Continental Building Products Reports Fourth Quarter and Full Year 2017 Results
– Produces Record Full Year Net Sales, Operating Income and Net
Income –
– Expands Stock Repurchase Program to $300 Million and Extends
Through 2019 –
HERNDON, Va.–(BUSINESS WIRE)–Continental Building Products, Inc. (NYSE: CBPX) (the "Company"), a
leading manufacturer of gypsum wallboard and complementary finishing
products, announced today results for the fourth quarter and year ended
December 31, 2017.
Highlights of Fourth Quarter 2017 as Compared to Fourth Quarter 2016
-
Net sales increased 11.1% to $131.4 million on higher wallboard
volumes and average mill net price -
Net income increased 92.5% to $24.2 million due in part to the
recently enacted tax legislation; Adjusted net income1
increased 22.2% to $15.4 million -
Earnings per share increased 100.0% to $0.64; Adjusted earnings per
share1 increased 28.1% to $0.41 -
EBITDA1 grew to $37.2 million up 10.1% compared to
$33.8 million
Highlights of Full Year 2017 as Compared to Full Year 2016
- Net sales increased 6.0% to $489.2 million
-
Net income increased 35.9% to $59.8 million due in part to the
recently enacted tax legislation; Adjusted net income1
increased 7.5% to $51.5 million -
Earnings per share increased 43.5% to $1.55; Adjusted earnings per
share1 increased 12.7% to $1.33 -
EBITDA1 grew to $136.0 million up 1.7% compared to
$133.8 million - SG&A as a percentage of net sales improved 50 basis points to 7.7%
- Deployed $11.0 million in high-return investments
- Deployed $54.6 million to repurchase 2.3 million shares of common stock
"We wrapped up 2017 with a strong fourth quarter resulting in a 10%
increase in EBITDA and a double digit increase in earnings per share as
we began to realize the benefits of our high-return capital investments
and our Bison Way continuous improvement efforts," stated Jay Bachmann,
Continental's President and Chief Executive Officer. "Net sales up 11%
demonstrated the incredible focus of our employees on the customer while
driving higher operating profit at improved margins year-over-year."
Mr. Bachmann continued, "For the full year, our disciplined operational
focus drove improved earnings in an inflationary cost environment and
delivered strong margins that are among the industry leaders. We also
invested significant operating cash flow to repurchase shares and
reinvest in our business to further augment returns. As we look ahead to
2018, our strong balance sheet and anticipated cash flows firmly
position us to execute on additional value enhancing opportunities.
These opportunities include high-return capital investments, which are
expected to be between $25 and $35 million from 2018 through 2019, and
our expanded share repurchase authorization, which was increased from
$200 million to $300 million through 2019. We are inspired by the
dedicated efforts of our employees, who work incredibly hard every day
to streamline processes, eliminate waste and continuously improve our
operations with the aim of further enhancing Continental's position as
the wallboard supplier of choice."
Fourth Quarter 2017 Results vs. Fourth Quarter 2016
Wallboard sales volumes increased to 725 million square feet (MMSF) for
the fourth quarter 2017, compared to 666 MMSF in the prior year quarter.
Net sales were up 11.1% to $131.4 million, compared to $118.2 million in
the prior year quarter, primarily due to an increase in wallboard
volumes and average mill net price.
Operating income was $26.6 million, compared to $22.8 million in the
prior year quarter. This increase was primarily attributable to higher
wallboard volumes, which were partially offset by higher input costs.
SG&A expense was $10.4 million compared to $9.6 million in the prior
year quarter, or 7.9% of net sales compared to 8.1% in the prior year
quarter.
Interest expense decreased 8.9% to $2.8 million, compared to
$3.1 million in the prior year quarter, reflecting lower average
outstanding borrowings during fourth quarter 2017 compared to fourth
quarter 2016 and the lower interest rate spread over LIBOR following the
debt repricings in February and December of 2017. This decrease was
partially offset by the rise in LIBOR.
