News Column

Summit Materials Announces Second Quarter 2014 Results

August 6, 2014

DENVER, Colorado--(BUSINESS WIRE)-- Summit Materials, LLC today announced results for the quarter ended June 28, 2014.

Notable items for the quarter and first half of 2014, as compared to the prior year, include:

  • Revenue increased 27%.
  • Operating income increased 147%.
  • Adjusted EBITDA increased 70%.
  • Aggregates, ready-mixed concrete and asphalt volumes increased 35%, 139% and 21%, respectively, in the first half of 2014, while cement volumes decreased 3%.
  • Cement and ready-mixed concrete pricing improved 11% and 2%, respectively, in the first half of 2014, while aggregates and asphalt pricing decreased 1% and 4%, respectively.

    Tom Hill, the President and CEO of Summit Materials, stated, “This quarter, we continued to build off of the momentum we had at the start of the year and we were able to achieve a $56.8 million increase in product revenue and a $69.5 million increase in total revenue compared to the second quarter of 2013. Our operating income improved 147% and Adjusted EBITDA increased 70%, while SG&A expenses fell to 11% of net sales, which is a 4% reduction as compared to the second quarter of 2013. Our product pricing increased in many of our markets, most notably in Missouri and Kansas. We continue to focus on growing our materials and products sales and improving margins in our paving and other services. It is encouraging seeing our aggregate backlog 6% greater than it was at this point last year and an 8% increase in our aggregate volumes from organic growth, reflecting an overall increase in market demand. In addition, this quarter we increased our presence in Texas with the acquisition of Troy Vines., Inc, an integrated aggregates and ready-mixed concrete business. We also acquired Buckhorn Materials LLC, an aggregates business serving North and South Carolina. In addition, our January acquisition of Alleyton Resources continues to provide strong results and is being seamlessly integrated with the rest of the company.”

    Second Quarter Regional Results

    West Region Results – The West Region’s revenue increased 44% due to higher aggregates, ready-mixed concrete and asphalt volumes and improved aggregate pricing. The increase in volumes was driven primarily by the Alleyton and Troy Vines acquisitions, contributing approximately $42.6 million of revenue. Adjusted EBITDA in the West Region increased $23.9 million. This was primarily driven by improved margins and the volume increases, primarily from our acquisitions in Texas.

    Central Region Results – The Central Region’s revenue increased 18%, which was primarily through organic growth. Aggregates, ready-mixed concrete and asphalt volumes improved and the region experienced pricing improvements across the majority of the product lines. Adjusted EBITDA improved $3.7 million primarily due to the revenue growth and realized cost efficiencies.

    East Region Results – The East Region’s revenue and Adjusted EBITDA remained relatively consistent.

    Liquidity and Capital Resources

    Our primary sources of liquidity include cash on-hand, cash provided by our operations and amounts available for borrowing under our credit facilities. As of June 28, 2014, we had $20.8 million in cash and working capital of $128.7 million as compared to cash and working capital of $14.9 million and $85.4 million, respectively, at December 28, 2013. We calculate working capital as current assets less current liabilities, excluding the current portion of long term debt and outstanding borrowings on our revolving credit facility (“Revolver”). As of June 28, 2014, our remaining borrowing capacity on our Revolver was $62.2 million, net of $22.8 million of outstanding letters of credit.

    Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year. Our working capital requirements generally increase during the first half of the year as we build up inventory and focus on repair and maintenance and other set up costs for the upcoming season. Working capital levels then generally decrease toward the end of the year, which is when we generally see significant inflows of cash from the collection of receivables.

    Free cash flow, a non-GAAP measure defined as net cash used for operating activities less net capital expenditures, was $89.2 million and $81.1 million in the six month periods ended June 28, 2014 and June 29, 2013, respectively. We invested $8.7 million more in capital projects and generated $1.1 million less from asset sales in the first half of 2014 compared to 2013.

