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): May 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 May 9, 2018, Foundation Building Materials, Inc. (the “Company”) issued a press release announcing its financial results for its first quarter ended March 31, 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 first quarter ended March 31, 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: May 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

396425821_logofbmtitleclra05.jpg

Foundation Building Materials, Inc. Announces First Quarter 2018 Results

2018 First Quarter Highlights

Net sales of $536.3 million, an increase of 11.9% compared to the prior year period
Base business net sales of $485.2 million, an increase of 4.9% compared to the prior year period
Net loss of $1.1 million compared to net income of $3.9 million in the prior year period
Adjusted EBITDA(1) of $35.0 million
Completed two acquisitions in the quarter

Tustin, CA, May 9, 2018 (Business Wire) - Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building product distributors of wallboard, suspended ceiling systems and mechanical insulation in North America, today reported first quarter 2018 financial results.
“We recorded a solid quarter of operational and financial performance, highlighted by year-over-year net sales growth of 12%, and base business growth of 5%, with good performance from both our Specialty Building Products and Mechanical Insulation business segments,” said Ruben Mendoza, President and CEO. “Despite adverse weather early in the year, we finished the quarter strong, and we look forward to building on this positive momentum in the business as we continue to deliver long-term value to our customers and stockholders.”

2018 First Quarter Results

Consolidated net sales for the three months ended March 31, 2018 were $536.3 million compared to $479.5 million for the three months ended March 31, 2017, representing an increase of $56.8 million, or 11.9%. Base business net sales increased $22.5 million, or 4.9%, to $485.2 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017.
Consolidated gross profit for the three months ended March 31, 2018 was $154.4 million compared to $139.9 million for the three months ended March 31, 2017, representing an increase of $14.5 million, or 10.4%. Consolidated gross margin for the three months ended March 31, 2018 was 28.8% compared to 29.2% for the three months ended March 31, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from 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 March 31, 2018 were $121.4 million compared to $113.1 million for the three months ended March 31, 2017, representing an increase of $8.4 million, or 7.4.%. As a percentage of net sales, SG&A expenses were 22.6% for the three months ended March 31, 2018 compared to 23.6% for the three months ended March 31, 2017. Excluding non-recurring expenses, SG&A expenses as a percentage of net sales for the three months ended March 31, 2018 were 22.3% compared to 22.4% for the three months ended March 31, 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.

Net loss for the three months ended March 31, 2018 was $1.1 million, or $0.02 loss per share, a decrease of $5.0 million compared to net income of $3.9 million, or $0.11 earnings per share, for the three months ended March 31, 2017. The decrease in net income was primarily due to a decrease in gains from derivatives of $13.1 million, partially offset by higher income from operations of $4.7 million and lower income taxes of $3.4 million. Adjusted net income(1) for the three months ended March 31, 2018 was $0.4 million, or $0.01 adjusted earnings per share(1), an increase of $1.2 million compared to an adjusted net loss(1) of $0.8 million, or $0.02 adjusted loss per share(1), for the three months ended March 31, 2017.

Adjusted EBITDA(1) was $35.0 million and Adjusted EBITDA margin(1) was 6.5% for the three months ended March 31, 2018.

(1) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted earnings (loss) 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





2018 First Quarter Segment Results

Specialty Building Products (“SBP”). SBP net sales for the three months ended March 31, 2018 were $463.7 million compared to $418.5 million for the three months ended March 31, 2017, representing an increase of $45.2 million, or 10.8%. Net sales from acquired branches and existing branches that were strategically combined with acquired branches contributed $32.0 million of the increase.

SBP gross profit for the three months ended March 31, 2018 was $134.4 million compared to $122.4 million for the three months ended March 31, 2017, representing an increase of $12.0 million, or 9.8%. SBP gross margin for the three months ended March 31, 2018 was 29.0% compared to 29.3% for the three months ended March 31, 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, on a percentage of net sales basis.

Mechanical Insulation (“MI”). MI net sales for the three months ended March 31, 2018 were $72.6 million compared to $61.0 million for the three months ended March 31, 2017, representing an increase of $11.6 million, or 19.1%. Base business net sales contributed $9.3 million of the increase, primarily due to higher net sales to industrial end markets.

MI gross profit for the three months ended March 31, 2018 was $20.0 million compared to $17.5 million for the three months ended March 31, 2017, representing an increase of $2.5 million, or 14.4%. MI gross margin for the three months ended March 31, 2018 was 27.5% compared to 28.7% for the three months ended March 31, 2017. This decrease was primarily due to a higher contribution from large industrial projects for the three months ended March 31, 2018, which generally have lower margins relative to the overall MI segment.

