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 fourth quarter
and fiscal year ended March 31, 2017.
Fiscal Fourth Quarter 2017 Highlights
- Net sales of $244.2 million compared to $245.4 million in prior
year quarter
- Net loss of $18.1 million compared to $11.1 million in prior year
quarter
- Adjusted EBITDA (Non-GAAP) of $12.6 million compared to $21.6
million in prior year quarter
Fiscal Year 2017 Highlights
- Net sales of $1,257.3 million compared to $1,290.7 million in prior
year
- Net income of $35.9 million compared to $30.6 million in prior year
- Adjusted EBITDA (Non-GAAP) of $193.4 million compared to $187.3
million in prior year
- Cash flow from operating activities of $104.2 million compared to
$135.3 million in prior year
- Free cash flow (Non-GAAP) of $57.6 million compared to $90.4
million in prior year
Joe Chlapaty, Chairman and Chief Executive Officer of ADS commented, “In
light of the challenging market environment, we were pleased with our
overall performance during fiscal 2017. We continued our long track
record of market conversion in our core construction markets, with sales
in both non-residential and new residential construction growing 300
basis points above their respective markets. We also generated Adjusted
EBITDA of over $193 million, within our updated guidance range, and had
another strong year of favorable cash flow generation.”
Chlapaty continued, “As we enter fiscal 2018, we expect our strong
performance in our core construction markets to continue, aided by
improving sales in international coupled with a slower decline in Ag
compared to the prior year. In addition, we will look to accelerate our
growth through innovation, such as our recently launched HPXR 75 product
line, as well as bolt-on acquisitions that complement our product suite
and geographic footprint. Lastly, we are committed to improving our
longer-term margin profile through performance improvement initiatives
focused on operational and customer excellence. Overall, we feel very
good about our position in the markets we serve and our ability to
continue driving above-market growth and operating leverage over time.”
Fiscal Fourth Quarter 2017 Results compared to
Fiscal Fourth Quarter 2016 Results
Net sales decreased 0.5% to $244.2 million, as compared to $245.4
million in the prior period. Domestic net sales increased 0.8% to $223.4
million as compared to $221.6 million in the prior period, driven by
construction market demand and the impact of favorable weather
conditions in certain geographies. International net sales decreased
12.7% to $20.8 million as compared to $23.8 million in the prior period.
Gross profit decreased 20.7% to $39.3 million, as compared to $49.5
million the prior period. As a percentage of net sales, gross profit
decreased 410 basis points to 16.1% compared to 20.2% in the prior
period, primarily due to the timing of absorption costs related to
production and an increase in transportation costs.
General and administrative expenses increased 17.4% to $32.5 million, as
compared to $27.7 million in the prior period. The increase in general
and administrative expenses is primarily due to increases of $7.9
million in stock-based compensation, $2.3 million in professional fees
and $1.7 million in executive termination payments compared to the prior
period. These increases were partially offset by a $9.0 million decrease
in restatement related costs compared to the prior period.
Adjusted EBITDA (Non-GAAP) decreased 41.9% to $12.6 million, as compared
to $21.6 million in the prior period. As a percentage of net sales,
Adjusted EBITDA decreased to 5.1% as compared to 8.8% in the prior
period. The decrease in Adjusted EBITDA was largely attributed to the
factors mentioned above.
Adjusted Loss Per Fully Converted Share (Non-GAAP) was $0.22 based on
weighted average fully converted shares of 73.9 million, increased from
$0.15 for the prior period on weighted average fully converted shares of
73.5 million.
A reconciliation of GAAP to Non-GAAP financial measures for Adjusted
EBITDA, Free Cash Flow, Adjusted Earnings Per Diluted Share and Adjusted
Loss Per Fully Converted 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.”
Fiscal Year 2017 Results compared to Fiscal
Year 2016 Results
Net sales decreased 2.6% to $1,257.3 million, as compared to $1,290.7
million in fiscal 2016. The decrease in net sales was primarily due to
continued softness in the agriculture market and Mexico, which offset 3%
growth in domestic construction markets compared to fiscal 2016.
