-Net Revenue +19.6% Y/Y; Operating Income +28.8% Y/Y; Net Income +76.4% Y/Y

-Generated Y/Y Organic Volume Growth Across Materials Lines of Business

-Completed Four New Acquisitions Since August 2017 for a Combined Purchase Price of $94 million

-Lowering FY17 Adjusted EBITDA Guidance to a Range of $425 million to $435 million due to Hurricanes Harvey & Irma

DENVER--()--Summit Materials, Inc. (NYSE: SUM, “Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the third quarter 2017.

For the three months ended September 30, 2017, the Company reported diluted net income per share of $0.72 on net income of $79.1 million, compared to diluted earnings per share of $0.60 on net income of $44.8 million in the prior year period. On an adjusted diluted basis, excluding tax-related adjustments, the Company reported adjusted diluted net income per share of $0.73 per share on net income of $82.0 million, compared to adjusted diluted earnings per share of $0.71 on adjusted net income of $73.5 million in the prior year period. In the third quarter, the Company recorded a significant benefit related to the valuation of its deferred tax assets that was substantially offset by a corresponding Tax Receivable Agreement (“TRA”) expense. Both of these items are excluded from adjusted net income. Operating income increased by 28.8% to $113.9 million in the third quarter 2017, versus $88.4 million in the prior year period.

“We delivered double-digit year-over-year growth in net revenue, operating income and net income during the third quarter, driven by a combination of increased organic sales volumes in our materials businesses, together with contributions from recently completed acquisitions,” stated Tom Hill, CEO of Summit Materials. “Adjusted EBITDA increased 18.1% year-over-year to $172.7 million, supported by organic growth in our Cement Segment and East Segment. Organic growth contributed nearly 30% of the year-over-year improvement in third quarter Adjusted EBITDA, as we continue to leverage efficiencies afforded by our vertically integrated, decentralized model.”

“Demand fundamentals remain strong in our core regional markets,” continued Hill. “Organic sales volumes of cement and aggregates increased 10.0% and 2.6%, respectively, in the third quarter 2017, when compared to the prior year period. Organic sales volumes of cement in our core northern Mississippi River markets increased significantly on a year-over-year basis in the third quarter, while organic aggregates sales volumes in both the East and West Segments increased versus the prior year period.”

“Our two cement plants located along the Mississippi River corridor are operating at capacity, given continued growth in cement demand throughout the region,” continued Hill. “On a year-to-date basis, cement prices have grown organically by 3.6%, consistent with expectations. Looking to 2018, we anticipate additional growth in cement prices along the Mississippi River corridor.”

“Organic prices on aggregates declined less than 1% in the third quarter, due mainly to sales mix related factors isolated to the West Segment,” continued Hill. “Excluding mix, we estimate organic aggregates prices increased nearly 3% in the third quarter, versus the prior year period.”

“We continue to deliver exceptional margin capture in our materials lines of business,” continued Hill. “During the third quarter, adjusted cash gross profit margin on aggregates increased 130 basis points to a record 73.0% while adjusted cash gross profit margin on cement increased 160 basis points to 50.6%. Temporary disruptions related to Harvey, a category 4 hurricane, impacted operations in Houston, our single largest ready-mix market by volume, resulting in lower overall margin capture in our products line of business in the third quarter.”

“Since our last update in August 2017, we closed on four additional materials-based acquisitions,” noted Hill. “Our acquisitions of Georgia Stone/McLanahan provide us with an entry point into the growing Georgia market, while the acquisition of Alan Ritchey Materials provides us an entry point into the Dallas market. Columbia Silica and Stockman are attractive bolt-on acquisitions that expand our existing footprint in South Carolina and Missouri, respectively. As before, we remain disciplined acquirors, transacting on quality aggregates reserves with high synergy potential. For the full-year 2017, we are maintaining our annualized acquired EBITDA target range of $50 million to $70 million.”

“From a regional perspective, we remain bullish on Texas, where we have existing positions in Houston, Midland/Odessa, Austin, North Dallas, together with Utah, Nevada, North/South Carolina, Virginia and Georgia. Over time, we believe each of these regions stand to benefit from a combination of increased state-level infrastructure investment, stable demand for new single-family homes and the subsequent build-out of low-rise commercial amenities,” noted Hill.

