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GMS Reports Second Quarter Fiscal 2020 Results

Dec 05, 2019

Net Sales of $861.9 million up 3.4%; Organic Net Sales up 2.7%

--Reported Net Income of $29.1 Million, or $0.68 per Diluted Share, up 17.0%

--Adjusted Net Income of $42.7 Million, or $1.00 per Diluted Share, up 11.6%

--Adjusted EBITDA of $89.9 million, or 10.4% of net sales

GMS Inc. (NYSE:GMS), a leading North American specialty distributor of interior building products, today reported financial results for the second quarter of fiscal 2020 ended October 31, 2019.

Second Quarter Fiscal 2020 Highlights

Net sales of $861.9 million increased 3.4% from $833.8 million in the second quarter of the prior fiscal year. Organic net salesincreased 2.7% year over year. Reported net income of $29.1 million, or $0.68 per diluted share, compared to $24.9 million, or $0.58 per diluted share, in the second quarter of the prior fiscal year. Adjusted net income of $42.7 million, or $1.00 per diluted share, compared to $38.3 million, or $0.89 per diluted share, in the second quarter of the prior fiscal year. Adjusted EBITDA of $89.9 million, or 10.4% of net sales, compared to Adjusted EBITDA of $87.1 million, or 10.5% of net sales, in the second quarter of the prior fiscal year. The company completed one greenfield opening during the second quarter of fiscal 2020. Net leverage was reduced to 3.5 times as of the end of the second quarter of fiscal 2020 from 3.7 times as of the end of the first quarter of fiscal 2020. Cash provided by operating activities and free cash flow for the first six months of fiscal 2020 totaled $69.9 million and $55.3 million, respectively, representing increases of 53.2% and 51.5%, respectively, from the first six months of fiscal 2019.

"The GMS team continued to execute well in the second quarter, growing sales, expanding gross margin and achieving higher net income and Adjusted EBITDA," said John C. Turner, Jr., President and Chief Executive Officer. "We achieved strong volume performance in the United States, where demand conditions remain solid, while managing continued softness in Canada. We also generated strong cash from operations and free cash flow, and continue to pursue our existing capital allocation priorities, including debt reduction and prudent geographic and market share expansion through acquisitions and greenfields.

"Moving forward, we remain focused on our strategic priorities which include increased emphasis on organic growth through expanding market share in core products and growing our complementary product lines. We will also continue to pursue strategic acquisitions and greenfield branch openings as we broaden our geographic platform. With a heightened focus on enhanced productivity and profitability across the organization, we are confident that we are well-positioned to capitalize on the growth opportunities ahead and drive value for our shareholders."

Second Quarter Fiscal 2020 Results

Net sales for the second quarter of fiscal 2020 of $861.9 million were up 3.4%, or 2.7% on an organic basis, compared to $833.8 million for the second quarter of the prior fiscal year.

Wallboard sales of $350.6 million increased 4.8% (4.0% on an organic basis) compared to the second quarter of fiscal 2019, driven primarily by higher organic volumes and acquisitions, partially offset by lower pricing/mix. Ceilings sales of $122.8 million increased 3.7% (1.7% on an organic basis) compared to the second quarter of fiscal 2019, primarily due to higher organic volumes and acquisitions, as well as slightly higher pricing/mix. Steel framing sales of $136.2 million increased 0.3% (down 0.6% on an organic basis) compared to the second quarter of fiscal 2019, driven by higher organic volumes and acquisitions, partially offset by lower pricing/mix. Other product sales of $252.3 million increased 3.0% (3.1% on an organic basis) compared to the second quarter of fiscal 2019, due to higher organic growth and acquisitions.

Gross profit of $284.5 million increased 6.1% from $268.2 million in the second quarter of fiscal 2019, as a result of higher sales, both organically and including the positive impact of acquisitions. Gross margin of 33.0% increased 80 basis points from 32.2% a year ago primarily due to net favorable price-cost dynamics, acquisition-related purchasing synergies and product mix.