Acquisitions

During the first quarter the Company completed two acquisitions totaling seven branches. For 2018, these two acquisitions are expected to contribute $27.0 million to $29.0 million to net sales. Foundation Building Materials will continue to supplement organic growth with strategic acquisitions.
Expected Debt Refinancing

The Company is actively exploring the refinancing of its $575.0 million 8.25% senior secured notes due 2021, or Notes. In the third quarter of 2018, the prepayment premium of the Notes will decrease, and the Company believes it will have opportunities to refinance the Notes, which could provide estimated annual cash interest savings of $12.0 million to $15.0 million. As Foundation Building Materials 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.
First Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call today, Wednesday, May 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.
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 Wednesday, May 9, 2018, and ending 11:59 PM Eastern Time May 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 13679454.










About Foundation Building Materials

Foundation Building Materials 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 Report 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
Investors@fbmsales.com

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


- Financial Tables Follow -








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

 
Three Months Ended March 31,
 
2018
 
2017
Net sales
$
536,297

 
$
479,457

Cost of goods sold
381,857

 
339,546

Gross profit
154,440

 
139,911

Operating expenses:
 
 
 
Selling, general and administrative
121,427

 
113,062

Depreciation and amortization
19,886

 
18,396

Total operating expenses
141,313

 
131,458

Income from operations
13,127

 
8,453

Interest expense
(15,132
)
 
(15,249
)
Other income, net
67

 
13,289

(Loss) income before income taxes
(1,938
)
 
6,493

Income tax (benefit) expense
(885
)
 
2,564

Net (loss) income
$
(1,053
)
 
$
3,929

 
 
 
 
(Loss) earnings per share data:
 
 
 
Basic
$
(0.02
)
 
$
0.11

Diluted
$
(0.02
)
 
$
0.11

Weighted average shares outstanding:
 
 
 
Basic
42,879,874

 
37,273,156

Diluted
42,879,874

 
37,273,156



4



FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
 
March 31, 2018
 
December 31, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
8,645

 
$
12,101

Accounts receivable—net of allowance for doubtful accounts of $4,870 and $4,651, respectively
312,787

 
280,023

Other receivables
53,191

 
59,462

Inventories
192,934

 
184,436

Prepaid expenses and other current assets
11,327

 
12,636

Total current assets
578,884

 
548,658

Property and equipment, net
152,306

 
151,408

Intangible assets, net
181,856

 
189,770

Goodwill
466,614

 
458,737

Other assets
5,352

 
5,604

Total assets
$
1,385,012

 
$
1,354,177

Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
158,475

 
$
156,345

Accrued payroll and employee benefits
20,902

 
21,158

Accrued taxes
11,081

 
7,790

Tax receivable agreement
15,892

 
15,892

Other current liabilities
27,405

 
41,093

Total current liabilities
233,755

 
242,278

Asset-based revolving credit facility
89,878

 
47,486

Long-term portion of notes payable, net
536,748

 
534,379

Tax receivable agreement
119,912

 
119,912

Deferred income taxes, net
16,646

 
17,819

Other liabilities
11,264

 
13,639

Total liabilities
1,008,203

 
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; 42,891,252 and 42,865,407 shares issued, respectively
13

 
13

     Additional paid-in capital
330,339

 
330,113

     Retained earnings
45,311

 
46,184

     Accumulated other comprehensive income
1,146

 
2,354

          Total stockholders' equity
376,809

 
378,664

Total liabilities and stockholders' equity
$
1,385,012

 
$
1,354,177



5



FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(1,053
)
 
$
3,929

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
     Depreciation
7,970

 
7,131

     Amortization of intangible assets
11,916

 
11,265

     Amortization of debt issuance costs and debt discount
2,624

 
2,399

     Inventory fair value purchase accounting adjustment
407

 
71

     Provision for doubtful accounts
551

 
135

     Stock-based compensation
271

 
1,553

     Unrealized gain on derivative instruments, net
(74
)
 
(13,219
)
     Loss on disposal of property and equipment
13

 
152

     Deferred income taxes
(1,614
)
 
2,543

     Change in assets and liabilities, net of effects of acquisitions:
 
 
 
          Accounts receivable
(31,221
)
 
(11,273
)
          Other receivables
6,278

 
12,595

          Inventories
(6,129
)
 
