Summit Materials, Inc. Reports Third Quarter 2016 Results

Company Release - 11/2/2016 7:00 AM ET

- 3Q16 Net Income of $61.1 million, or $0.61 Basic Earnings per Share

- 3Q16 Adjusted Net Income of $73.5 million, or $0.73 Adjusted Diluted Earnings per Share

- Reaffirmed full year 2016 Adjusted EBITDA financial guidance of $360.0 million to $370.0 million

DENVER--(BUSINESS WIRE)-- Summit Materials, Inc. (NYSE:SUM, “Summit” or the “Company”), a leading vertically integrated construction materials company, today announced results for the third quarter of 2016. For the three months ended October 1, 2016, the Company generated basic earnings per share of $0.61 and adjusted diluted earnings per share of $0.73 on adjusted net income of $73.5 million, an increase of more than 15% when compared to the prior year period.

“Sustained organic growth in aggregates and cement pricing, coupled with improved cost discipline and margin capture, contributed to significant year-over-year increases in operating cash flow and net income in the third quarter,” stated Tom Hill, CEO of Summit Materials. “Materials gross profit increased nearly 30% on a year over year basis, representing more than half of total gross profit in the period. Overall, total gross profit margin increased 290 basis points on a year-over-year basis to 40.3% in the third quarter 2016.”

“Total sales volumes increased across all lines of business in the third quarter, due mainly to the benefit of acquisitions completed during the past twelve months,” continued Hill. “On an organic basis, total sales volumes of aggregates and products declined due to a combination of severe summer weather in most of our core regional markets and tough prior-year comparisons in Vancouver. Looking ahead, we believe that our regional markets remain in the early stages of a multi-year recovery in public infrastructure, residential and non-residential construction spending, as supported by favorable long-term demographic trends,” continued Hill.

“For the nine months ended 2016, approximately 40% of our aggregates revenues were related to public infrastructure projects,” continued Hill. “Entering 2017, we anticipate an acceleration in public infrastructure spending from current levels, supported in part by the passage of the FAST Act and state-level funding.”

“We remain a disciplined acquirer of strategic assets that serve to further entrench Summit as a leader in markets where our scale and integrated model are proven competitive advantages,” stated Hill. “During the third quarter, we completed four small bolt-on acquisitions, including one transaction that serves to expand our materials distribution capabilities through two acquired terminals in the Louisiana market. We anticipate financial contributions from these transactions will begin to contribute meaningfully in 2017,” continued Hill.

“Net leverage declined to 4.3x at third quarter-end, as Adjusted EBITDA increased more than 20% on a year-over-year basis to $146.2 million,” stated Brian Harris, CFO of Summit Materials. “At quarter-end, we had more than $240 million of cash and availability under our revolving credit facility, providing us with sufficient flexibility with which to support the growth of our existing business. We continue to maintain a high degree of capital discipline, even as we regularly review potential acquisition opportunities that align with our materials-based growth strategy. As before, we remain committed to reducing outstanding net leverage, with the objective of achieving a net debt to Adjusted EBITDA metric of 4.0x by year-end 2016.”

“We are pleased to host our first-ever Investor Day in Houston on November 15, 2016, which will be streamed live via webcast in the investor relations section of our corporate website,” noted Hill. “We believe Summit is uniquely positioned for profitable expansion in the years ahead and intend to provide important details around our roadmap for strategic growth at this important event.”

Third Quarter 2016 | Financial Performance

Net revenue increased to $480.2 million in the third quarter 2016, versus $426.3 million in the prior year period. The year-over-year improvement in net revenue was primarily attributable to higher acquisition-related sales volumes across all lines of business, coupled with improved organic and acquisition-related pricing on aggregates, cement and ready-mix concrete.

The Company reported third quarter 2016 basic earnings per share of $0.61 on net income of $61.1 million. On an adjusted basis, the Company reported third quarter 2016 earnings per share of $0.73 per diluted share on net income of $73.5 million, using 100.0 million weighted-average total shares. The shares of Class A common stock are issued by Summit Materials, Inc., and as such the earnings and equity interests of non-controlling interests, including LP units, are not included in basic earnings per share. Summit believes adjusted net income and Adjusted EPS are more representative of earnings performance, as these measures exclude the non-operating impact to earnings per share of any potential exchange of LP units for Class A common stock in any given quarter.