    About Summit Materials, LLC

    Summit Materials is a leading U.S. aggregates based construction materials company that supplies aggregates, cement, ready-mixed concrete, and provides paving and other services. We are committed to promoting the success of our businesses by offering a safe place to work and implementing best practices, while striving to exceed our environmental and social responsibilities. Summit Materials was formed in 2008 by its President and CEO Tom W. Hill and a small group of investors, including members of its management team, Blackstone Capital Partners (an affiliate of The Blackstone Group) and Silverhawk Capital Partners. Since then, Summit Materials has completed 31 acquisitions, which are organized into nine operating companies in three distinct geographic regions across the United States.

    For more information about Summit Materials, please contact us at info@summit-materials.com

    Conference Call Information

    The Company will conduct a conference call at 1:00 p.m. Eastern Time (11:00 a.m. Mountain Time) on Wednesday, August 6, 2014. Interested parties may access this event at https://viavid.webcasts.com/starthere.jsp?ei=1040202.

    For those investors without online web access, the conference call may be accessed at:

     
    Conference ID: 1501711
    Domestic: 1-888-806-6231
    International: 1-913-643-4201


    Non-GAAP Financial Measures

    The rules of the Securities and Exchange Commission (the “SEC”) regulate the use in filings with the SEC of “non-GAAP financial measures,” such as Adjusted EBITDA, Pro Forma Adjusted EBITDA and free cash flow, that are derived on the basis of methodologies other than in accordance with GAAP. We have provided Adjusted EBITDA and Pro Forma Adjusted EBITDA because 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. Pro Forma Adjusted EBITDA is defined in our senior secured credit facilities and used to measure compliance with covenants, including interest coverage and debt incurrence, and is used to measure our debt incurrence and restricted payment capacity under the indenture governing our senior notes. Our use of the terms Adjusted EBITDA and Pro Forma Adjusted EBITDA may vary from the use of such terms by others and should not be considered as alternatives to net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with GAAP as measures of operating performance or to cash flows as measures of liquidity.

    Adjusted EBITDA and Pro Forma Adjusted EBITDA 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 GAAP. Some of the limitations of Adjusted EBITDA and Pro Forma Adjusted EBITDA are that these measures do not reflect: (i) changes in, or cash requirements for, our working capital needs; (ii) the significant interest expense or cash requirements necessary to service interest and principal payments on our debt; and (iii) any cash requirements for the replacement cost of assets being depreciated or amortized. Because of these limitations, we rely primarily on our GAAP results and use Adjusted EBITDA and Pro Forma Adjusted EBITDA only supplementally.

    We define free cash flow as net cash provided by (used for) operating activities less purchases of property, plant and equipment. It is a metric used by our senior management to assess the performance of our segments.

    Adjusted EBITDA, Pro Forma Adjusted EBITDA and free cash flow reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to 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. However, non-GAAP financial measures should not be construed as being more important than other comparable GAAP financial measures and should be considered in conjunction with the GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore, it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.

    Reconciliations of net income (loss) to Adjusted EBITDA and cash flows used for operations to free cash flow for the three and six months ended June 28, 2014 and of net income (loss) to Pro Forma Adjusted EBITDA for the twelve months ended June 28, 2014 and December 28, 2013 are included in the tables attached to this press release.

    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 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 December 28, 2013, filed with the SEC as such factors may be updated from time to time in our periodic filings with the SEC.

    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.

    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.

     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Consolidated Balance Sheets

    ($ in thousands)

     
     

    June 28,

    2014

    (unaudited)

     

    December 28,

    2013

    (audited)

    Assets
    Current assets:
    Cash $ 20,802 $ 14,917
    Accounts receivable, net 143,768 99,337
    Costs and estimated earnings in excess of billings 21,779 10,767
    Inventories 119,171 96,432
    Other current assets   13,235     13,181  
    Total current assets 318,755 234,634
     
