Segments

9 Months Ended

Jan. 31, 2021

Segments

Segments

14. Segments

General

The Company has eight 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 eight operating segments based on the Company’s eight geographic divisions, which are Central, Midwest, Northeast, Southern, Southeast, Southwest, Western and Canada. During the nine months ended January 31, 2021, the Company divided its Southern operating segment into two operating segments, Southern and Southwest, which resulted in an increase (from seven to eight) in the number of operating segments. The Company performed a goodwill impairment test immediately before and after the change in operating segments, which indicated the fair values of the Company’s reporting units exceeded their carrying values. 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. 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:

	Three Months Ended January 31, 2021
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		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

	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

	Nine Months Ended January 31, 2021
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		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

	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

The following table presents a reconciliation of Adjusted EBITDA to net income:

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2021		2020		2021		2020
	(in thousands)
Net income	$	16,126	$	10,879	$	71,814	$	64,837
Interest expense		13,454		16,474		41,060		52,310
Write-off of debt discount and deferred financing fees		—		—		—		707
Interest income		(6)		(8)		(57)		(26)
Provision for income taxes		5,709		2,816		23,590		18,333
Depreciation expense		11,371		12,930		36,908		37,944
Amortization expense		14,191		16,492		42,996		50,271
Stock appreciation rights(a)		1,446		(347)		2,552		980
Redeemable noncontrolling interests(b)		624		(318)		1,062		326
Equity-based compensation(c)		1,877		1,465		6,734		5,175
Severance and other permitted costs(d)		(83)		1,700		2,626		3,648
Transaction costs (acquisitions and other)(e)		664		434		789		1,733
Gain on disposal and impairment of assets(f)		(1,404)		(130)		(529)		(872)
Effects of fair value adjustments to inventory(g)		—		310		—		461
Gain on legal settlement		(1,382)		—		(1,382)		—
Secondary public offering costs(h)		—		—		—		363
Adjusted EBITDA	$	62,587	$	62,697	$	228,163	$	236,190

(a) Represents changes in the fair value of stock appreciation rights.

(b) Represents changes in the fair value 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 received due to the COVID-19 pandemic.

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

(f) Includes gains from the sale of assets and impairment of assets resulting from restructuring plans to close certain facilities.

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

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

Revenues by Product

The following table presents the Company’s net sales to external customers by main product lines:

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2021		2020		2021		2020
	(in thousands)
Wallboard	$	311,122	$	314,391	$	969,634	$	1,006,604
Ceilings		101,909		112,768		326,904		364,685
Steel framing		103,956		118,823		325,736		386,811
Other products		234,204		215,370		744,346		712,357
Total net sales	$	751,191	$	761,352	$	2,366,620	$	2,470,457

Geographic Information

The following table presents the Company’s net sales by major geographic area:

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2021		2020		2021		2020
	(in thousands)
United States	$	637,568	$	661,491	$	2,001,020	$	2,136,968
Canada		113,623		99,861		365,600		333,489
Total net sales	$	751,191	$	761,352	$	2,366,620	$	2,470,457

The following table presents the Company’s property and equipment, net, by major geographic area:

	January 31,		April 30,
	2021		2020
	(in thousands)
United States	$	268,826	$	270,855
Canada		36,318		34,612
Total property and equipment, net	$	305,144	$	305,467