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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended
January 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _______________ to
_______________.
COMMISSION FILE NUMBER:
001-37784
______________________________________________________________
GMS INC.
(Exact name of registrant as specified in its charter)
______________________________________________________________
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Delaware |
46-2931287 |
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(State or other jurisdiction of incorporation |
(IRS Employer Identification No.) |
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or organization) |
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100 Crescent Centre Parkway, Suite 800
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Tucker,
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Georgia |
30084 |
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(Address of principal executive offices) |
(ZIP Code) |
(800)
392-4619
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchanged on which registered |
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Common Stock, par value $0.01 per share |
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GMS |
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New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days.
Yes
☒
No ◻
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter)
during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Yes
☒
No
◻
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the
Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
☒
There were 43,040,983 shares of the registrant’s common stock, par
value $0.01 per share, outstanding as of February 28,
2022.
FORM 10-Q
TABLE OF CONTENTS
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Page |
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PART I |
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Item 1 |
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Item 2 |
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Item 3 |
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Item 4 |
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PART II |
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Item 1 |
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Item 1A |
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Item 2 |
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Item 3 |
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Item 4 |
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Item 5 |
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Item 6 |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
You can generally identify forward-looking statements by our 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 growth of or other
future developments relating to our various markets, and statements
about our expectations, beliefs, plans, strategies, objectives,
prospects, assumptions or future events or performance contained in
this Quarterly Report on Form 10-Q are forward-looking
statements.
We have based these forward-looking statements on our current
expectations, assumptions, estimates and projections. While we
believe 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 our control. These and other important
factors, including those discussed under the heading “Risk Factors”
in Part 1, Item 1A of our Annual Report on Form 10-K
for the fiscal year ended April 30, 2021, filed with the
U.S. Securities and Exchange Commission (the “SEC”), may cause our
actual results, performance or achievements to differ materially
from any future results, performance or achievements expressed or
implied by these forward-looking statements. Some of the factors
that could cause actual results to differ materially from those
expressed or implied by the forward-looking statements
include:
•the
negative impact of the COVID-19 pandemic (which, among other
things, may exacerbate each of the risks listed
below);
•general
economic and financial conditions;
•our
dependency upon the commercial and residential new construction and
repair and remodeling, or R&R, markets;
•competition
in our industry and the markets in which we operate;
•the
fluctuations in prices and mix of the products we distribute,
including as a result of inflationary and deflationary pressures,
and our ability to pass on price increases to our customers and
effectively manage inventories and margins in both inflationary and
deflationary pricing environments;
•the
consolidation of our industry;
•our
ability to successfully implement our strategic initiatives, which
include pursuing growth through acquisitions and greenfield branch
expansion, as well as cost reduction and productivity
initiatives;
•our
ability to successfully identify acquisition candidates, complete
and integrate acquisitions and achieve synergies;
•our
ability to expand into new geographic markets;
•our
ability to continue to anticipate and address evolving consumer
demands, particularly in the automatic taping and finishing (“ATF”)
market;
•product
shortages, other disruptions in our supply chain or distribution
network and potential loss of relationships with key suppliers,
including heightened risks relating to sourcing products from
international suppliers;
•the
seasonality of the commercial and residential construction
markets;
•the
potential loss of any significant customers and the reduction of
the quantity of products our customers purchase;
•exposure
to product liability and various other claims and litigation, and
the adequacy of insurance related thereto;
•operating
hazards that may cause personal injury or property
damage;
•our
ability to attract and retain key employees;
•rising
health care and labor costs and the impact of labor and trucking
shortages;
•the
credit risk from our customers;
•our
ability to renew leases for our facilities on favorable terms or
identify new facilities;
•our
ability to effectively manage our inventory as our sales volume or
the prices of the products we distribute fluctuate;
•the
impact of federal, state, provincial and local regulations,
including potential changes in our effective tax rate;
•the
cost of compliance with environmental, health and safety laws and
other regulations;
•significant
fluctuations in fuel costs or shortages in the supply of
fuel;
•a
cybersecurity breach, including misappropriation of our customers’,
employees’ or suppliers’ confidential information, and the
potential costs related thereto;
•a
disruption in our IT systems and costs necessary to maintain and
update our IT systems;
•natural
or man-made disruptions to our facilities;
•the
risk of our Canadian operations, including currency rate
fluctuations;
•the
imposition of tariffs and other trade barriers, and the effect of
retaliatory trade measures;
•our
current level of indebtedness and our potential to incur additional
indebtedness; and
•our
ability to obtain additional financing on acceptable terms, if at
all.
Given these risks and uncertainties, you are cautioned not to place
undue reliance on such forward-looking statements. The
forward-looking statements contained in this Quarterly Report on
Form 10-Q are not guarantees of future performance and actual
results and events may differ materially from the forward-looking
statements contained in this Quarterly Report on
Form 10-Q.
Any forward-looking statement that we make in this Quarterly Report
on Form 10-Q speaks only as of the date of such statement.
Except as required by law, we do not undertake any obligation to
update or revise, or to publicly announce any update or revision
to, any of the forward-looking statements, whether as a result of
new information, future events or otherwise, after the date of this
Quarterly Report on Form 10-Q. You should review the factors
and risks we describe in the reports we will file from time to time
with the SEC after the date of the filing of this Quarterly Report
on Form 10-Q.
PART I – Financial Information
Item 1. Financial Statements
GMS Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
Assets |
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
86,975 |
|
|
$ |
167,012 |
|
|
Trade accounts and notes receivable, net of allowances of $9,683
and $6,282, respectively
|
700,255 |
|
|
558,661 |
|
|
Inventories, net |
585,351 |
|
|
357,054 |
|
|
Prepaid expenses and other current assets |
19,055 |
|
|
19,525 |
|
|
Total current assets |
1,391,636 |
|
|
1,102,252 |
|
|
Property and equipment, net of accumulated depreciation of $216,541
and $193,364, respectively
|
342,995 |
|
|
311,326 |
|
|
Operating lease right-of-use assets |
146,762 |
|
|
118,413 |
|
|
Goodwill |
693,942 |
|
|
576,330 |
|
|
Intangible assets, net |
480,312 |
|
|
350,869 |
|
|
Deferred income taxes |
20,536 |
|
|
15,715 |
|
|
Other assets |
9,997 |
|
|
8,993 |
|
|
Total assets |
$ |
3,086,180 |
|
|
$ |
2,483,898 |
|
|
Liabilities and Stockholders’ Equity |
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
293,485 |
|
|
$ |
322,965 |
|
|
Accrued compensation and employee benefits |
79,031 |
|
|
72,906 |
|
|
Other accrued expenses and current liabilities |
129,927 |
|
|
87,138 |
|
|
Current portion of long-term debt |
44,624 |
|
|
46,018 |
|
|
Current portion of operating lease liabilities |
40,413 |
|
|
33,474 |
|
|
Total current liabilities |
587,480 |
|
|
562,501 |
|
|
Non-current liabilities: |
|
|
|
|
Long-term debt, less current portion |
1,281,737 |
|
|
932,409 |
|
|
Long-term operating lease liabilities |
107,002 |
|
|
90,290 |
|
|
Deferred income taxes, net |
47,174 |
|
|
12,728 |
|
|
Other liabilities |
59,511 |
|
|
63,508 |
|
|
Total liabilities |
2,082,904 |
|
|
1,661,436 |
|
|
Commitments and contingencies |
|
|
|
|
Stockholders' equity: |
|
|
|
|
Common stock, par value $0.01 per share, 500,000 shares authorized;
43,095 and 43,073 shares issued and outstanding as of
January 31, 2022 and April 30, 2021,
respectively
|
431 |
|
|
431 |
|
|
Preferred stock, par value $0.01 per share, 50,000 shares
authorized; 0 shares issued and outstanding as of January 31,
2022 and April 30, 2021
|
— |
|
|
— |
|
|
Additional paid-in capital |
536,635 |
|
|
542,737 |
|
|
Retained earnings |
471,481 |
|
|
274,535 |
|
|
Accumulated other comprehensive income (loss) |
(5,271) |
|
|
4,759 |
|
|
Total stockholders' equity |
1,003,276 |
|
|
822,462 |
|
|
Total liabilities and stockholders' equity |
$ |
3,086,180 |
|
|
$ |
2,483,898 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
GMS Inc.
Condensed Consolidated Statements of Operations and Comprehensive
Income (Unaudited)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net sales |
$ |
1,153,595 |
|
|
$ |
751,191 |
|
|
$ |
3,346,222 |
|
|
$ |
2,366,620 |
|
|
Cost of sales (exclusive of depreciation and amortization shown
separately below) |
785,823 |
|
|
507,867 |
|
|
2,270,747 |
|
|
1,597,767 |
|
|
Gross profit |
367,772 |
|
|
243,324 |
|
|
1,075,475 |
|
|
768,853 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
241,040 |
|
|
184,844 |
|
|
685,652 |
|
|
556,308 |
|
|
Depreciation and amortization |
29,750 |
|
|
25,562 |
|
|
86,867 |
|
|
79,904 |
|
|
Total operating expenses |
270,790 |
|
|
210,406 |
|
|
772,519 |
|
|
636,212 |
|
|
Operating income |
96,982 |
|
|
32,918 |
|
|
302,956 |
|
|
132,641 |
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
Interest expense |
(15,429) |
|
|
(13,454) |
|
|
(43,830) |
|
|
(41,060) |
|
|
Gain on legal settlement |
— |
|
|
1,382 |
|
|
— |
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
Other income, net |
1,041 |
|
|
989 |
|
|
2,771 |
|
|
2,441 |
|
|
Total other expense, net |
(14,388) |
|
|
(11,083) |
|
|
(41,059) |
|
|
(37,237) |
|
|
Income before taxes |
82,594 |
|
|
21,835 |
|
|
261,897 |
|
|
95,404 |
|
|
Provision for income taxes |
21,211 |
|
|
5,709 |
|
|
64,951 |
|
|
23,590 |
|
|
Net income |
$ |
61,383 |
|
|
$ |
16,126 |
|
|
$ |
196,946 |
|
|
$ |
71,814 |
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
43,094 |
|
|
42,726 |
|
|
43,106 |
|
|
42,691 |
|
|
Diluted |
43,945 |
|
|
43,361 |
|
|
43,937 |
|
|
43,184 |
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.42 |
|
|
$ |
0.38 |
|
|
$ |
4.57 |
|
|
$ |
1.68 |
|
|
Diluted |
$ |
1.40 |
|
|
$ |
0.37 |
|
|
$ |
4.48 |
|
|
$ |
1.66 |
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
Net income |
$ |
61,383 |
|
|
$ |
16,126 |
|
|
$ |
196,946 |
|
|
$ |
71,814 |
|
|
Foreign currency translation income (loss) |
(15,185) |
|
|
20,373 |
|
|
(19,304) |
|
|
39,813 |
|
|
Changes in other comprehensive income, net of tax |
4,023 |
|
|
1,974 |
|
|
9,274 |
|
|
5,777 |
|
|
Comprehensive income |
$ |
50,221 |
|
|
$ |
38,473 |
|
|
$ |
186,916 |
|
|
$ |
117,404 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
GMS Inc.
