Forterra, Inc. (“Forterra” or “the Company”) (NASDAQ: FRTA), a
leading manufacturer of water and drainage infrastructure pipe and
products in the United States and Eastern Canada, today announced
results for the quarter and full year ended December 31, 2020.
Full Year 2020 Highlights
- Increased net sales by 4.2% to $1,594.5 million as
compared to $1,529.8 million last year
- Increased gross profit by 27.1% to $376.7 million as
compared to $296.4 million last year; gross profit margin improved
by more than 400 basis points
year-over-year
- Net income for 2020 was $64.5 million, compared to a
net loss for 2019 of $7.3 million
- Adjusted EBITDA1
increased by 36.8% to $279.0 million as compared to $203.9
million last year; adjusted EBITDA
margin1 improved by more than 400
basis points year-over-year to
17.5% in 2020, compared to 13.3%
in 2019
- Generated $243.2
million of operating cash flow in 2020 compared to $146.8
million in 2019, and voluntarily repaid $203.5 million of long-term
debt; reduced Net Leverage Ratio2
to 3.7x at year-end from 6.1x a year ago
- Completed two refinancing transactions, extending the
maturities of our revolving credit facility and $500 million of our
long-term debt to 2025
- Received credit rating upgrades from both Moody’s and
S&P
- Received favorable arbitration decision in earnout
dispute with HeidelbergCement AG
Fourth Quarter 2020 Highlights
- Increased net sales by 4.6% to $379.9 million as
compared to $363.1 million in the prior year quarter
- Increased gross profit by 29.3% to $86.1 million as
compared to $66.6 million in the prior year quarter. Gross profit
margin improved by more than 400 basis points
year-over-year
- Net income of $22.6 million and Adjusted EBITDA of
$58.7 million, compared to net loss of $7.7 million and Adjusted
EBITDA of $41.5 million in the prior year quarter
1 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 prior 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.
Forterra CEO Karl Watson, Jr. commented, “I want to thank all of
the Forterra team members on the exceptional performance they
delivered in 2020 while working diligently to keep safe and healthy
during the pandemic. Our strong performance in earnings growth,
increased cash flow, and debt reduction that produced a more robust
balance sheet demonstrate the results of the continuing execution
of our five improvement pillars, which are specifically designed to
earn a full and fair return on the products we produce and the
capital we have deployed. Our fourth quarter results reflect
another step forward toward achieving this aim. We had a solid
finish to the year with continued pricing improvements while
holding our costs relatively flat. We also saw the predicted
improvements in year-over-year shipment volume trends this quarter,
especially in our Drainage business, as compared to quarters
earlier in the year. As a result, we exceeded our annual earnings
and debt reduction guidance that were provided at the end of the
third quarter. Net income for the year was $65 million, exceeding
our guidance of $30 million to $40 million, and Adjusted EBITDA for
the year was at the top end of our guidance of $265 million to $280
million. Voluntary debt repayment was $204 million, exceeding the
guidance of $170 million to $185 million. This voluntary debt
prepayment, combined with improved earnings, reduced our Net
Leverage Ratio2 to 3.7x at year-end."
“In recognition of the collective efforts of our
team in rising to overcome the unprecedented challenges of 2020 and
their delivery of the much-improved results for the year, during
the fourth quarter we accrued a discretionary 2% profit sharing
contribution to team members’ 401K (U.S.) or DCPP (Canada)
retirement accounts for 2020. The total contribution was $5.2
million, comprised of $2.9 million in Drainage, $2.0 million in
Water, and $0.3 million in Corporate. This contribution
demonstrated our commitment to investing in our people.”
Mr. Watson continued, "Looking ahead, we remain
focused on the execution of our five primary improvement pillars:
health and safety, plant-level operational discipline, enhanced
commercial capabilities, working capital efficiency, and general
and administrative expense effectiveness. For 2021, we expect our
focus on these pillars to further enhance our results. While
challenges from the pandemic persist, and some of our key raw
material prices have increased, our team will make continued
progress across all of our five improvement pillars. We are very
proud of what we have accomplished 2020, but even more excited
about what we can still achieve in 2021 and beyond.”
