SiteOne Landscape Supply, Inc. (NYSE:SITE) Files An 8-K Results of Operations and Financial Condition
Item2.02.
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Results of Operations and Financial Condition. |
In connection with the filing today by the registrant of a
Registration Statement on Form S-1 for a secondary offering by
certain selling stockholders of shares of our common stock, the
registrant is furnishing with this Current Report on Form 8-K
estimated financial information for the registrants fiscal
quarter ended April2, 2017.
Expected First Fiscal Quarter 2017
Results
For the three months ended April2, 2017, we expect net sales to
be $332.0 million to $337.0 million, an increase of $3.5 million
to $8.5 million, or 1% to 3%, as compared to net sales of $328.5
million for the three months ended April3, 2016; net loss to be
$(11.2) million to $(10.2) million, a decrease of $5.6 million to
$4.6 million, as compared to a net loss of $(5.6) million for the
three months ended April3, 2016; and Adjusted EBITDA to be $0.5
million to $1.5 million, a decrease of $4.0 million to $3.0
million, as compared to Adjusted EBITDA of $4.5 million for the
three months ended April3, 2016. Our expected net sales growth
for the three months ended April2, 2017 includes the impact of
acquisitions and slightly negative organic daily sales growth,
reflecting a return to normal spring weather patterns as compared
to the early spring in 2016 when we experienced unusually strong
organic daily sales growth compared to our historical first
quarter experience.Our results for the quarter benefited from
sales growth in the construction sector and gross margin
improvement from our operational initiatives, offset by increased
operating expenses due to our acquisitions and higher interest
expense driven by the higher debt levels and a higher blended
interest rate on our debt following our term loan refinancing and
amendment transactions.
Our ongoing liquidity needs are expected to be funded by cash on
hand, net cash provided by operating activities and, as required,
borrowings under our asset-based loan facility. Our borrowing
base capacity under our asset-based loan facility was
approximately $114.8 million as of April2, 2017 after giving
effect to approximately $205.8 million of revolving credit loans
under our asset-based loan facility, a $114.8 million increase
from $91.0 million of revolving credit loans outstanding as of
January1, 2017, reflecting an increase in working capital in
preparation for the spring selling season and the completion of
four acquisitions in the first quarter.
The estimated results for the three months ended April2, 2017 are
preliminary, unaudited and subject to completion, reflect
managements current views and may change as a result of
managements review of results and other factors, including a wide
variety of significant business, economic and competitive risks
and uncertainties. Such preliminary results are subject to the
closing of the first fiscal quarter of 2017 and finalization of
financial and accounting procedures (which have yet to be
performed) and should not be viewed as a substitute for full
quarterly financial statements prepared in accordance with
accounting principles generally accepted in the United States
(GAAP). We caution you that the estimates of net sales, net
income (loss) and Adjusted EBITDA are forward-looking statements
and are not guarantees of future performance or outcomes and that
actual results may differ materially from those described above.
You should read this information together with the financial
statements and the related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations for
prior periods included in our most recent Annual Report on Form
10-K for the fiscal year ended January1, 2017.
Neither our independent registered public accounting firm nor any
other independent registered public accounting firm has audited,
reviewed or compiled, examined or performed any procedures with
respect to the estimated results, nor have they expressed any
opinion or any other form of assurance on the estimated results.
Adjusted EBITDA Description and
Reconciliation
We present Adjusted EBITDA to evaluate the operating performance
and efficiency of our business. Adjusted EBITDA represents EBITDA
as further adjusted for items permitted under the covenants of
our Credit Facilities. EBITDA represents our net income (loss)
plus the sum of income tax (benefit), depreciation and
amortization and interest expense, net of interest income.
