Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - BEACON ROOFING SUPPLY INC | v466063_ex99-2.htm |
| 8-K - FORM 8-K - BEACON ROOFING SUPPLY INC | v466063_8-k.htm |
Exhibit 99.1
May 4, 2017
Beacon Roofing Supply Reports Second Quarter 2017 Results
| · | Record second quarter sales of $870.7 million (5.7% growth year-over-year) |
| · | Existing market sales growth of 2.4% on top of record breaking Q2 2016 |
| · | Second quarter EPS of ($0.16); ($0.04) Adj. vs. ($0.10); $0.03 Adj. in prior year; in line with our normal second quarter seasonality |
| · | Completed five acquisitions in the fiscal year, adding 23 branches to our national footprint |
HERNDON, VA. — (BUSINESS WIRE) — Beacon Roofing Supply, Inc. (NASDAQ: BECN) announced results today for its second quarter ended March 31, 2017 and first half ended March 31, 2017 of the fiscal year ending September 30, 2017 (“2017” or “Fiscal 2017”).
Paul Isabella, the Company’s President and Chief Executive Officer, stated: “I am pleased to announce another record breaking revenue quarter for Beacon which has us positioned for a strong second half of 2017. Most notable is our existing market same day sales growth of 2.4%, which is particularly even more impressive considering the 26% mild weather-aided growth we saw in Q2 of 2016. Our existing residential roofing business delivered the 12th consecutive quarter of year-over-year improvement, achieving 9.3% growth in the quarter. Our complementary products business, one of our strategic focus areas, also demonstrated positive growth in the quarter. This is a favorable sign, and we will continue to pursue organic and acquisition growth within this category, as shown by our May 1st acquisition of Lowry’s, Inc., a market leader in waterproofing in the western United States. Our second quarter gross margins also remained above the most recent three-year reported average for Q2, and we are confident in sequential improvements during the upcoming quarters. We also expect our non-residential business to rebound in the second half with anticipated stronger demand and more favorable year-over-year comparisons. We will remain intensely focused on producing above-market growth within our core roofing markets and complementary categories, both organically and by acquisition. I am enthusiastic about the remainder of 2017 and our ability to achieve strong full year results.”
Second Quarter
Total sales increased 5.7% to a second quarter record of $870.7 million in second quarter 2017, from $823.5 million in 2016. Residential roofing product sales increased 11.8%, non-residential roofing product sales declined 9.4%, and complementary product sales increased 17.6% over the prior year. Existing markets same day sales, excluding acquisitions, increased 2.4% for the quarter. The second quarter 2017 had an identical number of business days as the year ago period (64 vs. 64 days).
The net loss for the second quarter was ($9.4) million, compared to ($5.7) million in 2016. Second quarter EPS was ($0.16), compared to ($0.10) in 2016. Adjusted Net Income (Loss), after removing the impact of certain non-recurring costs related to major acquisitions, was a loss of ($2.6) million in the second quarter 2017, compared to a profit of $1.7 million in 2016. Second quarter Adjusted EPS was a loss of ($0.04) (see included financial tables for a reconciliation of “Adjusted”), compared to $0.03 in 2016. Second quarter results were favorably impacted by attractive volume growth within both residential roofing and complementary products segments. Operating performance was negatively impacted by a decline in non-residential roofing sales and lower gross margins.
First Half
Total sales increased 4.0% to a first half record of $1.87 billion in 2017, from $1.80 billion in 2016. Residential roofing product sales increased 8.4%, non-residential roofing product sales decreased 9.9%, and complementary product sales increased 22.2% over the prior year. Existing market same day sales, excluding acquisitions, increased 0.9% for the first half. The first half of fiscal 2017 and 2016 had 125 and 126 business days, respectively.
