Document

0001678463-19-000108.txt : 20191105 0001678463-19-000108.hdr.sgml : 20191105 20191104200207 ACCESSION NUMBER: 0001678463-19-000108 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20191105 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20191105 DATE AS OF CHANGE: 20191104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Forterra, Inc. CENTRAL INDEX KEY: 0001678463 STANDARD INDUSTRIAL CLASSIFICATION: CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK [3272] IRS NUMBER: 371830464 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37921 FILM NUMBER: 191191304 BUSINESS ADDRESS: STREET 1: 511 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 600 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 469-458-7973 MAIL ADDRESS: STREET 1: 511 E. JOHN CARPENTER FREEWAY STREET 2: SUITE 600 CITY: IRVING STATE: TX ZIP: 75062 8-K 1 frta2019q38k.htm 8-K Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 4, 2019

Forterra, Inc.

(Exact Name of Registrant as Specified in Charter)




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, 6^th Floor, Irving, TX		75062
(Address of Principal Executive Offices)		(Zip Code)

(469) 458-7973

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities Registered Pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	FRTA	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02. Results of Operations and Financial Condition.

On November 4, 2019, Forterra, Inc. (the "Company") issued a press release announcing its financial results for its fiscal quarter ended September 30, 2019. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information included or incorporated by reference in this Item 2.02, including Exhibit 99.1, is being furnished to the Securities and Exchange Commission (the “SEC”) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 7.01. Regulation FD.

The Company intends to reference a slide deck (the “Presentation”) during the Company’s conference call to discuss its financial results for its fiscal quarter ended September 30, 2019. A copy of the Presentation can be accessed on the Company’s website – forterrabp.com – by following the links to “Investors”, “News and Events” and “Events and Presentations”.

The information included in this Item 7.01 is being furnished to the SEC and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.



(d)	Exhibits

99.1	Press Release issued by Forterra, Inc. on November 4, 2019.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




	Forterra, Inc.

	/s/ Lori M. Browne
	Lori M. Browne
	Executive Vice President, General Counsel and Secretary

Date: November 5, 2019

EX-99.1 2 frta2019q3ex991.htm EXHIBIT 99.1 Exhibit

EXHIBIT 99.1

Forterra Announces Third Quarter 2019 Results

Third Quarter 2019 Highlights


•	Net sales increased by 7% to $464.5 million as compared to $434.5 million in the prior year quarter


•	Consolidated gross profit margin increased by over 400 basis points


•	Net income of $22.4 million and Adjusted EBITDA¹ of $80.0 million exceeded prior year quarter by $16.9 million and $18.4 million, respectively


•	Repaid the $39 million outstanding borrowings under revolving credit facility; in addition, voluntarily repurchased $16.5 million of term loan

Irving, TX - GLOBE NEWSWIRE - November 4, 2019 - Forterra, Inc. (“Forterra” or “the Company”) (NASDAQ: FRTA), a leading manufacturer of water and drainage infrastructure pipe and products in the United States and Eastern Canada, today announced results for the quarter ended September 30, 2019.

Third Quarter 2019 Consolidated Results

In the third quarter of 2019, consolidated net sales increased by 7% over the prior year quarter to

$464.5 million, and consolidated gross profit increased by 32% over the prior year quarter to $102.2 million. These increases were achieved primarily by higher average selling prices in both the Drainage Pipe & Products (“Drainage”) and the Water Pipe & Products (“Water”) segments. As a result, gross profit margins for Drainage and Water segments improved by 290 and 480 basis points, respectively, over the prior year quarter. Net income for the quarter was $22.4 million, or $0.35 per share, compared to net income of $5.5 million, or $0.09 per share, in the prior year quarter. Adjusted EBITDA for the third quarter increased by 30% to $80.0 million, compared to $61.6 million in the prior year quarter.

¹ A reconciliation of non-GAAP financial measures, including EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin, to comparable GAAP financial measures is provided in the reconciliation of Non-GAAP measures section of this press release.