Operating income increased 5.9% to $88.3 million, compared to the prior year period. Gross profit increased 21.3% to $193.6 million, compared to the prior year period. As a percentage of net revenue, gross profit margin increased 290 basis points to 40.3% in the third quarter 2016, due mainly to improved gross margins across most lines of business and a higher percentage of revenue from aggregates and cement.

Adjusted EBITDA increased 21.4% to $146.2 million, compared to the prior year period, with growth across all operating segments. As a percentage of net revenue, Adjusted EBITDA improved to 30.4%, up 220 basis points from the prior year period. Operating segment Adjusted EBITDA in the third quarter 2016 was as follows:

  • West Segment: Adjusted EBITDA increased 6.6% million to $63.7 million in the third quarter 2016, when compared to the prior-year period. A year-over-year decline in organic Adjusted EBITDA growth was more than offset by acquisition-related EBITDA contributions, including the impact of acquisitions completed in 2015 and 2016.
  • East Segment: Adjusted EBITDA increased 40.6% to $51.6 million in the third quarter 2016, when compared to the prior year period. The East segment reported Adjusted EBITDA growth in the period, both including and excluding acquisitions. This performance was attributable to a higher mix of revenue from aggregates, organic improvement in aggregates and ready mix, and the impact of acquisitions.
  • Cement Segment: Adjusted EBITDA increased 27.6% to $40.3 million, when compared to the prior year period, due mainly to increased sales volumes, higher average prices attributable to stronger residential market demand and improved operational efficiencies, including a reduction in unscheduled downtime, cost reductions and improved production processes.

Third Quarter 2016 | Results by Line of Business

  • Aggregates Business: Aggregates net revenues increased 25.4% to $78.3 million in the third quarter 2016, when compared to the prior year period. Aggregates gross profit as a percentage of aggregates net revenues increased 490 basis points to 71.7% in the third quarter 2016, when compared to the prior year period. Including acquisitions, sales volumes increased 16.8% and average sales price increased 8.1%, when compared to the prior year period. Excluding acquisitions, organic sales volume declined 3.4% and organic average sales price increased 4.6%, when compared to the prior year period. Organic sales volumes were impacted in the third quarter by a combination of lower volumes in: (1) the Vancouver, B.C. market, given the completion of a large sand river project in 2015; and (2) the Texas market, given temporary flooding during the period. Aggregates organic average sales price was strong across all major markets in the third quarter.
  • Cement Business: Cement net revenues increased 22.4% to $81.2 million in the third quarter 2016, when compared to the prior year period. Cement gross profit as a percentage of cement segment net revenues was 48.9% in the third quarter 2016, essentially flat with the prior year period. Sales volumes increased 14.4% and the average sales price increased 7.0% in the third quarter, in each case when compared to the prior year period. Cement volumes increased on a year-over-year basis as a result of the Davenport acquisition in July 2015, while cement prices improved as a result of favorable overall market conditions.
  • Products Business: Net revenues from ready-mix concrete, asphalt and other products increased 8.4% to $226.8 million in the third quarter 2016, when compared to the prior year period. Products gross margin as a percentage of product net revenues increased 180 basis points to 28.4%, when compared to the prior year period. Including acquisitions, sales volumes of ready-mix concrete and asphalt increased 16.6% and 2.7%, respectively, while average sales prices increased 0.6% and declined 7.7%, respectively. Excluding acquisitions, organic sales volumes of ready-mix concrete and asphalt declined 2.8% and 7.9%, respectively, while average sales prices increased 1.7% and declined 7.1%, respectively. The organic decline in products volumes was related to a less favorable geographic sales mix, coupled with temporary budgetary constraints on public infrastructure spending in Kansas and Kentucky.

Liquidity and Capital Resources

At October 1, 2016, the Company improved its leverage metrics as compared to July 2, 2016 with cash on hand of $31.6 million, total outstanding debt of $1.5 billion and a borrowing capacity of $209.4 million. The borrowing capacity is net of $25.6 million of outstanding letters of credit, and is fully available to the Company within the terms and covenant requirements of its credit agreement.

Financial Guidance & Business Outlook

Based on current market conditions, the Company is reiterating its prior full year 2016 Adjusted EBITDA guidance to be in the range of $360.0 million to $370.0 million, versus Adjusted EBITDA of $287.5 million in the full-year 2015. The Adjusted EBITDA outlook includes the successor period impact for acquisitions completed through today’s date.

