- Third Quarter Net Sales Increased 4.1% to
$585.5 Million -
- Third Quarter Net Income Improved by 139%
to $19.7 Million -
- Third Quarter Adjusted EBITDA Increased
3.8% to $42.2 Million -
GMS Inc. (NYSE:GMS), a leading North American distributor of
wallboard and suspended ceilings systems, today reported financial
results for the third quarter of fiscal 2018 ended January 31,
2018.
Third Quarter 2018 Highlights Compared to Third Quarter
2017
- Net sales increased 4.1% to a record
$585.5 million; base business net sales increased 2.9%
- Net income increased to $19.7 million,
or $0.47 per diluted share, compared to $8.2 million, or $0.20 per
diluted share
- Adjusted EBITDA grew 3.8% to a record
$42.2 million
- Gross margin expanded 40 basis points
to 33.4%
Mike Callahan, President and CEO of GMS, stated, “We delivered
record revenue and Adjusted EBITDA performance during the third
quarter, topping a very challenging year-over-year comparison. I am
particularly encouraged that we delivered solid organic revenue
growth despite the impact of adverse weather conditions in the
southern U.S. I am also pleased to report we captured approximately
three points of wallboard price growth during the third quarter and
expanded our overall gross margin on both a sequential and annual
basis, which keeps us on track to achieve our previously announced
guidance of gross margin in excess of 32.5% for fiscal year
2018.”
Mr. Callahan continued, “We generated broad-based sales growth
across all of our product groups led by strong double-digit growth
in ceilings during the third quarter. We completed one acquisition
in the quarter and maintain a very robust pipeline that we
anticipate will become more active over the next few quarters.
Looking towards the balance of the year, we remain confident in our
ability to deliver another year of record net sales and Adjusted
EBITDA.”
Third Quarter 2018 Results
Net sales for the third quarter of fiscal 2018 ended January 31,
2018 were $585.5 million, compared to $562.5 million for the third
quarter of fiscal 2017 ended January 31, 2017.
- Wallboard sales of $256.4 million
increased 0.6%, compared to the third quarter of fiscal 2017 with
wallboard unit volume decline of 1.9% to 826.3 million square feet
offset by pricing improvement of 2.9%. Wallboard volume decline was
partially driven by lost shipping days due to abnormal weather
conditions across many of our largest markets in the southern U.S.
as well as a tough comparison to an extremely strong third quarter
of fiscal 2017.
- Ceilings sales of $90.4 million rose
10.5%, compared to the third quarter of fiscal 2017, mainly due to
greater commercial activity, price gains and the positive impact of
acquisitions.
- Steel framing sales of $96.7 million
grew 3.5%, compared to the third quarter of fiscal 2017, mainly
driven by pricing improvement.
- Other product sales of $142.0 million
were up 7.4%, compared to the third quarter of fiscal 2017, as a
result of strategic initiatives, price gains and the positive
impact of acquisitions.
Gross profit of $195.4 million grew 5.2%, compared to $185.7
million in the third quarter of fiscal 2017, mainly attributable to
higher pricing and increased sales. Gross margin expanded 40 basis
points to 33.4%, compared to 33.0% in the third quarter of fiscal
2017 largely due to pricing discipline and purchasing initiatives.
On a sequential basis, gross margin improved 60 basis points from
32.8% from the second quarter of fiscal 2018.
Net income of $19.7 million, or $0.47 per diluted share,
increased by 139% or $11.5 million, compared to $8.2 million, or
$0.20 per diluted share, in the third quarter of fiscal 2017.
Adjusted net income of $15.3 million, or $0.36 per diluted share,
grew $0.5 million, compared to $14.8 million, or $0.36 per diluted
share, in the third quarter of fiscal 2017.
Adjusted EBITDA of $42.2 million rose 3.8%, compared to $40.7
million in the third quarter of fiscal 2017. Adjusted EBITDA margin
was 7.2% as a percentage of net sales, flat compared to the third
quarter of fiscal 2017, with improvement in gross margin offset by
an increase in SG&A related expenses.
Capital Resources
As of January 31, 2018, GMS had cash of $28.9 million and total
debt of $597.5 million, compared to cash of $19.8 million and total
debt of $610.5 million as of October 31, 2017.
Tax Legislation Update
We recognized an income tax benefit of $4.5 million during the
three months ended January 31, 2018 compared to income tax expense
of $5.4 million during the three months ended January 31, 2017. The
change over the third quarter of fiscal 2017 is primarily related
to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which was
signed into law on December 22, 2017. More specifically, we
recognized a provisional income tax benefit of $7.8 million, or
$0.18 per diluted share, related to the re-measurement of net
deferred tax liabilities in connection with the enactment of the
Tax Act. Our Adjusted EPS disclosures exclude the net benefit from
this item and reflects an effective tax rate of 34.5% based on our
estimated taxes under the Tax Act. For fiscal 2019, we anticipate
our full year effective tax rate will be approximately 23% to
25%.
