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What changed in ADVANCED DRAINAGE SYSTEMS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ADVANCED DRAINAGE SYSTEMS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+186 added−189 removedSource: 10-K (2024-05-16) vs 10-K (2023-05-18)

Top changes in ADVANCED DRAINAGE SYSTEMS, INC.'s 2024 10-K

186 paragraphs added · 189 removed · 169 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeA wide variety of production processes and expertise allow us to provide cost-effective finished goods at competitive prices delivered in a timely fashion to our customers. Our molds and machines have been designed to maximize interchangeability in order to optimize flexibility, maximize efficiency and minimize downtime.
Biggest changeWith our large manufacturing footprint, we can support rapid seasonal demand growth while focusing on customer service and minimizing transportation costs. 6 Table of Contents Advanced Drainage Systems, Inc. A wide variety of production processes and expertise allow us to provide cost-effective finished goods at competitive prices delivered in a timely fashion to our customers.
To a limited extent, our current and past operations, and those of many of the companies we have acquired, involve materials that are, or could be classified as, toxic or hazardous. There is inherent risk of contamination and environmental damage in our operations and the products we handle, transport and distribute. See “Item 1A.
To a limited extent, our current and past operations, and those of many of the companies we have acquired, involve materials that are, or could be classified as, toxic or hazardous. There is an inherent risk of contamination and environmental damage in our operations and the products we handle, transport and distribute. See “Item 1A.
We currently purchase in excess of 1.1 billion pounds of virgin and recycled resin annually from approximately 400 suppliers. As a high-volume buyer of resin, we achieve economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material) ordered for delivery to our production locations.
We currently purchase in excess of 1.1 billion pounds of virgin and recycled resin annually from approximately 525 suppliers. As a high-volume buyer of resin, we achieve economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material) ordered for delivery to our production locations.
This ongoing dialogue has positioned us as an industry resource for design guidance and product development and as a respected expert in water management solutions. CUSTOMERS We have a large, active customer base of approximately 16,000 customers, with two customers representing 10% or more of fiscal 2023 net sales.
This ongoing dialogue has positioned us as an industry resource for design guidance and product development and as a respected expert in water management solutions. CUSTOMERS We have a large, active customer base of approximately 16,000 customers, with two customers representing 10% or more of fiscal 2024 net sales.
In comparison to traditional concrete tanks, our IM-Series septic tanks are easier to transport to the job site and require less time and energy to install. Our IM-Series line of potable tanks are injection-molded polypropylene plastic tanks manufactured from virgin materials suitable for water reuse and drinking water storage. IM-Series potable tanks are available in various capacities for water storage.
In comparison to traditional concrete tanks, our Infiltrator tanks are easier to transport to the job site and require less time and energy to install. Our IM-Series line of potable tanks are injection-molded polypropylene plastic tanks manufactured from virgin materials suitable for water reuse and drinking water storage. IM-Series potable tanks are available in various capacities for water storage.
Our North American truck fleet incorporates approximately 1,300 trailers that are specially designed to haul our lightweight pipe and Allied Products. These designs maximize payload versus conventional over the road trailers and facilitate the loading and unloading of our products at the various customer delivery locations.
Our North American truck fleet incorporates approximately 1,100 trailers that are specially designed to haul our lightweight pipe and Allied Products. These designs maximize payload versus conventional over the road trailers and facilitate the loading and unloading of our products at the various customer delivery locations.
(“EMA”) and NSF International and several state Departments of Transportation (“DOT”) and municipal agencies conduct both scheduled and unscheduled audits/inspections of our plants to verify product quality and compliance to applicable standards. Fleet – We also operate an in-house fleet of approximately 700 tractors.
(“EMA”) and NSF International and several state Departments of Transportation (“DOT”) and municipal agencies conduct both scheduled and unscheduled audits/inspections of our plants to verify product quality and compliance to applicable standards. Fleet – We also operate an in-house fleet of approximately 650 tractors.
Fiscal 2023 Revenue OUR PRODUCTS We design, manufacture and market a complete line of high performance thermoplastic corrugated pipe and related water management products for use in a wide range of end markets.
Fiscal 2024 Revenue OUR PRODUCTS We design, manufacture and market a complete line of high performance thermoplastic corrugated pipe and related water management products for use in a wide range of end markets.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K. CORPORATE AND AVAILABLE INFORMATION We were founded in 1966 and are a Delaware corporation. Our principal executive offices are located at 4640 Trueman Boulevard, Hilliard, Ohio 43026, and our telephone number at that address is (614) 658-0050. Our corporate website is www.adspipe.com.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K. CORPORATE AND AVAILABLE INFORMATION We were founded in 1966 and are a Delaware corporation. Our principal executive offices are located at 4640 Trueman Boulevard, Hilliard, Ohio 43026, and our telephone number at that address is (614) 658-0050.
IM-Series potable tanks are commonly used in water cistern applications, such as rainwater harvesting systems. Delta Treatment Systems – Our Delta Treatment Systems’ (“Delta”) wastewater treatment systems provide a higher level of wastewater purification through mechanical aeration wastewater for residential and commercial systems with daily flows up to 100,000 gallons per day.
IM-Series potable tanks are commonly used in water cistern applications, such as rainwater harvesting systems. Advanced Treatment Systems – Our Advanced Treatment Systems, previously known as Delta Treatment Systems, provide a higher level of wastewater purification through mechanical aeration wastewater for residential and commercial systems with daily flows up to 100,000 gallons per day.
In August 2022, we announced plans to invest $65 million near our existing headquarters to fund the development of a 110,000 square foot Engineering & Technology Center. This new facility will be dedicated to innovation across product engineering, material science and manufacturing technology.
In August 2022, we announced plans to invest $65 million near our existing headquarters to fund the development of a 110,000 square foot Engineering & Technology Center. This new facility will be dedicated to innovation across product engineering, material science and manufacturing technology and we anticipate it will open in fiscal 2025.
Further, we are focused on a program of continuous sustainability improvement, with approximately 360 million pounds of post-consumer and post-industrial recycled HDPE and 130 million pounds of post-consumer and post-industrial recycled polypropylene converted each year to make our products.
Fiscal 2024 Materials Purchased Further, we are focused on a program of continuous sustainability improvement, with approximately 360 million pounds of post-consumer and post-industrial recycled HDPE and 130 million pounds of post-consumer and post-industrial recycled polypropylene converted each year to make our products.
This recycling 5 Table of Contents Advanced Drainage Systems, Inc. capacity not only contributes to our sustainability initiatives through the promotion of a circular economy, but also allows us to better and more quickly serve the needs of our customers. We leverage our raw material blending and processing technologies to produce an HDPE pipe that incorporates recycled resin.
This recycling capacity not only contributes to our sustainability initiatives through the promotion of a circular economy, but also allows us to better and more quickly serve the needs of our customers. We leverage our raw material blending and processing technologies to produce an HDPE pipe that incorporates recycled resin.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those pertaining to air emissions, water discharges, the handling, disposal and transport of solid and hazardous 11 Table of Contents Advanced Drainage Systems, Inc. materials and wastes, the investigation and remediation of contamination and otherwise relating to health and safety and the protection of the environment and natural resources.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those pertaining to air emissions, water discharges, the handling, disposal and transport of solid and hazardous materials and wastes, the investigation and remediation of contamination and otherwise relating to health and safety and the protection of the environment and natural resources.
The optimized design of our Infiltrator chambers and tanks provides the ability to nest products, enabling us to manufacture products from one location and efficiently ship throughout North America. 7 Table of Contents Advanced Drainage Systems, Inc. SUSTAINABILITY “Our Reason is Water” and our vision is to advance the quality of life through sustainable solutions to water management challenges.
The optimized design of our Infiltrator chambers and tanks provides the ability to nest products, enabling us to manufacture products from one location and efficiently ship throughout North America. SUSTAINABILITY “Our Reason is Water” and our vision is to advance the quality of life through sustainable solutions to water management challenges.
OUR MANUFACTURING AND DISTRIBUTION PLATFORM We have a leading domestic and international manufacturing and distribution infrastructure, serving customers throughout the United States, Canada, Mexico and other countries worldwide through 66 manufacturing plants and 40 distribution centers, including eight manufacturing plants and nine distribution centers owned or leased by our joint ventures.
OUR MANUFACTURING AND DISTRIBUTION PLATFORM We have a leading domestic and international manufacturing and distribution infrastructure, serving customers throughout the United States, Canada, Mexico and other countries worldwide through 64 manufacturing plants and 41 distribution centers, including eight manufacturing plants and seven distribution centers owned or leased by our joint ventures.
These systems when installed in a bed of sand provide combined treatment and dispersal in the same small footprint and at a reduced cost with minimal long-term maintenance. Advanced Treatment Leachfield - Our Advanced Treatment Leachfield (“ATL”) product is an alternative combined treatment and dispersal system that provides advanced wastewater treatment.
These systems when installed in a bed of sand provide combined treatment and dispersal in the same small footprint and at a reduced cost with minimal long-term maintenance. Our ATL product is an alternative combined treatment and dispersal system that provides advanced wastewater treatment. The ATL is a profile of polystyrene aggregates and geotextiles installed in a bed of sand.
The table below summarizes the percentage of Net Sales for Pipe, Infiltrator, International and Allied Products & Other. 2023 2022 2021 Pipe 55.9 % 55.6 % 53.1 % Infiltrator 14.4 % 16.6 % 16.6 % International 7.2 % 7.4 % 8.0 % Allied Products & Other 22.5 % 20.4 % 22.3 % Our products and engineering project designs have been continuously and frequently recognized by the industry.
The table below summarizes the percentage of Net Sales for Pipe, Infiltrator, International and Allied Products & Other. 2024 2023 2022 Pipe 53.7 % 55.9 % 55.6 % Infiltrator 15.6 % 14.4 % 16.6 % International 7.2 % 7.2 % 7.4 % Allied Products & Other 23.5 % 22.5 % 20.4 % Our products and engineering project designs have been continuously and frequently recognized by the industry.
The Ethics Code provides guidelines in relation to conflicts of interest, fair dealing, confidential information and 10 Table of Contents Advanced Drainage Systems, Inc. intellectual property, fair employment practices, environmental health and safety, and improper payments to third parties, among many other areas of ethical business conduct.
The Ethics Code provides guidelines in relation to conflicts of interest, fair dealing, confidential information and intellectual property, fair employment practices, environmental health and safety, and improper payments to third parties, among many other areas of ethical business conduct.
Our fittings are sold in all end markets where we sell our current pipe products. 4 Table of Contents Advanced Drainage Systems, Inc. Other Products - Our ARC, BioDiffuser, Contactor and Recharger products are chambers that are used in septic systems for residential and small volume non-residential wastewater treatment and disposal.
Our fittings are sold in all end markets where we sell our current pipe products. Other Products - Our ARC, BioDiffuser, Contactor and Recharger products are chambers that are used in septic systems for residential and small volume non-residential wastewater treatment and disposal.
EZflow - EZflow synthetic aggregate bundles replace stone and pipe leachfields for effluent and drainage applications. The EZflow proprietary products are a modular design that incorporates recycled polystyrene aggregate bundles and corrugated polyethylene pipe that act as a replacement to the traditional materials stone and pipe. 3 Table of Contents Advanced Drainage Systems, Inc.
EZflow - EZflow synthetic aggregate bundles replace stone and pipe leachfields for effluent and drainage applications. The EZflow proprietary products are a modular design that incorporates recycled polystyrene aggregate bundles and corrugated polyethylene pipe that act as a replacement to the traditional materials stone and pipe.
United States Pipe and Allied Product Facilities 6 Table of Contents Advanced Drainage Systems, Inc. Domestically, we can produce more than one billion pounds of pipe annually. Additional capacity is in place to support seasonal production needs and expected growth.
United States Pipe and Allied Product Facilities Domestically, we can produce more than one billion pounds of pipe annually. Additional capacity is in place to support seasonal production needs and expected growth.
In addition to providing competitive compensation and benefits, this includes the following categories: Health and Safety; Values; Diversity, Equity & Inclusion; and Training. Employees - As of March 31, 2023, in our domestic and international operations, the Company and its consolidated subsidiaries had both hourly personnel and salaried employees.
