Foundation Building Materials, Inc. Announces Second Quarter 2017 Results

2017 Second Quarter Highlights

  • Record net sales of $529.2 million, an increase of 95.9% compared to the prior year period
  • Net income of $1.3 million, compared to a net loss of $3.0 million in the prior year period
  • Adjusted EBITDA of $40.3 million, Adjusted EBITDA margin of 7.6%1
  • Completed four acquisitions in the quarter
  • Base business net sales of $235.9 million, an increase of 9.0% compared to the prior year period
  • Completed the integration of Winroc-SPI

TUSTIN, Calif.--()--Foundation Building Materials, Inc. (NYSE: FBM), the largest specialty distributor of suspended ceiling systems in the United States and Canada and the second largest specialty distributor of wallboard in the United States and Canada, today reported second quarter 2017 financial results.

"We recorded another quarter of strong operational and financial performance, highlighted by year-over-year net sales growth of 96%, net income of $1.3 million and adjusted EBITDA of $40.3 million," said Ruben Mendoza, President and CEO. "These positive results were driven by the strength of our underlying markets, our continued growth via acquisitions, increased cross-selling of products throughout our organization, and our commitment to cost containment and procurement synergies." Mr. Mendoza continued, "Base business net sales increased 9.0% in the quarter, with a particularly strong showing from our suspended ceiling systems product category, which grew base business net sales in the category by 24.9%. We also remained active on the acquisition front, closing four more acquisitions in the quarter, and adding three more since the period ended for a total of eight in 2017. In short, we continue to execute on our long-term strategy of growing market share in key product categories, thereby achieving larger economies of scale, which benefits our customers and shareholders alike."

2017 Second Quarter Results

Consolidated net sales for the three months ended June 30, 2017 were $529.2 million compared to $270.1 million for the three months ended June 30, 2016, representing an increase of $259.1 million, or 95.9%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $239.5 million of this increase. Base business net sales increased $19.6 million, or 9.0%, for the three months ended June 30, 2017 compared to the three months ended June 30, 2016. The increase in our base business was primarily driven by the following factors:

  • an increase in suspended ceiling systems sales of approximately $6.3 million, or 24.9%, primarily due to increased market share gains in California, Texas and Colorado;
  • an increase in wallboard sales of $5.3 million, or 5.6%, primarily due to a wallboard unit volume increase of approximately 4.2% driven by an increase in the commercial and residential end markets, and an increase in average selling price of approximately 1.4%; and
  • an increase in other product sales of $5.6 million, or 9.6%, primarily due to continued complementary product sales growth.

Consolidated gross profit for the three months ended June 30, 2017 was $149.5 million compared to $79.3 million for the three months ended June 30, 2016, representing an increase of $70.2 million, or 88.5%. The increase in gross profit was primarily due to the increase in sales volume and contribution from acquisitions. Consolidated gross margin for the three months ended June 30, 2017 was 28.3% compared to 29.4% for the three months ended June 30, 2016. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from ceilings and mechanical insulation on a percentage basis.

Selling, general and administrative, or SG&A, expenses consist of warehouse, delivery and general and administrative expenses. SG&A expenses for the three months ended June 30, 2017 were $113.6 million compared to $66.0 million for the three months ended June 30, 2016, representing an increase of $47.6 million, or 72.1%. As a percentage of net sales, SG&A expenses were 21.5% for the three months ended June 30, 2017 compared to 24.4% for the three months ended June 30, 2016. The decrease in SG&A expenses as a percentage of net sales was primarily due to lower transaction costs.

2017 Second Quarter Segment Results

Specialty Building Products ("SBP"). SBP net sales for the three months ended June 30, 2017 were $460.1 million compared to $270.1 million for the three months ended June 30, 2016, representing an increase of $189.9 million, or 70.3%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $170.4 million of the increase, primarily due to the acquisition of Winroc-SPI in August 2016. SBP net sales attributable to our base business also increased due to product expansion into new markets and the overall market growth in both the commercial and residential construction markets.

