EX-99.1 2 d811369dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Summit Materials Announces Third Quarter 2014 Results

Denver, Colorado (November 6, 2014)—Summit Materials, LLC today announced results for the quarter ended September 27, 2014.

Notable items for the quarter include (all comparisons, unless noted, are with the prior year’s third quarter):

 

    Revenue increased 25%.

 

    Operating income and Adjusted EBITDA increased 26%.

 

    Year-to-date operating margin increased 400 basis points.

 

    Year-to-date aggregates, cement, ready-mixed concrete and asphalt volumes increased 35%, 2%, 123% and 9%, respectively.

 

    Year-to-date aggregates, cement and ready-mixed concrete pricing improved 2%, 9% and 3%, respectively, while asphalt pricing decreased 1%.

Tom Hill, the President and CEO of Summit Materials, stated, “This quarter, we were able to achieve a $54.9 million increase in product revenue and a $78.5 million increase in total revenue compared to the third quarter of 2013. Our operating income and Adjusted EBITDA both improved 26%, while SG&A expenses fell to 9% of net sales, which is a 2% reduction from the third 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 to see our organic aggregate volumes grow 7% year-to-date, reflecting an overall increase in market demand in our existing markets. In addition, this quarter we increased our presence in Texas with the acquisitions of Canyon Redi-Mix, Inc. in Midland/Odessa and Southwest Ready-Mix LLC in Houston, both ready-mixed concrete producers. For the first time, we have entered an international market by acquiring Mainland Sand & Gravel, an aggregates business serving the Vancouver metropolitan area.”

Third Quarter Regional Results

West Region Results – The West Region’s revenue increased 48% due to higher aggregates, ready-mixed concrete and asphalt volumes and improved aggregate pricing. The increase in volumes was driven primarily by the Alleyton, Troy Vines and Mainland acquisitions, contributing approximately $48.7 million of incremental revenue. Adjusted EBITDA in the West Region increased $19.9 million. This was primarily driven by improved margins and the volume increases.

Central Region Results – The Central Region’s revenue increased 10%, which was primarily through organic growth. Aggregates, cement and asphalt volumes improved and the region experienced pricing improvements across the majority of the product lines. Adjusted EBITDA remained relatively flat.

East Region Results – The East Region’s revenue and Adjusted EBITDA declined $1.2 million and $1.3 million, respectively. The decline was due to higher costs to clear land for additional mining and lower production output in aggregates.

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 September 27, 2014, we had $6.7 million in cash and working capital of $134.7 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 September 27, 2014, our remaining borrowing capacity on our Revolver was $102.7 million, net of $23.3 million of outstanding letters of credit.

 

1


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 $65.5 million and $44.9 million in the nine months ended September 27, 2014 and September 28, 2013, respectively. We invested $10.6 million more in capital projects and generated $11.0 million less from operating activities in 2014 compared to 2013.

About Summit Materials

Summit Materials is a leading heavy-side construction materials company that supplies aggregates, cement, ready-mixed concrete and asphalt in more than 15 U.S. states and in western Canada. It was founded by CEO Tom Hill, The Blackstone Group and Silverhawk Capital Partners with the objective of building a geographically diverse, vertically integrated aggregates-based business of scale. To that end, Summit Materials has completed more than 30 acquisitions since 2009 focused around eleven operating platforms and continues to pursue growth opportunities in new and existing markets.

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 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Thursday, November 6, 2014. Interested parties may access this event at https://viavid.webcasts.com/starthere.jsp?ei=1046462.

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

 

Domestic:

     1-888-277-7112   

International:

     1-913-312-0397   

Conference ID:

     6705257   

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, 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 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 U.S. 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 U.S. 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 U.S. 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 net purchases of property, plant and equipment. It is a metric used by our senior management to assess the performance of our segments.

 

2


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 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. However, non-GAAP financial measures should not be construed as being more important than other comparable U.S. GAAP financial measures and should be considered in conjunction with the U.S. 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 nine months ended September 27, 2014 and of net income (loss) to Pro Forma Adjusted EBITDA for the twelve months ended September 27, 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.

