DENVER--(BUSINESS WIRE)--Summit Materials, Inc. (NYSE: SUM, “Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the fourth quarter and full-year 2016.
For the twelve months ended December 31, 2016, the Company reported basic and diluted earnings per share of $0.53 on net income of $36.8 million. For the same twelve month period, Summit reported adjusted diluted earnings per share of $0.97 on adjusted net income of $98.3 million. For the three months ended December 31, 2016, the Company reported a basic loss per share of ($0.00) on a net loss of ($0.3) million. For the same three month period, Summit reported adjusted diluted earnings per share of $0.21 on adjusted net income of $21.0 million. The Company’s adjusted net income for the fourth quarter and full-year 2016 excludes an $14.9 million charge for estimated future payments to certain current and former limited partners under the tax receivable agreement entered into at the time of the Company’s initial public offering, $13.8 million of which is expected to be paid beginning in 2019 or thereafter.
“Our strong full-year performance further validates the unique competitive advantages afforded by our integrated, materials-based model,” stated Tom Hill, CEO of Summit Materials. “Our leading positions in well-structured, early-cycle markets drove sustained margin expansion throughout all lines of business in 2016, as both gross margin and Adjusted EBITDA margin increased to record levels. Adjusted EBITDA exceeded the high-end of our guided range for the full-year, given sustained growth in materials pricing, contributions from completed acquisitions and improved cost efficiencies.”
“Gross profit generated from our materials lines of business increased by more than 35% year-over-year in 2016, despite temporary softness in organic sales volumes of aggregates in our Texas and Vancouver markets,” continued Hill. “Excluding Texas and Vancouver, organic sales volumes of aggregates and ready-mix increased 1.2% and 5.1%, respectively, in the full-year 2016, versus the prior year. Looking ahead to 2017, we anticipate positive growth in materials pricing and volumes across all of our reporting segments.”
“In January 2017, we entered into definitive agreements to acquire Colorado-based Everist Materials and Arkansas-based Razorback Concrete Company for a combined $110 million in cash,” stated Hill. “Collectively, these acquisitions bring aggregates operations with ~100 million tons of permitted reserves and an extensive network of vertically integrated ready-mix concrete and asphalt plants in close proximity to our existing portfolio of materials-based assets. In addition to Everist, which closed in January 2017, and Razorback, which is expected to close during the first quarter 2017, our acquisition pipeline remains robust, with more than 20 additional transactions currently under review.”
“Our cement business represents a clear catalyst for growth heading into 2017,” continued Hill. “Limited domestic production capacity and continued growth in U.S. demand have combined to create opportunities for sustained growth in industry cement pricing. During the fourth quarter, our cement segment generated organic price and volume growth of 6.8% and nearly 1%, respectively. Looking ahead to the remainder of 2017, we anticipate continued Adjusted EBITDA growth in our cement business, as supported by sustained growth in organic cement prices and sales volumes along the Mississippi River corridor.”
“Following the recent election cycle, we have entered a new era of bipartisan support for funding that will help to properly maintain and modernize our nation’s aging transportation infrastructure,” continued Hill. “In the markets we serve, nearly 60 cents of every dollar spent by states on transportation infrastructure is federally funded. Given that nearly 40% of our net revenue is derived from public infrastructure work, Summit is well positioned to benefit from this opportunity. With the support of appropriations from the FAST Act, we anticipate an acceleration in state-level infrastructure spending beginning in mid-to-late 2017. Further, given ongoing advocacy by Congress and the current Administration for increased investment in state transportation infrastructure, we see numerous opportunities for multi-year growth in our public-facing businesses.”
“We generated significant growth in cash flows from operations last year, resulting in a material improvement in our credit metrics,” stated Brian Harris, CFO of Summit Materials. “We had outstanding debt of $1.5 billion as of December 31, 2016. Net leverage was 3.9x at year-end 2016, ahead of our full-year guidance of 4.0x. Including net proceeds from the 10 million share equity offering we completed in January 2017, net leverage declined to 3.5x at year-end 2016. Looking ahead, we currently anticipate a further reduction in net leverage to approximately 3.0x by year-end 2017, assuming the mid-point of our 2017 Adjusted EBITDA guidance.”
“We had $143.4 million in cash and $209.4 million of available liquidity under our revolving credit facility at year-end,” stated Harris. “Including proceeds from the equity offering we completed in January 2017, net of $110 million used to fund the acquisition of Everist and Razorback, we had pro-forma cash and liquidity of approximately $480 million exiting 2016,” continued Harris. “Our current liquidity position provides sufficient flexibility with which to fund the working capital and strategic growth requirements of our business at this time. Looking forward, disciplined capital allocation remains a high priority for us, particularly as we seek to reduce our net leverage ratio and improve our credit metrics. We are pleased with our full-year performance and remain focused on creating additional value for our investors in the year ahead.”
Full-Year 2016 | Financial Performance
Net revenue increased 15.4% year-over-year to $1.5 billion, versus $1.3 billion in 2015. The year-over-year improvement in net revenue was primarily attributable to higher acquisition-related sales volumes across all lines of business, coupled with improved organic and acquisition-related pricing on aggregates, cement and ready-mix concrete.
Gross profit increased 25.4% year-over-year to $554.0 million, versus $441.7 million in 2015. Gross profit generated from the Company’s aggregates and cement assets represented 52.5% of total gross profit in 2016, versus 48.4% of gross profit in 2015. Gross margin increased 300 basis points to a record 37.2% for the full-year 2016, versus 34.2% in 2015. Adjusted EBITDA increased 29.2% year-over-year to $371.3 million, versus $287.5 million in 2015. Adjusted EBITDA margin increased 270 basis points to a record 25.0% for the full-year 2016, versus 22.3% in 2015.
