2018 Third Quarter
Highlights
- Record net sales of $542.3 million from
continuing operations, an increase of 15.9% compared to the prior
year period
- Base business net sales of $472.1
million from continuing operations, an increase of 12.5% compared
to the prior year period
- Entered into definitive agreement to
sell the Mechanical Insulation segment for $122.5 million, expected
net proceeds of $116.0 million will be used to pay down debt
- Completed refinance of Senior Secured
Notes; expected to save $12.0 million to $15.0 million per year in
cash interest
- Net loss of $37.6 million from
continuing operations; loss per share of $0.88; net loss primarily
due to loss of $58.5 million related to refinancing of debt
- Adjusted net income(1) of $8.2 million
and adjusted earnings per share(1) of $0.19
- Adjusted EBITDA(1) of $43.7 million
from continuing operations, an increase of 20.3% compared to the
prior year period; Adjusted EBITDA margin(1) of 8.1% compared to
7.8% in the prior year period
Foundation Building Materials, Inc. (the "Company") (NYSE:FBM),
one of the largest specialty building product distributors of
wallboard, suspended ceiling systems and metal framing in North
America, today reported third quarter 2018 financial results and
provided updated full year 2018 and full year 2019 financial
guidance.
“We delivered strong third-quarter results highlighted by
year-over-year net sales growth of 15.9% and base business growth
of 12.5%,” said Ruben Mendoza, President and CEO. “Our record
results demonstrate the on-going strength of our non-residential
construction and commercial repair and remodel markets.”
On September 26, 2018, the Company entered into a definitive
agreement to sell its mechanical insulation business. The
previously reported amounts for the mechanical insulation segment
have now been reclassified as discontinued operations. Our
continuing operations now consist of what was previously reported
as the Specialty Building Products segment. The transaction is
expected to close during the fourth quarter of 2018.
The discussion below represents our continuing operations,
unless otherwise noted.
2018 Third Quarter
Results
Net sales for the three months ended September 30, 2018, were
$542.3 million compared to $467.9 million for the three months
ended September 30, 2017, representing an increase of $74.4
million, or 15.9%. Net sales from base business branches
contributed $52.3 million, or 12.5%, of the increase which was
driven by strong commercial activity, price increases and product
expansion into new geographic markets. Net sales from acquired
branches and existing branches that were strategically combined
contributed $22.1 million of the increase.
Gross profit for the three months ended September 30, 2018, was
$154.0 million compared to $135.9 million for the three months
ended September 30, 2017, representing an increase of $18.2
million, or 13.4%. The increase in gross profit was primarily due
to the increase in net sales. Gross margin for the three months
ended September 30, 2018, was 28.4% compared to 29.0% for the three
months ended September 30, 2017. The decrease in gross margin was
primarily due to higher product costs.
Selling, general and administrative, or SG&A, expenses for
the three months ended September 30, 2018, were $113.3 million
compared to $102.3 million for the three months ended September 30,
2017, representing an increase of $11.0 million, or 10.8%. As a
percentage of net sales, SG&A expenses were 20.9% for the three
months ended September 30, 2018, compared to 21.9% for the three
months ended September 30, 2017. Excluding non-recurring
adjustments of $3.0 million and $2.5 million for the three months
ended September 30, 2018 and 2017, respectively, SG&A expenses
as a percentage of net sales for the three months ended September
30, 2018, were 20.3% compared to 21.3% for the three months ended
September 30, 2017. The decrease in SG&A expenses as a
percentage of net sales was due to our continued focus on operating
efficiencies, cost reduction initiatives and leveraging costs with
the increase in net sales.
In August 2018, the Company completed the refinancing of its
$575 million Senior Secured Notes. The refinancing resulted in a
loss of $58.5 million consisting primarily of a write off of
deferred financing costs and original issuance discounts and a
prepayment premium. The Company expects to save $12.0 million to
$15.0 million in cash interest on an annual basis.
Net loss for the three months ended September 30, 2018, was
$37.6 million, or $0.88 per share, compared to net income of $0.1
million, or $0.00 per share for the three months ended September
30, 2017. Adjusted net income(1) for the three months ended
September 30, 2018, was $8.2 million, or $0.19 per share, an
increase of $6.4 million compared to an Adjusted net income(1) of
$1.9 million, or $0.04 per share, for the three months ended
September 30, 2017.
Adjusted EBITDA(1) was $43.7 million and Adjusted EBITDA
margin(1) was 8.1% for the three months ended September 30, 2018,
compared to Adjusted EBITDA(1) of $36.4 million and Adjusted EBITDA
margin(1) of 7.8% for the three months ended September 30,
2017.
