Form 8-K GMS Inc. For: Sep 13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 13, 2016
GMS INC.
(Exact name of registrant as specified in charter)
Delaware |
|
001-37784 |
|
46-2931287 |
(State or Other Jurisdiction |
|
(Commission |
|
(I.R.S. Employer |
100 Crescent Centre Parkway, Suite 800 |
|
30084 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
Registrants telephone number, including area code: (800) 392-4619
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On September 13, 2016, GMS Inc. (the Company or GMS) issued a press release, a copy of which is furnished as Exhibit 99.1 hereto and incorporated herein by reference, announcing the Companys financial results for the three months ended July 31, 2016.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On September 13, 2016, the Company announced that Lynn Ross, age 49, will be promoted to serve as the Companys Corporate Controller and Chief Accounting Officer, effective September 13, 2016. Ms. Ross will replace Richard Alan Adams, age 56, who has served as the Companys Vice President, Chief Accounting Officer, and Chief Technology Officer since August 2014. Mr. Adams will remain with the Company and serve as its Vice President and Chief Information Officer, effective September 13, 2016.
Ms. Ross has served as the Corporate Controller of the Company since January 2015. Prior to joining the Company, she served as the Corporate Controller for Floor and Decor Outlets of America, Inc., a retailer of floor and wall coverings. From 2004 to 2011, Ms. Ross worked for Georgia-Pacific LLC in positions of increasing responsibility, most recently in a Vice President/Controller role. Prior to 2004, Ms. Ross was an Audit Senior Manager at Deloitte & Touche LLP, an international accounting firm. Ms. Ross holds a B.S.B.A. in accounting from Appalachian State University and is a certified public accountant.
Ms. Ross does not have any family relationships with any executive officer or director of the Company.
Ms. Ross is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Item 7.01. Regulation FD Disclosure.
The slide presentation furnished as Exhibit 99.2 hereto, and incorporated herein by reference, will be presented to certain investors of GMS on September 13, 2016 and may be used by GMS in various other presentations to investors.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2 attached hereto, shall not be deemed filed for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits:
Exhibit Number |
|
Description |
99.1 |
|
Press Release of GMS Inc., dated September 13, 2016. |
99.2 |
|
GMS Inc. presentation to investors. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
GMS INC. | |
|
| |
|
|
|
Date: September 13, 2016 |
By: |
/s/ H. Douglas Goforth |
|
|
Name: H. Douglas Goforth |
|
|
Title: Chief Financial Officer |
EXHIBIT INDEX
Exhibit Number |
|
Description |
99.1 |
|
Press Release of GMS Inc., dated September 13, 2016. |
99.2 |
|
GMS Inc. presentation to investors. |
Exhibit 99.1
GMS REPORTS RESULTS FOR FIRST QUARTER OF FISCAL 2017
- Net Sales Increased 21.5% -
- Net Income Grew to $9.2 Million -
- Adjusted EBITDA Rose 34.7% to $45.9 Million -
Tucker, Georgia, September 13, 2016. 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 2017 ended July 31, 2016.
First Quarter Fiscal 2017 Highlights Compared to First Quarter Fiscal 2016
· Net sales increased 21.5% to $549.8 million; base business net sales up 9.2% despite one fewer shipping day
· Wallboard unit volume grew 20.0% to 818 million square feet
· Net income increased to $9.2 million, or $0.24 per share, compared to $3.0 million, or $0.09 per share
· Gross margin expanded 140 basis points to 32.5%
· Adjusted EBITDA margin improved approximately 80 basis points to 8.4% as a percentage of net sales
· Completed four acquisitions as of September 1, 2016, adding eight branches in five states
Mike Callahan, President and CEO of GMS, stated, We are excited to produce our 20th straight quarter of double-digit growth in net sales, with strong results across all of our product categories to start the current fiscal year. Residential demand continued to outpace commercial activity in many markets, which particularly benefitted our wallboard and other product categories. The modest improvement in wallboard price compared to Q4 of last fiscal year was in line with expectations. Beyond our base business improvement, we completed four acquisitions during fiscal 2017 as of September 1, 2016, representing $134.9 million of combined trailing twelve month net sales. In June 2016, we used the proceeds from our successful initial public offering to further reduce debt and strengthen our balance sheet. In all, we are pleased with our progress and the dedication of the entire GMS family which is driving our continued success.
First Quarter Fiscal 2017 Results
Net sales for the first quarter ended July 31, 2016 were $549.8 million, compared to $452.4 million for the first quarter ended July 31, 2015.
· Wallboard sales of $251.3 million increased 19.1%, compared to the first quarter of fiscal 2016. Wallboard unit volume grew 20.0% million to 818 million square feet, helped by greater end market demand and the positive contribution from acquisitions.
· Ceiling sales of $86.3 million rose 9.3%, compared to the first quarter of fiscal 2016, helped by improved pricing and acquisitions.
· Steel framing sales of $84.3 million grew 25.3%, compared to the first quarter of fiscal 2016, due to greater commercial activity and pricing gains as industry steel prices increased year-over-year, along with the benefit from accretive acquisitions.
· Other product sales of $127.8 million were up 34.2%, compared to the first quarter of fiscal 2016, attributable to greater end market demand, price gains, retail showrooms, acquisitions and other initiatives.