 

3


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands)

 

     September 27,
2014
    December 28,
2013
 
     (unaudited)     (audited)  
Assets     

Current assets:

    

Cash

   $ 6,729     $ 14,917  

Accounts receivable, net

     179,328       99,337  

Costs and estimated earnings in excess of billings

     26,542       10,767  

Inventories

     111,137       96,432  

Other current assets

     16,157       13,181  
  

 

 

   

 

 

 

Total current assets

     339,893       234,634  

Property, plant and equipment, less accumulated depreciation, depletion and amortization (September 27, 2014 - $261,614 and December 28, 2013 - $212,382)

     946,980       831,778  

Goodwill

     390,338       127,038  

Intangible assets, less accumulated amortization (September 27, 2014 - $2,815 and December 28, 2013 - $2,193)

     18,026       15,147  

Other assets

     51,255       39,197  
  

 

 

   

 

 

 

Total assets

   $ 1,746,492     $ 1,247,794  
  

 

 

   

 

 

 

Liabilities, Redeemable Noncontrolling Interest and Member’s Interest

    

Current liabilities:

    

Current portion of debt

   $ 28,187     $ 30,220  

Current portion of acquisition-related liabilities

     20,571       10,635  

Accounts payable

     87,604       72,104  

Accrued expenses

     87,513       57,251  

Billings in excess of costs and estimated earnings

     9,533       9,263  
  

 

 

   

 

 

 

Total current liabilities

     233,408       179,473  

Long-term debt

     1,062,921       658,767  

Acquisition-related liabilities

     41,287       23,756  

Other noncurrent liabilities

     86,242       77,480  
  

 

 

   

 

 

 

Total liabilities

     1,423,858       939,476  
  

 

 

   

 

 

 

Redeemable noncontrolling interest

     31,820        24,767  

Member’s interest:

    

Member’s equity

     514,890        486,896  

Accumulated deficit

     (218,128     (198,511 )

Accumulated other comprehensive loss

     (7,236     (6,045 )
  

 

 

   

 

 

 

Member’s interest

     289,526        282,340  

Noncontrolling interest

     1,288        1,211  
  

 

 

   

 

 

 

Total member’s interest

     290,814        283,551  
  

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and member’s interest

   $ 1,746,492     $ 1,247,794  
  

 

 

   

 

 

 

 

4


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

($ in thousands)

 

     Three months ended     Nine months ended  
     September 27,
2014
    September 28,
2013
    September 27,
2014
    September 28,
2013
 

Revenue:

        

Product

   $ 265,031      $ 210,162      $ 594,800      $ 447,343   

Service

     129,728        106,101        275,345        230,591   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     394,759        316,263        870,145        677,934   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue (excluding items shown separately below):

        

Product

     184,573        145,605        429,576        327,536   

Service

     100,924        79,678        216,358        175,662   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     285,497        225,283        645,934        503,198   
  

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative expenses

     35,517        33,822        105,872        107,219   

Depreciation, depletion, amortization and accretion

     23,255        18,552        63,950        54,577   

Transaction costs

     2,741        711        7,737        3,175   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     47,749        37,895        46,652        9,765   

Other income, net

     (1,408     (1,151     (2,299     (988

Loss on debt financings

     —          —          —          3,115   

Interest expense

     22,085        14,531        62,555        42,380   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     27,072        24,515        (13,604     (34,742

Income tax (benefit) expense

     (1,038     1,565        (2,498     (1,782
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     28,110        22,950        (11,106     (32,960

(Income) loss from discontinued operations

     (7     160        (356     257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     28,117        22,790        (10,750     (33,217

Net income attributable to noncontrolling interest

     1,243        2,623        674        1,105   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to member of Summit Materials, LLC

   $ 26,874      $ 20,167      $ (11,424   $ (34,322
  

 

 

   

 

 

   

 

 

   

 

 

 

 

5


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

 

     Nine months ended  
     September 27,
2014
    September 28,
2013
 

Cash flow from operating activities:

    

Net loss

   $ (10,750   $ (33,217

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

    