(2,137
)
          Prepaid expenses and other current assets
1,423

 
787

          Other assets
36

 
158

          Accounts payable
2,423

 
8,249

          Accrued payroll and employee benefits
(202
)
 
(7,793
)
          Accrued taxes
3,301

 
(238
)
          Other liabilities
(13,461
)
 
(15,424
)
Net cash (used in) provided by operating activities
(16,541
)
 
883

Cash flows from investing activities:
 
 
 
     Purchases of property and equipment
(7,594
)
 
(7,572
)
     Payment of net working capital adjustments
(15
)
 

     Proceeds from net working capital adjustments
178

 

     Proceeds from the disposal of fixed assets
200

 
98

     Acquisitions, net of cash acquired
(21,233
)
 
(13,195
)
Net cash used in investing activities
(28,464
)
 
(20,669
)
Cash flows from financing activities:
 
 
 
     Proceeds from asset-based revolving credit facility
131,224

 
114,500

     Repayments of asset-based revolving credit facility
(88,724
)
 
(281,032
)
     Tax withholding payment related to net settlement of equity awards
(45
)
 

     Principal repayment of capital lease obligations
(745
)
 
(691
)
     Issuance of common stock

 
164,189

     Capital contributions

 
2,997

Net cash provided by (used in) financing activities
41,710

 
(37
)
Effect of exchange rate changes on cash
(161
)
 
64

Net decrease in cash
(3,456
)
 
(19,759
)

6



Cash and cash equivalents at beginning of period
12,101

 
28,552

Cash and cash equivalents at end of period
$
8,645

 
$
8,793

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

 
$
39

Cash paid during the period for interest
$
24,201

 
$
25,308

Supplemental disclosures of non-cash investing and financing activities:
 
 
 
Change in fair value of derivatives, net of tax
$
1,163

 
$
461

Assets acquired under capital lease
$

 
$
378

Goodwill adjustment for purchase price allocation
$
202

 
$
723

Tax receivable agreement
$

 
$
203,837






7



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

 
Three Months Ended March 31,
 
Change
(dollars in thousands)
2018
 
2017
 
$
 
%
SBP Segment
 
 
 
 
 
 
 
 
 
     Wallboard(1)
$
180,653

39.0
%
 
$
168,239

40.2
%
 
$
12,414

 
7.4
%
     Suspended ceiling systems
86,179

18.6
%
 
72,716

17.4
%
 
13,463

 
18.5
%
     Metal framing
73,967

16.0
%
 
68,662

16.4
%
 
5,305

 
7.7
%
     Complementary and other products
122,862

26.4
%
 
108,846

26.0
%
 
14,016

 
12.9
%
Total SBP net sales
$
463,661

100.0
%
 
$
418,463

100.0
%
 
$
45,198

 
10.8
%
 
 
 
 
 
 
 
 
 
 
MI Segment
 
 
 
 
 
 
 
 
 
Total MI net sales(2)
$
72,636

100.0
%
 
$
60,994

100.0
%
 
$
11,642

 
19.1
%
Total net sales
$
536,297

 
 
$
479,457

 
 
$
56,840

 
11.9
%
 
 
 
 
 
 
 
 
 
 
Gross profit - SBP
$
134,437

 
 
$
122,426

 
 
$
12,011

 
9.8
%
Gross profit - MI
20,003

 
 
17,485

 
 
2,518

 
14.4
%
Total gross profit
$
154,440

 
 
$
139,911

 
 
$
14,529

 
10.4
%
 
 
 
 
 
 
 
 
 
 
Gross margin - SBP
29.0
%
 
 
29.3
%
 
 
(0.3
)%
 
 
Gross margin - MI
27.5
%
 
 
28.7
%
 
 
(1.2
)%
 
 
Total gross margin
28.8
%
 
 
29.2
%
 
 
(0.4
)%
 
 
(1) For the three months ended March 31, 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.


8



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

 
Three Months Ended March 31,
 
Change
(dollars in thousands)
2018
 
2017
 
$
 
%
Base business(1)
$
485,241

 
$
462,743

 
$
22,498

 
4.9
%
Acquired and combined(2)
51,056

 
16,714

 
34,342

 
205.5
%
Net sales
$
536,297

 
$
479,457

 
$
56,840

 
11.9
%
(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.



