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Section 1: 8-K (8-K)

sum_Current Folio_8K

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): February 22, 2017

 


 

Summit Materials, Inc.

(Exact name of registrant as specified in its charter)

 


 

 

 

 

 

 

 

Delaware

001-36873

47-1984212

(State or Other Jurisdiction

(Commission

(I.R.S. Employer

of Incorporation)

File Numbers)

Identification No.)

 

1550 Wynkoop Street, 3rd Floor
Denver, Colorado 80202

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, Including Area Code:  (303) 893-0012

 

Not Applicable

(Former Name or Address, if Changed Since Last Report)

 


 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 


 

 

Item 2.02 Results of Operations and Financial Condition.  

 

On February 22, 2017, Summit Materials, Inc. (the “Company”) issued a press release announcing its financial results for the year ended December 31, 2016. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information being furnished pursuant to this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.  

 

(d)    Exhibits

 

 

 

 

 

Exhibit No.

    

Description

 

 

 

99.1

 

Press Release of Summit Materials, Inc. dated February 22, 2017.

 

 


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

SUMMIT MATERIALS, INC.

 

 

 

 

 

 

 

By:

/s/ Anne Lee Benedict

 

Name:

Anne Lee Benedict

 

Title:

Chief Legal Officer

 

 

DATED:  February 22, 2017

 


 

EXHIBIT INDEX

 

 

 

 

Exhibit Number

    

Description of Exhibit

99.1

 

Press Release of Summit Materials, Inc., dated February 22, 2017.

 

 

 

 


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

sum_Ex99_1

Exhibit 99.1

Summit Materials, Inc. Reports Fourth Quarter and Full-Year 2016 Results

 

- Full-Year Net Income Increased 32.7% to $36.8 million

-Full-Year Adjusted Net Income Increased 31.5% to $98.3 million

-Full-Year Operating Income Increased 14.4% to $154.0 million

- Full-Year Adjusted EBITDA Increased 29.2% to $371.3 million

- Introducing Full-Year 2017 Adjusted EBITDA Guidance of $410.0 million to $425.0 million

 

DENVER, CO. - (February 22, 2017) - Summit Materials, Inc. (NYSE: SUM, “Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the fourth quarter and full-year 2016. 

For the twelve months ended December 31, 2016, the Company reported basic and diluted earnings per share of $0.53 on net income of $36.8 million.  For the same twelve month period, Summit reported adjusted diluted earnings per share of $0.97 on adjusted net income of $98.3 million.  For the three months ended December 31, 2016, the Company reported a basic loss per share of ($0.00) on a net loss of ($0.3) million.  For the same three month period, Summit reported adjusted diluted earnings per share of $0.21 on adjusted net income of $21.0 million.  The Company’s adjusted net income for the fourth quarter and full-year 2016 excludes an $14.9 million charge for estimated future payments to certain current and former limited partners under the tax receivable agreement entered into at the time of the Company’s initial public offering, $13.8 million of which is expected to be paid beginning in 2019 or thereafter.

“Our strong full-year performance further validates the unique competitive advantages afforded by our integrated, materials-based model,” stated Tom Hill, CEO of Summit Materials.  “Our leading positions in well-structured, early-cycle markets drove sustained margin expansion throughout all lines of business in 2016, as both gross margin and Adjusted EBITDA margin increased to record levels.  Adjusted EBITDA exceeded the high-end of our guided range for the full-year, given sustained growth in materials pricing, contributions from completed acquisitions and improved cost efficiencies.”

“Gross profit generated from our materials lines of business increased by more than 35% year-over-year in 2016, despite temporary softness in organic sales volumes of aggregates in our Texas and Vancouver markets,” continued Hill.  “Excluding Texas and Vancouver, organic sales volumes of aggregates and ready-mix increased 1.2% and 5.1%, respectively, in the full-year 2016, versus the prior year.  Looking ahead to 2017, we anticipate positive growth in materials pricing and volumes across all of our reporting segments.”

“In January 2017, we entered into definitive agreements to acquire Colorado-based Everist Materials and Arkansas-based Razorback Concrete Company for a combined $110 million in cash,” stated Hill.  “Collectively, these acquisitions bring aggregates operations with ~100 million tons of permitted reserves and an extensive network of vertically integrated ready-mix concrete and asphalt plants in close proximity to our existing portfolio of materials-based assets.  In addition to Everist, which closed in January 2017, and Razorback, which is expected to close during the first quarter 2017, our acquisition pipeline remains robust, with more than 20 additional transactions currently under review.”

“Our cement business represents a clear catalyst for growth heading into 2017,” continued Hill.  “Limited domestic production capacity and continued growth in U.S. demand have combined to create opportunities for sustained growth in industry cement pricing.  During the fourth quarter, our cement segment generated organic price and volume growth of 6.8% and nearly 1%, respectively.  Looking ahead to the remainder of 2017, we anticipate continued Adjusted EBITDA growth in our cement business, as supported by sustained growth in organic cement prices and sales volumes along the Mississippi River corridor.”

