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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 5, 2019
 
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. ¨

Securities registered pursuant to Section 12(b) of the Act:
Tile of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock
 
FBM
 
New York Stock Exchange






Item 2.02. Results of Operations and Financial Condition.

On August 5, 2019, Foundation Building Materials, Inc. (the “Company”) issued a press release announcing its financial results for its second quarter ended June 30, 2019 and providing updated guidance for 2019. 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, 2019. A copy of the Presentation can be accessed on the Company’s website – investors.fbmsales.com by selecting "Presentations" under the "Events and Presentations" section.

The information included or incorporated by reference 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 5, 2019
 
 
 
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


399054920_logofbmtitleclra20.jpg

Foundation Building Materials, Inc. Announces Second Quarter 2019 Results

2019 Second Quarter Highlights

Net sales of $559.9 million, an increase of 7.2% compared to the prior year period
Base business net sales of $499.0 million, an increase of 3.4% compared to the prior year period; average daily base business net sales increased 3.4%
Net income from continuing operations of $14.7 million for the three months ended June 30, 2019, an increase of $13.2 million, compared to net income from continuing operations of $1.5 million in the prior year period
Adjusted net income(1) of $15.8 million for the three months ended June 30, 2019, an increase of $12.4 million, compared to an adjusted net income of $3.4 million in the prior year period
Earnings per share from continuing operations of $0.34 compared to earnings per share of $0.03 in the prior year period; adjusted earnings per share(1) of $0.37 compared to adjusted earnings per share of $0.08 in the prior year period
Adjusted EBITDA(1) of $50.3 million, an increase of 29.8% compared to the prior year period; adjusted EBITDA margin(1) of 9.0% compared to 7.4% in the prior year period

Tustin, CA, August 5, 2019 Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building product distributors of wallboard, suspended ceiling systems and metal framing in North America, today reported second quarter 2019 financial results and updated its 2019 guidance.
"Our strong underlying profitability highlighted our second quarter results," said Ruben Mendoza, President and CEO. "Despite adverse weather affecting our net sales, we continue to see solid demand in our core non-residential construction markets, and we are on track to exceed our financial objectives for the year."

2019 Second Quarter Results

Net sales for the three months ended June 30, 2019, were $559.9 million compared to $522.2 million for the three months ended June 30, 2018, representing an increase of $37.7 million, or 7.2%. Average daily base business net sales grew 3.4% driven by strong commercial activity and product expansion into new geographic markets.

Gross profit for the three months ended June 30, 2019, was $171.5 million compared to $146.3 million for the three months ended June 30, 2018, representing an increase of $25.2 million, or 17.3%. The increase in gross profit was primarily due to an expansion of our gross margin and an increase in sales from acquisitions and base business growth. Gross margin for the three months ended June 30, 2019, was 30.6% compared to 28.0% for the three months ended June 30, 2018. The increase in gross margin was primarily due to improved profitability across our product lines driven by our ongoing pricing and purchasing initiatives.

Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2019, were $122.7 million compared to $110.2 million for the three months ended June 30, 2018, representing an increase of $12.6 million. As a percentage of net sales, SG&A expenses were 21.9% for the three months ended June 30, 2019, compared to 21.1% for the three months ended June 30, 2018. The increase in SG&A expenses as a percentage of net sales was primarily due to our continued investment in various company-wide initiatives and higher operating costs as a result of adverse weather conditions.
Net income from continuing operations for the three months ended June 30, 2019, was $14.7 million, or $0.34 per share, compared to net income from continuing operations of $1.5 million, or $0.03 per share for the three months ended June 30, 2018. Adjusted net income(1) for the three months ended June 30, 2019, was $15.8 million, or $0.37 per share, an increase of $12.4 million compared to adjusted net income(1) of $3.4 million, or $0.08 per share, for the three months ended June 30, 2018.


1






Adjusted EBITDA(1) was $50.3 million and adjusted EBITDA margin(1) was 9.0% for the three months ended June 30, 2019, compared to adjusted EBITDA(1) of $38.8 million and adjusted EBITDA margin(1) of 7.4% for the three months ended June 30, 2018.

