Summit Materials, Inc. Reports First Quarter 2019 Results

May 8, 2019 ALE

– Net Revenue Growth of 5.5% in First Quarter 2019

– Organic aggregates volumes increased 6.6%

– Organic aggregates price increased 6.3%

– Reaffirmed 2019 Adjusted EBITDA Guidance Range For The Full-Year
2019 at $430 – $470 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 first quarter 2019.

For the three months ended March 30, 2019, the Company reported net loss
attributable to Summit Inc. of $(68.8) million, or $(0.62) per basic
share, compared to net loss attributable to Summit Inc. of $(53.7)
million, or $(0.49) per basic share in the comparable prior year
period. Summit reported adjusted diluted net loss of $(56.9) million, or
$(0.49) per adjusted diluted share as compared to adjusted diluted net
loss of $(62.9) million, or $(0.55) per adjusted diluted share in the
prior year period.

Summit’s net revenue increased 5.5% in the first quarter of 2019
compared to the comparable 2018 period, while net income and earnings
per share decreased in 2019 as compared to the comparable 2018 period,
primarily due to the $14.6 million loss on debt financing to redeem the
8.5% senior notes in March 2019. Adjusted EBITDA increased to $6.6
million in 2019 as compared to $5.5 million in 2018, as increases in
aggregates and asphalt volumes and pricing were achieved. However,
Summit noted those increases were offset by higher costs of revenue in
its cement segment due to lower production levels during the quarter.
Tom Hill, CEO of Summit Materials, stated, “We were very pleased to see
our organic average sales prices for aggregates increased by 6.3% in the
first quarter as compared to a year ago. We continue to believe end
market fundamentals remain intact for the construction industry going
into 2019.” Hill commented, “Cement sales volumes were up slightly in
the first quarter of 2019 as compared to 2018 despite challenging
weather conditions. However, an extended annual maintenance shutdown and
record flooding on the Mississippi River that has continued into the
second quarter has negatively impacted our Cement business.”

Summit reaffirmed its 2019 full year Adjusted EBITDA guidance. Hill
continued, “We are pleased to confirm our previously announced Adjusted
EBITDA guidance of approximately $430 million to $470 million for 2019.”

“Underlying demand conditions in most of our markets remain favorable
and are expected to remain so during the remainder of 2019,” continued
Hill. In Summit’s public markets, state transportation funding measures
in Texas, coupled with steady increases in federal subsidies, are
contributing to increased lettings activity. Single family housing
starts and permits remain well below peak levels in Summit’s major
markets.

As previously announced, in February 2019 Summit extended and amended
its revolving credit facility which now has maximum availability of $345
million and matures in 2024. Further, in March 2019, Summit retired $250
million of 8.5% senior notes due 2022 by issuing $300 million of 6.5%
senior notes due in 2027. Brian Harris, CFO of Summit Materials, stated,
“We were very pleased with both of those transactions, which increased
our overall liquidity position and lowers our cash interest outlays in
the future. Further, we are pleased to reaffirm our guidance for 2019
capital expenditures of approximately $160 million to $175 million.” As
expected, given the seasonal decrease in cash balances, Summit’s
leverage ratio increased over year-end levels. However, Summit continues
to expect increased levels of cash flow generated from operations less
capital expenditures in 2019 as compared to 2018, which we expect will
allow Summit to reduce its leverage ratio by the end of 2019.

First Quarter 2019| Results by Line of Business

Aggregates Business: Aggregates net revenues increased by 30.3%
to $87.9 million in the first quarter 2019, when compared to the prior
year period. Aggregates adjusted cash gross profit margin improved to
43.2% in the first quarter 2019, compared to 41.5% in the prior year
period, as pricing gains exceeded input costs. Organic aggregates sales
volumes increased 6.6% in the first quarter 2019, when compared to the
prior year period. Organic average selling prices on aggregates
increased 6.3% in the first quarter 2019 when compared to the prior year
period due to improvements in prices within both the West and East
segments during the period.

Cement Business: Cement segment net revenues declined 0.7%
to $37.3 million in the first quarter 2019, when compared to the prior
year period. Cement adjusted cash gross profit margin decreased to 3.1%
in the first quarter, compared to 19.5% in the prior year period, as
margins were impacted by lower production levels in 2019. Organic sales
volume of cement increased 1.0% in the first quarter, when compared to
the prior year period. Organic average selling prices on cement
decreased 1.5% in the first quarter, when compared to the prior year
period due to changes of the customer mix across our geographies.

