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Foundation Building Materials, Inc. Announces Second Quarter 2017 Results
2017 Second Quarter Highlights
• | Record net sales of $529.2 million, an increase of 95.9% compared to the prior year period |
• | Net income of $1.3 million, compared to a net loss of $3.0 million in the prior year period |
• | Adjusted EBITDA of $40.3 million, Adjusted EBITDA margin of 7.6%1 |
• | Completed four acquisitions in the quarter |
• | Base business net sales of $235.9 million, an increase of 9.0% compared to the prior year period |
• | Completed the integration of Winroc-SPI |
Tustin, CA, August 3, 2017 (Business Wire) - Foundation Building Materials, Inc. (NYSE: FBM), the largest specialty distributor of suspended ceiling systems in the United States and Canada and the second largest specialty distributor of wallboard in the United States and Canada, today reported second quarter 2017 financial results.
"We recorded another quarter of strong operational and financial performance, highlighted by year-over-year net sales growth of 96%, net income of $1.3 million and adjusted EBITDA of $40.3 million," said Ruben Mendoza, President and CEO. "These positive results were driven by the strength of our underlying markets, our continued growth via acquisitions, increased cross-selling of products throughout our organization, and our commitment to cost containment and procurement synergies." Mr. Mendoza continued, "Base business net sales increased 9.0% in the quarter, with a particularly strong showing from our suspended ceiling systems product category, which grew base business net sales in the category by 24.9%. We also remained active on the acquisition front, closing four more acquisitions in the quarter, and adding three more since the period ended for a total of eight in 2017. In short, we continue to execute on our long-term strategy of growing market share in key product categories, thereby achieving larger economies of scale, which benefit our customers and shareholders alike."
2017 Second Quarter Results
Consolidated net sales for the three months ended June 30, 2017 were $529.2 million compared to $270.1 million for the three months ended June 30, 2016, representing an increase of $259.1 million, or 95.9%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $239.5 million of this increase. Base business net sales increased $19.6 million, or 9.0%, for the three months ended June 30, 2017 compared to the three months ended June 30, 2016. The increase in our base business was primarily driven by the following factors:
• | an increase in suspended ceiling systems sales of approximately $6.3 million, or 24.9%, primarily due to increased market share gains in California, Texas and Colorado; |
• | an increase in wallboard sales of $5.3 million, or 5.6%, primarily due to a wallboard unit volume increase of approximately 4.2% driven by an increase in the commercial and residential end markets, and an increase in average selling price of approximately 1.4%; and |
• | an increase in other product sales of $5.6 million, or 9.6%, primarily due to continued complementary product sales growth. |
Consolidated gross profit for the three months ended June 30, 2017 was $149.5 million compared to $79.3 million for the three months ended June 30, 2016, representing an increase of $70.2 million, or 88.5%. The increase in gross profit was primarily due to the increase in sales volume and contribution from acquisitions. Consolidated gross margin for the three months ended June 30, 2017 was 28.3% compared to 29.4% for the three months ended June 30, 2016. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from ceilings and mechanical insulation on a percentage basis.
(1) Adjusted EBITDA is a non-GAAP measure. See the supplementary schedules at the end of this press release for a discussion of how we define and calculate this measure, why we believe it is important and a reconciliation thereof to the most directly comparable GAAP measure. Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales.
1
Selling, general and administrative, or SG&A, expenses consist of warehouse, delivery and general and administrative expenses. SG&A expenses for the three months ended June 30, 2017 were $113.6 million compared to $66.0 million for the three months ended June 30, 2016, representing an increase of $47.6 million, or 72.1%. As a percentage of net sales, SG&A expenses were 21.5% for the three months ended June 30, 2017 compared to 24.4% for the three months ended June 30, 2016. The decrease in SG&A expenses as a percentage of net sales was primarily due to lower transaction costs.