Adjusted net income increased 31.5% year-over-year to $98.3 million, versus $74.7 million in 2015. On an adjusted basis, the Company reported full-year 2016 earnings per share of $0.97 per adjusted diluted share, using 101.2 million weighted-average total shares. The shares of Class A common stock are issued by Summit Materials, Inc., and as such the earnings and equity interests of non-controlling interests, including LP units that are issued by its subsidiary Summit Materials Holdings L.P., are not included in basic earnings per share. Summit believes adjusted net income and Adjusted EPS are more representative of earnings performance, as these measures exclude the non-operating impact to earnings per share of any potential exchange of LP units for Class A common stock in any given quarter.
- West Segment: Adjusted EBITDA increased 11.1% year-over-year to $167.4 million, versus $150.8 million in 2015. Adjusted EBITDA margin increased to 22.7% in 2016, up from 21.0% in 2015. A year-over-year decline in organic Adjusted EBITDA growth was more than offset by acquisition-related EBITDA contributions. The organic decline was attributable to severe weather and flooding in Houston and tough prior-year comparisons in the Vancouver, B.C. market related to the timing of customer projects.
- East Segment: Adjusted EBITDA increased 36.5% year-over-year to $126.0 million, versus $92.3 million in 2015. Adjusted EBITDA margin increased to 26.8% in 2016, up from 24.6% in 2015. A year-over-year decline in organic Adjusted EBITDA growth was more than offset by acquisition-related EBITDA contributions. The organic decline was attributable to transitory softness in public infrastructure spending in the Kansas and Kentucky markets.
- Cement Segment: Adjusted EBITDA increased 51.0% to $113.0 million, versus $74.8 million in 2015. Adjusted EBITDA margin increased to 40.2% in 2016, up from 38.3% in 2015. A year-over-year increase in average selling prices, increased sales volumes due to the acquisition of the Davenport cement assets in July 2015, improved production efficiencies and continued cost reductions all contributed to improved full-year results.
Full-Year 2016 | Results by Line of Business
- Aggregates Business: Aggregates net revenues increased 20.8% to $264.6 million in 2016, when compared to the prior year period. Aggregates gross profit as a percentage of aggregates net revenues increased nearly 260 basis points to 62.0% in 2016, when compared to the prior year period. Including acquisitions, sales volumes increased 11.8% and average sales price increased 7.2%, when compared to the prior year period. Excluding acquisitions, organic sales volume declined 5.5% and organic average sales price increased 4.8%, when compared to the prior year period. In the full-year 2016, organic sales volumes were affected by severe weather conditions throughout Texas and lower year-over-year contributions from the Vancouver, B.C. market, given the completion of a large sand river project in 2015.
- Cement Business: Cement net revenues increased 49.3% to $250.3 million in 2016, when compared to the prior year period. Cement gross profit as a percentage of cement segment net revenues was 45.1% in 2016, more than 220 basis points higher than in the prior year period. Sales volumes and the average sales price increased 37.0% and 7.5%, respectively, when compared to the prior year period. Cement volumes increased on a year-over-year basis as a result of the Davenport acquisition in July 2015, while cement prices improved as a result of favorable overall market conditions.
- Products Business: Net revenues from ready-mix concrete, asphalt and other products increased 7.8% to $708.1 million in 2016, when compared to the prior year. Products gross margin as a percentage of product net revenues increased 190 basis points to 26.6% in 2016, when compared to the prior year period. Including acquisitions, sales volumes and the average selling price of ready-mix concrete increased 12.2% and 0.8%, respectively, versus the prior year. Including acquisitions, sales volumes of asphalt were flat, versus the prior year, while the average selling price declined by 5.1%, versus the prior year. Excluding acquisitions, organic sales volumes of ready-mix concrete and asphalt declined 3.4% and 13.0%, respectively, while average selling prices increased 2.0% and declined 3.6%, respectively.
Fourth Quarter 2016 | Financial Performance
Net revenue increased by 7.7% year-over-year to $387.4 million in the fourth quarter 2016, versus $359.5 in the prior year period. The year-over-year improvement in net revenue was primarily attributable to higher acquisition-related sales volumes across all lines of business, improved organic pricing on cement and ready-mix concrete, in addition to improved acquisition related pricing on aggregates.
Gross profit increased 13.9% year-over-year to $148.9 million in the fourth quarter 2016, versus $130.7 million in the prior year period. Gross profit generated from the Company’s aggregates and cement assets represented 52.2% of total gross profit in the fourth quarter 2016, versus 52.9% of gross profit in the prior year period. Gross margin increased 210 basis points to 38.4% in the fourth quarter 2016, versus 36.3% in the prior year period. Adjusted EBITDA increased 12.9% year-over-year to $102.0 million, versus $90.3 million in the prior year period. Adjusted EBITDA margin increased 120 basis points to a record 26.3% in the fourth quarter 2016, versus 25.1% in the prior year period.
Adjusted net income declined 38.9% year-over-year to $21.0 million in the fourth quarter 2016, versus $34.4 million in the prior year period. On an adjusted basis, the Company reported fourth quarter 2016 earnings per share of $0.21 per adjusted diluted share, using 101.2 million weighted-average total shares. The shares of Class A common stock are issued by Summit Materials, Inc., and as such the earnings and equity interests of non-controlling interests, including LP units, are not included in basic earnings per share. Summit believes adjusted net income and Adjusted EPS are more representative of earnings performance, as these measures exclude the non-operating impact to earnings per share of any potential exchange of LP units for Class A common stock in any given quarter.
