Gms reports third quarter fiscal 2019 results
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 2019 ended january 31, 2019. net sales increased 23.6% to $723.9 million from $585.5 million in the third quarter of fiscal 2018. reported net income of $5.8 million, or $0.14 per diluted share, compared to $19.7 million, or $0.47 per diluted share in the prior year. adjusted net income of $17.3 million, or $0.41 per diluted share, compared to $15.3 million, or $0.36 per diluted share, in the third quarter of fiscal 2018. adjusted ebitda increased to a third quarter record of $59.7 million, or 8.2% of net sales, from adjusted ebitda of $42.2 million, or 7.2% of net sales, in the third quarter of fiscal 2018. “we were pleased to deliver record net sales and adjusted ebitda for our third fiscal quarter, with an organic sales increase of 6.6% reflecting broad-based growth across each of our product lines,” said mike callahan, president and ceo. “we generated strong free cash flow in the quarter, which enabled us to reduce our net debt by $32.8 million and repurchase $11.5 million of our common stock under the repurchase program announced last quarter. adjusted ebitda of $59.7 million increased 41.5%, reflecting contributions from the titan acquisition and our continued focus on operational improvements.” mr. callahan continued, “we remain encouraged by activity across our end markets and in the broader economy, despite ongoing questions about the current macroeconomic outlook and moderating growth in new residential construction. at the same time, we believe our market-leading position in the distribution of interior building products, our balanced product portfolio and our diversified exposure across commercial and residential new and r&r construction markets, which we believe continue to exhibit healthy long-term fundamentals, will enable us to continue to take advantage of growth opportunities across our business both now and in the future.” third quarter 2019 results net sales for the third quarter of fiscal 2019 ended january 31, 2019 were $723.9 million, up 23.6%, with 6.6% on an organic basis, compared to $585.5 million for the third quarter of the prior year. wallboard sales of $297.4 million increased 16.0% (3.9% on an organic basis) compared to the third quarter of fiscal 2018, driven by acquisitions and improved pricing. ceilings sales of $105.2 million increased 16.4% (10.6% on an organic basis) compared to the third quarter of fiscal 2018, mainly due to pricing improvement, higher organic volumes as a result of increased commercial business, and the positive impact of acquisitions. steel framing sales of $117.4 million increased 21.4% (13.1% on an organic basis) compared to the third quarter of fiscal 2018, driven by strong pricing gains, the positive impact of acquisitions, and higher organic volumes as a result of greater commercial activity. other product sales of $203.9 million increased 43.6% (4.5% on an organic basis) compared to the third quarter of fiscal 2018, as a result of the positive impact of acquisitions, as well as higher organic volumes and pricing improvement. gross profit of $234.2 million increased 19.9% compared to $195.4 million in the third quarter of fiscal 2018, as a result of higher sales including the positive impact of acquisitions and pricing improvement. gross margin of 32.4% declined from 33.4% a year ago, due to increased product costs and changes in product mix. on a sequential basis, gross margin improved 20 basis points from 32.2% in the second quarter of fiscal 2019. selling, general and administrative expense as a percentage of net sales was 24.6% for the quarter compared to 26.7% in the third quarter of fiscal 2018. adjusted selling, general and administrative expense as a percentage of net sales was 24.2% compared to 26.3% in the prior year quarter. of the 210 basis point improvement, 130 basis points was the result of increased cost efficiencies, primarily attributable to cost reduction initiatives taken during the fiscal year, and contributions from the titan acquisition, partially offset by continuing inflationary pressures, primarily in logistics. the remaining 80 basis points was the result of the amendment of certain equipment operating leases that are now being accounted for as capital leases. net income of $5.8 million, or $0.14 per diluted share, compared to $19.7 million, or $0.47 per diluted share, in the third quarter of fiscal 2018. adjusted net income of $17.3 million, or $0.41 per diluted share, compared to $15.3 million, or $0.36 per diluted share, in the third quarter of fiscal 2018. adjusted ebitda of $59.7 million increased 41.5% year over year and represented an adjusted ebitda margin of 8.2%. capital allocation and expansion activity as of january 31, 2019, the company had cash of $74.3 million and total debt of $1.23 billion, compared to cash of $52.9 million and total debt of $1.25 billion, as of october 31, 2018. during the third fiscal quarter, the company reduced its net debt by $32.8 million and net leverage was 3.8 times. under the previously announced $75.0 million stock repurchase program, the company repurchased $11.5 million, or approximately 691,000 shares, of common stock during the third quarter of fiscal 2019. as of january 31, 2019, approximately $63.5 million of availability remained under the program. during the third quarter of fiscal 2019, the company opened a greenfield location in stow, ohio. for the nine months ended january 31, 2019, the company completed two acquisitions and opened four greenfield locations. as announced in a separate press release issued today, the company completed the acquisition of commercial builders group, llc in southern louisiana on march 4, 2019. conference call and webcast gms will host a conference call and webcast to discuss its results for the fiscal third quarter ended january 31, 2019 and other information related to its business at 8:30 a.m. eastern time on march 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 april 5, 2019 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13687870. about gms inc. founded in 1971, gms operates a network of more than 245 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 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, 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. 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, statements about growth potential across the company’s business and the ability to deliver growth and value creation, and the anticipated benefits of the company’s cost reduction and operational improvements plan, including future sg&a savings, contained in this press release are forward-looking statements. in addition, forward looking statements may include statements regarding the company’s expectations concerning management's plans for execution of a stock repurchase program, including the maximum amount, manner and duration of purchases of the company’s common stock under its authorized stock repurchase program. 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 and canada; 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; the possibility that the expected synergies and cost savings and final impacts from the titan acquisition will not be realized, or will not be realized within the expected time period; the risk that the gms and titan businesses will not be integrated successfully; disruption from the transaction making it more difficult to maintain business and operational relationships and to accomplish other gms objectives; the risk of customer attrition; our ability to efficiently manage and control our costs and the success of our previously announced cost reduction plan; 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, 2018, and in its other periodic reports filed with the sec. in addition, the statements in this release are made as of march 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 march 5, 2019. (1) the following table sets forth the computation of basic and diluted earnings per share of common stock for the three and nine months ended january 31, 2019 and 2018:
