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, 2021.
Third Quarter 2021 Highlights
- Increased net sales by
15.1% to $526.6 million as compared to $457.6 million in the prior
year quarter
- Gross profit of $116.6
million as compared to $126.3 million in the prior year
quarter
- Net income for the quarter increased to $35.8 million
from $28.8 million in the prior year quarter
- Adjusted
EBITDA1 of $96.2 million as
compared to $99.0 million in the prior year quarter
- Maintained net leverage
ratio2 at 3.4x as of the end of
the quarter
Forterra CEO Karl Watson, Jr. commented,
“Overall, I am pleased with our results for the third quarter, as
we delivered strong net sales growth while carefully managing a
dynamic and volatile supply chain and cost environment. Our team
showed the necessary agility to navigate through an extremely
challenging atmosphere of supply chain disruptions and cost
inflation. While the industry still faces these ongoing issues, I
believe we have taken the right steps to capture the growth
momentum in our various end-markets, offset the higher costs of
doing business, and further enhance our relationships with
customers.”
Mr. Watson continued, “Specifically with respect
to the third quarter, as we previously anticipated, the sharply
escalated costs in raw materials, freight, and labor have further
negatively impacted our profitability, particularly in our Water
segment. That being said, despite the year-over-year decline in
Water segment Adjusted EBITDA, our Water segment still reported
meaningful improvements in profitability when comparing to the
third quarter in 2019, when we began the execution of our five
improvement pillars. During this time frame, the industry average
price for scrap metal (our largest cost input) increased by more
than 50%, yet our Water segment’s EBITDA and Adjusted EBITDA
increased by 27% and 28%, respectively.
1 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP
measures. A reconciliation of non-GAAP financial measures,
including 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.2 Ratio represents
net debt divided by adjusted EBITDA for the last twelve-month
period. Net debt and adjusted EBITDA are non-GAAP measures and a
reconciliation thereof to comparable GAAP financial measures is
provided in the Reconciliation of Non-GAAP Measures section of this
press release.
This growth demonstrates that the investments we
made over the past two years and the continuous execution on our
improvement pillars have made us a stronger and better company,
especially during such challenging times. I am very proud of what
our team has achieved, and I want to thank them again for their
continued support and dedication.”
Segment ResultsDrainage
Pipe & Products (“Drainage”) - Key Financial
Statistics:
Key
Financial Statistics ($ in millions) |
|
Q3 2021 |
|
Q3 20203 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
299.4 |
|
|
$ |
261.1 |
|
|
Gross Profit |
|
81.6 |
|
|
73.7 |
|
|
EBITDA |
|
75.6 |
|
|
66.8 |
|
|
Adjusted
EBITDA1 |
|
77.6 |
|
|
70.4 |
|
|
Gross
Profit Margin |
27.3 |
% |
|
28.2 |
% |
|
Adjusted
EBITDA Margin1 |
25.9 |
% |
|
27.0 |
% |
|
|
|
|
|
|
|
|
|
|
3 During the
fourth quarter of 2020, the Company reclassified the pressure pipe
business from Water segment to Drainage segment to better align
with its organizational structure. As a result, historical segment
data was updated to reflect the current segment compositions. |
|
Drainage net sales for the quarter increased by 14.6%, or $38.3
million, to $299.4 million as compared to $261.1 million in the
prior year quarter. The increase was primarily driven by higher
shipment volumes year-over-year, coupled with a slight increase in
average selling prices. Strong demand across all of Drainage’s
end-markets supported the year-over-year volume growth. Our sales
backlogs in Drainage at the end of the quarter were higher compared
to the prior year quarter.
Drainage gross profit and gross profit margin
were $81.6 million and 27.3%, compared to $73.7 million and 28.2%,
respectively, in the prior year quarter. The increase in gross
profit was primarily driven by higher shipment volumes. The slight
decline in gross margin was primarily driven by higher raw material
costs, delivery costs, and wage increases, partially offset by
improved plant-level operational efficiency, better absorption of
manufacturing costs due to higher production volumes, and higher
average selling prices.
