Business Wire | Aug 3, 2020 04:26PM EDT

Foundation Building Materials, Inc. Announces Second Quarter 2020 Results

Aug. 03, 2020

SANTA ANA, Calif.--(BUSINESS WIRE)--Aug. 03, 2020--Foundation Building Materials, Inc. (NYSE: FBM), one of the largest specialty building products distributors of wallboard, suspended ceiling systems, metal framing and complementary and other products in North America, today reported second quarter 2020 financial results and provided a COVID-19 business update.

"Despite the decline in net sales due to the COVID-19 Pandemic, our stable profitability highlighted our second quarter results," said Ruben Mendoza, President and CEO. "Our long-term strategic focus is unwavering. As we navigate through these challenging market conditions, we remain committed to our strategic priorities that will lead to long-term value creation for our company."

2020 Second Quarter Results

Net sales for the three months ended June 30, 2020, were $486.1 million compared to $559.9 million for the three months ended June 30, 2019, representing a decrease of $73.8 million, or 13.2%. Net sales from base business decreased $77.4 million compared to the prior period. There was the same number of business days in the current period as compared to the prior period. Net sales from acquired branches and existing branches that were strategically combined increased by $3.6 million. Our base business net sales across all of our major product lines decreased during the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily as a result of reduced business activity due to the impacts and disruptions caused by the novel coronavirus COVID-19 (the "COVID-19 Pandemic").

Gross profit for the three months ended June 30, 2020, was $145.7 million compared to $171.5 million for the three months ended June 30, 2019, representing a decrease of $25.9 million, or 15.1%. The decrease in gross profit was primarily due to lower net sales. Gross margin for the three months ended June 30, 2020, was 30.0% compared to 30.6% for the three months ended June 30, 2019. The decrease in gross margin was primarily due to COVID-19 Pandemic related market disruptions.

Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2020, were $106.3 million compared to $122.7 million for the three months ended June 30, 2019, representing a decrease of $16.5 million, or 13.4%. As a percentage of net sales, SG&A expenses were 21.9% for the three months ended June 30, 2020, compared to 21.9% for the three months ended June 30, 2019. SG&A expenses remained flat as a percentage of net sales primarily due to proactive actions taken to right-size our cost structure in response to a decline in net sales resulting from the COVID-19 Pandemic.

Net income from continuing operations for the three months ended June 30, 2020, was $9.9 million, or $0.23 per share, a decrease of $4.9 million compared to $14.7 million, or $0.34 per share, for the three months ended June 30, 2019. Adjusted net income(1) for the three months ended June 30, 2020, was $11.6 million, or $0.27 per share, a decrease of $4.2 million compared to $15.8 million, or $0.37 per share, for the three months ended June 30, 2019.

Adjusted EBITDA(1) was $42.3 million and adjusted EBITDA margin(1) was 8.7% for the three months ended June 30, 2020, compared to adjusted EBITDA(1) of $50.3 million and adjusted EBITDA margin(1) of 9.0% for the three months ended June 30, 2019.

2020 Year-to-Date Results

Net sales for the six months ended June 30, 2020, were $1,010.3 million compared to $1,074.8 million for the six months ended June 30, 2019, representing a decrease of $64.4 million, or 6.0%. Average daily net sales decreased 6.7% over the prior period. Net sales from base business decreased $78.9 million compared to the prior period, and average daily base business net sales decreased by 8.4% over the prior period. There was one more business day in the current period as compared to the prior period. Net sales from acquired branches and existing branches that were strategically combined increased by $14.5 million. Our base business net sales across all of our major product lines decreased primarily as a result of reduced business activity due to impacts of the COVID-19 Pandemic.

Gross profit for the six months ended June 30, 2020, was $307.8 million compared to $324.5 million for the six months ended June 30, 2019, representing a decrease of $16.7 million, or 5.1%. The decrease in gross profit was primarily due to lower net sales. Gross margin for the six months ended June 30, 2020, was 30.5% compared to 30.2% for the six months ended June 30, 2019. The increase in gross margin was primarily due to improved profitability driven by our ongoing pricing and purchasing initiatives that was partially offset by COVID-19 Pandemic related market disruptions.