In addition to providing competitive compensation and benefits, this includes the following categories: Health and Safety; Values; Diversity, Equity & Inclusion; and Training. 9 Table of Contents Advanced Drainage Systems, Inc. Employees - As of March 31, 2024, in our domestic and international operations, the Company and its consolidated subsidiaries had both hourly personnel and salaried employees.
Our Allied Products offer adjacent technologies to our core Pipe offering, presenting a complete drainage solution for our clients and customers with this combination forming a key strategy in our sales growth, profitability and market share penetration.
Allied Products & Other We produce a range of Allied Products that are complementary to our Pipe products. Our Allied Products offer adjacent technologies to our core Pipe offering, presenting a complete drainage solution for our clients and customers with this combination forming a key strategy in our sales growth, profitability and market share penetration.
These interconnecting chambers are favored by septic contractors because they are lightweight and easy to install and the Arc chamber offers articulating features which increase site-specific design flexibility. The ARC chamber products are manufactured by Infiltrator.
These interconnecting 4 Table of Contents Advanced Drainage Systems, Inc. chambers are favored by septic contractors because they are lightweight and easy to install, and the Arc chamber offers articulating features which increase site-specific design flexibility. The ARC chamber products are manufactured by Infiltrator.
Ferguson Enterprises (“Ferguson”) accounted for 13.7% and Core and Main accounted for 11.8% of fiscal 2023 net sales. Our customer base is diversified across the range of end markets that we serve.
Ferguson Enterprises (“Ferguson”) accounted for 13.3% and Core and Main accounted for 12.5% of fiscal 2024 net sales. Our customer base is diversified across the range of end markets that we serve.
We cannot be certain that our patent applications will be issued or that any issued patents will provide us with any competitive advantages or will not be challenged by third parties. 9 Table of Contents Advanced Drainage Systems, Inc.
We cannot be certain that our patent applications will be issued or that any issued patents will provide us with any competitive advantages or will not be challenged by third parties.
Presby Treatment Dispersal Systems - Our Presby Environmental Enviro-Septic and Advanced Enviro-Septic systems are proprietary combined treatment and dispersal systems made with a twelve-inch diameter corrugated extrusion product that is encapsulated in fibrous materials and geotextiles.
Combined Treatment and Dispersal Products - Combined Treatment and Dispersal Products includes our Advanced Enviro-Septic (“AES”), previously known as Presby Treatment Dispersal Systems, and Advanced Treatment Leachfield (“ATL”). Our AES systems are proprietary combined treatment and dispersal systems made with a twelve-inch diameter corrugated extrusion product that is encapsulated in fibrous materials and geotextiles.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) are filed with the SEC.
Our corporate website is www.adspipe.com. 11 Table of Contents Advanced Drainage Systems, Inc. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) are filed with the SEC.
Tank Products – Our IM-Series line of septic tanks are injection-molded polypropylene plastic tanks manufactured from recycled materials. IM-Series septic tanks are available in various capacities for wastewater storage. Our IM-Series is the only two-piece construction, injection molded septic tank design in North America.
Tank Products – Our Infiltrator tanks line, including our IM-Series and CM-Series septic tanks, are injection or compression molded polypropylene plastic tanks manufactured from recycled materials. Our Infiltrator tanks are available in various capacities for wastewater storage. Our IM-Series is the only two-piece construction, injection molded septic tank 3 Table of Contents Advanced Drainage Systems, Inc. design in North America.
Health and Safety – Employee safety is our highest priority and a key component of our company culture. Our operations follow a comprehensive, proactive safety and health management system that includes a collaborative process to find and fix workplace hazards prior to injury occurrence.
Our operations follow a comprehensive, proactive safety and health management system that includes a collaborative process to find and fix workplace hazards prior to injury occurrence.
These products assist our customers in meeting sustainability targets such as LEED or ENVISION certification while also allowing them to make needed repairs to aging infrastructure, plan for and mitigate future impacts from climate change and rapidly recover from catastrophic events when necessary. Our manufacturing facilities have no material process-related by-products released into the atmosphere, waterways, or solid waste discharge.
These products assist our customers in meeting sustainability targets such as LEED or ENVISION certification while also allowing them to make needed repairs to aging infrastructure, plan for and mitigate future impacts from climate change and rapidly recover from catastrophic events when necessary.
The goals are a set of targets focused on the “REASON” in “Our Reason is Water” and demonstrate our commitment to leadership in environment, social and governance.
In fiscal 2022, we announced our 10 Year Sustainability Goals, which are available on our website. The goals are a set of targets focused on the “REASON” in “Our Reason is Water” and demonstrate our commitment to leadership in environment, social and governance.
We have strong relationships with major national retailers that carry drainage products. We offer the most complete line of HDPE products in the industry and are the only national manufacturer that can service the “Big-Box” retailers from coast-to-coast.
We have strong relationships with major national retailers that carry drainage products. We offer the most complete line of HDPE products in the industry and are the only national manufacturer that can service the “Big-Box” retailers from coast-to-coast. We also sell to buying groups and co-ops in the United States that serve the plumbing, hardware, irrigation and landscaping markets.
Combining local partners’ customer relationships, brand recognition and local management talent, with our world-class manufacturing and process expertise, broad product portfolio and innovation creates a powerful solution driven platform and opportunities for continued profitable international expansion.
We also have wholly-owned subsidiaries that distribute our pipe and related products in Europe and the Middle East. Combining local partners’ customer relationships, brand recognition and local management talent, with our world-class manufacturing and process expertise, broad product portfolio and innovation creates a powerful solution driven platform and opportunities for continued profitable international expansion.
These products, which meet an ASTM International standard and an American Association of State Highway and Transportation Officials standard, replaces a majority of the virgin resin that is used with optimized recycled materials. The manufacturing of septic leach field chambers and tanks leverage these same core competencies in the use of recycled polypropylene material streams.
These products, which meet an ASTM International standard and an American Association of State Highway and Transportation Officials standard, replaces a majority of the virgin resin that is used with optimized recycled materials.
We are dedicated to providing clean water management solutions to communities and delivering unparalleled service to our customers. We are focused on bringing highly engineered products to market that are both sustainable and resilient.
We are dedicated to providing clean water management solutions to communities and delivering unparalleled service to our customers. Our commitment to sustainability was recognized when we were named on Newsweek’s list of America’s Most Responsible Companies 2024. We are focused on bringing highly engineered products to market that are both sustainable and resilient.
Our joint venture strategy has provided us with local and regional access to key markets such as Mexico, Brazil, Chile, Argentina, and Peru. Our international joint ventures produce pipe and related products to be sold in their respective regional markets. We also have wholly-owned subsidiaries that distribute our pipe and related products in Europe and the Middle East.
We serve international markets primarily in Mexico, Central America and South America through joint venture operations with local partners. Our joint venture strategy has provided us with local and regional access to key markets such as Mexico, Brazil, Chile, Argentina, and Peru. Our international joint ventures produce pipe and related products to be sold in their respective regional markets.
Training – Our operational and management training programs are core to our commitment and enablement of a safe and productive manufacturing environment. Through our ADS Academy, we deliver targeted role-specific training to our operations team members through a blended curriculum of online and hands-on training experiences covering safety, quality, product knowledge and manufacturing process.
Through our ADS Academy, we deliver targeted role-specific training to our operations team members through a blended curriculum of online and hands-on training experiences covering safety, 10 Table of Contents Advanced Drainage Systems, Inc. quality, product knowledge and manufacturing process.
This transportability provides us with the flexibility to optimize our capacity through centrally coordinated production planning, which helps to adapt to shifting sales demand patterns while reducing the capital needed for tooling. With our large manufacturing footprint, we can support rapid seasonal demand growth while focusing on customer service and minimizing transportation costs.
This transportability provides us with the flexibility to optimize our capacity through centrally coordinated production planning, which helps to adapt to shifting sales demand patterns while reducing the capital needed for tooling.
In conjunction with our field sales and engineering team, this highly trained and competent staff allows us to maintain more customer touch points and interaction than any of our competitors.
Our customer service organization is supplemented by the employees of our manufacturing plants, distribution centers and drivers of our tractor-trailers. In conjunction with our field sales and engineering team, this highly trained and competent staff allows us to maintain more customer touch points and interaction than any of our competitors. 8 Table of Contents Advanced Drainage Systems, Inc.
As of March 31, 2023, approximately 210 hourly personnel in our Mexican joint venture were covered by collective bargaining agreements.
As of March 31, 2024, approximately 230 hourly personnel in our Mexican joint venture were covered by collective bargaining agreements. Five employees at one US location are negotiating a collective bargaining agreement.
We have won numerous awards from organizations such as the Wisconsin Department of Natural Resources for our local recycling 2 Table of Contents Advanced Drainage Systems, Inc. program, the American Society of Testing & Materials (“ASTM”), the American Society of Civil Engineers, and many others.
This includes being honored many times during the past decade as the Plastics Pipe Institute’s Project of the Year. We have won 2 Table of Contents Advanced Drainage Systems, Inc. numerous awards from organizations such as the American Society of Testing & Materials (“ASTM”), the American Society of Civil Engineers, and many others.
The standard fittings products (tees, wyes, elbows, etc.) that we produce and sell to connect our pipe on job sites are blow molded or injection molded at three domestic plants. In addition, customized fabricated fittings (e.g. more complex dual wall pipe reducers, bends or structures) are produced in specific North American plants.
Our molds and machines have been designed to maximize interchangeability in order to optimize flexibility, maximize efficiency and minimize downtime. The standard fittings products (tees, wyes, elbows, etc.) that we produce and sell to connect our pipe on job sites are blow molded or injection molded at three domestic plants.
We produce storm and septic chambers, tanks and accessories using injection molding machines ranging in size. International Presence – We own manufacturing facilities in Canada to produce our products for sale in the Canadian markets. We serve international markets primarily in Mexico, Central America and South America through joint venture operations with local partners.
In addition, customized fabricated fittings (e.g. more complex dual wall pipe reducers, bends or structures) are produced in specific North American plants. We produce storm and septic chambers, tanks and accessories using injection molding machines ranging in size. International Presence – We own manufacturing facilities in Canada to produce our products for sale in the Canadian markets.
Our preferred vendor status with these groups allows us to reach thousands of locations in an effective manner. Members of these groups and co-ops generally are independent businesses with strong relationships and brand recognition with smaller contractors and homeowners in their local markets.
Selling to buying groups and co-ops provides us a further presence on a national, regional and local basis for the distribution of our products. Our preferred vendor status with these groups allows us to reach thousands of locations in an effective manner.
The combination of our large sales force, long-standing retail and contractor customer relationships and extensive network of manufacturing and distribution facilities complements and strengthens our broad customer and market coverage. Our customer service organization is supplemented by the employees of our manufacturing plants, distribution centers and drivers of our tractor-trailers.
Members of these groups and co-ops generally are independent businesses with strong relationships and brand recognition with smaller contractors and homeowners in their local markets. The combination of our large sales force, long-standing retail and contractor customer relationships and extensive network of manufacturing and distribution facilities complements and strengthens our broad customer and market coverage.
March 31, 2023 March 31, 2022 Employees by Region United States (1) 5,195 4,945 Canada 340 340 Other 335 350 Total 5,870 5,635 Employees by Type Hourly 3,885 3,905 Salary 1,985 1,730 Total 5,870 5,635 (1) Includes 31 employees from the acquisition of Cultec.
March 31, 2024 March 31, 2023 Employees by Region United States 5,100 5,195 Canada 345 340 Other 260 335 Total 5,705 5,870 Employees by Type Hourly 3,845 3,885 Salary 1,860 1,985 Total 5,705 5,870 Health and Safety – Employee safety is our highest priority and a key component of our company culture.
During pipe production start-ups and size changeovers, non-compliant scrap and any damaged finished goods pipe are recycled for internal re-use. In fiscal 2022, we announced our 10 Year Sustainability Goals, which are available on our website.
Our manufacturing facilities have no material process-related by-products 7 Table of Contents Advanced Drainage Systems, Inc. released into the atmosphere, waterways, or solid waste discharge. During pipe production start-ups and size changeovers, non-compliant scrap and any damaged finished goods pipe are recycled for internal re-use.
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This includes being honored many times during the past decade as the Plastics Pipe Institute’s Project of the Year.