2019 Year-To-Date Results

Net sales for the six months ended June 30, 2019, were $1,074.8 million compared to $985.9 million for the six months ended June 30, 2018, representing an increase of $88.9 million, or 9.0%. Average daily net sales increased 9.9% over the prior year period. Average daily base business net sales grew 5.8%, driven by strong commercial activity and product expansion into new geographic markets.

Gross profit for the six months ended June 30, 2019, was $324.5 million compared to $280.7 million for the six months ended June 30, 2018, representing an increase of $43.8 million, or 15.6%. The increase in gross profit was driven by higher sales volume and contributions from acquisitions and base business growth. Gross margin for the six months ended June 30, 2019, was 30.2% compared to 28.5% for the six months ended June 30, 2018. The increase in gross margin was primarily due to improved profitability across our product lines driven by ongoing pricing and purchasing initiatives and continued stabilization of the Company's product costs.

SG&A expenses for the six months ended June 30, 2019, were $240.0 million compared to $214.8 million for the six months ended June 30, 2018, representing an increase of $25.2 million. As a percentage of net sales, SG&A expenses were 22.3% for the six months ended June 30, 2019, compared to 21.8% for the six months ended June 30, 2018. The increase in SG&A expenses as a percentage of net sales was primarily due to our continued investment in various company-wide initiatives and higher operating costs as a result of adverse weather conditions.

Net income from continuing operations for the six months ended June 30, 2019, was $19.5 million, or $0.45 per share, compared to a net loss from continuing operations of $0.8 million, or $0.02 per share, for the six months ended June 30, 2018. Adjusted net income(1) for the six months ended June 30, 2019, was $21.9 million, or $0.51 per share, an increase of $19.5 million compared to an adjusted net income(1) of $2.3 million, or $0.05 per share, for the six months ended June 30, 2018.

Adjusted EBITDA(1) was $87.8 million and adjusted EBITDA margin(1) was 8.2% for the six months ended June 30, 2019, compared to adjusted EBITDA(1) of $70.2 million and adjusted EBITDA margin(1) of 7.1% for the six months ended June 30, 2018.

Acquisitions

On May 1, 2019, the Company acquired all of the shares of Select Acoustic Supply Inc. ("Select"). Select was an independent distributor of drywall, steel framing, insulation, basement blanket and spray foam. Select operated one branch in the Greater Toronto Area in Ontario, Canada. For 2019, Select is expected to contribute between $10.0 million -- $12.0 million to net sales. From January 1 through June 30, 2019, the Company completed two acquisitions totaling four branches with combined annualized net sales between $28.0 million and $34.0 million. The Company expects to continue to supplement organic growth with strategic acquisitions.

















2





2019 Guidance
 
Previously Provided 2019 Guidance(a)
 
Updated 2019 Guidance(a)
 
 
 
 
Net sales (in billions)
$2.10 to $2.25
 
$2.10 to $2.25
Gross margin
29.1% to 29.3%
 
29.7% to 30.2%
Adjusted EBITDA(b) (in millions)
$160.0 to $180.0
 
$165.0 to $185.0
Adjusted EBITDA margin(b)
7.6% to 8.0%
 
7.8% to 8.2%
Adjusted EPS(b)
$0.70 to $0.90
 
$0.80 to $1.00
Net debt leverage(b)(c)
3.2x to 3.5x
 
2.9x to 3.2x
(a) Guidance for 2019 includes anticipated contributions from acquisitions and planned greenfield branches.

(b)Adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and net debt leverage are non-GAAP financial measures. Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.

(c)For a calculation of net debt leverage as of June 30, 2019, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months ended June 30, 2019.


Second Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, August 6, 2019, at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, Pete Welly, Chief Operating Officer, Kirby Thompson, Senior Vice President of Sales and Marketing and John Moten, Vice President Investor Relations will host the call.
The call can be accessed in three ways:
At the FBM website: www.fbmsales.com under the "Event Calendar" in the "Investors" section of the Company’s website;
By telephone: For both listen-only participants and those who wish to take part in the question and answer portion of the call, the dial-in telephone number in the U.S. is (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and
Audio Replay: A replay of the call will be available beginning at 12:00 PM Eastern Time on Tuesday, August 6, 2019, and ending 11:59 PM Eastern Time on Tuesday, August 13, 2019. The dial-in number for U.S.-based participants is (844) 512-2921. Participants outside the U.S. should use the replay dial-in number of (412) 317-6671. All callers will be required to provide the Conference ID of 13692295.

