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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): October 30, 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 Number)

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 filing 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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company             

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                                 

 

 

 


 

 

Item 2.02 Results of Operations and Financial Condition.  

 

On October 30, 2017, Summit Materials, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended September 30, 2017. 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 October 30, 2017.

 

 


 

EXHIBIT INDEX

 

 

 

 

Exhibit No.

    

Description

99.1

 

Press Release of Summit Materials, Inc., dated October 30, 2017.

 

 

 

 

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the 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:  October 30, 2017

 

 


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

sum_Ex99_1

Exhibit 99.1

Summit Materials, Inc. Reports Third Quarter 2017 Results

 

-Net Revenue +19.6% Y/Y; Operating Income +28.8% Y/Y; Net Income +76.4% Y/Y

-Generated Y/Y Organic Volume Growth Across Materials Lines of Business

-Completed Four New Acquisitions Since August 2017 For a Combined Purchase Price of $94 million

-Lowering FY17 Adjusted EBITDA Guidance to a Range of $425 million to $435 million due to Hurricanes Harvey & Irma

 

DENVER, CO. - (October 30, 2017) - Summit Materials, Inc. (NYSE: SUM, “Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the third quarter 2017. 

For the three months ended September 30, 2017, the Company reported diluted net income per share of $0.72 on net income of $79.1 million, compared to diluted earnings per share of $0.60 on net income of $44.8 million in the prior year period.  On an adjusted diluted basis, excluding tax-related adjustments, the Company reported adjusted diluted net income per share of $0.73 per share on net income of $82.0 million, compared to adjusted diluted earnings per share of $0.71 on adjusted net income of $73.5 million in the prior year period.  In the third quarter, the Company recorded a significant benefit related to the valuation of its deferred tax assets that was substantially offset by a corresponding Tax Receivable Agreement (“TRA”) expense.  Both of these items are excluded from adjusted net income.  Operating income increased by 28.8% to $113.9 million in the third quarter 2017, versus $88.4 million in the prior year period. 

“We delivered double-digit year-over-year growth in net revenue, operating income and net income during the third quarter, driven by a combination of increased organic sales volumes in our materials businesses, together with contributions from recently completed acquisitions,” stated Tom Hill, CEO of Summit Materials.  “Adjusted EBITDA increased 18.1% year-over-year to $172.7 million, supported by organic growth in our Cement Segment and East Segment.  Organic growth contributed nearly 30% of the year-over-year improvement in third quarter Adjusted EBITDA, as we continue to leverage efficiencies afforded by our vertically integrated, decentralized model.”

“Demand fundamentals remain strong in our core regional markets,” continued Hill.  “Organic sales volumes of cement and aggregates increased 10.0% and 2.6%, respectively, in the third quarter 2017, when compared to the prior year period.  Organic sales volumes of cement in our core northern Mississippi River markets increased significantly on a year-over-year basis in the third quarter, while organic aggregates sales volumes in both the East and West Segments increased versus the prior year period.”

“Our two cement plants located along the Mississippi River corridor are operating at capacity, given continued growth in cement demand throughout the region,” continued Hill. “On a year-to-date basis, cement prices have grown organically by 3.6%, consistent with expectations.  Looking to 2018, we anticipate additional growth in cement prices along the Mississippi River corridor.”

“Organic prices on aggregates declined less than 1% in the third quarter, due mainly to sales mix related factors isolated to the West Segment,” continued Hill.  “Excluding mix, we estimate organic aggregates prices increased nearly 3% in the third quarter, versus the prior year period.”

“We continue to deliver exceptional margin capture in our materials lines of business,” continued Hill.  “During the third quarter, adjusted cash gross profit margin on aggregates increased 130 basis points to a record 73.0% while adjusted cash gross profit margin on cement increased 160 basis points to 50.6%.  Temporary disruptions related to Harvey, a category 4 hurricane, impacted operations in Houston, our single largest ready-mix market by volume, resulting in lower overall margin capture in our products line of business in the third quarter.”

“Since our last update in August 2017, we closed on four additional materials-based acquisitions,” noted Hill.  “Our acquisitions of Georgia Stone/McLanahan provide us with an entry point into the growing Georgia market, while the acquisition of Alan Ritchey Materials provides us an entry point into the Dallas market.  Columbia Silica and Stockman are attractive bolt-on acquisitions that expand our existing footprint in South Carolina and Missouri, respectively.  As before, we remain disciplined acquirors, transacting on quality aggregates reserves with high synergy potential.  For the full-year 2017, we are maintaining our annualized acquired EBITDA target range of $50 million to $70 million.”