Products Business: Net revenues decreased 3.2% to $151.3 million
in the first quarter 2019, when compared to the prior year period.
Products adjusted cash gross profit margin declined to 13.5% in the
first quarter, versus 16.1% in the prior year period, reflecting a 5.7%
decrease in organic sales volumes of ready-mix concrete, which adversely
impacted productivity and efficiency in the first quarter of 2019. This
decrease was only partially offset by an increase in the organic average
selling prices of 0.4% above the prior year period. Organic sales
volumes of asphalt increased 20.0% in the first quarter and organic
average selling prices increased 5.0% over the same period in 2018.

First Quarter 2019 | Results By Reporting Segment

Net revenue increased by 5.5% to $306.0 million in the first quarter
2019, versus $289.9 million in the prior year period. The improvement in
net revenue was primarily attributable to both organic and
acquisition-related contributions in the East and West segments, offset
by a decline in the Cement segment. The Company reported operating loss
of $(57.7) million in the first quarter 2019, compared to $(51.5)
million in the prior year period. Adjusted EBITDA was $6.6 million in
the first quarter 2019, compared to $5.5 million in the prior year
period.

West Segment: The West Segment reported operating loss of
$(11.6) million in the first quarter 2019, compared to $(6.1) million in
the prior year period. Adjusted EBITDA decreased to $14.3 million in the
first quarter 2019, compared to $16.2 million in the prior year
period. The quarterly declines in West Segment operating income and
Adjusted EBITDA were primarily attributable to increased labor and
materials costs as well as increased depreciation and amortization from
acquisitions completed in the last nine months of 2018, partially offset
by increases in average selling prices on aggregates and asphalt
concrete. Aggregates revenue in the first quarter increased 12.3% over
the prior year period as a result of contributions from acquisitions,
resulting in a 4.2% increase in organic volumes and a 4.7% increase in
organic average sales prices. Ready-mix concrete revenue in the first
quarter 2019 decreased 4.3% over the prior year period, primarily due to
a 5.4% and 0.5% decrease in organic volumes and organic average sales
prices, respectively, which were partially offset by an increase in
acquisition related volumes. Asphalt revenue increased by 44.0% in the
first quarter 2019 over the prior year period, resulting from a 22.8%
and 1.6% increase in volumes and average sales prices, respectively.

East Segment: The East Segment reported operating loss of
$(17.3) million in the first quarter 2019, compared to $(20.9) million
in the prior year period. Adjusted EBITDA increased to $3.2 million in
the first quarter 2019, compared to $(3.2) million in the prior year
period. The quarterly improvement in East Segment operating loss and
Adjusted EBITDA was mainly attributable to increases in net revenue from
our acquisition program, increases in average selling prices of
aggregates, ready-mix concrete and asphalt, partially offset by
increased labor as well as decreases in ready-mix volumes. Aggregates
revenue increased 36.8%, primarily due to increases resulting from our
acquisition program as well as a 9.1% and 7.6% increase in organic
volumes and average sales prices, respectively. Ready-mix concrete
revenue decreased 2.7% as a result of lower sales volumes, partially
offset by an increase in organic average sales prices. Asphalt revenue
increased 47.3% primarily as a result of a 50.0% increase in organic
average sales prices, partially offset by a 5.9% decrease in organic
volumes.

Cement Segment: The Cement Segment reported operating loss of
$(12.9) million in the first quarter 2019, compared to $(2.8) million in
the prior year period primarily due to lower levels of production due to
extended plant shutdowns in 2019, which resulted in higher costs of
revenue as less production costs were capitalized into inventory.
Adjusted EBITDA declined to $(2.6) million in the first quarter 2019,
compared to $3.7 million in the prior year period, as total production
in the first three months of 2019 was below production levels in the
first three months of 2018. The Company experienced slightly lower
organic average selling prices mostly offset by a slight increase in
organic sales volumes during first quarter 2019 as compared to the prior
year period.

Liquidity and Capital Resources

As of March 30, 2019, the Company had cash on hand of $64.8 million and
borrowing capacity under its revolving credit facility of $329.8
million. The borrowing capacity on the revolving credit facility is
fully available to the Company within the terms and covenant
requirements of its credit agreement. As of March 30, 2019, the Company
had $1.9 billion in debt outstanding.

Financial Outlook

For the full-year 2019, the Company estimates its Adjusted EBITDA to be
in the range of $430 million to $470 million. For the full-year 2019,
the Company estimates its capital expenditures to be in the range of
$160 million to $175 million.

Webcast and Conference Call Information

Summit Materials will conduct a conference call today at 11:00 a.m.
eastern time (9:00 a.m. mountain time) to review the Company’s first
quarter financial results. 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.

