10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period EndedJune 30, 2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF1934

For the transition period from _________ to _________.

Commission File Number: 001-37921

FORTERRA, INC.

(Exact name of registrant as specified in its charter)

Delaware	37-1830464
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

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)

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 Global Select Market

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company x Emerging growth company o

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. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

There were 64,298,391 shares of common stock, par value $0.001 per share, of the registrant outstanding as of August 2, 2019.

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Income (Loss)	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Shareholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
Part II	Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FORTERRA, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
Net sales	$	410,219		$	416,087		$	702,077		$	706,047
Cost of goods sold	324,405			340,774			574,458			596,369
Gross profit	85,814			75,313			127,619			109,678
Selling, general & administrative expenses	(58,640		)	(51,263		)	(110,031		)	(103,125		)
Impairment and exit charges	(582		)	(276		)	(813		)	(1,721		)
Other operating income (expense), net	(376		)	4,536			203			5,326
	(59,598		)	(47,003		)	(110,641		)	(99,520		)
Income from operations	26,216			28,310			16,978			10,158
Other income (expense)
Interest expense	(25,783		)	(17,745		)	(50,448		)	(31,053		)
Earnings from equity method investee	3,402			3,672			4,969			5,521
Other income, net	—			—			—			6,016
Income (loss) before income taxes	3,835			14,237			(28,501		)	(9,358		)
Income tax (expense) benefit	(881		)	(7,243		)	6,416			(3,558		)
Net income (loss)	$	2,954		$	6,994		$	(22,085	)	$	(12,916	)
Earnings (loss) per share:
Basic and diluted	$	0.05		$	0.11		$	(0.34	)	$	(0.20	)
Weighted average common shares outstanding:
Basic	64,142			63,893			64,073			63,865
Diluted	64,464			64,209			64,073			63,865

See accompanying notes to unaudited condensed consolidated financial statements

1

FORTERRA, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three months ended					Six months ended
	June 30,					June 30,
	2019		2018			2019			2018
	(unaudited)					(unaudited)
Net income (loss)	$	2,954	$	6,994		$	(22,085	)	$	(12,916	)
Unrealized gain on derivative activities, net of tax	—		—			—			970
Change in other postretirement benefit plans, net of tax	—		—			373			—
Foreign currency translation adjustment	1,320		(1,569		)	2,828			(3,126		)
Comprehensive income (loss)	$	4,274	$	5,425		$	(18,884	)	$	(15,072	)

See accompanying notes to unaudited condensed consolidated financial statements

2

FORTERRA, INC.

Condensed Consolidated Balance Sheets

(in thousands)

	June 30, 2019			December 31, 2018
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	16,791		$	35,793
Receivables, net	266,818			198,468
Inventories	291,696			285,030
Other current assets	22,432			24,798
Total current assets	597,737			544,089
Non-current assets
Property, plant and equipment, net	485,184			492,167
Operating lease right-of-use assets	63,616			—
Goodwill	508,742			508,193
Intangible assets, net	166,480			183,789
Investment in equity method investee	54,076			50,607
Other long-term assets	2,329			14,407
Total assets	$	1,878,164		$	1,793,252
LIABILITIES AND EQUITY
Current liabilities
Trade payables	$	131,697		$	114,708
Accrued liabilities	71,780			70,236
Deferred revenue	10,972			9,138
Current portion of long-term debt	12,510			12,510
Current portion of tax receivable agreement	15,457			15,457
Total current liabilities	242,416			222,049
Non-current liabilities
Long-term debt	1,210,546			1,176,095
Long-term finance lease liabilities	136,096			134,948
Long-term operating lease liabilities	56,578			—
Deferred tax liabilities	39,430			46,615
Deferred gain on sale-leaseback	—			9,338
Other long-term liabilities	20,938			22,667
Long-term tax receivable agreement	73,318			73,318
Total liabilities	1,779,322			1,685,030
Commitments and Contingencies (Note 14)
Equity
Common stock, $0.001 par value, 190,000 shares authorized; 64,298 and 64,206 shares issued and outstanding	18			18
Additional paid-in-capital	237,478			234,931
Accumulated other comprehensive loss	(7,539		)	(10,740		)
Retained deficit	(131,115		)	(115,987		)
Total shareholders' equity	98,842			108,222
Total liabilities and shareholders' equity	$	1,878,164		$	1,793,252

See accompanying notes to unaudited condensed consolidated financial statements

3

FORTERRA, INC.

Condensed Consolidated Statements of Shareholders' Equity

(in thousands, except share data)

	Common Stock
	Shares	Amount		Additional Paid-in-Capital			Accumulated Other Comprehensive Income (Loss)			Retained Deficit			Total Shareholders' Equity
Balance at December 31, 2018	64,205,604	$	18	$	234,931		$	(10,740	)	$	(115,987	)	$	108,222
Cumulative effect of accounting changes, net of tax	—	—		—			—			6,957			6,957
Share-based compensation expense	—	—		1,529			—			—			1,529
Stock-based plan activity	57,106	—		(26		)	—			—			(26		)
Comprehensive loss:
Net loss	—	—		—			—			(25,039		)	(25,039		)
Change in other postretirement benefit plans, net of tax	—	—		—			373			—			373
Foreign currency translation adjustment	—	—		—			1,508			—			1,508
Balance at March 31, 2019	64,262,710	18		236,434			(8,859		)	(134,069		)	93,524
Share-based compensation expense	—	—		1,132			—			—			1,132
Stock-based plan activity	35,447	—		(88		)	—			—			(88		)
Comprehensive income:
Net income	—	—		—			—			2,954			2,954
Foreign currency translation adjustment	—	—		—			1,320			—			1,320
Balance at June 30, 2019	64,298,157	$	18	$	237,478		$	(7,539	)	$	(131,115	)	$	98,842

	Common Stock
	Shares		Amount		Additional Paid-in-Capital			Accumulated Other Comprehensive Income (Loss)			Retained Deficit			Total Shareholders' Equity
Balance at December 31, 2017	64,230,888		$	18	$	230,023		$	(5,098	)	$	(92,452	)	$	132,491
Share-based compensation expense	—		—		1,154			—			—			1,154
Stock-based plan activity	(3,663	)	—		(57		)	—			—			(57		)
Comprehensive loss:
Net loss	—		—		—			—			(19,910		)	(19,910		)
Gain on derivative transactions, net of tax	—		—		—			970			—			970
Foreign currency translation adjustment	—		—		—			(1,557		)	—			(1,557		)
Reclassification due to the adoption of ASU 2018-02	—		—		—			(830		)	830			—
Balance at March 31, 2018	64,227,225		18		231,120			(6,515		)	(111,532		)	113,091
Share-based compensation expense	—		—		1,984			—			—			1,984
Stock-based plan activity	868		—		(39		)	—			—			(39		)
Comprehensive income:
Net income	—		—		—			—			6,994			6,994
Foreign currency translation adjustment, and other	—		—		—			(1,569		)	2			(1,567		)
Balance at June 30, 2018	64,228,093		$	18	$	233,065		$	(8,084	)	$	(104,536	)	$	120,463

See accompanying notes to unaudited condensed consolidated financial statements

4

FORTERRA, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

	Six months ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES	(unaudited)
Net loss	$	(22,085	)	$	(12,916	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation & amortization expense	48,782			53,448
(Gain) / loss on business divestiture	—			(6,016		)
(Gain) / loss on disposal of property, plant and equipment	1,033			(2,571		)
Amortization of debt discount and issuance costs	4,013			4,050
Stock-based compensation expense	2,661			3,138
Earnings from equity method investee	(4,969		)	(5,521		)
Distributions from equity method investee	1,500			5,000
Unrealized loss / (gain) on derivative instruments, net	5,024			(4,220		)
Unrealized foreign currency gains, net	(93		)	(195		)
Provision (recoveries) for doubtful accounts	(194		)	(316		)
Deferred taxes	(9,566		)	(22,722		)
Deferred rent	—			979
Other non-cash items	919			471
Change in assets and liabilities:
Receivables, net	(67,813		)	(72,062		)
Inventories	(5,734		)	(35,625		)
Other current assets	(641		)	18,861
Accounts payable and accrued liabilities	13,066			25,464
Other assets & liabilities	6,775			4,095
NET CASH USED IN OPERATING ACTIVITIES	(27,322		)	(46,658		)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment, and intangible assets	(34,051		)	(17,629		)
Proceeds from sale of fixed assets	9,509			4,874
Settlement of net investment hedges	—			(4,990		)
Business combinations, net of cash acquired	—			(2,914		)
NET CASH USED IN INVESTING ACTIVITIES	(24,542		)	(20,659		)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loans	(6,255		)	(6,255		)
Proceeds from revolver	54,000			—
Payments on revolver	(15,000		)	—
Other financing activities	(395		)	(265		)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	32,350			(6,520		)
Effect of exchange rate changes on cash	512			(515		)
Net change in cash and cash equivalents	(19,002		)	(74,352		)
Cash and cash equivalents, beginning of period	35,793			104,534
Cash and cash equivalents, end of period	$	16,791		$	30,182
SUPPLEMENTAL DISCLOSURES:
Cash interest paid	$	38,835		$	30,613
Income taxes paid	3,911			4,608
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:
Assets and liabilities acquired in non-cash exchange	—			18,140
Fair value changes of derivatives recorded in OCI, net of tax	—			970
Capital lease obligation resulting from the sale-leaseback exchange transaction	—			148,962

See accompanying notes to unaudited condensed consolidated financial statements

5

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and description of the business

Description of the Business

Forterra, Inc. (“Forterra” or the ‘‘Company’’) is involved in the manufacturing, sale and distribution of building products in the United States (“U.S.”) and Eastern Canada. Forterra’s primary products are concrete drainage pipe, precast concrete structures, and water transmission pipe used in drinking and wastewater systems. These products are used in the residential, infrastructure and non-residential sectors of the construction industry.

Organization

Forterra, a Delaware corporation, was formed on June 21, 2016 to hold the business of Forterra Building Products. The entities comprising the business of Forterra Building Products were indirect wholly-owned subsidiaries of HeidelbergCement A.G. (together with its affiliates, "HC") prior to its acquisition by LSF9 Concrete Holdings Ltd. ("LSF9") on March 13, 2015 (the "Acquisition"), including certain businesses that were divested between March 2015 and October 2016. In October 2016, in a corporate reorganization transaction (the "Reorganization") ownership of the remaining businesses of Forterra Building Products was transferred to Forterra, a wholly-owned subsidiary of Forterra US Holdings, LLC, which is indirectly wholly-owned by an affiliate of Lone Star Fund IX (U.S.),L.P. (along with its affiliates, related parties and associated, but excluding the Company and other companies that it owns as a result of its investment activity, “Lone Star”). On October 25, 2016, Forterra sold 18,420,000 shares of common stock in its initial public offering (the “IPO”).

2. Summary of significant accounting policies

General

The Company's condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accounts and results of operations of the Company and its consolidated subsidiaries. All intercompany transactions have been eliminated in consolidation.

The condensed consolidated balance sheets and the condensed consolidated statements of operations, comprehensive income (loss), cash flows and equity for the periods presented herein reflect all adjustments that are of a normal recurring nature and are necessary for a fair statement of the results of the periods shown. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. Seasonal changes and other conditions can affect the sales volumes of the Company's products. The financial results for any interim period do not necessarily indicate the expected results for the year.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 as provided in Forterra, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 12, 2019 (the “2018 10-K”). The Company has continued to follow the accounting policies set forth in those financial statements, except as supplemented and documented below. Certain prior year numbers were reclassified to conform with current year presentation. Such reclassification had no impact on the previously reported results of operations.

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date, and the reported amounts of

6

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. The more significant estimates made by management relate to fair value estimates for assets and liabilities acquired in business combinations; estimates for accrued liabilities for environmental cleanup, bodily injury and insurance claims; estimates for commitments and contingencies; and estimates for the realizability of deferred tax assets, the tax receivable agreement obligation, inventory reserves, allowance for doubtful accounts and impairment of goodwill and long-lived assets.

Concentration of Credit Risk

The Company had an individual customer within its Water Pipe & Products segment that accounted for approximately 14% and 15% of the Company's total net sales for the six months ended June 30, 2019 and 2018, respectively, and total receivables at June 30, 2019 and December 31, 2018 representing 16% and 16% of the Company's total receivables, net, respectively.

Leases

The Company determines if an arrangement is a lease at inception. Leases with an initial term of less than 12 months are not recorded on the balance sheet. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and long-term operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, accrued liabilities, and long-term finance lease liabilities in the condensed consolidated balance sheets.  

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment leases, such as forklifts, the Company accounts for the lease and non-lease components as a single lease component.

Recent Accounting Guidance Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2016-02, Leases (Topic 842), which establishes the principles that lessees and lessors shall apply to report information about the amount, timing, and uncertainty of cash flows arising from a lease. Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The Company adopted Topic 842 during the first quarter of 2019, using the transition approach that permits application of the new standard at the adoption date instead of the earliest comparative period presented in the financial statements.

To adopt Topic 842, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward its historical assessments of (1) whether the existing contracts contained a lease, (2) the lease classification for existing leases, and (3) initial direct cost for existing leases. In addition to the package of practical expedients, the Company has elected the adoption expedients of (1) the exclusion of leases with terms less than 12 months, and

7

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(2) the election not to separate non-lease components from lease components for certain classes of underlying leased assets.

To adopt Topic 842, the Company recognized a cumulative catch-up adjustment to the opening balance sheet presented January 1, 2019. The adoption of standard had a material impact on the Company’s condensed consolidated balance sheet, but did not have an impact on its condensed consolidated statements of operations, comprehensive income (loss) or cash flows. As a result of the adoption, the Company has recorded additional lease assets and lease liabilities of approximately $63.9 million and $65.2 million, respectively, as of January 1, 2019. In addition, the Company recognized the carrying value of deferred gains related to certain sale and operating leaseback of land of $9.3 million, net of tax impact of $2.3 million, to beginning retained deficit as of January 1, 2019, in accordance with ASC 842-10-65-1.

3.Acquisitions

On March 1, 2019, the Company acquired certain assets of Texas limited liability companies Houston Buckner Precast, LLC, Buckner Precast, LLC, Montgomery 18905 E. Industrial, LLC, and 1763 Old Denton Road, LLC (altogether "Buckner") for aggregate consideration of $12.0 million in cash, subject to a working capital adjustment.  The acquired Buckner assets did not meet the definition of a business and, as such, the transaction was accounted for as an asset acquisition pursuant to the guidance in subsection 805-50 of ASC 805, Business Combinations. The assets will operate as part of the Company’s Drainage Pipe & Products segment. 

4. Receivables, net

Receivables consist of the following (in thousands):

	June 30,			December 31,
	2019			2018
Trade receivables	$	252,442		$	188,999
Amounts billed, but not yet paid under retainage provisions	2,351			2,065
Other receivables	13,902			9,545
Total receivables	268,695			200,609
Less: Allowance for doubtful accounts	(1,877		)	(2,141		)
Receivables, net	$	266,818		$	198,468

5. Inventories

Inventories consist of the following (in thousands):

	June 30,		December 31,
	2019		2018
Finished goods	$	202,560	$	193,603
Raw materials	87,881		90,376
Work in process	1,255		1,051
Total inventories	$	291,696	$	285,030

8

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

6.Investment in equity method investee

The Company owns 50%of the Common Unit voting shares of Concrete Pipe & Precast LLC ("CP&P") and consequently, has recorded its investment in the Common Unit voting shares in accordance with ASC 323, Investments–EquityMethod and Joint Ventures,under the equity method of accounting.

The Company's investment in the joint venture was$54.1 million at June 30, 2019, which is included within the Drainage Pipe & Products segment. At June 30, 2019, the difference between the amount at which the Company's investment is carried and the amount of the Company's share of the underlying equity in net assets of CP&P was approximately $13.1 million. The basis difference is primarily attributed to the value of land and equity method goodwill associated with the investment.

The following reflects the Company's distribution and earnings in the equity investment (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Distribution received from CP&P	$	—		$	5,000		$	1,500		$	5,000
Share of earnings in CP&P	3,420			3,690			5,005			5,557
Amortization of excess fair value of investment	(18		)	(18		)	(36		)	(36		)

Selected financial data for CP&P on a 100% basis is as follows (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Net sales	$	37,353	$	34,655	$	65,602	$	64,673
Gross profit	11,721		11,046		19,675		19,494
Income from operations	6,840		6,860		10,020		10,695
Net income	6,776		6,797		9,893		10,573

7. Property, plant and equipment, net

Property, plant and equipment, net, consist of the following (in thousands):

	June 30,			December 31,
	2019			2018
Machinery and equipment	$	391,027		$	373,881
Land, buildings and improvements	235,598			235,819
Other equipment	6,291			6,962
Construction-in-progress	30,639			32,448
Total property, plant and equipment	663,555			649,110
Less: accumulated depreciation	(178,371		)	(156,943		)
Property, plant and equipment, net	$	485,184		$	492,167

Depreciation expense totaled $12.4 millionand $25.2 million for the three and six months ended June 30, 2019, and $12.8 million and $27.1 million for the three and six months ended June 30, 2018,

9

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

respectively, which is included in cost of goods sold and selling, general and administrative expenses in the condensed consolidated statements of operations.

8. Goodwill and other intangible assets, net

    The Company has recorded goodwill in connection with its acquisition of businesses. The following table summarizes the changes in goodwill by operating segment for the six months ended June 30, 2019 (in thousands):

	Drainage Pipe & Products		Water Pipe & Products		Total
Balance at December 31, 2018	$	189,833	$	318,360	$	508,193
Foreign currency and other adjustments	549		—		549
Balance at June 30, 2019	$	190,382	$	318,360	$	508,742

Intangible assets other than goodwill at June 30, 2019 and December 31, 2018 included the following (in thousands):

	Net carrying value as of June 30, 2019		Net carrying value as of December 31, 2018
Customer relationships and contracts	$	118,671	$	131,473
Trade names	22,075		24,523
Patents	9,489		11,304
Non-compete agreements	9,570		9,574
Developed technology	6,167		—
In-Process R&D (1)	—		6,354
Other	508		561
Total intangible assets	$	166,480	$	183,789

(1) Reclassified to developed technology in the first quarter of 2019.

Amortization expense totaled $12.0 million and $23.6 millionfor the three and six months ended June 30, 2019, and $13.2 million and $26.4 million for the three and six months ended June 30, 2018, which is included in selling, general and administrative expenses in the condensed consolidated statements of operations. All of the Company's intangible assets are amortizable.

9. Fair value measurement

The Company's financial instruments consist primarily of cash and cash equivalents, trade and other receivables, derivative instruments, accounts payable, long-term debt, operating and finance lease liabilities, accrued liabilities and the tax receivable agreement obligation. The carrying value of the Company's trade receivables, other receivables, trade payables, the asset-based revolver and accrued liabilities approximates fair value due to their short-term maturity or other terms related to these financial instruments. The Company may adjust the carrying amount of certain non-financial assets to fair value on a non-recurring basis when they are impaired.

10

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured and recorded at fair value on a recurring basis are as follows for the dates indicated (in thousands):

	Fair value measurements at June 30, 2019 using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value June 30, 2019
Assets:
Derivative asset	$	—	$	1,635	$	—	$	1,635
	Fair value measurements at December 31, 2018 using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value December 31, 2018
Assets:
Derivative asset	$	—	$	6,659	$	—	$	6,659

Liabilities and assets classified as level 2 which are recorded at fair value are valued using observable market inputs. The fair values of derivative assets and liabilities are determined using quantitative models that utilize multiple market inputs including interest rates and exchange rates to generate continuous yield or pricing curves and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair values of derivative assets and liabilities include adjustments for market liquidity, counter-party credit quality, and other instrument-specific factors, where appropriate. In addition, the Company incorporates within its fair value measurements a valuation adjustment to reflect the credit risk associated with the net position. Positions are netted by counter-parties, and fair value for net long exposures is adjusted for counter-party credit risk while the fair value for net short exposures is adjusted for the Company’s own credit risk.

The estimated carrying amount and fair value of the Company’s financial instruments and liabilities for which fair value is only disclosed is as follows (in thousands):

			Fair value measurements at June 30, 2019 using
	Carrying Amount June 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value June 30, 2019
Liabilities:
Term Loan	$	1,185,956	$	—	$	1,129,165	$	—	$	1,129,165
Tax receivable agreement payable	88,775		—		—		54,186		54,186

11

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

			Fair value measurements at December 31, 2018 using
	Carrying Amount December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value December 31, 2018
Liabilities:
Term Loan	$	1,188,605	$	—	$	1,103,628	$	—	$	1,103,628
Tax receivable agreement payable (1)	88,775		—		—		51,832		51,832

(1) During the first quarter of 2019, the Company identified a mathematical error in the 2018 10-K related to the disclosure of the fair value of the tax receivable agreement payable as of December 31, 2018. The fair value should have been $51.8 million, as opposed to $82.9 million, and is being corrected herein. This disclosure error did not have an impact on the Company's consolidated financial statements.

The fair value of debt is valued using a market approach based on indicative quoted prices for our debt instruments traded in over-the-counter markets and, therefore, is classified as Level 2 within the fair value hierarchy. See Note 11, Debt and deferred financing costs, for a further discussion of Company debt.

The determination of the fair value of the Company's tax receivable agreement payable was determined using a discounted cash flow methodology with level 3 inputs as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value required significant judgment, including estimates of the timing and amounts of various tax attributes. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future.Actual results could differ from these estimates. See Note 14, Commitments and contingencies, for a further discussion of the Company's tax receivable agreement.