EXHIBIT 99.1

Forterra CEO Karl Watson, Jr. commented, “Our third quarter results demonstrate continued progress in three key levers to advancing our business: improving plant level production efficiencies, strategic and tactical pricing discipline, and working capital optimization. While still in the early stages of delivering a full and fair return for the products we produce and the capital we deploy, we are glad to see our efforts begin to yield positive results to the bottom line. Given this success, we are narrowing our guidance and now expect full year 2019 net loss in the range of $35 million to $8 million versus our previous view of $38 million to $16 million; and full year 2019 Adjusted EBITDA in the range of $180 to $200 million versus our previous view of $170 to $200 million."

Business Segment Results

Drainage Pipe & Products (“Drainage”) - Third Quarter 2019 Results

Drainage net sales increased by 16% to $280.7 million, compared to $243.0 million in the prior year quarter. The increase in net sales was driven by both higher average selling prices and higher shipment volumes primarily driven by more favorable weather conditions compared to last year. Drainage backlogs at the end of the third quarter remained strong.

Drainage gross profit and gross profit margin were $74.3 million and 26.5%, compared to $57.4 million and 23.6%, respectively, in the prior year quarter. Drainage EBITDA, Adjusted EBITDA and Adjusted EBITDA margin were $67.4 million, $69.6 million and 24.8%, respectively, compared to $53.3 million, $55.6 million and 22.9%, respectively, in the prior year quarter. The higher gross profit and gross profit margin primarily reflect the benefit of higher average selling prices and shipment volumes while our cost of goods sold remained relatively flat. The higher EBITDA, Adjusted EBITDA and Adjusted EBITDA margin reflect the same dynamics, with further support of higher EBITDA from our joint venture, partially offset by higher general and administrative expenses primarily related to increased reserves for certain legal disputes, claims, and credit losses that arose in the ordinary course of our business.

EXHIBIT 99.1

Water Pipe & Products (“Water”) - Third Quarter 2019 Results

Water net sales decreased by 4% to $183.8 million, compared to $191.5 million in the prior year quarter. The decrease in net sales was driven by a decline in shipment volumes, partially offset by higher average selling prices. As we expected, our current quarter shipment volumes were lower when compared to the third quarter of 2018 as our customers built inventory levels during the second half of last year. Over the past year we have worked closely with our customers to ensure we are able to efficiently service their needs, and now see bookings beginning to grow.

Despite the decline in net sales, Water gross profit and gross profit margin in the third quarter increased to $27.9 million and 15.2%, respectively, compared to $20.0 million and 10.4%, respectively, in the prior year quarter. Water EBITDA, Adjusted EBITDA and Adjusted EBITDA margin in the third quarter increased to $25.6 million, $25.8 million and 14.0%, respectively, compared to $17.8 million, $19.0 million and 9.9%, respectively, in the prior year quarter. The improvements in gross profit, gross profit margin, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin were driven by higher average selling prices, lower raw material costs, and manufacturing efficiencies, partially offset by lower shipment volumes.

Corporate and Other (“Corporate”) - Third Quarter 2019 Results

Corporate EBITDA and Adjusted EBITDA loss were $17.1 million and $15.4 million, respectively, in the third quarter of 2019 compared to $14.9 million and $13.1 million, respectively, in the prior year quarter. The increase in both Corporate EBITDA and Adjusted EBITDA loss reflects our investment in information technology systems and business processes. We expect Corporate Adjusted EBITDA loss for the full year 2019 to be in line with our internal plan.

EXHIBIT 99.1

Balance Sheet and Liquidity

As of September 30, 2019, we had cash of $43.9 million, outstanding debt on our senior term loan of $1.2 billion and no outstanding borrowings under our $300 million asset-based revolving credit facility. During the third quarter, in addition to repaying the $39 million outstanding borrowings under our revolving credit facility, we voluntarily repurchased $16.5 million of our senior term loan before its maturity. We expect to make additional voluntary repurchases during the fourth quarter to achieve the previously announced $30 to $85 million senior term loan pay down for the year.

Full Year Financial Outlook

Based on current trends and expectations, management has revised its full-year 2019 guidance as reflected below:



	Previous Guidance						Revised Guidance
($ in millions)	Low			High			Low			High
Net Loss	$	(38	)	$	(16	)	$	(35	)	$	(8	)
Adjusted EBITDA	$	170		$	200		$	180		$	200

Supporting this revised guidance are our positive pricing trends in both the Drainage and Water segments and our expectation of continued strength in market demand. We remain focused on executing commercial and operational initiatives geared toward improving operating margins and cash flow while controlling overhead costs.

