Press Release

GMS Reports Second Quarter Fiscal 2020 Results

Company Release - 12/5/2019 6:00 AM ET

Net Sales of $861.9 million up 3.4%; Organic Net Sales up 2.7%

Reported Net Income of $29.1 Million, or $0.68 per Diluted Share, up 17.0%

Adjusted Net Income of $42.7 Million, or $1.00 per Diluted Share, up 11.6%

Adjusted EBITDA of $89.9 million, or 10.4% of net sales

TUCKER, Ga.--(BUSINESS WIRE)-- GMS Inc. (NYSE:GMS), a leading North American specialty distributor of interior building products, today reported financial results for the second quarter of fiscal 2020 ended October 31, 2019.

Second Quarter Fiscal 2020 Highlights

  • Net sales of $861.9 million increased 3.4% from $833.8 million in the second quarter of the prior fiscal year. Organic net sales increased 2.7% year over year.
  • Reported net income of $29.1 million, or $0.68 per diluted share, compared to $24.9 million, or $0.58 per diluted share, in the second quarter of the prior fiscal year.
  • Adjusted net income of $42.7 million, or $1.00 per diluted share, compared to $38.3 million, or $0.89 per diluted share, in the second quarter of the prior fiscal year.
  • Adjusted EBITDA of $89.9 million, or 10.4% of net sales, compared to Adjusted EBITDA of $87.1 million, or 10.5% of net sales, in the second quarter of the prior fiscal year.
  • The company completed one greenfield opening during the second quarter of fiscal 2020.
  • Net leverage was reduced to 3.5 times as of the end of the second quarter of fiscal 2020 from 3.7 times as of the end of the first quarter of fiscal 2020.
  • Cash provided by operating activities and free cash flow for the first six months of fiscal 2020 totaled $69.9 million and $55.3 million, respectively, representing increases of 53.2% and 51.5%, respectively, from the first six months of fiscal 2019.

“The GMS team continued to execute well in the second quarter, growing sales, expanding gross margin and achieving higher net income and Adjusted EBITDA,” said John C. Turner, Jr., President and Chief Executive Officer. “We achieved strong volume performance in the United States, where demand conditions remain solid, while managing continued softness in Canada. We also generated strong cash from operations and free cash flow, and continue to pursue our existing capital allocation priorities, including debt reduction and prudent geographic and market share expansion through acquisitions and greenfields.

“Moving forward, we remain focused on our strategic priorities which include increased emphasis on organic growth through expanding market share in core products and growing our complementary product lines. We will also continue to pursue strategic acquisitions and greenfield branch openings as we broaden our geographic platform. With a heightened focus on enhanced productivity and profitability across the organization, we are confident that we are well-positioned to capitalize on the growth opportunities ahead and drive value for our shareholders.”

Second Quarter Fiscal 2020 Results

Net sales for the second quarter of fiscal 2020 of $861.9 million were up 3.4%, or 2.7% on an organic basis, compared to $833.8 million for the second quarter of the prior fiscal year.

  • Wallboard sales of $350.6 million increased 4.8% (4.0% on an organic basis) compared to the second quarter of fiscal 2019, driven primarily by higher organic volumes and acquisitions, partially offset by lower pricing/mix.
  • Ceilings sales of $122.8 million increased 3.7% (1.7% on an organic basis) compared to the second quarter of fiscal 2019, primarily due to higher organic volumes and acquisitions, as well as slightly higher pricing/mix.
  • Steel framing sales of $136.2 million increased 0.3% (down 0.6% on an organic basis) compared to the second quarter of fiscal 2019, driven by higher organic volumes and acquisitions, partially offset by lower pricing/mix.
  • Other product sales of $252.3 million increased 3.0% (3.1% on an organic basis) compared to the second quarter of fiscal 2019, due to higher organic growth and acquisitions.

Gross profit of $284.5 million increased 6.1% from $268.2 million in the second quarter of fiscal 2019, as a result of higher sales, both organically and including the positive impact of acquisitions. Gross margin of 33.0% increased 80 basis points from 32.2% a year ago primarily due to net favorable price-cost dynamics, acquisition-related purchasing synergies and product mix.

