Delaware | 1-37921 | 37-1830464 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S Employer Identification No.) |
511 East John Carpenter Freeway, 6th Floor, Irving, TX | 75062 | |
(Address of Principal Executive Offices) | (Zip Code) |
(469) 458-7973 |
(Registrant's telephone number, including area code) |
(d) | Exhibits |
99.1 |
Forterra, Inc. | |
/s/ Lori M. Browne | |
Lori M. Browne | |
Senior Vice President, General Counsel and Secretary |
• | Higher average selling prices on a sequential quarter basis in both the Drainage and Water segments |
• | Sold the U.S. concrete and steel pressure pipe business for a loss of $31.6 million that contributed to the net loss of $11.5 million for the quarter |
• | Adjusted EBITDA of $60.9 million, above the mid-point of the guidance range despite the impact of two major hurricanes |
• | Ended the quarter with no outstanding balance on the Revolver |
($ in millions) | Three Months Ended September 30, | ||||||
2017 | 2016 | ||||||
(unaudited) | (unaudited) | ||||||
Net Sales | $ | 10.8 | $ | 19.7 | |||
EBITDA | (33.9 | ) | (6.1 | ) | |||
Adjusted EBITDA | $ | (2.4 | ) | $ | (3.1 | ) |
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
(unaudited) | (unaudited) | ||||||||||||
Net sales | $ | 444,257 | $ | 441,132 | $ | 1,219,244 | $ | 1,009,851 | |||||
Cost of goods sold | 362,150 | 339,819 | 1,022,574 | 789,756 | |||||||||
Gross profit | 82,107 | 101,313 | 196,670 | 220,095 | |||||||||
Selling, general & administrative expenses | (59,366 | ) | (62,355 | ) | (191,964 | ) | (153,076 | ) | |||||
Impairment and exit charges | (1,193 | ) | (555 | ) | (13,004 | ) | (578 | ) | |||||
Earnings from equity method investee | 2,936 | 4,146 | 9,449 | 9,014 | |||||||||
Other operating income, net | 2,008 | 1,946 | 5,251 | 5,290 | |||||||||
(55,615 | ) | (56,818 | ) | (190,268 | ) | (139,350 | ) | ||||||
Income from operations | 26,492 | 44,495 | 6,402 | 80,745 | |||||||||
Other income (expenses) | |||||||||||||
Interest expense | (15,582 | ) | (31,756 | ) | (46,202 | ) | (73,885 | ) | |||||
Other expense, net | (30,866 | ) | (217 | ) | (30,866 | ) | (1,394 | ) | |||||
Income (loss) from continuing operations before income taxes | (19,956 | ) | 12,522 | (70,666 | ) | 5,466 | |||||||
Income tax benefit (expense) | 8,454 | (8,154 | ) | 25,448 | 28,586 | ||||||||
Income (loss) from continuing operations | (11,502 | ) | 4,368 | (45,218 | ) | 34,052 | |||||||
Discontinued operations, net of tax | — | 4,000 | — | 7,069 | |||||||||
Net income (loss) | $ | (11,502 | ) | $ | 8,368 | $ | (45,218 | ) | $ | 41,121 | |||
Basic and Diluted earnings (loss) per share: | |||||||||||||
Continuing operations | $ | (0.18 | ) | $ | 0.10 | $ | (0.71 | ) | $ | 0.75 | |||
Discontinued operations | $ | — | $ | 0.09 | $ | — | $ | 0.16 | |||||
Net income (loss) | $ | (0.18 | ) | $ | 0.19 | $ | (0.71 | ) | $ | 0.91 | |||
Weighted average common shares outstanding: | |||||||||||||
Basic and Diluted | 63,799 | 45,369 | 63,794 | 45,369 |
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | (unaudited) | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 41,131 | $ | 40,024 | |||
Receivables, net | 266,676 | 201,481 | |||||
Inventories | 264,292 | 279,502 | |||||
Prepaid expenses | 5,596 | 6,417 | |||||
Other current assets | 22,430 | 5,179 | |||||
Total current assets | 600,125 | 532,603 | |||||
Non-current assets | |||||||
Property, plant and equipment, net | 426,246 | 452,914 | |||||
Goodwill | 504,964 | 491,447 | |||||
Intangible assets, net | 243,603 | 281,598 | |||||
Investment in equity method investee | 55,685 | 55,236 | |||||
Other long-term assets | 15,992 | 10,988 | |||||
Total assets | $ | 1,846,615 | $ | 1,824,786 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities | |||||||
