Forterra Announces Third Quarter 2017 Results
  • Higher average selling prices on a sequential quarter basis in both the Drainage and Water segments
  • Sold the U.S. concrete and steel pressure pipe business for a loss of $31.6 million that contributed to the net loss of $11.5 million for the quarter
  • Adjusted EBITDA of $60.9 million, above the mid-point of the guidance range despite the impact of two major hurricanes
  • Ended the quarter with no outstanding balance on the Revolver

IRVING, Texas, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Forterra, Inc. (“Forterra” or the "Company”) (NASDAQ:FRTA), a leading manufacturer of water and drainage infrastructure pipe and products in the United States and Eastern Canada, today announced results for the quarter ended September 30, 2017.

Third Quarter 2017 Results
Third quarter 2017 net sales increased to $444.3 million, compared to $441.1 million in the prior year quarter.  Net loss for the quarter was $11.5 million, or a loss of $0.18 per share, compared to net income of $8.4 million, or $0.19 per share, in the prior year quarter.  Adjusted EBITDA for the third quarter was $60.9 million, compared to $80.4 million in the prior year quarter.  The estimated Adjusted EBITDA impact of Hurricanes Harvey and Irma was approximately $3.7 million including a $3.0 million impact to Drainage Pipe & Products ("Drainage") and $0.7 million impact to Water Pipe & Products ("Water"). 

Drainage net sales increased to $248.2 million, compared to $215.5 million in the prior year quarter, due primarily to $28.4 million of net sales from acquisitions.  Net sales excluding the acquisitions grew year over year with organic growth in shipments partially offset by the negative impact of Hurricanes Irma and Harvey.  Drainage gross profit was $51.8 million compared to $52.7 million in the prior year quarter, primarily due to higher labor, freight and raw materials costs, that were not fully offset by an increase in selling prices.  Third quarter 2017 Drainage EBITDA and Adjusted EBITDA were $47.3 million and $48.1 million, respectively, compared to $51.5 million and $51.8 million, respectively, in the prior year quarter. 

Water net sales decreased to $196.0 million, compared to $225.6 million in the prior year quarter, despite higher selling prices of ductile iron pipe products.  The sale of the U.S. concrete and steel pressure pipe business effective July 31, 2017 reduced net sales by $8.9 million.  The balance of the net sales decline was due to lower net sales of concrete pressure pipe products in Canada and the impact of lower net sales of ductile iron pipe. The decline in net sales of Canada pressure pipe products was due to the completion of a large project in 2016. The decline in ductile iron pipe sales was due to the impact of Hurricane Irma and lower demand for infrastructure projects.  

Water gross profit in the third quarter was $30.9 million compared to $49.4 million in the prior year quarter.  Third quarter 2017 Water EBITDA and Adjusted EBITDA decreased to $(4.1) million and $28.4 million, respectively, compared to $43.6 million and $43.3 million, respectively, in the prior year quarter.  The declines in gross profit, EBITDA and Adjusted EBITDA were due to the impact of lower profitability from both ductile iron pipe sales and concrete and steel pressure pipe sales.  

The ductile iron pipe portion of the Water segment was impacted by higher scrap costs that were not fully offset by an increase in selling prices of products sold. In Canada, the decline in Water EBITDA and Adjusted EBITDA was primarily due to lower net sales of concrete pressure pipe products as a result of a large project that was completed in 2016.

   
Summary of Results for the Divested U.S. Concrete and Steel Pressure Pipe Business
   
($ in millions) Three Months Ended September 30,
  2017   2016
  (unaudited)   (unaudited)
Net Sales $ 10.8     $ 19.7  
EBITDA (33.9 )   (6.1 )
Adjusted EBITDA $ (2.4 )   $ (3.1 )
               

Consolidated SG&A costs were lower in the third quarter of 2017 as compared to the prior year quarter due primarily to lower consulting and professional fees during the quarter.

