2019 First Quarter
Highlights
- Net sales of $514.9 million, an
increase of 11.0% compared to the prior year period; average daily
net sales increased 12.8%
- Base business net sales of $460.9
million, an increase of 6.8% compared to the prior year period;
average daily base business net sales increased 8.5%
- Net income from continuing operations
increased by $7.1 million, to $4.8 million, compared to a net loss
from continuing operations of $2.3 million in the prior year
period;
- Adjusted net income(1) increased by
$7.1 million to $6.1 million, compared to an adjusted net loss of
$1.1 million in the prior year period
- Earnings per share from continuing
operations of $0.11 compared to a loss per share of $0.05 in the
prior year period; adjusted earnings per share(1) of $0.14 compared
to adjusted loss per share of $0.03 in the prior year period
- Adjusted EBITDA(1) of $37.5 million, an
increase of 19.2% compared to the prior year period; adjusted
EBITDA margin(1) of 7.3% compared to 6.8% 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 first quarter 2019 financial results and reaffirmed its
2019 guidance.
“We delivered strong first quarter net sales and base business
growth, reflecting our continued momentum in the commercial end
market,” said Ruben Mendoza, President and CEO. “We are well on our
way to achieving our strategic goals, including reducing our debt
leverage and growing our profitability.”
2019 First Quarter
Results
Net sales for the three months ended March 31, 2019, were $514.9
million compared to $463.7 million for the three months ended March
31, 2018, representing an increase of $51.2 million, or 11.0%;
average daily net sales increased 12.8%. Average daily base
business net sales grew 8.5%, driven by strong commercial activity
and product expansion into new geographic markets.
Gross profit for the three months ended March 31, 2019, was
$153.0 million compared to $134.4 million for the three months
ended March 31, 2018, representing an increase of $18.5 million, or
13.8%. The increase in gross profit was primarily due to the
increase in sales volume, contributions from acquisitions and base
business growth. Gross margin for the three months ended March 31,
2019, was 29.7% compared to 29.0% for the three months ended March
31, 2018. The increase in gross margin was primarily due to the
continued stabilization of our product costs and a shift in product
mix.
Selling, general and administrative ("SG&A") expenses for
the three months ended March 31, 2019, were $117.2 million compared
to $104.7 million for the three months ended March 31, 2018,
representing an increase of $12.6 million. As a percentage of net
sales, SG&A expenses were 22.8% for the three months ended
March 31, 2019, compared to 22.6% for the three months ended March
31, 2018. The increase in SG&A expenses as 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
March 31, 2019, was $4.8 million, or $0.11 per share,
compared to a net loss from continuing operations of
$2.3 million, or $0.05 per share for the three months
ended March 31, 2018. Adjusted net income(1) for the
three months ended March 31, 2019, was $6.1 million,
or $0.14 per share, an increase of
$7.2 million compared to an
adjusted net loss(1) of $1.1 million, or
$0.03 per share, for the three months ended March 31,
2018.
Adjusted EBITDA(1) was $37.5 million and adjusted EBITDA
margin(1) was 7.3% for the three months ended March 31, 2019,
compared to adjusted EBITDA(1) of $31.4 million and adjusted EBITDA
margin(1) of 6.8% for the three months ended March 31, 2018.
Acquisitions
On February 1, 2019, the Company acquired Builders' Supplies
Limited ("BSL"), adding three additional branches serving the
Greater Toronto Area in Ontario, Canada. For 2019, BSL is expected
to contribute between $20.0 million to $24.0 million to net sales.
The Company will continue to supplement organic growth with
strategic acquisitions.
2019
Guidance(a)
Net sales (in billions)
$2.10 to $2.25 Gross margin 29.1% to 29.3% Adjusted EBITDA(b) (in
millions) $160.0 to $180.0 Adjusted EBITDA margin(b) 7.6% to 8.0%
Adjusted EPS(b) $0.70 to $0.90 Net debt leverage(b)(c) 3.2x to 3.5x
(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. (c) For a calculation of net debt
leverage as of March 31, 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 March
31, 2019.
