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Forterra Announces Third Quarter 2019 Results

Third Quarter 2019 Highlights

  • Net sales increased by 7% to $464.5 million as compared to $434.5 million in the prior year quarter
  • Consolidated gross profit margin increased by over 400 basis points
  • Net income of $22.4 million and Adjusted EBITDA1 of $80.0 million exceeded prior year quarter by $16.9 million and $18.4 million, respectively
  • Repaid the $39 million outstanding borrowings under revolving credit facility; in addition, voluntarily repurchased $16.5 million of term loan

IRVING, Texas, Nov. 04, 2019 (GLOBE NEWSWIRE) -- Forterra, Inc. (“Forterra” or “the Company”) (FRTA), a leading manufacturer of water and drainage infrastructure pipe and products in the United States and Eastern Canada, today announced results for the quarter ended September 30, 2019.

1 A reconciliation of non-GAAP financial measures, including EBITDA, EBITDA margin, 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.

Third Quarter 2019 Consolidated Results
In the third quarter of 2019, consolidated net sales increased by 7% over the prior year quarter to $464.5 million, and consolidated gross profit increased by 32% over the prior year quarter to $102.2 million. These increases were achieved primarily by higher average selling prices in both the Drainage Pipe & Products (“Drainage”) and the Water Pipe & Products (“Water”) segments. As a result, gross profit margins for Drainage and Water segments improved by 290 and 480 basis points, respectively, over the prior year quarter.  Net income for the quarter was $22.4 million, or $0.35 per share, compared to net income of $5.5 million, or $0.09 per share, in the prior year quarter.  Adjusted EBITDA for the third quarter increased by 30% to $80.0 million, compared to $61.6 million in the prior year quarter.

Forterra CEO Karl Watson, Jr. commented, “Our third quarter results demonstrate continued progress in three key levers to advancing our business:  improving plant level production efficiencies, strategic and tactical pricing discipline, and working capital optimization. While still in the early stages of delivering a full and fair return for the products we produce and the capital we deploy, we are glad to see our efforts begin to yield positive results to the bottom line.  Given this success, we are narrowing our guidance and now expect full year 2019 net loss in the range of $35 million to $8 million versus our previous view of $38 million to $16 million; and full year 2019 Adjusted EBITDA in the range of $180 to $200 million versus our previous view of $170 to $200 million."

Business Segment Results
Drainage Pipe & Products (“Drainage”) - Third Quarter 2019 Results
Drainage net sales increased by 16% to $280.7 million, compared to $243.0 million in the prior year quarter.  The increase in net sales was driven by both higher average selling prices and higher shipment volumes primarily driven by more favorable weather conditions compared to last year.  Drainage backlogs at the end of the third quarter remained strong.

Drainage gross profit and gross profit margin were $74.3 million and 26.5%, compared to $57.4 million and 23.6%, respectively, in the prior year quarter.  Drainage EBITDA, Adjusted EBITDA and Adjusted EBITDA margin were $67.4 million, $69.6 million and 24.8%, respectively, compared to $53.3 million, $55.6 million and 22.9%, respectively, in the prior year quarter.  The higher gross profit and gross profit margin primarily reflect the benefit of higher average selling prices and shipment volumes while our cost of goods sold remained relatively flat.  The higher EBITDA, Adjusted EBITDA and Adjusted EBITDA margin reflect the same dynamics, with further support of higher EBITDA from our joint venture, partially offset by higher general and administrative expenses primarily related to increased reserves for certain legal disputes, claims, and credit losses that arose in the ordinary course of our business.

Water Pipe & Products (“Water”) - Third Quarter 2019 Results
Water net sales decreased by 4% to $183.8 million, compared to $191.5 million in the prior year quarter.  The decrease in net sales was driven by a decline in shipment volumes, partially offset by higher average selling prices.  As we expected, our current quarter shipment volumes were lower when compared to the third quarter of 2018 as our customers built inventory levels during the second half of last year.  Over the past year we have worked closely with our customers to ensure we are able to efficiently service their needs, and now see bookings beginning to grow.