Drainage - Key Financial Statistics:



($ in millions)	Q3 2019			Q3 2018

Net Sales	$	280.7		$	243.0
Gross Profit	74.3			57.4
EBITDA	67.4			53.3
Adjusted EBITDA	69.6			55.6
Gross Profit Margin	26.5		%	23.6		%
Adjusted EBITDA Margin	24.8		%	22.9		%

EXHIBIT 99.1

Water - Key Financial Statistics:



($ in millions)	Q3 2019			Q3 2018

Net Sales	$	183.8		$	191.5
Gross Profit	27.9			20.0
EBITDA	25.6			17.8
Adjusted EBITDA	25.8			19.0
Gross Profit Margin	15.2		%	10.4		%
Adjusted EBITDA Margin	14.0		%	9.9		%

Conference Call and Webcast Information

Forterra will host a conference call to review its third quarter 2019 results on November 5, 2019 at 10:00 a.m. Eastern Time (9:00 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 3959906. Please dial in at least five minutes prior to the call to register. The call may also be accessed via a webcast which is available on the Investors section of the Company’s website at http://forterrabp.com. A replay of the conference call and archive of the webcast will be available for 30 days under the Investor section of the Company's website.

About 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 stormwater systems. Based in Irving, Texas, Forterra’s product breadth and significant scale help make it a one-stop shop for water related pipe and products, and a preferred supplier to a wide variety of customers, including contractors, distributors and municipalities. For more information on Forterra, visit http://forterrabp.com.

Forward-Looking 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",

EXHIBIT 99.1

"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 and Quarterly Reports on Form 10-Q, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

EXHIBIT 99.1

Condensed Consolidated Statements of Operations

(in thousands, except per share data)



	Three months ended						Nine months ended
	September 30,						September 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
Net sales	$	464,526		$	434,510		$	1,166,603		$	1,140,557
Cost of goods sold	362,362			357,374			936,820			953,743
Gross profit	102,164			77,136			229,783			186,814
Selling, general & administrative expenses	(55,234		)	(48,492		)	(165,265		)	(151,617		)
Impairment and exit charges	(510		)	(2,170		)	(1,323		)	(3,891		)
Other operating income, net	815			1,538			1,018			6,864
	(54,929		)	(49,124		)	(165,570		)	(148,644		)
Income from operations	47,235			28,012			64,213			38,170

Other income (expense)
Interest expense	(23,272		)	(21,940		)	(73,720		)	(52,993		)
Gain on extinguishment of debt	374			—			374			—
Earnings from equity method investee	3,990			2,224			8,959			7,745
Other income, net	—			—			—			6,016
Income (loss) before income taxes	28,327			8,296			(174		)	(1,062		)
Income tax (expense) benefit	(5,897		)	(2,793		)	519			(6,351		)
Net income (loss)	$	22,430		$	5,503		$	345		$	(7,413	)

Earnings (loss) per share:
Basic	$	0.35		$	0.09		$	0.01		$	(0.12	)
Diluted	$	0.34		$	0.09		$	0.01		$	(0.12	)

Weighted average common shares outstanding:
Basic	64,210			63,919			64,119			63,883
Diluted	64,998			64,269			64,528			63,883

EXHIBIT 99.1

Condensed Consolidated Balance Sheets

(in thousands)



	September 30, 2019			December 31, 2018
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	43,852		$	35,793
Receivables, net	286,345			198,468
Inventories	256,645			285,030
Other current assets	19,603			24,798
Total current assets	606,445			544,089
Non-current assets
Property, plant and equipment, net	477,273			492,167
Operating lease right-of-use assets	62,252			—
Goodwill	508,588			508,193
Intangible assets, net	154,558			183,789
Investment in equity method investee	53,065			50,607
Other long-term assets	3,965			14,407
Total assets	$	1,866,146		$	1,793,252

