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 non-residential, residential, infrastructure and agricultural
applications, today announced financial results for the fiscal second
quarter ended September 30, 2017.
Second Quarter Fiscal 2018 Highlights
- Net sales increased 11.2% to $401.0 million
- Net income of $18.0 million compared to $24.3 million in prior year
- Adjusted EBITDA (Non-GAAP) increased 2.0% to $66.9 million
Fiscal Year-to-Date Highlights
- Net sales increased 5.7% to $759.4 million
- Net income of $36.4 million compared to $43.7 million in prior year
- Adjusted EBITDA (Non-GAAP) of $127.2 million compared to $137.4
million in prior year
- Cash flow from operating activities of $28.4 million compared to
$45.6 million in prior year
- Free cash flow (Non-GAAP) of $1.4 million compared to $21.8 million
in prior year
Scott Barbour, President and Chief Executive Officer of ADS commented,
“We are pleased to report above-market growth for the second fiscal
quarter, with net sales increasing over 11% compared to the prior year.
We generated strong performance in our core domestic construction
markets driven by continued execution of our conversion strategy and
strong growth from our HP pipe product line and Allied Products. We were
also pleased to see growth return in our agriculture market this
quarter.”
Barbour continued, “While we are disappointed with the continued
pressure on our margins, we are pursuing a number of actions to address
this through operational improvements as well as our broader set of
strategic initiatives. Although I am still early in my assessment of the
business, I am confident we have the opportunity, capability and
resources to drive sustainable improvements in our profitability. It is
my belief that we need to focus on the fundamentals and drive better
execution across all aspects of our operations as we progress through
the remainder of fiscal year 2018.”
Second Quarter Fiscal 2018 Results
Net sales increased 11.2% to $401.0 million, as compared to $360.8
million in the prior year quarter. Domestic net sales increased 12.9% to
$351.9 million as compared to $311.8 million in the prior year quarter,
driven by growth in both construction and agriculture markets.
International net sales increased 0.3% to $49.2 million as compared to
$49.0 million in the prior year quarter.
Gross profit decreased 0.8% to $89.8 million, as compared to $90.5
million the prior year quarter. As a percentage of net sales, gross
profit decreased 270 basis points to 22.4% compared to 25.1% in the
prior year, primarily due to increases in raw material and operational
costs.
Adjusted EBITDA (Non-GAAP) increased 2.0% to $66.9 million, as compared
to $65.6 million in the prior year. As a percentage of net sales,
Adjusted EBITDA decreased 150 basis points to 16.7% as compared to 18.2%
in the prior year. The decrease in Adjusted EBITDA margin was largely
attributed to the factors mentioned above.
Adjusted Earnings Per Fully Converted Share (Non-GAAP) was $0.28 based
on weighted average fully converted shares of 73.8 million, as compared
to $0.36 for the prior year on weighted average fully converted shares
of 73.4 million.
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.”
Fiscal Year-to-Date 2018 Results
Net sales increased 5.7% to $759.4 million, as compared to $718.4
million in the prior year. Domestic net sales increased 7.5% to $671.4
million as compared to $624.5 million in the prior year, driven by
growth in core construction markets. International net sales decreased
6.2% to $88.0 million as compared to $93.8 million in the prior year.
Gross profit decreased 5.7% to $176.5 million, as compared to $187.1
million the prior year. As a percentage of net sales, gross profit
decreased 280 basis points to 23.2% compared to 26.0% in the prior year,
primarily due to increases in raw material and operational costs, and
pricing headwinds in the agricultural markets and Mexico.
Adjusted EBITDA (Non-GAAP) decreased 7.4% to $127.2 million, as compared
to $137.4 million in the prior year. As a percentage of net sales,
Adjusted EBITDA decreased 230 basis points to 16.8% as compared to 19.1%
in the prior year. The decrease in Adjusted EBITDA margin was largely
attributed to the factors mentioned above.
Adjusted Earnings Per Fully Converted Share (Non-GAAP) was $0.55 based
on weighted average fully converted shares of 74.0 million, as compared
to $0.64 for the prior year on weighted average fully converted shares
of 73.3 million.
The Company recorded net cash provided by operating activities of $28.4
million, as compared to $45.6 million in the prior year. Net debt (total
debt and capital lease obligations net of cash) was $456.6 million as of
September 30, 2017, an increase of $34.2 million from March 31, 2017.