Selling, general and administrative (SG&A) expense as a percentage of net sales was 23.3% for the quarter compared to 22.2% in the second quarter of fiscal 2019. Adjusted SG&A expense as a percentage of net sales was 22.7% compared to 21.8% in the prior year quarter. The 90 basis point increase in adjusted SG&A as a percentage of sales resulted primarily from the year-over-year decline in the selling price of certain of our products and, to a lesser extent, continuing inflationary cost pressures. In addition, the Company continued to make ongoing investments in greenfields and business initiatives intended to drive growth and productivity.

Net income of $29.1 million, or $0.68 per diluted share, compared to $24.9 million, or $0.58 per diluted share, in the second quarter of fiscal 2019. Adjusted net income of $42.7 million, or $1.00 per diluted share, compared to $38.3 million, or $0.89 per diluted share, in the second quarter of fiscal 2019. Adjusted EBITDA of $89.9 million increased 3.2% year over year and represented an Adjusted EBITDA margin of 10.4%.

Balance Sheet

As of October 31, 2019, the Company had cash of $36.3 million and total debt of $1.10 billion, compared to cash of $24.1 million and total debt of $1.16 billion, as of July 31, 2019.

As previously disclosed, during the second fiscal quarter, the Company amended its asset based revolving credit facility to increase commitments from $345.0 million to $445.0 million, extend the maturity date to September 30, 2024 and improve the rate structure. Also during the second fiscal quarter, the Company made a $50.0 million prepayment of outstanding principal of its senior secured first lien term loan facility. As of the end of the fiscal second quarter, the Company had a total of $410.4 million available under its revolving credit facilities.

During the second fiscal quarter, the Company reduced its net debt by $73.1 million and net leverage was 3.5 times as of the end of the quarter compared to 3.7 times as of the end of the first quarter of fiscal 2020.

Platform Expansion Activity

During the second quarter of fiscal 2020, the Company opened a greenfield location in Wilsonville, Oregon. Subsequent to the end of the second quarter, the Company also completed the previously announced acquisition of Rigney Building Supplies LTD in Kingston, Ontario.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the second quarter ended October 31, 2019 and other information related to its business at 8:30 a.m. Eastern Time on Thursday, December 5, 2019. Investors who wish to participate in the call should dial 877-407-3982 (domestic) or 201-493-6780 (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 January 5, 2019 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13697005.

About GMS Inc.

Founded in 1971, GMS operates a network of more than 250 distribution centers across the United States and Canada. GMS’s extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary 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, free cash flow, Adjusted SG&A, Adjusted EBITDA and Adjusted EBITDA margin, which are not recognized financial measures under GAAP. GMS believes that Adjusted net income, free cash flow, Adjusted SG&A, 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 SG&A, free cash flow, Adjusted EBITDA and Adjusted EBITDA margin 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, Adjusted SG&A 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, Adjusted SG&A and Adjusted EBITDA. The Company’s presentation of Adjusted net income, Adjusted SG&A, Adjusted SG&A margin, Adjusted EBITDA and Adjusted EBITDA margin 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, free cash flow, Adjusted SG&A and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in GMS’s industry or across different industries. Please see the tables at the end of this release for a reconciliation of Adjusted EBITDA, free cash flow, Adjusted SG&A and Adjusted net income to the most directly comparable GAAP financial measures.

When calculating organic net sales growth, the Company excludes from the calculation (i) net sales of acquired businesses until the first anniversary of the acquisition date, and (ii) the impact of foreign currency translation.

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 and the economy generally and statements about growth potential across the Company’s business and the ability to deliver growth and value creation 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, those described in the “Risk Factors” section in the Company’s most recent Annual Report on Form 10-K, and in its other periodic reports filed with the SEC. In addition, the statements in this release are made as of December 5, 2019. 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 December 5, 2019.

         
         
         

GMS Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31,

 

October 31,

 

 

2019

 

2018

 

2019

 

2018

Net sales

 

$

861,929

 

 

$

833,837

 

 

$

1,709,105

 

 

$

1,611,981

 

Cost of sales (exclusive of depreciation and amortization shown separately below)

 

 

577,436

 

 

 

565,687

 

 

 

1,150,958

 

 

 

1,099,015

 

Gross profit

 

 

284,493

 

 

 

268,150

 

 

 

558,147

 

 

 

512,966

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

200,457

 

 

 

185,268

 

 

 

395,088

 

 

 

370,703

 

Depreciation and amortization

 

 

29,518

 

 

 

30,787

 

 

 

58,793

 

 

 

57,109

 

Total operating expenses

 

 

229,975

 

 

 

216,055

 

 

 

453,881

 

 

 

427,812

 

Operating income

 

