UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 3, 2014

 

 

Advanced Drainage Systems, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36557   51-0105665

(State or other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

 

4640 Trueman Boulevard,

Hilliard, Ohio 43026

   43026
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (614) 658-0050

(Former name or former address if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02 Results of Operations and Financial Condition.

On September 3, 2014, Advanced Drainage Systems, Inc. (the “Company”) issued a press release setting forth the Company’s first-quarter fiscal 2015 earnings. A copy of the Company’s press release is being furnished as Exhibit 99 and hereby incorporated by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.

 

Item 9.01 Financial Statements and Exhibits.

 

  (d) Exhibits

The following exhibit is being furnished as part of this report:

 

Exhibit    Description
99    Press release, dated September 3, 2014, issued by Advanced Drainage Systems, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ADVANCED DRAINAGE SYSTEMS, INC.
Date: September 3, 2014     By:  

/s/ Mark B. Sturgeon

    Name:   Mark B. Sturgeon
    Title:   EVP, CFO, Secretary & Treasurer
EX-99

Exhibit 99

 

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ADVANCED DRAINAGE SYSTEMS ANNOUNCES FISCAL FIRST QUARTER 2015 RESULTS

HILLIARD, Ohio – (September 3, 2014) – Advanced Drainage Systems, Inc. (NYSE: WMS) (“ADS” or the “Company”), a leading global manufacturer of water management products and solutions for commercial, residential, infrastructure and agricultural applications, today announced financial results for the fiscal first quarter ended June 30, 2014.

Fiscal First Quarter 2015 Highlights

 

•   Quarterly net sales increased 12.0%

 

•   Adjusted EBITDA of $49.2 million

 

•   Earnings per diluted share of $(0.09)

 

•   Adjusted earnings per fully converted share of $0.25

 

•   Company provides fiscal year 2015 guidance

Joseph A. Chlapaty, Chairman and Chief Executive Officer of ADS commented, “I am pleased with our performance this quarter as we delivered strong top line growth aided by solid order activity in the domestic non-residential and residential construction markets. Although we are cautiously optimistic about the strength and pace of recovery in the U.S. housing market, we are not reliant on the residential market for growth and have performed well in all economic and housing market cycles. Our strong results this quarter extend our long track record of delivering above-market growth, underscore the strength of our competitive position and demonstrate our continued track record in driving material conversion.”

Chlapaty added, “We are extremely proud of the success our Company has achieved over the past fifty years, and most recently in our first quarter prior to the completion of our successful IPO in late July. However, we are even more excited about our future. As we move further into fiscal 2015, we are focused on executing our strategic growth plan, which centers on driving market conversion and utilizing our Allied Products to deliver holistic solutions. These initiatives, coupled with the ongoing recovery in the construction markets, positions us well to continue to gain market share while enhancing our significant operating leverage over time.”

Fiscal First Quarter 2015 Results

Net sales were $328.3 million for the fiscal first quarter of 2015, a 12.0% increase compared to fiscal first quarter 2014 net sales of $293.1 million. The growth this quarter was primarily driven by improved demand in the domestic construction markets for both Pipe and Allied Products, which offset slower demand in the international markets in which we operate. Allied Products sales increased 13.4% compared to prior year sales of continuing products (excluding $2.9 million of Allied Product lines sold in fiscal 2014).

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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Gross profit increased $6.0 million, or 9.1%, to $72.0 million for the fiscal first quarter of 2015, compared to $66.0 million for the same period last year. As a percentage of net sales, gross profit was 21.9% compared to 22.5% for the prior year period. The slight decrease in overall gross margin percentage was largely attributed to lower pipe gross margins due to higher raw material and freight costs, and lower international margins, partially offset by stronger margins in Allied Products.

Selling, general and administrative (“SG&A”) expenses for the fiscal first quarter of 2015 increased $4.4 million, or 12.6%, to $39.8 million from $35.4 million for the fiscal first quarter of 2014. As a percentage of net sales, SG&A expenses totaled 12.1% in the first quarter of fiscal 2015, flat compared to the prior year. The increase in SG&A expenses was driven primarily by higher variable selling expenses tied to sales volume, an increase in non-cash stock based compensation, as well as higher professional fees and other corporate expenses related to being a public company.

The Company reported Adjusted EBITDA of $49.2 million in the fiscal first quarter of 2015 compared to Adjusted EBITDA of $49.5 million in the fiscal first quarter of 2014. Results for the fiscal first quarter of 2014 included a $4.8 million one-time gain related to the sale of a non-core product line. Excluding this one-time gain, Adjusted EBITDA increased 10.1% or $4.5 million as compared to the prior year period.

