Fourth Quarter
Highlights
- Organic sales growth of
approximately 7% driven primarily by favorable
weather
- Average sales prices higher
for both pipe and precast and ductile iron pipe
products
- Net income of $43.2 million
includes a pre-tax benefit of a $45.4 million reduction in tax
receivable agreement ("TRA") liability and a $15.2 million income
tax benefit, due primarily to U.S. tax reform
- Adjusted EBITDA1 of $28.2
million, above the top-end of the guidance range
- Quarter-end cash balance of
$104.5 million and no outstanding balance on the
revolver
IRVING, Texas, March 07, 2018
(GLOBE NEWSWIRE) -- 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 and full year ended
December 31, 2017.
CEO
Commentary
Forterra CEO Jeff Bradley commented, "Our results for the quarter
came in above our guidance range on higher than anticipated sales
growth due to favorable weather conditions that enabled us to ship
products delayed by unfavorable weather in the third quarter and
also to pull forward some shipments from the first quarter of
2018. While our earnings and margins were below 2016 levels,
the year over year decline in our margins narrowed in the fourth
quarter as a result of higher shipments, higher average selling
prices and the benefit of cost savings initiatives that partially
offset inflationary cost pressures."
"While 2017 proved to be more
challenging than we expected," Mr. Bradley continued, "I am
confident that our efforts over the last year have better
positioned our company both strategically and operationally.
We continue to evaluate portfolio enhancement opportunities in our
Drainage segment that will bolster our position in existing regions
and optimize our geographic exposure to well-structured
markets. We also see growth potential from our Bio Clean,
structural products and other specialty precast products. We
remain focused on capitalizing on our position as an industry
leader and the strength of end-markets."
Fourth
Quarter 2017 Results
Fourth quarter 2017 net sales increased to $361.2 million, compared
to $354.1 million in the prior year quarter. Net income for the
quarter was $43.2 million, or $0.67 per share, compared to a net
loss of $48.7 million, or a loss of $0.75 per share, in the prior
year quarter. Adjusted EBITDA for the fourth quarter was
$28.2 million, compared to $42.6 million in the prior year
quarter.
Drainage
Pipe & Products ("Drainage") - Fourth Quarter 2017
Results
Drainage net sales increased to $204.6 million, compared to $176.8
million in the prior year quarter, including the benefit of $9.9
million of net sales from acquisitions. Net sales excluding
acquisitions grew by approximately 10% due to growth in shipments
and average sales prices for pipe and precast products as well as
growth in sales in both structural products and Bio Clean
products. The sales growth in the fourth quarter was due in
part to the benefit of favorable weather conditions that
facilitated the shipment of products delayed by unfavorable weather
in the third quarter and the pull forward of some shipments from
the first quarter of 2018.
Drainage gross profit was $35.4
million, compared to $31.1 million in the prior year quarter,
resulting in a modest decline in the gross profit margin due to the
impact of higher costs including labor, freight and raw materials
not fully offset by higher average sales prices. Fourth
quarter 2017 Drainage EBITDA and Adjusted EBITDA were $30.8 million
and $31.4 million, respectively, compared to $11.7 million and
$29.6 million, respectively, in the prior year quarter.
Water Pipe
& Products ("Water") - Fourth Quarter 2017
Results
Water net sales decreased to $156.6 million, compared to $177.3
million in the prior year quarter. The prior year quarter
included $26.9 million in net sales associated with the U.S.
concrete and steel pressure pipe assets that are not comparable to
the 2017 period after the divestiture of the assets effective
July 31, 2017. Excluding the impact of the divestiture, year over
year sales grew by approximately 4% due primarily to higher
shipments and higher average selling prices for ductile iron pipe
products, partially offset by a decline in net sales of concrete
and steel pressure pipe products in Canada.
Water gross profit in the fourth
quarter was $22.0 million compared to $30.0 million in the prior
year quarter. Fourth quarter 2017 Water EBITDA and Adjusted
EBITDA of $16.7 million and $18.0 million, respectively, compared
to $18.4 million and $24.9 million, respectively, in the prior year
quarter. The decline in gross profit and Adjusted EBITDA was
due to the impact of higher scrap costs for ductile iron pipe
products that were not fully offset by an increase in average
selling prices of products sold along with lower net sales of
concrete pressure pipe products in Canada.
Corporate
and Other ("Corporate") - Fourth Quarter 2017
Results
Corporate EBITDA of $21.8 million and Adjusted EBITDA loss of
$(21.1) million in Q4 2017 compared to EBITDA and Adjusted EBITDA
loss of ($18.6) million and ($11.8) million, respectively, in the
prior year quarter. Corporate EBITDA in Q4 2017 includes the
benefit of a $45.4 million decline in the TRA liability due to the
benefit of U.S. tax reform. The increase in the Adjusted EBITDA
loss in Corporate is due primarily to higher run-rate costs in 2017
as compared to 2016 as well as higher professional fees including
increased audit fees and external consultants associated with the
Company's Sarbanes-Oxley compliance and material weakness
remediation work.