Fiscal Year 2018 Outlook
Based on current visibility, backlog of existing orders and business
trends, the Company updated its Adjusted EBITDA target for fiscal 2018.
Adjusted EBITDA (Non-GAAP) is expected to be in the range of $195 and
$210 million for fiscal year 2018, while the outlook for net sales is
unchanged and expected to be in the range of $1.275 billion to $1.325
billion. Capital expenditures are expected to be approximately $50 to
$55 million.
Webcast Information
The Company will host an investor conference call and webcast on
Thursday, November 2, 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 delay in the filing of any filings
with the Securities and Exchange Commission (“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 SEC.
New risks and uncertainties emerge from time to time and it is not
possible for the Company to predict all risks and uncertainties that
could have an impact on the forward-looking statements contained in this
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 | | | | Six Months Ended | |
| | | | September 30, | | | | September 30, | |
(Amounts in thousands, except per share data) | | | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | |
Net sales
| | | |
$
|
401,049
| | | |
$
|
360,785
| | | |
$
|
759,408
| | | |
$
|
718,361
| |
Cost of goods sold
| | | |
|
311,248
| | | |
|
270,273
| | | |
|
582,868
| | | |
|
531,243
| |
Gross profit
| | | | |
89,801
| | | | |
90,512
| | | | |
176,540
| | | | |
187,118
| |
Operating expenses:
| | | | | | | | | | | | | | | | | | | | | |
Selling
| | | | |
24,346
| | | | |
23,210
| | | | |
47,445
| | | | |
47,440
| |
General and administrative
| | | | |
23,887
| | | | |
21,181
| | | | |
50,563
| | | | |
55,710
| |
Loss on disposal of assets and costs from exit and disposal
activities
| | | | |
5,121
| | | | |
737
| | | | |
8,544
| | | | |
939
| |
Intangible amortization
| | | |
|
2,015
| | | |
|
2,128
| | | |
|
4,059
| | | |
|
4,315
| |
Income from operations
| | | | |
34,432
| | | | |
43,256
| | | | |
65,929
| | | | |
78,714
| |
Other expense:
| | | | | | | | | | | | | | | | | | | | | |
Interest expense
| | | | |
5,055
| | | | |
4,546
| | | | |
9,534
| | | | |
9,330
| |
Derivative gains and other income, net
| | | |
|
(2,539
|
)
| | |
|
(1,734
|
)
| | |
|
(3,493
|
)
| | |
|
(4,771
|
)
|
Income before income taxes
| | | | |
31,916
| | | | |
40,444
| | | | |
59,888
| | | | |
74,155
| |
Income tax expense
| | | | |
13,437
| | | | |
15,348
| | | | |
23,183
| | | | |
29,542
| |
Equity in net loss of unconsolidated affiliates
| | | |
|
520
| | | |
|
815
| | | |
|
272
| | | |
|
911
| |
Net income
| | | | |
17,959
| | | | |
24,281
| | | | |
36,433
| | | | |
43,702
| |
Less: net income attributable to noncontrolling interest
| | | |
|
96
| | | |
|
547
| | | |
|
828
| | | |
|
1,695
| |
Net income attributable to ADS
| | | | |
17,863
| | | | |
23,734
| | | | |
35,605
| | | | |
42,007
| |
Accretion of redeemable noncontrolling interest
| | | | |
-
| | | | |
(380
|
)
| | | |
-
| | | | |
(742
|
)
|
Dividends to redeemable convertible preferred stockholders
| | | | |
(470
|
)
| | | |
(415
|
)
| | | |
(959
|
)
| | | |
(840
|
)
|
Dividends paid to unvested restricted stockholders
| | | |
|
(16
|
)
| | |
|
(24
|
)
| | |
|
(35
|
)
| | |
|
(54
|
)
|
Net income available to common stockholders and participating
securities
| | | | |
17,377
| | | | |
22,915
| | | | |
34,611
| | | | |
40,371
| |
Undistributed income allocated to participating securities