Selling, general and administrative (SG&A) expense as a percentage of net sales was 23.3% for the quarter compared to 22.2% in the second quarter of fiscal 2019. Adjusted SG&A expense as a percentage of net sales was 22.7% compared to 21.8% in the prior year quarter. The 90 basis point increase in adjusted SG&A as a percentage of sales resulted primarily from the year-over-year decline in the selling price of certain of our products and, to a lesser extent, continuing inflationary cost pressures. In addition, the Company continued to make ongoing investments in greenfields and business initiatives intended to drive growth and productivity.

Net income of $29.1 million, or $0.68 per diluted share, compared to $24.9 million, or $0.58 per diluted share, in the second quarter of fiscal 2019. Adjusted net income of $42.7 million, or $1.00 per diluted share, compared to $38.3 million, or $0.89 per diluted share, in the second quarter of fiscal 2019. Adjusted EBITDA of $89.9 million increased 3.2% year over year and represented an Adjusted EBITDA margin of 10.4%.

Balance Sheet

As of October 31, 2019, the Company had cash of $36.3 million and total debt of $1.10 billion, compared to cash of $24.1 million and total debt of $1.16 billion, as of July 31, 2019.

As previously disclosed, during the second fiscal quarter, the Company amended its asset based revolving credit facility to increase commitments from $345.0 million to $445.0 million, extend the maturity date to September 30, 2024 and improve the rate structure. Also during the second fiscal quarter, the Company made a $50.0 million prepayment of outstanding principal of its senior secured first lien term loan facility. As of the end of the fiscal second quarter, the Company had a total of $410.4 million available under its revolving credit facilities.

During the second fiscal quarter, the Company reduced its net debt by $73.1 million and net leverage was 3.5 times as of the end of the quarter compared to 3.7 times as of the end of the first quarter of fiscal 2020.

Platform Expansion Activity

During the second quarter of fiscal 2020, the Company opened a greenfield location in Wilsonville, Oregon. Subsequent to the end of the second quarter, the Company also completed the previously announced acquisition of Rigney Building Supplies LTD in Kingston, Ontario.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss its results for the second quarter ended October 31, 2019 and other information related to its business at 8:30 a.m. Eastern Time on Thursday, December 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 January 5, 2019 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 13697005.

About GMS Inc.

Founded in 1971, GMS operates a network of more than 250 distribution centers across the United States and Canada. GMS's extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary construction products is designed to provide a comprehensive one-stop-shop for our core customer, the interior contractor who installs these products in commercial and residential buildings.

Use of Non-GAAP Financial Measures

GMS reports its financial results in accordance with GAAP. However, it presents Adjusted net income, free cash flow, Adjusted SG&A, Adjusted EBITDA and Adjusted EBITDA margin, which are not recognized financial measures under GAAP. GMS believes that Adjusted net income, free cash flow, Adjusted SG&A, Adjusted EBITDA and Adjusted EBITDA margin assist investors and analysts in comparing its operating performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company's management believes Adjusted net income, Adjusted SG&A, free cash flow, Adjusted EBITDA and Adjusted EBITDA margin are helpful in highlighting trends in its operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which the Company operates and capital investments. In addition, the Company utilizes Adjusted EBITDA in certain calculations under its senior secured asset based revolving credit facility and its senior secured first lien term loan facility.

You are encouraged to evaluate each adjustment and the reasons GMS considers it appropriate for supplemental analysis. In addition, in evaluating Adjusted net income, Adjusted SG&A and Adjusted EBITDA, you should be aware that in the future, the Company may incur expenses similar to the adjustments in the presentation of Adjusted net income, Adjusted SG&A and Adjusted EBITDA. The Company's presentation of Adjusted net income, Adjusted SG&A, Adjusted SG&A margin, Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. In addition, Adjusted net income, free cash flow, Adjusted SG&A and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in GMS's industry or across different industries. Please see the tables at the end of this release for a reconciliation of Adjusted EBITDA, free cash flow, Adjusted SG&A and Adjusted net income to the most directly comparable GAAP financial measures.

When calculating organic net sales growth, the Company excludes from the calculation (i) net sales of acquired businesses until the first anniversary of the acquisition date, and (ii) the impact of foreign currency translation.

Forward-Looking Statements and Information:

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by the Company's use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," or "should," or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which GMS operates and the economy generally and statements about growth potential across the Company's business and the ability to deliver growth and value creation contained in this press release are forward-looking statements. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Forward-looking statements involve risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section in the Company's most recent Annual Report on Form 10-K, and in its other periodic reports filed with the SEC. In addition, the statements in this release are made as of December 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 December 5, 2019.

