Second Quarter Highlights

  • Higher Income from operations, EBITDA and Adjusted EBITDA1 in the Drainage segment due to higher selling prices and mitigation of inflationary cost pressures
  • Lower Corporate costs as a result of reduced consulting spend and continued cost savings initiatives
  • Net income of $7.0 million and Adjusted EBITDA of $57.6 million

IRVING, Texas, Aug. 08, 2018 (GLOBE NEWSWIRE) --  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, 2018.

CEO Commentary
Forterra CEO Jeff Bradley commented, “I am pleased with the progress we made in the Drainage segment in the first half of 2018.  We successfully raised our selling prices, and our procurement initiative enabled us to keep our year over year cost increases below market levels. With strong end-market demand fundamentals and a solid backlog, we expect to continue to deliver year over year improvement in our margins in Drainage."

Bradley continued, “Our Water segment has proven to be more challenging than we previously expected in the face of continued higher average scrap costs on both a sequential quarter and year over year basis that have not yet been offset by higher average selling prices.  In response, we are taking price and cost actions to better capitalize on strong market demand.  Our pricing initiatives are gaining momentum and we are seeing the benefit in our bookings and in our backlog.  We are implementing an initiative focused on improving margins through a number of commercial and operational enhancements, including our recently announced senior leadership organizational realignment.  Market demand for ductile iron pipe in the first half of 2018 was well above levels seen in 2017, and the outlook for the next twelve months appears strong, as supported by our backlog and discussions with our customers.  We are committed to increasing our margins in Water, and I believe that we are taking the right steps.”

Second Quarter 2018 Consolidated Results
Second quarter 2018 net sales of $416.1 million decreased from $436.7 million in the prior year quarter. The decline is due to the impact of previously disclosed asset sales and divestitures.  Net sales excluding the impact of asset sales and divestitures of $46.8 million grew by approximately 7%.  Net income for the quarter was $7.0 million, or net income of $0.11 per share, compared to a net loss of $11.2 million, or a loss of $0.18 per share, in the prior year quarter.  Adjusted EBITDA for the second quarter was $57.6 million, compared to $46.5 million in the prior year quarter.  The increase in net income and Adjusted EBITDA is due to the benefit of improved results in Drainage and lower costs at Corporate, partially offset by lower results in Water.

Drainage Pipe & Products (“Drainage”) - Second Quarter 2018 Results
Drainage net sales increased to $222.9 million, compared to $221.5 million in the prior year quarter.  Net sales excluding the impact of asset sales of $12.6 million grew by approximately 7% due to higher shipments and higher average selling prices for pipe and precast products as well as growth in sales in both structural products and Bio Clean stormwater management systems.  The organic sales growth in pipe and precast reflects the benefit of higher average selling prices and strong demand across the Forterra footprint.

Drainage gross profit and gross profit margin were $49.8 million and 22.4%, respectively, compared to $43.1 million and 19.5%, respectively, in the prior year quarter.  The higher gross profit and gross profit margin reflects the benefit of higher average selling prices and the mitigation of labor, freight and raw materials cost inflation resulting from the 2017 procurement and operating expense initiatives.  Drainage EBITDA and Adjusted EBITDA were $48.4 million and $46.4 million, respectively, compared to $40.1 million and $40.5 million, respectively, in the prior year quarter due to higher gross profit.

Water Pipe & Products (“Water”) - Second Quarter 2018 Results
Water net sales decreased to $193.2 million, compared to $215.2 million in the prior year quarter.  Excluding the impact of the divestiture of the U.S. concrete and steel pressure pipe business of $34.2 million, net sales increased by 7%, due primarily to higher shipments.  The increase in shipments is due primarily to strong demand fundamentals.

