Foundation Building Materials, Inc. Announces Fourth Quarter and Full Year 2019 Results

2019 Fourth Quarter Highlights

  • Earnings per share ("EPS") from continuing operations of $0.22 compared to $0.04 in the prior year period; adjusted EPS(1) of $0.26 compared to $0.16 in the prior year period
  • Net income from continuing operations of $9.6 million, an increase of $7.6 million, compared to the prior year period
  • Adjusted net income(1) of $11.3 million, an increase of $4.3 million, compared to the prior year period
  • Completed three acquisitions and opened San Antonio greenfield branch

2019 Full Year Highlights

  • EPS from continuing operations of $0.97 compared to a loss per share of $0.85 in the prior year period; adjusted EPS(1) of $1.11 compared to $0.41 in the prior year period
  • Net sales of $2.2 billion, an increase of $110.2 million compared to the prior year period
  • Base business net sales of $1.9 billion, an increase of 2.5% compared to the prior year period
  • Net income from continuing operations of $41.8 million, an increase of $78.2 million compared to the prior year period
  • Reduced net debt leverage ratio(1) to 2.91x at December 31, 2019 from 3.63x at December 31, 2018
  • Adjusted net income(1) of $47.6 million, an increase of $30.0 million, compared to the prior year period
  • Adjusted EBITDA(1) of $176.8 million, an increase of 14.0% compared to the prior year period; adjusted EBITDA margin(1) of 8.2% compared to 7.6% in the prior year period

SANTA ANA, Calif.--()--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
December 31, (Unaudited)

 

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
Ended
December 31,
2018

 

Base
Business
Net Sales
Change

 

Acquired
and
Combined
Net Sales
Change

 

Three Months
Ended
December 31,
2019

 

Total Net
Sales %
Change

Base
Business
Net Sales
%
Change(1)

 

Acquired
and
Combined
Net Sales
%
Change(2)

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
December 31,
2018

 

Base
Business
Net Sales
Change

 

Acquired
and
Combined
Net Sales
Change

 

Year Ended
December 31,
2019

 

Total Net
Sales %
Change

Base
Business
Net Sales
%
Change(1)

 

Acquired
and
Combined
Net Sales
%
Change(2)

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
December 31,

 

Year Ended
December 31,

 

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
December 31,

 

Year Ended
December 31,

 

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.

 

Contacts

Investor Relations:
John Moten, IRC
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com

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

Contacts

Investor Relations:
John Moten, IRC
Foundation Building Materials, Inc.
657-900-3200
Investors@fbmsales.com

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