About Foundation Building Materials

Foundation Building Materials is a specialty building products distributor of wallboard, suspended ceiling systems, and metal framing throughout North America. Based in Tustin, California, the Company employs more than 3,400 people and operates more than 175 branches across the U.S. and Canada.



3





Forward-Looking Statements

This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” or words or phrases with similar meaning. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements contained in this press release relate to, among other things, the Company's projected financial performance and operating results, including projected net sales, gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and net debt leverage, as well as statements regarding the Company's progress towards achieving its strategic objectives, including the successful integration and performance of acquisitions and performance of greenfield branches and the Company's acquisition strategy. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. We do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Investors are referred to our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

Contact Information:

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

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

(1) Adjusted EBITDA, adjusted net income and adjusted EPS are non-GAAP financial measures. See the supplementary schedules at the end of this press release for discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.
- Financial Tables Follow -




4






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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net sales
$
559,911


$
522,219


$
1,074,783


$
985,880

Cost of goods sold
388,374


375,952


750,286


705,176

Gross profit
171,537


146,267


324,497


280,704

Operating expenses:







Selling, general and administrative expenses
122,735


110,153


239,965


214,810

Depreciation and amortization
20,351


18,751


40,693


37,148

Total operating expenses
143,086


128,904


280,658


251,958

Income from operations
28,451


17,363


43,839


28,746

Interest expense
(8,341
)

(15,333
)

(16,897
)

(30,452
)
Other income, net
44


61


85


135

Income (loss) before income taxes
20,154


2,091


27,027


(1,571
)
Income tax expense (benefit)
5,433


618


7,478


(780
)
Income (loss) from continuing operations
14,721


1,473


19,549


(791
)
Income from discontinued operations, net of tax


3,927




5,138

Loss on sale of discontinued operations, net of tax
(44
)



(1,390
)


Net income
$
14,677


$
5,400


$
18,159


$
4,347

 
 
 
 
 
 
 
 
Earnings (loss) per share data:
 
 
 
 
 
 
 
Earnings (loss) from continuing operations per share - basic
$
0.34


$
0.03


$
0.45


$
(0.02
)
Earnings (loss) from continuing operations per share - diluted
$
0.34


$
0.03


$
0.45


$
(0.02
)
 











Earnings (loss) from discontinued operations per share - basic
$


$
0.10


$
(0.03
)

$
0.12

Earnings (loss) from discontinued operations per share - diluted
$


$
0.10


$
(0.03
)

$
0.12

 











Earnings per share - basic
$
0.34


$
0.13


$
0.42


$
0.10

Earnings per share - diluted
$
0.34


$
0.13


$
0.42


$
0.10

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
42,987,915


42,893,498


42,960,124


42,886,867

Diluted
43,245,353


42,910,017


43,064,496


42,903,788



5



FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
 
June 30, 2019
 
December 31, 2018
Current assets:



Cash and cash equivalents
$
6,454


$
15,299

Accounts receivable—net of allowance for doubtful accounts of $3,631 and $3,239, respectively
325,579


276,043

Other receivables
46,415


57,472

Inventories
170,398


165,989

Prepaid expenses and other current assets
12,281


9,053

Total current assets
561,127


523,856

Property and equipment, net
148,054


151,641

Right-of-use assets, net
114,653



Intangible assets, net
129,565


145,876

Goodwill
490,607


484,941

Other assets
5,760


10,393

Total assets
$
1,449,766


$
1,316,707

Liabilities and stockholders' equity:





Current liabilities:




Accounts payable
$
165,314


$
137,773

Accrued payroll and employee benefits
25,867


28,830

Accrued taxes
9,508


11,867

Tax receivable agreement
27,676


16,667

Current portion of term loan, net
4,500


4,500

Current portion of lease liabilities
28,407



Other current liabilities
22,227


19,979

Total current liabilities
283,499


219,616

Asset-based revolving credit facility
136,462


146,000

Long-term portion of term loan, net
436,316


437,999

Tax receivable agreement
90,272


117,948

Deferred income taxes, net
18,701


20,678

Long-term portion of lease liabilities
93,627



Other liabilities
8,231


8,117

Total liabilities
1,067,108


950,358

Commitments and contingencies











Stockholders' equity:



