Summit Materials, Inc. Reports Third Quarter 2018 Results

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

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

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

DENVER--()--Summit Materials, Inc. (NYSE: SUM, “Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the third quarter 2018.

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

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

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

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

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

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

Third Quarter 2018 | Results by Line of Business

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

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

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

Third Quarter 2018 | Results By Reporting Segment

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

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

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

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

Acquisitions and Divestitures

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

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

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

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

Liquidity and Capital Resources

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

Financial Outlook

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

Webcast and Conference Call Information

Summit Materials will conduct a conference call today at 11:00 a.m. eastern time (9:00 a.m. mountain time) to review the Company’s third quarter 2018 financial results. A webcast of the conference call and accompanying presentation materials will be available in the Investors section of Summit’s website at investors.summit-materials.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

To participate in the live teleconference:

Domestic Live:         1-877-407-0784
International Live:         1-201-689-8560
Conference ID:         57511368
 

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

Domestic Replay:         1-844-512-2921
International Replay:         1-412-317-6671
Conference ID:         13684335
           
 

About Summit Materials

Summit Materials is a leading vertically integrated materials-based company that supplies aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a geographically diverse, materials-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the public infrastructure, residential and nonresidential, and end markets. Summit has a strong track record of successful acquisitions since its founding and continues to pursue growth opportunities in new and existing markets. For more information about Summit Materials, please visit www.summit-materials.com.

Non-GAAP Financial Measures

The Securities and Exchange Commission (“SEC”) regulates the use of “non-GAAP financial measures,” such as Adjusted Net Income (Loss), Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt which are derived on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have provided these measures because, among other things, we believe that they provide investors with additional information to measure our performance, evaluate our ability to service our debt and evaluate certain flexibility under our restrictive covenants. Our Adjusted Net Income (Loss), Adjusted Diluted EPS, Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt may vary from the use of such terms by others and should not be considered as alternatives to or more important than net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or to cash flows as measures of liquidity. This press release also includes certain unaudited financial information for the last twelve months (“LTM”) ended September 29, 2018, which is calculated as the nine months ended September 29, 2018 plus the actual results for the year-ended December 30, 2017 less the actual results for the nine months ended September 30, 2017. This presentation is not in accordance with GAAP. However, we believe that this information is useful to investors as we use LTM financial information to evaluate our financial performance for ongoing planning purposes, including a continuous assessment of our financial performance in comparison to budgets and internal projections. In addition, we use such LTM financial information to test compliance with covenants under our senior secured credit facilities.

Adjusted EBITDA, Adjusted EBITDA Margin, LTM financial information and other non-GAAP measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA are that these measures do not reflect: (i) our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, our working capital needs; (iii) interest expense or cash requirements necessary to service interest and principal payments on our debt; and (iv) income tax payments we are required to make. Because of these limitations, we rely primarily on our U.S. GAAP results and use Adjusted EBITDA, Adjusted EBITDA Margin and other non-GAAP measures on a supplemental basis.

Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Adjusted Net Income (Loss), Adjusted Diluted EPS, Free Cash Flow, Net Leverage and Net Debt reflect additional ways of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to U.S. GAAP financial measures included in the tables attached to this press release, may provide a more complete understanding of factors and trends affecting our business. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure. Reconciliations of the non-GAAP measures used in this press release are included in the attached tables. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the effect of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be realized. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in Summit Inc.’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (the “Annual Report”) and Summit Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018 each as filed with the Securities and Exchange Commission (the “SEC”), any factors discussed in the section entitled “Risk Factors” in any of our subsequently filed SEC filings and the following:

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

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. Any forward-looking statement that we make herein speaks only as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

