CBPX Continental Building Products Inc

Continental Building Products, Inc. (NYSE:CBPX) (the "Company"), a leading manufacturer of gypsum wallboard and complementary finishing products, announced today results for the first quarter ended March 31, 2018.

Highlights of First Quarter 2018 as Compared to First Quarter 2017

• Net income increased 11.6% to $13.6 million
• Earnings per share increased 16.1% to $0.36
• Net sales decreased 3.2% to $116.8 million on wallboard volumes down 5.4%
• Gross margin increased to 25.8% compared to 25.7%
• EBITDA1 decreased to $31.3 million down 4.9% compared to $33.0 million
• Deployed $6.4 million in capital investments
• Deployed $14.6 million to repurchase 530,600 shares of common stock
• Outlook for full year 2018 unchanged

"We delivered higher gross margins in the first quarter while facing a challenging operating environment, including lower volumes as expected given strong pre-buy activity in advance of our January 1, 2018 price increase and poor weather for our regions. Our ability to improve gross margins while overcoming a tightening freight and labor market reflects our sharp focus on operating discipline and our low cost highly efficient assets" stated Jay Bachmann, President and Chief Executive Officer.

Mr. Bachmann continued, "We delivered strong quarterly earnings of $0.36 per share. In addition to the benefits of tax reform and the accretive benefit of our stock repurchase plan, we believe this is a direct result of our Bison Way continuous improvement efforts and the payback we are already receiving from high-return capital projects. As we look forward to the balance of the year, we are encouraged by the pace of wallboard demand in our markets, which supports our unchanged outlook for full year 2018. At the same time, we remain focused on deploying our strong cash flow to improve our cost position through further investments in high-return capital projects while continuing to repurchase shares as a key avenue to return value to shareholders."

First Quarter 2018 Results vs. First Quarter 2017

Wallboard sales volumes decreased to 615 million square feet (MMSF) for the first quarter 2018, compared to 650 MMSF in the prior year quarter. Net sales were down 3.2% to $116.8 million, compared to $120.6 million in the prior year quarter, primarily due to a 5.4% decrease in wallboard volumes attributable to strong customer pre-buy activity during the fourth quarter 2017 in anticipation of a previously announced January 1, 2018 price increase, partially offset by an increase in average mill net price compared to the prior year quarter.

Operating income was $20.8 million, compared to $21.7 million in the prior year quarter. This decrease was primarily attributable to lower wallboard volumes. SG&A expense was $9.4 million compared to $9.3 million in the prior year quarter, or 8.1% of net sales compared to 7.7% in the prior year quarter.

Interest expense decreased 6.7% to $2.7 million, compared to $2.9 million in the prior year quarter, reflecting higher investment income and capitalized interest partially offset by the rise in LIBOR.

Net income for the first quarter 2018 increased 11.6% to $13.6 million, or $0.36 per share, compared to $12.2 million, or $0.31 per share, in the prior year quarter. The $1.4 million increase in net income is primarily a result of the decrease in provision for income taxes under the new tax rates effective for 2018.

Balance Sheet and Cash Flow

As of March 31, 2018, the Company had cash on hand of $63.8 million and total outstanding borrowing under the term loan agreement of $270.9 million. During the first quarter 2018, the Company generated cash flows from operations of $13.7 million and deployed $6.4 million in capital investments.

In February 2018, the Company's Board of Directors authorized an expansion of its stock repurchase program from up to $200 million to up to $300 million. The program's expiration date was also extended from the end of 2018 to the end of 2019. During the first quarter 2018, the Company repurchased 530,600 shares of its common stock under its repurchase program at an aggregate purchase price of $14.6 million, representing 1.4% of its outstanding shares as of December 31, 2017. As of March 31, 2018, against the expanded program, the Company has repurchased $117.9 million of our common stock at an average price of $21.84 per share and had a remaining capacity of $182.1 million for future repurchases.

Forward-Looking Outlook For the Full Year 2018

• SG&A is expected to be in the range of $39 - $40 million
• Cost of goods sold inflation per unit is expected to be at 3% to 5% partly offset by approximately $5 million of savings from high return capital projects
• Total capital expenditures are expected to be in the range of $30 - $35 million
  • Maintenance capital spending is expected to be approximately $15 million
  • High-return capital spending is expected to be in the range of $15 - $20 million
• Depreciation and amortization is expected to be in the range of $43 - $46 million
• Effective tax rate is expected to be in the range of 22% - 24%

Investor Conference Webcast and Conference Call

The Company will host a webcast and conference call on Thursday, May 3, 2018 at 5:00 p.m. Eastern Time to review first quarter 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 June 3, 2018, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the pass code number 13678456.

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.

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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 a non-GAAP financial measure, to relevant GAAP financial measures, and a discussion of why they are useful to investors.