Drainage EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin during the quarter were $75.6 million, $77.6 million
and 25.9%, respectively, compared to $66.8 million, $70.4 million
and 27.0%, respectively, in the prior year quarter. These results
reflect the same dynamics as discussed above in the gross profit
and gross profit margin analysis.
Water Pipe & Products (“Water”) -
Key Financial Statistics:
Key
Financial Statistics ($ in millions) |
|
Q3 2021 |
|
Q3 20203 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
227.2 |
|
|
$ |
196.4 |
|
|
Gross Profit |
|
35.0 |
|
|
52.6 |
|
|
EBITDA |
|
32.0 |
|
|
45.0 |
|
|
Adjusted
EBITDA1 |
|
32.4 |
|
|
45.0 |
|
|
Gross
Profit Margin |
15.4 |
% |
|
26.8 |
% |
|
Adjusted
EBITDA Margin1 |
14.3 |
% |
|
22.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Water net sales for the quarter increased by 15.7%, or $30.8
million, respectively, to $227.2 million, as compared to $196.4
million in the prior year quarter. The year-over-year increase was
driven by both higher average selling prices and higher shipment
volumes. Our sales backlogs in Water at the end of the quarter were
significantly higher compared to the prior year quarter.
Water gross profit and gross profit margin for
the quarter were $35.0 million and 15.4%, respectively, as compared
to $52.6 million and 26.8%, respectively, in the prior year
quarter. The decline in the quarter’s gross profit and gross profit
margin were primarily caused by substantially inflated scrap metal
costs, significant increases in other material costs used in the
manufacturing of ductile iron pipe, higher labor costs, and a
substantial increase in freight cost year-over-year. While previous
selling price increases have been well executed and are being
realized as expected, the price increases have only partially
offset the more sudden onset of higher costs.
Water EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin during the quarter were $32.0 million, $32.4 million
and 14.3%, respectively, compared to $45.0 million, $45.0 million
and 22.9%, respectively, in the prior year quarter.
These results reflect the same dynamics as discussed above in the
gross profit and gross profit margin analysis. In
addition, the Water segment’s selling, general and administrative
expenses decreased year-over-year primarily due to a non-recurring
legal accrual that was recorded in the prior year quarter and not
in the current year quarter.
Corporate and Other
(“Corporate”)
Corporate EBITDA and Adjusted EBITDA loss for
the quarter were $18.3 million and $13.8 million, respectively,
compared to $30.6 million and $16.3 million, respectively, in the
prior year quarter. During the prior year quarter, the Company
recorded a $11.5 million loss on extinguishment of debt as a result
of its prepayments of long-term debt and the consequent write-offs
of the corresponding debt issuance costs in connection with the
issuance and use of proceeds from our senior secured notes.
Excluding this non-recurring charge that impacted the prior year
quarter, both EBITDA and Adjusted EBITDA loss for the current year
quarter were slightly lower than the prior year’s and are generally
in line with management’s expectations for the year.
Balance Sheet and Liquidity
As of September 30, 2021, the Company had cash
of $24.0 million and total debt of $905.4 million, which was
comprised of $500 million in senior secured notes due in July 2025,
$405.4 million in term loan due in October 2023, and no outstanding
borrowings under its $350 million asset-based revolving credit
facility. The Company maintained its net leverage ratio2 at 3.4x at
September 30, 2021 and remains focused on further deleveraging
while prudently investing in growth opportunities.
Update on Proposed Transaction with
Quikrete
The Company remains committed to completing the
proposed merger and delivering the benefits of the transaction to
Forterra’s shareholders. Completion of the pending transaction is
subject to certain regulatory approvals, among other conditions set
forth in the merger agreement dated February 19, 2021. Integration
planning is underway.
As previously disclosed in the Company’s current
report on Form 8-K dated May 3, 2021, on April 30, 2021 the Company
and Quikrete received a request for additional information and
documentary material from the United States Department of Justice
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the parties are currently working with the
Department of Justice to gain the necessary approvals to complete
the proposed transaction. The Company is aiming to achieve the
necessary approvals to permit it to complete the transaction by the
end of 2021 or shortly thereafter.
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 scale help make it a preferred supplier for
water-related pipe and products, serving a wide variety of
customers, including contractors, distributors and municipalities.
