Non-GAAP Financial Measures
EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted free cash flow, adjusted net cash flows provided by operating activities, adjusted net cash flows used in investing activities, adjusted net cash flows (used in) provided by financing activities and total net non-floorplan debt are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies.
We arrange our new and used vehicle inventory floorplan financing through lenders affiliated with our vehicle manufacturers and our Revolving Credit Facility. However, we believe that all floorplan financing of inventory purchases in the normal course of business should correspond with the related inventory activity and be classified as an operating activity. As a result, we use the non-GAAP measures “adjusted net cash provided by/used in operating activities,” “adjusted net cash provided by/used in investing activities” and “adjusted net cash provided by/used in financing activities” to further evaluate our cash flows. We believe that this classification eliminates excess volatility in our operating cash flows prepared in accordance with GAAP. In addition, floorplan financing associated with dealership acquisitions and dispositions are classified as investing activities on an adjusted basis to eliminate excess volatility in our operating cash flows prepared in accordance with GAAP.
From time to time, our management evaluates and analyzes results and any impact on our company of strategic decisions and actions relating to, among other things, cost reduction, growth, profitability improvement initiatives, and other events outside of our normal, or “core,” business and operations, by considering alternative financial measures not prepared in accordance with GAAP, such as EBITDA from continuing operations and adjusted EBITDA from continuing operations. In our evaluation of results from time to time, we exclude items that do not arise directly from core operations, including catastrophic events, such as hailstorms, hurricanes, and snow storms, gains and losses on dealership and real estate transactions, severance costs, acquisition costs, legal and other professional fees, asset impairment charges (and accelerated depreciation), and non-cash gains and losses on interest rate swaps. Because these charges and gains materially affect our company’s financial condition or results in the specific period in which they are recognized, management also evaluates, and makes resource allocation and performance evaluation decisions based on, the related non-GAAP measures that exclude such items. In addition to using such non-GAAP measures to evaluate results in a specific period, management believes that such measures may provide more complete and consistent comparisons of operational performance on a period-over-period historical basis and a better indication of expected future trends. Our management also uses non-GAAP measures in conjunction with GAAP financial measures to assess our business, including communication with our board of directors, investors, and industry analysts concerning financial performance. We believe investors use these metrics in evaluating longer-term period-over-period performance, and these metrics allow investors to better understand and evaluate the information used by management to assess operating performance. The exclusion of certain costs and expenses in the calculation of adjusted EBITDA from continuing operations should not be construed as an inference that these costs are unusual or infrequent.
EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted free cash flow, adjusted net cash flows provided by operating activities, adjusted net cash flows used in investing activities, adjusted net cash flows (used in) provided by financing activities and total net non-floorplan debt are not measures of financial performance under GAAP, but are instead considered non-GAAP financial performance measures. Non-GAAP measures do not have definitions under GAAP and may be defined differently by, and not be comparable to similarly titled measures used by, other companies. As a result, EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted free cash flow, adjusted net cash flows provided by operating activities, adjusted net cash flows used in investing activities, adjusted net cash flows (used in) provided by financing activities and total net non-floorplan debt are considered and evaluated by management in conjunction with a review of the most directly comparable measures calculated in accordance with GAAP. We caution investors not to place undue reliance on EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted free cash flow, adjusted net cash flows provided by operating activities, adjusted net cash flows used in investing activities, adjusted net cash flows (used in) provided by financing activities and total net non-floorplan debt, but also to consider them together with the most directly comparable GAAP measures.
The following table presents a reconciliation of the non-GAAP financial measures of EBITDA from continuing operations and adjusted EBITDA from continuing operations to the GAAP financial measure of net income from continuing operations. Certain amounts set for the below may not compute due to rounding.
