- Fourth Quarter Net Sales Increased 16.7%
to $615.0 Million -
- Fiscal 2017 Net Sales Increased 24.8% to
$2.32 Billion -
- Fourth Quarter Net Income Improved by
59.6% to $14.3 Million -
- Fourth Quarter Adjusted EBITDA Increased
$8.5 Million to $52.1 Million -
GMS Inc. (NYSE:GMS), a leading North American distributor of
wallboard and suspended ceilings systems, today reported financial
results for the fourth quarter and fiscal year ended April 30,
2017.
Fourth Quarter 2017 Highlights Compared to Fourth Quarter
2016
- Net sales increased 16.7% to a record
$615.0 million; base business net sales increased 5.6% with 2 fewer
shipping days
- Wallboard unit volume grew 11.1% to a
record 906 million square feet
- Net income increased to $14.3 million,
or $0.34 per diluted share, compared to $8.9 million, or $0.27 per
diluted share
- Adjusted EBITDA grew 19.5% to $52.1
million
- Adjusted EBITDA margin improved 20
basis points to 8.5% as a percentage of net sales
- Net debt to Adjusted EBITDA declined
from 4.3x to 2.9x
- Strengthened existing presence in
Hawaii
Fiscal Year 2017 Highlights Compared to Fiscal Year
2016
- Net sales increased 24.8% to $2.32
billion; base business net sales up 10.0%
- Net income increased to $48.9 million,
or $1.19 per diluted share, compared to $12.6 million, or $0.38 per
diluted share
- Adjusted EBITDA increased 36.2% to
$188.2 million, improving 70 bps as a percentage of net sales
- Completed 8 acquisitions with a
combined $215.9 million of trailing twelve month net sales
- Expanded nationwide footprint to 42
states and District of Columbia
Mike Callahan, President and CEO of GMS, stated, “The fourth
quarter represented another quarter of strong growth in net sales
supported by price gains in each product category, steady end
market demand and the contribution of successful acquisitions. We
were pleased with this progress and our ability to continue growing
our business to deliver a 19.5% year-over-year increase in Adjusted
EBITDA for the fourth quarter. These results capped an exciting
year for GMS, marked by our successful IPO, record sales and
Adjusted EBITDA growth of 36.2%, along with significant improvement
in our leverage metrics. Through our proven growth strategy, we
remain confident in our ability to capitalize on healthy demand
trends and execute on our robust acquisition pipeline to build upon
our market leading positions and continue to deliver strong
performance in net sales and Adjusted EBITDA in fiscal 2018.”
Fourth Quarter 2017 Results
Net sales for the fourth quarter of fiscal 2017 ended
April 30, 2017 were $615.0 million, compared to $527.2 million
for the fourth quarter of fiscal 2016 ended April 30,
2016.
- Wallboard sales of $282.2 million
increased 13.4%, compared to the fourth quarter of fiscal 2016.
Wallboard unit volume grew 11.1% to 906 million square feet, driven
by improved end market demand, price gains, and the positive
contribution from acquisitions.
- Ceilings sales of $87.5 million rose
11.9%, compared to the fourth quarter of fiscal 2016, mainly due to
greater commercial activity, price gains and the positive impact
from acquisitions.
- Steel framing sales of $100.2 million
grew 28.9%, compared to the fourth quarter of fiscal 2016, due to
greater commercial activity, price gains as a result of higher
industry steel prices and acquisitions.
- Other product sales of $145.1 million
were up 18.5%, compared to the fourth quarter of fiscal 2016, as a
result of strong demand pull through, strategic initiatives,
improved pricing and acquisitions.
Gross profit of $201.0 million grew 15.4%, compared to $174.2
million in the fourth quarter of fiscal 2016, mainly attributable
to pricing discipline, improved purchasing opportunities and
product mix. Gross margin was 32.7%, compared to 33.0% in the
fourth quarter of fiscal 2016, largely due to the timing of
favorable cost savings in the prior year quarter.
Net income of $14.3 million, or $0.34 per diluted share,
increased $5.3 million, compared to $8.9 million, or $0.27 per
diluted share, in the fourth quarter of fiscal 2016. Adjusted net
income of $20.0 million, or $0.48 per diluted share, grew $2.6
million, compared to $17.4 million, or $0.53 per diluted share, in
the fourth quarter of fiscal 2016.