| | | |
|
(1,397
|
)
| | |
|
(2,040
|
)
| | |
|
(2,830
|
)
| | |
|
(3,563
|
)
|
Net income available to common stockholders | | | | $ | 15,980 | | | | $ | 20,875 | | | | $ | 31,781 | | | | $ | 36,808 | |
| | | | | | | | | | | | | | | | | | | | |
|
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | |
Basic
| | | | |
55,269
| | | | |
54,429
| | | | |
55,286
| | | | |
54,250
| |
Diluted
| | | | |
55,893
| | | | |
55,276
| | | | |
55,953
| | | | |
55,115
| |
Net income per share: | | | | | | | | | | | | | | | | | | | | | |
Basic
| | | |
$
|
0.29
| | | |
$
|
0.38
| | | |
$
|
0.57
| | | |
$
|
0.68
| |
Diluted
| | | |
$
|
0.29
| | | |
$
|
0.38
| | | |
$
|
0.57
| | | |
$
|
0.67
| |
Cash dividends declared per share | | | |
$
|
0.07
| | | |
$
|
0.06
| | | |
$
|
0.14
| | | |
$
|
0.12
| |
| | | | | | | | | | | | | | | | | | | | |
|
|
|
|
| | | |
|
| | | |
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
| | | | | | | | | | |
|
| | | | As of | |
(Amounts in thousands) | | | | September 30, 2017 | | | | March 31, 2017 | |
ASSETS | | | | | | | | | | | |
Current assets: | | | | | | | | | | | |
Cash
| | | |
$
|
11,183
| | | |
$
|
6,450
| |
Receivables
| | | | |
279,711
| | | | |
168,943
| |
Inventories
| | | | |
214,283
| | | | |
258,430
| |
Other current assets
| | | |
|
7,161
| | | |
|
6,743
| |
Total current assets
| | | | |
512,338
| | | | |
440,566
| |
Property, plant and equipment, net
| | | | |
410,271
| | | | |
406,858
| |
Other assets: | | | | | | | | | | | |
Goodwill
| | | | |
103,380
| | | | |
100,566
| |
Intangible assets, net
| | | | |
48,429
| | | | |
51,758
| |
Other assets
| | | |
|
35,691
| | | |
|
46,537
| |
Total assets | | | |
$
|
1,110,109
| | | |
$
|
1,046,285
| |
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | |
Current maturities of debt obligations
| | | |
$
|
26,818
| | | |
$
|
37,789
| |
Current maturities of capital lease obligations
| | | | |
21,949
| | | | |
21,450
| |
Accounts payable
| | | | |
93,944
| | | | |
121,922
| |
Current portion of liability-classified stock-based awards
| | | | |
-
| | | | |
11,926
| |
Other accrued liabilities
| | | | |
71,611
| | | | |
54,460
| |
Accrued income taxes
| | | |
|
12,209
| | | |
|
8,207
| |
Total current liabilities
| | | | |
226,531
| | | | |
255,754
| |
Long-term debt obligations
| | | | |
358,047
| | | | |
310,849
| |
Long-term capital lease obligations
| | | | |
60,934
| | | | |
58,710
| |
Deferred tax liabilities
| | | | |
42,971
| | | | |
44,007
| |
Other liabilities
| | | |
|
22,868
| | | |
|
26,530
| |
Total liabilities
| | | | |
711,351
| | | | |
695,850
| |
Mezzanine equity: | | | | | | | | | | | |
Redeemable convertible preferred stock
| | | | |
296,410
| | | | |
302,814
| |
Deferred compensation — unearned ESOP shares
| | | | |
(194,192
|
)
| | | |
(198,216
|
)
|
Redeemable noncontrolling interest in subsidiaries
| | | |
|
8,682
| | | |
|
8,227
| |
Total mezzanine equity
| | | | |
110,900
| | | | |
112,825
| |
Stockholders’ equity: | | | | | | | | | | | |
Common stock
| | | | |
12,393
| | | | |
12,393
| |
Paid-in capital
| | | | |
778,548
| | | | |
755,787
| |
Common stock in treasury, at cost
| | | | |
(442,787
|
)
| | | |
(436,984
|
)
|
Accumulated other comprehensive loss
| | | | |
(19,442
|
)
| | | |
(24,815
|
)
|
Retained deficit
| | | |
|
(56,746
|
)
| | |
|
(83,678
|
)
|
Total ADS stockholders’ equity
| | | | |
271,966
| | | | |
222,703
| |
Noncontrolling interest in subsidiaries
