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Summit Materials, Inc. Reports Second Quarter 2022 Results

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Record Quarterly Net Income

Strongest Balance Sheet in Company History

Net Leverage Ratio remains below Elevate Summit target

DENVER, August 03, 2022--(BUSINESS WIRE)--Summit Materials, Inc. (NYSE: SUM) ("Summit," "Summit Materials," "Summit Inc." or the "Company"), a leading vertically integrated construction materials company, today announced results for the second quarter ended July 2, 2022 ("second quarter"). All comparisons are versus the quarter ended July 3, 2021 unless noted otherwise.

Three months ended

($ in thousands)

July 2, 2022

July 3, 2021

% Chg vs. PY

Net revenue

$

631,918

$

618,530

2.2

%

Operating income

111,236

95,923

16.0

%

Net income

192,766

57,758

233.7

%

Basic EPS

$

1.61

$

0.48

235.4

%

Adjusted Cash Gross Profit

202,349

200,201

1.1

%

Adjusted EBITDA

164,034

163,792

0.1

%

"Today, Summit is reporting record quarterly earnings and the lowest net leverage in Company history as we continue to successfully execute on our Elevate Strategy," commented Anne Noonan, Summit Materials President and CEO. "In 2022, we have already achieved a mid to high single digit price increases in each line of business, with asphalt achieving double digit price increases. We continue to characterize current market conditions as favorable towards the potential for additional price increases. Our portfolio optimization efforts are enhancing the contributions from materials and opening up opportunities to invest strategically. We are pulling all available self-help margin levers to improve performance and offset inflation. We are maintaining our 2022 Adjusted EBITDA guidance and remain confident that Summit Materials is on track for another year of strong performance."

Brian Harris, CFO of Summit Materials, added, "Armed with the strongest balance sheet in Summit history, we are well positioned to pursue a broad range of high return capital allocation priorities that are value creative to Summit shareholders. As part of our Horizon Two objective, we will invest to grow priority markets. To us, that means advancing our market leadership position through growth initiatives, including greenfields, as well as pursuing attractive M&A opportunities that align with our portfolio optimization criteria. This financial flexibility together with sound execution sets Summit Materials up for growth and strong returns."

In the three months ended July 2, 2022, Summit Materials sold one business in the East segment, resulting in cash proceeds of $293.9 million and a total gain on disposition of $156.1 million. To date, as part of its Elevate Summit Strategy, the Company has received $470.1 million in proceeds from a total of ten divestitures.

During the three months ended July 2, 2022, Summit Materials repaid $72.4 million of its term loan under provisions related to the divestitures of businesses.

2022 Guidance

For the full year 2022, Summit is reiterating its Adjusted EBITDA guidance of approximately $500 million to $530 million, and continues to expect 2022 capital expenditures of approximately $270 million to $290 million, including greenfield projects.

Second Quarter 2022 | Total Company Results

Net Revenue increased $13.4 million, or 2.2% in the second quarter to $631.9 million, due to increases in average sales prices across all lines of business that more than offset volume declines due primarily to divestitures.

Operating income increased $15.3 million, or 16.0% in the second quarter to $111.2 million, primarily as net revenue gains and decreases in depletion, amortization and accretion expenses outpaced increases in cost of revenue. Summit's operating margin percentage for the three months ended July 2, 2022 increased to 17.6% from 15.5%, from the comparable period a year ago.

Net income attributable to Summit Inc. increased to $190.1 million, or $1.61 per basic share, compared to $56.7 million, or $0.48 per basic share in the comparable prior year period. Summit reported adjusted diluted net income of $71.8 million, or $0.60 per adjusted diluted share as compared to $58.0 million, or $0.49 per adjusted diluted share in the prior year period.

Adjusted EBITDA increased $0.2 million, or 0.1% to $164.0 million as net revenue growth was mostly offset by higher cost of revenue.

Second Quarter 2022 | Results by Line of Business

Aggregates Business: Aggregates net revenues increased by $8.0 million to $161.5 million in the second quarter. Aggregates adjusted cash gross profit margin decreased to 53.7% in the second quarter as compared to 55.9% in the second quarter 2021. Aggregates sales volume decreased 1.6% in the second quarter as solid organic volume growth driven by the West Segment was more than offset by volume decreases in certain markets due to divestitures. Average selling prices for aggregates increased 4.7% in the second quarter with growth across both reporting segments.