For more information on Forterra, visit http://forterrabp.com.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Forward-looking statements may be identified
by the use of words such as "anticipate", "believe", "expect",
"estimate", "plan", "outlook", and "project" and other similar
expressions that predict or indicate future events or trends or
that are not statements of historical matters. Forward-looking
statements should not be read as a guarantee of future performance
or results and will not necessarily be accurate indications of the
times at, or by, which such performance or results will be
achieved. Forward-looking statements are based on historical
information available at the time the statements are made and are
based on management's reasonable belief or expectations with
respect to future events, and are subject to risks and
uncertainties, many of which are beyond the Company's control, that
could cause actual performance or results to differ materially from
the belief or expectations expressed in or suggested by the
forward-looking statements.
Some of the risks and uncertainties that could
cause actual results to differ materially from those expressed in
any forward-looking statements include risks and uncertainties
relating to the pending merger with an affiliate of Quikrete
Holdings, Inc.; the impacts of the COVID-19 pandemic; the level of
construction activity, particularly in the residential construction
and non-residential construction markets; government funding of
infrastructure and related construction activities; the highly
competitive nature of our industry and our ability to effectively
compete; the availability and price of the raw materials we use in
our business; the ability to implement our growth strategy; our
dependence on key customers and the absence of long-term agreements
with these customers; the level of construction activity in Texas;
energy costs; disruption at one or more of our manufacturing
facilities or in our supply chain; construction project delays and
our inventory management; our ability to successfully integrate
acquisitions; labor disruptions and other union activity; a
tightening of mortgage lending or mortgage financing requirements;
compliance with environmental laws and regulations; compliance with
health and safety laws and regulations and other laws and
regulations to which we and our products are subject to; our
dependence on key executives and key management personnel; our
ability, or that of the customers with which we work, to retain and
attract additional skilled and non-skilled technical or sales
personnel; credit and non-payment risks of our customers; warranty
and related claims; legal and regulatory claims; the seasonality of
our business and its susceptibility to adverse weather; our
contract backlog; our ability to maintain sufficient liquidity and
ensure adequate financing or guarantees for large projects; delays
or outages in our information technology systems and computer
networks; security breaches in our information technology systems
and other cybersecurity incidents and additional factors discussed
in our filings with the Securities and Exchange Commission,
including our 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.
FORTERRA,
INC.Consolidated Statements of
Operations(in millions, except per share data)
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2021 |
2020 |
|
2021 |
2020 |
|
(unaudited) |
|
(unaudited) |
Net sales |
$ |
526.6 |
|
$ |
457.6 |
|
|
$ |
1,387.6 |
|
$ |
1,214.6 |
|
Cost of goods
sold |
410.0 |
|
331.3 |
|
|
1,069.2 |
|
924.0 |
|
Gross
profit |
116.6 |
|
126.3 |
|
|
318.4 |
|
290.6 |
|
Selling, general & administrative expenses |
(51.8 |
) |
(57.1 |
) |
|
(163.1 |
) |
(164.6 |