Despite the decline in net sales, Water gross profit and gross profit margin in the third quarter increased to $27.9 million and 15.2%, respectively, compared to $20.0 million and 10.4%, respectively, in the prior year quarter.  Water EBITDA, Adjusted EBITDA and Adjusted EBITDA margin in the third quarter increased to $25.6 million, $25.8 million and 14.0%, respectively, compared to $17.8 million, $19.0 million and 9.9%, respectively, in the prior year quarter.  The improvements in gross profit, gross profit margin, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin were driven by higher average selling prices, lower raw material costs, and manufacturing efficiencies, partially offset by lower shipment volumes.

Corporate and Other (“Corporate”) - Third Quarter 2019 Results
Corporate EBITDA and Adjusted EBITDA loss were $17.1 million and $15.4 million, respectively, in the third quarter of 2019 compared to $14.9 million and $13.1 million, respectively, in the prior year quarter.  The increase in both Corporate EBITDA and Adjusted EBITDA loss reflects our investment in information technology systems and business processes.  We expect Corporate Adjusted EBITDA loss for the full year 2019 to be in line with our internal plan.

Balance Sheet and Liquidity
As of September 30, 2019, we had cash of $43.9 million, outstanding debt on our senior term loan of $1.2 billion and no outstanding borrowings under our $300 million asset-based revolving credit facility.  During the third quarter, in addition to repaying the $39 million outstanding borrowings under our revolving credit facility, we voluntarily repurchased $16.5 million of our senior term loan before its maturity.  We expect to make additional voluntary repurchases during the fourth quarter to achieve the previously announced $30 to $85 million senior term loan pay down for the year.

Full Year Financial Outlook
Based on current trends and expectations, management has revised its full-year 2019 guidance as reflected below:

  Previous Guidance
  Revised Guidance
 
($ in millions)   Low     High     Low     High  
Net Loss $ (38 ) $ (16 ) $ (35 ) $ (8 )
Adjusted EBITDA $ 170   $ 200   $ 180   $ 200  
                         

Supporting this revised guidance are our positive pricing trends in both the Drainage and Water segments and our expectation of continued strength in market demand.  We remain focused on executing commercial and operational initiatives geared toward improving operating margins and cash flow while controlling overhead costs.

Drainage - Key Financial Statistics:

($ in millions) Q3 2019   Q3 2018
       
Net Sales $ 280.7     $ 243.0  
Gross Profit 74.3     57.4  
EBITDA 67.4     53.3  
Adjusted EBITDA 69.6     55.6  
Gross Profit Margin 26.5 %   23.6 %
Adjusted EBITDA Margin 24.8 %   22.9 %
           

Water - Key Financial Statistics:

($ in millions) Q3 2019   Q3 2018
       
Net Sales $ 183.8     $ 191.5  
Gross Profit 27.9     20.0  
EBITDA 25.6     17.8  
Adjusted EBITDA 25.8     19.0  
Gross Profit Margin 15.2 %   10.4 %
Adjusted EBITDA Margin 14.0 %   9.9 %
           

Conference Call and Webcast Information

Forterra will host a conference call to review its third quarter 2019 results on November 5, 2019 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The dial-in number for the call is 574-990-1396 or toll free 844-498-0572. The participant passcode is 3959906. Please dial in at least five minutes prior to the call to register. The call may also be accessed via a webcast which is available on the Investors section of the Company’s website at http://forterrabp.com.  A replay of the conference call and archive of the webcast will be available for 30 days under the Investor section of the Company's website.

About Forterra

Forterra is a leading manufacturer of water and drainage pipe and products in the U.S. and Eastern Canada for a variety of water-related infrastructure applications, including water transmission, distribution, drainage and stormwater systems. Based in Irving, Texas, Forterra’s product breadth and 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. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company's filings with the Securities and Exchange Commission, including its 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.