SBP gross profit for the three months ended June 30, 2017 was $130.7 million compared to $79.3 million for the three months ended June 30, 2016, representing an increase of $51.4 million, or 64.8%. SBP gross profit increased in line with higher sales volume and contribution from acquisitions and base business growth. SBP gross margin for the three months ended June 30, 2017 was 28.4% compared to 29.4% for the three months ended June 30, 2016. The decrease in SBP gross margin was primarily due to a change in product mix with a higher contribution from ceilings on a percentage basis.

Mechanical Insulation ("MI"). MI net sales for the three months ended June 30, 2017 were $69.1 million. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there were no sales in this segment for the three months ended June 30, 2016.

MI gross profit for the three months ended June 30, 2017 was $18.8 million. MI gross margin for the three months ended June 30, 2017 was 27.2%. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there was no gross profit in this segment for the three months ended June 30, 2016.

2017 Year-to-Date Highlights

  • Record net sales of $1,008.7 million, an increase of 96.0% compared to the prior year period
  • Net income of $5.2 million, compared to a net loss of $4.2 million in the prior year period
  • Completed five acquisitions in the period ended June 30, 2017
  • Base business net sales of $458.1 million, an increase of 10.2% compared to the prior year period

2017 Year-to-Date Results

Consolidated net sales for the six months ended June 30, 2017 were $1,008.7 million compared to $514.8 million for the six months ended June 30, 2016, representing an increase of $493.9 million, or 96.0%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $451.5 million of the increase. Base business net sales increased $42.5 million, or 10.2%, for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. The increase in our base business was primarily driven by the following factors:

  • an increase in suspended ceiling systems sales of approximately $10.4 million, or 21.9%, primarily due to increased market share gains in California, Texas and Colorado;
  • an increase in wallboard sales of $13.4 million, or 7.3%, primarily due to a wallboard unit volume increase of approximately 5.8% driven by an increase in the commercial and residential end markets, and an increase in average selling price of approximately 1.5%; and
  • an increase in other product sales of $10.5 million, or 9.4%, primarily due to continued complementary product sales growth.

Consolidated gross profit for the six months ended June 30, 2017 was $289.4 million compared to $151.6 million for the six months ended June 30, 2016, representing an increase of $137.9 million, or 91.0%. The increase in consolidated gross profit was primarily due to the increase in sales volume and contribution from acquisitions. Consolidated gross margin for the six months ended June 30, 2017 was 28.7% compared to 29.4% for the six months ended June 30, 2016. The decrease in consolidated gross margin was primarily due to a change in product mix with a higher contribution from ceilings and mechanical insulation on a percentage basis.

Selling, general and administrative, or SG&A, expenses consist of warehouse, delivery and general and administrative expenses. SG&A expenses for the six months ended June 30, 2017 were $226.7 million compared to $122.8 million for the six months ended June 30, 2016, representing an increase of $103.9 million, or 84.6%. As a percentage of net sales, SG&A expenses were 22.5% for the six months ended June 30, 2017 compared to 23.9% for the six months ended June 30, 2016. The decrease in SG&A expenses as a percentage of net sales was primarily due to lower transaction costs.

2017 Year-to-Date Segment Results

SBP. SBP net sales for the six months ended June 30, 2017 were $878.5 million compared to $514.8 million for the six months ended June 30, 2016, representing an increase of $363.8 million, or 70.7%. Acquired branches and existing branches that were strategically combined with acquired branches contributed $321.3 million of the increase, primarily due to the acquisition of Winroc-SPI in August 2016. Base business net sales also increased by $42.5 million due to product expansion into new markets and the overall market growth in both the commercial and residential construction markets.

SBP gross profit for the six months ended June 30, 2017 was $253.2 million compared to $151.6 million for the six months ended June 30, 2016, representing an increase of $101.6 million, or 67.0%. SBP gross profit increased in line with higher sales volume and contribution from acquisitions and base business growth. SBP gross margin for the six months ended June 30, 2017 was 28.8% compared to 29.4% for the six months ended June 30, 2016. The decrease in SBP gross margin was primarily due to a change in product mix with a higher contribution from ceilings on a percentage basis.

MI. MI net sales for the six months ended June 30, 2017 were $130.1 million. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there were no sales in this segment for the six months ended June 30, 2016.

