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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.00pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.10pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.11pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+3
unable+3
loss+3
challenges+3
adverse+2
Positive rising
able+3
achieve+3
successful+2
achieved+2
profitability+1
Risk Factors (Item 1A)
8,388 words
Item 1A. Risk Factors
Please carefully consider the risks described below, together with all other information included or incorporated by reference in this Annual Report on Form 10-K. If any of the following risks actually occur, our business, financial condition, results of operations and cash flows could be materially adversely affected. In these circumstances, the market price of our common stock could decline significantly.
Risks Relating to Our Business
Fluctuations in the price and availability of resins, our principal raw materials, new tariff policies and our inability to obtain adequate supplies of resins from suppliers and pass on resin price increases to customers could adversely affect our business, financial condition, results of operations and cash flows.
Resin prices fluctuate substantially as a result of changes in crude oil and natural gas prices, changes in existing processing capabilities and the capacity of resin suppliers. Polypropylene resin suppliers are limited, high-density polyethylene suppliers are geographically concentrated, and supply of recycled resin is also limited. Supply interruptions could arise from disruptions to existing petrochemical capacity and recycled resin sources caused by labor and , weather conditions or natural affecting supplies or shipments, transportation or other factors beyond our control. An extended in the timely availability of raw materials from our key suppliers would result in a decrease in our revenues and . Additionally, our customers’ production schedules could be impacted by these , which could result in reduced sales of our products.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+8
restructuring+4
discontinued+3
attrition+3
impairment+2
Positive rising
gain+3
effective+2
greater+2
favorable+1
profitability+1
MD&A (Item 7)
9,257 words
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, “2026” refers to fiscal 2026, which is the period from April 1, 2025 to March 31, 2026.
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the sections titled “Item 1A. Risk Factors” and “Cautionary Statement About Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. Please read the following discussion together with the sections titled “Item 1A. Risk Factors” and our consolidated financial statements, including the related notes, included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Overview
We are the leading manufacturer of innovative water management solutions in the stormwater and onsite wastewater industries, providing drainage solutions for use in the construction and agriculture marketplaces. Our products, for which we hold many patents, are used across a broad range of end markets and applications, including non-residential, infrastructure and agriculture applications. We have established a position in many of these end markets by leveraging our national sales and distribution platform, industry- engineering support, overall product breadth and scale plus manufacturing .
Inflation in these raw material costs could also result in significant cost increases, further affecting our business. Our ability to maintain profitability heavily depends on our ability to pass through to our customers any increase in raw material costs. If increases in the cost of raw materials or any potential tariffs cannot be passed on to our customers, our business, financial condition, results of operations and cash flows will be adversely affected. Conversely, in the event that there is deflation, we may experience pressure from our customers to reduce prices. 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.
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Any disruption or volatility in general business and economic conditions in the markets in which we operate, including market uncertainty and volatility, could have a material adverse effect on the demand for our products and services.
The markets in which we operate are sensitive to regional, U.S. and worldwide economic conditions, including availability of credit, interest rates, inflation, tariffs or other trade policies, fluctuations in capital and business and consumer confidence. The difficult conditions in these markets and the overall economy affect our business in a number of ways. For example:
• The volatility of the U.S. economy, including market uncertainty and volatility, can have an adverse effect on our sales that are dependent on the non-residential construction market if participants in this industry may postpone spending or are otherwise unable to secure financing for construction projects.
• Our business depends upon general activity levels in the agriculture market. 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 depends to a significant degree on spending on infrastructure. Infrastructure spending is affected by a variety of factors beyond our control, including interest rates, inflation, availability and commitment of public funds for municipal spending and highway spending and general economic conditions.
Additionally, U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations. The current administration has suggested various new strategies regarding tariffs. In response, countries have imposed or proposed additional tariffs on certain U.S. imports, as well as additional trade restrictions. Tariffs may result in a decrease of global trade volumes due to uncertainty, may create an administrative burden and will cause companies to make difficult decisions as to how to pay the tariffs or absorb the cost into their profit margins.
Weakness in the markets in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows. B ank 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 depend 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. 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 on 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.
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 betterable to withstand price competition and inflationary pressures. In addition, consolidation by industry participants could result in competitors with increased market share, larger customer bases, greater diversified product offerings and greater technological and marketing expertise, which would allow them to compete more effectively against us. Moreover, our competitors may develop products that are superior to our products or may adapt more quickly to new technologies or evolving customer requirements or requests. In many markets in which we operate, there are no significant entry barriers that would prevent new competitors from entering the market, especially on the local level, or existing competitors from expanding in the market. Increased competition by existing and future competitors could result in reductions in sales, prices, volumes and gross margins that would materially adversely affect our business, financial condition, results of operations and cash flows. Furthermore, our success will depend, in part, on our ability to maintain our market share, generate adequate demand for our products and gain market share from competitors.
We may be affected by global climate change or by legal, regulatory or market responses to such change.
Many of our products are made from a material whose manufacturing process involves the emission of carbon dioxide, a greenhouse gas (“GHG”) that scientists have attributed as a cause of climate change. Our products require transportation from our facilities to the site where they are used, which consumes energy. Concerns over climate change, including the impact of global warming, has led to federal, state, and international efforts to limit GHG emissions. Although it is uncertain what actions various governmental bodies will take to address the effects of climate change and to achieve goals in response to the effects of climate change, including in what timeframe those actions would be implemented, new laws or regulations could directly and indirectly affect our customers and suppliers (through an increase in the cost of production or their ability to produce satisfactory products) and our business (through the impact on our inventory availability, cost of
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sales, operations or demands for the products we sell). 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.
In January 2022, we communicated our initial 10-year goals regarding sustainability. To reduce our environmental impact, we have committed to pursuing science-based targets consistent with limiting global temperature increase to 1.5°C above pre-industrial levels. We are working to define absolute targets for reduction of scope 1 (direct) & 2 (indirect) greenhouse gas emissions that align with limiting future temperature rise to 1.5°C above baseline. These goals reflect our current plans and there is no guarantee that they will be achieved. Our ability to achieve any goal is subject to factors and conditions, many of which are outside of our control, including technology, or the availability of recycled resin.
While we no longer face reporting requirements under SEC rules after the SEC stated it would no longer defend its previous rules on climate-related disclosures, we may be subject to reporting requirements as states enact reporting obligations. Regardless of whether governmental bodies enact legislation to address climate change and reduce GHG emissions or we achieve our 10-year goals, the public perception of carbon-intensive industries may change adversely over time and additional focus on environmental, social and governance issues by the public and/or investors may harm our business as it could damage our reputation, require us to expend resources in reducing our net carbon emissions, or reduce demand for our products, which could adversely impact our results of operations and cash flows.
Our results of operations could be adversely affected by the effects of weather.
Most of our business units experience seasonal variation as a result of the dependence of our customers on suitable weather to engage in construction projects. Generally, during the winter months, construction activity declines due to inclement weather, frozen ground and shorter daylight hours. 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.
Notwithstanding our commitment to advancing sustainable business practices, climate change may also have adverse physical or financial impacts on our business to the extent that it causes more severe or more frequent major storm events, flooding, drought-induced wildfires, or other shifts in weather patterns. Increases in the intensity and frequency of acute weather events have been linked to climate change, and this risk may increase to the extent global warming continues or is unabated. 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.
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 50% o f our net sales in fiscal 2026. 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. The loss of one or more of our significant customers, a significant customer’s decision to purchase our products in significantly lower quantities than they have in the past, or deterioration in our relationship with any of them could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Because our business is working capital intensive, we rely on our ability to manage our supply purchasing and customer credit policies.