“Following the recent election cycle, we have entered a new era of bipartisan support for funding that will help to properly maintain and modernize our nation’s aging transportation infrastructure,” continued Hill.  “In the markets we serve, nearly 60 cents of every dollar spent by states on transportation infrastructure is federally funded.  Given that nearly 40% of our net revenue is derived from public infrastructure work, Summit is well positioned to benefit from this opportunity.  With the support of appropriations from the FAST Act, we anticipate an acceleration in state-level infrastructure spending beginning in mid-to-late 2017.  Further, given ongoing advocacy by Congress and the current Administration for increased investment in state transportation infrastructure, we see numerous opportunities for multi-year growth in our public-facing businesses.”

“We generated significant growth in cash flows from operations last year, resulting in a material improvement in our credit metrics,” stated Brian Harris, CFO of Summit Materials.  “We had outstanding debt of $1.5 billion as of December 31, 2016.  Net leverage was 3.9x at year-end 2016, ahead of our full-year guidance of 4.0x.  Including net proceeds from the 10 million share equity offering we completed in January 2017, net leverage declined to 3.5x at year-end 2016.  Looking ahead, we currently anticipate a further reduction in net leverage to approximately 3.0x by year-end 2017, assuming the mid-point of our 2017 Adjusted EBITDA guidance.”

1


 

“We had $143.4 million in cash and $209.4 million of available liquidity under our revolving credit facility at year-end,” stated Harris.  “Including proceeds from the equity offering we completed in January 2017, net of $110 million used to fund the acquisition of Everist and Razorback, we had pro-forma cash and liquidity of approximately $480 million exiting 2016,” continued Harris. “Our current liquidity position provides sufficient flexibility with which to fund the working capital and strategic growth requirements of our business at this time.  Looking forward, disciplined capital allocation remains a high priority for us, particularly as we seek to reduce our net leverage ratio and improve our credit metrics.  We are pleased with our full-year performance and remain focused on creating additional value for our investors in the year ahead.”

 

Full-Year 2016 | Financial Performance

 

Net revenue increased 15.4% year-over-year to $1.5 billion, versus $1.3 billion in 2015.  The year-over-year improvement in net revenue was primarily attributable to higher acquisition-related sales volumes across all lines of business, coupled with improved organic and acquisition-related pricing on aggregates, cement and ready-mix concrete.

 

Gross profit increased 25.4% year-over-year to $554.0 million, versus $441.7 million in 2015.  Gross profit generated from the Company’s aggregates and cement assets represented 52.5% of total gross profit in 2016, versus 48.4% of gross profit in 2015.  Gross margin increased 300 basis points to a record 37.2% for the full-year 2016, versus 34.2% in 2015.  Adjusted EBITDA increased 29.2% year-over-year to $371.3 million, versus $287.5 million in 2015.  Adjusted EBITDA margin increased 270 basis points to a record 25.0% for the full-year 2016, versus 22.3% in 2015.

 

Adjusted net income increased 31.5% year-over-year to $98.3 million, versus $74.7 million in 2015.  On an adjusted basis, the Company reported full-year 2016 earnings per share of $0.97 per adjusted diluted share, using 101.2 million weighted-average total shares. The shares of Class A common stock are issued by Summit Materials, Inc., and as such the earnings and equity interests of non-controlling interests, including LP units that are issued by its subsidiary Summit Materials Holdings L.P., are not included in basic earnings per share. Summit believes adjusted net income and Adjusted EPS are more representative of earnings performance, as these measures exclude the non-operating impact to earnings per share of any potential exchange of LP units for Class A common stock in any given quarter. 

-

West Segment:  Adjusted EBITDA increased 11.1% year-over-year to $167.4 million, versus $150.8 million in 2015.  Adjusted EBITDA margin increased to 22.7% in 2016, up from 21.0% in 2015.  A year-over-year decline in organic Adjusted EBITDA growth was more than offset by acquisition-related EBITDA contributions. The organic decline was attributable to severe weather and flooding in Houston and tough prior-year comparisons in the Vancouver, B.C. market related to the timing of customer projects.

-

East Segment:  Adjusted EBITDA increased 36.5% year-over-year to $126.0 million, versus $92.3 million in 2015.  Adjusted EBITDA margin increased to 26.8% in 2016, up from 24.6% in 2015.  A year-over-year decline in organic Adjusted EBITDA growth was more than offset by acquisition-related EBITDA contributions.  The organic decline was attributable to transitory softness in public infrastructure spending in the Kansas and Kentucky markets.

