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, 2021.
Full Year 2021 Highlights
- Increased net sales by 16.5% to $1,858.3 million as
compared to $1,594.5 million last year
- Increased gross profit by 11.6% to $420.4 million as
compared to $376.7 million last year
- Increased net income by 80.3% to $116.3 million as
compared to $64.5 million last year
- Adjusted EBITDA1
increased by 16.3% to $324.4 million as compared to $279.0
million last year
- Reduced Net Leverage Ratio2
to 3.1x at year-end from 3.7x a year ago; achieved
previously communicated short-term net leverage ratio target of
below 3.5x
Fourth Quarter 2021 Highlights
- Increased net sales by 23.9% to $470.7 million as
compared to $379.9 million in the prior year quarter
- Increased gross profit by 18.5% to $102.0 million as
compared to $86.1 million in the prior year quarter
- Increased net income by 14.2% to $25.8 million as
compared to $22.6 million in the prior year quarter
- Adjusted EBITDA increased by 32.2% to $77.6 million as
compared to $58.7 million in the prior year quarter
1 A reconciliation of non-GAAP financial measures, including
Adjusted EBITDA and Adjusted EBITDA margin, to comparable GAAP
financial measures is provided in the reconciliation of non-GAAP
measures section of this press release.2 Ratio represents net debt
divided by adjusted EBITDA for the prior twelve-month period.
Net debt and adjusted EBITDA are non-GAAP measures and a
reconciliation thereof to comparable GAAP financial measures is
provided in the reconciliation of Non-GAAP measures section of this
press release.
Forterra CEO Karl Watson, Jr. commented, “The fourth quarter
marked the conclusion of a year in which we delivered excellent
financial results, driven by the efforts, dedication, and
perseverance of our team members. Our execution on our five
improvement pillars demonstrated we are focusing on the right
levers to navigate a year challenged by ongoing supply chain
disruptions and input cost inflation to achieve record revenues and
profits.”
Mr. Watson continued, “Underlying demand and
order trends remained strong throughout the year. We were able to
satisfy this demand and mitigated significant inflationary
pressures across nearly every cost category with improved
operational efficiencies and successful strategic price increases.
Although we expect these external challenges to continue in the
near term, we believe the actions we have taken, and the ones we
will take in 2022, position us well to deliver another year of
profitable growth. Our business is on strong footing, and we
believe the improvements we have made provide a solid foundation
for even more positive results in 2022 and sustained growth
beyond.”
Segment ResultsDrainage
Pipe & Products (“Drainage”) - Key Financial
Statistics:
|
Key Financial Statistics ($ in millions) |
|
Fourth Quarter |
|
Full Year |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Q4 2021 |
|
Q4 2020 |
|
|
2021 |
|
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
243.7 |
|
|
$ |
211.0 |
|
|
$ |
993.5 |
|
|
$ |
887.4 |
|
|
Gross Profit |
|
|
59.2 |
|
|
|
45.2 |
|
|
|
254.1 |
|
|
$ |
211.6 |
|
|
Gross Profit Margin |
|
24.3 |
% |
|
|
21.4 |
% |
|
|
25.6 |
% |
|
|
23.8 |
% |
|
EBITDA |
|
|
53.8 |
|
|
|
39.7 |
|
|
|
239.9 |
|
|
|
187.5 |
|
|
Adjusted EBITDA |
|
|
53.9 |
|
|
|
40.6 |
|
|
|
234.6 |
|
|
|
198.0 |
|
|
Adjusted EBITDA Margin |
|
22.1 |
% |
|
|
19.2 |
% |
|
|
23.6 |
% |
|
|
22.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Drainage net sales for the fourth quarter
increased by 15.5%, or $32.7 million, to $243.7 million as compared
to $211.0 million in the prior year quarter. The increase in net
sales was driven by both higher shipment volumes year-over-year, as
well as higher average selling prices resulting from price
increases announced earlier in the year to combat rising input
costs. On a full year basis, Drainage net sales increased by 12.0%,
or $106.1 million, to $993.5 million as compared to $887.4 million
in 2020. The increase was primarily due to higher shipment volumes
driven by a favorable demand trend in 2021 as compared to 2020.
Average selling prices in 2021 were also higher than 2020, most
notably during the fourth quarter, as increases implemented to
combat rising input costs began to be realized. Drainage backlog at
year-end was significantly higher than at the end of 2020.