Net income for the fourth quarter 2017 increased 92.5% to $24.2 million,
or $0.64 per share, compared to $12.6 million, or $0.32 per share, in
the prior year quarter. The improvement in net income was primarily
driven by the one-time tax benefit related to the impact of the Tax Cuts
and Jobs Act passed in December 2017. Excluding the effects of the tax
reform and debt repricing fees in December 2017, the adjusted net income1
increased 22.2% to $15.4 million, or $0.41 per share, compared to the
prior year quarter of $12.6 million, or $0.32 per share. The
$2.8 million increase in adjusted net income1 is
primarily a result of higher wallboard volumes and average mill net
price compared to the prior year quarter.
Full Year 2017 Results vs. Full Year 2016
Wallboard volumes increased to 2,666 MMSF for the year ended
December 31, 2017, compared to 2,560 MMSF in the prior year. Net sales
were up 6.0% to $489.2 million, compared to $461.4 million in the prior
year, primarily due to an increase in wallboard volumes and average mill
net price.
Operating income was $89.6 million, compared to $87.1 million in the
prior year. This increase was primarily attributable to higher volumes,
which were partially offset by higher input and labor costs. SG&A
expense was $37.8 million compared to $37.9 million in the prior year,
or 7.7% of net sales compared to 8.2% in the prior year.
Interest expense decreased 13.3% to $11.8 million, compared to
$13.6 million in the prior year, reflecting lower average outstanding
borrowings during 2017 compared to 2016 and the lower interest rate
spread over LIBOR following the debt refinancing in August 2016 and the
two subsequent repricing transactions in 2017. This decrease was
partially offset by the rise in LIBOR.
Net income for 2017 increased 35.9% to $59.8 million, or $1.55 per
share, compared to $44.0 million, or $1.08 per share, in the prior year.
The improvement in net income was primarily driven by the one-time tax
benefit related to the impact of the Tax Cuts and Jobs Act of 2017.
Excluding the effects of the tax reform and debt repricing fees in
February and December 2017, adjusted net income1 was up 7.5%
to $51.5 million, or $1.33 per share, from the prior year adjusted net
income of $47.8 million, or $1.18 per share. The $3.6 million increase
in adjusted net income1 is primarily a result of higher
volumes and average mill net price, along with a decrease in SG&A and
interest expense, compared to 2016.
Balance Sheet and Cash Flow
In December 2017, the Company successfully repriced
its $271.6 million term loan facility. The interest rate spread on the
term loan was reduced by 25 basis points to LIBOR plus 2.25%, with a
0.75% floor, compared to a prior rate of LIBOR plus 2.50%, with a 0.75%
floor. This transaction marks the second repricing of this term loan
since the original refinancing in August 2016, effectively reducing the
spread in aggregate by 50 basis points from LIBOR plus 2.75% to LIBOR
plus 2.25%. The final maturity of the term loan in 2023 is unchanged.
As of December 31, 2017, the Company had cash of $72.5 million and total
outstanding borrowing under the term loan agreement of $271.6 million.
During the fourth quarter 2017, the Company generated cash flows from
operations of $26.6 million and invested $7.8 million in capital
investments.
During the full year 2017, the Company repurchased 2.3 million shares of
its common stock under its repurchase program at an aggregate purchase
price of $54.6 million, representing 5.8% of its outstanding shares as
of December 31, 2016.
The Company announced today that its Board of Directors has authorized
an expansion of its stock repurchase program from up to $200 million to
up to $300 million. The program has also been extended from the end of
2018 to the end of 2019. To date against the program, as expanded, the
Company has repurchased $103.3 million of our common stock at an average
price of $21.23 per share through December 31, 2017. The Company also
announced plans to invest in high-return capital spending under its
"Bison Way" initiative in the range of $25 million to $35 million
beginning in 2018 and running through 2019.