MI gross profit for the six months ended June 30, 2017 was $36.3 million. MI gross margin for the six months ended June 30, 2017 was 27.9%. We entered the mechanical insulation market as a result of the Winroc-SPI acquisition in August 2016, therefore, there was no gross profit in this segment for the six months ended June 30, 2016.

Acquisitions

We have completed the following eight acquisitions in 2017:

      # of Branches
Acquisitions   Effective Date   Branch Locations   Acquired
American Wal-Board, Inc. August 1, 2017 TN, MS 2
Ceiling and Wall Supply, Inc. July 1, 2017 MO, IL, KY 5
Virginia Builders Supply, Inc. July 1, 2017 VA 1
Wallboard, Inc. May 1, 2017 MN 2
Gypsum Wallboard Supply, Inc. May 1, 2017 WA 1
Performance Contracting, Inc (Trident) April 28, 2017 GA 1
Irwin Builders Supply Corporation April 3, 2017 PA 1
Dominion Interior Supply Corporation January 3, 2017 VA 4
Total 17

The five acquisitions completed prior to June 30, 2017 contributed approximately $15.4 million of net sales to our results for the three months ended June 30, 2017 and $18.6 million for the six months ended June 30, 2017. We expect the eight acquisitions completed between January 1, 2017 and the date of this earnings release to contribute net sales of approximately $57.0 million to $61.0 million for the period from July 1, 2017 through December 31, 2017. As of August 1, 2017, all acquisitions made through June 30, 2017 were integrated from an accounting and information technology perspective.

Conference Call Information

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call today, Thursday, August 3, 2017, at 10:00 am Eastern Time. Ruben Mendoza, President and Chief Executive Officer and John Gorey, Chief Financial Officer will host the call. Investors may dial into the call at (877) 407-9039 (U.S.) or (201) 689-8470 (international) five to ten minutes prior to the start time to allow for registration. Investors may also listen to the live audio webcast via the Investor Relations page of the Foundation Building Materials, Inc. website at http://investors.fbmsales.com. Please allow 15 minutes prior to the call to download and install any necessary audio software.

An audio replay of the event will be archived on the Investor Relations page of the company's website at http://investors.fbmsales.com. The audio replay will also be available via telephone from Thursday, August 3, 2017, at approximately 12:00 p.m. Eastern Time through Thursday, August 10, 2017, at 11:59 p.m. Eastern Time. Dial (844) 512-2921 and enter the passcode 13666696. International callers should dial (412) 317-6671 and enter the same passcode number to access the audio replay.

About Foundation Building Materials

Foundation Building Materials is a specialty distributor of wallboard, suspended ceiling systems, and mechanical insulation throughout the U.S. and Canada. Based in Tustin, California, the Company employs more than 3,500 people and operates more than 220 branches across the U.S. and Canada.

Forward-Looking Statements

This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” or words or phrases with similar meaning. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. We do not intend, and undertake no obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Investors are referred to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

(1) Adjusted EBITDA is a non-GAAP measure. See the supplementary schedules at the end of this press release for a discussion of how we define and calculate this measure, why we believe it is important and a reconciliation thereof to the most directly comparable GAAP measure. Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales

FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands, except share and per share data)
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2017       2016     2017       2016  
Net sales $ 529,230   $ 270,147 $ 1,008,687 $ 514,752
Cost of goods sold (exclusive of depreciation and amortization)   379,698     190,812     719,244     363,172  
Gross profit 149,532 79,335 289,443 151,580
Operating expenses:
Selling, general and administrative 113,602 66,025 226,664 122,796
Depreciation and amortization   19,027     10,281     37,423     19,894  
Total operating expenses   132,629     76,306     264,087     142,690  
Income from operations 16,903 3,029 25,356 8,890
Interest expense (14,876 ) (8,478 ) (30,125 ) (16,514 )
Other income, net   95     4     13,384     14  
Income (loss) before income taxes 2,122 (5,445 ) 8,615 (7,610 )
Income tax expense (benefit)   862     (2,485 )   3,426     (3,389 )
Net income (loss) $ 1,260   $ (2,960 ) $ 5,189   $ (4,221 )
 
Earnings (loss) per share data:
Basic $ 0.03 $ (0.10 ) $ 0.13 $ (0.14 )
Diluted $ 0.03 $ (0.10 ) $ 0.13 $ (0.14 )
Weighted average shares outstanding:
Basic 42,865,407 29,974,239 40,084,730 29,974,239
Diluted 42,879,319 29,974,239 40,084,940 29,974,239
 
