Forterra, Inc. (“Forterra” or “the Company”) (NASDAQ: FRTA),
a leading manufacturer of water and drainage infrastructure pipe
and products in the United States and Eastern Canada, today
announced results for the quarter ended June 30, 2018.
CEO CommentaryForterra CEO Jeff
Bradley commented, “I am pleased with the progress we made in the
Drainage segment in the first half of 2018. We successfully
raised our selling prices, and our procurement initiative enabled
us to keep our year over year cost increases below market levels.
With strong end-market demand fundamentals and a solid backlog, we
expect to continue to deliver year over year improvement in our
margins in Drainage."
Bradley continued, “Our Water segment has proven
to be more challenging than we previously expected in the face of
continued higher average scrap costs on both a sequential quarter
and year over year basis that have not yet been offset by higher
average selling prices. In response, we are taking price and
cost actions to better capitalize on strong market demand.
Our pricing initiatives are gaining momentum and we are seeing the
benefit in our bookings and in our backlog. We are
implementing an initiative focused on improving margins through a
number of commercial and operational enhancements, including our
recently announced senior leadership organizational
realignment. Market demand for ductile iron pipe in the first
half of 2018 was well above levels seen in 2017, and the outlook
for the next twelve months appears strong, as supported by our
backlog and discussions with our customers. We are committed
to increasing our margins in Water, and I believe that we are
taking the right steps.”
Second Quarter 2018 Consolidated
ResultsSecond quarter 2018 net sales of $416.1 million
decreased from $436.7 million in the prior year quarter. The
decline is due to the impact of previously disclosed asset sales
and divestitures. Net sales excluding the impact of asset
sales and divestitures of $46.8 million grew by approximately
7%. Net income for the quarter was $7.0 million, or net
income of $0.11 per share, compared to a net loss of $11.2 million,
or a loss of $0.18 per share, in the prior year quarter.
Adjusted EBITDA for the second quarter was $57.6 million, compared
to $46.5 million in the prior year quarter. The increase in
net income and Adjusted EBITDA is due to the benefit of improved
results in Drainage and lower costs at Corporate, partially offset
by lower results in Water.
Drainage Pipe & Products
(“Drainage”) - Second Quarter 2018 ResultsDrainage net
sales increased to $222.9 million, compared to $221.5 million in
the prior year quarter. Net sales excluding the impact of
asset sales of $12.6 million grew by approximately 7% due to higher
shipments and higher average selling prices for pipe and precast
products as well as growth in sales in both structural products and
Bio Clean stormwater management systems. The organic sales
growth in pipe and precast reflects the benefit of higher average
selling prices and strong demand across the Forterra footprint.
Drainage gross profit and gross profit margin
were $49.8 million and 22.4%, respectively, compared to $43.1
million and 19.5%, respectively, in the prior year quarter.
The higher gross profit and gross profit margin reflects the
benefit of higher average selling prices and the mitigation of
labor, freight and raw materials cost inflation resulting from the
2017 procurement and operating expense initiatives. Drainage
EBITDA and Adjusted EBITDA were $48.4 million and $46.4 million,
respectively, compared to $40.1 million and $40.5 million,
respectively, in the prior year quarter due to higher gross
profit.
Water Pipe & Products (“Water”) -
Second Quarter 2018 ResultsWater net sales decreased to
$193.2 million, compared to $215.2 million in the prior year
quarter. Excluding the impact of the divestiture of the U.S.
concrete and steel pressure pipe business of $34.2 million, net
sales increased by 7%, due primarily to higher shipments. The
increase in shipments is due primarily to strong demand
fundamentals.
Water gross profit and gross profit margin in
the second quarter were $25.6 million and 13.3%, respectively,
compared to $33.3 million and 15.5%, respectively, in the prior
year quarter. Second quarter 2018 Water EBITDA and Adjusted
EBITDA of $24.2 million and $24.3 million, respectively, compared
to $17.9 million and $29.6 million, respectively, in the prior year
quarter. The decline in gross profit, gross profit margin and
Adjusted EBITDA was due primarily to higher scrap costs, in
addition to higher labor and freight costs, that were not fully
offset by higher average selling prices.