| | | |
|
15,892
| | | |
|
14,907
| |
Total stockholders’ equity
| | | |
|
287,858
| | | |
|
237,610
| |
Total liabilities, mezzanine equity and stockholders’ equity | | | |
$
|
1,110,109
| | | |
$
|
1,046,285
| |
| | | | | | | | | | |
|
|
|
|
| | | |
|
| | | |
ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
| | | | | | | | | | |
|
| | | | Six Months Ended September 30, | |
(Amounts in thousands) | | | | 2017 | | | | 2016 | |
Cash Flow from Operating Activities | | | | | | | | | | | |
Net income
| | | |
$
|
36,433
| | | |
$
|
43,702
| |
Adjustments to reconcile net income to net cash provided by
operating activities:
| | | | | | | | | | | |
Depreciation and amortization
| | | | |
37,941
| | | | |
36,036
| |
Deferred income taxes
| | | | |
(801
|
)
| | | |
1,829
| |
Loss on disposal of assets and costs from exit and disposal
activities
| | | | |
8,544
| | | | |
939
| |
ESOP and stock-based compensation
| | | | |
8,709
| | | | |
11,217
| |
Amortization of deferred financing charges
| | | | |
550
| | | | |
702
| |
Fair market value adjustments to derivatives
| | | | |
(590
|
)
| | | |
(9,060
|
)
|
Equity in net loss of unconsolidated affiliates
| | | | |
272
| | | | |
911
| |
Other operating activities
| | | | |
12,078
| | | | |
657
| |
Changes in working capital:
| | | | | | | | | | | |
Receivables
| | | | |
(111,463
|
)
| | | |
(31,113
|
)
|
Inventories
| | | | |
46,205
| | | | |
5,781
| |
Prepaid expenses and other current assets
| | | | |
256
| | | | |
(3,570
|
)
|
Accounts payable, accrued expenses, and other liabilities
| | | |
|
(9,745
|
)
| | |
|
(12,455
|
)
|
Net cash provided by operating activities
| | | | |
28,389
| | | | |
45,576
| |
Cash Flows from Investing Activities | | | | | | | | | | | |
Capital expenditures
| | | | |
(27,035
|
)
| | | |
(23,796
|
)
|
Cash paid for acquisitions, net of cash acquired
| | | | |
(1,990
|
)
| | | |
-
| |
Other investing activities
| | | |
|
(411
|
)
| | |
|
(622
|
)
|
Net cash used in investing activities
| | | | |
(29,436
|
)
| | | |
(24,418
|
)
|
Cash Flows from Financing Activities | | | | | | | | | | | |
Proceeds from Revolving Credit Facility
| | | | |
335,950
| | | | |
235,600
| |
Payments on Revolving Credit Facility
| | | | |
(273,650
|
)
| | | |
(207,900
|
)
|
Payments on Term Loan
| | | | |
(72,500
|
)
| | | |
(5,000
|
)
|
Proceeds from Senior Notes
| | | | |
75,000
| | | | |
-
| |
Payments on Senior Notes
| | | | |
(25,000
|
)
| | | |
(25,000
|
)
|
Debt issuance costs
| | | | |
(2,268
|
)
| | | |
-
| |
Payments of notes, mortgages and other debt
| | | | |
(1,450
|
)
| | | |
(430
|
)
|
Payments on capital lease obligations
| | | | |
(12,217
|
)
| | | |
(10,810
|
)
|
Cash dividends paid
| | | | |
(8,673
|
)
| | | |
(7,338
|
)
|
Proceeds from exercise of stock options
| | | | |
100
| | | | |
2,687
| |
Repurchase of common stock
| | | | |
(7,947
|
)
| | | |
-
| |
Other financing activities
| | | |
|
(1,171
|
)
| | |
|
(620
|
)
|
Net cash provided by (used in) financing activities
| | | | |
6,174
| | | | |
(18,811
|
)
|
Effect of exchange rate changes on cash
| | | |
|
(394
|
)
| | |
|
(98
|
)
|
Net change in cash
| | | | |
4,733
| | | | |
2,249
| |
Cash at beginning of period
| | | |
|
6,450
| | | |
|
6,555
| |
Cash at end of period | | | | $ | 11,183 | | | |
$
|
8,804
| |
Selected Financial Data
The following tables set forth net sales by reportable segment for the
three and six months ended September 30, 2017 and 2016, respectively.