Net income for the first half was $11.1 million, compared to $1.4 million in 2016. First half EPS was $0.18, compared to $0.02 in 2016. Adjusted Net Income (Loss), after removing certain non-recurring costs related to major acquisitions, was $24.4 million in the first half 2017, compared to $26.4 million in 2016. First half Adjusted EPS was $0.40 (see included financial tables for a reconciliation of “Adjusted”) compared to $0.44 in 2016. The net income for the first half was favorably impacted by existing market growth within residential roofing and complementary products, and improved gross margins. Operating profits were negatively impacted by a decline in non-residential roofing sales and higher expenses.
The Company will host a webcast and conference call today at 5:00 p.m. ET to discuss these results. The webcast link and call-in details are as follows:
| What: | Beacon Roofing Supply Second Quarter 2017 Earnings Results Webcast and Conference Call | |
| When: | Thursday, May 4, 2017 | |
| Time: | 5:00 p.m. ET | |
| Webcast: | http://ir.beaconroofingsupply.com/events.cfm (live and replay) | |
| Live Call: | 720-634-9063, Conf. ID #12074415 |
To assure timely access, conference call participants should dial in prior to the 5:00 p.m. start time.
Forward-Looking Statements:
This release contains information about management’s view of the Company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the “Risk Factors” section of the Company’s latest Form 10-K. In addition, the forward-looking statements included in this press release represent the Company’s views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point, the Company specifically disclaims any obligation to do so, other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this press release.
About Beacon Roofing Supply
Founded in 1928, Beacon Roofing Supply, Inc. is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating 384 branches throughout 48 states in the U.S. and 6 provinces in Canada. To learn more about Beacon and its family of regional brands, please visit www.becn.com.
BECN-F
Beacon Roofing Supply, Inc.
Joseph Nowicki, Executive VP & CFO
571-323-3940
JNowicki@becn.com
| BEACON ROOFING SUPPLY, INC |
| Consolidated Statements of Operations |
| (In thousands, except share and per share amounts) |
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||||||||||||||||
| 20171 | %
of Net Sales | 20162 | %
of Net Sales | 20171 | %
of Net Sales | 20162 | %
of Net Sales | |||||||||||||||||||||||||
| Net sales | $ | 870,724 | 100.0% | $ | 823,537 | 100.0% | $ | 1,872,908 | 100.0% | $ | 1,800,017 | 100.0% | ||||||||||||||||||||
| Cost of products sold | 666,247 | 76.5% | 627,773 | 76.2% | 1,417,364 | 75.7% | 1,371,065 | 76.2% | ||||||||||||||||||||||||
| Gross profit | 204,477 | 23.5% | 195,764 | 23.8% | 455,544 | 24.3% | 428,952 | 23.8% | ||||||||||||||||||||||||
| Operating expense | 207,533 | 23.8% | 191,881 | 23.3% | 411,643 | 22.0% | 398,225 | 22.1% | ||||||||||||||||||||||||
| Income (loss) from operations | (3,056 | ) | -0.3% | 3,883 | 0.5% | 43,901 | 2.3% | 30,727 | 1.7% | |||||||||||||||||||||||
| Interest expense, financing costs, and other | 12,268 | 1.4% | 13,026 | 1.6% | 25,842 | 1.4% | 29,282 | 1.6% | ||||||||||||||||||||||||
| Income (loss) before provision for income taxes | (15,324 | ) | -1.7% | (9,143 | ) | -1.1% | 18,059 | 0.9% | 1,445 | 0.1% | ||||||||||||||||||||||
| Provision for (benefit from) income taxes | (5,968 | ) | -0.6% | (3,424 | ) | -0.4% | 6,985 | 0.3% | 46 | 0.0% | ||||||||||||||||||||||
| Net income (loss) | $ | (9,356 | ) | -1.1% | $ | (5,719 | ) | -0.7% | $ | 11,074 | 0.6% | $ | 1,399 | 0.1% | ||||||||||||||||||
