SiteOne Landscape Supply, Inc 10-Q for FY2020 Q2

SiteOne Landscape Supply, Inc. (SITE)

10-Q 2020-07-29 For: 2020-06-28

Added on April 07, 2026

About this 10-Q

SiteOne Landscape Supply, Inc filed this 10-Q on July 29, 2020, covering the quarter ended June 28, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $817.7M; up 8.7% from $752.4M a year earlier
Net income: $79.1M; up 22.3% from net income of $64.7M a year earlier
Diluted EPS: $1.83; up 20.4% from $1.52 a year earlier

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Delaware			46-4056061
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)


Title of each class						Shares Outstanding as of July 24, 2020
Common Stock, $0.01 par value per share						42,005,352



TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statements of Comprehensive Income			5
Consolidated Statements of Equity			6
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures About Market Risk			40
Item 4. Controls and Procedures			40

Part II. OTHER INFORMATION
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 6. Exhibits			43
Signatures			44


Assets	June 28, 2020		December 29, 2019
Current assets:
Cash and cash equivalents	$	163.8	$	19.0
Accounts receivable, net of allowance for doubtful accounts of $8.0 and $8.3, respectively	332.7		283.4
Inventory, net	465.5		427.1
Income tax receivable	—		7.0
Prepaid expenses and other current assets	31.4		29.3
Total current assets	993.4		765.8

Property and equipment, net (Note 5)	111.9		104.9
Operating lease right-of-use assets, net (Note 7)	235.7		231.0
Goodwill (Note 6)	205.9		181.3
Intangible assets, net (Note 6)	155.7		150.6
Deferred tax assets	1.6		1.9
Other assets	6.9		7.8
Total assets	$	1,711.1	$	1,443.3

Liabilities and Equity
Current liabilities:
Accounts payable	$	239.0	$	162.2
Current portion of finance leases (Note 7)	8.8		6.7
Current portion of operating leases (Note 7)	50.5		48.6
Accrued compensation	37.5		39.7
Long-term debt, current portion (Note 9)	4.5		4.5
Income tax payable	2.4		—
Accrued liabilities	66.9		49.1
Total current liabilities	409.6		310.8

Other long-term liabilities	18.7		13.2
Finance leases, less current portion (Note 7)	21.7		16.2
Operating leases, less current portion (Note 7)	190.1		186.3
Deferred tax liabilities	3.4		3.2
Long-term debt, less current portion (Note 9)	605.3		520.4
Total liabilities	1,248.8		1,050.1

Commitments and contingencies (Note 11)

Stockholders' equity:
Common stock, par value $0.01; 1,000,000,000 shares authorized; 41,998,876 and 41,591,727 shares issued, and 41,977,965 and 41,570,816 shares outstanding at June 28, 2020 and December 29, 2019, respectively	0.4		0.4
Additional paid-in capital	273.0		261.5
Retained earnings	199.4		137.8
Accumulated other comprehensive loss	(10.5)		(6.5)
Total equity	462.3		393.2
Total liabilities and equity	$	1,711.1	$	1,443.3


	Three Months Ended						Six Months Ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019

Net sales	$	817.7	$	752.4	$	1,277.5	$	1,169.7
Cost of goods sold	531.6		494.4		848.6		781.7
Gross profit	286.1		258.0		428.9		388.0

Selling, general and administrative expenses	175.0		166.7		342.1		322.5
Other income	1.2		1.4		2.2		2.5
Operating income	112.3		92.7		89.0		68.0

Interest and other non-operating expenses, net	7.6		8.7		15.3		17.7
Income before taxes	104.7		84.0		73.7		50.3
Income tax expense	25.6		19.3		12.1		9.7
Net income	$	79.1	$	64.7	61.6		40.6








Net income per common share:
Basic	$	1.89	$	1.57	$	1.47	$	0.99
Diluted	$	1.83	$	1.52	$	1.43	$	0.95
Weighted average number of common shares outstanding:
Basic	41,950,914		41,099,329		41,858,615		41,031,776
Diluted	43,114,035		42,687,841		43,081,617		42,607,074


