Continental Building Products, Inc. (Form: 10-Q, Received: 08/06/2015 06:25:35)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-36293

Continental Building Products, Inc.

(Exact name of registrant as specified in its charter)


Delaware		61-1718923
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12950 Worldgate Drive, Suite 700, Herndon VA		20170
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code (703) 480-3800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s common stock outstanding as of July 31, 2015 was 43,205,636, which amount excludes 915,364 shares of common stock held by the Registrant as treasury shares.

Table of Contents


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Unaudited Consolidated Statements of Operations		3

	Unaudited Consolidated Statements of Comprehensive Income (Loss)		4

	Unaudited Consolidated Balance Sheets		5

	Unaudited Consolidated Statements of Cash Flows		6

	Notes to Unaudited Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24

Item 4.	Controls and Procedures		25

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		26

Item 1A.	Risk Factors		26

Item 6.	Exhibits		26

	Signatures		27

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Continental Building Products, Inc.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Net Sales	$	110,996		$	102,915		$	203,172		$	189,888
Costs, expenses and other income:
Cost of goods sold		81,516			82,025			153,191			155,221
Selling and administrative		9,363			8,088			17,791			15,584
Long Term Incentive Plan funded by Lone Star		15,842			—			20,013			—

Total costs and operating expenses		106,721			90,113			190,995			170,805

Operating income		4,275			12,802			12,177			19,083
Other income (expense), net		31			(144	)		(417	)		(5,330	)
Interest expense, net		(4,184	)		(5,397	)		(8,405	)		(19,573	)

Income (loss) before loss on equity method investment and income tax		122			7,261			3,355			(5,820	)
Loss from equity method investment		(311	)		(237	)		(252	)		(237	)

Income (loss) before income tax		(189	)		7,024			3,103			(6,057	)
Income tax (expense) benefit		63			(2,357	)		(1,209	)		2,101

Net income (loss)	$	(126	)	$	4,667		$	1,894		$	(3,956	)

Net income (loss) per common share:
Basic	$	(0.00	)	$	0.11		$	0.04		$	(0.09	)
Diluted	$	(0.00	)	$	0.11		$	0.04		$	(0.09	)
Weighted average shares outstanding:
Basic		43,606			44,069			43,840			41,794
Diluted		43,606			44,081			43,877			41,794

See accompanying notes to unaudited financial statements.

Continental Building Products, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

(Unaudited)


	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014		Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Net income (loss)	$	(126	)	$	4,667	$	1,894		$	(3,956	)
Foreign currency translation adjustment		425			733		(1,138	)		(108	)
Gain on derivatives qualifying as cash flow hedges, net of tax		405			—		498			—

Other comprehensive income (loss), net of tax		830			733		(640	)		(108	)

Comprehensive income (loss)	$	704		$	5,400	$	1,254		$	(4,064	)

See accompanying notes to unaudited financial statements.

Continental Building Products, Inc.

Consolidated Balance Sheets

(dollars in thousands except share data)


	As of June 30, 2015 (unaudited)			As of December 31, 2014
Assets
Cash	$	15,839		$	15,627
Receivables, net		42,218			40,152
Inventories		30,934			29,564
Prepaid and other current assets		8,108			8,330
Deferred taxes, current		3,161			3,157

Total current assets		100,260			96,830
Property, plant and equipment, net		337,278			353,652
Customer relationships and other intangibles, net		102,394			110,809
Goodwill		119,945			119,945
Equity method investment		10,085			10,919
Debt issuance costs		7,907			8,826

Total Assets	$	677,869		$	700,981

Liabilities and equity
Accounts payable	$	23,042		$	24,561
Accrued and other liabilities	$	7,725			11,428
Notes payable, current portion	$	—			—

Total current liabilities		30,767			35,989
Deferred taxes and other long-term liabilities		12,861			12,494
Notes payable, non-current portion		329,350			349,125

Total liabilities		372,978			397,608

Equity
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2015 and December 31, 2014		—			—
Common stock, $0.001 par value per share; 190,000,000 shares authorized, 43,205,636 and 44,069,000 shares issued and outstanding at June 30, 2015 and December 31, 2014		43			44
Additional paid-in capital		308,694			288,393
Less: Treasury stock		(20,036	)		—
Accumulated other comprehensive loss		(3,700	)		(3,060	)
Accumulated earnings		19,890			17,996

Total equity		304,891			303,373

Total liabilities and equity	$	677,869		$	700,981

See accompanying notes to unaudited financial statements.

Continental Building Products, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)


	Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Cash flows from operating activities:
Net income (loss)	$	1,894		$	(3,956	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		26,270			27,813
Bad debt recovery		(250	)		—
Amortization of debt issuance costs and debt discount		1,106			7,996
Loss from equity method investment		252			237
Share based compensation		407			215
Deferred taxes		457			(1,842	)
Change in assets and liabilities:
Receivables		(1,890	)		(3,540	)
Inventories		(1,505	)		(8,485	)
Prepaid expenses and other current assets		222			686
Accounts payable		(1,302	)		(2,885	)
Accrued and other current liabilities		(3,120	)		(4,193	)
Other long term liabilities		(93	)		255

Net cash provided by operating activities		22,448			12,301

Cash flows from investing activities:
Capital expenditures		(1,733	)		(1,741	)
Software purchased or developed		(554	)		(1,130	)
Distributions from equity method investment		583			1,540

Net cash used in investing activities		(1,704	)		(1,331	)

Cash flows from financing activities:
Net proceeds from issuance of common stock		—			151,354
Principal payments for First Lien Credit Agreement		(20,000	)		(12,075	)
Repayment of Second Lien Credit Agreement		—			(155,000	)
Proceeds from revolving credit facility, net		—			—
Capital Contribution from Lone Star Funds		19,893			—
Payments to repurchase common stock		(20,036	)		—

Net cash used in financing activities		(20,143	)		(15,721	)

Effect of foreign exchange rates on cash and cash equivalents		(389	)		(33	)
Net change in cash and cash equivalents		212			(4,784	)
Cash, beginning of period		15,627			11,822

Cash, end of period	$	15,839		$	7,038

See accompanying notes to unaudited financial statements.

CONTINENTAL BUILDING PRODUCTS, INC.

CONSOLIDATED NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND JUNE 30, 2014

1. Background and Nature of Operations

Description of Business

Continental Building Products, Inc. (“CBP”, or the “Company”) is a Delaware corporation. Prior to the acquisition of the gypsum division of Lafarge North America Inc. (“Lafarge N.A.”) on August 30, 2013, further described below, CBP had no operating activity. The accompanying consolidated financial statements of CBP for the three and six months ended June 30, 2015 and June 30, 2014 contain activity of the acquired business.

The Company manufactures gypsum wallboard and related products for commercial and residential buildings and houses. The Company operates a network of three highly efficient wallboard facilities, all located in the eastern United States and produces joint compound at one plant in the United States and at another plant in Canada.

The Acquisition

On June 24, 2013, Lone Star Funds (“Lone Star”) entered into a definitive agreement with Lafarge N.A. to purchase the assets of its North American gypsum division for a total purchase price of approximately $703 million (the “Acquisition”) in cash. The closing of the Acquisition occurred on August 30, 2013.

Initial Public Offering

On February 10, 2014, the Company completed the initial public offering of 11,765,000 shares of its common stock par value $0.001 per share, at an offering price of $14.00 per share (the “Initial Public Offering”). Net proceeds from the Initial Public Offering after underwriting discounts and commissions, but before other closing costs, were approximately $154 million. The net proceeds were used to pay a $2 million one-time payment to Lone Star in consideration for the termination of the Company’s asset advisory agreement with affiliates of Lone Star (See Note 10, Related Party Transactions). The remaining $152 million of net proceeds and cash on hand of $6.1 million were used to repay the $155 million Second Lien Term Loan in full along with a prepayment premium of $3.1 million (See Note 13, Debt). In expectation of the Initial Public Offering, on February 3, 2014, the Company effected a 32,304 for one stock split of its common stock. The Company’s common stock trades on the New York Stock Exchange under the symbol “CBPX”.

Secondary Public Offerings

On March 18, 2015, LSF8 Gypsum Holdings, L.P. (“LSF8”), an affiliate of Lone Star, sold 5,000,000 shares of the Company’s common stock at a price per share of $19.40. As a result of the sale, the aggregate beneficial ownership of Lone Star fell below 50% of the Company’s outstanding shares of common stock and the Company no longer qualified as a “Controlled Company” under the corporate governance standards of New York Stock Exchange. On May 15, 2015 and June 3, 2015, LSF8 sold an additional 4,600,000 and 361,747 shares of the Company’s common stock, respectively, at a price per share of $21.90. The decrease in ownership by Lone Star and its affiliates to below 50% triggered an aggregate of $20.0 million in payments to certain officers and the estate of our former CEO under the LSF8 Gypsum Holdings, L.P. Long Term Incentive Plan, which is funded by LSF8 (See Note 10, Related Party Transaction).

2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements for CBP have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Basis of Presentation for Interim Periods

Certain information and footnote disclosures normally included for the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods presented. Management believes that the unaudited interim financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position of the Company and the results of operations and cash flows for the periods presented.

The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. Seasonal changes and other conditions can affect the sales volumes of the Company’s products. Therefore, the financial results for any interim period do not necessarily indicate the expected results for the year.

The financial statements should be read in conjunction with CBP’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K for the fiscal year then ended (the “2014 10-K”). The Company has continued to follow the accounting policies set forth in those financial statements.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year and it is currently scheduled to be effective for the Company in the first quarter of 2018 and requires retroactive application on either a full or modified basis. Early application is permitted as of the original effective date. The Company is currently evaluating ASU 2014-09 to determine its impact on its consolidated financial statements and disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern : Presentation of Financial Statements— Going Concern (Subtopic 205-40). This ASU defines when and how companies are required to disclose going concern uncertainties, which must be evaluated each interim and annual period. Specifically, it requires management to determine whether substantial doubt exists regarding the entity’s going concern presumption. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). If substantial doubt exists, certain disclosures are required; the extent of those disclosures depends on an evaluation of management’s plans (if any) to mitigate the going concern uncertainty. The provisions of ASU 2014-15 will be effective for annual periods ending after December 15, 2016, and to annual and interim periods thereafter. Early adoption is permitted. The ASU should be applied on a prospective basis. The Company believes the adoption of this ASU will not have a material impact on the Company’s disclosures.

In April 2015, the FASB issued ASU 2015-03, which changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. ASU 2015-03 will be effective for the Company in the first quarter of 2016. Early adoption is permitted. Upon adoption, the guidance must be applied retroactively to all periods presented in the financial statements. The adoption of this guidance will result in a reclassification of debt issuance costs on the Company’s balance sheet, but will not have a material impact on our results of operations.

3. Receivables

Receivables consist of the following:


(in thousands)	As of June 30, 2015			As of December 31, 2014
Trade receivables	$	44,131		$	42,460
Total allowances		(1,913	)		(2,308	)

Total receivables, net	$	42,218		$	40,152

Trade receivables are recorded net of credit memos issued during the normal course of business.

4. Inventories

Inventories consist of the following:


(in thousands)	As of June 30, 2015		As of December 31, 2014
Finished products	$	8,303	$	4,875
Raw materials		14,723		17,010
Supplies and other		7,908		7,679

Total inventories	$	30,934	$	29,564

5. Property, Plant and Equipment

Property, plant and equipment consist of the following:


(in thousands)	As of June 30, 2015			As of December 31, 2014
Land	$	12,928		$	12,930
Buildings		111,828			111,506
Plant machinery		270,724			269,633
Mobile equipment		3,518			3,448
Construction in progress		3,118			3,165

Property, plant and equipment, at cost		402,116			400,682
Accumulated depreciation		(64,838	)		(47,030	)

Total property, plant and equipment, net	$	337,278		$	353,652

Depreciation expense was $9.0 million for the three months ended June 30, 2015, $17.9 million for the six months ended June 30, 2015, $8.8 million for the three months ended June 30, 2014 and $17.6 million for the six months ended June 30, 2014.