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The 5 Table of Contents Advanced Drainage Systems, Inc. manufacturing of septic leach field chambers and tanks leverage these same core competencies in the use of recycled polypropylene material streams. ADS Recycling procures and processes recycled raw materials that can be used in products we produce and sell.
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The ATL is a profile of polystyrene aggregates and geotextiles installed in a bed of sand. Allied Products & Other We produce a range of Allied Products that are complementary to our Pipe products.
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In November 2023, we announced a plan to build a new pipe manufacturing facility on a 100-acre site in Lake Wales, Florida. The facility is designed with the future workforce in mind, promoting safety, efficient flow of materials and traffic, and incorporating the Company’s most advanced automation technologies for the manufacturing of corrugated thermoplastic pipe.
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ADS Recycling procures and processes recycled raw materials that can be used in products we produce and sell. On December 3, 2021, we completed the acquisition of Jet Polymer Recycling, Inc. (“Jet”). The acquisition of Jet expands the Company’s plastic recycling capabilities to support future growth. Jet is the largest supplier of recycled polypropylene plastic for Infiltrator.
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Training – Our operational and management training programs are core to our commitment and enablement of a safe and productive manufacturing environment.
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We also sell to buying groups and co-ops in the United States that serve the plumbing, 8 Table of Contents Advanced Drainage Systems, Inc. hardware, irrigation and landscaping markets. Selling to buying groups and co-ops provides us a further presence on a national, regional and local basis for the distribution of our products.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

42 edited+5 added−6 removed95 unchanged
Biggest changeThe trustee of our retirement plan has certain limited powers to vote a large block of shares on matters presented to stockholders for approval. As of May 9, 2023, our directors, officers and principal stockholders and their affiliates collectively own approximately 11% of our outstanding shares of common stock.
Biggest changeOur directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders. The trustee of our retirement plan has certain limited powers to vote a large block of shares on matters presented to stockholders for approval.
These risks include but are not limited to: • taxation by multiple jurisdictions and the impact of such taxation on the effective tax rate and taxes paid; • material liabilities under our self-insured programs for workers' compensation, automobile and product/general liability coverage as well as health coverage to our employees; • fluctuations in our effective tax rate, including from the Tax Cuts and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and any future tax legislation; • new or modified legislation related to health care; • the review of potential weaknesses or deficiencies in the Company's disclosure controls and procedures, and discovering further weaknesses of which we are not currently aware or which have not been detected; • we cannot assure our stockholders that an active market for shares of our common stock can be sustained and the market price of our common stock may be volatile and could decline in the future; and • failure to meet the expectations of investors, including as a result of factors beyond our control.
These risks include but are not limited to: • taxation by multiple jurisdictions and the impact of such taxation on the effective tax rate and taxes paid; • material liabilities under our self-insured programs for workers' compensation, automobile and product/general liability coverage as well as health coverage to our employees; • fluctuations in our effective tax rate, including from the Inflation Reduction Act of 2022, Tax Cuts and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and any future tax legislation; • new or modified legislation related to health care; • the review of potential weaknesses or deficiencies in the Company's disclosure controls and procedures, and discovering further weaknesses of which we are not currently aware, or which have not been detected; • we cannot assure our stockholders that an active market for shares of our common stock can be sustained, and the market price of our common stock may be volatile and could decline in the future; and • failure to meet the expectations of investors, including as a result of factors beyond our control.
Any interruption in production may limit our ability to supply enough products to customers and may required us to make capital expenditures, which could have a negative impact on our profitability and cash flows. The nature of our business exposes us to construction defect and product liability claims as well as other legal proceedings.
Any interruption in production may limit our ability to supply enough products to customers and may require us to make capital expenditures, which could have a negative impact on our profitability and cash flows. The nature of our business exposes us to construction defect and product liability claims as well as other legal proceedings.
These attacks include but are not limited to, malicious software or viruses, including “ransomware” attempts to gain unauthorized access to, or otherwise disrupt, our information systems, attempts to gain unauthorized access to business, proprietary or other confidential information, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
These incidents include but are not limited to, malicious software or viruses, including “ransomware” attempts to gain unauthorized access to, or otherwise disrupt, our information systems, attempts to gain unauthorized access to business, proprietary or other confidential information, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to disruption and an increasing threat of continually evolving cybersecurity risks. Cybersecurity attacks across industries are sophisticated and frequent and may range from uncoordinated individual attempts to targeted measures.
In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to disruption and an increasing threat of continually evolving cybersecurity risks. Cybersecurity incidents across industries are sophisticated and frequent and may range from uncoordinated individual attempts to targeted measures.
Any events which deny us use of vital operating or information systems may seriously disrupt our normal business operations. Additionally, our key partners, distributors or suppliers could experience a compromise of their information security due to a cybersecurity attack, which may have an impact on our business and financial performance.
Any events which deny us use of vital operating or information systems may seriously disrupt our normal business operations. Additionally, our key partners, distributors or suppliers could experience a compromise of their information security due to a cybersecurity incident, which may have an impact on our business and financial performance.
For example, it could: • make it more difficult for us to satisfy our obligations with respect to the Company’s existing debt obligations; • increase our vulnerability to and compromise our flexibility to plan for, or react to, general adverse economic, industry or competitive conditions, including interest rate fluctuations, because a portion of our borrowings will be at variable rates of interest; • cause us to be unable to meet the financial covenants contained in our debt agreements, or to generate cash sufficient to make required debt payments, which circumstances would have the potential of accelerating the maturity of some or all of our outstanding indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, joint ventures and investments and other general corporate purposes, that could improve our competitive position, results of operations or share price; • require us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; • place us at a competitive disadvantage compared to our competitors that do not have the same level of indebtedness as we do and competitors that may be in a more favorable position to access additional capital resources; • limit our ability to execute business development and acquisition activities to support our strategies; • limit our ability to obtain additional indebtedness or equity due to applicable financial and restrictive covenants in our debt agreements; and • limit our ability to refinance our indebtedness on more favorable terms.
For example, it could: • make it more difficult for us to satisfy our obligations with respect to the Company’s existing debt obligations; • increase our vulnerability to and compromise our flexibility to plan for, or react to, general adverse economic, industry or competitive conditions, including interest rate fluctuations, because a portion of our borrowings will be at variable rates of interest; • cause us to be unable to meet the financial covenants contained in our debt agreements, or to generate cash sufficient to make required debt payments, which circumstances would have the potential of accelerating the maturity of some or all of our outstanding indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, joint ventures and investments and other general corporate purposes, which could improve our competitive position, results of operations or share price; • require us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; • place us at a competitive disadvantage compared to our competitors that do not have the same level of indebtedness as we do and competitors that may be in a more favorable position to access additional capital resources; 18 Table of Contents Advanced Drainage Systems, Inc. • limit our ability to execute business development and acquisition activities to support our strategies; • limit our ability to obtain additional indebtedness or equity due to applicable financial and restrictive covenants in our debt agreements; and • limit our ability to refinance our indebtedness on more favorable terms.
While we have been subject to cybersecurity attacks in the past that (based on information known to date) did not have a material impact on our financial condition or results of operations, we may experience such attacks in the future, potentially with more frequency or sophistication which may have a material impact on our financial condition or results of operations.
While we have been subject to cybersecurity incidents in the past that (based on information known to date) did not have a material impact on our financial condition or results of operations, we may experience such incidents in the future, potentially with more frequency or sophistication which may have a material impact on our financial condition or results of operations.
The occurrence of such issues could have a material adverse effect on our business financial condition and results of operations. Cybersecurity attacks may threaten our confidential information, disrupt operations and result in harm to our reputation and adversely impact our business and financial performance.
The occurrence of such issues could have a material adverse effect on our business financial condition and results of operations. Cybersecurity incidents may threaten our confidential information, disrupt operations and result in harm to our reputation and adversely impact our business and financial performance.
Failures of our IT systems as a result of cybersecurity attacks or other disruptions could result in a breach of critical operational or financial controls and lead to a disruption of our operations, commercial activities or financial processes. Cybersecurity attacks or other disruptions impacting significant customers and/or suppliers could also lead to a disruption of our operations.
Failures of our IT systems as a result of cybersecurity incidents or other disruptions could result in a breach of critical operational or financial controls and lead to a disruption of our operations, commercial activities or financial processes. Cybersecurity incidents or other disruptions impacting significant customers and/or suppliers could also lead to a disruption of our operations.
Based on shares outstanding as of May 9, 2023, we have 79.1 million outstanding shares of common stock, including 0.2 million outstanding shares of our restricted stock, a significant portion of which are freely tradable without restriction under the Securities Act of 1933, as amended, (“Securities Act”) unless held by “affiliates,” as that term is defined in Rule 144 under the Securities Act.
Based on shares outstanding as of May 9, 2024, we have 77.4 million outstanding shares of common stock, including 0.2 million outstanding shares of our restricted stock, a significant portion of which are freely tradable without restriction under the Securities Act of 1933, as amended, (“Securities Act”) unless held by “affiliates,” as that term is defined in Rule 144 under the Securities Act.
As of March 31, 2023, there were stock options outstanding to purchase a total of approximately 1.1 million shares of our common stock. In addition, approximately 2.3 million shares of common stock are available for grant under our 2017 Omnibus Plan.
As of March 31, 2024, there were stock options outstanding to purchase a total of approximately 1.1 million shares of our common stock. In addition, approximately 2.0 million shares of common stock are available for grant under our 2017 Omnibus Plan.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for : any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by our directors, officers, employees or agents; any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or 20 Table of Contents Advanced Drainage Systems, Inc. our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for : any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by our directors, officers, employees or agents; any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Thus, the collective voting power of our directors, officers and principal stockholders and their affiliates as of May 9, 2023 is approximate ly 23%, inc lusive of the outstanding shares of common stock held by the KSOP.
Thus, the collective voting power of our directors, officers and principal stockholders and their affiliates as of May 9, 2024 is approximate ly 28%, inc lusive of the outstanding shares of common stock held by the KSOP.
Until the timing, scope and extent of any regulation becomes known, we cannot predict its effect on our cost structure or our operating results, but it is likely our costs will increase in relation to any climate change legislation and regulations concerning GHG, which could have an adverse effect on our future financial position, results of operations or cash flows. 13 Table of Contents Advanced Drainage Systems, Inc.
Until the timing, scope and extent of any regulation becomes known, we cannot predict its effect on our cost structure or our operating results, but it is likely our costs will increase in relation to any climate change legislation and regulations concerning GHG, which could have an adverse effect on our future financial position, results of operations or cash flows.
Foreign Corrupt Practices Act (“FCPA”) and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to wrongfully influence foreign government officials for the purpose of obtaining or retaining business or obtaining an unfair advantage, and generally require companies to maintain accurate books and records and internal controls, including at foreign controlled subsidiaries.
Foreign Corrupt Practices Act (“FCPA”) and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to wrongfully influence foreign 14 Table of Contents Advanced Drainage Systems, Inc. government officials for the purpose of obtaining or retaining business or obtaining an unfair advantage, and generally require companies to maintain accurate books and records and internal controls, including at foreign controlled subsidiaries.
The nature of the agriculture market is such that a downturn in demand can occur suddenly, resulting in excess inventories, under utilized production capacity and reduced prices for pipe products. • Shifts in residential housing trends (urban vs. suburban), homeowner demographics, and increasing mortgage rates impact demand for our products. • Demand for our products and services depend to a significant degree on spending on infrastructure.
The nature of the agriculture market is such that a downturn in demand can occur suddenly, resulting in excess inventories, underutilized production capacity and reduced prices for pipe products. • Shifts in residential housing trends (urban vs. suburban), homeowner demographics, increasing mortgage rates, and consumers ability to finance home construction impact demand for our products. • Demand for our products and services depend to a significant degree on spending on infrastructure.
If we experience difficulties with the integration process or other unforeseen costs, the anticipated benefits and cost savings of the acquisition may not be realized fully or may take longer to realize than expected. The integration planning and implementation process will result in significant costs and divert management 14 Table of Contents Advanced Drainage Systems, Inc. attention and resources.
If we experience difficulties with the integration process or other unforeseen costs, the anticipated benefits and cost savings of the acquisition may not be realized fully or may take longer to realize than expected. The integration planning and implementation process will result in significant costs and divert management attention and resources.