“From a regional perspective, we remain bullish on Texas, where we have existing positions in Houston, Midland/Odessa, Austin, North Dallas, together with Utah, Nevada, North/South Carolina, Virginia and Georgia.  Over time, we believe each of these regions stand to benefit from a combination of increased state-level infrastructure investment, stable demand for new single-family homes and the subsequent build-out of low-rise commercial amenities,” noted Hill.

1


 

“For the full-year 2017, we expect Adjusted EBITDA to be in a range of $425 million to $435 million, down from the previous range of $440 million to $455 million,” stated Hill.  “In the aftermath of Hurricanes Harvey and Irma, sales volumes in our Texas and southeastern U.S. markets temporarily declined below historical levels in September and, to a lesser degree, in October, the combined impact of which has led us to reduce our full-year Adjusted EBITDA guidance.” 

“We ended the third quarter with significant available liquidity on our balance sheet with which to support a combination of organic and acquisition-related growth,” stated Brian Harris, CFO of Summit Materials.  “As of September 30, 2017, we had $506 million in cash and availability under our revolving credit facility, up from $224 million in the prior year period.” 

“Net leverage was 3.7x exiting the third quarter 2017, versus 4.3x in the prior year period,” continued Harris.  “Looking ahead, we expect net leverage to be at approximately 3.5x by year-end 2017.”

“We are pleased with our year-to-date performance,” continued Hill.  “Although historic volumes of rainfall resulting from the current hurricane season has impacted our full-year outlook, underlying demand conditions remain strong in our private and public end-markets, positioning us for continued profitable growth as we look ahead to 2018.”

 

Third Quarter 2017 | Financial Performance

 

Net revenue increased by 19.6% to $574.4 million in the third quarter 2017, versus $480.2 in the prior year period.  The improvement in net revenue was primarily attributable to acquisition-related contributions, increased organic sales volumes of cement, aggregates and asphalt, together with increased organic selling prices on cement, ready-mix concrete and asphalt.  Operating income increased by 28.8% to $113.9 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA increased 18.1% year-over-year to $172.7 million, versus $146.2 million in the prior year period. 

 

In connection with a normal periodic review of its deferred tax assets, the Company released $513.2 million of the valuation allowance against its deferred tax assets that is largely responsible for a $483.6 million income tax benefit realized in the third quarter 2017. Further, given an increase in the probability that deferred tax assets subject to the TRA would be realized, the Company recorded $489.2 million of TRA expense in the third quarter of 2017. The Company has accrued its full liability related to the TRA, which totaled $548.9 million as of September 30, 2017.  This accrued liability is not classified as debt for the purposes of the Company’s net leverage calculation.

 

West Segment:  Operating income increased 22.4% to $57.5 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA increased by 20.3% to $76.6 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA margin was 26.1% in the third quarter 2017, versus 27.0% in the prior-year period.  Year-over-year organic improvements in sales volumes of aggregates, ready-mix concrete and asphalt, together with acquisition-related EBITDA contributions, were partially offset by lower organic declines in average selling prices on aggregates.

East Segment:  Operating income increased by 5.2% to $36.9 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA increased by 9.4% to $56.4 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA margin declined to 31.5% in the third quarter 2017, versus 33.3% in the prior year period.  Year-over-year organic improvements in average selling prices on aggregates and ready-mix concrete and asphalt, improved organic sales volumes of aggregates and asphalt, together with acquisition-related EBITDA contributions, were offset by a sales volume decline in ready-mix concrete, due in part to weather-related factors.

Cement Segment:  Operating income increased 7.1% to $35.1 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA increased by 16.4% to $46.9 million in the third quarter 2017, when compared to the prior year period.  Adjusted EBITDA margin increased to 46.3% in the third quarter 2017, versus 45.0% 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.

Third Quarter 2017 | Results by Line of Business

 

Aggregates Business:   Aggregates net revenues increased by 15.7% to $90.6 million in the third quarter 2017, when compared to the prior year period.  Aggregates adjusted cash gross profit margin increased to 73.0% in the third quarter 2017, versus 71.7% in the prior year period.  Organic aggregates sales volumes increased 2.6% in the third quarter 2017, due mainly to increased demand in north Texas, Utah, Vancouver and additional markets in the southeast.  Organic aggregates average selling prices declined 0.8% in the third quarter, mainly in the West Segment, where hurricane-related weather impacted business conditions.