Segment ResultsDrainage
Pipe & Products (“Drainage”) - Key Financial and Operational
Statistics:
Key Financial Statistics ($ in millions) |
|
Fourth Quarter |
|
Full Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2020 |
|
Q4 20193 |
|
2020 |
|
20193 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
211.0 |
|
|
$ |
214.1 |
|
|
$ |
887.4 |
|
|
$ |
913.1 |
|
Gross Profit |
|
45.2 |
|
|
37.9 |
|
|
211.6 |
|
|
$ |
201.0 |
|
Gross Profit Margin |
21.4 |
% |
|
17.7 |
% |
|
23.8 |
% |
|
22.0 |
% |
EBITDA |
|
39.7 |
|
|
31.1 |
|
|
187.5 |
|
|
173.0 |
|
Adjusted EBITDA |
|
40.6 |
|
|
33.2 |
|
|
198.0 |
|
|
182.1 |
|
Adjusted EBITDA Margin |
19.2 |
% |
|
15.5 |
% |
|
22.3 |
% |
|
19.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Key Operational Statistics4 |
|
Q4 2020 vs. Q4 2019 |
|
FY 2020 vs. FY 2019 |
|
|
|
|
|
|
|
|
|
|
|
Shipment Volumes |
|
-6% |
|
-11% |
Average Selling Prices |
|
+5% |
|
+8% |
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.4 Operational statistics only pertain
to pipe and precast products and do not include other services,
non-volume-based products, or non-core products. Pipe and precast
products revenue accounted for approximately 90% of Drainage
segment revenue.
Drainage net sales for the fourth quarter slightly decreased by
1.4%, or $3.1 million, to $211.0 million as compared to $214.1
million in the prior year quarter. The decrease was due to lower
shipment volumes year-over-year, primarily driven by less favorable
weather conditions compared to the last year period, while the
volume shortfall seen in the prior sequential quarter progressively
improved during the fourth quarter. The impact of volume decline on
net sales was mostly offset by higher average selling
prices. On a full year basis, Drainage net sales
decreased by 2.8%, or $25.7 million, to $887.4 million as compared
to $913.1 million in 2019. The decrease was driven by lower
shipment volumes year-over-year, primarily due to less favorable
weather conditions compared to last year, project delays earlier in
the year caused by the COVID-19 pandemic, as well as the impact
from the early stage of the Company’s margin-enhanced value before
volume commercial strategy improvements. As the Company has
continued execution of its commercial strategy, it has made
appropriate adjustments to its commercial activities.
Drainage gross profit and gross profit margin
for the fourth quarter increased to $45.2 million and 21.4%,
respectively, as compared to $37.9 million and 17.7%, respectively,
in the prior year quarter. Gross profit and gross profit margin for
the prior year quarter were negatively impacted by a $5.4 million
non-cash inventory valuation adjustment, as well as higher
operating expenses. In addition, higher average selling prices in
2020 further contributed to the year-over-year increase.
On a full year basis, Drainage gross profit and
gross profit margin increased to $211.6 million and 23.8%,
respectively, as compared to $201.0 million and 22.0%,
respectively, in 2019. The increase was primarily due to higher
average selling prices caused by a combination of true pricing
improvements and the effect of product and geographic sales mix,
partially offset by lower shipment volumes year-over-year.
Drainage EBITDA, Adjusted EBITDA and Adjusted EBITDA margin
during the fourth quarter increased to $39.7 million, $40.6 million
and 19.2%, respectively, compared to $31.1 million, $33.2 million
and 15.5%, respectively, in the prior year quarter. On
a full year basis, Drainage EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin increased to $187.5 million, $198.0 million and
22.3%, respectively, as compared to $173.0 million, $182.1 million,
and 19.9%, respectively, in 2019. The improvements generally
reflect the same dynamics as discussed above in the gross profit
and gross profit margin analysis.
Water Pipe & Products (“Water”) -
Key Financial and Operational Statistics:
Key Financial Statistics ($ in millions) |
|
Fourth Quarter |
|
Full Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2020 |
|
Q4 20193 |
|
2020 |
|
20193 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
168.9 |
|
|
$ |
149.0 |
|
|
$ |
707.1 |
|
|
$ |
616.7 |
|
Gross Profit |
|
40.9 |
|
|
28.6 |
|
|
165.1 |
|
|
95.6 |
|
Gross Profit Margin |
24.2 |
% |
|
19.2 |
% |
|
23.3 |
% |
|
15.5 |
% |
EBITDA |
|
35.5 |
|
|
24.0 |
|
|
145.5 |
|
|
82.8 |
|
Adjusted EBITDA |
|
35.9 |
|
|
26.0 |
|
|
146.9 |
|
|
85.5 |
|
Adjusted EBITDA Margin |
21.3 |
% |
|
17.4 |
% |
|
20.8 |
% |
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Key Operational Statistics5 |
|
Q4 2020 vs. Q4 2019 |
|
FY 2020 vs. FY 2019 |
|
|
|
|
|
|
|
|
|
|
|
Shipment Volumes |
|
+1% |
|
+3% |
Average Selling Prices |
|
+15% |
|
+14% |
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.5 Operational statistics only pertain
to ductile iron pipe products and do not include other services,
non-volume-based products, or non-core products. Ductile iron pipe
revenue accounted for approximately 90% of Water segment
revenue.