2018 Year-To-Date
Results
Net sales for the nine months ended September 30, 2018, were
$1,528.2 million compared to $1,346.4 million for the nine months
ended September 30, 2017, representing an increase of $181.7
million, or 13.5%. Net sales from base business branches
contributed $95.1 million, or 7.6%, of the increase which was
driven by strong commercial activity, price increases and product
expansion into new geographic markets. Net sales from acquired
branches and existing branches that were strategically combined
contributed $86.6 million of the increase.
Gross profit for the nine months ended September 30, 2018, was
$434.7 million compared to $389.0 million for the nine months ended
September 30, 2017, representing an increase of $45.7 million, or
11.7%. The increase in gross profit was primarily due to the
increase in net sales. Gross margin for the nine months ended
September 30, 2018, was 28.4% compared to 28.9% for the nine months
ended September 30, 2017. The decrease in gross margin was
primarily due to higher product costs.
SG&A expenses for the nine months ended September 30, 2018,
were $328.1 million compared to $299.3 million for the nine months
ended September 30, 2017, representing an increase of $28.8
million, or 9.6%. As a percentage of net sales, SG&A expenses
were 21.5% for the nine months ended September 30, 2018 compared to
22.2% for the nine months ended September 30, 2017. Excluding
non-recurring adjustments of $6.9 million and $11.1 million,
respectively, SG&A expenses as a percentage of net sales for
the nine months ended September 30, 2018 were 21.0% compared to
21.4% for the nine months ended September 30, 2017. The decrease in
SG&A expenses as a percentage of net sales was due to our
continued focus on operating efficiencies, cost reduction
initiatives and leveraging costs with the increase in net
sales.
Net loss for the nine months ended September 30, 2018, was $38.3
million, or $0.89 per share, compared to net income of $3.1
million, or $0.08 per share for the nine months ended September 30,
2017. Adjusted net income(1) for the nine months ended September
30, 2018, was $10.6 million, or $0.25 per share, an increase of
$8.1 million compared to an Adjusted net income(1) of $2.5 million,
or $0.06 per share, for the nine months ended September 30,
2017.
Adjusted EBITDA(1) was $114.0 million and Adjusted EBITDA
margin(1) was 7.5% for the nine months ended September 30, 2018,
compared to Adjusted EBITDA(1) of $102.0 million and Adjusted
EBITDA margin(1) of 7.6% for the nine months ended September 30,
2017.
Acquisitions and Greenfield
Branches
On October 1, 2018, the Company completed the acquisition of
Agan Drywall Supply and its related companies ("Agan"), adding
three additional branches serving the South Dakota and Iowa
markets. For the fourth quarter of 2018, Agan is expected to
contribute $5.0 million to $7.0 million to net sales. Through
November 1, 2018, the Company has completed four acquisitions
totaling 16 branches with combined annualized net sales in excess
of $130.0 million. The Company expects to continue to supplement
organic growth with strategic acquisitions.
As of September 30, 2018, the Company has opened four specialty
building products greenfield branches and expects to open one to
two more branches by the end of 2018, for a total of five to six
branches. These greenfield branches are projected to yield high
returns on invested capital within the first few years of startup.
They also serve to further leverage the Company’s national scale,
increase the Company’s market share, generate economies of scale
and support the Company’s organic growth.
2018 and 2019 Outlook for Continuing
Operations
For 2018, the Company expects full year net sales to be in the
range of $2.0 billion to $2.06 billion. The Company expects
Adjusted EBITDA margin(2) for full year 2018 to be between 7.3% and
7.5%, with expected full year 2018 Adjusted EBITDA(2) of $146.0
million to $150.0 million. These expected results include
anticipated contributions from acquisitions and greenfield
branches.
For 2019, the Company expects full year net sales to be in the
range of $2.10 billion to $2.25 billion. The Company expects
Adjusted EBITDA margin(2) for full year 2019 to be between 7.6% and
8.0%, with expected full year 2019 Adjusted EBITDA(2) of $160.0
million to $180.0 million. These expected results include
anticipated contributions from acquisitions and greenfield
branches.
Third Quarter Earnings Release and
Conference Call
In conjunction with this release, the Company will host a
conference call today, Thursday, November 1, 2018, at 8:30 AM
Eastern Time. Ruben Mendoza, President and Chief Executive Officer,
John Gorey, Chief Financial Officer, and John Moten, Vice President
Investor Relations, will host the call.