Condensed
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total
Stockholders'
Equity |
|
Shares |
|
Amount |
|
|
|
|
|
Balances as of April 30, 2021 |
43,073 |
|
|
$ |
431 |
|
|
$ |
542,737 |
|
|
$ |
274,535 |
|
|
$ |
4,759 |
|
|
$ |
822,462 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
61,202 |
|
|
— |
|
|
61,202 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,233) |
|
|
(8,233) |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,962 |
|
|
1,962 |
|
|
Repurchase and retirement of common stock |
(85) |
|
|
(1) |
|
|
(3,854) |
|
|
— |
|
|
— |
|
|
(3,855) |
|
|
Equity-based compensation |
— |
|
|
— |
|
|
1,958 |
|
|
— |
|
|
— |
|
|
1,958 |
|
|
Exercise of stock options |
44 |
|
|
1 |
|
|
862 |
|
|
— |
|
|
— |
|
|
863 |
|
|
Vesting of restricted stock units |
8 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholding related to net share settlements of equity
awards |
— |
|
|
— |
|
|
(256) |
|
|
— |
|
|
— |
|
|
(256) |
|
|
Issuance of common stock pursuant to employee stock purchase
plan |
43 |
|
|
— |
|
|
1,140 |
|
|
— |
|
|
— |
|
|
1,140 |
|
|
Balances as of July 31, 2021 |
43,083 |
|
|
431 |
|
|
542,587 |
|
|
335,737 |
|
|
(1,512) |
|
|
877,243 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
74,361 |
|
|
— |
|
|
74,361 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,114 |
|
|
4,114 |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,289 |
|
|
3,289 |
|
|
Repurchase and retirement of common stock |
(195) |
|
|
(2) |
|
|
(9,267) |
|
|
— |
|
|
— |
|
|
(9,269) |
|
|
Equity-based compensation |
— |
|
|
— |
|
|
3,215 |
|
|
— |
|
|
— |
|
|
3,215 |
|
|
Exercise of stock options |
52 |
|
|
1 |
|
|
976 |
|
|
— |
|
|
— |
|
|
977 |
|
|
Vesting of restricted stock units |
112 |
|
|
1 |
|
|
(1) |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholding related to net share settlements of equity
awards |
— |
|
|
— |
|
|
(2,579) |
|
|
— |
|
|
— |
|
|
(2,579) |
|
|
Balances as of October 31, 2021 |
43,052 |
|
|
431 |
|
|
534,931 |
|
|
410,098 |
|
|
5,891 |
|
|
951,351 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
61,383 |
|
|
— |
|
|
61,383 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(15,185) |
|
|
(15,185) |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,023 |
|
|
4,023 |
|
|
Repurchase and retirement of common stock |
(87) |
|
|
(1) |
|
|
(4,733) |
|
|
— |
|
|
— |
|
|
(4,734) |
|
|
Equity-based compensation |
— |
|
|
— |
|
|
3,077 |
|
|
— |
|
|
— |
|
|
3,077 |
|
|
Exercise of stock options |
101 |
|
|
1 |
|
|
2,183 |
|
|
— |
|
|
— |
|
|
2,184 |
|
|
Vesting of restricted stock units |
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholding related to net share settlements of equity
awards |
— |
|
|
— |
|
|
(15) |
|
|
— |
|
|
— |
|
|
(15) |
|
|
Issuance of common stock pursuant to employee stock purchase
plan |
27 |
|
|
— |
|
|
1,192 |
|
|
— |
|
|
— |
|
|
1,192 |
|
|
Balances as of January 31, 2022 |
43,095 |
|
|
$ |
431 |
|
|
$ |
536,635 |
|
|
$ |
471,481 |
|
|
$ |
(5,271) |
|
|
$ |
1,003,276 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
GMS Inc.
Condensed
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Loss |
|
Total
Stockholders'
Equity |
|
Shares |
|
Amount |
|
|
|
|
|
Balances as of April 30, 2020 |
42,554 |
|
|
$ |
426 |
|
|
$ |
529,662 |
|
|
$ |
168,975 |
|
|
$ |
(65,082) |
|
|
$ |
633,981 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
27,219 |
|
|
— |
|
|
27,219 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,281 |
|
|
16,281 |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
959 |
|
|
959 |
|
|
Equity-based compensation |
— |
|
|
— |
|
|
1,575 |
|
|
— |
|
|
— |
|
|
1,575 |
|
|
Exercise of stock options |
54 |
|
|
— |
|
|
691 |
|
|
— |
|
|
— |
|
|
691 |
|
|
Vesting of restricted stock units |
7 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholding related to net share settlements of equity
awards |
— |
|
|
— |
|
|
(105) |
|
|
— |
|
|
— |
|
|
(105) |
|
|
Issuance of common stock pursuant to employee stock purchase
plan |
58 |
|
|
1 |
|
|
1,269 |
|
|
— |
|
|
— |
|
|
1,270 |
|
|
Balances as of July 31, 2020 |
42,673 |
|
|
427 |
|
|
533,092 |
|
|
196,194 |
|
|
(47,842) |
|
|
681,871 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
28,469 |
|
|
— |
|
|
28,469 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,159 |
|
|
3,159 |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,844 |
|
|
2,844 |
|
|
Repurchase and retirement of common stock |
(50) |
|
|
(1) |
|
|
(1,221) |
|
|
— |
|
|
— |
|
|
(1,222) |
|
|
Equity-based compensation |
— |
|
|
— |
|
|
3,253 |
|
|
— |
|
|
— |
|
|
3,253 |
|
|
Exercise of stock options |
5 |
|
|
— |
|
|
172 |
|
|
— |
|
|
— |
|
|
172 |
|
|
Vesting of restricted stock units |
62 |
|
|
1 |
|
|
(1) |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholding related to net share settlements of equity
awards |
— |
|
|
— |
|
|
(649) |
|
|
— |
|
|
— |
|
|
(649) |
|
|
Balances as of October 31, 2020 |
42,690 |
|
|
427 |
|
|
534,646 |
|
|
224,663 |
|
|
(41,839) |
|
|
717,897 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
16,126 |
|
|
— |
|
|
16,126 |
|
|
Foreign currency translation adjustments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
20,373 |
|
|
20,373 |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,974 |
|
|
1,974 |
|
|
Repurchase and retirement of common stock |
(30) |
|
|
— |
|
|
(778) |
|
|
— |
|
|
— |
|
|
(778) |
|
|
Equity-based compensation |
— |
|
|
— |
|
|
1,876 |
|
|
— |
|
|
— |
|
|
1,876 |
|
|
Exercise of stock options |
152 |
|
|
1 |
|
|
2,792 |
|
|
— |
|
|
— |
|
|
2,793 |
|
|
Vesting of restricted stock units |
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax withholding related to net share settlements of equity
awards |
— |
|
|
— |
|
|
(53) |
|
|
— |
|
|
— |
|
|
(53) |
|
|
Issuance of common stock pursuant to employee stock purchase
plan |
38 |
|
|
— |
|
|
806 |
|
|
— |
|
|
— |
|
|
806 |
|
|
Balances as of January 31, 2021 |
42,854 |
|
|
$ |
428 |
|
|
$ |
539,289 |
|
|
$ |
240,789 |
|
|
$ |
(19,492) |
|
|
$ |
761,014 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
GMS Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
Cash flows from operating activities: |
|
|
|
|
Net income |
$ |
196,946 |
|
|
$ |
71,814 |
|
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
|
Depreciation and amortization |
86,867 |
|
|
79,904 |
|
|
Amortization of debt discount and debt issuance costs |
2,037 |
|
|
2,257 |
|
|
Equity-based compensation |
12,461 |
|
|
10,318 |
|
|
Gain on disposal of assets |
(474) |
|
|
(529) |
|
|
Deferred income taxes |
(1,740) |
|
|
(9,645) |
|
|
Other items, net |
5,357 |
|
|
105 |
|
|
Changes in assets and liabilities net of effects of
acquisitions: |
|
|
|
|
Trade accounts and notes receivable |
(109,948) |
|
|
(15,381) |
|
|
Inventories |
(191,103) |
|
|
(24,391) |
|
|
Prepaid expenses and other assets |
2,215 |
|
|
1,040 |
|
|
Accounts payable |
(46,310) |
|
|
(41,371) |
|
|
Accrued compensation and employee benefits |
3,618 |
|
|
(11,932) |
|
|
Other accrued expenses and liabilities |
20,187 |
|
|
6,307 |
|
|
Cash (used in) provided by operating activities |
(19,887) |
|
|
68,496 |
|
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property and equipment |
(33,161) |
|
|
(17,857) |
|
|
Proceeds from sale of assets |
1,124 |
|
|
1,233 |
|
|
Acquisition of businesses, net of cash acquired |
(345,376) |
|
|
(51) |
|
|
Cash used in investing activities |
(377,413) |
|
|
(16,675) |
|
|
Cash flows from financing activities: |
|
|
|
|
Repayments on revolving credit facilities |
(823,583) |
|
|
(102,189) |
|
|
Borrowings from revolving credit facilities |
1,182,774 |
|
|
14,750 |
|
|
Payments of principal on long-term debt |
(3,832) |
|
|
(7,476) |
|
|
Payments of principal on finance lease obligations |
(23,154) |
|
|
(22,662) |
|
|
Repurchases of common stock |
(17,858) |
|
|
(2,000) |
|
|
Proceeds from exercises of stock options |
4,024 |
|
|
3,656 |
|
|
Payments for taxes related to net share settlement of equity
awards |
(2,850) |
|
|
(807) |
|
|
Other financing activities |
2,332 |
|
|
2,076 |
|
|
Cash provided by (used in) financing activities |
317,853 |
|
|
(114,652) |
|
|
Effect of exchange rates on cash and cash equivalents |
(590) |
|
|
2,495 |
|
|
Decrease in cash and cash equivalents |
(80,037) |
|
|
(60,336) |
|
|
Cash and cash equivalents, beginning of period |
167,012 |
|
|
210,909 |
|
|
Cash and cash equivalents, end of period |
$ |
86,975 |
|
|
$ |
150,573 |
|
|
Supplemental cash flow disclosures: |
|
|
|
|
Cash paid for income taxes |
$ |
61,066 |
|
|
$ |
31,942 |
|
|
Cash paid for interest |
35,721 |
|
|
38,114 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
GMS Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Business, Basis of Presentation and Summary of Significant
Accounting Policies
Business
Founded in 1971, GMS Inc. (“we,” “our,” “us,” or the “Company”),
through its wholly owned operating subsidiaries, operates a network
of nearly 300 distribution centers with extensive product offerings
of wallboard, ceilings, steel framing and complementary
construction products. GMS also operates more than 90 tool sales,
rental and service centers. Through these operations, GMS provides
a comprehensive selection of building products and solutions for
its residential and commercial contractor customer base across the
United States and Canada. The Company’s unique operating model
combines the benefits of a national platform and strategy with a
local go-to-market focus, enabling GMS to generate significant
economies of scale while maintaining high levels of customer
service.
Basis of Presentation
The condensed consolidated financial statements included in this
Quarterly Report on Form 10-Q have been prepared pursuant to
the rules and regulations of the Securities and Exchange
Commission (“SEC”) that permit reduced disclosure for interim
periods. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all normal and
recurring adjustments necessary for a fair presentation of the
results of operations, financial position and cash flows. All
adjustments are of a normal recurring nature unless otherwise
disclosed. The results of operations for interim periods are not
necessarily indicative of results for any other interim period or
the entire fiscal year. The unaudited condensed consolidated
financial statements should be read in conjunction with our audited
consolidated financial statements included in our Annual Report on
Form 10-K for the fiscal year ended April 30,
2021.
Principles of Consolidation
The condensed consolidated financial statements present the results
of operations, financial position, stockholders’ equity and cash
flows of the Company and its subsidiaries. All material
intercompany balances and transactions have been eliminated in
consolidation. The results of operations of businesses acquired are
included from their respective dates of acquisition.
