Foundation Building Materials, Inc. Announces First Quarter 2018 Results

2018 First Quarter Highlights

• Net sales of $536.3 million, an increase of 11.9% compared to the prior year period
• Base business net sales of $485.2 million, an increase of 4.9% compared to the prior year period
• Net loss of $1.1 million compared to net income of $3.9 million in the prior year period
• Adjusted EBITDA(1) of $35.0 million
• Completed two acquisitions in the quarter

Tustin, CA, May 9, 2018 (Business Wire) – Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building product distributors of wallboard, suspended ceiling systems and mechanical insulation in North America, today reported first quarter 2018 financial results.

“We recorded a solid quarter of operational and financial performance, highlighted by year-over-year net sales growth of 12%, and base business growth of 5%, with good performance from both our Specialty Building Products and Mechanical Insulation business segments,” said Ruben Mendoza, President and CEO. “Despite adverse weather early in the year, we finished the quarter strong, and we look forward to building on this positive momentum in the business as we continue to deliver long-term value to our customers and stockholders.”

2018 First Quarter Results

Consolidated net sales for the three months ended March 31, 2018 were $536.3 million compared to $479.5 million for the three months ended March 31, 2017, representing an increase of $56.8 million, or 11.9%. Base business net sales increased $22.5 million, or 4.9%, to $485.2 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017.
Consolidated gross profit for the three months ended March 31, 2018 was $154.4 million compared to $139.9 million for the three months ended March 31, 2017, representing an increase of $14.5 million, or 10.4%. Consolidated gross margin for the three months ended March 31, 2018 was 28.8% compared to 29.2% for the three months ended March 31, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from suspended ceilings systems and mechanical insulation on a percentage of net sales basis.

Selling, general and administrative, or SG&A, expenses for the three months ended March 31, 2018 were $121.4 million compared to $113.1 million for the three months ended March 31, 2017, representing an increase of $8.4 million, or 7.4.%. As a percentage of net sales, SG&A expenses were 22.6% for the three months ended March 31, 2018 compared to 23.6% for the three months ended March 31, 2017. Excluding non-recurring expenses, SG&A expenses as a percentage of net sales for the three months ended March 31, 2018 were 22.3% compared to 22.4% for the three months ended March 31, 2017. The decrease in SG&A expenses as a percentage of net sales was due to our continued focus on operating efficiencies and cost reduction initiatives.

Net loss for the three months ended March 31, 2018 was $1.1 million, or $0.02 loss per share, a decrease of $5.0 million compared to net income of $3.9 million, or $0.11 earnings per share, for the three months ended March 31, 2017. The decrease in net income was primarily due to a decrease in gains from derivatives of $13.1 million, partially offset by higher income from operations of $4.7 million and lower income taxes of $3.4 million. Adjusted net income(1) for the three months ended March 31, 2018 was $0.4 million, or $0.01 adjusted earnings per share(1), an increase of $1.2 million compared to an adjusted net loss(1) of $0.8 million, or $0.02 adjusted loss per share(1), for the three months ended March 31, 2017. Adjusted EBITDA(1) was $35.0 million and Adjusted EBITDA margin(1) was 6.5% for the three months ended March 31, 2018.

2018 First Quarter Segment Results

Specialty Building Products (“SBP”). SBP net sales for the three months ended March 31, 2018 were $463.7 million compared to $418.5 million for the three months ended March 31, 2017, representing an increase of $45.2 million, or 10.8%. Net sales from acquired branches and existing branches that were strategically combined with acquired branches contributed $32.0 million of the increase.
SBP gross profit for the three months ended March 31, 2018 was $134.4 million compared to $122.4 million for the three months ended March 31, 2017, representing an increase of $12.0 million, or 9.8%. SBP gross margin for the three months ended March 31, 2018 was 29.0% compared to 29.3% for the three months ended March 31, 2017. The decrease in gross margin was primarily due to a change in product mix with a higher contribution from lower gross margin products such as suspended ceilings systems, on a percentage of net sales basis.

Mechanical Insulation (“MI”). MI net sales for the three months ended March 31, 2018 were $72.6 million compared to $61.0 million for the three months ended March 31, 2017, representing an increase of $11.6 million, or 19.1%. Base business net sales contributed $9.3 million of the increase, primarily due to higher net sales to industrial end markets.

MI gross profit for the three months ended March 31, 2018 was $20.0 million compared to $17.5 million for the three months ended March 31, 2017, representing an increase of $2.5 million, or 14.4%. MI gross margin for the three months ended March 31, 2018 was 27.5% compared to 28.7% for the three months ended March 31, 2017. This decrease was primarily due to a higher contribution from large industrial projects for the three months ended March 31, 2018, which generally have lower margins relative to the overall MI segment.

Acquisitions

During the first quarter the Company completed two acquisitions totaling seven branches. For 2018, these two acquisitions are expected to contribute $27.0 million to $29.0 million to net sales. Foundation Building Materials will continue to supplement organic growth with strategic acquisitions.

Expected Debt Refinancing

The Company is actively exploring the refinancing of its $575.0 million 8.25% senior secured notes due 2021, or Notes. In the third quarter of 2018, the prepayment premium of the Notes will decrease, and the Company believes it will have opportunities to refinance the Notes, which could provide estimated annual cash interest savings of $12.0 million to $15.0 million. As Foundation Building Materials continues to optimize its capital structure and operating efficiencies, the Company expects its generation of cash flow to improve, which will allow the company to further reduce its leverage over the next couple of years.

First Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call today, Wednesday, May 9, 2018, at 9:00 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, and John Moten, Vice President Investor Relations, will host the call.

The call can be accessed three ways:
• At the FBM website: www.fbmsales.com 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 telephone dial-in number in the U.S. is (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and
• Audio Replay: A replay of the call will be available beginning at 12:00 PM Eastern Time on Wednesday, May 9, 2018, and ending 11:59 PM Eastern Time May 16, 2018. Dial-in numbers for U.S. based participants are (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 13679454.

About Foundation Building Materials

Foundation Building Materials is a specialty building products distributor of wallboard, suspended ceiling systems, and mechanical insulation throughout North America. Based in Tustin, California, the Company employs more than 3,700 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.

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

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

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