10.Accrued liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued payroll and employee benefits	$	27,659	$	31,095
Short-term finance leases	16,648		16,430
Short-term operating leases	9,232		—
Accrued taxes	7,853		11,489
Warranty	3,004		3,251
Accrued rebates	2,823		3,542
Environmental obligation	618		570
Other miscellaneous accrued liabilities	3,943		3,859
Total accrued liabilities	$	71,780	$	70,236

12

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

11. Debt and deferred financing costs

The Company’s debt consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Term Loan, net of debt issuance costs and original issuance discount of $30,646 and $34,252, respectively	$	1,185,956		$	1,188,605
Revolver, net of debt issuance costs of $1,900	37,100			—
Total debt	$	1,223,056		$	1,188,605
Less: current portion debt	(12,510		)	(12,510		)
Total long-term debt	$	1,210,546		$	1,176,095

Concurrent with the completion of the IPO, Forterra entered into a $300 million asset based revolving credit facility for working capital and general corporate purposes (“Revolver”) and a $1.05 billion senior term loan facility (“Term Loan”).

The Term Loan initially provided for a $1.05 billion senior secured term loan. Subject to the conditions set forth in the term loan agreement, the Term Loan may be increased by (i) up to the greater of $285.0 million and 1.0x consolidated EBITDA (defined below) of Forterra and its restricted subsidiaries for the four quarters most recently ended prior to such incurrence plus (ii) the aggregate amount of any voluntary prepayments, plus (iii) an additional amount, provided certain financial tests are met.

Effective May 1, 2017, the Company amended the Term Loan to increase the principal outstanding by an additional $200.0 million and to reduce the interest margins applicable to the full balance of the Term Loan by 50 basis points such that applicable margin based on LIBOR was reduced from 3.50% to 3.00%. The net proceeds from the incremental term loan of $196.8 million were used to pay down a portion of the outstanding balance on the Revolver. This amendment had no effect on the Company's ability to increase the size of the Term Loan under the original provisions. The Term Loan matures on October 25, 2023 and is subject to quarterly amortization equal to 0.25% of the initial principal amount. Interest accrues on outstanding borrowings thereunder at a rate equal to LIBOR (with a floor of 1.0%) or an alternate base rate, in each case plus a margin of 3.00% or 2.00%, respectively. The weighted average interest rates for the Term Loan were 5.5% and 5.5% for the three and six months ended June 30, 2019, respectively, and 4.9% and 4.8% for the three and six months ended June 30, 2018, respectively.

The Revolver provides for an aggregate principal amount of up to $300.0 million, with up to $280.0 million to be made available to the U.S. borrowers and up to $20.0 million to be made available to the Canadian borrowers (the allocation may be modified periodically at the Company's request). Subject to the conditions set forth in the revolving credit agreement related to the Revolver (the "Revolving Credit Agreement"), the Revolver may be increased by up to the greater of (i) $100.0 million and (ii) such amount as would not cause the aggregate borrowing base to be exceeded by more than $50.0 million. Borrowings under the Revolver may not exceed a borrowing base equal to the sum of (i) 100% of eligible cash, (ii) 85% of eligible accounts receivable and (iii) the lesser of (a) 75% of eligible inventory and (b) 85% of the orderly liquidation value of eligible inventory, with the U.S. and Canadian borrowings being subject to separate borrowing base limitations. The advance rates for accounts receivable and inventory are subject to increase by 2.5% during certain periods. As of June 30, 2019, the Revolver had borrowings of $39.0 million and the weighted average interest rate was 3.75%. As of December 31, 2018, there were no outstanding borrowings under the Revolver.

The Revolver matures on October 25, 2021. The Revolver also provides for the issuance of letters of credit of up to an agreed sublimit. Interest accrues on outstanding borrowings at a rate equal to LIBOR or CDOR plus a margin ranging from 1.25% to 1.75% per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25% to 0.75% per annum, in each case, based upon the average excess availability under the Revolver for the most recently completed calendar quarter. The obligations of the borrowers under the Revolver are guaranteed by Forterra and its direct and indirect wholly-owned restricted

13

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

subsidiaries other than certain excluded subsidiaries; provided that the obligations of the U.S. borrowers are not guaranteed by the Canadian subsidiaries. The Revolver is secured by substantially all of the assets of the borrowers; provided that the obligations of the U.S. borrowers are not secured by any liens on more than 65% of the voting stock of the Canadian subsidiaries or assets of the Canadian subsidiaries.

In addition, Forterra pays a facility fee of between 20.0 and 32.5 basis points per annum based upon the utilization of the total Revolver. Availability under the Revolver at June 30, 2019 based on draws, and outstanding letters of credit of $17.3 million and allowable borrowing base was $243.7 million.

Outstanding borrowings under the Term Loan are guaranteed by Forterra and each of its direct and indirect material wholly-owned domestic subsidiaries except certain excluded subsidiaries (the "Guarantors"). The Term Loan is secured by substantially all of the assets of Forterra, the borrower and the Guarantors; provided that the obligations under the Term Loan are not secured by any liens on more than 65% of the voting stock of the Canadian subsidiaries or assets of the Canadian subsidiaries. The Term Loan contains customary representations and warranties, and affirmative and negative covenants, that, among other things, restrict the ability of Forterra and its restricted subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and pay dividends and make distributions. The Term Loan does not contain any financial covenants. Obligations under the Term Loan may be accelerated upon certain customary events of default (subject to grace periods, as appropriate).

The Revolver and the Term Loan contain customary representations and warranties, and affirmative and negative covenants, including representations, warranties, and covenants that, among other things, restrict the ability of Forterra and its restricted subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and pay dividends and make distributions. The Revolver contains a financial covenant restricting Forterra from allowing its fixed charge coverage ratio to drop below 1.00:1.00 during a compliance period, which is triggered when the availability under the Revolver falls below a threshold set forth in the Revolving Credit Agreement. Obligations under the Revolver and the Term Loan may be accelerated upon certain customary events of default (subject to grace periods, as appropriate). The fixed charge coverage ratio is the ratio of consolidated earnings before interest, depreciation, and amortization (“EBITDA’’) less cash payments for capital expenditures and income taxes to consolidated fixed charges (interest expense plus scheduled payments of principal on indebtedness).

As of June 30, 2019, the Company was in compliance with all applicable covenants under the Revolver and the Term Loan.

As of June 30, 2019, scheduled maturities of long-term debt were as follows (in thousands):

	Total		Term Loan		Revolver
2019	$	6,256	$	6,256	$	—
2020	12,510		12,510		—
2021	51,510		12,510		39,000
2022	12,510		12,510		—
2023	1,172,816		1,172,816		—
	$	1,255,602	$	1,216,602	$	39,000

14

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

12. Derivatives and hedging

The Company uses derivatives to manage selected foreign exchange and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes, and, except as discussed below, cash flows from derivative instruments are included in net cash provided by (used in) operating activities in the condensed consolidated statements of cash flows.

    On February 9, 2017, Forterra entered into interest rate swap transactions with a combined notional value of $525 million.  Under the terms of the swap transactions, Forterra agreed to pay a fixed rate of interest of 1.52% and receive floating rate interest indexed to one-month LIBOR with monthly settlement terms with the swap counterparties.  The swaps have a three-year term and expire on March 31, 2020. The interest rate swaps are not designated as cash flow hedges, therefore all changes in the fair value of these instruments are captured as a component of interest expense in the condensed consolidated statements of operations. Accordingly, cash flows from the monthly interest rate swap settlements are included in net cash provided by (used in) operating activities in the condensed consolidated statements of cash flows.

The Company elects to present all derivative assets and derivative liabilities on a net basis on its condensed consolidated balance sheets when a legally enforceable International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement exists. An ISDA Master Agreement is an agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, and such ISDA Master Agreement generally provides for the net settlement of all or a specified group of these derivative transactions, through a single payment, in a single currency, in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions. At June 30, 2019 and December 31, 2018, the Company’s derivative instruments fall under an ISDA master netting agreement.

The following table presents the fair values of derivative assets and liabilities in the condensed consolidated balance sheets (in thousands):

	June 30, 2019
	Derivative Assets				Derivative Liabilities
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate swaps	$	525,000	$	1,635	$	—	$	—
Total derivatives, gross			1,635				—
Less: Legally enforceable master netting agreements			—				—
Total derivatives, net			$	1,635			$	—

	December 31, 2018
	Derivative Assets				Derivative Liabilities
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate swaps	$	525,000	$	6,659	$	—	$	—
Total derivatives, gross			6,659				—
Less: Legally enforceable master netting agreements			—				—
Total derivatives, net			$	6,659			$	—

15

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents the effect of derivative instruments on the condensed consolidated statements of operations (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2019			2018		2019			2018
Net investment hedges
Foreign exchange forward contracts
Gain on derivatives recognized in Accumulated other comprehensive loss	$	—		$	—	$	—		$	970
Derivatives not designated as hedges
Interest rate swaps
Gain (loss) on derivatives not designated as hedges included in interest expense	(2,932		)	871		(5,024		)	4,220

13.Leases

The Company leases land and buildings, office spaces, vehicles, machinery and equipment under various lease agreements. A large portion of the Company’s leases were the result of the sale and leaseback of land and buildings related to certain production facilities. These leases have an initial term of 25 years, followed by one optional renewal term of approximately ten years that may be exercised at the Company’s discretion. These leases, with the exception of certain land leases, were classified as finance leases. The Company’s operating leases are mainly comprised of land and buildings, office spaces, vehicles, machinery and equipment leases, and have remaining terms of one to 25 years, some of which include options to extend the leases for up to 10 years.

The components of lease expense were as follows (in thousands):

Lease cost	Classification	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	Lease expense	$	4,184	$	8,221
Finance lease cost
Amortization of leased assets	Depreciation, amortization, and accretion	594		1,097
Interest on lease liabilities	Interest expense	4,609		9,153

Lease term and discount rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	15.5 years
Finance leases	33.7 years
Weighted-average discount rate (%)
Operating leases	12.6	%
Finance leases	12.3	%

16

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Supplemental cash flow information related to leases was as follows (in thousands):

	Six months ended June 30, 2019
Cash paid for amounts included in lease liabilities
Operating cash flows related to operating leases	$	7,386
Operating cash flows related to finance leases	8,009
Financing cash flows related to finance leases	282
Leased assets obtained in exchange for new finance lease liabilities	42
Leased assets obtained in exchange for new operating lease liabilities	3,872

Supplemental balance sheet information related to leases was as follows (in thousands):

	Classification	June 30, 2019
Operating leases
Right of use assets	Operating lease right-of-use assets	$	63,616
Operating lease liabilities - current portion	Accrued liabilities	(9,232		)
Operating lease liabilities - long term portion	Long-term operating lease liabilities	(56,578		)
Finance leases
Finance lease assets	Property, plant and equipment, net	50,861
Finance lease liabilities - current portion	Accrued liabilities	(16,648		)
Finance lease liabilities - long term portion	Long-term finance lease liabilities	(136,096		)

As of June 30, 2019, maturities of lease liabilities were as follows (in thousands):

	Operating leases			Finance leases			Total
2019	$	7,347		$	8,406		$	15,753
2020	13,392			16,837			30,229
2021	11,076			16,992			28,068
2022	10,309			17,242			27,551
2023	10,095			17,458			27,553
Thereafter	120,127			669,468			789,595
Total lease payments	172,346			746,403			918,749
Less: imputed interest	(106,536		)	(593,659		)	(700,195		)
Present value of lease liabilities	$	65,810		$	152,744		$	218,554

14.Commitments and contingencies

Legal matters

The Company is involved in legal proceedings and litigation in the ordinary course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or liquidity. Other than routine litigation incidental to the Company's business and those matters described below, there are no material legal proceedings to which the Company is a party or to which any of the Company’s properties are subject.

17

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Earnout Dispute

The Acquisition included an earnout, which was contingent consideration of up to $100.0 million, if and to the extent the 2015 financial results of the businesses acquired by Lone Star in the Acquisition, including the Company and HC's former building products business in the United Kingdom, exceeded a specified Adjusted EBITDA target for fiscal year 2015, as calculated pursuant to the terms of the purchase agreement. If such Adjusted EBITDA calculation exceeded the specified target, LSF9 and, as a result of the Reorganization, the Company would be required to pay the U.S. affiliate of HC an amount equal to a multiple of such excess Adjusted EBITDA, with any payment capped at $100.0 million. In April 2016, the Company provided an earnout statement to affiliates of HC demonstrating that no payment was required. On June 13, 2016, HC provided notification that it disputes, among other things, the Company’s calculation of Adjusted EBITDA under the purchase agreement and asserting that a payment should be made in the amount of $100.0 million. The Company does not believe HC’s position has merit and is vigorously opposing HC's assertions. On October 5, 2016, affiliates of HC filed a lawsuit in the Delaware Court of Chancery seeking specific performance and claiming access to the Company's books, records, and personnel; seeking a declaratory judgment concerning the scope of the neutral accounting expert’s authority; and in the alternative, claiming a breach of contract and seeking the $100.0 million and other damages (the "Delaware Action"). On December 8, 2017, the court granted the defendants' Motion to Dismiss the First Amended Complaint in the Delaware Action, finding that the earnout dispute should be heard before a neutral accounting arbitrator as set forth in the purchase agreement and that any claims that required to be brought as indemnification claims under the purchase agreement were time-barred by the contractual limitations period. Following the dismissal of the Delaware Action, the Company and HC jointly engaged a neutral accounting expert to act as an arbitrator in the dispute as required by the purchase agreement. The parties then briefed certain preliminary matters for the arbitrator. Based on the arbitrator's rulings, the Company is currently producing additional documents to HC and the accounting arbitrator is in the process of ruling on objections to that production. Under the terms of the engagement with the arbitrator, once document production is deemed complete, the parties will begin providing briefing on the merits of their claims to the arbitrator. As of June 30, 2019, no liability for this contingency has been accrued as payment of any earnout is not considered probable. However, the outcome of this matter is uncertain, and no assurance can be given to the ultimate outcome of the resulting proceedings. If the Company is unsuccessful in resolving the dispute, it could recognize a material charge to its earnings.

Securities Lawsuit and Shareholder Derivative Action

Beginning on August 14, 2017, fourplaintiffs filed putative class action complaints in the United States District Court for the Eastern District of New York against various defendants. On July 27, 2018, an order was entered consolidating the lawsuits into a single action (the "Securities Action"), and transferring the venue of the case from the Eastern District of New York to the Northern District of Texas. On September 17, 2018, an order was entered appointing Wladislaw Maciuga as lead plaintiff and approving his counsel as lead counsel. Pursuant to an agreed scheduling order, plaintiffs in the Securities Action filed their Consolidated Amended Complaint on November 30, 2018.

The Securities Action is brought by two plaintiffs individually and on behalf of all persons that purchased or otherwise acquired the Company's common stock issued pursuant to and/or traceable to the IPO and is brought against the Company, certain of its current and former officers and directors, Lone Star and certain of its affiliates, and certain banks that acted as underwriters of the IPO (collectively, the “Securities Defendants”). The Securities Action generally alleges that the Company's registration statement on Form S-1 filed in connection with the IPO (the "Registration Statement") contained false or misleading statements and/or omissions of material facts. Specifically, plaintiffs allege the Registration Statement (1) made false and/or misleading statements about the Company's ability to generate organic growth through cross-selling initiatives amongst the Company's various businesses while failing to disclose that the Company had not adequately integrated acquisitions, had not begun rolling out its cross-selling initiative, and that its businesses were submitting competing bids against one another, and (2) made false or misleading statements regarding the existence of certain accounting practices and alleged material weaknesses in the Company's internal controls over financial reporting, including the existence of and accounting for bill and hold transactions, the lack of sufficient accounting personnel, the lack of effective internal

18

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

controls to ensure costs were properly and accurately accrued, resulting in misstated costs and profits in the Company's 2016 financial statements, and the making of inventory accounting entries without adequate substantiation or documentation. The Securities Action asserts claims under Section 11 and Section 15 of the Securities Act of 1933, as amended, (the "Securities Act") and seeks (1) class certification under the Federal Rules of Civil Procedure, (2) damages suffered by plaintiffs and other class members, (3) prejudgment and post-judgment interest, (4) reasonable counsel fees and expert fees, and other costs and expenses reasonably incurred, and (5) other relief the court deems appropriate.

On February 15, 2019, the Securities Defendants filed a Motion to Dismiss all claims in the case based on plaintiffs' failure to state a claim. Briefing on the motion to dismiss was completed on May 1, 2019, and the court has not yet ruled on the motion. The parties have agreed to mediate the Securities Action, and the mediation is scheduled to occur in the third quarter 2019.

On July 31, 2018, a putative shareholder derivative complaint captioned Maloney v. Bradley, et al., was filed in the United States District Court for the Northern District of Texas, naming as defendants certain of the Company’s current and former directors and officers (the "Maloney Action"). The complaint alleges the defendants breached their fiduciary duties, committed constructive fraud, and wasted corporate assets, and also asserts unjust enrichment claims against certain defendants. The complaint seeks, on behalf of the Company, unspecified damages, an order directing the return of certain payments to the defendants and imposing a constructive trust thereon, certain injunctive relief, reasonable costs and attorneys' fees, and punitive damages. On November 16, 2018, the defendants filed motions to dismiss the Maloney Action on the grounds that it was brought in the wrong venue in violation of the Company's Amended and Restated Certificate of Incorporation, that plaintiffs failed to make a pre-suit demand as required by applicable law and that plaintiff's complaint fails to state a claim. On July 30, 2019, the court in the Maloney Action granted the defendants' motion to dismiss on the grounds that the case should have been brought in Delaware according to the Company's Amended and Restated Certificate of Incorporation. The Company does not know whether plaintiffs will appeal the court's ruling.

On January 15, 2019, a putative shareholder derivative complaint captioned Lee v. Bradley, et al., was filed in the United States District Court for the District of Delaware, naming as defendants certain of the Company’s current and former directors and officers (the "Lee Action"). The complaint alleges the defendants violated Section 14A of the Securities and Exchange Act of1934, as amended, and related rules by failing to make certain disclosures in the Company's proxy solicitation in advance of the 2017 Annual Meeting of Stockholders, and that defendants breached their fiduciary duties, wasted corporate assets, and committed constructive fraud. The complaint also asserts unjust enrichment claims against certain defendants. The complaint seeks, on behalf of the Company, unspecified damages, an order directing the return of certain payments to the defendants, certain injunctive relief, and reasonable costs and attorneys' fees. On April 18, 2019, the court entered an agreed stipulation staying the Lee Action until the court in the Securities Action rules on the motion to dismiss in that case.

The Company and other defendants are vigorously defending the Securities Action, the Maloney Action and the Lee Action. Given the stage of the proceedings, the Company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the Securities Action, the Maloney Action or the Lee Action.

Long-term incentive plan

Following the Acquisition, Lone Star implemented a cash-based long term incentive plan (the “LTIP”), which entitles the participants in the LTIP a potential cash payout upon a monetization event as defined by the LTIP. Potential monetization events include the sale, transfer or otherwise disposition of all or a portion of the Company or successor entities of LSF9, an initial public offering where Lone Star reduces its ownership interest in the Company or successor entities of LSF9, or through certain cash distribution as defined in the LTIP. Before the payout of any cash the LTIP requires Lone Star realize in cash the full return of their investment plus a specified internal rate of return, which is calculated by comparing the return to Lone Star over the timeline of its investment in the Company and certain successor entities of LSF9. As of June 30, 2019, no such monetization events that meet the required return for an LTIP payment have occurred, and therefore no amounts were accrued in the accompanying condensed consolidated balance sheets. While no payments have occurred thus far, payments

19

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

under the LTIP could be significant depending upon future monetization events. The timing and amount of such payments are unknown and is dependent upon future monetization events and market conditions that are outside of the control of the Company or the participants of the plan. Subsequent to the IPO, Forterra became directly liable for any payment obligations triggered under the LTIP, but LSF9 or one of its affiliates will remain obligated to make payments to the Company in amounts equal to any payment obligations triggered under the LTIP as and when such payment obligations are triggered.

Tax receivable agreement

The Company has a tax receivable agreement (the "TRA") with Lone Star that provides for, among other things, the payment by the Company to Lone Star of 85% of the amount of certain covered tax benefits, which may reduce the actual liability for certain taxes that the Company might otherwise be required to pay. The tax benefits subject to the TRA include: (i) all depreciation and amortization deductions, and any offset to taxable income and gain or increase to taxable loss, resulting from the tax basis that the Company had in its assets as of the time of the consummation of the IPO, (ii) the utilization of the Company's and its subsidiaries’ net operating losses and tax credits, if any, attributable to periods prior to the IPO, (iii) deductions in respect of payments made, funded or reimbursed by an initial party to the tax receivable agreement (other than the Company or one of its subsidiaries) or an affiliate thereof to participants under the LTIP, (iv) deductions in respect of transaction expenses attributable to the acquisition of USP Holdings, Inc. and (v) certain other tax benefits attributable to payments made under the tax receivable agreement.

For purposes of the TRA, the aggregate reduction in income tax payable by the Company will be computed by comparing the Company's actual income tax liability with its hypothetical liability had it not been able to utilize the related tax benefits. The agreement will remain in effect for the period of time in which any such related tax benefits remain. The Company accounts for potential payments under the TRA as a contingent liability, with amounts accrued when considered probable and reasonably estimable. The liability recorded by the Company for the TRA at June 30, 2019 and December 31, 2018 was $88.8 million and $88.8 million, respectively. The timing and amount of future tax benefits associated with the TRA are subject to change, and additional payments may be required which could be materially different from the current accrued liability. The Company anticipates that it will have sufficient taxable income in future periods to realize the full value of the obligation recorded. Future tax receivable agreement payments related to the tax basis of assets at the time of the IPO will be recorded as a reduction to the liability and will be recorded as a financing activity in the consolidated statement of cash flows. During the six months ended June 30, 2019, no payments have been made on the TRA to Lone Star.

15. Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Potentially dilutive securities include employee stock options and shares of restricted stock. Diluted EPS reflects the assumed exercise, vesting or conversion of all dilutive securities.

