Non-GAAP Financial Measures
The below table provides reconciliations of non-GAAP financial measures presented in this Current Report on Form 8-K to the most directly comparable measures prepared in accordance with U.S. GAAP for the periods presented.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| Successor | | | Predecessor | | Combined* | | Predecessor |
| (in thousands) | Period from
July 25, 2022
through
October 1, 2022 | | | Period from
July 3, 2022
through
July 24, 2022 | | Period from
July 3, 2022
through
October 1, 2022 | | Period from
July 4, 2021
through
October 2, 2021 |
| Operating income (loss) | $ | 47,034 | | | | $ | (12,664) | | | $ | 34,370 | | | $ | 910,726 | |
| Restructuring and impairment charges | 2,399 | | | | 975 | | | 3,374 | | | 971 | |
| Share-based compensation | 8,838 | | | | 937 | | | 9,775 | | | 8,353 | |
| Acquired inventory step-up amortization | 30,317 | | | | — | | | 30,317 | | | — | |
| Strategic development and acquisition related costs | 2,732 | | | | 28,895 | | | 31,627 | | | 22,250 | |
| Loss (gain) on divestitures | 1,762 | | | | — | | | 1,762 | | | (831,252) | |
| Other | 108 | | | | 151 | | | 259 | | | 1,194 | |
| Adjusted operating income | 93,190 | | | | 18,294 | | | 111,484 | | | 112,242 | |
| Depreciation and amortization | 56,260 | | | | 18,288 | | | 74,548 | | | 71,055 | |
| Adjusted EBITDA | $ | 149,450 | | | | $ | 36,582 | | | $ | 186,032 | | | $ | 183,297 | |
| * ‒ Consists of the mathematical addition of selected financial data of the Predecessor and Successor periods. No other adjustments are made to the combined presentation. |
We present certain “non-GAAP financial measures” as defined under the Securities Exchange Act of 1934. Management believes that the use of such non-GAAP financial measures provides investors with useful information upon which to assess our operating performance. Such non-GAAP financial measures should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. However, we believe the presentation of the non-GAAP financial measures, when considered together with the comparable U.S. GAAP financial measures, along with a reconciliation to its respective U.S. GAAP financial measure, enables investors to better understand the factors and trends affecting our underlying business that could not be obtained absent these disclosures. Additionally, we believe that the presentation of our non-GAAP financial measures enables investors to evaluate trends in the business excluding certain items which are not entirely a result of our core operations.
Specifically, in this report, we discuss Adjusted operating income and Adjusted EBITDA. We also discuss Combined financial results which is a combination of our selected financial and operating data of the Predecessor and Successor periods. The presentation of the Combined selected financial and operating data consists of the mathematical addition of selected financial and operating data of the Successor for the period from July 25, 2022 through October 1, 2022 with the financial and operating data of the Predecessor for the period from July 3, 2022 through July 24, 2022. There are no other adjustments made in this combined presentation.
The presentation of these non-GAAP financial measures supplements other metrics we use to internally evaluate our business and facilitates the comparison of past and present operations. The non-GAAP financial measures we use may differ from non-GAAP financial measures used by other companies, and other companies may not define non-GAAP financial measures we use in the same way.
The preliminary financial information is not a comprehensive statement of the Company’s financial results and is subject to change pending completion of the Company’s financial closing procedures for the quarter ended October 1, 2022, final adjustments and other developments that may arise prior to the time the Company’s financial results are finalized, which may be material. The preliminary financial information should not be viewed as a substitute for financial statements prepared in accordance with U.S. GAAP and is not necessarily indicative of the results to be achieved in future periods. Accordingly, you should not place undue reliance on this preliminary financial information as additional information and disclosure would be required for a more complete understanding of the Company’s financial position and results of operations for the period. The Company’s independent registered public accounting firm has not conducted a review of, and does not express an opinion or any other form of assurance with respect to, this preliminary unaudited financial information. It is possible that the Company or its independent registered public accounting firm may identify items that require them to make adjustments to the preliminary estimates set forth above and those changes could be material. The Company undertakes no obligation, and specifically
disclaims any obligation, to update the information presented in this Form 8-K in the future to reflect events and circumstances occurring or existing after the date hereof, except as may be required by law or the terms of our unsecured bonds.