Water net sales for the fourth quarter increased
by 13.4%, or $19.9 million, to $168.9 million as compared to $149.0
million in the prior year quarter. On a full year basis, Water net
sales increased by 14.7%, to $707.1 million as compared to $616.7
million in 2019. These year-over-year increases were mostly driven
by higher average selling prices, coupled with a small increase in
shipment volumes.
Water gross profit and gross profit margin for
the fourth quarter increased to $40.9 million and 24.2%,
respectively, as compared to $28.6 million and 19.2%, respectively,
in the prior year quarter. On a full year basis, Water gross profit
and gross profit margin significantly increased to $165.1 million
and 23.3%, respectively, as compared to $95.6 million and 15.5%,
respectively, in 2019. These increases were primarily driven by
higher average selling prices, while unit cost remained relatively
flat.
Water EBITDA, Adjusted EBITDA and Adjusted EBITDA margin during
the fourth quarter increased to $35.5 million, $35.9 million and
21.3%, respectively, compared to $24.0 million, $26.0 million and
17.4%, respectively, in the prior year quarter. On a
full year basis, Water EBITDA, Adjusted EBITDA and Adjusted EBITDA
margin significantly increased to $145.5 million, $146.9 million
and 20.8%, respectively, as compared to $82.8 million, $85.5
million, and 13.9%, respectively, in 2019. These improvements
reflect the same dynamics as discussed above in the gross profit
and gross profit margin analysis.
Corporate and Other
(“Corporate”) During the fourth quarter, Corporate EBITDA
and Adjusted EBITDA loss were $20.0 million and $17.8 million,
respectively, compared to $20.0 million and $17.7 million,
respectively, in the prior year quarter. On a full year basis,
Corporate EBITDA and Adjusted EBITDA loss were $90.7 million and
$65.9 million, respectively, compared to $74.2 million and $63.7
million, respectively, in the prior year quarter. On a reported
basis, the increase in Corporate segment EBITDA loss was primarily
driven by a $12.3 million loss on extinguishment of debt as a
result of the Company’s prepayments of term loan debt and the
consequent write-offs of the corresponding debt issuance costs. The
year-over-year increase in Corporate adjusted EBITDA loss, which
excludes the loss on extinguishment of term loan debt, was slightly
higher than in the prior year, primarily due to increased annual
bonus accruals driven by the significantly improved business
performance.
Other Items – Income TaxesTax
expense for the year was $8.4 million (effective tax rate of 11.5%)
compared to the prior year tax benefit of $3.3 million. With the
improved earnings in 2020, the Company released $11.8 million, or
$0.18 on a per share basis, of valuation allowance against its
deferred tax assets, resulting in the lower than statutory tax
rate. The prior year's tax benefit was mainly driven by the pre-tax
loss the Company generated.
Balance Sheet and LiquidityAs
of December 31, 2020, the Company had cash of $25.7 million and
total debt of $914.9 million, which was comprised of $500 million
of senior secured notes due in July 2025 and $414.9 million of term
loan due in October 2023. There were no outstanding borrowings
under the Company's $350 million revolving credit facility at
year-end. Net cash from operating activities during the year was
$243.2 million, a 65.7% increase from $146.8 million in 2019.
During 2020, the Company continued its commitment to its strategy
to reduce leverage and voluntarily prepaid $203.5 million of term
loan; as a result, Net Leverage Ratio2 reduced to 3.7x at year-end
compared to 6.1x a year ago.
About ForterraForterra is a
leading manufacturer of water and drainage pipe and products in the
U.S. and Eastern Canada for a variety of water-related
infrastructure applications, including water transmission,
distribution, drainage and storm water management. Based in Irving,
Texas, Forterra’s product breadth and significant scale help make
it a one-stop shop for water related pipe and products, and a
preferred supplier to a wide variety of customers, including
contractors, distributors and municipalities. For more information
on Forterra, visit http://forterrabp.com.