- West Segment: Adjusted EBITDA was relatively flat at $39.9 million in the fourth quarter 2016, versus the prior year period. Adjusted EBITDA margin increased to 22.4% in the fourth quarter 2016, versus 21.5% in the prior year period. A year-over-year decline in Adjusted EBITDA in certain of the Company’s Texas operations was more than offset by acquisition-related EBITDA contributions.
- East Segment: Adjusted EBITDA increased 20.5% year-over-year to $35.6 million in the fourth quarter 2016, versus $29.5 million in the prior year period. Adjusted EBITDA margin declined to 27.1% in the fourth quarter 2016, down from 29.0% in the prior year period. A year-over-year decline in Adjusted EBITDA growth primarily related to the delayed public funding in Kentucky was more than offset by acquisition-related EBITDA contributions.
- Cement Segment: Adjusted EBITDA increased 10.4% to $34.2 million in the fourth quarter 2016, versus $30.9 million in the prior year period. Adjusted EBITDA margin increased to 43.8% in the fourth quarter 2016, up from 41.3% in the prior year period. A year-over-year increase in average selling prices, organic sales volumes, improved production efficiencies and cost reductions all contributed to improved results.
Fourth Quarter 2016 | Results by Line of Business
- Aggregates Business: Aggregates net revenues increased 10.9% to $63.4 million in the fourth quarter 2016, when compared to the prior year period. Aggregates gross profit as a percentage of aggregates net revenues declined 140 basis points to 63.7% in the fourth quarter 2016, versus 65.1% in the prior year period. Including acquisitions, sales volumes and average selling prices increased 5.3% and 2.7%, respectively, in the fourth quarter 2016, when compared to the prior year period. Excluding acquisitions, organic sales volumes declined 11.8% and average selling prices were flat in the fourth quarter 2016, versus the prior year period. Organic sales volumes in the fourth quarter 2016 were impacted by a combination of transitory softness in Houston’s residential market, lower contributions from continued delays in public spending within the Kentucky market and tough prior-year comparisons in the Vancouver, B.C. market.
- Cement Business: Cement net revenues increased by 12.7% to $70.7 million in the fourth quarter 2016, when compared to the prior year period. Cement gross profit as a percentage of cement segment net revenues was 47.9% in the fourth quarter 2016, 530 basis points higher than in the prior year period. On an organic basis, cement sales volumes and average selling prices increased 0.6% and 6.8% in the fourth quarter 2016, respectively, when compared to the prior year period. A combination of steady organic demand along the Company’s core markets along the Mississippi River, coupled with continued organic growth in average selling prices, contributed to strong fourth quarter results in the Cement segment.
- Products Business: Net revenues increased by 3.1% to $181.2 million in the fourth quarter 2016, when compared to the prior year period. Products gross margin as a percentage of products net revenues. Products gross margin as a percentage of product net revenues increased 170 basis points to 26.1% in the fourth quarter 2016, when compared to the prior year period. Including acquisitions, sales volumes and the average selling price of ready-mix concrete increased 12.3% and declined 1%, respectively, compared to the prior year period. Including acquisitions, sales volumes and the average selling price of asphalt increased 1.7% and declined 10.5%, respectively, compared to the prior year period. Excluding acquisitions, organic sales volumes of ready-mix concrete and asphalt declined 9.5% and 9.2%, respectively, while average selling prices increased 1.5% and declined 9.0%, respectively.
Liquidity and Capital Resources
At December 31, 2016, the Company had cash on hand of $143.4 million and borrowing capacity under its revolving credit facility of $209.4 million. Including net proceeds from the equity offering completed in January 2017, the Company held pro-forma cash of $271.5 million at year-end 2016. The borrowing capacity on the revolving credit facility is net of $25.6 million of outstanding letters of credit, and is fully available to the Company within the terms and covenant requirements of its credit agreement. At year-end 2016, the Company had $1.5 billion in debt outstanding, versus $1.3 billion in debt outstanding at year-end 2015.
2017 Financial Guidance & Outlook
Based on current market conditions, the Company anticipates Adjusted EBITDA in the range of $410.0 million to $425.0 million for the full-year 2017. The Adjusted EBITDA outlook assumes organic improvement, coupled with the residual impact of acquisitions announced since the beginning of 2017, including the acquisitions of Everist Materials and Razorback Concrete. No additional potential acquisitions are included within the Company’s full-year 2017 Adjusted EBITDA guidance.
For the full year 2017, the Company anticipates gross capital expenditures to be in the range $135.0 million to $155.0 million, which includes several maintenance and profit-improvement projects. Longer-term, the Company expects gross capital expenditures to approximate 7-8% of net revenue per annum.
Webcast and Conference Call Information
Summit Materials will conduct a conference call today at 11:00 a.m. eastern time (9:00 a.m. mountain time) to review the Company’s fourth quarter and full-year 2016 financial results. A webcast of the conference call and accompanying presentation materials will be available in the Investors section of Summit’s website at investors.summit-materials.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.
To participate in the live teleconference:
Domestic Live: 1-877-407-0784
International Live: 1-201-689-8560
Conference
ID: 86972581
To listen to a replay of the teleconference, which will be available through March 22, 2017:
Domestic Replay: 1-844-512-2921
International Replay: 1-412-317-6671
Conference
ID: 13652776
About Summit Materials
Summit Materials is a leading vertically integrated materials-based company that supplies aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a geographically diverse, materials-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the public infrastructure, residential and nonresidential, and end markets. Summit has a strong track record of successful acquisitions since its founding and continues to pursue growth opportunities in new and existing markets. For more information about Summit Materials, please visit www.summit-materials.com.
