SiteOne Landscape Supply, Inc 10-Q for FY2022 Q2

SiteOne Landscape Supply, Inc. (SITE)

10-Q 2022-08-03 For: 2022-07-03

Added on April 07, 2026

About this 10-Q

SiteOne Landscape Supply, Inc filed this 10-Q on August 3, 2022, covering the quarter ended July 3, 2022 (FY2022 Q2).

Headline figures

Quarter ended July 3, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.22B; up 12.2% from $1.08B a year earlier
Net income: $140.7M; up 13.9% from net income of $123.5M a year earlier
Diluted EPS: $3.07; up 13.7% from $2.70 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 29, 2022
Common Stock, $0.01 par value per share						45,033,535



TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets			4
Consolidated Statements of Operations			5
Consolidated Statements of Comprehensive Income			6
Consolidated Statements of Equity			7
Consolidated Statements of Cash Flows			8
Notes to Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			41

Part II. OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 1A. Risk Factors			42
Item 6. Exhibits			43
Signature			44


Assets	July 3, 2022		January 2, 2022
Current assets:
Cash and cash equivalents	$	50.1	$	53.7
Accounts receivable, net of allowance for doubtful accounts of $15.9 and $13.5, respectively	527.1		393.8
Inventory, net	864.9		636.6
Income tax receivable	—		3.3
Prepaid expenses and other current assets	56.4		41.4
Total current assets	1,498.5		1,128.8

Property and equipment, net (Note 5)	170.0		151.5
Operating lease right-of-use assets, net (Note 7)	302.7		298.5
Goodwill (Note 6)	360.9		311.1
Intangible assets, net (Note 6)	248.1		213.9
Deferred tax assets	2.4		3.2
Other assets	11.7		9.1
Total assets	$	2,594.3	$	2,116.1

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	342.4	$	254.5
Current portion of finance leases (Note 7)	11.9		11.0
Current portion of operating leases (Note 7)	65.0		62.1
Accrued compensation	63.9		99.3
Long-term debt, current portion (Note 9)	4.0		4.0
Income tax payable	35.0		—
Accrued liabilities	91.2		82.0
Total current liabilities	613.4		512.9

Other long-term liabilities	11.1		10.6
Finance leases, less current portion (Note 7)	34.7		34.4
Operating leases, less current portion (Note 7)	246.2		244.2
Deferred tax liabilities	9.5		5.1
Long-term debt, less current portion (Note 9)	435.8		251.2
Total liabilities	1,350.7		1,058.4

Commitments and contingencies (Note 11)

Stockholders' equity:
Common stock, par value $0.01; 1,000,000,000 shares authorized; 45,031,637 and 44,788,385 shares issued, and 45,010,726 and 44,767,474 shares outstanding at July 3, 2022 and January 2, 2022, respectively	0.5		0.4
Additional paid-in capital	567.2		562.0
Retained earnings	670.5		497.5
Accumulated other comprehensive income (loss)	5.4		(2.2)
Total stockholders' equity	1,243.6		1,057.7
Total liabilities and stockholders' equity	$	2,594.3	$	2,116.1


	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net sales	$	1,216.6	$	1,083.9	$	2,021.9	$	1,734.1
Cost of goods sold	755.5		695.7		1,291.6		1,144.4
Gross profit	461.1		388.2		730.3		589.7

Selling, general and administrative expenses	272.7		225.8		503.2		418.1
Other income	1.7		2.2		4.2		3.4
Operating income	190.1		164.6		231.3		175.0

Interest and other non-operating expenses, net	4.6		4.3		8.9		9.8
Income before taxes	185.5		160.3		222.4		165.2
Income tax expense	44.8		36.8		49.4		34.3
Net income	$	140.7	$	123.5	$	173.0	$	130.9








Net income per common share:
Basic	$	3.12	$	2.77	$	3.85	$	2.95
Diluted	$	3.07	$	2.70	$	3.78	$	2.86
Weighted average number of common shares outstanding:
Basic	45,034,633		44,508,725		44,985,199		44,444,950
Diluted	45,779,173		45,789,261		45,814,054		45,720,629