Adjusted EBITDA is further adjusted for stock-based compensation
expense, related party advisory fees, loss (gain) on sale of
assets, other non-cash items, other non-recurring (income) and
loss. We believe that Adjusted EBITDA is an important
supplemental measure of operating performance because:
Adjusted EBITDA is used to test compliance with certain covenants
under our credit facilities;
we believe Adjusted EBITDA is frequently used by securities
analysts, investors and other interested parties in their
evaluation of companies, many of which present an Adjusted EBITDA
measure when reporting their results;
we believe Adjusted EBITDA is helpful in highlighting operating
trends, because it excludes the results of decisions that are
outside the control of operating management and that can differ
significantly from company to company depending on long-term
strategic decisions regarding capital structure, the tax
jurisdictions in which companies operate, age and book
depreciation of facilities and capital investments;
we consider (gains) losses on the acquisition, disposal and
impairment of assets as resulting from investing decisions rather
than ongoing operations; and
other significant non-recurring items, while periodically
affecting our results, may vary significantly from period to
period and have a disproportionate effect in a given period,
which affects comparability of our results.
Adjusted EBITDA is not a measure of our liquidity or financial
performance under GAAP and should not be considered as an
alternative to net income, operating income or any other
performance measures derived in accordance with GAAP, or as an
alternative to cash flow from operating activities as a measure
of our liquidity. The use of Adjusted EBITDA instead of net
income has limitations as an analytical tool. For example, this
measure:
does not reflect changes in, or cash requirements for, our
working capital needs;
does not reflect our interest expense, or the cash requirements
necessary to service interest or principal payments, on our debt;
does not reflect our income tax (benefit) expense or the cash
requirements to pay our income taxes;
does not reflect historical cash expenditures or future
requirements for capital expenditures or contractual commitments;
and
although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be
replaced in the future, and does not reflect any cash
requirements for such replacements.
Management compensates for these limitations by relying primarily
on our GAAP results and by using Adjusted EBITDA only as a
supplement to provide a more complete understanding of the
factors and trends affecting the business than GAAP results
alone. Because not all companies use identical calculations, our
presentation of Adjusted EBITDA may not be comparable to other
similarly titled measures of other companies, limiting its
usefulness as a comparative measure.
The following table reconciles Adjusted EBITDA to net loss for
the periods presented:
| Three months ended | ||||||||
| April2, 2017 (preliminary) | April3,2016 (actual) | |||||||
| (in millions) | ||||||||
| (unaudited) | ||||||||
|
Net loss |
$ | (11.2)$(10.2) | $ | (5.6) | ||||
|
Income tax benefit |
(7.6) | (3.4) | ||||||
|
Interest expense, net |
6.2 | 2.6 | ||||||
|
Depreciation and amortization |
9.8 | 8.6 | ||||||
|
EBITDA |
$ | (2.8)$(1.8) | 2.2 | |||||
|
Stock-based compensation (a) |
1.4 | 0.7 | ||||||
|
(Gain) loss on sale of assets (b) |
0.1 | (0.1) | ||||||
|
Advisory fees (c) |
0.5 | |||||||
|
Rebranding, acquisitions and other adjustments (d) |
1.8 | 1.2 | ||||||
|
Adjusted EBITDA (e) |
$ | 0.5$1.5 | $ | 4.5 | ||||
| (a) |
Represents stock-based compensation expense recorded during the period. |
| (b) |
Represents the gain or loss associated with the sale or write-down of assets not in the ordinary course of business. |
| (c) |
Represents fees paid to Clayton, Dubilier Rice, LLC (CDR) and Deere Company (Deere) for consulting services. In connection with our initial public offering, we entered into termination agreements with CDR and Deere to which the parties agreed to terminate the related consulting agreements. See Certain Relationships and Related Party TransactionsConsulting Agreements included in our Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March31, 2017. |
| (d) |
Represents (i)expenses related to our rebranding to the name SiteOne and (ii)professional fees, retention and severance payments, and performance bonuses related to historical acquisitions. Although we have incurred professional fees, retention and severance payments, and performance bonuses related to acquisitions in several historical periods and expect to incur such fees and payments for any future acquisitions, we cannot predict the timing or amount of any such fees or payments. |
| (e) |
Adjusted EBITDA excludes any earnings or loss of acquisitions prior to their respective acquisition dates for all periods presented. |
