Press Release

Foundation Building Materials, Inc. Announces Third Quarter 2019 Results

Company Release - 11/4/2019 4:40 PM ET

Increases full-year adjusted EPS guidance 

2019 Third Quarter Highlights

  • Net sales of $564.9 million, an increase of 4.2% compared to the prior year period
  • Base business net sales of $500.8 million, an increase of 1.1% compared to the prior year period
  • Net income from continuing operations of $12.7 million, an increase of $50.3 million, compared to the prior year period
  • Adjusted net income(1) of $14.4 million, an increase of $6.2 million, compared to the prior year period
  • Earnings per share ("EPS") from continuing operations of $0.30 compared to a loss per share of $0.88 in the prior year period; adjusted EPS(1) of $0.33 compared to adjusted EPS of $0.19 in the prior year period
  • Adjusted EBITDA(1) of $50.0 million, an increase of 14.4% compared to the prior year period; adjusted EBITDA margin(1) of 8.9% compared to 8.1% in the prior year period
  • Increasing full-year adjusted EPS guidance from $0.80 to $1.00 to $0.95 to $1.05

SANTA ANA, Calif.--(BUSINESS WIRE)-- 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 third quarter 2019 financial results and increased its adjusted EPS 2019 guidance.

“Our strong underlying profitability was the key driver of our third quarter results,” said Ruben Mendoza, President and CEO. “Despite continuing softness in Canadian markets and 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 meet our financial objectives for the year.”

2019 Third Quarter Results

Net sales for the three months ended September 30, 2019 were $564.9 million compared to $542.3 million for the three months ended September 30, 2018, representing an increase of $22.6 million, or 4.2%. Net sales from base business branches contributed $5.2 million of the increase for the quarter, primarily driven by strong commercial activity and product expansion into new geographic markets.

Gross profit for the three months ended September 30, 2019 was $171.8 million compared to $154.0 million for the three months ended September 30, 2018, representing an increase of $17.8 million, or 11.5%. The increase in gross profit was primarily due to an expansion of our gross margin and an increase in sales from acquisitions. Gross margin for the three months ended September 30, 2019 was 30.4% compared to 28.4% for the three months ended September 30, 2018. The increase in gross margin was primarily due to improved profitability across our product lines driven by the Company's ongoing pricing and purchasing initiatives and continued stabilization of product costs.

Selling, general and administrative ("SG&A") expenses for the three months ended September 30, 2019 were $123.9 million compared to $113.3 million for the three months ended September 30, 2018, representing an increase of $10.6 million. As a percentage of net sales, SG&A expenses were 21.9% for the three months ended September 30, 2019, compared to 20.9% for the three months ended September 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.

Net income from continuing operations for the three months ended September 30, 2019 was $12.7 million, or $0.30 per share, compared to a net loss from continuing operations of $37.6 million, or $0.88 per share, for the three months ended September 30, 2018. Adjusted net income(1) for the three months ended September 30, 2019 was $14.4 million, or $0.33 per share, an increase of $6.2 million compared to adjusted net income(1) of $8.2 million, or $0.19 per share, for the three months ended September 30, 2018.

Adjusted EBITDA(1) was $50.0 million and adjusted EBITDA margin(1) was 8.9% for the three months ended September 30, 2019, compared to adjusted EBITDA(1) of $43.7 million and adjusted EBITDA margin(1) of 8.1% for the three months ended September 30, 2018.

2019 Year-To-Date Results

Net sales for the nine months ended September 30, 2019 were $1,639.7 million compared to $1,528.2 million for the nine months ended September 30, 2018, representing an increase of $111.5 million, or 7.3%. There was one less day in the current period as compared to the prior period. Average daily net sales increased 7.9% over the prior period. Net sales from base business branches contributed $51.1 million of the net sales increase, and average daily base business net sales increased by 4.2% over the prior period. The base business net sales increase was primarily due to strong commercial activity and product expansion into new geographic markets.

Gross profit for the nine months ended September 30, 2019 was $496.3 million compared to $434.7 million for the nine months ended September 30, 2018, representing an increase of $61.6 million, or 14.2%. Gross profit increased due to an expansion of our gross margin, an increase in sales from acquisitions and base business growth. Gross margin for the nine months ended September 30, 2019 was 30.3% compared to 28.4% for the nine months ended September 30, 2018. The increase in gross margin was primarily due to improved profitability across our product lines driven by the Company's ongoing pricing and purchasing initiatives and continued stabilization of product costs.