6. Software and Other Intangibles

Customer relationships and other intangibles consist of the following:


(in thousands)	As of June 30, 2015			As of December 31, 2014
Customer relationships	$	116,818		$	117,243
Purchased and internally developed software		4,736			4,332
Trademarks		14,852			14,905

Customer relationships and other intangibles, at cost		136,406			136,480
Accumulated amortization		(34,012	)		(25,671	)

Customer relationships and other intangibles, net	$	102,394		$	110,809

Amortization expense was $4.2 million for the three months ended June 30, 2015, $8.4 million for the six months ended June 30, 2015, $5.1 million for the three months ended June 30, 2014 and $10.2 million for the six months ended June 30, 2014.

Amortization of customer relationships is done over a 15-year period using an accelerated method that reflects the expected future cash flows from the acquired customer-related intangible asset. Trademarks are amortized on a straight-line basis over the estimated useful life of 15 years.

Amortization expense related to capitalized software was $0.4 million and $0.7 million for the three and six months ended June 30, 2015, respectively, and $0.01 million for the six months ended June 30, 2014. Software development costs are amortized over a three-year life with the expense recorded in selling and administrative expense.

7. Accrued and Other Liabilities

Accrued and other liabilities consist of the following:


(in thousands)	As of June 30, 2015		As of December 31, 2014
Vacation and other employee-related costs	$	4,385		7,945
VAT taxes		726		1,220
Other		2,614		2,263

Total accrued and other liabilities	$	7,725	$	11,428

8. Income Taxes

The Company’s annual estimated effective tax rate, before reporting the impact of foreign losses, is approximately 35% and the Company did not recognize any discrete tax items for the six months ended June 30, 2015. At both June 30, 2015 and December 31, 2014, there was a valuation allowance of $0.4 million related to the Company’s Canadian operations.

The Company is subject to audit examinations at federal, state and local levels by tax authorities in those jurisdictions. In addition, the Canadian operations are subject to audit examinations at federal and provincial levels by tax authorities in those jurisdictions. The tax matters challenged by the tax authorities are typically complex; therefore, the ultimate outcome of these challenges is subject to uncertainty. The Company has not identified any issues that did not meet the recognition threshold or would be impacted by the measurement provisions of the uncertain tax position guidance.

9. Commitments and Contingencies

The Company leases certain buildings and equipment. The Company’s facility and equipment leases may provide for escalations of rent or rent abatements and payment of pro rata portions of building operating expenses. Minimum lease payments are recognized on a straight-line basis over the minimum lease term. During the three months ended June 30, 2015, the six months ended June 30, 2015, three months ended June 30, 2014, and six months ended June 30, 2014, total expenses under operating leases were $1.1 million, $2.1 million, $1.2 million, and $2.5 million, respectively. The Company also has noncapital purchase commitments that primarily relate to gas, gypsum, paper and other raw materials.

The table below shows the future minimum lease payments due under non-cancelable operating leases and purchase commitments at June 30, 2015:


(in thousands)	Total		Remaining 2015		2016		2017		2018		2019		2020		Thereafter
Operating leases (1)	$	5,459	$	846	$	1,320	$	1,183	$	616	$	1,494	$	—	$	—
Purchase commitments		156,824		16,370		29,959		29,446		19,410		16,529		14,145		30,965

Total commitments	$	162,283	$	17,216	$	31,279	$	30,629	$	20,026	$	18,023	$	14,145	$	30,965

(1)	Future minimum lease payments over the non-cancelable lease terms of the operating leases.

Under certain circumstances, the Company provides letters of credit related to its natural gas and other supply purchases. At June 30, 2015 and December 31, 2014, the Company had outstanding letters of credit of approximately $3.6 million and $4.8 million, respectively.

In the ordinary course of business, the Company executes contracts involving indemnifications standard in the industry. These indemnifications might include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, it is the opinion of management that these indemnifications are not expected to have a materially adverse effect on the Company’s financial condition, results of operations or liquidity.

In the ordinary course of business, the Company is involved in certain legal actions and claims, including proceedings under laws and regulations relating to environmental and other matters. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the total liability for these legal actions and claims cannot be determined with certainty. When the Company determines that it is probable that a liability for environmental matters, legal actions or other contingencies has been incurred and the amount of the loss is reasonably estimable, an estimate of the costs to be incurred is recorded as a liability in the financial statements. As of June 30, 2015 and December 31, 2014, such liabilities were not material to the Company’s financial statements. While management believes its accruals for such liabilities are adequate, the Company may incur costs in excess of the amounts provided. Although the ultimate amount of liability that may result from these matters or actions is not ascertainable, the Company believes that any amounts exceeding the recorded accruals will not materially affect its financial condition.

In March 2015, a group of homebuilders commenced a lawsuit against the Company and other US wallboard manufacturers alleging that such manufacturers had conspired to fix the price of wallboard in violation of antitrust and unfair competition laws. The complaint also alleges that the manufacturers agreed to abolish the use of “job quotes” and agreed to restrict the supply of wallboard in order to support the allegedly collusive price increases. The Company denies any wrongdoing of the type alleged in the complaint and believes that it has meritorious defenses to the allegations and will vigorously defend itself in this case. The case has been transferred to the Eastern District of Pennsylvania for coordinated and consolidated pretrial proceedings with existing antitrust litigation in that district. The Company does not believe the lawsuit will have a material adverse effect on its financial condition, results of operation or liquidity.

In July 2015, the Company received a grand jury subpoena directing it to provide certain documents in connection with an investigation being conducted by the Department of Justice regarding antitrust matters in the gypsum drywall industry. The Company is cooperating fully with the Department of Justice in responding to the subpoena. The Company does not believe the investigation will have a material adverse effect on its financial condition, results of operations or liquidity.

10. Related Party Transactions

Since the Acquisition, the Company is no longer part of Lafarge N.A. but had a Transition Services Agreement to help with certain ongoing back-office functions. These functions included, among others, accounting, treasury, tax, and information technology services. The Company paid Lafarge N.A. a fee for these services of $129,700 per month through September 2014. Thereafter, the Company reduced the services provided by Lafarge N.A. and the fees paid until the Agreement was terminated in December 2014.

On August 30, 2013, the Company entered into an asset advisory agreement with an affiliate of Lone Star to provide certain management oversight services to the Company, including assistance and advice on strategic plans, obtaining and maintaining certain legal documents, and communicating and coordinating with service providers. The Company paid 110% of actual costs for the services provided. No services were provided in 2014. The agreement was terminated upon the closing of the Initial Public Offering in the first quarter of 2014 and in connection therewith, the Company paid a termination fee of $2.0 million that is included in non-operating expense.

In connection with the March and May 2015 secondary public offerings, certain executives of the Company earned incentive payments in the aggregate amount of approximately $20.0 million. These payments were earned under the LSF8 Gypsum Holdings, L.P. Long Term Incentive Plan (the “LTIP”). Under the LTIP, certain of the Company’s officers and the estate of the Company’s former CEO are eligible to receive payments from LSF8 in the event of a monetization event, as further described in the 2014 10-K. LSF8 is responsible for funding any payments under the LTIP, including those paid in connection with the March and May 2015 secondary public offerings (See Note 1, Background and Nature of Operations). As these payments arose out of employment with the Company, the Company recognizes the payments made to the officers as expense. The funding of the LTIP payments by LSF8 is recorded as additional paid in capital. The $20.0 million in LTIP payments related to the March and May 2015 secondary public offerings were recorded as an expense to the Company, that will also be tax deductible, and capital contributions by LSF8 in the first and second quarters of fiscal 2015.

11. Investment in Seven Hills

The Company is a party with an unaffiliated third-party to a paperboard liner venture named Seven Hills Paperboard, LLC (“Seven Hills”) that provides the Company with a continuous supply of high-quality recycled paperboard liner to meet its ongoing production requirements.

The Company has evaluated the characteristics of its investment and determined that Seven Hills would be deemed a variable interest entity, but that it did not have the power to direct the principal activities most impacting the economic performance of Seven Hills, and is thus not the primary beneficiary. As such, the Company accounts for this investment in Seven Hills under the equity method of accounting.

Paperboard purchased from Seven Hills was $11.3 million and $12.0 million for the three months ended June 30, 2015 and June 30, 2014, respectively. Paperboard purchased from Seven Hills was $22.4 million and $24.9 million for the six months ended June 30, 2015 and June 30, 2014, respectively. As of June 30, 2015, the Company has certain paper purchase commitments to Seven Hills totaling $36.3 million through 2018.

12. Fair Value Measurements

U.S. GAAP provides a framework for measuring fair value, establishes a fair value hierarchy of the valuation techniques used to measure the fair value and requires certain disclosures relating to fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in a market with sufficient activity.

The three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value is as follows:

•

Level 1—Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities that a Company has the ability to access;

•

Level 2—Inputs, other than the quoted market prices included in Level 1, which are observable for the asset or liability, either directly or indirectly; and

•

Level 3—Unobservable inputs for the asset or liability which is typically based on an entity’s own assumptions when there is little, if any, related market data available.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by the Company. The fair values of receivables, accounts payable, accrued costs and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments.

The Company estimates the fair value of its debt by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles. These inputs are classified as Level 3 within the fair value hierarchy. As of June 30, 2015 and December 31, 2014, the carrying value reported in the consolidated balance sheet for the Company’s notes payable approximated its fair value.

The only assets or liabilities the Company had at June 30, 2015 that are recorded at fair value on a recurring basis are the interest rate cap that the Company entered into on March 31, 2014 that had zero fair value as of June 30, 2015 (see Note 13, Debt) and a fair value of $0.03 million as of December 31, 2014, and natural gas hedges that had a negative fair value of $0.4 million at June 30, 2015, net of tax amount of $0.2 million, and $0.9 million at December 31, 2014, net of tax amount of $0.5 million. Both the interest rate cap and the natural gas hedges are classified within Level 2 of the fair value hierarchy as they are valued using third party pricing models which contain inputs that are derived from observable market data. Generally, the Company obtains its Level 2 pricing inputs from the counterparties. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Assets and liabilities that are measured at fair value on a non-recurring basis include intangible assets and goodwill. These items are recognized at fair value when they are considered to be impaired.

There were no fair value adjustments for assets and liabilities measured on a non-recurring basis. The Company discloses fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

13. Debt

Debt consists of the following:


(in thousands)	As of June 30, 2015			As of December 31, 2014
First Lien Credit Agreement maturing on August 28, 2020; interest rate of LIBOR (with a 1% floor) plus 3.00% at June 30, 2015 and December 31, 2014		331,988		$	351,988
Less: Original issue discount (net of amortization)		(2,638	)		(2,863	)

Total debt		329,350			349,125
Less: Current portion of long-term debt		—			—

Long-term debt	$	329,350		$	349,125

On August 30, 2013, the Company and its subsidiary Continental Building Products Operating Company, LLC (“OpCo”) entered into a first lien credit agreement with Credit Suisse AG, as administrative agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners, and Royal Bank of Canada, as syndication agent (as amended on December 2, 2013, the “First Lien Credit Agreement”). The First Lien Credit Agreement provided OpCo a term loan facility at an initial amount of $415.0 million and a U.S. dollar revolving loan facility of $40.0 million and a Canadian dollar and/or U.S. dollar revolving facility of $10.0 million (such aggregate $50.0 million revolving facilities together, the “Revolver”), which may be borrowed by OpCo or by its subsidiary, Continental Building Products Canada Inc. in Canadian dollars or U.S. dollars.

On August 30, 2013, the Company and OpCo entered into a second lien credit agreement with Credit Suisse AG, as administrative agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners, and Royal Bank of Canada, as syndication agent (as amended on December 2, 2013, the “Second Lien Credit Agreement”). The Second Lien Credit Agreement provided OpCo a term loan facility of $155.0 million (the “Second Lien Term Loan”).