Corporate and Other (“Corporate”) -
Second Quarter 2018 ResultsCorporate EBITDA and Adjusted
EBITDA losses of $14.6 million and $13.0 million, respectively, in
the second quarter of 2018 compared to EBITDA and Adjusted EBITDA
losses of $27.2 million and $23.6 million, respectively, in the
prior year quarter. The year over year improvement is due
primarily to lower external consulting fees and the continued
benefit of cost savings initiatives.
Balance Sheet and LiquidityOn
June 30, 2018, the Company had cash of $30.2 million, outstanding
debt on its senior term loan of $1.2 billion and no outstanding
balance on the Company's $300.0 million asset based revolving
credit facility. The decline in cash, compared to the first
quarter of 2018, was consistent with expectations relative to the
full-year 2018 key cash out-flow items guidance range previously
provided by the Company.
Organizational Realignment of Water Pipe
& ProductsIn July 2018, Forterra announced an
organizational realignment of its senior leadership team in its
Water segment to accelerate the execution of the Company's
commercial and operational initiatives focused on driving higher
margins.
Amendment and Restatement of Existing
Sale-Leaseback ArrangementAs previously announced in June
2018, Forterra amended and restated its existing sale-leaseback
arrangement (the "SLB"). The transaction removed 24 U.S.
Drainage facilities and U.S. and Canadian concrete pressure pipe
facilities from the SLB in exchange for Forterra's contribution of
two ductile iron pipe facilities in Bessemer, Alabama to the
SLB.
Certain modifications to the SLB, including an
increase in the lease term, resulted in a change in accounting
treatment for a portion of the SLB from an operating lease to a
finance lease effective with the completion of the transaction in
early June 2018. Capital lease obligations increased to
$150.2 million at June 30, 2018, compared to $4.7 million as of
March 31, 2018, as a result of the change in accounting treatment
for a portion of the SLB.
In the June 2018 press release announcing the
SLB amendment, Forterra estimated an annual reduction in SLB
operating expenses of approximately $19 million, as compared to
actual SLB operating expenses incurred in 2017. After further
review, the annual reduction is expected to be approximately $17
million. SLB operating expenses in the second quarter were
$1.4 million lower than the same quarter last year including $1.1
million in the Drainage segment and $0.3 million in the Water
segment.
Financial OutlookFor the third
quarter of 2018, the Company expects that net income will range
from $5 million to $11 million and Adjusted EBITDA will range from
$60 million to $68 million. The third quarter guidance range
incorporates the following key assumptions:
- Continued gradual year over year improvement in Drainage,
including expected net sales growth on the benefit of higher
shipments and higher average selling prices mitigating the impact
of continued cost inflation
- Lower expected EBITDA, EBITDA margin, Adjusted EBITDA and
Adjusted EBITDA margin in Water, as compared to the same quarter
last year, due primarily to higher scrap costs, as well as higher
labor and freight costs, not yet fully offset by higher average
selling prices
- Corporate costs of $15 to $16 million, consistent with
previously provided expectations. As compared to the average
quarterly Corporate costs of approximately $14 million in the first
half of 2018, the Q3 2018 Corporate cost reflects the timing of
certain cost accruals and the completion of a transition service
agreement that provided an income offset to Corporate expenses in
the first half of 2018.