First Quarter Earnings Release and
Conference Call
In conjunction with this release, Foundation Building Materials,
Inc. will host a conference call tomorrow, Tuesday, May 7, 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 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, May 7,
2019, and ending 11:59 PM Eastern Time on Tuesday, May 14, 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 13689550.
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 (loss) and adjusted EPS
are non-GAAP financial measures. See the supplementary schedules at
the end of this press release for a discussion of how we define and
calculate these measures, why we believe they are important and a
reconciliation thereof to the most directly comparable GAAP
measures. Adjusted EBITDA margin represents adjusted EBITDA divided
by net sales.
- Financial Tables Follow -
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
(in thousands, except share and per
share data)
Three Months Ended March 31, 2019
2018 Net sales $ 514,872 $ 463,661 Cost of goods sold
361,912 329,224 Gross profit 152,960 134,437
Operating expenses: Selling, general and administrative expenses
117,230 104,657 Depreciation and amortization 20,342 18,397
Total operating expenses 137,572 123,054
Income from operations 15,388 11,383 Interest expense (8,556 )
(15,119 ) Other income, net 41 74 Income (loss)
before income taxes 6,873 (3,662 ) Income tax expense (benefit)
2,045 (1,398 ) Income (loss) from continuing operations
4,828 (2,264 ) Income from discontinued operations, net of tax —
1,211 Loss on sale from discontinued operations, net of tax (1,346
) — Net income (loss) $ 3,482 $ (1,053 )
Earnings (loss) per share data: Earnings (loss) from continuing
operations per share - basic $ 0.11 $ (0.05 ) Earnings (loss) from
continuing operations per share - diluted $ 0.11 $ (0.05 )
(Loss) earnings from discontinued operations per share - basic $
(0.03 ) $ 0.03 (Loss) earnings from discontinued operations per
share - diluted $ (0.03 ) $ 0.03 Earnings (loss) earnings
per share - basic $ 0.08 $ (0.02 ) Earnings (loss) per share -
diluted $ 0.08 $ (0.02 ) Weighted average shares
outstanding: Basic 42,932,024 42,879,874 Diluted 42,944,829
42,879,874
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share
data)
March 31, 2019 December 31, 2018 Assets
Current assets: Cash and cash equivalents $ 4,978 $ 15,299
Accounts receivable—net of allowance for doubtful accounts of
$3,578 and $3,239, respectively 303,445 276,043 Other receivables
42,908 57,472 Inventories 170,584 165,989 Prepaid expenses and
other current assets 13,715 9,053 Total current
assets 535,630 523,856 Property and equipment, net 148,491 151,641
Right-of-use assets, net 116,245 — Intangible assets, net 134,887
145,876 Goodwill 487,888 484,941 Other assets 5,816 10,393
Total assets $ 1,428,957 $ 1,316,707
Liabilities and stockholders' equity: Current liabilities:
Accounts payable $ 149,519 $ 137,773 Accrued payroll and employee
benefits 21,281 28,830 Accrued taxes 11,043 11,867 Tax receivable
agreement 27,676 16,667 Current portion of term loan, net 4,500
4,500
Current portion of lease liabilities
28,061 — Other current liabilities 18,849 19,979
Total current liabilities 260,929 219,616 Asset-based revolving
credit facility 153,500 146,000 Long-term portion of term loan, net
437,158 437,999 Tax receivable agreement 90,272 117,948 Deferred
income taxes, net 19,723 20,678
Long-term portion of lease liabilities
96,006 — Other liabilities 2,937 8,117
Total
liabilities 1,060,525 950,358 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; 42,986,683 and
42,907,326 shares issued, respectively 13 13 Additional paid-in
capital 333,029 332,330 Retained earnings 37,497 34,187 Accumulated
other comprehensive loss (2,107 ) (181 )
Total stockholders'
equity 368,432 366,349
Total liabilities and
stockholders' equity $ 1,428,957 $ 1,316,707