On February 10, 2014, the Company completed the Initial Public Offering and used $152 million of net proceeds from the Initial Public Offering and cash on hand of $6.1 million to repay the $155 million Second Lien Term Loan in full along with a prepayment premium of $3.1 million. The $3.1 million prepayment premium was recorded in other (expense) income. The prepayment of the Second Lien Term Loan also resulted in the write-off of $6.9 million in original issue discount and deferred financing fees that were recorded in interest expense.

Interest under the First Lien Credit Agreement is floating. The interest rate spread over LIBOR, which has a 1% floor, was reduced by 50 basis points on May 14, 2014, from 3.75% to 3.25%, as a result of the Company achieving a total leverage ratio of less than four times net debt to the trailing twelve months adjusted earnings before interest, depreciation and amortization, as of March 31, 2014, as calculated pursuant to the First Lien Credit Agreement. This reduced interest rate for the First Lien Credit Agreement will be in effect for as long as the leverage ratio, as calculated pursuant to the First Lien Credit Agreement, remains below four. The margin applicable to the borrowing was further reduced on August 26, 2014 by 25 basis points to 3.00% after the Company achieved a B2 rating with a stable outlook by Moody’s and will remain in effect as long as this rating and outlook are maintained or better.

The First Lien Credit Agreement is secured by the underlying property and equipment of the Company. During the three and six months ended June 30, 2015, the Company pre-paid $10.0 and $20.0 million of principal payments, respectively, and no further quarterly mandatory principal payments are required until the final payment of $332 million due on August 28, 2020. The annual effective interest rate on the First Lien Credit Agreement including original issue discount and amortization of debt issuance costs was 4.7% at June 30, 2015.

There were no amounts outstanding under the Revolver as of June 30, 2015. The interest rate on amounts outstanding under the Revolver is floating, based on LIBOR (with a floor of 1%), plus 225 basis points. In addition, CBP pays a facility fee of 50 basis points per annum on the total Revolver. Availability under the Revolver, based on draws and outstanding letters of credit and non-existence of violations of covenants, was $46.4 million at June 30, 2015.

Total cash interest paid for the three and six months ended June 30, 2015 was $3.5 million and $7.0 million, respectively. Total cash interest paid for the three and six months ended June 30, 2014 was $4.8 million and $11.4 million, respectively.

The table below shows the future minimum principal payments due under the First Lien Credit Agreement.


(in thousands)	Amount Due
2015		—
2016		—
2017		—
2018		—
2019		—
Thereafter	$	331,988

Under the terms of the First Lien Credit Agreement, the Company is required to comply with certain covenants, including among others, a limitation of indebtedness, limitation on liens, and limitations on certain cash distributions. One single financial covenant governs all of the Company’s debt and applies only if the outstanding borrowings of the Revolver plus outstanding letters of credit are greater than $12.5 million as of the end of the quarter. The financial covenant is a total leverage ratio calculation, in which total debt less outstanding cash is divided by adjusted earnings before interest, depreciation and amortization. If the financial covenant were applicable, it would require a leverage ratio below 6.0 as of June 30, 2015. As the sum of outstanding borrowings under the Revolver and outstanding letters of credit were less than $12.5 million at June 30, 2015, the financial covenant was not applicable for the quarter.

14. Derivative Instruments

The Company uses derivative instruments to manage selected commodity price and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes, and typically does not hedge beyond two years. Cash flows from derivative instruments are included in net cash provided by operating activities in the consolidated statements of cash flows.

Commodity Derivative Instruments

As of June 30, 2015, the Company had 600 thousand millions of British Thermal Units (“mmBTUs”) in aggregate notional amount outstanding natural gas swap contracts to manage natural gas price exposures. All of these contracts mature by October 31, 2015. The Company elected to designate these derivative instruments as cash flow hedges in accordance with FASB Accounting Standards Codification (“ASC”) 815-20, Derivatives - Hedging . For derivative contracts designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to accumulated other comprehensive income, and is reclassified to earnings when the underlying forecasted transaction affects earnings. The ineffective portion of changes in the fair value of the derivative is recorded in cost of goods sold. The net unrealized loss that remained in accumulated other comprehensive income (loss), as of June 30, 2015 was $0.4 million, which is net of a tax amount of $0.2 million. No ineffectiveness was recorded on these contracts during the fiscal year 2014 and the six months ended June 30, 2015. Gains and losses on these contracts that are designated as cash flow hedges are reclassified into earnings when the underlying forecasted transactions affect earnings. The Company reassesses the probability of the underlying forecasted transactions occurring on a quarterly basis.

On a pre-tax basis, approximately $0.6 million and $0.8 million of gains were recognized in other comprehensive income for the commodity contracts for the three and six months ended June 30, 2015, respectively. For the same periods, the amount of gain reclassified from accumulated other comprehensive income into income was nominal. As of June 30, 2015, $0.4 million was recorded in other current liabilities.

Interest Rate Derivative Instrument

At June 30, 2015, the Company had an interest rate cap on three month U.S. Dollar LIBOR of 2% for a notional amount of $203.9 million, representing 61.4% of the principal amount outstanding under the First Lien Credit Agreement as of June 30, 2015. The notional amount of the interest rate cap declines by $0.5 million each quarter through December 31, 2015. The objective of the hedge is to protect the cash flows from

adverse extreme market interest rate changes for a portion of the First Lien Credit Agreement through June 30, 2016. Changes in the fair value of the interest rate cap are expected to be perfectly effective in offsetting the changes in cash flow of interest payments attributable to fluctuations for three month U.S. Dollar LIBOR interest rates above 2%. The hedge is being accounted for as a cash flow hedge.

Changes in the time value of the interest rate cap are reflected directly in earnings through “other income / expense” in non-operating income. CBP recorded a $0.03 million loss for the three and six months ended June 30, 2015. The fair value of the time value of the interest rate cap was $0 as of June 30, 2015.

Counterparty Risk

The Company is exposed to credit losses in the event of nonperformance by the counterparties to the Company’s derivative instruments. As of June 30, 2015, the Company’s derivatives were in a $0.4 million net liability position. All of the Company’s counterparties have investment grade credit ratings; accordingly, the Company anticipates that the counterparties will be able to fully satisfy their obligations under the contracts. The Company’s agreements outline the conditions upon which it or the counterparties are required to post collateral. As of June 30, 2015, the Company had no collateral posted with its counterparties related to the derivatives.

15. Segment Reporting

Segment information is presented in accordance with ASC 280, Segment Reporting , which establishes standards for reporting information about operating segments. It also establishes standards for related disclosures about products and geographic areas. The Company’s primary reportable segment is wallboard which represented approximately 97% of the Company’s revenues for the three and six months ended June 30, 2015, and approximately 96% of the Company’s revenues for the three and six months ended June 30, 2014. This segment produces wallboard for the commercial and residential construction sectors. The Company also operates other business activities, primarily finishing products, which complement the Company’s full range of wallboard products.

Revenues from the major products sold to external customers include gypsum wallboard and finishing products.

The Company’s two geographic areas consist of the United States and Canada for which it reports net sales, fixed assets and total assets.

The Company evaluates operating performance based on profit or loss from operations before certain adjustments as shown below. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. The Company did not provide asset information by segment as the Company’s Chief Operating Decision Maker does not use such information for purposes of allocating resources and assessing segment performance.

Reportable segment information consists of the following:


(in thousands)	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Net Sales:
Wallboard		107,569			99,222			196,312			182,140
Other		3,427			3,693			6,860			7,748

Total net sales		110,996			102,915			203,172			189,888

Operating income (loss):
Wallboard		4,418			12,984			12,196			19,340
Other		(143	)		(182	)		(19	)		(257	)

Total operating income (loss)		4,275			12,802			12,177			19,083

Adjustments:
Interest Expense		(4,184	)		(5,397	)		(8,405	)		(19,573	)
Gain (loss) from Equity Investment		(311	)		(237	)		(252	)		(237	)
Other non-operating expenses		31			(144	)		(417	)		(5,330	)

Income (loss) before income tax benefit		(189	)		7,024			3,103			(6,057	)

Depreciation and Amortization
Wallboard		12,847			13,629			25,682			27,212
Other		294			301			588			601

Total depreciation and amortization		13,141			13,930			26,270			27,813

16. Share Repurchase

On May 15, 2015, the Company repurchased 913,200 shares of its common stock from LSF8 in a private transaction at a price per share of $21.90 per share, or an aggregate of approximately $20.0 million, pursuant to a stock purchase agreement dated May 11, 2015. The repurchased shares are held in treasury and the effect thereof reduces the number of shares of common stock outstanding is reflected in our earnings per share calculation.

17. Share-Based Compensation

In conjunction with the Initial Public Offering, the Company granted certain employees and independent members of the Board of Directors an aggregate of 142,000 stock options and 75,000 shares of restricted stock that vest over four years. The fair value of stock options was determined using the Black Scholes option pricing model with the following assumptions: (a) a risk free interest rate assumption of 2.15%, based on the U.S. Treasury yield curve in effect at the time of the grant; (b) a dividend yield of 0% as the Company currently has no plans to pay a dividend; (c) a volatility assumption of 50.34%, based on historical volatilities of comparable publicly traded companies, and (d) an expected life of 6.25 years based on the assumption that the options will be exercised evenly from time of vesting to the expiration date.

On March 2, 2015, the Company granted certain employees and independent members of the Board of Directors 62,070 Restricted Stock Units (“RSUs”) and 40,050 RSUs that are subject to certain performance conditions (“PRSUs”). Of the 62,070 RSUs granted in March, 7,581 fully vest after one year, and 54,489 vest ratably over four years. On May 5, 2015, the Company granted certain employees an additional 9,205 RSUs and 6,280 PRSUs which vest ratably over four years. The PRSUs vest on December 31, 2017, with the exact number of PRSUs vested subject to the achievement of certain performance conditions through December 31, 2016. The number of PRSUs earned will vary from 0% to 200% of the number of PRSUs awarded, depending on our performance relative to a cumulative two year EBITDA target for fiscal years 2015 and 2016. The fair value of each RSU and PRSU is equal to the market price of our common stock at the date of the grant.

The following table summarizes shares of restricted stock (“RSAs”), RSU and PRSU activity for the six months ending June 30, 2015:


	Number of RSAs			Number of RSUs		Number of PRSUs		Weighted Average Grant Date Value
Non-Vested, December 31, 2014		55,000			—		—	$	14.00
Granted		—			71,275		46,330	$	21.19
Cancelled/Forfeited		(3,000	)		—		—	$	14.00
Vested		(13,750	)		—		—	$	14.00

Non-Vested, June 30, 2015		38,250			71,275		46,330	$	19.43

As of June 30, 2015, there was $2.7 million of unrecognized compensation expense related to non-vested restricted stock. This expense is subject to future adjustments for vesting and forfeitures and is being recognized on a straight-line basis.

The following table summarizes stock option activity for the six months ending June 30, 2015:


	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in Years)
Outstanding, January 1, 2015		142,000		$	14.00
Granted		—			—
Forfeited		(1,925	)	$	14.00
Exercised		—			—

Outstanding, June 30, 2015		140,075		$	14.00	$	1,007,139		8.61

Exercisable, June 30, 2015		81,462		$	14.00	$	585,710		8.61
Vested and Expected to Vest, June 30, 2015		140,075		$	14.00	$	1,007,139		8.61

Unearned compensation related to stock options as of June 30, 2015 of $0.4 million will be recognized over a weighted average remaining period of approximately three years. Compensation expense of $0.3 million and $0.4 million was recorded for share-based awards for the three and six months ended June 30, 2015, respectively. Compensation expense of $0.1 million and $0.2 million was recorded for share-based awards for the three and six months ended June 30, 2014, respectively.

Employee Stock Purchase Plan

On February 18, 2015, subject to approval by the Company’s stockholders, the Company adopted an Employee Stock Purchase Plan (“ESPP”) enabling employees to purchase the Company’s shares at a discount. On May 20, 2015, the Company’s stockholders approved the ESPP at the Company’s 2015 annual meeting. The ESPP authorizes the issuance of up to 600,000 shares of the Company’s common stock, but actual shares issued will depend on plan participation. Shares issued under the ESPP will reduce, on a share-for-share basis, the number of shares of the Company’s common stock already available for issuance pursuant to the Company’s 2014 Stock Incentive Plan. Employees contribute to the ESPP through payroll deductions over a twelve month offering period and are limited to the lower of 10% of the employee’s salary or $10,000 per employee. The purchase price of the shares is equal to the lower of 85 percent of the closing price of our common stock on either the first or last trading day of a given offering period. The first offering period commenced on May 1, 2015.

18. Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of shares of common stock outstanding assuming the 32,304 for one stock split occurred as of January 1, 2014 and taking into account the issuance of 11,765,000 new shares on February 10, 2014 in connection with the Initial Public Offering. Diluted earnings and loss per share is based on the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding restricted stock, restricted stock units and stock options.

Earnings (Loss) Per Share


(in thousands, except per share data)	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Net income (loss)	$	(126	)	$	4,667	$	1,894	$	(3,956	)
Weighted average shares outstanding - basic		43,606			44,069		43,840		41,794
Dilutive impact of RSAs		—			12		5		—
Dilutive impact of PRSUs		—			—		4		—
Dilutive impact of RSUs		—			—		3		—
Dilutive impact of Stock Options		—			—		24		—

Weighted average shares outstanding - diluted		43,606			44,081		43,877		41,794
Net income per common share:
Basic	$	(0.00	)	$	0.11	$	0.04	$	(0.09	)
Diluted	$	(0.00	)	$	0.11	$	0.04	$	(0.09	)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with “Risk Factors,” “Forward-Looking Statements,” “Selected Historical Financial and Operating Data,” and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2014 filed with the Securities and Exchange Commission on February 25, 2015 (the “2014 10-K”) and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Overview

We are a leading manufacturer of gypsum wallboard and complementary finishing products in the eastern United States and eastern Canada. We operate highly efficient and automated manufacturing facilities that produce a full range of gypsum wallboard products for our diversified customer base. We sell our products in the new residential, repair and remodel (“R&R”) and commercial construction markets. We believe our operating efficiencies, favorable plant locations, manufacturing expertise and focus on delivering superior customer service position us to benefit from an anticipated increase in gypsum wallboard demand as the housing market recovers from historic lows.

Our primary reportable segment is wallboard, which accounted for approximately 97% of our net sales in the three and six months ended June 30, 2015 and 96% in the three and six months ended June 30, 2014. We also operate other business activities, primarily finishing products, which complement our full range of wallboard products. See Part I, Item 1, Financial Information – Notes to Consolidated Financial Statements, Note 15, Segment Reporting.

Due to our limited history as a stand-alone company and changes in connection with our Initial Public Offering, the historical financial information included in this Quarterly Report on Form 10-Q is not necessarily indicative of our financial position, results of operations and cash flows in the future.

Paper and synthetic gypsum are our principal wallboard raw materials. Paper constitutes our most significant input cost and the most significant driver of our variable manufacturing costs. Energy costs, consisting of natural gas and electricity, are the other key input costs. In total, manufacturing cash costs represented 61% of our costs of goods sold for each of the six months ended June 30, 2015 and June 30, 2014. Depreciation and amortization represented 17% and 18% of our costs of goods sold for the six months ended June 30, 2015 and June 30, 2014, respectively. Distribution costs to deliver product to our customers represented the remaining portion of our costs of goods sold, or approximately 22% and 21% of our costs of goods sold for the six months ended June 30, 2015 and June 30, 2014, respectively.

Variable manufacturing costs, including inputs such as paper, gypsum, natural gas, and other raw materials, represented 66% and 69% of our manufacturing cash costs for the six months ended June 30, 2015 and June 30, 2014, respectively. Fixed production costs excluding depreciation and amortization consisted of labor, maintenance, and other costs that represented 34% and 31% of manufacturing cash costs for the six months ended June 30, 2015 and June 30, 2014, respectively.

We currently purchase substantially all of our paperboard liner from Seven Hills, a joint venture between the Company and Rock-Tenn Company (“RockTenn”). Under the agreement with Seven Hills, the price of paper adjusts based on changes in the underlying costs of production of the paperboard liner, of which the two most significant are recovered waste paper and natural gas. The largest waste paper source used by the operation is old cardboard containers (known as OCC). Seven Hills has the capacity to supply us with approximately 75% of our paper needs at our full capacity utilization and substantially all of our needs at current capacity utilization on market-based pricing terms that we consider favorable. We believe we can also purchase additional paper on the spot market at competitive prices. See Part I, Item 1, Financial Information – Notes to Consolidated Financial Statements, Note 11, Investment in Seven Hills.

Results of Operations

The table below highlights our results of operations for the three and six months ended June 30, 2015 and the three and six months ended June 30, 2014 ( in thousands, except per share data and mill net sales price ):


	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Net Sales	$	110,996		$	102,915		$	203,172		$	189,888
Costs, expenses and other income:
Cost of goods sold		81,516			82,025			153,191			155,221
Selling and administrative		9,363			8,088			17,791			15,584
Long Term Incentive Plan funded by Lone Star		15,842			—			20,013			—

Total costs and operating expenses		106,721			90,113			190,995			170,805

Operating income (loss)		4,275			12,802			12,177			19,083
Other income (expense), net		31			(144	)		(417	)		(5,330	)
Interest expense, net		(4,184	)		(5,397	)		(8,405	)		(19,573	)

Income (loss) before loss on equity method investment and income tax		122			7,261			3,355			(5,820	)
Loss from equity method investment		(311	)		(237	)		(252	)		(237	)

Income (loss) before income tax		(189	)		7,024			3,103			(6,057	)
Income tax benefit (expense)		63			(2,357	)		(1,209	)		2,101

Net income (loss)	$	(126	)	$	4,667		$	1,894		$	(3,956	)

Net income (loss) per common share:
Basic	$	(0.00	)	$	0.11		$	0.04		$	(0.09	)
Diluted	$	(0.00	)	$	0.11		$	0.04		$	(0.09	)
Weighted average shares outstanding:
Basic		43,606			44,069			43,840			41,794
Diluted		43,606			44,081			43,877			41,794

Other Financial and Operating Data:
EBITDA (1)	$	17,416		$	26,732		$	38,447		$	46,896
Adjusted EBITDA (1)	$	33,258		$	26,732		$	58,460		$	46,896
Capital expenditures and software purchased or developed	$	1,270		$	1,587		$	2,287		$	2,871
Wallboard sales volume (MSF)		567			525			1,036			963
Mill net sales price (2)	$	156.85		$	155.76		$	157.13		$	156.47

(1)

EBITDA and Adjusted EBITDA are non-GAAP measures. See “Reconciliation of Non-GAAP Measures” below for how we calculate and define EBITDA and Adjusted EBITDA as non-GAAP measures, reconciliations thereof to operating income, the most directly comparable GAAP measure, and a description as to why we believe these measures are important.

(2)	Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.

Three and Six Months Ended June 30, 2015 Compared to Three and Six Months Ended June 30, 2014

Net Sales. Net sales increased by $8.1 million, up 7.9% from $102.9 million for the three months ended June 30, 2014, to $111.0 million for the three months ended June 30, 2015. The increase was primarily attributable to the increase in volume, which contributed approximately $8.1 million of additional net sales. Total volume grew 8.1% compared to the prior year period, mostly driven by a U.S. volume increase of 7.9%, and to a lesser extent by Canadian volumes. The increase in the average net selling price for gypsum wallboard had a $1.5 million favorable impact on net sales at constant exchange rates. An unfavorable $1.2 million impact of foreign currency and $0.3 million in lower sales of our other products contributed to the remaining difference.

Net sales increased by $13.3 million, up 7.0% from $189.9 million for the six months ended June 30, 2014, to $203.2 million for the six months ended June 30, 2015. The increase was primarily attributable to the increase in volume, which contributed approximately $13.9 million of additional net sales. Total volume grew 7.6% compared to the prior year period, mostly driven by a U.S. volume increase of 7.2%, and to a lesser extent by Canadian volumes. The increase in the average net selling price for gypsum wallboard had a $2.6 million favorable impact on net sales at constant exchange rates. An unfavorable $2.3 million impact of foreign currency and $0.9 million in lower sales of our other products contributed to the remaining difference.

C ost of Goods Sold. Cost of goods sold decreased $0.5 million, down 0.6% from $82.0 million for the three months ended June 30, 2014, to $81.5 million for the three months ended June 30, 2015. Approximately $2.0 million of the decrease in cost of goods sold was due to lower manufacturing costs, primarily helped by lower energy prices. Lower amortization decreased costs by $1.2 million. Favorable foreign exchange rates reduced costs by an additional $1.1 million. Lower sales volumes of our non-wallboard products reduced cost of goods sold by $0.3 million and higher wallboard volumes increased cost of goods sold by approximately $4.1 million.

Cost of goods sold decreased $2.0 million, down 1.3% from $155.2 million for the six months ended June 30, 2014, to $153.2 million for the six months ended June 30, 2015. Approximately $3.9 million of the decrease in cost of goods sold was due to lower manufacturing costs, primarily helped by lower energy prices. Higher freight to customers increased costs by $0.3 million. Lower amortization and favorable foreign exchange rates reduced costs by an additional $2.4 million and $2.1 million, respectively. Lower sales volumes of our non-wallboard products reduced cost of goods sold by $0.9 million. Higher wallboard volumes increased costs by $7.0 million.

Selling and Administrative Expense. Selling and administrative expense increased $1.3 million, up 15.8% to $9.4 million for the three months ended June 30, 2015 compared to $8.1 million for the three months ended June 30, 2014. This increase was primarily driven by $0.4 million in higher amortization for the recently implemented information technology system, $0.3 million in professional fees for the secondary public offering in the second quarter of 2015 and $0.6 million related to additional costs of being a standalone company.

Selling and administrative expense increased $2.2 million, up 14.2% to $17.8 million for the six months ended June 30, 2015 compared to $15.6 million for the six months ended June 30, 2014. This increase was primarily driven by $0.8 million in higher amortization for the recently implemented information technology system, $0.7 million in professional fees for two secondary public offerings in the first half of 2015 and $0.2 million in Delaware franchise tax.

Long Term Incentive Plan Funded by Lone Star. Under the LSF8 Gypsum Holdings, LP. Long Term Incentive Plan (the “LTIP”), certain of our officers and the estate of our former CEO are eligible to receive payments from LSF8 Gypsum Holdings, L.P., an affiliate of Lone Star Funds (“LSF8”), in the event of a monetization event, as further described in our 2014 10-K. LSF8 is responsible for funding any payments under the LTIP. The secondary public offering in March 2015 triggered a monetization event for the first time and resulted in aggregate payments of $4.2 million, and the secondary public offering in May 2015 resulted in aggregate payments of $15.8 million. As these payments arose out of employment with the Company, the $15.8 million and $20.0 million expense was recorded on the Company’s books for the three and six months ended June 30, 2015, respectively, and will also be deductible for tax purposes. The funding of LTIP is recorded as capital contributions from LSF8 in the statement of cash flows under financing activities .

Operating (Loss) Income. Operating income of $4.3 million for the three months ended June 30, 2015 decreased by $8.5 million from operating income of $12.8 million for the three months ended June 30, 2014. The difference was driven mostly by the $15.8 million LTIP expense and $1.3 million higher selling and administrative expense, partially offset by $8.1 million higher net sales and $0.5 million lower cost of goods sold.

Operating income of $12.2 million for the six months ended June 30, 2015 decreased by $6.9 million from operating income of $19.1 million for the six months ended June 30, 2014. The difference was driven mostly by the $20.0 million LTIP expense and $2.2 million higher selling and administrative expense, partially offset by $13.3 million higher net sales and $2.0 million lower cost of goods sold.

Other Income (Expense), Net. Other income (expense), net, was a net income of $0.03 million for the three months ended June 30, 2015, slightly higher than other expense of $0.1 million in the prior year period.