    Property, plant and equipment, less accumulated depreciation, depletion and amortization (June 28, 2014 - $246,098 and December 28, 2013 - $212,382) 920,513 831,778
    Goodwill 317,323 127,038
    Intangible assets, less accumulated amortization (June 28, 2014 - $2,577 and December 28, 2013 - $2,192) 15,275 15,147
    Other assets   45,774     39,197  
    Total assets $ 1,617,640   $ 1,247,794  
     
     
    Liabilities, Redeemable Noncontrolling Interest and Member’s Interest
    Current liabilities:
    Current portion of debt $ 69,220 $ 30,220
    Current portion of acquisition-related liabilities 19,039 10,635
    Accounts payable 78,244 72,104
    Accrued expenses 87,913 57,251
    Billings in excess of costs and estimated earnings   4,902     9,263  
    Total current liabilities 259,318 179,473
     
    Long-term debt 938,290 658,767
    Acquisition-related liabilities 40,947 23,756
    Other noncurrent liabilities   83,415     77,480  
    Total liabilities   1,321,970     939,476  
     
     
    Redeemable noncontrolling interest 26,825 24,767
    Member’s interest:
    Member’s equity 512,297 486,896
    Accumulated deficit (239,213 ) (198,511 )
    Accumulated other comprehensive loss   (5,472 )   (6,045 )
    Member’s interest 267,612 282,340
    Noncontrolling interest   1,233     1,211  
    Total member’s interest   268,845     283,551  
    Total liabilities, redeemable noncontrolling interest and member’s interest $ 1,617,640   $ 1,247,794  
     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Unaudited Consolidated Statements of Operations

    ($ in thousands)

     
           
    Three months endedSix months ended
    June 28,

    2014
    June 29,

    2013
    June 28,

    2014
    June 29,

    2013
    Revenue:
    Product $ 225,808 $ 169,041 $ 329,769 $ 237,181
    Service   98,487     85,801     145,617     124,490  
    Total revenue   324,295     254,842     475,386     361,671  
    Cost of revenue (excluding items shown separately below):
    Product 155,984 115,960 245,003 181,932
    Service   75,778     65,883     115,434     95,984  
    Total cost of revenue   231,762     181,843     360,437     277,916  
    General and administrative expenses 34,867 39,392 70,355 73,395
    Depreciation, depletion, amortization and accretion 21,339 18,894 40,695 36,026
    Transaction costs   2,405     982     4,996     2,464  
     
    Operating income (loss) 33,922 13,731 (1,097 ) (28,130 )
    Other (income) expense, net (697 ) (269 ) (891 ) 163
    Loss on debt financings 3,115
    Interest expense   21,651     14,482     40,470     27,849  
    Income (loss) from continuing operations before taxes 12,968 (482 ) (40,676 ) (59,257 )
    Income tax benefit   (864 )   (726 )   (1,460 )   (3,347 )
    Income (loss) from continuing operations 13,832 244 (39,216 ) (55,910 )
    (Income) loss from discontinued operations   (369 )   (26 )   (349 )   97  
     
    Net income (loss) 14,201 270 (38,867 ) (56,007 )
    Net income (loss) attributable to noncontrolling interest   1,946     1,939     (569 )   (1,518 )
    Net income (loss) attributable to member of Summit Materials, LLC $ 12,255   $ (1,669 ) $ (38,298 ) $ (54,489 )
     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Unaudited Consolidated Statements of Cash Flows

    ($ in thousands)

     
      Six months ended
    June 28,

    2014
      June 29,

    2013
    Cash flow from operating activities:
    Net loss $ (38,867 ) $ (56,007 )
    Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation, depletion, amortization and accretion 43,296 37,404
    Financing fee amortization 470 1,629
    Share-based compensation expense 1,138 1,114
    Deferred income tax benefit (525 ) (2,969 )
    Net (gain) loss on asset disposals (76 ) 5,574
    Loss on debt financings 2,989
    Other 559 755
    (Increase) decrease in operating assets, net of acquisitions:
    Account receivable, net (28,917 ) (11,610 )
    Inventories (17,820 ) (13,222 )
    Costs and estimated earnings in excess of billings (10,246 ) (13,688 )
    Other current assets (2,128 ) (491 )
    Other assets 2,214 (118 )
    Increase (decrease) in operating liabilities, net of acquisitions:
    Accounts payable 3,589 6,691
    Accrued expenses 8,511 (4,722 )
    Billings in excess of costs and estimated earnings (4,361 ) (1,493 )
    Other liabilities   (2,717 )   404  
    Net cash used for operating activities   (45,880 )   (47,760 )
     
