2020 First Quarter
Highlights
- Net sales of $524.3 million, an increase of 1.8% compared to
the prior year period; average daily net sales increased 0.2%
- Net income from continuing operations of $14.4 million, an
increase of $9.5 million, compared to the prior year period
- Adjusted net income(1) of $9.7 million, an increase of $3.7
million, compared to the prior year period
- Adjusted EBITDA(1) of $40.3 million and adjusted EBITDA
margin(1) of 7.7%, compared to adjusted EBITDA(1) of $37.5 million
and adjusted EBITDA margin(1) of 7.3% in the prior year period
- Earnings per share ("EPS") from continuing operations of $0.33
compared to $0.11 in the prior year period; adjusted EPS(1) of
$0.23 compared to $0.14 in the prior year period
- Reduced net debt leverage ratio(1) to 2.98x at March 31, 2020
from 3.61x at March 31, 2019
- Completed one acquisition in February 2020 and opened the
Charleston, South Carolina greenfield branch
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 first quarter 2020 financial results and provided a
COVID-19 business update.
“We continue to extend our thoughts and prayers to those
affected by the COVID-19 Pandemic,” said Ruben Mendoza, President
and Chief Executive Officer. “While our first quarter results
reflect the resiliency of our employees and operations, we have
implemented a number of strategic actions and cost-saving
initiatives in response to the current market environment. Our
company continues to operate the vast majority of its branches in
the United States and Canada utilizing safety precautions based on
recommendations from federal, state and local authorities, and we
believe our company is well-positioned to successfully navigate
this challenging time.”
2020 First Quarter
Results
Net sales for the three months ended March 31, 2020, were $524.3
million compared to $514.9 million for the three months ended March
31, 2019, representing an increase of $9.4 million, or 1.8%. There
was one more business day in the current period as compared to the
prior year period. Average daily net sales increased 0.2% over the
prior year period. Net sales from base business branches decreased
$1.5 million compared to the prior year period, and average daily
base business net sales decreased by 1.9% over the prior year
period. Net sales from acquired branches and existing branches that
were strategically combined contributed $10.9 million of the net
sales increase. The base business net sales decrease was primarily
driven by the impacts and disruptions caused by the novel
coronavirus COVID-19, which was declared a pandemic by the World
Health Organization on March 11, 2020 (the "COVID-19
Pandemic").
Gross profit for the three months ended March 31, 2020, was
$162.2 million compared to $153.0 million for the three months
ended March 31, 2019, representing an increase of $9.2 million, or
6.0%. Gross profit increased due to an expansion of our gross
margin and an increase in sales from acquisitions. Gross margin for
the three months ended March 31, 2020, was 30.9% compared to 29.7%
for the three months ended March 31, 2019. The increase in gross
margin was primarily due to improved profitability across our
wallboard, metal framing, and complementary and other products
lines driven by our ongoing pricing and purchasing initiatives.
Selling, general and administrative ("SG&A") expenses for
the three months ended March 31, 2020, were $123.1 million compared
to $117.2 million for the three months ended March 31, 2019,
representing an increase of $5.9 million, or 5.0%. As a percentage
of net sales, SG&A expenses were 23.5% for the three months
ended March 31, 2020, compared to 22.8% for the three months ended
March 31, 2019. The increase in SG&A expenses as a percentage
of net sales was primarily due to loss of sales leverage resulting
from the COVID-19 Pandemic, our continued investment in various
company-wide initiatives and higher labor costs.
Net income from continuing operations for the three months ended
March 31, 2020, was $14.4 million, or $0.33 per share, an increase
of $9.5 million compared to $4.8 million, or $0.11 per share, for
the three months ended March 31, 2019. Adjusted net income(1) for
the three months ended March 31, 2020, was $9.7 million, or $0.23
per share, an increase of $3.7 million compared to $6.1 million, or
$0.14 per share, for the three months ended March 31, 2019.
Adjusted EBITDA(1) was $40.3 million and adjusted EBITDA
margin(1) was 7.7% for the three months ended March 31, 2020,
compared to adjusted EBITDA(1) of $37.5 million and adjusted EBITDA
margin(1) of 7.3% for the three months ended March 31, 2019.
COVID-19 Pandemic Business
Update
On April 8, 2020, we withdrew our full year financial guidance.
