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Section 1: 8-K (8-K)

 

 

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): March 5, 2019

 


 

GMS INC.

(Exact name of registrant as specified in charter)

 


 

Delaware

 

001-37784

 

46-2931287

(State or Other Jurisdiction

 

(Commission

 

(I.R.S. Employer

of Incorporation)

 

File Number)

 

Identification No.)

 

100 Crescent Centre Parkway, Suite 800
Tucker, Georgia

 

30084

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s 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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  o

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

 

On March 5, 2019, 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 Company’s financial results for the three and nine months ended January 31, 2019.

 

The information contained in Item 7.01 concerning the presentation to GMS investors is hereby incorporated into this Item 2.02 by reference.

 

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 Exhibits 99.1 and 99.2 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 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 March 5, 2019 and may be used by GMS in various other presentations to investors on or after March 5, 2019.

 

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

 

Description

99.1*

 

Press release, dated March 5, 2019.

99.2*

 

GMS Inc. presentation to investors.

 


*Furnished herewith

 

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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: March 5, 2019

By:

/s/ Craig D. Apolinsky

 

Name:

Craig D. Apolinsky

 

Title:

General Counsel and Corporate Secretary

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

GMS REPORTS THIRD QUARTER FISCAL 2019 RESULTS

—Net Sales Increased 23.6% to a Q3 Record of $723.9 Million —

—Organic Net Sales increased 6.6% —

—Reported Net Income of $5.8 Million or $0.14 per share—

—Adjusted Net Income of $17.3 Million or $0.41 per share—

—Adjusted EBITDA Increased 41.5% to a Q3 Record of $59.7 Million —

 

Tucker, Georgia, March 5, 2019. 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.

 

1


 

·                  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.

 

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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.

 

3


 

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.

 

Contact Information:

 

Investors:

Leslie H. Kratcoski

ir@gms.com

770-723-3306

 

Media:

marketing@gms.com

770-723-3378

 

4


 

GMS Inc.

Condensed Consolidated Statements of Operations (Unaudited)

Three and Nine Months Ended January 31, 2019 and 2018

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2019

 

2018

 

2019

 

2018

 

Net sales

 

$

723,902

 

$

585,508

 

$

2,335,883

 

$

1,875,669

 

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

 

489,676

 

390,088

 

1,588,691

 

1,262,885

 

Gross profit

 

234,226

 

195,420

 

747,192

 

612,784

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

178,180

 

156,262

 

548,883

 

472,232

 

Depreciation and amortization

 

30,220

 

16,490

 

87,329

 

49,548

 

Total operating expenses

 

208,400

 

172,752

 

636,212

 

521,780

 

Operating income

 

25,826

 

22,668

 

110,980

 

91,004

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

Interest expense

 

(19,526

)

(7,871

)

(54,896

)

(23,288

)

Change in fair value of financial instruments

 

 

(276

)

(6,395

)

(710

)

Write-off of debt discount and deferred financing fees

 

 

 

 

(74

)

Other income, net

 

957

 

677

 

2,025

 

1,675

 

Total other expense, net

 

(18,569

)

(7,470

)

(59,266

)

(22,397

)

Income before taxes

 

7,257

 

15,198

 

51,714

 

68,607

 

Provision (benefit) for income taxes

 

1,442

 

(4,488

)

12,337

 

15,555

 

Net income

 

$

5,815

 

$

19,686

 

$

39,377

 

$

53,052

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

40,912

 

41,036

 

41,053

 

41,004

 

Diluted

 

41,371

 

42,228

 

41,789

 

42,167

 

Net income per common share(1):

 

 

 

 

 

 

 

 

 

Basic

 

$

0.14

 

$

0.48

 

$

0.94

 

$

1.29

 

Diluted

 

$

0.14

 

$

0.47

 

$

0.92

 

$

1.26

 

 


(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:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(in thousands, except per share data)

 

Net income

 

$

5,815

 

$

19,686

 

$

39,377

 

$

53,052

 

Less: Net income allocated to participating securities

 

156

 

 

940

 

 

Net income attributable to common stockholders

 

$

5,659

 

$

19,686

 

$

38,437

 

$

53,052

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

40,912

 

41,036

 

41,053

 

41,004

 

Basic earnings per common share

 

$

0.14

 

$

0.48

 

$

0.94

 

$

1.29

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

40,912

 

41,036

 

41,053

 

41,004

 

Add: Common Stock Equivalents

 

459

 

1,192

 

736

 

1,163

 

Diluted weighted average common shares outstanding

 

41,371

 

42,228

 

41,789

 

42,167

 

Diluted earnings per common share

 

$

0.14

 

$

0.47

 

$

0.92

 

$

1.26

 

 

5


 

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

January 31, 2019 and April 30, 2018

(in thousands, except per share data)

 

 

 

January 31, 

 

April 30, 

 

 

 

2019

 

2018

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

74,347

 

$

36,437

 

Trade accounts and notes receivable, net of allowances of $7,963 and $9,633, respectively

 

410,017

 

346,450

 

Inventories, net

 

308,115

 

239,223

 

Prepaid expenses and other current assets

 

12,610

 

11,726

 

Total current assets

 

805,089

 

633,836

 

Property and equipment, net of accumulated depreciation of $113,898 and $85,761, respectively

