10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2020

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

COMMISSION FILE NUMBER: 001-37784

GMS INC.

(Exact name of registrant as specified in its charter)

Delaware	46-2931287
(State or other jurisdiction of incorporation	(IRS Employer Identification No.)
or organization)
100 Crescent Centre Parkway, Suite 800
Tucker, Georgia	30084
(Address of principal executive offices)	(ZIP Code)
(800) 392-4619
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class	Trading Symbol(s)	Name of each exchanged on which registered
Common Stock, par value $0.01 per share	GMS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ⌧	Accelerated filer                          ☐
Non-accelerated filer       ☐	Smaller reporting company         ☐
	Emerging growth company         ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

There were 42,681,068 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of November 30, 2020.

FORM 10-Q

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements		3
PART I	Financial Information	5
Item 1	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4	Controls and Procedures	41
PART II	Other Information	42
Item 1	Legal Proceedings	42
Item 1A	Risk Factors	42
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3	Defaults Upon Senior Securities	43
Item 4	Mine Safety Disclosures	43
Item 5	Other Information	43
Item 6	Exhibits	44
Signatures		45

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” or “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the growth of our various markets, and statements about our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this Quarterly Report on Form 10-Q are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed under the heading “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”), may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

● the negative impact of the COVID-19 pandemic (which, among other things, may exacerbate each of the risks listed below);

● general economic and financial conditions;

● our dependency upon the commercial and residential construction and residential repair and remodeling, or R&R, markets;

● competition in our highly fragmented industry and the markets in which we operate;

● the fluctuations in prices of the products we distribute;

● the consolidation of our industry;

● our ability to successfully implement our strategic initiatives, which include pursuing growth through acquisitions and greenfield branch expansion as well as cost reduction and productivity initiatives;

● our ability to expand into new geographic markets;

● product shortages, other disruptions in our supply chain or distribution network and potential loss of relationships with key suppliers;

● the seasonality of the commercial and residential construction markets;

● the potential loss of any significant customers and the reduction of the quantity of products our customers purchase;

● exposure to product liability and various other claims and litigation;

● operating hazards that may cause personal injury or property damage;

● our ability to attract and retain key employees;

3

● rising health care costs and labor costs, including the impact of labor and trucking shortages;

● the credit risk from our customers;

● our ability to renew leases for our facilities on favorable terms or identify new facilities;

● our ability to effectively manage our inventory as our sales volume or the prices of the products we distribute fluctuate;

● an impairment of our goodwill or intangible assets;

● the impact of federal, state, provincial and local regulations;

● the cost of compliance with environmental, health and safety laws and other regulations;

● significant fluctuations in fuel costs or shortages in the supply of fuel;

● a cybersecurity breach, including misappropriation of our customers’, employees’ or suppliers’ confidential information, and the potential costs related thereto;

● a disruption in our IT systems and costs necessary to maintain and update our IT systems;

● natural or man-made disruptions to our facilities;

● the risk of our Canadian operations, including currency rate fluctuations;

● the imposition of tariffs and other trade barriers, and the effect of retaliatory trade measures;

● our inability to engage in activities that may be in our best long-term interests because of restrictions in our debt agreements;

● our current level of indebtedness and our potential to incur additional indebtedness; and

● our ability to obtain additional financing on acceptable terms, if at all.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance and actual results and events may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q. You should review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of the filing of this Quarterly Report on Form 10-Q.

4

PART I – Financial Information

Item 1. Financial Statements

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

	October 31,		April 30,
	2020		2020
Assets
Current assets:
Cash and cash equivalents	$	118,168	$	210,909
Trade accounts and notes receivable, net of allowances of $5,273 and $5,141, respectively		434,836		405,254
Inventories, net		302,357		299,815
Prepaid expenses and other current assets		19,042		14,972
Total current assets		874,403		930,950
Property and equipment, net of accumulated depreciation of $174,832 and $158,554, respectively		300,144		305,467
Operating lease right-of-use assets		114,198		115,257
Goodwill		557,486		553,073
Intangible assets, net		339,918		361,884
Deferred income taxes		12,651		8,904
Other assets		12,074		13,247
Total assets	$	2,210,874	$	2,288,782
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	163,927	$	213,230
Accrued compensation and employee benefits		43,843		67,590
Other accrued expenses and current liabilities		88,170		63,812
Current portion of long-term debt		49,302		50,201
Current portion of operating lease liabilities		31,694		33,040
Total current liabilities		376,936		427,873
Non-current liabilities:
Long-term debt, less current portion		946,721		1,047,279
Long-term operating lease liabilities		88,122		89,605
Deferred income taxes, net		7,837		12,018
Other liabilities		73,361		78,026
Total liabilities		1,492,977		1,654,801
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share, 500,000 shares authorized; 42,690 and 42,554 shares issued and outstanding as of October 31, 2020 and April 30, 2020, respectively		427		426
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of October 31, 2020 and April 30, 2020		—		—
Additional paid-in capital		534,646		529,662
Retained earnings		224,663		168,975
Accumulated other comprehensive loss		(41,839)		(65,082)
Total stockholders' equity		717,897		633,981
Total liabilities and stockholders' equity	$	2,210,874	$	2,288,782

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

GMS Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(in thousands, except per share data)

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019			2020	2019
Net sales	$	812,856	$	861,929	$	1,615,429	$	1,709,105
Cost of sales (exclusive of depreciation and amortization shown separately below)		547,785		577,436		1,089,900		1,150,958
Gross profit		265,071		284,493		525,529		558,147
Operating expenses:
Selling, general and administrative		188,352		200,457		371,464		395,088
Depreciation and amortization		27,245		29,518		54,342		58,793
Total operating expenses		215,597		229,975		425,806		453,881
Operating income		49,474		54,518		99,723		104,266
Other (expense) income:
Interest expense		(13,525)		(17,559)		(27,606)		(35,836)
Write-off of debt discount and deferred financing fees		—		(707)		—		(707)
Other income, net		797		813		1,452		1,752
Total other expense, net		(12,728)		(17,453)		(26,154)		(34,791)
Income before taxes		36,746		37,065		73,569		69,475
Provision for income taxes		8,277		7,927		17,881		15,517
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Weighted average common shares outstanding:
Basic		42,723		41,761		42,674		41,382
Diluted		43,174		42,635		43,096		42,126
Net income per common share(1):
Basic	$	0.67	$	0.70	$	1.30	$	1.30
Diluted	$	0.66	$	0.68	$	1.29	$	1.27
Comprehensive income
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Foreign currency translation income (loss)		3,159		(409)		19,440		11,451
Changes in other comprehensive income (loss), net of tax		2,844		(3,602)		3,803		(9,667)
Comprehensive income	$	34,472	$	25,127	$	78,931	$	55,742

(1) See Note 15 for detailed calculations.

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

GMS Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands)

										Accumulated
						Additional				Other		Total
	Common Stock			Exchangeable		Paid-in		Retained		Comprehensive		Stockholders'
	Shares	Amount		Shares		Capital		Earnings		Loss		Equity
Balances as of April 30, 2020	42,554	$	426	$	—	$	529,662	$	168,975	$	(65,082)	$	633,981
Net income	—		—		—		—		27,219		—		27,219
Foreign currency translation adjustments	—		—		—		—		—		16,281		16,281
Change in other comprehensive income (loss), net of tax	—		—		—		—		—		959		959
Equity-based compensation	—		—		—		1,575		—		—		1,575
Exercise of stock options	54		—		—		691		—		—		691
Vesting of restricted stock units	7		—		—		—		—		—		—
Tax withholding related to net share settlements of equity awards	—		—		—		(105)		—		—		(105)
Issuance of common stock pursuant to employee stock purchase plan	58		1		—		1,269		—		—		1,270
Balances as of July 31, 2020	42,673		427		—		533,092		196,194		(47,842)		681,871
Net income	—		—		—		—		28,469		—		28,469
Foreign currency translation adjustments	—		—		—		—		—		3,159		3,159
Change in other comprehensive income (loss), net of tax	—		—		—		—		—		2,844		2,844
Repurchase and retirement of common stock	(50)		(1)		—		(1,221)		—		—		(1,222)
Equity-based compensation	—		—		—		3,253		—		—		3,253
Exercise of stock options	5		—		—		172		—		—		172
Vesting of restricted stock units	62		1		—		(1)		—		—		—
Tax withholding related to net share settlements of equity awards	—		—		—		(649)		—		—		(649)
Balances as of October 31, 2020	42,690	$	427	$	—	$	534,646	$	224,663	$	(41,839)	$	717,897

										Accumulated
						Additional				Other		Total
	Common Stock			Exchangeable		Paid-in		Retained		Comprehensive		Stockholders'
	Shares	Amount		Shares		Capital		Earnings		Loss		Equity
Balances as of April 30, 2019	40,375	$	404	$	29,639	$	480,113	$	145,594	$	(26,574)	$	629,176
Net income	—		—		—		—		24,820		—		24,820
Exercise of Exchangeable Shares	1,129		11		(29,639)		29,628		—		—		—
Foreign currency translation adjustments	—		—		—		—		—		11,860		11,860
Change in other comprehensive income (loss), net of tax	—		—		—		—		—		(6,065)		(6,065)
Equity-based compensation	—		—		—		1,349		—		—		1,349
Exercise of stock options	9		—		—		133		—		—		133
Issuance of common stock pursuant to employee stock purchase plan	76		1		—		1,021		—		—		1,022
Balances as of July 31, 2019	41,589		416		—		512,244		170,414		(20,779)		662,295
Net income	—		—		—		—		29,138		—		29,138
Foreign currency translation adjustments	—		—		—		—		—		(409)		(409)
Change in other comprehensive income (loss), net of tax	—		—		—		—		—		(3,602)		(3,602)
Equity-based compensation	—		—		—		2,271		—		—		2,271
Exercise of stock options	525		5		—		6,623		—		—		6,628
Vesting of restricted stock units	55		1		—		(1)		—		—		—
Tax withholding related to net share settlements of equity awards	—		—		—		(282)		—		—		(282)
Balances as of October 31, 2019	42,169	$	422	$	—	$	520,855	$	199,552	$	(24,790)	$	696,039

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Six Months Ended
	October 31,
	2020		2019
Cash flows from operating activities:
Net income	$	55,688	$	53,958
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		54,342		58,793
Write-off and amortization of debt discount and debt issuance costs		1,505		2,368
Equity-based compensation		6,370		5,591
Loss (gain) on disposal and impairment of assets		875		(742)
Deferred income taxes		(9,296)		(2,380)
Other items, net		(1,057)		1,101
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable		(26,137)		(29,932)
Inventories		(950)		1,800
Prepaid expenses and other assets		(4,776)		1,573
Accounts payable		(50,867)		(5,486)
Accrued compensation and employee benefits		(23,889)		(12,974)
Other accrued expenses and liabilities		22,240		(3,743)
Cash provided by operating activities		24,048		69,927
Cash flows from investing activities:
Purchases of property and equipment		(11,845)		(14,637)
Proceeds from sale of assets		720		1,056
Acquisition of businesses, net of cash acquired		(51)		(10,633)
Cash used in investing activities		(11,176)		(24,214)
Cash flows from financing activities:
Repayments on revolving credit facilities		(102,189)		(558,906)
Borrowings from revolving credit facilities		14,750		562,698
Payments of principal on long-term debt		(4,984)		(54,984)
Payments of principal on finance lease obligations		(14,629)		(12,310)
Repurchases of common stock		(1,222)		—
Debt issuance costs		—		(1,286)
Proceeds from exercises of stock options		863		6,761
Payments for taxes related to net share settlement of equity awards		(754)		—
Other financing activities		1,270		1,022
Cash used in financing activities		(106,895)		(57,005)
Effect of exchange rates on cash and cash equivalents		1,282		223
Decrease in cash and cash equivalents		(92,741)		(11,069)
Cash and cash equivalents, beginning of period		210,909		47,338
Cash and cash equivalents, end of period	$	118,168	$	36,269
Supplemental cash flow disclosures:
Cash paid for income taxes	$	20,224	$	25,642
Cash paid for interest		25,726		33,654

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

Founded in 1971, GMS Inc. (“we,” “our,” “us,” or the “Company”), through its wholly-owned operating subsidiaries, is a distributor of specialty building products including wallboard, suspended ceilings systems, or ceilings, steel framing and other complementary building products. We purchase products from many manufacturers and then distribute these goods to a customer base consisting of wallboard and ceilings contractors and homebuilders and, to a lesser extent, general contractors and individuals. We operate a network of approximately 260 distribution centers across the United States and Canada.

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair presentation of the results of operations, financial position and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. The results of operations for interim periods are not necessarily indicative of results for any other interim period or the entire fiscal year. As a result, the unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

Principles of Consolidation

The condensed consolidated financial statements present the results of operations, financial position, stockholders’ equity and cash flows of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The results of operations of businesses acquired are included from their respective dates of acquisition.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

Assets and liabilities of the Company’s Canadian subsidiaries are translated at the exchange rate prevailing at the balance sheet date, while income and expenses are translated at average rates for the period. Translation gains and losses are reported as a separate component of stockholders’ equity and other comprehensive income. Gains and losses on foreign currency transactions are recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income within other (expense) income, net.

Insurance Liabilities

The Company is self-insured for certain losses related to medical claims. The Company has stop-loss coverage to limit the exposure arising from medical claims. In addition, the Company has deductible-based insurance policies for certain losses related to general liability, workers’ compensation and automobile. The deductible amount per incident is $0.3 million, $0.5 million and $1.0 million for general liability, workers’ compensation and automobile, respectively. The coverage consists of a deductible layer, a primary layer, a self-insured buffer layer, a lead umbrella layer and excess layers. The primary layer of coverage is from $0.3 million, $0.5 million and $1.0 million for deductibles for general liability, workers’ compensation, and automobile liability, respectively, to $5.0 million. The Company self-insures a

9

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

buffer layer from $5.0 million to $10.0 million. The umbrella and excess layers cover claims from $10.0 million to $100.0 million. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. Insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience.

As of October 31, 2020 and April 30, 2020, the aggregate liabilities for medical self-insurance were $4.2 million and $3.8 million, respectively, and are included in other accrued expenses and current liabilities in the Condensed Consolidated Balance Sheets. As of October 31, 2020 and April 30, 2020, reserves for general liability, automobile and workers’ compensation totaled approximately $20.1 million and $19.4 million, respectively, and are included in other accrued expenses and current liabilities and other liabilities in the Condensed Consolidated Balance Sheets. As of October 31, 2020 and April 30, 2020, expected recoveries for medical self-insurance, general liability, automobile and workers’ compensation totaled approximately $8.0 million and $6.0 million, respectively, and are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheets.

Income Taxes

The Company considers each interim period an integral part of the annual period and measures tax expense (benefit) using an estimated annual effective income tax rate. Estimates of the annual effective income tax rate at the end of interim periods are, out of necessity, based on evaluation of possible future events and transactions and may be subject to subsequent refinement or revision. The Company forecasts its estimated annual effective income tax rate and then applies that rate to its year-to-date pre-tax ordinary income (loss), subject to certain loss limitation provisions. In addition, certain specific transactions are excluded from the Company’s estimated annual effective tax rate computation, but are discretely recognized within income tax expense (benefit) in their respective interim period. Future changes in the forecasted annual income (loss) projections, tax rate changes, or discrete tax items could result in significant adjustments to quarterly income tax expense (benefit) in future periods.

The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In this evaluation, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive evidence considered includes the reversal of deferred tax liabilities primarily related to depreciation and amortization that would occur within the same jurisdiction and during the carryforward period necessary to absorb the federal and state net operating losses and other deferred tax assets.

Deferred tax assets and liabilities are computed by applying the federal, provincial and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

10

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Authoritative guidance for fair value measurements establishes a three-level hierarchy that prioritizes the inputs to valuation models based upon the degree to which they are observable. The three levels of the fair value measurement hierarchy are as follows:

Level 1	Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2	Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3	Inputs are unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying values of the Company’s cash, cash equivalents, trade receivables and trade payables approximate their fair values because of their short-term nature. Based on borrowing rates available to the Company for loans with similar terms, the carrying values of the Company’s debt instruments approximate fair value. See Note 11, “Fair Value Measurements,” for additional information with respect to the Company’s fair value measurements.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of outstanding shares of common stock for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units (collectively “Common Stock Equivalents”), were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amount of compensation cost attributed to future services and not yet recognized. Diluted earnings per share is computed by increasing the weighted-average number of outstanding shares of common stock computed in basic earnings per share to include the dilutive effect of Common Stock Equivalents for the period. In periods of net loss, the number of shares used to calculate diluted loss per share is the same as basic net loss per share.

The holders of the Company’s Exchangeable Shares (as defined in Note 8, “Stockholders’ Equity”) were entitled to receive dividends or distributions that are equal to any dividends or distributions on the Company’s common stock. As a result, when the Exchangeable Shares were outstanding, they were classified as a participating security and thereby required the allocation of income that would have otherwise been available to common stockholders when calculating earnings per share. Diluted earnings per share was calculated by utilizing the most dilutive result of the if-converted and two-class methods. In both methods, net income attributable to common stockholders and the weighted-average common shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation. 

Recently Adopted Accounting Pronouncements

Credit Losses –  In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on credit losses on financial instruments. This guidance introduces a revised approach to the recognition and measurement of credit losses of certain financial instruments, including trade and other receivables, emphasizing an updated model based on expected losses rather than incurred losses. The Company adopted this guidance on May 1,

11

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

2020 with no material impact to its financial statements. See Note 3, “Accounts Receivable,” for additional information with respect to the Company’s allowance for expected credit losses.

Fair Value Measurement Disclosures – In August 2018, the FASB issued new guidance that changes certain fair value measurement disclosure requirements. The Company adopted this guidance on May 1, 2020 with no material impact to its financial statements.

Recently Issued Accounting Pronouncements

Reference Rate Reform – In March 2020, the FASB issued new guidance to temporarily ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The guidance was effective upon issuance and generally can be applied through December 31, 2022. The Company expects to elect optional expedients and exceptions provided by the guidance, as needed, related to its debt instruments, which include interest rates based on a LIBOR rate. The Company will evaluate and disclose the impact of this guidance in the period of election, as well as the nature and reason for doing so.

2. Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of promised goods to customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company includes shipping and handling costs billed to customers in net sales. These costs are recognized as a component of selling, general and administrative expenses.

See Note 14, “Segments,” for information regarding disaggregation of revenue, including revenue by product and by geographic area.

Performance Obligations

The Company satisfies its performance obligations at a point in time, which is upon delivery of products. The Company’s payment terms vary by the type and location of its customers. The amount of time between point of sale and when payment is due is not significant and the Company has determined its contracts do not include a significant financing component.

The Company’s contracts with customers involve performance obligations that are one year or less. Therefore, the Company applied the standard’s optional exemption that permits the omission of information about its unfulfilled performance obligations as of the balance sheet dates.

Significant Judgments

The Company’s contracts may include terms that could cause variability in the transaction price, including customer rebates, returns and cash discounts for early payment. Variable consideration is estimated and included in the transaction price based on the expected value method. These estimates are based on historical experience, anticipated performance and other factors known at the time. The Company only includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

12

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Contract Balances

Receivables from contracts with customers, net of allowances, were $418.3 million and $393.6 million as of October 31, 2020 and April 30, 2020, respectively. The Company did not have material amounts of contract assets or liabilities as of October 31, 2020 or April 30, 2020.

3. Accounts Receivable

The Company’s trade accounts and notes receivable consisted of the following:

	October 31,		April 30,
	2020		2020
	(in thousands)
Trade receivables	$	423,603	$	398,739
Other receivables		16,506		11,656
Allowance for expected credit losses		(2,490)		(2,861)
Other allowances		(2,783)		(2,280)
Trade accounts and notes receivable	$	434,836	$	405,254

The Company records accounts and notes receivable net of allowances, including the allowance for expected credit losses. The Company maintains an allowance for estimated losses due to the failure of customers to make required payments, as well as allowances for cash discounts. The Company’s estimate of the allowance for expected credit losses is based on an assessment of individual past due accounts, historical loss information, accounts receivable aging and current economic factors and the Company’s expectation of future economic conditions. Account balances are written off when the potential for recovery is considered remote.

The Company routinely assesses the financial strength of its customers and generally does not require collateral. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of geographically diverse customers comprising the Company’s customer base.