LIABILITIES AND EQUITY
Current liabilities
Trade payables	$	138,247		$	114,708
Accrued liabilities	85,422			70,236
Deferred revenue	9,221			9,138
Current portion of long-term debt	12,510			12,510
Current portion of tax receivable agreement	15,457			15,457
Total current liabilities	260,857			222,049
Non-current liabilities
Long term debt	1,156,023			1,176,095
Long-term finance lease liabilities	136,556			134,948
Long-term operating lease liabilities	55,669			—
Deferred tax liabilities	37,324			46,615
Deferred gain on sale-leaseback	—			9,338
Other long-term liabilities	22,395			22,667
Long-term tax receivable agreement	73,318			73,318
Total liabilities	1,742,142			1,685,030
Equity
Common stock, $0.001 par value, 190,000 shares authorized; 64,540 and 64,206 shares issued and outstanding	18			18
Additional paid-in-capital	240,920			234,931
Accumulated other comprehensive loss	(8,249		)	(10,740		)
Retained deficit	(108,685		)	(115,987		)
Total shareholders' equity	124,004			108,222
Total liabilities and shareholders' equity	$	1,866,146		$	1,793,252

EXHIBIT 99.1

Condensed Consolidated Statements of Cash Flows

(in thousands)



	Nine months ended
	September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES	(unaudited)
Net income (loss)	$	345		$	(7,413	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation & amortization expense	72,954			79,373
(Gain) / loss on business divestiture	—			(6,016		)
(Gain) / loss on disposal of property, plant and equipment	1,551			(2,447		)
Gain on extinguishment of debt	(374		)	—
Amortization of debt discount and issuance costs	6,022			6,099
Stock-based compensation expense	4,833			4,588
Impairment charges	—			936
Earnings from equity method investee	(8,959		)	(7,745		)
Distributions from equity method investee	6,500			8,875
Unrealized loss / (gain) on derivative instruments, net	5,892			(4,291		)
Unrealized foreign currency loss / (gain), net	35			(358		)
Provision (recoveries) for doubtful accounts	511			(1,905		)
Deferred taxes	(11,672		)	(24,787		)
Deferred rent	—			1,022
Other non-cash items	(188		)	77
Change in assets and liabilities:
Receivables, net	(88,138		)	(83,720		)
Inventories	29,109			(25,019		)
Other current assets	1,296			6,910
Accounts payable and accrued liabilities	37,259			25,042
Other assets & liabilities	8,746			2,184
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	65,722			(28,595		)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment, and intangible assets	(44,321		)	(31,474		)
Proceeds from business divestiture	—			618
Proceeds from sale of fixed assets	10,580			4,874
Settlement of net investment hedges	—			(4,990		)
Business combinations, net of cash acquired	—			(4,500		)
NET CASH USED IN INVESTING ACTIVITIES	(33,741		)	(35,472		)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loans	(25,110		)	(9,383		)
Proceeds from revolver	54,000			—
Payments on revolver	(54,000		)	—
Proceeds from issuance of common stock	1,282			—
Other financing activities	(552		)	(385		)
NET CASH USED IN FINANCING ACTIVITIES	(24,380		)	(9,768		)
Effect of exchange rate changes on cash	458			(351		)
Net change in cash and cash equivalents	8,059			(74,186		)
Cash and cash equivalents, beginning of period	35,793			104,534
Cash and cash equivalents, end of period	$	43,852		$	30,348

SUPPLEMENTAL DISCLOSURES:
Cash interest paid	$	59,138		$	50,217
Income taxes paid	5,054			21,508
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:
Assets and liabilities acquired in non-cash exchange	—			18,140
Fair value changes of derivatives recorded in OCI, net of tax	—			970
Capital lease obligation resulting from the sale-leaseback exchange transaction	—			(148,962		)

EXHIBIT 99.1

Non-GAAP Measures

(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 the sum of net income (loss), before interest expense (including (gains) losses from extinguishment of debt), depreciation and amortization, income tax benefit (expense) and before (gains) losses on the sale of property, plant and equipment, impairment and exit charges and certain other non-recurring income and expenses, such as transaction costs, inventory step-up impacting margin, non-cash compensation expense and pro-rate share of Adjusted EBITDA from equity method investee, minus earnings from equity method investee. 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

EXHIBIT 99.1

results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations.

