Exhibit 99.1
Beacon Roofing Supply Reports Second Quarter 2016 Results
· | Record second quarter sales of $823.5 million, nearly doubling prior year at 99.3% growth |
· | Organic growth of 27.7% in existing markets (31.4% growth in residential roofing) |
· | Adjusted EPS of $0.03 (GAAP EPS of ($0.10)) vs. ($0.20) in prior year |
· | Second quarter adjusted EBITDA grew to $36.9 million from ($3.6) million in the prior year |
· | Record first half sales of $1.8 billion vs. $1.0 billion in prior year (78.4% growth) |
HERNDON, VA. — (BUSINESS WIRE) — May 2, 2016 — Beacon Roofing Supply, Inc. (the "Company") (NASDAQ: BECN) announced results today for its second quarter ended March 31, 2016 and first half ended March 31, 2016 of the fiscal year ending September 30, 2016 ("fiscal 2016").
Paul Isabella, the Company’s President and Chief Executive Officer, stated: “I am pleased to announce our outstanding second quarter and first half 2016 results that have Beacon well positioned to achieve another record breaking year. We had record second quarter sales of $823.5 million, nearly doubling the prior year at 99.3% growth. Growth came from our acquisitions, led by RSG, and organically through same-store sales and maturing greenfield operations. Gross margin grew in the quarter by 40 basis points over the prior year, mainly driven from a strong residential mix increase. We also saw very good cost leverage during the quarter. Our balance sheet is strong and we have been able to pay down approximately $50 million of revolving debt while funding approximately $100 million in acquisitions. Inventory has been managed effectively and inventory turns increased to 4.1 compared to 2.9 last year. Our strong cash flow generation and solid EBITDA has helped to reduce our net debt leverage ratio to 3.6 times. Adjusted earnings per share of $0.03 were positive in our historically toughest quarter for the first time since 2012 and were $0.23 better than last year. We are tracking to plan on the RSG synergy attainment, with integration progressing ahead of schedule. The acquisition pipeline is more robust than ever, and we already have made three great acquisitions to start the third quarter. I am enthusiastic about the second half of the year and we will continue to push hard to achieve strong results for our shareholders.”
Second Quarter
Total sales increased 99.3% to a second quarter record of $823.5 million in 2016, from $413.2 million in 2015. Residential roofing product sales increased 113.1%, non-residential roofing product sales increased 95.3%, and complementary product sales increased 67.2% over the prior year. Existing market sales, excluding acquisitions, increased 27.7% for the quarter. The second quarter of 2016 and 2015 had 64 and 63 business days, respectively.
The net loss for the second quarter was ($5.7) million, compared to ($9.8) million in 2015. The second quarter net loss per share was ($0.10), compared to ($0.20) in 2015. Adjusted net income, after removing the impact of non-recurring RSG Acquisition-related costs, was $1.7 million in the second quarter 2016, with adjusted diluted net income per share of $0.03 (see included financial tables for a reconciliation of adjusted net income and adjusted earnings per share). The net income for the quarter was favorably impacted by warmer than normal weather, allowing for higher volumes and gross margins which improved by 40 basis points over the prior year. This was offset by increased operating expenses driven by the incremental costs associated with the RSG acquisition made this fiscal year.
First Half
Total sales increased 78.4% to a first half record of $1.8 billion in 2016, from $1.0 billion in 2015. Residential roofing product sales increased 92.1%, non-residential roofing product sales increased 73.1%, and complementary product sales increased 49.9% over the prior year. Existing market sales, excluding acquisitions, increased 18.3% for the first half. The first half of 2016 and 2015 had 126 and 125 business days, respectively.
Net income for the first half was $1.4 million, compared to $3.1 million in 2015. The first half net income per share was $0.02, compared to $0.06 in 2015. Adjusted net income, after removing the impact of non-recurring RSG Acquisition-related costs, was $26.4 million in the second quarter 2016, with adjusted diluted net income per share of $0.44 (see included financial tables for a reconciliation of adjusted net income and adjusted earnings per share). The net income for the first half was favorably impacted by higher volume and gross margins which improved by 60 basis points over the prior year. This was offset by increased operating expenses driven by the incremental costs associated with the RSG acquisition made this fiscal year.