Use of Estimates
The preparation of financial statements in conformity with
Generally Accepted Accounting Principles (“GAAP”) requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Foreign Currency Translation
Assets and liabilities of the Company’s Canadian subsidiaries are
translated at the exchange rate prevailing at the balance sheet
date, while income and expenses are translated at average rates for
the period. Translation gains and losses are reported as a separate
component of stockholders’ equity and other comprehensive income
(loss). Gains and losses on foreign currency transactions are
recognized in the Condensed Consolidated Statements of Operations
and Comprehensive Income within other income, net.
Insurance Liabilities
The Company is self-insured for certain losses related to medical
claims. The Company has stop-loss coverage to limit the exposure
arising from medical claims. In addition, the Company has
deductible-based insurance policies for certain losses related to
general liability, automobile and workers’ compensation. The
expected ultimate cost for claims incurred as of the balance sheet
date is not discounted and is recognized as a liability. Insurance
losses for claims filed and claims incurred but not reported are
accrued based upon estimates of the aggregate liability for
uninsured claims using historical loss development factors and
actuarial assumptions followed in the insurance
industry.
The following table presents the Company’s aggregate liabilities
for medical self-insurance, reserves for general liability,
automobile and workers’ compensation and the expected recoveries
for medical self-insurance, general liability,
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
automobile and workers’ compensation. Liabilities for medical
self-insurance are included in other accrued expenses and current
liabilities. Reserves for general liability, automobile and
workers’ compensation are included in other accrued expenses and
current liabilities and other liabilities. Expected recoveries for
insurance liabilities are included in prepaid expenses and other
current assets and other assets in the Condensed Consolidated
Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
(in thousands) |
|
Medical self‑insurance |
$ |
3,738 |
|
|
$ |
3,852 |
|
|
General liability, automobile and workers’ compensation |
18,140 |
|
|
19,807 |
|
|
Expected recoveries for insurance liabilities |
(3,256) |
|
|
(3,209) |
|
Revenue Recognition
Revenue is recognized upon transfer of control of contracted goods
to customers at an amount that reflects the consideration the
Company expects to receive in exchange for those goods. Revenue is
recognized net of any taxes collected from customers, which are
subsequently remitted to governmental authorities. The Company
includes shipping and handling costs billed to customers in net
sales. These costs are recognized as a component of selling,
general and administrative expenses.
See Note 13, “Segments,” for information regarding
disaggregation of revenue, including revenue by product and by
geographic area.
Income Taxes
The Company considers each interim period an integral part of the
annual period and measures tax expense (benefit) using an estimated
annual effective income tax rate. Estimates of the annual effective
income tax rate at the end of interim periods are, out of
necessity, based on evaluation of possible future events and
transactions and may be subject to subsequent refinement or
revision. The Company forecasts its estimated annual effective
income tax rate and then applies that rate to its year-to-date
pre-tax ordinary income (loss), subject to certain loss limitation
provisions. In addition, certain specific transactions are excluded
from the Company’s estimated annual effective tax rate computation
but are discretely recognized within income tax expense (benefit)
in their respective interim period. Future changes in annual income
(loss) projections, tax rate changes, or discrete tax items could
result in significant adjustments to quarterly income tax expense
(benefit) in future periods.
The Company evaluates its deferred tax assets quarterly to
determine if valuation allowances are required. In this evaluation,
the Company considers both positive and negative evidence in
determining whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The primary
negative evidence considered includes the cumulative operating
losses generated in prior periods. The primary positive evidence
considered includes the reversal of deferred tax liabilities
primarily related to depreciation and amortization that would occur
within the same jurisdiction and during the carryforward period
necessary to absorb the federal and state net operating losses and
other deferred tax assets.
Deferred tax assets and liabilities are computed by applying the
federal, provincial and state income tax rates in effect to the
gross amounts of temporary differences and other tax attributes,
such as net operating loss carry-forwards. In assessing if the
deferred tax assets will be realized, the Company considers whether
it is more likely than not that some or all of these deferred tax
assets will be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income
during the period in which these deductible temporary differences
reverse.
Earnings Per Share
Basic earnings per share is computed by dividing net income
available to common stockholders by the weighted average number of
outstanding shares of common stock for the period. Diluted earnings
per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock, including
stock options and restricted stock units (collectively “Common
Stock Equivalents”), were exercised or converted into common stock.
The dilutive effect of outstanding stock options and restricted
stock units is reflected in diluted earnings per share by
application of the treasury stock method. In applying the treasury
stock method for stock-based compensation arrangements, the assumed
proceeds are computed as the sum of the amount the employee must
pay upon exercise and the amount of compensation cost attributed to
future services and not
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
yet recognized. Diluted earnings per share is computed by
increasing the weighted-average number of outstanding shares of
common stock computed in basic earnings per share to include the
dilutive effect of Common Stock Equivalents for the period. In
periods of net loss, the number of shares used to calculate diluted
loss per share is the same as basic net loss per
share.
Reclassifications
Certain amounts in the prior period financial statements have been
reclassified to conform to the current year
presentation.
Recently Issued Accounting Pronouncements
Reference Rate Reform
– In March 2020, the Financial Accounting Standards Board (“FASB”)
issued new guidance to temporarily ease the potential burden in
accounting for reference rate reform. The guidance provides
optional expedients and exceptions for applying GAAP to contracts,
hedging relationships and other transactions affected by reference
rates that are expected to be discontinued, such as the London
Interbank Offered Rate (“LIBOR”). The guidance was effective upon
issuance and generally can be applied through December 31, 2022.
However, the new guidance is not applicable to contract
modifications made, and hedging relationships entered into or
evaluated after, December 31, 2022. The Company will adopt this
guidance when its relevant contracts are modified upon transition
to alternative reference rates. The Company does not expect the
adoption to have a material impact on its consolidated financial
statements.
2. Business Combinations
The Company accounts for business combinations by recognizing the
assets acquired and liabilities assumed at the acquisition date
fair value. In valuing certain acquired assets and liabilities,
fair value estimates use Level 3 inputs, including future expected
cash flows and discount rates. Goodwill is measured as the
excess of consideration transferred over the fair values of the
assets acquired and the liabilities assumed. While the Company uses
its best estimates and assumptions to value assets acquired and
liabilities assumed at the acquisition date, the Company’s
estimates are inherently uncertain and subject to refinement. As a
result, during the measurement period, which may be up to
one year from the acquisition date, the Company records
adjustments to the assets acquired and liabilities assumed, with
the corresponding offset to goodwill. Upon the conclusion of the
measurement period, any subsequent adjustments arising from new
facts and circumstances are recorded to the Consolidated Statements
of Operations and Comprehensive Income. The results of operations
of acquisitions are reflected in the Company’s Consolidated
Financial Statements from the date of acquisition. The Company's
Condensed Consolidated Statement of Operations and Comprehensive
Income for the nine months ended January 31, 2022 included
$150.1 million of net sales and $3.5 million of net income from
acquisitions made in fiscal 2022.
Westside Acquisition
On July 1, 2021, the Company acquired substantially all the assets
of Westside Building Material (“Westside”), one of the largest
independent distributors of interior building products in the U.S.,
for preliminary consideration of $140.1 million. Westside is a
leading supplier of steel framing, wallboard, ceilings, insulation
and complementary building products serving commercial and
residential markets. Westside’s distribution network comprises ten
locations, including nine across California (Anaheim, Hesperia,
Oakland, Chatsworth, Fresno, Lancaster, Santa Maria, San Diego and
National City) and one in Las Vegas, Nevada. The primary purpose of
the transaction was to expand the geographical coverage of the
Company and grow the business.
The assets acquired and liabilities assumed were recognized at
their acquisition date fair values. The acquisition accounting
is subject to change as the Company obtains additional information
during the measurement period about the facts and circumstances
that existed as of the acquisition date. The primary areas of
the preliminary acquisition accounting that are not yet finalized
relate to settlement of the holdback liability.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
The following table summarizes the components of the preliminary
consideration:
|
|
|
|
|
|
|
(in thousands) |
|
Cash consideration |
$ |
126,609 |
|
|
Holdback liability |
13,500 |
|
|
Total preliminary consideration transferred |
$ |
140,109 |
|
Included in the total preliminary consideration as of
January 31, 2022 is a $13.5 million holdback liability for
general representations and warranties of the sellers that is
scheduled to be settled 15 months after the acquisition
date.
The following table summarizes the preliminary acquisition
accounting for this acquisition, and subsequent measurement period
adjustments recorded, based on currently available
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2021 |
|
Adjustments |
|
January 31, 2022 |
|
(in thousands) |
|
Trade accounts and notes receivable |
$ |
27,081 |
|
|
$ |
(799) |
|
|
$ |
26,282 |
|
|
Inventories |
28,900 |
|
|
(145) |
|
|
28,755 |
|
|
Prepaid and other current assets |
228 |
|
|
— |
|
|
228 |
|
|
Property and equipment |
16,687 |
|
|
— |
|
|
16,687 |
|
|
Operating lease right-of-use assets |
20,782 |
|
|
— |
|
|
20,782 |
|
|
Customer relationships |
51,500 |
|
|
— |
|
|
51,500 |
|
|
Tradenames |
11,300 |
|
|
— |
|
|
11,300 |
|
|
Goodwill |
13,351 |
|
|
1,363 |
|
|
14,714 |
|
|
Accounts payable and accrued expenses |
(14,375) |
|
|
55 |
|
|
(14,320) |
|
|
Operating lease liabilities |
(15,819) |
|
|
— |
|
|
(15,819) |
|
|
Fair value of consideration transferred |
$ |
139,635 |
|
|
$ |
474 |
|
|
$ |
140,109 |
|
Goodwill recognized is attributable to synergies achieved through
the streamlining of operations combined with improved margins
attainable through increased market presence and is all
attributable to the Company's geographic divisions reportable
segment. Goodwill is expected to be deductible for U.S. federal
income tax purposes. The estimated useful life for the customer
relationships is 12 years and the estimated useful life for the
tradenames is 15 years.
Ames Acquisition
On December 1, 2021, the Company acquired Ames Taping Tools Holding
LLC (“Ames”) for preliminary consideration of $224.5 million in
cash. Ames is the leading provider of automatic taping and
finishing (“ATF”) tools and related products to the professional
drywall finishing industry. Ames operates more than 90 retail
locations servicing professionals in the interior finishing market.
The acquisition was primarily funded with borrowings under the
Company's asset based revolving credit facility. The primary
purpose of the transaction was to expand the Company's
complementary product offerings and grow the business.
The assets acquired and liabilities assumed were recognized at
their acquisition date fair values. Due to the limited amount
of time since the acquisition of Ames, the acquisition accounting
is subject to change as the Company obtains additional information
during the measurement period about the facts and circumstances
that existed as of the acquisition date. The primary areas of
the preliminary acquisition accounting that are not yet finalized
relate to the finalization of preliminary fair value estimates,
working capital adjustments and residual goodwill.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
The following table summarizes the preliminary acquisition
accounting for this acquisition based on currently available
information:
|
|
|
|
|
|
|
Preliminary
Acquisition
Accounting |
|
(in thousands) |
|
Cash and cash equivalents |
$ |
10,692 |
|
|
Trade accounts and notes receivable |
9,955 |
|
|
Inventories |
15,464 |
|
|
Prepaid and other current assets |
1,941 |
|
|
Property and equipment |
6,165 |
|
|
Operating lease right-of-use assets |
8,238 |
|
|
Customer relationships |
63,000 |
|
|
Tradenames |
53,000 |
|
|
Patents |
3,000 |
|
|
Goodwill |
104,557 |
|
|
Accounts payable and accrued expenses |
(14,827) |
|
|
Deferred tax liability |
(28,440) |
|
|
Operating lease liabilities |
(8,238) |
|
|
Fair value of consideration transferred |
$ |
224,507 |
|
Goodwill recognized is attributable to expected synergies and the
expected value in the potential to expand and enhance the Company's
complementary product offerings. Goodwill is not expected to be
deductible for U.S. federal income tax purposes. The estimated
useful life for the customer relationships is eleven years and the
estimated useful life for the patents is ten years. The tradenames
are estimated to have an indefinite useful life.