Drainage gross profit and gross profit margin
for the fourth quarter increased to $59.2 million and 24.3%,
respectively, as compared to $45.2 million and 21.4%, respectively,
in the prior year quarter. Higher average selling prices during the
current year quarter primarily contributed to this increase. On a
full year basis, Drainage gross profit and gross profit margin
increased to $254.1 million and 25.6%, respectively, as compared to
$211.6 million and 23.8%, respectively, in 2020. The increase was
primarily due to higher shipment volumes year-over-year and, to a
lesser extent, increased average selling prices.
Drainage EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin during the fourth quarter increased to $53.8 million,
$53.9 million and 22.1%, respectively, compared to $39.7 million,
$40.6 million and 19.2%, respectively, in the prior year quarter.
On a full year basis, Drainage EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin increased to $239.9 million, $234.6 million and
23.6%, respectively, as compared to $187.5 million, $198.0 million,
and 22.3%, respectively, in 2020. The improvements in EBITDA,
Adjusted EBITDA and Adjusted EBITDA margin generally reflect the
same dynamics as discussed above in the gross profit and gross
profit margin analysis.
Water Pipe & Products (“Water”) -
Key Financial Statistics:
|
Key Financial Statistics ($ in millions) |
|
Fourth Quarter |
|
Full Year |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Q4 2021 |
|
Q4 2020 |
|
|
2021 |
|
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
227.0 |
|
|
$ |
168.9 |
|
|
$ |
864.8 |
|
|
$ |
707.1 |
|
|
Gross Profit |
|
|
42.8 |
|
|
|
40.9 |
|
|
|
166.4 |
|
|
|
165.1 |
|
|
Gross Profit Margin |
|
18.9 |
% |
|
|
24.2 |
% |
|
|
19.2 |
% |
|
|
23.3 |
% |
|
EBITDA |
|
|
38.1 |
|
|
|
35.5 |
|
|
|
150.4 |
|
|
|
145.5 |
|
|
Adjusted EBITDA |
|
|
39.7 |
|
|
|
35.9 |
|
|
|
152.9 |
|
|
|
146.9 |
|
|
Adjusted EBITDA Margin |
|
17.5 |
% |
|
|
21.3 |
% |
|
|
17.7 |
% |
|
|
20.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Water net sales for the fourth quarter increased
by 34.4%, or $58.1 million, to $227.0 million as compared to $168.9
million in the prior year quarter. On a full year basis, Water net
sales increased by 22.3%, or $157.7 million, to $864.8 million as
compared to $707.1 million in 2020. These year-over-year increases
were due to both increased shipment volumes driven by stronger
demand, especially in the fourth quarter, as well as higher average
selling prices announced to combat significant inflation on raw
materials and labor costs. Water backlog at year-end rose to a
record level and was significantly higher than 2020.
Water gross profit and gross profit margin for
the fourth quarter were $42.8 million and 18.9%, respectively, as
compared to $40.9 million and 24.2%, respectively, in the prior
year quarter. On a full year basis, Water gross profit and gross
profit margin were $166.4 million and 19.2%, respectively, as
compared to $165.1 million and 23.3%, respectively, in 2020. Water
segment experienced significantly higher raw material, labor and
freight costs during the year as compared to 2020. For example, the
industry average cost of scrap metal increased by more than 50%
year-over-year. Despite such headwinds of higher costs, which
resulted in the year-over-year decline in gross profit margin,
Water segment managed to maintain strong gross profit levels for
both the fourth quarter and the full year, primarily driven by
double-digit shipment volume growth over the prior year periods. In
addition, higher average selling prices along with improved
productivity helped to partially offset the substantial
inflationary cost pressures.
Water EBITDA, Adjusted EBITDA and Adjusted
EBITDA margin during the fourth quarter were $38.1 million, $39.7
million and 17.5%, respectively, compared to $35.5 million, $35.9
million and 21.3%, respectively, in the prior year quarter. On a
full year basis, Water EBITDA, Adjusted EBITDA and Adjusted EBITDA
margin were $150.4 million, $152.9 million and 17.7%, respectively,
as compared to $145.5 million, $146.9 million, and 20.8%,
respectively, in 2019. The changes in EBITDA, Adjusted EBITDA and
Adjusted EBITDA margin 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 losses were $18.4 million and $16.0 million,
respectively, compared to $20.0 million and $17.8 million,
respectively, in the prior year quarter. On a full year basis,
Corporate EBITDA and Adjusted EBITDA losses were $77.8 million and
$63.1 million, respectively, compared to $90.7 million and $65.9
million, respectively, in 2020. The 2020 EBITDA included a $12.3
million loss on extinguishment of debt as a result of the Company’s
prepayments of long-term debt and the consequent write-offs of the
corresponding debt issuance costs, which caused the spike in annual
EBITDA loss in that year. Excluding such charge, both EBITDA and
Adjusted EBITDA in 2021 were modestly lower than 2020, reflecting
the efficiencies realized within the organization.