Preferred stock, $0.001 par value, authorized 10,000,000 shares; 0 shares issued



Common stock, $0.001 par value, authorized 190,000,000 shares; 42,988,110 and 42,907,326 shares issued, respectively
13


13

     Additional paid-in capital
334,131


332,330

     Retained earnings
52,174


34,187

     Accumulated other comprehensive loss
(3,660
)

(181
)
          Total stockholders' equity
382,658


366,349

Total liabilities and stockholders' equity
$
1,449,766


$
1,316,707



6



FOUNDATION BUILDING MATERIALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:



Net income
$
18,159


$
4,347

Less: loss on sale of discontinued operations
(1,390
)


Less: net income from discontinued operations


5,138

Net income (loss) from continuing operations
19,549


(791
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities from continuing operations:





     Depreciation
17,558


15,627

     Amortization of intangible assets
23,135


21,521

     Amortization of debt issuance costs and debt discount
992


5,338

     Inventory fair value purchase accounting adjustment
234


407

     Provision for doubtful accounts
1,525


1,278

     Stock-based compensation
1,939


878

     Unrealized gain on derivative instruments, net


(134
)
     (Gain) loss on disposal of property and equipment
(67
)

275

     Right-of-use assets non-cash expense
13,601



     Deferred income taxes
271


(421
)
     Change in assets and liabilities, net of effects of acquisitions:





          Accounts receivable
(43,441
)

(53,444
)
          Other receivables
13,581


10,052

          Inventories
(1,291
)

(22,209
)
          Prepaid expenses and other current assets
(3,123
)

(1,019
)
          Other assets
(121
)

977

          Accounts payable
23,429


15,061

          Accrued payroll and employee benefits
(3,057
)

5,136

          Accrued taxes
(2,291
)

3,216

          Other liabilities
(9,219
)

(1,049
)
Net cash provided by operating activities from continuing operations
53,204


699

Cash flows from investing activities from continuing operations:





     Purchases of property and equipment
(15,052
)

(19,762
)
     Proceeds from termination of net investment hedge
3,313



     Proceeds from net working capital adjustments related to acquisitions
470


296

     Proceeds from the disposal of fixed assets
2,376


577

     Acquisitions, net of cash acquired
(21,923
)

(21,220
)
Net cash used in investing activities from continuing operations
(30,816
)

(40,109
)
Cash flows from financing activities from continuing operations:





     Proceeds from asset-based revolving credit facility
281,620


266,198

     Repayments of asset-based revolving credit facility
(291,371
)

(219,350
)
     Principal payments for term loan
(2,250
)


     Payment related to tax receivable agreement
(16,667
)


     Tax withholding payment related to net settlement of equity awards
(138
)

(45
)
     Principal repayment of finance lease obligations
(1,319
)

(1,358
)

7



Net cash (used in) provided by financing activities from continuing operations
(30,125
)

45,445

     Net cash used in operating activities from discontinued operations


(10,038
)
     Net cash used in investing activities from discontinued operations
(1,390
)

(701
)
     Net cash used in financing activities of discontinued operations


(131
)
Net cash used in discontinued operations
(1,390
)

(10,870
)
Effect of exchange rate changes on cash
282


(183
)
Net decrease in cash
(8,845
)

(5,018
)
Cash and cash equivalents at beginning of period
15,299


12,101

Cash and cash equivalents at end of period
$
6,454


$
7,083







Supplemental disclosures of cash flow information:





Cash paid for income taxes
$
5,091


$
1,423

Cash paid for interest
$
16,477


$
25,201

Supplemental disclosures of non-cash investing and financing activities:





Change in fair value of derivatives, net of tax
$
6,012


$
2,259

Goodwill adjustment for purchase price allocation
$
57


$
138






8



FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
(in thousands)