Full Year
2017 Results
Full year 2017 net sales increased to $1,580.4 million, compared to
$1,364.0 million in the prior year including the benefit of $253.5
million of net sales from acquisitions, partially offset by $39.0
million in net sales in 2016 associated with the U.S. concrete and
steel pressure pipe assets that are not comparable to the 2017
period after the divestiture of the assets effective July 31,
2017. Net sales excluding acquisitions and divestitures were
essentially flat compared to the prior year with growth of
approximately 3% in Drainage offsetting an approximately 3% decline
in Water.
Net loss for the year was $2.1
million, or a loss of $0.03 per share, compared to a net loss of
$7.6 million, or a loss of $0.23 per share, in the prior year due
primarily to the pre-tax benefit of a $46.2 million reduction in
the tax receivable agreement liability and a $40.7 million income
tax benefit, due primarily to U.S. tax reform. Adjusted
EBITDA for the year was $147.5 million, compared to $218.0 million
in the prior year, attributable to higher costs including labor,
freight and raw materials and lower average sales prices due to
increased competition and higher costs in Corporate, including
professional fees in support of initiatives, Sarbanes-Oxley
compliance and material weakness remediation work.
Balance
Sheet and Liquidity
On December 31, 2017, the Company had cash of $104.5 million and
outstanding debt on its senior term loan of $1.2 billion. As
of December 31, 2017, there was no outstanding balance on the
Company's $300 million Revolver. The $63.4 million increase
in cash in the fourth quarter, as compared to the third quarter of
2017, included the benefit of seasonal improvement in working
capital.
Financial
Outlook
The Company expects that the net loss for the first quarter of 2018
will range from $31 million to $28 million and Adjusted EBITDA will
range from $8 million to $12 million, including a $10 million
impact from operational costs, deferred shipments and lost sales
associated with a major upgrade at the Bessemer, Alabama ductile
iron pipe facility. This impact is expected to be largely
offset by raw material savings and recovery of sales deferred in
the first quarter over the balance of 2018. The first quarter
guidance range incorporates the following key assumptions:
- Lower anticipated net sales in both Drainage and
Water as compared to the same period last year due to unfavorable
weather and sales pulled forward in the fourth quarter of 2017
- Lower expected EBITDA, EBITDA margin, Adjusted
EBITDA and Adjusted EBITDA margin in Water, as compared to the same
quarter last year, as a result of temporary downtime associated
with the Bessemer project, which is expected to increase efficiency
and quality, reduce input costs and expand margins; Q1 is also
expected to be impacted by higher scrap costs as compared to the
same period last year
- Higher expected EBITDA, EBITDA margin, Adjusted
EBITDA and Adjusted EBITDA margin in Drainage, as compared to the
same quarter last year, with the benefit of 2017 cost saving
initiatives mitigating the impact of expected cost inflation
- Lower anticipated costs in the Corporate segment
as compared to fourth quarter 2017, but higher than the longer term
run-rate expectation of approximately $16 to $17 million per
quarter due to the wrap-up of consulting support associated with
Sarbanes-Oxley and material weakness remediation work
The Company expects full year 2018
net income, adjusted for the benefits associated with U.S. tax
reform, Adjusted EBITDA and Adjusted EBITDA margin to improve
as compared to 2017, reflecting the benefit of initiatives put in
place to mitigate the impact of anticipated inflationary cost
pressures, higher average prices of products sold and lower
Corporate expenses.
