TopBuild Reports First Quarter 2016 Financial Results

Net sales Increased 15.5% to $414 Million

$19.8 Million Operating Profit $20.8 Million on an Adjusted Basis, up $14.1 Million

$0.29 Diluted Net Income per Share $0.31 on an Adjusted Basis, up $0.25 per Share

DAYTONA BEACH, Fla., May 11, 2016 /PRNewswire/ -- TopBuild Corp. (NYSE: BLD), the leading installer and distributor of insulation products to the U.S. construction industry, reported financial results for the quarter ended March 31, 2016. 

TopBuild Corp. -  www.topbuild.com (PRNewsFoto/TopBuild Corp.)

Jerry Volas, Chief Executive Officer, stated, "We had an excellent quarter. The mild winter was a strong contributor to our top line results and our focus on operating efficiency drove a significant improvement in our first quarter operating margin to an adjusted 5.0% from an adjusted 1.9% a year ago.  As we look to the remainder of the year, we expect business to remain strong.  As a reminder, the first quarter is historically the lowest of the year, reflecting the seasonality of our business.  Although we expect that to remain true this year, the magnitude of this seasonality may be less significant due to the strong first quarter.    

"From a macro perspective, we believe the U.S. housing recovery will continue for the next several years. Although we expect that TopBuild will certainly be advantaged by that, we intend to outperform that recovery with organic growth and strategically selective acquisitions in both the residential and commercial space. Additionally, we believe that continued improvements in operating efficiency will optimize the impact of this expected growth on operating margins."

First Quarter Financial Highlights
(unless otherwise indicated, comparisons are to quarter ended March 31, 2015)

The Company noted that it had one operating adjustment in the first quarter of 2016, totaling $1.0 million, primarily related to the closing of 13 branches and headcount reductions at its corporate headquarters, both of which were announced in March 2016. 

  • Net sales increased 15.5% to $414.0 million.
  • Gross margin was 21.6%, up 100 basis points.
  • Operating profit was $19.8 million compared to a loss of $1.1 million.  Adjusted operating profit was $20.8 million compared to $6.6 million.
  • Operating margin was 4.8%.  Adjusted operating margin was 5.0%, up 310 basis points.
  • Net income was $11.1 million, or $0.29 per diluted share, compared to a loss of $3.8 million or $0.10 per diluted share.  Adjusted net income was $11.9 million, or $0.31 per diluted share, compared to $2.2 million or $0.06 per diluted share. 

At quarter end, the Company had cash and cash equivalents of $108 million and availability under its revolving credit facility of $70 million for total liquidity of $178 million. 

Operating Segment Highlights
(all comparisons are to quarter ended March 31, 2015)

  • Installation (TruTeamSM)
    • Net sales increased 16.9%.
    • Operating margin was 4.9%.  On an adjusted basis, operating margin was 5.3%, a 530 basis point improvement.
  • Distribution (Service Partners®)
    • Net sales rose 11.3%.
    • Operating margin was 8.9%.  On an adjusted basis, operating margin was 9.0%, a 110 basis point improvement. 

Share Repurchase Program
On March 3, 2016, the Company announced that its Board of Directors had approved a share repurchase program.  Under the program, the Company may purchase up to $50 million in shares of its common stock during a twelve-month period ending February 28, 2017.  In the first quarter, the Company repurchased 53,408 shares at an average price of $28.81.

Repurchases will be made from time to time at the Company's discretion, based on ongoing assessments of the capital needs of the Company, the market price of its common stock and general market conditions.  The program may be suspended or discontinued at any time.

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 the Company's first quarter 2016 financial results is scheduled for today, Wednesday, May 11, 2016, at 9:00 a.m. Eastern Time.  Call participants may access the call by dialing (800) 667-9701.  The conference call will be webcast simultaneously on the "Investors" section of the Company's website at www.topbuild.com.

A replay of the call will be available for one week on TopBuild's website or by phone by dialing
(800) 633-8284.  The replay passcode is 21807487.

Use of Non-GAAP Financial Measures
The "adjusted" financial measures presented above are not calculated in accordance with 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. Such non-GAAP financial measures are reconciled to their closest GAAP financial measures in tables contained in this news release. Non-GAAP financial measures and ratios 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.

