Document
false0001678463 0001678463 2020-07-27 2020-07-27


 

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): July 27, 2020
 
FORTERRA, INC.
(Exact Name of Registrant as Specified in Charter)
 
Delaware
 
001-37921
 
37-1830464
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

511 East John Carpenter Freeway, 6th Floor
Irving, TX 75062
(Address of principal executive offices, including ZIP code)
(469) 458-7973
(Registrant's telephone number, including area code)
 
Not Applicable
(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))

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
 
FRTA
 
Nasdaq Stock Market LLC






Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
 





Item 2.02. Results of Operations and Financial Condition.
On July 27, 2020, Forterra, Inc. (the "Company") issued a press release announcing its financial results for its fiscal quarter ended June 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information included or incorporated by reference in this Item 2.02, including Exhibit 99.1, is being furnished to the Securities and Exchange Commission (the “SEC”) and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 8.01. Other Events.
The Company intends to reference a slide deck (the "Presentation") during the Company's conference call to discuss its financial results for its fiscal quarter ended June 30, 2020 and from time to time by the Company's executive management team in meetings with investors regarding, among other things, the Company's operations and performance.  A copy of the Presentation is attached hereto as Exhibit 99.2 and incorporated herein by reference and can also be accessed on the Company’s website – forterrabp.com – by following the links to “Investors”, “News and Events” and “Events and Presentations”.

Item 9.01. Financial Statements and Exhibits.
(d)
Exhibits
 
 
Press Release issued by Forterra, Inc. on July 27, 2020.
 
 
Investor Presentation.
 
 
104
Cover Page Interactive Data File – The cover page from the Company’s Current Report on Form 8-K filed on July 28, 2020 is formatted in Inline XBRL (included as Exhibit 101).







SIGNATURE
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.
 
 
 
 
Forterra, Inc.
 
 
 
/s/ Lori M. Browne
 
Lori M. Browne
 
Executive Vice President, General Counsel and Secretary
Date: July 28, 2020



Exhibit
EXHIBIT 99.1

Forterra Announces Second Quarter 2020 Results

Irving, TX - GLOBE NEWSWIRE - July 27, 2020 - 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 June 30, 2020.

Second Quarter 2020 Highlights

Increased net sales by 3.9% to $426.2 million as compared to $410.2 million in the prior year quarter
Increased gross profit by 23.0% to $105.6 million as compared to $85.8 million in the prior year quarter and improved gross profit margin by 390 basis points year-over-year
Net income increased to $27.1 million compared to $3.0 million in the prior year quarter
Adjusted EBITDA1 increased to $85.9 million as compared to $62.5 million in the prior year quarter, and Adjusted EBITDA margin1 improved by 490 basis points year-over-year
During the first half of 2020, improved operating cash flow by $67.5 million and free cash flow1 by $93.6 million year-over-year
Repaid $180 million in precautionary first quarter revolver borrowings and amended revolving credit facility to increase borrowing capacity to $350 million and extend maturity to 2025
Completed offering of $500 million senior secured notes due 2025 and used net proceeds to repay a portion of term loan in July
Net Leverage Ratio2 reduced to 5.0x from 7.9x a year ago

Forterra CEO Karl Watson, Jr. commented, “Our company performed well in this challenging market environment associated with the COVID-19 pandemic.  We continue to demonstrate the operating and financial durability of our business as well as our ability to achieve higher profitability and cash flow. Second quarter revenues were within the range of the preliminary guidance that we provided last month, while Adjusted EBITDA slightly exceeded our estimate. Importantly, we were able to continue to expand our gross profit margins, Adjusted EBITDA margins, and generate higher operating cash flow compared to the prior year period. These results reflect our continued progress towards earning a full and fair return on the products we produce and the capital we have deployed.”


1 A reconciliation of non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, net debt, and free cash flow, to comparable GAAP financial measures is provided in the reconciliation of Non-GAAP measures section of this press release.
2 Ratio represents net debt divided by adjusted EBITDA for the prior twelve-month period. Net debt and adjusted EBITDA are non-GAAP measures and a reconciliation thereof to comparable GAAP financial measures is provided in the reconciliation of Non-GAAP measures section of this press release.

 
1

EXHIBIT 99.1


“As financial markets started to show some stability and demand for our products persisted, we repaid the $180 million precautionary borrowings under our ABL revolving credit facility. In addition, we amended our ABL revolving credit facility to increase the capacity from $300 million to $350 million and extend the maturity from 2021 to 2025. Lastly, we recently issued $500 million of senior secured notes that are due in 2025 and used the net proceeds to repay a portion of our term loan. These transactions increase our liquidity and extend our debt maturities, providing us additional flexibility.”

Mr. Watson continued, “While there is still great uncertainty around demand, the shape of economic recovery and the continuing impact of the pandemic, we are encouraged by the results we have achieved during the first half of the year. We remain focused on our five improvement pillars: Health and Safety; Plant-Level Operational Discipline; Enhanced Commercial Capabilities; Working Capital Efficiency; and G&A effectiveness. By focusing on these five pillars, we intend to keep our team members safe, further expand unit margins, decrease working capital investment, and use the increased cash flow to reduce our debt.”

Segment Results
Drainage Pipe & Products (“Drainage”) - Key Financial and Operational Statistics:

($ in millions)
 
Q2 2020
 
Q2 2019
 
 
 
 
 
 
 
 
 
Net Sales
 
$
235.6

 
$
241.7

 
Gross Profit
 
61.4

 
57.7

 
EBITDA
 
57.4

 
49.0

 
Adjusted EBITDA1
 
58.8

 
52.4

 
Gross Profit Margin
26.1
%
 
23.9
%
 
Adjusted EBITDA Margin1
24.9
%
 
21.7
%
 
Drainage net sales decreased slightly by 2.5% to $235.6 million, compared to $241.7 million in the prior year quarter. The decrease in net sales was driven by lower shipment volumes primarily due to certain temporary project delays in the early stages of the COVID-19 pandemic, partially offset by higher average selling prices.

Drainage gross profit and gross profit margin were $61.4 million and 26.1%, compared to $57.7 million and 23.9%, respectively, in the prior year quarter. Higher average selling prices and manufacturing efficiencies, partially offset by increased input costs, resulted in gross profit margin improvement year over year. Consequently, Drainage EBITDA, Adjusted EBITDA1 and Adjusted EBITDA margin1 were $57.4


2

EXHIBIT 99.1

million, $58.8 million and 24.9%, respectively, as compared to the prior year quarter of $49.0 million, $52.4 million and 21.7%, respectively.

Water Pipe & Products (“Water”) - Key Financial and Operational Statistics:
($ in millions)
 
Q2 2020
 
Q2 2019
 
 
 
 
 
 
 
 
 
Net Sales
 
$
190.6

 
$
168.5

 
Gross Profit
 
44.2

 
28.1

 
EBITDA
 
39.7

 
25.0

 
Adjusted EBITDA1
 
42.7

 
25.4

 
Gross Profit Margin
23.2
%
 
16.7
%
 
Adjusted EBITDA Margin1
22.4
%
 
15.1
%
 
Water net sales increased by 13.1% to $190.6 million, compared to $168.5 million in the prior year quarter. The increase in net sales was primarily driven by higher average selling price while shipment volumes were relatively flat year-over-year.

Water gross profit and gross profit margin increased to $44.2 million and 23.2%, respectively, compared to $28.1 million and 16.7%, respectively, in the prior year quarter. Water EBITDA, Adjusted EBITDA1 and Adjusted EBITDA margin1 increased to $39.7 million, $42.7 million and 22.4%, respectively, compared to $25.0 million, $25.4 million and 15.1%, respectively, in the prior year quarter. The improvements in gross profit, gross profit margin, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin were primarily driven by higher average selling prices, also aided by lower raw material costs.

Corporate and Other (“Corporate”) - Second Quarter 2020 Results
Corporate EBITDA and Adjusted EBITDA1 losses were $20.5 million and $15.6 million, respectively, in the second quarter of 2020 compared to $20.0 million and $15.4 million, respectively, in the prior year quarter.  The Company remains focused on lowering corporate overhead expenses as a percentage of sales.



