Addition of Leading Architectural
Acquisition Expected to be Accretive to Earnings in 2022;
Will Double DMC’s Consolidated Annual Sales to Nearly
Transaction details
- DMC will purchase a 60% interest in Arcadia for
$282.5 million , subject to final purchase price adjustments and closing conditions$262.0 million of the purchase price to be paid in cash and$20.5 million will be paid in DMC stock- Cash portion to be financed with cash and marketable securities on DMC’s balance sheet and funds from a
$150.0 million senior credit facility
- DMC’s total debt-to-adjusted EBITDA leverage ratio after closing will be 2.79 based on total borrowings of
$150.0 million and pro forma adjusted EBITDA of$53.7 million ; total net debt-to-adjusted EBITDA leverage ratio will be 2.25 based on net debt of$120.8 million and pro forma adjusted EBITDA of$53.7 million - Closing is expected to occur prior to
December 31, 2021 - DMC to acquire the remaining 40% interest in Arcadia through a three-year put and call option with a floor valuation of
$187.1 million - Total implied transaction value is
$469.6 million - Transaction value is 8.6x Arcadia’s trailing 12-month adjusted EBITDA of
$54.6 million as ofSeptember 30, 2021
“Arcadia’s strong position in a
Schladen added, “This is an exciting transaction for Arcadia, its employees and our customers. We look forward to DMC’s support as we expand Arcadia’s capacity and increase its position in the commercial and high-end residential architectural products markets. I am confident this will be an outstanding partnership that will provide long-term benefits to Arcadia, DMC, and our stakeholders.”
Inclusive of Arcadia, DMC’s consolidated pro forma sales for the trailing 12 months ended
From 2010 through 2020, Arcadia increased its sales at a 13% compound annual growth rate (CAGR) and increased adjusted EBITDA at a 23% CAGR.
DMC expects the acquisition will be accretive to earnings within the first year. Arcadia will operate as a standalone business of DMC and will be led by
Based in
Arcadia’s commercial interiors business, Wilson Partitions, provides a national customer base with custom interior architectural framing systems. Its products are used in new construction and repair and remodel projects, and address noise control, fire rating, functionality, and aesthetics.
Arcadia’s residential business, Arcadia Custom, provides premium, energy-efficient steel, aluminum, and wood windows and doors to the America’s fast-growing, high-end home market. The division works closely with architects, contractors, and installers. It sells through a national network of sales agents, and approximately 140 high-end window and door dealers.
New Senior Secured Credit Facilities
To fund a portion of the purchase price for the acquisition, DMC expects to enter into a new five-year syndicated credit facility, which includes a
Presentation
A presentation on the transaction, Arcadia’s business and pertinent financial data is available here:
https://dmc.mobi/arcadia
Conference Call
DMC will conduct an investor conference call to discuss the planned acquisition today at
Additional information about Arcadia is available on its websites:
https://arcadiainc.com/
https://arcadiacustom.com/
https://www.wilsonpart.com/
Houlihan Lokey acted as sole financial advisor to Arcadia and
About
Cautionary Note Regarding Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of applicable securities laws regarding events or conditions that may occur in the future, including the closing of the acquisition, the entry into and terms of the credit facilities, the acquisition of the remaining 40% of Arcadia, future financial results and the benefits of the acquisition. Factors that could cause actual results to differ materially from any forward-looking statements include, but are not limited to, the risk that the transactions described herein will not be completed as planned and the risk that the acquisition will not have the expected benefits, including as a result of unanticipated liabilities, integration or performance issues and/or general economic conditions, and other factors described in the public filings made by
*Use of Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP (generally accepted accounting principles) financial measure used by management to measure operating performance and liquidity. Non-GAAP results are presented only as a supplement to the financial statements based on
EBITDA is defined as net income plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation, restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance (as further described in the attached financial schedules).
Management uses adjusted EBITDA in its operational and financial decision-making, believing that it is useful to eliminate certain items in order to focus on what it deems to be a more reliable indicator of ongoing operating performance. As a result, internal management reports used during monthly operating reviews feature adjusted EBITDA measures. Management believes that investors may find this non-GAAP financial measure useful for similar reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures. In addition, management incentive awards are based, in part, on the amount of adjusted EBITDA achieved during relevant periods. EBITDA and adjusted EBITDA are also used by research analysts, investment bankers and lenders to assess operating performance. For example, a measure similar to adjusted EBITDA is required by the lenders under DMC’s credit facility.