About TopBuild
TopBuild Corp., headquartered in Daytona Beach, Florida, is the leading installer and distributor of insulation products to the U.S. construction industry. We provide insulation services nationwide through TruTeamSM, which has over 175 branches in 40 states.  Our Service Partners® business distributes insulation from over 70 branches in 33 states.  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 visit our website at www.topbuild.com.

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," "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, it 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 common share amounts)
















Three Months Ended March 31, 



2016


2015

Net sales


$

414,024


$

358,460

Cost of sales



324,569



284,644

Gross profit



89,455



73,816








Selling, general, and administrative expense



69,688



74,963

Operating profit (loss)



19,767



(1,147)








Other income (expense), net:







Interest expense



(1,673)



(3,161)

Other, net 



75



8

Other expense, net



(1,598)



(3,153)

Income (loss) from continuing operations before income taxes



18,169



(4,300)








Income tax (expense) benefit from continuing operations



(7,053)



500

Income (loss) from continuing operations



11,116



(3,800)








Income from discontinued operations, net





1

Net income (loss)


$

11,116


$

(3,799)








Income (loss) per common share:







Basic:







  Income (loss) from continuing operations


$

0.29


$

(0.10)

  Income from discontinued operations, net





  Net income (loss)


$

0.29


$

(0.10)








Diluted:







  Income (loss) from continuing operations


$

0.29


$

(0.10)

  Income from discontinued operations, net





  Net income (loss)


$

0.29


$

(0.10)








 

 

 

TopBuild Corp.








Condensed Consolidated Balance Sheets and Other Financial Data (Unaudited)








(dollars in thousands)










As of




March 31, 


December 31, 




2016


2015


ASSETS








Current assets:








Cash and cash equivalents


$

108,150


$

112,848


Receivables, net of an allowance for doubtful accounts of $3,334 and $3,399 at March 31, 2016
and December 31, 2015, respectively



243,000



235,549


Inventories, net



108,016



118,701


Prepaid expenses and other current assets



6,096



13,263


Total current assets



465,262



480,361










Property and equipment, net



92,098



93,066


Goodwill



1,044,041



1,044,041


Other intangible assets, net



1,778



1,987


Deferred tax assets, net



20,549



20,549


Other assets



2,127



2,245


Total assets


$

1,625,855


$

1,642,249










LIABILITIES








Current liabilities:








Accounts payable


$

223,308


$

253,311


Current portion of long-term debt



17,500



15,000


Accrued liabilities



65,527



58,369


Total current liabilities



306,335



326,680










Long-term debt



173,543



178,457


Deferred tax liabilities, net



181,251



181,254


Long-term portion of insurance reserves



38,641



39,655


Other liabilities



435



474


Total liabilities



700,205



726,520










EQUITY



925,650



915,729


Total liabilities and equity


$

1,625,855


$

1,642,249












 As of 




March 31, 


March 31, 




2016


2015


Other Financial Data








Working Capital Days








Receivable days



44



46


Inventory days



30



32


Accounts payable days



90



89


Working capital


$

127,708


$

124,121


Working capital as a percentage of net sales for the trailing twelve months



7.6

%


8.1

%









 

 

 

TopBuild Corp.







Condensed Consolidated Statement of Cash Flows (Unaudited)







(in thousands)























Three Months Ended March 31, 



2016


2015

Net Cash From (For) Operating Activities:






Net income (loss)


$

11,116


$

(3,799)

Adjustments to reconcile net income (loss) to net cash from (for) operating activities:







Depreciation and amortization



2,895



3,053

Share-based compensation



1,600



808

Loss on sale or abandonment of property and equipment



950



97

Provision for bad debt expense



1,054



944

Loss from inventory obsolescence



335



358

Deferred income taxes, net



(3)



(500)

Changes in certain assets and liabilities:







Receivables, net



(8,505)



2,047

Inventories, net



10,350



2,223

Prepaid expenses and other current assets



7,167



450

Accounts payable



(29,846)



(31,265)

Long-term portion of insurance reserves



(1,014)



1,713

Accrued liabilities



7,158



5,232

Other, net



96



Net cash from (for) operating activities



3,353



(18,639)








Cash Flows From (For) Investing Activities:







Purchases of property and equipment



(2,900)



(2,298)

