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 on an unaudited basis
for the fiscal year ended March 31, 2016.
Fiscal Year Ended March 31, 2016 Highlights
- Net sales increased 9.3% to $1.289 billion
- Net income of $26.1 million compared to $12.8 million in fiscal
year 2015
- Adjusted EBITDA (Non-GAAP) of $185.9 million compared to $143.8
million in fiscal year 2015
- Cash flow from operating activities of $134.8 million compared to
$74.4 million in fiscal year 2015
- Free cash flow (Non-GAAP) of $89.9 million compared to $42.3
million in fiscal year 2015
Joe Chlapaty, Chairman and Chief Executive Officer of ADS commented, “In
fiscal year 2016, we experienced net sales growth of 9.3% compared to
fiscal year 2015, driven primarily by healthy conversion and favorable
weather conditions in the majority of our end markets, as well as
contributions from the Ideal Pipe acquisition. Our sales were
particularly strong in the second half of the fiscal year, as we
generated net sales growth of 11.8% in the third quarter and 17.9% in
the fourth quarter, more than offsetting a slower-than-expected start to
the year. Our strong second half performance reflected significant
growth in our Allied Products and healthy Pipe sales, as we continued to
gain market share by capitalizing on conversion opportunities. Our
performance in the domestic construction markets was also strong, as we
grew 10.6% for the year compared to the estimated market growth of only
5%.”
Chlapaty continued, “We are pleased with our full year 2016 results and
continue to see significant opportunity for further growth and operating
leverage as we look ahead to 2017 and beyond. We currently expect the
momentum that we experienced in the second half of the year to continue
into fiscal year 2017, complemented by favorable raw material and energy
costs. We remain confident in our ability to generate above-market
growth across all of our end markets as we execute our growth strategy
of conversion from alternative materials with our broad portfolio of
Pipe and Allied Products.”
Fiscal Year 2016 Results
Gross profit increased $74.5 million, or 36.2 %, to $280.7 million for
fiscal year 2016, compared to $206.1 million for the prior fiscal year.
As a percentage of net sales, gross profit was 21.8%, compared to 17.5%,
for the prior fiscal year. The increase in gross profit was largely
attributed to increased revenues combined with lower raw material and
transportation costs.
The Company reported Adjusted EBITDA (Non-GAAP) of $185.9 million in the
full fiscal year 2016 compared to Adjusted EBITDA of $143.8 million in
the prior fiscal year, an increase of 29.3%. As a percentage of net
sales, Adjusted EBITDA was 14.4% for the fiscal year 2016 compared to
12.2% in the prior fiscal year. The increase in Adjusted EBITDA was
largely attributed to the factors mentioned above offset by settlement
losses on hedge positions primarily related to polypropylene resins.
Adjusted Earnings per fully converted share (Non-GAAP) for the fiscal
year 2016 was $0.42 per share based on weighted average fully converted
shares of 73.5 million, improved from an adjusted earnings per fully
converted share of $0.29 per share for the prior year.
A reconciliation of GAAP to Non-GAAP financial measures for Adjusted
EBITDA, Free Cash Flow 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 fiscal year 2016, the Company recorded net cash provided by
operating activities of $134.8 million compared to $74.4 million for the
same period last year. Long Term Debt was $350.2 million as of March 31,
2016, a reduction of $49.7 million from March 31, 2015.
Fiscal Year 2017 Outlook
Based on current visibility, backlog of existing orders and business
trends, the Company provided its financial targets for fiscal year 2017.
Net sales for fiscal year 2017 are forecasted to be in the range of
$1.330 billion to $1.380 billion, while the outlook for Adjusted EBITDA
(Non-GAAP) is expected to be in the range of $205 million to $230
million. Capital expenditures are expected to be approximately $50-55
million.