For the six months ended June 30, 2015, other income (expense), net, was a net expense of $0.4 million, a decrease from the $5.3 million other expense in the prior year period. The decrease is primarily due to non-recurring costs incurred in the first quarter 2014, including the prepayment premium of $3.1 million for the repayment of the Second Lien Term Loan and $2.0 million for the payment of termination fees to affiliates of Lone Star.

Interest Expense, Net. Interest expense was $4.2 million for the three months ended June 30, 2015, compared to $5.4 million for the prior year period, and relates to the First Lien Credit Agreement. This decrease was driven by lower borrowings during the second quarter of 2015 and a reduced interest rate on the First Lien Term Loan. During the second quarter of 2015, the Company prepaid $10.0 million of the First Lien Term Loan.

Interest expense was $8.4 million for the six months ended June 30, 2015, a decrease from $19.6 million for the six months ended June 30, 2014, reflecting lower borrowings during six months ended June 30, 2015, a reduced interest rate on the First Lien Term Loan and non-recurring costs that occurred in 2014 and not in 2015. The non-recurring costs include a write-off of the original issue discount and deferred financing fees associated with the early repayment of the Second Lien Term Loan on February 10, 2014.

The Company prepaid $59.9 million in the course of 2014, $10 million during each of the first and second quarter of 2015, in each case under the First Lien Credit Agreement. In May 2014, the interest rate on the First Lien Credit Agreement was reduced by 0.5% due to the Company reaching lower leverage ratios as outlined in the First Lien Credit Agreement. In August 2014, the interest rate on the First Lien Credit Agreement was further reduced by 0.25% due to a ratings upgrade by Moody’s (See Note 13, Debt, in the Notes to the unaudited financial statements). As a result, the effective interest rate on the First Lien Credit Agreement as of June 30, 2015 was 4.74% and the effective interest rate on the Revolver was 3.25%.

Income Tax Benefit (Expense). Income tax benefit was $0.1 million for the three months ended June 30, 2015, compared to an income tax expense of $2.4 million in the prior year period.

Income tax expense was $1.2 million for the six months ended June 30, 2015, compared to an income tax benefit of $2.1 million in the prior year period.

Net Income (Loss) . Net loss for the three ended June 30, 2015 was $0.1 million, compared to a net income of $4.7 million in the prior year period. The decrease was primarily driven by the $15.8 million LTIP expense, partly offset by $8.1 million higher net sales, $2.4 million lower tax expense and $0.5 million lower cost of goods sold.

Net income for the six months ended June 30, 2015 was $1.9 million, compared to a net loss of $4.0 million in the prior year period. The increase was primarily driven by $13.3 million higher net sales, $11.2 million lower interest expense, $4.9 million lower other expense and $2.0 million lower cost of goods sold, partly offset by the $20.0 million LTIP expense, $3.3 million higher income tax expense and $2.2 million higher selling, general and administrative expense.

Reconciliation of Non-GAAP Measures

EBITDA and Adjusted EBITDA have been presented in this Quarterly Report on Form 10-Q as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We have presented EBITDA and Adjusted EBITDA as supplemental performance measures because we believe that they facilitate a comparative assessment of our operating performance relative to our performance based on our results under GAAP while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that we believe do not reflect our operations and underlying operational performance. Management also believes that EBITDA and Adjusted EBITDA are useful to investors because they present a better reflection of our performance as an independent company following the Acquisition and allow investors to view our business through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods.

EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate EBITDA and Adjusted EBITDA in the same manner as we do. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered in isolation or as alternatives to operating income determined in accordance with GAAP or any other financial statement data presented as indicators of financial performance or liquidity, each as calculated and presented in accordance with GAAP.

The following table reconciles the non-GAAP measures to GAAP measures:

Three Months
Ended
June 30, 2015

Three Months
Ended
June 30, 2014

Six Months
Ended
June 30, 2015

Six Months
Ended
June 30, 2014

Operating Income - GAAP Measure

4,275

12,802

12,177

19,083

Adjustments:

Depreciation and amortization

13,141

13,930

26,270

27,813

EBITDA—Non-GAAP Measure

17,416

26,732

38,447

46,896

Long Term Incentive Plan funded by Lone Star (a)

15,842

—

20,013

—

Adjusted EBITDA—Non-GAAP Measure

33,258

26,732

58,460

46,896

(a)

Represents expense recognized pursuant to the LTIP funded by LSF8, an affiliate of Lone Star.

Liquidity and Capital Resources

Since the Acquisition, our primary sources of liquidity are cash on hand, cash from operations, and borrowings under the debt financing arrangements that we entered into in connection with the Acquisition. We believe these sources will be sufficient to fund our planned operations and capital expenditures. See Part I, Item 1, Financial Information – Notes to Consolidated Financial Statements, Note 13, Debt, and the 2014 10-K for a more detailed discussion of our debt financing arrangements.

The following table sets forth a summary of the net cash provided by (used in) operating, investing and financing activities for the Company for the six months ended June 30, 2015 and June 30, 2014:


	Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Net cash provided by operating activities	$	22,448		$	12,301
Net cash used in investing activities		(1,704	)		(1,331	)
Net cash used in financing activities		(20,143	)		(15,721	)
Effect of foreign exchange rates on cash and cash equivalents		(389	)		(33	)

Net change in cash and cash equivalents	$	212		$	(4,784	)

Net Cash Provided By Operating Activities

Net cash provided by operating activities was $22.4 million for the six months ended June 30, 2015. Net cash provided by operating activities for the six months ended June 30, 2014 was $12.3 million. This improvement was primarily due to the net income in the current period relative to the net loss for the same period last year as well as an increase in net working capital.

Net Cash Used In Investing Activities

Net cash used in investing activities was $1.7 million and $1.3 million for the six months ended June 30, 2015 and June 30, 2014, respectively. Net cash used in investing activities for the six months ended June 30, 2015 reflects an aggregate of $2.3 million in capital expenditures and software purchased or developed, partially offset by $0.6 million in distributions received from our equity investment in Seven Hills. The increase as compared to the six months ended June 30, 2014 was primarily due to $1.0 million lower distributions received from our equity investment in Seven hills, partly offset by $0.6 million lower expenditures for software purchased or developed.

Net Cash Used In Financing Activities

Net cash used in financing activities was $20.1 million for the six months ended June 30, 2015. Net cash provided by financing activities was $15.7 million for the six months ended June 30, 2014. In May 2015, the Company repurchased 913,200 shares of its common stock from LSF8 for an aggregate amount of approximately $20.0 million. The Company made voluntary prepayments of $10.0 million on the First Lien Credit Agreement in each of the first and second quarters of 2015. The next required mandatory principal payment on the First Lien Credit Agreement is the amount due at maturity on August 28, 2020. In addition, the Company received $20.0 million of LTIP funding from Lone Star.

In the first quarter 2014, net proceeds of $151.4 million from the Initial Public Offering were used to repay a portion of the Second Lien Credit Agreement of $155 million.

Critical Accounting Policies

The preparation of our financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the periods presented. Our 2014 10-K includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues or expenses during the first six months of 2015.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements.” These forward-looking statements are included throughout this Quarterly Report on Form 10-Q, and relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity, capital resources and other financial and operating information. We have used the words “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements in this Quarterly Report on Form 10-Q. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including:

•

cyclicality in our markets, especially the new residential construction market;

•

the highly competitive nature of our industry and the substitutability of competitors’ products;

•

disruptions in our supply of synthetic gypsum due to regulatory changes or coal-fired power plants switching to natural gas;

•

changes to environmental and safety laws and regulations requiring modifications to our manufacturing systems;

•

disruptions to our supply of paperboard liner;

•

potential losses of customers;

•

changes in affordability of energy and transportation costs;

•

material disruptions at our facilities or the facilities of our suppliers;

•

changes in, cost of compliance with or the failure or inability to comply with governmental laws and regulations, in particular environmental regulations;

•

our involvement in legal and regulatory proceedings;

•

our ability to attract and retain key management employees;

•

disruptions in our information technology systems;

•

labor disruptions;

•

seasonal nature of our business;

•

the effectiveness of our internal control over financial reporting;

•

increased costs and demands on management as a public company;

•

our limited public company operating experience;

•

our relationship, and actual and potential conflicts of interest, with Lone Star; and

•

additional factors discussed under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” in our 2014 10-K, as applicable.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. We believe that these factors include those described in “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates, and commodity price risk associated with our input costs. We use derivative instruments to manage certain commodity price and interest rate exposures. We do not use derivative instruments for speculative trading purposes, and we typically do not hedge beyond two years. See Note 14, Derivative Instruments, to the Notes to the unaudited financial statements for additional information regarding our financial exposures.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our outstanding debt, and cash and cash equivalents. As of June 30, 2015, we had $15.8 million in cash and cash equivalents. The interest expense associated with First Lien Credit Agreement and any loans under the Revolver will vary with market rates.

Our exposure to market risk for changes in interest rates related to our outstanding debt is somewhat mitigated as the First Lien Term Loan and the Revolver have a LIBOR floor of 1%. A rise of current interest rate levels to above the 1% floor would be required to increase our interest expense and a reduction in interest rates would have no impact on our interest expense. As of June 30, 2015, we elected to use three month LIBOR with a rate of 0.25%. A hypothetical 1% increase in interest rates would have increased interest expense by approximately $0.2 million for the three months ended June 30, 2015.

At March 31, 2014, the Company entered into an interest rate cap on three months US Dollar LIBOR of 2% for a notional amount of $206.5 million, which represented one-half of the principal amount due under our First Lien Credit Agreement at March 31, 2014. The notional amount of the interest rate cap declines by approximately $0.5 million each quarter through December 31, 2015, and was $203.9 million as of June 30, 2015. The objective of the hedge is to protect our cash flows for a portion of the First Lien Credit Agreement from adverse extreme market interest rate changes through June 30, 2016. As U.S. Dollar LIBOR interest rates remain below 2%, the contract had a fair value of $0 at June 30, 2015.

The return on our cash equivalents balance was less than one percent. Therefore, although investment interest rates may further decrease in the future, the corresponding impact to our interest income, and likewise to our income and cash flow, would not be material.

Foreign Currency Risk

Approximately 9% of our sales for each of the three and six months ended June 30, 2015, and three and six months ended June 30, 2014, were in Canada. As a result, we are exposed to movements in foreign exchange rates between the U.S. dollar and Canadian dollar. We estimate that a 1% change in the exchange rate between the U.S. and Canadian currencies would impact net sales by approximately $0.1 million and $0.2 million based on 2015 results for the three and six months ended June 30, 2015, respectively. This may differ from actual results depending on the level of sales volumes in Canada. During the reported periods we did not use foreign currency hedges to manage this risk.

Commodity Price Risk

Some of our key production inputs, such as paper and natural gas, are commodities whose prices are determined by the market’s supply and demand for such products. Price fluctuations on our key input costs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected by factors such as global economic conditions, changes in or disruptions to industry production capacity, changes in inventory levels and other factors beyond our control.

We use natural gas swap contracts to manage our exposure to fluctuations in commodity prices associated with anticipated purchases of natural gas. Currently, a portion of our anticipated purchases of natural gas for 2015 is hedged. The aggregate notional amount of these hedge contracts in place as of June 30, 2015 was 600 thousand mmBTUs. We review our positions regularly and make adjustments as market and business conditions warrant. The fair value of the outstanding quarter-end contracts was an unrealized loss of $0.4 million as of June 30, 2015.

Seasonality

Sales of our wallboard products are, similar to many building products, seasonal in that sales are generally slightly higher from spring through autumn when construction activity is greatest in our markets.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.

The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We have been from time to time, and may in the future become, party to litigation or other legal proceedings that we consider to be part of the ordinary course of our business. We are not currently involved in any legal proceedings that could be reasonably expected to have a material adverse effect on our business or our results of operations. We may become involved in material legal proceedings in the future.

For a description of our legal proceedings, see Part I, Item 1, Financial Information – Notes to Consolidated Financial Statements, Note 9, Commitments and Contingencies, which is incorporated herein by reference.

Item 1A.

