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Foundation Building Materials, Inc. Announces Second Quarter 2020 Results

Company Release – 08/03/2020

2020 Second Quarter Highlights

  • Net sales of $486.1 million, a decrease of 13.2% compared to the prior year period
  • Net income from continuing operations of $9.9 million, a decrease of $4.9 million, compared to the prior year period
  • Adjusted net income(1) of $11.6 million, a decrease of $4.2 million, compared to the prior year period
  • Adjusted EBITDA(1) of $42.3 million compared to $50.3 million in the prior year period
  • Adjusted EBITDA margin(1) of 8.7% compared to 9.0% in the prior year period
  • Reduced net debt leverage ratio(1) to 2.64x at June 30, 2020 from 3.29x at June 30, 2019

SANTA ANA, Calif.–(BUSINESS WIRE)– Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building products distributors of wallboard, suspended ceiling systems, metal framing and complementary and other products in North America, today reported second quarter 2020 financial results and provided a COVID-19 business update.

“Despite the decline in net sales due to the COVID-19 Pandemic, our stable profitability highlighted our second quarter results,” said Ruben Mendoza, President and CEO. “Our long-term strategic focus is unwavering. As we navigate through these challenging market conditions, we remain committed to our strategic priorities that will lead to long-term value creation for our company.”

2020 Second Quarter Results

Net sales for the three months ended June 30, 2020, were $486.1 million compared to $559.9 million for the three months ended June 30, 2019, representing a decrease of $73.8 million, or 13.2%. Net sales from base business decreased $77.4 million compared to the prior period. There was the same number of business days in the current period as compared to the prior period. Net sales from acquired branches and existing branches that were strategically combined increased by $3.6 million. Our base business net sales across all of our major product lines decreased during the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily as a result of reduced business activity due to the impacts and disruptions caused by the novel coronavirus COVID-19 (the “COVID-19 Pandemic”).

Gross profit for the three months ended June 30, 2020, was $145.7 million compared to $171.5 million for the three months ended June 30, 2019, representing a decrease of $25.9 million, or 15.1%. The decrease in gross profit was primarily due to lower net sales. Gross margin for the three months ended June 30, 2020, was 30.0% compared to 30.6% for the three months ended June 30, 2019. The decrease in gross margin was primarily due to COVID-19 Pandemic related market disruptions.

Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2020, were $106.3 million compared to $122.7 million for the three months ended June 30, 2019, representing a decrease of $16.5 million, or 13.4%. As a percentage of net sales, SG&A expenses were 21.9% for the three months ended June 30, 2020, compared to 21.9% for the three months ended June 30, 2019. SG&A expenses remained flat as a percentage of net sales primarily due to proactive actions taken to right-size our cost structure in response to a decline in net sales resulting from the COVID-19 Pandemic.

Net income from continuing operations for the three months ended June 30, 2020, was $9.9 million, or $0.23 per share, a decrease of $4.9 million compared to $14.7 million, or $0.34 per share, for the three months ended June 30, 2019. Adjusted net income(1) for the three months ended June 30, 2020, was $11.6 million, or $0.27 per share, a decrease of $4.2 million compared to $15.8 million, or $0.37 per share, for the three months ended June 30, 2019.

Adjusted EBITDA(1) was $42.3 million and adjusted EBITDA margin(1) was 8.7% for the three months ended June 30, 2020, compared to adjusted EBITDA(1) of $50.3 million and adjusted EBITDA margin(1) of 9.0% for the three months ended June 30, 2019.

2020 Year-to-Date Results

Net sales for the six months ended June 30, 2020, were $1,010.3 million compared to $1,074.8 million for the six months ended June 30, 2019, representing a decrease of $64.4 million, or 6.0%. Average daily net sales decreased 6.7% over the prior period. Net sales from base business decreased $78.9 million compared to the prior period, and average daily base business net sales decreased by 8.4% over the prior period. There was one more business day in the current period as compared to the prior period. Net sales from acquired branches and existing branches that were strategically combined increased by $14.5 million. Our base business net sales across all of our major product lines decreased primarily as a result of reduced business activity due to impacts of the COVID-19 Pandemic.