The following table presents the change in the allowance for expected credit losses during the six months ended October 31, 2020:

	(in thousands)
Balance as of April 30, 2020	$	2,861
Provision		(40)
Recoveries		(250)
Write-offs		(81)
Balance as of October 31, 2020	$	2,490

13

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

4. Goodwill and Intangible Assets

Goodwill

The following table presents changes in the carrying amount of goodwill during the six months ended October 31, 2020:

	Carrying
	Amount
	(in thousands)
Balance as of April 30, 2020
Goodwill	$	616,147
Accumulated impairment loss		(63,074)
		553,073
Working capital settlements		(159)
Translation adjustment		4,572
Balance as of October 31, 2020
Goodwill		620,560
Accumulated impairment loss		(63,074)
	$	557,486

Intangible Assets

The following tables present the components of the Company’s definite-lived intangible assets:

	Estimated	Weighted	October 31, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	526,916	$	298,246	$	228,670
Definite-lived tradenames	5 - 20	16.3		56,907		12,448		44,459
Vendor agreements	8 - 10	8.3		6,644		4,970		1,674
Developed technology	5	4.9		5,253		2,582		2,671
Other	3 - 5	3.3		4,272		3,195		1,077
Totals			$	599,992	$	321,441	$	278,551

	Estimated	Weighted	April 30, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	516,928	$	270,029	$	246,899
Definite-lived tradenames	5 - 20	16.3		55,654		10,474		45,180
Vendor agreements	8 - 10	8.3		6,644		4,567		2,077
Developed technology	5	4.9		5,036		1,963		3,073
Other	1 - 15	5.3		7,836		4,548		3,288
Totals			$	592,098	$	291,581	$	300,517

Definite-lived intangible assets are amortized over their estimated useful lives. The Company amortizes its customer relationships using an accelerated method to match the estimated cash flows generated by such assets, and amortizes its other definite-lived intangibles using the straight-line method because a pattern to which the expected

14

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

benefits will be consumed or otherwise used up cannot be reliably determined. Amortization expense related to definite-lived intangible assets was $14.5 million and $16.9 million for the three months ended October 31, 2020 and 2019, respectively, and $28.8 million and $33.8 million for the six months ended October 31, 2020 and 2019, respectively. Amortization expense is recorded in depreciation and amortization expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

The following table summarizes the estimated future amortization expense for definite-lived intangible assets. Actual amortization expense to be reported in future periods could differ materially from these estimates as a result of acquisitions, changes in useful lives, foreign currency exchange rate fluctuations and other relevant factors.

Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	26,862
2022		46,613
2023		38,834
2024		31,731
2025		26,223
Thereafter		108,288
Total	$	278,551

The Company’s indefinite-lived intangible assets consist of tradenames that had a carrying amount of $61.4 million as of October 31, 2020 and April 30, 2020.

5. Long-Term Debt

The Company’s long-term debt consisted of the following:

	October 31,		April 30,
	2020		2020
	(in thousands)
Term Loan Facility	$	871,919	$	876,903
Unamortized discount and deferred financing costs on Term Loan Facility		(9,540)		(10,602)
ABL Facility		—		80,000
Finance lease obligations		122,058		128,767
Installment notes at fixed rates up to 5.0%, due in monthly and annual installments through 2024		12,506		16,316
Unamortized discount on installment notes		(920)		(1,098)
Canadian Facility		—		7,194
Carrying value of debt		996,023		1,097,480
Less current portion		49,302		50,201
Long-term debt	$	946,721	$	1,047,279

Term Loan Facility

The Company has a senior secured first lien term loan facility (the “Term Loan Facility”) with aggregate principal amount of $871.9 million outstanding as of October 31, 2020. The Company is required to make scheduled quarterly payments of $2.5 million, or 0.25% of the aggregate principal amount of the Term Loan Facility, with the balance due in June 2025. The Term Loan Facility bears interest at a floating rate based on LIBOR plus 2.75%, with a 0% floor. As of October 31, 2020, the applicable rate of interest was 2.90%.

15

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Asset Based Lending Facility

The Company has an asset based revolving credit facility (the “ABL Facility”) that provides for aggregate revolving commitments of $445.0 million (including same day swing line borrowings of $44.5 million). Extensions of credit under the ABL Facility are limited by a borrowing base calculated periodically based on specified percentages of the value of eligible inventory and eligible accounts receivable, subject to certain reserves and other adjustments.

At the Company’s option, the interest rates applicable to the loans under the ABL Facility are based on LIBOR or base rate plus, in each case, an applicable margin. The margins applicable for each elected interest rate are subject to a pricing grid, as defined in the ABL Facility agreement, based on average daily availability for the most recent fiscal quarter. The ABL Facility also contains an unused commitment fee.

As of October 31, 2020, the Company had available borrowing capacity of approximately $392.9 million under the ABL Facility. The ABL Facility matures on September 30, 2024 unless the individual affected lenders agree to extend the maturity of their respective loans under the ABL Facility upon the Company’s request and without the consent of any other lender. The ABL Facility contains a cross default provision with the Term Loan Facility.

Covenants under the Term Loan Facility and ABL Facility

The Term Loan Facility contains a number of covenants that limit our ability and the ability of our restricted subsidiaries, as described in the respective credit agreement, to: incur more indebtedness; pay dividends, redeem or repurchase stock or make other distributions; make investments; create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers; create liens securing indebtedness; transfer or sell assets; merge or consolidate; enter into certain transactions with our affiliates; and prepay or amend the terms of certain indebtedness. The Company was in compliance with all restrictive covenants as of October 31, 2020.

The ABL Facility contains certain affirmative covenants, including financial and other reporting requirements. The Company was in compliance with all such covenants as of October 31, 2020.

Canadian Revolving Credit Facility

Through its WSB Titan (“Titan”) subsidiary, the Company has a revolving credit facility (the “Canadian Facility”) that provides for aggregate revolving commitments of $22.5 million ($30.0 million Canadian dollars). The Canadian Facility bears interest at the Canadian prime rate plus a marginal rate based on the level determined by Titan’s total debt to EBITDA ratio at the end of the most recently completed fiscal quarter or year. As of October 31, 2020, the Company had available borrowing capacity of approximately $22.5 million under the Canadian Facility. The Canadian Facility matures on June 28, 2022.

Debt Maturities

As of October 31, 2020, the maturities of long-term debt were as follows

	Term Loan		Finance		Installment
	Facility		Leases		Notes		Total
Year ending April 30,	(in thousands)
2021 (remaining six months)	$	4,984	$	17,878	$	964	$	23,826
2022		9,968		34,324		4,458		48,750
2023		9,968		29,049		4,424		43,441
2024		9,968		22,039		1,800		33,807
2025		9,968		12,110		860		22,938
Thereafter		827,063		6,658		—		833,721
	$	871,919	$	122,058	$	12,506	$	1,006,483

16

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

6. Leases

The Company leases office and warehouse facilities, distribution equipment and its fleet of vehicles. The Company’s leases have lease terms ranging from one to eleven years. The Company’s facility leases generally contain renewal options for periods ranging from one to five years. The exercise of lease renewal options is typically at the Company’s sole discretion. The Company does not recognize right-of-use (“ROU”) assets or lease liabilities for renewal options unless it is determined that the Company is reasonably certain of exercising renewal options at lease inception. Certain of the Company’s equipment leases include options to purchase the leased property and residual value guarantees. Any residual value payment deemed probable is included in the Company’s lease liability. The Company’s lease agreements do not contain any material restrictive covenants.

The Company determines if an arrangement is a lease at inception and evaluates whether the lease meets the classification criteria of a finance or operating lease. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liabilities and long-term operating lease liabilities in the Condensed Consolidated Balance Sheets. Finance leases are included in property and equipment, current portion of long-term debt and long-term debt in the Condensed Consolidated Balance Sheets.  

Lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. For leases that do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of future payments. The Company determines its incremental borrowing rate based on the applicable lease terms and the current economic environment. Lease ROU assets also include any lease payments made in advance and excludes lease incentives and initial direct costs incurred. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations), rent holidays, capital improvements funding or other lease concessions. Lease expense is recognized on a straight-line basis based on the fixed component over the lease term. Variable lease costs consist primarily of taxes, insurance and common area or other maintenance costs for leased facilities and vehicles and equipment, which are expensed as incurred.

The components of lease expense were as follows:

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	5,960	$	6,054	$	12,099	$	12,113
Interest on lease liabilities		2,863		3,367		5,925		6,789
Operating lease cost		10,630		10,289		21,329		20,709
Variable lease cost		3,157		3,414		6,132		6,613
Total lease cost	$	22,610	$	23,124	$	45,485	$	46,224

Operating lease cost, including variable lease cost, is included in selling, general and administrative expenses; amortization of finance ROU assets is included in depreciation and amortization; and interest on finance lease liabilities is included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

17

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Supplemental cash flow information related to leases was as follows:

	Six Months Ended
	October 31,
	2020		2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	21,479	$	20,377
Operating cash flows from finance leases		5,925		6,789
Financing cash flows from finance leases		14,629		12,310
Right-of-use assets obtained in exchange for lease obligations
Operating leases		17,216		12,810
Finance leases		12,342		22,812

Other information related to leases was as follows:

	October 31,			April 30,
	2020			2020
	(in thousands)
Finance leases included in property and equipment
Property and equipment	$	170,868		$	171,380
Accumulated depreciation		(47,342)			(41,737)
Property and equipment, net	$	123,526		$	129,643
Weighted-average remaining lease term (years)
Operating leases		5.0			4.9
Finance leases		3.5			3.6
Weighted-average discount rate
Operating leases		5.5	%		5.5	%
Finance leases		4.9	%		5.0	%

Future minimum lease payments under non-cancellable leases as of October 31, 2020 were as follows:

	Finance		Operating
Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	25,683	$	19,870
2022		41,454		33,301
2023		32,727		26,613
2024		23,445		21,766
2025		12,541		15,068
Thereafter		6,746		21,474
Total lease payments		142,596		138,092
Less imputed interest		20,538		18,276
Total	$	122,058	$	119,816

18

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

7. Income Taxes

General. The Company’s effective income tax rate on continuing operations was 24.3% and 22.3% for the six months ended October 31, 2020 and 2019, respectively. The difference in the effective income tax rate over the U.S. federal statutory rate of 21.0% for the six months ended October 31, 2020 was primarily due to the impact of state taxes and foreign taxes. The difference in the effective income tax rate over the U.S. federal statutory rate for the six months ended October 31, 2019 was primarily due to the impact of equity based compensation, as well as foreign tax rates and state taxes and other tax effects associated with the acquisition of Titan.

Valuation allowance. The Company had a valuation allowance of $10.6 million and $10.2 million against its deferred tax assets related to certain U.S. tax jurisdictions as of October 31, 2020 and April 30, 2020, respectively. To the extent the Company generates sufficient taxable income in the future to utilize the tax benefits of the net deferred tax assets on which a valuation allowance is recorded, the effective tax rate may decrease as the valuation allowance is reversed.

Uncertain tax positions. The Company had no uncertain tax positions as of October 31, 2020 or April 30, 2020.

8. Stockholders’ Equity

Exchangeable Shares

In connection with the acquisition of Titan on June 1, 2018, the Company issued 1.1 million shares of equity that were exchangeable for the Company’s common stock on a one-for-one basis (“Exchangeable Shares”). The Exchangeable Shares were issued by an indirect wholly-owned subsidiary of the Company. The Exchangeable Shares ranked senior to the Company’s common stock with respect to dividend rights and rights on liquidation, dissolution and winding-up. The holders of the Exchangeable Shares were entitled to receive dividends or distributions that were equal to any dividends or distributions on the Company’s common stock. The holders of the Exchangeable Shares did not have voting rights.

The Exchangeable Shares contained rights that allowed the holders to exchange their Exchangeable Shares for GMS common stock at any time on a one-for-one basis. On June 13, 2019, the holders of the Exchangeable Shares exchanged all of the Exchangeable Shares for 1.1 million shares of the Company’s common stock. Following such exchange, the Exchangeable Shares ceased to be outstanding.

Share Repurchase Program

The Company has a common stock repurchase program authorized by its Board of Directors to repurchase up to $75.0 million of outstanding common stock. The Company may conduct repurchases under the share repurchase program through open market transactions, under trading plans in accordance with SEC Rule 10b5-1 and/or in privately negotiated transactions, in compliance with Rule 10b-18 under the Exchange Act of 1934, as amended. These repurchases are subject to a variety of factors, including, but not limited to, our liquidity, credit availability, general business and market conditions, our debt covenant restrictions and the availability of alternative investment opportunities. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or terminated at any time at the Company’s discretion.

The Company repurchased approximately 50 thousand shares of its common stock for $1.2 million during the six months ended October 31, 2020. The Company did not repurchase any shares of its common stock during the six months ended October 31, 2019. As of October 31, 2020, the Company had $57.3 million remaining repurchase authorization. 

19

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Accumulated Other Comprehensive Loss

The following table sets forth the changes to accumulated other comprehensive loss, net of tax, by component for the six months ended October 31, 2020:

					Accumulated
	Foreign		Derivative		Other
	Currency		Financial		Comprehensive
	Translation		Instruments		Loss
	(in thousands)
Balance as of April 30, 2020	$	(40,577)	$	(24,505)	$	(65,082)
Other comprehensive income (loss) before reclassification		19,440		(530)		18,910
Reclassification to earnings from accumulated other comprehensive loss		—		4,333		4,333
Balance as of October 31, 2020	$	(21,137)	$	(20,702)	$	(41,839)

Other comprehensive loss on derivative instruments for the six months ended October 31, 2020 is net of $0.2 million of tax and reclassification to earnings from accumulated other comprehensive loss is net of $1.4 million of tax.

9. Equity-Based Compensation

General

The Company measures compensation cost for all share-based awards at fair value on the grant date (or measurement date if different) and recognizes compensation expense, net of estimated forfeitures, over the requisite service period for awards expected to vest. The Company estimates the fair value of stock options using the Black-Scholes valuation model, and determines the fair value of restricted stock units based on the quoted price of GMS’ common stock on the date of grant. The Company estimates forfeitures based on historical analysis of actual forfeitures and employee turnover. Actual forfeitures are recorded when incurred and estimated forfeitures are reviewed and adjusted at least annually.

Equity-based compensation expense related to stock options and restricted stock units was $4.6 million and $3.4 million during the six months ended October 31, 2020 and 2019, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Stock Option Awards

The following table presents stock option activity for the six months ended October 31, 2020:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Life (years)	Value
	(shares and dollars in thousands)
Outstanding as of April 30, 2020	1,487	$	18.85	6.4	$	3,895
Options granted	321		23.43
Options exercised	(43)		14.55
Options forfeited	(48)		25.98
Outstanding as of October 31, 2020	1,717	$	19.62	6.4	$	6,958
Exercisable as of October 31, 2020	1,082	$	17.45	4.8	$	6,585
Vested and expected to vest as of October 31, 2020	1,709	$	19.60	6.4	$	6,957

20

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

The aggregate intrinsic value represents the excess of the Company’s closing stock price on the last trading day of the period over the weighted average exercise price multiplied by the number of options outstanding, exercisable or expected to vest. Options expected to vest are unvested shares net of expected forfeitures. The total intrinsic value of options exercised during the six months ended October 31, 2020 and 2019 was $0.3 million and $8.6 million, respectively. As of October 31, 2020, there was $5.4 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 2.2 years.

The fair value of stock options granted during the six months ended October 31, 2020 and 2019 estimated using the Black-Scholes option-pricing model with the following assumptions:

	Six Months Ended
	October 31,
	2020		2019
Volatility	51.28	%	49.94	%
Expected life (years)	6.0		6.0
Risk-free interest rate	0.30	%	1.97	%
Dividend yield	—	%	—	%

The weighted average grant date fair value of options granted during the six months ended October 31, 2020 and 2019 was $11.13 per share and $10.55 per share, respectively. The expected volatility was based on historical and implied volatility. The expected life of stock options was based on previous history of exercises. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock option. The expected dividend yield was 0% as we have not declared any common stock dividends to date and do not expect to declare common stock dividends in the near future. The fair value of the underlying common stock at the date of grant was determined based on the value of the Company’s closing stock price on the trading day immediately preceding the date of the grant.

Restricted Stock Units

The following table presents restricted stock unit activity for the six months ended October 31, 2020:

		Weighted
	Number of	Average
	Restricted	Grant Date
	Stock Units	Fair Value
	(shares in thousands)
Outstanding as of April 30, 2020	286	$	22.71
Granted	212		23.43
Vested	(103)		22.43
Forfeited	(28)		23.91
Outstanding as of October 31, 2020	367	$	23.12

As of October 31, 2020, there was $6.2 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.0 years.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (“ESPP”), the terms of which allow for qualified employees to participate in the purchase of shares of the Company’s common stock at a price equal to 90% of the lower of the closing price at the beginning or end of the purchase period, which is a six-month period ending on December 31 and June 30 of each year. During the six months ended October 31, 2020, 0.1 million shares of the Company’s common stock were purchased under the ESPP at a price of $22.13 per share. The Company recognized $0.3 million and $0.3

21

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

million of stock-based compensation expense during the six months ended October 31, 2020 and 2019, respectively, related to the ESPP.

10. Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

The following table presents a summary of changes to the liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests for the six months ended October 31, 2020:

	Stock				Redeemable
	Appreciation		Deferred		Noncontrolling
	Rights		Compensation		Interests
	(in thousands)
Balance as of April 30, 2020	$	24,205	$	1,660	$	8,300
Amounts redeemed		(181)		—		—
Change in fair value		1,106		73		365
Balance as of October 31, 2020	$	25,130	$	1,733	$	8,665
Classified as current as of April 30, 2020	$	624	$	—	$	—
Classified as long-term as of April 30, 2020		23,581		1,660		8,300
Classified as current as of October 31, 2020	$	650	$	—	$	—
Classified as long-term as of October 31, 2020		24,480		1,733		8,665

Total expense related to these instruments was $1.5 million and $2.0 million during the six months ended October 31, 2020 and 2019, respectively, and was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income. Current and long-term liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests are included in other accrued expenses and liabilities and other liabilities, respectively, in the Condensed Consolidated Balance Sheets.

Stock Appreciation Rights

Certain subsidiaries have granted stock appreciation rights to certain employees under which payments are dependent on the appreciation in the book value per share, adjusted for certain provisions, of the applicable subsidiary. Settlements of the awards can be made in a combination of cash or installment notes, generally paid over five years, upon a triggering event. As of October 31, 2020, all stock appreciation rights were vested. Liabilities related to these agreements are classified as share-based liability awards and are measured at fair value.

Deferred Compensation

Subsidiaries’ stockholders have entered into other deferred compensation agreements that granted the stockholders a payment based on a percentage in excess of book value, adjusted for certain provisions, upon an occurrence as defined in the related agreements. These instruments are redeemed in cash or installment notes, generally paid in annual installments over the five years following termination of employment. Liabilities related to these agreements are classified as share-based liability awards and are measured at fair value.

Redeemable Noncontrolling Interests

Noncontrolling interests were issued to certain employees of certain of the Company’s subsidiaries. All of the noncontrolling interest awards are subject to mandatory redemption on termination of employment for any reason. These instruments are redeemed in cash or installment notes, generally paid in annual installments over the five years following termination of employment. Liabilities related to these agreements are classified as share-based liability awards and are measured at fair value. Under the terms of the employee agreements, the redemption value is determined based on the book value of the subsidiary, as adjusted for certain items.

22

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Upon the termination of employment or other triggering events including death or disability of the noncontrolling stockholders in the Company’s subsidiaries, we are obligated to purchase, or redeem, the noncontrolling interests at either an agreed upon price or a formula value provided in the stockholder agreements. This formula value is typically based on the book value per share of the subsidiary’s equity, including certain adjustments.

11. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the estimated carrying amount and fair value of the Company’s liabilities measured at fair value on a recurring basis:

	October 31,		April 30,
	2020		2020
	(in thousands)
Interest rate swaps (Level 2)	$	27,180	$	32,218
Stock appreciation rights (Level 3)		25,130		24,205
Deferred compensation (Level 3)		1,733		1,660
Noncontrolling interest holders (Level 3)		8,665		8,300

Derivative instruments. The Company has interest rate swap agreements with a notional amount of $500.0 million that convert the variable interest rate on its Term Loan Facility to a fixed interest rate of 2.46%. The contracts were effective on February 28, 2019 and terminate on February 28, 2023. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with variable interest rates. The Company designated the interest rate swaps as a cash flow hedges. The Company believes there have been no material changes in the creditworthiness of the counterparty to this interest rate swap and believes the risk of nonperformance by such party is minimal. As of October 31, 2020, $11.7 million of the interest rate swap liability was classified in other accrued expenses and current liabilities and $15.5 million was classified in other liabilities in the Condensed Consolidated Balance Sheet. The Company recognized losses, net of tax, of $2.2 million and $4.3 million in earnings during the three and six months ended October 31, 2020, respectively, related to its interest rate swaps. As of October 31, 2020, the Company expects that approximately $11.7 million of pre-tax net losses will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months.

The fair value of derivative instruments is determined using Level 2 inputs. Generally, the Company obtains the Level 2 inputs from its counterparties. Substantially all of the inputs throughout the full term of the instruments can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The fair value of the Company’s interest rate swap was determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including interest rate curves and implied volatilities.

