EX-99.1 2 ex991q32016earningsrelease.htm EXHIBIT 99.1 Exhibit

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Continental Building Products Reports Third Quarter 2016 Results

Herndon, Virginia, November 7, 2016. Continental Building Products, Inc. (NYSE: CBPX) (the Company), a leading manufacturer of wallboard and gypsum-based products, announced today results for the third quarter ended September 30, 2016.
Highlights of Third Quarter 2016 as Compared to Third Quarter 2015
•
Net sales of $114.6 million rose by 5.9%
•
Cash flow from operations increased to $35.6 million, up 25.3%
•
Net income improved to $6.2 million compared to $4.2 million
•
Adjusted EBITDA1 of $30.4 million down from $33.7 million
•
Earnings per share increased 50.0% to $0.15; Adjusted earnings per share1 remained constant at $0.25
•
Deployed $11.4 million to repurchase 520,843 shares of common stock
•
Extended debt maturity and reduced interest rate through successful refinancing
“We are pleased to achieve another quarter of revenue growth and significant cash flow generation reflecting the strength of our highly efficient, low cost operations,” stated Jay Bachmann, Continental’s Chief Executive Officer. “For the third consecutive quarter, we experienced stronger demand in our markets east of the Mississippi which drove the 6% net sales growth versus last year. We converted all of our adjusted EBITDA into operating cash flow and deployed over $11 million for share repurchases to enhance shareholder returns. As we look to the remainder of 2016, we remain committed to executing our operational initiatives and taking advantage of value-enhancing opportunities.”
Third Quarter 2016 Results vs. Third Quarter 2015
Wallboard volumes increased to 634 million square feet (MMSF), compared to 567 MMSF in the prior year quarter, helped by continued stronger demand in the construction markets, specifically new residential and overall in the Southeast. Net sales were up 5.9% to $114.6 million on higher volumes, compared to $108.2 million in the prior year quarter, partially offset by lower average mill net price2 of $144.34, compared to $153.05 in the prior year quarter. Average mill net price was essentially flat on a sequential quarter basis when compared to $144.86 in the second quarter 2016.
Gross profit was $27.8 million, compared to $30.0 million in the prior year quarter. Gross margin declined to 24.3% compared to 27.7% in the prior year quarter, primarily as a result of higher raw material and maintenance costs.

1 See the financial schedules at the end of this press release for a reconciliation of adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted earnings per share, which are non-GAAP financial measures, to relevant GAAP financial measures.
2 Mill net price represents average selling price per thousand square feet (MSF), net of freight and delivery costs.



SG&A expense was $9.2 million compared to $9.0 million in the prior year quarter, or 8.1% as a percentage of net sales compared to 8.3% in the prior year quarter.
Operating income was $18.6 million, compared to $11.1 million in the prior year quarter.
Other expenses, net was $5.9 million which primarily consists of $5.8 million of debt refinancing expenses which includes non-cash write-off of debt issuance costs related to the first lien credit agreement.
Interest expense decreased 24.3% to $3.1 million, compared to $4.2 million in the prior year quarter, reflecting our continued reduction of long-term debt throughout the past twelve months and our debt refinancing in August 2016.
Net income for the third quarter 2016 grew to $6.2 million, or $0.15 per share, compared to $4.2 million, or $0.10 per share, in the third quarter 2015. Adjusted net income1 decreased slightly to $10.1 million, compared to $10.7 million in the prior year quarter. Adjusted earnings per share1 remained constant at $0.25 per share for the third quarter 2016 compared to the prior year quarter. Adjusted EBITDA1 was $30.4 million, compared to $33.7 million in the prior year quarter.
Balance Sheet and Cash Flow
In August, 2016, the Company closed the refinancing of its entire outstanding long term debt. The new borrowings consist of a $275.0 million senior secured term loan facility and a $75.0 million senior secured revolving credit facility. Borrowings under the new term loan bear interest at a floating rate based on LIBOR, with a 0.75% floor, plus 2.75%, compared to the previous term loan which had a floating rate based on LIBOR, with a 1.00% floor, plus 3.00%. Additionally, the new term loan has a final maturity in 2023, compared to the prior term loan which was due in 2020.
As of September 30, 2016, the Company had cash of $34.8 million and total outstanding borrowing under the credit agreement of $274.3 million. During the three months ended September 30, 2016, the Company generated cash flows from operations of $35.6 million and incurred $3.1 million of capital expenditures and software development costs.
During the third quarter of 2016, the Company repurchased 520,843 shares of its common stock at an aggregate purchase price of $11.4 million as part of its $100.0 million share repurchase program. For the nine months ended September 30, 2016, the Company repurchased a total of 1,803,982 shares of its common stock at an aggregate purchase price of $33.4 million, representing 4.3% of its outstanding shares as of December 31, 2015.