SG&A expenses for the nine months ended September 30, 2019 were $363.9 million compared to $328.1 million for the nine months ended September 30, 2018, representing an increase of $35.8 million, or 10.9%. As a percentage of net sales, SG&A expenses were 22.2% for the nine months ended September 30, 2019, compared to 21.5% for the nine months ended September 30, 2018. The increase in SG&A expenses as a percentage of net sales was primarily due to the Company's 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 nine months ended September 30, 2019 was $32.3 million, or $0.75 per share, compared to a net loss from continuing operations of $38.3 million, or $0.89 per share, for the nine months ended September 30, 2018. Adjusted net income(1) for the nine months ended September 30, 2019 was $36.3 million, or $0.84 per share, an increase of $25.7 million compared to an adjusted net income(1) of $10.6 million, or $0.25 per share, for the nine months ended September 30, 2018.

Adjusted EBITDA(1) was $137.8 million and adjusted EBITDA margin(1) was 8.4% for the nine months ended September 30, 2019, compared to adjusted EBITDA(1) of $114.0 million and adjusted EBITDA margin(1) of 7.5% for the nine months ended September 30, 2018.

Acquisitions

On October 1, 2019, the Company acquired the operations and substantially all of the assets of Joe's Wallboard Supply Co. of Colorado Springs, Inc. (“Wallboard Supply”). Wallboard Supply was a distributor of drywall and accessories, steel framing, insulation, tools and fasteners. Wallboard Supply operated one branch in Colorado Springs, Colorado. For the remainder of 2019, Wallboard Supply is expected to contribute $2.0 million to $3.0 million to net sales.

On October 1, 2019, the Company acquired the operations and substantially all of the assets of The Supply Guy, Inc. (“TSG”). TSG was a distributor of tools, fasteners, and other related products. TSG operated one branch in Lakewood, Washington. For the remainder of 2019, TSG is expected to contribute $0.8 million to $1.2 million to net sales.

From January 1 through September 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(a)

 

 

 

 

 

Net sales (in billions)

 

$2.10 to $2.25

Gross margin

 

29.7% to 30.2%

Adjusted EBITDA(b) (in millions)

 

$165.0 to $185.0

Adjusted EBITDA margin(b)

 

7.8% to 8.2%

Adjusted EPS(b)(c)

 

$0.95 to $1.05

Net debt leverage ratio(b)(d)

 

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 ratio are non-GAAP financial measures. Adjusted EBITDA margin represents adjusted EBITDA divided by net sales. For a reconciliation of net income (loss) to adjusted EBITDA, please see the supplementary schedules at the end of this release.

(c)We are increasing adjusted EPS guidance. Previously provided guidance was $0.80 to $1.00.

(d)For a calculation of our net debt leverage ratio as of September 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 September 30, 2019.

Third Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, November 5, 2019, at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial 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 "Events and Presentations" tab 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
  • Using audio replay: A replay of the call will be available beginning at 11:30 AM Eastern Time on Tuesday, November 5, 2019, and ending 11:59 PM Eastern Time on Tuesday, November 12, 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 13695544.

     

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 Santa Ana, 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 ratio, as well as statements regarding the Company's progress towards achieving its strategic objectives, including the successful integration and future 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 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
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net sales

$

564,906

 

 

$

542,273

 

 

$

1,639,689

 

 

$

1,528,153

 

Cost of goods sold

393,111

 

 

388,236

 

 

1,143,397

 

 

1,093,412

 

Gross profit

171,795

 

 

154,037

 

 

496,292

 

 

434,741

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative expenses

123,907

 

 

113,279

 

 

363,872

 

 

328,088

 

Depreciation and amortization

20,218

 

 

19,771

 

 

60,911

 

 

56,922

 

Total operating expenses

144,125

 

 

133,050

 

 

424,783

 

 

385,010

 

Income from operations

27,670

 

 

20,987

 

 

71,509

 

 

49,731

 

Loss on extinguishment of debt

 

 

(58,475

)

 

 

 

(58,475

)

Interest expense

(9,118

)

 

(12,576

)

 

(26,015

)

 

(43,028

)

Other (expense) income, net

(89

)

 

(8

)

 

(4

)

 

126

 

Income (loss) before income taxes

18,463

 

 

(50,072

)

 

45,490

 

 

(51,646

)

Income tax expense (benefit)

5,754

 

 

(12,519

)

 

13,232

 

 

(13,299

)

Income (loss) from continuing operations

12,709

 

 

(37,553

)

 