     
    Cash flow from investing activities:
    Acquisitions, net of cash acquired (234,870 ) (60,779 )
    Purchases of property, plant and equipment (49,260 ) (40,528 )
    Proceeds from the sale of property, plant and equipment 5,985 7,086
    Other   757      
    Net cash used for investing activities   (277,388 )   (94,221 )
     
     
    Cash flow from financing activities:
    Proceeds from investment by member 24,350
    Proceeds from debt issuances 424,750 189,681
    Payments on long-term debt (109,246 ) (61,343 )
    Payments on acquisition-related liabilities (4,259 ) (3,426 )
    Financing costs (6,354 ) (2,707 )
    Other   (88 )    
    Net cash provided by financing activities   329,153     122,205  
    Net increase (decrease) in cash 5,885 (19,776 )
    Cash – beginning of period   14,917     27,431  
    Cash – end of period $ 20,802   $ 7,655  
     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Unaudited Financial Highlights

    ($ in thousands)

     
      Three months ended   Six months ended
    June 28,

    2014
      June 29,

    2013
    June 28,

    2014
      June 29,

    2013
    Revenue by product:*
    Aggregates $ 59,816 $ 47,439 $ 91,365 $ 68,304
    Cement 26,181 21,474 33,387 30,914
    Ready-mixed concrete 71,389 33,279 113,769 46,412
    Asphalt 74,686 55,857 99,082 75,208
    Paving and related services 143,918 125,536 199,420 171,946
    Other   (51,695 )   (28,743 )   (61,637 )   (31,113 )
    Total revenue $ 324,295   $ 254,842   $ 475,386   $ 361,671  
     

    * Revenue by product includes intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other.



           
    Three months endedSix months ended
    June 28,

    2014
    June 29,

    2013
    June 28,

    2014
    June 29,

    2013
    Revenue:
    West region $ 172,236 $ 119,656 $ 267,130 $ 179,719
    Central region 109,117 92,780 156,659 128,680
    East region   42,942   42,406   51,597   53,272
    Total revenue $ 324,295 $ 254,842 $ 475,386 $ 361,671
       
    Six months ended
    Volume in 2014

    Compared to 2013
    Pricing in 2014

    Compared to 2013
    Aggregate 35 % (1 %)
    Cement (3 %) 11 %
    Ready-mixed concrete 139 % 2 %
    Asphalt 21 % (4 %)
     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Unaudited Reconciliations of Non-GAAP Financial Measures

    ($ in thousands)

     

    The tables below reconcile our net income (loss) to Adjusted EBITDA and present Adjusted EBITDA by segment for the three and six month periods ended June 28, 2014 and June 29, 2013.

     
      Three months ended   Six months ended
    Reconciliation of Net Loss to Adjusted EBITDAJune 28,

    2014
      June 29,

    2013
    June 28,

    2014
      June 29,

    2013
    (in thousands)
    Net income (loss) $ 14,201 $ 270 $ (38,867 ) $ (56,007 )
    Income tax benefit (864 ) (726 ) (1,460 ) (3,347 )
    Interest expense 21,651 14,482 40,470 27,849
    Depreciation, depletion and amortization 21,121 18,714 40,270 35,674
    Accretion 218 180 425 352
    (Income) loss from discontinued operations   (369 )   (26 )   (349 )   97  
    Adjusted EBITDA $ 55,958   $ 32,894   $ 40,489   $ 4,618  
     
     
    Adjusted EBITDA by Segment
     
    (in thousands)
    West $ 30,750 $ 6,807 $ 32,541 $ 85
    Central 28,823 25,136 28,400 19,182
    East 7,932 7,155 (1,406 ) (2,377 )
    Corporate   (11,547 )   (6,204 )   (19,046 )   (12,272 )
    Adjusted EBITDA $ 55,958   $ 32,894   $ 40,489   $ 4,618  
     

    The following table reconciles net cash used for operating activities to free cash flow for the three and six month periods ended June 28, 2014 and June 29, 2013.

