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Contact Investor Relations

Phone:
703.480.3980

Email:
investorrelations@continental-bp.com

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Press Release Details

Continental Building Products Reports Third Quarter 2017 Results

November 09, 2017

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 third quarter ended September 30, 2017.

Highlights of Third Quarter 2017 and Comparisons to Third Quarter 2016

  • Net sales increased 1.7% to $116.5 million
  • Net income increased 76.9% to $11.0 million; Adjusted net income1 increased 9%
  • Earnings per share increased 93.3% to $0.29; Adjusted earnings per share1 increased 16%
  • EBITDA1 was $31.8 million up 4.4% compared to $30.4 million
  • Gross margin improves 20 basis points to 24.5%
  • EBITDA1 margin improved 70 basis points to 27.3%
  • SG&A as a percentage of net sales improved 50 basis points to 7.6%
  • Invested $6.1 million in capital expenditures
  • 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:

  • SG&A is expected to be in the range of $37 - $39 million down from our prior guidance of $38 - $40 million.
  • Cost of goods sold inflation is expected to be at 6% to 7%.
  • Total capital expenditures is expected to be in the range of $22 - $27 million down from our prior guidance of $24 - $31 million.
    • Maintenance capital spending is expected to be in the range of $11 - $13 million narrowed from our prior guidance of $12 - $14 million.
    • 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.
  • Depreciation and amortization is expected to be in the range of $46 - $47 million, up from our prior guidance of $43 - $45 million.
  • 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%.
  • 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 877-451-6152 (domestic) or 201-389-0879 (international). A replay of the conference call will be available through December 9, 2017, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13671626.

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.

 

Continental Building Products, Inc.

Consolidated Statements of Operations

(unaudited)

       
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

       
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  
 

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.

   
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

Source: Continental Building Products, Inc.

Continental Building Products, Inc.

Investor Relations:

703-480-3980

Investorrelations@continental-bp.com

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