|
|
|
| | |
|
| | |
|
|
| | |
|
| | |
|
| | |
|
|
| | |
| | | | Three Months Ended | | | | | | | | Six Months Ended | | | | | |
(Amounts in thousands | | | | September 30, | | | % | | | | September 30, | | | % | |
except percentages) | | | | 2017 | | | 2016 | | | Variance | | | | 2017 | | | 2016 | | | Variance | |
Domestic | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pipe
| | | |
$
|
253,486
| | |
$
|
222,026
| | | |
14.2
|
%
| | |
$
|
479,677
| | |
$
|
445,336
| | | |
7.7
|
%
|
Allied Products
| | | |
|
98,398
| | |
|
89,747
| | | |
9.6
|
%
| | |
|
191,704
| | |
|
179,200
| | | |
7.0
|
%
|
Domestic net sales
| | | |
$
|
351,884
| | |
$
|
311,773
| | | |
12.9
|
%
| | |
$
|
671,381
| | |
$
|
624,536
| | | |
7.5
|
%
|
International | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pipe
| | | |
$
|
38,204
| | |
$
|
38,910
| | | |
(1.8
|
%)
| | |
$
|
67,973
| | |
$
|
73,282
| | | |
(7.2
|
%)
|
Allied Products
| | | |
|
10,961
| | |
|
10,102
| | | |
8.5
|
%
| | |
|
20,054
| | |
|
20,543
| | | |
(2.4
|
%)
|
International net sales
| | | |
$
|
49,165
| | |
$
|
49,012
| | | |
0.3
|
%
| | |
$
|
88,027
| | |
$
|
93,825
| | | |
(6.2
|
%)
|
Consolidated | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pipe
| | | |
$
|
291,690
| | |
$
|
260,936
| | | |
11.8
|
%
| | |
$
|
547,650
| | |
$
|
518,618
| | | |
5.6
|
%
|
Allied Products
| | | |
|
109,359
| | |
|
99,849
| | | |
9.5
|
%
| | |
|
211,758
| | |
|
199,743
| | | |
6.0
|
%
|
Net sales
| | | |
$
|
401,049
| | |
$
|
360,785
| | | |
11.2
|
%
| | |
$
|
759,408
| | |
$
|
718,361
| | | |
5.7
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
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 | | | | Six Months Ended | |
| | | | September 30, | | | | September 30, | |
(Amounts in thousands) | | | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 | |
Net income | | | |
$
|
17,959
| | | |
$
|
24,281
| | | |
$
|
36,433
| | | |
$
|
43,702
| |
Depreciation and amortization
| | | | |
19,720
| | | | |
18,010
| | | | |
37,941
| | | | |
36,036
| |
Interest expense
| | | | |
5,055
| | | | |
4,546
| | | | |
9,534
| | | | |
9,330
| |
Income tax expense
| | | |
|
13,437
| | | |
|
15,348
| | | |
|
23,183
| | | |
|
29,542
| |
EBITDA
| | | | |
56,171
| | | | |
62,185
| | | | |
107,091
| | | | |
118,610
| |
Derivative fair value adjustments
| | | | |
(781
|
)
| | | |
(4,153
|
)
| | | |
(590
|
)
| | | |
(9,060
|
)
|
Foreign currency transaction (gains) losses
| | | | |
(1,579
|
)
| | | |
685
| | | | |
(2,448
|
)
| | | |
(1,077
|
)
|
Loss on disposal of assets and costs from exit and disposal
activities
| | | | |
5,121
| | | | |
737
| | | | |
8,544
| | | | |
939
| |
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | | | |
715
| | | | |
802
| | | | |
1,423
| | | | |
1,580
| |
Contingent consideration remeasurement
| | | | |
6
| | | | |
33
| | | | |
32
| | | | |
57
| |
Stock-based compensation expense (benefit)
| | | | |
1,810
| | | | |
(2,908
|
)
| | | |
3,500
| | | | |
6,112
| |
ESOP deferred stock-based compensation
| | | | |
2,595
| | | | |
2,368
| | | | |
5,209
| | | | |
5,105
| |
Executive retirement benefits
| | | | |
894
| | | | |
79
| | | | |
909
| | | | |
158
| |
Transaction costs
| | | | |
890
| | | | |
-
| | | | |
1,057
| | | | |
-
| |
Restatement-related costs
| | | |
|
1,042
| | | |
|
5,773
| | | |
|
2,502
| | | |
|
14,985
| |
Adjusted EBITDA | | | |
$
|
66,884
| | | |
$
|
65,601
| | | |
$
|
127,229
| | | |
$
|
137,409
| |
