Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): August 9, 2018
 
FOUNDATION BUILDING MATERIALS, INC.
(Exact Name of the Registrant as Specified in Charter)

 
Delaware
 
001-38009
 
81-4259606
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
2741 Walnut Avenue, Suite 200, Tustin, California
 
92780
(Address of Principal Executive Offices)
 
(Zip Code)

(714) 380-3127
Registrant’s telephone number, including area code
 
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 August 9, 2018, Foundation Building Materials, Inc. (the “Company”) issued a press release announcing its financial results for its second quarter ended June 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information included or incorporated by reference in this Item 2.02, including Exhibit 99.1, is being furnished to the Securities and Exchange Commission (the “SEC”) and shall not be deemed “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 in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD.

The Company intends to reference a slide deck (the “Presentation”) during the Company’s conference call to discuss its financial results for its second quarter ended June 30, 2018. A copy of the Presentation can be accessed on the Company’s website – investors.fbmsales.com by going to the “Events and Presentations” section and selecting “Read More Events and Presentations.”

The information included in this Item 7.01 is being furnished to the SEC and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.
 
(d)
Exhibits
 






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
FOUNDATION BUILDING MATERIALS, INC.
 
 
 
 
Date: August 9, 2018
 
 
 
By:
 
/s /  Richard Tilley
 
 
 
 
Name:
 
Richard Tilley
 
 
 
 
Title:
 
Vice President, General Counsel and Secretary



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
396425817_logofbmtitleclra06.jpg

Foundation Building Materials, Inc. Announces Second Quarter 2018 Results

2018 Second Quarter Highlights

Record net sales of $605.0 million, an increase of 14.3% compared to the prior year period
Base business net sales of $546.2 million, an increase of 9.5% compared to the prior year period
Net income of $5.4 million, an increase of $4.1 million compared to the prior year period; earnings per share of $0.13
Adjusted net income(1) of $7.6 million and adjusted earnings per share(1) of $0.18
Adjusted EBITDA(1) of $46.3 million, an increase of 14.8% compared to the prior year period; adjusted EBITDA margin(1) of 7.7%
Opened four greenfield branches

Tustin, CA, August 9, 2018 (Business Wire) - Foundation Building Materials, Inc. (the "Company") (NYSE: FBM), one of the largest specialty building product distributors of wallboard, suspended ceiling systems and mechanical insulation in North America, today reported second quarter 2018 financial results.
"We delivered strong second quarter results with double-digit top line and robust bottom line growth," said Ruben Mendoza, President and CEO. "Both our Specialty Building Products and Mechanical Insulation segments posted record results reflecting solid demand in our business." Mendoza continues, "As we enter the second half of 2018, our business remains strong, and we see solid activity in each of our end markets."

2018 Second Quarter Consolidated Results

Consolidated net sales for the three months ended June 30, 2018, were $605.0 million compared to $529.2 million for the three months ended June 30, 2017, representing an increase of $75.7 million, or 14.3%. Base business net sales increased $47.5 million, or 9.5%, to $546.2 million for the three months ended June 30, 2018, compared to the three months ended June 30, 2017. Net sales from acquired branches and existing branches that were strategically combined contributed $28.2 million to the increase in consolidated net sales.
Consolidated gross profit for the three months ended June 30, 2018, was $169.1 million compared to $149.5 million for the three months ended June 30, 2017, representing an increase of $19.6 million, or 13.1%. Consolidated gross margin for the three months ended June 30, 2018, was 28.0% compared to 28.3% for the three months ended June 30, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from lower gross margin products such as suspended ceilings systems and mechanical insulation on a percentage of net sales basis.

Selling, general and administrative, or SG&A, expenses for the three months ended June 30, 2018, were $125.8 million compared to $113.6 million for the three months ended June 30, 2017, representing an increase of $12.2 million, or 10.7%. As a percentage of net sales, SG&A expenses were 20.8% for the three months ended June 30, 2018, compared to 21.5% for the three months ended June 30, 2017. Excluding non-recurring adjustments of $3.0 million and $3.6 million for the three months ended June 30, 2018 and 2017, respectively, SG&A expenses as a percentage of net sales for the three months ended June 30, 2018 was 20.3% compared to 20.8% for the three months ended June 30, 2017. The decrease in SG&A expenses as a percentage of net sales was due to our continued focus on operating efficiencies and cost reduction initiatives, as well as our increase in net sales.