Drainage - Key Financial and Operational Statistics:
($ in millions) |
|
Fourth
Quarter |
|
Full
Year |
|
|
|
|
Q4
2017 |
|
Q4
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
204.6 |
|
|
$ |
176.8 |
|
|
$ |
834.8 |
|
|
$ |
728.9 |
|
Gross Profit |
|
35.4 |
|
|
31.1 |
|
|
147.7 |
|
|
162.4 |
|
EBITDA |
|
30.8 |
|
|
11.7 |
|
|
129.6 |
|
|
138.3 |
|
Adjusted EBITDA |
|
$ |
31.4 |
|
|
$ |
29.6 |
|
|
$ |
132.8 |
|
|
$ |
158.7 |
|
Gross Profit Margin |
17.3 |
% |
|
17.6 |
% |
|
17.7 |
% |
|
22.3 |
% |
Adjusted EBITDA Margin |
15.3 |
% |
|
16.7 |
% |
|
15.9 |
% |
|
21.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Key Year over Year Performance
Metrics: |
Q4
2017 |
|
|
|
FY
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Sales Growth - Total Drainage |
|
10 |
% |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipe
& Precast Sales Growth (price and volume) |
|
4 |
% |
|
|
|
1 |
% |
|
|
|
|
Other Sales Growth (specialty products including Bio Clean
and structural) |
|
6 |
% |
|
|
|
2 |
% |
|
|
Water - Key
Financial and Operational Statistics:
($ in millions) |
|
Fourth
Quarter |
|
Full
Year |
|
|
|
|
Q4
2017 |
|
Q4
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
156.6 |
|
|
$ |
177.3 |
|
|
$ |
745.6 |
|
|
$ |
632.6 |
|
Gross Profit |
|
22.0 |
|
|
30.0 |
|
|
108.3 |
|
|
120.6 |
|
EBITDA |
|
16.7 |
|
|
18.4 |
|
|
47.6 |
|
|
98.6 |
|
Adjusted EBITDA |
|
$ |
18.0 |
|
|
$ |
24.9 |
|
|
$ |
93.8 |
|
|
$ |
114.0 |
|
Gross Profit Margin |
14.0 |
% |
|
16.9 |
% |
|
14.5 |
% |
|
19.1 |
% |
Adjusted EBITDA Margin |
11.5 |
% |
|
14.0 |
% |
|
12.6 |
% |
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Key Year over Year Performance
Metrics: |
Q4
2017 |
|
|
|
FY
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Sales Growth - Total Water |
|
4 |
% |
|
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ductile Iron Pipe Sales Growth (price and volume) |
|
7 |
% |
|
|
|
0 |
% |
|
|
|
|
Other Sales Growth (fabrication, fittings and large
diameter concrete pipe) |
|
-3 |
% |
|
|
|
-3 |
% |
|
|
Key
components of expected 2018 cash outflow requirements:
($ in
millions) |
Low |
|
High |
Capital Expenditures |
$ |
(40.0 |
) |
|
$ |
(45.0 |
) |
TRA
Payments, net of 2017 Tax Refund |
(19.0 |
) |
|
(24.0 |
) |
Cash
Interest |
(60.0 |
) |
|
(65.0 |
) |
Principal Amortization |
(12.0 |
) |
|
(12.0 |
) |
Working Capital |
(10.0 |
) |
|
(20.0 |
) |
Total |
$ |
(141.0 |
) |
|
$ |
(166.0 |
) |
|
Conference
Call and Webcast Information
Forterra will host a conference call to review fourth quarter 2017
results on March 7, 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 9178619. Please
dial in at least five minutes prior to the call to register. The
call may also be accessed via a webcast that is available on the
Investors section of the Company's website at
http://forterrabp.com. A replay of the conference call will
be available for 30 days under the Investor section of the
Company's website.
About
Forterra
Forterra 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 storm water management.
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 Statements
This 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.
1 A
reconciliation of non-GAAP financial measures to comparable GAAP
financial measures is provided in the Reconciliation of Non-GAAP
Measures section of this press release.
|
FORTERRA, INC.
Consolidated Statements of
Operations
(in thousands, except per share data) |
|
|
|
|
|
Quarter
ended |
|
Year
ended |
|
December
31, |
|
December
31, |
|
2017 |
2016 |
|
2017 |
2016 |
|
unaudited |
unaudited |
|
|
Net sales |
$ |
361,169 |
|
$ |
354,111 |
|
|
$ |
1,580,413 |
|
$ |
1,363,962 |
|
Cost of goods sold |
304,731 |
|
293,752 |
|
|
1,327,305 |
|
1,083,508 |
|
Gross profit |
56,438 |
|
60,359 |
|
|
253,108 |
|
280,454 |
|
Selling, general & administrative expenses |
(63,070 |
) |
(63,023 |
) |
|
(255,034 |
) |
(216,099 |
) |
Impairment and exit charges |
(216 |
) |
(1,640 |