20

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The calculations of the basic and diluted EPS for the three and six months ended June 30, 2019 and 2018 are presented below (in thousands, except per share amounts):

	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019			2018
Net income (loss)	$	2,954	$	6,994	$	(22,085	)	$	(12,916	)
Less: Earnings allocated to unvested restricted stock awards	7		37		—			—
Earnings (loss) allocated to common shareholders	$	2,947	$	6,957	$	(22,085	)	$	(12,916	)
Common stock:
Weighted average basic shares outstanding	64,142		63,893		64,073			63,865
Effect of dilutive securities	322		316		—			—
Weighted average diluted shares outstanding	64,464		64,209		64,073			63,865
Basic earnings (loss) per share:
Net income (loss)	$	0.05	$	0.11	$	(0.34	)	$	(0.20	)
Diluted earnings (loss) per share:
Net income (loss)	$	0.05	$	0.11	$	(0.34	)	$	(0.20	)

As detailed further below, potential dilutive shares of common stock were anti-dilutive as a result of the Company's net loss for the six months ended June 30, 2019 and June 30, 2018. As a result, basic weighted average shares were used in the calculations of basic earnings per share and diluted earnings per share for those periods. 

The number of stock options and restricted shares that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts for the three months ended June 30, 2019 and June 30, 2018 and the six months ended June 30, 2019 and June 30, 2018 were 5,437,403, 3,046,569,4,557,278 and 2,318,182, respectively.

16.Income taxes

The Company recorded income tax expense from continuing operations of $0.9 million and income tax benefit of $6.4 million for the three and six months ended June 30, 2019, respectively, and an income tax expense of $7.2 million and $3.6 million for the three and six months ended June 30, 2018, respectively.

The income tax expense for the three months ended June 30, 2019 differs from the expense computed at the federal statutory rate primarily due to the unfavorable permanent add-back of the non-deductible one-time executive severance payment, offset by the favorable return-to-provision adjustment recorded in the quarter.

The income tax benefit for the six months ended June 30, 2019 differs from the benefit computed at the federal statutory rate primarily due to the unfavorable permanent add-back of the non-deductible one-time executive severance payment, offset by the favorable state benefit and favorable return-to-provision adjustment recorded in the quarter.

The income tax expense for the three months ended June 30, 2018 is higher than the expense computed at the statutory rate primarily due to changes in the Company's valuation allowance. The Company evaluates the recoverability of its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. The Company assesses whether valuation allowances should be established against deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. The analysis used in determining the valuation allowance involves considerable judgment and

21

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

assumptions. After consideration of all evidence, the Company increased the valuation allowance by $3.5 million for the three months ended June 30, 2018.

The income tax expense for the six months ended June 30, 2018 is higher than the benefit computed at the statutory rate primarily due to changes in the Company's valuation allowance described above and the unfavorable impact of the disposition of nondeductible goodwill in connection with a divestiture transaction that occurred in the three months ended March 31, 2018.

The Company's quarterly provision for income taxes has historically been calculated using the annual effective rate method, which applies an estimated annual effective tax rate to pre-tax income or loss. However, when the result of the expected annual effective tax rate is not deemed reliable and distorts the income tax provision for an interim period, the Company calculates the income tax provision or benefit using the actual year-to-date effective tax rate (the "discrete method"), which results in an income tax provision or benefit based solely on the year-to-date pre-tax income or loss as adjusted for permanent differences on a pro rata basis. The Company has recorded its interim income tax provision using the discrete method, as allowed under ASC 740-270, Accounting for Income Taxes - Interim Reportingfor the six months ended June 30, 2019.

17.Segment reporting

Segment information is presented in accordance with ASC 280, Segment Reporting, which establishes standards for reporting information about operating segments. It also establishes standards for related disclosures about products and geographic areas. Operating segments are defined as components of an enterprise that engage in business activities that earn revenues, incur expenses and prepare separate financial information that is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in order to allocate resources and assess performance. The Company's Chief Executive Officer is its CODM. The Corporate and Other segment includes expenses related to certain executive salaries, interest costs related to the Company's credit agreements, acquisition related costs, and other corporate costs that are not directly attributable to the Company's operating segments. The Company's segments follow the same accounting policies as the Company.

Net sales from the major products sold to external customers include drainage pipe and precast products and concrete and steel water transmission pipe.

The Company’s three geographic areas consist of the United States, Canada, and Mexico for which it reports net sales, fixed assets and total assets. For purposes of evaluating segment profit, the CODM reviews EBITDA as a basis for making the decisions to allocate resources and assess performance.

22

FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The following tables set forth the disaggregation of revenue earned from contracts with customers based on the Company's reportable segments as well as other financial information attributable to the Company's reportable segments for the three and six months ended June 30, 2019 and 2018(in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Net sales:
Drainage Pipe & Products	$	241,680		$	222,881		$	405,414		$	378,526
Water Pipe & Products	168,539			193,205			296,663			327,518
Corporate and Other	—			1			—			3
Total	$	410,219		$	416,087		$	702,077		$	706,047
Depreciation and amortization:
Drainage Pipe & Products	$	9,456		$	10,354		$	18,658		$	20,451
Water Pipe & Products	14,595			15,475			29,470			32,557
Corporate and Other	339			207			654			440
Total	$	24,390		$	26,036		$	48,782		$	53,448
Segment EBITDA and reconciliation to income (loss) before income taxes:
Drainage Pipe & Products	$	48,997		$	48,411		$	74,063		$	69,570
Water Pipe & Products	24,973			24,196			33,714			31,105
Corporate and Other	(19,962		)	(14,589		)	(37,048		)	(25,532		)
Less: Interest expense	(25,783		)	(17,745		)	(50,448		)	(31,053		)
Depreciation and amortization	(24,390		)	(26,036		)	(48,782		)	(53,448		)
Income (loss) before income taxes	$	3,835		$	14,237		$	(28,501	)	$	(9,358	)
Capital expenditures:
Drainage Pipe & Products	$	7,519		$	6,641		$	15,448		$	9,508
Water Pipe & Products	2,248			2,410			4,525			7,653
Corporate and Other	695			200			2,463			278
Total	$	10,462		$	9,251		$	22,436		$	17,439
							June 30,			December 31,
							2019			2018
Total assets:
Drainage Pipe & Products							$	910,259		$	800,454
Water Pipe & Products							923,687			922,162
Corporate and Other							44,218			70,636
Total							$	1,878,164		$	1,793,252

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FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company has an investment in an equity method investee included in the Drainage Pipe & Products segment for which earnings from equity method investee were $3.4 million, $5.0 million, $3.7 millionand $5.5 million for the three and six months ended June 30, 2019 and June 30, 2018, respectively, and with the following balances (in thousands):

	June 30,		December 31,
	2019		2018
Investment in equity method investee	$	54,076	$	50,607

Disaggregated revenue by geographic location is provided in the tables below. The Company has operations in the United States, Canada and Mexico. The economic characteristics of the Company's customers does not significantly vary across geographic locations or product lines. The Company has both revenues and long-lived assets in each country; and those assets and revenues are recorded within geographic location as follows (in thousands):

Property, plant, and equipment, net:	June 30,		December 31,
	2019		2018
United States	$	432,416	$	441,773
Canada	43,024		40,331
Mexico	9,744		10,063
	$	485,184	$	492,167

Net sales:	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
United States	$	391,721	$	391,770	$	668,458	$	665,439
Canada	16,555		21,706		29,655		35,886
Mexico	1,943		2,611		3,964		4,722
	$	410,219	$	416,087	$	702,077	$	706,047

18. Related party transactions

Tax receivable agreement

In connection with the IPO, the Company entered into the TRA with Lone Star that provides for, among other things, the payment by the Company to Lone Star of 85% of the amount of certain covered tax benefits, which may reduce the actual liability for certain taxes that the Company might otherwise be required to pay. See Note 14, Commitments and contingencies, for additional information on the tax receivable agreement.

CP&P

The Company sold certain goods and services to its joint venture, CP&P, including spare parts for repairs, and property rentals. For the six months ended June 30, 2019, Forterra sold $0.03 million of product to CP&P and purchased goods and services from CP&P for an amount of $0.18 million. For the six months ended June 30, 2018, Forterra sold $0.04 million of product to CP&P and purchased $0.1 million of goods and services from CP&P.

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FORTERRA, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Bricks Joint Venture

Prior to the IPO, LSF9 distributed its brick operations in the United States and Eastern Canada to a joint venture formed by an affiliate of Lone Star (the "Bricks Disposition"). In connection with the Bricks Disposition, Forterra entered into a transition services agreement with the joint venture, whereby Forterra would continue to provide certain administrative services, including but not limited to information technology, accounting and treasury for a limited period of time. Such transition services ended in February 2018. During the transition period, the Company collected cash from as well as settled invoices and payroll on behalf of the joint venture. As a result, Forterra had a net receivable from affiliates of $4.4 million as of December 31, 2018 included in other current assets. Such amount was subsequently collected during the second quarter of 2019.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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. These forward-looking statements relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity, capital resources and other financial and operating information. We have used the words “approximately,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including:

• 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;

• our dependence on key customers and the absence of long-term agreements with these customers;

• the level of construction activity in Texas;

• 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;

• energy costs;

• labor disruptions and other union activity;

• a tightening of mortgage lending or mortgage financing requirements;

• the ability to implement our growth strategy;

• our current dispute with HeidelbergCement related to the payment of an earnout;

• compliance with environmental laws and regulations;

• changes in tax laws could adversely affect us;

• 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 and that of our 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;

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• 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, or the SEC.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, as well as the other factors described in Item 1A, “Risk Factors” in our 2018 10-K filed with the SEC on March 12, 2019. Additional factors or events that could cause our actual results to differ may also emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on March 12, 2019, or the 2018 10-K.

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See the section entitled “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with those statements.

Unless otherwise specified or where the context otherwise requires, references in this Report to “our,” “we,” “us,” “Forterra”, the “Company” and “our business” refer to Forterra, Inc., together with its consolidated subsidiaries.

Overview

Our Company

We are a manufacturer of pipe and precast products in the United States and Eastern Canada for a variety of water-related infrastructure applications, including water transmission, distribution and drainage. We provide critical infrastructure components for a broad spectrum of construction projects across residential, non-residential and infrastructure markets. Our suite of products ranges from large diameter pipe that transports water to and from treatment centers and manages drainage along major transportation corridors, to smaller diameter pipe that delivers potable water to, and removes wastewater from, end users in residential and commercial settings.

Our Segments

Our operations are organized into the following reportable segments:

• Drainage Pipe & Products - We are a producer of concrete drainage pipe and precast products.

• Water Pipe & Products - We are a producer of ductile iron pipe, or DIP, and concrete pressure pipe.

• Corporate and Other - Corporate, general and administrative expenses not allocated to our revenue-generating segments such as certain shared services, executive and other administrative functions.

Principal Factors Affecting Our Results of Operations

Our financial performance and results of operations are influenced by a variety of factors, including conditions in the residential, non-residential and infrastructure construction markets, general economic conditions, changes in cost of goods sold, and seasonality and weather conditions. Some of the more important factors are discussed in the 2018 10-K, to which there were no material changes during the period covered by this report.

Principal Components of Results of Operations

Net Sales

Net sales consist of the consideration which we expect to be entitled to for the sale of products in the ordinary course of business and include the billable costs of delivery of our products to customers. Revenue for certain contracts related to our structural precast and products that are designed and engineered specifically for the customer is recognized over time using an acceptable input method which utilizes our cost incurred to date relative to total estimated costs at completion to measure progress.

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Cost of Goods Sold

Cost of goods sold includes raw materials (cement, aggregates, scrap, steel and clay) and supplies, labor (including contract labor), freight (including outbound freight for delivery of products to end users and other charges such as inbound freight), energy, depreciation and amortization, repairs and maintenance and other cost of goods sold.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include expenses for sales, marketing, legal, accounting and finance services, human resources, customer support, treasury and other general corporate services. Selling, general and administrative expenses also include transaction costs directly related to the business combinations and other costs incurred with respect to cost savings initiatives.

Impairment and Exit Charges

Impairment and exit charges are primarily comprised of severance and other charges incurred to consolidate certain plants in an effort to optimize our portfolio, as well as asset impairment charges.

Other Operating Income

The remaining categories of operating income and expenses consist of scrap income (associated with scrap from the manufacturing process or remaining scrap after plants are closed), insurance gains, rental income and the gain or loss generated on the sale of assets including property, plant and equipment.

Interest Expense

Interest expense represents interest on indebtedness, including finance lease obligations, the amortization of deferred financing costs, as well as the gain and loss associated with our interest rate swaps.

Earnings from Equity Method Investee

Earnings from equity method investee represents our share of the income of the CP&P joint venture we entered into with Americast, Inc. CP&P is engaged primarily in the manufacture, marketing, sale and distribution of concrete pipe and precast products in Virginia, West Virginia, Maryland, North Carolina, Pennsylvania and South Carolina with sales to contiguous states. See Note 6, Investment in Equity Method Investee, to the condensed consolidated financial statements for additional information on CP&P.

Other Expense, net

Other expense, net includes miscellaneous non-operating net income or expenses.

Income Tax (Expense) Benefit

Income tax (expense) benefit consists of federal, state, provincial, local and foreign taxes based on income in the jurisdictions in which we operate.

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Results of Operations

Three Months Ended June 30, 2019 as Compared to Three Months Ended June 30, 2018

Total Company

The following table summarizes certain financial information relating to our operating results for the three months ended June 30, 2019 and June 30, 2018 (in thousands).

Statements of Income Data:	Three months ended June 30, 2019			Three months ended June 30, 2018			% Change
Net sales	$	410,219		$	416,087		(1.4	)%
Cost of goods sold	324,405			340,774			(4.8	)%
Gross profit	85,814			75,313			13.9	%
Selling, general and administrative expenses	(58,640		)	(51,263		)	14.4	%
Impairment and exit charges	(582		)	(276		)	*
Other operating income (expense), net	(376		)	4,536			*
	(59,598		)	(47,003		)	26.8	%
Income from operations	26,216			28,310			(7.4	)%
Other income (expenses)
Interest expense	(25,783		)	(17,745		)	45.3	%
Earnings from equity method investee	3,402			3,672			(7.4	)%
Income before income taxes	3,835			14,237			(73.1	)%
Income tax expense	(881		)	(7,243		)	(87.8	)%
Net income	$	2,954		$	6,994		(57.8	)%

* Represents positive or negative change in excess of 100%

Net Sales

Net sales in the three months ended June 30, 2019 was $410.2 million, a slight decrease of $5.9 million or 1.4% from $416.1 million in the three months ended June 30, 2018. The slight decrease in net sales was primarily due to lower sales volumes in our Water Pipe & Products segment, partially offset by higher average selling prices in both segments.

Cost of Goods Sold

Cost of goods sold in the three months ended June 30, 2019 was $324.4 million, a decrease of $16.4 million or 4.8% from $340.8 million in the three months ended June 30, 2018. The decrease was primarily due to lower sales volumes and lower cost of raw materials in our Water Pipe & Products segment.

Gross Profit

Gross profit in the three months ended June 30, 2019 was $85.8 million, an increase of $10.5 million, or 13.9%, from $75.3 million in the three months ended June 30, 2018. Gross profit increased primarily due to higher average selling prices in both segments and stabilized manufacturing costs especially in our Water Pipe & Products segment, partially offset by lower sales volumes compared to prior year.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses in the three months ended June 30, 2019 were$58.6 million, an increase of $7.3 million or 14.4% from $51.3 million in the three months ended June 30, 2018. The increase was due to a $3.7 million executive severance charge primarily related to the change in CEO being recorded in the three months ended June 30, 2019, as well as increased expenses related to various pending legal disputes and claims in the ordinary course of our business.

Impairment and Exit Charges

Impairment and exit charges in the three months ended June 30, 2019 were $0.6 million compared to $0.3 million in the three months ended June 30, 2018. The increase primarily related to the reorganization activities in our Water Pipe & Products segment.

Interest Expense

Interest expense in the three months ended June 30, 2019 was $25.8 million, an increase of $8.1 million or 45.3% from$17.7 millionin the three months ended June 30, 2018. The interest expense in the 2019 period included $4.6 million resulting from the change in the classification of certain leases from operating lease to finance lease as the result of the amendment and restatement of our sale-leaseback transaction completed in June 2018. The remainder of the interest expense increase was primarily due to the impact of higher average interest rates and a larger debt balance due to outstanding borrowings under our revolving credit facility.

Income Tax Expense

Income tax expense in the three months ended June 30, 2019 was $0.9 million, a decrease of $6.3 million from $7.2 million in the three months ended June 30, 2018. The change is primarily due to the greater positive earnings before income taxes recorded for the three months ended June 30, 2018 versus the income in the same period of 2019, as well as the benefit related to the set up of the valuation allowance in the three months ended June 30, 2018 that did not recur in the three months ended June 30, 2019.

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Segments

	For the three months ended June 30,
(in thousands)	2019			2018			% Change
Net sales:
Drainage Pipe & Products	$	241,680		$	222,881		8.4	%
Water Pipe & Products	168,539			193,205			(12.8	)%
Corporate and Other	—			1			*
Total	$	410,219		$	416,087		(1.4	)%
Gross profit (loss):
Drainage Pipe & Products	57,717			49,851			15.8	%
Water Pipe & Products	28,147			25,585			10.0	%
Corporate and Other	(50		)	(123		)	(59.3	)%
Total	$	85,814		$	75,313		13.9	%
Segment EBITDA(1):
Drainage Pipe & Products	48,997			48,411			1.2	%
Water Pipe & Products	24,973			24,196			3.2	%
Corporate and Other	(19,962		)	(14,589		)	36.8	%

(1) For the purposes of evaluating segment performance, the Company’s chief operating decision maker reviews earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a basis for making the decisions to allocate resources and assess performance. Our discussion below includes the primary drivers of EBITDA. See Note 17, Segment Reporting, to the condensed consolidated financial statements for segment EBITDA reconciliation to income (loss) before income taxes.

* Represents positive or negative change in excess of 100%.

Drainage Pipe & Products

Net Sales

Net sales in the three months ended June 30, 2019 was $241.7 million, an increase of $18.8 million or 8.4% from $222.9 million in the three months ended June 30, 2018. The increase was primarily due to higher average selling prices. Sales volumes in the three months ended June 30, 2019 remained relatively unchanged compared to the same period in prior year.

Gross Profit

Gross profit in the three months ended June 30, 2019 was $57.7 million, an increase of $7.8 million or 15.8% from $49.9 million in the three months ended June 30, 2018. The increase was primarily due to higher average selling prices, cost controls from operational improvement initiatives and lower rent expense.

Water Pipe & Products

Net Sales

Net sales in the three months ended June 30, 2019 were $168.5 million, a decrease of $24.7 million or 12.8% from $193.2 million in the three months ended June 30, 2018. The decrease was due primarily to a decline in shipment volumes. As we continue to improve our product and service quality, we have seen a shift in customer

32

purchasing patterns towards ordering on an as-needed basis and away from building on-hand inventory levels, which resulted a slowdown in our shipments during the current quarter. The decrease in shipment volumes were partially offset by higher selling prices as we continue to focus on pricing discipline.

Gross Profit

Gross profit in the three months ended June 30, 2019 was $28.1 million, an increase of $2.5 million or 10.0% from $25.6 million in the three months ended June 30, 2018. The increase was primarily due to higher average selling prices and lower raw material costs, partially offset by the decline in sales volumes.

Six Months Ended June 30, 2019 as Compared to Six Months Ended June 30, 2018

Total Company

The following table summarizes certain financial information relating to our operating results for the six months ended June 30, 2019 and June 30, 2018 (in thousands).

Statements of Income Data:	Six months ended June 30, 2019			Six months ended June 30, 2018			% Change
Net sales	$	702,077		$	706,047		(0.6	)%
Cost of goods sold	574,458			596,369			(3.7	)%
Gross profit	127,619			109,678			16.4	%
Selling, general and administrative expenses	(110,031		)	(103,125		)	6.7	%
Impairment and exit charges	(813		)	(1,721		)	(52.8	)%
Other operating income	203			5,326			(96.2	)%
	(110,641		)	(99,520		)	11.2	%
Income from operations	16,978			10,158			67.1	%
Other income (expenses)
Interest expense	(50,448		)	(31,053		)	62.5	%
Earnings from equity method investee	4,969			5,521			(10.0	)%
Other income, net	—			6,016			*
Loss before income taxes	(28,501		)	(9,358		)	*
Income tax (expense) benefit	6,416			(3,558		)	*
Net loss	$	(22,085	)	$	(12,916	)	71.0	%

* Represents positive or negative change in excess of 100%

Net Sales

Net sales in the six months ended June 30, 2019 was $702.1 million, a slight decrease of $3.9 million or 0.6% from $706.0 million in the six months ended June 30, 2018. The decrease was primarily due to lower shipment volumes in our Water Pipe & Products segment, offset by higher average selling prices in both segments.

Cost of Goods Sold

Cost of goods sold in the six months ended June 30, 2019 was $574.5 million, a decrease of $21.9 million or 3.7% from $596.4 million in the six months ended June 30, 2018. The decrease was primarily due to lower shipments volumes in our Water Pipe & Product segment.

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Gross Profit

Gross profit in the six months ended June 30, 2019 was $127.6 million, an increase of $17.9 million, or 16.4%, from $109.7 million in the six months ended June 30, 2018. Gross profit increased primarily due to higher average selling prices in both segments and stabilized manufacturing costs especially in our Water Pipe & Products segment compared to prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses in the six months ended June 30, 2019 were $110.0 million, an increase of $6.9 million, or 6.7% from $103.1 million in the six months ended June 30, 2018. The increase was due to a $3.7 million executive severance charge primarily related to the change in CEO being recorded in the six months ended June 30, 2019, as well as increased expenses related to various disputes and claims in the ordinary course of our business.

Impairment and Exit Charges

Impairment and exit charges in the six months ended June 30, 2019 were $0.8 million, compared to $1.7 million in the prior year period. The exit charges in the six months ended June 30, 2018 primarily related to the consolidation of certain locations associated with a divestiture transaction which did not recur in 2019.