SG&A expenses for the six months ended June 30, 2020, were $229.4 million compared to $240.0 million for the six months ended June 30, 2019, representing a decrease of $10.6 million, or 4.4%. As a percentage of net sales, SG&A expenses were 22.7% for the six months ended June 30, 2020, compared to 22.3% for the six months ended June 30, 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 and our continued investment in various company-wide initiatives, partially offset by actions taken to right-size our cost structure in the second quarter in response to a decline in net sales.

Net income from continuing operations for the six months ended June 30, 2020, was $24.2 million, or $0.56 per share, an increase of $4.7 million compared to $19.5 million, or $0.45 per share, for the six months ended June 30, 2019. Adjusted net income(1) for the six months ended June 30, 2020, was $21.3 million, or $0.49 per share, a decrease of $0.5 million compared to $21.9 million, or $0.51 per share, for the six months ended June 30, 2019.

Adjusted EBITDA(1) was $82.5 million and adjusted EBITDA margin(1) was 8.2% for the six months ended June 30, 2020, compared to adjusted EBITDA(1) of $87.8 million and adjusted EBITDA margin(1) of 8.2% for the six months ended June 30, 2019.

COVID-19 Pandemic Business Update

Through July 2020, the COVID-19 Pandemic has had a negative impact on most of the markets in which the Company operates. In a select number of states, including Washington, California, Michigan, New Jersey, and the Commonwealth of Pennsylvania, the Company continued to have jobsite restrictions, which reduced branch operations. As a result, July 2020 net sales were down approximately 7% 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.

Second Quarter Earnings Release and Conference Call

In conjunction with this release, Foundation Building Materials, Inc. will host a conference call tomorrow, Tuesday, August 4, 2020, at 8:30 AM Eastern Time. Ruben Mendoza, President and Chief Executive Officer, John Gorey, Chief Financial Officer, Pete Welly, Chief Operating Officer, Kirby Thompson, Senior Vice President of Sales and Marketing and John Moten, Vice President Investor Relations will host the call.

The call can be accessed in three ways:

* Through the Company's website: www.fbmsales.com under the "Events and Presentations" tab in the "Investors" section of the website; * By telephone: For both listen-only participants and those who wish to take part in the question and answer portion of the call, the dial-in telephone number in the U.S. is (877) 407-9039. For participation outside the U.S., the dial-in number is (201) 689-8470; and * Using audio replay: A replay of the call will be available beginning at 11:30 AM Eastern Time on Tuesday, August 4, 2020, and ending at 11:59 PM Eastern Time on Tuesday, August 11, 2020. The dial-in number for U.S.-based participants to listen to the audio replay is (844) 512-2921. Participants outside the U.S. should use the replay dial-in number of (412) 317-6671. All callers will be required to provide a Conference ID of 13707041.

About Foundation Building Materials

Foundation Building Materials, Inc. is a specialty building products distributor of wallboard, suspended ceiling systems, metal framing, and complementary and other products throughout North America. Based in Santa Ana, California, the Company employs more than 3,400 employees and operates more than 170 branches across the United States and Canada. Learn more at www.fbmsales.com or follow us on LinkedIn, Twitter, Instagram, or Facebook.

Forward-Looking Statements

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as "believe," "anticipate," "expect," "estimate," "intend," "project," "plan," or words or phrases with similar meaning. 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 contained in this press release relate to, among other things, the impact of the COVID-19 Pandemic on the Company's business and financial performance, the effect of certain strategic actions and cost-saving initiatives taken by the Company, and the Company's ability to create long-term value. The impacts and disruptions caused by the COVID-19 Pandemic are highly uncertain, cannot be accurately predicted, and will depend upon future developments outside the control of the Company, including the scope and duration of the outbreak, as well as the scope and impact of any government orders and restrictions designed to limit the further spread of COVID-19. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, public health and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. We do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Investors are referred to our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and 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.

(1) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS and net debt leverage ratio are non-GAAP financial measures. See the supplementary schedules at the end of this press release, as well as the information provided under the heading "Non-GAAP Financial Measures" for a discussion of how we define and calculate these measures, why we believe they are important and a reconciliation thereof to the most directly comparable GAAP measures. For a calculation of our net debt leverage ratio as of June 30, 2020, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months ended June 30, 2020.