Gross profit of $178.6 million grew 26.8%, compared to $140.9 million in the first quarter of fiscal 2016. Gross margin of 32.5% expanded by 140 basis points, compared to 31.1% in the first quarter of fiscal 2016 mainly attributable to increased product margins.
Net income of $9.2 million, or $0.24 per share, increased $6.2 million, compared to $3.0 million, or $0.09 per share, in the first quarter of fiscal 2016. Adjusted net income of $17.8 million, or $0.47 per share, grew $6.5 million, compared to $11.3 million, or $0.35 per share, in the first quarter of fiscal 2016.
Adjusted EBITDA of $45.9 million rose 34.7%, compared to $34.1 million in the first quarter of fiscal 2016. Adjusted EBITDA margin was 8.4% as a percentage of net sales for the first quarter of fiscal 2017, compared to 7.5% in the first quarter of fiscal 2016, largely reflecting a higher gross margin.
Capital Resources
On June 1, 2016, GMS completed the initial public offering of its common stock, raising net proceeds of approximately $157.2 million, including the full exercise of the underwriters option to purchase additional shares. Following completion of the offering, GMS had 40,942,905 of basic and 41,605,076 of diluted shares of common stock outstanding.
GMS used all of the net proceeds from its initial public offering, together with cash on hand, to repay, in full, its outstanding indebtedness of $160.0 million plus accrued and unpaid interest under its 7.75% senior secured second lien term loan facility due April 2022.
At July 31, 2016, GMS had cash of $9.8 million and total debt of $546.7 million, as compared to cash of $19.1 million and total debt of $644.6 million at April, 30, 2016.
Acquisition Activity
During the first quarter of fiscal 2017, the Company acquired Wall & Ceiling Supply Co., Inc., or Wall & Ceiling Supply, and Rockwise, LLC, or Rockwise, for a total purchase price of approximately $26.0 million. Wall & Ceiling Supply and Rockwise distribute wallboard and related building materials from four locations in Washington, Arizona and Colorado. For the twelve months ended April 30, 2016, the combined companies generated approximately $35.2 million in net sales and the earnings of these entities would have contributed approximately $4.5 million to Adjusted EBITDA for that period, including operating synergies.
Subsequent to July 31, 2016, the Company acquired Steven F. Kempf Building Materials, Inc., or SKBM, and Olympia Building Supplies, LLC, or Olympia, for a total purchase price of approximately $75.6 million. SKBM and Olympia distribute wallboard and related building materials from four locations in Pennsylvania and Florida. For the twelve months ended July 31, 2016, the combined companies generated approximately $99.7 million in net sales and the earnings of these entities would have contributed approximately $10.9 million to Adjusted EBITDA for that period, including operating synergies.
Conference Call and Webcast
The Company will host a conference call and webcast to discuss its results for the first quarter ended July 31, 2016 at 11:00 a.m. Eastern Time on September 13, 2016. Investors who wish to participate in the call should dial 877-407-0789 (domestic) or 201-689-8562 (international) at least 5 minutes prior to the start of the call. The live webcast will be available on the Investors section of the Companys website at www.gms.com. There will be a slide presentation of the Companys first quarter results available on that page of the website as well. Replays of the call will be available through October 13, 2016 and can be accessed at 877-870-5176 (domestic) or 858-384-5517 (international) and entering the pass code 13644496.
About GMS Inc.
Founded in 1971, GMS operates a national network of distribution centers across the United States. GMSs extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary interior 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, we present adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and base buisness growth, which are not recognized financial measures under GAAP.We believe adjusted net income, Adjusted EBITDA and Adjusted EBITDA margin assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and base business growth are helpful in highlighting trends in our operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. In addition, we utilize Adjusted EBITDA in certain calculations under our senior secured asset based revolving credit facility and our senior secured first lien term loan facility.
You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. In addition, in evaluating adjusted net income and Adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of adjusted net income and Adjusted EBITDA. Our presentation of adjusted net income and Adjusted EBITDA should not be construed as an inference that our 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 our industry or across different industries.
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 our 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 we operate, including the potential for growth in the commercial, residential and repair and remodeling, or R&R, markets, statements about our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance, statements related to net sales, gross profit and capital expenditures, as well as non-GAAP financial measures such as Adjusted EBITDA, adjusted net income and base business growth and statements regarding potential acquisitions and future greenfield locations contained in this press release are forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe 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 our control. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our 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 we distribute; general economic and business conditions in the United States; 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; and other factors described in the Risk Factors section in our Annual Report on Form 10-K for the fiscal year ended April 30, 2016, and in our other periodic reports filed with the SEC. In addition, the statements in this release are made as of September 13, 2016. We undertake 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 our views as of any date subsequent to September 13, 2016.