 

280,225

 

163,582

 

Goodwill

 

619,554

 

427,645

 

Intangible assets, net

 

452,811

 

222,682

 

Deferred income taxes

 

5,219

 

 

Other assets

 

14,250

 

6,766

 

Total assets

 

$

2,177,148

 

$

1,454,511

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

129,580

 

$

116,168

 

Accrued compensation and employee benefits

 

52,454

 

56,323

 

Other accrued expenses and current liabilities

 

60,488

 

45,146

 

Current portion of long-term debt

 

40,328

 

16,284

 

Total current liabilities

 

282,850

 

233,921

 

Non-current liabilities:

 

 

 

 

 

Long-term debt, less current portion

 

1,193,522

 

579,602

 

Deferred income taxes, net

 

9,743

 

10,742

 

Other liabilities

 

46,148

 

35,088

 

Liabilities to noncontrolling interest holders, less current portion

 

11,125

 

15,707

 

Total liabilities

 

1,543,388

 

875,060

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01 per share, 500,000 shares authorized; 40,561 and 41,069 shares issued and outstanding as of January 31, 2019 and April 30, 2018, respectively

 

406

 

411

 

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of January 31, 2019 and April 30, 2018

 

 

 

Exchangeable shares

 

29,639

 

 

Additional paid-in capital

 

482,635

 

489,007

 

Retained earnings

 

128,969

 

89,592

 

Accumulated other comprehensive income (loss)

 

(7,889

)

441

 

Total stockholders’ equity

 

633,760

 

579,451

 

Total liabilities and stockholders’ equity

 

$

2,177,148

 

$

1,454,511

 

 

6


 

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended January 31, 2019 and 2018

(in thousands)

 

 

 

Nine Months Ended

 

 

 

January 31,

 

 

 

2019

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

39,377

 

$

53,052

 

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

 

 

 

 

 

Depreciation and amortization

 

87,329

 

49,548

 

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

 

2,505

 

2,141

 

Provision for losses on accounts and notes receivable

 

240

 

133

 

Provision for obsolescence of inventory

 

416

 

113

 

Effects of fair value adjustments to inventory

 

4,129

 

276

 

Increase in fair value of contingent consideration

 

535

 

195

 

Equity-based compensation

 

4,706

 

4,375

 

Gain on sale and disposal of assets

 

(412

)

(648

)

Change in fair value of financial instruments

 

6,395

 

710

 

Changes in assets and liabilities net of effects of acquisitions:

 

 

 

 

 

Trade accounts and notes receivable

 

23,243

 

14,545

 

Inventories

 

(11,576

)

(23,893

)

Prepaid expenses and other assets

 

(968

)

(8,756

)

Accounts payable

 

(17,856

)

(5,723

)

Accrued compensation and employee benefits

 

(3,824

)

(7,140

)

Derivative liability

 

(10,778

)

 

Other accrued expenses and liabilities

 

446

 

312

 

Deferred income taxes

 

(18,470

)

(12,860

)

Cash provided by operating activities

 

105,437

 

66,380

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(13,385

)

(13,408

)

Proceeds from sale of assets

 

910

 

2,374

 

Acquisition of businesses, net of cash acquired

 

(579,731

)

(23,568

)

Cash used in investing activities

 

(592,206

)

(34,602

)

Cash flows from financing activities:

 

 

 

 

 

Repayments on the revolving credit facility

 

(748,999

)

(597,092

)

Borrowings from the revolving credit facility

 

886,896

 

493,739

 

Payments of principal on long-term debt

 

(7,476

)

(4,332

)

Payments of principal on capital lease obligations

 

(13,923

)

(4,530

)

Borrowings from term loan

 

996,840

 

577,616

 

Repayments of term loan

 

(571,840

)

(477,616

)

Repurchases of common stock

 

(11,514

)

 

Debt issuance costs

 

(7,933

)

(3,283

)

Proceeds from exercises of stock options

 

1,280

 

130

 

Other financing activities

 

1,355

 

(2,032

)

Cash provided by (used in) financing activities

 

524,686

 

(17,400

)

Effect of exchange rates on cash and cash equivalents

 

(7

)

 

Increase in cash and cash equivalents

 

37,910

 

14,378

 

Cash and cash equivalents, beginning of period

 

36,437

 

14,561

 

Cash and cash equivalents, end of period

 

$

74,347

 

$

28,939

 

Supplemental cash flow disclosures:

 

 

 

 

 

Cash paid for income taxes

 

$

16,121

 

$

35,005

 

Cash paid for interest

 

45,724

 

21,192

 

Supplemental schedule of noncash activities:

 

 

 

 

 

Assets acquired under capital lease

 

$

102,053

 

$

7,953

 

Issuance of installment notes associated with equity-based compensation liability awards

 

5,356

 

11,898

 

 

7


 

GMS Inc.

