HILLIARD, Ohio--(BUSINESS WIRE)--
Advanced Drainage Systems, Inc. (NYSE: WMS) (“ADS” or the “Company”), a
leading global manufacturer of water management products and solutions
for commercial, residential, infrastructure and agricultural
applications, today announced financial results for the second fiscal
quarter ended September 30, 2014.
Second Fiscal Quarter 2015 Highlights
- Quarterly net sales increased 9.4% compared to the second fiscal
quarter 2014
- Adjusted EBITDA of $60.5 million
- Net income per diluted share of $0.51
- Adjusted earnings per fully converted share of $0.35
- Company updates fiscal year 2015 guidance
Joe Chlapaty, Chairman and Chief Executive Officer of ADS commented, “We
experienced solid operating performance during the second quarter,
reflecting continued momentum in our growth initiatives and strong
execution across our business. Our top-line growth was driven by
continued strength in our domestic construction markets and improved
results from our International operations, which offset weakness in our
agriculture markets. In particular, we outpaced market growth in both
the non-residential and infrastructure markets primarily through
material conversion and market share gains. We also generated
double-digit growth in sales of our Allied Products driven by increased
demand for our Nyloplast® and Storm Tech® product
lines. Importantly, we were able to capture operating leverage from the
higher sales volumes leading to an improvement in Adjusted EBITDA margin
over the prior year period.”
Chlapaty added, “We believe the strength we are seeing in our core
domestic construction markets is sustainable, and we expect to continue
to benefit from the recovery as it gains momentum. Furthermore, our
leadership position and ability to provide a complete water management
solution – including both pipe and Allied Products – enables us to drive
above-market growth through conversion opportunities from traditional
materials. This is evidenced by our sales growth of approximately 15% in
our domestic construction markets during the first six months of our
current fiscal year.”
Second Fiscal Quarter 2015 Results
Net sales were $364.7 million in the second fiscal quarter of 2015, a
9.4% increase compared to second fiscal quarter 2014 net sales of $333.2
million. The growth in the quarter was driven by our domestic
construction end markets and improved sales in our International
markets. Sales by domestic end markets were as follows: 52.2% in the
non-residential market, 17.8% in the residential market, 10.9% in the
infrastructure market, and 19.1% in the agriculture market. Growth in
the domestic construction markets was primarily driven by a 17.0%
increase in sales in the non-residential market and 19.4% increase in
sales in the infrastructure market. Allied Products sales increased
12.4% compared to the prior year sales of continuing products, which
exclude $2.2 million of Allied Product lines sold in fiscal 2014.
Gross profit increased $9.2 million, or 12.6%, to $82.4 million for the
second fiscal quarter of 2015, compared to $73.2 million for the same
period last year. As a percentage of net sales, gross profit was 22.6%
compared to 22.0% for the prior year period. The improvement in gross
margins was largely attributed to increased volume of our pipe products
and Allied Products as well as strong cost performance in our
manufacturing and logistics operations.
Selling, general and administrative ("SG&A") expenses for the second
fiscal quarter of 2015 increased $2.5 million, or 7.1%, to $38.6 million
from $36.1 million for the second fiscal quarter of 2014. The increase
in SG&A expenses was driven primarily by higher variable selling
expenses tied to sales volume and higher non-cash stock based
compensation expenses. As a percentage of net sales, SG&A expenses
decreased to 10.6% for the second fiscal quarter of 2015 as compared to
10.8% in the prior year. The decrease in SG&A expenses as a percentage
of net sales was driven primarily by the Company’s ability to leverage
the incremental expense with higher sales volumes.
The Company reported adjusted EBITDA of $60.5 million for the second
fiscal quarter of 2015 compared to adjusted EBITDA of $51.6 million, an
increase of 17.2%. As a percentage of net sales, adjusted EBITDA
improved to 16.6% for the second fiscal quarter from 15.5% in the year
ago period.
Net income attributable to ADS for the second fiscal quarter of 2015 was
$22.4 million, 29.3% higher compared to net income attributable to ADS
of $17.3 million for the second fiscal quarter of 2014. Net income per
diluted share for the second fiscal quarter of 2015 was $0.51 per share
based on weighted average common shares outstanding of 56.5 million.
Adjusted Earnings per fully converted share (Non-GAAP) for the
second fiscal quarter of 2015 was $0.35 per share based on weighted
average fully converted shares of 71.8 million, up from $0.29 per share
for the prior year. On a year-to-date basis for the first six months,
adjusted earnings per fully converted share totaled $0.60 per share
compared to $0.57 per share for the prior year. A reconciliation of
earnings per (GAAP) to adjusted earnings per fully converted share
(Non-GAAP) is presented below.
|
|
|
|
| Three Months Ended September 30, |
|
| Six Months Ended September 30, |
(Amounts in thousands, except per share data) | | | | | 2013 |
| 2014 | | | 2013 |
| 2014 |
Net income available to common shareholders
| | | | |
$
|
12,378
| |
$
|
26,268
| | | |
$
|
25,284
| |
$
|
22,462
|
Adjustments to net income available to common shareholders:
| | | | | | | | | | | | |
Change in fair value of Redeemable Convertible Preferred Stock
| | | | | |
3,186
| | |
(7,319
|
)
| | | |
4,764
| | |
11,054
|
Dividends to Redeemable Convertible Preferred Stockholders
| | | | | |
214
| | |
37
| | | | |
430
| | |
75
|
Dividends paid to unvested restricted stockholders
| | | | | |
8
| | |
-
| | | | |
16
| | |
-
|
Undistributed income allocated to participating securities
| | | | |
|
1,536
| |
|
3,404
|
| | |
|
3,124
| |
|
3,040
|
Total adjustments to net income (loss) available to common
shareholders
| | | | |
|
4,944
| |
|
(3,878
|
)
| | |
|
8,334
| |
|
14,169
|
Net income attributable to ADS
| | | | | |
17,322
| | |
22,390
| | | | |
33,618
| | |
36,631
|
Fair value of ESOP Compensation related to Redeemable Convertible
Preferred Stock
| | | | |
|
2,506
| |
|
2,687
|
| | |
|
5,026
| |
|
5,374
|
Adjusted net income (Non-GAAP)
| | | | |
$
|
19,828
| |
$
|
25,077
|
| | |
$
|
38,644
| |
$
|
42,005
|
Weighted Average Common Shares Outstanding – Basic
| | | | | |
47,250
| | |
51,518
| | | | |
47,220
| | |
49,538
|
Unvested restricted shares
| | | | | |
336
| | |
221
| | | | |
328
| | |
235
|
Redeemable Convertible Preferred shares
| | | | |
|
20,341
| |
|
20,099
|
| | |
|
20,379
| |
|
20,099
|
Total Weighted Average Fully Converted Common Shares Outstanding
(Non-GAAP)
| | | | | |
67,927
| | |
71,838
| | | | |
67,927
| | |
69,872
|
Adjusted Earnings Per Fully Converted Share (Non-GAAP) | | | | | $ | 0.29 | | $ | 0.35 | | | | $ | 0.57 | | $ | 0.60 |
| | | | | | | | | | | | | | | | |
|
A reconciliation of GAAP to Non-GAAP financial measures for adjusted
EBITDA and adjusted earnings per fully converted share has been provided
in the financial statement tables included in this press release. An
explanation of these measures is also included below under the heading
“Non-GAAP Financial Measures.”
For the first six months of fiscal 2015, the Company recorded net cash
provided by operating activities of $10.8 million compared to $3.3
million for the same period last year. In the second quarter of fiscal
year 2015, long term debt was reduced by $95.3 million paid for by net
proceeds from the IPO of $72.3 million completed in late July and cash
flow generated from stronger earnings.
Fiscal Year 2015 Outlook
Based on current visibility, backlog of existing orders and business
trends, the Company updated its financial targets for fiscal year 2015.
The range for net sales for fiscal year 2015 was tightened to $1.21 to
$1.25 billion, while the outlook remained unchanged for adjusted EBITDA
and is expected to be in the range of $165 to $175 million. Capital
expenditures are expected to be approximately $35 million.
Mark Sturgeon, Executive Vice President and Chief Financial Officer of
ADS noted, “We generated strong cash flows during the second quarter,
which enabled us to bring our net debt-to-EBITDA ratio to 2.58, within
our target range of 2 to 3 times. As we look ahead, our priorities for
capital deployment remain focused on investments and capital
expenditures in our business to drive organic growth, targeted
acquisition opportunities that extend our product leadership and
complement our existing package, and enhancements to shareholder returns
including restarting our dividend program.”
Diluted Shares of Common Stock Outstanding
(Non-GAAP)
As of September 30, 2014, the Company had 73.3 million diluted shares of
common stock outstanding, inclusive of outstanding shares of unvested
restricted common stock and on an as-converted basis with respect to the
outstanding shares of ESOP preferred stock. The following table
illustrates the breakdown of diluted shares of common stock outstanding:
|
|
|
|
|
|
Common Stock Outstanding
|
|
|
|
|
52,934,649
|
| | | | | |
Unvested Restricted Stock
| | | | |
237,906
|
| | | | | |
Redeemable Convertible Preferred Stock
| | | | |
20,099,096
|
| | | | | | Total Diluted Shares of Common Stock Outstanding (Non-GAAP) | | | | | 73,271,651 |
| | | | | | | | | | |
|
An explanation of Diluted Shares of Common Stock Outstanding is also
included below under the heading “Non-GAAP Financial Measures.”
Webcast Information
The Company will host an investor conference call and webcast on
Wednesday, November 5, 2014 at 10:00 a.m. Eastern Time. The live call
can be accessed by dialing 1-877-317-6789 (US toll-free) or
1-412-317-6789 (international) and asking to be connected to the
Advanced Drainage Systems, Inc. call. The live webcast will also be
accessible via the "Events Calendar” section of the Company’s Investor
Relations website, www.investors.ads-pipe.com.
An archived version of the webcast will be available for 90 days
following the call.
About ADS
Advanced Drainage Systems (ADS) is the leading manufacturer of high
performance thermoplastic corrugated pipe, providing a comprehensive
suite of water management products and superior drainage solutions for
use in the construction and infrastructure marketplace. Its innovative
products are used across a broad range of end markets and applications,
including non-residential, residential, agriculture and infrastructure
applications. The Company has established a leading position in many of
these end markets by leveraging its national sales and distribution
platform, its overall product breadth and scale and its manufacturing
excellence. Founded in 1966, the Company operates a global network of 58
manufacturing plants and 29 distribution centers. To learn more about
the ADS, please visit the Company’s website at www.ads-pipe.com.