The call can be accessed three ways:
- At the FBM website: www.fbmsales.com in
the Investors section of the Company’s website;
- By telephone: For both listen only
participants and those who wish to take part in the question and
answer portion of the call, the telephone dial-in number in the
U.S. is (855) 327-6837. For participation outside the U.S., the
dial-in number is (631) 891-4304; and
- Audio Replay: A replay of the call will
be available beginning at 11:30 AM Eastern Time on Thursday,
November 1, 2018, and ending 11:59 PM Eastern Time November 8,
2018. Dial-in numbers for U.S. based participants are (844)
512-2921. Participants outside the U.S. should use the replay
dial-in number of (412) 317-6671. All callers will be required to
provide the Conference ID of 10005665
About Foundation Building
Materials
Foundation Building Materials, Inc. is a specialty building
products distributor of wallboard, suspended ceiling systems, and
metal framing throughout North America. Based in Tustin,
California, the Company employs more than 3,400 people and operates
more than 170, branches across the U.S. and Canada.
Forward-Looking
Statements
This press release contains “forward-looking statements” as that
term is defined in the Private Securities Litigation Reform Act of
1995. Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain words such as
“believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,”
“plan,” or words or phrases with similar meaning. Forward-looking
statements contained in this press release relate to, among other
things, the Company’s projected financial performance, including
cash interest savings, and operating results, including net sales,
Adjusted EBITDA and Adjusted EBITDA margin, and the Company’s
strategic plans and objectives including acquisitions and
greenfields. Forward-looking statements should not be read as a
guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward-looking
statements are based on our management’s current expectations,
forecasts and assumptions that involve risks and uncertainties,
including, but not limited to, economic, competitive, governmental
and technological factors outside of the Company’s control, that
may cause the Company’s business, strategy or actual results to
differ materially from the forward-looking statements. The Company
does not intend, and undertakes no obligation, to update any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable
law. Investors are referred to the Company’s filings with the
Securities and Exchange Commission, including its Annual Reports on
Form 10-K and its Quarterly Reports on Form 10-Q for additional
information regarding the risks and uncertainties that may cause
actual results to differ materially from those expressed in any
forward-looking statement.
(1) Adjusted net income, Adjusted earnings per share, Adjusted
EBITDA and Adjusted EBITDA margin are non-GAAP measures. See
“Non-GAAP (Generally Accepted Accounting Principles) Financial
Measures” section below for a discussion of how the Company defines
and calculates this measure, why the Company believes it is
important, and a reconciliation thereof to the most directly
comparable GAAP measure.
(2) Adjusted net income, Adjusted earnings per share, Adjusted
EBITDA and Adjusted EBITDA margin are non-GAAP measures. See
“Non-GAAP (Generally Accepted Accounting Principles) Financial
Measures” section below for a discussion of how the Company defines
and calculates this measure and why the Company believes it is
important.
- Financial Tables Follow -
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME (UNAUDITED) (in thousands,
except share and per share data) Three Months
Ended Nine Months Ended September 30,
September 30, 2018 2017 2018
2017 Net sales $ 542,273 $ 467,891 $ 1,528,153 $
1,346,441 Cost of goods sold 388,236 332,008
1,093,412 957,404 Gross profit 154,037 135,883 434,741
389,037 Operating expenses: Selling, general and administrative
113,279 102,259 328,088 299,298 Depreciation and amortization
19,771 18,234 56,922 52,662 Total
operating expenses 133,050 120,493 385,010
351,960 Income from operations 20,987 15,390 49,731 37,077
Loss on extinguishment of debt (58,475 ) - (58,475 ) - Interest
expense (12,576 ) (15,054 ) (43,028 ) (45,147 ) Other (expense)
income, net (8 ) 25 126 13,424 (Loss)
income before income taxes (50,072 ) 361 (51,646 ) 5,354 Income tax
(benefit) expense (12,519 ) 239 (13,299 )
2,205 (Loss) income from continuing operations (37,553 ) 122
(38,347 ) 3,149 Income from discontinued operations, net of tax