For the full year 2016, the Company is reiterating its gross capital expenditures guidance to be in the range of $150.0 million to $170.0 million, which includes several profit-improvement projects, mainly in aggregates facilities, which stand to increase capacity and operational efficiency. Longer-term, the Company expects gross capital expenditures to approximate 6% to 7% of net revenue per annum.

Webcast and Conference Call Information

Summit Materials will conduct a conference call at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) on Wednesday, November 2, 2016 to review third quarter 2016 results, discuss recent events, and conduct a question-and-answer period. A webcast of the conference call and presentation slides to be referred to on the call 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.

To participate in the telephone conference call:

  Domestic:   1-877-407-0784
International: 1-201-689-8560
Conference ID: 86972581

To listen to a replay of the telephone conference call:

 

Domestic:

 

1-877-870-5176

International:

1-858-384-5517

Conference ID:

13646656

 

The playback recording can be accessed through December 2, 2016

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, and 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, Adjusted EPS, Adjusted EBITDA, gross profit and free cash flow, 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, Adjusted EPS, Adjusted EBITDA, gross profit and free cash flow, 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 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 and other non-GAAP measures on a supplemental basis.

Adjusted EBITDA, gross profit, adjusted net income, Adjusted EPS and free cash flow 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, to the extent available without unreasonable effort. 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 contains “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. Any and all statements made relating to the expectations for our anticipated benefits from recent acquisitions, the macroeconomic outlook for our markets, potential acquisition activity, our estimated and projected earnings, margins, costs, expenditures, cash flows, sales volumes and financial results are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those expected. 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 impact 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 achieved. 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 our Annual Report on Form 10-K for the fiscal year ended January 2, 2016. Such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.

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 otherwise required by law.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations

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

       
Three months ended Nine months ended
October 1, September 26, October 1, September 26,
2016 2015   2016   2015  
Revenue:
Product $ 386,236 $ 338,020 $ 907,679 $ 748,210
Service   93,974   88,266     193,206     182,224  
Net revenue 480,210 426,286 1,100,885 930,434
Delivery and subcontract revenue   49,227   45,619     102,205     100,401  
Total revenue   529,437   471,905     1,203,090     1,030,835  
Cost of revenue (excluding items shown separately below):
Product 224,927 207,500 559,512 490,923
Service   61,725   59,280     136,250     128,514  
Net cost of revenue 286,652 266,780 695,762 619,437
Delivery and subcontract cost   49,227   45,619     102,205     100,401  
Total cost of revenue   335,879   312,399     797,967     719,838  
General and administrative expenses 64,194 42,539 185,208 149,484
Depreciation, depletion, amortization and accretion 39,427 33,306 109,195 86,818
Transaction costs   1,684   304     5,290     8,044  
Operating income 88,253 83,357 105,430 66,651
Other expense (income), net 565 (1,171 ) 799 (678 )
Loss on debt financings 32,641 64,313
Interest expense   25,273   20,727     72,467     62,231  
Income (loss) from operations before taxes 62,415 31,160 32,164 (59,215 )
Income tax expense (benefit)   1,309   (2,655 )   (7,913 )   (12,468 )
Income (loss) from continuing operations 61,106 33,815 40,077 (46,747 )
Income from discontinued operations     (57 )       (815 )
Net income (loss) 61,106 33,872 40,077 (45,932 )
Net income (loss) attributable to noncontrolling interest in subsidiaries 92 52 57 (1,917 )
Net income (loss) attributable to Summit Holdings (1)   16,194   19,109     2,947     (48,370 )
Net income attributable to Summit Inc. $ 44,820 $ 14,711   $ 37,073   $ 4,355  
Net income per share of Class A common stock:
Basic $ 0.61 $ 0.38 $ 0.60 $ 0.13
Diluted $ 0.61 $ 0.38 $ 0.41 $ 0.13
Weighted average shares of Class A common stock:
Basic 73,297,795 38,901,989 61,550,741 32,589,721
Diluted 73,444,105 38,945,467 100,343,458 32,632,630

(1) Represents portion of business owned by private interests

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

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

   
October 1, January 2,
2016 2016
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 31,643 $ 186,405
Accounts receivable, net 247,175 145,544
Costs and estimated earnings in excess of billings 39,052 5,690
Inventories 164,875 130,082
Other current assets   8,353     4,807  
Total current assets 491,098 472,528

