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Continental Building Products Reports Second Quarter 2018 Results

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Continental Building Products, Inc. (NYSE:CBPX) (the "Company"), a
leading manufacturer of gypsum wallboard and complementary finishing
products, announced today results for the second quarter ended June 30,
2018.

Highlights of Second Quarter 2018 as Compared to Second Quarter 2017

  • Earnings per share increased 84.4% to $0.59
  • Net income increased 76.6% to $21.9 million
  • EBITDA1 increased 21.3% to $41.4 million
  • Net sales increased 15.5% to $139.3 million
  • Gross margin increased to 29.4% compared to 25.5%
  • Operating cash flow improved 62.9% to $39.0 million
  • Deployed $7.4 million in capital investments
  • Deployed $10.0 million to repurchase 0.3 million shares of common stock

"We delivered higher earnings per share reflecting strong momentum in
sales and a rigorous focus on operating discipline," stated Jay
Bachmann, President and Chief Executive Officer. "We are especially
pleased by our 63% improvement in operating cash flows where we
converted essentially all of our EBITDA into cash. This accomplishment
is reflective of our relentless focus on improving our efficient, low
cost operations while we continue to combat persistent inflationary
pressures."

Mr. Bachmann continued, "We improved EBITDA in the quarter by 21%
against the backdrop of tightening freight and labor markets. Higher
earnings also reflected our commitment to the Bison Way continuous
improvement effort as all of our associates work together to streamline
operations and better serve our customers. As we look forward to the
balance of the year, we expect demand to remain strong, and our volumes
to be in line with industry wallboard growth, which we now anticipate
will be 3% to 4% which represents the high end of our previously
communicated range of 2% to 4% for the full year 2018. We are encouraged
by the momentum of wallboard demand in our markets, and even more so by
the commitment and hard work of everyone in the Company to ensure that
we deliver exceptional value to our customers."

Second Quarter 2018 Results vs. Second Quarter 2017

Net sales were up 15.5% to $139.3 million for the second quarter 2018,
compared to $120.6 million in the prior year quarter, primarily due to a
11.6% increase in wallboard volumes. Wallboard sales volumes increased
to 722 million square feet (MMSF), compared to 647 MMSF in the prior
year quarter, attributable to strong demand in the Company's markets.

Operating income was $30.6 million, compared to $21.6 million in the
prior year quarter. This increase was primarily attributable to higher
net sales which more than offset an increase in input costs per unit.
SG&A expense was $10.4 million compared to $9.2 million in the prior
year quarter, or 7.5% of net sales compared to 7.6% in the prior year
quarter.

Interest expense decreased 12.0% to $2.7 million, compared to
$3.1 million in the prior year quarter, reflecting higher investment
income and capitalized interest, partially offset by the rise in LIBOR.

Net income for the second quarter 2018 increased 76.6% to $21.9 million,
or $0.59 per share, compared to $12.4 million, or $0.32 per share, in
the prior year quarter. The $9.5 million increase in net income is
primarily a result of the increase in net sales and the decrease in
provision for income taxes under the new federal and state tax rates
effective for 2018.

Balance Sheet and Cash Flow

As of June 30, 2018, the Company had cash on hand of $84.4 million and
total outstanding borrowing under the term loan agreement of
$270.2 million. During the second quarter 2018, the Company generated
cash flows from operations of $39.0 million and deployed $7.4 million in
capital investments.

During the second quarter 2018, the Company repurchased 0.3 million
shares of its common stock under its recently expanded repurchase
program for an aggregate purchase price of $10.0 million, representing
0.9% of its outstanding shares as of December 31, 2017. As of June 30,
2018, against the program, the Company has repurchased $127.9 million of
common stock at an average price of $22.27 per share and had a remaining
capacity of $172.1 million for future repurchases.