- Financial Tables Follow -

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except share and per share data)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net sales $ 486,090 $ 559,911 $ 1,010,348 $ 1,074,783

Cost of goods sold 340,435 388,374 702,535 750,286

Gross profit 145,655 171,537 307,813 324,497

Operating expenses:

Selling, generaland administrative 106,257 122,735 229,354 239,965 expenses

Depreciation and 19,288 20,351 38,507 40,693 amortization

Total operating 125,545 143,086 267,861 280,658 expenses

Income from 20,110 28,451 39,952 43,839 operations

Interest expense (7,153 ) (8,341 ) (14,886 ) (16,897 )

Gain on legal - - 8,556 - settlement

Other income 547 44 (475 ) 85 (expense), net

Income before 13,504 20,154 33,147 27,027 income taxes

Income tax expense 3,647 5,433 8,914 7,478

Income fromcontinuing 9,857 14,721 24,233 19,549 operations

Loss on sale fromdiscontinued - (44 ) - (1,390 )operations, net oftax

Net income $ 9,857 $ 14,677 $ 24,233 $ 18,159



Earnings per share data:

Earnings fromcontinuing 0.23 0.34 0.56 0.45 operations pershare - basic

Earnings fromcontinuing 0.23 0.34 0.56 0.45 operations pershare - diluted



Loss fromdiscontinued - - - (0.03 )operations pershare - basic

Loss fromdiscontinued - - - (0.03 )operations pershare - diluted



Earnings per share 0.23 0.34 0.56 0.42 - basic

Earnings per share 0.23 0.34 0.56 0.42 - diluted



Weighted averageshares outstanding:

Basic 43,203,894 42,987,915 43,124,793 42,960,124

Diluted 43,332,225 43,245,353 43,440,723 43,064,496

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

June 30, 2020 December 31, 2019

Current assets:

Cash and cash equivalents $ 31,122 $ 17,766

Accounts receivable-net of allowance forexpected credit losses of $2,896 and $3,169, 263,340 262,757 respectively

Other receivables 35,003 59,104

Inventories 159,615 178,624

Prepaid expenses and other current assets 9,386 7,965

Total current assets 498,466 526,216

Property and equipment, net 149,195 150,188

Right-of-use assets, net 126,290 120,562

Intangible assets, net 89,776 113,861

Goodwill 494,159 495,724

Other assets 6,607 5,206

Total assets $ 1,364,493 $ 1,411,757

Liabilities and stockholders' equity:

Current liabilities:

Accounts payable $ 145,267 $ 145,226

Accrued payroll and employee benefits 25,458 31,410

Accrued taxes 9,594 8,780

Current portion of tax receivable agreement 8,537 27,850

Current portion of term loan 4,500 4,500

Current portion of lease liabilities 31,508 30,307

Other current liabilities 19,336 18,557

Total current liabilities 244,200 266,630

Asset-based revolving credit facility 40,000 89,000

Long-term portion of term loan, net 432,950 434,633

Tax receivable agreement 80,996 89,533

Deferred income taxes, net 21,670 18,972

Long-term portion of lease liabilities 100,867 97,145

Other liabilities 14,388 7,679

Total liabilities 935,071 1,003,592

Commitments and contingencies



Stockholders' equity:

Preferred stock, $0.001 par value, authorized - - 10,000,000 shares; 0 shares issued

Common stock, $0.001 par value, authorized190,000,000 shares; 43,205,678 and 42,991,016 13 13 shares issued, respectively

Additional paid-in capital 338,820 336,362

Retained earnings 98,487 74,254

Accumulated other comprehensive loss (7,898 ) (2,464 )

Total stockholders' equity 429,422 408,165

Total liabilities and stockholders' equity $ 1,364,493 $ 1,411,757

FOUNDATION BUILDING MATERIALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Six Months Ended June 30,

2020 2019

Cash flows from operating activities:

Net income $ 24,233 $ 18,159

Less: loss on sale of discontinued operations - (1,390 )

Net income from continuing operations 24,233 19,549

Adjustments to reconcile net income to net cashprovided by operating activities from continuing operations:

Depreciation 14,598 17,558

Amortization of intangible assets 23,909 23,135

Amortization of debt issuance costs and debt discount 1,080 992

Inventory fair value purchase accounting adjustment - 234

Provision for expected credit losses 1,366 1,525

Stock-based compensation 2,828 1,939

Loss (gain) on disposal or sale of assets 708 (67 )