-

Cement Segment:  Adjusted EBITDA increased 51.0% to $113.0 million, versus $74.8 million in 2015.  Adjusted EBITDA margin increased to 40.2% in 2016, up from 38.3% in 2015.  A year-over-year increase in average selling prices, increased sales volumes due to the acquisition of the Davenport cement assets in July 2015, improved production efficiencies and continued cost reductions all contributed to improved full-year results. 

Full-Year 2016 | Results by Line of Business

 

-

Aggregates Business:   Aggregates net revenues increased 20.8% to $264.6 million in 2016, when compared to the prior year period.  Aggregates gross profit as a percentage of aggregates net revenues increased nearly 260 basis points to 62.0% in 2016, when compared to the prior year period.  Including acquisitions, sales volumes increased 11.8% and average sales price increased 7.2%, when compared to the prior year period.  Excluding acquisitions, organic sales volume declined 5.5% and organic average sales price increased 4.8%, when compared to the prior year period. In the full-year 2016, organic sales volumes were affected by severe weather conditions throughout Texas and lower year-over-year contributions from the Vancouver, B.C. market, given the completion of a large sand river project in 2015.

 

-

Cement Business: Cement net revenues increased 49.3% to $250.3 million in 2016, when compared to the prior year period.  Cement gross profit as a percentage of cement segment net revenues was 45.1% in 2016, more than 220 basis points higher than in the prior year period. Sales volumes and the average sales price increased 37.0% and 7.5%, respectively, when compared to the prior year period. Cement volumes increased on a year-over-year basis as a result of the Davenport acquisition in July 2015, while cement prices improved as a result of favorable overall market conditions.

 

2


 

-

Products Business: Net revenues from ready-mix concrete, asphalt and other products increased 7.8% to $708.1 million in 2016, when compared to the prior year. Products gross margin as a percentage of product net revenues increased 190 basis points to 26.6% in 2016, when compared to the prior year period. Including acquisitions, sales volumes and the average selling price of ready-mix concrete increased 12.2% and 0.8%, respectively, versus the prior year.  Including acquisitions, sales volumes of asphalt were flat, versus the prior year, while the average selling price declined by 5.1%, versus the prior year.  Excluding acquisitions, organic sales volumes of ready-mix concrete and asphalt declined 3.4% and 13.0%, respectively, while average selling prices increased 2.0% and declined 3.6%, respectively. 

 

Fourth Quarter 2016 | Financial Performance

 

Net revenue increased by 7.7% year-over-year to $387.4 million in the fourth quarter 2016, versus $359.5 in the prior year period.  The year-over-year improvement in net revenue was primarily attributable to higher acquisition-related sales volumes across all lines of business, improved organic pricing on cement and ready-mix concrete, in addition to improved acquisition related pricing on aggregates.

 

Gross profit increased 13.9% year-over-year to $148.9 million in the fourth quarter 2016, versus $130.7 million in the prior year period.  Gross profit generated from the Company’s aggregates and cement assets represented 52.2% of total gross profit in the fourth quarter 2016, versus 52.9% of gross profit in the prior year period.  Gross margin increased 210 basis points to 38.4% in the fourth quarter 2016, versus 36.3% in the prior year period.  Adjusted EBITDA increased 12.9% year-over-year to $102.0 million, versus $90.3 million in the prior year period.  Adjusted EBITDA margin increased 120 basis points to a record 26.3% in the fourth quarter 2016, versus 25.1% in the prior year period.

 

Adjusted net income declined 38.9% year-over-year to $21.0 million in the fourth quarter 2016, versus $34.4 million in the prior year period.  On an adjusted basis, the Company reported fourth quarter 2016 earnings per share of $0.21 per adjusted diluted share, using 101.2 million weighted-average total shares. The shares of Class A common stock are issued by Summit Materials, Inc., and as such the earnings and equity interests of non-controlling interests, including LP units, are not included in basic earnings per share. Summit believes adjusted net income and Adjusted EPS are more representative of earnings performance, as these measures exclude the non-operating impact to earnings per share of any potential exchange of LP units for Class A common stock in any given quarter. 

-

West Segment:  Adjusted EBITDA was relatively flat at $39.9 million in the fourth quarter 2016, versus the prior year period.  Adjusted EBITDA margin increased to 22.4% in the fourth quarter 2016, versus 21.5% in the prior year period.  A year-over-year decline in Adjusted EBITDA in certain of the Company’s Texas operations was more than offset by acquisition-related EBITDA contributions.

-

East Segment:  Adjusted EBITDA increased 20.5% year-over-year to $35.6 million in the fourth quarter 2016, versus $29.5 million in the prior year period.  Adjusted EBITDA margin declined to 27.1% in the fourth quarter 2016, down from 29.0% in the prior year period.  A year-over-year decline in Adjusted EBITDA growth primarily related to the delayed public funding in Kentucky was more than offset by acquisition-related EBITDA contributions.