Proceeds from sale of property and equipment



76



369

Other, net 



68



140

Net cash for investing activities



(2,756)



(1,789)








Cash Flows From (For) Financing Activities:







Net transfer from Former Parent





21,062

Repayment of long-term debt



(2,500)



Taxes withheld and paid on employees' equity awards



(1,256)



Repurchase of shares of common stock



(1,539)



Net cash (for) from financing activities



(5,295)



21,062








Cash and Cash Equivalents







(Decrease) increase for the period



(4,698)



634

Beginning of year



112,848



2,965

End of period


$

108,150


$

3,599








Supplemental disclosure of noncash investing activities:







Accruals for property and equipment


$

426


$








 

 

 

TopBuild Corp.











Segment Data (Unaudited)











(dollars in thousands)
























Three Months Ended March 31, 






2016



 

2015


Change

Installation











Sales


$

272,878



$

233,363


16.9

%












Operating profit (loss), as reported


$

13,506



$

(1,032)




Operating margin, as reported



4.9

%


(0.4)

%













Rationalization charges



828




642




Legal adjustments, net






350




Operating profit (loss), as adjusted


$

14,334



$

(40)




Operating margin, as adjusted



5.3

%


(0.0)

%













Distribution 











Sales


$

160,888



$

144,611


11.3

%












Operating profit, as reported


$

14,333



$

11,377




Operating margin, as reported



8.9

%


7.9

%













Rationalization charges



83







Operating profit, as adjusted


$

14,416



$

11,377




Operating margin, as adjusted



9.0

%


7.9

%













Total











Sales before eliminations


$

433,766



$

377,974




Intercompany eliminations 



(19,742)




(19,514)




Net sales after eliminations


$

414,024



$

358,460


15.5

%












Operating profit, as reported - segment


$

27,839



$

10,345




General corporate expense, net



(4,720)




(7,903)




Intercompany eliminations and other adjustments



(3,352)




(3,589)




Operating profit (loss), as reported


$

19,767



$

(1,147)




Operating margin, as reported



4.8

%


(0.3)

%













Rationalization charges



1,008




642




Legal adjustments, net






350




Masco general corporate expense, net






7,903




Masco direct corporate expense






4,397




Expected standalone corporate expense






(5,500)




Operating profit, as adjusted


$

20,775



$

6,645




Operating margin, as adjusted



5.0

%


1.9

%













Share-based compensation



1,600




808




Depreciation and amortization



2,895




3,053




EBITDA, as adjusted


$

25,270



$

10,506















Sales change period over period



55,564








EBITDA, as adjusted change period over period



14,764








EBITDA, as adjusted as percentage of sales change



26.6

%

















2015 Rationalization charges included spin-off charges.











2016 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, 




2016


2015


Gross Profit and Operating Profit Reconciliations
















Net sales


$

414,024


$

358,460










Gross profit, as reported


$

89,455


$

73,816










Gross profit, as adjusted


$

89,455


$

73,816










Gross margin, as reported



21.6

%

20.6

%

Gross margin, as adjusted



21.6

%

20.6

%









Operating profit (loss), as reported


$

19,767


$

(1,147)










Rationalization charges



1,008



642


Legal adjustments, net





350


Masco general corporate expense, net





7,903


Masco direct corporate expense





4,397


Expected standalone corporate expense





(5,500)


Operating profit, as adjusted


$

20,775


$

6,645










Operating margin, as reported



4.8

%

(0.3)

%

Operating margin, as adjusted



5.0

%

1.9

%









Income Per Common Share Reconciliation
















Income (loss) from continuing operations before income taxes, as reported


$

18,169


$

(4,300)










Rationalization charges



1,008



642


Legal adjustments, net





350


Masco general corporate expense, net





7,903


Masco direct corporate expense





4,397


Expected standalone corporate expense





(5,500)


Income from continuing operations before income taxes, as adjusted



19,177



3,492










Tax rate at 38% and 36% for 2016 and 2015, respectively



(7,287)



(1,257)


Income from continuing operations, as adjusted


$

11,890


$

2,235










Income per common share, as adjusted


$

0.31


$

0.06










Average diluted common shares outstanding



37,899,110



37,667,947










† 2015 Rationalization charges included spin-off charges.








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SOURCE TopBuild Corp.