Organization and description of the business

Description of the business, the offering and reorganization

Forterra Building Products (“Forterra” or the “Successor”) is involved in the manufacturing, sale and distribution of building materials in the United States (‘‘U.S.’’) and Canada. Forterra’s primary products are concrete drainage pipe, precast concrete structures, water transmission pipe used in drinking and wastewater systems, and bricks. These products are used in the residential, infrastructure and non-residential sectors of the construction industry.

Forterra, Inc., a Delaware corporation, was formed on June 21, 2016 to hold the interest in the Successor following the Reorganization (as defined below). On October 25, 2016, Forterra, Inc. completed an initial public offering of its common stock (the "Offering"), in which it offered 18,420,000 shares of common stock at a public offering price of $18.00 per share. Forterra, Inc. received net proceeds from the Offering of $313.3 million, net of underwriting discounts and commissions and before deducting offering expenses, $296.0 million of which was used to repay indebtedness.

Prior to the consummation of the Offering, LSF9 Concrete Holdings Ltd. ("LSF9"), an indirect wholly owned subsidiary of Lone Star Fund IX (U.S.), L.P. (along with its affiliates and associates, but excluding the Company and other companies that it owns as a result of its investment activity, "Lone Star") distributed its brick operations in the United States and Eastern Canada to an affiliate of Lone Star (the "Brick Disposition"). Following the Brick Disposition and prior to the consummation of the Offering, the remaining building products operations of LSF9 in the United States and Eastern Canada, were transferred to Forterra, Inc. in an internal reorganization under common control transaction (the "Reorganization"). Following the Reorganization but prior to the consummation of the Offering, Forterra, Inc. was a wholly owned subsidiary of Forterra US Holdings, LLC, which is indirectly wholly owned by LSF9. Each of LSF9, Forterra US Holdings, LLC and Forterra, Inc. are affiliates of Lone Star.

Basis of Presentation - Successor

Forterra includes indirect wholly-owned subsidiaries of LSF9. Lone Star, through its wholly-owned subsidiary LSF9, acquired Forterra on March 13, 2015 (the “Acquisition”). LSF9, which was formed on February 6, 2015 for the purpose of acquiring Forterra, had no operations prior to the date of the Acquisition. The legal entities that comprise Forterra are domiciled in the U.S. and Canada.

Prior to the Acquisition, the entities comprising Forterra which were acquired by Lone Star were indirect wholly-owned subsidiaries of HeidelbergCement A.G. (“HC” or “Parent”), a publicly listed company in Germany, encompassing HC's North American building products operations (“BP NAM" or the “Predecessor”). LSF9 acquired Forterra in a business combination which also included the acquisition of HC’s U.K.-based building products operations for a total initial purchase price of $1.33 billion cash, including customary working capital adjustments and a possible earn-out of up to $100.0 million. The acquisition of BP NAM and HC's UK-based building products was funded with an equity investment of $432.3 million and third-party debt in the amount of $940.0 million.

In the accompanying financial information, Successor refers to Forterra and Predecessor refers to BP NAM. The term “Company” is used throughout the combined financial statements and applies to either the Predecessor or the Successor.

The Successor’s combined financial statements include certain assets and liabilities historically held at LSF9, including the proportionate debt and related interest expense incurred by LSF9 to acquire the Company that Forterra is obligated to pay. The Company's portion of Lone Star's initial $432.3 million equity investment is $167.5 million. The Company’s allocated portion of the $940.0 million of third party debt used to finance the Acquisition is $515.5 million. The remaining $424.5 million of the debt was allocated to affiliates of LSF9 that are not included in these financial statements based on the amounts affiliates of LSF9 have fully repaid. The Company and the affiliates of LSF9 were co-obligors and jointly and severally liable under the terms of the initial credit agreements. In April of 2016, the Company’s affiliate co-obligors were released from joint and several liability under the credit agreements and the Company is consequently the sole source of repayment for its $515.5 million share of the initial obligation under the credit agreements. See discussion of the joint and several obligations in Note 9, Debt and deferred financing costs.