Scott Cottrill, Executive Vice President and Chief Financial Officer of
ADS, commented, “Our guidance for fiscal year 2017 reflects anticipated
overall domestic end market growth of 4% to 7% in our construction
related end markets and a decline of 5% to 12% in the agriculture
market. In addition, international net sales are expected to be
relatively soft, driven by weakness in the Mexican economy and flat
sales in Canada due to a weaker agriculture market that we believe will
offset growth in our construction markets. Adjusted EBITDA is forecasted
to improve by 10% to 24% driven by higher sales volumes, as well as a
favorable cost environment due to lower raw material costs, partially
offset by anticipated lower selling prices and higher SG&A expenses.”
Webcast Information
The Company will host an investor conference call and webcast on
Tuesday, June 7, 2016 at 10:00 a.m. Eastern Time. The live call can be
accessed by dialing 1-866-450-8367 (US toll-free) or 1-412-317-5465
(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 61
manufacturing plants and 31 distribution centers. To learn more about
the ADS, please visit the Company’s website at www.ads-pipe.com.
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. 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,” “confident” 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 CONSOLIDATED STATEMENTS OF INCOME (unaudited) |
|
| | Twelve Months Ended March 31, |
(Amounts in thousands, except per share data) | | | 2016 |
| | 2015 |
Net sales
| |
$
|
1,289,483
| |
$
|
1,180,073
|
Cost of goods sold
| | |
1,008,831
| | |
973,960
|
Gross profit
| | |
280,652
| | |
206,113
|
Operating expenses:
| | | | | | |
Selling
| | |
87,205
| | |
78,981
|
General and administrative
| | |
101,353
| | |
58,749
|
Loss on disposal of assets or businesses
| | |
812
| | |
362
|
Intangible amortization
| | |
9,223
| | |
9,754
|
Income from operations
| | |
82,059
| | |
58,267
|
Other expense:
| | | | | | |
Interest expense
| | |
18,460
| | |
19,368
|
Derivative losses and other expense, net
| | |
17,136
| | |
14,370
|
Income before income taxes
| | |
46,463
| | |
24,529
|
Income tax expense
| | |
19,087
| | |
9,443
|
Equity in net loss of unconsolidated affiliates
| | |
1,234
| | |
2,335
|
Net income
| | |
26,142
| | |
12,751
|
Less net income attributable to noncontrolling interest
| | |
5,515
| | |
4,131
|
Net income attributable to ADS
| | |
20,627
| | |
8,620
|
Change in fair value of Redeemable convertible preferred stock
| | |
-
| | |
(11,054)
|
Accretion of Redeemable noncontrolling interest
| | |
(932)
| | |
-
|
Dividends to Redeemable convertible preferred stockholders
| | |
(1,425)
| | |
(661)
|
Dividends paid to unvested restricted stockholders
| | |
(24)
| | |
(11)
|
Net income (loss) available to common stockholders and participating
securities
| | |
18,246
| | |
(3,106)
|
Undistributed income allocated to participating securities
| | |
(796)
| | |
-
|
Net income (loss) available to common stockholders | |
$
| 17,450 | | $ | (3,106) |
| | | | | |
|
Weighted average common shares outstanding: | | | | | | |
Basic
| | |
53,978
| | |
51,344
|
Diluted
| | |
61,378
| | |
51,344
|
Net income (loss) per share: | | | | | | |
Basic
| |
$
|
0.32
| |
$
|
(0.06)
|
Diluted
| |
$
|
0.30
| |
$
|
(0.06)
|
Cash dividends declared per share | |
$
|
0.05
| |
$
|
0.08
|
| | | | | |
|
|
|
| |
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) |
| | | Fiscal Year Ended March 31, |
| | | |
| |
(Amounts in thousands, except par value) | | | 2016 | | 2015 |
ASSETS | | |
| |
|
Current assets: | | | | | |
Cash
| | |
$
|
4,492
| |
$
|
3,623
|
Receivables
| | | |
189,274
| | |
154,294
|
Inventories
| | | |
237,691
| | |
269,842
|
Deferred income taxes and other current assets
| | |
|
7,093
| |
|
18,972
|
Total current assets
| | | |
438,550
| | |
446,731
|
Property, plant and equipment, net
| | | |
391,744
| | |
377,067
|
Other assets: | | | | | |
Goodwill
| | | |
100,885
| | |
98,679
|
Intangible assets, net
| | | |
59,869
| | |
58,055
|
Other assets
| | |
|
49,955
| |
|
61,167
|
