Coronavirus (COVID-19)-related market declines tempered fourth quarter net sales for Gypsum Management & Supply (GMS), however the company still experienced positive growth for the full 2020 fiscal year. Net sales decreased 1.2% year-over-year (YOY) to $770.9 million as a result of COVID-19 impacts in late March and April, according to GMS’s quarterly earnings report.
For the fourth quarter, wallboard sales increased 0.3% YOY compared to the fourth quarter of the 2019 fiscal year. Ceiling sales decreased 1.0% YOY in the fourth quarter and Steel framing sales decreased 7.4% YOY.
Despite the effects of COVID-19 in late March and April, GMS reported net sales of $3.2 billion for the full 2020 fiscal year, an increase of 4.0% from the 2019 fiscal year. Organic sales increased 2.0% YOY for the full fiscal year.
GMS posted a net loss of $41.5 million in the fiscal fourth quarter, compared to a net income of $16.6 million in the fourth quarter of the prior fiscal year. The net loss reflects a non-cash goodwill impairment charge of $63.1 million related to the company’s Canada reporting unit, partially offset by a gain on a legal settlement of $14.0 million, according to GMS. The primary factors contributing to the impairment were an increase in the discount rate and a decrease in market multiples, combined with a decrease in the reporting unit’s forecasted near-term cash flows, a result of COVID-19 driven economic uncertainty.
For the full fiscal year, GMS reported a net income of $23.4 million, down from $56.0 million for the 2019 fiscal year. The dip in net income for the full fiscal year reflects the non-cash goodwill impairment charge, according to GMS.
The distributor reported a gross profit of $251.6 million for the fiscal fourth quarter, a 2.1% decrease compared to the fiscal fourth quarter in 2019. The lower gross profit can be attributed to lower sales and a 30 basis point decrease in gross margin for the quarter, according to GMS.
“We entered the fourth quarter with strong momentum in line with what we had seen through the first three quarters of fiscal 2020, grounded in our team’s focus on effective execution of our strategic priorities,” John Turner, president and CEO of GMS, said in a prepared statement. “Through mid-March we experienced favorable end-market trends and generated robust volume growth. Even as disruptions from COVID-19 began to escalate in the second half of March, construction and building products distribution were deemed essential in the majority of our markets, which enabled us to keep most of our locations open. However, demand weakened significantly in late March and in April as customers delayed orders and building projects were paused due to mandated shutdowns in certain markets or as they focused on responding to the effects of COVID-19 on their businesses.”
Adjusted EBITDA–earnings before interest, taxes, depreciation, and amortization–decreased to $63.6 million in the fiscal fourth quarter of 2020 from $73.5 million in the prior year’s fourth quarter. For the full fiscal year, adjusted EBITDA increased $4.1 million YOY to $299.8 million.
GMS completed the acquisition of Trowel Trades Supply and opened a greenfield location in Panama City Beach, Fla., in the fiscal fourth quarter. For the full 2020 fiscal year, the distributor completed three acquisitions and six greenfield openings.
In response to the effects of COVID-19, GMS proactively drew $87.2 million under revolving credit facilities in March and deferred or limited non-essential operating or other discretionary expenses. The distributor also implemented a wage and hiring freeze and certain permanent headcount reductions and closed certain underperforming branches and distribution centers. The company said it also has taken actions at a branch level to promote the safety of its employees, customers, and communities.
“The health, safety, and wellbeing of our employees, business partners, and communities remains our top priority during the pandemic and I would like to share my appreciation for all our teammates who continue to be engaged, focused, and proactive as we come together and support our customers and each other during these unprecedented times,” Turner said.
Turner said GMS has experienced sequential improvement in net sales levels to date in the first quarter of the fiscal 2021 year compared to the latter half of the fourth quarter. Comparable daily sales thus far in the fiscal first quarter are down low single digits, compared to the double-digit YOY decline in April, according to Turner.
“Given current macroeconomic conditions, there continues to be uncertainty regarding the near-term outlook for construction,” Turner said. “We have taken, and intend to continue to take, the necessary actions to optimize our operations and align our business with demand.”
Tucker, Ga.-based GMS operates a network of more than 260 distribution centers across the United States and Canada, offering wallboard, suspended ceiling systems, and complementary construction products. GMS ranked 8th on the 2020 ProSales 100 list.