GMS Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
(in thousands of dollars, except for share and per share data)
|
|
Three Months Ended |
| ||||
|
|
July 31, |
| ||||
|
|
2016 |
|
2015 |
| ||
Net sales |
|
$ |
549,800 |
|
$ |
452,441 |
|
Cost of sales (exclusive of depreciation and amortization shown separately below) |
|
371,215 |
|
311,553 |
| ||
Gross profit |
|
178,585 |
|
140,888 |
| ||
Operating expenses: |
|
|
|
|
| ||
Selling, general and administrative |
|
135,058 |
|
110,210 |
| ||
Depreciation and amortization |
|
15,795 |
|
16,065 |
| ||
Total operating expenses |
|
150,853 |
|
126,275 |
| ||
Operating income |
|
27,732 |
|
14,613 |
| ||
Other (expense) income: |
|
|
|
|
| ||
Interest expense |
|
(7,577 |
) |
(9,257 |
) | ||
Write-off of discount and deferred financing fees |
|
(5,426 |
) |
|
| ||
Other income, net |
|
593 |
|
510 |
| ||
Total other (expense), net |
|
(12,410 |
) |
(8,747 |
) | ||
Income before taxes |
|
15,322 |
|
5,866 |
| ||
Provision for income taxes |
|
6,159 |
|
2,855 |
| ||
Net income |
|
$ |
9,163 |
|
$ |
3,011 |
|
Weighted average shares outstanding: |
|
|
|
|
| ||
Basic |
|
38,200,597 |
|
32,677,418 |
| ||
Diluted |
|
38,602,378 |
|
32,830,677 |
| ||
Net income per share: |
|
|
|
|
| ||
Basic |
|
$ |
0.24 |
|
$ |
0.09 |
|
Diluted |
|
$ |
0.24 |
|
$ |
0.09 |
|
Comprehensive income: |
|
|
|
|
| ||
Net income |
|
$ |
9,163 |
|
$ |
3,011 |
|
Decrease in fair value of financial instrument, net of tax |
|
(88 |
) |
(181 |
) | ||
Comprehensive income |
|
$ |
9,075 |
|
$ |
2,830 |
|
GMS Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands of dollars, except share data)
|
|
July 31, |
|
April 30, |
| ||
|
|
2016 |
|
2016 |
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
9,828 |
|
$ |
19,072 |
|
Trade accounts and notes receivable, net of allowances of $9,432 and $8,607, respectively |
|
295,105 |
|
270,257 |
| ||
Inventories, net |
|
186,006 |
|
165,766 |
| ||
Prepaid expenses and other current assets |
|
12,109 |
|
16,548 |
| ||
Total current assets |
|
503,048 |
|
471,643 |
| ||
Property and equipment, net of accumulated depreciation of $58,952 and $54,377, respectively |
|
154,368 |
|
153,260 |
| ||
Goodwill |
|
393,640 |
|
386,306 |
| ||
Intangible assets, net |
|
223,594 |
|
221,790 |
| ||
Other assets |
|
7,346 |
|
7,815 |
| ||
Total assets |
|
$ |
1,281,996 |
|
$ |
1,240,814 |
|
Liabilities and Stockholders Equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
95,999 |
|
$ |
91,500 |
|
Accrued compensation and employee benefits |
|
27,959 |
|
51,680 |
| ||
Other accrued expenses and current liabilities |
|
42,985 |
|
41,814 |
| ||
Current portion of long-term debt |
|
9,514 |
|
8,667 |
| ||
Revolving credit facility |
|
|
|
26,914 |
| ||
Total current liabilities |
|
176,457 |
|
220,575 |
| ||
Non-current liabilities: |
|
|
|
|
| ||
Long-term debt, less current portion |
|
537,220 |
|
609,029 |
| ||
Deferred income taxes, net |
|
37,908 |
|
41,203 |
| ||
Other liabilities |
|
33,468 |
|
33,600 |
| ||
Liabilities to noncontrolling interest holders, less current portion |
|
24,378 |
|
25,247 |
| ||
Total liabilities |
|
809,431 |
|
929,654 |
| ||
Commitments and contingencies |
|
|
|
|
| ||
Stockholders equity: |
|
|
|
|
| ||
Common stock, par value $0.01 per share, authorized 500,000,000 shares; 40,942,905 and 32,892,905 shares issued at July 31, 2016 and April 30, 2016, respectively |
|
409 |
|
329 |
| ||
Preferred stock, par value $0.01 per share, authorized 50,000,000 shares; 0 shares issued at July 31, 2016 and April 30, 2016, respectively |
|
|
|
|
| ||
Additional paid-in capital |
|
486,494 |
|
334,244 |
| ||
Accumulated deficit |
|
(13,102 |
) |
(22,265 |
) | ||
Accumulated other comprehensive loss |
|
(1,236 |
) |
(1,148 |
) | ||
Total stockholders equity |
|
472,565 |
|
311,160 |
| ||
Total liabilities and stockholders equity |
|
$ |
1,281,996 |
|
$ |
1,240,814 |
|
GMS Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands of dollars)
|
|
Three Months Ended |
| ||||
|
|
July 31, |
| ||||
|
|
2016 |
|
2015 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
9,163 |
|
$ |
3,011 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
| ||
Depreciation and amortization of property and equipment |
|
6,382 |
|
7,279 |
| ||
Accretion and amortization of debt discount and deferred financing fees |
|
6,129 |
|
854 |
| ||
Amortization of intangible assets |
|
9,413 |
|
8,792 |
| ||
Provision for losses on accounts and notes receivable |
|
(75 |
) |
(1 |
) | ||
Provision for obsolescence of inventory |
|
23 |
|
43 |
| ||
Equity-based compensation |
|
627 |
|
1,172 |
| ||
Net gain on sale or impairment of assets |
|
(199 |
) |
(25 |
) | ||
Deferred income tax benefit |
|
(3,222 |
) |
(4,091 |
) | ||