Other Operating Income

Other operating income in the six months ended June 30, 2019 was $0.2 million, compared to $5.3 million in the prior year period. The income in the 2018 period primarily related to gains from the disposition of certain property, plant and equipment.

Interest Expense

Interest expense in the six months ended June 30, 2019 was $50.4 million, an increase of $19.3 million or 62.5% from$31.1 millionin the six months ended June 30, 2018. The interest expense in the 2019 period included $9.1 million resulting from the change in the classification of certain leases from operating lease to finance lease as the result of the amendment and restatement of our sale-leaseback transaction completed in June 2018. The remainder of the interest expense increase was primarily due to the impact of higher average interest rates and a larger debt balance due to outstanding borrowings under our revolving credit facility.

Other Income, net

Other income, net of $6.0 million in the six months ended June 30, 2018 related to the gain from a divestiture transaction that was completed in February 2018.

Income Tax (Expense) Benefit

Income tax benefit in the six months ended June 30, 2019 was $6.4 million, a change of $10.0 million from income tax expense of $3.6 million in the six months ended June 30, 2018. The change is primarily due to a larger loss before income taxes recorded in the six months ended June 30, 2019 compared to the prior year period, as well as the benefit of the valuation allowance that was set up during the six months ended June 30, 2018 that did not recur in the six months ended June 30, 2019.

34

Segments

	For the six months ended June 30,
(in thousands)	2019			2018			% Change
Net sales:
Drainage Pipe & Products	$	405,414		$	378,526		7.1	%
Water Pipe & Products	296,663			327,518			(9.4	)%
Corporate and Other	—			3			*
Total	$	702,077		$	706,047		(0.6	)%
Gross profit (loss):
Drainage Pipe & Products	89,150			76,267			16.9	%
Water Pipe & Products	38,882			33,668			15.5	%
Corporate and Other	(413		)	(257		)	60.7	%
Total	$	127,619		$	109,678		16.4	%
Segment EBITDA(1):
Drainage Pipe & Products	74,063			69,570			6.5	%
Water Pipe & Products	33,714			31,105			8.4	%
Corporate and Other	(37,048		)	(25,532		)	45.1	%

(1) For the purposes of evaluating segment performance, the Company’s chief operating decision maker reviews earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a basis for making the decisions to allocate resources and assess performance. Our discussion below includes the primary drivers of EBITDA. See Note 17, Segment Reporting, to the condensed consolidated financial statements for segment EBITDA reconciliation to income (loss) before income taxes.

* Represents positive or negative change in excess of 100%.

Drainage Pipe & Products

Net Sales

Net sales in the six months ended June 30, 2019 was $405.4 million, an increase of $26.9 million or 7.1% from $378.5 million in the six months ended June 30, 2018. The increase was primarily due to higher average selling prices. Sales volumes in the six months ended June 30, 2019 remained relatively unchanged compared to the same period in prior year.

Gross Profit

Gross profit in the six months ended June 30, 2019 was $89.2 million, an increase of $12.9 million or 16.9% from $76.3 million in the six months ended June 30, 2018. The increase was primarily due to higher average selling prices, cost controls from operational improvement initiatives and lower rent expense.

Water Pipe & Products

Net Sales

Net sales in the six months ended June 30, 2019 was $296.7 million, a decrease of $30.8 million or 9.4% from $327.5 million in the six months ended June 30, 2018. The decrease was due primarily to a decline in sales volumes. As we continue to improve our product and service quality, we have seen a shift in customer purchasing patterns towards ordering on an as-needed basis and away from building on-hand inventory levels, which resulted

35

in a slowdown in our shipments during the current year. The decrease in sales volumes were partially offset by higher average selling prices.

Gross Profit

Gross profit in the six months ended June 30, 2019 was $38.9 million, an increase of $5.2 million or 15.5% from $33.7 million in the six months ended June 30, 2018. The increase was primarily due to higher average selling prices and lower raw material costs, partially offset by the decline in sales volumes.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash from operations and borrowings under our credit agreements. We believe these sources will be sufficient to fund our planned operations and capital expenditures in the next 24 months.

We are currently engaged in a dispute with HeidelbergCement regarding the earnout provision in the purchase agreement entered into in connection with the original acquisition of our business. HeidelbergCement has asserted that a payment should be made in the amount of $100.0 million. Resolution is expected to be determined by a neutral accountant pursuant to the terms of the purchase agreement. If it is determined that we are required to make a significant payment to HeidelbergCement, we may not have sufficient cash to make such payment and may be required to incur additional indebtedness. This dispute is discussed in greater detail in Note 14, Commitments and contingencies, to the condensed consolidated financial statements.

As of June 30, 2019 and December 31, 2018, we had approximately $16.8 million and $35.8 million of cash and cash equivalents, respectively, of which $6.9 million and $18.1 million, respectively, were held by foreign subsidiaries. The decline in cash balances as of June 30, 2019 reflects the higher cash demand of our seasonal business. All of the cash and cash equivalents as of June 30, 2019 and December 31, 2018 were readily convertible as of such dates into currencies used in the Company’s operations, including the U.S. dollar.  As a result of the U.S. government enacted comprehensive tax reform legislation commonly known as the TCJA, the Company believes it has the ability to repatriate the cumulative undistributed foreign earnings back to the U.S. when needed with minimal additional taxes other than state income and foreign withholding tax.

In connection with our initial public offering, we entered into a tax receivable agreement with Lone Star that provides for the payment by us to Lone Star of specified amounts in respect of any cash savings as a result of the utilization of certain tax benefits. The actual utilization of the relevant tax benefits as well as the timing of any payments under the tax receivable agreement will vary depending upon a number of factors, including the amount, character and timing of our and our subsidiaries’ taxable income in the future. However, we expect that the payments we make under the tax receivable agreement could be substantial. The tax receivable agreement also includes provisions which restrict the incurrence of debt and that require that we make an accelerated payment to Lone Star equal to the present value of all future payments due under the tax receivable agreement, in each case under certain circumstances. Because of the foregoing, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. See Note 14, Commitments and contingencies, to the condensed consolidated financial statements for additional information regarding the tax receivable agreement. Our forecasted payments under the tax receivable agreement in 2019, pertaining to the 2018 tax year, are expected to be in the range of $10 to $13 million. We expect that future annual payments under the tax receivable agreement will decline each year in accordance with our tax basis depreciation and amortization schedule unless future unplanned transactions result in an acceleration of our tax benefits under the agreement.

As of June 30, 2019, we had $1.2 billion outstanding balance under our senior term loan, or, as amended, the Term Loan, and $39.0 million borrowings outstanding under our $300.0 million asset-based revolving credit facility, or the Revolver. The Revolver had available borrowing capacity as of June 30, 2019 of $243.7 million.

36

The Revolver provides for an aggregate principal amount of up to $300.0 million, with up to $280.0 million to be made available to the U.S. borrowers and up to $20.0 million to be made available to the Canadian borrowers. Subject to the conditions set forth in the revolving credit agreement, the Revolver may be increased by up to the greater of (i) $100.0 million and (ii) such amount as would not cause the aggregate borrowing base to be exceeded by more than $50.0 million. Borrowings under the Revolver may not exceed a borrowing base equal to the sum of (i) 100% of eligible cash, (ii) 85% of eligible accounts receivable and (iii) the lesser of (a) 75% of eligible inventory and (b) 85% of the orderly liquidation value of eligible inventory, with the U.S. and Canadian borrowings being subject to separate borrowing base limitations. The Revolver matures on October 25, 2021.

The Term Loan provides for a $1.25 billion senior secured term loan. Subject to the conditions set forth in the term loan agreement, the Term Loan may be increased by (i) up to the greater of $285.0 million and 1.0x consolidated EBITDA of Forterra, Inc. and its restricted subsidiaries for the four quarters most recently ended prior to such incurrence plus (ii) the aggregate amount of any voluntary prepayments, plus (iii) an additional amount, provided certain financial tests are met. The Term Loan matures on October 25, 2023 and is subject to quarterly amortization equal to 0.25% of the initial principal amount. Interest will accrue on outstanding borrowings thereunder at a rate equal to LIBOR (with a floor of 1.0%) or an alternate base rate, in each case plus a margin of 3.00% or 2.00%, respectively.

The Revolver and the Term Loan contain customary representations and warranties, and affirmative and negative covenants, that, among other things, restrict our ability to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and pay dividends and make distributions. The Revolver contains a financial covenant restricting us from allowing its fixed charge coverage ratio to drop below 1.00:1.00 during a compliance period, which is triggered when the availability under the Revolver falls below a threshold. The fixed charge coverage ratio is the ratio of consolidated earnings before interest, depreciation, and amortization, less cash payments for capital expenditures and income taxes to consolidated fixed charges (interest expense plus scheduled payments of principal on indebtedness). The Term Loan does not contain any financial covenants. Obligations under the Revolver and the Term Loan may be accelerated upon certain customary events of default (subject to grace periods, as appropriate). As of June 30, 2019, we were in compliance with all applicable covenants under the Revolver and the Term Loan.

The following table sets forth a summary of the net cash provided by (used in) operating, investing and financing activities for the periods presented (in thousands):

	For the six months ended
	June 30, 2019			June 30, 2018
Statement of Cash Flows data:
Net cash used in operating activities	$	(27,322	)	$	(46,658	)
Net cash used in investing activities	(24,542		)	(20,659		)
Net cash provided by (used in) financing activities	32,350			(6,520		)

Net Cash Used In Operating Activities

Net cash used in operating activities was $27.3 million in the six months ended June 30, 2019, compared to net cash used in operating activities of $46.7 million in the six months ended June 30, 2018. Changes between the periods are primarily due to higher income from operations as well as the timing of settlements of our receivables and payables.

37

Net Cash Used in Investing Activities

Net cash used in investing activities was $24.5 million in the six months ended June 30, 2019, primarily due to capital expenditures of $23.2 million and the acquisition of Buckner assets of $10.8 million, partially offset by proceeds from sale of fixed assets of $9.5 million. Net cash used in investing activities was $20.7 million in the six months ended June 30, 2018, primarily due to capital expenditures of $17.6 million and business acquisitions of $13 million, partially offset by cash received from a divestiture transaction of $10.1 million.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $32.4 million in the six months ended June 30, 2019 due primarily to $39.0 million net proceeds from the Revolver, partially offset by $6.3 million repayments of principal on the Term Loan. Net cash used in financing activities was $6.5 million for the six months ended June 30, 2018 due primarily to repayments of principal on the Term Loan.

Capital Expenditures

Our capital expenditures were $23.2 million and $17.6 million for the six months ended June 30, 2019 and June 30, 2018, respectively. Capital expenditures primarily related to equipment, such as plant and mobile equipment, upgrade and expansion of existing facilities, and environmental and permit compliance projects.

Off-Balance Sheet Arrangements

In the ordinary course of our business, we are required to provide surety bonds and standby letters of credit to secure performance commitments. As of June 30, 2019, outstanding stand-by letters of credit amounted to $17.3 million.

Application of Critical Accounting Policies and Estimates  

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accounting policies that we believe are critical to or require subjective and/or complex judgments that could potentially affect 2019 reported results are discussed in greater detail in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2018 10-K. There have been no significant changes to those accounting policies or our assessment of which accounting policies we would consider to be critical accounting policies apart from those identified below, which were applied to reflect the adoption of an updated accounting standard, Topic 842, in our first quarter 2019 condensed consolidated financial statements.

Leases Accounting Policy

We determine if an arrangement is a lease at inception. Leases with an initial term of less than 12 months are not recorded on the balance sheet. Operating leases are included in operating lease right-of-use, or ROU, assets, accrued liabilities, and long-term operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, accrued liabilities, and long-term finance lease liabilities in the condensed consolidated balance sheets.  

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

38

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment leases, such as forklifts, we account for the lease and non-lease components as a single lease component.

Recent Accounting Guidance Adopted

A summary of recent accounting pronouncements and our assessment of any expected impact of these pronouncements, if known, is included in Note 2 to the audited consolidated financial statements included the 2018 10-K and Note 2, Summary of significant accounting policies, to the condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates and commodity price risk associated with our input costs. We utilize derivative instruments to manage selected foreign exchange and interest rate exposures. See Note 12, Derivatives and hedging to the condensed consolidated financial statements.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our long-term debt. The interest expense associated with our long-term debt will vary with market rates. We entered into two interest rate swap transactions with a combined notional value of $525 million to limit our exposure to interest rate increases related to a portion of our floating rate indebtedness.  Under the terms of both swap transactions, we agreed to pay a fixed rate of interest of 1.52% and receive floating rate interest indexed to one-month LIBOR with monthly settlement terms with the swap counterparties.  The swaps have a three-year term and expire on March 31, 2020. At June 30, 2019, we estimate that a 1% increase in the rates relating to the portion of our floating rate debt that is not hedged would increase annual interest requirements by approximately $7.3 million.

Foreign Currency Risk

Approximately 4.8% of our net sales for the six months ended June 30, 2019, were made in countries outside of the U.S. As a result, we are exposed to movements in foreign exchange rates between the U.S. dollar and other currencies. Based upon our net sales for the six months ended June 30, 2019, we estimate that a 1% change in the exchange rate between the U.S. dollar and foreign currencies would affect net sales by approximately $0.3 million. This may differ from actual results depending on the levels of net sales outside of the U.S.

Commodity Price Risk

We are subject to commodity price risks with respect to price changes mainly in the electricity and natural gas markets and other raw material costs, such as cement, aggregates, steel and clay. Price fluctuations on our key inputs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected by factors such as the global economic conditions, changes in or disruptions to industry production capacity, changes in inventory levels and other factors beyond our control.

Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist principally of accounts receivable. We provide our products to customers based on an evaluation of the financial condition of our customers, generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. We monitor the exposure for credit losses and maintain allowances for anticipated losses. Concentrations of credit risk with respect to our accounts receivable are limited due to the large number of customers comprising our customer base and their dispersion among many different geographies.

39

At June 30, 2019, we had an individual customer within our Water Pipe & Products segment that accounted for more than 10% of total net sales for the six months ended June 30, 2019. The customer represented approximately 14% of our total net sales for the six months ended June 30, 2019, and amounts receivable from the customer at June 30, 2019 represented approximately 16% of our total receivables, net.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of June 30, 2019.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2019.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our system of internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system of internal control are met. The design of our control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.

40

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth in Note 14, Commitments and contingencies, to the condensed consolidated financial statements is incorporated by reference herein.

Item 1A. Risk Factors

There have been no material changes during the quarter ended June 30, 2019 to the risk factors previously disclosed in the 2018 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

41

Item 6. Exhibits and Financial Statement Schedules

Exhibit No.	Description of Exhibit
10.1#	Employment Agreement, dated as of May 22, 2019 by and between the Company and Richard Hunter	(a)
10.2#	Employment Agreement, dated as of May 22, 2019 by and between the Company and Vikrant Bhatia	(a)
10.3#	Employment Agreement, dated as of June 21, 2019 by and between the Company and Karl Watson, Jr.	(b)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	^
101.INS	XBRL Instance Document.	*
101.SCH	XBRL Taxonomy Extension Schema Document.	*
101.CAL	XBRL Taxonomy Calculation Linkbase Document.	*
101.DEF	XBRL Taxonomy Definition Linkbase Document.	*
101.LAB	XBRL Taxonomy Label Linkbase Document.	*
101.PRE	XBRL Taxonomy Presentation Linkbase Document.	*

*	Filed herewith
#	Denotes management compensatory plan or arrangement
^	Exhibit 32.1 shall not be deemed filed with the SEC, nor shall it be deemed incorporated by reference in any filing with the SEC under the Exchange Act or the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
(a)	Previously filed on May 23, 2019 as an exhibit to the Company's Current Report on Form 8-K and incorporated herein by reference.
(b)	Previously filed on June 24, 2019 as an exhibit to the Company's Current Report on Form 8-K and incorporated herein by reference.

42

SIGNATURES

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

FORTERRA, INC.
(Registrant)
	/s/ Karl Watson, Jr.	August 6, 2019
By:	Karl Watson, Jr.
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ Charles R. Brown, II	August 6, 2019
By:	Charles R. Brown, II
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Karl Watson, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Forterra, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 6, 2019	/s/ Karl Watson, Jr.
		Karl Watson, Jr.
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Charles R. Brown II, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Forterra, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:	August 6, 2019	/s/ Charles R. Brown, II
		Charles R. Brown, II
		Executive Vice President and Chief
		Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to 18 U.S.C. Section 1350

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019 of Forterra, Inc. (the “Company”) as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of the Company certifies to his knowledge that:

• the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 6, 2019	/s/ Karl Watson, Jr.
		Karl Watson, Jr.
		Chief Executive Officer

Date:	August 6, 2019	/s/ Charles R. Brown, II
		Charles R. Brown, II
		Executive Vice President and Chief
		Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 02, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	Forterra, Inc.
Entity Central Index Key	0001678463
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		64,298,391

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Net sales	$ 410,219	$ 416,087	$ 702,077	$ 706,047
Cost of goods sold	324,405	340,774	574,458	596,369
Gross profit	85,814	75,313	127,619	109,678
Selling, general & administrative expenses	(58,640)	(51,263)	(110,031)	(103,125)
Impairment and exit charges	(582)	(276)	(813)	(1,721)
Other operating income (expense), net	(376)	4,536	203	5,326
Operating expenses	(59,598)	(47,003)	(110,641)	(99,520)
Income from operations	26,216	28,310	16,978	10,158
Other income (expense)
Interest expense	(25,783)	(17,745)	(50,448)	(31,053)
Earnings from equity method investee	3,402	3,672	4,969	5,521
Other income, net	0	0	0	6,016
Income (loss) before income taxes	3,835	14,237	(28,501)	(9,358)
Income tax (expense) benefit	(881)	(7,243)	6,416	(3,558)
Net income (loss)	$ 2,954	$ 6,994	$ (22,085)	$ (12,916)
Earnings (loss) per share:
Basic and diluted (in shares)	$ 0.05	$ 0.11	$ (0.34)	$ (0.20)
Weighted average common shares outstanding:
Basic (in dollars per share)	64,142	63,893	64,073	63,865
Diluted (in dollars per share)	64,464	64,209	64,073	63,865

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 2,954	$ 6,994	$ (22,085)	$ (12,916)
Unrealized gain on derivative activities, net of tax	0	0	0	970
Change in other postretirement benefit plans, net of tax	0	0	373	0
Foreign currency translation adjustment	1,320	(1,569)	2,828	(3,126)
Comprehensive income (loss)	$ 4,274	$ 5,425	$ (18,884)	$ (15,072)

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 16,791	$ 35,793
Receivables, net	266,818	198,468
Inventories	291,696	285,030
Other current assets	22,432	24,798
Total current assets	597,737	544,089
Non-current assets
Property, plant and equipment, net	485,184	492,167
Operating lease right-of-use assets	63,616
Goodwill	508,742	508,193
Intangible assets, net	166,480	183,789
Investment in equity method investee	54,076	50,607
Other long-term assets	2,329	14,407
Total assets	1,878,164	1,793,252
Current liabilities
Trade payables	131,697	114,708
Accrued liabilities	71,780	70,236
Deferred revenue	10,972	9,138
Current portion of long-term debt	12,510	12,510
Current portion of tax receivable agreement	15,457	15,457
Total current liabilities	242,416	222,049
Non-current liabilities
Long-term debt	1,210,546	1,176,095
Long-term finance lease liabilities	136,096
Long-term finance lease liabilities		134,948
Long-term operating lease liabilities	56,578
Deferred tax liabilities	39,430	46,615
Deferred gain on sale-leaseback	0	9,338
Other long-term liabilities	20,938	22,667
Long-term tax receivable agreement	73,318	73,318
Total liabilities	1,779,322	1,685,030
Commitments and Contingencies (Note 14)
Equity
Common stock, $0.001 par value, 190,000 shares authorized; 64,298 and 64,206 shares issued and outstanding	18	18
Additional paid-in-capital	237,478	234,931
Accumulated other comprehensive loss	(7,539)	(10,740)
Retained deficit	(131,115)	(115,987)
Total shareholder's equity	98,842	108,222
Total liabilities and shareholders' equity	$ 1,878,164	$ 1,793,252

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Common shares, par value (in dollars per share)	$ 0.001	$ 0.001
Common shares, authorized (in shares)	190,000,000	190,000,000
Common shares, issued (in shares)	64,298,000	64,206,000
Common shares, outstanding (in shares)	64,298,000	64,206,000

