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GMS Reports Second Quarter Fiscal 2021 Results

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Focused Execution Results in Solid Performance Despite Ongoing COVID-19 Market Pressure

GMS Inc. (NYSE:GMS), a leading North American specialty distributor of interior building products, today reported financial results for the second quarter of fiscal 2021 ended October 31, 2020.

Second Quarter Fiscal 2021 Highlights

(Comparisons are to the second quarter of fiscal 2020, except where noted.)

  • Net sales of $812.9 million decreased 5.7%; organic net sales decreased 6.4%. On a per day basis, net sales and organic net sales declined 4.2% and 5.0%, respectively.
  • Net income of $28.5 million, or $0.66 per diluted share; adjusted net income of $40.2 million, or $0.93 per diluted share.
  • SG&A and Adjusted SG&A as a percentage of sales were 23.2% and 22.5%, representing 10 and 20 basis points of improvement, respectively.
  • Adjusted EBITDA of $82.5 million, or 10.2% of sales, compared to $89.9 million, or 10.4% of sales.
  • The Company opened one new greenfield location during the second quarter of fiscal 2021.
  • Net debt leverage was 3.0 times as of the end of the second quarter of fiscal 2021.
  • Cash provided by operating activities and free cash flow totaled $39.8 million and $32.7 million, respectively.
  • As of October 31, 2020, the Company had cash on hand of $118.2 million, and $415.4 million of available liquidity under its revolving credit facilities.

"Outstanding execution by our entire team enabled us to generate solid second quarter results, with net sales levels exceeding our earlier expectations," said John C. Turner, Jr., President and Chief Executive Officer. "The overall operating environment remained challenged throughout the period, particularly with respect to commercial construction, although we realized benefits from the strong residential market. A disciplined alignment of our cost structure to current demand enabled us to improve SG&A and Adjusted SG&A as a percentage of sales while maintaining a relentless focus on serving our customers. Additionally, we continued to advance our strategic growth initiatives in the second quarter, as evidenced by the opening of a new greenfield location and generating yet another quarter of positive sales growth in our complementary Other products category, despite the difficult market conditions."

Turner continued, "Looking ahead, the safety of our employees, customers and communities remains our top priority. I am confident in our team's ability to continue to leverage opportunities, address challenges and ensure that GMS remains well-positioned to generate value for our shareholders."

Second Quarter Fiscal 2021 Results

Net sales for the second quarter of fiscal 2021 were $812.9 million, down 5.7%, compared to $861.9 million for the second quarter of the prior fiscal year, as a result of continued COVID-19 related market declines. Organic net sales declined 6.4%.

  • Wallboard sales of $330.5 million decreased 5.7% (down 6.0% on an organic basis) compared to the second quarter of fiscal 2020, principally due to a decline in mix, volume and, to a lesser extent, price.
  • Ceilings sales of $111.3 million decreased 9.4% (down 9.5% on an organic basis) year over year driven by lower volume partially offset by higher price/mix.
  • Steel framing sales of $111.3 million decreased 18.3% (down 18.6% on an organic basis) year over year due to a decline in both volumes and price/mix.
  • Other product sales of $259.8 million increased 2.9% (up 1.2% on an organic basis) year over year due to positive contributions from acquisitions and execution of strategic growth initiatives.

There was one less selling day in the second quarter of fiscal 2021 than the same period a year ago. Net sales and organic net sales on a per day basis declined 4.2% and 5.0%, respectively.

Year over year sales declines were more pronounced in ceilings and steel framing, as these product categories are tied primarily to commercial construction which remained challenged during the quarter.

Gross profit of $265.1 million decreased 6.8% compared to the second quarter of fiscal 2020 primarily due to lower sales. Gross margin of 32.6% declined 40 basis points year over year principally due to challenging mix dynamics, particularly in the commercial segment.

Selling, general and administrative ("SG&A") expense as a percentage of net sales was 23.2% for the quarter compared to 23.3% in the second quarter of fiscal 2020. Adjusted SG&A expense as a percentage of net sales was 22.5% compared to 22.7% in the prior year quarter. This 20 basis point improvement resulted from ongoing actions to align the Company's cost structure with the current demand environment resulting from the COVID-19 pandemic. This SG&A leverage was realized despite deflationary price and unfavorable mix impacts with certain of the Company's products.