Recent Transactions

A number of transactions have been completed since the Acquisition. These transactions include:

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Cretex Acquisition - On October 1, 2015, Forterra acquired Cretex for aggregate consideration of $245.1 million (the "Cretex Acquisition"). Cretex is a manufacturer of concrete pipe, box culverts, concrete precast drainage structures, pre-stressed bridge components and ancillary precast products in the Upper Midwestern United States. The Cretex Acquisition was financed with borrowings on LSF9's senior term loan and cash on hand.

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Sherman-Dixie Acquisition - On January 29, 2016, Forterra acquired substantially all the assets of Sherman-Dixie Concrete Industries (“Sherman-Dixie”) for aggregate consideration of $66.8 million (the "Sherman-Dixie Acquisition"). Sherman-Dixie is a manufacturer of precast concrete structures operating in Kentucky, Tennessee, Alabama and Indiana. The Sherman Dixie Acquisition was financed with borrowings on LSF9’s revolving credit facility.


•	Roof Tile Divestiture - On April 12, 2016, Forterra sold its roof tile business for aggregate consideration of $10.5 million, subject to customary working capital adjustments (the "Roof Tile Divestiture").

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U.S. Pipe Acquisition - On April 15, 2016, Forterra acquired all of the stock of USP Holdings Inc. (“USP”) for a purchase price of $775.1 million, subject to customary working capital adjustments (the "USP Acquisition"). USP is a manufacturer of water transmission pipe servicing residential, commercial and infrastructure customers. The USP Acquisition was financed with proceeds from a capital contribution, borrowings on LSF9's revolving credit facility and cash on hand.

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Bio Clean Acquisition - On August 4, 2016, Forterra acquired all of the stock of Bio Clean Environmental Services, Inc. and Modular Wetland Systems, Inc. (together, "Bio Clean") for aggregate consideration of $30.6 million (the "Bio Clean Acquisition"). Bio Clean designs and sells storm water management systems that meet the requirements of local regulatory bodies regulating storm water quality and owns technologies relating to drainage and storm water management. The Bio Clean Acquisition was financed with cash on hand.

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Bricks Disposition - On August 23, 2016, an affiliate of Lone Star entered into an agreement with an unaffiliated third party to contribute Forterra's bricks business to a newly formed joint venture with the unaffiliated third party (the "Bricks Joint Venture"). In exchange for the contribution of the bricks business, an affiliate of Lone Star received a 50% interest in the Bricks Joint Venture. On October 17th, 2016, Forterra distributed its bricks business to an affiliate of Lone Star (the "Bricks Disposition"). Following the Bricks Disposition, Forterra no longer had any relation to or business affiliation with its former bricks business or the Bricks Joint Venture other than contractual arrangements regarding certain limited transition services, the temporary use of the “Forterra” name, and a short-term loan which has subsequently been repaid in full. The Company will incur tax liabilities of approximately $32.3 million as a result of the Brick Disposition which will be recognized as a charge to income in the fourth quarter.

This transaction qualifies as a reorganization of businesses under common control as set forth in the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") 805, Business Combinations and, as such, will first be reflected in the Company's financial statements covering the date on which the transaction occurred. As of the disposition date, the carrying value of net assets related to the brick business will be removed from the Company's balance sheet and recognized as an equity distribution. Also, beginning in the fourth quarter of 2016, the Company will reclassify the operations of the Company's then-former brick business to discontinued operations for all periods presented on the statement of operations.


•	J&G Acquisition - On October 14, 2016, Forterra acquired J&G Concrete Operations, LLC ("J&G") for aggregate consideration of $32.0 million, subject to customary working capital adjustments (the "J&G Acquisition"). J&G manufactures concrete pipe, box culverts and special fittings in North Texas. The J&G Acquisition was financed with borrowings on LSF9's revolving credit facility.

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Precast Concepts Acquisition - On October 14, 2016, Forterra acquired the business of Precast Concepts, LLC ("Precast Concepts") for aggregate consideration of $97.1 million, subject to customary working capital adjustments (the "Precast Concepts Acquisition"). Precast Concepts manufactures concrete pipe, box culverts, storm detention systems and other precast concrete and related products in Colorado through its three facilities. The Precast Concepts Acquisition was financed with borrowings on LSF9's revolving credit facility.

The financial statements contained herein have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The combined financial statements include the accounts of the Company. All intercompany transactions among the Successor entities have been eliminated.