Prepaid expenses and other assets |
|
(3,058 |
) |
(4,144 |
) | ||
Accrued compensation and employee benefits |
|
(24,947 |
) |
(26,880 |
) | ||
Other accrued expenses and liabilities |
|
852 |
|
11,429 |
| ||
Liabilities to noncontrolling interest holders |
|
246 |
|
473 |
| ||
Income taxes |
|
2,835 |
|
2,457 |
| ||
|
|
4,169 |
|
369 |
| ||
Changes in primary working capital components, net of acquisitions: |
|
|
|
|
| ||
Trade accounts and notes receivable |
|
(19,360 |
) |
(21,834 |
) | ||
Inventories |
|
(17,101 |
) |
377 |
| ||
Accounts payable |
|
1,672 |
|
2,677 |
| ||
Cash used in operating activities |
|
(30,620 |
) |
(18,411 |
) | ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchases of property and equipment |
|
(2,607 |
) |
(1,465 |
) | ||
Proceeds from sale of assets |
|
841 |
|
430 |
| ||
Acquisition of businesses, net of cash acquired |
|
(23,278 |
) |
|
| ||
Cash used in investing activities |
|
(25,044 |
) |
(1,035 |
) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Repayments on the revolving credit facility |
|
(225,702 |
) |
(136,243 |
) | ||
Borrowings from the revolving credit facility |
|
280,397 |
|
161,089 |
| ||
Payments of principal on long-term debt |
|
(975 |
) |
(975 |
) | ||
Principal repayments of capital lease obligations |
|
(1,213 |
) |
(1,032 |
) | ||
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts |
|
157,217 |
|
|
| ||
Repayment of term loan |
|
(160,000 |
) |
|
| ||
Stock repurchases |
|
|
|
(5,827 |
) | ||
Exercise of stock options |
|
|
|
3,317 |
| ||
Payments of contingent consideration |
|
(3,304 |
) |
|
| ||
Cash provided by financing activities |
|
46,420 |
|
20,329 |
| ||
(Decrease) increase in cash and cash equivalents |
|
(9,244 |
) |
883 |
| ||
Balance, beginning of period |
|
19,072 |
|
12,284 |
| ||
Balance, end of period |
|
$ |
9,828 |
|
$ |
13,167 |
|
Supplemental cash flow disclosures: |
|
|
|
|
| ||
Cash paid for income taxes |
|
$ |
6,540 |
|
$ |
4,515 |
|
Cash paid for interest |
|
6,613 |
|
7,943 |
| ||
Supplemental schedule of noncash activities: |
|
|
|
|
| ||
Assets acquired under capital lease |
|
$ |
3,824 |
|
$ |
2,283 |
|
Change in fair value of derivative instrument |
|
(205 |
) |
(282 |
) | ||
Increase (decrease) in insurance claims payable and insurance recoverable |
|
161 |
|
(26,000 |
) |
GMS Inc.
Net Sales by Product Group (Unaudited)
(in thousands of dollars)
|
|
Three Months |
|
|
|
Three Months |
|
|
| ||
|
|
July 31, |
|
% of |
|
July 31, |
|
% of |
| ||
|
|
2016 |
|
Total |
|
2015 |
|
Total |
| ||
Wallboard |
|
$ |
251,296 |
|
45.7 |
% |
$ |
210,922 |
|
46.6 |
% |
Ceilings |
|
86,349 |
|
15.7 |
% |
78,967 |
|
17.5 |
% | ||
Steel framing |
|
84,343 |
|
15.3 |
% |
67,332 |
|
14.9 |
% | ||
Other products |
|
127,812 |
|
23.3 |
% |
95,220 |
|
21.0 |
% | ||
Total net sales |
|
$ |
549,800 |
|
|
|
$ |
452,441 |
|
|
|
GMS Inc.
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
(in thousands of dollars)
|
|
Three Months Ended |
| ||||
|
|
July 31, |
|
July 31, |
| ||
|
|
2016 |
|
2015 |
| ||
Net income |
|
$ |
9,163 |
|
$ |
3,011 |
|
Interest expense |
|
13,003 |
|
9,257 |
| ||
Interest income |
|
(43 |
) |
(230 |
) | ||
Income tax expense |
|
6,159 |
|
2,855 |
| ||
Depreciation expense |
|
6,382 |
|
7,273 |
| ||
Amortization expense |
|
9,413 |
|
8,792 |
| ||
EBITDA |
|
$ |
44,077 |
|
$ |
30,958 |
|
Stock appreciation rights expense (a) |
|
$ |
(92 |
) |
$ |
594 |
|
Redeemable noncontrolling interests (b) |
|
292 |
|
554 |
| ||
Equity-based compensation (c) |
|
673 |
|
498 |
| ||
Severance and other permitted costs (d) |
|
140 |
|
557 |
| ||
Transaction costs (acquisitions and other) (e) |
|
654 |
|
415 |
| ||
Gain on disposal of assets |
|
(198 |
) |
(25 |
) | ||
Management fee to related party (f) |
|
188 |
|
562 |
| ||
Effects of fair value adjustments to inventory (g) |
|
164 |
|
|
| ||
Interest rate swap and cap mark-to-market (h) |
|
43 |
|
|
| ||
Adjusted EBITDA add-backs |
|
|
1,864 |
|
|
3,155 |
|
Adjusted EBITDA |
|
$ |
45,941 |
|
$ |
34,113 |
|
Adjusted EBITDA margin |
|
|
8.4 |
% |
|
7.5 |
% |
(a) Represents non-cash compensation expenses related to stock appreciation rights agreements
(b) Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests
(c) Represents non-cash equity-based compensation expense related to the issuance of stock options
(d) Represents severance and other costs permitted in calculations under the ABL Facility and the Term Loan Facilities
(e) Represents one-time costs related to the IPO and acquisitions paid to third party advisors
(f) Represents management fees paid to AEA, which were discontinued after the IPO
(g) Non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value
(h) Mark to market adjustments for certain financial instruments
GMS Inc.
