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Continental Building Products, Inc. (CBPX) SEC Filing 8-K Material Event for the period ending Thursday, February 21, 2019

Continental Building Products, Inc.

CIK: 1592480 Ticker: CBPX

cbpx.jpg
Continental Building Products Reports Fourth Quarter and Full Year 2018 Results
Herndon, Virginia, February 21, 2019. Continental Building Products, Inc. (NYSE: CBPX) (the "Company"), a leading manufacturer of gypsum wallboard and complementary finishing products, announced today results for the fourth quarter and year ended December 31, 2018.
Highlights of Fourth Quarter 2018 as Compared to Fourth Quarter 2017
Net sales increased 7.1% to $140.8 million on flat wallboard sales volumes
Net income decreased 16.9% to $20.1 million due to prior year favorable tax adjustments
Adjusted net income1 increased 32.5% to $20.4 million from $15.4 million
Earnings per share decreased 12.5% to $0.56; Adjusted earnings per share1 increased 36.6% to $0.56
EBITDA1 increased 7.0% to $39.8 million
Cash flow from operations increased 76.0% to $46.8 million
Deployed $9.6 million in capital investments and $38.3 million to repurchase 1.3 million shares of common stock
Highlights of Full Year 2018 as Compared to Full Year 2017
Net sales increased 8.0% to $528.1 million
Net income increased 24.1% to $74.2 million
Adjusted net income1 increased 44.8% to $74.5 million
Earnings per share increased 30.3% to $2.02; Adjusted earnings per share1 increased 51.9% to $2.02
EBITDA1 increased 11.1% to $151.1 million
Gross profit increased 200 basis points to 28.0%
Cash flow from operations increased 28.7% to $130.8 million
Deployed $30.8 million in capital investments and $65.7 million to repurchase 2.3 million shares of common stock
"We finished the year on a strong note, generating strong earnings growth and achieving record setting results in 2018 driven by higher sales and our highly efficient low cost operations," stated Jay Bachmann, President and Chief Executive Officer. "This positive performance reflected our relentless focus on our Bison Way continuous improvement effort as our associates worked together to streamline our operations against a backdrop of inflationary pressures."
Mr. Bachmann further stated, "As we look into 2019, we remain focused on deploying our strong cash flow to improve our operations and cost position through investments in high-return capital projects while continuing to repurchase shares as a key avenue to return value to shareholders."