“For the full-year 2017, we expect Adjusted EBITDA to be in a range of $425 million to $435 million, down from the previous range of $440 million to $455 million,” stated Hill. “In the aftermath of Hurricanes Harvey and Irma, sales volumes in our Texas and southeastern U.S. markets temporarily declined below historical levels in September and, to a lesser degree, in October, the combined impact of which has led us to reduce our full-year Adjusted EBITDA guidance.”

“We ended the third quarter with significant available liquidity on our balance sheet with which to support a combination of organic and acquisition-related growth,” stated Brian Harris, CFO of Summit Materials. “As of September 30, 2017, we had $506 million in cash and availability under our revolving credit facility, up from $224 million in the prior year period.”

“Net leverage was 3.7x exiting the third quarter 2017, versus 4.3x in the prior year period,” continued Harris. “Looking ahead, we expect net leverage to be at approximately 3.5x by year-end 2017.”

“We are pleased with our year-to-date performance,” continued Hill. “Although historic volumes of rainfall resulting from the current hurricane season have impacted our full-year outlook, underlying demand conditions remain strong in our private and public end-markets, positioning us for continued profitable growth as we look ahead to 2018.”

Third Quarter 2017 | Financial Performance

Net revenue increased by 19.6% to $574.4 million in the third quarter 2017, versus $480.2 in the prior year period. The improvement in net revenue was primarily attributable to acquisition-related contributions, increased organic sales volumes of cement, aggregates and asphalt, together with increased organic selling prices on cement, ready-mix concrete and asphalt. Operating income increased by 28.8% to $113.9 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA increased 18.1% year-over-year to $172.7 million, versus $146.2 million in the prior year period.

In connection with a normal periodic review of its deferred tax assets, the Company released $513.2 million of the valuation allowance against its deferred tax assets that is largely responsible for a $483.6 million income tax benefit realized in the third quarter 2017. Further, given an increase in the probability that deferred tax assets subject to the TRA would be realized, the Company recorded $489.2 million of TRA expense in the third quarter of 2017. The Company has accrued its full liability related to the TRA, which totaled $548.9 million as of September 30, 2017. This accrued liability is not classified as debt for the purposes of the Company’s net leverage calculation.

West Segment: Operating income increased 22.4% to $57.5 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA increased by 20.3% to $76.6 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA margin was 26.1% in the third quarter 2017, versus 27.0% in the prior year period. Year-over-year organic improvements in sales volumes of aggregates, ready-mix concrete and asphalt, together with acquisition-related EBITDA contributions, were partially offset by lower organic declines in average selling prices on aggregates.

East Segment: Operating income increased by 5.2% to $36.9 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA increased by 9.4% to $56.4 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA margin declined to 31.5% in the third quarter 2017, versus 33.3% in the prior year period. Year-over-year organic improvements in average selling prices on aggregates and ready-mix concrete and asphalt, improved organic sales volumes of aggregates and asphalt, together with acquisition-related EBITDA contributions, were offset by a sales volume decline in ready-mix concrete, due in part to weather-related factors.

Cement Segment: Operating income increased 7.1% to $35.1 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA increased by 16.4% to $46.9 million in the third quarter 2017, when compared to the prior year period. Adjusted EBITDA margin increased to 46.3% in the third quarter 2017, versus 45.0% 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.

Third Quarter 2017 | Results by Line of Business

Aggregates Business: Aggregates net revenues increased by 15.7% to $90.6 million in the third quarter 2017, when compared to the prior year period. Aggregates adjusted cash gross profit margin increased to 73.0% in the third quarter 2017, versus 71.7% in the prior year period. Organic aggregates sales volumes increased 2.6% in the third quarter 2017, due mainly to increased demand in north Texas, Utah, Vancouver and additional markets in the southeast. Organic aggregates average selling prices declined 0.8% in the third quarter, mainly in the West Segment, where hurricane-related weather impacted business conditions.

Cement Business: Cement segment net revenues increased 13.1% to $101.3 million in the third quarter 2017, when compared to the prior year period. Cement adjusted cash gross profit margin was 50.6% in the third quarter 2017, versus 49.0% in the prior year period. Organic sales volumes and average selling prices on cement increased 10.0% and 3.2%, respectively, when compared to the prior year period. Strong regional demand in the Company’s northern markets drove organic volume growth in the third quarter, while continued organic growth in sales prices was attributable to previously announced annual price increase effective January 1, 2017.

Products Business: Net revenues increased 23.5% to $280.0 million in the third quarter 2017, when compared to the prior year period. Products adjusted cash gross profit margin declined to 26.1% in the third quarter 2017, versus 28.4% in the prior year period. Organic sales volumes of ready-mix concrete declined 3.1%, versus the prior year period, due to Hurricane-related disruptions in the Houston market. Organic sales volumes of asphalt increased 11.9%, versus the prior year period, given strength in the north Texas, Austin and Utah markets.