32,258

 

 

(38,347

)

Income from discontinued operations, net of tax

 

 

2,772

 

 

 

 

7,913

 

Loss on sale of discontinued operations, net of tax

(11

)

 

 

 

(1,401

)

 

 

Net income (loss)

$

12,698

 

 

$

(34,781

)

 

$

30,857

 

 

$

(30,434

)

 

 

 

 

 

 

 

 

Earnings (loss) per share data:

 

 

 

 

 

 

 

Earnings (loss) from continuing operations per share - basic

$

0.30

 

 

$

(0.88

)

 

$

0.75

 

 

$

(0.89

)

Earnings (loss) from continuing operations per share - diluted

$

0.30

 

 

$

(0.88

)

 

$

0.75

 

 

$

(0.89

)

 

 

 

 

 

 

 

 

Earnings (loss) from discontinued operations per share - basic

$

 

 

$

0.07

 

 

$

(0.03

)

 

$

0.18

 

Earnings (loss) from discontinued operations per share - diluted

$

 

 

$

0.07

 

 

$

(0.03

)

 

$

0.18

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - basic

$

0.30

 

 

$

(0.81

)

 

$

0.72

 

 

$

(0.71

)

Earnings (loss) per share - diluted

$

0.30

 

 

$

(0.81

)

 

$

0.72

 

 

$

(0.71

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

42,988,829

 

 

42,894,474

 

 

42,969,797

 

 

42,889,430

 

Diluted

43,508,678

 

 

42,917,230

 

 

43,174,351

 

 

42,905,273

 

 

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

 

 

September 30, 2019

 

December 31, 2018

Current assets:

 

 

 

Cash and cash equivalents

$

22,668

 

 

$

15,299

 

Accounts receivable—net of allowance for doubtful accounts of $3,678 and $3,239, respectively

314,088

 

 

276,043

 

Other receivables

49,284

 

57,472

Inventories

163,280

 

165,989

Prepaid expenses and other current assets

13,321

 

9,053

Total current assets

562,641

 

523,856

Property and equipment, net

153,294

 

151,641

Right-of-use assets, net

117,137

 

 

Intangible assets, net

117,894

 

145,876

Goodwill

490,315

 

484,941

Other assets

5,481

 

10,393

Total assets

$

1,446,762

 

 

$

1,316,707

 

Liabilities and stockholders' equity:

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

143,958

 

 

$

137,773

 

Accrued payroll and employee benefits

29,113

 

 

28,830

 

Accrued taxes

11,092

 

11,867

Current portion of tax receivable agreement

27,676

 

16,667

 

Current portion of term loan, net

4,500

 

4,500

 

Current portion of lease liabilities

29,310

 

 

Other current liabilities

23,650

 

19,979

Total current liabilities

269,299

 

219,616

Asset-based revolving credit facility

134,306

 

146,000

Long-term portion of term loan, net

435,475

 

 

437,999

 

Tax receivable agreement

90,272

 

117,948

Deferred income taxes, net

18,586

 

20,678

Long-term portion of lease liabilities

95,045

 

 

Other liabilities

7,957

 

8,117

Total liabilities

1,050,940

 

 

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; 42,989,840 and 42,907,326 shares issued, respectively

13

 

 

13

 

Additional paid-in capital

335,237

 

332,330

Retained earnings

64,872

 

34,187

 

Accumulated other comprehensive loss

(4,300

)

 

(181

)

Total stockholders' equity

395,822

 

366,349

Total liabilities and stockholders' equity

$

1,446,762

 

 

$

1,316,707

 

 

FOUNDATION BUILDING MATERIALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

Nine Months Ended September 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net income (loss)

$

30,857

 

 

$

(30,434

)

Add: loss on sale of discontinued operations

(1,401

)

 

 

Less: net income from discontinued operations

 

 

7,913

 

Net income (loss) from continuing operations

32,258

 

 

(38,347

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities from continuing operations:

 

 

 

Depreciation

26,173

 

 

24,383

 

Amortization of intangible assets

34,738

 

 

32,539

 

Amortization of debt issuance costs and debt discount

1,617

 

 

6,834

 

Loss on extinguishment of debt

 

 

58,475

 

Inventory fair value purchase accounting adjustment

234

 

 

413

 

Provision for doubtful accounts

2,017

 

 

1,654

 

Stock-based compensation

3,056

 

 

1,512

 

Unrealized gain on derivative instruments, net

 

 

(56

)

(Gain) loss on disposal of property and equipment

(54

)