2,772 1,277 7,913 3,439 Net (loss)
income $ (34,781 ) $ 1,399 $ (30,434 ) $ 6,588 (Loss)
earnings per share data: (Loss) earnings from continuing operations
per share - basic $ (0.88 ) $ 0.00 $ (0.89 ) $ 0.08 (Loss) earnings
from continuing operations per share - diluted $ (0.88 ) $ 0.00 $
(0.89 ) $ 0.08 Earnings from discontinued operations per
share - basic $ 0.07 $ 0.03 $ 0.18 $ 0.08 Earnings from
discontinued operations per share - diluted $ 0.07 $ 0.03 $ 0.18 $
0.08 (Loss) earnings per share - basic $ (0.81 ) $ 0.03 $
(0.71 ) $ 0.16 (Loss) earnings per share - diluted $ (0.81 ) $ 0.03
$ (0.71 ) $ 0.16 Weighted average shares outstanding: Basic
42,894,474 42,865,407 42,889,430 41,021,808 Diluted 42,917,230
42,870,391 42,905,273 41,023,935 Comprehensive (loss)
income: Net (loss) income $ (34,781 ) $ 1,399 $ (30,434 ) $ 6,588
Foreign currency translation adjustment 1,481 3,037 (2,724 ) 5,695
Unrealized (loss) gain on derivative, net
of taxes of $0.5 million and $1.0 million, respectively and $0.5
million and $1.9 million, respectively
(1,420 ) (1,647 ) 839 (3,047 ) Total
other comprehensive income (loss) 61 1,390
(1,885 ) 2,648 Total comprehensive (loss) income $ (34,720 )
$ 2,789 $ (32,319 ) $ 9,236
FOUNDATION BUILDING MATERIALS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands,
except share data) September 30, December
31, 2018 2017 Assets Current assets: Cash and
cash equivalents $ 10,560 $ 12,101
Accounts receivable-net of allowance for
doubtful accounts of $3,297 and $3,494,
respectively
316,290 238,091 Other receivables 50,808 55,487 Inventories 158,766
148,246 Prepaid expenses and other current assets 12,304 11,785
Current assets held for sale 128,188 82,948 Total
current assets 676,916 548,658 Property and equipment, net 153,386
144,524 Intangible assets, net 145,379 164,536 Goodwill 481,260
452,728 Other assets 6,928 5,604 Noncurrent assets held for sale
- 38,220
Total assets $ 1,463,869 $ 1,354,270
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 130,169 $ 134,460 Accrued payroll and employee
benefits 25,777 17,920 Accrued taxes 11,775 7,003 Tax receivable
agreement 15,892 15,892 Current portion of term loan 3,375 - Other
current liabilities 22,995 37,270 Current liabilities held for sale
26,599 29,733 Total current liabilities 236,582
242,278 Asset-based revolving credit facility 305,704 47,486
Long-term debt, net 438,841 534,379 Tax receivable agreement
119,912 119,912 Deferred income taxes, net 5,200 17,912 Other
liabilities 9,545 12,657 Noncurrent liabilities held for sale
- 982
Total liabilities 1,115,784 975,606
Commitments and contingencies Stockholders' equity:
Preferred stock, $0.001 par value, authorized 10,000,000 shares; 0
shares issued
-
-
Common stock, $0.001 par value, authorized 190,000,000 shares;
42,894,965 and
42,865,407 shares issued, respectively
13 13 Additional paid-in capital 331,667 330,113 Retained earnings
15,936 46,184 Accumulated other comprehensive income 469
2,354 Total stockholders' equity 348,085
378,664
Total liabilities and stockholders' equity $
1,463,869 $ 1,354,270
FOUNDATION BUILDING
MATERIALS, INC. NET SALES BY PRODUCT LINE, GROSS PROFIT AND
GROSS MARGIN (UNAUDITED) Three Months Ended
September 30, Change 2018 2017
$ % (dollars in thousands)
Wallboard (1) $ 203,991 37.6 % $ 179,362 38.3
% $ 24,629 13.7 % Suspended ceiling systems 104,422 19.3 % 91,933
19.6 % 12,489 13.6 % Metal framing 98,576 18.2 % 71,420 15.3 %
27,156 38.0 % Complementary and other products 135,284
24.9 % 125,176 26.8 % 10,108 8.1 %
Total net sales $ 542,273 100.0 % $ 467,891 100.0 % $
74,382 15.9 % Total gross profit $ 154,037 $ 135,883 $ 18,154 13.4
% Total gross margin 28.4 % 29.0 % (0.6 )%
(1) For the three months ended September 30, 2017, wallboard
accessories have been reclassified from “Wallboard” to
“Complementary and other products” to conform to the current year
presentation.
Nine Months Ended September 30, Change
2018 2017 $ % (dollars in
thousands) Wallboard (1) $
583,242 38.2 % $ 528,556 39.3 % $ 54,686 10.3 % Suspended ceiling
systems 288,356 18.9 % 247,921 18.4 % $ 40,435 16.3 % Metal framing
264,019 17.3 % 212,486 15.8 % $ 51,533 24.3 % Complementary and
other products 392,536 25.7 % 357,478
26.5 % $ 35,058 9.8 % Total net sales $ 1,528,153 100.0 % $
1,346,441 100.0 % $ 181,712 13.5 % Total gross profit
434,741 389,037 $ 45,704 11.7 % Total gross margin 28.4 % 28.9 %
(0.5 )%
(1) For the nine months ended September 30, 2017, wallboard
accessories have been reclassified from “Wallboard” to
“Complementary and other products” to conform to the current year
presentation.
