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GMS Reports Third Quarter Fiscal 2020 Results

03/05/2020

Net Sales of $761.4 million up 5.2%; Organic Net Sales up 3.8%

Reported Net Income of $10.9 Million, or $0.25 per Diluted Share, up 87.1%

Adjusted Net Income of $22.2 Million, or $0.52 per Diluted Share, up 28.2%

Adjusted EBITDA of $62.7 million, or 8.2% of net sales, up 5.0%

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

Third Quarter Fiscal 2020 Highlights

  • Net sales of $761.4 million increased 5.2% from $723.9 million in the third quarter of the prior fiscal year. Organic net salesincreased 3.8% year over year.
  • Reported net income of $10.9 million, or $0.25 per diluted share, compared to $5.8 million, or $0.14 per diluted share, in the third quarter of the prior fiscal year.
  • Adjusted net income of $22.2 million, or $0.52 per diluted share, compared to $17.3 million, or $0.41 per diluted share, in the third quarter of the prior fiscal year.
  • Adjusted EBITDA of $62.7 million, or 8.2% of net sales, compared to Adjusted EBITDA of $59.7 million, or 8.2% of net sales, in the third quarter of the prior fiscal year.
  • The company completed one acquisition and two greenfield location openings during the third quarter of fiscal 2020.
  • Net leverage was reduced to 3.3 times as of the end of the third quarter of fiscal 2020 from 3.5 times as of the end of the second quarter of fiscal 2020.
  • Cash provided by operating activities and free cash flow for the third quarter of fiscal 2020 totaled $65.4 million and $59.2 million, respectively, representing increases of 9.5% and 6.6%, respectively, from the third quarter of fiscal 2019.
  • Cash provided by operating activities and free cash flow for the first nine months of fiscal 2020 totaled $135.4 million and $114.5 million, respectively, representing increases of 28.4% and 24.4%, respectively, from the first nine months of fiscal 2019.

“GMS’s third quarter results demonstrate our team’s momentum and effective execution and we remain focused on our strategic priorities in order to further capitalize on the growth opportunities in our industry,” said John C. Turner, Jr., President and Chief Executive Officer. “We generated robust volume growth across all product groups, expanded gross margin and delivered higher net income and Adjusted EBITDA. We were pleased to complete another acquisition and additional greenfield openings during the quarter, as we continue to pursue prudent geographic and market share expansion. At the same time, we continued to utilize our strong cash from operations and free cash flow to further reduce debt. Conditions in our construction end markets presently remain favorable in the United States, and we are encouraged by signs of stabilization in Canada. As we look forward, we remain optimistic in our market position and ability to create long-term value for our shareholders.”

Third Quarter Fiscal 2020 Results

Net sales for the third quarter of fiscal 2020 of $761.4 million were up 5.2%, or 3.8% on an organic basis, compared to $723.9 million for the third quarter of the prior fiscal year.

  • Wallboard sales of $314.4 million increased 5.7% (4.6% on an organic basis) compared to the third quarter of fiscal 2019, driven primarily by higher organic volumes and acquisitions, partially offset by lower pricing/mix.
  • Ceilings sales of $112.8 million increased 7.2% (4.7% on an organic basis) compared to the third quarter of fiscal 2019, primarily due to higher organic volumes and acquisitions, as well as higher pricing/mix.
  • Steel framing sales of $118.8 million increased 1.2% (flat on an organic basis) compared to the third quarter of fiscal 2019, driven by higher organic volumes and acquisitions, mostly offset by lower pricing/mix.
  • Other product sales of $215.4 million increased 5.6% (4.5% on an organic basis) compared to the third quarter of fiscal 2019, due to higher organic growth and acquisitions.

Gross profit of $253.5 million increased 8.2% from $234.2 million in the third quarter of fiscal 2019. Gross margin of 33.3% increased 90 basis points from 32.4% a year ago primarily due to favorable price-cost dynamics resulting from both higher volume purchases in multiple product groups and other purchasing initiatives. Acquisition-related purchasing synergies and mix also contributed to gross margin improvement.

Selling, general and administrative (SG&A) expense as a percentage of net sales was 25.4% for the quarter compared to 24.6% in the third quarter of fiscal 2019. Adjusted SG&A expense as a percentage of net sales was 25.2% compared to 24.2% in the prior year quarter. The 100 basis point increase in Adjusted SG&A as a percentage of sales resulted from the continuation of year-over-year declines in the selling prices of certain of our products and continuing inflationary cost pressures. In addition, the Company continued to make ongoing investments in greenfield locations and business initiatives intended to grow sales, leverage scale and drive profitability.