Condensed Consolidated Statements of Operations
(in thousands, except per share data)

  Three months ended   Nine months ended
  September 30,   September 30,
  2019 2018   2019 2018
  (unaudited)   (unaudited)
Net sales $ 464,526   $ 434,510     $ 1,166,603   $ 1,140,557  
Cost of goods sold 362,362   357,374     936,820   953,743  
Gross profit 102,164   77,136     229,783   186,814  
Selling, general & administrative expenses (55,234 ) (48,492 )   (165,265 ) (151,617 )
Impairment and exit charges (510 ) (2,170 )   (1,323 ) (3,891 )
Other operating income, net 815   1,538     1,018   6,864  
  (54,929 ) (49,124 )   (165,570 ) (148,644 )
Income from operations 47,235   28,012     64,213   38,170  
           
Other income (expense)          
Interest expense (23,272 ) (21,940 )   (73,720 ) (52,993 )
Gain on extinguishment of debt 374       374    
Earnings from equity method investee 3,990   2,224     8,959   7,745  
Other income, net         6,016  
Income (loss) before income taxes 28,327   8,296     (174 ) (1,062 )
Income tax (expense) benefit (5,897 ) (2,793 )   519   (6,351 )
Net income (loss) $ 22,430   $ 5,503     $ 345   $ (7,413 )
           
Earnings (loss) per share:          
Basic $ 0.35   $ 0.09     $ 0.01   $ (0.12 )
Diluted $ 0.34   $ 0.09     $ 0.01   $ (0.12 )
           
Weighted average common shares outstanding:          
Basic 64,210   63,919     64,119   63,883  
Diluted 64,998   64,269     64,528   63,883  
                   

Condensed Consolidated Balance Sheets
(in thousands)

  September 30,
 2019
  December 31,
 2018
ASSETS (unaudited)    
Current assets      
Cash and cash equivalents $ 43,852     $ 35,793  
Receivables, net 286,345     198,468  
Inventories 256,645     285,030  
Other current assets 19,603     24,798  
Total current assets 606,445     544,089  
Non-current assets      
Property, plant and equipment, net 477,273     492,167  
Operating lease right-of-use assets 62,252      
Goodwill 508,588     508,193  
Intangible assets, net 154,558     183,789  
Investment in equity method investee 53,065     50,607  
Other long-term assets 3,965     14,407  
Total assets $ 1,866,146     $ 1,793,252  
       
LIABILITIES AND EQUITY      
Current liabilities      
Trade payables $ 138,247     $ 114,708  
Accrued liabilities 85,422     70,236  
Deferred revenue 9,221     9,138  
Current portion of long-term debt 12,510     12,510  
Current portion of tax receivable agreement 15,457     15,457  
Total current liabilities 260,857     222,049  
Non-current liabilities      
Long term debt 1,156,023     1,176,095  
Long-term finance lease liabilities 136,556     134,948  
Long-term operating lease liabilities 55,669      
Deferred tax liabilities 37,324     46,615  
Deferred gain on sale-leaseback     9,338  
Other long-term liabilities 22,395     22,667  
Long-term tax receivable agreement 73,318     73,318  
Total liabilities 1,742,142     1,685,030  
Equity      
Common stock, $0.001 par value, 190,000 shares authorized; 64,540 and 64,206 shares issued and outstanding 18     18  
Additional paid-in-capital 240,920     234,931  
Accumulated other comprehensive loss (8,249 )   (10,740 )
Retained deficit (108,685 )   (115,987 )
Total shareholders' equity 124,004     108,222  
Total liabilities and shareholders' equity $ 1,866,146     $ 1,793,252  
               

Condensed Consolidated Statements of Cash Flows
(in thousands)

  Nine months ended
  September 30,
  2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES (unaudited)
Net income (loss) $ 345     $ (7,413 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation & amortization expense 72,954     79,373  
(Gain) / loss on business divestiture     (6,016 )
(Gain) / loss on disposal of property, plant and equipment 1,551     (2,447 )
Gain on extinguishment of debt (374 )    
Amortization of debt discount and issuance costs 6,022     6,099  
Stock-based compensation expense 4,833     4,588  
Impairment charges     936  
Earnings from equity method investee (8,959 )   (7,745 )
Distributions from equity method investee 6,500     8,875  
Unrealized loss / (gain) on derivative instruments, net 5,892     (4,291 )
Unrealized foreign currency loss / (gain), net 35     (358 )
Provision (recoveries) for doubtful accounts 511     (1,905 )
Deferred taxes (11,672 )   (24,787 )
Deferred rent     1,022  
Other non-cash items (188 )   77  
Change in assets and liabilities:      
Receivables, net (88,138 )   (83,720 )
Inventories 29,109     (25,019 )
Other current assets 1,296     6,910  
Accounts payable and accrued liabilities 37,259     25,042  
Other assets & liabilities 8,746     2,184  
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 65,722     (28,595 )
       