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock Shares	Common Stock Amount		Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at December 30, 2018	40,890.1	$	0.4	$	242.1	$	60.1	$	(0.8)	$	301.8
Net loss	—	—		—		(24.1)		—		(24.1)
Other comprehensive loss	—	—		—		—		(2.0)		(2.0)
Issuance of common shares under stock-based compensation plan	89.4	—		0.2		—		—		0.2
Stock-based compensation	—	—		1.8		—		—		1.8
Balance at March 31, 2019	40,979.5	$	0.4	$	244.1	$	36.0	$	(2.8)	$	277.7
Net income	—	—		—		64.7		—		64.7
Other comprehensive loss	—	—		—		—		(3.5)		(3.5)
Issuance of common shares under stock-based compensation plan	219.9	—		2.3		—		—		2.3
Stock-based compensation	—	—		5.4		—		—		5.4
Balance at June 30, 2019	41,199.4	$	0.4	$	251.8	$	100.7	$	(6.3)	$	346.6


Cash and cash equivalents:
Beginning	19.0		17.3
Ending	$	163.8	$	25.2

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for interest	14.3		17.6
Cash paid during the year for income taxes	0.8		1.0


Note 1. Nature of Business and Significant Accounting Policies			10
Note 2. Revenue from Contracts with Customers			13
Note 3. Acquisitions			13
Note 4. Fair Value Measurement and Interest Rate Swaps			15
Note 5. Property and Equipment, Net			17
Note 6. Goodwill and Intangible Assets, Net			17
Note 7. Leases			19
Note 8. Employee Benefit and Stock Incentive Plans			20
Note 9. Long-Term Debt			22
Note 10. Income Taxes			24
Note 11. Commitments and Contingencies			24
Note 12. Earnings (Loss) Per Share			24
Note 13. Subsequent Events			25


	Derivative Liabilities
	June 28, 2020				December 29, 2019
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate contracts	Accrued liabilities	$	5.3	Accrued liabilities	$	2.1
	Other long-term liabilities	6.7		Other long-term liabilities	5.3
Total derivatives		$	12.0		$	7.4


	June 28, 2020		December 29, 2019
Land	$	12.2	$	12.2
Buildings and leasehold improvements:
Buildings	7.8		7.8
Leasehold improvements	27.5		25.5
Branch equipment	49.8		47.9
Office furniture and fixtures and vehicles:
Office furniture and fixtures	21.0		21.4
Vehicles	32.0		30.2
Finance lease right-of-use assets	57.8		46.3
Tooling	0.1		0.1
Construction in progress	3.7		2.9
Total property and equipment, gross	211.9		194.3
Less: accumulated depreciation and amortization	100.0		89.4
Total property and equipment, net	$	111.9	$	104.9


	December 30, 2019
	to June 28, 2020
Beginning balance	$	181.3
Goodwill acquired during the period	26.0
Goodwill adjusted during the period	(1.4)
Ending balance	$	205.9


		June 28, 2020										December 29, 2019
	Weighted Average Remaining Useful Life (Years)	Amount		Accumulated Amortization		Net		Amount		Accumulated Amortization		Net
Customer relationships	16.8	$	289.2	$	140.3	$	148.9	$	267.9	$	124.4	$	143.5
Trademarks and other	3.2	18.2		11.4		6.8		17.0		9.9		7.1
Total intangible assets		$	307.4	$	151.7	$	155.7	$	284.9	$	134.3	$	150.6


Fiscal year ending:
2020 (remainder)	$	16.4
2021	28.2
2022	23.1
2023	18.5
2024	14.5
Thereafter	55.0
Total future amortization	$	155.7


	Stock Options	RSUs	DSUs	PSUs
Outstanding as of December 29, 2019	1,998.8	148.5	32.8	28.4
Granted	137.4	75.0	7.9	16.9
Exercised/Vested/Settled	(378.1)	(45.7)	—	—
Expired or forfeited	(15.5)	(4.4)	—	(1.1)
Outstanding as of June 28, 2020	1,742.6	173.4	40.7	44.2