The majority of our net sales volume is facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon the economic strength of the industry in the areas where they operate. The inability of our customers to pay in a timely manner, or at all, would adversely affect our business, financial condition, results of operations and cash flows. Furthermore, our collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.
Our operations are working capital intensive, and our inventories, accounts receivable and accounts payable are significant components of our net asset base. We manage our inventories and accounts payable through our purchasing policies and our accounts receivable through our customer credit policies. If we fail to adequately manage our supply purchasing or customer credit policies, our working capital and financial condition may be adversely affected.
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Our international operations expose us to political, economic and regulatory risks not normally faced by businesses that operate only in the U.S. As a result of our international operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.
Our international operations are subject to risks similar to those affecting our operations in the U.S. in addition to a number of other risks, including: difficulties in enforcing contractual and intellectual property rights; impositions or increases of withholding and other taxes on remittances and other payments by subsidiaries and affiliates; difficulties in managing and complying with continually evolving data and privacy laws, such as the European Union’s General Data Protection Regulation and a number of state-specific consumer privacy laws in the U.S.; exposure to different or changing legal standards, including potential changes in government mandated regulatory product standards in those countries in which we or our joint ventures operate; fluctuations in currency exchange rates; impositions or increases of investment and other restrictions by foreign governments; the requirements of a wide variety of foreign laws; political and economic instability; war, escalating geopolitical conflicts or acts or threats of terrorism; and difficulties in staffing and managing operations, particularly in remote locations.
The U.S. Foreign Corrupt Practices Act 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 unfairadvantage, and generally require companies to maintain accurate books and records and internal controls, including at foreign controlled subsidiaries. Our internal policies provide for compliance with all applicable anti-corruption laws for both us and for our joint venture operations. Our continued operation and expansion outside the U.S., including in developing countries, could increase the risk of such violations in the future. Despite our training and compliance programs, our internal control policies and procedures may not always protect us from unauthorized, reckless or criminal acts committed by our employees, agents or joint venture partners.
Conducting a portion of our operations through joint ventures exposes us to risks and uncertainties, many of which are outside of our control.
With respect to our existing joint ventures, any differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major issues. We also cannot control the actions of our joint venture partners, including any nonperformance, default or bankruptcy of our joint venture partners. We may be unable to control the quality of products produced by the joint ventures or achieve consistency of product quality as compared with our other operations. In addition to net sales and market share, this may have a material negative impact on our brand and how it is perceived thereafter. Moreover, if our partners also fail to invest in the joint venture in the manner that is anticipated or otherwise fail to meet their contractual obligations, the joint ventures may be unable to adequately perform and conduct their respective operations, requiring us to make additional investments or perform additional services to ensure the adequate performance and delivery of products and/or services to the joint ventures’ customers, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may not be able to successfully expand into new products.
We may develop new products and processes based on our existing manufacturing, design and engineering capabilities and services. Our business depends in part on our ability to identify future products and product lines that complement existing products and product lines and that respond to our customers’ needs. We may not be able to compete effectively unless our product selection keeps up with trends in the markets in which we compete or trends in new products. In addition, our ability to integrate new products and product lines into our distribution network could impact our ability to compete. Furthermore, the success of new products and new product lines will depend on market demand and there is a risk that new products and new product lines will not deliver expected results, which could negatively impact our future sales and results of operations.
We continue to invest in our initiatives. If we fail to implement these initiatives as expected, our business, financial condition, and results of operations could be adversely affected.
Our financial performance and future growth depend on our management’s ability to successfully implement our initiatives. Our operational initiatives are focused on customer experience, capacity expansion, automation, safety, order management and transportation. 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.
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We are affected by increased fuel and energy prices, and our inability to obtain sufficient quantities of fuel to operate our in-house delivery fleet could negatively impact our business, results of operations and cash flows.
Prices and availability of petroleum products are subject to political, economic and market factors that are outside our control. We consume a large amount of energy and petroleum products in our operations, including the manufacturing process and delivering products to our customers by our in-house fleet. The recent conflict in the Middle East has led to an increase in oil prices in the U.S. Oil prices may continue to surge if the conflict continues, other geopolitical conflicts arise or continue, certain oil supply routes remain blocked or additional supply routes become blocked. While we utilize a diesel hedging program associated with our in-house fleet to mitigate against higher fuel prices, our operating profit will be adversely affected if we are unable to obtain the energy and fuel we require or to fully offset the anticipated impact of higher energy and fuel prices through increased prices or surcharges to our customers or through other hedging strategies. If shortages occur in the supply of energy or necessary petroleum products and we are not able to pass along the full impact of increased energy or petroleum prices to our customers, our business, financial condition, results of operations and cash flows would be adversely affected.
Internally manufacturing our products at our own facilities subjects our business to risks associated with manufacturing processes and supply chain disruption.
We internally manufacture our own products at our facilities with substantial fixed costs. 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. Our business interruption insurance may not be sufficient to offset the lost revenues or increased costs that we may experience during a disruption of our operations.
Unexpectedfailures of our equipment and machinery may result in production delays, revenue loss and significant repair costs, injuries to our employees, and customer claims. Increasing manufacturing capacity requires successful execution of capital projects, including adding, upgrading and replacing equipment, which may be subject to supply chain delays for equipment or parts. 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. 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.
We are exposed to construction defect and product liability claims relating to our various products if our products do not meet customer expectations. Such liabilities may arise out of the quality of raw materials we purchase from third-party suppliers. We also operate a large fleet of trucks and other vehicles and therefore face the risk of traffic accidents. We cannot make assurances that our insurance will provide adequate coverage againstclaims or that we will be able to obtain such insurance on acceptable terms in the future, if at all.
From time to time, we are also involved in government inquiries and investigations, as well as consumer, employment, tort proceedings and other litigation. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies. The outcome of some of these legal proceedings and other contingencies could require us to take actions which would adversely affect our operations, negatively impact customer confidence in us and our products or could require us to pay substantial amounts of money. Additionally, defendingagainst these lawsuits and proceedings may involve significant expense and diversion of management’s attention and resources from other matters.
Our operations are affected by various laws and regulations in the markets in which we operate, including government mandated regulatory product standards, and our failure to obtain or maintain approvals by municipalities, state departments of transportation, engineers and developers may affect our results of operations.
While we are not engaged in a regulated industry, we are subject to various laws applicable to businesses generally, including laws affecting land usage, zoning, the environment, health and safety, transportation, labor and employment practices (including pensions), competition, immigration and other matters. Approvals by municipalities, the U.S. and state departments of transportation, engineers and developers may affect the products our customers are allowed to use, and, consequently, failure to obtain or maintain such approvals may affect the salability of our products. Building codes may also affect the products our customers use, and, consequently, changes in building codes may also affect the salability of our products. Changes in applicable regulations governing the sale of some of our products, including changes in government-mandated regulatory product standards in countries in which we or our joint ventures operate, could increase
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our costs. 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. Vehicle dimensions and driver hours of service are subject to both federal and state regulation. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service could increase our costs, which, if we are unable to pass these cost increases on to our customers, would reduce our gross profit and net income (loss) and increase our selling, general and administrative expenses.
We cannot predict whether future developments or changes in law, regulations or government mandated product standards will affect our business, financial condition and results of operations in a negative manner. 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. 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.
Because we use our information technology (“IT”) systems to, among other things, manage inventories and accounts receivable, make purchasing decisions and monitor our results of operations, the proper functioning of our IT systems is important to the successful operation of our business. 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. If critical IT systems fail, or are otherwise unavailable, our ability to process orders, track credit risk, identify business opportunities, maintain proper levels of inventories, collect accounts receivable and pay expenses and otherwise manage our business units would be adversely affected.