2017 Second Quarter Segment Results
Specialty Building Products ("SBP"). SBP net sales for the three months ended June 30, 2017 were $460.1 million compared to $270.1 million for the three months ended June 30, 2016, representing an increase of $189.9 million, or 70.3%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $170.4 million of the increase, primarily due to the acquisition of Winroc-SPI in August 2016. SBP net sales attributable to our base business also increased due to product expansion into new markets and the overall market growth in both the commercial and residential construction markets.
SBP gross profit for the three months ended June 30, 2017 was $130.7 million compared to $79.3 million for the three months ended June 30, 2016, representing an increase of $51.4 million, or 64.8%. SBP gross profit increased in line with higher sales volume and contribution from acquisitions and base business growth. SBP gross margin for the three months ended June 30, 2017 was 28.4% compared to 29.4% for the three months ended June 30, 2016. The decrease in SBP gross margin was primarily due to a change in product mix with a higher contribution from ceilings on a percentage basis.
Mechanical Insulation ("MI"). MI net sales for the three months ended June 30, 2017 were $69.1 million. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there were no sales in this segment for the three months ended June 30, 2016.
MI gross profit for the three months ended June 30, 2017 was $18.8 million. MI gross margin for the three months ended June 30, 2017 was 27.2%. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there was no gross profit in this segment for the three months ended June 30, 2016.
2017 Year-to-Date Highlights
• | Record net sales of $1,008.7 million, an increase of 96.0% compared to the prior year period |
• | Net income of $5.2 million, compared to a net loss of $4.2 million in the prior year period |
• | Completed five acquisitions in the period ended June 30, 2017 |
• | Base business net sales of $458.1 million, an increase of 10.2% compared to the prior year period |
2017 Year-to-Date Results
Consolidated net sales for the six months ended June 30, 2017 were $1,008.7 million compared to $514.8 million for the six months ended June 30, 2016, representing an increase of $493.9 million, or 96.0%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $451.5 million of the increase. Base business net sales increased $42.5 million, or 10.2%, for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. The increase in our base business was primarily driven by the following factors:
• | an increase in suspended ceiling systems sales of approximately $10.4 million, or 21.9%, primarily due to increased market share gains in California, Texas and Colorado; |
• | an increase in wallboard sales of $13.4 million, or 7.3%, primarily due to a wallboard unit volume increase of approximately 5.8% driven by an increase in the commercial and residential end markets, and an increase in average selling price of approximately 1.5%; and |
• | an increase in other product sales of $10.5 million, or 9.4%, primarily due to continued complementary product sales growth. |
Consolidated gross profit for the six months ended June 30, 2017 was $289.4 million compared to $151.6 million for the six months ended June 30, 2016, representing an increase of $137.9 million, or 91.0%. The increase in consolidated gross profit was primarily due to the increase in sales volume and contribution from acquisitions. Consolidated gross margin for the six months ended June 30, 2017 was 28.7% compared to 29.4% for the six months ended June 30, 2016. The decrease in consolidated gross margin was primarily due to a change in product mix with a higher contribution from ceilings and mechanical insulation on a percentage basis.
2
Selling, general and administrative, or SG&A, expenses consist of warehouse, delivery and general and administrative expenses. SG&A expenses for the six months ended June 30, 2017 were $226.7 million compared to $122.8 million for the six months ended June 30, 2016, representing an increase of $103.9 million, or 84.6%. As a percentage of net sales, SG&A expenses were 22.5% for the six months ended June 30, 2017 compared to 23.9% for the six months ended June 30, 2016. The decrease in SG&A expenses as a percentage of net sales was primarily due to lower transaction costs.
2017 Year-to-Date Segment Results
SBP. SBP net sales for the six months ended June 30, 2017 were $878.5 million compared to $514.8 million for the six months ended June 30, 2016, representing an increase of $363.8 million, or 70.7%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $321.3 million of the increase, primarily due to the acquisition of Winroc-SPI in August 2016. Base business net sales also increased by $42.5 million due to product expansion into new markets and the overall market growth in both the commercial and residential construction markets.