Acquisition Program Update

As of October 2017, the Company has completed fourteen acquisitions on a year-to-date basis, including four transactions that have closed since August 2017. Total investment spend across the fourteen acquisitions completed year-to-date 2017 was approximately $402 million, including approximately $94 million for the four acquisitions completed since August 2017.

Alan Ritchey Materials (Southern Oklahoma-Northeast Texas). Alan Ritchey Materials is an aggregates bolt-on acquisition to Summit’s existing business in the northeast Texas market. This acquisition complements Summit’s existing footprint in the region and provides increased exposure to the fast-growing north Dallas market, Alan Ritchey’s primary shipping destination. Summit closed on its acquisition of Alan Ritchey in August 2017.

Georgia Stone Products/McLanahan (Northeast Georgia). Georgia Stone Products is an aggregates bolt-on acquisition comprising two quarries in northeast Georgia. This transaction represents an expansion westwards into Georgia from Summit’s existing position in the Carolinas. Summit closed on this acquisition over August/September 2017.

Columbia Silica (Columbia, South Carolina). Columbia Silica is an aggregates bolt-on acquisition in central South Carolina. This acquisition is a strong complementary fit with the recent Glasscock acquisition also in South Carolina (acquired May 2017) and brings additional scale to Summit’s growing footprint in the region. Summit closed on its acquisition of Columbia Silica in September 2017.

Stockman Quarry (Central Missouri). Stockman is an aggregates bolt-on acquisition to our existing position in central Missouri. This transaction brings new market expansion to Summit’s existing Missouri business. Summit closed on its acquisition of Stockman in October 2017.

Liquidity and Capital Resources

At September 30, 2017, the Company had cash on hand of $287.1 million and borrowing capacity under its revolving credit facility of $218.9 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 30, 2017, the Company had $1.8 billion in debt outstanding.

Financial Guidance and Outlook

Due mainly to the combined effects of Hurricane Harvey, which impacted the Houston market beginning in late August 2017, and Hurricane Irma, which impacted regions of Virginia and South Carolina beginning in early September 2017, the Company is lowering its full-year 2017 Adjusted EBITDA guidance from a range of $440 million to $455 million to a range of $425 million to $435 million. The downwardly revised Adjusted EBITDA outlook includes the partial-year impact of the four acquisitions completed since August 2017. No additional potential acquisitions are included within the Company’s full-year 2017 Adjusted EBITDA guidance.

The Company is raising its full-year 2017 capital spending guidance from a range of $140 million to $160 million, to a range of $180 million to $190 million. The upwardly revised capital spending guidance includes incremental investments related to discretionary organic growth investments, land/reserve acquisitions, together with acquisition-related maintenance expenditures.

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 2017 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 November 30, 2017:

Domestic Replay:     1-844-512-2921
International Replay:     1-412-317-6671
Conference ID:     13670383
       
 

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, Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow and Net Leverage 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 and Adjusted Cash Gross Profit 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, Adjusted Cash 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. 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 report 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 31, 2016 (the “Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”), any factors discussed in the section entitled “Risk Factors” of this report 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; and
  • interruptions in our information technology systems and infrastructure.

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 report. 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 Consolidated Statements of Operations

($ in thousands, except share and per share amounts)

 
      Three months ended     Nine months ended
      September 30,   October 1,     September 30,   October 1,
      2017   2016     2017   2016
Revenue:                            
Product     $ 465,556     $ 386,236     $ 1,088,299     $ 907,679  
Service       108,831       93,974       223,500       193,206  
Net revenue       574,387       480,210       1,311,799       1,100,885  
Delivery and subcontract revenue       59,794       49,227       130,752       102,205  
Total revenue       634,181       529,437       1,442,551       1,203,090  
Cost of revenue (excluding items shown separately below):                            
Product       277,301       224,868       677,861       559,293  
Service       72,450       61,725       154,408       136,250  
Net cost of revenue       349,751       286,593       832,269       695,543  
Delivery and subcontract cost       59,794       49,227       130,752       102,205  
Total cost of revenue       409,545       335,820       963,021       797,748  
General and administrative expenses       59,175       64,096       175,729       184,956  
Depreciation, depletion, amortization and accretion       48,969       39,427       133,756       109,195  
Transaction costs       2,581       1,684       6,474       5,290  
Operating income       113,911       88,410       163,571       105,901  
Interest expense       28,921       25,273       79,876       72,467  