The Company will host a webcast and conference call today at 5:00 p.m. (EST) to discuss these results. The live webcast of the call, along with a webcast replay after the call, can be accessed athttp://ir.beaconroofingsupply.com/events.cfm (the “Events & Presentations” page of the “Investor Relations” section of the Company’s web site). There will be a slide presentation of the results available on that page of the website as well. For those unable to connect to the Internet or who may wish to ask questions, the conference call dial-in number is 720-634-9063. To assure timely access, call participants should call in before 5:00 p.m.
About Beacon Roofing Supply
Founded in 1928, Beacon Roofing Supply, Inc. (NASDAQ: BECN) is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating 369 branches throughout 45 states in the U.S. and six provinces in Canada. To learn more about Beacon and its family of regional brands, please visitwww.becn.com.
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.
BECN-F
Beacon Roofing Supply, Inc.
Joseph Nowicki, 571-323-3940
Executive Vice President & Chief Financial Officer
JNowicki@becn.com
Source: Beacon Roofing Supply, Inc.
BEACON ROOFING SUPPLY, INC | ||||||||||||||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||||||||||||||
(unaudited; in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||||||||||||||||
2016* | % of Net Sales | 2015 | % of Net Sales | 2016* | % of Net Sales | 2015 | % of Net Sales | |||||||||||||||||||||||||
Net sales | $ | 823,537 | 100.0 | % | $ | 413,184 | 100.0 | % | $ | 1,800,017 | 100.0 | % | $ | 1,009,226 | 100.0 | % | ||||||||||||||||
Cost of products sold | 627,773 | 76.2 | % | 316,411 | 76.6 | % | 1,371,065 | 76.2 | % | 774,888 | 76.8 | % | ||||||||||||||||||||
Gross profit | 195,764 | 23.8 | % | 96,773 | 23.4 | % | 428,952 | 23.8 | % | 234,338 | 23.2 | % | ||||||||||||||||||||
Operating expenses | 191,881 | 23.3 | % | 110,979 | 26.9 | % | 398,225 | 22.1 | % | 224,724 | 22.3 | % | ||||||||||||||||||||
Income from operations | 3,883 | 0.5 | % | (14,206 | ) | -3.4 | % | 30,727 | 1.7 | % | 9,614 | 1.0 | % | |||||||||||||||||||
Interest expense, financing costs and other | 13,026 | 1.6 | % | 2,522 | 0.6 | % | 29,282 | 1.6 | % | 5,177 | 0.5 | % | ||||||||||||||||||||
Income (loss) before provision for income taxes | (9,143 | ) | -1.1 | % | (16,728 | ) | -4.0 | % | 1,445 | 0.1 | % | 4,437 | 0.4 | % | ||||||||||||||||||
Provision (benefit) for income taxes | (3,424 | ) | -0.4 | % | (6,942 | ) | -1.7 | % | 46 | 0.0 | % | 1,316 | 0.1 | % | ||||||||||||||||||
Net income (loss) | $ | (5,719 | ) | -0.7 | % | $ | (9,786 | ) | -2.4 | % | $ | 1,399 | 0.1 | % | $ | 3,121 | 0.3 | % | ||||||||||||||
Net income (loss) per share: | ||||||||||||||||||||||||||||||||
Basic | $ | (0.10 | ) | $ | (0.20 | ) | $ | 0.02 | $ | 0.06 | ||||||||||||||||||||||
Diluted | $ | (0.10 | ) | $ | (0.20 | ) | $ | 0.02 | $ | 0.06 | ||||||||||||||||||||||
Weighted average shares used in computing net income (loss) per share: | ||||||||||||||||||||||||||||||||
Basic | 59,295,990 | 49,513,141 | 59,133,569 | 49,470,528 | ||||||||||||||||||||||||||||
Diluted | 59,295,990 | 49,513,141 | 60,077,852 | 50,029,935 |
* | The second quarter 2016 Consolidated Statements of Operations includes $5.5 million of non-recurring charges, $5.7 million of additional amortization for acquired intangibles, and $1.2 million of interest expense, financing costs and other for the recognition of certain costs related to the RSG acquisition. For the six months ended March 31, 2016 Consolidated Statements of Operations includes $25.5 million of non-recurring charges, $11.4 million of additional amortization for acquired intangibles, and $5.0 million of interest expense, financing costs and other for the recognition of certain costs related to the RSG acquisition Management believes the Adjusted Net Income for second quarter 2016 and 6 months ended March 31, 2016 provides a meaningful comparison to prior periods operating results as it adjusts for the impact of the RSG Acquisition. |
