3 of 4 Horizon One targets achieved in year
after strategy launch
Over $470 million in proceeds generated from
divestitures
Reiterates and Provides Additional Details on
its Path to Horizon Three Targeted Returns and Margins
Summit Materials, Inc. (NYSE: SUM) (“Summit,” “Summit
Materials,” "Summit Inc." or the “Company”), a leading vertically
integrated construction materials company, today announced
highlights that are being presented at its Investor Day today in
New York City.
“When Summit launched its ambitious Elevate Strategy in March
2021, we said we would provide regular progress updates,” commented
Summit Materials CEO Anne Noonan. “Today we are providing more
details on our success in our path to enhanced growth and value
creation. Specifically, today’s presentation highlights the
strengthening quality of Summit’s earnings and margin profile,
demonstrates specific accomplishments in portfolio optimization and
debt reduction, shows evidence of strong pricing and demand
fundamentals, and describes our priorities as we are now in the
best capital allocation position in Company history.”
At the launch of its Elevate Strategy, Summit presented
objectives of less than three times’ net debt to EBITDA, 10% or
higher Return on Invested Capital (“ROIC”), and greater than 30%
Adjusted EBITDA margin to be achieved over three Horizons. The
Company also presented specific Horizon One objectives of less than
three times’ net debt to EBITDA, achieving a 9% ROIC, 23-25%
Adjusted EBITDA margin, and completing 10 to 12 divestitures
yielding up to $200 million in total proceeds.
At January 1, 2022, just 9 months after the launch of Elevate
Summit, the Company achieved significant progress on its Horizon
One targets: it achieved less than three times’ net debt to EBITDA,
reporting 2.5 times' net debt to EBITDA; it achieved a ROIC of
8.8%, just shy of its 9% goal; and reported Adjusted EBITDA margin
of 23.3%. As of today, the Company has completed 10 divestitures
through its Elevate Strategy, yielding approximately $470 million
in total proceeds on a GAAP basis, with an average selling multiple
of over 10 times’ Adjusted EBITDA. Of the 10 divestitures, 8 were
in downstream businesses, and 7 resulted in long term aggregates
supply contracts.
The Elevate strategy has also resulted in additional financial
flexibility. In March 2022, Summit’s board authorized the Company’s
first ever share repurchase program. The Company repurchased 1.5
million shares of Class A common stock for $47.5 million through
the end of the first quarter 2022. As of April 2, 2022,
approximately $202.5 million remained available for share
repurchases under the share repurchase program. The Company is also
planning to use a portion of the proceeds from recent divestitures
to repay approximately $100 million on its Term Loan.
“Since we launched the Elevate Strategy last year, Summit has
significantly improved its quality of earnings, reduced its
leverage, shed non-core businesses, repurchased stock, and opened
up new capital allocation opportunities,” added Summit Materials
CFO Brian Harris. “In 2020, Summit’s Adjusted EBITDA contribution
from materials was approximately 63%, and in 2021, it grew to 68%
as we pursued the Asset Light component of our strategy. We now
believe 75% or higher is an appropriate target for materials
Adjusted EBITDA contribution in Horizon Two, and continue to pursue
the Elevate pillars of Market Leadership, Asset Light, Social
Responsibility and Innovation. As we look to the future, we see
opportunities for both organic and inorganic growth as we add to
key market positions, maximize the capital efficiency of our
business, help our stakeholders achieve their sustainability
objectives, and drive innovative approaches to serving our
customers.”
2022 Guidance
For the full year 2022, Summit is updating its Adjusted EBITDA
guidance to reflect the divestiture of Hinkle Contracting, LLC,
which was announced on May 16, 2022. The Company now expects
Adjusted EBITDA guidance of approximately $500 million to $530
million, a revision from $529 million to $557 million previously,
and continues to expect 2022 capital expenditure of approximately
$270 million to $290 million, including greenfield projects.
Investor Day Webcast Information
Summit Materials will conduct a conference call on Tuesday, May
24, 2022 beginning at 9:00am eastern time (7:00am mountain
time).
Chief Executive Officer Anne Noonan, Chief Financial Officer
Brian Harris, Chief Strategy Officer Kekin Ghelani, EVP of ESG and
Head of Investor Relations Karli Anderson, as well as Summit’s
Regional Presidents will lead an investor presentation and Q&A
session that will focus on the Elevate Summit Strategy, growth
drivers, ESG initiatives, as well as the Company’s capital
allocation priorities.