Dennis Schemm, Continental's Chief Financial Officer, concluded, "We are
pleased with the sustained cash flow generation of our business, our
repricing activities and the success of our numerous investments. We
have an exceptional platform to continue investing in our people, assets
and operational capabilities. The expected reduction in our tax rate
made possible by the Tax Cuts and Jobs Act of 2017 further enhances our
flexibility to strengthen our business while targeting additional value
enhancing opportunities."
Forward-Looking Outlook For the Full Year 2018
- SG&A is expected to be in the range of $39 – $40 million
-
Cost of goods sold inflation is expected to be at 3% to 5% partly
offset by approximately $5 million of savings from high return
investments -
Total capital expenditures are expected to be in the range of $30 –
$35 million-
Maintenance capital spending is expected to be approximately $15
million -
High-return capital spending is expected to be in the range of $15
– $20 million
-
Maintenance capital spending is expected to be approximately $15
-
Depreciation and amortization is expected to be in the range of $43 –
$46 million - Effective tax rate is expected to be in the range of 22% – 24%
Investor Conference Webcast and Conference Call
The Company will host a webcast and conference call on Thursday,
February 22, 2018 at 5:00 p.m. Eastern Time to review fourth quarter and
full year 2017 financial results, 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 March 22, 2018, by dialing (844) 512-2921 (domestic)
or (412) 317-6671 (international) and entering the pin number 13675626.
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.
_________________________
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.
Continental Building Products, Inc. Consolidated Statements of Operations |
||||||||
For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||
2017 | 2016 | 2017 | 2016 | |||||
(in thousands, except share data and per share amounts) | ||||||||
(Unaudited) | (Unaudited) | |||||||
Net sales | $ | 131,392 | $ | 118,217 | $ | 489,163 | $ | 461,375 |
Costs, expenses and other income: | ||||||||
Cost of goods sold | 94,432 | 85,862 | 361,825 | 336,317 | ||||
Selling and administrative | 10,389 | 9,554 | 37,753 | 37,918 | ||||
Total costs and operating expenses | 104,821 | 95,416 | 399,578 | 374,235 | ||||
Operating income | 26,571 | 22,801 | 89,585 | 87,140 | ||||
Other expense, net | (563 | ) | (223 | ) | (1,196 | ) | (5,963 | ) |
Interest expense, net | (2,822 | ) | (3,098 | ) | (11,788 | ) | (13,590 | ) |
Income before losses from equity method investment and provision for income tax |
23,186 | 19,480 | 76,601 | 67,587 | ||||
Losses from equity method investment | (158 | ) | (10 | ) | (187 | ) | (736 | ) |
Income before provision for income taxes | 23,028 | 19,470 | 76,414 | 66,851 | ||||
Benefit from/(provision for) income taxes | 1,208 | (6,879 | ) | (16,566 | ) | (22,827 | ) | |
Net income | $ | 24,236 | $ | 12,591 | $ | 59,848 | $ | 44,024 |
Net income per share: | ||||||||
Basic | $ | 0.64 | $ | 0.32 | $ | 1.55 | $ | 1.08 |
Diluted | $ | 0.64 | $ | 0.31 | $ | 1.54 | $ | 1.08 |
Weighted average shares outstanding: | ||||||||
Basic | 37,655,655 | 39,918,867 | 38,636,152 | 40,605,464 | ||||
Diluted | 37,867,710 | 40,014,797 | 38,774,963 | 40,662,304 | ||||
Continental Building Products, Inc. Consolidated Balance Sheets |
||||
As of December 31, | ||||
2017 | 2016 | |||
(in thousands) | ||||
Assets: | ||||
Cash and cash equivalents | $ | 72,521 | $ | 51,536 |
Receivables, net | 38,769 | 32,473 | ||
Inventories, net | 24,882 | 25,239 | ||
Prepaid and other current assets | 11,267 | 7,485 | ||
Total current assets | 147,439 | 116,733 | ||
