The following is a discussion and analysis of our financial condition and
results of operations as of and for the periods presented below. The following
discussion and analysis should be read in conjunction with the "Condensed
Consolidated Financial Statements" and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q. This section and other parts of this Quarterly
Report on Form 10-Q contain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from the
results expressed or implied by the forward-looking statement. We have made
these statements in reliance on the safe harbor created by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of
the Securities Exchange Act of 1934, as amended, or the Exchange Act). In some
cases, forward-looking statements can be identified by words such as
"anticipates," "believes," "could," "estimates," "expects," "intends," "may,"
"plans," "potential," "predicts," "projects," "should," "will," "would" or the
negative or similar expressions. All of our forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially from those that we are expecting, including:

•the recent outbreak of the novel coronavirus COVID-19, which was declared a
pandemic by the World Health Organization on March 11, 2020, or the COVID-19
Pandemic;
•the length and severity of the recent COVID-19 Pandemic and its impact on the
global economy, our business, operations and financial results;
•the impact of cost-saving initiatives on our financial and liquidity position;
•federal, state and local government initiatives to mitigate the impact of the
COVID-19 Pandemic, including additional restrictions on business activities,
"shelter-in-place" orders and other restrictions;
•our ability to qualify as an essential business or service under state, county
or local orders;
•the timing, amount and availability of economic stimulus or other initiatives
by federal, state or provincial governments;
•our ability to effectively manage any downturns in the new commercial
construction market, the commercial repair and remodel market and the new
residential construction market;
•our ability to effectively manage any changes in economic, political and social
conditions;
•fluctuating demand for the products and services we offer;
•our ability to effectively compete in a highly competitive industry;
•our ability to realize the anticipated financial and strategic goals of future
acquisitions or investments, including the identification of acquisition targets
and the integration and performance of acquired stores and businesses, including
integration of financial systems;
•our ability to achieve the intended benefits of our recent acquisitions,
including the realization of synergies;
•a diversion of management's attention from ongoing business concerns to matters
related to acquisitions we may make in the future or the integration of previous
acquisitions;
•our ability to maintain our existing contractual and business relationships;
•the change in any exclusive rights or relationships we have with suppliers that
provide us access to leading brands;
•a material disruption at our suppliers' facilities due to weather,
environmental incidents, transportation disruption, natural disasters or public
health emergencies such as the COVID-19 Pandemic and other operational problems;
•the effects of any changes in environmental, health and safety laws and
regulations on our operations and liquidity;
•our ability to attract and retain key management personnel and other talent
required for our business;
•our exposure to legal claims and proceedings related to our business;
•our ability to manage the impact of debt and equity financing transactions;
•our ability to generate a sufficient amount of cash to service our indebtedness
and fund our operations;
•our ability to operate our business under agreements governing our indebtedness
containing financial covenants and other restrictions;
•the effects of and ability to continue incurring a substantial amount of
indebtedness under our asset-based lending credit facility and our term loan
facility;
•the volatility of the trading price of our common stock;
•our relationship, and actual and potential conflicts of interest, with our
majority shareholder; and
•additional factors discussed under the sections entitled "Risk Factors," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as in the other reports we file with the Securities and
Exchange Commission, or SEC.

The forward-looking statements contained in this Quarterly Report on Form 10-Q
are based on historical performance and management's current plans, estimates
and expectations in light of information currently available to us and are
subject to uncertainty and changes in circumstances. There can be no assurance
that future developments affecting us will be those that we have anticipated.
Actual results may differ materially from these expectations due to changes in
global, regional or
                                       23
--------------------------------------------------------------------------------

local political, economic, business, competitive, market, regulatory, public
health and other factors, many of which are beyond our control, as well as the
other factors described in Item 1A. Risk Factors in this Quarterly Report on
Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31,
2019, filed with the SEC on February 25, 2020, or the 2019 10-K, as updated by
our subsequent filings with the SEC. Additional factors or events that could
cause our actual results to differ may also emerge from time to time, and it is
not possible for us to predict all of them. Comparisons of results for current
and any prior periods are not intended to express any future trends or
indications of future performance, unless expressed as such, and should only be
viewed as historical data. Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove to be incorrect, our actual
results may vary in material respects from what we may have expressed or implied
by these forward-looking statements. You should not place undue reliance on any
of our forward-looking statements. Any forward-looking statement made by us in
this Quarterly Report on Form 10-Q speaks only as of the date hereof. We
undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or otherwise, except
as may be required by applicable securities laws. We qualify all of our
forward-looking statements by these disclaimers.

Overview



We are one of the largest specialty building products distributors of wallboard
and suspended ceiling systems in the United States and Canada. Since 2013, we
have completed more than 35 acquisitions and have over 175 branches and 30,000
SKUs.

We have a national operating model supported by local market expertise and an
entrepreneurial, customer-centric culture. Our strong national brand and
acquisition expertise have established us as the distributor of choice for
leading suppliers, and we have over 25,000 customers across construction-related
end markets. We believe we are able to maintain our local market excellence due
to our longstanding customer relationships, dependable service and
market-specific product offerings that cater to local market trends and
preferences.