Non-GAAP Financial Measures
This press release contains financial information determined by methods
other than in accordance with accounting principles generally accepted
in the United States of America ("US GAAP"). ADS management uses non-US
GAAP measures in its analysis of the Company's performance. Investors
are encouraged to review the reconciliation of non-US GAAP financial
measures to the comparable US GAAP results available in the accompanying
tables.
Forward Looking Statements
Certain statements in this press release may be deemed to be
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, including statements regarding the
initial public offering. 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 relating to our operations and business
include: fluctuations in the price and availability of resins and other
raw materials and our ability to pass any increased costs of raw
materials on to our customers in a timely manner; volatility in general
business and economic conditions in the markets in which we operate,
including, without limitation, factors relating to availability of
credit, interest rates, fluctuations in capital and business and
consumer confidence; cyclicality and seasonality of the non-residential
and residential construction markets and infrastructure spending; the
risks of increasing competition in our existing and future markets,
including competition from both manufacturers of high performance
thermoplastic corrugated pipe and manufacturers of products using
alternative materials; our ability to continue to convert current demand
for concrete, steel and PVC pipe products into demand for our high
performance thermoplastic corrugated pipe and Allied Products; the
effect of weather or seasonality; the loss of any of our significant
customers; the risks of doing business internationally; the risks of
conducting a portion of our operations through joint ventures; our
ability to expand into new geographic or product markets; our ability to
achieve the acquisition component of our growth strategy; the risk
associated with manufacturing processes; our ability to manage our
assets; the risks associated with our product warranties; our ability to
manage our supply purchasing and customer credit policies; the risks
associated with our self-insured programs; our ability to control labor
costs and to attract, train and retain highly-qualified employees and
key personnel; our ability to protect our intellectual property rights;
changes in laws and regulations, including environmental laws and
regulations; our ability to project product mix; the risks associated
with our current levels of indebtedness; our ability to meet future
capital requirements and fund our liquidity needs; and the other risks
and uncertainties described in the Company’s filings with the Securities
and Exchange Commission. 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 press release. In light of the significant
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.
|
|
|
|
| | |
|
| | |
| | | | | | | | | |
|
Financial Statements | | | | | | | | | | |
| | | | | | | | | |
|
|
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) |
| | | | | | | | | |
|
| | | | | | Three Months Ended September 30, | | | | Six Months Ended September 30, |
(Amounts in thousands, except per share data) | | | | | | 2013 |
| | 2014 | | | | 2013 |
| | 2014 |
Net sales
| | | | |
$
|
333,240
| | |
$
|
364,724
| | | |
$
|
626,342
| | |
$
|
693,021
| |
Cost of goods sold
| | | | | |
260,021
|
| | |
282,282
|
| | | |
487,120
|
| | |
538,546
|
|
Gross profit
| | | | | |
73,219
| | | |
82,442
| | | | |
139,222
| | | |
154,475
| |
Operating expenses:
| | | | | | | | | | | | | | | | |
Selling
| | | | | |
18,166
| | | |
19,762
| | | | |
35,843
| | | |
39,008
| |
General and administrative
| | | | | |
17,917
| | | |
18,879
| | | | |
35,576
| | | |
39,411
| |
Gain on sale of business
| | | | | |
-
| | | |
-
| | | | |
(4,848
|
)
| | |
-
| |
Intangible amortization
| | | | | |
2,861
|
| | |
2,638
|
| | | |
5,722
|
| | |
5,279
|
|
Income from operations
| | | | | |
34,275
| | | |
41,163
| | | | |
66,929
| | | |
70,777
| |
Other expense:
| | | | | | | | | | | | | | | | |
Interest expense
| | | | | |
3,866
| | | |
4,338
| | | | |
7,967
| | | |
8,953
| |
Other miscellaneous expense(income), net
| | | | | |
287
|
| | |
(7
|
)
| | | |
816
|
| | |
7
|
|
Income before income taxes
| | | | | |
30,122
| | | |
36,832
| | | | |
58,146
| | | |
61,817
| |
Income tax expense
| | | | | |
12,242
| | | |
14,062
| | | | |
23,308
| | | |
23,757
| |
Equity in net loss of unconsolidated affiliates
| | | | | |
97
|
| | |
2
|
| | | |
345
|
| | |
623
|
|
Net income
| | | | | |
17,783
| | | |
22,768
| | | | |
34,493
| | | |
37,437
| |
Less net income attributable to noncontrolling interest
| | | | | |
461
|
| | |
378
|
| | | |
875
|
| | |
806
|
|
Net income attributable to ADS
| | | | | |
17,322
|
| | |
22,390
|
| | | |
33,618
|
| | |
36,631
|
|
Change in fair value of Redeemable Convertible Preferred Stock
| | | | | |
(3,186
|
)
| | |
7,319
| | | | |
(4,764
|
)
| | |
(11,054
|
)
|