Management uses IT systems to support decision making and to monitor business performance. We may fail to generate accurate financial and operational reports essential for making decisions at various levels of management. In addition, if we do not maintain adequate controls such as reconciliations, segregation of duties and verification to prevent errors or incomplete information, our ability to operate our business could be limited.
We have made, and will continue to make, significant investments in technology. Our technology initiatives are designed to provide our customers a better order management and fulfillment experience, streamline our manufacturing operations and improve the quality of our internal control environment. The cost and potential problems and interruptions associated with the implementation of our technology initiatives could disrupt or reduce the efficiency of our operations in the near term. In addition, our new or upgraded technology might not provide the anticipated benefits, might take longer than expected to realize the anticipated benefits or might fail altogether. 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.
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. These incidents include but are not limited to, malicious software or viruses, including “ransomware” attempts to gainunauthorized access to, or otherwise disrupt, our information systems, attempts to gainunauthorized 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. 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.
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 any of these events could adversely affect our reputation and could result in litigation, regulatory action, financial loss, project delayclaims and increased costs and operational consequences of implementing further data protection systems.
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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. Given the persistent and advanced nature of cybersecurity threats, we continue to invest in upgraded programs, implement advanced features, and establish adequate controls to stop or curtail these threats. However, investing in upgraded programs, advanced features and adequate controls is expensive and an ongoing, rapidly changing challenge. Further, 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. The occurrence of such events could have a material adverse effect on our business financial condition, reputation and results of operations.
All of these risks are also applicable when we rely on outside vendors to provide services. We are dependent on third-party vendors to operate secure and reliable systems which may include data transfers over the internet. Any events which deny us use of vital operating or information systems may seriouslydisrupt 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, reputation and financial performance.
Our success depends upon our ability to control labor costs and to attract, train and retain highly qualified employees and key personnel.
To be successful, we must attract, train and retain a large number of highly qualified employees while controlling related labor costs. 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. 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. Additionally, we increasingly compete for talent within our industry.
In addition, our business results of operations depend largely upon our chief executive officer and senior management team as well as our plant managers and sales personnel, including those of companies acquired, and their experience, knowledge of local market dynamics and specifications and long-standing customer relationships. Our inability to retain, develop or hire qualified employees would restrict our ability to grow our business, limit our ability to continue to successfully operate our business and result in lower operating results and profitability.
If we are unable to protect our intellectual property rights, or we infringe on the intellectual property rights of others, our ability to compete could be negatively impacted.
Our ability to compete effectively depends, in part, upon our ability to protect and preserve proprietary aspects of our intellectual property through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.S. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.
We could incur significant costs in complying with environmental, health and safety laws or permits or as a result of satisfying any liability or obligation imposed under such laws or permits.
Our operations are subject to various federal, state, local and foreign environmental, health and safety laws and regulations. Violations of these laws and regulations, failure to obtain or maintain required environmental permits or non-compliance with any conditions contained in any environmental permit can result in substantial fines or penalties, injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit revocations and/or facility shutdowns. We could be held liable for the costs to address contamination of any real property we have ever owned, leased, operated or used, including as a disposal site. 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.
In addition, changes in, or new interpretations of, existing laws, regulations or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, including additional investigation or other obligations with respect to any potential health hazards of our products or
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business activities or the imposition of new permit requirements, may lead to additional compliance or other costs that could have material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Relating to Our Acquisition of NDS
We may be unable to successfully integrate our and NDS’ businesses in order to realize the anticipated benefits of the acquisition or do so within the intended timeframe.
We will be required to devote significant management attention and resources to integrating the business practices and operations of NDS with our business. We may be unable to realize the planned synergies from the acquisition or other benefits in the timeframe that we expect or at all. We continue to assess synergies that we may realize as a combined company, the realization of which will depend on a number of factors.
The success of the acquisition, including anticipated synergies, benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate our current operations with NDS’ business. 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 at all 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. These integration matters could have an adverse effect on our combined company for an undetermined period after completion of the acquisition. In addition, the actual cost savings of the acquisition could be less than anticipated or otherwise offset by other factors.
Additional difficulties we may encounter as part of the integration process include the following:
• the costs of integration and compliance and the possibility that the full benefits anticipated to result from our acquisition of NDS will not be realized;
• any delay in the integration of management teams, strategies, operations, products and services;
• diversion of the attention of each company’s management as a result of our acquisition of NDS;
• differences in business backgrounds, corporate cultures and management philosophies that may delaysuccessful integration;
• operating in foreign jurisdictions where we have no prior operating experience, including compliance, workforce and operational challenges;
• delays in the disposition of the NDS International Entities;
• the ability to retain key employees;
• the ability to create and enforce uniform standards, controls, procedures, policies and information systems;
• the challenge of integrating complex systems, technology, networks and other assets of NDS into those of ours in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;
• potential unknown liabilities and unforeseen increased expenses or delays associated with the acquisition, including costs to integrate NDS beyond current estimates; or
• the disruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies.
Any of these factors could adversely affect each company’s ability to maintain relationships with customers, suppliers, employees and other constituencies or our ability to achieve the anticipated benefits of the acquisition or could reduce each company’s earnings or otherwise adversely affect our business and financial results after the acquisition. These risks are not limited to our acquisition of NDS and could also apply to our future acquisitions.
Uncertainties associated with our acquisition of NDS may cause a loss of management personnel and other key employees, which could adversely affect our future business, operations and financial results.
The acquisition of NDS could disrupt our and NDS’ businesses. We are dependent on the experience and industry knowledge of senior management and other key employees to execute our business plans, which could be disrupted by the unanticipated departure of any key member of our management team or employee base, as well as management or key employees of NDS. Our and NDS’ current and prospective employees may experience uncertainty about their roles within our company, which may have an adverse effect on the ability of each of us to attract or retain key management and other key personnel.
Accordingly, no assurance can be given that we will be able to attract or retain our and NDS’ key management personnel and other key employees to the same extent that our companies have previously been able to attract or retain such employees. In addition, because of the specialized and technical nature of our business, our future performance is dependent on the continued service of, and on our ability to attract and retain, qualified management, engineering,
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technical, marketing and support personnel. Competition for such personnel is intense, and we may be unable to continue to attract or retain such personnel.
Our results after our acquisition of NDS may suffer if we do not effectively manage our expanded operations following the acquisition or the business of NDS may underperform relative to our expectations.
Following our acquisition of NDS, the size and complexity of our business will increase significantly beyond the current size of either our or NDS’ existing business. Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and new types of manufacturing processes and products and associated increased costs and complexity. There can be no assurances that we will be successful after completion of the acquisition or that we will realize the expected benefits currently anticipated from our acquisition of NDS.
Additionally, we may not be able to maintain the levels of revenue, earnings or operating efficiency that we and NDS have achieved or might achieve separately. The business and financial performance of NDS is subject to certain risks and uncertainties, including the risk of the loss of, or changes to, its relationships with its customers. We may be unable to achieve the same growth, revenues and profitability that NDS has achieved in the past.
Risks Relating to Our Indebtedness
Our level of indebtedness could adversely affect our business, financial conditions or results of operations and prevent us from fulfilling our obligations under the agreements governing the terms of our indebtedness.
Our indebtedness could have risks. 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;
• 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.
We expect to pay principal and interest on current and future debt from cash provided by operating activities. Therefore, our ability to meet these payment obligations will depend on future financial performance and cash availability. If our cash flow and capital resources are insufficient to fund our debt obligations, we may be forced to reduce or delay expansion plans and capital expenditures, limit payment of dividends, sell material assets or operations, obtain additional capital or restructure our debt.
Risks Relating to Our Common Stock
Future sales of shares by existing stockholders could cause our stock price to decline.