 
Three Months Ended June 30,
 
Change
 
2019
 
2018
 
$
 
%
Wallboard
$
214,059

38.2
%

$
198,598

38.0
%

$
15,461


7.8
%
Suspended ceiling systems
106,176

19.0
%

97,755

18.7
%

8,421


8.6
%
Metal framing
102,425

18.3
%

91,476

17.5
%

10,949


12.0
%
Complementary and other products
137,251

24.5
%

134,390

25.8
%

2,861


2.1
%
Total net sales
$
559,911

100.0
%

$
522,219

100.0
%

$
37,692


7.2
%
Total gross profit
$
171,537



$
146,267



$
25,270


17.3
%
Total gross margin
30.6
%


28.0
%


2.6
%




 
Six Months Ended June 30,
 
Change
 
2019
 
2018
 
$
 
%
Wallboard
$
416,973

38.8
%

$
379,252

38.5
%

$
37,721


9.9
%
Suspended ceiling systems
195,172

18.2
%

183,933

18.7
%

11,239


6.1
%
Metal framing
201,676

18.8
%

165,443

16.8
%

36,233


21.9
%
Complementary and other products
260,962

24.2
%

257,252

26.0
%

3,710


1.4
%
Total net sales
$
1,074,783

100.0
%

$
985,880

100.0
%

$
88,903


9.0
%
Total gross profit
$
324,497



$
280,704



$
43,793


15.6
%
Total gross margin
30.2
%


28.5
%


1.7
%







9



FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
(in thousands)

 
Three Months Ended June 30,
 
Change
 
2019
 
2018
 
$
 
%
Base business (1)
$
499,006


$
482,655


$
16,351


3.4
%
Acquired and combined (2)
60,905


39,564


21,341


53.9
%
Net sales
$
559,911


$
522,219


$
37,692


7.2
%
(1) Represents net sales from branches that were owned by us since January 1, 2018 and branches that were opened by us during such period.
(2) Represents branches acquired and combined after January 1, 2018, primarily as a result of our strategic combination of branches.

 
Six Months Ended June 30,
 
Change
 
2019
 
2018
 
$
 
%
Base business (1)
$
959,907


$
914,019


$
45,888


5.0
%
Acquired and combined (2)
114,876


71,861


43,015


59.9
%
Net sales
$
1,074,783


$
985,880


$
88,903


9.0
%
(1) Represents net sales from branches that were owned by us since January 1, 2018 and branches that were opened by us during such period.
(2) Represents branches acquired and combined after January 1, 2018, primarily as a result of our strategic combination of branches.




10



FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY MAJOR PRODUCT LINE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
(in thousands)
 
Three Months Ended June 30, 2018
 
Base Business Net Sales Change
 
Acquired and Combined Net Sales Change
 
Three Months Ended June 30, 2019
 
Total Net Sales % Change
Base Business Net Sales % Change(1)
 
Acquired and Combined Net Sales % Change(2)
Wallboard
$
198,598


$
3,593


$
11,868


$
214,059


7.8
%
1.9
%

134.5
 %
Suspended ceiling systems
97,755


2,637


5,784


106,176


8.6
%
3.1
%

47.8
 %
Metal framing
91,476


4,683


6,266


102,425


12.0
%
5.3
%

212.5
 %
Complementary and other products
134,390


5,438


(2,577
)

137,251


2.1
%
4.6
%

(16.4
)%
Net sales
$
522,219


$
16,351


$
21,341


$
559,911


7.2
%
3.4
%

53.9
 %
Average daily net sales(3)
$
8,160


$
256


$
333


$
8,749


7.2
%
3.4
%

53.9
 %
(1) Represents base business net sales change as a percentage of base business net sales for the three months ended June 30, 2018.
(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the three months ended June 30, 2018.
(3) The number of business days for the three months ended June 30, 2019 and 2018 were 64 and 64, respectively.


 
Six Months Ended June 30, 2018
 
Base Business Net Sales Change
 
Acquired and Combined Net Sales Change
 
Six Months Ended June 30, 2019
 
Total Net Sales % Change
Base Business Net Sales % Change(1)
 
Acquired and Combined Net Sales % Change(2)
Wallboard
$
379,252


$
13,129


$
24,592


$
416,973


9.9
%
3.6
%

156.1
 %
Suspended ceiling systems
183,933


2,459


8,780


195,172


6.1
%
1.5
%

39.6
 %
Metal framing
165,443


22,622


13,611


201,676


21.9
%
14.1
%

285.5
 %
Complementary and other products
257,252


7,678


(3,968
)

260,962


1.4
%
3.4
%

(13.6
)%
Net sales
$
985,880


$
45,888


$
43,015


$
1,074,783


9.0
%
5.0
%

59.9
 %
Average daily net sales(3)
$
7,702


$
418


$
343


$
8,463


9.9
%
5.8
%

61.1
 %
(1) Represents base business net sales change as a percentage of base business net sales for the six months ended June 30, 2018.
(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the six months ended June 30, 2018.
(3) The number of business days for the six months ended June 30, 2019 and 2018 were 127 and 128, respectively.






