Foundation Building Materials (FBM), one of the nation’s biggest dealers in wallboard, steel studs, and mechanical insulation, reported today that it swung to net loss of $1.1 million in the first quarter from a $3.9 million profit in the year-earlier period. Sales rose 11.9% to $536.3 million; base business sales climbed 4.9%.
“The decrease in net income was primarily due to a decrease in gains from derivatives of $13.1 million, partially offset by higher income from operations of $4.7 million and lower income taxes of $3.4 million,” the Tustin, Calif.-based company said in a news release.
Gross profit rose 10.4% to $154.4 million, leading the gross margin to slip to 28.8% from 29.2% in the January-to-March 2017 quarter. FBM said a change in product mix caused the decline in margin. Selling, general, and administrative expenses rose 7.4% to $121.4 million.
“Despite adverse weather early in the year, we finished the quarter strong, and we look forward to building on this positive momentum in the business as we continue to deliver long-term value to our customers and stockholders,” Ruben Mendoza, president and CEO, said in a news release.
FBM prefers to measure itself in terms of adjusted EBITDA–earnings before interest, taxes, depreciation, amortization, unrealized gains on derivaties, IPO and “public company readiness expenses,” stock-based compensation, non-cash purchase accounting effects, losses on disposals of property and equipment, transaction costs, and management fees. By that metric, adjusted EBITDA reached $35 million, or 6.5% of revenues, up from a year-earlier $32.6 million (6.8% of revenues). Adjusted net income totaled $400,000 compared with an $800,000 loss one year ago.
The company’s balance sheet shows that goodwill accounted for $466 million of its $1.39 billion in assets as of March 31. The liabilities side included $536.7 million in long-term debt.
FBM’s specialty building products unit recorded a 10.8% rise in sales to $463.7 million. Roughly $32 million of the $45.2 million increase from a year ago came from acquired branches and “existing branches that were strategically combined with acquired branches,” the company said. Gross profit for this sector totaled $134.4 million, or 9.8% of sales, producing a gross margin of 29.0% vs. 29.3% a year earlier.
Meanwhile, the mechanical insulation units sales jumped 19.1% to $72.6 million. Gross profit climbed 14.4% to $17.5 million, while gross margin slipped to 27.5% from 28.7%.
The dealer noted it acquired two companies with seven branches total during the first quarter. Those two deals will boost sales by $27 million ot $29 million, FBM said.