Net income attributable to ADS for the fiscal first quarter of 2015 was $14.2 million, 12.6% lower compared to net income attributable to ADS of $16.3 million for the fiscal first quarter of 2014. Earnings per basic and diluted share for the fiscal first quarter of 2015 was $(0.09) based on weighted average common shares of 47.5 million shares. The loss per share for the fiscal first quarter 2015 is primarily related to a non-cash charge of $18.4 million for the increase in the fair value of the Company’s redeemable convertible preferred stock held in the Company’s ESOP, which is presented in Mezzanine Equity. This charge does not affect net income recorded in the financial statements, but is included in the determination of basic and diluted earnings per share. Excluding this fair value charge and other miscellaneous adjustments to income available to common shareholders, adjusted earnings per fully converted share for the fiscal first quarter of 2015 was $0.25. A reconciliation of earnings per share (GAAP) to net income per fully converted share (Non-GAAP) is presented below:

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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     Quarter      Quarter  
     Ended      Ended  
Amounts in (000) Except Per Share Data    6/30/2013      6/30/2014  

Net Income (loss) available to common shareholders

    $ 12,906       $ (4,169 ) 

Add: Adjustments to net income available to common shareholders

      3,390         18,410   
  

 

 

     

 

 

  

Adjusted net income attributable to ADS - (Non-GAAP)

      16,296         14,241   

Add: Fair value of ESOP Compensation related to Convertible Preferred Stock

      2,520         2,687   

Adjusted net income - (Non-GAAP)

    $ 18,816       $ 16,928   
  

 

 

     

 

 

  

Weighted Average Common Shares Oustanding:

      47,190         47,536   

Add: Unvested restricted stock shares

      319         249   

 Convertible Preferred Stock shares

      20,418         20,099   
  

 

 

     

 

 

  

Total Weighted Average Common Shares Outstanding - Fully Converted

      67,927         67,884   

Adjusted net income per share - Fully Converted - Basic (Non-GAAP)

    $ 0.28       $ 0.25   

A reconciliation of GAAP to non-GAAP financial measures for Adjusted EBITDA and Adjusted earnings per fully converted share have 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.”

During the fiscal first quarter of 2015, the Company recorded net cash used by operating activities of $21.3 million compared to $30.0 million in the same period last year, with its traditional seasonal working capital build in the period. Compared to the prior year quarter, the lower use of net cash was realized primarily by an increase in accounts payable and accrued expenses offsetting higher accounts receivable from revenue growth.

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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Fiscal Year 2015 Outlook

Based on current market conditions, backlog of existing orders and business trends, the Company expects net sales for fiscal year 2015 to be in the range of $1.21 to $1.26 billion, and Adjusted EBITDA in the range of $165 to $175 million. Capital expenditures are expected to be approximately $35 million.

Mark Sturgeon, Executive Vice President and Chief Financial Officer of ADS noted, “As our guidance indicates, we believe our plans will produce sustainable, above-market net sales and Adjusted EBITDA growth. In addition, our strong balance sheet and ability to generate significant operating cash flows allows us to strategically deploy our capital to support growth and shareholder value. Our priorities for capital deployment in the future remain focused on investments and capital expenditures in our business to enhance organic growth, targeted acquisition opportunities that extend our product leadership and complement our existing package, and enhancements to shareholder returns including restarting our dividend program.”

Common Shares Outstanding

As of June 30, 2014, the Company had 67, 883, 736 fully converted weighted average shares of common stock outstanding. The following table illustrates the breakdown of the weighted average shares of common stock outstanding:

 

Weighted Average Shares Outstanding

  

Common Stock

      47,535,532   

Unvested Restricted Stock

      249,108   

Convertible Preferred Stock

      20,099,096   
  

 

 

  

Total Shares Outstanding

      67,883,736   
  

 

 

  

As of July 30, 2014 (Post-IPO), the Company had 73,201,560 fully converted shares of common stock outstanding. The following table illustrates the breakdown of the period ending shares of common stock outstanding:

 

Period Ending Shares Outstanding – Post IPO

  

Common Stock

      52,876,151   

Unvested Restricted Stock

      226,313   

Convertible Preferred Stock

      20,099,096   
  

 

 

  

Total Shares Outstanding

      73,201,560   
  

 

 

  

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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Webcast Information

The Company will host an investor conference call and webcast on Wednesday, September 3rd, 2014 at 10:00 a.m. Eastern Time. The live call can be accessed by dialing 1-877-317-6789 (US toll-free) or 1-412-317-6789 (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 ADS

Advanced Drainage Systems (ADS) 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 58 manufacturing plants and 29 distribution centers. To learn more about the ADS, please visit the Company’s website at www.ads-pipe.com.

