Fourth Quarter Highlights
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 CommentaryForterra 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
ResultsFourth 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 ResultsDrainage 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 ResultsWater 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 ResultsCorporate 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 ResultsFull 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 LiquidityOn
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 OutlookThe 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
InformationForterra 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 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 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 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.
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 endedDecember
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
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