Through April 2020, the COVID-19 Pandemic has had a negative impact
on most of the markets in which the Company operates, with low
single digit daily sales decreases as compared to last year. In a
select number of states, including Washington, California,
Michigan, New Jersey, and the Commonwealth of Pennsylvania,
stronger restrictions are or have been in place, and the Company
has experienced more significant year over year headwinds and has
not seen the typical seasonal improvements. As a result,
consolidated April net sales are down approximately 20% year over
year. The Company continues to monitor the current environment and
anticipates its future financial performance will be adversely
impacted due to the effects of the COVID-19 Pandemic. Given the
uncertainty related to the magnitude and duration of the COVID-19
Pandemic, the Company cannot reliably provide financial guidance
for the full year at this time.
Acquisitions
On February 3, 2020, the Company acquired the operations of two
branches and certain assets of Insulation Distributors, Inc.
(“IDI”), which resulted in the addition of two specialty building
products branches in Maryland. For 2020, the former IDI branches
are expected to contribute between $16.0 million and $18.0 million
to net sales. The Company has temporarily suspended acquisition
activity due to the COVID-19 Pandemic.
First Quarter Earnings Release and
Conference Call
In conjunction with this release, Foundation Building Materials,
Inc. will host a conference call tomorrow, Tuesday, May 12, 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, May 12, 2020, and
ending 11:59 PM Eastern Time on Tuesday, May 19, 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 13701879.
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 operates more than 175 branches across the United
States 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 impact of the COVID-19
Pandemic on the Company’s financial performance, and the effect of
certain strategic actions and cost-saving initiatives taken by the
Company. The impacts and disruptions caused by the COVID-19
Pandemic are highly uncertain, cannot be accurately predicted, and
will depend upon future developments outside the control of the
Company, including the scope and duration of the outbreak, and the
scope and impact of any government orders and restrictions designed
to limit the further spread of COVID-19. Forward-looking statements
are based on current expectations, forecasts and assumptions that
involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental, public health 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 March 31, 2020, see Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations in our Quarterly
Report on Form 10-Q for the three months ended March 31, 2020.
- Financial Tables Follow -
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share
and per share data)
Three Months Ended March
31,
2020
2019
Net sales
$
524,258
$
514,872
Cost of goods sold
362,100
361,912
Gross profit
162,158
152,960
Operating expenses:
Selling, general and administrative
expenses
123,097
117,230
Depreciation and amortization
19,219
20,342
Total operating expenses
142,316
137,572
Income from operations
19,842
15,388
Interest expense
(7,733
)
(8,556
)
Gain on legal settlement
8,556
—
Other (expense) income, net
(1,022
)
41
Income before income taxes
19,643
6,873
Income tax expense
5,267
2,045
Income from continuing operations
14,376
4,828
Loss on sale of discontinued operations,
net of tax
—
(1,346
)
Net income
$
14,376
$
3,482
Earnings (loss) per share data:
Earnings from continuing operations per
share - basic
$
0.33
$
0.11
Earnings from continuing operations per
share - diluted
$
0.33
$
0.11
Loss from discontinued operations per
share - basic
$
—
$
(0.03
)
Loss from discontinued operations per
share - diluted
$
—
$
(0.03
)
Earnings per share - basic
$
0.33
$
0.08
Earnings per share - diluted
$
0.33
$
0.08
Weighted average shares outstanding:
Basic
43,045,692
42,932,024
Diluted
43,542,819
42,944,829
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(in thousands, except share
data)
March 31, 2020
December 31, 2019
Current assets:
Cash and cash equivalents
$
141,235
$
17,766
Accounts receivable—net of allowance for
expected credit losses of $2,212 and $3,169, respectively
293,504
262,757
Other receivables
41,411
59,104
Inventories
173,284
178,624
Prepaid expenses and other current
assets
7,446
7,965
Total current assets
656,880
526,216
Property and equipment, net
154,447
150,188
Right-of-use assets, net
121,700
120,562
Intangible assets, net
101,452
113,861
Goodwill
493,068
495,724
Other assets
9,470
5,206
Total assets
$
1,537,017
$
1,411,757
