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 March 31, 2021.
First Quarter 2021
Highlights
- Increased net sales by
11.2% to $368.1 million as compared to $330.9 million in the prior
year quarter
- Increased gross profit by
40.0% to $82.3 million as compared to $58.8 million in the prior
year quarter; gross profit margin improved by more than 450 basis
points year-over-year
- Net income for the quarter
was $18.7 million, compared to a net loss of $14.1 million in the
prior year quarter
- Adjusted
EBITDA1 increased by 61.1% to
$57.2 million as compared to $35.5 million in the prior year
quarter; adjusted EBITDA margin1
improved by 480 basis points year-over-year to 15.5% in
2021, as compared to 10.7% in the first quarter of
2020
- Further reduced Net
Leverage Ratio2 to 3.6x at March
31, 2021, compared to 3.7x at 2020 year-end and 5.8x a year
ago
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, “We are
pleased with our performance during the quarter, which reflects our
continued focus on the execution of our five improvement pillars,
and demonstrates our capability to accelerate earnings generation
as underlying product demand increased along with the economic
recovery. I am particularly pleased with our team’s continued focus
on safety throughout this pandemic. Our results, especially in our
Drainage business, have improved substantially. The health and
safety of our team members remains to be our top priority and I am
pleased with our safety performance for the quarter. On the
Drainage side, shipment volumes were surprisingly robust even with
the historic winter storm in February that especially affected
Texas and the surrounding southern states. On the Water side, raw
material cost volatility was significant, as scrap prices increased
by more than 30% year-over-year during the quarter; however, we
were able to meaningfully expand margin and earnings through the
execution of our disciplined commercial strategy. I want to thank
all of my Forterra teammates for their dedication, effort, and
effectiveness. I am very proud of them for the substantial
improvements they have made across the five pillars and the value
they have created for shareholders.”
“Looking ahead, while rising input costs are
still a concern, we are encouraged by the strength of the continued
recovery of the economy as well as the possible passage of an
infrastructure plan. With our well-positioned portfolio, continued
execution of our improvement pillars and prudent investment of
capital resources, we expect to continue to grow earnings while
delivering exceptional customer service.”
Segment ResultsDrainage
Pipe & Products (“Drainage”) - Key Financial and Operational
Statistics:
Key
Financial Statistics ($ in millions) |
|
Q1 2021 |
|
Q1 20203 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
191.8 |
|
|
$ |
176.4 |
|
|
Gross Profit |
|
47.0 |
|
|
32.7 |
|
|
EBITDA |
|
51.8 |
|
|
26.4 |
|
|
Adjusted
EBITDA1 |
|
42.6 |
|
|
28.4 |
|
|
Gross
Profit Margin |
24.5 |
% |
|
18.5 |
% |
|
Adjusted
EBITDA Margin1 |
22.2 |
% |
|
16.1 |
% |
|
Key
Operational Statistics4 |
|
Q1 2021 vs. Q1 2020 |
|
|
|
|
|
|
|
Shipment
Volumes |
|
+8 |
% |
|
Average Selling
Prices |
|
+1 |
% |
|
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 quarter increased by
8.7%, or $15.4 million, to $191.8 million as compared to $176.4
million in the prior year quarter. The increase was primarily
driven by the higher shipment volumes year-over-year, coupled with
a modest improvement in average selling price. The segment's Texas
and Canada regions contributed to most of the year-over-year volume
improvements due to strong demand. Drainage backlogs at quarter-end
were higher compared to the same quarter last year.
Drainage gross profit and gross profit margin
were $47.0 million and 24.5%, respectively, compared to $32.7
million and 18.5%, respectively, in the prior year quarter. Better
absorption of manufacturing costs due to higher production volumes
more than offset increases in raw materials costs, resulting in the
meaningful expansion in the unit product margin as well as 600
basis points of improvement in gross profit margin
year-over-year.
Drainage EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin during the quarter increased to $51.8 million, $42.6
million and 22.2%, respectively, compared to $26.4 million, $28.4
million and 16.1%, respectively, in the prior year quarter. During
the quarter, the Company sold several idle properties and
recognized a gain of $11.1 million, which was included in Drainage
EBITDA but excluded from Adjusted EBITDA.