Adjusted EBITDA of $52.1 million rose 19.5%, compared to $43.6
million in the fourth quarter of fiscal 2016. Adjusted EBITDA
margin was 8.5% as a percentage of net sales for the fourth quarter
of fiscal 2017, compared to 8.3% in the fourth quarter of fiscal
2016, largely reflecting increased profitability on higher net
sales.
Fiscal Year 2017 Results
Net sales for the fiscal year ended April 30, 2017
increased 24.8% to $2.32 billion, compared to $1.86 billion for the
fiscal year ended April 30, 2016, with double-digit growth
across all product categories.
Gross profit of $758.6 million in fiscal 2017 increased 27.9%,
compared to $593.2 million in fiscal 2016. Gross margin of 32.7%
improved by 80 basis points, compared to 31.9% in the prior year,
primarily driven by improved purchasing opportunities, pricing
discipline and product mix.
Net income of $48.9 million in fiscal 2017, or $1.19 per diluted
share, grew $36.3 million, compared to $12.6 million, or $0.38 per
diluted share, in fiscal 2016. Adjusted net income of $69.9
million, or $1.70 per diluted share, increased $22.5 million,
compared to $47.4 million, or $1.43 per diluted share, in the prior
year.
Adjusted EBITDA of $188.2 million in fiscal 2017 grew 36.2%,
compared to $138.2 million in fiscal 2016. Adjusted EBITDA margin
was 8.1% as a percentage of net sales in fiscal 2017, compared to
7.4% in fiscal 2016, representing strong overall improvement in
operating performance.
Capital Resources
At April 30, 2017, GMS had cash of $14.6 million and total
debt of $595.0 million, as compared to cash of $19.1 million and
total debt of $644.6 million at April 30, 2016.
Subsequent to the end of fiscal 2017, on June 7, 2017, the
Company amended its First Lien Credit Agreement with new borrowings
consisting of a $578 million term loan facility due in
2023. Borrowings under the new term loan bear interest at a
floating rate based on LIBOR, with a 1.00% floor, plus 3.00%,
representing a 50 basis point improvement compared to the previous
term loan’s interest rate. Net proceeds from the new term loan were
used to repay the Company’s previous first lien term loan of $478
million and approximately $94 million of loans under the asset
based revolving credit facility as well as related expenses.
Acquisition Activity
In February 2017, the Company acquired the Hawaiian
distribution assets of Grabber Construction Products, Inc., a
highly regarded supplier of fasteners and drywall related products
based in Honolulu, Hawaii.
The Company’s eight acquisitions completed during fiscal 2017
generated an aggregate of approximately $215.9 million in net sales
for the twelve month period prior to the date of acquisition, and
the earnings of the entities would have contributed approximately
$24.3 million to Adjusted EBITDA for that period, including
operating synergies.
Conference Call and Webcast
GMS will host a conference call and webcast to discuss its
results for the fourth quarter and fiscal year ended April 30,
2017 at 9:00 a.m. Eastern Time on June 29, 2017.
Investors who wish to participate in the call should dial
877-719-9788 (domestic) or 719-457-2647 (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 results
available on that page of the website as well.
Replays of the call will be available through July 29, 2017
and can be accessed at 844-512-2921 (domestic) or 412-317-6671
(international) and entering the pass code 1243163.
About GMS Inc.
Founded in 1971, GMS operates a network of more than 205
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, it presents Adjusted net income, Adjusted EBITDA, Adjusted
EBITDA margin and base business growth, which are not recognized
financial measures under GAAP. GMS believes that Adjusted net
income, Adjusted EBITDA and Adjusted EBITDA margin assist investors
and analysts in comparing its operating performance across
reporting periods on a consistent basis by excluding items that the
Company does not believe are indicative of its core operating
performance. The Company’s management believes Adjusted net income,
Adjusted EBITDA, Adjusted EBITDA margin and base business growth
are helpful in highlighting trends in its operating results, while
other measures can differ significantly depending on long-term
strategic decisions regarding capital structure, the tax
jurisdictions in which the Company operates and capital
investments. In addition, the Company utilizes Adjusted EBITDA in
certain calculations under its senior secured asset based revolving
credit facility and its senior secured first lien term loan
facility.