Water gross profit and gross profit margin in the second quarter were $25.6 million and 13.3%, respectively, compared to $33.3 million and 15.5%, respectively, in the prior year quarter.  Second quarter 2018 Water EBITDA and Adjusted EBITDA of $24.2 million and $24.3 million, respectively, compared to $17.9 million and $29.6 million, respectively, in the prior year quarter.  The decline in gross profit, gross profit margin and Adjusted EBITDA was due primarily to higher scrap costs, in addition to higher labor and freight costs, that were not fully offset by higher average selling prices.

Corporate and Other (“Corporate”) - Second Quarter 2018 Results
Corporate EBITDA and Adjusted EBITDA losses of $14.6 million and $13.0 million, respectively, in the second quarter of 2018 compared to EBITDA and Adjusted EBITDA losses of $27.2 million and $23.6 million, respectively, in the prior year quarter.  The year over year improvement is due primarily to lower external consulting fees and the continued benefit of cost savings initiatives.

Balance Sheet and Liquidity
On June 30, 2018, the Company had cash of $30.2 million, outstanding debt on its senior term loan of $1.2 billion and no outstanding balance on the Company's $300.0 million asset based revolving credit facility.  The decline in cash, compared to the first quarter of 2018, was consistent with expectations relative to the full-year 2018 key cash out-flow items guidance range previously provided by the Company.

Organizational Realignment of Water Pipe & Products
In July 2018, Forterra announced an organizational realignment of its senior leadership team in its Water segment to accelerate the execution of the Company's commercial and operational initiatives focused on driving higher margins.

Amendment and Restatement of Existing Sale-Leaseback Arrangement
As previously announced in June 2018, Forterra amended and restated its existing sale-leaseback arrangement (the "SLB").  The transaction removed 24 U.S. Drainage facilities and U.S. and Canadian concrete pressure pipe facilities from the SLB in exchange for Forterra's contribution of two ductile iron pipe facilities in Bessemer, Alabama to the SLB.

Certain modifications to the SLB, including an increase in the lease term, resulted in a change in accounting treatment for a portion of the SLB from an operating lease to a finance lease effective with the completion of the transaction in early June 2018.  Capital lease obligations increased to $150.2 million at June 30, 2018, compared to $4.7 million as of March 31, 2018, as a result of the change in accounting treatment for a portion of the SLB.

In the June 2018 press release announcing the SLB amendment, Forterra estimated an annual reduction in SLB operating expenses of approximately $19 million, as compared to actual SLB operating expenses incurred in 2017.  After further review, the annual reduction is expected to be approximately $17 million.  SLB operating expenses in the second quarter were $1.4 million lower than the same quarter last year including $1.1 million in the Drainage segment and $0.3 million in the Water segment.

Financial Outlook
For the third quarter of 2018, the Company expects that net income will range from $5 million to $11 million and Adjusted EBITDA will range from $60 million to $68 million.  The third quarter guidance range incorporates the following key assumptions:

  • Continued gradual year over year improvement in Drainage, including expected net sales growth on the benefit of higher shipments and higher average selling prices mitigating the impact of continued cost inflation
  • Lower expected EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin in Water, as compared to the same quarter last year, due primarily to higher scrap costs, as well as higher labor and freight costs, not yet fully offset by higher average selling prices
  • Corporate costs of $15 to $16 million, consistent with previously provided expectations.  As compared to the average quarterly Corporate costs of approximately $14 million in the first half of 2018, the Q3 2018 Corporate cost reflects the timing of certain cost accruals and the completion of a transition service agreement that provided an income offset to Corporate expenses in the first half of 2018. 

Drainage - Key Financial Statistics:

($ in millions) 
    
 Q2 2018 Q2 2017
    
Net Sales$222.9  $221.5 
Gross Profit49.8  43.1 
EBITDA48.4  40.1 
Adjusted EBITDA46.4  40.5 
Gross Profit Margin22.4% 19.5%
Adjusted EBITDA Margin20.8% 18.3%

Water - Key Financial Statistics:

($ in millions) 
    
 Q2 2018 Q2 2017
    
Net Sales$193.2  $215.2 
Gross Profit25.6  33.3 
EBITDA24.2  17.9 
Adjusted EBITDA24.3  29.6 
Gross Profit Margin13.3% 15.5%
Adjusted EBITDA Margin12.6% 13.8%

Conference Call and Webcast Information
Forterra will host a conference call to review second quarter 2018 results on August 8, 2018 at 8:30 a.m. Eastern Time (7:30 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 5582649. 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 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.