Net income of $10.9 million, or $0.25 per diluted share, compared to $5.8 million, or $0.14 per diluted share, in the third quarter of fiscal 2019. Adjusted net income of $22.2 million, or $0.52 per diluted share, compared to $17.3 million, or $0.41 per diluted share, in the third quarter of fiscal 2019. Adjusted EBITDA of $62.7 million increased 5.0% year over year and represented an Adjusted EBITDA margin of 8.2%.

Balance Sheet

As of January 31, 2020, the Company had cash of $40.9 million and total debt of $1.07 billion, compared to cash of $36.3 million and total debt of $1.10 billion, as of October 31, 2019.

During the third fiscal quarter, the Company reduced its net debt by $35.7 million and net leverage was 3.3 times as of the end of the quarter compared to 3.5 times as of the end of the second quarter of fiscal 2020.

Platform Expansion Activity

During the third quarter of fiscal 2020, the Company completed the previously announced acquisition of Rigney Building Supplies LTD. in Kingston, Ontario and opened two greenfield locations in Cambridge, Ontario and Austin, Texas. Subsequent to the end of the third quarter, the Company also completed the previously announced acquisition of Trowel Trades Supply, Inc., a single-location distributor based in Colchester, Vermont.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the third quarter ended January 31, 2020 and other information related to its business at 8:30 a.m. Eastern Time on Thursday, March 5, 2020. 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 April 5, 2020 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13699024.

About GMS Inc.

Founded in 1971, GMS operates a network of more than 260 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, strategic initiatives and 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, including current public health issues that may affect the Company’s business. 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 March 5, 2020. 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 5, 2020.

 


 

GMS Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

January 31,

 

January 31,

 

 

2020

 

2019

 

2020

 

2019

Net sales

 

$

761,352

 

 

$

723,902

 

 

$

2,470,457

 

 

$

2,335,883

 

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

 

 

507,879

 

 

 

489,676

 

 

 

1,658,837

 

 

 

1,588,691

 

Gross profit

 

 

253,473

 

 

 

234,226

 

 

 

811,620

 

 

 

747,192

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

193,384

 

 

 

178,180

 

 

 

588,472

 

 

 

548,883

 

Depreciation and amortization

 

 

29,422

 

 

 

30,220

 

 

 

88,215

 

 

 

87,329

 

Total operating expenses

 

 

222,806

 

 

 

208,400

 

 

 

676,687

 

 

 

636,212

 

Operating income

 

 

30,667

 

 

 

25,826

 

 

 

134,933

 

 

 

110,980

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(16,474

)

 

 

(19,526

)

 

 

(52,310

)

 

 

(54,896

)

Change in fair value of financial instruments

 

 

 

 

 

 

 

 

 

 

 

(6,395

)

Write-off of debt discount and deferred financing fees

 

 

 

 

 

 

 

 

(707

)

 

 

 

Other (expense) income, net

 

 

(498

)

 

 

957

 

 

 

1,254

 

 

 

2,025

 

Total other expense, net

 

 

(16,972

)

 

 

(18,569

)

 

 

(51,763

)

 

 

(59,266

)

Income before taxes

 

 

13,695

 

 

 

7,257

 

 

 

83,170

 

 

 

51,714

 

Provision for income taxes

 

 

2,816

 

 

 

1,442

 

 

 

18,333

 

 

 

12,337

 

Net income

 

$

10,879

 

 

$

5,815

 

 

$

64,837

 

 

$

39,377

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,223

 

 

 

40,912

 

 

 

41,663

 

 

 

41,053

 

Diluted

 

 

42,949

 

 

 

41,371

 

 

 

42,401

 

 

 

41,789

 

Net income per common share(1):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.26

 

 

$

0.14

 

 

$

1.55

 

 

$

0.94

 

Diluted

 

$

0.25

 

 

$

0.14

 

 

$

1.52

 

 

$

0.92

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

January 31,

 

January 31,

 

 

2020

 

2019

 

2020

 

2019

 

 

(in thousands, except per share data)

Net income

 

$

10,879

 

$

5,815

 

$

64,837

 

$

39,377

Less: Net income allocated to participating securities

 

 

-

 

 

156

 

 

273

 

 

940

Net income attributable to common stockholders

 

$

10,879

 

$

5,659

 

$

64,564

 

$

38,437

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

42,223

 

 

40,912

 

 

41,663

 

 

41,053

Basic earnings per common share

 

$

0.26

 

$

0.14

 

$

1.55

 

$

0.94

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

42,223

 