) |
|
(13,220 |
) |
(2,218 |
) |
Earnings from equity method investee |
2,911 |
|
2,933 |
|
|
12,360 |
|
11,947 |
|
Loss
on sale of property, plant and equipment, net |
(357 |
) |
(20,954 |
) |
|
(2,107 |
) |
(21,274 |
) |
Other
operating income, net |
303 |
|
4,693 |
|
|
7,304 |
|
10,303 |
|
|
(60,429 |
) |
(77,991 |
) |
|
(250,697 |
) |
(217,341 |
) |
Income (loss) from operations |
(3,991 |
) |
(17,632 |
) |
|
2,411 |
|
63,113 |
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
Interest expense |
(13,206 |
) |
(51,163 |
) |
|
(59,408 |
) |
(125,048 |
) |
Change
in tax receivable agreement liability |
45,440 |
|
- |
|
|
46,180 |
|
- |
|
Other
income (expense), net |
(309 |
) |
547 |
|
|
(31,915 |
) |
(847 |
) |
Income (loss) before income
taxes |
27,934 |
|
(68,248 |
) |
|
(42,732 |
) |
(62,782 |
) |
Income
tax benefit |
15,224 |
|
23,106 |
|
|
40,672 |
|
51,692 |
|
Income (loss) from continuing
operations |
43,158 |
|
(45,142 |
) |
|
(2,060 |
) |
(11,090 |
) |
|
|
|
|
|
|
Discontinued operations, net of
tax |
$ |
- |
|
$ |
(3,585 |
) |
|
$ |
- |
|
$ |
3,484 |
|
|
|
|
|
|
|
Net income (loss) |
$ |
43,158 |
|
$ |
(48,727 |
) |
|
$ |
(2,060 |
) |
$ |
(7,606 |
) |
|
|
|
|
|
|
Diluted income (loss) per
share: |
|
|
|
|
|
Continuing operations |
$ |
0.67 |
|
$ |
(0.75 |
) |
|
$ |
(0.03 |
) |
$ |
(0.23 |
) |
Discontinued operations |
$ |
- |
|
$ |
(0.06 |
) |
|
$ |
- |
|
$ |
0.07 |
|
Net
income (loss) |
$ |
0.67 |
|
$ |
(0.81 |
) |
|
$ |
(0.03 |
) |
$ |
(0.16 |
) |
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
Basic |
63,824 |
|
59,985 |
|
|
63,801 |
|
49,053 |
|
Diluted |
63,952 |
|
59,985 |
|
|
63,801 |
|
49,053 |
|
FORTERRA, INC.
Consolidated Balance
Sheets
(in thousands, except per share data) |
|
|
|
December
31, |
|
2017 |
|
2016 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash
and cash equivalents |
$ |
104,534 |
|
|
$ |
40,024 |
|
Receivables, net |
192,654 |
|
|
201,481 |
|
Inventories |
236,655 |
|
|
279,502 |
|
Prepaid expenses |
5,381 |
|
|
6,417 |
|
Other
current assets |
27,059 |
|
|
5,179 |
|
Current assets held for sale |
12,242 |
|
|
- |
|
Total
current assets |
578,525 |
|
|
532,603 |
|
Non-current assets |
|
|
|
Property, plant and equipment, net |
412,572 |
|
|
452,914 |
|
Goodwill |
496,141 |
|
|
491,447 |
|
Intangible assets, net |
225,304 |
|
|
281,598 |
|
Investment in equity method investee |
54,445 |
|
|
55,236 |
|
Other
long-term assets |
18,866 |
|
|
10,988 |
|
Non-current assets held for sale |
25,385 |
|
|
- |
|
Total
assets |
$ |
1,811,238 |
|
|
$ |
1,824,786 |
|
LIABILITIES AND EQUITY |
|
|
|
Current liabilities |
|
|
|
Trade
payables |
$ |
108,560 |
|
|
$ |
134,059 |
|
Accrued liabilities |
72,782 |
|
|
78,165 |
|
Deferred revenue |
9,029 |
|
|
20,797 |
|
Current portion of long-term debt |
12,510 |
|
|
10,500 |
|
Current portion of tax receivable agreement |
34,601 |
|
|
4,000 |
|
Current liabilities held for sale |
4,615 |
|
|
- |
|
Total
current liabilities |
242,097 |
|
|
247,521 |
|
Non-current liabilities |
|
|
|
Senior
term loan |
1,181,277 |
|
|
990,483 |
|
Revolving credit facility |
- |
|
|
95,064 |
|
Deferred tax liabilities |
67,481 |
|
|
100,550 |
|
Deferred gain on sale-leaseback |
75,743 |
|
|
78,215 |
|
Other
long-term liabilities |
29,187 |
|
|
23,253 |
|
Long-term tax receivable agreement |
82,962 |
|
|
156,783 |
|
Total
liabilities |
1,678,747 |
|
|
1,691,869 |
|
Commitments and Contingencies |
|
|
|
Equity |
|
|
|
Common
stock, $0.001 par value. 190,000 shares authorized; 64,231 and
63,924 shares issued and outstanding at December 31, 2017 and
December 31, 2016, respectively |
18 |
|
|
18 |
|
Additional paid-in-capital |
230,023 |
|
|
228,316 |
|
Accumulated other comprehensive loss |
(5,098 |
) |
|
(5,025 |
) |
Retained deficit |
(92,452 |
) |
|
(90,392 |
) |
Total
shareholders' equity |
132,491 |
|
|
132,917 |
|
Total
liabilities and shareholders' equity |
$ |
1,811,238 |
|
|
$ |
1,824,786 |
|
FORTERRA, INC.