Net income for the three months ended June 30, 2018, was $5.4 million, or $0.13 per share, an increase of $4.1 million compared to net income of $1.3 million, or $0.03 per share, for the three months ended June 30, 2017. Adjusted net income(1) for the three months ended June 30, 2018, was $7.6 million, or $0.18 per share, an increase of $3.6 million compared to an adjusted net income(1) of $4.0 million, or $0.09 per share, for the three months ended June 30, 2017.

(1) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted earnings per share are non-GAAP 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.
1






Adjusted EBITDA(1) was $46.3 million and Adjusted EBITDA margin(1) was 7.7% for the three months ended June 30, 2018.

2018 Second Quarter Segment Results

Specialty Building Products (“SBP”). SBP net sales for the three months ended June 30, 2018, were $522.2 million compared to $460.1 million for the three months ended June 30, 2017, representing an increase of $62.1 million, or 13.5%. Net sales from base business contributed $34.4 million of the net increase which was driven by strong commercial activity, price increases and product expansion into new geographic markets. Net sales from acquired branches and existing branches that were strategically combined with acquired branches contributed $27.7 million of the increase.

SBP gross profit for the three months ended June 30, 2018, was $146.3 million compared to $130.7 million for the three months ended June 30, 2017, representing an increase of $15.5 million, or 11.9%. SBP gross margin for the three months ended June 30, 2018, was 28.0% compared to 28.4% for the three months ended June 30, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from lower gross margin products such as suspended ceiling systems and metal framing on a percentage of net sales basis.

Mechanical Insulation (“MI”). MI net sales for the three months ended June 30, 2018, were $82.8 million compared to $69.1 million for the three months ended June 30, 2017, representing an increase of $13.6 million, or 19.7%. Net sales from base business contributed $13.1 million of the increase, which was primarily due to higher net sales from our industrial end markets.

MI gross profit for the three months ended June 30, 2018, was $22.8 million compared to $18.8 million for the three months ended June 30, 2017, representing an increase of $4.0 million, or 21.4%. MI gross margin for the three months ended June 30, 2018, was 27.6% compared to 27.2% for the three months ended June 30, 2017. The increase in gross margin was primarily due to a change in product mix with an increased contribution from higher gross margin products on a percentage of net sales basis.  

2018 Year-to-Date Consolidated Results

Consolidated net sales for the six months ended June 30, 2018, were $1,141.3 million compared to $1,008.7 million for the six months ended June 30, 2017, representing an increase of $132.6 million, or 13.1%. Base business net sales increased $70.0 million, or 7.3%, to $1,031.4 million, for the six months ended June 30, 2018, compared to the six months ended June 30, 2017. Net sales from acquired branches and existing branches that were strategically combined contributed $62.6 million to the increase in consolidated net sales.
Consolidated gross profit for the six months ended June 30, 2018, was $323.5 million compared to $289.4 million for the six months ended June 30, 2017, representing an increase of $34.1 million, or 11.8%. Consolidated gross margin for the six months ended June 30, 2018, was 28.3% compared to 28.7% for the six months ended June 30, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from lower gross margin products such as suspended ceilings systems and mechanical insulation on a percentage of net sales basis.

SG&A expenses for the six months ended June 30, 2018, were $247.2 million compared to $226.7 million for the six months ended June 30, 2017, representing an increase of $20.5 million, or 9.1%. As a percentage of net sales, SG&A expenses were 21.7% for the six months ended June 30, 2018, compared to 22.5% for the six months ended June 30, 2017. Excluding non-recurring adjustments of $4.6 million and $9.3 million for the three months ended June 30, 2018 and 2017, respectively, SG&A expenses as a percentage of net sales for the six months ended June 30, 2018, was 21.3% compared to 21.6% for the six months ended June 30, 2017. The decrease in SG&A expenses as a percentage of net sales was due to our continued focus on operating efficiencies and cost reduction initiatives, as well as our increase in net sales.