 

40,912

 

 

41,663

 

 

41,053

Add: Common Stock Equivalents

 

 

726

 

 

459

 

 

738

 

 

736

Diluted weighted average common shares outstanding

 

 

42,949

 

 

41,371

 

 

42,401

 

 

41,789

Diluted earnings per common share

 

$

0.25

 

$

0.14

 

$

1.52

 

$

0.92 

 

 

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

January 31,

 

April 30,

 

 

2020

 

2019

Assets

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,949

 

 

$

47,338

 

Trade accounts and notes receivable, net of allowances of $5,600 and $6,432, respectively

 

 

434,801

 

 

 

445,771

 

Inventories, net

 

 

296,117

 

 

 

290,829

 

Prepaid expenses and other current assets

 

 

17,142

 

 

 

18,368

 

Total current assets

 

 

789,009

 

 

 

802,306

 

Property and equipment, net of accumulated depreciation of $149,924 and $123,583, respectively

 

 

306,472

 

 

 

282,349

 

Operating lease right-of-use assets

 

 

118,092

 

 

 

 

Goodwill

 

 

624,070

 

 

 

617,327

 

Intangible assets, net

 

 

386,346

 

 

 

429,313

 

Deferred income taxes

 

 

8,014

 

 

 

4,676

 

Other assets

 

 

13,274

 

 

 

13,583

 

Total assets

 

$

2,245,277

 

 

$

2,149,554

 

Liabilities and Stockholders’ Equity

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

143,689

 

 

$

173,751

 

Accrued compensation and employee benefits

 

 

51,256

 

 

 

62,858

 

Other accrued expenses and current liabilities

 

 

73,759

 

 

 

79,848

 

Current portion of long-term debt

 

 

48,688

 

 

 

42,118

 

Current portion of operating lease liabilities

 

 

33,131

 

 

 

 

Total current liabilities

 

 

350,523

 

 

 

358,575

 

Non-current liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

1,020,306

 

 

 

1,099,077

 

Long-term operating lease liabilities

 

 

90,336

 

 

 

 

Deferred income taxes, net

 

 

12,977

 

 

 

10,226

 

Other liabilities

 

 

63,809

 

 

 

52,500

 

Total liabilities

 

 

1,537,951

 

 

 

1,520,378

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value $0.01 per share, 500,000 shares authorized; 42,310 and 40,375 shares issued and outstanding as of January 31, 2020 and April 30, 2019, respectively

 

 

423

 

 

 

404

 

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of January 31, 2020 and April 30, 2019

 

 

 

 

 

 

Exchangeable shares

 

 

 

 

 

29,639

 

Additional paid-in capital

 

 

524,313

 

 

 

480,113

 

Retained earnings

 

 

210,431

 

 

 

145,594

 

Accumulated other comprehensive loss

 

 

(27,841

)

 

 

(26,574

)

Total stockholders' equity

 

 

707,326

 

 

 

629,176

 

Total liabilities and stockholders' equity

 

$

2,245,277

 

 

$

2,149,554

 

 

 

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

January 31,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

64,837

 

 

$

39,377

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

88,215

 

 

 

87,329

 

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

 

 

2,964

 

 

 

2,505

 

Provision for losses on accounts and notes receivable

 

 

104

 

 

 

240

 

Provision for obsolescence of inventory

 

 

221

 

 

 

416

 

Effects of fair value adjustments to inventory

 

 

461

 

 

 

4,129

 

Increase in fair value of contingent consideration

 

 

1,601

 

 

 

535

 

Equity-based compensation

 

 

6,345

 

 

 

4,706

 

Gain on sale and disposal of assets

 

 

(872

)

 

 

(412

)

Change in fair value of financial instruments

 

 

 

 

 

6,395

 

Deferred income taxes

 

 

174

 

 

 

(18,470

)

Changes in assets and liabilities net of effects of acquisitions:

 

 

 

 

 

 

Trade accounts and notes receivable

 

 

16,561

 

 

 

23,243

 

Inventories

 

 

317

 

 

 

(11,576

)

Prepaid expenses and other assets

 

 

4,210

 

 

 

(968

)

Accounts payable

 

 

(30,420

)

 

 

(17,856

)

Accrued compensation and employee benefits

 

 

(11,729

)

 

 

(3,824

)

Derivative liability

 

 

 

 

 

(10,778

)

Other accrued expenses and liabilities

 

 

(7,622

)

 

 

446

 

Cash provided by operating activities

 

 

135,367

 

 

 

105,437

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(20,884

)

 

 

(13,385

)