Depreciation, depletion, amortization and accretion

     67,972        56,825   

Financing fee amortization

     495        2,450   

Share-based compensation expense

     1,746        1,743   

Deferred income tax benefit

     (525     (2,685

Net (gain) loss on asset disposals

     (219     7,709   

Loss on debt financings

     —          2,989   

Other

     (463     (79

(Increase) decrease in operating assets, net of acquisitions:

    

Accounts receivable, net

     (54,463     (18,797

Inventories

     (3,843     700   

Costs and estimated earnings in excess of billings

     (15,009     (21,836

Other current assets

     (3,910     (1,046

Other assets

     (675     (800

Increase (decrease) in operating liabilities, net of acquisitions:

    

Accounts payable

     9,433        10,919   

Accrued expenses

     2,578        (1,020

Billings in excess of costs and estimated earnings

     270        (2,421

Other liabilities

     (3,473     (1,311
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (10,836     123   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Acquisitions, net of cash acquired

     (351,941     (60,913

Purchases of property, plant and equipment

     (64,244     (53,659

Proceeds from the sale of property, plant and equipment

     9,575        8,642   

Other

     757        —     
  

 

 

   

 

 

 

Net cash used for investing activities

     (405,853     (105,930
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Proceeds from investment by member

     24,350        —     

Proceeds from debt issuances

     657,217        217,681   

Payments on long-term debt

     (258,337     (111,884

Payments on acquisition-related liabilities

     (5,807     (4,923

Financing costs

     (8,834     (3,291

Other

     (88     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     408,501        97,583   
  

 

 

   

 

 

 

Net decrease in cash

     (8,188     (8,224

Cash – beginning of period

     14,917        27,431   
  

 

 

   

 

 

 

Cash – end of period

   $ 6,729      $ 19,207   
  

 

 

   

 

 

 

 

6


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Financial Highlights

($ in thousands)

 

     Three months ended     Nine months ended  
     September 27,
2014
    September 28,
2013
    September 27,
2014
    September 28,
2013
 

Revenue by product:*

        

Aggregates

   $ 68,997      $ 51,454      $ 160,362      $ 119,757   

Cement

     32,729        28,245        66,116        59,160   

Ready-mixed concrete

     75,429        36,035        189,198        82,447   

Asphalt

     104,862        87,277        203,944        162,485   

Paving and related services

     191,049        171,399        390,469        343,346   

Other

     (78,307     (58,147     (139,944     (89,261
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ 394,759      $ 316,263      $ 870,145      $ 677,934   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

     Three months ended      Nine months ended  
     September 27,
2014
     September 28,
2013
     September 27,
2014
     September 28,
2013
 

Revenue:

           

West region

   $ 211,302       $ 142,921       $ 478,432       $ 322,640   

Central region

     126,882         115,527         283,541         244,207   

East region

     56,575         57,815         108,172         111,087   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 394,759       $ 316,263       $ 870,145       $ 677,934   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Nine months ended  
     Volume in 2014
Compared to 2013
    Pricing in 2014
Compared to 2013
 

Aggregate

     35     2

Cement

     2     9

Ready-mixed concrete

     123     3

Asphalt

     9     (1 %) 

 

7


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 nine months ended September 27, 2014 and September 28, 2013.

 

     Three months ended     Nine months ended  
     September 27,
2014
    September 28,
2013
    September 27,
2014
    September 28,
2013
 
Reconciliation of Net Income (Loss) to Adjusted EBITDA                         

Net income (loss)

   $ 28,117      $ 22,790      $ (10,750   $ (33,217

Income tax (benefit) expense

     (1,038     1,565        (2,498     (1,782

Interest expense

     22,085        14,531        62,555        42,380   

Depreciation, depletion and amortization

     23,032        18,367        63,302        54,040   

Accretion

     223        185        648        537   

(Income) loss from discontinued operations

     (7     160        (356     257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 72,412      $ 57,598      $ 112,901      $ 62,215   
  

 

 

   

 

 

   

 

 

   

 

 

 
Adjusted EBITDA by Segment                         

West

   $ 39,105      $ 19,175      $ 71,646      $ 19,260   

Central

     30,820        30,710        59,220        49,892   

East

     11,868        13,167        10,462        10,790   

Corporate(1)

     (9,381     (5,454     (28,427     (17,727
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 72,412      $ 57,598      $ 112,901      $ 62,215   
  

 

 

   

 

 

   

 

 

   

 

 

 
        

 

  (1) The decrease in Corporate EBITDA in the three and nine months ended September 27, 2014, is due to a $0.9 million and $3.4 million, respectively, increase in transaction fees from the increase in 2014 acquisitions, a $1.0 million and $3.3 million, respectively, increase in monitoring fees paid to our indirect investors, which are based on a percentage of earnings and were allocated as a regional expense in 2013 and an increase in labor costs from the infrastructure development in the prior year.