Dividends to Redeemable Convertible Preferred Stockholders
| | | | | |
(214
|
)
| | |
(37
|
)
| | | |
(430
|
)
| | |
(75
|
)
|
Dividends paid to unvested restricted stockholders
| | | | | |
(8
|
)
| | |
-
|
| | | |
(16
|
)
| | |
-
|
|
Net income available to common stockholders and participating
securities
| | | | | |
13,914
| | | |
29,672
| | | | |
28,408
| | | |
25,502
| |
Undistributed income allocated to participating securities
| | | | | |
(1,536
|
)
| | |
(3,404
|
)
| | | |
(3,124
|
)
| | |
(3,040
|
)
|
Net income available to common stockholders | | | | |
$
| 12,378 |
| |
$
| 26,268 |
| | |
$
| 25,284 |
| | $ | 22,462 |
|
| | | | | | | | | | | | | | | |
|
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic
| | | | | |
47,250
| | | |
51,518
| | | | |
47,220
| | | |
49,538
| |
Diluted
| | | | | |
47,579
| | | |
56,463
| | | | |
47,634
| | | |
52,198
| |
Net income per share: | | | | | | | | | | | | | | | | |
Basic
| | | | |
$
|
0.26
| | |
$
|
0.51
| | | |
$
|
0.54
| | |
$
|
0.45
| |
Diluted
| | | | |
$
|
0.26
| | |
$
|
0.51
| | | |
$
|
0.53
| | |
$
|
0.45
| |
Cash dividends declared per share | | | | |
$
|
0.03
| | |
$
|
-
| | | |
$
|
0.06
| | |
$
|
-
| |
| | | | | | | | | | | | | | | | | | | |
|
|
|
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|
|
|
|
| | |
| | | | | | As of |
(Amounts in thousands, except par value) | | | | | | March 31, 2014 |
| | September 30, 2014 |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash
| | | | |
$
|
3,931
| | |
$
|
6,581
| |
Receivables (less allowance for doubtful accounts of $3,977 and
$3,819, respectively)
| | | | | |
150,713
| | | |
248,120
| |
Inventories
| | | | | |
260,300
| | | |
247,368
| |
Deferred income taxes and other current assets
| | | | | |
13,555
|
| | |
12,848
|
|
Total current assets
| | | | | |
428,499
| | | |
514,917
| |
Property, plant and equipment, net
| | | | | |
292,082
| | | |
288,170
| |
Other assets: | | | | | | | | | |
Goodwill
| | | | | |
86,297
| | | |
86,280
| |
Intangible assets, net
| | | | | |
66,184
| | | |
60,266
| |
Other assets
| | | | | |
64,533
|
| | |
68,591
|
|
Total assets | | | | | $ | 937,595 |
| | $ | 1,018,224 |
|
| | | | | | | | |
|
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Current maturities of debt obligations
| | | | |
$
|
11,153
| | |
$
|
11,148
| |
Accounts payable
| | | | | |
108,111
| | | |
113,530
| |
Other accrued liabilities
| | | | | |
37,956
| | | |
43,508
| |
Accrued income taxes
| | | | | |
7,372
|
| | |
22,360
|
|
Total current liabilities
| | | | | |
164,592
| | | |
190,546
| |
Long-term debt obligation
| | | | | |
442,895
| | | |
386,435
| |
Deferred tax liabilities
| | | | | |
69,169
| | | |
64,398
| |
Other liabilities
| | | | | |
15,324
|
| | |
14,263
|
|
Total liabilities
| | | | | |
691,980
| | | |
655,642
| |
| | | | | | | | |
|
| | | | | | | | |
|
Mezzanine equity: | | | | | | | | | |
Redeemable Common Stock; $0.01 par value: 38,320 and 0 issued and
outstanding, respectively
| | | | | |
549,119
| | | |
-
| |
Redeemable Convertible Preferred Stock; $0.01 par value: 47,070
authorized: 44,170 issued: 26,129 and 26,129 outstanding,
respectively
| | | | | |
291,720
| | | |
326,623
| |
Deferred compensation – unearned ESOP shares
| | | | | |
(197,888
|
)
| | |
(217,346
|
)
|
Total mezzanine equity
| | | | | |
642,951
| | | |
109,277
| |
Stockholders’ equity: | | | | | | | | | |
Common stock; $0.01 par value: 148,271 and 1,000,000 authorized:
109,951 and 153,560 issued: 9,141 and 52,935 outstanding,
respectively
| | | | | |
11,957
| | | |
12,393
| |
Paid-in capital
| | | | | |
22,547
| | | |
675,183
| |
Common stock in treasury, at cost
| | | | | |
(448,439
|
)
| | |
(447,674
|
)
|
Accumulated other comprehensive loss
| | | | | |
(5,977
|
)
| | |
(8,483
|
)
|
Retained earnings
| | | | | |
−
|
| | |
-
|
|
Total ADS stockholders’ equity
| | | | | |
(419,912
|
)
| | |
231,419
| |
Noncontrolling interest in subsidiaries
| | | | | |
22,576
|
| | |
21,886
|
|
Total stockholders’ equity
| | | | | |
(397,336
|
)
| | |
253,305
|
|
Total liabilities, mezzanine equity and stockholders’ equity | | | | | $ | 937,595 |
| | $ | 1,018,224 |
|
| | | | | | | | | | |
|
|
|
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
|
|
|
|
| | |
| | | | | | Six Months Ended September 30, |
(Amounts in thousands) | | | | | | 2013 |
| | 2014 |
Cash Flows from Operating Activities | | | | |
$
|
3,283
|
| |
$
|
10,807
|
|
Cash Flows from Investing Activities | | | | | | | | | |
Capital expenditures
| | | | | |
(21,700
|
)
| | |
(15,643
|
)
|
Proceeds from sale of business
| | | | | |
5,877
| | | |
-
| |
Investment in unconsolidated affiliate
| | | | | |
(5,300
|
)
| | |
(7,566
|
)
|
Additions of capitalized software
| | | | | |
(1,380
|
)
| | |
(2,008
|
)
|
Other investing activities
| | | | | |
(533
|
)
| | |
(525
|
)
|
Net cash used in investing activities
| | | | | |
(23,036
|
)
| | |
(25,742
|
)
|
Cash Flows from Financing Activities | | | | | | | | | |
Cash dividends paid
| | | | | |
(3,079
|
)
| | |
-
| |
Debt issuance costs
| | | | | |
(2,311
|
)
| | |
-
| |
Redemption of Redeemable Convertible Preferred Stock
| | | | | |