You are encouraged to evaluate each adjustment and the reasons
GMS considers it appropriate for supplemental analysis. In
addition, in evaluating Adjusted net income and Adjusted EBITDA,
you should be aware that in the future, the Company may incur
expenses similar to the adjustments in the presentation of Adjusted
net income and Adjusted EBITDA. The Company’s presentation of
Adjusted net income and Adjusted EBITDA should not be construed as
an inference that its 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 GMS’s 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 the
Company’s 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 GMS operates, including the potential for growth in the
commercial, residential and repair and remodeling, or R&R,
markets, statements about its 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. The Company has based these
forward-looking statements on its current expectations,
assumptions, estimates and projections. While the Company believes
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 its control. Forward-looking statements involve
risks and uncertainties, including, but not limited to, economic,
competitive, governmental and technological factors outside of the
Company’s control, that may cause its 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 GMS
distributes; 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 the Company’s Annual Report on
Form 10-K for the fiscal year ended April 30, 2017, and
in its other periodic reports filed with the SEC. In addition, the
statements in this release are made as of June 29, 2017. The
Company undertakes 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 the Company’s views as of any date subsequent to
June 29, 2017.
GMS Inc. Consolidated Statements of
Operations Three Months Ended April 30, 2017 and 2016 and
Years Ended April 30, 2017 and 2016 (in thousands of
dollars, except for share and per share data) Three
Months Ended Year Ended April 30, April
30, 2017 2016 2017
2016 Net sales $ 614,977 $ 527,182 $ 2,319,146 $ 1,858,182
Cost of sales (exclusive of depreciation and amortization shown
separately below) 413,942 352,979 1,560,575 1,265,018 Gross profit
201,035 174,203 758,571 593,164 Operating expenses: Selling,
general and administrative 152,962 133,231 585,078 470,035
Depreciation and amortization 17,761 16,879 69,240 64,215 Total
operating expenses 170,723 150,110 654,318 534,250 Operating income
30,312 24,093 104,253 58,914 Other (expense) income: Interest
expense (7,198 ) (9,428 ) (29,360 ) (37,418 ) Change in fair value
of financial instruments (141 ) (19 ) (382 ) (19 ) Write-off of
debt discount and deferred financing fees
-
-
(7,103 )
-
Other income, net 1,721 2,219 4,132 3,671 Total other (expense),
net (5,618 ) (7,228 ) (32,713 ) (33,766 ) Income before taxes
24,694 16,865 71,540 25,148 Provision for (benefit from) income
taxes 10,422 7,925 22,654 12,584 Net income $ 14,272 $ 8,940 $
48,886 $ 12,564 Weighted average shares outstanding: Basic
40,955,632 32,892,905 40,260,405 32,799,098 Diluted 41,758,974
33,155,140 41,070,025 33,125,242 Net income (loss) per share: Basic
$ 0.35 $ 0.27 $ 1.21 $ 0.38 Diluted $ 0.34 $ 0.27 $ 1.19 $ 0.38
GMS Inc. Consolidated Balance
Sheets April 30, 2017 and 2016 (in thousands of
dollars, except share data) April 30, April
30, 2017 2016 Assets Current assets: Cash
and cash equivalents $ 14,561 $ 19,072 Trade accounts and notes
receivable, net of allowances of $9,851 and $8,607, respectively
328,988 270,257 Inventories, net 200,234 165,766 Prepaid expenses
and other current assets 11,403 16,548 Total current assets 555,186
471,643 Property and equipment, net 154,465 153,260 Goodwill
423,644 386,306 Intangible assets, net 252,293 221,790 Other assets
7,677 7,815 Total assets $ 1,393,265 $ 1,240,814
Liabilities and
Stockholders’ Equity Current liabilities: Accounts payable
102,688 91,500 Accrued compensation and employee benefits 58,393