While we maintain insurance covering our facilities and have significant flexibility to manufacture and ship our own products from various facilities, a loss of the use of our facilities, whether short or long-term, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
While we maintain insurance covering our facilities and have significant flexibility to manufacture and ship our own products from various facilities, a loss of the use of our facilities, whether short or long-term, could have a material adverse effect on our business, financial 15 Table of Contents Advanced Drainage Systems, Inc. condition, results of operations and cash flows.
Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs. The market for highly qualified employees remains competitive and there is no assurance that we will be able to attract or retain highly qualified employees in the future, including those employed by companies we acquire.
Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs. The market for highly qualified employees remains competitive and may not be able to attract or retain highly qualified employees in the future, including those employed by companies we acquire.
For example, our amended and restated certificate of incorporation and amended and restated bylaws, each as further amended, authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; maintain a classified board of directors, for the next three years, until such time that our declassified board structure is fully implemented at the 2023 annual meeting of stockholders; provide that vacancies on our board of directors, including newly-created directorships, may be filled only by a majority vote of directors then in office; prohibit stockholders from calling special meetings of stockholders; prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders; do not give the holders of our common stock cumulative voting rights with respect to the election of directors, which means that the holders of a majority of our outstanding shares of common stock can elect all directors standing for election; establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; require a super-majority stockholders vote of 75% to approve any reorganization, recapitalization, share exchange, share reclassification, consolidation, merger, conversion or sale of all or substantially all assets to which we are a party that is not approved by the affirmative vote of at least 75% of the members of our board of directors; and require the approval of holders of a majority of the outstanding shares of our voting common stock to amend the bylaws and at least 75% of the outstanding shares of our voting common stock to amend certain provisions of the certificate of incorporation.
For example, our amended and restated certificate of incorporation and amended and restated bylaws, each as further amended, authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; provide that vacancies on our board of directors, including newly-created directorships, may be 19 Table of Contents Advanced Drainage Systems, Inc. filled only by a majority vote of directors then in office; prohibit stockholders from calling special meetings of stockholders; prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders; do not give the holders of our common stock cumulative voting rights with respect to the election of directors, which means that the holders of a majority of our outstanding shares of common stock can elect all directors standing for election; establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; require a super-majority stockholders vote of 75% to approve any reorganization, recapitalization, share exchange, share reclassification, consolidation, merger, conversion or sale of all or substantially all assets to which we are a party that is not approved by the affirmative vote of at least 75% of the members of our board of directors; and require the approval of holders of a majority of the outstanding shares of our voting common stock to amend the bylaws and at least 75% of the outstanding shares of our voting common stock to amend certain provisions of the certificate of incorporation.
Automation in our plants will allow for production efficiency and improved safety for plant personnel. Any failure to successfully implement these initiatives and related strategies could adversely affect our business, financial condition, and results of operations, including increases in our severance and impairment charges. 15 Table of Contents Advanced Drainage Systems, Inc.
Automation in our plants will allow for production efficiency and improved safety for plant personnel. Any failure to successfully implement these initiatives and related strategies could adversely affect our business, financial condition, and results of operations, including increases in our severance and impairment charges.
We could also incur fines, penalties, sanctions or be subject to third-party claims for property damage, personal injury or nuisance or otherwise as a result of violations of or liabilities under environmental laws in connection with releases of hazardous or other materials. 18 Table of Contents Advanced Drainage Systems, Inc.
We could also incur fines, penalties, sanctions or be subject to third-party claims for property damage, personal injury or nuisance or otherwise as a result of violations of or liabilities under environmental laws in connection with releases of hazardous or other materials.
Additionally, our new 401(k) retirement plan (“KSOP”) holds shares of common stock that KSOP participants with ESOP accounts are entitled to vote on a one-for-one basis on any matter requiring the vote or consent of our stockholders.
Additionally, our tax-qualified Retirement and Stock Ownership Plan (“KSOP”) holds shares of common stock that KSOP participants with ESOP accounts are entitled to vote on a one-for-one basis on any matter requiring the vote or consent of our stockholders.
None of our domestic employees are currently covered by collective bargaining or other similar labor agreements. However, if a number of our employees were to unionize, the effect on us may be negative.
None of our 17 Table of Contents Advanced Drainage Systems, Inc. domestic employees are currently covered by collective bargaining or other similar labor agreements. However, if a number of our employees were to unionize, the effect on us may be negative.
Although our IT systems are protected through physical and software safeguards and remote processing capabilities exist, IT systems are still vulnerable to natural disasters, power losses, unauthorized access, telecommunication failures and other problems.
Although our IT systems are protected through physical and software 16 Table of Contents Advanced Drainage Systems, Inc. safeguards and remote processing capabilities exist, IT systems are still vulnerable to natural disasters, power losses, unauthorized access, telecommunication failures and other problems.
These types of extreme weather events may include disruptions to operations or production, disruptions to supply chains or damage to our physical plants, which could lead to reduced financial performance of our business.
These types of extreme weather events may include disruptions to operations or production, disruptions to supply chains or damage to our physical plants, which could lead to reduced financial performance of our business. The loss of any of our significant customers could adversely affect our business.
Despite our attempts to safeguard our systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cyberattacks or security breaches that manipulate or improperly use our systems or networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations.
Our attempts to safeguard our systems and mitigate potential risks may not be sufficient to prevent cyberattacks or security breaches that manipulate or improperly use our systems or networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations.
Global supply chain disruptions, including as a result of the COVID-19 pandemic and geopolitical events, and shortage of raw materials, and the related impacts on our third-party suppliers to deliver the raw materials, components, systems and parts that we need to manufacture and service our products could also adversely impact our production.
Global supply chain disruptions and the related impacts on our third-party suppliers to deliver the raw materials, components, systems and parts that we need to manufacture and service our products could also adversely impact our production.
In addition, to the extent that hurricanes, severe storms, floods, other natural disasters or similar events occur in the geographic regions in which we operate, our results of operations may be adversely affected. We anticipate that fluctuations of our operations results from period to period due to seasonality will continue in the future.
In addition, to the extent that hurricanes, severe storms, floods, other 13 Table of Contents Advanced Drainage Systems, Inc. natural disasters or similar events occur in the geographic regions in which we operate, our results of operations may be adversely affected.
In addition, changes to applicable tax laws and regulations could increase our costs of doing business. We cannot provide assurance that we will not incur material costs or liabilities in connection with regulatory requirements. 16 Table of Contents Advanced Drainage Systems, Inc. We deliver products to many of our customers through our own fleet of vehicles. The U.S.
In addition, changes to applicable tax laws and regulations could increase our costs of doing business. We may incur material costs or liabilities in connection with regulatory requirements. We deliver products to many of our customers through our own fleet of vehicles. The U.S. DOT regulates our operations in domestic interstate commerce.
DOT regulates our operations in domestic interstate commerce. Vehicle dimensions and driver hours of service are subject to both federal and state regulation.
Vehicle dimensions and driver hours of service are subject to both federal and state regulation.
In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement or employee arrangement or otherwise.
In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement or employee arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline.
Interruptions in the proper functioning of information technology systems could disrupt operations and cause unanticipated increases in costs, decreases in revenues, or both. The implementation of our technology initiatives could disrupt our operations in the near term, and our technology initiatives might not provide the anticipated benefits or might fail.
The implementation of our technology initiatives could disrupt our operations in the near term, and our technology initiatives might not provide the anticipated benefits or might fail.
The loss of any of our significant customers could adversely affect our business. Our success will depend, in part, on our ability to maintain the quality of our customer service, and selling and marketing efforts, as well as our ability to develop long-term relationships with our customers.
Our success will depend, in part, on our ability to maintain the quality of our customer service, and selling and marketing efforts, as well as our ability to develop long-term relationships with our customers. Our ten largest customers generated approximately 43% o f our net sales in fiscal 2024.
Any disruption or volatility in general business and economic conditions in the markets in which we operate could have a material adverse effect on the demand for our products and services.
We may not be able to reduce our cost base to offset any such price concessions which could adversely impact our results of operations and cash flows. Any disruption or volatility in general business and economic conditions in the markets in which we operate could have a material adverse effect on the demand for our products and services.
Similarly, we cannot assess whether we will be successful in meeting future demands of regulatory agencies in a manner which will not materially adversely affect our business, financial condition, results of operations and cash flows. The COVID-19 pandemic or other pandemics in the future, could have a significant negative impact on our operations, liquidity, financial condition and financial results.
Similarly, we cannot assess whether we will be successful in meeting future demands of regulatory agencies in a manner which will not materially adversely affect our business, financial condition, results of operations and cash flows. Interruptions in the proper functioning of information technology systems could disrupt operations and cause unanticipated increases in costs, decreases in revenues, or both.
Recent U.S. bank failures and market disruptions could impact banks used by our customers, which could negatively affect our customers. Delays in the placement of new orders and extended uncertainties may reduce future sales of our products and services. The revenue growth and profitability of our business depends on the overall demand for our product and services.
B ank failures and market disruptions could impact banks used by our customers, 12 Table of Contents Advanced Drainage Systems, Inc. which could negatively affect our customers. Delays in the placement of new orders and extended uncertainties may reduce future sales of our products and services.
Cybersecurity failures may be caused by employee error, malfeasance, other corporate or governmental actors, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, and their products. 17 Table of Contents Advanced Drainage Systems, Inc.
New developments in the fields of generative artificial intelligence (“AI”), machine learning, and robotics may create new vulnerabilities and cybersecurity risks. Cybersecurity failures may be caused by employee error, malfeasance, other corporate or governmental actors, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, and their products.
Our ten largest customers generated approximately 42% o f our net sales in fiscal 2023. Because we do not have long-term arrangements with many of our customers, such customers may cease purchasing our products without notice or upon short notice to us.
Because we do not have long-term arrangements with many of our customers, such customers may cease purchasing our products without notice or upon short notice to us. In addition, consolidation among customers could also result in a loss of some of our present customers to our competitors.
Competitors may have financial and other resources that are greater than ours and may be better able to withstand price competition and inflationary pressures.
Demand for our products and services could decrease if we are unable to compete effectively, and our success depends largely on our ability to convert current demand for competitive products into demand for our products. Competitors may have financial and other resources that are greater than ours and may be better able to withstand price competition and inflationary pressures.
We may have to close under-performing facilities as warranted by general economic conditions and/or weakness in the markets in which we operate. In addition to a reduction in demand for our products, these factors may also reduce the price we are able to charge for our products and restrict our ability to pass raw material cost increases to our customers.
In addition to a reduction in demand for our products, these factors may also reduce the price we are able to charge for our products and restrict our ability to pass raw material cost increases to our customers. This, combined with an increase in excess capacity, will negatively impact our profitability, cash flows and our financial condition, generally.
Removed
There can be no assurance that we would be able to reduce our cost base to offset any such price concessions which could adversely impact our results of operations and cash flows. 12 Table of Contents Advanced Drainage Systems, Inc.
Added
The revenue growth and profitability of our business depends on the overall demand for our product and services. We may have to close under-performing facilities as warranted by general economic conditions and/or weakness in the markets in which we operate.
Removed
This, combined with an increase in excess capacity, will negatively impact our profitability, cash flows and our financial condition, generally. Demand for our products and services could decrease if we are unable to compete effectively, and our success depends largely on our ability to convert current demand for competitive products into demand for our products.
Added
In March 2024, the SEC adopted final rules on climate-related disclosure, which require issuers to make a significant amount of climate-related disclosure, including, among others, material scope 1 and scope 2 greenhouse gas, or GHG, emissions, climate-related financial metrics, climate-related strategy, governance, targets and goals, that could significantly increase compliance burdens and associated regulatory costs and complexity.
Removed
In addition, consolidation among customers could also result in a loss of some of our present customers to our competitors.
Added
We anticipate that fluctuations of our operations results from period to period due to seasonality will continue in the future.
Removed
The COVID-19 pandemic negatively impacted the global economy, in addition to disrupting global supply chains and workforce participation. Quarantines and “stay in place” orders, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to our supply chain or our customers could adversely impact our sales and operating results.