                                                                                                                                                                                                             GMS Inc.
                                                                                                                                                                                    Condensed Consolidated Statements of Operations (Unaudited)
                                                                                                                                                                                               (in thousands, except per share data)
                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                 Three Months Ended                                                                                                                                    Six Months Ended
                                                                                                                                     October 31,                                                                                                                                          October 31,
                                                                                                       --------------------------------------------------------------------------------------------------------------------------------------------                            --------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              2019                                                             2018                                                             2019                                                             2018
                                                                                                       ------------------------------------------------------------                        ------------------------------------------------------------                        ------------------------------------------------------------                        ------------------------------------------------------------
Net sales                                                                                              $              861,929                        $              833,837                        $            1,709,105                        $            1,611,981  
Cost of sales (exclusive of depreciation and amortization shown separately below)                  577,436                    565,687                  1,150,958                  1,099,015  
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Gross profit                                                                                       284,493                    268,150                    558,147                    512,966  
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Operating expenses:                                                                                              
                                                                                                   200,457                    185,268                    395,088                    370,703  
    Selling, general and administrative
                                                                                                    29,518                     30,787                     58,793                     57,109  
    Depreciation and amortization
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total operating expenses                                                                           229,975                    216,055                    453,881                    427,812  
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Operating income                                                                                    54,518                     52,095                    104,266                     85,154  
Other (expense) income:                                                                                          
                                                                                                   (17,559 )                                     (19,182 )                                     (35,836 )                                     (35,370 )
    Interest expense
                                                                                            --                       (376 )                              --                     (6,395 )
    Change in fair value of financial instruments
                                                                                                      (707 )                              --                       (707 )                              --  
    Write-off of debt discount and deferred financing fees
                                                                                                       813                        434                      1,752                      1,068  
    Other income, net
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total other expense, net                                                                           (17,453 )                                     (19,124 )                                     (34,791 )                                     (40,697 )
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Income before taxes                                                                                 37,065                     32,971                     69,475                     44,457  
Provision for income taxes                                                                           7,927                      8,059                     15,517                     10,895  
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Net income                                                                                             $               29,138                        $               24,912                        $               53,958                        $               33,562  
                                                                                                       ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================
Weighted average common shares outstanding:                                                                      
                                                                                                    41,761                     41,149                     41,382                     41,121  
    Basic
                                                                                                    42,635                     41,918                     42,126                     41,996  
    Diluted
Net income per common share(1):                                                                                  
                                                                                                       $                 0.70                        $                 0.59                        $                 1.30                        $                 0.80  
    Basic
                                                                                                       ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================
                                                                                                       $                 0.68                        $                 0.58                        $                 1.27                        $                 0.78  
    Diluted
                                                                                                       ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================

(1) The following table sets forth the computation of basic and diluted earnings per share of common stock for periods presented:

                                                                                 Three Months Ended                                                                                          Six Months Ended
                                                                                     October 31,                                                                                                October 31,
                                                                            ----------------------------------------------------------------------------------------------------                          ----------------------------------------------------------------------------------------------------
                                                         2019                                        2018                                        2019                                        2018
                                                                            ----------------------------------------                       ----------------------------------------                       ----------------------------------------                       ----------------------------------------
                                                                                                                                       (in thousands, except per share data)
Net income                                                                  $               29,138                      $               24,912                      $               53,958                      $               33,562
Less: Net income allocated to participating securities           --                      665                      342                      751
                                                                            -------------------- --------------------                      -------------------- --------------------                      -------------------- --------------------                      -------------------- --------------------
Net income attributable to common stockholders                              $               29,138                      $               24,247                      $               53,616                      $               32,811
                                                                            ==================== ====================                      ==================== ====================                      ==================== ====================                      ==================== ====================
Basic earnings per common share:                                              
Basic weighted average common shares outstanding                         41,761                   41,149                   41,382                   41,121
                                                                            -------------------- --------------------                      -------------------- --------------------                      -------------------- --------------------                      -------------------- --------------------
Basic earnings per common share                                             $                 0.70                      $                 0.59                      $                 1.30                      $                 0.80
                                                                            ==================== ====================                      ==================== ====================                      ==================== ====================                      ==================== ====================
Diluted earnings per common share:                                            
Basic weighted average common shares outstanding                         41,761                   41,149                   41,382                   41,121
Add: Common Stock Equivalents                                               874                      769                      744                      875
                                                                            -------------------- --------------------                      -------------------- --------------------                      -------------------- --------------------                      -------------------- --------------------
Diluted weighted average common shares outstanding                       42,635                   41,918                   42,126                   41,996
                                                                            ==================== ====================                      ==================== ====================                      ==================== ====================                      ==================== ====================
Diluted earnings per common share                                           $                 0.68                      $                 0.58                      $                 1.27                      $                 0.78
                                                                            ==================== ====================                      ==================== ====================                      ==================== ====================                      ==================== ====================
                                                                                                                                                                        GMS Inc.
                                                                                                                                                    Condensed Consolidated Balance Sheets (Unaudited)
                                                                                                                                                          (in thousands, except per share data)
                                                                                                                                                                                                                                                                                              