☒			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 Income (Loss)		Total Equity
Balance at January 2, 2022	44,767.5	$	0.4	$	562.0	$	497.5	$	(2.2)	$	1,057.7
Net income	—	—		—		32.3		—		32.3
Other comprehensive income	—	—		—		—		8.2		8.2
Issuance of common shares under stock-based compensation plan	134.1	—		(2.7)		—		—		(2.7)
Stock-based compensation	—	—		3.7		—		—		3.7
Balance at April 3, 2022	44,901.6	$	0.4	$	563.0	$	529.8	$	6.0	$	1,099.2
Net income	—	—		—		140.7		—		140.7
Other comprehensive loss	—	—		—		—		(0.6)		(0.6)
Issuance of common shares under stock-based compensation plan	109.1	0.1		(1.6)		—		—		(1.5)
Stock-based compensation	—	—		5.8		—		—		5.8
Balance at July 3, 2022	45,010.7	$	0.5	$	567.2	$	670.5	$	5.4	$	1,243.6


Cash and cash equivalents:
Beginning	53.7		55.2
Ending	$	50.1	$	107.8

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for interest	$	6.8	$	9.1
Cash paid during the year for income taxes	$	13.7	$	1.0


Note 1. Nature of Business and Significant Accounting Policies			11
Note 2. Revenue from Contracts with Customers			13
Note 3. Acquisitions			14
Note 4. Fair Value Measurement and Interest Rate Swaps			15
Note 5. Property and Equipment, Net			18
Note 6. Goodwill and Intangible Assets, Net			18
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			25
Note 12. Earnings (Loss) Per Share			25
Note 13. Subsequent Events			26


	Derivative Assets
	July 3, 2022			January 2, 2022
Derivatives designated as hedging instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Interest rate contracts	Prepaid expenses and other current assets	$	4.5	Prepaid expenses and other current assets	$	—
	Other assets	6.4		Other assets	2.5
Total derivative assets		$	10.9		$	2.5


	Derivative Liabilities
	July 3, 2022			January 2, 2022
Derivatives designated as hedging instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Interest rate contracts	Accrued liabilities	$	—	Accrued liabilities	$	1.2
	Other long-term liabilities	—		Other long-term liabilities	0.6




Total derivative liabilities		$	—		$	1.8


		Three Months Ended
		Gain (Loss) Reclassified from AOCI into Income				Gain (Loss) Recognized in Income
Derivatives not designated as hedging instruments	Location of Gain (Loss)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Interest rate contracts	Interest and other non-operating expenses, net	$	(0.8)	$	(0.3)	$	—	$	(0.5)


	July 3, 2022		January 2, 2022
Land	$	13.2	$	12.2
Buildings and leasehold improvements:
Buildings	8.1		7.8
Leasehold improvements	41.8		39.5
Branch equipment	101.1		81.0
Office furniture and fixtures and vehicles:
Office furniture and fixtures	28.2		25.5
Vehicles	37.7		33.6
Finance lease right-of-use assets	84.4		77.5
Tooling	0.2		0.1
Construction in progress	7.1		7.3
Total property and equipment, gross	321.8		284.5
Less: accumulated depreciation and amortization	151.8		133.0
Total property and equipment, net	$	170.0	$	151.5


	January 2, 2022
	to July 3, 2022
Beginning balance	$	311.1
Goodwill acquired during the period(a)	50.3
Goodwill adjusted during the period	(0.5)
Ending balance	$	360.9


	Six Months Ended
	July 3, 2022		July 4, 2021
Cash Flows from Operating Activities:
Net income	$	173.0	$	130.9
Adjustments to reconcile Net income to net cash (used in) provided by operating activities:
Amortization of finance lease right-of-use assets and depreciation	21.1		16.9
Stock-based compensation	9.5		7.7
Amortization of software and intangible assets	23.7		22.8
Amortization of debt related costs	0.6		0.7
Loss on extinguishment of debt	—		0.8
Gain on sale of equipment	(0.3)		(0.1)

Other	0.6		(1.0)
Changes in operating assets and liabilities, net of the effects of acquisitions:
Receivables	(122.5)		(117.3)
Inventory	(215.2)		(145.6)
Income tax receivable	3.3		6.8
Prepaid expenses and other assets	(9.1)		(4.1)
Accounts payable	80.8		134.8
Income tax payable	34.6		28.8
Accrued expenses and other liabilities	(23.7)		10.1
Net Cash (Used In) Provided By Operating Activities	$	(23.6)	$	92.2