Water Pipe & Products (“Water”) -
Key Financial and Operational Statistics:
Key
Financial Statistics ($ in millions) |
|
Q1 2021 |
|
Q1 20203 |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
176.3 |
|
|
$ |
154.5 |
|
|
Gross Profit |
|
35.3 |
|
|
26.0 |
|
|
EBITDA |
|
31.1 |
|
|
22.5 |
|
|
Adjusted
EBITDA1 |
|
31.5 |
|
|
23.2 |
|
|
Gross
Profit Margin |
20.0 |
% |
|
16.8 |
% |
|
Adjusted
EBITDA Margin1 |
17.9 |
% |
|
15.0 |
% |
|
Key
Operational Statistics5 |
|
Q1 2021 vs. Q1 2020 |
|
|
|
|
|
|
|
Shipment
Volumes |
|
+6 |
% |
|
Average Selling
Prices |
|
+11 |
% |
|
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
products revenue accounted for more than 85% of Water segment
revenue.
Water net sales for the quarter increased by
14.1%, or $21.8 million, to $176.3 million, as compared to $154.5
million in the prior year quarter. The year-over-year increase was
driven by both higher average selling prices and higher shipment
volumes.
Water gross profit and gross profit margin for
the quarter increased to $35.3 million and 20.0%, respectively, as
compared to $26.0 million and 16.8%, respectively, in the prior
year quarter. Higher raw material costs drove an increase in unit
cost of sales year-over-year; however, that increase was more than
offset by higher average selling prices, resulting in further
improvements in gross profit margin.
Water EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin during the quarter increased to $31.1 million, $31.5
million and 17.9%, respectively, compared to $22.5 million, $23.2
million and 15.0%, respectively, in the prior year quarter. These
improvements reflect the same dynamics as discussed above in the
gross profit and gross profit margin analysis.
Corporate and Other (“Corporate”)
Corporate EBITDA and Adjusted EBITDA loss for
the quarter were $20.9 million and $16.9 million, respectively,
compared to $19.6 million and $16.1 million, respectively, in the
prior year quarter. On a reported basis, the increase in Corporate
segment EBITDA loss was primarily driven by the transaction costs
incurred during the quarter related to the pending transaction with
Quikrete. The year-over-year increase in Corporate adjusted EBITDA
loss, which excludes such transaction costs, was slightly higher
than in the prior year quarter, primarily due to increased annual
bonus accruals driven by the improved business performance
year-over-year.
Balance Sheet, Liquidity and Capital
ExpenditureAs of March 31, 2021, the Company had cash of
$36.6 million and total debt of $951.7 million, which was comprised
of $500 million of senior secured notes due in July 2025, $411.7
million of term loan due in October 2023, and $40 million in
borrowings under its $350 million revolving credit facility. Due to
the seasonal nature of its business, the Company borrowed $40
million during the quarter to fund its working capital needs.
Despite the increase in debt balance, the Company further reduced
its net leverage ratio during the quarter to 3.6x at March 31,
2021, compared to 3.7x at December 31, 2020 and 5.8x at March 31,
2020. The Company remains focused on deleveraging and achieving its
communicated plan of reducing its net leverage ratio below 3.5x,
which it now expects to achieve during the second quarter of
2021.
Capital expenditures during the quarter were
$12.4 million, compared to $4.3 million in the prior year quarter.
The Company delayed some non-essential capital spending projects
during the early stages of the COVID-19 pandemic in 2020, resulting
in full year 2020 capital expenditures of $34.0 million, which is
lower than the range of $45.0 million to $55.0 million under normal
circumstances. The Company has since resumed many of these delayed
projects and expects they will be caught up during 2021, resulting
in a slightly higher than average capital expenditure spend in the
current year.
Update on Proposed Transaction with
Quikrete
The Company is committed to completing the
proposed merger and delivering the benefits of the transaction to
Forterra’s shareholders. Completion of the pending transaction
remains subject to certain regulatory approvals, among other
conditions set forth in the merger agreement dated February 19,
2021.
As previously disclosed in the Company’s
Information Statement on Schedule 14C dated March 24, 2021, the
review of the proposed merger by the Federal Trade Commission and
the Antitrust Division of the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
is still in progress.