3

EXHIBIT 99.1

Balance Sheet, Liquidity and Cash Flow
Balance sheet, liquidity and cash flow were improved during the first six months of 2020 as compared to prior year, as the tables below summarize:

Cash and Debt Balance ($ in millions)
 
June 30, 2020
 
December 31, 2019
 
June 30, 2019
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
52.5

 
$
34.8

 
$
16.8

Outstanding borrowings under revolving credit facility
 

 

 
39.0

Outstanding term loan balance
 
1,101.6

 
1,123.4

 
1,216.6


Cash Flow Information ($ in millions)
 
Six Months Ended June 30,
 
 
2020
 
2019
 
 
 
 
 
Operating cash inflow (outflow)
 
$
40.2

 
$
(27.3
)
Investing cash inflow (outflow)
 
1.5

 
(24.5
)
Financing cash inflow (outflow)
 
(23.6
)
 
32.4

Free cash inflow (outflow)1
 
41.7

 
(51.9
)

During the second quarter, the Company fully repaid the $180 million previously borrowed under its revolving credit facility. In addition, in June 2020, the Company amended its revolving credit facility by (i) increasing the size of the revolving credit facility from $300 million to $350 million of aggregate commitments, (ii) extending the maturity date to June 17, 2025, and (iii) modifying the interest rates on outstanding borrowings to reflect current market conditions. As of June 30, 2020, there were no outstanding borrowings under the revolving credit facility and available borrowing capacity was $261.9 million. Given the improvements in cash generation and liquidity, the Company has resumed capital projects that had been put on hold during the second quarter and now expects full year capital expenditures in the range of $35 million to $45 million.

In July 2020, the Company completed the offering of $500 million senior secured notes at an annual interest rate of 6.5%. The senior secured notes have a five-year term and will mature in July 2025. Net proceeds of $492.5 million from this offering were utilized to repay a portion of the Company’s term loan. During the second quarter, the Company continued voluntary prepayments of its term loan in the amount of $10.5 million. Subsequent to the repayment and other second quarter repayments, the term loan now has a balance of $609.1 million that will mature in October 2023.



4

EXHIBIT 99.1

The Company’s net leverage ratio2 as of June 30, 2020 was 5.0x, compared to 6.1x at December 31, 2019 and 7.9x at June 30, 2019, and the Company remains committed to its communicated plan to reduce leverage to between 3.0x and 3.5x over the next several years.

Outlook
Regarding the Company’s outlook, Mr. Watson stated, “While we are pleased with the robust quarterly results, our visibility into the remainder of 2020 and beyond is still clouded by the uncertainly surrounding the impact of the COVID-19 pandemic with respect to sales volumes, funding of projects, and the overall economy. Based on recent trends in our backlogs, along with other factors, we expect shipment volumes in the second half of the year to continue to be lower than the prior year level as they were during the first half. That said, we believe we are favorably positioned to confront any future market challenges just as we have this quarter.”

Conference Call and Webcast Information
Forterra will host a conference call to review its second quarter 2020 results on July 28 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 2745607. Please dial in at least five minutes prior to the call to register. The call may also be accessed via a webcast which is 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 systems. Based in Irving, Texas, Forterra’s product breadth and scale help make it a preferred supplier for water-related pipe and products, serving 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


5

EXHIBIT 99.1

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.

Some of the risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements include risks and uncertainties relating to the impacts of the COVID-19 pandemic; the level of construction activity, particularly in the residential construction and non-residential construction markets; government funding of infrastructure and related construction activities; the highly competitive nature of our industry and our ability to effectively compete; the availability and price of the raw materials we use in our business; the ability to implement our growth strategy; our dependence on key customers and the absence of long-term agreements with these customers; the level of construction activity in Texas; energy costs; disruption at one or more of our manufacturing facilities or in our supply chain; construction project delays and our inventory management; our ability to successfully integrate acquisitions; labor disruptions and other union activity; a tightening of mortgage lending or mortgage financing requirements; our current dispute with HeidelbergCement related to the payment of an earnout; compliance with environmental laws and regulations; compliance with health and safety laws and regulations and other laws and regulations to which we and our products are subject to; our dependence on key executives and key management personnel; our ability, or that of the customers with which we work, to retain and attract additional skilled and non-skilled technical or sales personnel; credit and non-payment risks of our customers; warranty and related claims; legal and regulatory claims; the seasonality of our business and its susceptibility to adverse weather; our contract backlog; our ability to maintain sufficient liquidity and ensure adequate financing or guarantees for large projects; delays or outages in our information technology systems and computer networks; security breaches in our information technology systems and other cybersecurity incidents and additional factors discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.





6

EXHIBIT 99.1

Condensed Consolidated Statements of Operations
(in thousands, except per share data)


 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2020
2019
 
2020
2019
 
(unaudited)
 
(unaudited)
Net sales
$
426,186

$
410,219

 
$
757,062

$
702,077

Cost of goods sold
320,607

324,405

 
592,741

574,458

Gross profit
105,579

85,814

 
164,321

127,619

Selling, general & administrative expenses
(53,283
)
(58,640
)
 
(107,523
)
(110,031
)
Impairment and exit charges
(265
)
(582
)
 
(1,089
)
(813
)
Other operating income, net
(1,001
)
(376
)
 
(671
)
203

 
(54,549
)
(59,598
)
 
(109,283
)
(110,641
)
Income from operations
51,030

26,216

 
55,038

16,978

 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
Interest expense
(19,702
)
(25,783
)
 
(40,447
)
(50,448
)
Gain on extinguishment of debt
116


 
66


Earnings from equity method investee
3,126

3,402

 
5,925

4,969

Income (loss) before income taxes
34,570

3,835

 
20,582

(28,501
)
Income tax (expense) benefit
(7,455
)
(881
)
 
(7,533
)
6,416

Net income (loss)
$
27,115

$
2,954

 
$
13,049

$
(22,085
)
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
Basic
$
0.42

$
0.05

 
$
0.20

$
(0.34
)
Diluted
$
0.40

$
0.05

 
$
0.19

$
(0.34
)
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
Basic
65,093

64,142

 
64,948

64,073

Diluted
67,191

64,464

 
67,458

64,073


7

EXHIBIT 99.1

Condensed Consolidated Balance Sheets
(in thousands)

 
June 30,
2020
 
December 31,
2019
ASSETS
(unaudited)
 
 
Current assets
 
 
 
Cash and cash equivalents
$
52,506

 
$
34,800

Receivables, net
271,601

 
205,801

Inventories
238,835

 
238,483

Prepaid expenses
12,334

 
11,021

Other current assets
4,794

 
8,890

Total current assets
580,070

 
498,995

Non-current assets
 
 
 
Property, plant and equipment, net
446,974

 
475,575

Operating lease right-of-use assets
57,444

 
60,253

Goodwill
508,182

 
508,826

Intangible assets, net
121,978

 
142,674

Investment in equity method investee
51,459

 
50,034

Other long-term assets
5,390

 
3,701

Total assets
$
1,771,497

 
$
1,740,058

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Trade payables
$
122,715

 
$
102,426

Accrued liabilities
97,434

 
88,839

Deferred revenue
10,558

 
9,527

Current portion of long-term debt
12,510

 
12,510

Current portion of tax receivable agreement
13,145

 
13,145

Total current liabilities
256,362

 
226,447

Non-current liabilities
 
 
 
Long term debt
1,067,682

 
1,085,793

Long-term finance lease liabilities
138,449

 
137,365

Long-term operating lease liabilities
52,518

 
54,411

Deferred tax liabilities
30,745

 
28,929

Other long-term liabilities
26,105

 
21,906

Long-term tax receivable agreement
64,240

 
64,240

Total liabilities
1,636,101

 
1,619,091

Equity
 
 
 
Common stock, $0.001 par value, 190,000 shares authorized; 65,211 and 64,741 shares issued and outstanding
19

 
19

Additional paid-in-capital
249,695

 
244,372

Accumulated other comprehensive loss
(11,006
)
 
(7,063
)
Retained deficit
(103,312
)
 
(116,361
)
Total shareholders' equity
135,396

 
120,967

Total liabilities and shareholders' equity
$
1,771,497

 
$
1,740,058


8

EXHIBIT 99.1

Condensed Consolidated Statements of Cash Flows
(in thousands)
 
 
Six months ended
 
 
June 30,
 
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES
 
(unaudited)
Net income (loss)
 
$
13,049

 
$
(22,085
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation & amortization expense
 
44,907

 
48,782

Loss on disposal of property, plant and equipment
 
1,353

 
1,033

Gain on extinguishment of debt
 
(66
)
 

Amortization of debt discount and issuance costs
 
3,730

 
4,013

Stock-based compensation expense
 
5,471

 
2,661

Write-off of debt discount and issuance costs
 
376

 

Earnings from equity method investee
 
(5,925
)
 
(4,969
)
Distributions from equity method investee
 
4,500

 
1,500

Unrealized loss on derivative instruments, net
 
921

 
5,024

Unrealized foreign currency loss / (gain), net
 
212

 
(93
)
Provision (recoveries) for doubtful accounts
 
80

 
(194
)
Deferred taxes
 
1,816

 
(9,566
)
Other non-cash items
 
2,088

 
919

Change in assets and liabilities:
 
 
 
 
Receivables, net
 
(66,160
)
 
(67,813
)
Inventories
 
(945
)
 