Gross profit increased 3.7% to $295.8 million, as compared to $285.4
million in fiscal 2016. As a percentage of net sales, gross profit
increased 140 basis points to 23.5%, compared to 22.1% in fiscal 2016.
The increase in gross margin is primarily due to disciplined pricing and
a favorable cost environment.
General and administrative expenses increased 19.9% to $111.0 million,
as compared to $92.5 million in fiscal 2016. The increase in general and
administrative expenses is primarily due to increases of $13.1 million
in stock-based compensation, $5.1 million in professional fees and $4.3
million in salaries and benefits compared to fiscal 2016. These
increases were partially offset by a $4.0 million decrease in
restatement related costs compared to fiscal 2016.
Adjusted EBITDA (Non-GAAP) increased 3.2% to $193.4 million, as compared
to $187.3 million in fiscal 2016. As a percentage of net sales, Adjusted
EBITDA increased to 15.4%, as compared to 14.5% in fiscal 2016. The
increase in Adjusted EBITDA was largely attributed to the same factors
mentioned above.
Adjusted Earnings Per Fully Converted Share (Non-GAAP) was $0.58 based
on weighted average fully converted shares of 73.9 million, increased
from $0.48 for fiscal 2016 on weighted average fully converted shares of
73.5 million.
The Company recorded net cash provided by operating activities of $104.2
million, as compared to $135.3 million for fiscal 2016. Net debt (total
debt and capital lease obligations net of cash) was $422.3 million as of
March 31, 2017, an increase of $4.8 million from March 31, 2016.
Fiscal Year 2018 Outlook
Based on current visibility, backlog of existing orders and business
trends, the Company provided its financial targets for fiscal 2018. Net
sales for fiscal year 2018 are expected to be in the range of $1.275
billion to $1.325 billion, while the outlook for Adjusted EBITDA
(Non-GAAP) is expected to be in the range of $200 and $220 million for
fiscal year 2018. Capital expenditures are expected to be approximately
$55 to $60 million.
Scott Cottrill, Executive Vice President and Chief Financial Officer of
ADS, commented, “Our guidance for fiscal 2018 reflects anticipated
domestic construction end market growth in the low to mid-single digits
and a low to mid-single digit decline in the agriculture market. In
addition, international markets are expected to generate low-single
digit growth.”
Webcast Information
The Company will host an investor conference call and webcast on
Thursday, May 25, 2017 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 the Company
Advanced Drainage Systems 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
approximately 60 manufacturing plants and over 30 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; the risk that additional information may arise that would require
the Company to make additional adjustments or revisions or to restate
the financial statements and other financial data for certain prior
periods and any future periods, any further delay in the filing of any
filings with the SEC; the review of potential weaknesses or deficiencies
in the Company’s disclosure controls and procedures, and discovering
further weaknesses of which we are not currently aware or which have not
been detected 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) | |
| | | | | |
|
| | Three Months Ended | | | Fiscal Year Ended | |
| | March 31, | | | March 31, | |
(Amounts in thousands, except per share data) | | 2017 | |
| 2016 | | | 2017 | |
| 2016 | |
Net sales
| |
$
|
244,184
| | |
$
|
245,398
| | |
$
|
1,257,261
| | |
$
|
1,290,678
| |
Cost of goods sold
| |
|
204,933
| | |
|
195,894
| | |
|