Non-GAAP Financial Measures
The Securities and Exchange Commission (“SEC”) regulates the use of “non-GAAP financial measures,” such as adjusted net income (loss), Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, gross profit and free cash flow, which are derived on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have provided these measures because, among other things, we believe that they provide investors with additional information to measure our performance, evaluate our ability to service our debt and evaluate certain flexibility under our restrictive covenants. Our adjusted net income, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, gross profit and net leverage may vary from the use of such terms by others and should not be considered as alternatives to or more important than net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or to cash flows as measures of liquidity.
Adjusted EBITDA, Adjusted EBITDA margin and other non-GAAP measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA are that these measures do not reflect: (i) our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, our working capital needs; (iii) interest expense or cash requirements necessary to service interest and principal payments on our debt; and (iv) income tax payments we are required to make. Because of these limitations, we rely primarily on our U.S. GAAP results and use Adjusted EBITDA, Adjusted EBITDA margin and other non-GAAP measures on a supplemental basis.
Adjusted EBITDA, Adjusted EBITDA margin, gross profit, adjusted net income, Adjusted EPS and free cash flow reflect additional ways of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to U.S. GAAP financial measures included in the tables attached to this press release, may provide a more complete understanding of factors and trends affecting our business. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.
Reconciliations of the non-GAAP measures used in this press release are included in the attached tables, to the extent available without unreasonable effort. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. Any and all statements made relating to the expectations for our anticipated benefits from recent acquisitions, the macroeconomic outlook for our markets, potential acquisition activity, our estimated and projected earnings, margins, costs, expenditures, cash flows, sales volumes and financial results are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results.
In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2016. Such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.
We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
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SUMMIT MATERIALS, INC. AND SUBSIDIARIES Consolidated Statements of Operations ($ in thousands, except share and per share amounts) |
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| Three months ended | Year ended | |||||||||||||||||
| December 31, | January 2, | December 31, |
January 2, |
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| 2016 | 2016 | 2016 | 2016 | |||||||||||||||
| (unaudited) | (unaudited) | (audited) | (audited) | |||||||||||||||
| Revenue: | ||||||||||||||||||
| Product | $ | 315,329 | $ | 295,633 | $ | 1,223,008 | $ | 1,043,843 | ||||||||||
| Service | 72,060 | 63,899 | 265,266 | 246,123 | ||||||||||||||
| Net revenue | 387,389 | 359,532 | 1,488,274 | 1,289,966 | ||||||||||||||
| Delivery and subcontract revenue | 35,584 | 41,930 | 137,789 | 142,331 | ||||||||||||||
| Total revenue | 422,973 | 401,462 | 1,626,063 | 1,432,297 | ||||||||||||||
| Cost of revenue (excluding items shown separately below): | ||||||||||||||||||
| Product | 192,185 | 185,534 | 751,697 | 676,457 | ||||||||||||||
| Service | 46,334 | 43,343 | 182,584 | 171,857 | ||||||||||||||
| Net cost of revenue | 238,519 | 228,877 | 934,281 | 848,314 | ||||||||||||||
| Delivery and subcontract cost | 35,584 | 41,930 | 137,789 | 142,331 | ||||||||||||||
| Total cost of revenue | 274,103 | 270,807 | 1,072,070 | 990,645 | ||||||||||||||
| General and administrative expenses | 58,654 | 28,285 | 243,862 | 177,769 | ||||||||||||||
| Depreciation, depletion, amortization and accretion | 40,105 | 32,905 | 149,300 | 119,723 | ||||||||||||||
| Transaction costs | 1,507 | 1,475 | 6,797 | 9,519 | ||||||||||||||
| Operating income | 48,604 | 67,990 | 154,034 | 134,641 | ||||||||||||||
| Interest expense | 25,069 | 22,398 | 97,536 | 84,629 | ||||||||||||||
| Loss on debt financings | — | 7,318 | — | 71,631 | ||||||||||||||
| Tax receivable agreement expense | 14,938 | — | 14,938 | — | ||||||||||||||
| Other (income) expense, net | (66 | ) | (1,747 | ) | 733 | (2,425 | ) | |||||||||||
| Income (loss) from operations before taxes | 8,663 | 40,021 | 40,827 | (19,194 | ) | |||||||||||||
| Income tax expense (benefit) | 2,614 | (5,795 | ) | (5,299 | ) | (18,263 | ) | |||||||||||
| Income (loss) from continuing operations | 6,049 | 45,816 | 46,126 | (931 | ) | |||||||||||||
| Income from discontinued operations | — | (1,600 | ) | — | (2,415 | ) | ||||||||||||
