Installed Building Products Reports Results for Second Quarter 2017
Second Quarter 2017 Highlights
-
Net revenue increased 33.2% to a record
$282.2 million -
Net income increased 19.8% to a record
$12.0 million -
Adjusted EBITDA* increased 49.6% to a record
$39.2 million -
Net income per diluted share increased 18.8% to
$0.38 -
Adjusted net income per diluted share* increased 47.5% to a record
$0.59 -
In
April 2017 , refinanced borrowings and closed a$300 million Term Loan B facility and$100 million ABL Revolving Credit facility -
In
April 2017 , acquiredMinnesota basedHorizon Electric Company with 2016 revenues of$1.2 million -
In
May 2017 , acquiredFlorida based Legacy, &Glass & Supply, Inc. , with 2016 revenues of$5.4 million -
In
June 2017 , acquiredSouth Carolina basedColumbia Shelving andMirror Inc. andCharleston Shelving & Mirror Inc. with 2016 revenues of$11.0 million
Recent Developments
-
In
July 2017 , acquiredKentucky basedEnergy Savers, LLC with 2016 revenues of$2.0 million
"As expected, the 2017 second quarter benefitted from normal seasonal
installation trends, which helped drive sequential improvements in sales
and profitability," stated
"IBP is well positioned to capitalize on the continued strength of the
Second Quarter 2017 Results Overview
For the second quarter of 2017, net revenue was
Gross profit improved 36.4% to
Net income was
Adjusted EBITDA was
Conference Call and Webcast
The Company will host a conference call and webcast on
About
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the federal securities laws, including with respect to our
financial model and seasonality, demand for our services, expansion of
our national footprint, our ability to capitalize on the new home
construction recovery, our ability to strengthen our market position,
our ability to pursue, close and integrate value-enhancing acquisitions,
the impact of Alpha on our revenue and profitability, our ability to
improve sales and profitability, and expectations for demand for our
services and our earnings for the remainder of 2017. Forward-looking
statements may generally be identified by the use of words such as
"anticipate," "believe," "expect," "intends," "plan," and "will" or, in
each case, their negative, or other variations or comparable
terminology. These forward-looking statements include all matters that
are not historical facts. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend
on circumstances that may or may not occur in the future. Any
forward-looking statements that we make herein and in any future reports
and statements are not guarantees of future performance, and actual
results may differ materially from those expressed in or suggested by
such forward-looking statements as a result of various factors,
including, without limitation, the factors discussed in the "Risk
Factors" section of the Company's Annual Report on Form 10-K for the
year ended
*Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||||||||||||||
(unaudited, in thousands, except share and per share amounts) | ||||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenue | $ | 282,196 | $ | 211,913 | $ | 537,865 | $ | 403,611 | ||||||||
Cost of sales | 197,268 | 149,670 | 380,765 | 286,777 | ||||||||||||
Gross profit | 84,928 | 62,243 | 157,100 | 116,834 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling | 13,650 | 11,960 | 27,676 | 23,211 | ||||||||||||
Administrative | 41,761 | 30,890 | 81,022 | 61,173 | ||||||||||||
Amortization | 6,550 | 2,810 | 12,966 | 5,289 | ||||||||||||
Operating income | 22,967 | 16,583 | 35,436 | 27,161 | ||||||||||||
Other expense | ||||||||||||||||
Interest expense | 4,865 | 1,509 | 7,035 | 3,061 | ||||||||||||
Other | 131 | 121 | 283 | 225 | ||||||||||||
Income before income taxes | 17,971 | 14,953 | 28,118 | 23,875 | ||||||||||||