 

614

 

Right-of-use assets non-cash expense

20,586

 

 

 

Deferred income taxes

63

 

 

(13,038

)

Change in assets and liabilities, net of effects of acquisitions:

 

 

 

Accounts receivable

(32,949

)

 

(65,361

)

Other receivables

10,520

 

 

5,361

 

Inventories

5,623

 

 

(3,244

)

Prepaid expenses and other current assets

(4,198

)

 

(496

)

Other assets

(187

)

 

(1,928

)

Accounts payable

2,417

 

 

(8,940

)

Accrued payroll and employee benefits

214

 

 

7,929

 

Accrued taxes

(860

)

 

4,783

 

Operating lease liability

(20,034

)

 

 

Other liabilities

6,019

 

 

(13,960

)

Net cash provided by (used in) operating activities from continuing operations

87,253

 

 

(873

)

Cash flows from investing activities from continuing operations:

 

 

 

Purchases of property and equipment

(29,369

)

 

(28,157

)

Proceeds from termination of net investment hedge

3,313

 

 

 

Proceeds from net working capital adjustments related to acquisitions

461

 

 

115

 

Proceeds from the disposal of fixed assets

2,719

 

 

1,605

 

Acquisitions, net of cash acquired

(21,882

)

 

(70,334

)

Net cash used in investing activities from continuing operations

(44,758

)

 

(96,771

)

Cash flows from financing activities from continuing operations:

 

 

 

Proceeds from asset-based revolving credit facility

403,454

 

 

757,298

 

Repayments of asset-based revolving credit facility

(415,178

)

 

(498,964

)

Principal payments for term loan

(3,375

)

 

 

Term loan proceeds

 

 

450,000

 

Term loan original issuance discount and deferred finance costs

 

 

(7,935

)

Repayment of bond principal

 

 

(575,000

)

Prepayment premium on senior secured notes

 

 

(23,872

)

Payment related to tax receivable agreement

(16,667

)

 

 

Tax withholding payment related to net settlement of equity awards

(155

)

 

(61

)

Principal repayment of finance lease obligations

(2,002

)

 

(2,094

)

Net cash (used in) provided by financing activities from continuing operations

(33,923

)

 

99,372

 

Net cash used in operating activities from discontinued operations

 

 

(2,063

)

Net cash used in investing activities from discontinued operations

(1,401

)

 

(928

)

Net cash used in financing activities of discontinued operations

 

 

(140

)

Net cash used in discontinued operations

(1,401

)

 

(3,131

)

Effect of exchange rate changes on cash

198

 

 

(138

)

Net increase (decrease) in cash

7,369

 

 

(1,541

)

Cash and cash equivalents at beginning of period

15,299

 

 

12,101

 

Cash and cash equivalents at end of period

$

22,668

 

 

$

10,560

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for income taxes

$

10,401

 

 

$

1,504

 

Cash paid for interest

$

24,150

 

 

$

52,288

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

Change in fair value of derivatives, net of tax

$

5,663

 

 

$

839

 

Goodwill adjustment for purchase price allocation

$

57

 

 

$

202

 

 

FOUNDATION BUILDING MATERIALS, INC.

NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

(dollars in thousands)

 

 

Three Months Ended September 30,

 

Change

 

2019

 

2018

 

$

 

%

Wallboard

$

207,326

 

36.7

%

 

$

203,991

 

37.6

%

 

$

3,335

 

 

1.6

%

Suspended ceiling systems

118,873

 

21.0

%

 

104,422

 

19.3

%

 

14,451

 

 

13.8

%

Metal framing

98,817

 

17.5

%

 

98,576

 

18.2

%

 

241

 

 

0.2

%

Complementary and other products

139,890

 

24.8

%

 

135,284

 

24.9

%

 

4,606

 

 

3.4

%

Total net sales

$

564,906

 

100.0

%

 

$

542,273

 

100.0

%

 

$

22,633

 

 

4.2

%

Total gross profit

$

171,795

 

 

 

$

154,037

 

 

 

$

17,758

 

 

11.5

%

Total gross margin

30.4

%

 

 

28.4

%

 

 

2.0

%

 

 

 
 

 

Nine Months Ended September 30,

 

Change

 

2019

 

2018

 

$

 

%

Wallboard

$

624,299

 

38.1

%

 

$

583,242

 

38.2

%

 

$

41,057

 

 

7.0

%

Suspended ceiling systems

314,045

 

19.2

%

 

288,356

 

18.9

%

 