Net income of $28.5 million, or $0.66 per diluted share, compared to $29.1 million, or $0.68 per diluted share, in the second quarter of the prior fiscal year. Adjusted net income of $40.2 million, or $0.93 per diluted share, compared to $42.7 million, or $1.00 per diluted share, in the second quarter of the prior fiscal year. Adjusted EBITDA of $82.5 million compared to $89.9 million in the second quarter of the prior fiscal year. Adjusted EBITDA margin of 10.2% compared to 10.4% a year ago.

Platform Expansion Activity

During the second quarter of fiscal 2021, the Company opened a new greenfield location in Hillsboro, Oregon.

Balance Sheet and Liquidity

As of October 31, 2020, the Company had cash on hand of $118.2 million, total debt of $996.0 million and $415.4 million of available liquidity under its revolving credit facilities. Net debt leverage was 3.0 times as of the end of the quarter, equal to that at the end of the first quarter of fiscal 2021, and down from the 3.5 times as of the end of the second quarter of fiscal 2020. The Company generated cash provided by operating activities and free cash flow of $39.8 million and $32.7 million, respectively, in the second quarter.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the second quarter of fiscal 2021 ended October 31, 2020 and other information related to its business at 8:30 a.m. Eastern Time on Thursday, December 3, 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 January 3, 2021 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13713234.

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, actions taken to optimize our operations and align our business consistent with demand, our ability to continue successfully navigating the evolving operating environment, strategic initiatives and growth potential across the Company's business, our efforts in response to COVID-19, and the ability to deliver growth, value creation and long-term success contained in this press release may be considered forward-looking statements. The Company has based 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 December 3, 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 December 3, 2020.

GMS Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 31,

 

October 31,

 

 

2020

 

2019

 

 

2020

 

2019

Net sales

 

$

812,856

 

$

861,929

 

$

1,615,429

 

$

1,709,105

Cost of sales (exclusive of depreciation and amortization shown

separately below)

 

 

547,785

 

 

577,436

 

 

1,089,900

 

 

1,150,958

Gross profit

 

 

265,071

 

 

284,493

 

 

525,529

 

 

558,147

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

188,352

 

 

200,457

 

 

371,464

 

 

395,088

Depreciation and amortization

 

 

27,245

 

 

29,518

 

 

54,342

 

 

58,793

Total operating expenses

 

 

215,597

 

 

229,975

 

 

425,806

 

 

453,881

Operating income

 

 

49,474

 

 

54,518

 

 

99,723

 

 

104,266

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(13,525)

 

 

(17,559)

 

 

(27,606)

 

 

(35,836)

Write-off of debt discount and deferred financing fees

 

 

 

 

(707)

 

 

 

 

(707)

Other income, net

 

 

797

 

 

813

 

 

1,452

 

 

1,752

Total other expense, net

 

 

(12,728)

 

 

(17,453)

 

 

(26,154)

 

 

(34,791)

Income before taxes

 

 

36,746

 

 

37,065

 

 

73,569

 

 

69,475

Provision for income taxes

 

 

8,277

 

 

7,927

 

 

17,881

 

 

15,517

Net income

 

$

28,469

 

$

29,138

 

$

55,688

 

$

53,958

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,723

 

 

41,761

 

 

42,674

 

 

41,382

Diluted

 

 

43,174

 

 

42,635

 

 

43,096

 

 

42,126

Net income per common share(1):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.67

 

$

0.70

 

$

1.30

 

$

1.30

Diluted

 

$

0.66

 

$

0.68

 

$

1.29

 

$

1.27

(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,

 

 

2020

 

2019

 

2020

 

2019

 

 

(in thousands, except per share data)

Net income

 

$

28,469

 

$

29,138

 

$

55,688

 

$

53,958

Less: Net income allocated to participating securities

 

 

— 

 

 

 

 

 

 

342

Net income attributable to common stockholders

 

$

28,469

 

$

29,138

 

$

55,688

 

$

53,616

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

42,723

 

 

41,761

 