Other Items – Income TaxesTax
expense for the year was $38.7 million (reflecting an effective tax
rate of 25%), compared to $8.4 million, (reflecting an effective
tax rate of 12%), in 2020. During 2020, the Company released $11.8
million of valuation allowance against its deferred tax assets,
resulting in the lower than statutory tax rate for that year.
Balance Sheet, Liquidity and Capital
ExpendituresAs of December 31, 2021, the Company had cash
of $56.8 million and total debt of $902.4 million, which was
comprised of $500 million of senior secured notes due in July 2025
and $402.4 million of term loan due in October 2023. There were no
outstanding borrowings under its $350 million revolving credit
facility at year-end. During 2021, the Company achieved its
de-leveraging goal of below 3.5x, with a Net Leverage Ratio2 at
year-end reduced to 3.1x.
Capital expenditures for the year were $65.6
million, compared to $34.0 million in 2020. 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 being lower than the range of $45.0
million to $55.0 million invested under normal circumstances.
During 2021, the Company not only caught up with most of these
delayed projects, but also focused on investing in projects that
improve productivities. In the future, the Company intends to
continue investing in its facilities to increase capacity and
improve productivity.
Update on Proposed Transaction with
Quikrete In February 2021, the Company entered into an
agreement to be acquired by an affiliate of Quikrete Holdings, Inc.
(the “Merger Agreement”). 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, including
approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (“HSR Act”), among other conditions set forth in
the Merger Agreement. Integration planning between the Company and
Quikrete continues.
As previously disclosed in the Company’s current
reports on Forms 8-K dated December 1, 2021, December 16, 2021, and
February 16, 2022, in order to address some of the divestitures
anticipated to be required by the U.S. Department of Justice (the
“DOJ”) to obtain approval for the consummation of the merger and
the other transactions contemplated by the Merger Agreement, the
Company, together with Quikrete, have entered into several
agreements with various buyers to sell such assets and equity
investments to these buyers. Consummation of these divestitures are
subject to customary closing conditions, including, among others,
the consummation of the merger and approval by the DOJ. The Company
is aiming to achieve the necessary approvals to permit it to
complete the transaction by the outside date of March 22, 2022 set
forth in the Merger Agreement.
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 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 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 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)
| |
Quarter ended |
|
Year ended |
| |
December 31, |
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
2021 |
|
|
2020 |
|
| |
unaudited |
unaudited |
|
|
| Net
sales |
$ |
470.7 |
|
$ |
379.9 |
|
|
$ |
1,858.3 |
|
$ |
1,594.5 |
|
| Cost of goods
sold |
|
368.7 |
|