Income tax provision | 5,998 | 4,960 | 9,781 | 8,069 | ||||||||||||
Net income | $ | 11,973 | $ | 9,993 | $ | 18,337 | $ | 15,806 | ||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||
Unrealized loss on cash flow hedge, net of tax benefit of |
(77 | ) | - | (77 | ) | - | ||||||||||
Comprehensive income | 11,896 | 9,993 | 18,260 | 15,806 | ||||||||||||
Basic net income per share | $ | 0.38 | $ | 0.32 | $ | 0.58 | $ | 0.51 | ||||||||
Diluted net income per share | $ | 0.38 | $ | 0.32 | $ | 0.58 | $ | 0.50 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 31,646,460 | 31,317,632 | 31,618,624 | 31,279,935 | ||||||||||||
Diluted | 31,709,554 | 31,347,067 | 31,698,460 | 31,339,019 | ||||||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||||
(unaudited, in thousands, except share and per share amounts) | ||||||||||||||
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2017 | 2016 | ||||||||||||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | 66,690 | $ | 14,482 | ||||||||||
Investments | 25,293 | - | ||||||||||||
Accounts receivable (less allowance for doubtful accounts of
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176,769 | 128,466 | ||||||||||||
Inventories | 43,198 | 40,229 | ||||||||||||
Other current assets | 16,027 | 9,214 | ||||||||||||
Total current assets | 327,977 | 192,391 | ||||||||||||
Property and equipment, net | 73,971 | 67,788 | ||||||||||||
Non-current assets | ||||||||||||||
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148,031 | 107,086 | ||||||||||||
Intangibles, net | 139,426 | 86,317 | ||||||||||||
Other non-current assets | 10,021 | 8,513 | ||||||||||||
Total non-current assets | 297,478 | 201,916 | ||||||||||||
Total assets | $ | 699,426 | $ | 462,095 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
Current liabilities | ||||||||||||||
Current maturities of long-term debt | $ | 13,506 | $ | 17,192 | ||||||||||
Current maturities of capital lease obligations | 6,204 | 6,929 | ||||||||||||
Accounts payable | 76,103 | 67,921 | ||||||||||||
Accrued compensation | 23,083 | 18,212 | ||||||||||||
Other current liabilities | 24,866 | 19,851 | ||||||||||||
Total current liabilities | 143,762 | 130,105 | ||||||||||||
Long-term debt | 326,968 | 134,235 | ||||||||||||
Capital lease obligations, less current maturities | 7,715 | 8,364 | ||||||||||||
Deferred income taxes | 13,796 | 14,239 | ||||||||||||
Other long-term liabilities | 22,069 | 21,175 | ||||||||||||
Total liabilities | 514,310 | 308,118 | ||||||||||||
Commitments and contingencies | ||||||||||||||
Stockholders' equity | ||||||||||||||
Preferred Stock; |
- |
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- | |||||||||||
Common Stock; |
325 | 321 | ||||||||||||
Additional paid in capital | 172,006 | 158,581 | ||||||||||||
Retained earnings | 25,631 | 7,294 | ||||||||||||
Treasury Stock; at cost: 661,989 and 650,402 shares at |
(12,769 | ) | (12,219 | ) | ||||||||||
Accumulated other comprehensive loss | (77 | ) | - | |||||||||||
Total stockholders' equity | 185,116 | 153,977 | ||||||||||||
Total liabilities and stockholders' equity | $ | 699,426 | $ | 462,095 | ||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(unaudited, in thousands) | |||||||||||||||
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2017 | 2016 | ||||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 18,337 | $ | 15,806 | |||||||||||
Adjustments to reconcile net income to net cash | |||||||||||||||
provided by operating activities | |||||||||||||||
Depreciation and amortization of property and equipment | 13,482 | 11,281 | |||||||||||||
Amortization of intangibles | 12,966 | 5,289 | |||||||||||||
Amortization of deferred financing costs and debt discount | 424 | 179 | |||||||||||||
Provision for doubtful accounts | 1,807 | 1,181 | |||||||||||||
Write-off of debt issuance costs | 1,201 | 286 | |||||||||||||