(5,734
)
Other current assets
 
2,435

 
(641
)
Accounts payable and accrued liabilities
 
27,950

 
13,066

Other assets & liabilities
 
4,447

 
6,775

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
 
40,239

 
(27,322
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Purchase of property, plant and equipment, and intangible assets
 
(9,054
)
 
(34,051
)
Proceeds from sale of fixed assets
 
10,590

 
9,509

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
1,536

 
(24,542
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Payment of debt issuance costs
 
(1,734
)
 

Payments on term loans
 
(21,368
)
 
(6,255
)
Proceeds from revolver
 
180,000

 
54,000

Payments on revolver
 
(180,000
)
 
(15,000
)
Other financing activities
 
(454
)
 
(395
)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
 
(23,556
)
 
32,350

Effect of exchange rate changes on cash
 
(513
)
 
512

Net change in cash and cash equivalents
 
17,706

 
(19,002
)
Cash and cash equivalents, beginning of period
 
34,800

 
35,793

Cash and cash equivalents, end of period
 
$
52,506

 
$
16,791

 
 
 
 
 
SUPPLEMENTAL DISCLOSURES:
Cash interest paid
 
$
33,134

 
$
38,835

Income taxes paid (refunds received), net
 
(241
)
 
3,911


9

EXHIBIT 99.1

Non-GAAP Measures
(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 the sum of net income (loss), before interest expense (including (gains) losses from extinguishment of debt), depreciation and amortization, income tax benefit (expense) and before (gains) losses on the sale of property, plant and equipment, impairment and exit charges and certain other non-recurring income and expenses, such as transaction costs, inventory step-up impacting margin, non-cash compensation expense and pro-rata share of Adjusted EBITDA from equity method investee, minus earnings from equity method investee. 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 (loss), 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

10

EXHIBIT 99.1

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.

This release also presents both GAAP and non-GAAP financial measures on a last twelve month (“LTM”) basis. LTM information corresponding to fiscal years (i.e., the periods ended Q4 2018 and Q4 2019) reflects our audited historical results for such fiscal years presented in accordance with GAAP. Information presented for other LTM periods (i.e., the periods ended Q1 2019, Q2 2019, Q3 2019, Q1 2020, and Q2 2020) reflect unaudited trailing four quarter financial information calculated by starting with the results from the most recent audited fiscal year included in such LTM period and then (x) adding quarterly information for subsequent fiscal quarters and (y) subtracting quarterly information for the corresponding prior year period. For example, LTM Q2 2020 has been calculated by starting with the data from the twelve months ended Q4 2019 and then adding data for the six months ended Q2 2020, followed by subtracting data for the six months ended Q2 2019. This release is not in accordance with GAAP. However, we believe this information is useful to investors as we use it to evaluate our financial performance for ongoing planning purposes, including a continuous assessment of our financial performance in comparison to budgets and internal projections. We also use such LTM financial data to test compliance with covenants under our debt facilities. This presentation has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Please see our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for the relevant periods for the historical amounts used to calculate the LTM information presented.

This release also includes free cash flow, a non-GAAP liquidity measure that represents cash flow from operating activities, less capital expenditure, net of proceeds from asset disposals. Management uses free cash flow, and ratios based on it, as one of the means by which it assesses available liquidity for strategic opportunities and other discretionary investment, and it is, therefore, useful to investors in evaluating our business using the same measures as management. Free cash flow is also useful to investors because it is often used by securities analysts and other interested parties in evaluating our operating results and our ability to generate cash without incurring additional financing. Free cash flow does, however, have certain limitations due to the fact that it does not represent the total increase or

11

EXHIBIT 99.1

decrease in the cash, cash equivalents and investments balance for the period nor does it represent the residual cash flow available for discretionary expenditures. Therefore, free cash flow should not be considered as an alternative to, or in isolation from, net cash flows from operating activities or any other measure of cash flow calculated in accordance with GAAP.

This release also includes Net debt, a non-GAAP measure that represents the sum of long-term debt, the current portion of long-term debt, debt issuance cost and original issue discount and finance lease liabilities less cash and cash equivalents. Management uses net debt as one of the means by which it assesses financial leverage, and it is therefore useful to investors in evaluating our business using the same measures as management. Net debt is also useful to investors because it is often used by securities analysts and other interested parties in evaluating our business. Net debt does however have certain limitations and should not be considered as an alternative to or in isolation from long-term debt or any other measure calculated in accordance with GAAP.

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 these non-GAAP measures, 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 non-GAAP measures as supplemental financial metrics and in conjunction with results prepared in accordance with GAAP.






12

EXHIBIT 99.1


Reconciliation of net income (loss) to Adjusted EBITDA
(in thousands)


 
Three months ended June 30,
 
Six months ended June 30,
 
2020
 
2019
 
2020
 
2019
 
(unaudited)
 
(unaudited)
Net income (loss)
$
27,115

 
$
2,954

 
$
13,049

 
$
(22,085
)
Interest expense
19,702

 
25,783

 
40,447

 
50,448

Depreciation and amortization
22,406

 
24,390

 
44,907

 
48,782

Income tax (benefit) expense
7,455

 
881

 
7,533

 
(6,416
)
EBITDA1
76,678

 
54,008

 
105,936

 
70,729

Loss on sale of property, plant & equipment, net
1,317

 
1,086

 
1,353

 
1,033

Gain on extinguishment of debt
(116
)
 

 
(66
)
 

Impairment and exit charges2
1,356

 
582

 
2,180

 
813

Transaction costs3
3,036

 
854

 
4,494

 
1,274

Inventory step-up impacting margin4

 
185

 

 
278

Non-cash compensation5
2,607

 
1,132

 
5,471

 
2,661

Other6

 
3,628

 

 
3,628

Earnings from equity method investee7
(3,126
)
 
(3,402
)
 
(5,925
)
 
(4,969
)
Pro-rata share of Adjusted EBITDA from equity method investee8
4,102

 
4,396

 
7,874

 
6,932

Adjusted EBITDA
$
85,854

 
$
62,469

 
$
121,317

 
$
82,379

Adjusted EBITDA margin
20.1
%
 
15.2
%
 
16.0
%
 
11.7
%
Gross profit
105,579

 
85,814

 
$
164,321

 
$
127,619

Gross profit margin
24.8
%
 
20.9
%
 
21.7
%
 
18.2
%


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 
Impairment or abandonment of long-lived assets and other exit charges.
3 
Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
4 
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.
5 
Non-cash equity compensation expense.
6 
Other includes one-time charges such as executive severance costs.
7 
Net income from Forterra's 50% ownership in the Concrete Pipe & Precast LLC ("CP&P") joint venture accounted for under the equity method of accounting.
8 
Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense.













13

EXHIBIT 99.1


Reconciliation of segment EBITDA to segment Adjusted EBITDA
(in thousands)
Three months ended June 30, 2020
Drainage Pipe & Products
 
Water Pipe & Products
 
Corporate and Other
 
Total
EBITDA1
$
57,414

 
$
39,717

 
$
(20,453
)
 
$
76,678

(Gain) loss on sale of property, plant & equipment, net
(338
)
 
1,655

 

 
1,317

Gain on extinguishment of debt

 

 
(116
)
 
(116
)
Impairment and exit charges2

 
1,356

 

 
1,356

Transaction costs3

 

 
3,036

 
3,036

Inventory step-up impacting margin4

 

 

 

Non-cash compensation5
321

 
397

 
1,889

 
2,607

Other6
401

 
(401
)
 

 

Earnings from equity method investee7
(3,126
)
 

 

 
(3,126
)
Pro-rata share of Adjusted EBITDA from equity method investee 8
4,102

 

 

 
4,102

Adjusted EBITDA
$
58,774

 
$
42,724

 
$
(15,644
)
 
$
85,854

Adjusted EBITDA margin
24.9
%
 
22.4
%
 
NM

 
20.1
%
 
 
 
 
 
 
 
 
Net sales
$
235,596

 
$
190,590

 
$

 
$
426,186

Gross profit
61,393

 
44,185

 
1

 
105,579



Three months ended June 30, 2019
Drainage Pipe & Products
 
Water Pipe & Products
 
Corporate and Other
 
Total
EBITDA1
$
48,997

 
$
24,973

 
$
(19,962
)
 
$
54,008

Loss on sale of property, plant & equipment, net
915

 
171

 

 
1,086

Impairment and exit charges2
79

 
503

 

 
582

Transaction costs3

 

 
854

 
854

Inventory step-up impacting margin4
185

 

 

 
185

Non-cash compensation5
820

 
196

 
116

 
1,132

Other6
401

 
(401
)
 
3,628

 
3,628

Earnings from equity method investee7
(3,402
)
 

 

 
(3,402
)
Pro-rata share of Adjusted EBITDA from equity method investee 8
4,396

 

 

 
4,396

Adjusted EBITDA
$
52,391

 
$
25,442

 
$
(15,364
)
 
