlighted by year-over-year net sales growth of 11.8%, earnings per share of $1.77 compared to a net loss per share of $0.29 in the prior year period and adjusted earnings per share(1) of $0.19 compared to a loss of $0.09 per share in the prior year. While base business net sales expanded $4.0 million, or 2.1%, our sustained pricing discipline led to aggregate price increases across our business segments and consolidated gross margins of 29.7%, a record level of profitability for our company.”
2017 Fourth Quarter Results
Consolidated net sales for the quarter ended December 31, 2017, were $516.8 million compared to $462.2 million for the quarter ended December 31, 2016, representing an increase of $54.6 million, or 11.8%. Net sales from acquired branches and those that were strategically combined with existing branches increased by $50.6 million period over period. Base business net sales increased $4.0 million, or 2.1%, for the quarter ended December 31, 2017, compared to the quarter ended December 31, 2016.
Consolidated gross profit for the quarter ended December 31, 2017, was $153.6 million compared to $132.3 million for the quarter ended December 31, 2016, representing an increase of $21.3 million, or 16.2%. This increase was primarily due to higher sales volume and contributions from 2017 acquisitions. Gross margin for the quarter ended December 31, 2017, was 29.7% compared to 28.6% for the quarter ended December 31, 2016. This increase in gross margin was primarily due to an increase in margins in wallboard and suspended ceiling systems.
(1) Adjusted EBITDA, Adjusted net income and Adjusted earnings per share are non-GAAP measures. See the supplementary schedules at the end of this press release for a discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales.
1
Selling, general, and administrative, or SG&A, expenses for the quarter ended December 31, 2017, were $117.5 million compared to $110.1 million for the quarter ended December 31, 2016, representing an increase of $7.4 million. As a percentage of net sales, SG&A expenses were 22.7% for the quarter ended December 31, 2017, compared to 23.8% for the quarter ended December 31, 2016. The decrease in SG&A expenses as a percentage of net sales was primarily due to lower transaction costs and improved operating efficiencies.
Net income for the quarter ended December 31, 2017, was $75.9 million, or $1.77 per diluted share, which was an increase of $84.7 million, compared to a net loss of $8.8 million, or $0.29 net loss per share, for the quarter ended December 31, 2016. Net income for the quarter ended December 31, 2017, increased primarily due to the passage of the Tax Cut and Jobs Act of 2017, which decreased the Company’s undiscounted liability under its Tax Receivable Agreement by $68.0 million from $203.8 million at September 30, 2017 to $135.8 million at December 31, 2017.
Adjusted EBITDA(1) was $36.9 million and Adjusted EBITDA margin(1) was 7.1% for the quarter ended December 31, 2017.
2017 Fourth Quarter Segment Results
Specialty Building Products (“SBP”). SBP net sales for the quarter ended December 31, 2017, were $443.7 million compared to $400.5 million for the quarter ended December 31, 2016, representing an increase of $43.2 million, or 10.8%. Net sales from acquired branches that were strategically combined with existing branches increased by $39.2 million period-over-period. The increase in SBP net sales is primarily due to contributions from acquisitions and higher net sales from wallboard and complementary and other products.
SBP gross profit for the quarter ended December 31, 2017, was $133.2 million compared to $115.0 million for the quarter ended December 31, 2016, representing an increase of $18.2 million, or 15.8%. SBP gross profit increased with higher sales volume and contributions from 2017 acquisitions. SBP gross margin for the quarter ended December 31, 2017, was 30.0% compared to 28.7% for the quarter ended December 31, 2016. The increase in SBP gross margin was primarily due to the Company's disciplined pricing approach and improved purchasing power.
Mechanical Insulation (“MI”). MI net sales for the quarter ended December 31, 2017, were $73.1 million compared to $61.7 million for the quarter ended December 31, 2017, representing an increase of $11.4 million, or 18.4%. The increase was primarily due to higher net sales to industrial end markets.
MI gross profit for the quarter ended December 31, 2017, was $20.5 million compared to $17.3 million for the quarter ended December 31, 2016, representing an increase of $3.2 million, or 18.6%. The increase was primarily due to higher sales volume. MI gross margin was 28.0% for both the quarter ended December 31, 2017, and the quarter ended December 31, 2016.
2017 Full Year Results
Consolidated net sales for the year ended December 31, 2017, were $2,060.9 million compared to $1,392.5 million for the year ended December 31, 2016, representing an increase of $668.4 million, or 48.0%. Net sales from acquired branches and existing branches that were strategically combined contributed $624.0 million of the increase. Base business net sales increased $44.4 million, or 5.8% year-over-year, due to continued organic growth initiatives.