Loss on debt financings

                  190        
Tax receivable agreement expense       489,215             490,740        
Other (income) expense, net       (2,716 )     722       (3,963 )     1,270  
(Loss) income from operations before taxes       (401,509 )     62,415       (403,272 )     32,164  
Income tax (benefit) expense       (483,584 )     1,309       (482,327 )     (7,913 )
Net income       82,075       61,106       79,055       40,077  
Net income (loss) attributable to noncontrolling interest in subsidiaries       59       92       (27 )     57  
Net income attributable to Summit Holdings (1)       2,964       16,194       2,474       2,947  
Net income attributable to Summit Inc.     $ 79,052     $ 44,820     $ 76,608     $ 37,073  
Income per share of Class A common stock:                            
Basic     $ 0.73     $ 0.60     $ 0.72     $ 0.59  
Diluted     $ 0.72     $ 0.60     $ 0.71     $ 0.40  
Weighted average shares of Class A common stock:                            
Basic       108,024,055       74,433,487       106,698,076       62,686,433  
Diluted       109,303,412       74,579,797       107,327,624       101,479,150  
 

_________________________

(1)   Represents portion of business owned by pre-IPO investors rather than by Summit.
     
     
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands, except share and per share amounts)

 
          September 30,     December 31,
          2017     2016
          (unaudited)     (audited)
Assets                    
Current assets:                    
Cash and cash equivalents         $ 287,082     $ 143,392  
Accounts receivable, net           295,491       162,377  
Costs and estimated earnings in excess of billings           39,316       7,450  
Inventories           181,784       157,679  
Other current assets           11,669       12,800  
Total current assets           815,342       483,698  
Property, plant and equipment, less accumulated depreciation, depletion and amortization (September 30, 2017 - $592,086 and December 31, 2016 - $484,554)           1,620,123       1,446,452  
Goodwill           1,012,771       782,212  
Intangible assets, less accumulated amortization (September 30, 2017 - $6,376 and December 31, 2016 - $7,854)           16,995       17,989  

Deferred tax assets, less valuation allowance (September 30, 2017 - $2,677 and December 31, 2016 - $502,839)

          477,493       4,326  
Other assets           50,068       46,789  
Total assets         $ 3,992,792     $ 2,781,466  
Liabilities and Stockholders’ Equity                    
Current liabilities:                    
Current portion of debt         $ 6,500     $ 6,500  
Current portion of acquisition-related liabilities           25,153       24,162  
Accounts payable           134,925       81,565  
Accrued expenses           130,502       111,605  
Billings in excess of costs and estimated earnings           18,043       15,456  
Total current liabilities           315,123       239,288  
Long-term debt           1,807,064       1,514,456  
Acquisition-related liabilities           36,326       32,664  
Tax receivable agreement liability           548,885       58,145  
Other noncurrent liabilities           68,030       76,874  
Total liabilities           2,775,428       1,921,427  
                     
Stockholders’ equity:                    
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 108,465,688 and 96,033,222 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively           1,085       961  
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 100 shares issued and outstanding as of September 30, 2017 and December 31, 2016                  
Additional paid-in capital           1,098,151       824,304  
Accumulated earnings           95,636       19,028  
Accumulated other comprehensive income (loss)           6,688       (2,249 )
Stockholders’ equity           1,201,560       842,044  
Noncontrolling interest in consolidated subsidiaries           1,351       1,378  
Noncontrolling interest in Summit Holdings           14,453       16,617  
Total stockholders’ equity           1,217,364       860,039  
Total liabilities and stockholders’ equity         $ 3,992,792     $ 2,781,466  
                       
                       
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

 
      Nine months ended
      September 30,     October 1,
      2017     2016
Cash flow from operating activities:                
Net income     $ 79,055       $ 40,077  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation, depletion, amortization and accretion       140,634         118,026  
Share-based compensation expense       14,148         46,123  
Deferred income tax benefit (expense)       4,768         (8,994 )
Net gain on asset disposals       (6,063 )       (5,844 )
Non-cash loss on debt financings       85          
Other       (855 )       (971 )
(Increase) decrease in operating assets, net of acquisitions:                
Accounts receivable, net       (98,961 )       (81,234 )
Inventories       (12,835 )       (17,072 )
Costs and estimated earnings in excess of billings       (31,606 )       (34,349 )
Other current assets       6,043         (2,876 )
Deferred tax assets, net       (488,852 )       -  
Other assets       (3,141 )       (217 )
Increase (decrease) in operating liabilities, net of acquisitions:                
Accounts payable       38,357         23,812  
Accrued expenses       3,854         8,948  
Billings in excess of costs and estimated earnings       2,386         2,138  
Tax receivable agreement liability       490,740         -  
Other liabilities      

