- Net Sales Increased 21.5% -
- Net Income Grew to $9.2 Million -
- Adjusted EBITDA Rose 34.7% to $45.9
Million -
GMS Inc. (NYSE:GMS), a leading North American distributor of
wallboard and suspended ceilings systems, today reported financial
results for the first quarter of fiscal 2017 ended July 31,
2016.
First Quarter Fiscal 2017 Highlights Compared to First
Quarter Fiscal 2016
- Net sales increased 21.5% to $549.8
million; base business net sales up 9.2% despite one fewer shipping
day
- Wallboard unit volume grew 20.0% to 818
million square feet
- Net income increased to $9.2 million,
or $0.24 per share, compared to $3.0 million, or $0.09 per
share
- Gross margin expanded 140 basis points
to 32.5%
- Adjusted EBITDA margin improved
approximately 80 basis points to 8.4% as a percentage of net
sales
- Completed four acquisitions as of
September 1, 2016, adding eight branches in five states
Mike Callahan, President and CEO of GMS, stated, “We are excited
to produce our 20th straight quarter of double-digit growth in net
sales, with strong results across all of our product categories to
start the current fiscal year. Residential demand continued to
outpace commercial activity in many markets, which particularly
benefitted our wallboard and other product categories. The modest
improvement in wallboard price compared to Q4 of last fiscal year
was in line with expectations. Beyond our base business
improvement, we completed four acquisitions during fiscal 2017 as
of September 1, 2016, representing $134.9 million of combined
trailing twelve month net sales. In June 2016, we used the
proceeds from our successful initial public offering to further
reduce debt and strengthen our balance sheet. In all, we are
pleased with our progress and the dedication of the entire GMS
family which is driving our continued success.”
First Quarter Fiscal 2017 Results
Net sales for the first quarter ended July 31, 2016 were
$549.8 million, compared to $452.4 million for the first quarter
ended July 31, 2015.
- Wallboard sales of $251.3 million
increased 19.1%, compared to the first quarter of fiscal 2016.
Wallboard unit volume grew 20.0% million to 818 million square
feet, helped by greater end market demand and the positive
contribution from acquisitions.
- Ceiling sales of $86.3 million rose
9.3%, compared to the first quarter of fiscal 2016, helped by
improved pricing and acquisitions.
- Steel framing sales of $84.3 million
grew 25.3%, compared to the first quarter of fiscal 2016, due to
greater commercial activity and pricing gains as industry steel
prices increased year-over-year, along with the benefit from
accretive acquisitions.
- Other product sales of $127.8 million
were up 34.2%, compared to the first quarter of fiscal 2016,
attributable to greater end market demand, price gains, retail
showrooms, acquisitions and other initiatives.
Gross profit of $178.6 million grew 26.8%, compared to $140.9
million in the first quarter of fiscal 2016. Gross margin of 32.5%
expanded by 140 basis points, compared to 31.1% in the first
quarter of fiscal 2016 mainly attributable to increased product
margins.
Net income of $9.2 million, or $0.24 per share, increased $6.2
million, compared to $3.0 million, or $0.09 per share, in the first
quarter of fiscal 2016. Adjusted net income of $17.8 million, or
$0.47 per share, grew $6.5 million, compared to $11.3 million, or
$0.35 per share, in the first quarter of fiscal 2016.
Adjusted EBITDA of $45.9 million rose 34.7%, compared to $34.1
million in the first quarter of fiscal 2016. Adjusted EBITDA margin
was 8.4% as a percentage of net sales for the first quarter of
fiscal 2017, compared to 7.5% in the first quarter of fiscal 2016,
largely reflecting a higher gross margin.
Capital Resources
On June 1, 2016, GMS completed the initial public offering
of its common stock, raising net proceeds of approximately $157.2
million, including the full exercise of the underwriters’ option to
purchase additional shares. Following completion of the offering,
GMS had 40,942,905 of basic and 41,605,076 of diluted shares of
common stock outstanding.
