Advanced Drainage Systems Inc (WMS) 2015 Q4 法說會逐字稿

Good day and welcome to the Advanced Drainage Systems brief statement conference call and webcast.

(Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference call over to Mr. Mike Higgins, Director of Investor Relations and Business Strategy. Mr. Higgins, the floor is yours, sir.

Thank you and good afternoon.

With me today is Joe Chlapaty, our Chairman and CEO, and Scott Cottrill, our new CFO. Before we begin, I would like to remind you that some comments today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995, including statements regarding the restatement process and the filing of the Company's fiscal 10-K and other restated filings.

Factors that could cause actual results to differ from those reflected in any forward-looking statements include but are not limited to those factors identified in the Company's February 2, 2016 press release, as well as other factors identifying the Company's filings with the SEC, which factors could cause actual results to differ materially from those expressed in these forward-looking statements. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today.

We will make a replay of this conference call available via webcast on the Company website, and a copy of these remarks have been filed today with the SEC on an 8-K.

With that, I will turn the call over to Joe Chlapaty

Thank you, Mike, and good afternoon to everyone. We want to thank all of you for joining us today.

The purpose of today's call is to provide you with an update on our restatement process. While this will be a brief update, we wanted to ensure you heard directly from us on the progress that has been made to date. Please note we are limiting the call to prepared remarks focused on the restatement, which reflects the full extent of information we are able to share at this time.

As you might imagine, this is been a very difficult period for me, the management team, the Board of Directors, and the entire company. We have dedicated a significant amount of time and resources to this effort, which is a reflection of the complexity and sheer volume of work that goes into a restatement, as well as our commitment to getting it right.

I, along with my team, am continuing to move in a deliberate, thoughtful, and reliable manner to ensure our historical financial statements and FY16 results properly incorporate all necessary changes. Our team continues to work closely and collaboratively with our independent auditors. And I am encouraged by the progress we are making. In fact, we believe we are in the final stages of the restatement process.

However, at this time, we will not meet the end of February filing date, as previously estimated. Given our current belief that the end of the process is near, we will not be providing a specific revised timeline. We will continue to provide updates regarding the restatement process as appropriate, until the necessary reports are on file with the SEC.

Since last summer, our employees, management team, independent auditors, and outside advisers have worked extremely hard to fully understand the facts and circumstances underlining the accounting and control issues that were discovered. At the same time, we have been assessing and making changes to ensure that our appropriate systems and controls are in place. Our commitment to getting it right gives me comfort knowing that we will come out of this process a stronger and better company.

While Scott will touch on this in more detail in just a moment, we have already begun the process of implementing changes to our finance and accounting functions. And at the top of that list is the appointment of Scott Cottrill as our new Chief Financial Officer. We are fortunate to have Scott on our team, and are confident that under his leadership, our financial and accounting function will continue to strengthen.

As you saw in our press release issued yesterday, the Board of Directors has approved a regular quarterly cash dividend to stockholders in the amount of $0.05 per share. The decision to continue returning cash to our stockholders through a quarterly dividend underlies the confidence we have in the overall financial strength of our business, including a healthy balance sheet and strong liquidity.

With that, I will now turn the call over to Scott to provide additional comments on the restatement.

Thank you, Joe, and good afternoon, everyone.

As you know, I joined the Company a few months ago, in the midst of the restatement. To say that I jumped in with both feet would be an understatement. However, I joined ADS because I believe in the Company, its growing position in the market, its management team, and our significant potential to create shareholder value.

Much of my time and attention thus far has been focused on our accounting and control issues. And necessarily so. I'm now going to spend the next couple of minutes updating you on the enhancements and improvements that we are making in the finance and accounting areas to address these issues.

Our remediation efforts can be broken down into the following areas. First, we have performed an assessment of the finance organization as part of a broader financial transformation project. The project will not only be looking at our organizational structure, but our reporting lines, roles, responsibilities, and required skill sets, to ensure we meet all of our obligations, including those related to internal controls over financial reporting, one of our key non-negotiables.

On the people front, we have already hired a director of SEC reporting and technical accounting, an international controller to help strengthen oversight of our international operations, as well as several other financial and accounting personnel. We will continue building out the organization and strengthening our underlying accounting and financial reporting foundation over the coming months.

Second, we will continue to use third party consultants to supplement our existing staff, until we have made significant progress on the financial transformation actions I just covered. Our outside experts are assisting us across a wide range of areas including technical accounting, tax, and SEC reporting, internal audit, as well as financial statement preparation, and external reporting support, among others.

Third, we will be enhancing our overall governance processes, both domestically, as well as internationally. Improvements include better and enhanced communications and training, as well as enhanced and improved accountability and oversight.

Fourth, we intend to implement enhanced controls over our financial reporting processes, including more granular procedures and standard work, around making and approving journal entries, as well as performing account reconciliations. We have also established a cross functional disclosure committee, and have implemented a robust certification and sub-certification process to support all of our SEC filings going forward.

Again, while this summary was in no means meant to be fully inclusive of all of the actions we are taking, we thought it important to provide you with this overview. As Joe mentioned, we believe we are the final stages of the process, and are working diligently to complete the restatement and file our FY015 10-K and amended quarterly reports as soon as possible. I look forward to the opportunity to meet with each of you the near future to discuss not only the restatement, but our business and operating performance.

With that, let me turn it back to Joe.

Thank you, Scott.

We recognize that we have had limited disclosures throughout the process, particularly as it relates to our business performance. This reflects our philosophy and priority to complete the restatement process in a deliberate, thoughtful, and reliable manner. And like you, we look forward to putting this process behind us so that we can shift the emphasis of our communications back to our business operations.

With this in mind, I am committed to issuing our preliminary unaudited financial results for the first nine months of FY16, as well as provide an update to our full-year guidance as soon as possible, following the filing of the FY15 10-K and amended FY15 quarterly reports. We look forward to discussing our business and financial performance with you at that time.

Lastly, I want to take this opportunity to emphasize our continued confidence in our strategic direction and the future of ADS. For those of you who have supported us since the IPO, I can assure you that I, along with the rest of the management team, carry the same level of passion and excitement for the business as we always have. Thank you again for your patience and support.

Operator that concludes our call.

And we thank you, sir, and to the rest of the management team for your time also today. Again, the conference call is now concluded. At this time you may disconnect your lines. Thank you, take care, and have a great day, everyone.