Item 8.01 Other Events
On February 2, 2022, the Board of Directors (the "Board") of Advanced Drainage Systems, Inc. (the "Company") authorized a cash contribution to the Advanced Drainage Systems, Inc. Employee Stock Ownership Plan (the "ESOP"). The ESOP operates as a tax-qualified leveraged ESOP and was designed to enable eligible employees to acquire stock ownership interests in their ESOP accounts. The ESOP was originally funded with a 30-year term loan from the Company (the "ESOP Loan"), together with a transfer of funds from the Company’s existing profit sharing retirement plan, which were then used by the ESOP to purchase shares of the Company’s 2.5% cumulative convertible preferred stock (the "Preferred Stock"). The ESOP Loan is secured by a pledge of shares of Preferred Stock that have not yet been released from the pledge and allocated to ESOP accounts. Within 30 days following the repayment of the ESOP Loan, the ESOP committee can direct the shares of Preferred Stock owned by the ESOP to be converted into shares of the Company’s common stock ("Common Stock"). The amount of the cash contribution authorized by the Board is an amount that is sufficient to pay off the ESOP Loan, which has a current outstanding balance of approximately $0.3 million. The terms of the ESOP are further described in the Company’s periodic reports as filed with the Securities and Exchange Commission ("SEC").
On February 3, 2022, the ESOP committee notified the Company that it will instruct the ESOP trustee to repay the remaining balance of the ESOP Loan in full with the proceeds from the cash contribution, effective as of March 31, 2022, and that following the repayment of the ESOP Loan, the ESOP trustee will cause the remaining 0.3 million shares of Preferred Stock to be released from the pledge, and all currently outstanding shares of Preferred Stock held by the ESOP will thereafter be converted into shares of the Company’s Common Stock at the conversion rate, with such conversion to be effective within thirty days following the ESOP Loan repayment (the "Preferred Stock Conversion"). The repayment of the ESOP Loan, release of shares of Preferred Stock from the pledge securing the ESOP Loan, allocation of shares of Preferred Stock to ESOP participants’ accounts and the Preferred Stock Conversion are collectively referred to as the "ESOP Transition Events". The Board has further authorized the merger of the ESOP into the Company’s existing 401(k) retirement plan, to become effective as of April 1, 2022, immediately following the completion of the ESOP Transition Events.
Item 9.01 Financial Statements and Exhibits.
The Company is filing with this Current Report on Form 8-K certain unaudited pro forma financial information of the Company to give effect to the ESOP Transition Events, as further described below. The information included in Exhibit 99.1, which is attached hereto and incorporated by reference, is being provided on a voluntary basis to illustrate the pro forma effect of the ESOP Transition Events on the Company’s historical financial statements, and is being provided in conformity with Article 11 of Regulation S-X.
(b) Pro forma financial information.
Unaudited pro forma financial information of the Company for the fiscal year ended March 31, 2021 and for the nine months ended December 31, 2021, giving effect to the ESOP Transition Events, are attached to this Current Report on Form 8-K as Exhibit 99.1 and incorporated herein by reference.
(d)Exhibits
The following exhibits are being furnished as part of this report:
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99.1
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document)
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Disclosures About Forward-Looking Statements
Certain statements in this Current Report on Form 8-K may be deemed to be forward-looking 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.
Such statements include, but are not limited to, statements regarding the anticipated ESOP Transition Events and the expected impact on the Company’s financial statements and other financial data, the anticipated timing for the completion of the ESOP Transition Events and other matters related to the ESOP. These statements are not historical facts but rather are based on the Company’s current expectations, estimates and projections regarding the Company’s business, operations and other factors relating thereto. Words such as "may," "will," "could," "would," "should," "anticipate," "predict," "potential," "continue," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are used to identify these forward-looking statements. Factors that could cause actual results to differ from those reflected in forward-looking statements include, but are not limited to, uncertainties described in the Company’s filings with the SEC. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Current Report on Form 8-K. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the Company’s expectations, objectives or plans will be achieved in the timeframe anticipated or at all. Investors are cautioned not to place undue reliance on the Company’s forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.