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

 
      Three months ended     Nine months ended
      September 29,     September 30,     September 29,     September 30,
      2018     2017     2018     2017
Revenue:                        
Product     $ 512,822       $ 465,556       $ 1,229,596       $ 1,088,299  
Service     112,195       108,831       234,572       223,500  
Net revenue     625,017       574,387       1,464,168       1,311,799  
Delivery and subcontract revenue     69,644       59,794       145,804       130,752  
Total revenue     694,661       634,181       1,609,972       1,442,551  
Cost of revenue (excluding items shown separately below):                        
Product     321,586       277,301       814,166       677,861  
Service     80,573       72,450       170,626       154,408  
Net cost of revenue     402,159       349,751       984,792       832,269  
Delivery and subcontract cost     69,644       59,794       145,804       130,752  
Total cost of revenue     471,803       409,545       1,130,596       963,021  
General and administrative expenses     59,457       59,175       190,975       175,729  
Depreciation, depletion, amortization and accretion     53,974       48,969       150,663       133,756  
Transaction costs     1,260       2,581       3,817       6,474  
Operating income     108,167       113,911       133,921       163,571  
Interest expense     28,889       28,921       86,616       79,876  
Loss on debt financings                 149       190  
Tax receivable agreement expense           501,752             503,277  
Gain on sale of business     (12,108 )           (12,108 )      
Other income, net     (3,371 )     (2,716 )     (11,942 )     (3,963 )
Income (loss) from operations before taxes     94,757       (414,046 )     71,206       (415,809 )
Income tax expense (benefit)     20,765       (498,333 )     16,249       (497,076 )
Net income     73,992       84,287       54,957       81,267  
Net income (loss) attributable to noncontrolling interest in subsidiaries           59             (27 )
Net income attributable to Summit Holdings (1)     2,703       2,964       1,888       2,474  
Net income attributable to Summit Inc.     $ 71,289       $ 81,264       $ 53,069       $ 78,820  
Income per share of Class A common stock:                        
Basic     $ 0.64       $ 0.74       $ 0.48       $ 0.73  
Diluted     $ 0.64       $ 0.73       $ 0.47       $ 0.72  
Weighted average shares of Class A common stock:                        
Basic     111,641,344       109,545,111       111,288,211       108,219,132  
Diluted     111,940,067       110,824,468       112,472,724       108,848,680  
 
________________________________________________________
(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 29,     December 30,
          2018     2017
          (unaudited)     (audited)
Assets                
Current assets:                
Cash and cash equivalents         $ 64,930       $ 383,556
Accounts receivable, net         301,670       198,330
Costs and estimated earnings in excess of billings         47,629       9,512
Inventories         229,761       184,439
Other current assets         15,690       7,764
Total current assets         659,680       783,601
Property, plant and equipment, less accumulated depreciation, depletion and amortization (September 29, 2018 - $748,265 and December 30, 2017 - $631,841)         1,751,810       1,615,424
Goodwill         1,147,588       1,036,320
Intangible assets, less accumulated amortization (September 29, 2018 - $7,819 and December 30, 2017 - $6,698)         18,892       16,833
Deferred tax assets, less valuation allowance (September 29, 2018 and December 30, 2017 - $1,675)         267,532       284,092
Other assets         50,832       51,063
Total assets         $ 3,896,334       $ 3,787,333
Liabilities and Stockholders’ Equity                
Current liabilities:                
Current portion of debt         $ 4,765       $ 4,765
Current portion of acquisition-related liabilities         14,148       14,087
Accounts payable         140,174       98,744
Accrued expenses         114,257       116,629
Billings in excess of costs and estimated earnings         13,072       15,750
Total current liabilities         286,416       249,975
Long-term debt         1,808,190       1,810,833
Acquisition-related liabilities         29,129       58,135
Tax receivable agreement liability         333,152       331,340
Other noncurrent liabilities         80,577       65,329
Total liabilities         2,537,464       2,515,612
Stockholders’ equity:                
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 111,654,552 and 110,350,594 shares issued and outstanding as of September 29, 2018 and December 30, 2017, respectively         1,117       1,104
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 and 100 shares issued and outstanding as of September 29, 2018 and December 30, 2017, respectively              
Additional paid-in capital         1,188,707       1,154,220
Accumulated earnings         148,902       95,833
Accumulated other comprehensive income         6,134       7,386
Stockholders’ equity         1,344,860       1,258,543
Noncontrolling interest in Summit Holdings         14,010       13,178
Total stockholders’ equity         1,358,870       1,271,721
Total liabilities and stockholders’ equity         $ 3,896,334       $ 3,787,333
                       