-

Cement Segment:  Adjusted EBITDA increased 10.4% to $34.2 million in the fourth quarter 2016, versus $30.9 million in the prior year period.  Adjusted EBITDA margin increased to 43.8% in the fourth quarter 2016, up from 41.3% in the prior year period.  A year-over-year increase in average selling prices, organic sales volumes, improved production efficiencies and cost reductions all contributed to improved results.

Fourth Quarter 2016 | Results by Line of Business

 

-

Aggregates Business:   Aggregates net revenues increased 10.9% to $63.4 million in the fourth quarter 2016, when compared to the prior year period.  Aggregates gross profit as a percentage of aggregates net revenues declined 140 basis points to 63.7% in the fourth quarter 2016, versus 65.1% in the prior year period.  Including acquisitions, sales volumes and average selling prices increased 5.3% and 2.7%, respectively, in the fourth quarter 2016, when compared to the prior year period.  Excluding acquisitions, organic sales volumes declined 11.8% and average selling prices were flat in the fourth quarter 2016, versus the prior year period.  Organic sales volumes in the fourth quarter 2016 were impacted by a combination of transitory softness in Houston’s residential market, lower contributions from continued delays in public spending within the Kentucky market and tough prior-year comparisons in the Vancouver, B.C. market.

 

-

Cement Business:  Cement net revenues increased by 12.7% to $70.7 million in the fourth quarter 2016, when compared to the prior year period.  Cement gross profit as a percentage of cement segment net revenues was 47.9% in the fourth quarter 2016, 530 basis points higher than in the prior year period.  On an organic basis, cement sales volumes and average selling prices increased 0.6% and 6.8% in the fourth quarter 2016, respectively, when compared to the prior year period.  A combination of steady organic demand along the Company’s core markets along the Mississippi River, coupled with continued organic growth in average selling prices, contributed to strong fourth quarter results in the Cement segment. 

3


 

 

-

Products Business: Net revenues increased by 3.1% to $181.2 million in the fourth quarter 2016, when compared to the prior year period.  Products gross margin as a percentage of products net revenues.  Products gross margin as a percentage of product net revenues increased 170 basis points to 26.1% in the fourth quarter 2016, when compared to the prior year period. Including acquisitions, sales volumes and the average selling price of ready-mix concrete increased 12.3% and declined 1%, respectively, compared to the prior year period.  Including acquisitions, sales volumes and the average selling price of asphalt increased 1.7% and declined 10.5%, respectively, compared to the prior year period.  Excluding acquisitions, organic sales volumes of ready-mix concrete and asphalt declined 9.5% and 9.2%, respectively, while average selling prices increased 1.5% and declined 9.0%, respectively. 

Liquidity and Capital Resources

 

At December 31, 2016, the Company had cash on hand of $143.4 million and borrowing capacity under its revolving credit facility of $209.4 million. Including net proceeds from the equity offering completed in January 2017, the Company held pro-forma cash of $271.5 million at year-end 2016.  The borrowing capacity on the revolving credit facility is net of $25.6 million of outstanding letters of credit, and is fully available to the Company within the terms and covenant requirements of its credit agreement.  At year-end 2016, the Company had $1.5 billion in debt outstanding, versus $1.3 billion in debt outstanding at year-end 2015.

2017 Financial Guidance & Outlook

 

Based on current market conditions, the Company anticipates Adjusted EBITDA in the range of $410.0 million to $425.0 million for the full-year 2017.  The Adjusted EBITDA outlook assumes organic improvement, coupled with the residual impact of acquisitions announced since the beginning of 2017, including the acquisitions of Everist Materials and Razorback Concrete.  No additional potential acquisitions are included within the Company’s full-year 2017 Adjusted EBITDA guidance.

 

For the full year 2017, the Company anticipates gross capital expenditures to be in the range $135.0 million to $155.0 million, which includes several maintenance and profit-improvement projects.  Longer-term, the Company expects gross capital expenditures to approximate 7-8% of net revenue per annum.  

4


 

Webcast and Conference Call Information

 

Summit Materials will conduct a conference call today at 11:00 a.m. eastern time (9:00 a.m. mountain time) to review the Company’s fourth quarter and full-year 2016 financial results.  A webcast of the conference call and accompanying presentation materials will be available in the Investors section of Summit’s website at investors.summit-materials.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

 

To participate in the live teleconference:

 

 

 

Domestic Live:

1-877-407-0784

International Live:

1-201-689-8560

Conference ID:

86972581

 

To listen to a replay of the teleconference, which will be available through March 22, 2017:

 

Domestic Replay:

1-844-512-2921

International Replay:

1-412-317-6671

Conference ID:

13652776

 

About Summit Materials

Summit Materials is a leading vertically integrated materials-based company that supplies aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a geographically diverse, materials-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the public infrastructure, residential and nonresidential, and end markets. Summit has a strong track record of successful acquisitions since its founding and continues to pursue growth opportunities in new and existing markets.  For more information about Summit Materials, please visit www.summit-materials.com.  