Drainage - Key Financial
Statistics:
($ in
millions) |
|
|
|
|
|
|
Q2 2018 |
|
Q2 2017 |
|
|
|
|
Net
Sales |
$ |
222.9 |
|
|
$ |
221.5 |
|
Gross
Profit |
49.8 |
|
|
43.1 |
|
EBITDA |
48.4 |
|
|
40.1 |
|
Adjusted
EBITDA |
46.4 |
|
|
40.5 |
|
Gross Profit Margin |
22.4 |
% |
|
19.5 |
% |
Adjusted EBITDA Margin |
20.8 |
% |
|
18.3 |
% |
Water - Key Financial
Statistics:
($ in
millions) |
|
|
|
|
|
|
Q2 2018 |
|
Q2 2017 |
|
|
|
|
Net
Sales |
$ |
193.2 |
|
|
$ |
215.2 |
|
Gross
Profit |
25.6 |
|
|
33.3 |
|
EBITDA |
24.2 |
|
|
17.9 |
|
Adjusted
EBITDA |
24.3 |
|
|
29.6 |
|
Gross Profit Margin |
13.3 |
% |
|
15.5 |
% |
Adjusted EBITDA Margin |
12.6 |
% |
|
13.8 |
% |
Conference Call and Webcast InformationForterra
will host a conference call to review second quarter 2018 results
on August 8, 2018 at 8:30 a.m. Eastern Time (7:30 a.m. Central
Time). The dial-in number for the call is 574-990-1396 or toll free
844-498-0572. The participant passcode is 5582649. Please dial in
at least five minutes prior to the call to register. The call may
also be accessed via a webcast which is available on the Investors
section of the Company’s website at http://forterrabp.com. A
replay of the conference call and archive of the webcast will be
available for 30 days under the Investor section of the Company's
website.
About ForterraForterra is a leading
manufacturer of water and drainage pipe and products in the U.S.
and Eastern Canada for a variety of water-related infrastructure
applications, including water transmission, distribution, drainage
and stormwater systems. Based in Irving, Texas, Forterra’s product
breadth and significant scale help make it a one-stop shop for
water related pipe and products, and a preferred supplier to a wide
variety of customers, including contractors, distributors and
municipalities. For more information on Forterra, visit
http://forterrabp.com.
Forward-Looking StatementsThis press release
contains 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. Forward-looking
statements may be identified by the use of words such as
"anticipate", "believe", "expect", "estimate", "plan", "outlook",
and "project" and other similar expressions that predict or
indicate future events or trends or that are not statements of
historical matters. Forward-looking statements should not be read
as a guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward-looking
statements are based on historical information available at the
time the statements are made and are based on management's
reasonable belief or expectations with respect to future events,
and are subject to risks and uncertainties, many of which are
beyond the Company's control, that could cause actual performance
or results to differ materially from the belief or expectations
expressed in or suggested by the forward-looking statements.
Forward-looking statements speak only as of the date on which they
are made and the Company undertakes no obligation to update any
forward-looking statement to reflect future events, developments or
otherwise, except as may be required by applicable law. Investors
are referred to the Company's filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K, for
additional information regarding the risks and uncertainties that
may cause actual results to differ materially from those expressed
in any forward-looking statement.
Condensed Consolidated Statements of
Operations
(in thousands, except per share data)
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2018 |
2017 |
|
2018 |
2017 |
|
(unaudited) |
|
(unaudited) |
Net
sales |
$ |
416,087 |
|
$ |
436,685 |
|
|
$ |
706,047 |
|
$ |
774,987 |
|
Cost of goods
sold |
340,774 |
|
361,089 |
|
|
596,369 |
|
660,424 |
|
Gross
profit |