Cement Business: Cement segment net revenues increased 9.1% to $93.7 million in the second quarter. Cement segment adjusted cash gross profit margin increased to 48.6% in the second quarter, compared to 47.2% in the prior year period, reflecting strong pricing gains that more than offset higher variable costs. Sales volume of cement decreased 0.4% and average selling prices increased 7.5% in the second quarter.

Products Business: Products net revenues were $294.6 million in the second quarter, compared to $292.1 million in the prior year period. Products adjusted cash gross profit margin decreased to 18.2% in the second quarter, versus 18.8% in the prior year period. Average sales price for ready-mix concrete increased 9.7% driven by pricing growth across the majority of markets, with strong, double-digit growth in the Intermountain West and Texas. Sales volumes of ready-mix concrete decreased 9.1% due to divestitures and cement supply constraints. Average selling prices for asphalt increased 18.9%, driven by strong pricing gains in Texas and the Intermountain West market. Asphalt volume decreased 15.2% due primarily to the impact of divestitures.

Second Quarter 2022 | Results By Reporting Segment

West Segment: The West Segment operating income increased 17.6% to $62.6 million and Adjusted EBITDA increased 7.5% to $84.6 million in the second quarter due primarily to pricing gains and aggregates volume growth that more than offset lower downstream volumes and inflationary cost conditions. Aggregates revenue in the second quarter increased 11.8% on 4.2% pricing growth and 7.3% volume growth, which was driven by strong demand conditions in Texas and British Columbia. Ready-mix concrete revenue in the second quarter increased 10.7% as 11.2% pricing growth was partially offset by lower volumes in the Intermountain West and North Texas. Asphalt revenue increased 10.8% in the second quarter as volumes decreased 5.0%, due to a divestiture made in the second quarter of 2021. Asphalt sales prices increased 19.2% in the period.

East Segment: The East Segment operating income decreased 8.6% to $31.6 million and Adjusted EBITDA decreased 18.5% to $46.7 million in the second quarter. Lower operating income and Adjusted EBITDA reflects increased cost of revenue that exceeded pricing growth. Aggregates revenue decreased 4.1% versus the prior year period. Aggregates volumes decreased 9.9% as growth in the Georgia market was more than offset by divestitures and wet conditions in Kansas. Average selling prices for aggregates increased 6.6% led by strong growth in Georgia. Ready-mix concrete revenue decreased 37.0% as volumes decreased 38.2% due to divestitures. Excluding divestitures, volumes were flat in the second quarter relative to the year ago period. Ready-mix concrete average selling price increased 1.8% in the period. Due to divestitures, asphalt revenue decreased 22.0% as lower volumes were only partially offset by pricing growth. Asphalt average selling prices increased 16.1% to reflect increases in liquid asphalt costs.

Cement Segment: The Cement Segment operating income increased 30.7% to $33.7 million in the second quarter. Adjusted EBITDA increased $3.8 million as pricing gains and cost control measures more than offset inflationary conditions. In the second quarter, the Cement Segment reported a volume decrease of 0.4% and average selling price growth of 7.5%.

Liquidity and Capital Resources

As of July 2, 2022, the Company had $465.3 million in cash and $1.5 billion in debt outstanding. The Company's $345 million revolving credit facility has $324.6 million available after outstanding letters of credit. For the quarter ended July 2, 2022, cash flow provided by operations was $16.3 million and cash paid for capital expenditures was $129.6 million.

In March 2022, Summit’s board authorized the Company’s first ever share repurchase program. As of July 2, 2022, approximately $202.5 million remained available under the share repurchase program.

Webcast and Conference Call Information

Summit Materials will conduct a conference call on Thursday, August 4, 2022, at 11:00 a.m. eastern time (9:00 a.m. mountain time) to review the Company’s second quarter 2022 financial results, discuss recent events and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investors section of Summit’s website at investors.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.

