Continental Building Products Reports First Quarter 2019 Results

Continental Building Products, Inc. (NYSE:CBPX) (the "Company"), a leading manufacturer of gypsum wallboard and complementary finishing products, announced today results for the first quarter ended March 31, 2019.

Highlights of First Quarter 2019 as Compared to First Quarter 2018

• Net sales increased 4.5% to $122.0 million
• Wallboard sales volumes increased 5.5% to 649 million square feet
• Net income increased 16.7% to $15.9 million; adjusted net income¹ increased 8.1% to $14.8 million from $13.6 million
• Earnings per share increased 25.0% to $0.45; adjusted earnings per share¹ increased 16.7% to $0.42
• Adjusted EBITDA¹ increased 2.5% to $32.1 million
• Deployed $5.6 million in capital investments, excluding $1.8 million incurred as a result of the Buchanan outage, and $5.0 million to repurchase 191,907 shares of common stock
• As previously disclosed, the Company resumed operations at its Buchanan, New York plant on March 15, 2019, following a significant equipment malfunction on January 24, 2019 which resulted in a temporary outage of the plant

"We overcame the outage at our Buchanan facility to deliver another quarter of strong performances," stated Jay Bachmann, President and Chief Executive Officer. "Our associates worked safely and tirelessly to restart the Buchanan facility and increase production at our other plants to service our customers. I want to thank all of our associates for their hard work and dedication and express my thanks to our customers for their understanding."

Mr. Bachmann further stated, "Through this experience, we proved the resilience of our team to produce double digit growth in earnings per share and kept our focus on Bison Way lean initiatives to further improve our business. As we look at the rest of 2019, we remain focused on deploying our strong cash flow to improve our operations and cost position through investments in high-return capital projects while continuing to repurchase shares as a key avenue to return value to shareholders."

First Quarter 2019 Results vs. First Quarter 2018

Net sales were up 4.5% to $122.0 million for the first quarter 2019, compared to $116.8 million in the prior year quarter. Wallboard sales volumes increased 5.5% to 649 million square feet (MMSF) for the first quarter 2019, compared to 615 MMSF in the prior year quarter with strong demand overcoming the adverse impact of the Buchanan outage. Partially offsetting the increased volumes was a 1.4% decrease in the average mill net price compared to the prior year quarter.

Operating income was up 11.3% to $23.1 million for the first quarter 2019, which included a $1.5 million gain from insurance recoveries related to Buchanan, compared to $20.8 million in the prior year quarter. SG&A expense was $9.7 million compared to $9.4 million in the prior year quarter, or 7.9% of net sales compared to 8.1% in the prior year quarter.

Net interest expense decreased 8.4% to $2.5 million, compared to $2.7 million in the prior year quarter, reflecting higher investment income and capitalized interest, along with the benefits of lower spreads obtained on the term debt, partially offset by the rise in LIBOR.

Net income for the first quarter 2019 increased 16.7% to $15.9 million, or $0.45 per share, compared to $13.6 million, or $0.36 per share, in the prior year quarter. Adjusted net income¹, which excludes the net gain from insurance recoveries increased $1.1 million, or 8.1%, to $14.8 million compared to $13.6 million, and adjusted earnings per share¹ increased 16.7% to $0.42 per share compared to $0.36 per share. The $1.1 million increase in adjusted net income¹ was primarily a result of the increase in net sales.

Adjusted EBITDA¹, which excludes the net gain from insurance recoveries, increased $0.8 million, or 2.5% to $32.1 million from $31.3 million.

Balance Sheet and Cash Flow

As of March 31, 2019, the Company had a cash balance of $101.1 million and total outstanding borrowing under the term loan agreement and industrial revenue bonds of $268.2 million. During the first quarter 2019, the Company generated cash flows from operations of $10.6 million and deployed $5.6 million in capital investments, which excludes $1.8 million related to the Buchanan outage.

During the first quarter 2019, the Company repurchased 191,907 shares of its common stock under its expanded repurchase program for an aggregate purchase price of $5.0 million, representing 0.5% of its outstanding shares as of December 31, 2018. As of March 31, 2019, against the program, the Company has repurchased $174.0 million of common stock at an average price of $23.71 per share and had a remaining capacity of $126.0 million for future repurchases.

Buchanan Plant Update

As previously announced, in January 2019 the Company's Buchanan, New York plant experienced a significant equipment malfunction, resulting in an outage at the plant. The plant was off-line while repairs were made through March 15, 2019. While the Buchanan plant was down, the Company increased production at its plants in Silver Grove, Kentucky and Palatka, Florida to offset a portion of the lost production from the Buchanan plant.

The Company has standard insurance coverage that is intended to cover circumstances such as these, including business interruption insurance. Our insurance coverage is designed to cover the direct costs of rebuilding the damaged equipment, costs incurred to re-direct products from our other plants, and the lost contribution margin of the sales that otherwise would have been made if the plant was operating normally.