Property, plant and equipment, net | 294,003 | 307,838 | ||
Customer relationships and other intangibles, net | 70,807 | 81,555 | ||
Goodwill | 119,945 | 119,945 | ||
Equity method investment | 9,263 | 8,020 | ||
Debt issuance costs | 477 | 658 | ||
Total Assets | $ | 641,934 | $ | 634,749 |
Liabilities and Shareholders' Equity: | ||||
Liabilities: | ||||
Accounts payable | $ | 30,809 | $ | 27,411 |
Accrued and other liabilities | 11,940 | 12,321 | ||
Notes payable, current portion | 1,702 | 1,742 | ||
Total current liabilities | 44,451 | 41,474 | ||
Deferred taxes and other long-term liabilities | 15,847 | 19,643 | ||
Notes payable, non-current portion | 263,610 | 264,620 | ||
Total Liabilities | 323,908 | 325,737 | ||
Equity: | ||||
Undesignated preferred stock, par value $0.001 per share; 10,000,000 | ||||
shares authorized, no shares issued and outstanding | — | — | ||
Common stock, $0.001 par value per share; 190,000,000 shares | ||||
authorized; 44,321,776 and 44,191,370 shares issued and 37,532,959 | ||||
and 39,691,715 shares outstanding as of December 31, 2017 and 2016, | ||||
respectively | 44 | 44 | ||
Additional paid-in capital | 325,391 | 322,384 | ||
Less: Treasury stock | (143,357 | ) | (88,756 | ) |
Accumulated other comprehensive loss | (2,649 | ) | (3,409 | ) |
Accumulated earnings | 138,597 | 78,749 | ||
Total Equity | 318,026 | 309,012 | ||
Total Liabilities and Equity | $ | 641,934 | $ | 634,749 |
Continental Building Products, Inc. Consolidated Statements of Cash Flows |
||||
For the Year Ended December 31, | ||||
2017 | 2016 | |||
(in thousands) | ||||
Cash flows from operating activities: | ||||
Net income | $ | 59,848 | $ | 44,024 |
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Depreciation and amortization | 46,460 | 46,646 | ||
Amortization of debt issuance costs and debt discount | 1,177 | 1,947 | ||
Losses from equity method investment | 187 | 736 | ||
Debt related expenses | 1,170 | 5,802 | ||
Stock-based compensation | 2,784 | 2,288 | ||
Deferred taxes | (3,414 | ) | 6,504 | |
Change in assets and liabilities: | ||||
Receivables | (6,296 | ) | 3,342 | |
Inventories | 488 | 1,921 | ||
Prepaid expenses and other current assets | (3,735 | ) | 895 | |
Accounts payable | 3,987 | 2,058 | ||
Accrued and other current liabilities | (830 | ) | 360 | |
Other long term liabilities | (159 | ) | (256 | ) |
Net cash provided by operating activities | 101,667 | 116,267 | ||
Cash flows from investing activities: | ||||
Capital expenditures | (21,459 | ) | (11,733 | ) |
Software purchased or developed | (583 | ) | (414 | ) |
Capital contributions to equity method investment | (2,219 | ) | (349 | ) |
Distributions from equity method investment | 790 | 855 | ||
Net cash used in investing activities | (23,471 | ) | (11,641 | ) |
Cash flows from financing activities: | ||||
Proceeds from exercise of stock options | 230 | 20 | ||
Tax withholdings on share-based compensation | (240 | ) | — | |
Proceeds from debt refinancing | 545,198 | 275,000 | ||
Disbursements for debt refinancing | (545,198 | ) | (271,988 | ) |
Payments of financing costs | (1,170 | ) | (4,424 | ) |
Principal payments for debt | (2,052 | ) | (26,375 | ) |
Payments to repurchase common stock | (54,601 | ) | (40,277 | ) |
Net cash used in financing activities | (57,833 | ) | (68,044 | ) |
Effect of foreign exchange rates on cash and cash equivalents | 622 | 225 | ||
Net change in cash and cash equivalents | 20,985 | 36,807 | ||
Cash, beginning of period | 51,536 | 14,729 | ||
Cash, end of period | $ | 72,521 | $ | 51,536 |
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 in the United
States ("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.
