Costs linked to the acquisition of Canada's WSB Titan depressed GMS' earnings in its fiscal first quarter ended July 31 even as net sales rose 21.2% to $778.1 million and same-store sales climbed 6.1%, the company reported today.
Net income at the giant distributor of wallboards and ceiling systems shrank to $8.7 million from $15.3 million in the May-July 2017 quarter. Tucker, Ga.-based GMS noted it incurred $10.5 million in pre-tax transaction-related costs stemming from its June 1 acquisition of Titan, plus $4.1 million in accounting adjustments and $4.8 million in severance costs.
After discounting for those and similar one-time factors, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) jumped to $75.3 million in the fiscal first quarter from $52.8 million a year earlier.
Gross profit rose 19.4% to $244.8 million, while gross margin edged up to 32.0% from 31.9%.
“We are off to a solid start to the year, generating record sales and strong earnings," GMS president and CEO Mike Callahan said in a news release. "We delivered organic revenue growth of 6.1% driven by broad-based growth across each of our product groups. We also generated strong earnings, reflecting the contribution of Titan, our commitment to operational improvement initiatives and continued pricing discipline. The previously announced cost reduction plan coupled with the successful integration of Titan are expected to drive additional benefits as we progress through fiscal 2019 and beyond.”
The company's balance sheet as of July 31 showed that goodwill accounted for $633.2 million of its $2.25 billion in assets. On the liabilities side, the Titan deal caused GMS' long-term debt to shoot up to $1.27 billion.
GMS runs more than 245 distribution centers across North America and ranks 8th on the ProSales 100, with 2017 sales totaling $2.49 billion. The Titan deal brought it 30 locations in five provinces. Since then, GMS acquired Charles G. Hardy, a Los Angeles area dealer and GMS' first outpost in that market.
Sales by segment went this way:
- Wallboard sales rose 11.6% to $317.7 million.
- Ceilings sales climbed 16.2% to $115.9 million.
- Steel framing sales jumped 23.4% to $129.1 million.
- Sales of other products climbed 40.7% to $215.4 million.