Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building products distributors of wallboard, suspended ceiling systems and metal framing in North America, today reported fourth quarter and full year 2019 financial results and provided its 2020 guidance.
“We are pleased to deliver strong fourth quarter and full-year results. As our results demonstrate, 2019 was a year of focus and execution, and we achieved our financial goals with solid sales growth and profit margin expansion, which contributed to our reduction of debt,” said Ruben Mendoza, President and CEO. "For 2020, our strategic priorities are to drive organic growth, further reduce our debt, and continue to drive profit margin expansion that will deliver long-term value to our shareholders.”
2019 Fourth Quarter Results
Net sales for the three months ended December 31, 2019 were $514.8 million compared to $516.2 million for the three months ended December 31, 2018, representing a decrease of $1.3 million, or 0.3%. Net sales from base business branches decreased $4.1 million compared to the prior year period, primarily due to ongoing softness in Canadian markets and lower residential construction volumes.
Gross profit for the three months ended December 31, 2019 was $160.3 million compared to $155.6 million for the three months ended December 31, 2018, representing an increase of $4.7 million, or 3.0%. The increase in gross profit was primarily due to an expansion of our gross margin and an increase in sales from acquisitions. Gross margin for the three months ended December 31, 2019 was 31.1% compared to 30.1% for the three months ended December 31, 2018. The increase in gross margin was primarily due to improved profitability across our product lines driven by the Company's ongoing pricing and purchasing initiatives.
Selling, general and administrative ("SG&A") expenses for the three months ended December 31, 2019 were $124.0 million compared to $116.4 million for the three months ended December 31, 2018, representing an increase of $7.6 million. As a percentage of net sales, SG&A expenses were 24.1% for the three months ended December 31, 2019, compared to 22.6% for the three months ended December 31, 2018. The increase in SG&A expenses as a percentage of net sales was primarily due to lower net sales, higher labor and related costs and the Company's continued investment in various company-wide initiatives.
Net income from continuing operations for the three months ended December 31, 2019 was $9.6 million, or $0.22 per share, an increase of $7.6 million compared to a net income from continuing operations of $1.9 million, or $0.04 per share, for the three months ended December 31, 2018. Adjusted net income(1) for the three months ended December 31, 2019 was $11.3 million, or $0.26 per share, an increase of $4.3 million compared to adjusted net income(1) of $7.0 million, or $0.16 per share, for the three months ended December 31, 2018.
Adjusted EBITDA(1) was $39.0 million and adjusted EBITDA margin(1) was 7.6% for the three months ended December 31, 2019, compared to adjusted EBITDA(1) of $41.2 million and adjusted EBITDA margin(1) of 8.0% for the three months ended December 31, 2018.
2019 Full Year Results
Net sales for the year ended December 31, 2019 were $2,154.5 million compared to $2,044.3 million for the year ended December 31, 2018, representing an increase of $110.2 million, or 5.4%. There was one less business day in the current period as compared to the prior period. Average daily net sales increased 5.8% compared to the prior period. Net sales from base business branches contributed $47.0 million of the net sales increase, and average daily base business net sales increased by 2.9% over the prior period. Net sales from acquired branches and existing branches that were strategically combined contributed $63.3 million of the net sales increase. The base business net sales increase was primarily due to strong commercial activity and product expansion into new geographic markets.
Gross profit for the year ended December 31, 2019 was $656.6 million compared to $590.4 million for the year ended December 31, 2018, representing an increase of $66.3 million, or 11.2%. Gross profit increased due to an expansion of the Company’s gross margin, an increase in sales from acquisitions and base business growth. Gross margin for the year ended December 31, 2019 was 30.5% compared to 28.9% for the year ended December 31, 2018. The increase in gross margin was primarily due to improved profitability across our product lines driven by the Company's ongoing pricing and purchasing initiatives and continued stabilization of product costs.
SG&A expenses for the year ended December 31, 2019 were $487.9 million compared to $444.5 million for the year ended December 31, 2018, representing an increase of $43.3 million, or 9.7%. As a percentage of net sales, SG&A expenses were 22.6% for the year ended December 31, 2019, compared to 21.7% for the year ended December 31, 2018. The increase in SG&A expenses as a percentage of net sales was primarily due to the Company's continued investment in various company-wide initiatives and higher labor and related costs.