Net Sales by Product Group (Unaudited)

Three and Nine Months Ended January 31, 2019 and 2018

(dollars in thousands)

 

 

 

Three Months Ended 

 

Nine Months Ended 

 

 

 

January 31, 

 

% of

 

January 31, 

 

% of

 

January 31, 

 

% of

 

January 31, 

 

% of

 

 

 

2019

 

Total

 

2018

 

Total

 

2019

 

Total

 

2018

 

Total

 

 

 

(dollars in thousands)

 

Wallboard

 

$

297,358

 

41.1

%

$

256,413

 

43.8

%

$

949,781

 

40.7

%

$

829,568

 

44.2

%

Ceilings

 

105,219

 

14.5

%

90,360

 

15.4

%

339,450

 

14.5

%

291,716

 

15.6

%

Steel framing

 

117,432

 

16.2

%

96,744

 

16.5

%

382,304

 

16.4

%

304,598

 

16.2

%

Other products

 

203,893

 

28.2

%

141,991

 

24.3

%

664,348

 

28.4

%

449,787

 

24.0

%

Total net sales

 

$

723,902

 

 

 

$

585,508

 

 

 

$

2,335,883

 

 

 

$

1,875,669

 

 

 

 

8


 

GMS Inc.

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

Three and Nine Months Ended January 31, 2019 and 2018

(in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,815

 

$

19,686

 

$

39,377

 

$

53,052

 

Interest expense

 

19,526

 

7,871

 

54,896

 

23,288

 

Write-off of debt discount and deferred financing fees

 

 

 

 

74

 

Interest income

 

(10

)

(44

)

(43

)

(93

)

Provision (benefit) for income taxes

 

1,442

 

(4,488

)

12,337

 

15,555

 

Depreciation expense

 

11,919

 

6,009

 

34,067

 

18,021

 

Amortization expense

 

18,301

 

10,481

 

53,262

 

31,527

 

EBITDA

 

$

56,993

 

$

39,515

 

$

193,896

 

$

141,424

 

Stock appreciation expense (a)

 

442

 

631

 

1,425

 

1,863

 

Redeemable noncontrolling interests(b)

 

(35

)

340

 

778

 

1,370

 

Equity-based compensation(c)

 

1,140

 

430

 

2,638

 

1,277

 

Severance and other permitted costs(d)

 

229

 

8

 

5,947

 

325

 

Transaction costs (acquisitions and other)(e)

 

1,066

 

75

 

6,660

 

321

 

Gain on disposal of assets

 

(118

)

(51

)

(412

)

(648

)

Effects of fair value adjustments to inventory(f)

 

 

89

 

4,129

 

276

 

Change in fair value of financial instruments(g)

 

 

276

 

6,395

 

710

 

Secondary public offering costs(h)

 

 

894

 

 

1,525

 

Debt transaction costs(i)

 

 

 

678

 

758

 

EBITDA add-backs

 

2,724

 

2,692

 

28,238

 

7,777

 

Adjusted EBITDA

 

$

59,717

 

$

42,207

 

$

222,134

 

$

149,201

 

Adjusted EBITDA margin

 

8.2

%

7.2

%

9.5

%

8.0

%

 


(a)                                 Represents non-cash expense related to stock appreciation rights agreements.

 

(b)                                 Represents non-cash compensation expense related to changes in the redemption values of noncontrolling interests.

 

(c)                                  Represents non-cash equity-based compensation expense related to the issuance of share-based awards.

 

(d)                                 Represents severance expenses and other costs permitted in calculations under the ABL Facility and the First Lien Facility.

 

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

 

(f)                                   Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value.

 

(g)                                  Represents the mark-to-market adjustments for derivative financial instruments.

 

(h)                                 Represents one-time costs related to our secondary offering paid to third-party advisors.

 

(i)                                     Represents expenses paid to third-party advisors related to debt refinancing activities.

 

9


 

GMS Inc.

Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited)

Three and Nine Months Ended January 31, 2019 and 2018

(in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31,

 

January 31,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

59,780

 

$

34,370

 

$

105,437

 

$

66,380

 

Purchases of property and equipment

 

(4,229

)

(4,966

)

(13,385

)

(13,408

)

Free cash flow (a)

 

$

55,551

 

$

29,404

 

$

92,052

 

$

52,972

 

 


(a)                                 Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures.

 

GMS Inc.

Reconciliation of Selling, General and Administrative Expense to Adjusted SG&A (Unaudited)

Three and Nine Months Ended January 31, 2019 and 2018

(in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

$

178,180

 

$

156,262

 

$

548,883

 

$

472,232

 

 

 

 

 

 

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

 

 

Stock appreciation expense (a)

 

(442

)

(631

)

(1,425

)

(1,863

)

Redeemable noncontrolling interests(b)

 

35

 

(340

)

(778

)

(1,370

)

Equity-based compensation(c)

 

(1,140

)

(430

)

(2,638

)

(1,277

)

Severance and other permitted costs(d)

 

(229

)

(8

)

(5,947

)

(325

)

Transaction costs (acquisitions and other)(e)

 

(1,066

)

(75

)

(6,660

)

(321

)

Gain on disposal of assets

 

118

 

51

 

412

 

648

 

Secondary public offering costs(f)

 

 

(894

)

 

(1,525

)

Debt transaction costs(g)

 

 

 

(678

)

(758

)

Adjusted SG&A

 

$

175,456

 

$

153,935

 

$

531,169

 

$

465,441

 

Adjusted SG&A margin

 

24.2

%

26.3

%

22.7

%

24.8

%

 


(a)                                 Represents non-cash expense related to stock appreciation rights agreements.