75,313 |
|
75,596 |
|
|
109,678 |
|
114,563 |
|
Selling,
general & administrative expenses |
(51,263 |
) |
(67,297 |
) |
|
(103,125 |
) |
(132,598 |
) |
Impairment and exit charges |
(276 |
) |
(11,376 |
) |
|
(1,721 |
) |
(11,811 |
) |
Earnings
from equity method investee |
3,672 |
|
3,342 |
|
|
5,521 |
|
6,513 |
|
Other
operating income, net |
4,536 |
|
2,010 |
|
|
5,326 |
|
3,243 |
|
|
(43,331 |
) |
(73,321 |
) |
|
(93,999 |
) |
(134,653 |
) |
Income (loss)
from operations |
31,982 |
|
2,275 |
|
|
15,679 |
|
(20,090 |
) |
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
Interest
expense |
(17,745 |
) |
(17,078 |
) |
|
(31,053 |
) |
(30,620 |
) |
Other
income, net |
— |
|
— |
|
|
6,016 |
|
— |
|
Income (loss)
before income taxes |
14,237 |
|
(14,803 |
) |
|
(9,358 |
) |
(50,710 |
) |
Income
tax benefit (expense) |
(7,243 |
) |
3,630 |
|
|
(3,558 |
) |
16,994 |
|
Net income
(loss) |
$ |
6,994 |
|
$ |
(11,173 |
) |
|
$ |
(12,916 |
) |
$ |
(33,716 |
) |
|
|
|
|
|
|
Basic and
Diluted earnings (loss) per share: |
|
|
|
|
|
Net
income (loss) |
$ |
0.11 |
|
$ |
(0.18 |
) |
|
$ |
(0.20 |
) |
$ |
(0.53 |
) |
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
|
Basic |
63,893 |
|
63,793 |
|
|
63,865 |
|
63,791 |
|
Diluted |
64,209 |
|
63,793 |
|
|
63,865 |
|
63,791 |
|
Condensed Consolidated Balance
Sheets(in thousands, except per share data)
|
June 30, 2018 |
|
December 31, 2017 |
ASSETS |
(unaudited) |
|
|
Current
assets |
|
|
|
Cash and
cash equivalents |
$ |
30,182 |
|
|
$ |
104,534 |
|
Receivables, net |
267,266 |
|
|
192,654 |
|
Inventories |
275,850 |
|
|
236,655 |
|
Prepaid
expenses |
7,268 |
|
|
5,381 |
|
Other
current assets |
6,335 |
|
|
27,059 |
|
Current
assets held for sale |
— |
|
|
12,242 |
|
Total
current assets |
586,901 |
|
|
578,525 |
|
Non-current
assets |
|
|
|
Property,
plant and equipment, net |
489,527 |
|
|
412,572 |
|
Goodwill |
506,750 |
|
|
496,141 |
|
Intangible assets, net |
208,211 |
|
|
225,304 |
|
Investment in equity method investee |
54,966 |
|
|
54,445 |
|
Other
long-term assets |
17,927 |
|
|
18,866 |
|
Non-current assets held for sale |
— |
|
|
25,385 |
|
Total
assets |
$ |
1,864,282 |
|
|
$ |
1,811,238 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Current
liabilities |
|
|
|
Trade
payables |
$ |
148,843 |
|
|
$ |
108,560 |
|
Accrued
liabilities |
66,415 |
|
|
72,782 |
|
Deferred
revenue |
10,263 |
|
|
9,029 |
|
Current
portion of long-term debt |
12,510 |
|
|
12,510 |
|
Current
portion of tax receivable agreement |
34,601 |
|
|
34,601 |
|
Current
liabilities held for sale |
— |
|
|
4,615 |
|
Total
current liabilities |
272,632 |
|
|
242,097 |
|
Non-current
liabilities |
|
|
|
Long term
debt |
1,178,665 |
|
|
1,181,277 |
|
Long-term
capital leases |
134,042 |
|
|
4,155 |
|
Deferred
tax liabilities |
45,075 |
|
|
67,481 |
|
Deferred
gain on sale-leaseback |
9,497 |
|
|
75,743 |
|
Other
long-term liabilities |
20,946 |
|
|
25,032 |
|
Long-term
tax receivable agreement |
82,962 |
|
|
82,962 |
|
Total
liabilities |
1,743,819 |
|
|
1,678,747 |
|
Equity |
|
|
|
Common
stock, $0.001 par value, 190,000 shares authorized; 64,228 and
64,231 shares issued and outstanding |
18 |
|
|
18 |
|
Additional paid-in-capital |
233,065 |
|
|
230,023 |
|
Accumulated other comprehensive loss |
(8,084 |
) |
|
(5,098 |
) |
Retained
deficit |
(104,536 |
) |
|
(92,452 |
) |
Total
shareholders' equity |
120,463 |
|
|
132,491 |
|
Total
liabilities and shareholders' equity |
$ |
1,864,282 |
|
|
$ |
1,811,238 |
|
Condensed Consolidated Statements of Cash
Flows(in thousands)
|
Six months ended |
|
June 30, |
|
2018 |
|
2017 |
CASH FLOWS FROM
OPERATING ACTIVITIES |
(unaudited) |
Net loss |
$ |
(12,916 |
) |
|
$ |
(33,716 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