Non-GAAP Financial Measures

The Securities and Exchange Commission (“SEC”) regulates the use of “non-GAAP financial measures,” such as adjusted net income (loss), Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, gross profit and free cash flow, which are derived on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have provided these measures because, among other things, we believe that they provide investors with additional information to measure our performance, evaluate our ability to service our debt and evaluate certain flexibility under our restrictive covenants. Our adjusted net income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, gross profit and net leverage may vary from the use of such terms by others and should not be considered as alternatives to or more important than net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or to cash flows as measures of liquidity.

Adjusted EBITDA, Adjusted EBITDA margin and other non-GAAP measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA are that these measures do not reflect: (i) our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, our working capital needs; (iii) interest expense or cash requirements necessary to service interest and principal payments on our debt; and (iv) income tax payments we are required to make. Because of these limitations, we rely primarily on our U.S. GAAP results and use Adjusted EBITDA, Adjusted EBITDA margin and other non-GAAP measures on a supplemental basis. 

Adjusted EBITDA, Adjusted EBITDA margin, gross profit, adjusted net income, Adjusted EPS and free cash flow reflect additional ways of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to U.S. GAAP financial measures included in the tables attached to this press release, may provide a more complete understanding of factors and trends affecting our business. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.

Reconciliations of the non-GAAP measures used in this press release are included in the attached tables, to the extent available without unreasonable effort. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

5


 

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. Any and all statements made relating to the expectations for our anticipated benefits from recent acquisitions, the macroeconomic outlook for our markets, potential acquisition activity, our estimated and projected earnings, margins, costs, expenditures, cash flows, sales volumes and financial results are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results.

In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2016. Such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.

We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

6


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

($ in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

 

December 31,

 

January 2,

 

December 31,

 

January 2,

 

 

2016

    

2016

    

2016

    

2016

 

    

(unaudited)

 

(unaudited)

 

(audited)

 

(audited)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

315,329

 

$

295,633

 

$

1,223,008

 

$

1,043,843

Service

 

 

72,060

 

 

63,899

 

 

265,266

 

 

246,123

Net revenue

 

 

387,389

 

 

359,532

 

 

1,488,274

 

 

1,289,966

Delivery and subcontract revenue

 

 

35,584

 

 

41,930

 

 

137,789

 

 

142,331

Total revenue

 

 

422,973

 

 

401,462

 

 

1,626,063

 

 

1,432,297

Cost of revenue (excluding items shown separately below):

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

192,185

 

 

185,534

 

 

751,697

 

 

676,457

Service

 

 

46,334

 

 

43,343

 

 

182,584

 

 

171,857

Net cost of revenue

 

 

238,519

 

 

228,877

 

 

934,281

 

 

848,314

Delivery and subcontract cost

 

 

35,584

 

 

41,930

 

 

137,789

 

 

142,331

Total cost of revenue

 

 

274,103

 

 

270,807

 

 

1,072,070

 

 

990,645

General and administrative expenses

 

 

58,654

 

 

28,285

 

 

243,862

 

 

177,769

Depreciation, depletion, amortization and accretion

 

 

40,105

 

 

32,905

 

 

149,300

 

 

119,723

Transaction costs

 

 

1,507

 

 

1,475

 

 

6,797

 

 

9,519

Operating income

 

 

48,604

 

 

67,990

 

 

154,034

 

 

134,641

Interest expense

 

 

25,069

 

 

22,398

 

 

97,536

 

 

84,629

Loss on debt financings

 

 

 —

 

 

7,318

 

 

 —

 

 

71,631

Tax receivable agreement expense

 

 

14,938

 

 

 —

 

 

14,938

 

 

 —

Other (income) expense, net

 

 

(66)

 

 

(1,747)

 

 

733

 

 

(2,425)

Income (loss) from operations before taxes

 

 

8,663

 

 

40,021

 

 

40,827

 

 

(19,194)

Income tax expense (benefit)

 

 

2,614

 

 

(5,795)

 

 

(5,299)

 

 

(18,263)

Income (loss) from continuing operations

 

 

6,049

 

 

45,816

 

 

46,126

 

 

(931)

Income from discontinued operations

 

 

 —

 

 

(1,600)

 

 

 —

 

 

(2,415)

Net income

 

 

6,049

 

 

47,416

 

 

46,126

 

 

1,484

Net income (loss) attributable to noncontrolling interest in subsidiaries

 

 

(41)

 

 

91

 

 

16

 

 

(1,826)

Net income (loss) attributable to Summit Holdings (1)

 

 

6,380

 

 

23,962

 

 

9,327

 

 

(24,408)

Net income attributable to Summit Inc.

