Business Combinations

6 Months Ended

Oct. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

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.

On May 1, 2024, the Company acquired Howard & Sons Building Materials, Inc., a distributor of wallboard, steel framing and complementary products from a single location in Pomona, California.

On July 2, 2024, the Company acquired Yvon Building Supply, Inc., Yvon Insulation Corporation, Yvon Insulation Windsor, Laminated Glass Technologies, Inc. and Right Fit Foam Insulation Ltd. (collectively, “Yvon”). Yvon provides drywall, insulation, steel, ceilings and other complementary products and related services, including installed insulation. Yvon operates through seven locations across Greater Toronto and Ontario, Canada. The Company funded this transaction with cash on hand and borrowings under its asset based revolving credit facility (the “ABL Facility”). The Company also entered into contingent consideration arrangements, based on purchase volumes of certain customers, that are payable in cash to the sellers over five years, up to a maximum amount of $33.5 million as of the acquisition date ($46.0 million Canadian dollars).

On August 26, 2024, the Company acquired R.S. Elliott Specialty Supply, Inc., a leading regional distributor of stucco, plaster, siding, External Insulation and Finishing Systems (“EIFS”) and related construction supplies, servicing markets across Florida from five locations in Orlando, Wildwood, Tampa, West Palm Beach and Jacksonville. The Company funded this transaction with cash on hand and borrowings under its ABL Facility.

The primary purpose of these transactions was to expand the geographical coverage of the Company and grow the business. The Company’s Condensed Consolidated Statement of Operations and Comprehensive Income for the six months ended October 31, 2024 included $64.4 million of net sales and $0.4 million of net income from acquisitions made in fiscal 2025. The Company recorded transaction costs of $2.5 million and $2.6 million during the six months ended October 31, 2024

and 2023, respectively. Unaudited pro forma financial information is not provided because the impact of these acquisitions was not material to the Company’s Consolidated Financial Statements.

The following table summarizes the preliminary consideration transferred for the Company’s fiscal 2025 acquisitions:


	(in thousands)
Cash	$	215,503
Contingent consideration	26,648
Fair value of consideration transferred	$	242,151

The preliminary estimated fair value of the Yvon contingent consideration payments was determined using a Monte Carlo simulation which accounts for the probabilities of various outcomes. The contingent consideration will be remeasured to fair value each reporting period with changes in fair value recorded in the Consolidated Statements of Operations and Comprehensive Income. See Note 11, “Fair Value Measurements,” for more information on the changes in fair value of contingent consideration.

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 preliminary fair value estimates (including contingent consideration), working capital adjustments and residual goodwill.

The following table summarizes the preliminary acquisition accounting for the Company’s fiscal 2025 acquisitions based on currently available information:


	Preliminary Acquisition Accounting		Adjustments		Preliminary Acquisition Accounting
	(in thousands)
Cash	$	8,414	$	—	$	8,414
Trade accounts and notes receivable	51,721		34		51,755
Inventories	10,731		(53)		10,678
Property and equipment	22,392		—		22,392
Other assets	15,826		496		16,322
Intangible assets	102,563		—		102,563
Goodwill	83,217		(477)		82,740
Accounts payable and other liabilities	(31,483)		—		(31,483)
Deferred income taxes	(21,230)		—		(21,230)
Fair value of consideration transferred	$	242,151	$	—	$	242,151

Goodwill recognized for acquisitions is attributable to synergies achieved through the streamlining of acquired company operations combined with improved margins attainable through increased market presence. The goodwill is assigned to the Company’s geographic divisions reportable segment. Goodwill of $37.8 million is not expected to be deductible for income tax purposes and goodwill of $44.9 million is expected to be deductible for income tax purposes.

The following table summarizes the preliminary components of intangible assets acquired in connection with the Company’s fiscal 2025 acquisitions (dollars in thousands):


	Fair Value		Weighted Average Amortization Period (Years)
Customer relationships	$	87,440	10.6
Trade names	13,276		15.0
Other	1,847		5.0
Total intangible assets	$	102,563	11.0

Trade accounts and notes receivable had an estimated fair value of $51.8 million and a gross contractual value of $52.0 million. The difference represents the Company’s best estimate of the contractual cash flows that will not be collected.