11



Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to presenting financial results prepared in accordance with GAAP, this press release contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, net debt leverage and adjusted earnings per share, which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. The Company calculates adjusted EBITDA as net income (loss) from continuing operations before interest expense, net, income tax expense (benefit), depreciation and amortization, unrealized gain 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, (gain) loss on the disposal of property and equipment and transaction costs. The Company calculates adjusted EBITDA margin as adjusted EBITDA divided by net sales. The Company calculates adjusted net income as net income (loss) from continuing operations before unrealized gain 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, (gain) loss on the disposal of property and equipment and transaction costs. The Company calculates adjusted earnings per share as adjusted net income on a per weighted average share outstanding basis. For a calculation of net debt leverage, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months ended June 30, 2019.
 
These non-GAAP financial measures are presented because they are important metrics used by management as a means by which it assesses financial performance. These measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. These measures, when used in conjunction with the most directly comparable GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company’s financial condition and results of operations.
 
These non-GAAP financial measures have certain limitations, which are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. These measures should not be considered as alternatives to measures of financial performance prepared in accordance with GAAP. In addition, these measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be considered liquidity measures. Other companies, including other companies in the Company’s industry, may not use these measures or may calculate one or more of these measures differently than the Company does, limiting their usefulness as comparative measures.
The following is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income (loss) from continuing operations (unaudited):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
(dollars in thousands)
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
14,721


$
1,473


$
19,549


$
(791
)
Interest expense, net
8,402


15,315


16,987


30,413

Income tax expense (benefit)
5,433


618


7,478


(780
)
Depreciation and amortization
20,351


18,751


40,693


37,148

Unrealized gain on derivative financial instruments


(60
)



(134
)
IPO and public company readiness expenses






89

Stock-based compensation
1,110


636


1,939


878

Non-cash purchase accounting effects(a)






407

(Gain) loss on disposal of property and equipment
(258
)

263


(67
)

275

Transaction costs(b)
582


1,786


1,227


2,703

Adjusted EBITDA
$
50,341


$
38,782


$
87,806


$
70,208

Adjusted EBITDA margin(c)
9.0
%

7.4
%

8.2
%
 
7.1
%

(a)
Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.
(b)
Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, other professionals as well as certain internal corporate development costs.
(c)
Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.

12



The following is a reconciliation of adjusted net income to the most directly comparable GAAP measure, net income (loss) from continuing operations (unaudited):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
(in thousands, except share and per share data)
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
14,721


$
1,473


$
19,549


$
(791
)
Unrealized gain on derivative financial instruments


(60
)
 

 
(134
)
IPO and public company readiness expenses



 

 
89

Stock-based compensation
1,110


636

 
1,939

 
878

Non-cash purchase accounting effects(a)



 

 
407

(Gain) loss on disposal of property and equipment
(258
)

263

 
(67
)
 
275

Transaction costs(b)
582


1,786

 
1,227

 
2,703

Tax effects(c)
(366
)

(671
)
 
(792
)
 
(1,078
)
Adjusted net income
$
15,789


$
3,427

 
$
21,856

 
$
2,349

 
 
 
 
 
 
 
 
Earnings (loss) per share data as reported:
 
 
 
 
 
 
 
Basic
$
0.34


$
0.03


$
0.45


$
(0.02
)
Diluted
$
0.34


$
0.03


$
0.45


$
(0.02
)
Earnings (loss) per share data as adjusted:



 
 
 
 
Basic
$
0.37


$
0.08

 
$
0.51

 
$
0.05

Diluted
$
0.37


$
0.08

 
$
0.51

 
$
0.05

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
42,987,915


42,893,498


42,960,124


42,886,867

Diluted
43,245,353


42,910,017


43,064,496


42,903,788

(a)
Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.
(b)
Represents costs related to our transactions, including fees paid to financial advisors, accountants, attorneys and other professionals, as well as certain internal corporate development costs.
(c)
Represents the impact of corporate income taxes.




13
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