| Net income | 6,049 | 47,416 | 46,126 | 1,484 | ||||||||||||||
| Net income (loss) attributable to noncontrolling interest in subsidiaries | (41 | ) | 91 | 16 | (1,826 | ) | ||||||||||||
| Net income (loss) attributable to Summit Holdings (1) | 6,380 | 23,962 | 9,327 | (24,408 | ) | |||||||||||||
| Net income attributable to Summit Inc. | $ | (290 | ) | $ | 23,363 | $ | 36,783 | $ | 27,718 | |||||||||
| Net income per share of Class A common stock: | ||||||||||||||||||
| Basic | $ | (0.00 | ) | $ | 0.46 | $ | 0.53 | $ | 0.70 | |||||||||
| Diluted | $ | (0.00 | ) | $ | 0.46 | $ | 0.53 | $ | 0.51 | |||||||||
| Weighted average shares of Class A common stock: | ||||||||||||||||||
| Basic | 87,276,645 | 50,881,602 | 68,833,986 | 39,367,381 | ||||||||||||||
|
Diluted |
87,276,645 | 50,908,151 | 69,317,452 | 89,472,266 | ||||||||||||||
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_________________________ |
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(1) Represents portion of business owned by private interests |
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SUMMIT MATERIALS, INC. AND SUBSIDIARIES Consolidated Balance Sheets ($ in thousands, except share and per share amounts) |
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| 2016 | 2015 | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
|
Cash and cash equivalents |
$ | 143,392 | $ | 186,405 | ||||||
| Accounts receivable, net | 162,377 | 145,544 | ||||||||
| Costs and estimated earnings in excess of billings | 7,450 | 5,690 | ||||||||
| Inventories | 157,679 | 130,082 | ||||||||
| Other current assets | 12,800 | 4,807 | ||||||||
| Total current assets | 483,698 | 472,528 | ||||||||
| Property, plant and equipment, net | 1,444,367 | 1,269,006 | ||||||||
| Goodwill | 781,824 | 596,397 | ||||||||
| Intangible assets, net | 24,576 | 15,005 | ||||||||
| Other assets | 47,001 | 43,243 | ||||||||
| Total assets | $ | 2,781,466 | $ | 2,396,179 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Current liabilities: | ||||||||||
| Current portion of debt | $ | 6,500 | $ | 6,500 | ||||||
| Current portion of acquisition-related liabilities | 24,162 | 20,584 | ||||||||
| Accounts payable | 81,565 | 81,397 | ||||||||
| Accrued expenses | 111,605 | 92,942 | ||||||||
| Billings in excess of costs and estimated earnings | 15,456 | 13,081 | ||||||||
| Total current liabilities | 239,288 | 214,504 | ||||||||
| Long-term debt | 1,514,456 | 1,273,652 | ||||||||
| Acquisition-related liabilities | 32,664 | 39,977 | ||||||||
| Other noncurrent liabilities | 135,019 | 100,186 | ||||||||
| Total liabilities | 1,921,427 | 1,628,319 | ||||||||
| Stockholders’ equity: | ||||||||||
| Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 96,033,222 and 49,745,944 shares issued and outstanding as of December 31, 2016 and January 2, 2016, respectively | 961 | 497 | ||||||||
| Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 100 and 69,007,297 shares issued and outstanding as of December 31, 2016 and January 2, 2016, respectively | — | 690 | ||||||||
| Additional paid-in capital | 824,304 | 619,003 | ||||||||
| Accumulated earnings | 19,028 | 10,870 | ||||||||
| Accumulated other comprehensive loss | (2,249 | ) | (2,795 | ) | ||||||
| Stockholders’ equity | 842,044 | 628,265 | ||||||||
| Noncontrolling interest in consolidated subsidiaries | 1,378 | 1,362 | ||||||||
| Noncontrolling interest in Summit Holdings | 16,617 | 138,233 | ||||||||
| Total stockholders’ equity | 860,039 | 767,860 | ||||||||
| Total liabilities and stockholders’ equity | $ | 2,781,466 | $ | 2,396,179 | ||||||
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SUMMIT MATERIALS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows ($ in thousands) |
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| 2016 | 2015 | |||||||||
| Cash flow from operating activities: | ||||||||||
| Net income (loss) | $ | 46,126 | $ | 1,484 | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||
| Depreciation, depletion, amortization and accretion | 160,633 | 125,019 | ||||||||
| Share-based compensation expense | 49,940 | 19,899 | ||||||||
| Deferred income tax benefit | (8,589 | ) | (19,838 | ) | ||||||
| Net (gain) loss on asset disposals | (3,102 | ) | (23,087 | ) | ||||||
| Net gain on debt financings | — | (9,877 | ) | |||||||
| Other | (1,282 | ) | (1,629 | ) | ||||||
| Decrease (increase) in operating assets, net of acquisitions: | ||||||||||
| Accounts receivable, net | 2,511 | 3,852 | ||||||||
| Inventories | (10,297 | ) | 4,275 | |||||||
| Costs and estimated earnings in excess of billings | (2,684 | ) | 6,604 | |||||||
| Other current assets | (5,518 | ) | 11,438 | |||||||
| Other assets | 1,976 | (1,369 | ) | |||||||
| (Decrease) increase in operating liabilities, net of acquisitions: | ||||||||||
| Accounts payable | (5,751 | ) | (4,241 | ) | ||||||
| Accrued expenses | 13,196 | (14,354 | ) | |||||||
| Billings in excess of costs and estimated earnings | 700 | 1,313 | ||||||||
| Other liabilities | 7,004 | (1,286 | ) | |||||||