|
293.8 |
|
|
|
1,437.9 |
|
|
1,217.8 |
|
| Gross
profit |
|
102.0 |
|
|
86.1 |
|
|
|
420.4 |
|
|
376.7 |
|
|
Selling, general & administrative expenses |
|
(53.0 |
) |
|
(57.2 |
) |
|
|
(216.1 |
) |
|
(221.8 |
) |
|
Impairment and exit charges |
|
(0.2 |
) |
|
— |
|
|
|
(0.6 |
) |
|
(2.5 |
) |
|
Other operating income, net |
|
0.9 |
|
|
1.8 |
|
|
|
13.7 |
|
|
1.4 |
|
| |
|
(52.3 |
) |
|
(55.4 |
) |
|
|
(203.0 |
) |
|
(222.9 |
) |
| Income from
operations |
|
49.7 |
|
|
30.7 |
|
|
|
217.4 |
|
|
153.8 |
|
| |
|
|
|
|
|
| Other income
(expenses) |
|
|
|
|
|
|
Interest expense |
|
(18.6 |
) |
|
(19.4 |
) |
|
|
(75.0 |
) |
|
(79.9 |
) |
|
Loss on extinguishment of debt |
|
— |
|
|
(0.8 |
) |
|
|
— |
|
|
(12.3 |
) |
|
Earnings from equity method investee |
|
3.1 |
|
|
3.1 |
|
|
|
12.6 |
|
|
11.3 |
|
| Income before income
taxes |
|
34.2 |
|
|
13.6 |
|
|
|
155.0 |
|
|
72.9 |
|
|
Income tax (expense) benefit |
|
(8.4 |
) |
|
9.0 |
|
|
|
(38.7 |
) |
|
(8.4 |
) |
| Net
income |
$ |
25.8 |
|
$ |
22.6 |
|
|
$ |
116.3 |
|
$ |
64.5 |
|
| |
|
|
|
|
|
| Earnings per
share: |
|
|
|
|
|
|
Basic |
$ |
0.39 |
|
$ |
0.34 |
|
|
$ |
1.74 |
|
$ |
0.99 |
|
|
Diluted |
$ |
0.37 |
|
$ |
0.33 |
|
|
$ |
1.67 |
|
$ |
0.94 |
|
| |
|
|
|
|
|
| Weighted average
common shares outstanding: |
|
|
|
|
|
|
Basic |
|
67.0 |
|
|
65.8 |
|
|
|
66.7 |
|
|
65.3 |
|
|
Diluted |
|
69.9 |
|
|
69.2 |
|
|
|
69.6 |
|
|
68.2 |
|
FORTERRA,
INC.Consolidated Balance Sheets(in
millions)
| |
December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
| ASSETS |
|
|
|
| Current
assets |
|
|
|
|
Cash and cash equivalents |
$ |
56.8 |
|
|
$ |
25.7 |
|
|
Receivables, net |
|
293.9 |
|
|
|
227.9 |
|
|
Inventories |
|
263.7 |
|
|
|
222.9 |
|
|
Prepaid expenses |
|
10.9 |
|
|
|
8.0 |
|
|
Other current assets |
|
3.1 |
|
|
|
2.0 |
|
|
Total current assets |
|
628.4 |
|
|
|
486.5 |
|
| Non-current
assets |
|
|
|
|
Property, plant and equipment, net |
|
458.7 |
|
|
|
451.1 |
|
|
Operating lease right-of-use assets |
|
52.8 |
|
|
|
54.4 |
|
|
Goodwill |
|
509.9 |
|
|
|
509.1 |
|
|
Intangible assets, net |
|
69.1 |
|
|
|
101.4 |
|
|
Investment in equity method investee |
|
49.3 |
|
|
|
48.3 |
|
|
Deferred tax assets |
|
1.8 |
|
|
|
2.4 |
|
|
Other long-term assets |
|
4.0 |
|
|
|
5.0 |
|
|
Total assets |
$ |
1,774.0 |
|
|
$ |
1,658.2 |
|
| LIABILITIES AND
EQUITY |
|
|
|
| Current
liabilities |
|
|
|
|
Trade payables |
$ |
144.5 |
|
|
$ |
134.1 |
|
|
Accrued liabilities |
|
116.7 |
|
|
|
115.7 |
|
|
Deferred revenue |
|
10.6 |
|
|
|
8.2 |
|
|
Current portion of long-term debt |
|
12.5 |
|
|
|
12.5 |
|
|
Current portion of tax receivable agreement |
|
7.7 |
|
|
|
8.4 |
|
|
Total current liabilities |
|
292.0 |
|
|
|
278.9 |
|
| Non-current
liabilities |
|
|
|
|
Senior term loan |
|
879.3 |
|
|
|
887.5 |
|
|
Long-term finance lease liabilities |
|
142.9 |
|
|
|
142.2 |
|
|
Long-term operating lease liabilities |
|
49.8 |
|
|
|
50.9 |
|
|
Deferred tax liabilities |
|
15.5 |
|
|
|
12.0 |
|
|
Other long-term liabilities |
|
27.3 |
|
|
|
37.0 |
|
|
Long-term tax receivable agreement |
|
48.2 |
|
|
|
55.9 |
|
|
Total liabilities |
|
1,455.0 |
|
|
|
1,464.4 |
|
|
Commitments and Contingencies |