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES
(UNAUDITED) Three Months Ended September 30,
Change 2018 2017 $
% (dollars in thousands) Base business (1) $
472,116 $ 419,823 $ 52,293 12.5 % Acquired and combined (2)
70,157 48,068 22,089 46.0 % Net sales $
542,273 $ 467,891 $ 74,382 15.9 %
(1) Represents net sales from branches that were owned by us
since January 1, 2017 and branches that were opened by us
during such period.
(2) Represents branches acquired and existing branches combined
with acquired branches after January 1, 2017.
Nine Months Ended September 30,
Change 2018 2017 $
% (dollars in thousands) Base business (1) $
1,339,918 $ 1,244,778 $ 95,140 7.6 % Acquired and combined (2)
188,235 101,663 86,572 85.2 % Net sales
$ 1,528,153 $ 1,346,441 $ 181,712 13.5 %
(1) Represents net sales from branches that were owned by us
since January 1, 2017 and branches that were opened by us
during such period.
(2) Represents branches acquired and existing branches combined
with acquired branches after January 1, 2017.
FOUNDATION BUILDING MATERIALS,
INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY PRODUCT
(UNAUDITED)
Three Months
EndedSeptember 30, 2017
BaseBusinessNet
SalesChange
Acquired andCombinedNet
SalesChange
Three
MonthsEndedSeptember 30, 2018
Total NetSales
%Change
BaseBusinessNet
Sales
% Change (1)
Acquired andCombinedNet
Sales
% Change (2)
(dollars in thousands)
Wallboard (3) $ 179,362 $ 13,766 $ 10,863 $ 203,991 13.7 % 8.5 %
61.3 % Suspended ceiling systems 91,933 7,168 5,321 104,422 13.6 %
8.7 % 55.1 % Metal framing 71,420 21,938 5,218 98,576 38.0 % 33.8 %
79.6 % Complementary and other products 125,176 9,421
687 135,284 8.1 % 8.5 % 4.9 %
Total net sales $ 467,891 $ 52,293 $ 22,089 $ 542,273 15.9 %
12.5 % 46.0 % Average daily net sales $ 7,547 $ 830 $
351 $ 8,608 14.1 % 12.3 % 45.2 %
(1) Represents base business net sales increase as a percentage
of base business net sales for the three months ended September 30,
2017.
(2) Represents acquired and combined net sales increase as a
percentage of acquired and combined net sales for the three months
ended September 30, 2017.
(3) For the three months ended September 30, 2017, wallboard
accessories have been reclassified from “Wallboard” to
“Complementary and other products” to conform to the current year
presentation.
Base Business
Net Sales Change
Acquired and
Combined Net Sales
Change
Acquired and
Combined
Net Sales
% Change (2)
Base Business
Net Sales
% Change (1)
Nine Months Ended
September 30, 2017
Nine Months Ended
September 30, 2018
Total Net
Sales % Change
(dollars in thousands) Wallboard
(3) $ 528,556 $ 18,836 $ 35,850 $ 583,242 10.3 % 3.8 % 94.4 %
Suspended ceiling
systems
247,921 20,276 20,159 288,356 16.3 % 8.8 % 113.1 % Metal framing
212,486 38,750 12,783 264,019 24.3 % 19.4 % 96.7 % Complementary
and
other products
357,478 17,277 17,781 392,536
9.8 % 5.3 % 54.5 % Total net sales $ 1,346,441 $
95,139 $ 86,573 $ 1,528,153 13.5 % 7.6 % 85.2
% Average daily net
sales
$ 7,087 $ 498 $ 453 $ 8,001 12.9 % 7.6 % 84.7 %
(1) Represents base business net sales increase as a percentage
of base business net sales for the nine months ended September 30,
2017.
(2) Represents acquired and combined net sales increase as a
percentage of acquired and combined net sales for the nine months
ended September 30, 2017.
(3) For the nine months ended September 30, 2017, wallboard
accessories have been reclassified from “Wallboard” to
“Complementary and other products” to conform to the current year
presentation.
Non-GAAP (Generally Accepted Accounting
Principles) Financial Measures
In addition to results under GAAP, this press release contains
certain non-GAAP financial measures, including Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted
earnings per share ("EPS"), which are provided as supplemental
measures of financial performance. These measures are not required
by, or presented in accordance with, GAAP. The Company calculates
Adjusted EBITDA as net (loss) income before interest expense net,
loss on extinguishment of debt, income tax (benefit) expense,
depreciation and amortization, unrealized losses on derivative
financial instruments, IPO and public company readiness expenses,
stock-based compensation, and other non-recurring adjustments such
as non-cash purchase accounting effects, losses on the disposal of
property and equipment, transaction costs, management fees and
hurricane related costs. The Company calculates Adjusted EBITDA
margin as Adjusted EBITDA divided by net sales. The Company
calculates Adjusted net income as net income before unrealized
losses (gains) on derivative financial instruments, IPO and public
company readiness expenses, stock-based compensation, and other
non-recurring adjustments such as non-cash purchase accounting
adjustments, losses on the disposal of property and equipment,
transaction costs, management fees and hurricane related costs. The
Company calculates Adjusted EPS as Adjusted net income on a per
weighted average share outstanding basis.