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Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in-Capital	Accumulated Other Comprehensive Income (Loss)	Retained Deficit
Beginning Balance (in shares) at Dec. 31, 2017		64,230,888
Beginning Balance at Dec. 31, 2017	$ 132,491	$ 18	$ 230,023	$ (5,098)	$ (92,452)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense	1,154		1,154
Stock-based plan activity (in shares)		(3,663)
Stock-based plan activity	(57)		(57)
Comprehensive income (loss):
Net loss	(19,910)				(19,910)
Gain on derivative transactions, net of tax	970			970
Foreign currency translation adjustment, and other	(1,557)			(1,557)
Reclassification due to the adoption of ASU 2018-02	0			(830)	830
Ending Balance (in shares) at Mar. 31, 2018		64,227,225
Ending Balance at Mar. 31, 2018	113,091	$ 18	231,120	(6,515)	(111,532)
Beginning Balance (in shares) at Dec. 31, 2017		64,230,888
Beginning Balance at Dec. 31, 2017	132,491	$ 18	230,023	(5,098)	(92,452)
Comprehensive income (loss):
Net loss	(12,916)
Change in other postretirement benefit plans, net of tax	0
Ending Balance (in shares) at Jun. 30, 2018		64,228,093
Ending Balance at Jun. 30, 2018	120,463	$ 18	233,065	(8,084)	(104,536)
Beginning Balance (in shares) at Mar. 31, 2018		64,227,225
Beginning Balance at Mar. 31, 2018	113,091	$ 18	231,120	(6,515)	(111,532)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense	1,984		1,984
Stock-based plan activity (in shares)		868
Stock-based plan activity	(39)		(39)
Comprehensive income (loss):
Net loss	6,994				6,994
Change in other postretirement benefit plans, net of tax	0
Foreign currency translation adjustment, and other	(1,567)			(1,569)	2
Ending Balance (in shares) at Jun. 30, 2018		64,228,093
Ending Balance at Jun. 30, 2018	$ 120,463	$ 18	233,065	(8,084)	(104,536)
Beginning Balance (in shares) at Dec. 31, 2018	64,206,000	64,205,604
Beginning Balance at Dec. 31, 2018	$ 108,222	$ 18	234,931	(10,740)	(115,987)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense	1,529		1,529
Stock-based plan activity (in shares)		57,106
Stock-based plan activity	(26)		(26)
Comprehensive income (loss):
Net loss	(25,039)				(25,039)
Change in other postretirement benefit plans, net of tax	373			373
Foreign currency translation adjustment, and other	1,508			1,508
Ending Balance (in shares) at Mar. 31, 2019		64,262,710
Ending Balance at Mar. 31, 2019	$ 93,524	$ 18	236,434	(8,859)	(134,069)
Beginning Balance (in shares) at Dec. 31, 2018	64,206,000	64,205,604
Beginning Balance at Dec. 31, 2018	$ 108,222	$ 18	234,931	(10,740)	(115,987)
Comprehensive income (loss):
Net loss	(22,085)
Change in other postretirement benefit plans, net of tax	$ 373
Ending Balance (in shares) at Jun. 30, 2019	64,298,000	64,298,157
Ending Balance at Jun. 30, 2019	$ 98,842	$ 18	237,478	(7,539)	(131,115)
Beginning Balance (in shares) at Mar. 31, 2019		64,262,710
Beginning Balance at Mar. 31, 2019	93,524	$ 18	236,434	(8,859)	(134,069)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense	1,132		1,132
Stock-based plan activity (in shares)		35,447
Stock-based plan activity	(88)		(88)
Comprehensive income (loss):
Net loss	2,954				2,954
Change in other postretirement benefit plans, net of tax	0
Foreign currency translation adjustment, and other	$ 1,320			1,320
Ending Balance (in shares) at Jun. 30, 2019	64,298,000	64,298,157
Ending Balance at Jun. 30, 2019	$ 98,842	$ 18	$ 237,478	$ (7,539)	$ (131,115)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ 2,954	$ (25,039)	$ 6,994	$ (19,910)	$ (22,085)	$ (12,916)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation & amortization expense					48,782	53,448
(Gain) / loss on business divestiture					0	(6,016)
(Gain) / loss on disposal of property, plant and equipment					1,033	(2,571)
Amortization of debt discount and issuance costs					4,013	4,050
Stock-based compensation expense					2,661	3,138
Earnings from equity method investee	(3,402)		(3,672)		(4,969)	(5,521)
Distributions from equity method investee					1,500	5,000
Unrealized loss / (gain) on derivative instruments, net					5,024	(4,220)
Unrealized foreign currency gains, net					(93)	(195)
Provision (recoveries) for doubtful accounts					(194)	(316)
Deferred taxes					(9,566)	(22,722)
Deferred rent					0	979
Other non-cash items					919	471
Change in assets and liabilities:
Receivables, net					(67,813)	(72,062)
Inventories					(5,734)	(35,625)
Other current assets					(641)	18,861
Accounts payable and accrued liabilities					13,066	25,464
Other assets & liabilities					6,775	4,095
NET CASH USED IN OPERATING ACTIVITIES					(27,322)	(46,658)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment, and intangible assets					(34,051)	(17,629)
Proceeds from sale of fixed assets					9,509	4,874
Settlement of net investment hedges					0	(4,990)
Business combinations, net of cash acquired					0	(2,914)
NET CASH USED IN INVESTING ACTIVITIES					(24,542)	(20,659)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term loans					(6,255)	(6,255)
Proceeds from revolver					54,000	0
Payments on revolver					(15,000)	0
Other financing activities					(395)	(265)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES					32,350	(6,520)
Effect of exchange rate changes on cash					512	(515)
Net change in cash and cash equivalents					(19,002)	(74,352)
Cash and cash equivalents, beginning of period		$ 35,793		$ 104,534	35,793	104,534	$ 104,534
Cash and cash equivalents, end of period	$ 16,791		$ 30,182		16,791	30,182	$ 35,793
SUPPLEMENTAL DISCLOSURES:
Cash interest paid					38,835	30,613
Income taxes paid					3,911	4,608
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:
Assets and liabilities acquired in non-cash exchange					0	18,140
Fair value changes of derivatives recorded in OCI, net of tax					0	970
Capital lease obligation resulting from the sale-leaseback exchange transaction					$ 0	$ 148,962

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Organization and description of the business

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and description of the business

Organization and description of the business

Description of the Business

Forterra, Inc. (“Forterra” or the ‘‘Company’’) is involved in the manufacturing, sale and distribution of building products in the United States (“U.S.”) and Eastern Canada. Forterra’s primary products are concrete drainage pipe, precast concrete structures, and water transmission pipe used in drinking and wastewater systems. These products are used in the residential, infrastructure and non-residential sectors of the construction industry.

Organization

Forterra, a Delaware corporation, was formed on June 21, 2016 to hold the business of Forterra Building Products. The entities comprising the business of Forterra Building Products were indirect wholly-owned subsidiaries of HeidelbergCement A.G. (together with its affiliates, "HC") prior to its acquisition by LSF9 Concrete Holdings Ltd. ("LSF9") on March 13, 2015 (the "Acquisition"), including certain businesses that were divested between March 2015 and October 2016. In October 2016, in a corporate reorganization transaction (the "Reorganization") ownership of the remaining businesses of Forterra Building Products was transferred to Forterra, a wholly-owned subsidiary of Forterra US Holdings, LLC, which is indirectly wholly-owned by an affiliate of Lone Star Fund IX (U.S.),L.P. (along with its affiliates, related parties and associated, but excluding the Company and other companies that it owns as a result of its investment activity, “Lone Star”). On October 25, 2016, Forterra sold 18,420,000 shares of common stock in its initial public offering (the “IPO”).

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Summary of significant accounting policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of significant accounting policies

Summary of significant accounting policies

General

The Company's condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accounts and results of operations of the Company and its consolidated subsidiaries. All intercompany transactions have been eliminated in consolidation.

The condensed consolidated balance sheets and the condensed consolidated statements of operations, comprehensive income (loss), cash flows and equity for the periods presented herein reflect all adjustments that are of a normal recurring nature and are necessary for a fair statement of the results of the periods shown. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. Seasonal changes and other conditions can affect the sales volumes of the Company's products. The financial results for any interim period do not necessarily indicate the expected results for the year.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 as provided in Forterra, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 12, 2019 (the “2018 10-K”). The Company has continued to follow the accounting policies set forth in those financial statements, except as supplemented and documented below. Certain prior year numbers were reclassified to conform with current year presentation. Such reclassification had no impact on the previously reported results of operations.

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. The more significant estimates made by management relate to fair value estimates for assets and liabilities acquired in business combinations; estimates for accrued liabilities for environmental cleanup, bodily injury and insurance claims; estimates for commitments and contingencies; and estimates for the realizability of deferred tax assets, the tax receivable agreement obligation, inventory reserves, allowance for doubtful accounts and impairment of goodwill and long-lived assets.

Concentration of Credit Risk

The Company had an individual customer within its Water Pipe & Products segment that accounted for approximately 14% and 15% of the Company's total net sales for the six months ended June 30, 2019 and 2018, respectively, and total receivables at June 30, 2019 and December 31, 2018 representing 16% and 16% of the Company's total receivables, net, respectively.

Leases

The Company determines if an arrangement is a lease at inception. Leases with an initial term of less than 12 months are not recorded on the balance sheet. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and long-term operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, accrued liabilities, and long-term finance lease liabilities in the condensed consolidated balance sheets.  

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment leases, such as forklifts, the Company accounts for the lease and non-lease components as a single lease component.

Recent Accounting Guidance Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2016-02, Leases (Topic 842), which establishes the principles that lessees and lessors shall apply to report information about the amount, timing, and uncertainty of cash flows arising from a lease. Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The Company adopted Topic 842 during the first quarter of 2019, using the transition approach that permits application of the new standard at the adoption date instead of the earliest comparative period presented in the financial statements.

To adopt Topic 842, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward its historical assessments of (1) whether the existing contracts contained a lease, (2) the lease classification for existing leases, and (3) initial direct cost for existing leases. In addition to the package of practical expedients, the Company has elected the adoption expedients of (1) the exclusion of leases with terms less than 12 months, and (2) the election not to separate non-lease components from lease components for certain classes of underlying leased assets.

To adopt Topic 842, the Company recognized a cumulative catch-up adjustment to the opening balance sheet presented January 1, 2019. The adoption of standard had a material impact on the Company’s condensed consolidated balance sheet, but did not have an impact on its condensed consolidated statements of operations, comprehensive income (loss) or cash flows. As a result of the adoption, the Company has recorded additional lease assets and lease liabilities of approximately $63.9 million and $65.2 million, respectively, as of January 1, 2019. In addition, the Company recognized the carrying value of deferred gains related to certain sale and operating leaseback of land of $9.3 million, net of tax impact of $2.3 million, to beginning retained deficit as of January 1, 2019, in accordance with ASC 842-10-65-1.

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Acquisitions

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisitions

Acquisitions

On March 1, 2019, the Company acquired certain assets of Texas limited liability companies Houston Buckner Precast, LLC, Buckner Precast, LLC, Montgomery 18905 E. Industrial, LLC, and 1763 Old Denton Road, LLC (altogether "Buckner") for aggregate consideration of $12.0 million in cash, subject to a working capital adjustment.  The acquired Buckner assets did not meet the definition of a business and, as such, the transaction was accounted for as an asset acquisition pursuant to the guidance in subsection 805-50 of ASC 805, Business Combinations. The assets will operate as part of the Company’s Drainage Pipe & Products segment.

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Receivables, net

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Receivables, net

Receivables, net

Receivables consist of the following (in thousands):

	June 30,			December 31,
	2019			2018
Trade receivables	$	252,442		$	188,999
Amounts billed, but not yet paid under retainage provisions	2,351			2,065
Other receivables	13,902			9,545
Total receivables	268,695			200,609
Less: Allowance for doubtful accounts	(1,877		)	(2,141		)
Receivables, net	$	266,818		$	198,468

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Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of the following (in thousands):

	June 30,		December 31,
	2019		2018
Finished goods	$	202,560	$	193,603
Raw materials	87,881		90,376
Work in process	1,255		1,051
Total inventories	$	291,696	$	285,030

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Investment in equity method investee

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in equity method investee

Investment in equity method investee

The Company owns 50%of the Common Unit voting shares of Concrete Pipe & Precast LLC ("CP&P") and consequently, has recorded its investment in the Common Unit voting shares in accordance with ASC 323, Investments–EquityMethod and Joint Ventures,under the equity method of accounting.

The Company's investment in the joint venture was$54.1 million at June 30, 2019, which is included within the Drainage Pipe & Products segment. At June 30, 2019, the difference between the amount at which the Company's investment is carried and the amount of the Company's share of the underlying equity in net assets of CP&P was approximately $13.1 million. The basis difference is primarily attributed to the value of land and equity method goodwill associated with the investment.

The following reflects the Company's distribution and earnings in the equity investment (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Distribution received from CP&P	$	—		$	5,000		$	1,500		$	5,000
Share of earnings in CP&P	3,420			3,690			5,005			5,557
Amortization of excess fair value of investment	(18		)	(18		)	(36		)	(36		)

Selected financial data for CP&P on a 100% basis is as follows (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Net sales	$	37,353	$	34,655	$	65,602	$	64,673
Gross profit	11,721		11,046		19,675		19,494
Income from operations	6,840		6,860		10,020		10,695
Net income	6,776		6,797		9,893		10,573

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Property, plant and equipment, net

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property, plant and equipment, net

Property, plant and equipment, net

Property, plant and equipment, net, consist of the following (in thousands):

	June 30,			December 31,
	2019			2018
Machinery and equipment	$	391,027		$	373,881
Land, buildings and improvements	235,598			235,819
Other equipment	6,291			6,962
Construction-in-progress	30,639			32,448
Total property, plant and equipment	663,555			649,110
Less: accumulated depreciation	(178,371		)	(156,943		)
Property, plant and equipment, net	$	485,184		$	492,167

Depreciation expense totaled $12.4 millionand $25.2 million for the three and six months ended June 30, 2019, and $12.8 million and $27.1 million for the three and six months ended June 30, 2018, respectively, which is included in cost of goods sold and selling, general and administrative expenses in the condensed consolidated statements of operations.

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Goodwill and other intangible assets, net

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and other intangible assets, net

Goodwill and other intangible assets, net

    The Company has recorded goodwill in connection with its acquisition of businesses. The following table summarizes the changes in goodwill by operating segment for the six months ended June 30, 2019 (in thousands):

	Drainage Pipe & Products		Water Pipe & Products		Total
Balance at December 31, 2018	$	189,833	$	318,360	$	508,193
Foreign currency and other adjustments	549		—		549
Balance at June 30, 2019	$	190,382	$	318,360	$	508,742

Intangible assets other than goodwill at June 30, 2019 and December 31, 2018 included the following (in thousands):

	Net carrying value as of June 30, 2019		Net carrying value as of December 31, 2018
Customer relationships and contracts	$	118,671	$	131,473
Trade names	22,075		24,523
Patents	9,489		11,304
Non-compete agreements	9,570		9,574
Developed technology	6,167		—
In-Process R&D (1)	—		6,354
Other	508		561
Total intangible assets	$	166,480	$	183,789

(1) Reclassified to developed technology in the first quarter of 2019.

Amortization expense totaled $12.0 million and $23.6 millionfor the three and six months ended June 30, 2019, and $13.2 million and $26.4 million for the three and six months ended June 30, 2018, which is included in selling, general and administrative expenses in the condensed consolidated statements of operations. All of the Company's intangible assets are amortizable.

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Fair value measurement

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair value measurement

Fair value measurement

The Company's financial instruments consist primarily of cash and cash equivalents, trade and other receivables, derivative instruments, accounts payable, long-term debt, operating and finance lease liabilities, accrued liabilities and the tax receivable agreement obligation. The carrying value of the Company's trade receivables, other receivables, trade payables, the asset-based revolver and accrued liabilities approximates fair value due to their short-term maturity or other terms related to these financial instruments. The Company may adjust the carrying amount of certain non-financial assets to fair value on a non-recurring basis when they are impaired.

The estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured and recorded at fair value on a recurring basis are as follows for the dates indicated (in thousands):

	Fair value measurements at June 30, 2019 using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value June 30, 2019
Assets:
Derivative asset	$	—	$	1,635	$	—	$	1,635
	Fair value measurements at December 31, 2018 using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value December 31, 2018
Assets:
Derivative asset	$	—	$	6,659	$	—	$	6,659

Liabilities and assets classified as level 2 which are recorded at fair value are valued using observable market inputs. The fair values of derivative assets and liabilities are determined using quantitative models that utilize multiple market inputs including interest rates and exchange rates to generate continuous yield or pricing curves and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair values of derivative assets and liabilities include adjustments for market liquidity, counter-party credit quality, and other instrument-specific factors, where appropriate. In addition, the Company incorporates within its fair value measurements a valuation adjustment to reflect the credit risk associated with the net position. Positions are netted by counter-parties, and fair value for net long exposures is adjusted for counter-party credit risk while the fair value for net short exposures is adjusted for the Company’s own credit risk.

The estimated carrying amount and fair value of the Company’s financial instruments and liabilities for which fair value is only disclosed is as follows (in thousands):

			Fair value measurements at June 30, 2019 using
	Carrying Amount June 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value June 30, 2019
Liabilities:
Term Loan	$	1,185,956	$	—	$	1,129,165	$	—	$	1,129,165
Tax receivable agreement payable	88,775		—		—		54,186		54,186

			Fair value measurements at December 31, 2018 using
	Carrying Amount December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value December 31, 2018
Liabilities:
Term Loan	$	1,188,605	$	—	$	1,103,628	$	—	$	1,103,628
Tax receivable agreement payable (1)	88,775		—		—		51,832		51,832

(1) During the first quarter of 2019, the Company identified a mathematical error in the 2018 10-K related to the disclosure of the fair value of the tax receivable agreement payable as of December 31, 2018. The fair value should have been $51.8 million, as opposed to $82.9 million, and is being corrected herein. This disclosure error did not have an impact on the Company's consolidated financial statements.

The fair value of debt is valued using a market approach based on indicative quoted prices for our debt instruments traded in over-the-counter markets and, therefore, is classified as Level 2 within the fair value hierarchy. See Note 11, Debt and deferred financing costs, for a further discussion of Company debt.

The determination of the fair value of the Company's tax receivable agreement payable was determined using a discounted cash flow methodology with level 3 inputs as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value required significant judgment, including estimates of the timing and amounts of various tax attributes. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future.Actual results could differ from these estimates. See Note 14, Commitments and contingencies, for a further discussion of the Company's tax receivable agreement.

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Accrued liabilities

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Accrued liabilities

Accrued liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued payroll and employee benefits	$	27,659	$	31,095
Short-term finance leases	16,648		16,430
Short-term operating leases	9,232		—
Accrued taxes	7,853		11,489
Warranty	3,004		3,251
Accrued rebates	2,823		3,542
Environmental obligation	618		570
Other miscellaneous accrued liabilities	3,943		3,859
Total accrued liabilities	$	71,780	$	70,236

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Debt and deferred financing costs

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt and deferred financing costs

Debt and deferred financing costs

The Company’s debt consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Term Loan, net of debt issuance costs and original issuance discount of $30,646 and $34,252, respectively	$	1,185,956		$	1,188,605
Revolver, net of debt issuance costs of $1,900	37,100			—
Total debt	$	1,223,056		$	1,188,605
Less: current portion debt	(12,510		)	(12,510		)
Total long-term debt	$	1,210,546		$	1,176,095

Concurrent with the completion of the IPO, Forterra entered into a $300 million asset based revolving credit facility for working capital and general corporate purposes (“Revolver”) and a $1.05 billion senior term loan facility (“Term Loan”).

The Term Loan initially provided for a $1.05 billion senior secured term loan. Subject to the conditions set forth in the term loan agreement, the Term Loan may be increased by (i) up to the greater of $285.0 million and 1.0x consolidated EBITDA (defined below) of Forterra and its restricted subsidiaries for the four quarters most recently ended prior to such incurrence plus (ii) the aggregate amount of any voluntary prepayments, plus (iii) an additional amount, provided certain financial tests are met.

Effective May 1, 2017, the Company amended the Term Loan to increase the principal outstanding by an additional $200.0 million and to reduce the interest margins applicable to the full balance of the Term Loan by 50 basis points such that applicable margin based on LIBOR was reduced from 3.50% to 3.00%. The net proceeds from the incremental term loan of $196.8 million were used to pay down a portion of the outstanding balance on the Revolver. This amendment had no effect on the Company's ability to increase the size of the Term Loan under the original provisions. The Term Loan matures on October 25, 2023 and is subject to quarterly amortization equal to 0.25% of the initial principal amount. Interest accrues on outstanding borrowings thereunder at a rate equal to LIBOR (with a floor of 1.0%) or an alternate base rate, in each case plus a margin of 3.00% or 2.00%, respectively. The weighted average interest rates for the Term Loan were 5.5% and 5.5% for the three and six months ended June 30, 2019, respectively, and 4.9% and 4.8% for the three and six months ended June 30, 2018, respectively.

The Revolver provides for an aggregate principal amount of up to $300.0 million, with up to $280.0 million to be made available to the U.S. borrowers and up to $20.0 million to be made available to the Canadian borrowers (the allocation may be modified periodically at the Company's request). Subject to the conditions set forth in the revolving credit agreement related to the Revolver (the "Revolving Credit Agreement"), the Revolver may be increased by up to the greater of (i) $100.0 million and (ii) such amount as would not cause the aggregate borrowing base to be exceeded by more than $50.0 million. Borrowings under the Revolver may not exceed a borrowing base equal to the sum of (i) 100% of eligible cash, (ii) 85% of eligible accounts receivable and (iii) the lesser of (a) 75% of eligible inventory and (b) 85% of the orderly liquidation value of eligible inventory, with the U.S. and Canadian borrowings being subject to separate borrowing base limitations. The advance rates for accounts receivable and inventory are subject to increase by 2.5% during certain periods. As of June 30, 2019, the Revolver had borrowings of $39.0 million and the weighted average interest rate was 3.75%. As of December 31, 2018, there were no outstanding borrowings under the Revolver.

The Revolver matures on October 25, 2021. The Revolver also provides for the issuance of letters of credit of up to an agreed sublimit. Interest accrues on outstanding borrowings at a rate equal to LIBOR or CDOR plus a margin ranging from 1.25% to 1.75% per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25% to 0.75% per annum, in each case, based upon the average excess availability under the Revolver for the most recently completed calendar quarter. The obligations of the borrowers under the Revolver are guaranteed by Forterra and its direct and indirect wholly-owned restricted subsidiaries other than certain excluded subsidiaries; provided that the obligations of the U.S. borrowers are not guaranteed by the Canadian subsidiaries. The Revolver is secured by substantially all of the assets of the borrowers; provided that the obligations of the U.S. borrowers are not secured by any liens on more than 65% of the voting stock of the Canadian subsidiaries or assets of the Canadian subsidiaries.

In addition, Forterra pays a facility fee of between 20.0 and 32.5 basis points per annum based upon the utilization of the total Revolver. Availability under the Revolver at June 30, 2019 based on draws, and outstanding letters of credit of $17.3 million and allowable borrowing base was $243.7 million.