Stock appreciation rights, deferred compensation and redeemable noncontrolling interests. The fair values of stock appreciation rights, deferred compensation and redeemable noncontrolling interests are determined using Level 3 inputs. These inputs include a volatility rate, a discount rate, the expected time to redemption of the liabilities, historical values of the book equity of certain subsidiaries and market information for comparable entities. The use of these inputs to derive the fair value of the liabilities at a point in time can result in volatility to the financial statements. See Note 10, “Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests,” for a reconciliation of the beginning and ending balances.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Disclosures are required for certain assets and liabilities that are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Such measurements of fair value relate primarily to assets and liabilities

23

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

measured at fair value in connection with business combinations and long-lived asset impairments. The Company recorded a $1.0 million impairment of operating lease right-of-use assets during the six months ended October 31, 2020. There were no other material long-lived asset impairments during the six months ended October 31, 2020 or 2019.

12. Transactions With Related Parties

The Company purchases inventories from Southern Wall Products, Inc. (“SWP”) on a continuing basis. During the six months ended October 31, 2020 and 2019, certain former executive officers and stockholders and certain directors and stockholders of the Company were stockholders of SWP. As of October 31, 2020, these executive officers and directors were no longer with the Company. The Company purchased inventory from SWP for distribution in the amount of $3.8 million and $3.7 million during the three months ended October 31, 2020 and 2019, respectively, and $7.3 million and $7.3 million during the six months ended October 31, 2020 and 2019, respectively. Amounts due to SWP for purchases of inventory for distribution was $1.2 million as of April 30, 2020 and is included in accounts payable in the Condensed Consolidated Balance Sheets.

13. Commitments and Contingencies

The Company is a defendant in various lawsuits and administrative actions associated with personal injuries, claims of former employees and other events arising in the normal course of business. As discussed in Note 1 “—Insurance Liabilities”, the Company records liabilities for these claims, and assets for amounts recoverable from the insurer, for claims covered by insurance.

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 six months ended October 31, 2020, 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

24

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

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 October 31, 2020
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	805,074	$	262,534	$	26,783	$	82,169
Other		7,782		2,537		91		353
Corporate		—		—		371		—
	$	812,856	$	265,071	$	27,245	$	82,522

	Three Months Ended October 31, 2019
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	854,853	$	281,900	$	29,024	$	89,171
Other		7,076		2,593		55		734
Corporate		—		—		439		—
	$	861,929	$	284,493	$	29,518	$	89,905

	Six Months Ended October 31, 2020
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	1,599,546	$	520,372	$	53,565	$	164,673
Other		15,883		5,157		182		903
Corporate		—		—		595		—
	$	1,615,429	$	525,529	$	54,342	$	165,576

	Six Months Ended October 31, 2019
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	1,695,010	$	553,254	$	57,956	$	172,254
Other		14,095		4,893		108		1,239
Corporate		—		—		729		—
	$	1,709,105	$	558,147	$	58,793	$	173,493

25

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

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

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Interest expense		13,525		17,559		27,606		35,836
Write-off of debt discount and deferred financing fees				707		—		707
Interest income		(14)		(6)		(51)		(18)
Provision for income taxes		8,277		7,927		17,881		15,517
Depreciation expense		12,710		12,592		25,537		25,014
Amortization expense		14,535		16,926		28,805		33,779
Stock appreciation expense(a)		314		1,267		1,106		1,327
Redeemable noncontrolling interests(b)		186		(18)		438		644
Equity-based compensation(c)		3,252		2,315		4,857		3,710
Severance and other permitted costs(d)		762		1,394		2,709		1,948
Transaction costs (acquisitions and other)(e)		25		327		125		1,299
Loss (gain) on disposal and impairment of assets(f)		481		(586)		875		(742)
Effects of fair value adjustments to inventory(g)		—		—		—		151
Secondary public offering costs(h)		—		363		—		363
Adjusted EBITDA	$	82,522	$	89,905	$	165,576	$	173,493

(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 the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

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

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

(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.

26

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

Revenues by Product

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

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Wallboard	$	330,515	$	350,618	$	658,512	$	692,213
Ceilings		111,293		122,807		224,995		251,917
Steel framing		111,293		136,159		221,780		267,988
Other products		259,755		252,345		510,142		496,987
Total net sales	$	812,856	$	861,929	$	1,615,429	$	1,709,105

Geographic Information

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

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
United States	$	684,131	$	744,134	$	1,363,452	$	1,475,477
Canada		128,725		117,795		251,977		233,628
Total net sales	$	812,856	$	861,929	$	1,615,429		1,709,105

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

	October 31,		April 30,
	2020		2020
	(in thousands)
United States	$	265,941	$	270,855
Canada		34,203		34,612
Total property and equipment, net	$	300,144	$	305,467

27

GMS Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)

15. Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per share of common stock:

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands, except per share data)
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Less: Net income allocated to participating securities		—		—		—		342
Net income attributable to common stockholders	$	28,469	$	29,138	$	55,688	$	53,616
Basic earnings per common share:
Basic weighted average common shares outstanding		42,723		41,761		42,674		41,382
Basic earnings per common share	$	0.67	$	0.70	$	1.30	$	1.30
Diluted earnings per common share:
Basic weighted average common shares outstanding		42,723		41,761		42,674		41,382
Add: Common Stock Equivalents		451		874		422		744
Diluted weighted average common shares outstanding		43,174		42,635		43,096		42,126
Diluted earnings per common share	$	0.66	$	0.68	$	1.29	$	1.27

During the three and six months ended October 31, 2020, approximately 0.5 million and 0.4 million, respectively, Common Stock Equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Anti-dilutive securities could be dilutive in future periods.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Cautionary Note Regarding Forward-Looking Statements,” and discussed in the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended April 30, 2020.

Overview

Founded in 1971, GMS Inc. (“we,” “our,” “us” or the “Company”) is a distributor of specialty building products including wallboard, suspended ceilings systems, or ceilings, steel framing and other complementary specialty building products. We purchase products from many manufacturers and then distribute these goods to a customer base consisting of wallboard and ceilings contractors and homebuilders and, to a lesser extent, general contractors and individuals. We operate a network of approximately 260 distribution centers across the United States and Canada.

Business Strategy

Our growth strategy entails an emphasis on organic growth through expanding market share in our core products (wallboard, ceilings and steel framing) and growing our complementary product lines (insulation, lumber, ready-mix joint compound, tools, fasteners and various other construction products). Our growth strategy also includes the pursuit of greenfield branch openings and strategic acquisitions as we seek to further broaden our geographic platform. We expect to continue to capture profitable market share in our existing footprint by delivering industry-leading customer service. Our strategy for opening new branches is to further penetrate markets that are adjacent to our existing operations. Typically, we have pre-existing customer relationships in these markets but need a new location to fully capitalize on those relationships. In addition, we will continue to selectively pursue acquisitions. Due to the large, highly fragmented nature of our market and our reputation throughout the industry, we believe we have the potential to access a robust acquisition pipeline that will continue to supplement our organic growth. We use a rigorous targeting process to identify acquisition candidates that will fit our culture and business model and have an experienced team of professionals to manage the acquisition and integration processes. As a result of our scale, purchasing power and ability to improve operations through implementing best practices, we believe we can achieve substantial synergies and drive earnings accretion from our acquisition strategy. Finally, our growth strategy also entails a heightened focus on enhanced productivity and profitability across the organization, seeking to leverage our scale and employ both technology and best practices to deliver further margin expansion and earnings growth.

COVID-19 Update

We continue to monitor the COVID-19 pandemic and its impact on macroeconomic and local economic conditions. We have implemented a number of procedures and processes to protect the health and safety of our employees, customers, partners and suppliers. Such measures include routine cleaning throughout the day at all locations, adherence to social distancing protocols, restricting or modifying access to facilities including limiting walk-in traffic in showrooms, encouraging employees to work remotely when possible, mandating the use of appropriate personal protective equipment and the suspension of non-essential travel. We expect to continue to implement these measures throughout the COVID-19 pandemic, and we may take further actions as government authorities require or recommend or as we determine certain procedures to be in the best interests of our employees, customers, partners and suppliers.

During the first half of fiscal 2021, we continued to see reductions in sales as a result of COVID-19 that began in the fourth quarter of fiscal 2020. Net sales for the first half of fiscal 2021 declined compared to the comparable period in the prior year as a result of the suspension of construction activity related to mandated shutdowns and as customers focused on responding to COVID-19 and cancelled, delayed or temporarily paused building projects. The decrease in net sales was more pronounced in our ceilings and steel framing products, as these product categories are tied primarily to

29

commercial construction, which was more impacted by the COVID-19 pandemic than the residential market. During the first half of fiscal 2021, we also incurred $1.6 million of incremental costs related to the COVID-19 pandemic. However, we were able to respond quickly to reduce variable costs and have maintained our selling, general and administrative expenses as a percent of sales. We also repaid the $87.2 million that we proactively borrowed under our revolving credit facilities in March 2020. We will continue to evaluate further ways to manage costs in line with reduced net sales levels as the impact of COVID-19 develops.

While we are currently able to operate in all of our locations, the resurgence of the COVID-19 pandemic in key areas of our operations may require us to implement further restrictions, may require us to temporarily shut down facilities or may further impact our net sales. We will continue to actively monitor the COVID-19 pandemic and may take further actions that alter our business operations if required by federal, state, provincial or local authorities or that we determine are in the best interests of our employees, customers, suppliers and stockholders. See Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020 for more information regarding the impact of COVID-19 and our response.

Products

The following is a summary of our net sales by product group:

	Three Months Ended								Six Months Ended
	October 31,		% of			October 31,	% of		October 31,		% of		October 31,		% of
	2020		Total			2019	Total		2020		Total		2019		Total
	(dollars in thousands)
Wallboard	$	330,515	40.6	%	$	350,618	40.7	%	$	658,512	40.8	%	$	692,213	40.5	%
Ceilings		111,293	13.7	%		122,807	14.2	%		224,995	13.9	%		251,917	14.7	%
Steel framing		111,293	13.7	%		136,159	15.8	%		221,780	13.7	%		267,988	15.7	%
Other products		259,755	32.0	%		252,345	29.3	%		510,142	31.6	%		496,987	29.1	%
Total net sales	$	812,856			$	861,929			$	1,615,429			$	1,709,105

30

Results of Operations

Three Months Ended October 31, 2020 and 2019

The following table summarizes key components of our results of operations for the three months ended October 31, 2020 and 2019:

	Three Months Ended
	October 31,
	2020			2019
		(dollars in thousands)
Statement of operations data:
Net sales	$	812,856		$	861,929
Cost of sales (exclusive of depreciation and amortization shown separately below)		547,785			577,436
Gross profit		265,071			284,493
Operating expenses:
Selling, general and administrative expenses		188,352			200,457
Depreciation and amortization		27,245			29,518
Total operating expenses		215,597			229,975
Operating income		49,474			54,518
Other (expense) income:
Interest expense		(13,525)			(17,559)
Write-off of debt discount and deferred financing fees		—			(707)
Other income, net		797			813
Total other expense, net		(12,728)			(17,453)
Income before taxes		36,746			37,065
Provision for income taxes		8,277			7,927
Net income	$	28,469		$	29,138
Non-GAAP measures:
Adjusted EBITDA(1)	$	82,522		$	89,905
Adjusted EBITDA margin(1)(2)		10.2	%		10.4	%

(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “—Non-GAAP Financial Measures—Adjusted EBITDA,” for how we define and calculate Adjusted EBITDA and Adjusted EBITDA margin, reconciliations thereof to net income and a description of why we believe these measures are useful.

(2) Adjusted EBITDA margin is Adjusted EBITDA as a percentage of net sales.

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Net Sales

Net sales of $812.9 million decreased $49.1 million, or 5.7%, during the three months ended October 31, 2020 compared to the three months ended October 31, 2019 primarily due to the negative impacts of the COVID-19 pandemic. In addition, there was one less selling day during the three months ended October 31, 2020 compared to the prior year period. The decrease in net sales was due to the following:

● Wallboard sales, which are impacted by both commercial and residential construction activity, decreased $20.1 million, or 5.7%, compared to the three months ended October 31, 2019. The decrease in wallboard sales was primarily due to a decline in product mix, volume and, to a lesser extent, price.

● Ceilings sales decreased $11.5 million, or 9.4%, compared to the three months ended October 31, 2019. The decrease in ceilings sales was primarily due to lower volume, partially offset by higher price/mix.

● Steel framing sales decreased $24.9 million, or 18.3%, compared to the three months October 31, 2019. The decrease in steel framing sales was primarily due to a decline in both volumes and price/mix.

● Other products sales, which include insulation, joint treatment, tools, lumber and various other specialty building products, increased $7.4 million, or 2.9%, compared to the three months ended October 31, 2019. The increase was primarily due to positive contributions from acquisitions and execution of growth initiatives to increase other products sales.

Organic net sales decreased $55.1 million, or 6.4%, during the three months ended October 31, 2020 compared to the prior year period. The decrease was primarily driven by the negative impacts of the COVID-19 pandemic, partially offset by growth in other products sales and strength in the Canadian housing market. The decrease was more pronounced in our ceilings and steel framing products, as these product categories are tied primarily to commercial construction, which was more impacted by the COVID-19 pandemic than the residential market.

The following table breaks out our net sales into organic, or base business, net sales and recently acquired net sales for the three months ended October 31, 2020:

	Three Months
	Ended
	October 31, 2020
	(in thousands)
Net sales	$	812,856
Recently acquired net sales (1)		(6,024)
Impact of foreign currency (2)		(40)
Base business net sales (3)	$	806,792

(1) Represents net sales of branches acquired by us until the first anniversary of the acquisition date. For the three months ended October 31, 2020, this includes net sales of Rigney Building Supplies Ltd., which was acquired on November 1, 2019 and Trowel Trades Supply, Inc., which was acquired on February 1, 2020.

(2) Represents the impact of foreign currency translation on net sales.

(3) Represents net sales of existing branches and branches that were opened by us during the period presented.

When calculating organic sales growth, we exclude the net sales of acquired businesses until the first anniversary of the acquisition date. In addition, we exclude the impact of foreign currency translation in our calculation of organic net sales growth.

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Gross Profit and Gross Margin

Gross profit of $265.1 million for the three months ended October 31, 2020 decreased $19.4 million, or 6.8%, compared to the three months ended October 31, 2019 primarily due to a decrease in sales volume due to the impact of the COVID-19 pandemic. Gross margin on net sales decreased to 32.6% for the three months ended October 31, 2020 compared to 33.0% for the three months ended October 31, 2019 primarily due to challenging product mix dynamics, particularly in the commercial market.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of warehouse, delivery and general and administrative expenses. Selling, general and administrative expenses of $188.4 million for the three months ended October 31, 2020 decreased $12.1 million, or 6.0%, compared to the three months ended October 31, 2019. Selling, general and administrative expenses were 23.2% of our net sales during the three months ended October 31, 2020 compared to 23.3% of our net sales during the three months ended October 31, 2019. The decrease was primarily driven by proactive actions taken to reduce costs in response to the COVID-19 pandemic, partially offset by deflationary market pricing of certain of our products.

Depreciation and Amortization Expense

Depreciation and amortization expense includes depreciation of property and equipment and amortization of definite-lived intangible assets acquired in purchases of businesses. Depreciation and amortization expense was $27.2 million for the three months ended October 31, 2020 compared to $29.5 million for the three months ended October 31, 2019. The decrease was due to a $2.4 million decrease in amortization of definite-lived intangible assets, partially offset by a $0.1 million increase in depreciation expense. The decrease in amortization expense was primarily due to the time-based progression of our use of the accelerated method of amortization for acquired customer relationships. The increase in depreciation expense was primarily due to capital expenditures and acquisitions over the past year.

Interest Expense

Interest expense consists primarily of interest expense incurred on our debt and finance leases and amortization of deferred financing fees and debt discounts. Interest expense was $13.5 million during the three months ended October 31, 2020 compared to $17.6 million for the three months ended October 31, 2019. The decrease was primarily due to a decrease in the outstanding amount of debt and a decrease in interest rates.

Income Taxes

We recognized income tax expense of $8.3 million during the three months ended October 31, 2020 compared to $7.9 million during the three months ended October 31, 2019. Our effective tax rate was 22.5% and 21.4% for the three months ended October 31, 2020 and 2019, respectively. The change in the effective income tax rate was primarily due to the impact of foreign taxes and stock-based compensation.

Net Income

Net income was $28.5 million during the three months ended October 31, 2020 compared to $29.1 million for the three months ended October 31, 2019. The decrease in net income was primarily due to a decrease in operating income, primarily as a result of lower net sales, partially offset by a decrease in interest expense.

Adjusted EBITDA

Adjusted EBITDA of $82.5 million for the three months ended October 31, 2020 decreased $7.4 million, or 8.2%, from our Adjusted EBITDA of $89.9 million for the three months ended October 31, 2019. The decrease in Adjusted EBITDA was primarily due to the negative impacts of the COVID-19 pandemic on net sales, partially offset by operating expense containment measures and strength in the Canadian housing market. See “—Non-GAAP Financial

33

Measures—Adjusted EBITDA,” below for how we define and calculate Adjusted EBITDA, reconciliations to net income and a description of why we believe these measures are useful.

Six Months Ended October 31, 2020 and 2019

The following table summarizes key components of our results of operations for the six months ended October 31, 2020 and 2019:

	Six Months Ended
	October 31,
	2020			2019
		(dollars in thousands)
Statement of operations data:
Net sales	$	1,615,429		$	1,709,105
Cost of sales (exclusive of depreciation and amortization shown separately below)		1,089,900			1,150,958
Gross profit		525,529			558,147
Operating expenses:
Selling, general and administrative expenses		371,464			395,088
Depreciation and amortization		54,342			58,793
Total operating expenses		425,806			453,881
Operating income		99,723			104,266
Other (expense) income:
Interest expense		(27,606)			(35,836)
Write-off of debt discount and deferred financing fees		—			(707)
Other income, net		1,452			1,752
Total other expense, net		(26,154)			(34,791)
Income before tax		73,569			69,475
Provision for income taxes		17,881			15,517
Net income	$	55,688		$	53,958
Non-GAAP measures:
Adjusted EBITDA(1)	$	165,576		$	173,493
Adjusted EBITDA margin(1)(2)		10.2	%		10.2	%

(1) Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See “—Non-GAAP Financial Measures—Adjusted EBITDA,” for how we define and calculate Adjusted EBITDA and Adjusted EBITDA margin, reconciliations thereof to net income and a description of why we believe these measures are useful.

(2) Adjusted EBITDA margin is Adjusted EBITDA as a percentage of net sales.

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Net Sales

Net sales of $1,615.4 million decreased $93.7 million, or 5.5%, during the six months ended October 31, 2020 compared to the six months ended October 31, 2019 primarily due to the negative impacts of the COVID-19 pandemic. The decrease in net sales was due to the following:

● Wallboard sales, which are impacted by both commercial and residential construction activity, decreased $33.7 million, or 4.9%, compared to the six months ended October 31, 2019. The decrease in wallboard sales was primarily due to a decline in both price and mix and, to a lesser extent, lower volumes.

● Ceilings sales decreased $26.9 million, or 10.7%, compared to the six months ended October 31, 2019. The decrease in ceilings sales was primarily due to lower volumes and product mix, partially offset by higher pricing.

● Steel framing sales decreased $46.2 million, or 17.2%, compared to the six months October 31, 2019. The decrease in steel framing sales was primarily due to a decline in volumes and pricing, partially offset by higher product mix.

● Other products sales, which include insulation, joint treatment, tools, lumber and various other specialty building products, increased $13.2 million, or 2.6%, compared to the six months ended October 31, 2019. The increase was primarily due to execution of growth initiatives to increase other products sales and positive contributions from acquisitions.

Organic net sales decreased $103.0 million, or 6.0%, during the six months ended October 31, 2020 compared to the prior year period. The decrease was primarily driven by the negative impacts of the COVID-19 pandemic, partially offset by growth in other products sales and strength in the Canadian housing market. The decrease was more pronounced in our ceilings and steel framing products, as these product categories are tied primarily to commercial construction, which was more impacted by the COVID-19 pandemic than the residential market.

The following table breaks out our net sales into organic, or base business, net sales and recently acquired net sales for the six months ended October 31, 2020:

	Six Months
	Ended
(Unaudited)	October 31, 2020
	(in thousands)
Net sales	$	1,615,429
Recently acquired net sales (1)		(12,901)
Impact of foreign currency (2)		3,496
Base business net sales (3)	$	1,606,024

(1) Represents net sales of branches acquired by us until the first anniversary of the acquisition date. For the six months ended October 31, 2020, this includes net sales of J.P. Hart Lumber Company, which was acquired on June 3, 2019, Rigney Building Supplies Ltd., which was acquired on November 1, 2019 and Trowel Trades Supply, Inc., which was acquired on February 1, 2020.

(2) Represents the impact of foreign currency translation on net sales.

(3) Represents net sales of existing branches and branches that were opened by us during the period presented.

