09212017Headline:

TopBuild Reports Strong First Quarter 2017 Results

May 9, 2017 - (Newswire)

- TopBuild Corp. (NYSE: BLD), the leading purchaser, installer and distributor of insulation products to the United States construction industry, today reported results for the first quarter ended March 31, 2017.

Jerry Volas, Chief Executive Officer, stated, "TopBuild reported another strong quarter. Top line growth was solid and operating margins expanded in both business segments. Our results reflect the ongoing housing recovery combined with the impact of internal initiatives to expand our residential market share, grow our commercial revenue base and enhance our operational efficiency. We remain confident 2017 will be another outstanding year for TopBuild."

First Quarter Financial Highlights
(unless otherwise indicated, comparisons are to the quarter ended March 31, 2016)

  • Net Sales increased 6.6% to $441.4 million, primarily driven by sales volume growth in both operating segments. On a same branch basis, revenue increased 4.8% to $433.8 million.
  • Gross margin expanded 140 basis points to 23.0%.
  • Operating loss was $3.5 million, compared to operating profit of $19.8 million. The first quarter operating loss was the result of a $30 million legal settlement with Owens Corning announced on May 5, 2017. On an adjusted basis, operating profit was $28.6 million, compared to $20.8 million, a 37.5% improvement.
  • Operating margin was (0.8%), down 560 basis points. Adjusted operating margin improved 150 basis points to 6.5%.
  • Loss from continuing operations was $1.7 million, or $0.05 per diluted share, compared to income of $11.1 million, or $0.29 per diluted share. Adjusted income from continuing operations was $16.9 million, or $0.46 per diluted share, compared to $11.9 million, or $0.31 per diluted share.
  • Adjusted EBITDA was $33.9 million, compared to $25.3 million, a 34.1% increase. Incremental EBITDA margin was 31.5%.
  • At March 31, 2017, the Company had cash and cash equivalents of $80.4 million and availability under its revolving credit facility of $75.9 million for total liquidity of $156.3 million.

Operating Segment Highlights ($ in 000s)
(comparisons are to the quarter ended March 31, 2016)

View Table Fullscreen

TruTeam

3 Months
Ended
3/31/17


Service
Partners

3 Months
Ended
3/31/17

Sales

$290,887


Sales

$170,244

Change

6.6%


Change

5.8%

Operating Margin

-3.1%


Operating Margin

9.1%

Change

(800) bps


Change

20 bps

Adj. Operating Margin

7.4%


Adj. Operating Margin

9.1%

Change

210 bps


Change

10 bps

New Credit Facilities
The Company has entered into a new term loan and revolving credit facility, replacing its previous facility.


New
Facility

Previous
Facility

Term Loan

$350M

$200M

Revolver

$250M

$125M

Total Credit Facility

$600M

$325M

Accordion*

$200M

$100M

LIBOR Borrowing Spread**

150 bps

150 bps

Maturity Date

May 2022

June 2020

Participating Lenders

6

6


*Subject to certain conditions

**Subject to leverage grid

"We are very pleased to have successfully increased our term loan and revolving credit facilities by $275 million with a maturity extension of almost two years," stated Volas. "The additional capital from the term loan and revolving credit facility strengthens our ability to capitalize on strategic acquisitions and other opportunities designed to enhance long-term value for our shareholders."

Bank of America Merrill Lynch (BofAML) and PNC Bank served as Joint Lead Arrangers and Joint Book Runners on the new credit facilities.

Capital Allocation
Acquisitions
Year-to-date, through May 9, 2017, the Company has closed five acquisitions, four concentrating on residential insulation and one on heavy commercial. Combined, they are expected to generate approximately $54 million of incremental revenue on an annual basis.

Volas stated, "The companies we've acquired demonstrate our commitment to expanding our market share and enhancing our competitive position. In addition, the synergies achieved are meaningful, increasing our return on investment.

"Our dedicated M&A team remains focused on our significant pipeline of prospects as well as the integration of the companies we've acquired."

Share Repurchases
Under the $200 million share repurchase program announced on February 28, 2017, the Company has repurchased 282,262 shares at an average price of $46.39 per share through March 31.