Consolidated gross profit for the year ended December 31, 2017, was $597.9 million compared to $396.8 million for the year ended December 31, 2016, representing an increase of $201.1 million, or 50.7%. The increase in gross profit was primarily due to the increase in sales volume and contributions from acquisitions. Consolidated gross margin for the year ended December 31, 2017 was 29.0% compared to 28.5% for the year ended December 31, 2016.
SG&A expenses were $461.6 million for the year ended December 31, 2017, compared to $328.8 million for the year ended December 31, 2016, representing an increase of $132.8 million, or 40.4%. As a percentage of net sales, SG&A expenses were 22.4% for the year ended December 31, 2017, compared to 23.6% for the year ended December 31, 2016. The decrease in SG&A expenses as a percentage of net sales was primarily due to lower transaction costs and improved operating efficiencies.
For the year ended December 31, 2017, net income was $82.5 million, or $1.99 per diluted share, an increase of $110.9 million, compared to a net loss of $28.4 million, or $0.95 net loss per share for the year ended December 31, 2016.
(1) Adjusted EBITDA, Adjusted net income and Adjusted earnings per share are non-GAAP measures. See the supplementary schedules at the end of this press release for a discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales.
2
Adjusted EBITDA(1) was $150.1 million for the year ended December 31, 2017 and Adjusted EBITDA margin(1) was 7.3%.
2017 Full Year Segment Results
SBP. SBP net sales for the year ended December 31, 2017, were $1,790.1 million compared to $1,293.5 million for the year ended December 31, 2016, representing an increase of $496.6 million, or 38.4%. Net sales from acquired branches and existing branches that were strategically combined contributed $452.2 million of the net sales increase, primarily due to the acquisition of Winroc-SPI in August 2016. SBP base business net sales also increased by $44.4 million, or 5.8%, due to market share gains in the Company's wallboard and suspended ceiling systems and also in complementary and other products.
SBP gross profit for the year ended December 31, 2017, was $522.2 million compared to $371.7 million for the year ended December 31, 2016, representing an increase of $150.5 million, or 40.5%. SBP gross profit increased with higher sales volume from both acquired and base business branches. SBP gross margin for the year ended December 31, 2017 was 29.2% compared to 28.7% for the year ended December 31, 2016. The increase in gross margin was primarily due to continued pricing discipline across the markets the Company serves and improved purchasing power.
MI. MI net sales for the year ended December 31, 2017, were $270.8 million compared to $99.0 million for the year ended December 31, 2016. The Company entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016; therefore, there was a shorter period of sales in this segment during the prior year.
MI gross profit for the year ended December 31, 2017, was $75.7 million compared to $25.1 million for the year ended December 31, 2016, representing an increase of $50.6 million. The increase in MI gross profit for the year ended December 31, 2017, compared to the year ended December 31, 2016, is primarily due to the timing of the Winroc-SPI acquisition in August 2016 and reflects a partial year of results in 2016. MI gross margin for the year ended December 31, 2017, was 27.9% as compared to 25.3% for the year ended December 31, 2016. Excluding the adjustment for fair market value adjustments of $0.1 million and $2.3 million in the years ended December 31, 2017 and 2016, respectively, MI gross margin for the year ended December 31, 2017 was 28.0% as compared to 27.7% for the year ended December 31, 2016. Excluding the impact of the fair value adjustments, the 30 basis point increase in MI gross margin was primarily due to operational efficiencies.
Acquisitions
Foundation Building Materials supplements organic growth with strategic acquisitions. During 2017, the Company completed 10 acquisitions totaling 19 branches. The 10 acquisitions contributed $78.4 million of net sales for the year ended December 31, 2017.
Expected Debt Refinancing
The Company is actively exploring the refinancing of its $575.0 million senior secured term notes, or Notes, which currently carry a coupon rate of 8.25%. In the third quarter of 2018, the premium prepayment of these Notes will decrease, and the Company will have opportunities to refinance the Notes, which could provide estimated annual cash interest savings of $10.0 million to $15.0 million. As Foundation Building Materials continues to optimize its capital structure and operating efficiencies, the Company expects its generation of cash flow to improve, which will allow Foundation Building Materials to further reduce its leverage in the next couple of years.
Fourth Quarter Earnings Release and Conference Call
In conjunction with this release, Foundation Building Materials, Inc. will host a conference call today, Tuesday, February 27, 2018, at 9:00 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 (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and |
• | Audio Replay: A replay of the call will be available beginning at 12:00 PM Eastern Time on Tuesday, February 27, 2018, and ending 11:59 PM Eastern Time March 6, 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 13675754. |
(1) Adjusted EBITDA, Adjusted net income and Adjusted earnings per share are non-GAAP measures. See the supplementary schedules at the end of this press release for a discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales.