 

(b)                                 Represents non-cash compensation expense related to changes in the redemption values of noncontrolling interests.

 

(c)                                  Represents non-cash equity-based compensation expense related to the issuance of share-based awards.

 

(d)                                 Represents severance expenses and other costs permitted in calculations under the ABL Facility and the First Lien Facility.

 

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

 

(f)                                   Represents one-time costs related to our secondary offering paid to third-party advisors.

 

(g)                                  Represents expenses paid to third-party advisors related to debt refinancing activities.

 

10


 

GMS Inc.

Reconciliation of Income Before Taxes to Adjusted Net Income (Unaudited)

Three and Nine Months Ended January 31, 2019 and 2018

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

January 31, 

 

January 31, 

 

 

 

2019

 

2018

 

2019

 

2018

 

Income before taxes

 

$

7,257

 

$

15,198

 

$

51,714

 

$

68,607

 

EBITDA add-backs

 

2,724

 

2,692

 

28,238

 

7,777

 

Write-off of debt discount and deferred financing fees

 

 

 

 

74

 

Purchase accounting depreciation and amortization (1)

 

12,395

 

5,493

 

37,250

 

16,038

 

Adjusted pre-tax income

 

22,376

 

23,383

 

117,202

 

92,496

 

Adjusted income tax expense

 

5,035

 

8,067

 

26,370

 

31,911

 

Adjusted net income

 

$

17,341

 

$

15,316

 

$

90,832

 

$

60,585

 

Effective tax rate (2)

 

22.5

%

34.5

%

22.5

%

34.5

%

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

40,912

 

41,036

 

41,053

 

41,004

 

Diluted (3)

 

42,500

 

42,228

 

42,918

 

42,137

 

Adjusted net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.42

 

$

0.37

 

$

2.21

 

$

1.48

 

Diluted

 

$

0.41

 

$

0.36

 

$

2.12

 

$

1.44

 

 


(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. Full year projected amount for FY19 is $49.7 million.

(2)          Normalized cash tax rate determined based on our estimated taxes for fiscal 2019 excluding the impact of purchase accounting and certain other deferred tax accounts.

(3)          Includes the effect of 1.1 million shares of equity issued in connection with the acquisition of Titan that are exchangeable for the Company’s common stock.

 

11


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

GMS Quarterly Review Fiscal Q3 2019

 

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. 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. 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. Please see the Appendix to this presentation for a further discussion on these non-GAAP measures and a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 2

 

Fiscal Q3 2019 Highlights 3 We achieved record third quarter results Net sales increased 23.6% to a record $723.9 million Organic net sales growth of 6.6% Wallboard sales increased 16.0% (3.9% organic) Ceilings sales increased 16.4% (10.6% organic) Steel framing sales increased 21.4% (13.1% organic) Other product sales increased 43.6% (4.5% organic) Reported net income of $5.8 million, or $0.14 per diluted share Adjusted net income of $17.3 million, or $0.41 per diluted share (1) Adjusted EBITDA increased 41.5% to $59.7 million (1) Generated strong cash flows during the quarter, enabling us to reduce our net debt by $32.8 million and repurchase ~691,000 shares for $11.5 million Titan integration progressing well; purchasing synergies being realized Opened one greenfield location near Akron, OH in November 2018, for a current total of four this fiscal year Fiscal Q3 2019 Highlights Other Highlights Completed the acquisition of Commercial Builders Group, LLC in southern Louisiana on March 4, 2019 We remain encouraged by what we are seeing across our business and in the broader economy despite questions about current macro outlook For a reconciliation of Adjusted Net Income and Adj. EBITDA to Net Income, the most directly comparable GAAP metric, see Appendix.

 

Fiscal Q3 2019 Performance Gross Profit ($ mm) Gross Profit & Margin Net Sales & Mix 4 Net Sales ($ mm) +23.6% YOY Organic net sales growth of 6.6% Wallboard: +3.9% organic (Volume flat/Price ~+4%) Ceilings: +10.6% organic (Volume ~ +3%/Price ~ +7%) Steel: +13.1% organic (Volume ~+3%/Price ~+10%) Other: +4.5% Gross Profit up 19.9% as a result of higher sales, including the positive impact of acquisitions and pricing improvement Gross margin of 32.4% down from 33.4% last year due to increased product costs and changes in product mix On a sequential basis, gross margin improved 20 basis points from 32.2% in Q2 $585.5 $723.9 $0 $100 $200 $300 $400 $500 $600 $700 $800 Fiscal Q3 2018 Fiscal Q3 2019 44% 15% 17% 24% 41% 15% 16% 28%

 