Forward-Looking StatementsThis
press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements may be identified by the use of words
such as "anticipate", "believe", "expect", "estimate", "plan",
"outlook", and "project" and other similar expressions that predict
or indicate future events or trends or that are not statements of
historical matters. Forward-looking statements should not be read
as a guarantee of future performance or results and will not
necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward-looking
statements are based on historical information available at the
time the statements are made and are based on management's
reasonable belief or expectations with respect to future events,
and are subject to risks and uncertainties, many of which are
beyond the Company's control, that could cause actual performance
or results to differ materially from the belief or expectations
expressed in or suggested by the forward-looking statements.
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 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)
|
Quarter ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
2020 |
2019 |
|
2020 |
2019 |
|
unaudited |
unaudited |
|
|
Net sales |
$ |
379.9 |
|
|
$ |
363.1 |
|
|
|
$ |
1,594.5 |
|
|
$ |
1,529.8 |
|
|
Cost of goods
sold |
293.8 |
|
|
296.5 |
|
|
|
1,217.8 |
|
|
1,233.4 |
|
|
Gross
profit |
86.1 |
|
|
66.6 |
|
|
|
376.7 |
|
|
296.4 |
|
|
Selling, general & administrative expenses |
(57.2 |
) |
|
(56.5 |
) |
|
|
(221.8 |
) |
|
(221.8 |
) |
|
Impairment and exit charges |
— |
|
|
(2.2 |
) |
|
|
(2.5 |
) |
|
(3.5 |
) |
|
Other operating income, net |
1.8 |
|
|
0.1 |
|
|
|
1.4 |
|
|
1.1 |
|
|
|
(55.4 |
) |
|
(58.6 |
) |
|
|
(222.9 |
) |
|
(224.2 |
) |
|
Income from
operations |
30.7 |
|
|
8.0 |
|
|
|
153.8 |
|
|
72.2 |
|
|
|
|
|
|
|
|
Other income
(expenses) |
|
|
|
|
|
Interest expense |
(19.4 |
) |
|
(21.2 |
) |
|
|
(79.9 |
) |
|
(95.0 |
) |
|
Gain (loss) on extinguishment of debt |
(0.8 |
) |
|
1.3 |
|
|
|
(12.3 |
) |
|
1.7 |
|
|
Earnings from equity method investee |
3.1 |
|
|
1.5 |
|
|
|
11.3 |
|
|
10.5 |
|
|
Income (loss) before
income taxes |
13.6 |
|
|
(10.4 |
) |
|
|
72.9 |
|
|
(10.6 |
) |
|
Income tax (expense) benefit |
9.0 |
|
|
2.7 |
|
|
|
(8.4 |
) |
|
3.3 |
|
|
Net income
(loss) |
$ |
22.6 |
|
|
$ |
(7.7 |
) |
|
|
$ |
64.5 |
|
|
$ |
(7.3 |
) |
|
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
Basic |
$ |
0.34 |
|
|
$ |
(0.12 |
) |
|
|
$ |
0.99 |
|
|
$ |
(0.11 |
) |
|
Diluted |
$ |
0.33 |
|
|
$ |
(0.12 |
) |
|
|
$ |
0.94 |
|
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
Weighted average
common shares outstanding: |
|
|
|
|
|
Basic |
65.8 |
|
|
64.6 |
|
|
|
65.3 |
|
|
64.2 |
|
|
Diluted |
69.2 |
|
|
64.6 |
|
|
|
68.2 |
|
|
64.2 |
|
|
FORTERRA,
INC.Consolidated Balance Sheets(in
millions)
|
December 31, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
$ |
25.7 |
|
|
|
$ |
34.8 |
|
|
Receivables, net |
227.9 |
|
|
|
205.8 |
|
|
Inventories |
222.9 |
|
|
|
238.5 |
|
|
Prepaid expenses |
8.0 |
|
|
|
11.0 |
|
|
Other current assets |
2.0 |
|
|
|
8.9 |
|
|
Total current assets |
486.5 |
|
|
|
499.0 |
|
|
Non-current
assets |
|
|
|
Property, plant and equipment, net |
451.1 |
|
|
|
475.6 |
|
|
Operating lease right-of-use assets |
54.4 |
|
|
|
60.3 |
|
|
Goodwill |
509.1 |
|
|
|
508.8 |
|
|
Intangible assets, net |
101.4 |
|
|
|
142.7 |
|
|