GMS used all of the net proceeds from its initial public
offering, together with cash on hand, to repay, in full, its
outstanding indebtedness of $160.0 million plus accrued and unpaid
interest under its 7.75% senior secured second lien term loan
facility due April 2022.
At July 31, 2016, GMS had cash of $9.8 million and total
debt of $546.7 million, as compared to cash of $19.1 million and
total debt of $644.6 million at April, 30, 2016.
Acquisition Activity
During the first quarter of fiscal 2017, the Company acquired
Wall & Ceiling Supply Co., Inc., or Wall &
Ceiling Supply, and Rockwise, LLC, or Rockwise, for a total
purchase price of approximately $26.0 million. Wall &
Ceiling Supply and Rockwise distribute wallboard and related
building materials from four locations in Washington, Arizona and
Colorado. For the twelve months ended April 30, 2016, the
combined companies generated approximately $35.2 million in net
sales and the earnings of these entities would have contributed
approximately $4.5 million to Adjusted EBITDA for that period,
including operating synergies.
Subsequent to July 31, 2016, the Company acquired Steven F.
Kempf Building Materials, Inc., or SKBM, and Olympia Building
Supplies, LLC, or Olympia, for a total purchase price of
approximately $75.6 million. SKBM and Olympia distribute wallboard
and related building materials from four locations in Pennsylvania
and Florida. For the twelve months ended July 31, 2016, the
combined companies generated approximately $99.7 million in net
sales and the earnings of these entities would have contributed
approximately $10.9 million to Adjusted EBITDA for that period,
including operating synergies.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss
its results for the first quarter ended July 31, 2016 at 11:00
a.m. Eastern Time on September 13, 2016. Investors who
wish to participate in the call should dial 877-407-0789 (domestic)
or 201-689-8562 (international) at least 5 minutes prior to the
start of the call. The live webcast will be available on the
Investors section of the Company’s website at www.gms.com. There
will be a slide presentation of the Company’s first quarter results
available on that page of the website as well. Replays of the
call will be available through October 13, 2016 and can be
accessed at 877-870-5176 (domestic) or 858-384-5517 (international)
and entering the pass code 13644496.
About GMS Inc.
Founded in 1971, GMS operates a national network of distribution
centers across the United States. GMS’s extensive product offering
of wallboard, suspended ceilings systems, or ceilings, and
complementary interior construction products is designed to provide
a comprehensive one-stop-shop for our core customer, the interior
contractor who installs these products in commercial and
residential buildings.
Use of Non-GAAP Financial Measures
GMS reports its financial results in accordance with GAAP.
However, we present adjusted net income, Adjusted EBITDA, Adjusted
EBITDA margin and base buisness growth, which are not recognized
financial measures under GAAP.We believe adjusted net income,
Adjusted EBITDA and Adjusted EBITDA margin assist investors and
analysts in comparing our operating performance across reporting
periods on a consistent basis by excluding items that we do not
believe are indicative of our core operating performance.
Management believes adjusted net income, Adjusted EBITDA, Adjusted
EBITDA margin and base business growth are helpful in highlighting
trends in our operating results, while other measures can differ
significantly depending on long-term strategic decisions regarding
capital structure, the tax jurisdictions in which companies operate
and capital investments. In addition, we utilize Adjusted EBITDA in
certain calculations under our senior secured asset based revolving
credit facility and our senior secured first lien term loan
facility.
You are encouraged to evaluate each adjustment and the reasons
we consider it appropriate for supplemental analysis. In addition,
in evaluating adjusted net income and Adjusted EBITDA, you should
be aware that in the future, we may incur expenses similar to the
adjustments in the presentation of adjusted net income and Adjusted
EBITDA. Our presentation of adjusted net income and Adjusted EBITDA
should not be construed as an inference that our future results
will be unaffected by unusual or non-recurring items. In addition,
adjusted net income and Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies in our industry
or across different industries.