Gross profit for the six months ended June 30, 2020, was $307.8 million compared to $324.5 million for the six months ended June 30, 2019, representing a decrease of $16.7 million, or 5.1%. The decrease in gross profit was primarily due to lower net sales. Gross margin for the six months ended June 30, 2020, was 30.5% compared to 30.2% for the six months ended June 30, 2019. The increase in gross margin was primarily due to improved profitability driven by our ongoing pricing and purchasing initiatives that was partially offset by COVID-19 Pandemic related market disruptions.

SG&A expenses for the six months ended June 30, 2020, were $229.4 million compared to $240.0 million for the six months ended June 30, 2019, representing a decrease of $10.6 million, or 4.4%. As a percentage of net sales, SG&A expenses were 22.7% for the six months ended June 30, 2020, compared to 22.3% for the six months ended June 30, 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 and our continued investment in various company-wide initiatives, partially offset by actions taken to right-size our cost structure in the second quarter in response to a decline in net sales.

Net income from continuing operations for the six months ended June 30, 2020, was $24.2 million, or $0.56 per share, an increase of $4.7 million compared to $19.5 million, or $0.45 per share, for the six months ended June 30, 2019. Adjusted net income(1) for the six months ended June 30, 2020, was $21.3 million, or $0.49 per share, a decrease of $0.5 million compared to $21.9 million, or $0.51 per share, for the six months ended June 30, 2019.

Adjusted EBITDA(1) was $82.5 million and adjusted EBITDA margin(1) was 8.2% for the six months ended June 30, 2020, compared to adjusted EBITDA(1) of $87.8 million and adjusted EBITDA margin(1) of 8.2% for the six months ended June 30, 2019.

COVID-19 Pandemic Business Update

Through July 2020, the COVID-19 Pandemic has had a negative impact on most of the markets in which the Company operates. In a select number of states, including Washington, California, Michigan, New Jersey, and the Commonwealth of Pennsylvania, the Company continued to have jobsite restrictions, which reduced branch operations. As a result, July 2020 net sales were down approximately 7% 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.

Second Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, August 4, 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:

  • Through the Company’s website: www.fbmsales.com under the “Events and Presentations” tab in the “Investors” section of the 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, August 4, 2020, and ending at 11:59 PM Eastern Time on Tuesday, August 11, 2020. The dial-in number for U.S.-based participants to listen to the audio replay 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 a Conference ID of 13707041.

About Foundation Building Materials

Foundation Building Materials, Inc. is a specialty building products distributor of wallboard, suspended ceiling systems, metal framing, and complementary and other products throughout North America. Based in Santa Ana, California, the Company employs more than 3,400 employees and operates more than 170 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 business and financial performance, the effect of certain strategic actions and cost-saving initiatives taken by the Company, and the Company’s ability to create long-term value. 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, as well as 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, as well as the information provided under the heading “Non-GAAP Financial Measures” 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. For a calculation of our net debt leverage ratio as of June 30, 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 June 30, 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 June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net sales$486,090  $559,911  $1,010,348  $1,074,783 
Cost of goods sold340,435  388,374  702,535  750,286 
Gross profit145,655  171,537  307,813  324,497 
Operating expenses:       
Selling, general and administrative expenses106,257  122,735  229,354  239,965 
Depreciation and amortization19,288  20,351  38,507  40,693 
Total operating expenses125,545  143,086  267,861  280,658 
Income from operations20,110  28,451  39,952  43,839 
Interest expense(7,153) (8,341) (14,886) (16,897)
Gain on legal settlement    8,556   
Other income (expense), net547  44  (475) 85 
Income before income taxes13,504  20,154  33,147  27,027 
Income tax expense3,647  5,433  8,914  7,478 
Income from continuing operations9,857  14,721  24,233  19,549 
Loss on sale from discontinued operations, net of tax  (44)   (1,390)
Net income$9,857  $14,677  $24,233  $18,159 
        