FOUNDATION BUILDING MATERIALS,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended March 31, 2019
2018 Cash flows from operating activities: Net income
(loss) $ 3,482 $ (1,053 ) Less: loss on sale of discontinued
operations (1,346 ) — Less: net income from discontinued operations
— 1,211 Net income (loss) from continuing operations
4,828 (2,264 ) Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities of continuing
operations: Depreciation 8,846 7,685 Amortization of intangible
assets 11,496 10,692 Amortization of debt issuance costs and debt
discount 539 2,624 Inventory fair value purchase accounting
adjustment 196 407 Provision for doubtful accounts 636 413
Stock-based compensation 829 242 Unrealized gain on derivative
instruments, net — (74 ) Loss on disposal of property and equipment
191 12 Right-of-use assets 6,743 — Deferred income taxes 211 (1,614
) Change in assets and liabilities, net of effects of acquisitions:
Accounts receivable (23,860 ) (26,783 ) Other receivables 16,851
5,112 Inventories (2,917 ) (4,554 ) Prepaid expenses and other
current assets (2,206 ) 1,211 Other assets (15 ) 651 Accounts
payable 9,182 8,385 Accrued payroll and employee benefits (7,601 )
1,715 Accrued taxes (831 ) 3,035 Other liabilities (5,409 ) (12,007
) Net cash provided by (used in) operating activities from
continuing operations 17,709 (5,112 ) Cash flows from investing
activities from continuing operations: Purchases of property and
equipment (5,242 ) (7,286 ) Payment of net working capital
adjustments related to acquisitions (13 ) (15 ) Proceeds from net
working capital adjustments related to acquisitions — 178 Proceeds
from the disposal of fixed assets 238 200 Acquisitions, net of cash
acquired (10,757 ) (21,233 ) Net cash used in investing activities
from continuing operations (15,774 ) (28,156 ) Cash flows from
financing activities from continuing operations: Proceeds from
asset-based revolving credit facility 145,276 131,224 Repayments of
asset-based revolving credit facility (137,776 ) (88,724 )
Principal payments for term loan (1,125 ) — Payment related to tax
receivable agreement (16,667 ) — Tax withholding payment related to
net settlement of equity awards (130 ) (45 ) Principal repayment of
finance lease obligations (654 ) (680 ) Net cash (used in) provided
by financing activities from continuing operations (11,076 ) 41,775
Net cash used in operating activities from discontinued operations
— (11,429 ) Net cash used in investing activities from discontinued
operations (1,346 ) (308 ) Net cash used in financing activities of
discontinued operations — (65 ) Net cash used in
discontinued operations (1,346 ) (11,802 ) Effect of exchange rate
changes on cash 166 (161 ) Net decrease increase in cash
(10,321 ) (3,456 ) Cash and cash equivalents at beginning of period
15,299 12,101 Cash and cash equivalents at end of
period $ 4,978 $ 8,645 Supplemental
disclosures of cash flow information: Cash paid for income taxes $
79 $ — Cash paid for interest $ 8,613 $ 24,201 Supplemental
disclosures of non-cash investing and financing activities: Change
in fair value of derivatives, net of tax $ 3,496 $ 1,163 Goodwill
adjustment for purchase price allocation $ 187 $ 202
FOUNDATION BUILDING MATERIALS,
INC.
NET SALES BY MAJOR PRODUCT LINE, GROSS
PROFIT AND GROSS MARGIN
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018 (UNAUDITED)
(in thousands)
Three Months Ended March 31, Change
2019 2018 $
%
Wallboard $ 202,914 39.4 % $ 180,653 39.0 % $ 22,261 12.3 %
Suspended ceiling systems 88,996 17.3 % 86,179 18.6 % 2,817 3.3 %
Metal framing 99,251 19.3 % 73,967 16.0 % 25,284 34.2 %
Complementary and other products 123,711 24.0 % 122,862
26.4 % 849 0.7 % Total net sales $ 514,872
100.0 % $ 463,661 100.0 % $ 51,211 11.0 % Total gross
profit $ 152,960 $ 134,437 $ 18,523 13.8 % Total gross margin 29.7
% 29.0 % 0.7 %
FOUNDATION BUILDING MATERIALS,
INC.