Consolidated (Successor) / Combined
(Predecessor) Statements of Cash Flows
(in thousands) |
|
|
Successor |
|
|
Predecessor |
|
|
|
|
|
For the
period from |
|
|
For the
period
from |
|
Year
ended
December 31, |
|
Year
ended
December 31, |
|
March 14
to
December 31, |
|
|
January
1 to
March 13, |
|
2017 |
|
2016 |
|
2015 |
|
|
2015 |
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net
loss |
$ |
(2,060 |
) |
|
$ |
(7,606 |
) |
|
$ |
(82,786 |
) |
|
|
$ |
(5,756 |
) |
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities: |
|
|
|
Depreciation & amortization expense |
115,659 |
|
|
99,873 |
|
|
32,930 |
|
|
|
6,894 |
|
Loss
on business divestiture |
32,278 |
|
|
- |
|
|
- |
|
|
|
- |
|
(Gain)
loss on disposal of property, plant and equipment |
2,107 |
|
|
21,267 |
|
|
618 |
|
|
|
(122 |
) |
Amortization of debt discount and issuance costs |
8,123 |
|
|
8,244 |
|
|
5,085 |
|
|
|
- |
|
Stock-based compensation expense |
3,696 |
|
|
252 |
|
|
- |
|
|
|
- |
|
Impairment on property, plant, and equipment and goodwill |
10,551 |
|
|
- |
|
|
1,088 |
|
|
|
27 |
|
Write-off of debt discount and issuance costs |
- |
|
|
22,385 |
|
|
- |
|
|
|
- |
|
Earnings from equity method investee |
(12,360 |
) |
|
(11,947 |
) |
|
(8,429 |
) |
|
|
(67 |
) |
Distributions from equity method investee |
13,150 |
|
|
13,000 |
|
|
8,542 |
|
|
|
- |
|
Unrealized (gain) loss on derivative instruments, net |
(5,251 |
) |
|
2,945 |
|
|
(8,331 |
) |
|
|
- |
|
Unrealized foreign currency gains, net |
(615 |
) |
|
(5,485 |
) |
|
6,940 |
|
|
|
(26 |
) |
Provision (recoveries) for doubtful accounts |
2,947 |
|
|
(1,864 |
) |
|
1,377 |
|
|
|
(31 |
) |
Deferred taxes |
(25,496 |
) |
|
(67,619 |
) |
|
(3,138 |
) |
|
|
2,749 |
|
Deferred rent |
2,616 |
|
|
1,371 |
|
|
1,279 |
|
|
|
0 |
|
Other
non-cash items |
196 |
|
|
1,012 |
|
|
(13 |
) |
|
|
(1,736 |
) |
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables, net |
(16,831 |
) |
|
16,852 |
|
|
28,900 |
|
|
|
(7,520 |
) |
Inventories |
1,838 |
|
|
14,916 |
|
|
59,506 |
|
|
|
(20,160 |
) |
Other
current assets |
(23,436 |
) |
|
(6,412 |
) |
|
(2,153 |
) |
|
|
(855 |
) |
Accounts payable and accrued liabilities |
(19,424 |
) |
|
(27,655 |
) |
|
72,422 |
|
|
|
(20,119 |
) |
Change
in tax receivable agreement liability |
(46,180 |
) |
|
- |
|
|
- |
|
|
|
- |
|
Other
assets & liabilities |
826 |
|
|
3,396 |
|
|
7,580 |
|
|
|
(1,502 |
) |
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
42,334 |
|
|
76,925 |
|
|
121,417 |
|
|
|
(48,224 |
) |
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
(52,514 |
) |
|
(54,289 |
) |
|
(14,705 |
) |
|
|
(2,762 |
) |
Proceeds from the sale of long-term assets |
23,200 |
|
|
- |
|
|
2,194 |
|
|
|
- |
|
Assets
and liabilities acquired, business combinations, net |
(36,709 |
) |
|
(1,008,158 |
) |
|
(885,528 |
) |
|
|
- |
|
NET
CASH USED IN INVESTING ACTIVITIES |
(66,023 |
) |
|
(1,062,447 |
) |
|
(898,039 |
) |
|
|
(2,762 |
) |
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from sale-leaseback |
- |
|
|
216,280 |
|
|
- |
|
|
|
- |
|
Payment of debt issuance costs |
(2,498 |
) |
|
(20,036 |
) |
|
(27,410 |
) |
|
|
- |
|
Proceeds from issuance of common stock, net |
- |
|
|
303,805 |
|
|
- |
|
|
|
- |
|
Payments on senior and junior term loans |
(12,008 |
) |
|
(1,300,536 |
) |
|
(5,366 |
) |
|
|
- |
|
Proceeds from senior and junior term loans, net |
200,000 |
|
|
1,593,150 |
|
|
730,404 |
|
|
|
- |
|
Proceeds from revolver |
194,000 |
|
|
398,611 |
|
|
45,619 |
|
|
|
- |
|
Payments on revolver |
(293,000 |
) |
|
(248,173 |
) |
|
(45,619 |
) |
|
|
- |
|
Proceeds from settlement of derivatives |