 

$

(290)

 

$

23,363

 

$

36,783

 

$

27,718

Net income per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.00)

 

$

0.46

 

$

0.53

 

$

0.70

Diluted

 

$

(0.00)

 

$

0.46

 

$

0.53

 

$

0.51

Weighted average shares of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

87,276,645

 

 

50,881,602

 

 

68,833,986

 

 

39,367,381

Diluted

 

 

87,276,645

 

 

50,908,151

 

 

69,317,452

 

 

89,472,266

(1)

Represents portion of business owned by private interests

7


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

143,392

 

$

186,405

 

Accounts receivable, net

 

 

162,377

 

 

145,544

 

Costs and estimated earnings in excess of billings

 

 

7,450

 

 

5,690

 

Inventories

 

 

157,679

 

 

130,082

 

Other current assets

 

 

12,800

 

 

4,807

 

Total current assets

 

 

483,698

 

 

472,528

 

Property, plant and equipment, net

 

 

1,444,367

 

 

1,269,006

 

Goodwill

 

 

781,824

 

 

596,397

 

Intangible assets, net

 

 

24,576

 

 

15,005

 

Other assets

 

 

47,001

 

 

43,243

 

Total assets

 

$

2,781,466

 

$

2,396,179

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

 

$

6,500

 

$

6,500

 

Current portion of acquisition-related liabilities

 

 

24,162

 

 

20,584

 

Accounts payable

 

 

81,565

 

 

81,397

 

Accrued expenses

 

 

111,605

 

 

92,942

 

Billings in excess of costs and estimated earnings

 

 

15,456

 

 

13,081

 

Total current liabilities

 

 

239,288

 

 

214,504

 

Long-term debt

 

 

1,514,456

 

 

1,273,652

 

Acquisition-related liabilities

 

 

32,664

 

 

39,977

 

Other noncurrent liabilities

 

 

135,019

 

 

100,186

 

Total liabilities

 

 

1,921,427

 

 

1,628,319

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 96,033,222 and 49,745,944 shares issued and outstanding as of December 31, 2016 and January 2, 2016, respectively

 

 

961

 

 

497

 

Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 100 and 69,007,297 shares issued and outstanding as of December 31, 2016 and January 2, 2016, respectively

 

 

 —

 

 

690

 

Additional paid-in capital

 

 

824,304

 

 

619,003

 

Accumulated earnings

 

 

19,028

 

 

10,870

 

Accumulated other comprehensive loss

 

 

(2,249)

 

 

(2,795)

 

Stockholders’ equity

 

 

842,044

 

 

628,265

 

Noncontrolling interest in consolidated subsidiaries

 

 

1,378

 

 

1,362

 

Noncontrolling interest in Summit Holdings

 

 

16,617

 

 

138,233

 

Total stockholders’ equity

 

 

860,039

 

 

767,860

 

Total liabilities and stockholders’ equity

 

$

2,781,466

 

$

2,396,179

 

 

 

 

8


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in thousands)

 

 

 

 

 

 

 

 

 

    

2016

    

2015

Cash flow from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

46,126

 

$

1,484

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

 

 

 

 

 

 

Depreciation, depletion, amortization and accretion

 

 

160,633

 

 

125,019

Share-based compensation expense

 

 

49,940

 

 

19,899

Deferred income tax benefit

 

 

(8,589)

 

 

(19,838)

Net (gain) loss on asset disposals

 

 

(3,102)

 

 

(23,087)

Net gain on debt financings

 

 

 —

 

 

(9,877)

Other

 

 

(1,282)

 

 

(1,629)

Decrease (increase) in operating assets, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net

 

 

2,511

 

 

3,852

Inventories

 

 

(10,297)

 

 

4,275

Costs and estimated earnings in excess of billings

 

 

(2,684)

 

 

6,604

Other current assets

 

 

(5,518)

 

 

11,438

Other assets

 

 

1,976

 

 

(1,369)

(Decrease) increase in operating liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts payable

 

 

(5,751)

 

 

(4,241)

Accrued expenses

 

 

13,196

 

 

(14,354)

Billings in excess of costs and estimated earnings

 

 

700

 

 

1,313

Other liabilities

 

 

7,004

 

 

(1,286)

Net cash provided by operating activities

 

 

244,863

 

 

98,203

Cash flow from investing activities:

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(336,958)

 

 

(510,017)

Purchases of property, plant and equipment

 

 

(153,483)

 

 

(88,950)

Proceeds from the sale of property, plant and equipment

 

 

16,868

 

 

13,110

Other

 

 

2,921

 

 

1,510

Net cash used for investing activities

 

 

(470,652)

 

 

(584,347)

Cash flow from financing activities:

 

 

 

 

 

 

Proceeds from equity offerings

 

 

 —

 

 

1,037,444

Capital issuance costs

 

 

(136)

 

 

(61,609)

Capital contributions by partners

 

 

 —

 

 

 —

Proceeds from debt issuances

 

 

354,000

 

 

1,748,875

Debt issuance costs

 

 

(5,801)

 

 

(14,246)