$
62,469

Adjusted EBITDA margin
21.7
%
 
15.1
%
 
NM

 
15.2
%
 
 
 
 
 
 
 
 
Net sales
$
241,680

 
$
168,539

 
$

 
$
410,219

Gross profit
57,717

 
28,147

 
(50
)
 
85,814





14

EXHIBIT 99.1

Six months ended June 30, 2020
Drainage Pipe & Products
 
Water Pipe & Products
 
Corporate and Other
 
Total
EBITDA1
$
83,466

 
$
62,590

 
$
(40,120
)
 
$
105,936

(Gain) loss on sale of property, plant & equipment, net
(414
)
 
1,736

 
31

 
1,353

Gain on extinguishment of debt

 

 
(66
)
 
(66
)
Impairment and exit charges2

 
2,180

 

 
2,180

Transaction costs3

 

 
4,494

 
4,494

Inventory step-up impacting margin4

 

 

 

Non-cash compensation5
1,022

 
582

 
3,867

 
5,471

Other6
802

 
(802
)
 

 

Earnings from equity method investee7
(5,925
)
 

 

 
(5,925
)
Pro-rata share of Adjusted EBITDA from equity method investee 8
7,874

 

 

 
7,874

Adjusted EBITDA
$
86,825

 
$
66,286

 
$
(31,794
)
 
$
121,317

Adjusted EBITDA margin
21.4
%
 
18.9
%
 
NM

 
16.0
%
 
 
 
 
 
 
 
 
Net sales
$
405,830

 
$
351,232

 
$

 
$
757,062

Gross profit
93,948

 
70,345

 
28

 
164,321


Six months ended June 30, 2019
Drainage Pipe & Products
 
Water Pipe & Products
 
Corporate and Other
 
Total
EBITDA1
$
74,063

 
$
33,714

 
$
(37,048
)
 
$
70,729

Loss on sale of property, plant & equipment, net
775

 
258

 

 
1,033

Impairment and exit charges2
102

 
711

 

 
813

Transaction costs3

 

 
1,274

 
1,274

Inventory step-up impacting margin4
278

 

 

 
278

Non-cash compensation5
892

 
245

 
1,524

 
2,661

Other6
802

 
(802
)
 
3,628

 
3,628

Earnings from equity method investee7
(4,969
)
 

 

 
(4,969
)
Pro-rata share of Adjusted EBITDA from equity method investee 8
6,932

 

 

 
6,932

Adjusted EBITDA
$
78,875

 
$
34,126

 
$
(30,622
)
 
$
82,379

Adjusted EBITDA margin
19.5
%
 
11.5
%
 
NM

 
11.7
%
 
 
 
 
 
 
 
 
Net sales
$
405,414

 
$
296,663

 
$

 
$
702,077

Gross profit
89,150

 
38,882

 
(413
)
 
127,619



NM
Not meaningful
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 
Impairment or abandonment of long-lived assets and other exit charges.
3 
Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
4 
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.
5 
Non-cash equity compensation expense.
6 
Inter-segment charges that are eliminated upon consolidation and one-time charges such as executive severance costs.
7 
Net income from Forterra's 50% ownership in the CP&P joint venture accounted for under the equity method of accounting.
8 
Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense.



15

EXHIBIT 99.1

Reconciliation of Adjusted EBITDA for trailing 12 months
(in thousands)

 
Twelve months ended
 
June 30, 2019
 
September 30, 2019
 
December 31, 2019
 
March 31, 2020
 
June 30, 2020
Net (loss) income
$
(33,534
)
 
$
(16,607
)
 
$
(7,331
)
 
$
3,642

 
$
27,802

Interest expense
97,732

 
99,064

 
94,970

 
91,050

 
84,969

Depreciation & amortization
100,757

 
99,007

 
97,258

 
95,367

 
93,385

Income tax (benefit) expense
(6,889
)
 
(3,786
)
 
(3,279
)
 
4,097

 
10,671

EBITDA1
158,066

 
177,678

 
181,618

 
194,156

 
216,827

(Gain) loss on sale of property, plant & equipment, net
(663
)
 
(268
)
 
2,045

 
2,134

 
2,366

Gain on extinguishment of debt

 
(374
)
 
(1,708
)
 
(1,658
)
 
(1,774
)
Impairment & exit charges2
3,428

 
1,767

 
3,520

 
4,113

 
4,887

Transaction costs3
2,248

 
2,306

 
2,963

 
3,999

 
6,182

Inventory step-up impacting margin4
278

 
278

 
278

 
185

 

Non-cash compensation5
5,762

 
6,485

 
7,919

 
9,254

 
10,729

Other6
3,628

 
3,328

 
3,328

 
3,328

 
(300
)
Earnings from equity method investee7
(9,611
)
 
(11,376
)
 
(10,466
)
 
(11,697
)
 
(11,422
)
Pro-rate share of Adjusted EBITDA from equity method investee8
13,707

 
15,451

 
14,433

 
15,668

 
15,375

Adjusted EBITDA
$
176,843

 
$
195,275

 
$
203,930

 
$
219,482

 
$
242,870


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 
Impairment or abandonment of long-lived assets and other exit charges.
3 
Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
4 
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.
5 
Non-cash equity compensation expense.
6 
Other includes one-time charges such as executive severance costs and gains on insurance proceeds related to the destruction property.
7 
Net income from Forterra's 50% ownership in the CP&P joint venture accounted for under the equity method of accounting.
8 
Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense.



16

EXHIBIT 99.1


Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow 1 
(in thousands)

 
 
Six months ended
 
 
June 30,

 
2020
 
2019
Net cash provided by (used in) operating activities - GAAP
 
$
40,239

 
$
(27,322
)
Add/(Deduct):
 
 
 
 
Purchase of property, plant and equipment, and intangible assets
 
(9,054
)
 
(34,051
)
Proceeds from sale of fixed assets
 
10,590

 
9,509

Free cash flow (usage) - Non-GAAP
 
$
41,775

 
$
(51,864
)

1 
The Company defines free cash flow as net cash flow from operations accounted for under GAAP, less capital expenditures and cash paid for intangible assets, plus proceeds from sale of fixed assets. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies.



Reconciliation of Long-Term Debt to Total Debt and Net Debt
(in thousands)

 
June 30,
 
December 31,
 
June 30,
 
2020
 
2019
 
2019
Long-term debt
$
1,067,682

 
$
1,085,793

 
$
1,210,546

Current portion of long-term debt
12,500

 
12,500

 
12,500

Carrying value of long-term debt
1,080,182

 
1,098,293

 
1,223,046

Add: Debt issuance cost and original issuance discount
21,419

 
25,055

 
30,646

Gross value of long-term debt
1,101,601

 
1,123,348

 
1,253,692

Add: Short-term finance lease liabilities
16,545

 
16,542

 
16,648

Long-term finance lease liabilities
138,449

 
137,365

 
136,096

Total debt
1,256,595

 
1,277,255

 
1,406,436

Less: Cash and cash equivalents
(52,506
)
 
(34,800
)
 
(16,791
)
Net debt
$
1,204,089

 
$
1,242,455

 
$
1,389,645




Source: Forterra, Inc.

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


17
frta2020q2ex992investorp
11 141 185 116 182 144 0 181 239 215 220 225 30 40 89 87 186 73 16 125 224 150 155 160 Investor Presentation July 2020 \\Firmwide.corp.gs.com\ibdroot\projects\IBD-NY\coltan2020\650015_1\Graphics\Photoshop\Fonterra PPT Template\Fonterra PPT Template A.psd


 
DISCLAIMER Forward-Looking Statements This presentation 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, as updated by any quarterly reporting on Form 10-Q, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement. Some of the risks and uncertainties that could cause actual results to differ materially from those expressed in any forward looking statement include risks and uncertainties relating to the impacts of the COVID-19 pandemic; the level of construction activity, particularly in the residential construction and non-residential construction markets; government funding of infrastructure and related construction activities; the highly competitive nature of our industry and our ability to effectively compete; the availability and price of the raw materials we use in our business; the ability to implement our growth strategy; our dependence on key customers and the absence of long-term agreements with these customers; the level of construction activity in Texas; energy costs; disruption at one or more of our manufacturing facilities or in our supply chain; construction project delays and our inventory management; our ability to successfully integrate acquisitions; labor disruptions and other union activity; a tightening of mortgage lending or mortgage financing requirements; our current dispute with HeidelbergCement related to the payment of an earnout; compliance with environmental laws and regulations; compliance with health and safety laws and regulations and other laws and regulations to which we and our products are subject; our dependence on key executives and key management personnel; our ability or that of the customers with which we work to retain and attract additional skilled and non-skilled technical or sales personnel; credit and non-payment risks of our customers; warranty and related claims; legal and regulatory claims; the seasonality of our business and its susceptibility to adverse weather; our contract backlog; our ability to maintain sufficient liquidity and ensure adequate financing or guarantees for large projects; delays or outages in our information technology systems and computer networks; security breaches in our information technology systems and other cybersecurity incidents and additional factors discussed in our filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, that may cause actual results to differ materially from those expressed in any forward-looking statement. Industry Data We use market data and industry forecasts throughout this presentation. Unless otherwise indicated, statements in this presentation concerning our industries and the markets in which we operate, including our general expectations, competitive position, business opportunity and market size, growth and share, are based on publicly available information, periodic industry publications and surveys, government surveys and reports, and reports by market research firms. We have not independently verified market data and industry forecasts provided by any of these third-party sources, although we believe such market data and industry forecasts included in this presentation are reliable. This information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in surveys of market size. Management estimates are derived from the information and data referred to above, as well as our internal research, calculations and assumptions made by the Company based on our analysis of such information and data and our knowledge of our industries and markets, which we believe to be reasonable, although they have not been independently verified. While we believe that the market position information included in this presentation is generally reliable, such information is inherently imprecise. Assumptions, expectations and estimates of our future performance and the future performance of the industries and markets in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in our filings with the Securities and Exchange Commission. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. 1