  Continental Building Products, Inc. Consolidated Statements of Operations

(unaudited)

  For the Three Months Ended March 31, 2018   March 31, 2017 (in thousands, except share data and per share amounts) Net sales $ 116,802 $ 120,615 Costs, expenses and other income: Cost of goods sold 86,616 89,624 Selling and administrative 9,424   9,304   Total costs and operating expenses 96,040   98,928   Operating income 20,762 21,687 Other expense, net (140 ) (644 ) Interest expense, net (2,720 ) (2,916 ) Income before losses from equity method investment and provision for income taxes 17,902 18,127 Losses from equity method investment (364 ) (170 ) Income before provision for income taxes 17,538 17,957 Provision for income taxes (3,892 ) (5,730 ) Net income $ 13,646   $ 12,227     Net income per share: Basic $ 0.36 $ 0.31 Diluted $ 0.36 $ 0.31 Weighted average shares outstanding: Basic 37,432,782 39,576,268 Diluted 37,604,953 39,702,126       Continental Building Products, Inc. Consolidated Balance Sheets     March 31, 2018

December 31, 2017

(unaudited)   (in thousands) Assets: Cash and cash equivalents $ 63,848 $ 72,521 Receivables, net 46,246 38,769 Inventories, net 27,725 24,882 Prepaid and other current assets 11,014   11,267   Total current assets 148,833 147,439 Property, plant and equipment, net 293,902 294,003 Customer relationships and other intangibles, net 68,433 70,807 Goodwill 119,945 119,945 Equity method investment 9,071 9,263 Debt issuance costs 432   477   Total Assets $ 640,616   $ 641,934   Liabilities and Shareholders' Equity: Liabilities: Accounts payable $ 31,215 $ 30,809 Accrued and other liabilities 10,682 11,940 Notes payable, current portion 1,680   1,702   Total current liabilities 43,577 44,451 Deferred taxes and other long-term liabilities 15,888 15,847 Notes payable, non-current portion 263,242   263,610   Total Liabilities 322,707   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; 44,408,395 and 44,321,776 shares issued

and 37,088,978 and 37,532,959 shares outstanding as of March 31, 2018 and December 31, 2017, respectively

44 44 Additional paid-in capital 325,615 325,391 Less: Treasury stock (157,907 ) (143,357 ) Accumulated other comprehensive loss (2,085 ) (2,649 ) Accumulated earnings 152,242   138,597   Total Shareholders' Equity 317,909   318,026   Total Liabilities and Shareholders' Equity $ 640,616   $ 641,934         Continental Building Products, Inc. Consolidated Statements of Cash Flows

(unaudited)

  For the Three Months Ended March 31, 2018   March 31, 2017 (in thousands) Cash flows from operating activities: Net income $ 13,646 $ 12,227 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,581 11,286 Amortization of debt issuance costs and debt discount 334 291 Losses from equity method investment 364 170 Debt related expenses — 686 Share-based compensation 600 724 Deferred taxes — 92 Change in assets and liabilities: Receivables (7,562 ) (9,323 ) Inventories (2,913 ) (1,279 ) Prepaid expenses and other current assets 1,144 1,994 Accounts payable (1,353 ) 1,714 Accrued and other current liabilities (1,042 ) 100 Other long-term liabilities (56 ) (146 ) Net cash provided by operating activities 13,743 18,536 Cash flows from investing activities: Capital expenditures (5,955 ) (5,359 ) Software purchased or developed (482 ) (1 ) Capital contributions to equity method investment (251 ) (524 ) Distributions from equity method investment 78   214   Net cash used in investing activities (6,610 ) (5,670 ) Cash flows from financing activities: Proceeds from exercise of stock options 11 168 Tax withholdings on share-based compensation (421 ) (209 ) Proceeds from debt refinancing — 273,625 Disbursements for debt refinancing — (273,625 ) Payments of financing costs — (649 ) Principal payments for debt (679 ) (684 ) Payments to repurchase common stock (14,550 ) (5,237 ) Net cash used in financing activities (15,639 ) (6,611 ) Effect of foreign exchange rates on cash and cash equivalents (167 ) 117   Net change in cash and cash equivalents (8,673 ) 6,372   Cash, beginning of period 72,521   51,536   Cash, end of period $ 63,848   $ 57,908    

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 March 31, 2018   March 31, 2017 (unaudited, in thousands) Net income $ 13,646 $ 12,227

Adjustments:

Other expense, net 140 644 Interest expense, net 2,720 2,916 Losses from equity method investment 364 170 Provision for income taxes 3,892 5,730 Depreciation and amortization 10,581   11,286   EBITDA - Non-GAAP measure $ 31,343   $ 32,973   EBITDA Margin - EBITDA as a percentage of net sales - Non-GAAP measure 26.8 % 27.3 %     Reconciliation of Net Income and Earnings Per Share to Adjusted Net Income and Adjusted Earnings Per Share For the Three Months Ended March 31, 2018 March 31, 2017 (unaudited, in thousands, except share data and per share amounts) Net income - GAAP measure $ 13,646 $ 12,227 Debt related expenses, net of tax (1) —   454   Adjusted net income - Non-GAAP measure $ 13,646   $ 12,681     Earnings per share - GAAP measure $ 0.36 $ 0.31 Debt related expenses, net of tax (1) —   0.01   Adjusted earnings per share - Non-GAAP measure $ 0.36   $ 0.32     (1)   Expenses related to debt repricing activities are shown net of income tax benefit of $0.2 million for the three months ended March 31, 2017.   Other Financial and Operating Data   For the Three Months Ended March 31, 2018   March 31, 2017 (in thousands, except mill net) Capital expenditures and software purchased or developed $ 6,437 $ 5,360 Wallboard sales volume (million square feet) 615 650 Mill net sales price (1) $ 151.60 $ 147.92   (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

March 31,2017

 

June 30,2017

 

September 30,2017

 

December 31,2017

 

March 31,2018

Volumes (million square feet) 650 647 644 725 615 Mill net sales price (1) $ 147.92 $ 150.32 $ 144.90 $ 144.78 $ 151.60   (1)   Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.

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Continental Building Products, Inc.Investor Relations:Tel.: (703) 480-3980Investorrelations@continental-bp.com