(5,324

)       (3,044 )
Net cash provided by operating activities      

132,433

        84,523  
Cash flow from investing activities:                
Acquisitions, net of cash acquired      

(371,479

)       (331,463 )
Purchases of property, plant and equipment       (147,478 )       (121,945 )
Proceeds from the sale of property, plant and equipment       13,290         16,222  
Other       182         1,500  
Net cash used for investing activities      

(505,485

)       (435,686 )
Cash flow from financing activities:                
Proceeds from equity offerings       237,600          
Capital issuance costs       (627 )       (136 )
Proceeds from debt issuances       302,000         354,000  
Debt issuance costs       (5,317 )       (5,675 )
Payments on debt       (12,887 )       (114,254 )
Payments on acquisition-related liabilities       (22,616 )       (28,920 )
Distributions from partnership       (109 )       (9,049 )
Other       17,964         105  
Net cash provided by financing activities       516,008         196,071  
Impact of foreign currency on cash       734         330  
Net increase (decrease) in cash       143,690         (154,762 )
Cash and cash equivalents—beginning of period       143,392         186,405  
Cash and cash equivalents—end of period     $ 287,082       $ 31,643  
                     
                     
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Revenue Data by Segment and Line of Business

($ in thousands)

 
      Three months ended     Nine months ended
      September 30,     October 1,     September 30,     October 1,
      2017     2016     2017     2016
                                       
Segment Net Revenue:                                      
West     $ 293,851       $ 235,667       $ 675,674       $ 558,488  
East       179,262         154,980         406,787         339,229  
Cement       101,274         89,563         229,338         203,168  
Net Revenue     $ 574,387       $ 480,210       $ 1,311,799       $ 1,100,885  
                                       
Line of Business - Net Revenue:                                      
Materials                                      
Aggregates     $ 90,594       $ 78,274       $ 236,437       $ 201,217  
Cement (1)       94,915         81,154         213,243         179,658  
Products       280,047         226,808         638,619         526,804  
Total Materials and Products       465,556         386,236         1,088,299         907,679  
Services       108,831         93,974         223,500         193,206  
Net Revenue     $ 574,387       $ 480,210       $ 1,311,799       $ 1,100,885  
                                       
Line of Business - Net Cost of Revenue:                                      
Materials                                      
Aggregates     $ 24,478       $ 22,166       $ 86,000       $ 77,444  
Cement       43,715         37,273         107,399         89,831  
Products       206,911         162,410         479,274         385,544  
Total Materials and Products       275,104         221,849         672,673         552,819  
Services       74,647         64,744         159,596         142,724  
Net Cost of Revenue     $ 349,751       $ 286,593       $ 832,269       $ 695,543  
                                       
Line of Business - Adjusted Cash Gross Profit (2):                                      
Materials                                      
Aggregates     $ 66,116       $ 56,108       $ 150,437       $ 123,773  
Cement (3)       51,200         43,881         105,844         89,827  
Products       73,136         64,398         159,345         141,260  
Total Materials and Products       190,452         164,387         415,626         354,860  
Services       34,184         29,230         63,904         50,482  
Adjusted Cash Gross Profit     $ 224,636       $ 193,617       $ 479,530       $ 405,342  
                                       
Adjusted Cash Gross Profit Margin (2)                                      
Materials                                      
Aggregates       73.0 %       71.7 %       63.6 %      

61.5

%

Cement (3)       50.6 %       49.0 %       46.2 %      

44.2

%

Products       26.1 %       28.4 %       25.0 %      

26.8

%

Services       31.4 %       31.1 %       28.6 %      

26.1

%

Total Adjusted Cash Gross Profit Margin       39.1 %       40.3 %       36.6 %      

36.8

%

 

_________________________

(1)   Net revenue for the cement line of business excludes revenue associated with 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.
(2)  

Previously, we presented gross profit as a non-GAAP metric. We have renamed that metric adjusted cash gross profit to be more descriptive of the calculation. Adjusted cash gross profit is calculated as net revenue by line of business less net cost of revenue by line of business. Adjusted cash gross profit margin is defined as adjusted cash gross profit divided by net revenue.