BEACON ROOFING SUPPLY, INC | ||||||||||||
Consolidated Balance Sheets | ||||||||||||
(in thousands) | ||||||||||||
March 31, 2016 | September 30, 2015 | March 31, 2015 | ||||||||||
ASSETS | (unaudited) | (audited) | (unaudited) | |||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 14,841 | $ | 45,661 | $ | 22,956 | ||||||
Accounts receivable, net | 490,850 | 399,732 | 248,154 | |||||||||
Inventories | 513,750 | 320,999 | 361,317 | |||||||||
Prepaid expenses and other current assets | 164,624 | 97,928 | 73,490 | |||||||||
Total current assets | 1,184,065 | 864,320 | 705,917 | |||||||||
Property and equipment, net | 147,995 | 90,405 | 85,054 | |||||||||
Goodwill | 1,160,775 | 496,415 | 488,324 | |||||||||
Intangible assets, net | 472,582 | 87,055 | 91,650 | |||||||||
Other assets, net | 1,430 | 1,233 | 3,012 | |||||||||
TOTAL ASSETS | $ | 2,966,847 | $ | 1,539,428 | $ | 1,373,957 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 417,994 | $ | 244,891 | $ | 202,713 | ||||||
Accrued expenses | 152,691 | 124,794 | 80,546 | |||||||||
Borrowings under revolver lines of credit | - | 11,240 | 3,948 | |||||||||
Current portion of long-term obligations | 12,159 | 16,320 | 16,612 | |||||||||
Total current liabilities | 582,844 | 397,245 | 303,819 | |||||||||
Borrowings under revolving lines of credit | 295,690 | - | - | |||||||||
Long-term debt, net of current | 722,542 | 170,200 | 178,241 | |||||||||
Deferred income taxes | 102,878 | 66,500 | 48,637 | |||||||||
Long-term obligations under equipment financing and other, | ||||||||||||
net of current portion | 42,907 | 22,367 | 24,779 | |||||||||
Total liabilities | 1,746,861 | 656,312 | 555,476 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders' equity: | ||||||||||||
Common stock | 595 | 497 | 495 | |||||||||
Undesignated preferred stock | - | - | - | |||||||||
Additional paid-in capital | 678,749 | 345,934 | 335,972 | |||||||||
Retained earnings | 558,804 | 557,405 | 498,249 | |||||||||
Accumulated other comprehensive loss | (18,162 | ) | (20,720 | ) | (16,235 | ) | ||||||
Total stockholders' equity | 1,219,986 | 883,116 | 818,481 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,966,847 | $ | 1,539,428 | $ | 1,373,957 |
BEACON ROOFING SUPPLY, INC | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(unaudited; in thousands) | ||||||||
Six Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Operating activities: | ||||||||
Net income | $ | 1,399 | $ | 3,121 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 47,644 | 16,430 | ||||||
Stock-based compensation | 10,696 | 4,744 | ||||||
Certain interest expense and other financing costs | 4,053 | 543 | ||||||
Gain on sale of fixed assets | (411 | ) | (273 | ) | ||||
Deferred income taxes | 1,741 | 287 | ||||||
Adjustment of liability for contingent consideration and other | (280 | ) | 181 | |||||
Changes in assets and liabilities, net of the effects of | ||||||||
businesses acquired: | ||||||||
Accounts receivable | 95,150 | 118,564 | ||||||
Inventories | (2,519 | ) | (50,305 | ) | ||||
Prepaid expenses and other assets | (15,815 | ) | (5,007 | ) | ||||
Accounts payable and accrued expenses | (61,006 | ) | (25,800 | ) | ||||
Net cash provided by operating activities | 80,652 | 62,485 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (11,059 | ) | (5,384 | ) | ||||
Acquisition of businesses | (941,156 | ) | (69,745 | ) | ||||
Proceeds from sales of assets | 377 | 367 | ||||||
Net cash used in investing activities | (951,838 | ) | (74,762 | ) | ||||
Financing activities: | ||||||||
Borrowings under revolving lines of credit, net of repayments | 292,273 | (13,632 | ) | |||||
Borrowings under term loan, net of repayments | 262,125 | (5,625 | ) | |||||
Borrowings under Senior Notes | 300,000 | - | ||||||
Borrowings/(Repayments) under equipment financing facilities and other | (2,633 | ) | (2,758 | ) | ||||
