2019 Second Quarter
Highlights
- Net sales of $559.9 million, an increase of 7.2% compared to
the prior year period
- Base business net sales of $499.0 million, an increase of 3.4%
compared to the prior year period; average daily base business net
sales increased 3.4%
- Net income from continuing operations of $14.7 million for the
three months ended June 30, 2019, an increase of $13.2 million,
compared to net income from continuing operations of $1.5 million
in the prior year period
- Adjusted net income(1) of $15.8 million for the three months
ended June 30, 2019, an increase of $12.4 million, compared to an
adjusted net income of $3.4 million in the prior year period
- Earnings per share from continuing operations of $0.34 compared
to earnings per share of $0.03 in the prior year period; adjusted
earnings per share(1) of $0.37 compared to adjusted earnings per
share of $0.08 in the prior year period
- Adjusted EBITDA(1) of $50.3 million, an increase of 29.8%
compared to the prior year period; adjusted EBITDA margin(1) of
9.0% compared to 7.4% in the prior year period
Foundation Building Materials, Inc. (NYSE: FBM), one of the
largest specialty building product distributors of wallboard,
suspended ceiling systems and metal framing in North America, today
reported second quarter 2019 financial results and updated its 2019
guidance.
"Our strong underlying profitability highlighted our second
quarter results," said Ruben Mendoza, President and CEO. "Despite
adverse weather affecting our net sales, we continue to see solid
demand in our core non-residential construction markets, and we are
on track to exceed our financial objectives for the year."
2019 Second Quarter
Results
Net sales for the three months ended June 30, 2019, were $559.9
million compared to $522.2 million for the three months ended June
30, 2018, representing an increase of $37.7 million, or 7.2%.
Average daily base business net sales grew 3.4% driven by strong
commercial activity and product expansion into new geographic
markets.
Gross profit for the three months ended June 30, 2019, was
$171.5 million compared to $146.3 million for the three months
ended June 30, 2018, representing an increase of $25.2 million, or
17.3%. The increase in gross profit was primarily due to an
expansion of our gross margin and an increase in sales from
acquisitions and base business growth. Gross margin for the three
months ended June 30, 2019, was 30.6% compared to 28.0% for the
three months ended June 30, 2018. The increase in gross margin was
primarily due to improved profitability across our product lines
driven by our ongoing pricing and purchasing initiatives.
Selling, general and administrative ("SG&A") expenses for
the three months ended June 30, 2019, were $122.7 million compared
to $110.2 million for the three months ended June 30, 2018,
representing an increase of $12.6 million. As a percentage of net
sales, SG&A expenses were 21.9% for the three months ended June
30, 2019, compared to 21.1% for the three months ended June 30,
2018. The increase in SG&A expenses as a percentage of net
sales was primarily due to our continued investment in various
company-wide initiatives and higher operating costs as a result of
adverse weather conditions.
Net income from continuing operations for the three months ended
June 30, 2019, was $14.7 million, or $0.34 per share, compared to
net income from continuing operations of $1.5 million, or $0.03 per
share for the three months ended June 30, 2018. Adjusted net
income(1) for the three months ended June 30, 2019, was $15.8
million, or $0.37 per share, an increase of $12.4 million compared
to adjusted net income(1) of $3.4 million, or $0.08 per share, for
the three months ended June 30, 2018.
Adjusted EBITDA(1) was $50.3 million and adjusted EBITDA
margin(1) was 9.0% for the three months ended June 30, 2019,
compared to adjusted EBITDA(1) of $38.8 million and adjusted EBITDA
margin(1) of 7.4% for the three months ended June 30, 2018.
2019 Year-To-Date
Results
Net sales for the six months ended June 30, 2019, were $1,074.8
million compared to $985.9 million for the six months ended June
30, 2018, representing an increase of $88.9 million, or 9.0%.
Average daily net sales increased 9.9% over the prior year period.
Average daily base business net sales grew 5.8%, driven by strong
commercial activity and product expansion into new geographic
markets.
Gross profit for the six months ended June 30, 2019, was $324.5
million compared to $280.7 million for the six months ended June
30, 2018, representing an increase of $43.8 million, or 15.6%. The
increase in gross profit was driven by higher sales volume and
contributions from acquisitions and base business growth. Gross
margin for the six months ended June 30, 2019, was 30.2% compared
to 28.5% for the six months ended June 30, 2018. The increase in
gross margin was primarily due to improved profitability across our
product lines driven by ongoing pricing and purchasing initiatives
and continued stabilization of the Company's product costs.
SG&A expenses for the six months ended June 30, 2019, were
$240.0 million compared to $214.8 million for the six months ended
June 30, 2018, representing an increase of $25.2 million. As a
percentage of net sales, SG&A expenses were 22.3% for the six
months ended June 30, 2019, compared to 21.8% for the six months
ended June 30, 2018. The increase in SG&A expenses as a
percentage of net sales was primarily due to our continued
investment in various company-wide initiatives and higher operating
costs as a result of adverse weather conditions.
Net income from continuing operations for the six months ended
June 30, 2019, was $19.5 million, or $0.45 per share, compared to a
net loss from continuing operations of $0.8 million, or $0.02 per
share, for the six months ended June 30, 2018. Adjusted net
income(1) for the six months ended June 30, 2019, was $21.9
million, or $0.51 per share, an increase of $19.5 million compared
to an adjusted net income(1) of $2.3 million, or $0.05 per share,
for the six months ended June 30, 2018.
Adjusted EBITDA(1) was $87.8 million and adjusted EBITDA
margin(1) was 8.2% for the six months ended June 30, 2019, compared
to adjusted EBITDA(1) of $70.2 million and adjusted EBITDA
margin(1) of 7.1% for the six months ended June 30, 2018.
Acquisitions
On May 1, 2019, the Company acquired all of the shares of Select
Acoustic Supply Inc. ("Select"). Select was an independent
distributor of drywall, steel framing, insulation, basement blanket
and spray foam. Select operated one branch in the Greater Toronto
Area in Ontario, Canada. For 2019, Select is expected to contribute
between $10.0 million -- $12.0 million to net sales. From January 1
through June 30, 2019, the Company completed two acquisitions
totaling four branches with combined annualized net sales between
$28.0 million and $34.0 million. The Company expects to continue to
supplement organic growth with strategic acquisitions.
2019 Guidance
Previously Provided 2019
Guidance(a)
Updated 2019
Guidance(a)
Net sales (in billions)
$2.10 to $2.25
$2.10 to $2.25
Gross margin
29.1% to 29.3%
29.7% to 30.2%
Adjusted EBITDA(b) (in millions)
$160.0 to $180.0
$165.0 to $185.0
Adjusted EBITDA margin(b)
7.6% to 8.0%
7.8% to 8.2%
Adjusted EPS(b)
$0.70 to $0.90
$0.80 to $1.00
Net debt leverage(b)(c)
3.2x to 3.5x
2.9x to 3.2x
(a) Guidance for 2019 includes anticipated contributions from
acquisitions and planned greenfield branches.
(b) Adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and
net debt leverage are non-GAAP financial measures. Adjusted EBITDA
margin represents adjusted EBITDA divided by net sales.
(c) For a calculation of net debt leverage as of June 30,
2019, see Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations in our Quarterly Report on Form
10-Q for the three months ended June 30, 2019.
Second Quarter Earnings Release and
Conference Call
In conjunction with this release, Foundation Building Materials,
Inc. will host a conference call tomorrow, Tuesday, August 6, 2019,
at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief
Executive Officer, John Gorey, Chief Financial Officer, Pete Welly,
Chief Operating Officer, Kirby Thompson, Senior Vice President of
Sales and Marketing and John Moten, Vice President Investor
Relations will host the call.
The call can be accessed in three ways:
- At the FBM website: www.fbmsales.com under the "Event Calendar" 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 dial-in telephone 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, August 6, 2019, and ending
11:59 PM Eastern Time on Tuesday, August 13, 2019. The dial-in
number for U.S.-based participants is (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 13692295.
About Foundation Building
Materials
Foundation Building Materials 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 175
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 contained in this press
release relate to, among other things, the Company's projected
financial performance and operating results, including projected
net sales, gross margin, adjusted EBITDA, adjusted EBITDA margin,
adjusted EPS and net debt leverage, as well as statements regarding
the Company's progress towards achieving its strategic objectives,
including the successful integration and performance of
acquisitions and performance of greenfield branches and the
Company's acquisition strategy. 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 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 EBITDA, adjusted net income and adjusted EPS are
non-GAAP financial measures. See the supplementary schedules at the
end of this press release for 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.
- Financial Tables Follow -
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share
and per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net sales
$
559,911
$
522,219
$
1,074,783
$
985,880
Cost of goods sold
388,374
375,952
750,286
705,176
Gross profit
171,537
146,267
324,497
280,704
Operating expenses:
Selling, general and
administrative expenses
122,735
110,153
239,965
214,810
Depreciation and
amortization
20,351
18,751
40,693
37,148
Total operating expenses
143,086
128,904
280,658
251,958
Income from operations
28,451
17,363
43,839
28,746
Interest expense
(8,341
)
(15,333
)
(16,897
)
(30,452
)
Other income, net
44
61
85
135
Income (loss) before income taxes
20,154
2,091
27,027
(1,571
)
Income tax expense (benefit)
5,433
618
7,478
(780
)
Income (loss) from continuing
operations
14,721
1,473
19,549
(791
)
Income from discontinued
operations, net of tax
—
3,927
—
5,138
Loss on sale of discontinued
operations, net of tax
(44
)
—
(1,390
)
—
Net income
$
14,677
$
5,400
$
18,159
$
4,347
Earnings (loss) per share data:
Earnings (loss) from continuing operations
per share - basic
$
0.34
$
0.03
$
0.45
$
(0.02
)
Earnings (loss) from continuing operations
per share - diluted
$
0.34
$
0.03
$
0.45
$
(0.02
)
Earnings (loss) from discontinued
operations per share - basic
$
—
$
0.10
$
(0.03
)
$
0.12
Earnings (loss) from discontinued
operations per share - diluted
$
—
$
0.10
$
(0.03
)
$
0.12
Earnings per share - basic
$
0.34
$
0.13
$
0.42
$
0.10
Earnings per share - diluted
$
0.34
$
0.13
$
0.42
$
0.10
Weighted average shares outstanding:
Basic
42,987,915
42,893,498
42,960,124
42,886,867
Diluted
43,245,353
42,910,017
43,064,496
42,903,788
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(in thousands, except share
data)
June 30, 2019
December 31, 2018
Current assets:
Cash and cash equivalents
$
6,454
$
15,299
Accounts receivable—net of
allowance for doubtful accounts of $3,631 and $3,239,
respectively
325,579
276,043
Other receivables
46,415
57,472
Inventories
170,398
165,989
Prepaid expenses and other
current assets
12,281
9,053
Total current assets
561,127
523,856
Property and equipment, net
148,054
151,641
Right-of-use assets, net
114,653
—
Intangible assets, net
129,565
145,876
Goodwill
490,607
484,941
Other assets
5,760
10,393
Total assets
$
1,449,766
$
1,316,707
Liabilities and stockholders'
equity:
Current liabilities:
Accounts payable
$
165,314
$
137,773
Accrued payroll and employee
benefits
25,867
28,830
Accrued taxes
9,508
11,867
Tax receivable agreement
27,676
16,667
Current portion of term loan,
net
4,500
4,500
Current portion of lease
liabilities
28,407
—
Other current liabilities
22,227
19,979
Total current liabilities
283,499
219,616
Asset-based revolving credit facility
136,462
146,000
Long-term portion of term loan, net
436,316
437,999
Tax receivable agreement
90,272
117,948
Deferred income taxes, net
18,701
20,678
Long-term portion of lease liabilities
93,627
—
Other liabilities
8,231
8,117
Total liabilities
1,067,108
950,358
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; 42,988,110 and 42,907,326 shares issued,
respectively
13
13
Additional paid-in capital
334,131
332,330
Retained earnings
52,174
34,187
Accumulated other comprehensive
loss
(3,660
)
(181
)
Total stockholders'
equity
382,658
366,349
Total liabilities and stockholders'
equity
$
1,449,766
$
1,316,707
FOUNDATION BUILDING MATERIALS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended June
30,
2019
2018
Cash flows from operating activities:
Net income
$
18,159
$
4,347
Less: loss on sale of discontinued
operations
(1,390
)
—
Less: net income from discontinued
operations
—
5,138
Net income (loss) from continuing
operations
19,549
(791
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities from continuing
operations:
Depreciation
17,558
15,627
Amortization of intangible
assets
23,135
21,521