Depreciation & amortization expense |
53,449 |
|
|
58,305 |
|
Gain on
business divestiture |
(6,016 |
) |
|
— |
|
(Gain) /
loss on disposal of property, plant and equipment |
(2,571 |
) |
|
1,194 |
|
Amortization of debt discount and issuance costs |
4,050 |
|
|
3,994 |
|
Stock-based compensation expense |
3,138 |
|
|
1,395 |
|
Impairment charges |
— |
|
|
10,551 |
|
Earnings
from equity method investee |
(5,521 |
) |
|
(6,513 |
) |
Distributions from equity method investee |
5,000 |
|
|
5,250 |
|
Unrealized gain on derivative instruments, net |
(4,220 |
) |
|
(1,326 |
) |
Unrealized foreign currency gains, net |
(195 |
) |
|
(934 |
) |
Provision
(recoveries) for doubtful accounts |
(316 |
) |
|
1,398 |
|
Deferred
taxes |
(22,722 |
) |
|
(12,112 |
) |
Deferred
rent |
979 |
|
|
1,122 |
|
Other
non-cash items |
471 |
|
|
110 |
|
Change in
assets and liabilities: |
|
|
|
Receivables, net |
(72,062 |
) |
|
(70,062 |
) |
Inventories |
(35,625 |
) |
|
(49,458 |
) |
Other
current assets |
18,861 |
|
|
(8,190 |
) |
Accounts
payable and accrued liabilities |
25,464 |
|
|
(21,031 |
) |
Other
assets & liabilities |
4,094 |
|
|
(6,021 |
) |
NET CASH USED IN
OPERATING ACTIVITIES |
(46,658 |
) |
|
(126,044 |
) |
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES |
|
|
|
Purchase
of property, plant and equipment |
(17,629 |
) |
|
(30,024 |
) |
Proceeds
from sale of fixed assets |
4,874 |
|
|
— |
|
Settlement of net investment hedges |
(4,990 |
) |
|
— |
|
Assets
and liabilities acquired, business combinations, net |
(2,914 |
) |
|
(35,380 |
) |
NET CASH USED IN
INVESTING ACTIVITIES |
(20,659 |
) |
|
(65,404 |
) |
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES |
|
|
|
Payment
of debt issuance costs |
— |
|
|
(2,498 |
) |
Payments
on term loans |
(6,255 |
) |
|
(5,753 |
) |
Proceeds
from term loans, net |
— |
|
|
200,000 |
|
Proceeds
from revolver |
— |
|
|
194,000 |
|
Payments
on revolver |
— |
|
|
(213,000 |
) |
Other
financing activities |
(265 |
) |
|
(110 |
) |
NET CASH (USED IN)
PROVIDED BY FINANCING ACTIVITIES |
(6,520 |
) |
|
172,639 |
|
Effect of exchange rate
changes on cash |
(515 |
) |
|
809 |
|
Net change in cash and
cash equivalents |
(74,352 |
) |
|
(18,000 |
) |
Cash and cash
equivalents, beginning of period |
104,534 |
|
|
40,024 |
|
Cash and cash
equivalents, end of period |
$ |
30,182 |
|
|
$ |
22,024 |
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
Cash interest paid |
30,613 |
|
|
26,465 |
|
Income taxes paid |
4,608 |
|
|
25,882 |
|
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES: |
Assets and liabilities
acquired in non-cash exchange |
18,140 |
|
|
— |
|
Fair value changes of
derivatives recorded in OCI, net of tax |
970 |
|
|
(1,908 |
) |
Capital lease
obligation |
148,962 |
|
|
|
Additional Statistics
(unaudited)
Reconciliation of Non-GAAP
Measures
In addition to our results calculated under
generally accepted accounting principles in the United States
("GAAP"), in this earnings release we also present adjusted EBITDA
and adjusted EBITDA margin. Adjusted EBITDA and adjusted EBITDA
margin are non-GAAP measures and have been presented in this
earnings release as supplemental measures of financial performance
that are not required by, or presented in accordance with GAAP. We
calculate Adjusted EBITDA as net (loss), interest expense,
depreciation and amortization, income tax benefit and before
(gains)/losses on the sale of property, plant and equipment,
impairment and exit charges and certain other non-recurring income
and expenses, such as transaction costs, inventory step-up
impacting margin and non-cash compensation expense. Adjusted
EBITDA margin represents Adjusted EBITDA as a percentage of net
sales.