     
      Three months ended   Six months ended
    June 28,

    2014
      June 29,

    2013
    June 28,

    2014
      June 29,

    2013
     
    Net income (loss) $ 14,201 $ 270 $ (38,867 ) $ (56,007 )
    Non- cash items   23,522     23,388     44,862     46,496  
    Net income (loss) adjusted for non-cash items 37,723 23,658 5,995 (9,511 )
    Change in working capital accounts   (33,228 )   (25,522 )   (51,875 )   (38,249 )
    Net cash provided by (used for) operating activities 4,495 (1,864 ) (45,880 ) (47,760 )
    Capital expenditures, net of asset sales   (25,536 )   (22,896 )   (43,275 )   (33,442 )
    Free cash flow $ (21,041 ) $ (24,760 ) $ (89,155 ) $ (81,202 )
     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Unaudited Reconciliations of Non-GAAP Financial Measures

    ($ in thousands)

     

    The following table presents a reconciliation of net income (loss) to Pro Forma Adjusted EBITDA for the twelve months ended June 28, 2014 and December 28, 2013.

     
      Twelve months ended

    June 28, 2014
      Twelve months ended

    December 28, 2013
    Net loss $ (86,538 ) $ (103,679 )
    Interest expense 69,064 56,443
    Income tax expense (760 ) (2,647 )
    Depreciation, depletion, amortization and accretion expense   77,602     72,934  
    EBITDA $ 59,368   $ 23,051  
    EBITDA for certain acquisitions 27,597 (1,596 )
    Discontinued operations 426 678
    Transaction expenses 6,521 3,990
    Monitoring fees and expenses 3,724 2,620
    Strategic fees and initiatives 2,711 3,887
    Goodwill impairment 68,202 68,202
    Non-cash compensation 2,339 2,315
    Deferred financing fees written off at re-financing 3,115
    Loss on disposal and impairment of fixed assets 6,770 12,419
    Severance and relocation costs 2,340 2,755
    Other   2,588     7,015  
    Pro Forma Adjusted EBITDA$182,586   $128,451  
     
    SUMMIT MATERIALS, LLC AND SUBSIDIARIES

    Unaudited Credit Statistics

    ($ in millions)

     

    The following is a summary of our credit statistics as of and for the twelve months ended June 28, 2014 and December 28, 2013:

     
      June 28, 2014     December 28, 2013
    Cash $ 20.8 $ 14.9
     
     
    Debt
    Revolving credit facility

    ($150M capacity)
    $ 65.0 $ 26.0
    Senior secured term loan 417.8 419.9
    Capital leases 23.4 8.0
    Other debt   0.4   1.6
     
    Total senior secured debt $ 506.6 $ 455.5
     
    10.5 % senior notes 510.0 250.0
    Acquisition related liabilities   60.0   34.4
     
    Total debt $ 1,076.6 $ 739.9
     
    Leverage Ratio Calculations
    Senior secured net debt $ 485.8 $ 440.6
    Total net debt $ 1,055.8 $ 725.0
     
    Pro Forma Adjusted EBITDA $ 182.6 $ 128.5
     
    Senior Secured Net Leverage 2.66 x 3.43 x
    Covenant Senior Secured Net Leverage Limit 4.75 x 4.75 x
     
    Total Net Leverage 5.78 x 5.64 x





    Summit Materials, LLC

    Jennifer Rose, 303-893-0012

    info@summit-materials.com


    Source: Summit Materials, LLC


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