Cash Flows from Investing Activities:
Purchases of property and equipment	(16.6)		(16.6)
Purchases of intangible assets	(7.2)		(3.7)
Acquisitions, net of cash acquired	(122.0)		(63.0)
Proceeds from the sale of property and equipment	1.1		1.3
Net Cash Used In Investing Activities	$	(144.7)	$	(82.0)

Cash Flows from Financing Activities:
Equity proceeds from common stock	2.3		4.7

Borrowings under term loan	—		325.0
Repayments under term loan	(1.3)		(269.8)
Borrowings on asset-based credit facility	319.8		161.9
Repayments on asset-based credit facility	(133.8)		(161.9)
Payments of debt issuance costs	—		(2.4)
Payments on finance lease obligations	(5.8)		(5.0)


		July 3, 2022						January 2, 2022
	Weighted Average Remaining Useful Life	Amount		Accumulated Amortization		Net		Amount		Accumulated Amortization		Net
Customer relationships	17.3 years	$	444.8	$	217.5	$	227.3	$	394.8	$	197.3	$	197.5
Trademarks and other	3.8 years	39.3		18.5		20.8		34.1		17.7		16.4
Total intangibles		$	484.1	$	236.0	$	248.1	$	428.9	$	215.0	$	213.9


Fiscal year ending:
2022 (remainder)	$	25.7
2023	44.1
2024	35.9
2025	29.3
2026	23.8
Thereafter	89.3
Total future amortization	$	248.1


Maturity of Lease Liabilities	Operating Leases		Finance Leases
Fiscal year:
2022 (remainder)	$	33.3	$	6.8
2023	71.7		13.2
2024	60.5		12.0
2025	48.7		9.0
2026	37.0		6.2
2027	26.7		2.7
Thereafter	89.9		0.5
Total lease payments	367.8		50.4
Less: interest	56.6		3.8
Present value of lease liabilities	$	311.2	$	46.6


		Three Months Ended				Six Months Ended
Lease Cost	Classification	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Finance lease cost:
Amortization of right-of-use assets	Selling, general and administrative expenses	$	3.0	$	2.6	$	6.0	$	5.2
Interest on lease liabilities	Interest and other non-operating expenses, net	0.4		0.3		0.8		0.7
Operating lease cost	Cost of goods sold	1.5		0.9		3.0		1.6
Operating lease cost	Selling, general and administrative expenses	18.7		18.0		37.1		34.7
Short-term lease cost	Selling, general and administrative expenses	0.5		0.3		1.0		0.8
Variable lease cost	Selling, general and administrative expenses	0.4		0.3		0.6		0.5
Sublease income	Selling, general and administrative expenses	(0.3)		(0.3)		(0.6)		(0.6)
Total lease cost		$	24.2	$	22.1	$	47.9	$	42.9


	Three Months Ended				Six Months Ended
Other Information	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Cash paid for amounts included in the measurements of lease liabilities:
Operating cash flows from finance leases	$	0.4	$	0.3	$	0.8	$	0.7
Operating cash flows from operating leases	$	20.1	$	18.6	$	39.4	$	35.5
Financing cash flows from finance leases	$	2.9	$	2.6	$	5.8	$	5.0
Right-of-use assets obtained in exchange for new lease liabilities:
Finance leases	$	5.2	$	3.0	$	7.1	$	5.0
Operating leases	$	11.3	$	21.1	$	37.3	$	33.6


Lease Term and Discount Rate	July 3, 2022
Weighted-average remaining lease term:
Finance leases	4.2 years
Operating leases	6.7 years
Weighted-average discount rate:
Finance leases	3.9	%
Operating leases	4.6	%


	Stock Options	RSUs	DSUs	PSUs
Outstanding as of January 2, 2022	1,193.3	186.6	45.5	60.5
Granted(a)	65.8	78.0	6.1	46.8
Exercised/Vested/Settled(a)	(173.0)	(63.2)	—	(52.4)
Expired or forfeited	(5.2)	(5.5)	—	(0.5)
Outstanding as of July 3, 2022	1,080.9	195.9	51.6	54.4