 

54,518

 

 

 

52,095

 

 

 

104,266

 

 

 

85,154

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(17,559

)

 

 

(19,182

)

 

 

(35,836

)

 

 

(35,370

)

Change in fair value of financial instruments

 

 

 

 

 

(376

)

 

 

 

 

 

(6,395

)

Write-off of debt discount and deferred financing fees

 

 

(707

)

 

 

 

 

 

(707

)

 

 

 

Other income, net

 

 

813

 

 

 

434

 

 

 

1,752

 

 

 

1,068

 

Total other expense, net

 

 

(17,453

)

 

 

(19,124

)

 

 

(34,791

)

 

 

(40,697

)

Income before taxes

 

 

37,065

 

 

 

32,971

 

 

 

69,475

 

 

 

44,457

 

Provision for income taxes

 

 

7,927

 

 

 

8,059

 

 

 

15,517

 

 

 

10,895

 

Net income

 

$

29,138

 

 

$

24,912

 

 

$

53,958

 

 

$

33,562

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

41,761

 

 

 

41,149

 

 

 

41,382

 

 

 

41,121

 

Diluted

 

 

42,635

 

 

 

41,918

 

 

 

42,126

 

 

 

41,996

 

Net income per common share(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.70

 

 

$

0.59

 

 

$

1.30

 

 

$

0.80

 

Diluted

 

$

0.68

 

 

$

0.58

 

 

$

1.27

 

 

$

0.78

 

(1) The following table sets forth the computation of basic and diluted earnings per share of common stock for periods presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31,

 

October 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands, except per share data)

Net income

 

$

29,138

 

$

24,912

 

$

53,958

 

$

33,562

Less: Net income allocated to participating securities

 

 

 

 

665

 

 

342

 

 

751

Net income attributable to common stockholders

 

$

29,138

 

$

24,247

 

$

53,616

 

$

32,811

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

41,761

 

 

41,149

 

 

41,382

 

 

41,121

Basic earnings per common share

 

$

0.70

 

$

0.59

 

$

1.30

 

$

0.80

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

41,761

 

 

41,149

 

 

41,382

 

 

41,121

Add: Common Stock Equivalents

 

 

874

 

 

769

 

 

744

 

 

875

Diluted weighted average common shares outstanding

 

 

42,635

 

 

41,918

 

 

42,126

 

 

41,996

Diluted earnings per common share

 

$

0.68

 

$

0.58

 

$

1.27

 

$

0.78

     
     
     
     

GMS Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)

 

 

 

 

 

October 31,

 

April 30,

 

 

2019

 

2019

Assets

   

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,269

 

 

$

47,338

 

Trade accounts and notes receivable, net of allowances of $6,414 and $6,432, respectively

 

 

480,321

 

 

 

445,771

 

Inventories, net

 

 

293,465

 

 

 

290,829

 

Prepaid expenses and other current assets

 

 

19,621

 

 

 

18,368

 

Total current assets

 

 

829,676

 

 

 

802,306

 

Property and equipment, net of accumulated depreciation of $140,608 and $123,583, respectively

 

 

292,136

 

 

 

282,349

 

Operating lease right-of-use assets

 

 

107,624

 

 

 

 

Goodwill

 

 

621,916

 

 

 

617,327

 

Intangible assets, net

 

 

401,909

 

 

 

429,313

 

Deferred income taxes

 

 

10,199

 

 

 

4,676

 

Other assets

 

 

17,890

 

 

 

13,583

 

Total assets

 

$

2,281,350

 

 

$

2,149,554

 

Liabilities and Stockholders’ Equity

   

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

168,768

 

 

$

173,751

 

Accrued compensation and employee benefits

 

 

49,981

 

 

 

62,858

 

Other accrued expenses and current liabilities

 

 

80,034

 

 

 

79,848

 

Current portion of long-term debt

 

 

45,963

 

 

 

42,118

 

Current portion of operating lease liabilities

 

 

31,178

 

 

 

 

Total current liabilities

 

 

375,924

 

 

 

358,575

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

1,054,085

 

 

 

1,099,077

 

Long-term operating lease liabilities

 

 

81,896

 

 

 

 

Deferred income taxes, net

 

 

10,382

 

 

 

10,226

 

Other liabilities

 

 

63,024

 

 

 

52,500

 

Total liabilities

 

 

1,585,311

 

 

 

