|FORTERRA, INC. filed this Form 10-Q on 11/09/2017|
products business of LSF9 in the United States and Eastern Canada and (ii) for periods following the Reorganization refer to the operations of Forterra, Inc., together with its consolidated subsidiaries.
On February 3, 2017, we acquired Royal Enterprises America, Inc. (“Royal”), for aggregate consideration of $35.5 million, including customary working capital adjustments. Royal manufactures concrete drainage pipe, precast concrete products, stormwater treatment technologies and erosion control products serving the greater Minneapolis market. The acquisition was financed with borrowings on our asset based revolving credit facility entered into in connection with the IPO (the “2016 Revolver”).
Divestiture of U.S. Pressure Pipe
On July 31, 2017, we completed the sale of our U.S. concrete and steel pressure pipe business, a component of our Water Pipe and Products segment, to TPG in exchange for approximately $23.2 million in cash, exclusive of fees and expenses, as well as certain assets relating to a drainage pipe and products manufacturing facility. This divestiture generated a pre-tax loss of $31.6 million recorded in other expense, net. In addition, for the second quarter of 2017, we recorded a pre-tax long-lived asset impairment of $7.5 million within impairment and exit charges. We used the net proceeds from the transaction to pay down debt on our 2016 Revolver. See Note 20, Discontinued operations and divestitures, to the condensed consolidated financial statements.
Principal Factors Affecting Our Results of Operations
Our financial performance and results of operations are influenced by a variety of factors, including conditions in the residential, and non-residential and infrastructure construction markets, general economic conditions, changes in cost of goods sold, and seasonality and weather conditions. Some of the more important factors are discussed in the 2016 10-K, to which there were no material changes during period covered by this Report.
Factors Affecting our Financial Statements
Prior to the consummation of the IPO, LSF9 distributed its brick operations in the United States and Eastern Canada to an affiliate of Lone Star (the “Bricks Disposition”), which was recognized as a return of capital in the statement of shareholders' equity. We reclassified the operations of our former brick business to discontinued operations for the three and nine months ended September 30, 2016. Following the Bricks Disposition and prior to the consummation of the IPO, the remaining building products operations of LSF9 in the United States and Eastern Canada were transferred to Forterra, Inc. in the Reorganization. Following the Reorganization, Forterra, Inc. became a wholly owned subsidiary of Forterra US Holdings, LLC, which is indirectly wholly owned by an affiliate of Lone Star.
On October 25, 2016, we completed the IPO, in which we offered and sold 18,420,000 shares of our common stock at a public offering price of $18.00 per share. We received net proceeds from the IPO of $313.3 million, net of underwriting discounts and commissions and before payment of IPO expenses, $296.0 million of which were used to repay indebtedness in the refinancing transactions summarized below.