3
About Foundation Building Materials
Foundation Building Materials is a specialty building products distributor of wallboard, suspended ceiling systems, and mechanical insulation throughout North America. Based in Tustin, California, the Company employs more than 3,700 people and operates more than 220 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 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 current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. We do not intend, and undertake 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 our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and our 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.
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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended December 31, (Unaudited) | Year Ended December 31, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
Net sales | $ | 516,769 | $ | 462,194 | $ | 2,060,902 | $ | 1,392,509 | |||||
Cost of goods sold | 363,134 | 329,937 | 1,463,041 | 995,704 | |||||||||
Gross profit | 153,635 | 132,257 | 597,861 | 396,805 | |||||||||
Operating expenses: | |||||||||||||
Selling, general and administrative | 117,490 | 110,089 | 461,564 | 328,847 | |||||||||
Depreciation and amortization | 19,698 | 17,773 | 76,850 | 51,378 | |||||||||
Total operating expenses | 137,188 | 127,862 | 538,414 | 380,225 | |||||||||
Income from operations | 16,447 | 4,395 | 59,447 | 16,580 | |||||||||
Interest expense | (15,877 | ) | (15,309 | ) | (61,071 | ) | (52,511 | ) | |||||
Other income (expense), net | 68,083 | (7,265 | ) | 81,502 | (7,172 | ) | |||||||
Income (loss) before income taxes | 68,653 | (18,179 | ) | 79,878 | (43,103 | ) | |||||||
Income tax benefit | (7,239 | ) | (9,375 | ) | (2,602 | ) | (14,733 | ) | |||||
Net income (loss) | $ | 75,892 | $ | (8,804 | ) | $ | 82,480 | $ | (28,370 | ) | |||
Earnings (loss) per share data: | |||||||||||||
Basic | $ | 1.77 | $ | (0.29 | ) | $ | 1.99 | $ | (0.95 | ) | |||
Diluted | $ | 1.77 | $ | (0.29 | ) | $ | 1.99 | $ | (0.95 | ) | |||
Weighted average shares outstanding: | |||||||||||||
Basic | 42,865,407 | 29,974,239 | 41,486,496 | 29,974,239 | |||||||||
Diluted | 42,890,114 | 29,974,239 | 41,490,653 | 29,974,239 | |||||||||
5
FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 12,101 | $ | 28,552 | |||
Accounts receivable—net of allowance for doubtful accounts of $4,651 and $5,685, respectively | 280,023 | 261,686 | |||||
Other receivables | 59,462 | 52,845 | |||||
Inventories | 184,436 | 157,991 | |||||
Prepaid expenses and other current assets | 12,636 | 12,516 | |||||
Total current assets | 548,658 | 513,590 | |||||
Property and equipment, net | 151,408 | 144,387 | |||||
Intangible assets, net | 189,770 | 215,381 | |||||
Goodwill | 458,737 | 437,935 | |||||
Other assets | 5,604 | 9,692 | |||||
Total assets | $ | 1,354,177 | $ | 1,320,985 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 156,345 | $ | 119,788 | |||
Accrued payroll and employee benefits | 21,158 | 26,956 | |||||
Accrued taxes | 7,790 | 9,151 | |||||
Tax receivable agreement | 15,892 | — | |||||
Other current liabilities | 41,093 | 49,613 | |||||
Total current liabilities | 242,278 | 205,508 | |||||
Asset-based revolving credit facility | 47,486 | 208,469 | |||||
Long-term portion of notes payable, net | 534,379 | 525,487 | |||||
Tax receivable agreement | 119,912 | — | |||||
Deferred income taxes, net | 17,819 | 26,867 | |||||
Other liabilities | 13,639 | 26,138 | |||||
Total liabilities | 975,513 | 992,469 | |||||
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; 42,865,407 and 29,974,239 shares issued, respectively | 13 | — | |||||
Additional paid-in capital | 330,113 | 364,815 | |||||
Retained earnings (accumulated deficit) | 46,184 | (36,296 | ) | ||||
Accumulated other comprehensive income (loss) | 2,354 | (3 | ) | ||||
Total stockholders' equity | 378,664 | 328,516 | |||||
Total liabilities and stockholders' equity | $ | 1,354,177 | $ | 1,320,985 | |||
6
FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31, | ||||||
2017 | 2016 | |||||
Cash flows from operating activities: | ||||||
Net income (loss) | $ | 82,480 | $ | (28,370 | ) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
Depreciation | 30,582 | 16,487 | ||||
Amortization of intangible assets | 46,268 | 34,891 | ||||
Amortization of debt issuance costs and debt discount | 9,910 | 5,950 | ||||
Inventory fair value purchase accounting adjustment | 814 | 6,469 | ||||