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline. Based on shares outstanding as of May 14, 2026, we have 76.6 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,
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2026, there were stock options outstanding to purchase a total of approximately 0.9 million shares of our common stock. In addition, approximately 1.5 million shares of common stock are available for grant under our 2017 Omnibus Plan.
Certain of our significant stockholders may distribute shares that they hold to their investors who themselves may then sell into the public market. Such sales may not be subject to the volume, manner of sale, holding period and other limitations of Rule 144 of the Securities Act (“Rule 144”). As resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them.
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.
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. The 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 14, 2026, our directors, officers and principal stockholders and their affiliates collectively own, or have the right to own within 60 days, approx imately 16% of our outstanding shares of common stock. 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. Thus, the collective voting power of our directors, officers and principal stockholders and their affiliates as of May 14, 2026 is approximately 22%, inclusive of the outstanding shares of common stock held by the KSOP. As a result, these stockholders, if they act together, may be able to control our management and affairs and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change of control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of our other stockholders.
The KSOP trustee has the ability to vote a significant block of shares on certain matters presented to stockholders for approval. Each participant with an ESOP account in the KSOP may direct the KSOP trustee on how to vote the shares of common stock allocated to the participant’s ESOP accounts in the KSOP; and the KSOP trustee may vote any shares of common stock for which no participant instructions were received in the same proportion as the allocated stock for which participants’ voting instructions have been received is voted.
Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of us and may affect the trading price of our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. 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 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.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware General Corporation Law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
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Our amended and restated certificate of incorporation and amended and restated bylaws may also make it difficult for stockholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.
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. Any person or entity purchasing or otherwise acquiring any interest in shares of our common stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us or our directors, officers, employees or agents. If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
General Risk Factors
As a publicly-traded manufacturing company, we are subject to a variety of risks in addition to the risks described above, each of which could adversely affect our financial position, results of operations or cash flows.
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 OBBBA signed July 4, 2025, Inflation Reduction Act of 2022, Tax Cuts and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security Act and any future tax legislation;
• the impact of tariffs;
• 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;
• our inability to 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.
superior
innovative
leading
acclaimed
excellence
Key Factors Affecting Our Results of Operations
Product Demand - There are numerous factors that influence demand for our products. Our businesses are cyclical in nature and sensitive to general economic conditions, primarily in the United States, Canada, Mexico and South America. The non-residential, residential, agricultural and infrastructure markets we serve are affected by the availability of credit, lending practices, interest rates and unemployment rates. Demand for new homes, farm income, commercial development and highway infrastructure spending have a direct impact on our financial condition and results of operations. Accordingly, the following factors may have a direct impact on our business in the markets in which our products are sold:
• the strength of the economy;
• the amount and type of non-residential and residential construction;
• funding for infrastructure spending;
• farm income and agricultural land values;
• inventory of improved housing lots;
• changes in raw material and commodity prices;
• the availability and cost of credit;
• non-residential occupancy rates; and
• demographic factors such as population growth and household formation.
Growth in Allied Products - Our Allied Products include storm and onsite wastewater chambers, PVC drainage structures, fittings, stormwater filters and water separators. These products complement our pipe products and allow us to offer a comprehensive water management solution to our customers and drive organic growth. Our leading market position in pipe products allows us to cross-sell Allied Products effectively. Our comprehensive offering of Allied Products can also increase pipe sales in certain markets. Allied Products are less sensitive to resin prices since resin prices represent a smaller percentage of the cost for Allied Products. Our leading position in the pipe market has allowed us to increase organic growth of our Allied Products, and we also expect to expand our Allied Product offerings through acquisitions, including our recent acquisition of NDS.
Product Pricing - The price of our products is impacted by competitive pricing dynamics in our industry as well as by raw material costs. Our industry is highly competitive and the sales prices for our products may vary based on the sales policies of our competitors. Raw material costs represent a significant portion of the cost of goods sold for our products. We aim to increase our product selling prices in order to cover raw material price increases, including increases due to tariffs, but the inability to do so could impact our profitability. Movements in raw material, logistics or other overhead costs and resulting changes in the selling prices may also impact changes in period-to-period comparisons of net sales.
Material Conversion - Our HDPE and PP pipe, plastic leachfield chambers, onsite wastewater tanks and related water management product lines compete with other manufacturers of similar products as well as manufacturers of alternative products made with traditional materials, such as concrete, steel and PVC. 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
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from traditional materials. 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.
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. 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. Our ability to pass through raw material price increases to our customers may lag the increase in our costs of goods sold. Sharp rises in raw material prices over a short period of time have historically occurred with a significant supply disruption, which may increase prices to levels that cannot be fully passed through to customers due to pricing of competing products or the anticipated length of time the raw material pricing will stay elevated.
We currently purchase in excess of 1.0 billion pounds of virgin and recycled resin annually from approximately 450 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). The price movements of the different materials vary, resulting in the need to use a number of strategies to reduce volatility.
In order to reduce the volatility of raw material costs in the future, our raw material strategies for managing our costs include the following:
• increasing the use of low cost resin in place of virgin resin while meeting or exceeding industry standards;
• internally processing greater amounts of our recycled resin in order to closely monitor quality and minimize costs;
• managing a resin price risk program that may entail both physical fixed price and volume contracts; and
• maintaining supply agreements with our major resin suppliers that provide multi-year terms and volumes that are in excess of our projected consumption.
We also consume a large amount of energy and other petroleum products in our operations, including the electricity we use in our manufacturing process as well as the diesel fuel consumed in delivering a significant volume of products to our customers through our in-house fleet. As a result, our operating profit also depends upon our ability to manage the cost of the energy and fuel we require, as well as our ability to pass through increased prices or surcharges to our customers.
Seasonality - Our operating results are impacted by seasonality. Historically, sales of our products have been higher in the first and second quarters of each fiscal year due to favorable weather and longer daylight conditions accelerating construction project activity during these periods while fourth quarter results are impacted by the timing of spring in the northern United States and Canada. Seasonal variations in operating results may also be significantly impacted by inclement weather conditions, which can delay projects, resulting in decreased net sales for one or more quarters, but we believe that these delayed projects generally result in increased net sales during subsequent quarters.
In the non-residential, residential and infrastructure markets in the northern United States and Canada, the construction season typically begins to gain momentum in late March and lasts through November, before winter significantly slows the construction markets. In the southern and western United States, Mexico, Central America and South America, the construction markets are less seasonal. The agricultural drainage market is concentrated in the early spring just prior to planting and in the fall just after crops are harvested prior to freezing of the ground in winter.
Currency Exchange Rates - Although we sell and manufacture our products in many countries, our sales and production costs are primarily denominated in U.S. dollars. We have wholly-owned facilities in Canada, the Netherlands and joint venture facilities in Mexico, Chile, Brazil, Argentina, Colombia and Peru. The functional currencies in the areas in which we have wholly-owned facilities and joint venture facilities other than the U.S. dollar are the Canadian dollar, Euro, Mexican peso, Chilean peso, Brazilian real and Colombian peso. From time to time, we use derivatives to reduce our exposure to currency fluctuations.
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Executive Summary of Our Fiscal 2026 Results
• Net sales increased 5.0% to $3.1 billion
• Net income from continuing operations decreased 5.0% to $429.9 million
• Adjusted EBITDA increased 8.3% to $962.9 million
• Cash provided by operating activities increased $237.6 million to $819.1 million
• Free cash flow increased $200.7 million to $569.3 million
Net sales increased $146.1 million, or 5.0%, to $3,050.4 million, as compared to $2,904.2 million in the prior year. Stormwater sales increased $71.0 million, or 3.1%, to $2,397.4 million. Wastewater sales increased $75.1 million, or 13.0%, to $653.0 million.