Fiscal Q3 2019 Performance Adj. EBITDA ($ mm) Net Income & Adjusted EBITDA (1) For a reconciliation of Adj. SG&A to reported SG&A and Adj. EBITDA and Adj. Net Income to Net Income, the most directly comparable GAAP metrics, see Appendix. Fiscal Q3 2019 includes the $5.9 million favorable impact to Adjusted SG&A and Adjusted EBITDA related to the amendment of existing GMS equipment operating leases to capital leases. We have excluded this impact for comparability. +41.5% YOY 5 26.3% 24.2% SG&A and Adjusted SG&A (1) Adj. SG&A ($ mm) 7.2% 8.2% SG&A% ex. Leases(2): 25.0% -130 bps Reported net income was $5.8 million in Q3 2019 and $19.7 million in Q3 2018 Adjusted net income was $17.3 million in Q3 2019 and $15.3 million in Q3 2018 Adjusted EBITDA up 41.5% as a result of contributions from Titan, increased operating leverage, continued pricing improvement and favorable lease accounting Adjusted EBITDA margin up 100 bps year over year; excluding leases, up 20 bps Reported SG&A was $178.2 million (24.6% of sales) in Q3 2019 and $156.3 million (26.7% of sales) in Q3 2018 Adjusted SG&A was $175.5 million (24.2% of sales) in Q3 2019 and $153.9 million (26.3% of sales) in Q3 2018 Adjusted SG&A as % of sales reduced by 210 bps from 26.3% in Q3 2018 to 24.2% in Q3 2019: 130 bps due to increased cost efficiencies and contributions from Titan, partially offset by continuing inflationary pressures, primarily in logistics Remaining 80 bps due to lease changes Margin ex. Leases(2): 7.4% +20 bps $42.2 $59.7 $0 $10 $20 $30 $40 $50 $60 $70 Fiscal Q3 2018 Fiscal Q3 2019 $153.9 $175.5 $0 $25 $50 $75 $100 $125 $150 $175 Fiscal Q3 2018 Fiscal Q3 2019

 

Attractive Capital Structure Generated $59.8 million of cash from operations and $55.6 million of free cash flow (1) during the quarter, reducing net debt by $32.8 million and repurchasing $11.5 million of common stock Post Titan transaction capital structure as of 1/31/19: Reflects the June 1, 2018 $627 million acquisition of WSB Titan Pro Forma leverage of 3.8x Net Debt / LTM Pro Forma Adj. EBITDA (2) Compares favorably to 6.0x Net Debt / LTM Pro Forma Adj. EBITDA as of 4/30/14 and 4.3x pre-IPO Substantial liquidity, with $74.3 million of cash on hand and an additional $220 million available under our ABL Facilities First Lien Term Loan at L+275 (>75% of total long term debt) matures 2025 In order to hedge against potential future interest rate volatility, entered into an interest rate swap agreement in February. This agreement effectively provides a fixed rate on $500 million of our first lien term debt Commentary Leverage Summary Net Debt / PF Adjusted EBITDA (2) Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures. Differences may occur due to rounding. See appendix for a reconciliation of Pro Forma Adjusted EBITDA. Net of unamortized discount of $2.4mm, $2.3mm and $2.2mm as of July 31, 2018, October 31, 2018 and January 31, 2019, respectively. Net of deferred financing costs of $13.6mm, $13.1mm and $12.6mm as of July 31, 2018, October 31, 2018 and January 31, 2019, respectively. Net of unamortized discount of $1.5mm, $1.4mm and $1.3mm as of July 31, 2018, October 31, 2018 and January 31, 2019, respectively. 6 4.2x 3.8x 3.8x 7/31/18 LTM 10/31/18 LTM 01/31/19 LTM ($ mm) 7/31/18 10/31/18 1/31/19 LTM LTM LTM Cash and cash equivalents $37 $53 $74 Asset-Based Revolver $215 $153 $138 First Lien Term Loan (3)(4) 978 976 975 Capital Lease Obligations 94 100 105 Installment Notes (5) 16 15 16 Total Debt $1,304 $1,245 $1,234 Total Net Debt $1,267 $1,192 $1,160 PF Adj. EBITDA (2) $304 $310 $305 Total Debt / PF Adj. EBITDA 4.3x 4.0x 4.0x Net Debt / PF Adj. EBITDA 4.2x 3.8x 3.8x

 

Leading Specialty Distributor Poised for Continued Growth 7 Market – Leading Distributor of Interior Building Products with significant scale and local expertise Differentiated Service Model Drives Market Leadership Multiple Levers to Drive Market Leading Growth – Organic Growth, Greenfields, M&A, Operating Leverage Capitalizing on growth in Large, Diverse End Markets Entrepreneurial Culture with Dedicated Employees and Experienced Leadership Driving Superior Execution

 

Appendix

 