| Weighted-average common stock outstanding: | ||||||||||||||||||||||||||||||||
| Basic | 60,141,580 | 59,295,990 | 60,041,332 | 59,133,569 | ||||||||||||||||||||||||||||
| Diluted | 60,141,580 | 59,295,990 | 61,069,938 | 60,077,852 | ||||||||||||||||||||||||||||
| Net income (loss) per share: | ||||||||||||||||||||||||||||||||
| Basic | $ | (0.16 | ) | $ | (0.10 | ) | $ | 0.18 | $ | 0.02 | ||||||||||||||||||||||
| Diluted | $ | (0.16 | ) | $ | (0.10 | ) | $ | 0.18 | $ | 0.02 | ||||||||||||||||||||||
| 1 | The second quarter 2017 operating results include $1.6 million ($1.0 million, net of taxes) of non-recurring charges, $7.9 million ($4.8 million, net of taxes) of additional amortization for acquired intangibles, and $1.6 million ($1.0 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal years 2016 and 2017. The first half 2017 operating results include $2.7 million ($1.7 million, net of taxes) of non-recurring charges, $15.9 million ($9.7 million, net of taxes) of additional amortization for acquired intangibles, and $3.1 million ($1.9 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal years 2016 and 2017. See “Adjusted Net Income (Loss) and Adjusted EPS” table for further details. |
| 2 | The second quarter 2016 operating results include $5.5 million ($3.3 million, net of taxes) of non-recurring charges, $5.7 million ($3.4 million, net of taxes) of additional amortization for acquired intangibles, and $1.2 million ($0.7 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal year 2016. The first half 2016 operating results include $25.5 million ($15.2 million, net of taxes) of non-recurring charges, $11.4 million ($6.8 million, net of taxes) of additional amortization for acquired intangibles, and $5.0 million ($3.0 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal year 2016. See “Adjusted Net Income (Loss) and Adjusted EPS” table for further details |
| BEACON ROOFING SUPPLY, INC |
| Consolidated Balance Sheets |
| (In thousands) |
| March 31, | September 30, | March 31, | ||||||||||
| 2017 | 2016 | 2016 | ||||||||||
| Assets | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 10,012 | $ | 31,386 | $ | 14,841 | ||||||
| Accounts receivable, net | 506,386 | 626,965 | 490,850 | |||||||||
| Inventories | 580,889 | 480,736 | 513,750 | |||||||||
| Prepaid expenses and other current assets | 217,389 | 163,103 | 164,625 | |||||||||
| Total current assets | 1,314,676 | 1,302,190 | 1,184,066 | |||||||||
| Property and equipment, net | 156,380 | 148,569 | 147,994 | |||||||||
| Goodwill | 1,228,059 | 1,197,565 | 1,160,775 | |||||||||
| Intangibles, net | 439,507 | 464,024 | 472,582 | |||||||||
| Other assets, net | 1,511 | 1,511 | 1,430 | |||||||||
| Total Assets | $ | 3,140,133 | $ | 3,113,859 | $ | 2,966,847 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 486,328 | $ | 360,915 | $ | 417,994 | ||||||
| Accrued expenses | 131,264 | 161,113 | 152,692 | |||||||||
| Current portion of long-term obligations | 14,014 | 14,811 | 12,159 | |||||||||
| Total current liabilities | 631,606 | 536,839 | 582,845 | |||||||||
| Borrowings under revolving lines of credit, net | 269,124 | 359,661 | 295,690 | |||||||||
| Long-term debt, net | 722,101 | 722,929 | 722,542 | |||||||||
| Deferred income taxes, net | 137,495 | 135,482 | 102,878 | |||||||||
| Long-term obligations under equipment financing and other, net | 30,639 | 35,121 | 42,907 | |||||||||
| Total liabilities | 1,790,965 | 1,790,032 | 1,746,862 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders’ equity: | ||||||||||||
| Common stock | 602 | 598 | 595 | |||||||||
| Undesignated preferred stock | - | - | - | |||||||||
