gms-20220731

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 July 31, 2022

☐ 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 exchange 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 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,” “smaller reporting company” and “emerging growth 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 42,406,821 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of August 31, 2022.

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	24
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	34

PART II	Other Information	35
Item 1	Legal Proceedings	35
Item 1A	Risk Factors	35
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3	Defaults Upon Senior Securities	36
Item 4	Mine Safety Disclosures	36
Item 5	Other Information	36
Item 6	Exhibits	37
Signatures		38

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. Statements about the growth of or other future developments relating to 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, 2022, 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 ongoing effects of the COVID-19 pandemic and other widespread public health crises on our business, industry and results of operations;

•general business, financial market and economic conditions, including inflation, rising interest rates, supply chain disruptions, labor shortages and capital market volatility;

•our dependency upon commercial and residential construction, both new and repair and remodeling, or R&R, markets;

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

•consolidation in our industry;

•the fluctuations in prices and mix of the products we distribute, and our ability to pass on price increases to our customers and effectively manage inventories and margins in both inflationary and deflationary pricing environments;

•our ability to successfully implement our growth strategy, including through making and integrating acquisitions, opening new branches and expanding our product offerings;

•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, including increased shipping costs and delays and heightened risks relating to sourcing products from international suppliers;

•our ability to drive improved productivity and profitability, including managing operating costs and achieving productivity initiatives;

•the potential loss of any significant customers, a reduction of the quantity of products our customers purchase or inability to pay;

•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;

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

•natural or man-made disruptions to our facilities;

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

•our ability to continue to anticipate and address evolving consumer demands;

•exposure to product liability and various other claims and litigation, and the adequacy and costs of insurance related thereto;

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

•the impact of federal, state, provincial and local regulations, including potential changes in our effective tax rate;

•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;

•our ability to attract and retain key employees while controlling costs, including the impact of labor and trucking shortages;

•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; and

•the imposition of tariffs and other trade barriers, and the effect of retaliatory trade measures.

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.

PART I – Financial Information

Item 1. Financial Statements

GMS Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)


	July 31, 2022		April 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	106,613	$	101,916
Trade accounts and notes receivable, net of allowances of $9,583 and $9,346, respectively	820,589		750,046
Inventories, net	577,938		550,953
Prepaid expenses and other current assets	24,856		20,212
Total current assets	1,529,996		1,423,127
Property and equipment, net of accumulated depreciation of $237,746 and $227,288, respectively	359,556		350,679
Operating lease right-of-use assets	158,295		153,271
Goodwill	698,631		695,897
Intangible assets, net	438,103		454,747
Deferred income taxes	19,415		17,883
Other assets	8,429		8,795
Total assets	$	3,212,425	$	3,104,399
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	363,287	$	367,315
Accrued compensation and employee benefits	62,344		107,925
Other accrued expenses and current liabilities	153,380		127,938
Current portion of long-term debt	47,712		47,605
Current portion of operating lease liabilities	39,904		38,415
Total current liabilities	666,627		689,198
Non-current liabilities:
Long-term debt, less current portion	1,192,101		1,136,585
Long-term operating lease liabilities	116,815		112,161
Deferred income taxes, net	48,114		46,802
Other liabilities	49,544		55,155
Total liabilities	2,073,201		2,039,901
Commitments and contingencies
Stockholders' equity:

SEC Form 10-Q filed by GMS Inc.