- |
|
|
6,546 |
|
|
- |
|
|
|
- |
|
Capital contribution from Predecessor Parent, net |
- |
|
|
- |
|
|
- |
|
|
|
60,910 |
|
Capital contribution from parent |
- |
|
|
402,127 |
|
|
167,482 |
|
|
|
- |
|
Payments for return of contributed capital |
- |
|
|
(363,582 |
) |
|
(42,513 |
) |
|
|
- |
|
Other
financing activities |
(244 |
) |
|
(6,464 |
) |
|
(17 |
) |
|
|
(3 |
) |
NET
CASH PROVIDED BY FINANCING ACTIVITIES |
86,250 |
|
|
981,728 |
|
|
822,580 |
|
|
|
60,907 |
|
Effect
of exchange rate changes on cash |
1,949 |
|
|
228 |
|
|
(2,368 |
) |
|
|
(130 |
) |
Net
change in cash and cash equivalents |
64,510 |
|
|
(3,566 |
) |
|
43,590 |
|
|
|
9,791 |
|
Cash
and cash equivalents, beginning of period |
40,024 |
|
|
43,590 |
|
|
- |
|
|
|
42 |
|
Cash
and cash equivalents, end of period |
$ |
104,534 |
|
|
$ |
40,024 |
|
|
$ |
43,590 |
|
|
|
$ |
9,833 |
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
|
Cash
interest paid |
$ |
54,676 |
|
|
$ |
77,437 |
|
|
$ |
25,379 |
|
|
|
$ |
- |
|
Income
taxes paid |
$ |
28,086 |
|
|
$ |
66,264 |
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
income (loss) before (earnings) loss from discontinued operations,
net interest expense, depreciation and amortization, income tax
benefit (expense), and before loss on sale of property, plant and
equipment, impairment and exit charges, transaction costs and
inventory step-up impacting margins, loss on divestitures, non-cash
compensation and certain other income and expenses, such as
the change in the tax receivable agreement liability. 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 net income and
adjusted EBITDA should not be considered as alternatives to
consolidated net income, and in the case of our segment results,
adjusted EBITDA should not be considered an alternative to EBITDA,
which the CODM 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 tax 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.
|
FORTERRA, INC.
Reconciliation of net income (loss) to
adjusted EBITDA
(in thousands) |
|
|
|
|
|
Three
months ended December 31, |
|
Year
ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
unaudited |
|
unaudited |
|
|
|
|
Net
income (loss) |
$ |
43,158 |
|
|
$ |
(48,727 |
) |
|
$ |
(2,060 |
) |
|
$ |
(7,606 |
) |
(Earnings) loss from discontinued operations, net |
- |
|
|
3,585 |
|
|
- |
|
|
(3,484 |
) |
Interest expense |
13,206 |
|
|
51,163 |
|
|
59,408 |
|
|
125,048 |
|
Depreciation and amortization |
28,196 |
|
|
28,585 |
|
|
115,659 |
|
|
93,503 |
|
Income
tax benefit |
(15,224 |
) |
|
(23,106 |
) |
|
(40,672 |
) |
|
(51,692 |
) |
EBITDA1 |
69,336 |
|
|
11,500 |
|
|
132,335 |
|
|
155,769 |
|
Loss
on sale of property, plant & equipment, net2 |
358 |
|
|
20,097 |
|
|
2,107 |
|
|
21,274 |
|
Impairment and exit charges3 |
216 |
|
|
1,640 |
|
|
13,220 |
|
|
2,218 |
|
Transaction costs4 |
1,452 |
|
|
5,993 |
|
|
7,743 |
|
|
25,221 |
|
Inventory step-up impacting margin5 |
282 |
|
|
2,563 |
|
|
2,433 |
|
|
15,078 |
|
Loss
on divestitures6 |
672 |
|
|
- |
|
|
32,278 |
|
|
234 |
|
Non-cash compensation7 |
1,008 |
|
|
- |
|
|
3,696 |
|
|
- |
|
Change
in tax receivable agreement liability8 |
(45,440 |
) |
|
- |
|
|
(46,180 |
) |
|
- |
|
Other
(gains) expenses9 |
360 |
|
|
835 |
|
|
(117 |
) |
|
(1,841 |
) |
Adjusted EBITDA |
$ |
28,244 |
|
|
$ |
42,628 |
|
|
$ |
147,515 |
|
|
$ |
217,953 |
|
Adjusted EBITDA margin |
7.8 |
% |
|
12.0 |
% |
|
9.3 |
% |
|
16.0 |
% |
Gross
profit |
56,438 |
|
|
60,359 |
|
|
253,108 |
|
|
280,454 |
|
Gross
profit margin |
15.6 |
% |
|
17.0 |
% |
|
16.0 |
% |
|
20.6 |
% |
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 facilities.