Forward-Looking Statements and Information:
This press release includes “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. You can generally identify forward-looking statements by our
use of forward-looking terminology such as “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,”
“might,” “plan,” “potential,” “predict,” “seek,” or “should,” or
the negative thereof or other variations thereon or comparable
terminology. In particular, statements about the markets in which
we operate, including the potential for growth in the commercial,
residential and repair and remodeling, or R&R, markets,
statements about our expectations, beliefs, plans, strategies,
objectives, prospects, assumptions or future events or performance,
statements related to net sales, gross profit and capital
expenditures, as well as non-GAAP financial measures such as
Adjusted EBITDA, adjusted net income and base business growth and
statements regarding potential acquisitions and future greenfield
locations contained in this press release are forward-looking
statements. We have based these forward-looking statements on our
current expectations, assumptions, estimates and projections. While
we believe these expectations, assumptions, estimates and
projections are reasonable, such forward-looking statements are
only predictions and involve known and unknown risks and
uncertainties, many of which are beyond our control.
Forward-looking statements involve risks and uncertainties,
including, but not limited to, economic, competitive, governmental
and technological factors outside of our control, that may cause
our business, strategy or actual results to differ materially from
the forward-looking statements. These risks and uncertainties may
include, among other things: changes in the prices, supply, and/or
demand for products which we distribute; general economic and
business conditions in the United States; the activities of
competitors; changes in significant operating expenses; changes in
the availability of capital and interest rates; adverse weather
patterns or conditions; acts of cyber intrusion; variations in the
performance of the financial markets, including the credit markets;
and other factors described in the “Risk Factors” section in our
Annual Report on Form 10-K for the fiscal year ended
April 30, 2016, and in our other periodic reports filed with
the SEC. In addition, the statements in this release are made as of
September 13, 2016. We undertake no obligation to update any
of the forward looking statements made herein, whether as a result
of new information, future events, changes in expectation or
otherwise. These forward-looking statements should not be relied
upon as representing our views as of any date subsequent to
September 13, 2016.
GMS Inc. Condensed Consolidated Statements of
Operations and Comprehensive Income (Unaudited) (in
thousands of dollars, except for share and per share data)
Three Months Ended July 31, 2016
2015 Net sales $ 549,800 $ 452,441 Cost of sales (exclusive
of depreciation and amortization shown separately below) 371,215
311,553 Gross profit 178,585 140,888 Operating expenses: Selling,
general and administrative 135,058 110,210 Depreciation and
amortization 15,795 16,065 Total operating expenses 150,853 126,275
Operating income 27,732 14,613 Other (expense) income: Interest
expense (7,577 ) (9,257 ) Write-off of discount and deferred
financing fees (5,426 )
-
Other income, net 593 510 Total other (expense), net (12,410 )
(8,747 ) Income before taxes 15,322 5,866 Provision for income
taxes 6,159 2,855 Net income $ 9,163 $ 3,011 Weighted average
shares outstanding: Basic 38,200,597 32,677,418 Diluted 38,602,378
32,830,677 Net income per share: Basic $ 0.24 $ 0.09 Diluted $ 0.24
$ 0.09 Comprehensive income: Net income $ 9,163 $ 3,011 Decrease in