 

Cement Business:  Cement segment net revenues increased 13.1% to $101.3 million in the third quarter 2017, when compared to the prior-year period.  Cement adjusted cash gross profit margin was 50.6% in the third quarter 2017, versus 49.0% in the prior-year period.  Organic sales volumes and average selling prices on cement increased 10.0% and 3.2%, respectively, when compared to the prior year period.  Strong regional demand in the Company’s northern markets drove organic volume growth in the third quarter, while continued organic growth in sales prices was attributable to previously announced annual price increase effective January 1, 2017.    

2


 

 

Products Business:  Net revenues increased 23.5% to $280.0 million in the third quarter 2017, when compared to the prior year period.  Products adjusted cash gross profit margin declined to 26.1% in the third quarter 2017, versus 28.4% in the prior year period.  Organic sales volumes of ready-mix concrete declined 3.1%, versus the prior year period, due to Hurricane-related disruptions in the Houston market.  Organic sales volumes of asphalt increased 11.9%, versus the prior year period, given strength in the north Texas, Austin and Utah markets.

 

Acquisition Program Update

 

As of October 2017, the Company has completed fourteen acquisitions on a year-to-date basis, including four transactions that have closed since August 2017.  Total investment spend across the fourteen acquisitions completed year-to-date 2017 was approximately $402 million, including approximately $94 million for the four acquisitions completed since August 2017. 

 

Alan Ritchey Materials (Southern Oklahoma-Northeast Texas).  Alan Ritchey Materials is an aggregates bolt-on acquisition to Summit’s existing business in the northeast Texas market.  This acquisition complements Summit’s existing footprint in the region and provides increased exposure to the fast-growing north Dallas market, Alan Ritchey’s primary shipping destination.  Summit closed on its acquisition of Alan Ritchey in August 2017.

 

Georgia Stone Products/McLanahan (Northeast Georgia).  Georgia Stone Products is an aggregates bolt-on acquisition comprising two quarries in northeast Georgia.  This transaction represents an expansion westwards into Georgia from Summit’s existing position in the Carolinas.  Summit closed on this acquisition over August/September 2017. 

 

Columbia Silica (Columbia, South Carolina).  Columbia Silica is an aggregates bolt-on acquisition in central South Carolina.  This acquisition is a strong complementary fit with the recent Glasscock acquisition also in South Carolina (acquired May 2017) and brings additional scale to Summit’s growing footprint in the region.  Summit closed on its acquisition of Columbia Silica in September 2017.

 

Stockman Quarry (Central Missouri).  Stockman is an aggregates bolt-on acquisition to our existing position in central Missouri.  This transaction brings new market expansion to Summit’s existing Missouri business.  Summit closed on its acquisition of Stockman in October 2017.

 

Liquidity and Capital Resources

 

At September 30, 2017, the Company had cash on hand of $287.1 million and borrowing capacity under its revolving credit facility of $218.9 million.  The borrowing capacity on the revolving credit facility is fully available to the Company within the terms and covenant requirements of its credit agreement.  As of September 30, 2017, the Company had $1.8 billion in debt outstanding. 

 

Financial Guidance and Outlook

 

Due mainly to the combined effects of Hurricane Harvey, which impacted the Houston market beginning in late August 2017, and Hurricane Irma, which impacted regions of Virginia and South Carolina beginning in early September 2017, the Company is lowering its full-year 2017 Adjusted EBITDA guidance from a range of $440 million to $455 million to a range of $425 million to $435 million.  The downwardly revised Adjusted EBITDA outlook includes the partial-year impact of the four acquisitions completed since August 2017.  No additional potential acquisitions are included within the Company’s full-year 2017 Adjusted EBITDA guidance.

 

The Company is raising its full-year 2017 capital spending guidance from a range of $140 million to $160 million, to a range of $180 million to $190 million.  The upwardly revised capital spending guidance includes incremental investments related to discretionary organic growth investments, land/reserve acquisitions, together with acquisition-related maintenance expenditures.

 

3


 

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 third quarter 2017 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 November 30, 2017:

 

 

 

Domestic Replay:

1-844-512-2921

International Replay:

1-412-317-6671

Conference ID:

13670383

 

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, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow and Net Leverage 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 and Adjusted Cash Gross Profit 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, Adjusted Cash 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.  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.

