Foundation Building Materials, Inc. Announces First Quarter 2020 Results and Provides COVID-19 Business Update

SANTA ANA, Calif.–()–Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building products distributors of wallboard, suspended ceiling systems and metal framing in North America, today reported first quarter 2020 financial results and provided a COVID-19 business update.

We continue to extend our thoughts and prayers to those affected by the COVID-19 Pandemic,” said Ruben Mendoza, President and Chief Executive Officer. “While our first quarter results reflect the resiliency of our employees and operations, we have implemented a number of strategic actions and cost-saving initiatives in response to the current market environment. Our company continues to operate the vast majority of its branches in the United States and Canada utilizing safety precautions based on recommendations from federal, state and local authorities, and we believe our company is well-positioned to successfully navigate this challenging time.”

2020 First Quarter Results

Net sales for the three months ended March 31, 2020, were $524.3 million compared to $514.9 million for the three months ended March 31, 2019, representing an increase of $9.4 million, or 1.8%. There was one more business day in the current period as compared to the prior year period. Average daily net sales increased 0.2% over the prior year period. Net sales from base business branches decreased $1.5 million compared to the prior year period, and average daily base business net sales decreased by 1.9% over the prior year period. Net sales from acquired branches and existing branches that were strategically combined contributed $10.9 million of the net sales increase. The base business net sales decrease was primarily driven by the impacts and disruptions caused by the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020 (the “COVID-19 Pandemic”).

Gross profit for the three months ended March 31, 2020, was $162.2 million compared to $153.0 million for the three months ended March 31, 2019, representing an increase of $9.2 million, or 6.0%. Gross profit increased due to an expansion of our gross margin and an increase in sales from acquisitions. Gross margin for the three months ended March 31, 2020, was 30.9% compared to 29.7% for the three months ended March 31, 2019. The increase in gross margin was primarily due to improved profitability across our wallboard, metal framing, and complementary and other products lines driven by our ongoing pricing and purchasing initiatives.

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2020, were $123.1 million compared to $117.2 million for the three months ended March 31, 2019, representing an increase of $5.9 million, or 5.0%. As a percentage of net sales, SG&A expenses were 23.5% for the three months ended March 31, 2020, compared to 22.8% for the three months ended March 31, 2019. The increase in SG&A expenses as a percentage of net sales was primarily due to loss of sales leverage resulting from the COVID-19 Pandemic, our continued investment in various company-wide initiatives and higher labor costs.

Net income from continuing operations for the three months ended March 31, 2020, was $14.4 million, or $0.33 per share, an increase of $9.5 million compared to $4.8 million, or $0.11 per share, for the three months ended March 31, 2019. Adjusted net income(1) for the three months ended March 31, 2020, was $9.7 million, or $0.23 per share, an increase of $3.7 million compared to $6.1 million, or $0.14 per share, for the three months ended March 31, 2019.

Adjusted EBITDA(1) was $40.3 million and adjusted EBITDA margin(1) was 7.7% for the three months ended March 31, 2020, compared to adjusted EBITDA(1) of $37.5 million and adjusted EBITDA margin(1) of 7.3% for the three months ended March 31, 2019.

COVID-19 Pandemic Business Update

On April 8, 2020, we withdrew our full year financial guidance. Through April 2020, the COVID-19 Pandemic has had a negative impact on most of the markets in which the Company operates, with low single digit daily sales decreases as compared to last year. In a select number of states, including Washington, California, Michigan, New Jersey, and the Commonwealth of Pennsylvania, stronger restrictions are or have been in place, and the Company has experienced more significant year over year headwinds and has not seen the typical seasonal improvements. As a result, consolidated April net sales are down approximately 20% year over year. The Company continues to monitor the current environment and anticipates its future financial performance will be adversely impacted due to the effects of the COVID-19 Pandemic. Given the uncertainty related to the magnitude and duration of the COVID-19 Pandemic, the Company cannot reliably provide financial guidance for the full year at this time.