|
|
|
| Equity |
|
|
|
|
Common stock, $0.001 par value. 190.0 shares authorized; 67.3 and
66.0 shares issued and outstanding at December 31, 2021 and
December 31, 2020, respectively |
|
— |
|
|
|
— |
|
|
Additional paid-in-capital |
|
261.7 |
|
|
|
252.7 |
|
|
Accumulated other comprehensive loss |
|
(7.1 |
) |
|
|
(7.0 |
) |
|
Retained earnings (deficit) |
|
64.4 |
|
|
|
(51.9 |
) |
|
Total shareholders’ equity |
|
319.0 |
|
|
|
193.8 |
|
|
Total liabilities and shareholders’ equity |
$ |
1,774.0 |
|
|
$ |
1,658.2 |
|
FORTERRA,
INC.Consolidated Statements of Cash
Flows(in millions)
| |
Year endedDecember 31, |
|
|
|
2021 |
|
|
|
2020 |
|
| CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
| Net income |
$ |
116.3 |
|
|
$ |
64.5 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
Depreciation & amortization expense |
|
82.6 |
|
|
|
89.5 |
|
|
(Gain) loss on disposal of property, plant and equipment |
|
(10.3 |
) |
|
|
0.6 |
|
|
Loss on extinguishment of debt |
|
— |
|
|
|
12.3 |
|
|
Amortization of debt discount and issuance costs |
|
4.9 |
|
|
|
6.6 |
|
|
Stock-based compensation expense |
|
8.7 |
|
|
|
9.5 |
|
|
Impairment of property, plant, and equipment and goodwill |
|
0.4 |
|
|
|
1.2 |
|
|
Earnings from equity method investee |
|
(12.6 |
) |
|
|
(11.3 |
) |
|
Distributions from equity method investee |
|
11.6 |
|
|
|
13.0 |
|
|
Unrealized (gain) loss on derivative instruments, net |
|
(0.4 |
) |
|
|
0.8 |
|
|
Unrealized foreign currency (gains) losses, net |
|
(0.1 |
) |
|
|
0.3 |
|
|
Provision (recoveries) for doubtful accounts |
|
1.0 |
|
|
|
(0.3 |
) |
|
Deferred income taxes |
|
4.0 |
|
|
|
(19.3 |
) |
|
Other non-cash items |
|
2.4 |
|
|
|
5.2 |
|
|
Change in assets and liabilities: |
|
|
|
|
Receivables, net |
|
(64.7 |
) |
|
|
(21.4 |
) |
|
Inventories |
|
(39.9 |
) |
|
|
15.7 |
|
|
Other current assets |
|
(4.0 |
) |
|
|
9.7 |
|
|
Accounts payable and accrued liabilities |
|
7.2 |
|
|
|
53.9 |
|
|
Other assets & liabilities |
|
(6.6 |
) |
|
|
12.7 |
|
| NET CASH PROVIDED BY OPERATING
ACTIVITIES |
|
100.5 |
|
|
|
243.2 |
|
| CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
Purchase of property, plant and equipment, and intangible
assets |
|
(65.6 |
) |
|
|
(34.0 |
) |
|
Proceeds from sale of fixed assets |
|
24.9 |
|
|
|
15.6 |
|
|
Assets and liabilities acquired, business combinations, net |
|
(7.3 |
) |
|
|
— |
|
| NET CASH USED IN INVESTING
ACTIVITIES |
|
(48.0 |
) |
|
|
(18.4 |
) |
| CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
Payment of debt issuance costs |
|
— |
|
|
|
(11.4 |
) |
|
Proceeds from issuance of common stock, net |
|
5.1 |
|
|
|
2.4 |
|
|
Payments on term loan |
|
(12.5 |
) |
|
|
(707.6 |
) |
|
Proceeds from senior secured notes |
|
— |
|
|
|
500.0 |
|
|
Proceeds from revolver |
|
40.0 |
|
|
|
180.0 |
|
|
Payments on revolver |
|
(40.0 |
) |
|
|
(180.0 |
) |
|
Payments pursuant to tax receivable agreement |
|
(8.3 |
) |
|
|
(13.1 |
) |
|
Other financing activities |
|
(5.6 |
) |
|
|
(4.5 |
) |
| NET CASH USED IN FINANCING
ACTIVITIES |
|
(21.3 |
) |
|
|
(234.2 |
) |
| Effect of exchange rate
changes on cash |
|
(0.1 |
) |
|
|
0.3 |
|