A live webcast of the investor day presentation, along with
supporting materials, will be available on the day of the event at
the following link:
https://summit2022investorday.q4web.com/home/default.aspx.
To listen live to the investor day:
Toll Free Number:
1-877-823-8690
International Number:
1-825-312-2236
Conference ID:
3986328
A replay of the webcast and accompanying presentation materials
will be available in the Investors section of Summit’s website at
investors.summit-materials.com shortly following the conclusion of
the event.
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 Reconciliations of
Non-GAAP Financial Measures
($ in thousands, except share and
per share amounts)
The tables below reconcile our
net income (loss) to Adjusted EBITDA by segment for the year ended
January 1, 2022.
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
Year ended January 1,
2022
by Segment
West
East
Cement
Corporate
Consolidated
($ in thousands)
Net income (loss)
$
181,253
$
122,321
$
95,352
$
(244,645
)
$
154,281
Interest (income) expense
(11,460
)
(8,872
)
(17,217
)
129,789
92,240
Income tax expense
2,697
114
—
41,545
44,356
Depreciation, depletion and
amortization
98,596
84,912
38,685
4,249
226,442
EBITDA
$
271,086
$
198,475
$
116,820
$
(69,062
)
$
517,319
Accretion
874
1,711
339
—
2,924
Loss on debt financings
—
—
—
6,016
6,016
Tax receivable agreement benefit
—
—
—
(6,779
)
(6,779
)
Gain on sale of businesses
(355
)
(19,656
)
—
—
(20,011
)
Non-cash compensation
—
—
—
19,705
19,705
Other
(45
)
953
—
—
908
Adjusted EBITDA
$
271,560
$
181,483
$
117,159
$
(50,120
)
$
520,082
Adjusted EBITDA Margin (1)
23.2
%
23.7
%
39.3
%
23.3
%
________________________________________________
(1) Adjusted EBITDA Margin is defined as Adjusted EBITDA as a
percentage of net revenue.
The table below reconciles our Adjusted EBITDA to Further
Adjusted EBITDA and our calculation of Net Debt to arrive at our
Net Leverage Ratio for the year ended January 1, 2022.
Year ended
January 1,
($ in thousands)
2022
Adjusted EBITDA
$
520,082
Transaction costs (1)
3,252
EBITDA for certain acquisitions (2)
(2,992
)
Further Adjusted EBITDA (3)
$
520,342
Long-term debt, including current
portion
$
1,609,960
Acquisition related liabilities
46,479
Finance leases and other
32,606
Less: Cash and cash equivalents
(380,961
)
Net Debt
$
1,308,084
Net Leverage Ratio (4)
2.5
x
_____________________________________
(1) Under the terms of our credit facilities, we include
transaction expenses associated with acquisitions and divestitures,
consisting primarily of accounting, legal, valuation and financial
advisory fees.
(2) Under the terms of our credit facilities, we include EBITDA
from our acquisitions, net of dispositions, in each fiscal year for
periods prior to acquisition.
(3) Further Adjusted EBITDA is defined as Adjusted EBITDA plus
transaction costs and the EBITDA contribution for certain recent
acquisitions.
(4) Net Leverage Ratio is defined as Net Debt divided by Further
Adjusted EBITDA.
The table below calculates our Return on Invested Capital
("ROIC") for the year ended January 1, 2022.
Return on Invested Capital
Calculation
5-Quarter Average(1)
($ in thousands)
Q4 2021
Total Liabilities & Shareholders
Equity
$
4,313,485
Less: Cash
(377,213
)
Less: TRA Long-Term Liability
(326,749
)
Less: Trade AP
(141,498
)
Less: Billings in Excess of Costs
(12,397
)
Less: Accrued Expenses
(145,183
)
Total Investment
$
3,310,446
FY 2021
Adjusted EBITDA
$
520,082
Less: Depreciation, depletion and
amortization (DD&A)
(226,442
)
Less: Accretion
(2,924
)
Adj. EBITDA, less DD&A and
accretion
$
290,716
Divided by: Total Investment
$
3,310,446
ROIC
8.8
%
_____________________________________
(1) 5 quarter average reflects reported average of balance sheet
items for the 5 quarters ended January 1, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220524005403/en/
Andy Larkin VP, Investor Relations
andy.larkin@summit-materials.com 720-618-6013
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