Acquisitions

On February 3, 2020, the Company acquired the operations of two branches and certain assets of Insulation Distributors, Inc. (“IDI”), which resulted in the addition of two specialty building products branches in Maryland. For 2020, the former IDI branches are expected to contribute between $16.0 million and $18.0 million to net sales. The Company has temporarily suspended acquisition activity due to the COVID-19 Pandemic.

First Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, May 12, 2020, at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, Pete Welly, Chief Operating Officer, Kirby Thompson, Senior Vice President of Sales and Marketing and John Moten, Vice President Investor Relations will host the call.

The call can be accessed in three ways:

  • At the FBM website: www.fbmsales.com under the “Events and Presentations” tab in the “Investors” section of the Company’s website;
  • By telephone: For both listen-only participants and those who wish to take part in the question and answer portion of the call, the dial-in telephone number in the U.S. is (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and
  • Using audio replay: A replay of the call will be available beginning at 11:30 AM Eastern Time on Tuesday, May 12, 2020, and ending 11:59 PM Eastern Time on Tuesday, May 19, 2020. The dial-in number for U.S.-based participants is (844) 512-2921. Participants outside the U.S. should use the replay dial-in number of (412) 317-6671. All callers will be required to provide the Conference ID of 13701879.

About Foundation Building Materials

Foundation Building Materials is a specialty building products distributor of wallboard, suspended ceiling systems, and metal framing throughout North America. Based in Santa Ana, California, the Company operates more than 175 branches across the United States and Canada. Learn more at www.fbmsales.com or follow us on LinkedIn, Twitter, Instagram, or Facebook.

Forward-Looking Statements

This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” or words or phrases with similar meaning. 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 contained in this press release relate to, among other things, the impact of the COVID-19 Pandemic on the Company’s financial performance, and the effect of certain strategic actions and cost-saving initiatives taken by the Company. The impacts and disruptions caused by the COVID-19 Pandemic are highly uncertain, cannot be accurately predicted, and will depend upon future developments outside the control of the Company, including the scope and duration of the outbreak, and the scope and impact of any government orders and restrictions designed to limit the further spread of COVID-19. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, public health and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. We do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Investors are referred to our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and 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)

Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS and net debt leverage ratio are non-GAAP financial measures. See the supplementary schedules at the end of this press release for a discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. Adjusted EBITDA margin represents adjusted EBITDA divided by net sales. For a calculation of our net debt leverage ratio as of March 31, 2020, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020.

– Financial Tables Follow –

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except share and per share data)

 

 

Three Months Ended March 31,

 

2020

 

2019

Net sales

$

 

524,258

 

 

 

$

 

514,872

 

 

Cost of goods sold

 

362,100

 

 

 

 

361,912

 

 

Gross profit

 

162,158

 

 

 

 

152,960

 

 

Operating expenses:

 

 

 

Selling, general and administrative expenses

 

123,097

 

 

 

 

117,230

 

 

Depreciation and amortization

 

19,219

 

 

 

 

20,342

 

 

Total operating expenses

 

142,316

 

 

 

 

137,572

 

 

Income from operations

 

19,842

 

 

 

 

15,388

 

 

Interest expense

 

(7,733

)

 

 

 

(8,556

)

 

Gain on legal settlement

 

8,556

 

 

 

 

Other (expense) income, net

 

(1,022

)

 

 

 

41

 

 

Income before income taxes

 

19,643

 

 

 

 

6,873

 

 

Income tax expense

 

5,267

 

 

 

 

2,045

 

 

Income from continuing operations

 

14,376

 

 

 

 

4,828

 

 

Loss on sale of discontinued operations, net of tax

 

 

 

(1,346

)

 

Net income

$

 

14,376

 

 

 

$

 

3,482

 

 

 

 

 

 

Earnings (loss) per share data:

 

 

 

Earnings from continuing operations per share – basic

$

 

0.33

 

 

 

$

 

0.11

 

