Summit Materials Announces First Quarter 2015 Results

DENVER

Summit Materials, Inc. (NYSE:SUM)(“Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the first quarter ended March 28, 2015.

First Quarter 2015 Highlights Compared to First Quarter 2014:

• Net revenue grew 28.8% to $175.1 million.

• Operating loss of $59.0 million, compared to $35.0 million, due to initial public offering costs.

• Adjusted EBITDA improved to a $5.0 million deficit, compared to a $15.5 million deficit.

• Gross profit increased 59.3% to $35.7 million.

• Aggregates, cement and ready-mixed concrete volumes grew 67.4%, 39.3% and 52.0%, respectively.

• Aggregates, cement, ready-mixed concrete and asphalt organic pricing improved 4.5%, 10.7%, 6.3% and 17.5%, respectively.

• Completes initial public offering in March 2015 raising net proceeds of $433.0 million.

Tom Hill, the President and CEO of Summit, stated, “We are pleased to report our first quarter results as a public company. We delivered a solid quarter of growth and profitability and improvement throughout our entire business. We experienced improving demand in our markets and also benefitted from the favorable pricing environment across our vertically integrated lines of business. The favorable impact of our acquisitive growth strategy is also evident as we continue to outpace the growth of the U.S. construction industry, realizing the accretive benefits of our strategic platform and bolt-on additions. We expanded our Adjusted EBITDA margin by 860 basis points and improved our gross margin by 390 basis points, reflecting our successful efforts to focus on growing our materials and products revenues and improving margins in our paving and other services. As we move forward in 2015, we are focused on building on the core demand improvements in our markets and sourcing value-enhancing acquisitions in select markets, while remaining disciplined with our costs to generate additional cash flow.”

First Quarter 2015 Operating Results

In the first quarter 2015, net revenue increased 28.8% to $175.1 million, compared to $136.0 million in the prior year quarter. The increase in net revenue was primarily attributable to an increase in volumes in the aggregates, cement and ready-mixed concrete lines of business, largely in the West region. Net revenue grew organically by $6.7 million, or 4.9%, compared to the prior year quarter.

Adjusted EBITDA increased to a $5.0 million deficit, compared to $15.5 million deficit in the prior year quarter. Adjusted EBITDA by region in the first quarter 2015 compared to the prior year quarter was as follows:

• The West Region grew $10.1 million, primarily driven by a higher mix of net revenue from aggregates, organic volume growth and the impact of 2014 acquisitions in the Houston and Midland/Odessa, Texas and British Columbia, Canada markets.

• The Central Region increased $1.1 million with higher volume and prices in aggregates and cement and higher prices in asphalt, which more than offset lower asphalt volumes and a $2.5 million increase in repair and maintenance expense at the Company’s cement plant.

• The East Region improved $1.5 million as a result of an increase in aggregates volumes.

Gross profit increased 59.3% to $35.7 million, compared to $22.4 million in the prior year quarter. As a percentage of net revenue, gross margin improved to 20.4%, compared to 16.5% in the prior year quarter, primarily attributable to a higher mix of net revenue from materials and products as a result of acquisitions completed in 2014.

Materials Results – Net revenue from materials increased 68.0% to $50.1 million, compared to $29.8 million in the prior year quarter. Aggregates volumes grew 67.4% driven by 12.8% organic volume growth and the remainder attributable to acquisitions. Aggregates organic prices increased 4.5% with the improvement due to higher prices across most markets. Aggregates prices declined 0.9% primarily due to the regional mix effect of acquisitions in markets with lower absolute prices. Cement volumes and prices increased 39.3% and 10.7%, respectively, both driven by additional market demand. Gross profit from materials more than doubled to $10.1 million, compared to $4.3 million in the prior year quarter.

Products Results – Net revenue from products increased 40.5% to $98.8 million, compared to $70.4 million in the prior year quarter. Ready-mixed concrete volumes increased 52.0% driven by organic volume that was up 13.2% with the remainder attributable to acquisitions. Ready-mixed concrete prices increased 8.9%, largely benefitting from the pass through of higher industry cement prices. Asphalt pricing grew 17.5% due to a shift in product mix which included a lower percentage of base materials, while inclement weather resulted in a 30.8% reduction in volumes. Gross profit from products grew 66.7% to $19.0 million, compared to $11.4 million in the prior year quarter.

Liquidity and Capital Resources

In March 2015, Summit completed its initial public offering of Class A common stock, raising net proceeds of approximately $433.0 million, including the full exercise of the underwriter’s option to purchase additional shares. In connection with the offering, Summit increased its revolving credit facility to $235.0 million and extended the maturity date to March 2020. As of March 28, 2015, the Company’s borrowing capacity was fully available on its undrawn revolver (excluding $23.3 million of letters of credit).

At March 28, 2015, the Company had cash of $315.0 million and total outstanding debt of $1,062.7 million, as compared to cash of $13.2 million and total outstanding debt of approximately $1,064.9 million at December 27, 2014.