Investment in equity method investee |
48.3 |
|
|
|
50.0 |
|
|
Other long-term assets |
5.0 |
|
|
|
3.7 |
|
|
Total assets |
$ |
1,655.8 |
|
|
|
$ |
1,740.1 |
|
|
LIABILITIES AND
EQUITY |
|
|
|
Current
liabilities |
|
|
|
Trade payables |
$ |
134.1 |
|
|
|
$ |
102.4 |
|
|
Accrued liabilities |
115.8 |
|
|
|
88.8 |
|
|
Deferred revenue |
8.2 |
|
|
|
9.5 |
|
|
Current portion of long-term debt |
12.5 |
|
|
|
12.5 |
|
|
Current portion of tax receivable agreement |
8.3 |
|
|
|
13.2 |
|
|
Total current liabilities |
278.9 |
|
|
|
226.4 |
|
|
Non-current
liabilities |
|
|
|
Senior term loan |
395.5 |
|
|
|
1,085.8 |
|
|
Senior secured notes |
492.0 |
|
|
|
— |
|
|
Long-term finance lease liabilities |
142.2 |
|
|
|
137.4 |
|
|
Long-term operating lease liabilities |
50.9 |
|
|
|
54.4 |
|
|
Deferred tax liabilities |
9.7 |
|
|
|
28.9 |
|
|
Other long-term liabilities |
36.9 |
|
|
|
22.0 |
|
|
Long-term tax receivable agreement |
55.9 |
|
|
|
64.2 |
|
|
Total liabilities |
1,462.0 |
|
|
|
1,619.1 |
|
|
Commitments and Contingencies |
|
|
|
Equity |
|
|
|
Common stock, $0.001 par value. 190.0 shares authorized; 66.0 and
64.7 shares issued and outstanding at December 31, 2020 and
December 31, 2019, respectively |
— |
|
|
|
— |
|
|
Additional paid-in-capital |
252.6 |
|
|
|
244.5 |
|
|
Accumulated other comprehensive loss |
(6.9 |
) |
|
|
(7.1 |
) |
|
Retained deficit |
(51.9 |
) |
|
|
(116.4 |
) |
|
Total shareholders' equity |
193.8 |
|
|
|
121.0 |
|
|
Total liabilities and shareholders' equity |
$ |
1,655.8 |
|
|
|
$ |
1,740.1 |
|
|
FORTERRA,
INC.Consolidated Statements of Cash
Flows(in thousands)
|
Year endedDecember 31, |
|
2020 |
|
2019 |
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
Net income (loss) |
$ |
64.5 |
|
|
|
$ |
(7.3 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
Depreciation & amortization expense |
89.5 |
|
|
|
97.3 |
|
|
Loss on disposal of property, plant and equipment |
0.6 |
|
|
|
2.0 |
|
|
(Gain) / loss on extinguishment of debt |
12.3 |
|
|
|
(1.7 |
) |
|
Amortization of debt discount and issuance costs |
6.6 |
|
|
|
8.0 |
|
|
Stock-based compensation expense |
9.5 |
|
|
|
7.9 |
|
|
Impairment of property, plant, and equipment and goodwill |
1.2 |
|
|
|
0.1 |
|
|
Earnings from equity method investee |
(11.3 |
) |
|
|
(10.5 |
) |
|
Distributions from equity method investee |
13.0 |
|
|
|
11.0 |
|
|
Unrealized loss on derivative instruments, net |
0.8 |
|
|
|
6.4 |
|
|
Unrealized foreign currency losses, net |
0.3 |
|
|
|
— |
|
|
Provision (recoveries) for doubtful accounts |
(0.3 |
) |
|
|
0.4 |
|
|
Deferred income taxes |
(19.3 |
) |
|
|
(20.1 |
) |
|
Other non-cash items |
5.2 |
|
|
|
1.3 |
|
|
Change in assets and liabilities: |
|
|
|
Receivables, net |
(21.4 |
) |
|
|
(7.4 |
) |
|
Inventories |
15.7 |
|
|
|
47.5 |
|
|
Other current assets |
9.7 |
|
|
|
0.5 |
|
|
Accounts payable and accrued liabilities |
53.9 |
|
|
|
2.7 |
|
|
Other assets & liabilities |
12.7 |
|
|
|
8.7 |
|
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES |
243.2 |
|
|
|
146.8 |
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
Purchase of property, plant and equipment, and intangible
assets |
(34.0 |
) |
|
|
(53.7 |
) |
|
Proceeds from sale of fixed assets |
15.6 |
|
|
|
11.4 |
|
|
NET CASH USED IN INVESTING
ACTIVITIES |
(18.4 |
) |
|
|
(42.3 |
) |
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
Payment of debt issuance costs |
(11.4 |
) |
|
|
— |
|
|
Proceeds from issuance of common stock, net |
2.4 |
|
|
|
1.7 |
|
|
Payments on term loan |
(707.6 |
) |
|
|
(95.7 |
) |
|
Proceeds from senior secured notes |
500.0 |
|
|
|
— |
|
|
Proceeds from revolver |
180.0 |
|
|
|
54.0 |
|
|
Payments on revolver |
(180.0 |
) |
|
|
(54.0 |
) |
|
Payments pursuant to tax receivable agreement |
(13.1 |
) |
|
|
(11.4 |
) |
|
Other financing activities |
(4.5 |
) |
|
|
(0.8 |
) |
|
NET CASH USED IN FINANCING
ACTIVITIES |
(234.2 |
) |
|
|
(106.2 |
) |
|
Effect of exchange rate
changes on cash |
0.3 |
|
|
|
0.7 |
|
|
Net change in cash and cash
equivalents |
(9.1 |
) |
|
|
(1.0 |
) |
|
Cash and cash equivalents,
beginning of period |
34.8 |
|
|
|
35.8 |
|
|
Cash and cash equivalents, end
of period |
25.7 |
|
|
|
34.8 |
|
|
Additional Statistics
(unaudited)
Reconciliation of Non-GAAP
Measures
In addition to our results calculated under
generally accepted accounting principles in the United States
("GAAP"), in this earnings release we also present Adjusted EBITDA
and Adjusted EBITDA margin. Adjusted EBITDA and Adjusted EBITDA
margin are non-GAAP measures and have been presented in this
earnings release as supplemental measures of financial performance
that are not required by, or presented in accordance with GAAP. We
calculate Adjusted EBITDA as 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 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 (loss) to
adjusted EBITDA(in millions)
|
Three months ended December 31, |
|
Year ended December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
unaudited |
|
unaudited |
|
|
|
|
Net income (loss) |
$ |
22.6 |
|
|
|
$ |
(7.7 |
) |
|
|
$ |
64.5 |
|
|
|
$ |
(7.3 |
) |
|
Interest expense |
19.4 |
|
|
|
21.2 |
|
|
|
79.9 |
|
|
|
95.0 |
|
|
Depreciation and
amortization |
22.2 |
|
|
|
24.3 |
|
|
|
89.5 |
|
|
|
97.2 |
|
|
Income tax (benefit)
expense |
(9.0 |
) |
|
|
(2.7 |
) |
|
|
8.4 |
|
|
|
(3.3 |
) |
|
EBITDA1 |
55.2 |
|
|
|
35.1 |
|
|
|
242.3 |
|
|
|
181.6 |
|
|
(Gain) loss on sale of
property, plant & equipment, net |
(1.3 |
) |
|
|
0.5 |
|
|
|
0.6 |
|
|
|
2.1 |
|
|
Loss (gain) on extinguishment
of debt |
0.8 |
|
|
|
(1.3 |
) |
|
|
12.3 |
|
|
|
(1.7 |
) |
|
Impairment and exit
charges2 |
0.4 |
|
|
|
2.2 |
|
|
|
3.9 |
|
|
|
3.5 |
|
|
Transaction costs3 |
(0.3 |
) |
|
|
0.9 |
|
|
|
5.3 |
|
|
|
3.0 |
|
|
Inventory step-up impacting
margin4 |
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
Non-cash compensation5 |
1.7 |
|
|
|
3.1 |
|
|
|
9.5 |
|
|
|
7.9 |
|
|
Other 6 |
1.2 |
|
|
|
— |
|
|
|
1.2 |
|
|
|
3.3 |
|
|
Earnings from equity method
investee 7 |
(3.1 |
) |
|
|
(1.5 |
) |
|
|
(11.3 |
) |
|
|
(10.5 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee 8 |
4.1 |
|
|
|
2.5 |
|
|
|
15.2 |
|
|
|
14.4 |
|
|
Adjusted EBITDA |
$ |
58.7 |
|
|
|
$ |
41.5 |
|
|
|
$ |
279.0 |
|
|
|
$ |
203.9 |
|
|
Adjusted EBITDA margin |
15.5 |
% |
|
|
11.4 |
% |
|
|
17.5 |
% |
|
|
13.3 |
% |
|
Gross profit |
86.1 |
|
|
|
66.6 |
|
|
|
376.7 |
|
|
|
296.4 |
|
|
Gross profit margin |
22.7 |
% |
|
|
18.3 |
% |
|
|
23.6 |
% |
|
|
19.4 |
% |
|
- 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.
- 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.
- Non-cash equity compensation
expense.
- Other includes one-time charges
such as executive severance costs and (gains) losses from
divestiture transactions.
