Continental Building Products Reports Second Quarter 2015 Results

– Reports Second Quarter 2015 Adjusted Earnings Per Share1 of $0.23; GAAP Earnings Per Share of $0.00 –

– Generates Adjusted Cash Flow From Operations1 of $28.2 Million; Cash Flow From Operations of $12.3 Million –

– Wallboard Volume Increases 8.1% to 567 Million Square Feet –

HERNDON, Va.--()--Continental Building Products, Inc. (NYSE:CBPX) (the Company), a leading manufacturer of wallboard and gypsum-based products, announced today results for the second quarter ended June 30, 2015.

Highlights of Second Quarter 2015 as Compared to Second Quarter 2014

  • Net sales increase 7.9% to $111.0 million
  • Adjusted EBITDA1 increases 24.4 % to $33.3 million
  • Operating income of $4.3 million, compared to $12.8 million
  • Adjusted EBITDA margin1 expands 400 basis points to 30.0%
  • Operating margin of 3.9%, compared to 12.4%
  • Wallboard volume improves 8.1% to 567 million square feet (MMSF)
  • Approximately $20.0 million of common stock repurchased
  • Debt reduction of $10.0 million

“We produced another quarter of strong cash flow as a result of our disciplined operations, efficient cost structure and sharp focus on execution as we continue to grow our business,” stated Jay Bachmann, Continental’s CEO. “During the quarter, each of our regions experienced stronger construction activity enabling us to deliver solid growth in our wallboard shipments. We actively managed our costs to achieve significant operating leverage on higher sales and repurchased approximately two percent of our outstanding shares for $20.0 million while also reducing our debt leverage. We believe we continue to be well positioned to capitalize on improving construction activity in our markets to enhance our profitability and deploy our capital into additional value-enhancing opportunities.”

Second Quarter 2015 Results vs. Second Quarter 2014

Net sales for the second quarter of 2015 were $111.0 million, up 7.9%, compared to $102.9 million in the second quarter of 2014. The incremental increase in sales was primarily driven by wallboard volumes up 8.1% to 567 MMSF compared to 525 MMSF in the prior year quarter. The average mill net price2 was $156.85 per thousand square feet (MSF), up 0.7% compared to $155.76 per MSF in the prior year quarter, with core price gains partly offset by a weaker Canadian dollar. At constant currency, average mill net price increased 1.5% compared to the prior year quarter. For US shipments, the average mill net price increased 1.4% compared to the prior year quarter.

Gross profit was $29.5 million, an increase of 41.1% compared to $20.9 million in the prior year quarter. The gross margin of 26.6% expanded from 20.3% in the prior year quarter, primarily as a result of operating leverage achieved through higher wallboard volume and favorable energy costs.

Selling and administrative (SG&A) expense was $9.4 million, compared to $8.1 million in the prior year quarter. SG&A as a percentage of net sales was 8.4% compared to 7.9% in the prior year quarter, largely due to additional amortization of software development costs of $0.4 million, professional fees of $0.3 million incurred in connection with a secondary public offering costs in May 2015, and additional costs associated with being a public company.

The expense associated with the Company’s Long-Term Incentive Plan, which was implemented and is funded by Lone Star3 (the “LTIP”), was $15.8 million for the second quarter of 2015. Certain members of the Company’s management team earned payments under the LTIP in connection with Lone Star’s sale of common stock in the May secondary public offering. These payments did not, and any future LTIP payments will not, result in a net cash outlay by the Company as it is funded by Lone Star.

Operating income was $4.3 million, compared to $12.8 million in the prior year quarter, mainly attributable to the LTIP expense in the second quarter of 2015, with no comparable expense in the prior year quarter. Excluding the expense associated with the LTIP, operating income increased 57.1% to $20.1 million, compared to the prior year quarter.

Interest expense was $4.2 million, an improvement of $1.2 million from $5.4 million in the prior year quarter, reflecting a reduction in the long-term debt and a decrease in the interest rate on the Company’s borrowings.

Adjusted net income1 grew to $10.2 million, or $0.23 per share, compared to adjusted net income of $4.7 million, or $0.11 per share, in the prior year quarter. GAAP net loss was $0.1 million, or $0.00 per share, compared to net income of $4.7 million, or $0.11 per share, in the prior year quarter.