| Additional paid-in capital | 709,278 | 694,564 | 678,748 | |||||||||
| Retained earnings | 658,396 | 647,322 | 558,804 | |||||||||
| Accumulated other comprehensive loss | (19,108 | ) | (18,657 | ) | (18,162 | ) | ||||||
| Total stockholders’ equity | 1,349,168 | 1,323,827 | 1,219,985 | |||||||||
| Total Liabilities and Stockholders’ Equity | $ | 3,140,133 | $ | 3,113,859 | $ | 2,966,847 | ||||||
| BEACON ROOFING SUPPLY, INC |
| Consolidated Statements of Cash Flows |
| (In thousands) |
| Six Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 11,074 | $ | 1,399 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 56,955 | 47,644 | ||||||
| Stock-based compensation | 7,574 | 10,696 | ||||||
| Certain interest expense and other financing costs | 2,703 | 4,053 | ||||||
| Gain on sale of fixed assets | (420 | ) | (411 | ) | ||||
| Deferred income taxes | 2,020 | 1,741 | ||||||
| Other, net | 131 | (280 | ) | |||||
| Changes in operating assets and liabilities, net of the effects of businesses acquired: | ||||||||
| Accounts receivable | 123,590 | 95,150 | ||||||
| Inventories | (92,072 | ) | (2,519 | ) | ||||
| Prepaid expenses and other assets | (53,062 | ) | (15,815 | ) | ||||
| Accounts payable and accrued expenses | 91,950 | (61,006 | ) | |||||
| Net cash provided by operating activities | 150,443 | 80,652 | ||||||
| Investing activities: | ||||||||
| Purchases of property and equipment | (24,231 | ) | (11,059 | ) | ||||
| Acquisition of businesses | (58,359 | ) | (941,156 | ) | ||||
| Proceeds from sales of assets | 1,285 | 377 | ||||||
| Net cash used in investing activities | (81,305 | ) | (951,838 | ) | ||||
| Financing activities: | ||||||||
| Borrowings under revolving lines of credit, net of repayments | (91,371 | ) | 292,273 | |||||
| Borrowings under term loan, net of repayments | (1,125 | ) | 262,125 | |||||
| Borrowings under Senior Notes | - | 300,000 | ||||||
| Borrowings under equipment financing facilities and other, net of repayments | (5,278 | ) | (2,633 | ) | ||||
| Payment of deferred financing costs | - | (27,813 | ) | |||||
| Proceeds from exercise of options | 7,840 | 15,391 | ||||||
| Taxes paid related to net share settlement of equity awards | (697 | ) | - | |||||
| Excess tax benefit from stock-based compensation | - | 1,630 | ||||||
| Net cash provided by (used in) financing activities | (90,631 | ) | 840,973 | |||||
| Effect of exchange rate changes on cash | 119 | (607 | ) | |||||
| Net decrease in cash and cash equivalents | (21,374 | ) | (30,820 | ) | ||||
| Cash and cash equivalents, beginning of period | 31,386 | 45,661 | ||||||
| Cash and cash equivalents, end of period | $ | 10,012 | $ | 14,841 | ||||
| BEACON ROOFING SUPPLY, INC |
| Consolidated Sales by Product Line |
| (Dollars in thousands) |
| Consolidated Sales by Product Line | ||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
| Residential roofing products | $ | 483,928 | 55.6% | $ | 432,774 | 52.6% | $ | 51,154 | 11.8% | |||||||||||||||
| Non-residential roofing products | 243,966 | 28.0% | 269,270 | 32.7% | (25,304 | ) | -9.4% | |||||||||||||||||
| Complementary building products | 142,830 | 16.4% | 121,493 | 14.7% | 21,337 | 17.6% | ||||||||||||||||||
| $ | 870,724 | 100.0% | $ | 823,537 | 100.0% | $ | 47,187 | 5.7% | ||||||||||||||||
| Consolidated Sales by Product Line for Existing Markets1 | ||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
| Residential roofing products | $ | 473,126 | 56.1% | $ | 432,774 | 52.6% | $ | 40,352 | 9.3% | |||||||||||||||
| Non-residential roofing products | 243,482 | 28.9% | 269,270 | 32.7% | (25,788 | ) | -9.6% | |||||||||||||||||