Gain on sale of property and equipment | (190 | ) | (173 | ) | |||||||||||
Noncash stock compensation | 2,570 | 1,171 | |||||||||||||
Deferred income taxes | - | 708 | |||||||||||||
Changes in assets and liabilities, excluding effects of acquisitions | |||||||||||||||
Accounts receivable | (17,421 | ) | (9,742 | ) | |||||||||||
Inventories | 342 | (3,310 | ) | ||||||||||||
Other assets | (1,263 | ) | 2,442 | ||||||||||||
Accounts payable | (2,043 | ) | 6,632 | ||||||||||||
Income taxes payable/receivable | (4,102 | ) | (873 | ) | |||||||||||
Other liabilities | 2,316 | 5,283 | |||||||||||||
Net cash provided by operating activities | 28,426 | 36,160 | |||||||||||||
Cash flows from investing activities | |||||||||||||||
Purchases of investments | (25,328 | ) | - | ||||||||||||
Purchases of property and equipment | (14,681 | ) | (13,424 | ) | |||||||||||
Acquisitions of businesses, net of cash acquired of |
(116,883 | ) | (29,948 | ) | |||||||||||
Proceeds from sale of property and equipment | 451 | 384 | |||||||||||||
Other | (1,532 | ) | - | ||||||||||||
Net cash used in investing activities | (157,973 | ) | (42,988 | ) | |||||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from revolving line of credit under credit agreement applicable to respective period | - | 37,975 | |||||||||||||
Payments on revolving line of credit under credit agreement applicable to respective period | - | (37,975 | ) | ||||||||||||
Proceeds from term loan under credit agreement applicable to respective period | 300,000 | 100,000 | |||||||||||||
Payments on term loan under credit agreement applicable to respective period | (96,250 | ) | (49,375 | ) | |||||||||||
Proceeds from delayed draw term loan under credit agreement applicable to respective period | 112,500 | 12,500 | |||||||||||||
Payments on delayed draw term loan under credit agreement applicable to respective period | (125,000 | ) | (50,000 | ) | |||||||||||
Proceeds from vehicle and equipment notes payable | 9,317 | 11,039 | |||||||||||||
Debt issuance costs | (7,940 | ) | (1,238 | ) | |||||||||||
Principal payments on long term debt | (4,915 | ) | (2,591 | ) | |||||||||||
Principal payments on capital lease obligations | (3,738 | ) | (4,556 | ) | |||||||||||
Acquisition-related obligations | (1,669 | ) | (1,191 | ) | |||||||||||
Surrender of common stock awards by employees | (550 | ) | (836 | ) | |||||||||||
Net cash provided by financing activities | 181,755 | 13,752 | |||||||||||||
Net change in cash | 52,208 | 6,924 | |||||||||||||
Cash at beginning of period | 14,482 | 6,818 | |||||||||||||
Cash at end of period | $ | 66,690 | $ | 13,742 | |||||||||||
Supplemental disclosures of cash flow information | |||||||||||||||
Net cash paid during the period for: | |||||||||||||||
Interest | $ | 5,634 | $ | 2,537 | |||||||||||
Income taxes, net of refunds | 13,401 | 8,355 | |||||||||||||
Supplemental disclosure of noncash investing and financing activities | |||||||||||||||
Common stock issued for acquisition of business | 10,859 | - | |||||||||||||
Vehicles capitalized under capital leases and related lease obligations | 2,519 | 2,033 | |||||||||||||
Seller obligations in connection with acquisition of businesses | 3,025 | 2,430 | |||||||||||||
Unpaid purchases of property and equipment included in accounts payable | 658 | - | |||||||||||||
Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income measure performance by adjusting EBITDA and GAAP net income, respectively, for certain income or expense items that are not considered part of our core operations. We believe that the presentation of these measures provides useful information to investors regarding our results of operations because it assists both investors and us in analyzing and benchmarking the performance and value of our business.