Adjusted EBITDA increased 24.4% to $33.3 million, compared to $26.7 million in the prior year quarter. Adjusted EBITDA as a percentage of net sales was 30.0% compared to 26.0% in the prior year quarter.

Balance Sheet and Cash Flow

At the end of the quarter on June 30, 2015, the Company had cash of $15.8 million and total debt outstanding of $329.4 million. In the second quarter of 2015, the Company generated cash flow from operations of $12.3 million and incurred $1.3 million of capital expenditures and software development costs. Excluding the net impact of the LTIP, the Company produced adjusted cash flow from operations of $28.2 million in the second quarter of 2015.

In the second quarter of 2015, the Company repurchased 913,200 shares of common stock at an aggregate purchase price of $20.0 million from an affiliate of Lone Star in a private transaction in connection with the secondary public offering in May 2015. In the second quarter of 2015, the Company also used cash flow from operations for the voluntary repayment of $10.0 million of debt with the next principal payment on the Company’s debt not required until August 2020.

Investor Conference Webcast and Conference Call:

The Company will host a webcast and conference call on Tuesday, August 4, 2015 at 5:00 p.m. Eastern time to review second quarter 2015 financial results and discuss recent events and conduct a question-and-answer session. The live webcast will be available on the Investor Relations section of the Company’s website at www.continental-bp.com. To participate in the call, please dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of the conference call will be available through September 4, 2015, by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the pass code 13615025.

About Continental Building Products

Continental Building Products is a leading North American manufacturer of gypsum wallboard and complementary finishing products. The Company is headquartered in Herndon, Virginia with operations serving the residential, commercial and repair and remodel construction markets primarily in the eastern United States and eastern Canada. For additional information, visit www.continental-bp.com.

Forward‐Looking Statements

This press release contains forward-looking statements. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. 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 historical information available at the time the statements are made and are based on management’s reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company’s control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for fiscal year 2014 filed on February 25, 2015, as supplemented by its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015 filed on May 6, 2015, 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 See the financial schedules at the end of this press release for a reconciliation of adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and adjusted Cash Flow from Operations, which are non-GAAP financial measures, to relevant GAAP financial measures.

2 Mill net price represents average selling price per thousand square feet net of freight and delivery costs.

3 On August 30, 2013, an affiliate of the Company’s largest stockholder, Lone Star Funds, acquired substantially all of the assets of the gypsum business that was part of Lafarge North America Inc. (Lafarge) to create the Successor company, Continental Building Products. The LTIP was implemented in connection with this acquisition.

               

Continental Building Products, Inc.

Consolidated Statements of Operations

(dollars in thousands, except per share, mill net and volume data)

(Unaudited)

 
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
 
Net Sales $ 110,996 $ 102,915 $ 203,172 $ 189,888
Costs, expenses and other income:
Cost of goods sold 81,516 82,025 153,191 155,221
Selling and administrative 9,363 8,088 17,791 15,584
Long Term Incentive Plan funded by Lone Star   15,842     -     20,013     -  
Total costs and operating expenses   106,721     90,113     190,995     170,805  
Operating income (loss) 4,275 12,802 12,177 19,083
Other income (expense), net 31 (144 ) (417 ) (5,330 )
Interest expense, net   (4,184 )   (5,397 )   (8,405 )   (19,573 )
Income (loss) before loss on equity method investment and income tax 122 7,261 3,355 (5,820 )
Loss from equity method investment   (311 )   (237 )   (252 )   (237 )
Income (loss) before income tax (189 ) 7,024 3,103 (6,057 )
Income tax benefit (expense)   63     (2,357 )   (1,209 )   2,101  
Net income (loss) $ (126 ) $ 4,667   $ 1,894   $ (3,956 )
 
Net income (loss) per common share:
Basic $ (0.00 ) $ 0.11 $ 0.04 $ (0.09 )
Diluted $ (0.00 ) $ 0.11 $ 0.04 $ (0.09 )
Weighted average shares outstanding:
Basic 43,606 44,069 43,840 41,794
Diluted 43,606 44,081 43,877 41,794
 
Other Financial and Operating Data:
EBITDA (1) $ 17,416 $ 26,732 $ 38,447 $ 46,896
Adjusted EBITDA (1) $ 33,258 $ 26,732 $ 58,460 $ 46,896
Capital expenditures and software purchased or developed $ 1,270 $ 1,587 $ 2,287 $ 2,871
Wallboard sales volume (MSF) 567 525 1,036 963
Mill net sales price (2) $ 156.85 $ 155.76 $ 157.13 $ 156.47
 

(1)

 

EBITDA and Adjusted EBITDA are non-GAAP measures. See “Reconciliation of GAAP Measures to Non-GAAP Measures” below for how we define and calculate EBITDA and Adjusted EBITDA as non-GAAP measures, reconciliations of operating income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA, and a description of why we believe these measures are important.