Loss on extinguishment of debt | — | 5,354 | ||||
Provision for doubtful accounts | 2,095 | 1,608 | ||||
Stock-based compensation | 2,199 | — | ||||
Reduction in tax receivable agreement liability | (68,033 | ) | — | |||
Unrealized (gain) loss on derivative instruments, net | (13,059 | ) | 6,952 | |||
Loss on disposal of property and equipment | 276 | 1,791 | ||||
Deferred income taxes | (6,081 | ) | (17,669 | ) | ||
Change in assets and liabilities, net of effects of acquisitions: | ||||||
Accounts receivable | 1,115 | 5,985 | ||||
Other receivables | (4,078 | ) | (13,220 | ) | ||
Inventories | (16,359 | ) | (9,727 | ) | ||
Prepaid expenses and other current assets | 260 | (3,588 | ) | |||
Other assets | 2,980 | (800 | ) | |||
Accounts payable | 25,975 | (21,622 | ) | |||
Accrued payroll and employee benefits | (6,015 | ) | 3,931 | |||
Accrued taxes | (1,385 | ) | 3,392 | |||
Other liabilities | (12,683 | ) | 35,316 | |||
Net cash provided by operating activities | 77,261 | 33,130 | ||||
Cash flows from investing activities: | ||||||
Purchases of property and equipment | (29,760 | ) | (30,473 | ) | ||
Payment of net working capital adjustments related to acquisitions | (405 | ) | — | |||
Proceeds from net working capital adjustments related to acquisitions | 8,602 | — | ||||
Proceeds from the disposal of fixed assets | 2,586 | 587 | ||||
Acquisitions, net of cash acquired | (77,961 | ) | (401,919 | ) | ||
Net cash used in investing activities | (96,938 | ) | (431,805 | ) | ||
Cash flows from financing activities: | ||||||
Proceeds from asset-based revolving credit facility | 400,239 | 456,469 | ||||
Repayments of asset-based revolving credit facility | (561,509 | ) | (318,000 | ) | ||
Principal borrowings on long-term debt | — | 645,000 | ||||
Principal payments on long-term debt | — | (397,369 | ) | |||
Debt issuance costs | — | (34,406 | ) | |||
Principal repayment of capital lease obligations | (2,837 | ) | (1,175 | ) | ||
Issuance of common stock | 163,952 | — | ||||
Capital contributions | 2,997 | 66,205 | ||||
7
Capital distributions | — | (67 | ) | |||
Net cash provided by financing activities | 2,842 | 416,657 | ||||
Effect of exchange rate changes on cash | 384 | (92 | ) | |||
Net (decrease) increase in cash | (16,451 | ) | 17,890 | |||
Cash and cash equivalents at beginning of period | 28,552 | 10,662 | ||||
Cash and cash equivalents at end of period | $ | 12,101 | $ | 28,552 | ||
Supplemental disclosures of cash flow information: | ||||||
Cash paid for income taxes | $ | 4,129 | $ | 4,448 | ||
Cash paid for interest | $ | 50,866 | $ | 19,745 | ||
Cash paid during the period for early debt repayment penalty | $ | — | $ | 1,600 | ||
Supplemental disclosures of non-cash investing and financing activities: | ||||||
Change in fair value of derivatives, net of tax | $ | 2,970 | $ | 1,461 | ||
Assets acquired under capital lease | $ | 670 | $ | 3,196 | ||
Goodwill adjustment for purchase price allocation | $ | 519 | $ | 1,210 | ||
Tax receivable agreement | $ | 203,837 | $ | — | ||
Embedded derivative in issued notes | $ | — | $ | 6,200 | ||
Notes received for disposals of equipment | $ | 134 | $ | — | ||
8
FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY SEGMENT AND PRODUCT LINE AND SEGMENT GROSS PROFIT AND GROSS MARGIN
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 AND 2016 (Unaudited)
(in thousands)
Three Months Ended December 31, | Change | |||||||||||||||||
2017 | 2016 | $ | % | |||||||||||||||
SBP Segment | ||||||||||||||||||
Wallboard(1) | $ | 172,910 | 39.0 | % | $ | 153,410 | 38.3 | % | $ | 19,500 | 12.7 | % | ||||||
Suspended ceiling systems | 80,895 | 18.2 | % | 73,641 | 18.4 | % | 7,254 | 9.9 | % | |||||||||
Metal framing | 67,925 | 15.3 | % | 63,579 | 15.9 | % | 4,346 | 6.8 | % | |||||||||
Complementary and other products(1) | 121,943 | 27.5 | % | 109,834 | 27.4 | % | 12,109 | 11.0 | % | |||||||||
Total SBP net sales | $ | 443,673 | 100.0 | % | $ | 400,464 | 100.0 | % | $ | 43,209 | 10.8 | % | ||||||
MI Segment | ||||||||||||||||||
Commercial and industrial insulation | $ | 58,179 | 79.6 | % | $ | 47,802 | 77.4 | % | $ | 10,377 | 21.7 | % | ||||||
Non-insulation products | 14,917 | 20.4 | % | 13,928 | 22.6 | % | 989 | 7.1 | % | |||||||||
Total MI net sales | $ | 73,096 | 100.0 | % | $ | 61,730 | 100.0 | % | $ | 11,366 | 18.4 | % | ||||||
Total net sales | $ | 516,769 | $ | 462,194 | $ | 54,575 | 11.8 | % | ||||||||||