Trade accounts and notes receivable had a preliminary estimate of
fair value of $10.0 million and a gross contractual value of
$11.6 million. The difference represents the Company’s best
estimate of the contractual cash flows that will not be
collected.
Pro Forma Financial Information
The following table presents the unaudited pro forma consolidated
net sales and net income for the Company for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands) |
|
Net sales |
$ |
1,160,211 |
|
|
$ |
813,078 |
|
|
$ |
3,429,878 |
|
|
$ |
2,571,616 |
|
|
Net income |
61,336 |
|
|
15,303 |
|
|
203,721 |
|
|
75,924 |
|
The above pro forma results have been calculated by combining the
historical results of the Company, Westside and Ames as if the
acquisitions of Westside and Ames had occurred on May 1, 2020, the
first day of the comparable prior reporting period presented. The
pro forma results include estimates for intangible asset
amortization, depreciation, interest expense and income taxes, and
are subject to change once final asset values have been determined.
The pro forma information is not necessarily indicative of the
results that would have been achieved had the transactions occurred
on the first day of each of the periods presented or that may be
achieved in the future.
Other Acquisitions
On June 3, 2021, the Company acquired the assets of Architectural
Coatings Distributors, Inc. (“Architectural Coating”).
Architectural Coating is an interior building products distributor
in Cleveland, Ohio. On August 2, 2021, the Company acquired certain
assets of DK&B Construction Specialties, Inc. (“DK&B”).
DK&B is a distributor of External Insulation and Finishing
Systems (“EIFS”) and stucco products through one location in Omaha,
Nebraska. On December 1, 2021, the Company acquired the assets of
Kimco Supply Company (“Kimco”). Kimco is an interior building
products
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
distributor through two locations in the Tampa, Florida area. The
impact of these acquisitions is not material to the Company’s
Consolidated Financial Statements.
3. Accounts Receivable
The Company’s trade accounts and notes receivable consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
(in thousands) |
|
Trade receivables |
$ |
604,321 |
|
|
$ |
488,002 |
|
|
Other receivables |
105,617 |
|
|
76,941 |
|
|
Allowance for expected credit losses |
(5,424) |
|
|
(3,254) |
|
|
Other allowances |
(4,259) |
|
|
(3,028) |
|
|
Trade accounts and notes receivable |
$ |
700,255 |
|
|
$ |
558,661 |
|
The following table presents the change in the allowance for
expected credit losses during the nine months ended
January 31, 2022:
|
|
|
|
|
|
|
(in thousands) |
|
Balance as of April 30, 2021 |
$ |
3,254 |
|
|
Provision |
786 |
|
|
Other |
1,384 |
|
|
Balance as of January 31, 2022 |
$ |
5,424 |
|
Receivables from contracts with customers, net of allowances, were
$594.6 million and $481.7 million as of January 31, 2022 and
April 30, 2021, respectively. The Company did not have
material amounts of contract assets or liabilities as of
January 31, 2022 or April 30, 2021.
4. Goodwill and Intangible Assets
Goodwill
The following table presents changes in the carrying amount of
goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
Accumulated |
|
Net |
|
Carrying Amount |
|
Impairment Loss |
|
Carrying Amount |
|
(in thousands) |
|
Balance as of April 30, 2021 |
$ |
645,377 |
|
|
$ |
(69,047) |
|
|
$ |
576,330 |
|
|
Goodwill recognized from acquisitions |
122,624 |
|
|
— |
|
|
122,624 |
|
|
Acquisition accounting adjustments from prior period |
(476) |
|
|
— |
|
|
(476) |
|
|
Translation adjustment |
(6,504) |
|
|
1,968 |
|
|
(4,536) |
|
|
Balance as of January 31, 2022 |
$ |
761,021 |
|
|
$ |
(67,079) |
|
|
$ |
693,942 |
|
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
Intangible Assets
The following tables present the components of the Company’s
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Useful
Lives
(years) |
|
Weighted
Average
Amortization
Period |
|
January 31, 2022 |
|
|
|
Gross
Carrying
Amount |
|
Accumulated
Amortization |
|
Net
Carrying
Value |
|
(dollars in thousands) |
|
Customer relationships |
5-16
|
|
12.5 |
|
$ |
674,835 |
|
|
$ |
(368,089) |
|
|
$ |
306,746 |
|
|
Definite-lived tradenames |
5-20
|
|
15.8 |
|
72,141 |
|
|
(18,023) |
|
|
54,118 |
|
|
Vendor agreements |
8-10
|
|
8.3 |
|
6,644 |
|
|
(5,976) |
|
|
668 |
|
|
Developed technology |
5 |
|
4.9 |
|
8,499 |
|
|
(4,151) |
|
|
4,348 |
|
|
Other |
3-5
|
|
3.8 |
|
1,278 |
|
|
(1,213) |
|
|
65 |
|
|
Definite-lived intangible assets |
|
|
|
|
$ |
763,397 |
|
|
$ |
(397,452) |
|
|
$ |
365,945 |
|
|
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
114,367 |
|
|
Total intangible assets, net |
|
|
|
|
|
|
|
|
$ |
480,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Useful
Lives
(years) |
|
Weighted
Average
Amortization
Period |
|
April 30, 2021 |
|
|
|
Gross
Carrying
Amount |
|
Accumulated
Amortization |
|
Net
Carrying
Value |
|
(dollars in thousands) |
|
Customer relationships |
5-16
|
|
13.3 |
|
$ |
569,255 |
|
|
$ |
(330,880) |
|
|
$ |
238,375 |
|
|
Definite-lived tradenames |
5-20
|
|
16.8 |
|
62,084 |
|
|
(14,842) |
|
|
47,242 |
|
|
Vendor agreements |
8-10
|
|
8.3 |
|
6,644 |
|
|
(5,372) |
|
|
1,272 |
|
|
Developed technology |
5 |
|
4.9 |
|
5,699 |
|
|
(3,381) |
|
|
2,318 |
|
|
Other |
3-5
|
|
3.3 |
|
4,291 |
|
|
(3,996) |
|
|
295 |
|
|
Definite-lived intangible assets |
|
|
|
|
$ |
647,973 |
|
|
$ |
(358,471) |
|
|
$ |
289,502 |
|
|
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
61,367 |
|
|
Total intangible assets, net |
|
|
|
|
|
|
|
|
$ |
350,869 |
|
Amortization expense related to definite-lived intangible assets
was $15.9 million and $14.2 million for the three months ended
January 31, 2022 and 2021, respectively, and $46.4 million and
$43.0 million for the nine months ended January 31, 2022 and
2021, respectively.
The following table summarizes the estimated future amortization
expense for definite-lived intangible assets. Actual amortization
expense to be reported in future periods could differ materially
from these estimates as a result of acquisitions, changes in useful
lives, foreign currency exchange rate fluctuations and other
relevant factors.
|
|
|
|
|
|
|
Year Ending April 30, |
(in thousands) |
|
2022 (remaining three months) |
$ |
17,637 |
|
|
2023 |
65,218 |
|
|
2024 |
54,181 |
|
|
2025 |
45,074 |
|
|
2026 |
37,786 |
|
|
Thereafter |
146,049 |
|
|
Total |
$ |
365,945 |
|
The Company’s indefinite-lived intangible assets consist of
tradenames that had a carrying amount of $114.4 million and $61.4
million as of January 31, 2022 and April 30, 2021,
respectively.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
5. Long-Term Debt
The Company’s long-term debt consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
(in thousands) |
|
Term Loan Facility |
$ |
505,890 |
|
|
$ |
509,722 |
|
|
Unamortized discount and deferred financing costs on Term Loan
Facility |
(3,861) |
|
|
(4,735) |
|
|
Senior Notes |
350,000 |
|
|
350,000 |
|
|
Unamortized discount and deferred financing costs on Senior
Notes |
(4,989) |
|
|
(5,485) |
|
|
ABL Facility |
359,000 |
|
|
— |
|
|
Finance lease obligations |
112,967 |
|
|
117,948 |
|
|
Installment notes at fixed rates up to 5.0%, due in monthly and
annual installments through 2025
|
7,812 |
|
|
11,716 |
|
|
Unamortized discount on installment notes |
(458) |
|
|
(739) |
|
|
|
|
|
|
Carrying value of debt |
1,326,361 |
|
|
978,427 |
|
|
Less current portion |
44,624 |
|
|
46,018 |
|
|
Long-term debt |
$ |
1,281,737 |
|
|
$ |
932,409 |
|
Term Loan Facility
The Company has a senior secured first lien term loan facility (the
“Term Loan Facility”). The Company is required to make scheduled
quarterly payments of $1.3 million, or 0.25% of the aggregate
principal amount of the Term Loan Facility, with the remaining
balance due in June 2025. The Term Loan Facility bears
interest at a floating rate based on LIBOR plus 2.50%, with a 0%
floor. As of January 31, 2022, the applicable rate of interest
was 2.61%.
Senior Notes
The Company has senior unsecured notes due May 2029 (the "Senior
Notes"). The Senior Notes bear interest at 4.625% per annum and
mature on May 1, 2029. Interest is payable semi-annually in arrears
on May 1 and November 1.
Asset Based Lending Facility
The Company has an asset based revolving credit facility (the “ABL
Facility”) that provided for aggregate revolving commitments of
$545.0 million as of January 31, 2022. Extensions of credit
under the ABL Facility are limited by a borrowing base calculated
periodically based on specified percentages of the value of
eligible inventory and eligible accounts receivable, subject to
certain reserves and other adjustments.
On November 30, 2021, the Company amended its ABL Facility to,
among other things, increase the commitments thereunder by
$100.0 million from $445.0 million to $545.0 million and
change the interest rate provisions from LIBOR to Secured Overnight
Financing Rate ("SOFR").
As of January 31, 2022, at the Company’s option, the interest
rates applicable to the loans under the ABL Facility were based on
SOFR or base rate plus, in each case, an applicable margin. The
margins applicable for each elected interest rate are subject to a
pricing grid, as defined in the ABL Facility agreement, based on
average daily availability for the most recent fiscal quarter. The
ABL Facility also contains an unused commitment fee. As of
January 31, 2022, the applicable base rate of interest was
3.50%.
As of January 31, 2022, the Company had available borrowing
capacity of approximately $159.6 million under the ABL Facility.
The ABL Facility matures on September 30, 2024 unless the
individual affected lenders agree to extend the maturity of their
respective loans under the ABL Facility upon the Company’s request
and without the consent of any other lender. The ABL Facility
contains a cross default provision with the Term Loan
Facility.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
Debt Covenants
The Term Loan Facility and the indenture governing the Senior Notes
contain a number of covenants that limit our ability and the
ability of our restricted subsidiaries, as described in the
respective credit agreement and the indenture, to: incur more
indebtedness; pay dividends, redeem or repurchase stock or make
other distributions; make investments; create restrictions on the
ability of our restricted subsidiaries to pay dividends to us or
make other intercompany transfers; create liens securing
indebtedness; transfer or sell assets; merge or consolidate;
enter into certain transactions with our affiliates; and prepay or
amend the terms of certain indebtedness. Such covenants are subject
to several important exceptions and qualifications set forth in the
Term Loan Facility and the indenture governing the Senior Notes.