Payments on debt

 

 

(120,702)

 

 

(1,505,486)

Purchase of noncontrolling interests

 

 

 —

 

 

(497,848)

Payments on acquisition-related liabilities

 

 

(32,040)

 

 

(18,056)

Distributions from partnership

 

 

(13,034)

 

 

(28,736)

Other

 

 

420

 

 

(1)

Net cash provided by financing activities

 

 

182,707

 

 

660,337

Impact of foreign currency on cash

 

 

69

 

 

(1,003)

Net (decrease) increase in cash

 

 

(43,013)

 

 

173,190

Cash and cash equivalents—beginning of period

 

 

186,405

 

 

13,215

Cash and cash equivalents—end of period

 

$

143,392

 

$

186,405

 

9


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Revenue Data by Segment and Line of Business

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,

 

January 2,

 

December 31,

 

January 2,

 

 

    

2016

    

2016

 

2016

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

178,085

 

$

182,763

 

$

736,573

 

$

719,485

 

East

 

 

131,385

 

 

101,902

 

 

470,614

 

 

374,997

 

Cement

 

 

77,919

 

 

74,867

 

 

281,087

 

 

195,484

 

Net Revenue

 

$

387,389

 

$

359,532

 

$

1,488,274

 

$

1,289,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue by Line of Business

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

63,392

 

$

57,144

 

$

264,609

 

$

219,040

 

Cement (1)

 

 

70,691

 

 

62,710

 

 

250,349

 

 

167,696

 

Products

 

 

181,246

 

 

175,779

 

 

708,050

 

 

657,107

 

Total Materials and Products

 

 

315,329

 

 

295,633

 

 

1,223,008

 

 

1,043,843

 

Services

 

 

72,060

 

 

63,899

 

 

265,266

 

 

246,123

 

Net Revenue

 

$

387,389

 

$

359,532

 

$

1,488,274

 

$

1,289,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

40,356

 

$

37,228

 

$

164,129

 

$

130,163

 

Cement (1)

 

 

37,299

 

 

31,913

 

 

126,907

 

 

83,804

 

Products

 

 

47,351

 

 

42,812

 

 

188,611

 

 

162,466

 

Services

 

 

23,864

 

 

18,702

 

 

74,346

 

 

65,219

 

Gross Profit

 

$

148,870

 

$

130,655

 

$

553,993

 

$

441,652

 


(1)

Net revenue for the cement line of business excludes revenue associated with the processing of hazardous and non-hazardous waste, which is processed into fuel and used in the cement plants and is included in services net revenue. Additionally, net revenue from cement swaps and other cement-related products are included in products net revenue. The cement segment gross profit includes the earnings from the waste processing operations, cement swaps and other products.

 

10


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Volume and Price Statistics

(Units in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

Total Volume

    

December 31, 2016

    

January 2, 2016

 

December 31, 2016

    

January 2, 2016

 

Aggregates (tons)

 

 

8,790

 

 

8,349

 

 

36,092

 

 

32,297

 

Cement (tons)

 

 

658

 

 

628

 

 

2,357

 

 

1,720

 

Ready-mix concrete (cubic yards)

 

 

1,025

 

 

913

 

 

3,823

 

 

3,406

 

Asphalt (tons)

 

 

1,090

 

 

1,072

 

 

4,359

 

 

4,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

Pricing

    

December 31, 2016

    

January 2, 2016

 

December 31, 2016

    

January 2, 2016

 

Aggregates (per ton)

 

$

9.67

 

$

9.42

 

$

9.85

 

$

9.19

 

Cement (per ton)

 

 

109.57

 

 

102.25

 

 

108.63

 

 

101.05

 

Ready-mix concrete (per cubic yards)

 

 

104.44

 

 

104.82

 

 

103.74

 

 

102.92

 

Asphalt (per ton)

 

 

52.06

 

 

58.15

 

 

54.74

 

 

57.67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year over Year Comparison

    

Volume

    

Pricing

 

Volume

    

Pricing

 

Aggregates (per ton)

 

 

5.3

%  

 

2.7

%

 

11.8

%  

 

7.2

%

Cement (per ton)

 

 

4.8

%  

 

7.2

%

 

37.0

%  

 

7.5

%

Ready-mix concrete (per cubic yards)

 

 

12.3

%  

 

(0.4)

%

 

12.2

%  

 

0.8

%

Asphalt (per ton)

 

 

1.7

%  

 

(10.5)

%

 

 -

%  

 

(5.1)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year over Year Comparison (Excluding acquisitions)

    

Volume

    

Pricing

 

Volume

    

Pricing

 

Aggregates (per ton)

 

 

(11.8)

%  

 

0.0

%

 

(5.5)

%  

 

4.8

%

Cement (per ton)

 

 

0.6

%  

 

6.8

%

 

*

 

 

*

 

Ready-mix concrete (per cubic yards)

 

 

(9.5)

%  

 

1.5

%

 

(3.4)

%  

 

2.0

%

Asphalt (per ton)

 

 

(9.2)

%  

 

(9.0)

%

 

(13.0)

%  

 

(3.6)

%


*     The Davenport Assets were immediately integrated with our existing cement operations such that it is impracticable to bifurcate the growth attributable to the Davenport Assets from organic growth. 