To participate in the live teleconference:

Domestic Live:					1-877-407-0784
International Live:					1-201-689-8560
Conference ID:					57511368

To listen to a replay of the teleconference, which will be available
through June 9, 2019:

Domestic Replay:					1-844-512-2921
International Replay:					1-412-317-6671
Conference ID:					13690428

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 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
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 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 December 29, 2018 as filed
with the Securities and Exchange Commission (the “SEC”), any factors
discussed in the section entitled “Risk Factors” in any of our
subsequently filed SEC filings, and the following:

– 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;

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

– rising prices for commodities, labor and other production and delivery
costs as a result of inflation 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;

– our substantial current level of indebtedness;

– our dependence on senior management and other key 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; and

– potential labor disputes.

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
Consolidated Statements of Operations
($ in thousands, except share and per share amounts)

	Three months ended
	March 30,			March 31,
	2019			2018
Revenue:
Product	$	271,641		$	256,807
Service	34,309			33,109
Net revenue	305,950			289,916
Delivery and subcontract revenue	26,689			24,505
Total revenue	332,639			314,421
Cost of revenue (excluding items shown separately below):
Product	213,726			197,433
Service	26,589			25,923
Net cost of revenue	240,315			223,356
Delivery and subcontract cost	26,689			24,505
Total cost of revenue	267,004			247,861
General and administrative expenses	67,610			69,861
Depreciation, depletion, amortization and accretion	55,388			46,958
Transaction costs	308			1,266
Operating loss	(57,671		)	(51,525		)
Interest expense	30,105			28,784
Loss on debt financings	14,565			—
Other income, net	(2,803		)	(7,655		)
Loss from operations before taxes	(99,538		)	(72,654		)
Income tax benefit	(28,037		)	(16,706		)
Net loss	(71,501		)	(55,948		)
Net loss attributable to Summit Holdings (1)	(2,729		)	(2,219		)
Net loss attributable to Summit Inc.	$	(68,772	)	$	(53,729	)
Loss per share of Class A common stock:
Basic	$	(0.62	)	$	(0.49	)
Diluted	$	(0.62	)	$	(0.49	)
Weighted average shares of Class A common stock:
Basic	111,811,679			110,659,098
Diluted	111,811,679			110,659,098

________________________________________________________
(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)

	March 30,		December 29,
	2019		2018
	(unaudited)		(audited)
Assets
Current assets:
Cash and cash equivalents	$	64,837	$	128,508
Accounts receivable, net	195,411		214,518
Costs and estimated earnings in excess of billings	17,079		18,602
Inventories	214,038		213,851
Other current assets	19,245		16,061
Total current assets	510,610		591,540
Property, plant and equipment, less accumulated depreciation, depletion and amortization (March 30, 2019 – $837,896 and December 29, 2018 – $794,251)	1,799,941		1,780,132
Goodwill	1,195,262		1,192,028
Intangible assets, less accumulated amortization (March 30, 2019 – $8,656 and December 29, 2018 – $8,247)	18,051		18,460
Deferred tax assets, less valuation allowance (March 30, 2019 – $21,859 and December 29, 2018 – $19,366)	253,104		225,397
Operating lease right-of-use assets	34,403		—
Other assets	49,990		50,084
Total assets	$	3,861,361	$	3,857,641
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of debt	$	4,765	$	6,354
Current portion of acquisition-related liabilities	37,422		34,270
Accounts payable	101,843		107,702
Accrued expenses	96,476		100,491
Current operating lease liabilities	8,098		—
Billings in excess of costs and estimated earnings	10,656		11,840
Total current liabilities	259,260		260,657
Long-term debt	1,855,346		1,807,502
Acquisition-related liabilities	38,908		49,468
Tax receivable agreement liability	309,733		309,674
Noncurrent operating lease liabilities	27,200		—
Other noncurrent liabilities	92,439		88,195
Total liabilities	2,582,886		2,515,496
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 112,067,531 and 111,658,927 shares issued and outstanding as of March 30, 2019 and December 29, 2018, respectively	1,121		1,117
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 shares issued and outstanding as of March 30, 2019 and December 29, 2018	—		—
Additional paid-in capital	1,200,503		1,194,204
Accumulated earnings	60,967		129,739
Accumulated other comprehensive income	4,265		2,681
Stockholders’ equity	1,266,856		1,327,741
Noncontrolling interest in Summit Holdings	11,619		14,404
Total stockholders’ equity	1,278,475		1,342,145
Total liabilities and stockholders’ equity	$	3,861,361	$	3,857,641

Contacts

Mr. Brian Harris
Executive Vice President and Chief Financial
Officer
Summit Materials, Inc.
brian.harris@summit-materials.com

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