(3)   The cement adjusted cash gross profit includes the earnings from the waste processing operations, cement swaps and other products. Cement line of business adjusted cash gross profit margin is defined as cement adjusted cash gross profit divided by cement segment net revenue.
     
     
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Volume and Price Statistics

(Units in thousands)

 
      Three months ended     Nine months ended
Total Volume     September 30, 2017   October 1, 2016     September 30, 2017   October 1, 2016
Aggregates (tons)       11,998       10,658         31,247       27,302  
Cement (tons)       850       757         1,925       1,699  
Ready-mix concrete (cubic yards)       1,320       1,083         3,463       2,798  
Asphalt (tons)       2,124       1,735         4,004       3,269  
                                     
      Three months ended     Nine months ended
Pricing     September 30, 2017   October 1, 2016     September 30, 2017   October 1, 2016
Aggregates (per ton)     $ 10.23     $ 10.19       $ 10.04     $ 9.91  
Cement (per ton)       113.15       109.35         112.45       108.26  
Ready-mix concrete (per cubic yards)       106.09       103.36         104.63       103.48  
Asphalt (per ton)       54.37       53.91         54.55       55.63  
                                     
Year over Year Comparison     Volume   Pricing     Volume   Pricing
Aggregates (per ton)       12.6 %     0.4 %       14.4 %     1.3 %
Cement (per ton)       12.3 %     3.5 %       13.3 %     3.9 %
Ready-mix concrete (per cubic yards)       21.9 %     2.6 %       23.8 %     1.1 %
Asphalt (per ton)       22.4 %     0.9 %       22.5 %    

(1.9

)%

                                     
Year over Year Comparison (Excluding acquisitions)     Volume   Pricing     Volume   Pricing
Aggregates (per ton)       2.6 %    

(0.8

)%

      3.4 %    

(0.2

)%

Cement (per ton)       10.0 %     3.2 %       10.2 %     3.6 %
Ready-mix concrete (per cubic yards)      

(3.1

)%

    0.2 %      

(1.2

)%

    0.0 %
Asphalt (per ton)       11.9 %     0.8 %       12.1 %    

(1.8

)%

                                     
                                     
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Gross Revenue to Net Revenue by Line of Business

($ and Units in thousands, except pricing information)

 
      Three months ended September 30, 2017
              Gross Revenue   Intercompany   Net
      Volumes   Pricing   by Product   Elimination/Delivery   Revenue
Aggregates     11,998   $ 10.23   $ 122,796   $ (32,202 )   $ 90,594
Cement     850     113.15     96,223     (1,308 )     94,915
Materials               $ 219,019   $ (33,510 )   $ 185,509
Ready-mix concrete     1,320     106.09     140,049     (115 )     139,934
Asphalt     2,124     54.37     115,470     (161 )     115,309
Other Products                 109,976     (85,172 )     24,804
Products               $ 365,495   $ (85,448 )   $ 280,047
 
 
      Nine months ended September 30, 2017
              Gross Revenue   Intercompany   Net
      Volumes   Pricing   by Product   Elimination/Delivery   Revenue
Aggregates     31,247   $ 10.04   $ 313,686   $ (77,249 )   $ 236,437
Cement     1,925     112.45     216,512     (3,269 )     213,243
Materials               $ 530,198   $ (80,518 )   $ 449,680
Ready-mix concrete     3,463     104.63     362,349     (525 )     361,824
Asphalt     4,004     54.55     218,403     (346 )     218,057
Other Products                 262,958     (204,220 )     58,738
Products               $ 843,710   $ (205,091 )   $ 638,619
                                 
                                 
 

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 30, 2017 and October 1, 2016 and the twelve months ended September 30, 2017 and October 1, 2016.

Reconciliation of Net Income (Loss) to Adjusted EBITDA     Three months ended September 30, 2017
by Segment     West   East   Cement   Corporate   Consolidated
(in thousands)                                
Net income (loss)     $ 54,839     $ 37,617     $ 36,056     $ (46,437 )   $ 82,075  
Interest expense (income)       1,839       889       (1,011 )     27,204       28,921  
Income tax expense (benefit)       889                   (484,473 )     (483,584 )
Depreciation, depletion and amortization       18,697       17,416       11,751       619       48,483  
EBITDA     $ 76,264     $ 55,922     $ 46,796     $ (503,087 )   $ (324,105 )
Accretion       210       212       64             486  
Loss on debt financings                                
Tax receivable agreement expense                         489,215       489,215  
Transaction costs       14                   2,567       2,581  
Non-cash compensation                         4,724       4,724  
Other       149       263             (612 )     (200 )
Adjusted EBITDA     $ 76,637     $ 56,397     $ 46,860     $ (7,193 )   $ 172,701  
Adjusted EBITDA Margin (1)       26.1 %     31.5 %     46.3 %           30.1 %
 