Reconciliation of Net Income to Adjusted Net Income (Unaudited)
(in thousands of dollars, except for share and per share data)
|
|
Three Months Ended |
| ||||
|
|
July 31, |
|
July 31, |
| ||
|
|
2016 |
|
2015 |
| ||
Income before taxes |
|
$ |
15,322 |
|
$ |
5,866 |
|
Adjusted EBITDA add-backs |
|
1,864 |
|
3,155 |
| ||
Write-off of discount and deferred financing fees |
|
5,426 |
|
|
| ||
Purchase accounting depreciation and amortization (1) |
|
7,999 |
|
10,445 |
| ||
Adjusted pre-tax income |
|
30,611 |
|
19,466 |
| ||
Adjusted income tax expense |
|
12,826 |
|
8,156 |
| ||
Adjusted net income |
|
$ |
17,785 |
|
11,310 |
| |
Effective tax rate (2) |
|
41.9 |
% |
41.9 |
% | ||
|
|
|
|
|
| ||
Weighted average shares outstanding: |
|
|
|
|
| ||
Basic |
|
38,200,597 |
|
32,677,418 |
| ||
Diluted |
|
38,602,378 |
|
32,830,677 |
| ||
Adjusted net income per share: |
|
|
|
|
| ||
Basic |
|
$ |
0.47 |
|
$ |
0.35 |
|
Diluted |
|
$ |
0.46 |
|
$ |
0.34 |
|
(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.
(2) Normalized effective tax rate excluding the impact of purchase accounting and certain other deferred tax amounts.
Contact Information:
Investor Relations:
678-353-2883
Media Relations:
770-723-3378
Exhibit 99.2
GMS Quarterly Review Fiscal Q1 2017
Safe Harbor and Basis of Presentation Forward-Looking Statement Safe Harbor - This presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our 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 we distribute; general economic and business conditions in the United States; 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; and other factors described in the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended April 30, 2016, and in our other periodic reports filed with the SEC. In addition, the statements in this presentation are made as of September 13, 2016. We undertake 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 our views as of any date subsequent to September 13, 2016. Use of Non-GAAP and Adjusted Financial Information - To supplement GAAP financial information, we use adjusted measures of operating results which are non-GAAP measures. This non-GAAP adjusted financial information is provided as additional information for investors. These adjusted results exclude certain costs, expenses, gains and losses, and we believe their exclusion can enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our operating performance by excluding non-recurring, infrequent or other non-cash charges that are not believed to be material to the ongoing performance of our business. The presentation of this additional information is not meant to be considered in isolation or as a substitute for GAAP measures of net income, diluted earnings per share or net cash provided by (used in) operating activities prepared in accordance with generally accepted accounting principles in the United States. 2
GMS at a Glance Based on FY2015 results. Wallboard share based on volume. Ceilings share based on sales. GMS Overview Fiscal Q1 2017 Net Sales Breakdown #1 North American specialty distributor of interior construction products (1) 13% market share in wallboard 14% market share in ceilings Critical link between suppliers and highly fragmented customer base National scale combined with local expertise One-stop-shop for the interior contractor with broad product offering of 20,000+ SKUs Substantial diversification across customers, geographies and end markets National Scale Combined With Local Expertise Wallboard $251.3mm 46% Ceilings $86.3mm 16% Steel Framing $84.3mm 15% Other $127.8mm 23% 3 GMS Branch Locations GMS Headquarters
Q1 2017 Highlights 4 Above-Market Growth Attractive Capital Structure Accretive Acquisitions Continued Margin Improvement Net sales increased 21.5% to $549.8 million Base business net sales up 9.2% despite one fewer shipping day Wallboard unit volume grew 20.0% to 818 million square feet Net income tripled to $9.2 million Gross margin expanded 140 basis points to 32.5% Adjusted EBITDA grew 34.7% to $45.9 million Completed four acquisitions as of September 1, 2016, adding 8 branches across 5 states with combined LTM net sales and EBITDA of $135 million and $15.4 million, respectively Acquisitions closed since February 1, 2015 represented 59% of Q1 2017 net sales growth Completed Initial Public Offering in June 2016 Further improved balance sheet and credit metrics Corporate debt upgraded to B2/B+ from B3/B by Moodys and Standard & Poor's in Q2 2017