Additionally, the Company has entered into an agreement with BofAML to repurchase $100 million of the Company's common stock under an accelerated share repurchase (ASR) program. This ASR is part of TopBuild's $200 million share repurchase program.

"While the top priority of our capital allocation plan is funding acquisitions, our accelerated share repurchase program demonstrates our firm commitment to optimizing the efficiency of our capital structure," added Volas.

Under the terms of the ASR agreement, the Company will pay $100 million to BofAML. The actual number of shares to be repurchased will be based on the average of the daily volume-weighted prices of the Company's common stock during the term of the transaction, less an agreed discount, and subject to potential adjustments pursuant to the terms and conditions of the ASR agreement. At final settlement, BofAML may be required to deliver additional shares of common stock to the Company or, under certain circumstances, the Company may be required to deliver shares of common stock or to make a cash payment, at its election, to BofAML. The final settlement of the transaction under the ASR is expected to occur no later than the first quarter of 2018.

Additional Information
Quarterly supplemental materials, including a presentation that will be referenced on today's conference call, are available on the "Investors" section of the Company's website at www.topbuild.com.

Conference Call
A conference call to discuss first quarter 2017 financial results is scheduled for today, Tuesday, May 9, 2017, at 9:00 a.m. Eastern Time. The call may be accessed by dialing (888) 221-6256. The conference call will be webcast simultaneously on the "Investors" section of the Company's website at www.topbuild.com. A replay will be available for one week beginning at 11:00 a.m. Eastern Time and may be accessed by dialing (800) 633-8284 and entering the passcode: 21842819.

About TopBuild
TopBuild Corp., headquartered in Daytona Beach, Florida, is the leading purchaser, installer and distributor of insulation products to the U.S. construction industry. We provide insulation services nationwide through TruTeamSM, which has over 175 branches, and through Service Partners® which distributes insulation from over 70 branches. We leverage our national footprint to gain economies of scale while capitalizing on our local market presence to forge strong relationships with our customers. To learn more about TopBuild please visit our website at www.topbuild.com.

Use of Non-GAAP Financial Measures
EBITDA, incremental EBITDA margin, the "adjusted" financial measures presented above, and figures presented on a "same branch basis" are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company believes that these non-GAAP financial measures, which are used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. We define same branch sales as sales from branches in operation for at least 12 full calendar months. Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in tables contained in this press release. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results under GAAP. Additional information may be found in the Company's filings with the Securities and Exchange Commission which are available on TopBuild's website under "Investors" at www.topbuild.com.

Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements may address, among other things, our expected financial and operational results and the related assumptions underlying our expected results. These forward-looking statements are distinguished by use of words such as "will," "would," "anticipate," "expect," "believe," "designed," "plan" or "intend," the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. Our forward-looking statements contained herein speak only as of the date of this press release. Factors or events that we cannot predict, including those described in the risk factors contained in our filings with the Securities and Exchange Commission, may cause our actual results to differ from those expressed in forward-looking statements. Although TopBuild believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be achieved and it undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise, except as required by applicable law.

Investor Relations and Media Contact
Tabitha Zane
tabitha.zane@topbuild.com
386-763-8801

(tables follow)

View Table Fullscreen

TopBuild Corp.







Condensed Consolidated Statements of Operations (Unaudited)







(in thousands, except per common share amounts)
















Three Months Ended March 31,



2017


2016

Net sales


$

441,363


$

414,024

Cost of sales



339,735



324,569

Gross profit



101,628



89,455








Selling, general, and administrative expense (exclusive of significant
legal settlement, shown separately below)



75,091



69,688

Significant legal settlement



30,000



Operating (loss) profit



(3,463)



19,767








Other income (expense), net:







Interest expense



(1,370)



(1,673)

Other, net



107



75

Other expense, net



(1,263)



(1,598)

(Loss) income from continuing operations before income taxes



(4,726)



18,169








Income tax benefit (expense) from continuing operations



3,016



(7,053)

(Loss) income from continuing operations



(1,710)



11,116

Net (loss) income


$

(1,710)


$

11,116








Income (loss) per common share:







Basic:







(Loss) income from continuing operations


$

(0.05)


$

0.29

Net (loss) income


$

(0.05)


$

0.29








Diluted:







(Loss) income from continuing operations


$

(0.05)


$

0.29

Net (loss) income


$

(0.05)


$

0.29

View Table Fullscreen

TopBuild Corp.








Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)







(dollars in thousands)










As of




March 31,


December 31,




2017


2016


ASSETS








Current assets:








Cash and cash equivalents


$

80,370


$

134,375


Receivables, net of an allowance for doubtful accounts of $3,633
and $3,374 at March 31, 2017, and December 31, 2016, respectively



269,359



252,624


Inventories, net



112,633



116,190


Prepaid expenses and other current assets



27,592



23,364


Total current assets



489,954



526,553










Property and equipment, net



95,788



92,760


Goodwill



1,063,518



1,045,058


Other intangible assets, net



15,952



2,656


Deferred tax assets, net



19,469



19,469


Other assets



3,258



3,623


Total assets


$

1,687,939


$

1,690,119










LIABILITIES








Current liabilities:








Accounts payable


$

226,974


$

241,534


Current portion of long-term debt



20,000



20,000


Accrued liabilities



99,647



64,399


Total current liabilities



346,621



325,933










Long-term debt



153,885



158,800


Deferred tax liabilities, net



193,715



193,715


Long-term portion of insurance reserves



37,867



38,691


Other liabilities



1,892



433


Total liabilities



733,980



717,572










EQUITY



953,959



972,547


Total liabilities and equity


$

1,687,939


$

1,690,119












As of




March 31,


March 31,




2017


2016


Other Financial Data








Working Capital Days†








Receivable days



45



44


Inventory days



30



30


Accounts payable days



84



90


Working capital


$

155,018


$

127,708


Working capital as a percent of sales (LTM)



8.8

%


7.6

%









† Amounts adjusted for acquisitions for comparability purposes








View Table Fullscreen

TopBuild Corp.







Condensed Consolidated Statements of Cash Flows (Unaudited)







(in thousands)
















Three Months Ended March 31,



2017


2016

Net Cash Provided by (Used in) Operating Activities:







Net (loss) income


$

(1,710)


$

11,116

Adjustments to reconcile net (loss) income to net cash provided by operating activities:







Depreciation and amortization



3,231



2,895

Share-based compensation



2,084



1,600

Loss on sale or abandonment of property and equipment



88



950

Amortization of debt issuance costs



86



86

Provision for bad debt expense



995



1,054

Loss from inventory obsolescence



360



335

Deferred income taxes, net





(3)

Changes in certain assets and liabilities:







Receivables, net



(6,568)



(8,505)

Inventories, net



4,531



10,350

Prepaid expenses and other current assets



(4,195)



7,167

Accounts payable



(17,842)



(29,846)

Accrued liabilities



33,656



6,181

Other, net



118



(27)

Net cash provided by operating activities



14,834



3,353








Cash Flows Provided by (Used in) Investing Activities:







Purchases of property and equipment



(3,800)



(2,900)

Acquisition of businesses



(41,242)



Proceeds from sale of property and equipment



133



76

Other, net



32



68

Net cash used in investing activities



(44,877)



(2,756)








Cash Flows Provided by (Used in) Financing Activities:







Repayment of long-term debt



(5,000)



(2,500)

Taxes withheld and paid on employees' equity awards



(1,583)



(1,256)

Repurchase of shares of common stock



(17,379)



(1,539)

Net cash used in financing activities



(23,962)



(5,295)








Cash and Cash Equivalents







Decrease for the year



(54,005)



(4,698)

Beginning of year



134,375



112,848

End of year


$

80,370


$

108,150








Supplemental disclosure of noncash investing activities:







Accruals for property and equipment


$

237


$

426

View Table Fullscreen

TopBuild Corp.











Segment Data (Unaudited)











(dollars in thousands)
























Three Months Ended
March 31,







2017


2016


Change


Installation











Sales


$

290,887


$

272,878



6.6

%












Operating (loss) profit, as reported


$

(8,964)


$

13,506





Operating margin, as reported



(3.1)

%


4.9

%















Significant legal settlement



30,000



828





Rationalization charges



411







Operating profit, as adjusted


$

21,447


$

14,334





Operating margin, as adjusted



7.4

%


5.3

%















Distribution











Sales


$

170,244


$

160,888



5.8

%












Operating profit, as reported


$

15,484


$

14,333





Operating margin, as reported



9.1

%


8.9

%















Rationalization charges





83





Operating profit, as adjusted


$

15,484


$

14,416





Operating margin, as adjusted



9.1

%


9.0

%















Total











Sales before eliminations


$

461,131


$

433,766





Intercompany eliminations



(19,768)



(19,742)





Net sales after eliminations


$

441,363


$

414,024



6.6

%












Operating profit, as reported - segment


$

6,520


$

27,839





General corporate expense, net



(6,682)



(4,720)





Intercompany eliminations and other adjustments



(3,301)



(3,352)





Operating (loss) profit, as reported


$

(3,463)


$

19,767





Operating margin, as reported



(0.8)

%


4.8

%















Significant legal settlement



30,000



1,008





Rationalization charges



1,738







Acquisition costs



292







Operating profit, as adjusted


$

28,567


$

20,775





Operating margin, as adjusted



6.5

%


5.0

%















Share-based compensation



2,084



1,600





Depreciation and amortization



3,231



2,895





EBITDA, as adjusted


$

33,882


$

25,270
















Sales change period over period



27,339








EBITDA, as adjusted change period over period



8,612








EBITDA, as adjusted as percentage of sales change



31.5

%


















† Rationalization charges include corporate level adjustments as well as segment operating adjustments.

View Table Fullscreen

TopBuild Corp.








Non-GAAP Reconciliations (Unaudited)








(in thousands, except common share amounts)


















Three Months Ended March 31,




2017


2016


Gross Profit and Operating Profit Reconciliations
















Net sales


$

441,363


$

414,024










Gross profit, as reported


$

101,628


$

89,455










Gross profit, as adjusted


$

101,628


$

89,455










Gross margin, as reported



23.0

%


21.6

%

Gross margin, as adjusted



23.0

%


21.6

%









Operating (loss) profit, as reported


$

(3,463)


$

19,767










Significant legal settlement



30,000



1,008


Rationalization charges



1,738




Acquisition costs



292




Operating profit, as adjusted


$

28,567


$

20,775










Operating margin, as reported



(0.8)

%


4.8

%

Operating margin, as adjusted



6.5

%


5.0

%









Income Per Common Share Reconciliation
















(Loss) income from continuing operations before income taxes, as reported


$

(4,726)


$

18,169










Significant legal settlement



30,000



1,008


Rationalization charges



1,738




Acquisition costs



292




Income from continuing operations before income taxes, as adjusted



27,304



19,177










Tax rate at 38% rate



(10,376)



(7,287)


Income from continuing operations, as adjusted


$

16,928


$

11,890










Income per common share, as adjusted


$

0.46


$

0.31










Average diluted common shares outstanding



37,123,245



37,899,110


View Table Fullscreen

TopBuild Corp.








Same Branch Net Sales and Adjusted EBITDA (Unaudited)








(in thousands)


















Three Months Ended March 31,




2017


2016


Net sales








Same branch


$

433,777


$

414,024


Acquired



7,586




Total


$

441,363


$

414,024










EBITDA, as adjusted








Same branch



33,453



25,270


Acquired



429




Total


$

33,882


$

25,270










Same branch EBITDA, as adjusted as percentage of sales change



41.4

%


26.6

%

Acquired adjusted EBITDA , as adjusted as percentage of sales change



5.7

%


%

View Table Fullscreen

TopBuild Corp.







Reconciliation of EBITDA to Net Income (Unaudited)







(in thousands)
















Three Months Ended March 31,



2017


2016

Net (loss) income, as reported


$

(1,710)


$

11,116

Adjustments to arrive at EBITDA, as adjusted:







Other expense, net



1,263



1,598

Income tax benefit (expense) from continuing operations



(3,016)



7,053

Depreciation and amortization



3,231



2,895

Share-based compensation



2,084



1,600

Rationalization charges



1,738



1,008

Acquisition costs



292



Significant legal settlement



30,000



EBITDA, as adjusted


$

33,882


$

25,270

SOURCE TopBuild Corp.

Related Links

www.topbuild.com

Original Source: https://www.newswire.com/news/topbuild-reports-strong-first-quarter-2017-results

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