	Weighted Average Grant Date Fair Value
Stock options	$	57.47
RSUs	$	176.45
DSUs	$	120.83
PSUs(a)	$	146.06


	Unrecognized Compensation (in millions)		Weighted Average Remaining Period
Stock options	$	7.4	2.7 years
RSUs	$	24.9	3.0 years
DSUs	$	0.9	1.8 years
PSUs	$	5.2	2.0 years


	July 3, 2022		January 2, 2022
ABL facility	$	186.0	$	—
Term loans	254.1		255.4
Hybrid debt instruments	4.1		4.8
Total gross long-term debt	444.2		260.2
Less: unamortized debt issuance costs and discounts on debt	(4.4)		(5.0)
Total debt	$	439.8	$	255.2
Less: current portion	(4.0)		(4.0)
Total long-term debt	$	435.8	$	251.2


(In millions, except per share information and percentages)
	2022				2021												2020
	Qtr 2		Qtr 1		Qtr 4			Qtr 3			Qtr 2			Qtr 1			Qtr 4			Qtr 3
Net sales	$	1,216.6	$	805.3	$	805.2		$	936.4		$	1,083.9		$	650.2		$	675.1		$	751.9
Cost of goods sold	755.5		536.1		522.8			595.9			695.7			448.7			452.8			501.8
Gross profit	461.1		269.2		282.4			340.5			388.2			201.5			222.3			250.1
Selling, general and administrative expenses	272.7		230.5		247.2			235.3			225.8			192.3			202.8			183.3
Other (income) expense, net	(1.7)		(2.5)		(0.1)			1.8			(2.2)			(1.2)			(2.7)			(1.8)
Operating income	190.1		41.2		35.3			103.4			164.6			10.4			22.2			68.6
Interest and other non-operating expenses, net	4.6		4.3		5.1			4.3			4.3			5.5			9.1			6.6
Income tax (benefit) expense	44.8		4.6		2.7			19.1			36.8			(2.5)			1.6			13.8
Net income	$	140.7	$	32.3	$	27.5		$	80.0		$	123.5		$	7.4		$	11.5		$	48.2
Net income per common share:
Basic	$	3.12	$	0.72	$	0.61		$	1.79		$	2.77		$	0.17		$	0.26		$	1.11
Diluted	$	3.07	$	0.70	$	0.60		$	1.74		$	2.70		$	0.16		$	0.25		$	1.08
Adjusted EBITDA(a)	$	222.0	$	67.8	$	61.8		$	128.2		$	190.6		$	34.5		$	43.9		$	87.8
Net sales as a percentage of annual Net sales					23.2		%	26.9		%	31.2		%	18.7		%	25.0		%	27.8		%
Gross profit as a percentage of annual Gross profit					23.3		%	28.1		%	32.0		%	16.6		%	24.7		%	27.8		%
Adjusted EBITDA as a percentage of annual Adjusted EBITDA					14.9		%	30.9		%	45.9		%	8.3		%	16.9		%	33.7		%


	Total		Next 12 Months		Beyond 12 Months
Long-term debt, including current maturities	$	444.2	$	4.0	$	440.2
Interest on long-term debt	$	57.8	$	14.4	$	43.4



	Six Months Ended
Net cash (used in) provided by:	July 3, 2022		July 4, 2021
Operating activities	$	(23.6)	$	92.2
Investing activities	$	(144.7)	$	(82.0)
Financing activities	$	164.9	$	41.9


Exhibit Number						Description

10.1						Seventh Amendment to the Credit Agreement, dated as of July 22, 2022, by and among SiteOne Landscape Supply Holding, LLC, SiteOne Landscape Supply, LLC, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the several banks and other financial institutions party thereto, is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of SiteOne Landscape Supply, Inc. filed July 25, 2022.

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						The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended July 3, 2022 is formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted in Inline XBRL with applicable taxonomy extension information contained in Exhibit 101).


		SITEONE LANDSCAPE SUPPLY, INC.


Date:	August 3, 2022	By:	/s/ John T. Guthrie
			John T. Guthrie
			Executive Vice President, Chief Financial Officer and Assistant Secretary
			(Principal Financial and Principal Accounting Officer)


			/s/ Doug Black
			Doug Black
			Chairman and Chief Executive Officer