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking
statements within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Forward-looking statements may
include, but are not limited to, statements relating to our
expected first fiscal quarter 2017 results. Some of the
forward-looking statements can be identified by the use of terms
such as may, intend, might, will, should, could, would, expect,
believe, estimate, anticipate, predict, project, potential, or
the negative of these terms, and similar expressions. You should
be aware that these forward-looking statements are subject to
risks and uncertainties that are beyond our control. Further, any
forward-looking statement speaks only as of the date on which it
is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances
after the date on which it is made or to reflect the occurrence
of anticipated or unanticipated events or circumstances. New
factors emerge from time to time that may cause our business not
to develop as we expect, and it is not possible for us to predict
all of them. Factors that may cause actual results to differ
materially from those expressed or implied by the forward-looking
statements include, but are not limited to, the following:
cyclicality in residential and commercial construction markets;
general economic and financial conditions; weather conditions,
seasonality and availability of water to end-users; laws and
government regulations applicable to our business that could
negatively impact demand for our products; public perceptions
that our products and services are not environmentally friendly;
competitive industry pressures; product shortages and the loss of
key suppliers; product price fluctuations; inventory management
risks; ability to implement our business strategies and achieve
our growth objectives; acquisition and integration risks;
increased operating costs; and other risks, as described in
Item1A, Risk Factors, and elsewhere in our Annual Report on Form
10-K for the fiscal year ended January1, 2017.
Item9.01. Financial Statements and Exhibits.
| (d) | Exhibits |
The documents listed below, filed in November 2016 as exhibits to
the registrants Registration Statement on Form S-1, Registration
No.333-214628 (the November 2016 Form S-1), under the Securities
Act of 1933, are being filed as exhibits to this Current Report
on Form 8-K under the Securities Exchange Act of 1934.
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ExhibitNo. |
DescriptionofExhibit |
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| 10.1 |
Separation Benefit Agreement, dated as of May27, 2016, by and among SiteOne Landscape Supply, LLC, SiteOne Landscape Supply, Inc. and Pascal Convers, is incorporated by reference to Exhibit 10.38 to the November 2016 Form S-1. |
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| 10.2 |
Separation Benefit Agreement, dated as of May27, 2016, by and among SiteOne Landscape Supply, LLC, SiteOne Landscape Supply, Inc. and John Guthrie, is incorporated by reference to Exhibit 10.39 to the November 2016 Form S-1. |
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| 10.3 |
Separation Benefit Agreement, dated as of May27, 2016, by and among SiteOne Landscape Supply, LLC, SiteOne Landscape Supply, Inc. and Joe Ketter, is incorporated by reference to Exhibit 10.40 to the November 2016 Form S-1. |
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| 10.4 |
Separation Benefit Agreement, dated as of August17, 2015, by and among SiteOne Landscape Supply, LLC, SiteOne Landscape Supply, Inc. and Briley Brisendine, is incorporated by reference to Exhibit 10.41 to the November 2016 Form S-1. |
About SiteOne Landscape Supply, Inc. (NYSE:SITE)
SiteOne Landscape Supply, Inc. is a national wholesale distributor of landscape supplies in the United States and Canada. The Company is a supplier of irrigation, landscape lighting, hardscapes, lawn care supplies, nursery stock, and landscape accessories to green industry professionals. As of October 2, 2016, the Company had over 450 stores. The Company offers a selection of fertilizer and control products, such as herbicides, irrigation supplies, landscape accessories, nursery goods, hardscapes, including pavers, natural stones and blocks, and outdoor lighting products. The Company’s customers are primarily residential and commercial landscape professionals specializing in the designing, installation and maintenance of lawns, gardens, golf courses and other outdoor spaces. The Company offers various products, such as spreader settings, LESCO equipment specification sheets, golf course supplies, seed: golf and greentech specification binder. SiteOne Landscape Supply, Inc. (NYSE:SITE) Recent Trading Information
SiteOne Landscape Supply, Inc. (NYSE:SITE) closed its last trading session down -0.85 at 46.24 with 362,193 shares trading hands.