ADVANCED DRAINAGE SYSTEMS, INC.

Previous wording

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, 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.

Current wording

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.

Previous wording

We currently purchase in excess of 1.1 billion pounds of virgin and recycled resin annually from approximately 525 suppliers in North America. As a high-volume buyer of resin, we are able to achieve economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material). The price movements of the different materials vary, resulting in the need to use a number of strategies to reduce volatility.

Current wording

We currently purchase in excess of 1.0 billion pounds of virgin and recycled resin annually from approximately 400 suppliers in North America. As a high-volume buyer of resin, we are able to achieve economies of scale to negotiate favorable terms and pricing. Our purchasing strategies differ based on the material (virgin resin versus recycled material). The price movements of the different materials vary, resulting in the need to use a number of strategies to reduce volatility.

Previous wording

•increasing the use of recycled resin in place of virgin resin while meeting or exceeding industry standards;

Current wording

•increasing the use of low cost resin in place of virgin resin while meeting or exceeding industry standards;

Previous wording

•Net income per diluted share increased 6.1% to $6.45

Current wording

•Net income per diluted share decreased 10.7% to $5.76

Previous wording

•Free cash flow decreased $6.8 million to $534.1 million

Current wording

•Free cash flow decreased $165.6 million to $368.5 million

Previous wording

Net sales decreased $196.6 million, or 6.4%, to $2,874.5 million, as compared to $3,071.1 million in the prior year. Domestic pipe sales decreased $172.9 million, or 10.1%, to $1,544.3 million. Domestic Allied Products & Other sales decreased $18.4 million, or 2.7%, to $673.4 million. Infiltrator sales increased $6.7 million, or 1.5%, to $449.0 million. The decrease in overall domestic net sales was driven by lower demand in the U.S. construction and agriculture end markets during the first half of the year. The increase in sales at Infiltrator was driven by better-than-expected single-family housing construction and new product introductions. International sales decreased $12.1 million, or 5.5%, to $207.8 million.

Current wording

Net sales increased $29.8 million, or 1.0%, to $2,904.2 million, as compared to $2,874.5 million in the prior year. Domestic pipe sales decreased $40.9 million, or 2.6%, to $1,503.4 million. Domestic Allied Products & Other sales increased $16.6 million, or 2.5%, to $689.9 million. Infiltrator sales increased $67.3 million, or 15.0%, to $516.3 million. Excluding the acquisition of Orenco Systems, Inc. (“Orenco”), Infiltrator organic revenue increased 4.6%. The increase in overall domestic net sales was driven the growth of the Infiltrator business and Allied products portfolio as well as material conversion in the U.S. construction end markets. International sales decreased $13.1 million, or 6.3%, to $194.6 million.

Previous wording

Gross profit increased $27.5 million, or 2.5%, to $1,145.9 million as compared to $1,118.4 million in the prior year. The increase in gross profit is primarily due to favorable material cost, partially offset by the decrease in volume and unfavorable fixed cost absorption.

Current wording

Gross profit decreased $51.7 million, or 4.5%, to $1,094.2 million as compared to $1,145.9 million in the prior year. The decrease in gross profit is primarily driven by unfavorable pricing and material cost, partially offset by favorable volume, sales mix and manufacturing costs.

Previous wording

Adjusted EBITDA, a non-GAAP financial measure, increased $19.0 million, or 2.1%, to $922.9 million, as compared to $904.0 million in the prior year. The increase is primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 32.1% as compared to 29.4% in the prior year.

Current wording

Adjusted EBITDA, a non-GAAP financial measure, decreased $33.7 million, or 3.7%, to $889.2 million, as compared to $922.9 million in the prior year. The decrease is primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 30.6% as compared to 32.1% in the prior year.

Previous wording

International – Our International segment manufactures and markets products in regions outside of the United States, with a strategy focused on our owned facilities in Canada and those markets serviced through our joint ventures in Mexico and South America. Pipe manufactured in these countries is primarily sold into the same region. Our joint venture strategy has provided us with local and regional access to new markets. The unconsolidated sales of the South American Joint Venture were $75.9 million, $69.5 million, and $61.6 million, in fiscal 2024, 2023, and 2022, respectively.

Current wording

International - Our International segment manufactures and markets products in regions outside of the United States, with a strategy focused on our owned facilities in Canada and those markets serviced through our joint ventures in Mexico and South America. Pipe manufactured in these countries is primarily sold into the same region. Our joint venture strategy has provided us with local and regional access to new markets. The unconsolidated sales of the South American Joint Venture were $72.3 million, $75.9 million, and $69.5 million, in fiscal 2025, 2024, and 2023, respectively.

Previous wording

Selling, general and administrative expenses for the fiscal year ended March 31, 2024 increased $31.2 million from the same period in fiscal 2023. The increase in Selling, general and administrative expenses is the result of an increase in stock-based and incentive compensation related to business performance, headcount to support our engineering and innovation initiatives and the impact of inflation.

Current wording

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.

Previous wording

(Gain) loss on disposal of assets and costs from exit and disposal activities –The change in (Gain) loss on disposal of assets and costs from exit and disposal activities is primarily due to the gain on the sale of the assets of Spartan Concrete, Inc. in fiscal 2024, partially offset by the losses on the sale of the Paper Recycling business and disposal of other assets.

Current wording

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.

Previous wording

Interest expense –Interest expense increased $18.7 million for the fiscal year ended March 31, 2024 compared to the same period in fiscal 2023. The increase was primarily due to an increase in interest rates.

Current wording

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.

Previous wording

Interest income and other, net –Interest income and other, net increased by $15.5 million for the fiscal year ended March 31, 2024 compared to the same period in fiscal 2023 primarily due to the increase in Cash.

Current wording

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.

Previous wording

The change in the effective tax rate was primarily related to the decrease of the income tax benefit related to the stock-based compensation windfall in fiscal 2024. See “Note 15. Income Taxes” for additional information.

Current wording

The change in the effective tax rate was primarily related to the increaseof the income tax benefit related to the stock-based compensation windfall and the increase of income tax expense related to the executive compensation limitation infiscal year 2025. See “Note 15. Income Taxes” for additional information.

Previous wording

Equity in net income of unconsolidated affiliates –The Equity in net income of unconsolidated affiliates increased for the fiscal year ended March 31, 2024 compared to the same period in fiscal 2023 due to an increase in the current period income at our South American Joint Venture.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

(b)Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with business or asset acquisitions and dispositions.

Current wording

(a)Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with business or asset acquisitions and dispositions.

Previous wording

(c)Includes derivative fair value adjustments, foreign currency transaction (gains) losses, the proportionate share of interest, income taxes, depreciation and amortization related to the South American Joint Venture, which is accounted for under the equity method of accounting and executive retirement expense (benefit).

Current wording

(b)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).

Previous wording

As of March 31, 2024, we had $24.8 million in cash that was held by our foreign subsidiaries, of which, $15.8 million was held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. See “Note 15. Income Taxes” for additional discussion of our plans to repatriate earnings from Canada.

Current wording

As of March 31, 2025, we had $22.5 million in cash that was held by our foreign subsidiaries, of which, $13.4 million was held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. See “Note 15. Income Taxes” for additional discussion of our plans to repatriate earnings from Canada.

Previous wording

In fiscal 2024, our cash balance increased by $278.7 million. Cash generated from operations, changes in working capital and dispositions of assets was partially offset by $207.3 million in share repurchases and capital expenditures of $183.8 million and $47.7 million of dividend payments. Our increase of cash in fiscal 2023 of $197.0 million was predominantly driven by cash generated from operations in excess of changes in working capital and $500.0 million proceeds from the issuance of senior notes. These sources were partially offset by $575.0 million in share repurchases, capital expenditures of $166.9 million, and $44.9 million of dividend payments.

Current wording

In fiscal 2025, our cash balance decreased by $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. Our increase of cash in fiscal 2024 was $278.7 million. Cash generated from operations, changes in working capital and dispositions of assets was partially offset by $207.3 million in share repurchases and capital expenditures of $183.8 million and $47.7 million of dividend payments.

Previous wording

As of March 31, 2024, we had $1,079.1 million in liquidity, including $490.2 million of cash, $588.9 million in borrowings available under our Revolving Credit Agreement, excluding $11.2 million of outstanding letters of credit. 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.

Current wording

As of March 31, 2025, we had $1,053.9 million in liquidity, including $463.3 million of cash, $590.6 million in borrowings available under our Revolving Credit Agreement, excluding $9.5 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.

Previous wording

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 increased to $860.3 million as of March 31, 2024, from $638.7 million as of March 31, 2023, primarily due to increases in cash and an increase in accounts receivable due to increased net sales offset by increases in accounts payable due to the timing of the purchases of raw materials.

Current wording

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 increased to $926.4 million as of March 31, 2025, from $860.3 million as of March 31, 2024, primarily due to increases in inventory to support projected sales and a decrease in accounts payable due to the timing of purchases.

Previous wording

Operating Cash Flows -During fiscal 2024, cash provided by operating activities was $717.9 million. Cash flow from operating activities in fiscal 2024 was primarily driven by operating income and changes in working capital.

Current wording

Operating Cash Flows -During fiscal 2025, 2024 and 2023, cash provided by operating activities was $581.5 million, $717.9 million and $707.8 million, respectively. Cash flow from operating activities for all periods was primarily driven by operating income and changes in working capital.

Previous wording

Investing Cash Flows -During fiscal 2024, cash used for investing activities was $155.7 million. The cash used for investing cash flows was primarily from capital expenditures offset with the disposition of assets or businesses. Capital expenditures increased in fiscal 2024 compared to fiscal 2023. Our capital expenditures in fiscal 2024 were used primarily to support new facilities, facility expansions, equipment replacements and technology improvement initiatives.

Current wording

During fiscal 2024, cash used for investing activities was $155.7 million. The cash used for investing cash flows was primarily from capital expenditures offset with the disposition of assets or businesses. Capital expenditures increased in fiscal 2024 compared to fiscal 2023. Our capital expenditures in fiscal 2024 were used primarily to support new facilities, facility expansions, equipment replacements and technology improvement initiatives.

Previous wording

We currently anticipate that we will make capital expenditures of approximately $250 to $300 million in fiscal 2025 to focus on growth and productivity through increasing our manufacturing capacity and investing in automation. Such capital expenditures are expected to be financed using funds generated by operations. We had approximately $130 million of open orders through purchase commitments as of March 31, 2024.

Current wording

We currently anticipate that we will make capital expenditures of approximately $275 million in fiscal 2026 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, 2025.

Previous wording

Financing Cash Flows –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.

Current wording

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.

Previous wording

Issuance of Senior Notes due 2027 -On September 23, 2019, we issued $350.0 million aggregate principal amount of its 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 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 of 1933 (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. See “Note 12. Debt” for further information on the 2027 Notes.

Current wording

Issuance of Senior Notes due 2027 -On September 23, 2019, we issued $350.0 million aggregate principal amount of its 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 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. See “Note 12. Debt” for further information on the 2027 Notes.

Previous wording

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 $10.9 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 1.6% as of March 31, 2024.

Current wording

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 $6.0 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 1.7% as of March 31, 2025.