 

(2)

Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.

 
       

Continental Building Products, Inc.

Consolidated Balance Sheets

(dollars in thousands, except share data)

 
As of

June 30, 2015

(unaudited)

As of December 31,

2014

 
Assets
Cash $ 15,839 $ 15,627
Receivables, net 42,218 40,152
Inventories 30,934 29,564
Prepaid and other current assets 8,108 8,330
Deferred taxes, current   3,161     3,157  
Total current assets 100,260 96,830
Property, plant and equipment, net 337,278 353,652
Customer relationships and other intangibles, net 102,394 110,809
Goodwill 119,945 119,945
Equity method investment 10,085 10,919
Debt issuance costs   7,907     8,826  
Total Assets $ 677,869   $ 700,981  
 
Liabilities and equity
Accounts payable $ 23,042 $ 24,561
Accrued and other liabilities 7,725 11,428
Notes payable, current portion   -     -  
Total current liabilities 30,767 35,989
Deferred taxes and other long-term liabilities 12,861 12,494
Notes payable, non-current portion   329,350     349,125  
Total liabilities   372,978     397,608  
Equity
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2015 and December 31, 2014 - -
Common stock, $0.001 par value per share; 190,000,000 shares authorized, 43,205,636 and 44,069,000 shares issued and outstanding at June 30, 2015 and December 31, 2014 43 44
Additional paid-in capital 308,694 288,393
Less: Treasury stock (20,036 ) -
Accumulated other comprehensive income (loss) (3,700 ) (3,060 )
Accumulated earnings   19,890     17,996  
Total equity   304,891     303,373  
Total liabilities and equity $ 677,869   $ 700,981  
 
       

Continental Building Products, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

 
Six Months Six Months
Ended Ended
June 30, 2015 June 30, 2014
Cash flows from operating activities:
Net income (loss) $ 1,894 $ (3,956 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 26,270 27,813
Bad debt expense (250 ) -
Amortization of debt issuance costs and debt discount 1,106 7,996
Loss from equity method investment 252 237
Share based compensation 407 215
Deferred taxes 457 (1,842 )
Change in assets and liabilities:
Receivables (1,890 ) (3,540 )
Inventories (1,505 ) (8,485 )
Prepaid expenses and other current assets 222 686
Accounts payable (1,302 ) (2,885 )
Accrued and other current liabilities (3,120 ) (4,193 )
Other long term liabilities   (93 )   255  
Net cash provided by operating activities   22,448     12,301  
Cash flows from investing activities:
Capital expenditures (1,733 ) (1,741 )
Software purchased or developed (554 ) (1,130 )
Distributions from equity method investment   583     1,540  
Net cash used in investing activities   (1,704 )   (1,331 )
Cash flows from financing activities:
Net proceeds from issuance of common stock - 151,354
Principal payments for First Lien Credit Agreement (20,000 ) (12,075 )
Repayment of Second Lien Credit Agreement - (155,000 )
Proceeds from revolving credit facility, net - -
Capital Contribution from Lone Star Funds 19,893 -
Payments to repurchase common stock   (20,036 )   -  
Net cash used in financing activities   (20,143 )   (15,721 )
Effect of foreign exchange rates on cash and cash equivalents (389 ) (33 )
Net change in cash and cash equivalents 212 (4,784 )
Cash, beginning of period   15,627     11,822  
Cash, end of period $ 15,839   $ 7,038  
 

Reconciliation of GAAP Measures to Non-GAAP Measures

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted Cash Flow from Operations have been presented in this press release as supplemental measures of financial performance that are not required by, or presented in accordance with, Generally Accepted Accounting Principles (GAAP). This release presents EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted Cash Flow from Operations as supplemental performance measures because management believes that they facilitate a comparative assessment of the Company’s operating performance relative to its performance based on results under GAAP while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company’s operations and underlying operational performance. Management also believes that EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted Cash Flow from Operations are useful to investors because they present a better reflection of the Company’s performance as an independent company following the acquisition of the business from Lafarge and allow investors to view the business through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted Cash Flow from Operations may not be comparable to similarly titled measures of other companies because other companies may not calculate EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted Cash Flow from Operations in the same manner. EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted Cash Flow from Operations are not measurements of the Company’s financial performance under GAAP and should not be considered in isolation or as alternatives to operating income, net income, earnings per share or cash flow from operations determined in accordance with GAAP or any other financial statement data presented as indicators of financial performance or liquidity, each as calculated and presented in accordance with GAAP.

