Summit Materials, Inc. Reports Third Quarter 2018 Results

- Net Revenue Growth of 8.8% in Three Month Period Ended September 29, 2018, Supported By Organic Volume Improvements

- Completed Two Materials-Based Bolt-on Acquisitions For Total Invested Capital of $72 million Since August 2018

- Reduced Midpoint of Adjusted EBITDA Guidance Range For The Full-Year 2018 By 14%

Summit Materials, Inc. SUM "Summit" or the "Company"))), a leading vertically integrated construction materials company, today announced results for the third quarter 2018.

For the three months ended September 29, 2018, the Company reported net income attributable to Summit Inc. of $71.3 million or $0.64 per basic share, compared to net income attributable to Summit Inc. of $81.3 million or $0.74 per basic share in the comparable prior year period. Summit reported adjusted diluted net income of $61.9 million or $0.54 per adjusted diluted share as compared to adjusted diluted net income of $54.0 million or $0.48 per adjusted diluted share in the prior year period.

Summit's net revenue increased 11.6% in the first nine months of 2018 as compared to the same period in 2017, primarily due to acquisitions. Tom Hill, CEO of Summit Materials, stated, "We experienced significant inclement weather in the third quarter, as well as continued inflationary cost pressures in our businesses beyond our expectations. While we achieved organic volume and price increases in our aggregates and products during the third quarter, our net income declined and our Adjusted EBITDA remained flat in the third quarter of 2018 as compared to the third quarter of 2017, reflecting lower contributions from our cement segment and Houston operations together with inflation in our variable costs. We had expected normal weather going into the third quarter; instead, weather patterns continued to have a significant negative impact on most of our operating geographies."

Organic sales volumes in Summit's cement segment were impacted by a combination of high precipitation levels, together with competitive pressures along the Mississippi River corridor. Further, Summit's Houston operations were affected by a wetter than normal third quarter, as rainfall in many parts of Texas reached all-time record levels in September. Summit's average selling prices on both materials and products gained traction through the third quarter, which partially offset these higher raw materials, freight, labor and fuel costs. As the inflationary cost increases have exceeded Summit's price increases, and the persistent weather conditions impacted operations, Summit reduced 2018 guidance for Adjusted EBITDA to $400 million to $410 million.

"Underlying demand conditions in most of our markets are healthy and are expected to remain so into 2019," continued Hill. In Summit's public markets, state transportation funding measures in Texas, coupled with steady increases in federal subsidies, are contributing to increased lettings activity. Single family housing starts and permits remain well below peak levels in Summit's major markets.

Since August 2018, Summit has completed two aggregates-based acquisitions for total invested capital of $72 million. During 2018 to date, Summit has completed 13 acquisitions for total invested capital of $300 million. Across these 13 transactions, Summit has added more than 400 million tons of aggregates reserves to its portfolio.

"While our guidance for Adjusted EBITDA has been reduced, we continue to generate significant free cash flow from operations that is helping to support the overall growth of our business," stated Brian Harris, CFO of Summit Materials. The Company expects its net leverage ratio to approximate current levels at year end, based on the midpoint of the revised guidance. Summit plans to reduce its leverage during 2019 through a disciplined capital allocation program, reducing its capital expenditures and implementing an increasingly selective acquisition strategy.

Third Quarter 2018 | Results by Line of Business

Aggregates Business: Aggregates net revenues increased by 21.0% to $109.6 million in the third quarter 2018, when compared to the prior year period. Aggregates adjusted cash gross profit margin declined to 69.2% in the third quarter, compared to 73.0% in the prior year period, due to higher variable costs. Organic aggregates sales volumes increased 3.9% in the third quarter 2018, when compared to the prior-year period. Organic growth in aggregates sales volumes was due to higher volumes in the West Region, which more than offset a decline in organic aggregates sales volumes in the East Region. Organic average selling prices on aggregates increased 1.5% in the third quarter 2018 due to improvements in prices within both the West and East segments during the period.

Cement Business: Cement segment net revenues declined 7.2% to $94.0 million in the third quarter 2018, when compared to the prior-year period. Cement adjusted cash gross profit margin increased slightly to 50.7% in the third quarter, compared to 50.6% in the prior-year period, as productivity gains were mostly offset by a reduction in average selling price, coupled with higher freight, storage and demurrage costs related to weather-affected cement inventories. Organic sales volume of cement declined 6.4% in the third quarter, when compared to the prior year period, due to high levels of precipitation that continued to disrupt project work during the period, as well as increased competition. Organic average selling prices on cement decreased 1.0% in the third quarter, when compared to the prior year period, as competitive pressures continued in our markets.