Gross profit - SBP | $ | 133,152 | $ | 114,981 | $ | 18,171 | 15.8 | % | ||||||||||
Gross profit - MI | 20,483 | 17,276 | 3,207 | 18.6 | % | |||||||||||||
Total gross profit | $ | 153,635 | $ | 132,257 | $ | 21,378 | 16.2 | % | ||||||||||
Gross margin - SBP | 30.0 | % | 28.7 | % | 1.3 | % | ||||||||||||
Gross margin - MI | 28.0 | % | 28.0 | % | — | % | ||||||||||||
Total gross margin | 29.7 | % | 28.6 | % | 1.1 | % | ||||||||||||
(1) For the year ended December 31, 2017, certain product classification categories have changed. Wallboard accessories have been reclassified from "Wallboard" to "Complementary and other products." All prior periods presented have been reclassified to conform to the current year presentation. | ||||||||||||||||||
9
FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY SEGMENT AND PRODUCT LINE AND SEGMENT GROSS PROFIT AND GROSS MARGIN
FOR THE YEAR ENDED DECEMBER 31, 2017 AND 2016
(in thousands)
Year Ended December 31, | Change | |||||||||||||||||
2017 | 2016 | $ | % | |||||||||||||||
SBP Segment | ||||||||||||||||||
Wallboard(1) | $ | 701,467 | 39.2 | % | $ | 525,044 | 40.6 | % | $ | 176,423 | 33.6 | % | ||||||
Suspended ceiling systems | 328,815 | 18.3 | % | 191,964 | 14.8 | % | 136,851 | 71.3 | % | |||||||||
Metal framing | 280,410 | 15.7 | % | 219,994 | 17.0 | % | 60,416 | 27.5 | % | |||||||||
Complementary and other products(1) | 479,422 | 26.8 | % | 356,494 | 27.6 | % | 122,928 | 34.5 | % | |||||||||
Total SBP net sales | $ | 1,790,114 | 100.0 | % | $ | 1,293,496 | 100.0 | % | $ | 496,618 | 38.4 | % | ||||||
MI Segment | ||||||||||||||||||
Commercial and industrial insulation | $ | 206,668 | 76.3 | % | $ | 75,929 | 76.7 | % | $ | 130,739 | 172.2 | % | ||||||
Non-insulation products | 64,120 | 23.7 | % | 23,084 | 23.3 | % | 41,036 | 177.8 | % | |||||||||
Total MI net sales | $ | 270,788 | 100.0 | % | $ | 99,013 | 100.0 | % | $ | 171,775 | 173.5 | % | ||||||
Total net sales | $ | 2,060,902 | $ | 1,392,509 | $ | 668,393 | 48.0 | % | ||||||||||
Gross profit - SBP | $ | 522,189 | $ | 371,715 | $ | 150,474 | 40.5 | % | ||||||||||
Gross profit - MI | 75,672 | 25,090 | 50,582 | 201.6 | % | |||||||||||||
Total gross profit | $ | 597,861 | $ | 396,805 | $ | 201,056 | 50.7 | % | ||||||||||
Gross margin - SBP | 29.2 | % | 28.7 | % | 0.5 | % | ||||||||||||
Gross margin - MI | 27.9 | % | 25.3 | % | 2.6 | % | ||||||||||||
Total gross margin | 29.0 | % | 28.5 | % | 0.5 | % | ||||||||||||
(1) For the year ended December 31, 2017, certain product classification categories have changed. Wallboard accessories have been reclassified from "Wallboard" to "Complementary and other products." All prior periods presented have been reclassified to conform to the current year presentation. | ||||||||||||||||||
10
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 AND 2016 (Unaudited) AND
YEAR ENDED DECEMBER 31, 2017 AND 2016 (Unaudited)
(in thousands)
Three Months Ended December 31, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Base business (1) | $ | 194,875 | $ | 190,912 | $ | 3,963 | 2.1 | % | ||||||
Acquired and combined (2) | 321,894 | 271,282 | 50,612 | 18.7 | % | |||||||||
Net sales | $ | 516,769 | $ | 462,194 | $ | 54,575 | 11.8 | % | ||||||
(1) Represents net sales from branches that were owned by us since January 1, 2016 and branches that were opened by us during such period. | ||||||||||||||
(2) Represents branches acquired and combined after January 1, 2016, primarily as a result of our strategic combination of branches. | ||||||||||||||
Year Ended December 31, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Base business (1) | $ | 815,987 | $ | 771,571 | $ | 44,416 | 5.8 | % | ||||||
Acquired and combined (2) | 1,244,915 | 620,938 | 623,977 | 100.5 | % | |||||||||
Net sales | $ | 2,060,902 | $ | 1,392,509 | $ | 668,393 | 48.0 | % | ||||||
(1) Represents net sales from branches that were owned by us since January 1, 2016 and branches that were opened by us during such period. | ||||||||||||||
(2) Represents branches acquired and combined after January 1, 2016, primarily as a result of our strategic combination of branches. | ||||||||||||||
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FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY SEGMENT AND PRODUCT
FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 AND 2016 (Unaudited) AND
YEAR ENDED DECEMBER 31, 2017 AND 2016 (Unaudited)
(in thousands)