The following table reconciles net cash used for operating activities to free cash flow for the three and nine months ended September 27, 2014 and September 28, 2013.

 

     Three months ended     Nine months ended  
     September 27,
2014
    September 28,
2013
    September 27,
2014
    September 28,
2013
 

Net income (loss)

   $ 28,117      $ 22,790      $ (10,750   $ (33,217

Non- cash items

     24,144        22,456        69,006        68,952   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income adjusted for non-cash items

     52,261        45,246        58,256        35,735   

Change in working capital accounts

     (17,217     2,637        (69,092     (35,612
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) operating activities

     35,044        47,883        (10,836     123   

Capital expenditures, net of asset sales

     (11,394     (11,575     (54,669     (45,017
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 23,650      $ 36,308      $ (65,505   $ (44,894
  

 

 

   

 

 

   

 

 

   

 

 

 

 

8


SUMMIT MATERIALS, LLC AND SUBSIDIARIES

Unaudited Reconciliations of Non-GAAP Financial Measures

($ in thousands)

The following table presents a reconciliation of net loss to Pro Forma Adjusted EBITDA for the twelve months ended September 27, 2014 and December 28, 2013.

 

     Twelve months ended
September 27, 2014
    Twelve months ended
December 28, 2013
 

Net loss

   $ (81,212   $ (103,679

Interest expense

     76,623        56,443   

Income tax expense

     (3,363     (2,647

Depreciation, depletion, amortization and accretion expense

     82,305        72,934   
  

 

 

   

 

 

 

EBITDA

   $ 74,353      $ 23,051   
  

 

 

   

 

 

 

EBITDA for certain acquisitions

     31,418        (1,596

Discontinued operations

     429        678   

Transaction expenses

     8,552        3,990   

Monitoring fees and expenses

     3,908        2,620   

Strategic fees and initiatives

     1,487        3,887   

Goodwill impairment

     68,202        68,202   

Non-cash compensation

     2,319        2,315   

Deferred financing fees written off at re-financing

     —          3,115   

Loss on disposal and impairment of fixed assets

     4,677        12,419   

Severance and relocation costs

     1,461        2,755   

Other

     (433     7,015   
  

 

 

   

 

 

 

Pro Forma Adjusted EBITDA

   $ 196,373      $ 128,451   
  

 

 

   

 

 

 

 

9


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 September 27, 2014 and December 28, 2013:

 

     September 27, 2014     December 28, 2013  

Cash

   $ 6.7      $ 14.9   
  

 

 

   

 

 

 

Debt

    

Revolving credit facility ($150M capacity)

   $ 24.0      $ 26.0   

Senior secured term loan

     416.7        419.9   

Capital leases

     28.4        8.0   

Other debt

     0.4        1.6   
  

 

 

   

 

 

 

Total senior secured debt

   $ 469.5      $ 455.5   

10.5% senior notes

     625.0        250.0   

Acquisition related liabilities

     61.9        34.4   
  

 

 

   

 

 

 

Total debt

   $ 1,156.4      $ 739.9   

Leverage Ratio Calculations

    

Senior secured net debt

   $ 462.7      $ 440.6   

Total net debt

   $ 1,149.6      $ 725.0   

Pro Forma Adjusted EBITDA

   $ 196.4      $ 128.5   

Senior Secured Net Leverage

     2.36  x      3.43  x 

Covenant Senior Secured Net Leverage Limit

     4.50  x      4.75  x 

Total Net Leverage

     5.85  x      5.64  x 

 

Contact:   info@summit-materials.com
  303-893-0012
 

 

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