CEO Commentary
Forterra CEO Jeff Bradley commented, “Our results this quarter demonstrate our ability to successfully execute on multiple objectives on a sequential quarter basis, including higher selling prices, lower costs, and improved earnings.  Additionally, in spite of the impact of two major hurricanes, Adjusted EBITDA was above the mid-point of our guidance range.  My expectation for continued improvement in our earnings is supported by ongoing initiatives, a solid backlog and favorable market conditions."

Balance Sheet and Liquidity
At September 30, 2017, the Company had cash of $41.1 million and outstanding debt on its senior term loan of $1.2 billion.  As of September 30, 2017, there was no outstanding balance on the Company's $300 million Revolver following an $80 million net pay down during the quarter.  The Company expects to continue to build its cash position through the end of 2017 reflecting the anticipated benefit of positive cash flow from working capital during the fourth quarter. 

Financial Outlook
The Company expects that the net loss for the fourth quarter of 2017 will range from $16 million to $13 million and Adjusted EBITDA will range from $20 million to $25 million.  The guidance range anticipates delivering an improved year over year Adjusted EBITDA margin variance in Q4 2017 as compared to the prior quarter.  The guidance range also assumes a year over year decline in sales, including a $27 million decline in net sales associated with the divestiture of the U.S. concrete and steel pressure pipe business.  The Company expects to see higher sequential quarter SG&A reflecting the continued use of professionals in support of its Sarbanes-Oxley implementation.

Conference Call and Webcast Information
Forterra will host a conference call to review third quarter 2017 results on November 8, 2017 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The dial-in number for the call is 574-990-1396 or toll free 844-498-0572. The participant passcode is 4668329. Please dial in at least five minutes prior to the call to register. The call may also be accessed via a webcast which, along with the supplemental presentation that will be referenced during the call, are available on the Investors section of the Company’s website at http://forterrabp.com.  A replay of the conference call and archive of the webcast will be available for 30 days under the Investor section of the Company's website.

About Forterra
Forterra is a leading manufacturer of water and drainage pipe and products in the U.S. and Eastern Canada for a variety of water-related infrastructure applications, including water transmission, distribution, drainage and stormwater management. Based in Irving, Texas, Forterra’s product breadth and significant scale help make it a one-stop shop for water related pipe and products, and a preferred supplier to a wide variety of customers, including contractors, distributors and municipalities. For more information on Forterra, visit http://forterrabp.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of words such as "anticipate", "believe", "expect", "estimate", "plan", "outlook", and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on historical information available at the time the statements are made and are based on management's reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company's control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

1 A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is provided in the Reconciliation of Non-GAAP Measures section of this press release.

 
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
 
  Three months ended   Nine months ended
  September 30,   September 30,
  2017 2016   2017 2016
  (unaudited)   (unaudited)
Net sales $ 444,257   $ 441,132     $ 1,219,244   $ 1,009,851  
Cost of goods sold 362,150   339,819     1,022,574   789,756  
Gross profit 82,107   101,313     196,670   220,095  
Selling, general & administrative expenses (59,366 ) (62,355 )   (191,964 ) (153,076 )
Impairment and exit charges (1,193 ) (555 )   (13,004 ) (578 )
Earnings from equity method investee 2,936   4,146     9,449   9,014  
Other operating income, net 2,008   1,946     5,251   5,290  
  (55,615 ) (56,818 )   (190,268 ) (139,350 )
Income from operations 26,492   44,495     6,402   80,745  
           
Other income (expenses)          
Interest expense (15,582 ) (31,756 )   (46,202 ) (73,885 )
Other expense, net (30,866 ) (217 )   (30,866 ) (1,394 )
Income (loss) from continuing operations before income taxes
(19,956 ) 12,522     (70,666 ) 5,466  
Income tax benefit (expense) 8,454   (8,154 )   25,448   28,586  
Income (loss) from continuing operations (11,502 ) 4,368     (45,218 ) 34,052  
           
Discontinued operations, net of tax   4,000       7,069  
Net income (loss) $ (11,502 ) $ 8,368     $ (45,218 ) $ 41,121  
           