| Net cash provided by operating activities | 244,863 | 98,203 | ||||||||
| Cash flow from investing activities: | ||||||||||
| Acquisitions, net of cash acquired | (336,958 | ) | (510,017 | ) | ||||||
| Purchases of property, plant and equipment | (153,483 | ) | (88,950 | ) | ||||||
| Proceeds from the sale of property, plant and equipment | 16,868 | 13,110 | ||||||||
| Other | 2,921 | 1,510 | ||||||||
| Net cash used for investing activities | (470,652 | ) | (584,347 | ) | ||||||
| Cash flow from financing activities: | ||||||||||
| Proceeds from equity offerings | — | 1,037,444 | ||||||||
| Capital issuance costs | (136 | ) | (61,609 | ) | ||||||
| Capital contributions by partners | — | — | ||||||||
| Proceeds from debt issuances | 354,000 | 1,748,875 | ||||||||
| Debt issuance costs | (5,801 | ) | (14,246 | ) | ||||||
| Payments on debt | (120,702 | ) | (1,505,486 | ) | ||||||
| Purchase of noncontrolling interests | — | (497,848 | ) | |||||||
| Payments on acquisition-related liabilities | (32,040 | ) | (18,056 | ) | ||||||
| Distributions from partnership | (13,034 | ) | (28,736 | ) | ||||||
| Other | 420 | (1 | ) | |||||||
| Net cash provided by financing activities | 182,707 | 660,337 | ||||||||
| Impact of foreign currency on cash | 69 | (1,003 | ) | |||||||
| Net (decrease) increase in cash | (43,013 | ) | 173,190 | |||||||
| Cash and cash equivalents—beginning of period | 186,405 | 13,215 | ||||||||
| Cash and cash equivalents—end of period | $ | 143,392 | $ | 186,405 | ||||||
|
SUMMIT MATERIALS, INC. AND SUBSIDIARIES Unaudited Revenue Data by Segment and Line of Business ($ in thousands) |
||||||||||||||
| Three months ended | Year ended | |||||||||||||
| December 31, | January 2, | December 31, | January 2, | |||||||||||
| 2016 | 2016 | 2016 | 2016 | |||||||||||
| Net Revenue by Segment | ||||||||||||||
| West | $ | 178,085 | $ | 182,763 | $ | 736,573 | $ | 719,485 | ||||||
| East | 131,385 | 101,902 | 470,614 | 374,997 | ||||||||||
| Cement | 77,919 | 74,867 | 281,087 | 195,484 | ||||||||||
| Net Revenue | $ | 387,389 | $ | 359,532 | $ | 1,488,274 | $ | 1,289,966 | ||||||
| Net Revenue by Line of Business | ||||||||||||||
| Materials | ||||||||||||||
| Aggregates | $ | 63,392 | $ | 57,144 | $ | 264,609 | $ | 219,040 | ||||||
| Cement (1) | 70,691 | 62,710 | 250,349 | 167,696 | ||||||||||
| Products | 181,246 | 175,779 | 708,050 | 657,107 | ||||||||||
| Total Materials and Products | 315,329 | 295,633 | 1,223,008 | 1,043,843 | ||||||||||
| Services | 72,060 | 63,899 | 265,266 | 246,123 | ||||||||||
| Net Revenue | $ | 387,389 | $ | 359,532 | $ | 1,488,274 | $ | 1,289,966 | ||||||
| Gross Profit | ||||||||||||||
| Materials | ||||||||||||||
| Aggregates | $ | 40,356 | $ | 37,228 | $ | 164,129 | $ | 130,163 | ||||||
| Cement (1) | 37,299 | 31,913 | 126,907 | 83,804 | ||||||||||
| Products | 47,351 | 42,812 | 188,611 | 162,466 | ||||||||||
| Services | 23,864 | 18,702 | 74,346 | 65,219 | ||||||||||
| Gross Profit | $ | 148,870 | $ | 130,655 | $ | 553,993 | $ | 441,652 | ||||||
|
_______________________ |
|||
| (1) | Net revenue for the cement line of business excludes revenue associated with the processing of hazardous and non-hazardous waste, which is processed into fuel and used in the cement plants and is included in services net revenue. Additionally, net revenue from cement swaps and other cement-related products are included in products net revenue. The cement segment gross profit includes the earnings from the waste processing operations, cement swaps and other products. | ||
|
SUMMIT MATERIALS, INC. AND SUBSIDIARIES Unaudited Volume and Price Statistics (Units in thousands) |
|||||||||||||||||||
| Three months ended | Year ended | ||||||||||||||||||
| Total Volume | December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | |||||||||||||||
| Aggregates (tons) | 8,790 | 8,349 | 36,092 | 32,297 | |||||||||||||||
| Cement (tons) | 658 | 628 | 2,357 | 1,720 | |||||||||||||||
| Ready-mix concrete (cubic yards) | 1,025 | 913 | 3,823 | 3,406 | |||||||||||||||
| Asphalt (tons) | 1,090 | 1,072 | 4,359 | 4,359 | |||||||||||||||
| Three months ended | Year ended | ||||||||||||||||||
| Pricing | December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | |||||||||||||||
| Aggregates (per ton) | $ | 9.67 | $ | 9.42 | $ | 9.85 | $ | 9.19 | |||||||||||
| Cement (per ton) | 109.57 | 102.25 | 108.63 | 101.05 | |||||||||||||||
| Ready-mix concrete (per cubic yards) | 104.44 | 104.82 | 103.74 | 102.92 | |||||||||||||||
| Asphalt (per ton) | 52.06 | 58.15 | 54.74 | 57.67 | |||||||||||||||
| Year over Year Comparison | Volume | Pricing | Volume | Pricing | |||||||||||||||
| Aggregates (per ton) | 5.3 | % | 2.7 | % | 11.8 | % | 7.2 | % | |||||||||||
| Cement (per ton) | 4.8 | % | 7.2 | % | 37.0 | % | 7.5 | % | |||||||||||
| Ready-mix concrete (per cubic yards) | 12.3 | % | (0.4 | ) | % | 12.2 | % | 0.8 | % | ||||||||||
| Asphalt (per ton) | 1.7 | % | (10.5 | ) | % | - | % | (5.1 | ) | % | |||||||||
| Year over Year Comparison (Excluding acquisitions) | Volume | Pricing | Volume | Pricing | |||||||||||||||