Reconciliation of Net Income to EBITDA | ||||||||
For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||
2017 | 2016 | 2017 | 2016 | |||||
(unaudited, in thousands) | ||||||||
Net income | $ | 24,236 | $ | 12,591 | $ | 59,848 | $ | 44,024 |
Adjustments: |
||||||||
Other expense, net | 563 | 223 | 1,196 | 5,963 | ||||
Interest expense, net | 2,822 | 3,098 | 11,788 | 13,590 | ||||
Losses from equity method investment | 158 | 10 | 187 | 736 | ||||
(Benefit from)/provision for income taxes | (1,208 | ) | 6,879 | 16,566 | 22,827 | |||
Depreciation and amortization | 10,643 | 10,990 | 46,460 | 46,646 | ||||
EBITDA—Non-GAAP Measure | $ | 37,214 | $ | 33,791 | $ | 136,045 | $ |
133,786 |
EBITDA Margin – EBITDA as a percentage of net sales – Non-GAAP Measure |
28.3 | % | 28.6 | % | 27.8 | % | 29.0 | % |
Reconciliation of Net Income and Earnings Per Share to Adjusted Net Income and Adjusted Earnings Per Share |
||||||||
For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||
2017 | 2016 | 2017 | 2016 | |||||
(unaudited, in thousands, except share data and per share amounts) | ||||||||
Net income – GAAP Measure | $ | 24,236 | $ | 12,591 | $ | 59,848 | $ | 44,024 |
Debt related expenses, net of tax (a) | 319 | — | 774 | 3,821 | ||||
Impact of Tax Cuts and Jobs Act of 2017 | (9,168 | ) | — | (9,168 | ) | — | ||
Adjusted net income – non-GAAP measure | $ | 15,387 | $ | 12,591 | $ | 51,454 | $ | 47,845 |
Earnings per share – GAAP measure | $ | 0.64 | $ | 0.32 | $ | 1.55 | $ | 1.08 |
Debt related expenses, net of tax (a) | 0.01 | — | 0.02 | 0.10 | ||||
Impact of Tax Cuts and Jobs Act of 2017 | (0.24 | ) | — | (0.24 | ) | — | ||
Adjusted earnings per share – non-GAAP measure | $ | 0.41 | $ | 0.32 | $ | 1.33 | $ | 1.18 |
(a) Expenses related to debt refinancing and repricing activities |
||||||||
Other Financial and Operating Data | ||||||||
For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||
2017 | 2016 | 2017 | 2016 | |||||
(in thousands, except share data and per share amounts) | ||||||||
(Unaudited) | (Unaudited) | |||||||
Capital expenditures and software purchased or developed | $ | 7,782 | $ | 6,964 | $ | 22,042 | $ | 12,147 |
Wallboard sales volume (million square feet) | 725 | 666 | 2,666 | 2,560 | ||||
Mill net sales price (a) | $ | 144.78 | $ | 141.61 | $ | 146.92 | $ | 143.83 |
(a) Mill net sales price represents average selling price per |
Interim Volumes and Mill Net Prices | ||||||||||
For the Three Months Ended | ||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||
2016 | 2017 | 2017 | 2017 | 2017 | ||||||
Volumes (million square feet) | 666 | 650 | 647 | 644 | 725 | |||||
Mill net sales price | $ | 141.61 | $ | 147.92 | $ | 150.32 | $ | 144.90 | $ | 144.78 |
Contacts
Continental Building Products, Inc.
Investor Relations:
Tel.:
(703) 480-3980
[email protected]