Right-of-use assets non-cash expense 15,057 13,601

Deferred income taxes 3,334 271

Change in assets and liabilities, net of effects of acquisitions:

Accounts receivable 208 (43,441 )

Other receivables 23,435 13,581

Inventories 20,053 (1,291 )

Prepaid expenses and other current assets (1,472 ) (3,123 )

Other assets (6 ) (121 )

Accounts payable 1,333 23,429

Accrued payroll and employee benefits (5,802 ) (3,057 )

Accrued taxes 827 (2,291 )

Operating lease liabilities (14,752 ) (13,345 )

Other liabilities 4,365 4,126

Net cash provided by operating activities from 115,302 53,204 continuing operations

Cash flows from investing activities from continuing operations:

Purchases of property and equipment (13,263 ) (15,052 )

Proceeds from termination of net investment hedge - 3,313

Net (payments of) proceeds from net working capital (34 ) 470 adjustments related to acquisitions

Proceeds from disposal or sale of assets 980 2,376

Acquisitions, net of cash acquired (8,638 ) (21,923 )

Net cash used in investing activities from continuing (20,955 ) (30,816 )operations

Cash flows from financing activities from continuing operations:

Proceeds from asset-based revolving credit facility 322,500 281,620

Repayments of asset-based revolving credit facility (371,500 ) (291,371 )

Principal payments for term loan (2,250 ) (2,250 )

Payment related to tax receivable agreement (27,850 ) (16,667 )

Tax withholding payment related to net settlement of (370 ) (138 )equity awards

Principal repayment of finance lease liabilities (1,355 ) (1,319 )

Net cash used in financing activities from continuing (80,825 ) (30,125 )operations

Net cash used in investing activities from - (1,390 )discontinued operations

Net cash used in discontinued operations - (1,390 )

Effect of exchange rate changes on cash (166 ) 282

Net increase (decrease) in cash 13,356 (8,845 )

Cash and cash equivalents at beginning of period 17,766 15,299

Cash and cash equivalents at end of period $ 31,122 $ 6,454



Supplemental disclosures of cash flow information:

Cash paid for income taxes $ 190 $ 5,091

Cash paid for interest $ 14,186 $ 16,477

Supplemental disclosures of non-cash investing and financing activities:

Decrease in fair value of derivatives, net of tax $ 1,525 $ 6,012

Net goodwill increase for purchase price allocation $ 47 $ 57

FOUNDATION BUILDING MATERIALS, INC.

NET SALES BY MAJOR PRODUCT LINE, GROSS PROFIT AND GROSS MARGIN

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

(dollars in thousands)

Three Months Ended June 30, Change

2020 2019 $ %

Wallboard $ 188,588 38.8 % $ 214,059 38.2 % $ (25,471 ) (11.9 ) %

Suspended )ceiling 91,508 18.8 % 106,176 19.0 % (14,668 ) (13.8 %systems

Metal framing 82,188 16.9 % 102,425 18.3 % (20,237 ) (19.8 ) %

Complementary )and other 123,806 25.5 % 137,251 24.5 % (13,445 ) (9.8 %products

Total net $ 486,090 100.0 % $ 559,911 100.0 % $ (73,821 ) (13.2 )sales %

Total gross $ 145,655 $ 171,537 $ (25,882 ) (15.1 )profit %

Total gross 30.0 % 30.6 % (0.6 ) margin %

Six Months Ended June 30, Change

2020 2019 $ %

Wallboard $ 390,856 38.7 % $ 416,973 38.8 % $ (26,117 ) (6.3 ) %

Suspended )ceiling 190,014 18.8 % 195,172 18.2 % (5,158 ) (2.6 %systems

Metal framing 175,522 17.4 % 201,676 18.8 % (26,154 ) (13.0 ) %

Complementary )and other 253,956 25.1 % 260,962 24.2 % (7,006 ) (2.7 %products

Total net $ 1,010,348 100.0 % $ 1,074,783 100.0 % $ (64,435 ) (6.0 )sales %

Total gross $ 307,813 $ 324,497 $ (16,684 ) (5.1 )profit %

Total gross 30.5 % 30.2 % 0.3 % margin



FOUNDATION BUILDING MATERIALS, INC.

BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

(dollars in thousands)

Three Months Ended June Change 30,

2020 2019 $ %

Base business ^(1) $ 457,811 $ 535,185 $ (77,374 ) (14.5 )%

Acquired and combined^ (2) 28,279 24,726 3,553 14.4 %

Net sales $ 486,090 $ 559,911 $ (73,821 ) (13.2 )%

(1) Represents net sales from branches that were owned by us since January 1, 2019, and branches that were opened by us during such period. (2) Represents branches acquired and combined after January 1, 2019, primarily as a result of our strategic combination of branches.

Six Months Ended June 30, Change

2020 2019 $ %

Base business ^(1) $ 951,189 $ 1,030,103 $ (78,914 ) (7.7 )%

Acquired and combined^ 59,159 44,680 14,479 32.4 %(2)

Net sales $ 1,010,348 $ 1,074,783 $ (64,435 ) (6.0 )%

(1) Represents net sales from branches that were owned by us since January 1, 2019, and branches that were opened by us during such period. (2) Represents branches acquired and combined after January 1, 2019, primarily as a result of our strategic combination of branches.

FOUNDATION BUILDING MATERIALS, INC.

BASE BUSINESS AND ACQUIRED AND COMBINED NET SALES BY MAJOR PRODUCT LINE

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

(dollars in thousands)

Acquired Acquired Base and Three Base and Three Total Business Combined Months Business Combined Months Net Net Net Ended June Net Sales Net Sales Ended June Sales % Sales % Sales 30, 2019 Change Change 30, 2020 Change Change^ % (1) Change^ (2)

Wallboard $ 214,059 $ (27,410 ) $ 1,939 $ 188,588 (11.9 ) (13.3 )% 23.4 % %

Suspended )ceiling 106,176 (15,112 ) 444 91,508 (13.8 % (15.0 )% 8.2 %systems

Metal framing 102,425 (20,272 ) 35 82,188 (19.8 ) (20.6 )% 0.9 % %

Complementary )and other 137,251 (14,580 ) 1,135 123,806 (9.8 % (11.2 )% 16.1 %products

Net sales $ 559,911 $ (77,374 ) $ 3,553 $ 486,090 (13.2 ) (14.5 )% 14.4 % %

Average daily $ 8,749 $ (1,209 ) $ 55 $ 7,595 (13.2 ) (14.5 )% 14.4 %net sales^(3) %

(1) Represents base business net sales change as a percentage of base business net sales for the three months ended June 30, 2019. (2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the three months ended June 30, 2019. (3) The number of business days for the three months ended June 30, 2020 and 2019 was 64 for both periods.

Acquired Acquired Base and Six Months Base and Six Months Total Business Combined Ended June Business Combined Ended June Net Net Net 30, 2019 Net Sales Net Sales 30, 2020 Sales % Sales % Sales Change Change Change Change^ % (1) Change^ (2)

Wallboard $ 416,973 $ (30,383 ) $ 4,266 $ 390,856 (6.3 ) (7.6 )% 26.7 % %

Suspended )ceiling 195,172 (10,995 ) 5,837 190,014 (2.6 % (5.9 )% 73.1 %systems

Metal framing 201,676 (26,888 ) 734 175,522 (13.0 ) (13.9 )% 9.4 % %

Complementary )and other 260,962 (10,648 ) 3,642 253,956 (2.7 % (4.3 )% 28.2 %products

Net sales $ 1,074,783 $ (78,914 ) $ 14,479 $ 1,010,348 (6.0 ) (7.7 )% 32.4 % %

Average daily $ 8,463 $ (680 ) $ 110 $ 7,893 (6.7 ) (8.4 )% 31.4 %net sales^(3) %

(1) Represents base business net sales change as a percentage of base business net sales for the six months ended June 30, 2019. (2) Represents acquired and combined net sales change as a percentage of acquired and combined net sales for the six months ended June 30, 2019. (3) The numbers of business days for the six months ended June 30, 2020 and 2019 were 128 and 127, respectively.