Lease Accounting
In order to take advantage of the Tax Act’s accelerated
depreciation provisions, facilitate the implementation of the new
lease accounting standard which we will adopt in fiscal 2020, and
improve the comparability of our financial statements with our
publicly traded peers, beginning in fiscal 2019 we intend to
finance the purchase of new commercial vehicles under capital
leases and to convert the majority of our legacy equipment
operating leases into capital leases or purchase the equipment
outright. We anticipate that this will reduce our SG&A expense
and increase our Adjusted EBITDA by approximately $21.0 to $24.0
million per year beginning in fiscal 2019. The change is also
expected to increase the property and equipment and debt accounts
by approximately $75 million as of the first quarter of fiscal
2019.
Conference Call and Webcast
GMS will host a conference call and webcast to discuss its
results for the third quarter ended January 31, 2018 at 10:00
a.m. Eastern Time on March 6, 2018. Investors who wish to
participate in the call should dial 800-239-9838 (domestic) or
323-794-2551 (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
April 6, 2018 and can be accessed at 844-512-2921 (domestic) or
412-317-6671 (international) and entering the pass code
2730994.
About GMS Inc.
Founded in 1971, GMS operates a network of more than 210
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, gross
margins and capital expenditures, as well as non-GAAP financial
measures such as Adjusted EBITDA, Adjusted net income and base
business growth, statements regarding the impact of the recent tax
legislation and anticipated changes related to lease accounting,
including the expected impact on the fiscal 2019 effective tax
rate, SG&A and Adjusted EBITDA, and statements regarding
potential acquisitions and future greenfield locations, demand
trends and future SG&A savings 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 March 6, 2018. 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 March
6, 2018.
GMS Inc. Condensed
Consolidated Statements of Operations and Comprehensive Income
(Unaudited) Three and Nine Months Ended January 31, 2018 and
2017 (in thousands, except per share data)
Three Months Ended Nine Months Ended January
31, January 31, 2018 2017 2018
2017 Net sales $ 585,508 $ 562,523 $ 1,875,669 $ 1,704,169
Cost of sales (exclusive of depreciation and amortization shown
separately below) 390,088 376,796
1,262,885 1,146,633 Gross profit
195,420 185,727 612,784
557,536 Operating expenses: Selling, general and
administrative 156,262 147,260 472,232 432,116 Depreciation and
amortization 16,490 18,316
49,548 51,479 Total operating expenses
172,752 165,576 521,780
483,595 Operating income 22,668 20,151 91,004 73,941 Other
(expense) income: Interest expense (7,871 ) (7,431 ) (23,288 )
(22,162 ) Write-off of debt discount and deferred financing fees —
(211 ) (74 ) (7,103 ) Other income, net 401
1,081 965 2,170 Total other
(expense), net (7,470 ) (6,561 ) (22,397 )
(27,095 ) Income before taxes 15,198 13,590 68,607 46,846
Provision (benefit) for income taxes (4,488 ) 5,363
15,555 12,232 Net income $
19,686 $ 8,227 $ 53,052 $ 34,614
Weighted average common shares outstanding: Basic 41,036 40,943
41,004 40,035 Diluted 42,228 41,578 42,167 40,670 Net income per
share: Basic $ 0.48 $ 0.20 $ 1.29 $ 0.86
Diluted $ 0.47 $ 0.20 $ 1.26 $ 0.85
GMS Inc. Condensed Consolidated
Balance Sheets (Unaudited) January 31, 2018 and April 30,
2017 (in thousands, except per share data)
January 31, April 30, 2018 2017
Assets Current assets: Cash and cash equivalents $ 28,939 $
14,561 Trade accounts and notes receivable, net of allowances of
$10,665 and $9,851, respectively 319,025 328,988 Inventories, net
227,564 200,234 Prepaid expenses and other current assets
18,104 11,403 Total current assets
593,632 555,186 Property and equipment, net of
accumulated depreciation of $81,648 and $71,409, respectively
158,013 154,465 Goodwill 426,810 423,644 Intangible assets, net
232,214 252,293 Other assets 7,682 7,677
Total assets $ 1,418,351 $ 1,393,265
Liabilities and Stockholders’ Equity Current liabilities:
Accounts payable $ 98,924 $ 102,688 Accrued compensation and