                                                                                                                                                                                         October 31,                                                       April 30,
                                                                                                                                                                                            2019                                                             2019
                                                                                                                                                                                                     ------------------------------------------------------------                        ------------------------------------------------------------
                                                                                                                    Assets                                                                                                                                                                                       
Current assets:                                                                                                                                                                                
                                                                                                                                                                                                     $               36,269                        $               47,338  
    Cash and cash equivalents
                                                                                                                                                                                                 480,321                    445,771  
    Trade accounts and notes receivable, net of allowances of $6,414 and $6,432, respectively
                                                                                                                                                                                                 293,465                    290,829  
    Inventories, net
                                                                                                                                                                                                  19,621                     18,368  
    Prepaid expenses and other current assets
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total current assets                                                                                                                                                                             829,676                    802,306  
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Property and equipment, net of accumulated depreciation of $140,608 and $123,583, respectively                                                                                                   292,136                    282,349  
Operating lease right-of-use assets                                                                                                                                                              107,624             --  
Goodwill                                                                                                                                                                                         621,916                    617,327  
Intangible assets, net                                                                                                                                                                           401,909                    429,313  
Deferred income taxes                                                                                                                                                                             10,199                      4,676  
Other assets                                                                                                                                                                                      17,890                     13,583  
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total assets                                                                                                                                                                                         $            2,281,350                        $            2,149,554  
                                                                                                                                                                                                     ==================== ==================== ====================                      ==================== ==================== ====================
                                                                                        Liabilities and Stockholders' Equity                                                                                                                                                          
Current liabilities:                                                                                                                                                                           
                                                                                                                                                                                                     $              168,768                        $              173,751  
    Accounts payable
                                                                                                                                                                                                  49,981                     62,858  
    Accrued compensation and employee benefits
                                                                                                                                                                                                  80,034                     79,848  
    Other accrued expenses and current liabilities
                                                                                                                                                                                                  45,963                     42,118  
    Current portion of long-term debt
                                                                                                                                                                                                  31,178             --  
    Current portion of operating lease liabilities
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total current liabilities                                                                                                                                                                        375,924                    358,575  
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Non-current liabilities:                                                                                                                                                                       
                                                                                                                                                                                               1,054,085                  1,099,077  
    Long-term debt, less current portion
                                                                                                                                                                                                  81,896             --  
    Long-term operating lease liabilities
                                                                                                                                                                                                  10,382                     10,226  
    Deferred income taxes, net
                                                                                                                                                                                                  63,024                     52,500  
    Other liabilities
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total liabilities                                                                                                                                                                              1,585,311                  1,520,378  
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Commitments and contingencies                                                                                                                                                                  
Stockholders' equity:                                                                                                                                                                          
                                                                                                                                                                                                     422                        404  
    Common stock, par value $0.01 per share, 500,000 shares authorized; 42,169 and 40,375 shares issued and outstanding as of October 31, 2019 and April 30, 2019, respectively
                                                                                                                                                                                          --             --  
    Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of October 31, 2019 and April 30, 2019
                                                                                                                                                                                          --                     29,639  
    Exchangeable shares
                                                                                                                                                                                                 520,855                    480,113  
    Additional paid-in capital
                                                                                                                                                                                                 199,552                    145,594  
    Retained earnings
                                                                                                                                                                                                 (24,790 )                                     (26,574 )
    Accumulated other comprehensive loss
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total stockholders' equity                                                                                                                                                                       696,039                    629,176  
                                                                                                                                                                                                     -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Total liabilities and stockholders' equity                                                                                                                                                           $            2,281,350                        $            2,149,554  
                                                                                                                                                                                                     ==================== ==================== ====================                      ==================== ==================== ====================
                                                                                                                         GMS Inc.
                                                                                                Condensed Consolidated Statements of Cash Flows (Unaudited)
                                                                                                                      (in thousands)
                                                                                                                    