Three Months Ended December 31, 2016 | Base Business Net Sales Increase | Acquired and Combined Net Sales Increase | Three Months Ended December 31, 2017 | Total Net Sales % Increase | Base Business Net Sales % Increase (1) | Acquired and Combined Net Sales % Increase(2) | |||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Wallboard | $ | 153,410 | $ | 1,266 | $ | 18,234 | $ | 172,910 | 12.7 | % | 1.6 | % | 24.4 | % | |||||||||
Suspended ceiling systems | 73,641 | 562 | 6,692 | 80,895 | 9.9 | % | 2.1 | % | 14.1 | % | |||||||||||||
Metal framing | 63,579 | 739 | 3,607 | 67,925 | 6.8 | % | 2.2 | % | 12.2 | % | |||||||||||||
Complementary and other products | 109,834 | 1,395 | 10,714 | 121,943 | 11.0 | % | 2.7 | % | 18.6 | % | |||||||||||||
SBP net sales | 400,464 | 3,962 | 39,247 | 443,673 | 10.8 | % | 2.1 | % | 18.7 | % | |||||||||||||
MI net sales | 61,730 | — | 11,366 | 73,096 | 18.4 | % | — | % | 18.4 | % | |||||||||||||
Total net sales | $ | 462,194 | $ | 3,962 | $ | 50,613 | $ | 516,769 | 11.8 | % | 2.1 | % | 18.7 | % | |||||||||
Average daily net sales | $ | 7,455 | $ | 64 | $ | 816 | $ | 8,335 | 11.8 | % | 2.1 | % | 18.7 | % | |||||||||
(1) Represents base business net sales increase as a percentage of base business net sales for the three months ended December 31, 2016. | |||||||||||||||||||||||
(2) Represents as acquired and combined net sales increase as a percentage of acquired and combined net sales for the three months ended December 31, 2016. | |||||||||||||||||||||||
Year Ended December 31, 2016 | Base Business Net Sales Increase | Acquired and Combined Net Sales Increase | Year Ended December 31, 2017 | Total Net Sales % Increase | Base Business Net Sales % Increase(1) | Acquired and Combined Net Sales % Increase(2) | |||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Wallboard | $ | 525,044 | $ | 14,085 | $ | 162,338 | $ | 701,467 | 33.6 | % | 4.3 | % | 81.0 | % | |||||||||
Suspended ceiling systems | 191,964 | 11,510 | 125,341 | 328,815 | 71.3 | % | 11.3 | % | 139.3 | % | |||||||||||||
Metal framing | 219,994 | 5,669 | 54,747 | 280,410 | 27.5 | % | 4.1 | % | 66.5 | % | |||||||||||||
Complementary and other products | 356,494 | 13,152 | 109,776 | 479,422 | 34.5 | % | 6.3 | % | 73.5 | % | |||||||||||||
SBP net sales | 1,293,496 | 44,416 | 452,202 | 1,790,114 | 38.4 | % | 5.8 | % | 86.6 | % | |||||||||||||
MI net sales | 99,013 | — | 171,775 | 270,788 | 173.5 | % | — | % | 173.5 | % | |||||||||||||
Total net sales | $ | 1,392,509 | $ | 44,416 | $ | 623,977 | $ | 2,060,902 | 48.0 | % | 5.8 | % | 100.5 | % | |||||||||
Average daily net sales | $ | 5,482 | $ | 200 | $ | 2,496 | $ | 8,178 | 49.2 | % | 6.6 | % | 102.1 | % | |||||||||
(1) Represents base business net sales increase in the year ended December 31, 2017 as a percentage of base business net sales for the year ended December 31, 2016. | |||||||||||||||||||||||
(2) Represents acquired and combined net sales increase in the year ended December 31, 2017 as a percentage of acquired and combined net sales for the year ended December 31, 2016. | |||||||||||||||||||||||
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Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
In addition to results under GAAP, this press release contains certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted net income 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. We calculate EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization. We calculate Adjusted EBITDA as EBITDA before unrealized (gains) losses on derivative financial instruments, IPO and public company readiness expenses, stock-based compensation, non-recurring adjustments such as non-cash purchase accounting adjustments, losses on the disposal of property and equipment, hurricane related costs, transaction costs, management fees and changes in the value of the tax receivable agreement liability. We calculate Adjusted net income as net income (loss) before unrealized (gains) losses on derivative financial instruments, IPO and public company readiness expenses, stock-based compensation, non-recurring adjustments such as non-cash purchase accounting adjustments, losses on the disposal of property and equipment, hurricane related costs, transaction costs, management fees and changes in the value of the tax receivable agreement liability and the effect of income taxes related to these adjustments. We calculate Adjusted EPS as Adjusted net income on a per weighted average share outstanding basis.
EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted EPS are presented because they are important metrics used by management as a means by which it assesses financial performance. EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted EPS are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. These measures, when used in conjunction with related GAAP financial measures, provides investors with an additional financial analytical framework that may be useful in assessing our company and its results of operations.
EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted EPS have certain limitations. These measures should not be considered as alternatives to net income and earnings per share, or as any other measure of financial performance derived in accordance with GAAP. Adjusted EBITDA, Adjusted net income and Adjusted EPS also should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted EPS are not intended to be liquidity measures. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than we do, limiting their usefulness as comparative measures.
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The following is a reconciliation of Adjusted EBITDA to the nearest GAAP measure, net income (loss) (unaudited):
Three Months Ended December 31, | ||||||
2017 | 2016 | |||||
(in thousands) | ||||||
Net income (loss) | $ | 75,892 | $ | (8,804 | ) | |
Interest expense, net | 15,851 | 15,303 | ||||
Income tax benefit | (7,239 | ) | (9,375 | ) | ||
Depreciation and amortization | 19,698 | 17,773 | ||||
EBITDA | 104,202 | 14,897 | ||||
Unrealized (gain) loss on derivative financial instrument | (14 | ) | 7,271 | |||
IPO and public company readiness expenses | 157 | — | ||||
Stock-based compensation | 220 | — | ||||
Non-cash purchase accounting effects(a) | (127 | ) | 96 | |||
Loss on disposal of property and equipment | 73 | 1,548 | ||||
Transaction costs(b) | 411 | — | ||||
Management fees(c) | — | 903 | ||||
Decrease in TRA liability(d) | (68,033 | ) | — | |||
Adjusted EBITDA | $ | 36,889 | $ | 24,715 | ||
Adjusted EBITDA margin(e) | 7.1 | % | 5.3 | % | ||
(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 one-time, third-party advisor costs related to our acquisitions in the period, including fees to financial advisors, accountants, attorneys and other professionals. |
(c) | Represents fees paid to former private equity sponsors for services provided pursuant to past management agreements. These fees are no longer being incurred. |
(d) | Related to adjustment in liability related to the Tax Cut and Jobs Act of 2017. See Note 19, Tax Receivable Agreement, to the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. |
(e) | Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales. |
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Year Ended December 31, | ||||||
2017 | 2016 | |||||
(in thousands) | ||||||
Net income (loss) | $ | 82,480 | $ | (28,370 | ) | |
Interest expense, net | 60,984 | 52,487 | ||||
Income tax benefit | (2,602 | ) | (14,733 | ) | ||
Depreciation and amortization | 76,850 | 51,378 | ||||
EBITDA | 217,712 | 60,762 | ||||
Unrealized (gain) loss on derivative financial instrument | (13,059 | ) | 7,123 | |||
IPO and public company readiness expenses | 5,085 | — | ||||
Stock-based compensation | 2,198 | — | ||||
Non-cash purchase accounting effects(a) | 815 | 6,469 | ||||
Loss on disposal of property and equipment | 275 | 1,791 | ||||
Hurricane related costs(b) | 430 | — | ||||
Transaction costs(c)(d) | 4,298 | — | ||||
Management fees(e) | 353 | 3,622 | ||||
Decrease in TRA liability(f) | (68,033 | ) | — | |||
Adjusted EBITDA | $ | 150,074 | $ | 79,767 | ||
Adjusted EBITDA margin(g) | 7.3 | % | 5.7 | % | ||
(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 costs related to payroll and inventory resulting from Hurricanes Harvey and Irma. |
(c) | Represents one-time, third-party advisor costs related to our acquisitions in the period, including fees to financial advisors, accountants, attorneys and other professionals. |
(d) | Certain amounts have been reclassified for the three months ended March 31, 2017, to make our presentation of Adjusted EBITDA consistent for the year ended December 31, 2017. |
(e) | Represents fees paid to former private equity sponsors for services provided pursuant to past management agreements. These fees are no longer being incurred. |
