Company Quick10K Filing
GMS
Price28.67 EPS2
Shares43 P/E16
MCap1,222 P/FCF8
Net Debt1,077 EBIT182
TEV2,300 TEV/EBIT13
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-01-31 Filed 2020-03-05
10-Q 2019-10-31 Filed 2019-12-05
10-Q 2019-07-31 Filed 2019-08-29
10-K 2019-04-30 Filed 2019-06-27
10-Q 2019-01-31 Filed 2019-03-05
10-Q 2018-10-31 Filed 2018-12-04
10-Q 2018-07-31 Filed 2018-08-30
10-K 2018-04-30 Filed 2018-06-28
10-Q 2018-01-31 Filed 2018-03-06
10-Q 2017-10-31 Filed 2017-12-07
10-Q 2017-07-31 Filed 2017-09-06
10-K 2017-04-30 Filed 2017-06-30
10-Q 2017-01-31 Filed 2017-03-09
10-Q 2016-10-31 Filed 2016-12-13
10-Q 2016-07-31 Filed 2016-09-13
10-K 2016-04-30 Filed 2016-07-12
8-K 2020-03-05 Earnings, Regulation FD, Exhibits
8-K 2020-01-27 Officers
8-K 2019-12-05 Earnings, Regulation FD, Exhibits
8-K 2019-10-30 Officers, Shareholder Vote
8-K 2019-10-03 Officers, Exhibits
8-K 2019-09-30 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-09-27 Officers, Exhibits
8-K 2019-09-04 Other Events, Exhibits
8-K 2019-08-29 Earnings, Regulation FD, Exhibits
8-K 2019-08-02 Officers
8-K 2019-07-23 Officers, Exhibits
8-K 2019-06-27 Earnings, Regulation FD, Exhibits
8-K 2019-04-23 Officers, Exhibits
8-K 2019-03-29 Officers, Regulation FD, Exhibits
8-K 2019-03-05 Earnings, Regulation FD, Exhibits
8-K 2019-01-09 Officers
8-K 2018-12-04 Earnings, Regulation FD, Exhibits
8-K 2018-10-30 Shareholder Vote
8-K 2018-10-01 Officers
8-K 2018-09-06 Regulation FD, Exhibits
8-K 2018-08-30 Earnings, Regulation FD, Exhibits
8-K 2018-08-08 Regulation FD, Exhibits
8-K 2018-07-24 Officers
8-K 2018-06-28 Earnings, Regulation FD, Exhibits
8-K 2018-06-06 Officers
8-K 2018-06-01 Enter Agreement, M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-04-04 Enter Agreement, Regulation FD, Exhibits
8-K 2018-03-06 Earnings, Regulation FD, Exhibits

GMS 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex-31d1.htm
EX-31.2 ex-31d2.htm
EX-32.1 ex-32d1.htm
EX-32.2 ex-32d2.htm

GMS Earnings 2020-01-31

Balance SheetIncome StatementCash Flow
2.31.81.40.90.50.02015201620182020
Assets, Equity
0.90.70.50.40.20.02015201620182020
Rev, G Profit, Net Income
0.70.40.2-0.1-0.3-0.62015201620182020
Ops, Inv, Fin

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Table of Contents

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 January 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 42,320,668 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of February 28, 2020.

Table of Contents

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)

9

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4

Controls and Procedures

42

PART II

Other Information

43

Item 1

Legal Proceedings

43

Item 1A

Risk Factors

43

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

43

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

Table of Contents

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, 2019, 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:

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, including our growth strategies and cost reduction initiatives;

our ability to open new branches and expand into new geographic markets;

our ability to successfully identify acquisition candidates, complete and integrate acquisitions and realize anticipated benefits and synergies from completed acquisitions;

product shortages and potential loss of relationships with key suppliers;

other disruptions in our supply chain or distribution network as a result of factors beyond our control, including public health issues such as pandemics or quarantines, work stoppages, natural disasters, military conflicts and acts of terrorism;

the seasonality of the commercial and residential construction markets;

the potential loss of any significant customers;

exposure to product liability and various other claims and litigation;

our ability to attract and retain key employees and risks related our recent executive management transitions;

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

the reduction of the quantity of products our customers purchase;

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 increases 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 increases 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;

our exposure to greater than anticipated tax liabilities;

the risk of our foreign 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;

our ability to obtain additional financing on acceptable terms, if at all; and

our holding company structure.

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, however, 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.