A webcast of the second quarter results conference call and accompanying presentation materials will be available in the Investors section of Summit’s website at investors.summit-materials.com or at the following link: https://events.q4inc.com/attendee/118298228

To participate in the live teleconference for second quarter 2022 financial results:

Domestic Live:

1-888-330-3416

International Live:

1-646-960-0820

Conference ID:

1542153

To listen to a replay of the teleconference, which will be available through August 11, 2022:

Domestic Replay:

1-800-770-2030

International Replay:

1-647-362-9199

Conference ID:

1542153

About Summit Materials

Summit Materials is a leading vertically integrated materials-based company that supplies aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a geographically diverse, materials-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the public infrastructure, residential and nonresidential end markets. Summit has a strong track record of successful 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 Securities and Exchange Commission ("SEC") regulates the use of "non-GAAP financial measures," such as Adjusted Net Income (Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt 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 these measures 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. Our Adjusted Net Income (Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and Net Debt may vary from the use of such terms by others and should not be considered as alternatives to or more important than 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, Adjusted EBITDA Margin, 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 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; and (iv) income tax payments we are required to make. Because of these limitations, we rely primarily on our U.S. GAAP results and use Adjusted EBITDA, Adjusted EBITDA Margin and other non-GAAP measures on a supplemental basis.

Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, Adjusted Net Income (Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Free Cash Flow, Net Leverage and Net Debt reflect additional ways 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. 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 attached tables. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes "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. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. 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 effect 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 realized. 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 Summit Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022, as filed with the SEC, and any factors discussed in the section entitled "Risk Factors" in any of our subsequently filed SEC filings.

  • the impact of the COVID-19 pandemic, and responses to it, including vaccine mandates, or any similar crisis, on our business;

  • our dependence on the construction industry and the strength of the local economies in which we operate;

  • the cyclical nature of our business;

  • risks related to weather and seasonality;

  • risks associated with our capital-intensive business;

  • competition within our local markets;

  • our ability to execute on our acquisition strategy, successfully integrate acquisitions with our existing operations and retain key employees of acquired businesses;

  • our dependence on securing and permitting aggregate reserves in strategically located areas;

  • declines in public infrastructure construction and delays or reductions in governmental funding, including the funding by transportation authorities and other state agencies;

  • our reliance on private investment in infrastructure, which may be adversely affected by periods of economic stagnation and recession;

  • environmental, health, safety and climate change laws or governmental requirements or policies concerning zoning and land use;

  • costs associated with pending and future litigation;

  • rising prices for, or more limited availability of, commodities, labor and other production and delivery inputs as a result of inflation, supply chain challenges or otherwise;

  • conditions in the credit markets;

  • our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;

  • material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications;

  • cancellation of a significant number of contracts or our disqualification from bidding for new contracts;

  • special hazards related to our operations that may cause personal injury or property damage not covered by insurance;

  • unexpected factors affecting self-insurance claims and reserve estimates;

  • our substantial current level of indebtedness, including our exposure to variable interest rate risk;

  • our dependence on senior management and other key personnel, and our ability to retain and attract qualified personnel;

  • supply constraints or significant price fluctuations in the electricity and petroleum-based resources that we use, including diesel and liquid asphalt;

  • climate change and climate change legislation or regulations;

  • unexpected operational difficulties;

  • interruptions in our information technology systems and infrastructure; including cybersecurity and data leakage risks; and

  • potential labor disputes, strikes, other forms of work stoppage or other union activities.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. Any forward-looking statement that we make herein speaks only as of the date of this press release. 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 required by law.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

($ in thousands, except share and per share amounts)

Three months ended

Six months ended

July 2,

July 3,

July 2,

July 3,

2022

2021

2022

2021

Revenue:

Product

$

542,939

$

527,800

$

898,608

$

882,034

Service

88,979

90,730

125,805

134,977

Net revenue

631,918

618,530

1,024,413

1,017,011

Delivery and subcontract revenue

54,636

49,387

83,088

78,750

Total revenue

686,554

667,917

1,107,501

1,095,761

Cost of revenue (excluding items shown separately below):