 

Earnings from continuing operations per share – diluted

$

 

0.33

 

 

 

$

 

0.11

 

 

 

 

 

 

Loss from discontinued operations per share – basic

$

 

 

 

$

 

(0.03

)

 

Loss from discontinued operations per share – diluted

$

 

 

 

$

 

(0.03

)

 

 

 

 

 

Earnings per share – basic

$

 

0.33

 

 

 

$

 

0.08

 

 

Earnings per share – diluted

$

 

0.33

 

 

 

$

 

0.08

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

43,045,692

 

 

 

 

42,932,024

 

 

Diluted

 

43,542,819

 

 

 

 

42,944,829

 

 

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

 

 

March 31, 2020

 

December 31, 2019

Current assets:

 

 

 

Cash and cash equivalents

$

 

141,235

 

 

 

$

 

17,766

 

 

Accounts receivable—net of allowance for expected credit losses of $2,212 and $3,169, respectively

 

293,504

 

 

 

 

262,757

 

 

Other receivables

 

41,411

 

 

 

 

59,104

 

 

Inventories

 

173,284

 

 

 

 

178,624

 

 

Prepaid expenses and other current assets

 

7,446

 

 

 

 

7,965

 

 

Total current assets

 

656,880

 

 

 

 

526,216

 

 

Property and equipment, net

 

154,447

 

 

 

 

150,188

 

 

Right-of-use assets, net

 

121,700

 

 

 

 

120,562

 

 

Intangible assets, net

 

101,452

 

 

 

 

113,861

 

 

Goodwill

 

493,068

 

 

 

 

495,724

 

 

Other assets

 

9,470

 

 

 

 

5,206

 

 

Total assets

$

 

1,537,017

 

 

 

$

 

1,411,757

 

 

Liabilities and stockholders’ equity:

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

 

149,474

 

 

 

$

 

145,226

 

 

Accrued payroll and employee benefits

 

23,871

 

 

 

 

31,410

 

 

Accrued taxes

 

9,612

 

 

 

 

8,780

 

 

Current portion of tax receivable agreement

 

8,537

 

 

 

 

27,850

 

 

Current portion of term loan

 

4,500

 

 

 

 

4,500

 

 

Current portion of lease liabilities

 

31,138

 

 

 

 

30,307

 

 

Other current liabilities

 

12,642

 

 

 

 

18,557

 

 

Total current liabilities

 

239,774

 

 

 

 

266,630

 

 

Asset-based revolving credit facility

 

235,000

 

 

 

 

89,000

 

 

Long-term portion of term loan, net

 

433,791

 

 

 

 

434,633

 

 

Tax receivable agreement

 

80,996

 

 

 

 

89,533

 

 

Deferred income taxes, net

 

21,759

 

 

 

 

18,972

 

 

Long-term portion of lease liabilities

 

96,831

 

 

 

 

97,145

 

 

Other liabilities

 

12,836

 

 

 

 

7,679

 

 

Total liabilities

 

1,120,987

 

 

 

 

1,003,592

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock, $0.001 par value, authorized 10,000,000 shares; 0 shares issued

 

 

 

Common stock, $0.001 par value, authorized 190,000,000 shares; 43,201,056 and 42,991,016 shares issued, respectively

 

13

 

 

 

 

13

 

 

Additional paid-in capital

 

337,393

 

 

 

 

336,362

 

 

Retained earnings

 

88,630

 

 

 

 

74,254

 

 

Accumulated other comprehensive loss

 

(10,006

)

 

 

 

(2,464

)

 

Total stockholders’ equity

 

416,030

 

 

 

 

408,165

 

 

Total liabilities and stockholders’ equity

$

 

1,537,017

 

 

 

$

 

1,411,757

 

 

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

Three Months Ended March 31,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income

$

 

14,376

 

 

 

$

 

3,482

 

 

Add: loss on sale of discontinued operations

 

 

 

(1,346

)

 

Net income from continuing operations

 