Liabilities and stockholders'
equity:
Current liabilities:
Accounts payable
$
149,474
$
145,226
Accrued payroll and employee benefits
23,871
31,410
Accrued taxes
9,612
8,780
Current portion of tax receivable
agreement
8,537
27,850
Current portion of term loan
4,500
4,500
Current portion of lease liabilities
31,138
30,307
Other current liabilities
12,642
18,557
Total current liabilities
239,774
266,630
Asset-based revolving credit facility
235,000
89,000
Long-term portion of term loan, net
433,791
434,633
Tax receivable agreement
80,996
89,533
Deferred income taxes, net
21,759
18,972
Long-term portion of lease liabilities
96,831
97,145
Other liabilities
12,836
7,679
Total liabilities
1,120,987
1,003,592
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; 43,201,056 and 42,991,016 shares issued,
respectively
13
13
Additional paid-in capital
337,393
336,362
Retained earnings
88,630
74,254
Accumulated other comprehensive loss
(10,006
)
(2,464
)
Total stockholders' equity
416,030
408,165
Total liabilities and stockholders'
equity
$
1,537,017
$
1,411,757
FOUNDATION BUILDING MATERIALS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended March
31,
2020
2019
Cash flows from operating activities:
Net income
$
14,376
$
3,482
Add: loss on sale of discontinued
operations
—
(1,346
)
Net income from continuing operations
14,376
4,828
Adjustments to reconcile net income to net
cash provided by operating activities from continuing
operations:
Depreciation
7,249
8,846
Amortization of intangible assets
11,970
11,496
Amortization of debt issuance costs and
debt discount
540
539
Inventory fair value purchase accounting
adjustment
—
196
Provision for expected credit losses
652
636
Stock-based compensation
1,393
829
Loss on disposal of property and
equipment
51
191
Right-of-use assets non-cash expense
7,489
6,743
Deferred income taxes
3,133
211
Change in assets and liabilities, net of
effects of acquisitions:
Accounts receivable
(30,308
)
(23,860
)
Other receivables
16,875
16,851
Inventories
5,924
(2,917
)
Prepaid expenses and other current
assets
460
(2,206
)
Other assets
(24
)
(15
)
Accounts payable
6,256
9,182
Accrued payroll and employee benefits
(7,349
)
(7,601
)
Accrued taxes
863
(831
)
Operating lease liabilities
(7,335
)
(6,618
)
Other liabilities
(4,499
)
1,209
Net cash provided by operating activities
from continuing operations
27,716
17,709
Cash flows from investing activities from
continuing operations:
Purchases of property and equipment
(11,442
)
(5,242
)
Payments of net working capital
adjustments related to acquisitions
(34
)
(13
)
Proceeds from the disposal of fixed
assets
474
238
Acquisitions, net of cash acquired
(8,638
)
(10,757
)
Net cash used in investing activities from
continuing operations
(19,640
)
(15,774
)
Cash flows from financing activities from
continuing operations:
Proceeds from asset-based revolving credit
facility
322,500
145,276
Repayments of asset-based revolving credit
facility
(176,500
)
(137,776
)
Principal payments for term loan
(1,125
)
(1,125
)
Payment related to tax receivable
agreement
(27,850
)
(16,667
)
Tax withholding payment related to net
settlement of equity awards
(362
)
(130
)
Principal repayment of finance lease
obligations
(678
)
(654
)
Net cash provided by (used in) financing
activities from continuing operations
115,985
(11,076
)
Net cash used in investing activities from
discontinued operations
—
(1,346
)
Net cash used in discontinued
operations
—
(1,346
)
Effect of exchange rate changes on
cash
(592
)
166
Net increase (decrease) in cash
123,469
(10,321
)
Cash and cash equivalents at beginning of
period
17,766
15,299
Cash and cash equivalents at end of
period
$
141,235
$
4,978
Supplemental disclosures of cash flow
information:
Cash paid for income taxes
$
103
$
79
Cash paid for interest
$
7,665
$
8,613
Supplemental disclosures of non-cash
investing and financing activities:
Change in fair value of derivatives, net
of tax
$
499
$
3,496
Goodwill adjustment for purchase price
allocation
$
55
$
187
FOUNDATION BUILDING MATERIALS,
INC.
NET SALES BY MAJOR PRODUCT
LINE, GROSS PROFIT AND GROSS MARGIN
FOR THE THREE MONTHS ENDED
MARCH 31, 2020 AND 2019 (UNAUDITED)
(dollars in thousands)
Three Months Ended March
31,
Change
2020
2019
$
%
Wallboard
$
202,268
38.6
%
$
202,914
39.4
%
$
(646
)
(0.3
)
%
Suspended ceiling systems
98,506
18.8
%
88,996
17.3
%
9,510
10.7
%
Metal framing
93,334
17.8
%
99,251
19.3
%
(5,917
)
(6.0
)
%
Complementary and other products
130,150
24.8
%
123,711
24.0
%
6,439
5.2
%
Total net sales
$
524,258
100.0
%
$
514,872
100.0
%
$
9,386
1.8
%
Total gross profit
$
162,158
$
152,960
$
9,198
6.0
%
Total gross margin
30.9
%
29.7
%
1.2
%
FOUNDATION BUILDING MATERIALS,
INC.