Attractive Acquirer with Significant Consolidation Opportunity 5 Acquisition Strategy FY 2017 GMS Acquisitions Acquisition Rationale Industry Structure: Large, highly fragmented industry comprised of ~400 competitors Similar business operations enable efficient integration Limited number of scaled players Acquisition Strategy: Criteria: leading capabilities in targeted new markets / increase existing network density / enhance strategic capabilities Fit GMS culture and platform Deliver scale benefits Attractive purchase price multiples Dedicated M&A team Pipeline: The majority of the market is comprised of local, independent competitors representing significant opportunity Maintain active dialogue with many potential targets at any given time Employee-centric culture and industry track record positions GMS to drive additional growth through acquisitions LTM Sales of $46.8 million Strategic entrance into the greater Philadelphia metropolitan area Over its 20+ year operating history, SKBM has built an extremely strong reputation for customer service in the market which has garnered significant respect for its management team and also makes it a great fit with GMS core values September 1, 2016 3 Branches August 29, 2016 1 Branch July 5, 2016 3 Branches May 2, 2016 1 Branch LTM Sales of $52.9 million Strategic entrance into south Florida Founded in 2008, OBS is a leading supplier of wallboard and related construction products to the south Florida marketplace. OBS has developed a strong reputation for customer service and fits nicely with the GMS culture LTM Sales of $26.7 million Founded in 2009, RW is a leading supplier of wallboard and related construction products to the greater Arizona and southwestern Colorado markets Given its locations in Arizona and southwestern Colorado, RW has a strong commercial and multi-family residential focus which dovetails nicely with GMSs existing operations LTM Sales of $8.5 million Founded in the early 1970s, W&CS is a leading supplier of wallboard and related construction products to the Seattle, WA and greater Puget Sound marketplaces Given its location in Seattle, WA, W&CS has a strong commercial and multi-family residential focus which compliments GMSs existing position in the market
Continue to Use Multiple Levers to Drive Growth 6 (5) Net Sales ($ mm) Fiscal Q1 2017 Net Sales Strong track record of executing profitable growth strategy (5) When calculating our base business results, we exclude any branches that were acquired in the current fiscal year, prior fiscal year and three months prior to the start of the prior fiscal year. Fiscal Q1 2017 Performance End Market Recovery and Expansion Market Growth Operating Leverage Operational Excellence Margin Expansion Organic Growth Strategic Acquisitions Strategic Acquisition Opportunities in Highly Fragmented Market Continued Market Share Gains Greenfield Branch Openings +21.5% YOY +9.2% Base Business YOY $452.4 $549.8 $427.7 $467.2 $24.7 $82.6 $0 $200 $400 $600 Fiscal Q1 2016 Fiscal Q1 2017 Base Business Acquisitions ($ in millions) Fiscal Q1 YOY Base FY16 FY17 Growth Business (1) Wallboard Volume (MSF) 681 818 20.0% 8.8% Wallboard Price ($/'000 Sq. Ft.) 310 $ 307 $ (0.7%) Net Sales Wallboard 210.9 $ 251.3 $ 19.1% 6.8% Ceilings 79.0 86.3 9.3% 3.4% Steel Framing 67.3 84.3 25.3% 6.0% Other Products 95.3 127.9 34.2% 22.9% Total Net Sales 452.4 $ 549.8 $ 21.5% 9.2%
One-Stop-Shop Outsized Impact on Other Products Sales One-stop-shop for the Interior Contractor Interior Contractor Wallboard Steel Framing Joint Compound Tools Safety Products Insulation GMS sells a complementary and complete product offering to the interior contractor who installs wallboard, ceilings, steel framing and all the ancillary products needed to complete the job Ceilings Fasteners Other products net sales benefitting from significant pull through factor and further supplemented by pricing improvements, retail showrooms, acquisitions and other initiatives 7 Net Sales ($ mm) Fiscal Q1 2017 Other Product Net Sales Represents complementary product (other products) +34.2% YOY +22.9% Base Business YOY $95.2 $127.8 $83.3 $102.5 $11.9 $25.3 $0 $50 $100 $150 Fiscal Q1 2016 Fiscal Q1 2017 Base Business Acquisitions
Margin Expansion in Fiscal Q1 2017 8 Gross Profit ($ mm) FY 2016 Gross Profit & Margin Tailored investments in Yard Support Center, IT and branch talent to support our growth are paying off (5) Adj. EBITDA ($ mm) FY 2016 Adjusted EBITDA (1) For a reconciliation of Adj. EBITDA to Net Income (loss), the most directly comparable GAAP metric, see Appendix. Margin(1): 7.5% 8.4% Gross margin increased 140 basis points, primarily driven by increased product margins and, to a lesser extent, product mix Partially offsetting higher gross profit were higher operating expenses at the branch level to support growth in sales Adjusted EBITDA grew 34.7% to $45.9 million reflecting stronger sales activity Adjusted EBITDA margin improved ~80 basis points to 8.4% as a percentage of net sales reflecting better product margins Commentary +34.7% YOY $34.1 $45.9 $0 $10 $20 $30 $40 $50 Fiscal Q1 2016 Fiscal Q1 2017