BASE BUSINESS AND ACQUIRED AND COMBINED
NET SALES
FOR THE THREE MONTHS ENDED MARCH 31,
2019 AND 2018 (UNAUDITED)
(in thousands)
Three Months Ended March 31, Change
2019 2018 $
%
Base business (1) $ 460,901 $ 431,364 $ 29,537 6.8 % Acquired and
combined (2) 53,971 32,297 21,674 67.1 % Net
sales $ 514,872 $ 463,661 $ 51,211 11.0
% (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 MONTHS ENDED MARCH 31,
2019 AND 2018 (UNAUDITED)
(in thousands)
Three Months Ended March
31, 2018
Base Business Net
Sales Change
Acquired and Combined
Net Sales Change
Three Months Ended March
31, 2019
Total Net Sales %
Change
Base Business Net
Sales % Change(1)
Acquired and Combined
Net Sales % Change(2)
Wallboard $ 180,653 $ 9,536 $ 12,725 $ 202,914 12.3 % 5.5 % 183.7 %
Suspended ceiling systems 86,179 (178 ) 2,995 88,996 3.3 % (0.2 )%
29.8 % Metal framing 73,967 17,939 7,345 99,251 34.2 % 24.9 % 403.9
% Complementary and other products 122,862 2,239
(1,390 ) 123,711 0.7 % 2.0 % (10.3 )% Net sales $ 463,661 $
29,536 $ 21,675 $ 514,872 11.0 % 6.8 % 67.1 % Average daily net
sales(3) $ 7,245 $ 576 $ 352 $ 8,173 12.8 % 8.5 % 69.8 % (1)
Represents base business net sales change as a percentage of base
business net sales for the three months ended March 31, 2018. (2)
Represents acquired and combined net sales change as a percentage
of acquired and combined net sales for the three months ended March
31, 2018. (3) The number of business days for the three months
ended March 31, 2019 and 2018, were 63 and 64, 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 (loss), net debt leverage and adjusted
earnings (loss) 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, 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 (loss) 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, loss on
the disposal of property and equipment and transaction costs. The
Company calculates adjusted earnings (loss) per share as adjusted
net income (loss) 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 March 31, 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)
(unaudited):
Three Months Ended March 31, 2019
2018 (dollars in thousands) Net income (loss) from
continuing operations $ 4,828 $ (2,264 ) Interest expense, net
8,585 15,098 Income tax expense (benefit) 2,045 (1,398 )
Depreciation and amortization 20,342 18,397 Unrealized gain on
derivative financial instruments — (74 ) IPO and public company
readiness expenses — 89 Stock-based compensation 829 242 Non-cash
purchase accounting effects(a) — 407 Loss on disposal of property
and equipment 191 12 Transaction costs(b) 645 917
Adjusted EBITDA $ 37,465 $
31,426 Adjusted EBITDA margin(c) 7.3 % 6.8 %
(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 and 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)
(unaudited):
Three Months Ended March 31, 2019
2018 (in thousands, except share and per share data)
Net income (loss) from continuing operations $ 4,828 $ (2,264 )
Unrealized gain on derivative financial instruments — (74 ) IPO and
public company readiness expenses — 89 Stock-based compensation 829
242 Non-cash purchase accounting effects(a) — 407 Loss on disposal
of property and equipment 191 12 Transaction costs(b) 645 917 Tax
effects(c) (426 ) (407 ) Adjusted net income (loss) $ 6,067
$ (1,078 ) Earnings (loss) per share data as reported: Basic
$ 0.11 $ (0.05 ) Diluted $ 0.11 $ (0.05 ) Earnings (loss) per share
data as adjusted: Basic $ 0.14 $ (0.03 ) Diluted $ 0.14 $ (0.03 )
Weighted average shares outstanding: Basic 42,932,024
42,879,874 Diluted 42,944,829 42,879,874 (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.
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version on businesswire.com: https://www.businesswire.com/news/home/20190506005757/en/
Investor Relations:John Moten, IRCFoundation Building Materials,
Inc.657-900-3200Investors@fbmsales.comMedia Relations:Joele Frank,
Wilkinson Brimmer KatcherJed Repko or Ed Trissel212-355-4449
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