Amortization of debt issuance
costs and debt discount
992
5,338
Inventory fair value purchase
accounting adjustment
234
407
Provision for doubtful
accounts
1,525
1,278
Stock-based compensation
1,939
878
Unrealized gain on derivative
instruments, net
—
(134
)
(Gain) loss on disposal of
property and equipment
(67
)
275
Right-of-use assets non-cash
expense
13,601
—
Deferred income taxes
271
(421
)
Change in assets and
liabilities, net of effects of acquisitions:
Accounts receivable
(43,441
)
(53,444
)
Other receivables
13,581
10,052
Inventories
(1,291
)
(22,209
)
Prepaid expenses and other
current assets
(3,123
)
(1,019
)
Other assets
(121
)
977
Accounts payable
23,429
15,061
Accrued payroll and employee
benefits
(3,057
)
5,136
Accrued taxes
(2,291
)
3,216
Other liabilities
(9,219
)
(1,049
)
Net cash provided by operating activities
from continuing operations
53,204
699
Cash flows from investing activities from
continuing operations:
Purchases of property and
equipment
(15,052
)
(19,762
)
Proceeds from termination of
net investment hedge
3,313
—
Proceeds from net working
capital adjustments related to acquisitions
470
296
Proceeds from the disposal of
fixed assets
2,376
577
Acquisitions, net of cash
acquired
(21,923
)
(21,220
)
Net cash used in investing activities from
continuing operations
(30,816
)
(40,109
)
Cash flows from financing activities from
continuing operations:
Proceeds from asset-based
revolving credit facility
281,620
266,198
Repayments of asset-based
revolving credit facility
(291,371
)
(219,350
)
Principal payments for term
loan
(2,250
)
—
Payment related to tax
receivable agreement
(16,667
)
—
Tax withholding payment related
to net settlement of equity awards
(138
)
(45
)
Principal repayment of finance
lease obligations
(1,319
)
(1,358
)
Net cash (used in) provided by financing
activities from continuing operations
(30,125
)
45,445
Net cash used in operating
activities from discontinued operations
—
(10,038
)
Net cash used in investing
activities from discontinued operations
(1,390
)
(701
)
Net cash used in financing
activities of discontinued operations
—
(131
)
Net cash used in discontinued
operations
(1,390
)
(10,870
)
Effect of exchange rate changes on
cash
282
(183
)
Net decrease in cash
(8,845
)
(5,018
)
Cash and cash equivalents at beginning of
period
15,299
12,101
Cash and cash equivalents at end of
period
$
6,454
$
7,083
Supplemental disclosures of cash flow
information:
Cash paid for income taxes
$
5,091
$
1,423
Cash paid for interest
$
16,477
$
25,201
Supplemental disclosures of non-cash
investing and financing activities:
Change in fair value of derivatives, net
of tax
$
6,012
$
2,259
Goodwill adjustment for purchase price
allocation
$
57
$
138
FOUNDATION BUILDING MATERIALS,
INC.
NET SALES BY MAJOR PRODUCT
LINE, GROSS PROFIT AND GROSS MARGIN
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
(in thousands)
Three Months Ended June
30,
Change
2019
2018
$
%
Wallboard
$
214,059
38.2
%
$
198,598
38.0
%
$
15,461
7.8
%
Suspended ceiling systems
106,176
19.0
%
97,755
18.7
%
8,421
8.6
%
Metal framing
102,425
18.3
%
91,476
17.5
%
10,949
12.0
%
Complementary and other products
137,251
24.5
%
134,390
25.8
%
2,861
2.1
%
Total net sales
$
559,911
100.0
%
$
522,219
100.0
%
$
37,692
7.2
%
Total gross profit
$
171,537
$
146,267
$
25,270
17.3
%
Total gross margin
30.6
%
28.0
%
2.6
%
Six Months Ended June
30,
Change
2019
2018
$
%
Wallboard
$
416,973
38.8
%
$
379,252
38.5
%
$
37,721
9.9
%
Suspended ceiling systems
195,172
18.2
%
183,933
18.7
%
11,239
6.1
%
Metal framing
201,676
18.8
%
165,443
16.8
%
36,233
21.9
%
Complementary and other products
260,962
24.2
%
257,252
26.0
%
3,710
1.4
%
Total net sales
$
1,074,783
100.0
%
$
985,880
100.0
%
$
88,903
9.0
%
Total gross profit
$
324,497
$
280,704
$
43,793
15.6
%
Total gross margin
30.2
%
28.5
%
1.7
%
FOUNDATION BUILDING MATERIALS,
INC.