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PART I – Financial Information

Item 1. Financial Statements

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

    

January 31, 

April 30,

2020

    

2019

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

 

$

40,949

$

47,338

Trade accounts and notes receivable, net of allowances of $5,600 and $6,432, respectively

 

 

434,801

 

445,771

Inventories, net

 

 

296,117

 

290,829

Prepaid expenses and other current assets

 

 

17,142

 

18,368

Total current assets

 

 

789,009

 

802,306

Property and equipment, net of accumulated depreciation of $149,924 and $123,583, respectively

 

 

306,472

 

282,349

Operating lease right-of-use assets

118,092

Goodwill

 

 

624,070

 

617,327

Intangible assets, net

 

 

386,346

 

429,313

Deferred income taxes

8,014

4,676

Other assets

 

 

13,274

 

13,583

Total assets

 

$

2,245,277

$

2,149,554

Liabilities and Stockholders’ Equity

Current liabilities:

 

 

  

 

  

Accounts payable

 

$

143,689

$

173,751

Accrued compensation and employee benefits

 

 

51,256

 

62,858

Other accrued expenses and current liabilities

 

 

73,759

 

79,848

Current portion of long-term debt

48,688

 

42,118

Current portion of operating lease liabilities

 

 

33,131

Total current liabilities

 

 

350,523

 

358,575

Non-current liabilities:

 

Long-term debt, less current portion

 

 

1,020,306

 

1,099,077

Long-term operating lease liabilities

90,336

Deferred income taxes, net

 

 

12,977

 

10,226

Other liabilities

 

 

63,809

 

52,500

Total liabilities

 

 

1,537,951

 

1,520,378

Commitments and contingencies

 

 

  

 

  

Stockholders' equity:

 

 

  

 

  

Common stock, par value $0.01 per share, 500,000 shares authorized; 42,310 and 40,375 shares issued and outstanding as of January 31, 2020 and April 30, 2019, respectively

 

 

423

 

404

Preferred stock, par value $0.01 per share, 50,000 shares authorized; 0 shares issued and outstanding as of January 31, 2020 and April 30, 2019

 

 

 

Exchangeable shares

29,639

Additional paid-in capital

 

 

524,313

 

480,113

Retained earnings

 

 

210,431

 

145,594

Accumulated other comprehensive loss

 

 

(27,841)

 

(26,574)

Total stockholders' equity

707,326

629,176

Total liabilities and stockholders' equity

 

$

2,245,277

$

2,149,554

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

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GMS Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

January 31, 

January 31, 

    

2020

    

2019

    

2020

2019

Net sales

 

$

761,352

$

723,902

$

2,470,457

$

2,335,883

Cost of sales (exclusive of depreciation and amortization shown separately below)

 

 

507,879

 

489,676

 

1,658,837

 

1,588,691

Gross profit

 

 

253,473

 

234,226

 

811,620

 

747,192

Operating expenses:

 

 

  

 

  

 

  

 

  

Selling, general and administrative

 

 

193,384

 

178,180

 

588,472

 

548,883

Depreciation and amortization

 

 

29,422

 

30,220

 

88,215

 

87,329

Total operating expenses

 

 

222,806

 

208,400

 

676,687

 

636,212

Operating income

 

 

30,667

 

25,826

 

134,933

 

110,980

Other (expense) income:

 

 

  

 

  

 

  

 

  

Interest expense

 

 

(16,474)

 

(19,526)

 

(52,310)

 

(54,896)

Change in fair value of financial instruments

(6,395)

Write-off of debt discount and deferred financing fees

(707)

Other (expense) income, net

 

 

(498)

 

957

 

1,254

 

2,025

Total other expense, net

 

 

(16,972)

 

(18,569)

 

(51,763)

 

(59,266)

Income before taxes

 

 

13,695

 

7,257

 

83,170

 

51,714

Provision for income taxes

 

 

2,816

 

1,442

 

18,333

 

12,337

Net income

 

$

10,879

$

5,815

$

64,837

$

39,377

Weighted average common shares outstanding:

 

 

  

Basic

 

 

42,223

 

40,912

 

41,663

 

41,053

Diluted

 

 

42,949

 

41,371

 

42,401

 

41,789

Net income per common share(1):

 

 

  

 

  

 

  

 

  

Basic

 

$

0.26

$

0.14

$

1.55

$

0.94

Diluted

 

$

0.25

$

0.14

$

1.52

$

0.92

Comprehensive income

 

  

Net income

 

$

10,879

$

5,815

$

64,837

$

39,377

Foreign currency translation income (loss)

(2,504)

(128)

8,947

(8,821)

Changes in other comprehensive income, net of tax

 

 

(547)

 

 

(10,214)

 

491

Comprehensive income

$

7,828

$

5,687

$

63,570

$

31,047

(1)See Note 15 for detailed calculations.

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

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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, 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 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 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

Net income

10,879

10,879

Foreign currency translation adjustments

(2,504)

(2,504)

Change in other comprehensive loss, net of tax

(547)

(547)

Equity-based compensation

1,419

1,419

Exercise of stock options

85

1

1,518

1,519

Vesting of restricted stock units

17

Tax withholding related to net share settlements of equity awards

(250)

(250)

Issuance of common stock pursuant to employee stock purchase plan

39

771

771

Balances as of January 31, 2020

42,310

$

423

$

$

524,313

$

210,431

$

(27,841)

$

707,326

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

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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

    

Income (Loss)

    

Equity

Balances as of April 30, 2018

41,069

$

411

$

$

489,007

$

89,592

$

441

$

579,451

Net income

8,650

8,650

Issuance of Exchangeable Shares

33,194

33,194

Foreign currency translation adjustments

(3,791)

(3,791)