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchase of property, plant and equipment, and intangible assets (44,321 )   (31,474 )
Proceeds from business divestiture     618  
Proceeds from sale of fixed assets 10,580     4,874  
Settlement of net investment hedges     (4,990 )
Business combinations, net of cash acquired     (4,500 )
NET CASH USED IN INVESTING ACTIVITIES (33,741 )   (35,472 )
       
CASH FLOWS FROM FINANCING ACTIVITIES      
Payments on term loans (25,110 )   (9,383 )
Proceeds from revolver 54,000      
Payments on revolver (54,000 )    
Proceeds from issuance of common stock 1,282      
Other financing activities (552 )   (385 )
NET CASH USED IN FINANCING ACTIVITIES (24,380 )   (9,768 )
Effect of exchange rate changes on cash 458     (351 )
Net change in cash and cash equivalents 8,059     (74,186 )
Cash and cash equivalents, beginning of period 35,793     104,534  
Cash and cash equivalents, end of period $ 43,852     $ 30,348  
       
SUPPLEMENTAL DISCLOSURES:
Cash interest paid $ 59,138     $ 50,217  
Income taxes paid 5,054     21,508  
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:
Assets and liabilities acquired in non-cash exchange     18,140  
Fair value changes of derivatives recorded in OCI, net of tax     970  
Capital lease obligation resulting from the sale-leaseback exchange transaction     (148,962 )
           

Non-GAAP Measures
(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-rate 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.

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 Adjusted EBITDA and Adjusted EBITDA margin, 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 Adjusted EBITDA and Adjusted EBITDA margin as supplemental financial metrics and in conjunction with results prepared in accordance with GAAP.

Reconciliation of net income (loss) to Adjusted EBITDA
(in thousands)

  Three months ended September 30,   Nine months ended September 30,
  2019   2018   2019   2018
  (unaudited)   (unaudited)
Net income (loss) $ 22,430     $ 5,503     $ 345     $ (7,413 )
Interest expense 23,272     21,940     73,720     52,993  
Depreciation and amortization 24,172     25,922     72,954     79,370  
Income tax (benefit) expense 5,897     2,793     (519 )   6,351  
EBITDA1 75,771     56,158     146,500     131,301  
(Gain) loss on sale of property, plant & equipment, net 518     124     1,551     (2,447 )
Gain on extinguishment of debt (374 )       (374 )    
Impairment and exit charges2 510     2,170     1,323     3,891  
Transaction costs3 734     675     2,008     2,243  
Inventory step-up impacting margin4         278     464  
Non-cash compensation5 2,172     1,450     4,833     4,588  
Other6 (300 )       3,328     (6,688 )
Earnings from equity method investee7 (3,990 )   (2,224 )   (8,959 )   (7,745 )
Pro-rata share of Adjusted EBITDA from equity method investee8 4,966     3,221     11,898     10,198  
Adjusted EBITDA $ 80,007     $ 61,574     $ 162,386     $ 135,805  
Adjusted EBITDA margin 17.2 %   14.2 %   13.9 %   11.9 %
Gross profit 102,164     77,136     $ 229,783     $ 186,814  
Gross profit margin 22.0 %   17.8 %   19.7 %   16.4 %
                       

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.

Reconciliation of segment EBITDA to segment Adjusted EBITDA
(in thousands)

Three months ended September 30, 2019 Drainage Pipe & Products   Water Pipe & Products   Corporate and Other   Total
EBITDA1 $ 67,361     $ 25,557     $ (17,147 )   $ 75,771  
(Gain) loss on sale of property, plant & equipment, net 463     53     2     518  
Gain on extinguishment of debt         (374 )   (374 )
Impairment and exit charges2     510         510  
Transaction costs3         734     734  
Inventory step-up impacting margin4              
Non-cash compensation5 387     98     1,687     2,172  
Other6 401     (401 )   (300 )   (300 )
Earnings from equity method investee7 (3,990 )           (3,990 )
Pro-rata share of Adjusted EBITDA from equity method investee 8 4,966             4,966  
Adjusted EBITDA $ 69,588     $ 25,817     $ (15,398 )   $ 80,007  
Adjusted EBITDA margin 24.8 %   14.0 %     NM     17.2 %
               