	Weighted Average Grant Date Fair Value
Stock options	$	26.04
RSUs	$	100.92
DSUs	$	85.39
PSUs	$	101.87


	Unrecognized Compensation (in millions)		Weighted Average Remaining Period (Years)
Stock options	$	8.8	2.58
RSUs	$	11.3	3.07
DSUs	$	0.6	1.33
PSUs	$	2.2	2.18


	June 28, 2020		December 29, 2019
ABL facility	$	179.0	$	92.8
Term loan facility	439.5		441.8
Total gross long-term debt	618.5		534.6
Less: unamortized debt issuance costs and discounts on debt	(8.7)		(9.7)
Total debt	$	609.8	$	524.9
Less: current portion	(4.5)		(4.5)
Total long-term debt	$	605.3	$	520.4


		Three Months Ended						Six Months Ended
Lease cost	Classification	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Finance lease cost
Amortization of right-of-use assets	Selling, general and administrative expenses	$	2.2	$	1.7	$	4.2	$	3.5
Interest on lease liabilities	Interest and other non-operating expenses, net	0.3		0.2		0.6		0.4
Operating lease cost	Cost of goods sold	0.8		0.8		1.6		1.6
Operating lease cost	Selling, general and administrative expenses	16.4		14.5		32.4		29.3
Short-term lease cost	Selling, general and administrative expenses	0.4		0.4		0.8		0.8
Variable lease cost	Selling, general and administrative expenses	0.1		0.3		0.3		0.4
Sublease income	Selling, general and administrative expenses	(0.3)		(0.1)		(0.6)		(0.2)
Total lease cost		$	19.9	$	17.8	$	39.3	$	35.8


	Three Months Ended						Six Months Ended
Other information	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flows from finance leases	$	0.3	$	0.2	$	0.6	$	0.4
Operating cash flows from operating leases	$	16.2	$	15.4	$	32.7	$	30.4
Financing cash flows from finance leases	$	2.1	$	1.6	$	3.9	$	3.3
Right-of-use assets obtained in exchange for new lease liabilities
Finance leases	$	4.9	$	3.5	$	11.5	$	6.8
Operating leases	$	9.8	$	23.2	$	31.3	$	33.8


Maturity of Lease Liabilities	Operating Leases		Finance Leases
Fiscal year:
2020 (remainder)	$	26.9	$	5.0
2021	59.9		9.5
2022	49.4		7.8
2023	38.9		6.1
2024	29.6		3.6
2025	19.8		0.8
Thereafter	75.1		0.1
Total lease payments	299.6		32.9
Less: interest	59.0		2.4
Present value of lease liabilities	$	240.6	$	30.5


Lease Term and Discount Rate	June 28, 2020
Weighted-average remaining lease term (years)
Finance leases	3.8
Operating leases	6.9
Weighted-average discount rate
Finance leases	4.3	%
Operating leases	5.8	%


(In millions)
Consolidated Statements of Operations

	Three Months Ended															Six Months Ended
	June 28, 2020						June 30, 2019						June 28, 2020					June 30, 2019
Net sales	$	817.7	100.0	%	$	752.4	100.0	%	$	1,277.5	100.0	%		$	1,169.7	100.0	%
Cost of goods sold	531.6		65.0	%	494.4		65.7	%	848.6		66.4	%		781.7		66.8	%
Gross profit	286.1		35.0	%	258.0		34.3	%	428.9		33.6	%		388.0		33.2	%
Selling, general and administrative expenses	175.0		21.4	%	166.7		22.2	%	342.1		26.8	%		322.5		27.6	%
Other income	1.2		0.1	%	1.4		0.2	%	2.2		0.2	%		2.5		0.2	%
Operating income	112.3		13.7	%	92.7		12.3	%	89.0		7.0	%		68.0		5.8	%
Interest and other non-operating expenses, net	7.6		0.9	%	8.7		1.2	%	15.3		1.2	%		17.7		1.5	%
Income tax expense	25.6		3.1	%	19.3		2.6	%	12.1		0.9	%		9.7		0.8	%
Net income	$	79.1	9.7	%	$	64.7	8.6	%	$	61.6	4.8	%		$	40.6	3.5	%