Added
As of May 9, 2024, our directors, officers and principal stockholders and their affiliates collectively own approximately 20% of our outstanding shares of common stock.
Removed
To the extent that our customers and suppliers are adversely impacted by the COVID-19 pandemic or other future pandemics, this could reduce the availability, or result in delays, of materials or supplies, or delays in customer payments, which in turn could materially interrupt our business operations and/or impact our liquidity.
Added
Item 1B. Unresolved Staff Comments None. 20 Table of Contents Advanced Drainage Systems, Inc.
Removed
Any of these 19 Table of Contents Advanced Drainage Systems, Inc. issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline. Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

Item 2. Properties

Properties — owned and leased real estate

6 edited+1 added−0 removed0 unchanged
Biggest changeEach distribution center carries single wall and dual wall pipe and fittings and Allied Products per needs of the local market. In-House Fleet - As of March 31, 2023, our in-house fleet consists of approximately 700 tractors and approximately 1,300 trailers that are specially designed to haul our lightweight pipe and fittings products.
Biggest changeIn-House Fleet - As of March 31, 2024, our in-house fleet consists of approximately 650 tractors and approximately 1,100 trailers that are specially designed to haul our lightweight pipe and fittings products.
We generally prefer to own our manufacturing plant locations, with a typical pipe manufacturing facility consisting of approximately 40,000 square feet and 15 to 20 acres of land for storage of pipe and related products. Our network of 40 distribution centers consists of 3 owned and 37 leased locations.
We generally prefer to own our manufacturing plant locations, with a typical pipe manufacturing facility consisting of approximately 40,000 square feet and 15 to 20 acres of land for storage of pipe and related products. Our network of 41 distribution centers consists of 4 owned and 37 leased locations.
We believe that our properties have been adequately maintained and are generally in good 21 Table of Contents Advanced Drainage Systems, Inc. condition. The extent to which we use our properties varies by property, but we believe the capacity of our facilities is adequate for the level of production and distribution activities necessary in our business as presently conducted.
We believe that our properties have been adequately maintained and are generally in good condition. The extent to which we use our properties varies by property, but we believe the capacity of our facilities is adequate for the level of production and distribution activities necessary in our business as presently conducted.
We currently own approximately 36,000 square feet and lease approximately 29,000 square feet of office space in Hilliard, Ohio for our corporate headquarters and lease an office space in Old Saybrook, Connecticut for our Infiltrator headquarters. Our network of 66 manufacturing plants consists of 47 that are owned and 19 that are leased.
We currently own approximately 36,000 square feet and lease approximately 33,000 square feet of office space in Hilliard, Ohio for our corporate headquarters and lease an office space in Old Saybrook, Connecticut for our Infiltrator headquarters. Our network of 64 manufacturing plants consists of 46 that are owned and 18 that are leased.
Properties Property - We have a network of 66 manufacturing plant locations and 40 distribution centers, summarized in the following table: Manufacturing Plants Distribution Centers Total United States 53 27 80 Canada 5 4 9 Mexico (1) 4 3 7 South America (2) 4 5 9 Other (3) — 1 1 Total 66 40 106 (1) Manufacturing plants and distribution centers in Mexico are owned or leased by our joint venture.
Properties Property - We have a network of 64 manufacturing plant locations and 41 distribution centers, summarized in the following table: Manufacturing Plants Distribution Centers Total United States 51 29 80 Canada 5 4 9 Mexico (1) 4 2 6 South America (2) 4 5 9 Other (3) — 1 1 Total 64 41 105 (1) Manufacturing plants and distribution centers in Mexico are owned or leased by our joint venture.
(2) Manufacturing plants and distribution centers owned or leased by our South America joint venture are not consolidated. (3) The other facility is located in the Netherlands.
(2) Manufacturing plants and distribution centers owned or leased by our South America joint venture are not consolidated. (3) The other facility is located in the Netherlands. 21 Table of Contents Advanced Drainage Systems, Inc.
Added
Our Pipe segment and Allied Products and other use our properties in the United States, except for 8 properties utilized by our Infiltrator segment, and our International segment operates all of our international properties. Each distribution center carries single wall and dual wall pipe and fittings and Allied Products per needs of the local market.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−0 removed3 unchanged
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (amounts in thousands, except per share data) January 1, 2023 to January 31, 2023 — $ — — $ 624,973 February 1, 2023 to February 28, 2023 804 91.82 804 551,101 March 1, 2023 to March 31, 2023 1,495 84.36 1,495 424,973 Total 2,299 $ 86.97 2,299 $ 424,973 Equity Compensation Plan Information - For equity compensation plan information, refer to “Part III, Item 12.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (amounts in thousands, except per share data) January 1, 2024 to January 31, 2024 100 $ 131.08 100 $ 232,572 February 1, 2024 to February 29, 2024 — — — 232,572 March 1, 2024 to March 31, 2024 100 166.29 100 215,943 Total 200 $ 148.71 200 $ 215,943 Equity Compensation Plan Information - For equity compensation plan information, refer to “Part III, Item 12.
The graph assumes investment of $100 on March 31, 2018 in our common stock and in each of the two indices and the reinvestment of dividends. Recent Sales of Unregistered Securities - Since the completion of our IPO, we have not sold any securities without registration under the Securities Act of 1933, as amended.
The graph assumes investment of $100 on March 31, 2019 in our common stock and in each of the two indices and the reinvestment of dividends. Recent Sales of Unregistered Securities - Since the completion of our IPO, we have not sold any securities without registration under the Securities Act of 1933, as amended.
The following table provides information with respect to repurchases of our common stock by us and our “affiliated purchasers” (as defined by Rule 10b-18(a)(3) under the Exchange Act) during the three months ended March 31, 2023.
The following table provides information with respect to repurchases of our common stock by us and our “affiliated purchasers” (as defined by Rule 10b-18(a)(3) under the Exchange Act) during the three months ended March 31, 2024.
During each quarter of fiscal 2023, 2022 and 2021, the Board of Directors approved a quarterly cash dividend of $0.12, $0.11 and $0.09 per share, respectively, to all common stockholders. During the first quarter of fiscal 2024, the Company declared a quarterly cash dividend of $0.14 per share of common stock.
During each quarter of fiscal 2024, 2023 and 2022, the Board of Directors approved a quarterly cash dividend of $0.14, $0.12 and $0.11 per share, respectively, to all common stockholders. During the first quarter of fiscal 2025, the Company declared a quarterly cash dividend of $0.16 per share of common stock.
Stock Performance Graph - The following graph presents a comparison from March 31, 2018 through March 31, 2023 of the cumulative return of our common stock, the Standard and Poor's Index (“S&P 500”) and the Standard and Poor’s Mid Cap 400 - Capital Goods Index (“S&P Mid Cap 400 - Capital Goods”).
Stock Performance Graph - The following graph presents a comparison from March 31, 2019 through March 31, 2024 of the cumulative return of our common stock, the Standard and Poor's Index (“S&P 500”) and the Standard and Poor’s Mid Cap 400 - Capital Goods Index (“S&P Mid Cap 400 - Capital Goods”).
The Repurchase Program does not obligate us to acquire any particular amount of common stock and may be suspended or terminated at any time at our discretion. During the fiscal 2023, we repurchased 6.1 million shares of common stock at a cost of $575.0 million.
The Repurchase Program does not obligate us to acquire any particular amount of common stock and may be suspended or terminated at any time at our discretion. During fiscal 2024, we repurchased 1.8 million shares of common stock at a cost of $207.3 million.
The dividend is payable on June 15, 2023 to stockholders of record at the close of business on June 1, 2023. Holders of Record - As of May 9, 2023, we had 774 holders of record of our common stock.
The dividend is payable on June 14, 2024 to stockholders of record at the close of business on May 31, 2024. Holders of Record - As of May 9, 2024, we had 787 holders of record of our common stock.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report on Form 10-K.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report on Form 10-K. Item 6. Reserved 23 Table of Contents Advanced Drainage Systems, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(Amounts in thousands) 2023 2022 Net sales $ 3,071,121 100.0 % $ 2,769,315 100.0 % Cost of goods sold 1,952,713 63.6 1,949,750 70.4 Cost of goods sold - ESOP acceleration — — 19,181 0.7 Gross profit 1,118,408 36.4 800,384 28.9 Selling, general and administrative expenses 339,504 11.1 309,840 11.2 Selling, general and administrative - ESOP acceleration — — 11,254 0.4 Loss on disposal of assets and costs from exit and disposal activities 4,397 0.1 3,398 0.1 Intangible amortization 55,197 1.8 63,974 2.3 Income from operations 719,310 23.4 411,918 14.9 Interest expense 70,182 2.3 33,550 1.2 Derivative gains and other income, net (7,972) (0.3) (5,143) (0.2) Income before income taxes 657,100 21.4 383,511 13.8 Income tax expense 150,589 4.9 110,071 4.0 Equity in net income of unconsolidated affiliates (4,842) (0.2) (1,586) (0.1) Net income 511,353 16.7 275,026 9.9 Less: net income attributable to the non-controlling interest 4,267 0.1 3,695 0.1 Net income attributable to ADS $ 507,086 16.5 % $ 271,331 9.8 % Net sales – The following table presents net sales to external customers by reportable segment for the fiscal years ended March 31, 2023 and 2022.
Biggest change(Amounts in thousands) 2024 2023 Net sales $ 2,874,473 100.0 % $ 3,071,121 100.0 % Cost of goods sold 1,728,524 60.1 1,952,713 63.6 Gross profit 1,145,949 39.9 1,118,408 36.4 Selling, general and administrative expenses 370,714 12.9 339,504 11.1 (Gain) loss on disposal of assets and costs from exit and disposal activities (8,365) (0.3) 4,397 0.1 Intangible amortization 51,469 1.8 55,197 1.8 Income from operations 732,131 25.5 719,310 23.4 Interest expense 88,862 3.1 70,182 2.3 Interest income and other, net (23,484) (0.8) (7,972) (0.3) Income before income taxes 666,753 23.2 657,100 21.4 Income tax expense 158,998 5.5 150,589 4.9 Equity in net income of unconsolidated affiliates (5,536) (0.2) (4,842) (0.2) Net income 513,291 17.9 511,353 16.7 Less: net income attributable to the non-controlling interest 3,376 0.1 4,267 0.1 Net income attributable to ADS $ 509,915 17.7 % $ 507,086 16.5 % Net sales – The following table presents net sales to external customers by reportable segment for the fiscal years ended March 31, 2024 and 2023.
Covenant Compliance The Senior Secured Credit Facility requires, if the aggregate amount of outstanding exposure under the Amended Revolving Credit Facility exceeds $210.0 million at the end of any fiscal quarter, the Company to maintain a consolidated senior secured net leverage ratio not to exceed 4.25 to 1.00 for any four consecutive fiscal quarter periods.
Covenant Compliance The Senior Secured Credit Facility requires, if the aggregate amount of outstanding exposure under the Amended Revolving Credit Facility exceeds $210.0 million at the end of any fiscal quarter, the Company is to maintain a consolidated senior secured net leverage ratio not to exceed 4.25 to 1.00 for any four consecutive fiscal quarter periods.
We currently purchase in excess of 1.1 billion pounds of virgin and recycled resin annually from approximately 400 suppliers in North America. As a high-volume buyer of resin, we are able to achieve economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material).
We currently purchase in excess of 1.1 billion pounds of virgin and recycled resin annually from approximately 525 suppliers in North America. As a high-volume buyer of resin, we are able to achieve economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material).
(d) Includes derivative fair value adjustments, foreign currency transaction (gains) losses, the proportionate share of interest, income taxes, depreciation and amortization related to the South American Joint Venture, which is accounted for under the equity method of accounting and executive retirement expense (benefit).
(c) Includes derivative fair value adjustments, foreign currency transaction (gains) losses, the proportionate share of interest, income taxes, depreciation and amortization related to the South American Joint Venture, which is accounted for under the equity method of accounting and executive retirement expense (benefit).
The discussion of our results of operations for the fiscal year ended March 31, 2022 compared with the fiscal year ended March 31, 2021 can be found in “Item 7. Management’s Discussion and Analysis of Financial Discussion and Results of Operations” in our fiscal 2022 Form 10-K for further information on our prior period results of operations.