(3,146
|
)
| | |
-
| |
Proceeds from Senior Notes
| | | | | |
25,000
| | | |
-
| |
Proceeds from term loan
| | | | | |
100,000
| | | |
-
| |
Payments on term loan
| | | | | |
(77,500
|
)
| | |
(2,500
|
)
|
Payments of notes, mortgages, and other debt
| | | | | |
(963
|
)
| | |
(1,665
|
)
|
Proceeds from Revolving Credit Facility
| | | | | |
225,400
| | | |
174,760
| |
Payments on Revolving Credit Facility
| | | | | |
(242,300
|
)
| | |
(227,000
|
)
|
Proceeds from initial public offering of common stock
| | | | | |
-
| | | |
79,131
| |
Payments for deferred initial public offering costs
| | | | | |
-
| | | |
(4,458
|
)
|
Other financing activities
| | | | | |
(673
|
)
| | |
(432
|
)
|
Net cash provided by financing activities
| | | | | |
20,428
|
| | |
17,836
|
|
Effect of exchange rate changes on cash and cash equivalents
| | | | | |
-
|
| | |
(251
|
)
|
Net change in cash and equivalents
| | | | | |
675
| | | |
2,650
| |
Cash and equivalents at beginning of period
| | | | | |
1,361
|
| | |
3,931
|
|
Cash and equivalents at end of period | | | | | $ | 2,036 |
| | $ | 6,581 |
|
| | | | | | | | | | |
|
|
|
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES |
SEGMENT REPORTING |
(unaudited) |
|
The following table sets forth reportable segment information with
respect to the amount of net sales contributed by each class of
similar products of our consolidated gross profit in the three and
six months ended September 30, 2013 and 2014, respectively:
|
|
|
|
|
|
| | Three Months Ended September 30, |
|
| | Six Months Ended September 30, |
(Amounts in thousands) | | | | | | 2013 |
| | 2014 | | | | 2013 |
| | 2014 |
Domestic
| | | | | | | | | | | | | | | | |
Pipe
| | | | | |
224,064
| | |
241,872
| | | |
413,206
| | |
459,179
|
Allied Products
| | | | | |
72,008
| | |
77,770
| | | |
138,455
| | |
151,945
|
Total Domestic
| | | | | $ | 296,072 | | $ | 319,642 | | | $ | 551,661 | | $ | 611,124 |
International
| | | | | | | | | | | | | | | | |
Pipe
| | | | | |
30,062
| | |
36,422
| | | |
59,649
| | |
66,359
|
Allied Products
| | | | | |
7,106
| | |
8,660
| | | |
15,032
| | |
15,538
|
Total International
| | | | | $ | 37,168 | | $ | 45,082 | | | | 74,681 | | | 81,897 |
Total net sales | | | | | $ | 333,240 | | $ | 364,724 | | | $ | 626,342 | | $ | 693,021 |
| | | | | | | | | | | | | | | |
|
The following sets forth certain additional financial information
attributable to our reportable segments for the three and six months
ended September 30, 2013, and 2014, respectively:
|
|
|
|
| | Three Months Ended September 30, |
|
| | Six Months Ended September 30, |
(Amounts in thousands) | | | | | | 2013 |
| | 2014 | | | | 2013 |
| | 2014 |
Net sales | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
296,072
| | | |
319,642
| | | | |
551,661
| | | |
611,124
| |
International
| | | | | |
37,168
|
| | |
45,082
|
| | | |
74,681
|
| | |
81,897
|
|
Total | | | | | $ | 333,240 |
| | $ | 364,724 |
| | | $ | 626,342 |
| | $ | 693,021 |
|
Gross profit | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
65,278
| | | |
74,572
| | | | |
122,830
| | | |
139,362
| |
International
| | | | | |
7,941
|
| | |
7,870
|
| | | |
16,392
|
| | |
15,113
|
|
Total | | | | | $ | 73,219 |
| | $ | 82,442 |
| | | $ | 139,222 |
| | $ | 154,475 |
|
Segment Adjusted EBITDA | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
46,802
| | | |
56,124
| | | | |
91,880
| | | |
101,893
| |
International
| | | | | |
4,765
|
| | |
4,334
|
| | | |
9,229
|
| | |
7,770
|
|
Total | | | | | $ | 51,567 |
| | $ | 60,458 |
| | | $ | 101,109 |
| | $ | 109,663 |
|
Interest expense, net | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
3,844
| | | |
4,325
| | | | |
7,933
| | | |
8,938
| |
International
| | | | | |
22
|
| | |
13
|
| | | |
34
|
| | |
15
|
|
Total | | | | | $ | 3,866 |
| | $ | 4,338 |
| | | $ | 7,967 |
| | $ | 8,953 |
|
Capital expenditures | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
7,065
| | | |
7,898
| | | | |
18,003
| | | |
14,835
| |
International
| | | | | |
1,493
|
| | |
295
|
| | | |
3,697
|
| | |
808
|
|
Total | | | | | $ | 8,558 |
| | $ | 8,193 |
| | | $ | 21,700 |
| | $ | 15,643 |
|
Depreciation and amortization | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
12,701
| | | |
12,486
| | | | |
25,569
| | | |
24,952
| |
International
| | | | | |
1,186
|
| | |
1,297
|
| | | |
2,419
|
| | |
2,534
|
|
Total | | | | | $ | 13,887 |
| | $ | 13,783 |
| | | $ | 27,988 |
| | $ | 27,486 |
|
Equity in net income (loss) of unconsolidated affiliates | | | | | | | | | | | | | | | | |
Domestic
| | | | | |
114
| | | |
251
| | | | |
114
| | | |
404
| |
International
| | | | | |
(211
|
)
| | |
(253
|
)
| | | |
(459
|
)
| | |
(1,027
|
)
|
Total | | | | | $ | (97 | ) | | $ | (2 | ) | | | $ | (345 | ) | | $ | (623 | ) |
| | | | | | | | | | | | | | | | | | | |
|
Reconciliation of Non-GAAP Measures
We present EBITDA and Adjusted EBITDA because they are key metrics used
by management and our board of directors to assess our financial
performance, to make budgeting decisions and to compare our performance
against that of other peer companies using similar measures.