Products Business: Net revenues increased 12.6% to $315.3 million in the third quarter 2018, when compared to the prior year period. Products adjusted cash gross profit margin declined to 22.5% in the third quarter, versus 26.1% in the prior year period, as the increases in labor, raw materials and transportation costs exceeded increases in our average sales prices. Organic sales volumes of ready-mix concrete increased 3.2% in the third quarter, while organic average selling prices increased 2.3% as compared to the prior year period. Organic sales volumes of asphalt increased 3.2% in the third quarter, while organic average selling prices increased 3.6%, over the same period in 2017.

Third Quarter 2018 | Results By Reporting Segment

Net revenue increased by 8.8% to $625.0 million in the third quarter 2018, versus $574.4 million in the prior year period. The improvement in net revenue was primarily attributable to both organic and acquisition-related contributions in the East and West segments, offset by a decline in the Cement segment. The Company reported operating income of $108.2 million in the third quarter 2018, compared to $113.9 million in the prior year period. Adjusted EBITDA was $172.0 million in the third quarter 2018, compared to $172.7 million in the prior year period.

West Segment: The West Segment reported operating income of $48.2 million in the third quarter 2018, compared to $57.5 million in the prior year period. Adjusted EBITDA decreased to $73.9 million in the third quarter 2018, compared to $76.6 million in the prior year period. The quarterly declines in West Segment operating income and Adjusted EBITDA were primarily attributable to increased labor and hydrocarbon costs, partially offset by increases in average selling prices on aggregates and ready-mix concrete. Aggregates revenue in the third quarter increased 19.0% over the prior year as a result of contributions from acquisitions, a 10.0% increase in organic volumes and a 2.0% increase in organic average sales prices. Ready-mix concrete revenue in the third quarter 2018 increased 26.1% over the prior year period, as a result of contributions from acquisitions, along with a 7.6% increase in organic volumes and a 2.8% increase in organic average sales prices. Asphalt revenue also increased by 2.5% in the third quarter, resulting from a 4.9% increase in volumes, offset by a 1.0% decrease in average sales price.

East Segment: The East Segment reported operating income of $38.0 million in the third quarter 2018, compared to $36.9 million in the prior year period. Adjusted EBITDA increased to $58.3 million in the third quarter 2018, compared to $56.4 million in the prior year period. The quarterly improvement in East Segment operating income and Adjusted EBITDA were mainly attributable to increases in net revenue from our acquisition program, increases in average selling prices of aggregates, ready-mix concrete and asphalt, partially offset by increased labor and hydrocarbon costs, as well as decreases in ready-mix volumes. Aggregates revenue increased 20.1%, primarily due to increases resulting from our acquisition program as well as increases in average sales prices as organic sales volumes were flat. Ready-mix concrete revenue decreased 1.1% as a result of lower sales volumes, partially offset by an increase in organic average sales prices. Asphalt revenue increased 18.8% primarily as a result of acquisition related volumes and increased average sales prices, partially offset by a decrease in organic sales volumes.

Cement Segment: The Cement Segment reported operating income of $33.5 million in the third quarter 2018, compared to $35.1 million in the prior year period. Adjusted EBITDA declined to $44.3 million in the third quarter 2018, compared to $46.9 million in the prior year period. The Company experienced slightly lower organic average selling prices as well as declines in organic sales volumes during the three month period ended September 29, 2018 due to high levels of precipitation in the Company's Mississippi River markets and price-driven competitive pressures.

Acquisitions and Divestitures

As of November 6, 2018, the Company has completed 13 acquisitions in 2018, including two transactions that have closed since the Company's last quarterly update on August 1, 2018. Total investment across the 13 acquisitions completed in 2018 was approximately $300 million, including approximately $72 million for the two bolt-on acquisitions completed since the last update.

Walker Sand & Gravel (Idaho). Walker Sand & Gravel is an aggregates business that expands the Company's market position and reserve base in Idaho. Summit closed on the acquisition in October.

