Business Combinations

12 Months Ended

Apr. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Business Combinations

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 Consolidated Statement of Operations and Comprehensive Income for the year ended April 30, 2023 included $23.3 million of net sales and $4.1 million of net loss from acquisitions made in fiscal 2023. The Company recorded transaction costs of $2.0 million, $3.5 million and $1.1 million during the years ended April 30, 2023, 2022 and 2021, respectively.

Fiscal 2023 Acquisitions

In fiscal 2023, the Company completed the following acquisitions, with an aggregate preliminary purchase price of $61.7 million of cash consideration. The purpose of these acquisitions was to expand the geographical coverage of the Company, expand the Company's complementary product offerings and grow the business. The impact of these acquisitions is not material to the Company’s Consolidated Financial Statements.

Company Name	Form of Acquisition	Date of Acquisition
Construction Supply of Southwest Florida, Inc.	Purchase of net assets	June 1, 2022
Tanner Bolt and Nut, Inc.	Purchase of net assets	December 30, 2022
Blair Building Materials, Inc.	Purchase of net assets	April 3, 2023
Engler, Meier and Justus, Inc.	Purchase of 100% of outstanding common stock	April 3, 2023

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 dates. The primary areas of the preliminary acquisition accounting that are not yet finalized relate to preliminary fair value estimates, working capital adjustments and residual goodwill.

The following table summarizes the preliminary acquisition accounting for the Company's fiscal 2023 acquisitions based on currently available information:

	Preliminary Acquisition Accounting
	(in thousands)
Trade accounts and notes receivable	$	20,267
Inventories	16,768
Prepaid and other current assets	542
Property and equipment	4,689
Operating lease right-of-use assets	6,894
Customer relationships	14,039
Tradenames	4,614
Goodwill	10,697
Accounts payable and accrued expenses	(9,091)
Operating lease liabilities	(6,894)
Deferred income taxes	(793)
Fair value of consideration transferred	$	61,732

Goodwill recognized is attributable to expected synergies, increased market presence and the expected value to expand and enhance the Company's complementary product offerings and is attributable to the Company's geographic divisions reportable segment. Goodwill of $7.0 million is expected to be deductible for U.S. federal income tax purposes. Goodwill of $3.7 million is not expected to be deductible for U.S. federal income tax purposes. The weighted average estimated useful life for customer relationships is 9.5 years and the weighted average estimated useful life for tradenames is 15 years.

Trade accounts and notes receivable had an estimated fair value of $20.3 million and a gross contractual value of $22.0 million. The difference represents the Company’s best estimate of the contractual cash flows that will not be collected.

Fiscal 2022 Acquisitions

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 consideration of $140.1 million in cash. 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 acquisition was funded with cash on hand and borrowings under the Company's asset based revolving credit facility. The primary purpose of the transaction was to expand the geographical coverage of the Company and grow the business.

During the year ended April 30, 2023, the Company settled its $13.5 million holdback liability related to the acquisition of Westside in accordance with the terms of the purchase agreement. The holdback liability was for general representations and warranties of the sellers and was settled 15 months after the acquisition date.

The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The following table summarizes the acquisition accounting:

	Initial Acquisition Accounting		Adjustments		Final Acquisition Accounting
	(in thousands)
Trade accounts and notes receivable	$	27,081	$	(799)	$	26,282
Inventories	28,900		(948)		27,952
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		2,625		15,976
Accounts payable and accrued expenses	(14,375)		(405)		(14,780)
Operating lease liabilities	(15,819)		—		(15,819)
Fair value of consideration transferred	$	139,635	$	473	$	140,108

Goodwill recognized is attributable to synergies achieved through the streamlining of operations combined with improved margins attainable through increased market presence and is attributable to the Company's geographic divisions reportable segment. Goodwill is deductible for U.S. federal income tax purposes. The estimated useful life for customer relationships is 9.5 years and the estimated useful life for tradenames is 15 years.

Trade accounts and notes receivable had an estimated fair value of $26.3 million and a gross contractual value of $26.4 million. The difference represents the Company’s best estimate of the contractual cash flows that will not be collected.

Ames Acquisition

On December 1, 2021, the Company acquired Ames Taping Tools Holding LLC (“Ames”) for consideration of $226.7 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 nearly 100 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. The following table summarizes the acquisition accounting:

	Initial Acquisition Accounting		Adjustments		Final Acquisition Accounting
	(in thousands)
Cash and cash equivalents	$	10,692	$	—	$	10,692
Trade accounts and notes receivable	9,955		(54)		9,901
Inventories	15,464		870		16,334
Prepaid and other current assets	1,941		—		1,941
Property and equipment	6,165		—		6,165
Operating lease right-of-use assets	8,238		(235)		8,003
Customer relationships	63,000		(3,000)		60,000
Tradenames	53,000		(4,000)		49,000
Patents	3,000		—		3,000
Goodwill	104,557		2,822		107,379
Accounts payable and accrued expenses	(14,827)		3,170		(11,657)
Deferred tax liability	(28,440)		2,355		(26,085)
Operating lease liabilities	(8,238)		235		(8,003)
Fair value of consideration transferred	$	224,507	$	2,163	$	226,670

Goodwill recognized is attributable to expected synergies and the expected value in the potential to expand and enhance the Company's complementary product offerings and is attributable to the Company's other reportable segment. Goodwill is not deductible for U.S. federal income tax purposes. The estimated useful life for the customer relationships is 11 years and the estimated useful life for the patents is 10 years. Tradenames valued at $26.0 million have an estimated useful life of 15 years and tradenames valued at $23.0 million have an indefinite useful life.

Trade accounts and notes receivable had an estimated fair value of $9.9 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 period indicated:

	Year Ended
	April 30, 2022
	(in thousands)
Net sales	$	4,718,531
Net income	281,151

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, 2021, the first day of the comparable prior reporting period. The pro forma results include estimates for intangible asset amortization, depreciation, interest expense and income taxes. 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 sells building and construction supplies through two locations in the Tampa, Florida area. The impact of these acquisitions is not material to the Company’s Consolidated Financial Statements.

Fiscal 2021 Acquisition

On February 1, 2021, the Company acquired 100% of the outstanding stock of D.L. Building Materials Inc. (“D.L. Building Materials”) for consideration of approximately $38.9 million ($49.9 million Canadian dollars). D.L. Building Materials distributes wallboard, acoustical ceilings, steel framing, insulation and related building products in the Eastern Ontario and Western Quebec markets through two locations in Gatineau, Quebec and Kingston, Ontario.

The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The following table summarizes the acquisition accounting:

	Preliminary Acquisition Accounting		Adjustments		Final Acquisition Accounting
	(in thousands)
Cash	$	4,179	$	—	$	4,179
Trade accounts and notes receivable	8,325		(24)		8,301
Inventories	5,075		(8)		5,067
Prepaid and other current assets	675		—		675
Property and equipment	2,721		—		2,721
Operating lease right-of-use assets	1,103		—		1,103
Customer relationships	20,926		(476)		20,450
Tradenames	2,498		—		2,498
Goodwill	9,084		—		9,084
Liabilities assumed	(12,282)		(45)		(12,327)
Deferred income taxes	(2,830)		—		(2,830)
Fair value of consideration transferred	$	39,474	$	(553)	$	38,921

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 not deductible for U.S. federal income tax purposes. The pro forma impact of this acquisition is not presented as it is not considered material to the Company's Consolidated Financial Statements.