Specialty dealer Foundation Building Materials (FBM) reported mixed results in its third quarter earnings report, with the company posting a net loss for the quarter despite net sales experiencing healthy growth. Tustin, Calif.-based FBM recorded a net loss of $37.6 million from continuing operations in the quarter, a loss primarily attributed to the loss of $58.5 million related to the refinancing of debt.
The 10th-largest dealer on the ProSales 100 also reported third quarter net sales of $542.3 million, a 15.9% increase from the same period during 2017. FBM's net sales from base business branches contributed $52.3 million, or 12.5%, of the overall increase while net sales from acquired branches and existing branches that were strategically combined contributed $22.1 million of the overall increase.
“We delivered strong third-quarter results highlighted by year-over-year net sales growth of 15.9% and base business growth of 12.5%,” FBM president and CEO Ruben Mendoza said in a news release. “Our record results demonstrate the on-going strength of our non-residential construction and commercial repair and remodel markets.”
FBM entered an agreement to sell its mechanical insulation business for $122.5 million on September 26, 2018, and the company expects net proceeds of $116.0 million to be used to pay down debt.
FBM's gross profit for the third quarter of 2018 was $154.0 million, a $18.2 million increase from the year-earlier period. The gross profit increase was primarily attributed to the growth in net sales. However, FBM's gross margin slipped 0.6 points from the year-earlier period to 28.4% of sales. This decline was attributed to higher product costs.
FBM measures itself in EBITDA, encompassing earnings before interest, taxes, depreciation, amortization, gains or losses on financial derivatives, stock-based compensation, losses on disposal of property and equipment, and transaction costs. FBM's adjusted EBITDA for the quarter was $43.7 million, an increase of 20.3% compared to 3Q 2017 and 8.1% of sales.
FBM completed the acquisition of Agan Drywall Supply in October, adding three branches to serve the South Dakota and Iowa markets. The company anticipates Agan will contribute $5.0-$7.0 million to net sales in the fourth quarter. Through November, FBM has completed four acquisitions totaling 16 branches with combined annualized net sales in excess of $130 million. The company has opened four specialty building products greenfield branches as of September 30 and anticipates opening two more branches by the end of 2018.
FBM's balance sheet as of September 30 shows goodwill accounts for $481.3 million of FBM's $1.46 billion in assets. The liability side reports $438.8 million in long-term debt, a decline of over $95.5 million since December 31, 2017.