Aggregate Reserves (Georgia). Summit acquired property in the greater Atlanta, Georgia area containing over 100 million tons of permitted reserves and an active quarry which is currently leased to a third party through mid 2021. Initially, Summit will receive royalty payments through the end of the lease, at which time Summit will take over quarry operations. Summit closed on the acquisition in October.

In the third quarter of 2018, the Company divested a non-core business in the West segment, receiving $21.6 million in cash proceeds, and recorded a gain of $12.1 million related to this transaction.

Liquidity and Capital Resources

As of September 29, 2018, the Company had cash on hand of $64.9 million and borrowing capacity under its revolving credit facility of $219.6 million. The borrowing capacity on the revolving credit facility is fully available to the Company within the terms and covenant requirements of its credit agreement. As of September 29, 2018, the Company had $1.8 billion in debt outstanding.

Financial Outlook

For the full-year 2018, the Company has reduced its Adjusted EBITDA guidance from a range of $460 million to $480 million to a range of $400 million to $410 million, including acquisition-related contributions from two transactions that closed since the Company's last update in August 2018. No additional potential acquisitions are included within the Company's full-year 2018 Adjusted EBITDA guidance. For the full-year 2018, the Company has revised its capital expenditure guidance to be in the range of $225 million to $235 million.

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 third quarter 2018 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:

To listen to a replay of the teleconference, which will be available through December 6, 2018:

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 Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt 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 (Loss), Adjusted Diluted EPS, Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt 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. This press release also includes certain unaudited financial information for the last twelve months ("LTM") ended September 29, 2018, which is calculated as the nine months ended September 29, 2018 plus the actual results for the year-ended December 30, 2017 less the actual results for the nine months ended September 30, 2017. This presentation is not in accordance with GAAP. However, we believe that this information is useful to investors as we use LTM financial information to evaluate our financial performance for ongoing planning purposes, including a continuous assessment of our financial performance in comparison to budgets and internal projections. In addition, we use such LTM financial information to test compliance with covenants under our senior secured credit facilities.

Adjusted EBITDA, Adjusted EBITDA Margin, LTM financial information 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, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Adjusted Net Income (Loss), Adjusted Diluted EPS, Free Cash Flow, Net Leverage and Net Debt 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. 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 includes "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. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. 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 effect 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 realized. 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 Summit Inc.'s Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (the "Annual Report") and Summit Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018 each as filed with the Securities and Exchange Commission (the "SEC"), any factors discussed in the section entitled "Risk Factors" in any of our subsequently filed SEC filings and the following:

• our dependence on the construction industry and the strength of the local economies in which we operate;
• the cyclical nature of our business;
• risks related to weather and seasonality;
• risks associated with our capital-intensive business;
• competition within our local markets;
• our ability to execute on our acquisition strategy, successfully integrate acquisitions with our existing operations and retain key employees of acquired businesses;
• our dependence on securing and permitting aggregate reserves in strategically located areas;
• declines in public infrastructure construction and delays or reductions in governmental funding, including the funding by transportation authorities and other state agencies;
• environmental, health, safety and climate change laws or governmental requirements or policies concerning zoning and land use;
• conditions in the credit markets;
• our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;
• material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications;
• cancellation of a significant number of contracts or our disqualification from bidding for new contracts;
• special hazards related to our operations that may cause personal injury or property damage not covered by insurance;
• our substantial current level of indebtedness;
• our dependence on senior management and other key personnel;
• supply constraints or significant price fluctuations in electricity and the petroleum-based resources that we use, including diesel and liquid asphalt;
• unexpected operational difficulties;
• interruptions in our information technology systems and infrastructure;
• potential labor disputes; and
• rising prices for commodities, labor and other production and delivery costs as a result of inflation or otherwise.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. Any forward-looking statement that we make herein speaks only as of the date of this press release. 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 required by law.

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 (loss) to Adjusted EBITDA by segment for the three and nine months ended September 29, 2018 and September 30, 2017.

The table below reconciles our net income per share attributable to Summit Materials, Inc. to adjusted diluted net income per share for the three and nine months ended September 29, 2018 and September 30, 2017. 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 diluted net income per share.

The following table reconciles operating income to Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin for the three and nine months ended September 29, 2018 and September 30, 2017.

The following table reconciles net cash provided by operating activities to free cash flow for the three and nine months ended September 29, 2018 and September 30, 2017.

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