We believe the Adjusted EBITDA measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of our capital structure (primarily interest expense), asset base (primarily depreciation and amortization), items outside our control (primarily income taxes) and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. In addition, we use various EBITDA-based measures in determining the achievement of awards under certain of our incentive compensation programs. Other companies may define Adjusted EBITDA differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted EBITDA may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.
Although we use the Adjusted EBITDA measure to assess the performance of our business, the use of the measure is limited because it does not include certain material expenses, such as interest and taxes, necessary to operate our business. Adjusted EBITDA should be considered in addition to, and not as a substitute for, GAAP net (loss) income as a measure of performance. Our presentation of this measure should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. This measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, this measure is not intended as an alternative to net (loss) income as an indicator of our operating performance, as an alternative to any other measure of performance in conformity with GAAP or as an alternative to cash flow (used in) provided by operating activities as a measure of liquidity. You should therefore not place undue reliance on this measure or ratios calculated using this measure.
We also believe the Adjusted Net Income measure is useful to investors and us as a measure of comparative operating performance from period to period as it measures our changes in pricing decisions, cost controls and other factors that impact operating performance, and removes the effect of certain non-core items such as discontinued operations, acquisition related expenses, amortization expense, the tax impact of these certain non-core items, and the volatility related to the timing and extent of other activities such as asset impairments and non-core income and expenses. To make the financial presentation more consistent with other public building products companies, beginning in the fourth quarter 2016 we included an addback for non-cash amortization expense related to acquisitions. Accordingly, we believe that this measure is useful for comparing general operating performance from period to period. Other companies may define Adjusted Net Income differently and, as a result, our measure may not be directly comparable to measures of other companies. In addition, Adjusted Net Income may be defined differently for purposes of covenants contained in our revolving credit facility or any future facility.
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RECONCILIATION OF GAAP TO NON-GAAP MEASURES | ||||||||||||||||
ADJUSTED NET INCOME CALCULATIONS | ||||||||||||||||
(unaudited, in thousands, except share and per share amounts) | ||||||||||||||||
The table below reconciles Adjusted Net Income to the most directly comparable GAAP financial measure, net income, for the periods presented therein. |
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Per share figures may reflect rounding adjustments and consequently totals may not appear to sum. | ||||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income, as reported | $ | 11,973 | $ | 9,993 | $ | 18,337 | $ | 15,806 | ||||||||
Adjustments for adjusted net income: | ||||||||||||||||
Write-off of capitalized loan costs | 1,201 | - | 1,201 | 286 | ||||||||||||
Share based compensation expense | 2,091 | 635 | 2,570 | 1,171 | ||||||||||||
Acquisition related expenses | 794 | 460 | 1,347 | 823 | ||||||||||||
Amortization expense 1 | 6,550 | 2,810 | 12,966 | 5,289 | ||||||||||||
Tax impact of adjusted items at normalized tax rate 2 | (3,935 | ) | (1,445 | ) | (6,691 | ) | (2,801 | ) | ||||||||
Adjusted net income | $ | 18,674 | $ | 12,453 | $ | 29,730 | $ | 20,574 | ||||||||