| | | | | | | | | | | | | | | | | | | | |
|
Reconciliation of Segment Adjusted EBITDA to Net Income
|
|
|
| | | |
|
| | | |
|
| | | |
|
| | |
| | | | Three Months Ended September 30, |
| | | | 2017 | | | | 2016 |
(Amounts in thousands) | | | | Domestic | | | | International | | | | Domestic | | | | International |
Net income | | | |
$
|
16,932
| | | |
$
|
1,027
| | | |
$
|
21,049
| | | |
$
|
3,232
|
Depreciation and amortization
| | | | |
17,658
| | | | |
2,062
| | | | |
15,829
| | | | |
2,181
|
Interest expense
| | | | |
4,971
| | | | |
84
| | | | |
4,436
| | | | |
110
|
Income tax expense
| | | |
|
12,185
| | | |
|
1,252
| | | |
|
13,824
| | | |
|
1,524
|
EBITDA
| | | | |
51,746
| | | | |
4,425
| | | | |
55,138
| | | | |
7,047
|
Derivative fair value adjustments
| | | | |
(781
|
)
| | | |
-
| | | | |
(4,153
|
)
| | | |
-
|
Foreign currency transaction (gains) losses
| | | | |
-
| | | | |
(1,579
|
)
| | | |
-
| | | | |
685
|
Loss on disposal of assets and costs from exit and disposal
activities
| | | | |
4,994
| | | | |
127
| | | | |
512
| | | | |
225
|
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | | | |
277
| | | | |
438
| | | | |
272
| | | | |
530
|
Contingent consideration remeasurement
| | | | |
6
| | | | |
-
| | | | |
33
| | | | |
-
|
Stock-based compensation expense (benefit)
| | | | |
1,810
| | | | |
-
| | | | |
(2,908
|
)
| | | |
-
|
ESOP deferred stock-based compensation
| | | | |
2,595
| | | | |
-
| | | | |
2,368
| | | | |
-
|
Executive retirement benefits
| | | | |
894
| | | | |
-
| | | | |
79
| | | | |
-
|
Transaction costs
| | | | |
890
| | | | |
-
| | | | |
-
| | | | |
-
|
Restatement-related costs
| | | |
|
1,042
| | | |
|
-
| | | |
|
5,773
| | | |
|
-
|
Adjusted EBITDA(a) | | | |
$
|
63,473
| | | |
$
|
3,411
| | | |
$
|
57,114
| | | |
$
|
8,487
|
| | | | | | | | | | | | | | | | | | | |
|
(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.
|
| |
|
|
|
|
| | | |
|
| | | |
|
| | | |
|
| | | |
| | | | Six Months Ended September 30, |
| | | | 2017 | | | | 2016 | |
(Amounts in thousands) | | | | Domestic | | | | International | | | | Domestic | | | | International | |
Net income | | | |
$
|
32,082
| | | |
$
|
4,351
| | | |
$
|
36,471
| | | |
$
|
7,231
| |
Depreciation and amortization
| | | | |
33,921
| | | | |
4,020
| | | | |
31,507
| | | | |
4,529
| |
Interest expense
| | | | |
9,356
| | | | |
178
| | | | |
9,109
| | | | |
221
| |
Income tax expense
| | | |
|
21,700
| | | |
|
1,483
| | | |
|
25,977
| | | |
|
3,565
| |
EBITDA
| | | | |
97,059
| | | | |
10,032
| | | | |
103,064
| | | | |
15,546
| |
Derivative fair value adjustments
| | | | |
(590
|
)
| | | |
-
| | | | |
(9,060
|
)
| | | |
-
| |
Foreign currency translation (gains)
| | | | |
-
| | | | |
(2,448
|
)
| | | |
-
| | | | |
(1,077
|
)
|
Loss on disposal of assets and costs from exit and disposal
activities
| | | | |
8,313
| | | | |
231
| | | | |
782
| | | | |
157
| |
Unconsolidated affiliates interest, tax, depreciation and
amortization
| | | | |
571
| | | | |
852
| | | | |
551
| | | | |
1,029
| |
Contingent consideration remeasurement
| | | | |
32
| | | | |
-
| | | | |
57
| | | | |
-
| |
Stock-based compensation expense
| | | | |
3,500
| | | | |
-
| | | | |
6,112
| | | | |
-
| |
ESOP deferred stock-based compensation
| | | | |
5,209
| | | | |
-
| | | | |
5,105
| | | | |
-
| |
Executive retirement benefits
| | | | |
909
| | | | |
-
| | | | |
158
| | | | |
-
| |
Transaction costs
| | | | |
1,057
| | | | |
-
| | | | |
-