Subsequent Events

Acquisition Activity

In April 2015, Summit signed a definitive agreement with Lafarge North America Inc. (“Lafarge”) to acquire its 1.2 million short ton capacity cement plant in Davenport, Iowa and seven cement distribution terminals (“Davenport Assets”) for a cash purchase price of $450.0 million plus an exchange of Summit’s Bettendorf, Iowa cement distribution terminal. The transaction is expected to close in the third quarter of 2015, pending final regulatory approval and the closing of the merger of Lafarge’s parent company, Lafarge S.A., with Holcim Ltd.

The Davenport Assets will be integrated with Summit’s Continental Cement Company operations. The combined business is expected to have 2.5 million short tons of cement capacity across two plants located in Hannibal, Missouri and Davenport and eight cement distribution terminals with a total import capacity of 1.5 million short tons from Minneapolis, Minnesota to New Orleans, Louisiana.

The cash purchase price of $450.0 million is expected to be funded primarily by an increase of Summit’s existing term debt facility together with new equity. Under the terms of the agreement, Summit has agreed to pay an initial purchase price of $370.0 million upon closing of the transaction, with the remaining purchase price of $80.0 million due by December 31, 2015.

Liquidity

In April 2015, in connection with its initial public offering, the Company redeemed $288.2 million aggregate principal amount of its outstanding 10 ¹⁄₂% Senior Notes due 2020 at a redemption price equal to par, plus an applicable premium of $38.2 million, plus $5.2 million of accrued and unpaid interest.

Webcast and Conference Call Information

Summit will conduct a conference call at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Tuesday, May 5, 2015 to review first quarter results, discuss recent events, and conduct a question-and-answer period. A webcast of the conference call will be available in the Investors section of Summit’s website at www.summit-materials.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

To participate in the telephone conference call:

To listen to a replay of the telephone conference call:

About Summit Materials

Summit Materials is a leading vertically integrated construction materials company that supplies aggregates, cement, ready-mixed concrete and asphalt in the United States and western Canada. Summit is a geographically diverse, aggregates-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the residential, nonresidential, and public infrastructure end markets. Summit has completed more than 30 acquisitions since its founding and continues to pursue growth opportunities in new and existing markets.

For more information about Summit Materials, please visit www.summit-materials.com.

Non-GAAP Financial Measures

The rules of the SEC regulate the use in filings with the SEC of “non-GAAP financial measures,” such as Adjusted EBITDA, Further Adjusted EBITDA, gross profit, adjusted net loss per share, and free cash flow which are derived on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). We have provided Adjusted EBITDA, Further Adjusted EBITDA, gross profit, adjusted net loss per share, and free cash flow because, among other things, we believe that they provide investors with additional information to measure our performance, evaluate our ability to service our debt and evaluate certain flexibility under our restrictive covenants. Further Adjusted EBITDA is defined in our senior secured credit facilities and used to measure compliance with covenants, including interest coverage and debt incurrence, and is used to measure our debt incurrence and restricted payment capacity under the indenture governing our senior notes. Our use of the terms Adjusted EBITDA, Further Adjusted EBITDA, gross profit and adjusted net loss per share, may vary from the use of such terms by others and should not be considered as alternatives to net income (loss), operating income (loss), revenue or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or to cash flows as measures of liquidity.

Adjusted EBITDA and Further Adjusted EBITDA and other non-GAAP measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA and Further Adjusted EBITDA are that these measures do not reflect: (i) our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, our working capital needs; (iii) interest expense or cash requirements necessary to service interest and principal payments on our debt; (iv) income tax payments we are required to make; and (v) any cash requirements for the replacement cost of assets being depreciated or amortized. Because of these limitations, we rely primarily on our U.S. GAAP results and use Adjusted EBITDA and Further Adjusted EBITDA only supplementally.

Adjusted EBITDA, Further Adjusted EBITDA, gross profit, adjusted net loss per share, and free cash flow reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results and the accompanying reconciliations to U.S. GAAP financial measures included in the tables attached to this press release, may provide a more complete understanding of factors and trends affecting our business. However, non-GAAP financial measures should not be construed as being more important than other comparable U.S. GAAP financial measures and should be considered in conjunction with the U.S. GAAP measures. In addition, non-GAAP financial measures are not standardized; therefore, it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.

Reconciliations of the non-GAAP measures used in this press release are included in the tables attached to this press release.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. Any and all statements made relating to the timing, funding of, and expectations for our anticipated purchase of the Davenport Assets, the macroeconomic outlook for our markets, potential acquisition activity, our estimated and projected earnings, margins, costs, expenditures, cash flows, sales volumes and financial results are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results.

In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in our prospectus dated March 11, 2015, filed with the SEC on March 13, 2015. Such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.

We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The following table reconciles operating income to gross profit for the three months ended March 28, 2015 and March 29, 2014.

The following table reconciles net cash used for operating activities to free cash flow for the three months ended March 28, 2015 and March 29, 2014.

Summit Materials, Inc.
Investor Relations:
303-515-5159
Investorrelations@summit-materials.com