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 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 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 acquisition by 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 |
|
|
March 31, |
|
|
2021 |
2020 |
|
|
(unaudited) |
Net
sales |
|
$ |
368.1 |
|
|
$ |
330.9 |
|
|
Cost of goods
sold |
|
285.8 |
|
|
272.2 |
|
|
Gross
profit |
|
82.3 |
|
|
58.7 |
|
|
Selling, general & administrative expenses |
|
(55.0 |
) |
|
(54.2 |
) |
|
Impairment and exit charges |
|
(0.4 |
) |
|
(0.8 |
) |
|
Other operating income, net |
|
12.0 |
|
|
0.3 |
|
|
|
|
(43.4 |
) |
|
(54.7 |
) |
|
Income from
operations |
|
38.9 |
|
|
4.0 |
|
|
|
|
|
|
Other income
(expense) |
|
|
|
Interest expense |
|
(18.3 |
) |
|
(20.7 |
) |
|
Loss on extinguishment of debt |
|
— |
|
|
(0.1 |
) |
|
Earnings from equity method investee |
|
2.6 |
|
|
2.8 |
|
|
Income (loss) before
income taxes |
|
23.2 |
|
|
(14.0 |
) |
|
Income tax expense |
|
(4.5 |
) |
|
(0.1 |
) |
|
Net income
(loss) |
|
$ |
18.7 |
|
|
$ |
(14.1 |
) |
|
|
|
|
|
Earnings per
share: |
|
|
|
Basic |
|
$ |
0.28 |
|
|
$ |
(0.22 |
) |
|
Diluted |
|
0.27 |
|
|
(0.22 |
) |
|
|
|
|
|
Weighted average
common shares outstanding: |
|
|
|
Basic |
|
66.2 |
|
|
64.8 |
|
|
Diluted |
|
69.4 |
|
|
64.8 |
|
|
FORTERRA,
INC.Consolidated Balance Sheets(in
millions)
|
March 31,2021 |
|
December 31,2020 |
ASSETS |
(unaudited) |
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
$ |
36.6 |
|
|
|
$ |
25.7 |
|
|
Receivables, net |
263.9 |
|
|
|
227.9 |
|
|
Inventories |
256.4 |
|
|
|
222.9 |
|
|
Prepaid expenses |
9.0 |
|
|
|
8.0 |
|
|
Other current assets |
2.0 |
|
|
|
2.0 |
|
|
Total current assets |
567.9 |
|
|
|
486.5 |
|
|
Non-current
assets |
|
|
|
Property, plant and equipment, net |
442.6 |
|
|
|
451.1 |
|
|
Operating lease right-of-use assets |
53.5 |
|
|
|
54.4 |
|
|
Goodwill |
509.3 |
|
|
|
509.1 |
|
|
Intangible assets, net |
93.1 |
|
|
|
101.4 |
|
|
Investment in equity method investee |
49.4 |
|
|
|
48.3 |
|
|
Other long-term assets |
1.9 |
|
|
|
5.0 |
|
|
Total assets |
$ |
1,717.7 |
|
|
|
$ |
1,655.8 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Current
liabilities |
|
|
|
Trade payables |
$ |
161.4 |
|
|
|
$ |
134.1 |
|
|
Accrued liabilities |
101.2 |
|
|
|
115.8 |
|
|
Deferred revenue |
7.3 |
|
|
|
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 |
290.7 |
|
|
|
278.9 |
|
|
Non-current
liabilities |
|
|
|
Long-term debt |
922.6 |
|
|
|
887.5 |
|
|
Long-term finance lease liabilities |
142.6 |
|
|
|
142.2 |
|
|
Long-term operating lease liabilities |
50.6 |
|
|
|
50.9 |
|
|
Deferred tax liabilities |
8.5 |
|
|
|
9.7 |
|
|
Other long-term liabilities |
31.8 |
|
|
|
36.9 |
|
|
Long-term tax receivable agreement |
55.9 |
|
|
|
55.9 |
|
|
Total liabilities |
1,502.7 |
|
|
|
1,462.0 |
|
|
Equity |
|
|
|
Common stock, $0.001 par value, 190,000 shares authorized; 66,656
and 65,981 shares issued and outstanding |
— |
|
|
|
— |
|
|
Additional paid-in-capital |
254.5 |
|
|
|
252.6 |
|
|
Accumulated other comprehensive loss |
(6.3 |
) |
|
|