Adjusted EBITDA and Adjusted EBITDA margin have certain limitations. Adjusted EBITDA should not be considered as an alternative to consolidated net income (loss), and in the case of our segment results, Adjusted EBITDA should not be considered an alternative to EBITDA, which the chief operating decision maker reviews for purposes of evaluating segment profit, or in the case of any of the non-GAAP measures, as a substitute for any other measure of financial performance calculated in accordance with GAAP. Similarly, Adjusted EBITDA margin should not be considered as an alternative to gross margin or any other margin calculated in accordance with GAAP. These measures also should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items for which these non-GAAP measures make adjustments. Additionally, Adjusted EBITDA and Adjusted EBITDA margin are not intended to be liquidity measures because of certain limitations such as: (i) they do not reflect our cash outlays for capital expenditures or future contractual commitments; (ii) they do not reflect changes in, or cash requirements for, working capital; (iii) they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness; (iv) they do not reflect income tax expense or the cash necessary to pay income taxes; and (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and these non-GAAP measures do not reflect cash requirements for such replacements.

Other companies, including other companies in our industry, may not use such measures or may calculate one or more of the measures differently than as presented in this earnings release, limiting their usefulness as a comparative measure. In evaluating Adjusted EBITDA and Adjusted EBITDA margin, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments made in the calculations below and the presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed to mean that our future results will be unaffected by such adjustments. Management compensates for these limitations by using Adjusted EBITDA and Adjusted EBITDA margin as supplemental financial metrics and in conjunction with results prepared in accordance with GAAP.

EXHIBIT 99.1

Reconciliation of net income (loss) to Adjusted EBITDA

(in thousands)



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
Net income (loss)	$	22,430		$	5,503		$	345		$	(7,413	)
Interest expense	23,272			21,940			73,720			52,993
Depreciation and amortization	24,172			25,922			72,954			79,370
Income tax (benefit) expense	5,897			2,793			(519		)	6,351
EBITDA¹	75,771			56,158			146,500			131,301
(Gain) loss on sale of property, plant & equipment, net	518			124			1,551			(2,447		)
Gain on extinguishment of debt	(374		)	—			(374		)	—
Impairment and exit charges²	510			2,170			1,323			3,891
Transaction costs³	734			675			2,008			2,243
Inventory step-up impacting margin⁴	—			—			278			464
Non-cash compensation⁵	2,172			1,450			4,833			4,588
Other⁶	(300		)	—			3,328			(6,688		)
Earnings from equity method investee⁷	(3,990		)	(2,224		)	(8,959		)	(7,745		)
Pro-rata share of Adjusted EBITDA from equity method investee⁸	4,966			3,221			11,898			10,198
Adjusted EBITDA	$	80,007		$	61,574		$	162,386		$	135,805
Adjusted EBITDA margin	17.2		%	14.2		%	13.9		%	11.9		%
Gross profit	102,164			77,136			$	229,783		$	186,814
Gross profit margin	22.0		%	17.8		%	19.7		%	16.4		%


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	Impairment or abandonment of long-lived assets and other exit charges.


³	Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.


⁴	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.


⁵	Non-cash equity compensation expense.


⁶	Other includes one-time charges such as executive severance costs and (gains) losses from divestiture transactions.


⁷	Net income from Forterra's 50% ownership in the Concrete Pipe & Precast LLC ("CP&P") joint venture accounted for under the equity method of accounting.


⁸	Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense.

EXHIBIT 99.1

Reconciliation of segment EBITDA to segment Adjusted EBITDA

(in thousands)



Three months ended September 30, 2019	Drainage Pipe & Products			Water Pipe & Products			Corporate and Other			Total
EBITDA¹	$	67,361		$	25,557		$	(17,147	)	$	75,771
(Gain) loss on sale of property, plant & equipment, net	463			53			2			518
Gain on extinguishment of debt	—			—			(374		)	(374		)
Impairment and exit charges²	—			510			—			510
Transaction costs³	—			—			734			734
Inventory step-up impacting margin⁴	—			—			—			—
Non-cash compensation⁵	387			98			1,687			2,172
Other⁶	401			(401		)	(300		)	(300		)
Earnings from equity method investee⁷	(3,990		)	—			—			(3,990		)
Pro-rata share of Adjusted EBITDA from equity method investee ⁸	4,966			—			—			4,966
Adjusted EBITDA	$	69,588		$	25,817		$	(15,398	)	$	80,007
Adjusted EBITDA margin	24.8		%	14.0		%	NM			17.2		%

Net sales	$	280,678		$	183,848		$	—		$	464,526
Gross Profit	74,269			27,864			31			102,164