Net income for the six months ended June 30, 2018, was $4.3 million, or $0.10 per share, a decrease of $0.8 million compared to net income of $5.2 million, or $0.13 per share, for the six months ended June 30, 2017. Adjusted net income(1) for the six months ended June 30, 2018, was $8.0 million, or $0.19 per share, an increase of $4.8 million compared to an adjusted net income of $3.1 million, or $0.08 per share, for the six months ended June 30, 2017.

Adjusted EBITDA(1) was $81.3 million and Adjusted EBITDA margin(1) was 7.1% for the six months ended June 30, 2018.


(1) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted earnings per share are non-GAAP 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.
2





2018 Year-to-Date Segment Results

Specialty Building Products. SBP net sales for the six months ended June 30, 2018, were $985.9 million compared to $878.5 million for the six months ended June 30, 2017, representing an increase of $107.3 million, or 12.2%. Net sales from acquired branches and existing branches that were strategically combined with acquired branches contributed $59.7 million of the increase. SBP base business net sales also increased by $47.6 million, which was driven by strong commercial activity, price increases and product expansion into new geographic markets.

SBP gross profit for the six months ended June 30, 2018, was $280.7 million compared to $253.2 million for the six months ended June 30, 2017, representing an increase of $27.5 million, or 10.9%. SBP gross profit increased as a result of higher sales volume and contributions from acquired and combined branches. SBP gross margin for the six months ended June 30, 2018, was 28.5% compared to 28.8% for the six months ended June 30, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from lower gross margin products such as suspended ceiling systems and metal framing on a percentage of net sales basis.

Mechanical Insulation. MI net sales for the six months ended June 30, 2018, were $155.4 million compared to $130.1 million for the six months ended June 30, 2017, representing an increase of $25.3 million, or 19.4%. Net sales from base business contributed $22.4 million of the increase, which was primarily due to higher net sales from our industrial end markets. Net sales from acquired branches and existing branches that were strategically combined with acquired branches contributed $2.9 million of the increase.

MI gross profit for the six months ended June 30, 2018, was $42.8 million compared to $36.3 million for the six months ended June 30, 2017, representing an increase of $6.5 million, or 18.0%. MI gross profit increased due to higher net sales from our base business. MI gross margin for the six months ended June 30, 2018, was 27.6% compared to 27.9% for the six months ended June 30, 2017. This decrease was primarily due to a higher contribution from large industrial projects for the six months ended June 30, 2018, which generally have lower margins relative to the overall MI segment.  

Acquisitions and Greenfield Branches

On August 1, 2018, the Company completed the acquisition of Ciesco, Inc. ("Ciesco"), adding six additional SBP branches to the Company's Northeastern and Mid-Atlantic markets. For the remainder of 2018, Ciesco is expected to contribute $24.0 million to $27.0 million to net sales. Through August 9, 2018, the Company has completed three acquisitions totaling 13 branches with combined annualized net sales in excess of $100.0 million. The Company will continue to supplement organic growth with strategic acquisitions.
As of June 30, 2018, the Company has opened five greenfield branches and expects to open one to two more branches by the end of 2018, for a total of six to seven branches. These greenfield branches are projected to yield high returns on invested capital within the first few years of startup. They also serve to further leverage our national scale, increase our market share, and support our organic growth.
Expected Debt Refinancing

On July 30, 2018, the Company submitted a conditional notice of redemption to the trustee and the holders of its senior secured notes, or Notes, seeking to redeem all of the outstanding Notes on August 15, 2018, conditioned on the prior completion of a new $450.0 million term loan (the "Term Loan") and ABL Credit Agreement (the "2018 ABL," and, together with the Term Loan, the "2018 Credit Agreements"). The Term Loan was priced on May 14, 2018, with a spread of LIBOR plus 325 basis points and will be issued at an original issue discount of 99.75. The 2018 ABL also includes an increase in commitments to $400.0 million from $300.0 million.

Due to the redemption of the Notes, the Company expects to expense approximately $35.8 million of non-cash amortization related to deferred financing costs and a $23.7 million prepayment premium during the three months ending September 30, 2018. Upon completion of the refinancing, the Company expects to realize annual cash interest savings of $12.0 million to $15.0 million. As the Company continues to optimize its capital structure and operating efficiencies, the Company expects its generation of cash flow to improve, which will allow the Company to further reduce its leverage over the next couple of years.

