Exhibit
Continental Building Products Reports Third Quarter 2017 Results
Herndon, Virginia, November 9, 2017. Continental Building Products, Inc. (NYSE: CBPX) (the Company), a leading manufacturer of gypsum wallboard and complementary finishing products, announced today results for the third quarter ended September 30, 2017.
Highlights of Third Quarter 2017 and Comparisons to Third Quarter 2016
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• | Net sales increased 1.7% to $116.5 million |
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• | Net income increased 76.9% to $11.0 million; Adjusted net income1 increased 9% |
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• | Earnings per share increased 93.3% to $0.29; Adjusted earnings per share1 increased 16% |
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• | EBITDA1 was $31.8 million up 4.4% compared to $30.4 million |
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• | Gross margin improves 20 basis points to 24.5% |
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• | EBITDA1 margin improved 70 basis points to 27.3% |
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• | SG&A as a percentage of net sales improved 50 basis points to 7.6% |
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• | Invested $6.1 million in capital expenditures |
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• | Deployed $21.3 million to repurchase 941,039 shares of common stock |
"We delivered significant operating cash flow on stronger margins helped by higher net sales and improved SG&A performance," stated Jay Bachmann, Continental’s President and Chief Executive Officer. "Higher raw material costs continued to pressure gross margins into the second half of 2017, which we have increasingly worked to offset through other cost savings measures. The concentrated focus of our teams on continuous operational improvement and disciplined spending have supported our ability to reduce the impact of unfavorable industry cost dynamics, which allowed us to convert essentially all of our profits to operating cash flow during the quarter. Additionally, we used the cash to repurchase more than 2% of our outstanding shares in the quarter, and we are proud to announce that we have repurchased almost $100 million of our common stock since inception of the share repurchase program in November, 2015."
Mr. Bachmann continued, "In September, we provided an update on our manufacturing facility, operations and team in Palatka, Florida following the impact of Hurricane Irma. Given the disruption from the preparation for the storm, clean-up, and normalization of business operations, we estimate that the hurricane caused approximately 15 - 17 million square feet of our wallboard volumes to be pushed into subsequent quarters. We anticipate playing an integral role in rebuilding our affected communities and participating in the continued expected strong economic growth in the Southeast United States.”
1 See the financial schedules at the end of this press release for a reconciliation of EBITDA, adjusted net income and adjusted earnings per share, which are a non-GAAP financial measure, to relevant GAAP financial measures, and a discussion of why they are useful to investors.
Third Quarter 2017 Results vs. Third Quarter 2016
Wallboard volumes increased to 644 million square feet (MMSF) for the third quarter 2017, compared to 634 MMSF in the prior year quarter. Net sales were up 1.7% to $116.5 million, compared to $114.6 million in the prior year quarter, primarily due to an increase in wallboard volumes.
Operating income was $19.7 million, compared to $18.6 million in the prior year quarter. This increase was primarily attributable to higher volumes, lower freight and maintenance costs, which was partially offset by higher input costs. SG&A expense was $8.9 million compared to $9.2 million in the prior year quarter, or 7.6% as a percentage of net sales compared to 8.1% in the prior year quarter.
Interest expense decreased 5.0% to $3.0 million, compared to $3.1 million in the prior year quarter, reflecting lower average outstanding borrowings during third quarter 2017 compared to third quarter 2016 and the lower interest rate spread over the LIBOR following the debt refinancing in August 2016 and debt repricing in February 2017. This decrease was partially offset by the rise in LIBOR.
Net income for the third quarter 2017 increased 76.9% to $11.0 million, compared to $6.2 million in the prior year quarter. The improvement in net income was primarily driven by the non-recurring costs related to debt refinancing that were incurred in the third quarter 2016 partially offset by an increase in provision for income taxes as a result of taxable income increasing. EPS was $0.29 per share, compared to $0.15 per share, in the third quarter 2016. EBITDA1 was $31.8 million for the third quarter 2017, compared to $30.4 million in the prior year quarter. EBITDA1 margin increased to 27.3% compared to 26.6% in the prior year quarter. This improvement in EBITDA1 was driven by higher volumes, lower maintenance costs and SG&A expense compared to the prior year quarter.
Balance Sheet and Cash Flow
As of September 30, 2017, the Company had cash of $59.9 million and total outstanding borrowing under the credit agreement of $271.6 million. During the third quarter 2017, the Company generated cash flows from operations of $32.6 million and incurred $6.1 million of capital expenditures and software development costs.
During the third quarter 2017, the Company repurchased 941,039 shares of its common stock under its repurchase program at an aggregate purchase price of $21.3 million, representing 2.4% of its outstanding shares as of December 31, 2016. Since the inception of this program in November 2015, the Company has repurchased $97.8 million of its common stock through September 30, 2017.