These non-GAAP financial measures are presented because they are
important metrics used by management as a means by which it
assesses financial performance. These measures may also be used by
analysts, investors and other interested parties to evaluate
companies in the Company’s industry. These measures, when used in
conjunction with related GAAP financial measures, provide investors
with an additional financial analytical framework that may be
useful in assessing the Company’s financial condition and results
of operations.
These non-GAAP financial measures have certain limitations.
These measures should not be considered as alternatives to measures
of financial performance derived in accordance with GAAP. In
addition, these measures should not be construed as an inference
that the Company’s future results will be unaffected by unusual or
non-recurring items. Furthermore, these measures are not intended
to be liquidity measures. Other companies, including other
companies in the Company’s industry, may not use these measures or
may calculate these measures differently than the Company does,
limiting their usefulness as comparative measures.
The following is a reconciliation of Adjusted EBITDA to the
nearest GAAP measure, net (loss) income (unaudited):
Three Months Ended September 30, Three Months
Ended September 30, 2018 2017
Reconciliation Reconciliation
Reconciliation To Net Reconciliation To Net
Loss To Net Income To Net From
Income From From Income From
Reconciliation Continuing Discontinued
Reconciliation Continuing Discontinued To
Net Operations
Operations (e)
To Net Loss Operations
Operations (e)
Income (in thousands) Net (loss) income $ (37,553 ) $ 2,772
$ (34,781 ) $ 122 $ 1,277 $ 1,399 Interest expense, net 12,544 11
12,555 15,028 15 15,043 Loss on extinguishment
of debt
58,475 - 58,475 - - - Income tax (benefit)
expense
(12,519 ) 991 (11,528 ) 239 973 1,212 Depreciation and
amortization
19,771 1,561 21,332 18,234 1,495 19,729 Unrealized losses on
derivative financial
instruments
78 - 78 111 - 111 IPO and public company
readiness expenses
- - - 519 - 519 Stock-based compensation 633 44 677 203 10 213
Non-cash purchase
accounting effects (a)
6 - 6 166 112 278 Loss on disposal of
property and equipment
339 8 347 53 (23 ) 30 Hurricane related costs (b) (241 ) - (241 )
376 54 430 Transaction costs (c) 2,208 386
2,594 1,315 1 1,316
Adjusted EBITDA
$ 43,741 $ 5,773 $ 49,514
$ 36,366 $ 3,914 $ 40,280
Adjusted EBITDA
margin (d)
8.1 % 7.0 % 7.9 % 7.8 % 5.8 % 7.5 %
(a) Adjusts for the effect of the purchase accounting step-up in
the value of inventory to fair value recognized in cost of goods
sold as a result of acquisitions.
(b) Represents insurance proceeds for hurricane related costs
for the three months ended September 30, 2018; represents costs
related to payroll and inventory resulting from Hurricanes Harvey
and Irma for the three months ended September 30, 2017.
(c) Represents one-time costs related to our transactions,
including fees to financial advisors, accountants, attorneys, other
professionals and certain internal corporate development costs.
(d) Adjusted EBITDA margin represents Adjusted EBITDA divided by
net sales.
(e) The operating results reflected above do not fully represent
the mechanical insulation's segment historical operating results,
as the results reported within net income from discontinued
operations only include expenses that are directly attributable to
the mechanical insulation segment.