Fourth Quarter 2018 Results vs. Fourth Quarter 2017
Net sales were up 7.1% to $140.8 million for the fourth quarter 2018, compared to $131.4 million in the prior year quarter, primarily due to a 6.5% increase in average mill net price on wallboard sales. Wallboard sales volumes were flat at 725 million square feet (MMSF) for both quarters.
Operating income was $29.0 million, compared to $26.6 million in the prior year quarter. This increase was primarily attributable to higher net sales partially offset by an increase in input costs per unit. SG&A expense was $10.5 million compared to $10.4 million in the prior year quarter, or 7.5% of net sales compared to 7.9% in the prior year quarter.
Interest expense, net, decreased 18.3% to $2.3 million, compared to $2.8 million in the prior year quarter, reflecting higher investment income and capitalized interest, along with the benefits of lower spreads obtained on the term debt, partially offset by the rise in LIBOR.
Net income for the fourth quarter 2018 decreased 16.9% to $20.1 million, or $0.56 per share, compared to $24.2 million, or $0.64 per share, in the prior year quarter. This decrease is a result of the tax adjustment in the fourth quarter 2017 related to the Tax Cuts and Jobs Act of 2017. Adjusted net income1 increased $5.0 million, or 32.5%, from $15.4 million to $20.4 million and adjusted earnings per share increased 36.6% from $0.41 per share to $0.56 per share. The $5.0 million increase in net income was primarily a result of the increase in net sales.
Full Year 2018 Results vs. Full Year 2017
Net sales were up 8.0% to $528.1 million, compared to $489.2 million in the prior year, primarily due to a 4.7% increase in average mill net price on wallboard sales. Wallboard sales volumes for the year increased 2.6% to 2,736 million square feet (MMSF) compared to 2,666 MMSF in the prior year.
Operating income was $107.3 million, compared to $89.6 million in the prior year. This increase was primarily attributable to higher net sales partially offset by an increase in input costs per unit. SG&A expense was $40.4 million compared to $37.8 million in the prior year, or 7.6% of net sales compared to 7.7% in the prior year.
Interest expense, net, decreased 12.9% to $10.3 million, compared to $11.8 million in the prior year, reflecting higher investment income and capitalized interest, along with the benefits of lower spreads obtained on the term debt, partially offset by the rise in LIBOR.
Net income increased $14.4 million to $74.2 million, or $2.02 per share, compared to $59.8 million, or $1.55 per share, in the prior year. Adjusted net income1 increased $23.0 million, or 44.8%, from $51.5 million to $74.5 million and adjusted earnings per share1 increased 51.9% from $1.33 per share to $2.02 per share. The $23.0 million increase in adjusted net income1 was primarily a result of the increase in net sales as a result of increased average mill net price and increase volumes.
Balance Sheet and Cash Flow
As of December 31, 2018, the Company had a cash balance of $102.6 million and total outstanding borrowing under the term loan agreement and industrial revenue bonds of $268.9 million. During the fourth quarter 2018, the Company generated cash flows from operations of $46.8 million and deployed $9.6 million in capital investments.
During the fourth quarter 2018, the Company repurchased 1.3 million shares of its common stock under its expanded repurchase program for an aggregate purchase price of $38.3 million, representing 3.5% of its outstanding shares as of December 31, 2017. As of December 31, 2018, against the program, the Company has repurchased $169.0 million of common stock at an average price of $23.65 per share and had a remaining capacity of $131.0 million for future repurchases.
Buchanan Plant Update
As previously announced, in January 2019 the Company's Buchanan, New York plant experienced a significant equipment malfunction, resulting in an outage at the plant. The plant is off-line while repairs are being made. No injuries occurred from this event. The company is working to resolve the outage and expects the plant to resume operations by mid-March upon completion of repairs.
While the Buchanan plant is down, the Company has increased production at its plants in Silver Grove, Kentucky and Palatka, Florida to offset a portion of the lost production from the Buchanan plant.
Continental has standard insurance coverage that is intended to respond to circumstances such as these, including business interruption insurance. Our insurance coverage is designed to cover not only the direct costs of the damaged equipment, but also the lost contribution margin of the sales that otherwise would have been made by the plant.

2



Mr Bachmann commented, "Our teams are making strong progress to resolve the malfunction and ready the plant for startup by mid-March. I thank all of our people who are working safe and hard to ensure the plant is once again ready to operate in a highly efficient, safe manner."
Outlook for the Full Year 2019
SG&A is expected to be in the range of $40 - $42 million.
Cost of goods sold inflation per unit compared to the prior year is expected to be in the range of 4.5% - 6.5%. We expect to partly offset this inflation by approximately $3 million of savings from high return capital projects.
Total capital expenditures are expected to be in the range of $28 - $32 million.
Maintenance capital spending is expected to be in the range of $14 - $16 million.
High-return capital spending is expected to be in the range of $14 - $16 million.
Depreciation and amortization is expected to be in the range of $43 - $45 million.
Effective tax rate is expected to be in the range of 21% - 22%.
Investor Conference Webcast and Conference Call
The Company will host a webcast and conference call on Thursday, February 21, 2019 at 5:00 p.m. Eastern Time to review fourth quarter and full year 2018 financial results, discuss recent events and conduct a question-and-answer period. The live webcast will be available on the Investor Relations section of the Company's website at www.continental-bp.com. To participate in the call, please dial (877) 407-0789 (domestic) or (201) 689-8562 (international). A replay of the conference call will be available through March 21, 2019, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the pass code number 13687008.
About Continental Building Products
Continental Building Products is a leading North American manufacturer of gypsum wallboard and complementary finishing products. The Company is headquartered in Herndon, Virginia with operations serving the residential, commercial and repair and remodel construction markets primarily in the eastern United States and eastern Canada. For additional information, visit www.continental-bp.com.
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements may be identified by the use of words such as "anticipate", "believe", "expect", "estimate", "plan", "outlook", and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on historical information available at the time the statements are made and are based on management's reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company's control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

