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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



As a result of the interim impairment testing, the Company determined the carrying value of the reporting unit's goodwill was fully impaired and a goodwill impairment charge of $3.0 million was recorded during the second quarter of 2017.

Intangible assets other than goodwill at September 30, 2017 and December 31, 2016 included the following (in thousands):
 
Net carrying value as of September 30, 2017
 
Net carrying value as of December 31, 2016
Customer relationships
$
181,231

 
$
209,937

Trade names
30,970

 
34,771

Patents
16,978

 
20,673

Customer backlog
613

 
1,628

Non-compete agreements
6,604

 
7,410

In-Process R&D
6,354

 
6,692

Other
853

 
487

Total intangible assets
$
243,603

 
$
281,598

    
Amortization expense totaled $13.5 million and $41.8 million for the three and nine months ended September 30, 2017, respectively, and $12.2 million and $25.2 million for the three and nine months ended September 30, 2016, respectively, which is included in selling, general and administrative expenses in the condensed consolidated statements of operations. All of the Company's intangible assets are amortizable.

9. Fair value measurement

The Company's financial instruments consist primarily of cash and cash equivalents, trade and other receivables, derivative instruments, accounts payable, long-term debt, accrued liabilities, and the long-term tax receivable agreement payable. The carrying value of the Company's cash equivalents, trade receivables, other receivables, trade payables, the asset based revolver and accrued liabilities approximates fair value due to their short-term maturity. The Company may adjust the carrying amount of certain non-financial assets to fair value on a non-recurring basis when they are impaired.
 
The carrying amount and estimated fair value of the Company’s financial instruments and other assets and liabilities measured and recorded at fair value on a recurring basis is as follows for the dates indicated (in thousands):

 
Fair value measurements at September 30, 2017 using
 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total Fair Value
Non-current assets
 
 
 
 
Derivative asset

$2,035

$2,035
Current liabilities
 
 
 
 
Derivative liability

$7,028

$7,028
 
 
 
 
 
 
Fair value measurements at December 31, 2016 using
 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total Fair Value
Non-current liabilities
 
 
 
 
Derivative liability

$372

$372

Liabilities and assets recorded at fair value classified as level 2 are valued using observable market inputs. The fair values of derivative assets and liabilities are determined using quantitative models that utilize multiple market inputs including interest rates and exchange rates to generate continuous yield or pricing curves and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair values of derivative assets and liabilities include adjustments for market liquidity, counter-party credit quality and other instrument-specific factors, where appropriate. In addition, the Company incorporates within its fair value measurements a valuation adjustment to reflect the credit risk associated with the net position. Positions are netted by counter-parties, and fair value for net long exposures is adjusted for counter-party credit risk while the fair value for net short exposures is adjusted for the Company’s own credit risk.

The estimated carrying amount and fair value of the Company’s financial instruments and liabilities for which fair value is only disclosed is as follows (in thousands):

 
 
Fair value measurements at September 30, 2017 using
 
 
Carrying Amount September 30, 2017
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total Fair Value
2016 Senior Term Loan
$1,195,055

$1,054,269

$1,054,269
Tax receivable agreement payable
163,003



118,183

118,183



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