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 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, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.


Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 Three months ended Six months ended
 June 30, June 30,
 20182017 20182017
 (unaudited) (unaudited)
Net sales$416,087 $436,685  $706,047 $774,987 
Cost of goods sold340,774 361,089  596,369 660,424 
Gross profit75,313 75,596  109,678 114,563 
Selling, general & administrative expenses(51,263)(67,297) (103,125)(132,598)
Impairment and exit charges(276)(11,376) (1,721)(11,811)
Earnings from equity method investee3,672 3,342  5,521 6,513 
Other operating income, net4,536 2,010  5,326 3,243 
 (43,331)(73,321) (93,999)(134,653)
Income (loss) from operations31,982 2,275  15,679 (20,090)
      
Other income (expense)     
Interest expense(17,745)(17,078) (31,053)(30,620)
Other income, net   6,016  
Income (loss) before income taxes14,237 (14,803) (9,358)(50,710)
Income tax benefit (expense)(7,243)3,630  (3,558)16,994 
Net income (loss)$6,994 $(11,173) $(12,916)$(33,716)
      
Basic and Diluted earnings (loss) per share:     
Net income (loss)$0.11 $(0.18) $(0.20)$(0.53)
      
Weighted average common shares outstanding:     
Basic63,893 63,793  63,865 63,791 
Diluted64,209 63,793  63,865 63,791 

Condensed Consolidated Balance Sheets
(in thousands, except per share data)

 June 30,
 2018
 December 31,
 2017
ASSETS(unaudited)  
Current assets   
Cash and cash equivalents$30,182  $104,534 
Receivables, net267,266  192,654 
Inventories275,850  236,655 
Prepaid expenses7,268  5,381 
Other current assets6,335  27,059 
Current assets held for sale  12,242 
Total current assets586,901  578,525 
Non-current assets   
Property, plant and equipment, net489,527  412,572 
Goodwill506,750  496,141 
Intangible assets, net208,211  225,304 
Investment in equity method investee54,966  54,445 
Other long-term assets17,927  18,866 
Non-current assets held for sale  25,385 
Total assets$1,864,282  $1,811,238 
    
LIABILITIES AND EQUITY   
Current liabilities   
Trade payables$148,843  $108,560 
Accrued liabilities66,415  72,782 
Deferred revenue10,263  9,029 
Current portion of long-term debt12,510  12,510 
Current portion of tax receivable agreement34,601  34,601 
Current liabilities held for sale  4,615 
Total current liabilities272,632  242,097 
Non-current liabilities   
Long term debt1,178,665  1,181,277 
Long-term capital leases134,042  4,155 
Deferred tax liabilities45,075  67,481 
Deferred gain on sale-leaseback9,497  75,743 
Other long-term liabilities20,946  25,032 
Long-term tax receivable agreement82,962  82,962 
Total liabilities1,743,819  1,678,747 
Equity   
Common stock, $0.001 par value, 190,000 shares authorized; 64,228 and 64,231 shares issued and outstanding18  18 
Additional paid-in-capital233,065  230,023 
Accumulated other comprehensive loss(8,084) (5,098)
Retained deficit(104,536) (92,452)
Total shareholders' equity120,463  132,491 
Total liabilities and shareholders' equity$1,864,282  $1,811,238 

Condensed Consolidated Statements of Cash Flows
(in thousands)