Earnings per share data:       
Earnings from continuing operations per share – basic0.23  0.34  0.56  0.45 
Earnings from continuing operations per share – diluted0.23  0.34  0.56  0.45 
        
Loss from discontinued operations per share – basic      (0.03)
Loss from discontinued operations per share – diluted      (0.03)
        
Earnings per share – basic0.23  0.34  0.56  0.42 
Earnings per share – diluted0.23  0.34  0.56  0.42 
        
Weighted average shares outstanding:       
Basic43,203,894  42,987,915  43,124,793  42,960,124 
Diluted43,332,225  43,245,353  43,440,723  43,064,496 
FOUNDATION BUILDING MATERIALS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(in thousands, except share data)
 
 June 30, 2020 December 31, 2019
Current assets:   
Cash and cash equivalents$31,122  $17,766 
Accounts receivable—net of allowance for expected credit losses of $2,896 and $3,169, respectively263,340  262,757 
Other receivables35,003  59,104 
Inventories159,615  178,624 
Prepaid expenses and other current assets9,386  7,965 
Total current assets498,466  526,216 
Property and equipment, net149,195  150,188 
Right-of-use assets, net126,290  120,562 
Intangible assets, net89,776  113,861 
Goodwill494,159  495,724 
Other assets6,607  5,206 
Total assets$1,364,493  $1,411,757 
Liabilities and stockholders’ equity:   
Current liabilities:   
Accounts payable$145,267  $145,226 
Accrued payroll and employee benefits25,458  31,410 
Accrued taxes9,594  8,780 
Current portion of tax receivable agreement8,537  27,850 
Current portion of term loan4,500  4,500 
Current portion of lease liabilities31,508  30,307 
Other current liabilities19,336  18,557 
Total current liabilities244,200  266,630 
Asset-based revolving credit facility40,000  89,000 
Long-term portion of term loan, net432,950  434,633 
Tax receivable agreement80,996  89,533 
Deferred income taxes, net21,670  18,972 
Long-term portion of lease liabilities100,867  97,145 
Other liabilities14,388  7,679 
Total liabilities935,071  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; 43,205,678 and 42,991,016 shares issued, respectively13  13 
Additional paid-in capital338,820  336,362 
Retained earnings98,487  74,254 
Accumulated other comprehensive loss(7,898) (2,464)
Total stockholders’ equity429,422  408,165 
Total liabilities and stockholders’ equity$1,364,493  $1,411,757 
FOUNDATION BUILDING MATERIALS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(in thousands)
 
 Six Months Ended June 30,
 2020 2019
Cash flows from operating activities:   
Net income$24,233  $18,159 
Less: loss on sale of discontinued operations  (1,390)
Net income from continuing operations24,233  19,549 
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:   
Depreciation14,598  17,558 
Amortization of intangible assets23,909  23,135 
Amortization of debt issuance costs and debt discount1,080  992 
Inventory fair value purchase accounting adjustment  234 
Provision for expected credit losses1,366  1,525 
Stock-based compensation2,828  1,939 
Loss (gain) on disposal or sale of assets708  (67)
Right-of-use assets non-cash expense15,057  13,601 
Deferred income taxes3,334  271 
Change in assets and liabilities, net of effects of acquisitions:   
Accounts receivable208  (43,441)
Other receivables23,435  13,581 
Inventories20,053  (1,291)
Prepaid expenses and other current assets(1,472) (3,123)
Other assets(6) (121)
Accounts payable1,333  23,429 
Accrued payroll and employee benefits(5,802) (3,057)
Accrued taxes827  (2,291)
Operating lease liabilities(14,752) (13,345)
Other liabilities4,365  4,126 
Net cash provided by operating activities from continuing operations115,302  53,204 
Cash flows from investing activities from continuing operations:   
Purchases of property and equipment(13,263) (15,052)
Proceeds from termination of net investment hedge  3,313 
Net (payments of) proceeds from net working capital adjustments related to acquisitions(34) 470 
Proceeds from disposal or sale of assets980  2,376 
Acquisitions, net of cash acquired(8,638) (21,923)
Net cash used in investing activities from continuing operations(20,955) (30,816)
Cash flows from financing activities from continuing operations:   
Proceeds from asset-based revolving credit facility322,500  281,620 
Repayments of asset-based revolving credit facility(371,500) (291,371)
Principal payments for term loan(2,250) (2,250)
Payment related to tax receivable agreement(27,850) (16,667)
Tax withholding payment related to net settlement of equity awards(370) (138)
Principal repayment of finance lease liabilities(1,355) (1,319)
Net cash used in financing activities from continuing operations(80,825) (30,125)
Net cash used in investing activities from discontinued operations  (1,390)
Net cash used in discontinued operations  (1,390)
Effect of exchange rate changes on cash(166) 282 
Net increase (decrease) in cash13,356  (8,845)
Cash and cash equivalents at beginning of period17,766  15,299 
Cash and cash equivalents at end of period$31,122  $6,454 
    