Product

360,356

346,697

650,701

623,831

Service

69,213

71,632

103,796

111,829

Net cost of revenue

429,569

418,329

754,497

735,660

Delivery and subcontract cost

54,636

49,387

83,088

78,750

Total cost of revenue

484,205

467,716

837,585

814,410

General and administrative expenses

47,651

47,448

99,575

99,090

Depreciation, depletion, amortization and accretion

47,157

58,233

98,350

114,569

Gain on sale of property, plant and equipment

(3,695

)

(1,403

)

(4,950

)

(3,172

)

Operating income

111,236

95,923

76,941

70,864

Interest expense

20,599

24,216

40,748

48,402

Tax receivable agreement expense

954

954

(Gain) loss on sale of businesses

(156,053

)

236

(170,258

)

(15,432

)

Other income, net

(977

)

(4,695

)

(1,673

)

(9,584

)

Income from operations before taxes

246,713

76,166

207,170

47,478

Income tax expense

53,947

18,408

49,204

12,965

Net income

192,766

57,758

157,966

34,513

Net income attributable to Summit Holdings (1)

2,653

1,099

2,145

371

Net income attributable to Summit Inc.

$

190,113

$

56,659

$

155,821

$

34,142

Earnings per share of Class A common stock:

Basic

$

1.61

$

0.48

$

1.31

$

0.29

Diluted

$

1.60

$

0.48

$

1.31

$

0.29

Weighted average shares of Class A common stock:

Basic

118,242,880

117,637,036

118,590,173

116,650,881

Diluted

118,681,507

118,585,398

119,394,954

117,832,026

_______________

(1) Represents portion of business owned by pre-IPO investors rather than by Summit.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands, except share and per share amounts)

July 2,

January 1,

2022

2022

(unaudited)

(audited)

Assets

Current assets:

Cash and cash equivalents

$

465,315

$

380,961

Accounts receivable, net

327,266

287,226

Costs and estimated earnings in excess of billings

37,813

7,600

Inventories

209,875

180,760

Other current assets

14,393

11,827

Current assets held for sale

1,799

1,236

Total current assets

1,056,461

869,610

Property, plant and equipment, less accumulated depreciation, depletion and amortization (July 2, 2022 - $1,219,120 and January 1, 2022 - $1,266,513)

1,785,844

1,842,908

Goodwill

1,144,282

1,163,750

Intangible assets, less accumulated amortization (July 2, 2022 - $13,824 and January 1, 2022 - $15,269)

68,375

69,396

Deferred tax assets, less valuation allowance (July 2, 2022 - $1,113 and January 1, 2022 - $1,675)

161,942

204,566

Operating lease right-of-use assets

31,407

30,150

Other assets

42,492

58,745

Total assets

$

4,290,803

$

4,239,125

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of debt

$

6,354

$

6,354

Current portion of acquisition-related liabilities

12,846

13,110

Accounts payable

167,643

128,232

Accrued expenses

133,810

147,476

Current operating lease liabilities

6,504

6,497

Billings in excess of costs and estimated earnings

5,805

7,401

Total current liabilities

332,962

309,070

Long-term debt

1,516,705

1,591,019

Acquisition-related liabilities

23,849

33,369

Tax receivable agreement liability

327,501

326,548

Noncurrent operating lease liabilities

30,186

28,880

Other noncurrent liabilities

118,798

127,027

Total liabilities

2,350,001

2,415,913

Stockholders’ equity:

Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 118,114,612 and 118,705,108 shares issued and outstanding as of July 2, 2022 and January 1, 2022, respectively

1,182

1,188

Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 shares issued and outstanding as of July 2, 2022 and January 1, 2022

Additional paid-in capital

1,336,375

1,326,340

Accumulated earnings

587,283

478,956

Accumulated other comprehensive income

4,193

7,083

Stockholders’ equity

1,929,033

1,813,567

Noncontrolling interest in Summit Holdings

11,769

9,645

Total stockholders’ equity

1,940,802

1,823,212

Total liabilities and stockholders’ equity

$

4,290,803

$

4,239,125

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

Six months ended

July 2,

July 3,

2022

2021

Cash flows from operating activities:

Net income

$

157,966

$

34,513

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion, amortization and accretion

107,511

118,430

Share-based compensation expense

10,156

10,190

Net gain on asset and business disposals

(174,902

)

(18,390

)

Change in deferred tax asset, net