Gross profit increased $73.1 million, or 6.7%, to $1,167.4 million as compared to $1,094.2 million in the prior year. The increase in gross profit is primarily driven by favorable volume, price/cost and mix of construction market and Infiltrator sales, partially offset by unfavorable fixed cost absorption as well as the mix impact from acquisitions.
Adjusted EBITDA, a non-GAAP financial measure, increased $73.7 million, or 8.3%, to $962.9 million, as compared to $889.2 million in the prior year. The increase is primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 31.6% as compared to 30.6% in the prior year.
Description of our Segments
Following the acquisition of NDS, the Company realigned its reportable segments to align with the manner in which the CODM assesses performance and makes resource allocation decisions. The Company’s revised reportable segments consist of Stormwater and Wastewater (formerly referred to as the “Infiltrator” reportable segment). Further, the Company changed the measure used to evaluate segment profitability from adjusted gross profit to Adjusted EBITDA. Segment results for the historical periods presented in these consolidated financial statements have been recast to reflect these changes. The Segment Realignment had no impact on our previously reported consolidated net sales, income from operations, net income attributable to ADS or earnings per share.
We generate a greater portion of our net sales and Adjusted EBITDA in our Stormwater segment, which includes sales of high performance thermoplastic corrugated pipe and complementary products throughout the United States and certain international regions. We expect the percentage of total net sales and gross profit derived from the Wastewater segment to continue to increase in future periods as we continue to expand our wastewater management presence. See “Note 20. Business Segment Information” to our audited consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Stormwater - The Stormwater segment manufactures and markets high performance thermoplastic corrugated pipe and complementary products designed as an integrated, end-to-end solution set which provides a comprehensive approach to managing stormwater from the moment it hits the ground until it is cleaned and returned to its natural environment. In February 2026, the Company acquired NDS to further expand the Stormwater product offering, enhance go-to-market capabilities in retail and distributor channels, and expand the Stormwater addressable market. Stormwater products are sold and manufactured throughout the United States and certain international regions, including Company owned facilities in Canada, subsidiaries that distribute to Europe and the Middle East, and exports through the Company’s joint ventures with local partners in Mexico and South America. The Company maintains and serves these markets through product distribution relationships with many of the largest waterworks distributors, buying groups and co-ops, major retailers as well as an extensive network of hundreds of small to medium-sized distributors. Our joint venture strategy has provided us with local and regional access to new international markets. The unconsolidated sales of the South American Joint Venture were $75.6 million, $72.3 million, and $75.9 million, in fiscal 2026, 2025, and 2024, respectively.
Wastewater - Wastewater (formerly “Infiltrator”) is a leading national provider of plastic leachfield chambers and systems, onsite wastewater tanks and accessories, primarily for use in residential applications. Wastewater products are used in onsite wastewater treatment systems in the United States and Canada.
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Results of Operations for Fiscal Year Ended March 31, 2026 Compared with Fiscal Year Ended March 31, 2025
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, 2026 and 2025. We believe this presentation is useful to investors in comparing historical results.
(Amounts in thousands)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Loss on disposal of assets and costs from exit and disposal activities
Intangible amortization
Income from operations
Interest expense
Interest income and other, net
Income before income taxes
Income tax expense
Equity in net income of unconsolidated affiliates
Net income from continuing operations
Net loss from discontinued operations, net of taxes
Net income
Less: net income attributable to the non-controlling interest
Net income attributable to ADS
Net sales - The following table presents net sales to external customers by reportable segment for the fiscal years ended March 31, 2026 and 2025.
(Amounts in thousands)
$ Variance
% Variance
Stormwater
Wastewater
Total Consolidated
Our consolidated net sales for the fiscal year ended March 31, 2026 increased by $146.1 million, or 5.0%, compared to fiscal 2025. The increase in Stormwater sales was primarily driven by NDS net sales of $48.8 million and an increase in demand for our Allied Products in the non-residential construction market. The increase in Wastewater sales was primarily driven by an increase of Orenco net sales of $52.6 million to account for a full year of sales in fiscal 2026 and an increase in demand in the construction market.
Cost of goods sold and Gross profit - The following table presents gross profit by reportable segment for the fiscal years ended March 31, 2026 and 2025.
(Amounts in thousands)
$ Variance
% Variance
Stormwater
Wastewater
Intersegment eliminations
Total gross profit
Our consolidated Cost of goods sold for the fiscal year ended March 31, 2026 increased by $73.0 million or, 4.0%, and our consolidated Gross profit decreased by $73.1 million, or 6.7%, compared to the same period in fiscal 2025. The increase in gross profit for Stormwater is primarily due to favorable material costs and the acquisition of NDS. The increase in gross profit for Wastewater was driven by Orenco and volume.
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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, 2026 and 2025.
(Amounts in thousands)
Selling, general and administrative
% of Net Sales
Selling, general and administrative expenses for the fiscal year ended March 31, 2026 increased $89.2 million from the same period in fiscal 2025. The increase in Selling, general and administrative expenses is primarily the result of an increase in transaction costs of $31.5 million due to the acquisition of NDS, incremental operating expenses of NDS and Orenco, unfavorable incentive and stock-based compensation, and realignment expenses of $12.0 million.
Loss on disposal of assets and costs from exit and disposal activities - The loss on disposal in fiscal 2026 was due to exit and disposal activities related to plant closures and asset disposals partially offset by the sale of properties held-for-sale. See “Note 3. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.
Intangible amortization - Intangible amortization increased by $6.9 million primarily due to the increase in intangible assets due to the NDS acquisition and the accelerated method of amortization for customer relationships.
Interest expense - Interest expense increased $2.1 million for the fiscal year ended March 31, 2026 compared to the same period in fiscal 2025. The increase was primarily due to increased debt levels.
Interest income and other, net - Interest income and other, net increased by $10.6 million for the fiscal year ended March 31, 2026 compared to the same period in fiscal 2025. The increase was primarily due to increased cash balances in the fiscal year and unrealized gains related to derivatives.
Income tax expense - The following table presents the effective tax rates for the fiscal years presented:
Effective tax rate
See “N ote 16. 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, 2026 compared to the same period in fiscal 2025 due to the current period income at our South American Joint Venture.
Net income attributable to noncontrolling interest - Net income attributable to noncontrolling interest was relatively flat for fiscal year ended March 31, 2026 compared to the same period in fiscal 2025.
Net loss from discontinued operations - The loss from discontinued operations was attributable the NDS International entities classified as held for sale as of March 31, 2026.
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Results of Operations for Fiscal Year Ended March 31, 2025 Compared with Fiscal Year Ended March 31, 2024
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, 2025 and 2024. We believe this presentation is useful to investors in comparing historical results.
(Amounts in thousands)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Loss (gain) on disposal of assets and costs from exit and disposal activities
Intangible amortization
Income from operations
Interest expense
Interest income and other, net
Income before income taxes
Income tax expense
Equity in net income of unconsolidated affiliates
Net income
Less: net income attributable to the non-controlling interest
Net income attributable to ADS
Net sales - The following table presents net sales to external customers by reportable segment for the fiscal years ended March 31, 2025 and 2024.
(Amounts in thousands)
$ Variance
% Variance
Stormwater
Wastewater
Total Consolidated
Our consolidated net sales for the fiscal year ended March 31, 2025 increased by $29.8 million, or 1.0%, compared to fiscal 2024. The decrease in Net sales for Stormwater was primarily driven by unfavorable price/mix impact partially offset by higher demand in our Allied Products. The increase in Net sales for Wastewater was driven by improved price/mix and $46.4 million of net sales from Orenco.