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Gross Profit and Gross Margin

Gross profit of $525.5 million for the six months ended October 31, 2020 decreased $32.6 million, or 5.8%, compared to the six months ended October 31, 2019 primarily due to a decrease in sales volume due to the impact of the COVID-19 pandemic. Gross margin on net sales decreased to 32.5% for the six months ended October 31, 2020 compared to 32.7% for the six months ended October 31, 2019 primarily due to increased competition and product mix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses of $371.5 million for the six months ended October 31, 2020 decreased $23.6 million, or 6.0%, compared to the six months ended October 31, 2019. Selling, general and administrative expenses were 23.0% of our net sales during the six months ended October 31, 2020 compared to 23.1% of our net sales during the six months ended October 31, 2019. The decrease was primarily driven by proactive actions taken to reduce costs in response to the COVID-19 pandemic, partially offset by deflationary market pricing of certain of our products and incremental costs as a result of the COVID-19 pandemic.

Depreciation and Amortization Expense

Depreciation and amortization expense was $54.3 million for the six months ended October 31, 2020 compared to $58.8 million for the six months ended October 31, 2019. The decrease was due to a $5.0 million decrease in amortization of definite-lived intangible assets, partially offset by a $0.5 million increase in depreciation expense. The decrease in amortization expense was primarily due to the time-based progression of our use of the accelerated method of amortization for acquired customer relationships. The increase in depreciation expense was primarily due to capital expenditures and acquisitions over the past year.

Interest Expense

Interest expense was $27.6 million during the six months ended October 31, 2020 compared to $35.8 million for the six months ended October 31, 2019. The decrease was primarily due to a decrease in the outstanding amount of debt and a decrease in interest rates.

Income Taxes

We recognized income tax expense of $17.9 million during the six months ended October 31, 2020 compared to $15.5 million during the six months ended October 31, 2019. Our effective tax rate was 24.3% and 22.3% for the six months ended October 31, 2020 and 2019, respectively. The change in the effective income tax rate was primarily due to the impact of state taxes, foreign taxes and stock-based compensation.

Net Income

Net income was $55.7 million during the six months ended October 31, 2020 compared to $54.0 million for the six months ended October 31, 2019. The increase in net income was primarily due to a decrease in interest expense, partially offset by a decrease in operating income, primarily resulting from lower net sales, and an increase in income taxes.

Adjusted EBITDA

Adjusted EBITDA of $165.6 million for the six months ended October 31, 2020 decreased $7.9 million, or 4.6%, from our Adjusted EBITDA of $173.5 million for the six months ended October 31, 2019. The decrease in Adjusted EBITDA was primarily due to the negative impacts of the COVID-19 pandemic on net sales, partially offset by operating expense containment measures and strength in the Canadian housing market. See “—Non-GAAP Financial Measures—Adjusted EBITDA,” below for how we define and calculate Adjusted EBITDA, reconciliations to net income and a description of why we believe these measures are useful.

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Liquidity and Capital Resources

Summary

We depend on cash flow from operations, cash on hand and funds available under our asset based revolving credit facility (the “ABL Facility”) to finance working capital needs, capital expenditures and acquisitions. We believe that these sources of funds will be adequate to fund debt service requirements and provide cash, as required, to support our growth strategies, ongoing operations, capital expenditures, lease obligations and working capital for at least the next 12 months. We have taken several measures to preserve liquidity in response to the COVID-19 pandemic. We currently believe that these measures and any others we may determine to take in the future to preserve our cash flows from operations, combined with our current financial resources, will allow us to manage the anticipated impact of the COVID-19 pandemic on our business operations.

As of October 31, 2020, we had available borrowing capacity of approximately $392.9 million under our $445.0 million ABL Facility. The ABL Facility is scheduled to mature on September 30, 2024.

As of October 31, 2020, we had available borrowing capacity of approximately $22.5 million under our Canadian revolving credit facility (the “Canadian Facility”) that provides for aggregate revolving commitments of $22.5 million ($30.0 million Canadian dollars). The Canadian Facility matures on June 28, 2022.

For more information regarding our ABL Facility and other indebtedness, see Note 5 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 7 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

We have a common stock repurchase program authorized by our Board of Directors to repurchase up to $75.0 million of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or terminated at any time at our discretion. The timing and amount of any purchases of our common stock will be subject to a variety of factors, including, but not limited to, our liquidity, credit availability, general business and market conditions, our debt covenant restrictions and the availability of alternative investment opportunities. We repurchased approximately 50 thousand shares of our common stock for $1.2 million during the six months ended October 31, 2020. As of October 31, 2020, we had $57.3 million of remaining purchase authorization. 

We regularly evaluate opportunities to optimize our capital structure, including through consideration of the issuance or incurrence of additional debt to refinance existing debt and to fund ongoing cash needs such as general corporate purposes, growth initiatives, acquisitions and our stock repurchase program.

Cash Flows

A summary of our operating, investing and financing activities is shown in the following table:

	Six Months Ended
	October 31,
	2020		2019
	(in thousands)
Cash provided by operating activities	$	24,048	$	69,927
Cash used in investing activities		(11,176)		(24,214)
Cash used in financing activities		(106,895)		(57,005)
Effect of exchange rates on cash and cash equivalents		1,282		223
Decrease in cash and cash equivalents	$	(92,741)	$	(11,069)

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Operating Activities

The decrease in cash provided by operating activities during the six months ended October 31, 2020 compared to the prior year period was primarily due to a $35.6 million decrease in cash resulting from changes to our net working capital and a $10.3 million decrease in net income after adjustments for non-cash items. The decrease in cash from net working capital was primarily due to our efforts to preserve liquidity at the end of fiscal 2020 in response to the COVID-19 pandemic. We postponed certain payments of accounts payable at the end of fiscal 2020, which we subsequently paid during the six months ended October 31, 2020.

Investing Activities

The decrease in cash used in investing activities during the six months ended October 31, 2020 compared to the prior year period was primarily due to a $10.6 million decrease in cash used for acquisitions and a $2.8 million decrease in capital expenditures.

Capital expenditures during the six months ended October 31, 2020 primarily consisted of building and leasehold improvements, vehicles and IT-related spending. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. Historically, capital expenditures have remained at relatively low levels in comparison to the operating cash flows generated during the corresponding periods.

Financing Activities

The increase in cash used in financing activities during the six months ended October 31, 2020 compared to the prior year period was primarily due to the repayment of $87.2 million of our revolving credit facilities we proactively borrowed in March 2020, a $2.3 million increase in principal payments on finance leases and $1.2 million of repurchases of common stock during the six months ended October 31, 2020. These increases were partially offset by cash used in the prior year period for a $50.0 million principal prepayment of debt.

Debt Covenants

Our senior secured first lien term loan facility (the “Term Loan Facility”) contains a number of covenants that limit our ability and the ability of our restricted subsidiaries, as described in the respective credit agreement, to: incur more indebtedness; pay dividends, redeem or repurchase stock or make other distributions; make investments; create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers; create liens securing indebtedness; transfer or sell assets; merge or consolidate; enter into certain transactions with our affiliates; and prepay or amend the terms of certain indebtedness. We were in compliance with all covenants contained in the Term Loan Facility as of October 31, 2020.

The ABL Facility contains certain affirmative covenants, including financial and other reporting requirements. We were in compliance with all such covenants as of October 31, 2020.

Contractual Obligations

There have been no material changes to the contractual obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020, other than those made in the ordinary course of business.

Off-Balance Sheet Arrangements

There have been no material changes to our off-balance sheet arrangements as discussed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

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Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. We report our financial results in accordance with GAAP. However, we present Adjusted EBITDA and Adjusted EBITDA margin, which are not recognized financial measures under GAAP, because we believe they assist 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 and Adjusted EBITDA margin are 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 Term Loan Facility. The ABL Facility and the Term Loan 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. We may in the future reflect such permitted adjustments in our calculations of Adjusted EBITDA.

We believe that Adjusted EBITDA and Adjusted EBITDA margin are frequently used by analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA or Adjusted EBITDA margin measure when reporting their results. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

We also include information concerning Adjusted EBITDA margin, which is calculated as Adjusted EBITDA divided by net sales. We present Adjusted EBITDA margin because it is used by management as a performance measure to judge the level of Adjusted EBITDA that is generated from net sales.

Adjusted EBITDA and Adjusted EBITDA margin have their limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

39

The following is a reconciliation of our net income to Adjusted EBITDA and Adjusted EBITDA margin for the three and six months ended October 31, 2020 and 2019:

	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2020			2019			2020			2019
	(in thousands)
Net income	$	28,469		$	29,138		$	55,688		$	53,958
Interest expense		13,525			17,559			27,606			35,836
Write-off of debt discount and deferred financing fees		—			707			—			707
Interest income		(14)			(6)			(51)			(18)
Provision for income taxes		8,277			7,927			17,881			15,517
Depreciation expense		12,710			12,592			25,537			25,014
Amortization expense		14,535			16,926			28,805			33,779
Stock appreciation expense(a)		314			1,267			1,106			1,327
Redeemable noncontrolling interests(b)		186			(18)			438			644
Equity-based compensation(c)		3,252			2,315			4,857			3,710
Severance and other permitted costs(d)		762			1,394			2,709			1,948
Transaction costs (acquisitions and other)(e)		25			327			125			1,299
Loss (gain) on disposal and impairment of assets(f)		481			(586)			875			(742)
Effects of fair value adjustments to inventory(g)		—			—			—			151
Secondary public offering costs(h)		—			363			—			363
Adjusted EBITDA	$	82,522		$	89,905		$	165,576		$	173,493
Net sales	$	812,856		$	861,929		$	1,615,429		$	1,709,105
Adjusted EBITDA Margin		10.2	%		10.4	%		10.2	%		10.2	%

(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 the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

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

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

(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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our exposure to market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of October 31, 2020, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 31, 2020, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended October 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – Other Information

Item 1. Legal Proceedings

From time to time, we are involved in lawsuits that are brought against us in the normal course of business. We are not currently a party to any legal proceedings that would be expected, either individually or in the aggregate, to have a material adverse effect on our business or financial condition. For additional information, see Note 13, “Commitments and Contingencies.”

The building materials industry has been subject to personal injury and property damage claims arising from alleged exposure to raw materials contained in building products as well as claims for incidents of catastrophic loss, such as building fires. As a distributor of building materials, we face an inherent risk of exposure to product liability claims in the event that the use of the products we have distributed in the past or may in the future distribute is alleged to have resulted in economic loss, personal injury or property damage or violated environmental, health or safety or other laws. Such product liability claims have included and may in the future include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. In particular, certain of our subsidiaries have been the subject of claims related to alleged exposure to asbestos-containing products they distributed prior to 1979. Since 2002 and as of October 31, 2020, approximately 1,018 asbestos-related personal injury lawsuits have been filed and we vigorously defend against them. Of these, 973 have been dismissed without any payment by us, 35 are pending and only 10 have been settled, which settlements have not materially impacted our financial condition or operating results. See “Risk Factors—Risks Relating to Our Business and Industry—We are exposed to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings related to our business, the products we distribute, the services we provide and services provided for us by third parties” listed in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

Item 1A. Risk Factors

There have been no material changes in the risks facing the Company as described in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The number of shares repurchased and the average price paid per share for each month in the three months ended October 31, 2020 are as follows:

				Total Number of		Maximum Approximate
	Total Number	Average		Shares Repurchased		Dollar Value that May
	of Shares	Price Paid		as Part of Publicly		Yet be Purchased
	Repurchased	Per Share		Announced Program (1)		Under the Program
						(in thousands)
August 1 through August 31	—	$	—	—	$	58,480
September 1 through September 30	19,989		22.78	19,989		58,025
October 1 through October 31	30,423		25.19	30,423		57,259
Total	50,412			50,412

(1) On November 30, 2018, our Board of Directors authorized a common stock repurchase program to repurchase up to $75.0 million of our outstanding common stock. We may conduct repurchases under the share repurchase program through open market transactions, under trading plans in accordance with Rule 10b5-1 and/or in privately negotiated transactions, in compliance with Rule 10b-18 under the Exchange Act of 1934, as amended, subject to a variety of factors, including, but not limited to, our liquidity, credit availability, general business and market conditions, our debt covenant restrictions and the availability of alternative investment opportunities. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or terminated at any time at our discretion.

42

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

43

Item 6. Exhibits

(a) Exhibits. The following exhibits are filed as part of this report:

Exhibit No.		Exhibit Description
3.1		Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 23, 2020).
3.2		Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to to the Company’s Current Report on Form 8-K filed on October 23, 2020).
4.1		Specimen Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 to Amendment No. 5 to the Company’s Registration Statement on Form S-1 filed on May 16, 2016 (File No. 333-205902)).
10.1		GMS Inc. 2020 Equity Incentive Plan (incorporated by reference to Appendix E to the Company’s Definitive Proxy Statement on Schedule 14A filed on August 27, 2020).
10.2		Form of Nonqualified Stock Option Agreement under the GMS Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 10, 2020).
10.3		Form of Restricted Stock Unit Agreement under the GMS Inc. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 10, 2020).
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1	*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS	*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
101 SCH	*	Inline XBRL Taxonomy Extension Schema Document.
101 CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101 DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101 LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101 PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*     Filed herewith.

44

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

	GMS INC.
Date: December 3, 2020	By:	/s/ Scott M. Deakin
		Scott M. Deakin
		Chief Financial Officer
		(Principal Financial Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John C. Turner, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended October 31, 2020 of GMS Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(a) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	December 3, 2020	/s/ John C. Turner, Jr.
		John C. Turner, Jr.
		Chief Executive Officer, President and Director (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott M. Deakin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended October 31, 2020 of GMS Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	December 3, 2020	/s/ Scott M. Deakin
		Scott M. Deakin
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of GMS Inc., a Delaware corporation (the "Company"), for the quarter ended October 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), John C. Turner, Jr., Chief Executive Officer, President and Director of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 3, 2020	/s/ John C. Turner, Jr.
	John C. Turner, Jr.
	Chief Executive Officer, President and Director
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of GMS Inc., a Delaware corporation (the "Company"), for the quarter ended October 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Scott M. Deakin, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 3, 2020	/s/ Scott M. Deakin
	Scott M. Deakin
	Chief Financial Officer
	(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Oct. 31, 2020	Nov. 30, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Oct. 31, 2020
Entity File Number	001-37784
Entity Registrant Name	GMS INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-2931287
Entity Address, Address Line One	100 Crescent Centre Parkway, Suite 800
Entity Address, City or Town	Tucker
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30084
City Area Code	800
Local Phone Number	392-4619
Title of 12(b) Security	Common Stock
Trading Symbol	GMS
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		42,681,068
Entity Central Index Key	0001600438
Current Fiscal Year End Date	--04-30
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Current assets:
Cash and cash equivalents	$ 118,168	$ 210,909
Trade accounts and notes receivable, net of allowances of $5,273 and $5,141, respectively	434,836	405,254
Inventories, net	302,357	299,815
Prepaid expenses and other current assets	19,042	14,972
Total current assets	874,403	930,950
Property and equipment, net of accumulated depreciation of $174,832 and $158,554, respectively	300,144	305,467
Operating lease right-of-use assets	114,198	115,257
Goodwill	557,486	553,073
Intangible assets, net	339,918	361,884
Deferred income taxes	12,651	8,904
Other assets	12,074	13,247
Total assets	2,210,874	2,288,782
Current liabilities:
Accounts payable	163,927	213,230
Accrued compensation and employee benefits	43,843	67,590
Other accrued expenses and current liabilities	88,170	63,812
Current portion of long-term debt	49,302	50,201
Current portion of operating lease liabilities	31,694	33,040
Total current liabilities	376,936	427,873
Non-current liabilities:
Long-term debt, less current portion	946,721	1,047,279
Long-term operating lease liabilities	88,122	89,605
Deferred income taxes, net	7,837	12,018
Other liabilities	73,361	78,026
Total liabilities	1,492,977	1,654,801
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01 per share, 500,000 shares authorized; 42,690 and 42,554 shares issued and outstanding as of October 31, 2020 and April 30, 2020, respectively	427	426
Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of October 31, 2020 and April 30, 2020
Additional paid-in capital	534,646	529,662
Retained earnings	224,663	168,975
Accumulated other comprehensive loss	(41,839)	(65,082)
Total stockholders' equity	717,897	633,981
Total liabilities and stockholders' equity	$ 2,210,874	$ 2,288,782

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Condensed Consolidated Balance Sheets
Trade accounts and notes receivable, allowances (in dollars)	$ 5,273	$ 5,141
Property and equipment, accumulated depreciation (in dollars)	$ 174,832	$ 158,554
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500,000	500,000
Common stock, shares issued	42,690	42,554
Common stock, shares outstanding	42,690	42,554
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000	50,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

XML

Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Condensed Consolidated Statements of Operations and Comprehensive Income
Net sales		$ 812,856	$ 861,929	$ 1,615,429	$ 1,709,105
Cost of sales (exclusive of depreciation and amortization shown separately below)		547,785	577,436	1,089,900	1,150,958
Gross profit		265,071	284,493	525,529	558,147
Operating expenses:
Selling, general and administrative		188,352	200,457	371,464	395,088
Depreciation and amortization		27,245	29,518	54,342	58,793
Total operating expenses		215,597	229,975	425,806	453,881
Operating income		49,474	54,518	99,723	104,266
Other (expense) income:
Interest expense		(13,525)	(17,559)	(27,606)	(35,836)
Write-off of debt discount and deferred financing fees			(707)		(707)
Other income, net		797	813	1,452	1,752
Total other expense, net		(12,728)	(17,453)	(26,154)	(34,791)
Income before taxes		36,746	37,065	73,569	69,475
Provision for income taxes		8,277	7,927	17,881	15,517
Net income		$ 28,469	$ 29,138	$ 55,688	$ 53,958
Weighted average common shares outstanding:
Basic (in shares)		42,723	41,761	42,674	41,382
Diluted (in shares)		43,174	42,635	43,096	42,126
Net income per common share:
Basic (in dollars per share)	[1]	$ 0.67	$ 0.70	$ 1.30	$ 1.30
Diluted (in dollars per share)	[1]	$ 0.66	$ 0.68	$ 1.29	$ 1.27
Comprehensive income
Net income		$ 28,469	$ 29,138	$ 55,688	$ 53,958
Foreign currency translation income (loss)		3,159	(409)	19,440	11,451
Changes in other comprehensive income (loss), net of tax		2,844	(3,602)	3,803	(9,667)
Comprehensive income		$ 34,472	$ 25,127	$ 78,931	$ 55,742

[1] See Note 15 for detailed calculations.