 
Company and Industry Overview


 
COMPANY OVERVIEW #1 in Drainage Pipe1 #1 in Ductile Iron Pipe2 2019 Revenue by Segment Water Pipe &  Manufacturer of a range of water and transportation Products infrastructure products in the U.S. and Eastern Canada 42% Drainage Pipe &  Two businesses: Drainage Pipe & Products and Water Products Pipe & Products 58%  70+ active manufacturing facilities located across the 2019 Revenue by End Markets3 U.S. and Eastern Canada Non-  4,500+ employees serve 6,000+ customers Residential Municipal / ~25% Infrastructure Unmatched breadth ~50% and scale Residential ~25% Deep, long-standing channel relationships with local and Strong Momentum national customers Adj. EBITDA & Net Income Adj. EBITDA Net Sales (Loss) Margin4 5 Pure-play water infrastructure manufacturer LTM $243 2018 2019 6/30 $204 serving the $300bn+ U.S. water and $1,585 $1,530 transportation infrastructure markets $1,480 $28 $169 $(7) 15.3% 13.3% Source: Census Bureau, Congressional Budget Office 11.4% Note: $ in millions. 5 5 1 Based on industry data and management estimates for sales volume in 2019. 2018 2019 LTM $(24) 2018 2019 LTM 2 Based on management estimates for sales volume in 2019. 6/30 6/30 3 Based on management estimates. 4 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP measure. 5 Presentation of financial information on a last twelve month (“LTM”) basis is not in accordance with GAAP. See the Appendix to this presentation for a discussion of this presentation and how it is derived from our historical amounts reported under GAAP. 3


 
INDUSTRY LEADER – DRAINAGE More than 90% of Drainage revenues are tied to markets where we have a #1 or #2 position1 Segment Overview Key Demand Drivers 1. Growth in public highway construction 2. Historically consistent federal and growing state level funding Reinforced Manholes Specialty Storm 3. Housing under-supply and Concrete Products Water increased suburban living trends Pipe 2019 Net Sales by End Market2 Historical Financials Segment EBITDA & Segment Adj. EBITDA & Net Sales Margin Margin3 Non-Residential ~25% $895 $895 $181 $189 $835 $181 Municipal / $811 $171 $162 $160 Infrastructure $729 $157 ~45% $138 $130 $137 22% 20% 21% Residential 19% 19% 19% 20% 20% ~30% Note: $ in millions. 16% 16% 1 Management estimate based on 2019 revenue. 2 Based on management estimates. 3 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the Appendix to this presentation 4 4 4 for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 measure. LTM LTM LTM 4 Presentation of financial information on a last twelve month (“LTM”) basis is not in accordance with GAAP. See the Appendix to this presentation for a discussion of this presentation and how it is derived from our historical amounts reported under GAAP. 4


 
INDUSTRY LEADER – WATER Largest producer of ductile iron pipe (DIP) in the U.S.1 Segment Overview Key Demand Drivers 1. Aging municipal water infrastructure 2. Aging wastewater and utilities infrastructure 3. Housing under-supply and Ductile Iron Fabrication Fittings increased suburban living trends Pipe 2019 Net Sales by End Market2 Historical Financials Residential Segment EBITDA & Segment Adj. EBITDA & 3 ~15% Net Sales Margin Margin $119 $746 $113 $114 $690 $668 $99 Municipal / $633 $635 $94 Non-Residential Infrastructure $84 $87 ~25% ~60% $65 $67 16% $48 16% 18% 17% 13% 13% 14% 10% 6% 10% Note: $ in millions. 1 Management estimate based on 2019 revenue. 2 Based on management estimates. 3 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the Appendix to this presentation 4 4 4 for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 2016 2017 2018 2019 2Q20 measure. LTM LTM LTM 4 Presentation of financial information on a last twelve month (“LTM”) basis is not in accordance with GAAP. See the Appendix to this presentation for a discussion of this presentation and how it is derived from our historical amounts reported under GAAP. 5


 
KEY INVESTMENT HIGHLIGHTS 1 Pure-Play Water Infrastructure Manufacturer Positioned to Benefit from Strong Demand Dynamics 2 Leading Market Position with Unmatched Scale and Manufacturing Footprint 3 Deep, Long Standing Channel Relationships with Local and National Customers 4 Expanding Margins Through Enhanced Commercial and Operational Capabilities 5 Experiencing Significant Momentum 6 Strong Cash Flow Generation Directed Toward Debt Reduction 7 Energized and Experienced Management Team 6


 
1 PURE-PLAY WATER INFRASTRUCTURE MANUFACTURER POSITIONED TO BENEFIT FROM STRONG DEMAND DYNAMICS Federal and local governments have allocated substantial Significant spending needed to address amounts of capital to infrastructure spending categories current and future water & highway directly aligned with Forterra’s end markets infrastructure needs ASCE Report Card Results “According to the agency’s estimate of national drinking water and waste water needs, over $743 billion is needed for water infrastructure improvements.” D | C+ | D- D | D+ U.S. EPA, May 9, 2019 Select Funding Sources  Federal transportation ~$1 Trillion and infrastructure bills “The U.S. has been underfunding its highway system for years, resulting in a $836 billion backlog of highway and bridge capital Funding Gap  Over 30 states have ~$100 Billion taken initiatives to needs. The bulk of the backlog ($420 billion) is in repairing Funding Gap address the funding existing highways, while $123 billion is needed for bridge repair, gap $167 billion for system expansion, and $126 billion for system enhancement.” Select Funding Sources American Society of Civil Engineers , 2017 ~46%  Water Infrastructure Funded Portion ~30% Improvements for the of Required Funded Portion Nation Act (2016) Investment of Required We also asked mayors, in an open-ended question, what specific  America’s Water Investment infrastructure projects they would pursue if given a large or small Infrastructure Act of 2018 unrestricted grant. Starting with large grants, a plurality of mayors (25%) Roads, Bridges & cited water, wastewater, and stormwater projects. This is a modest Water / Wastewater  Clean Water State increase (seven percentage points) compared with 2015. Transit Infrastructure2 Revolving Fund A number of mayors worried about aging water infrastructure; one mayor Infrastructure1 succinctly described these concerns: “Stormwater runoff. In the last ten Cumulative days, we’ve seen two 100 year storms and one 500 year storm. People are being flooded like we haven’t seen before.” A southwestern mayor Infrastructure underscored the importance of water regionally, noting that his top project Need Through 20253 would be: “Water reuse facilities. The southwest of the country is in need of thinking about the future and finding ways to conserve water.” Source: Center for Budget and Policy Priorities It’s Time for States to Invest in Infrastructure (March 2019), American Society of Civil Engineers 2017 Infrastructure Report Card, U.S. EPA 1 Based on ASCE Failure to Act Series published in 2011-2016. Menino Survey of Mayors, 2019 Results 2 Funding only includes publicly funded remediation, not private sector investment. Boston University Initiative on Cities 3 Based on 2015 U.S. Dollars. 7