) |
Impairment and exit charges |
— |
|
(1.4 |
) |
|
(0.5 |
) |
(2.5 |
) |
Other operating income (expense), net |
0.4 |
|
0.2 |
|
|
12.9 |
|
(0.4 |
) |
|
(51.4 |
) |
(58.3 |
) |
|
(150.7 |
) |
(167.5 |
) |
Income from
operations |
65.2 |
|
68.0 |
|
|
167.7 |
|
123.1 |
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
Interest expense |
(19.0 |
) |
(20.1 |
) |
|
(56.4 |
) |
(60.5 |
) |
Loss on extinguishment of debt |
— |
|
(11.5 |
) |
|
— |
|
(11.5 |
) |
Earnings from equity method investee |
3.3 |
|
2.3 |
|
|
9.5 |
|
8.2 |
|
Income before income
taxes |
49.5 |
|
38.7 |
|
|
120.8 |
|
59.3 |
|
Income tax expense |
(13.7 |
) |
(9.9 |
) |
|
(30.3 |
) |
(17.4 |
) |
Net
income |
$ |
35.8 |
|
$ |
28.8 |
|
|
$ |
90.5 |
|
$ |
41.9 |
|
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
Basic |
$ |
0.53 |
|
$ |
0.44 |
|
|
$ |
1.36 |
|
$ |
0.64 |
|
Diluted |
$ |
0.51 |
|
$ |
0.42 |
|
|
1.30 |
|
0.62 |
|
|
|
|
|
|
|
Weighted average
common shares outstanding: |
|
|
|
|
|
Basic |
66.9 |
|
65.3 |
|
|
66.6 |
|
65.1 |
|
Diluted |
69.8 |
|
68.7 |
|
|
69.6 |
|
67.9 |
|
FORTERRA,
INC.Consolidated Balance Sheets(in
millions)
|
September 30,2021 |
|
December 31,2020 |
ASSETS |
(unaudited) |
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
$ |
24.0 |
|
|
$ |
25.7 |
|
Receivables, net |
345.8 |
|
|
227.9 |
|
Inventories |
254.8 |
|
|
222.9 |
|
Prepaid expenses |
9.2 |
|
|
8.0 |
|
Other current assets |
1.9 |
|
|
2.0 |
|
Total current assets |
635.7 |
|
|
486.5 |
|
Non-current
assets |
|
|
|
Property, plant and equipment, net |
451.1 |
|
|
451.1 |
|
Operating lease right-of-use assets |
53.8 |
|
|
54.4 |
|
Goodwill |
509.7 |
|
|
509.1 |
|
Intangible assets, net |
77.5 |
|
|
101.4 |
|
Investment in equity method investee |
48.8 |
|
|
48.3 |
|
Other long-term assets |
4.3 |
|
|
5.0 |
|
Total assets |
$ |
1,780.9 |
|
|
$ |
1,655.8 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Current
liabilities |
|
|
|
Trade payables |
$ |
166.3 |
|
|
$ |
134.1 |
|
Accrued liabilities |
117.7 |
|
|
115.8 |
|
Deferred revenue |
11.6 |
|
|
8.2 |
|
Current portion of long-term debt |
12.5 |
|
|
12.5 |
|
Current portion of tax receivable agreement |
8.3 |
|
|
8.3 |
|
Total current liabilities |
316.4 |
|
|
278.9 |
|
Non-current
liabilities |
|
|
|
Long-term debt |
881.3 |
|
|
887.5 |
|
Long-term finance lease liabilities |
142.5 |
|
|
142.2 |
|
Long-term operating lease liabilities |
50.8 |
|
|
50.9 |
|
Deferred tax liabilities |
10.0 |
|
|
9.7 |
|
Other long-term liabilities |
32.4 |
|
|
36.9 |
|
Long-term tax receivable agreement |
55.9 |
|
|
55.9 |
|
Total liabilities |
1,489.3 |
|
|
1,462.0 |
|
Equity |
|
|
|
Common stock, $0.001 par value, 190,000 shares authorized; 66,960
and 65,981 shares issued and outstanding |
— |
|
|
— |
|
Additional paid-in-capital |
260.2 |
|
|
252.6 |
|
Accumulated other comprehensive loss |
(7.2 |
) |
|
(6.9 |
) |
Retained earnings (deficit) |
38.6 |
|
|
(51.9 |
) |
Total shareholders' equity |
291.6 |
|
|
193.8 |
|
Total liabilities and shareholders' equity |
$ |
1,780.9 |
|
|
$ |
1,655.8 |
|
FORTERRA,
INC.Consolidated Statements of Cash
Flows(in millions)
|
|
Nine months ended |
|
|
September 30, |
|
|
2021 |
|
2020 |
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
(unaudited) |
Net income |
|
$ |
90.5 |
|
|
$ |
41.9 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
Depreciation & amortization expense |
|
61.8 |
|
|
67.3 |
|
(Gain) loss on disposal of property, plant and equipment |
|
(10.3 |
) |
|
1.9 |
|
Loss on extinguishment of debt |
|
— |
|
|
11.5 |
|
Amortization of debt discount and issuance costs |
|
3.7 |
|
|
5.3 |
|
Stock-based compensation expense |
|
6.8 |
|
|
7.8 |
|
Impairment charges |
|
0.4 |
|
|
1.3 |
|
Earnings from equity method investee |