Three months ended September 30, 2018	Drainage Pipe & Products			Water Pipe & Products			Corporate and Other			Total
EBITDA¹	$	53,271		$	17,818		$	(14,931	)	$	56,158
(Gain) loss on sale of property, plant & equipment, net	(14		)	138			—			124
Impairment and exit charges²	571			1,599			—			2,170
Transaction costs³	—			—			675			675
Non-cash compensation⁵	410			(157		)	1,197			1,450
Other⁶	401			(401		)	—			—
Earnings from equity method investee⁷	(2,224		)	—			—			(2,224		)
Pro-rata share of Adjusted EBITDA from equity method investee ⁸	3,221			—			—			3,221
Adjusted EBITDA	$	55,636		$	18,997		$	(13,059	)	$	61,574
Adjusted EBITDA margin	22.9		%	9.9		%	NM			14.2		%

Net sales	$	242,997		$	191,513		$	—		$	434,510
Gross Profit	57,441			19,972			(277		)	77,136

EXHIBIT 99.1



Nine months ended September 30, 2019	Drainage Pipe & Products			Water Pipe & Products			Corporate and Other			Total
EBITDA¹	$	141,424		$	59,271		$	(54,195	)	$	146,500
(Gain) loss on sale of property, plant & equipment, net	1,238			311			2			1,551
Gain on extinguishment of debt	—			—			(374		)	(374		)
Impairment and exit charges²	102			1,221			—			1,323
Transaction costs³	—			—			2,008			2,008
Inventory step-up impacting margin⁴	278			—			—			278
Non-cash compensation⁵	1,279			343			3,211			4,833
Other⁶	1,203			(1,203		)	3,328			3,328
Earnings from equity method investee⁷	(8,959		)	—			—			(8,959		)
Pro-rata share of Adjusted EBITDA from equity method investee ⁸	11,898			—			—			11,898
Adjusted EBITDA	$	148,463		$	59,943		$	(46,020	)	$	162,386
Adjusted EBITDA margin	21.6		%	12.5		%	NM			13.9		%

Net sales	$	686,092		$	480,511		$	—		$	1,166,603
Gross Profit	163,419			66,746			(382		)	229,783



Nine months ended September 30, 2018	Drainage Pipe & Products			Water Pipe & Products			Corporate and Other			Total
EBITDA¹	$	122,841		$	48,923		$	(40,463	)	$	131,301
(Gain) loss on sale of property, plant & equipment, net	(3,419		)	972			—			(2,447		)
Impairment and exit charges²	1,733			2,166			(8		)	3,891
Transaction costs³	—			—			2,243			2,243
Inventory step-up impacting margin⁴	464			—			—			464
Non-cash compensation⁵	1,285			206			3,097			4,588
Other⁶	519			(1,270		)	(5,937		)	(6,688		)
Earnings from equity method investee⁷	(7,745		)	—			—			(7,745		)
Pro-rata share of Adjusted EBITDA from equity method investee ⁸	10,198			—			—			10,198
Adjusted EBITDA	$	125,876		$	50,997		$	(41,068	)	$	135,805
Adjusted EBITDA margin	20.3		%	9.8		%	NM			11.9		%

Net sales	$	621,523		$	519,031		$	3		$	1,140,557
Gross Profit	133,708			53,640			(534		)	186,814


NM	Not meaningful


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	Impairment or abandonment of long-lived assets and other exit charges.


³	Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.


⁴	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.


⁵	Non-cash equity compensation expense.


⁶	Other includes one-time charges such as executive severance costs and (gains) losses from divestiture transactions.


⁷	Net income from Forterra's 50% ownership in the CP&P joint venture accounted for under the equity method of accounting.


⁸	Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense.

EXHIBIT 99.1

Reconciliation of net loss to Adjusted EBITDA guidance for full year 2019

(in millions)



	Full Year 2019 Guidance
	Low			High
Net loss	$	(35	)	$	(8	)
Interest expense	97			97
Income tax expense (benefit)	2			(5		)
Depreciation and amortization	97			97
Non-cash equity compensation	7			7
Other adjustments	12			12
Adjusted EBITDA	$	180		$	200

Source: Forterra, Inc.

Company Contact Information:

Charlie Brown

Executive Vice President and Chief Financial Officer

469-299-9113

IR@forterrabp.com

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