4


 

Cautionary Statement Regarding Forward-Looking Statements

 

This report includes “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. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. 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 effect 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 realized. 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 Summit Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”), any factors discussed in the section entitled “Risk Factors” of this report and the following:

 

-

our dependence on the construction industry and the strength of the local economies in which we operate;

 

-

the cyclical nature of our business;

 

-

risks related to weather and seasonality;

 

-

risks associated with our capital-intensive business;

 

-

competition within our local markets;

 

-

our ability to execute on our acquisition strategy, successfully integrate acquisitions with our existing operations and retain key employees of acquired businesses;

 

-

our dependence on securing and permitting aggregate reserves in strategically located areas;

 

-

declines in public infrastructure construction and delays or reductions in governmental funding, including the funding by transportation authorities and other state agencies;

 

-

environmental, health, safety and climate change laws or governmental requirements or policies concerning zoning and land use;

 

-

conditions in the credit markets;

 

-

our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;

 

-

material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications;

 

-

cancellation of a significant number of contracts or our disqualification from bidding for new contracts;

 

-

special hazards related to our operations that may cause personal injury or property damage not covered by insurance;

 

-

our substantial current level of indebtedness;

 

-

our dependence on senior management and other key personnel; and

 

-

interruptions in our information technology systems and infrastructure.

 

5


 

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

 

Any forward-looking statement that we make herein speaks only as of the date of this report. 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 required by law.

6


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

September 30,

 

October 1,

 

September 30,

 

October 1,

 

    

2017

    

2016

    

2017

    

2016

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

465,556

 

$

386,236

 

$

1,088,299

 

$

907,679

Service

 

 

108,831

 

 

93,974

 

 

223,500

 

 

193,206

Net revenue

 

 

574,387

 

 

480,210

 

 

1,311,799

 

 

1,100,885

Delivery and subcontract revenue

 

 

59,794

 

 

49,227

 

 

130,752

 

 

102,205

Total revenue

 

 

634,181

 

 

529,437

 

 

1,442,551

 

 

1,203,090

Cost of revenue (excluding items shown separately below):

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

277,301

 

 

224,868

 

 

677,861

 

 

559,293

Service

 

 

72,450

 

 

61,725

 

 

154,408

 

 

136,250

Net cost of revenue

 

 

349,751

 

 

286,593

 

 

832,269

 

 

695,543

Delivery and subcontract cost

 

 

59,794

 

 

49,227

 

 

130,752

 

 

102,205

Total cost of revenue

 

 

409,545

 

 

335,820

 

 

963,021

 

 

797,748

General and administrative expenses

 

 

59,175

 

 

64,096

 

 

175,729

 

 

184,956

Depreciation, depletion, amortization and accretion

 

 

48,969

 

 

39,427

 

 

133,756

 

 

109,195

Transaction costs

 

 

2,581

 

 

1,684

 

 

6,474

 

 

5,290

Operating income

 

 

113,911

 

 

88,410

 

 

163,571

 

 

105,901

Interest expense

 

 

28,921

 

 

25,273

 

 

79,876

 

 

72,467

Loss on debt financings

 

 

 —

 

 

 —

 

 

190

 

 

 —

Tax receivable agreement expense

 

 

489,215

 

 

 —

 

 

490,740

 

 

 —

Other (income) expense, net

 

 

(2,716)

 

 

722

 

 

(3,963)

 

 

1,270

(Loss) income from operations before taxes

 

 

(401,509)

 

 

62,415

 

 

(403,272)

 

 

32,164

Income tax (benefit) expense

 

 

(483,584)

 

 

1,309

 

 

(482,327)

 

 

(7,913)

Net income

 

 

82,075

 

 

61,106

 

 

79,055

 

 

40,077

Net income (loss) attributable to noncontrolling interest in subsidiaries

 

 

59

 

 

92

 

 

(27)

 

 

57

Net income attributable to Summit Holdings (1)

 

 

2,964

 

 

16,194

 

 

2,474

 

 

2,947

Net income attributable to Summit Inc.

