FBM Announces First Quarter 2020 Results and Provides COVID-19 Business Update
Foundation Building Materials, Inc. (the “Company”), one of the largest specialty building products distributors of wallboard, suspended ceiling systems and metal framing in North America, 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.
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.
For the full first quarter results, click here.
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.
John Moten, IRC – Vice President Investor Relations – Investors@fbmsales.com – (657) 900-3200
Source: Foundation Building Materials, Inc.