Second Quarter Earnings Release and Conference Call

In conjunction with this release, the Company will host a conference call today, Thursday, August 9, 2018, at 9:00 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, and John Moten, Vice President Investor Relations, will host the call.

3


The call can be accessed three ways:
At the FBM website: www.fbmsales.com in the Investors section of the Company’s website;
By telephone: For both listen only participants and those who wish to take part in the question and answer portion of the call, the telephone dial-in number in the U.S. is (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and
Audio Replay: A replay of the call will be available beginning at 12:00 PM Eastern Time on Thursday, August 9, 2018, and ending 11:59 PM Eastern Time August 16, 2018. Dial-in numbers for U.S. based participants are (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 13681777.

About Foundation Building Materials

Foundation Building Materials, Inc. is a specialty building products distributor of wallboard, suspended ceiling systems, and mechanical insulation throughout North America. Based in Tustin, California, the Company employs more than 3,700 people and operates more than 220 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 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 our 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.

Contact Information:

Investor Relations:
John Moten
Foundation Building Materials, Inc.
657-900-3200
[email protected]

Media Relations:
Joele Frank, Wilkinson Brimmer Katcher
Jed Repko or Ed Trissel
212-355-4449



- Financial Tables Follow -



4



FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share and per share data)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net sales
$
604,973

 
$
529,230

 
$
1,141,270

 
$
1,008,687

Cost of goods sold
435,876

 
379,698

 
817,733

 
719,244

Gross profit
169,097

 
149,532

 
323,537

 
289,443

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
125,785

 
113,602

 
247,212

 
226,664

Depreciation and amortization
20,341

 
19,027

 
40,227

 
37,423

Total operating expenses
146,126

 
132,629

 
287,439

 
264,087

Income from operations
22,971

 
16,903

 
36,098

 
25,356

Interest expense
(15,345
)
 
(14,876
)
 
(30,477
)
 
(30,125
)
Other income, net
57

 
95

 
124

 
13,384

Income before income taxes
7,683

 
2,122

 
5,745

 
8,615

Income tax expense
2,283

 
862

 
1,398

 
3,426

Net income
$
5,400

 
$
1,260

 
$
4,347

 
$
5,189

 
 
 
 
 
 
 
 
Earnings per share data:
 
 
 
 
 
 
 
Basic
$
0.13

 
$
0.03

 
$
0.10

 
$
0.13

Diluted
$
0.13

 
$
0.03

 
$
0.10

 
$
0.13

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
42,893,498

 
42,865,407

 
42,886,867

 
40,084,730

Diluted
42,910,017

 
42,879,319

 
42,903,788

 
40,084,940



5



FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
 
June 30, 2018
 
December 31, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
7,083

 
$
12,101

Accounts receivable—net of allowance for doubtful accounts of $4,092 and $4,651, respectively
343,382

 
280,023

Other receivables
49,286

 
59,462

Inventories
211,997

 
184,436

Prepaid expenses and other current assets
13,807

 
12,636

Total current assets
625,555

 
548,658

Property and equipment, net
156,000

 
151,408

Intangible assets, net
169,738

 
189,770

Goodwill
465,762

 
458,737

Other assets
5,790

 
5,604

Total assets
$
1,422,845

 
$
1,354,177

Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
166,910

 
$
156,345

Accrued payroll and employee benefits
24,717

 
21,158

Accrued taxes
11,627

 
7,790

Tax receivable agreement
15,892

 
15,892

Other current liabilities
40,021

 
41,093

Total current liabilities
259,167

 
242,278

Asset-based revolving credit facility
94,075

 
47,486

Long-term portion of notes payable, net
539,168

 
534,379

Tax receivable agreement
119,912

 
119,912

Deferred income taxes, net
18,198

 
17,819

Other liabilities
10,195

 
13,639

Total liabilities
1,040,715

 
975,513

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; 42,893,982 and 42,865,407 shares issued, respectively
13

 
13

     Additional paid-in capital
330,995

 
330,113

     Retained earnings
50,711

 
46,184

     Accumulated other comprehensive income
411

 
2,354

          Total stockholders' equity
382,130

 
378,664

Total liabilities and stockholders' equity
$
1,422,845

 
$
1,354,177



6



FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
Six Months Ended June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
4,347

