Advanced Drainage Systems to Restate Prior Period Financial Statements
November 29 2016 - 5:15PM
Business Wire
Advanced Drainage Systems, Inc. (NYSE: WMS) (“ADS” or the
“Company”), a leading global manufacturer of water management
products and solutions for commercial, residential, infrastructure
and agricultural applications, today announced that the Company
will restate its prior period financial statements and related
financial information as filed with the Securities and Exchange
Commission (“SEC”). The restated financial information will include
the consolidated financial statements for the annual periods ended
March 31, 2016, 2015 and 2014, selected annual financial
information for the annual periods ended 2013 and 2012, as well as
the associated consolidated financial statements for the quarterly
periods for fiscal years 2016 and 2015. Accordingly, the financial
statements, including the related report of independent registered
public accounting firm thereon, and all press releases and similar
communications issued by the Company relating to those periods
should not be relied upon pending completion of the restatement.
The Company intends to file its restated financial information as
soon as possible.
Historically, the Company has classified its share-based awards
as equity awards and recorded the associated compensation expense
based on the award’s grant date fair value. Based upon an internal
review of its share-based award agreements and related
administrative procedures, the Company has concluded that it should
have accounted for these awards as liability-classified instead of
equity-classified. The fair value of liability-classified awards is
remeasured at each reporting period until settlement.
Certain tax withholding provisions that were added to award
agreements beginning in fiscal 2009 allowed award recipients to use
net shares upon exercise of their award to satisfy tax withholding
requirements in amounts greater than the minimum statutory
withholding obligations. In addition, prior to the Company’s
initial public offering in fiscal 2015, the Company had
periodically repurchased shares resulting from option exercises
within six months of the exercise date. Both of these practices
would result in the liability classification for awards.
As part of its review of the foregoing compensation expense
issues, the Company also determined that additional adjustments are
required for historic compensation expense associated with certain
executive employment agreements as well as certain stock repurchase
agreements in place with members of senior management, whereby the
Company was required to repurchase shares upon the employee’s
death. The stock repurchase agreements were entered into in fiscal
2007 and terminated at the time of the Company’s initial public
offering in fiscal 2015.
While the Company continues to assess the impact of adjusting
the accounting for its compensation related agreements described
above, the effect of such treatment will result in the recognition
of either compensation expense or compensation benefit (reduction
in compensation expense) for various reporting periods. This
recognition of compensation expense or compensation benefit will
have a corresponding impact to the Company’s previously reported
net income. The Company is in the process of finalizing the impact
these adjustments will have to its previously reported financial
statements, including the impact to net income. However, due to the
nature of the adjustments, the Company does not anticipate that the
restatement will impact revenue or Adjusted EBITDA, a non-GAAP
financial measure. The Company’s definition of Adjusted EBITDA
excludes the impact of share-based compensation and in its restated
filings will exclude the impact of retirement or termination
related compensation expense. Additional information regarding
Adjusted EBITDA is set forth below under “Non-GAAP Financial
Measures”.
The Company’s review of its prior period accounting with respect
to its share-based awards and other compensation matters are
ongoing and subject to change.
About ADS
Advanced Drainage Systems (ADS) is the leading manufacturer of
high performance thermoplastic corrugated pipe, providing a
comprehensive suite of water management products and superior
drainage solutions for use in the construction and infrastructure
marketplace. Its innovative products are used across a broad range
of end markets and applications, including non-residential,
residential, agriculture and infrastructure applications. The
Company has established a leading position in many of these end
markets by leveraging its national sales and distribution platform,
its overall product breadth and scale and its manufacturing
excellence. Founded in 1966, the Company operates a global network
of 61 manufacturing plants and 29 distribution centers.
Non-GAAP Financial
Measures
This press release includes references to Adjusted EBITDA, a
non-GAAP financial measure. This non-GAAP financial measure is
used in addition to and in conjunction with results presented in
accordance with GAAP. This measure is not intended to be a
substitute for those reported in accordance with GAAP. Adjusted
EBITDA may be different from non-GAAP financial measures used by
other companies, even when similar terms are used to identify such
measures.
Adjusted EBITDA is a non-GAAP financial measure that comprises
net income before interest, income taxes, depreciation and
amortization, stock-based compensation, non-cash charges and
certain other expenses. The Company’s definition of Adjusted EBITDA
may differ from similar measures used by other companies, even when
similar terms are used to identify such measures. Adjusted EBITDA
is a key metric used by management and the Company’s board of
directors to assess financial performance and evaluate the
effectiveness of the Company’s business strategies. Accordingly,
management believes that Adjusted EBITDA provides useful
information to investors and others in understanding and evaluating
our operating results in the same manner as the Company’s
management and board of directors.
Forward Looking
Statements
Certain statements in this press release may be deemed to be
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.
Such statements include, but are not limited to, statements
regarding the anticipated restatements and expected impact of the
Company’s accounting adjustments on its financial statements and
other financial data for the non-reliance periods and for future
periods, and the anticipated timing of filing of the restated
filings. These statements are not historical facts but rather are
based on the Company’s current expectations, estimates and
projections regarding the Company’s business, operations and other
factors relating thereto. Words such as “may,” “will,” “could,”
“would,” “should,” “anticipate,” “predict,” “potential,”
“continue,” “expects,” “intends,” “plans,” “projects,” “believes,”
“estimates” and similar expressions are used to identify these
forward-looking statements. Factors that could cause actual results
to differ from those reflected in forward-looking statements
include, but are not limited to, the risk that additional
information may arise during the course of the Company’s ongoing
accounting review that would require the Company to make additional
adjustments or revisions or to restate further the financial
statements and other financial data for the non-reliance periods
and any future periods, any further delay in the filing of the
Company’s filings with the SEC or restated filings with the SEC, a
conclusion that the Company’s disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
were ineffective, the review of potential weaknesses or
deficiencies in the Company’s disclosure controls, and discovering
further weaknesses of which we are not currently aware or which
have not been detected, additional uncertainties related to
accounting issues generally and other risks and uncertainties
described in the Company’s filings with the SEC. New risks and
uncertainties emerge from time to time and it is not possible for
the Company to predict all risks and uncertainties that could have
an impact on the forward-looking statements contained in this press
release. In light of the significant risks and uncertainties
inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a
representation by the Company or any other person that the
Company’s expectations, objectives or plans will be achieved in the
timeframe anticipated or at all. Investors are cautioned not to
place undue reliance on the Company’s forward-looking statements
and the Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
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version on businesswire.com: http://www.businesswire.com/news/home/20161129006302/en/
Advanced Drainage Systems, Inc.Michael Higgins,
614-658-0050Director of Investor Relations and Business
Strategymike.higgins@ads-pipe.com
Advanced Drainage Systems (NYSE:WMS)
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