961,451
| | |
|
1,005,326
| |
Gross profit
| | |
39,251
| | | |
49,504
| | | |
295,810
| | | |
285,352
| |
Operating expenses:
| | | | | | | | | | | | | | | | |
Selling
| | |
22,743
| | | |
23,077
| | | |
91,475
| | | |
88,478
| |
General and administrative
| | |
32,521
| | | |
27,696
| | | |
110,950
| | | |
92,504
| |
Loss on disposal of assets and costs from exit and disposal
activities
| | |
5,432
| | | |
254
| | | |
8,509
| | | |
812
| |
Intangible amortization
| |
|
2,117
| | |
|
2,175
| | |
|
8,548
| | |
|
9,224
| |
Income from operations
| | |
(23,562
|
)
| | |
(3,698
|
)
| | |
76,328
| | | |
94,334
| |
Other expense:
| | | | | | | | | | | | | | | | |
Interest expense
| | |
3,916
| | | |
4,504
| | | |
17,467
| | | |
18,460
| |
Derivative (gains) losses and other (income) expense, net
| |
|
(427
|
)
| |
|
(1,758
|
)
| |
|
(5,970
|
)
| |
|
16,575
| |
Income before income taxes
| | |
(27,051
|
)
| | |
(6,444
|
)
| | |
64,831
| | | |
59,299
| |
Income tax expense
| | |
(10,913
|
)
| | |
342
| | | |
24,615
| | | |
23,498
| |
Equity in net loss of unconsolidated affiliates
| |
|
1,914
| | |
|
4,299
| | |
|
4,308
| | |
|
5,234
| |
Net (loss) income
| | |
(18,052
|
)
| | |
(11,085
|
)
| | |
35,908
| | | |
30,567
| |
Less net income attributable to noncontrolling interest
| |
|
58
| | |
|
1,034
| | |
|
2,958
| | |
|
5,515
| |
Net (loss) income attributable to ADS
| | |
(18,110
|
)
| | |
(12,119
|
)
| | |
32,950
| | | |
25,052
| |
Accretion of Redeemable noncontrolling interest
| | |
(419
|
)
| | |
(346
|
)
| | |
(1,560
|
)
| | |
(932
|
)
|
Dividends to Redeemable convertible preferred stockholders
| | |
(399
|
)
| | |
(343
|
)
| | |
(1,646
|
)
| | |
(1,425
|
)
|
Dividends paid to unvested restricted stockholders
| |
|
(69
|
)
| |
|
(6
|
)
| |
|
(73
|
)
| |
|
(24
|
)
|
Net (loss) income available to common stockholders and participating
securities
| | |
(18,997
|
)
| | |
(12,814
|
)
| | |
29,671
| | | |
22,671
| |
Undistributed income (loss) allocated to participating securities
| |
|
-
| | |
|
-
| | |
|
(1,700
|
)
| |
|
(1,270
|
)
|
Net (loss) income available to common stockholders | | $ | (18,997 | ) | | $ | (12,814 | ) | | $ | 27,971 | | | $ | 21,401 | |
| | | | | | | | | | | | | | | |
|
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic
| | |
55,186
| | | |
54,274
| | | |
54,919
| | | |
53,978
| |
Diluted
| | |
55,186
| | | |
54,274
| | | |
55,624
| | | |
55,176
| |
Net income per share: | | | | | | | | | | | | | | | | |
Basic
| |
$
|
(0.34
|
)
| |
$
|
(0.24
|
)
| |
$
|
0.51
| | |
$
|
0.40
| |
Diluted
| |
$
|
(0.34
|
)
| |
$
|
(0.24
|
)
| |
$
|
0.50
| | |
$
|
0.39
| |
Cash dividends declared per share | |
$
|
0.06
| | |
$
|
0.05
| | |
$
|
0.24
| | |
$
|
0.20
| |
|
| | |
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) | |
| | |
|
| | As of March 31, | |
(Amounts in thousands) | | 2017 | |
| 2016 | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash
| |
$
|
6,450
| | |
$
|
6,555
| |
Receivables
| | |
168,943
| | | |
186,883
| |
Inventories
| | |
258,430
| | | |
230,466
| |
Deferred income taxes and other current assets
| |
|
6,743
| | |
|
15,658
| |
Total current assets
| | |
440,566
| | | |
439,562
| |
Property, plant and equipment, net
| | |
406,858
| | | |
391,744
| |
Other assets: | | | | | | | | |
Goodwill
| | |
100,566
| | | |
100,885
| |
Intangible assets, net
| | |
51,758
| | | |
59,869
| |
Other assets
| |
|
46,537
| | |
|
45,256
| |
Total assets | |
$
|
1,046,285
| | |
$
|
1,037,316
| |
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Current maturities of debt obligations
| |
$
|
37,789
| | |
$
|
35,870
| |
Current maturities of capital lease obligations
| | |
21,450
| | | |
19,231