| Complementary building products | 126,760 | 15.0% | 121,493 | 14.7% | 5,267 | 4.3% | ||||||||||||||||||
| $ | 843,368 | 100.0% | $ | 823,537 | 100.0% | $ | 19,831 | 2.4% | ||||||||||||||||
| Existing Market1 Sales By Business Day2 | ||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
| Residential roofing products | $ | 7,393 | 56.1% | $ | 6,762 | 52.6% | $ | 631 | 9.3% | |||||||||||||||
| Non-residential roofing products | 3,804 | 28.9% | 4,207 | 32.7% | (403 | ) | -9.6% | |||||||||||||||||
| Complementary building products | 1,981 | 15.0% | 1,898 | 14.7% | 83 | 4.3% | ||||||||||||||||||
| $ | 13,178 | 100.0% | $ | 12,867 | 100.0% | $ | 311 | 2.4% | ||||||||||||||||
| 1 | Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of the second quarter of fiscal year 2017. |
| 2 | There were 64 business days in each of the quarters ended March 31, 2017 and 2016. |
| BEACON ROOFING SUPPLY, INC |
| Consolidated Sales by Product Line |
| (Dollars in thousands) |
| Consolidated Sales by Product Line | ||||||||||||||||||||||||
| Six Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
| Residential roofing products | $ | 1,013,145 | 54.1% | $ | 934,285 | 51.9% | $ | 78,860 | 8.4% | |||||||||||||||
| Non-residential roofing products | 555,974 | 29.7% | 617,214 | 34.3% | (61,240 | ) | -9.9% | |||||||||||||||||
| Complementary building products | 303,789 | 16.2% | 248,518 | 13.8% | 55,271 | 22.2% | ||||||||||||||||||
| $ | 1,872,908 | 100.0% | $ | 1,800,017 | 100.0% | $ | 72,891 | 4.0% | ||||||||||||||||
| Consolidated Sales by Product Line for Existing Markets1 | ||||||||||||||||||||||||
| Six Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
| Residential roofing products | $ | 983,115 | 55.3% | $ | 925,484 | 52.1% | $ | 57,631 | 6.2% | |||||||||||||||
| Non-residential roofing products | 553,053 | 31.1% | 617,096 | 34.8% | (64,043 | ) | -10.4% | |||||||||||||||||
| Complementary building products | 240,453 | 13.6% | 233,120 | 13.1% | 7,333 | 3.1% | ||||||||||||||||||
| $ | 1,776,621 | 100.0% | $ | 1,775,700 | 100.0% | $ | 921 | 0.1% | ||||||||||||||||
| Existing Market1 Sales By Business Day2 | ||||||||||||||||||||||||
| Six Months Ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
| Residential roofing products | $ | 7,865 | 55.3% | $ | 7,345 | 52.1% | $ | 520 | 7.1% | |||||||||||||||
| Non-residential roofing products | 4,424 | 31.1% | 4,898 | 34.8% | (474 | ) | -9.7% | |||||||||||||||||
| Complementary building products | 1,924 | 13.6% | 1,850 | 13.1% | 74 | 4.0% | ||||||||||||||||||
| $ | 14,213 | 100.0% | $ | 14,093 | 100.0% | $ | 120 | 0.9% | ||||||||||||||||
| 1 | Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of fiscal year 2017. |
| 2 | There were 125 and 126 business days for the six months ended March 31, 2017 and 2016, respectively. |
| BEACON ROOFING SUPPLY, INC |
| Adjusted Net Income (Loss) and Adjusted EPS1 |
| (In thousands except per share amounts) |
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||||||
| Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||||
| Net income (loss) | $ | (9,356 | ) | $ | (0.16 | ) | $ | (5,719 | ) | $ | (0.10 | ) | $ | 11,074 | $ | 0.18 | $ | 1,399 | $ | 0.02 | ||||||||||||
| Company adjustments, net of income taxes: | ||||||||||||||||||||||||||||||||
| Acquisition costs2 | 6,777 | 0.12 | 7,401 | 0.13 | 13,314 | 0.22 | 24,961 | 0.42 | ||||||||||||||||||||||||
| Adjusted Net Income (Loss) | $ | (2,579 | ) | $ | (0.04 | ) | $ | 1,682 | $ | 0.03 | $ | 24,388 | $ | 0.40 | $ | 26,360 | $ | 0.44 | ||||||||||||||