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock	Exchangeable Shares	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Balance at Apr. 30, 2019	$ 404	$ 29,639	$ 480,113	$ 145,594	$ (26,574)	$ 629,176
Balance (in shares) at Apr. 30, 2019	40,375
Increase (Decrease) in Stockholders' Equity
Net income				24,820		24,820
Exercise of Exchangeable Shares	$ 11	(29,639)	29,628
Exercise of Exchangeable Shares (in shares)	1,129
Foreign currency translation adjustments					11,860	11,860
Change in other comprehensive income (loss), net of tax					(6,065)	(6,065)
Equity-based compensation			1,349			1,349
Exercise of stock options			133			133
Exercise of stock options (in shares)	9
Issuance of common stock pursuant to employee stock purchase plan	$ 1		1,021			1,022
Issuance of common stock pursuant to employee stock purchase plan (in shares)	76
Balance at Jul. 31, 2019	$ 416		512,244	170,414	(20,779)	662,295
Balance (in shares) at Jul. 31, 2019	41,589
Balance at Apr. 30, 2019	$ 404	$ 29,639	480,113	145,594	(26,574)	629,176
Balance (in shares) at Apr. 30, 2019	40,375
Increase (Decrease) in Stockholders' Equity
Net income						53,958
Foreign currency translation adjustments						11,451
Balance at Oct. 31, 2019	$ 422		520,855	199,552	(24,790)	696,039
Balance (in shares) at Oct. 31, 2019	42,169
Balance at Jul. 31, 2019	$ 416		512,244	170,414	(20,779)	662,295
Balance (in shares) at Jul. 31, 2019	41,589
Increase (Decrease) in Stockholders' Equity
Net income				29,138		29,138
Foreign currency translation adjustments					(409)	(409)
Change in other comprehensive income (loss), net of tax					(3,602)	(3,602)
Equity-based compensation			2,271			2,271
Exercise of stock options	$ 5		6,623			6,628
Exercise of stock options (in shares)	525
Vesting of restricted stock units	$ 1		(1)
Vesting of restricted stock units (in shares)	55
Tax withholding related to net share settlements of stock options/equity awards			(282)			(282)
Balance at Oct. 31, 2019	$ 422		520,855	199,552	(24,790)	696,039
Balance (in shares) at Oct. 31, 2019	42,169
Balance at Apr. 30, 2020	$ 426		529,662	168,975	(65,082)	$ 633,981
Balance (in shares) at Apr. 30, 2020	42,554					42,554
Increase (Decrease) in Stockholders' Equity
Net income				27,219		$ 27,219
Foreign currency translation adjustments					16,281	16,281
Change in other comprehensive income (loss), net of tax					959	959
Equity-based compensation			1,575			1,575
Exercise of stock options			691			691
Exercise of stock options (in shares)	54
Vesting of restricted stock units (in shares)	7
Tax withholding related to net share settlements of stock options/equity awards			(105)			(105)
Issuance of common stock pursuant to employee stock purchase plan	$ 1		1,269			1,270
Issuance of common stock pursuant to employee stock purchase plan (in shares)	58
Balance at Jul. 31, 2020	$ 427		533,092	196,194	(47,842)	681,871
Balance (in shares) at Jul. 31, 2020	42,673
Balance at Apr. 30, 2020	$ 426		529,662	168,975	(65,082)	$ 633,981
Balance (in shares) at Apr. 30, 2020	42,554					42,554
Increase (Decrease) in Stockholders' Equity
Net income						$ 55,688
Foreign currency translation adjustments						19,440
Balance at Oct. 31, 2020	$ 427		534,646	224,663	(41,839)	$ 717,897
Balance (in shares) at Oct. 31, 2020	42,690					42,690
Balance at Jul. 31, 2020	$ 427		533,092	196,194	(47,842)	$ 681,871
Balance (in shares) at Jul. 31, 2020	42,673
Increase (Decrease) in Stockholders' Equity
Net income				28,469		28,469
Foreign currency translation adjustments					3,159	3,159
Change in other comprehensive income (loss), net of tax					2,844	2,844
Repurchase and retirement of common stock	$ (1)		(1,221)			(1,222)
Repurchase and retirement of common stock (in shares)	(50)
Equity-based compensation			3,253			3,253
Exercise of stock options			172			172
Exercise of stock options (in shares)	5
Vesting of restricted stock units	$ 1		(1)
Vesting of restricted stock units (in shares)	62
Tax withholding related to net share settlements of stock options/equity awards			(649)			(649)
Balance at Oct. 31, 2020	$ 427		$ 534,646	$ 224,663	$ (41,839)	$ 717,897
Balance (in shares) at Oct. 31, 2020	42,690					42,690

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019
Cash flows from operating activities:
Net income	$ 55,688	$ 53,958
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	54,342	58,793
Write-off and amortization of debt discount and debt issuance costs	1,505	2,368
Equity-based compensation	6,370	5,591
Loss (gain) on disposal and impairment of assets	875	(742)
Deferred income taxes	(9,296)	(2,380)
Other items, net	(1,057)	1,101
Changes in assets and liabilities net of effects of acquisitions:
Trade accounts and notes receivable	(26,137)	(29,932)
Inventories	(950)	1,800
Prepaid expenses and other assets	(4,776)	1,573
Accounts payable	(50,867)	(5,486)
Accrued compensation and employee benefits	(23,889)	(12,974)
Other accrued expenses and liabilities	22,240	(3,743)
Cash provided by operating activities	24,048	69,927
Cash flows from investing activities:
Purchases of property and equipment	(11,845)	(14,637)
Proceeds from sale of assets	720	1,056
Acquisition of businesses, net of cash acquired	(51)	(10,633)
Cash used in investing activities	(11,176)	(24,214)
Cash flows from financing activities:
Repayments on revolving credit facilities	(102,189)	(558,906)
Borrowings from revolving credit facilities	14,750	562,698
Payments of principal on long-term debt	(4,984)	(54,984)
Payments of principal on finance lease obligations	(14,629)	(12,310)
Repurchases of common stock	(1,222)
Debt issuance costs		(1,286)
Proceeds from exercises of stock options	863	6,761
Payments for taxes related to net share settlement of equity awards	(754)
Other financing activities	1,270	1,022
Cash used in financing activities	(106,895)	(57,005)
Effect of exchange rates on cash and cash equivalents	1,282	223
Decrease in cash and cash equivalents	(92,741)	(11,069)
Cash and cash equivalents, beginning of period	210,909	47,338
Cash and cash equivalents, end of period	118,168	36,269
Supplemental cash flow disclosures:
Cash paid for income taxes	20,224	25,642
Cash paid for interest	$ 25,726	$ 33,654

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Business, Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Oct. 31, 2020

Business, Basis of Presentation and Summary of Significant Accounting Policies

Business, Basis of Presentation and Summary of Significant Accounting Policies

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

Founded in 1971, GMS Inc. (“we,” “our,” “us,” or the “Company”), through its wholly-owned operating subsidiaries, is a distributor of specialty building products including wallboard, suspended ceilings systems, or ceilings, steel framing and other complementary building products. We purchase products from many manufacturers and then distribute these goods to a customer base consisting of wallboard and ceilings contractors and homebuilders and, to a lesser extent, general contractors and individuals. We operate a network of approximately 260 distribution centers across the United States and Canada.

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair presentation of the results of operations, financial position and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. The results of operations for interim periods are not necessarily indicative of results for any other interim period or the entire fiscal year. As a result, the unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

Principles of Consolidation

The condensed consolidated financial statements present the results of operations, financial position, stockholders’ equity and cash flows of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The results of operations of businesses acquired are included from their respective dates of acquisition.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

Assets and liabilities of the Company’s Canadian subsidiaries are translated at the exchange rate prevailing at the balance sheet date, while income and expenses are translated at average rates for the period. Translation gains and losses are reported as a separate component of stockholders’ equity and other comprehensive income. Gains and losses on foreign currency transactions are recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income within other (expense) income, net.

Insurance Liabilities

The Company is self-insured for certain losses related to medical claims. The Company has stop-loss coverage to limit the exposure arising from medical claims. In addition, the Company has deductible-based insurance policies for certain losses related to general liability, workers’ compensation and automobile. The deductible amount per incident is $0.3 million, $0.5 million and $1.0 million for general liability, workers’ compensation and automobile, respectively. The coverage consists of a deductible layer, a primary layer, a self-insured buffer layer, a lead umbrella layer and excess layers. The primary layer of coverage is from $0.3 million, $0.5 million and $1.0 million for deductibles for general liability, workers’ compensation, and automobile liability, respectively, to $5.0 million. The Company self-insures a

buffer layer from $5.0 million to $10.0 million. The umbrella and excess layers cover claims from $10.0 million to $100.0 million. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. Insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience.

As of October 31, 2020 and April 30, 2020, the aggregate liabilities for medical self-insurance were $4.2 million and $3.8 million, respectively, and are included in other accrued expenses and current liabilities in the Condensed Consolidated Balance Sheets. As of October 31, 2020 and April 30, 2020, reserves for general liability, automobile and workers’ compensation totaled approximately $20.1 million and $19.4 million, respectively, and are included in other accrued expenses and current liabilities and other liabilities in the Condensed Consolidated Balance Sheets. As of October 31, 2020 and April 30, 2020, expected recoveries for medical self-insurance, general liability, automobile and workers’ compensation totaled approximately $8.0 million and $6.0 million, respectively, and are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheets.

Income Taxes

The Company considers each interim period an integral part of the annual period and measures tax expense (benefit) using an estimated annual effective income tax rate. Estimates of the annual effective income tax rate at the end of interim periods are, out of necessity, based on evaluation of possible future events and transactions and may be subject to subsequent refinement or revision. The Company forecasts its estimated annual effective income tax rate and then applies that rate to its year-to-date pre-tax ordinary income (loss), subject to certain loss limitation provisions. In addition, certain specific transactions are excluded from the Company’s estimated annual effective tax rate computation, but are discretely recognized within income tax expense (benefit) in their respective interim period. Future changes in the forecasted annual income (loss) projections, tax rate changes, or discrete tax items could result in significant adjustments to quarterly income tax expense (benefit) in future periods.

The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In this evaluation, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive evidence considered includes the reversal of deferred tax liabilities primarily related to depreciation and amortization that would occur within the same jurisdiction and during the carryforward period necessary to absorb the federal and state net operating losses and other deferred tax assets.

Deferred tax assets and liabilities are computed by applying the federal, provincial and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Authoritative guidance for fair value measurements establishes a three-level hierarchy that prioritizes the inputs to valuation models based upon the degree to which they are observable. The three levels of the fair value measurement hierarchy are as follows:

Level 1	Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2	Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3	Inputs are unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying values of the Company’s cash, cash equivalents, trade receivables and trade payables approximate their fair values because of their short-term nature. Based on borrowing rates available to the Company for loans with similar terms, the carrying values of the Company’s debt instruments approximate fair value. See Note 11, “Fair Value Measurements,” for additional information with respect to the Company’s fair value measurements.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of outstanding shares of common stock for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units (collectively “Common Stock Equivalents”), were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amount of compensation cost attributed to future services and not yet recognized. Diluted earnings per share is computed by increasing the weighted-average number of outstanding shares of common stock computed in basic earnings per share to include the dilutive effect of Common Stock Equivalents for the period. In periods of net loss, the number of shares used to calculate diluted loss per share is the same as basic net loss per share.

The holders of the Company’s Exchangeable Shares (as defined in Note 8, “Stockholders’ Equity”) were entitled to receive dividends or distributions that are equal to any dividends or distributions on the Company’s common stock. As a result, when the Exchangeable Shares were outstanding, they were classified as a participating security and thereby required the allocation of income that would have otherwise been available to common stockholders when calculating earnings per share. Diluted earnings per share was calculated by utilizing the most dilutive result of the if-converted and two-class methods. In both methods, net income attributable to common stockholders and the weighted-average common shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation. 

Recently Adopted Accounting Pronouncements

Credit Losses –  In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on credit losses on financial instruments. This guidance introduces a revised approach to the recognition and measurement of credit losses of certain financial instruments, including trade and other receivables, emphasizing an updated model based on expected losses rather than incurred losses. The Company adopted this guidance on May 1,

2020 with no material impact to its financial statements. See Note 3, “Accounts Receivable,” for additional information with respect to the Company’s allowance for expected credit losses.

Fair Value Measurement Disclosures – In August 2018, the FASB issued new guidance that changes certain fair value measurement disclosure requirements. The Company adopted this guidance on May 1, 2020 with no material impact to its financial statements.

Recently Issued Accounting Pronouncements

Reference Rate Reform – In March 2020, the FASB issued new guidance to temporarily ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The guidance was effective upon issuance and generally can be applied through December 31, 2022. The Company expects to elect optional expedients and exceptions provided by the guidance, as needed, related to its debt instruments, which include interest rates based on a LIBOR rate. The Company will evaluate and disclose the impact of this guidance in the period of election, as well as the nature and reason for doing so.

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Revenue

6 Months Ended

Oct. 31, 2020

Revenue

Revenue

2. Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of promised goods to customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company includes shipping and handling costs billed to customers in net sales. These costs are recognized as a component of selling, general and administrative expenses.

See Note 14, “Segments,” for information regarding disaggregation of revenue, including revenue by product and by geographic area.

Performance Obligations

The Company satisfies its performance obligations at a point in time, which is upon delivery of products. The Company’s payment terms vary by the type and location of its customers. The amount of time between point of sale and when payment is due is not significant and the Company has determined its contracts do not include a significant financing component.

The Company’s contracts with customers involve performance obligations that are one year or less. Therefore, the Company applied the standard’s optional exemption that permits the omission of information about its unfulfilled performance obligations as of the balance sheet dates.

Significant Judgments

The Company’s contracts may include terms that could cause variability in the transaction price, including customer rebates, returns and cash discounts for early payment. Variable consideration is estimated and included in the transaction price based on the expected value method. These estimates are based on historical experience, anticipated performance and other factors known at the time. The Company only includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Contract Balances

Receivables from contracts with customers, net of allowances, were $418.3 million and $393.6 million as of October 31, 2020 and April 30, 2020, respectively. The Company did not have material amounts of contract assets or liabilities as of October 31, 2020 or April 30, 2020.

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Accounts Receivable

6 Months Ended

Oct. 31, 2020

Accounts Receivable

Accounts Receivable

3. Accounts Receivable

The Company’s trade accounts and notes receivable consisted of the following:

	October 31,		April 30,
	2020		2020
	(in thousands)
Trade receivables	$	423,603	$	398,739
Other receivables		16,506		11,656
Allowance for expected credit losses		(2,490)		(2,861)
Other allowances		(2,783)		(2,280)
Trade accounts and notes receivable	$	434,836	$	405,254

The Company records accounts and notes receivable net of allowances, including the allowance for expected credit losses. The Company maintains an allowance for estimated losses due to the failure of customers to make required payments, as well as allowances for cash discounts. The Company’s estimate of the allowance for expected credit losses is based on an assessment of individual past due accounts, historical loss information, accounts receivable aging and current economic factors and the Company’s expectation of future economic conditions. Account balances are written off when the potential for recovery is considered remote.

The Company routinely assesses the financial strength of its customers and generally does not require collateral. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of geographically diverse customers comprising the Company’s customer base.

The following table presents the change in the allowance for expected credit losses during the six months ended October 31, 2020:

	(in thousands)
Balance as of April 30, 2020	$	2,861
Provision		(40)
Recoveries		(250)
Write-offs		(81)
Balance as of October 31, 2020	$	2,490

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Goodwill and Intangible Assets

6 Months Ended

Oct. 31, 2020

Goodwill and Intangible Assets

Goodwill and Intangible Assets

4. Goodwill and Intangible Assets

Goodwill

The following table presents changes in the carrying amount of goodwill during the six months ended October 31, 2020:

	Carrying
	Amount
	(in thousands)
Balance as of April 30, 2020
Goodwill	$	616,147
Accumulated impairment loss		(63,074)
		553,073
Working capital settlements		(159)
Translation adjustment		4,572
Balance as of October 31, 2020
Goodwill		620,560
Accumulated impairment loss		(63,074)
	$	557,486

Intangible Assets

The following tables present the components of the Company’s definite-lived intangible assets:

	Estimated	Weighted	October 31, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	526,916	$	298,246	$	228,670
Definite-lived tradenames	5 - 20	16.3		56,907		12,448		44,459
Vendor agreements	8 - 10	8.3		6,644		4,970		1,674
Developed technology	5	4.9		5,253		2,582		2,671
Other	3 - 5	3.3		4,272		3,195		1,077
Totals			$	599,992	$	321,441	$	278,551

	Estimated	Weighted	April 30, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	516,928	$	270,029	$	246,899
Definite-lived tradenames	5 - 20	16.3		55,654		10,474		45,180
Vendor agreements	8 - 10	8.3		6,644		4,567		2,077
Developed technology	5	4.9		5,036		1,963		3,073
Other	1 - 15	5.3		7,836		4,548		3,288
Totals			$	592,098	$	291,581	$	300,517

Definite-lived intangible assets are amortized over their estimated useful lives. The Company amortizes its customer relationships using an accelerated method to match the estimated cash flows generated by such assets, and amortizes its other definite-lived intangibles using the straight-line method because a pattern to which the expected

benefits will be consumed or otherwise used up cannot be reliably determined. Amortization expense related to definite-lived intangible assets was $14.5 million and $16.9 million for the three months ended October 31, 2020 and 2019, respectively, and $28.8 million and $33.8 million for the six months ended October 31, 2020 and 2019, respectively. Amortization expense is recorded in depreciation and amortization expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

The following table summarizes the estimated future amortization expense for definite-lived intangible assets. Actual amortization expense to be reported in future periods could differ materially from these estimates as a result of acquisitions, changes in useful lives, foreign currency exchange rate fluctuations and other relevant factors.

Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	26,862
2022		46,613
2023		38,834
2024		31,731
2025		26,223
Thereafter		108,288
Total	$	278,551

The Company’s indefinite-lived intangible assets consist of tradenames that had a carrying amount of $61.4 million as of October 31, 2020 and April 30, 2020.

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Long-Term Debt

6 Months Ended

Oct. 31, 2020

Long-Term Debt

Long-Term Debt

5. Long-Term Debt

The Company’s long-term debt consisted of the following:

	October 31,		April 30,
	2020		2020
	(in thousands)
Term Loan Facility	$	871,919	$	876,903
Unamortized discount and deferred financing costs on Term Loan Facility		(9,540)		(10,602)
ABL Facility		—		80,000
Finance lease obligations		122,058		128,767
Installment notes at fixed rates up to 5.0%, due in monthly and annual installments through 2024		12,506		16,316
Unamortized discount on installment notes		(920)		(1,098)
Canadian Facility		—		7,194
Carrying value of debt		996,023		1,097,480
Less current portion		49,302		50,201
Long-term debt	$	946,721	$	1,047,279

Term Loan Facility

The Company has a senior secured first lien term loan facility (the “Term Loan Facility”) with aggregate principal amount of $871.9 million outstanding as of October 31, 2020. The Company is required to make scheduled quarterly payments of $2.5 million, or 0.25% of the aggregate principal amount of the Term Loan Facility, with the balance due in June 2025. The Term Loan Facility bears interest at a floating rate based on LIBOR plus 2.75%, with a 0% floor. As of October 31, 2020, the applicable rate of interest was 2.90%.

Asset Based Lending Facility

The Company has an asset based revolving credit facility (the “ABL Facility”) that provides for aggregate revolving commitments of $445.0 million (including same day swing line borrowings of $44.5 million). Extensions of credit under the ABL Facility are limited by a borrowing base calculated periodically based on specified percentages of the value of eligible inventory and eligible accounts receivable, subject to certain reserves and other adjustments.

At the Company’s option, the interest rates applicable to the loans under the ABL Facility are based on LIBOR or base rate plus, in each case, an applicable margin. The margins applicable for each elected interest rate are subject to a pricing grid, as defined in the ABL Facility agreement, based on average daily availability for the most recent fiscal quarter. The ABL Facility also contains an unused commitment fee.

As of October 31, 2020, the Company had available borrowing capacity of approximately $392.9 million under the ABL Facility. The ABL Facility matures on September 30, 2024 unless the individual affected lenders agree to extend the maturity of their respective loans under the ABL Facility upon the Company’s request and without the consent of any other lender. The ABL Facility contains a cross default provision with the Term Loan Facility.

Covenants under the Term Loan Facility and ABL Facility

The Term Loan Facility contains a number of covenants that limit our ability and the ability of our restricted subsidiaries, as described in the respective credit agreement, to: incur more indebtedness; pay dividends, redeem or repurchase stock or make other distributions; make investments; create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers; create liens securing indebtedness; transfer or sell assets; merge or consolidate; enter into certain transactions with our affiliates; and prepay or amend the terms of certain indebtedness. The Company was in compliance with all restrictive covenants as of October 31, 2020.

The ABL Facility contains certain affirmative covenants, including financial and other reporting requirements. The Company was in compliance with all such covenants as of October 31, 2020.

Canadian Revolving Credit Facility

Through its WSB Titan (“Titan”) subsidiary, the Company has a revolving credit facility (the “Canadian Facility”) that provides for aggregate revolving commitments of $22.5 million ($30.0 million Canadian dollars). The Canadian Facility bears interest at the Canadian prime rate plus a marginal rate based on the level determined by Titan’s total debt to EBITDA ratio at the end of the most recently completed fiscal quarter or year. As of October 31, 2020, the Company had available borrowing capacity of approximately $22.5 million under the Canadian Facility. The Canadian Facility matures on June 28, 2022.

Debt Maturities

As of October 31, 2020, the maturities of long-term debt were as follows

	Term Loan		Finance		Installment
	Facility		Leases		Notes		Total
Year ending April 30,	(in thousands)
2021 (remaining six months)	$	4,984	$	17,878	$	964	$	23,826
2022		9,968		34,324		4,458		48,750
2023		9,968		29,049		4,424		43,441
2024		9,968		22,039		1,800		33,807
2025		9,968		12,110		860		22,938
Thereafter		827,063		6,658		—		833,721
	$	871,919	$	122,058	$	12,506	$	1,006,483

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Leases

6 Months Ended

Oct. 31, 2020

Leases

Leases

6. Leases

The Company leases office and warehouse facilities, distribution equipment and its fleet of vehicles. The Company’s leases have lease terms ranging from one to eleven years. The Company’s facility leases generally contain renewal options for periods ranging from one to five years. The exercise of lease renewal options is typically at the Company’s sole discretion. The Company does not recognize right-of-use (“ROU”) assets or lease liabilities for renewal options unless it is determined that the Company is reasonably certain of exercising renewal options at lease inception. Certain of the Company’s equipment leases include options to purchase the leased property and residual value guarantees. Any residual value payment deemed probable is included in the Company’s lease liability. The Company’s lease agreements do not contain any material restrictive covenants.

The Company determines if an arrangement is a lease at inception and evaluates whether the lease meets the classification criteria of a finance or operating lease. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liabilities and long-term operating lease liabilities in the Condensed Consolidated Balance Sheets. Finance leases are included in property and equipment, current portion of long-term debt and long-term debt in the Condensed Consolidated Balance Sheets.  

Lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. For leases that do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of future payments. The Company determines its incremental borrowing rate based on the applicable lease terms and the current economic environment. Lease ROU assets also include any lease payments made in advance and excludes lease incentives and initial direct costs incurred. Some of the Company’s lease agreements contain rent escalation clauses (including index-based escalations), rent holidays, capital improvements funding or other lease concessions. Lease expense is recognized on a straight-line basis based on the fixed component over the lease term. Variable lease costs consist primarily of taxes, insurance and common area or other maintenance costs for leased facilities and vehicles and equipment, which are expensed as incurred.

The components of lease expense were as follows:

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	5,960	$	6,054	$	12,099	$	12,113
Interest on lease liabilities		2,863		3,367		5,925		6,789
Operating lease cost		10,630		10,289		21,329		20,709
Variable lease cost		3,157		3,414		6,132		6,613
Total lease cost	$	22,610	$	23,124	$	45,485	$	46,224

Operating lease cost, including variable lease cost, is included in selling, general and administrative expenses; amortization of finance ROU assets is included in depreciation and amortization; and interest on finance lease liabilities is included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Supplemental cash flow information related to leases was as follows:

	Six Months Ended
	October 31,
	2020		2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	21,479	$	20,377
Operating cash flows from finance leases		5,925		6,789
Financing cash flows from finance leases		14,629		12,310
Right-of-use assets obtained in exchange for lease obligations
Operating leases		17,216		12,810
Finance leases		12,342		22,812

Other information related to leases was as follows:

	October 31,			April 30,
	2020			2020
	(in thousands)
Finance leases included in property and equipment
Property and equipment	$	170,868		$	171,380
Accumulated depreciation		(47,342)			(41,737)
Property and equipment, net	$	123,526		$	129,643
Weighted-average remaining lease term (years)
Operating leases		5.0			4.9
Finance leases		3.5			3.6
Weighted-average discount rate
Operating leases		5.5	%		5.5	%
Finance leases		4.9	%		5.0	%

Future minimum lease payments under non-cancellable leases as of October 31, 2020 were as follows:

	Finance		Operating
Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	25,683	$	19,870
2022		41,454		33,301
2023		32,727		26,613
2024		23,445		21,766
2025		12,541		15,068
Thereafter		6,746		21,474
Total lease payments		142,596		138,092
Less imputed interest		20,538		18,276
Total	$	122,058	$	119,816

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Income Taxes

6 Months Ended

Oct. 31, 2020

Income Taxes

Income Taxes

7. Income Taxes

General. The Company’s effective income tax rate on continuing operations was 24.3% and 22.3% for the six months ended October 31, 2020 and 2019, respectively. The difference in the effective income tax rate over the U.S. federal statutory rate of 21.0% for the six months ended October 31, 2020 was primarily due to the impact of state taxes and foreign taxes. The difference in the effective income tax rate over the U.S. federal statutory rate for the six months ended October 31, 2019 was primarily due to the impact of equity based compensation, as well as foreign tax rates and state taxes and other tax effects associated with the acquisition of Titan.

Valuation allowance. The Company had a valuation allowance of $10.6 million and $10.2 million against its deferred tax assets related to certain U.S. tax jurisdictions as of October 31, 2020 and April 30, 2020, respectively. To the extent the Company generates sufficient taxable income in the future to utilize the tax benefits of the net deferred tax assets on which a valuation allowance is recorded, the effective tax rate may decrease as the valuation allowance is reversed.

Uncertain tax positions. The Company had no uncertain tax positions as of October 31, 2020 or April 30, 2020.

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Stockholders' Equity

6 Months Ended

Oct. 31, 2020

Stockholders' Equity

Stockholders' Equity

8. Stockholders’ Equity

Exchangeable Shares

In connection with the acquisition of Titan on June 1, 2018, the Company issued 1.1 million shares of equity that were exchangeable for the Company’s common stock on a one-for-one basis (“Exchangeable Shares”). The Exchangeable Shares were issued by an indirect wholly-owned subsidiary of the Company. The Exchangeable Shares ranked senior to the Company’s common stock with respect to dividend rights and rights on liquidation, dissolution and winding-up. The holders of the Exchangeable Shares were entitled to receive dividends or distributions that were equal to any dividends or distributions on the Company’s common stock. The holders of the Exchangeable Shares did not have voting rights.

The Exchangeable Shares contained rights that allowed the holders to exchange their Exchangeable Shares for GMS common stock at any time on a one-for-one basis. On June 13, 2019, the holders of the Exchangeable Shares exchanged all of the Exchangeable Shares for 1.1 million shares of the Company’s common stock. Following such exchange, the Exchangeable Shares ceased to be outstanding.

Share Repurchase Program

The Company has a common stock repurchase program authorized by its Board of Directors to repurchase up to $75.0 million of outstanding common stock. The Company may conduct repurchases under the share repurchase program through open market transactions, under trading plans in accordance with SEC Rule 10b5-1 and/or in privately negotiated transactions, in compliance with Rule 10b-18 under the Exchange Act of 1934, as amended. These repurchases are subject to a variety of factors, including, but not limited to, our liquidity, credit availability, general business and market conditions, our debt covenant restrictions and the availability of alternative investment opportunities. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or terminated at any time at the Company’s discretion.

The Company repurchased approximately 50 thousand shares of its common stock for $1.2 million during the six months ended October 31, 2020. The Company did not repurchase any shares of its common stock during the six months ended October 31, 2019. As of October 31, 2020, the Company had $57.3 million remaining repurchase authorization. 

Accumulated Other Comprehensive Loss

The following table sets forth the changes to accumulated other comprehensive loss, net of tax, by component for the six months ended October 31, 2020:

					Accumulated
	Foreign		Derivative		Other
	Currency		Financial		Comprehensive
	Translation		Instruments		Loss
	(in thousands)
Balance as of April 30, 2020	$	(40,577)	$	(24,505)	$	(65,082)
Other comprehensive income (loss) before reclassification		19,440		(530)		18,910
Reclassification to earnings from accumulated other comprehensive loss		—		4,333		4,333
Balance as of October 31, 2020	$	(21,137)	$	(20,702)	$	(41,839)

Other comprehensive loss on derivative instruments for the six months ended October 31, 2020 is net of $0.2 million of tax and reclassification to earnings from accumulated other comprehensive loss is net of $1.4 million of tax.

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Equity-Based Compensation

6 Months Ended

Oct. 31, 2020

Equity-Based Compensation

Equity-Based Compensation

9. Equity-Based Compensation

General

The Company measures compensation cost for all share-based awards at fair value on the grant date (or measurement date if different) and recognizes compensation expense, net of estimated forfeitures, over the requisite service period for awards expected to vest. The Company estimates the fair value of stock options using the Black-Scholes valuation model, and determines the fair value of restricted stock units based on the quoted price of GMS’ common stock on the date of grant. The Company estimates forfeitures based on historical analysis of actual forfeitures and employee turnover. Actual forfeitures are recorded when incurred and estimated forfeitures are reviewed and adjusted at least annually.

Equity-based compensation expense related to stock options and restricted stock units was $4.6 million and $3.4 million during the six months ended October 31, 2020 and 2019, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Stock Option Awards

The following table presents stock option activity for the six months ended October 31, 2020:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Life (years)	Value
	(shares and dollars in thousands)
Outstanding as of April 30, 2020	1,487	$	18.85	6.4	$	3,895
Options granted	321		23.43
Options exercised	(43)		14.55
Options forfeited	(48)		25.98
Outstanding as of October 31, 2020	1,717	$	19.62	6.4	$	6,958
Exercisable as of October 31, 2020	1,082	$	17.45	4.8	$	6,585
Vested and expected to vest as of October 31, 2020	1,709	$	19.60	6.4	$	6,957

The aggregate intrinsic value represents the excess of the Company’s closing stock price on the last trading day of the period over the weighted average exercise price multiplied by the number of options outstanding, exercisable or expected to vest. Options expected to vest are unvested shares net of expected forfeitures. The total intrinsic value of options exercised during the six months ended October 31, 2020 and 2019 was $0.3 million and $8.6 million, respectively. As of October 31, 2020, there was $5.4 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 2.2 years.

The fair value of stock options granted during the six months ended October 31, 2020 and 2019 estimated using the Black-Scholes option-pricing model with the following assumptions:

	Six Months Ended
	October 31,
	2020		2019
Volatility	51.28	%	49.94	%
Expected life (years)	6.0		6.0
Risk-free interest rate	0.30	%	1.97	%
Dividend yield	—	%	—	%

The weighted average grant date fair value of options granted during the six months ended October 31, 2020 and 2019 was $11.13 per share and $10.55 per share, respectively. The expected volatility was based on historical and implied volatility. The expected life of stock options was based on previous history of exercises. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock option. The expected dividend yield was 0% as we have not declared any common stock dividends to date and do not expect to declare common stock dividends in the near future. The fair value of the underlying common stock at the date of grant was determined based on the value of the Company’s closing stock price on the trading day immediately preceding the date of the grant.

Restricted Stock Units

The following table presents restricted stock unit activity for the six months ended October 31, 2020:

		Weighted
	Number of	Average
	Restricted	Grant Date
	Stock Units	Fair Value
	(shares in thousands)
Outstanding as of April 30, 2020	286	$	22.71
Granted	212		23.43
Vested	(103)		22.43
Forfeited	(28)		23.91
Outstanding as of October 31, 2020	367	$	23.12

As of October 31, 2020, there was $6.2 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.0 years.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (“ESPP”), the terms of which allow for qualified employees to participate in the purchase of shares of the Company’s common stock at a price equal to 90% of the lower of the closing price at the beginning or end of the purchase period, which is a six-month period ending on December 31 and June 30 of each year. During the six months ended October 31, 2020, 0.1 million shares of the Company’s common stock were purchased under the ESPP at a price of $22.13 per share. The Company recognized $0.3 million and $0.3

million of stock-based compensation expense during the six months ended October 31, 2020 and 2019, respectively, related to the ESPP.

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Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

6 Months Ended

Oct. 31, 2020

Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

10. Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

The following table presents a summary of changes to the liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests for the six months ended October 31, 2020:

	Stock				Redeemable
	Appreciation		Deferred		Noncontrolling
	Rights		Compensation		Interests
	(in thousands)
Balance as of April 30, 2020	$	24,205	$	1,660	$	8,300
Amounts redeemed		(181)		—		—
Change in fair value		1,106		73		365
Balance as of October 31, 2020	$	25,130	$	1,733	$	8,665
Classified as current as of April 30, 2020	$	624	$	—	$	—
Classified as long-term as of April 30, 2020		23,581		1,660		8,300
Classified as current as of October 31, 2020	$	650	$	—	$	—
Classified as long-term as of October 31, 2020		24,480		1,733		8,665

Total expense related to these instruments was $1.5 million and $2.0 million during the six months ended October 31, 2020 and 2019, respectively, and was included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income. Current and long-term liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests are included in other accrued expenses and liabilities and other liabilities, respectively, in the Condensed Consolidated Balance Sheets.

Stock Appreciation Rights

Certain subsidiaries have granted stock appreciation rights to certain employees under which payments are dependent on the appreciation in the book value per share, adjusted for certain provisions, of the applicable subsidiary. Settlements of the awards can be made in a combination of cash or installment notes, generally paid over five years, upon a triggering event. As of October 31, 2020, all stock appreciation rights were vested. Liabilities related to these agreements are classified as share-based liability awards and are measured at fair value.

Deferred Compensation

Subsidiaries’ stockholders have entered into other deferred compensation agreements that granted the stockholders a payment based on a percentage in excess of book value, adjusted for certain provisions, upon an occurrence as defined in the related agreements. These instruments are redeemed in cash or installment notes, generally paid in annual installments over the five years following termination of employment. Liabilities related to these agreements are classified as share-based liability awards and are measured at fair value.

Redeemable Noncontrolling Interests

Noncontrolling interests were issued to certain employees of certain of the Company’s subsidiaries. All of the noncontrolling interest awards are subject to mandatory redemption on termination of employment for any reason. These instruments are redeemed in cash or installment notes, generally paid in annual installments over the five years following termination of employment. Liabilities related to these agreements are classified as share-based liability awards and are measured at fair value. Under the terms of the employee agreements, the redemption value is determined based on the book value of the subsidiary, as adjusted for certain items.

Upon the termination of employment or other triggering events including death or disability of the noncontrolling stockholders in the Company’s subsidiaries, we are obligated to purchase, or redeem, the noncontrolling interests at either an agreed upon price or a formula value provided in the stockholder agreements. This formula value is typically based on the book value per share of the subsidiary’s equity, including certain adjustments.

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Fair Value Measurements

6 Months Ended

Oct. 31, 2020

Fair Value Measurements

Fair Value Measurements

11. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the estimated carrying amount and fair value of the Company’s liabilities measured at fair value on a recurring basis:

	October 31,		April 30,
	2020		2020
	(in thousands)
Interest rate swaps (Level 2)	$	27,180	$	32,218
Stock appreciation rights (Level 3)		25,130		24,205
Deferred compensation (Level 3)		1,733		1,660
Noncontrolling interest holders (Level 3)		8,665		8,300

Derivative instruments. The Company has interest rate swap agreements with a notional amount of $500.0 million that convert the variable interest rate on its Term Loan Facility to a fixed interest rate of 2.46%. The contracts were effective on February 28, 2019 and terminate on February 28, 2023. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with variable interest rates. The Company designated the interest rate swaps as a cash flow hedges. The Company believes there have been no material changes in the creditworthiness of the counterparty to this interest rate swap and believes the risk of nonperformance by such party is minimal. As of October 31, 2020, $11.7 million of the interest rate swap liability was classified in other accrued expenses and current liabilities and $15.5 million was classified in other liabilities in the Condensed Consolidated Balance Sheet. The Company recognized losses, net of tax, of $2.2 million and $4.3 million in earnings during the three and six months ended October 31, 2020, respectively, related to its interest rate swaps. As of October 31, 2020, the Company expects that approximately $11.7 million of pre-tax net losses will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months.

The fair value of derivative instruments is determined using Level 2 inputs. Generally, the Company obtains the Level 2 inputs from its counterparties. Substantially all of the inputs throughout the full term of the instruments can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The fair value of the Company’s interest rate swap was determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including interest rate curves and implied volatilities.

Stock appreciation rights, deferred compensation and redeemable noncontrolling interests. The fair values of stock appreciation rights, deferred compensation and redeemable noncontrolling interests are determined using Level 3 inputs. These inputs include a volatility rate, a discount rate, the expected time to redemption of the liabilities, historical values of the book equity of certain subsidiaries and market information for comparable entities. The use of these inputs to derive the fair value of the liabilities at a point in time can result in volatility to the financial statements. See Note 10, “Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests,” for a reconciliation of the beginning and ending balances.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Disclosures are required for certain assets and liabilities that are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Such measurements of fair value relate primarily to assets and liabilities

measured at fair value in connection with business combinations and long-lived asset impairments. The Company recorded a $1.0 million impairment of operating lease right-of-use assets during the six months ended October 31, 2020. There were no other material long-lived asset impairments during the six months ended October 31, 2020 or 2019.

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Transactions With Related Parties

6 Months Ended

Oct. 31, 2020

Transactions With Related Parties

Transactions With Related Parties

12. Transactions With Related Parties

The Company purchases inventories from Southern Wall Products, Inc. (“SWP”) on a continuing basis. During the six months ended October 31, 2020 and 2019, certain former executive officers and stockholders and certain directors and stockholders of the Company were stockholders of SWP. As of October 31, 2020, these executive officers and directors were no longer with the Company. The Company purchased inventory from SWP for distribution in the amount of $3.8 million and $3.7 million during the three months ended October 31, 2020 and 2019, respectively, and $7.3 million and $7.3 million during the six months ended October 31, 2020 and 2019, respectively. Amounts due to SWP for purchases of inventory for distribution was $1.2 million as of April 30, 2020 and is included in accounts payable in the Condensed Consolidated Balance Sheets.

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Commitments and Contingencies

6 Months Ended

Oct. 31, 2020

Commitments and Contingencies

Commitments and Contingencies

13. Commitments and Contingencies

The Company is a defendant in various lawsuits and administrative actions associated with personal injuries, claims of former employees and other events arising in the normal course of business. As discussed in Note 1 “—Insurance Liabilities”, the Company records liabilities for these claims, and assets for amounts recoverable from the insurer, for claims covered by insurance.

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Segments

6 Months Ended

Oct. 31, 2020

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 six months ended October 31, 2020, 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 October 31, 2020
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	805,074	$	262,534	$	26,783	$	82,169
Other		7,782		2,537		91		353
Corporate		—		—		371		—
	$	812,856	$	265,071	$	27,245	$	82,522

	Three Months Ended October 31, 2019
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	854,853	$	281,900	$	29,024	$	89,171
Other		7,076		2,593		55		734
Corporate		—		—		439		—
	$	861,929	$	284,493	$	29,518	$	89,905

	Six Months Ended October 31, 2020
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	1,599,546	$	520,372	$	53,565	$	164,673
Other		15,883		5,157		182		903
Corporate		—		—		595		—
	$	1,615,429	$	525,529	$	54,342	$	165,576

	Six Months Ended October 31, 2019
					Depreciation and		Adjusted
	Net Sales		Gross Profit		Amortization		EBITDA
	(in thousands)
Geographic divisions	$	1,695,010	$	553,254	$	57,956	$	172,254
Other		14,095		4,893		108		1,239
Corporate		—		—		729		—
	$	1,709,105	$	558,147	$	58,793	$	173,493

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

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Interest expense		13,525		17,559		27,606		35,836
Write-off of debt discount and deferred financing fees				707		—		707
Interest income		(14)		(6)		(51)		(18)
Provision for income taxes		8,277		7,927		17,881		15,517
Depreciation expense		12,710		12,592		25,537		25,014
Amortization expense		14,535		16,926		28,805		33,779
Stock appreciation expense(a)		314		1,267		1,106		1,327
Redeemable noncontrolling interests(b)		186		(18)		438		644
Equity-based compensation(c)		3,252		2,315		4,857		3,710
Severance and other permitted costs(d)		762		1,394		2,709		1,948
Transaction costs (acquisitions and other)(e)		25		327		125		1,299
Loss (gain) on disposal and impairment of assets(f)		481		(586)		875		(742)
Effects of fair value adjustments to inventory(g)		—		—		—		151
Secondary public offering costs(h)		—		363		—		363
Adjusted EBITDA	$	82,522	$	89,905	$	165,576	$	173,493

(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 the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

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

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

(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				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Wallboard	$	330,515	$	350,618	$	658,512	$	692,213
Ceilings		111,293		122,807		224,995		251,917
Steel framing		111,293		136,159		221,780		267,988
Other products		259,755		252,345		510,142		496,987
Total net sales	$	812,856	$	861,929	$	1,615,429	$	1,709,105

Geographic Information

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

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
United States	$	684,131	$	744,134	$	1,363,452	$	1,475,477
Canada		128,725		117,795		251,977		233,628
Total net sales	$	812,856	$	861,929	$	1,615,429		1,709,105

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

	October 31,		April 30,
	2020		2020
	(in thousands)
United States	$	265,941	$	270,855
Canada		34,203		34,612
Total property and equipment, net	$	300,144	$	305,467

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Earnings Per Common Share

6 Months Ended

Oct. 31, 2020

Earnings Per Common Share

Earnings Per Common Share

15. Earnings Per Common Share

The following table sets forth the computation of basic and diluted earnings per share of common stock:

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands, except per share data)
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Less: Net income allocated to participating securities		—		—		—		342
Net income attributable to common stockholders	$	28,469	$	29,138	$	55,688	$	53,616
Basic earnings per common share:
Basic weighted average common shares outstanding		42,723		41,761		42,674		41,382
Basic earnings per common share	$	0.67	$	0.70	$	1.30	$	1.30
Diluted earnings per common share:
Basic weighted average common shares outstanding		42,723		41,761		42,674		41,382
Add: Common Stock Equivalents		451		874		422		744
Diluted weighted average common shares outstanding		43,174		42,635		43,096		42,126
Diluted earnings per common share	$	0.66	$	0.68	$	1.29	$	1.27

During the three and six months ended October 31, 2020, approximately 0.5 million and 0.4 million, respectively, Common Stock Equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Anti-dilutive securities could be dilutive in future periods.

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Business, Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Oct. 31, 2020

Business, Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair presentation of the results of operations, financial position and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. The results of operations for interim periods are not necessarily indicative of results for any other interim period or the entire fiscal year. As a result, the unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements present the results of operations, financial position, stockholders’ equity and cash flows of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The results of operations of businesses acquired are included from their respective dates of acquisition.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

Foreign Currency Translation

Assets and liabilities of the Company’s Canadian subsidiaries are translated at the exchange rate prevailing at the balance sheet date, while income and expenses are translated at average rates for the period. Translation gains and losses are reported as a separate component of stockholders’ equity and other comprehensive income. Gains and losses on foreign currency transactions are recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income within other (expense) income, net.