 

42,674

 

 

41,382

Basic earnings per common share

 

$

0.67

 

$

0.70

 

$

1.30

 

$

1.30

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

42,723

 

 

41,761

 

 

42,674

 

 

41,382

Add: Common Stock Equivalents

 

 

451

 

 

874

 

 

422

 

 

744

Diluted weighted average common shares outstanding

 

 

43,174

 

 

42,635

 

 

43,096

 

 

42,126

Diluted earnings per common share

 

$

0.66

 

$

0.68

 

$

1.29

 

$

1.27

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

October 31,

 

April 30,

 

 

2020

 

2020

Assets

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

118,168

 

$

210,909

Trade accounts and notes receivable, net of allowances of $5,273 and $5,141, respectively

 

 

434,836

 

 

405,254

Inventories, net

 

 

302,357

 

 

299,815

Prepaid expenses and other current assets

 

 

19,042

 

 

14,972

Total current assets

 

 

874,403

 

 

930,950

Property and equipment, net of accumulated depreciation of $174,832 and $158,554, respectively

 

 

300,144

 

 

305,467

Operating lease right-of-use assets

 

 

114,198

 

 

115,257

Goodwill

 

 

557,486

 

 

553,073

Intangible assets, net

 

 

339,918

 

 

361,884

Deferred income taxes

 

 

12,651

 

 

8,904

Other assets

 

 

12,074

 

 

13,247

Total assets

 

$

2,210,874

 

$

2,288,782

Liabilities and Stockholders' Equity

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

163,927

 

$

213,230

Accrued compensation and employee benefits

 

 

43,843

 

 

67,590

Other accrued expenses and current liabilities

 

 

88,170

 

 

63,812

Current portion of long-term debt

 

 

49,302

 

 

50,201

Current portion of operating lease liabilities

 

 

31,694

 

 

33,040

Total current liabilities

 

 

376,936

 

 

427,873

Non-current liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

946,721

 

 

1,047,279

Long-term operating lease liabilities

 

 

88,122

 

 

89,605

Deferred income taxes, net

 

 

7,837

 

 

12,018

Other liabilities

 

 

73,361

 

 

78,026

Total liabilities

 

 

1,492,977

 

 

1,654,801

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value $0.01 per share, 500,000 shares authorized; 42,690 and 42,554 shares

issued and outstanding as of October 31, 2020 and April 30, 2020, respectively

 

 

427

 

 

426

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and

outstanding as of October 31, 2020 and April 30, 2020

 

 

 

 

Additional paid-in capital

 

 

534,646

 

 

529,662

Retained earnings

 

 

224,663

 

 

168,975

Accumulated other comprehensive loss

 

 

(41,839)

 

 

(65,082)

Total stockholders' equity

 

 

717,897

 

 

633,981

Total liabilities and stockholders' equity

 

$

2,210,874

 

$

2,288,782

 

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

October 31,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

55,688

 

$

53,958

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

 

 

 

 

 

 

Depreciation and amortization

 

 

54,342

 

 

58,793

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

 

 

1,505

 

 

2,368

Equity-based compensation

 

 

6,370

 

 

5,591

Loss (gain) on disposal and impairment of assets

 

 

875

 

 

(742)

Deferred income taxes

 

 

(9,296)

 

 

(2,380)

Other items, net

 

 

(1,057)

 

 

1,101

Changes in assets and liabilities net of effects of acquisitions:

 

 

 

 

 

 

Trade accounts and notes receivable

 

 

(26,137)

 

 

(29,932)

Inventories

 

 

(950)

 

 

1,800

Prepaid expenses and other assets

 

 

(4,776)

 

 

1,573

Accounts payable

 

 

(50,867)

 

 

(5,486)

Accrued compensation and employee benefits

 

 

(23,889)

 

 

(12,974)

Other accrued expenses and liabilities

 

 

22,240

 

 

(3,743)

Cash provided by operating activities

 

 

24,048

 

 

69,927

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(11,845)

 

 

(14,637)

Proceeds from sale of assets

 

 

720

 

 

1,056

Acquisition of businesses, net of cash acquired

 

 

(51)

 

 

(10,633)