(In millions, except per share information and percentages)
	2020							2019															2018
	Qtr 2		Qtr 1		Qtr 4			Qtr 3			Qtr 2			Qtr 1			Qtr 4			Qtr 3

Net sales	$	817.7	$	459.8	$	535.0		$	652.8		$	752.4		$	417.3		$	474.6		$	578.5
Cost of goods sold	531.6		317.0		365.0			437.6			494.4			287.3			325.9			387.5
Gross profit	286.1		142.8		170.0			215.2			258.0			130.0			148.7			191.0
Selling, general and administrative expenses	175.0		167.1		166.8			165.0			166.7			155.8			150.1			151.8
Other income	1.2		1.0		1.2			2.3			1.4			1.1			2.0			2.3
Operating income (loss)	112.3		(23.3)		4.4			52.5			92.7			(24.7)			0.6			41.5
Interest and other non-operating expenses	7.6		7.7		7.5			8.2			8.7			9.0			8.3			9.2
Income tax (benefit) expense	25.6		(13.5)		(5.6)			9.7			19.3			(9.6)			(5.6)			2.4
Net income (loss)	$	79.1	$	(17.5)	$	2.5		$	34.6		$	64.7		$	(24.1)		$	(2.1)		$	29.9
Net income (loss) per common share:
Basic	$	1.89	$	(0.42)	$	0.06		$	0.84		$	1.57		$	(0.59)		$	(0.05)		$	0.74
Diluted	$	1.83	$	(0.42)	$	0.06		$	0.81		$	1.52		$	(0.59)		$	(0.05)		$	0.70
Adjusted EBITDA⁽¹⁾	$	132.1	$	(3.6)	$	22.2		$	70.5		$	114.3		$	(5.9)		$	18.1		$	60.0
Net sales as a percentage of annual Net sales					22.7		%	27.7		%	31.9		%	17.7		%	22.4		%	27.4		%
Gross profit as a percentage of annual Gross profit					22.0		%	27.8		%	33.4		%	16.8		%	21.9		%	28.2		%
Adjusted EBITDA as a percentage of annual Adjusted EBITDA					11.0		%	35.1		%	56.8		%	(2.9)		%	10.3		%	34.1		%


(In millions)
	Payments Due by Period
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years

Long-term debt, including current maturities⁽¹⁾	$	618.5	$	5.6	$	8.9	$	604.0	$	—
Interest on long-term debt⁽²⁾	97.2		26.1		46.5		24.6		—


Exhibit Number						Description

10.1†						S iteOne Landscape Supply, Inc. 2020 Omnibus Equity Incentive Plan, is incorporated by reference to E xhibit 10.1 to the Company ’s Current Report on F orm 8-K filed on May 15, 2020.

10.2†						Form of Employee Stock Option Agreement under the SiteOne Landscape Supply, Inc. 2020 Omnibus Incentive Plan.

10.3†						Form of Employee Restricted Stock Unit Agreement under the SiteOne Landscape Supply, Inc. 2020 Omnibus Incentive Plan.

10.4†						Form of Performance Stock Unit Award Agreement under the SiteOne Landscape Supply, Inc. 2020 Omnibus Incentive Plan.

10.5†						Form of Non-Employee Director Deferred Stock Unit Agreement under the SiteOne Landscape Supply, Inc. 2020 Omnibus Incentive Plan.

10.6†						Summary of Non-Employee Director Compensation, as amended and restated on May 13, 2020.

31.1						Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a - 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a - 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document

101.SCH						XBRL Taxonomy Extension Schema

101.CAL						XBRL Taxonomy Extension Calculation Linkbase

101.DEF						XBRL Taxonomy Extension Definition Linkbase

101.LAB						XBRL Taxonomy Extension Label Linkbase

101.PRE						XBRL Extension Presentation Linkbase

104						Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)