The following is a reconciliation of operating income to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin:

      Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Operating Income - GAAP Measure $ 4,275 $ 12,802 $ 12,177 $ 19,083
Depreciation and amortization 13,141 13,930 26,270 27,813
EBITDA—Non-GAAP Measure 17,416 26,732 38,447 46,896
Long Term Incentive Plan funded by Lone Star (a) 15,842 - 20,013 -
Adjusted EBITDA—Non-GAAP Measure $ 33,258 $ 26,732 $ 58,460 $ 46,896
Adjusted EBITDA Margin - Adjusted EBITDA as a percentage of net sales - Non-GAAP Measure 30.0% 26.0% 28.8% 24.7%
 

(a) Represents expense recognized pursuant to the LTIP. The amounts are funded by an affiliate of Lone Star Funds.

The following is a reconciliation of net income to Adjusted Net Income, earnings per share to Adjusted Earnings per Share, and cash flow from operations to Adjusted Cash Flow from Operations:

      Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Net income - GAAP Measure $ (126 ) $ 4,667 $ 1,894 $ (3,956 )
Long Term Incentive Plan funded by Lone Star, after tax (a) 10,293 - 13,020 -
Termination fee for advisory agreement, after tax (b) - - - 1,318
Call premium for Second Lien Credit Agreement, after tax (c) - - - 2,044
Expense of original issue discount and deferred financing fees for debt repayment, after tax (d)   -     -   -   4,570  
Adjusted net income - non-GAAP measure $ 10,167   $ 4,667 $ 14,914 $ 3,976  
 
 
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Earnings per share - GAAP measure $ (0.00 ) $ 0.11 $ 0.04 $ (0.09 )
Long Term Incentive Plan funded by Lone Star, after tax (a) $ 0.23 $ - $ 0.30 $ -
Termination fee for advisory agreement, after tax (b) $ - $ - $ - $ 0.03
Call premium for Second Lien Credit Agreement, after tax (c) $ - $ - $ - $ 0.05
Expense of original issue discount and deferred financing fees for debt repayment, after tax (d) $ -   $ - $ - $ 0.11  

Adjusted earnings per share - non-GAAP measure

$ 0.23   $ 0.11 $ 0.34 $ 0.10  
 
 
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Cash Flow from Operations - GAAP Measure $ 12,326 $ 28,242 $ 22,448 $ 12,301
Long Term Incentive Plan funded by Lone Star (a)   15,842     0   20,013   0  
Adjusted Cash Flow from Operations - non-GAAP Measure   28,168     28,242   42,461   12,301  
 
(a)   Represents expense recognized pursuant to the LTIP. All amounts are funded by an affiliate of Lone Star Funds.
(b) Adjusts for one-time payment of termination fees to affiliates of Lone Star in connection with the termination of our asset advisory agreement.
(c) Adjusts for a prepayment premium for the repayment of the Second Lien Credit Agreement.
(d) Adjusts for original issue discount and deferred financing amortization accelerated by the repayment of the Second Lien Credit Agreement.
 
                       

Interim Volumes and Mill Net Prices (Unaudited)

 
Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended
March 31, 2014 June 30, 2014     September 30, 2014     December 31, 2014     March 31, 2015     June 30, 2015

Volumes (million square feet)

438 525 590 627 469 567

Mill net Price per MSF - Total

$ 157.32 $ 155.76 $ 154.10 $ 152.79 $ 157.46 $ 156.85

Mill net Price per MSF - U.S. only

$ 160.83 $ 159.18 $ 156.72 $ 155.54 $ 162.70 $ 161.41

Contacts

Continental Building Products
Investor Relations:
703-480-3980
Investorrelations@continental-bp.com

Contacts

Continental Building Products
Investor Relations:
703-480-3980
Investorrelations@continental-bp.com