Factors and Trends Affecting Our Business and Results of Operations



See Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations, in the 2019 10-K for a discussion of the general and
specific factors and trends affecting our business and results of operations,
which include general economic conditions, new non-residential construction, new
residential construction, non-residential repair and remodel construction,
volume, costs and pricing programs.

The COVID-19 Pandemic's Impact on our Business



The uncertain macroeconomic environment created by the COVID-19 Pandemic has had
and will continue to have a significant, adverse impact on our business. As of
the date of this filing, significant uncertainty exists concerning the magnitude
of the impact and duration of the disruption, and we are unable to determine or
predict the overall impact the COVID-19 Pandemic will have on our financial
position, results of operations, or cash flows. The following events related to
the COVID-19 Pandemic have resulted and will result in lost or delayed revenue
to our company:

•limitations on the ability of manufacturers to produce the products we sell;
•limitations on the ability of our suppliers to meet delivery requirements and
commitments;
•limitations on the ability of our employees to perform their work;
•limitations imposed by local, state or federal orders affecting our ability to
operate;
•limitations on the ability of freight carriers to deliver our products to us
and our customers;
•limitations on the ability of our customers to conduct their business and
purchase our products and services;
•delays in starting construction jobs, temporary closure of jobsites or
cancellation of jobs;
•disruptions to our customers' supply chains or purchasing; and
•limitations on the ability of our customers to pay us on a timely basis.

We continue to operate the vast majority of our branches throughout the United
States and Canada, taking safety precautions based on recommendations from
federal, state and local authorities. We continue to operate as part of an
"Essential Critical Infrastructure Sector" in many states. In a select number of
states, including Washington, California, Michigan, New Jersey, and the
Commonwealth of Pennsylvania, stronger restrictions are or have been in place,
and the Company has experienced more significant year over year headwinds and
has not seen the typical seasonal improvement.

                                       24
--------------------------------------------------------------------------------

We will continue to actively monitor the disruption caused by the COVID-19
Pandemic, and may take further actions that alter our business operations as may
be required by federal, state or local authorities or that we determine are in
the best interests of our employees, customers, suppliers and stockholders. We
furloughed approximately 450 employees in response to the COVID-19 Pandemic, but
as of May 8, 2020, approximately 250 employees have returned to work. Other than
the furloughs, we have not seen any material changes to our workforce due to the
COVID-19 Pandemic. We may take further actions in the future as the situation
develops.

We entered the COVID-19 Pandemic with a strong balance sheet and have taken
steps to enhance our financial flexibility. In March 2020, in response to the
COVID-19 Pandemic, we drew $120.0 million from our 2018 Revolving Credit
Facility to provide financial flexibility and liquidity due to volatile
financial market conditions. The additional steps we have taken to maintain cash
flow include:

•delaying or reducing capital expenditures that are not anticipated to impact
near-term business;
•deferring or limiting non-essential operating expenses;
•reduced salaries for exempt employees led by voluntary salary reductions by
certain members of our senior
management team, including a 50% salary reduction for our Chief Executive
Officer;
•reduced independent board member compensation by 50%;
•optimizing all areas of working capital;
•restricted hiring, deferred wage increases and reduced other employer-related
costs;
•furloughed team members associated with temporary branch closures; and
•temporarily suspended acquisition-related activity.

We do not anticipate any issues servicing our debt and do not expect to need
additional borrowings in the second quarter of 2020. As of April 30, 2020, we
have cash on hand of approximately $87 million and approximately $205 million of
remaining borrowing capacity under our 2018 Revolving Credit Facility.

We estimate the negative impact of the COVID-19 Pandemic to our base business
net sales for the three months ended March 31, 2020, was between $14.0 million
and $18.0 million across all product lines. This historical estimate is a
management estimate only based on the information available as of the date of
this filing. We did not record any asset impairments, inventory charges or
provision for expected credit losses related to the COVID-19 Pandemic during the
first quarter of 2020, but future events may require such charges, which could
have a material adverse effect on our financial condition, results of
operations, cash flows or liquidity.

First Quarter Update

Financial Results



We reported net sales of $524.3 million for the three months ended March 31,
2020, an increase of $9.4 million, or 1.8%, compared to the three months ended
March 31, 2019. Our gross margin for the three months ended March 31, 2020, was
30.9% compared to 29.7% for the three months ended March 31, 2019, due to
improved profitability across our wallboard, metal framing, and complementary
and other products lines driven by our ongoing pricing and purchasing
initiatives.

2020 Acquisitions



We supplement our organic growth strategy with selective acquisitions. As noted
above, we have temporarily suspended our acquisition activity in response to the
COVID-19 Pandemic. Since January 2020 through the date of this filing, we have
completed one acquisition, which resulted in the addition of two branches. See
Note 7, Acquisitions, to the condensed consolidated financial statements. In
executing our acquisition strategy and integrating acquired companies, we focus
on the cost savings we can achieve through combined procurement and pricing
programs and brand consolidation. The acquisition contributed $3.9 million to
net sales for the three months ended March 31, 2020.

                                                   Effective Date of
               Acquisitions                           Acquisition                  Branch Locations                # of Branches Acquired
Insulation Distributors, Inc.                       February 3, 2020                   Maryland                               2






                                       25

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses