Continental Building Products Inc. announced results for the first quarter ended March 31, 2014.
Highlights of First Quarter 2014 (Successor) as Compared to First Quarter 2013 (Predecessor)
- Net sales increase 4.2% to $87.0 million
- Adjusted EBITDA1 at $20.2 million, flat to last year
- Operating income of $6.3 million, compared to $10.0 million last year
- Adjusted net loss of $0.6 million, compared to net income of $9.8 million a year ago
- Wallboard average mill net price increases 7.0% to $157.32 per thousand square feet
- Wallboard volume flat at 438 million square feet
- Lower quarter-end leverage ratio expected to reduce interest rate margin spread by 50 basis points on first lien credit agreement
“We are pleased with the continued pricing momentum in our business evidenced by the sequential quarterly increase in the average mill net price of our U.S. operations, which grew 11.5% compared to the fourth quarter of 2013,” stated Ike Preston, Continental’s CEO. “We achieved these strong price gains in the first quarter amid flat volumes, which were unfavorably impacted by adverse weather conditions in many of our markets in the eastern United States. In our efforts to overcome the subdued pace of construction activity to start the year, we remained focused on cost reductions and realized a 140 basis point improvement in SG&A as a percent of sales to 8.6%, helped by ongoing efficiency initiatives. Our adjusted EBITDA was stable compared to a year ago as our improvement in sales was offset primarily by higher energy costs. As we move forward in 2014, we believe the longer term recovery in housing markets remains in place and we are well positioned to grow our business and leverage our low cost, efficient capacity as demand improves.”
First Quarter 2014 (Successor) Vs First Quarter 2013 (Predecessor)
Net sales for the first quarter of 2014 totaled $87.0 million, up 4.2%, compared to $83.5 million in the first quarter of 2013. The increase in sales was primarily driven by a 7.0% increase in the average mill net price2 to $157.32 per MSF from $146.97 per MSF in the prior year quarter, partially offset by unfavorable foreign exchange rates. Wallboard volumes were impacted by adverse weather conditions and remained stable at 438 MMSF compared to the prior year quarter, with a 2.2% increase in U.S. volumes offset by lower volumes in Canada.
Comparison of Successor current period gross profit to prior year Predecessor gross profit was significantly impacted by purchase accounting from our acquisition by Lone Star. Gross profit was $13.8 million, down compared to $18.3 million in the prior year quarter, primarily as a result of $7.8 million in higher depreciation and amortization costs from the acquisition, as well as increased energy costs. This decrease was partially offset by savings from the Company’s continued focus on cost reduction and efficiencies.
Selling and administrative (SG&A) expense was $7.5 million in the first quarter of 2014, a decrease of 10.1% from $8.3 million in the prior year quarter, as a result of reduced overhead expenses. Services performed by Lafarge North America, which were allocated costs in the prior year, are now performed in-house or through a transition services agreement with Lafarge North America. In the current quarter, all of these costs were captured in direct SG&A.
Operating income was $6.3 million, down $3.7 million from $10.0 million in the prior year quarter, largely attributable to the impact of higher depreciation and amortization resulting from the Lone Star acquisition. Interest expense was $14.2 million, up $14.1 million from $0.1 million in the prior year, reflecting an increase in long-term debt and a non-recurring charge of $6.9 million related to the write-off of deferred financing fees and original issue discount as part of the extinguishment of debt. Net loss during the quarter was $8.6 million, or $0.22 per diluted share, compared to net income of $9.8 million in the prior year quarter. Our adjusted net loss for the first quarter of 2014, which excludes several charges incurred in connection with our recently completed initial public offering, was $691,000, or an adjusted loss per diluted share of $0.02.3
Adjusted EBITDA was $20.2 million, stable compared to the prior year quarter, as higher revenues were essentially offset by higher energy costs resulting from severe cold in the early part of the year.
On March 31, 2014, the Company had cash of $3.1 million and total debt outstanding of $423.3 million. In February 2014, the Company completed its initial public offering, raising net proceeds of $151.4 million, which was used, along with cash on hand, to reduce debt through the repayment of its second lien term loan of $155.0 million. This helped the Company achieve a lower leverage ratio at March 31, 2014, which based on the Company’s credit agreement, is expected to reduce the interest rate spread on the first lien credit agreement by 50 basis points starting later in the second quarter 2014. Maintaining this leverage ratio would represent approximately $2.1 million in cash interest savings on an annual basis.