 

$

79,052

 

$

44,820

 

$

76,608

 

$

37,073

Income per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.73

 

$

0.60

 

$

0.72

 

$

0.59

Diluted

 

$

0.72

 

$

0.60

 

$

0.71

 

$

0.40

Weighted average shares of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

108,024,055

 

 

74,433,487

 

 

106,698,076

 

 

62,686,433

Diluted

 

 

109,303,412

 

 

74,579,797

 

 

107,327,624

 

 

101,479,150


(1)

Represents portion of business owned by pre-IPO investors rather than by Summit.

7


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

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

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

    

2017

    

2016

 

    

(unaudited)

    

(audited)

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

287,082

 

$

143,392

Accounts receivable, net

 

 

295,491

 

 

162,377

Costs and estimated earnings in excess of billings

 

 

39,316

 

 

7,450

Inventories

 

 

181,784

 

 

157,679

Other current assets

 

 

11,669

 

 

12,800

Total current assets

 

 

815,342

 

 

483,698

Property, plant and equipment, less accumulated depreciation, depletion and amortization (September 30, 2017 - $592,086 and December 31, 2016 - $484,554)

 

 

1,620,123

 

 

1,446,452

Goodwill

 

 

1,012,771

 

 

782,212

Intangible assets, less accumulated amortization (September 30, 2017 - $6,376 and December 31, 2016 - $7,854)

 

 

16,995

 

 

17,989

Deferred tax assets, less valuation allowance (September 30, 2017 - $2,677 and December 31, 2016 - $502,839)

 

 

477,493

 

 

4,326

Other assets

 

 

50,068

 

 

46,789

Total assets

 

$

3,992,792

 

$

2,781,466

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of debt

 

$

6,500

 

$

6,500

Current portion of acquisition-related liabilities

 

 

25,153

 

 

24,162

Accounts payable

 

 

134,925

 

 

81,565

Accrued expenses

 

 

130,502

 

 

111,605

Billings in excess of costs and estimated earnings

 

 

18,043

 

 

15,456

Total current liabilities

 

 

315,123

 

 

239,288

Long-term debt

 

 

1,807,064

 

 

1,514,456

Acquisition-related liabilities

 

 

36,326

 

 

32,664

Tax receivable agreement liability

 

 

548,885

 

 

58,145

Other noncurrent liabilities

 

 

68,030

 

 

76,874

Total liabilities

 

 

2,775,428

 

 

1,921,427

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 108,465,688 and 96,033,222 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively

 

 

1,085

 

 

961

Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 100 shares issued and outstanding as of September 30, 2017 and December 31, 2016

 

 

 —

 

 

 —

Additional paid-in capital

 

 

1,098,151

 

 

824,304

Accumulated earnings

 

 

95,636

 

 

19,028

Accumulated other comprehensive income (loss)

 

 

6,688

 

 

(2,249)

Stockholders’ equity

 

 

1,201,560

 

 

842,044

Noncontrolling interest in consolidated subsidiaries

 

 

1,351

 

 

1,378

Noncontrolling interest in Summit Holdings

 

 

14,453

 

 

16,617

Total stockholders’ equity

 

 

1,217,364

 

 

860,039

Total liabilities and stockholders’ equity

 

$

3,992,792

 

$

2,781,466

 

8


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30,

 

October 1,

 

    

2017

    

2016

Cash flow from operating activities:

 

 

 

 

 

 

Net income

 

$

79,055

 

$

40,077

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion, amortization and accretion

 

 

140,634

 

 

118,026

Share-based compensation expense

 

 

14,148

 

 

46,123

Deferred income tax benefit (expense)

 

 

4,768

 

 

(8,994)

Net gain on asset disposals

 

 

(6,063)

 

 

(5,844)

Non-cash loss on debt financings

 

 

85

 

 

 —

Other

 

 

(855)

 

 

(971)

(Increase) decrease in operating assets, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net

 

 

(98,961)

 

 

(81,234)

Inventories

 

 

(12,835)

 

 

(17,072)

Costs and estimated earnings in excess of billings

 

 

(31,606)

 

 

(34,349)

Other current assets

 

 

6,043

 

 

(2,876)

Deferred tax assets, net

 

 

(488,852)

 

 

 -

Other assets

 

 

(3,141)

 

 

(217)

Increase (decrease) in operating liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts payable

 

 

38,357

 

 

23,812

Accrued expenses

 

 

3,854

 

 

8,948

Billings in excess of costs and estimated earnings

 

 

2,386

 

 

2,138

Tax receivable agreement liability

 

 

490,740

 

 

 -

Other liabilities

 

 

(5,324)

 

 

(3,044)