EBITDA is calculated as net income attributable to ADS before interest,
income taxes, depreciation and amortization. Adjusted EBITDA is
calculated as EBITDA before stock-based compensation expense, non-cash
charges and certain other expenses.
EBITDA and Adjusted EBITDA are not GAAP measures of our financial
performance or liquidity. They should not be considered as alternatives
to net income as a measure of financial performance or cash flows from
operations as a measure of liquidity, or any other performance measure
derived in accordance with GAAP. In addition, they should not be
construed as an inference that our future results will be unaffected by
unusual or non-recurring items. EBITDA and Adjusted EBITDA are not
intended to be measures of free cash flow for management’s discretionary
use, as they do not reflect certain cash requirements such as tax
payments, debt service requirements, capital expenditures and certain
other cash costs that may recur in the future. EBITDA and Adjusted
EBITDA contain certain other limitations, including the failure to
reflect our cash expenditures, cash requirements for working capital
needs and cash costs to replace assets being depreciated and amortized.
In evaluating Adjusted EBITDA, you should be aware that in the future we
will incur expenses that are the same as or similar to some of the
adjustments in this presentation, such as stock based compensation
expense, derivative fair value adjustments, and foreign currency
transaction losses.
The following table presents a reconciliation of EBITDA and Adjusted
EBITDA to Net Income attributable to ADS, the most comparable GAAP
measure, for each of the periods indicated:
|
|
|
|
| Three Months Ended September 30, |
|
| Six Months Ended September 30, |
(Amounts in thousands) | | | | | 2013 |
| 2014 | | | 2013 |
| 2014 |
Net income attributable to ADS
| | | | |
$
|
17,322
| | |
$
|
22,390
| | | |
$
|
33,618
| | |
$
|
36,631
| |
Depreciation and amortization (a) | | | | | |
14,221
| | | |
14,429
| | | | |
28,665
| | | |
28,758
| |
Interest expense, net
| | | | | |
3,866
| | | |
4,338
| | | | |
7,967
| | | |
8,953
| |
Income tax expense
| | | | |
|
12,242
|
| |
|
14,062
|
| | |
|
23,308
|
| |
|
23,757
|
|
EBITDA
| | | | | |
47,651
| | | |
55,219
| | | | |
93,558
| | | |
98,099
| |
Derivative fair value adjustments
| | | | | |
319
| | | |
67
| | | | |
238
| | | |
163
| |
Foreign currency transaction losses
| | | | | |
(181
|
)
| | |
(205
|
)
| | | |
(87
|
)
| | |
(75
|
)
|
Unconsolidated affiliates interest and tax
| | | | | |
98
| | | |
236
| | | | |
228
| | | |
413
| |
Management fee to minority interest holder JV
| | | | | |
410
| | | |
323
| | | | |
604
| | | |
558
| |
Share-based compensation
| | | | | |
764
| | | |
2,131
| | | | |
1,424
| | | |
4,416
| |
ESOP deferred compensation
| | | | | |
2,506
| | | |
2,687
| | | | |
5,026
| | | |
5,374
| |
Transaction costs (b) | | | | |
|
-
|
| |
|
-
|
| | |
|
118
|
| |
|
715
|
|
Adjusted EBITDA | | | | | $ | 51,567 |
| | $ | 60,458 |
| | | $ | 101,109 |
| | $ | 109,663 |
|
| | | | | | | | | | | | | | | | | | | |
|
|
|
|
(a)
|
|
|
Includes our proportionate share of depreciation and amortization
expense of $334 and $646 for the three months ended September 30,
2013 and 2014, respectively, and $677 and $1,272 for the six months
ended September 30, 2013 and 2014, respectively, related to our
Tigre ADS joint venture, BaySaver joint venture and Tigre-ADS USA
joint venture, which is included in Net income of unconsolidated
affiliates in our Condensed Consolidated Statements of Income.
|
| | |
(b)
| | |
Represents expenses recorded related to legal, accounting and other
professional fees incurred in connection with our debt refinancing
and completion of the IPO.