|
(9.5 |
) |
|
(8.2 |
) |
Distributions from equity method investee |
|
9.0 |
|
|
7.5 |
|
Unrealized (gain) loss on derivative instruments, net |
|
(0.2 |
) |
|
0.9 |
|
Unrealized foreign currency (gain) loss, net |
|
(0.1 |
) |
|
0.3 |
|
Provision for doubtful accounts |
|
1.1 |
|
|
0.2 |
|
Deferred taxes |
|
0.3 |
|
|
(3.5 |
) |
Other non-cash items |
|
1.7 |
|
|
3.8 |
|
Change in assets and liabilities: |
|
|
|
|
Receivables, net |
|
(116.8 |
) |
|
(71.2 |
) |
Inventories |
|
(30.7 |
) |
|
18.8 |
|
Other current assets |
|
(1.1 |
) |
|
6.3 |
|
Accounts payable and accrued liabilities |
|
29.8 |
|
|
59.3 |
|
Other assets and liabilities |
|
(0.7 |
) |
|
11.4 |
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES |
|
35.7 |
|
|
162.6 |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
Purchase of property, plant and equipment, and intangible
assets |
|
(42.4 |
) |
|
(15.5 |
) |
Proceeds from sale of fixed assets1 |
|
21.2 |
|
|
10.7 |
|
Business combinations, net of cash acquired |
|
(7.0 |
) |
|
— |
|
NET CASH USED IN INVESTING
ACTIVITIES |
|
(28.2 |
) |
|
(4.8 |
) |
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
Proceeds from senior secured notes |
|
— |
|
|
500.0 |
|
Payment of debt issuance costs |
|
— |
|
|
(11.3 |
) |
Repayments of term loans |
|
(9.4 |
) |
|
(644.9 |
) |
Proceeds from revolver |
|
40.0 |
|
|
180.0 |
|
Repayments of revolver |
|
(40.0 |
) |
|
(180.0 |
) |
Proceeds from issuance of common stock |
|
3.5 |
|
|
2.3 |
|
Payment pursuant to tax receivable agreement |
|
— |
|
|
(4.4 |
) |
Other financing activities |
|
(3.3 |
) |
|
(1.2 |
) |
NET CASH USED IN FINANCING
ACTIVITIES |
|
(9.2 |
) |
|
(159.5 |
) |
Effect of exchange rate
changes on cash |
|
— |
|
|
(0.3 |
) |
Net change in cash and cash
equivalents |
|
(1.7 |
) |
|
(2.0 |
) |
Cash and cash equivalents,
beginning of period |
|
25.7 |
|
|
34.8 |
|
Cash and cash equivalents, end
of period |
|
$ |
24.0 |
|
|
$ |
32.8 |
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES: |
Cash interest paid |
|
$ |
58.4 |
|
|
$ |
44.3 |
|
Income taxes paid, net |
|
26.1 |
|
|
8.8 |
|
Additional Statistics
(unaudited)
Reconciliation of Non-GAAP
MeasuresIn 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-rata 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 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.
This release also presents both GAAP and
non-GAAP financial measures on a last twelve month (“LTM”) basis.
Information presented for LTM periods that are not fiscal years
(i.e., the period ended Q3 2021) reflect unaudited trailing four
quarter financial information calculated by starting with the
results from the most recent audited fiscal year included in such
LTM period and then (x) adding quarterly information for subsequent
fiscal quarters and (y) subtracting quarterly information for the
corresponding prior year periods. For example, LTM Q3 2021 has been
calculated by starting with the data from the year ended December
31, 2020 and then adding data for the nine months ended Q3 2021,
followed by subtracting data for the nine months ended Q3 2020.
This presentation is not in accordance with GAAP. However, we
believe this information is useful to investors as we use it to
evaluate our financial performance for ongoing planning purposes,
including a continuous assessment of our financial performance in
comparison to budgets and internal projections. We also use such
LTM financial data to test compliance with covenants under our debt
facilities. This presentation has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP.
Please see our Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q for the relevant periods for the historical amounts used
to calculate the LTM information presented.