SBP gross profit for the six months ended June 30, 2017 was $253.2 million compared to $151.6 million for the six months ended June 30, 2016, representing an increase of $101.6 million, or 67.0%. SBP gross profit increased in line with higher sales volume and contribution from acquisitions and base business growth. SBP gross margin for the six months ended June 30, 2017 was 28.8% compared to 29.4% for the six months ended June 30, 2016. The decrease in SBP gross margin was primarily due to a change in product mix with a higher contribution from ceilings on a percentage basis.
MI. MI net sales for the six months ended June 30, 2017 were $130.1 million. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there were no sales in this segment for the six months ended June 30, 2016.
MI gross profit for the six months ended June 30, 2017 was $36.3 million. MI gross margin for the six months ended June 30, 2017 was 27.9%. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there was no gross profit in this segment for the six months ended June 30, 2016.
Acquisitions
We have completed the following eight acquisitions in 2017:
Acquisitions | Effective Date | Branch Locations | # of Branches Acquired | |||
American Wal-Board, Inc. | August 1, 2017 | TN, MS | 2 | |||
Ceiling and Wall Supply, Inc. | July 1, 2017 | MO, IL, KY | 5 | |||
Virginia Builders Supply, Inc. | July 1, 2017 | VA | 1 | |||
Wallboard, Inc. | May 1, 2017 | MN | 2 | |||
Gypsum Wallboard Supply, Inc. | May 1, 2017 | WA | 1 | |||
Performance Contracting, Inc (Trident) | April 28, 2017 | GA | 1 | |||
Irwin Builders Supply Corporation | April 3, 2017 | PA | 1 | |||
Dominion Interior Supply Corporation | January 3, 2017 | VA | 4 | |||
Total | 17 | |||||
The five acquisitions completed prior to June 30, 2017 contributed approximately $15.4 million of net sales to our results for the three months ended June 30, 2017 and $18.6 million for the six months ended June 30, 2017. We expect the eight acquisitions completed between January 1, 2017 and the date of this earnings release to contribute net sales of approximately $57.0 million to $61.0 million for the period from July 1, 2017 through December 31, 2017. As of August 1, 2017, all acquisitions made through June 30, 2017 were integrated from an accounting and information technology perspective.
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Conference Call Information
In conjunction with this release, Foundation Building Materials, Inc. will host a conference call today, Thursday, August 3, 2017, at 10:00 am Eastern Time. Ruben Mendoza, President and Chief Executive Officer and John Gorey, Chief Financial Officer will host the call. Investors may dial into the call at (877) 407-9039 (U.S.) or (201) 689-8470 (international) five to ten minutes prior to the start time to allow for registration. Investors may also listen to the live audio webcast via the Investor Relations page of the Foundation Building Materials, Inc. website at http://investors.fbmsales.com. Please allow 15 minutes prior to the call to download and install any necessary audio software.
An audio replay of the event will be archived on the Investor Relations page of the company's website at
http://investors.fbmsales.com. The audio replay will also be available via telephone from Thursday, August 3, 2017, at approximately 12:00 p.m. Eastern Time through Thursday, August 10, 2017, at 11:59 p.m. Eastern Time. Dial (844) 512-2921 and enter the passcode 13666696. International callers should dial (412) 317-6671 and enter the same passcode number to access the audio replay.