Risk Factors

We are subject to risks and uncertainties that could cause our actual results to differ materially from the expectations expressed in the forward looking statements. Factors that could cause our actual results to differ from expectations are described under Item 1A. Risk Factors in the 2014 10-K, as supplemented by the update in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015, to which there were no material changes during the period covered by this Quarterly Report on Form 10-Q. However, although not material, we have elected to update (i) our risk factor regarding our synthetic gypsum suppliers to reflect that in August 2015 the Environmental Protection Agency announced final rules for its Clean Power Plan and (ii) our risk factor regarding legal and regulatory proceedings to reflect the receipt of the Department of Justice subpoena discussed in Part I, Item 1, Financial Information – Notes to Consolidated Financial Statements, Note 9, Commitments and Contingencies.

If our coal-fired power plant synthetic gypsum suppliers switch to natural gas or cease operations, our supply of synthetic gypsum could be constrained and our operating results or cash flows may be materially and adversely affected.

All of the gypsum used in our plants is synthetic gypsum, which is a coal-combustion residual, or CCR, resulting primarily from flue gas desulfurization, or FGD, carried out by electric generation or industrial plants burning coal as a fuel. The suppliers of synthetic gypsum are primarily power companies. As a result of the increase in coal price relative to natural gas and other reasons, some power companies have recently ceased operations or reduced power generation at certain high cost plants or at plants that are not compliant with current or anticipated environmental laws or switched such plants to using natural gas instead of coal for their electric generation needs. Additionally, existing or future changes in environmental regulations could make it more difficult or costly for power providers or industrial plants to burn coal. The EPA’s regulations issued in August 2015 as part of its “Clean Power Plan,” have the stated goal of reducing the amount of carbon dioxide emitted from power plants by 32% from 2005 levels by the year 2030. A meaningful portion of the reduction in carbon emissions will come from reducing the output of coal fired power plants. We believe that the larger power plants with sophisticated pollution control devices that supply most of our gypsum would be less likely to be affected than smaller, less efficient plants. However, in the event any of the power companies with which we have synthetic gypsum supply agreements, for these or other reasons, reduce their power generation, switch to using natural gas instead of coal or cease operations completely, our access to synthetic gypsum may be constrained, which could have an adverse effect on our business. In that event, there can be no assurance that we could find alternative sources of synthetic gypsum in reasonable quantities or at reasonable prices. In December 2013 our synthetic gypsum supplier for the Buchanan plant, NRG Energy, announced plans to deactivate its Chalk Point and Dickerson coal fired power plants in May of 2018 (an extension from its prior announced date of May 2017). These two plants together have recently provided approximately one-third of our Buchanan plant’s synthetic gypsum. It is not certain that these plants will be deactivated at the announced time. However, even if these plants are deactivated, we believe we will have access to sufficient gypsum through multiple sources to continue economically operating the Buchanan plant at required capacity levels.

Our financial results may be affected by various legal and regulatory proceedings.

We are subject to litigation and regulatory proceedings in the normal course of business and could become subject to additional claims in the future, some of which could be material, including but not limited to the Department of Justice subpoena we recently received in connection with an investigation of the gypsum drywall industry (See Note 9, Commitments and Contingencies, in the Notes to the unaudited financial statements). The outcome of existing legal proceedings may differ from our expectations because the outcomes of litigation and similar disputes are often difficult to predict reliably. Various factors and developments could lead us to make changes in current estimates of liabilities and related insurance receivables, where applicable, or make additional estimates, including new or modified estimates as a result of a judicial ruling or judgment, a settlement, regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on our results of operations.

Item 6.

Exhibits


10.1		Stock Purchase Agreement dated May 11, 2015 between Continental Building Products, Inc. and LSF8 Gypsum Holdings, L.P.

10.2#		Continental Building Products, Inc. Employee Stock Purchase Plan, dated March 31, 2015

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

#	Denotes management compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Continental Building Products, Inc.

By:		/s/ James Bachmann
Name:		James Bachmann
Title:		President and Chief Executive Officer

By:		/s/ Dennis Schemm
Name:		Dennis Schemm
Title:		Senior Vice President, Chief Financial Officer

Date: August 6, 2015

Exhibit 10.1

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement, dated May 11, 2015 (the “Agreement”), is entered into by and between Continental Building Products, Inc., a Delaware corporation (the “Company”), and LSF8 Gypsum Holdings, L.P., a Delaware limited partnership (the “Selling Stockholder”).

WHEREAS, the Selling Stockholder owns 17,489,250 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and wishes to sell a certain number of the Shares to the Company;

WHEREAS, it is expected that the Selling Stockholder will effect an underwritten secondary public offering of a certain number of the Shares (the “Offering”) pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-202400), as amended, no later than June 16, 2015;

WHEREAS, in connection with the Offering, the Company wishes to purchase the aggregate amount of Shares specified herein from the Selling Stockholder, and the Selling Stockholder wishes to sell such aggregate amount of Shares to the Company, in the manner, for the consideration and subject to the terms and conditions set forth in this Agreement; and

WHEREAS, the transactions contemplated by this Agreement were approved by the Company’s Board of Directors and the Company’s Audit Committee.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter contained, the parties hereby agree as follows:

1. TERMS OF PURCHASE AND SALE OF THE SHARES

(a) Shares to Be Purchased . On the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined below), the Selling Stockholder shall sell, transfer and deliver to the Company, free and clear of all liens, charges or encumbrances of any nature whatsoever, and the Company shall purchase from the Selling Stockholder, all of the Selling Stockholder’s right, title and interest in and to a number of Shares (the “Purchased Shares”) equal to Twenty Million Dollars ($20,000,000.00) divided by the Per Share Purchase Price (as defined below), rounded down to the nearest Share (the “Purchased Shares”).

(b) Purchase Price . The purchase price per Share to be purchased pursuant to this Agreement (the “Per Share Purchase Price”) shall be an amount equal to the net proceeds per Share to be received by the Selling Stockholder in the Offering. At the Closing, the Company shall pay to the Selling Stockholder by wire transfer of immediately available funds an amount equal to the Per Share Purchase Price multiplied by the number of Purchased Shares (the “Purchase Price”).

(c) Closing Deliveries . Upon receipt of the Purchase Price from the Company, the Selling Stockholder shall direct the Company’s registrar and transfer agent to deliver to the Company the Purchased Shares, by book entry transfer or other method agreed upon by the Company and the Selling Stockholder, accompanied by a duly executed stock power transferring said Purchased Shares to the Company.

(d) Closing Date and Place . The consummation of the purchase and sale of the Purchased Shares (the “Closing”) shall take place on the date of the closing of the Offering at the offices of Gibson, Dunn & Crutcher LLP, 2100 McKinney Avenue, Suite 1100, Dallas, Texas 75206 or at such other place as agreed upon by the Company and the Selling Stockholder.

2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER

The Selling Stockholder hereby represents and warrants to the Company as follows:

(a) All Action Necessary . The Selling Stockholder has taken all action necessary to enter into this Agreement and to carry out and consummate the transactions contemplated hereby, and this Agreement has been duly executed and delivered by or on behalf of the Selling Stockholder.

(b) Title . The Selling Stockholder is the record and beneficial owner of the Purchased Shares, free and clear of all liens, encumbrances, equities and claims, and has duly endorsed such Purchased Shares in blank, and has full power and authority to sell its interest in the Purchased Shares. Upon payment for the Purchased Shares pursuant to this Agreement and delivery of such Purchased Shares, (A) the Company shall be a “protected purchaser” of such Purchased Shares within the meaning of Section 8-303 of the New York Uniform Commercial Code (the “UCC”), (B) under Section 8-501 of the UCC, the Company will acquire a valid security entitlement in respect of such Purchased Shares and (C) no action based on any “adverse claim,” within the meaning of Section 8-102 of the UCC, to such Purchased Shares may be asserted against the Company with respect to such security entitlement. For purposes of this representation, the Selling Stockholder may assume that when such payment, delivery and crediting occur, such Purchased Shares will have been registered in the name of the Company, retired or treated as treasury shares, in each case on the Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law.

(c) No Conflicts . Neither the sale of the Purchased Shares nor the consummation of any other of the transactions herein contemplated by the Selling Stockholder or the fulfillment of the terms hereof by the Selling Stockholder will conflict with, result in a breach or violation of, or constitute a default under any law or the organizational documents of the Selling Stockholder or the terms of any indenture or other agreement or instrument to which the Selling Stockholder or any of its subsidiaries is a party or bound, or any judgment, order or decree applicable to the Selling Stockholder or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Selling Stockholder or any of its subsidiaries, except as would not reasonably be expected to materially and adversely affect the ability of the Selling Stockholder to perform its obligations hereunder.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Selling Stockholder as follows:

(a) Power and Authority . The Company has full corporate power and authority and has taken all action necessary to enter into this Agreement and to carry out and consummate the transactions contemplated hereby, and this Agreement has been duly executed and delivered by the Company.

(b) No Conflicts . Neither the purchase of the Purchased Shares nor the consummation of any other of the transactions herein contemplated by the Company or the fulfillment of the terms hereof by the Company will conflict with, or result in a breach or violation of, or an imposition of any lien, charge or encumbrance upon any property or assets of the Company or constitute a default under any law or the organizational documents of the Company or the terms of any indenture or other agreement or instrument to which the Company or any of its subsidiaries is a party or bound, or any judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries, except as would not reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations hereunder.

4. CONDITION TO CLOSING

The obligations of the parties hereunder are subject to and conditioned upon, and the transactions contemplated hereby will occur concurrent with, the closing of the Offering.

5. TERMINATION

Notwithstanding anything else set forth in this Agreement to the contrary, this Agreement shall terminate, be null and void and of no further force or effect if:

(a) based on the pricing of the Offering, the Per Share Purchase Price exceeds $25.00; or

(b) the Offering has not been consummated on or prior to June 30, 2015.

6. MISCELLANEOUS

(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

(b) Paragraph and Section Headings . The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.

(c) Entire Agreement; Amendment and Waiver . This Agreement constitutes the entire understanding of the parties hereto and supersedes all prior understandings among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of each of the parties hereto.

(e) Execution . This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This

Agreement may be executed by facsimile or electronic signature, which for all purposes hereunder shall have the same force and effect as an original.

[Signature page follows.]

IN WITNESS WHEREOF, the Company and the Selling Stockholder have each executed this Agreement as of the date first above written.


Continental Building Products, Inc.

By:		/s/ Timothy Power
Name:		Timothy Power
Title:		Senior Vice President and General Counsel

LSF8 Gypsum Holdings, L.P.

By: LSF8 GenPar, LLC, its general partner

By:		/s/ Kyle Volluz
Name:		Kyle Volluz
Title:		Vice President

Exhibit 10.2

APPENDIX A

CONTINENTAL BUILDING PRODUCTS, INC.

EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I.

PURPOSE, SCOPE AND ADMINISTRATION OF THE PLAN

1.1 Purpose and Scope . The purpose of the Continental Building Products, Inc. Employee Stock Purchase Plan, as it may be amended from time to time, (the “ Plan ”) is to assist employees of Continental Building Products, Inc., a Delaware corporation, (the “ Company ”) and its Designated Subsidiaries in acquiring a stock ownership interest in the Company pursuant to a plan which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code and to help such employees provide for their future security and to encourage them to remain in the employment of the Company and its Subsidiaries.

ARTICLE II.

DEFINITIONS

Whenever the following terms are used in the Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates.

2.1 “ Agent ” means the brokerage firm, bank or other financial institution, entity or person(s), if any, engaged, retained, appointed or authorized to act as the agent of the Company or an Employee with regard to the Plan.

2.2 “ Administrator ” shall mean the Committee, or such individuals to which authority to administer the Plan has been delegated under Section 7.1 hereof.

2.3 “ Board ” shall mean the Board of Directors of the Company.

2.4 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

2.5 “ Committee ” shall mean the Compensation and Benefits Committee of the Board (or any successor committee), or such other committee as designated by the Board.

2.6 “ Common Stock ” shall mean the common stock of the Company, par value $0.001 USD per share.