1,520,378

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share, 500,000 shares authorized; 42,169 and 40,375 shares issued and outstanding as of October 31, 2019 and April 30, 2019, respectively

 

 

422

 

 

 

404

 

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of October 31, 2019 and April 30, 2019

 

 

 

 

 

 

Exchangeable shares

 

 

 

 

 

29,639

 

Additional paid-in capital

 

 

520,855

 

 

 

480,113

 

Retained earnings

 

 

199,552

 

 

 

145,594

 

Accumulated other comprehensive loss

 

 

(24,790

)

 

 

(26,574

)

Total stockholders' equity

 

 

696,039

 

 

 

629,176

 

Total liabilities and stockholders' equity

 

$

2,281,350

 

 

$

2,149,554

 

 
 
 
 

GMS Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

 

 

 

Six Months Ended

 

 

October 31,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

53,958

 

 

$

33,562

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

58,793

 

 

 

57,109

 

Write-off and amortization of debt discount and debt issuance costs

 

 

2,368

 

 

 

1,665

 

Provision for losses on accounts and notes receivable

 

 

375

 

 

 

81

 

Provision for obsolescence of inventory

 

 

195

 

 

 

229

 

Effects of fair value adjustments to inventory

 

 

151

 

 

 

4,129

 

Increase in fair value of contingent consideration

 

 

380

 

 

 

460

 

Equity-based compensation

 

 

5,591

 

 

 

3,204

 

Gain on sale and disposal of assets

 

 

(742

)

 

 

(294

)

Change in fair value of financial instruments

 

 

 

 

 

6,395

 

Deferred income taxes

 

 

(2,380

)

 

 

(5,145

)

Changes in assets and liabilities net of effects of acquisitions:

 

 

 

 

 

 

 

 

Trade accounts and notes receivable

 

 

(29,932

)

 

 

(45,355

)

Inventories

 

 

1,800

 

 

 

(4,553

)

Prepaid expenses and other assets

 

 

1,573

 

 

 

(343

)

Accounts payable

 

 

(5,486

)

 

 

9,516

 

Accrued compensation and employee benefits

 

 

(12,974

)

 

 

(9,550

)

Derivative liability

 

 

 

 

 

(10,778

)

Other accrued expenses and liabilities

 

 

(3,743

)

 

 

5,325

 

Cash provided by operating activities

 

 

69,927

 

 

 

45,657

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(14,637

)

 

 

(9,156

)

Proceeds from sale of assets

 

 

1,056

 

 

 

638

 

Acquisition of businesses, net of cash acquired

 

 

(10,633

)

 

 

(578,917

)

Cash used in investing activities

 

 

(24,214

)

 

 

(587,435

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayments on the revolving credit facility

 

 

(558,906

)

 

 

(469,647

)

Borrowings from the revolving credit facility

 

 

562,698

 

 

 

623,117

 

Payments of principal on long-term debt

 

 

(54,984

)

 

 

(4,984

)

Payments of principal on finance lease obligations

 

 

(12,310

)

 

 

(8,820

)

Borrowings from term loan amendment

 

 

 

 

 

996,840

 

Repayments from term loan amendment

 

 

 

 

 

(571,840

)

Debt issuance costs

 

 

(1,286

)

 

 

(7,933

)

Proceeds from exercises of stock options

 

 

6,761

 

 

 

973

 

Other financing activities

 

 

1,022

 

 

 

873

 

Cash (used in) provided by financing activities

 

 

(57,005

)

 

 

558,579

 

Effect of exchange rates on cash and cash equivalents

 

 

223

 

 

 

(360

)

(Decrease) increase in cash and cash equivalents

 

 

(11,069

)

 

 

16,441

 

Cash and cash equivalents, beginning of period

 

 

47,338

 

 

 

36,437

 

Cash and cash equivalents, end of period

 

$

36,269

 

 

$

52,878

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

25,642

 

 

$

10,469

 

Cash paid for interest

 

 

33,654

 

 

 

30,966

 

 
 
 
 

GMS Inc.
Net Sales by Product Group (Unaudited)
(dollars in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

October 31,

 

% of

 

 

 

October 31,

 

% of

 

 

October 31,

 

% of

 

 

October 31,

 

% of

 

 

 

2019

 

Total

 

 

 

2018

 

Total

 

 

2019

 

Total

 

 

2018

 

Total

 

 

 

(dollars in thousands)

 

Wallboard

 

$

350,618

 

40.7

%

 

$

334,688

 

40.1

%

 