9



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

 
Three Months Ended March 31, 2017
 
Base Business Net Sales (Decrease) Increase
 
Acquired and Combined Net Sales Increase
 
Three Months Ended March 31, 2018
 
Total Net Sales % Increase
Base Business Net Sales % (Decrease) Increase(1)
 
Acquired and Combined Net Sales % Increase(2)
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Wallboard
$
168,239

 
$
(1,641
)
 
$
14,055

 
$
180,653

 
7.4
%
(1.0
)%
 
203.2
%
Suspended ceiling systems
72,716

 
6,719

 
6,744

 
86,179

 
18.5
%
9.7
 %
 
186.3
%
Metal framing
68,662

 
776

 
4,529

 
73,967

 
7.7
%
1.2
 %
 
210.0
%
Complementary and other products
108,846

 
7,373

 
6,643

 
122,862

 
12.9
%
7.0
 %
 
236.1
%
SBP net sales
418,463

 
13,227

 
31,971

 
463,661

 
10.8
%
3.3
 %
 
206.2
%
MI net sales
60,994

 
9,271

 
2,371

 
72,636

 
19.1
%
15.5
 %
 
196.4
%
Total net sales
$
479,457

 
$
22,498

 
$
34,342

 
$
536,297

 
11.9
%
4.9
 %
 
205.5
%
Average daily sales
$
7,492

 
$
352

 
$
537

 
$
8,380

 
11.9
%
4.9
 %
 
205.5
%
(1) Represents base business net sales (decrease) increase as a percentage of base business net sales for the three months ended March 31, 2017.
(2) Represents acquired and combined net sales increase as a percentage of acquired and combined net sales for the three months ended March 31, 2017.




10



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 (loss) 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 (loss) income before interest expense net, income tax (benefit) expense, and depreciation and amortization. We calculate Adjusted EBITDA as EBITDA before unrealized gains 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 (loss) as net (loss) income before unrealized gains 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 (loss) on a per weighted average share outstanding basis.

EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted EPS are presented because they are important metrics used by management as a means by which it assesses financial performance. EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted EPS are also frequently 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, provides investors with an additional financial analytical framework that may be useful in assessing our company and its results of operations.

EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted EPS have certain limitations. These measures should not be considered as alternatives to net income and earnings per share, or as any other measure of financial performance derived in accordance with GAAP. EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted EPS also should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income (loss) and Adjusted EPS 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.

















11




The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net (loss) income (unaudited):
 
Three Months Ended March 31,
 
2018
 
2017
(in thousands)
 
 
 
Net (loss) income
$
(1,053
)
 
$
3,929

Interest expense, net
15,111

 
15,214

Income tax (benefit) expense
(885
)
 
2,564

Depreciation and amortization
19,886

 
18,396

EBITDA
33,059

 
40,103

 
 
 
 
Unrealized gain on derivative financial instruments
(74
)
 
(13,219
)
IPO and public company readiness expenses
89

 
2,975

Stock-based compensation
271

 
1,553

Non-cash purchase accounting effects(a)
407

 
71

Loss on disposal of property and equipment
13

 
152

Transaction costs(b)
1,218

 
592

Management fees(c)

 
353

Adjusted EBITDA
$
34,983

 
$
32,580

Adjusted EBITDA margin(d)
6.5
%
 
6.8
%

(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 three months ended March 31, 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.












12



The following is a reconciliation of Adjusted net income (loss) to the nearest GAAP measure, net (loss) income (unaudited):
 
Three Months Ended March 31,
 
2018
 
2017
(in thousands, except share and per share data)
 
 
 
Net (loss) income
$
(1,053
)
 
$
3,929

Unrealized gain on derivative financial instruments
(74
)
 
(13,219
)
IPO and public company readiness expenses
89

 
2,975

Stock-based compensation
271

 
1,553

Non-cash purchase accounting effects(a)
407

 
71

Loss on disposal of property and equipment
13

 
152

Transaction costs(b)
1,218

 
592

Management fees(c)

 
353

Tax effect of adjustments(d)
(492
)
 
2,746

Adjusted net income (loss)
$
379

 
$
(848
)
 
 
 
 
(Loss) earnings per share data as reported:
 
 
 
Basic
$
(0.02
)
 
$
0.11

Diluted
$
(0.02
)
 
$
0.11

Earnings (loss) per share data as adjusted:
 
 
 
Basic
$
0.01

 
$
(0.02
)
Diluted
$
0.01

 
$
(0.02
)
 
 
 
 
Weighted average shares outstanding:
 
 
 
Basic
42,879,874

 
37,273,156

Diluted
42,879,874

 
37,273,156

(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 rates for the three months ended March 31, 2018 and 2017 are 25.6% and 36.5%, respectively.


13
(Back To Top)