Supplemental disclosures of cash flow information:   
Cash paid for income taxes$190  $5,091 
Cash paid for interest$14,186  $16,477 
Supplemental disclosures of non-cash investing and financing activities:   
Decrease in fair value of derivatives, net of tax$1,525  $6,012 
Net goodwill increase for purchase price allocation$47  $57 
FOUNDATION BUILDING MATERIALS, INC.NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGINFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)(dollars in thousands)
 
 Three Months Ended June 30, Change
 2020 2019 $ %
Wallboard$188,588  38.8% $214,059  38.2% $(25,471) (11.9)%
Suspended ceiling systems 91,508  18.8%  106,176  19.0%  (14,668) (13.8)%
Metal framing 82,188  16.9%  102,425  18.3%  (20,237) (19.8)%
Complementary and other products 123,806  25.5%  137,251  24.5%  (13,445) (9.8)%
Total net sales$486,090  100.0% $559,911  100.0% $(73,821) (13.2)%
Total gross profit$145,655    $171,537    $(25,882) (15.1)%
Total gross margin 30.0%    30.6%    (0.6)%  
 
 
 Six Months Ended June 30, Change
 2020 2019 $ %
Wallboard$390,856  38.7% $416,973  38.8% $(26,117) (6.3)%
Suspended ceiling systems 190,014  18.8%  195,172  18.2%  (5,158) (2.6)%
Metal framing 175,522  17.4%  201,676  18.8%  (26,154) (13.0)%
Complementary and other products 253,956  25.1%  260,962  24.2%  (7,006) (2.7)%
Total net sales$1,010,348  100.0% $1,074,783  100.0% $(64,435) (6.0)%
Total gross profit$307,813    $324,497    $(16,684) (5.1)%
Total gross margin 30.5%    30.2%    0.3%  
   
FOUNDATION BUILDING MATERIALS, INC.BASE BUSINESS AND ACQUIRED AND COMBINED NET SALESFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)(dollars in thousands)
 
 Three Months Ended June 30, Change
 2020 2019 $ %
Base business (1)$457,811  $535,185  $(77,374) (14.5)%
Acquired and combined (2)28,279  24,726  3,553  14.4%
Net sales$486,090  $559,911  $(73,821) (13.2)%

(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.

Six Months Ended June 30, Change
 2020 2019 $ %
Base business (1)$951,189  $1,030,103  $(78,914) (7.7)%
Acquired and combined (2)59,159  44,680  14,479  32.4%
Net sales$1,010,348  $1,074,783  $(64,435) (6.0)%

(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 LINEFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)(dollars in thousands)
 
 Three
Months
Ended June
30, 2019
 Base
Business
Net Sales
Change
 Acquired
and
Combined
Net Sales
Change
 Three
Months
Ended June
30, 2020
 Total Net
Sales %
Change
Base
Business
Net Sales %
Change(1)
 Acquired
and
Combined
Net Sales
%
Change(2)
Wallboard$214,059  $(27,410) $1,939  $188,588  (11.9)%(13.3)% 23.4%
Suspended ceiling systems106,176  (15,112) 444  91,508  (13.8)%(15.0)% 8.2%
Metal framing102,425  (20,272) 35  82,188  (19.8)%(20.6)% 0.9%
Complementary and other products137,251  (14,580) 1,135  123,806  (9.8)%(11.2)% 16.1%
Net sales$559,911  $(77,374) $3,553  $486,090  (13.2)%(14.5)% 14.4%
Average daily net sales(3)$8,749  $(1,209) $55  $7,595  (13.2)%(14.5)% 14.4%