Trade payables | $ | 133,899 | $ | 134,059 | |||
Accrued liabilities | 79,320 | 82,165 | |||||
Deferred revenue | 8,892 | 20,797 | |||||
Current portion of long-term debt | 12,510 | 10,500 | |||||
Total current liabilities | 234,621 | 247,521 | |||||
Non-current liabilities | |||||||
Senior term loan | 1,182,545 | 990,483 | |||||
Revolving credit facility | — | 95,064 | |||||
Deferred tax liabilities | 77,651 | 100,550 | |||||
Deferred gain on sale-leaseback | 76,469 | 78,215 | |||||
Other long-term liabilities | 27,991 | 23,253 | |||||
Long-term TRA Payable | 159,003 | 156,783 | |||||
Total liabilities | 1,758,280 | 1,691,869 | |||||
Equity | |||||||
Common stock, $0.001 par value, 64,294,793 and 63,924,124 shares issued and outstanding, respectively, and 190,000,000 shares authorized | 18 | 18 | |||||
Additional paid-in-capital | 229,057 | 228,316 | |||||
Accumulated other comprehensive loss | (5,130 | ) | (5,025 | ) | |||
Retained deficit | (135,610 | ) | (90,392 | ) | |||
Total shareholders' equity | 88,335 | 132,917 | |||||
Total liabilities and shareholders' equity | $ | 1,846,615 | $ | 1,824,786 |
Nine months ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | (unaudited) | (unaudited) | ||||||
Net Income (loss) | $ | (45,218 | ) | $ | 41,121 | |||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
Depreciation & amortization expense | 87,463 | 71,049 | ||||||
Loss on business divestiture | 31,606 | — | ||||||
Loss on disposal of property, plant and equipment | 1,749 | 1,169 | ||||||
Amortization of debt discount and issuance costs | 6,061 | 6,393 | ||||||
Impairment charges | 10,551 | — | ||||||
Earnings from equity method investee | (9,449 | ) | (9,014 | ) | ||||
Distributions from equity method investee | 9,000 | 7,800 | ||||||
Unrealized (gain) loss on derivative instruments, net | (2,035 | ) | 1,606 | |||||
Provision (recoveries) for doubtful accounts | 2,289 | (1,235 | ) | |||||
Deferred taxes | (16,321 | ) | (51,846 | ) | ||||
Deferred rent | 1,941 | — | ||||||
Other non-cash items | 1,690 | 45 | ||||||
Change in assets and liabilities: | ||||||||
Receivables, net | (84,974 | ) | (61,591 | ) | ||||
Inventories | (18,217 | ) | 18,370 | |||||
Other assets | (15,522 | ) | (7,973 | ) | ||||
Accounts payable and accrued liabilities | 2,668 | 7,854 | ||||||
Other assets & liabilities | (2,415 | ) | 7,124 | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (39,133 | ) | 30,872 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property, plant and equipment | (38,729 | ) | (27,043 | ) | ||||
Proceeds from business divestiture | 23,200 | — | ||||||
Assets and liabilities acquired, business combinations, net | (35,380 | ) | (872,471 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (50,909 | ) | (899,514 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from sale-leaseback | — | 216,280 | ||||||
Deferred transaction costs on failed sale-leaseback | — | (6,492 | ) | |||||
Payment of debt issuance costs | (2,498 | ) | (10,638 | ) | ||||
Payment of equity issuance costs | — | (6,669 | ) | |||||
Payments on term loans | (8,880 | ) | (2,191 | ) | ||||
Proceeds from term loans, net | 200,000 | 548,400 | ||||||
Proceeds from revolver | 194,000 | 131,611 | ||||||
Payments on revolver | (293,000 | ) | (55,173 | ) | ||||
Proceeds from settlement of derivatives | — | 6,546 | ||||||
Capital contribution from parent | — | 402,127 | ||||||
Payments for return of contributed capital | — | (363,582 | ) | |||||
Other financing activities | (232 | ) | — | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 89,390 | 860,219 | ||||||
Effect of exchange rate changes on cash | 1,759 | 1,050 | ||||||
Net change in cash and cash equivalents | 1,107 | (7,373 | ) | |||||