fair value of financial instrument, net of tax (88 ) (181 )
Comprehensive income $ 9,075 $ 2,830
GMS
Inc. Condensed Consolidated Balance Sheets (Unaudited)
(in thousands of dollars, except share data) July
31, April 30, 2016 2016 Assets
Current assets: Cash and cash equivalents $ 9,828 $ 19,072 Trade
accounts and notes receivable, net of allowances of $9,432 and
$8,607, respectively 295,105 270,257 Inventories, net 186,006
165,766 Prepaid expenses and other current assets 12,109 16,548
Total current assets 503,048 471,643 Property and equipment, net of
accumulated depreciation of $58,952 and $54,377, respectively
154,368 153,260 Goodwill 393,640 386,306 Intangible assets, net
223,594 221,790 Other assets 7,346 7,815 Total assets $ 1,281,996 $
1,240,814
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable $ 95,999 $ 91,500 Accrued
compensation and employee benefits 27,959 51,680 Other accrued
expenses and current liabilities 42,985 41,814 Current portion of
long-term debt 9,514 8,667 Revolving credit facility
-
26,914 Total current liabilities 176,457 220,575 Non-current
liabilities: Long-term debt, less current portion 537,220 609,029
Deferred income taxes, net 37,908 41,203 Other liabilities 33,468
33,600 Liabilities to noncontrolling interest holders, less current
portion 24,378 25,247 Total liabilities 809,431 929,654 Commitments
and contingencies Stockholders’ equity: Common stock, par value
$0.01 per share, authorized 500,000,000 shares; 40,942,905 and
32,892,905 shares issued at July 31, 2016 and April 30, 2016,
respectively 409 329 Preferred stock, par value $0.01 per share,
authorized 50,000,000 shares; 0 shares issued at July 31, 2016 and
April 30, 2016, respectively
-
-
Additional paid-in capital 486,494 334,244 Accumulated deficit
(13,102 ) (22,265 ) Accumulated other comprehensive loss (1,236 )
(1,148 ) Total stockholders’ equity 472,565 311,160 Total
liabilities and stockholders’ equity $ 1,281,996 $ 1,240,814
GMS Inc. Condensed Consolidated Statements of Cash
Flows (Unaudited) (in thousands of dollars)
Three Months Ended July 31, 2016
2015 Cash flows from operating activities: Net income
$ 9,163 $ 3,011 Adjustments to reconcile net income to net cash
used in operating activities: Depreciation and amortization of
property and equipment 6,382 7,279 Accretion and amortization of
debt discount and deferred financing fees 6,129 854 Amortization of
intangible assets 9,413 8,792 Provision for losses on accounts and
notes receivable (75 ) (1 ) Provision for obsolescence of inventory
23 43 Equity-based compensation 627 1,172 Net gain on sale or
impairment of assets (199 ) (25 ) Deferred income tax benefit
(3,222 ) (4,091 ) Prepaid expenses and other assets (3,058 ) (4,144
) Accrued compensation and employee benefits (24,947 ) (26,880 )
Other accrued expenses and liabilities 852 11,429 Liabilities to
noncontrolling interest holders 246 473 Income taxes 2,835 2,457
4,169 369 Changes in primary working capital components, net of
acquisitions: Trade accounts and notes receivable (19,360 ) (21,834
) Inventories (17,101 ) 377 Accounts payable 1,672 2,677 Cash used
in operating activities (30,620 ) (18,411 )
Cash flows from
investing activities: Purchases of property and equipment
(2,607 ) (1,465 ) Proceeds from sale of assets 841 430 Acquisition
of businesses, net of cash acquired (23,278 )
-
Cash used in investing activities (25,044 ) (1,035 )
Cash flows
from financing activities: Repayments on the revolving credit
facility (225,702 ) (136,243 ) Borrowings from the revolving credit
facility 280,397 161,089 Payments of principal on long-term debt
(975 ) (975 ) Principal repayments of capital lease obligations
(1,213 ) (1,032 ) Proceeds from issuance of common stock in initial
public offering, net of underwriting discounts 157,217
-
Repayment of term loan (160,000 )
-
Stock repurchases
-