Total assets | | | $ | 1,041,003 | | $ | 1,041,699 |
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Current maturities of debt obligations
| | |
$
|
35,870
| |
$
|
9,580
|
Current maturities of capital lease obligations
| | | |
19,231
| | |
15,731
|
Accounts payable
| | | |
117,764
| | |
111,893
|
Other accrued liabilities
| | | |
69,819
| | |
54,349
|
Accrued income taxes
| | |
|
4,524
| |
|
6,041
|
Total current liabilities
| | | |
247,208
| | |
197,594
|
Long-term debt obligation
| | | |
315,345
| | |
390,315
|
Long-term capital lease obligations
| | | |
56,809
| | |
45,503
|
Deferred tax liabilities
| | | |
54,914
| | |
65,088
|
Other liabilities
| | |
|
28,912
| |
|
28,602
|
Total liabilities
| | | |
703,188
| | |
727,102
|
Commitments and contingencies
| | | | | |
Mezzanine equity: | | | | | |
Redeemable convertible preferred stock
| | | |
310,240
| | |
320,490
|
Deferred compensation — unearned ESOP shares
| | | |
(205,664)
| | |
(212,469)
|
Redeemable noncontrolling interest in subsidiaries
| | |
|
7,697
| |
|
—
|
Total mezzanine equity
| | | |
112,273
| | |
108,021
|
Stockholders’ equity: | | | | | |
Common stock
| | | |
12,393
| | |
12,393
|
Paid-in capital
| | | |
715,334
| | |
700,977
|
Common stock in treasury, at cost
| | | |
(441,197)
| | |
(445,065)
|
Accumulated other comprehensive loss
| | | |
(21,261)
| | |
(15,521)
|
Retained deficit
| | |
|
(54,234)
| |
|
(62,621)
|
Total ADS stockholders’ equity
| | | |
211,035
| | |
190,163
|
Noncontrolling interest in subsidiaries
| | |
|
14,507
| |
|
16,413
|
Total stockholders’ equity
| | |
|
225,542
| |
|
206,576
|
Total liabilities, mezzanine equity and stockholders’ equity | | | $ | 1,041,003 |
| $ | 1,041,699 |
| | | | |
|
|
| | |
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
| |
| Fiscal Year Ended March 31, |
| |
| 2016 |
|
| 2015 |
Cash Flows from Operating Activities | | | | | | |
Net cash provided by operating activities
| |
$
|
134,757
| |
$
|
74,379
|
Cash Flows from Investing Activities | | | | | | |
Capital expenditures
| | |
(40,964)
| | |
(31,479)
|
Proceeds from disposition of assets or businesses
| | |
-
| | |
538
|
Cash paid for acquisitions, net of cash acquired
| | |
(3,188)
| | |
(36,385)
|
Investment in unconsolidated affiliates
| | |
-
| | |
(7,566)
|
Additions of capitalized software
| | |
(3,924)
| | |
(601)
|
Proceeds from note receivable to related party
| | |
3,854
| | |
-
|
Issuance of note receivable to related party
| | |
(3,854)
| | |
-
|
Other investing activities
| |
|
(888)
| |
|
(600)
|
Net cash used in investing activities
| |
|
(48,964)
| |
|
(76,093)
|
Cash Flows from Financing Activities | | | | | | |
Proceeds from Revolving Credit Facility
| | |
409,100
| | |
389,200
|
Payments on Revolving Credit Facility
| | |
(448,200)
| | |
(432,200)
|
Payments on Term Loan
| | |
(8,750)
| | |
(6,250)
|
Proceeds from notes, mortgages, and other debt
| | |
6,378
| | |
-
|
Payments of notes, mortgages, and other debt
| | |
(7,208)
| | |
(4,903)
|
Payments on CSV life insurance policies
| | |
-
| | |
(872)
|
Payments on capital lease obligation
| | |
(19,780)
| | |
(9,278)
|
Payments for deferred initial public offering costs
| | |
-
| | |
(6,479)
|
Proceeds from initial public offering of common stock, net of
underwriter discounts and commissions
| | |
-
| | |
79,131
|
Cash dividends paid
| | |
(16,240)
| | |
(7,869)
|
Purchase of treasury stock – common
| | |
-
| | |
(3)
|
Other financing activities
| |
|
647
| |
|
1,314
|
Net cash provided by (used in) financing activities
| |
|
(84,053)
| |
|
1,791
|
Effect of exchange rate changes on cash
| |
|
(871)
| |
|
(385)
|
Net change in cash
| | |
869
| | |
(308)
|
Cash at beginning of year
| |
|
3,623
| |
|
3,931
|
Cash at end of year | | $ | 4,492 | | $ | 3,623 |
| | | | | |
|
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 (" GAAP"). ADS management uses non-GAAP
measures in its analysis of the Company's performance. Investors are
encouraged to review the reconciliation of non-GAAP financial measures
to the comparable GAAP results available in the accompanying tables.