(6.9 |
) |
|
Retained deficit |
(33.2 |
) |
|
|
(51.9 |
) |
|
Total shareholders' equity |
215.0 |
|
|
|
193.8 |
|
|
Total liabilities and shareholders' equity |
$ |
1,717.7 |
|
|
|
$ |
1,655.8 |
|
|
FORTERRA,
INC.Consolidated Statements of Cash
Flows(in millions)
|
|
Three months ended |
|
|
March 31, |
|
|
2021 |
|
2020 |
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
(unaudited) |
Net income (loss) |
|
$ |
18.7 |
|
|
|
$ |
(14.1 |
) |
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities: |
Depreciation & amortization expense |
|
20.5 |
|
|
|
22.5 |
|
|
Gain on disposal of property, plant and equipment |
|
(11.1 |
) |
|
|
— |
|
|
Loss on extinguishment of debt |
|
— |
|
|
|
0.1 |
|
|
Amortization of debt discount and issuance costs |
|
1.2 |
|
|
|
1.9 |
|
|
Stock-based compensation expense |
|
2.8 |
|
|
|
2.9 |
|
|
Impairment charges |
|
0.4 |
|
|
|
— |
|
|
Earnings from equity method investee |
|
(2.6 |
) |
|
|
(2.8 |
) |
|
Distributions from equity method investee |
|
1.5 |
|
|
|
1.6 |
|
|
Unrealized (gain) loss on derivative instruments, net |
|
(0.1 |
) |
|
|
0.7 |
|
|
Unrealized foreign currency loss, net |
|
0.1 |
|
|
|
0.3 |
|
|
Provision (recoveries) for doubtful accounts |
|
0.3 |
|
|
|
(0.1 |
) |
|
Deferred taxes |
|
(1.2 |
) |
|
|
6.0 |
|
|
Other non-cash items |
|
0.7 |
|
|
|
1.1 |
|
|
Change in assets and liabilities: |
|
|
|
|
Receivables, net |
|
(18.7 |
) |
|
|
(23.4 |
) |
|
Inventories |
|
(33.4 |
) |
|
|
(21.8 |
) |
|
Other current assets |
|
(1.1 |
) |
|
|
(6.6 |
) |
|
Accounts payable and accrued liabilities |
|
11.0 |
|
|
|
11.4 |
|
|
Other assets and liabilities |
|
(6.0 |
) |
|
|
1.1 |
|
|
NET CASH USED IN OPERATING
ACTIVITIES |
|
(17.0 |
) |
|
|
(19.2 |
) |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
Purchase of property, plant and equipment, and intangible
assets |
|
(11.0 |
) |
|
|
(4.3 |
) |
|
Proceeds from sale of fixed assets1 |
|
3.0 |
|
|
|
— |
|
|
NET CASH USED IN INVESTING
ACTIVITIES |
|
(8.0 |
) |
|
|
(4.3 |
) |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
Repayments of term loans |
|
(3.1 |
) |
|
|
(8.1 |
) |
|
Proceeds from revolver |
|
40.0 |
|
|
|
180.0 |
|
|
Proceeds from issuance of common stock |
|
1.5 |
|
|
|
— |
|
|
Other financing activities |
|
(2.7 |
) |
|
|
(0.3 |
) |
|
NET CASH PROVIDED BY FINANCING
ACTIVITIES |
|
35.7 |
|
|
|
171.6 |
|
|
Effect of exchange rate
changes on cash |
|
0.2 |
|
|
|
(0.5 |
) |
|
Net change in cash and cash
equivalents |
|
10.9 |
|
|
|
147.6 |
|
|
Cash and cash equivalents,
beginning of period |
|
25.7 |
|
|
|
34.8 |
|
|
Cash and cash equivalents, end
of period |
|
$ |
36.6 |
|
|
|
$ |
182.4 |
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES: |
Cash interest paid |
|
$ |
24.7 |
|
|
|
$ |
17.1 |
|
|
Income taxes paid (refunds
received), net |
|
0.9 |
|
|
|
(0.1 |
) |
|
- $15.9 million of proceeds from the
disposal of certain properties was not received until the second
quarter of 2021; therefore, the amount was excluded from “Proceeds
from sales of fixed assets” within “Net Cash Used in Investing
Activities".