| Net change in cash and cash
equivalents |
|
31.1 |
|
|
|
(9.1 |
) |
| Cash and cash equivalents,
beginning of period |
|
25.7 |
|
|
|
34.8 |
|
| Cash and cash equivalents, end
of period |
$ |
56.8 |
|
|
$ |
25.7 |
|
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 to adjusted
EBITDA(in millions)
| |
Three months ended December 31, |
|
Year ended December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| |
unaudited |
|
unaudited |
|
|
|
|
| Net income |
$ |
25.8 |
|
|
$ |
22.6 |
|
|
$ |
116.3 |
|
|
$ |
64.5 |
|
| Interest expense |
|
18.6 |
|
|
|
19.4 |
|
|
|
75.0 |
|
|
|
79.9 |
|
| Depreciation and
amortization |
|
20.7 |
|
|
|
22.2 |
|
|
|
82.5 |
|
|
|
89.5 |
|
| Income tax (benefit)
expense |
|
8.4 |
|
|
|
(9.0 |
) |
|
|
38.7 |
|
|
|
8.4 |
|
| EBITDA1 |
|
73.5 |
|
|
|
55.2 |
|
|
|
312.5 |
|
|
|
242.3 |
|
| (Gain) loss on sale of
property, plant & equipment, net |
|
— |
|
|
|
(1.3 |
) |
|
|
(10.3 |
) |
|
|
0.6 |
|
| Loss on extinguishment of
debt |
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
|
12.3 |
|
| Impairment and exit
charges2 |
|
0.2 |
|
|
|
0.4 |
|
|
|
0.7 |
|
|
|
3.9 |
|
| Transaction costs3 |
|
1.1 |
|
|
|
(0.3 |
) |
|
|
9.3 |
|
|
|
5.3 |
|
| Non-cash compensation4 |
|
1.9 |
|
|
|
1.7 |
|
|
|
8.7 |
|
|
|
9.5 |
|
| Other 5 |
|
— |
|
|
|
1.2 |
|
|
|
(0.2 |
) |
|
|
1.2 |
|
| Earnings from equity method
investee 6 |
|
(3.1 |
) |
|
|
(3.1 |
) |
|
|
(12.6 |
) |
|
|
(11.3 |
) |
| Pro-rata share of Adjusted
EBITDA from equity method investee 7 |
|
4.0 |
|
|
|
4.1 |
|
|
|
16.3 |
|
|
|
15.2 |
|
| Adjusted EBITDA |
$ |
77.6 |
|
|
$ |
58.7 |
|
|
$ |
324.4 |
|
|
$ |
279.0 |
|
| Adjusted EBITDA margin |
|
16.5 |
% |
|
|
15.5 |
% |
|
|
17.5 |
% |
|
|
17.5 |
% |
| Gross profit |
|
102.0 |
|
|
|
86.1 |
|
|
|
420.4 |
|
|
|
376.7 |
|
| Gross profit margin |
|
21.7 |
% |
|
|
22.7 |
% |
|
|
22.6 |
% |
|
|
23.6 |
% |
- 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 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, 2021: |
Drainage Pipe& Products |
|
Water Pipe &Products |
|
Corporateand Other |
|
Total |
|
EBITDA1 |
$ |
53.8 |
|
|
$ |
38.1 |
|
|
$ |
(18.4 |
) |
|
$ |
73.5 |
|
| |
|
|
|
|
|
|
|
| (Gain) loss on sale of
property, plant & equipment, net2 |
|
(1.5 |
) |
|
|
1.5 |
|
|
|
— |
|
|
|
— |
|
| Impairment and exit
charges3 |
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
| Transaction costs4 |
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
1.1 |
|
| Non-cash compensation5 |
|
0.3 |
|
|
|
0.3 |
|
|
|
1.3 |
|
|
|
1.9 |
|
| Other 6 |
|
0.4 |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
| Earnings from equity method
investee 7 |
|
(3.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.1 |
) |
| Pro-rata share of Adjusted
EBITDA from equity method investee 8 |
|
4.0 |
|
|
|
— |
|
|
|
— |
|
|
|
4.0 |
|
| Adjusted EBITDA |
$ |
53.9 |
|
|
$ |
39.7 |
|
|
$ |
(16.0 |
) |
|
$ |
77.6 |
|
| Adjusted EBITDA margin |
|
22.1 |
% |
|
|
17.5 |
% |
|
NM |
|
|
16.5 |
% |
| |
|
|
|
|
|
|
|
| Net sales |
$ |
243.7 |
|
|
$ |
227.0 |
|
|
$ |
— |
|
|
$ |
470.7 |
|
| Gross profit |
$ |
59.2 |
|
|
$ |
42.8 |
|
|
$ |
— |
|
|
$ |
102.0 |
|
| For the three months
ended December 31, 2020: |