Basic and Diluted earnings (loss) per share:          
Continuing operations $ (0.18 ) $ 0.10     $ (0.71 ) $ 0.75  
Discontinued operations $   $ 0.09     $   $ 0.16  
Net income (loss) $ (0.18 ) $ 0.19     $ (0.71 ) $ 0.91  
           
Weighted average common shares outstanding:          
Basic and Diluted 63,799   45,369     63,794   45,369  
                   


 
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 
  September 30,
 2017
  December 31,
 2016
ASSETS (unaudited)    
Current assets      
Cash and cash equivalents $ 41,131     $ 40,024  
Receivables, net 266,676     201,481  
Inventories 264,292     279,502  
Prepaid expenses 5,596     6,417  
Other current assets 22,430     5,179  
Total current assets 600,125     532,603  
Non-current assets      
Property, plant and equipment, net 426,246     452,914  
Goodwill 504,964     491,447  
Intangible assets, net 243,603     281,598  
Investment in equity method investee 55,685     55,236  
Other long-term assets 15,992     10,988  
Total assets $ 1,846,615     $ 1,824,786  
LIABILITIES AND EQUITY      
Current liabilities      
Trade payables $ 133,899     $ 134,059  
Accrued liabilities 79,320     82,165  
Deferred revenue 8,892     20,797  
Current portion of long-term debt 12,510     10,500  
Total current liabilities 234,621     247,521  
Non-current liabilities      
Senior term loan 1,182,545     990,483  
Revolving credit facility     95,064  
Deferred tax liabilities 77,651     100,550  
Deferred gain on sale-leaseback 76,469     78,215  
Other long-term liabilities 27,991     23,253  
Long-term TRA Payable 159,003     156,783  
Total liabilities 1,758,280     1,691,869  
Equity      
Common stock, $0.001 par value, 64,294,793 and 63,924,124 shares issued and outstanding, respectively, and 190,000,000 shares authorized 18     18  
Additional paid-in-capital 229,057     228,316  
Accumulated other comprehensive loss (5,130 )   (5,025 )
Retained deficit (135,610 )   (90,392 )
Total shareholders' equity 88,335     132,917  
Total liabilities and shareholders' equity $ 1,846,615     $ 1,824,786  
               

 

 
Condensed Consolidated Statements of Cash Flows
(in thousands)
     
    Nine months ended
    September 30,
    2017   2016
CASH FLOWS FROM OPERATING ACTIVITIES   (unaudited)   (unaudited)
Net Income (loss)   $ (45,218 )   $ 41,121  
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation & amortization expense   87,463     71,049  
Loss on business divestiture   31,606      
Loss on disposal of property, plant and equipment   1,749     1,169  
Amortization of debt discount and issuance costs   6,061     6,393  
Impairment charges   10,551      
Earnings from equity method investee   (9,449 )   (9,014 )
Distributions from equity method investee   9,000     7,800  
Unrealized (gain) loss on derivative instruments, net   (2,035 )   1,606  
Provision (recoveries) for doubtful accounts   2,289     (1,235 )
Deferred taxes   (16,321 )   (51,846 )
Deferred rent   1,941      
Other non-cash items   1,690     45  
Change in assets and liabilities:        
Receivables, net   (84,974 )   (61,591 )
Inventories   (18,217 )   18,370  
Other assets   (15,522 )   (7,973 )
Accounts payable and accrued liabilities   2,668     7,854  
Other assets & liabilities   (2,415 )   7,124  
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES   (39,133 )   30,872  
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Purchase of property, plant and equipment   (38,729 )   (27,043 )
Proceeds from business divestiture   23,200      
Assets and liabilities acquired, business combinations, net   (35,380 )   (872,471 )
NET CASH USED IN INVESTING ACTIVITIES   (50,909 )   (899,514 )
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Proceeds from sale-leaseback       216,280  
Deferred transaction costs on failed sale-leaseback       (6,492 )
Payment of debt issuance costs   (2,498 )   (10,638 )
Payment of equity issuance costs       (6,669 )
Payments on term loans   (8,880 )   (2,191 )
Proceeds from term loans, net   200,000     548,400  
Proceeds from revolver   194,000     131,611  
Payments on revolver   (293,000 )   (55,173 )
Proceeds from settlement of derivatives       6,546  
Capital contribution from parent       402,127  
Payments for return of contributed capital       (363,582 )
Other financing activities   (232 )    
NET CASH PROVIDED BY FINANCING ACTIVITIES   89,390     860,219  
Effect of exchange rate changes on cash   1,759     1,050  
Net change in cash and cash equivalents   1,107     (7,373 )
Cash and cash equivalents, beginning of period   40,024     43,590  
Cash and cash equivalents, end of period   $ 41,131     $ 36,217  
         