Property, plant and equipment, less accumulated depreciation, depletion and amortization (October 1, 2016 - $452,186 and January 2, 2016 - $366,505)

1,456,491 1,269,006
Goodwill 760,448 596,397

Intangible assets, less accumulated amortization (October 1, 2016 - $7,315 and January 2, 2016 - $5,237)

25,205 15,005
Other assets   47,796     43,243  
Total assets $ 2,781,038   $ 2,396,179  
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of debt $ 6,500 $ 6,500
Current portion of acquisition-related liabilities 21,907 20,584
Accounts payable 113,329 81,397
Accrued expenses 108,711 92,942
Billings in excess of costs and estimated earnings   16,869     13,081  
Total current liabilities 267,316 214,504
Long-term debt 1,515,381 1,273,652
Acquisition-related liabilities 31,473 39,977
Other noncurrent liabilities   121,133     100,186  
Total liabilities   1,935,303     1,628,319  
 
Stockholders’ equity:

Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 75,566,319 and 49,745,944 shares issued and outstanding as of October 1, 2016 and January 2, 2016, respectively

756 497

Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 28,661,526 and 69,007,297 shares issued and outstanding as of October 1, 2016 and January 2, 2016, respectively

287 690
Additional paid-in capital 730,201 619,003
Accumulated earnings 46,259 10,870
Accumulated other comprehensive loss   (2,865 )   (2,795 )
Stockholders’ equity 774,638 628,265
Noncontrolling interest in consolidated subsidiaries 1,419 1,362
Noncontrolling interest in Summit Holdings   69,678     138,233  
Total stockholders’ equity   845,735     767,860  
Total liabilities and stockholders’ equity $ 2,781,038   $ 2,396,179  

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

   
Nine months ended
October 1, September 26,
2016 2015
Cash flow from operating activities:
Net income (loss) $ 40,077 $ (45,932 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation, depletion, amortization and accretion 118,026 90,789
Share-based compensation expense 46,123 18,589
Deferred income tax benefit (8,994 ) -
Net gain on asset disposals (5,844 ) (4,990 )
Net gain on debt financings - (4,570 )
Other (971 ) 136
(Increase) decrease in operating assets, net of acquisitions:
Accounts receivable, net (81,234 ) (56,287 )
Inventories (17,072 ) (3,830 )
Costs and estimated earnings in excess of billings (34,349 ) (23,402 )
Other current assets (2,876 ) (4,401 )
Other assets (217 ) (524 )
Increase (decrease) in operating liabilities, net of acquisitions:
Accounts payable 23,812 29,383
Accrued expenses 8,948 (11,575 )
Billings in excess of costs and estimated earnings 2,138 (763 )
Other liabilities   (3,044 )   (853 )
Net cash provided by (used in) operating activities   84,523     (18,230 )
Cash flow from investing activities:
Acquisitions, net of cash acquired (331,463 ) (505,466 )
Purchases of property, plant and equipment (121,945 ) (69,672 )
Proceeds from the sale of property, plant and equipment 16,222 8,883
Other   1,500     610  
Net cash used for investing activities   (435,686 )   (565,645 )
Cash flow from financing activities:
Proceeds from equity offerings - 1,037,444
Capital issuance costs (136 ) (61,218 )
Proceeds from stock option exercises 113 -
Shares redeemed to settle employee taxes (8 ) -
Proceeds from debt issuances 354,000 1,415,750
Debt issuance costs (5,675 ) (10,911 )
Payments on debt (114,254 ) (1,251,407 )
Purchase of noncontrolling interests - (497,848 )
Payments on acquisition-related liabilities (28,920 ) (15,018 )
Distributions from partnership   (9,049 )   (26,448 )
Net cash provided by financing activities   196,071     590,344  
Impact of foreign currency on cash 330 (697 )
Net (decrease) increase in cash   (154,762 )   5,772  
Cash and cash equivalents—beginning of period   186,405     13,215  
Cash and cash equivalents—end of period $ 31,643   $ 18,987  

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Revenue Data by Segment and Line of Business

($ in thousands)

       
Three months ended Nine months ended
October 1, September 26, October 1, September 26,
2016 2015 2016 2015
 
Net Revenue by Segment
West $ 235,667 $ 233,703 $ 558,488 $ 536,722
East 154,980 120,151 339,229 273,095
Cement   89,563   72,432   203,168   120,617
Net Revenue $ 480,210 $ 426,286 $ 1,100,885 $ 930,434
 