Proceeds from sale of assets

 

 

1,299

 

 

 

910

 

Acquisition of businesses, net of cash acquired

 

 

(20,803

)

 

 

(579,731

)

Cash used in investing activities

 

 

(40,388

)

 

 

(592,206

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayments on the revolving credit facility

 

 

(794,623

)

 

 

(748,999

)

Borrowings from the revolving credit facility

 

 

760,444

 

 

 

886,896

 

Payments of principal on long-term debt

 

 

(57,476

)

 

 

(7,476

)

Payments of principal on finance lease obligations

 

 

(17,971

)

 

 

(13,923

)

Borrowings from term loan amendment

 

 

 

 

 

996,840

 

Repayments from term loan amendment

 

 

 

 

 

(571,840

)

Repurchases of common stock

 

 

 

 

 

(11,514

)

Debt issuance costs

 

 

(1,286

)

 

 

(7,933

)

Proceeds from exercises of stock options

 

 

8,280

 

 

 

1,280

 

Other financing activities

 

 

1,261

 

 

 

1,355

 

Cash (used in) provided by financing activities

 

 

(101,371

)

 

 

524,686

 

Effect of exchange rates on cash and cash equivalents

 

 

3

 

 

 

(7

)

(Decrease) increase in cash and cash equivalents

 

 

(6,389

)

 

 

37,910

 

Cash and cash equivalents, beginning of period

 

 

47,338

 

 

 

36,437

 

Cash and cash equivalents, end of period

 

$

40,949

 

 

$

74,347

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Cash paid for income taxes

 

$

30,199

 

 

$

16,121

 

Cash paid for interest

 

 

49,224

 

 

 

45,724

 

 

 

GMS Inc.

Net Sales by Product Group (Unaudited)

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

January 31,

 

% of

 

 

 

January 31,

 

% of

 

 

January 31,

 

% of

 

 

January 31,

 

% of

 

 

 

2020

 

Total

 

 

 

2019

 

Total

 

 

2020

 

Total

 

 

2019

 

Total

 

 

 

(dollars in thousands)

 

Wallboard

 

$

314,391

 

41.3

%

 

$

297,358

 

41.1

%

 

$

1,006,604

 

40.7

%

 

$

949,781

 

40.7

%

Ceilings

 

 

112,768

 

14.8

%

 

 

105,219

 

14.5

%

 

 

364,685

 

14.8

%

 

 

339,450

 

14.5

%

Steel framing

 

 

118,823

 

15.6

%

 

 

117,432

 

16.2

%

 

 

386,811

 

15.7

%

 

 

382,304

 

16.4

%

Other products

 

 

215,370

 

28.3

%

 

 

203,893

 

28.2

%

 

 

712,357

 

28.8

%

 

 

664,348

 

28.4

%

Total net sales

 

$

761,352

 

 

 

 

$

723,902

 

 

 

 

$

2,470,457

 

 

 

 

$

2,335,883

 

 

 

     

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

January 31,

 

January 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,879

 

 

$

5,815

 

 

$

64,837

 

 

$

39,377

 

Interest expense

 

 

16,474

 

 

 

19,526

 

 

 

52,310

 

 

 

54,896

 

Write-off of debt discount and deferred financing fees

 

 

 

 

 

 

 

 

707

 

 

 

 

Interest income

 

 

(8

)

 

 

(10

)

 

 

(26

)

 

 

(43

)

Provision for income taxes

 

 

2,816

 

 

 

1,442

 

 

 

18,333

 

 

 

12,337

 

Depreciation expense

 

 

12,930

 

 

 

11,919

 

 

 

37,944

 

 

 

34,067

 

Amortization expense

 

 

16,492

 

 

 

18,301

 

 

 

50,271

 

 

 

53,262

 

EBITDA

 

$

59,583

 

 

$

56,993

 

 

$

224,376

 

 

$

193,896

 

Stock appreciation expense(a)

 

 

(347

)

 

 

442

 

 

 

980

 

 

 

1,425

 

Redeemable noncontrolling interests(b)

 

 

(318

)

 

 

(35

)

 

 

326

 

 

 

778

 

Equity-based compensation(c)

 

 

1,465

 

 

 

1,140

 

 

 

5,175

 

 

 

2,638

 

Severance and other permitted costs(d)

 

 

1,700

 

 

 

229

 

 

 

3,648

 

 

 

5,947

 

Transaction costs (acquisitions and other)(e)

 

 

434

 

 

 

1,066

 

 

 

1,733

 

 

 

6,660

 

Gain on disposal of assets

 