Reconciliation of Non-GAAP Financial Measures
This press release includes references to Adjusted EBITDA, Free cash
flow and Adjusted earnings per fully converted share, all non-GAAP
financial measures. These non-GAAP financial measures are used in
addition to and in conjunction with results presented in accordance with
GAAP. These measures are not intended to be substitutes for those
reported in accordance with GAAP. Adjusted EBITDA, Free Cash Flow, and
Adjusted Earnings per Fully Converted Share may be different from
non-GAAP financial measures used by other companies, even when similar
terms are used to identify such measures.
Adjusted EBITDA is a non-GAAP financial measure that comprises net
income before interest, income taxes, depreciation and amortization,
stock-based compensation, non-cash charges and certain other expenses.
The Company’s definition of Adjusted EBITDA may differ from similar
measures used by other companies, even when similar terms are used to
identify such measures. Adjusted EBITDA is a key metric used by
management and the Company’s board of directors to assess financial
performance and evaluate the effectiveness of the Company’s business
strategies. Accordingly, management believes that Adjusted EBITDA
provides useful information to investors and others in understanding and
evaluating our operating results in the same manner as the Company’s
management and board of directors. In order to provide investors with a
meaningful reconciliation, the Company has provided below a
reconciliation of net income with Adjusted EBITDA as originally
reported, and the impact of the restatement adjustments identified to
date on Adjusted EBITDA.
Free Cash Flow is a non-GAAP financial measure that comprises cash flow
from operations less capital expenditures and expenditures for
capitalized software. Free Cash Flow is a measure used by management and
the Company’s board of directors to assess the Company’s ability to
generate cash. Accordingly, management believes that Free Cash Flow
provides useful information to investors and others in understanding and
evaluating our ability to generate cash flow from operations after
capital expenditures. In order to provide investors with a meaningful
reconciliation, the Company has provided below a reconciliation of cash
flow from operating activities to Free Cash Flow.
Adjusted Earnings per Fully Converted Share is a non-GAAP measure that
is calculated 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 accretion
of Redeemable noncontrolling interest, (2) 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, (3) added back the dividends to Redeemable
convertible preferred stockholders and dividends paid to unvested
restricted stockholders, (4) made corresponding adjustments to the
amount allocated to participating securities under the two-class
earnings per share computation method, and (5) 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. We have
also made adjustments to the Weighted average common shares outstanding
– Basic to assume (1) share conversion of the Redeemable convertible
preferred stock outstanding shares to common stock and (2) add shares of
outstanding unvested restricted stock. Adjusted earnings per fully
converted share (non-GAAP) is included because it is a key metric used
by management and our board of directors to assess our financial
performance.