The discussion of our results of operations for the fiscal year ended March 31, 2023 compared with the fiscal year ended March 31, 2022 can be found in “Item 7. Management’s Discussion and Analysis of Financial Discussion and Results of Operations” in our fiscal 2023 Form 10-K for further information on our prior period results of operations.
Allied Products & Other – Our other operating segments manufacture a range of Allied Products & Other that are complementary to our Pipe products. Our Allied Products & Other offer adjacent technologies to our core Pipe offering, presenting a complete drainage solution for our clients and customers. 27 Table of Contents Advanced Drainage Systems, Inc.
Allied Products & Other – Our other operating segments manufacture a range of Allied Products & Other that are complementary to our Pipe products. Our Allied Products & Other offer adjacent technologies to our core Pipe offering, presenting a complete drainage solution for our clients and customers. 26 Table of Contents Advanced Drainage Systems, Inc.
Results of Operations for Fiscal Year Ended March 31, 2023 Compared with Fiscal Year Ended March 31, 2022 The following table summarizes our operating results as a percentage of net sales that have been derived from our Consolidated Financial Statements for the fiscal years ended March 31, 2023 and 2022.
Results of Operations for Fiscal Year Ended March 31, 2024 Compared with Fiscal Year Ended March 31, 2023 The following table summarizes our operating results as a percentage of net sales that have been derived from our Consolidated Financial Statements for the fiscal years ended March 31, 2024 and 2023.
We did not record any impairment charges for definite-lived intangible assets in fiscal 2023, 2022, or 2021. We performed our annual impairment test for indefinite-lived intangible assets as of March 31, 2023.
We did not record any impairment charges for definite-lived intangible assets in fiscal 2024, 2023, or 2022. We performed our annual impairment test for indefinite-lived intangible assets as of March 31, 2024.
Cost of goods sold and Gross profit – The following table presents gross profit by reportable segment for the fiscal years ended March 31, 2023 and 2022.
Cost of goods sold and Gross profit – The following table presents gross profit by reportable segment for the fiscal years ended March 31, 2024 and 2023.
Selling, general and administrative expenses – The following table presents selling, general and administrative expenses as a percentage of sales for the fiscal years ended March 31, 2023 and 2022.
Selling, general and administrative expenses – The following table presents Selling, general and administrative expenses as a percentage of sales for the fiscal years ended March 31, 2024 and 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, references to “year” pertain to our fiscal year. For example, “2023” refers to fiscal 2023, which is the period from April 1, 2022 to March 31, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, references to “year” pertain to our fiscal year. For example, “2024” refers to fiscal 2024, which is the period from April 1, 2023 to March 31, 2024.
From time to time, we use derivatives to reduce our exposure to currency fluctuations. 26 Table of Contents Advanced Drainage Systems, Inc.
From time to time, we use derivatives to reduce our exposure to currency fluctuations. 25 Table of Contents Advanced Drainage Systems, Inc.
The assets acquired are titled to the Company and included in Property, plant and equipment, net on our Consolidated Balance Sheet. The equipment financing has a balance of $18.6 million and had an initial term of between 12 and 84 months, based on the life of the equipment.
The assets acquired are titled to the Company and included in Property, plant and equipment, net on our Consolidated Balance Sheet. The equipment financing has a balance of $10.9 million and had an initial term of between 12 and 84 months, based on the life of the equipment.
Accordingly, free cash flow has been presented in this Annual Report on Form 10-K as a supplemental measure of liquidity that is not required by, or presented in accordance with GAAP, because management believes that free cash flow provides useful information to investors and others in understanding and evaluating our ability to generate cash flow from operations after capital expenditures.
Accordingly, free cash flow has been presented in this Annual Report on Form 10-K as a supplemental measure of liquidity that is not required by, or presented in accordance with GAAP, because management believes that free cash flow provides useful information to investors and others in understanding and evaluating our ability to generate cash flow from 29 Table of Contents Advanced Drainage Systems, Inc. operations after capital expenditures.
Our joint venture strategy has provided us with local and regional access to new markets. The unconsolidated sales of the South American Joint Venture were $69.5 million, $61.6 million, and $45.6 million, in fiscal 2023, 2022, and 2021, respectively.
Our joint venture strategy has provided us with local and regional access to new markets. The unconsolidated sales of the South American Joint Venture were $75.9 million, $69.5 million, and $61.6 million, in fiscal 2024, 2023, and 2022, respectively.
Among other things, the Second Amendment (i) amended the Base Credit Agreement by increasing the Revolving Credit Facility (the “Amended Revolving Credit Facility”) from $350.0 million to $600.0 million (including an increase of the sub-limit for the swing-line sub-facility from $50.0 million to $60.0 million) and extended the maturity date of the Revolving Credit Facility to May 26, 2027.
Among other things, the Second Amendment (i) amended the Base Credit Agreement by increasing the Revolving Credit Facility (the “Amended Revolving Credit Facility”) from $350.0 million to $600.0 million (including an increase of the sub-limit for the swing-line sub-facility from $50.0 million to $60.0 million) and extended the maturity date of the Revolving Credit Facility to May 26, 2027. 31 Table of Contents Advanced Drainage Systems, Inc.
Operating Cash Flows - During fiscal 2023, cash provided by operating activities was $707.8 million. Cash flow from operating activities in fiscal 2023 was primarily driven by operating income offset by changes in working capital. During fiscal 2022, cash provided by operating activities was $274.9 million.
Cash flow from operating activities in fiscal 2023 was primarily driven by operating income offset by changes in working capital. During fiscal 2022, cash provided by operating activities was $274.9 million. Cash flow from operating activities in fiscal 2022 was primarily driven by operating income offset by investments in working capital.
Our net sales are driven by market trends, including the adoption of thermoplastic corrugated pipe products as a replacement for traditional materials. Thermoplastic corrugated 25 Table of Contents Advanced Drainage Systems, Inc. pipe is generally lighter, more durable, more cost effective and easier to install than comparable products made from traditional materials.
Our net sales are driven by market trends, including the adoption of thermoplastic corrugated pipe products as a replacement for traditional materials. Thermoplastic corrugated pipe is generally lighter, more durable, more cost effective and easier to install than comparable products made from traditional materials.
Net income attributable to noncontrolling interest – Net income attributable to noncontrolling interest increased for the fiscal year ended March 31, 2023 due to increased net income at our ADS Mexicana joint venture.
Net income attributable to noncontrolling interest – Net income attributable to noncontrolling interest decreased for the fiscal year ended March 31, 2024 due to decreased net income at our ADS Mexicana joint venture.
In addition to covenant compliance and executive performance evaluations, we use EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
In addition to covenant compliance and executive performance evaluations, we use 28 Table of Contents Advanced Drainage Systems, Inc. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
The fair value estimates are based on assumptions management believes to be reasonable but are inherently uncertain. We performed our annual impairment test for goodwill for all reporting units as of March 31, 2023 using a quantitative approach.
The fair value estimates are based on assumptions management believes to be reasonable but are inherently uncertain. We performed our annual impairment test for goodwill for all reporting units as of March 31, 2024 using a qualitative approach, except for Cultec, which was assessed using a quantitative approach.
For additional discussion of our significant accounting policies, see “Note 1. Background and Summary of Significant Accounting Policies” to our consolidated financial statements included in “Item 8. Financial Statements and 34 Table of Contents Advanced Drainage Systems, Inc. Supplementary Data” included in this Form 10-K.
For additional discussion of our significant accounting policies, see “Note 1. Background and Summary of Significant Accounting Policies” to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” included in this Form 10-K.
As of March 31, 2023, we had $6.7 million in cash that was held by our foreign subsidiaries, and none held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. See “Note 15 .
As of March 31, 2024, we had $24.8 million in cash that was held by our foreign subsidiaries, of which, $15.8 million was held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. See “Note 15 .
Adjusted EBITDA, a non-GAAP financial measure, increased $227.9 million, or 33.7%, to $904.0 million, as compared to $676.0 million in the prior year. The increase is primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 29.4% as compared to 24.4% in the prior year.
Adjusted EBITDA, a non-GAAP financial measure, increased $19.0 million, or 2.1%, to $922.9 million, as compared to $904.0 million in the prior year. The increase is primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 32.1% as compared to 29.4% in the prior year.
Definite-lived intangible assets - Definite-lived intangible assets are tested for recoverability whenever events or changes in circumstances indicate that carrying amounts of the asset group may not be recoverable. Asset groups are established primarily by determining the lowest level of cash flows available.
Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. Definite-lived intangible assets - Definite-lived intangible assets are tested for recoverability whenever events or changes in circumstances indicate that carrying amounts of the asset group may not be recoverable. Asset groups are established primarily by determining the lowest level of cash flows available.
Investing Cash Flows - During fiscal 2023, cash used for investing activities was $214.5 million. The increase in cash used for investing cash flows was primarily due to elevated capital expenditures and the acquisition of Cultec, Inc. Our capital expenditures in fiscal 2023 were used primarily to support growth and our productivity initiatives, including automation and safety.
Our capital expenditures in fiscal 2023 were used primarily to support growth and our productivity initiatives, including automation and safety. During fiscal 2022, cash used for investing activities was $198.8 million. The increase in cash used for investing cash flows was primarily due to elevated capital expenditures and the acquisition of Jet Polymer Recycling.
Issuance of Senior Notes Due 2030 – On June 9, 2022, we issued $500.0 million aggregate principal amount of 6.375% its senior notes (the “2030 Notes”) pursuant to an Indenture, dated June 9, 2022 (the “2030 Indenture”), among the Company, the Guarantors and the Trustee.
The equipment financing bears a weighted average interest of 1.6% as of March 31, 2024. Issuance of Senior Notes Due 2030 – On June 9, 2022, we issued $500.0 million aggregate principal amount of 6.375% its senior notes (the “2030 Notes”) pursuant to an Indenture, dated June 9, 2022 (the “2030 Indenture”), among the Company, the Guarantors and the Trustee.
Debt” to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” for a discussion of the Company’s financing transactions, including the Secured Bank Loans, the Senior Notes and the Company’s finance lease obligations.
Financial Statements and Supplementary Data” for a discussion of the Company’s financing transactions, including the Secured Bank Loans, the Senior Notes and the Company’s finance lease obligations.
For further information, see “Note 12 . Debt” to the Consolidated Financial Statements. We were in compliance with our debt covenants as of March 31, 2023.
For further information, see “Note 12 . Debt” to the Consolidated Financial Statements. We were in compliance with our debt covenants as of March 31, 2024. 32 Table of Contents Advanced Drainage Systems, Inc.
Our maximum potential obligation under this guarantee totals $11 million as of March 31, 2023. The maximum borrowing permitted under the South American Joint Venture’s credit agreement is $22 million. As of March 31, 2023, our South American Joint Venture had approximately $5.5 million of outstanding debt subject to our guarantee, resulting in our guarantee of 50%, or $2.8 million.
Our maximum potential obligation under this guarantee totals $5.5 million as of March 31, 2024. The maximum borrowing permitted under the South American Joint Venture’s credit agreement is $11.0 million. As of March 31, 2024, our South American Joint Venture had no outstanding debt subject to our guarantee.
Equity in net income of unconsolidated affiliates – The Equity in net income of unconsolidated affiliates increased for the fiscal year ended March 31, 2023 compared to the same period in fiscal 2022 due to an increase in the current period income at our South American Joint Venture. 29 Table of Contents Advanced Drainage Systems, Inc.
Income Taxes” for additional information. Equity in net income of unconsolidated affiliates – The Equity in net income of unconsolidated affiliates increased for the fiscal year ended March 31, 2024 compared to the same period in fiscal 2023 due to an increase in the current period income at our South American Joint Venture.
Derivative gains and other income, net – Derivative gains and other income, net increased by $2.8 million for the fiscal year ended March 31, 2023 compared to the same period in fiscal 2022 primarily due to increased interest income.
Interest income and other, net – Interest income and other, net increased by $15.5 million for the fiscal year ended March 31, 2024 compared to the same period in fiscal 2023 primarily due to the increase in Cash.