About Foundation Building Materials
Foundation Building Materials is a specialty distributor of wallboard, suspended ceiling systems, and mechanical insulation throughout the U.S. and Canada. Based in Tustin, California, the Company employs more than 3,500 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 Report 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:
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com
Media Relations:
Joele Frank, Wilkinson Brimmer Katcher
Joe Sala or Ed Trissel
212-355-4449
- Financial Tables Follow -
4
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands, except share and per share data)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 529,230 | $ | 270,147 | $ | 1,008,687 | $ | 514,752 | |||||||
Cost of goods sold (exclusive of depreciation and amortization) | 379,698 | 190,812 | 719,244 | 363,172 | |||||||||||
Gross profit | 149,532 | 79,335 | 289,443 | 151,580 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 113,602 | 66,025 | 226,664 | 122,796 | |||||||||||
Depreciation and amortization | 19,027 | 10,281 | 37,423 | 19,894 | |||||||||||
Total operating expenses | 132,629 | 76,306 | 264,087 | 142,690 | |||||||||||
Income from operations | 16,903 | 3,029 | 25,356 | 8,890 | |||||||||||
Interest expense | (14,876 | ) | (8,478 | ) | (30,125 | ) | (16,514 | ) | |||||||
Other income, net | 95 | 4 | 13,384 | 14 | |||||||||||
Income (loss) before income taxes | 2,122 | (5,445 | ) | 8,615 | (7,610 | ) | |||||||||
Income tax expense (benefit) | 862 | (2,485 | ) | 3,426 | (3,389 | ) | |||||||||
Net income (loss) | $ | 1,260 | $ | (2,960 | ) | $ | 5,189 | $ | (4,221 | ) | |||||
Earnings (loss) per share data: | |||||||||||||||
Basic | $ | 0.03 | $ | (0.10 | ) | $ | 0.13 | $ | (0.14 | ) | |||||
Diluted | $ | 0.03 | $ | (0.10 | ) | $ | 0.13 | $ | (0.14 | ) | |||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 42,865,407 | 29,974,239 | 40,084,730 | 29,974,239 | |||||||||||
Diluted | 42,879,319 | 29,974,239 | 40,084,940 | 29,974,239 | |||||||||||
5
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
JUNE 30, 2017 AND DECEMBER 31, 2016
(in thousands, except share data)
June 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 19,946 | $ | 28,552 | |||
Accounts receivable—net of allowance for doubtful accounts of $5,266 and $5,685, respectively | 306,104 | 261,686 | |||||
Other receivables | 43,486 | 52,845 | |||||
Inventories | 167,425 | 157,991 | |||||
Prepaid expenses and other current assets | 12,227 | 12,516 | |||||
Total current assets | 549,188 | 513,590 | |||||
Property and equipment, net | 153,282 | 144,387 | |||||
Intangible assets, net | 205,496 | 215,381 | |||||
Goodwill | 452,205 | 437,935 | |||||
Other assets | 6,420 | 9,692 | |||||
Total assets | $ | 1,366,591 | $ | 1,320,985 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 143,483 | $ | 119,788 | |||
Accrued payroll and employee benefits | 22,624 | 26,956 | |||||
Accrued taxes | 7,690 | 9,151 | |||||
Other current liabilities | 43,602 | 49,613 | |||||
Total current liabilities | 217,399 | 205,508 | |||||
Asset-based revolving credit facility | 74,247 | 208,469 | |||||
Long-term portion of notes payable, net | 529,822 | 525,487 | |||||
Tax receivable agreement | 203,837 | — | |||||
Deferred income taxes, net | 29,347 | 26,867 | |||||
Other liabilities | 12,099 | 26,138 | |||||
Total liabilities | 1,066,751 | 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 | 329,679 | 364,815 | |||||
Accumulated deficit | (31,107 | ) | (36,296 | ) | |||
Accumulated other comprehensive income (loss) | 1,255 | (3 | ) | ||||
Total stockholders' equity | 299,840 | 328,516 | |||||
Total liabilities and stockholders' equity | $ | 1,366,591 | $ | 1,320,985 | |||
6