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 (“US GAAP”). ADS management uses non-US GAAP measures in its analysis of the Company’s performance. Investors are encouraged to review the reconciliation of non-US GAAP financial measures to the comparable US GAAP results available in the accompanying tables.

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, including statements regarding the initial public offering. 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” 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

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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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; and the other risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission. 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.

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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Financial Statements

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

     Three Months Ended June 30,  
(Amounts in thousands, except per share data)    2013     2014  

Net sales

    $ 293,102      $ 328,297   

Cost of goods sold

      227,099        256,264   
  

 

 

    

 

 

  

Gross profit

      66,003        72,033   

Operating expenses:

     

Selling

      17,677        19,246   

General and administrative

      17,659        20,532   

Gain on sale of business

      (4,848 )      —     

Intangible amortization

      2,861        2,641   
  

 

 

    

 

 

  

Income from operations

      32,654        29,614   

Other expense:

     

Interest expense

      4,101        4,615   

Other miscellaneous expense, net

      529        14   
  

 

 

    

 

 

  

Income before income taxes

      28,024        24,985   

Income tax expense

      11,066        9,695   

Equity in net loss of unconsolidated affiliates

      248        621   
  

 

 

    

 

 

  

Net income

      16,710        14,669   

Less net income attributable to non-controlling interest

      414        428   
  

 

 

    

 

 

  

Net income attributable to ADS

      16,296        14,241   
  

 

 

    

 

 

  

Change in fair value of Redeemable Convertible Preferred Stock

      (1,578 )      (18,373 ) 

Dividends to Redeemable Convertible Preferred Stockholders

      (216 )      (37 ) 

Dividends paid to unvested restricted stockholders

      (8 )      —     
  

 

 

    

 

 

  

Net income (loss) available to common stockholders and participating securities

      14,494        (4,169 ) 

Undistributed income allocated to participating securities

      (1,588 )      —     
  

 

 

    

 

 

  

Net income (loss) available to common stockholders

    $ 12,906      $ (4,169 ) 
  

 

 

    

 

 

  

Weighted average common shares outstanding:

     

Basic

      47,190        47,536   

Diluted

      47,689        47,536   

Net income (loss) per share:

     

Basic

    $ 0.27      $ (0.09 ) 

Diluted

    $ 0.27      $ (0.09 ) 

Cash dividends declared per share

    $ —        $ —     

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

     As of  
(Amounts in thousands, except par value)    March 31, 2014     June 30, 2014  

ASSETS

     

Current assets:

     

Cash

    $ 3,931      $ 4,720   

Receivables (less allowance for doubtful accounts of $3,977 and $4,138, respectively)

      150,713        218,037   

Inventories

      260,300        260,971   

Deferred income taxes and other current assets

      13,555        17,000   
  

 

 

    

 

 

  

Total current assets

      428,499        500,728   

Property, plant and equipment, net

      292,082        290,761   

Other assets:

     

Goodwill

      86,297        86,299   

Intangible assets, net

      66,184        63,264   

Other assets

      64,533        71,277   
  

 

 

    

 

 

  

Total assets

    $ 937,595      $ 1,012,329   
  

 

 

    

 

 

  

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current maturities of debt obligations

    $ 11,153      $ 11,667   

Accounts payable

      108,111        123,189   

Other accrued liabilities

      37,956        36,134   

Accrued income taxes

      7,372        11,244   
  

 

 

    

 

 

  

Total current liabilities

      164,592        182,234   

Long-term debt obligation

      442,895        481,215   

Deferred tax liabilities

      69,169        67,913   

Other liabilities

      15,324        16,112   
  

 

 

    

 

 

  

Total liabilities

      691,980        747,474   

Mezzanine equity:

     

Redeemable Common Stock; $0.01 par value: 38,320 and 38,320 issued and outstanding, respectively

      549,119        659,431   

Redeemable Convertible Preferred Stock; $0.01 par value: 47,070 authorized; 44,170 issued and 26,129 and 26,129 outstanding, respectively

      291,720        348,898   

Deferred compensation – unearned ESOP shares

      (197,888 )      (233,106 ) 
  

 

 

    

 

 

  

Total mezzanine equity

      642,951        775,223   

Stockholders’ equity:

     