Net cash provided by operating activities

 

 

132,433

 

 

84,523

Cash flow from investing activities:

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(371,479)

 

 

(331,463)

Purchases of property, plant and equipment

 

 

(147,478)

 

 

(121,945)

Proceeds from the sale of property, plant and equipment

 

 

13,290

 

 

16,222

Other

 

 

182

 

 

1,500

Net cash used for investing activities

 

 

(505,485)

 

 

(435,686)

Cash flow from financing activities:

 

 

 

 

 

 

Proceeds from equity offerings

 

 

237,600

 

 

 —

Capital issuance costs

 

 

(627)

 

 

(136)

Proceeds from debt issuances

 

 

302,000

 

 

354,000

Debt issuance costs

 

 

(5,317)

 

 

(5,675)

Payments on debt

 

 

(12,887)

 

 

(114,254)

Payments on acquisition-related liabilities

 

 

(22,616)

 

 

(28,920)

Distributions from partnership

 

 

(109)

 

 

(9,049)

Other

 

 

17,964

 

 

105

Net cash provided by financing activities

 

 

516,008

 

 

196,071

Impact of foreign currency on cash

 

 

734

 

 

330

Net increase (decrease) in cash

 

 

143,690

 

 

(154,762)

Cash and cash equivalents—beginning of period

 

 

143,392

 

 

186,405

Cash and cash equivalents—end of period

 

$

287,082

 

$

31,643

 

9


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Revenue Data by Segment and Line of Business

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

October 1,

 

September 30,

 

October 1,

 

 

    

2017

    

2016

    

2017

    

2016

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

293,851

 

$

235,667

 

$

675,674

 

$

558,488

 

East

 

 

179,262

 

 

154,980

 

 

406,787

 

 

339,229

 

Cement

 

 

101,274

 

 

89,563

 

 

229,338

 

 

203,168

 

Net Revenue

 

$

574,387

 

$

480,210

 

$

1,311,799

 

$

1,100,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of Business - Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

90,594

 

$

78,274

 

$

236,437

 

$

201,217

 

Cement (1)

 

 

94,915

 

 

81,154

 

 

213,243

 

 

179,658

 

Products

 

 

280,047

 

 

226,808

 

 

638,619

 

 

526,804

 

Total Materials and Products

 

 

465,556

 

 

386,236

 

 

1,088,299

 

 

907,679

 

Services

 

 

108,831

 

 

93,974

 

 

223,500

 

 

193,206

 

Net Revenue

 

$

574,387

 

$

480,210

 

$

1,311,799

 

$

1,100,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of Business - Net Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

24,478

 

$

22,166

 

$

86,000

 

$

77,444

 

Cement

 

 

43,715

 

 

37,273

 

 

107,399

 

 

89,831

 

Products

 

 

206,911

 

 

162,410

 

 

479,274

 

 

385,544

 

Total Materials and Products

 

 

275,104

 

 

221,849

 

 

672,673

 

 

552,819

 

Services

 

 

74,647

 

 

64,744

 

 

159,596

 

 

142,724

 

Net Cost of Revenue

 

$

349,751

 

$

286,593

 

$

832,269

 

$

695,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of Business - Adjusted Cash Gross Profit (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

$

66,116

 

$

56,108

 

$

150,437

 

$

123,773

 

Cement (3)

 

 

51,200

 

 

43,881

 

 

105,844

 

 

89,827

 

Products

 

 

73,136

 

 

64,398

 

 

159,345

 

 

141,260

 

Total Materials and Products

 

 

190,452

 

 

164,387

 

 

415,626

 

 

354,860

 

Services

 

 

34,184

 

 

29,230

 

 

63,904

 

 

50,482

 

Adjusted Cash Gross Profit

 

$

224,636

 

$

193,617

 

$

479,530

 

$

405,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Cash Gross Profit Margin (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregates

 

 

73.0

%

 

71.7

%

 

63.6

%

 

61.5

%

Cement (3)

 

 

50.6

%

 

49.0

%

 

46.2

%

 

44.2

%

Products

 

 

26.1

%

 

28.4

%

 

25.0

%

 

26.8

%

Services

 

 

31.4

%

 

31.1

%

 

28.6

%

 

26.1

%

Total Adjusted Cash Gross Profit Margin

 

 

39.1

%

 

40.3

%

 

36.6

%

 

36.8

%


(1)

Net revenue for the cement line of business excludes revenue associated with 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.