 
$
5,189

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
     Depreciation
16,329

 
14,723

     Amortization of intangible assets
23,898

 
22,700

     Amortization of debt issuance costs and debt discount
5,298

 
4,844

     Inventory fair value purchase accounting adjustment
407

 
664

     Provision for doubtful accounts
1,050

 
766

     Stock-based compensation
927

 
1,765

     Unrealized gain on derivative instruments, net
(135
)
 
(13,155
)
     Loss on disposal of property and equipment
309

 
242

     Deferred income taxes
(421
)
 
3,356

     Change in assets and liabilities, net of effects of acquisitions:
 
 
 
          Accounts receivable
(63,199
)
 
(32,706
)
          Other receivables
9,918

 
10,638

          Inventories
(25,680
)
 
(2,807
)
          Prepaid expenses and other current assets
(1,155
)
 
561

          Other assets
382

 
393

          Accounts payable
11,349

 
17,875

          Accrued payroll and employee benefits
3,674

 
(4,433
)
          Accrued taxes
3,855

 
(1,474
)
          Other liabilities
(491
)
 
(7,258
)
Net cash (used in) provided by operating activities
(9,338
)
 
21,883

Cash flows from investing activities:
 
 
 
     Purchases of property and equipment
(20,463
)
 
(17,525
)
     Payment of net working capital adjustments
(40
)
 
(405
)
     Proceeds from net working capital adjustments
336

 
8,554

     Proceeds from the disposal of fixed assets
577

 
429

     Acquisitions, net of cash acquired
(21,220
)
 
(52,951
)
Net cash used in investing activities
(40,810
)
 
(61,898
)
Cash flows from financing activities:
 
 
 
     Proceeds from asset-based revolving credit facility
266,198

 
280,995

     Repayments of asset-based revolving credit facility
(219,350
)
 
(415,497
)
     Tax withholding payment related to net settlement of equity awards
(45
)
 

     Principal repayment of capital lease obligations
(1,489
)
 
(1,395
)
     Issuance of common stock

 
163,952

     Capital contributions

 
2,997

Net cash provided by financing activities
45,314

 
31,052

Effect of exchange rate changes on cash
(184
)
 
357

Net decrease in cash
(5,018
)
 
(8,606
)
Cash and cash equivalents at beginning of period
12,101

 
28,552


7



Cash and cash equivalents at end of period
$
7,083

 
$
19,946

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for income taxes
$
1,423

 
$
143

Cash paid during the period for interest
$
25,226

 
$
25,699

Supplemental disclosures of non-cash investing and financing activities:
 
 
 
Change in fair value of derivative, net of tax
$
2,259

 
$
1,400

Assets acquired under capital lease
$

 
$
658

Goodwill adjustment for purchase price allocation
$
202

 
$
1,724

Tax receivable agreement
$

 
$
203,837

Property and equipment included in accounts payable
$

 
$
198






8



FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY SEGMENT AND PRODUCT LINE AND SEGMENT GROSS PROFIT AND GROSS MARGIN
(UNAUDITED)

 
Three Months Ended June 30,
 
Change
(dollars in thousands)
2018
 
2017
 
$
 
%
SBP Segment
 
 
 
 
 
 
 
 
 
     Wallboard(1)
$
198,598

38.0
%
 
$
180,955

39.3
%
 
$
17,643

 
9.7
%
     Suspended ceiling systems
97,755

18.7
%
 
83,271

18.1
%
 
14,484

 
17.4
%
     Metal framing
91,476

17.5
%
 
72,404

15.7
%
 
19,072

 
26.3
%
     Complementary and other products
134,390

25.8
%
 
123,456

26.9
%
 
10,934

 
8.9
%
Total SBP net sales
$
522,219

100.0
%
 
$
460,086

100.0
%
 
$
62,133

 
13.5
%
 
 
 
 
 
 
 
 
 
 
MI Segment
 
 
 
 
 
 
 
 
 
Total MI net sales(2)
$
82,754

100.0
%
 
$
69,144

100.0
%
 
$
13,610

 
19.7
%
Total net sales
$
604,973

 
 