employee benefits 49,043 58,393 Other accrued expenses and current
liabilities 40,020 37,891 Current portion of long-term debt
15,949 11,530 Total current liabilities
203,936 210,502 Non-current liabilities:
Long-term debt, less current portion 581,535 583,390 Deferred
income taxes, net 14,256 26,820 Other liabilities 34,958 35,371
Liabilities to noncontrolling interest holders, less current
portion 15,381 22,576 Total liabilities
850,066 878,659 Commitments and
contingencies Stockholders’ equity: Common stock, par value $0.01
per share, 500,000 shares authorized; 41,041 and 40,971 shares
issued as of January 31, 2018 and April 30, 2017, respectively 410
410 Preferred stock, par value $0.01 per share, 50,000 shares
authorized; 0 shares issued as of January 31, 2018 and April 30,
2017 — — Additional paid-in capital 488,289 488,459 Retained
earnings 79,673 26,621 Accumulated other comprehensive loss
(87 ) (884 ) Total stockholders’ equity 568,285
514,606 Total liabilities and stockholders’
equity $ 1,418,351 $ 1,393,265
GMS
Inc. Condensed Consolidated Statements of Cash Flows
(Unaudited) Nine Months Ended January 31, 2018 and 2017
(in thousands) Nine Months Ended January
31, 2018 2017 Cash flows from operating
activities: Net income $ 53,052 $ 34,614 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 18,021
19,395 Write-off, accretion and amortization of debt discount and
deferred financing fees 2,141 9,142 Amortization of intangible
assets 31,527 32,084 Provision for losses on accounts and notes
receivable 133 (434 ) Provision for obsolescence of inventory 113
427 Increase (decrease) in fair value of contingent consideration
195 (388 ) Equity-based compensation 1,473 1,669 (Gain) on sale of
assets (648 ) (242 ) Changes in assets and liabilities net of
effects of acquisitions: Trade accounts and notes receivable 14,545
(3,179 ) Inventories (23,617 ) (25,708 ) Accounts payable (5,723 )
318 Deferred income taxes (12,860 ) (14,773 ) Prepaid expenses and
other assets (1,719 ) (1,425 ) Accrued compensation and employee
benefits (7,140 ) (3,057 ) Accrued expenses and liabilities 1,289
(321 ) Liabilities to noncontrolling interest holders (2,000 ) 908
Income tax receivable / payable (5,049 ) (12,690 )
Cash provided by operating activities 63,733
36,340
Cash flows from investing activities:
Purchases of property and equipment (13,408 ) (6,900 ) Proceeds
from sale of assets 2,374 3,245 Acquisition of businesses, net of
cash acquired (23,568 ) (145,976 ) Cash used in
investing activities (34,602 ) (149,631 )
Cash
flows from financing activities: Repayments on the revolving
credit facility (597,092 ) (817,598 ) Borrowings from the revolving
credit facility 493,739 836,507 Payments of principal on long-term
debt (4,332 ) (3,381 ) Principal repayments of capital lease
obligations (4,530 ) (3,819 ) Proceeds from issuance of common
stock in initial public offering, net of underwriting discounts —
156,941 Repayment of term loan — (160,000 ) Borrowings from term
loan amendment 577,616 481,225 Repayment of term loan amendment
(477,616 ) (381,225 ) Debt issuance costs on revolving credit
facility amendment — (1,342 ) Debt issuance costs (636 ) (2,487 )
Payments for taxes related to net share settlement of equity awards
(1,441 ) — Proceeds from exercises of stock options 130 — Other
financing activities (591 ) — Cash (used in)
provided by financing activities (14,753 ) 104,821
Increase (decrease) in cash and cash equivalents 14,378
(8,470 ) Cash and cash equivalents, beginning of period
14,561 19,072 Cash and cash equivalents, end
of period $ 28,939 $ 10,602 Supplemental cash flow
disclosures: Cash paid for income taxes $ 35,005 $ 39,831 Cash paid
for interest 21,192 20,038 Supplemental schedule of noncash
activities: Assets acquired under capital lease $ 7,953 $ 6,667
Issuance of installment notes associated with equity-based
compensation liability awards 11,898 5,353
GMS Inc. Net Sales by
Product Group Three and Nine Months Ended January 31, 2018
and 2017 (dollars in thousands) Three Months
Ended Nine Months Ended January 31, % of
January 31, % of January 31, % of
January 31, % of 2018 Total 2017
Total 2018 Total 2017 Total