Net sales $ 280,678     $ 183,848     $     $ 464,526  
Gross Profit 74,269     27,864     31     102,164  


Three months ended September 30, 2018 Drainage Pipe & Products   Water Pipe & Products   Corporate and Other   Total
EBITDA1 $ 53,271     $ 17,818     $ (14,931 )   $ 56,158  
(Gain) loss on sale of property, plant & equipment, net (14 )   138         124  
Impairment and exit charges2 571     1,599         2,170  
Transaction costs3         675     675  
Non-cash compensation5 410     (157 )   1,197     1,450  
Other6 401     (401 )        
Earnings from equity method investee7 (2,224 )           (2,224 )
Pro-rata share of Adjusted EBITDA from equity method investee 8 3,221             3,221  
Adjusted EBITDA $ 55,636     $ 18,997     $ (13,059 )   $ 61,574  
Adjusted EBITDA margin 22.9 %   9.9 %     NM     14.2 %
               
Net sales $ 242,997     $ 191,513     $     $ 434,510  
Gross Profit 57,441     19,972     (277 )   77,136  


Nine months ended September 30, 2019 Drainage Pipe & Products   Water Pipe & Products   Corporate and Other   Total
EBITDA1 $ 141,424     $ 59,271     $ (54,195 )   $ 146,500  
(Gain) loss on sale of property, plant & equipment, net 1,238     311     2     1,551  
Gain on extinguishment of debt         (374 )   (374 )
Impairment and exit charges2 102     1,221         1,323  
Transaction costs3         2,008     2,008  
Inventory step-up impacting margin4 278             278  
Non-cash compensation5 1,279     343     3,211     4,833  
Other6 1,203     (1,203 )   3,328     3,328  
Earnings from equity method investee7 (8,959 )           (8,959 )
Pro-rata share of Adjusted EBITDA from equity method investee 8 11,898             11,898  
Adjusted EBITDA $ 148,463     $ 59,943     $ (46,020 )   $ 162,386  
Adjusted EBITDA margin 21.6 %   12.5 %     NM     13.9 %
               
Net sales $ 686,092     $ 480,511     $     $ 1,166,603  
Gross Profit 163,419     66,746     (382 )   229,783  


Nine months ended September 30, 2018 Drainage Pipe & Products   Water Pipe & Products   Corporate and Other   Total
EBITDA1 $ 122,841     $ 48,923     $ (40,463 )   $ 131,301  
(Gain) loss on sale of property, plant & equipment, net (3,419 )   972         (2,447 )
Impairment and exit charges2 1,733     2,166     (8 )   3,891  
Transaction costs3         2,243     2,243  
Inventory step-up impacting margin4 464             464  
Non-cash compensation5 1,285     206     3,097     4,588  
Other6 519     (1,270 )   (5,937 )   (6,688 )
Earnings from equity method investee7 (7,745 )           (7,745 )
Pro-rata share of Adjusted EBITDA from equity method investee 8 10,198             10,198  
Adjusted EBITDA $ 125,876     $ 50,997     $ (41,068 )   $ 135,805  
Adjusted EBITDA margin 20.3 %   9.8 %     NM     11.9 %
               
Net sales $ 621,523     $ 519,031     $ 3     $ 1,140,557  
Gross Profit 133,708     53,640     (534 )   186,814  
                       

NM Not meaningful
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 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 net loss to Adjusted EBITDA guidance for full year 2019
(in millions)

  Full Year 2019 Guidance
  Low   High
Net loss $ (35 )   $ (8 )
Interest expense 97     97  
Income tax expense (benefit) 2     (5 )
Depreciation and amortization 97     97  
Non-cash equity compensation 7     7  
Other adjustments 12     12  
Adjusted EBITDA $ 180     $ 200  
               

Source: Forterra, Inc.

Company Contact Information:

Charlie Brown
Executive Vice President and Chief Financial Officer
469-299-9113
IR@forterrabp.com