Net debt is defined as total debt less cash and cash equivalents and marketable securities. Net debt is used by management to supplement GAAP financial information and evaluate DMC’s performance, and management believes this information may be similarly useful to investors.
Because not all companies use identical calculations, DMC’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. For example, a company with greater GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, eliminating the effects of interest income and expense moderates the impact of a company’s capital structure on its performance.
All of the items included in the reconciliation from net income to EBITDA and adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles and stock-based compensation) or (ii) items that management does not consider to be useful in assessing DMC’s operating performance (e.g., income taxes, restructuring and impairment charges). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect DMC’s ability to generate free cash flow or invest in its business. For example, by adjusting for depreciation and amortization in computing EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, management believes that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.
Trailing Twelve Months Ended | ||||||||||||||
Redeemable | Pro Forma | |||||||||||||
DMC | Arcadia | Noncontrolling | Arcadia | Pro Forma | ||||||||||
In Millions | (Unaudited) | (Unaudited) | Interest (1) | (Unaudited) | (Unaudited) | |||||||||
Net sales | $ | 245,384 | $ | 245,653 | $ | 245,653 | $ | 491,037 | ||||||
Gross profit | 58,732 | 87,006 | 87,006 | 145,738 | ||||||||||
Gross profit % | 23.9 | % | 35.4 | % | 35.4 | % | 29.7 | % | ||||||
Selling, general, and administrative expenses | 55,050 | 34,243 | 34,243 | 89,293 | ||||||||||
Amortization | 1,196 | - | 1,196 | |||||||||||
Depreciation and amortization | 12,061 | 1,789 | 1,789 | 13,850 | ||||||||||
Stock-based compensation expense | 6,425 | - | 6,425 | |||||||||||
Adjusted EBITDA * | 20,972 | 54,552 | (21,821 | ) | 32,731 | 53,703 | ||||||||
Adjusted EBITDA % * | 8.5 | % | 22.2 | % | 13.3 | % | 10.9 | % |
Nine Months Ended | ||||||||||||||
Redeemable | Pro Forma | |||||||||||||
DMC | Arcadia | Noncontrolling | Arcadia | Pro Forma | ||||||||||
In Millions | (Unaudited) | (Unaudited) | Interest (1) | (Unaudited) | (Unaudited) | |||||||||
Net sales | $ | 188,271 | $ | 183,692 | $ | 183,692 | $ | 371,963 | ||||||
Gross profit | 46,546 | 66,080 | 66,080 | 112,626 | ||||||||||
Gross profit % | 24.7 | % | 36.0 | % | 36.0 | % | 30.3 | % | ||||||
Selling, general, and administrative expenses | 42,501 | 25,496 | 25,496 | 67,997 | ||||||||||
Amortization | 823 | - | 823 | |||||||||||
Depreciation and amortization | 9,223 | 1,286 | 1,286 | 10,509 | ||||||||||
Stock-based compensation expense | 4,904 | - | 4,904 | |||||||||||
Adjusted EBITDA * | 17,349 | 41,870 | (16,748 | ) | 25,122 | 42,471 | ||||||||
Adjusted EBITDA % * | 9.2 | % | 22.8 | % | 13.7 | % | 11.4 | % |
Trailing Twelve Months | |||||||||
DMC | Arcadia | Combined | |||||||
Unaudited | Unaudited | Unaudited | |||||||
Net income | $ | 1,632 | $ | 52,970 | $ | 54,602 | |||
Interest expense, net | 397 | 397 | |||||||
Income tax provision | 437 | 889 | 1,326 | ||||||
Depreciation | 10,865 | 1,789 | 12,654 | ||||||
Amortization | 1,196 | 1,196 | |||||||
EBITDA | 14,527 | 55,648 | 70,175 | ||||||
Restructuring | 209 | 209 | |||||||
Due diligence adjustments (1) | (1,096 | ) | (1,096 | ) | |||||
Stock-based compensation | 6,425 | 6,425 | |||||||
Other (income), net | (189 | ) | (189 | ) | |||||
Adjusted EBITDA | 20,972 | 54,552 | 75,524 | ||||||
Adjusted EBITDA attributable to redeemable noncontrolling interest (2) | (21,821 | ) | (21,821 | ) | |||||
Adjusted EBITDA attributable to DMC | 20,972 | 32,731 | 53,703 | ||||||
CONTACT:
Vice President of Investor Relations
303-604-3924
Source:
2021 GlobeNewswire, Inc., source