The Company was in compliance with all covenants contained in the
Term Loan Facility and the indenture governing the Senior Notes as
of January 31, 2022.
The ABL Facility contains certain affirmative covenants, including
financial and other reporting requirements. The Company was in
compliance with all such covenants as of January 31,
2022.
Canadian Revolving Credit Facility
Through its WSB Titan (“Titan”) subsidiary, the Company has a
revolving credit facility (the “Canadian Facility”) that provides
for aggregate revolving commitments of $23.6 million ($30.0 million
Canadian dollars). The Canadian Facility bears interest at the
Canadian prime rate plus a marginal rate based on the level
determined by Titan’s total debt to EBITDA ratio at the end of the
most recently completed fiscal quarter or year. As of
January 31, 2022, the Company had available borrowing capacity
of approximately $23.6 million under the Canadian Facility. The
Canadian Facility matures on January 12, 2026.
Debt Maturities
As of January 31, 2022, the maturities of long-term debt were
as follows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
Facility |
|
Senior Notes |
|
ABL Facility |
|
Finance
Leases |
|
Installment
Notes |
|
|
|
Total |
|
Year Ending April 30, |
(in thousands) |
|
2022 (remaining three months) |
$ |
1,278 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,107 |
|
|
$ |
493 |
|
|
|
|
$ |
10,878 |
|
|
2023 |
5,110 |
|
|
— |
|
|
— |
|
|
35,585 |
|
|
4,505 |
|
|
|
|
45,200 |
|
|
2024 |
5,110 |
|
|
— |
|
|
— |
|
|
28,819 |
|
|
1,881 |
|
|
|
|
35,810 |
|
|
2025 |
5,110 |
|
|
— |
|
|
359,000 |
|
|
19,082 |
|
|
921 |
|
|
|
|
384,113 |
|
|
2026 |
489,282 |
|
|
— |
|
|
— |
|
|
11,867 |
|
|
12 |
|
|
|
|
501,161 |
|
|
Thereafter |
— |
|
|
350,000 |
|
|
— |
|
|
8,507 |
|
|
— |
|
|
|
|
358,507 |
|
|
|
$ |
505,890 |
|
|
$ |
350,000 |
|
|
$ |
359,000 |
|
|
$ |
112,967 |
|
|
$ |
7,812 |
|
|
|
|
$ |
1,335,669 |
|
6. Leases
The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands) |
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
$ |
5,557 |
|
|
$ |
5,898 |
|
|
$ |
16,713 |
|
|
$ |
17,997 |
|
|
Interest on lease liabilities |
1,954 |
|
|
2,748 |
|
|
6,378 |
|
|
8,673 |
|
|
Operating lease cost |
12,628 |
|
|
10,601 |
|
|
34,955 |
|
|
31,930 |
|
|
Variable lease cost |
4,440 |
|
|
3,197 |
|
|
12,992 |
|
|
9,329 |
|
|
Total lease cost |
$ |
24,579 |
|
|
$ |
22,444 |
|
|
$ |
71,038 |
|
|
$ |
67,929 |
|
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
Supplemental cash flow information related to leases was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
(in thousands) |
|
Cash paid for amounts included in the measurement of lease
liabilities |
|
|
|
|
Operating cash flows from operating leases |
$ |
35,385 |
|
|
$ |
32,208 |
|
|
Operating cash flows from finance leases |
6,378 |
|
|
8,673 |
|
|
Financing cash flows from finance leases |
23,154 |
|
|
22,662 |
|
|
Right-of-use assets obtained in exchange for lease
obligations |
|
|
|
|
Operating leases(a) |
53,549 |
|
|
27,918 |
|
|
Finance leases |
24,887 |
|
|
22,408 |
|
__________________________________________
(a) Includes operating lease right-of-use assets obtained in
acquisitions. See Note 2, “Business Combinations” for more
information on business combinations.
Other information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
(in thousands) |
|
Finance leases included in property and equipment |
|
|
|
|
Property and equipment |
$ |
180,401 |
|
|
$ |
176,591 |
|
|
Accumulated depreciation |
(54,954) |
|
|
(51,869) |
|
|
Property and equipment, net |
$ |
125,447 |
|
|
$ |
124,722 |
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
Operating leases |
4.5 |
|
4.7 |
|
Finance leases |
3.2 |
|
3.5 |
|
Weighted-average discount rate |
|
|
|
|
Operating leases |
4.9 |
% |
|
5.5 |
% |
|
Finance leases |
4.5 |
% |
|
4.6 |
% |
Future minimum lease payments under non-cancellable leases as of
January 31, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance |
|
Operating |
|
Year Ending April 30, |
(in thousands) |
|
2022 (remaining three months) |
$ |
10,797 |
|
|
$ |
12,214 |
|
|
2023 |
40,327 |
|
|
45,206 |
|
|
2024 |
31,056 |
|
|
39,144 |
|
|
2025 |
20,118 |
|
|
28,353 |
|
|
2026 |
12,316 |
|
|
17,146 |
|
|
Thereafter |
8,678 |
|
|
22,890 |
|
|
Total lease payments |
123,292 |
|
|
164,953 |
|
|
Less imputed interest |
10,325 |
|
|
17,538 |
|
|
Total |
$ |
112,967 |
|
|
$ |
147,415 |
|
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
7. Income Taxes
General.
The Company’s effective income tax rate on continuing operations
was 24.8% and 24.7% for the nine months ended January 31,
2022 and 2021, respectively. The difference in the effective income
tax rate over the U.S. federal statutory rate of 21.0% for the nine
months ended January 31, 2022 was primarily due to the impact
of state and foreign taxes, as well as equity compensation. The
difference in the effective income tax rate over the U.S. federal
statutory rate for the nine months ended January 31, 2021 was
primarily due to the impact of state taxes, foreign tax rates and a
change in the valuation allowance.
Valuation allowance.
The Company had a valuation allowance of $11.9 million and $11.8
million against its deferred tax assets related to certain U.S. tax
jurisdictions as of January 31, 2022 and April 30, 2021,
respectively. To the extent the Company generates sufficient
taxable income in the future to utilize the tax benefits of the net
deferred tax assets on which a valuation allowance is recorded, the
effective tax rate may decrease as the valuation allowance is
reversed.
Uncertain tax positions.
The Company had no reserve for uncertain tax positions as of
January 31, 2022 or April 30, 2021.
8. Stockholders’ Equity
Share Repurchases
The Company's Board of Directors has authorized a common stock
repurchase program to repurchase up to $75.0 million of outstanding
common stock. The Company may conduct repurchases under the share
repurchase program through open market transactions, under trading
plans in accordance with SEC Rule 10b5-1 and/or in privately
negotiated transactions, in each case in compliance with Rule
10b-18 under the Exchange Act of 1934, as amended. These
repurchases are subject to a variety of factors, including, but not
limited to, our liquidity, credit availability, general business
and market conditions, our debt covenant restrictions and the
availability of alternative investment opportunities. The
share repurchase program does not obligate the Company to acquire
any particular amount of common stock, and it may be suspended or
terminated at any time at the Company’s discretion.
The Company repurchased approximately 367,000 shares of its common
stock for $17.9 million during the nine months ended
January 31, 2022. The Company repurchased approximately 80,000
shares of its common stock for $2.0 million during the nine months
ended January 31, 2021. As of January 31, 2022, the
Company had $36.5 million of remaining repurchase
authorization under the stock repurchase
program.
Accumulated Other Comprehensive Income (Loss)
The following table sets forth the changes to accumulated other
comprehensive income (loss), net of tax, by component for the
nine months ended January 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation |
|
Derivative
Financial
Instruments |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
(in thousands) |
|
Balance as of April 30, 2021 |
$ |
20,764 |
|
|
$ |
(16,005) |
|
|
$ |
4,759 |
|
|
Other comprehensive income (loss) before
reclassification |
(19,304) |
|
|
2,430 |
|
|
(16,874) |
|
|
Reclassification to earnings from accumulated other comprehensive
income (loss) |
— |
|
6,844 |
|
|
6,844 |
|
|
Balance as of January 31, 2022 |
$ |
1,460 |
|
|
$ |
(6,731) |
|
|
$ |
(5,271) |
|
Other comprehensive income (loss) before reclassification on
derivative instruments for the nine months ended January 31,
2022 is net of $0.8 million of tax. Reclassification to earnings
from accumulated other comprehensive income is net of $2.2 million
of tax.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
9. Equity-Based Compensation
General
Equity-based compensation expense related to stock options and
restricted stock units was $7.7 million and $6.3 million during the
nine months ended January 31, 2022 and 2021, respectively, and
is included in selling, general and administrative expenses in the
Condensed Consolidated Statements of Operations and Comprehensive
Income.
Stock Option Awards
The following table presents stock option activity for the nine
months ended January 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options |
|
Weighted
Average
Exercise
Price |
|
Weighted
Average
Remaining
Contractual
Life (years) |
|
Aggregate
Intrinsic
Value |
|
(shares and dollars in thousands) |
|
Outstanding as of April 30, 2021 |
1,289 |
|
|
$ |
20.86 |
|
|
6.8 |
|
$ |
29,465 |
|
|
Options granted |
208 |
|
|
49.77 |
|
|
|
|
|
|
Options exercised |
(197) |
|
|
20.58 |
|
|
|
|
|
|
Options forfeited |
(15) |
|
|
23.06 |
|
|
|
|
|
|
Outstanding as of January 31, 2022 |
1,285 |
|
|
$ |
25.56 |
|
|
6.6 |
|
$ |
33,023 |
|
|
Exercisable as of January 31, 2022 |
758 |
|
|
$ |
20.09 |
|
|
5.1 |
|
$ |
23,558 |
|
|
Vested and Expected to vest as of January 31, 2022 |
1,281 |
|
|
$ |
25.51 |
|
|
6.6 |
|
$ |
32,960 |
|
The aggregate intrinsic value represents the excess of the
Company’s closing stock price on the last trading day of the period
over the weighted average exercise price multiplied by the number
of options outstanding, exercisable or expected to vest. Options
expected to vest are unvested shares net of expected forfeitures.
The total intrinsic value of options exercised during the nine
months ended January 31, 2022 and 2021 was $6.6
million and $2.5 million, respectively. As of January 31,
2022, there was $5.5 million of total unrecognized
compensation cost related to stock options. That cost is expected
to be recognized over a weighted-average period of 2.1
years.
The fair value of stock options granted during the nine months
ended January 31, 2022 and 2021 was estimated using the
Black-Scholes option-pricing model with the following assumptions
and resulting weighted average grant date fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
Volatility |
43.13 |
% |
|
51.28 |
% |
|
Expected life (years) |
6.0 |
|
6.0 |
|
Risk-free interest rate |
0.89 |
% |
|
0.30 |
% |
|
Dividend yield |
— |
% |
|
— |
% |
|
Grant date fair value |
$ |
20.86 |
|
|
$ |
11.13 |
|
The expected volatility was based on historical and implied
volatility. The expected life of stock options was based on
previous history of exercises. The risk-free rate was based on the
U.S. Treasury yield curve in effect at the time of grant for the
expected term of the stock option. The expected dividend yield was
0% as we have not declared any common stock dividends to date and
do not expect to declare common stock dividends in the near future.
The fair value of the underlying common stock at the date of grant
was determined based on the value of the Company’s closing stock
price on the date of the grant.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
Restricted Stock Units
The following table presents restricted stock unit activity for the
nine months ended January 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Stock Units |
|
Weighted
Average
Grant Date
Fair Value |
|
(shares in thousands) |
|
Outstanding as of April 30, 2021 |
361 |
|
|
$ |
22.92 |
|
|
Granted |
165 |
|
|
49.51 |
|
|
Vested |
(182) |
|
|
23.14 |
|
|
Forfeited |
(7) |
|
|
23.03 |
|
|
Outstanding as of January 31, 2022 |
337 |
|
|
$ |
35.79 |
|
As of January 31, 2022, there was $7.8 million of
total unrecognized compensation cost related to nonvested
restricted stock units. That cost is expected to be recognized over
a weighted-average period of 2.0 years.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan (“ESPP”), the terms
of which allow for qualified employees to participate in the
purchase of shares of the Company’s common stock at a price equal
to 90% of the lower of the closing price at the beginning or end of
the purchase period, which is a six-month period ending on December
31 and June 30 of each year. During the nine months ended
January 31, 2022, 70,000 shares of the Company’s common stock
were purchased under the ESPP at a price of $33.19 per share.
During the nine months ended January 31, 2021, 96,000 shares
of the Company’s common stock were purchased under the ESPP at a
price of $21.78 per share. The Company recognized $0.5 million and
$0.4 million of stock-based compensation expense during the nine
months ended January 31, 2022 and 2021, respectively, related
to the ESPP.
10. Stock Appreciation Rights, Deferred Compensation and Redeemable
Noncontrolling Interests
The following table presents a summary of changes to the
liabilities for stock appreciation rights, deferred compensation
and redeemable noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Appreciation
Rights |
|
Deferred
Compensation |
|
Redeemable
Noncontrolling
Interests |
|
(in thousands) |
|
Balance as of April 30, 2021 |
$ |
26,795 |
|
|
$ |
1,875 |
|
|
$ |
9,373 |
|
|
Amounts redeemed |
(320) |
|
|
— |
|
— |
|
Change in fair value |
3,126 |
|
|
181 |
|
|
904 |
|
|
Balance as of January 31, 2022 |
$ |
29,601 |
|
|
$ |
2,056 |
|
|
$ |
10,277 |
|
|
|
|
|
|
|
|
|
Classified as current as of April 30, 2021 |
$ |
1,305 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Classified as long-term as of April 30, 2021 |
25,490 |
|
|
1,875 |
|
|
9,373 |
|
|
|
|
|
|
|
|
|
Classified as current as of January 31, 2022 |
$ |
1,310 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Classified as long-term as of January 31, 2022 |
28,291 |
|
|
2,056 |
|
|
10,277 |
|
Total expense related to these instruments was $4.2 million and
$3.6 million during the nine months ended January 31, 2022 and
2021, respectively, and was included in selling, general and
administrative expenses in the Condensed Consolidated Statements of
Operations and Comprehensive Income. Current and long-term
liabilities for stock appreciation rights, deferred compensation
and redeemable noncontrolling interests are included in other
accrued expenses and liabilities and other liabilities,
respectively, in the Condensed Consolidated Balance Sheets. See
Note 13, "Stock Appreciation Rights, Deferred Compensation and
Redeemable Noncontrolling Interests," in the Company's Annual
Report on Form 10-K for the year ended
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
April 30, 2021 for more information regarding stock appreciation
rights, deferred compensation and redeemable noncontrolling
interests.
11. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring
Basis
The following table presents the estimated carrying amount and fair
value of the Company’s liabilities measured at fair value on a
recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
(in thousands) |
|
Interest rate swaps (Level 2) |
$ |
8,720 |
|
|
$ |
21,004 |
|
The Company has interest rate swap agreements with a notional
amount of $500.0 million to convert the variable interest rate
on a portion of its Term Loan Facility to a fixed 1-month LIBOR
interest rate of 2.46%. The contracts were effective
on February 28, 2019 and terminate on February 28,
2023. The objective of the interest rate swap agreements is to
eliminate the variability of interest payment cash flows associated
with variable interest rates. The Company believes there have been
no material changes in the creditworthiness of the counterparty to
this interest rate swap and believes the risk of nonperformance by
such party is minimal. The Company designated the interest rate
swaps as cash flow hedges.
As of January 31, 2022, $8.1 million of the interest rate swap
liability was classified in other accrued expenses and current
liabilities and $0.6 million was classified in other liabilities in
the Condensed Consolidated Balance Sheet. The Company recognized
losses, net of tax, of $2.3 million and $2.2 million in
earnings during the three months ended January 31, 2022 and
2021, respectively, related to its interest rate swaps, and $6.8
million and $6.5 million during the nine months ended
January 31, 2022 and 2021, respectively. These losses are
included in interest expense in the Condensed Consolidated
Statements of Operations and Comprehensive Income and within cash
flows from operating activities within the Condensed Consolidated
Statements of Cash Flows. As of January 31, 2022, the Company
expects that approximately $8.1 million of pre-tax net losses will
be reclassified from accumulated other comprehensive income (loss)
into earnings during the next twelve months.
The fair value of interest rate swaps is determined using Level 2
inputs. Generally, the Company obtains the Level 2 inputs from its
counterparties. Substantially all of the inputs throughout the full
term of the instruments can be derived from observable data or are
supported by observable levels at which transactions are executed
in the marketplace. The fair value of the Company’s interest rate
swap was determined using widely accepted valuation techniques
including a discounted cash flow analysis on the expected cash
flows of the derivative. This analysis reflected the contractual
terms of the derivatives, including the period to maturity, and
used observable market-based inputs, including interest rate curves
and implied volatilities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring
Basis
Disclosures are required for certain assets and liabilities that
are measured at fair value on a nonrecurring basis in periods
subsequent to initial recognition. Such measurements of fair value
relate primarily to assets and liabilities measured at fair value
in connection with business combinations and long-lived asset
impairments. For more information on business combinations, see
Note 2, “Business Combinations.” There were no material long-lived
asset impairments during the nine months ended January 31,
2022 or 2021.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
Fair Value of Debt
The estimated fair value of the Company’s Senior Notes was
determined based on Level 2 input using observable market prices in
less active markets. The carrying amount of the Company’s Term Loan
Facility and ABL Facility approximates its fair value as the
interest rates are variable and reflective of market rates. The
following table presents the carrying value and fair value of the
Company’s Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2022 |
|
April 30, 2021 |
|
Carrying Amount |
|
Fair Value |
|
Carrying Amount |
|
Fair Value |
|
(in thousands) |
|
Senior Notes |
$ |
350,000 |
|
|
$ |
338,625 |
|
|
$ |
350,000 |
|
|
$ |
350,000 |
|
12. Commitments and Contingencies
The Company is a defendant in various lawsuits and administrative
actions associated with personal injuries, property damage, product
liability claims, claims of former employees and other events
arising in the normal course of business. As discussed in
Note 1 “—Insurance Liabilities”, the Company records
liabilities for these claims, and assets for amounts recoverable
from the insurer, for claims covered by insurance.
13. Segments
There have been no changes to the Company's reportable segments
during the nine months ended January 31, 2022. Westside is
included in Geographic divisions and Ames is included in Other. For
more information regarding the Company's reportable segments, see
Note 17, "Segments," in the Company's Annual Report on Form 10-K
for the year ended April 30, 2021.
Segment Results
The following tables present segment results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31, 2022 |
|
Net Sales |
|
Gross Profit |
|
Depreciation and
Amortization |
|
Adjusted
EBITDA |
|
(in thousands) |
|
Geographic divisions |
$ |
1,130,130 |
|
|
$ |
356,811 |
|
|
$ |
28,154 |
|
|
$ |
129,725 |
|
|
Other |
23,465 |
|
|
10,961 |
|
|
1,102 |
|
|
5,330 |
|
|
Corporate |
— |
|
— |
|
494 |
|
|
— |
|
$ |
1,153,595 |
|
|
$ |
367,772 |
|
|
$ |
29,750 |
|
|
$ |
135,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended January 31, 2021 |
|
Net Sales |
|
Gross Profit |
|
Depreciation and
Amortization |
|
Adjusted
EBITDA |
|
(in thousands) |
|
Geographic divisions |
$ |
741,885 |
|
|
$ |
240,536 |
|
|
$ |
24,942 |
|
|
$ |
61,916 |
|
|
Other |
9,306 |
|
|
2,788 |
|
|
92 |
|
|
671 |
|
|
Corporate |
— |
|
— |
|
528 |
|
|
— |
|
$ |
751,191 |
|
|
$ |
243,324 |
|
|
$ |
25,562 |
|
|
$ |
62,587 |
|
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 31, 2022 |
|
Net Sales |
|
Gross Profit |
|
Depreciation and
Amortization |
|
Adjusted
EBITDA |
|
(in thousands) |
|
Geographic divisions |
$ |
3,303,170 |
|
|
$ |
1,057,417 |
|
|
$ |
84,572 |
|
|
$ |
404,665 |
|
|
Other |
43,052 |
|
|
18,058 |
|
|
1,278 |
|
|
8,008 |
|
|
Corporate |
— |
|
— |
|
1,017 |
|
|
— |
|
$ |
3,346,222 |
|
|
$ |
1,075,475 |
|
|
$ |
86,867 |
|
|
$ |
412,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended January 31, 2021 |
|
Net Sales |
|
Gross Profit |
|
Depreciation and
Amortization |
|
Adjusted
EBITDA |
|
(in thousands) |
|
Geographic divisions |
$ |
2,341,430 |
|
|
$ |
760,908 |
|
|
$ |
78,507 |
|
|
$ |
226,588 |
|
|
Other |
25,190 |
|
|
7,945 |
|
|
274 |
|
|
1,575 |
|
|
Corporate |
— |
|
— |
|
1,123 |
|
|
— |
|
$ |
2,366,620 |
|
|
$ |
768,853 |
|
|
$ |
79,904 |
|
|
$ |
228,163 |
|
The following table presents a reconciliation of Adjusted EBITDA to
net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands) |
|
Net income |
$ |
61,383 |
|
|
$ |
16,126 |
|
|
$ |
196,946 |
|
|
$ |
71,814 |
|
|
Interest expense |
15,429 |
|
|
13,454 |
|
|
43,830 |
|
|
41,060 |
|
|
Interest income |
(40) |
|
|
(6) |
|
|
(67) |
|
|
(57) |
|
|
Provision for income taxes |
21,211 |
|
|
5,709 |
|
|
64,951 |
|
|
23,590 |
|
|
Depreciation expense |
13,816 |
|
|
11,371 |
|
|
40,444 |
|
|
36,908 |
|
|
Amortization expense |
15,934 |
|
|
14,191 |
|
|
46,423 |
|
|
42,996 |
|
|
Stock appreciation rights(a) |
1,251 |
|
|
1,446 |
|
|
3,126 |
|
|
2,552 |
|
|
Redeemable noncontrolling interests(b) |
182 |
|
|
624 |
|
|
1,085 |
|
|
1,062 |
|
|
Equity-based compensation(c) |
3,077 |
|
|
1,877 |
|
|
8,250 |
|
|
6,734 |
|
|
Severance and other permitted costs(d) |
273 |
|
|
(83) |
|
|
669 |
|
|
2,626 |
|
|
Transaction costs (acquisitions and other)(e) |
921 |
|
|
664 |
|
|
3,889 |
|
|
789 |
|
|
Gain on disposal of assets(f) |
(252) |
|
|
(1,404) |
|
|
(474) |
|
|
(529) |
|
|
Effects of fair value adjustments to inventory(g) |
1,870 |
|
|
— |
|
|
3,601 |
|
|
— |
|
|
Gain on legal settlement |
— |
|
|
(1,382) |
|
|
— |
|
|
(1,382) |
|
|
Adjusted EBITDA |
$ |
135,055 |
|
|
$ |
62,587 |
|
|
$ |
412,673 |
|
|
$ |
228,163 |
|
__________________________________________
(a)Represents
changes in the fair value of stock appreciation
rights.
(b)Represents
changes in the fair 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 the calculation of
Adjusted EBITDA under the ABL Facility and the Term Loan Facility,
including certain unusual, nonrecurring costs and credits due to
COVID-19.
(e)Represents
costs related to acquisitions paid to third parties.
(f)Includes
gains from the sale of assets.
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
(g)Represents
the non-cash cost of sales impact of acquisition accounting
adjustments to increase inventory to its estimated fair
value.
Revenues by Product
The following table presents the Company’s net sales to external
customers by main product lines:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands) |
|
Wallboard |
$ |
415,132 |
|
|
$ |
311,122 |
|
|
$ |
1,219,789 |
|
|
$ |
969,722 |
|
|
Ceilings |
139,894 |
|
|
103,711 |
|
|
418,831 |
|
|
330,480 |
|
|
Steel framing |
282,764 |
|
|
103,957 |
|
|
751,040 |
|
|
325,782 |
|
|
Complementary products |
315,805 |
|
|
232,401 |
|
|
956,562 |
|
|
740,636 |
|
|
Total net sales |
$ |
1,153,595 |
|
|
$ |
751,191 |
|
|
$ |
3,346,222 |
|
|
$ |
2,366,620 |
|
Geographic Information
The following table presents the Company’s net sales by major
geographic area:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands) |
|
United States |
$ |
1,016,425 |
|
|
$ |
637,568 |
|
|
$ |
2,867,318 |
|
|
$ |
2,001,020 |
|
|
Canada |
137,170 |
|
|
113,623 |
|
|
478,904 |
|
|
365,600 |
|
|
Total net sales |
$ |
1,153,595 |
|
|
$ |
751,191 |
|
|
$ |
3,346,222 |
|
|
$ |
2,366,620 |
|
The following table presents the Company’s property and equipment,
net, by major geographic area:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2022 |
|
April 30,
2021 |
|
(in thousands) |
|
United States |
$ |
302,420 |
|
|
$ |
271,346 |
|
|
Canada |
40,575 |
|
|
39,980 |
|
|
Total property and equipment, net |
$ |
342,995 |
|
|
$ |
311,326 |
|
GMS Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
14. Earnings Per Common Share
The following table sets forth the computation of basic and diluted
earnings per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands, except per share data) |
|
Net income |
$ |
61,383 |
|
|
$ |
16,126 |
|
|
$ |
196,946 |
|
|
$ |
71,814 |
|
|
Basic earnings per common share: |
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
43,094 |
|
|
42,726 |
|
|
43,106 |
|
|
42,691 |
|
|
Basic earnings per common share |
$ |
1.42 |
|
|
$ |
0.38 |
|
|
$ |
4.57 |
|
|
$ |
1.68 |
|
|
Diluted earnings per common share: |
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
43,094 |
|
|
42,726 |
|
|
43,106 |
|
|
42,691 |
|
|
Add: Common Stock Equivalents |
851 |
|
|
635 |
|
|
831 |
|
|
493 |
|
|
Diluted weighted average common shares outstanding |
43,945 |
|
|
43,361 |
|
|
43,937 |
|
|
43,184 |
|
|
Diluted earnings per common share |
$ |
1.40 |
|
|
$ |
0.37 |
|
|
$ |
4.48 |
|
|
$ |
1.66 |
|
During the three and nine months ended January 31, 2022, the
number of Common Stock Equivalents excluded from the
calculation of diluted earnings per share was not
material. During the three and nine months ended
January 31, 2021, approximately 0.3 million and
0.4 million, respectively, Common Stock Equivalents were
excluded from the calculation of diluted earnings per share because
their effect would have been anti-dilutive. Anti-dilutive
securities could be dilutive in future periods.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following information should be read in conjunction with the
unaudited condensed consolidated financial statements and related
notes included in this Quarterly Report on Form 10-Q. The
following discussion may contain forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could
differ materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to these
differences include those factors discussed below and elsewhere in
this Quarterly Report on Form 10-Q, particularly in
“Cautionary Note Regarding Forward-Looking Statements,” and
discussed in the section entitled “Risk Factors” included in our
Annual Report on Form 10-K for the year
ended April 30, 2021.
Overview
Founded in 1971, GMS Inc. (“we,” “our,” “us,” or the “Company”),
through its wholly owned operating subsidiaries, operates a network
of nearly 300 distribution centers with extensive product offerings
of wallboard, ceilings, steel framing and complementary
construction products. GMS also operates more than 90 tool sales,
rental and service centers. Through these operations, GMS provides
a comprehensive selection of building products and solutions for
its residential and commercial contractor customer base across the
United States and Canada. The Company’s unique operating model
combines the benefits of a national platform and strategy with a
local go-to-market focus, enabling GMS to generate significant
economies of scale while maintaining high levels of customer
service.
Market Conditions and Outlook
Residential
There has been strong underlying demand for residential products
since mid-calendar year 2020. We believe this strength in
residential demand has been driven by a combination of factors
including favorable demographics, historically low interest rates,
low levels of supply of new and existing homes for sale, strong
wages and a solid job market, as well as by changes in workplace
habits and preferences resulting from the COVID-19 pandemic
(“COVID-19”). Despite an uptick in affordability concerns,
including the expectation of higher mortgage interest rates, we
expect this strong demand environment to continue throughout
calendar year 2022.
Driven in part by the solid level of residential demand,
homebuilders and contractors are facing significant inflationary
pressures for products and labor plus supply chain constraints,
primarily related to products needed during construction phases
outside of those serviced by GMS, resulting in significantly
increased cycle times and a decreased ability to predict project
timing, as compared to historical periods. As a result, and as our
sales teams work hard to ensure product availability for our
customers, we have experienced an increase in our inventory
balances. We expect our inventory levels to return to more normal
levels as the supply chain constraints subside in future
quarters.
Commercial
Demand for commercial projects was severely impacted by COVID-19
and has been slow to recover in certain sectors. While construction
to support medical, educational and governmental projects has
generally rebounded, hospitality and larger office projects remain
tempered. Leading indicators of commercial activity, such as the
Architectural Billings Index, as well as our own quoting activity
and discussions with customers make us optimistic that we will
begin to see a possible recovery in these commercial projects
beginning sometime this calendar year.
As with residential contractors, commercial contractors and GMS
face significant inflationary pressures for fuel, labor, building
products and other miscellaneous expenses.
Business Strategy
Our business strategy includes an emphasis on organic growth
through expanding market share in our core products (wallboard,
ceilings and steel framing) and growing our complementary product
lines (insulation, lumber, ready-mix joint compound, tools
(including automatic taping and finishing tools), fasteners and
various other construction products) to diversify our offerings and
to provide additional value to our customers. Our growth strategy
also includes the pursuit of greenfield branch openings and
strategic acquisitions as we seek to further broaden our geographic
platform. We expect to continue to capture profitable market share
in our existing footprint by delivering industry-leading customer
service. Our strategy for opening new branches is to further
penetrate markets that are adjacent to our existing operations.
Typically, we have pre-existing customer relationships in these
markets but need a new location to fully capitalize on those
relationships. In addition, we will continue to pursue
acquisitions. We believe we have the potential to continue to
access a robust acquisition pipeline that will supplement our
organic growth. We use a rigorous targeting process to identify
acquisition candidates that we believe will fit our culture and
business model and we have built an experienced team of
professionals to manage the acquisition and
integration processes. As a result of our scale, purchasing power
and ability to improve operations through implementing best
practices, we believe we can continue to achieve substantial
synergies and drive earnings accretion from our acquisition
strategy. Finally, our growth strategy also entails a heightened
focus on enhanced productivity and profitability across the
organization, seeking to leverage our scale and employ both
technology and other best practices to deliver further margin
expansion and earnings growth.
COVID-19 Update
We continue to monitor COVID-19 and its impact on macroeconomic and
local economic conditions. We will continue to implement, as deemed
necessary or advisable, procedures and processes to protect the
health and safety of our employees, customers, partners and
suppliers.
We may take actions that alter our business operations if required
by federal, state, provincial or local authorities or that we
determine are in the best interests of our employees, customers,
suppliers and stockholders. Furthermore, while COVID-19 had a
limited impact on our financial results and operations during the
three and nine months ended January 31, 2022, there is no guarantee
that COVID-19 will not have a material impact on our future
financial results or operations. See Item 1A, “Risk Factors,”
and Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” in our Annual Report on
Form 10-K for the fiscal year ended April 30, 2021
for a discussion of risks which could have a material adverse
effect on our operations and financial results and for more
information regarding the impact of COVID-19 and our
response.
Fiscal 2022 Highlights
Key highlights in our business during the
nine months ended January 31, 2022 are described
below:
•Generated
net sales of $3,346.2 million during the nine months
ended January 31, 2022, a 41.4% increase from the
prior year period primarily due to inflationary pricing, healthy
residential end markets, growth in complementary products sales,
acquisitions over the past year and the negative impacts of
COVID-19 in the prior year period.
•Generated
net income of $196.9 million during the nine months ended
January 31, 2022, a 174.2% increase compared to the prior
year primarily due to the increase in net sales noted above,
partially offset by an increase in the provision for income taxes.
Supply chain dynamics have led to high levels of product inflation,
which have been the principal driver of both sales growth and
incremental profitability.
•Generated
Adjusted EBITDA (a non-GAAP measure, see “Non-GAAP Financial
Measures” in this Item 2) of $412.7 million during the
nine months ended January 31, 2022, a 80.9% increase
compared to the prior year primarily due to the increase in net
sales noted above. Adjusted EBITDA, as a percentage of net
sales, increased to 12.3% for the nine months ended
January 31, 2022 compared to 9.6% for the nine months ended
January 31, 2021 primarily due to better operating leverage,
as product price inflation on sales outpaced operating cost
inflation.
•Completed
five acquisitions and opened seven greenfield locations, increasing
the Company’s geographic footprint and product
offerings.
Fiscal 2022 Developments
Acquisitions
Westside.
On July 1, 2021, we acquired substantially all the assets of
Westside Building Material (“Westside”), one of the largest
independent distributors of interior building products in the U.S.,
for preliminary consideration of $139.6 million. Westside is a
leading supplier of steel framing, wallboard, ceilings, insulation
and complementary building products serving commercial and
residential markets. Westside’s distribution network comprises ten
locations, including nine across California (Anaheim, Hesperia,
Oakland, Chatsworth, Fresno, Lancaster, Santa Maria, San Diego and
National City) and one in Las Vegas, Nevada. For more information
regarding our acquisition of Westside, see Note 2 of the
Notes to Condensed Consolidated Financial Statements included
in this Quarterly Report on Form 10-Q.
Ames.
On December 1, 2021, we acquired Ames Taping Tools Holding LLC
(“Ames”) for preliminary consideration of $224.5 million in cash.
Ames is the leading provider of automatic taping and finishing
(“ATF”) tools and related products to the professional drywall
finishing industry. Ames operates more than 90 retail locations
servicing professionals in the interior finishing market. The
acquisition of Ames was primarily funded with borrowings under our
asset based lending facility ("ABL Facility"). For more information
regarding our acquisition of Ames, see Note 2 of the
Notes to Condensed Consolidated Financial Statements included
in this Quarterly Report on Form 10-Q.