The following tables present a reconciliation of Adjusted EBITDA to Net
Income, Free Cash Flow to Cash Flow from Operating Activities, and
Adjusted Earnings per Fully Converted Share to Earnings per Share, the
most comparable GAAP measures, for each of the periods indicated:
|
| | |
Reconciliation of Adjusted EBITDA to Net Income |
|
| | Twelve Months Ended March 31, |
(Amounts in thousands) | | 2016 |
| 2015 |
Net income | | $ | 26,142 | | $ | 12,751 |
Depreciation and amortization
| | |
72,264
| | |
65,472
|
Interest expense
| | |
18,460
| | |
19,368
|
Income tax expense
| |
|
19,087
| |
|
9,443
|
EBITDA
| | |
135,953
| | |
107,034
|
Derivative fair value adjustments
| | |
3,377
| | |
7,746
|
Foreign currency transaction losses
| | |
563
| | |
5,404
|
Loss on disposal of assets or businesses
| | |
812
| | |
362
|
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | |
3,215
| | |
3,585
|
Contingent consideration remeasurement
| | |
309
| | |
174
|
Share-based compensation
| | |
2,944
| | |
5,880
|
ESOP deferred stock based compensation
| | |
10,250
| | |
12,144
|
Loss related to BaySaver step acquisition
| | |
490
| | |
-
|
Restatement costs
| | |
27,970
| | |
-
|
Transaction costs
| |
|
-
| |
|
1,448
|
Adjusted EBITDA | | $ | 185,883 | | $ | 143,777 |
| | | | | |
|
|
|
|
| |
Reconciliation of Free cash flow to Cash flow from operations |
|
| | | | Twelve Months Ended March 31, |
(Amounts in thousands) | | | | 2016 |
| 2015 |
Cash flow from operating activities | | | |
$
|
134,757
| |
$
|
74,379
|
Capital expenditures
| | | | |
(40,964)
| | |
( 31,479)
|
Additions to capitalized software
| | | |
|
( 3,924)
| |
|
(601)
|
Free cash flow | | | |
$
|
89,869
| |
$
|
42,299
|
| | | | | | | |
|
|
| |
Reconciliation of Adjusted Earnings per Fully Converted Share
(non-GAAP) to Net Income (Loss) Available to Common Stockholders |
|
| | Twelve Months Ended March 31, |
(Amounts in thousands, except per share data) | | 2016 |
| 2015 |
Net income (loss) available to common stockholders | | $ | 17,450 | | $ | (3,106) |
Adjustments to net loss (income) available to common stockholders:
| | | | | | |
Accretion of Redeemable noncontrolling interest
| | |
932
| | |
-
|
Change in fair value of Redeemable convertible preferred stock
| | |
-
| | |
11,054
|
Dividends to Redeemable convertible preferred stockholders
| | |
1,425
| | |
661
|
Dividends paid to unvested restricted stockholders
| | |
24
| | |
11
|
Undistributed income allocated to participating securities
| |
|
796
| |
|
-
|
Total adjustments to net (loss) income available to common
stockholders
| |
|
3,177
| |
|
11,726
|
Net income attributable to ADS
| |
$
|
20,627
| |
$
|
8,620
|
Adjustments to net income attributable to ADS:
| | | | | | |
Fair value of ESOP compensation related to Redeemable convertible
preferred stock
| |
|
10,250
| |
|
12,144
|
Adjusted net income - (Non-GAAP) | | $ | 30,877 | | $ | 20,764 |
| | | | | |
|
Weighted Average Common Shares Outstanding - Basic
| | |
53,978
| | |
51,344
|
Adjustments to Weighted Average Common Shares Outstanding - Basic
| | | | | | |
Unvested restricted shares
| | |
123
| | |
228
|
Redeemable convertible preferred shares
| |
|
19,399
| |
|
20,029
|
Total Weighted Average Fully Converted Common Shares (Non-GAAP)
| | |
73,500
| | |
71,601
|
Adjusted Earnings per Fully Converted Share (Non-GAAP) | | $ | 0.42 | | $ | 0.29 |
| | | | | |
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160607005769/en/
Advanced Drainage Systems, Inc.
Michael Higgins, 614-658-0050
Mike.Higgins@ads-pipe.com
Source: Advanced Drainage Systems, Inc.