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 5,189 | $ | (4,221 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation | 14,723 | 5,430 | |||||
Amortization of intangible assets | 22,700 | 14,464 | |||||
Amortization of debt issuance costs and debt discount | 4,844 | 1,707 | |||||
Inventory fair value adjustment | 664 | 1,635 | |||||
Provision for doubtful accounts | 766 | 1,132 | |||||
Stock-based compensation | 1,765 | — | |||||
Unrealized gain on derivative instruments, net | (13,155 | ) | — | ||||
Loss on disposal of property and equipment | 242 | 110 | |||||
Deferred income taxes | 3,356 | (1,875 | ) | ||||
Change in assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | (32,706 | ) | (15,248 | ) | |||
Other receivables | 10,638 | 3,982 | |||||
Inventories | (2,807 | ) | (12,378 | ) | |||
Prepaid expenses and other current assets | 561 | 403 | |||||
Other assets | 393 | 197 | |||||
Accounts payable | 17,875 | 26,959 | |||||
Accrued payroll and employee benefits | (4,433 | ) | (1,468 | ) | |||
Accrued taxes | (1,474 | ) | 1,031 | ||||
Other liabilities | (7,258 | ) | (3,087 | ) | |||
Net cash provided by operating activities | 21,883 | 18,773 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (17,525 | ) | (7,763 | ) | |||
Payment of net working capital adjustments | (405 | ) | — | ||||
Proceeds from net working capital adjustments | 8,554 | — | |||||
Proceeds from the disposal of fixed assets | 429 | — | |||||
Acquisitions, net of cash acquired | (52,951 | ) | (57,942 | ) | |||
Net cash used in investing activities | (61,898 | ) | (65,705 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from asset-based revolving credit facility | 280,995 | 15,000 | |||||
Repayments of asset-based revolving credit facility | (415,497 | ) | (30,000 | ) | |||
Principal borrowings on long-term debt | — | 67,200 | |||||
Principal payments on long-term debt | — | (1,400 | ) | ||||
Debt issuance costs | — | (1,281 | ) | ||||
Principal repayment of capital lease obligations | (1,395 | ) | — | ||||
Issuance of common stock | 163,952 | — | |||||
Capital contributions | 2,997 | — | |||||
Capital distributions | — | (17 | ) | ||||
Net cash provided by financing activities | 31,052 | 49,502 | |||||
7
Effect of exchange rate changes on cash | 357 | — | |||||
Net (decrease) increase in cash | (8,606 | ) | 2,570 | ||||
Cash and cash equivalents at beginning of period | 28,552 | 10,662 | |||||
Cash and cash equivalents at end of period | $ | 19,946 | $ | 13,232 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for income taxes | $ | 143 | $ | 1,610 | |||
Cash paid during the period for interest | $ | 25,699 | $ | 14,582 | |||
Supplemental disclosures of non-cash investing and financing activities: | |||||||
Change in fair value of derivatives, net of tax | $ | 1,400 | $ | — | |||
Assets acquired under capital lease | $ | 658 | $ | — | |||
Goodwill adjustment for purchase price allocation | $ | 1,724 | $ | — | |||
Tax receivable agreement | $ | 203,837 | $ | — | |||
Property and equipment included in accounts payable | $ | 198 | $ | — | |||
8
FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY SEGMENT AND PRODUCT LINE AND SEGMENT GROSS PROFIT AND GROSS MARGIN
FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
Three Months Ended June 30, | Change | |||||||||||||||||
2017 | 2016 | $ | % | |||||||||||||||
SBP Segment | ||||||||||||||||||
Wallboard | $ | 181,062 | 39.4 | % | $ | 117,507 | 43.5 | % | $ | 63,555 | 54.1 | % | ||||||
Suspended ceiling systems | 83,271 | 18.1 | % | 29,679 | 11.0 | % | 53,592 | 180.6 | % | |||||||||
Metal framing | 72,404 | 15.7 | % | 48,485 | 17.9 | % | 23,919 | 49.3 | % | |||||||||
Other | 123,349 | 26.8 | % | 74,476 | 27.6 | % | 48,873 | 65.6 | % | |||||||||