25,689

 

 

8.9

%

Metal framing

300,493

 

18.3

%

 

264,019

 

17.3

%

 

36,474

 

 

13.8

%

Complementary and other products

400,852

 

24.4

%

 

392,536

 

25.7

%

 

8,316

 

 

2.1

%

Total net sales

$

1,639,689

 

100.0

%

 

$

1,528,153

 

100.0

%

 

$

111,536

 

 

7.3

%

Total gross profit

$

496,292

 

 

 

$

434,741

 

 

 

$

61,551

 

 

14.2

%

Total gross margin

30.3

%

 

 

28.4

%

 

 

1.9

%

 

 

 

FOUNDATION BUILDING MATERIALS, INC.

BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

(dollars in thousands)

 

 

Three Months Ended September 30,

 

Change

 

2019

 

2018

 

$

 

%

Base business (1)

$

500,834

 

 

$

495,613

 

 

$

5,221

 

 

1.1

%

Acquired and combined (2)

64,072

 

 

46,660

 

 

17,412

 

 

37.3

%

Net sales

$

564,906

 

 

$

542,273

 

 

$

22,633

 

 

4.2

%

(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.

 
 

Nine Months Ended September 30,

 

Change

 

2019

 

2018

 

$

 

%

Base business (1)

$

1,460,741

 

 

$

1,409,632

 

 

$

51,109

 

 

3.6

%

Acquired and combined (2)

178,948

 

 

118,521

 

 

60,427

 

 

51.0

%

Net sales

$

1,639,689

 

 

$

1,528,153

 

 

$

111,536

 

 

7.3

%

(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 NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

(dollars in thousands)

 

 

Three Months
Ended
September 30, 2018

 

Base
Business
Net Sales
Change

 

Acquired
and
Combined
Net Sales
Change

 

Three Months
Ended
September 30,
2019

 

Total Net
Sales %
Change

Base
Business
Net Sales
%
Change(1)

 

Acquired
and
Combined
Net Sales
%
Change(2)

Wallboard

$

203,991

 

 

$

(3,872

)

 

$

7,207

 

 

$

207,326

 

 

1.6

%

(2.0

)%

 

57.1

%

Suspended ceiling systems

104,422

 

 

9,654

 

 

4,797

 

 

118,873

 

 

13.8

%

11.0

%

 

28.6

%

Metal framing

98,576

 

 

(3,032

)

 

3,273

 

 

98,817

 

 

0.2

%

(3.3

)%

 

51.2

%

Complementary and other products

135,284

 

 

2,471

 

 

2,135

 

 

139,890

 

 

3.4

%

2.0

%

 

19.6

%

Net sales

$

542,273

 

 

$

5,221

 

 

$

17,412

 

 

$

564,906

 

 

4.2

%

1.1

%

 

37.3

%

Average daily net sales(3)

$

8,608

 

 

$

83

 

 

$

276

 

 

$

8,967

 

 

4.2

%

1.1

%

 

37.3

%

(1) Represents base business net sales change as a percentage of base business net sales for the three months ended September 30, 2018.

(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the three months ended September 30, 2018.

(3) The number of business days for the three months ended September 30, 2019 and 2018 were 63 and 63, respectively.

 
 

 

Nine Months
Ended
September 30,
2018

 

Base
Business
Net Sales
Change

 

Acquired
and
Combined
Net Sales
Change

 

Nine Months
Ended
September 30,
2019

 

Total Net
Sales %
Change

Base
Business
Net Sales
%
Change(1)

 

Acquired
and
Combined
Net Sales
%
Change(2)

Wallboard

$

583,242

 

 

$

9,257

 

 

$

31,800

 

 

$

624,299

 

 

7.0

%

1.7

%

 

112.0

%

Suspended ceiling systems

288,356

 

 

12,113

 

 

13,576

 

 

314,045

 

 

8.9

%

4.9

%

 

34.9

%

Metal framing

264,019

 

 

19,590

 

 

16,884

 

 

300,493

 

 

13.8

%

7.7

%

 

151.3

%

Complementary and other products

392,536

 

 

10,149

 

 

(1,833

)

 

400,852

 

 

2.1

%

2.9

%

 

(4.6

)%

Net sales

$

1,528,153

 

 

$

51,109

 

 

$

60,427

 

 

$

1,639,689

 

 

7.3

%

3.6

%

 

51.0

%

Average daily net sales(3)

$

8,001

 

 

$

308

 

 

$

321

 

 

$

8,630

 

 

7.9

%

4.2

%

 

51.8

%

(1) Represents base business net sales change as a percentage of base business net sales for the nine months ended September 30, 2018.