Net income from continuing operations for the year ended December 31, 2019 was $41.8 million, or $0.97 per share, an increase of $78.2 million compared to a net loss from continuing operations of $36.4 million, or $0.85 per share, for the year ended December 31, 2018. Adjusted net income(1) for the year ended December 31, 2019 was $47.6 million, or $1.11 per share, an increase of $30.0 million compared to an adjusted net income(1) of $17.5 million, or $0.41 per share, for the year ended December 31, 2018.
Adjusted EBITDA(1) was $176.8 million and adjusted EBITDA margin(1) was 8.2% for the year ended December 31, 2019, compared to adjusted EBITDA(1) of $155.2 million and adjusted EBITDA margin(1) of 7.6% for the year ended December 31, 2018.
Acquisitions and Greenfield Branches
In 2019, the Company completed five acquisitions with combined annualized net sales in excess of $52.0 million. During 2019, the Company opened four greenfield branches and expects to open four to six more branches by the end of 2020, which includes our most recent greenfield branch in Charleston, South Carolina. 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 the Company’s national scale, increase the Company’s market share, generate economies of scale and support the Company’s organic growth.
2020 Guidance(a) | ||||
Net sales (in billions) | $2.2 to $2.3 | |||
Gross margin | 30.0% to 31.0% | |||
Adjusted EBITDA(b) (in millions) | $180.0 to $200.0 | |||
Adjusted EBITDA margin(b) | 8.2% to 8.6% | |||
Adjusted EPS(b) | $1.15 to $1.45 | |||
Net debt leverage ratio(b)(c) | 2.5x to 2.8x |
(a) Guidance for 2020 includes anticipated contributions from greenfield branches and excludes acquisitions. |
(b) Adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and net debt leverage ratio are non-GAAP financial measures. Adjusted EBITDA margin represents adjusted EBITDA divided by net sales. |
(c) For a calculation of our net debt leverage ratio as of December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019. |
Fourth Quarter and Full Year Earnings Release and Conference Call
In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, February 25, 2020, 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 "Events and Presentations" tab 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
- Using audio replay: A replay of the call will be available beginning at 11:30 AM Eastern Time on Tuesday, February 25, 2020, and ending 11:59 PM Eastern Time on Tuesday, March 3, 2020. 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 13698136.
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 Santa Ana, California, the Company employs more than 3,500 people and operates more than 175 branches across the U.S. and Canada. Learn more at www.fbmsales.com or follow us on LinkedIn, Twitter, Instagram, or Facebook.
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 ratio, as well as statements regarding the Company's progress towards achieving its strategic objectives, including the successful integration and future 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.
(1) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS and net debt leverage ratio are non-GAAP financial 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. For a calculation of our net debt leverage ratio as of December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.