The company is working closely with our insurance advisors and carrier to calculate the lost sales as a result of the plant outage. The Company anticipates the lost operating income and EBITDA¹ associated with the outage to be in the range of $4.0 to $5.0 million. This amount is still being finalized and was not recorded in the first quarter 2019. We believe the estimated lost sales from the Buchanan outage would have improved adjusted EBITDA¹ margins by approximately 141 to 173 basis points in the first quarter 2019. When collected and recorded, we expect there will be a favorable $4.0 to $5.0 million operating income and EBITDA¹ impact to a future quarter.

(a) The rebuild of property, plant and equipment damaged and related net recovery resulted in a net gain of $1.5 million.

(b) Direct costs associated with the business interruption include various expenses such as additional freight to ship to customers at greater distances from other plants, additional freight costs to reroute incoming raw materials and other various costs that were incurred as a result of the Buchanan outage and are expected to be covered by our insurance policy. The amounts reported are for the first quarter 2019; additional expenses might be incurred in the second quarter, which the Company believes would be recoverable from the insurance policy. The net recovery of direct costs associated with business interruption were netted against actual costs incurred resulting in a net impact of zero to the income statement.

(c) This represents the midpoint of the estimated $4.0 - $5.0 million of insurance proceeds for the lost operating income and EBITDA¹ the Company expects to receive related to the Buchanan outage. This amount is still being finalized and was not recorded in the first quarter 2019.

(a) This calculation does not include the $4.0 - $5.0 million of insurance proceeds for the lost operating income and EBITDA¹ the Company expects to receive related to the Buchanan outage.

Forward-Looking Outlook for the Full Year 2019

• SG&A is expected to be in the range of $39 - $41 million, down from the previous range of $40 - $42 million.
• Cost of goods sold inflation per unit compared to the prior year is expected to be in the range of 2% - 3%, down from the previously estimated range of 4.5% - 6.5%. We expect to partly offset this inflation by approximately $3 million of savings from high return capital projects.
• Total capital expenditures are now in the range of $30 - $34 million to reflect the Buchanan outage.
  • Maintenance capital spending is expected to be in the range of $14 - $16 million.
  • High-return capital spending is expected to be in the range of $14 - $16 million.
  • Approximately $1.8 million incurred as a result of the Buchanan outage.
• Depreciation and amortization is expected to be in the range of $43 - $45 million.
• Effective tax rate is expected to be in the range of 22% - 23%, up from the previous range of 21% - 22%.

Investor Conference Webcast and Conference Call

The Company will host a webcast and conference call on Thursday, May 2, 2019 at 5:00 p.m. Eastern Time to review first quarter 2019 financial results, discuss recent events and conduct a question-and-answer period. The live webcast will be available on the Investor Relations section of the Company's website at www.continental-bp.com. To participate in the call, please dial (855) 327-6837 (domestic) or (631) 891-4304 (international). A replay of the conference call will be available through June 2, 2019, by dialing (844) 512-2921 (domestic) or (412) 317-6671 (international) and entering the pass code number 10006602.

About Continental Building Products

Continental Building Products is a leading North American manufacturer of gypsum wallboard and complementary finishing products. The Company is headquartered in Herndon, Virginia with operations serving the residential, commercial and repair and remodel construction markets primarily in the eastern United States and eastern Canada. For additional information, visit www.continental-bp.com.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements may be identified by the use of words such as "anticipate", "believe", "expect", "estimate", "plan", "outlook", and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. 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 are based on historical information available at the time the statements are made and are based on management's reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company's control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and its 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 See the financial schedules at the end of this press release for a reconciliation of EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share, which are non-GAAP financial measures, to relevant GAAP financial measures, and a discussion of why they are useful to investors.

Reconciliation of Non-GAAP Measures

EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income, adjusted net income, and adjusted earnings per share have been presented in this press release as supplemental measures of financial performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). This release presents EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted earnings per share as supplemental performance measures because management believes that they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results under GAAP while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. Furthermore, the Company's Board of Directors' compensation committee uses EBITDA to evaluate management's compensation. Management also believes that EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted earnings per share are useful to investors because they allow investors to view the business through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods.

EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income, adjusted net income, and adjusted earnings per share may not be comparable to similarly titled measures of other companies because other companies may not calculate EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income, adjusted net income, and adjusted earnings per share in the same manner. EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income, adjusted net income, and adjusted earnings per share are not measurements of the Company's financial performance under GAAP and should not be considered in isolation or as alternatives to net income or earnings per share determined in accordance with GAAP or any other financial statement data presented as indicators of financial performance or liquidity, each as calculated and presented in accordance with GAAP.

(a) The calculation does not include the $4.0 - $5.0 million of insurance proceeds from the lost profits for the Buchanan outage that the Company expects to receive.

(a) Gain from insurance recoveries is show net of tax benefit of $0.3 million for the three months ended March 31, 2019.

(b) The calculation does not include the $4.0 - $5.0 million of insurance proceeds from the lost profits, or approximately $0.13 per share assuming recovery at the mid-point of the range, for the Buchanan closure that the Company expects to receive.

(a) Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.

(a) Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.

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