14,376

 

 

 

 

4,828

 

 

Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:

 

 

 

Depreciation

 

7,249

 

 

 

 

8,846

 

 

Amortization of intangible assets

 

11,970

 

 

 

 

11,496

 

 

Amortization of debt issuance costs and debt discount

 

540

 

 

 

 

539

 

 

Inventory fair value purchase accounting adjustment

 

 

 

196

 

 

Provision for expected credit losses

 

652

 

 

 

 

636

 

 

Stock-based compensation

 

1,393

 

 

 

 

829

 

 

Loss on disposal of property and equipment

 

51

 

 

 

 

191

 

 

Right-of-use assets non-cash expense

 

7,489

 

 

 

 

6,743

 

 

Deferred income taxes

 

3,133

 

 

 

 

211

 

 

Change in assets and liabilities, net of effects of acquisitions:

 

 

 

Accounts receivable

 

(30,308

)

 

 

 

(23,860

)

 

Other receivables

 

16,875

 

 

 

 

16,851

 

 

Inventories

 

5,924

 

 

 

 

(2,917

)

 

Prepaid expenses and other current assets

 

460

 

 

 

 

(2,206

)

 

Other assets

 

(24

)

 

 

 

(15

)

 

Accounts payable

 

6,256

 

 

 

 

9,182

 

 

Accrued payroll and employee benefits

 

(7,349

)

 

 

 

(7,601

)

 

Accrued taxes

 

863

 

 

 

 

(831

)

 

Operating lease liabilities

 

(7,335

)

 

 

 

(6,618

)

 

Other liabilities

 

(4,499

)

 

 

 

1,209

 

 

Net cash provided by operating activities from continuing operations

 

27,716

 

 

 

 

17,709

 

 

Cash flows from investing activities from continuing operations:

 

 

 

Purchases of property and equipment

 

(11,442

)

 

 

 

(5,242

)

 

Payments of net working capital adjustments related to acquisitions

 

(34

)

 

 

 

(13

)

 

Proceeds from the disposal of fixed assets

 

474

 

 

 

 

238

 

 

Acquisitions, net of cash acquired

 

(8,638

)

 

 

 

(10,757

)

 

Net cash used in investing activities from continuing operations

 

(19,640

)

 

 

 

(15,774

)

 

Cash flows from financing activities from continuing operations:

 

 

 

Proceeds from asset-based revolving credit facility

 

322,500

 

 

 

 

145,276

 

 

Repayments of asset-based revolving credit facility

 

(176,500

)

 

 

 

(137,776

)

 

Principal payments for term loan

 

(1,125

)

 

 

 

(1,125

)

 

Payment related to tax receivable agreement

 

(27,850

)

 

 

 

(16,667

)

 

Tax withholding payment related to net settlement of equity awards

 

(362

)

 

 

 

(130

)

 

Principal repayment of finance lease obligations

 

(678

)

 

 

 

(654

)

 

Net cash provided by (used in) financing activities from continuing operations

 

115,985

 

 

 

 

(11,076

)

 

Net cash used in investing activities from discontinued operations

 

 

 

(1,346

)

 

Net cash used in discontinued operations

 

 

 

(1,346

)

 

Effect of exchange rate changes on cash

 

(592

)

 

 

 

166

 

 

Net increase (decrease) in cash

 

123,469

 

 

 

 

(10,321

)

 

Cash and cash equivalents at beginning of period

 

17,766

 

 

 

 

15,299

 

 

Cash and cash equivalents at end of period

$

 

141,235

 

 

 

$

 

4,978

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for income taxes

$

 

103

 

 

 

$

 

79

 

 

Cash paid for interest

$

 

7,665

 

 

 

$

 

8,613

 

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

Change in fair value of derivatives, net of tax

$

 

499

 

 

 

$

 

3,496

 

 

Goodwill adjustment for purchase price allocation

$

 

55

 

 

 

$

 

187

 

 

FOUNDATION BUILDING MATERIALS, INC.

NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(dollars in thousands)

 

 

Three Months Ended March 31,

 

Change

 

2020

 

2019

 

$

 

%

Wallboard

$

 

202,268

 

38.6

%

 

$

 

202,914

 

39.4

%

 

$

 

(646

)

 

 

(0.3

)

%

Suspended ceiling systems

 

98,506

 

18.8

%

 

 

88,996

 

17.3

%

 

 

9,510

 

 

 

10.7

 

%

Metal framing

 

93,334

 

17.8

%

 

 

99,251

 

19.3

%

 

 

(5,917

)

 

 

(6.0

)

%

Complementary and other products

 

130,150

 

24.8

%

 

 

123,711

 

24.0

%

 

 

6,439

 

 

 

5.2

 

%

Total net sales

$

 

524,258

 

100.0

%

 

$

 

514,872

 

100.0

%

 

$

 

9,386

 

 

 

1.8

 

%

Total gross profit

$

 

162,158

 

 

 

$

 

152,960

 

 

 

$

 

9,198

 

 

 

6.0

 

%

Total gross margin

 

30.9

%

 

 

 

29.7

%

 

 

 

1.2

 

%

 

 

FOUNDATION BUILDING MATERIALS, INC.

BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(dollars in thousands)

 

 

Three Months Ended

March 31,

 

Change

 

2020

 

2019

 

$

 

%

Base business (1)

$

 

493,377

 

 

$

 

494,918

 

 

$

 

(1,541

)

 

 

(0.3

)

%

Acquired and combined (2)

 

30,881

 

 

 

19,954

 

 

 

10,927

 

 

 

54.8

 

%

Net sales

$

 

524,258

 

 

$

 

514,872

 

 

$

 

9,386

 

 

 

1.8

 

%

(1) Represents net sales from branches that were owned by us since January 1, 2019, and branches that were opened by us during such period.
(2)

Represents branches acquired and combined after January 1, 2019, primarily as a result of our strategic combination of branches.

FOUNDATION BUILDING MATERIALS, INC.

BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY MAJOR PRODUCT LINE

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(dollars in thousands)

 

 

Three

Months

Ended

March 31,

2019

 

Base

Business

Net Sales

Change

 

Acquired

and

Combined

Net Sales

Change

 

Three

Months

Ended

March 31,

2020

 

Total Net

Sales %

Change

Base

Business

Net Sales %

Change(1)

 

Acquired

and

Combined

Net Sales

% Change(2)

Wallboard

$

 

202,914

 

 

$

 

(2,974

)

 

 

$

 

2,328

 

 

$

 

202,268

 

 

(0.3

)

%

(1.5

)

%

 

30.4

%

Suspended ceiling systems

 

88,996

 

 

 

4,117

 

 

 

 

5,393

 

 

 

98,506

 

 

10.7

 

%

4.8

 

%

 

210.1

%

Metal framing

 

99,251

 

 

 

(6,616

)

 

 

 

699

 

 

 

93,334

 

 

(6.0

)

%

(6.9

)

%

 

18.0

%

Complementary and other products

 

123,711

 

 

 

3,932

 

 

 

 

2,507

 

 

 

130,150

 

 

5.2

 

%

3.3

 

%

 

42.9

%

Net sales

$

 

514,872

 

 

$

 

(1,541

)

 

 

$

 

10,927

 

 

$

 

524,258

 

 

1.8

 

%

(0.3

)

%

 

54.8

%

Average daily net sales(3)

$

 

8,173

 

 

$

 

(147

)

 

 

$

 

166

 

 

$

 

8,192

 

 

0.2

 

%

(1.9

)

%

 

52.3

%

(1)

Represents base business net sales change as a percentage of base business net sales for the three months ended March 31, 2019.

(2)

Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the three months ended March 31, 2019.

(3)

The number of business days for the three months ended March 31, 2020 and 2019 were 64 and 63, respectively.