| |
Accounts payable
| | |
121,922
| | | |
119,606
| |
Current portion of liability-classified stock-based awards
| | |
11,926
| | | |
10,118
| |
Other accrued liabilities
| | |
54,460
| | | |
65,099
| |
Accrued income taxes
| |
|
8,207
| | |
|
2,260
| |
Total current liabilities
| | |
255,754
| | | |
252,184
| |
Long-term debt obligation
| | |
310,849
| | | |
312,214
| |
Long-term capital lease obligations
| | |
58,710
| | | |
56,809
| |
Deferred tax liabilities
| | |
44,007
| | | |
63,952
| |
Other liabilities
| |
|
26,530
| | |
|
37,921
| |
Total liabilities
| | |
695,850
| | | |
723,080
| |
Mezzanine equity: | | | | | | | | |
Redeemable convertible preferred stock
| | |
302,814
| | | |
310,240
| |
Deferred compensation — unearned ESOP shares
| | |
(198,216
|
)
| | |
(205,664
|
)
|
Redeemable noncontrolling interest in subsidiaries
| |
|
8,227
| | |
|
7,171
| |
Total mezzanine equity
| | |
112,825
| | | |
111,747
| |
Stockholders’ equity: | | | | | | | | |
Common stock
| | |
12,393
| | | |
12,393
| |
Paid-in capital
| | |
755,787
| | | |
739,097
| |
Common stock in treasury, at cost
| | |
(436,984
|
)
| | |
(440,995
|
)
|
Accumulated other comprehensive loss
| | |
(24,815
|
)
| | |
(21,261
|
)
|
Retained deficit
| |
|
(83,678
|
)
| |
|
(101,778
|
)
|
Total ADS stockholders’ equity
| | |
222,703
| | | |
187,456
| |
Noncontrolling interest in subsidiaries
| |
|
14,907
| | |
|
15,033
| |
Total stockholders’ equity
| |
|
237,610
| | |
|
202,489
| |
Total liabilities, mezzanine equity and stockholders’ equity | |
$
|
1,046,285
| | |
$
|
1,037,316
| |
| |
|
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |
| |
|
| Fiscal Year Ended March 31, | |
(Amounts in thousands) | 2017 | |
| 2016 | |
Cash Flow from Operating Activities |
$
|
104,239
| | |
$
|
135,342
| |
Cash Flows from Investing Activities | | | | | | | |
Capital expenditures
| |
(46,676
|
)
| | |
(44,942
|
)
|
Purchases of property, plant and equipment through financing
| |
(4,620
|
)
| | |
-
| |
Cash paid for acquisitions, net of cash acquired
| |
(8,573
|
)
| | |
(3,188
|
)
|
Proceeds from note receivable to related party
| |
-
| | | |
3,854
| |
Issuance of note receivable to related party
| |
-
| | | |
(3,854
|
)
|
Other investing activities
|
|
(1,390
|
)
| |
|
(888
|
)
|
Net cash used in investing activities
| |
(61,259
|
)
| | |
(49,018
|
)
|
Cash Flows from Financing Activities | | | | | | | |
Proceeds from Revolving Credit Facility
| |
412,400
| | | |
409,100
| |
Payments on Revolving Credit Facility
| |
(382,600
|
)
| | |
(448,200
|
)
|
Payments on Term Loan
| |
(10,000
|
)
| | |
(8,750
|
)
|
Payments on Senior Notes
| |
(25,000
|
)
| | |
-
| |
Proceeds from notes, mortgages, and other debt
| |
1,000
| | | |
6,378
| |
Payments on notes, mortgages, and other debt
| |
(870
|
)
| | |
(7,208
|
)
|
Payments on loans against CSV life insurance policies
| |
(6,823
|
)
| | |
-
| |
Equipment financing loans
| |
4,620
| | | |
-
| |
Payments on capital lease obligation
| |
(21,760
|
)
| | |
(19,780
|
)
|
Cash dividends paid
| |
(16,820
|
)
| | |
(16,240
|
)
|
Proceeds from options exercises
| |
4,011
| | | |
1,765
| |
Other financing activities
|
|
(983
|
)
| |
|
(29
|
)
|
Net cash used in financing activities
| |
(42,825
|
)
| | |
(82,964
|
)
|
Effect of exchange rate changes on cash
|
|
(260
|
)
| |
|
(428
|
)
|
Net change in cash
| |
(105
|
)
| | |
2,932
| |
Cash at beginning of period
|
|
6,555
| | |
|
3,623
| |
Cash at end of period | $ | 6,450 | | | $ | 6,555 | |
| | | | | | |
|
Selected Financial Data
The following tables set forth net sales by reportable segment for the
three and nine months ended December 31, 2016 and 2015, respectively.