Cost of goods sold and Gross profit - The following table presents gross profit by reportable segment for the fiscal years ended March 31, 2025 and 2024.
(Amounts in thousands)
$ Variance
% Variance
Stormwater
Wastewater
Intersegment eliminations
Total gross profit
Our consolidated Cost of goods sold for the fiscal year ended March 31, 2025 increased by $81.5 million or, 4.7%, and our consolidated Gross profit decreased by $51.7 million, or 4.5%, compared to the same period in fiscal 2024. The decrease in gross profit for Stormwater is primarily due to unfavorable material cost and the decrease in Net sales in Pipe. The increase in gross profit for Wastewater was driven by improved pricing, improved material costs and the acquisition of Orenco.
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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, 2025 and 2024.
(Amounts in thousands)
Selling, general and administrative
% of Net Sales
Selling, general and administrative expenses for the fiscal year ended March 31, 2025 increased $9.7 million from the same period in fiscal 2024. The increase in Selling, general and administrative expenses is primarily the result of the operating and acquisition expenses of Orenco partially offset by favorable incentive and stock-based compensation expense.
Loss (gain) on disposal of assets and costs from exit and disposal activities - The change in Loss (gain) on disposal of assets and costs from exit and disposal activities is primarily due to the closure of a plant and other asset disposals in fiscal 2025 compared to a 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.
Intangible amortization - Intangible amortization increased by $1.1 million primarily due to the increase in intangible assets due to the Orenco acquisition.
Interest expense - Interest expense increased $2.9 million for the fiscal year ended March 31, 2025 compared to the same period in fiscal 2024. The increase was primarily due to an increase in interest rates.
Interest income and other, net - Interest income and other, net increased by $0.3 million for the fiscal year ended March 31, 2025 compared to the same period in fiscal 2024.
Income tax expense - The following table presents the effective tax rates for the fiscal years presented:
Effective tax rate
The change in the effective tax rate was primarily related to the increase of the income tax benefit related to the stock-based compensation windfall and the increase of income tax expense related to the executive compensation limitation in fiscal year 2025. See “N ote 16. Income Taxes” for additional information.
Equity in net income of unconsolidated affiliates - The Equity in net income of unconsolidated affiliates decreased for the fiscal year ended March 31, 2025 compared to the same period in fiscal 2024 due to a decrease in the current period income at our South American Joint Venture.
Net income attributable to noncontrolling interest - Net income attributable to noncontrolling interest decreased for the fiscal year ended March 31, 2025 due to decreased net income at our ADS Mexicana joint venture.
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin - EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, non-GAAP financial measures, have been presented in this Annual Report on Form 10-K as supplemental measures of financial performance that are not required by, or presented in accordance with generally accepted accounting principles (“GAAP”) and should not be considered as alternatives to net income as measures of financial performance or any other performance measure derived in accordance with GAAP. We calculate Adjusted EBITDA as net income from continuing operations before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other gains and expenses. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are included in this Annual Report on Form 10-K because they are key metrics used by management and our Board of Directors to assess our financial performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. 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.
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EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not GAAP measures of our financial performance and should not be considered as alternatives to net income as measures of financial performance or any other performance measure derived in accordance with GAAP, and it should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as stock-based compensation expense, derivative fair value adjustments, and foreign currency transaction losses. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin on a supplemental basis. Our measure of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
(Amounts in thousands)
Net income from continuing operations
Depreciation and amortization
Interest expense
Income tax expense
EBITDA
Restructuring and realignment expense (a)
(Gain) loss on disposal of assets
Stock-based compensation expense
Transaction costs (b)
Inventory step up related to acquisition of NDS
Interest income
Other adjustments (c)
Adjusted EBITDA
Adjusted EBITDA Margin
(a) Includes costs associated with the optimization of the Company’s production, recycling and distribution network, as well as professional fees incurred in connection with supporting enterprise-wide restructuring and realignment initiatives. Excludes gain on sale of properties previously held-for-sale and equipment. See “Note 3. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” 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.
(c) Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, inventory step-up costs, 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).
Liquidity and Capital Resources
Historically we have funded our operations through internally generated cash flow supplemented by debt financings, equity issuance and finance and operating leases. These sources have been sufficient historically to fund our primary liquidity requirements, including working capital, capital expenditures, debt service and dividend payments. From time to time, we may explore additional financing methods and other means to raise capital. There can be no assurance that any additional financing will be available to us on acceptable terms or at all.
Free Cash Flow - Free cash flow is a non-GAAP financial measure that comprises cash flow from operations less capital expenditures. Free cash flow is a measure used by management and our Board of Directors to assess our ability to generate cash. 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. Free cash flow is not a GAAP measure of our liquidity and should not be considered as an alternative to cash flow from operating activities as a measure of liquidity or any other liquidity measure derived in
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accordance with GAAP. Our measure of free cash flow is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
(Amounts in thousands)
Cash flow from operating activities
Capital expenditures
Free cash flow
The following table presents key liquidity metrics utilized by management:
(Amounts in thousands)
March 31, 2026
Total debt (debt and finance lease obligations)
Cash
Net debt (total debt less cash)
Leverage ratio (Net debt/Adjusted EBITDA)
The following table summarizes our available liquidity under our Revolving Credit Facility as of March 31, 2026:
(Amounts in thousands)
March 31, 2026
Revolver capacity
Less: outstanding borrowings
Less: letters of credit
Revolver available liquidity
As of March 31, 2026, we had $25.7 million in cash that was held by our foreign subsidiaries, of which, $13.1 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 16 . Income Taxes” for additional discussion of our plans to repatriate earnings from Canada.
Working Capital and Cash Flows
In fiscal 2026, our cash balance decreased by $235.3 million. Cash outflows from the acquisition of NDS, repayment of the term loan and Senior Notes due 2027, and capital expenditures of $249.8 million were partially offset by cash generated from operations, issuance of the Senior Notes due 2034, proceeds from the new term loan facility, changes in working capital and dispositions of assets. Our decrease of cash in fiscal 2025 was $26.6 million. Cash generated from operations, changes in working capital and dispositions of assets was offset by the acquisition of Orenco, capital expenditures of $212.9 million, $69.9 million in share repurchases and $49.7 million of dividend payments.
As of March 31, 2026, we had $962.9 million in liquidity, including $223.0 million of cash and $739.9 million in borrowings available under our Revolving Credit Agreement, excluding $10.1 million of outstanding letters of credit. We believe that our cash on hand, together with the availability of borrowings under our Credit Agreement and other financing arrangements and cash generated from operations, will be sufficient to meet our working capital requirements, anticipated capital expenditures, and scheduled principal and interest payments on our indebtedness for at least the next twelve months.
Working Capital - Working capital is an indication of liquidity and potential need for short-term funding. We define working capital as current assets less current liabilities. Working capital decreased to $721.4 million as of March 31, 2026, from $926.4 million as of March 31, 2025, primarily due to a decrease in cash due to the acquisition of NDS and capital expenditures, partially offset by cash flow from operations and the incremental working capital of NDS.
Operating Cash Flows - During fiscal 2026, 2025 and 2024, cash provided by operating activities was $819.1 million, $581.5 million and $717.9 million, respectively. Cash flow from operating activities for all periods was primarily driven by operating income and changes in working capital.
Investing Cash Flows - During fiscal 2026, cash used for investing activities was $1,211.8 million. The cash used for investing cash flows was primarily for the acquisition of NDS and capital expenditures. Capital expenditures increased in
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fiscal 2026 compared to fiscal 2025. Our capital expenditures in fiscal 2026 were used primarily to support facility expansions, equipment replacements, technology improvement initiatives and our corporate headquarters.