(Amounts in thousands) 2023 2022 2021 Cash flow from operating activities $ 707,810 $ 274,888 $ 452,216 Capital expenditures (166,913) (149,083) (78,757) Free cash flow $ 540,897 $ 125,805 $ 373,459 The following table presents key liquidity metrics utilized by management: (Amounts in thousands) 3/31/2023 Total debt (debt and finance lease obligations) $ 1,324,897 Cash 217,128 Net debt (total debt less cash) 1,107,769 Leverage ratio 1.2 The following table summarizes our available liquidity under our Revolving Credit Facility as of March 31, 2023: (Amounts in thousands) 3/31/2023 Revolver capacity $ 600,000 Less: outstanding borrowings — Less: letters of credit 9,650 Revolver available liquidity $ 590,350 In addition to the available liquidity above, we have the ability to borrow up to $1.3 billion under our Term Loan Facility, subject to leverage ratio restrictions. 31 Table of Contents Advanced Drainage Systems, Inc.
(Amounts in thousands) 2024 2023 2022 Cash flow from operating activities $ 717,928 $ 707,810 $ 274,888 Capital expenditures (183,812) (166,913) (149,083) Free cash flow $ 534,116 $ 540,897 $ 125,805 The following table presents key liquidity metrics utilized by management: (Amounts in thousands) 3/31/2024 Total debt (debt and finance lease obligations) $ 1,351,068 Cash 490,163 Net debt (total debt less cash) 860,905 Leverage ratio 0.9 The following table summarizes our available liquidity under our Revolving Credit Facility as of March 31, 2024: (Amounts in thousands) 3/31/2024 Revolver capacity $ 600,000 Less: outstanding borrowings — Less: letters of credit 11,150 Revolver available liquidity $ 588,850 In addition to the available liquidity above, we have the ability to borrow up to $1.3 billion under our Term Loan Facility, subject to leverage ratio restrictions.
Executive Summary of Our Fiscal Year 2023 Results • Net sales increased 10.9% to $3.1 billion • Net income increased to $511.4 million, compared to net income of $275.0 million in the prior year • Adjusted EBITDA increased 33.7% to $904.0 million • Cash provided by operating activities increased 157.5% to $707.8 million • Free cash flow increased 329.9% to $540.9 million Net sales increased $301.8 million, or 10.9%, to $3,071.1 million, as compared to $2,769.3 million in the prior year.
Executive Summary of Our Fiscal 2024 Results • Net sales decreased 6.4% to $2.9 billion • Net income increased 0.4% to $513.3 million • Net income per diluted share increased 6.1% to $6.45 • Adjusted EBITDA increased 2.1% to $922.9 million • Cash provided by operating activities increased $10.1 million to $717.9 million • Free cash flow decreased $6.8 million to $534.1 million Net sales decreased $196.6 million, or 6.4%, to $2,874.5 million, as compared to $3,071.1 million in the prior year.
(Amounts in thousands) 2023 2022 $ Variance % Variance Selling, general and administrative $ 339,504 $ 309,840 $ 29,664 9.6 % % of Net Sales 11.1 % 11.2 % (0.1) Selling, general and administrative expenses for the fiscal year ended March 31, 2023 increased $29.7 million from the same period in fiscal 2022 and as a percentage of sales, decreased by 0.1%.
(Amounts in thousands) 2024 2023 Selling, general and administrative $ 370,714 $ 339,504 % of Net Sales 12.9 % 11.2 % Selling, general and administrative expenses for the fiscal year ended March 31, 2024 increased $31.2 million from the same period in fiscal 2023.
We had approximately $90 million of open orders through purchase commitments as of March 31, 2023. Financing Cash Flows – During fiscal 2023, cash used in financing activities was $296.3 million. During fiscal 2023, ADS repurchased shares for $575.0 million, paid $114.3 million of the Revolving Credit Facility, net of proceeds, and dividend payments of $44.9 million.
During fiscal 2024, we repurchased shares at a cost of $207.3 million and made dividend payments of $47.7 million. During fiscal 2023, cash used in financing activities was $296.3 million. During fiscal 2023, we repurchased shares at a cost of $575.0 million; paid $114.3 million of the Revolving Credit Facility, net of proceeds, and made dividend payments of $44.9 million.
Raw Material Costs - Our raw material cost and product selling prices fluctuate with changes in the price of resins utilized in production. We actively manage our resin purchases and pass fluctuations in the cost of resin through to our customers, where possible, in order to maintain our profitability.
We actively manage our resin purchases and pass fluctuations in the cost of resin through to our customers, where possible, in order to maintain our profitability. Fluctuations in the price of crude oil and natural gas prices may impact the cost of resin.
We believe customers will continue to acknowledge the superior attributes and compelling value proposition of our thermoplastic products and expanded regulatory approvals allow for their use in new markets and geographies. In addition, we believe that PP pipe products will also help accelerate conversion given the additional applications for which our PP pipe products can be used.
We believe customers will continue to acknowledge the superior attributes and compelling value 24 Table of Contents Advanced Drainage Systems, Inc. proposition of our thermoplastic products and expanded regulatory approvals allow for their use in new markets and geographies.
These sources were offset by $575.0 million in share repurchases and capital expenditures of $166.9 million. Our use of cash in fiscal 2022, of $174.9 million, was predominantly driven by the $292.0 million in share repurchases net of incremental borrowings during fiscal 2022, offset by cash generated from operations in excess of investments in working capital and capital expenditures.
Our increase of cash in fiscal 2023 of $197.0 million was predominantly driven by cash generated from operations in excess of changes in working capital and $500.0 million proceeds from the issuance of senior notes. These sources were partially offset by $575.0 million in share repurchases, capital expenditures of $166.9 million, and $44.9 million of dividend payments.
Fluctuations in the price of crude oil and natural gas prices may impact the cost of resin. In addition, changes in and disruptions to existing capacities could also significantly increase resin prices, often within a short period of time.
In addition, changes in and disruptions to existing capacities could also significantly increase resin prices, often within a short period of time. Our ability to pass through raw material price increases to our customers may lag the increase in our costs of goods sold.
During fiscal 2021, cash used for investing activities was $77.9 million. Our capital expenditures in fiscal 2021 were used primarily to support facility expansions, equipment replacements, our recycled resin and technology improvement initiatives.
Our capital expenditures in fiscal 2024 were used primarily to support new facilities, facility expansions, equipment replacements and technology improvement initiatives. During fiscal 2023, cash used for investing activities was $214.5 million. The increase in cash used for investing cash flows was primarily due to elevated capital expenditures and the acquisition of Cultec, Inc.
If our historical experience differs from future experience, our estimates of variable consideration could differ. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see “Note 1. Background and Summary of Significant Accounting Policies” to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data.”
Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. 34 Table of Contents Advanced Drainage Systems, Inc. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see “Note 1. Background and Summary of Significant Accounting Policies” to our consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data.”
(Amounts in thousands) 2023 2022 2021 Net income (loss) $ 511,353 $ 275,026 $ 226,090 Depreciation and amortization 145,149 141,808 145,586 Interest expense 70,182 33,550 35,658 Income tax expense 150,589 110,071 86,382 EBITDA 877,273 560,455 493,716 Loss on disposal of assets and costs from exit and disposal activities 4,397 3,398 4,275 Stock-based compensation expense 21,659 24,158 20,453 ESOP compensation expense — 53,401 44,981 ESOP acceleration compensation expense (a) — 30,435 — Transaction costs (b) 3,903 3,539 1,415 Strategic growth and operational improvement initiatives (c) — — 3,304 Interest income (9,782) (52) (287) Other adjustments (d) 6,512 708 (902) Adjusted EBITDA $ 903,962 $ 676,042 $ 566,955 Adjusted EBITDA Margin 29.4 % 24.4 % 28.6 % 30 Table of Contents Advanced Drainage Systems, Inc.
(Amounts in thousands) 2024 2023 2022 Net income $ 513,291 $ 511,353 $ 275,026 Depreciation and amortization 154,903 145,149 141,808 Interest expense 88,862 70,182 33,550 Income tax expense 158,998 150,589 110,071 EBITDA 916,054 877,273 560,455 (Gain) loss on disposal of assets and costs from exit and disposal activities (8,365) 4,397 3,398 Stock-based compensation expense 31,986 21,659 24,158 ESOP compensation expense — — 53,401 ESOP acceleration compensation expense (a) — — 30,435 Transaction costs (b) 3,444 3,903 3,539 Interest income (22,047) (9,782) (52) Other adjustments (c) 1,875 6,512 708 Adjusted EBITDA $ 922,947 $ 903,962 $ 676,042 Adjusted EBITDA Margin 32.1 % 29.4 % 24.4 % (a) In the fourth quarter of fiscal 2022, the approximately 0.3 million remaining unallocated shares of Preferred Stock were allocated on March 31, 2022 after repayment of the ESOP loan.
Interest expense – Interest expense increased $36.6 million for the fiscal year ended March 31, 2023 compared to the same period in fiscal 2022. The increase was primarily due to increased average debt levels and an increase in interest rates.
Intangible amortization – Intangible amortization decreased by $3.7 million primarily due the accelerated method of amortization for certain customer relationships. Interest expense – Interest expense increased $18.7 million for the fiscal year ended March 31, 2024 compared to the same period in fiscal 2023. The increase was primarily due to an increase in interest rates.
(Amounts in thousands) 2023 2022 $ Variance % Variance Pipe $ 1,717,189 $ 1,539,434 $ 177,755 11.5 % Infiltrator 442,280 460,500 (18,220) (4.0) International 219,853 205,312 14,541 7.1 Allied Products & Other 691,799 564,069 127,730 22.6 Total Consolidated $ 3,071,121 $ 2,769,315 $ 301,806 10.9 % Our consolidated net sales for the fiscal year ended March 31, 2023 increased by $301.8 million, or 10.9%, compared to fiscal 2022.
(Amounts in thousands) 2024 2023 $ Variance % Variance Pipe $ 1,544,290 $ 1,717,189 $ (172,899) (10.1) % Infiltrator 449,027 442,280 6,747 1.5 International 207,769 219,853 (12,084) (5.5) Allied Products & Other 673,387 691,799 (18,412) (2.7) Total Consolidated $ 2,874,473 $ 3,071,121 $ (196,648) (6.4) % Our consolidated net sales for the fiscal year ended March 31, 2024 decreased by $196.6 million, or 6.4%, compared to fiscal 2023.
The cash outflows were offset by $500.0 million of proceeds from Senior Notes due 2030. 32 Table of Contents Advanced Drainage Systems, Inc. During fiscal 2022, cash used in financing activities was $251.1 million. During fiscal 2022, ADS repurchased shares for $292.0 million.
The cash outflows were offset by $500.0 million of proceeds from Senior Notes due 2030. During fiscal 2022 , cash used in financing activities was $251.1 million. During fiscal 2022, we repurchased shares for $292.0 million. Debt and Capitalized Lease Obligations See “Note 6. Leases” and “Note 12. Debt” to our consolidated financial statements included in “Item 8.
Income Taxes” for additional discussion of our plans to repatriate earnings from Canada. Working Capital and Cash Flows Our source of cash in fiscal 2023, of $197.0 million, was predominantly driven by cash generated from operations in excess of changes in working capital and $500.0 million proceeds from the issuance of senior notes.
Income Taxes” for additional discussion of our plans to repatriate earnings from Canada. Working Capital and Cash Flows In fiscal 2024, our cash balance increased by $278.7 million.
(Amounts in thousands) 2023 2022 $ Variance % Variance Pipe $ 476,859 $ 269,855 $ 207,004 76.7 % Infiltrator 213,242 217,432 (4,190) (1.9) International 56,188 53,284 2,904 5.5 Allied Products & Other 371,195 279,022 92,173 33.0 1,117,484 819,593 297,891 36.3 Cost of goods sold - ESOP acceleration — (19,181) 19,181 100.0 Intersegment eliminations 924 (28) 952 (3400.0) Total gross profit $ 1,118,408 $ 800,384 $ 318,024 39.7 % Our consolidated Cost of goods sold for the fiscal year ended March 31, 2023 increased by $3.0 million or, 0.2%, and our consolidated Gross profit increased by $318.0 million, or 39.7%, compared to the same period in fiscal 2022.