Summary Quarterly Financials 9 FY19 Business Days 1Q19 64 days 2Q19 65 days 3Q19 62 days 4Q19 63 days FY19 254 days Note: Fiscal year end April 30. Includes greenfields, which we consider extensions of “base business.” FY18 acquired branches have been updated to reflect the number of acquired branches that are included within the sales from acquisitions (In millions, except per share data) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 (Unaudited) Wallboard Volume (MSF) 914 929 826 878 3,548 985 1,025 912 Wallboard Price ($ / '000 Sq. Ft.) 311 $ 311 $ 312 $ 319 $ 313 $ 323 $ 326 $ 326 $ Wallboard 285 $ 288 $ 256 $ 280 $ 1,110 $ 318 $ 335 $ 297 $ Ceilings 100 102 90 96 387 116 118 105 Steel framing 105 103 97 107 412 129 136 117 Other products 153 155 142 153 603 215 245 204 Net sales 642 648 586 636 2,511 778 834 724 Cost of sales 437 436 390 430 1,693 533 566 490 Gross profit 205 212 195 206 819 245 268 234 Gross margin 31.9% 32.8% 33.4% 32.4% 32.6% 31.5% 32.2% 32.4% Operating expenses: Selling, general and administrative expenses 156 160 156 162 634 185 185 178 Depreciation and amortization 16 17 16 16 66 26 31 30 Total operating expenses 172 177 173 178 699 212 216 208 Operating income 33 36 23 28 119 33 52 26 Other (expense) income: Interest expense (8) (8) (8) (8) (31) (16) (19) (20) Change in fair value of financial instruments (0) (0) (0) (5) (6) (6) (0) - Write-off of discount and deferred financing costs (0) - - - (0) - - - Other income, net 0 1 1 1 2 1 0 1 Total other expense, net (7) (8) (7) (13) (35) (22) (19) (19) Income from continuing operations, before tax 25 28 15 15 84 11 33 7 Income tax expense (benefit) 10 10 (4) 5 21 3 8 1 Net income 15 $ 18 $ 20 $ 10 $ 63 $ 9 $ 25 $ 6 $ Business Days 64 65 62 63 254 64 65 62 Net Sales by Business Day 10.0 $ 10.0 $ 9.4 $ 10.1 $ 9.9 $ 12.2 $ 12.8 $ 11.7 $ Base Business Branches (1) (2) 206 206 207 207 207 209 209 211 Acquired Branches (2) - 4 5 7 7 37 38 38 Total Branches 206 210 212 214 214 246 247 249

 

Quarterly Cash Flows 10 Free cash flow is a non-GAAP financial measure defined as net cash provided by operations less capital expenditures. Differences may occur due to rounding. ($ in millions) (Unaudited) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 Net income $ 15.3 $ 18.0 $ 19.7 $ 9.9 $ 63.0 $ 8.7 $ 24.9 $ 5.8 Non-cash changes & other changes (0.2) 13.3 14.9 35.3 63.4 7.1 45.3 19.8 Changes in primary working capital components: Trade accounts and notes receivable (12.9) (8.9) 36.4 (26.3) (11.8) (41.0) (4.4) 68.6 Inventories (3.3) (4.0) (16.3) (11.2) (34.8) (20.9) 16.4 (7.0) Accounts payable 9.5 5.1 (20.3) 17.1 11.4 (1.7) 11.2 (27.4) Cash provided by (used in) operating activities 8.5 23.5 34.4 24.9 91.2 (47.8) 93.5 59.8 Purchases of property and equipment (5.5) (2.9) (5.0) (10.3) (23.7) (3.8) (5.4) (4.2) Proceeds from sale of assets 1.4 0.5 0.4 0.5 2.9 0.3 0.4 0.3 Acquisitions of businesses, net of cash acquired (3.1) (15.3) (5.2) (4.8) (28.3) (575.5) (3.4) (0.8) Cash (used in) investing activities (7.2) (17.7) (9.7) (14.6) (49.2) (579.0) (8.4) (4.8) Cash provided by (used in) financing activities 3.9 (5.8) (15.5) (2.8) (20.2) 627.3 (68.7) (33.9) Increase in cash and cash equivalents 5.2 0.0 9.2 7.5 21.8 0.4 16.0 21.5 Balance, beginning of period 14.6 19.7 19.8 28.9 14.6 36.4 36.8 52.9 Balance, end of period $ 19.7 $ 19.8 $ 28.9 $ 36.4 $ 36.4 $ 36.8 $ 52.9 $ 74.3 Supplemental cash flow disclosures: Cash paid for income taxes $ 1.8 $ 26.7 $ 6.6 $ 3.9 $ 39.0 $ 1.0 $ 9.5 $ 5.7 Cash paid for interest $ 6.8 $ 7.3 $ 7.1 $ 7.4 $ 28.6 $ 11.0 $ 20.0 $ 14.8 Cash provided by (used in) operating activities $ 8.5 $ 23.5 $ 34.4 $ 24.9 $ 91.2 $ (47.8) $ 93.5 $ 59.8 Purchases of property and equipment (5.5) (2.9) (5.0) (10.3) (23.7) (3.8) (5.4) (4.2) Free cash flow (1) 3.0 20.6 29.5 14.6 67.4 (51.6) 88.1 55.6 Historical

 

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. FY18 quarterly sales from acquisitions have been updated in accordance with our presentation of base business for the FY19 vs. FY18 comparative period. 11 ($ in millions) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 (Unaudited) Base Business (1) (2) 642 $ 642 $ 579 $ 627 $ 2,490 $ 681 $ 698 $ 617 $ Acquisitions (2) - 6 7 8 21 97 136 107 Total Net Sales 642 $ 648 $ 586 $ 636 $ 2,512 $ 778 $ 834 $ 724 $ Total Net Sales Growth Wallboard 13.3% 6.9% 0.6% (0.8%) 4.8% 11.6% 16.0% 16.0% Ceilings 15.5% 19.0% 10.5% 9.3% 13.6% 16.2% 16.5% 16.4% Steel Framing 24.1% 7.4% 3.5% 6.8% 10.0% 23.4% 31.5% 21.4% Other Products 19.8% 10.2% 7.4% 5.6% 10.5% 40.7% 58.4% 43.6% Total Net Sales 16.8% 9.5% 4.1% 3.4% 8.3% 21.2% 28.7% 23.6% Base Business Sales Growth Wallboard 4.9% 3.0% (1.0%) (1.4%) 1.5% 2.5% 3.7% 3.9% Ceilings 10.6% 12.9% 7.4% 5.1% 9.0% 8.1% 10.0% 10.6% Steel Framing 10.0% 2.3% 3.6% 5.5% 5.4% 16.1% 21.9% 13.1% Other Products 10.0% 6.1% 7.2% 4.6% 7.0% 4.6% 8.5% 4.5% Total Base Business Net Sales 7.8% 5.1% 2.9% 2.0% 4.5% 6.1% 8.7% 6.6%