Forward-Looking Guidance
For the full year 2017, guidance on certain measures is as follows:
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• | SG&A is expected to be in the range of $37 - $39 million down from our prior guidance of $38 - $40 million. |
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• | Cost of goods sold inflation is expected to be at 6% to 7%. |
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• | Total capital expenditures is expected to be in the range of $22 - $27 million down from our prior guidance of $24 ‑ $31 million. |
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◦ | Maintenance capital spending is expected to be in the range of $11 - $13 million narrowed from our prior guidance of $12 - $14 million. |
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◦ | High-return plant network capital spending is expected to be in the range of $11 - $14 million, down from our prior guidance of $12 - $17 million. |
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• | Depreciation and amortization is expected to be in the range of $46 - $47 million, up from our prior guidance of $43 ‑ $45 million. |
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• | Effective interest rate on our term loan is expected to be 4.1%, while the cash interest rate is expected to be 3.7%, up from our prior guidance of 3.6%. |
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• | Effective tax rate is expected to be in the range of 33% - 35%. |
Investor Conference Webcast and Conference Call
The Company will host a webcast and conference call on Thursday, November 9, 2017 at 5:00 p.m. Eastern time to review third quarter 2017 financial results and discuss recent events and conduct a question-and-answer period. The live webcast will be available on the Investor Relations section of the Company’s website at www.continental-bp.com. To participate in the call, please dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of the conference call will be available through December 9, 2017, by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the passcode 13634638.
About Continental Building Products
Continental Building Products is a leading North American manufacturer of gypsum wallboard and complementary finishing products. The Company is headquartered in Herndon, Virginia with operations serving the residential, commercial and repair and remodel construction markets primarily in the eastern United States and eastern Canada. For additional information, visit www.continental-bp.com.
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. 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 historical information available at the time the statements are made and are based on management’s reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company’s control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and its 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.
Contact Information
Investor Relations:
Tel.: 703-480-3980
Investorrelations@continental-bp.com
Continental Building Products, Inc.
Consolidated Statements of Operations
(unaudited)
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| | | | | | | | | | | | | | | |
| For the Three Months Ended | | For the Nine Months Ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
| (in thousands, except share data and per share amounts) |
Net sales | $ | 116,526 |
| | $ | 114,558 |
| | $ | 357,771 |
| | $ | 343,158 |
|
Costs, expenses and other income: | | | | | | | |
Cost of goods sold | 87,952 |
| | 86,756 |
| | 267,393 |
| | 250,455 |
|
Selling and administrative | 8,867 |
| | 9,241 |
| | 27,364 |
| | 28,364 |
|
Total costs and operating expenses | 96,819 |
| | 95,997 |
| | 294,757 |
| | 278,819 |
|
Operating income | 19,707 |
| | 18,561 |
| | 63,014 |
| | 64,339 |
|
Other income/(expense), net | 146 |
| | (5,900 | ) | | (633 | ) | | (5,740 | ) |
Interest expense, net | (2,988 | ) | | (3,146 | ) | | (8,966 | ) | | (10,492 | ) |
Income before losses from equity method investment and provision for income tax | 16,865 |
| | 9,515 |
| | 53,415 |
| | 48,107 |
|
Losses from equity method investment | (204 | ) | | (291 | ) | | (29 | ) | | (726 | ) |
Income before provision for income taxes | 16,661 |
| | 9,224 |
| | 53,386 |
| | 47,381 |
|
Provision for income taxes | (5,674 | ) | | (3,014 | ) | | (17,774 | ) | | (15,948 | ) |
Net income | $ | 10,987 |
| | $ | 6,210 |
| | $ | 35,612 |
| | $ | 31,433 |
|
| | | | | | | |
Net income per share: | | | | | | | |
Basic | $ | 0.29 |
| | $ | 0.15 |
| | $ | 0.91 |
| | $ | 0.77 |
|
Diluted | $ | 0.29 |
| | $ | 0.15 |
| | $ | 0.91 |
| | $ | 0.77 |
|
Weighted average shares outstanding: | | | | | | | |
Basic | 38,212,869 |
| | 40,318,741 |
| | 38,966,575 |
| | 40,836,000 |
|
Diluted | 38,345,556 |
| | 40,388,185 |
| | 39,080,973 |
| | 40,879,809 |
|
Continental Building Products, Inc.