2.7 “ Company ” shall have such meaning as set forth in Section 1.1 hereof.

2.8 “ Designated Subsidiary ” shall mean each Subsidiary that has been designated by the Board or Committee from time to time in its sole discretion as eligible to participate in the Plan.

2.9 “ Effective Date ” means February 18, 2015, the date the Plan was approved by the Board.

2.10 “ Eligible Employee ” shall mean an Employee who, after the granting of the Option would not be deemed for purposes of Section 423(b)(3) of the Code to possess five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary. The rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and stock which an Employee may purchase under outstanding options shall be treated as stock owned by the Employee. Notwithstanding the foregoing, the Administrator may exclude from participation in the Plan as an Eligible Employee (x) any Employee that is a “highly compensated employee” of the Company or any Designated Subsidiary (within the meaning of Section 414(q) of the Code), or that is such a “highly compensated employee” (A) with compensation above a specified level, (B) who is an officer and/or (C) is subject to the disclosure requirements of Section 16(a) of the Exchange Act and/or (y) any Employee who is a citizen or resident of a foreign jurisdiction (without regard to whether they are also a citizen of the United States or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) if either (i) the grant of the Option is

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prohibited under the laws of the jurisdiction governing such Employee, or (ii) compliance with the laws of the foreign jurisdiction would cause the Plan or the Option to violate the requirements of Section 423 of the Code; provided that any exclusion in clauses (x), and/or (y) shall be applied in an identical manner under each Offering Period to all Employees of the Company and all Designated Subsidiaries, in accordance with Treasury Regulation Section 1.423-2(e). An Eligible Employee shall not include Employees whose customary employment is less than twenty-one (21) hours per week or Employees whose customary employment is for not more than five months in a calendar year.

2.11 “ Employee ” shall mean any person who renders services to the Company or a Designated Subsidiary in the status of an employee within the meaning of Section 3401(c) of the Code. “Employee” shall not include any director of the Company or a Designated Subsidiary who does not render services to the Company or a Designated Subsidiary in the status of an employee within the meaning of Section 3401(c) of the Code. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on military leave, sick leave or other leave of absence approved by the Company or Designated Subsidiary and meeting the requirements of Treasury Regulation Section 1.421-1(h)(2). Where the period of leave exceeds three (3) months, or such other period specified in Treasury Regulation Section 1.421-1(h)(2), and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the first day immediately following such three (3)-month period, or such other period specified in Treasury Regulation Section 1.421-1(h)(2).

2.12 “ Enrollment Date ” shall mean the first date of each Offering Period.

2.13 “ Exercise Date ” shall mean the last Trading Day of each Offering Period, except as provided in Section 5.2 hereof.

2.14 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

2.15 “ Fair Market Value ” shall mean, as of any date, the value of Common Stock determined as follows:

(a) If the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a share of Common Stock as quoted on such exchange or system for such date or, if there is no closing sales price for a share of Common Stock on the date in question, the closing sales price for a share of Stock on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(b) If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a share of Common Stock on such date, the high bid and low asked prices for a share of Common Stock on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(c) If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.

2.16 “ Grant Date ” shall mean the first Trading Day of an Offering Period.

2.17 “ New Exercise Date ” shall have such meaning as set forth in Section 5.2(b) hereof.

2.18 “ Offering Period ” shall mean the twelve (12)-month period as determined by the Board or the Committee; provided, however, that the duration and timing of Offering Periods may be changed by the Board or Committee, in its sole discretion. In no event may an Offering Period exceed twenty-seven (27) months.

2.19 “ Option ” shall mean the right to purchase shares of Common Stock pursuant to the Plan during each Offering Period.

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2.20 “ Option Price ” shall mean the purchase price of a share of Common Stock hereunder as provided in Section 4.2 hereof.

2.21 “ Parent ” means any entity that is a parent corporation of the Company within the meaning of Section 424 of the Code and the Treasury Regulations thereunder.

2.22 “ Participant ” shall mean any Eligible Employee who elects to participate in the Plan.

2.23 “ Payday ” shall mean the regular and recurring established day for payment of compensation to an Employee of the Company or any Designated Subsidiary.

2.24 “ Plan ” shall have such meaning as set forth in Section 1.1 hereof.

2.25 “ Plan Account ” shall mean a bookkeeping account established and maintained by the Company in the name of each Participant.

2.26 “ Section 423 Option ” shall have such meaning as set forth in Section 3.1(b) hereof.

2.27 “ Subsidiary ” shall mean any entity that is a subsidiary corporation of the Company within the meaning of Section 424 of the Code and the Treasury Regulations thereunder. In addition, with respect to any sub-plans adopted under Section 7.1(d) hereof which are designed to be outside the scope of Section 423 of the Code, Subsidiary shall include any corporate or noncorporate entity in which the Company has a direct or indirect equity interest or significant business relationship.

2.28 “ Trading Day ” shall mean a day on which the principal securities exchange on which the Common Stock is listed is open for trading or, if the Common Stock is not listed on a securities exchange, shall mean a business day, as determined by the Administrator in good faith.

2.29 “ Withdrawal Election ” shall have such meaning as set forth in Section 6.1(a) hereof.

ARTICLE III.

PARTICIPATION

3.1 Eligibility .

(a) Any Eligible Employee who shall be employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of Articles IV and V hereof, and the limitations imposed by Section 423(b) of the Code and the Treasury Regulations thereunder.

(b) No Eligible Employee shall be granted an Option under the Plan which permits the Participant’s rights to purchase shares of Common Stock under the Plan, and to purchase stock under all other employee stock purchase plans of the Company, any Parent or any Subsidiary subject to Section 423 of the Code (any such Option or other option, a “ Section 423 Option ”), to accrue at a rate which exceeds $25,000 USD of fair market value of such stock (determined at the time the Section 423 Option is granted) for each calendar year in which any Section 423 Option granted to the Participant is outstanding at any time. The limitation under this Section 3.1(b) shall be applied in accordance with Section 423(b)(8) of the Code and the Treasury Regulations thereunder. No Eligible Employee may purchase in any one Offering Period shares of Common Stock having an aggregate Fair Market Value in excess of $25,000 USD (determined at the time the Section 423 Option is granted). Notwithstanding any other provision of the Plan, the Committee may specify a maximum number of shares of Common Stock that may be purchased by each participating employee for such Offering Period and/or a maximum aggregate number of shares of Common Stock that may be purchased by all participating employees for such Offering Period.

3.2 Election to Participate; Payroll Deductions

(a) Except as provided in Section 3.3 hereof, an Eligible Employee may become a Participant in the Plan only by means of payroll deduction. Each individual who is an Eligible Employee as of an Offering Period’s Enrollment Date may elect to participate in such Offering Period and the Plan by delivering to the Company a

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payroll deduction authorization no later than such period of time prior to the applicable Enrollment Date as determined by the Administrator, in its sole discretion.

(b) Subject to Section 3.1(b) hereof, payroll deductions for each Offering Period shall not exceed the lesser of (i) ten percent (10%) of the Participant’s base salary during the Offering Period or (ii) $10,000 USD for employees based in the United States, or $10,000 CAD for employees based in Canada; and may be expressed as a whole number percentage or as a dollar amount. Amounts deducted from a Participant’s base salary with respect to an Offering Period pursuant to this Section 3.2 shall be deducted each Payday through payroll deduction and credited to the Participant’s Plan Account.

(c) Following at least one (1) payroll deduction, a Participant may decrease (to as low as zero) the amount deducted from such Participant’s base salary only once during an Offering Period upon ten (10) calendar days’ prior written notice to the Company.

(d) Notwithstanding the foregoing, upon the termination of an Offering Period, each Participant in such Offering Period shall automatically participate in the immediately following Offering Period at the same payroll deduction percentage as in effect at the termination of the prior Offering Period, unless such Participant delivers to the Company a different election with respect to the successive Offering Period in accordance with Section 3.1(a) hereof, or unless such Participant becomes ineligible for participation in the Plan.

3.3 Leave of Absence . Payroll deductions for shares for which a Participant has an option to purchase may be suspended during any leave of absence approved by the Company meeting the requirements of Treasury Regulation Section 1.421-1(h)(2) under the Code, or, if the Participant so elects, periodic payments for such shares may continue to be made in cash. If such Participant returns to active service prior to the last day of the Offering Period, the Participant’s payroll deductions will be resumed and if said Participant did not make periodic cash payments during the Participant’s period of absence, the Participant shall, by written notice to the Company’s Human Resources Department within ten (10) days after the Participant’s return to active service, but not later than the last day of the Offering Period, elect: (a) to make up any deficiency in the Participant’s Plan Account resulting from a suspension of payroll deductions by making an immediate cash payment or through increased payroll deductions; (b) not to make up such deficiency, in which event the number of shares to be purchased by the Participant shall be reduced to the number of whole shares which may be purchased with the amount, if any, then credited to the Participant’s Plan Account plus the aggregate amount, if any, of all payroll deductions to be made thereafter; or (c) withdraw the amount in the Participant’s Plan Account and terminate the Participant’s option to purchase. If any Participant fails to deliver the written notice described above within ten (10) days after the Participant’s return to active service or by the last day of the Offering Period, whichever is earlier, the Participant shall be deemed to have elected subsection 3.3(b) above.

ARTICLE IV.

PURCHASE OF SHARES

4.1 Grant of Option . Each Participant shall be granted an Option with respect to an Offering Period on the applicable Grant Date. Subject to the limitations of Section 3.1(b) hereof, the number of shares of Common Stock subject to a Participant’s Option shall be determined by dividing (a) such Participant’s payroll deductions accumulated prior to such Exercise Date and retained in the Participant’s Plan Account on such Exercise Date by (b) the applicable Option Price; provided, however , that in accordance with Section 3.1(b), the maximum number of shares of Common Stock that may be purchased by a single Participant in an Offering Period shall be determined by dividing $10,000 USD (or, for employees based in Canada, $10,000 CAD) by eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Grant Date. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that a Participant may purchase during such future Offering Periods. Each Option shall expire on the Exercise Date for the applicable Offering Period immediately after the automatic exercise of the Option in accordance with Section 4.3 hereof, unless such Option terminates earlier in accordance with Article 6 hereof.

4.2 Option Price . The “ Option Price ” per share of Common Stock to be paid by a Participant upon exercise of the Participant’s Option on the applicable Exercise Date for an Offering Period shall be equal to eighty-five

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percent (85%) of the lesser of (i) the Fair Market Value of a share of Common Stock on the applicable Exercise Date or (ii) the Fair Market Value of a share of Common Stock on the Grant Date; provided that in no event shall the Option Price per share of Common Stock be less than the par value per share of the Common Stock.

4.3 Purchase of Shares .

(a) Subject to the limitation contained in Section 4.1 hereof, on the applicable Exercise Date for an Offering Period, each Participant shall automatically and without any action on such Participant’s part be deemed to have exercised his or her Option to purchase at the applicable per share Option Price the largest number of whole shares of Common Stock which can be purchased with the amount in the Participant’s Plan Account. No fractional shares shall be issued upon the exercise of rights granted under this Plan. Any balance that is remaining in the Participant’s Plan Account (after exercise of such Participant’s Option) as of the Exercise Date shall be returned to the Participant in one lump sum in cash within thirty (30) days after such Exercise Date, without any interest thereon.

(b) As soon as practicable following the applicable Exercise Date, the number of shares of Common Stock purchased by such Participant pursuant to Section 4.3(a) hereof shall be delivered (either in share certificate or book entry form), in the Company’s sole discretion, to either (i) the Participant or (ii) an account established in the Participant’s name at a stock brokerage or other financial services firm designated by the Company. If the Company is required to obtain from any commission or agency authority to issue any such shares of Common Stock, the Company shall seek to obtain such authority. Inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such shares shall relieve the Company from liability to any Participant except to refund to the Participant such Participant’s Plan Account balance, without interest thereon.

4.4 Transferability of Rights . An Option granted under the Plan shall not be transferable, other than by will or the applicable laws of descent and distribution, and is exercisable during the Participant’s lifetime only by the Participant. No option or interest or right to the Option shall be available to pay off any debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempt at disposition of the option shall have no effect.