Outstanding borrowings under the Term Loan are guaranteed by Forterra and each of its direct and indirect material wholly-owned domestic subsidiaries except certain excluded subsidiaries (the "Guarantors"). The Term Loan is secured by substantially all of the assets of Forterra, the borrower and the Guarantors; provided that the obligations under the Term Loan are not secured by any liens on more than 65% of the voting stock of the Canadian subsidiaries or assets of the Canadian subsidiaries. The Term Loan contains customary representations and warranties, and affirmative and negative covenants, that, among other things, restrict the ability of Forterra and its restricted subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and pay dividends and make distributions. The Term Loan does not contain any financial covenants. Obligations under the Term Loan may be accelerated upon certain customary events of default (subject to grace periods, as appropriate).

The Revolver and the Term Loan contain customary representations and warranties, and affirmative and negative covenants, including representations, warranties, and covenants that, among other things, restrict the ability of Forterra and its restricted subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and pay dividends and make distributions. The Revolver contains a financial covenant restricting Forterra from allowing its fixed charge coverage ratio to drop below 1.00:1.00 during a compliance period, which is triggered when the availability under the Revolver falls below a threshold set forth in the Revolving Credit Agreement. Obligations under the Revolver and the Term Loan may be accelerated upon certain customary events of default (subject to grace periods, as appropriate). The fixed charge coverage ratio is the ratio of consolidated earnings before interest, depreciation, and amortization (“EBITDA’’) less cash payments for capital expenditures and income taxes to consolidated fixed charges (interest expense plus scheduled payments of principal on indebtedness).

As of June 30, 2019, the Company was in compliance with all applicable covenants under the Revolver and the Term Loan.

As of June 30, 2019, scheduled maturities of long-term debt were as follows (in thousands):

	Total		Term Loan		Revolver
2019	$	6,256	$	6,256	$	—
2020	12,510		12,510		—
2021	51,510		12,510		39,000
2022	12,510		12,510		—
2023	1,172,816		1,172,816		—
	$	1,255,602	$	1,216,602	$	39,000

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Derivatives and hedging

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and hedging

Derivatives and hedging

The Company uses derivatives to manage selected foreign exchange and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes, and, except as discussed below, cash flows from derivative instruments are included in net cash provided by (used in) operating activities in the condensed consolidated statements of cash flows.

    On February 9, 2017, Forterra entered into interest rate swap transactions with a combined notional value of $525 million.  Under the terms of the swap transactions, Forterra agreed to pay a fixed rate of interest of 1.52% and receive floating rate interest indexed to one-month LIBOR with monthly settlement terms with the swap counterparties.  The swaps have a three-year term and expire on March 31, 2020. The interest rate swaps are not designated as cash flow hedges, therefore all changes in the fair value of these instruments are captured as a component of interest expense in the condensed consolidated statements of operations. Accordingly, cash flows from the monthly interest rate swap settlements are included in net cash provided by (used in) operating activities in the condensed consolidated statements of cash flows.

The Company elects to present all derivative assets and derivative liabilities on a net basis on its condensed consolidated balance sheets when a legally enforceable International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement exists. An ISDA Master Agreement is an agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, and such ISDA Master Agreement generally provides for the net settlement of all or a specified group of these derivative transactions, through a single payment, in a single currency, in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions. At June 30, 2019 and December 31, 2018, the Company’s derivative instruments fall under an ISDA master netting agreement.

The following table presents the fair values of derivative assets and liabilities in the condensed consolidated balance sheets (in thousands):

	June 30, 2019
	Derivative Assets				Derivative Liabilities
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate swaps	$	525,000	$	1,635	$	—	$	—
Total derivatives, gross			1,635				—
Less: Legally enforceable master netting agreements			—				—
Total derivatives, net			$	1,635			$	—

	December 31, 2018
	Derivative Assets				Derivative Liabilities
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate swaps	$	525,000	$	6,659	$	—	$	—
Total derivatives, gross			6,659				—
Less: Legally enforceable master netting agreements			—				—
Total derivatives, net			$	6,659			$	—

The following table presents the effect of derivative instruments on the condensed consolidated statements of operations (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2019			2018		2019			2018
Net investment hedges
Foreign exchange forward contracts
Gain on derivatives recognized in Accumulated other comprehensive loss	$	—		$	—	$	—		$	970
Derivatives not designated as hedges
Interest rate swaps
Gain (loss) on derivatives not designated as hedges included in interest expense	(2,932		)	871		(5,024		)	4,220

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

The Company leases land and buildings, office spaces, vehicles, machinery and equipment under various lease agreements. A large portion of the Company’s leases were the result of the sale and leaseback of land and buildings related to certain production facilities. These leases have an initial term of 25 years, followed by one optional renewal term of approximately ten years that may be exercised at the Company’s discretion. These leases, with the exception of certain land leases, were classified as finance leases. The Company’s operating leases are mainly comprised of land and buildings, office spaces, vehicles, machinery and equipment leases, and have remaining terms of one to 25 years, some of which include options to extend the leases for up to 10 years.

The components of lease expense were as follows (in thousands):

Lease cost	Classification	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	Lease expense	$	4,184	$	8,221
Finance lease cost
Amortization of leased assets	Depreciation, amortization, and accretion	594		1,097
Interest on lease liabilities	Interest expense	4,609		9,153

Lease term and discount rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	15.5 years
Finance leases	33.7 years
Weighted-average discount rate (%)
Operating leases	12.6	%
Finance leases	12.3	%

Supplemental cash flow information related to leases was as follows (in thousands):

	Six months ended June 30, 2019
Cash paid for amounts included in lease liabilities
Operating cash flows related to operating leases	$	7,386
Operating cash flows related to finance leases	8,009
Financing cash flows related to finance leases	282
Leased assets obtained in exchange for new finance lease liabilities	42
Leased assets obtained in exchange for new operating lease liabilities	3,872

Supplemental balance sheet information related to leases was as follows (in thousands):

	Classification	June 30, 2019
Operating leases
Right of use assets	Operating lease right-of-use assets	$	63,616
Operating lease liabilities - current portion	Accrued liabilities	(9,232		)
Operating lease liabilities - long term portion	Long-term operating lease liabilities	(56,578		)
Finance leases
Finance lease assets	Property, plant and equipment, net	50,861
Finance lease liabilities - current portion	Accrued liabilities	(16,648		)
Finance lease liabilities - long term portion	Long-term finance lease liabilities	(136,096		)

As of June 30, 2019, maturities of lease liabilities were as follows (in thousands):

	Operating leases			Finance leases			Total
2019	$	7,347		$	8,406		$	15,753
2020	13,392			16,837			30,229
2021	11,076			16,992			28,068
2022	10,309			17,242			27,551
2023	10,095			17,458			27,553
Thereafter	120,127			669,468			789,595
Total lease payments	172,346			746,403			918,749
Less: imputed interest	(106,536		)	(593,659		)	(700,195		)
Present value of lease liabilities	$	65,810		$	152,744		$	218,554

Leases

Leases

The Company leases land and buildings, office spaces, vehicles, machinery and equipment under various lease agreements. A large portion of the Company’s leases were the result of the sale and leaseback of land and buildings related to certain production facilities. These leases have an initial term of 25 years, followed by one optional renewal term of approximately ten years that may be exercised at the Company’s discretion. These leases, with the exception of certain land leases, were classified as finance leases. The Company’s operating leases are mainly comprised of land and buildings, office spaces, vehicles, machinery and equipment leases, and have remaining terms of one to 25 years, some of which include options to extend the leases for up to 10 years.

The components of lease expense were as follows (in thousands):

Lease cost	Classification	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	Lease expense	$	4,184	$	8,221
Finance lease cost
Amortization of leased assets	Depreciation, amortization, and accretion	594		1,097
Interest on lease liabilities	Interest expense	4,609		9,153

Lease term and discount rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	15.5 years
Finance leases	33.7 years
Weighted-average discount rate (%)
Operating leases	12.6	%
Finance leases	12.3	%

Supplemental cash flow information related to leases was as follows (in thousands):

	Six months ended June 30, 2019
Cash paid for amounts included in lease liabilities
Operating cash flows related to operating leases	$	7,386
Operating cash flows related to finance leases	8,009
Financing cash flows related to finance leases	282
Leased assets obtained in exchange for new finance lease liabilities	42
Leased assets obtained in exchange for new operating lease liabilities	3,872

Supplemental balance sheet information related to leases was as follows (in thousands):

	Classification	June 30, 2019
Operating leases
Right of use assets	Operating lease right-of-use assets	$	63,616
Operating lease liabilities - current portion	Accrued liabilities	(9,232		)
Operating lease liabilities - long term portion	Long-term operating lease liabilities	(56,578		)
Finance leases
Finance lease assets	Property, plant and equipment, net	50,861
Finance lease liabilities - current portion	Accrued liabilities	(16,648		)
Finance lease liabilities - long term portion	Long-term finance lease liabilities	(136,096		)

As of June 30, 2019, maturities of lease liabilities were as follows (in thousands):

	Operating leases			Finance leases			Total
2019	$	7,347		$	8,406		$	15,753
2020	13,392			16,837			30,229
2021	11,076			16,992			28,068
2022	10,309			17,242			27,551
2023	10,095			17,458			27,553
Thereafter	120,127			669,468			789,595
Total lease payments	172,346			746,403			918,749
Less: imputed interest	(106,536		)	(593,659		)	(700,195		)
Present value of lease liabilities	$	65,810		$	152,744		$	218,554

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Commitments and contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

Legal matters

The Company is involved in legal proceedings and litigation in the ordinary course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or liquidity. Other than routine litigation incidental to the Company's business and those matters described below, there are no material legal proceedings to which the Company is a party or to which any of the Company’s properties are subject.

Earnout Dispute

The Acquisition included an earnout, which was contingent consideration of up to $100.0 million, if and to the extent the 2015 financial results of the businesses acquired by Lone Star in the Acquisition, including the Company and HC's former building products business in the United Kingdom, exceeded a specified Adjusted EBITDA target for fiscal year 2015, as calculated pursuant to the terms of the purchase agreement. If such Adjusted EBITDA calculation exceeded the specified target, LSF9 and, as a result of the Reorganization, the Company would be required to pay the U.S. affiliate of HC an amount equal to a multiple of such excess Adjusted EBITDA, with any payment capped at $100.0 million. In April 2016, the Company provided an earnout statement to affiliates of HC demonstrating that no payment was required. On June 13, 2016, HC provided notification that it disputes, among other things, the Company’s calculation of Adjusted EBITDA under the purchase agreement and asserting that a payment should be made in the amount of $100.0 million. The Company does not believe HC’s position has merit and is vigorously opposing HC's assertions. On October 5, 2016, affiliates of HC filed a lawsuit in the Delaware Court of Chancery seeking specific performance and claiming access to the Company's books, records, and personnel; seeking a declaratory judgment concerning the scope of the neutral accounting expert’s authority; and in the alternative, claiming a breach of contract and seeking the $100.0 million and other damages (the "Delaware Action"). On December 8, 2017, the court granted the defendants' Motion to Dismiss the First Amended Complaint in the Delaware Action, finding that the earnout dispute should be heard before a neutral accounting arbitrator as set forth in the purchase agreement and that any claims that required to be brought as indemnification claims under the purchase agreement were time-barred by the contractual limitations period. Following the dismissal of the Delaware Action, the Company and HC jointly engaged a neutral accounting expert to act as an arbitrator in the dispute as required by the purchase agreement. The parties then briefed certain preliminary matters for the arbitrator. Based on the arbitrator's rulings, the Company is currently producing additional documents to HC and the accounting arbitrator is in the process of ruling on objections to that production. Under the terms of the engagement with the arbitrator, once document production is deemed complete, the parties will begin providing briefing on the merits of their claims to the arbitrator. As of June 30, 2019, no liability for this contingency has been accrued as payment of any earnout is not considered probable. However, the outcome of this matter is uncertain, and no assurance can be given to the ultimate outcome of the resulting proceedings. If the Company is unsuccessful in resolving the dispute, it could recognize a material charge to its earnings.

Securities Lawsuit and Shareholder Derivative Action

Beginning on August 14, 2017, fourplaintiffs filed putative class action complaints in the United States District Court for the Eastern District of New York against various defendants. On July 27, 2018, an order was entered consolidating the lawsuits into a single action (the "Securities Action"), and transferring the venue of the case from the Eastern District of New York to the Northern District of Texas. On September 17, 2018, an order was entered appointing Wladislaw Maciuga as lead plaintiff and approving his counsel as lead counsel. Pursuant to an agreed scheduling order, plaintiffs in the Securities Action filed their Consolidated Amended Complaint on November 30, 2018.

The Securities Action is brought by two plaintiffs individually and on behalf of all persons that purchased or otherwise acquired the Company's common stock issued pursuant to and/or traceable to the IPO and is brought against the Company, certain of its current and former officers and directors, Lone Star and certain of its affiliates, and certain banks that acted as underwriters of the IPO (collectively, the “Securities Defendants”). The Securities Action generally alleges that the Company's registration statement on Form S-1 filed in connection with the IPO (the "Registration Statement") contained false or misleading statements and/or omissions of material facts. Specifically, plaintiffs allege the Registration Statement (1) made false and/or misleading statements about the Company's ability to generate organic growth through cross-selling initiatives amongst the Company's various businesses while failing to disclose that the Company had not adequately integrated acquisitions, had not begun rolling out its cross-selling initiative, and that its businesses were submitting competing bids against one another, and (2) made false or misleading statements regarding the existence of certain accounting practices and alleged material weaknesses in the Company's internal controls over financial reporting, including the existence of and accounting for bill and hold transactions, the lack of sufficient accounting personnel, the lack of effective internal controls to ensure costs were properly and accurately accrued, resulting in misstated costs and profits in the Company's 2016 financial statements, and the making of inventory accounting entries without adequate substantiation or documentation. The Securities Action asserts claims under Section 11 and Section 15 of the Securities Act of 1933, as amended, (the "Securities Act") and seeks (1) class certification under the Federal Rules of Civil Procedure, (2) damages suffered by plaintiffs and other class members, (3) prejudgment and post-judgment interest, (4) reasonable counsel fees and expert fees, and other costs and expenses reasonably incurred, and (5) other relief the court deems appropriate.

On February 15, 2019, the Securities Defendants filed a Motion to Dismiss all claims in the case based on plaintiffs' failure to state a claim. Briefing on the motion to dismiss was completed on May 1, 2019, and the court has not yet ruled on the motion. The parties have agreed to mediate the Securities Action, and the mediation is scheduled to occur in the third quarter 2019.

On July 31, 2018, a putative shareholder derivative complaint captioned Maloney v. Bradley, et al., was filed in the United States District Court for the Northern District of Texas, naming as defendants certain of the Company’s current and former directors and officers (the "Maloney Action"). The complaint alleges the defendants breached their fiduciary duties, committed constructive fraud, and wasted corporate assets, and also asserts unjust enrichment claims against certain defendants. The complaint seeks, on behalf of the Company, unspecified damages, an order directing the return of certain payments to the defendants and imposing a constructive trust thereon, certain injunctive relief, reasonable costs and attorneys' fees, and punitive damages. On November 16, 2018, the defendants filed motions to dismiss the Maloney Action on the grounds that it was brought in the wrong venue in violation of the Company's Amended and Restated Certificate of Incorporation, that plaintiffs failed to make a pre-suit demand as required by applicable law and that plaintiff's complaint fails to state a claim. On July 30, 2019, the court in the Maloney Action granted the defendants' motion to dismiss on the grounds that the case should have been brought in Delaware according to the Company's Amended and Restated Certificate of Incorporation. The Company does not know whether plaintiffs will appeal the court's ruling.

On January 15, 2019, a putative shareholder derivative complaint captioned Lee v. Bradley, et al., was filed in the United States District Court for the District of Delaware, naming as defendants certain of the Company’s current and former directors and officers (the "Lee Action"). The complaint alleges the defendants violated Section 14A of the Securities and Exchange Act of1934, as amended, and related rules by failing to make certain disclosures in the Company's proxy solicitation in advance of the 2017 Annual Meeting of Stockholders, and that defendants breached their fiduciary duties, wasted corporate assets, and committed constructive fraud. The complaint also asserts unjust enrichment claims against certain defendants. The complaint seeks, on behalf of the Company, unspecified damages, an order directing the return of certain payments to the defendants, certain injunctive relief, and reasonable costs and attorneys' fees. On April 18, 2019, the court entered an agreed stipulation staying the Lee Action until the court in the Securities Action rules on the motion to dismiss in that case.

The Company and other defendants are vigorously defending the Securities Action, the Maloney Action and the Lee Action. Given the stage of the proceedings, the Company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the Securities Action, the Maloney Action or the Lee Action.

Long-term incentive plan

Following the Acquisition, Lone Star implemented a cash-based long term incentive plan (the “LTIP”), which entitles the participants in the LTIP a potential cash payout upon a monetization event as defined by the LTIP. Potential monetization events include the sale, transfer or otherwise disposition of all or a portion of the Company or successor entities of LSF9, an initial public offering where Lone Star reduces its ownership interest in the Company or successor entities of LSF9, or through certain cash distribution as defined in the LTIP. Before the payout of any cash the LTIP requires Lone Star realize in cash the full return of their investment plus a specified internal rate of return, which is calculated by comparing the return to Lone Star over the timeline of its investment in the Company and certain successor entities of LSF9. As of June 30, 2019, no such monetization events that meet the required return for an LTIP payment have occurred, and therefore no amounts were accrued in the accompanying condensed consolidated balance sheets. While no payments have occurred thus far, payments under the LTIP could be significant depending upon future monetization events. The timing and amount of such payments are unknown and is dependent upon future monetization events and market conditions that are outside of the control of the Company or the participants of the plan. Subsequent to the IPO, Forterra became directly liable for any payment obligations triggered under the LTIP, but LSF9 or one of its affiliates will remain obligated to make payments to the Company in amounts equal to any payment obligations triggered under the LTIP as and when such payment obligations are triggered.

Tax receivable agreement

The Company has a tax receivable agreement (the "TRA") with Lone Star that provides for, among other things, the payment by the Company to Lone Star of 85% of the amount of certain covered tax benefits, which may reduce the actual liability for certain taxes that the Company might otherwise be required to pay. The tax benefits subject to the TRA include: (i) all depreciation and amortization deductions, and any offset to taxable income and gain or increase to taxable loss, resulting from the tax basis that the Company had in its assets as of the time of the consummation of the IPO, (ii) the utilization of the Company's and its subsidiaries’ net operating losses and tax credits, if any, attributable to periods prior to the IPO, (iii) deductions in respect of payments made, funded or reimbursed by an initial party to the tax receivable agreement (other than the Company or one of its subsidiaries) or an affiliate thereof to participants under the LTIP, (iv) deductions in respect of transaction expenses attributable to the acquisition of USP Holdings, Inc. and (v) certain other tax benefits attributable to payments made under the tax receivable agreement.

For purposes of the TRA, the aggregate reduction in income tax payable by the Company will be computed by comparing the Company's actual income tax liability with its hypothetical liability had it not been able to utilize the related tax benefits. The agreement will remain in effect for the period of time in which any such related tax benefits remain. The Company accounts for potential payments under the TRA as a contingent liability, with amounts accrued when considered probable and reasonably estimable. The liability recorded by the Company for the TRA at June 30, 2019 and December 31, 2018 was $88.8 million and $88.8 million, respectively. The timing and amount of future tax benefits associated with the TRA are subject to change, and additional payments may be required which could be materially different from the current accrued liability. The Company anticipates that it will have sufficient taxable income in future periods to realize the full value of the obligation recorded. Future tax receivable agreement payments related to the tax basis of assets at the time of the IPO will be recorded as a reduction to the liability and will be recorded as a financing activity in the consolidated statement of cash flows. During the six months ended June 30, 2019, no payments have been made on the TRA to Lone Star.

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Earnings per share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings per share

Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Potentially dilutive securities include employee stock options and shares of restricted stock. Diluted EPS reflects the assumed exercise, vesting or conversion of all dilutive securities.

The calculations of the basic and diluted EPS for the three and six months ended June 30, 2019 and 2018 are presented below (in thousands, except per share amounts):

	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019			2018
Net income (loss)	$	2,954	$	6,994	$	(22,085	)	$	(12,916	)
Less: Earnings allocated to unvested restricted stock awards	7		37		—			—
Earnings (loss) allocated to common shareholders	$	2,947	$	6,957	$	(22,085	)	$	(12,916	)
Common stock:
Weighted average basic shares outstanding	64,142		63,893		64,073			63,865
Effect of dilutive securities	322		316		—			—
Weighted average diluted shares outstanding	64,464		64,209		64,073			63,865
Basic earnings (loss) per share:
Net income (loss)	$	0.05	$	0.11	$	(0.34	)	$	(0.20	)
Diluted earnings (loss) per share:
Net income (loss)	$	0.05	$	0.11	$	(0.34	)	$	(0.20	)

As detailed further below, potential dilutive shares of common stock were anti-dilutive as a result of the Company's net loss for the six months ended June 30, 2019 and June 30, 2018. As a result, basic weighted average shares were used in the calculations of basic earnings per share and diluted earnings per share for those periods. 

The number of stock options and restricted shares that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts for the three months ended June 30, 2019 and June 30, 2018 and the six months ended June 30, 2019 and June 30, 2018 were 5,437,403, 3,046,569,4,557,278 and 2,318,182, respectively.

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Income taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The Company recorded income tax expense from continuing operations of $0.9 million and income tax benefit of $6.4 million for the three and six months ended June 30, 2019, respectively, and an income tax expense of $7.2 million and $3.6 million for the three and six months ended June 30, 2018, respectively.

The income tax expense for the three months ended June 30, 2019 differs from the expense computed at the federal statutory rate primarily due to the unfavorable permanent add-back of the non-deductible one-time executive severance payment, offset by the favorable return-to-provision adjustment recorded in the quarter.

The income tax benefit for the six months ended June 30, 2019 differs from the benefit computed at the federal statutory rate primarily due to the unfavorable permanent add-back of the non-deductible one-time executive severance payment, offset by the favorable state benefit and favorable return-to-provision adjustment recorded in the quarter.

