Segments

12 Months Ended

Apr. 30, 2020

Segments

Segments

18. 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, the Company utilizes Adjusted EBITDA in certain calculations under the ABL Facility and the Term Loan Facility. The ABL Facility and the Term Loan Facility permit the Company 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 Annual Report on Form 10-K. 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 years ended April 30, 2020, 2019 and 2018:

	Year Ended April 30, 2020								April 30, 2020
					Depreciation and		Adjusted		Total
	Net Sales		Gross Profit		Amortization		EBITDA		Assets
	(in thousands)
Geographic divisions	$	3,213,938	$	1,053,555	$	114,279	$	297,646	$	2,264,208
Other		27,369		9,659		233		2,113		18,745
Corporate		—		—		2,021		—		5,829
	$	3,241,307	$	1,063,214	$	116,533	$	299,759	$	2,288,782

	Year Ended April 30, 2019								April 30, 2019
					Depreciation and		Adjusted		Total
	Net Sales		Gross Profit		Amortization		EBITDA		Assets
	(in thousands)
Geographic divisions	$	3,090,314	$	994,981	$	114,558	$	293,190	$	2,125,518
Other		25,718		9,138		220		2,479		16,897
Corporate		—		—		2,681		—		7,139
	$	3,116,032	$	1,004,119	$	117,459	$	295,669	$	2,149,554

	Year Ended April 30, 2018								April 30, 2018
					Depreciation and		Adjusted		Total
	Net Sales		Gross Profit		Amortization		EBITDA		Assets
	(in thousands)
Geographic divisions	$	2,487,557	$	809,884	$	64,491	$	196,903	$	1,434,371
Other		23,912		8,692		242		2,355		12,854
Corporate		—		—		797		—		7,286
	$	2,511,469	$	818,576	$	65,530	$	199,258	$	1,454,511

The following table presents a reconciliation of net income to Adjusted EBITDA for the years ended April 30, 2020, 2019 and 2018:

	Year Ended April 30,
	2020		2019		2018
	(in thousands)
Net income	$	23,381	$	56,002	$	62,971
Interest expense		67,718		73,677		31,395
Write-off of debt discount and deferred financing fees		1,331		—		74
Interest income		(88)		(66)		(177)
Provision for income taxes		22,944		14,039		20,883
Depreciation expense		51,332		46,456		24,075
Amortization expense		65,201		71,003		41,455
Impairment of goodwill		63,074		—		—
Stock appreciation expense(a)		1,572		2,730		2,318
Redeemable noncontrolling interests(b)		520		1,188		1,868
Equity-based compensation(c)		7,060		3,906		1,695
Severance and other permitted costs(d)		5,733		8,152		581
Transaction costs (acquisitions and other)(e)		2,414		7,858		3,370
Loss (gain) on disposal and impairment of assets(f)		658		(525)		(509)
Effects of fair value adjustments to inventory(g)		575		4,176		324
Change in fair value of financial instruments(h)		—		6,395		6,125
Gain on legal settlement		(14,029)		—		—
Secondary public offering costs(i)		363		—		1,525
Debt transaction costs(j)		—		678		1,285
Adjusted EBITDA	$	299,759	$	295,669	$	199,258

(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 Term Loan Facility, including certain unusual, nonrecurring costs due to COVID-19.

(e) Represents costs related to acquisitions paid to third parties.

(f) The year ended April 30, 2020 includes a $1.9 million impairment of operating lease right-of-use assets resulting from a restructuring plan to close one of the Company’s facilities.

(g) Represents the non-cash cost of sales impact of purchase accounting adjustments to increase inventory to its estimated fair value.

(h) Represents the mark-to-market adjustments for derivative financial instruments.

(i) Represents costs paid to third-party advisors related to secondary offerings of our common stock.

(j) Represents costs paid to third-party advisors related to debt refinancing activities.

Revenues by Product

The following table presents Company’s net sales to external customers by main product line for the years ended April 30, 2020, 2019 and 2018:

	Year Ended April 30,
	2020		2019		2018
	(in thousands)
Wallboard	$	1,329,775	$	1,272,068	$	1,109,552
Ceilings		475,827		451,695		387,360
Steel framing		502,122		506,805		411,630
Other products		933,583		885,464		602,927
Total net sales	$	3,241,307	$	3,116,032	$	2,511,469

Geographic Information

The following table presents the Company’s net sales by major geographic area for the years ended April 30, 2020, 2019 and 2018:

	Year Ended April 30,
	2020		2019		2019
	(in thousands)
United States	$	2,805,920	$	2,701,678	$	2,511,469
Canada		435,387		414,354		—
Total net sales	$	3,241,307	$	3,116,032	$	2,511,469

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

	April 30,		April 30,
	2020		2019
	(in thousands)
United States	$	270,855	$	249,857
Canada		34,612		32,492
Total property and equipment, net	$	305,467	$	282,349