During fiscal 2025, cash used for investing activities was $447.9 million. The cash used for investing cash flows was primarily from the acquisition of Orenco and capital expenditures. Capital expenditures increased in fiscal 2025 compared to fiscal 2024. Our capital expenditures in fiscal 2025 were used primarily to support new facilities, facility expansions to increase production capacity and recycling capabilities, manufacturing equipment replacements and upgrades, and technology initiatives to improve customer service.
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. Our capital expenditures in fiscal 2024 were used primarily to support new facilities, facility expansions, equipment replacements and technology improvement initiatives.
We currently anticipate that we will make capital expenditures of approximately $200 million in fiscal 2027 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. We had approximately $100 million of open orders through purchase commitments as of March 31, 2026.
Financing Cash Flows - During fiscal 2026, cash provided by financing activities was $156.3 million. During fiscal 2026, we received proceeds from the Term Loan Facility (as defined below) and issued 2034 Notes (as defined below) of $600.0 million and $500.0 million, respectively, we repaid the Initial Term Loan Facility (as defined below) and the 2027 Notes (as defined below) of $413.3 million and $350.0 million, respectively. Additionally, we repurchased shares at a cost of $92.0 million and made dividend payments of $56.1 million.
During fiscal 2025, cash used in financing activities was $157.7 million. During fiscal 2025, we repurchased shares at a cost of $69.9 million and made dividend payments of $49.7 million.
During fiscal 2024 , cash used in financing activities was $284.3 million. During fiscal 2024, we repurchased shares at a cost of $207.3 million and made dividend payments of $47.7 million.
Debt and Capitalized Lease Obligations
See “Note 7. Leases” and “Note 13. 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.
Financing Transactions
Senior Secured Credit Facility - On July 31, 2019, we entered into a credit agreement (the “Base Credit Agreement”) by and among, the Company, as borrower, Barclays Bank PLC, as administrative agent, and several lenders from time to time party thereto. Among other things, the Base Credit Agreement provided for a term loan facility in the initial aggregate principal amount of $1.3 billion (the “Initial Term Loan Facility”) and a revolving credit facility in an initial aggregate amount of up to $350 million (the “Initial Revolving Credit Facility”), which included a sub-limit for a letter of credit sub-facility in the initial aggregate amount of up to $50 million.
On September 24, 2019, we entered into a First Amendment (the “First Amendment”) to the Company’s Base Credit Agreement subsequent to the common stock offering and Senior Notes due in 2027.
On May 26, 2022, the Company entered into a Second Amendment (the “Second Amendment”) to the Company's Base Credit Agreement with, among others, Barclays Bank PLC, as administrative agent under the Initial Term Loan Facility, and PNC Bank, National Association, as new administrative agent under the Initial Revolving Credit Facility. Among other things, the Second Amendment (i) amended the Base Credit Agreement by increasing the Initial Revolving Credit Facility (the “Second 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 the earlier of May 26, 2027 or the date that is six months prior to the earliest maturity date of the outstanding loans under the Initial Term Loan Facility .
On November 26, 2025, the Company entered into a Third Amendment (the “Third Amendment”) to the Company’s Base Credit Agreement. Among other things, the Third Amendment modified the termination date of the Second Amended
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Revolving Credit Facility to remove reference to the earliest maturity date of the loans outstanding under the Initial Term Loan Facility.
On February 27, 2026, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Company’s Base Credit Agreement (the Base Credit Agreement as amended by the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment, the “Credit Agreement”) with, among others, certain subsidiaries of the Company, as guarantors, Bank of America, N.A., as administrative agent under the Term Loan Facility (as defined below) and PNC Bank, National Association, as administrative agent under the Revolving Credit Facility (as defined below) and as successor administrative agent, Barclays Bank PLC, as predecessor administrative agent, and the several financial institutions from time to time party thereto as lenders. Among other things, the Fourth Amendment (i) increased the Amended Revolving Credit Facility from $600 million to $750 million (the “Revolving Credit Facility”), including an increase of the sub-limit for the letter of credit sub-facility from $60 million to $75 million, (ii) refinanced the outstanding amounts owing under the Initial Term Loan Facility by providing for a new term loan facility in the initial aggregate principal amount of $600 million (the “Term Loan Facility”), (iii) extended the maturity date of the Revolving Credit Facility to February 27, 2031, (iv) extended the maturity date of the Term Credit Facility to February 28, 2033, (v) revised the “applicable margin” to provide for a range of 125 basis points to 225 basis points (for Term Benchmark based loans) and 25 basis points to 125 basis points (for base rate loans), as determined based on the consolidated senior secured net leverage ratio ranging from less than 1.50 to 1.00 to greater than or equal to 3.50 to 1.00, (vi) provides for incremental facilities in the aggregate maximum amount of the greater of $350 million or 100% of consolidated EBITDA for the most recently ended four consecutive fiscal quarters, and (vii) amended certain covenant baskets under the Credit Agreement to align with the growth of the Company.
At the option of the Company, borrowings under the Term Loan Facility and under the Revolving Credit Facility (subject to certain limitations) bear interest at either a base rate (as determined pursuant to the Fourth Amendment) or at a Term Benchmark rate (as defined in the Fourth Amendment), plus the applicable margin as set forth therein from time to time. In the case of the Revolving Credit Facility, the applicable margin is based on the Company's consolidated senior secured net leverage ratio (as defined in the Fourth Amendment). All borrowings under the Term Loan Facility as described above initially bear interest at the Term Benchmark rate (as defined in the Fourth Amendment). In the case of the Term Loan Facility, the applicable margin shall be, for loans bearing interest at the Term Benchmark rate, 1.625%, and for loans bearing interest at the base rate, 0.625%.
The Company is also required to pay a commitment fee that is based upon the undrawn amounts of the Revolving Credit Facility at a rate per annum based upon a calculated ratio as prescribed within the Credit Agreement. As of March 31, 2026, the rate the Company was committed to paying on the undrawn portion was equal to 0.15%.
The Company’s obligations under the Credit Agreement have been secured by granting a first priority lien on substantially all of the Company’s assets (subject to certain exceptions and limitations), and each of StormTech, LLC, Infiltrator Water Technologies, LLC, and Orenco Systems, Inc. (collectively the “Guarantors”) has agreed to guarantee the obligations of the Company under the Credit Agreement and to secure the obligations thereunder by granting a first priority lien in substantially all of such Guarantor's assets (subject to certain exceptions and limitations).
Issuance of Senior Notes due 2027 - On September 23, 2019, we issued $350.0 million aggregate principal amount of senior notes (“2027 Notes”), pursuant to the Indenture dated September 23, 2019 (the “2027 Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and U.S. Bank Trust Company, National Association (formerly known as U.S. Bank National Association), as Trustee (the “Trustee”). The 2027 Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act or to persons outside the United States under Regulation S of the Securities Act. We may redeem the 2027 Notes, in whole or in part, at any time on or after September 30, 2022 at established redemption prices set forth in the 2027 Indenture. On February 27, 2026, we redeemed all of our outstanding 2027 Notes in the original aggregate principal amount of $350.0 million at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, to, but excluding, the redemption date in connection with our issuance of $500.0 million aggregate principal amount of 5.375% senior notes due 2034 (the “2034 Notes”). See “Note 13 . Debt” for further information on the 2027 Notes and 2034 Notes.
Equipment Financing - In November 2021, we purchased material handling equipment, trucks and trailers previously leased under a master lease agreement and classified as finance leases. The purchase was funded with debt through the Master Lease Agreement and Interim Funding Schedule with Fifth Third. 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 $3.1 million and had an initial term of between 12 and 84 months, based on the life of the equipment. The equipment financing bears a weighted average interest of 1.8% as of March 31, 2026.