Common stock; $0.01 par value: 148,271 authorized: 109,951 issued: 9,141 and 9,263 outstanding respectively

      11,957        11,957   

Paid-in capital

      22,547        —     

Common stock in treasury, at cost

      (448,439 )      (447,992 ) 

Accumulated other comprehensive loss

      (5,977 )      (5,672 ) 

Retained earnings

      —          (91,219 ) 
  

 

 

    

 

 

  

Total ADS stockholders’ equity

      (419,912 )      (532,926 ) 

Non-controlling interest in subsidiaries

      22,576        22,558   
  

 

 

    

 

 

  

Total stockholders’ equity

      (397,336 )      (510,368 ) 
  

 

 

    

 

 

  

Total liabilities, mezzanine equity and stockholders’ equity

    $ 937,595      $ 1,012,329   
  

 

 

    

 

 

  

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

     Three Months Ended June 30,  
(Amounts in thousands)    2013     2014  

Cash Flows from Operating Activities

    $ (29,990 )    $ (21,258 ) 
  

 

 

    

 

 

  

Cash Flows from Investing Activities

     

Capital expenditures

      (13,142 )      (7,450 ) 

Proceeds from sale of assets/business

      5,877        —     

Investment in unconsolidated affiliate

      (550 )      (7,566 ) 

Additions of capitalized software

      (918 )      (1,320 ) 

Other investing activities

      (286 )      (310 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (9,019 )      (16,646 ) 
  

 

 

    

 

 

  

Cash Flows from Financing Activities

     

Cash dividends paid

      (1,538 )      —     

Debt issuance costs

      (2,311 )      —     

Proceeds from term loan

      22,500        —     

Payments on term loan

      —          (1,250 ) 

Payments of notes, mortgages, and other debt

      (307 )      (317 ) 

Proceeds from Revolving Credit Facility

      136,700        91,000   

Payments on Revolving Credit Facility

      (113,000 )      (50,600 ) 

Other financing activities

      (1,360 )      (40 ) 
  

 

 

    

 

 

  

Net cash provided by financing activities

      40,684        38,793   
  

 

 

    

 

 

  

Effect of exchange rate changes on cash and cash equivalents

      —          (100 ) 
  

 

 

    

 

 

  

Net change in cash and equivalents

      1,675        789   

Cash and equivalents at beginning of period

      1,361        3,931   
  

 

 

    

 

 

  

Cash and equivalents at end of period

    $ 3,036      $ 4,720   
  

 

 

    

 

 

  

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

SEGMENT REPORTING

(unaudited)

The following table sets forth reportable segment information with respect to the amount of net sales contributed by each class of similar products of our consolidated gross profit in the three months ended June 30, 2013 and 2014:

 

     Three Months Ended June 30,  
(Amounts in thousands)    2013      2014  

Domestic

      

Pipe

      189,142         217,307   

Allied Products

      66,447         74,175   
  

 

 

     

 

 

  

Total Domestic

    $ 255,589       $ 291,482   
  

 

 

     

 

 

  

International

      

Pipe

      29,588         29,937   

Allied Products

      7,925         6,878   
  

 

 

     

 

 

  

Total International

    $ 37,513       $ 36,815   
  

 

 

     

 

 

  

Total net sales

    $ 293,102       $ 328,297   
  

 

 

     

 

 

  

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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The following sets forth certain additional financial information attributable to our reportable segments for the three months ended June 30, 2013, and 2014, respectively:

 

     Three months ended June 30,  
(Amounts in thousands)    2013     2014  

Net sales

     

Domestic

      255,589        291,482   

International

      37,513        36,815   
  

 

 

    

 

 

  

Total

    $ 293,102      $ 328,297   
  

 

 

    

 

 

  

Gross profit

     

Domestic

      57,552        64,790   

International

      8,451        7,243   
  

 

 

    

 

 

  

Total

    $ 66,003      $ 72,033   
  

 

 

    

 

 

  

Segment Adjusted EBITDA

     

Domestic

      45,078        45,769   

International

      4,464        3,436   
  

 

 

    

 

 

  

Total

    $ 49,542      $ 49,205   
  

 

 

    

 

 

  

Interest expense, net

     

Domestic

      4,089        4,613   

International

      12        2   
  

 

 

    

 

 

  

Total

    $ 4,101      $ 4,615   
  

 

 

    

 

 

  

Capital expenditures

     

Domestic

      10,938        6,937   

International

      2,204        513   
  

 

 

    

 

 

  

Total

    $ 13,142      $ 7,450   
  

 

 

    

 

 

  

Depreciation and amortization

     

Domestic

      12,868        12,466   

International

      1,233        1,237   
  

 

 

    

 

 

  

Total

    $ 14,101      $ 13,703   
  

 

 

    

 

 

  

Equity in net income (loss) of unconsolidated affiliates

     

Domestic

      —          153   

International

      (248 )      (774 ) 
  

 

 

    

 

 

  

Total

    $ (248 )    $ (621 ) 
  

 

 

    

 

 

  

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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Reconciliation of Non-GAAP Measures

We present EBITDA and Adjusted EBITDA because they are key metrics used by management and our board of directors to assess our financial performance, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.