51,680 Other accrued expenses and current liabilities 37,891 41,814
Current portion of long-term debt 11,530 8,667 Revolving credit
facility
-
26,914 Total current liabilities 210,502 220,575 Non-current
liabilities: Long-term debt, less current portion 583,390 609,029
Deferred income taxes, net 26,820 41,203 Other liabilities 35,371
33,600 Liabilities to noncontrolling interest holders, less current
portion 22,576 25,247 Total liabilities 878,659 929,654 Commitments
and contingencies Stockholders’ equity: Common stock, par value
$0.01 per share, authorized 500,000,000 shares; 40,970,905 and
32,892,905 shares issued at April 30, 2017 and April 30, 2016,
respectively 410 329 Preferred stock, par value $0.01 per share,
authorized 50,000,000 shares; 0 shares issued at April 30, 2017 and
April 30, 2016, respectively
-
-
Additional paid-in capital 488,459 334,244 Accumulated earnings
(deficit) 26,621 (22,265 ) Accumulated other comprehensive (loss)
income (884 ) (1,148 ) Total stockholders’ equity 514,606 311,160
Total liabilities and stockholders’ equity $ 1,393,265 $ 1,240,814
GMS Inc. Consolidated Statements of
Cash Flows Three Months Ended April 30, 2017 and 2016 and
Years Ended April 30, 2017 and 2016 (in thousands of
dollars) Three Months Ended Year Ended
April 30, April 30, 2017 2016
2017 2016 Cash flows from operating
activities: Net Income $ 14,272 $ 8,940 $ 48,886 $ 12,564
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property and
equipment 6,170 6,460 25,565 26,667 Accretion and amortization of
debt discount and deferred financing fees 651 878 9,793 3,438
Amortization of intangible assets 11,591 10,419 43,675 37,548
Provision for losses on accounts and notes receivable 312 (1,035 )
(122 ) (1,032 ) Provision for obsolescence of inventory (2 ) (3 )
425 80 Decrease in fair value of contingent consideration (1,096 )
-
(1,484 )
-
Equity-based compensation 1,473 991 3,142 4,733 Gain on sale or
impairment of assets (94 ) (721 ) (336 ) (645 ) Trade accounts and
notes receivable (17,221 ) (29,212 ) (20,400 ) (27,338 )
Inventories 7,318 (428 ) (18,390 ) (699 ) Accounts payable (4,081 )
15,187 (3,763 ) 1,055 Deferred income tax expense (5,341 ) (13,842
) (20,114 ) (20,499 ) Prepaid expenses and other assets 1,013 (559
) (412 ) (4,682 ) Accrued compensation and employee benefits 7,497
15,383 4,440 3,454 Other accrued expenses and liabilities 947 132
626 5,551 Liabilities to noncontrolling interest holders 225 (743 )
1,133 446 Income taxes 6,734 17,998 (5,956 ) 7,106 Cash provided by
operating activities 30,368 29,845 66,708 47,747
Cash flows from
investing activities: Purchases of property and equipment
(4,183 ) (3,697 ) (11,083 ) (7,692 ) Proceeds from sale of assets
750 3,084 3,995 9,847 Acquisitions of businesses, net of cash
acquired (4,452 ) (31,929 ) (150,428 ) (120,195 ) Cash used in
investing activities (7,885 ) (32,542 ) (157,516 ) (118,040 )
Cash flows from financing activities: Repayments on the
revolving credit facility (194,327 ) (252,438 ) (1,011,925 )
(697,144 ) Borrowings from the revolving credit facility 176,858
269,257 1,013,365 782,104 Payments of principal on long-term debt
(1,203 ) (975 ) (4,584 ) (3,931 ) Principal repayments of capital
lease obligations (1,389 ) (1,067 ) (5,208 ) (4,249 ) Proceeds from
issuance of common stock in initial public offering, net of
underwriting discounts
-
-
156,941
-
Repaymemt on term loan
-
-
(160,000 )
-
Proceeds from term loan amendment
-
-
481,225
-
Repayments on term loan amendment
-
-
(381,225 )
-
Debt issuance costs 1,192 (391 ) (2,637 ) (391 ) Stock repurchases
-
-
-
(5,827 ) Exercise of stock options 345
-
345 6,519 Cash provided by financing activities (18,524 ) 14,386
86,297 77,081 Increase (decrease) in cash and cash equivalents
3,959 11,689 (4,511 ) 6,788 Balance, beginning of period 10,602
7,383 19,072 12,284 Balance, end of period $ 14,561 $ 19,072 $