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,
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the Guarantors and the Trustee. The 2030 Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to the Securities Act or to persons outside the United States under Regulation S of the Securities Act. See “Note 13 . Debt” for further information on the 2030 Notes.
Issuance of Senior Notes Due 2034 - On February 27, 2026, we issued $500.0 million aggregate principal amount of 5.375% senior notes due 2034 pursuant to an Indenture, dated February 27, 2026 (the “2034 Indenture”), among the Company, the Guarantors and the Trustee. The 2034 Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to the Securities Act or to persons outside the United States under Regulation S of the Securities Act. See “Note 13 . Debt” for further information on the 2034 Notes.
Covenant Compliance
The Credit Agreement requires, if, on the last day of each fiscal quarter, the aggregate amount of outstanding exposure under the Revolving Credit Facility exceeds 35% of the aggregate maximum amount of commitments under the Revolving Credit Facility then in effect, 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.
The Credit Agreement also includes other covenants, including negative covenants that, subject to certain exceptions, limit the Company's and its restricted subsidiaries’ (as defined in the Credit Agreement) ability to, among other things: (i) incur additional debt, including guarantees; (ii) create liens upon any of their property; (iii) enter into any merger, consolidation or amalgamation, liquidate, wind up or dissolve, or dispose of all or substantially all of their property or business; (iv) dispose of assets; (v) pay subordinated debt; (vi) make certain investments; (vii) enter into swap agreements; (viii) engage in transactions with affiliates; (ix) engage in new lines of business; (x) modify certain material contractual obligations, organizational documents, accounting policies or fiscal year; or (xi) create or permit restrictions on the ability of any subsidiary of any Loan Party (as defined in the Credit Agreement) to pay dividends or make distributions to the Company or any of its subsidiaries.
The Credit Agreement also contains customary provisions requiring the following mandatory prepayments (subject to certain exceptions and limitations): (i) annual prepayments (beginning with the fiscal year ending March 31, 2027) with a percentage of excess cash flow (as defined in the Credit Agreement); (ii) 100% of the net cash proceeds from any non-ordinary course sale of assets and certain casualty or condemnation events; and (iii) 100% of the net cash proceeds of indebtedness not permitted to be incurred under the Credit Agreement. For further information, see “Note 13 . Debt” to the Consolidated Financial Statements. We were in compliance with our debt covenants as of March 31, 2026.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, with the exception of the guarantee of 50% of certain debt of our unconsolidated South American Joint Venture, as further discussed in “Note 12. Related Party Transactions” of our Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data,” of this Form 10-K. Our maximum potential obligation under this guarantee totals $5.5 million as of March 31, 2026. The maximum borrowing permitted under the South American Joint Venture’s credit agreement is $11.0 million. As of March 31, 2026, our South American Joint Venture had no outstanding debt subject to our guarantee. We do not believe that this guarantee will have a current or future effect on our financial condition, results of operations, liquidity, or capital resources.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes. Certain of our accounting policies involve a higher degree of judgment and complexity in their application, and therefore, represent the critical accounting policies used in the preparation of our financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. We believe the following accounting policies may involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our financial statements. 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.
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Policy
Judgments and Estimates
Effect if Actual Results Differ from Assumptions
Revenue Recognition - We generate revenue by selling pipe and related water management products primarily to distributors, retailers, buying groups and co-operative buying groups. Products are shipped predominately by our internal fleet, and we do not provide any additional revenue generating services after product delivery. Payment terms and conditions vary by contract. Revenue is recognized at the point in-time obligations under the terms of a contract with a customer are satisfied, which generally occurs upon the transfer of control of the promised goods. In substantially all of our contracts with customers, control is transferred to the customer upon delivery. We recognize revenue in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We estimate and allocate variable consideration, such as right of return, credits or incentives, based on numerous factors, including the customer agreements and past transaction history.
If our historical experience differs from future experience, our estimates of variable consideration could differ.
Goodwill - Goodwill is reviewed annually for impairment in the fourth quarter or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The fair value of goodwill is determined by considering both the income and market approach.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. In Fiscal 2026, we revised our reportable segments and allocated the goodwill balance on the former Pipe, Infiltrator, International and Allied Products reporting units to our revised reporting units. Based on the revision as of March 31, 2026, the goodwill related to Stormwater and Wastewater reportable segments is $442.6 million and $600.1 million, respectively. Estimates and assumptions include: revenue growth rates and EBITDA used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. 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 in the fourth quarter of Fiscal 2026 using a quantitative approach. We determined for our goodwill that the fair value of the assets exceeded the carrying value for the fiscal year March 31, 2026.
Future events and unanticipated changes to assumptions could require a provision for impairment in a future period.
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Policy
Judgments and Estimates
Effect if Actual Results Differ from Assumptions
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. If the estimated undiscounted future cash flows are less than the carrying amounts of such assets, an impairmentloss is recognized to the extent the fair value of the asset less any costs of disposition is less than the carrying amount of the asset.
Indefinite-lived intangible assets - Indefinite-lived intangible assets are tested for impairment annually as of March 31 or whenever events or changes in circumstances indicate the carrying value may be greater than fair value. Determining the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We base our fair value estimates on assumptions we believe to be reasonable, but that are inherently uncertain. To estimate the fair value of these indefinite-lived intangible assets, we use an income approach, which utilizes a market derived rate of return to discount anticipated performance. An impairmentloss is recognized when the estimated fair value of the intangible asset is less than the carrying value.
Determining the fair value of the definite-lived and indefinite-lived intangible assets is judgmental in nature and involves the use of significant estimates and assumptions.
We did not record any impairment charges for definite-lived intangible assets in fiscal 2026, 2025, or 2024.
We performed our annual impairment test for indefinite-lived intangible assets as of March 31, 2026. 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, 2026. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period.
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Policy
Judgments and Estimates
Effect if Actual Results Differ from Assumptions
Business Combinations - Acquisitions, such as the acquisition of NDS, are accounted for in accordance with ASC 805, Business Combinations. We recognize separately from goodwill the assets acquired and the liabilities assumed, at their acquisition date fair values and goodwill is defined as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.
During the measurement period, which may take up to one year from the acquisition date, adjustments due to changes in the estimated fair value of assets acquired and liabilities assumed may be recorded as adjustments to the consideration transferred and related allocations. Upon the conclusion of the measurement period or the final determination of the values of assets acquired and liabilities assumed, whichever comes first, any such adjustments are charged to the consolidated statements of operations.
Fair values allocated to assets acquired and liabilities assumed in business combinations require management to make significant judgments, estimates, and assumptions, especially with respect to intangible assets. Management makes estimates of fair values based upon assumptions it believes to be reasonable. These estimates are based upon historical experience, information obtained from the management of the acquired company, comparable transactions, and market and industry considerations and these estimates are inherently uncertain. The estimated fair values related to intangible assets primarily consist of customer relationships, patents and developed technology, and tradenames and trademarks. Estimates in the discounted cash flow models include, but are not limited to, certain assumptions that form the basis of the forecasted results (e.g. revenue growth rates, discount rate, royalty, customer attrition rates and EBITDA).
These significant assumptions are forward looking and could be affected by future economic and market conditions.
Customer Relationships - In addition to revenue growth rates, EBITDA and discount rate, a key input for customer relationships is the customer attrition rate. A higher than expected customer attrition rate could result in an impairment charge.
Tradenames - The most significant driver is revenue growth rates, discount rate and royalty rate. If revenue growth rates are lower than expected, it could result in an impairment charge.
Developed Technology – In addition to revenue growth rates, discount rate, royalty rate and an obsolescence factor, the timing of obsolescence of the acquired technology could result in a shorter useful life than originally determined and an acceleration of amortization expense.
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.”