(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the nine months ended September 30, 2018.

(3) The number of business days for the nine months ended September 30, 2019 and 2018 were 190 and 191, 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 ratio 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 loss on extinguishment of debt, interest expense, net, income tax expense (benefit), depreciation and amortization, unrealized loss (gain) on derivative financial instruments, offering and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as non-cash purchase accounting effects, loss (gain) 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 loss on extinguishment of debt, unrealized loss (gain) on derivative financial instruments, offering and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as non-cash purchase accounting effects, loss (gain) 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 ratio, 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 September 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
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

(dollars in thousands)

 

 

 

 

 

 

 

Net income (loss) from continuing operations

$

12,709

 

 

$

(37,553

)

 

$

32,258

 

 

$

(38,347

)

Loss on extinguishment of debt

 

 

58,475

 

 

 

 

58,475

 

Interest expense, net

9,012

 

 

12,544

 

 

25,999

 

 

42,957

 

Income tax expense (benefit)

5,754

 

 

(12,519

)

 

13,232

 

 

(13,299

)

Depreciation and amortization

20,218

 

 

19,771

 

 

60,911

 

 

56,922

 

Unrealized loss (gain) on derivative financial instruments

 

 

78

 

 

 

 

(56

)

Offering and public company readiness expenses(a)

378

 

 

 

 

378

 

 

89

 

Stock-based compensation

1,117

 

 

633

 

 

3,056

 

 

1,512

 

Non-cash purchase accounting effects(b)

 

 

6

 

 

 

 

413

 

Loss (gain) on disposal of property and equipment

13

 

 

339

 

 

(54

)

 

614

 

Transaction costs(c)

819

 

 

1,967

 

 

2,046

 

 

4,670

 

Adjusted EBITDA

$

50,020

 

 

$

43,741

 

 

$

137,826

 

 

$

113,950

 

Adjusted EBITDA margin(d)

8.9

%

 

8.1

%

 

8.4

%

 

7.5

%

 

(a)

 

Represents costs related to our initial public offering, secondary offering, and public company readiness expenses.

(b)

 

Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.

(c)

 

Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys and other professionals as well as certain internal corporate development costs.

(d)

 

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):

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

(in thousands, except share and per share data)

 

 

 

 

 

 

 

Net income (loss) from continuing operations

$

12,709

 

 

$

(37,553

)

 

$

32,258

 

 

$

(38,347

)

Loss on extinguishment of debt

 

 

58,475

 

 

 

 

58,475

 

Unrealized loss (gain) on derivative financial instruments

 

 

78

 

 

 

 

(56

)

Offering and public company readiness expenses(a)

378

 

 

 

 

378

 

 

89

 

Stock-based compensation

1,117

 

 

633

 

 

3,056

 

 

1,512

 

Non-cash purchase accounting effects(b)

 

 

6

 

 

 

 

413

 

Loss (gain) on disposal of property and equipment

13

 

 

339

 

 

(54

)

 

614

 

Transaction costs(c)

819

 

 

1,967

 

 

2,046

 

 

4,670

 

Tax effects(d)

(594

)

 

(15,719

)

 

(1,386

)

 

(16,797

)

Adjusted net income

$

14,442

 

 

$

8,226

 

 

$

36,298

 

 

$

10,573

 

 

 

 

 

 

 

 

 

Earnings (loss) per share data as reported:

 

 

 

 

 

 

 

Basic

$

0.30

 

 

$

(0.88

)

 

$

0.75

 

 

$

(0.89

)

Diluted

$

0.30

 

 

$

(0.88

)

 

$

0.75

 

 

$

(0.89

)

Earnings per share data as adjusted:

 

 

 

 

 

 

 

Basic

$

0.33

 

 

$

0.19

 

 

$

0.84

 

 

$

0.25

 

Diluted

$

0.33

 

 

$

0.19

 

 

$

0.84

 

 

$

0.25

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

42,988,829

 

 

42,894,474

 

 

42,969,797

 

 

42,889,430

 

Diluted

43,508,678

 

 

42,917,230

 

 

43,174,351

 

 

42,905,273

 

(a)

 

Represents costs related to our initial public offering, secondary offering, and public company readiness expenses.

(b)

 

Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.

(c)

 

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.

(d)

 

Represents the impact of corporate income taxes.

 

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

Source: Foundation Building Materials, Inc.