(1) Represents base business net sales change as a percentage of base business net sales for the three months ended June 30, 2019.
(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the three months ended June 30, 2019.
(3) The number of business days for the three months ended June 30, 2020 and 2019 was 64 for both periods.

Six Months
Ended June
30, 2019
 Base
Business
Net Sales
Change
 Acquired
and
Combined
Net Sales
Change
 Six Months
Ended June
30, 2020
 Total Net
Sales %
Change
Base
Business
Net Sales %
Change(1)
 Acquired
and
Combined
Net Sales
%
Change(2)
Wallboard$416,973  $(30,383) $4,266  $390,856  (6.3)%(7.6)% 26.7%
Suspended ceiling systems195,172  (10,995) 5,837  190,014  (2.6)%(5.9)% 73.1%
Metal framing201,676  (26,888) 734  175,522  (13.0)%(13.9)% 9.4%
Complementary and other products260,962  (10,648) 3,642  253,956  (2.7)%(4.3)% 28.2%
Net sales$1,074,783  $(78,914) $14,479  $1,010,348  (6.0)%(7.7)% 32.4%
Average daily net sales(3)$8,463  $(680) $110  $7,893  (6.7)%(8.4)% 31.4%

(1) Represents base business net sales change as a percentage of base business net sales for the six months ended June 30, 2019.
(2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the six months ended June 30, 2019.
(3) The numbers of business days for the six months ended June 30, 2020 and 2019 were 128 and 127, respectively.

Non-GAAP Financial Measures

In addition to presenting financial results prepared in accordance with Generally Accepted Accounting Principles (“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 (gain) on disposal or sale of assets, 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 (gain) on disposal or sale of assets, 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 June 30, 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 June 30, Six Months Ended June 30,
 2020 2019 2020 2019
(dollars in thousands)       
Net income from continuing operations 9,857  $14,721  24,233  19,549 
Interest expense, net 7,127   8,402  14,818  16,987 
Income tax expense 3,647   5,433  8,914  7,478 
Depreciation and amortization 19,288   20,351  38,507  40,693 
Stock-based compensation 1,435   1,110  2,828  1,939 
Loss (gain) on disposal or sale of assets 657   (258) 708  (67)
Gain on legal settlement      (8,556)  
Transaction costs(a) 245   582  1,084  1,227 
Adjusted EBITDA$42,256   50,341  82,536  87,806 
Adjusted EBITDA margin(b) 8.7%  9.0% 8.2% 8.2%
 
(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 June 30, Six Months Ended June 30,
 2020 2019 2020 2019
(in thousands, except share and per share data)       
Net income from continuing operations$9,857  $14,721  $24,233  $19,549 
Stock-based compensation1,435  1,110  2,828  1,939 
Loss (gain) on disposal or sale of assets657  (258) 708  (67)
Gain on legal settlement    (8,556)  
Transaction costs(a)245  582  1,084  1,227 
Tax effects(b)(602) (366) 1,014  (792)
Adjusted net income$11,592  $15,789  $21,311  $21,856 
        
Earnings per share data as reported:       
Basic$0.23  $0.34  $0.56  $0.45 
Diluted$0.23  $0.34  $0.56  $0.45 
Earnings per share data as adjusted:       
Basic$0.27  $0.37  $0.49  $0.51 
Diluted$0.27  $0.37  $0.49  $0.51 
        
Weighted average shares outstanding:       
Basic43,203,894  42,987,915  43,124,793  42,960,124 
Diluted43,332,225  43,245,353  43,440,723  43,064,496 
(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.

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

Source: Foundation Building Materials, Inc.