- 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)
For the three months
ended December 31, 2020: |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
39.7 |
|
|
|
$ |
35.5 |
|
|
|
$ |
(20.0 |
) |
|
|
$ |
55.2 |
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
property, plant & equipment, net2 |
$ |
(1.8 |
) |
|
|
0.5 |
|
|
|
— |
|
|
|
(1.3 |
) |
|
Loss on extinguishment of
debt |
$ |
— |
|
|
|
— |
|
|
|
0.8 |
|
|
|
0.8 |
|
|
Impairment and exit
charges3 |
$ |
0.2 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.4 |
|
|
Transaction costs4 |
$ |
— |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
(0.3 |
) |
|
Non-cash compensation6 |
$ |
— |
|
|
|
0.1 |
|
|
|
1.6 |
|
|
|
1.7 |
|
|
Other 7 |
$ |
1.5 |
|
|
|
(0.4 |
) |
|
|
0.1 |
|
|
|
1.2 |
|
|
Earnings from equity method
investee 8 |
$ |
(3.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.1 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee 9 |
$ |
4.1 |
|
|
|
— |
|
|
|
— |
|
|
|
4.1 |
|
|
Adjusted EBITDA |
$ |
40.6 |
|
|
|
$ |
35.9 |
|
|
|
$ |
(17.8 |
) |
|
|
$ |
58.7 |
|
|
Adjusted EBITDA margin |
19.2 |
% |
|
|
21.3 |
% |
|
|
|
NM |
|
|
|
15.5 |
% |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
211.0 |
|
|
|
$ |
168.9 |
|
|
|
$ |
— |
|
|
|
$ |
379.9 |
|
|
Gross profit |
$ |
45.2 |
|
|
|
$ |
40.9 |
|
|
|
$ |
— |
|
|
|
$ |
86.1 |
|
|
For the three months
ended December 31, 2019: |
Drainage Pipe &
Products(a) |
|
Water Pipe & Products(a) |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
31.1 |
|
|
|
$ |
24.0 |
|
|
|
$ |
(20.0 |
) |
|
|
$ |
35.1 |
|
|
|
|
|
|
|
|
|
|
Loss on sale of property,
plant & equipment, net2 |
0.3 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.5 |
|
|
Gain on extinguishment of
debt |
|
|
|
|
(1.3 |
) |
|
|
(1.3 |
) |
|
Impairment and exit
charges3 |
0.1 |
|
|
|
2.1 |
|
|
|
— |
|
|
|
2.2 |
|
|
Transaction costs4 |
— |
|
|
|
— |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
Non-cash compensation6 |
0.3 |
|
|
|
0.1 |
|
|
|
2.7 |
|
|
|
3.1 |
|
|
Other 7 |
0.4 |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
Earnings from equity method
investee 8 |
(1.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1.5 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee 9 |
2.5 |
|
|
|
— |
|
|
|
— |
|
|
|
2.5 |
|
|
Adjusted EBITDA |
$ |
33.2 |
|
|
|
$ |
26.0 |
|
|
|
$ |
(17.7 |
) |
|
|
$ |
41.5 |
|
|
Adjusted EBITDA margin |
15.5 |
% |
|
|
17.4 |
% |
|
|
|
NM |
|
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
214.1 |
|
|
|
$ |
149.0 |
|
|
|
$ |
— |
|
|
|
$ |
363.1 |
|
|
Gross profit |
$ |
37.9 |
|
|
|
$ |
28.6 |
|
|
|
$ |
0.1 |
|
|
|
$ |
66.6 |
|
|
FORTERRA,
INC.Reconciliation of segment EBITDA to segment
adjusted EBITDA(in millions)
For the year ended
December 31, 2020: |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
187.5 |
|
|
|
$ |
145.5 |
|
|
|
$ |
(90.7 |
) |
|
|
$ |
242.3 |
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
property, plant & equipment, net2 |
(0.2 |
) |
|
|
0.8 |
|
|
|
— |
|
|
|
0.6 |
|
|
Loss on extinguishment of
debt |
— |
|
|
|
— |
|
|
|
12.3 |
|
|
|
12.3 |
|
|
Impairment and exit
charges3 |
2.6 |
|
|
|
1.3 |
|
|
|
— |
|
|
|
3.9 |
|
|
Transaction costs4 |
— |
|
|
|
— |
|
|
|
5.3 |
|
|
|
5.3 |
|
|
Non-cash compensation6 |
1.4 |
|
|
|
0.9 |
|
|
|
7.2 |
|
|
|
9.5 |
|
|
Other 7 |
2.8 |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
1.2 |
|
|