3 Impairment
of goodwill and long-lived assets and other exit and disposal
costs.
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 Loss
on divestiture of U.S. concrete and steel pressure pipe business,
and results of operations of our disposed roof tile business and
other disposed sites for the periods presented, net of specific
items for which adjustments are separately made elsewhere in the
calculation of adjusted EBITDA presented herein.
7 Non-cash
equity compensation expense.
8 Adjustments
to the estimated value of the tax receivable agreement due
primarily to the December 2017 Tax Cuts and Jobs
Act.
9 Other
(gains) losses, such as gain on insurance proceeds related to the
destruction of property and results of operations of our disposed
roof tile business and other disposed sites for the periods
presented.
|
FORTERRA, INC.
Reconciliation of segment EBITDA to segment
adjusted EBITDA
(in thousands) |
|
|
|
|
|
|
|
|
For the three months ended December 31,
2017: |
Drainage
Pipe
& Products |
|
Water
Pipe &
Products |
|
Corporate
and Other |
|
Total |
EBITDA1 |
$ |
30,786 |
|
|
$ |
16,706 |
|
|
$ |
21,844 |
|
|
$ |
69,336 |
|
|
|
|
|
|
|
|
|
Loss
on sale of property, plant & equipment, net2 |
19 |
|
|
339 |
|
|
- |
|
|
358 |
|
Impairment and exit charges3 |
- |
|
|
216 |
|
|
- |
|
|
216 |
|
Transaction costs4 |
- |
|
|
- |
|
|
1,452 |
|
|
1,452 |
|
Inventory step-up impacting margin5 |
282 |
|
|
- |
|
|
- |
|
|
282 |
|
Loss
on divestitures6 |
- |
|
|
672 |
|
|
- |
|
|
672 |
|
Non-cash compensation7 |
257 |
|
|
34 |
|
|
717 |
|
|
1,008 |
|
Change
in tax receivable agreement liability8 |
- |
|
|
- |
|
|
(45,440 |
) |
|
(45,440 |
) |
Other
(gains) expenses9 |
29 |
|
|
- |
|
|
331 |
|
|
360 |
|
Adjusted EBITDA |
$ |
31,373 |
|
|
$ |
17,967 |
|
|
$ |
(21,096 |
) |
|
$ |
28,244 |
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
204,610 |
|
|
$ |
156,556 |
|
|
$ |
3 |
|
|
$ |
361,169 |
|
Gross
profit |
$ |
35,418 |
|
|
$ |
21,993 |
|
|
$ |
(973 |
) |
|
$ |
56,438 |
|
For the three months ended December 31,
2016: |
Drainage
Pipe
& Products |
|
Water
Pipe &
Products |
|
Corporate
and Other |
|
Total |
EBITDA1 |
$ |
11,738 |
|
|
$ |
18,390 |
|
|
$ |
(18,628 |
) |
|
$ |
11,500 |
|
|
|
|
|
|
|
|
|
(Gain)
loss on sale of property, plant & equipment, net2 |
15,300 |
|
|
5,644 |
|
|
(847 |
) |
|
20,097 |
|
Impairment and exit charges3 |
(18 |
) |
|
1,618 |
|
|
40 |
|
|
1,640 |
|
Transaction costs4 |
- |
|
|
(176 |
) |
|
6,169 |
|
|
5,993 |
|
Inventory step-up impacting margin5 |
2,563 |
|
|
- |
|
|
- |
|
|
2,563 |
|
Other
(gains) expenses9 |
- |
|
|
(587 |
) |
|
1,422 |
|
|
835 |
|
Adjusted EBITDA |
$ |
29,583 |
|
|
$ |
24,889 |
|
|
$ |
(11,844 |
) |
|
$ |
42,628 |
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
176,837 |
|
|
$ |
177,287 |
|
|
$ |
(13 |
) |
|
$ |
354,111 |
|
Gross
profit |
$ |
31,117 |
|
|
$ |
29,953 |
|
|
$ |
(711 |
) |
|
$ |
60,359 |
|
FORTERRA, INC.