                       
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in thousands)

 
          Nine months ended
          September 29,     September 30,
          2018     2017
Cash flow from operating activities:                
Net income         $ 54,957       $ 81,267  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation, depletion, amortization and accretion         152,829       140,634  
Share-based compensation expense         19,833       14,148  
Net gain on asset disposals         (27,261 )     (6,063 )
Non-cash loss on debt financings               85  
Change in deferred tax asset, net         12,577       (498,816 )
Other         873       (855 )
(Increase) decrease in operating assets, net of acquisitions and dispositions:                
Accounts receivable, net         (90,481 )     (98,961 )
Inventories         (26,027 )     (12,835 )
Costs and estimated earnings in excess of billings         (37,643 )     (31,606 )
Other current assets         (6,819 )     6,026  
Other assets         (1,217 )     (3,141 )
Increase (decrease) in operating liabilities, net of acquisitions and dispositions:                
Accounts payable         24,978       38,357  
Accrued expenses         (2,197 )     3,854  
Billings in excess of costs and estimated earnings         (3,850 )     2,386  
Tax receivable agreement liability         1,812       503,277  
Other liabilities         (1,807 )     (5,324 )
Net cash provided by operating activities         70,557       132,433  
Cash flow from investing activities:                
Acquisitions, net of cash acquired         (210,894 )     (371,479 )
Purchases of property, plant and equipment         (183,752 )     (147,478 )
Proceeds from the sale of property, plant and equipment         18,426       13,290  
Proceeds from sale of business         21,564        
Other         2,660       182  
Net cash used for investing activities         (351,996 )     (505,485 )
Cash flow from financing activities:                
Proceeds from equity offerings               237,600  
Capital issuance costs               (627 )
Proceeds from debt issuances         64,500       302,000  
Debt issuance costs         (550 )     (5,317 )
Payments on debt         (79,027 )     (12,887 )
Payments on acquisition-related liabilities         (35,321 )     (22,616 )
Distributions from partnership         (69 )     (109 )
Proceeds from stock option exercises         15,615       18,810  
Other         (1,913 )     (846 )
Net cash (used in) provided by financing activities         (36,765 )     516,008  
Impact of foreign currency on cash         (422 )     734  
Net (decrease) increase in cash         (318,626 )     143,690  
Cash and cash equivalents—beginning of period         383,556       143,392  
Cash and cash equivalents—end of period         $ 64,930       $ 287,082  
                         
                         
 
SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Revenue Data by Segment and Line of Business

($ in thousands)

 
      Three months ended     Nine months ended     Twelve Months Ended
      September 29,   September 30,     September 29,   September 30,     September 29,   September 30,
      2018   2017     2018   2017     2018   2017
Segment Net Revenue:                              
West     $ 329,346     $ 293,851       $ 791,975     $ 675,674       $ 1,016,293     $ 853,759  
East     201,699     179,262       458,829     406,787       600,646     538,172  
Cement     93,972     101,274       213,364     229,338       287,839     307,257  
Net Revenue     $ 625,017     $ 574,387       $ 1,464,168     $ 1,311,799       $ 1,904,778     $ 1,699,188  
                               
Line of Business - Net Revenue:                              
Materials                              
Aggregates     $ 109,621     $ 90,594       $ 280,761     $ 236,437       $ 357,707     $ 299,829  
Cement (1)     87,909     94,915       197,439     213,243       266,237     283,934  
Products     315,292     280,047       751,396     638,619       967,289     819,865  
Total Materials and Products     512,822     465,556       1,229,596     1,088,299       1,591,233     1,403,628  
Services     112,195     108,831       234,572     223,500       313,545     295,560  
Net Revenue     $ 625,017     $ 574,387       $ 1,464,168     $ 1,311,799       $ 1,904,778     $ 1,699,188  
                               
Line of Business - Net Cost of Revenue:                              
Materials                              
Aggregates     $ 33,793     $ 24,478       $ 109,747     $ 86,000       $ 132,476     $ 109,036  
Cement     40,294     43,715       104,441     107,399       136,100     140,732  
Products     244,410     206,911       593,862     479,274       758,598     613,169  
Total Materials and Products     318,497     275,104       808,050     672,673       1,027,174     862,937  
Services     83,662     74,647       176,742     159,596       226,960     207,792  
Net Cost of Revenue     $ 402,159     $ 349,751       $ 984,792     $ 832,269       $ 1,254,134     $ 1,070,729  
                               