 Six months ended
 June 30,
 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES(unaudited)
Net loss$(12,916) $(33,716)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation & amortization expense53,449  58,305 
Gain on business divestiture(6,016)  
(Gain) / loss on disposal of property, plant and equipment(2,571) 1,194 
Amortization of debt discount and issuance costs4,050  3,994 
Stock-based compensation expense3,138  1,395 
Impairment charges  10,551 
Earnings from equity method investee(5,521) (6,513)
Distributions from equity method investee5,000  5,250 
Unrealized gain on derivative instruments, net(4,220) (1,326)
Unrealized foreign currency gains, net(195) (934)
Provision (recoveries) for doubtful accounts(316) 1,398 
Deferred taxes(22,722) (12,112)
Deferred rent979  1,122 
Other non-cash items471  110 
Change in assets and liabilities:   
Receivables, net(72,062) (70,062)
Inventories(35,625) (49,458)
Other current assets18,861  (8,190)
Accounts payable and accrued liabilities25,464  (21,031)
Other assets & liabilities4,094  (6,021)
NET CASH USED IN OPERATING ACTIVITIES(46,658) (126,044)
    
CASH FLOWS FROM INVESTING ACTIVITIES   
Purchase of property, plant and equipment(17,629) (30,024)
Proceeds from sale of fixed assets4,874   
Settlement of net investment hedges(4,990)  
Assets and liabilities acquired, business combinations, net(2,914) (35,380)
NET CASH USED IN INVESTING ACTIVITIES(20,659) (65,404)
    
CASH FLOWS FROM FINANCING ACTIVITIES   
Payment of debt issuance costs  (2,498)
Payments on term loans(6,255) (5,753)
Proceeds from term loans, net  200,000 
Proceeds from revolver  194,000 
Payments on revolver  (213,000)
Other financing activities(265) (110)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES(6,520) 172,639 
Effect of exchange rate changes on cash(515) 809 
Net change in cash and cash equivalents(74,352) (18,000)
Cash and cash equivalents, beginning of period104,534  40,024 
Cash and cash equivalents, end of period$30,182  $22,024 
    
SUPPLEMENTAL DISCLOSURES:
Cash interest paid30,613  26,465 
Income taxes paid4,608  25,882 
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:
Assets and liabilities acquired in non-cash exchange18,140   
Fair value changes of derivatives recorded in OCI, net of tax970  (1,908)
Capital lease obligation148,962   

Additional Statistics (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 net (loss), interest expense, depreciation and amortization, income tax benefit 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 and non-cash compensation expense.  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 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.

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 adjusted EBITDA and adjusted EBITDA margin, 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 adjusted EBITDA and adjusted EBITDA margin as supplemental financial metrics and in conjunction with results prepared in accordance with GAAP.

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

 Three months ended June 30, Six months ended June 30,
 2018 2017 2018 2017
 (unaudited) (unaudited)
Net income (loss)$6,994  $(11,173) $(12,916) $(33,716)
Interest expense17,745  17,078  31,053  30,620 
Depreciation and amortization26,036  28,501  53,448  58,305 
Income tax (benefit) expense7,243  (3,630) 3,558  (16,994)
EBITDA158,018  30,776  75,143  38,215 
(Gain) loss on sale of property, plant & equipment, net2(2,624) 420  (2,571) 1,194 
Impairment and exit charges3276  11,376  1,721  11,811 
Transaction costs4407  2,679  1,568  4,738 
Inventory step-up impacting margin5291  338  464  1,757 
Non-cash compensation61,984  887  3,138  1,244 
Other (gains) losses7(712)   (6,688) (538)
Adjusted EBITDA$57,640  $46,476  $72,775  $58,421 
Adjusted EBITDA margin13.9% 10.6% 10.3% 7.5%
Gross profit75,313  75,596  109,678  114,563 
Gross profit margin18.1% 17.3% 15.5% 14.8%

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.
(Gain) loss on sale of property, plant and equipment, primarily related to the disposition of manufacturing equipment.
Impairment or abandonment of long-lived assets and other exit charges.
Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
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.
Non-cash equity compensation expense.
Other (gains) or losses, including the non-cash gain on a divestiture transaction completed in January 2018 and gains on insurance proceeds related to the destruction of property.

