Currency adjustments and pre-tax costs related to the acquisition of Canada's WSB Titan led GMS to report today a 30% decline in net income to $9.9 million in its fiscal fourth quarter ended April 30 even as revenues rose 3.4% to a record $635.8 million.
The wallboard and ceiling systems specialty dealer incurred $5.1 million in pre-tax currency adjustments related to the Titan deal, as well as $3 million in pre-tax transaction costs. Those were more than enough to cause GMS' net income to shrink from $14.1 million in last year's fiscal fourth quarter.
The Titan acquisition was completed on June 1, so none of that company's financials were included in this report. GMS estimates that Titan's net sales totaled US$478.4 million (C$612.1 million) in the year ended last April 30. GMS' U.S. operations put it in 8th place on the latest ProSales 100.
Gross profit for GMS' latest quarter rose 2.4% to $205.8 million, but shifts in the mix of products sold caused the the gross margin to slip to 32.4% from a year-earlier 32.7%.
Atlanta-based GMS prefers to measure itself in terms of adjusted EBITDA--earnings before interest, taxes, depreciation, amortization, stock appreciation expense, equity-based compensation, severance costs, transaction costs, losses or gains on asset disposals, debt transaction costs, a change in fair value of financial instruments, and other special costs. By that measure, GMS said, its adjusted EBITDA slipped to $50.1 million, or 7.9% of revenue, from $52.1 million, or 8.5%.
Wallboard sales fell 0.8% to $280 million as volume dropped 3.1% but prices rose 2.4%. Ceiling sales grew 9.3% to $95.6 million, while sales of steel framing increased 6.8% to $107 million. Higher prices helped in both cases.
GMS President and CEO Mike Callahan noted that sales totals hit records for three straight fiscal years, reaching $2.51 billion in fiscal 2018; that's an 8.3% gain from the previous year. Gross margin for all of fiscal 2018 topped 32.5%. Net income grew 28.8% to $63 million.
“Looking ahead to fiscal 2019, the markets that we operate in remain healthy and we are encouraged that May sales increased 7% over last year as we finally started to experience favorable weather trends," Callahan said in a press release. "We also initiated a strategic cost reduction plan in May of this year to improve our operational efficiency and demonstrate our strong commitment to expanding our margins, while continuing to invest in the areas of our business that we believe will provide the best return for our shareholders, business partners, and employees.
"Excluding one-time, pre-tax severance related charges in the range of $4.1 million to $4.6 million that we expect to record in the first quarter of fiscal 2019, we anticipate that the actions we have taken will generate payroll related and other cost savings of approximately $20 million on an annual basis," Callahan added.
The Titan deal, announced April 5, calls for GMS to take over WSB Titan's 30 locations operating under several different brand names in the provinces of Ontario, British Columbia, Alberta, Manitoba, and Saskatchewan. These will be the first Canadian properties for Atlanta-based GMS, which has more than 210 facilities in the U.S.
GMS ranks 8th on the current ProSales 100 list, having posted $2.23 billion in sales in 2016, 92% of it to pros. Sales in its fiscal third quarter ended Jan. 31 rose 4.1% to $585.5 million.