| Aggregates (per ton) | (11.8 | ) | % | 0.0 | % | (5.5 | ) | % | 4.8 | % | |||||||||
| Cement (per ton) | 0.6 | % | 6.8 | % | * | * | |||||||||||||
| Ready-mix concrete (per cubic yards) | (9.5 | ) | % | 1.5 | % | (3.4 | ) | % | 2.0 | % | |||||||||
| Asphalt (per ton) | (9.2 | ) | % | (9.0 | ) | % | (13.0 | ) | % | (3.6 | ) | % | |||||||
|
_________________________ |
|||
| * | The Davenport Assets were immediately integrated with our existing cement operations such that it is impracticable to bifurcate the growth attributable to the Davenport Assets from organic growth. | ||
|
SUMMIT MATERIALS, INC. AND SUBSIDIARIES Unaudited Reconciliations of Gross Revenue to Net Revenue by Line of Business ($ and Units in thousands) |
|||||||||||||||
| Three months ended December 31, 2016 | |||||||||||||||
| Gross Revenue | Intercompany | Net | |||||||||||||
| Volumes | Pricing | by Product | Elimination/Delivery | Revenue | |||||||||||
| Aggregates | 8,790 | $ | 9.67 | $ | 84,989 | $ | (21,597 | ) | $ | 63,392 | |||||
| Cement | 658 | 109.57 | 72,078 | (1,387 | ) | 70,691 | |||||||||
| Materials | $ | 157,067 | $ | (22,984 | ) | $ | 134,083 | ||||||||
| Ready-mix concrete | 1,025 | 104.44 | 107,035 | 274 | 107,309 | ||||||||||
| Asphalt | 1,090 | 52.06 | 56,766 | 154 | 56,920 | ||||||||||
| Other Products | 79,732 | (62,715 | ) | 17,017 | |||||||||||
| Products | $ | 243,533 | $ | (62,287 | ) | $ | 181,246 | ||||||||
| Year ended December 31, 2016 | |||||||||||||||
| Gross Revenue | Intercompany | Net | |||||||||||||
| Volumes | Pricing | by Product | Elimination/Delivery | Revenue | |||||||||||
| Aggregates | 36,092 | $ | 9.85 | $ | 355,617 | $ | (91,008 | ) | $ | 264,609 | |||||
| Cement | 2,357 | 108.63 | 256,046 | (5,697 | ) | 250,349 | |||||||||
| Materials | $ | 611,663 | $ | (96,705 | ) | $ | 514,958 | ||||||||
| Ready-mix concrete | 3,823 | 103.74 | 396,597 | (681 | ) | 395,916 | |||||||||
| Asphalt | 4,359 | 54.74 | 238,588 | (230 | ) | 238,358 | |||||||||
| Other Products | 327,778 | (254,002 | ) | 73,776 | |||||||||||
| Products | $ | 962,963 | $ | (254,913 | ) | $ | 708,050 | ||||||||
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited
Reconciliations of Non-GAAP Financial Measures
($ in thousands,
except share and per share amounts)
The tables below reconcile our net income to Adjusted EBITDA and present Adjusted EBITDA by segment for the three months and year ended December 31, 2016 and January 2, 2016.
| Three months ended | Year ended | |||||||||||||||||||
| December 31, | January 2, | December 31, | January 2, | |||||||||||||||||
| Reconciliation of Net Income to Adjusted EBITDA | 2016 | 2016 | 2016 | 2016 | ||||||||||||||||
| Net income | $ | 6,049 | $ | 47,416 | $ | 46,126 | $ | 1,484 | ||||||||||||
| Interest expense | 25,069 | 22,398 | 97,536 | 84,629 | ||||||||||||||||
| Income tax expense (benefit) | 2,614 | (5,795 | ) | (5,299 | ) | (18,263 | ) | |||||||||||||
| Depreciation, depletion and amortization | 39,743 | 32,632 | 147,736 | 118,321 | ||||||||||||||||
| EBITDA | $ | 73,475 | $ | 96,651 | $ | 286,099 | $ | 186,171 | ||||||||||||
| Accretion | 362 | 273 | 1,564 | 1,402 | ||||||||||||||||
| IPO/ Legacy equity modification costs | — | — | 37,257 | 28,296 | ||||||||||||||||
| Loss on debt financings | — | 7,318 | — | 71,631 | ||||||||||||||||
| Tax receivable agreement expense | 14,938 | — | 14,938 | — | ||||||||||||||||
| Income from discontinued operations | — | (1,600 | ) | — | (2,415 | ) | ||||||||||||||
| Transaction costs | 1,507 | 1,475 | 6,797 | 9,519 | ||||||||||||||||
| Management fees and expenses | (1,379 | ) | — | (1,379 | ) | 1,046 | ||||||||||||||
| Non-cash compensation | 3,817 | 1,310 | 12,683 | 5,448 | ||||||||||||||||
| Loss (gain) on disposal and impairment of assets | 3,805 | (16,561 | ) | 3,805 | (16,561 | ) | ||||||||||||||
| Other | 5,490 | 1,463 | 9,583 | 2,991 | ||||||||||||||||
| Adjusted EBITDA | $ | 102,015 | $ | 90,329 | $ | 371,347 | $ | 287,528 | ||||||||||||
| Adjusted EBITDA by Segment | ||||||||||||||||||||
| West | 39,887 | 39,314 | 167,434 | 150,764 | ||||||||||||||||
| East | 35,602 | 29,545 | 126,007 | 92,303 | ||||||||||||||||
| Cement | 34,163 | 30,948 | 112,991 | 74,845 | ||||||||||||||||
| Corporate | (7,637 | ) | (9,478 | ) | (35,085 | ) | (30,384 | ) | ||||||||||||
| Adjusted EBITDA | $ | 102,015 | $ | 90,329 | $ | 371,347 | $ | 287,528 | ||||||||||||
| Adjusted EBITDA Margin (1) | 26.3 | % | 25.1 | % | 25.0 | % | 22.3 | % | ||||||||||||
|
|
||||||||||||||||||||
|
(1) Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of net revenue. |
||||||||||||||||||||
The table below reconciles our net (loss) income per share attributable to Summit Materials, Inc. to adjusted income per share for the three months and year ended December 31, 2016 and January 2, 2016. The per share amount of the net income attributable to Summit Materials, Inc. presented in the table is calculated using the total equity interests for the purpose of reconciling to adjusted net income per share.