- Financial Tables Follow -
FOUNDATION BUILDING MATERIALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) | |||||||||||||||
Three Months Ended
| Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 514,841 | $ | 516,159 | $ | 2,154,530 | $ | 2,044,312 | |||||||
Cost of goods sold | 354,524 | 360,541 | 1,497,921 | 1,453,953 | |||||||||||
Gross profit | 160,317 | 155,618 | 656,609 | 590,359 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative expenses | 123,993 | 116,438 | 487,865 | 444,527 | |||||||||||
Depreciation and amortization | 19,533 | 20,500 | 80,444 | 77,419 | |||||||||||
Total operating expenses | 143,526 | 136,938 | 568,309 | 521,946 | |||||||||||
Income from operations | 16,791 | 18,680 | 88,300 | 68,413 | |||||||||||
Loss on extinguishment of debt | — | — | — | (58,475 | ) | ||||||||||
Interest expense | (7,773 | ) | (10,255 | ) | (33,788 | ) | (53,283 | ) | |||||||
Other income, net | 447 | 1,171 | 443 | 1,298 | |||||||||||
Income (loss) before income taxes | 9,465 | 9,596 | 54,955 | (42,047 | ) | ||||||||||
Income tax (benefit) expense | (105 | ) | 7,671 | 13,127 | (5,628 | ) | |||||||||
Income (loss) from continuing operations | 9,570 | 1,925 | 41,828 | (36,419 | ) | ||||||||||
Income from discontinued operations, net of tax | — | 2,612 | — | 10,523 | |||||||||||
(Loss) gain on sale of discontinued operations, net of tax | (188 | ) | 13,713 | (1,589 | ) | 13,713 | |||||||||
Net income (loss) | $ | 9,382 | $ | 18,250 | $ | 40,239 | $ | (12,183 | ) | ||||||
Earnings (loss) per share data: | |||||||||||||||
Earnings (loss) from continuing operations per share - basic | $ | 0.22 | $ | 0.04 | $ | 0.97 | $ | (0.85 | ) | ||||||
Earnings (loss) from continuing operations per share - diluted | $ | 0.22 | $ | 0.04 | $ | 0.97 | $ | (0.85 | ) | ||||||
Earnings (loss) from discontinued operations per share - basic | $ | — | $ | 0.39 | $ | (0.03 | ) | $ | 0.57 | ||||||
Earnings (loss) from discontinued operations per share - diluted | $ | (0.01 | ) | $ | 0.39 | $ | (0.04 | ) | $ | 0.57 | |||||
Earnings (loss) per share - basic | $ | 0.22 | $ | 0.43 | $ | 0.94 | $ | (0.28 | ) | ||||||
Earnings (loss) per share - diluted | $ | 0.21 | $ | 0.43 | $ | 0.93 | $ | (0.28 | ) | ||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 42,990,542 | 42,903,161 | 42,975,026 | 42,892,879 | |||||||||||
Diluted | 43,668,064 | 42,912,707 | 43,307,528 | 42,915,028 | |||||||||||
FOUNDATION BUILDING MATERIALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) | |||||||
December 31, 2019 | December 31, 2018 | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 17,766 | $ | 15,299 | |||
Accounts receivable—net of allowance for doubtful accounts of $3,169 and $3,239, respectively | 262,757 | 276,043 | |||||
Other receivables | 59,104 | 57,472 | |||||
Inventories | 178,624 | 165,989 | |||||
Prepaid expenses and other current assets | 7,965 | 9,053 | |||||
Total current assets | 526,216 | 523,856 | |||||
Property and equipment, net | 150,188 | 151,641 | |||||
Right-of-use assets, net | 120,562 | — | |||||
Intangible assets, net | 113,861 | 145,876 | |||||
Goodwill | 495,724 | 484,941 | |||||
Other assets | 5,206 | 10,393 | |||||
Total assets | $ | 1,411,757 | $ | 1,316,707 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 145,226 | $ | 137,773 | |||
Accrued payroll and employee benefits | 31,410 | 28,830 | |||||
Accrued taxes | 8,780 | 11,867 | |||||
Current portion of tax receivable agreement | 27,850 | 16,667 | |||||
Current portion of term loan | 4,500 | 4,500 | |||||
Current portion of lease liabilities | 30,307 | — | |||||
Other current liabilities | 18,557 | 19,979 | |||||
Total current liabilities | 266,630 | 219,616 | |||||
Asset-based revolving credit facility | 89,000 | 146,000 | |||||