|
| |
|
|
| | |
| |
|
|
| | |
| | Three Months Ended | | | | | | | Fiscal Year Ended | | | | | |
(Amounts in thousands | | March 31, | | | % | | | March 31, | | | % | |
except percentages) | | 2017 |
|
| 2016 | | | Variance | | | 2017 |
|
| 2016 | | | Variance | |
Net sales | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | |
Pipe
| |
$
|
159,149
| | |
$
|
157,084
| | | |
1.3%
| | |
$
|
786,546
| | |
$
|
812,071
| | | |
(3.1%
|
)
|
Allied Products
| |
|
64,239
| | |
|
64,497
| | | |
(0.4%
|
)
| |
|
315,690
| | |
|
301,725
| | | |
4.6%
| |
Total domestic
| | |
223,388
| | | |
221,581
| | | |
0.8%
| | | |
1,102,236
| | | |
1,113,796
| | | |
(1.0%
|
)
|
International | | | | | | | | | | | | | | | | | | | | | | | | |
Pipe
| | |
16,552
| | | |
18,363
| | | |
(9.9%
|
)
| | |
122,384
| | | |
139,731
| | | |
(12.4%
|
)
|
Allied Products
| |
|
4,244
| | |
|
5,454
| | | |
(22.2%
|
)
| |
|
32,641
| | |
|
37,151
| | | |
(12.1%
|
)
|
Total international
| | |
20,796
| | | |
23,817
| | | |
(12.7%
|
)
| | |
155,025
| | | |
176,882
| | | |
(12.4%
|
)
|
Consolidated | | | | | | | | | | | | | | | | | | | | | | | | |
Pipe
| | |
175,701
| | | |
175,447
| | | |
0.1%
| | | |
908,930
| | | |
951,802
| | | |
(4.5%
|
)
|
Allied Products
| |
|
68,483
| | |
|
69,951
| | | |
(2.1%
|
)
| |
|
348,331
| | |
|
338,876
| | | |
2.8%
| |
Total net sales
| |
$
|
244,184
| | |
$
|
245,398
| | | |
(0.5%
|
)
| |
$
|
1,257,261
| | |
$
|
1,290,678
| | | |
(2.6%
|
)
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
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
reconciliations of Adjusted EBITDA to net income.
Free Cash Flow is a non-GAAP financial measure that comprises cash flow
from operating activities less capital expenditures. 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, the most
comparable GAAP measure. To effect this adjustment with respect to Net
income available to common stockholders, we have (1) removed the
accretion of Redeemable noncontrolling interest in subsidiaries, (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. 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 a key metric
used by management and our board of directors to assess our financial
performance. This information is useful to investors as the preferred
shares held by the ESOP are required to be distributed to our employees
over time, which is done in the form of common stock after the
conversion of the preferred shares. As such, this measure is included
because it provides investors with information to understand the impact
on the financial statements once all preferred shares are converted and
distributed.