BASE BUSINESS AND ACQUIRED AND
COMBINED NET SALES
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
(in thousands)
Three Months Ended June
30,
Change
2019
2018
$
%
Base business (1)
$
499,006
$
482,655
$
16,351
3.4
%
Acquired and combined (2)
60,905
39,564
21,341
53.9
%
Net sales
$
559,911
$
522,219
$
37,692
7.2
%
(1) Represents net sales from branches
that were owned by us since January 1, 2018 and branches that were
opened by us during such period.
(2) Represents branches acquired and
combined after January 1, 2018, primarily as a result of our
strategic combination of branches.
Six Months Ended June
30,
Change
2019
2018
$
%
Base business (1)
$
959,907
$
914,019
$
45,888
5.0
%
Acquired and combined (2)
114,876
71,861
43,015
59.9
%
Net sales
$
1,074,783
$
985,880
$
88,903
9.0
%
(1) Represents net sales from branches
that were owned by us since January 1, 2018 and branches that were
opened by us during such period.
(2) Represents branches acquired and
combined after January 1, 2018, primarily as a result of our
strategic combination of branches.
FOUNDATION BUILDING MATERIALS,
INC.
BASE BUSINESS AND ACQUIRED AND
COMBINED NET SALES BY MAJOR PRODUCT LINE
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
(in thousands)
Three Months Ended June 30,
2018
Base Business Net Sales
Change
Acquired and Combined Net
Sales Change
Three Months Ended June 30,
2019
Total Net Sales %
Change
Base Business Net Sales %
Change(1)
Acquired and Combined Net
Sales % Change(2)
Wallboard
$
198,598
$
3,593
$
11,868
$
214,059
7.8
%
1.9
%
134.5
%
Suspended ceiling systems
97,755
2,637
5,784
106,176
8.6
%
3.1
%
47.8
%
Metal framing
91,476
4,683
6,266
102,425
12.0
%
5.3
%
212.5
%
Complementary and other products
134,390
5,438
(2,577
)
137,251
2.1
%
4.6
%
(16.4
)%
Net sales
$
522,219
$
16,351
$
21,341
$
559,911
7.2
%
3.4
%
53.9
%
Average daily net sales(3)
$
8,160
$
256
$
333
$
8,749
7.2
%
3.4
%
53.9
%
(1) Represents base business net sales
change as a percentage of base business net sales for the three
months ended June 30, 2018.
(2) Represents acquired and combined net
sales change as a percentage of acquired and combined net sales for
the three months ended June 30, 2018.
(3) The number of business days for the
three months ended June 30, 2019 and 2018 were 64 and 64,
respectively.
Six Months Ended June 30,
2018
Base Business Net Sales
Change
Acquired and
Combined Net Sales
Change
Six Months Ended June 30,
2019
Total Net Sales %
Change
Base Business Net Sales %
Change(1)
Acquired and Combined Net
Sales % Change(2)
Wallboard
$
379,252
$
13,129
$
24,592
$
416,973
9.9
%
3.6
%
156.1
%
Suspended ceiling systems
183,933
2,459
8,780
195,172
6.1
%
1.5
%
39.6
%
Metal framing
165,443
22,622
13,611
201,676
21.9
%
14.1
%
285.5
%
Complementary and other products
257,252
7,678
(3,968
)
260,962
1.4
%
3.4
%
(13.6
)%
Net sales
$
985,880
$
45,888
$
43,015
$
1,074,783
9.0
%
5.0
%
59.9
%
Average daily net sales(3)
$
7,702
$
418
$
343
$
8,463
9.9
%
5.8
%
61.1
%
(1) Represents base business net sales
change as a percentage of base business net sales for the six
months ended June 30, 2018.
(2) Represents acquired and combined net
sales change as a percentage of acquired and combined net sales for
the six months ended June 30, 2018.
(3) The number of business days for the
six months ended June 30, 2019 and 2018 were 127 and 128,
respectively.