Net Revenue by Line of Business
Materials
Aggregates $ 78,274 $ 62,422 $ 201,217 $ 161,896
Cement (1) 81,154 66,313 179,658 104,986
Products   226,808   209,285   526,804   481,328
Total Materials and Products   386,236   338,020   907,679   748,210
Services   93,974   88,266   193,206   182,224
Net Revenue $ 480,210 $ 426,286 $ 1,100,885 $ 930,434
 
Gross Profit
Materials
Aggregates $ 56,108 $ 41,719 $ 123,773 $ 92,935
Cement (1) 43,822 35,877 89,608 51,891
Products 64,398 55,716 141,260 119,654
Services   29,230   26,194   50,482   46,517
Gross Profit $ 193,558 $ 159,506 $ 405,123 $ 310,997

(1) Net revenue for the cement line of business excludes revenue associated with the processing of hazardous and non-hazardous waste, which is processed into fuel and used in the cement plants and is included in services net revenue. Additionally, net revenue from cement swaps and other cement-related products are included in products net revenue. The cement segment gross profit includes the earnings from the waste processing operations, cement swaps and other products.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Volume and Price Statistics

(Units in thousands)

 
Three months ended Nine months ended
Total Volume October 1, 2016 September 26, 2015 October 1, 2016 September 26, 2015
Aggregates (tons) 10,658 9,127 27,302 23,949
Cement (tons) 757 662 1,699 1,093
Ready-mix concrete (cubic yards) 1,083 929 2,798 2,493
Asphalt (tons) 1,735 1,690 3,269 3,288
 
Three months ended Nine months ended
Pricing October 1, 2016 September 26, 2015 October 1, 2016 September 26, 2015
Aggregates (per ton) $ 10.19 $ 9.43 $ 9.91 $ 9.12
Cement (per ton) 109.35 102.17 108.26 100.36
Ready-mix concrete (per cubic yards) 103.36 102.74 103.48 102.22
Asphalt (per ton) 53.91 58.40 55.63 57.52
 
Year over Year Comparison Volume Pricing Volume Pricing
Aggregates (per ton) 16.8 % 8.1 % 14.0 % 8.7 %
Cement (per ton) 14.4 % 7.0 % 55.4 % 7.9 %
Ready-mix concrete (per cubic yards) 16.6 % 0.6 % 12.2 % 1.2 %
Asphalt (per ton) 2.7 % (7.7 ) % (0.6 ) % (3.3 ) %
 
Year over Year Comparison (Excluding acquisitions) Volume Pricing Volume Pricing
Aggregates (per ton) (3.4 ) % 4.6 % (3.3 ) % 6.4 %
Cement (per ton) * * * *
Ready-mix concrete (per cubic yards) (2.8 ) % 1.7 % (1.2 ) % 2.2 %
Asphalt (per ton) (7.9 ) % (7.1 ) % (14.3 ) % (1.8 ) %

* The Davenport Assets were immediately integrated with our existing cement operations such that it is impracticable to bifurcate the growth attributable to the Davenport Assets from organic growth.

SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Unaudited Reconciliations of Gross Revenue to Net Revenue by Line of Business

($ and Units in thousands)

         
Three months ended October 1, 2016
Gross Revenue Intercompany Net
Volumes Pricing by Product Elimination/Delivery Revenue
Aggregates 10,658 $ 10.19 $ 108,565 $ (30,291 ) $ 78,274
Cement 757   109.35   82,746   (1,592 )   81,154
Materials $ 191,311 $ (31,883 ) $ 159,428
Ready-mix concrete 1,083 103.36 111,954 (814 ) 111,140
Asphalt 1,735 53.91 93,545 (214 ) 93,331
Other Products   104,384   (82,047 )   22,337
Products $ 309,883 $ (83,075 ) $ 226,808

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 and present Adjusted EBITDA by segment for the three and nine months ended October 1, 2016 and September 26, 2015.