$

692,213

 

40.5

%

 

$

652,423

 

40.5

%

Ceilings

 

 

122,807

 

14.2

%

 

 

118,376

 

14.2

%

 

 

251,917

 

14.7

%

 

 

234,231

 

14.5

%

Steel framing

 

 

136,159

 

15.8

%

 

 

135,760

 

16.3

%

 

 

267,988

 

15.7

%

 

 

264,872

 

16.4

%

Other products

 

 

252,345

 

29.3

%

 

 

245,013

 

29.4

%

 

 

496,987

 

29.1

%

 

 

460,455

 

28.6

%

Total net sales

 

$

861,929

 

 

 

 

$

833,837

 

 

 

 

$

1,709,105

 

 

 

 

$

1,611,981

 

 

 

   
   
   
   

GMS Inc.
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
(in thousands)

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

29,138

 

 

$

24,912

 

 

$

53,958

 

 

$

33,562

 

 

Interest expense

 

 

17,559

 

 

 

19,182

 

 

 

35,836

 

 

 

35,370

 

 

Write-off of debt discount and deferred financing fees

 

 

707

 

 

 

 

 

 

707

 

 

 

 

 

Interest income

 

 

(6

)

 

 

203

 

 

 

(18

)

 

 

(33

)

 

Provision for income taxes

 

 

7,927

 

 

 

8,059

 

 

 

15,517

 

 

 

10,895

 

 

Depreciation expense

 

 

12,592

 

 

 

11,538

 

 

 

25,014

 

 

 

22,148

 

 

Amortization expense

 

 

16,926

 

 

 

19,249

 

 

 

33,779

 

 

 

34,961

 

 

EBITDA

 

$

84,843

 

 

$

83,143

 

 

$

164,793

 

 

$

136,903

 

 

Stock appreciation expense (a)

 

 

1,267

 

 

 

649

 

 

 

1,327

 

 

 

983

 

 

Redeemable noncontrolling interests(b)

 

 

(18

)

 

 

282

 

 

 

644

 

 

 

813

 

 

Equity-based compensation(c)

 

 

2,315

 

 

 

1,094

 

 

 

3,710

 

 

 

1,498

 

 

Severance and other permitted costs(d)

 

 

1,394

 

 

 

882

 

 

 

1,948

 

 

 

5,718

 

 

Transaction costs (acquisitions and other)(e)

 

 

327

 

 

 

841

 

 

 

1,299

 

 

 

5,594

 

 

Gain on disposal of assets

 

 

(586

)

 

 

(173

)

 

 

(742

)

 

 

(294

)

 

Effects of fair value adjustments to inventory(f)

 

 

 

 

 

 

 

 

151

 

 

 

4,129

 

 

Change in fair value of financial instruments(g)

 

 

 

 

 

376

 

 

 

 

 

 

6,395

 

 

Secondary public offering costs(h)

 

 

363

 

 

 

 

 

 

363

 

 

 

 

 

Debt transaction costs(i)

 

 

 

 

 

51

 

 

 

 

 

 

678

 

 

EBITDA add-backs

 

 

5,062

 

 

 

4,002

 

 

 

8,700

 

 

 

25,514

 

 

Adjusted EBITDA

 

$

89,905

 

 

$

87,145

 

 

$

173,493

 

 

$

162,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

861,929

 

 

$

833,837

 

 

 

1,709,105

 

 

 

1,611,981

 

 

Adjusted EBITDA margin

 

 

10.4

 

%

 

10.5

 

%

 

10.2

 

%

 

10.1

 

%

______________________________________
(a) Represents non‑cash expense related to stock appreciation rights agreements.
(b) Represents non‑cash compensation expense related to changes in the 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 costs related to acquisitions paid to third parties.
(f) Represents the non‑cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value.
(g) Represents the mark‑to‑market adjustments for derivative financial instruments.
(h) Represents costs paid to third-party advisors related to secondary offerings of our common stock.
(i) Represents costs paid to third-party advisors related to debt refinancing activities.

 
 
 
 

GMS Inc.
Reconciliation of Cash Provided By Operating Activities to Free Cash Flow (Unaudited)
(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31,

 

October 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

82,367

 

 

$

93,481

 

 

$

69,927

 

 

$

45,657

 

Purchases of property and equipment

 

 

(8,746

)

 

 

(5,363

)

 

 

(14,637

)

 

 

(9,156

)

Free cash flow(a)

 

$

73,621

 

 

$

88,118

 

 

$

55,290

 

 

$

36,501

 

______________________________________
(a) Free cash flow is a non-GAAP financial measure that we define as net cash provided by operations less capital expenditures.