Total SBP net sales | $ | 460,086 | 100.0 | % | $ | 270,147 | 100.0 | % | $ | 189,939 | 70.3 | % | ||||||
MI Segment | ||||||||||||||||||
Commercial and industrial insulation | $ | 49,730 | 71.9 | % | $ | — | — | $ | 49,730 | — | % | |||||||
Non-insulation products | 19,414 | 28.1 | % | — | — | 19,414 | — | % | ||||||||||
Total MI net sales | $ | 69,144 | 100.0 | % | $ | — | — | $ | 69,144 | — | % | |||||||
Total net sales | $ | 529,230 | $ | 270,147 | ||||||||||||||
Gross profit - SBP | $ | 130,729 | $ | 79,335 | $ | 51,394 | 64.8 | % | ||||||||||
Gross profit - MI | 18,803 | — | 18,803 | — | % | |||||||||||||
Total gross profit | $ | 149,532 | $ | 79,335 | $ | 70,197 | 88.5 | % | ||||||||||
Gross margin - SBP | 28.4 | % | 29.4 | % | (1.0 | )% | ||||||||||||
Gross margin - MI | 27.2 | % | — | % | — | % | ||||||||||||
Total gross margin | 28.3 | % | 29.4 | % | (1.1 | )% | ||||||||||||
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FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY SEGMENT AND PRODUCT LINE AND SEGMENT GROSS PROFIT AND GROSS MARGIN
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
Six Months Ended June 30, | Change | |||||||||||||||||
2017 | 2016 | $ | % | |||||||||||||||
SBP Segment | ||||||||||||||||||
Wallboard | $ | 349,576 | 39.8 | % | $ | 226,441 | 44.0 | % | $ | 123,135 | 54.4 | % | ||||||
Suspended ceiling systems | 155,984 | 17.8 | % | 55,835 | 10.8 | % | 100,149 | 179.4 | % | |||||||||
Metal framing | 141,065 | 16.1 | % | 91,465 | 17.8 | % | 49,600 | 54.2 | % | |||||||||
Other | 231,924 | 26.3 | % | 141,011 | 27.4 | % | 90,913 | 64.5 | % | |||||||||
Total SBP net sales | $ | 878,549 | 100.0 | % | $ | 514,752 | 100.0 | % | $ | 363,797 | 70.7 | % | ||||||
MI Segment | ||||||||||||||||||
Commercial and industrial insulation | $ | 95,041 | 73.0 | % | $ | — | — | $ | 95,041 | — | % | |||||||
Non-insulation products | 35,097 | 27.0 | % | — | — | 35,097 | — | % | ||||||||||
Total MI net sales | $ | 130,138 | 100.0 | % | $ | — | — | $ | 130,138 | — | % | |||||||
Total net sales | $ | 1,008,687 | $ | 514,752 | ||||||||||||||
Gross profit - SBP | $ | 253,155 | $ | 151,580 | $ | 101,575 | 67.0 | % | ||||||||||
Gross profit - MI | 36,288 | — | 36,288 | — | % | |||||||||||||
Total gross profit | $ | 289,443 | $ | 151,580 | $ | 137,863 | 91.0 | % | ||||||||||
Gross margin - SBP | 28.8 | % | 29.4 | % | (0.6 | )% | ||||||||||||
Gross margin - MI | 27.9 | % | — | % | — | % | ||||||||||||
Total gross margin | 28.7 | % | 29.4 | % | (0.7 | )% | ||||||||||||
10
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
Three Months Ended June 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Base business (1) | $ | 235,927 | $ | 216,369 | $ | 19,558 | 9.0 | % | ||||||
Acquired and combined (2) | 293,303 | 53,778 | 239,525 | 445.4 | % | |||||||||
Net sales | $ | 529,230 | $ | 270,147 | $ | 259,083 | 95.9 | % | ||||||
(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. | ||||||||||||||
Six Months Ended June 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Base business (1) | $ | 458,086 | $ | 415,603 | $ | 42,483 | 10.2 | % | ||||||
Acquired and combined (2) | 550,601 | 99,149 | 451,452 | 455.3 | % | |||||||||
Net sales | $ | 1,008,687 | $ | 514,752 | $ | 493,935 | 96.0 | % | ||||||
(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 AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
Three Months Ended June 30, 2016 | Base Business Net Sales Growth | Acquired and Combined Net Sales | Three Months Ended June 30, 2017 | Base Business Net Sales % Growth | Acquired and Combined Net Sales % Growth | Total Net Sales % Growth | |||||||||||||||
Wallboard | $ | 117,507 | $ | 5,250 | $ | 58,305 | $ | 181,062 | 5.6 | % | 49.6 | % | 54.1 | % | |||||||
Metal framing | 48,485 | 2,394 | 21,525 | 72,404 | 6.3 | % | 44.4 | % | 49.3 | % | |||||||||||