SUPPLEMENTAL DISCLOSURES:
Cash interest paid   40,968     51,476  
Income taxes paid   27,590      
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:
Fair value changes of derivatives recorded in OCI, net of tax   (4,103 )   (1,253 )
             

Additional Statistics

(unaudited)

Reconciliation of Non-GAAP Measures

In addition to our results calculated under generally accepted accounting principles in the United States ("GAAP"), in this earnings release we also present adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and have been presented in this earnings release as supplemental measures of financial performance that are not required by, or presented in accordance with GAAP. We calculate adjusted EBITDA as net income (loss) before (earnings)/loss from discontinued operations, interest expense, income tax benefit (expense), depreciation and amortization and before impairment and restructuring charges, (gains)/losses on the sale of property, plant and equipment and certain other non-recurring income and expenses, such as transaction costs, inventory step-up impacting margin, non-cash compensation expense and costs associated with disposed sites.  Adjusted EBITDA margin represents adjusted EBITDA as a percentage of net sales.

Adjusted EBITDA and adjusted EBITDA margin are presented in this earnings release because they are important metrics used by management as one of the means by which it assesses our financial performance. Adjusted EBITDA and adjusted EBITDA margin are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use adjusted EBITDA and adjusted EBITDA margin as supplements to GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to allocate resources and to compare our performance relative to our peers.  Adjusted EBITDA and adjusted EBITDA margin are also important measures for assessing our operating results and evaluating each operating segment’s performance on a consistent basis, by excluding the impacts of depreciation, amortization, income tax expense, interest expense and other items not indicative of ongoing operating performance. Additionally, these measures, when used in conjunction with related GAAP financial measures, provide investors with additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations.

Adjusted EBITDA and adjusted EBITDA margin have certain limitations. Adjusted EBITDA should not be considered as an alternative to consolidated net income, and in the case of our segment results, adjusted EBITDA should not be considered an alternative to EBITDA, which the chief operating decision maker reviews for purposes of evaluating segment profit, or in the case of any of the non-GAAP measures, as a substitute for any other measure of financial performance calculated in accordance with GAAP.  Similarly, adjusted EBITDA margin should not be considered as an alternative to gross margin or any other margin calculated in accordance with GAAP.  These measures also should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items for which these non-GAAP measures make adjustments. Additionally, adjusted EBITDA and adjusted EBITDA margin are not intended to be liquidity measures because of certain limitations such as: (i) they do not reflect our cash outlays for capital expenditures or future contractual commitments; (ii) they do not reflect changes in, or cash requirements for, working capital; (iii) they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness; (iv) they do not reflect income tax expense or the cash necessary to pay income taxes; and (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and these non-GAAP measures do not reflect cash requirements for such replacements.

Other companies, including other companies in our industry, may not use such measures or may calculate one or more of the measures differently than as presented in this earnings release, limiting their usefulness as a comparative measure. In evaluating adjusted EBITDA and adjusted EBITDA margin, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments made in the calculations below and the presentation of adjusted EBITDA and adjusted EBITDA margin should not be construed to mean that our future results will be unaffected by such adjustments. Management compensates for these limitations by using adjusted EBITDA and adjusted EBITDA margin as supplemental financial metrics and in conjunction with results prepared in accordance with GAAP.