Adjusted EBITDA and adjusted EBITDA margin are
presented in this earnings release because they are important
metrics used by management as one of the means by which it assesses
our financial performance. Adjusted EBITDA and adjusted EBITDA
margin are also frequently used by analysts, investors and other
interested parties to evaluate companies in our industry. We use
Adjusted EBITDA and adjusted EBITDA margin as supplements to GAAP
measures of performance to evaluate the effectiveness of our
business strategies, to make budgeting decisions, to allocate
resources and to compare our performance relative to our
peers. Adjusted EBITDA and adjusted EBITDA margin are also
important measures for assessing our operating results and
evaluating each operating segment’s performance on a consistent
basis, by excluding the impacts of depreciation, amortization,
income tax expense, interest expense and other items not indicative
of ongoing operating performance. Additionally, these measures,
when used in conjunction with related GAAP financial measures,
provide investors with additional financial analytical framework
which management uses, in addition to historical operating results,
as the basis for financial, operational and planning decisions and
present measurements that third parties have indicated are useful
in assessing the Company and its results of operations.
Adjusted EBITDA and adjusted EBITDA margin have
certain limitations. Adjusted EBITDA should not be considered as an
alternative to consolidated net income (loss), and in the case of
our segment results, Adjusted EBITDA should not be considered an
alternative to EBITDA, which the chief operating decision maker
reviews for purposes of evaluating segment profit, or in the case
of any of the non-GAAP measures, as a substitute for any other
measure of financial performance calculated in accordance with
GAAP. Similarly, adjusted EBITDA margin should not be
considered as an alternative to gross margin or any other margin
calculated in accordance with GAAP. These measures also
should not be construed as an inference that our future results
will be unaffected by unusual or nonrecurring items for which these
non-GAAP measures make adjustments. Additionally, adjusted EBITDA
and adjusted EBITDA margin are not intended to be liquidity
measures because of certain limitations such as: (i) they do not
reflect our cash outlays for capital expenditures or future
contractual commitments; (ii) they do not reflect changes in, or
cash requirements for, working capital; (iii) they do not reflect
interest expense, or the cash requirements necessary to service
interest, or principal payments, on indebtedness; (iv) they do not
reflect income tax expense or the cash necessary to pay income
taxes; and (v) although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will often have
to be replaced in the future, and these non-GAAP measures do not
reflect cash requirements for such replacements.
Other companies, including other companies in
our industry, may not use such measures or may calculate one or
more of the measures differently than as presented in this earnings
release, limiting their usefulness as a comparative measure. In
evaluating adjusted EBITDA and adjusted EBITDA margin, you should
be aware that in the future we will incur expenses that are the
same as or similar to some of the adjustments made in the
calculations below and the presentation of adjusted EBITDA and
adjusted EBITDA margin should not be construed to mean that our
future results will be unaffected by such adjustments. Management
compensates for these limitations by using adjusted EBITDA and
adjusted EBITDA margin as supplemental financial metrics and in
conjunction with results prepared in accordance with GAAP.