Long-term portion of term loan, net | 434,633 | 437,999 | |||||
Tax receivable agreement | 89,533 | 117,948 | |||||
Deferred income taxes, net | 18,972 | 20,678 | |||||
Long-term portion of lease liabilities | 97,145 | — | |||||
Other liabilities | 7,679 | 8,117 | |||||
Total liabilities | 1,003,592 | 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; 42,991,016 and 42,907,326 shares issued, respectively | 13 | 13 | |||||
Additional paid-in capital | 336,362 | 332,330 | |||||
Retained earnings | 74,254 | 34,187 | |||||
Accumulated other comprehensive loss | (2,464 | ) | (181 | ) | |||
Total stockholders' equity | 408,165 | 366,349 | |||||
Total liabilities and stockholders' equity | $ | 1,411,757 | $ | 1,316,707 | |||
FOUNDATION BUILDING MATERIALS, INC. STATEMENTS OF CASH FLOWS (in thousands) | |||||||
Year Ended December 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 40,239 | $ | (12,183 | ) | ||
Less: (loss) gain on sale of discontinued operations | (1,589 | ) | 13,713 | ||||
Less: net income from discontinued operations | — | 10,523 | |||||
Net income (loss) from continuing operations | 41,828 | (36,419 | ) | ||||
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities of continuing operations: | |||||||
Depreciation | 33,708 | 33,437 | |||||
Amortization of intangible assets | 46,736 | 43,982 | |||||
Amortization of debt issuance costs and debt discount | 2,156 | 7,370 | |||||
Inventory fair value purchase accounting adjustment | 285 | 1,057 | |||||
Loss on extinguishment of debt | — | 58,475 | |||||
Provision for doubtful accounts | 2,390 | 1,810 | |||||
Stock-based compensation | 4,187 | 2,175 | |||||
Reduction in tax receivable agreement | (242 | ) | (1,189 | ) | |||
Unrealized gain on derivative instruments, net | — | (265 | ) | ||||
Loss on disposal of property and equipment | 584 | 552 | |||||
Right-of-use assets non-cash expense | 27,801 | — | |||||
Deferred income taxes | (1,038 | ) | 221 | ||||
Change in assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | 20,272 | (23,326 | ) | ||||
Other receivables | 1,151 | (1,721 | ) | ||||
Inventories | (8,226 | ) | (8,834 | ) | |||
Prepaid expenses and other current assets | 1,168 | 2,708 | |||||
Other assets | (167 | ) | (1,320 | ) | |||
Accounts payable | 2,477 | (1,951 | ) | ||||
Accrued payroll and employee benefits | 2,449 | 11,105 | |||||
Accrued taxes | (3,164 | ) | 4,893 | ||||
Operating lease liability | (26,940 | ) | — | ||||
Other liabilities | (1,697 | ) | (16,911 | ) | |||
Net cash provided by operating activities from continuing operations | 145,718 | 75,849 | |||||
Cash flows from investing activities from continuing operations: | |||||||
Purchases of property and equipment | (34,402 | ) | (34,892 | ) | |||
Proceeds from termination of net investment hedge | 3,313 | — | |||||
Payment of net working capital adjustments related to acquisitions | — | (40 | ) | ||||
Proceeds from net working capital adjustments related to acquisitions | 464 | 154 | |||||
Proceeds from the disposal of fixed assets | 3,441 | 2,315 | |||||
Acquisitions, net of cash acquired | (33,751 | ) | (93,477 | ) | |||
Net cash used in investing activities from continuing operations | (60,935 | ) | (125,940 | ) | |||
Cash flows from financing activities from continuing operations: | |||||||
Proceeds from asset-based revolving credit facility | 531,993 | 897,911 | |||||
Repayments of asset-based revolving credit facility | (588,993 | ) | (799,272 | ) | |||
Principal payments for term loan | (4,500 | ) | — | ||||
Term loan proceeds | — | 450,000 | |||||
Principal payments on long-term debt | — | (575,000 | ) | ||||
Prepayment premium on bond | — | (23,872 | ) | ||||
Debt issuance costs and deferred finance costs | — | (7,935 | ) | ||||
Payment related to tax receivable agreement | (16,667 | ) | — | ||||
