IRVING, Texas, Feb. 24, 2021 (GLOBE NEWSWIRE) -- Forterra, Inc. (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 and full year ended December 31, 2020.

Full Year 2020 Highlights

• Increased net sales by 4.2% to $1,594.5 million as compared to $1,529.8 million last year
• Increased gross profit by 27.1% to $376.7 million as compared to $296.4 million last year; gross profit margin improved by more than 400 basis points year-over-year
• Net income for 2020 was $64.5 million, compared to a net loss for 2019 of $7.3 million
• Adjusted EBITDA¹ increased by 36.8% to $279.0 million as compared to $203.9 million last year; adjusted EBITDA margin¹ improved by more than 400 basis points year-over-year to 17.5% in 2020, compared to 13.3% in 2019
• Generated $243.2 million of operating cash flow in 2020 compared to $146.8 million in 2019, and voluntarily repaid $203.5 million of long-term debt; reduced Net Leverage Ratio² to 3.7x at year-end from 6.1x a year ago
• Completed two refinancing transactions, extending the maturities of our revolving credit facility and $500 million of our long-term debt to 2025
• Received credit rating upgrades from both Moody’s and S&P
• Received favorable arbitration decision in earnout dispute with HeidelbergCement AG

Fourth Quarter 2020 Highlights

• Increased net sales by 4.6% to $379.9 million as compared to $363.1 million in the prior year quarter
• Increased gross profit by 29.3% to $86.1 million as compared to $66.6 million in the prior year quarter. Gross profit margin improved by more than 400 basis points year-over-year
• Net income of $22.6 million and Adjusted EBITDA of $58.7 million, compared to net loss of $7.7 million and Adjusted EBITDA of $41.5 million in the prior year quarter

¹ A reconciliation of non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA margin, 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.

Forterra CEO Karl Watson, Jr. commented, “I want to thank all of the Forterra team members on the exceptional performance they delivered in 2020 while working diligently to keep safe and healthy during the pandemic. Our strong performance in earnings growth, increased cash flow, and debt reduction that produced a more robust balance sheet demonstrate the results of the continuing execution of our five improvement pillars, which are specifically designed to earn a full and fair return on the products we produce and the capital we have deployed. Our fourth quarter results reflect another step forward toward achieving this aim. We had a solid finish to the year with continued pricing improvements while holding our costs relatively flat. We also saw the predicted improvements in year-over-year shipment volume trends this quarter, especially in our Drainage business, as compared to quarters earlier in the year. As a result, we exceeded our annual earnings and debt reduction guidance that were provided at the end of the third quarter. Net income for the year was $65 million, exceeding our guidance of $30 million to $40 million, and Adjusted EBITDA for the year was at the top end of our guidance of $265 million to $280 million. Voluntary debt repayment was $204 million, exceeding the guidance of $170 million to $185 million. This voluntary debt prepayment, combined with improved earnings, reduced our Net Leverage Ratio² to 3.7x at year-end."

“In recognition of the collective efforts of our team in rising to overcome the unprecedented challenges of 2020 and their delivery of the much-improved results for the year, during the fourth quarter we accrued a discretionary 2% profit sharing contribution to team members’ 401K (U.S.) or DCPP (Canada) retirement accounts for 2020. The total contribution was $5.2 million, comprised of $2.9 million in Drainage, $2.0 million in Water, and $0.3 million in Corporate. This contribution demonstrated our commitment to investing in our people.”

Mr. Watson continued, "Looking ahead, we remain focused on the execution of our five primary improvement pillars: health and safety, plant-level operational discipline, enhanced commercial capabilities, working capital efficiency, and general and administrative expense effectiveness. For 2021, we expect our focus on these pillars to further enhance our results. While challenges from the pandemic persist, and some of our key raw material prices have increased, our team will make continued progress across all of our five improvement pillars. We are very proud of what we have accomplished 2020, but even more excited about what we can still achieve in 2021 and beyond.”

Drainage net sales for the fourth quarter slightly decreased by 1.4%, or $3.1 million, to $211.0 million as compared to $214.1 million in the prior year quarter. The decrease was due to lower shipment volumes year-over-year, primarily driven by less favorable weather conditions compared to the last year period, while the volume shortfall seen in the prior sequential quarter progressively improved during the fourth quarter. The impact of volume decline on net sales was mostly offset by higher average selling prices. On a full year basis, Drainage net sales decreased by 2.8%, or $25.7 million, to $887.4 million as compared to $913.1 million in 2019. The decrease was driven by lower shipment volumes year-over-year, primarily due to less favorable weather conditions compared to last year, project delays earlier in the year caused by the COVID-19 pandemic, as well as the impact from the early stage of the Company’s margin-enhanced value before volume commercial strategy improvements. As the Company has continued execution of its commercial strategy, it has made appropriate adjustments to its commercial activities.