Reconciliation of net (loss) to Adjusted
EBITDA(in thousands)
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
Net income (loss) |
$ |
6,994 |
|
|
$ |
(11,173 |
) |
|
$ |
(12,916 |
) |
|
$ |
(33,716 |
) |
Interest expense |
17,745 |
|
|
17,078 |
|
|
31,053 |
|
|
30,620 |
|
Depreciation and
amortization |
26,036 |
|
|
28,501 |
|
|
53,448 |
|
|
58,305 |
|
Income tax (benefit)
expense |
7,243 |
|
|
(3,630 |
) |
|
3,558 |
|
|
(16,994 |
) |
EBITDA1 |
58,018 |
|
|
30,776 |
|
|
75,143 |
|
|
38,215 |
|
(Gain) loss on sale of
property, plant & equipment, net2 |
(2,624 |
) |
|
420 |
|
|
(2,571 |
) |
|
1,194 |
|
Impairment and exit
charges3 |
276 |
|
|
11,376 |
|
|
1,721 |
|
|
11,811 |
|
Transaction costs4 |
407 |
|
|
2,679 |
|
|
1,568 |
|
|
4,738 |
|
Inventory step-up
impacting margin5 |
291 |
|
|
338 |
|
|
464 |
|
|
1,757 |
|
Non-cash
compensation6 |
1,984 |
|
|
887 |
|
|
3,138 |
|
|
1,244 |
|
Other (gains)
losses7 |
(712 |
) |
|
— |
|
|
(6,688 |
) |
|
(538 |
) |
Adjusted EBITDA |
$ |
57,640 |
|
|
$ |
46,476 |
|
|
$ |
72,775 |
|
|
$ |
58,421 |
|
Adjusted EBITDA
margin |
13.9 |
% |
|
10.6 |
% |
|
10.3 |
% |
|
7.5 |
% |
Gross profit |
75,313 |
|
|
75,596 |
|
|
109,678 |
|
|
114,563 |
|
Gross profit
margin |
18.1 |
% |
|
17.3 |
% |
|
15.5 |
% |
|
14.8 |
% |
1 For purposes of evaluating segment
profit, the Company's chief operating decision maker reviews EBITDA
as a basis for making the decisions to allocate resources and
assess performance.2 (Gain) loss on sale of property, plant
and equipment, primarily related to the disposition of
manufacturing equipment.3 Impairment or abandonment of
long-lived assets and other exit charges.4 Legal, valuation,
accounting, advisory and other costs related to business
combinations and other transactions.5 Effect of the purchase
accounting step-up in the value of inventory to fair value
recognized in cost of goods sold as a result of business
combinations.6 Non-cash equity compensation
expense.7 Other (gains) or losses, including the non-cash gain
on a divestiture transaction completed in January 2018 and gains on
insurance proceeds related to the destruction of property.
Reconciliation of segment EBITDA to
segment Adjusted EBITDA(in thousands)
Three months
ended June 30, 2018 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
48,411 |
|
|
$ |
24,196 |
|
|
$ |
(14,589 |
) |
|
$ |
58,018 |
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
property, plant & equipment, net2 |
(3,080 |
) |
|
456 |
|
|
— |
|
|
(2,624 |
) |
Impairment and exit
charges3 |
1 |
|
|
275 |
|
|
— |
|
|
276 |
|
Transaction costs4 |
— |
|
|
— |
|
|
407 |
|
|
407 |
|
Inventory step-up
impacting margin5 |
291 |
|
|
— |
|
|
— |
|
|
291 |
|
Non-cash
compensation6 |
635 |
|
|
199 |
|
|
1,150 |
|
|
1,984 |
|
Other (gains)
losses7 |
134 |
|
|
(869 |
) |
|
23 |
|
|
(712 |
) |
Adjusted EBITDA |
$ |
46,392 |
|
|
$ |
24,257 |
|
|
$ |
(13,009 |
) |
|
$ |
57,640 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
222,881 |
|
|
$ |
193,205 |
|
|
$ |
1 |
|
|
$ |
416,087 |
|
Gross Profit |
$ |
49,851 |
|
|
$ |
25,585 |
|
|
$ |
(123 |
) |
|
$ |
75,313 |
|
Three months
ended June 30, 2017 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
40,079 |
|
|
$ |
17,913 |
|
|
$ |
(27,216 |
) |
|
$ |
30,776 |
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
property, plant & equipment, net2 |
77 |
|
|
293 |
|
|
50 |
|
|
420 |
|
Impairment and exit
charges3 |
(14 |
) |
|
11,390 |
|
|
— |
|
|
11,376 |
|
Transaction costs4 |
— |
|
|
— |
|
|
2,679 |
|
|
2,679 |
|
Inventory step-up
impacting margin5 |