$
529,230

 
 
$
75,743

 
14.3
%
 
 
 
 
 
 
 
 
 
 
Gross profit - SBP
$
146,267

 
 
$
130,729

 
 
$
15,538

 
11.9
%
Gross profit - MI
22,830

 
 
18,803

 
 
4,027

 
21.4
%
Total gross profit
$
169,097

 
 
$
149,532

 
 
$
19,565

 
13.1
%
 
 
 
 
 
 
 
 
 
 
Gross margin - SBP
28.0
%
 
 
28.4
%
 
 
(0.4
)%
 
 
Gross margin - MI
27.6
%
 
 
27.2
%
 
 
0.4
 %
 
 
Total gross margin
28.0
%
 
 
28.3
%
 
 
(0.3
)%
 
 
(1) For the three months ended June 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation.
(2) MI contains sales from Commercial and industrial insulation and Non-insulation products.


9



FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY SEGMENT AND PRODUCT LINE AND SEGMENT GROSS PROFIT AND GROSS MARGIN
(UNAUDITED)

 
Six Months Ended June 30,
 
Change
(dollars in thousands)
2018
 
2017
 
$
 
%
SBP Segment
 
 
 
 
 
 
 
 
 
     Wallboard(1)
$
379,251

38.5
%
 
$
349,195

39.7
%
 
$
30,056

 
8.6
%
     Suspended ceiling systems
183,933

18.7
%
 
155,988

17.8
%
 
27,945

 
17.9
%
     Metal framing
165,443

16.8
%
 
141,065

16.1
%
 
24,378

 
17.3
%
     Complementary and other products
257,252

26.0
%
 
232,301

26.4
%
 
24,951

 
10.7
%
Total SBP net sales
$
985,879

100.0
%
 
$
878,549

100.0
%
 
$
107,330

 
12.2
%
 
 
 
 
 
 
 
 
 
 
MI Segment
 
 
 
 
 
 
 
 
 
Total MI net sales(2)
$
155,391

100.0
%
 
$
130,138

100.0
%
 
$
25,253

 
19.4
%
Total net sales
$
1,141,270

 
 
$
1,008,687

 
 
$
132,583

 
13.1
%
 
 
 
 
 
 
 
 
 
 
Gross profit - SBP
$
280,704

 
 
$
253,155

 
 
$
27,549

 
10.9
%
Gross profit - MI
42,833

 
 
36,288

 
 
6,545

 
18.0
%
Total gross profit
$
323,537

 
 
$
289,443

 
 
$
34,094

 
11.8
%
 
 
 
 
 
 
 
 
 
 
Gross margin - SBP
28.5
%
 
 
28.8
%
 
 
(0.3
)%
 
 
Gross margin - MI
27.6
%
 
 
27.9
%
 
 
(0.3
)%
 
 
Total gross margin
28.3
%
 
 
28.7
%
 
 
(0.4
)%
 
 
(1) For the six months ended June 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation.
(2) MI contains sales from Commercial and industrial insulation and Non-insulation products.


10



FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES (UNAUDITED)

 
Three Months Ended June 30,
 
Change
(dollars in thousands)
2018
 
2017
 
$
 
%
Base business(1)
$
546,206

 
$
498,704

 
$
47,502

 
9.5
%
Acquired and combined(2)
58,767

 
30,526

 
28,241

 
92.5
%
Net sales
$
604,973

 
$
529,230

 
$
75,743

 
14.3
%
(1) Represents net sales from branches that were owned by us since January 1, 2017 and branches that were opened by us during such period.
(2) Represents branches acquired and existing branches combined with acquired branches after January 1, 2017.

 
Six Months Ended June 30,
 
Change
(dollars in thousands)
2018
 
2017
 
$
 
%
Base business(1)
$
1,031,447

 
$
961,447

 
$
70,000

 
7.3
%
Acquired and combined(2)
109,823

 
47,240

 
62,583

 
132.5
%
Net sales
$
1,141,270

 
$
1,008,687

 
$
132,583

 
13.1
%
(1) Represents net sales from branches that were owned by us since January 1, 2017 and branches that were opened by us during such period.
(2) Represents branches acquired and existing branches combined with acquired branches after January 1, 2017.