Attractive Capital Structure Post IPO Leverage of 3.4x Net Debt / LTM Adj. EBITDA as of 7/31/16, after use of $157.2 million net proceeds from IPO and $2.8 million cash on hand to pay off $160 million Second Lien Term Loan Continued improvement in credit metrics from 6.0x Net Debt / LTM Adj. EBITDA as of 4/30/14 and 4.9x as of 4/30/15 There remains a significant degree of liquidity in the business, with $9.8 million of cash on hand and an additional $132 million undrawn on the ABL facility as of 7/31/16 In Q2 2017, Moodys and Standard & Poors upgraded GMS corporate debt to B2/B+ from B3/B based on increased construction activity and improved credit metrics Commentary Leverage Summary Net Debt / Adjusted EBITDA 9 PF Adjusted EBITDA includes the earnings of acquired entities from the beginning of the periods presented to the date of such acquisitions, as well as certain purchasing synergies and cost savings, as defined in and permitted by the ABL Facility and the First Lien Facility, and which is used in the calculation of certain baskets to covenants in the Companys debt agreements, including in connection with the Companys ability to incur additional indebtedness. PF Adjusted EBITDA for the LTM period ending 7/31/16, fiscal year ended 4/30/16 and fiscal year ended 4/30/15 include PF adjustments of $11.3 million, $12.1 million and $8.1 million, respectively. For a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP metric, see Appendix. 6.0x 4.9x 4.3x 3.4x 4/30/14 4/30/15 4/30/16 LTM 7/31/16 ($ mm) 4/30/14 4/30/15 4/30/16 7/31/16 FYE FYE FYE LTM Cash $33 $12 $19 $10 Asset-Based Revolver - 17 102 157 First Lien Term Loan 390 386 382 381 Second Lien Term Loan 160 160 160 - Capital Lease and Other 2 10 14 15 Total Debt $552 $573 $658 $553 PF Adj. EBITDA (1) $87 $114 $150 $161 Total Debt / PF Adj. EBITDA 6.3x 5.0x 4.4x 3.4x Net Debt / PF Adj. EBITDA 6.0x 4.9x 4.3x 3.4x
Appendix
Summary Quarterly Financials Note: Fiscal year end April 30. 11 (In millions, except per share data) 1Q16 2Q16 3Q16 4Q16 FY16 1Q17 (Unaudited) Wallboard Volume (MSF) 681 700 646 816 2,843 818 Wallboard Price ($ / '000 Sq. Ft.) 310 $ 306 $ 305 $ 305 $ 306 $ 307 $ Wallboard 211 $ 214 $ 197 $ 249 $ 871 $ 251 $ Ceilings 79 75 65 78 297 86 Steel framing 67 70 66 78 281 84 Other products 95 99 92 122 409 128 Net sales 452 458 420 527 1,858 550 Cost of sales 312 314 286 353 1,265 371 Gross profit 141 144 134 174 593 179 Operating expenses: Selling, general and administrative expenses 110 114 112 133 470 135 Depreciation and amortization 16 15 16 17 64 16 Total operating expenses 126 130 128 150 534 151 Operating income (loss) 15 14 6 24 59 28 Other (expense) income: Interest expense (9) (9) (9) (9) (37) (8) Change in fair value of financial instruments - - - (0) (0) (0) Write-off of discount and deferred financing costs - - - - - (5) Other income, net 1 0 1 2 4 1 Total other (expense), net (9) (9) (9) (7) (34) (12) Income (loss) from continuing operations, before tax 6 5 (3) 17 25 15 Income tax expense (benefit) 3 3 (1) 8 13 6 Net income (loss) 3 3 (2) 9 13 9 Weighted average shares outstanding: Basic 32,677 32,738 32,891 32,893 32,799 38,201 Diluted 32,831 32,898 32,891 33,155 33,125 38,602 Net income (loss) per share: Basic 0.09 $ 0.09 $ (0.07) $ 0.27 $ 0.38 $ 0.24 $ Diluted 0.09 $ 0.09 $ (0.07) $ 0.27 $ 0.38 $ 0.24 $
Quarterly Net Sales Note: Fiscal year end April 30. When calculating our base business results, we exclude any branches that were acquired in the current fiscal year, prior fiscal year and three months prior to the start of the prior fiscal year. FY16 quarterly sales from acquisitions have been updated in accordance with our presentation of base business for the FY17 vs. FY16 comparative period. Quarterly business days for FY17 are 63, 65, 63 and 63 for 1Q17, 2Q17, 3Q17 and 4Q17, respectively. Includes greenfields, which we consider extensions of base business. FY16 acquired branches have been updated to reflect the number of acquired branches that are included within the sales from acquisitions 12 ($ in millions) 1Q16 2Q16 3Q16 4Q16 FY16 1Q17 (Unaudited) Base Business (1) (2) 428 $ 432 $ 379 $ 451 $ 1,642 $ 467 $ Acquisitions (2) 25 26 41 76 216 83 Total Net Sales 452 $ 458 $ 420 $ 527 $ 1,858 $ 550 $ Business Days (3) 64 64 61 65 254 63 Net Sales by Business Day 7.1 $ 7.2 $ 6.9 $ 8.1 $ 7.3 $ 8.7 $ Base Business Branches (4) (5) 149 151 152 153 153 153 Acquired Branches (5) 7 8 26 33 33 37 Total Branches 156 159 178 186 186 190