This release also includes Net debt, a non-GAAP
measure that represents the sum of long-term debt, the current
portion of long-term debt, debt issuance cost and original issue
discount and finance lease liabilities less cash and cash
equivalents. Management uses net debt as one of the means by which
it assesses financial leverage, and it is therefore useful to
investors in evaluating our business using the same measures as
management. Net debt is also useful to investors because it is
often used by securities analysts and other interested parties in
evaluating our business. Net debt does however have certain
limitations and should not be considered as an alternative to or in
isolation from long-term debt or any other measure calculated in
accordance with GAAP.
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 these non-GAAP measures, 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 non-GAAP measures as supplemental financial metrics and in
conjunction with results prepared in accordance with GAAP.
FORTERRA,
INC.Reconciliation of net income to adjusted
EBITDA(in millions)
|
Three months ended |
|
Nine months ended |
|
Twelve months ended |
|
Sept. 30, 2021 |
|
Sept. 30, 2020 |
|
Sept. 30, 2021 |
|
Sept. 30, 2020 |
|
Sept. 30, 2021 |
|
December 31, 2020 |
Net income |
$ |
35.8 |
|
|
|
$ |
28.8 |
|
|
|
$ |
90.5 |
|
|
|
$ |
41.9 |
|
|
|
$ |
113.1 |
|
|
|
$ |
64.5 |
|
|
Interest expense |
19.0 |
|
|
|
20.1 |
|
|
|
56.4 |
|
|
|
60.5 |
|
|
|
75.8 |
|
|
|
79.9 |
|
|
Depreciation &
amortization |
20.8 |
|
|
|
22.4 |
|
|
|
61.8 |
|
|
|
67.3 |
|
|
|
84.0 |
|
|
|
89.5 |
|
|
Income tax expense |
13.7 |
|
|
|
9.9 |
|
|
|
30.3 |
|
|
|
17.4 |
|
|
|
21.3 |
|
|
|
8.4 |
|
|
EBITDA1 |
89.3 |
|
|
|
81.2 |
|
|
|
239.0 |
|
|
|
187.1 |
|
|
|
294.2 |
|
|
|
242.3 |
|
|
(Gain) loss on sale of
property, plant & equipment, net |
0.6 |
|
|
|
0.6 |
|
|
|
(10.3 |
) |
|
|
2.0 |
|
|
|
(11.6 |
) |
|
|
0.6 |
|
|
(Gain) loss on extinguishment
of debt |
— |
|
|
|
11.5 |
|
|
|
— |
|
|
|
11.5 |
|
|
|
0.8 |
|
|
|
12.3 |
|
|
Impairment & exit
charges2 |
— |
|
|
|
1.4 |
|
|
|
0.1 |
|
|
|
3.5 |
|
|
|
0.2 |
|
|
|
3.9 |
|
|
Transaction costs3 |
3.2 |
|
|
|
1.0 |
|
|
|
8.3 |
|
|
|
5.5 |
|
|
|
8.0 |
|
|
|
5.3 |
|
|
Non-cash compensation4 |
2.0 |
|
|
|
2.3 |
|
|
|
6.8 |
|
|
|
7.8 |
|
|
|
8.5 |
|
|
|
9.5 |
|
|
Other5 |
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
1.8 |
|
|
|
1.2 |
|
|
Earnings from equity method
investee6 |
(3.3 |
) |
|
|
(2.3 |
) |
|
|
(9.5 |
) |
|
|
(8.2 |
) |
|
|
(12.6 |
) |
|
|
(11.3 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee7 |
4.2 |
|
|
|
3.3 |
|
|
|
12.2 |
|
|
|
11.1 |
|
|
|
16.2 |
|
|
|
15.2 |
|
|
Adjusted EBITDA |
$ |
96.2 |
|
|
|
$ |
99.0 |
|
|
|
$ |
246.8 |
|
|
|
$ |
220.3 |
|
|
|
$ |
305.5 |
|
|
|
$ |
279.0 |
|
|
Adjusted EBITDA margin |
18.3 |
|
% |
|
21.6 |
|
% |
|
17.8 |
|
% |
|
18.1 |
|
% |
|
17.3 |
|
% |
|
17.5 |
|
% |
- 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.
- Impairment or abandonment of
long-lived assets and other exit charges.