(5,827 ) Exercise of stock options
-
3,317 Payments of contingent consideration (3,304 )
-
Cash provided by financing activities 46,420 20,329 (Decrease)
increase in cash and cash equivalents (9,244 ) 883 Balance,
beginning of period 19,072 12,284 Balance, end of period $ 9,828 $
13,167 Supplemental cash flow disclosures: Cash paid for income
taxes $ 6,540 $ 4,515 Cash paid for interest 6,613 7,943
Supplemental schedule of noncash activities: Assets acquired under
capital lease $ 3,824 $ 2,283 Change in fair value of derivative
instrument (205 ) (282 ) Increase (decrease) in insurance claims
payable and insurance recoverable 161 (26,000 )
GMS Inc. Net Sales by Product Group
(Unaudited) (in thousands of dollars) Three
Months Three Months Ended Ended July
31, % of July 31, % of 2016
Total 2015 Total Wallboard $ 251,296 45.7 % $
210,922 46.6 % Ceilings 86,349 15.7 % 78,967 17.5 % Steel framing
84,343 15.3 % 67,332 14.9 % Other products 127,812 23.3 % 95,220
21.0 % Total net sales $ 549,800 $ 452,441
GMS
Inc. Reconciliation of Net Income to Adjusted EBITDA
(Unaudited) (in thousands of dollars) Three
Months Ended July 31, July 31, 2016
2015 Net income $ 9,163 $ 3,011 Interest expense 13,003
9,257 Interest income (43 ) (230 ) Income tax expense 6,159 2,855
Depreciation expense 6,382 7,273 Amortization expense 9,413 8,792
EBITDA $ 44,077 $ 30,958 Stock appreciation rights expense (a) $
(92 ) $ 594 Redeemable noncontrolling interests (b) 292 554
Equity-based compensation (c) 673 498 Severance and other permitted
costs (d) 140 557 Transaction costs (acquisitions and other) (e)
654 415 Gain on disposal of assets (198 ) (25 ) Management fee to
related party (f) 188 562 Effects of fair value adjustments to
inventory (g) 164
-
Interest rate swap and cap mark-to-market (h) 43
-
Adjusted EBITDA add-backs 1,864 3,155 Adjusted EBITDA
$ 45,941 $ 34,113 Adjusted EBITDA margin 8.4 % 7.5 %
(a) Represents non-cash compensation expenses related to stock
appreciation rights agreements(b) Represents non-cash compensation
expense related to changes in the fair values of noncontrolling
interests(c) Represents non-cash equity-based compensation expense
related to the issuance of stock options(d) Represents severance
and other costs permitted in calculations under the ABL Facility
and the Term Loan Facilities(e) Represents one-time costs related
to the IPO and acquisitions paid to third party advisors(f)
Represents management fees paid to AEA, which were discontinued
after the IPO(g) Non-cash cost of sales impact of purchase
accounting adjustments to increase inventory to its estimated fair
value(h) Mark to market adjustments for certain financial
instruments
GMS Inc. Reconciliation of Net Income to Adjusted
Net Income (Unaudited) (in thousands of dollars, except for
share and per share data) Three Months Ended
July 31, July 31, 2016 2015
Income before taxes $ 15,322 $ 5,866 Adjusted EBITDA add-backs
1,864 3,155 Write-off of discount and deferred financing fees 5,426
-
Purchase accounting depreciation and amortization (1) 7,999 10,445
Adjusted pre-tax income 30,611 19,466 Adjusted income tax expense
12,826 8,156 Adjusted net income $ 17,785 11,310 Effective tax rate
(2) 41.9 % 41.9 % Weighted average shares outstanding: Basic
38,200,597 32,677,418 Diluted 38,602,378 32,830,677 Adjusted net
income per share: Basic $ 0.47 $ 0.35 Diluted $ 0.46 $ 0.34
(1) Depreciation and amortization from the increase in value
of certain long-term assets associated with the April 1, 2014
acquisition of the predecessor company. (2) Normalized effective
tax rate excluding the impact of purchase accounting and certain
other deferred tax amounts.
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GMS Inc.Investor Relations:678-353-2883ir@gms.comorMedia
Relations:770-723-3378marketing@gms.com
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