TopBuild Reports Strong First Quarter 2017 Results

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Upsizes Term and Revolving Credit Facilities to $600 Million

Announces $100 Million Accelerated Share Repurchase

DAYTONA BEACH, Fla., May 9, 2017 /PRNewswire/ -- 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)

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)

 

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

 

 

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






 

 

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

 

 

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.

 

 

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

 

 

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

%

—

%

 

 

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

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/topbuild-reports-strong-first-quarter-2017-results-300453615.html

SOURCE TopBuild Corp.

Released May 9, 2017