Tax withholding payment related to net settlement of equity awards | (155 | ) | (61 | ) | |||
Principal repayment of finance lease obligations | (2,674 | ) | (2,771 | ) | |||
Net cash used in financing activities from continuing operations | (80,996 | ) | (61,000 | ) | |||
Net cash used in operating activities from discontinued operations | — | (6,614 | ) | ||||
Net cash (used in) provided by investing activities from discontinued operations | (1,589 | ) | 121,568 | ||||
Net cash used in financing activities from discontinued operations | — | (162 | ) | ||||
Net cash (used in) provided by discontinued operations | (1,589 | ) | 114,792 | ||||
Effect of exchange rate changes on cash | 269 | (503 | ) | ||||
Net increase in cash | 2,467 | 3,198 | |||||
Cash and cash equivalents at beginning of period | 15,299 | 12,101 | |||||
Cash and cash equivalents at end of period | $ | 17,766 | $ | 15,299 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for income taxes | $ | 13,190 | $ | 2,507 | |||
Cash paid for interest | $ | 31,749 | $ | 61,199 | |||
Supplemental disclosures of non-cash investing and financing activities: | |||||||
Change in fair value of derivatives, net of tax | $ | 5,443 | $ | 4,616 | |||
Goodwill adjustment for purchase price allocation | $ | 466 | $ | 202 | |||
FOUNDATION BUILDING MATERIALS, INC. NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018 (Unaudited) AND YEARS ENDED DECEMBER 31, 2019 AND 2018 (Unaudited) (dollars in thousands) | ||||||||||||||||||
Three Months Ended December 31, | Change | |||||||||||||||||
2019 | 2018 | $ | % | |||||||||||||||
Wallboard | $ | 193,500 | 37.6 | % | $ | 198,014 | 38.4 | % | $ | (4,514 | ) | (2.3 | )% | |||||
Suspended ceiling systems | 99,629 | 19.4 | % | 91,453 | 17.7 | % | 8,176 | 8.9 | % | |||||||||
Metal framing | 92,137 | 17.8 | % | 97,474 | 18.9 | % | (5,337 | ) | (5.5 | )% | ||||||||
Complementary and other products | 129,575 | 25.2 | % | 129,218 | 25.0 | % | 357 | 0.3 | % | |||||||||
Total net sales | $ | 514,841 | 100.0 | % | $ | 516,159 | 100.0 | % | $ | (1,318 | ) | (0.3 | )% | |||||
Total gross profit | $ | 160,317 | $ | 155,618 | $ | 4,699 | 3.0 | % | ||||||||||
Total gross margin | 31.1 | % | 30.1 | % | 1.0 | % | ||||||||||||
Year Ended December 31, | Change | |||||||||||||||||
2019 | 2018 | $ | % | |||||||||||||||
Wallboard | $ | 817,799 | 38.0 | % | $ | 781,257 | 38.2 | % | $ | 36,542 | 4.7 | % | ||||||
Suspended ceiling systems | 413,674 | 19.2 | % | 379,809 | 18.6 | % | 33,865 | 8.9 | % | |||||||||
Metal framing | 392,630 | 18.2 | % | 361,493 | 17.7 | % | 31,137 | 8.6 | % | |||||||||
Complementary and other products | 530,427 | 24.6 | % | 521,753 | 25.5 | % | 8,674 | 1.7 | % | |||||||||
Total net sales | $ | 2,154,530 | 100.0 | % | $ | 2,044,312 | 100.0 | % | $ | 110,218 | 5.4 | % | ||||||
Total gross profit | $ | 656,609 | $ | 590,359 | $ | 66,250 | 11.2 | % | ||||||||||
Total gross margin | 30.5 | % | 28.9 | % | 1.6 | % | ||||||||||||
FOUNDATION BUILDING MATERIALS, INC. | ||||||||||||||
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES | ||||||||||||||
FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018 (Unaudited) AND | ||||||||||||||
YEARS ENDED DECEMBER 31, 2019 AND 2018 (Unaudited) | ||||||||||||||
(dollars in thousands) | ||||||||||||||
Three Months Ended December 31, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
Base business (1) | $ | 455,567 | $ | 459,713 | $ | (4,146 | ) | (0.9 | )% | |||||
Acquired and combined (2) | 59,274 | 56,446 | 2,828 | 5.0 | % | |||||||||
Net sales | $ | 514,841 | $ | 516,159 | $ | (1,318 | ) | (0.3 | )% | |||||
(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. |
Year Ended December 31, | Change | |||||||||||||
2019 | 2018 | $ | % | |||||||||||