Payment of deferred financing costs | (27,813 | ) | - | |||||
Proceeds from exercise of options | 15,391 | 3,171 | ||||||
Excess tax benefit from stock-based compensation | 1,630 | 262 | ||||||
Net cash provided by (used in) financing activities | 840,973 | (18,582 | ) | |||||
Effect of exchange rate changes on cash | (607 | ) | (657 | ) | ||||
Net decrease in cash and cash equivalents | (30,820 | ) | (31,516 | ) | ||||
Cash and cash equivalents, beginning of period | 45,661 | 54,472 | ||||||
Cash and cash equivalents, end of period | $ | 14,841 | $ | 22,956 |
BEACON ROOFING SUPPLY, INC | ||||||||||||||||||||||||
Consolidated Sales by Product Line | ||||||||||||||||||||||||
(unaudited; dollars in thousands) | ||||||||||||||||||||||||
Consolidated Sales by Product Line | ||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | Change | ||||||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
Residential roofing products | $ | 436,153 | 53.0 | % | $ | 204,714 | 49.5 | % | $ | 231,439 | 113.1 | % | ||||||||||||
Non-residential roofing products | 269,469 | 32.7 | % | 138,004 | 33.4 | % | 131,465 | 95.3 | % | |||||||||||||||
Complementary building products | 117,915 | 14.3 | % | 70,467 | 17.1 | % | 47,448 | 67.2 | % | |||||||||||||||
$ | 823,537 | 100.0 | % | $ | 413,185 | 100.0 | % | $ | 410,352 | 99.3 | % |
Consolidated Sales by Product Line for Existing Markets* | ||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | Change | ||||||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
Residential roofing products | $ | 253,613 | 51.4 | % | $ | 192,991 | 50.0 | % | $ | 60,622 | 31.4 | % | ||||||||||||
Non-residential roofing products | 155,305 | 31.5 | % | 123,817 | 32.0 | % | 31,488 | 25.4 | % | |||||||||||||||
Complementary building products | 84,514 | 17.1 | % | 69,529 | 18.0 | % | 14,985 | 21.5 | % | |||||||||||||||
$ | 493,432 | 100.0 | % | $ | 386,337 | 100.0 | % | $ | 107,095 | 27.7 | % |
Existing Market Sales By Business Day** | ||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | Change | ||||||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
Residential roofing products | $ | 3,963 | 51.4 | % | $ | 3,063 | 50.0 | % | $ | 900 | 29.4 | % | ||||||||||||
Non-residential roofing products | 2,427 | 31.5 | % | 1,965 | 32.0 | % | 462 | 23.5 | % | |||||||||||||||
Complementary building products | 1,321 | 17.1 | % | 1,104 | 18.0 | % | 217 | 19.7 | % | |||||||||||||||
$ | 7,711 | 100.0 | % | $ | 6,132 | 100.0 | % | $ | 1,579 | 25.7 | % |
*Excludes branches acquired during the four quarters prior to the start of the second quarter of Fiscal 2016. | |
**There were 64 and 63 business days in the quarters ended March 31, 2016 and 2015, respectively. |
BEACON ROOFING SUPPLY, INC | ||||||||||||||||||||||||
Consolidated Sales by Product Line | ||||||||||||||||||||||||
(unaudited; dollars in thousands) | ||||||||||||||||||||||||
Consolidated Sales by Product Line | ||||||||||||||||||||||||
Six Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | Change | ||||||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
Residential roofing products | $ | 930,100 | 51.7 | % | $ | 484,239 | 48.0 | % | $ | 445,861 | 92.1 | % | ||||||||||||
Non-residential roofing products | 617,704 | 34.3 | % | 356,778 | 35.4 | % | 260,926 | 73.1 | % | |||||||||||||||
Complementary building products | 252,213 | 14.0 | % | 168,209 | 16.6 | % | 84,004 | 49.9 | % | |||||||||||||||
$ | 1,800,017 | 100.0 | % | $ | 1,009,226 | 100.0 | % | $ | 790,791 | 78.4 | % |
Consolidated Sales by Product Line for Existing Markets* | ||||||||||||||||||||||||
Six Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | Change | ||||||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
Residential roofing products | $ | 549,691 | 49.5 | % | $ | 448,002 | 47.8 | % | $ | 101,689 | 22.7 | % | ||||||||||||
Non-residential roofing products | 372,983 | 33.7 | % | 325,106 | 34.7 | % | 47,877 | 14.7 | % | |||||||||||||||