 
Reconciliation of net income (loss) to Adjusted EBITDA
(in thousands)
 
  Three months ended September 30,
  2017   2016
  (unaudited)   (unaudited)
Net income (loss) $ (11,502 )   $ 8,368  
Loss from discontinued operations, net     (4,000 )
Interest expense 15,582     31,756  
Depreciation and amortization 29,158     28,490  
Income tax (benefit) expense (8,454 )   8,154  
EBITDA1 24,784     72,768  
(Gain) loss on sale of property, plant & equipment, net2 555     1,547  
Impairment and exit charges3 1,193     555  
Transaction costs4 1,553     8,139  
Inventory step-up impacting margin5 394      
Costs associated with disposed sites6 31,606     46  
Non-cash compensation7 1,444      
Other (gains) expenses8 (679 )   (2,676 )
Adjusted EBITDA9 $ 60,850     $ 80,379  
Adjusted EBITDA margin9 13.7 %   18.2 %
Gross profit 82,107     101,313  
Gross profit margin 18.5 %   23.0 %


  Nine months ended September 30,
  2017   2016
  (unaudited)   (unaudited)
Net income (loss) $ (45,218 )   $ 41,121  
Loss from discontinued operations, net     (7,069 )
Interest expense 46,202     73,885  
Depreciation and amortization 87,463     64,918  
Income tax benefit (25,448 )   (28,586 )
EBITDA1 62,999     144,269  
(Gain) loss on sale of property, plant & equipment, net2 1,749     1,177  
Impairment and exit charges3 13,004     578  
Transaction costs4 6,291     19,228  
Inventory step-up impacting margin5 2,151     12,515  
Costs associated with disposed sites6 31,606     234  
Non-cash compensation7 2,688      
Other (gains) expenses8 (1,217 )   (2,676 )
Adjusted EBITDA9 $ 119,271     $ 175,325  
Adjusted EBITDA margin9 9.8 %   17.4 %
Gross profit 196,670     220,095  
Gross profit margin 16.1 %   21.8 %
           

1 For purposes of evaluating segment profit, the Company's chief operating decision maker reviews EBITDA as a basis for making the decisions to allocate resources and assess performance.
2 (Gain) loss on sale of property, plant and equipment, primarily related to the disposition of manufacturing facilities.
3 Impairment of goodwill and long-lived assets and other exit charges.
4 Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
5 Effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of business combinations.
6 Loss on divestiture of U.S. concrete and steel pressure pipe business, and results of operations of our disposed roof tile business and other disposed sites for the periods presented, net of specific items for which adjustments are separately made elsewhere in the calculation of adjusted EBITDA presented herein.
7 Non-cash equity compensation expense.
8 Other (gains) losses, such as gain on insurance proceeds related to the destruction of property and adjustments to the estimated value of the TRA liability.
9 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures.  See the discussion of why we believe they are useful and reconciliation thereof to the most directly comparable GAAP financial measures in the beginning of these schedules.

 

 
Reconciliation of segment EBITDA to segment Adjusted EBITDA
(in thousands)
 
Three months ended September 30, 2017 Drainage
Pipe & Products
  Water Pipe &
Products
  Corporate
and Other
  Total
EBITDA1 $ 47,342     $ (4,144 )   $ (18,414 )   $ 24,784  
               
(Gain) loss on sale of property, plant & equipment, net2 (75 )   680     (50 )   555  
Impairment and exit charges3     354     839     1,193  
Transaction costs4         1,553     1,553  
Inventory step-up impacting margin5 394             394  
Costs associated with disposed sites6     31,606         31,606  
Non-cash compensation7 405     308     731     1,444  
Other (gains) expenses8     (404 )   (275 )   (679 )
Adjusted EBITDA9 $ 48,066     $ 28,400     $ (15,616 )   $ 60,850  
               
Net sales $ 248,231     $ 195,987     $ 39     $ 444,257  
Gross Profit $ 51,825     $ 30,920     $ (638 )   $ 82,107  


Three months ended September 30, 2016 Drainage
Pipe & Products
  Water Pipe &
Products
  Corporate
and Other
  Total
EBITDA1 $ 51,502     $ 43,634     $ (22,368 )   $ 72,768  
               