1 See the financial schedules at the end of this press release for a reconciliation of EBITDA, adjusted net income and adjusted earnings per share, which are non-GAAP financial measures, to relevant GAAP financial measures, and a discussion of why they are useful to investors.
Contact Information
Investor Relations:
Tel.: (703) 480-3980
Investorrelations@continental-bp.com



3



Continental Building Products, Inc.
Consolidated Statements of Operations
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except share data and per share amounts)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
Net sales
$
140,756

 
131,392

 
$
528,060

 
489,163

Cost of goods sold
101,196

 
94,432

 
380,381

 
361,825

Gross profit
39,560

 
36,960

 
147,679

 
127,338

Selling and administrative
10,539

 
10,389

 
40,365

 
37,753

Operating income
29,021

 
26,571

 
107,314

 
89,585

Other expense, net
(422
)
 
(563
)
 
(678
)
 
(1,196
)
Interest expense, net
(2,306
)
 
(2,822
)
 
(10,269
)
 
(11,788
)
Income before losses from equity method investment and (provision for)/benefit from for income taxes
26,293

 
23,186

 
96,367

 
76,601

Losses from equity method investment
(374
)
 
(158
)
 
(1,522
)
 
(187
)
Income before provision for income taxes
25,919

 
23,028

 
94,845

 
76,414

(Provision for)/benefit from income taxes
(5,780
)
 
1,208

 
(20,601
)
 
(16,566
)
Net income
$
20,139

 
$
24,236

 
$
74,244

 
59,848

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.56

 
0.64

 
$
2.02

 
1.55

Diluted
$
0.55

 
0.64

 
$
2.01

 
1.54

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
36,174,204

 
37,655,655

 
36,801,231

 
38,636,152

Diluted
36,375,014

 
37,867,710

 
36,978,071

 
38,774,963



4



Continental Building Products, Inc.
Consolidated Balance Sheets
 
As of December 31,
 
2018
 
2017
 
(in thousands)
Assets:
 
 
 
Cash and cash equivalents
$
102,633

 
$
72,521

Trade receivables, net
38,454

 
38,769

Inventories, net
32,225

 
24,882

Prepaid and other current assets
19,805

 
11,267

Total current assets
193,117

 
147,439

Property, plant and equipment, net
288,368

 
294,003

Customer relationships and other intangibles, net
62,680

 
70,807

Goodwill
119,945

 
119,945

Equity method investment
7,975

 
9,263

Debt issuance costs
296

 
477

Total Assets
$
672,381

 
$
641,934

Liabilities and Shareholders' Equity:
 
 
 
Liabilities:
 
 
 
Accounts payable
$
48,060

 
$
30,809

Accrued and other liabilities
12,815

 
11,940

Debt, current portion
1,669

 
1,702

Total current liabilities
62,544

 
44,451

Deferred taxes and other long-term liabilities
20,204

 
15,847

Debt, non-current portion
261,886

 
263,610

Total Liabilities
344,634

 
323,908

Shareholders' Equity:
 
 
 
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding

 

Common stock, $0.001 par value per share; 190,000,000 shares authorized; 44,472,214 and 44,321,776 shares issued and 35,401,868 and 37,532,959 shares outstanding as of December 31, 2018 and December 31, 2017, respectively
44

 
44

Additional paid-in capital
327,515

 
325,391

Less: Treasury stock
(209,050
)
 
(143,357
)
Accumulated other comprehensive loss
(3,391
)
 
(2,649
)
Accumulated earnings
212,629

 
138,597

Total Shareholders' Equity
327,747

 
318,026

Total Liabilities and Shareholders' Equity
$
672,381

 
$
641,934




5



Continental Building Products, Inc.
Consolidated Statements of Cash Flows
 
For the Year Ended December 31,
 
2018
 
2017
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
74,244

 
$
59,848

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
43,782

 
46,460

Amortization of debt issuance costs and debt discount
1,234

 
1,177

Losses from equity method investment
1,522

 
187

Amortization of deferred gain on terminated swaps
(1,083
)
 

Debt issuance expense
317

 
1,170

Share-based compensation
2,928

 
2,784

Deferred taxes
4,735

 
(3,414
)
Change in assets and liabilities:
 
 
 
Trade receivables
201

 
(6,296
)
Inventories
(7,558
)
 
488

Prepaid expenses and other current assets
(4,977
)
 
(3,735
)
Accounts payable
14,716

 
3,987

Accrued and other current liabilities
961

 
(830
)
Other long-term liabilities
(204
)
 
(159
)
Net cash provided by operating activities
130,818

 
101,667

Cash flows from investing activities:
 
 
 
Payments for property, plant and equipment
(28,857
)
 
(21,459
)
Payments for intangible assets
(1,902
)
 
(583
)
Proceeds from disposal of property, plant and equipment
125

 

Capital contributions to equity method investment
(703
)
 
(2,219
)
Distributions from equity method investment
468

 
790

Net cash used in investing activities
(30,869
)
 
(23,471
)
Cash flows from financing activities:
 
 
 
Proceeds from exercise of stock options
145

 
230

Tax withholdings on share-based compensation
(547
)
 
(240
)
Proceeds from debt refinancing

 
545,198

Disbursements for debt refinancing

 
(545,198
)
Payments of financing costs
(415
)
 
(1,170
)
Principal payments for debt
(18,916
)
 
(2,052
)
Proceeds from Industrial Revenue Bonds
16,200

 

Payments to repurchase common stock
(65,693
)
 
(54,601
)
Net cash used in financing activities
(69,226
)
 
(57,833
)
Effect of foreign exchange rates on cash and cash equivalents
(611
)
 
622

Net change in cash and cash equivalents
30,112

 
20,985

Cash, beginning of period
72,521

 
51,536

Cash, end of period
$
102,633

 
$
72,521


6



Reconciliation of Non-GAAP Measures
EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share have been presented in this press release as supplemental measures of financial performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). This release presents EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share as supplemental performance measures because management believes that they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results under GAAP while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. Furthermore, the Company's Board of Directors' compensation committee uses EBITDA to evaluate management's compensation. Management also believes that EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share are useful to investors because they allow investors to view the business through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods.
EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share may not be comparable to similarly titled measures of other companies because other companies may not calculate EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share in the same manner. EBITDA, EBITDA Margin, Adjusted Net Income, and Adjusted Earnings Per Share are not measurements of the Company's financial performance under GAAP and should not be considered in isolation or as alternatives to net income or earnings per share determined in accordance with GAAP or any other financial statement data presented as indicators of financial performance or liquidity, each as calculated and presented in accordance with GAAP.
Reconciliation of Net Income to EBITDA
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(unaudited, in thousands)
Net income
$
20,139

 
$
24,236

 
$
74,244

 
$
59,848

Adjustments:
 
 
 
 
 
 
 
Other expense, net
422

 
563

 
678

 
1,196

Interest expense, net
2,306

 
2,822

 
10,269

 
11,788

Losses from equity method investment
374

 
158

 
1,522

 
187

Provision for/(benefit from) income taxes
5,780

 
(1,208
)
 
20,601

 
16,566

Depreciation and amortization
10,816

 
10,643

 
43,782

 
46,460

EBITDA - Non-GAAP measure
$
39,837

 
$
37,214

 
$
151,096

 
$
136,045

EBITDA Margin - EBITDA as a percentage of net sales - Non-GAAP measure
28.3
%
 
28.3
%
 
28.6
%
 
27.8
%
Reconciliation of Net Income and Earnings Per Share to Adjusted Net Income and Adjusted Earnings Per Share
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(unaudited, in thousands, except share data and per share amounts)
Net income - GAAP measure
$
20,139

 
$
24,236

 
$
74,244

 
$
59,848

Debt related expenses, net of tax (1)
248

 
319

 
248

 
774

Impact of Tax Cuts and Jobs Act of 2017

 
(9,168
)
 

 
(9,168
)
Adjusted net income - Non-GAAP measure
$
20,387

 
$
15,387

 
$
74,492

 
$
51,454

 
 
 
 
 
 
 
 
Earnings per share - GAAP measure
$
0.56

 
$
0.64

 
$
2.02

 
$
1.55

Debt related expenses, net of tax (1)

 
0.01

 

 
0.02

Impact of Tax Cuts and Jobs Act of 2017

 
(0.24
)
 

 
(0.24
)
Adjusted earnings per share - Non-GAAP measure
$
0.56

 
$
0.41

 
$
2.02

 
$
1.33

(1)
Expenses related to debt repricing activities are shown net of income tax benefit of $0.2 million.

7



Other Financial and Operating Data
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except mill net)
Capital expenditures and software purchased or developed
$
9,639

 
$
7,782

 
$
30,759

 
$
22,042

Wallboard sales volume (million square feet)
725

 
725

 
2,736

 
2,666

Mill net sales price (1)
$
154.20

 
$
144.78

 
$
153.83

 
$
146.92

(1)
Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.
Interim Volumes and Mill Net Prices
 
For the Three Months Ended
 
December 31,
2017
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31,
2018
Volumes (million square feet)
725

 
615

 
722

 
674

 
725

Mill net sales price (1)
$
144.78

 
$
151.60

 
$
153.88

 
$
155.43

 
$
154.20

(1)
Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.


8


UNITED STATES
SECEURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 8-K


CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


Date of Report: February 21, 2019

cbpx.jpg
Continental Building Products, Inc.
(Exact name of registrant as specified in its charter)

Delaware
 
1-36293
 
61-1718923
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S Employer Identification No.)
12950 Worldgate Drive, Suite 700, Herndon, VA
 
20170
(Address of principal executive offices)
 
(Zip Code)
(703) 480-3800
(Registrant's telephone number, including the area code)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company    ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





Item 2.02. Results of Operation and Financial Condition.
On February 21, 2019, Continental Building Products, Inc. (the “Company”) issued a press release to announce its financial results for the fourth quarter and year ended December 31, 2018. A copy of the press release is attached as Exhibit 99.1. The information included or incorporated in Item 2.02 of this current report, including Exhibit 99.1, is being furnished to the Securities and Exchange Commission and shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d)
Exhibits. Press Release issued by Continental Building Products, Inc. dated February 21, 2019.


2



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Continental Building Products, Inc.
 
 
 
February 21, 2019
 
/s/ Timothy A. Power
Date
 
Timothy A. Power
 
 
Senior Vice President and General Counsel



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Continental Building Products, Inc. provided additional information to their SEC Filing as exhibits

Ticker: CBPX
CIK: 1592480
Form Type: 8-K Corporate News
Accession Number: 0001592480-19-000003
Submitted to the SEC: Thu Feb 21 2019 4:07:55 PM EST
Accepted by the SEC: Thu Feb 21 2019
Period: Thursday, February 21, 2019
Industry: Concrete Gypsum And Plaster Products
Events:
  1. Earnings Release
  2. Financial Exhibit

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