EBITDA is calculated as net income attributable to ADS before interest, income taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before stock-based compensation expense, non-cash charges and certain other expenses.

EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity. They should not be considered as alternatives to net income as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP. In addition, they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. EBITDA and Adjusted EBITDA contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as stock based compensation expense, derivative fair value adjustments, and foreign currency transaction losses.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to Net Income attributable to ADS, the most comparable GAAP measure, for each of the periods indicated:

 

     Three Months Ended June 30,  
(Amounts in thousands)    2013     2014  

Net income attributable to ADS

    $ 16,296      $ 14,241   

Depreciation and amortization (a)

      14,444        14,329   

Interest expense, net

      4,101        4,615   

Income tax expense

      11,066        9,695   
  

 

 

    

 

 

  

EBITDA

      45,907        42,880   

Derivative fair value adjustments

      (81 )      96   

Foreign currency transaction losses

      94        130   

Unconsolidated affiliates interest and tax

      130        177   

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

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Management fee to minority interest holder JV

      194         235   

Share-based compensation

      660         2,285   

ESOP deferred compensation

      2,520         2,687   

Transaction costs (b)

      118         715   
  

 

 

     

 

 

  

Adjusted EBITDA

    $ 49,542       $ 49,205   
  

 

 

     

 

 

  

 

(a) Includes our proportionate share of depreciation and amortization expense of $343 and $626 related to our Tigre ADS joint venture, BaySaver joint venture and Tigre ADS-USA joint venture, which is included in Net income of unconsolidated affiliates in our Condensed Consolidated Statements of Income for the three months ended June 30, 2013 and 2014, respectively.
(b) Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with our debt refinancing and completion of the IPO.

The following table presents a reconciliation of Segment EBITDA and Segment Adjusted EBITDA to Net Income attributable to ADS, the most comparable GAAP measure, for each of the periods indicated:

 

     Three Months Ended June 30,  
(Amounts in thousands)    2013      2014  
     Domestic     International      Domestic      International  

Reconciliation of Segment EBITDA and Segment Adjusted EBITDA:

           

Net income attributable to ADS

    $ 14,457      $ 1,839       $ 13,442       $ 799   

Depreciation and amortization (a)

      12,869        1,575         12,674         1,655   

Interest expense, net

      4,089        12         4,613         2   

Income tax expense

      10,446        620         9,216         479   
  

 

 

    

 

 

     

 

 

     

 

 

  

Segment EBITDA

      41,861        4,046         39,945         2,935   

Derivative fair value adjustments

      (81 )      —           96         —     

Foreign currency transaction losses

      —          94         —           130   

Unconsolidated affiliates interest and tax

      —          130         41         136   

Management fee to minority interest holder JV

      —          194         —           235   

Share-based compensation

      660        —           2,285         —     

ESOP deferred compensation

      2,520        —           2,687         —     

Transaction costs (b)

      118        —           715         —     
  

 

 

    

 

 

     

 

 

     

 

 

  

Segment Adjusted EBITDA

    $ 45,078      $ 4,464       $ 45,769       $ 3,436   
  

 

 

    

 

 

     

 

 

     

 

 

  

 

(a) Includes our proportionate share of depreciation and amortization expense of $343 and $626 related to our Tigre ADS joint venture, BaySaver joint venture and Tigre ADS-USA joint venture, which is included in Net income of unconsolidated affiliates in our Condensed Consolidated Statements of Income for the three months ended June 30, 2013 and 2014, respectively.
(b) Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with our debt refinancing and completion of the IPO.

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com

LOGO

 

For more information, please contact:

Michael Higgins

(614) 658-0050

Mike.Higgins@ads-pipe.com

 

ADVANCED DRAINAGE SYSTEMS, INC., 4640 TRUEMAN BLVD., HILLIARD, OH 43026 PHONE: 800/733-7473

E-mail: info@ads-pipe.com    Web site: www. ads-pipe.com