Investor Day
Reconciliation of Non-GAAP
Financial Measures
Management uses certain non-GAAP financial measures and considers them to be important supplemental measures of the company's performance. In addition, management believes these non-GAAP financial
measures provide additional insight for analysts and investors in evaluating the company's financial and operating performance. These non-GAAP financial measures should not be considered alternatives to, or
more meaningful indicators of, the company's financial measures as prepared in accordance with GAAP. The company's methods of determining these non-GAAP financial measures may differ from the
methods used by other companies and may not be comparable. The company also provides certain guidance solely on a non-GAAP basis because the company cannot predict certain elements that are included
in certain reported GAAP results, including the variables and individual adjustments necessary for a reconciliation to GAAP. While management is not able to specifically quantify the reconciliation items for
forward-looking non-GAAP measures without unreasonable effort, the company expects these items to be similar to the types of charges and costs excluded from Adjusted EBITDA in prior periods. Management
bases the estimated ranges of non-GAAP measures for future periods on its reasonable estimates of such factors as assumed effective tax rate, assumed interest expense, stock-based compensation expense,
litigation expense, and other assumptions about capital requirements for future periods. The variability of these items may have a significant impact on our future GAAP financial results. We use Adjusted
EBITDA, Adjusted EBITDA margin, Adjusted net income, and Adjusted EPS because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a
consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA and Adjusted EBITDA margin are helpful in highlighting
trends because they exclude the results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital
structure, the tax jurisdictions in which we operate, and capital investments. We use Adjusted EBITDA and Adjusted EBITDA margin to measure our financial performance and also to report our results to our
board of directors. Further, our executive incentive compensation is based in part on Adjusted EBITDA. In addition, we use Adjusted EBITDA for purposes of calculating compliance with our debt covenants in
certain of our debt facilities. Adjusted EBITDA should not be considered as an alternative to net income as a measure of financial performance or to cash flows from operations as a liquidity measure. We define
Adjusted EBITDA as net income (loss), adjusted for the following items: loss from discontinued operations, net of tax; equity of non-consolidated entities; income tax (benefit) expense; depreciation and
amortization; interest expense, net; impairment and restructuring charges; gain on previously held shares of equity investment; (gain) loss on sale of property and equipment; share-based compensation
expense; non-cash foreign exchange transaction/translation (income) loss; other non-cash items; and costs related to debt restructuring and debt refinancing. Adjusted EBITDA margin is defined as Adjusted
EBITDA divided by net revenues. We present free cash flow because we believe it assists investors and analysts in determining the quality of our earnings. We also use free cash flow to measure our financial
performance and to report to our board of directors. In addition, our executive incentive compensation is based in part on free cash flow. We define free cash flow as cash flow from operations less capital
expenditures (including purchases of intangible assets). Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We also present net debt leverage
because it is a key financial metric that is used by management to assess the balance sheet risk of the company. We define net debt leverage as net debt (total principal debt outstanding less unrestricted cash)
divided by adjusted EBITDA for the last twelve month period. Adjusted net income represents net income adjusted for certain items as presented in our reconciliation of non-GAAP, including the after-tax impact
of i) non-cash foreign currency (gains) losses, ii) impairment and restructuring charges, iii) one-time, non-cash gains, and iv) other non-recurring expenses associated with certain matters such as mergers and
acquisitions, and litigation. Adjusted EPS represents net income per diluted share adjusted to exclude the estimated per share impact of the same specifically identified items used to calculate adjusted net
income as described above. Where applicable such items are tax-effected at our estimated annual effective tax rate. We also present Return on Invested Capital (ROIC) because we believe ROIC is a
meaningful metric of how effectively we create value from cash deployment. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method we use may
differ from the methods used by other companies.
Due to rounding, numbers presented throughout this presentation may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures.
64
© 2021 JELD-WEN | Investor Day
JWView entire presentation