Reconciliation of segment EBITDA to segment
adjusted EBITDA
(in thousands) |
|
|
|
|
|
|
|
|
For the year ended December 31,
2017: |
Drainage
Pipe
& Products |
|
Water
Pipe &
Products |
|
Corporate
and Other |
|
Total |
EBITDA1 |
$ |
129,618 |
|
|
$ |
47,587 |
|
|
$ |
(44,870 |
) |
|
$ |
132,335 |
|
|
|
|
|
|
|
|
|
Loss
on sale of property, plant & equipment, net2 |
15 |
|
|
2,092 |
|
|
- |
|
|
2,107 |
|
Impairment and exit charges3 |
(14 |
) |
|
12,395 |
|
|
839 |
|
|
13,220 |
|
Transaction costs4 |
- |
|
|
- |
|
|
7,743 |
|
|
7,743 |
|
Inventory step-up impacting margin5 |
2,433 |
|
|
- |
|
|
- |
|
|
2,433 |
|
Loss
on divestitures6 |
- |
|
|
32,278 |
|
|
- |
|
|
32,278 |
|
Non-cash compensation7 |
711 |
|
|
379 |
|
|
2,606 |
|
|
3,696 |
|
Change
in tax receivable agreement liability8 |
- |
|
|
- |
|
|
(46,180 |
) |
|
(46,180 |
) |
Other
(gains) expenses9 |
29 |
|
|
(942 |
) |
|
796 |
|
|
(117 |
) |
Adjusted EBITDA |
$ |
132,792 |
|
|
$ |
93,789 |
|
|
$ |
(79,066 |
) |
|
$ |
147,515 |
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
834,810 |
|
|
$ |
745,555 |
|
|
$ |
48 |
|
|
$ |
1,580,413 |
|
Gross
profit |
$ |
147,741 |
|
|
$ |
108,320 |
|
|
$ |
(2,953 |
) |
|
$ |
253,108 |
|
For the year ended December 31,
2016: |
Drainage
Pipe
& Products |
|
Water
Pipe &
Products |
|
Corporate
and Other |
|
Total |
EBITDA1 |
$ |
138,274 |
|
|
$ |
98,641 |
|
|
$ |
(81,146 |
) |
|
$ |
155,769 |
|
|
|
|
|
|
|
|
|
Loss
on sale of property, plant & equipment, net2 |
15,547 |
|
|
5,727 |
|
|
- |
|
|
21,274 |
|
Impairment and exit charges3 |
227 |
|
|
1,945 |
|
|
46 |
|
|
2,218 |
|
Transaction costs4 |
- |
|
|
359 |
|
|
24,862 |
|
|
25,221 |
|
Inventory step-up impacting margin5 |
4,441 |
|
|
10,637 |
|
|
- |
|
|
15,078 |
|
Loss
on divestitures6 |
234 |
|
|
- |
|
|
- |
|
|
234 |
|
Other
(gains) expenses9 |
- |
|
|
(3,263 |
) |
|
1,422 |
|
|
(1,841 |
) |
Adjusted EBITDA |
$ |
158,723 |
|
|
$ |
114,046 |
|
|
$ |
(54,816 |
) |
|
$ |
217,953 |
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
728,872 |
|
|
$ |
632,573 |
|
|
$ |
2,517 |
|
|
$ |
1,363,962 |
|
Gross
profit |
$ |
162,442 |
|
|
$ |
120,564 |
|
|
$ |
(2,552 |
) |
|
$ |
280,454 |
|
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 facilities.
3 Impairment
of goodwill and long-lived assets and other exit and disposal
costs.
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 Loss
on divestiture of U.S. concrete and steel pressure pipe business,
and results of operations of our disposed roof tile business and
other disposed sites for the periods presented, net of specific
items for which adjustments are separately made elsewhere in the
calculation of adjusted EBITDA presented herein.
7 Non-cash
equity compensation expense.
8 Adjustments
to the estimated value of the tax receivable agreement due
primarily to the December 2017 Tax Cuts and Jobs
Act.
9 Other
(gains) losses, such as gain on insurance proceeds related to the
destruction of property and results of operations of our disposed
roof tile business and other disposed sites for the periods
presented.
|
FORTERRA, INC.
Reconciliation of Net Income to Adjusted
EBITDA Guidance for Q1 2018
(in millions) |
|
|
|
|
|
Q1 2018
Adjusted EBITDA Guidance |
|
|
Low |
|
High |
Net
Loss |
|
$ |
(31 |
) |
|
$ |
(28 |
) |
Interest expense |
|
16 |
|
|
16 |
|
Income
tax benefit |
|
(7 |
) |
|
(6 |
) |
Depreciation and amortization |
|
30 |
|
|
30 |
|
Adjusted EBITDA |
|
$ |
8 |
|
|
$ |
12 |
|
Source: Forterra, Inc.
Company Contact Information:
David J. Lawrence
Vice President of Treasury and Investor Relations
469-299-9113
IR@forterrabp.com
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Forterra, Inc. via Globenewswire
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