Non-GAAP (Generally Accepted Accounting
Principles) Financial Measures
In addition to presenting financial results prepared in
accordance with GAAP, this press release contains certain non-GAAP
financial measures, including adjusted EBITDA, adjusted EBITDA
margin, adjusted net income, net debt leverage and adjusted
earnings per share, 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 income (loss) from continuing operations before
interest expense, net, income tax expense (benefit), depreciation
and amortization, unrealized gain 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, (gain) loss on the disposal of
property and equipment and transaction costs. The Company
calculates adjusted EBITDA margin as adjusted EBITDA divided by net
sales. The Company calculates adjusted net income as net income
(loss) from continuing operations before unrealized gain 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, (gain)
loss on the disposal of property and equipment and transaction
costs. The Company calculates adjusted earnings per share as
adjusted net income on a per weighted average share outstanding
basis. For a calculation of net debt leverage, see Item 2,
Management's Discussion and Analysis of Financial Condition and
Results of Operations in our Quarterly Report on Form 10-Q for the
three months ended June 30, 2019.
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 are also frequently
used by analysts, investors and other interested parties to
evaluate companies in the Company’s industry. These measures, when
used in conjunction with the most directly comparable 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,
which are discussed in greater detail in the Company's filings with
the Securities and Exchange Commission. These measures should not
be considered as alternatives to measures of financial performance
prepared 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 considered
liquidity measures. Other companies, including other companies in
the Company’s industry, may not use these measures or may calculate
one or more of these measures differently than the Company does,
limiting their usefulness as comparative measures.
The following is a reconciliation of adjusted EBITDA to the most
directly comparable GAAP measure, net income (loss) from continuing
operations (unaudited):
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(dollars in thousands)
Net income (loss) from continuing
operations
$
14,721
$
1,473
$
19,549
$
(791
)
Interest expense, net
8,402
15,315
16,987
30,413
Income tax expense (benefit)
5,433
618
7,478
(780
)
Depreciation and amortization
20,351
18,751
40,693
37,148
Unrealized gain on derivative financial
instruments
—
(60
)
—
(134
)
IPO and public company readiness
expenses
—
—
—
89
Stock-based compensation
1,110
636
1,939
878
Non-cash purchase accounting
effects(a)
—
—
—
407
(Gain) loss on disposal of property and
equipment
(258
)
263
(67
)
275
Transaction costs(b)
582
1,786
1,227
2,703
Adjusted EBITDA
$
50,341
$
38,782
$
87,806
$
70,208
Adjusted EBITDA margin(c)
9.0
%
7.4
%
8.2
%
7.1
%
(a) Adjusts for the effect of the purchase accounting step-up in
the value of inventory to fair value recognized as a result of
acquisitions.
(b) Represents costs related to our transactions, including fees
to financial advisors, accountants, attorneys, other professionals
as well as certain internal corporate development costs.
(c) Adjusted EBITDA margin represents adjusted EBITDA divided by
net sales.
The following is a reconciliation of adjusted net income to the
most directly comparable GAAP measure, net income (loss) from
continuing operations (unaudited):
(in thousands, except share and per share
data)
Net income (loss) from continuing
operations
$
14,721
$
1,473
$
19,549
$
(791
)
Unrealized gain on derivative financial
instruments
—
(60
)
—
(134
)
IPO and public company readiness
expenses
—
—
—
89
Stock-based compensation
1,110
636
1,939
878
Non-cash purchase accounting
effects(a)
—
—
—
407
(Gain) loss on disposal of property and
equipment
(258
)
263
(67
)
275
Transaction costs(b)
582
1,786
1,227
2,703
Tax effects(c)
(366
)
(671
)
(792
)
(1,078
)
Adjusted net income
$
15,789
$
3,427
$
21,856
$
2,349
Earnings (loss) per share data as
reported:
Basic
$
0.34
$
0.03
$
0.45
$
(0.02
)
Diluted
$
0.34
$
0.03
$
0.45
$
(0.02
)
Earnings (loss) per share data as
adjusted:
Basic
$
0.37
$
0.08
$
0.51
$
0.05
Diluted
$
0.37
$
0.08
$
0.51
$
0.05
Weighted average shares outstanding:
Basic
42,987,915
42,893,498
42,960,124
42,886,867
Diluted
43,245,353
42,910,017
43,064,496
42,903,788
(a) Adjusts for the effect of the purchase
accounting step-up in the value of inventory to fair value
recognized as a result of acquisitions.
(b) Represents costs related to our
transactions, including fees paid to financial advisors,
accountants, attorneys and other professionals, as well as certain
internal corporate development costs.
(c) Represents the impact of corporate
income taxes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190805005551/en/
Investor Relations: John Moten, IRC 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
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