(Gain) loss on sale of property, plant & equipment, net2 6     1,541         1,547  
Impairment and exit charges3 245     304     6     555  
Transaction costs4     466     7,673     8,139  
Inventory step-up impacting margin5              
Costs associated with disposed sites6 46             46  
Other (gains) expenses8     (2,676 )       (2,676 )
Adjusted EBITDA9 $ 51,799     $ 43,269     $ (14,689 )   $ 80,379  
               
Net sales $ 215,486     $ 225,645     $ 1     $ 441,132  
Gross Profit $ 52,661     $ 49,394     $ (742 )   $ 101,313  


Nine months ended September 30, 2017 Drainage
Pipe & Products
  Water Pipe &
Products
  Corporate
and Other
  Total
EBITDA1 $ 98,832     $ 30,881     $ (66,714 )   $ 62,999  
               
(Gain) loss on sale of property, plant & equipment, net2 (4 )   1,753         1,749  
Impairment and exit charges3 (14 )   12,179     839     13,004  
Transaction costs4         6,291     6,291  
Inventory step-up impacting margin5 2,151             2,151  
Costs associated with disposed sites6     31,606         31,606  
Non-cash compensation7 454     345     1,889     2,688  
Other (gains) expenses8     (942 )   (275 )   (1,217 )
Adjusted EBITDA9 $ 101,419     $ 75,822     $ (57,970 )   $ 119,271  
               
Net sales $ 630,200     $ 588,999     $ 45     $ 1,219,244  
Gross Profit $ 112,323     $ 86,327     $ (1,980 )   $ 196,670  


Nine months ended September 30, 2016 Drainage
Pipe & Products
  Water Pipe &
Products
  Corporate
and Other
  Total
EBITDA1 $ 126,536     $ 80,251     $ (62,518 )   $ 144,269  
               
(Gain) loss on sale of property, plant & equipment, net2 247     83     847     1,177  
Impairment and exit charges3 245     327     6     578  
Transaction costs4     535     18,693     19,228  
Inventory step-up impacting margin5 1,878     10,637         12,515  
Costs associated with disposed sites6 234             234  
Other (gains) expenses8     (2,676 )       (2,676 )
Adjusted EBITDA9 $ 129,140     $ 89,157     $ (42,972 )   $ 175,325  
               
Net sales $ 552,035     $ 455,286     $ 2,530     $ 1,009,851  
Gross Profit $ 131,325     $ 90,611     $ (1,841 )   $ 220,095  
                               

1 For purposes of evaluating segment profit, the Company's chief operating decision maker reviews EBITDA as a basis for making the decisions to allocate resources and assess performance.
2 (Gain) loss on sale of property, plant and equipment, primarily related to the disposition of manufacturing facilities.
3 Impairment of goodwill and long-lived assets and other exit charges.
4 Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
5 Effect of the purchase accounting step-up in the value of inventory to fair value recognized in cost of goods sold as a result of business combinations.
6 Loss on divestiture of U.S. concrete and steel pressure pipe business, and results of operations of our disposed roof tile business and other disposed sites for the periods presented, net of specific items for which adjustments are separately made elsewhere in the calculation of adjusted EBITDA presented herein.
7 Non-cash equity compensation expense.
8 Other (gains) losses, such as gain on insurance proceeds related to the destruction of property and adjustments to the estimated value of the TRA liability.
9 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures.  See the discussion of why we believe they are useful and reconciliation thereof to the most directly comparable GAAP financial measures in the beginning of these schedules.


 
Reconciliation of Net Income to Adjusted EBITDA Guidance for Q4 2017
(in millions)
 
    Q4 2017 EBITDA Guidance
    Low   High
Net income   $ (16 )   $ (13 )
Interest expense   16     16  
Income tax benefit   (10 )   (8 )
Depreciation and amortization   30     30  
Adjusted EBITDA   $ 20     $ 25  
                 

Company Contact Information:
Charles R. Brown, II
Executive Vice President and Chief Financial Officer
469-299-9113
IR@forterrabp.com

Forterra, Inc.

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