Insurance Liabilities

Insurance Liabilities

The Company is self-insured for certain losses related to medical claims. The Company has stop-loss coverage to limit the exposure arising from medical claims. In addition, the Company has deductible-based insurance policies for certain losses related to general liability, workers’ compensation and automobile. The deductible amount per incident is $0.3 million, $0.5 million and $1.0 million for general liability, workers’ compensation and automobile, respectively. The coverage consists of a deductible layer, a primary layer, a self-insured buffer layer, a lead umbrella layer and excess layers. The primary layer of coverage is from $0.3 million, $0.5 million and $1.0 million for deductibles for general liability, workers’ compensation, and automobile liability, respectively, to $5.0 million. The Company self-insures a

buffer layer from $5.0 million to $10.0 million. The umbrella and excess layers cover claims from $10.0 million to $100.0 million. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. Insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience.

As of October 31, 2020 and April 30, 2020, the aggregate liabilities for medical self-insurance were $4.2 million and $3.8 million, respectively, and are included in other accrued expenses and current liabilities in the Condensed Consolidated Balance Sheets. As of October 31, 2020 and April 30, 2020, reserves for general liability, automobile and workers’ compensation totaled approximately $20.1 million and $19.4 million, respectively, and are included in other accrued expenses and current liabilities and other liabilities in the Condensed Consolidated Balance Sheets. As of October 31, 2020 and April 30, 2020, expected recoveries for medical self-insurance, general liability, automobile and workers’ compensation totaled approximately $8.0 million and $6.0 million, respectively, and are included in prepaid expenses and other current assets and other assets in the Condensed Consolidated Balance Sheets.

Income Taxes

Income Taxes

The Company considers each interim period an integral part of the annual period and measures tax expense (benefit) using an estimated annual effective income tax rate. Estimates of the annual effective income tax rate at the end of interim periods are, out of necessity, based on evaluation of possible future events and transactions and may be subject to subsequent refinement or revision. The Company forecasts its estimated annual effective income tax rate and then applies that rate to its year-to-date pre-tax ordinary income (loss), subject to certain loss limitation provisions. In addition, certain specific transactions are excluded from the Company’s estimated annual effective tax rate computation, but are discretely recognized within income tax expense (benefit) in their respective interim period. Future changes in the forecasted annual income (loss) projections, tax rate changes, or discrete tax items could result in significant adjustments to quarterly income tax expense (benefit) in future periods.

The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In this evaluation, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive evidence considered includes the reversal of deferred tax liabilities primarily related to depreciation and amortization that would occur within the same jurisdiction and during the carryforward period necessary to absorb the federal and state net operating losses and other deferred tax assets.

Deferred tax assets and liabilities are computed by applying the federal, provincial and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Authoritative guidance for fair value measurements establishes a three-level hierarchy that prioritizes the inputs to valuation models based upon the degree to which they are observable. The three levels of the fair value measurement hierarchy are as follows:

Level 1	Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2	Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3	Inputs are unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying values of the Company’s cash, cash equivalents, trade receivables and trade payables approximate their fair values because of their short-term nature. Based on borrowing rates available to the Company for loans with similar terms, the carrying values of the Company’s debt instruments approximate fair value. See Note 11, “Fair Value Measurements,” for additional information with respect to the Company’s fair value measurements.

Earnings Per Share

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of outstanding shares of common stock for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units (collectively “Common Stock Equivalents”), were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amount of compensation cost attributed to future services and not yet recognized. Diluted earnings per share is computed by increasing the weighted-average number of outstanding shares of common stock computed in basic earnings per share to include the dilutive effect of Common Stock Equivalents for the period. In periods of net loss, the number of shares used to calculate diluted loss per share is the same as basic net loss per share.

The holders of the Company’s Exchangeable Shares (as defined in Note 8, “Stockholders’ Equity”) were entitled to receive dividends or distributions that are equal to any dividends or distributions on the Company’s common stock. As a result, when the Exchangeable Shares were outstanding, they were classified as a participating security and thereby required the allocation of income that would have otherwise been available to common stockholders when calculating earnings per share. Diluted earnings per share was calculated by utilizing the most dilutive result of the if-converted and two-class methods. In both methods, net income attributable to common stockholders and the weighted-average common shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules.

Reclassifications

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation. 

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Credit Losses –  In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on credit losses on financial instruments. This guidance introduces a revised approach to the recognition and measurement of credit losses of certain financial instruments, including trade and other receivables, emphasizing an updated model based on expected losses rather than incurred losses. The Company adopted this guidance on May 1,

2020 with no material impact to its financial statements. See Note 3, “Accounts Receivable,” for additional information with respect to the Company’s allowance for expected credit losses.

Fair Value Measurement Disclosures – In August 2018, the FASB issued new guidance that changes certain fair value measurement disclosure requirements. The Company adopted this guidance on May 1, 2020 with no material impact to its financial statements.

Recently Issued Accounting Pronouncements

Reference Rate Reform – In March 2020, the FASB issued new guidance to temporarily ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The guidance was effective upon issuance and generally can be applied through December 31, 2022. The Company expects to elect optional expedients and exceptions provided by the guidance, as needed, related to its debt instruments, which include interest rates based on a LIBOR rate. The Company will evaluate and disclose the impact of this guidance in the period of election, as well as the nature and reason for doing so.

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Accounts Receivable (Tables)

6 Months Ended

Oct. 31, 2020

Accounts Receivable

Schedule of trade accounts and notes receivable

	October 31,		April 30,
	2020		2020
	(in thousands)
Trade receivables	$	423,603	$	398,739
Other receivables		16,506		11,656
Allowance for expected credit losses		(2,490)		(2,861)
Other allowances		(2,783)		(2,280)
Trade accounts and notes receivable	$	434,836	$	405,254

Schedule of change in allowance for expected credit losses

	(in thousands)
Balance as of April 30, 2020	$	2,861
Provision		(40)
Recoveries		(250)
Write-offs		(81)
Balance as of October 31, 2020	$	2,490

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Oct. 31, 2020

Goodwill and Intangible Assets

Schedule of changes in the carrying amount of goodwill

	Carrying
	Amount
	(in thousands)
Balance as of April 30, 2020
Goodwill	$	616,147
Accumulated impairment loss		(63,074)
		553,073
Working capital settlements		(159)
Translation adjustment		4,572
Balance as of October 31, 2020
Goodwill		620,560
Accumulated impairment loss		(63,074)
	$	557,486

Schedule of components of definite-lived intangible assets

	Estimated	Weighted	October 31, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	526,916	$	298,246	$	228,670
Definite-lived tradenames	5 - 20	16.3		56,907		12,448		44,459
Vendor agreements	8 - 10	8.3		6,644		4,970		1,674
Developed technology	5	4.9		5,253		2,582		2,671
Other	3 - 5	3.3		4,272		3,195		1,077
Totals			$	599,992	$	321,441	$	278,551

	Estimated	Weighted	April 30, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	516,928	$	270,029	$	246,899
Definite-lived tradenames	5 - 20	16.3		55,654		10,474		45,180
Vendor agreements	8 - 10	8.3		6,644		4,567		2,077
Developed technology	5	4.9		5,036		1,963		3,073
Other	1 - 15	5.3		7,836		4,548		3,288
Totals			$	592,098	$	291,581	$	300,517

Schedule of estimated future aggregate amortization expense

Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	26,862
2022		46,613
2023		38,834
2024		31,731
2025		26,223
Thereafter		108,288
Total	$	278,551

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Long-Term Debt (Tables)

6 Months Ended

Oct. 31, 2020

Long-Term Debt

Schedule of long-term debt

	October 31,		April 30,
	2020		2020
	(in thousands)
Term Loan Facility	$	871,919	$	876,903
Unamortized discount and deferred financing costs on Term Loan Facility		(9,540)		(10,602)
ABL Facility		—		80,000
Finance lease obligations		122,058		128,767
Installment notes at fixed rates up to 5.0%, due in monthly and annual installments through 2024		12,506		16,316
Unamortized discount on installment notes		(920)		(1,098)
Canadian Facility		—		7,194
Carrying value of debt		996,023		1,097,480
Less current portion		49,302		50,201
Long-term debt	$	946,721	$	1,047,279

Scheduled of maturities of long-term debt

	Term Loan		Finance		Installment
	Facility		Leases		Notes		Total
Year ending April 30,	(in thousands)
2021 (remaining six months)	$	4,984	$	17,878	$	964	$	23,826
2022		9,968		34,324		4,458		48,750
2023		9,968		29,049		4,424		43,441
2024		9,968		22,039		1,800		33,807
2025		9,968		12,110		860		22,938
Thereafter		827,063		6,658		—		833,721
	$	871,919	$	122,058	$	12,506	$	1,006,483

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Leases (Tables)

6 Months Ended

Oct. 31, 2020

Leases

Summary of components of lease expense

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	5,960	$	6,054	$	12,099	$	12,113
Interest on lease liabilities		2,863		3,367		5,925		6,789
Operating lease cost		10,630		10,289		21,329		20,709
Variable lease cost		3,157		3,414		6,132		6,613
Total lease cost	$	22,610	$	23,124	$	45,485	$	46,224

Summary of components of supplemental cash flow information related to leases

	Six Months Ended
	October 31,
	2020		2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	21,479	$	20,377
Operating cash flows from finance leases		5,925		6,789
Financing cash flows from finance leases		14,629		12,310
Right-of-use assets obtained in exchange for lease obligations
Operating leases		17,216		12,810
Finance leases		12,342		22,812

Summary of other lease information

	October 31,			April 30,
	2020			2020
	(in thousands)
Finance leases included in property and equipment
Property and equipment	$	170,868		$	171,380
Accumulated depreciation		(47,342)			(41,737)
Property and equipment, net	$	123,526		$	129,643
Weighted-average remaining lease term (years)
Operating leases		5.0			4.9
Finance leases		3.5			3.6
Weighted-average discount rate
Operating leases		5.5	%		5.5	%
Finance leases		4.9	%		5.0	%

Schedule of maturities for finance leases

	Finance		Operating
Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	25,683	$	19,870
2022		41,454		33,301
2023		32,727		26,613
2024		23,445		21,766
2025		12,541		15,068
Thereafter		6,746		21,474
Total lease payments		142,596		138,092
Less imputed interest		20,538		18,276
Total	$	122,058	$	119,816

Schedule of maturities for operating leases

	Finance		Operating
Year Ending April 30,	(in thousands)
2021 (remaining six months)	$	25,683	$	19,870
2022		41,454		33,301
2023		32,727		26,613
2024		23,445		21,766
2025		12,541		15,068
Thereafter		6,746		21,474
Total lease payments		142,596		138,092
Less imputed interest		20,538		18,276
Total	$	122,058	$	119,816

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Stockholders' Equity (Tables)

6 Months Ended

Oct. 31, 2020

Stockholders' Equity

Schedule of changes to accumulated other comprehensive loss, net of tax, by component

					Accumulated
	Foreign		Derivative		Other
	Currency		Financial		Comprehensive
	Translation		Instruments		Loss
	(in thousands)
Balance as of April 30, 2020	$	(40,577)	$	(24,505)	$	(65,082)
Other comprehensive income (loss) before reclassification		19,440		(530)		18,910
Reclassification to earnings from accumulated other comprehensive loss		—		4,333		4,333
Balance as of October 31, 2020	$	(21,137)	$	(20,702)	$	(41,839)

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Equity-Based Compensation - (Tables)

6 Months Ended

Oct. 31, 2020

Equity-Based Compensation

Summary of stock option activity

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Life (years)	Value
	(shares and dollars in thousands)
Outstanding as of April 30, 2020	1,487	$	18.85	6.4	$	3,895
Options granted	321		23.43
Options exercised	(43)		14.55
Options forfeited	(48)		25.98
Outstanding as of October 31, 2020	1,717	$	19.62	6.4	$	6,958
Exercisable as of October 31, 2020	1,082	$	17.45	4.8	$	6,585
Vested and expected to vest as of October 31, 2020	1,709	$	19.60	6.4	$	6,957

Schedule of weighted average assumptions used in Black-Scholes option-pricing model

	Six Months Ended
	October 31,
	2020		2019
Volatility	51.28	%	49.94	%
Expected life (years)	6.0		6.0
Risk-free interest rate	0.30	%	1.97	%
Dividend yield	—	%	—	%

Summary of restricted stock unity activity

		Weighted
	Number of	Average
	Restricted	Grant Date
	Stock Units	Fair Value
	(shares in thousands)
Outstanding as of April 30, 2020	286	$	22.71
Granted	212		23.43
Vested	(103)		22.43
Forfeited	(28)		23.91
Outstanding as of October 31, 2020	367	$	23.12

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Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests (Tables)

6 Months Ended

Oct. 31, 2020

Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests

Summary of changes to the liabilities for stock appreciation rights, deferred compensation and redeemable noncontrolling interests

	Stock				Redeemable
	Appreciation		Deferred		Noncontrolling
	Rights		Compensation		Interests
	(in thousands)
Balance as of April 30, 2020	$	24,205	$	1,660	$	8,300
Amounts redeemed		(181)		—		—
Change in fair value		1,106		73		365
Balance as of October 31, 2020	$	25,130	$	1,733	$	8,665
Classified as current as of April 30, 2020	$	624	$	—	$	—
Classified as long-term as of April 30, 2020		23,581		1,660		8,300
Classified as current as of October 31, 2020	$	650	$	—	$	—
Classified as long-term as of October 31, 2020		24,480		1,733		8,665

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Fair Value Measurements (Tables)

6 Months Ended

Oct. 31, 2020

Fair Value Measurements

Schedule of liabilities measured at fair value on a recurring basis

	October 31,		April 30,
	2020		2020
	(in thousands)
Interest rate swaps (Level 2)	$	27,180	$	32,218
Stock appreciation rights (Level 3)		25,130		24,205
Deferred compensation (Level 3)		1,733		1,660
Noncontrolling interest holders (Level 3)		8,665		8,300

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Segments (Tables)

6 Months Ended

Oct. 31, 2020

Segments

Schedule of segment results

Reconciliation of Adjusted EBITDA to net income

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Interest expense		13,525		17,559		27,606		35,836
Write-off of debt discount and deferred financing fees				707		—		707
Interest income		(14)		(6)		(51)		(18)
Provision for income taxes		8,277		7,927		17,881		15,517
Depreciation expense		12,710		12,592		25,537		25,014
Amortization expense		14,535		16,926		28,805		33,779
Stock appreciation expense(a)		314		1,267		1,106		1,327
Redeemable noncontrolling interests(b)		186		(18)		438		644
Equity-based compensation(c)		3,252		2,315		4,857		3,710
Severance and other permitted costs(d)		762		1,394		2,709		1,948
Transaction costs (acquisitions and other)(e)		25		327		125		1,299
Loss (gain) on disposal and impairment of assets(f)		481		(586)		875		(742)
Effects of fair value adjustments to inventory(g)		—		—		—		151
Secondary public offering costs(h)		—		363		—		363
Adjusted EBITDA	$	82,522	$	89,905	$	165,576	$	173,493

(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 the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs due to the COVID-19 pandemic.

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

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

(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.

Schedule of net sales to external customers by main product lines

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
Wallboard	$	330,515	$	350,618	$	658,512	$	692,213
Ceilings		111,293		122,807		224,995		251,917
Steel framing		111,293		136,159		221,780		267,988
Other products		259,755		252,345		510,142		496,987
Total net sales	$	812,856	$	861,929	$	1,615,429	$	1,709,105

Schedule of net sales by major geographic area

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands)
United States	$	684,131	$	744,134	$	1,363,452	$	1,475,477
Canada		128,725		117,795		251,977		233,628
Total net sales	$	812,856	$	861,929	$	1,615,429		1,709,105

Schedule of property and equipment by major geographic area

	October 31,		April 30,
	2020		2020
	(in thousands)
United States	$	265,941	$	270,855
Canada		34,203		34,612
Total property and equipment, net	$	300,144	$	305,467

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Earnings Per Common Share (Tables)

6 Months Ended

Oct. 31, 2020

Earnings Per Common Share

Schedule of computation of basic and diluted earnings per share of common stock

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2020		2019		2020		2019
	(in thousands, except per share data)
Net income	$	28,469	$	29,138	$	55,688	$	53,958
Less: Net income allocated to participating securities		—		—		—		342
Net income attributable to common stockholders	$	28,469	$	29,138	$	55,688	$	53,616
Basic earnings per common share:
Basic weighted average common shares outstanding		42,723		41,761		42,674		41,382
Basic earnings per common share	$	0.67	$	0.70	$	1.30	$	1.30
Diluted earnings per common share:
Basic weighted average common shares outstanding		42,723		41,761		42,674		41,382
Add: Common Stock Equivalents		451		874		422		744
Diluted weighted average common shares outstanding		43,174		42,635		43,096		42,126
Diluted earnings per common share	$	0.66	$	0.68	$	1.29	$	1.27

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Business, Basis of Presentation and Summary of Significant Accounting Policies - Business (Details)	6 Months Ended
	Oct. 31, 2020 item
Business
Number of distribution centers	260

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Business, Basis of Presentation and Summary of Significant Accounting Policies - Insurance Liabilities (Details) - USD ($) $ in Millions	Oct. 31, 2020	Apr. 30, 2020
Other accrued expenses and current liabilities.
Insurance Liabilities
Aggregate liabilities for medical self-insurance	$ 4.2	$ 3.8
General liability
Insurance Liabilities
Deductible amount	0.3
Primary layer of insurance coverage	0.3
Workers' compensation
Insurance Liabilities
Deductible amount	0.5
Primary layer of insurance coverage	0.5
Automobile
Insurance Liabilities
Deductible amount	1.0
Primary layer of insurance coverage	1.0
General liability, workers' compensation and automobile | Other accrued expenses and current liabilities.
Insurance Liabilities
Reserve for insurance	20.1	19.4
General liability, workers' compensation and automobile | Prepaid expenses and other current assets
Insurance Liabilities
Insurance recovery receivable	8.0	$ 6.0
General liability, workers' compensation and automobile | Minimum
Insurance Liabilities
Buffer layer of insurance coverage	5.0
Excess layer of insurance coverage	10.0
General liability, workers' compensation and automobile | Maximum
Insurance Liabilities
Primary layer of insurance coverage	5.0
Buffer layer of insurance coverage	10.0
Excess layer of insurance coverage	$ 100.0

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Revenue (Details) - USD ($) $ in Millions	6 Months Ended
	Oct. 31, 2020	Apr. 30, 2020
Revenue
Revenue, Practical Expedient, Financing Component [true false]	true
Revenue, Practical Expedient, Remaining Performance Obligation [true/false]	true
Receivables from contracts with customers	$ 418.3	$ 393.6

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Accounts Receivable - Trade Accounts And Notes Receivable (Details) - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Accounts Receivable
Trade receivables	$ 423,603	$ 398,739
Other receivables	16,506	11,656
Allowance for expected credit losses	(2,490)	(2,861)
Other allowances	(2,783)	(2,280)
Trade accounts and notes receivable	$ 434,836	$ 405,254

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Accounts Receivable - Change In Allowance (Details) $ in Thousands	6 Months Ended
	Oct. 31, 2020 USD ($)
Change in allowance
Beginning balance	$ 2,861
Ending balance	2,490
Accounts receivable.
Change in allowance
Beginning balance	2,861
Provision	(40)
Recoveries	(250)
Write-offs	(81)
Ending balance	$ 2,490

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Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands	6 Months Ended
	Oct. 31, 2020 USD ($)
Carrying Amount of Goodwill
Goodwill	$ 616,147
Accumulated impairment loss	(63,074)
Balance	553,073
Working capital settlement	(159)
Translation adjustment	4,572
Goodwill	620,560
Accumulated impairment loss	(63,074)
Balance	$ 557,486