Cash used in investing activities

 

 

(11,176)

 

 

(24,214)

Cash flows from financing activities:

 

 

 

 

 

 

Repayments on revolving credit facilities

 

 

(102,189)

 

 

(558,906)

Borrowings from revolving credit facilities

 

 

14,750

 

 

562,698

Payments of principal on long-term debt

 

 

(4,984)

 

 

(54,984)

Payments of principal on finance lease obligations

 

 

(14,629)

 

 

(12,310)

Repurchases of common stock

 

 

(1,222)

 

 

Debt issuance costs

 

 

 

 

(1,286)

Proceeds from exercises of stock options

 

 

863

 

 

6,761

Payments for taxes related to net share settlement of equity awards

 

 

(754)

 

 

Other financing activities

 

 

1,270

 

 

1,022

Cash used in financing activities

 

 

(106,895)

 

 

(57,005)

Effect of exchange rates on cash and cash equivalents

 

 

1,282

 

 

223

Decrease in cash and cash equivalents

 

 

(92,741)

 

 

(11,069)

Cash and cash equivalents, beginning of period

 

 

210,909

 

 

47,338

Cash and cash equivalents, end of period

 

$

118,168

 

$

36,269

Supplemental cash flow disclosures:

 

 

 

 

 

 

Cash paid for income taxes

 

$

20,224

 

$

25,642

Cash paid for interest

 

 

25,726

 

 

33,654

 

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

 

 

 

2020

 

Total

 

 

 

2019

 

Total

 

 

2020

 

Total

 

 

2019

 

Total

 

 

 

 

Wallboard

 

$

330,515

 

40.6

%

 

$

350,618

 

40.7

%

 

$

658,512

 

40.8

%

 

$

692,213

 

40.5

%

Ceilings

 

 

111,293

 

13.7

%

 

 

122,807

 

14.2

%

 

 

224,995

 

13.9

%

 

 

251,917

 

14.7

%

Steel framing

 

 

111,293

 

13.7

%

 

 

136,159

 

15.8

%

 

 

221,780

 

13.7

%

 

 

267,988

 

15.7

%

Other products

 

 

259,755

 

32.0

%

 

 

252,345

 

29.3

%

 

 

510,142

 

31.6

%

 

 

496,987

 

29.1

%

Total net sales

 

$

812,856

 

 

 

 

$

861,929

 

 

 

 

$

1,615,429

 

 

 

 

$

1,709,105

 

 

 

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

28,469

 

$

29,138

 

$

55,688

 

$

53,958

 

Interest expense

 

 

13,525

 

 

17,559

 

 

27,606

 

 

35,836

 

Write-off of debt discount and deferred financing fees

 

 

 

 

707

 

 

 

 

707

 

Interest income

 

 

(14)

 

 

(6)

 

 

(51)

 

 

(18)

 

Provision for income taxes

 

 

8,277

 

 

7,927

 

 

17,881

 

 

15,517

 

Depreciation expense

 

 

12,710

 

 

12,592

 

 

25,537

 

 

25,014

 

Amortization expense

 

 

14,535

 

 

16,926

 

 

28,805

 

 

33,779

 

EBITDA

 

$

77,502

 

$

84,843

 

$

155,466

 

$

164,793

 

Stock appreciation expense(a)

 

 

314

 

 

1,267

 

 

1,106

 

 

1,327

 

Redeemable noncontrolling interests(b)

 

 

186

 

 

(18)

 

 

438

 

 

644

 

Equity-based compensation(c)

 

 

3,252

 

 

2,315

 

 

4,857

 

 

3,710

 

Severance and other permitted costs(d)

 

 

762

 

 

1,394

 

 

2,709

 

 

1,948

 

Transaction costs (acquisitions and other)(e)

 

 

25

 

 

327

 

 

125

 

 

1,299

 

Loss (gain) on disposal and impairment of assets(f)

 

 

481

 

 

(586)

 

 

875

 

 

(742)

 

Effects of fair value adjustments to inventory(g)

 

 

 

 

 

 

 

 

151

 

Secondary public offering costs(h)

 

 

 

 

363

 

 

 

 

363

 

EBITDA add-backs

 

 

5,020

 

 

5,062

 

 

10,110

 

 

8,700

 

Adjusted EBITDA

 

$

82,522

 

$

89,905

 

$

165,576

 

$

173,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

812,856

 

$

861,929

 

$

1,615,429

 

$

1,709,105

 

Adjusted EBITDA margin

 

 

10.2

%

 

10.4

%

 

10.2

%

 

10.2

%

 

(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 Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

(e) Represents costs related to acquisitions paid to third parties.