- Legal, valuation, accounting, advisory and other costs related
to business combinations and other transactions.
- Non-cash equity compensation
expense.
- Other includes one-time charges
such as executive severance costs, as well as inter-segment charges
that are eliminated upon consolidation.
- 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.
- 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.
FORTERRA,
INC.Reconciliation of segment EBITDA to segment
adjusted EBITDA(in millions)
Three months ended
September 30, 2021 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
75.6 |
|
|
|
$ |
32.0 |
|
|
|
$ |
(18.3 |
) |
|
|
$ |
89.3 |
|
|
Loss on sale of property,
plant & equipment, net |
0.1 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
0.6 |
|
|
Impairment and exit
charges2 |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Transaction costs3 |
— |
|
|
|
— |
|
|
|
3.2 |
|
|
|
3.2 |
|
|
Non-cash compensation4 |
0.4 |
|
|
|
0.3 |
|
|
|
1.3 |
|
|
|
2.0 |
|
|
Other5 |
0.6 |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
0.2 |
|
|
Earnings from equity method
investee6 |
(3.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.3 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee7 |
4.2 |
|
|
|
— |
|
|
|
— |
|
|
|
4.2 |
|
|
Adjusted EBITDA |
$ |
77.6 |
|
|
|
$ |
32.4 |
|
|
|
$ |
(13.8 |
) |
|
|
$ |
96.2 |
|
|
Adjusted EBITDA margin |
25.9 |
|
% |
|
14.3 |
|
% |
|
NM |
|
18.3 |
|
% |
|
|
|
|
|
|
|
|
Net sales |
$ |
299.4 |
|
|
|
$ |
227.2 |
|
|
|
$ |
— |
|
|
|
$ |
526.6 |
|
|
Gross profit |
81.6 |
|
|
|
35.0 |
|
|
|
— |
|
|
|
116.6 |
|
|
Three months ended
September 30, 2020 |
Drainage Pipe &
Products(a) |
|
Water Pipe & Products(a) |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
66.8 |
|
|
|
$ |
45.0 |
|
|
|
$ |
(30.6 |
) |
|
|
$ |
81.2 |
|
|
Loss on sale of property,
plant & equipment, net |
0.4 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.6 |
|
|
Loss on extinguishment of
debt |
— |
|
|
|
— |
|
|
|
11.5 |
|
|
|
11.5 |
|
|
Impairment and exit
charges2 |
1.4 |
|
|
|
— |
|
|
|
— |
|
|
|
1.4 |
|
|
Transaction costs3 |
— |
|
|
|
— |
|
|
|
1.0 |
|
|
|
1.0 |
|
|
Non-cash compensation4 |
0.4 |
|
|
|
0.2 |
|
|
|
1.7 |
|
|
|
2.3 |
|
|
Other5 |
0.4 |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
Earnings from equity method
investee6 |
(2.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2.3 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee7 |
3.3 |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
|
Adjusted EBITDA |
$ |
70.4 |
|
|
|
$ |
45.0 |
|
|
|
$ |
(16.4 |
) |
|
|
$ |
99.0 |
|
|
Adjusted EBITDA margin |
27.0 |
|
% |
|
22.9 |
|
% |
|
NM |
|
21.6 |
|
% |
|
|
|
|
|
|
|
|
Net sales |
$ |
261.2 |
|
|
|
$ |
196.4 |
|
|
|
$ |
— |
|
|
|
$ |
457.6 |
|
|
Gross profit |
73.7 |
|
|
|
52.6 |
|
|
|
— |
|
|
|
126.3 |
|
|
Nine months ended
September 30, 2021 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
186.1 |
|
|
|
$ |
112.3 |
|
|
|
$ |
(59.4 |
) |
|
|
$ |
239.0 |
|
|
(Gain) loss on sale of
property, plant & equipment, net |
(11.0 |
) |
|
|
0.7 |
|
|
|
— |
|
|
|
(10.3 |
) |
|
Impairment and exit
charges2 |
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
Transaction costs3 |
— |
|
|
|
— |
|
|
|
8.3 |
|
|
|
8.3 |
|
|
Non-cash compensation4 |
1.5 |
|
|
|
1.3 |
|
|
|
4.0 |
|
|
|
6.8 |
|
|
Other5 |
1.4 |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