|
| | | | | |
|
The following table presents a reconciliation of Segment Adjusted EBITDA
to Net Income attributable to ADS, the most comparable GAAP measure, for
each of the periods indicated:
Reconciliation of Segment EBITDA and Adjusted Segment EBITDA to Net
Income
|
|
|
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
(Amounts in thousands) | | | | | 2013 | | | 2014 |
| | | | | Domestic |
| International | | | Domestic |
| International |
Reconciliation of Segment EBITDA and Segment Adjusted EBITDA | | | | | | | | | | | | |
Net Income Attributable to ADS
| | | | |
$
|
15,218
| |
$
|
2,104
| | | |
$
|
20,612
| |
$
|
1,778
| |
Depreciation and amortization (a) | | | | | |
12,702
| | |
1,519
| | | | |
12,724
| | |
1,705
| |
Interest expense, net
| | | | | |
3,844
| | |
22
| | | | |
4,325
| | |
13
| |
Income tax expense
| | | | |
|
11,449
| |
|
793
|
| | |
|
13,525
| |
|
537
|
|
Segment EBITDA
| | | | | |
43,213
| | |
4,438
| | | | |
51,186
| | |
4,033
| |
Derivative fair value adjustments
| | | | | |
319
| | |
-
| | | | |
67
| | |
-
| |
Foreign currency transaction losses
| | | | | |
-
| | |
(181
|
)
| | | |
-
| | |
(205
|
)
|
Unconsolidated affiliates interest and tax
| | | | | |
-
| | |
98
| | | | |
53
| | |
183
| |
Management fee to minority interest holder JV
| | | | | |
-
| | |
410
| | | | |
-
| | |
323
| |
Share-based compensation
| | | | | |
764
| | |
-
| | | | |
2,131
| | |
-
| |
ESOP deferred compensation
| | | | | |
2,506
| | |
-
| | | | |
2,687
| | |
-
| |
Transaction costs (b) | | | | |
|
-
| |
|
-
|
| | |
|
-
| |
|
-
|
|
Segment Adjusted EBITDA | | | | | $ | 46,802 | | $ | 4,765 |
| | | $ | 56,124 | | $ | 4,334 |
|
| | | | | | | | | | | | | | | | | |
|
|
|
|
(a)
|
|
|
Includes our proportionate share of depreciation and amortization
expense of $334 and $646 related to our Tigre ADS joint venture,
BaySaver joint venture and Tigre-ADS USA joint venture, which is
included in Net income of unconsolidated affiliates in our Condensed
Consolidated Statements of Income for the three months ended
September 30, 2013 and 2014, respectively.
|
| | |
(b)
| | |
Represents expenses recorded related to legal, accounting and other
professional fees incurred in connection with our debt refinancing
and completion of the IPO.
|
| | | | | |
|
Reconciliation of Segment EBITDA and Adjusted Segment EBITDA to Net
Income
|
|
|
|
| Six Months Ended September 30, |
|
| Six Months Ended September 30, |
(Amounts in thousands) | | | | | 2013 | | | 2014 |
| | | | | Domestic |
| International | | | Domestic |
| International |
Reconciliation of Segment EBITDA and Segment Adjusted EBITDA | | | | | | | | | | | | |
Net Income Attributable to ADS
| | | | |
$
|
29,675
| |
$
|
3,943
| | | |
$
|
34,054
| |
$
|
2,577
| |
Depreciation and amortization (a) | | | | | |
25,571
| | |
3,094
| | | | |
25,398
| | |
3,360
| |
Interest expense, net
| | | | | |
7,933
| | |
34
| | | | |
8,938
| | |
15
| |
Income tax expense
| | | | |
|
21,895
| |
|
1,413
|
| | |
|
22,741
| |
|
1,016
|
|
Segment EBITDA
| | | | | |
85,074
| | |
8,484
| | | | |
91,131
| | |
6,968
| |
Derivative fair value adjustments
| | | | | |
238
| | |
-
| | | | |
163
| | |
-
| |
Foreign currency transaction losses
| | | | | |
-
| | |
(87
|
)
| | | |
-
| | |
(75
|
)
|
Unconsolidated affiliates interest and tax
| | | | | |
-
| | |
228
| | | | |
94
| | |
319
| |
Management fee to minority interest holder JV
| | | | | |
-
| | |
604
| | | | |
-
| | |
558
| |
Share-based compensation
| | | | | |
1,424
| | |
-
| | | | |
4,416
| | |
-
| |
ESOP deferred compensation
| | | | | |
5,026
| | |
-
| | | | |
5,374
| | |
-
| |
Transaction costs (b) | | | | |
|
118
| |
|
-
|
| | |
|
715
| |
|
-
|
|
Segment Adjusted EBITDA | | | | | $ | 91,880 | | $ | 9,229 |
| | | $ | 101,893 | | $ | 7,770 |
|
| | | | | | | | | | | | | | | | | |
|
|
|
|
(a)
|
|
|
Includes our proportionate share of depreciation and amortization
expense of $677 and $1,272 related to our Tigre ADS joint venture,
BaySaver joint venture and Tigre-ADS USA joint venture, which is
included in Net income of unconsolidated affiliates in our Condensed
Consolidated Statements of Income for the six months ended September
30, 2013 and 2014, respectively.
|
| | |
(b)
| | |
Represents expenses recorded related to legal, accounting and other
professional fees incurred in connection with our debt refinancing
and completion of the IPO.
|
| | | | | |
|
Adjusted Earningsper Fully Converted Share, which is a non-GAAP
measure, is a supplemental measure of financial performance that is not
required by, or presented in accordance with GAAP. We calculate Adjusted
earnings per fully converted share (Non-GAAP), and Weighted average
fully converted common shares outstanding (Non-GAAP), by adjusting our
Net income per share - Basic and Weighted average common shares
outstanding – Basic, the most comparable GAAP measures.