BASE BUSINESS AND ACQUIRED AND
COMBINED NET SALES
FOR THE THREE MONTHS ENDED
MARCH 31, 2020 AND 2019 (UNAUDITED)
(dollars in thousands)
Three Months Ended
March 31,
Change
2020
2019
$
%
Base business (1)
$
493,377
$
494,918
$
(1,541
)
(0.3
)
%
Acquired and combined (2)
30,881
19,954
10,927
54.8
%
Net sales
$
524,258
$
514,872
$
9,386
1.8
%
(1) Represents net sales from branches that were owned by us since
January 1, 2019, and branches that were opened by us during such
period. (2)
Represents branches acquired and combined
after January 1, 2019, 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
MARCH 31, 2020 AND 2019 (UNAUDITED)
(dollars in thousands)
Three Months Ended March 31,
2019
Base Business Net Sales
Change
Acquired and Combined Net
Sales Change
Three Months Ended March 31,
2020
Total Net Sales %
Change
Base Business Net Sales %
Change(1)
Acquired and Combined Net
Sales % Change(2)
Wallboard
$
202,914
$
(2,974
)
$
2,328
$
202,268
(0.3
)
%
(1.5
)
%
30.4
%
Suspended ceiling systems
88,996
4,117
5,393
98,506
10.7
%
4.8
%
210.1
%
Metal framing
99,251
(6,616
)
699
93,334
(6.0
)
%
(6.9
)
%
18.0
%
Complementary and other products
123,711
3,932
2,507
130,150
5.2
%
3.3
%
42.9
%
Net sales
$
514,872
$
(1,541
)
$
10,927
$
524,258
1.8
%
(0.3
)
%
54.8
%
Average daily net sales(3)
$
8,173
$
(147
)
$
166
$
8,192
0.2
%
(1.9
)
%
52.3
%
(1)
Represents base business net sales change
as a percentage of base business net sales for the three months
ended March 31, 2019.
(2)
Represents acquired and combined net sales
change as a percentage of acquired and combined net sales for the
three months ended March 31, 2019.
(3)
The number of business days for the three
months ended March 31, 2020 and 2019 were 64 and 63,
respectively.
Non-GAAP Financial
Measures
In addition to presenting financial results prepared in
accordance with Generally Accepted Accounting Principles, or 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 from continuing operations before interest expense, net,
income tax expense, depreciation and amortization, stock-based
compensation, and other non-recurring adjustments such as loss on
the disposal of property and equipment, gain on legal settlement
and transaction costs. The Company calculates adjusted EBITDA
margin as adjusted EBITDA divided by net sales. The Company
calculates adjusted net income as net income from continuing
operations before stock-based compensation, and other non-recurring
adjustments such as loss on the disposal of property and equipment,
gain on legal settlement and transaction costs. The Company
calculates adjusted earnings per share as adjusted net income on a
per weighted average share outstanding basis. For a calculation of
net debt leverage ratio, see Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations in our
Quarterly Report on Form 10-Q for the three months ended March 31,
2020.
These non-GAAP financial measures are presented because they are
important metrics used by management as a means by which it
assesses financial performance. We believe 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 from continuing
operations (unaudited):
Three Months Ended March
31,
2020
2019
(dollars in thousands)
Net income from continuing operations
$
14,376
$
4,828
Interest expense, net
7,691
8,585
Income tax expense
5,267
2,045
Depreciation and amortization
19,219
20,342
Stock-based compensation
1,393
829
Loss on disposal of property and
equipment
51
191
Gain on legal settlement
(8,556
)
—
Transaction costs(a)
839
645
Adjusted EBITDA
$
40,280
$
37,465
Adjusted EBITDA margin(b)
7.7
%
7.3
%
______________________________________________
(a)
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.
(b)
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 from continuing
operations (unaudited):
Three Months Ended March
31,
2020
2019
(in thousands, except share and per share
data)
Net income from continuing operations
$
14,376
$
4,828
Stock-based compensation
1,393
829
Loss on disposal of property and
equipment
51
191
Gain on legal settlement
(8,556
)
—
Transaction costs(a)
839
645
Tax effects(b)
1,616
(426
)
Adjusted net income
$
9,719
$
6,067
Earnings per share data as reported:
Basic
$
0.33
$
0.11
Diluted
$
0.33
$
0.11
Earnings per share data as adjusted:
Basic
$
0.23
$
0.14
Diluted
$
0.22
$
0.14
Weighted average shares outstanding:
Basic
43,045,692
42,932,024
Diluted
43,542,819
42,944,829
(a)
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.
(b)
Represents the impact of corporate income
taxes.
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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
Foundation Building Mate... (NYSE:FBM)
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From Dec 2024 to Jan 2025
Foundation Building Mate... (NYSE:FBM)
Historical Stock Chart
From Jan 2024 to Jan 2025