 
Reconciliation of Net Income (Loss) to Adjusted EBITDA     Three months ended October 1, 2016
by Segment     West   East   Cement   Corporate   Consolidated
(in thousands)                                
Net income (loss)     $ 42,249     $ 34,657     $ 32,823     $ (48,623 )   $ 61,106  
Interest expense (income)       2,556       1,929       (178 )     20,966       25,273  
Income tax expense       97                   1,212       1,309  
Depreciation, depletion and amortization       16,301       14,572       7,610       572       39,055  
EBITDA     $ 61,203     $ 51,158     $ 40,255     $ (25,873 )   $ 126,743  
Accretion       191       172       9             372  
IPO/ Legacy equity modification costs                         12,506       12,506  
Transaction costs       75       20             1,589       1,684  
Non-cash compensation                         3,801       3,801  
Other       2,214       208             (1,337 )     1,085  
Adjusted EBITDA     $ 63,683     $ 51,558     $ 40,264     $ (9,314 )   $ 146,191  
Adjusted EBITDA Margin (1)       27.0 %     33.3 %     45.0 %           30.4 %
 
 
Reconciliation of Net Income (Loss) to Adjusted EBITDA     Nine months ended September 30, 2017
by Segment     West   East   Cement   Corporate   Consolidated
(in thousands)                                
Net income (loss)     $ 93,342     $ 46,124     $ 65,785     $ (126,196 )   $ 79,055  
Interest expense (income)       5,586       2,503       (2,345 )     74,132       79,876  
Income tax expense (benefit)       1,424       (21 )           (483,730 )     (482,327 )
Depreciation, depletion and amortization       51,389       49,343       29,702       1,940       132,374  
EBITDA     $ 151,741     $ 97,949     $ 93,142     $ (533,854 )   $ (191,022 )
Accretion       600       596       186             1,382  
Loss on debt financings                         190       190  
Tax receivable agreement expense                         490,740       490,740  
Transaction costs       23                   6,451       6,474  
Non-cash compensation                         14,148       14,148  
Other       492       966             (1,804 )     (346 )
Adjusted EBITDA     $ 152,856     $ 99,511     $ 93,328     $ (24,129 )   $ 321,566  
Adjusted EBITDA Margin (1)       22.6 %     24.5 %     40.7 %           24.5 %
 
 
Reconciliation of Net Income (Loss) to Adjusted EBITDA     Nine months ended October 1, 2016
by Segment     West   East   Cement   Corporate   Consolidated
(in thousands)                                
Net income (loss)     $ 67,705     $ 46,369     $ 53,395     $ (127,392 )   $ 40,077  
Interest expense       7,087       5,827       3,322       56,231       72,467  
Income tax expense (benefit)       175                   (8,088 )     (7,913 )
Depreciation, depletion and amortization       48,044       36,984       21,116       1,849       107,993  
EBITDA     $ 123,011     $ 89,180     $ 77,833     $ (77,400 )   $ 212,624  
Accretion       670       501       31             1,202  
IPO/ Legacy equity modification costs                         37,257       37,257  
Transaction costs       440       25             4,825       5,290  
Non-cash compensation                         8,866       8,866  
Other       3,426       699       964       (996 )     4,093  
Adjusted EBITDA     $ 127,547     $ 90,405     $ 78,828     $ (27,448 )   $ 269,332  
Adjusted EBITDA Margin (1)       22.8 %     26.7 %     38.8 %           24.5 %
                                         
 
      Twelve months ended (2)
Reconciliation of Net Income to Adjusted EBITDA     September 30, 2017     October 1, 2016
(in thousands)                
Net income     $ 85,104       $ 87,493  
Interest expense       104,945         94,865  
Income tax benefit       (479,713 )       (13,708 )
Depreciation, depletion and amortization       172,117         140,625  
EBITDA     $ (117,547 )     $ 309,275  
Accretion       1,744         1,475  
IPO/ Legacy equity modification costs               37,257  
Loss on debt financings       190         7,318  
Tax receivable agreement expense       505,678          
Transaction costs       7,981         6,765  
Management fees and expenses       (1,379 )        
Non-cash compensation       17,965         10,176  
(Gain) loss on disposal and impairment of assets       3,805         (16,561 )
Other       5,144         3,956  
Adjusted EBITDA     $ 423,581       $ 359,661  
Adjusted EBITDA Margin (1)       24.9 %       24.6 %
 