Change in other comprehensive income (loss), net of tax

113

113

Equity-based compensation

358

358

Tax withholding related to net share settlements of equity awards

(7)

(7)

Exercise of stock options

35

431

431

Issuance of common stock pursuant to employee stock purchase plan

35

881

881

Balances as of July 31, 2018

41,139

411

33,194

490,670

98,242

(3,237)

619,280

Net income

24,912

24,912

Foreign currency translation adjustments

(4,902)

(4,902)

Change in other comprehensive income (loss), net of tax

378

378

Equity-based compensation

1,049

1,049

Exercise of stock options

18

1

541

542

Balances as of October 31, 2018

41,157

412

33,194

492,260

123,154

(7,761)

641,259

Net income

5,815

5,815

Issuance of Exchangeable Shares

(3,555)

(3,555)

Repurchase and retirement of common stock

(691)

(7)

(11,507)

(11,514)

Foreign currency translation adjustments

(128)

(128)

Equity-based compensation

1,095

1,095

Tax withholding related to net share settlements of equity awards

(44)

(44)

Exercise of stock options

50

308

308

Vesting of restricted stock units

5

Issuance of common stock pursuant to employee stock purchase plan

40

1

523

524

Balances as of January 31, 2019

40,561

$

406

$

29,639

$

482,635

$

128,969

$

(7,889)

$

633,760

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

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GMS Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

    

Nine Months Ended

January 31, 

    

2020

    

2019

Cash flows from operating activities:

 

  

Net income

 

$

64,837

$

39,377

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization

 

 

88,215

87,329

Write-off and amortization of debt discount and debt issuance costs

 

 

2,964

2,505

Provision for losses on accounts and notes receivable

 

 

104

240

Provision for obsolescence of inventory

 

 

221

416

Effects of fair value adjustments to inventory

461

4,129

Increase in fair value of contingent consideration

 

 

1,601

535

Equity-based compensation

 

 

6,345

4,706

Gain on sale and disposal of assets

 

 

(872)

(412)

Change in fair value of financial instruments

6,395

Deferred income taxes

 

 

174

(18,470)

Changes in assets and liabilities net of effects of acquisitions:

Trade accounts and notes receivable

 

 

16,561

23,243

Inventories

 

 

317

(11,576)

Prepaid expenses and other assets

 

 

4,210

(968)

Accounts payable

 

 

(30,420)

(17,856)

Accrued compensation and employee benefits

 

 

(11,729)

(3,824)

Derivative liability

(10,778)

Other accrued expenses and liabilities

 

 

(7,622)

446

Cash provided by operating activities

 

 

135,367

 

105,437

Cash flows from investing activities:

 

 

  

 

  

Purchases of property and equipment

 

 

(20,884)

 

(13,385)

Proceeds from sale of assets

 

 

1,299

 

910

Acquisition of businesses, net of cash acquired

 

 

(20,803)

 

(579,731)

Cash used in investing activities

 

 

(40,388)

 

(592,206)

Cash flows from financing activities:

 

 

  

 

  

Repayments on the revolving credit facility

 

 

(794,623)

 

(748,999)

Borrowings from the revolving credit facility

 

 

760,444

 

886,896

Payments of principal on long-term debt

 

 

(57,476)

 

(7,476)

Payments of principal on finance lease obligations

 

 

(17,971)

 

(13,923)

Borrowings from term loan amendment

996,840

Repayments from term loan amendment

(571,840)

Repurchases of common stock

(11,514)

Debt issuance costs

(1,286)

(7,933)

Proceeds from exercises of stock options

8,280

1,280

Other financing activities

1,261

1,355

Cash (used in) provided by financing activities

 

 

(101,371)

 

524,686

Effect of exchange rates on cash and cash equivalents

3

(7)

(Decrease) increase in cash and cash equivalents

 

 

(6,389)

 

37,910

Cash and cash equivalents, beginning of period

 

 

47,338

 

36,437

Cash and cash equivalents, end of period

 

$

40,949

$

74,347

Supplemental cash flow disclosures:

 

 

  

 

  

Cash paid for income taxes

 

$

30,199

$

16,121

Cash paid for interest

 

 

49,224

 

45,724

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

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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 a large number of 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 more than 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, 2019.

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, automobile and workers’ compensation. 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 primary layer and an excess layer. The primary layer of coverage is from $0.5 million to $2.0 million and the excess layer cover claims from $2.0 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

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GMS Inc.

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

and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors, actuarial assumptions and historical loss development experience.

As of January 31, 2020 and April 30, 2019, the aggregate liabilities for medical self-insurance were $4.0 million and $3.4 million, respectively, and are included in other accrued expenses and current liabilities in the Condensed Consolidated Balance Sheets. As of January 31, 2020 and April 30, 2019, reserves for general liability, automobile and workers’ compensation totaled approximately $19.1 million and $17.7 million, respectively, and are included in other accrued expenses and current liabilities and other liabilities in the Condensed Consolidated Balance Sheets. As of January 31, 2020 and April 30, 2019, expected recoveries for medical self-insurance, general liability, automobile and workers’ compensation totaled approximately $6.1 million and $