ARTICLE V.

PROVISIONS RELATING TO COMMON STOCK

5.1 Common Stock Reserved . Subject to adjustment as provided in Section 5.2 hereof, the number of shares of Common Stock that shall be made available for sale under the Plan shall be 600,000 (six hundred thousand) shares of Common Stock. Each share of Common Stock issued under this Plan shall reduce, on a share-for-share basis, the number of shares of Common Stock available for issuance pursuant to the Company’s 2014 Stock Incentive Plan.

5.2 Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale .

(a) Changes in Capitalization . Subject to any required action by the stockholders of the Company, the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under Option, as well as the price per share and the number of shares of Common Stock covered by each Option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company. Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

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(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the “ New Exercise Date ”), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Exercise Date shall be before the date of the Company’s proposed dissolution or liquidation. The Administrator shall notify each Participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the Participant’s Option has been changed to the New Exercise Date and that the Participant’s Option shall be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 6.1 hereof.

(c) Merger or Asset Sale . In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding Option shall be assumed or an equivalent Option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, any Offering Periods then in progress shall be shortened by setting a New Exercise Date and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company’s proposed sale or merger. The Administrator shall notify each Participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the Participant’s Option has been changed to the New Exercise Date and that the Participant’s Option shall be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 6.1 hereof.

5.3 Insufficient Shares due to Share Pool or Offering Period Limitation . If the Administrator determines that, on a given Exercise Date: (1) the number of shares of Common Stock with respect to which Options are to be exercised may exceed the number of shares of Common Stock remaining available for sale under the Plan on such Exercise Date, or (2) if the number of shares of Common Stock that can be purchased in an Offering Period is limited pursuant to Section 4.1, the Administrator shall make a pro rata allocation of the shares of Common Stock available for issuance on such Exercise Date in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising Options to purchase Common Stock on such Exercise Date. In the event that the number of shares of Common Stock with respect to which Options are to be exercised may exceed the number of shares of Common Stock remaining available for sale under the Plan on an Exercise Date, unless additional shares are authorized for issuance under the Plan, no further Offering Periods shall take place and the Plan shall terminate pursuant to Section 7.5 hereof. In the event of either scenario contemplated in this Section 5.3, then the balance of the amount credited to the Participant’s Plan Account which has not been applied to the purchase of shares of Common Stock shall be paid to such Participant in one lump sum in cash within thirty (30) days after such Exercise Date, without any interest thereon.

5.4 Rights as Stockholders . With respect to shares of Common Stock subject to an Option, a Participant shall not be deemed to be a stockholder of the Company and shall not have any of the rights or privileges of a stockholder. A Participant shall have the rights and privileges of a stockholder of the Company when, but not until, shares of Common Stock have been deposited in the designated brokerage account following exercise of his or her Option.

ARTICLE VI.

TERMINATION OF PARTICIPATION

6.1 Cessation of Contributions; Voluntary Withdrawal .

(a) A Participant may cease payroll deductions during an Offering Period and elect to withdraw from the Plan by delivering written notice of such election to the Company in such form and at such time prior to the Exercise Date for such Offering Period as may be established by the Administrator (a “ Withdrawal Election ”). A Participant electing to withdraw from the Plan may elect to withdraw all of the funds then credited to the Participant’s Plan Account as of the date on which the Withdrawal Election is received by the Company, in which case amounts credited to such Plan Account shall be returned to the Participant in one (1) lump-sum

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payment in cash within thirty (30) days after such election is received by the Company, without any interest thereon, and the Participant shall cease to participate in the Plan and the Participant’s Option for such Offering Period shall terminate. Upon receipt of a Withdrawal Election, the Participant’s payroll deduction authorization and his or her Option to purchase under the Plan shall terminate.

(b) A participant’s withdrawal from the Plan shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the Participant withdraws.

(c) A Participant who ceases contributions to the Plan during any Offering Period shall not be permitted to resume contributions to the Plan during that Offering Period.

6.2 Termination of Eligibility . Upon a Participant’s ceasing to be an Eligible Employee, for any reason, such Participant’s Option for the applicable Offering Period shall automatically terminate, he or she shall be deemed to have elected to withdraw from the Plan, and amounts credited to the Participant’s Plan Account shall be paid in cash to such Participant or, in the case of his or her death, to the person or persons entitled thereto pursuant to applicable law, within thirty (30) days after such cessation of being an Eligible Employee, without any interest thereon.

ARTICLE VII.

GENERAL PROVISIONS

7.1 Administration .

(a) The Plan shall be administered by the Committee, which shall be composed of members of the Board. The Committee may delegate administrative tasks under the Plan to the services of an Agent and/or Employees to assist in the administration of the Plan, including establishing and maintaining an individual securities account under the Plan for each Participant.

(b) It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with the provisions of the Plan. The Administrator shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i) To establish Offering Periods;

(ii) To determine when and how Options shall be granted and the provisions and terms of each Offering Period (which need not be identical);

(iii) To select Designated Subsidiaries in accordance with Section 7.2 hereof; and

(iv) To construe and interpret the Plan, the terms of any Offering Period and the terms of the Options and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, any Offering Period or any Option, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effect, subject to Section 423 of the Code and the Treasury Regulations thereunder.

(c) The Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding handling of participation elections, payroll deductions, payment of interest, conversion of local currency, payroll tax, withholding procedures and handling of stock certificates which vary with local requirements. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Administrator under the Plan.

(d) The Administrator may adopt sub-plans applicable to particular Designated Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code. The rules of such sub-plans may take precedence over other provisions of this Plan, with the exception of Section 5.1 hereof, but

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unless otherwise superseded by the terms of such sub-plan, the provisions of this Plan shall govern the operation of such sub-plan.

(e) All expenses and liabilities incurred by the Administrator in connection with the administration of the Plan shall be borne by the Company. The Administrator may, with the approval of the Committee, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Administrator, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Board or Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the options, and all members of the Board or Administrator shall be fully protected by the Company in respect to any such action, determination, or interpretation.

7.2 Designation of Subsidiary Corporations . The Administrator, Board or Committee shall designate from among the Subsidiaries, as determined from time to time, the Subsidiary or Subsidiaries that shall constitute Designated Subsidiaries. The Administrator, Board or Committee may designate a Subsidiary, or terminate the designation of a Subsidiary, without the approval of the stockholders of the Company.

7.3 Reports . Individual accounts shall be maintained for each Participant in the Plan. Statements of Plan Accounts shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Option Price, the number of shares purchased and the remaining cash balance, if any.

7.4 No Right to Employment . Nothing in the Plan shall be construed to give any person (including any Participant) the right to remain in the employ of the Company, a Parent or a Subsidiary or to affect the right of the Company, any Parent or any Subsidiary to terminate the employment of any person (including any Participant) at any time, with or without cause, which right is expressly reserved.

7.5 Amendment and Termination of the Plan .

(a) The Board may, in its sole discretion, amend, suspend or terminate the Plan at any time and from time to time; provided , however , that without approval of the Company’s stockholders given within twelve (12) months before or after action by the Board, the Plan may not be amended to increase the maximum number of shares of Common Stock subject to the Plan or change the designation or class of Eligible Employees; and provided , further that without approval of the Company’s stockholders, the Plan may not be amended in any manner that would cause the Plan to no longer be an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.

(b) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, to the extent permitted under Section 423 of the Code, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:

(i) altering the Option Price for any Offering Period including an Offering Period underway at the time of the change in Option Price;

(ii) shortening any Offering Period so that the Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Administrator action; and

(iii) allocating shares of Common Stock.

Such modifications or amendments shall not require stockholder approval or the consent of any Participant.

(c) Upon termination of the Plan, the balance in each Participant’s Plan Account shall be refunded as soon as practicable after such termination, without any interest thereon.

7.6 Use of Funds; No Interest Paid . All funds received by the Company by reason of purchase of Common Stock under the Plan shall be included in the general funds of the Company free of any trust or other restriction and may be used for any corporate purpose. No interest shall be paid to any Participant or credited under the Plan.

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7.7 Term; Approval by Stockholders . No Option may be granted during any period of suspension of the Plan or after termination of the Plan. The Plan shall be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of the Plan. Options may be granted prior to such stockholder approval; provided , however , that such Options shall not be exercisable prior to the time when the Plan is approved by the stockholders; provided , further that if such approval has not been obtained by the end of said twelve (12)-month period, all Options previously granted under the Plan shall thereupon terminate and be canceled and become null and void without being exercised.

7.8 Effect Upon Other Plans . The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company, any Parent or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company, any Parent or any Subsidiary (a) to establish any other forms of incentives or compensation for Employees of the Company or any Parent or any Subsidiary, or (b) to grant or assume Options otherwise than under the Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.

7.9 Conformity to Securities Laws . Notwithstanding any other provision of the Plan, the Plan and the participation in the Plan by any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemption rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

7.10 Notice of Disposition of Shares . Each Participant shall give the Company prompt notice of any disposition or other transfer of any shares of Common Stock, acquired pursuant to the exercise of an Option, if such disposition or transfer is made (a) within two (2) years after the applicable Grant Date or (b) within one (1) year after the transfer of such shares of Common Stock to such Participant upon exercise of such Option. The Company may direct that any certificates evidencing shares acquired pursuant to the Plan refer to such requirement.

7.11 Tax Withholding . The Company or any Parent or any Subsidiary shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to any purchase of shares of Common Stock under the Plan or any sale of such shares.

7.12 Governing Law . The Plan and all rights and obligations thereunder shall be construed and enforced in accordance with the laws of the State of Delaware.

7.13 Notices . All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

7.14 Conditions To Issuance of Shares .

(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing shares of Common Stock pursuant to the exercise of an Option by a Participant, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such shares of Common Stock is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any securities exchange or automated quotation system on which the shares of Common Stock are listed or traded, and the shares of Common Stock are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Participant make such reasonable covenants, agreements, and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.

(b) All certificates for shares of Common Stock delivered pursuant to the Plan and all shares of Common Stock issued pursuant to book entry procedures are subject to any stop-transfer orders and other

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restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on which the shares of Common Stock are listed, quoted, or traded. The Committee may place legends on any certificate or book entry evidencing shares of Common Stock to reference restrictions applicable to the shares of Common Stock.

(c) The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Option, including a window-period limitation, as may be imposed in the sole discretion of the Committee.

(d) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company may, in lieu of delivering to any Participant certificates evidencing shares of Common Stock issued in connection with any Option, record the issuance of shares of Common Stock in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

7.15 Equal Rights and Privileges . Except with respect to sub-plans designed to be outside the scope of Section 423 of the Code, all Eligible Employees of the Company (or of any Designated Subsidiary) shall have equal rights and privileges under this Plan to the extent required under Section 423 of the Code or the regulations promulgated thereunder so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 of the Code or the Treasury Regulations thereunder. Any provision of this Plan that is inconsistent with Section 423 of the Code or the Treasury Regulations thereunder shall, without further act or amendment by the Company or the Board, be reformed to comply with the equal rights and privileges requirement of Section 423 of the Code or the Treasury Regulations thereunder.

* * * * * *

Executed on this 31 ^st day of March, 2015.

/s/ Isabelle Shiffrin

Isabelle Shiffrin

Vice President, Human Resources

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Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, James Bachmann, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Continental Building Products, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2015

/s/ James Bachmann

James Bachmann

President and Chief Executive Officer

( Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Dennis Schemm, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Continental Building Products, Inc.;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2015

/s/ Dennis Schemm

Dennis Schemm

Senior Vice President, Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

In connection with the Quarterly Report of Continental Building Products, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, James Bachmann, President and Chief Executive Officer of the Company, and Dennis Schemm, Senior Vice President, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to his knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 6, 2015						/s/ James Bachmann
						James Bachmann
						President and Chief Executive Officer
						( Principal Executive Officer)

						/s/ Dennis Schemm
						Dennis Schemm
						Senior Vice President, Chief Financial Officer
						( Principal Financial Officer)