                                                                                                                                  Six Months Ended
                                                                                                                                     October 31,
                                                                                                       --------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              2019                                                             2018
                                                                                                       ------------------------------------------------------------                        ------------------------------------------------------------
Cash flows from operating activities:                                                            
Net income                                                                                             $               53,958                        $               33,562  
Adjustments to reconcile net income to net cash provided by operating activities:                
                                                                                                    58,793                     57,109  
    Depreciation and amortization
                                                                                                     2,368                      1,665  
    Write-off and amortization of debt discount and debt issuance costs
                                                                                                       375                         81  
    Provision for losses on accounts and notes receivable
                                                                                                       195                        229  
    Provision for obsolescence of inventory
                                                                                                       151                      4,129  
    Effects of fair value adjustments to inventory
                                                                                                       380                        460  
    Increase in fair value of contingent consideration
                                                                                                     5,591                      3,204  
    Equity-based compensation
                                                                                                      (742 )                                        (294 )
    Gain on sale and disposal of assets
                                                                                            --                      6,395  
    Change in fair value of financial instruments
                                                                                                    (2,380 )                                      (5,145 )
    Deferred income taxes
                                                                                                 
    Changes in assets and liabilities net of effects of acquisitions:
                                                                                                   (29,932 )                                     (45,355 )
        Trade accounts and notes receivable
                                                                                                     1,800                     (4,553 )
        Inventories
                                                                                                     1,573                       (343 )
        Prepaid expenses and other assets
                                                                                                    (5,486 )                                       9,516  
        Accounts payable
                                                                                                   (12,974 )                                      (9,550 )
        Accrued compensation and employee benefits
                                                                                            --                    (10,778 )
        Derivative liability
                                                                                                    (3,743 )                                       5,325  
        Other accrued expenses and liabilities
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
                                                                                                    69,927                     45,657  
    Cash provided by operating activities
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Cash flows from investing activities:                                                            
                                                                                                   (14,637 )                                      (9,156 )
    Purchases of property and equipment
                                                                                                     1,056                        638  
    Proceeds from sale of assets
                                                                                                   (10,633 )                                    (578,917 )
    Acquisition of businesses, net of cash acquired
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
                                                                                                   (24,214 )                                    (587,435 )
    Cash used in investing activities
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Cash flows from financing activities:                                                            
                                                                                                  (558,906 )                                    (469,647 )
    Repayments on the revolving credit facility
                                                                                                   562,698                    623,117  
    Borrowings from the revolving credit facility
                                                                                                   (54,984 )                                      (4,984 )
    Payments of principal on long-term debt
                                                                                                   (12,310 )                                      (8,820 )
    Payments of principal on finance lease obligations
                                                                                            --                    996,840  
    Borrowings from term loan amendment
                                                                                            --                   (571,840 )
    Repayments from term loan amendment
                                                                                                    (1,286 )                                      (7,933 )
    Debt issuance costs
                                                                                                     6,761                        973  
    Proceeds from exercises of stock options
                                                                                                     1,022                        873  
    Other financing activities
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
                                                                                                   (57,005 )                                     558,579  
    Cash (used in) provided by financing activities
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Effect of exchange rates on cash and cash equivalents                                                  223                       (360 )
(Decrease) increase in cash and cash equivalents                                                   (11,069 )                                      16,441  
Cash and cash equivalents, beginning of period                                                      47,338                     36,437  
                                                                                                       -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Cash and cash equivalents, end of period                                                               $               36,269                        $               52,878  
                                                                                                       ==================== ==================== ====================                      ==================== ==================== ====================
Supplemental cash flow disclosures:                                                              
                                                                                                       $               25,642                        $               10,469  
    Cash paid for income taxes
                                                                                                    33,654                     30,966  
    Cash paid for interest
                                                                                                                                                                                                                                     GMS Inc.
                                                                                                                                                                                                                             Net Sales by Product Group (Unaudited)
                                                                                                                                                                                                                                     (dollars in thousands)
                                                                                                                                                                                                                                      