Line of Business - Adjusted Cash Gross Profit (2):                              
Materials                              
Aggregates     $ 75,828     $ 66,116       $ 171,014     $ 150,437       $ 225,231     $ 190,793  
Cement (3)     47,615     51,200       92,998     105,844       130,137     143,202  
Products     70,882     73,136       157,534     159,345       208,691     206,696  
Total Materials and Products     194,325     190,452       421,546     415,626       564,059     540,691  
Services     28,533     34,184       57,830     63,904       86,585     87,768  
Adjusted Cash Gross Profit     $ 222,858     $ 224,636       $ 479,376     $ 479,530       $ 650,644     $ 628,459  
                               
Adjusted Cash Gross Profit Margin (2)                              
Materials                              
Aggregates     69.2 %   73.0 %     60.9 %   63.6 %     63.0 %   63.6 %
Cement (3)     50.7 %   50.6 %     43.6 %   46.2 %     45.2 %   46.6 %
Products     22.5 %   26.1 %     21.0 %   25.0 %     21.6 %   25.2 %
Services     25.4 %   31.4 %     24.7 %   28.6 %     27.6 %   29.7 %
Total Adjusted Cash Gross Profit Margin     35.7 %   39.1 %     32.7 %   36.6 %     34.2 %   37.0 %
 
________________________________________________________
(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)   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 29,
2018

   

September 30,
2017

   

September 29,
2018

   

September 30,
2017

Aggregates (tons)     14,116       11,998       36,081       31,247  
Cement (tons)     796       850       1,770       1,925  
Ready-mix concrete (cubic yards)     1,519       1,320       4,164       3,463  
Asphalt (tons)     2,212       2,124       4,173       4,004  
                         
      Three months ended     Nine months ended
Pricing    

September 29,
2018

   

September 30,
2017

   

September 29,
2018

   

September 30,
2017

Aggregates (per ton)     $ 10.41       $ 10.23       $ 10.20       $ 10.04  
Cement (per ton)     112.03       113.15       113.37       112.45  
Ready-mix concrete (per cubic yards)     108.75       106.09       107.69       104.63  
Asphalt (per ton)     56.34       54.37       55.35       54.55  
                         
Year over Year Comparison     Volume     Pricing     Volume     Pricing
Aggregates (per ton)     17.7 %     1.8 %     15.5 %     1.6 %
Cement (per ton)     (6.4 )%     (1.0 )%     (8.1 )%     0.8 %
Ready-mix concrete (per cubic yards)     15.1 %     2.5 %     20.2 %     2.9 %
Asphalt (per ton)     4.1 %     3.6 %     4.2 %     1.5 %
                         
Year over Year Comparison (Excluding acquisitions)     Volume     Pricing     Volume     Pricing
Aggregates (per ton)     3.9 %     1.5 %     0.6 %     2.3 %
Cement (per ton)     (6.4 )%     (1.0 )%     (8.1 )%     0.8 %
Ready-mix concrete (per cubic yards)     3.2 %     2.3 %     2.0 %     3.0 %
Asphalt (per ton)     3.2 %     3.6 %     0.4 %     1.2 %
                                 
                                 
 
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 29, 2018
                  Gross Revenue     Intercompany     Net
      Volumes     Pricing     by Product     Elimination/Delivery     Revenue
Aggregates     14,116       $ 10.41       $ 146,913       $ (37,292 )     $ 109,621
Cement     796       112.03       89,224       (1,315 )     87,909
Materials                 $ 236,137       $ (38,607 )     $ 197,530
Ready-mix concrete     1,519       108.75       165,204       (337 )     164,867
Asphalt     2,212       56.34       124,622       48       124,670
Other Products                 116,410       (90,655 )     25,755
Products                 $ 406,236       $ (90,944 )     $ 315,292
       