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Goodwill and Intangible Assets - Definite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Oct. 31, 2020	Apr. 30, 2020
Definite-lived intangible assets
Gross Carrying Amount	$ 599,992	$ 592,098
Accumulated Amortization	321,441	291,581
Total	$ 278,551	$ 300,517
Customer relationships
Definite-lived intangible assets
Weighted Average Amortization Period (in years)	12 years 9 months 18 days	12 years 9 months 18 days
Gross Carrying Amount	$ 526,916	$ 516,928
Accumulated Amortization	298,246	270,029
Total	$ 228,670	$ 246,899
Customer relationships | Minimum
Definite-lived intangible assets
Estimated Useful Lives (years)	5 years	5 years
Customer relationships | Maximum
Definite-lived intangible assets
Estimated Useful Lives (years)	16 years	16 years
Tradenames
Definite-lived intangible assets
Weighted Average Amortization Period (in years)	16 years 3 months 18 days	16 years 3 months 18 days
Gross Carrying Amount	$ 56,907	$ 55,654
Accumulated Amortization	12,448	10,474
Total	$ 44,459	$ 45,180
Tradenames | Minimum
Definite-lived intangible assets
Estimated Useful Lives (years)	5 years	5 years
Tradenames | Maximum
Definite-lived intangible assets
Estimated Useful Lives (years)	20 years	20 years
Vendor agreements
Definite-lived intangible assets
Weighted Average Amortization Period (in years)	8 years 3 months 18 days	8 years 3 months 18 days
Gross Carrying Amount	$ 6,644	$ 6,644
Accumulated Amortization	4,970	4,567
Total	$ 1,674	$ 2,077
Vendor agreements | Minimum
Definite-lived intangible assets
Estimated Useful Lives (years)	8 years	8 years
Vendor agreements | Maximum
Definite-lived intangible assets
Estimated Useful Lives (years)	10 years	10 years
Developed technology
Definite-lived intangible assets
Estimated Useful Lives (years)	5 years	5 years
Weighted Average Amortization Period (in years)	4 years 10 months 24 days	4 years 10 months 24 days
Gross Carrying Amount	$ 5,253	$ 5,036
Accumulated Amortization	2,582	1,963
Total	$ 2,671	$ 3,073
Other intangible assets
Definite-lived intangible assets
Weighted Average Amortization Period (in years)	3 years 3 months 18 days	5 years 3 months 18 days
Gross Carrying Amount	$ 4,272	$ 7,836
Accumulated Amortization	3,195	4,548
Total	$ 1,077	$ 3,288
Other intangible assets | Minimum
Definite-lived intangible assets
Estimated Useful Lives (years)	3 years	1 year
Other intangible assets | Maximum
Definite-lived intangible assets
Estimated Useful Lives (years)	5 years	15 years

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Goodwill and Intangible Assets - Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Intangible assets
Amortization expense	$ 14,535	$ 16,926	$ 28,805	$ 33,779
Depreciation and amortization expense
Intangible assets
Amortization expense	$ 14,500	$ 16,900	$ 28,800	$ 33,800

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Goodwill and Intangible Assets - Estimated Aggregate Amortization Expense (Details) - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Estimated aggregate future amortization expense
2021 (remaining six months)	$ 26,862
2022	46,613
2023	38,834
2024	31,731
2025	26,223
Thereafter	108,288
Total	$ 278,551	$ 300,517

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Goodwill and Intangible Assets - Indefinite-Lived Intangible Assets (Details) - USD ($) $ in Millions	Oct. 31, 2020	Apr. 30, 2020
Goodwill and Intangible Assets
Tradenames	$ 61.4	$ 61.4

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Long-Term Debt - Components (Details) - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Long-term debt
Carrying value of debt	$ 996,023	$ 1,097,480
Less current portion	49,302	50,201
Long-term debt	946,721	1,047,279
Term Loan Facility
Long-term debt
Carrying value of debt	871,919	876,903
Unamortized discount and deferred financing costs	(9,540)	(10,602)
ABL Facility
Long-term debt
Carrying value of debt		80,000
Finance lease obligations
Long-term debt
Carrying value of debt	122,058	128,767
Installment notes
Long-term debt
Carrying value of debt	$ 12,506	$ 16,316
Interest rate	5.00%	5.00%
Unamortized discount	$ (920)	$ (1,098)
Canadian Facility
Long-term debt
Carrying value of debt		$ 7,194

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Long-Term Debt - Acquisition Debt (Details) - Term Loan Facility $ in Millions	6 Months Ended
	Oct. 31, 2020 USD ($)
Long-term debt
Aggregate principal amount	$ 871.9
Borrowing interest rate (as a percent)	2.90%
Loan quarterly payments	$ 2.5
Loan quarterly payments of the principal amount (as a percent)	0.25%
LIBOR
Long-term debt
Margin added to variable rate (as a percent)	2.75%
Variable rate floor (as a percent)	0.00%

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Long-Term Debt - Asset-Based Lending Facility (Details) - ABL Facility $ in Millions	Oct. 31, 2020 USD ($)
Long-term debt
Maximum amount under the facility	$ 445.0
Available borrowings under the facility	392.9
Swing-line
Long-term debt
Maximum amount under the facility	$ 44.5

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Long-Term Debt - Canadian Revolving Credit Facility (Details) - Canadian Facility $ in Millions, $ in Millions	Oct. 31, 2020 USD ($)	Jun. 01, 2018 USD ($)	Jun. 01, 2018 CAD ($)
Debt Instrument [Line Items]
Maximum amount under the facility		$ 22.5	$ 30.0
Available borrowings under the facility	$ 22.5

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Long-Term Debt - Maturities (Details) - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Debt maturities
2021 (remaining six months)	$ 23,826
2022	48,750
2023	43,441
2024	33,807
2025	22,938
Thereafter	833,721
Total	1,006,483
Term Loan Facility
Debt maturities
2021 (remaining six months)	4,984
2022	9,968
2023	9,968
2024	9,968
2025	9,968
Thereafter	827,063
Total	871,919
Finance lease obligations
Debt maturities
2021 (remaining six months)	17,878
2022	34,324
2023	29,049
2024	22,039
2025	12,110
Thereafter	6,658
Total	122,058
Installment notes
Debt maturities
2021 (remaining six months)	964
2022	4,458
2023	4,424
2024	1,800
2025	860
Total	12,506
Long Term Debt
Unamortized discount	$ 920	$ 1,098

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Leases
Option to extend			true
Finance lease cost:
Amortization of right-of-use assets	$ 5,960	$ 6,054	$ 12,099	$ 12,113
Interest on lease liabilities	2,863	3,367	5,925	6,789
Operating lease cost	10,630	10,289	21,329	20,709
Variable lease cost	3,157	3,414	6,132	6,613
Total lease cost	$ 22,610	$ 23,124	$ 45,485	$ 46,224
Minimum
Leases
Lease term (in years)	1 year		1 year
Renewal lease term (in years)	1 year		1 year
Maximum
Leases
Lease term (in years)	11 years		11 years
Renewal lease term (in years)	5 years		5 years

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Leases - Supplemental cash flow information (Details) - USD ($) $ in Thousands	6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 21,479	$ 20,377
Operating cash flows from finance leases	5,925	6,789
Financing cash flows from finance leases	14,629	12,310
Right-of-use assets obtained in exchange for lease obligations - Operating leases	17,216	12,810
Right-of-use assets obtained in exchange for lease obligations - Finance leases	$ 12,342	$ 22,812

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Leases - Other information (Details) - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Finance leases included in property and equipment
Accumulated depreciation	$ (174,832)	$ (158,554)
Property and equipment, net	$ 300,144	$ 305,467
Weighted-average remaining lease term (years) - Operating leases	5 years	4 years 10 months 24 days
Weighted-average remaining lease term (years) - Finance leases	3 years 6 months	3 years 7 months 6 days
Weighted-average discount rate - Operating leases	5.50%	5.50%
Weighted-average discount rate - Finance leases	4.90%	5.00%
Finance Leased Assets
Finance leases included in property and equipment
Property and equipment	$ 170,868	$ 171,380
Accumulated depreciation	(47,342)	(41,737)
Property and equipment, net	$ 123,526	$ 129,643

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Leases - Future minimum lease payments under non-cancellable leases (Details) $ in Thousands	Oct. 31, 2020 USD ($)
Finance lease
2021 (remaining six months)	$ 25,683
2022	41,454
2023	32,727
2024	23,445
2025	12,541
Thereafter	6,746
Total lease payments	142,596
Less imputed interest	20,538
Total	122,058
Operating lease
2021 (remaining six months)	19,870
2022	33,301
2023	26,613
2024	21,766
2025	15,068
Thereafter	21,474
Total lease payments	138,092
Less imputed interest	18,276
Total	$ 119,816

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Income Taxes (Details) - USD ($) $ in Millions	6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Apr. 30, 2020
Effective income tax rate (as a percent)	24.30%	22.30%
Valuation allowance	$ 10.6		$ 10.2
Reserve for uncertain tax positions	$ 0.0		$ 0.0
Domestic
Federal statutory rate (as a percent)	21.00%

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Stockholders' Equity - Exchangeable Shares, Share Repurchase Program and Secondary Public Offering (Details) shares in Thousands, $ in Millions			6 Months Ended
	Jun. 13, 2019 shares	Jun. 01, 2018 shares	Oct. 31, 2020 USD ($) shares	Nov. 30, 2018 USD ($)
Exchangeable Shares and Share Repurchase Program
Number of shares repurchased | shares			50
Shares repurchased, cost | $			$ 1.2
Remaining amount under repurchase program | $			$ 57.3
Maximum
Exchangeable Shares and Share Repurchase Program
Stock repurchase program, authorized amount | $				$ 75.0
Titan
Exchangeable Shares and Share Repurchase Program
Issuance of shares to current shareholders of Titan (in shares) | shares		1,100
Exchangeable shares converted | shares	1,100
Exchangeable shares conversion ratio		1

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Stockholders' Equity - Accumulated Other Comprehensive Loss (Details) $ in Thousands	6 Months Ended
	Oct. 31, 2020 USD ($)
Accumulated other comprehensive (loss) income
Balance	$ 633,981
Balance	717,897
Other comprehensive loss on derivative instruments before reclassification, tax	200
Reclassification of (decrease) increase in fair value financial instruments from Accumulated other comprehensive income (loss)
Amount expected to be reclassified to earnings during next twelve months	(1,400)
Accumulated Other Comprehensive Loss
Accumulated other comprehensive (loss) income
Balance	(65,082)
Other comprehensive income before reclassification	18,910
Reclassification to earnings from accumulated other comprehensive loss	4,333
Balance	(41,839)
Foreign Currency Translation
Accumulated other comprehensive (loss) income
Balance	(40,577)
Other comprehensive income before reclassification	19,440
Balance	(21,137)
Derivative Financial Instruments
Accumulated other comprehensive (loss) income
Balance	(24,505)
Other comprehensive income before reclassification	(530)
Reclassification to earnings from accumulated other comprehensive loss	4,333
Balance	$ (20,702)

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Equity-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019	Apr. 30, 2020
Other disclosures
Equity-based compensation	$ 3,252	$ 2,315	$ 4,857	$ 3,710
Selling, general and administrative expenses
Other disclosures
Equity-based compensation			$ 4,600	3,400
Stock Options
Number of Options
Outstanding, beginning of the period (in shares)			1,487
Options granted (in shares)			321
Options exercised (in shares)			(43)
Options forfeited (in shares)			(48)
Outstanding, end of the period (in shares)	1,717		1,717		1,487
Exercisable at end of period (in shares)	1,082		1,082
Vested and expected to vest at end of period (in shares)	1,709		1,709
Weighted Average Exercise Price
Outstanding, beginning of period (in dollars per share)			$ 18.85
Options granted (in dollars per share)			23.43
Options exercised (in dollars per share)			14.55
Options forfeited (in dollars per share)			25.98
Outstanding, end of the period (in dollars per share)	$ 19.62		19.62		$ 18.85
Exercisable at end of period (in dollars per share)	17.45		17.45
Vested and expected to vest at end of period (in dollars per share)	$ 19.60		$ 19.60
Other disclosures
Weighted Average Remaining Contractual Life, Outstanding (in years)			6 years 4 months 24 days		6 years 4 months 24 days
Weighted Average Remaining Contractual Life, Exercisable at end of period (in years)			4 years 9 months 18 days
Weighted Average Remaining Contractual Life, Vested and expected to vest at end of period (in years)			6 years 4 months 24 days
Aggregate Intrinsic Value, Outstanding	$ 6,958		$ 6,958		$ 3,895
Aggregate Intrinsic Value, Exercisable at end of period	6,585		6,585
Aggregate Intrinsic Value, Vested and expected to vest at end of period	6,957		6,957
Intrinsic value of options exercised			300	$ 8,600
Unrecognized compensation cost	$ 5,400		$ 5,400
Weighted-average period for recognition of unrecognized compensation expense (in years)			2 years 2 months 12 days
Options granted (in shares)			321

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Equity-Based Compensation - Black Scholes Options - Pricing Model (Details) - Stock Options - $ / shares	6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019
Stock options
Volatility (as a percent)	51.28%	49.94%
Expected life (years)	6 years	6 years
Risk-free interest rate (as a percent)	0.30%	1.97%
Dividend yield (as a percent)	0.00%	0.00%
Weighted average grant date fair value (in dollars per share)	$ 11.13	$ 10.55

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Equity-Based Compensation - Restricted Stock Units (Details) - Restricted stock units $ / shares in Units, shares in Thousands, $ in Millions	6 Months Ended
	Oct. 31, 2020 USD ($) $ / shares shares
Number of Restricted Stock Units
Outstanding, beginning of the period (in shares) | shares	286
Granted (in shares) | shares	212
Vested (in shares) | shares	(103)
Forfeited (in shares) | shares	(28)
Outstanding, end of the period (in shares) | shares	367
Weighted Average Exercise Price
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 22.71
Granted (in dollars per share) | $ / shares	23.43
Vested (in dollars per share) | $ / shares	22.43
Forfeited (in dollars per share) | $ / shares	23.91
Outstanding, end of the period (in dollars per share) | $ / shares	$ 23.12
Unrecognized compensation cost | $	$ 6.2
Weighted-average period for recognition of unrecognized compensation expense (in years)	2 years

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Equity-Based Compensation - Employee Stock Purchase Plan (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 3,252	$ 2,315	$ 4,857	$ 3,710
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of common stock price based on closing price at the beginning or end of the last day of the purchase period			90.00%
Purchase period			6 months
Number of shares purchased under ESPP			0.1
Average price per share	$ 22.13		$ 22.13
Share-based compensation expense			$ 300	$ 300

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Stock Appreciation Rights, Deferred Compensation and Redeemable Noncontrolling Interests (Details) - USD ($) $ in Thousands	6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Apr. 30, 2020
Selling, general and administrative expenses
Equity based compensation arrangements
Expense related to equity based compensation arrangements	$ 1,500	$ 2,000
Stock Appreciation Rights
Equity based compensation arrangements
Award liability as of beginning of period	24,205
Amounts redeemed	(181)
Change in fair value	1,106
Award liability as of end of period	25,130
Current liabilities related to plans	650		$ 624
Long-term liabilities related to plans	$ 24,480		23,581
Settlement period	5 years
Deferred Compensation
Equity based compensation arrangements
Award liability as of beginning of period	$ 1,660
Change in fair value	73
Award liability as of end of period	1,733
Long-term liabilities related to plans	$ 1,733		1,660
Settlement period	5 years
Redeemable Noncontrolling Interests
Equity based compensation arrangements
Award liability as of beginning of period	$ 8,300
Change in fair value	365
Award liability as of end of period	8,665
Long-term liabilities related to plans	$ 8,665		$ 8,300
Settlement period	5 years

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Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Oct. 31, 2020	Oct. 31, 2020	Apr. 30, 2020	Feb. 28, 2019
Fair Value Measurements
Impairment charges		$ 1,000
Fair Value, Measurements, Recurring | Level 3
Fair Value Measurements
Stock appreciation rights	$ 25,130	25,130	$ 24,205
Deferred compensation	1,733	1,733	1,660
Noncontrolling interest holders	8,665	8,665	8,300
Interest rate swap agreements
Fair Value Measurements
Interest rate swap gains (losses)	(2,200)	(4,300)
Expected amount of pre-tax net losses will be reclassified from accumulated other comprehensive income (loss) into earnings during the next twelve months		11,700
Interest rate swap agreements | Fair Value, Measurements, Recurring | Level 2
Fair Value Measurements
Derivative liabilities	27,180	27,180	$ 32,218
Interest rate swap agreements | Term Loan Facility
Fair Value Measurements
Notional amount				$ 500,000
Interest rate swap agreements | LIBOR | Term Loan Facility
Fair Value Measurements
Fixed interest rate				2.46%
Other accrued expenses and current liabilities | Interest rate swap agreements
Fair Value Measurements
Derivative liabilities	11,700	11,700
Other liabilities | Interest rate swap agreements
Fair Value Measurements
Derivative liabilities	$ 15,500	$ 15,500

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Transactions With Related Parties - Purchased Inventories (Details) - Southern Wall Products, Inc. - Inventory purchases - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019	Apr. 30, 2020
Transactions with related parties
Purchases from related party	$ 3.8	$ 3.7	$ 7.3	$ 7.3
Accounts payable
Transactions with related parties
Due to SWP					$ 1.2

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Segments (Details)		6 Months Ended
	Apr. 30, 2020 segment	Oct. 31, 2020 segment division
Segments
Number of operating segments | segment	7	8
Number of reportable segments | segment		1
Number of geographic divisions | division		8
Number of operating segment, divisions | division		2

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Segments - Net Sales, Adjusted EBITDA and Certain Other Measures (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019	Apr. 30, 2020
Segment information
Net sales	$ 812,856	$ 861,929	$ 1,615,429	$ 1,709,105
Gross Profit	265,071	284,493	525,529	558,147
Depreciation and Amortization	27,245	29,518	54,342	58,793
Adjusted EBITDA	82,522	89,905	165,576	173,493
Total assets	2,210,874		2,210,874		$ 2,288,782
Geographic divisions
Segment information
Net sales	805,074	854,853	1,599,546	1,695,010
Gross Profit	262,534	281,900	520,372	553,254
Depreciation and Amortization	26,783	29,024	53,565	57,956
Adjusted EBITDA	82,169	89,171	164,673	172,254
Other.
Segment information
Net sales	7,782	7,076	15,883	14,095
Gross Profit	2,537	2,593	5,157	4,893
Depreciation and Amortization	91	55	182	108
Adjusted EBITDA	353	734	903	1,239
Corporate
Segment information
Depreciation and Amortization	$ 371	$ 439	$ 595	$ 729

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Segments - Reconciliation of Net Income to Adjusted EBITDA (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Oct. 31, 2020	Jul. 31, 2020	Oct. 31, 2019	Jul. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Segments
Net income	$ 28,469	$ 27,219	$ 29,138	$ 24,820	$ 55,688	$ 53,958
Interest expense	13,525		17,559		27,606	35,836
Write-off of debt discount and deferred financing fees			707			707
Interest income	(14)		(6)		(51)	(18)
Provision for income taxes	8,277		7,927		17,881	15,517
Depreciation expense	12,710		12,592		25,537	25,014
Amortization expense	14,535		16,926		28,805	33,779
Stock appreciation expense	314		1,267		1,106	1,327
Redeemable noncontrolling interests	186		(18)		438	644
Equity-based compensation	3,252		2,315		4,857	3,710
Severance and other permitted costs	762		1,394		2,709	1,948
Transaction costs (acquisitions and other)	25		327		125	1,299
Loss (gain) on disposal and impairment of assets	481		(586)		875	(742)
Effects of fair value adjustments to inventory						151
Secondary public offering costs			363			363
Adjusted EBITDA	$ 82,522		$ 89,905		$ 165,576	$ 173,493

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Segments - Net Sales by Main Product Lines (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Revenue from external customers
Total net sales	$ 812,856	$ 861,929	$ 1,615,429	$ 1,709,105
Wallboard
Revenue from external customers
Total net sales	330,515	350,618	658,512	692,213
Ceilings
Revenue from external customers
Total net sales	111,293	122,807	224,995	251,917
Steel framing
Revenue from external customers
Total net sales	111,293	136,159	221,780	267,988
Other products
Revenue from external customers
Total net sales	$ 259,755	$ 252,345	$ 510,142	$ 496,987

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Segments - Net sales by major geographic area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	$ 812,856	$ 861,929	$ 1,615,429	$ 1,709,105
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	684,131	744,134	1,363,452	1,475,477
Canada
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net sales	$ 128,725	$ 117,795	$ 251,977	$ 233,628

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Segments - Property and equipment, net, by major geographic area (Details) - USD ($) $ in Thousands	Oct. 31, 2020	Apr. 30, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	$ 300,144	$ 305,467
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	265,941	270,855
Canada
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	$ 34,203	$ 34,612

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended				6 Months Ended
		Oct. 31, 2020	Jul. 31, 2020	Oct. 31, 2019	Jul. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Computation of basic and diluted earnings per share of common stock
Net income		$ 28,469	$ 27,219	$ 29,138	$ 24,820	$ 55,688	$ 53,958
Less: Net income allocated to participating securities							342
Net income attributable to common stockholders		$ 28,469		$ 29,138		$ 55,688	$ 53,616
Basic earnings per common share:
Basic weighted average common shares outstanding (in shares)		42,723		41,761		42,674	41,382
Basic earnings per common share (in dollars per share)	[1]	$ 0.67		$ 0.70		$ 1.30	$ 1.30
Diluted earnings per common share:
Basic weighted average common shares outstanding (in shares)		42,723		41,761		42,674	41,382
Add: Common Stock Equivalents		451		874		422	744
Diluted weighted average common shares outstanding (in shares)		43,174		42,635		43,096	42,126
Diluted earnings per common share (in dollars per share)	[1]	$ 0.66		$ 0.68		$ 1.29	$ 1.27
Shares were not included in the calculation of Diluted loss per common share
Anti-dilutive shares		500				400

[1] See Note 15 for detailed calculations.