2


Investor Conference Webcast and Conference Call:
The Company will host a webcast and conference call on Monday, November 7, 2016 at 5:00 p.m. Eastern time to review third quarter 2016 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 7, 2016, 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 for the fiscal year 2015 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


3


Continental Building Products, Inc.
Consolidated Statements of Operations
(unaudited)
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
2016
 
September 30,
2015
 
September 30,
2016
 
September 30,
2015
 
(in thousands, except share data and per share amounts)
Net sales
$
114,558

 
$
108,150

 
$
343,158

 
$
311,322

Costs, expenses and other income:
 
 
 
 
 
 
 
Cost of goods sold
86,756

 
78,151

 
250,455

 
231,342

Selling and administrative
9,241

 
9,008

 
28,364

 
26,799

Long Term Incentive Plan funded by Lone Star
—

 
9,933

 
—

 
29,946

Total costs and operating expenses
95,997

 
97,092

 
278,819

 
288,087

Operating income
18,561

 
11,058

 
64,339

 
23,235

Other expense, net
(5,900
)
 
(283
)
 
(5,740
)
 
(700
)
Interest expense, net
(3,146
)
 
(4,154
)
 
(10,492
)
 
(12,559
)
Income before losses from equity method investment and provision for income tax
9,515

 
6,621

 
48,107

 
9,976

Losses from equity method investment
(291
)
 
(278
)
 
(726
)
 
(530
)
Income before provision for income taxes
9,224

 
6,343

 
47,381

 
9,446

Provision for income taxes
(3,014
)
 
(2,104
)
 
(15,948
)
 
(3,313
)
Net income
$
6,210

 
$
4,239

 
$
31,433

 
$
6,133

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.15

 
$
0.10

 
$
0.77

 
$
0.14

Diluted
$
0.15

 
$
0.10

 
$
0.77

 
$
0.14

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
40,318,741

 
42,999,654

 
40,836,000

 
43,556,876

Diluted
40,388,185

 
43,057,749

 
40,879,809

 
43,596,978



4


Continental Building Products, Inc.
Consolidated Balance Sheets
 
September 30, 2016
 
December 31, 2015
 
(unaudited)
 
 
 
(in thousands)
Assets:
 
 
 
Cash and cash equivalents
$
34,758

 
$
14,729

Receivables, net
34,531

 
35,812

Inventories
26,965

 
27,080

Prepaid and other current assets
3,090

 
6,448

Total current assets
99,344

 
84,069

Property, plant and equipment, net
307,443

 
326,407

Customer relationships and other intangibles, net
85,105

 
94,835

Goodwill
119,945

 
119,945

Equity method investment
8,297

 
9,262

Debt issuance costs
704

 
450

Total Assets
$
620,838

 
$
634,968

Liabilities and Shareholders' Equity:
 
 
 
Liabilities:
 
 
 
Accounts payable
$
27,190

 
$
22,788

Accrued and other liabilities
12,626

 
12,334

Notes payable, current portion
1,746

 
—

Total current liabilities
41,562

 
35,122

Deferred taxes and other long-term liabilities
12,466

 
12,537

Notes payable, non-current portion
265,053

 
286,543

Total Liabilities
319,081

 
334,202

Equity:
 
 
 
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2016 and December 31, 2015
—

 
—

Common stock, $0.001 par value per share; 190,000,000 shares authorized; 44,191,370 and 44,145,080 shares issued at September 30, 2016 and December 31, 2015, respectively; 39,992,339 and 41,750,031 shares outstanding at September 30, 2016 and December 31, 2015, respectively
44

 
44

Additional paid-in capital
321,865

 
319,817

Less: Treasury stock
(81,906
)
 
(48,479
)
Accumulated other comprehensive loss
(4,403
)
 
(5,341
)
Accumulated earnings
66,157

 
34,725

Total Equity
301,757

 
300,766

Total Liabilities and Equity
$
620,838

 
$
634,968



5


Continental Building Products, Inc.
Consolidated Statements of Cash Flows
(unaudited)
 
For the Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
31,433

 
$
6,133

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
35,656

 
38,931

Bad debt expense/(recovery)
15

 
(250
)
Amortization of debt issuance costs and debt discount
1,651

 
1,742

Loss on disposal of property, plant and equipment
41

 
—

Losses from equity method investment
726

 
530

Loss on debt extinguishment
5,802

 
—

Stock-based compensation
1,769

 
730

Deferred taxes
340

 
(491
)
Change in assets and liabilities:
 
 
 
Receivables
1,303

 
2,654

Inventories
242

 
(2,401
)
Prepaid expenses and other current assets
3,147

 
1,178

Accounts payable
2,942

 
1,955

Accrued and other current liabilities
502

 
275

Other long term liabilities
(477
)
 
(142
)
Net cash provided by operating activities
85,092

 
50,844

Cash flows from investing activities:
 
 
 
Capital expenditures
(4,797
)
 
(2,851
)
Software purchased or developed
(386
)
 
(880
)
Capital contributions to equity method investment
(259
)
 
(4
)
Distributions from equity method investment
498

 
797

Net cash used in investing activities
(4,944
)
 
(2,938
)
Cash flows from financing activities:
 
 
 