The income tax expense for the three months ended June 30, 2018 is higher than the expense computed at the statutory rate primarily due to changes in the Company's valuation allowance. The Company evaluates the recoverability of its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. The Company assesses whether valuation allowances should be established against deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. The analysis used in determining the valuation allowance involves considerable judgment and assumptions. After consideration of all evidence, the Company increased the valuation allowance by $3.5 million for the three months ended June 30, 2018.

The income tax expense for the six months ended June 30, 2018 is higher than the benefit computed at the statutory rate primarily due to changes in the Company's valuation allowance described above and the unfavorable impact of the disposition of nondeductible goodwill in connection with a divestiture transaction that occurred in the three months ended March 31, 2018.

The Company's quarterly provision for income taxes has historically been calculated using the annual effective rate method, which applies an estimated annual effective tax rate to pre-tax income or loss. However, when the result of the expected annual effective tax rate is not deemed reliable and distorts the income tax provision for an interim period, the Company calculates the income tax provision or benefit using the actual year-to-date effective tax rate (the "discrete method"), which results in an income tax provision or benefit based solely on the year-to-date pre-tax income or loss as adjusted for permanent differences on a pro rata basis. The Company has recorded its interim income tax provision using the discrete method, as allowed under ASC 740-270, Accounting for Income Taxes - Interim Reportingfor the six months ended June 30, 2019.

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Segment reporting

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment reporting

Segment reporting

Segment information is presented in accordance with ASC 280, Segment Reporting, which establishes standards for reporting information about operating segments. It also establishes standards for related disclosures about products and geographic areas. Operating segments are defined as components of an enterprise that engage in business activities that earn revenues, incur expenses and prepare separate financial information that is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in order to allocate resources and assess performance. The Company's Chief Executive Officer is its CODM. The Corporate and Other segment includes expenses related to certain executive salaries, interest costs related to the Company's credit agreements, acquisition related costs, and other corporate costs that are not directly attributable to the Company's operating segments. The Company's segments follow the same accounting policies as the Company.

Net sales from the major products sold to external customers include drainage pipe and precast products and concrete and steel water transmission pipe.

The Company’s three geographic areas consist of the United States, Canada, and Mexico for which it reports net sales, fixed assets and total assets. For purposes of evaluating segment profit, the CODM reviews EBITDA as a basis for making the decisions to allocate resources and assess performance.

The following tables set forth the disaggregation of revenue earned from contracts with customers based on the Company's reportable segments as well as other financial information attributable to the Company's reportable segments for the three and six months ended June 30, 2019 and 2018(in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Net sales:
Drainage Pipe & Products	$	241,680		$	222,881		$	405,414		$	378,526
Water Pipe & Products	168,539			193,205			296,663			327,518
Corporate and Other	—			1			—			3
Total	$	410,219		$	416,087		$	702,077		$	706,047
Depreciation and amortization:
Drainage Pipe & Products	$	9,456		$	10,354		$	18,658		$	20,451
Water Pipe & Products	14,595			15,475			29,470			32,557
Corporate and Other	339			207			654			440
Total	$	24,390		$	26,036		$	48,782		$	53,448
Segment EBITDA and reconciliation to income (loss) before income taxes:
Drainage Pipe & Products	$	48,997		$	48,411		$	74,063		$	69,570
Water Pipe & Products	24,973			24,196			33,714			31,105
Corporate and Other	(19,962		)	(14,589		)	(37,048		)	(25,532		)
Less: Interest expense	(25,783		)	(17,745		)	(50,448		)	(31,053		)
Depreciation and amortization	(24,390		)	(26,036		)	(48,782		)	(53,448		)
Income (loss) before income taxes	$	3,835		$	14,237		$	(28,501	)	$	(9,358	)
Capital expenditures:
Drainage Pipe & Products	$	7,519		$	6,641		$	15,448		$	9,508
Water Pipe & Products	2,248			2,410			4,525			7,653
Corporate and Other	695			200			2,463			278
Total	$	10,462		$	9,251		$	22,436		$	17,439
							June 30,			December 31,
							2019			2018
Total assets:
Drainage Pipe & Products							$	910,259		$	800,454
Water Pipe & Products							923,687			922,162
Corporate and Other							44,218			70,636
Total							$	1,878,164		$	1,793,252

The Company has an investment in an equity method investee included in the Drainage Pipe & Products segment for which earnings from equity method investee were $3.4 million, $5.0 million, $3.7 millionand $5.5 million for the three and six months ended June 30, 2019 and June 30, 2018, respectively, and with the following balances (in thousands):

	June 30,		December 31,
	2019		2018
Investment in equity method investee	$	54,076	$	50,607

Disaggregated revenue by geographic location is provided in the tables below. The Company has operations in the United States, Canada and Mexico. The economic characteristics of the Company's customers does not significantly vary across geographic locations or product lines. The Company has both revenues and long-lived assets in each country; and those assets and revenues are recorded within geographic location as follows (in thousands):

Property, plant, and equipment, net:	June 30,		December 31,
	2019		2018
United States	$	432,416	$	441,773
Canada	43,024		40,331
Mexico	9,744		10,063
	$	485,184	$	492,167

Net sales:	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
United States	$	391,721	$	391,770	$	668,458	$	665,439
Canada	16,555		21,706		29,655		35,886
Mexico	1,943		2,611		3,964		4,722
	$	410,219	$	416,087	$	702,077	$	706,047

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Related party transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related party transactions

Related party transactions

Tax receivable agreement

In connection with the IPO, the Company entered into the TRA with Lone Star that provides for, among other things, the payment by the Company to Lone Star of 85% of the amount of certain covered tax benefits, which may reduce the actual liability for certain taxes that the Company might otherwise be required to pay. See Note 14, Commitments and contingencies, for additional information on the tax receivable agreement.

CP&P

The Company sold certain goods and services to its joint venture, CP&P, including spare parts for repairs, and property rentals. For the six months ended June 30, 2019, Forterra sold $0.03 million of product to CP&P and purchased goods and services from CP&P for an amount of $0.18 million. For the six months ended June 30, 2018, Forterra sold $0.04 million of product to CP&P and purchased $0.1 million of goods and services from CP&P.

Bricks Joint Venture

Prior to the IPO, LSF9 distributed its brick operations in the United States and Eastern Canada to a joint venture formed by an affiliate of Lone Star (the "Bricks Disposition"). In connection with the Bricks Disposition, Forterra entered into a transition services agreement with the joint venture, whereby Forterra would continue to provide certain administrative services, including but not limited to information technology, accounting and treasury for a limited period of time. Such transition services ended in February 2018. During the transition period, the Company collected cash from as well as settled invoices and payroll on behalf of the joint venture. As a result, Forterra had a net receivable from affiliates of $4.4 million as of December 31, 2018 included in other current assets. Such amount was subsequently collected during the second quarter of 2019.

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Summary of significant accounting policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

The Company's condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accounts and results of operations of the Company and its consolidated subsidiaries.

Consolidation

All intercompany transactions have been eliminated in consolidation.

Reclassifications

Certain prior year numbers were reclassified to conform with current year presentation. Such reclassification had no impact on the previously reported results of operations.

Use of Estimates

Use of estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. The more significant estimates made by management relate to fair value estimates for assets and liabilities acquired in business combinations; estimates for accrued liabilities for environmental cleanup, bodily injury and insurance claims; estimates for commitments and contingencies; and estimates for the realizability of deferred tax assets, the tax receivable agreement obligation, inventory reserves, allowance for doubtful accounts and impairment of goodwill and long-lived assets.

Leases

Leases

The Company determines if an arrangement is a lease at inception. Leases with an initial term of less than 12 months are not recorded on the balance sheet. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and long-term operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, accrued liabilities, and long-term finance lease liabilities in the condensed consolidated balance sheets.  

ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment leases, such as forklifts, the Company accounts for the lease and non-lease components as a single lease component.

Recent Accounting Guidance Adopted

Recent Accounting Guidance Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2016-02, Leases (Topic 842), which establishes the principles that lessees and lessors shall apply to report information about the amount, timing, and uncertainty of cash flows arising from a lease. Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The Company adopted Topic 842 during the first quarter of 2019, using the transition approach that permits application of the new standard at the adoption date instead of the earliest comparative period presented in the financial statements.

To adopt Topic 842, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward its historical assessments of (1) whether the existing contracts contained a lease, (2) the lease classification for existing leases, and (3) initial direct cost for existing leases. In addition to the package of practical expedients, the Company has elected the adoption expedients of (1) the exclusion of leases with terms less than 12 months, and (2) the election not to separate non-lease components from lease components for certain classes of underlying leased assets.

To adopt Topic 842, the Company recognized a cumulative catch-up adjustment to the opening balance sheet presented January 1, 2019. The adoption of standard had a material impact on the Company’s condensed consolidated balance sheet, but did not have an impact on its condensed consolidated statements of operations, comprehensive income (loss) or cash flows. As a result of the adoption, the Company has recorded additional lease assets and lease liabilities of approximately $63.9 million and $65.2 million, respectively, as of January 1, 2019. In addition, the Company recognized the carrying value of deferred gains related to certain sale and operating leaseback of land of $9.3 million, net of tax impact of $2.3 million, to beginning retained deficit as of January 1, 2019, in accordance with ASC 842-10-65-1.

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Receivables, net (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of receivables, net and allowance for doubtful accounts

Receivables consist of the following (in thousands):

	June 30,			December 31,
	2019			2018
Trade receivables	$	252,442		$	188,999
Amounts billed, but not yet paid under retainage provisions	2,351			2,065
Other receivables	13,902			9,545
Total receivables	268,695			200,609
Less: Allowance for doubtful accounts	(1,877		)	(2,141		)
Receivables, net	$	266,818		$	198,468

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Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consist of the following (in thousands):

	June 30,		December 31,
	2019		2018
Finished goods	$	202,560	$	193,603
Raw materials	87,881		90,376
Work in process	1,255		1,051
Total inventories	$	291,696	$	285,030

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Investment in equity method investee (Tables)

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Company's distribution and earnings and selected financial data from equity investment

The following reflects the Company's distribution and earnings in the equity investment (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Distribution received from CP&P	$	—		$	5,000		$	1,500		$	5,000
Share of earnings in CP&P	3,420			3,690			5,005			5,557
Amortization of excess fair value of investment	(18		)	(18		)	(36		)	(36		)

Selected financial data for CP&P on a 100% basis is as follows (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Net sales	$	37,353	$	34,655	$	65,602	$	64,673
Gross profit	11,721		11,046		19,675		19,494
Income from operations	6,840		6,860		10,020		10,695
Net income	6,776		6,797		9,893		10,573

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Property, plant and equipment, net (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment, net

Property, plant and equipment, net, consist of the following (in thousands):

	June 30,			December 31,
	2019			2018
Machinery and equipment	$	391,027		$	373,881
Land, buildings and improvements	235,598			235,819
Other equipment	6,291			6,962
Construction-in-progress	30,639			32,448
Total property, plant and equipment	663,555			649,110
Less: accumulated depreciation	(178,371		)	(156,943		)
Property, plant and equipment, net	$	485,184		$	492,167

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Goodwill and other intangible assets, net (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill by operating segment

The following table summarizes the changes in goodwill by operating segment for the six months ended June 30, 2019 (in thousands):

	Drainage Pipe & Products		Water Pipe & Products		Total
Balance at December 31, 2018	$	189,833	$	318,360	$	508,193
Foreign currency and other adjustments	549		—		549
Balance at June 30, 2019	$	190,382	$	318,360	$	508,742

Schedule of intangible assets

Intangible assets other than goodwill at June 30, 2019 and December 31, 2018 included the following (in thousands):

	Net carrying value as of June 30, 2019		Net carrying value as of December 31, 2018
Customer relationships and contracts	$	118,671	$	131,473
Trade names	22,075		24,523
Patents	9,489		11,304
Non-compete agreements	9,570		9,574
Developed technology	6,167		—
In-Process R&D (1)	—		6,354
Other	508		561
Total intangible assets	$	166,480	$	183,789

(1) Reclassified to developed technology in the first quarter of 2019.

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Fair value measurement (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of fair value measurements on recurring basis

The estimated carrying amount and fair value of the Company’s financial instruments and other assets and liabilities measured and recorded at fair value on a recurring basis are as follows for the dates indicated (in thousands):

	Fair value measurements at June 30, 2019 using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value June 30, 2019
Assets:
Derivative asset	$	—	$	1,635	$	—	$	1,635
	Fair value measurements at December 31, 2018 using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value December 31, 2018
Assets:
Derivative asset	$	—	$	6,659	$	—	$	6,659

Schedule of carrying and fair value amounts for financial instruments and liabilities

The estimated carrying amount and fair value of the Company’s financial instruments and liabilities for which fair value is only disclosed is as follows (in thousands):

			Fair value measurements at June 30, 2019 using
	Carrying Amount June 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value June 30, 2019
Liabilities:
Term Loan	$	1,185,956	$	—	$	1,129,165	$	—	$	1,129,165
Tax receivable agreement payable	88,775		—		—		54,186		54,186

			Fair value measurements at December 31, 2018 using
	Carrying Amount December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value December 31, 2018
Liabilities:
Term Loan	$	1,188,605	$	—	$	1,103,628	$	—	$	1,103,628
Tax receivable agreement payable (1)	88,775		—		—		51,832		51,832

(1) During the first quarter of 2019, the Company identified a mathematical error in the 2018 10-K related to the disclosure of the fair value of the tax receivable agreement payable as of December 31, 2018. The fair value should have been $51.8 million, as opposed to $82.9 million, and is being corrected herein. This disclosure error did not have an impact on the Company's consolidated financial statements.

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Accrued liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Schedule of accrued liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,		December 31,
	2019		2018
Accrued payroll and employee benefits	$	27,659	$	31,095
Short-term finance leases	16,648		16,430
Short-term operating leases	9,232		—
Accrued taxes	7,853		11,489
Warranty	3,004		3,251
Accrued rebates	2,823		3,542
Environmental obligation	618		570
Other miscellaneous accrued liabilities	3,943		3,859
Total accrued liabilities	$	71,780	$	70,236

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Debt and deferred financing costs (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of long-term debt

The Company’s debt consisted of the following (in thousands):

	June 30,			December 31,
	2019			2018
Term Loan, net of debt issuance costs and original issuance discount of $30,646 and $34,252, respectively	$	1,185,956		$	1,188,605
Revolver, net of debt issuance costs of $1,900	37,100			—
Total debt	$	1,223,056		$	1,188,605
Less: current portion debt	(12,510		)	(12,510		)
Total long-term debt	$	1,210,546		$	1,176,095

Schedule of maturities of long-term debt

As of June 30, 2019, scheduled maturities of long-term debt were as follows (in thousands):

	Total		Term Loan		Revolver
2019	$	6,256	$	6,256	$	—
2020	12,510		12,510		—
2021	51,510		12,510		39,000
2022	12,510		12,510		—
2023	1,172,816		1,172,816		—
	$	1,255,602	$	1,216,602	$	39,000

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Derivatives and hedging (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair values of derivative assets and liabilities in the balance sheets

The following table presents the fair values of derivative assets and liabilities in the condensed consolidated balance sheets (in thousands):

	June 30, 2019
	Derivative Assets				Derivative Liabilities
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate swaps	$	525,000	$	1,635	$	—	$	—
Total derivatives, gross			1,635				—
Less: Legally enforceable master netting agreements			—				—
Total derivatives, net			$	1,635			$	—

	December 31, 2018
	Derivative Assets				Derivative Liabilities
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate swaps	$	525,000	$	6,659	$	—	$	—
Total derivatives, gross			6,659				—
Less: Legally enforceable master netting agreements			—				—
Total derivatives, net			$	6,659			$	—

Schedule of gain (loss) recognized in the statements of operations and comprehensive income on derivative instruments in cash flow hedging relationships

The following table presents the effect of derivative instruments on the condensed consolidated statements of operations (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2019			2018		2019			2018
Net investment hedges
Foreign exchange forward contracts
Gain on derivatives recognized in Accumulated other comprehensive loss	$	—		$	—	$	—		$	970
Derivatives not designated as hedges
Interest rate swaps
Gain (loss) on derivatives not designated as hedges included in interest expense	(2,932		)	871		(5,024		)	4,220

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of components of expense, discount, rate and supplemental cash flow information related to leases

The components of lease expense were as follows (in thousands):

Lease cost	Classification	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	Lease expense	$	4,184	$	8,221
Finance lease cost
Amortization of leased assets	Depreciation, amortization, and accretion	594		1,097
Interest on lease liabilities	Interest expense	4,609		9,153

Lease term and discount rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	15.5 years
Finance leases	33.7 years
Weighted-average discount rate (%)
Operating leases	12.6	%
Finance leases	12.3	%

Supplemental cash flow information related to leases was as follows (in thousands):

	Six months ended June 30, 2019
Cash paid for amounts included in lease liabilities
Operating cash flows related to operating leases	$	7,386
Operating cash flows related to finance leases	8,009
Financing cash flows related to finance leases	282
Leased assets obtained in exchange for new finance lease liabilities	42
Leased assets obtained in exchange for new operating lease liabilities	3,872

Schedule of supplemental balance sheet information related to leases

Supplemental balance sheet information related to leases was as follows (in thousands):

	Classification	June 30, 2019
Operating leases
Right of use assets	Operating lease right-of-use assets	$	63,616
Operating lease liabilities - current portion	Accrued liabilities	(9,232		)
Operating lease liabilities - long term portion	Long-term operating lease liabilities	(56,578		)
Finance leases
Finance lease assets	Property, plant and equipment, net	50,861
Finance lease liabilities - current portion	Accrued liabilities	(16,648		)
Finance lease liabilities - long term portion	Long-term finance lease liabilities	(136,096		)

Schedule of maturity of operating lease liabilities

As of June 30, 2019, maturities of lease liabilities were as follows (in thousands):

	Operating leases			Finance leases			Total
2019	$	7,347		$	8,406		$	15,753
2020	13,392			16,837			30,229
2021	11,076			16,992			28,068
2022	10,309			17,242			27,551
2023	10,095			17,458			27,553
Thereafter	120,127			669,468			789,595
Total lease payments	172,346			746,403			918,749
Less: imputed interest	(106,536		)	(593,659		)	(700,195		)
Present value of lease liabilities	$	65,810		$	152,744		$	218,554

Schedule of maturity of finance lease liabilities

As of June 30, 2019, maturities of lease liabilities were as follows (in thousands):

	Operating leases			Finance leases			Total
2019	$	7,347		$	8,406		$	15,753
2020	13,392			16,837			30,229
2021	11,076			16,992			28,068
2022	10,309			17,242			27,551
2023	10,095			17,458			27,553
Thereafter	120,127			669,468			789,595
Total lease payments	172,346			746,403			918,749
Less: imputed interest	(106,536		)	(593,659		)	(700,195		)
Present value of lease liabilities	$	65,810		$	152,744		$	218,554

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Earnings per share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of calculation of basic and dilutive earnings per share

The calculations of the basic and diluted EPS for the three and six months ended June 30, 2019 and 2018 are presented below (in thousands, except per share amounts):

	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019			2018
Net income (loss)	$	2,954	$	6,994	$	(22,085	)	$	(12,916	)
Less: Earnings allocated to unvested restricted stock awards	7		37		—			—
Earnings (loss) allocated to common shareholders	$	2,947	$	6,957	$	(22,085	)	$	(12,916	)
Common stock:
Weighted average basic shares outstanding	64,142		63,893		64,073			63,865
Effect of dilutive securities	322		316		—			—
Weighted average diluted shares outstanding	64,464		64,209		64,073			63,865
Basic earnings (loss) per share:
Net income (loss)	$	0.05	$	0.11	$	(0.34	)	$	(0.20	)
Diluted earnings (loss) per share:
Net income (loss)	$	0.05	$	0.11	$	(0.34	)	$	(0.20	)

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Segment reporting (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of segment reporting information

The following tables set forth the disaggregation of revenue earned from contracts with customers based on the Company's reportable segments as well as other financial information attributable to the Company's reportable segments for the three and six months ended June 30, 2019 and 2018(in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Net sales:
Drainage Pipe & Products	$	241,680		$	222,881		$	405,414		$	378,526
Water Pipe & Products	168,539			193,205			296,663			327,518
Corporate and Other	—			1			—			3
Total	$	410,219		$	416,087		$	702,077		$	706,047
Depreciation and amortization:
Drainage Pipe & Products	$	9,456		$	10,354		$	18,658		$	20,451
Water Pipe & Products	14,595			15,475			29,470			32,557
Corporate and Other	339			207			654			440
Total	$	24,390		$	26,036		$	48,782		$	53,448
Segment EBITDA and reconciliation to income (loss) before income taxes:
Drainage Pipe & Products	$	48,997		$	48,411		$	74,063		$	69,570
Water Pipe & Products	24,973			24,196			33,714			31,105
Corporate and Other	(19,962		)	(14,589		)	(37,048		)	(25,532		)
Less: Interest expense	(25,783		)	(17,745		)	(50,448		)	(31,053		)
Depreciation and amortization	(24,390		)	(26,036		)	(48,782		)	(53,448		)
Income (loss) before income taxes	$	3,835		$	14,237		$	(28,501	)	$	(9,358	)
Capital expenditures:
Drainage Pipe & Products	$	7,519		$	6,641		$	15,448		$	9,508
Water Pipe & Products	2,248			2,410			4,525			7,653
Corporate and Other	695			200			2,463			278
Total	$	10,462		$	9,251		$	22,436		$	17,439
							June 30,			December 31,
							2019			2018
Total assets:
Drainage Pipe & Products							$	910,259		$	800,454
Water Pipe & Products							923,687			922,162
Corporate and Other							44,218			70,636
Total							$	1,878,164		$	1,793,252