Quarterly Net Income to Adjusted EBITDA GAAP Adjusted EBITDA Reconciliation Commentary Represents non-cash compensation expenses related to stock appreciation rights agreements Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests Represents non-cash equity-based compensation expense related to the issuance of stock options Represents severance and other costs permitted in calculations under the ABL Facility and the Term Loan Facilities Represents one-time costs related to the IPO and acquisitions paid to third party advisors Represents management fees paid to AEA, which were discontinued after the IPO Non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Mark to market adjustments for certain financial instruments Full year (i.e. predecessor) pro forma impact of acquisitions assuming a May 1st purchase 13 ( $ in 000s) 1Q16 2Q16 3Q16 4Q16 FY16 1Q17 (Unaudited) Net Income (Loss) 3,011 $ 2,825 $ (2,212) $ 8,940 $ 12,564 $ 9,163 $ Add: Income Tax Expense 2,855 2,623 (819) 7,925 12,584 6,159 Less: Interest Income (230) (208) (247) (243) (928) (43) Add: Interest Expense 9,257 9,260 9,473 9,428 37,418 13,003 Add: Depreciation Expense 7,273 6,465 6,469 6,460 26,667 6,382 Add: Amortization Expense 8,792 8,797 9,540 10,419 37,548 9,413 EBITDA 30,958 $ 29,762 $ 22,204 $ 42,929 $ 125,853 $ 44,077 $ Adjustments Stock appreciation rights expense (benefit) (A) 594 692 337 365 1,988 (92) Redeemable noncontrolling interests (B) 554 451 167 (292) 880 292 Equity-based compensation (C) 498 863 728 610 2,699 673 Severance and other permitted costs (D) 557 824 52 (1,054) 379 140 Transaction costs (acquisition and other) (E) 415 1,340 1,057 939 3,751 654 Loss (gain) on disposal of assets (25) 305 (205) (720) (645) (198) AEA management fee (F) 562 563 562 563 2,250 188 Effects of fair value adjustments to inventory (G) - - 786 223 1,009 164 Interest rate swap / cap mark-to-market (H) - - - 19 19 43 Total Add-Backs 3,155 $ 5,038 $ 3,484 $ 653 $ 12,330 $ 1,864 $ Adjusted EBITDA 34,113 $ 34,800 $ 25,688 $ 43,582 $ 138,183 $ 45,941 $ Contributions from acquisitions - prior year (I) 4,896 4,991 2,073 132 12,093 Contributions from acquisitions - current year (I) 1,227 856 1,232 3,315 811 Pro-forma Adjusted EBITDA 39,009 $ 41,018 $ 28,617 $ 44,946 $ 153,591 $ 46,752 $
Quarterly Cash Flows 14 ($ in millions) (Unaudited) 1Q16 2Q16 3Q16 4Q16 FY16 1Q17 Net income (loss) $ 3.0 $ 2.8 $ (2.2) $ 8.9 $ 12.6 $ 9.2 Non-cash changes (2.6) 17.2 12.2 35.4 62.2 (5.0) Changes in primary working capital components: Trade accounts and notes receivable (21.8) (2.1) 25.8 (29.2) (27.3) (19.4) Inventories 0.4 (0.6) (0.0) (0.4) (0.7) (17.1) Accounts payable 2.7 (1.2) (15.6) 15.2 1.1 1.7 Cash provided by (used in) operating activities (18.4) 16.1 20.2 29.8 47.7 (30.6) Purchases of property and equipment (1.5) (1.2) (1.3) (3.7) (7.7) (2.6) Proceeds from sale of assets 0.4 5.7 0.7 3.1 9.8 0.8 Purchase of financial instruments - - - - - - Acquisitions of businesses, net of cash acquired - (0.9) (82.9) (29.9) (113.6) (23.3) Cash (used in) provided by investing activities (1.0) 3.6 (83.5) (30.5) (111.4) (25.0) Cash provided by (used in) financing activities 20.3 (23.5) 61.3 12.4 70.5 46.4 Increase (decrease) in cash and cash equivalents 0.9 (3.8) (2.0) 11.7 6.8 (9.2) Balance, beginning of period 12.3 13.2 9.4 7.4 12.3 19.1 Balance, end of period $ 13.2 $ 9.4 $ 7.4 $ 19.1 $ 19.1 $ 9.8 Supplemental cash flow disclosures: Cash paid for income taxes $ 4.5 $ 9.7 $ 8.0 $ 3.9 $ 26.1 $ 6.5 Cash paid for interest $ 7.9 $ 8.6 $ 8.3 $ 9.8 $ 34.6 $ 6.6 Historical
SG&A Adjustments Table 15 GAAP SG&A Reconciliation Commentary Represents non-cash compensation expenses related to stock appreciation rights agreements Represents non-cash compensation expense related to changes in the fair values of noncontrolling interests Represents non-cash equity-based compensation expense related to the issuance of stock options Represents severance and other costs permitted in calculations under the ABL Facility and the Term Loan Facilities Represents one-time costs related to the IPO and acquisitions paid to third party advisors Represents management fees paid to AEA, which were discontinued after the IPO. 1Q17 includes fees paid for the month of May (Unaudited) ($ in millions) 1Q16 2Q16 3Q16 4Q16 FY2016 1Q17 SG&A - Reported 110.2 $ 114.4 $ 112.2 $ 133.2 $ 470.0 $ 135.1 $ Adjustments Stock appreciation rights expense (benefit) (A) (0.6) (0.7) (0.3) (0.4) (2.0) 0.1 Redeemable noncontrolling interests (B) (0.6) (0.5) (0.2) 0.3 (0.9) (0.3) Equity-based compensation (C) (0.5) (0.9) (0.7) (0.6) (2.7) (0.7) Severance and other permitted costs (D) (0.6) (0.8) (0.1) (0.1) (1.6) (0.1) Transaction costs (acquisition and other) (E) (0.4) (1.3) (1.1) (0.9) (3.8) (0.7) Loss (gain) on disposal of assets 0.0 (0.3) 0.2 0.7 0.6 0.2 AEA management fee (F) (0.6) (0.6) (0.6) (0.6) (2.2) (0.2) SG&A - Adjusted 107.1 $ 109.3 $ 109.5 $ 131.6 $ 457.6 $ 133.4 $
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