       
      Nine months ended September 29, 2018
                  Gross Revenue     Intercompany     Net
      Volumes     Pricing     by Product     Elimination/Delivery     Revenue
Aggregates     36,081       $ 10.20       $ 368,005       $ (87,244 )     $ 280,761
Cement     1,770       113.37       200,704       (3,265 )     197,439
Materials                 $ 568,709       $ (90,509 )     $ 478,200
Ready-mix concrete     4,164       107.69       448,442       (952 )     447,490
Asphalt     4,173       55.35       230,962       (216 )     230,746
Other Products                 287,069       (213,909 )     73,160
Products                 $ 966,473       $ (215,077 )     $ 751,396
                                         
                                         
 

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Non-GAAP Financial Measures

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

The tables below reconcile our net income (loss) to Adjusted EBITDA by segment for the three and nine months ended September 29, 2018 and September 30, 2017.

Reconciliation of Net Income (Loss) to Adjusted EBITDA     Three months ended September 29, 2018
by Segment     West   East   Cement   Corporate   Consolidated
($ in thousands)                      
Net income (loss)     $ 61,021     $ 37,351     $ 35,326     $ (59,706 )   $ 73,992  
Interest expense (income)     1,380     844     (1,709 )   28,374     28,889  
Income tax expense     567     275         19,923     20,765  
Depreciation, depletion and amortization     23,144     19,154     10,622     574     53,494  
EBITDA     $ 86,112     $ 57,624     $ 44,239     $ (10,835 )   $ 177,140  
Accretion     145     275     60         480  
Gain on sale of business     (12,108 )               (12,108 )
Transaction costs     2             1,258     1,260  
Non-cash compensation                 5,643     5,643  
Other     (235 )   406         (580 )   (409 )
Adjusted EBITDA     $ 73,916     $ 58,305     $ 44,299     $ (4,514 )   $ 172,006  
Adjusted EBITDA Margin (1)     22.4 %   28.9 %   47.1 %       27.5 %
       
       
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     $ (44,225 )   $ 84,287  
Interest expense (income)     1,839     889     (1,011 )   27,204     28,921  
Income tax expense (benefit)     889             (499,222 )   (498,333 )
Depreciation, depletion and amortization     18,697     17,416     11,751     619     48,483  
EBITDA     $ 76,264     $ 55,922     $ 46,796     $ (515,624 )   $ (336,642 )
Accretion     210     212     64         486  
Tax receivable agreement expense                 501,752     501,752  
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     Nine months ended September 29, 2018
by Segment     West   East   Cement   Corporate   Consolidated
($ in thousands)                      
Net income (loss)     $ 97,625     $ 42,128     $ 61,687     $ (146,483 )   $ 54,957  
Interest expense (income)     4,114     2,397     (4,794 )   84,899     86,616  
Income tax expense     616     5         15,628     16,249  
Depreciation, depletion and amortization     67,597     54,272     25,651     1,919     149,439  
EBITDA     $ 169,952     $ 98,802     $ 82,544     $ (44,037 )   $ 307,261  
Accretion     432     710     82         1,224  
Loss on debt financings                 149     149  
Gain on sale of business     (12,108 )               (12,108 )
Transaction costs     (4 )           3,821     3,817  
Non-cash compensation                 19,833     19,833  
Other (2)     (6,956 )   985         (1,345 )   (7,316 )
Adjusted EBITDA     $ 151,316     $ 100,497     $ 82,626     $ (21,579 )   $ 312,860  
Adjusted EBITDA Margin (1)     19.1 %   21.9 %   38.7 %       21.4 %
       
       
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     $ (123,984 )   $ 81,267  
Interest expense (income)     5,586     2,503     (2,345 )   74,132     79,876  
Income tax expense (benefit)     1,424     (21 )       (498,479 )   (497,076 )
Depreciation, depletion and amortization     51,389     49,343     29,702     1,940     132,374  
EBITDA     $ 151,741     $ 97,949     $ 93,142     $ (546,391 )   $ (203,559 )
Accretion     600     596     186         1,382  
Loss on debt financings                 190     190  
Tax receivable agreement expense                 503,277     503,277  
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 %
 
_______________________________________________________
(1)   Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of net revenue.
(2)   In the nine months ended September 29, 2018, we negotiated a $6.9 million reduction in the amount of a contingent liability from one of our acquisitions. As we had passed the period to revise the opening balance sheet for this acquisition, the adjustment was recorded as other income.
     