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 Net income per share –
Basic, the most comparable GAAP measures, for each of the periods
indicated:
Reconciliation of Adjusted EBITDA to Net Income
|
| Three Months Ended | |
| Fiscal Year Ended | |
| | March 31, | | | March 31, | |
(Amounts in thousands) | | 2017 | |
| 2016 | | | 2017 | |
| 2016 | |
Net income | |
$
|
(18,052
|
)
| |
$
|
(11,085
|
)
| |
$
|
35,908
| | |
$
|
30,567
| |
Depreciation and amortization
| | |
18,290
| | | |
18,955
| | | |
72,355
| | | |
71,009
| |
Interest expense
| | |
3,916
| | | |
4,504
| | | |
17,467
| | | |
18,460
| |
Income tax expense
| |
|
(10,913
|
)
| |
|
342
| | |
|
24,615
| | |
|
23,498
| |
EBITDA
| | |
(6,759
|
)
| | |
12,716
| | | |
150,345
| | | |
143,534
| |
Derivative fair value adjustments
| | |
377
| | | |
(5,587
|
)
| | |
(10,921
|
)
| | |
2,163
| |
Foreign currency translation (gains) losses
| | |
49
| | | |
(38
|
)
| | |
(1,629
|
)
| | |
697
| |
Loss (gain) on disposal of assets and costs from exit and disposal
activities
| | |
5,432
| | | |
254
| | | |
8,509
| | | |
812
| |
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | |
702
| | | |
944
| | | |
2,751
| | | |
3,215
| |
Contingent consideration remeasurement
| | |
(307
|
)
| | |
257
| | | |
(265
|
)
| | |
371
| |
Stock-based compensation (benefit) expense
| | |
5,608
| | | |
(2,873
|
)
| | |
8,307
| | | |
(5,868
|
)
|
ESOP deferred stock-based compensation
| | |
2,140
| | | |
875
| | | |
9,568
| | | |
10,250
| |
(Benefit) expense related to executive termination payments
| | |
1,104
| | | |
(552
|
)
| | |
1,092
| | | |
(294
|
)
|
Restatement-related costs
| | |
2,635
| | | |
11,642
| | | |
24,026
| | | |
27,970
| |
Inventory step up related to PTI acquisition
| | |
525
| | | |
-
| | | |
525
| | | |
-
| |
Bargain purchase gain on PTI acquisition
| | |
(609
|
)
| | |
-
| | | |
(609
|
)
| | |
-
| |
Loss related to BaySaver acquisition
| | |
-
| | | |
-
| | | |
-
| | | |
490
| |
Transaction costs
| | |
372
| | | |
-
| | | |
372
| | | |
-
| |
Impairment of investment in unconsolidated affiliate
| |
|
1,300
| | |
|
4,000
| | |
|
1,300
| | |
|
4,000
| |
Adjusted EBITDA | |
$
|
12,569
| | |
$
|
21,638
| | |
$
|
193,371
| | |
$
|
187,340
| |
| | | | | | | | | | | | | | | |
|
Reconciliation of Segment Adjusted EBITDA to Net Income
|
| Three Months Ended March 31, | |
| | 2017 | |
| 2016 | |
(Amounts in thousands) | | Domestic | |
| International | | | Domestic | |
| International | |
Net income | |
$
|
(8,586
|
)
| |
$
|
(9,466
|
)
| |
$
|
(3,192
|
)
| |
$
|
(7,893
|
)
|
Depreciation and amortization
| | |
16,329
| | | |
1,961
| | | |
16,998
| | | |
1,957
| |
Interest expense
| | |
3,813
| | | |
103
| | | |
4,364
| | | |
140
| |
Income tax expense
| |
|
(9,533
|
)
| |
|
(1,380
|
)
| |
|
(259
|
)
| |
|
601
| |
EBITDA
| | |
2,023
| | | |
(8,782
|
)
| | |
17,911
| | | |
(5,195
|
)
|
Derivative fair value adjustments
| | |
377
| | | |
-
| | | |
(5,633
|
)
| | |
46
| |
Foreign currency translation (gains) losses
| | |
-
| | | |
49
| | | |
-
| | | |
(38
|
)
|
Loss (gain) on disposal of assets and costs from exit and disposal
activities
| | |
2,753
| | | |
2,679
| | | |
97
| | | |
157
| |
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | |
262
| | | |
440