14,561 $ 19,072 Supplemental cash flow disclosures: Cash paid for
income taxes $ 9,332 $ 3,817 $ 49,163 $ 26,067 Cash paid for
interest 6,405 9,688 26,443 34,557
GMS
Inc. Net Sales by Product Group Three Months Ended
April 30, 2017 and 2016 and Years Ended April 30, 2017 and 2016
(in thousands of dollars) Three Months Ended April
30, Year Ended April 30, % of
% of % of % of
2017 Total 2016 Total 2017
Total 2016 Total Wallboard $ 282,150 45.9 % $
248,829 47.2 % $ 1,058,400 45.6 % $ 870,952 46.9 % Ceilings 87,489
14.2 % 78,159 14.8 % 341,007 14.7 % 297,110 16.0 % Steel Framing
100,220 16.3 % 77,769 14.8 % 374,151 16.1 % 281,340 15.1 % Other
Products 145,118 23.6 % 122,425 23.2 % 545,588 23.5 % 408,780 22.0
% Total Net Sales $ 614,977 $ 527,182 $ 2,319,146 $ 1,858,182
GMS Inc. Reconciliation of Net Income to
Adjusted EBITDA Three Months Ended April 30, 2017 and 2016
and Years Ended April 30, 2017 and 2016 (in thousands of
dollars) Three Months Ended Year Ended
April 30, April 30, 2017 2016
2017 2016 Net income $ 14,272 $ 8,940 $ 48,886
$ 12,564 Interest expense 7,198 9,428 36,463 37,418 Interest income
(51 ) (243 ) (152 ) (928 ) Income tax expense (benefit) 10,422
7,925 22,654 12,584 Depreciation expense 6,170 6,460 25,565 26,667
Amortization expense 11,591 10,419 43,675 37,548 EBITDA $ 49,602 $
42,929 $ 177,091 $ 125,853 Stock appreciation rights expense (a) $
882 $ 365 $ 148 $ 1,988 Redeemable noncontrolling interests (b) 457
(292 ) 3,536 880 Equity-based compensation (c) 553 610 2,534 2,699
Severance, other costs related to discontinued operations and
closed branches, and certain other costs (d) (472 ) (1,054 ) (157 )
379 Transaction costs (acquisitions and other) (e) (798 ) 939 2,249
3,751 Gain on disposal of assets (94 ) (720 ) (338 ) (645 )
Management fee to related party (f)
-
563 188 2,250 Effects of fair value adjustments to inventory (g)
170 223 946 1,009 Interest rate swap and cap mark-to-market (h) 141
19 382 19 Secondary public offering (i) 1,385
-
1,385
-
Debt transaction costs (j) 265
-
265
-
EBITDA add-backs 2,489 653 11,138 12,330 Adjusted EBITDA $ 52,091 $
43,582 $ 188,229 $ 138,183 Adjusted EBITDA margin 8.5 % 8.3 % 8.1 %
7.4 % _________________________________ (a) Represents
non-cash compensation expense 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
First Lien Facility (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 (i)
Represents costs paid to third party advisors related to the
secondary public offerings of our common stock in February and June
of 2017 (j) Represents costs paid to third party advisors related
to debt refinancing activities
GMS Inc.
Reconciliation of Net Income to Adjusted Net Income Three
Months Ended April 30, 2017 and 2016 and Years Ended April 30, 2017
and 2016 (in thousands of dollars, except for share and per
share data) Three Months Ended Year Ended
April 30, April 30, 2017 2016
2017 2016 Income before taxes $ 24,694 $
16,865 $ 71,540 $ 25,148 EBTIDA add-backs 2,489 653 11,138 12,330
Write-off of debt discount and deferred financing fees
-
-
7,103
-
Purchase accounting depreciation and amortization (1) 7,254 12,492
30,518 44,099 Adjusted pre-tax income 34,437 30,010 120,299 81,577
Adjusted income tax expense 14,429 12,574 50,405 34,181 Adjusted
net income $ 20,008 $ 17,436 $ 69,894 $ 47,396 Effective tax rate
(2) 41.9 % 41.9 % 41.9 % 41.9 % Weighted average shares
outstanding: Basic 40,955,632 32,892,905 40,260,405 32,799,098
Diluted 41,758,974 33,155,140 41,070,025 33,125,242 Net income
(loss) per share: Basic $ 0.49 $ 0.53 $ 1.74 $ 1.45 Diluted $ 0.48
$ 0.53 $ 1.70 $ 1.43 ____________________________ (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. Full year projected amounts are $21.8
million and $15.6 million for FY18 and FY19, respectively. (2)
Normalized effective tax rate excluding the impact of purchase
accounting and certain other deferred tax amounts.
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