_________________________

(1)   Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of net revenue.
(2)   Information for the twelve months ended September 30, 2017 is calculated as the nine months ended September 30, 2017 plus the year ended December 31, 2016 less the nine months ended October 1, 2016. Information for the twelve months ended October 1, 2016 is calculated as the nine months ended October 1, 2016 plus the year ended January 2, 2016 less the nine months ended September 26, 2015. This presentation is not in accordance with U.S. GAAP. We believe this information is useful to investors as we use it 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 trailing twelve month financial data to test compliance with covenants under our senior secured credit facilities.
     
     
 

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 30, 2017 and October 1, 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 diluted net income per share.

      Three months ended   Nine months ended
      September 30, 2017   October 1, 2016   September 30, 2017   October 1, 2016

Reconciliation of Net Income Per Share to
Adjusted Diluted EPS

   

Net
Income

 

Per
Share

 

Net
Income

 

Per
Share

 

Net
Income

 

Per
Share

 

Net
Income

 

Per
Share

Net income attributable to Summit Materials, Inc.     $ 79,052     $ 0.70     $ 44,820   $ 0.44   $ 76,608     $ 0.69     $ 37,073   $ 0.37
Adjustments:                                                  
Net income attributable to noncontrolling interest       2,964       0.03       16,194     0.16     2,474       0.02       2,947     0.03
IPO/ Legacy equity modification costs                   12,506     0.11                 37,257     0.37
Loss on debt financings                           190                
Adjusted diluted net income before tax related adjustments       82,016       0.73       73,520     0.71     79,272       0.71       77,277     0.76
Tax receivable agreement expense       489,215       4.37               490,740       4.41          
Valuation allowance release       (513,191 )     (4.58 )             (513,191 )     (4.61 )        
Adjusted diluted net income     $ 58,040     $ 0.52     $ 73,520   $ 0.71   $ 56,821     $ 0.51     $ 77,277   $ 0.76
Weighted-average shares:                                                  
Class A common stock       108,024,055             74,433,487           106,698,076             62,686,433      
LP Units outstanding       4,039,020             26,731,747           4,560,976             38,470,523      
Total equity interest       112,063,075             101,165,234           111,259,052             101,156,956      
                                                       
 

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 30, 2017 and October 1, 2016.

      Three months ended   Nine months ended
      September 30,   October 1,   September 30,   October 1,
Reconciliation of Operating Income to Adjusted Cash Gross Profit     2017   2016   2017   2016
($ in thousands)                                  
Operating income     $ 113,911     $ 88,410     $ 163,571     $ 105,901  
General and administrative expenses       59,175       64,096       175,729       184,956  
Depreciation, depletion, amortization and accretion       48,969       39,427       133,756       109,195  
Transaction costs       2,581       1,684       6,474       5,290  
Adjusted Cash Gross Profit (exclusive of items shown separately)     $ 224,636     $ 193,617     $ 479,530     $ 405,342  
Adjusted Cash Gross Profit Margin (exclusive of items shown separately) (1)       39.1 %     40.3 %     36.6 %     36.8 %
 

_________________________

(1)   Adjusted cash gross profit margin is defined as adjusted cash 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 and nine months ended September 30, 2017 and October 1, 2016.

      Three months ended     Nine months ended
      September 30,   October 1,     September 30,   October 1,
      2017   2016     2017   2016
Net income     $ 82,075     $ 61,106       $ 79,055     $ 40,077  
Non-cash items       55,395       55,899         152,717       148,340  
Net income adjusted for non-cash items       137,470       117,005         231,772       188,417  
Change in working capital accounts      

(16,186

)     (5,982 )      

(99,339

)     (103,894 )
Net cash provided by operating activities      

121,284

      111,023        

132,433

      84,523  
Capital expenditures, net of asset sales       (33,511 )     (23,496 )       (134,188 )     (105,723 )
Free cash flow     $

87,773

    $ 87,527       $

(1,755

)   $ (21,200 )
 

 

Contacts

Summit Materials, Inc.
Mr. Noel Ryan
Vice President, Investor Relations
noel.ryan@summit-materials.com