11



FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY SEGMENT AND PRODUCT
(UNAUDITED)

 
Three Months Ended June 30, 2017
 
Base Business Net Sales Increase
 
Acquired and Combined Net Sales Increase
 
Three Months Ended June 30, 2018
 
Total Net Sales % Increase
Base Business Net Sales % Increase(1)
 
Acquired and Combined Net Sales % Increase(2)
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Wallboard(3)
$
180,955

 
$
6,710

 
$
10,933

 
$
198,598

 
9.7
%
4.0
%
 
81.9
%
Suspended ceiling systems
83,271

 
6,390

 
8,094

 
97,755

 
17.4
%
8.1
%
 
177.8
%
Metal framing
72,404

 
16,035

 
3,037

 
91,476

 
26.3
%
23.6
%
 
67.3
%
Complementary and other products
123,456

 
5,283

 
5,651

 
134,390

 
8.9
%
4.5
%
 
106.8
%
SBP net sales
460,086

 
34,418

 
27,715

 
522,219

 
13.5
%
8.0
%
 
100.1
%
MI net sales
69,144

 
13,084

 
526

 
82,754

 
19.7
%
19.7
%
 
18.6
%
Total net sales
$
529,230

 
$
47,502

 
$
28,241

 
$
604,973

 
14.3
%
9.5
%
 
92.5
%
Average daily sales
$
8,269

 
$
742

 
$
442

 
$
9,453

 
14.3
%
9.5
%
 
92.5
%
(1) Represents base business net sales increase as a percentage of base business net sales for the three months ended June 30, 2017.
(2) Represents acquired and combined net sales increase as a percentage of acquired and combined net sales for the three months ended June 30, 2017.
(3) For the three months ended June 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation.


 
Six Months Ended June 30, 2017
 
Base Business Net Sales Increase
 
Acquired and Combined Net Sales Increase
 
Six Months Ended June 30, 2018
 
Total Net Sales % Increase
Base Business Net Sales % Increase(1)
 
Acquired and Combined Net Sales % Increase(2)
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Wallboard(3)
$
349,195

 
$
5,069

 
$
24,987

 
$
379,251

 
8.6
%
1.5
%
 
123.3
%
Suspended ceiling systems
155,988

 
13,108

 
14,837

 
183,933

 
17.9
%
8.9
%
 
181.6
%
Metal framing
141,065

 
16,812

 
7,566

 
165,443

 
17.3
%
12.5
%
 
113.5
%
Complementary and other products
232,301

 
12,656

 
12,295

 
257,252

 
10.7
%
5.6
%
 
151.7
%
SBP net sales
878,549

 
47,645

 
59,685

 
985,879

 
12.2
%
5.7
%
 
138.2
%
MI net sales
130,138

 
22,355

 
2,898

 
155,391

 
19.4
%
17.7
%
 
71.7
%
Total net sales
$
1,008,687

 
$
70,000

 
$
62,583

 
$
1,141,270

 
13.1
%
7.3
%
 
132.5
%
Average daily sales
$
7,880

 
$
547

 
$
489

 
$
8,916

 
13.1
%
7.3
%
 
132.5
%
(1) Represents base business net sales increase as a percentage of base business net sales for the six months ended June 30, 2017.
(2) Represents acquired and combined net sales increase as a percentage of acquired and combined net sales for the six months ended June 30, 2017.
(3) For the six months ended June 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation.

12



Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to results under GAAP, this press release contains certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted earnings per share ("EPS"), which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. We calculate EBITDA as net income before interest expense net, income tax expense, and depreciation and amortization. We calculate Adjusted EBITDA as EBITDA before unrealized (gains) losses on derivative financial instruments, IPO and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as non-cash purchase accounting effects, losses on the disposal of property and equipment, transaction costs and management fees. We calculate Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. We calculate Adjusted net income as net income before unrealized (gains) losses on derivative financial instruments, IPO and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as non-cash purchase accounting adjustments, losses on the disposal of property and equipment, transaction costs, and management fees. We calculate Adjusted EPS as Adjusted net income on a per weighted average share outstanding basis.