Capital contribution from Lone Star Funds
—

 
29,750

Proceeds from exercise of stock options
20

 
—

Proceeds from debt refinancing
275,000

 
—

Disbursements for debt refinancing
(271,988
)
 
—

Payments of financing costs
(4,424
)
 
—

Principal payments for First Lien Credit Agreement
(25,688
)
 
(35,000
)
Payments to repurchase common stock
(33,427
)
 
(40,035
)
Net cash used in financing activities
(60,507
)
 
(45,285
)
Effect of foreign exchange rates on cash and cash equivalents
388

 
(990
)
Net change in cash and cash equivalents
20,029

 
1,631

Cash, beginning of period
14,729

 
15,627

Cash, end of period
$
34,758

 
$
17,258


6


Reconciliation of Non-GAAP Measures
EBITDA, Adjusted EBITDA, Adjusted 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, Adjusted EBITDA, Adjusted 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 non-GAAP EBITDA to evaluate management's compensation. Management also believes that EBITDA, Adjusted EBITDA, Adjusted 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, Adjusted EBITDA, Adjusted 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, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share in the same manner. EBITDA, Adjusted EBITDA, Adjusted 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.
Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Adjusted EBITDA
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
2016
 
September 30,
2015
 
September 30,
2016
 
September 30,
2015
 
(in thousands)
Net income
$
6,210

 
$
4,239

 
$
31,433

 
$
6,133

Adjustments:
 
 
 
 
 
 
 
Other expense, net
5,900

 
283

 
5,740

 
700

Interest expense, net
3,146

 
4,154

 
10,492

 
12,559

Losses from equity method investment
291

 
278

 
726

 
530

Provision for income taxes
3,014

 
2,104

 
15,948

 
3,313

Depreciation and amortization
11,868

 
12,661

 
35,656

 
38,931

EBITDA—Non-GAAP Measure
30,429

 
23,719

 
99,995

 
62,166

Long Term Incentive Plan Funded by Lone Star (a)
—

 
9,933

 
—

 
29,946

Adjusted EBITDA—Non-GAAP Measure
$
30,429

 
$
33,652

 
$
99,995

 
$
92,112

Adjusted EBITDA Margin - Adjusted EBITDA as a percentage of net sales - Non-GAAP Measure
26.6
%
 
31.1
%
 
29.1
%
 
29.6
%
(a)
Represents expense recognized pursuant to the Long Term Incentive Plan sponsored by an affiliate of Lone Star Funds. The amounts were funded by the affiliate of Lone Star Funds.



7


Reconciliation of GAAP Net Income and Earnings Per Share (EPS) to Non-GAAP Adjusted Net Income and Adjusted EPS
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
2016
 
September 30,
2015
 
September 30,
2016
 
September 30,
2015
 
(dollars in thousands, except per share amounts)
Net income - GAAP Measure
$
6,210

 
$
4,239

 
$
31,433

 
$
6,133

Expense of original issue discount and deferred financing fees for debt refinancing, after tax
3,842

 
—

 
3,842

 
—

Long Term Incentive Plan funded by Lone Star, after tax (a)
—

 
6,456

 
—

 
19,465

Adjusted net income - non-GAAP measure
$
10,052

 
$
10,695

 
$
35,275

 
$
25,598

 
 
 
 
 
 
 
 
Earnings per share - GAAP measure
$
0.15

 
$
0.10

 
$
0.77

 
$
0.14

Expense of original issue discount and deferred financing fees for debt refinancing, after tax (b)
0.10

 
—

 
0.09

 
—

Long Term Incentive Plan funded by Lone Star, after tax
—

 
0.15

 
—

 
0.45

Adjusted earnings per share - non-GAAP measure
$
0.25

 
$
0.25

 
$
0.86

 
$
0.59

(a)
Represents expense recognized pursuant to the LTIP. All amounts were funded by an affiliate of Lone Star Funds.
(b)
The earnings per share for the three months and nine month ended September 30, 2016 differ due to the required method of computing the weighted average shares outstanding in interim periods.
Other Financial and Operating Data:
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
2016
 
September 30,
2015
 
September 30,
2016
 
September 30,
2015
 
(dollars in thousands, except mill net)
Capital expenditures and software purchased or developed
$
3,062

 
$
1,444

 
$
5,183

 
$
3,731

Wallboard sales volume (million square feet)
634

 
567

 
1,894

 
1,603

Mill net sales price (a)
$
144.34

 
$
153.05

 
$
144.61

 
$
155.68

(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 (Unaudited)
 
For the Three Months Ended
 
September 30,
2015
 
December 31,
2015
 
March 31,
2016
 
June 30,
2016
 
September 30,
2016
Volumes (million square feet)
567

 
596

 
617

 
643

 
634

Mill net Price per MSF - Total
$
153.05

 
$
148.37

 
$
144.62

 
$
144.86

 
$
144.34

Mill net Price per MSF - U.S. only
$
157.05

 
$
151.74

 
$
147.54

 
$
148.15

 
$
147.96



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