11


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Gross Revenue to Net Revenue by Line of Business

($ and Units in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2016

 

 

 

 

 

 

 

 

Gross Revenue

 

Intercompany

 

Net

 

 

 

Volumes

 

Pricing

 

by Product 

 

Elimination/Delivery 

 

Revenue 

 

Aggregates

    

8,790

    

$

9.67

    

$

84,989

    

$

(21,597)

    

$

63,392

 

Cement

 

658

 

 

109.57

 

 

72,078

 

 

(1,387)

 

 

70,691

 

Materials

 

 

 

 

 

 

$

157,067

 

$

(22,984)

 

$

134,083

 

Ready-mix concrete

 

1,025

 

 

104.44

 

 

107,035

 

 

274

 

 

107,309

 

Asphalt

 

1,090

 

 

52.06

 

 

56,766

 

 

154

 

 

56,920

 

Other Products

 

 

 

 

 

 

 

79,732

 

 

(62,715)

 

 

17,017

 

Products

 

 

 

 

 

 

$

243,533

 

$

(62,287)

 

$

181,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2016

 

 

    

 

    

 

 

    

Gross Revenue

    

Intercompany

    

Net

 

 

 

Volumes

 

Pricing

 

by Product

 

Elimination/Delivery

 

Revenue

 

Aggregates

 

36,092

 

$

9.85

 

$

355,617

 

$

(91,008)

 

$

264,609

 

Cement

 

2,357

 

 

108.63

 

 

256,046

 

 

(5,697)

 

 

250,349

 

Materials

 

 

 

 

 

 

$

611,663

 

$

(96,705)

 

$

514,958

 

Ready-mix concrete

 

3,823

 

 

103.74

 

 

396,597

 

 

(681)

 

 

395,916

 

Asphalt

 

4,359

 

 

54.74

 

 

238,588

 

 

(230)

 

 

238,358

 

Other Products

 

 

 

 

 

 

 

327,778

 

 

(254,002)

 

 

73,776

 

Products

 

 

 

 

 

 

$

962,963

 

$

(254,913)

 

$

708,050

 

12


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Non-GAAP Financial Measures

($ in thousands, except share and per share amounts)

The tables below reconcile our net income to Adjusted EBITDA and present Adjusted EBITDA by segment for the three months and year ended December 31, 2016 and January 2, 2016.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,

 

January 2,

 

December 31,

 

January 2,

 

Reconciliation of Net Income to Adjusted EBITDA

 

2016

 

2016

    

2016

    

2016

 

Net income

 

$

6,049

 

$

47,416

 

$

46,126

 

$

1,484

 

Interest expense

 

 

25,069

 

 

22,398

 

 

97,536

 

 

84,629

 

Income tax expense (benefit)

 

 

2,614

 

 

(5,795)

 

 

(5,299)

 

 

(18,263)

 

Depreciation, depletion and amortization

 

 

39,743

 

 

32,632

 

 

147,736

 

 

118,321

 

EBITDA

 

$

73,475

 

$

96,651

 

$

286,099

 

$

186,171

 

Accretion

 

 

362

 

 

273

 

 

1,564

 

 

1,402

 

IPO/ Legacy equity modification costs

 

 

 —

 

 

 —

 

 

37,257

 

 

28,296

 

Loss on debt financings

 

 

 —

 

 

7,318

 

 

 —

 

 

71,631

 

Tax receivable agreement expense

 

 

14,938

 

 

 —

 

 

14,938

 

 

 —

 

Income from discontinued operations

 

 

 —

 

 

(1,600)

 

 

 —

 

 

(2,415)

 

Transaction costs

 

 

1,507

 

 

1,475

 

 

6,797

 

 

9,519

 

Management fees and expenses

 

 

(1,379)

 

 

 —

 

 

(1,379)

 

 

1,046

 

Non-cash compensation

 

 

3,817

 

 

1,310

 

 

12,683

 

 

5,448

 

Loss (gain) on disposal and impairment of assets

 

 

3,805

 

 

(16,561)

 

 

3,805

 

 

(16,561)

 

Other

 

 

5,490

 

 

1,463

 

 

9,583

 

 

2,991

 

Adjusted EBITDA

 

$

102,015

 

$

90,329

 

$

371,347

 

$

287,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

39,887

 

 

39,314

 

 

167,434

 

 

150,764

 

East

 

 

35,602

 

 

29,545

 

 

126,007

 

 

92,303

 

Cement

 

 

34,163

 

 

30,948