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
JUNE 30, 2017 AND DECEMBER 31, 2016
(in thousands, except share data)
 
  June 30, 2017   December 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 19,946 $ 28,552
Accounts receivable—net of allowance for doubtful accounts of $5,266 and $5,685, respectively 306,104 261,686
Other receivables 43,486 52,845
Inventories 167,425 157,991
Prepaid expenses and other current assets   12,227     12,516  
Total current assets 549,188 513,590
Property and equipment, net 153,282 144,387

Intangible assets, net

205,496 215,381
Goodwill 452,205 437,935
Other assets   6,420     9,692  
Total assets $ 1,366,591   $ 1,320,985  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 143,483 $ 119,788
Accrued payroll and employee benefits 22,624 26,956
Accrued taxes 7,690 9,151
Other current liabilities   43,602     49,613  
Total current liabilities 217,399 205,508
Asset-based revolving credit facility 74,247 208,469
Long-term portion of notes payable, net 529,822 525,487
Tax receivable agreement 203,837
Deferred income taxes, net 29,347 26,867
Other liabilities   12,099     26,138  
Total liabilities 1,066,751 992,469
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; 42,865,407 and 29,974,239 shares issued, respectively 13
Additional paid-in capital 329,679 364,815
Accumulated deficit (31,107 ) (36,296 )
Accumulated other comprehensive income (loss)   1,255     (3 )
Total stockholders' equity   299,840     328,516  
Total liabilities and stockholders' equity $ 1,366,591   $ 1,320,985  
 
FOUNDATION BUILDING MATERIALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
 
  Six Months Ended June 30,
  2017       2016  
Cash flows from operating activities:
Net income (loss) $ 5,189 $ (4,221 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 14,723 5,430
Amortization of intangible assets 22,700 14,464
Amortization of debt issuance costs and debt discount 4,844 1,707
Inventory fair value adjustment 664 1,635
Provision for doubtful accounts 766 1,132
Stock-based compensation 1,765
Unrealized gain on derivative instruments, net (13,155 )
Loss on disposal of property and equipment 242 110
Deferred income taxes 3,356 (1,875 )
Change in assets and liabilities, net of effects of acquisitions:
Accounts receivable (32,706 ) (15,248 )
Other receivables 10,638 3,982
Inventories (2,807 ) (12,378 )
Prepaid expenses and other current assets 561 403
Other assets 393 197
Accounts payable 17,875 26,959
Accrued payroll and employee benefits (4,433 ) (1,468 )
Accrued taxes (1,474 ) 1,031
Other liabilities   (7,258 )   (3,087 )
Net cash provided by operating activities 21,883 18,773
Cash flows from investing activities:
Purchases of property and equipment (17,525 ) (7,763 )
Payment of net working capital adjustments (405 )
Proceeds from net working capital adjustments 8,554
Proceeds from the disposal of fixed assets 429
Acquisitions, net of cash acquired   (52,951 )   (57,942 )
Net cash used in investing activities (61,898 ) (65,705 )
Cash flows from financing activities:
Proceeds from asset-based revolving credit facility 280,995 15,000
Repayments of asset-based revolving credit facility (415,497 ) (30,000 )
Principal borrowings on long-term debt 67,200
Principal payments on long-term debt (1,400 )
Debt issuance costs (1,281 )
Principal repayment of capital lease obligations (1,395 )
Issuance of common stock 163,952
Capital contributions 2,997
Capital distributions       (17 )
Net cash provided by financing activities 31,052 49,502
Effect of exchange rate changes on cash   357      
Net (decrease) increase in cash (8,606 ) 2,570
Cash and cash equivalents at beginning of period   28,552     10,662  
Cash and cash equivalents at end of period $ 19,946   $ 13,232  
 
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 143 $ 1,610
Cash paid during the period for interest $ 25,699 $ 14,582
Supplemental disclosures of non-cash investing and financing activities:
Change in fair value of derivatives, net of tax $ 1,400 $
Assets acquired under capital lease $ 658 $
Goodwill adjustment for purchase price allocation $ 1,724 $
Tax receivable agreement $ 203,837 $
Property and equipment included in accounts payable $ 198 $
 
FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY PRODUCTS BY SEGMENT AND GROSS PROFIT AND GROSS MARGIN BY SEGMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
 
  Three Months Ended June 30,   Change
2017   2016   $     %
SBP Segment    
Wallboard $ 181,062 39.4 % $ 117,507 43.5 % $ 63,555 54.1%
Suspended ceiling systems 83,271 18.1 % 29,679 11.0 % 53,592 180.6%
Metal framing 72,404 15.7 % 48,485 17.9 % 23,919 49.3%
Other   123,349     26.8 %   74,476     27.6 %   48,873   65.6%
Total SBP net sales $ 460,086     100.0 % $ 270,147     100.0 % $ 189,939   70.3%
 
MI Segment
Commercial and industrial insulation $ 49,730 71.9 % $ $ 49,730 —%
Non-insulation products   19,414     28.1 %           19,414   —%
Total MI net sales $ 69,144     100.0 % $       $ 69,144   —%
Total net sales $ 529,230   $ 270,147  
 
Gross profit - SBP $ 130,729 $ 79,335 $ 51,394 64.8%
Gross profit - MI   18,803         18,803   —%
Total gross profit $ 149,532   $ 79,335   $ 70,197   88.5%
 
Gross margin - SBP 28.4 % 29.4 % (1.0 )%
Gross margin - MI 27.2 % % %
Total gross margin 28.3 % 29.4 % (1.1 )%
 
FOUNDATION BUILDING MATERIALS, INC.
NET SALES BY PRODUCTS BY SEGMENT AND GROSS PROFIT AND GROSS MARGIN BY SEGMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
 
  Six Months Ended June 30,   Change
2017   2016   $    

%

SBP Segment    
Wallboard $ 349,576 39.8 % $ 226,441 44.0 % $ 123,135 54.4 %
Suspended ceiling systems 155,984 17.8 % 55,835 10.8 % 100,149 179.4 %
Metal framing 141,065 16.1 % 91,465 17.8 % 49,600 54.2 %
Other   231,924     26.3 %   141,011     27.4 %   90,913   64.5 %
Total SBP net sales $ 878,549     100.0 % $ 514,752     100.0 % $ 363,797   70.7 %
 
MI Segment
Commercial and industrial insulation $ 95,041 73.0 % $ $ 95,041 %
Non-insulation products   35,097     27.0 %           35,097   %
Total MI net sales $ 130,138     100.0 % $       $ 130,138   %
Total net sales $ 1,008,687   $ 514,752  
 
Gross profit - SBP $ 253,155 $ 151,580 $ 101,575 67.0 %
Gross profit - MI   36,288         36,288   %
Total gross profit $ 289,443   $ 151,580   $ 137,863   91.0 %
 
Gross margin - SBP 28.8 % 29.4 % (0.6 )%
Gross margin - MI 27.9 % % %
Total gross margin 28.7 % 29.4 % (0.7 )%
 
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
 
  Three Months Ended June 30,   Change
2017   2016 $   %
Base Business (1) $ 235,927 $ 216,369 $ 19,558 9.0%
Acquired and combined (2)   293,303   53,778   239,525 445.4%

Net sales

$ 529,230 $ 270,147 $ 259,083   95.9%
(1)Represents net sales from branches that were owned by us since January 1, 2016 and branches that were opened by us during such period.
(2)Represents branches acquired and combined after January 1, 2016, primarily as a result of our strategic combination of branches.
 
 
Six Months Ended June 30, Change
2017 2016 $ %
Base Business (1) $ 458,086 $ 415,603 $ 42,483 10.2%
Acquired and combined (2)   550,601   99,149   451,452 455.3%

Net sales

$ 1,008,687 $ 514,752 $ 493,935   96.0%
(1)Represents net sales from branches that were owned by us since January 1, 2016 and branches that were opened by us during such period.
(2)Represents branches acquired and combined after January 1, 2016, primarily as a result of our strategic combination of branches.
 