Nine Months Ended September 30, Nine Months
Ended September 30, 2018 2017
Reconciliation Reconciliation
Reconciliation Reconciliation To Net
Loss To Net To Net To Net From
Income From Income From Income From
Reconciliation Continuing Discontinued
Reconciliation Continuing Discontinued To
Net Operations
Operations (f)
To Net Loss Operations
Operations (f)
Income (in thousands) Net (loss) income $ (38,347 ) $ 7,913
$ (30,434 ) $ 3,149 $ 3,439 $ 6,588 Interest expense, net 42,957 36
42,993 45,058 47 45,105 Loss on extinguishment
of debt
58,475 - 58,475 - - - Income tax (benefit)
expense
(13,299 ) 3,169 (10,130 ) 2,205 2,433 4,638 Depreciation and
amortization
56,922 4,637 61,559 52,662 4,490 57,152 Unrealized gains on
derivative financial
instruments
(56 ) - (56 ) (13,045 ) - (13,045 ) IPO and public company
readiness expenses
89 - 89 4,929 - 4,929 Stock-based compensation 1,512 103 1,615
1,667 287 1,954 Non-cash purchase
accounting effects (a)
413 - 413 830 112 942 Loss on disposal of property
and equipment
614 42 656 171 31 202 Hurricane related costs (b) (83 ) - (83 ) 376
54 430 Transaction costs (c) 4,753 958 5,711 3,635 251 3,886
Management fees (d) -
-
- 353
-
353
Adjusted EBITDA $ 113,950 $
16,858 $ 130,808 $ 101,990
$ 11,144 $ 113,134 Adjusted EBITDA
margin (e)
7.5 % 7.1 % 7.4 % 7.6 % 5.6 % 7.3 %
(a) Adjusts for the effect of the purchase accounting step-up in
the value of inventory to fair value recognized in cost of goods
sold as a result of acquisitions.
(b) Represents insurance proceeds for hurricane related costs
for the nine months ended September 30, 2018; represents costs
related to payroll and inventory resulting from Hurricanes Harvey
and Irma for the nine months ended September 30, 2017.
(c) Represents one-time costs related to our transactions,
including fees to financial advisors, accountants, attorneys, other
professionals and certain internal corporate development costs.
(d) Represents fees paid to our former private equity sponsor
for services provided pursuant to past management agreements. These
fees are no longer being incurred.
(e) Adjusted EBITDA margin represents Adjusted EBITDA divided by
net sales.
(f) The operating results reflected above do not fully represent
the mechanical insulation's segment historical operating results,
as the results reported within net income from discontinued
operations only include expenses that are directly attributable to
the mechanical insulation segment.
The following is a reconciliation of Adjusted net income to the
nearest GAAP measure, net (loss) income (unaudited):
Three Months Ended September 30, 2018
Three Months Ended September 30, 2017 Reconciliation
Reconciliation Reconciliation
Reconciliation To Net Loss to Net
Income To Net to Net Income From
From Income From From Reconciliation
Continuing Discontinued Reconciliation
Continuing Discontinued To Net
Operations
Operations(e)
To Net Loss Operations
Operations(e)
Income (in thousands, except share and per share data) Net
(loss) income $ (37,553 ) $ 2,772 $ (34,781 ) $ 122 $ 1,277 $ 1,399
Loss on extinguishment of debt 58,475
-
58,475
-
-
-
Unrealized (gains) losses on derivative financial instruments 78
-
78 111
-
111 IPO and public company readiness expenses
-
-
-
519
-
519 Stock-based compensation 633 44 677 203 10 213 Non-cash
purchase accounting effects (a) 6
-
6 166 112 278 Loss on disposal of property and equipment 339 8 347
53 (23 ) 30 Hurricane related costs (b) (241 )
-
(241 ) 376 54 430 Transaction costs (c) 2,208 386 2,594 1,315 1
1,316 Tax effect of adjustments (d) (15,719 ) (112 )
(15,831 ) (1,001 ) (56 ) (1,057 )
Adjusted net income $ 8,226 $ 3,098 $ 11,324 $ 1,864 $ 1,375 $
3,239 Earnings per share (as reported): Basic $ (0.88 ) $
0.07 $ (0.81 ) $
-
$ 0.03 $ 0.03 Diluted $ (0.88 ) $ 0.07 $ (0.81 ) $
-
$ 0.03 $ 0.03 Adjusted earnings per share: Basic $ 0.19 $ 0.07 $
0.26 $ 0.04 $ 0.03 $ 0.08 Diluted $ 0.19 $ 0.07 $ 0.26 $ 0.04 $
0.03 $ 0.08 Weighted average shares outstanding: Basic
42,894,474 42,894,474 42,894,474 42,865,407 42,865,407 42,865,407
Diluted 42,917,230 42,917,230 42,917,230 42,870,391 42,870,391
42,870,391
(a) Adjusts for the effect of the purchase accounting step-up in
the value of inventory to fair value recognized in cost of goods
sold as a result of acquisitions.
(b) Represents insurance proceeds for hurricane related costs
for the three months ended September 30, 2018; represents costs
related to payroll and inventory resulting from Hurricanes Harvey
and Irma for the three months ended September 30, 2017.
(c) Represents one-time costs related to transactions, including
fees to financial advisors, accountants, attorneys, other
professionals and certain internal corporate development costs.
(d) Represents the tax effect of the adjustments to reflect
corporate income taxes at the statutory rates of 25.5% and 36.5%
for the three months ended September 30, 2018 and 2017,
respectively.