0.2 |
|
|
Earnings from equity method
investee6 |
(9.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(9.5 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee7 |
12.2 |
|
|
|
— |
|
|
|
— |
|
|
|
12.2 |
|
|
Adjusted EBITDA |
$ |
180.7 |
|
|
|
$ |
113.2 |
|
|
|
$ |
(47.1 |
) |
|
|
$ |
246.8 |
|
|
Adjusted EBITDA margin |
24.1 |
|
% |
|
17.8 |
|
% |
|
NM |
|
17.8 |
|
% |
|
|
|
|
|
|
|
|
Net sales |
$ |
749.8 |
|
|
|
$ |
637.8 |
|
|
|
$ |
— |
|
|
|
$ |
1,387.6 |
|
|
Gross profit |
194.9 |
|
|
|
123.6 |
|
|
|
(0.1 |
) |
|
|
318.4 |
|
|
Nine months ended
September 30, 2020 |
Drainage Pipe &
Products(a) |
|
Water Pipe & Products(a) |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
147.8 |
|
|
|
$ |
110.0 |
|
|
|
$ |
(70.7 |
) |
|
|
$ |
187.1 |
|
|
Loss on sale of property,
plant & equipment, net |
1.7 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
2.0 |
|
|
Loss on extinguishment of
debt |
— |
|
|
|
— |
|
|
|
11.5 |
|
|
|
11.5 |
|
|
Impairment and exit
charges2 |
2.4 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
3.5 |
|
|
Transaction costs3 |
|
|
— |
|
|
|
5.5 |
|
|
|
5.5 |
|
|
Non-cash compensation4 |
1.4 |
|
|
|
0.8 |
|
|
|
5.6 |
|
|
|
7.8 |
|
|
Other5 |
1.2 |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
— |
|
|
Earnings from equity method
investee6 |
(8.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
(8.2 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee7 |
11.1 |
|
|
|
— |
|
|
|
— |
|
|
|
11.1 |
|
|
Adjusted EBITDA |
$ |
157.4 |
|
|
|
$ |
111.0 |
|
|
|
$ |
(48.1 |
) |
|
|
$ |
220.3 |
|
|
Adjusted EBITDA margin |
23.3 |
|
% |
|
20.6 |
|
% |
|
NM |
|
18.1 |
|
% |
|
|
|
|
|
|
|
|
Net sales |
$ |
676.5 |
|
|
|
$ |
538.1 |
|
|
|
$ |
— |
|
|
|
$ |
1,214.6 |
|
|
Gross profit |
166.4 |
|
|
|
124.2 |
|
|
|
— |
|
|
|
290.6 |
|
|
(a) During the fourth
quarter of 2020, the Company reclassified the pressure pipe
business from Water segment to Drainage segment to better align
with its organizational structure. As a result, historical segment
data was updated to reflect the current segment compositions.
- 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.
- Impairment or abandonment of
long-lived assets and other exit charges.
- Legal, valuation, accounting, advisory and other costs related
to business combinations and other transactions.
- Non-cash equity compensation
expense.
- Other includes inter-segment
charges that are eliminated upon consolidation.
- Net income from Forterra's 50%
ownership in the CP&P joint venture accounted for under the
equity method of accounting.
- 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.
Reconciliation of Long-Term Debt to Total
Debt and Net Debt(in millions)
|
September 30, |
|
2021 |
Long-term debt |
$ |
881.3 |
|
Current portion of long-term
debt |
12.5 |
|
Carrying value of long-term debt |
893.8 |
|
Add: Debt issuance cost and
original issuance discount |
11.6 |
|
Gross value of long-term debt |
905.4 |
|
Add: Short-term finance lease
liabilities |
17.8 |
|
Long-term finance lease liabilities |
142.5 |
|
Total debt |
1,065.7 |
|
Less: Cash and cash
equivalents |
(24.0 |
) |
Net debt |
$ |
1,041.7 |
|
Source: Forterra, Inc.
Company Contact Information:
Charlie BrownExecutive Vice President and Chief Financial
Officer
469-299-9113IR@forterrabp.com
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