                                                                                         Three Months Ended                                                                                                                                                                               Six Months Ended                                                                                       
                                          ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                                    ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
             October 31,                   % of                October 31,          % of                       October 31,                    % of                       October 31,                    % of          
                2019                       Total                  2018              Total                         2019                        Total                         2018                        Total         
                                          ---------------------------                       --------------------                                           -------------------- -----------                      --------------------                                           -----------------------------                       --------------------                                           -----------------------------                       --------------------
                                                                                                                                                                                                          (dollars in thousands)                                                                                                                                                                                                       
Wallboard                                 $ 350,618                   40.7 %                                         $     334,688                   40.1 %                                         $   692,213                   40.5 %                                         $   652,423                   40.5 %
Ceilings                 122,807                   14.2 %                            118,376                   14.2 %                          251,917                   14.7 %                          234,231                   14.5 %
Steel framing            136,159                   15.8 %                            135,760                   16.3 %                          267,988                   15.7 %                          264,872                   16.4 %
Other products           252,345                   29.3 %                            245,013                   29.4 %                          496,987                   29.1 %                          460,455                   28.6 %
                                          -------------------- -------                                                                                     -------------------- -----------                                                                                     -------------------- ---------                                                                                     -------------------- ---------
Total net sales                           $ 861,929                            $     833,837                            $ 1,709,105                            $ 1,611,981      
                                          ==================== =======                                                                                     ==================== ===========                                                                                     ==================== =========                                                                                     ==================== =========
                                                                                                                                                                                                          GMS Inc.
                                                                                                                                                                                 Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
                                                                                                                                                                                                       (in thousands)
                                                                                                                                                                                                                                                                                                                                                                                     
                                                                                                      Three Months Ended                                                                                                                                    Six Months Ended                                                                   
                                                                                                          October 31,                                                                                                                                          October 31,                                                                     
                                                                            --------------------------------------------------------------------------------------------------------------------------------------------                            --------------------------------------------------------------------------------------------------------------------------------------------
                                                                   2019                                                             2018                                                             2019                                                             2018                               
                                                                            ------------------------------------------------------------                        ------------------------------------------------------------                        ------------------------------------------------------------                        ------------------------------------------------------------
                                                                     
Net income                                                                  $                                             $               24,912                        $               53,958                        $               33,562    
                                                                                                               29,138
Interest expense                                                         17,559                     19,182                     35,836                     35,370    
Write-off of debt discount and deferred financing fees                      707             --                        707             --    
Interest income                                                                 )                                         203                        (18 )                                         (33 )                     
                                                                                                                   (6
Provision for income taxes                                                7,927                      8,059                     15,517                     10,895    
Depreciation expense                                                     12,592                     11,538                     25,014                     22,148    
Amortization expense                                                     16,926                     19,249                     33,779                     34,961    
                                                                            -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
EBITDA                                                                      $               84,843                        $               83,143                        $              164,793                        $              136,903    
                                                                            -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Stock appreciation expense (a)                                            1,267                        649                      1,327                        983    
Redeemable noncontrolling interests(b)                                      (18 )                                         282                        644                        813    
Equity-based compensation(c)                                              2,315                      1,094                      3,710                      1,498    
Severance and other permitted costs(d)                                    1,394                        882                      1,948                      5,718    
Transaction costs (acquisitions and other)(e)                               327                        841                      1,299                      5,594    
Gain on disposal of assets                                                 (586 )                                        (173 )                                        (742 )                                        (294 )                     
Effects of fair value adjustments to inventory(f)                --             --                        151                      4,129    
Change in fair value of financial instruments(g)                 --                        376             --                      6,395    
Secondary public offering costs(h)                                          363             --                        363             --    
Debt transaction costs(i)                                        --                         51             --                        678    
                                                                            -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
EBITDA add-backs                                                          5,062                      4,002                      8,700                     25,514    
                                                                            -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Adjusted EBITDA                                                             $               89,905                        $               87,145                        $              173,493                        $              162,417    
                                                                            ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================
                                                                     