The Company has an investment in an equity method investee included in the Drainage Pipe & Products segment for which earnings from equity method investee were $3.4 million, $5.0 million, $3.7 millionand $5.5 million for the three and six months ended June 30, 2019 and June 30, 2018, respectively, and with the following balances (in thousands):

	June 30,		December 31,
	2019		2018
Investment in equity method investee	$	54,076	$	50,607

Schedule of long-lived assets by geographic areas

Disaggregated revenue by geographic location is provided in the tables below. The Company has operations in the United States, Canada and Mexico. The economic characteristics of the Company's customers does not significantly vary across geographic locations or product lines. The Company has both revenues and long-lived assets in each country; and those assets and revenues are recorded within geographic location as follows (in thousands):

Property, plant, and equipment, net:	June 30,		December 31,
	2019		2018
United States	$	432,416	$	441,773
Canada	43,024		40,331
Mexico	9,744		10,063
	$	485,184	$	492,167

Schedule of disaggregation of revenue by geographic areas

Net sales:	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018
United States	$	391,721	$	391,770	$	668,458	$	665,439
Canada	16,555		21,706		29,655		35,886
Mexico	1,943		2,611		3,964		4,722
	$	410,219	$	416,087	$	702,077	$	706,047

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Organization and description of the business (Details)	Oct. 25, 2016 shares
IPO | Forterra Building Products
Recent Transactions
Number of shares issued in stock offering (in shares)	18,420,000

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Summary of significant accounting policies (Details) - USD ($) $ in Millions	6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jan. 01, 2019
ASU 2016-02 Leases (Topic 842)
Significant Accounting Policies
Net lease assets				$ 63.9
Net lease liabilities				65.2
Sale leaseback transaction, carrying value of deferred gains				9.3
ASU 2016-02 Leases (Topic 842) | Retained Earnings
Significant Accounting Policies
Cumulative effect of accounting changes, net of tax				$ 2.3
Customer Concentration Risk | Sales Revenue, Net | Customer A | Water Pipe & Products
Significant Accounting Policies
Concentration risk, percentage	14.00%	15.00%
Customer Concentration Risk | Accounts Receivable | Customer A | Water Pipe & Products
Significant Accounting Policies
Concentration risk, percentage	16.00%		16.00%

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Acquisitions (Details) - USD ($) $ in Thousands		6 Months Ended
	Mar. 01, 2019	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition [Line Items]
Aggregate consideration paid		$ 34,051	$ 17,629
TEXAS | Buckner
Business Acquisition [Line Items]
Aggregate consideration paid	$ 12,000

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Receivables, net (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables, gross	$ 268,695	$ 200,609
Less: Allowance for doubtful accounts	(1,877)	(2,141)
Receivables, net	266,818	198,468
Trade receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables, gross	252,442	188,999
Amounts billed, but not yet paid under retainage provisions
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables, gross	2,351	2,065
Other receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivables, gross	$ 13,902	$ 9,545

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Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Finished goods	$ 202,560	$ 193,603
Raw materials	87,881	90,376
Work in process	1,255	1,051
Total inventories	$ 291,696	$ 285,030

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Investment in equity method investee - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Investment in equity method investee	$ 54,076	$ 50,607
Drainage Pipe & Products
Schedule of Equity Method Investments [Line Items]
Investment in equity method investee	$ 54,076	$ 50,607
CP&P Joint Venture | Drainage Pipe & Products
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage	50.00%
Investment in equity method investee	$ 54,100
Company's share of the underlying equity net assets of the investee	$ 13,100

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Investment in equity method investee - Company's Distribution and Earnings in Equity Method Investment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Distribution received from CP&P			$ 1,500	$ 5,000
Share of earnings in CP&P	$ 3,402	$ 3,672	4,969	$ 5,521
CP&P Joint Venture
Schedule of Equity Method Investments [Line Items]
Distribution received from CP&P	0	5,000	1,500		$ 5,000
Share of earnings in CP&P	3,420	3,690	5,005		5,557
Amortization of excess fair value of investment	$ (18)	$ (18)	$ (36)		$ (36)

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Investment in equity method investee - Selected Financial Data from the Investee (Details) - CP&P Joint Venture - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Schedule of Equity Method Investments [Line Items]
Net sales	$ 37,353	$ 34,655	$ 65,602	$ 64,673
Gross profit	11,721	11,046	19,675	19,494
Income from operations	6,840	6,860	10,020	10,695
Net income	$ 6,776	$ 6,797	$ 9,893	$ 10,573

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Property, plant and equipment, net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	$ 663,555		$ 663,555		$ 649,110
Less: accumulated depreciation	(178,371)		(178,371)		(156,943)
Property, plant and equipment, net	485,184		485,184		492,167
Depreciation expense	12,400	$ 12,800	25,200	$ 27,100
Machinery and equipment
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	391,027		391,027		373,881
Land, buildings and improvements
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	235,598		235,598		235,819
Other equipment
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	6,291		6,291		6,962
Construction-in-progress
Property, Plant and Equipment [Line Items]
Total property, plant and equipment	$ 30,639		$ 30,639		$ 32,448

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Goodwill and other intangible assets, net - Goodwill by Operating Segment (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill [Roll Forward]
Balance at December 31, 2018	$ 508,193
Foreign currency and other adjustments	549
Balance at June 30, 2019	508,742
Drainage Pipe & Products
Goodwill [Roll Forward]
Balance at December 31, 2018	189,833
Foreign currency and other adjustments	549
Balance at June 30, 2019	190,382
Water Pipe & Products
Goodwill [Roll Forward]
Balance at December 31, 2018	318,360
Foreign currency and other adjustments	0
Balance at June 30, 2019	$ 318,360

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Goodwill and other intangible assets, net - Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Total intangible assets	$ 166,480	$ 183,789
In-Process R&D
Finite-Lived Intangible Assets [Line Items]
Indefinite-lived intangibles		6,354
Customer relationships and contracts
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles	118,671	131,473
Trade names
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles	22,075	24,523
Patents
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles	9,489	11,304
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles	9,570	9,574
Developed technology
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles	6,167
Other
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles	$ 508	$ 561

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Goodwill and other intangible assets, net - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Selling, General and Administrative Expenses
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 12.0	$ 13.2	$ 23.6	$ 26.4

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Fair value measurement - Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets:
Derivative asset	$ 1,635	$ 6,659
Fair Value, Measurements, Recurring
Assets:
Derivative asset	1,635	6,659
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Derivative asset	0	0
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Assets:
Derivative asset	1,635	6,659
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Assets:
Derivative asset	$ 0	$ 0

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Fair value measurement - Carrying Amount and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Tax receivable agreement payable	$ 88,775	$ 88,775
Carrying Amount | Senior Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Term Loan	1,185,956	1,188,605
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Tax receivable agreement payable	54,186	51,832
Fair Value | Previously Reported
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Tax receivable agreement payable		82,900
Fair Value | Senior Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Term Loan	1,129,165	1,103,628
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Tax receivable agreement payable	0	0
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Senior Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Term Loan	0	0
Fair Value | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Tax receivable agreement payable	0	0
Fair Value | Significant Other Observable Inputs (Level 2) | Senior Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Term Loan	1,129,165	1,103,628
Fair Value | Significant Unobservable Inputs (Level 3)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Tax receivable agreement payable	54,186	51,832
Fair Value | Significant Unobservable Inputs (Level 3) | Senior Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Term Loan	$ 0	$ 0

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Accrued liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accrued payroll and employee benefits	$ 27,659	$ 31,095
Short-term finance leases	16,648
Short-term finance leases		16,430
Short-term operating leases	9,232
Accrued taxes	7,853	11,489
Warranty	3,004	3,251
Accrued rebates	2,823	3,542
Environmental obligation	618	570
Other miscellaneous accrued liabilities	3,943	3,859
Total accrued liabilities	$ 71,780	$ 70,236

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Debt and deferred financing costs - Schedule of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Oct. 25, 2016
Debt Instrument [Line Items]
Total debt	$ 1,223,056	$ 1,188,605
Less: current portion debt	(12,510)	(12,510)
Total long-term debt	1,210,546	1,176,095
Senior Notes | Term Loan
Debt Instrument [Line Items]
Total debt	1,185,956	1,188,605	$ 1,050,000
Debt issue costs and original issue discount	30,646	34,252
Revolving Line of Credit | Revolver
Debt Instrument [Line Items]
Total debt	37,100	$ 0
Debt issuance costs	$ 1,900

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Debt and deferred financing costs - Additional Information (Details) - USD ($)			3 Months Ended		6 Months Ended
	May 01, 2017	Oct. 25, 2016	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Debt Instrument [Line Items]
Debt outstanding			$ 1,223,056,000		$ 1,223,056,000		$ 1,188,605,000
Net proceeds from incremental term loan					54,000,000	$ 0
Term Loan | LIBOR
Debt Instrument [Line Items]
Margin rate	3.00%	3.50%
Revolving Line of Credit | Revolver
Debt Instrument [Line Items]
Debt outstanding			37,100,000		37,100,000		0
Revolving Line of Credit | Revolver | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 300,000,000
Line of credit facility, accordion feature, increase limit		100,000,000
Line of credit facility, maximum borrowing capacity, accordion feature, increase limit		$ 50,000,000
Debt instrument, borrowing base limitation, sum of eligible cash, maximum		100.00%
Debt instrument, borrowing base limitation, eligible accounts receivable, maximum		85.00%
Debt instrument, borrowing base limitation, eligible inventory, maximum		75.00%
Debt instrument, borrowing base limitation, orderly liquidation value of eligible inventory, maximum		85.00%
Debt instrument, borrowing base limitation, eligible accounts receivable and inventory, accordion feature, maximum		2.50%
Outstanding borrowings under revolver			$ 39,000,000		$ 39,000,000		0
Weighted average interest rate on borrowings outstanding			3.75%		3.75%
Stand-by letters of credit outstanding			$ 17,300,000		$ 17,300,000
Allowable borrowing base			243,700,000		$ 243,700,000
Fixed charge coverage ratio		1.00
Revolving Line of Credit | Revolver | Revolving Credit Facility | Minimum
Debt Instrument [Line Items]
Line of credit, facility fee percentage					0.20%
Revolving Line of Credit | Revolver | Revolving Credit Facility | Maximum
Debt Instrument [Line Items]
Line of credit, facility fee percentage					0.325%
Revolving Line of Credit | Revolver | Revolving Credit Facility | Canada
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 20,000,000.0
Revolving Line of Credit | Revolver | Revolving Credit Facility | United States
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 280,000,000.0
Revolving Line of Credit | Revolver | Revolving Credit Facility | LIBOR or CDOR
Debt Instrument [Line Items]
Debt instrument, collateral covenant, percentage of voting stock, maximum		65.00%
Revolving Line of Credit | Revolver | Revolving Credit Facility | LIBOR or CDOR | Minimum
Debt Instrument [Line Items]
Margin rate		1.25%
Revolving Line of Credit | Revolver | Revolving Credit Facility | LIBOR or CDOR | Maximum
Debt Instrument [Line Items]
Margin rate		1.75%
Revolving Line of Credit | Revolver | Revolving Credit Facility | CDOR | Minimum
Debt Instrument [Line Items]
Margin rate		0.25%
Revolving Line of Credit | Revolver | Revolving Credit Facility | CDOR | Maximum
Debt Instrument [Line Items]
Margin rate		0.75%
Revolving Line of Credit | Term Loan
Debt Instrument [Line Items]
Proceeds from term loans, net	$ 200,000,000
Debt instrument, reduction in applicable interest rate percentage	0.50%
Net proceeds from incremental term loan	$ 196,800,000
Senior Notes | Term Loan
Debt Instrument [Line Items]
Debt outstanding		$ 1,050,000,000	$ 1,185,956,000		$ 1,185,956,000		$ 1,188,605,000
Debt instrument, amortization percentage	0.25%
Weighted average interest rate			5.50%	4.90%	5.50%	4.80%
Senior Notes | Term Loan | LIBOR
Debt Instrument [Line Items]
Interest rate, floor percentage	1.00%
Senior Notes | Term Loan | Base Rate
Debt Instrument [Line Items]
Margin rate	2.00%
Senior Notes | Term Loan | LIBOR or CDOR | Canada
Debt Instrument [Line Items]
Debt instrument, collateral covenant, percentage of voting stock, maximum		65.00%
Senior Notes | Senior Secured Term Loan
Debt Instrument [Line Items]
Debt outstanding		$ 1,050,000,000
Line of credit facility, accordion feature, increase limit		$ 285,000,000

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Debt and deferred financing costs - Scheduled Maturities of Long-term Debt (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Debt Instrument [Line Items]
2019	$ 6,256
2020	12,510
2021	51,510
2022	12,510
2023	1,172,816
Total	1,255,602
Term Loan
Debt Instrument [Line Items]
2019	6,256
2020	12,510
2021	12,510
2022	12,510
2023	1,172,816
Total	1,216,602
Revolver
Debt Instrument [Line Items]
2019	0
2020	0
2021	39,000
2022	0
2023	0
Total	$ 39,000

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Derivatives and hedging - Additional Information (Details) - Interest rate swaps - Not Designated as Hedging Instrument $ in Millions	Feb. 09, 2017 USD ($)
Derivative [Line Items]
Derivative notional amount	$ 525
Derivative, fixed Interest rate to pay interest	1.52%
Derivative, term of contract	3 years

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Derivatives and hedging - Derivative Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Derivative Assets
Derivative Asset, Fair Value	$ 1,635	$ 6,659
Derivative Asset, Less: Legally enforceable master netting agreements	0	0
Derivative Asset, net	1,635	6,659
Derivative Liabilities
Derivative Liability, Fair Value	0	0
Derivative Liability, Less: Legally enforceable master netting agreements	0	0
Derivative Liability, net	0	0
Interest rate swaps
Derivative Assets
Derivative Asset, Notional Amount	525,000	525,000
Derivative Asset, Fair Value	1,635	6,659
Derivative Liabilities
Derivative Liability, Notional Amount	0	0
Derivative Liability, Fair Value	$ 0	$ 0

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Derivatives and hedging - Gain (Loss) on Derivative Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Gain on derivatives recognized in Accumulated other comprehensive loss	$ 0	$ 0	$ 0	$ 970
Designated as Hedging Instrument | Foreign exchange forward contracts
Derivative Instruments, Gain (Loss) [Line Items]
Gain on derivatives recognized in Accumulated other comprehensive loss	0	0	0	970
Not Designated as Hedging Instrument | Interest rate swaps | Interest Expense
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) on derivatives not designated as hedges included in interest expense	$ (2,932)	$ 871	$ (5,024)	$ 4,220

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Leases - Additional Information (Details)	Jun. 30, 2019 renewal_option
Leases [Abstract]
Initial term of finance leases	25 years
Number of renewal options of finance leases	1
Renewal term of finance leases	10 years
Minimum
Lessee, Lease, Description [Line Items]
Initial term of operating leases	1 year
Maximum
Lessee, Lease, Description [Line Items]
Initial term of operating leases	25 years
Renewal term of operating leases	10 years

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Operating lease cost	$ 4,184	$ 8,221
Finance lease cost
Amortization of leased assets	594	1,097
Interest on lease liabilities	$ 4,609	$ 9,153

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Leases - Lease Term and Discount Rate (Details)	Jun. 30, 2019
Leases [Abstract]
Operating leases, weighted-average remaining lease term	15 years 6 months
Finance leases, weighted-average remaining lease term	33 years 8 months
Operating leases, weighted-average discount rate	12.60%
Finance leases, weighted-average discount rate	12.30%

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Leases - Supplemental Cash Flow Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Cash paid for amounts included in lease liabilities
Operating cash flows related to operating leases	$ 7,386
Operating cash flows related to finance leases	8,009
Financing cash flows related to finance leases	282
Leased assets obtained in exchange for new finance lease liabilities	42
Leased assets obtained in exchange for new operating lease liabilities	$ 3,872

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Leases - Supplemental Balance Sheet Information (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Operating leases
Right of use assets	$ 63,616
Operating lease liabilities - current portion	(9,232)
Operating lease liabilities - long term portion	(56,578)
Finance leases
Finance lease assets	50,861
Finance lease liabilities - current portion	(16,648)
Finance lease liabilities - long term portion	$ (136,096)

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Leases - Maturities of Lease Liabilities (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2019	$ 7,347
2020	13,392
2021	11,076
2022	10,309
2023	10,095
Thereafter	120,127
Total lease payments	172,346
Less: imputed interest	(106,536)
Present value of lease liabilities	65,810
Finance leases
2019	8,406
2020	16,837
2021	16,992
2022	17,242
2023	17,458
Thereafter	669,468
Total lease payments	746,403
Less: imputed interest	(593,659)
Present value of lease liabilities	152,744
Total
2019	15,753
2020	30,229
2021	28,068
2022	27,551
2023	27,553
Thereafter	789,595
Total lease payments	918,749
Less: imputed interest	(700,195)
Present value of lease liabilities	$ 218,554

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Commitments and contingencies (Details)					6 Months Ended
	Nov. 30, 2018 plaintiff	Aug. 14, 2017 plaintiff	Oct. 25, 2016	Oct. 05, 2016 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 13, 2016 USD ($)	Mar. 13, 2015 USD ($)
Lone Star | Affiliated Entities
Loss Contingencies [Line Items]
Certain covered tax benefits paid by related party, percentage			85.00%
Accrued liabilities related to tax receivable agreement					$ 88,800,000	$ 88,800,000
Payments of liability related to tax receivable agreement					0
Heidelberg Cement Hanson Building Products
Loss Contingencies [Line Items]
Business acquisition, possible maximum earn out							$ 100,000,000.0	$ 100,000,000.0
Delaware Action | Pending Litigation
Loss Contingencies [Line Items]
Loss contingency, damages sought				$ 100,000,000.0
Loss contingency liability					$ 0
Securities Action
Loss Contingencies [Line Items]
Loss contingency, number of plaintiffs | plaintiff	2	4

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Earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net income (loss)	$ 2,954	$ (25,039)	$ 6,994	$ (19,910)	$ (22,085)	$ (12,916)
Less: Earnings allocated to unvested restricted stock awards	7		37		0	0
Earnings (loss) allocated to common shareholders	$ 2,947		$ 6,957		$ (22,085)	$ (12,916)
Common stock:
Weighted average basic shares outstanding (in shares)	64,142		63,893		64,073	63,865
Effect of dilutive securities (in shares)	322		316		0	0
Weighted average diluted shares outstanding (in shares)	64,464		64,209		64,073	63,865
Basic earnings (loss) per share:
Net loss (in dollars per share)	$ 0.05		$ 0.11		$ (0.34)	$ (0.20)
Diluted earnings (loss) per share:
Net loss (in dollars per share)	$ 0.05		$ 0.11		$ (0.34)	$ (0.20)

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Earnings per share - Additional Information (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock Options and Restricted Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	5,437,403	4,557,278	3,046,569	2,318,182

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Income taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Income tax benefit (expense)	$ (881)	$ (7,243)	$ 6,416	$ (3,558)
Increase in valuation allowance for deferred tax assets		$ 3,500

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Segment reporting (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) geographic_area	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of geographic areas | geographic_area			3
Net sales	$ 410,219	$ 416,087	$ 702,077	$ 706,047
Depreciation and amortization	24,390	26,036	48,782	53,448
Interest expense	(25,783)	(17,745)	(50,448)	(31,053)
Income (loss) before income taxes	3,835	14,237	(28,501)	(9,358)
Capital expenditures	10,462	9,251	22,436	17,439
Assets	1,878,164		1,878,164		$ 1,793,252
Earnings from equity method investee	3,402	3,672	4,969	5,521
Investment in equity method investee	54,076		54,076		50,607
Property, plant and equipment, net	485,184		485,184		492,167
United States
Segment Reporting Information [Line Items]
Net sales	391,721	391,770	668,458	665,439
Property, plant and equipment, net	432,416		432,416		441,773
Canada
Segment Reporting Information [Line Items]
Net sales	16,555	21,706	29,655	35,886
Property, plant and equipment, net	43,024		43,024		40,331
Mexico
Segment Reporting Information [Line Items]
Net sales	1,943	2,611	3,964	4,722
Property, plant and equipment, net	9,744		9,744		10,063
Drainage Pipe & Products
Segment Reporting Information [Line Items]
Earnings from equity method investee	3,400	3,700	5,000	5,500
Investment in equity method investee	54,076		54,076		50,607
Operating segments | Drainage Pipe & Products
Segment Reporting Information [Line Items]
Net sales	241,680	222,881	405,414	378,526
Depreciation and amortization	9,456	10,354	18,658	20,451
Segment EBITDA	48,997	48,411	74,063	69,570
Capital expenditures	7,519	6,641	15,448	9,508
Assets	910,259		910,259		800,454
Operating segments | Water Pipe & Products
Segment Reporting Information [Line Items]
Net sales	168,539	193,205	296,663	327,518
Depreciation and amortization	14,595	15,475	29,470	32,557
Segment EBITDA	24,973	24,196	33,714	31,105
Capital expenditures	2,248	2,410	4,525	7,653
Assets	923,687		923,687		922,162
Corporate and Other
Segment Reporting Information [Line Items]
Net sales	0	1	0	3
Depreciation and amortization	339	207	654	440
Segment EBITDA	(19,962)	(14,589)	(37,048)	(25,532)
Capital expenditures	695	$ 200	2,463	$ 278
Assets	$ 44,218		$ 44,218		$ 70,636

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Related party transactions (Details) - Affiliated Entities - USD ($) $ in Thousands		6 Months Ended
	Oct. 25, 2016	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
CP&P Joint Venture
Related Party Transaction [Line Items]
Sales of products to related party		$ 30	$ 40
Purchased goods and services from related party		$ 180	$ 100
Bricks Joint Venture | Transition Service Agreement
Related Party Transaction [Line Items]
Net receivable from affiliates				$ 4,400
Lone Star
Related Party Transaction [Line Items]
Payment of certain covered tax benefits buy the Company, percentage	85.00%

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Label	Element	Value
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 6,957,000
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 6,957,000