Complementary building products | 185,704 | 16.8 | % | 164,190 | 17.5 | % | 21,514 | 13.0 | % | |||||||||||||||
$ | 1,108,378 | 100.0 | % | $ | 937,298 | 100.0 | % | $ | 171,080 | 18.3 | % |
Existing Market Sales By Business Day** | ||||||||||||||||||||||||
Six Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | Change | ||||||||||||||||||||||
Net Sales | Mix % | Net Sales | Mix % | $ | % | |||||||||||||||||||
Residential roofing products | $ | 4,363 | 49.6 | % | $ | 3,584 | 47.8 | % | $ | 779 | 21.7 | % | ||||||||||||
Non-residential roofing products | 2,960 | 33.6 | % | 2,601 | 34.7 | % | 359 | 13.9 | % | |||||||||||||||
Complementary building products | 1,474 | 16.8 | % | 1,314 | 17.5 | % | 160 | 12.2 | % | |||||||||||||||
$ | 8,797 | 100.0 | % | $ | 7,499 | 100.0 | % | $ | 1,298 | 17.3 | % |
*Excludes branches acquired during the four quarters prior to the start of the second quarter of Fiscal 2016. | ||
**There were 126 and 125 business days for the six months ended March 31, 2016 and 2015, respectively. |
BEACON ROOFING SUPPLY INC | ||||||||||||||||||||||||||||||||
Adjusted Net Income and Adjusted Net Income Per Share1 | ||||||||||||||||||||||||||||||||
(unaudited; in thousands except per share amounts) | ||||||||||||||||||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||||||
Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||||
Net income | $ | (5,719 | ) | $ | (0.10 | ) | $ | (9,786 | ) | $ | (0.20 | ) | $ | 1,399 | $ | 0.02 | $ | 3,121 | $ | 0.06 | ||||||||||||
Company adjustments, net of income taxes: | ||||||||||||||||||||||||||||||||
RSG Acquisition costs | 7,401 | 0.12 | - | - | 24,961 | 0.42 | - | - | ||||||||||||||||||||||||
Adjusted Net Income | $ | 1,682 | $ | 0.03 | $ | (9,786 | ) | $ | (0.20 | ) | $ | 26,360 | $ | 0.44 | $ | 3,121 | $ | 0.06 |
(1) | The Company’s management believes that “Adjusted Net Income” and “Adjusted Net Income Per Share”, which excludes non-recurring costs related to the RSG acquisition, and incremental amortization of acquired intangibles, are useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. While management believes Adjusted Net Income and Adjusted Net Income Per Share 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 or Adjusted Net Income Per Share 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 | ||||||||||||||||
(unaudited; in thousands) | ||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Income | $ | (5,719 | ) | $ | (9,786 | ) | $ | 1,399 | $ | 3,121 | ||||||
RSG Acquisition costs2 | 5,452 | - | 21,154 | - | ||||||||||||
Interest expense, net | 13,128 | 2,522 | 29,328 | 5,177 | ||||||||||||
Income taxes | (3,424 | ) | (6,942 | ) | 46 | 1,316 | ||||||||||
Depreciation and amortization | 23,966 | 8,188 | 47,637 | 16,430 | ||||||||||||
Stock-based compensation | 3,516 | 2,389 | 10,696 | 4,744 | ||||||||||||
Adjusted EBITDA | $ | 36,918 | $ | (3,630 | ) | $ | 110,261 | $ | 30,788 |
(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 non-recurring costs related to the RSG acquisition. 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. Management uses these supplemental measures to evaluate performance period over period and to analyze the underlying trends in the Company’s business and to 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. |
While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with United States generally accepted accounting principles, or 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. The Company’s management separately monitors capital expenditures, which impact depreciation expense, as well as amortization expense, interest 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.
(2) | RSG Acquisition costs reflect all non-recurring charges related to the acquisition (excluding the impact of tax) that are not embedded in other balances of the table. Additional RSG Acquisition costs are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation in the table above. |