(e) The operating results reflected above do not fully represent
the mechanical insulation's segment historical operating results,
as the results reported within net income from discontinued
operations only include expenses that are directly attributable to
the mechanical insulation segment.
Nine Months Ended September 30, 2018
Nine Months Ended September 30, 2017 Reconciliation
Reconciliation Reconciliation
Reconciliation To Net Loss to Net
Income To Net Income to Net Income From
From From From Reconciliation
Continuing Discontinued Reconciliation
Continuing Discontinued To Net
Operations
Operations(f)
To Net Loss Operations
Operations(f)
Income (in thousands, except share and per share data) Net
(loss) income $ (38,347 ) $ 7,913 $ (30,434 ) $ 3,149 $ 3,439 $
6,588 Loss on extinguishment of debt 58,475
-
58,475
-
-
-
Unrealized (gains) losses on derivative financial instruments (56 )
-
(56 ) (13,045 )
-
(13,045 ) IPO and public company readiness expenses 89
-
89 4,929
-
4,929 Stock-based compensation 1,512 103 1,615 1,667 287 1,954
Non-cash purchase accounting effects (a) 413
-
413 830 112 942 Loss on disposal of property and equipment 614 42
656 171 31 202 Hurricane related costs (b) (83 )
-
(83 ) 376 54 430 Transaction costs (c) 4,753 958 5,711 3,635 251
3,886 Management fees (d)
-
-
-
353
-
353 Tax effect of adjustments (e) (16,797 ) (282 )
(17,079 ) 395 (268 ) 127 Adjusted net
income $ 10,573 $ 8,734 $ 19,307 $ 2,460 $ 3,906 $ 6,366
Earnings per share (as reported): Basic $ (0.89 ) $ 0.18 $ (0.71 )
$ 0.08 $ 0.08 $ 0.16 Diluted $ (0.89 ) $ 0.18 $ (0.71 ) $ 0.08 $
0.08 $ 0.16 Adjusted earnings per share: Basic $ 0.25 $ 0.20 $ 0.45
$ 0.06 $ 0.10 $ 0.16 Diluted $ 0.25 $ 0.20 $ 0.45 $ 0.06 $ 0.10 $
0.16 Weighted average shares outstanding: Basic 42,889,430
42,889,430 42,889,430 41,021,808 41,021,808 41,021,808 Diluted
42,905,273 42,905,273 42,905,273 41,023,935 41,023,935 41,023,935
(a) Adjusts for the effect of the purchase accounting step-up in
the value of inventory to fair value recognized in cost of goods
sold as a result of acquisitions.
(b) Represents insurance proceeds for hurricane related costs
for the three months ended September 30, 2018; represents costs
related to payroll and inventory resulting from Hurricanes Harvey
and Irma for the three months ended September 30, 2017.
(c) Represents one-time costs related to transactions, including
fees to financial advisors, accountants, attorneys, other
professionals and certain internal corporate development costs.
(d) Represents fees paid to our former private equity sponsor
for services provided pursuant to past management agreements. These
fees are no longer being incurred subsequent to our initial public
offering.
(e) Represents the tax effect of the adjustments to reflect
corporate income taxes at the statutory rates of 25.5% and 36.5%
for the three months ended September 30, 2018 and 2017,
respectively.
(f) The operating results reflected above do not fully represent
the mechanical insulation's segment historical operating results,
as the results reported within net income from discontinued
operations only include expenses that are directly attributable to
the mechanical insulation segment.
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
(UNAUDITED) (MECHANICAL INSULATION BUSINESS) (in
thousands) Three Months Ended Nine Months
Ended September 30, September 30, 2018
2017 2018 2017 Net sales $
82,533 $ 67,555 $ 237,923 $ 197,692 Cost of goods sold
60,125 48,655 172,682 142,503 Gross profit
22,408 18,900 65,241 55,189 Operating expenses: Selling, general
and administrative 17,078 15,150 49,481 44,775 Depreciation and
amortization 1,561 1,495 4,637 4,490
Total operating expenses 18,639 16,645 54,118
49,265 Income from operations 3,769 2,255 11,123 5,924
Interest expense (11 ) (15 ) (36 ) (47 ) Other income (expense),
net 5 10 (5 ) (5 ) Income from
discontinued operations before income taxes 3,763 2,250 11,082
5,872 Income tax expense 991 973 3,169
2,433 Net income from discontinued operations, net of tax $ 2,772 $
1,277 $ 7,913 $ 3,439
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version on businesswire.com: https://www.businesswire.com/news/home/20181101005482/en/
Investor Relations:John MotenFoundation Building Materials,
Inc.657-900-3200Investors@fbmsales.comorMedia Relations:Joele
Frank, Wilkinson Brimmer KatcherJed Repko or Ed
Trissel212-355-4449
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