Cash and cash equivalents, beginning of period | 40,024 | 43,590 | ||||||
Cash and cash equivalents, end of period | $ | 41,131 | $ | 36,217 | ||||
SUPPLEMENTAL DISCLOSURES: | ||||||||
Cash interest paid | 40,968 | 51,476 | ||||||
Income taxes paid | 27,590 | — | ||||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES: | ||||||||
Fair value changes of derivatives recorded in OCI, net of tax | (4,103 | ) | (1,253 | ) |
Three months ended September 30, | |||||||
2017 | 2016 | ||||||
(unaudited) | (unaudited) | ||||||
Net income (loss) | $ | (11,502 | ) | $ | 8,368 | ||
Loss from discontinued operations, net | — | (4,000 | ) | ||||
Interest expense | 15,582 | 31,756 | |||||
Depreciation and amortization | 29,158 | 28,490 | |||||
Income tax (benefit) expense | (8,454 | ) | 8,154 | ||||
EBITDA1 | 24,784 | 72,768 | |||||
(Gain) loss on sale of property, plant & equipment, net2 | 555 | 1,547 | |||||
Impairment and exit charges3 | 1,193 | 555 | |||||
Transaction costs4 | 1,553 | 8,139 | |||||
Inventory step-up impacting margin5 | 394 | — | |||||
Costs associated with disposed sites6 | 31,606 | 46 | |||||
Non-cash compensation7 | 1,444 | — | |||||
Other (gains) expenses8 | (679 | ) | (2,676 | ) | |||
Adjusted EBITDA9 | $ | 60,850 | $ | 80,379 | |||
Adjusted EBITDA margin9 | 13.7 | % | 18.2 | % | |||
Gross profit | 82,107 | 101,313 | |||||
Gross profit margin | 18.5 | % | 23.0 | % |
Nine months ended September 30, | |||||||
2017 | 2016 | ||||||
(unaudited) | (unaudited) | ||||||
Net income (loss) | $ | (45,218 | ) | $ | 41,121 | ||
Loss from discontinued operations, net | — | (7,069 | ) | ||||
Interest expense | 46,202 | 73,885 | |||||
Depreciation and amortization | 87,463 | 64,918 | |||||
Income tax benefit | (25,448 | ) | (28,586 | ) | |||
EBITDA1 | 62,999 | 144,269 | |||||
(Gain) loss on sale of property, plant & equipment, net2 | 1,749 | 1,177 | |||||
Impairment and exit charges3 | 13,004 | 578 | |||||
Transaction costs4 | 6,291 | 19,228 | |||||
Inventory step-up impacting margin5 | 2,151 | 12,515 | |||||
Costs associated with disposed sites6 | 31,606 | 234 | |||||
Non-cash compensation7 | 2,688 | — | |||||
Other (gains) expenses8 | (1,217 | ) | (2,676 | ) | |||
Adjusted EBITDA9 | $ | 119,271 | $ | 175,325 | |||
Adjusted EBITDA margin9 | 9.8 | % | 17.4 | % | |||
Gross profit | 196,670 | 220,095 | |||||
Gross profit margin | 16.1 | % | 21.8 | % |
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 facilities. |
3 | Impairment of goodwill and 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 | 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 | Other (gains) losses, such as gain on insurance proceeds related to the destruction of property and adjustments to the estimated value of the TRA liability. |
9 | Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the discussion of why we believe they are useful and reconciliation thereof to the most directly comparable GAAP financial measures in the beginning of these schedules. |
Three months ended September 30, 2017 | Drainage Pipe & Products | Water Pipe & Products | Corporate and Other | Total | |||||||||||
EBITDA1 | $ | 47,342 | $ | (4,144 | ) | $ | (18,414 | ) | $ | 24,784 | |||||
(Gain) loss on sale of property, plant & equipment, net2 | (75 | ) | 680 | (50 | ) | 555 | |||||||||
Impairment and exit charges3 | — | 354 | 839 | 1,193 | |||||||||||
Transaction costs4 | — | — | 1,553 | 1,553 | |||||||||||
Inventory step-up impacting margin5 | 394 | — | — | 394 | |||||||||||
Costs associated with disposed sites6 | — | 31,606 | — | 31,606 | |||||||||||
Non-cash compensation7 | 405 | 308 | 731 | 1,444 | |||||||||||
Other (gains) expenses8 | — | (404 | ) | (275 | ) | (679 | ) | ||||||||