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 periods ended Q1 2021 and Q1 2020) 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 Q1 2021 has been calculated by starting with the data from the
year ended December 31, 2020 and then adding data for the three
months ended Q1 2021, followed by subtracting data for the three
months ended Q1 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 (loss) to
adjusted EBITDA(in millions)
|
|
Three months ended |
|
Twelve months ended |
|
|
March 31, 2021 |
|
March 31, 2020 |
|
March 31, 2021 |
|
December 31, 2020 |
|
March 31, 2020 |
Net income (loss) |
|
$ |
18.7 |
|
|
|
$ |
(14.1 |
) |
|
|
$ |
97.2 |
|
|
|
$ |
64.5 |
|
|
|
$ |
3.6 |
|
|
Interest expense |
|
18.3 |
|
|
|
20.7 |
|
|
|
77.5 |
|
|
|
79.9 |
|
|
|
91.1 |
|
|
Depreciation &
amortization |
|
20.5 |
|
|
|
22.6 |
|
|
|
87.5 |
|
|
|
89.5 |
|
|
|
95.4 |
|
|
Income tax (benefit)
expense |
|
4.5 |
|
|
|
0.1 |
|
|
|
12.8 |
|
|
|
8.4 |
|
|
|
4.1 |
|
|
EBITDA1 |
|
62.0 |
|
|
|
29.3 |
|
|
|
275.0 |
|
|
|
242.3 |
|
|
|
194.2 |
|
|
(Gain) loss on sale of
property, plant & equipment, net |
|
(11.1 |
) |
|
|
— |
|
|
|
(10.5 |
) |
|
|
0.6 |
|
|
|
2.1 |
|
|
(Gain) loss on extinguishment
of debt |
|
— |
|
|
|
0.1 |
|
|
|
12.2 |
|
|
|
12.3 |
|
|
|
(1.7 |
) |
|
Impairment & exit
charges2 |
|
— |
|
|
|
0.8 |
|
|
|
3.1 |
|
|
|
3.9 |
|
|
|
4.1 |
|
|
Transaction costs3 |
|
2.7 |
|
|
|
1.4 |
|
|
|
6.5 |
|
|
|
5.3 |
|
|
|
4.0 |
|
|
Inventory step-up impacting
margin4 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
Non-cash compensation5 |
|
2.8 |
|
|
|
2.9 |
|
|
|
9.4 |
|
|
|
9.5 |
|
|
|
9.3 |
|
|
Other6 |
|
— |
|
|
|
— |
|
|
|
1.3 |
|
|
|
1.2 |
|
|
|
3.3 |
|
|
Earnings from equity method
investee7 |
|
(2.6 |
) |
|
|
(2.8 |
) |
|
|
(11.1 |
) |
|
|
(11.3 |
) |
|
|
(11.7 |
) |
|
Pro-rata share of Adjusted
EBITDA from equity method investee8 |
|
3.4 |
|
|
|
3.8 |
|
|
|
14.8 |
|
|
|
15.2 |
|
|
|
15.7 |
|
|
Adjusted EBITDA |
|
$ |
57.2 |
|
|
|
$ |
35.5 |
|
|
|
$ |
300.7 |
|
|
|
$ |
279.0 |
|
|
|
$ |
219.5 |
|
|
Adjusted EBITDA margin |
|
15.5 |
% |
|
|
10.7 |
% |
|
|
18.4 |
% |
|
|
17.5 |
% |
|
|
14.0 |
% |
|
- 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, 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
March 31, 2021 |
Drainage Pipe & Products |
|
Water Pipe & Products |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
51.8 |
|
|
|
$ |
31.1 |
|
|
|
$ |
(20.9 |
) |
|
|
$ |
62.0 |
|
|
(Gain) loss on sale of property, plant & equipment, net |
(11.2 |
) |
|
|
0.1 |
|
|
|
— |
|
|
|
(11.1 |
) |
|
Impairment and exit charges2 |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Transaction costs3 |
— |
|
|
|
— |
|
|
|
2.7 |
|
|
|
2.7 |
|
|
Non-cash compensation4 |
0.8 |
|
|
|
0.7 |
|
|
|
1.3 |
|
|
|
2.8 |
|
|
Other5 |
0.4 |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
Earnings from equity method investee6 |