338 |
|
|
— |
|
|
— |
|
|
338 |
|
Non-cash
compensation6 |
28 |
|
|
18 |
|
|
841 |
|
|
887 |
|
Adjusted EBITDA |
$ |
40,508 |
|
|
$ |
29,614 |
|
|
$ |
(23,646 |
) |
|
$ |
46,476 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
221,521 |
|
|
$ |
215,163 |
|
|
$ |
1 |
|
|
$ |
436,685 |
|
Gross Profit |
$ |
43,121 |
|
|
$ |
33,252 |
|
|
$ |
(777 |
) |
|
$ |
75,596 |
|
Six months
ended June 30, 2018 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
69,570 |
|
|
$ |
31,105 |
|
|
$ |
(25,532 |
) |
|
$ |
75,143 |
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
property, plant & equipment, net2 |
(3,405 |
) |
|
834 |
|
|
— |
|
|
(2,571 |
) |
Impairment and exit
charges3 |
1,162 |
|
|
567 |
|
|
(8 |
) |
|
1,721 |
|
Transaction costs4 |
— |
|
|
— |
|
|
1,568 |
|
|
1,568 |
|
Inventory step-up
impacting margin5 |
464 |
|
|
— |
|
|
— |
|
|
464 |
|
Non-cash
compensation6 |
875 |
|
|
363 |
|
|
1,900 |
|
|
3,138 |
|
Other (gains)
losses7 |
118 |
|
|
(869 |
) |
|
(5,937 |
) |
|
(6,688 |
) |
Adjusted EBITDA |
$ |
68,784 |
|
|
$ |
32,000 |
|
|
$ |
(28,009 |
) |
|
$ |
72,775 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
378,526 |
|
|
$ |
327,518 |
|
|
$ |
3 |
|
|
$ |
706,047 |
|
Gross Profit |
$ |
76,267 |
|
|
$ |
33,668 |
|
|
$ |
(257 |
) |
|
$ |
109,678 |
|
Six months
ended June 30, 2017 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
51,490 |
|
|
$ |
35,025 |
|
|
$ |
(48,300 |
) |
|
$ |
38,215 |
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
property, plant & equipment, net2 |
71 |
|
|
1,073 |
|
|
50 |
|
|
1,194 |
|
Impairment and exit
charges3 |
(14 |
) |
|
11,825 |
|
|
— |
|
|
11,811 |
|
Transaction costs4 |
— |
|
|
— |
|
|
4,738 |
|
|
4,738 |
|
Inventory step-up
impacting margin5 |
1,757 |
|
|
— |
|
|
— |
|
|
1,757 |
|
Non-cash
compensation6 |
49 |
|
|
37 |
|
|
1,158 |
|
|
1,244 |
|
Other (gains)
losses7 |
— |
|
|
(538 |
) |
|
— |
|
|
(538 |
) |
Adjusted EBITDA |
$ |
53,353 |
|
|
$ |
47,422 |
|
|
$ |
(42,354 |
) |
|
$ |
58,421 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
381,969 |
|
|
$ |
393,012 |
|
|
$ |
6 |
|
|
$ |
774,987 |
|
Gross Profit |
$ |
60,498 |
|
|
$ |
55,407 |
|
|
$ |
(1,342 |
) |
|
$ |
114,563 |
|
1 For purposes of evaluating segment
profit, the Company's chief operating decision maker reviews EBITDA
as a basis for making the decisions to allocate resources and
assess performance.2 (Gain) loss on sale of property, plant
and equipment, primarily related to the disposition of
manufacturing equipment.3 Impairment or abandonment of
long-lived assets and other exit charges.4 Legal, valuation,
accounting, advisory and other costs related to business
combinations and other transactions.5 Effect of the purchase
accounting step-up in the value of inventory to fair value
recognized in cost of goods sold as a result of business
combinations.6 Non-cash equity compensation
expense.7 Other (gains) or losses, including the non-cash gain
on a divestiture transaction completed in January 2018 and gains on
insurance proceeds related to the destruction of property.
Reconciliation of Net Income to Adjusted
EBITDA Guidance for Q3 2018(in millions)
|
Q3 2018 Guidance |
|
Low |
|
High |
Net income |
$ |
5 |
|
$ |
11 |
Interest expense |
21 |
|
21 |
Income tax expense |
5 |
|
7 |
Depreciation and
amortization |
29 |
|
29 |
Adjusted EBITDA |
$ |
60 |
|
$ |
68 |
Source: Forterra, Inc.
Company Contact Information:David J. LawrenceVice President of
Treasury and Investor Relations469-299-9113IR@forterrabp.com
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