     
 

The table below reconciles our net income per share attributable to Summit Materials, Inc. to adjusted diluted net income per share for the three and nine months ended September 29, 2018 and September 30, 2017. The per share amount of the net income attributable to Summit Materials, Inc. presented in the table is calculated using the total equity interests for the purpose of reconciling to adjusted diluted net income per share.

      Three months ended     Nine months ended
      September 29, 2018   September 30, 2017     September 29, 2018   September 30, 2017
Reconciliation of Net Income Per Share to Adjusted Diluted EPS     Net Income  

Per Equity
Unit

  Net Income  

Per Equity
Unit

    Net Income  

Per Equity
Unit

  Net Income  

Per Equity
Unit

Net income attributable to Summit Materials, Inc.     $ 71,289     $ 0.62     $ 81,264     $ 0.71       $ 53,069     $ 0.46     $ 78,820     $ 0.70  
Adjustments:                                    
Net income attributable to noncontrolling interest     2,703     0.03     2,964     0.03       1,888     0.02     2,474     0.02  
Adjustment to acquisition deferred liability                       (6,947 )   (0.06 )        
Gain on sale of business     (12,108 )   (0.11 )             (12,108 )   (0.11 )        
Loss on debt financings                       149         190      
Adjusted diluted net income before tax related adjustments     61,884     0.54     84,228     0.74       36,051     0.31     81,484     0.72  
Tax receivable agreement expense             501,752     4.42               503,277     4.46  
Valuation allowance release             (531,952 )   (4.68 )             (531,952 )   (4.71 )
Adjusted diluted net income     $ 61,884     $ 0.54     $ 54,028     $ 0.48       $ 36,051     $ 0.31     $ 52,809     $ 0.47  
Weighted-average shares:                                    
Basic Class A common stock     111,641,344         109,545,111           111,288,211         108,219,132      
LP Units outstanding     3,448,343         4,039,020           3,538,385         4,560,976      
Total equity units     115,089,687         113,584,131           114,826,596         112,780,108      
                                             
                                             
 

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

      Three months ended     Nine months ended
      September 29,     September 30,     September 29,     September 30,
Reconciliation of Operating Income to Adjusted Cash Gross Profit     2018     2017     2018     2017
($ in thousands)                        
Operating income     $ 108,167       $ 113,911       $ 133,921       $ 163,571  
General and administrative expenses     59,457       59,175       190,975       175,729  
Depreciation, depletion, amortization and accretion     53,974       48,969       150,663       133,756  
Transaction costs     1,260       2,581       3,817       6,474  
Adjusted Cash Gross Profit (exclusive of items shown separately)     $ 222,858       $ 224,636       $ 479,376       $ 479,530  
Adjusted Cash Gross Profit Margin (exclusive of items shown separately) (1)     35.7 %     39.1 %     32.7 %     36.6 %
 
_______________________________________________________
(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 provided by operating activities to free cash flow for the three and nine months ended September 29, 2018 and September 30, 2017.

      Three months ended     Nine months ended
      September 29,     September 30,     September 29,     September 30,
($ in thousands)     2018     2017     2018     2017
Net income     $ 73,992       $ 84,287       $ 54,957       $ 81,267  
Non-cash items     60,379       (448,206 )     158,851       (350,867 )
Net income adjusted for non-cash items     134,371       (363,919 )     213,808       (269,600 )
Change in working capital accounts     (30,096 )     485,203       (143,251 )     402,033  
Net cash provided by operating activities     104,275       121,284       70,557       132,433  
Capital expenditures, net of asset sales     (47,779 )     (33,511 )     (165,326 )     (134,188 )
Free cash flow     $ 56,496       $ 87,773       $ (94,769 )     $ (1,755 )
 

 

Contacts

Summit Materials, Inc.
Mr. Brian Harris
Executive Vice President and Chief Financial Officer
brian.harris@summit-materials.com