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 per unit compared to the prior year is
    expected to be in the range of 3% - 4%, down from the prior guidance
    of 3% - 5%, partly offset by approximately $5 million of savings from
    high return capital projects
  • Total capital expenditures are expected to be in the range of $29 -
    $33 million as compared to the prior guidance of $30 - $35 million
    • Maintenance capital spending is expected to be in the range of $14
      - $15 million as compared to the prior guidance of $15 million
    • High-return capital spending is expected to be in the range of $15
      - $18 million as compared to the prior guidance of $15 - $20
      million
  • Depreciation and amortization is expected to be in the range of $43 -
    $45 million
  • Effective tax rate is expected to be in the range of 21% - 22% as
    compared to the prior guidance of 22% - 24%

Investor Conference Webcast and Conference Call

The Company will host a webcast and conference call on Thursday,
August 2, 2018 at 5:00 p.m. Eastern Time to review second quarter 2018
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) 407-0789 (domestic) or
(201) 689-8562 (international). A replay of the conference call will be
available through September 2, 2018, by dialing (844) 512-2921
(domestic) or (412) 317-6671 (international) and entering the pass code
number 13681324.

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 non-GAAP financial measures, to relevant
GAAP financial measures, and a discussion of why they are useful to
investors.

 
Continental Building Products, Inc.

Consolidated Statements of Operations

(unaudited)

 
  For the Three Months Ended   For the Six Months Ended
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
(in thousands, except share data and per share amounts)
Net sales $ 139,268 $ 120,630 $ 256,070 $ 241,245
Costs, expenses and other income:
Cost of goods sold 98,263 89,817 184,879 179,441
Selling and administrative 10,445   9,193     19,869   18,497  
Total costs and operating expenses 108,708   99,010     204,748   197,938  
Operating income 30,560 21,620 51,322 43,307
Other expense, net (87 ) (135 ) (227 ) (779 )
Interest expense, net (2,694 ) (3,062 )   (5,414 ) (5,978 )
Income before (losses)/income from equity method investment and
provision for income taxes
27,779 18,423 45,681 36,550
(Losses)/income from equity method investment (391 ) 345     (755 ) 175  
Income before provision for income taxes 27,388 18,768 44,926 36,725
Provision for income taxes (5,493 ) (6,370 )   (9,385 ) (12,100 )
Net income $ 21,895   $ 12,398     $ 35,541   $ 24,625  
 
Net income per share:
Basic $ 0.59 $ 0.32 $ 0.96 $ 0.63
Diluted $ 0.59 $ 0.32 $ 0.95 $ 0.62
Weighted average shares outstanding:
Basic 36,879,774 39,125,571 37,154,750 39,349,674
Diluted 37,027,997 39,210,219 37,314,947 39,454,928
 
 
Continental Building Products, Inc.
Consolidated Balance Sheets
 
  June 30, 2018   December 31, 2017
(unaudited)
(in thousands)
Assets:
Cash and cash equivalents $ 84,365 $ 72,521
Trade receivables, net 43,314 38,769
Inventories, net 27,662 24,882
Prepaid and other current assets 8,280   11,267  
Total current assets 163,621 147,439
Property, plant and equipment, net 292,451 294,003
Customer relationships and other intangibles, net 66,284 70,807
Goodwill 119,945 119,945
Equity method investment 8,867 9,263
Debt issuance costs 387   477  
Total Assets $ 651,555   $ 641,934  
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable $ 30,437 $ 30,809
Accrued and other liabilities 10,259 11,940
Notes payable, current portion 1,685   1,702  
Total current liabilities 42,381 44,451
Deferred taxes and other long-term liabilities 15,456 15,847
Notes payable, non-current portion 262,807   263,610  
Total Liabilities 320,644   323,908  
Shareholders' 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; 44,413,204 and 44,321,776 shares issued and 36,748,879
and 37,532,959 shares outstanding as of June 30, 2018 and December
31, 2017, respectively
44 44
Additional paid-in capital 326,594 325,391
Less: Treasury stock (167,919 ) (143,357 )
Accumulated other comprehensive loss (1,946 ) (2,649 )
Accumulated earnings 174,138   138,597  
Total Shareholders' Equity 330,911   318,026  
Total Liabilities and Shareholders' Equity $ 651,555   $ 641,934  
 
 
Continental Building Products, Inc.
Consolidated Statements of Cash Flows

(unaudited)