 

Quarterly Net Income to Adjusted EBITDA 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 share-based awards Represents severance and other costs permitted in calculations under the ABL Facility and the First Lien Facility Represents one-time costs related to our initial public offering and acquisitions paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Represents mark-to-market adjustments for certain financial instruments Represents costs paid to third party advisors related to the secondary public offerings of our common stock Represents costs paid to third party advisors related to debt refinancing activities 12 ( $ in 000s) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 (Unaudited) Net Income 15,343 $ 18,023 $ 19,686 $ 9,919 $ 62,971 $ 8,650 $ 24,912 $ 5,815 $ Add: Interest Expense 7,500 7,917 7,871 8,107 31,395 16,188 19,182 19,526 Add: Write off of debt discount and deferred financing fees 74 - - - 74 - - - Less: Interest Income (23) (26) (44) (84) (177) (236) 203 (10) Add: Income Tax Expense (Benefit) 10,060 9,983 (4,488) 5,328 20,883 2,836 8,059 1,442 Add: Depreciation Expense 5,990 6,023 6,009 6,054 24,075 10,610 11,538 11,919 Add: Amortization Expense 10,355 10,690 10,481 9,928 41,455 15,712 19,249 18,301 EBITDA 49,299 $ 52,610 $ 39,515 $ 39,252 $ 180,676 $ 53,760 $ 83,143 $ 56,993 $ Adjustments Stock appreciation rights expense (A) 590 642 631 455 2,318 334 649 442 Redeemable noncontrolling interests (B) 866 164 340 498 1,868 531 282 (35) Equity-based compensation (C) 473 375 430 418 1,696 404 1,094 1,140 Severance and other permitted costs (D) 205 113 8 256 582 4,836 882 229 Transaction costs (acquisition and other) (E) 159 88 75 3,049 3,370 4,753 841 1,066 (Gain) loss on disposal of assets (390) (207) (51) 139 (509) (121) (173) (118) Effects of fair value adjustments to inventory (F) - 187 89 48 324 4,129 - - Change in fair value of financial instruments (G) 196 238 276 5,415 6,125 6,019 376 - Secondary public offerings (H) 631 - 894 - 1,525 - - - Debt transaction costs (I) 723 35 - 527 1,285 627 51 - Total Add-Backs 3,453 $ 1,635 $ 2,691 $ 10,805 $ 18,582 $ 21,512 $ 4,002 $ 2,724 $ Adjusted EBITDA (as reported) 52,752 $ 54,245 $ 42,207 $ 50,057 $ 199,258 $ 75,272 $ 87,145 $ 59,717 $

 

LTM Net Income to Pro Forma Adjusted EBITDA Pro Forma Adjusted EBITDA Reconciliation Commentary 13 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 share-based awards Represents non-recurring expenses related specifically to the AEA acquisition of GMS Represents severance and other costs permitted in calculations under the ABL Facility and the First Lien Facility Represents one-time costs related to our initial public offering and acquisitions (including the Acquisition) paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Also included are one-time bonuses paid to certain employees in connection with the Acquisition Represents management fees paid to AEA, which were discontinued after the IPO Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value Represents mark-to-market adjustments for certain financial instruments Represents costs paid to third party advisors related to the secondary public offerings of our common stock Represents costs paid to third party advisors related to debt refinancing activities Pro forma impact of earnings from acquisitions from the beginning of the LTM period to the date of acquisition, including synergies Represents the favorable impact to Adjusted EBITDA related to the amendment of existing GMS equipment operating leases to capital leases ( $ in 000s) 3Q19 LTM 2018 2017 2016 (Unaudited) Net Income 49,296 $ 62,971 $ 48,886 $ $ 12,564 Add: Interest Expense 63,003 31,395 29,360 37,418 Add: Write off of debt discount and deferred financing fees - 74 7,103 - Less: Interest Income (127) (177) (152) (928) Add: Income Tax Expense 17,665 20,883 22,654 12,584 Add: Depreciation Expense 40,121 24,075 25,565 26,667 Add: Amortization Expense 63,190 41,455 43,675 37,548 EBITDA 233,148 $ 180,676 $ 177,091 $ $ 125,853 Adjustments Stock appreciation rights expense (A) 1,880 2,318 148 1,988 Redeemable noncontrolling interests (B) 1,276 1,868 3,536 880 Equity-based compensation (C) 3,056 1,695 2,534 2,699 AEA transaction related costs (D) - - - - Severance and other permitted costs (E) 6,203 581 (157) 379 Transaction costs (acquisition and other) (F) 9,709 3,370 1,988 3,751 (Gain) loss on disposal of assets (273) (509) (338) (645) AEA management fee (G) - - 188 2,250 Effects of fair value adjustments to inventory (H) 4,177 324 946 1,009 Change in fair value of financial instruments (I) 11,810 6,125 382 - Secondary public offerings (J) - 1,525 1,385 19 Debt transaction costs (K) 1,205 1,285 526 - Total Add-Backs 39,043 $ 18,582 $ 11,138 $ 12,330 $ Adjusted EBITDA (as reported) 272,191 $ 199,258 $ 188,229 $ 138,183 $ Contributions from acquisitions (L) 26,990 1,280 9,500 12,093 Pro Forma Adjusted EBITDA with Acquisitions 299,181 $ 200,538 $ 197,729 $ 150,276 $ Conversion of GMS Operating Leases (M) 6,151 Pro Forma Adjusted EBITDA 305,332 $