Forward- Looking Statements
Certain statements and information in this Form 8-K may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “anticipate,” “guidance,” “plan,” “potential,” “expect,” “should,” “will,” “forecast,” “target” and similar expressions are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current expectations, assumptions and/or beliefs concerning future events. As a result, these forward-looking statements rely on a number of assumptions, forecasts and estimates, and therefore, these forward-looking statements are subject to a number of risks and uncertainties that may cause the Company’s actual performance to differ materially from that projected in such statements. Such forward-looking statements may include, but are not limited to, statements concerning our preliminary financial and operating results for the period from July 3, 2022 through October 1, 2022. Among the factors that could cause actual results to differ materially include, but are not limited to industry cyclicality; seasonality of the business and adverse weather conditions; challenging economic conditions affecting the residential, non-residential and repair and remodeling construction industries and markets; commodity price volatility and/or limited availability of raw materials, including polyvinyl chloride (“PVC”) resin, glass, aluminum, natural gas and steel due to supply chain disruptions; our ability to identify and develop relationships with a sufficient number of qualified suppliers and to mitigate risk in the event that a significant supplier experiences a significant production or supply chain interruption; the increasing difficulty of consumers and builders in obtaining credit or financing; increases in the macroeconomic inflationary environment and our ability to react accordingly; our ability to successfully achieve price increases to offset cost increases; our ability to successfully implement operational efficiency initiatives, including automation; our ability to successfully integrate our acquired businesses; our ability to attract and retain employees, including through various initiatives and actions; volatility in the U.S. and international economies and in the credit markets; the severity, duration and spread of the COVID-19 pandemic, as well as actions that may be taken by the Company or governmental authorities to contain the COVID-19 pandemic or to treat its impact and the resulting impact on supply chain and labor pressures; macroeconomic uncertainty and market volatility resulting from geopolitical concerns, including Russia’s invasion of Ukraine; an impairment of goodwill and/or intangible assets; our ability to successfully develop new products or improve existing products; enforcement and obsolescence of our intellectual property rights; costs related to compliance with, violations of or liabilities under environmental, health and safety laws; competitive activity and pricing pressure in our industry; our ability to make strategic acquisitions accretive to earnings and dispositions at favorable prices and terms; our ability to fund operations, provide increased working capital necessary to support our strategy and acquisitions using available liquidity; our ability to carry out our restructuring plans and to fully realize the expected cost savings; global climate change, including compliance with new laws or regulations relating thereto; breaches of our information system security measures; damage to our computer infrastructure and software systems; necessary maintenance or replacements to our enterprise resource planning technologies; potential personal injury, property damage or product liability claims or other types of litigation, including stockholder litigation related to the acquisition of the Company by Clayton Dubilier & Rice, LLC; compliance with certain laws related to our international business operations; increases in labor costs, labor market pressures, potential labor disputes, union organizing activity and work stoppages at our facilities or the facilities of our suppliers; significant changes in factors and assumptions used to measure certain of our defined benefit plan obligations and the effect of actual investment returns on pension assets; ability to compete effectively against competitors with substitutable products; additional costs from new regulations which relate to the utilization or manufacturing of our products or services, including changes in building codes and standards; our ability to realize the anticipated benefits of acquisitions and dispositions and to use the proceeds from dispositions; our substantial indebtedness and our ability to incur substantially more indebtedness; limitations that our debt agreements place on our ability to engage in certain business and financial transactions; our ability to obtain financing on acceptable terms; exchange rate fluctuations; downgrades of our credit ratings and the effect of increased interest rates on our ability to service our debt. See also the “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2022 and the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and other risks described in documents subsequently filed by the Company from time to time with the SEC, which identify other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in these forward-looking statements. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements, whether as a result of new information, future events or otherwise.