 
PURE-PLAY WATER INFRASTRUCTURE MANUFACTURER 1 POSITIONED TO BENEFIT FROM STRONG DEMAND DYNAMICS (CONT’D) Public Spending on Transportation & Water Infrastructure1 Aging Pipe $500 Infrastructure $441 Much of the drinking water pipes in the US were laid from the $400 1900s to 1950. This includes lead pipes, which are still in service in some cities $300 $200 ($ in billions) ($ Water $100 Main Breaks $0 This aging water pipe infrastructure contributes to an 1956 1966 1976 1986 1996 2006 2016 estimated 240,000 water main breaks per year in municipalities across the US Public Spending by Infrastructure Category1 $350 Wasted $300 $299 Resources $250 Water main breaks and other maintenance-related incidents Transportation cause trillions of gallons of treated drinking water – a critical $200 resource with increasing cost to end customers – to be $150 $142 wasted each year ($ in billions) ($ $100 Water $50 $0 1956 1966 1976 1986 1996 2006 2016 Indicates recessionary period Source: Congressional Budget Office – Public Spending on Transportation and Water Infrastructure, 1956 to 2017 and American Society of Civil Engineers (ASCE). Note: Spending data presented on nominal basis and not adjusted for inflation. (1) Includes highway, mass transit and rail, aviation, water transportation, water resources and water utilities spending. Water resources includes containment systems (dams, levees, reservoirs, and watersheds as well as sources of freshwater (lakes and rivers). Water utilities includes water supply and wastewater treatment facilities. 8


 
2 LEADING MARKET POSITION WITHIN ATTRACTIVE INDUSTRY STRUCTURES… Industry-leading scale creates significant sales, service, manufacturing and procurement advantages over local competitors Forterra Positioning Competitors  Extensive footprint sets us apart from local competitors Drainage Pipe  Well Defined Markets #1 1  Drainage: Entrenched customer base Local and in regional and local markets PipeProducts & Drainage Regional Competitors Precast Products  Water: Three primary players in the market with meaningful barriers to entry  Our scale enables us to win 2 projects large and small #1 Products Water Pipe & Water Ductile Iron Pipe 1 Based on industry data and management estimates for sales volume in 2019. 2 Based on management estimates for sales volume in 2019. 9


 
2 …WITH UNMATCHED SCALE AND MANUFACTURING FOOTPRINT Diverse geographic and end market footprint allows Forterra to support both local and national customers Drainage Pipe & Products Drainage products have a shipping radius of 150 – 350 miles and Forterra has established a footprint to cater to many attractive markets at a local level Water Pipe & Products Fabrication Plants DIP Manufacturing Plants Water products can be shipped across the country and Forterra’s manufacturing facilities are strategically located to provide coast-to-coast coverage Note: Illustrative map as of March 31, 2020. 10


 
3 DEEP, LONG STANDING CHANNEL RELATIONSHIPS WITH LOCAL AND NATIONAL CUSTOMERS Water Pipe & Products Drainage Pipe & Products Strong Relationships with Market Leading Trust-Based Contractors Relationship Across 1 1 Distributors Each Local Market Nationally Aligned Commercial Long Track Record of Putting Customers’ Philosophy and Strategy 2 2 Interests / Business Strategies First Executed Locally Refined Commercial Strategy Has Been Well- Value before Volume 3 3 Received and Accretive (But not in spite of) 11


 
4 TRANSFORMATION OF FORTERRA: HEIGHTENED FOCUS ON EXPANDING MARGINS Forterra’s new management is in the early innings of pricing enhancements and operational initiatives that are expected to continue to improve financial performance Plant-Level Enhanced Working Capital G&A Health and Safety Operational Commercial Efficiency Effectiveness Discipline Capabilities We put the health and Making daily safety of our Investing in sales force to Deeper information improvements using our Put inventory in the right employees before expand reach and better delivered faster and at a manufacturing / process places at the right times anything else; our inform our customers of lower cost so operators know-how to drive and match AR & AP most productive our compelling value can make better business efficiencies with limited cycles proposition decisions facilities should be our financial investment safest Revamped Incentive System to Drive Economic Profit Metrics 12


 
5 EXPERIENCING SIGNIFICANT MOMENTUM LTM Net Sales LTM Gross Profit and Margin 7% 32% $1,569 $1,585 $333 $1,482 $1,476 $1,506 $1,530 $313 $289 $296 $253 $264 19.4% 20.0% 21.0% 17.9% 19.2% 17.1% Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 LTM Net (Loss) Income LTM Adjusted EBITDA and Margin1 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 41% $243 $219 $28 $195 $204 $172 $177 $4 ($7) ($17) 11.6% 12.0% 13.0% 13.3% 14.0% 15.3% ($29) ($34) Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Note: Presentation of financial information on a last twelve month (“LTM”) basis is not in accordance with GAAP. See the Appendix to this presentation for a discussion of this presentation and how it is derived from our historical amounts reported under GAAP. 1 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP measure. 13


 
6 STRONG CASH FLOW GENERATION DIRECTED TOWARD DEBT REDUCTION Management’s relentless focus on de-leveraging is expected to increase financial flexibility and position the Company for long-term, sustainable growth Net Leverage Ratio1 Commentary Improved Leverage • Continuously improving our 7.9x leverage profile • Voluntarily prepaid $87.5 million of term loan in 2019 and $15.5 million during the first half of 2020 6.1x No Near-term Debt Maturities • Completed a $500 million senior 5.0x secured notes offering due 2025 and used net proceeds to repay term loan down to $609 million 3.0x – 3.5x (maturity in October 2023) • In June 2020, successfully amended and extended revolving credit facility, shifting maturity on the facility to 2025, increasing capacity from $300 million to $350 million Strong Liquidity • Year-over-year increase in total liquidity driven by improvement in 2018 2019 Q2 2020 Mid-Term Target free cash flow1 1 Ratio represents net debt divided by adjusted EBITDA for the prior twelve-month period. Net debt, Adjusted EBITDA and free cash flow are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and reconciliations thereof to the most directly comparable GAAP measures. 14


 
7 ENERGIZED AND EXPERIENCED MANAGEMENT TEAM Forterra’s diverse management team brings cross-industry experience and a proven track record of performance Karl Watson Charlie Brown Lori Browne CEO EVP & CFO EVP & General Counsel Rich Hunter Vik Bhatia Truman Greene President, Drainage President, Water SVP, Human Resources Segment Segment 15


 
Financial Update


 
Q2 2020 FINANCIAL HIGHLIGHTS Increased net sales by 3.9% to $426.2 million as compared to $410.2 million in the prior year quarter Increased gross profit by 23.0% to $105.6 million as compared to $85.8 million in the prior year quarter; and gross profit margin improved by 390 basis points year-over-year Net income increased to $27.1 million compared to $3.0 million in the prior year quarter Adjusted EBITDA1 increased to $85.9 million as compared to $62.5 million in the prior year quarter; and Adjusted EBITDA margin1 improved by 490 basis points year-over- year Repaid all precautionary first quarter revolver borrowings of $180 million, and amended revolving credit facility to increase borrowing capacity to $350 million and extend the maturity to 2025 Completed the offering of $500 million senior secured notes due 2025 and used the net proceeds to repay a portion of term loan in July Net Leverage Ratio2 reduced to 5.0x from 7.9x a year ago 1 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP measure. 2 Ratio represents net debt divided by adjusted EBITDA for the prior twelve-month period. Adjusted EBITDA, Adjusted EBITDA margin, and net debt are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and reconciliations of adjusted EBITDA and net debt to the most directly comparable GAAP measures. 17


 
Q2 AND YTD 2020 FINANCIAL PERFORMANCE – CONSOLIDATED ($MM) Net Sales Gross Profit and Margin +4% +8% +23% +29% $426 $757 $410 $702 $106 $164 $86 $128 24.8% 21.7% 20.9% 18.2% Q2 2019 Q2 2020 1H 2019 1H 2020 Q2 2019 Q2 2020 1H 2019 1H 2020 Net Income (Loss) Adjusted EBITDA and Margin1 +37% +47% $27 $ 13 $86 $121 $63 $82 20.1% 15.2% 16.0% 11.7% $3 $(22) Q2 2019 Q2 2020 1H 2019 1H 2020 Q2 2019 Q2 2020 1H 2019 1H 2020 1 Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP measure. 18


 
Q2 AND YTD 2020 FINANCIAL PERFORMANCE – DRAINAGE ($MM) Net Sales Gross Profit and Margin (3)% +0% +6% +5% $94 $405 $406 $61 $89 $58 $242 $236 26.1% 23.9% 22.0% 23.1% Q2 2019 Q2 2020 1H 2019 1H 2020 Q2 2019 Q2 2020 1H 2019 1H 2020 Segment EBITDA and Margin Adjusted EBITDA and Margin1 Operational Statistics2 +17% +13% +12% +10% 2Q20 1H20 vs. 2Q19 vs. 1H19 $57 $84 $59 $87 $49 $74 $79 Volume $52 (13)% (10)% (tons) 24.4% 24.9% 21.7% 21.4% 20.3% 20.6% 19.5% Pricing 18.3% +9% +9% per Unit Mix Impacted Cost of Goods Sold per Q2 2019 Q2 2020 1H 2019 1H 2020 Q2 2019 Q2 2020 1H 2019 1H 2020 Unit 1 Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP measure. 2 Operational statistics only pertain to our pipe and precast products and do not include other services, non-volume based products, or non-core products. Pipe and precast products revenue accounted for approximately 90% of Drainage segment revenue. 19


 
Q2 AND YTD 2020 FINANCIAL PERFORMANCE – WATER ($MM) Net Sales Gross Profit and Margin +13% +18% +57% +81% $351 $44 $70 $191 $297 $169 $28 23.2% $39 20.0% 16.7% 13.1% Q2 2019 Q2 2020 1H 2019 1H 2020 Q2 2019 Q2 2020 1H 2019 1H 2020 Segment EBITDA and Margin Adjusted EBITDA and Margin1 Operational Statistics2 +59% +86% +68% +94% 2Q20 1H20 vs. 2Q19 vs. 1H19 $40 $63 $66 $43 Volume ~ +7% (tons) $25 $25 20.8% $34 22.4% $34 17.8% 18.9% Pricing per +15% +12% 14.8% 15.1% Unit 11.4% 11.5% Cost of Goods ~ ~ Sold per Unit Q2 2019 Q2 2020 1H 2019 1H 2020 Q2 2019 Q2 2020 1H 2019 1H 2020 1 Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. See the Appendix to this presentation for a discussion of these non-GAAP measures and a reconciliation thereof to the most directly comparable GAAP measure. 2 Operational statistics only pertain to our ductile iron pipe products and do not include other services, non-volume based products, or non-core products. Ductile iron pipe revenue accounted for approximately 80% of Water segment revenue. 20


 
KEY INVESTMENT HIGHLIGHTS 1 Pure-Play Water Infrastructure Manufacturer Positioned to Benefit from Strong Demand Dynamics 2 Leading Market Position with Unmatched Scale and Manufacturing Footprint 3 Deep, Long Standing Channel Relationships with Local and National Customers 4 Expanding Margins Through Enhanced Commercial and Operational Capabilities 5 Experiencing Significant Momentum 6 Strong Cash Flow Generation Directed Toward Debt Reduction 7 Energized and Experienced Management Team 21


 
Appendix – Non-GAAP Financial Measures


 
APPENDIX: NON-GAAP FINANCIAL MEASURES In addition to our results calculated under generally accepted accounting principles in the United States ("GAAP"), in this presentation 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 presentation as supplemental measures of financial performance that are not required by, or presented in accordance with GAAP. We calculate Adjusted EBITDA as the sum of net income (loss), before interest expense (including (gains) losses from extinguishment of debt), depreciation and amortization, income tax benefit (expense) and before (gains) losses on the sale of property, plant and equipment, impairment and exit charges and certain other non-recurring income and expenses, such as transaction costs, inventory step-up impacting margin, non-cash compensation expense and pro-rate share of Adjusted EBITDA from equity method investee, minus earnings from equity method investee. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA and Adjusted EBITDA margin are presented in this presentation 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 (loss), 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. This presentation also includes Total debt, a non-GAAP measure that represents the sum of long-term debt, the current portion of long-term debt, debt issuance cost and original issue discount and finance lease liabilities, and Net debt, which represents Total debt less cash and cash equivalents. Management uses these non-GAAP measures as one of the means by which it assesses financial leverage, and they are therefore useful to investors in evaluating our business using the same measures as management. These measures are also useful to investors because they are often used by securities analysts and other interested parties in evaluating our business. The measures do, however, have certain limitations and should not be considered as alternatives to or in isolation from long- term debt or any other measure calculated in accordance with GAAP. Other companies, including other companies in our industry, may not use either measure in the same way or may calculate it differently than as presented herein. This Presentation also includes free cash flow, a non-GAAP liquidity measure that represents cash flow from operating activities, less capital expenditure, net of proceeds from asset disposal. Management uses free cash flow as one of the means by which it assesses available liquidity for strategic opportunities and other discretionary investment, and it is therefore useful to investors in evaluating our business using the same measures as management. Free cash flow is also useful to investors because it is often used by securities analysts and other interested parties in evaluating our operating results. Free cash flow does however have certain limitations due to the fact that it does not represent the total increase or decrease in the cash, cash equivalents and investments balance for the period nor does it represent the residual cash flow available for discretionary expenditures. Therefore, free cash flow should not be considered as an alternative to or in isolation from net cash flows from operating activities or any other measure of cash flow calculated in accordance with GAAP. This presentation also presents both GAAP and non-GAAP financial measures on a last twelve month (“LTM”) basis. LTM information corresponding to fiscal years (i.e., the periods ended Q4 2018 and Q4 2019) reflects our audited historical results for such fiscal years presented in accordance with GAAP. Information presented for other LTM periods (i.e., the periods ended Q1 2019, Q2 2019, Q3 2019, Q1 2020, and Q2 2020) reflect unaudited trailing four quarter financial information calculated by starting with the results from the most recent audited fiscal year included in such LTM period and then (x) adding quarterly information for subsequent fiscal quarters and (y) subtracting quarterly information for the corresponding prior year period. For example, LTM Q2 2020 has been calculated by starting with the data from the twelve months ended Q4 2019 and then adding data for the six months ended Q2 2020, followed by subtracting data for the six months ended Q2 2019. This presentation is not in accordance with GAAP. However, we believe this information is useful to investors as we use it to evaluate our financial performance for ongoing planning purposes, including a continuous assessment of our financial performance in comparison to budgets and internal projections. We also use such LTM financial data to test compliance with covenants under our debt facilities. This presentation has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Please see our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for the relevant periods for the historical amounts used to calculate the LTM information presented. 23


 
ADJUSTED EBITDA RECONCILIATION – THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2020 ($ in millions) Q2 2019 Q2 2020 YTD 2019 YTD 2020 Net Income (loss) 3.0 27.1 (22.1) 13.0 Interest expense 25.8 19.7 50.4 40.4 Depreciation and amortization 24.4 22.4 48.8 44.9 Income tax (benefit) expense 0.9 7.5 (6.4) 7.5 EBITDA1 54.0 76.7 70.7 105.9 (Gain) loss on sale of property, plant & equipment, net 1.1 1.3 1.0 1.4 Gain on extinguishment of debt - (0.1) - (0.1) Impairment and exit charges2 0.6 1.4 0.8 2.2 Transaction costs3 0.9 3.0 1.3 4.5 Inventory step-up impacting margin4 0.2 - 0.3 - Non-cash compensation5 1.1 2.6 2.7 5.5 Other6 3.6 - 3.6 - Earnings from equity method investee7 (3.4) (3.1) (5.0) (5.9) Pro-rata share of Adjusted EBITDA from equity method investee8 4.4 4.1 6.9 7.9 Adjusted EBITDA 62.5 85.9 82.4 121.3 % margin 15.2% 20.1% 11.7% 16.0% 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. Impairment of goodwill and long-lived assets and other exit and disposal costs. 3. Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions. 4. 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. 5. Non-cash equity compensation expense. 6. Other includes one-time charges such as executive severance costs 7. Net income from Forterra's 50% ownership in the Concrete Pipe & Precast LLC ("CP&P") joint venture accounted for under the equity method of accounting. 8. Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense. 24


 
CONSOLIDATED ADJUSTED EBITDA RECONCILIATION ($ in millions) Twelve Months Ended Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Income (loss) (24.4) (29.5) (33.5) (16.6) (7.3) 3.6 27.8 Interest expense 78.3 89.7 97.7 99.1 95.0 91.1 85.0 Depreciation and amortization 105.5 102.4 100.8 99.0 97.2 95.4 93.4 Income tax (benefit) expense 3.1 (0.5) (6.9) (3.8) (3.3) 4.1 10.7 EBITDA1 162.5 162.1 158.1 177.7 181.6 194.2 216.8 (Gain) loss on sale of property, plant & equipment, net (4.3) (4.4) (0.7) (0.3) 2.0 2.1 2.4 Gain on extinguishment of debt - - - (0.4) (1.7) (1.7) (1.8) Impairment and exit charges2 4.3 3.1 3.4 1.8 3.5 4.1 4.9 Transaction costs3 2.5 1.8 2.2 2.3 3.0 4.0 6.2 Inventory step-up impacting margin4 0.5 0.4 0.3 0.3 0.3 0.2 - Non-cash compensation5 6.2 6.6 5.8 6.5 7.9 9.3 10.7 Other6 (6.6) (0.7) 3.6 3.3 3.3 3.3 (0.3) Earnings from equity method investee7 (10.2) (9.9) (9.6) (11.4) (10.4) (11.7) (11.4) Pro-rata share of Adjusted EBITDA from equity method investee8 13.8 13.4 13.7 15.5 14.4 15.7 15.4 Adjusted EBITDA 168.7 172.4 176.8 195.3 203.9 219.5 242.9 % margin 11.4% 11.6% 12.0% 13.0% 13.3% 14.0% 15.3% 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. Impairment of goodwill and long-lived assets and other exit and disposal costs. 3. Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions. 4. 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. 5. Non-cash equity compensation expense. 6. Other includes one-time charges such as the non-cash gain on a divestiture transaction in January 2018, executive severance costs and gains on insurance proceeds related to the destruction of property. 7. Net income from Forterra's 50% ownership in the Concrete Pipe & Precast LLC ("CP&P") joint venture accounted for under the equity method of accounting. 8. Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense. 25