FOUNDATION BUILDING MATERIALS, INC.
BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY SEGMENT AND PRODUCT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands)
 
            Acquired  
Base Acquired Base and
Three Months Business and Three Months Business Combined Total Net
Ended June 30, Net Sales Combined Ended June 30, Net Sales Net Sales Sales %
2016 Growth Net Sales 2017   % Growth   % Growth   Growth
Wallboard $ 117,507 $ 5,250 $ 58,305 $ 181,062 5.6 % 49.6 % 54.1 %
Metal framing 48,485 2,394 21,525 72,404 6.3 % 44.4 % 49.3 %
Suspended ceiling systems 29,679 6,270 47,322 83,271 24.9 % 159.4 % 180.6 %
Other products   74,476   5,644   43,229   123,349 9.6 % 58.0 % 65.6 %

SBP net sales

270,147 19,558 170,381 460,086 9.0 % 63.1 % 70.3 %

MI net sales

      69,144   69,144 % % %

Total net sales

$ 270,147 $ 19,558 $ 239,525 $ 529,230 9.0 % 88.7 % 95.9 %
 
 
Acquired
Base Acquired Base and
Six Months Business and Six Months Business Combined Total Net
Ended June 30, Net Sales Combined Ended June 30, Net Sales Net Sales Sales %
2016 Growth Net Sales 2017   % Growth   % Growth   Growth
Wallboard $ 226,440 $ 13,392 $ 109,744 $ 349,576 7.3 % 48.5 % 54.4 %
Metal framing 91,465 8,173 41,427 141,065 11.2 % 45.3 % 54.2 %
Suspended ceiling systems 55,835 10,369 89,780 155,984 21.9 % 160.8 % 179.4 %
Other products   141,012   10,549   80,363   231,924 9.4 % 57.0 % 64.5 %

SBP net sales

514,752 42,483 321,314 878,549 10.2 % 62.4 % 70.7 %

MI net sales

      130,138   130,138 % % %

Total net sales

$ 514,752 $ 42,483 $ 451,452 $ 1,008,687 10.2 % 87.7 % 96.0 %

Non-GAAP (Generally Accepted Accounting Principles) Financial Measures

In addition to results under GAAP, this press release contains certain non-GAAP financial measures, including Adjusted EBITDA, which is provided as a supplemental measure of financial performance. This measure is not required by, or presented in accordance with, GAAP. We calculate Adjusted EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization and before non-recurring adjustments such as purchase accounting adjustments, IPO expenses, stock-based compensation, non-cash (gains) losses on the sale of property and equipment and derivative financial instruments.

Adjusted EBITDA is presented because it is an important metric used by management as one of the means by which it assesses financial performance. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. This measure, when used in conjunction with related GAAP financial measures, provides investors with an additional financial analytical framework that may be useful in assessing our company and its results of operations.

Adjusted EBITDA has certain limitations. Adjusted EBITDA should not be considered as an alternative to net income, or as any other measure of financial performance derived in accordance with GAAP. Adjusted EBITDA also should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items for which it makes adjustments. Additionally, Adjusted EBITDA is not intended to be a liquidity measure. Other companies, including other companies in our industry, may not use this measure or may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

The following is a reconciliation of Adjusted EBITDA to the nearest GAAP measure, net income:

  Three Months Ended
June 30, 2017
(in thousands)
Net income $ 1,260
Interest expense, net 14,876
Income tax expense 862
Depreciation and amortization 19,027
Unrealized non-cash loss on derivative financial instrument 63
Public company readiness expenses 1,434
Stock-based compensation 212
Non-cash purchase accounting effects(a) 593
Loss on disposal of property and equipment 20
Transaction costs(b)   1,979  
Adjusted EBITDA $ 40,326  
Adjusted EBITDA margin(c) 7.6 %
(a)   Adjusts for the effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of acquisitions.
(b) Represents one-time costs related to our acquisitions paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals.
(c) Adjusted EBITDA margin represents Adjusted EBITDA divided by net sales.

Contacts

Investor Relations:
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com
or
Media Relations:
Joele Frank, Wilkinson Brimmer Katcher
Joe Sala or Ed Trissel
212-355-4449

Contacts

Investor Relations:
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com
or
Media Relations:
Joele Frank, Wilkinson Brimmer Katcher
Joe Sala or Ed Trissel
212-355-4449