Drainage Pipe&
Products(a) |
|
Water Pipe &Products(a) |
|
Corporateand 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 compensation5 |
|
— |
|
|
|
0.1 |
|
|
|
1.6 |
|
|
|
1.7 |
|
| Other 6 |
|
1.5 |
|
|
|
(0.4 |
) |
|
|
0.1 |
|
|
|
1.2 |
|
| Earnings from equity method
investee 7 |
|
(3.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3.1 |
) |
| Pro-rata share of Adjusted
EBITDA from equity method investee 8 |
|
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 |
|
FORTERRA,
INC.Reconciliation of segment EBITDA to segment
adjusted EBITDA(in millions)
| For the year ended
December 31, 2021: |
Drainage Pipe& Products |
|
Water Pipe &Products |
|
Corporateand Other |
|
Total |
|
EBITDA1 |
$ |
239.9 |
|
|
$ |
150.4 |
|
|
$ |
(77.8 |
) |
|
$ |
312.5 |
|
| |
|
|
|
|
|
|
|
| (Gain) loss on sale of
property, plant & equipment, net2 |
|
(12.5 |
) |
|
|
2.2 |
|
|
|
— |
|
|
|
(10.3 |
) |
| Impairment and exit
charges3 |
|
0.4 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
0.7 |
|
| Transaction costs4 |
|
— |
|
|
|
— |
|
|
|
9.3 |
|
|
|
9.3 |
|
| Non-cash compensation5 |
|
1.7 |
|
|
|
1.6 |
|
|
|
5.4 |
|
|
|
8.7 |
|
| Other 6 |
|
1.4 |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
(0.2 |
) |
| Earnings from equity method
investee7 |
|
(12.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
(12.6 |
) |
| Pro-rata share of Adjusted
EBITDA from equity method investee8 |
|
16.3 |
|
|
|
— |
|
|
|
— |
|
|
|
16.3 |
|
| Adjusted EBITDA |
$ |
234.6 |
|
|
$ |
152.9 |
|
|
$ |
(63.1 |
) |
|
$ |
324.4 |
|
| Adjusted EBITDA margin |
|
23.6 |
% |
|
|
17.7 |
% |
|
NM |
|
|
17.5 |
% |
| |
|
|
|
|
|
|
|
| Net sales |
$ |
993.5 |
|
|
$ |
864.8 |
|
|
$ |
— |
|
|
$ |
1,858.3 |
|
| Gross profit |
$ |
254.1 |
|
|
$ |
166.4 |
|
|
$ |
(0.1 |
) |
|
$ |
420.4 |
|
| For the year ended
December 31, 2020: |
Drainage Pipe& Products |
|
Water Pipe &Products |
|
Corporateand 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 compensation5 |
|
1.4 |
|
|
|
0.9 |
|
|
|
7.2 |
|
|
|
9.5 |
|
| Other6 |
|
2.8 |
|
|
|
(1.6 |
) |
|
|
— |
|
|
|
1.2 |
|
| Earnings from equity method
investee7 |
|
(11.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(11.3 |
) |
| Pro-rata share of Adjusted
EBITDA from equity method investee8 |
|
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 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.
- 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, |
|
|
|
2021 |
|
|
|
2020 |
|
| Long-term debt |
$ |
879.3 |
|
|
$ |
887.5 |
|
| Current portion of long-term
debt |
|
12.5 |
|
|
|
12.5 |
|
|
Carrying value of long-term debt |
|
891.8 |
|
|
|
900.0 |
|
| Add: Debt issuance cost and
original issuance discount |
|
10.6 |
|
|
|
14.9 |
|
|
Gross value of long-term debt |
|
902.4 |
|
|
|
914.9 |
|
| Add: Short-term finance lease
liabilities |
|
17.8 |
|
|
|
17.0 |
|
|
Long-term finance lease liabilities |
|
142.9 |
|
|
|
142.2 |
|
|
Total debt |
|
1,063.1 |
|
|
|
1,074.1 |
|
| Less: Cash and cash
equivalents |
|
(56.8 |
) |
|
|
(25.7 |
) |
|
Net debt |
$ |
1,006.3 |
|
|
$ |
1,048.4 |
|
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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