Gms reports results for first quarter 2019
Tucker, ga.--(business wire)--gms inc. (nyse:gms), a leading north american distributor of wallboard and suspended ceilings systems, today reported financial results for the first quarter of fiscal 2019 ended july 31, 2018. net sales for the fiscal first quarter ended july 31, 2018 increased 21.2% to a record $778.1 million from $642.2 million for the fiscal first quarter ended july 31, 2017. reported net income decreased to $8.7 million, or $0.20 per diluted share, compared to $15.3 million, or $0.36 per diluted share. as previously disclosed, the decrease in net income is attributable to $10.5 million in pre-tax transaction related costs related to the june 1, 2018 acquisition of wsb titan (“titan”), $4.1 million in pre-tax purchase accounting adjustments for titan inventory and $4.8 million in pre-tax severance costs related to our previously announced cost reduction plan. adjusted ebitda for the fiscal first quarter increased to $75.3 million from adjusted ebitda of $52.8 million for the first quarter of fiscal 2018. mike callahan, president and ceo of gms, stated, “we are off to a solid start to the year, generating record sales and strong earnings. we delivered organic revenue growth of 6.1% driven by broad-based growth across each of our product groups. we also generated strong earnings, reflecting the contribution of titan, our commitment to operational improvement initiatives and continued pricing discipline. the previously announced cost reduction plan coupled with the successful integration of titan are expected to drive additional benefits as we progress through fiscal 2019 and beyond.” mr. callahan continued, “looking ahead to the balance of the year, we remain confident in the health of our end-markets and overall market conditions. we were able to capture more than three percent of price growth within the u.s. wallboard market and believe some of the pricing challenges facing our industry have begun to stabilize. as one of the largest wallboard distributors in north america with significant scale advantages and a well-balanced portfolio built for growth, we intend to continue to drive profitable growth while managing our business for the long-term. we remain excited about the overall strength of our business and confident in our ability to deliver another year of record sales and strong earnings in fiscal 2019.” first quarter 2019 results net sales for the first quarter of fiscal 2019 ended july 31, 2018 were $778.1 million, compared to $642.2 million for the first quarter of fiscal 2018 ended july 31, 2017. wallboard sales of $317.7 million increased 11.6% compared to the first quarter of fiscal 2018, with the positive impact of the june 1st acquisition of titan and pricing improvement, slightly offset by an organic wallboard unit volume decline of 0.4%. ceilings sales of $115.9 million rose 16.2% compared to the first quarter of fiscal 2018, mainly due to greater commercial activity, pricing improvement and the positive impact of acquisitions. steel framing sales of $129.1 million grew 23.4% compared to the first quarter of fiscal 2018, mainly driven by greater commercial activity, pricing improvement and the positive impact of acquisitions. other product sales of $215.4 million were up 40.7% compared to the first quarter of fiscal 2018, as a result of the positive impact of the acquisition of titan and pricing improvement. gross profit of $244.8 million grew 19.4% compared to $205.1 million in the first quarter of fiscal 2018, mainly attributable to increased sales from the titan acquisition. gross margin adjusted for the non-cash impact of purchase accounting adjustments improved by approximately 10 basis points to 32.0% compared to 31.9% in the first quarter of fiscal 2018. net income of $8.7 million, or $0.20 per diluted share, decreased by 43.6% or $6.7 million compared to $15.3 million, or $0.36 per diluted share, in the first quarter of fiscal 2018. the decrease in net income is attributable to $5.7 million in pre-tax mark-to-market currency adjustments, $4.8 million in pre-tax transaction costs, $4.1 million in pre-tax fair value adjustments to inventory, all related to the acquisition of titan, as well as $4.8 million in previously disclosed severance costs associated with the company’s cost reduction plan. adjusted net income of $35.2 million, or $0.82 per diluted share, increased 32.3% or $8.9 million, compared to $26.3 million, or $0.62 per diluted share, in the first quarter of fiscal 2018. adjusted ebitda of $75.3 million increased from $52.8 million in the first quarter of fiscal 2018. adjusted ebitda margin was 9.7% as a percentage of net sales or 9.1% excluding the impact of the favorable accounting benefit related to the previously disclosed changes in lease accounting, reflecting strong performance from the titan business, as well as improvement in our organic operating leverage. capital resources as of july 31, 2018, gms had cash of $36.9 million and total debt of $1.30 billion, compared to cash of $36.4 million and total debt of $595.9 million, as of july 31, 2017. on june 1, 2018, the company amended its first lien credit agreement to provide it with new borrowings consisting of an approximately $997 million term loan facility due in 2025. borrowings under the new term loan bear interest at a floating rate based on libor, with a 0% floor, plus 2.75%, representing a 25 basis point improvement compared to the previous term loan’s interest rate. net proceeds from the new term loan were used to repay amounts outstanding on the company’s prior first lien term loan of approximately $572 million and to finance the acquisition of titan. acquisition activity gms completed its acquisition of titan, canada’s largest gypsum specialty dealer with 30 locations across five provinces, on june 1, 2018. subsequent to july 31, 2018, the company acquired charles g. hardy, inc. a leading distributor of interior building products that serves residential and non-residential customers in the los angeles market. the acquisition marks gms’ entry into the los angeles area, the second largest metropolitan area nationwide. conference call and webcast gms will host a conference call and webcast to discuss its results for the first quarter ended july 31, 2018 and other information related to its business at 8:30 a.m. eastern time on august 30, 2018. 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 september 30, 2018 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13682840. 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, adjusted ebitda and adjusted ebitda margin, 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 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 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. please see the tables at the end of this release for a reconciliation of adjusted ebitda 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, statements about its expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance, statements related to net sales, gross profit and gross margins, as well as non-gaap financial measures such as adjusted ebitda, adjusted net income and base business growth, , statements about our ability to continue to drive profitable growth while managing our business for the long-term and our ability to deliver record sales and strong earnings in fiscal 2019, demand trends and the anticipated benefits of our cost reduction plan, including future sg&a savings, and titan acquisition contained in this press release are forward-looking statements. in addition, statements relating to the titan acquisition, including its expected contribution to the company’s adjusted ebitda for the eleven months ending april 30, 2019, 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 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 august 30, 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 august 30, 2018.
