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Segments
9 Months Ended
Jan. 31, 2020
Segments  
Segments

14. Segments

General

The Company has seven operating segments based on geographic operations that it aggregates into one reportable segment. The Company defines operating segments as components of the organization for which discrete financial information is available and operating results are evaluated on a regular basis by the Chief Operating Decision Maker (“CODM”) in order to assess performance and allocate resources. The Company’s CODM is its Chief Executive Officer. The Company determined it has seven operating segments based on the Company’s seven geographic divisions, which are Central, Midwest, Northeast, Southern, Southeast, Western and Canada. The Company aggregates its operating segments into a single reportable segment based on similarities between the operating segments’ economic characteristics, nature of products sold, production process, type of customer and methods of distribution. The accounting policies of the operating segments are the same as those described in the summary of significant policies. In addition to the Company’s reportable segment, the Company’s consolidated results include both corporate activities and certain other activities. Corporate includes the Company’s corporate office building and support services provided to its subsidiaries. Other includes Tool Source Warehouse, Inc., which functions primarily as an internal distributor of tools.

Segment Results

The CODM assesses the Company’s performance based on the periodic review of net sales, Adjusted EBITDA and certain other measures for each of the operating segments. Adjusted EBITDA is not a recognized financial measure under GAAP. However, we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA is helpful in highlighting trends in our operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments.

In addition, we utilize Adjusted EBITDA in certain calculations under the ABL Facility and the First Lien Facility. The ABL Facility and the First Lien Facility permit us to make certain additional adjustments in calculating Consolidated EBITDA, such as projected net cost savings, which are not reflected in the Adjusted EBITDA data presented in this Quarterly Report on Form 10-Q.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Non-GAAP Financial Measures” for a further discussion of this non-GAAP measure.

The following tables present segment results for the three and nine months ended January 31, 2020 and 2019:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended January 31, 2020

​

​

​

​

    

​

​

    

Depreciation and

​

Adjusted

​

​

Net Sales

​

Gross Profit

​

Amortization

​

EBITDA

​

​

(in thousands)

Geographic divisions

​

$

754,916

​

$

251,086

​

$

28,791

​

$

62,169

Other

​

​

6,436

​

 

2,387

​

 

56

​

​

528

Corporate

​

​

—

​

 

—

​

 

575

​

​

—

​

​

$

761,352

​

$

253,473

​

$

29,422

​

$

62,697

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended January 31, 2019

​

​

​

​

    

​

​

    

Depreciation and

​

Adjusted

​

​

Net Sales

​

Gross Profit

​

Amortization

​

EBITDA

​

​

(in thousands)

Geographic divisions

​

$

717,984

​

$

232,201

​

$

29,368

​

$

59,321

Other

​

 

5,918

​

 

2,025

​

 

55

​

​

396

Corporate

​

 

—

​

 

—

​

 

797

​

​

—

​

​

$

723,902

​

$

234,226

​

$

30,220

​

$

59,717

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Nine Months Ended January 31, 2020

​

​

​

​

    

​

​

    

Depreciation and

​

Adjusted

​

​

Net Sales

​

Gross Profit

​

Amortization

​

EBITDA

​

​

(in thousands)

Geographic divisions

​

$

2,449,926

​

$

804,340

​

$

86,747

​

$

234,422

Other

​

 

20,531

​

 

7,280

​

 

164

​

​

1,768

Corporate

​

 

—

​

 

—

​

 

1,304

​

​

—

​

​

$

2,470,457

​

$

811,620

​

$

88,215

​

$

236,190

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Nine Months Ended January 31, 2019

​

    

​

​

    

​

​

    

Depreciation and

​

Adjusted

​

​

Net Sales

​

Gross Profit

​

Amortization

​

EBITDA

​

​

(in thousands)

Geographic divisions

​

$

2,316,732

​

$

740,591

​

$

85,284

​

$

220,365

Other

​

 

19,151

​

 

6,601

​

 

168

​

 

1,769

Corporate

​

 

—

​

 

—

​

 

1,877

​

 

—

​

​

$

2,335,883

​

$

747,192

​

$

87,329

​

$

222,134

​

The following table presents a reconciliation of Adjusted EBITDA to net income for the three and nine months ended January 31, 2020 and 2019:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

January 31, 

​

January 31, 

​

    

2020

    

2019

​

2020

​

2019

​

​

(in thousands)

Net income

​

$

10,879

​

$

5,815

​

$

64,837

​

$

39,377

Interest expense

​

 

16,474

​

 

19,526

​

 

52,310

​

 