Other.
On June 3, 2021, we acquired the assets of Architectural Coatings
Distributors, Inc. (“Architectural Coating”). Architectural Coating
is an interior building products distributor in Cleveland, Ohio. On
August 2, 2021, we acquired certain assets of DK&B Construction
Specialties, Inc. (“DK&B”). DK&B is a distributor of
External Insulation and Finishing Systems (“EIFS”) and stucco
products through one location in Omaha, Nebraska. On December 1,
2021, we acquired the assets of Kimco Supply Company (“Kimco”).
Kimco is an interior building products distributor through two
locations in the Tampa, Florida area.
Greenfields
During the nine months ended January 31, 2022, we opened seven
new greenfield locations. In May 2021, we opened a greenfield
location in Hickory, North Carolina. In June 2021, we opened a
greenfield location in Scarborough, Ontario. In July 2021, we
opened greenfield locations in Denver, Colorado, Jackson,
Mississippi and Wilmington, Delaware. In August 2021, we opened a
greenfield location in Johnson City, Tennessee. In January 2022, we
opened a greenfield location in Ft. Myers, Florida.
Results of Operations
The following table summarizes key components of our results of
operations for the three and nine months ended January 31,
2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Nine Months Ended
January 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(dollars in thousands) |
|
Statement of operations data: |
|
|
|
|
|
|
|
|
Net sales |
$ |
1,153,595 |
|
|
$ |
751,191 |
|
|
$ |
3,346,222 |
|
|
$ |
2,366,620 |
|
|
Cost of sales (exclusive of depreciation and amortization shown
separately below) |
785,823 |
|
|
507,867 |
|
|
2,270,747 |
|
|
1,597,767 |
|
|
Gross profit |
367,772 |
|
|
243,324 |
|
|
1,075,475 |
|
|
768,853 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
241,040 |
|
|
184,844 |
|
|
685,652 |
|
|
556,308 |
|
|
Depreciation and amortization |
29,750 |
|
|
25,562 |
|
|
86,867 |
|
|
79,904 |
|
|
Total operating expenses |
270,790 |
|
|
210,406 |
|
|
772,519 |
|
|
636,212 |
|
|
Operating income |
96,982 |
|
|
32,918 |
|
|
302,956 |
|
|
132,641 |
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
Interest expense |
(15,429) |
|
|
(13,454) |
|
|
(43,830) |
|
|
(41,060) |
|
|
Gain on legal settlement |
— |
|
|
1,382 |
|
|
— |
|
|
1,382 |
|
|
Other income, net |
1,041 |
|
|
989 |
|
|
2,771 |
|
|
2,441 |
|
|
Total other expense, net |
(14,388) |
|
|
(11,083) |
|
|
(41,059) |
|
|
(37,237) |
|
|
Income before taxes |
82,594 |
|
|
21,835 |
|
|
261,897 |
|
|
95,404 |
|
|
Provision for income taxes |
21,211 |
|
|
5,709 |
|
|
64,951 |
|
|
23,590 |
|
|
Net income |
$ |
61,383 |
|
|
$ |
16,126 |
|
|
$ |
196,946 |
|
|
$ |
71,814 |
|
|
Non-GAAP measures: |
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
$ |
135,055 |
|
|
$ |
62,587 |
|
|
$ |
412,673 |
|
|
$ |
228,163 |
|
|
Adjusted EBITDA margin(1)(2) |
11.7 |
% |
|
8.3 |
% |
|
12.3 |
% |
|
9.6 |
% |
___________________________________
(1)Adjusted
EBITDA and Adjusted EBITDA margin are non-GAAP measures. See
“—Non-GAAP Financial Measures—Adjusted EBITDA,” for how we define
and calculate Adjusted EBITDA and Adjusted EBITDA margin,
reconciliations thereof to net income and a description of why we
believe these measures are useful.
(2)Adjusted
EBITDA margin is Adjusted EBITDA as a percentage of net
sales.
Three Months January 31, 2022 and 2021
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Wallboard |
$ |
415,132 |
|
|
$ |
311,122 |
|
|
$ |
104,010 |
|
|
33.4 |
% |
|
Ceilings |
139,894 |
|
|
103,711 |
|
|
36,183 |
|
|
34.9 |
% |
|
Steel framing |
282,764 |
|
|
103,957 |
|
|
178,807 |
|
|
172.0 |
% |
|
Complementary products |
315,805 |
|
|
232,401 |
|
|
83,404 |
|
|
35.9 |
% |
|
Total net sales |
$ |
1,153,595 |
|
|
$ |
751,191 |
|
|
$ |
402,404 |
|
|
53.6 |
% |
We generate net sales by providing a comprehensive product offering
of wallboard, ceilings, steel framing and complementary
construction products. The increase in net sales during the three
months ended January 31, 2022 compared to the prior year
period was primarily due to inflationary pricing and healthy
residential end markets. Also contributing to the
increase were acquisitions over the past year and one more selling
day during the three months ended January 31, 2022 compared to
the prior year period. The increase consisted of the
following:
•an
increase in wallboard sales, which are impacted by both commercial
and residential construction activity, primarily due to an increase
in price/product mix and higher volume driven by
acquisitions;
•an
increase in ceilings sales, which is principally impacted by
commercial construction activity, primarily due to an increase in
price/product mix and higher volume driven by
acquisitions;
•an
increase in steel framing sales, which is principally impacted by
commercial construction activity, primarily due to an increase in
price/product mix and higher volume; and
•an
increase in complementary products sales, which include insulation,
joint treatment, tools (including ATF tools), lumber and various
other specialty building products, primarily due to an increase in
pricing in certain product categories, positive contributions from
acquisitions and the execution of growth initiatives to increase
other products sales.
The following table breaks out our net sales into organic, or base
business, net sales and recently acquired net sales for the three
months ended January 31, 2022 and 2021. When calculating
organic sales growth, we exclude the net sales of acquired
businesses until the first anniversary of the acquisition date. In
addition, we exclude the impact of foreign currency translation in
our calculation of organic net sales growth.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Net sales |
$ |
1,153,595 |
|
|
$ |
751,191 |
|
|
|
|
|
|
Recently acquired net sales (1) |
(87,670) |
|
|
— |
|
|
|
|
|
|
Impact of foreign currency (2) |
(2,894) |
|
|
— |
|
|
|
|
|
|
Base business net sales (3) |
$ |
1,063,031 |
|
|
$ |
751,191 |
|
|
$ |
311,840 |
|
|
41.5 |
% |
___________________________________
(1)Represents
net sales of branches acquired by us until the first anniversary of
the acquisition date. For the three months ended January 31,
2022, net sales includes sales from the following acquisitions:
D.L. Building Materials Inc. ("D.L. Building Materials") acquired
on February 1, 2021, Westside acquired on July 1, 2021, Ames
acquired on December 1, 2021 and Kimco acquired on December 1,
2021. Our acquisitions of Architectural Coatings and DK&B have
been treated as new greenfield branches and are included in base
business net sales.
(2)Represents
the impact of foreign currency translation on net
sales.
(3)Represents
net sales of existing branches and branches that were opened by us
during the period presented.
The increase in organic net sales was primarily driven by
inflationary pricing, healthy residential end markets and one more
selling day during the three months ended January 31, 2022
compared to the prior year period.
Gross Profit and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Gross profit |
$ |
367,772 |
|
|
$ |
243,324 |
|
|
$ |
124,448 |
|
|
51.1 |
% |
|
Gross margin |
31.9 |
% |
|
32.4 |
% |
|
|
|
|
The increase in gross profit during the three months ended
January 31, 2022 compared to the prior year period was
primarily due to the successful pass through of product inflation,
strength in residential market demand and incremental gross profit
from acquisitions. The decrease in gross margin on net sales for
the three months ended January 31, 2022 compared to the
prior year period was primarily due to the timing and elasticity of
inflationary price-cost dynamics in the market. On a
product line basis, wallboard and steel margins were unfavorably
impacted by these dynamics and complementary products and ceilings
benefited. Included in cost of sales for three months ended
January 31, 2022 was a $1.9 million non-cash charge to
increase acquired inventory to its estimated fair value. This
adjustment had a negative effect on both gross profit and gross
margin as the related inventory was sold.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Selling, general and administrative expenses |
$ |
241,040 |
|
|
$ |
184,844 |
|
|
$ |
56,196 |
|
|
30.4 |
% |
|
% of net sales |
20.9 |
% |
|
24.6 |
% |
|
|
|
|
Selling, general and administrative expenses consist of warehouse,
delivery and general and administrative expenses. Selling, general
and administrative expenses increased during the three months
ended January 31, 2022 compared to the prior year period
primarily due to increases in payroll and payroll related costs,
fuel costs, travel costs and facilities costs, which were driven by
increased sales volume, inflationary pressures and incremental
selling, general and administrative expenses from acquisitions.
Selling, general and administrative expenses as a percentage of our
net sales decreased during the three months ended
January 31, 2022 compared to the prior year period primarily
due to the impact of inflationary market pricing on
sales.
Depreciation and Amortization Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Depreciation |
$ |
13,816 |
|
|
$ |
11,371 |
|
|
$ |
2,445 |
|
|
21.5 |
% |
|
Amortization |
15,934 |
|
|
14,191 |
|
|
1,743 |
|
|
12.3 |
% |
|
Depreciation and amortization |
$ |
29,750 |
|
|
$ |
25,562 |
|
|
$ |
4,188 |
|
|
16.4 |
% |
Depreciation and amortization expense includes depreciation of
property and equipment and amortization of definite-lived
intangible assets acquired in purchases of businesses. The increase
in depreciation expense during the three months ended
January 31, 2022 compared to the prior year period was
primarily due to incremental expense resulting from property and
equipment obtained in the acquisitions of Westside and Ames. The
increase in amortization expense during the three months ended
January 31, 2022 was primarily due to incremental expense
resulting from definite-lived intangible assets obtained in the
acquisitions of Westside, Ames and D.L. Building Materials,
partially offset by time-based progression of our use of the
accelerated method of amortization for acquired customer
relationships.
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Interest expense |
$ |
(15,429) |
|
|
$ |
(13,454) |
|
|
$ |
1,975 |
|
|
14.7 |
% |
Interest expense consists primarily of interest expense incurred on
our debt and finance leases and amortization of deferred financing
fees and debt discounts. The increase in interest expense during
the three months ended January 31, 2022 compared to the prior
year period was primarily due to an increase in average debt
outstanding during the comparable periods.
Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Provision for income taxes |
$ |
21,211 |
|
|
$ |
5,709 |
|
|
$ |
15,502 |
|
|
271.5 |
% |
|
Effective tax rate |
25.7 |
% |
|
26.1 |
% |
|
|
|
|
The change in the effective income tax rate during the three months
ended January 31, 2022 compared to the prior year period was
primarily due to the impact of foreign taxes and stock-based
compensation.
Nine Months Ended January 31, 2022 and 2021
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
January 31, |
|
Change |
|
2022 |
|
2021 |
|
Dollar |
|
Percent |
|
(dollars in thousands) |
|
Wallboard |
$ |
1,219,789 |
|
|
$ |
969,722 |
|
|
$ |
250,067 |
|
|
25.8 |
% |
|
Ceilings |
418,831 |
|
|
330,480 |
|
|
88,351 |
|
|
26.7 |
% |
|
Steel framing |
751,040 |
|
|
325,782 |
|
|
425,258 |
|
|
130.5 |
% |
|
Complementary products |
956,562 |
|
|
740,636 |
|
|
215,926 |
|
|
|