To effect this adjustment, we have (1) removed the adjustment for the
change in fair value of Redeemable Convertible Preferred Stock
classified as mezzanine equity from the numerator of the Net income per
share - Basic computation, (2) added back the dividends to Redeemable
Convertible Preferred Stockholders and dividends paid to unvested
restricted stockholders, (3) made corresponding adjustments to the
amount allocated to participating securities under the two-class
earnings per share computation method, and (4) added back ESOP deferred
compensation attributable to the shares of redeemable convertible
preferred stock allocated to employee ESOP accounts during the
applicable period, which is a non-cash charge to our earnings and not
deductible for income tax purposes.
We have also made adjustments to the Weighted average common shares
outstanding – Basic to assume, (1) share conversion of the Redeemable
Convertible Preferred Stock to outstanding shares of common stock and
(2) add shares of outstanding unvested restricted stock.
Adjusted Earnings Per Fully Converted Share (Non-GAAP) is included in
this report because it is a key metric used by management and our board
of directors to assess our financial performance. Adjusted Earnings Per
Fully Converted Share (Non-GAAP) is not necessarily comparable to other
similarly titled captions of other companies due to different methods of
calculation.
The following table presents a reconciliation of Adjusted Earnings Per
Fully Converted Share (Non-GAAP), and the corresponding Weighted Average
Fully Converted Common Shares Outstanding (Non-GAAP) to our Net income
per share and corresponding Weighted average common shares outstanding
amounts, the most comparable GAAP measure, for each of the periods
indicated.
|
|
|
|
| Three Months Ended September 30, |
|
| Six Months Ended September 30, |
(Amounts in thousands, except per share data) | | | | | 2013 |
| 2014 | | | 2013 |
| 2014 |
Net income available to common shareholders
| | | | |
$
|
12,378
| |
$
|
26,268
| | | |
$
|
25,284
| |
$
|
22,462
|
Adjustments to net income available to common shareholders:
| | | | | | | | | | | | |
Change in fair value of Redeemable Convertible Preferred Stock
| | | | | |
3,186
| | |
(7,319
|
)
| | | |
4,764
| | |
11,054
|
Dividends to Redeemable Convertible Preferred Stockholders
| | | | | |
214
| | |
37
| | | | |
430
| | |
75
|
Dividends paid to unvested restricted stockholders
| | | | | |
8
| | |
-
| | | | |
16
| | |
-
|
Undistributed income allocated to participating securities
| | | | |
|
1,536
| |
|
3,404
|
| | |
|
3,124
| |
|
3,040
|
Total adjustments to net income (loss) available to common
shareholders
| | | | |
|
4,944
| |
|
(3,878
|
)
| | |
|
8,334
| |
|
14,169
|
Net income attributable to ADS
| | | | | |
17,322
| | |
22,390
| | | | |
33,618
| | |
36,631
|
Fair value of ESOP Compensation related to Redeemable Convertible
Preferred Stock
| | | | |
|
2,506
| |
|
2,687
|
| | |
|
5,026
| |
|
5,374
|
Adjusted net income – (Non-GAAP)
| | | | |
$
|
19,828
| |
$
|
25,077
|
| | |
$
|
38,644
| |
$
|
42,005
|
Weighted Average Common Shares Outstanding – Basic
| | | | | |
47,250
| | |
51,518
| | | | |
47,220
| | |
49,538
|
Unvested restricted shares
| | | | | |
336
| | |
221
| | | | |
328
| | |
235
|
Redeemable Convertible Preferred shares
| | | | |
|
20,341
| |
|
20,099
|
| | |
|
20,379
| |
|
20,099
|
Total Weighted Average Fully Converted Common Shares Outstanding
(Non-GAAP)
| | | | | |
67,927
| | |
71,838
| | | | |
67,927
| | |
69,872
|
Adjusted Earnings Per Fully Converted Share (Non-GAAP) | | | | | $ | 0.29 | | $ | 0.35 | | | | $ | 0.57 | | $ | 0.60 |
| | | | | | | | | | | |
|
Diluted Shares of Common Stock Outstanding (Non-GAAP) is included in
this report because it is a key metric used by management and our board
of directors to assess our total market capitalization. We calculate
diluted shares of common stock outstanding by adjusting our shares of
common stock outstanding for outstanding shares of unvested restricted
common stock and on an as-converted basis the outstanding shares of ESOP
preferred stock. Diluted shares of common stock outstanding is not
necessarily comparable to other similarly titled captions of other
companies due to different methods of calculation.
The following table presents a reconciliation of Diluted Shares of
Common Stock Outstanding (Non-GAAP) to our shares of Common Stock
Outstanding amounts, the most comparable GAAP measure, for the period
presented.
|
|
|
|
|
| |
|
|
|
| As of September 30, 2014 |
| | | | | |
Common Stock Outstanding
| | | | |
52,934,649
|
| | | | | |
Unvested Restricted Stock
| | | | |
237,906
|
| | | | | |
Redeemable Convertible Preferred Stock
| | | | |
20,099,096
|
| | | | | | Total Diluted Shares of Common Stock Outstanding (Non-GAAP) | | | | | 73,271,651 |
| | | | | | | | | | |
|
Advanced Drainage Systems, Inc.
Michael Higgins, 614-658-0050
Mike.Higgins@ads-pipe.com
Source: Advanced Drainage Systems, Inc.