SiteOne Landscape Supply, Inc. — Form 10-K Summary
Business context and reporting period. SiteOne is a wholesale distributor of landscape supplies serving professional contractors, with more than 590 branches in 45 U.S. states and six Canadian provinces. The filing covers the fiscal year ended January 2, 2022 (52 weeks); the prior fiscal year ended January 3, 2021 (53 weeks). The company reports one operating segment.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $3,475.7 million | $2,704.5 million | +29% |
| Gross profit / margin | $1,212.6 million / 34.9% | $901.3 million / 33.3% | Margin +160 bps |
| SG&A | $900.6 million | $728.2 million | +24%; 25.9% of sales vs. 26.9% |
| Operating income | $313.7 million | $179.8 million | +75% |
| Net income | $238.4 million | $121.3 million | +97% |
| Diluted EPS | $5.20 | $2.75 | Increased |
| Adjusted EBITDA | $415.1 million | $260.2 million | Increased |
| Cash from operations | $210.8 million | $229.4 million | Decreased |
Organic Daily Sales increased 22%; acquisitions contributed 9% of reported sales growth. Management attributed organic growth partly to price inflation, which contributed approximately 11 percentage points. Landscaping products generated $2,584.8 million of sales and agronomic and other products $890.9 million.
Fourth quarter: Sales were $805.2 million versus $675.1 million; net income was $27.5 million versus $11.5 million; Adjusted EBITDA was $61.8 million versus $43.9 million. The business is seasonal, with sales and earnings typically strongest in the second and third quarters.
Cash, debt, and liquidity
- Year-end cash was $53.7 million; working capital was $615.9 million, up from $483.0 million.
- Gross long-term debt was $260.2 million, and finance lease obligations were $45.4 million. No borrowings were outstanding under the $375 million asset-based revolving facility; available borrowing capacity was $364.1 million.
- Management reported total available liquidity of $417.8 million and expected cash, operating cash flow, and ABL capacity to cover operating needs and obligations for the next 12 months.
- Operating cash flow fell despite higher net income, principally because receivables and inventory increased. Capital expenditures were $32.5 million; investing cash outflow was $182.0 million, including $147.2 million for acquisitions.
- The company repaid $68.0 million of term-loan principal in December 2021. The term loans mature in March 2028; the ABL facility matures in February 2024. Interest-rate swaps largely mitigated the disclosed near-term sensitivity to a 1 percentage-point rate increase.
Changes, outlook, and notable matters
- Results improved substantially year over year, supported by strong demand, acquisitions, pricing, gross-margin expansion, and lower SG&A as a share of sales. The prior year included one additional week.
- Management said product and logistics inflation, supply shortages, freight constraints, and labor availability remained challenging. It reported passing through cost increases to date and expected inflation to remain elevated for most of FY2022; supply-chain disruptions were also expected to continue.
- FY2022 capital expenditures were expected to be 0.8%–1.3% of net sales. The filing provides no specific sales or earnings guidance.
- Eight acquisitions were completed in FY2021 for an aggregate purchase price of $147.2 million. New distribution centers began operations in Hutchins, Texas and Palmetto, Georgia in the fourth quarter.
- COVID-19 had no material adverse effect on FY2021 results, according to management, but Omicron-related staffing and supply-chain disruptions occurred late in the year. Management emphasized uncertainty around the pandemic and its economic effects.
- Principal risks include weather and seasonality, construction-market cyclicality, inflation and inability to pass on costs, supply-chain and labor disruptions, inventory and customer-credit risks, environmental regulation and remediation, cybersecurity (including a July 2020 ransomware attack), and debt and interest-rate exposure. The company reported no material litigation and recorded a $3.9 million environmental remediation liability, partly offset by a $1.5 million indemnification asset.
- The independent auditor issued unqualified opinions on the financial statements and internal controls. The critical audit matter concerned valuation of customer-relationship intangible assets from acquisitions.
Important facts for investors to verify
- How much of reported and organic sales growth came from price inflation versus underlying volume and acquisitions.
- Whether elevated product, freight, and labor costs can continue to be passed through without eroding gross margins.
- Whether higher inventory and receivables convert to cash as supply conditions normalize; operating cash flow declined while working capital rose.
- Debt repayment capacity, covenant headroom, swap coverage, and exposure as LIBOR transitions to replacement benchmarks.
- Integration and returns from recent acquisitions, and the assumptions behind acquired customer-relationship valuations and goodwill.
- Exposure to environmental remediation, supplier purchase commitments, and continuing cybersecurity risks.