Non-GAAP Financial Measures

In addition to presenting financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), this press release contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, net debt leverage ratio and adjusted earnings per share, which are provided as supplemental measures of financial performance. These measures are not required by, or presented in accordance with, GAAP. The Company calculates adjusted EBITDA as net income from continuing operations before interest expense, net, income tax expense, depreciation and amortization, stock-based compensation, and other non-recurring adjustments such as loss (gain) on disposal or sale of assets, gain on legal settlement and transaction costs. The Company calculates adjusted EBITDA margin as adjusted EBITDA divided by net sales. The Company calculates adjusted net income as net income from continuing operations before stock-based compensation, and other non-recurring adjustments such as loss (gain) on disposal or sale of assets, gain on legal settlement and transaction costs. The Company calculates adjusted earnings per share as adjusted net income on a per weighted average share outstanding basis. For a calculation of net debt leverage ratio, see Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Quarterly Report on Form 10-Q for the three months ended June 30, 2020.

These non-GAAP financial measures are presented because they are important metrics used by management as a means by which it assesses financial performance. We believe these measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company's industry. These measures, when used in conjunction with the most directly comparable GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company's financial condition and results of operations.

These non-GAAP financial measures have certain limitations, which are discussed in greater detail in the Company's filings with the Securities and Exchange Commission. These measures should not be considered as alternatives to measures of financial performance prepared in accordance with GAAP. In addition, these measures should not be construed as an inference that the Company's future results will be unaffected by unusual or non-recurring items. Furthermore, these measures are not intended to be considered liquidity measures. Other companies, including other companies in the Company's industry, may not use these measures or may calculate one or more of these measures differently than the Company does, limiting their usefulness as comparative measures.

The following is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

Three Months Ended June Six Months Ended 30, June 30,

2020 2019 2020 2019

(dollars in thousands)

Net income from continuing 9,857 $ 14,721 24,233 19,549 operations

Interest expense, net 7,127 8,402 14,818 16,987

Income tax expense 3,647 5,433 8,914 7,478

Depreciation and amortization 19,288 20,351 38,507 40,693

Stock-based compensation 1,435 1,110 2,828 1,939

Loss (gain) on disposal or sale 657 (258 ) 708 (67 )of assets

Gain on legal settlement - - (8,556 ) -

Transaction costs^(a) 245 582 1,084 1,227

Adjusted EBITDA $ 42,256 50,341 82,536 87,806

Adjusted EBITDA margin^(b) 8.7 % 9.0 % 8.2 % 8.2 %



Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, and other professionals, as well as(a) certain internal corporate development costs. The costs also include non-cash purchase accounting effects to adjust for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.

(b) Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.

The following is a reconciliation of adjusted net income to the most directly comparable GAAP measure, net income from continuing operations (unaudited):

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(in thousands, exceptshare and per share data)

Net income from $ 9,857 $ 14,721 $ 24,233 $ 19,549 continuing operations

Stock-based 1,435 1,110 2,828 1,939 compensation

Loss (gain) ondisposal or sale of 657 (258 ) 708 (67 )assets

Gain on legal - - (8,556 ) - settlement

Transaction costs^(a) 245 582 1,084 1,227

Tax effects^(b) (602 ) (366 ) 1,014 (792 )

Adjusted net income $ 11,592 $ 15,789 $ 21,311 $ 21,856



Earnings per share data as reported:

Basic $ 0.23 $ 0.34 $ 0.56 $ 0.45

Diluted $ 0.23 $ 0.34 $ 0.56 $ 0.45

Earnings per share data as adjusted:

Basic $ 0.27 $ 0.37 $ 0.49 $ 0.51

Diluted $ 0.27 $ 0.37 $ 0.49 $ 0.51



Weighted average shares outstanding:

Basic 43,203,894 42,987,915 43,124,793 42,960,124

Diluted 43,332,225 43,245,353 43,440,723 43,064,496

Represents costs related to our transactions, including fees to financial advisors, accountants, attorneys, and other professionals, as well as(a) certain internal corporate development costs. The costs also include non-cash purchase accounting effects to adjust for the effect of the purchase accounting step-up in the value of inventory to fair value recognized as a result of acquisitions.

(b) Represents the impact of corporate income taxes.

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CONTACT: Investor Relations: John Moten, IRC Foundation Building Materials, Inc. 657-900-3200 Investors@fbmsales.com

CONTACT: Media Relations: Joele Frank, Wilkinson Brimmer Katcher Jed Repko or Ed Trissel 212-355-4449