 

Reconciliation of Income Before Taxes to Adjusted Net Income Adjusted Net Income Reconciliation Commentary 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. Full year projected amount for FY19 is $49.7 million. Normalized cash tax rate determined based on our estimated taxes for fiscal 2019 excluding the impact of purchase accounting and certain other deferred tax accounts. Includes the effect of 1.1 million shares of equity issued in connection with the acquisition of Titan that are exchangeable for the Company’s common stock. 14 ($ in 000s) 3Q19 3Q18 (Unaudited) Income before taxes 7,257 $ 15,198 $ EBITDA add-backs 2,724 2,692 Write-off of debt discount and deferred financing fees - - Purchase accounting depreciation and amortization (A) 12,395 5,493 Adjusted pre-tax income 22,376 23,383 Adjusted income tax expense 5,035 8,067 Adjusted net income 17,341 15,316 Effective tax rate (B) 22.5% 34.5% Weighted average shares outstanding: Basic 40,912 41,036 Diluted (C) 42,500 42,228 Adjusted net income per share: Basic 0.42 $ 0.37 $ Diluted 0.41 $ 0.36 $

 

Reconciliation of Gross Profit to Adjusted Gross Profit GAAP Gross Profit Reconciliation Commentary Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value 15 (Unaudited) 1Q18 2Q18 3Q18 4Q18 FY2018 1Q19 2Q19 3Q19 ($ in millions) Gross Profit - Reported 205.1 $ 212.3 $ 195.4 $ 205.8 $ 818.6 $ 244.8 $ 268.2 $ 234.2 $ Adjustments Effects of fair value adjustments to inventory (A) - 0.2 0.1 0.0 0.3 4.1 - - Gross Profit - Adjusted 205.1 $ 212.4 $ 195.5 $ 205.8 $ 818.9 $ 248.9 $ 268.2 $ 234.2 $ Gross Margin - Adjusted 31.9% 32.8% 33.4% 32.4% 32.6% 32.0% 32.2% 32.4%

 

Reconciliation of SG&A to Adjusted SG&A & Organic Adjusted SG&A 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 First Lien Facility Represents one-time costs related to our initial public offering and acquisitions (including the Acquisition) paid to third party advisors, including fees to financial advisors, accountants, attorneys and other professionals as well as costs related to the retirement of corporate stock appreciation rights. Represents costs paid to third party advisors related to the secondary public offerings of our common stock Represents costs paid to third party advisors related to debt refinancing activities Represents SG&A incurred by 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 16 (Unaudited) 1Q18 2Q18 3Q18 4Q18 FY2018 1Q19 2Q19 3Q19 ($ in millions) SG&A - Reported 156.1 $ 159.9 $ 156.3 $ 161.6 $ 633.9 $ 185.4 $ 185.3 $ 178.2 $ Adjustments Stock appreciation rights (expense) benefit (A) (0.6) (0.6) (0.6) (0.5) (2.3) (0.3) (0.6) (0.4) Redeemable noncontrolling interests (B) (0.9) (0.2) (0.3) (0.5) (1.9) (0.5) (0.3) 0.0 Equity-based compensation (C) (0.5) (0.4) (0.4) (0.4) (1.7) (0.4) (1.1) (1.1) Severance and other permitted costs (D) (0.2) (0.1) (0.0) (0.3) (0.6) (4.8) (0.9) (0.2) Transaction costs (acquisition and other) (E) (0.2) (0.1) (0.1) (3.0) (3.4) (4.8) (0.8) (1.1) Gain (loss) on disposal of assets 0.4 0.2 0.1 (0.1) 0.5 0.1 0.2 0.1 Secondary Public Offering (F) (0.6) - (0.9) - (1.5) - - - Debt Related Costs (G) (0.7) (0.0) - (0.5) (1.3) (0.6) (0.1) - SG&A - Adjusted 152.8 $ 158.7 $ 153.9 $ 156.3 $ 621.7 $ 174.1 $ 181.6 $ 175.5 $ % of net sales 23.8% 24.5% 26.3% 24.6% 24.8% 22.4% 21.8% 24.2% SG&A - Acquistions (H) - $ 1.0 $ 1.2 $ 0.5 $ 54.6 $ 17.8 $ 25.6 $ 22.8 $ Organic Adjusted SG&A 152.8 $ 157.7 $ 152.7 $ 155.8 $ 567.1 $ 156.3 $ 156.1 $ 152.7 $

 

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