Net sales                                                                   $              861,929                        $              833,837                  1,709,105                  1,611,981    
Adjusted EBITDA margin                                                     10.4                       10.5                       10.2                       10.1  
                                                                                                                      %                                                                                   %                                                                                   %                                                                                   %

______________________________________ (a) Represents non'cash expense related to stock appreciation rights agreements. (b) Represents non'cash compensation expense related to changes in the values of noncontrolling interests. (c) Represents non'cash equity-based compensation expense related to the issuance of share-based awards. (d) Represents severance expenses and other costs permitted in calculations under the ABL Facility and the First Lien Facility. (e) Represents 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 costs paid to third-party advisors related to secondary offerings of our common stock. (i) Represents costs paid to third-party advisors related to debt refinancing activities.

                                                                                                                                                                   GMS Inc.
                                                                                                                             Reconciliation of Cash Provided By Operating Activities to Free Cash Flow (Unaudited)
                                                                                                                                                                (in thousands)
                                                                                                                                                              
                                                                           Three Months Ended                                                                                                                Six Months Ended
                                                                               October 31,                                                                                                                      October 31,
                                                           ------------------------------------------------------------------------------------------------------------------------                            ------------------------------------------------------------------------------------------------------------------------
                                             2019                                                   2018                                                   2019                                                   2018
                                                           --------------------------------------------------                        --------------------------------------------------                        --------------------------------------------------                        --------------------------------------------------
                                                                           
Cash provided by operating activities                      $     82,367                        $     93,481                        $     69,927                        $     45,657  
Purchases of property and equipment           (8,746 )                            (5,363 )                           (14,637 )                            (9,156 )
                                                           -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------                      -------------------- ---------- --------------------
Free cash flow(a)                                          $     73,621                        $     88,118                        $     55,290                        $     36,501  
                                                           ==================== ========== ====================                      ==================== ========== ====================                      ==================== ========== ====================                      ==================== ========== ====================

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

                                                                                                                                                                                                     GMS Inc.
                                                                                                                                                            Reconciliation of Selling, General and Administrative Expense to Adjusted SG&A (Unaudited)
                                                                                                                                                                                                  (in thousands)
                                                                                                                                                                                                
                                                                                             Three Months Ended                                                                                                                                    Six Months Ended                                                                   
                                                                                                 October 31,                                                                                                                                          October 31,                                                                     
                                                                   --------------------------------------------------------------------------------------------------------------------------------------------                            --------------------------------------------------------------------------------------------------------------------------------------------
                                                          2019                                                             2018                                                             2019                                                             2018                               
                                                                   ------------------------------------------------------------                        ------------------------------------------------------------                        ------------------------------------------------------------                        ------------------------------------------------------------
                                                            
Selling, general and administrative expense                        $              200,457                        $              185,268                        $              395,088                        $              370,703    
                                                            
Adjustments                                                                    
Stock appreciation expense (a)                                  (1,267 )                                        (649 )                                      (1,327 )                                        (983 )                     
Redeemable noncontrolling interests(b)                              18                       (282 )                                        (644 )                                        (813 )                     
Equity-based compensation(c)                                    (2,315 )                                      (1,094 )                                      (3,710 )                                      (1,498 )                     
Severance and other permitted costs(d)                          (1,394 )                                        (882 )                                      (1,948 )                                      (5,718 )                     
Transaction costs (acquisitions and other)(e)                     (327 )                                        (841 )                                      (1,299 )                                      (5,594 )                     
Gain on disposal of assets                                         586                        173                        742                        294    
Secondary public offering costs(f)                                (363 )                              --                       (363 )                              --    
Debt transaction costs(g)                               --                        (51 )                              --                       (678 )                     
                                                                   -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------                      -------------------- -------------------- --------------------
Adjusted SG&A                                                      $              195,395                        $              181,642                        $              386,539                        $              355,713    
                                                                   ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================                      ==================== ==================== ====================
                                                            