(f) | Related to adjustment in liability related to the Tax Cut and Jobs Act of 2017. See Note 19, Tax Receivable Agreement, to the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. |
(g) | Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales. |
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The following is a reconciliation of Adjusted net income (loss) to the nearest GAAP measure, net income (loss)(unaudited):
Three Months Ended December 31, | ||||||
2017 | 2016 | |||||
(in thousands, except share and per share data) | ||||||
Net income (loss) | $ | 75,892 | $ | (8,804 | ) | |
Unrealized (gain) loss on derivative financial instrument | (14 | ) | 7,271 | |||
IPO and public company readiness expenses | 157 | — | ||||
Stock-based compensation | 220 | — | ||||
Non-cash purchase accounting effects(a) | (127 | ) | 96 | |||
Loss on disposal of property and equipment | 73 | 1,548 | ||||
Transaction costs(b) | 411 | — | ||||
Management fees(c) | — | 903 | ||||
Decrease in TRA liability(d) | (68,033 | ) | — | |||
Tax effect of adjustments(e) | (278 | ) | (3,790 | ) | ||
Adjusted net income (loss) | $ | 8,301 | $ | (2,776 | ) | |
Earnings (loss) per share data as reported: | ||||||
Basic | $ | 1.77 | $ | (0.29 | ) | |
Diluted | $ | 1.77 | $ | (0.29 | ) | |
Earnings (loss) per share data as adjusted: | ||||||
Basic | $ | 0.19 | $ | (0.09 | ) | |
Diluted | $ | 0.19 | $ | (0.09 | ) | |
Weighted average shares outstanding: | ||||||
Basic | 42,865,407 | 29,974,239 | ||||
Diluted | 42,890,114 | 29,974,239 | ||||
(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 one-time, third-party advisor costs related to our acquisitions in the period, including fees to financial advisors, accountants, attorneys and other professionals. |
(c) | Represents fees paid to former private equity sponsors for services provided pursuant to past management agreements. These fees are no longer being incurred. |
(d) | Related to adjustment in liability related to the Tax Cut and Jobs Act of 2017. See Note 19, Tax Receivable Agreement, to the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. |
(e) | Represents the tax effect of the adjustments to reflect corporate income taxes. |
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Year Ended December 31, | ||||||
2017 | 2016 | |||||
(in thousands, except share and per share data) | ||||||
Net income (loss) | $ | 82,480 | $ | (28,370 | ) | |
Unrealized (gain) loss on derivative financial instrument | (13,059 | ) | 7,123 | |||
IPO and public company readiness expenses | 5,085 | — | ||||
Stock-based compensation | 2,198 | — | ||||
Non-cash purchase accounting effects(a) | 815 | 6,469 | ||||
Loss on disposal of property and equipment | 275 | 1,791 | ||||
Hurricane related costs(b) | 430 | — | ||||
Transaction costs(c)(d) | 4,298 | — | ||||
Management fees(e) | 353 | 3,622 | ||||
Decrease in TRA liability(f) | (68,033 | ) | — | |||
Tax effect of adjustments(g) | (152 | ) | (7,336 | ) | ||
Adjusted net income (loss) | $ | 14,690 | $ | (16,701 | ) | |
Earnings (loss) per share data as reported: | ||||||
Basic | $ | 1.99 | $ | (0.95 | ) | |
Diluted | $ | 1.99 | $ | (0.95 | ) | |
Earnings (loss) per share data as adjusted: | ||||||
Basic | $ | 0.35 | $ | (0.56 | ) | |
Diluted | $ | 0.35 | $ | (0.56 | ) | |
Weighted average shares outstanding: | ||||||
Basic | 41,486,496 | 29,974,239 | ||||
Diluted | 41,490,653 | 29,974,239 | ||||
(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 costs related to payroll and inventory resulting from Hurricanes Harvey and Irma. |
(c) | Represents one-time, third-party advisor costs related to our acquisitions in the period, including fees to financial advisors, accountants, attorneys and other professionals. |
(d) | Certain amounts have been reclassified for the three months ended March 31, 2017 to make our presentation of Adjusted net income (loss) consistent. |
(e) | Represents fees paid to former private equity sponsors for services provided pursuant to past management agreements. These fees are no longer being incurred. |
(f) | Related to adjustment in liability related to the Tax Cut and Jobs Act of 2017. See Note 19, Tax Receivable Agreement, to the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. |
(g) | Represents the tax effect of the adjustments to reflect corporate income taxes. |
17