 
 
 
 

GMS Inc.
Reconciliation of Selling, General and Administrative Expense to Adjusted SG&A (Unaudited)
(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

$

200,457

 

 

$

185,268

 

 

$

395,088

 

 

$

370,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock appreciation expense (a)

 

 

(1,267

)

 

 

(649

)

 

 

(1,327

)

 

 

(983

)

 

Redeemable noncontrolling interests(b)

 

 

18

 

 

 

(282

)

 

 

(644

)

 

 

(813

)

 

Equity-based compensation(c)

 

 

(2,315

)

 

 

(1,094

)

 

 

(3,710

)

 

 

(1,498

)

 

Severance and other permitted costs(d)

 

 

(1,394

)

 

 

(882

)

 

 

(1,948

)

 

 

(5,718

)

 

Transaction costs (acquisitions and other)(e)

 

 

(327

)

 

 

(841

)

 

 

(1,299

)

 

 

(5,594

)

 

Gain on disposal of assets

 

 

586

 

 

 

173

 

 

 

742

 

 

 

294

 

 

Secondary public offering costs(f)

 

 

(363

)

 

 

 

 

 

(363

)

 

 

 

 

Debt transaction costs(g)

 

 

 

 

 

(51

)

 

 

 

 

 

(678

)

 

Adjusted SG&A

 

$

195,395

 

 

$

181,642

 

 

$

386,539

 

 

$

355,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

861,929

 

 

$

833,837

 

 

$

1,709,105

 

 

$

1,611,981

 

 

Adjusted SG&A margin

 

 

22.7

%

 

21.8

%

 

22.6

%

 

22.1

%

______________________________________
(a) Represents non‑cash expense related to stock appreciation rights agreements.
(b) Represents non‑cash compensation expense related to changes in the 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 costs related to acquisitions paid to third parties.
(f) Represents costs paid to third-party advisors related to secondary offerings of our common stock.
(g) Represents costs paid to third-party advisors related to debt refinancing activities. 

 
 
 
 

GMS Inc.
Reconciliation of Income Before Taxes to Adjusted Net Income (Unaudited)
(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2019

 

 

2018

 

2019

 

 

2018

 

Income before taxes

 

$

37,065

 

 

$

32,971

 

$

69,475

 

 

$

44,457

 

EBITDA add-backs

 

 

5,062

 

 

 

4,002

 

 

8,700

 

 

 

25,514

 

Write-off of discount and deferred financing fees

 

 

707

 

 

 

 

 

707

 

 

 

 

Purchase accounting depreciation and amortization (1)

 

 

12,276

 

 

 

12,399

 

 

24,661

 

 

 

24,854

 

Adjusted pre-tax income

 

 

55,110

 

 

 

49,372

 

 

103,543

 

 

 

94,825

 

Adjusted income tax expense

 

 

12,400

 

 

 

11,109

 

 

23,297

 

 

 

21,336

 

Adjusted net income

 

$

42,710

 

 

$

38,263

 

$

80,246

 

 

$

73,489

 

Effective tax rate (2)

 

 

22.5

%

 

 

22.5

%

 

22.5

%

 

 

22.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

41,761

 

 

 

41,149

 

 

41,382

 

 

 

41,121

 

Diluted (3)

 

 

42,635

 

 

 

43,047

 

 

42,391

 

 

 

43,125

 

Adjusted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.02

 

 

$

0.93

 

$

1.94

 

 

$

1.79

 

Diluted

 

$

1.00

 

 

$

0.89

 

$

1.89

 

 

$

1.70

 

______________________________________
(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 and the acquisition of Titan.
(2) Normalized cash tax rate determined based on our estimated taxes excluding the impact of purchase accounting and certain other deferred tax amounts.
(3) Diluted shares outstanding for periods prior to June 13, 2019 have been adjusted to include the effect of 1.1 million shares of equity issued in connection with the acquisition of Titan that were exchangeable for the Company’s common stock. On June 13, 2019, the holders exchanged all of the exchangeable shares for 1.1 million shares of the Company’s common stock.

Investors:
Leslie H. Kratcoski
ir@gms.com
770-723-3306

Media:
marketing@gms.com
770-723-3378

Source: GMS Inc.