| 1 | Adjusted Net Income (Loss) is defined as net income excluding certain non-recurring costs and the incremental amortization of intangibles related to major acquisitions completed in fiscal years 2016 and 2017. We believe that Adjusted Net Income (Loss) is an operating performance metric that is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. Adjusted net income per share or “Adjusted EPS” is calculated by dividing the Adjusted Net Income (Loss) for the period by the weighted-average diluted shares outstanding for the period (see Consolidated Statements of Operations for amounts). |
| 2 | Acquisition costs reflect certain non-recurring charges and the incremental amortization of intangibles related to major acquisitions completed in fiscal years 2016 and 2017, net of $4.3 million and $5.0 million in tax for the three months ended March 31, 2017 and 2016, respectively and net of $8.4 million and $16.9 million in tax for the six months ended March 31, 2017 and 2016, respectively. |
While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”). You should not consider Adjusted Net Income (Loss) or Adjusted EPS in isolation or as a substitute for net income and net loss per share or diluted earnings per share calculated in accordance with GAAP.
| BEACON ROOFING SUPPLY, INC |
| Adjusted EBITDA1 |
| (In thousands) |
| Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income (loss) | $ | (9,356 | ) | $ | (5,719 | ) | $ | 11,074 | $ | 1,399 | ||||||
| Acquisition costs2 | 1,584 | 5,451 | 2,744 | 21,155 | ||||||||||||
| Interest expense, net | 13,245 | 13,128 | 26,484 | 29,328 | ||||||||||||
| Income taxes | (5,968 | ) | (3,424 | ) | 6,985 | 46 | ||||||||||
| Depreciation and amortization | 28,530 | 23,966 | 56,955 | 47,637 | ||||||||||||
| Stock-based compensation | 3,758 | 3,516 | 7,574 | 10,696 | ||||||||||||
| Adjusted EBITDA | $ | 31,793 | $ | 36,918 | $ | 111,816 | $ | 110,261 | ||||||||
| Adjusted EBITDA as a % of net sales | 3.7% | 4.5% | 6.0% | 6.1% | ||||||||||||
| 1 | Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation, and certain non-recurring costs from major acquisitions completed in fiscal years 2016 and 2017. EBITDA is a measure commonly used in the distribution industry, and we present Adjusted EBITDA to enhance your understanding of our operating performance. Adjusted EBITDA is used in our bank covenants and we use Adjusted EBITDA as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Further, we believe that Adjusted EBITDA is a useful measure because it improves comparability of results of operations, since purchase accounting used for acquisitions can render depreciation and amortization non-comparable between periods. We use these supplemental measures to evaluate performance period over period and to analyze the underlying trends in our business and establish operational goals and forecasts that are used in allocating resources. We expect to compute our non-GAAP financial measures using the same consistent method from quarter-to-quarter and year-to-year. |
| 2 | Acquisition costs reflect certain non-recurring charges related to major acquisitions completed in fiscal years 2016 and 2017 (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation. |
While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with GAAP. You should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, Adjusted EBITDA has inherent material limitations as a performance measure. It does not include interest expense. Because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITDA also does not include stock-based compensation, which is a necessary element of our costs since we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, stock-based compensation expense, and income tax expense. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.