Non-GAAP Financial Measures

In addition to presenting financial results prepared in accordance with Generally Accepted Accounting Principles, or GAAP, this press release contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, net debt leverage ratio and adjusted earnings per share, which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. The Company calculates adjusted EBITDA as net income from continuing operations before interest expense, net, income tax expense, depreciation and amortization, stock-based compensation, and other non-recurring adjustments such as loss on the disposal of property and equipment, gain on legal settlement and transaction costs. The Company calculates adjusted EBITDA margin as adjusted EBITDA divided by net sales. The Company calculates adjusted net income as net income from continuing operations before stock-based compensation, and other non-recurring adjustments such as loss on the disposal of property and equipment, gain on legal settlement and transaction costs. The Company calculates adjusted earnings per share as adjusted net income on a per weighted average share outstanding basis. For a calculation of net debt leverage ratio, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020.

These non-GAAP financial measures are presented because they are important metrics used by management as a means by which it assesses financial performance. We believe these measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. These measures, when used in conjunction with the most directly comparable GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company’s financial condition and results of operations.

These non-GAAP financial measures have certain limitations, which are discussed in greater detail in the Company’s filings with the Securities and Exchange Commission. These measures should not be considered as alternatives to measures of financial performance prepared in accordance with GAAP. In addition, these measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be considered liquidity measures. Other companies, including other companies in the Company’s industry, may not use these measures or may calculate one or more of these measures differently than the Company does, limiting their usefulness as comparative measures.

The following is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

 

Three Months Ended March 31,

 

2020

 

2019

(dollars in thousands)

 

 

 

Net income from continuing operations

$

 

14,376

 

 

 

$

 

4,828

 

Interest expense, net

 

7,691

 

 

 

 

8,585

 

Income tax expense

 

5,267

 

 

 

 

2,045

 

Depreciation and amortization

 

19,219

 

 

 

 

20,342

 

Stock-based compensation

 

1,393

 

 

 

 

829

 

Loss on disposal of property and equipment

 

51

 

 

 

 

191

 

Gain on legal settlement

 

(8,556

)

 

 

 

Transaction costs(a)

 

839

 

 

 

 

645

 

Adjusted EBITDA

$

 

40,280

 

 

 

$

 

37,465

 

Adjusted EBITDA margin(b)

 

7.7

 

%

 

 

7.3

%

______________________________________________

(a)

Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, and other professionals, as well as certain internal corporate development costs. The costs also include non-cash purchase accounting effects to adjust for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.

(b)

Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.

The following is a reconciliation of adjusted net income to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

 

Three Months Ended March 31,

 

2020

 

2019

(in thousands, except share and per share data)

 

 

 

Net income from continuing operations

$

 

14,376

 

 

 

$

 

4,828

 

 

Stock-based compensation

 

1,393

 

 

 

 

829

 

 

Loss on disposal of property and equipment

 

51

 

 

 

 

191

 

 

Gain on legal settlement

 

(8,556

)

 

 

 

Transaction costs(a)

 

839

 

 

 

 

645

 

 

Tax effects(b)

 

1,616

 

 

 

 

(426

)

 

Adjusted net income

$

 

9,719

 

 

 

$

 

6,067

 

 

 

 

 

 

Earnings per share data as reported:

 

 

 

Basic

$

 

0.33

 

 

 

$

 

0.11

 

 

Diluted

$

 

0.33

 

 

 

$

 

0.11

 

 

Earnings per share data as adjusted:

 

 

 

Basic

$

 

0.23

 

 

 

$

 

0.14

 

 

Diluted

$

 

0.22

 

 

 

$

 

0.14

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

43,045,692

 

 

 

 

42,932,024

 

 

Diluted

 

43,542,819

 

 

 

 

42,944,829

 

 

(a)

Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, and other professionals, as well as certain internal corporate development costs. The costs also include non-cash purchase accounting effects to adjust for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.

(b)

Represents the impact of corporate income taxes.