| | | |
283
| | | |
661
| |
Contingent consideration remeasurement
| | |
(307
|
)
| | |
-
| | | |
257
| | | |
-
| |
Stock-based compensation (benefit) expense
| | |
5,608
| | | |
-
| | | |
(2,873
|
)
| | |
-
| |
ESOP deferred stock-based compensation
| | |
2,140
| | | |
-
| | | |
875
| | | |
-
| |
(Benefit) expense related to executive termination payments
| | |
1,104
| | | |
-
| | | |
(552
|
)
| | |
-
| |
Restatement-related costs
| | |
2,635
| | | |
-
| | | |
11,642
| | | |
-
| |
Inventory step up related to PTI acquisition
| | |
525
| | | |
-
| | | |
-
| | | |
-
| |
Bargain purchase gain on PTI acquisition
| | |
(609
|
)
| | |
-
| | | |
-
| | | |
-
| |
Loss related to BaySaver acquisition
| | |
-
| | | |
-
| | | |
-
| | | |
-
| |
Transaction costs
| | |
372
| | | |
-
| | | |
-
| | | |
-
| |
Impairment of investment in unconsolidated affiliate
| |
|
-
| | |
|
1,300
| | |
|
-
| | |
|
4,000
| |
Adjusted EBITDA(a) | |
$
|
16,883
| | |
$
|
(4,314
|
)
| |
$
|
22,007
| | |
$
|
(369
|
)
|
(a)
|
A portion of the reduction in International EBITDA is related to
transfer pricing. The reduction is fully offset by an increase in
Domestic EBITDA.
|
|
| | |
| | Fiscal Year Ended March 31, | |
| | 2017 | |
| 2016 | |
(Amounts in thousands) | | Domestic | |
| International | | | Domestic | |
| International | |
Net income | |
$
|
35,118
| | |
$
|
790
| | |
$
|
24,875
| | |
$
|
5,692
| |
Depreciation and amortization
| | |
63,747
| | | |
8,608
| | | |
62,625
| | | |
8,384
| |
Interest expense
| | |
17,049
| | | |
418
| | | |
17,908
| | | |
552
| |
Income tax expense
| |
|
21,786
| | |
|
2,829
| | |
|
20,465
| | |
|
3,033
| |
EBITDA
| | |
137,700
| | | |
12,645
| | | |
125,873
| | | |
17,661
| |
Derivative fair value adjustments
| | |
(10,921
|
)
| | |
-
| | | |
2,139
| | | |
24
| |
Foreign currency translation (gains) losses
| | |
-
| | | |
(1,629
|
)
| | |
-
| | | |
697
| |
Loss (gain) on disposal of assets and costs from exit and disposal
activities
| | |
4,793
| | | |
3,716
| | | |
892
| | | |
(80
|
)
|
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | |
1,088
| | | |
1,663
| | | |
1,052
| | | |
2,163
| |
Contingent consideration remeasurement
| | |
(265
|
)
| | |
-
| | | |
371
| | | |
-
| |
Stock-based compensation (benefit) expense
| | |
8,307
| | | |
-
| | | |
(5,868
|
)
| | |
-
| |
ESOP deferred stock-based compensation
| | |
9,568
| | | |
-
| | | |
10,250
| | | |
-
| |
(Benefit) expense related to executive termination payments
| | |
1,092
| | | |
-
| | | |
(294
|
)
| | |
-
| |
Restatement-related costs
| | |
24,026
| | | |
-
| | | |
27,970
| | | |
-
| |
Inventory step up related to PTI acquisition
| | |
525
| | | |
-
| | | |
-
| | | |
-
| |
Bargain purchase gain on PTI acquisition
| | |
(609
|
)
| | |
-
| | | |
-
| | | |
-
| |
Loss related to BaySaver acquisition
| | |
-
| | | |
-
| | | |
490
| | | |
-
| |
Transaction costs
| | |
372
| | | |
-
| | | |
-
| | | |
-
| |
Impairment of investment in unconsolidated affiliate
| |
|
-
| | |
|
1,300
| | |
|
-
| | |
|
4,000
| |
Adjusted EBITDA(a) | |
$
|
175,676
| | |
$
|
17,695
| | |
$
|
162,875
| | |
$
|
24,465
| |
(a)
|
A portion of the reduction in International EBITDA is related to
transfer pricing. The reduction is fully offset by an increase in
Domestic EBITDA.