(2.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2.6 |
) |
|
Pro-rata share of Adjusted EBITDA from equity method investee7 |
3.4 |
|
|
|
— |
|
|
|
— |
|
|
|
3.4 |
|
|
Adjusted EBITDA |
$ |
42.6 |
|
|
|
$ |
31.5 |
|
|
|
$ |
(16.9 |
) |
|
|
$ |
57.2 |
|
|
Adjusted EBITDA margin |
22.2 |
% |
|
|
17.9 |
% |
|
|
NM |
|
15.5 |
% |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
191.8 |
|
|
|
$ |
176.3 |
|
|
|
$ |
— |
|
|
|
$ |
368.1 |
|
|
Gross profit |
47.0 |
|
|
|
35.3 |
|
|
|
— |
|
|
|
82.3 |
|
|
Three months ended
March 31, 2020 |
Drainage Pipe &
Products(a) |
|
Water Pipe & Products(a) |
|
Corporate and Other |
|
Total |
EBITDA1 |
$ |
26.4 |
|
|
|
$ |
22.5 |
|
|
|
$ |
(19.6 |
) |
|
|
$ |
29.3 |
|
|
(Gain) loss on sale of property, plant & equipment, net |
(0.1 |
) |
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
Loss on extinguishment of debt |
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
Impairment and exit charges2 |
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
0.8 |
|
|
Transaction costs3 |
— |
|
|
|
— |
|
|
|
1.4 |
|
|
|
1.4 |
|
|
Non-cash compensation4 |
0.7 |
|
|
|
0.2 |
|
|
|
2.0 |
|
|
|
2.9 |
|
|
Other5 |
0.4 |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
Earnings from equity method investee6 |
(2.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2.8 |
) |
|
Pro-rata share of Adjusted EBITDA from equity method investee7 |
3.8 |
|
|
|
— |
|
|
|
— |
|
|
|
3.8 |
|
|
Adjusted EBITDA |
$ |
28.4 |
|
|
|
$ |
23.2 |
|
|
|
$ |
(16.1 |
) |
|
|
$ |
35.5 |
|
|
Adjusted EBITDA margin |
16.1 |
% |
|
|
15.0 |
% |
|
|
NM |
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
176.4 |
|
|
|
$ |
154.5 |
|
|
|
$ |
— |
|
|
|
$ |
330.9 |
|
|
Gross profit |
32.7 |
|
|
|
26.0 |
|
|
|
— |
|
|
|
58.7 |
|
|
(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)
|
March 31, |
|
December 31, |
|
March 31, |
|
2021 |
|
2020 |
|
2020 |
Long-term debt |
$ |
922.6 |
|
|
|
$ |
887.5 |
|
|
|
$ |
1,258.1 |
|
|
Current portion of long-term
debt |
12.5 |
|
|
|
12.5 |
|
|
|
12.5 |
|
|
Carrying value of long-term debt |
935.1 |
|
|
|
900.0 |
|
|
|
1,270.6 |
|
|
Add: Debt issuance cost and
original issuance discount |
16.6 |
|
|
|
14.9 |
|
|
|
23.3 |
|
|
Gross value of long-term debt |
951.7 |
|
|
|
914.9 |
|
|
|
1,293.9 |
|
|
Add: Short-term finance lease
liabilities |
17.0 |
|
|
|
17.0 |
|
|
|
16.4 |
|
|
Long-term finance lease liabilities |
142.6 |
|
|
|
142.2 |
|
|
|
137.3 |
|
|
Total debt |
1,111.3 |
|
|
|
1,074.1 |
|
|
|
1,447.6 |
|
|
Less: Cash and cash
equivalents |
(36.6 |
) |
|
|
(25.7 |
) |
|
|
(182.4 |
) |
|
Net debt |
$ |
1,074.7 |
|
|
|
$ |
1,048.4 |
|
|
|
$ |
1,265.2 |
|
|
Source: Forterra, Inc.
Company Contact Information:Charlie BrownExecutive Vice
President and Chief Financial
Officer469-299-9113IR@forterrabp.com
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