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 may also be used by analysts, investors and other interested parties to evaluate companies in our industry. These measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing our financial condition and results of operations.

These non-GAAP financial measures have certain limitations. These measures should not be considered as alternatives to measures of financial performance derived in accordance with GAAP. In addition, these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be liquidity measures. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than we do, limiting their usefulness as comparative measures.



















13



The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net income (unaudited):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
(in thousands)
 
 
 
 
 
 
 
Net income
$
5,400

 
$
1,260

 
$
4,347

 
$
5,189

Interest expense, net
15,327

 
14,876

 
30,438

 
30,090

Income tax expense
2,283

 
862

 
1,398

 
3,426

Depreciation and amortization
20,341

 
19,027

 
40,227

 
37,423

EBITDA
43,351

 
36,025

 
76,410

 
76,128

 
 
 
 
 
 
 
 
Unrealized (gains) losses on derivative financial instruments
(60
)
 
63

 
(134
)
 
(13,156
)
IPO and public company readiness expenses

 
1,434

 
89

 
4,409

Stock-based compensation
667

 
212

 
938

 
1,765

Non-cash purchase accounting effects(a)

 
593

 
407

 
664

Loss on disposal of property and equipment
296

 
20

 
309

 
172

Transaction costs(b)
2,057

 
1,979

 
3,275

 
2,571

Management fees(c)

 

 

 
353

Adjusted EBITDA
$
46,311

 
$
40,326

 
$
81,294

 
$
72,906

Adjusted EBITDA margin(d)
7.7
%
 
7.6
%
 
7.1
%
 
7.2
%

(a)
Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions.
(b)
Represents one-time costs related to our acquisitions, including fees to financial advisors, accountants, attorneys, other professionals and certain internal corporate development costs. Certain amounts have been reclassified for the six months ended June 30, 2017 to conform our presentation of Adjusted EBITDA to the current year presentation.
(c)
Represents fees paid to our former private equity sponsor for services provided pursuant to past management agreements. These fees are no longer being incurred.
(d)
Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales.












14



The following is a reconciliation of Adjusted net income to the nearest GAAP measure, net income (unaudited):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
(in thousands, except share and per share data)
 
 
 
 
 
 
 
Net income
$
5,400

 
$
1,260

 
$
4,347

 
$
5,189

Unrealized (gains) losses on derivative financial instruments
(60
)
 
63

 
(134
)
 
(13,156
)
IPO and public company readiness expenses

 
1,434

 
89

 
4,409

Stock-based compensation
667

 
212

 
938

 
1,765

Non-cash purchase accounting effects(a)

 
593

 
407

 
664

Loss on disposal of property and equipment
296

 
20

 
309

 
172

Transaction costs(b)
2,057

 
1,979

 
3,275

 
2,571

Management fees(c)

 

 

 
353

Tax effect of adjustments(d)
(757
)
 
(1,570
)
 
(1,249
)
 
1,176

Adjusted net income
$
7,603

 
$
3,991

 
$
7,982

 
$
3,143

 
 
 
 
 
 
 
 
Earnings per share (as reported):
 
 
 
 
 
 
 
Basic
$
0.13

 
$
0.03

 
$
0.10

 
$
0.13

Diluted
$
0.13

 
$
0.03

 
$
0.10

 
$
0.13

Adjusted earnings per share:
 
 
 
 
 
 
 
Basic
$
0.18

 
$
0.09

 
$
0.19

 
$
0.08

Diluted
$
0.18

 
$
0.09

 
$
0.19

 
$
0.08

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
42,893,498

 
42,865,407

 
42,886,867

 
40,084,730

Diluted
42,910,017

 
42,879,319

 
42,903,788

 
40,084,940

(a)
Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions.
(b)
Represents one-time costs related to our acquisitions, including fees to financial advisors, accountants, attorneys, other professionals and certain internal corporate development costs.
(c)
Represents fees paid to former private equity sponsors for services provided pursuant to past management agreements. These fees are no longer being incurred.
(d)
Represents the tax effect of the adjustments to reflect corporate income taxes. The statutory tax rate for the three and six months ended June 30, 2018, was 25.6%. The statutory tax rate for the three and six months ended June 30, 2017, was 36.5%.


15
(Back To Top)