Net sales                                                          $              861,929                        $              833,837                        $            1,709,105                        $            1,611,981    
Adjusted SG&A margin                                              22.7 %                                        21.8 %                                        22.6 %                                        22.1 %

______________________________________ (a) Represents non'cash expense related to stock appreciation rights agreements. (b) Represents non'cash compensation expense related to changes in the values of noncontrolling interests. (c) Represents non'cash equity-based compensation expense related to the issuance of share-based awards. (d) Represents severance expenses and other costs permitted in calculations under the ABL Facility and the First Lien Facility. (e) Represents costs related to acquisitions paid to third parties. (f) Represents costs paid to third-party advisors related to secondary offerings of our common stock. (g) Represents costs paid to third-party advisors related to debt refinancing activities.

                                                                                                                                                                                    GMS Inc.
                                                                                                                                                    Reconciliation of Income Before Taxes to Adjusted Net Income (Unaudited)
                                                                                                                                                                      (in thousands, except per share data)
                                                                                                                                                                               
                                                                                           Three Months Ended                                                                                                               Six Months Ended                                                        
                                                                                               October 31,                                                                                                                     October 31,                                                          
                                                                           ------------------------------------------------------------------------------------------------------------------------                           ------------------------------------------------------------------------------------------------------------------------
                                                        2019                                          2018                                        2019                                          2018                    
                                                                           ----------------------------------------                                            ----------------------------------------                       ----------------------------------------                                            ----------------------------------------
Income before taxes                                                        $               37,065                        $               32,971                      $               69,475                        $               44,457  
EBITDA add-backs                                                         5,062                      4,002                    8,700                     25,514  
Write-off of discount and deferred financing fees                          707             --                      707             --  
Purchase accounting depreciation and amortization (1)                   12,276                     12,399                   24,661                     24,854  
                                                                           -------------------- --------------------                                           -------------------- --------------------                      -------------------- --------------------                                           -------------------- --------------------
Adjusted pre-tax income                                                 55,110                     49,372                  103,543                     94,825  
Adjusted income tax expense                                             12,400                     11,109                   23,297                     21,336  
                                                                           -------------------- --------------------                                           -------------------- --------------------                      -------------------- --------------------                                           -------------------- --------------------
Adjusted net income                                                        $               42,710                        $               38,263                      $               80,246                        $               73,489  
                                                                           ==================== ====================                                           ==================== ====================                      ==================== ====================                                           ==================== ====================
Effective tax rate (2)                                                    22.5 %                                        22.5 %                                      22.5 %                                        22.5 %
                                                                
Weighted average shares outstanding:                                               
                                                                        41,761                     41,149                   41,382                     41,121  
    Basic
                                                                        42,635                     43,047                   42,391                     43,125  
    Diluted (3)
Adjusted net income per share:                                                     
                                                                           $                 1.02                        $                 0.93                      $                 1.94                        $                 1.79  
    Basic
                                                                           ==================== ====================                                           ==================== ====================                      ==================== ====================                                           ==================== ====================
                                                                           $                 1.00                        $                 0.89                      $                 1.89                        $                 1.70  
    Diluted
                                                                           ==================== ====================                                           ==================== ====================                      ==================== ====================                                           ==================== ====================

______________________________________ (1) Depreciation and amortization from the increase in value of certain long-term assets associated with the April 1, 2014 acquisition of the predecessor company and the acquisition of Titan. (2) Normalized cash tax rate determined based on our estimated taxes excluding the impact of purchase accounting and certain other deferred tax amounts. (3) Diluted shares outstanding for periods prior to June 13, 2019 have been adjusted to include the effect of 1.1 million shares of equity issued in connection with the acquisition of Titan that were exchangeable for the Company's common stock. On June 13, 2019, the holders exchanged all of the exchangeable shares for 1.1 million shares of the Company's common stock.

View source version on businesswire.com: https://www.businesswire.com/news/home/20191205005151/en/

SOURCE: GMS Inc.

Investors:
Leslie H. Kratcoski
ir@gms.com 
770-723-3306


Media:
marketing@gms.com 
770-723-3378

Copyright Business Wire 2019

SOURCE: Comtex

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