Suspended ceiling systems | 29,679 | 6,270 | 47,322 | 83,271 | 24.9 | % | 159.4 | % | 180.6 | % | |||||||||||
Other products | 74,476 | 5,644 | 43,229 | 123,349 | 9.6 | % | 58.0 | % | 65.6 | % | |||||||||||
SBP net sales | 270,147 | 19,558 | 170,381 | 460,086 | 9.0 | % | 63.1 | % | 70.3 | % | |||||||||||
MI net sales | — | — | 69,144 | 69,144 | — | % | — | % | — | % | |||||||||||
Total net sales | $ | 270,147 | $ | 19,558 | $ | 239,525 | $ | 529,230 | 9.0 | % | 88.7 | % | 95.9 | % | |||||||
Six Months Ended June 30, 2016 | Base Business Net Sales Growth | Acquired and Combined Net Sales | Six Months Ended June 30, 2017 | Base Business Net Sales % Growth | Acquired and Combined Net Sales % Growth | Total Net Sales % Growth | |||||||||||||||
Wallboard | $ | 226,440 | $ | 13,392 | $ | 109,744 | $ | 349,576 | 7.3 | % | 48.5 | % | 54.4 | % | |||||||
Metal framing | 91,465 | 8,173 | 41,427 | 141,065 | 11.2 | % | 45.3 | % | 54.2 | % | |||||||||||
Suspended ceiling systems | 55,835 | 10,369 | 89,780 | 155,984 | 21.9 | % | 160.8 | % | 179.4 | % | |||||||||||
Other products | 141,012 | 10,549 | 80,363 | 231,924 | 9.4 | % | 57.0 | % | 64.5 | % | |||||||||||
SBP net sales | 514,752 | 42,483 | 321,314 | 878,549 | 10.2 | % | 62.4 | % | 70.7 | % | |||||||||||
MI net sales | — | — | 130,138 | 130,138 | — | % | — | % | — | % | |||||||||||
Total net sales | $ | 514,752 | $ | 42,483 | $ | 451,452 | $ | 1,008,687 | 10.2 | % | 87.7 | % | 96.0 | % | |||||||
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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 Adjusted EBITDA, which is provided as a supplemental measure of financial performance. This measure is not required by, or presented in accordance with, GAAP. We calculate Adjusted EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization and before non-recurring adjustments such as purchase accounting adjustments, IPO expenses, stock-based compensation, non-cash (gain) losses on the sale of property and equipment and derivative financial instruments.
Adjusted EBITDA is presented because it is an important metric used by management as one of the means by which it assesses financial performance. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. This measure, 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.
Adjusted EBITDA has certain limitations. Adjusted EBITDA should not be considered as an alternative to net income, or as any other measure of financial performance derived in accordance with GAAP. Adjusted EBITDA also should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items for which it makes adjustments. Additionally, Adjusted EBITDA is not intended to be a liquidity measure. Other companies, including other companies in our industry, may not use this measure or may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
The following is a reconciliation of Adjusted EBITDA to the nearest GAAP measure, net income:
Three Months Ended June 30, 2017 | |||
(in thousands) | |||
Net income | $ | 1,260 | |
Interest expense, net | 14,876 | ||
Income tax expense | 862 | ||
Depreciation and amortization | 19,027 | ||
Unrealized non-cash loss on derivative financial instrument | 63 | ||
Public company readiness expenses | 1,434 | ||
Stock-based compensation | 212 | ||
Non-cash purchase accounting effects(a) | 593 | ||
Loss on disposal of property and equipment | 20 | ||
Transaction costs(b) | 1,979 | ||
Adjusted EBITDA | $ | 40,326 | |
Adjusted EBITDA margin(c) | 7.6 | % | |
(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 costs related to our acquisitions paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals. |
(c) | Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales. |
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