(2)

Previously, we presented gross profit as a non- GAAP metric. We have renamed that metric adjusted cash gross profit to be more descriptive of the calculation. Adjusted cash gross profit calculated as net revenue by line of business less net cost of revenue by line of business. Adjusted cash gross profit margin is defined as adjusted cash gross profit divided by net revenue.

(3)

The cement adjusted cash gross profit includes the earnings from the waste processing operations, cement swaps and other products. Cement line of business adjusted cash gross profit margin is defined as cement adjusted cash gross profit divided by cement segment net revenue.

10


 

 

 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Volume and Price Statistics

(Units in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

Total Volume

    

September 30, 2017

    

October 1, 2016

 

September 30, 2017

    

October 1, 2016

 

Aggregates (tons)

 

 

11,998

 

 

10,658

 

 

31,247

 

 

27,302

 

Cement (tons)

 

 

850

 

 

757

 

 

1,925

 

 

1,699

 

Ready-mix concrete (cubic yards)

 

 

1,320

 

 

1,083

 

 

3,463

 

 

2,798

 

Asphalt (tons)

 

 

2,124

 

 

1,735

 

 

4,004

 

 

3,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

Pricing

    

September 30, 2017

    

October 1, 2016

 

September 30, 2017

    

October 1, 2016

 

Aggregates (per ton)

 

$

10.23

 

$

10.19

 

$

10.04

 

$

9.91

 

Cement (per ton)

 

 

113.15

 

 

109.35

 

 

112.45

 

 

108.26

 

Ready-mix concrete (per cubic yards)

 

 

106.09

 

 

103.36

 

 

104.63

 

 

103.48

 

Asphalt (per ton)

 

 

54.37

 

 

53.91

 

 

54.55

 

 

55.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year over Year Comparison

    

Volume

    

Pricing

 

Volume

    

Pricing

 

Aggregates (per ton)

 

 

12.6

%  

 

0.4

%

 

14.4

%  

 

1.3

%

Cement (per ton)

 

 

12.3

%  

 

3.5

%

 

13.3

%  

 

3.9

%

Ready-mix concrete (per cubic yards)

 

 

21.9

%  

 

2.6

%

 

23.8

%  

 

1.1

%

Asphalt (per ton)

 

 

22.4

%  

 

0.9

%

 

22.5

%  

 

(1.9)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year over Year Comparison (Excluding acquisitions)

    

Volume

    

Pricing

 

Volume

    

Pricing

 

Aggregates (per ton)

 

 

2.6

%  

 

(0.8)

%

 

3.4

%  

 

(0.2)

%

Cement (per ton)

 

 

10.0

%  

 

3.2

%

 

10.2

%

 

3.6

%

Ready-mix concrete (per cubic yards)

 

 

(3.1)

%  

 

0.2

%

 

(1.2)

%  

 

0.0

%

Asphalt (per ton)

 

 

11.9

%  

 

0.8

%

 

12.1

%  

 

(1.8)

%

 

11


 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

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

($ and Units in thousands, except pricing information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2017

 

 

 

 

 

 

 

Gross Revenue

 

Intercompany

 

Net

 

 

Volumes

 

Pricing

 

by Product 

 

Elimination/Delivery 

 

Revenue 

Aggregates

    

11,998

    

$

10.23

    

$

122,796

    

$

(32,202)

    

$

90,594

Cement

 

850

 

 

113.15

 

 

96,223

 

 

(1,308)

 

 

94,915

Materials

 

 

 

 

 

 

$

219,019

 

$

(33,510)

 

$

185,509

Ready-mix concrete

 

1,320

 

 

106.09

 

 

140,049

 

 

(115)

 

 

139,934

Asphalt

 

2,124

 

 

54.37

 

 

115,470

 

 

(161)

 

 

115,309

Other Products

 

 

 

 

 

 

 

109,976

 

 

(85,172)

 

 

24,804

Products

 

 

 

 

 

 

$

365,495

 

$

(85,448)

 

$

280,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2017

 

    

 

    

 

 

    

Gross Revenue

    

Intercompany

    

Net

 

 

Volumes

 

Pricing

 

by Product

 

Elimination/Delivery

 

Revenue

Aggregates

 

31,247

 

$

10.04

 

$

313,686

 

$

(77,249)

 

$

236,437

Cement

 

1,925

 

 

112.45

 

 

216,512