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SEC Filings

10-Q
FORTERRA, INC. filed this Form 10-Q on 11/09/2017
Entire Document
 
FORTERRA, INC.
Notes to Unaudited Condensed Consolidated Financial Statements



7. Property, plant and equipment, net

Property, plant and equipment, net, consist of the following (in thousands):

 
September 30,
 
December 31,
 
2017
 
2016
Machinery and equipment
$
347,633

 
$
329,871

Land, buildings and improvements
146,682

 
142,105

Other equipment
4,699

 
2,592

Construction-in-progress
30,024

 
43,855

Total property, plant and equipment
529,038

 
518,423

Less: accumulated depreciation
(102,792
)
 
(65,509
)
Property, plant and equipment, net
$
426,246

 
$
452,914


Depreciation expense totaled $15.6 million and $45.7 million for the three and nine months ended September 30, 2017, respectively, and $16.3 million and $39.7 million for the three and nine months ended September 30, 2016, respectively, which is included in cost of goods sold and selling, general and administrative expenses in the condensed consolidated statements of operations.

8. Goodwill and other intangible assets, net

    The Company has goodwill which has been recorded in connection with its acquisition of businesses. The following table summarizes the changes in goodwill by operating segment for the nine months ended September 30, 2017 (in thousands):

 
Drainage Pipe & Products
 
Water Pipe & Products
 
Total
Balance at December 31, 2016
$
168,866

 
$
322,581

 
$
491,447

Acquisitions
19,515

 

 
19,515

Impairment

 
(3,003
)
 
(3,003
)
Foreign currency and other adjustments
1,085

 
(4,080
)
 
(2,995
)
Balance at September 30, 2017
$
189,466

 
$
315,498

 
$
504,964


During the second quarter of 2017, the Company performed interim goodwill impairment testing of our Canadian concrete and steel pressure pipe reporting unit after identifying indicators it was more-likely-than-not the reporting unit's carrying value was in excess of its fair value. The reporting unit's operating results are primarily driven by large contractual projects, for which future demand has not materialized, driving changes in the valuations inputs and assumptions supporting the reporting unit's fair value.

Upon early adoption of ASU 2017-04 (see Note 2, Summary of significant accounting policies), the Company began using a one-step quantitative approach that compares the business enterprise value of each reporting unit with its carrying value. Business enterprise value is computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit's estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. The market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. The calculation of business enterprise value is based on significant unobservable inputs, such as price trends, customer demand, material costs and discount rates, and are classified as Level 3 in the fair value hierarchy.


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