Weighted average shares outstanding (diluted) | 31,709,554 | 31,347,067 | 31,698,460 | 31,339,019 | ||||||||||||
Diluted net income per share, as reported | $ | 0.38 | $ | 0.32 | $ | 0.58 | $ | 0.50 | ||||||||
Adjustments for adjusted net income, net of tax impact, per diluted share 3 | 0.21 | $ | 0.08 | 0.36 | 0.16 | |||||||||||
Diluted adjusted net income per share | $ | 0.59 | $ | 0.40 | $ | 0.94 | $ | 0.66 |
1 Addback of all non-cash amortization resulting from business combinations |
2 Normalized tax rate of 37.0% applied to each period in 2017 and 2016 |
3 Includes adjustments related to the items noted above, net of tax |
The table below reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure, net income, for the periods presented therein.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES | |||||||||||||||||||||
ADJUSTED EBITDA CALCULATIONS | |||||||||||||||||||||
(unaudited, in thousands) | |||||||||||||||||||||
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2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Adjusted EBITDA: | |||||||||||||||||||||
Net income (GAAP) | $ | 11,973 | $ | 9,993 | $ | 18,337 | $ | 15,806 | |||||||||||||
Interest expense | 4,865 | 1,509 | 7,035 | 3,061 | |||||||||||||||||
Provision for income taxes | 5,998 | 4,960 | 9,781 | 8,069 | |||||||||||||||||
Depreciation and amortization | 13,481 | 8,648 | 26,448 | 16,569 | |||||||||||||||||
EBITDA | 36,317 | 25,110 | 61,601 | 43,505 | |||||||||||||||||
Acquisition related expenses | 794 | 460 | 1,347 | 823 | |||||||||||||||||
Share based compensation expense | 2,091 | 635 | 2,570 | 1,171 | |||||||||||||||||
Adjusted EBITDA | $ | 39,202 | $ | 26,205 | $ | 65,518 | $ | 45,499 | |||||||||||||
Adjusted EBITDA margin | 13.9 | % | 12.4 | % | 12.2 | % | 11.3 | % | |||||||||||||
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SUPPLEMENTARY TABLE | ||||||||
(unaudited) | ||||||||
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2017 | 2016 | 2017 | 2016 | |||||
Period-over-period Growth |
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Sales Growth | 33.2% | 32.7% | 33.3% | 39.3% | ||||
Same Branch Sales Growth | 11.6% | 16.9% | 10.2% | 21.0% | ||||
Single-Family Sales Growth | 19.4% | 28.1% | 17.0% | 36.8% | ||||
Single-Family Same Branch Sales Growth | 9.8% | 13.2% | 7.2% | 19.7% | ||||
Residential Sales Growth | 28.1% | 31.4% | 25.9% | 38.9% | ||||
Residential Same Branch Sales Growth | 14.2% | 16.3% | 11.2% | 20.9% | ||||
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Total Completions Growth | 11.6% | 3.6% | 11.0% | 10.8% | ||||
Single-Family Completions Growth | 8.0% | 11.3% | 9.3% | 13.6% | ||||
Same Branch Sales Growth |
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Volume Growth | 8.7% | 10.5% | 6.8% | 12.0% | ||||
Price/Mix Growth | 2.8% | 6.4% | 3.4% | 9.0% |
1 |
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COMPONENTS OF INCREASE IN REVENUE AND ADJUSTED EBITDA | ||||||||||||||||||||
(unaudited, in thousands) | ||||||||||||||||||||
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2017 | % Total | 2016 | % Total | 2017 | % Total | 2016 | % Total | |||||||||||||
Revenue Increase | ||||||||||||||||||||
Same Branch | $ | 24,510 | 34.9% | $ | 27,012 | 51.7% | $ | 41,193 | 30.7% | $ | 60,961 | 53.5% | ||||||||
Acquired | 45,774 | 65.1% | 25,208 | 48.3% | 93,062 | 69.3% | 53,009 | 46.5% | ||||||||||||
Total | $ | 70,283 | 100.0% | $ | 52,220 | 100.0% | $ | 134,254 | 100.0% | $ | 113,970 | 100.0% | ||||||||
Adj EBITDA | Adj EBITDA | Adj EBITDA | Adj EBITDA | |||||||||||||||||
Contribution | Contribution | Contribution | Contribution | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
Same Branch | $ | 6,202 | 25.3% | $ | 5,993 | 22.2% | $ | 6,398 | 15.5% | $ | 14,611 | 24.0% | ||||||||
Acquired | 6,795 | 14.8% | 2,543 | 10.1% | 13,623 | 14.6% | 5,647 | 10.7% | ||||||||||||
Total | $ | 12,997 | 18.5% | $ | 8,536 | 16.3% | $ | 20,021 | 14.9% | $ | 20,258 | 17.8% |
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