Reconciliation of segment EBITDA to segment Adjusted EBITDA
(in thousands)

Three months ended June 30, 2018Drainage Pipe & Products Water Pipe & Products Corporate and Other Total
EBITDA1$48,411  $24,196  $(14,589) $58,018 
        
(Gain) loss on sale of property, plant & equipment, net2(3,080) 456    (2,624)
Impairment and exit charges31  275    276 
Transaction costs4    407  407 
Inventory step-up impacting margin5291      291 
Non-cash compensation6635  199  1,150  1,984 
Other (gains) losses7134  (869) 23  (712)
Adjusted EBITDA$46,392  $24,257  $(13,009) $57,640 
        
Net sales$222,881  $193,205  $1  $416,087 
Gross Profit$49,851  $25,585  $(123) $75,313 


Three months ended June 30, 2017Drainage Pipe & Products Water Pipe & Products Corporate and Other Total
EBITDA1$40,079  $17,913  $(27,216) $30,776 
        
(Gain) loss on sale of property, plant & equipment, net277  293  50  420 
Impairment and exit charges3(14) 11,390    11,376 
Transaction costs4    2,679  2,679 
Inventory step-up impacting margin5338      338 
Non-cash compensation628  18  841  887 
Adjusted EBITDA$40,508  $29,614  $(23,646) $46,476 
        
Net sales$221,521  $215,163  $1  $436,685 
Gross Profit$43,121  $33,252  $(777) $75,596 


Six months ended June 30, 2018Drainage Pipe & Products Water Pipe & Products Corporate and Other Total
EBITDA1$69,570  $31,105  $(25,532) $75,143 
        
(Gain) loss on sale of property, plant & equipment, net2(3,405) 834    (2,571)
Impairment and exit charges31,162  567  (8) 1,721 
Transaction costs4    1,568  1,568 
Inventory step-up impacting margin5464      464 
Non-cash compensation6875  363  1,900  3,138 
Other (gains) losses7118  (869) (5,937) (6,688)
Adjusted EBITDA$68,784  $32,000  $(28,009) $72,775 
        
Net sales$378,526  $327,518  $3  $706,047 
Gross Profit$76,267  $33,668  $(257) $109,678 


Six months ended June 30, 2017Drainage Pipe & Products Water Pipe & Products Corporate and Other Total
EBITDA1$51,490  $35,025  $(48,300) $38,215 
        
(Gain) loss on sale of property, plant & equipment, net271  1,073  50  1,194 
Impairment and exit charges3(14) 11,825    11,811 
Transaction costs4    4,738  4,738 
Inventory step-up impacting margin51,757      1,757 
Non-cash compensation649  37  1,158  1,244 
Other (gains) losses7  (538)   (538)
Adjusted EBITDA$53,353  $47,422  $(42,354) $58,421 
        
Net sales$381,969  $393,012  $6  $774,987 
Gross Profit$60,498  $55,407  $(1,342) $114,563 

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.
(Gain) loss on sale of property, plant and equipment, primarily related to the disposition of manufacturing equipment.
Impairment or abandonment of long-lived assets and other exit charges.
Legal, valuation, accounting, advisory and other costs related to business combinations and other transactions.
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.
Non-cash equity compensation expense.
Other (gains) or losses, including the non-cash gain on a divestiture transaction completed in January 2018 and gains on insurance proceeds related to the destruction of property.

Reconciliation of Net Income to Adjusted EBITDA Guidance for Q3 2018
(in millions)

 Q3 2018 Guidance
 Low High
Net income$5 $11
Interest expense21 21
Income tax expense5 7
Depreciation and amortization29 29
Adjusted EBITDA$60 $68

Source: Forterra, Inc.

Company Contact Information:
David J. Lawrence
Vice President of Treasury and Investor Relations
469-299-9113
IR@forterrabp.com