Consolidated Balance Sheets
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| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (unaudited) | | |
| (in thousands) |
Assets: | | | |
Cash and cash equivalents | $ | 59,948 |
| | $ | 51,536 |
|
Receivables, net | 31,026 |
| | 32,473 |
|
Inventories, net | 26,252 |
| | 25,239 |
|
Prepaid and other current assets | 7,279 |
| | 7,485 |
|
Total current assets | 124,505 |
| | 116,733 |
|
Property, plant and equipment, net | 294,266 |
| | 307,838 |
|
Customer relationships and other intangibles, net | 72,713 |
| | 81,555 |
|
Goodwill | 119,945 |
| | 119,945 |
|
Equity method investment | 9,279 |
| | 8,020 |
|
Debt issuance costs | 523 |
| | 658 |
|
Total Assets | $ | 621,231 |
| | $ | 634,749 |
|
Liabilities and Shareholders' Equity: | | | |
Liabilities: | | | |
Accounts payable | $ | 25,989 |
| | $ | 27,411 |
|
Accrued and other liabilities | 12,293 |
| | 12,321 |
|
Notes payable, current portion | 1,712 |
| | 1,742 |
|
Total current liabilities | 39,994 |
| | 41,474 |
|
Deferred taxes and other long-term liabilities | 19,257 |
| | 19,643 |
|
Notes payable, non-current portion | 263,352 |
| | 264,620 |
|
Total Liabilities | 322,603 |
| | 325,737 |
|
Equity: | | | |
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2017 and December 31, 2016 | — |
| | — |
|
Common stock, $0.001 par value per share; 190,000,000 shares authorized; 44,304,827 and 44,191,370 shares issued at September 30, 2017 and December 31, 2016, respectively; 37,715,010 and 39,691,715 shares outstanding at September 30, 2017 and December 31, 2016, respectively | 44 |
| | 44 |
|
Additional paid-in capital | 324,708 |
| | 322,384 |
|
Less: Treasury stock | (137,884 | ) | | (88,756 | ) |
Accumulated other comprehensive loss | (2,601 | ) | | (3,409 | ) |
Accumulated earnings | 114,361 |
| | 78,749 |
|
Total Equity | 298,628 |
| | 309,012 |
|
Total Liabilities and Equity | $ | 621,231 |
| | $ | 634,749 |
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Continental Building Products, Inc.
Consolidated Statements of Cash Flows
(unaudited)
|
| | | | | | | |
| For the Nine Months Ended |
| September 30, 2017 | | September 30, 2016 |
| (in thousands) |
Cash flows from operating activities: | | | |
Net income | $ | 35,612 |
| | $ | 31,433 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 35,817 |
| | 35,656 |
|
(Release of)/provision for bad debt expense | (53 | ) | | 15 |
|
Amortization of debt issuance costs and debt discount | 885 |
| | 1,651 |
|
Loss on disposal of property, plant and equipment | 18 |
| | 41 |
|
Losses from equity method investment | 29 |
| | 726 |
|
Loss on debt extinguishment | 686 |
| | 5,802 |
|
Stock-based compensation | 2,101 |
| | 1,769 |
|
Deferred taxes | 92 |
| | 340 |
|
Change in assets and liabilities: | | | |
Receivables | 1,473 |
| | 1,303 |
|
Inventories | (872 | ) | | 242 |
|
Prepaid expenses and other current assets | (350 | ) | | 3,147 |
|
Accounts payable | (105 | ) | | 2,942 |
|
Accrued and other current liabilities | 4 |
| | 502 |
|
Other long term liabilities | (245 | ) | | (477 | ) |
Net cash provided by operating activities | 75,092 |
| | 85,092 |
|
Cash flows from investing activities: | | | |
Capital expenditures | (14,077 | ) | | (4,797 | ) |
Software purchased or developed | (183 | ) | | (386 | ) |
Capital contributions to equity method investment | (1,929 | ) | | (259 | ) |
Distributions from equity method investment | 641 |
| | 498 |
|
Net cash used in investing activities | (15,548 | ) | | (4,944 | ) |
Cash flows from financing activities: | | | |
Proceeds from exercise of stock options | 230 |
| | 20 |
|
Tax withholdings on share-based compensation | (240 | ) | | — |
|
Proceeds from debt refinancing | 273,625 |
| | 275,000 |
|
Disbursements for debt refinancing | (273,625 | ) | | (271,988 | ) |
Payments of financing costs | (649 | ) | | (4,424 | ) |
Principal payments for debt | (2,052 | ) | | (25,688 | ) |
Payments to repurchase common stock | (49,128 | ) | | (33,427 | ) |
Net cash used in financing activities | (51,839 | ) | | (60,507 | ) |
Effect of foreign exchange rates on cash and cash equivalents | 707 |
| | 388 |
|
Net change in cash and cash equivalents | 8,412 |
| | 20,029 |
|
Cash, beginning of period | 51,536 |
| | 14,729 |
|
Cash, end of period | $ | 59,948 |
| | $ | 34,758 |
|
Reconciliation of Non-GAAP Measures
EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share have been presented in this press release as supplemental measures of financial performance that are not required by, or presented in accordance with, Generally Accepted Accounting Principles (GAAP). This release presents EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share as supplemental performance measures because management believes that they facilitate a comparative assessment of the Company’s operating performance relative to its performance based on results under GAAP while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company’s operations and underlying operational performance. Furthermore, the Company's Board of Director compensation committee uses EBITDA to evaluate management's compensation. Management also believes that EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share are useful to investors because they allow investors to view the business through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods.
EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies because other companies may not calculate EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share in the same manner. EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share are not measurements of the Company’s financial performance under GAAP and should not be considered in isolation or as alternatives to net income or earnings per share determined in accordance with GAAP or any other financial statement data presented as indicators of financial performance or liquidity, each as calculated and presented in accordance with GAAP.
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| | | | | | | | | | | | | | | |
Reconciliation of Net Income to EBITDA | | | | |
| For the Three Months Ended | | For the Nine Months Ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
| (in thousands) |
Net income | $ | 10,987 |
| | $ | 6,210 |
| | $ | 35,612 |
| | $ | 31,433 |
|
Adjustments: | | | | | | | |
Other (income)/expense, net | (146 | ) | | 5,900 |
| | 633 |
| | 5,740 |
|
Interest expense, net | 2,988 |
| | 3,146 |
| | 8,966 |
| | 10,492 |
|
Losses from equity method investment | 204 |
| | 291 |
| | 29 |
| | 726 |
|
Provision for income taxes | 5,674 |
| | 3,014 |
| | 17,774 |
| | 15,948 |
|
Depreciation and amortization | 12,057 |
| | 11,868 |
| | 35,817 |
| | 35,656 |
|
EBITDA—Non-GAAP Measure | $ | 31,764 |
| | $ | 30,429 |
| | $ | 98,831 |
| | $ | 99,995 |
|
EBITDA Margin - EBITDA as a percentage of net sales - Non-GAAP Measure | 27.3 | % | | 26.6 | % | | 27.6 | % | | 29.1 | % |
|
| | | | | | | | | | | | | | | |
Reconciliation of Net Income and Earnings Per Share (EPS) to Adjusted Net Income and Adjusted EPS |
| For the Three Months Ended | | For the Nine Months Ended |
| September 30, 2017 | | September 30,
2016 | | September 30,
2017 | | September 30,
2016 |
| (dollars in thousands, except per share amounts) |
Net income - GAAP Measure | $ | 10,987 |
| | $ | 6,210 |
| | $ | 35,612 |
| | $ | 31,433 |
|
Expense of original issue discount and deferred financing fees for debt refinancing, after tax (a) | — |
| | 3,842 |
| | 454 |
| | 3,842 |
|
Adjusted net income - non-GAAP measure | $ | 10,987 |
| | $ | 10,052 |
| | $ | 36,066 |
| | $ | 35,275 |
|
| | | | | | | |
Earnings per share - GAAP measure | $ | 0.29 |
| | $ | 0.15 |
| | $ | 0.91 |
| | $ | 0.77 |
|
Expense of original issue discount and deferred financing fees for debt refinancing, after tax (a) | — |
| | 0.10 |
| | 0.02 |
| | 0.09 |
|
Adjusted earnings per share - non-GAAP measure | $ | 0.29 |
| | $ | 0.25 |
| | $ | 0.93 |
| | $ | 0.86 |
|
| |
(a) | Expense for debt repricing and expense for debt pricing per share is shown net of income tax benefit of $0.2 million. |
|
| | | | | | | | | | | | | | | |
Other Financial and Operating Data |
| For the Three Months Ended | | For the Nine Months Ended |
| September 30, 2017 | | September 30, 2016 | | September 30, 2017 | | September 30, 2016 |
| (dollars in thousands, except mill net) |
Capital expenditures and software purchased or developed | $ | 6,057 |
| | $ | 3,062 |
| | $ | 14,260 |
| | $ | 5,183 |
|
Wallboard sales volume (million square feet) | 644 |
| | 634 |
| | 1,941 |
| | 1,894 |
|
Mill net sales price (a) | $ | 144.90 |
| | $ | 144.34 |
| | $ | 147.72 |
| | $ | 144.61 |
|
| |
(a) | Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs. |
|
| | | | | | | | | | | | | | | | | | | |
Interim Volumes and Mill Net Prices |
| For the Three Months Ended |
| September 30,
2016 | | December 31,
2016 | | March 31,
2017 | | June 30,
2017 | | September 30,
2017 |
Volumes (million square feet) | 634 |
| | 666 |
| | 650 |
| | 647 |
| | 644 |
|
Mill net sales price | $ | 144.34 |
| | $ | 141.61 |
| | $ | 147.92 |
| | $ | 150.32 |
| | $ | 144.90 |
|