 

(130

)

 

 

(118

)

 

 

(872

)

 

 

(412

)

Effects of fair value adjustments to inventory(f)

 

 

310

 

 

 

 

 

 

461

 

 

 

4,129

 

Change in fair value of financial instruments(g)

 

 

 

 

 

 

 

 

 

 

 

6,395

 

Secondary public offering costs(h)

 

 

 

 

 

 

 

 

363

 

 

 

 

Debt transaction costs(i)

 

 

 

 

 

 

 

 

 

 

 

678

 

EBITDA add-backs

 

 

3,114

 

 

 

2,724

 

 

 

11,814

 

 

 

28,238

 

Adjusted EBITDA

 

$

62,697

 

 

$

59,717

 

 

$

236,190

 

 

$

222,134

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

761,352

 

 

$

723,902

 

 

 

2,470,457

 

 

 

2,335,883

 

Adjusted EBITDA margin

 

 

8.2

%

 

 

8.2

%

 

 

9.6

%

 

 

9.5

%

____________________________________________

(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

 

Nine Months Ended

 

 

January 31,

 

January 31,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

65,440

 

 

$

59,780

 

 

$

135,367

 

 

$

105,437

 

Purchases of property and equipment

 

 

(6,247

)

 

 

(4,229

)

 

 

(20,884

)

 

 

(13,385

)

Free cash flow(a)

 

$

59,193

 

 

$

55,551

 

 

$

114,483

 

 

$

92,052

 

____________________________________________  

(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

 

Nine Months Ended

 

 

January 31,

 

January 31,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

$

193,384

 

 

$

178,180

 

 

$

588,472

 

 

$

548,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

Stock appreciation expense(a)

 

 

347

 

 

 

(442

)

 

 

(980

)

 

 

(1,425

)

Redeemable noncontrolling interests(b)

 

 

318

 

 

 

35

 

 

 

(326

)

 

 

(778

)

Equity-based compensation(c)

 

 

(1,465

)

 

 

(1,140

)

 

 

(5,175

)

 

 

(2,638

)

Severance and other permitted costs(d)

 

 

(462

)

 

 

(229

)

 

 

(2,410

)

 

 

(5,947

)

Transaction costs (acquisitions and other)(e)

 

 

(434

)

 

 

(1,066

)

 

 

(1,733

)

 

 

(6,660

)

Gain on disposal of assets

 

 

130

 

 

 

118

 

 

 

872

 

 

 

412

 

Secondary public offering costs(f)

 

 

 

 

 

 

 

 

(363

)

 

 

 

Debt transaction costs(g)

 

 

 

 

 

 

 

 

 

 

 

(678

)

Adjusted SG&A

 

$

191,818

 

 

$

175,456

 

 

$

578,357

 

 

$

531,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

761,352

 

 

$

723,902

 

 

$

2,470,457

 

 

$

2,335,883

 

Adjusted SG&A margin

 

 

25.2

%

 

 

24.2

%

 

 

23.4

%

 

 

22.7

%

____________________________________________

(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

 

Nine Months Ended

 

 

 

January 31,

 

January 31,

 

 

 

2020

 

 

2019

 

2020

 

 

2019

 

Income before taxes

 

$

13,695

 

 

$

7,257

 

$

83,170

 

 

$

51,714

 

EBITDA add-backs

 

 

3,114

 

 

 

2,724

 

 

11,814

 

 

 

28,238

 

Write-off of discount and deferred financing fees

 

 

 

 

 

 

 

707

 

 

 

 

Purchase accounting depreciation and amortization (1)

 

 

11,869

 

 

 

12,395

 

 

36,530

 

 

 

37,250

 

Adjusted pre-tax income

 

 

28,678

 

 

 

22,376

 

 

132,221

 

 

 

117,202

 

Adjusted income tax expense

 

 

6,453

 

 

 

5,035

 

 

29,750

 

 

 

26,370

 

Adjusted net income

 

$

22,225

 

 

$

17,341

 

$

102,471

 

 

$

90,832

 

Effective tax rate (2)

 

 

22.5

%

 

 

22.5

%

 

22.5

%

 

 

22.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,223

 

 

 

40,912

 

 

41,663

 

 

 

41,053

 

Diluted (3)

 

 

42,949

 

 

 

42,500

 

 

42,577

 

 

 

42,918

 

Adjusted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.53

 

 

$

0.42

 

$

2.46

 

 

$

2.21

 

Diluted

 

$

0.52

 

 

$

0.41

 

$

2.41

 

 

$

2.12

 

____________________________________________

(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.

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