(dollars in thousands) Wallboard $ 256,413 43.8 % $ 254,979
45.3 % $ 829,568 44.2 % $ 776,250 45.6 % Ceilings 90,360 15.4 %
81,768 14.6 % 291,716 15.6 % 253,518 14.8 % Steel framing 96,744
16.5 % 93,514 16.6 % 304,598 16.2 % 273,931 16.1 % Other products
141,991 24.3 % 132,262 23.5 % 449,787 24.0 %
400,470 23.5 % Total net sales $ 585,508 $ 562,523 $
1,875,669 $ 1,704,169
GMS Inc. Reconciliation of
Net Income to Adjusted EBITDA Three and Nine Months Ended
January 31, 2018 and 2017 (in thousands) Three
Months Ended Nine Months Ended January 31,
January 31, 2018 2017 2018 2017
Net income $ 19,686 $ 8,227 $ 53,052 $ 34,614 Interest
expense 7,871 7,431 23,288 22,162 Write-off of debt discount and
deferred financing fees — 211 74 7,103 Interest income (44 ) (23 )
(93 ) (101 ) Provision (benefit) for income taxes (4,488 ) 5,363
15,555 12,232 Depreciation expense 6,009 6,465 18,021 19,395
Amortization expense 10,481 11,851
31,527 32,084 EBITDA $ 39,515 $
39,525 $ 141,424 $ 127,489 Stock appreciation
expense or (income)(a) 631 (498 ) 1,863 (734 ) Redeemable
noncontrolling interests(b) 340 256 1,370 3,079 Equity-based
compensation(c) 430 622 1,277 1,981 Severance and other permitted
costs(d) 8 57 325 315 Transaction costs (acquisitions and other)(e)
75 305 321 2,783 (Gain) loss on sale of assets (51 ) (114 ) (648 )
(244 ) Management fee to related party(f) — — — 188 Effects of fair
value adjustments to inventory(g) 89 155 276 776 Interest rate cap
mark-to-market(h) 276 109 710 241 Secondary public offering
costs(i) 894 — 1,525 — Debt transaction costs(j) —
261 758 264 EBITDA add-backs
2,692 1,153 7,777
8,649 Adjusted EBITDA $ 42,207 $ 40,678 $
149,201 $ 136,138 Adjusted EBITDA margin 7.2 % 7.2 %
8.0 % 8.0 % (a) Represents non-cash
compensation expenses (income) related to stock appreciation rights
agreements. (b) Represents non-cash compensation expense related to
changes in the redemption values of noncontrolling interests. (c)
Represents non-cash equity-based compensation expense related to
the issuance of share-based awards. (d) Represents severance
expenses and other costs permitted in calculations under the ABL
Facility and the First Lien Facility. (e) Represents one-time costs
related to our IPO and acquisitions paid to third party advisors.
(f) Represents management fees paid by us to AEA. Following our
IPO, AEA no longer receives management fees from us. (g) Represents
the non-cash cost of sales impact of purchase accounting
adjustments to increase inventory to its estimated fair value. (h)
Represents the mark-to-market adjustments for the interest rate
cap. (i) Represents one-time costs related to our secondary
offerings paid to third party advisors. (j) Represents expenses
paid to third party advisors related to debt refinancing
activities.
GMS Inc. Reconciliation
of Income Before Taxes to Adjusted Net Income Three and Nine
Months Ended January 31, 2018 and 2017 (in thousands, except
per share data) Three Months Ended Nine Months
Ended January 31, January 31, 2018
2017 2018 2017 Income before taxes $ 15,198 $
13,590 $ 68,607 $ 46,846 EBITDA add-backs 2,692 1,153 7,777 8,649
Write-off of debt discount and deferred financing fees — 211 74
7,103 Purchase accounting depreciation and amortization (1)
5,493 7,615 16,038 23,264 Adjusted pre-tax
income 23,383 22,569 92,496 85,862 Adjusted income tax expense
8,067 7,786 31,912 29,622 Adjusted net
income $ 15,316 $ 14,782 $ 60,584 $ 56,240 Effective tax rate (2)
34.5 % 34.5 % 34.5 % 34.5 % Weighted average shares
outstanding: Basic 41,036 40,943 41,004 40,035 Diluted 42,228
41,578 42,167 40,670 Adjusted net income per share: Basic $ 0.37 $
0.36 $ 1.48 $ 1.40 Diluted $ 0.36 $ 0.36 $ 1.44 $ 1.38
(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 cash tax rate determined based on our
estimated taxes for fiscal 2018 under the Tax Cuts and Jobs Act of
2017, excluding the impact of purchase accounting and certain other
deferred tax accounts.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180306005607/en/
GMS Inc.Investor Relations:ir@gms.com678-353-2883orMedia
Relations:marketing@gms.com770-723-3378
GMS (NYSE:GMS)
Historical Stock Chart
From Aug 2024 to Sep 2024
GMS (NYSE:GMS)
Historical Stock Chart
From Sep 2023 to Sep 2024