| | | | |
-
| |
Restatement-related costs
| | | |
|
2,502
| | | |
|
-
| | | |
|
14,985
| | | |
|
-
| |
Adjusted EBITDA(a) | | | |
$
|
118,562
| | | |
$
|
8,667
| | | |
$
|
121,754
| | | |
$
|
15,655
| |
| | | | | | | | | | | | | | | | | | | | |
|
(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
|
|
|
| | | |
|
| | | |
| | | | Six Months Ended September 30, | |
(Amounts in thousands) | | | | 2017 | | | | 2016 | |
Net cash provided by operating activities
| | | |
$
|
28,389
| | | |
$
|
45,576
| |
Capital expenditures
| | | |
|
(27,035
|
)
| | |
|
(23,796
|
)
|
Free cash flow | | | | $ | 1,354 | | | | $ | 21,780 | |
| | | | | | | | | | |
|
Reconciliation of Adjusted Earnings Per Fully Converted Share
(non-GAAP) to Net Income per Share – Basic
|
|
|
| | |
|
|
| | |
|
|
| | |
|
|
| | |
| | | | Three Months Ended | | | | Six Months Ended |
| | | | September 30, | | | | September 30, |
(Amounts in thousands, except per share data) | | | | 2017 | | | | 2016 | | | | 2017 | | | | 2016 |
Net income available to common stockholders | | | |
$
|
15,980
| | | |
$
|
20,875
| | | |
$
|
31,781
| | | |
$
|
36,808
|
Weighted average common shares outstanding - Basic | | | | |
55,269
| | | | |
54,429
| | | | |
55,286
| | | | |
54,250
|
Net income per share – Basic | | | |
$
|
0.29
| | | |
$
|
0.38
| | | |
$
|
0.57
| | | |
$
|
0.68
|
Adjustments to net income available to common stockholders:
| | | | | | | | | | | | | | | | | | | | |
Accretion of redeemable non-controlling interest in subsidiaries
| | | | |
-
| | | | |
380
| | | | |
-
| | | | |
742
|
Dividends to redeemable convertible preferred stockholders
| | | | |
470
| | | | |
415
| | | | |
959
| | | | |
840
|
Dividends paid to unvested restricted stockholders
| | | | |
16
| | | | |
24
| | | | |
35
| | | | |
54
|
Undistributed income allocated to participating securities
| | | |
|
1,397
| | | |
|
2,040
| | | |
|
2,830
| | | |
|
3,563
|
Total adjustments to net income available to common stockholders
| | | |
|
1,883
| | | |
|
2,859
| | | |
|
3,824
| | | |
|
5,199
|
Net income attributable to ADS
| | | | |
17,863
| | | | |
23,734
| | | | |
35,605
| | | | |
42,007
|
Adjustments to net income attributable to ADS:
| | | | | | | | | | | | | | | | | | | | |
Fair value of ESOP compensation related to redeemable convertible
preferred stock
| | | |
|
2,595
| | | |
|
2,368
| | | |
|
5,209
| | | |
|
5,105
|
Adjusted net income — (Non-GAAP) | | | | $ | 20,458 | | | | $ | 26,102 | | | | $ | 40,814 | | | | $ | 47,110 |
Weighted Average Common Shares Outstanding — Basic
| | | | |
55,269
| | | | |
54,429
| | | | |
55,286
| | | | |
54,250
|
Adjustments to weighted average common shares outstanding — Basic
| | | | | | | | | | | | | | | | | | | | |
Unvested restricted shares
| | | | |
223
| | | | |
56
| | | | |
240
| | | | |
67
|
Redeemable convertible preferred shares
| | | |
|
18,353
| | | |
|
18,901
| | | |
|
18,470
| | | |
|
18,983
|
Weighted Average Common Shares Outstanding - Fully Converted
(Non-GAAP) | | | |
| 73,845 | | | |
| 73,386 | | | |
| 73,996 | | | |
| 73,300 |
Adjusted Earnings per Fully Converted Share (Non-GAAP) | | | | $ | 0.28 | | | | $ | 0.36 | | | | $ | 0.55 | | | | $ | 0.64 |
| | | | | | | | | | | | | | | | | | | |
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005400/en/
Advanced Drainage Systems, Inc.
Michael Higgins, 614-658-0050
Director,
Investor Relations and Business Strategy
Mike.higgins@ads-pipe.com
Source: Advanced Drainage Systems, Inc.