Adjusted EBITDA9 | $ | 48,066 | $ | 28,400 | $ | (15,616 | ) | $ | 60,850 | ||||||
Net sales | $ | 248,231 | $ | 195,987 | $ | 39 | $ | 444,257 | |||||||
Gross Profit | $ | 51,825 | $ | 30,920 | $ | (638 | ) | $ | 82,107 |
Three months ended September 30, 2016 | Drainage Pipe & Products | Water Pipe & Products | Corporate and Other | Total | |||||||||||
EBITDA1 | $ | 51,502 | $ | 43,634 | $ | (22,368 | ) | $ | 72,768 | ||||||
(Gain) loss on sale of property, plant & equipment, net2 | 6 | 1,541 | — | 1,547 | |||||||||||
Impairment and exit charges3 | 245 | 304 | 6 | 555 | |||||||||||
Transaction costs4 | — | 466 | 7,673 | 8,139 | |||||||||||
Inventory step-up impacting margin5 | — | — | — | — | |||||||||||
Costs associated with disposed sites6 | 46 | — | — | 46 | |||||||||||
Other (gains) expenses8 | — | (2,676 | ) | — | (2,676 | ) | |||||||||
Adjusted EBITDA9 | $ | 51,799 | $ | 43,269 | $ | (14,689 | ) | $ | 80,379 | ||||||
Net sales | $ | 215,486 | $ | 225,645 | $ | 1 | $ | 441,132 | |||||||
Gross Profit | $ | 52,661 | $ | 49,394 | $ | (742 | ) | $ | 101,313 |
Nine months ended September 30, 2017 | Drainage Pipe & Products | Water Pipe & Products | Corporate and Other | Total | |||||||||||
EBITDA1 | $ | 98,832 | $ | 30,881 | $ | (66,714 | ) | $ | 62,999 | ||||||
(Gain) loss on sale of property, plant & equipment, net2 | (4 | ) | 1,753 | — | 1,749 | ||||||||||
Impairment and exit charges3 | (14 | ) | 12,179 | 839 | 13,004 | ||||||||||
Transaction costs4 | — | 6,291 | 6,291 | ||||||||||||
Inventory step-up impacting margin5 | 2,151 | — | — | 2,151 | |||||||||||
Costs associated with disposed sites6 | — | 31,606 | — | 31,606 | |||||||||||
Non-cash compensation7 | 454 | 345 | 1,889 | 2,688 | |||||||||||
Other (gains) expenses8 | — | (942 | ) | (275 | ) | (1,217 | ) | ||||||||
Adjusted EBITDA9 | $ | 101,419 | $ | 75,822 | $ | (57,970 | ) | $ | 119,271 | ||||||
Net sales | $ | 630,200 | $ | 588,999 | $ | 45 | $ | 1,219,244 | |||||||
Gross Profit | $ | 112,323 | $ | 86,327 | $ | (1,980 | ) | $ | 196,670 |
Nine months ended September 30, 2016 | Drainage Pipe & Products | Water Pipe & Products | Corporate and Other | Total | |||||||||||
EBITDA1 | $ | 126,536 | $ | 80,251 | $ | (62,518 | ) | $ | 144,269 | ||||||
(Gain) loss on sale of property, plant & equipment, net2 | 247 | 83 | 847 | 1,177 | |||||||||||
Impairment and exit charges3 | 245 | 327 | 6 | 578 | |||||||||||
Transaction costs4 | — | 535 | 18,693 | 19,228 | |||||||||||
Inventory step-up impacting margin5 | 1,878 | 10,637 | — | 12,515 | |||||||||||
Costs associated with disposed sites6 | 234 | — | — | 234 | |||||||||||
Other (gains) expenses8 | — | (2,676 | ) | — | (2,676 | ) | |||||||||
Adjusted EBITDA9 | $ | 129,140 | $ | 89,157 | $ | (42,972 | ) | $ | 175,325 | ||||||
Net sales | $ | 552,035 | $ | 455,286 | $ | 2,530 | $ | 1,009,851 | |||||||
Gross Profit | $ | 131,325 | $ | 90,611 | $ | (1,841 | ) | $ | 220,095 |
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 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 | 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 | Other (gains) losses, such as gain on insurance proceeds related to the destruction of property and adjustments to the estimated value of the TRA liability. |
9 | Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the discussion of why we believe they are useful and reconciliation thereof to the most directly comparable GAAP financial measures in the beginning of these schedules. |
Q4 2017 EBITDA Guidance | ||||||||
Low | High | |||||||
Net income | $ | (16 | ) | $ | (13 | ) | ||
Interest expense | 16 | 16 | ||||||
Income tax benefit | (10 | ) | (8 | ) | ||||
Depreciation and amortization | 30 | 30 | ||||||
Adjusted EBITDA | $ | 20 | $ | 25 |