Base business (1) | $ | 1,916,308 | $ | 1,869,345 | $ | 46,963 | 2.5 | % | ||||||
Acquired and combined (2) | 238,222 | 174,967 | 63,255 | 36.2 | % | |||||||||
Net sales | $ | 2,154,530 | $ | 2,044,312 | $ | 110,218 | 5.4 | % | ||||||
(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. |
FOUNDATION BUILDING MATERIALS, INC. BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY MAJOR PRODUCT LINE FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018 (Unaudited) AND YEARS ENDED DECEMBER 31, 2019 AND 2018 (Unaudited) (dollars in thousands) | |||||||||||||||||||||||
Three Months
| Base
| Acquired
| Three Months
| Total Net
| Base
| Acquired
| |||||||||||||||||
Wallboard | $ | 198,014 | $ | (5,149 | ) | $ | 635 | $ | 193,500 | (2.3 | )% | (2.9 | )% | 3.3 | % | ||||||||
Suspended ceiling systems | 91,453 | 5,147 | 3,029 | 99,629 | 8.9 | % | 6.7 | % | 21.0 | % | |||||||||||||
Metal framing | 97,474 | (4,963 | ) | (374 | ) | 92,137 | (5.5 | )% | (5.6 | )% | (4.2 | )% | |||||||||||
Complementary and other products | 129,218 | 819 | (462 | ) | 129,575 | 0.3 | % | 0.7 | % | (3.3 | )% | ||||||||||||
Net sales | $ | 516,159 | $ | (4,146 | ) | $ | 2,828 | $ | 514,841 | (0.3 | )% | (0.9 | )% | 5.0 | % | ||||||||
Average daily net sales(3) | $ | 8,325 | $ | (67 | ) | $ | 46 | $ | 8,304 | (0.3 | )% | (0.9 | )% | 5.0 | % | ||||||||
(1) Represents base business net sales change as a percentage of base business net sales for the three months ended December 31, 2018. |
(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the three months ended December 31, 2018. |
(3) The number of business days for the three months ended December 31, 2019 and 2018 were 62 and 62, respectively. |
Year Ended
| Base
| Acquired
| Year Ended
| Total Net
| Base
| Acquired
| |||||||||||||||||
Wallboard | $ | 781,257 | $ | 4,107 | $ | 32,435 | $ | 817,799 | 4.7 | % | 0.6 | % | 68.5 | % | |||||||||
Suspended ceiling systems | 379,809 | 17,260 | 16,605 | 413,674 | 8.9 | % | 5.3 | % | 31.1 | % | |||||||||||||
Metal framing | 361,493 | 14,627 | 16,510 | 392,630 | 8.6 | % | 4.3 | % | 82.1 | % | |||||||||||||
Complementary and other products | 521,753 | 10,969 | (2,295 | ) | 530,427 | 1.7 | % | 2.3 | % | (4.2 | )% | ||||||||||||
Net sales | $ | 2,044,312 | $ | 46,963 | $ | 63,255 | $ | 2,154,530 | 5.4 | % | 2.5 | % | 36.2 | % | |||||||||
Average daily net sales(3) | $ | 8,080 | $ | 216 | $ | 254 | $ | 8,550 | 5.8 | % | 2.9 | % | 36.7 | % | |||||||||
(1) Represents base business net sales change as a percentage of base business net sales for the year ended December 31, 2018. |
(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the year ended December 31, 2018. |
(3) The number of business days for the years ended December 31, 2019 and 2018, were 252 and 253, respectively. |
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 ratio 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, loss on extinguishment of debt, income tax (benefit) expense, depreciation and amortization, unrealized gain on derivative financial instruments, offering and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as loss (gain) on the disposal of property and equipment, transaction costs and non-cash decrease in tax receivable agreement, or TRA, liability. 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 loss on extinguishment of debt, unrealized gain on derivative financial instruments, offering and public company readiness expenses, stock-based compensation, and other non-recurring adjustments such as loss (gain) on the disposal of property and equipment, transaction costs and non-cash decrease in TRA liability. 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 ratio, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 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
| Year Ended
| ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(dollars in thousands) | |||||||||||||||
Net income (loss) from continuing operations | $ | 9,570 | $ | 1,925 | $ | 41,828 | $ | (36,419 | ) | ||||||
Interest expense, net | 7,696 | 10,244 | 33,695 | 53,201 | |||||||||||
Loss on extinguishment of debt | — | — | — | 58,475 | |||||||||||
Income tax (benefit) expense | (105 | ) | 7,671 | 13,127 | (5,628 | ) | |||||||||
Depreciation and amortization | 19,533 | 20,500 | 80,444 | 77,419 | |||||||||||
Unrealized gain on derivative financial instruments | — | (209 | ) | — | (265 | ) | |||||||||
Offering and public company readiness expenses(a) | 87 | — | 465 | 89 | |||||||||||
Stock-based compensation | 1,131 | 788 | 4,187 | 2,299 | |||||||||||
Loss (gain) on disposal of property and equipment | 638 | (61 | ) | 584 | 552 | ||||||||||
Transaction costs(b) | 704 | 1,553 | 2,750 | 6,636 | |||||||||||
Non-cash decrease in TRA liability | (242 | ) | (1,189 | ) | (242 | ) | (1,189 | ) | |||||||
Adjusted EBITDA | $ | 39,012 | $ | 41,222 | $ | 176,838 | $ | 155,170 | |||||||
Adjusted EBITDA margin(c) | 7.6 | % | 8.0 | % | 8.2 | % | 7.6 | % | |||||||
(a) | Represents costs related to our initial public offering, secondary offering, and public company readiness expenses. | |
(b) | Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, and other professionals, as well as certain internal corporate development costs. The costs also include non-cash purchase accounting effects to adjust for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions. | |
(c) | Adjusted EBITDA margin represents adjusted EBITDA divided by net sales. |
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
| Year Ended
| ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands, except share and per share data) | |||||||||||||||
Net income (loss) from continuing operations | $ | 9,570 | $ | 1,925 | $ | 41,828 | $ | (36,419 | ) | ||||||
Loss on extinguishment of debt | — | — | — | 58,475 | |||||||||||
Unrealized gain on derivative financial instruments | — | (209 | ) | — | (265 | ) | |||||||||
Offering and public company readiness expenses(a) | 87 | — | 465 | 89 | |||||||||||
Stock-based compensation | 1,131 | 788 | 4,187 | 2,299 | |||||||||||
Loss (gain) on disposal of property and equipment | 638 | (61 | ) | 584 | 552 | ||||||||||
Transaction costs(b) | 704 | 1,553 | 2,750 | 6,636 | |||||||||||
Non-cash decrease in TRA liability | (242 | ) | (1,189 | ) | (242 | ) | (1,189 | ) | |||||||
Tax effects(c) | (609 | ) | 4,162 | (1,995 | ) | (12,635 | ) | ||||||||
Adjusted net income | $ | 11,279 | $ | 6,969 | $ | 47,577 | $ | 17,543 | |||||||
Earnings (loss) per share data as reported: | |||||||||||||||
Basic | $ | 0.22 | $ | 0.04 | $ | 0.97 | $ | (0.85 | ) | ||||||
Diluted | $ | 0.22 | $ | 0.04 | $ | 0.97 | $ | (0.85 | ) | ||||||
Earnings per share data as adjusted: | |||||||||||||||
Basic | $ | 0.26 | $ | 0.16 | $ | 1.11 | $ | 0.41 | |||||||
Diluted | $ | 0.26 | $ | 0.16 | $ | 1.10 | $ | 0.41 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 42,990,542 | 42,903,161 | 42,975,026 | 42,892,879 | |||||||||||
Diluted | 43,668,064 | 42,912,707 | 43,307,528 | 42,915,028 | |||||||||||
(a) | Represents costs related to our initial public offering, secondary offering, and public company readiness expenses. | |
(b) | Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, and other professionals, as well as certain internal corporate development costs. The costs also include non-cash purchase accounting effects to adjust for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions. | |
(c) | Represents the impact of corporate income taxes. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200224005935/en/
Contacts:
John Moten, IRC
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com