       
Three months ended Nine months ended
October 1, September 26, October 1, September 26,
Reconciliation of Net Income (Loss) to Adjusted EBITDA 2016 2015 2016 2015
Net income (loss) $ 61,106 $ 33,872 $ 40,077 $ (45,932 )
Interest expense 25,273 20,727 72,467 62,231
Income tax expense (benefit) 1,309 (2,655 ) (7,913 ) (12,468 )
Depreciation, depletion and amortization   39,055     32,940     107,993     85,689  
EBITDA $ 126,743   $ 84,884   $ 212,624   $ 89,520  
Accretion 372 366 1,202 1,129
IPO/ Legacy equity modification costs 12,506 37,257 28,296
Loss on debt financings 32,641 64,313
Income from discontinued operations (57 ) (815 )
Transaction costs 1,684 304 5,290 8,044
Management fees and expenses 1,046
Non-cash compensation 3,801 1,569 8,866 4,138
Other   1,085     699     4,093     1,528  
Adjusted EBITDA $ 146,191   $ 120,406   $ 269,332   $ 197,199  
 
Adjusted EBITDA by Segment
West 63,683 59,760 127,547 111,450
East 51,558 36,677 90,405 62,758
Cement 40,264 31,554 78,828 43,897
Corporate   (9,314 )   (7,585 )   (27,448 )   (20,906 )
Adjusted EBITDA $ 146,191   $ 120,406   $ 269,332   $ 197,199  

The table below reconciles our net income per share attributable to Summit Materials, Inc. to adjusted income per share for the three and six months ended October 1, 2016 and September 26, 2015. The per share amount of the net income attributable to Summit Materials, Inc. presented in the table is calculated using the total equity interests for the purpose of reconciling to adjusted net income per share.

               
Three months ended Nine months ended
October 1, 2016 September 26, 2015 October 1, 2016 September 26, 2015
Reconciliation of Net Income Per Share to Adjusted EPS Net Income Per Share Net Income Per Share Net Income Per Share Net Income Per Share
Net income attributable to Summit Materials, Inc. $ 44,820 $ 0.45 $ 14,711 $ 0.16 $ 37,073 $ 0.37 $ 4,355 $ 0.05
Adjustments:
Net income (loss) attributable to noncontrolling interest 16,194 0.16 19,109 0.20 2,947 0.03 (48,370 ) (0.49 )
IPO/ Legacy equity modification costs 12,506 0.12 37,257 0.37 28,296 0.29
Loss on debt financings, net of tax       29,654   0.29       56,025     0.57  
Adjusted diluted net income $ 73,520 $ 0.73 $ 63,474 $ 0.65 $ 77,277 $ 0.77 $ 40,306   $ 0.42  
Weighted-average shares:
Class A common stock 73,297,795 38,901,989 61,550,741 32,589,721
LP Units outstanding   26,731,747   59,360,949   38,470,523   64,618,209  
Total equity interest   100,029,542   98,262,938   100,021,264   97,207,930  

The following table reconciles operating income to gross profit for the three and nine months ended October 1, 2016 and September 26, 2015.

 
Three months ended Nine months ended
October 1, September 26, October 1, September 26,
Reconciliation of Operating Income to Gross Profit 2016 2015 2016 2015
 
Operating income $ 88,253 $ 83,357 $ 105,430 $ 66,651
General and administrative expenses 64,194 42,539 185,208 149,484
Depreciation, depletion, amortization and accretion 39,427 33,306 109,195 86,818
Transaction costs   1,684   304   5,290   8,044
Gross Profit (exclusive of items shown separately) $ 193,558 $ 159,506 $ 405,123 $ 310,997
Gross Margin(1) (exclusive of items shown separately) 40.3 % 37.4 % 36.8 % 33.4 %

(1) Gross margin is defined as gross profit as a percentage of net revenue.

The following table reconciles net cash used for operating activities to free cash flow for the three and nine months ended October 1, 2016 and September 26, 2015.

       
Three months ended Nine months ended
October 1, September 26, October 1, September 26,
2016 2015 2016 2015
Net income (loss) $ 61,106 $ 33,872 $ 40,077 $ (45,932 )
Non-cash items   55,899     35,008     148,340     99,954  
Net income (loss) adjusted for non-cash items 117,005 68,880 188,417 54,022
Change in working capital accounts   (5,982 )   (6,886 )   (103,894 )   (72,252 )
Net cash provided by (used in) operating activities 111,023 61,994 84,523 (18,230 )
Capital expenditures, net of asset sales   (23,496 )   (23,449 )   (105,723 )   (60,789 )
Free cash flow $ 87,527   $ 38,545   $ (21,200 ) $ (79,019 )

Summit Materials, Inc.
Investor Relations:
303-515-5159
Investorrelations@summit-materials.com
or
Media:
303-515-5158
mediarelations@summit-materials.com

Source: Summit Materials, Inc.