(f) Includes impairment of assets resulting from restructuring plans to close certain facilities and gains from the sale of assets.

(g) Represents the non‑cash cost of sales impact of acquisition accounting adjustments to increase inventory to its estimated fair value.

(h) Represents costs paid to third-party advisors related to secondary offerings of our common stock.

 

 

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,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

39,759

 

$

82,367

 

$

24,048

 

$

69,927

Purchases of property and equipment

 

 

(7,100)

 

 

(8,746)

 

 

(11,845)

 

 

(14,637)

Free cash flow(a)

 

$

32,659

 

$

73,621

 

$

12,203

 

$

55,290

 

(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,

 

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

$

188,352

 

$

200,457

 

$

371,464

 

$

395,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock appreciation expense(a)

 

 

(314)

 

 

(1,267)

 

 

(1,106)

 

 

(1,327)

 

Redeemable noncontrolling interests(b)

 

 

(186)

 

 

18

 

 

(438)

 

 

(644)

 

Equity-based compensation(c)

 

 

(3,252)

 

 

(2,315)

 

 

(4,857)

 

 

(3,710)

 

Severance and other permitted costs(d)

 

 

(812)

 

 

(1,394)

 

 

(2,693)

 

 

(1,948)

 

Transaction costs (acquisitions and other)(e)

 

 

(25)

 

 

(327)

 

 

(125)

 

 

(1,299)

 

(Loss) gain on disposal and impairment of assets(f)

 

 

(481)

 

 

586

 

 

(875)

 

 

742

 

Secondary public offering costs(g)

 

 

 

 

(363)

 

 

 

 

(363)

 

Adjusted SG&A

 

$

183,282

 

$

195,395

 

$

361,370

 

$

386,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

812,856

 

$

861,929

 

$

1,615,429

 

$

1,709,105

 

Adjusted SG&A margin

 

 

22.5

%

 

22.7

%

 

22.4

%

 

22.6

%

 

(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 Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

(e) Represents costs related to acquisitions paid to third parties.

(f) Includes impairment of assets resulting from restructuring plans to close certain facilities and gains from the sale of assets.

(g) Represents costs paid to third-party advisors related to secondary offerings of our common stock.

 

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,

 

 

 

2020

 

 

2019

 

2020

 

 

2019

 

Income before taxes

 

$

36,746

 

 

$

37,065

 

$

73,569

 

 

$

69,475

 

EBITDA add-backs

 

 

5,020

 

 

 

5,062

 

 

10,110

 

 

 

8,700

 

Write-off of discount and deferred financing fees

 

 

 

 

 

707

 

 

 

 

 

707

 

Purchase accounting depreciation and amortization (1)

 

 

10,121

 

 

 

12,276

 

 

20,256

 

 

 

24,661

 

Adjusted pre-tax income

 

 

51,887

 

 

 

55,110

 

 

103,935

 

 

 

103,543

 

Adjusted income tax expense

 

 

11,674

 

 

 

12,400

 

 

23,385

 

 

 

23,297

 

Adjusted net income

 

$

40,213

 

 

$

42,710

 

$

80,550

 

 

$

80,246

 

Effective tax rate (2)

 

 

22.5

%

 

 

22.5

%

 

22.5

%

 

 

22.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,723

 

 

 

41,761

 

 

42,674

 

 

 

41,382

 

Diluted (3)

 

 

43,174

 

 

 

42,635

 

 

43,096

 

 

 

42,391

 

Adjusted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.94

 

 

$

1.02

 

$

1.89

 

 

$

1.94

 

Diluted

 

$

0.93

 

 

$

1.00

 

$

1.87

 

 

$

1.89

 

 

(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.

 

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