54,896

Write-off of debt discount and deferred financing fees

​

​

—

​

​

—

​

​

707

​

​

—

Interest income

​

 

(8)

​

 

(10)

​

 

(26)

​

 

(43)

Provision for income taxes

​

 

2,816

​

 

1,442

​

 

18,333

​

 

12,337

Depreciation expense

​

 

12,930

​

 

11,919

​

 

37,944

​

 

34,067

Amortization expense

​

 

16,492

​

 

18,301

​

 

50,271

​

 

53,262

Stock appreciation expense(a)

​

​

(347)

​

​

442

​

​

980

​

​

1,425

Redeemable noncontrolling interests(b)

​

 

(318)

​

 

(35)

​

 

326

​

 

778

Equity-based compensation(c)

​

 

1,465

​

 

1,140

​

 

5,175

​

 

2,638

Severance and other permitted costs(d)

​

 

1,700

​

 

229

​

 

3,648

​

 

5,947

Transaction costs (acquisitions and other)(e)

​

 

434

​

 

1,066

​

 

1,733

​

 

6,660

Gain on sale of assets

​

 

(130)

​

 

(118)

​

 

(872)

​

 

(412)

Effects of fair value adjustments to inventory(f)

​

 

310

​

 

—

​

 

461

​

 

4,129

Change in fair value of financial instruments(g)

​

 

—

​

 

—

​

 

—

​

 

6,395

Secondary public offering costs(h)

​

​

—

​

​

—

​

​

363

​

​

—

Debt transaction costs(i)

​

​

—

​

​

—

​

​

—

​

​

678

Adjusted EBITDA

​

$

62,697

​

$

59,717

​

$

236,190

​

$

222,134

(a)Represents non-cash expense related to stock appreciation rights agreements.
(b)Represents non-cash compensation expense related to 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 calculations under the ABL Facility and the First Lien Facility.
(e)Represents costs related to acquisitions paid to third parties.
(f)Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value.
(g)Represents the mark-to-market adjustments for derivative financial instruments.
(h)Represents costs paid to third-party advisors related to secondary offerings of our common stock.
(i)Represents costs paid to third-party advisors related to debt refinancing activities.

During the nine months ended January 31, 2020, the Company recorded operating lease ROU assets as a result of the adoption of the new lease guidance. The Company’s geographic divisions, other and corporate segments, recorded $113.3 million, $0.3 million and $5.2 million, respectively, of operating lease ROU assets as of the transition date.

Revenues by Product

The following table presents the Company’s net sales to external customers by main product lines for the three and nine months ended January 31, 2020 and 2019:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended 

​

Nine Months Ended

​

​

January 31, 

​

January 31, 

​

​

2020

​

2019

​

2020

    

2019

​

​

(in thousands)

Wallboard

    

$

314,391

    

$

297,358

    

$

1,006,604

​

$

949,781

Ceilings

​

 

112,768

 

 

105,219

 

 

364,685

 

 

339,450

Steel framing

​

 

118,823

 

 

117,432

 

 

386,811

 

 

382,304

Other products

​

 

215,370

 

 

203,893

 

 

712,357

 

 

664,348

Total net sales

​

$

761,352

 

$

723,902

 

$

2,470,457

 

$

2,335,883

​

Geographic Information

​

The following table presents the Company’s net sales by major geographic area for the three and nine months ended January 31, 2020 and 2019:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

January 31, 

​

January 31, 

​

    

2020

    

2019

​

2020

    

2019

​

​

(in thousands)

United States

​

$

661,491

    

$

624,672

​

$

2,136,968

    

$

2,021,750

Canada

​

 

99,861

 

 

99,230

​

 

333,489

 

 

314,133

Total net sales

​

$

761,352

 

$

723,902

​

$

2,470,457

 

$

2,335,883

​

Net sales for Canada for the nine months ended January 31, 2020 includes nine months of net sales compared to eight months for the prior year period due to the Company’s acquisition of Titan on June 1, 2018. The average exchange rates for translating Canada net sales from Canadian dollars to U.S. dollars were 0.7600 and 0.7555 for the three and nine months ended January 31, 2020, respectively. The average exchange rates were and 0.7491 and 0.7609 for the three and eight months ended January 31, 2019, respectively.

The following table presents the Company’s property and equipment, net, by major geographic area as of January 31, 2020 and April 30, 2019:

​

​

​

​

​

​

​

​

​

​

January 31, 

​

April 30, 

​

    

2020

    

2019

​

​

(in thousands)

United States

​

$

268,599

​

$

249,857

Canada

​

 

37,873

 

 

32,492

Total property and equipment, net

​

$

306,472

 

$

282,349

​