Drainage gross profit and gross profit margin for the fourth quarter increased to $45.2 million and 21.4%, respectively, as compared to $37.9 million and 17.7%, respectively, in the prior year quarter. Gross profit and gross profit margin for the prior year quarter were negatively impacted by a $5.4 million non-cash inventory valuation adjustment, as well as higher operating expenses. In addition, higher average selling prices in 2020 further contributed to the year-over-year increase.

On a full year basis, Drainage gross profit and gross profit margin increased to $211.6 million and 23.8%, respectively, as compared to $201.0 million and 22.0%, respectively, in 2019. The increase was primarily due to higher average selling prices caused by a combination of true pricing improvements and the effect of product and geographic sales mix, partially offset by lower shipment volumes year-over-year.

Drainage EBITDA, Adjusted EBITDA and Adjusted EBITDA margin during the fourth quarter increased to $39.7 million, $40.6 million and 19.2%, respectively, compared to $31.1 million, $33.2 million and 15.5%, respectively, in the prior year quarter. On a full year basis, Drainage EBITDA, Adjusted EBITDA and Adjusted EBITDA margin increased to $187.5 million, $198.0 million and 22.3%, respectively, as compared to $173.0 million, $182.1 million, and 19.9%, respectively, in 2019. The improvements generally reflect the same dynamics as discussed above in the gross profit and gross profit margin analysis.

Water net sales for the fourth quarter increased by 13.4%, or $19.9 million, to $168.9 million as compared to $149.0 million in the prior year quarter. On a full year basis, Water net sales increased by 14.7%, to $707.1 million as compared to $616.7 million in 2019. These year-over-year increases were mostly driven by higher average selling prices, coupled with a small increase in shipment volumes.

Water gross profit and gross profit margin for the fourth quarter increased to $40.9 million and 24.2%, respectively, as compared to $28.6 million and 19.2%, respectively, in the prior year quarter. On a full year basis, Water gross profit and gross profit margin significantly increased to $165.1 million and 23.3%, respectively, as compared to $95.6 million and 15.5%, respectively, in 2019. These increases were primarily driven by higher average selling prices, while unit cost remained relatively flat.

Water EBITDA, Adjusted EBITDA and Adjusted EBITDA margin during the fourth quarter increased to $35.5 million, $35.9 million and 21.3%, respectively, compared to $24.0 million, $26.0 million and 17.4%, respectively, in the prior year quarter. On a full year basis, Water EBITDA, Adjusted EBITDA and Adjusted EBITDA margin significantly increased to $145.5 million, $146.9 million and 20.8%, respectively, as compared to $82.8 million, $85.5 million, and 13.9%, respectively, in 2019. These improvements reflect the same dynamics as discussed above in the gross profit and gross profit margin analysis.

Corporate and Other (“Corporate”)
During the fourth quarter, Corporate EBITDA and Adjusted EBITDA loss were $20.0 million and $17.8 million, respectively, compared to $20.0 million and $17.7 million, respectively, in the prior year quarter. On a full year basis, Corporate EBITDA and Adjusted EBITDA loss were $90.7 million and $65.9 million, respectively, compared to $74.2 million and $63.7 million, respectively, in the prior year quarter. On a reported basis, the increase in Corporate segment EBITDA loss was primarily driven by a $12.3 million loss on extinguishment of debt as a result of the Company’s prepayments of term loan debt and the consequent write-offs of the corresponding debt issuance costs. The year-over-year increase in Corporate adjusted EBITDA loss, which excludes the loss on extinguishment of term loan debt, was slightly higher than in the prior year, primarily due to increased annual bonus accruals driven by the significantly improved business performance.

Other Items – Income Taxes
Tax expense for the year was $8.4 million (effective tax rate of 11.5%) compared to the prior year tax benefit of $3.3 million. With the improved earnings in 2020, the Company released $11.8 million, or $0.18 on a per share basis, of valuation allowance against its deferred tax assets, resulting in the lower than statutory tax rate. The prior year's tax benefit was mainly driven by the pre-tax loss the Company generated.

Balance Sheet and Liquidity
As of December 31, 2020, the Company had cash of $25.7 million and total debt of $914.9 million, which was comprised of $500 million of senior secured notes due in July 2025 and $414.9 million of term loan due in October 2023. There were no outstanding borrowings under the Company's $350 million revolving credit facility at year-end. Net cash from operating activities during the year was $243.2 million, a 65.7% increase from $146.8 million in 2019. During 2020, the Company continued its commitment to its strategy to reduce leverage and voluntarily prepaid $203.5 million of term loan; as a result, Net Leverage Ratio² reduced to 3.7x at year-end compared to 6.1x a year ago.

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 storm water management. Based in Irving, Texas, Forterra’s product breadth and significant scale help make it a one-stop shop for water related pipe and products, and a preferred supplier to a wide variety of customers, including contractors, distributors and municipalities. For more information on Forterra, visit http://forterrabp.com.