 
  For the Six Months Ended
June 30, 2018   June 30, 2017
(in thousands)
Cash flows from operating activities:
Net income $ 35,541 $ 24,625
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 21,386 23,760
Amortization of debt issuance costs and debt discount 629 586
Losses/(income) from equity method investment 755 (175 )
Amortization of deferred gain on terminated swaps (317 )
Loss on debt extinguishment 686
Share-based compensation 1,611 1,479
Deferred taxes 92
Change in assets and liabilities:
Trade receivables (4,647 ) (4,942 )
Inventories (2,896 ) (1,811 )
Prepaid expenses and other current assets 4,369 984
Accounts payable (2,078 ) (564 )
Accrued and other current liabilities (955 ) (2,038 )
Other long-term liabilities (622 ) (188 )
Net cash provided by operating activities 52,776 42,494
Cash flows from investing activities:
Capital expenditures (13,006 ) (8,070 )
Software purchased or developed (790 ) (133 )
Capital contributions to equity method investment (438 ) (647 )
Distributions from equity method investment 78   214  
Net cash used in investing activities (14,156 ) (8,636 )
Cash flows from financing activities:
Proceeds from exercise of stock options 11 230
Tax withholdings on share-based compensation (547 ) (240 )
Proceeds from debt refinancing 273,625
Disbursements for debt refinancing (273,625 )
Payments of financing costs (649 )
Principal payments for debt (1,358 ) (1,368 )
Payments to repurchase common stock (24,562 ) (27,836 )
Net cash used in financing activities (26,456 ) (29,863 )
Effect of foreign exchange rates on cash and cash equivalents (320 ) 316  
Net change in cash and cash equivalents 11,844   4,311  
Cash, beginning of period 72,521   51,536  
Cash, end of period $ 84,365   $ 55,847  
 

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 Directors'
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 Six Months Ended
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
(unaudited, in thousands)
Net income $ 21,895 $ 12,398 $ 35,541 $ 24,625

Adjustments:

Other expense, net 87 135 227 779
Interest expense, net 2,694 3,062 5,414 5,978
Losses/(income) from equity method investment 391 (345 ) 755 (175 )
Provision for income taxes 5,493 6,370 9,385 12,100
Depreciation and amortization 10,805   12,474   21,386   23,760  
EBITDA - Non-GAAP measure $ 41,365   $ 34,094   $ 72,708   $ 67,067  
EBITDA Margin - EBITDA as a percentage of net sales - Non-GAAP
measure
29.7 % 28.3 % 28.4 % 27.8 %
 
 
Reconciliation of Net Income and Earnings Per Share to Adjusted
Net Income and Adjusted Earnings Per Share
  For the Three Months Ended   For the Six Months Ended
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
(unaudited, in thousands, except share data and per share amounts)
Net income - GAAP measure $ 21,895 $ 12,398 $ 35,541 $ 24,625
Debt related expenses, net of tax (1)       454
Adjusted net income - Non-GAAP measure $ 21,895   $ 12,398   $ 35,541   $ 25,079
 
Earnings per share - GAAP measure $ 0.59 $ 0.32 $ 0.96 $ 0.63
Debt related expenses, net of tax (1)       0.01
Adjusted earnings per share - Non-GAAP measure $ 0.59   $ 0.32   $ 0.96   $ 0.64
 
(1)   Expenses related to debt repricing activities are shown net of
income tax benefit of $0.2 million.
 
Other Financial and Operating Data
  For the Three Months Ended   For the Six Months Ended
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
(in thousands, except mill net)
Capital expenditures and software purchased or developed $ 7,359 $ 2,843 $ 13,796 $ 8,203
Wallboard sales volume (million square feet) 722 647 1,337 1,297
Mill net sales price (1) $ 153.88 $ 150.32 $ 152.83 $ 149.11
 
(1)   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

June 30,
2017

 

September 30,
2017

 

December 31,
2017

 

March 31,
2018

 

June 30,
2018

Volumes (million square feet) 647 644 725 615 722
Mill net sales price (1) $ 150.32 $ 144.90 $ 144.78 $ 151.60 $ 153.88
 
(1)   Mill net sales price represents average selling price per thousand
square feet net of freight and delivery costs.

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