(Amounts in thousands) 2024 2023 $ Variance % Variance Pipe $ 448,186 $ 476,859 $ (28,673) (6.0) % Infiltrator 259,065 213,242 45,823 21.5 International 57,605 56,188 1,417 2.5 Allied Products & Other 385,650 371,195 14,455 3.9 Intersegment eliminations (4,557) 924 (5,481) (593.2) Total gross profit $ 1,145,949 $ 1,118,408 $ 27,541 2.5 % Our consolidated Cost of goods sold for the fiscal year ended March 31, 2024 decreased by $224.2 million or, 11.5%, and our consolidated Gross profit increased by $27.5 million, or 2.5%, compared to the same period in fiscal 2023.
We currently anticipate that we will make capital expenditures of approximately $200 to $225 million in fiscal 2024 to focus on growth and productivity through increasing our manufacturing capacity and investing in automation. Such capital expenditures are expected to be financed using funds generated by operations.
Our capital expenditures in fiscal 2022 were used primarily to support growth, but also to support our recycled resin and technology improvement initiatives. We currently anticipate that we will make capital expenditures of approximately $250 to $300 million in fiscal 2025 to focus on growth and productivity through increasing our manufacturing capacity and investing in automation.
Income tax expense – The following table presents the effective tax rates for the fiscal years presented: 2023 2022 Effective tax rate 22.9 % 28.7 % The change in the effective tax rate for the fiscal year ended March 31, 2023 was primarily related to the transition of the Company’s ESOP and the repayment of the ESOP loan in fiscal year 2022 .
Income tax expense – The following table presents the effective tax rates for the fiscal years presented: 2024 2023 Effective tax rate 23.8 % 22.9 % The change in the effective tax rate was primarily related to the decrease of the income tax benefit related to the stock-based compensation windfall in fiscal 2024. See “N ote 15.
We performed a quantitative impairment analysis and determined for our indefinite-lived intangible assets that the fair value of the assets exceeded carrying value for fiscal years ended March 31, 2023. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. 35 Table of Contents Advanced Drainage Systems, Inc.
We performed a qualitative impairment analysis and determined for our indefinite-lived intangible assets that it was more likely than not that the fair value of the assets exceeded carrying value for fiscal years ended March 31, 2024.
Cash in fiscal 2021 increased by $20.8 million primarily from cash generated from operations net of payments on our Term Loan Facility and Revolving Credit Facility. As of March 31, 2023, we had $807.5 million in liquidity, including $217.1 million of cash, $590.4 million in borrowings available under our Revolving Credit Agreement, excluding $9.7 million of outstanding letters of credit.
As of March 31, 2024, we had $1,079.1 million in liquidity, including $490.2 million of cash, $588.9 million in borrowings available under our Revolving Credit Agreement, excluding $11.2 million of outstanding letters of credit.
Cash flow from operating activities in fiscal 2022 was primarily driven by operating income offset by investments in working capital. During fiscal 2021, cash provided by operating activities was $452.2 million. Cash flow from operating activities during fiscal 2021 was primarily impacted by increased income from continuing operations and improvements in payment terms on accounts payable.
Operating Cash Flows - During fiscal 2024, cash provided by operating activities was $717.9 million. Cash flow from operating activities in fiscal 2024 was primarily driven by operating income and changes in working capital. During fiscal 2023, cash provided by operating activities was $707.8 million.
Working capital increased to $638.7 million as of March 31, 2023, from $480.7 million as of March 31, 2022, primarily due to increases in cash from the issuance of our 2030 Notes and decreases in accounts payable and other accrued liabilities partially offset by a decrease in accounts receivable and inventory aligned with planned sales demand.
Working capital increased to $860.3 million as of March 31, 2024, from $638.7 million as of March 31, 2023, primarily due to increases in cash and an increase in accounts receivable due to increased net sales offset by increases in accounts payable due to the timing of the purchases of raw materials. 30 Table of Contents Advanced Drainage Systems, Inc.
(b) Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with business or asset acquisitions and dispositions. (c) Represents professional fees incurred in connection with our strategic growth and operational improvement initiatives, which included various market feasibility assessments, acquisition strategies, evaluations of our manufacturing network and operating improvement initiatives.
See “Note 13. Employee Benefit Plans” for additional information. (b) Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with business or asset acquisitions and dispositions.
The increase in gross profit is primarily due to the favorable pricing on pipe, onsite septic and allied products as well as favorable material cost. This increase was partially offset by a decrease in volume, inflationary cost pressures and higher manufacturing costs.
The 27 Table of Contents Advanced Drainage Systems, Inc. increase in gross profit is primarily due to favorable material cost, partially offset by the decrease in volume and unfavorable fixed cost absorption.
Loss on disposal of assets and costs from exit and disposal activities – The change in Loss on disposal of assets and costs from exit and disposal activities is primarily due to asset disposals and site closures. Intangible amortization – Intangible amortization decreased by $8.8 million primarily due the accelerated method of amortization for certain customer relationships.
(Gain) loss on disposal of assets and costs from exit and disposal activities – The change in (Gain) loss on disposal of assets and costs from exit and disposal activities is primarily due to the gain on the sale of the assets of Spartan Concrete, Inc. in fiscal 2024, partially offset by the losses on the sale of the Paper Recycling business and disposal of other assets.
We determined for our goodwill that the fair value of the assets exceeded carrying value for the fiscal year ended March 31, 2023. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period.
We determined for our goodwill that it was more likely than not that the fair value of the assets exceeded carrying value for the fiscal year ended March 31, 2024 for all reporting units reviewed under the qualitative approach. For Cultec, the fair value of the reporting unit exceeded carrying value.
The increase in Selling, general and administrative expenses is the result of increased headcount to support business growth. Selling, general and administrative – ESOP acceleration – In fiscal 2022, ESOP acceleration compensation expense of $11.3 million was allocated to selling, general and administrative expenses which did not occur in fiscal 2023.
The increase in Selling, general and administrative expenses is the result of an increase in stock-based and incentive compensation related to business performance, headcount to support our engineering and innovation initiatives and the impact of inflation.
Domestic pipe sales increased $203.7 million, or 13.1%, to $1,759.0 million. Domestic Allied Products & Other sales increased $131.0 million, or 23.0%, to $700.3 million. These increases were driven by growth in both the U.S. construction and agriculture end markets. Infiltrator sales decreased $28.3 million, or 5.1%, to $523.6 million.
Domestic pipe sales decreased $172.9 million, or 10.1%, to $1,544.3 million. Domestic Allied Products & Other sales decreased $18.4 million, or 2.7%, to $673.4 million. Infiltrator sales increased $6.7 million, or 1.5%, to $449.0 million.
Removed
Our ability to pass through raw material price increases to our customers may lag the increase in our costs of goods sold.
Added
In addition, we believe that PP pipe products will also help accelerate conversion given the additional applications for which our PP pipe products can be used. Raw Material Costs - Our raw material cost and product selling prices fluctuate with changes in the price of resins utilized in production.
Removed
International sales increased $14.3 million, or 6.4%, to $239.1 million, driven by double-digit sales growth in the Canadian, Mexican and Exports businesses. Gross profit increased $318.0 million, or 39.7%, to $1,118.4 million as compared to $800.4 million in the prior year.
Added
The decrease in overall domestic net sales was driven by lower demand in the U.S. construction and agriculture end markets during the first half of the year. The increase in sales at Infiltrator was driven by better-than-expected single-family housing construction and new product introductions. International sales decreased $12.1 million, or 5.5%, to $207.8 million.
Removed
The increase in net sales was primarily a result of growth in our domestic Pipe segment and Allied Products & Other. Our Pipe segment experienced growth primarily through improved pricing/mix of products sold partially offset by volume decreases. Our Infiltrator segment experienced decreased sales primarily due to lower volume offset by improved pricing/mix of products sold.
Added
Gross profit increased $27.5 million, or 2.5%, to $1,145.9 million as compared to $1,118.4 million in the prior year. The increase in gross profit is primarily due to favorable material cost, partially offset by the decrease in volume and unfavorable fixed cost absorption.
Removed
The increase in our International segment was driven by growth in the Canadian and Mexican businesses. Growth in Allied Products & Other was driven mainly by improved price/mix of product offerings and the acquisition of Cultec partially offset by volume decreases. 28 Table of Contents Advanced Drainage Systems, Inc.
Added
The decrease in overall domestic net sales was driven by lower demand in the U.S. construction and agriculture end markets during the first half of the year. The increase in sales at Infiltrator was driven by better-than-expected single-family housing construction and new product introductions.
Removed
The increase in our gross profit was due to an increase in net sales from improved pricing partially offset by a decrease in volume, inflationary cost pressures and higher manufacturing costs.
Added
Cash generated from operations, changes in working capital and dispositions of assets was partially offset by $207.3 million in share repurchases and capital expenditures of $183.8 million and $47.7 million of dividend payments.
Removed
See “N ote 15. Income Taxes” for additional information.
Added
Investing Cash Flows - During fiscal 2024, cash used for investing activities was $155.7 million. The cash used for investing cash flows was primarily from capital expenditures offset with the disposition of assets or businesses. Capital expenditures increased in fiscal 2024 compared to fiscal 2023.
Removed
(a) In the fourth quarter of fiscal 2022, the approximately 0.3 million remaining unallocated shares of Preferred Stock were allocated on March 31, 2022 after repayment of the ESOP loan. See “Note 13. Employee Benefit Plans” for additional information.
Added
Such capital expenditures are expected to be financed using funds generated by operations. We had approximately $130 million of open orders through purchase commitments as of March 31, 2024. Financing Cash Flows – During fiscal 2024, cash used in financing activities was $284.3 million.
Removed
During fiscal 2022, cash used for investing activities was $198.8 million. The increase in cash used for investing cash flows was primarily due to elevated capital expenditures and the acquisition of Jet Polymer Recycling. Our capital expenditures in fiscal 2022 were used primarily to support growth, but also to support our recycled resin and technology improvement initiatives.
Added
If our historical experience differs from future experience, our estimates of variable consideration could differ. 33 Table of Contents Advanced Drainage Systems, Inc.
Removed
During fiscal 2021 , cash used in financing activities was $354.6 million, due to payments on the Term Loan Facility of $207.0 million and the Revolving Credit Facility of $100.0 million. In addition, we made dividend payments of $32.1 million and $21.5 million on our finance lease obligations. Debt and Capitalized Lease Obligations See “Note 6. Leases” and “Note 12.
Removed
The equipment financing bears a weighted average interest of 1.5% as of March 31, 2023. 33 Table of Contents Advanced Drainage Systems, Inc.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed13 unchanged
Biggest changeWe have supply agreements with our major resin suppliers that provide multi-year terms and 36 Table of Contents Advanced Drainage Systems, Inc. volumes that are in excess of our projected consumption. These supply agreements generally do not contain fixed prices, exposing us to pricing risk.
Biggest changeWe have supply agreements with our major resin suppliers that provide multi-year terms and volumes that are in excess of our projected consumption. These supply agreements generally do not contain fixed prices, exposing us to pricing risk.
Assuming the Revolving Credit Facility is fully drawn, each 1.0% increase or decrease in the applicable interest rate would change our interest expense by approximately $10.2 million, for the year ended March 31, 2023. Credit Risk - Financial instruments that potentially subject us to a concentration of credit risk consist principally of accounts receivable.
Assuming the Revolving Credit Facility is fully drawn, each 1.0% increase or decrease in the applicable interest rate would change our interest expense by approximately $10.2 million, for the year ended March 31, 2024. Credit Risk - Financial instruments that potentially subject us to a concentration of credit risk consist principally of accounts receivable.
A 1.0% increase in interest rates on our variable-rate debt would increase our annual forecasted interest expense by approximately $4.2 million based on our borrowings as of March 31, 2023.
A 1.0% increase in interest rates on our variable-rate debt would increase our annual forecasted interest expense by approximately $4.2 million based on our borrowings as of March 31, 2024.
A 1% increase in the price of resin would increase our cost of goods sold by approximately $6.4 million. Inflation Risk - Our cost of goods sold is subject to inflationary pressures and price fluctuations of the raw materials we use, primarily HDPE and PP resins.
A 1% increase in the price of resin would increase our cost of goods sold by approximately $5.0 million. Inflation Risk - Our cost of goods sold is subject to inflationary pressures and price fluctuations of the raw materials we use, primarily HDPE and PP resins.

Other WMS 10-K year-over-year comparisons