|
|
|
Reconciliation of Free Cash Flow to Cash flow from Operating
Activities
|
| Fiscal Year Ended March 31, | |
(Amounts in thousands) | | 2017 | |
| 2016 | |
Cash Flow from Operating Activities
| |
$
|
104,239
| | |
$
|
135,342
| |
Capital expenditures
| |
|
(46,676
|
)
| |
|
(44,942
|
)
|
Free cash flow | | $ | 57,563 | | | $ | 90,400 | |
| | | | | | | |
|
Reconciliation of Adjusted Earnings Per Fully Converted Share
(non-GAAP) to Net Income per Share – Basic
|
| Three Months Ended | |
| Fiscal Year Ended |
| | March 31, | | | March 31, |
(Amounts in thousands, except per share data) | | 2017 | |
| 2016 | | | 2017 |
|
| 2016 |
Net income available to common stockholders | |
$
|
(18,997
|
)
| |
$
|
(12,814
|
)
| |
$
|
27,971
| | |
$
|
21,401
|
Weighted average common shares outstanding - Basic | | |
55,186
| | | |
54,274
| | | |
54,919
| | | |
53,978
|
Net income per share – Basic | |
$
|
(0.34
|
)
| |
$
|
(0.24
|
)
| |
$
|
0.51
| | |
$
|
0.40
|
Adjustments to net income available to common stockholders:
| | | | | | | | | | | | | | | |
Accretion of Redeemable non-controlling interest in subsidiaries
| | |
419
| | | |
346
| | | |
1,560
| | | |
932
|
Dividends to Redeemable convertible preferred stockholders
| | |
399
| | | |
343
| | | |
1,646
| | | |
1,425
|
Dividends paid to unvested restricted stockholders
| | |
69
| | | |
6
| | | |
73
| | | |
24
|
Undistributed income allocated to participating securities
| |
|
-
| | |
|
-
| | |
|
1,700
| | |
|
1,270
|
Total adjustments to net income available to common stockholders
| |
|
887
| | |
|
695
| | |
|
4,979
| | |
|
3,651
|
Net income attributable to ADS
| | |
(18,110
|
)
| | |
(12,119
|
)
| | |
32,950
| | | |
25,052
|
Adjustments to net income attributable to ADS:
| | | | | | | | | | | | | | | |
Fair value of ESOP compensation related to Redeemable convertible
preferred stock
| |
|
2,140
| | |
|
875
| | |
|
9,568
| | |
|
10,250
|
Adjusted net income — (Non-GAAP) | | $ | (15,970 | ) | | $ | (11,244 | ) | | $ | 42,518 | | | $ | 35,302 |
Weighted Average Common Shares Outstanding — Basic
| | |
55,186
| | | |
54,274
| | | |
54,919
| | | |
53,978
|
Adjustments to weighted average common shares outstanding — Basic
| | | | | | | | | | | | | | | |
Unvested restricted shares
| | |
55
| | | |
112
| | | |
90
| | | |
123
|
Redeemable convertible preferred shares
| |
|
18,686
| | |
|
19,141
| | |
|
18,857
| | |
|
19,399
|
Weighted Average Fully Converted Common Shares (Non-GAAP) | |
| 73,927 | | |
| 73,527 | | |
| 73,866 | | |
| 73,500 |
Adjusted Earnings per Fully Converted Share (Non-GAAP) | | $ | (0.22 | ) | | $ | (0.15 | ) | | $ | 0.58 | | | $ | 0.48 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170525005232/en/
Advanced Drainage Systems, Inc.
Michael Higgins, 614-658-0050
Mike.higgins@ads-pipe.com
Source: Advanced Drainage Systems, Inc.