 
SEGMENT ADJUSTED EBITDA RECONCILIATION – THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2020 DRAINAGE PIPE & PRODUCTS WATER PIPE & PRODUCTS ($ in millions) Q2 2019 Q2 2020 YTD 2019 YTD 2020 Q2 2019 Q2 2020 YTD 2019 YTD 2020 1 EBITDA $49.0 $57.4 $74.1 $83.5 $25.0 $39.7 $33.7 $62.6 (Gain) loss on sale of property, plant & equipment, net 0.9 (0.3) 0.8 (0.4) 0.2 1.7 0.3 1.7 Impairment and exit charges2 0.1 - 0.1 - 0.5 1.4 0.7 2.2 Inventory step-up impacting margin3 0.2 - 0.3 - - - - - Non-cash compensation4 0.8 0.3 0.9 1.0 0.2 0.4 0.2 0.6 Other5 0.4 0.4 0.8 0.8 (0.4) (0.4) (0.8) (0.8) Earnings from equity method investee6 (3.4) (3.1) (5.0) (5.9) - - - - Pro-rata share of Adjusted EBITDA from equity method investee7 4.4 4.1 6.9 7.9 - - - - Adjusted EBITDA $52.4 $58.8 $78.9 $86.8 $25.4 $42.7 $34.1 $66.3 % margin 21.7% 24.9% 19.5% 21.4% 15.1% 22.4% 11.5% 18.9% 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. Impairment of goodwill and long-lived assets and other exit and disposal costs. 3. 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. 4. Non-cash equity compensation expense. 5. Inter-segment charges that are eliminated upon consolidation. 6. Net income from Forterra's 50% ownership in the Concrete Pipe & Precast LLC ("CP&P") joint venture accounted for under the equity method of accounting. 7. Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense. 26


 
SEGMENT ADJUSTED EBITDA RECONCILIATION – TWELVE MONTHS ENDED DECEMBER 31, 2016, 2017, 2018 AND 2019 DRAINAGE PIPE & PRODUCTS WATER PIPE & PRODUCTS ($ in millions) 2016 2017 2018 2019 2016 2017 2018 2019 1 EBITDA $138.3 $129.6 $156.7 $171.4 $98.6 $47.6 $64.5 $84.4 (Gain) loss on sale of property, plant & equipment, net 15.5 - (5.6) 1.6 5.7 2.1 1.3 0.5 Impairment and exit charges2 0.2 - 1.9 0.2 1.9 12.4 2.5 3.3 Transaction costs3 - - - - 0.5 - - - Inventory step-up impacting margin4 4.5 2.5 0.5 0.3 10.6 - - - Loss on Business Divestiture5 - - - - - 32.3 - - Non-cash compensation6 - 0.7 1.7 1.6 - 0.4 0.3 0.4 Costs associated with Disposed Sites7 0.2 - - - - - - - Other8 - - 0.9 1.6 (3.3) (1.0) (1.7) (1.6) Earnings from equity method investee9 (11.9) (12.4) (10.2) (10.5) - - - - Pro-rata share of Adjusted EBITDA from equity method investee10 15.1 16.7 13.8 14.4 - - - - Adjusted EBITDA $161.9 $137.1 $159.7 $180.6 $114.0 $93.8 $66.9 $87.0 % margin 22.2% 16.4% 19.7% 20.2% 18.0% 12.6% 10.0% 13.7% Note: Forterra changed the methodology for its calculation of Adjusted EBITDA in Q3 2018 to include the Adjusted EBITDA associated with Forterra’s 50% ownership in the Concrete Pipe & Precast LLC joint venture, which is accounted for under the equity method of accounting. All amounts for periods prior to Q3 2018 were revised to reflect the current presentation in all subsequent public disclosures thereof, and have been similarly updated herein. Adjusted EBITDA for 2016, as calculated pursuant to the current methodology, has not been previously publicly disclosed and the change in methodology increased Adjusted EBITDA for the year ended 2016 by $3.2 million compared to the previously disclosed amount. 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 Impairment or abandonment of long-lived assets and other exit charges. 3 Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions. 4 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. 5 Loss on divestiture of U.S. concrete and steel pressure pipe business, net of specific items for which adjustments are separately made elsewhere in the calculation of adjusted EBITDA presented herein. 6 Non-cash equity compensation expense. 7 Results of operations of our 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. 8 Other one-time charges or gains. 9 Net income from Forterra's 50% ownership in the CP&P joint venture accounted for under the equity method of accounting. 10 Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense. 27


 
SEGMENT ADJUSTED EBITDA RECONCILIATION – LAST TWELVE MONTH (“LTM”) ($ in millions) DRAINAGE PIPE & PRODUCTS WATER PIPE & PRODUCTS Q2 2020 LTM Q2 2020 LTM EBITDA1 180.8 113.3 Loss on sale of property, plant & equipment, net 0.4 2.0 Impairment and exit charges2 0.1 4.8 Non-cash compensation3 1.7 0.8 Other4 1.6 (1.6) Earnings from equity method investee5 (11.4) - Pro-rata share of Adjusted EBITDA from equity method investee6 15.4 - Adjusted EBITDA 188.5 119.2 % margin 21.1% 17.3% 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. Impairment of goodwill and long-lived assets and other exit and disposal costs. 3. Non-cash equity compensation expense. 4. Inter-segment charges that are eliminated upon consolidation. 5. Net income from Forterra's 50% ownership in the Concrete Pipe & Precast LLC ("CP&P") joint venture accounted for under the equity method of accounting. 6. Adjusted EBITDA from Forterra's 50% ownership in the CP&P joint venture. Calculated as CP&P net income adjusted primarily to add back Forterra's pro-rata portion of CP&P's depreciation and amortization and interest expense. 28


 
RECONCILIATION OF LONG-TERM DEBT TO TOTAL DEBT AND NET DEBT – DECEMBER 31,2018, JUNE 30, 2019, DECEMBER 31, 2019, AND JUNE 30, 2020 December 31, June 30, December 31, June 30, ($ in millions) 2018 2019 2019 2020 Long-Term Debt $1,176.1 $1,210.5 $1,085.8 $1,067.7 Current Portion of Long-Term Debt 12.5 12.5 12.5 12.5 Carrying Value of Long-Term Debt 1,188.6 1,223.0 1,098.3 1,080.2 Add: Debt Issuance Cost and Original Issuance Discount 34.3 30.6 25.1 21.4 Gross Value of Long-Term Debt 1,222.9 1,253.6 1,123.4 1,101.6 Add: Short-Term Finance Lease Liabilities 16.4 16.6 16.5 16.5 Long-Term Finance Lease Liabilities 134.9 136.1 137.4 138.4 Total Debt 1,374.2 1,406.3 1,277.3 1,256.5 Less: Cash and Cash Equivalents (35.8) (16.8) (34.8) (52.5) Net Debt 1,338.4 1,389.5 1,242.5 1,204.0 29


 
RECONCILIATION OF FREE CASH FLOW – SIX MONTHS ENDED JUNE 30, 2019 AND 2020 Six Months Ended June 30, ($ in millions) 2019 2020 Net Cash Provided by (Used in) Operating Activities ($27.3) $40.2 Net Cash Provided by (Used in) Investing Activities (24.5) 1.5 Net Cash Provided by (Used in) Financing Activities 32.4 (23.6) Net Cash Provided by (Used in) Operating Activities ($27.3) $40.2 Purchase of property, plant and equipment and intangible assets (34.1) (9.1) Proceeds from sale of fixed assets 9.5 10.6 Free Cash Flow ($51.9) $41.7 Note: The Company defines free cash flow as net cash flow from operations accounted for under GAAP, less capital expenditures and cash paid for intangible assets, plus proceeds from sale of fixed assets. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies. 30


 
v3.20.2
Cover Page
Jul. 27, 2020
Cover [Abstract]  
Document Type 8-K
Document Period End Date Jul. 27, 2020
Entity Registrant Name FORTERRA, INC.
Entity Incorporation, State or Country Code DE
Entity File Number 001-37921
Entity Tax Identification Number 37-1830464
Entity Address, Address Line One 511 East John Carpenter Freeway
Entity Address, Address Line Two 6th Floor
Entity Address, City or Town Irving
Entity Address, State or Province TX
Entity Address, Postal Zip Code 75062
City Area Code 469
Local Phone Number 458-7973
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.001 par value per share
Trading Symbol FRTA
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Entity Central Index Key 0001678463
Amendment Flag false