Earnings from equity method
investee 8 |
(11.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(11.3 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee 9 |
15.2 |
|
|
|
— |
|
|
|
— |
|
|
|
15.2 |
|
|
Adjusted EBITDA |
$ |
198.0 |
|
|
|
$ |
146.9 |
|
|
|
$ |
(65.9 |
) |
|
|
$ |
279.0 |
|
|
Adjusted EBITDA margin |
22.3 |
% |
|
|
20.8 |
% |
|
|
|
NM |
|
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
887.4 |
|
|
|
$ |
707.1 |
|
|
|
$ |
— |
|
|
|
$ |
1,594.5 |
|
|
Gross profit |
$ |
211.6 |
|
|
|
$ |
165.1 |
|
|
|
$ |
— |
|
|
|
$ |
376.7 |
|
|
For the year ended
December 31, 2019: |
Drainage Pipe &
Products(a) |
|
Water Pipe & Products(a) |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
173.0 |
|
|
|
$ |
82.8 |
|
|
|
$ |
(74.2 |
) |
|
|
$ |
181.6 |
|
|
|
|
|
|
|
|
|
|
Loss on sale of property,
plant & equipment, net2 |
1.6 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
2.1 |
|
|
Gain on extinguishment of
debt |
— |
|
|
|
— |
|
|
|
(1.7 |
) |
|
|
(1.7 |
) |
|
Impairment and exit
charges3 |
0.2 |
|
|
|
3.3 |
|
|
|
— |
|
|
|
3.5 |
|
|
Transaction costs4 |
— |
|
|
|
— |
|
|
|
3.0 |
|
|
|
3.0 |
|
|
Inventory step-up impacting
margin5 |
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
Non-cash compensation6 |
1.6 |
|
|
|
0.4 |
|
|
|
5.9 |
|
|
|
7.9 |
|
|
Other7 |
1.5 |
|
|
|
(1.5 |
) |
|
|
3.3 |
|
|
|
3.3 |
|
|
Earnings from equity method
investee 8 |
(10.5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(10.5 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee 9 |
14.4 |
|
|
|
— |
|
|
|
— |
|
|
|
14.4 |
|
|
Adjusted EBITDA |
$ |
182.1 |
|
|
|
$ |
85.5 |
|
|
|
$ |
(63.7 |
) |
|
|
$ |
203.9 |
|
|
Adjusted EBITDA margin |
19.9 |
% |
|
|
13.9 |
% |
|
|
NM |
|
13.3 |
% |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
913.1 |
|
|
|
$ |
616.7 |
|
|
|
$ |
— |
|
|
|
$ |
1,529.8 |
|
|
Gross profit |
$ |
201.0 |
|
|
|
$ |
95.6 |
|
|
|
$ |
(0.2 |
) |
|
|
$ |
296.4 |
|
|
- 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.
- (Gain) loss on sale of property,
plant and equipment.
- 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.
- 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.
- Non-cash equity compensation
expense.
- Other includes one-time charges
such as executive severance costs and (gains) losses from
divestiture transaction.
- 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)
|
December 31, |
|
December 31, |
|
2020 |
|
2019 |
Long-term debt |
$ |
887.5 |
|
|
|
$ |
1,085.8 |
|
|
Current portion of long-term
debt |
12.5 |
|
|
|
12.5 |
|
|
Carrying value of long-term debt |
900.0 |
|
|
|
1,098.3 |
|
|
Add: Debt issuance cost and
original issuance discount for Senior Term Loan |
6.9 |
|
|
|
25.1 |
|
|
Add: Debt issuance cost and
original issuance discount for Senior Secured Notes |
8.0 |
|
|
|
— |
|
|
Gross value of long-term debt |
914.9 |
|
|
|
1,123.4 |
|
|
Add: Short-term finance lease
liabilities |
17.0 |
|
|
|
16.5 |
|
|
Long-term finance lease liabilities |
142.2 |
|
|
|
137.4 |
|
|
Total debt |
1,074.1 |
|
|
|
1,277.3 |
|
|
Less: Cash and cash
equivalents |
(25.7 |
) |
|
|
(34.8 |
) |
|
Net debt |
$ |
1,048.4 |
|
|
|
$ |
1,242.5 |
|
|
Source: Forterra, Inc.
Company Contact Information:
Charlie BrownExecutive Vice President and Chief Financial
Officer469-299-9113IR@forterrabp.com
Forterra (NASDAQ:FRTA)
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