| Three months ended | Twelve months ended | ||||||||||||||||||||||||||||||
| December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | ||||||||||||||||||||||||||||
| Reconciliation of Net (Loss) Income Per Share to Adjusted Diluted EPS | Net Income | Per Share | Net Income | Per Share | Net Income | Per Share | Net Income | Per Share | |||||||||||||||||||||||
| Net (loss) income attributable to Summit Materials, Inc. | $ | (290 | ) | $ | — | $ | 23,363 | $ | 0.23 | $ | 36,783 | $ | 0.36 | $ | 27,718 | $ | 0.28 | ||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interest | 6,380 | 0.06 | 23,962 | 0.24 | 9,327 | 0.09 | (24,408 | ) | (0.25 | ) | |||||||||||||||||||||
| IPO/ Legacy equity modification costs | — | — | — | — | 37,257 | 0.37 | 28,296 | 0.29 | |||||||||||||||||||||||
| Tax receivable agreement expense | 14,938 | 0.15 | — | — | 14,938 | 0.15 | — | — | |||||||||||||||||||||||
| Loss on debt financings, net of tax | — | — | 3,671 | 0.04 | — | — | 59,696 | 0.60 | |||||||||||||||||||||||
| Gain on transfer of Bettendorf assets | — | — | (16,561 | ) | (0.16 | ) | — | — | (16,561 | ) | (0.17 | ) | |||||||||||||||||||
| Adjusted diluted net income | $ | 21,028 | $ | 0.21 | $ | 34,435 | $ | 0.35 | $ | 98,305 | $ | 0.97 | $ | 74,741 | $ | 0.75 | |||||||||||||||
| Weighted-average shares: | |||||||||||||||||||||||||||||||
| Class A common stock | 87,276,645 | 50,881,602 | 68,833,986 | 39,367,381 | |||||||||||||||||||||||||||
| LP Units outstanding | 13,900,060 | 50,306,370 | 32,327,907 | 59,911,631 | |||||||||||||||||||||||||||
| Total equity interest | 101,176,705 | 101,187,972 | 101,161,893 | 99,279,012 | |||||||||||||||||||||||||||
The following table reconciles operating income to gross profit and gross margin for the three months and year ended December 31, 2016 and January 2, 2016.
| Three months ended | Year ended | ||||||||||||||
| December 31, | January 2, | December 31, | January 2, | ||||||||||||
| Reconciliation of Operating Income to Gross Profit | 2016 | 2016 | 2016 | 2016 | |||||||||||
| (in thousands) | |||||||||||||||
| Operating income | $ | 48,604 | $ | 67,990 | $ | 154,034 | $ | 134,641 | |||||||
| General and administrative expenses | 58,654 | 28,285 | 243,862 | 177,769 | |||||||||||
| Depreciation, depletion, amortization and accretion | 40,105 | 32,905 | 149,300 | 119,723 | |||||||||||
| Transaction costs | 1,507 | 1,475 | 6,797 | 9,519 | |||||||||||
| Gross Profit | $ | 148,870 | $ | 130,655 | $ | 553,993 | $ | 441,652 | |||||||
| Gross Margin (1) | 38.4 | % | 36.3 | % | 37.2 | % | 34.2 | % | |||||||
|
_______________________ |
|||||||||||||||
|
(1) Gross margin is defined as gross profit as a percentage of net revenue. |
|||||||||||||||
The following table reconciles net cash used for operating activities to free cash flow for the three months and year ended December 31, 2016 and January 2, 2016.
| Three months ended | Year ended | |||||||||||||||||
| December 31, | January 2, | December 31, | January 2, | |||||||||||||||
| 2016 | 2016 | 2016 | 2016 | |||||||||||||||
| Net income | $ | 6,049 | $ | 47,416 | $ | 46,126 | $ | 1,484 | ||||||||||
| Non-cash items | 49,260 | (9,467 | ) | 197,600 | 90,487 | |||||||||||||
| Net income adjusted for non-cash items | 55,309 | 37,949 | 243,726 | 91,971 | ||||||||||||||
| Change in working capital accounts | 105,031 | 78,484 | 1,137 | 6,232 | ||||||||||||||
| Net cash provided by operating activities | 160,340 | 116,433 | 244,863 | 98,203 | ||||||||||||||
| Capital expenditures, net of asset sales | (30,892 | ) | (15,051 | ) | (136,615 | ) | (75,840 | ) | ||||||||||
| Free cash flow | $ | 129,448 | $ | 101,382 | $ | 108,248 | $ | 22,363 | ||||||||||
